TABLE OF CONTENTS PERSONS AND FAMILY RELATIONS I.
PERSONS A. When Law Takes Effect Doctrine ...................................................................1 B. Ignorance of the Law .....................................................................................2 C. Retroactivity of Laws......................................................................................3 D. Mandatory or Prohibitory Laws .....................................................................3 E. Waiver of Rights .............................................................................................3 F. Presumption and Applicability of Custom .....................................................6 G. Legal Periods ..................................................................................................6 H. Territoriality Principle ....................................................................................7 I. Conflict of Laws ..............................................................................................7 J. Human Relations in Relation to Persons .......................................................11 K. Capacity to Act ...............................................................................................13 L. Surnames .......................................................................................................17 M. Rules Governing Persons Who are Absent ....................................................19
II.
MARRIAGE A. General Principles ..........................................................................................23 B. Mixed Marriages and Foreign Divorce ...........................................................30 C. Void Marriages ...............................................................................................31 D. Voidable Marriages ........................................................................................37 E. Effect of Defective Marriages ........................................................................41 F. Foreign Marriages ..........................................................................................43 G. Legal Separation.............................................................................................44 H. Property Relations Between Spouses ............................................................49 I. The Family ......................................................................................................68 J. The Family Home ...........................................................................................68 K. Paternity and Filiation ....................................................................................70 L. Support ..........................................................................................................80 M. Parental Authority .........................................................................................83 PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS
I.
CLASSIFICATION OF PROPERTY A. Immovables....................................................................................................87 B. Movables........................................................................................................91
II.
BUNDLE OF RIGHTS A. Ownership ......................................................................................................94 B. Rights of Accession ........................................................................................102 C. Actions to Recover Ownership and Possession of Property ..........................110 D. Co-Ownership ................................................................................................113 E. Possession ......................................................................................................120 F. Usufruct .........................................................................................................126 G. Easem*nts ......................................................................................................129
III.
DIFFERENT MODES OF ACQUIRING OWNERSHIP A. Occupation .....................................................................................................142 B. Tradition.........................................................................................................144 C. Donation ........................................................................................................145 D. Prescription ....................................................................................................151
IV.
LAND TITLES AND DEEDS A. Torrens System ..............................................................................................156 B. Regalian Doctrine ...........................................................................................160 C. Nationality Restrictions on Land Ownership .................................................161 D. Original Registration ......................................................................................162 E. An Act Improving the Confirmation Process for Imperfect Land Titles (RA 11573), amending CA 141 and PD 1529 ............................................................................................165 F. Certificate of Title ..........................................................................................166 G. Subsequent Registration ................................................................................168 H. Non-Registrable Properties............................................................................174 I. Dealings With Unregistered Lands.................................................................176 J. Assurance Fund ..............................................................................................178 K. Reconstitution of Title ...................................................................................180
V.
WILLS AND SUCCESSION A. General Provisions .........................................................................................184 B. Testamentary Succession...............................................................................186 C. Intestate Succession ......................................................................................220 D. Provisions Common to Testate and Intestate Succession .............................222 OBLIGATIONS AND CONTRACTS
I.
OBLIGATIONS A. General Provisions .........................................................................................227 B. Nature and Effects of Obligations ..................................................................232
C. Different Kinds of Obligations ........................................................................242 D. Extinguishment of Obligations .......................................................................257 II.
CONTRACTS A. General Provisions .........................................................................................278 B. Basic Principles of Contracts ..........................................................................279 C. Essential Requisites of a Contract ..................................................................283 D. Defective Contracts …………………………………………………………………………………..297
III.
NATURAL OBLIGATIONS .................................................................................... 310
SPECIAL CONTRACTS I.
SALE A. B. C. D. E. F. G. H. I.
II.
Definition and Essential Requisites ............................................................... 311 Contract of Sale ............................................................................................. 312 Earnest Money .............................................................................................. 320 Double Sales .................................................................................................. 320 Risk of Loss .................................................................................................... 322 Breach of Contract of Sale ............................................................................. 323 Extinguishment of the Sale............................................................................ 331 Equitable Mortgage ....................................................................................... 335 Pacto de Retro Sales ...................................................................................... 336
LEASE A. Kinds of Lease ................................................................................................ 336 B. Rights and Obligations of Lessor ................................................................... 339 C. Rights and Obligations of Lessee ................................................................... 340
III.
AGENCY .....................................................................................................................342
IV.
CREDIT TRANSACTIONS A. Loans ............................................................................................................. 355 B. Deposit .......................................................................................................... 365 C. Guaranty and Suretyship ............................................................................... 372 D. Mortgage ....................................................................................................... 388 E. Pledge ............................................................................................................ 394 F. Antichresis ..................................................................................................... 395
V.
COMPROMISE ............................................................................................................397
VI.
QUASI-CONTACTS A. Negotiorum Gestio ........................................................................................ 399 B. Solutio Indebiti .............................................................................................. 399
VII.
TORTS AND DAMAGES A. Principles ....................................................................................................... 400 B. Classification of Torts .................................................................................... 402 C. The Tortfeasor ............................................................................................... 403
D. E. F. G. H. I. J. K. L. M.
Quasi-Delict vs. Culpa Contractual vs. Culpa Criminal .................................. 404 Proximate Cause............................................................................................ 405 Vicarious Liability........................................................................................... 407 Res Ipsa Loquitur ........................................................................................... 412 Damnum Absque Injuria................................................................................ 413 Defenses ........................................................................................................ 413 Negligence ..................................................................................................... 414 Damages ........................................................................................................ 416 Damages in Case of Death ............................................................................. 425 Duty of Injured Party ..................................................................................... 426
PERSONS AND FAMILY RELATIONS I. PERSONS A. WHEN LAW TAKES EFFECT DOCTRINE (Art. 2, NCC) Effect and Application of the New Civil Code The New Civil Code (NCC) took effect on August 30, 1950. Three possible scenarios: 1. If the law is silent as to its date of effectivity. It takes effect after fifteen (15) days following the completion of its publication in the Official Gazette or in a newspaper of general circulation (Article 2, as amended by E.O. No. 200). 2. If the law provides for its own date of effectivity. It takes effect on such date, provided there is publication. Publication is indispensable (Tañada v. Tuvera, G.R. No. L63915, April 24, 1985). 3. If the law provides that it shall take effect immediately upon its approval. It takes effect immediately after its publication. There is nothing in E.O. No. 200 that prevents a law from taking effect on a date other than – even before – the 15-day period after its publication. Where a law provides for its own date of effectivity, such date prevails over that prescribed by E.O. No. 200 (La Bugal-B’laan Tribal Association, Inc. v. Ramos, G.R. No. 127882, 27 January 2004). "Unless it is otherwise provided" refers solely to the fifteen-day period and not to the requirement of publication (Tañada v. Tuvera, G.R. No. L-63915, April 24, 1985). PUBLICATION. Publication is indispensable in every case, but the legislature may in its discretion provide that the usual fifteen-day period shall be shortened or extended (Tañada v. Tuvera, G.R. No. L-63915, April 24, 1985).
COMPLETE PUBLICATION IS REQUIRED. Otherwise, it is considered as no publication at all (Tañada v. Tuvera, G.R. No. L-63915, April 24, 1985). Where to publish 1. Official Gazette (See Art. 2); or 2. Newspaper of general circulation (E.O. No. 200) To be a newspaper of general circulation, it is enough that it is published for the dissemination of local news and general information, that it has a bona fide subscription list of paying subscribers, that it is published at regular intervals, that it must not be devoted to the interests or published for the entertainment of a particular class, profession trade, calling, race or religious denomination, and that need not have the largest circulation so long as it is of general circulation (Marcelo v. Philippine Commercial International Bank, G.R. No. 182735, December 4, 2009). The publication must be in full text since the purpose of the publication is to inform the public of the existence of the law (Cojuangco, Jr. v. Republic, G. R. No. 180705, November 27, 2012). Administrative Issuances: Publication of all executive and administrative orders and proclamations is also required, except such as have no general applicability (Sec. 3, Chapter 2, Book VII, Administrative Code of 1987). All rules and regulations issued by the different agencies of the national government must be filed with this office under the Tanada doctrine. Failure to comply with the requirements of publication and filing with the ONAR renders an administrative issuance ineffective (Republic v. Pilipinas Shell Petroleum Corporation, G.R. No. 173918, April 8, 2008). Strict compliance with the requirements of publication cannot be annulled by a mere allegation that parties were notified of the existence of the implementing rules
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concerned (Republic v. Filipinas Shell, G.R. No. 173918, April 8, 2008).
implement existing laws pursuant to a valid delegation.
When Publication is Required
B. IGNORANCE OF THE LAW (Art. 3, NCC)
1. Presidential Decrees and Executive Orders; 2. Administrative Rules and Regulations, if their purpose is to enforce or implement existing laws pursuant to a valid delegation; 3. Laws or statutes, including local and private laws; 4. City Charter; 5. Monetary Board Circulars, if these are meant not merely to interpret but to “fill in the details” of the Central Bank Act which that body is supposed to enforce; 6. Circulars and Regulations prescribing penalty for its violation (Rabuya, The Law on Persons and Family Relations, 2017 Ed, p. 9-10).
Ignorance of the law excuses no one from compliance therewith.
Before the public is bound by its contents, especially its penal provisions, a law, regulation or circular must first be published and the people must be officially and specifically informed of said contents and its penalties (People v. Que Po Lay, G.R. No. L6791, March 29, 1954). There’s no law requiring the publication of Supreme Court decisions in the Official Gazette before they can be binding and as a condition to their becoming effective (Roy v. Court of Appeals, G.R. No. 80718, Januart 29, 1988).
This doctrine applies to all kinds of domestic laws, whether civil or penal, substantive or remedial, but is limited to mandatory and prohibitory laws (Rabuya, The Law on Persons and Family Relations, 2017 Ed.). Exception: Ignorantia facti excusat. Ignorance or mistake in point of fact is a sufficient excuse (U.S. v. Ah Chong, G.R. No. L-5272, March 19, 1910). BASIS Knowledge
Nature
When Publication is NOT Required 1. Interpretative regulations and those merely internal in nature regulating only the personnel of the administrative agency and not the public; and 2. Letters of instructions issued by administrative superiors concerning the rules or guidelines to be followed by their subordinates in the performance of their duties (De Jesus vs. COA, G.R. No. 109023, August 12, 1998). Administrative rules and regulations must be published if their purpose is to enforce or
Defense
MISTAKE OF FACT Want of knowledge of some facts constituting or relating to the subject matter in hand. When some facts which really exist are unknown or some fact is supposed to exist which really does not exist. Good faith is an excuse.
MISTAKE OF LAW Want of knowledge or acquaintance with the laws of the land insofar as they apply to the act, relation, duty, or matter under consideration. Occurs when a person having full knowledge of the facts come to an erroneous conclusion as to its legal effects.
Not excusable, even if in good faith.
Mistake upon a doubtful or difficult question of law may be the basis of good faith (Art. 526, NCC). This pertains to excusable error arising from complex legal principles and from the interpretation of conflicting or doubtful doctrines. Payment by reason of mistake in the construction or application of a doubtful or difficult question of law may give rise to an obligation to return what has been unduly
2
received (Art. 2155, in relation to Art. 2154 NCC). C. RETROACTIVITY OF LAWS (Art. 4, NCC) General rule: Laws shall have no retroactive effect (lex prospicit, non respicit). A law that has not yet become effective cannot be considered as conclusively known by the people (Tolentino, Civil Code, 1991 Ed., p.23). The said provision is unequivocal and definite leaving no room for doubt as to its application. Corollarily, no court decision, much less of any foreign one can alter such mandate (Development Bank of the Philippines v. Court of Appeals, G.R. No. L28774, September 21, 1982). Exceptions: 1. 2. 3. 4. 5. 6. 7. 8.
Expressly provided by the law; Curative statutes; Procedural or remedial statutes; Laws creating new substantive rights; Emergency laws; Tax laws when expressly declared so; Interpretative statutes; and Penal laws favorable to the accused who is not a recidivist or a habitual delinquent (Rabuya, The Law on Persons and Family Relations, 2021 Ed., p. 17).
Exceptions to retroactivity of laws when the law expressly provides: 1. The retroactivity of the penal law will make it an ex post facto law; and 2. When the retroactivity of the law will result in the impairment of obligation of contracts. 3. When the law impairs a vested right (Rabuya, The Law on Persons and Family Relations, p. 15). D. MANDATORY OR PROHIBITORY LAWS (Art. 5, NCC) General rule: Acts executed against the provisions of mandatory or prohibitory laws are void.
A mandatory provision of law is one the omission of which renders the proceedings or acts to which it relates generally illegal or void; while prohibitory laws are those which contain positive prohibitions and are couched in the negative terms importing the act required shall not be done otherwise than designated (Brehm v. Republic, G.R. No. L-18566, September 30, 1963). Exceptions: 1. When the law itself authorizes its validity although generally, it would have been void; 2. When the law declares the act void, but recognizes legal effects arising from it; 3. When the law merely makes the act voidable and not void (i.e. if consent is vitiated, the contract is voidable and not void); or 4. When the law makes the act valid but punishes the violator (Rabuya, The Law on Persons and Family Relations, 2017 Ed., p. 21-22). E. WAIVER OF RIGHTS (Art. 6, NCC) Waiver is the voluntary and intentional relinquishment or abandonment of a known existing legal right, advantage, benefit, claim or privilege (Rabuya, The Law on Persons and Family Relations, 2017 Ed., p. 23). Waivers are not presumed, but must be clearly and convincingly shown, either by express stipulation or acts admitting no other reasonable explanation (Arrieta v. National Rice and Corn Corp., G.R. No. L-15645, January 31, 1964). Rules for the Waiver of Rights General rule: Rights may be waived Exceptions: 1. When waiver is contrary to law, public morals, public policy and good customs; 2. When waiver is prejudicial to a third person with a right recognized by law; 3. Waiver of inchoate rights, e.g., future inheritance); 4. When it is a natural right (e.g. right to support); or
3
5. When there is a particular formality required by law. Note: Art. 6 deals with the waiver of rights, not the waiver of obligations or duties. Waiver of obligations or duties would be possible only if the person being possessed of certain rights, and resultant obligations or duties waives the said rights; or if the law itself authorizes such waiver (e.g., if a person who has a right renounces the same, in a sense, he is exempting himself from the obligations that may have ensued from the exercise of the right.) What is a right? A right is the power or privilege given to one person and as a rule demandable of another (Black’s Law Dictionary, p. 1158), as the right to recover a debt justly due. In still another sense, a right denotes an interest or title in an object or property (Black’s Law Dictionary, p. 1558). Generally, rights involve two subjects: the active subject (the person entitled) and the passive subject (the person obliged to suffer the enforcement of the right). Elements of Rights: 1) Subject – which is further classified into: (a) active subject – one who is entitled to demand the enforcement of a right; and (b) passive subect – one who is dutybound to suffer the enforcement. 2) Object 3) Efficient Cause Kinds of Rights: 1) Political Rights – those referring to the participation of persons in the government of the State; 2) Civil Rights – rights of personality/human rights, family rights, and patrimonial rights
Kinds of Patrimonial Rights: 1. Real rights (jus in re, jus in rem) – enforceable against the whole world (absolute rights); 2. Personal rights (jus in personam, jus ad rem) – enforceable against a particular individual (relative rights) (Rabuya, The Law on Persons and Family Relations, 2017 Ed, p. 20). Requisites for a Valid Waiver 1. The person waiving must be capacitated to make the waiver. 2. The waiver must be made clearly, but not necessarily express. 3. The person waiving must actually have the right which he is renouncing; otherwise, he will not be renouncing anything (Rabuya, The Law on Persons and Family Relations, 2017 Ed, p. 21). 4. In certain instances, the waiver, as in the express remission of a debt owed in favor of the waiver, must comply with the formalities of a donation (See Art. 1270, Civil Code). 5. The waiver must not be contrary to law, morals, public policy; and (Sanico vs. Colipano, 841 SCRA 141) 6. The waiver must not prejudice others with a right recognized by law (Art. 6, NCC). Examples of Renounced a.
Rights
the
Cannot
be
Natural rights, such as the right to life
The right to be supported (present or future support) cannot be renounced, for support is vital to the life of the recipient (Art. 301, NCC). b.
Alleged rights which really do not yet exist
Future inheritance cannot be renounced, since no right is vested till the death of the decedent (Art. 2263, NCC).
The rights to personality and family rights are not subject to waiver, but patrimonial rights can generally be waived (Rabuya, The Law on Persons and Family Relations, 2017 Ed., p. 22).
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c.
Those the renunciation of which would infringe upon public policy 1. The right to be heard in court cannot be renounce in advance, hence this kind of confession of judgment cannot be allowed. 2. A waiver of the legal right to repurchase a homestead that had been sold if the waiver is made in advance. This is so, otherwise the benevolent intent of the State to give the homesteader all chances to preserve for himself and his family the land that the State has rewarded him which would be rendered useless (Barcelon v. Arambulo, et al., C.A., G.R. No. L-48610, March 31, 1987). 3. A waiver in advance of the one-month separation pay (the mesada) is contrary to public policy, but not a waiver after the right has accrued (Sanchez v. Lyons Construction Co., G.R. No. L 2779 October 18, 1950). 4. A tenant is not allowed to waive his right to the exemption provide by the Rice Tenancy Act from lien and attachment of 25% of his share in the land products because such a waiver would be equivalent to a waiver of the tenant’s right to live. Thus, a sheriff’s levy on said properties, and the subsequent sale thereof, should be considered unlawful (Maniego v. Castelo, L-9855, April 29, 1957). 5. A waiver of the ten-year period for suing on a written contract (Art. 1144) is contrary to public policy (See Macias and Co. V. China Fire Insurance Co., G.R. No. L21881, October 3, 1924; Deocariza v. General Indemniy Co., G.R. No. 229955, July 23, 2018). 6. A stipulation requiring the recipient of a scholarship grant to waive (before receiving said award) his right to transfer to another school, unless he refunds the equivalent of his scholarship in cash, is null and void. The school concerned obviously understands scholarship awards as a business scheme designed to increase the business potential of an educational institutions. Thus, conceived it is not only inconsistent with sound
policy, but also with good morals (Cui v. Arellano University, L-15127, May 30, 1961). 7. A private agreement between a husband and a wife providing that they consent or allow the commission of adultery or concubinage by the other spouse, as the case may be, thereby waiving their rights to live with each other, is a void agreement or a void waiver of rights as the same is contrary to public interest and morals. d.
When the waiver is prejudicial to a third person with a right recognized by law Examples: 1. While an heir may renounce present inheritance (i.e., inheritance that has already accrued by virtue of the decedent’s death), still if the waiver will prejudice existing creditors, the latter can accept the inheritance in the name of the heir, but only to the extent sufficient to cover the amount of their credits (Art. 1052, NCC). 2. T dies leaving J and H as heirs. H has his own children. If H repudiates the inheritance, his own children will clearly be prejudiced because H would have less property and the entire estate would be inherited by J. However, H is allowed to do this renouncing since after all, the children of H have no right recognized by the law (to their own legitime) till after H’s own death. The right to the legitime is indeed, from this viewpoint, a mere expectance.
Examples of Rights that May be Renounced 1. Support in arrears – for evidently this is no longer needed for subsistence (Art. 301, NCC). 2. The right granted to prepare at least two days before trial is waivable, expressly or impliedly. It can be implied from the failure to ask for sufficient time to prepare for trial (People v. Moreno, G.R. No. L-64, October 28, 1946).
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3. The right to object to testimony of a wife on information obtained because of her domestic relations with her husband, is waived when a husband accused of killing his son, does not only deny his guilt, but also points to the wife as the killer (People v. Francisco, G.R. No. L-568, July 16, 1947). In a prosecution for rape against his own child, a husband cannot object to the testimony given by his wife against him, for in effect this may be considered an offense committed by a husband against his wife. 4. The right of the accused to be helped by counsel may also be waived, provided, the judge informs said accused of his right (U.S. v. Escalante, G.R. No. 12442, August 10, 1917). 5. The right of the accused in a criminal case to have a preliminary investigation may be waived (U.S. v. Marfori, G.R. No. 10905, December 9, 1916). 6. The venue of actions (the place where the action should be brought may be waived, but not the court’s jurisdiction (Central Azucarera v. De Leon and Fernando, G.R. No. L-58287, August 19, 1982). 7. Although a tax obligation has already been extinguished by prescription, the taxpayer may waive the benefit granted by law by reason of said prescription by the execution of a chattel mortgage to secure the payment of the same (Sambrano v. Court of Tax Appeals, L-8652, March 30, 1957). 8. An individual who accepts the office of an executor or administrator may waive compensation therefor (Sison v. Teodoro, L9721, March 29, 1957). 9. The right to the back pay of an employee who has been dismissed without any justifiable cause may be waived by him. This is particularly so when he has been put back to work (Dimayuga v. CIR and Cebu Portland Co., L10213, May 27, 1957). 10. Failure to ask for vacation and sick leave privileges afer a period of more than five years constitutes a valid waiver unless the intent of the law granting the same is clearly otherwise. The purpose of the privileve is to give the employee a much needed rest, and not merely an additional salary. The privilege must be demanded in opportune time, and if he allows the years to go by in silence, he
waives it (Phil. Air Lines, Inc. V. Balanguit, et al., L-8715, June 30, 1956; Sunripe Coconut Prod. V. NLU-L-7964, 51 O.G. 5133). F. PRESUMPTION AND APPLICABILITY OF CUSTOM Customs are rules of human action (conduct), legally binding and obligatory, formed by repetition of acts uniformly observed as a rule. General Rule: It must be proved as a fact, according to the rules on evidence. Requisites: 1. Plurality of acts; 2. Uniformity or identity of acts; 3. General practice by the great mass of the social group; 4. Continued performance of these acts for a long period of time; 5. General conviction that the practice corresponds to a juridical necessity or that it is obligatory; and 6. The practice must not be contrary to law, morals, or public order. Customs are not subject to judicial notice (Art. 12, NCC). G. LEGAL PERIODS Applicable laws in counting of legal periods 1) Article 13 of the New Civil Code; and 2) Section 31, Chapter 8, Book 1 of the 1987 Administrative Code of the Philippines. Distinction between the two (2) governing laws:
Years
Art. 13, NCC 365 days each
1987 Admin. Code 12 calendar months
(whether it be a regular year or a leap year) Months
30 days
30 days (unless it refers to a
specific calendar month in which case it
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Days Nights
24 hours Sunset to sunrise
shall be computed according to the number of days of that specific month)
General rule: Penal laws are strictly territorial. They can have no effect outside the state’s territorial jurisdiction.
24 hours Sunset to sunrise
Exceptions to the Rule:
The provisions of Article 13 of the New Civil Code were already impliedly repealed by Sec. 31 of the 1987 Administrative Code with respect to the counting of a “year”. Therefore, under existing law and jurisprudence, a “year” shall now be understood to be “twelve calendar months” (Commissioner of Internal Revenue v. Primetown Property Group Inc., G.R. No. 162155, August 28, 2007). If the last day falls on a Sunday or a legal holiday If the last day is a Saturday, Sunday or a Legal Holiday, whether the act is due that day or the following day will depend on the following: 1. In an Ordinary Contract – the agreement of the parties prevails (Art. 1159, NCC). 2. Under the Rules of Court – when the time refers to a period prescribed or allowed by the Rules of Court, or by order of the court, or by any applicable statute, if the last day of the period falls on a Saturday, a Sunday, or a legal holiday in the place where the court sits, the time shall not run until the next working day (Sec. 1, Rule 22, 1997 Revised Rules of Civil Procedure). In computing a period, the first day shall be excluded and the last day included (Art. 13, NCC). H. TERRITORIALITY PRINCIPLE Penal laws and those of public security and safety shall be obligatory upon all who live or sojourn in Philippine territory, subject to the principles of public international law and to treaty stipulations (Article 14, NCC).
1. Treaty Stipulations (e.g., Visiting Forces Agreement), except: 1. When the offense is committed by a foreign sovereign while in Philippine territory; 2. When the offense is committed by diplomatic representatives; 3. When the offense is committed in a public or armed vessel of a foreign country. 2. Laws of Preferential Application 3. Principles of Public International Law (e.g., immunity of diplomatic representatives) (Rabuya, The Law on Persons and Family Relations, 2021 Ed, p. 45). I. CONFLICT OF LAWS Conflict of Laws, also called Private International Law, is that part of the municipal laws of a state which directs its courts and administrative agencies, when confronted with a legal problem involving a foreign element, whether or not they should apply a foreign law or foreign laws (Paras, Philippine Conflict of Laws, 1996, p. 2). Elements of Conflict of Laws a. Legal problem or case involving a foreign element; and Foreign element – refers to the factual situation cutting across territorial lines, affected by diverse laws of two or more states. The presence of foreign element in a case determines the existence of a conflict of laws. Where there is no foreign element, no conflict of laws exists (Agpalo, Conflict of Laws, 2004, p. 12).
7
b.
Determination of whether the law or judgments of other state/s will govern, and if so, the extent of its recognition/application in the forum (Coquia & Aguiling-Pangalangan, Conflict of Laws: Cases Materials and Comments, 2000, p. 57).
Rules or Principles Governing Conflict of Laws 1. Lex Nationalii 2. Lex Rei Sitae 3. Lex Loci Celebrationis 4. Territoriality of penal laws; 5. Other Rules or Principles Governing Conflict of Laws. 1. Lex Nationalii (Nationality Principle Status Laws) Laws relating to the following are binding upon citizens of the Philippines, even though living abroad (Art. 15, NCC): a. b. c. d.
Family rights and duties; Status; Condition; and Legal capacity of persons.
Note: In case of stateless individuals, the following shall be applicable:
The personal law shall be the domicile of the stateless person; or, Secondarily the place of temporary residence (Paras, Conflict of Laws, 1996 Ed, p. 110).
Application of rule to absolute divorce General rule: Our family laws do not recognize absolute divorce between Filipino citizens (Garcia v. Recio, G.R. No. 138322, October 2, 2001). Exception: Principle of Reciprocity
Tomas, G.R. No. 186571, August 11, 2010; Art. 26, FC).
Reckoning point in Determining Citizenship in a Recognized Divorce in the Philippines The reckoning point is the citizenship at the time a valid divorce is obtained, and not the citizenship at the time of marriage (Republic v. Orbecido III, G.R. No. 154380, October 5, 2005). 2. Lex Rei Sitae (Immovable Property laws) General Rule: Real property as well as personal property is subject to the law of the country where it is situated (Art. 16 [1], NCC). This comprises all aspects including formalities (Orayon Savings Bank v. Suzuki, G.R. No. 205487, November 12, 2014). Exceptions: National law of the decedent whose succession is under consideration will govern with respect to the following aspects of succession, whether testate or intestate: a. Order of succession; b. Amount of successional rights; c. Intrinsic validity of testamentary provisions; and d. Legal capacity to succeed (Art. 16, NCC). 3. Lex Loci Celebrationis (Laws on Forms and Solemnities) General Rule: The forms and solemnities of contracts, wills, and other public instruments shall be governed by the laws of the country in which they are executed (Art. 17, NCC). When a Filipino is in a foreign country, he is authorized to make a will in any of the forms established by the law of such country (Art. 815, NCC).
Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to remarry, the Filipino spouse shall likewise have capacity to remarry under Philippine law (Corpuz v. Sto.
8
Exceptions: a. Marriages involving Filipinos solemnized abroad when such marriages are void in the Philippines, such as: 1. Marriages contracted by minors, even with the consent of parents or guardian (Art. 35 [1], FC); 2. Bigamous or polygamous marriages not falling under Art. 41, FC (Art. 35 [4], FC); 3. Marriages contracted through mistake of identity of the other contracting party (Art. 35 [5], FC); 4. Non-compliance of recording requirements with appropriate civil registry and registries of properties concerning the judgment of annulment or of absolute nullity of marriage, the partition and distribution of properties of spouses, and the delivery of the presumptive legitimes of children (Art. 35 [6], FC); 5. Void marriages by reason of psychological incapacity of a party to comply with the essential marital obligations of marriage (Art. 36, FC); 6. Incestuous marriages (Art. 37, FC); and 7. Void marriages for reasons of public policy (Art. 38, FC). b.
Rule of Extra-territoriality - When the acts referred to are executed before the diplomatic or consular officials of the Republic of the Philippines in a foreign country, the solemnities established by Philippine laws shall be observed in their execution (Art. 17 [2], NCC).
c.
Rule on Prohibitive Laws - Prohibitive laws concerning persons, their acts or property, and those which have for their object public order, public policy or good customs shall not be rendered ineffective by laws or judgments promulgated, or by determinations or conventions agreed upon in a foreign country (Art. 17[3], NCC).
Under the rule of lex loci celebrationis, a contract executed in a foreign country is
considered valid as long as it is valid in accordance with the law of the place where it was celebrated. However, if such contract is prohibited under Philippine laws like those provided under Art. 26 par. [1] of E.O. 207, then such contract is not valid.
Lex Nationalii
Lex Rei Sitae
Lex Loci Celebrationis
Article 15 Civil Code
Article 16 Civil Code
Article 17 Civil Code
Citizenship is the basis for determining the personal law applicable
Law of the place where the property is situated is the basis for determining law applicable
Law of the place where the contract was executed is the basis for determining law applicable
Covers family rights and duties, status, condition and legal capacity of persons.
Covers real personal property
both and
Covers only the forms and solemnities (extrinsic validity)
Exception: Article 26 of par 2 of the Family Code
Exception: - Capacity to succeed - Intrinsic validity of the will - Amount of successiona l rights - Order of succession
Exception: - Article 26 of par 1 of the Family Code - Intrinsic validity of contracts
4. Doctrine of Renvoi Renvoi - literally means “to refer back”. Renvoi takes place when the conflicts rule of the forum makes a reference to a foreign law, but the foreign law is found to contain a conflict rule that returns or refers the matter back to the law of the forum (Remission) (Paras, Conflict of Laws, 1996, p. 211).
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Double Renvoi – occurs when the local court, in adopting the foreign court theory, discovers that the foreign court accepts the renvoi (Paras, supra, p. 214). Transmission Theory – provides that when the conflicts rule of the forum makes a reference to a foreign law, but the foreign law is found to contain a conflict rule that refers it to a third country, the law of the third country shall apply. It is the process of applying the law of a foreign state (third state) thru the law of a second foreign state (Paras, Conflict of Laws, 1996, p. 215). Other Principles Conflict of Laws a.
or
Doctrines
on
Jurisdiction
Principle of Forum Non Conveniens This refers to the court’s discretionary power to decline the exercise of its jurisdiction where another court may more conveniently hear a case. Accordingly, under this doctrine, a court, in conflict of laws cases, may refuse impositions on its jurisdiction where it is not the most convenient or available forum and the parties are not precluded from seeking redress elsewhere (Bank of America v. CA, G.R. No. 120135, March 31, 2003). b. Personal Law Different Theories on Personal Law 1. Nationality Theory or Personal Theory (Lex Nationalii) – the status and capacity of a person is determined by the law of his nationality or national law. This theory is followed in the Philippines. 2. Domiciliary Theory or Territorial Theory (Lex Domicilii) – the status and capacity of a person is determined by the law of his domicile. 3. Situs or Eclectic Theory - the particular place or situs of an event or
transaction is generally the controlling law (Paras, Conflict of Laws, 1996, p. 102). c. Doctrine of Lex Fori (Law of the Forum) It applies whenever the content of the otherwise applicable foreign law is excluded from application in a given case for the reason that it falls under one of the exceptions to the applications of foreign law (Saudi Arabian Airlines v. Court of Appeals, G.R. No. 122191, October 8, 1998). e. Doctrine of Processual Presumption (Presumed-Identity Approach) When a foreign law is not pleaded or, even if pleaded, is not proved, the presumption is that the foreign law is the same is ours. In our jurisdiction, courts do not take judicial notice of foreign laws (Philippine National Construction Corporation v. Asiavest, G.R. No. 172301, August 19, 2015). f.
Torts
General Rule: Lex Loci Delicti Comissi or law of the place where the tort was committed will govern. Under this, the court applies the substantive laws of the state where the last event necessary to make an actor liable for the alleged wrong takes place (Shaw v. LDC Enterprises, 863 N.E. 2d 424, March 30, 2007). Exceptions: When the place of the tort is an insignificant contact, the factors that must be evaluated are: 1. The place where the conduct causing the injury occurred; 2. The residence or place of business of the parties; and 3. The place where the relationship is centered (Melton v. Stephens, 13 N.E. 3d 533, July 22, 2014). Kilberg Doctrine – Where a wrongful death occurred in A state and the action for damages is brought in B state, B is not bound
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by A’s laws on any limitation of liability arising from the death where the set limitations on damages are procedural. The law of the forum (B) should be applied (Kilberg v. Northeast Airlines, Inc., 9 N.Y. 2d 34, 211 N.Y.S. 2d, 133, 172 N.E. 2d 526). J. HUMAN RELATIONS IN RELATION TO PERSONS PRINCIPLE OF ABUSE OF RIGHTS Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith (Art. 19, NCC). A right, though by itself legal because recognized or granted by law as such, may become the source of some llegality. When a right is exercised in a manner which does not conform to the norms enshrined in Art. 19 and results in damage to another, a legal wrong is thereby committed for which the wrongdoer must be held responsible. This principle is based upon the famous maxim summum jus summa injuria (the abuse of a right is the greatest possible wrong) (Arlegui v. CA, G.R. No. 126437, March 6, 2002). Rationale: The exercise of a right ends when the right disappears, and it disappears when it is abused, especially to the prejudice of others. It cannot be said that a person exercises a right when he unnecessarily prejudices another or offends morals or good customs. Elements of abuse of rights a. There is a legal right or duty; b. It is exercised in bad faith; and c. For the sole intent of prejudicing or injuring another (Albenson Enterprises Corp. v. CA, G.R. No. 88694, January 11, 1993). d. The absence of good faith is essential to abuse of right (Rabuya, The Law on Persons and Family Relations, 2009).
DAMNUM
ABSQUE
WITHOUT INJURY)
INJURIA
(DAMAGE
A person who only exercises his legal rights does no injury. General Rule: In the exercise of one’s right, there is no actionable injury, and no one can be held liable for damages (Amonoy v. Gutierrez, G.R. No. 140420, February 15, 2001).
Exceptions:
1. Abuse of rights; and 2. When the exercise of a right is suspended or extinguished pursuant to a court order (Amonoy v. Gutierrez, G.R. No. 140420, February 15, 2001).
DOCTRINE OF VOLENTI NON FIT INJURIA (To which a person assents is not esteemed in law as injury) It refers to self–inflicted injury or to the consent to the injury which precludes recovery of damages by one who has knowingly or voluntarily exposed himself to danger, even if he is not negligent in doing so (Nikko Hotel Manila Garden v. Roberto Reyes, G.R. No. 154259, Feb 28, 2005). WILLFUL AND NEGLIGENT ACTS. Anyone who, contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for damages (Art. 20, NCC). ACTS CONTRA BONOS contrary to good morals)
MORES
(Acts
Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage (Art. 21, NCC). Elements of Acts Contra Bonus Mores 1. An act which is legal; 2. But the act is contrary to morals, good customs, public order, or public policy; and
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3. It is done with intent to injure (Rabuya, The Law on Persons and Family Relations, 2006, p. 55). Article 19, 20 and 21 in the enforcement and sanctions of abuse of right Articles 19, 20, and 21 are related to each other. Under these articles, an act which causes an injury to another may be made the basis for an award for damages (Rabuya, The Law on Persons and Family Relations, 2006, p. 55). While Art. 19 lays down the rule of conduct for the government of human relations, it does not provide a remedy (Rabuya, The Law on Persons and Family Relations, 2006).
c.
Actual expenses are actually incurred in preparation for the wedding and the necessary incidents thereof (Wassmer v. Velez, G.R. No. L-20089, December 26, 1964).
Mere breach of promise to marry is not an actionable wrong. But to formally set a wedding and go through all the above-described preparation and publicity, only to walk out of it when the matrimony is about to be solemnized, is quite different. This is palpably and unjustifiably contrary to good customs for which defendant must be held answerable in damages in accordance with Article 21 (Wassmer v. Velez, Id.). PRINCIPLE OF UNJUST ENRICHMENT
Generally, an action for damages under either Art. 20 or Art. 21 of the NCC would be proper. Art. 21 deals with acts contra bonus mores or contrary to good morals and presupposes loss or injury, material or otherwise, which one may suffer as a result of such violation. Under Arts. 19 and 21, the act must be intentional (Rabuya, The Law on Persons and Family Relations, 2006).
It exists when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity or good conscience (Rabuya, The Law on Persons and Family Relations, 2017 Ed, p. 80).
Article 20 speaks of the general sanction for all other provisions of law which do not especially provide for their own sanction. Article 21 on the other hand, speaks of act which is legal but is contrary to morals, good custom, public order or public policy and is done with intent to injure.
It is an action for unjust enrichment. If a person acquires or comes into possession of something at the expense of another without just or legal ground has the obligation to return the same (Art. 22, NCC).
While under Articles 19 and 21, the act must be done intentionally, Article 20 does not distinguish the act, and may either be willful or negligent. However, the act must be contrary to law (Albenson Enterprise Corporation v. Court of Appeals G.R. No. 88694, January 11, 1993).
ACCION IN REM VERSO
Requisites: 1. Defendant has been enriched; 2. Plaintiff suffered a loss; 3. Enrichment of defendant is without just or legal ground; and 4. Plaintiff has no other action based on contract, quasi contract, crime, or quasidelict (LBP vs. Ong, G.R. No. 190755, November 24, 2010).
BREACH OF PROMISE TO MARRY Breach of promise to marry per se is not an actionable wrong. To be actionable, there must be some act independent of the cause of the breach, such as:
This is applicable only if someone acquires or comes into possession of something (by delivery or acquisition).
a. Fraud or deceit (Gashem Shookat Baksh v. CA, 1993, G.R. No. 97336, February 19, 1993); b. Forcible abduction and rape (Buñag, Jr. v.CA, G.R. No. 101749, July 10, 1992);
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ACCION IN REM VERSO vis-à-vis SOLUTIO INDEBITI.
B. Juridical persons are those created by law (2 Sanchez Roman 112-114). Juridical Capacity vs. Capacity to Act
ACCION IN REM VERSO
SOLUTIO INDEBITI
1. Plaintiff has suffered a loss. 2. Defendant has been enriched. 3. Enrichment is without just or legal ground. 4. Defendant has the obligation to return what was unduly delivered or paid to him. 5. Objective is to prevent unjust enrichment.
JURIDICAL CAPACITY Fitness to be the subject of legal relations. Passive Inherent in every natural person. Lost only through death.
Distinctions: Source of Obligation Source of obligation is Source of obligation is law quasi-contract Reason for delivery or payment The delivery or payment The delivery or payment is not by reason of is by reason of mistake of mistake of fact or mistake fact or mistake in the in the application of a application of a doubtful doubtful or difficult or difficult provision of provision of law. law.
K. CAPACITY TO ACT Capacity is synonymous with personality (I Caguioa, Civil Code, 1967 Ed., p. 74). Juridical capacity is the fitness to be the subject of legal relations, while capacity to act is the power to do acts with legal effect (Art. 37, NCC). The union of both juridical capacity and capacity to act constitutes full civil capacity (2 Sanchez Roman, 112-114). The external manifestation of either juridical capacity or capacity to act. It is the aptitude of being the subject of rights and obligations. (2 Sanchez Roman 114-147). A person is any being, natural or artificial, capable of possessing legal rights and obligations (2 Sanchez Roman 110). KINDS OF PERSONS A. Natural Persons are those human beings created by God through the intervention of the parents; and
Can exist without capacity to act. Cannot be limited or restricted.
CAPACITY TO ACT Power to do acts with legal effects. Active Merely acquired; Not inherent. Lost through death and may be restricted by other causes. Cannot exist without juridical capacity. Can be restricted modified or limited.
1. Restrictions on Capacity to Act (Article 38, NCC) a. Minority (below 18 years old) A minor needs parental consent before he can enter into an ordinary contract, but a contract he entered without parental consent is merely voidable (Art. 1327, NCC) and will arise to certain obligations from him (Cruz v. Court of Appeals, G.R. No. L-40880, October 13, 1979). R.A. 6809 (1989) is an act lowering the age of majority from twenty-one (21) to eighteen (18) years old. Under R.A. 9344, the age of criminal exemption was increased from 9 to 15 years old. A child less than 15 years old is exempted from criminal liability for it is conclusively presumed that he acted without discernment while a child above 15 years old but below 18 years old is presumed to have acted with discernment (Cruz v. Court of Appeals, G.R. No. L-40880, October 13, 1979). Estoppel is the preclusion of minor to annul a contract because of misrepresentation of their age. However, if the minor is guilty of ONLY PASSIVE or CONSTRUCTIVE misrepresentation and not active, he can be allowed to annul the contract upon attaining
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the age of majority (Rabuya, The Law on Persons and Family Relations, 2006, p. 108). b.
Insanity (condition of one whose mental faculties are diseased) or imbecility (a condition of a person whose advanced in age has the mental capacity comparable to that of a child between two to seven years of age) (Rabuya, The Law on Persons and Family Relations, 2006, p. 116).
Insanity in one thing does not mean insanity in another as in the case of monomania or partial insanity (Standard Oil Company of New York v. Arenas, G.R. No. L-5921, July 25, 1911). An insane person under guardianship who entered a contract is presumed to be insane and the contract is voidable, (Francisco v. Herrera, G.R. No. 139982, November 21, 2002) but may be rebutted by substantial evidence that the same acted within his lucid interval, thus such contract is valid (Dumaguin v. Reynolds, G.R. No. L-3572, September 30, 1952). c. Deaf-mute The state of being deaf-mute does not disqualify the ability to give consent. Contracts entered into by deaf-mute are valid. However, a deaf-mute who does not know how to write is declared incapable of giving consent therefore rendering the contract voidable (Rabuya, The Law on Persons and Family Relations, 2006, p. 117). d. Prodigality The state of squandering money or property with a morbid desire to prejudice the heirs of a person. NOTE: Prodigality per se doesn’t automatically modify or restrict a person’s capacity to act. There must be a declaration thereof and be placed under guardianship under the Rules on Special Proceeding. e. Civil interdiction The deprivation by the court of a person’s right: i. To have parental or marital authority;
ii. To be the guardian of the person and property of a ward; iii. To dispose of his property by an act inter vivos (he cannot donate, for this is an act inter vivos; but he can make a will, for this is a disposition mortis causa); and iv. To manage his own property (Art. 34, RPC). ●
The penalty of civil interdiction is given to a criminal punished by imprisonment of 12 years and 1 day or more (Art. 41, RPC).
●
These restrictions do not exempt the incapacitated person from certain obligations when the latter arise from his acts or from property relations such as easem*nts (Art. 38, NCC). MODIFICATIONS OR LIMITATIONS ON CAPACITY TO ACT (Art. 39, NCC) 1. Those enumerated under Art. 38, NCC; 2. Family relations – as to marriage and support: Incestuous and void marriages (Art. 37, FC); b. Donations/grants of gratuitous advantage between spouses during the marriage shall be void, except moderate gifts during family occasions (Art. 87, FC); c. Descendants cannot be compelled to testify in a criminal case, against his parents and grandparents unless: crime was against the descendant or by one parent against the other (Art. 215, FC); d. Spouses cannot sell property to each other, except: Absolute separation is agreed upon in the marriage settlements (Art. 1490, NCC); and e. Judicial separation of property (Art. 1490, NCC). a.
3. Aliens/Foreigners – limitations as to: a. Acquisition of private or public agricultural land; b. Practice medicine (Sec. 226, RAC); c. Vote or be voted upon; and
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therefore it lacked juridical personality, and no action for damages can be constituted. Parents, however, may recover moral damages on account of distress and anguish to the loss of the fetus and the disappointment of their parental expectations (Geluz vs. CA, G.R. No. L-16439, July 20, 1961).
d. Engagement in coast shipping (Sec. 1172, RAC). 4. Absence; 5. Insolvency; and 6. Trusteeship. The consequences of these circ*mstances are governed in this Code, other codes, the Rules of Court, and in special laws (Art. 39, NCC). 2. Birth and Death of Natural Persons BIRTH General Rule: Birth determines personality in case of natural persons (Art. 40, NCC). Exception: The civil personality of the child shall commence from the time of his conception for all purposes favorable to him, subject to the requirements of Art. 41, NCC (Art. 5, P.D. No. 603).
A conceived child, although as yet unborn, is given by law, a provisional personality of its own for all purposes favorable to it (Art. 40, NCC).
When is a child considered born? General Rule: The fetus is considered born if it is alive at the time it is completely delivered from the mother's womb or often the cutting of the umbilical cord (Art. 41, NCC). This holds true even if the same died after a few hours.
Complete delivery means the cutting of the umbilical cord. So, if after the cutting of the umbilical cord the child is alive, even only for a few hours, it is considered a person (I Caguioa, Civil Code, 1967 Ed., p. 82).
XPN: If the fetus had an intrauterine life of less than 7 months and dies within 24 hours after its complete delivery from the mother’s womb is not deemed born (Art. 41, NCC).
There is no dispute that the child was dead when separated from the mother’s womb,
While the Civil Code expressly provides that civil personality may be extinguished by death, it does not explicitly state that only those who have acquired juridical personality could die — one need not acquire civil personality first before he/she could die (Continental Steel Manufacturing Corporation vs. Montaño, G.R. No. 182836, October 13, 2009).
DEATH Civil personality is extinguished by death. The effect of death upon the rights and obligations of the deceased is determined by law, by contract and by will (Art. 42, NCC). Other legal effects of death: 1. The right to support ends (Falcon vs. Arca, G.R. No. L-18135, July 31, 1963); 2. A marriage, whether voidable or valid, also ends, however, the relationship by affinity survives (Intestate Estate of Manolita Gonzales Vda. De Carungcong vs. People, G.R. No. 181409, February 11, 2010); 3. Tenure of public office ends (Abeja vs. Tañada, G.R. No. 112283, August 30, 1994); 4. If a person dies after he has authorized another to sell the former's property, the sale after such death is not valid, if made by the agent with knowledge of the principal’s death. This is true even if the buyer is in good faith (Rallos vs. Felix Go Chan and Sons Realty Corporation, G.R. No. L-24332, January 3, 1978); 5. The moment a person dies, juridical capacity is extinguished. Therefore, he could not be validly served with summons nor convicted (Dumlao vs. Quality Plastic Products, Inc., G.R. No. L-27956, April 30, 1976); 6. Death extinguishes criminal liability but not civil liability, therefore, the case shall continue in order to determine the civil
15
liability of the accused (People vs. Tirol, G.R. No. L-30538, January 31, 1981).
Estate of a deceased is a person that may continue the personality of the deceased even after death for the purpose of settling debts (Limjuco vs. Estate of Pedro Fragrante, G.R. No. L-770, April 27, 1948).
The moment a person dies, juridical capacity is extinguished. Therefore, he could not be validly served with summons nor convicted (Dumlao vs. Quality Plastic Products, Inc., G.R. No. L-27956, April 30, 1976).
Death extinguishes criminal liability but not civil liability, therefore, the case shall continue in order to determine the civil liability of the accused (People vs. Tirol, G.R. No. L-30538, January 31, 1981).
In the case of Geluz vs. Court of Appeals
(G.R. No. L-16439, July 20, 1961), the husband of the wife who had an abortion filed a claim for damages against the physician who performed the abortion arguing that he does not consent thereto. Here, there is no dispute that the child was dead when separated from the mother’s womb, therefore it lacked juridical personality. Hence, no right of action for pecuniary damages could derivatively accrue to the parent of the unborn fetus since an action for such damages an account of personal injury or death pertains primarily to the one injured.
🕮 In the case of Continental Steel Manufacturing Corporation vs. Montaño (G.R. No. 182836, October 13, 2009), on the other hand, the father of the unborn child filed a claim for paternity leave, bereavement leave and death benefits as provided under the collective bargaining agreement between the employer and the employees. However, the employer denied the claim for bereavement leave and other death benefits arguing that only one with civil personality could die and hence, the unborn child never died because it never acquired juridical personality. Here, the Supreme Court granted said benefits holding that, although the fetus was dead from the moment of delivery, the Civil Code does not explicitly state that only those who have acquired juridical personality could die. Death has been defined as cessation of life, and life is not synonymous with civil personality. One need not acquire civil personality first before he/she could die. Even a child inside the womb already has life. If the unborn already has life, then the cessation thereof even prior to the child being delivered qualifies death. Moreover, the rights to bereavement leave and death other benefits in this case pertain directly to the parents of the unborn child upon the latter’s death.
3. Presumption of Survivorship If there is a doubt, as between two or more persons who are called to succeed each other, as to which of them died first, the following shall be observed: a. Whoever alleges the death of one prior to the other, shall prove the same; b. In the absence of proof, it is presumed that they died at the same time and there shall be no transmission of rights from one to the other (Art. 43, NCC). ELEMENTS In order for Article 43 of the New Civil Code to apply, two requisites must be satisfied: 1. The question of survivorship involves persons who are called to succeed each other. 2. The issue involves successional rights. If one of both requisites is absent, it is the rule on survivorship under the Rules of Court that shall govern and not Article 43 of the New Civil Code. The survivorship is determined from the probabilities resulting from the probabilities resulting from the strength and age of the sexes (Rabuya, The Law on Persons and Family Relations, 2017 Ed., p. 156).
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L. SURNAMES (Arts. 364-380, NCC) General Rule: No person shall use different names and surnames (Art. 380, NCC). The given name may be freely selected by the parents for the child, but the surname to which the child is entitled is fixed by law (Rabuya, The Law on Persons and Family Relations, 2017 Ed., p. 1028). Exception: The employment of pen names or stage names is permitted, provided it is done in good faith and there is no injury to third persons (Art. 379, NCC). Change of First Name Governing Law: RA 9048 now governs the change of first name. It vests the power and authority to entertain petitions for change of first name to municipal civil registrar or consul general concerned. Under the law, jurisdiction over applications for first name is primarily lodged with said administrative officers (Rabuya, Civil Law Reviewer Vol. 1, 2017, p. 298). Grounds for Change of First Name (Sec. 4, R.A. No. 9048): 1. The petitioner finds that the first name or nickname to be ridiculous, tainted with dishonor or extremely difficult to pronounce; 2. The new first name or nickname has been habitually and continuously used by the petitioner and he has been publicly known by that first name or nickname in the community; and, 3. The change will avoid confusion. Change of Name other than the First Name Governing Law: Rule 103 is now limited to change of name other than the first name which may include therefore change of surname or possibly, the middle name (Rabuya, Civil Law Reviewer Vol. 1, 2017, p. 300). Grounds for Change of Name other than the First Name 1. When the name is ridiculous, dishonorable or extremely difficult to pronounce; 2. When the change results as a legal consequence, as in legitimation; 3. When the change will avoid confusion;
4. When one has continuously used and known since childhood by a Filipino name, and was unaware of his alien parentage; 5. A sincere desire to adopt a Filipino name to erase signs of former alienage, all in good faith and without prejudicing anybody; 6. When the surname causes embarrassment and there is no showing that the desired change of name was for a fraudulent purpose or that the change of name would prejudice public interest (In re: Petition for Change of Name and/or Correction of Entry in the Civil Registry of Julian Lin Carulasan Wang, G.R. No. 159966, March 30, 2005). Before a person can legally change his given name, he must present proper or reasonable cause or any compelling reason justifying such change. In addition, he must show that he will be prejudiced by the use of his true and official name. Under the Civil Register Law, a birth certificate is a historical record of the facts as they existed at the time of birth. Thus, the sex of a person is determined at birth, visually done by the birth attendant (the physician or midwife) by examining the genitals of the infant. Considering that there is no law legally recognizing sex reassignment, the determination of a person’s sex made at the time of his or her birth, if not attended by error, is immutable (Silverio vs. Republic, G.R. No. 174689, Oct. 22, 2007). Surnames of Children 1. Legitimate and legitimated children shall principally use the surname of the father (Art. 364, NCC). However, the word “principally” in the provision is not equivalent to “exclusively” such that there is no legal obstacle for her to choose to use the surname of her mother to which she is entitled (Alfon vs. Republic, G.R. No. L-51201, May 29, 1980). A legitimate child cannot be allowed to change his surname by dropping the surname of the legitimate father and replacing it with the surname of the stepfather because confusion indeed might arise in the child’s paternity
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(Republic vs. Court of Appeals, G.R. No. 88202, December 4, 1998).
Julian Lin Carulasan Wang, G.R. No. 159966, March 30, 2005).
2. An adopted child shall bear the surname of the adopter (Art. 365, NCC).
5. Art. 176 gives illegitimate children the right to decide if they want to use the surname of their father or not. It is not the father or the mother who is granted by law the right to dictate the surname of their illegitimate children (Art. 176 as amended by R.A. No. 9255; Grande vs. Antonio, G.R. No. 206248, October 18, 2014).
The use of the surname of the adopter refers to the adopter’s own surname and not her surname acquired by virtue of marriage (Valdes-Johnson vs. Republic, G.R. No. L-18284, April 30, 1963). Pursuant to the present law on adoption which make it mandatory upon the spouses to jointly adopt, the above rule is applicable only in the following situations:
Rules governing the use of surname by a Married Woman
a. if the wife adopts her own illegitimate child with the consent of the husband; b. if the spouses are legally separated and only the wife filed the adoption; and c. if the adoption was made by the woman prior to her marriage (Rabuya, The Law on Persons and Family Relations, 2017 Ed., Pg. 1037-1038).
a. Her maiden first name and surname and add her husband’s surname; or b. Her maiden first name and her husband’s surname; or c. Her husband's full name but prefixing a word indicating that she is his wife, such as “Mrs” (Art. 370, NCC).
3. Illegitimate children referred to in Art. 287 shall bear the surname of the mother. 4. Children conceived before the decree annulling a voidable marriage shall principally use the surname of the father (Art. 369, NCC). A middle name has practical or legal significance as it serves to identify the maternal pedigree or filiation of a person and distinguishes him from others who may have the same given name and surname as he has. Art. 364 of the Civil Code states that legitimate and legitimated children shall principally use the surname of their father. Art. 174 of the Family Code gives legitimate children the right to bear the surnames of the father and mother, while illegitimate children, under Art. 176, as amended by R.A. 9255, shall use the surname of their mother, unless their father recognizes their filiation, in which case, they may bear the father's surname. In the case of these children, their registration in the civil registry requires that their middle names be indicated therein, apart of course from their given names and surnames (In re: Petition for Change of Name and/or Correction of Entry in the Civil Registry of
1. A married woman may use:
🕮 The wife may still opt to use her maiden name because the above is only permissive and not mandatory. The use of “may” in Article 370 of the NCC indicates that the use of the husband’s surname by the wife is permissive rather than obligatory (In re: Josephine P. Uy-Timosa, Bar Matter No. 1625, July 18, 2006). 2. In case of annulment of marriage: a. If the wife is the guilty party, she shall resume her maiden name and surname; b. If she is the innocent spouse, she may resume her maiden name and surname. However, she may choose to continue employing her former husband’s surname, unless the court decrees otherwise; or she or the former husband is married again to another person (Art. 371, NCC). c. When legal separation has been granted, the wife shall continue using her name and surname employed before the legal separation (Art. 372, NCC).
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Once a married woman opted to adopt her husband's surname in her passport, she may not revert to the use of her maiden name, except in the cases enumerated in Sec. 5 (d) of RA 8239. These instances are: (1) death of husband, (2) divorce, (3) annulment, or (4) nullity of marriage. Since the petitioner's marriage to her husband subsists, she may not resume her maiden name in the replacement passport. Otherwise stated, a married woman's reversion to the use of her maiden name must be based only on the severance of the marriage (Remo vs. DFA, G.R. No. 160202, March 5, 2010).
M. RULES GOVERNING PERSONS WHO ARE ABSENT
3. A widow may use the deceased husband’s surname as though he were still living, in accordance with Art. 370 (Art. 373, NCC).
DUTY OF JUDGE. The judge shall take the necessary measures to safeguard the rights and interest of the absentee and shall specify the powers, obligations and remuneration of his representative, regulating them, according to the circ*mstances, by the rules concerning guardians (Art. 382, NCC).
Rules in case of identity of names or surnames 1. The younger person shall be obliged to use additional name or surname (Art. 374, NCC); 2. In case of ascendants and descendants: a. The word “Junior” can only be used to a son; b. Grandsons and other male descendants shall either: (i) add a middle name or the mother’s surname, or (ii) add the roman numerals II, III and so on (Art. 375, NCC).
STAGES OF ABSENCE 1. PROVISIONAL ABSENCE APPOINTMENT. When a person disappears from his domicile, his whereabouts being unknown, and without leaving an agent to administer his property, the judge, at the instance of an interested party, a relative, or a friend, may appoint a person to represent him in all that may be necessary (Art. 381, NCC). This same rule shall be observed when under similar circ*mstances the power conferred by the absentee has expired (Art. 381, NCC).
PREFERENCE IN APPOINTMENT. In the appointment of a representative: 1. The spouse present shall be preferred when there is no legal separation; or 2. If the absentee left no spouse, or if the spouse present is a minor, any competent person may be appointed by the court (Art. 383, NCC);
Usurpation of Names 1. Usurpation of a name and surname may be the subject of an action for damages and other relief (Art. 377, NCC). 2. The unauthorized or unlawful use of another person's surname gives a right of action to the latter (Art. 378, NCC). 3. Pen names and stage names cannot be usurped (Art. 379, NCC).
2. DECLARATION OF ABSENCE a. Without administrator – have elapsed without about the absentee or receipt of the last news; b. With administrator – Five elapsed (Art. 384, NCC).
Two years any news since the years have
Who may ask for the declaration of absence? 1. The spouse present;
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2. The heirs instituted in a will, who may present an authentic copy of the same; 3. The relatives who may succeed by the law of intestacy; and 4. Those who may have over the property of the absentee some right subordinated to the condition of his death (Art. 385, NCC). PUBLICATION. The judicial declaration of absence shall not take effect until six months after its publication in a newspaper of general circulation (Art. 386, NCC). 3. ADMINISTRATION OF THE ABSENTEE’S PROPERTY The wife who is appointed as an administrator of the husband’s property cannot alienate or encumber the husband’s property, or that of the conjugal partnership, without judicial authority (Art. 388, NCC). TERMINATION OF ADMINISTRATION 1. When the absentee appears personally or by means of an agent; 2. When the death of the absentee is proved, and his testate or intestate heirs appear; 3. When a third person appears, showing by a proper document that he has acquired the absentee’s property by purchase or other title. In these cases, the administrator shall cease in the performance of his office, and the property shall be at the disposal of those who may have a right thereto (Art. 389, NCC). 4. PRESUMPTION OF DEATH Ordinary Presumption General rule: A person shall be presumed dead for all purposes after absence for a period of 7 years. Exception: Succession
1. In succession, 10 years is required for presumption of death. 2. If absentee disappeared after age 75, 5 years shall be sufficient (Art. 390, NCC). Extraordinary Presumption (for all purposes including opening of succession) The following shall be presumed dead after four years: a. A person on board a vessel lost during a sea voyage, or an aeroplane which is missing, since the loss of the vessel or aeroplane; b. A person in the armed forces who has taken part in war, and has been missing; c. A person who has been in danger of death under other circ*mstances and his existence has not been known (Art. 391, NCC). Exception: If for purposes for remarriage, it shall be two years. If the absentee appears, or without appearing his existence is proved, he shall recover his property in the condition in which it may be found, and the price of any property that may have been alienated or the property acquired therewith; but he cannot claim either fruits or rents (Art. 392, NCC). Presumptive Death of absent spouse under the Family Code (Art. 41, NCC) Requisites for the Declaration of Presumptive Death: a. Prior spouse had been absent for four consecutive years, or two years where there is danger of death under Art. 391, New Civil Code at the time of disappearance; b. Spouse present has a well-founded belief that the absent spouse is already dead; and c. The present spouse must institute a summary proceeding for the declaration of presumptive death of the absentee.
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To avoid being charged and convicted of bigamy, the above-mentioned requisites must concur, and the present spouse must secure a judicial declaration of presumptive death before contracting a subsequent marriage.
Presumptive Death Art. 390 and 391 of the New Civil Code. 1. Articles 390 and 391 of the Civil Code merely express rules of evidence that only allow a court or a. tribunal to presume that a person is dead upon the establishment of certain facts. 2. Since Articles 390 and 391 of the Civil Code merely express rules of evidence, an action brought exclusively to declare a person presumptively dead under either of the said articles actually presents no actual controversy that a court could decide. In such action, there would be no actual rights to be enforced, no wrong to be remedied nor any status to be established.
3. A judicial pronouncement declaring a person presumptively dead under Article 390 or Article 391 of the Civil Code, in an action exclusively based thereon, would never really become "final" as the same only confirms the existence of a prima facie or disputable presumption. The function of a court to render decisions that is supposed to be final and binding between litigants is thereby compromised. 4. Moreover, a court action to declare a person presumptively dead under Articles 390 and 391 of the Civil Code would be unnecessary. The presumption in the said articles is already established by law (Tadeo-Matias vs Republic, G.R. No. 230751, April 25, 2018).
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ABSENCE AND REMEDIES STAGES OF ABSENCE
Provisional Absence
WHEN TO FILE
No statutory period
WHO MAY FILE
Spouse
REMEDY
a. b. c.
Declared Absence
Without administrator – 2 years from time of disappearance. With administrator – 5 years from the time of disappearance.
a. The spouse; b. Voluntary heirs; and c. Intestate heirs; and d. Those who may have over the property of the absentee some right subordinated to condition of the absentee’s death.
Receivership; Judicial separation of property; or Authority to be sole administrator of the conjugal partnership.
Declaration of Absence and Appointment of Administrator (spouse shall be preferred) but only under the following cases when: a. Absentee has properties which have to be taked care of or administered by a representative appointed by the Court. b. Spouse of the absentee is asking for separation of property. c. Spouse of the absentee is asking the Court that the administration of all classes in the marriage be transferred to her.
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II. MARRIAGE
Marriage v. Ordinary Contracts
A marriage is a special contract of permanent union between a man and a woman entered into in accordance with law for the establishment of conjugal and family life. It is the foundation of the family and an inviolable social institution whose nature, consequences, and incidents are governed by law and not subject to stipulation, except that marriage settlements may fix the property relations during the marriage within the limits provided by the Code (Art. 1, FC).
Marriage is a contract sui generis, differing in notable respects from ordinary contracts (Rabuya, The Law on Persons and Family Relations, 2021, p. 192).
A. GENERAL PRINCIPLES 1. It is a special contract of permanent union between a man and a woman; 2. It is the foundation of the family; and 3. It is an inviolable social institution (Ibid). 🕮 Persons dwelling together in apparent matrimony are presumed, in the absence of counter-presumption or evidence special to the case, to be in fact married. The reason is that such is the common order of society, and if the parties were not what they thus hold themselves out as being, they would be living in the constant violation of decency and of law. There is a presumption in favor of marriage (Adong vs. Cheong See Gee, G.R. No. 18081, March 3, 1922). 🕮 Presumption in favor of a valid marriage (Balogbog vs. CA, G.R. No. 83598, March 7, 1997). 🕮 The best documentary evidence of a marriage is the marriage contract. However, the failure to present it is not, however, proof that no marriage took place, as other evidence may be presented to prove marriage (Balogbog vs. CA, G.R. No. 83598, March 7, 1997). 🕮 Under the Constitution, marriage, as an inviolable social institution, is the foundation of the family and shall be protected by the state (Sec. 2, Art. XV of the 1987 Constitution).
MARRIAGE Both a contract and a social institution. Nature, consequences and incidents are governed by law – not by the parties (XPN: marriage settlement) and cannot be subject to stipulations. Legal capacity is required. Marrying age is 18 years old and above and does not have legal impediments mentioned in Articles 37 and 38, FC (Art. 5,
FC)
Can be dissolved only by death or annulment, not by mutual agreement.
Only a man and a woman can enter into marriage. Only 2 persons of the opposite sex may enter into contract. Breach of the obligation imposed by law doesn’t give rise to damages – there may only be penal or civil sanctions. Governed by the Law on Marriage
ORDINARY CONTRACT Merely a contract. Stipulations are generally fixed by the parties provided that the same are not contrary to law, morals, good customs, public order, or public policy. The age of ordinary contract is the age of majority (18 years old) XPN: Minors may Contract through their parents or guardians or in some instances, by themselves. Can be ended by mutual agreement and by other legal causes like expiration of the term of contract or fulfillment of the purpose to which the contract was entered into. Gender of either party is not important. May be entered into by any number of persons. Breach of contract gives rise to an action for damages.
Governed by the Law on Contracts
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REQUISITES OF MARRIAGE
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1. ESSENTIAL REQUISITES (Art. 2, FC) 1) Legal capacity
Parties must have the necessary consent of parents if contracted marriage at the age of 18 years old but below 21 years old (Art. 14, FC).
2. FORMAL REQUISITES
a. Parties must be a male and a female; Two females are incapable of entering into marriage. There is no constitutional protection of the rights of marriage between two persons of the same sex (Jones v. Hallahan, 501 S.W.2d 588, November 9, 1973).
1) Authority of Solemnizing Officer; 2) Valid marriage license (not a marriage certificate), except in a marriage of exceptional character; and 3) Marriage ceremony – which takes place with the:
b. 18 years old and above; and
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The attainment of the required minimum age should be reckoned, not on the date of filing of the application for issuance of a marriage license, but on the date of the marriage. Pursuant to Article 6 of the Family Code, parties may contract marriage on the date of the solemnization of the marriage, i.e., when they appear personally before the solemnizing officer and declare in the presence of not less than two witnesses of legal age that they take each other as husband and wife (Rabuya, The Law on Persons and Family Relations, 2021).
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c.
▪
Effects of Absence of Requisites: 1. Absence of any of the essential requisites – void ab initio (Art. 4, FC) 2. Absence of any of the formal requisites – void ab initio (Art. 4, FC)
Not subject to any legal impediments in Arts. 37 and 38 of Family Code (Art. 5, FC).
Exception: Valid even in the absence of formal requisites:
2) Consent of the contracting parties ▪
▪
a. Marriages which are exempted from obtaining a marriage license (Arts. 27-34, FC). b. In case either or both parties believed in good faith that the solemnizing officer had the proper authority.
Freely given – not vitiated nor rendered defective by fraud, violence, force, undue influence, intimidation, or mistake (FVUIM). If consent is vitiated with error, fraud, intimidation, etc., it is merely voidable (valid until annulled). However, if there is absolutely no consent at all, as it was intended to be a jest, the marriage is void. Made in the presence of a solemnizing officer; and
Personal appearance of the contracting parties before solemnizing officer; Their personal declaration that they take each other as husband and wife; and In the presence of not less than two witnesses of legal age (Art. 3, FC).
3. Defect in any of the essential requisites – voidable (Art. 4, FC) 4. Irregularity in any of the essential requisites – Valid, but the party responsible shall be civilly, criminally and administratively liable (Art. 4, FC). 🕮
The issuance of a marriage license despite neither the parties are residents of the city or municipality which issued the same is a mere irregularity and does not affect the
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validity of the marriage (Alcantara vs. Alcantara, G.R. No. 167746, August 28, 2007). 🕮
Once the presumption of marriage arises, other evidence may be presented in support necessary/direct to establish the marriage but at least enough to strengthen the presumption of marriage. Every intention of law leans towards legitimizing marriage (Delgado vda De dela Rosa vs. Marciana vda de Damian, G.R. No. 155733, January 26, 2006).
Daguman, A.M. No. 99-1211 January 28, 2000). The defect is a mere irregularity in a formal requisite (Navarro vs. Domagtoy, A.M. No. MTJ-96-1088, July 19, 1996).
Members of the Judiciary: 1. Metropolitan/Municipal Trial Courts (MTC) and Regional Trial Courts (RTC) Judges – within their territorial jurisdiction 2. Court of Appeals, Court of Tax Appeals, Sandiganbayan, and Supreme Court Justices – anywhere in the Philippines
Some of the irregularities in the formal requisites include: 1. Marriage solemnized by a judge outside the court’s jurisdiction; 2. Presence of only one witness; 3. Lack of legal age of witness; 4. Failure to comply with the procedural requirements under Art. 12, FC; 5. Non-observance of 3-month period under Art. 15; and 6. Failure to comply with the requirements of notice under Art. 17, FC. a. Authority of Solemnizing Officer General Rule: Those solemnized by any person not legally authorized to perform marriages are void (Art. 35, par. 2, FC). Exception: The marriage was contracted with either or both parties believing in good faith that the solemnizing officer had the legal authority to do so. If a person seeks to impugn the validity of a marriage on the ground that the person who solemnized it was not really authorized, such lack of authority must be proved by the person petitioning (De Cardenas vs. Cardenas, et al., G.R. No. L-8218, Dec. 15, 1955).
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Where a judge solemnizes outside his court’s jurisdiction, there is a resultant irregularity in the formal requisite laid down in Article 3, which while it may not affect the validity of the marriage, may subject the officiating official to administrative liability (Navarro v. Domagtoy, A.M. No. MTJ-96-1088, July 19, 1996).
b. Priests, rabbis, ministers of any church Requisites to Perform Marriage: 1. Must be duly authorized by his or her church or religious sect in writing; 2. Must act within the limits of the written authority granted to him or her by the church or religious sect; 3. His written authority must be registered with the civil registrar general; and 4. At least one of the contracting parties belongs to the solemnizing officer’s church or religious sect (Art. 7 [2], FC). c. Ship captains or airplane chiefs or pilot
Solemnize
Requisites to Perform Marriage: 1. The marriage must be in articulo mortis (at least one of the parties is at the point of death).
a. Any incumbent member of the judiciary within the court’s jurisdiction
Effect of recovery from illness of dying person – Marriage is still valid (Art. 27, FC);
A marriage solemnized by a judge outside the court’s jurisdiction will not affect the validity of the marriage but may subject the officiating official to administrative liability (Beso vs.
2. The marriage must be between passengers or crew members; and
Persons Authorized to Marriages: (Art. 7-8, 10, FC)
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3. Generally, the plane must be in flight or the ship must be at sea or during stopovers at the port of call (Art. 31, FC). d. Military commanders of a unit; Requisites to Perform Marriage: 1.
He or she must be a commissioned officer, or an officer in the armed forces holding rank by virtue of a commission from the president (his rank should start from a second lieutenant, ensign and above); 2. Assigned chaplain must be absent at the time of the marriage; 3. The marriage must be one in articulo mortis; and 4. The contracting parties, whether members of the armed forces or civilians, must be within the zone of military operation (Art. 32, FC). e. Consul generals, consuls or vice consuls Marriages between Filipino citizens abroad may be solemnized by them. When performed abroad, or specifically in his place of assignment, the solemnities established by Philippine laws shall be observed in their execution (Art. 10, NCC). f.
Duly elected mayors of cities and municipalities pursuant to the Local Government Code.
The mayor of a city or municipality, within their exclusive jurisdiction, is empowered to solemnize a marriage (Sec. 444 [b](1)(xviii), Local Government Code). 🕮
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When the mayor is temporarily incapacitated to perform his duties for physical or legal reasons such as, but not limited to, leave of absence, travel abroad, any suspension from office, the vice mayor or the highest ranking Sangguniang Bayan member shall automatically exercise the powers and perform the duties of the local chief executive (Sec. 46, LGC). They were not included under the Family Code but their authority was restored by the Local Government Code, which took effect
on 1 January 1992. Thus, if a marriage was celebrated by a mayor after the effectivity of the Family Code on 3 August 1988 but prior to the effectivity of the Local Government Code on 1 January 1992, such marriage is void ab initio (Rabuya, The Law on Persons and Family Relations, 2006, p. 167). Duty of the Solemnizing officer: The solemnizing officer shall state under oath that he ascertained the qualifications of the contracting parties and found no legal impediment to the marriage (Art. 34, FC). Public Solemnization – based on the premise that the State takes an active interest in marriage. It may be done in the: 1. Chambers of the judge or in open court; 2. Church; 3. Chapel or temple; or 4. Office of the consul-general, consul or viceconsul (Estrada vs. Escritor, AM No. P-02-1651, June 22, 2006). Exceptions to the Public Solemnization: 1. At the point of death (articulo mortis); 2. In a remote place; or 3. When both of the parties requested in writing, solemnization in some other place. It must be stated in the sworn statement (Navarro vs. Judge Dumagtoy, AM No. MTJ-961088, July 19, 1996). b. Valid Marriage License (Articles 3[2], 9, 11, 20, and 26, FC). A marriage license is required in order to notify the public that two persons are about to be united in matrimony and that anyone who is aware or has knowledge of any impediment to the union of the two shall make it known to the local civil registrar. The requirement and issuance of marriage license is the State’s demonstration of its involvement and participation in every marriage (Rabuya, The Law on Persons and Family Relations, 2018).
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What is required is the marriage license, not the marriage certificate. The latter is not an essential or formal requisite; thus, an oral solemnization is valid. In fact, a marriage may be proved by oral evidence (Paras, 2016). 1. Marriage License following data: a. b. c. d. e. f. g. h. i. j.
must
include
the
Full name of the contracting parties; Place of birth; Age and date of birth; Civil status; If previously married, how, when and where the previous marriage was dissolved or annulled; Present residence or citizenship; Degree of relationship of the contracting parties; Full name, residence and citizenship of the father; Full name, residence and citizenship of the mother; and Full name, residence and citizenship of the guardian or person having charge, in case the contracting party has neither father nor mother and is under the age of 20 years old (Art. 11, FC).
2. Validity: Valid in any part of the Philippines for a period of one hundred twenty (120) days from date of issue. It is deemed automatically cancelled at the expiration of the said period (Art. 20, FC). 3. Place of Issuance: a. If within the Philippines – in the local civil registrar of the city or municipality where either contracting party habitually resides. b. If outside the Philippines – in the office of the consular officials. Under this rule, when a marriage between Filipino citizens is performed abroad, the Filipino consular official shall discharge the duties of the LCR and of the solemnizing official (Art. 10, FC).
Certificate of Compliance (RH LAW) No marriage license shall be issued by the Local Civil Registrar unless the applicants present a Certificate of Compliance issued for free by the local Family Planning Office certifying that they had duly received adequate instructions and information on responsible parenthood, family planning, breastfeeding and infant nutrition (Sec. 15, The Responsible Parenthood and Reproductive Health Act of 2012). Special Requirements for Application of Marriage License a.
Person previously married: (Art. 13, FC) 1. Death certificate of deceased spouse; and in case the death certificate cannot be secured, the party shall make an affidavit setting forth this circ*mstance and his/her actual civil status and name and date of death of the deceased spouse. 2. Judicial decree of annulment or declaration of nullity of previous marriage. 🕮
Petition for cancellation of entries in the marriage contract filed with the NSO, specifically the entries in the wife portion thereof on ground that the identity of the petitioner is stolen is allowed (Republic vs. Olaybar G.R. No. 189538, February 10, 2014).
b. Persons between 18 and 21 years old: (Art. 14, FC) 1. Parental consent of parents, guardian or person exercising substitute parental authority; and 2. Certificate of marriage counseling (Art. 16, FC). Lack of Parental Consent – The marriage is voidable (Art. 45[1], FC).
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c. Persons between 21 and 25 years old: (Art. 15, FC) 1. Parental advice of parents or guardian; and 2. Certificate of marriage counseling issued by: a. Priest, imam or minister authorized to solemnize marriage; or b. Marriage counselor accredited by proper government agency. Lack of Parental Advice or Marriage Counseling – There is no effect on the validity of marriage. However, the issuance of the marriage license will be suspended for a period of three months from the completion of the 10-day publication of the application for marriage license (Art. 15 and 16, FC). Marriage Performed During the 3-Month Period Without a License – The marriage shall be void (Art. 17, FC). Marriage License Obtained During the 3Month Prohibition – The marriage will be valid subject to civil and criminal liabilities on the part of the erring party or parties. The issuing offices shall be subjected to administrative sanctions (Art. 17, FC). d. Foreigners: When either or both parties are foreign nationals: Certificate of legal capacity to contract marriage , issued by a diplomatic or consular official, shall be submitted before a marriage license can be obtained (Art. 21, FC). e. Stateless Persons or Refugees from other Countries: a. Affidavit stating circ*mstances showing capacity to contract marriage; and b. Marriage license issued only after the completion of the 10-day publication of application (Art. 21, FC). The status of the marriage celebrated on the basis of a license issued without the required
Certificate of Legal Capacity is valid as this is merely an irregularity in complying with a formal requirement of the law in procuring a marriage license, which will not affect the validity of the marriage (Garcia v. Recio, G.R. No. 138322, October 2, 2001). 2. EXEMPTION FROM LICENSE REQUIREMENT (Arts. 27, 28, 31 to 34, FC) a. In Articulo mortis (Art. 27, 31 & 32) 1. Either or both of the contracting parties are at the point of death. 2. Marriage shall remain valid even if the ailing party subsequently survives. 🕮
A witness should sign the dying party’s signature if the latter be physically unable to do so (Cruz vs. Catandes, CA., 39 O.G. No. 18, p. 324).
b. In Remote Places (Art. 28) The residence of either party is located where there is no means of transportation to enable such party to appear personally before the local civil registrar. 🕮
There is no prescribed minimum or maximum distance, unlike that in the Civil Code.
Duty of the Solemnizing officer in marriages in articulo mortis and solemnized in remote places: 1. State in an affidavit executed before the local civil registrar or any other person legally authorized to administer oaths that the marriage was performed in (i) articulo mortis, or that (ii) the residence of either party, specifying the barrio or barangay, is so located that there is no means of transportation to enable such party to appear personally before the local civil registrar; 2. The officer took the necessary steps to ascertain the ages and relationship of the contracting parties and the absence of legal impediment to the marriage; (Art. 29, FC) and
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3. Send the affidavit stated above and the marriage contract to the local civil registrar of the municipality where it was performed within the period of thirty days after the performance of the marriage (Art. 30, FC).
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The falsity of an affidavit of marital cohabitation, where the parties have in truth fallen short of the minimum fiveyear requirement, effectively renders the marriage void ab initio for lack of a marriage license. It is the actual period of cohabitation that is essential to the validity of the affidavit of cohabitation (Republic vs. Dayot, G.R. No. 175581, March 28, 2008).
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The falsity of an affidavit of cohabitation CANNOT be used as a defense in the crime of bigamy, for it will be the height of absurdity for the Court to allow the accused to use her illegal act to escape criminal conviction (Santiago vs. People, G.R. No. 200233, July 15, 2015).
Effect of solemnizing officer’s failure to execute an affidavit It will have no effect as to the validity of the marriage. The marriage will still be valid. The local civil registrar is given the original of the affidavit which takes the place of a marriage license (Paras, 2016). Such affidavit is not an essential or formal requisite of marriage, the same with a Marriage Contract. The signing of the marriage contract and the affidavit is only required for the purpose of evidencing the act, not a requisite of marriage. It is the obligation of the solemnizing officer. It does not affect the validity of marriage (De Loria v. Felix, G.R. No. L-9005, June 20, 1958). c.
Cohabitation for at least 5 years (Art. 34, FC)
Requisites: 1. The parties must have been living together as husband and wife for at least 5 years; 2. The parties must have no legal impediment to marry each other; 3. The fact of absence of legal impediment between the parties must be present at the time of marriage; and 4. The parties must execute an affidavit stating that they have lived together for at least five years and are without legal impediment to marry each other (Orja-Manzano vs. Sanchez, A.M. No. MTJ-00-1329, March 8, 2008). The five-year period must be: ▪ continuous and uninterrupted; ▪ counted backwards from the day of the celebration of marriage; and ▪ characterized by exclusivity, meaning, no third party was involved at any time within the five years (Niñal vs. Bayadog, G.R. No. 133778, March 14, 2000).
d. Solemnized outside the Philippines where no marriage license is required by the country where it is solemnized. If the marriage was celebrated before the diplomatic or consular officials of the Republic of the Philippines in a foreign country, marriage license is still required (Art.17, NCC). e. Marriages among Muslims or among members of the ethnic cultural communities, provided they are solemnized in accordance with their customs, rites or practices (Art. 33, FC). C. Marriage Ceremony No prescribed form or religious rite for the solemnization of marriage is required (Art. 6, FC). Minimum requirements prescribed by law: 1. Appearance of contracting parties personally before the solemnizing officer (Art. 3, FC); 2. Personal declaration that they take each other as husband and wife (Art. 3, FC); 3. Presence of at least two witnesses of legal age (Art. 3, FC); 4. The declaration shall be contained in the marriage certificate; and (Art. 6, FC) 5. Marriage certificate shall be signed by the contracting parties and their witnesses and attested by the solemnizing officer (Art. 6, FC).
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In cases of Articulo Mortis, when the party is at the point of death and cannot sign the Marriage Certificate, it is sufficient that one of the witnesses write the name of the party, which will be attested by the solemnizing officer (Art. 6, FC). Civil Weddings during the Modified Enhanced Community Quarantine Civil weddings may be solemnized provided that: 1. The parties and guests shall not exceed 5; 2. Observance of health hygiene protocols and other public medical standards (wearing of face masks and face shields, subjecting everyone to no contact thermal scanning, and observance of social distancing. This rule is applicable during the declaration of the MECQ in the National Capital Region, Cebu City and Laguna (Admin. Circular No. 39 s. 2020). Validity of Marriage by Proxy (one where the other party is merely represented by a delegate or friend):
marriage certificate (Villanueva vs. CA, G.R. No. 84464, June 21, 1991). 🕮
There is a legal presumption that a man and woman deporting themselves as husband and wife have entered into a lawful contract of marriage (Sec. 5 [bb], Rule 131 of the Rules of Court), but may however be rebutted by evidence showing that the marriage did not actually take place (Fernandez vs. Puatdu, G.R. No. L-10071, October 31, 1957). MARRIAGE LICENSE
Authorization by the state to celebrate marriage. Formal requisite of marriage.
MARRIAGE CERTIFICATE Best documentary evidence of a marriage. Neither an essential or formal requisite of marriage.
Secondary Evidence – If primary evidence is not available. a. Testimonies of witness to matrimony. b. Couple’s public and open cohabitation as husband and wife after the alleged wedlock. c. Birth/baptismal certificates of children born during such union. d. Mention of such nuptials in subsequent documents (Trinidad vs. CA, G.R. No. 118904, April 20, 1998).
1. Not valid if celebrated in the Philippines since the presence of the contracting parties is required (Art. 6, FC). 2. Valid if celebrated abroad and valid there as such (Art. 26, FC). 3. The marriage by proxy is deemed celebrated at the place where the delegate or the proxy appears.
B. MIXED DIVORCE
Proofs of Marriage
Effect of Foreign Divorce
Primary Evidence – The marriage contract or certificate of marriage (Villanueva vs. CA, G.R. No. 84464, June 21, 1991).
General Rule: Divorce contemplates the dissolution of the lawful union for cause arising after the marriage. Absolute divorce is not recognized in the Philippines (Tolentino, Civil Code of the Philippines, Vol. 1, 2004 ed.).
Marriage Certificate (Article 22, FC) 🕮
A marriage certificate is not an essential or formal requisite of marriage and without which, the marriage remains valid. It is merely a proof of marriage (Madridejo vs. De Leon, G.R. No. 32473, October 6, 1993).
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The best documentary evidence of a marriage is the marriage contract or the
MARRIAGES
AND
FOREIGN
Exception: Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to remarry, the Filipino spouse shall have capacity to remarry under Philippine law (Art. 26 [2], FC).
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Requisites:
Requirements to prove foreign marriage:
a. There is a valid marriage that has been celebrated between a Filipino citizen and a foreigner; and b. A valid divorce is obtained abroad capacitating the alien spouse and the Filipino spouse to remarry (Art. 26[2], NCC).
1. The existence of the pertinent provision of the foreign marriage law; and 2. The celebration and performance of the marriage in accordance with the said law (Fujiki vs. Marinay G.R. No. 196049, June 26, 2013; Corpuz vs. Sto. Tomas, G.R. No. 186571, 11 August 2010; Garcia vs. Recio, G.R. No. 138322 October 2, 2001; Adong vs. Cheong Seng Gee Adong vs. Cheong Seng Gee, G.R. No. 18081, March 3, 1922).
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The party pleading it must prove the divorce as a fact and demonstrate its conformity to the foreign law allowing it. It must be shown that the divorce decree allows the former spouse to remarry as specifically required in Art. 26 of the Family Code (Republic vs. Orbecido III, G.R. No. 154380, October 5, 2005). Courts do not take judicial notice of foreign laws and foreign judgments; thus, our laws require that the divorce decree and the national law of the foreign spouse must be pleaded and proved like any other fact before trial courts (Racho vs. Tanaka, G.R. No. 199515, June 25, 2018). The purpose of Paragraph 2 of Article 26 of the Civil Code is to avoid the absurd situation where the Filipino spouse remains married to the alien spouse who, after a foreign divorce decree that is effective in the country where it was rendered, is no longer married to the Filipino spouse. Whether the Filipino spouse initiated the foreign divorce proceeding or not, a favorable decree dissolving the marriage bond and capacitating his or her alien spouse to remarry will have the same result: the Filipino spouse will effectively be without a husband or wife. A Filipino who initiated a foreign divorce proceeding is in the same place and in like circ*mstance as a Filipino who is at the receiving end of an alien-initiated proceeding (Republic vs. Manalo, G.R. No. 221029, April 24, 2018).
C. VOID MARRIAGES Void Marriages - Those which are inexistent from the very beginning. It is ipso facto void without need of any judicial declaration of nullity unless for purposes of remarriage. A judicial declaration of its nullity is required before a subsequent marriage can be contracted, otherwise, the subsequent marriage is also void and may be subjected to bigamy. 🕮 A void marriage can be questioned even after the death of either party (Niñal vs. Bayadog, G.R. No. 133778, March 14, 2000). 🕮 The clause “on the basis solely of a final judgment declaring such marriage void” (Art. 40, FC) denotes that such final judgment declaring the previous marriage void need not be obtained only for purposes of remarriage (Domingo vs. CA, G.R. No. 104818, Sept. 17, 1993). The following are void marriages: a. The absence of any of the essential or formal requisites (Art. 35, FC) Those contracted by any party below eighteen years of age even with the consent of parents or guardians (Art. 35 [1], FC); 2. Those solemnized by any person not legally authorized to perform marriages; Exception: Unless such marriages were contracted with either or both parties believing in good faith that the 1.
31
solemnizing officer had the legal authority to do so (Art. 35 [2], FC); 3. Those solemnized without license, except those covered in Chapter 2 of the FC (Art. 35 [3], FC); 4. Those bigamous or polygamous marriages not failing under Article 41 (Art. 35 [4], FC); Bigamous marriage – marriage contracted during the subsistence of a previous marriage. The subsequent marriage in Article 41 is perfectly valid when all three requisites were present before the celebration of the subsequent marriage: a. the prior spouse had been absent for four consecutive years or two years where there is danger of death under the circ*mstances stated in Art. 391 of the Civil Code; b. the spouse present had a well-founded belief that the absent spouse was already dead; and c. the spouse present obtained a judicial declaration of presumptive death 5. Those contracted through mistake of one of the contracting parties as to the identity of the other (Art. 35 [5], FC); Not applicable to mistake of circ*mstances. 🕮
The mistake in identity refers to the actual physical identity of the other contracting party (Rabuya, The Law on Persons and Family Relations, 2006, p. 213).
6. Those subsequent marriages under Article 53 (Art. 35 [6], FC); In case one of the spouses, who intend to remarry, failed to register the judgment of annulment or declaration of absolute nullity of the marriage, the partition and distribution of the properties of the spouses, and the delivery of the children’s legitimes, the subsequent marriage shall be void (Art. 53, FC).
Other void marriages: 1. Marriages in a play, drama, or movie; 2. Marriages between two boys or two girls; 3. Marriages in jest; 4. Common law marriages; 5. Marriages between persons of the same sex, even if celebrated abroad; 6. Marriages where parties merely signed a marriage contract; and 7. Marriages where the parties did not personally appear before the solemnizing authority (Paras, Persons and Family Relations Vol. 1 p. 441). Annulment under Article 36, FC A marriage contracted by any party, who, at the time of the celebration, was psychologically incapacitated to comply with the essential marital obligations of marriage, shall likewise be void even if such incapacity becomes manifest only after its solemnization (Art. 36, FC). Psychological incapacity involves a senseless and protracted refusal to comply with the essential marital obligations by one or both of the spouses although he and/or she is physically capable of performing such obligation (Chi Ming Tsoi vs. CA, G.R. No. 119190, January 16, 1997). Marital obligations are provided for in Art. 68 of the FC which provides “the husband and wife are obliged to live together, observe mutual love, respect and fidelity, and render mutual help and support.” Psychological Concept
Incapacity
as
a
Legal
Psychological incapacity is neither a mental incapacity nor a personality disorder that must be proven through expert opinion. “Mental” is not synonymous with “psychological”. The use of “mental” would give the wrong impression of psychological incapacity being a mere vice of consent. Psychological incapacity must consist in a lack of understanding of the essential obligations of marriage, making the marriage void ab initio. The “Totality of Evidence” presented is enough to sustain a finding of psychological incapacity. There must be proof, however, of the durable or
32
enduring aspects of a person’s personality, called “personality structure” which manifests itself through clear acts of dysfunctionality that undermines the family (Tan Andal vs. Andal, G.R. 196359, May 11, 2021).
which manifests itself through clear acts of dysfunctionality that undermines the family. The spouse’s personality structure must make it impossible for him or her to understand and more important, to comply with his or her essential marital obligations. Proof of these aspects need not be given by an expert. Ordinary witnesses who have been present in the life of the spouses before the latter contracted marriage may testify that the behaviors are indicative of a true and serious incapacity to assume the essential marital obligations (Tan Andal vs. Andal, supra.).
Molina Guidelines as amended by TanAndal vs. Andal Case 1. The burden of proof to show the nullity of the marriage belongs to the plaintiff. Any doubt should be resolved in favor of the existence and continuation of the marriage and against its dissolution and nullity. This is rooted in the fact that both our Constitution and our laws cherish the validity of marriage and unity of the family. Thus, our Constitution devotes an entire Article on the Family, recognizing it "as the foundation of the nation." It decrees marriage as legally "inviolable," thereby protecting it from dissolution at the whim of the parties. Both the family and marriage are to be "protected" by the state. The Family Code echoes this constitutional edict on marriage and the family and emphasizes their permanence, inviolability and solidarity. 🕮
The Molina guideline is silent as to the quantum of proof required in nullity cases. In the case of Tan-Andal vs. Andal, the Supreme Court held that the case must be proven with clear and convincing evidence. This requires more than preponderant of evidence but less than proof beyond reasonable doubt.
2. The root cause of the psychological incapacity must be: (a) medically or clinically identified, (b) alleged in the complaint, (c) sufficiently proven by experts and (d) clearly explained in the decision. 🕮
This second Molina guideline was categorically abandoned by the Supreme Court in the case of Tan-Andal vs. Andal. Psychological incapacity is neither a mental incapacity nor a personality disorder that must be proven through expert opinion. There must be proof, however, of the durable or enduring aspects of a person’s personality, called “personality structure”
3. Juridical Antecedence. The incapacity must be proven to be existing at "the time of the celebration" of the marriage. The evidence must show that the illness was existing when the parties exchanged their "I do's." The manifestation of the illness need not be perceivable at such time, but the illness itself must have attached at such moment, or prior thereto. 🕮 The party is still required to prove juridical antecedence because it is an explicit requirement of the law and this distinguishes psychological incapacity from divorce. Divorce severs a marital tie for causes that may have developed after the marriage celebration (Tan Andal vs. Andal, supra.). 4. Incurability. Such incapacity must also be shown to be medically or clinically permanent or incurable. Such incurability may be absolute or even relative only in regard to the other spouse, not necessarily absolutely against everyone of the same sex. Furthermore, such incapacity must be relevant to the assumption of marriage obligations, not necessarily to those not related to marriage, like the exercise of a profession or employment in a job. Hence, a pediatrician may be effective in diagnosing illnesses of children and prescribing medicine to cure them but may not be psychologically capacitated to procreate, bear and raise his/her own children as an essential obligation of marriage. 🕮
The psychological incapacity is incurable but in a legal sense. It is incurable in such
33
a way that the parties' personality structures are so incompatible and antagonistic that it would result to the inevitable and irreparable breakdown of marriage. It should not be defined as incurable in the medical sense or has poor long-term prognosis. Otherwise, if it is medically incurable, then the law should not allow the parties to remarry again because eventually, it will also result to another void marriage. It is relative and specific between the parties (Tan Andal vs. Andal, supra.). 5. Gravity. Such illness must be grave enough to bring about the disability of the party to assume the essential obligations of marriage. Thus, "mild characterological peculiarities, mood changes, occasional emotional outbursts" cannot be accepted as root causes. The illness must be shown as downright incapacity or inability, not a refusal, neglect or difficulty, much less ill will. In other words, there is a natal or supervening disabling factor in the person, an adverse integral element in the personality structure that effectively incapacitates the person from really accepting and thereby complying with the obligations essential to marriage. 🕮
The gravity of the condition is also retained but not in the sense that it is a serious or dangerous illness, but to exclude mild characterological peculiarities, mood changes, occasional emotional outburst. It must be caused by a genuinely serious psychic cause and not just a mere refusal, neglect or difficulty, or much less ill will (Tan Andal vs. Andal, supra.).
(Azcueta vs. Republic, G.R. No. 180668, May 26, 2009).
🕮
Mere showing of “irreconcilable differences” and “conflicting personalities” in no wise constitutes psychological incapacity. It is enough to prove that the parties failed to meet their responsibilities and duties as married persons. It is essential that it must be shown to be incapable of doing so, due to some psychological, not physical illness (Republic vs. CA, G.R. No. 108763, February 13, 1997).
🕮
Mere abandonment and lack of desire to communicate cannot qualify as the spouse as psychologically incapacitated (Santos vs. CA, G.R. No. 112019, January 4, 1995).
🕮
The senseless and protracted refusal of one of the contracting parties of sexual intercourse for the procreation of children is equivalent to psychological incapacity (Chi Ming Tsoi vs. CA, G.R. No. 119190, January 16, 1997).
🕮
If a psychological disorder can be proven by independent means, no reason exists why such independent proof cannot be admitted and given credit. Insensitivity, sexual infidelity, emotional immaturity, and irresponsibility do not by themselves warrant a finding of psychological incapacity under Art. 36 of the FC (Agraviador vs. Amparo-Agraviador, G.R. No. 170729, December 8, 2010).
b. Incestuous Marriage (Art. 37, FC):
6. The essential marital obligations must be those embraced by Articles 68 up to 71 of the Family Code as regards the husband and wife as well as Articles 220, 221 and 225 of the same Code in regard to parents and their children. Such noncomplied marital obligation(s) must also be stated in the petition, proven by evidence and included in the text of the decision.
Marriages are void, even if celebrated abroad, between these parties, whether their relationship is legitimate or illegitimate:
7. Interpretations given by the National Appellate Matrimonial Tribunal of the Catholic Church in the Philippines, while not controlling or decisive, should be given great respect by our courts
Notes: Regardless of whether the relationship between the parties is legitimate or illegitimate.
1. Between ascendants and descendants of any degree; and 2. Between brothers and sisters, whether of full or half-blood.
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Prohibition applies to those related by blood. Marriages between step-brothers and step-sisters are no longer prohibited under the Family Code, although prohibited under the Civil Code.
c. Void Marriages by Reason of Public Policy (Art. 38, FC): 1. Between collateral blood relatives whether legitimate or illegitimate, up to the fourth civil degree; 2. Between step-parents and step-children; 3. Between parents-in-law and children-inlaw; The prohibition under Nos. 2 and 3 applies even after the termination of the marriage, which is the very source of the relationship by affinity, regardless of the cause of such termination (Rabuya, Civil Law Reviewer Vol. 1, 2017, p. 92). Affinity is a relationship gained by marriage and a fictive kinship created by law. Also, it is aligned with the spirit of Art. 332 of the RPC. It holds for all intents and purposes favorable to the strengthening of the bond of the family (Intestate Estate of Carungcong vs. People, G.R. No. 181409, February 11, 2010). 4. Between the adopting parent and the adopted child; 5. Between the surviving spouse of the adopting parent and the adopted child; 6. Between the surviving spouse of the adopted child and the adopter; 7. Between an adopted child and a legitimate child of the adopter; 8. Between adopted children of the same adopter; and 9. Between parties where one, with the intention to marry the other, killed that other person's spouse, or his or her own spouse. The marriage is void even if the surviving spouse does not conspire in killing
his/her spouse. The primary intention must be to marry the surviving spouse. No conviction is required (Rabuya, Civil Law Reviewer Vol. 1, 2017, p. 94). The following can now marry each other: 1. 2. 3. 4.
Brother-in-Law and sister-in-Law; Stepbrother and stepsister; Guardian and ward; Parties who have been convicted of adultery and concubinage; and 5. Adopted and illegitimate child, parents and relatives by consanguinity and affinity of the adopter; and 6. Collateral relatives by the half blood. d. Subsequent Marriages that are Void Void Marriages under Article 40, FC Under Art. 40, when a party failed to secure a judicial declaration of nullity of the prior marriage before contracting a subsequent marriage, the subsequent marriage is also void and is liable for the crime of bigamy. Judicial declaration of nullity of a void marriage is necessary only when a marriage, although void, had taken place, otherwise, Article 40 will not apply. In the case of Morigo vs. People, no marriage ceremony was performed by a duly authorized solemnizing officer, hence since no marriage took place, Art. 40 will not apply, nor the parties be held liable for bigamy (Morigo vs. People, 422 G.R. No. 145226, February 6, 2004). General Rule: A marriage contracted by any person during the subsistence of a previous valid marriage shall be null and void (Art. 41, FC). Exception: Unless the requisites for the Declaration of Presumptive Death concur (Please see discussion under “Absence”) and the present spouse secured a judicial declaration of presumptive death before contracting a subsequent marriage. It is not necessary for the absent spouse to be declared an absentee, and that the only purpose of the declaration of absence is for the proper
35
administration of the estate of the absentee (Jones vs. Hortinguela, G.R. No. L-43701, March 6, 1937). BIGAMOUS MARRIAGE General Rule: A marriage contracted by any person during the subsistence of a previous valid marriage shall be null and void (Art. 41, FC). Exception: Unless the requisites for the Declaration of Presumptive Death concur (Please see discussion under “Absence”) and the present spouse secured a judicial declaration of presumptive death before contracting a subsequent marriage. It is not necessary for the absent spouse to be declared an absentee, and that the only purpose of the declaration of absence is for the proper administration of the estate of the absentee (Jones vs. Hortinguela, G.R. No. L-43701, March 6, 1937). Issuance of a marriage license to a widow No marriage license shall be issued to a widow till after 300 days following the death of the husband, unless in the meantime she has given birth to a child (Art. 84, NCC). Effect of Reappearance General Rule: The subsequent marriage is automatically terminated and without need of a judicial proceeding, by recording the Affidavit of Reappearance in the civil registry. Exception: Unless the previous marriage has been annulled or declared void ab initio (Art. 42 [1], FC). Failure to Execute and Record the Affidavit of Reappearance
contracted because of a presumption that the former spouse is dead, such presumption continues in spite of the spouses’ physical reappearance, and by fiction of law, he or she must still be regarded as legally an absentee until the subsequent marriage is terminated as provided by law (SSS vs. Jarque Vda de Bailon, G.R. No. 165545, March 24, 2006). Effect of Termination of Subsequent Marriage
(Art. 43, FC)
Good Faith Bad Faith Children of the subsequent marriage conceived prior to its termination shall be considered legitimate. The absolute community If either spouse is in bad of property or the faith, his or her share of conjugal partnership, as the net profits of the the case may be, shall community property or be dissolved and conjugal partnership liquidated. property shall be forfeited in favor of the common children or, if there are none, the children of the guilty spouse by a previous marriage or in default of children, the innocent spouse. Donations by reason of If the donee contracted marriage shall remain the marriage in bad faith, valid. such donations made to said donee are revoked by operation of law. The innocent spouse may revoke the designation of the other spouse who acted in bad faith as beneficiary in any insurance policy, even if such designation be stipulated as irrevocable. The spouse who contracted the subsequent marriage in bad faith shall be disqualified to inherit from the innocent spouse by testate and intestate succession.
Mere reappearance of the absentee spouse, EVEN IF made known to the present spouse, will NOT terminate the subsequent marriage IF no step is taken to terminate the subsequent marriage, either by recording the affidavit or by court action. Since the second marriage has been
36
Both Spouses to the Subsequent Marriage is in Bad Faith (Art. 44, FC)
Distinction between a void and voidable marriage
Requisites:
VOID MARRIAGE VOIDABLE MARRIAGE Status of marriage Void ab initio Valid until annulled Petition filed Declaration of Nullity of Annulment of Marriage Marriage Who may file GR: Solely by the GR: Offended Spouse husband or wife. XPNs: XPNs: Any real party in interest, only in the 1. Parents or guardians following cases: in cases of insanity; or 1. Nullity of marriage 2. Parents or guardians cases commenced before the party before the effectivity reaches 21 years old of A.M. No. 02-11-10on the ground of March 15, 2003. Lack of Parental 2. Marriages celebrated Authority. during the effectivity of the Civil Code (De
1. Prior spouse had been absent for four consecutive years, or two years where there is danger of death under Art. 391, New Civil Code at the time of disappearance; 2. The present spouse has obtained a judicial declaration of presumptive death; and 3. Both the present spouse and the second spouse acted in bad faith, meaning, they knew at the time of subsequent marriage, the absentee spouse is still alive (Rabuya, The Law on Persons and Family Relations, 2006, p. 292). Effects: 1. The subsequent marriage is void ab initio (Art. 41, FC); 2. All donations by reason of marriage and testamentary dispositions made by one in favor of the other are revoked by operation of law (Art. 43 [3], FC); 3. Testamentary dispositions made by one in favor of the other are revoked by operation of law (Art. 43 [5], FC); and 4. Parties are liable for the crime of bigamy (Rabuya, The Law on Persons and Family Relations, 2006, p. 293). Failure to comply with Art. 52 of the FC (Art. 53, FC) The judgment of annulment or of absolute nullity of the marriage, the partition and distribution of the properties of the spouses and the delivery of the children's presumptive legitimes shall be recorded in the appropriate civil registry and registries of property; otherwise, the same shall not affect third persons. ▪
The action or defense for the declaration of absolute nullity of marriage shall not prescribe (Art. 39, FC).
Dios Carlos vs. Sandoval, G.R. No. 179922, December 16, 2008).
Prescriptive Period No prescriptive period GR: Within 5 years from discovery of the ground. XPN: 1. Lifetime of spouse in cases of insanity; 2. Before the party reaches 21 in cases where parents or guardians may file annulment. Judicial Declaration GR: Not necessary Necessary XPN: In remarriage
case
of
D. VOIDABLE MARRIAGES Voidable marriage is considered valid and produces all its civil effects, until it is set aside by final judgment of a competent court in an action for annulment (Suntay vs. Cojuangco-Suntay, G.R. No. 183053, October 10, 2012).
37
General Rule: Defects of a voidable marriage can be ratified by free cohabitation or prescription. Exceptions: The following defects are not subject to ratification: (i) impotency which appears to be incurable; and (ii) STD that is found to be serious and incurable. These defects, however, may be subjected to prescription (Niñal vs. Bayadog, G.R. No. 133778, March 14, 2000).
▪
The true test is whether the party concerned could intelligently consent; that is, he knew what contract he is entering into (Hoadley vs. Hoadley, 244 N.Y. 424).
▪
Intoxication, Somnambulism at the time of the wedding, and drug addiction which results in lack of capacity to give consent is equivalent to unsoundness of mind (McKnee vs. McKnee, 49 Nev. 90; See also 15 Sanches Roman 528).
▪
A person is presumed to be of sound mind at any particular time and the condition is presumed to continue to exist, in the absence of proof to the contrary (Mendezona vs. Osamiz, G.R. No. 143370, February 6,2002; See also 29 Am Jur 2d Evidence § 295; Norwood v. Norwood, 207 Ga 148, 60 SE2d 449).
The marriage shall be annulled for the following reasons: (NUFFIS) 1. 2. 3. 4. 5. 6.
Non-age (below 18) Unsoundness of mind Fraud (as defined in Art. 46, FC) Force, intimidation, or undue influence Impotence STD
Grounds, Art. 45, FC (must exist at the time of marriage): 1. Absence of parental consent (required when party is at least 18 but below 21 years of age under Art. 14, FC); ▪
Father, mother, surviving parent or guardian, or persons having legal charge of the party must give consent. However, if the child is illegitimate, consent of the mother is required since it is under the latter’s parental authority (Rabuya, The Law on Persons and Family Relations, 2006, p. 298).
2. Unsoundness of mind ▪
▪
The sane spouse can file an action for annulment ONLY if he/she has no knowledge of the other spouse’s insanity at the time of marriage, otherwise, only the insane or the latter’s relatives may file an action for annulment (Rabuya, The Law on Persons and Family Relations, 2021, p. 301). The marriage may be ratified by the insane party, after coming to reason, freely cohabited with the other party (Art. 45[2], FC).
3.
Fraud: Non-disclosure or concealment of certain circ*mstances when materiality can affect the essence of marriage (Rabuya, The Law on Persons and Family Relations, 2006, p. 303).
Circ*mstances Constituting Marriage (Art. 46, FC)
Fraud
in
a. Non-disclosure of a previous conviction by final judgment of the other party of a crime involving moral turpitude. Moral turpitude is any act done contrary to justice, honesty, principle or good morals; or an act of baseness, vileness or depravity in private and social duties which a man owes to his fellowmen or to society in general, contrary to the accepted and customary rule of right and duty between man and man (Rabuya, The Law on Persons and Family Relations, 2006, p. 304). No other misrepresentation as to character, health, rank, fortune or chastity shall constitute such fraud as will give grounds for an action for the annulment of marriage (Art. 46 [2], FC). Non-disclosure of a husband’s pre-marital relationship with another woman is not one of the
38
enumerated circ*mstances that would constitute a ground for fraud (Anaya vs. Palaroan, G.R. No. L27930, November 26, 1970). b.
Concealment by the wife of the fact that at the time of the marriage, she was pregnant by a man other than her husband (Rabuya, The Law on Persons and Family Relations, 2006, p. 305). If the woman did not expressly inform the man of her pregnancy, but such physical condition was readily apparent to the man (seven months pregnant), he cannot claim lack of knowledge of such pregnancy (Buccat vs. Buccat, G.R. No. 47101, April 25, 1941). Even if the wife is pregnant with another man at the time of celebration of the marriage, the marriage cannot be annulled because the husband knew of such fact. In the case, the present condition of the woman was already evident at the time of marriage (Buccat vs. Buccat, supra.).
Concealment of sexually transmissible disease (STD), regardless of its nature, existing at the time of the marriage. d. Drug addiction
Intimidation – one of the contracting parties is compelled, by a reasonable and well-grounded fear of an imminent and grave evil upon the person or property or upon those of his spouse/descendant/ascendant to give consent. Undue influence – a person takes improper advantage of his power over the will of another, depriving him of a reasonable freedom of choice. Requisites for Duress: 1. It must be the determining cause of the contract; 2. It is unjust or unlawful; 3. It is serious or grave; and 4. It must produce a reasonable and wellgrounded fear from the fact that the person who employed it has the necessary means to inflict the threatened injury. ▪ A threat to enforce one’s claim through competent authority, if the claim is just or legal, does not vitiate consent (Art. 1335, NCC).
c.
5. Impotence or impotentia copulandi
Requisites for Annulment due to Drug Addiction:
It must be a continuing and incurable physical incapacity of consummating the marriage from the time of marriage up to the time of filing a petition for annulment. This refers to the physical inability to perform the act of sexual intercourse.
1. Existing at the time of the celebration of the marriage; 2. Continuous; 3. Appears to be incurable; 4. Unknown to the other spouse at the time of marriage; and 5. The case is filed within 5 years from discovery. Note: The enumeration in Art. 46, FC is exclusive. 4. Consent was obtained by force, intimidation or undue influence; Force – must be one as to prevent the party from acting as a free agent. His free will is destroyed by fear or compulsion.
The action must be brought by the potent spouse, and such spouse must be unaware of the other’s impotency (Keezer on Marriage and Divorce, 1946 Ed.,478). 🕮 If both parties are impotent, the marriage cannot be annulled because no one is aggrieved (Sarao vs. Guevara [CA], 40 O.G. [1st Sup] 263). 🕮 The test is not the capacity to reproduce, but the capacity to copulate (Menciano vs. San Jose, G.R. No. L-1967, May 28, 1951). 🕮 The advance age of a person did not mean that sexual intercourse is no longer possible (People vs. Ablog, G.R. No. 125005, June 28, 1999).
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Doctrine of Triennial Cohabitation
Refusal to be examined by the husband or wife
If the wife still remains a virgin after living together with her husband for three years, the presumption is that the husband is impotent, and he will have to overcome this presumption (Tompkins vs. Tompkins, 92 N.J. Eq. 113, 11 Atl. 599). Relative Impotence Annulment
as
Ground
Refusal on the part of the man to submit himself to physical examination raises the presumption of impotence (Keezer on Marriage and Divorce, 1946 Ed., pp. 480-481). However, refusal by the wife does not raise such presumption because of the natural modesty of our native girls (Jimenez vs. Cañizares, G.R. No. L-12790, August 31, 1960).
for
6. Sexually incurable
When a man may not be able to have penile erection with his wife but can have it with another woman (Tompkins vs. Tompkins, supra.).
ARTICLE 45 (Sexually Transmitted Disease) Ground for annulment Does not have to be concealed Must be serious and incurable The STD itself is the ground for annulment
transmitted
disease,
if
Requisites: 1. It must have existed at the time of the celebration of the marriage 2. It is serious and appears to be incurable 3. Unknown to both parties at the time of the marriage (Rabuya, The Law on Persons and Family Relations, 2006, p. 311).
STD: ART. 45 vs. ART. 46 ARTICLE 46 (Sexually Transmitted Disease) The STD is a type of fraud which is a ground for annulment Must be concealed Need not be serious nor incurable It is the concealment that gives rise to the annulment
Prescription of Action for Annulment (Art. 47, FC) GROUND
PERSON WHO MAY FILE
PRESCRIPTION
Absence of parental consent (required when
By the spouse whose parent or guardian did not give his or her consent; By the parent or guardian who did not give consent.
Within 5 years from attaining the age of 21;
CONVALIDATION OR RATIFICATION Free cohabitation after reaching 21.
At any time before the minor has reached the age of 21. At any time before the death of either spouse.
Free cohabitation after insane regains sanity.
the party is at least 18 but below 21 under Art. 14, FC) Unsoundness of mind;
Fraud
By the sane spouse who had no knowledge of the other’s insanity; Any relative or guardian or person having legal charge of the insane. By the insane spouse By the injured party
During lucid interval or after regaining sanity. Within 5 years after the discovery of fraud.
Free cohabitation knowledge of fraud.
after
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Force, intimidation or undue influence;
By the injured party
Impotence
By the injured party
Sexually disease
transmitted
By the injured party
Within 5 years from the time the force, intimidation or undue influence disappeared or ceased. Within 5 years after marriage. Within 5 years after marriage.
Free cohabitation after cause has disappeared.
Cannot be ratified, but action prescribes. Cannot be ratified, but action prescribes.
Pendency of Action
Other Effects:
In the absence of adequate provisions:
1. The absolute community of property or the conjugal partnership, as the case may be, shall be dissolved and liquidated. 2. If either spouse contracted said marriage in bad faith, his or her share of the net profits of the community property or conjugal partnership property shall be forfeited in favor of the common children or, if there are none, the children of the guilty spouse by a previous marriage or in default of children, the innocent spouse. 3. Donations by reason of marriage shall remain valid, except that if the donee contracted the marriage in bad faith, such donations made to said donee may be revoked by the donor. 4. The innocent spouse may revoke the designation of the other spouse who acted in bad faith as beneficiary in any insurance policy, even if such designation be stipulated as irrevocable (Art. 43 [4], FC). 5. The spouse who contracted the subsequent marriage in bad faith shall be disqualified to inherit from the innocent spouse by testate and intestate succession (Art. 43. [5]). 6. The marriage that is void ab initio is considered as having never to have taken place. As such, the judicial declaration of the nullity of the marriage retroacts to the date of the celebration of the marriage (Morigo vs. People, 422 G.R. No. 145226, February 6, 2004). 7. In case of annulment of marriage, and the wife is the guilty party, she shall resume her maiden name and surname. If she is the innocent spouse, she may resume her maiden name and surname. However, she
A written agreement between the spouses, the Court shall provide for: a. Support of the spouses; b. Custody and support of the common children; and c. Appropriate visitation rights of the other parent (Art. 49, FC). Paramount Considerations of the court are: a. Moral and material welfare of the children; and b. Children’s choice of the parent with whom they wish to remain. E. EFFECT OF DEFECTIVE MARRIAGES Status of Marriages
Children
Born
under
Void
General Rule: Children conceived and born outside a valid marriage are illegitimate. Hence, children born of void marriages are considered illegitimate (Art. 50, FC). Exceptions: 1. Children conceived or born before the judgment of annulment or absolute nullity of the marriage under Article 36 has become final and executory shall be considered legitimate (Art. 54, FC). 2. Children conceived or born of the subsequent marriage under Article 53 shall likewise be legitimate (Art. 54; Art. 53, FC).
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may choose to continue employing her former husband's surname, unless: a. The court decrees otherwise, or b. She or the former husband is married again to another person (Art. 371, NCC). The final judgment in such cases shall provide for the following: 1. Liquidation – all creditors of the spouses, the absolute community of property, or the conjugal partnership shall be notified; 2. Partition (conjugal dwelling and the lot on which it is situated, shall be adjudicated with the provision of Articles 102 and 109); 3. Distribution of the properties of the spouses 4. Custody and support of the common children 5. Delivery of presumptive legitimes, unless such matters had been adjudicated in previous judicial proceedings. Exception: Unless such matter has been adjudicated in previous proceedings (Art. 50, FC). Effect of partition provided for in the judicial decree in the annulment or nullity of marriage Delivery shall not prejudice successional rights of children accruing upon the death of either or both parents. The value already received under the decree of annulment is considered as an advance on the legitime (Art. 51, FC).
Effect of partition provided for in the judicial decree in the annulment or nullity of marriage Delivery shall not prejudice successional rights of children accruing upon the death of either or both parents. The value already received under the decree of annulment is considered as an advance on the legitime (Art. 51, FC). Effect of Non-Registration Either of the former spouses may marry again after compliance with the requirements of registering the (i) judgment of annulment or absolute nullity of marriage, (ii) the partition and distribution of properties, and (iii) delivery of the children’s presumptive legitimes, in the appropriate civil registry or registries of property, otherwise, the subsequent marriage shall be null and void (Arts. 52 and 53, FC). NOTES: ▪
▪
Value of partition of presumptive legitimes In said partition, the value of the presumptive legitimes of all common children are computed as of the date of the final judgment of the trial court, and shall be delivered in: 1. 2. 3. 4.
Cash; Property; or Sound securities. This is unless the parties, by mutual agreement judicially approved, had already provided for such matters (Art. 51, FC).
▪
A.M. No. 02-11-10, which took effect on March 15, 2003, provides that the court will only issue a decree of absolute nullity or decree of annulment after compliance with Article 50 and 51 of the Family Code (Sec. 19 [1]). It is clear from Article 50 of the Family Code that Section 19(1) of the Rule applies only to marriages which are declared void ab initio or annulled by final judgment under Articles 40 and 45 of the Family Code. In short, Article 50 of the Family Code does not apply to marriages which are declared void ab initio under Article 36 of the Family Code, which should be declared void without waiting for the liquidation of the properties of the parties (Diño vs. Diño, G.R. No. 178044, January 19, 2011). Thus, the requirement of a decree of absolute nullity or a decree of annulment is only required for cases covered under Article 40 and Article 45 of the Family Code (Id.).
42
F. FOREIGN MARRIAGES Rules governing the validity of marriage 1. As to its extrinsic validity – Lex loci celebrationis (Art. 17, NCC) NOTE: Locus regit actum (the act is governed by the law of the place where it is done) - is adhered to here in the Philippines as regards the extrinsic validity of marriage. 2. As to its intrinsic validity – Personal law (Art. 15, NCC) NOTE: Personal law may either be the national law or the law of the place where the person is domiciled. If the person involved is a stateless person, domiciliary rule applies, otherwise, lex nationalii applies. The 1st paragraph of Article 26 of the Family Code (FC) on the validity of foreign marriages applies, however, only to Filipinos. Foreign marriages of foreigners or of a Filipino and a foreigner are governed by the Rules on Conflict of Laws (Sempio-Diy, 1995). Marriages between Filipinos solemnized abroad in accordance with the law in force in said country General Rule: Marriages between Filipinos solemnized outside the Philippines in accordance with the law of the foreign country where it is celebrated, if valid there, shall be valid here as such. Exceptions: The following foreign marriages are considered void: 1. Marriages contracted by any party below eighteen (18) years of age even with the consent of parents or guardians (Art. 35 [1], FC); 2. Bigamous or Polygamous Marriages not falling under Art. 41 of the FC (Art. 35 [4], FC)
Art. 41, FC – in case the first spouse was judicially declared dead and the surviving spouse remarry.
3. Mistake in Identity (Art. 35 [5], FC); 4. Subsequent marriage celebrated without the court’s annulment or decree of nullity of prior marriage, partition of property, and delivery of presumptive legitime of children in previous marriage being first registered (Art 35 [6], FC); 5. Psychological incapacity (Art. 36, FC); 6. Incestuous marriages (Art. 37, FC); 7. Marriages void by reasons of public policy (Art. 38, FC). Marriage celebrated without license and marriage by proxy are valid in the Philippines if valid where celebrated, as they are not among the XPNs and will not contravene any public policy. With respect to same sex marriage celebrated abroad involving citizens of the Philippines, the same shall not be recognized as valid here in the Philippines even if such kind of marriage is valid in the place of celebration (Rabuya, The Law on Persons and Family Relations, 2006, p. 206). As to Essential and Formal requisites of Marriages celebrated abroad: Essential Requisites Inherent in the parties, carried everywhere.
Lex
Nationalii – Laws relating to family rights and duties, or to the status, condition and legal capacity of persons are binding upon Philippine citizens even though living abroad (Art. 15, NCC).
Foreign marriages void under Philippine law due to lack of an essential requisite, even if valid under foreign laws, will not be recognized.
Formal Requisites Requirements independent of the parties. Lex loci celebrationis – if valid where celebrated, then valid everywhere; forms of contracting marriage are to be regulated by the law where it is celebrated
(Art. 16, NCC).
Foreign marriages may be void under Philippine law due to absence of a formal requisite under foreign laws.
43
G. LEGAL SEPARATION Legal separation is merely the separation of spouses from bed and board (Art. 65, FC). While it permits the partial suspension of marital relations, the marriage bond still exists as the marital bonds are not severed as in the case of annulment or petition for nullity. Two kinds of Divorces: 1. Absolute Divorce (divorce a vincula matrimonii) – marriage is dissolved; 2. Relative Divorce or legal separation (divorce a mensa et thoro) – marriage is not dissolved; here, the parties are merely separated from bed and board (Garcia-Recio vs. Recio, G.R. No. 138322, October, 2, 2001). If the action for Absolute Divorce is brought here in the Philippines: 1. Between Filipinos – will not prosper 2. Between foreigners – will not prosper 3. Between a Filipino and a foreigner – will not prosper If the action is brought in a foreign country: Between Filipinos – will not be recognized here even if allowed in the foreign country, and even if the ground be either adultery on the part of the wife or concubinage on the part of the husband; Between foreigners – recognized as valid by the personal law of the parties involved, that is, if valid according to the national law or the law of their domicile depending upon the theory adopted by their countries (Recto vs. Harden, G.R. No. L-6897, November 29, 1956). Between a Filipino and a foreigner – if obtained by either the foreigner or the Filipino and valid according to his personal law or the Filipino, it is valid for both the foreigner and Filipino (Republic vs. Manalo, G.R. No. 221029, April 24, 2018).
Distinction between Legal Separation ANNULMENT The marriage was defective at the very beginning The cause for annulment must already be existing at the time of marriage There are seven grounds for annulment Annulment dissolves the marriage bond; the parties are free to marry again From PIL, the grounds are generally given in the lex loci celebrationis
1.
Annulment
and
LEGAL SEPARATION There was no defect in the marriage at the beginning The cause for legal separation arises after the marriage celebration There are 10 grounds for legal separation The marriage remains; the parties are not allowed to remarry From PIL, the grounds are those given by national law
Legal Grounds for Legal Separation (Article 55, FC) Rep-Mo-Pros-FiDLeBi-Se-AtAb 1. Repeated physical violence or grossly abusive conduct directed against the petitioner, a common child, or a child of the petitioner; a. If the physical violence is directed against the wife, a common child or a child of the wife, the same is also punishable under R.A. 9262, otherwise known as the ―AntiViolence Against Women and Their Children Act of 2004 b. Violence need not be physical; it is submitted that psychological and sexual violence and repeated verbal abuse may qualify as grossly abusive conduct (Rabuya, The Law on Persons and Family Relations, 2006, p. 352). c. “Psychological violence" refers to acts or omissions causing or likely to cause mental or emotional suffering of the victim such as but not limited to intimidation, harassment, stalking, damage to property, public ridicule or humiliation, repeated verbal abuse
44
and mental infidelity. It includes causing or allowing the victim to witness the physical, sexual or psychological abuse of a member of the family to which the victim belongs, or to witness p*rnography in any form or to witness abusive injury to pets or to unlawful or unwanted deprivation of the right to custody and/or visitation of common children (Sec. 3 [c], R.A. No. 9262). 2. Physical violence or moral pressure to compel the petitioner to change religious or political affiliation; Moral pressure must be directed against the petitioner-spouse. If the same is directed on a common child or child of the petitioner- spouse to compel the said child to change religious or political affiliation, there is no ground for legal separation (Rabuya, The Law on Persons and Family Relations, 2006, p.351). 3. Attempt of respondent to corrupt or induce the petitioner, a common child, or a child of the petitioner, to engage in prostitution, or connivance in such corruption or inducement; It pertains to a common child or the petitioner’s child, and not the respondent‘s child. 4. Final judgment sentencing the respondent to imprisonment of more than six years, even if pardoned; Conviction must occur after the celebration of the marriage. If respondent is convicted in a final judgment prior thereto, it is a ground for annulment if the crime involves moral turpitude and the fact of conviction is not disclosed to the other party (Rabuya, The Law on Persons and Family Relations, 2006, p. 353). 5. Drug addiction or habitual alcoholism of the respondent;
Requisites: a. There should be no condonation or consent to the drug addiction; b. The action must be filed within 5 years from the occurrence of the cause; c. Drug addiction arises during the marriage and not at the time of marriage. If such is present at the time of marriage and was concealed from the other party, it shall constitute as a ground for annulment (Art.46 [4], FC). 6. Lesbianism or hom*osexuality of the respondent; 7. Contracting by the respondent of a subsequent bigamous marriage, whether in the Philippines or abroad The subsequent marriage is void ab initio but it does not affect the validity of the prior marriage. Hence, the remedy of the aggrieved party in the prior marriage is legal separation (Rabuya, The Law on Persons and Family Relations, 2006, 354). 8. Sexual infidelity or perversion Sexual infidelity need not be in the form of adultery or concubinage (Rabuya, The Law on Persons and Family Relations, 2004, p. 355). Sexual perversion includes all unusual or abnormal sexual practices which may be offensive to the feelings or sense of decency of either the husband or the wife (Tolentino, Persons and Family Relations, 1990, p. 323). 9. Attempt by the respondent against the life of the petitioner; There must be an ―intent to kill and must not be justified or excused, as in the case of legitimate self-defense.
45
10. Abandonment of petitioner without justifiable cause for more than one year.
These grounds for legal separation are exclusive. Proof needed: Mere preponderance of evidence, will suffice to prove the existence of any of the grounds, although in Final Judgment sentencing the respondent to imprisonment of more than 6 years, even if pardoned, previous conviction is essential, in view of the necessity of ―Final Judgment (Paras, Civil Code of the Philippines Annotated Vol. 1, 2008, p. 543).
act does not necessarily imply condonation of the others (People v. Zapata, G.R. No. L-3047, May 16, 1951). 2. Consent to commission of offense or act complained of: Note: There is consent when either of the spouses agreed to or did not object, despite full knowledge, to the act, giving rise to a ground for legal separation, before such act was in fact committed. It may be express or implied and done prior to the offense.
The failure of the husband to look actively for his adulterous wife after she left the conjugal home does not constitute condonation or consent of the wife‘s adulterous acts. It was not his duty to search for her to bring her home. Hers was the obligation to return (Ocampo v. Florenciano, G.R. No. L-13554, February 23, 1960).
An agreement between the parties that they will not object to the other‘s act of sexual infidelity, adultery or concubinage has been declared as void, but, though void, is nevertheless an expression of their clear consent to the commission of the sexual infidelity (People v. Schneckenburger, G.R. No. L48183, November 10, 1941).
2. Grounds for Denial of Petition (Article 56, FC)
1. Condonation of the offense or act complained of: conditional forgiveness or remission, by a husband or wife, of a matrimonial offense which the other has committed (Rabuya, The Law on Persons and Family Relations, 2006, p. 357). The act of giving money to an erring wife and the fact that no action was taken against her before the courts of justice are sufficient to establish forgiveness amounting to condonation. At any rate, pardon or condonation does not require sexual intercourse and it may be express or implied (Almacen v. Baltazar, G.R. No. L10028, May 23, 1958). Forgiveness may be express or implied. Sleeping together after full knowledge of the offense is condonation (Bugayong v. Ginez, G.R. No. L-10033. December 28, 1956). It comes after, not before the offense (Ocampo v. Florenciano, G.R. No. L-13554, February 23, 1960). Each sexual intercourse of the wife outside marriage is a separate act of adultery. Therefore, condonation of one
3. Connivance between the parties in the commission of the offense or act constituting the ground for legal separation; Connivance - Implies agreement (express of implied) by both spouses to the ground for legal separation. It is an act of the mind before the offense was committed and involves criminality on the part of the individual who connives (Rabuya, The Law on Persons and Family Relations, 2006, p. 359).
46
4. Collusion between parties Collusion - The agreement between husband and wife for one of them to commit or to be represented in court as having committed a matrimonial offense, or to suppress evidence of valid defenses, for the purpose of enabling the other to obtain legal separation (Rabuya, The Law on Persons and Family Relations, 2006. p. 359). 5. Mutual Guilt Recrimination or Equal Guilt (In Pari Delicto) Both parties being in pari delicto, there is no offended spouse who deserves to bring the action (Benedicto v. Dela Rama, G.R. No. 1056, December 8, 1903).
parties and to take care that the evidence is not fabricated or suppressed (Art. 60, FC). 4.
a. Spouses are entitled to live separately, but the marital bond is not severed; b. No right to have sexual intercourse with the other spouse; c. In the absence of an agreement between the parties, the court shall designate the husband, the wife or a third person, to manage the absolute community or conjugal partnership property. 5.
7. Reconciliation (Please see further discussion
under 7. Reconciliation)
3.
Procedure Cooling-Off Period
General rule: An action for legal separation shall in no case be tried before six months has elapsed since the filing of the petition (Art. 58, FC). Exception: There is no cooling-off period if the ground alleged are those under RA 9262 (AntiViolence Against Women and Children). Confession of Judgment or Stipulation of Facts No decree of legal separation shall be based upon a stipulation of facts or a confession of judgment. In any case, the Court shall order the prosecuting attorney or fiscal assigned to it to take steps to prevent collusion between the
Effects of Pendency of the action for Legal Separation (Art. 62, FC) The Court shall provide for: 1. Support of spouses 2. Custody of children 3. Visitation rights of the other spouse
6. Action is barred by prescription; An action for legal separation shall be filed within five years from the time of the occurrence of the cause (Art. 57, FC).
Effects of Filing the Petition for Legal Separation (Art. 61, FC)
During the pendency of the action for legal separation, the provisions of Article 49 of the FC, wherein the Court shall provide for the support of the spouses and the custody and support of the common children (Art. 62, FC; Araneta v. Concepcion, G.R. No. L-9667, July 31, 1956). However, if the support is found to be onerous, the husband can file a motion to modify or reduce the same (Gaudionco v. Hon. Peñaranda, G.R. No. L-72984, November 27, 1987). 6.
Effects of the Decree of Legal Separation a. Spouses are entitled to live separately (Art. 63, FC). A third person may manage the property regime. The designation of this person may be done by the court; b. Marriage bond shall not be severed; c. Dissolution and liquidation of the property regime (Art. 63, FC) which
47
shall be automatic upon issuance of the decree of legal separation; (Laperal v. Republic, G.R. No. L-18008, October 30, 1962) d. The offending spouse shall have no right to the net profits and such will be forfeited according to Art. 43(2), FC; (Macadangdang v. CA, G.R. No. L-49542, September 12, 1980) e. Custody of the minor children shall be awarded to the innocent spouse, subject to the provisions of Art. 213, FC (Tonog v. Daguimol, G.R. No. 122906, February 7, 2002) f. Sec. 29 of R.A. 9262 prohibits the awarding of custody of minor children to the perpetrator of a woman who is suffering from battered woman syndrome. g. Disqualification of the offending spouse to inherit from the innocent spouse by intestate succession. The provisions in favor of the offending spouse made in the will of the innocent spouse shall be revoked by operation of law; (Art. 63 FC) h. Innocent spouse may revoke the donations (within five years from the time the decree of legal separation has become final) made by him in favor of the offending spouse. However, alienations, liens and encumbrances registered in good faith before the recording of the complaint for revocation in the registries of property shall be respected; (Art. 64, FC) i. Innocent spouse may revoke the designation of the offending spouse as the beneficiary in any insurance policy, even if the designation be irrevocable (Art. 64, FC). NOTE: Prescriptive period: 5 years from finality of decree of legal separation j.
k.
Pursuant to Art. 198, FC, obligation for mutual support ceases but guilty spouse may be ordered to give support to the innocent one; and Wife continues to use her name and surname before the legal separation.
7.
Reconciliation of the spouses during the pendency of the action. No legal separation may be decreed unless the Court has taken steps toward the reconciliation of the spouses and is fully satisfied, despite such efforts, that reconciliation is highly improbable (Art. 59, FC). If the spouses should reconcile, a corresponding joint manifestation under oath duly signed by them shall be filed with the court in the same proceeding for legal separation (Art. 65, FC).
Effects of Reconciliation 1. On their personal relations – resumption of cohabitation and marital relations; 2. On proceedings for the decree of legal separation: a. The legal separation proceedings, if still pending, shall thereby be terminated at whatever stage; and b. The final decree of legal separation shall be set aside, but the separation of property and any forfeiture of the share of the guilty spouse already effected shall subsist, unless the spouses agree to revive their former property regime (Art. 66, FC). c. The court's order containing the foregoing shall be recorded in the proper civil registries. Without the decree of reconciliation, even if they reconcile the effects of the final decree of legal separation will remain (Rabuya, Civil Law Reviewer Vol 1, 2017, p. 133).
Agreement to revive former property regime upon reconciliation (Art. 67, FC) Agreement of revival and motion for its approval shall be filed in court in the same proceeding for legal separation and shall be executed under oath, where it shall specify:
48
a. Properties to be contributed anew to the restored regime; b. Those to be retained as separated properties of each spouse; and c. Names of all their known creditors, their addresses and the amounts owing to each. The agreement of revival and the motion for its approval shall be filed with the court in the same proceeding for legal separation, with copies of both furnished to the creditors named therein. After due hearing, the court shall, in its order, take measure to protect the interest of creditors and such order shall be recorded in the proper registries of properties. The recording of the ordering in the registries of property shall not prejudice any creditor not listed or not notified, unless the debtor-spouse has sufficient separate properties to satisfy the creditor's claim. 8.
Effect of Death of one of the parties
An action for legal separation which involves nothing more than bed and board separation of the spouses is purely personal. Being personal, it follows that the death of one party to the action causes the death of the action itself (Lapuz-Sy v. Eufemio, G.R. No. 30977, January 31, 1972). H. PROPERTY SPOUSES
RELATIONS
OF
THE
1. GENERAL PROVISIONS The property relationship between husband and wife shall be governed in the following order: 1. By marriage settlements executed before the marriage; 2. By the provisions of the Civil Code; and 3. By the local custom (Art. 74, FC). Marriage settlements It is a contract entered into by the future spouses fixing the matrimonial property regime
that should govern during the existence of the marriage (Paras, Civil Code of the Philippines Annotated, Persons and Family Relations Vol. 1, 2008 p. 515). The future spouses may, in the marriage settlement, agree upon any of the following: 1. 2. 3. 4.
Regime of absolute community; Conjugal partnership of gains; Complete separation of property; or Any other regime (Art. 75, FC).
In the absence of a marriage settlement, or when the regime agreed upon is void, the system of absolute community of property as established in this Code shall govern (Art.75, FC). Requisites of a Valid Marriage Settlement 1. In writing; (Art. 77, FC) a. An agreement in consideration of marriage must be in writing; otherwise, it shall be unenforceable (Art. 1403[2C], NCC). Note: If marriage is terminated by death of one of the spouses and the surviving spouse marries again without initiating settlement of properties of previous marriage within one (1) year from death of deceased spouse, mandatory regime of complete separation of property shall govern property relations of the subsequent marriage (FAMILY CODE, Arts. 103 and 130). 2. Signed by the parties; (Art. 77, FC) 3. Must not contain provision contrary to law, good morals, good customs, public order, and public policy or against the dignity of either spouse. It must not be prejudicial to third person; (Art. 77, FC) 5. Executed before the celebration of the marriage; (Art. 76, FC) 6. Fixing the terms and conditions of their property relation;
49
7. Registration (to bind third persons) (Art. 77, FC); and 8. Additional signatories a. A minor who according to law may contract marriage may also execute his or her marriage settlements, but they shall be valid only if the persons designated in Article 14 [parents] to give consent to the marriage are made parties to the agreement (Art. 78, FC). b. If the party executing the settlement is under civil interdiction or any other disability, the guardian appointed by the court must be made a party to the settlement (Art. 79, FC). Commencement of Property Regime A property regime commences at the precise moment of the celebration of the marriage (i.e. actual time the marriage is celebrated on a certain date). Any stipulation, express or implied, for the commencement of the community regime at any other time shall be void (Art. 88, FC). Effect of marriage settlement if marriage does not take place General Rule: Everything stipulated in the settlements or contracts in consideration of a future marriage, including donations between the prospective spouses made therein, shall be rendered void if the marriage does not take place (Art. 81, FC). EXCEPTION: Stipulations that do not depend upon the celebration of the marriages shall be valid (Art. 81, FC). Applicable law for marriage settlements General Rule: In the absence of a contrary stipulation in a marriage settlement, the property relations of the spouses shall be governed by Philippine laws, regardless of the place of the celebration of the marriage and their residence (Art. 80, FC).
Exceptions: a. Both spouses are aliens; b. With respect to the extrinsic validity of contracts affecting property: 1) Not situated in the Philippines and executed in the country where the property is located; and 2) Situated in a foreign country whose laws require different formalities for its extrinsic validity (Art. 80, FC). 🕮 Prior to the effectivity of the Family Code, in the absence of a marriage settlement or when the same is void: Conjugal Partnership of Gains will govern (Rabuya, The Law on Persons and Family Relations, 2006, p. 421). 🕮 If there is no marriage settlement, the property regime shall be the Absolute Community of Property. (Sta. Maria, Persons and Family Relations, 2019, p. 443) 🕮 Under the Family Code, in the absence of a marriage settlement or when the regime agreed upon is void: System of Absolute Community of Property will govern (Art. 75, FC). 1. DONATION PROPTER NUPTIAS Requisites of Donation Propter Nuptias (Art. 82, FC): 1. It is made before the celebration of marriage. 2. It must be made in consideration of the marriage. 3. It must be made in favor of one or both of the future spouses. Otherwise, the GRs on donation shall govern. Form Required by Law: These donations are governed by the rules on ordinary donations established in Title III of Book III of the Civil Code, insofar as they are not modified by the following articles (Art. 83, FC).
50
Limitation on Donations by Reason of Marriage If the regime agreed upon is other than absolute community, they cannot donate to each other in their marriage settlements more than one-fifth of their present property. Any excess shall be considered void (Art. 84, FC).
Prescriptive Period: Five years from date of supposed solemnization of marriage (Art. 1149, NCC). b. If marriage depends:
The donation may comprehend all the present property of the donor, or part thereof, provided he reserves, in full ownership or in usufruct, sufficient means for the support of himself, and all relatives who, at the time of the acceptance of the donation, are by law entitled to be supported by the donor. Without such reservation, the donation shall be reduced on petition of any person affected (Art. 750, NCC). No person may give or receive, by way of donation, more than he may give or receive by will. The donation shall be inofficious in all that it may exceed this limitation (Art. 752, NCC). Donation propter nuptias of encumbered property Donations by reason of marriage of property subject to encumbrances shall be valid. In case of foreclosure of the encumbrance and the property is sold for: 1. Less than the total amount of the obligation secured, the donee shall not be liable for the deficiency. 2. More than the total amount of said obligation, the donee shall be entitled to the excess (Art. 85, FC). Donation by reason of marriage may be revoked in the following cases 1. If the marriage is not celebrated or judicially declared void ab initio except donations made in the marriage settlements, which is governed by Art. 81, FC; a. If marriage is not celebrated
is judicially
void,
it
If subsequent marriage is void pursuant to Art. 40, FC in relation to Arts. 52 and 53, FC because it was contracted by a spouse before the prior marriage is judicially declared void. If donee-spouse contracted subsequent void marriage in bad faith. Prescriptive Period: Revoked by operation of law
Judicially grounds.
declared
void
on
other
Prescriptive Period: Five years from finality of judicial declaration of nullity (if action to recover the property) 2. When the marriage takes place without the consent of the parents or guardian, as required by law; Prescriptive Period: Five years from the time the donor came to know that the required parental consent was not obtained 3. When the marriage is annulled, and the donee acted in bad faith; Prescriptive Periods: (a) Five years from finality of decree of legal separation, the donee being guilty spouse; (b) Five years from the time the decree of legal separation becomes final 4. If it is with a resolutory condition and the condition is complied with; Prescriptive Period: Five years from happening of condition
51
5.
When the donee has committed an act of ingratitude as specified by the provision of the Civil Code on donations in general (Art. 86, FC).
2. Donations mortis causa. 🕮 Donation between common-law spouses is void (Art. 87, FC).
Prescriptive Period: One donor’s knowledge of that fact
Void donations by the Spouses
year
from
2. VOID DONATION BY SPOUSES General Rule: Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be void (Art. 87, FC). Reason: 1. To prevent the weaker spouse from being influenced by the stronger spouse; 2. To protect creditors; 3. To prevent an indirect modification of the marriage settlement during marriage (Art. 76). Exceptions: 1. Moderate gifts given on occasion of family rejoicing; or
1. Those made between persons who were guilty of adultery or concubinage at the time of the donation; ▪ In this case, the action for declaration of nullity may be brought by the spouse of the donor or donee; and the guilt of the donor and donee may be proved by preponderance of evidence in the same action (Art. 739, NCC, last par.). 2. Those made between persons found guilty of the same criminal offense, in consideration thereof; and 3. Those made to a public officer or his wife, descendants and ascendants, by reason of his office (Art. 739, NCC) between the spouses during the marriage shall be void (Art. 87, FC).
MARRIAGE SETTLEMENT, DONATION PROPTER NUPTIAS AND ORDINARY DONATIONS Nature Definition
Marriage Settlement
Donation Proper Nuptias
Ordinary Donation
Contract entered into by a man and a woman who intend to get married, fixing the property regime that will govern their present and future property during marriage.
Act of liberality made before marriage in favor of one or both of the future spouses.
An act of liberality whereby a person gratuitously disposes of a thing or a right in favor of another, who accepts it.
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Nature Scope Restrictions
Marriage Settlement and
Should not prejudice 3rd persons
Donation Proper Nuptias May
include
future
property
Will be void if marriage does not take place
If regime is not absolute community property spouses cannot donate more than 1/5 of their present property.
Cannot stipulate that donations between them during marriage will be valid.
No
indirect
donations
Must not prejudice legitimes
Ordinary Donation Cannot future Cannot minors
comprehend property be
Start of marriage.
Who executes
Future
by
May comprehend all property of donor provided donor must reserve sufficient means to support himself. Must not legitimes
Effectivity
made
prejudice
When it is made spouse
Any person in favor of one or both of the future spouses
Between any person
Before the celebration of the marriage Same formalities as that required in ordinary donations, otherwise, void
Anytime
If party is 18-21 years old, the parent whose consent is needed must be a party thereto For persons suffering from civil interdiction or other disability, the guardian must be a party thereto. When to execute Form of Execution
Before the celebration of the marriage In writing, otherwise, unenforceable.
Movables – oral or written. Immovable – public document
53
Nature Revocation
Marriage Settlement
Donation Proper Nuptias
Ordinary Donation
Judicial separation of property, voluntarily or for cause.
Marriage is not celebrated or judicially declared void ab initio.
Donor, after the donation should have legitimate, illegitimate, legitimated children, even though they are posthumous.
Marriage takes place without the needed consent. Marriage acted
is in
annulled, bad
donee faith.
In case of legal separation and donee is guilty spouse. Resolutory complied
condition
is
not with.
Donee committed an act of ingratitutde.
Who may uestion validity
Heirs of any person rights are prejudiced.
whose
Child of donor, whom the latter believed dead, turns out to be alive. Donor adopts
a
subsequently minor child.
Acts of ingratitude by donee. Failure to comply with condition attached to donation. Those who have right to legitimate and their heirs.
PROPERTY RELATIONS OF SPOUSES
Applies when:
Different property regimes which may be adopted by future spouses
1) Agreed upon in the marriage settlement; 2) Do not choose any economic system of property regime and the marriage took place during the effectivity of the Family Code (on August 3, 1988 or after); or 3) When marriage settlement is void (Art.75, FC).
a. Absolute Community of Property (ACP) b. Conjugal Partnership of Gains (CPG); c. Absolute Separation of Property (ASOP); d. A combination of the above regimes; e. Any other regime within limits provided by the FC. 3. ABSOLUTE COMMUNITY OF PROPERTY REGIME General Provision A marriage settlement where spouses are considered co-owners of ALL property brought into the marriage which are not otherwise excluded from the community property either by the provisions of the Family Code or by the marriage settlement (Rabuya, The Law on Persons and Family Relations, 2006, p. 421).
Commencement The absolute community of property between spouses shall commence at the precise moment that the marriage is celebrated. Any stipulation, express or implied, for the commencement of the community regime at any other time shall be void (Art. 88, FC). The same applies to CPG (Art. 197, FC). Rules on Co-ownership applies suppletorily The provisions on co-ownership shall apply to the absolute community of property between the spouses in all matters not provided by the Chapter on ACP (Art. 90 FC).
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What constitutes community property General rule: Community property shall consist of all property owned by the spouses at the time of the marriage or acquired thereafter (Art. 91, FC). Exceptions: 1. Property acquired during the marriage by gratuitous title by either spouse, its fruits and income, unless it is expressly otherwise provided by the donor, testator or grantor. 2. For personal and exclusive use, except jewelry. 3. Acquired before the marriage by either spouse who has legitimate descendants by a former marriage including the fruits and income (Art. 92, FC). 4. Those excluded from the absolute community as in the marriage settlement (Art. 91, FC). Presumption of inclusion in the absolute community Property acquired during the marriage is presumed to belong to the community, unless proven otherwise by strong and convincing evidence (Art. 93, FC). Liability of the Absolute Community of Property 1. The support of the spouses, common children, and legitimate children of either spouse; 2. Illegitimate children shall be governed by the provisions of the Code on Support; 3. All debts and obligations contracted during marriage; 4. Debts and obligations contracted by either spouse without the consent of the other; 5. All taxes, liens, charges and expenses, including major or minor repairs; 6. All taxes and expenses for mere preservation made during marriage;
7. Expenses of either spouse to commence or complete a professional or vocational course; 8. Antenuptial debt; 9. The value of what is donated or promised by both spouse; 10. Advances of the debtor-spouse upon liquidation of the community; and 11. Expenses of litigation between the spouses unless the suit is found to be groundless. When the community property is insufficient to cover the foregoing liabilities, except par. 9, the spouses shall be solidarily liable for the unpaid balance with their separate properties (Art. 94, FC). Procedure on Liquidation of the Absolute Community Assets and Liabilities 1. An inventory of all the ACP properties and exclusive properties of each spouse; 2. Payment of debts and obligations of the absolute community; In case of insufficiency of said assets, the spouses shall be solidarily liable for the unpaid balance with their separate properties taking into consideration the charges and obligations upon the ACP (Article 94, FC). 3. Delivery of exclusive properties to spouses whatever remains of the exclusive properties of the spouses shall thereafter be delivered to each of them. 4. Net remainder = Net assets of ACP General Rule: The net remainder of the properties of the absolute community which shall be divided equally between husband and wife. Exception: a. Unless a different proportion or division was agreed upon in the marriage settlements or; b. There has been a voluntary waiver of such share provided in this Code or; c. The share of the guilty spouse is forfeited.
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For purpose of computing the net profits subject to forfeiture in accordance with Articles 43, No. 2 (i.e., one of the spouses contracted subsequent marriage in bad faith, his share shall be forfeited in favor of the common children, if none, the children of the guilty spouse by a previous marriage or in default of children, the innocent spouse) and 63, No. 2 (i.e., the offending spouse in case of legal separation shall have no right to any share of the net profits earned by the ACP) the said profits shall be the increase in value between the market value of the community property at the time of the celebration of the marriage and the market value at the time of its dissolution (Art. 102, FC). 5. Delivery of presumptive legitimes of the common children. 6. Adjudication of conjugal dwelling and lot. a. In accordance with agreement of the parties, if any; b. If no agreement, it shall be adjudicated to the spouse with whom the majority of the common children choose to remain; Effect of Termination of ACP due to death of one of the Spouses a. The community property shall be liquidated within one year from death of the deceased spouse in the same proceeding for the settlement of the estate of the deceased (Art.103, FC). b. If no judicial settlement proceeding is instituted, the surviving spouse shall liquidate the community property either judicially or 4. Conjugal Partnership of Gains regime It is a partnership established through the marriage of a man and a woman, who as partners, place in a common fund: a. The proceeds, the products, fruits and income from their separate properties;
extra-judicially within one year from the death of the deceased spouse. If there are debts 'to be paid, the surviving spouse must file a proceeding for the settlement of estate; c. If upon the lapse of the one-year period, no liquidation is made, any disposition or encumbrance involving the community property of the terminated marriage shall be void (Art. 103, FC). d. If the surviving spouse contract a subsequent marriage without liquidating the ACP or CPG, mandatory regime of complete separation of property shall govern the property relations of the subsequent marriage Effect of Failure to Liquidate Should the surviving spouse contract a subsequent marriage without compliance with the foregoing requirements, a mandatory regime of complete separation of property shall govern the property relations of the subsequent marriage (Art. 103, FC). Liquidation of ACP of Two Marriages by the Same Person Whenever the liquidation of the community properties of two or more marriages contracted by the same person before the effectivity of this Code is carried out simultaneously, the respective capital, fruits and income of each community shall be determined upon such proof as may be considered according to the rules of evidence. In case of doubt as to which community the existing properties belong, the same shall be divided between the different communities in proportion to the capital and duration of each (Art. 104, FC) b. Those acquired by either or both of them through their efforts; c. Those acquired by them by chance; The dissolution of the marriage or of the partnership, the net gains or profits obtained by either or both spouses shall be divided equally
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between them, unless otherwise agreed in the marriage settlements (Art. 106, FC). Presumption of CPG - All property acquired during the marriage, whether the acquisition appears to have been made, contracted or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved (Art. 116, FC).
7. Those acquired by chance (Art. 117, FC). But losses from a game of chance shall be borne exclusively by the loser-spouse. Exclusive property of each spouse (Arts. 109-115)
Conjugal Partnership of Gains Will Govern:
1. Those brought to the marriage as his or her own; 2. That which each acquires during the marriage by gratuitous title;
In case the future spouses agree in the marriage settlements that the regime of conjugal partnership gains shall govern their property relations during marriage (Art. 105, FC).
Pensions will not form part of the conjugal partnership of gains when it is given to him voluntarily and he is not entitled as a matter of right such as a fruit of industry or labor.
Commencement of CPG
Proceeds of life insurance policy will not form part of the conjugal partnership of gains when the beneficiary of the life insurance is the estate and the premiums are sourced from the separate property of the spouse.
CPG shall commence at the precise moment that the marriage is celebrated (Art. 107, FC in relation to Art. 88, FC). Rules that govern the CPG The rules on the contract of partnership in all that is not in conflict with what is expressly determined in the FC or by the spouses in their marriage settlements (Art. 108, FC). What constitutes CPG -Those acquired by the spouses: 1. Onerous title during marriage at the expense of common fund; 2. Labor, work, profession or industry of either or both spouses; 3. Fruits, natural, industrial or civil, due or received during marriage from common property, as well as net fruits from exclusive property of each spouse; 4. Share of either spouse in hidden treasure as finder or owner of property where treasure is found; 5. Through occupation; 6. Livestock existing upon dissolution of conjugal partnership of gains in excess of number of each kind brought to the marriage by either spouse; and
Retirement Benefits will not form part of the conjugal partnership of gains when it is given to him voluntarily and he is not entitled as a matter of right such as a fruit of industry or labor. 3. That which is acquired by right of redemption, by barter or by exchange with property belonging to only one of the spouses; and That which is purchased with exclusive money of the wife or of the husband (Art. 109, FC). NOTE: In right of redemption, for it to form part of the exclusive property of the spouse, the ownership over such property must still pertain to the said spouse. 4. The amount of principal which may be collected during the marriage in partial payments or by installments on the amount of credit belonging to one of the spouses. Exception: Interests falling due during the marriage on the principal shall belong to the conjugal partnership (Art. 119, FC).
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The spouses retain the ownership, possession, administration and enjoyment of their exclusive properties (Art. 110, FC). Rule on transfer of exclusive property under CPG 1. Either spouse may, during the marriage, transfer the administration of his or her exclusive property to the other by means of a public instrument, which shall be recorded in the registry of property of the place the property is located (Art. 110, FC). 2. A spouse, may mortgage, encumber, alienate or otherwise dispose of his or her exclusive property, without the consent of the other spouse, and appear alone in court to litigate with regard to the same (Art. 111, FC). 3. The alienation of any exclusive property of a spouse administered by the other automatically terminates the administration over such property and the proceeds of the alienation shall be turned over to the ownerspouse (Art. 112, FC). 🕮 The settled rule is that the sale or encumbrance of a conjugal property requires the consent of both the husband and the wife (Guiang vs. CA, G.R. No. 127172, June 26, 1998). The absence of the consent of one render the entire sale or encumbrance null and void, including the portion of the conjugal property pertaining to the husband who contracted the sale. Neither would the conjugal partnership be liable for the loan on the ground that it redounded to the benefit of the family. The sweeping conclusion that the loan was obtained by the husband in order to finance the construction of housing units, without however adducing adequate proof, does not persuade (Homeowners Savings & Loan Bank vs. Dailo, G.R. No. 153802, March 11, 2005). Rules on donation of exclusive property 1. Property donated or left by will to the spouses, jointly and with designation of determinate shares, shall pertain to the donee-spouses as his or her own exclusive property, and in the absence of designation,
share and share alike, without prejudice to the right of accretion when proper (Art. 113, FC). 2. If the donations are onerous, the amount of the charges shall be borne by the exclusive property of the donee spouse, whenever they have been advanced by the conjugal partnership of gains (Art. 114., FC). 3. Retirement benefits, pensions, annuities, gratuities, usufructs and similar benefits shall be governed by the rules on gratuitous or onerous acquisitions as may be proper in each case (Art. 115, FC). Ownership of property bought through instalment Property bought on installments paid partly from exclusive funds of the spouses and partly from conjugal funds: 1. If full ownership vested before marriage – it shall belong to the buyer spouse; 2. If full ownership vested during marriage – it shall belong to the conjugal partnership ▪
In either case, any amount advanced by the partnership or by either or both spouses shall be reimbursed by the owner or owners upon liquidation of the partnership (Art. 118, FC).
Rule on Ownership of Improvements (Art. 120, FC) When will apply: 1. If there is an improvement made on the separate property whether for utility or adornment; 2. At the expense of the partnership or through the acts or efforts of either or both spouses; and 3. Improvement is made during the marriage. ▪
Reverse Accession: When the cost of the improvement made by the conjugal partnership and any resulting increase in value are more than the value of
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the property at the time of the improvement, the entire property of one of the spouses shall belong to the conjugal partnership. Subject to reimbursem*nt of the value of the property of the owner-spouse at the time of the improvement. NOTE: For reverse accession to apply, the separate property must be owned by a spouse exclusively at the time of the introduction of the improvement. It will apply if the property is partly owned by a spouse and partly owned by a third person. ▪
It is the law that governs. Does not possess any legal personality distinct from that of the spouses. Begins precisely on the date of the celebration of the marriage – no contrary stipulation is allowed. Not formed particularly for profit. Profits are divided.
Accession When the cost of the improvement made by the conjugal partnership and any resulting increase in value are less than the value of the property at the time of the improvement, the entire property remains the exclusive property of the spouse. NOTE: In either case, there shall be reimbursem*nt upon the liquidation of the conjugal partnership and ownership of entire property shall be vested only upon reimbursem*nt. CONJUGAL PARTNERSHIP Arises only because of marriage contract. Conjugal owners are always only two. Profits are generally 50-50 unless a contrary stipulation is in a marriage settlement. Death of either husband or wife dissolves the conjugal partnership. Generally, the husband is the administrator. Encouraged by law to provide for better family solidarity. Created by operation of law upon celebration of marriage.
CO-OWNERSHIP May arise by an ordinary contract. Co-owners may be two or more. Profits are proportional to respective interests. Death of one does not dissolve the coownership. Generally, all co-owners administer. Co-ownership discouraged by law. Created by will or consent of the parties.
Administration and enjoyment of the conjugal partnership property belong to both spouses jointly.
The will of the partners shall govern. It possesses a legal personality. Begins from the moment of the execution of the contract but a contrary stipulation is allowed. Formed for profit. Profits are divided according to previous agreement; if there is no previous agreement, in proportion to the amount contributed. Management is conferred upon the partners so appointed by the others.
Liquidation of the Conjugal Partnership Assets and Liabilities 1. An inventory of all the CPG properties and exclusive properties of each spouse; 2. The benefits received by a spouse from the CPG during the marriage are returned to the CPG; 3. Reimbursem*nt for the use of exclusive funds/exclusive property, ownership of which has been vested in the CPG; 4. Payment of debts and obligations of the conjugal partnership; (Art. 129) ▪
In case of insufficiency of said assets, the spouses shall be solidarily liable for the unpaid balance with their separate properties, taking into consideration the charges and obligations upon the ACP (Art. 121, FC).
5. Delivery of exclusive properties to spouses; 6. Payment of loss or deterioration of movables used for the benefit of the family, belonging to either spouse, even due to fortuitous event 7. Net remainder = Net profits of CPG
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General Rule: The net remainder of the properties of the conjugal partnership shall be divided equally between husband and wife.
involving the community property of the terminated marriage shall be void (Id.). Effect of Failure to Liquidate
Exception: a. Unless a different proportion or division was agreed upon in the marriage settlements or; b. There has been a voluntary waiver of such share provided in this Code or; c. The share of the guilty spouse is forfeited. 8. Delivery of presumptive legitimes of the common children; 9. Adjudication of conjugal dwelling and lot: a. In accordance with agreement of the parties, if any; b. If no agreement, it shall be adjudicated to the spouse with whom the majority of the common children choose to remain; Presumption: Children below the age of seven years are deemed to have chosen the mother, unless the court has decided otherwise. In case there is no majority among children, the court shall decide the matter taking into consideration the best interests of the children (Art. 129, FC). Effect of Termination of CPG due to death of one of the Spouses Upon the termination of the marriage by death, the community property shall be liquidated within one year from death of the deceased spouse in the same proceeding for the settlement of the estate of the deceased (Art. 130, FC). ▪
If no judicial settlement proceeding is instituted, the surviving spouse shall liquidate the community property either judicially or extra-judicially within one year from the death of the deceased spouse. If upon the lapse of the one-year period, no liquidation is made, any disposition or encumbrance
Should the surviving spouse contract a subsequent marriage without compliance with the foregoing requirements, a mandatory regime of complete separation of property shall govern the property relations of the subsequent marriage (Art. 130, FC). Liquidation of CPG of Two Marriages by the Same Person Whenever the liquidation of the community properties of two or more marriages contracted by the same person before the effectivity of this Code is carried out simultaneously, the respective capital, fruits and income of each community shall be determined upon such proof as may be considered according to the rules of evidence. In case of doubt as to which community the existing properties belong, the same shall be divided between the different communities in proportion to the capital and duration of each (Art. 131, FC). Provisions Common to ACP and CPG Prohibition on the waiver of rights, interest, shares and effects (Art. 89, FC for ACP; Art. 107, FC for CPG) General Rule: No waiver of rights, interests, shares and effects of the absolute community of property during the marriage can be made. Exception: In case of judicial separation of property (Art. 89, FC). When the waiver takes place upon a judicial separation of property, or after the marriage has been dissolved or annulled, the same shall appear in a public instrument and shall be recorded in the office of the local civil registrar where the marriage contract was recorded as well as in the proper registry of property (Arts. 89 and 77, FC).
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Remedy of Creditors in case of waiver of debtor-spouse
debtor-spouse has no or has insufficient exclusive property.
The creditors of the spouse who made such waiver may petition the court to rescind the waiver to the extent of the amount sufficient to cover the amount of their credits (Art. 89 [2], FC).
2) Education and Self-Improvement:
Charges upon and obligations of absolute community property and conjugal property The absolute community of property shall be liable for (Art. 94, FC for ACP; Art. 121, FC for CPG): (DELTS) 1) Debts a. All debts and obligations contracted during the marriage by: i. The designated administrator-spouse for the benefit of the community; or ii. By both spouses; or iii. By one spouse with the consent of the other. b. Debts and obligations contracted by either spouse without the consent of the other to the extent that the family may have been benefited. c. Ante-nuptial debts of either spouse insofar as they have redounded to the benefit of the family. d. Ante-nuptial debts of either spouse other than those falling under item “c” stated above, such as:
a. Expenses to enable either spouse to commence or compete a professional, vocational, or other activity for selfimprovement. The value of what is donated or promised by both spouses in favor of their common legitimate children for the exclusive purpose of commencing or completing a professional or vocational course or other activity for selfimprovement. 3) Expenses of litigation between the spouses unless the suit is found to be groundless. 4) Taxes a. All taxes, liens, charges and expenses, including major or minor repairs, upon the community property. b. All taxes and expenses for mere preservation made during marriage upon the separate property of either spouse used by the family. In ACP, item “4.b” must pertain to the property used by the family before said obligation can be charged against the ACP, which is not a requirement in CPG (Rabuya, The Law on Persons and Family Relations, 2006, p. 435).
i. The support of illegitimate children of either spouse; and ii. Liabilities incurred by either spouse by reason of a crime or a quasi-delict.
5) Support- The support of the spouses, their common children, and legitimate children of either spouse.
Here, the ACP becomes automatically liable in case of absence or insufficiency of the exclusive property of the debtor-spouse, the payment of which shall be considered as advances to be deducted from the share of the debtor-spouse upon liquidation of the community. This is not applicable to CPG, as the CPG does not become automatically liable for its payment even if the
In case ACP/CPG is insufficient to cover the foregoing liabilities
The support of illegitimate children shall be governed by the provisions of Family Code on Support.
The spouses shall be solidarily liable for the unpaid balance with their separate properties
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(Art. 94, par [2], FC for ACP; Art. 121, par [2], FC for CPG).
General Rule: The payment of personal debts contracted by the husband or the wife before or during the marriage shall NOT be charged to the conjugal partnership. Exceptions: 1. They redounded to the benefit of the family; 2. Fines and indemnities imposed upon them; and 3. Support of illegitimate children of either spouse. Here, it is enforced against the partnership asset if the spouse who is bound should have no exclusive property or insufficient (Art. 122, FC). Ownership, administration, enjoyment and disposition of the community property Joint Administration -The administration and enjoyment of the community property shall belong to both spouses jointly (Art. 96, FC for ACP; Art. 124, FC for CPG). Disagreement in the administration of community property (Art. 96, FC) In case of disagreement, the decision of the husband shall prevail but subject to recourse to the court by the wife for proper remedy. NOTE: Prescriptive period for recourse is within 5 years from the date of the contract implementing such decision. Sole Administration – One spouse may assume sole power of administration when: a. Other spouse is incapacitated; b. Other spouse is unable to participate in the administration of the common properties; c. During the pendency of a legal separation case; or d. If one spouse abandons the other or fails to comply with his/her obligations to the family.
Limitation to Sole Administration: a. No power to dispose community/conjugal partnership property; and b. No power to encumber community/conjugal partnership property. Exceptions: a. With authority of the court; or b. With written consent of the other spouse In the absence of such authority or consent, the disposition or encumbrance shall be void. Continuing offer The transaction, however, shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors. Court authorization" in the sale of conjugal properties Court authorization is resorted to in cases where the spouse who does not give consent is incapacitated. If there is no showing that the spouse is incapacitated, court authorization cannot be sought (Manalo v. Fernandez, G.R. No. 147928, January 23, 2002). Rules on Donation and Disposition of Interest in the Community Property: 1. Either spouse may dispose by will of his or her interest in the community property (Art. 97, FC). 2. Neither spouse may donate any community property without the consent of the other (Art. 98, FC). Exception: Moderate donations for: (i) Charity; or (ii) Occasions of family rejoicing; or (iii) Family distress (Art. 98, FC for ACP; Art. 125, FC for CPG)
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Dissolution of Community Regime
What constitutes abandonment?
Grounds for Termination of ACP (Art. 99, FC for ACP; Art. 126, FC for CPG)
A spouse is deemed to have abandoned the other when he or she has left the conjugal dwelling without intention of returning (Rabuya, The Law on Persons and Family Relations, 2006, p. 446).
1. 2. 3. 4. 5.
Death of either spouse; Decree of legal separation; Marriage is annulled or declared void; Death of either spouse; Judicial separation of property on the ground of: a. Civil interdiction; b. Declared absentee; c. Loss of parental authority; d. Abandonment and failure to comply with the obligations to the family; e. Abuse of power of administration; f. At the time of the petition, spouses are separated in fact for at least 1 year and the possibility for reconciliation is highly improbable (Art. 135, FC).
Separation de Facto The separation in fact between husband and wife shall not affect the regime of absolute community/conjugal partnership. Effects of Separation de Facto: 1. The spouse who leaves the conjugal home or refuses to live therein, without just cause, shall not have the right to be supported; 2. When the consent of one spouse to any transaction of the other is required by law, judicial authorization shall be obtained in a summary proceeding; and 3. In the absence of sufficient community property, the separate property of both spouses shall be solidarily liable for the support of the family. The spouse present shall, upon proper petition in a summary proceeding, be given judicial authority to administer or encumber any specific separate property of the other spouse and use the fruits or proceeds thereof to satisfy the latter’s share (Art. 100, FC for ACP; Art. 127, FC for CPG).
Presumption of abandonment: If the spouse who left the conjugal dwelling for a period of three months or has failed within the same period to give any information as to his or her whereabouts shall be prima facie presumed to have no intention of returning to the conjugal dwelling (Art. 101, FC for ACP; Art. 128, FC for CPG). Remedy of the aggrieved spouse in case of abandonment of the other spouse If a spouse without just cause abandons the other or fails to comply with his or her obligations (may pertain to marital, parental or property relations) to the family, the aggrieved spouse may petition the court for: 1. Receivership; 2. Judicial separation of property or; 3. Authority to be the sole administrator of the absolute community (Art. 101, FC for ACP; Art. 128, FC for CPG).
ABSOLUTE CONJUGAL COMMUNITY OF PARTNERSHIP OF PROPERTY GAINS Support of the spouses, their common children and legitimate children of either spouse by previous marriage. All the properties Each spouse retains owned by the spouses his/her property before at the time of the marriage and only marriage become the fruits and income community property. of such properties become part of the conjugal properties during the marriage.
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Upon dissolution and liquidation of the community property what is divided equally between the spouses or their heirs is the net remainder of the properties of the absolute community property. Taxes and Expense for mere preservation during marriage upon separate property of either spouse used by family.
Upon dissolution and liquidation of the community property what is divided equally between the spouses or their heirs is the net remainder of the properties of the absolute community property. Taxes and Expenses for mere preservation during marriage upon separate property of either · spouse, regardless of whether or not used by family because use 'and enjoyment of separate property of the spouses belong to the partnership.
5. SEPARATION OF PROPERTY REGIME (Arts. 143-146, FC) Instances when separation of property is allowed (Art. 134, FC) 1. By agreement through marriage settlement In the absence of an express declaration in the marriage settlements, the separation of property between spouses during the marriage shall not take place EXCEPT by judicial order. 2. By judicial order (See No. 7)
prior to the marriage or during the marriage, without the need of the consent of the other (Art. 145, FC). 🕮 If the spouses agree on a partial separation, or separation only with respect either to their present or future property, the property not agreed upon as separate shall pertain to the absolute community following the provisions of Articles 75 and 144 of the FC. What properties are included? 1. All earnings by each spouse from his or her profession, business or industry; and 2. All fruits, natural, industrial or civil, due or received during the marriage from his or her separate property (Art. 145, FC). Rights of Each Spouse 1. Each spouse shall own, dispose of, administer, possess, and enjoy his or her own separate property, without need of the consent of the other. 2. Each spouse shall own all earnings from his or her profession, business or industry and all fruits, natural, industrial or civil, due or received during the marriage from his or her separate property (Art. 145, FC). Rule on Expenses: Both spouses shall bear the same in proportion to their income or, in case of insufficiency and default thereof, to the current market value of their separate properties.
The spouses may provide for separation with respect to:
They shall, however, be held solidarily liable to the creditors in connection with such family expenses (Art. 146, FC).
1. Their present properties; or 2. Their future properties; or 3. Their both properties (Art.144, FC).
Transfer of administration of exclusive property between the spouses:
General Rule: In the regime of Complete Separation of Property, each spouse shall own, dispose of, possess, administer, and enjoy his or her own separate property, whether acquired
By agreement by means of a public instrument, recorded in the registry of property of the place where the property is located.
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1. The administration of all classes of exclusive property of either spouse may be transferred by the court to the other spouse: a. When one spouse becomes the guardian of the other. b. When one spouse is judicially declared an absentee; c. When one spouse is sentenced to a penalty which carries with it civil interdiction; or d. When one spouse becomes a fugitive from justice or is in hiding as an accused in a criminal case (Art. 142, FC). If the other spouse is not qualified by reason of incompetence, conflict of interest, or any other just cause, the court shall appoint a suitable person to be the administrator (Id.). 🕮
Automatic termination of administration in case the administrator-spouse alienates any exclusive property of the other. The proceeds shall be turned over to the owner-spouse (Art 112, FC).
6. PROPERTY REGIME OF UNIONS WITHOUT MARRIAGE (Arts. 147-148, FC) General Rule: In case of void marriages, regardless of the cause thereof, or those living together as husband and wife without the benefit of marriage, the property relations of the parties during the period of cohabitation is Art. 147 or 148 of the FC, as the case may be (Rabuya, The Law on Persons and Family Relations, 2006, p. 507). ART. 147
ART. 148 Applicability 1. No legal Presence of legal impediment to marry impediment: but living as husband and wife; 1. Adulterous relationships 2. Void marriage on the 2. Bigamous/polygam ground of psychological ous marriages incapacity. 3. Incestuous void marriages under Art 37
4.
Void marriages by reason of public policy (Art. 38, FC)
Salaries & wages Owned in equal shares Separately owned by the parties. If any party is married, his/her salary pertains to the ACP or CPG of the legitimate marriage. Property exclusively acquired Belongs to party Belongs to such party upon proof of acquisition through exclusive funds Acquired by both through their work or industry Governed by rules of co‐ Owned in common in ownership proportion to their respective contributions Presumption Property acquired while No presumption of joint living together acquisition. presumed to have been obtained by their joint Actual joint contribution efforts, work or industry of money, property or and owned by them in industry shall be owned equal shares. by them in common proportion. If one party did not However, their participate in contributions are acquisition: presumed equal, in the presumed to have absence of proof to the contributed through care contrary. and maintenance of family and household
(Buenaventura vs. Buenaventura, G.R. No. 127358, Mar. 31, 2005)
Forfeiture When only one is in GF, If one of the parties is share of party in BF in validly married to the co‐ownership be another, his/her share in forfeited in favor of: the co‐ownership shall 1. their common accrue to the ACP or CPG children; existing in the marriage. 2. in default of / waiver by any/all common If the party who acted in children, or by their BF is not validly married descendants, to the to another or if both parties are in BF, such
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3.
surviving descendants; in their absence, to the innocent party
property shall still be considered as having contributed thereto jointly if said party’s “efforts consisted in the care and maintenance of the family household.” (Valdes vs. RTC, G.R. No. 122749, July 31, 1996).
share be forfeited in manner provided in last paragraph of Art. 147
Proof of actual contribution Not necessary Necessary
Co-ownership under Art. 147 This property regime applies when the following requisites concur (Art 147, FC) 1. A man and a woman who are capacitated to marry each other; 2. Live exclusively with each other as husband and wife; and without the benefit of marriage or under a void marriage. Examples: 1. Marriages declared void by reason of psychological incapacity (Art. 36, FC); 2. Marriages celebrated without a valid marriage license [(Art. 35[3], FC). Shares of parties in property 1. Wages and salaries are owned in equal shares. 🕮 Wages and salaries will be divided equally between them, even if only one party earned the wages and the other did not contribute thereto (Art. 147, FC). 2. De Facto Co-Ownership – With respect to property acquired by both through work and industry, rules on co-ownership shall apply. 🕮 Property acquired by both spouses through their work and industry shall be governed by the rules of equal coownership when the marriage was declared null pursuant to Art. 36 of the Family Code. A party who did not participate in the acquisition of the
3. Care and maintenance of the family and household are deemed to be joint and equal. 4. Parties cannot encumber or dispose by acts inter vivos their share in the property acquired during their cohabitation and owned in common, without the consent of the other, until after termination of cohabitation. 5. In cases of void marriages, if only one party is in good faith, the share of the spouse who is in bad faith shall be forfeited a. In favor of their common children b. In case of default or waiver by any or all of the common children or their descendants, each vacant share shall belong to the respective surviving descendants. c. In the absence of such descendants, such share belongs to the innocent party. Co-ownership under Art. 148 Unions Governed by Article 148, FC: 1. 2. 3. 4.
Bigamous marriages; Adulterous relationship; Relationships in a state of concubinage; Relationships where both man and woman are married to other persons; or 5. Multiple alliances of the same married man. 🕮 Wages and salaries earned by each party belong to him/her exclusively. 🕮 Only properties acquired by the parties through their “actual joint contribution” of money, property or industry shall be owned in common in proportion to their respective contributions. 🕮 In the absence of proof to the contrary, contributions and the share of the parties to the properties acquired during the cohabitation are presumed to be equal.
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Retroactive application of Art. 148 of the Family Code Although the adulterous co-habitation of the parties or the acquisition of the property occurred before the effectivity of the Family Code on August 3, 1998, Article 148 applies because the said provision was intended precisely to fill up the hiatus in Article 144 of the NCC. Before Article 148 of the Family Code was enacted, there was no provision governing property relations of couples living in a state of adultery or concubinage (Atienza v. De Castro, G.R. No. 169698, November 29, 2006). If one party is validly married to another: 1. His/her share in the co-owned properties will accrue to the absolute community property/conjugal partnership of gains of his/her existing valid marriage. 2. If the party who acted in bad faith is not validly married to another, his/her share shall be forfeited in the same manner as that provided in Art 147, FC. 3. The same rules on forfeiture shall apply if both parties are in bad faith 7. JUDICIAL SEPARATION OF PROPERTY In the absence of an express declaration in the marriage settlements, the separation of property between spouses during the marriage shall not take place EXCEPT by judicial order. Such judicial separation of property may either be voluntary or for sufficient cause (Art. 134, FC). ANY will be sufficient cause for judicial separation of property. 1. Civil interdiction of petitioner’s spouse; 2. Petitioner’s spouse has been declared an absentee; 3. Petitioner’s spouse loss of parental authority with court decree; 4. Petitioner’s spouse abandoned the former; 5. Abused of power by the petitioner’s spouse; and
6. Spouses have been separated in fact for at least one year and reconciliation is highly improbable. Nos. 1, 2, and 3, the final judgment against the guilty or absent spouse shall be enough basis for the grant of the decree of judicial separation of property (Art. 135, FC). Effects of Judicial Separation of Property 1. The absolute community or the judicial partnership of gains shall be liquidated in conformity with this Code (Art. 137, FC). 2. After the dissolution of the absolute community or the conjugal partnership, complete separation of property shall apply (Art. 138, FC). 3. The decree of final judgment will be recorded in the proper local civil registries and registries of property (Art. 139, FC). Revival of property regime: The spouses, may, in the same proceedings where separation of property was decreed, file a motion in court for a decree reviving the property regime that existed between them before the separation of property in any of the following instances: 1. When the civil interdiction terminates; 2. When the absentee spouse reappears; 3. When the court, being satisfied that the spouse granted the power of administration in the marriage settlements will not again abuse that power, authorizes the resumption of said administration; 4. When the spouse who has left the conjugal home without a decree of legal separation resumes common life with the other; 5. When parental authority is judicially restored to the spouse previously deprived thereof; 6. When the spouses who have separated in fact for at least one year, reconcile and resume common life; or 7. When after voluntary dissolution of the absolute community of property or conjugal partnership has been judicially decreed upon the joint petition of the spouses, they agree
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to the revival of the former property regime. No voluntary separation of property may thereafter be granted (Art.141, FC). I. THE FAMILY 1. GENERAL PRINCIPLES Family is considered as a basic social institution which, by reason of public policy, deserved State‘s protection. The Philippine Constitution emphatically declares the Filipino family as― foundation of the nation. As such, our Constitution is committed to the policy of strengthening the family as a basic autonomous social institution (Rabuya, The Law on Persons and Family Relations, 2007, p. 512-513). Earnest efforts toward a compromise be first exerted before action or suit between or among the members of the same family may be given due course. The requirement is mandatory that earnest efforts have been made but that the same failed, so that if it is shown that no such effort were in fact made, the case must be dismissed. Hence, it is a condition precedent to the filing of a suit between members of the same family. Failure to allege that earnest efforts to compromise were undertaken is assailable at any stage of the proceeding, even on appeal, for lack of cause of action (O‘Laco v. Co Cho Chit, G.R. No. 58010, March 31, 1993). J. THE FAMILY HOME 1. GENERAL PRINCIPLES The family home, constituted jointly by the husband and the wife or by an unmarried head of a family, is the dwelling house where they and their family reside, and the land on which it is situated (Arts. 152, FC). After the effectivity of the Family Code, a family home is deemed constituted upon actual occupation of the family. There is no need to constitute it judicially or extra-judicially (Rabuya,
The Law on Persons and Family Relations, 2006, p. 518).
Constitution of family home: The family home is deemed constituted on a house and lot from the time it is occupied as a family residence (Arts. 153, FC). Limitations: 1. Each family can only have one family home. After a family house is constituted, no other family home can be established without first dissolving the existing one. 2. The family home can be constituted only on the dwelling place, and therefore, in the locality where the family has its domicile. 3. The value of the family home exempt from seizure of creditors cannot exceed the limits fixed by law 4. It must be part of the properties of the ACP/CPG, or of the exclusive properties of either spouse with the latter's consent. It may also be constituted by an unmarried head of a family on his or her own property (Arts. 156, FC). The property that is the subject of a conditional sale on installments where ownership is reserved by the vendor only to guarantee payment of the purchase price may be constituted as a family home (Paras, Civil Code of the Philippine Annotated, Persons and Family Relations, 2008, p. 647). 5. It may be sold, alienated, donated, assigned or encumbered by the owner or owners thereof with the written consent of the person constituting the same, the latter's spouse, and a majority of the beneficiaries of legal age. In case of conflict, the court shall decide (Art. 158, FC).
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NOT a family home: 1. An apartment unit or a house that is being rented 2. A house erected by a person on the property of another General rule: From the time of its constitution and so long as any of its beneficiaries actually resides therein, the family home continues to be such and is exempt from execution, forced sale or attachment
(Art. 153, FC).
Exceptions: 1. Non-payment of taxes; 2. Debts incurred prior to the constitution of family home; 3. Debts secured by mortgages on the premises before or after its constitution; and 4. Debts due to laborers, mechanics, architects, builders, materialmen and others who have rendered service or furnished material for the construction of the building (Art. 155, FC).
The Family Home is protected only up to the extent of the following amounts: P300,000.00, in urban areas; and P200,000.00, in rural areas (Art. 157, FC). While it is true that the family home is constituted on a house and lot from the time it is occupied as a family residence and is exempt from execution or forced sale under Article 153 of the Family Code, such claim for exemption should be set up and proved to the Sheriff before the sale of the property at public auction. Failure to do so would estop the party from later claiming the exemption (Spouses Charlie Fortaleza and Ofelia Fortaleza vs. Spouses Raul Lapitan and Rona Lapitan, G.R. No. 178288, August 15, 2012). Period of coverage If a house is worth P300,000 in an urban area but was not legally instituted prior to the effectivity of FC, it will automatically become a family home if it is still worth P300,000 on Aug. 3 1988
If the house were worth P400,000 prior to the effectivity of the FC & if its value increased to P500,000 at the time or after the effectivity, it will not be considered a family home because the value of P400,000 at the time of its constitution is the basis of the evaluation (rather than the P500,000), as it is the more favorable assessment for the constitution of the family home If a house in 1987 was worth P500,000, & the value decreased to P300,000 at the time of the effectivity of the FC, it is the P300,000 that will be considered
Justification for limits Those who can afford more expensive homes need no protection; this is intended to protect the middle-class. Justification is a sweeping generalization that ignores some facts. It has become a regressive limitation inhibiting progressive middle-class growth Increase in Value of Family Home NOTE: The values in Art. 157 refer only to the value at the time of the constitution made after the effectivity of the FC. If after the constitution, the value of the house increased due to improvements to an amount more than fixed by law at the time of the constitution, the family home remains a family home. Duration of Protection: The right to exemption is effective from the time of the constitution of the family home and lasts so long as its beneficiaries actually reside therein (Art.153, FC). Requisites for judgment creditor to avail the rights under sale on execution of family home: 1. He must be a judgment creditor; 2. His claim is not among those excepted under Article 155; and
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3.
He has reasonable ground to believe that the family home is worth more than the maximum amount of P200,000 (for rural areas) or P300,000 (for urban areas) (Art. 160, FC).
Effect of death of the person constituting the family home If there are beneficiaries who survive and living in the family home, it will continue to be such for 10 years, unless at the expiration of 10 years, there is still a minor beneficiary, in which case it will remain a family home until that beneficiary becomes of age (Rabuya, Civil Law Reviewer Vol 1, 2017, p. 199). Even if a house & lot passes to the heirs upon the death of their father, it cannot be immediately partitioned, at least not for 10 years, as it is a physical symbol of family love. In the case, the family patriarch died on March 10 2003. It cannot be partitioned for 10 years or longer, if there is still a minor residing there. It can thus only be partitioned in March 10 2011 (Arriola vs Arriola, GR No. 177703, January 28, 2008). Beneficiaries of the Family Home: 1. Husband and wife, or unmarried person who is the head of the family; and 2. The following relatives of such persons whether legitimate or illegitimate: a. Their parents; b. Their ascendants and descendants; and c. Their brothers and sisters, Provided they comply with the following: 1. They live in the family home; and 2. They are dependent for legal support upon the head of the family (Art. 154, FC). 🕮
Beneficiaries include the in-laws. But the law definitely excludes maids and overseers (Patricio vs. Dario III, G.R. No. 170829, November 20, 2006).
K. PATERNITY AND FILIATION 1. CONCEPTS OF PATERNITY, FILIATION, AND LEGITIMACY General rule: the law will always recognize the husband as the father; if he does nothing to impugn the child, the child is legitimate & his. Paternity & filiation – relationship which exists between parents & children. Paternity - The civil status of the father with regard to the child. Filiation - The civil status of the child with regard to his father either by nature or adoption. Legitimacy/illegitimacy is fixed by law & cannot be left to the will of the parties or the declaration of a physician or midwife: a. By nature – legitimate if they are conceived or born during the valid marriage of the parents. NOTE: Presumption of legitimacy can only arise upon convincing proof that the parents of the child were legally married & that the child’s conception/birth occurred during the subsistence of such marriage. b. By adoption 2. LEGITIMATE CHILDREN a) Who are Legitimate Children Legitimate – conceived or born during a valid marriage or within a lawful wedlock (Art. 164, FC). Children who are born outside of wedlock but are considered LEGITIMATE: a. Children of void marriages on the ground of psychological incapacity (Art. 36, FC);
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b. Children born in a subsequent void marriage due to non-compliance of the registration requirements (Art. 53, FC); and c. Born of a voidable marriage before the decree of annulment (Art. 54, FC). Children by artificial insemination: A child conceived by artificial insemination (AI) is considered legitimate (Art. 164, FC).
ground for compulsory recognition; it is in itself a voluntary recognition that does not require a separate action for judicial approval (Eceta vs. Eceta, G.R. No. 157037, May 20, 2004). 🕮
A birth certificate to be considered as validating proof of paternity and as an instrument of recognition must be signed by the father and mother jointly, or the mother alone if the father refuses (Reyes v. CA, G.R. No. L-39537, March 19, 1985).
🕮
Alfredo Aguilar’s SSS Form E-1 (Exhibit “G”) satisfies the requirement for proof of filiation and relationship to the Aguilar spouses under Article 172 of the Family Code; by itself, said document constitutes an “admission of legitimate filiation in a public document or a private handwritten instrument and signed by the parent concerned” (Aguilar vs. Siasat, G.R. No. 200169, January 28, 2015).
🕮
The Court adopted adopt the following rules respecting the requirement of affixing the signature of the acknowledging parent in any private handwritten instrument wherein an admission of filiation of a legitimate or illegitimate child is made:
Requisites: 1) Artificial Insemination (AI) is made on the wife, not on another woman; 2) AI on the wife is done with sperm of the husband or that of a donor, or a combination of the husband and the donor; 3) AI has been authorized or ratified by the husband and wife in a written instrument; 4) Executed and signed by them before the birth of the child; and 5) The written instrument is recorded in civil registry together with the birth certificate of the child (Art. 164, FC). b) Proof of Filiation of Legitimate Children a. Primary 1) Record of birth appearing in civil register or a final judgment; or 2) Admission of legitimate filiations in a public document or a private handwritten instrument signed by the parent concerned (Art. 172, FC). b. Secondary 1) Open and continuous possession of the status of a legitimate child; or 2) Any other means allowed by the Rules of Court and Special laws (Art. 172, FC). 🕮 The due recognition of an illegitimate child in a record of birth, a will, a statement before a court of record, or in any authentic writing is, in itself, a consummated act of acknowledgment of the child, and no further court action is required. (Potenciano vs. Reynoso, G.R. No. 140707, April 22, 2003). In fact, any authentic writing is treated not just a
1) Where the private handwritten instrument is the lone piece of evidence submitted to prove filiation, there should be strict compliance with the requirement that the same must be signed by the acknowledging parent; and 2) Where the private handwritten instrument is accompanied by other relevant and competent evidence, it suffices that the claim of filiation therein be shown to have been made and handwritten by the acknowledging parent as it is merely corroborative of such other evidence (Dela Cruz vs. Gracia, G.R. No. 177728, July 31, 2009).
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c) Rights of Legitimate Children 1. To bear the surnames of the father and the mother, in conformity with the provisions of the Civil Code on Surnames; 2. To receive support from their parents, their ascendants, and in proper cases, their brothers and sisters, in conformity with the provisions of this Code on Support; and 3. To be entitled to the legitimate and other successional rights granted to them by the Civil Code (Art. 174, FC).
Grounds for impugning the legitimacy of a child (Art. 166, FC) 1. Physical impossibility for the husband to have sexual intercourse with his wife within the first 120 days of the 300 days immediately preceding the birth of the child due to: a. Physical incapacity (Impotent);
of
the
husband
🕮 It is only impotency which the law considers as sufficient ground to impugn the child’s legitimacy, and not sterility (Macadangdang vs. CA, G.R. No. L-49542, September 12, 1980).
d) Grounds to Impugn Legitimacy Presumption of legitimacy The child conceived or born during a valid marriage is presumed to be legitimate (Art. 164, FC).
b. The spouses are living separately in such a way that sexual intercourse was not possible;
Impugning the legitimacy of a child (Art. 171, FC)
🕮 Where the husband and wife continued to live together in the same province after their alleged separation, the Court did not discount the possibility of physical access to each other considering their proximity to each other (Concepcion vs. CA, G.R. No. 123450, August 31, 2005).
General Rule: Only the husband can impugn the legitimacy of a child. Exception: The heirs of the husband may impugn the child’s filiation in the following cases: 1. If the husband dies before the expiration of period for filing his action; 2. If the husband dies after filing without desisting therefrom; or 3. If the child was born after the death of the husband (Art. 171, FC). RATIONALE: Legitimacy can be impugned only by direct action brought for that purpose, by the proper parties and within the period allowed by law. It is strictly a personal right of the husband (Rabuya, Civil Law Reviewer I, 2017, p. 203). 🕮 Legitimacy cannot be attacked collaterally (Sayson vs. CA, G.R. No. 89224-25, January 23, 1992).
c.
Serious illness of the husband which absolutely prevented intercourse.
2. Biological or scientific proof that the child could not have been that of the husband; Estoppel applicable In artificial insemination by sperm of another man, the husband is expressly prohibited from assailing the child’s legitimacy if he authorized or ratified such artificial insemination in the manner required by law (Art. 166[2], FC). Blood testing 1. conclusive on non-paternity 2. inconclusive on paternity (Jao vs. CA, G.R. No. L-49162, July 28, 1987)
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DNA testing may now be used to establish paternity or non-paternity (Tijing vs. CA, G.R. No. 125901, March 8, 2001). 🕮 The death of the claimed father does not ipso facto negate the application of DNA testing for as long as there exists appropriate biological samples of his DNA (Estate of Rogelio Ong vs. Diaz, G.R. No. 171713, December 17, 2007). 🕮 There must be first a show cause hearing wherein the applicant must first present sufficient evidence to establish a prima facie case or a reasonable possibility of paternity or good cause for the holding of the test (Lucas vs. Lucas, G.R. No. 190710, June 6, 2011). 3. Written authorization or ratification for artificial insemination was obtained through mistake, fraud, violence, intimidation or undue influence (Art. 166, FC). Prescriptive legitimacy
period
for
impugning
May be brought within 1, 2, or 3 years from the knowledge of the birth, or the knowledge of registration of birth. 1. Within 1 year - if husband or any heirs reside in the same city or municipality where the child was born or his birth was recorded. 2. Within 2 years - if the husband or all heirs live in the Philippines but do not reside in the same city or municipality where the child's birth took place or was recorded. 3. Within 3 years - if the husband or all heirs live outside the Philippines when the child's birth took place or was recorded in the Philippines (Art. 170, FC). Applicability of the periods Applicable only if the action is to impugn legitimacy, the child was the undisputed offspring of the mother but the husband denies paternity.
Effect of expiration of period The action to impugn legitimacy of a child would no longer be legally feasible and the status conferred by the presumption is fixed and unassailable. If the birth of the child has been concealed or was unknown to the husband, the above periods shall be counted: 1. From the discovery or knowledge of the birth of the child, or 2. From the discovery or knowledge of the fact of registration of said birth, whichever is earlier (Art. 170, FC). 🕮
The period shall be counted from the knowledge of the child’s birth or its recording in the civil register.
🕮
There is a universal scientific agreement that the blood grouping tests are conclusive as to non-paternity, that is, the fact that the blood type of the child is a possible product of the mother and the alleged father does not conclusively prove that the child is born by such parents. If the blood type of the child is not the possible blood of the mother and of the alleged father after it had been crossmatched, then the child cannot possibly be that of the alleged father (Jao vs. Court of Appeals, G.R. No. L-49162, July 28, 1987).
Rule of the status of children born after 300 days following termination of marriage Requisites: 1. First marriage was terminated; 2. Mother contracted a subsequent marriage within 300 days after termination; 3. A child is born within 300 days after the termination of previous marriage. Rules as to Whom the Child Belongs: 1. To the first marriage – if the child is born BEFORE 180 days after the celebration of
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the 2nd marriage, and within 300 days after the termination of the 1st marriage. 2. To the second marriage – If the child was born AFTER 180 days following the celebration of the 2nd marriage even if born within 300 days after the termination of the 1st marriage. Action to Impugn Legitimacy v. Action to Claim Legitimacy ACTION TO IMPUGN ACTION TO CLAIM LEGITIMACY LEGITIMACY Remedy Action to impugn Action to claim legitimacy legitimacy or illegitimacy (compulsory recognition) Real party in interest General Rule: Husband General Rule: Child XPN: Heirs, where:
in
cases
XPN: Heirs of the child, in cases where:
1. Husband died before 1. Child died in state of the expiration of the insanity period for bringing the 2. Child died during action; minority 2. Husband died after filing the complaint, Note: Must be filed within 5 without having years. (Art. 173, FC) desisted; 3. Child was born after the death of husband. (Art. 171, FC) Prescription 1 year – husband reside in GR: During the lifetime of the same municipality or the child city where birth took place XPN: Lifetime of the 2 years – husband reside putative father. NOT in the same In cases where the action is municipality or city for the recognition of 3 years – husband is living illegitimate child by “open abroad (Art. 170, FC) and continuous possession” of the status and other means allowed by the Rules of Court and special laws. (Art. 175, FC)
One can prove filiation, either legitimate or illegitimate, through the record of birth appearing in the civil register or a final judgment, an admission of filiation in a public document or a
private handwritten instrument and signed by the parent concerned, or the open and continuous possession of the status of a legitimate or illegitimate child, or any other means allowed by the Rules of Court and special laws. We have held that such other proof of one's filiation may be a "baptismal certificate, a judicial admission, a family bible in which [his] name has been entered, common reputation respecting [his] pedigree, admission by silence, the [testimonies] of witnesses, and other kinds of proof [admissible] under Rule 130 of the Rules of Court." (Charles Gotardo vs. Divina Buling, G.R. No. 165166, August 15, 2012). 3. ILLEGITIMATE CHILDREN (Art. 176, FC as amended by R.A. No. 9255) a) Who are Illegitimate Children Illegitimate – conceived and born outside a valid marriage, except those children born during void marriages under Articles 36 and 53, FC. Illegitimate children may use the surname of their father if their filiation has been expressly recognized by the father, either through: 1. Record of birth in civil register; 2. Father’s admission in public document; 3. Father’s admission in private handwritten document. The father, under R.A. No. 9255, Sec. 1, has the right to file an action to prove non-filiation during his lifetime. ▪
All illegitimate child should use the surname of the mother if the requisites of R.A. No. 9255 are not complied with (Rule 8.1, Revised IRR of R.A. No. 9255).
b) Proof of Filiation of Illegitimate Children Illegitimate children may establish their illegitimate filiation in the same way and on the same evidence as legitimate children. Except if proof of illegitimate filiation is any of the following: a) open and continuous possession of the status of an illegitimate
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child; or b) any other means allowed by the Rules of Court and special laws. In case of these two instances, the action must be brought during the lifetime of the putative father (Art. 175, FC). Prescription Period for Claiming Filiation of illegitimate Child - The action must be brought by the child during his or her lifetime and shall be transmitted to the heirs should the child: 1. Dies during minority; 2. Dies during state of insanity; or 3. Dies after the commencement of the action. The heirs shall have 5 years within which to institute the action (Art. 173 in relation to Art. 175, FC). c) Rights of Illegitimate Children: 1. To bear the surname of the mother regardless of whether or not the father admits paternity; 2. To have an option to use his/her father’s surname if: his/her filiation is expressly recognized by the father though the record of birth; or when admission of paternity is written by the father in a public or private instrument; 3. To receive support from the mother and the exclusive or separate property of the father; and 4. To be entitled to the legitime (1/2 of each legitimate child) and other successional rights granted to them by the Civil Code (Art. 172, FC). d) Grounds to Impugn Filiation (Art. 166, FC): 1. Physical impossibility for the husband to have sexual intercourse with his wife within the first 120 days of the 300 days immediately preceding the birth of the child due to: a. Physical incapacity of the husband (Impotent); It is only impotency which the law considers as sufficient ground to impugn the child’s legitimacy, and not
sterility (Macadangdang vs. CA, G.R. No. L49542, September 12, 1980). b. The spouses are living separately in such a way that sexual intercourse was not possible; Where the husband and wife continued to live together in the same province after their alleged separation, the Court did not discount the possibility of physical access to each other considering their proximity to each other (Concepcion vs. CA, G.R. No. 123450, August 31, 2005). c. Serious illness of the husband which absolutely prevented intercourse. 2. Biological or scientific proof that the child could not have been that of the husband; 4. LEGITIMATED CHILDREN a) Who may be Legitimated? Legitimated – originally illegitimate but later considered legitimated by legal fiction because of the subsequent marriage of the parents who at the time of the child’s conception had no legal impediment to marry each other or even if disqualified, the reason for disqualification is simply below 18 (As amended by RA No. 9858). Children entitled to legitimation Only children conceived and born outside of wedlock of parents who, at the time of conception of the former, were not disqualified by any impediment to marry each other, or were so disqualified only because either or both of them were below eighteen (18) years of age (Art. 177, FC as amended by R.A. 9858). Requisites of legitimation 1. Child must have been conceived and born outside of wedlock; 2. Child’s parents, at the time of former’s conception, were not disqualified by any impediment to marry each other or were so disqualified only because either or both of
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them were below eighteen (18) years of age; and 3. The subsequent valid marriage of the parents. Effects of legitimation:
Effect of death before legitimation The legitimation of children who died before the celebration of marriage of his/her parents shall benefit his/her descendants (Art. 181, FC). c) Grounds to Impugn legitimacy
1. Confers on the child the rights of legitimate children (Art. 179, FC); 2. Retroacts to the time of the child’s birth (Art. 180, FC). b) How legitimation takes place 1. At the time of conception of the child, his/her parents were not disqualified by any impediment to marry each other; 2. The child is conceived and born outside of wedlock; 3. After the birth of the child, his/her parents subsequently got married; and 4. Such marriage is not void ab initio (Art. 178 and 177, FC).
1. Subsequent marriage of parents is void. 2. Child not really a child of the parents. 3. At the time of child’s conception, parents are disqualified to marry each other by reason other than their age. Who may impugn? Legitimation may be impugned only by those who are prejudiced in their rights as a result of the legitimation, within 5 years from the time of death of either of the parents of the child (Art.182, FC).
LEGITIMATE (L) ILLEGITIMATE (IL) LEGITIMATED (LD) L
IL
Conceived or born during a valid marriage.
Define Conceived and born outside a valid marriage or outside lawful wedlock
Children conceived as a result of artificial insemination on the wife.
LD Originally illegitimate but later considered legitimate by legal fiction by subsequent marriage of parent who, at the time of conception had no legal impediment to marry each or even if disqualified the reason for disqualification is simply 18.
Children born to void marriages under Arts. 36 and 53. Bear surname of father Receive support from parents ascendants, brothers and sisters Entitled to legitimate and other succession all rights under the Civil Code. (Art. 174, FC)
Rights Use of surname of the mother (or father under R.A. 9225) Support Legitimate (half of the legitime of legitimate children) (Art. 176, FC)
Bear surname of father; Receive support from brothers and sisters;
parents,
ascendants,
Entitled to legitime and other successional rights under the Civil Code (Art. 179 In relation to Art.
174, FC)
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To Establish Status May be brought by a child during In the same way and on Acknowledgement not needed: marriage of parents his or her lifetime and should be the same evidence as a enough transmitted to the heirs if the legitimate child. child dies during minority or in a state of insanity. Same period, except if action is based of Art. 172. Heirs shall have 5 years within Par. 2, it must be filed which to institute the action. within the lifetime of the (Art. 175, FC) alleged parent
Proof of Filiation Primary: Record of birth appearing in the civil register or a final judgement.
Certificate of Adoption
Admission of legitimate filiation in a public document or private handwritten instrument and signed by parent concerned (Art. 172, FC) Secondary: Open and continuous possession of the status of a legitimate child. Any other means allowed by the Rules of Court and special laws (Art.
172, FC)
Grounds for Impugning Physical impossibility of husband to have sexual intercourse with his wife within first 120 days of the 300 days immediately preceding birth Biological and scientific reasons For children conceived through artificial insemination, written authorization obtained thru fraud, mistake, violence, intimidation or undue influence. (Art. 176, FC) Who may Impugn Husband Heirs may impugn only in the ff. cases: 1. Husband dies before expiration of the period for bringing action 2. Husband dies after filing without desisting therefrom 3. Child was born after death of husband (Art. 171, FC) Periods for Filing 1 year if husband/heirs reside in the city or municipality where the child was born or birth was recorded.
Subsequent marriage of parents is void Child not really a child of the parents. At the time of child’s conception, parents are disqualified to marry each other by reason other than their age.
Those who are prejudiced in their rights.
(Art. 182, FC)
Within 5 years from time their cause accrues. (Art. 182, FC)
2 years if husband/heirs do not reside in the same city or municipality, but a resident of the Philippines 3 years if the husband is residing abroad and the child is born or birth recorded in the Philippines. (Art. 170, FC)
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4. ADOPTED CHILDREN a) Domestic Administrative Adoption and Alternative Child Care Act (RA No. 11642) Adoption A juridical act and a proceeding in rem which creates between two persons a relationship similar to that which results from legitimate paternity and filiation (Lazatin vs. Campos, G.R. No. L-43955-56, July 30, 1979). The tampering of the civil registry making it appear in the birth records that a certain child was born to a person who is not the biological mother, causing such child to lose his true identity and status is simulation of birth, which does not produce the legal effects of adoption (Sec. 3[j], R.A. No. 8552). Republic Act No. 11642 (the Domestic Administrative Adoption and Alternative Child Care Act) repealed RA 8552 and amended RA 8043. It took effect on January 21, 2022. Under RA 11642, the Inter-Country Adoption Board is reorganized into the National Authority for Child Care. The duties, functions and responsibilities of the ICAB, the DSWD and other government agencies relating to alternative child care and adoption are transferred to the NACC. b) Who May Adopt 1) Filipino Citizens [Sec. 21(a), RA 11642] 1. 2. 3. 4.
Of at least 25 years of age; With full civil capacity and legal rights; With good moral character; Has not been convicted of any crime involving moral turpitude; 5. Emotionally and psychological capable of caring for children; 6. In a position to support and care for his/her children in keeping with the means of the family; and 7. At least 16 years older than the adoptee, except: a. When the adopter is the biological parent of the adoptee; or
b. the spouse of the adoptee’s parent or c. The sibling of the adopted 8. Has undergone pre-adoption services 2) Foreign Nationals 1. Must possess the same qualifications as stated for Filipino nationals prior to the filing of the petition; 2. Are permanent or habitual residents of the Philippines for at least 5 years; 3. Must come from a country with diplomatic relations with the Philippines and that the laws of the adopter’s country will: a. acknowledge the Certificate of Adoption as valid b. acknowledge the child as a legal child of the adopters c. allow entry of the child into such country as an adoptee 3)
Guardians [Sec. 21(b), RA 11642]: With respect to their wards, after the termination of the guardianship and clearance of his/her accountabilities
4) Foster parent [Sec. 21(c), RA 11642]: With respect to the foster child 5) Philippine government officials employees [Sec. 21(d), RA 11642]:
and
1. Deployed abroad, and 2. Are able to bring the child with them c) Who may be Adopted (Sec. 22, RA 11642) The following may be adopted: a. Any child who has been issued by a CDCLAA. b. Legitimate child of one spouse by another. c. Illegitimate child by a qualified adopter to improve the child’s status to that of legitimacy. d. A Filipino of legal age if, prior to the adoption, said person has been consistently considered and treated, for a period of at least 3 years, by the adopter(s) as his/her child since minority.
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e. A child whose previous adoption has been rescinded. f. A child whose biological or adoptive parent(s) has died, provided that no proceedings shall be initiated within 6 months from the time of death of said parent(s). g. A foster child. 🕮 Provided, no proceedings shall be initiated within 6 months from the time of death of said parents (Id.). 🕮 Merely permitting the child to remain for a time undisturbed in the care of others is not the same as abandonment. To dispense with the requirement of consent, the abandonment must be shown to have existed at the time of adoption (Landingin vs. Republic, G.R. No. 164948, June 27, 2006). d) Effects of a Decree of Adoption (Art. 189190, FC): Adoption shall have the following effects: 1. For civil purposes, the adopted shall be deemed to be a legitimate child of the adopters and both shall acquire the reciprocal rights and obligations arising from the relationship of parent and child, including the right of the adopted to use the surname of the adopters; 2. The parental authority of the parents by nature over the adopted shall terminate and be vested in the adopters, except that if the adopter is the spouse of the parent by nature of the adopted, parental authority over the adopted shall be exercised jointly by both spouses; and
accordance with the ordinary rules of legal or intestate succession; 2. When the parents, legitimate or illegitimate, or the legitimate ascendants of the adopted concur with the adopter, they shall divide the entire estate, one-half to be inherited by the parents or ascendants and the other half, by the adopters; 3. When the surviving spouse or the illegitimate children of the adopted concur with the adopters, they shall divide the entire estate in equal shares, one-half to be inherited by the spouse or the illegitimate children of the adopted and the other half, by the adopters. 4. When the adopters concur with the illegitimate children and the surviving spouse of the adopted, they shall divide the entire estate in equal shares, one-third to be inherited by the illegitimate children, onethird by the surviving spouse, and one-third by the adopters; 5. When only the adopters survive, they shall inherit the entire estate; and 6. When only collateral blood relatives of the adopted survive, then the ordinary rules of legal or intestate succession shall apply. Under Ra 11642 (Sec. 41-43, RA 11642): Except in cases where the biological parent is the adopter’s spouse, all legal ties between biological parent and adoptee shall be severed, and the same shall then be vested on the adopters.
1. Legitimacy: The adoptee shall be considered
3. The adopted shall remain an intestate heir of his parents and other blood relatives. Legal or intestate succession to the estate of the adopted shall be governed by the following rules: 1. Legitimate and illegitimate children and descendants and the surviving spouse of the adopted shall inherit from the adopted, in
2.
the legitimate son/daughter of the adopters for all intents and purposes, and as such is entitled to all rights and obligations provided by law to legitimate children born to them without discrimination of any kind. The adoptee is entitled to love, guidance, and support in keeping with the means of the family (Sec. 41, RA 11642). Succession: In legal and intestate succession, the adopter and the adoptee shall have
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reciprocal rights of succession without distinction from legitimate filiation. However, if the adoptee and his/her biological parents had left a will, the law on testamentary succession shall govern (Sec. 41, RA 11642). 3. Name: Under RA 11642, the adopter has the right to choose the name by which the child is to be known, consistent with the best interest of the child. 4. Nationality: Adoption does not confer citizenship of the adopter to the adopted. Under Sec. 3, Art. IV of the Constitution, Philippine citizenship may be lost/acquired [only] in the manner provided by law. The adoption of an alien is not a means of acquiring Philippine citizenship. A Filipino adopted by an alien does not lose his Philippine citizenship. The right to confer citizenship belongs to the State (political) and cannot be granted by a citizen through adoption. Adoption creates a relationship between the adopter and adoptee, not between the State and the adoptee (Tolentino). R.A. NO. 11222 (An Act Allowing Rectification of Simulated Birth Records) Certification Declaring a Child Legally Available for Adoption (CDCLAA) refers to a document issued by the Secretary of DSWD or the Secretary’s duly authorized representative as provided for by RA No. 9523, otherwise known as "An Act Requiring Certification of the DSWD to Declare a ‘Child Legally Available for Adoption’ as a Prerequisite for Adoption Proceedings (Sec. 3[a], R.A. No. 11222). Simulation of birth record refers to the tampering of the civil registry to make it appear in the record of birth that a child was born to a person who is not such child’s biological mother, causing the loss of the true identity and status of such child (Sec. 3[f], R.A. No. 11222).
L. SUPPORT 1. What Comprises Support Support comprises everything indispensable for the following, in keeping with the financial capacity of the family: 1. 2. 3. 4. 5. 6.
Food or sustenance; Dwelling or shelter; Clothing; Medical attendance; Education; Transportation (Art. 194, FC)
Education shall include the schooling or training for some profession, trade or vocation of the persion entitled to be supported, even beyond the age of majority. Transportation shall include expenses going to and from school, or to and from place of work. (Art. 194, 2nd par., FC) 2. Who are Obliged to Give Support (Art. 195-197, 199-200, 206-208, FC) Persons obliged to support each other 1. Spouses – he/she must be the legitimate spouse 2. Legitimate ascendants and descendants; A husband may validly refuse to support a child who is a fruit of an adulterous relationship. (Sanchez vs. Zulueta, G.R. No. L-45616, May 16, 1939). 3. Parents and their children (whether or illegitimate) and the latter’s children (whether legitimate or illegitimate); The persons obliged to support each other are limited to the grandparents and the grandchildren only and vice versa. If at a hearing for support pendente lite, the status of the child is at issue, the alleged child can get support in the meantime while the case is pending from the alleged parent if his status as such has been proven provisionally (Mangulabnan vs. IAC, G.R. No. 71994, May 31, 1990).
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4. Legitimate brothers and sisters (whether full or half-blood); (Art. 195, FC) 5. Brothers and sisters not legitimately related (whether full or half-blood) (Art. 196, FC). Exception: When the need for support of the brother/sister, being of age, is due to cause imputable to the claimant’s fault of negligence (Art. 196, FC). 🕮 Since filiation is beyond question, support follows as a matter of obligation; a parent is obliged to support his child, whether legitimate or illegitimate. Support consists of everything indispensable for sustenance, dwelling, clothing, medical attendance, education and transportation, in keeping with the financial capacity of the family. Thus, the amount of support is variable and, for this reason, no final judgment on the amount of support is made as the amount shall be in proportion to the resources or means of the giver and the necessities of the recipient. It may be reduced or increased proportionately according to the reduction or increase of the necessities of the recipient and the resources or means of the person obliged to support (Charles Gotardo vs. Divina Buling, G.R. No. 165166, August 15, 2012). Basis of legal support The issue of legal support is dependent upon the relationship enumerated in Articles 195 and 196. It is not dependent on parentally authority. Support and parental authority are two distinct concepts. 3. Source of Support Support is chargeable to the absolute community or the conjugal partnership: 1. Spouses; 2. Common Children of the Spouses; and 3. Legitimate Children of Either Spouse Note: If the community property or the conjugal partnership is insufficient to cover this liability, the spouses shall be solidarily for the unpaid balance with their separate properties (Arts. 94 and 121, FC).
Support is chargeable to the separate property of the person obliged to give support: 1. Illegitimate Children; 2. Legitimate Ascendants; 3. Descendants, whether legitimate or illegitimate; and 4. Brothers and sisters, whether legitimately or illegitimately related (Art. 197, FC). Note: In case the person obliged to give support has no separate property, such support shall be advanced by the absolute community or the conjugal partnership. Such support shall be deducted from the share of the spouse obliged upon the liquidation of the absolute community or the conjugal partnership (Art. 197, FC). 4. Order of Support When two or more persons are obliged to give support, the following order should be followed: a. b. c. d.
The The The The
spouse; descendants in the nearest degree; ascendants in the nearest degree; and brothers and sisters (Art. 199, FC).
When the obligation to give support falls upon two or more persons, the payment of the same shall be divided between them in proportion to the resources of each. In case of urgent need and by special circ*mstances, the judge may order only one of them to furnish the support provisionally, without prejudice to his right to claim from the other obligors the share due from them (Art. 200, FC). Insufficiency of means to give support: When two or more recipients at the same time claim support from one and the same person legally obliged to give it, should the latter not have sufficient means to satisfy all claims, the order established in Art. 199, FC shall be followed, unless the concurrent obligees should be the spouse and a child subject to parental
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authority, in which case the child shall be preferred (Art. 200, FC). Amount of Support
to give support when urgently needed. The stranger has a right of reimbursem*nt (Art. 207, FC). 6. Manner and time of Payment
The amount of support shall be in proportion to the: 1. Resources or means of the giver; and 2. The necessities of the recipient (Art. 201, FC).
From the time the person who has a right to receive the same needs it for maintenance, but it shall not be paid except from the date of judicial or extrajudicial demand.
In the same vein, support shall be reduced or increased proportionately, according to the (a) reduction or (b) increase of the necessities of the recipient and the resources or means of the person obliged to furnish the same (Art. 202, FC).
Payment shall be made within the first five days of each corresponding month or when the recipient dies, his heirs shall not be obliged to return what he has received in advance (Art. 203, FC).
When demandable
Options
From the time the person who has a right to receive the same needs it for maintenance, but it shall not be paid except from the date of judicial or extrajudicial demand.
The person obliged to give support shall have the option to fulfill the obligation either by: 1. paying the allowance fixed; or 2. by receiving and maintaining in the family dwelling the person who has a right to receive support.
Payment shall be made within the first five days of each corresponding month or when the recipient dies, his heirs shall not be obliged to return what he has received in advance (Art. 203, FC). Options The person obliged to give support shall have the option to fulfill the obligation either by: 1. paying the allowance fixed; or 2. by receiving and maintaining in the family dwelling the person who has a right to receive support. This cannot be availed of in case there is a moral or legal obstacle thereto (Art. 204, FC). Payment by Third Person If payment by a stranger or third person, he/she is entitled to full reimbursem*nt even if made without the knowledge of the person obliged to give support, unless the stranger does not want to be reimbursed (Art. 206, FC). A third person may provide support to the needy if the person obliged to give support refuses or fails
This cannot be availed of in case there is a moral or legal obstacle thereto (Art. 204, FC). 7. Characteristics of the Right to Support: 1. Not subject to levy upon attachment or execution (Art. 205, FC). Exception: In case of contractual support or support given by will, the excess in amount beyond that required for legal support shall be subject to levy on attachment or execution (Art. 208, FC). Note: Contractual support shall be subject to adjustment whenever modification is necessary due to changes in circ*mstances beyond the contemplation of the parties. 2. Cannot be renounced nor transmitted to a 3rd person (De Asis vs. CA, G.R. No. 127578, February 15, 1998). 3. Cannot be subject of compromise (Art. 2035, NCC).
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4. Cannot be extinguished by setting up compensation against creditor who has a claim for support due by gratuitous title (Art.287[2], FC). 8. Renunciation and Termination After the final judgment granting petition for annulment or petition for declaration of nullity of marriage, the obligation of mutual support between spouses ceases (Art. 198, FC). In legal separation, even if the marriage bond is not severed, obligation of mutual support ceases upon finality of a decree of legal separation, although the court may, in its discretion, order the guilty spouse to support the innocent one (Art. 198, FC). 9. Support Pendente Lite Between Spouses During pendency of action for annulment or declaration of absolute nullity of marriage, the court shall provide for support of the spouses and their common children in the absence of a written agreement between spouses (Art. 49, FC). The same rule shall apply during pendency of an action for legal separation (Art. 62, FC). M. PARENTAL AUTHORITY (Patria Potestas) 1. Concept of Parental Authority Parental authority or patria potestas in Roman Law is the juridical institution whereby parents rightfully assume control and protection of their unemancipated children to the extent required by the latter’s needs. It is a mass of rights and obligations which the law grants to parents for the purpose ofthe children’s physical preservation and development, as well as the cultivation of their intellect and the education of their heart and senses (Masbate vs. Relucio, G.R. No. 235498, July 30, 2018).
1. Taking care of their children; 2. Rearing them for civic consciousness and efficiency; and 3. Development of their moral, mental and physical character and well-being (Art. 209, FC). 2. Substitute Parental Authority Substitute parental authority – parental authority which the persons designated by law may exercise over the persons and property of unemancipated children in case of death, absence, or unsuitability of both parents (Art. 214, FC). It is exercised in the order indicated: a. Surviving grandparent; b. Oldest brother/sister over 21 years of age unless unfit/disqualified; c. Child’s actual custodian who is over 21 years of age, unless unfit or disqualified (Art. 216, FC); and d. In case of foundlings, abandoned, neglected or abused children, they shall be entrusted in summary judicial proceedings to heads of children’s homes, orphanages and other similar institutions duly accredited by the proper government agency (Art. 217, FC). e. A foster parent in accordance with the Foster Care Act of 2012. Foster Care Act of 2012 (R.A. No. 10165) Foster Parents shall have the rights, duties, and liabilities of persons exercising substitute parental authority, as may be provided under the Family Code over the children under foster care (Sec. 6). Who may be a Foster Parent: A Foster Parent refers to a person, duly licensed with the DSWD, to provide foster care (Sec. 3[i], R.A. No. 10165).
What Constitutes Parental Authority
Qualifications of a Foster Parent
Pursuant to the natural right and duty of parents over the person and property of their unemancipated children, parental authority and responsibility shall include:
1. Must be of legal age 2. Must be at least 16 years older than the child unless the foster parent is a relative;
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3. Must have genuine interest, capacity and commitment in parenting and is able to provide a familial atmosphere for the child; 4. Must have a healthy and harmonious relationship with each family member; 5. Must be of good moral character; 6. Must be physically and mentally capable and emotionally mature; 7. Must have sufficient resources to be able to provide for the family’s needs; 8. Must be willing to further hone or be trained on knowledge, attitudes, and skills in caring for a child; and, 9. Must not already have the maximum number of children (Sec. 5, R.A. No. 10165). Aliens qualified to become foster parents provided that: 1. He or she must be legally documented; 2. Possess all the qualifications as stated above; 3. Have resided in the Philippines for at least 12 continuous months at the time of the application; 4. Undertake to maintain such residence until the termination of placement by the DSWD or expiration of the Foster Family Care License (Rule 6, IRR of R.A. No. 10165).
9. A child who committed a minor offense but has been released on recognizance, or who is in custody supervision or whose case has been dismissed; 10. A child who is in need of special protection as assessed by a Social Worker, an Agency or the DSWD (Sec. 4, R.A. No. 10165). Limitation of Foster Parent’s Substitute Parental Authority Foster parents shall only have the rights of a persons of a person with special parental authority to discipline the foster children, insofar as it prohibits the infliction of corporal punishment upon the child. The infliction of corporal punishment upon the child shall be ground for revocation of the Foster Family Care License and termination of Foster Placement Authority (Rule 8, IRR of R.A. No. 10165). 3. Special Parental authority It is granted by law to the following persons in view of their special relation to children under supervision, instruction, or custody (Rabuya, The Law on Persons and Family Relations, 2006, p. 690).
Who may be a foster child:
It may be exercised by the following:
The following children may be placed under Foster Care:
1. School; 2. School Administrator and teachers; or 3. Individual, entity or institution engaged in childcare.
1. A child who is abandoned, surrendered, neglected, dependent or orphaned; 2. A child who is a victim of sexual, physical, or any other form of abuse of exploitation; 3. A child with special needs; 4. A child whose family members are temporarily or permanently unable or willing to provide the child with adequate care; 5. A child awaiting adoptive placement md who would have to be prepared for family life; 6. A child who needs long-term care and close family ties but who cannot be placed for domestic adoption; 7. A child whose adoption has been disrupted; 8. A child who is under socially difficult circ*mstances (e.g. street child, child in armed conflict, victim of child labor or trafficking);
Their authority and responsibility shall apply to all authorized activities whether inside or outside the premises of the school, entity or institution (Art. 218, FC). Extent of liability of those exercising special parental authority General Rule: They shall be principally and solidarily liable for damages caused by the acts or omissions of the unemancipated minor. The parents, judicial guardians or the persons exercising substitute parental authority over said minor shall be subsidiarily liable.
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Exception: If it is proved that they exercised the proper diligence required under the particular circ*mstances (Art. 219, FC). 4. Effects of Parental Authority Effect of parental authority upon the persons of the children Rights and duties of persons exercising parental authority: 1. To keep them in their company, to support, educate and instruct them by right precept and good example, and to provide for their upbringing in keeping with their means; 2. To give them love and affection, advice and counsel, companionship and understanding; 3. To provide them with moral and spiritual guidance, inculcate in them honesty, integrity, self-discipline, self-reliance, industry and thrift, stimulate their interest in civic affairs, and inspire in them compliance with the duties of citizenship; 4. To furnish them with good and wholesome educational materials, supervise their activities, recreation and association with others, protect them from bad company, and prevent them from acquiring habits detrimental to their health, studies and morals; 5. To represent them in all matters affecting their interests; 6. To demand from them respect and obedience; 7. To impose discipline on them as may be required under the circ*mstances; and 8. To perform such other duties as are imposed by law upon parents and guardians (Art. 220, FC). Principle of Parental Liability Parents and other persons exercising parental authority shall be civilly liable for the injuries and damages caused by the acts or omissions of their unemancipated children living in their company and under their parental authority subject to the appropriate defenses provided by law (Art. 221, FC). 🕮 The principle of parental liability is a species of vicarious liability, or the doctrine of “imputed negligence”, where a person is not only liable
for torts committed by himself, but also for torts committed by others with whom he has a certain relationship and for whom he is responsible (Tamargo vs. CA, G.R. No. 85044, June 3, 1992). Effect of parental authority upon the property of the children Legal guardianship: The father and the mother shall jointly exercise legal guardianship over the property of the unemancipated common child without the necessity of a court appointment. In case of disagreement, the father’s decision shall prevail, unless there is a judicial order to the contrary (Art. 225, FC). Income of the child: The property of the unemancipated child earned or acquired with his work or industry or by onerous or gratuitous title shall belong to the child in ownership. The child’s property shall be devoted exclusively to the latter’s support and education, unless the title or transfer provides otherwise. Right of the parents over the fruits and income of the child’s property shall be limited to (a) primarily to the child’s support and (b) secondarily to the collective daily needs of the family (Art. 226, FC). Note: A parent is required to post a bond if the market value of the property or the annual income of the child exceeds P50,000. The bond shall not be less than 10% of the value of the property or annual income (Art. 226, FC). Rules regarding the use of the child’s property (Art. 226, FC) 1. The property of minor children shall be devoted to their support and education unless the title or transfer provides otherwise.
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2. The parents have the right to use only the fruits and income of said property for the following purposes: a. Primarily, to the child’s support; b. Secondarily, to the collective daily needs of the family. PROPERTY, OWNERSHIP, MODIFICATIONS
AND
ITS
PROPERTY Property defined Property efers to things which are or may be the object of appropriation (Art. 414, NCC).
Properties are things which are capable of satisfying human wants and are susceptible of appropriation (Rabuya, Pre-bar Reviewer in Civil Law, 2021, p.156).
Distinction between things and property Things are broader in scope than property. All kinds of property are things but not all things are property. Things refer to all objects that exist including those which could not be appropriated by man. Property refers to objects already possessed by man or are in their possession. Things involve only corporeal objects. Property may refer to intangible matters (Pineda, 2009). Requisites for a thing to be considered as property (USA) 1. Utility - the capacity to satisfy human wants; 2. Substantivity/Individuality - having a separate and autonomous existence a; and 3. Appropriability - Susceptibility of being appropriated (Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 403). I. CLASSIFICATION OF PROPERTY 1. As to nature: a. Immovable or Real Property b. Movable or Personal Property
2. As to character of ownership: a. Public Dominion b. Private Ownership 3. As to essential form: a. Incorporeal b. Corporeal 4. As to existence: a. Present b. Future 5. As to designation: a. Specific b. Generic 6. As to susceptibility of substitution: a. Fungible b. Non-Fungible 7. As to aptitude for repeated use: a. Consumable b. Non-Consumable 8. As to susceptibility to division: a. Divisible b. Indivisible 9. As to existence in time: a. Present b. Future 10. As to dependence: a. Principal b. Accessory 11. As to alienability: a. Within the commerce of man b. Outside the commerce of man Classification of things 1. Res Nullus – things that belong to no one; 2. Res Communes – things that is enjoyed by everyone; and 3. Res Alicujus – things that belong to someone (Paras, Civil Code of the Philippines Annotated, 2008, p. 2). Categories of real property 1. By nature - Those which by their essence and nature are immovable or cannot be moved from one place to another. (Lands and roads in paragraph 1 and mines, quarries, slag dumps, and waters in paragraph 8 of Article 415 (Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 156). 2. By incorporation - those which become as immovable by reason of their attachment
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or incorporation to an immovable in such manner as to be an integral part thereof, such as buildings and constructions of all kinds adhered to the soil mentioned in paragraph 1 of Article 415; trees, plants and growing fruits mentioned in paragraph 2 of Article 415 while they are still attached to the land; and those that are attached to an immovable in the manner provided for in paragraph 3 of Article 415 (Ibid). 3. By destination - those which are essentially movable, but by the purpose for which they have been placed in an immovable, partake of the nature of the latter because of the added utility derived therefrom, such as those mentioned in paragraphs 4, 5, 6, 7, and 9 of Article 415; and 4. By analogy - those that are mentioned in paragraph 10 of Article 415 (Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 156-9). A. IMMOVABLES 1. Land, buildings, roads and constructions of all kinds adhered to the soil. Lands and roads are always immovable (Art. 415, NCC; Punzalan vs. Vda. Lacsamana, G.R. No. L55729, March 28, 1983). A building is classified as an immovable by incorporation (Art. 415, NCC). It is classified as immovable property by reason of its adherence to the soil in which it is built (Biscerra vs. Teneza G.R. No. L-16218, Nov. 19, 1962). Thus, a building which is merely superimposed on the soil is not considered as real property (Evangelista vs. Alto Surety & Insurance Co., Inc., G.R. No. L-11139, April 23, 1958). A building treated separately from the land on which it stood is immovable property and the mere fact that the parties to a contract seem to have dealt with it separate and apart from the land on which it stood in no wise changed its character as immovable property (Punzalan, Jr. vs. Vda. de Lacsamana, 37 Phil 644, 1918).
Even if the parties may treat as personal property that which under the law is a real property, that agreement does not in any way alter the character of the property as an immovable or real property, except by estoppel. When the parties so agreed that the building (or house) is a personal property and a proper subject of the contract of chattel mortgage, they are estopped from denying the existence of the chattel mortgage which, as between them, must be upheld (Navarro vs. Pineda, G.R. No. L-18456, November 30, 1963). Register of Deed may not refuse the registration of a chattel mortgage on the pretext that the subject matter thereof is not a personal property. The Court clarifies that the duties of the register of deeds in respect to the registration of chattel mortgages are of purely ministerial in character (The Standard Oil Co. of New York vs. Jaramillo, G.R. No. L-20329, March 16, 1923). The law makes no distinction with respect to the ownership of the land on which the house is built and the Supreme Court should not lay down distinctions not contemplated by law (Makati Leasing and Finance Corp. v. Wearever Textile Mills, G.R. No. L-58469, May 16, 1983). Hence, a building is an immovable property regardless of whether or not said structure and the land on which it is adhered to belong to the same owner. (Lopez v. Orosa, Jr. and Plaza Theater, Inc., G.R. Nos. L-10817-18. February 28, 1958); (Rabuya, Property, 2021, p. 11) Constructions of All Kinds Adhered to the Soil - In Board of Assessment Appeals v. Manila Electric Co.,G.R. No. L-15334 , January 31, 1964, the steel towers constructed by the Manila Electric Company were not considered as real properties because they were "removable and merely attached to a square metal frame by means of bolts, which when unscrewed could easily be dismantled and moved from place to place." In Meralco Securities Industrial Corporation v. CBAA, however, the Court held that the pipeline system in question is indubitably a construction adhering to the soil. It is attached to the land in such a way that it cannot be separated therefrom without dismantling the
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steel pipes which were welded to form the pipeline (Rabuya, Property, 2021, p. 25). 2. Trees, plants and growing fruits, while they are attached to the land or form an integral of an immovable. While they are attached to the land, they are considered immovable property (Art. 415, NCC). Trees and Plants. Trees, plants and growing fruits, while they are attached to the land, are immovable property." They are immovable by reason of their incorporation to the soil OR because they form an integral part of the immovable. If, therefore, the trees or plants are cut or uprooted for purposes of making them firewood or timber they become movable property except when the timber constitutes the natural product of the tenement and, therefore, forms an integral part of the immovable." (Rabuya, Property, 2021, p. 27). Growing Fruits. In some instances while they are still attached to the soil, growing fruits may exceptionally be treated as personal property pursuant to the provision of Article 416(2) of NCC. By way of example, ungathered fruits are considered personal property for the purpose of sale of the whole or part of the crops. In addition, ungathered fruits have the nature of personal property for purposes of attachment and execution and in applying the provisions of the Chattel Mortgage Law." (Rabuya, Property, 2021, p. 27). 3. Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated there from without breaking the material or deterioration of the object. These properties are immovable by incorporation. Their attachment to an immovable must be in a fixed manner and in such a way that they cannot be separated therefrom without breaking the material or deterioration of the object (Art. 415 [3], NCC). The Civil Code nowhere requires that the attachment or incorporation be made by the owner of the land or immovable himself. For the
property to be immobilized under paragraph 3, the only criterion is its union or incorporation with the immovable in the manner required by law (Rabuya, Property, 2021, p. 28). The fact that the machineries are heavy, bolted or cemented on the real property, does not make them ipso facto immovable. Their intent has to be looked into. If the parties treat the machinery as chattels, they are bound by their agreement under the principle of estoppel notwithstanding the fact that the machinery may have been attached to an immovable in a fixed manner and may not be separated therefrom without breaking the material or deterioration of the object to which it is attached (Tsai vs. CA, 366 SCRA 324, October 2, 2001). Submarine or undersea communication cables are akin to electric transmission lines may qualify as “machinery” subject to real property tax under the Local Government Code. Both electric lines and communication cables, in the strictest sense, are not directly adhered to the soil but pass through posts, relays or landing stations, but both may be classified under the term “machinery” as real property under Article 415(5) absent any showing from Capwire of any express grant of an exemption for its lines and cable from real property taxation (Capitol Wireless v. Provincial Treasurer of Batangas, G.R. No. 10110, May 30, 2016). The oil storage tanks constitute real property, while they are not embodied in the land, they may nevertheless be considered as improvements in the land, enhancing its utility and rendering it useful to the oil industry. It is undeniable that the two tanks have been installed with some degree of permanence as receptacles for the considerable quantities of oil needed by Meralco for its operations (Manila Electric Co. v. Central Board of Assessment Appeals, G.R. No. L-47943, May 31, 1982). 4. Statues, reliefs, paintings or other objects for use or ornamentation placed in buildings or on lands by the owner of the immovable in such a manner that it
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reveals the intention to attach them permanently to the tenements.
Requisites:
a. They must be placed in building or on lands by the owner of the immovable or by his agent; and b. They are placed there in a manner that it reveals the intention to attach them permanently to the tenements.
In real properties by destination, which are basically movables, it is indispensable that they be placed by the owner of the immovable or his agent unto the immovable before they can partake of the nature of the latter, or before they are considered immobilized. This is the rule in paragraph numbers 4, 5, and 6 of Article 415 of the Civil Code (Rabuya, Property, 2021, p. 3031). Distinguished from paragraph 3 Art. 415 [4]
Art. 415 [3] Real property incorporation.
by
Separation from the immovable is not possible without injury. Not important caused attachment.
who the
Real property by incorporation and destination. Separation from the immovable is possible.
Must be placed by the owner of immovable.
(Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 158)
5. Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works. Requisites for immovability a. Must be destined for use in the industry or work in the tenement and must be
essential and principal elements of the industry or works; b. Industry or work must be carried on in a building or on a piece of land, or even on waters; c. They must be placed by the owner of the tenement, unless the tenant acts as an agent of the owner (Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 158). General Rule: The machinery, receptacles instruments or implements be placed in the land or tenement by the leases. Thereof remains personal because they are not placed by the owner of the tenement. Exception: Machinery becomes immobilized only when placed in a plant by the owner of the property or plant, but not when so placed by the tenant usufructuary, or any person having temporary right, unless such person acted as the agent of the owner (Davao Sawmill Co. vs. Castillo, G.R. No. L-40411, August 7, 1935). Application of the Doctrine of Estoppel. Machines are proper subject of a writ of replevin, although they are essential and principal elements of industry because the parties have treated the same as personal property (Serg’s Product Inc. vs. PCI Leasing and Finance, Inc., G.R. No. 137705, August 22, 2000). Must be essential and principal elements of industry. It is necessary that they must be essential and principal elements of industry or works without which such industry or works would be unable to function or carry on the industrial purpose for which it was established (Rabuya, Property, 2021, p.38). Industry or work must be carried in a building or on a piece of land. Court held that the steel towers do not fall under paragraph 5 of Article 415 for they are not machineries, receptacles, instruments or implements, and even if they were, the Court declared that “they are not intended for industry or works on the land” since the Manila Electric Company “is not engaged in an
industry or works on the land in which the steel supports or towers are constructed.”
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(Mindanao Bus vs. City Treasurer, G.R. No. L-17870, September 29, 1962).
6. Animal houses, pigeons, beehives, fish ponds or breeding places of similar nature, in case their owner has placed them or preserves them with the intention to have them permanently attached to the land, and forming a permanent part of it; the animals in these places are included. They are immovable by destination and the Code requires that they be placed by the owner of the land in order to acquire the same nature or consideration of real property. Even if not placed by the owner, however, such structures may still qualify as real property under paragraph 1 of Article 415, being a construction attached to the soil, provided that such attachment must be of a permanent character. Animals in the pigeon-houses, beehives, fishponds and breeding places are likewise considered as real property. However, these animals will be considered as personal property under laws which so provide for them pursuant to the second paragraph of Article 416-referring to "real property which by any special provision
of law is considered as personal property.”
Thus, the fish in fishponds will be considered as personal property for purposes of theft under the Revised Penal Code (Rabuya, Property, 2021 p. 43). 7. Fertilizers actually used on a piece of land They are immovable by destination. The fertilizers must actually be used on the land because it is only then that the intention of the owner to use them on the tenement is beyond doubt. Hence, fertilizers kept in the farmhouse are not immovable (Rabuya, Property, 2021 p. 44). 8. Mines, quarries, and slag dumps, while the matter thereof forms part of the bed, and waters either running or stagnant. They are considered immovable property "while the matter thereof forms part of the bed," that is, the matter thereof remains unsevered from
the soil. Once separated they are no longer mines but minerals and are considered as personal property. The waters, either running or stagnant are those which are found in their natural beds such as flowing streams, rivers or canals (Rabuya, Property, 2021, p.44). 9. Docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake or coast. They are considered real property and structure of which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast. Note: Power barges moored off the coast of Balayan, Batangas are real properties under Art. 415. (9) of NCC (Fels Energy Inc. vs. The Province of Batangas, GR. No. 168557, February 16, 2007). 10. Contracts for public works, and servitudes and other real rights over immovable property. Whether a right is personal or real property shall depend on: (1) whether it is a personal or real right; or (2) whether the subject matter thereof is a personal or real property. Except for rights arising from contracts for public works which are classified as real property under paragraph 10 of Article 415, all personal rights will fall under personal property regardless of the subject matter thereof. If the subject matter of the real right is a real property, then such real right is a real property. This is clear from paragraph 10 of Article 415 which classifies as real property "real rights over immovable property." Thus, a real estate mortgage is a real right and a real property by itself (MBTC vs. Alejo, G.R. No. 141970, September 10, 2001).
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Article 2126 of the Civil Code describes the real nature of a mortgage: it is a real right following the property, such that in subsequent transfers by the mortgagor, the transferee must respect the mortgage. A registered mortgage lien is considered inseparable from the property inasmuch as it is a right in rem (PNB v. RBL Enterprises, Inc., G.R. No. 149569, May 28, 2004). Easem*nt (or servitude) is also a real property under paragraph 10 because it is a real right that is exercised over an immovable property belonging to another person. On the other hand, if the subject matter of the real right is a personal property, as in the case of chattel mortgage, such real right is classified as personal property (Rabuya, Property, 2021, p.4546). B. MOVABLES The Civil Code does not likewise define the term “personal” or “movable” property. As in the case of “real” or “immovable” property, the Code simply enumerates in Articles 416 and 417 thereof what are to be considered as “personal” property. Movable properties in the Code 1. Those movables susceptible of appropriation which are not included in Art. 415; In Strochecker v. Ramirez, "interest in business" was declared to be personal property since it is capable of appropriation and not included in the enumeration of real properties and may, therefore, be the subject of mortgage. "Business" is likewise not enumerated as personal property under the Civil Code. Just like interest in business, however, it may be appropriated. Business should also be classified as personal property since it is not included in the exclusive enumeration of real properties under Article 415. In Laurel v. Abrogar and PLDT v. Alvarez, the Court ruled that the "business of providing telecommunication or telephone service" is
likewise personal property which can be the object of theft under Article 308 of the Revised Penal Code. The Court explained that even prior to the passage of the Revised Penal Code, jurisprudence is settled that "any
personal property, tangible or intangible, corporeal or incorporeal, capable of appropriation can be the object of theft." This jurisprudence, in turn, applied the prevailing legal meaning of the term "personal property" under the old Civil Code as "anything
susceptible of appropriation and not included in the foregoing chapter (not real property.)" (Rabuya, Property, 2021, p.60-61).
2. Real property which by any special provision of the law is considered as personal property; There are certain properties classified under Article 415 of the Code as real property which may, by special provision of law, be considered as personal property. In applying the provisions of the Revised Penal Code for the commission of the crime of theft, the animals in the animal houses referred to in paragraph 6 of Article 416 will be considered as personal property. Also, for purposes of attachment, execution and the Chattel Mortgage Law, ungathered fruits referred to in the second paragraph of Article 415 shall be treated as personal property (Rabuya, Property, 2021, p.61-62). 3. Forces of nature which are brought under control by science; The forces of nature in their original state are not, ordinarily, subject to appropriation because of the degree of difficulty in appropriating them. However, paragraph. (3) of Art. 416 clarifies that if these forces of nature are bought under the control of man through the help of science, thereby becoming appropriate, they are now considered as property and classified as personal property hence, gas and electricity are considered personal property under this provision (US vs. Tambunting, G.R. No. L-16513, January 18, 1921).
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4. In general, all things which can be transferred from place to place without impairment of the real property to which they are fixed. The following are also considered personal property: a. Obligation and action which have for their object movables or demandable sums; and b. Shares of stock of agriculture, commercial and industrial entities, although they may have real estate (Art. 417, NCC). Tests of “Movable” Character Test by exclusion – Whether the property was not enumerated in Art. 415., under the principle expressio unius est exclusio alterius (Art. 416 [1], NCC). Test by description – Whether the property can be transported or carried from place to place (Art. 416 [4], NCC); whether such change of location can be made without injuring the immovable to which the object may be attached; unless expressly included in Art. 415; whether real property is considered by any special provision of law as personality (Art. 416 [2], NCC). Note: Test by Exclusion is superior. Classification of Movable Property (Art. 418, NCC) CONSUMABLE
NON-CONSUMABLE
Movables which cannot be used in a manner appropriate to their nature without their being consumed.
Any other kind of movable property.
FUNGIBLE
NON-FUNGIBLE
Capable of substitution of same kind and quantity.
Incapable of substitution; Identical thing must be given or returned.
(Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 161)
Classification of Property: Based on Ownership Property is either of public dominion or of private ownership (Art. 419, NCC). Public Dominion is one not owned by the state but pertains to the state, which, as territorial sovereign, exercises certain juridical prerogatives over such property (3 Manresa 6669). In order to be property of public dominion an intention to devote it to public use is sufficient and it is not necessary that it must actually be used as such (Manila Lodge vs. CA, G.R. No. L41001, September 30, 1976). Kinds of Public Dominion (Arts. 420 & 424, NCC) 1. For public use 2. For public service 3. For the development of national wealth. Classification of Lands of the Public Domain: (Art. XIV, Sec. 10, 1987 Constitution) 1. 2. 3. 4.
Agricultural Forest or timber Mineral lands National parks
Regalian Doctrine or jura regalia declares that all property is presumed to be a State property in the absence of any showing to the contrary (Chavez vs. Public Estates Authority, G.R. No. 133250, July 9, 2000). The following things are property of public dominion (Art. 420, NCC): 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; 2. 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.
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Characteristics: 1. Outside the commerce of man. They cannot be subject to sale, disposition, or encumbrance; any sale, disposition, or encumbrance of such property of the public dominion is void for being contrary to law and public policy. They cannot likewise be leased or otherwise be the subject matter of contract (Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 165). When certain public streets in Caloocan City were converted into flea markets and leased to several vendors, the Supreme Court held that such leases were null and void since a public street is property for public use hence outside the commerce of man. Being outside the commerce of man, it may not be the subject of lease or other contract (Dacanay vs. Asistio, G.R. No. 93654, May 6, 1992). 2.
They are not susceptible to private appropriation and cannot be acquired by acquisitive prescription;
3. They cannot be the subject of an auction sale, levy, encumbrance, or disposition through public or private sale. Any encumbrance, levy on execution, or auction sale of any property of public dominion is void for being contrary to public policy. Adverse possession which may be the basis of a grant of title in confirmation of imperfect title cases applies only to alienable lands of the public domain. In this case, since the subject property is part of the reservation for provincial park purposes and, thus, part of the forest zone, it is not registrable and its possession, no matter how lengthy, cannot convert it into private property (Palomo vs. CA, G.R. No. 95608, January 21, 1997). Any encumbrance, levy on execution or auction sale of any property of public dominion is void for being contrary to public policy. Essential public services will stop if properties of public dominion are subject to encumbrances, foreclosures and
auction sale (Manila International Airport vs. CA, G.R. No. 155650 July 20, 2006). 4. They cannot be burdened by any voluntary easem*nt (Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 165). When a right of way was claimed on a lot owned by the government and on which stairways were built for the use of the people as a passageway, it is a property of public dominion devoted to public use and cannot be burdened by a voluntary easem*nt or right of way in favor of Villarico (Villarico vs. Sarmiento, G.R. No. 136438 November 11, 2004). 5. Cannot be registered under the Land Registration Law and be the subject of a Torrens title; 6. They can be used by everybody; and 7. Inalienable but when no longer needed for public use or service, may be declared patrimonial property (Art. 422, NCC). Patrimonial Property of the State It refers to all other property of the State, which is not of the character stated in Art. 420. It is considered as property of the State in a private sense. It is said that over this kind of property the State has the same rights and has the same power of disposition as private individuals, subject to existing rules and regulations (II Caguioa, Civil Code of the Philippines, 1996, p. 36). It is the property owned by the State in its private or proprietary capacity which may be acquired by private individuals or corporations through prescription. It may be an object of ordinary contract (Pineda, Law on Property, 2009, p. 32-33). Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain (Art. XII Secs. 7, 1987 Constitution).
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Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State (Art. 422, NCC). This provision is not selfexecuting. There must be a formal declaration by the executive or possible legislative department of the government that the property of the State is no longer needed for public use or for public service before the same can be classified as patrimonial or private property of the state; otherwise, the property continues to be property of public dominion notwithstanding the fact that it is not actually devoted for such use or service (Manila Lodge No. 761 vs. CA, G.R. No. L-41001, September 30, 1976). If no such declaration has been made, the lot forms part of public domain (Faustino Ignacio vs. Dir. of Lands, G.R. No. L-12958, May 30, 1960). Art. XII Secs. 7 and 8 of the 1987 Constitution explicitly prohibits non-Filipinos from acquiring or holding title to private lands or to lands of public domain (Ancheta vs. Guersey-Dalaygon, G.R. No. 139868, June 8, 2006). Property of Local Government Units 1. Property for public use – consists of the provincial roads, city streets, municipal streets, squares, fountains, public waters, promenades, and public works for public service paid for by said provinces, cities or municipalities (Art. 424[1], NCC). Manifestly owned by the city/municipal corporation in its public and governmental capacity and are therefore public property over which Congress has absolute control. Such property is held in trust for the State for the benefit of its inhabitants, whether it be for governmental or proprietary purposes (Rabuco vs. Villegas, G.R. No. L24661, February 28, 1974). 2. Patrimonial Property – All other property
possessed by LGUs not expressly mentioned in paragraph 1 of Article 424 and devoted to proprietary or private purposes (Rabuya, Prebar Reviewer in Civil Law, 2021, p. 166). a.
could not be deprived of without due process and without payment of just compensation. Such property is acquired with its own funds in its private or corporate capacity (Rabuco vs. Villegas, G.R. No. L-24661, February 28, 1974). b.
In the absence of proof that the land claimed by a municipal corporation was acquired with its private funds, the presumption is that such land was given to it by the State in trust upon the creation of the municipality (Sangguniang Panlalawigan of Bataan vs. Garcia, G.R. No. 174964, October 5, 2016).
Property of private ownership besides the patrimonial property of the State, provinces, cities, and municipalities, consists of all properties belonging to private persons, either individually or collectively (Art. 425, NCC). II. BUNDLE OF RIGHTS A.
OWNERSHIP Ownership may be exercised over things or rights (Art. 427, NCC). Ownership is the juridical relation of a person over a thing by virtue of which said person has the exclusive power or authority to receive all the benefits and advantages arising from said thing, save those restricted by law or the recognized rights of others (Pineda, 2009).
Kinds of Ownership. (F-N-S-C) 1. Full ownership – Includes all the rights of an owner; NOTE: Naked ownership + Usufruct 2. Naked ownership – Ownership where the rights to the use and to the fruits have been denied; NOTE: Full ownership – Usufruct 3. Sole ownership – Ownership is vested in only one person; and
Owned a municipal corporation in its private or proprietary capacity which it
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4. Co-ownership– Ownership is vested in two or more persons. There is Unity of the property, and plurality of the subjects (Paras, Civil Code of the Philippines Annotated, 2008, p. 83-84). Q:
Respondents inherited the subject property from Emiliana Bacalso, by virtue of Decree No. 98992. Sometime later, they found the heirs of Alejandra Delfin to be occupying the said property to which they even constructed houses there. The heirs argued they have better right for it was inherited to them after it was bought by the predecessor from Emiliana Bacalso; also, they are the ones paying the subject property’s realty taxes. Do the respondents have the better right to the ownership and possession of the subject property? A: YES. Respondents have the better right to the ownership and possession of the subject property. The basis is the LRA certification, daybook entry, and Decree No. 98992 that was issued to Emiliana Bacalso. The Decree bars all claims and rights which arose as may have existed prior to the decree of registration (Heirs of Delfin v. Rabadon, G.R. No. 165014, 31 July 2013). Attributes of Ownership. (Bundle of Rights) The Civil Code does not define ownership. Instead, the Code simply enumerates the rights which are included therein, to wit: 1.
2.
3.
Right to enjoy; (Art. 428, 1st par., NCC) a. Jus utendi (right to use); b. Jus fruendi (right to enjoy the fruits); c. Jus abutendi (right to consume the thing by its use); and d. Jus possidendi (right to possess). Righ to dispose; (jus disponendi) (Ibid) a. Alienate b. Encumber c. Transform d. Destroy Right to vindicate (jus vindicandi) or the right to recover the property from any holder or possessor; (Art. 428[2], NCC)
4.
Right to exclude; (Art. 429, NCC) a. Right to exclude any person from enjoyment and disposal of the property; b. Right to enclose or fence the land or tenement; or c. May use such force to repel or prevent usurpation of property.
5. Right to demand indemnity for damages suffered due to lawful interference by a third person to avert an imminent danger; (Art. 432, NCC) 6. Right to just compensation in eminent domain cases; (Art. 435, NCC) 7. Right to construct any works or make
any plantations and excavations on the surface or subsurface of the land; (Art. 437, NCC)
8. Right to hidden treasure found in the owner’s property; (Art. 438, NCC) and 9. Right to accessions (Arts. 440-475, NCC).
Accession is the right of the owner of a thing to become the owner of everything that is produced thereby or which may be inseparably attached or incorporated thereto, either naturally or artificially. Ownership is a Real Right A real right or jus in re has been defined as the power belonging to a person over a specific thing without a definite passive subject against whom such right may be personally enforced. A right in rem, therefore, is one which imposes an obligation on persons generally, i.e., either on all the world or on all the world except certain determinate persons. (Rabuya, Property, 2021, p. 167) A real right creates a direct relation between the specific thing and its holder in such a way that it permits the holder to exclude others from the enjoyment of the thing. Correspondingly, it creates an obligation on
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the part of third persons not to interfere in such enjoyment. These elements are clearly present in ownership. Hence, the owner of a thing has the right to exclude any person from its enjoyment and disposal save for the XPN mentioned in Article 432 for acts done in the state of necessity (Rabuya, Property, 2021, p. 167168). Objects of Ownership The relationship that exists between ownership and property is that the latter is the object of the former. In accordance with Article 427 of the Code, the subject matter of ownership may either be things or rights (Rabuya, Property, 2021, p. 108-169). Presumption of Ownership Possession is viewed by the Civil Code as presumed ownership. Actual possession under claim of ownership raises a disputable presumption of ownership. The true owner must resort to judicial process for the recovery of the property (Art. 433, NCC). The presumption, however, is merely disputable and may be overthrown by proof to the contrary (Rabuya, Property, 2021, p. 210). Attributes of Ownership 1. Right to Enjoy The essence of ownership is the right of the owner to freely enjoy either the property itself or the benefits derived therefrom, which enjoyment may consist: a. Simply of its possession. (jus possidendi); b. Its consumption. (jus abutendi) - which properly meant the use that extinguishes, that consumes, by acts of the owner, things which are consumable; c. Its use. (jus utendi) – involves consumption of the thing by its use; d. Enjoyments of its products or fruits. (jus fruendi); or, e. The enjoyment of anything attached or incorporated to it, either naturally or artificially (the right of accession) (Rabuya, Property, 2021, p. 170).
2. Right to Dispose
Jus disponendi or the power of the owner to dispose of his property includes the power:
a. To alienate - the right of the owner to transmit either by onerous or gratuitous title his right to another by any act inter vivos or mortis causa. Such right is exclusively vested upon the owner based upon the principle that “no one can give
what he does not have.”
b. To limit or to encumber - the power of the owner to deprive himself of several of the rights included in ownership and transfer them to another; c. To transform - the power to change the nature of the thing, or its form or destination d. To destroy - the power to destroy is the power to render useless or to abandon or annihilate the thing; and e. To merge (Rabuya, Property, 2021, p. 171). 3. Right to Vindicate The owner has also a right of action against the holder and possessor of the thing in order to recover it (Art. 428[3], NCC). Every possessor has a right to be respected in his possession; and should he be disturbed therein, he shall be protected in or restored to said possession by the means established by the laws and the Rules of Court (Art. 539, NCC). 4. Right to Possession Possession, as an incident of ownership or a right included in ownership, must be distinguished from possession, as a right independent and apart from ownership. Possession as an incident of ownership refers to jus possidendi or the right to possession. On the other hand, a right independent and apart from ownership refers to jus possessionis or the right of possession (Rabuya, Property, 2021, p. 171).
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5. Right to Exclude The owner is entitled to the exclusive possession of his property. For this purpose, he may exclude any person from the enjoyment and disposal thereof by force if necessary and he may also enclose or fence his property by any means. In the event, however, that the possessor is unlawfully deprived of possession, he is required to resort to the proper legal processes for the purpose of obtaining recovery of possession. This principle is embodied in Article 433 of the New Civil Code which directs the true owner to resort to judicial process for the recovery of the property, to wit:
“Article 433. Actual possession under claim of ownership raises disputable presumption of ownership. The true owner must resort to judicial process for the recovery of the property; and
Article 536 of the same Code which states:
“Art. 536. In no case may possession be acquired through force or intimidation as long as there is a possessor who objects thereto. He who believes that he has an action or a right to deprive another of the holding of a thing, must invoke the aid of the competent court, if the holder should refuse to deliver the thing (Rabuya, Property, 2021, p. 172-173).
a. Doctrine of Self-help
The owner or lawful possessor of a thing has the right to exclude any person from the enjoyment and disposal thereof. For this purpose, he may use such force as may be reasonably necessary to repel or prevent an actual or threatened unlawful physical invasion or usurpation of his property.” The employment
of such reasonable force in defense of his property is what is known in juridical science as the doctrine of self-help. The doctrine of selfhelp is available not only to owners of the property but also to any of its “lawful possessor.” (Art. 429, NCC). The actual invasion of property may consist of: i. A mere disturbance of possession; or
ii. A real dispossession. From the words of Art. 429, the word “repel” is referring to an “actual” unlawful physical invasion or usurpation of the property, while the word “prevent” is referring to threatened” unlawful physical invasion or usurpation of the property. In the latter case, the owner must resort to judicial process for the recovery of property as required in Article 536 of the Civil Code. In other words, the doctrine of self-help cannot be invoked for the purpose of recovering property (Rabuya, Property, 2021, p. 187-188). Note: If the property is immovable, there should be no delay in the use of force to recover it; a delay even if excusable, such as when due to the ignorance of the dispossession, will bar the right to the use of force (3-1 Enneccerus, Kipp & Wolff, 92-93). Q: A, the registered owner of a parcel of land, authorized petitioner ABC Construction Co. (Company) to develop their property into a residential subdivision. Finding that part of the property was occupied by respondent X and twenty other persons, the petitioner Company advised the occupants to vacate the premises but the latter refused. Nevertheless, the petitioner proceeded with the development of the subject property which included the portions occupied and cultivated by herein respondents. In so doing, the petitioner forcibly removed and destroyed the barbed wire fence enclosing private respondents’ farm holdings. Petitioner likewise bulldozed the rice, corn, fruit bearing trees and other crops of private respondents. Private respondents, thereafter, sued the petitioner for ejectment (forcible entry). The lower courts rationalized the petitioner’s drastic action of bulldozing and destroying the crops of private respondents on the basis of the doctrine of self-help enunciated in Article 429 of the New Civil. Are the contentions of the lower courts correct?
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A: No. The doctrine of self-help can only be exercised at the time of actual or threatened dispossession which is absent in the case at bar. When possession has already been lost, the owner must resort to judicial process for the recovery of property (German Management & Services, Inc. vs. CA, G.R. No. 76217, September 14, 1989). b. Defense of Property Circ*mstance
as
Justifying
Defense of property is deemed included in selfdefense under the provisions of Article 11, paragraph 1 (justifying circ*mstances in defense of person or rights), of the Revised Penal Code. (RPC) which requires unlawful aggression against the person of the owner or lawful possessor of the property. Defense of property without any aggression against the person of the owner is authorized. Thus, even if the aggression was directed not on the person of the accused-appellant but only on his property, the Court nonetheless considered such unlawful aggression for the purpose of crediting him with the special mitigating circ*mstance of incomplete selfdefense (Art. 429, NCC). For defense of property to be appreciated as a justifying circ*mstance, it is necessary that the means employed to prevent or repel the aggression must be reasonable. Note that under the doctrine of self-help in Article 429 of the Civil Code, what is authorized is the use of force “as may be reasonably necessary” for the purpose of repelling or preventing any actual or threatened unlawful physical invasion or usurpation of one’s property. In determining the reasonableness of the means employed, the absence of an attack against the person of the owner or lawful possessor of the property must be considered since defense of property is not of such importance as the right to life and limb (Rabuya, Property, 2021, p. 190). Q: A’s house was situated on a land awarded to B’s company by virtue of a sales patent. The validity of the award was, however, questioned before the court by a group of settlers including A. While the case was
still pending, a group of men headed by B, the landowner, and his son, were fencing the land of the A. At that time, A was taking his rest but when he heard that the walls of his house were being chiseled, he arose and there he saw the fencing going on. If the fencing would go on, A would be prevented from getting into his house and the bodega of his rice mill. So A addressed the group,
“Pare, if possible you stop destroying my house and if possible we will talk it over what is good.” B, however, answered: “No, gademit, proceed, go ahead.” A apparently lost his equilibrium and he got his gun and shot dead B and the latter’s companion, X. A now questions his criminal conviction claiming exemption from criminal liability as he acted merely in defense of his person and of his rights. Decide.
A: A, should be credited with the special mitigating circ*mstance of incomplete defense of property even if such defense is not coupled with an attack upon the person of the accused. There was an actual physical invasion of A’s property which he had the right to resist, pursuant to Art. 429 of the Civil Code. The unlawful physical invasion of A’s property is considered as unlawful aggression. However, when A fired his shotgun from his window, killing his two victims, his resistance was disproportionate to the attack. Hence, he must be credited only with special mitigating circ*mstance of incomplete defense of property (People vs. Narvaez, G.R. Nos. L-3346667, April 20, 1983). 6. Right to Enclose or Fence Every owner may enclose or fence his land or tenements by means of walls, ditches, live or dead hedges, or by any other means without detriment to servitudes constituted thereon (Art. 430, NCC). It is required that the right to enclose or fence must be legitimately exercised and must not be attended with bad faith.
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The same must not work to detriment the servitudes constituted therein (Rabuya, Property, 2021, p. 192). 7. Right to Sub-surface and Airspace The owner of a parcel of land is the owner of its surface and of everything under it, and he can construct thereon any works or make any plantations and excavations which he may deem proper, without detriment to servitudes and subject to special laws and ordinances. He cannot complain of the reasonable requirements of aerial navigation (Art. 437, NCC). The owner of piece of land has rights not only to its surface but also to everything underneath and the airspace above it up to a reasonable height. However, this is subject to certain limitations: a. That it cannot work detriment to servitudes; b. That it is subject to special laws and ordinances; c. That it is subject to reasonable requirements of aerial navigation; d. Rights of third person; (Art. 431, NCC) and e. Principles on human relations and the prevention of injury to the rights of third persons (Art. 19 and 431, NCC). Rights Over Land Are Indivisible. The rights over the land are indivisible and that the land itself cannot be half agricultural and half mineral. The classification must be categorical; the land must be either completely mineral or completely agricultural (Republic vs. Court of Appeals, G.R. No. L-43938, April 15, 1988). Extent of Rights Over The Sub-Surface. The landowners’ right extends to such height or depth where it is possible for them to obtain some benefit or enjoyment, and it is extinguished beyond such limit as there would be no more interest protected by law (National Power Corporation v. Ibrahim, G.R. No. 168732, June 29, 2007). When a landowner cannot dig upon his property motorized deep wells and was prevented from doing so by the authorities, he is entitled to recover the full compensation for the land
because the nature of the easem*nt deprives the owner of its normal beneficial use (Ibid). Extent of Landowner’s Right to Airspace. The landowner owns at least as much of the space above the ground as he can occupy or use in connection with the land. To this extent his title to the air is paramount. No other person can acquire any title or exclusive right to any space above him. Any unauthorized physical entry into that space is to be considered a trespass, if done by a private person, or a case of “taking” of private property, if done under governmental authority (Rabuya, Property, 2021, p. 233). 8. Right to Hidden Treasure Hidden treasure belongs to the owner of the land, building, or other property on which it is found. Nevertheless, when the discovery is made on the property of another, or of the State or any of its subdivisions, and by chance, one-half thereof shall be allowed to the finder. If the finder is a trespasser, he shall not be entitled to any share of the treasure. If the things found be of interest to science or the arts, the State may acquire them at their just price, which shall be divided in conformity with the rule stated (Art. 438, NCC). Rule on Hidden Treasure: a. Finder is the owner of the property where the treasure is found, is all his (Art. 438, NCC); b. Finder is a trespasser; it shall belong solely to the owner of the property where the treasure is found (Ibid); c. Finder is a third person who is not a trespasser and the finding of the treasure is by chance, the finder is entitled to ½ of the treasure while the other half goes to the owner of the property (Ibid). Meaning of Treasure By treasure is understood, for legal purposes, any hidden and unknown deposit of money, jewelry, or other precious objects, the lawful
99
ownership of which does not appear (Art. 439, NCC). Under the ejusdem generis rule, the term “other precious objects” should be understood as being similar to money or jewelry. Hence, the concept does not include natural wealth, i.e., minerals and petroleum. The Regalian doctrine reserves to the State all natural wealth that may be found in the bowels of the earth even if the land where the discovery is made be private. As such, the right of the owner of the land with respect to the subsurface or subsoil is subject to the application of the Regalian doctrine (Rabuya, Property, 2021, p. 223). Treasure Hunting A treasure hunter requires a permit from the state for the discovery/recovery of hidden treasures, shipwreck/sunken vessels, etc. (R.A. 8492, the National Museum Act of 1998). The net proceeds of the treasure hunting shall be distributed, as follows: a. For treasure hunting within public lands – 75% to the Government and 25% to the permit holder; b. For treasure hunting in private lands – 30% to the Government and 70% to be shared by the permit holder and the landowner; and c. For shipwreck/sunken vessel recovery – 50% to the Government and 50% to the permit holder (Rabuya, Property, 2021 p. 232). Limitations on the Right of Ownership The exercise of rights arising from ownership is always subject to the restrictions imposed by law, the exercise of the inherent powers of the State and the rights of others. Aside from the foregoing restrictions, the owner himself may impose limitations upon his own right (Rabuya, Property, 2021, p. 194).
a. General Limitations Pursuant to the Exercise of the Inherent Powers of the State i.
Police Power. In the State’s exercise of its police power, the owner does not recover from the government for injury sustained in consequence thereof (Art. 436, NCC).
ii.
Power of Eminent Domain. The exercise of the power of eminent domain is constrained by two constitutional provisions: (1) That private property shall not be taken for public use without just compensation; and (2) That no person shall be deprived of his/her life, liberty, or property without due process of law (Art. 435, NCC).
iii. Power of Taxation. As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range, acknowledging in its very nature no limits. Nevertheless, our Constitution provides that the rule of taxation shall be uniform and equitable and the Congress shall evolve a progressive system of taxation (Rabuya, Property, 2021, p.198). b. Specific Limitations Imposed By Law i. Legal easem*nts which can be enforced by law and, therefore, may be established even against the will of the owner of the servient estate. ii. During a period of acute public want or emergency, thoughtless extravagance in expenses for pleasure or display may be stopped by order of the courts at the instance of any government or private charitable institution. iii. Lands acquired under free patent or homestead cannot be subject to encumbrance or alienation within five years from the issuance of the patent (Rabuya, Property, 2021, p. 198-199).
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c. Inherent
Limitations Arising From Conflicts with Other Similar Rights i. The owner of a thing cannot make use thereof in such manner as to injure the rights of a third person (Art. 431, NCC). ii. The owner of a thing has no right to prohibit the interference of another with the same, if the interference is necessary to avert an imminent danger and the threatened damage, compared to the damage arising to the owner from the interference, is much greater. The owner may demand from the person benefited indemnity for the damage to him (Art. 432, NCC). When the owner acts in the legitimate exercise of his right, that is, when he acts with prudence and in good faith, he does no actionable injury and cannot be held liable for damages. The damage resulting from the legitimate exercise of a person’s right is a loss without injury — damnum absque injuria (Rabuya, Property, 2021, p. 200). If the right is exercise in bad faith, however, and for the sole intent of prejudicing or injuring another, there is liability under the principle of abuse of right (Ibid).
State of Necessity The interference by a third person with another’s property is justified and cannot be prevented by the latter if such interference is necessary to avert an imminent danger and the threatened damage, compared to the damage arising to the owner from the interference, is much greater (Art. 432, NCC). Requisites of State of Necessity: a. There must be a situation of grave peril, an actual or imminent danger, either upon the person of the actor or a third person or their property; b. The interference is necessary to avert such danger; c. The threatened damaged, compared to the damage arising to the owner from the interference, is much greater; and
d. The state of necessity must not be brought about by the intentional provocation of the party invoking the same (Rabuya, Property, 2021, p. 204). Since “state of necessity” is a justifying circ*mstance, the accused does not commit a crime in legal contemplation; hence, is not criminally and civilly liable. Civil liability is borne by the person/persons benefited by the act of the accused. d. Limitations Imposed By the Owner Himself The owner of the property may impose restrictions or limitations on ownership in two situations: i. At the time that he transmits the property to another person; or ii. At the time that he continues to be the owner of the property (Rabuya, Property, 2021, p. 206). Prohibition to Alienate. Prohibitions to alienate imposed by the will of the transmitting owner are generally valid except when they are forbidden by law or contrary to public policy. A prohibition to alienate should not exceed at most a period of twenty years whether the transmission of ownership is done gratuitously or onerously, otherwise there would be subversion of public policy, which naturally frowns on unwarranted restrictions on the right of ownership. A perpetual prohibition against alienation is, however, void for being contrary to public policy. Any such prohibition, indefinite and stated as to time, so much so that it shall continue to be applicable even beyond the lifetime of the original parties to the contract, is, without doubt, a nullity (Rabuya, Property, 2021, p. 207).
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B. RIGHTS OF ACCESSION
Kinds of Fruits
1. General Principles
1. Natural fruits. Spontaneous products of the soil and the young and other products of animals (Art. 442[1], NCC). Only such as are manifest or born are considered as natural or industrial fruits. With respect to animals, it is sufficient that they are in the womb of the mother, although unborn (Art. 444, NCC).
Accession defined It is the right by virtue of which the owner of a thing becomes the owner of everything which is produced thereby, or which is incorporated or attached thereto, either naturally or artificially (Art. 440, NCC). Kinds of Accession:
Offspring of Animals:
A.
General Rule: Partus Sequitur Ventrem The owner of the female animal owns the offspring which it produced (US vs. Caballero, G.R. No. 8608, September 26, 1913).
Accession Discreta
Right of the owner to the products of his property or to the fruits of the same. General rule: To the owner belongs the natural, industrial, and civil fruits (Art. 441, NCC). Exceptions: 1. Lease of rural lands. Lessee is entitled to the natural and industrial fruits of the thing leased. Civil fruits in the form of rent are given to the lessor (Arts. 1654 and 1676[2], NCC).
Exception: If there is a contrary custom or stipulation (U.S. vs. Caballero, G.R. No. 8608, September 26, 1931).
only to the enjoyment of the property subject matter thereof but also to its fruits (Art. 566, NCC).
Offspring is already considered as a natural fruit even during the time that it is inside the womb of its mother so long as the latter’s pregnancy is already manifest or evident. It is necessary that there must be no human labor which has intervened in its generation. If human labor intervenes in the production of the fruit, the same is classified as an industrial fruit.
3. Antichresis. The creditor acquires the
2. Industrial fruits. Produced by lands of
2. Usufruct. The usufructuary is entitled not
right to receive the fruits of an immovable of his debtor, with the obligation to apply them to the payment of interest, if owing, and thereafter to the principal of his credit (Art. 2123, NCC).
4. Possession in good faith. A possessor in good faith is entitled to the fruits received by him before his possession is legally interrupted (Art. 544, NCC). 5. Fruits naturally falling. If it falls upon adjacent land, it belongs to the owner of said land and not to the owner of the tree (Art. 681, NCC).
any kind through cultivation or labor (Art. 442[2], NCC).
Requirements:
a. Produced by the land; and b. Produced through cultivation or labor. 3. Civil fruits. The rents of buildings, the price of leases of lands and other property and the amount of perpetual or life annuities or other similar income. Income or revenues derived from the property itself (Art. 442[3], NCC). Article 443 does not apply to a situation where the fruits are still pending. In a situation where the fruits are still pending. (or ungathered) at the time the owner recovers possession from a possessor in
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bad faith, it is the provisions of Article 449 of the Civil Code that will apply (Rabuya, Civil Law Reviewer Vol. 1, 2017, p. 371-372). Production expenses is refundable when: 1. that they are dedicated to the annual production and note merely for purposes of improvement; and 2. that they be not superfluous, excessive or for luxury but rather that they be commensurate with that required by the products.
B.
Accession Continua Right to acquire whatever is attached or incorporated naturally or artificially to our things. The right pertaining to the owner of a thing, over everything that is incorporated or attached thereto, either naturally or artificially by external forces (Rabuya, Property, 2021, p. 251). Basic principles of accession continua: 1. Union or incorporation must generally be effected in such a manner that to separate the principal from the accessory would result in substantial injury to either. 2. Accessory follows the principal.
3. No one should unjustly enrich himself at the expense of another 4. Good faith exonerates a person from punitive liability and damages. 5. Bad faith subjects a person to damages and other unfavorable consequences. 6. Bad faith of one party neutralizes the bad faith of the other and, therefore, both should be considered as having acted in good faith (Rabuya, Property, 2021, p. 254-255). Principle: Accession exists only if separation is not feasible. Otherwise, separation may be demanded. 2. Accession Industrial Principles: 1. The accessory does not lead but follows the principal. 2. The accessory follows the nature of that to which it relates. 3. What is built upon the land goes with it, or the land is the principal, and whatever is built on it becomes the accessory. Obligation to third person who pay for the expenses He who receives the fruits has the obligation to pay the expenses made by a third person in their production, gathering, and preservation (Art. 443, NCC).
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Gathered Fruits (Art. 544, 545, NCC)
Planter in Good Faith Planter in Bad Faith
PLANTER Keeps fruits until possession is legally interrupted. Reimbursed for expenses for production, gathering and preservation
LANDOWNER No necessity to reimburse the planter of expenses since he retains the fruits Gets fruits, pays planter expenses
PLANTER Reimbursed for expenses for production, gathering and preservation
LANDOWNER Owns fruits provided he pays planter expenses for production, gathering and preservation. (force co-ownership) Owns fruits
Standing Crops
Planter in Good Faith Planter in Bad Faith
Loses everything. reimbursem*nt
No
right
to
RIGHTS OF A BUILDER/PLANTER/SOWER IN GOOD FAITH RIGHTS AND OBLIGATIONS AMONG THE LANDOWNER, BUILDER, PLANTER AND SOWER, AND THE OWNER OF THE MATERIALS IN CASE OF ACCESSION WITH RESPECT TO IMMOVABLE PROPERTY
LANDOWNER Acquire improvements and pay to Builder, Planter, Sower, indemnity; or Sell the land to Builder or Planter except if the value of the land is considerably more.
GOOD FAITH BUILDER, PLANTER, SOWER Right of retention for necessary and useful expense. Pay the value of materials to owner of materials
OWNER OF THE MATERIALS Collect value of materials primarily from Builder, Planter or Sower; subsidiarily liable from landowner if Builder, Planter or Sower is insolvent. Materials can be removed if without injury.
(Arts. 447 and 455, NCC)
Rent to Sower. (Arts. 448, 546
and 455, NCC)
Subsidiarily liable to owner of materials GOOD FAITH Acquire improvements and pay Right of retention for indemnity to Builder, Planter or and useful expenses. Sower; or sell to Builder, Planter or Sower if the value of Keep building, planting the land is considerable more. without indemnity to (forced lease) materials and collect
necessary
BAD FAITH Lose them without right to indemnity. (Art.
449, NCC)
or sowing owner of damages.
(Arts. 449 and 546, NCC)
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GOOD FAITH Acquire improvement without paying indemnity and collect damages or demolition or restoration, and collect damages or sell to Builder, Planter or rent to Sower, and collect damages
BAD FAITH Recover necessary expenses for Recover value from Builder, Planter, Sower preservation. as if they acted in good faith. Lose improvements without right to indemnity from Land Owner. (Art. 452, NCC) unless the Land Owner sells the land.
If Builder, Planter or Sower acquire improvements, materials can be removed but only if without injury. (Art. 447, NCC)
BAD FAITH Same as though they acted in good faith. (Art. 453, NCC) BAD FAITH Acquire improvements after paying indemnity and damages to Builder, Planter or Sower.
Remove event.
improvements
in
GOOD FAITH any Remove materials if without injury.
Be indemnified for damages.
Subsidiarily liable to owner of materials. (Arts. 447, 454 and
Subsidiarily liable from Land Owner.
455, NCC)
BAD Acquire improvements after indemnity to Builder, Planter, Sower or sell to Builder and Planter except if the property is considerably more
GOOD FAITH Acquire without paying indemnity and collect damages or sell to Builder, Planter or Sower and collect damages or demolish or restore and collect damages.
Collect value of materials, primarily from Builder, Planter or Sower.
FAITH Right of retention for necessary expenses. Pay the value of the materials to owner of materials and pay him damages. (Arts. 447 and 546,
GOOD FAITH Collect value of materials primarily from Builder, Planter and Sower, subsidiarily liable with the Land Owner Collect damages
NCC)
If Builder, Planter, Sower acquires improvements remove materials in any event. (Art. 447 and 455, NCC)
BAD FAITH Recover necessary expenses. (Art.
GOOD FAITH Collect value of materials and damages from Builder, Planter or Sower and subsidiarily from Land Owner.
443 and 452, CC)
Remove materials in any event if Builder, Planter or Sower acquires improvements.
Pay necessary expenses to Builder, Planter or Sower. BAD FAITH Acquire improvements and pay indemnity and damages to Builder, Planter or Sower.
(Arts. 447 and 454, NCC)
GOOD FAITH Indemnity for damages Remove improvements in any event. (Arts. 447 and 454, NCC)
BAD FAITH No indemnity Lose materials. (Art. 449, NCC)
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Concept of Good Faith: Builder, Planter or Sower – There is good faith if he has no knowledge of any flaw or defect in his title or mode of acquisition which invalidates it, while there is bad faith if he is aware of such defect (Art. 526, NCC). Landowner, Owner of the Materials – consists in the ignorance of the acts of the builder, planter or sower or if he was aware, there was opposition on his part, while bad faith is knowledge of such acts without opposition on his part (Jurado, Civil Law Reviewer, 2009, p.336). When both landowner and builder. (who is also the owner of the materials), all acted in good faith, the right to choose between appropriating the improvement or selling the land on which the improvement of the builder, planter or sower stands, is given to the only right given to the builder in good faith is the right to reimbursem*nt for the improvements; the builder, cannot compel the owner of the land to sell such land to the former (Art. 448, NCC). The landowner cannot refuse to exercise either option and compel instead the owner of the building or improvement to remove it from the land. The remedy of remotion is available only if and when the owner of the land chooses to compel the builder to buy the land at a reasonable price but the latter fails to pay such price (Technogas Philippines Manufacturing Corp. vs. CA, G.R. No. 108894, February 10, 1997). 3. Accession Natural To the owners of lands adjoining the banks of rivers belongs the accretion which they gradually receive from the effects of the current of the waters (Art 457, NCC). a. Alluvium Gradual and imperceptible addition to the banks of the river or as the increment which lands abutting rivers gradually receive as a result of the current of the waters. It is the soil
deposited on the estate fronting the river bank; while accretion is the process whereby the soil is deposited along the banks of the river (Rabuya, Property, 2021, p. 334). Requisites: 1. Deposit of soil or sediment is gradual and imperceptible; 2. As a result of the action of the currents of the waters of the river; and 3. Land where the accretion takes place is adjacent to the banks of the rivers (Rabuya, Property, 2021, p. 335). Deemed to Exist: When the deposit of the sediment has reached a level higher than the highest level of the water during the year Effects: 1. Land automatically owned by the riparian owner. 2. BUT does not automatically become registered property (Rabuya, Property, 2021, p. 334). Rationale: 1. Compensate for the danger of loss that he suffers because of the location of his land; and 2. Compensate for the diminutions which his land suffers by reason of the destructive force of waters (Rabuya, Property, 2021, p. 335). Accretion operates ipso jure. However, the additional area is not covered by a Torrens title and the riparian owner must register the additional area (Meneses vs. CA, G.R. No. 82220, July 14, 1995). Since the accretion was formed by the dumping of boulders, soil, sawdust and other filing materials, it cannot be claimed that the accumulation of such was gradual and imperceptible. The deposit was not also due to the effect of water current. The article excludes all deposits caused by human intervention. Alluvium must be the exclusive work of nature. The accretion in this case is man-made, since it was formed as a result of
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sawdust dumped into the dried-up creek along the banks of rivers, hence, part of the public domain (Vda. De Nazareno vs. CA, G.R. No. 98048, June 26, 1996).
Effect: The ownership of the detached property is retained by the owner subject to removal within 2 years from the detachment (Art. 459, NCC).
Registration under the Torrens System does not protect the riparian owner against diminution of the area of his land through gradual changes in the course of adjoining stream (Payatas vs. Tuazon G.R. No. L-30067, March 23, 1929).
Alluvium vs. Avulsion
b. Avulsion The accretion which takes place when the current of a river, creek or torrent segregates a known portion of the land form an estate on its banks and transfer it to another estate. Or, the accretion taking place in the estate on the bank of a river caused not by slow and constant action of the waters but by the violent and sudden action of a torrent (Rabuya, Property, 2021, p. 346). Requisites: 1. Segregation and transfer of land is sudden and abrupt; 2. Caused by the current of the water 3. Portion of land transported must be known and identifiable; and 4. Can also apply to sudden transfer by other forces of nature such as land transferred from a mountain slope because of an earthquake. The owner must remove the transported portion within two years to retain ownership (Art. 459, NCC). In avulsion, it is essential that the detached portion be known or identifiable. Therefore, mere placing on top will not make the article inapplicable as long as the identification is possible. But if because of some force, (e.g., continuous rain) the two have so mixed with each other that identification cannot take place, the article should not apply (II Tolentino, 135). In this case, the principles of commixtion or confusion should apply.
ALLUVIUM The deposit of the soil here is gradual and imprescriptible Soil cannot be identified Belongs to owner of the property to which it is attached. Merely an attachment
AVULSION Sudden or abrupt; may be seen. Soil is identifiable or verifiable Belongs to the owner from whose property it was detached within the two-year prescriptive period Detachment followed by attachment.
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 the trees form part of the soil which was removed by action of waters, the rule on avulsion will apply. Thus, the action will prescribe in 2 years. c. Change of Rivers’ Course If there is a natural change in the course of the waters of the river, the abandoned riverbeds shall ipso facto belong to the owners whose lands are occupied by the new course in proportion to the area lost (Art. 469, NCC). d. Island
When the current of a river divides itself into branches, leaving a piece of land. The island formed remains to be the property of the owner of the land where such island has been formed and the portion of the land separated from his estate by the current (Art. 463, NCC).
An island is formed on a sea, lake or navigable or floatable river through whatever cause. The
island formed is owned by the State (Art. 464, NCC).
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Islands formed through successive accumulation of alluvial deposits in nonnavigable and non-floatable rivers (Art. 465, NCC). Rules of Ownership: 1. It shall belong to the owner of the margins or banks nearest to the island; 2. If the island is in the middle of the river, the same shall be owned by the owners of both margins, in which case it shall be divided longitudinally in halves; or 3. If the island be more distant from one margin than from the other, the owner of the nearer margin shall be the sole owner thereof (Art. 465, NCC). Requisites: 1. Change in the natural course of the waters of the river; and 2. Such change causes the abandonment of the river beds (Rabuya, Property, 2021, 350). Natural Bed: ground covered by its waters during ordinary floods. Such change is sudden or abrupt (Ibid, p. 61). Results: 1. Owners whose lands are occupied by the new course automatically become owners of the old bed, in proportion to the area they lost; (Art. 461, NCC) 2. Owners of the lands adjoining the old bed are given the right to acquire the same by paying the value of the land not exceeding the value of the land invaded by the new bed (the old property of the owner); (Ibid) 3. The new bed opened by the river on a private estate shall become of public dominion (Art. 462, NCC). Islands’ Formation They belong to the State if: 1. Formed on the SEAS within jurisdiction of the Philippines;
the
2. Formed on LAKES; 3. Formed on NAVIGABLE or FLOATABLE RIVERS capable of affording a channel or passage for ships and vessels; 4. Must be sufficient not only to float bancas and light boats, but also bigger watercraft; or 5. Deep enough to allow unobstructed movements of ships and vessels (Art. 464, NCC). They belong to the owners of the nearest margins or banks if: 1. Formed through successive accumulation of alluvial deposits; or 2. On NON-NAVIGABLE and NONFLOATABLE RIVERS; or 3. If island is in the middle: divided longitudinally in half (Art. 464, NCC). 4. Forms of Accession Respect to Movables
Continua
with
a. Adjunction Takes place when two or more movable things belonging to different owners are so united that they cannot be separated without causing injury to one or both of them, thereby giving rise to a new thing (Rabuya, Property, 2021, p. 360). Requisites: 1. Two things must belong to different owners; 2. Form a single object; 3. Inseparable or their separation would impair their nature (Ibid). Kinds: 1. Inclusion or engraftment 2. Soldadura or soldering a. Ferrumination – if both accessory and principal are of the same metal b. Plumbatura – if they are of different metals 3. Escitura or writing
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4. Pintura or painting 5. Tejido or weaving. (Ibid)
b. Commixtion Combination or union of materials where the respective identities of the component elements are lost.
Test to Determine Principal 1. The “rule of importance and purpose” – to which the other. (accessory) has been united as an ornament or for its perfection. 2. Of greater value, if they are of unequal values 3. Of greater volume, if they are of an equal value 4. That of greater merits taking into consideration all the pertinent legal provisions applicable as well as the comparative merits, utility and volume of their respective things (Ibid, p. 258-259). Rules in Adjudication by either owner General principal.
rule:
Accessory
follows
the
Exception: If the accessory is much more precious than the principal, the owner of the accessory may demand the separation even if the principal suffer some injury (Art. 469, NCC). Adjudication in bad faith by the owner of the principal; Option of the owner of the accessory: 1. To recover the value plus damages; or 2. To demand separation plus damages. Adjudication in bad faith by the owner of the accessory: 1. He losses the accessory; or 2. He is liable for damages When separation of things allowed: 1. Separation is without injury (Art. 469 [1], NCC); or 2. Accessory is more precious than the principal (Art. 469[2], NCC); or 3. Owner of the principal acted in bad faith (Art. 470, NCC).
Kinds: Commixtion – mixture of solid Confusion – mixture of liquids Rules: 1. Mixture by will of the owners. In the absence of stipulations, each owner acquires a right or interest in the mixture in proportion to the value of his material as in co-ownership. 2. Mixture caused by an owner is proportional to the value of the part which belonged to him. The share of each owner is proportional to the value of the part which belonged to him. 3. Mixture is caused by an owner in bad faith; 4. He loses his material in favor of the other’s material; and 5. He is liable for damages Mixture made with the knowledge and without the objection of the other owner. Their respective rights shall be determined as though both acted in good faith.
c. Specification Giving of a new form to another’s material through application of labor (labor is the principal) (Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 183). Rules: 1. Owner of the principal (worker) in good faith; 2. A worker/maker acquires the new thing; and 3. Must indemnify the owner of the material.
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XPN: If the material is more precious/valuable than the new thing, the owner of the material may choose: 1. To appropriate the new thing to himself, but he pays for the work; or 2. To demand indemnity for the material. 3. Owner of the principal (worker) in bad faith: the owner of the material has the choice; 4. To acquire the new thing without indemnity; or 5. To demand indemnity for the material plus damages. 6. Owner of the material in bad faith 7. He loses the material; and 8. He is liable for damages (Ibid). ADJUNCTION Involves at least two things.
MIXTURE Involves at least two things.
Accessory follows the principal. Things joined retain their nature.
Coownership results. Things mixed or confused may either retain or lose their respective natures.
SPECIFICATION May involve only one thing (or more) but form is changed. Accessory follows the principal. The new object retains or preserves the nature of the original object.
C. ACTIONS TO RECOVER OWNERSHIP AND POSSESSION OF PROPERTY Real Property 1. ACCION REINVINDICATORIA – an action for recovery of possession of the real property as element of ownership (Ocampo vs. Heirs of Dionisio, G.R. No. 191101, October 4, 2014). Jurisdiction - RTC Prescriptive period: 10 years. (ordinary prescription) – requires good faith and just title; or 30 years. (extraordinary prescription)
– does not require good faith and just title (See Arts. 1134 and 1137, NCC). To successfully maintain an action to recover the ownership of a real property, the person who claims a better right to it must prove two. (2) things: a. Identity of the land claimed; and b. His title thereto (Art. 434, NCC). Personal Property Replevin - recovery of personal property (Rule 60, Rules of Court). Requisites for Recovery of Property: 1. Proof of Right 2. Identity Reliance on strength of own evidence, not weakness of defendant’s claim (Ibid). 2. ACCION PUBLICIANA – an ordinary proceeding to determine the better right of possession of realty independently of title (Urieta Vda. De Aguilar vs. Alfaro, G.R. No. 164402, July 5, 2010). Jurisdiction - RTC when dispossession has lasted for more than one year. It is an ordinary civil proceeding to determine the better right of possession of realty independently of title. In other words, if at the time of the filing of the complaint, more than one year has lapsed since defendant unlawfully withheld possession from plaintiff, the action will not be for illegal detainer, but an accion publiciana (Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 627). Prescription - 10 years (Art. 555[4], NCC). 3. ACCION INTERDICTAL – Summary action to recover physical possession, and not juridical possession nor ownership (Rabuya, Civil Law Reviewer Vol. I, 2017, p. 354).
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Accion interdictal comprises two distinct causes of action, namely, forcible entry (detentacion), and unlawful detainer (Rule 70, Rules of Court). a. Forcible Entry – Action for recovery of material/physical possession was deprived thereof by force, intimidation, strategy, threat or stealth (Sec. 1, Rule 70, Rules of Court). b. Unlawful Detainer – Possession by a landlord, vendor, vendee or other person of any land or building is being unlawfully withheld after the expiration or termination of the right to hold possession, by virtue of any contract (Ibid). Jurisdiction - MTC Prescription - Both actions must be brought within one year from the date of actual entry on the land, in case of forcible entry, and from the date of last demand, in case of unlawful detainer. The issue in said cases is the right to physical possession (Paras, Civil Code of the Philippines Annotated, Vol. 2, Property, 2008, p. 96). 4. QUIETING OF TITLE An action to remove a cloud from the title of real estate. Persons having legal as well as equitable title to or interest in a real property may bring such action. "Title" does not necessarily denote a certificate of title issued in favor of the person filing the suit (Maestrado vs. CA, G.R. No. 133345, March 9, 2000). A suit against a particular person or persons in respect to the res and the judgment will apply only to the property in dispute. Nature of action to quiet title The action to quiet title is characterized as proceeding quasi in rem. Technically, it is neither in rem nor in personam. In an action quasi in rem, an individual is named as defendant. However, unlike suits in rem, a quasi in rem judgment is conclusive only
between the parties (Spouses Portic vs. Cristobal, G.R. No. 156171, April 22, 2005). An action for quieting of title is imprescriptible until the claimant is ousted of his possession. Suits to quiet title are characterized as proceedings quasi in rem. In an action quasi in rem, an individual is named as defendant. However, unlike suits in rem, a quasi in rem judgment is conclusive only between the parties (San Pedro vs. Ong, G.R. No. 177598, October 17, 2008). Requisites: 1. Plaintiff must have a legal or equitable title to, or interest in real property which is the subject matter of the action; 2. There must be a cloud on such title to the real property or interest therein; and 3. The deed, claim, encumbrance or proceeding claimed to be casting cloud on the title must be shown to be in fact invalid or inoperative despite prima facie appearance of validity or legal efficacy (Rabuya, Property, Property, 2021, p. 370). The action for quieting of title may be based on the fact that a deed is invalid, ineffective, voidable, or unenforceable. The terms of the writing may or may not be material to an action for quieting of title, depending on the ground alleged by the plaintiff (Rabuya, Property, 2021, p. 371). Legal or Equitable Title. Legal title denotes registered ownership, while equitable title means beneficial ownership, meaning a title derived through a valid contract or relation, and based on recognized equitable principles; the right in the party, to whom it belongs, to have the legal title transferred to him. In the absence of such legal or equitable title, or interest, there is no cloud to be prevented or removed (Rabuya, Property, 2021, p. 371-372).
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Cloud on title. A semblance of title, either legal or equitable, or a claim or a right in real property, appearing in some legal form but which is, in fact, invalid or unfounded, or which would be inequitable to enforce (Rabuya, Property, 2021 p. 373). Requisites of a cloud on title 1. There is a Price, Record, Instrument, Claim, or Encumbrance. (P.R.I.C.E.) which is apparently effective or valid; (Art. 476, NCC) 2. Such is in fact invalid, ineffective, voidable or unenforceable, or has been extinguished or terminated, or has been barred by extinctive prescription; (Art. 478, NCC) 3. Such may be prejudicial to said title (Art. 476, NCC).
to quiet title, but one to recover real property (Galler vs. Hussain, 20 G.R. No. L-20954, May 24, 1967). Prescription / non-prescription of action 1.
2. If the plaintiff is not in possession of property action may prescribe in: a. Immovables i. 10 years. (ordinary good faith and with just title) (Art. 1134, NCC). ii. 30 years. (extraordinary uninterrupted adverse possession) (Art. 1137, NCC).
Distinctions between quieting of title and removing/preventing cloud ACTION TO QUIET TITLE To put an end to troublesome, vexatious litigation with respect to the property concerned. Plaintiff asserts own claim and declares that the claim of the defendant is unfounded and calls on the defendant to justify his claim on the property that the same may be determined by the court. Remedial action involving a present adverse claim
ACTION TO REMOVE CLOUD To procure the cancellation, release of an instrument, encumbrance, or claim in the plaintiffs title or enjoyment of the property. Plaintiff declares his own claim and title, and at the same time indicates the source and nature of the defendant’s claim, pointing out its defects and prays for the declaration of its invalidity. Preventive action to prevent a future cloud on the title
In an action to quiet title, the suit does not prescribe if the plaintiff is in possession of the property. However, if the property is in the possession of the defendant, then the action has prescribed. The action would not be one
If the plaintiff is in possession of property - action does not prescribe (Sapto vs. Fabiana, G.R. No. L-11285, May 16, 1958).
b. Movables: i. 4 years – in good faith (Art. 1132, 1st par., NCC). ii. 8 years – in bad faith (Art. 1132, 2nd par., NCC) When action to quiet title does not apply: To questions involving interpretation of contract or document; (Paras, Civil Code of the Philippines Annotated, Vol. 2, Property, 2008, p. 310) 2. To mere written or oral assertions of claim except: a. If made in legal proceeding; b. If it is being asserted that the instrument or reentry in plaintiff’s favor is not what it purports to be; c. To boundary disputes; d. To deeds by strangers to the title unless purporting to convey the property of the plaintiff; e. To instruments invalid on their face; f. Where the validity of the instrument involved pure questions of law; and g. If the action has prescribed and the plaintiff is not in possession of the property (Ibid). 1.
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D. CO-OWNERSHIP Co-ownership defined The form of ownership when the ownership of an undivided thing or right belongs to different persons (Art. 484, NCC). Co-ownership is the right of common dominion which two or more persons have in a spiritual part of a thing, not materially or physically divided (3 Sanchez Roman 162). Co-ownership is the manifestation of the private right of ownership, which instead of being exercised by the owner in an exclusive manner over the thing subject to it, it is exercised by two or more owners and the undivided thing or right to which it refers is one and the same (3 Manresa 401, Rabuya, Property, 2021, p. 384). Requisites of co-ownership 1. Plurality of subjects - Ownership of an undivided thing or right belongs to different persons; Co-ownership is a manifestation of the private right of dominion, where in lieu of its being exercised by the owner in an inclusive manner over things or rights, there are two or more owners." 2. Unity of object - There is a single object which is not materially divided, and which is the element which binds the subjects; The juridical concept of coownership is unity of the object or property and plurality of subjects; 3.
Recognition of ideal share - There must be recognition of ideal shares, which determines the rights and obligations of the co-owners. Property owned in common is actually partitioned, all that the co-owner has is an ideal or abstract quota or proportionate share in the entire property (Rabuya, Property, 2021, p. 385-386).
Consequences. A co-owner of an undivided parcel of land is an “owner of the whole, and over the whole he exercises the right of dominion, but he is at the same time the owner of a portion which is truly abstract (Torres, Jr. vs. Lapinid, G.R. No. 187987, November 26, 2014). The underlying rationale is that until a division is actually made, the respective share of each cannot be determined, and every co-owner exercises, together with his co-participants, joint ownership of the pro indiviso property, in addition to his use and enjoyment of it (Anzures v. Ventanilla, GR No. 222297, July 9, 2018). Right to use entire thing: A co-owner is entitled to possess and enjoy the entire property. Hence, he cannot be ejected from the property. It has the following imitations: (i) it is used for the purpose intended; (ii) it must be used in such a way as not to injure the interest of the other coowners; and (iii) such use does not prevent the other coowners from making use thereof according to their own right.” Hence, if there is an agreement to lease the house, the co-owners can demand rent from the co- owner who dwells in the house,”’ but the latter cannot be ejected from the property (Rabuya, Pre-bar Reviewer in Civil Law, p. 187). Cannot claim definite portion: By the nature of a co-ownership, a co-owner cannot point to specific portion of the property owned in common as his own because his share therein remains intangible (Ibid). Exception: Where the transferees of an undivided portion of the land allowed a coowner of the property to occupy a definite portion thereof, such undisturbed possession had the effect of a partial partition of the coowned property which entitles the possessor to the definite portion which he occupies (Ibid).
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Effect of sale of concrete portion: Whether the disposition involves an abstract or concrete portion of the co-owned property, the sale remains validly executed. What will be affected on the sale is only his proportionate share, subject to the results of the partition. The co-owners who did not give their consent to the sale stand to be unaffected by the alienation (Torres, Jr. v. Lapinid, G.R. No. 187987, November 26, 2014). Dual Nature Ownership: 1.
of
Ownership
in
Co-
Ownership over the ideal share
Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved (Art. 493, NCC). 2.
Characteristics of co-ownership
2.
3. 4. 5. 6.
Sources of Co-ownership 1. 2. 3. 4.
Law; Contracts; Succession; Testamentary disposition or donation inter vivos; 5. Fortuitous event or by chance. (commixtion, confusion, hidden treasure); and 6. Occupation or occupancy. (two persons claim ownership. Co-ownership distinguished from other concepts CO-OWNERSHIP Each co-owner owns only his ideal share in the whole property
Joint Ownership over the whole
Each co-owner may use the thing owned in common, provided he does so in accordance with the purpose for which it is intended and in such a way as not to injure the interest of the co-ownership or prevent the other coowners from using it according to their rights (Art. 486, NCC).
1.
provisions, and in default of such provisions, by the provisions of Title III on Co-ownership.
There are two or more co-owners (Art. 484, NCC); There is a single object which is not materially or physically divided and over which his ideal share of the whole, each of the co-owner exercises ownership, together with the other co-owners; There is no mutual representation by the co-owners; It exists for the common enjoyment of the co-owners; It has no distinct legal personality; and It is governed first of all by the contract of the parties; otherwise, by special legal
In case of death, the share of co-owners remains, even if one of them happens to be a minor Prescription runs against all co-owners, even if one of them happens to be a minor. CO-OWNERSHIP Created by law, contract, succession, fortuitous event or occupancy For common enjoyment of the thing or right owned in common. No juridical personality Share is proportionate to the respective interests of the coowners.
JOINT OWNERSHIP Each joint-tenant cannot dispose of his own share without the consent of all the others. In case of death, the share of joint-tenant goes to other jointtenant. Prescription does not run against all jointtenants if one of them is a minor or is under legal disability. ORDINARY PARTNERSHIP Created by contract. (express or implied) To obtain profits.
Has a juridical personality. Shares or profits may be subject to stipulation.
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Co-owner may dispose of his share without the consent of the others – except when personal rights are involved. Agreement to keep the thing undivided for a period of more than 10 years is void. Generally, there is no mutual representation. XPN: When a co-owner files a case for ejectment, the rest are represented. Death or incapacity of a co-owner does not dissolve the coownership. The deceased will be represented by his estate or heirs in the co-ownership.
A partner cannot dispose of his share and substitute the buyer/assignee in his place without the consent of the others. Law fixes no limit
CO-OWNERSHIP There is in each coowner a right of dominion over the whole property and over his undivided share. The right of ownership rests solely on each and every co-owner over a single object.
EAsem*nT Precisely a limitation on the right of dominion.
CO-OWNERSHIP May arise by an ordinary contract. Sex of the co-owners is immaterial Co-owners may be two or more. Profits are proportional to respective interests.
Generally, there is a mutual representation, unless otherwise stipulated.
Death of one does not dissolve the coownership. Generally, all coowners administer. Co-ownership is discouraged by law.
Death of either husband or wife dissolves the conjugal partnership. Generally, the husband is the administrator. Encourage by law to provide for better family solidarity.
1. Distinctions Between Right to Property Owned in Common and Full Ownership Over the Ideal Share 1. Right to property owned in common
Death dissolved partnership
the
NOTE: Each co-owner is granted the right to use the property owned in common for the purpose for which it is intended. Two restrictions in the enjoyment of this right: a. The co- ownership shall not be injured; and b. The exercise of such right shall not prevent the other co- owners from using the property according to their own rights. 2. Full ownership over his/her ideal share
The right of dominion is favor of one or more persons and over two or more different things. CONJUGAL PARTNERSHIP Arises only because of the marriage contract. One must be a male, the other a female. Conjugal owners are always two. Profits are generally 50-50 unless a contrary stipulation is in a marriage settlement.
NOTE: A co-owner has full ownership of his share (undivided interest) and the fruits and benefits arising therefrom. Being the full owner thereof, he may alienate, assign or mortgage it. He can also substitute another person in the enjoyment of his share, except only when personal rights are involved.
2. Contribution to Expenses Each co-owner shall have a right to compel the other co-owners to contribute to the expenses of preservation of the thing or right owned in common and to the taxes. Any one of the latter may exempt himself from this obligation by renouncing so much of his undivided interest as may be equivalent to his share of the expenses
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and taxes. No such waiver shall be made if it is prejudicial to the co-ownership (Art. 488, NCC). Repairs for preservation may be made at the will of one of the co-owners, but he must, if practicable, first notify his co-owners of the necessity for such repairs. Expenses to improve or embellish the thing shall be decided upon by a majority (Art. 489, NCC). Right to demand contribution from coowners. The law grants each co-owner the right to demand contribution from the other co-owners for any and all expenses he incurred for the purpose of preserving the thing or right owned in common, even if the repairs for preservation were made without the consent of the other co- owners. A co-owner who desires to make the necessary repairs is not required to secure the consent of all the co-owners. What the law requires is that he must, if practicable, notify the other co-owners of the necessity of such repair prior to undertaking the same. Consequently, any opposition on the part of the other co-owners for the making of such necessary repairs does not deprive the coowner who made the advances from demanding contributions from the other coowners. Repairs for preservation may be made at the will of only one of the co-owners (Rabuya, Property, 2021, p. 414-415). When notice of repairs is required. The giving of notice is required only if the same is "practicable" given the circ*mstances by which the repair is to be undertaken. Hence, if the repairs are urgent and any delay will be detrimental to the interest of the coownership, prior notification is no longer necessary and a co- owner may already undertake such repairs without need of giving prior notice to the other co-owners (Rabuya, Property, 2021, p. 415). Effect of Failure to Comply with the Notice Requirement. If the giving of notice is practicable and the co-owner who undertook the repair for preservation failed to
previously notify the other co-owners of the necessity of such repair, will the absence of such notice deprive him of the right to demand contribution from the other co-owners for the expenses he incurred? According to Senator Tolentino, such failure does not deprive the co-owner who incurred the expenses of the right to recover the proportionate shares of the other co-owners in the expenses. The only effect of such failure is to place upon the coowner who incurred the expenses the burden of proving the necessity of the repairs and the reasonableness of the expenses (Rabuya, Property, 2021, p. 415). Renunciation by a Co-owner. While the other co-owners can be compelled to contribute proportionately to the expenses incurred for the purpose of preserving the thing or right owned in common, they are given by law option of "renouncing so much of their undivided interest as may be an equivalent to their share of the expenses and taxes, in lieu of paying their proportionate contribution to such expenses.
Example: A, B, and C are co-owners of a car
valued at P300,000.00. Assuming that "A" had the car repaired for the purpose of preserving it and incurred the sum of P30,000.00 in the process. Assuming that the interest of the three in the co-ownership is equal (or P100,000.00 each), B and C are required to contribute P10,000.00 each to the expenses incurred. If "B," for example, does not want to shell out P10,000.00 and opts, instead, to renounce so much of his undivided interest as may be equivalent to his share of the expenses, he is required to renounce 1/10 of his share in favor of the co-owner who incurred the expenses (Rabuya, Property, 2021, p. 415-416). Requirement of Consent in Renunciation. Renunciation may not be compelled by the co-owner who made the advances if another co-owner refuses to pay his share in the expenses. The remedy of the co-owner who made the advances is an
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ordinary action for collection of sum of money (Rabuya, Property, 2021, p. 417). Limitation on the Exercise of the Option of Renunciation. Article 488 prohibits the exercise of the option of renunciation if it is prejudicial to the interest of the co-ownership.
Example: If A, B, and C are co-owners of a
property which is in need of immediate repairs for preservation but the amount thereof is more than A and B, together, can sustain, the law will not allow C to opt for renunciation, in lieu of his contribution to the expenses. Such waiver is not allowed because it will be prejudicial to the interest of the co-ownership (Rabuya, Property, 2021, p. 417). Includes Payment of Taxes and Expenses in Redemption. The expenses for the preservation of the thing include payment of taxes due on the property owned in common, i.e., real estate tax on the land owned in common. The concept of "necessary expenses" under Article 546 refers to those incurred for the purpose of preserving the thing or those expenses which seek to prevent the waste, deterioration or loss of the thing. A real estate tax is not a necessary expense under the provisions of Article 546 because if the same is not paid, the property will not be destroyed nor impaired, although its possession may be lost by the possessor. Under Article 488, however, the expenses for the preservation of the thing also include taxes. A co-owner who redeems the property in its entirety does not make him the owner of all of it. The redemption does not provide for a mode of terminating a co-ownership. But the one who redeemed had the right to be reimbursed for the redemption price and until reimbursed, holds a lien upon the subject property for the amount due. Article 488 of the Civil Code provides that necessary expenses may be incurred by one co- owner, subject to his right to collect reimbursem*nt from the remaining co-owners. Until
reimbursed, he holds a lien upon the subject property for the amount he advanced (Rabuya, Property, 2021, p. 417-418). Expenses for Improvement or Embellishment. While necessary expenses for the preservation of the co-owned property may be made at the will of only one of the coowners, the expenses to improve or embellish the thing shall be decided upon by a majority (Rabuya, Property, 2021, p.418). 3. Redemption Legal Redemption in Co-ownership. A coowner of a thing may exercise the right of legal redemption in case the shares of all the other co-owners or of any of them, are sold to a third person. Should two or more co-owners desire to exercise the right of redemption, they may only do so in proportion to the share they may respectively have in the thing owned in common. Legal redemption is in the nature of a privilege created by law partly for reasons of public policy and partly for the benefit and convenience of the redemptioner to afford him a way out of what might be a disagreeable or inconvenient association into which he has been thrust. Its purpose is to provide a method for terminating the co-ownership and consolidating the dominion in one sole owner (Rabuya, Property, 2021, p. 448-449). Requisites for the Exercise of Legal Redemption: (1) There must be a co-ownership; (2) one of the co-owners sold his right to a stranger; (3) the sale was made before the partition of the property; (4) the right of redemption must be exercised by one or more co-owners within a period of thirty days to be counted from the time that he or they were notified in writing by the co-owner vendor; and
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(5) the vendee must be reimbursed for the price of the sale (Art. 1620 and 1623, NCC; Rabuya, Property, 2021, p. 449). Presupposes Existence of Co-ownership. Thus, the exercise of a right of legal redemption presupposes the existence of coownership at the time the conveyance is made by a co-owner and when it is demanded by the other co-owner or co-owners (Rabuya, 2021, p. 449-450). Share Must Be Sold to a Third Party. A third person is anyone who is not a co-owner. When the portion is sold to a co-owner, the right does not arise because a new participant is not added to the co- ownership. However, the right to redeem is granted not only to the original co-owners, but also to all those who subsequently acquire their respective shares while the community subsists. But it is a oneway street. It is always in favor of the redemptioner since he can compel the vendee to sell to him but he cannot be compelled by the vendee to buy the alienated property (Rabuya, 2021, p.450). Who May Exercise Right of Redemption. The right of legal redemption lies in all cotenants of the things held in common. The law concedes to all the use of the right of redemption whenever they exercised it within the period indicated for the purpose. Should two or more co-owners desire to exercise the right of redemption, they may only do so in proportion to the share they may respectively have in the thing owned in common (Rabuya, 2021, p.450-451). Co-owner Has Right of Redemption, Not Pre-emption. The legal provisions on coownership do not grant to any of the owners of a property held in common a pre-emptive right to purchase the pro indiviso shares of his co-owners." By the very nature of the right of "legal redemption," a co-owner's right to redeem is invoked only after the shares of the other co-owners are sold to a third party or stranger to the co-ownership (not before) (Rabuya, 2021, p.451).
Period of Redemption. The right of legal redemption shall not be exercised except within 30 days from the notice in writing by the vendor. If no claim or offer is made within said period, no action will be allowed to enforce the right of redemption. It is necessary however to determine first if and when the written notice of sale was duly served by the vendors to their co-owner (Rabuya, 2021, p.451). Requirement of Written Notice. The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in writing by the prospective vendor, or by the vendor, as the case may be (Rabuya, 2021, p.451). A written notice of sale is mandatory and notwithstanding actual knowledge of a coowner, the latter is still entitled to a written notice from the selling co-owner (De Conejero vs. CA, G.R. No. L-21812, April 29, 1966). The obligation to serve written notice devolves upon the vendor co-heirs because the latter are in the best position to know the other coowners who, under the law, must be notified of the sale (Butte vs. Manuel Uy & Sons, Inc., G.R. No. L-15499 February 28, 1962). (Rabuya, Property, 2021, p.461). Form of Written Notice. Article 1623 does not prescribe any particular form of notice, nor any distinctive method for notifying the redemptioner. So long, therefore, as the latter is informed in writing of the sale and the particulars thereof, the 30 days for redemption start running, and the redemptioner has no real cause to complain (Rabuya, Property, 2021, p.461). 4. Partition The division between 2 or more persons of real or personal property which they own in common so that each may enjoy and possess his sole estate to the exclusion of and without interference from the others (Art. 1079, NCC).
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Partition is the separation, division and assignment of a thing held in common among those to whom it may belong. The thing itself may be divided, or its value. Every act which is intended to put an end to indivision among co-heirs and legatees or devisees is deemed to be a partition, although it should purport to be a sale, an exchange, a compromise or any other transaction (Rabuya, Property, 2021, p.474). Co-owner cannot immediately specify portion as his own. A co-owner cannot point to specific portion of the property owned in common as his own because his share therein remains intangible (Vda de Ape vs. CA, supra, 207). Effects of partition 1. Co-ownership is terminated and each coowner becomes the absolute and exclusive owner of the share allotted to him. 2. It shall not prejudice the rights of the third persons who shall retain the right to mortgage, servitude or any other real rights belonging to them before the division was made. 3. Personal rights pertaining to third persons against the ownership shall also remain in force. 4. Mutual accounting shall be rendered by the co-owners to each other with regard to benefits and expenses and each co-owner shall pay for the damages by reason of his negligence or fraud. 5. Every co-owner shall be liable for defects of title and quality of the portion assigned to each of the other co-owner (Rabuya, Property, 2021, p. 496-497). No more co-ownership when portion to property is already determined. There is no co-ownership when the different portions owned by different people are already concretely determined and separately identifiable, even if not yet technically described (Sps. Si vs. CA, G.R. No. 122047 October 12, 2000).
Prior to partition, co-owners hold ideal shares. Prior to the partition, all that the coowner has is an ideal or abstract quota or proportionate share in the entire land or thing (City of Mandaluyong vs. Aguilar, supra, p.499). Where the transferees of an undivided portion of the land allowed a co-owner of the property to occupy a definite portion thereof, the possessor is in a better condition or right than said transferees. (Potior est condition possidentis) Such undisturbed possession, according to the Court, had the effect of a partial partition of the co-owned property which entitles the possessor to the definite portion which he occupies (Vda de Cabrera vs. CA, G.R. No. 108547, February 3, 1997). Right to Partition General Rule: No co-owner shall be obliged to remain in the co-ownership and, thus, “each co-owner may demand at any time the partition of the thing owned in common, insofar as his share is concerned (Art. 494, NCC). When partition is not available a) An agreement to keep the thing undivided for a certain period NOT exceeding 10 years is valid. However, the term may be extended by a new agreement. b) Donor or testator may prohibit partition, period NOT to exceed 20 years. c) No partition if prohibited by law. Examples are: i. Spouses, who are governed by a regime of absolute community, cannot agree to partition the community property without a judicial order (Art. 134, FC). ii. The heirs cannot partition the family home upon the death of the person or persons who constituted the same unless the court finds compelling reasons therefore (Art. 159, FC). d) When partition would render the thing unserviceable for the use for which it is intended.
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Right does not prescribe. As long as the co-ownership is recognized, an action to compel partition will not prescribe and may be filed at any time against the actual possessor by any of the other co-owners.
ownership and the prescriptive period will begin to run and may eventually operate to divest the real owners of their right to the property after the lapse of the applicable statutory period (Rabuya, 2021, p.480).
Except when, a co-owner or co-heir, however, holds the property in exclusive adverse possession as owner, asserting sole and exclusive dominion for the required period, he can acquire sole title to it as against the coheirs or co-owners (Pangan vs. CA, G.R. No. L39299 October 18, 1988).
When thing is essentially indivisible. Whenever the thing is essentially indivisible and the co-owners cannot agree that it be allotted to one of them who shall indemnify the others, it shall be sold and its proceeds distributed. This is resorted to when: 1. The right to partition the property is invoked by any of the co-owners but because of the nature of the property it cannot be subdivided or its subdivision would prejudice the interests of the coowners; and 2. The co-owners are not in agreement as to who among them shall be allotted or assigned the entire property upon reimbursem*nt of the co-owners (Rabuya, Property, 2021, p. 493).
Acquisitive Prescription. While the action to demand partition of a co-owned property does not prescribe, a co-owner may acquire ownership thereof by prescription where there exists a clear repudiation of the co-ownership, and the co- owners are apprised of the claim of adverse and exclusive ownership. Ordinary acquisitive prescription requires possession of things in good faith and with just title for a period of ten (10) years. Without good faith and just title, acquisitive prescription can only be extraordinary in character which requires uninterrupted adverse possession for thirty years (Rabuya, 2021, p.476-477). Extinctive Prescription. While the action for the partition of the thing owned in common (action communi dividend or action familiae erciscundae) does not prescribe, the co-ownership does not last forever since it may be repudiated by a co-owner.” In such a case, the action for partition does not lie. Hence, if the defendants show that they had previously asserted title in themselves adversely to the plaintiff and for the requisite period of time, the plaintiff's right to require recognition of his status as a co-owner will have been lost by prescription and the court cannot issue an order granting partition. Hence, from the moment one of the coowners claims that he is the absolute and exclusive owner of the properties and denies the others any share therein, the question involved is no longer one of partition but of
E. POSSESSION Possession defined The holding of a thing or the enjoyment of a right, either by material occupation or by the fact of subjecting the thing or right to the action of our will (Art. 523, NCC). Requisites of Possession 1. There must be intent to possess (animus
possidendi); and
2. Possession one’s own name or in of another. It is not necessary that the owner or holder of the thing exercises personally the rights of possession. Rights of possession may be exercised through agents. Hence, possession may be exercised in one’s own name or in that of another (Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 197-198).
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Possession vs. Occupation (Bar 1997, 2000, 2007) Occupation can take place only with respect to property without an owner while possession can refer to all kinds of property, whether with owner or without an owner. Occupation itself, when proper, confers ownership but possession does not by itself give rise to ownership (Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines [1999 ed.], Vol. II, p. 489). Presumptions regarding possession 1. Good faith is always presumed (Art. 527,
NCC). 2. Continuity of character of possession, be it in good faith or bad faith (Art. 528, NCC). 3. Non-interruption of possession (Art. 533, NCC), i.e., hereditary succession, property unjustly lost but legally recovered (Art. 561, NCC). 4. Presumption of just title (Art. 541, NCC), i.e. possessor concept of an owner 5. Possession of real property includes the possession of movables therein (Art 542, NCC).
Object of Possession Only things and rights are susceptible of being appropriated may be the object of possession (Art. 530, NCC). Exceptions: 1. 2. 3. 4. 5.
Res communes Property of public dominion Discontinuous servitudes Non-apparent servitudes Things specifically prohibited by law ○ Res nullius may be acquired by occupation but not by acquisitive prescription because it presupposes prior ownership of another.
Kinds of Possession 1. In one’s own name or in that of another (Art. 524, NCC).
2. In the concept of an owner and in the concept of holder (Art. 525, NCC). 3. In good faith or in bad faith (Art. 526, NCC). 1. Possession in the Concept Holder One who possesses as a mere holder acknowledges in another a superior right which he believes to be ownership, whether his belief be right or wrong (Rabuya, Property, 2021, p. 538). In the case of possessors in the concept of holder who are as such by virtue of a juridical title or right, e.g., lessee, usufructuary, etc., they are considered as possessors in the concept of holder with respect to the thing itself, but considered as possessors in the concept of owner with respect to their right (Rabuya, Property, 2021, p. 538-539). 2. Possession in the Concept of the Owner A possessor in the concept of an owner may be the owner himself or one who claims to be so. The concept of owner, refers to the opinion or belief of the neighbors and the rest of the world and not that of the possessor. Consequently, even if the possessor is aware that that there is a flaw in his title resulting in its invalidation. (in which case he becomes a possessor in bad faith), so long as he claims ownership of the property and does not acknowledge in another a superior right, he is nonetheless considered a possessor in the concept of owner (Rabuya, Property, 2021, p. 538). Effects of possessor in concept of owner: (i)
it raises a disputable presumption of ownership; (ii) it creates a disputable presumption that the possessor has just title, which he cannot be obliged to show; and (iii) it may ripen into ownership thru acquisitive prescription upon
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compliance with the other requisites mentioned in Article 1118 of the NCC (Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 198).
It is presumed that possession continues to be enjoyed in the same character in which it was acquired, until the contrary is proved (Art. 529, NCC).
- Recognizes a title of ownership in another person. (e.g. usufruct, lessee, depositary bailee in commodatum)
Good faith is always presumed and continues to subsist until facts exist which show that the possessor is already aware that he wrongfully or improperly possesses the thing. Whatever may be the cause or the fact from which it can be deduced that the possessor has knowledge of the defects of his title or mode of acquisition, it must be considered sufficient to show bad faith (Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 198).
- May not ripen into ownership. 3. Relevance of Good Faith and Bad Faith Possession in good possession in bad faith
faith
and
He is deemed a possessor in good faith who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it. He is deemed a possessor in bad faith who possesses in any case contrary to the foregoing. Mistake upon a doubtful or difficult question of law may be the basis of good faith (Art. 526, NCC). A possessor by mere tolerance is not a possessor in good faith. One whose interest is merely that of a holder, such as a mere tenant, agent, or usufructuary, is not qualified to become a possessor in good faith (Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 198). Presumption of good faith Good faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the burden of proof (Art. 527, NCC). Possession acquired in good faith does not lose this character except in the case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully (Art. 528, NCC).
On who succeeds by hereditary title shall not suffer the consequences of the wrongful possession of the decedent, if it is not shown that he was aware of the flaws affecting it; but the effects of possession in good faith shall not benefit him except from the date of death of the decedent (Art. 534, NCC). Art. 534 is applicable only if the decedent is in bad faith. Effects of Good Faith and Bad Faith (Art. 544-552, NCC) Possessor in Good Possessor in Bad Faith Faith Fruits Already Received by Possessor Entitled to the fruits Reimburse the fruits before his possession received or which is legally interrupted. legitimate possessor would have received. Whether the possessor is in good faith or in bad faith, he is entitled to recover from the legitimate possessor the expenses he incurred in the production, gathering, and preservation of the fruits upon return of the same.
Necessary Expenses Right of Right of reimbursem*nt and reimbursem*nt only. retention of the thing.
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Pending Fruits Liable with the No right to the pending legitimate possessor fruits. for expenses of cultivation and shall share in the net harvest in proportion to the time of possession. Useful Expenses Reimbursed to None possessor. (owner’s option) Initial cost; Plus value; May be removed if no reimbursem*nt, and no damage is caused to the principal by the removal. Deterioration or Loss No liability unless due Always to his fault or negligence. Ornamental expenses Not entitled to a Not entitled to a refund. refund Right of removal, unless owner retains possession of ornaments, hence refund on the actual amount expended.
Right of removal, unless owner retains possession of ornaments, refund shall be LIMITED to the value at the time of possession of owner. Taxes and charges On capital – charged On capital – charged to to owner; owner; On fruits – charged to On fruits – charged to owner; owner; Charges – prorated. Charges – pro-rated.
NOTES: ● Gross and inexcusable ignorance of the law may not be the basis of good faith, but possible, excusable ignorance may be such basis (Kasilag vs Roque, 69 PHIL 217). ● Only personal knowledge of the flaw in one’s title or mode of acquisition can make him a possessor in bad faith. It is not transmissible even to an heir.
● Possession in good faith ceases from the moment defects in his title are made known to the possessor. This interruption of good faith may take place at the date of summons or that of the answer if the date of summons does not appear. However, there is a contrary view that the date of summons may be insufficient to convince the possessor that his title is defective. ● Possession in good faith (4 years) or bad faith (8 years) cannot benefit the possessor in cases where Art. 559 are applicable (Pajunar vs. CA, G.R. No. 77266, July 19, 1989). Q: Anthony bought a piece of untitled agricultural land from Bert, Bert, in turn, acquired the property by forging Carlo’s signature in a deed of sale over the property. Carlo had been in possession of the property for 8 years, declared it for tax purposes, and religiously paid all taxes due on the property. Anthony is not aware of the defect in Bert’s title, but has been in actual physical possession of the property from the time he bought it from Bert, who had never been in possession. Anthony has since then been in possession of the property for one year. a. If Carlo is able to legally recover his property, can he require Anthony to account for all the fruits he has harvested from the property while in possession? b. If there are standing crops on the property when Carlo recovers possession, can Carlo appropriate them? (Bar 2008) A: a. Since Anthony is a possessor in good faith, Anthony cannot be made to account for the fruits he gathered before he was served with summons. A possessor in good faith is entitled to the fruits received before the possession was legally interrupted by the service of summons (Art. 544, NCC). After Anthony was served with summons, he
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became a possessor in bad faith and a builder, planter, sower in bad faith. He can also be made to account for the fruits but he may deduct expenses for production gathering and preservation of the fruits (Art. 1443, NCC). b. The value of the standing crops must be prorated depending upon the period of possession and the period of growing and producing the fruits. Anthony is entitled to a part of the net harvest and a part of the expenses of cultivation in proportion to his period of possession. Carlo may appropriate the respective parts subject to prorating the respective periods of possession. However, Carlo may allow Anthony to gather these growing fruits as an indemnity for the expenses of cultivation. If Anthony refuses to accept this concession, he shall lose the right to indemnity under Art. 443 (Art. 545, par. 3, NCC). 4. Rules on Movables 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 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 therefore (Art. 559, NCC). Possession equivalent to title: a. the movable property must be acquired in good faith; and b. possessor is in the concept of owner General Rule of Irrevindicability. When a movable property is in the possession of one who has acquired it and holds it in good faith, the true owner cannot recover it as a general rule for the title is valid even against him.
Exceptions: When the owner: i. has lost the thing; or ii. has been unlawfully deprived thereof. In these cases, the possessor canot retain the thing as against the owner, who may recover it without paying any indemnity, except when the possessor acquired it in a public sale (Rabuya, Property, 604-605). In case of loss. When a person who finds a thing that has been lost or mislaid by the owner takes the thing into his hands, he acquires physical custody only and does not become vested with legal possession. In assuming such custody, the finder is charged with the obligation of restoring the thing to its owner. Pursuant to Article 719 of the New Civil Code, if a movable has been lost. (not abandoned), the finder does not immediately become its owner because there are rules which are required to be followed. If the finder knows the previous possessor, the movable must be returned to the latter. If the previous possessor is unknown, the finder is required to immediately deposit the movable with the mayor of the city or municipality where the finding has taken place. The mayor is then required to make a public announcement of such finding for two consecutive weeks in a manner he deems fit. If after six months, the owner does not appear, the thing found, or its value, shall be awarded to the finder. But if the owner appears on time, he shall be obliged to pay, as a reward to the finder, one-tenth of the sum or of the price of the thing found. If the finder does not comply with the foregoing procedural requirements and appropriate for himself the movable he found, he shall be guilty of the crime of theft, in which case, the owner shall have the right to recover the lost movable from him without need of
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paying any indemnity. The same rule shall apply even if the movable is already in possession of third persons who may have acquired it in good faith from such fnder, thief or robber (Rabuya, Property, 2021, p. 606-607).
One who recovers, according to law, possession unjustly lost, shall be deemed for all purposes which may redound to his benefit, to have enjoyed it without interruption (Art. 561, NCC).
In case of Unlawful Deprivation. Unlawfully withheld in Art. 559 is not limited to cases of unlawful taking but extends to cases where there has been abuse of confidence (Rabuya, Property, 2021, p. 607).
1. Wild animals – are those which are found in their natural freedom; e.g., wild board and horses roaming the forest;
In case there is transfer of ownership. Art. 559 does not apply when there is transfer of ownership. The remedy of the unpaid seller is an ordinary action for collection of sum of money against the buyer, with recovery of damages (Rabuya, Property, 2021, p. 611). Cases Where There Is No Recovery. The owner of a movable property who has lost it or has been unlawfully deprived of it may no longer recover the thing from the possessor: 1. If the possessor acquired the thing at a merchant's store, or in fairs, or in markets in accordance with the Code of Commerce and special laws; (Art. 1505, No. 3, NCC; Art. 1132, par. 3, NCC) 2. Where the possessor acquired the thing by sale under statutory power of sale or under the order of a court of competent jurisdiction; (Art. 1505, No. 2, NCC) 3. When the possessor is a holder in due course of a negotiable document of title to goods or where the owner is barred by the principle of negotiable instruments; (Art. 1518, NCC; Sec. 57, N.I.L., Act No. 2031) 4. Where the owner is barred by reason of his own acts or neglect from denying the seller's title; (Art. 1505, NCC) and 5. Where the owner can no longer recover the thing from the possessor by reason of prescription (Art. 1132, NCC). Possession of Animals Wild animals are possessed only while they are under one's control; domesticated or tamed animals are considered domestic or tame if they retain the habit of returning to the premises of the possessor (Art. 560, NCC).
Wild animals are considered possessed only while they are under one's control. Once they recover their natural freedom or once they are restored to their original state of being free, they ceased to be under one's possession. As a consequence, they immediately regain their status of being res nullius and may thus be acquired by occupation (Rabuya, Property, 2021, p. 617). 2. Domesticated or tamed – are those which were formerly wild but which have been subdued and retained the habit of. Returning to the premises of the possessor or owner. It will be regarded as such so long as they retain the habit of returning to the premises of the possessor. Once they lose that habit, they cease to be domesticated and revert back to their original status of being wild. s a consequence, such animals re-acquire its original status of being res nullius and may thus be acquired by occupation. However, so long as the animals retain the habit of returning to the premises of the possessor, the possession thereof is not immediately lost by the simple fact that the animals. are no longer under the control of the possessor. Pursuant to the provision of Article 716, the possessor or owner of domesticated animals has a period of 20 days counted from the occupation by another person within which to reclaim them. After the expiration of this period, the animals can no longer be recovered from its present
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possessor (Rabuya, Property, 2021, p. 617618). 3. Domestic or tame – those which are born or reared under the control and care of man Article 716 finds no application to domestic or tame animals. They are considered as personal property and are, therefore, subject to the rules governing any personal property. If they are lost, the owners, as a rule, can recover them from the present possessors without need of indemnifying the latter. They are not subject to occupation unless there has been abandonment but they can be acquired by another person through acquisitive prescription the period of prescription being four years if the possessor is in good faith or eight years if the possessor is in bad faith (Rabuya, Property, 2021, p. 618). F.
USUFRUCT Definition: Usufruct gives the right to enjoy the property of another with the obligation of preserving its form and substance, unless the title constituting it or the law otherwise provides (Art. 562, NCC). Usufruct, in essence, is nothing else but simply allowing one to enjoy another’s property. It is also defined as the right to enjoy the property of another temporarily, including both the jus utendi and the jus fruendi, with the owner retaining the jus disponendi or the power to alienate the same (Moralidad vs. Sps. Pernes, G.R. No. 152809, Aug. 3, 2006) General Rule: Usufructuary is bound to preserve the form and substance of the thing in usufruct. Exception: Abnormal usufruct whereby the law or the will of the parties may allow the modification of the substance of the thing.
1. Rights and Obligations of Usufructuary A. Rights of Usufructuary 1. Rights to civil, natural, and industrial fruits of property (Art. 566, NCC). Civil fruits are deemed to accrue daily and belong to the usufructuary in proportion to the time the usufruct may last (Art. 569, NCC). Both stock dividends and cash dividends are considered civil fruits. Fruits pending at the beginning of the usufruct belong to the usufructuary. No necessity of refunding the owner for expenses incurred. (for the owner gave the usufruct evidently without any thought of being reimbursed for the pending fruits or because the value of said fruits must have already been taken into consideration in fixing the terms and conditions of the usufruct, if for instance, the usufruct came about because of contract) (Art. 567[3], NCC). BUT without prejudice to the right of 3 persons. Thus, if the fruits had been planted by a possessor in good faith, the pending crop expenses and charges shall be prorated between said possessor and the usufructuary (Art. 567 [4], NCC). rd
Fruits pending at the termination of the usufruct belong to the owner (Art. 567[2], NCC). BUT the owner must reimburse the usufructuary for ordinary cultivation expenses and for seeds and similar expenses from the proceeds of the fruits. Hence, the excess of expenses over the proceeds need not be reimbursed. 2. Rights to hidden treasure as a stranger (Art. 566, NCC). If he is the actual finder, he gets half; if not, he gets nothing because he is not the owner.
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3. Right to transfer usufructuary (Art. 572, 574, NCC). Gratuitous or onerous (Art. 572, NCC); but is co-terminus with the term of usufruct; fruits proportionate at duration of usufruct; but can’t do acts of ownership such as alienation or conveyance except when property is: (Art. 574, NCC) a. Consumable b. Intended for sale c. Appraised when delivered; If not appraised and consumable, return same quality. (mutuum) 4. Right to exempt from execution and can be sold at public auction by the owner 5. Naked owner still has the rights but without prejudice to the usufructuary may still exercise rights of ownership (Art. 581, NCC). 6. Right to necessary expenses from cultivation at end of usufruct (par. 3, Art. 567, NCC). 7. Right to enjoy accessions and servitudes in its favor and all benefits inherent therein (Art. 571, NCC). 8. Right to make use of dead trunks of fruit bearing trees and shrubs or those uprooted or cut by accident but obliged to plant a new one (Art. 575, NCC). 10. Right to usufructuary of woodland (Art. 577, NCC). 11. Right to leave dead, uprooted trees at the disposal of owner with right to demand that owner should clear and remove them (Art. 576, NCC). 12. Right to oblige owner to give authority and furnish him proofs if usufruct is extended to recover real property (Art. 578, NCC). 13. Right to introduce useful and luxurious expenses but with no obligation of reimbursem*nt on the part of owner (Art. 579, NCC). 14. Right to set-off improvements against damages he made against property. (Art. 580, NCC). 15. Right to administer when property is coowned (Art. 582, NCC).
16. Right to demand the increase in value of property if owner did not spend for extraordinary repairs when urgent and necessary for preservation of a thing. As a rule, the lease executed by the usufructuary should terminate at the end of the usufruct or earlier, except in the case of leases of rural lands, because in said case, if the usufruct ends earlier than the lease, it continues for the remainder of the agricultural year. It is not the naked owner, but the usufructuary that has the right to choose the tenant (Art. 572, NCC). B. Obligations of the Usufructuary Before the usufruct begins 1. To make an inventory of the property; and 2. To give security/bond (Art. 583, NCC). Exceptions: a. When the usufruct is reserved by the donor; and b. In case of legal usufruct of the parents over the property of their minor children.
Exceptions: i. When parents contract a second marriage; ii. When the market value of property/annual income of the child exceeds P50,000. The usufructuary may be excused from the obligation of making an inventory or of giving security when: 1. No one will be injured thereby; or 2. The enjoyment of the property is to be acquired through caucion juratoria
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Obligations during the Usufruct To take care of the property (Art. 589, NCC). 2. To replace with the young thereof animals that die or are lost in certain cases when the usufruct is constituted on flock or herd of livestock (Art. 591, NCC). 3. To make ordinary repairs (Art. 592[1], NCC). 4. To notify the owner of urgent extraordinary repairs (Art. 593, NCC). 5. To permit works and improvements by the naked owner not prejudicial to the usufruct (Art. 595, NCC). 6. To pay annual taxes and charges on the fruits (Art. 596, NCC). 7.To pay interest on taxes on capital paid by the naked owner (Art 597, NCC). 8. To pay debts when the usufruct is constituted on the whole of a patrimony (Art 598, NCC). 9. To secure the naked owner’s or court’s approval to collect credits in certain case (Art. 599, NCC). 10. To notify the owner of any prejudicial act committed by third persons (Art 601, NCC). 11. To pay for court expenses and costs regarding usufruct (Art 602, NCC). 12. To indemnify the owner for any deterioration they may have suffered by reason of his fraud/negligence (Art. 573, NCC). 13. If usufruct includes fruit-bearing trees & shrubs, to replace them with new plants (Art. 574, NCC). 1.
At the Termination of the Usufruct 1. 2.
To return the thing in usufruct to the naked owner unless there is a right of retention (Art. 602, NCC). To pay legal interest for the time that the usufruct lasts, on the amount spent by the owner for extraordinary repairs (Art. 594, NCC) and the proper interest on the sums paid as taxes by the owner (Art. 597, NCC).
3. 4.
To indemnity the naked owner for any losses due to his negligence or of his transferees. If usufruct includes things which cannot be used without being consumed, obligation is to pay their appraised value at the termination of the usufruct, if they were appraised, or if not appraised, to return the same quality/quantity, or pay their current price at the time the usufruct ceases (Art. 574, NCC).
2. Classes of Usufruct
Classification of Usufruct as to Origin
(a) Legal Usufruct - created by law. i.e., usufruct of parents over the property of their unemancipated children (b) Voluntary or Conventional created by will of the parties inter vivos. (as by contract or donation) (c) Mixed or Prescriptive - created by law and will of the parties, i.e., usufruct acquired by prescription.
Other classifications
a. Total and Partial. Usufruct may be constituted on the whole (total) or part of a thing (partial). b. Simple and Multiple. It may be constituted in favor of one person (simple) or it may be constituted in favor of two or more persons (multiple) c. Pure, with a condition or with a period. It may be constituted from or to a certain day (with a period), purely or conditionally. d. Proper
(normal) and improper (abnormal). It is proper or normal when it is improper or abnormal when it is constituted over a consumable thing (Rabuya, Property, 2021, p. 23).
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3. Extinguishment of Usufruct 1. 2. 3. 4. 5. 6. 7. 8.
Death of the usufructuary, unless contrary intention appears; Expiration of the period or fulfillment of the resolutory condition; Merger of the usufruct and ownership in the same person; (Art. 603, NCC) Renunciation of the usufructuary; Total loss of the thing; Termination of the right of the person constituting the usufruct; Prescription; and (Art. 603, NCC) Other causes for extinguishment of usufruct a. Annulment b. Rescission c. Mutual withdrawal d. Legal causes ending usufruct, as when attainment of the age of majority extinguishes parental usufruct (Rabuya, Property, 2021, p. 650-651).
Bad use does not extinguish the usufruct, unless the ABUSE OR MISUSE should cause considerable injury to the owner (Art. 610, NCC). Q: On 1 January 1980, Minerva, the owner of a building granted Petronila a usufruct over the property until 01 June 1998 when Manuel, a son of Petronila, would have reached his 30th birthday. Manuel, however, died on 1 June 1990 when he was only 26 years old. Minerva notified Petronila that the usufruct had been extinguished by the death of Manuel and demanded that the latter vacate the premises and deliver the same to the former. Petronila refused to vacate the place on the ground that the usufruct in her favor would expire only on 1 June 1998 when Manuel would have reached his 30th birthday and that the death of Manuel before his 30th
birthday did usufruct.
not
Whose contention accepted? (Bar 1997)
extinguish
the
should
be
A: Petronila's contention is correct. Under Article 606 of the Civil Code, a usufruct granted for the time that may elapse before a third person reaches a certain age shall subsist for the number of years specified even if the third person should die unless there is an express stipulation in the contract that states otherwise. In the case at bar, there is no express stipulation that the consideration for the usufruct is the existence of Petronila's son. Thus, the GR and not the XPN should apply in this case.
G. EAsem*nTS Easem*nt defined It is a real right, constituted on the corporeal immovable property of another, by virtue of which the owner has to refrain from doing, or must allow someone to do, something on his property, for the benefit of another thing or person (Bogo-Medellin Milling Co., Inc. vs. CA, G.R. No. 124699, July 31, 2003). It is an encumbrance imposed upon an immovable for the benefit of another immovable belonging to a different owner (Art. 613, NCC). May also be established for the benefit of a community, or of one or more persons to whom the encumbered estate does not belong (Art. 614, NCC). An easem*nt is a limitation on the owner’s right to use his or her property for the benefit of another (Reyes vs. Sps. Valentin & Ramos, G.R. No. 194488, February 11, 2015).
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Difference of easem*nt and servitude “Easem*nt” refers to the right enjoyed by one over another’s property, or jura in re aliena while “servitude” refers to the burden imposed upon the other (Rabuya, Property, 2021, p. 656). 1. Characteristics of Easem*nt a. Intransmissible. (Art, 617, NCC) The easem*nt is inseparable from the estate to which it actively or passively belongs. It cannot, therefore, be alienated or mortgaged separately from the estate to which it forms part (Solid Manila Corp vs. Bio Hong Trading Co., G.R. No. 90596, April 8, 1991). b.
Indivisible. Even if the servient and dominant estates are divided between two or more persons, the easem*nt or the servitude continues to attach to the estates originally affected (Solid Manila Corp. v. Bio Hong Trading, G.R. No. 90596, April 8, 1991).
c.
The right consists of a limited use and enjoyment of the thing without possession and gives rise to an action in rem in favor of the owner of the tenement of the easem*nt and against any possessor of the servient estate (Caguioa, Civil Code of the Phil., 1966).
d.
Easem*nt is a real right which falls over the property itself. The easem*nt is inseparable from the estate which it actively or passively belongs (Art. 617, NCC).
e. Enjoyed over another immovable, never
on one’s own property (jura in re aliena) (Rabuya, Property, 2021 p.657).
Parties to an Easem*nt: (Art. 613, NCC) 1.
Dominant Estate - Immovable in favor of which an easem*nt is established.
2.
Servient Estate - That which is subject to easem*nt.
2. Kinds of Easem*nts As to recipient of Benefit: a. Real (or Praedial) – When it is in favor of another immovable (Art. 613, NCC). b. Personal - when it is in favor of a community, or of one or more persons to whom the encumbered estate does not belong (Art. 614, NCC). As to Source: a. Legal or compulsory – those constituted by law either for public use (public legal easem*nt) or for the interest of private persons (private legal easem*nt); b. Voluntary - constituted by will or tor agreement of the parties, but it is only the owner who can create a servitude that will bind the servient estate; and (Rabuya, Pre-bar Reviewer on Civil Law, 2021, p. 212) c. Mixed - created partly by agreement and partly by law. Examples of Legal Easem*nt: a. Easem*nt relating to waters (Arts. 637648, NCC);
b. Easem*nt of right of way (Arts. 649-657, NCC); c. Easem*nt of party wall (Arts. 658-666, NCC); d. Easem*nt of light and view (Arts. 667673, NCC); e. Easem*nt of drainage of buildings (Arts. 674-676, NCC); f. Easem*nt of distances (Arts. 677-681, NCC); g. Easem*nt of nuisance (Arts. 682-683, NCC); and h. Easem*nt of lateral and subjacent support (Arts. 684-687, NCC); (Rabuya, Property, 2008 p. 509).
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(**For more details, see DISCUSSION ON LEGAL AND VOLUNTARY EAsem*nT at the end of this section)
Easem*nt v. Lease: EAsem*nT Always a real right.
As to its exercise: a. Continuous easem*nts - those the use of which is or may be incessant, without the intervention of any act of man (Art. 615, NCC). Ex. Easem*nt of
light and view.
b. Discontinuous easem*nts - those which are used at intervals and depend upon the acts of man (Art. 615, NCC).
Ex. Easem*nt if right of way.
c. Apparent easem*nts - those which
are made known and are continually kept in view by external signs that reveal the use and enjoyment of the same (Art. 615, NCC). d. Non-apparent easem*nts - those which show no external indication of their existence (Art. 615, NCC). e. Positive Easem*nt - imposes upon the owner of the servient estate the obligation of allowing something to be done on his property (servitutes in patendo) (Art. 616, NCC). f. Negative easem*nt - prohibits the owner of the servient estate from doing something which he could lawfully do if the easem*nt did not exist (servitutes in non faciendo) (Art. 616, NCC). Q: What is the significance of determining whether an easem*nt is positive or negative? A: The determination is consequential in determining how an easem*nt is acquired. (Rabuya, Property, 2021 pg. 667) No such a thing as judicial easem*nt. When the court says that an easem*nt exists, it is not creating one. Court merely declares the existence of an easem*nt created by the parties (La Vista Association v CA, G.R. No. 95252, September 5, 1997).
A right limited to use without ownership or possession. Can refer only to immovable. Imposed only on real property. Limited to particular or specific use of the servient estate. A non-possessory right over an immovable. Not extinguished by the death of the dominant owner.
LEASE Real right only when it is registered, or when its subject matter is real property and the duration exceeds one year. A right limited to use and possession without ownership. May involve either real or personal property. Included all the uses and the fruits of the property. Involves a right of possession in an immovable or immovable. Extinguished by stipulation of the parties, or by law.
Easem*nt v. Usufruct: EAsem*nT Limited to a specific use of the property. Only on immovable property. Not extinguished by t he death of the owner of the dominant estate. Involves two neighboring estates. Does not include the right of possession. Cannot be alienated independently of the estate.
USUFRUCT Includes all use of the property, including jus fruendi. Real or personal property. Extinguished by the death of the usufructuary, unless a contrary intention appears. Contemplates only one property. Includes the right of possession in the property. May be alienated separ ately from the property to which it attaches.
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3. Modes of Acquiring Easem*nts
Two Modes:
(1) By title; and (2) By prescription a. By title - All kinds of easem*nts
whether continuous or discontinuous, apparent or non-apparent positive or negative, may be acquired by title (Arts. 620 and 622, NCC). By title as a mode of acquiring servitude, refers to the “juridical act: which gives birth to the servitude, such as the law, donations, contracts and wills. Hence, the act may either be inter vivos or mortis causa, may be onerous or gratuitous (4 Manresa, 5th Ed, 552). Title - means a juridical act or law sufficient to create the encumbrance. Intestate succession does not create an easem*nt because no act is involved. There is only transmission of easem*nt already existing.
b. By prescription. (Ten years [10]) Only continuous and apparent easem*nt may be acquired by prescription (Art. 620, NCC). Prescription runs irrespective of good faith or bad faith of the possessor and whether or not he has just title. Only requirement is adverse possession. Commencement of easem*nt. Depends on whether the easem*nt is positive or negative. Positive Servitude – The 10-year period is counted from the day when the owner of dominant estate begins to exercise it. (Art. 621, NCC) Negative Servitude – counted from the formal prohibition to the servitude owner to any opposed to the servitude. There
must be a notarized document (Art. 621, NCC). Proof that may establish existence of easem*nt: 1. By deed of recognition; 2. By apparent sign established by the owner of two adjoining estates. (legal presumption or apparent sign) Requisites: a. That there exists an apparent sign of servitude between two estates; b. That at the time of the establishment of such sign, the ownership of the two estates resides in one person; c. That the sign of the easem*nt be established by the owner of both estates because the article will not apply when the easem*nt is established by a person different from the owner; d. That the ownership over the two estates is later on divided, either by alienation or partition; and e. That at the time of division of ownership, nothing is stated in the document of alienation or partition contrary to the easem*nt nor is the sign of the easem*nt removed before the execution of the document (Art. 624, NCC). Acknowledgment of an easem*nt in one who owns property. An acknowledgment of the easem*nt is an admission that the property belongs to another (BOMEDCO vs. Heirs of Valdez, G.R. No. 124699, July 31, 2003). Effect of Zoning Ordinance. Such prohibition is similar to other conditions imposed by sellers of subdivision lots upon purchasers thereof, in and around Manila. It is in reality an easem*nt, which every owner of real estate may validly impose under Art. 594 of the Civil Code or under Art. 688 of the Civil Code, which provides that “the owner of a piece of land may establish thereon the easem*nts which he may deem suitable, provided he does not
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contravene the law, public policy or public order.” The validity of building restrictions limiting buildings to residences, restrictions as to the character or location of buildings or structures to be erected on the land has been sustained (14 Am, Jur. 617). 4. Effects of Easem*nt RIGHTS AND OBLIGATIONS OF THE OWNERS OF THE DOMINANT AND SERVIENT ESTATES. (Art. 627-630, NCC) Rights of the dominant owner a. Make on the servient estate all the works necessary for the use and preservation of the servitude (Art. 627, NCC). b. Seek judicial remedies. (mandatory injunction) to prevent impairment of his use of the easem*nt (Art. 625, NCC). c. Renounce the easem*nt if he desires to exempt himself from contribution to necessary expenses (Art. 628, NCC). d. To exercise all the rights necessary for the use of the easem*nt (Art. 625, NCC). Obligations of the dominant owner a. Cannot alter the easem*nt or render it more burdensome (Art. 627, NCC). b. Notify the servient owner of works necessary for the use and preservation of the servitude (Art. 627, NCC). c. Choose the most convenient time and manner in making the necessary works as to cause the least inconvenience to the servient owner (Art. 627, NCC). d. Contribute to the necessary expenses if there are several dominant estates (Art. 628, NCC). e. Cannot use the easem*nt except for the benefit of the immovable originally contemplated. f. Exercise the easem*nt in any other manner than that previously established (Art. 626, NCC).
Rights of the servient owner A servient owner is the owner of the immovable, whose property is subject to easem*nt for the benefit of the dominant owner. a. To retain ownership and possession of the servient estate (Art. 630, NCC). b. To make use of the easem*nt, unless there is agreement to the contrary (Art. 630, NCC). c. To change the place or manner of the easem*nt, provided it be equally convenient (Art. 629, NCC). Obligations of the servient owner. Cannot impair the use of the easem*nt. Exceptions: i. The same should become very inconvenient to the owner of the servient estate; or ii. Should prevent him from making any important works, repairs or improvements thereon. Requisites for the servient owner to be allowed to impair easem*nt i. He offers another place or manner equally convenient; ii. No injury is caused thereby to the owner of the dominant estate or to those who may have a right to the use of the easem*nt; and iii. Contribute to the necessary expenses in case he uses the easem*nt, unless there is an agreement to the contrary (Art. 629, NCC). 5. Extinguishment of Easem*nts. (Art. 631, NCC) 1. Merger of ownership of the dominant and servient estate. Where the merger is temporary or under resolutory condition, there is at most a
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suspension, but not an extinguishment of the servitude. 2. Non-user for 10 years a. Discontinuous: counted from the day they ceased to be used b. Continuous: Counted from the day an act adverse to the exercise takes place. 3. Permanent Impossibility to use the easem*nt. Impossibility of use only suspends the servitude until such time when it can be used again. 4. Expiration of the term 5. Fulfillment of the resolutory condition 6. Renunciation – renunciation by the dominant owner must be specific, clear and express (Fuentes v. Rivera, 40 O.G. [Sup. 12]). 7. Redemption agreed upon between the parties 8. Annulment or Rescission of title constituting the easem*nt 9. Termination of the right of the grantor. 10. Abandonment of the servient estate 11. Eminent Domain Legal vs. Voluntary Easem*nt Legal Easem*nt. (Arts. 634, 636, NCC) Those which can be enforced by force of law and may be established against the will of the servient estate. Those imposed by law having for their object either public use of the interest of private persons. (Rabuya, Property, 2021, p. 664) Public Legal Easem*nt. Public legal easem*nt is for public or communal use. Private legal easem*nt. Private legal easem*nt for the interest of private persons or for private use. It shall be governed by: 1. Agreement of the parties provided they are neither prohibited by law nor prejudicial to third persons;
2. In default, general or local laws and ordinances for the general welfare; 3. In default, Title VII of Articles 613-687 of
the NCC.
Kinds of Legal Easem*nt a. Easem*nt relating to water The following are the easem*nts relating to waters: Easem*nt of drainage of waters. (Art. 637, NCC; Art. 50, Water Code); (Bar, 1995) An easem*nt exists when, based on the physical condition of two estates, waters descend naturally and without the intervention of man from a higher estate (the dominant estate) to a lower estate (the servient estate) (Rabuya, Property, 2021 p. 708). Character: Continuous Obligations of the Servient Estate. (Art. 637, NCC): 1. To receive the waters which naturally and without the intervention of man flow from the higher estates, as well as the stones or earth which they carry with them; and 2. He may not construct works, such as dikes, walls or hedges, which will block or impede the flow of waters, unless he provides an alternative method of drainage. Obligations of the Dominant Estate: 1. He may not construct works which will increase the burden or increase the natural flow. 2. If he shall exercise the right to resort to artificial means of draining the waters from higher to lower estates, he is obliged to: a. To select the routes and methods of drainage that will cause the minimum damage to the lower lands; and
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b.
To pay just compensation to the lower estate (Rabuya, Property, 2021 p. 708).
Q: Lauro owns an agricultural land planted mostly with fruit trees. Hernando owns an adjacent land devoted to his piggery business, which is two. (2) meters higher in elevation. Although Hernando has constructed a waste disposal lagoon for his piggery, it is inadequate to contain the waste water containing pig manure, and it often overflows and inundates Lauro’s plantation. This has increased the acidity of the soil in the plantation, causing the trees to wither and die. Lauro sues for damages caused to his plantation. Hernando invokes his right to the benefit of a natural easem*nt in favor of his higher estate, which imposes upon the lower estate of Lauro the obligation to receive the waters descending from the higher estate. Is Hernando correct? (Bar, 2002)
Easem*nt for drawing waters or easem*nt for watering animals. (Arts. 640-641, NCC) This is a combined easem*nt for drawing of water and right of way. Requisites: 1. Must be imposed for reasons of public use; and 2. Must be in favor of a town or village; and 3. Indemnity must be paid. Easem*nt of abutment of dam. (Art. 639, NCC) Requisites: 1. For the purpose of diverting or taking waters from a river or brook, or for the use of any other continuous or discontinuous stream; 2. The person who is to construct it is not the owner of the banks or of the land on which must support it; and 3. Payment of the proper indemnity to the owner of the affected estates. Easem*nt of aqueduct. (Arts. 642-646, NCC) If a person wishes to use upon his estates any water of which he can dispose, he shall have the right to make it flow through intervening estates.
A: Hernando is wrong. Article 637 of the New Civil Code provides that the owner of the higher estate cannot make works which will increase the burden on the servient estate (Remman Enterprises, Inc. vs. CA, G.R. No. 125018, April 6, 2000).
Character: Apparent and continuous.
Easem*nt for public use. (Art. 638, NCC; Art. 51, Water Code) The banks or rivers and streams and the shores of the seas and lakes throughout their entire length and within a zone of three (3) meters in urban areas, twenty (20) meters in agricultural areas and forty (40) meters in forest areas, along their margins, are subject to the easem*nt of public use in the interest of recreation, navigation, floatage, fishing and salvage.
Requisites: 1. Dominant owner must prove that he has the capacity to dispose of the water; 2. That the water is sufficient for the intended use; 3. That the course is most convenient, and least onerous to the 3rd persons affected; and 4. Payment of indemnity to the servient estates and the lower estates
However, no person shall be allowed to stay in this zone longer than what is necessary for recreation, navigation, floatage, fishing or salvage or to build structures of any kind.
If this kind of easem*nt is established for private interest, may not be imposed on buildings, courtyards, annexes, or outhouse, or on orchards or gardens already existing (Art. 644, NCC).
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b. Easem*nt of Right of Way. (Arts. 649657, NCC) The right granted to the owner of an estate which is surrounded by other estates belonging to other persons and without adequate outlet to a public highway to demand that he be allowed a passageway throughout such neighboring estates after payment of proper indemnity. Manner of Acquisition: 1) Voluntary. (Arts. 688-693, NCC) Constituted by covenant and does not require that the dominant estate be isolated and without an adequate outlet to a public highway. 2) Compulsory. (Arts. 649-657, NCC) a. Legal easem*nt in favor of an owner entitled to use any immovable, which is landlocked by other immovables without an adequate access to a public highway (Art. 649, NCC). b. Legal easem*nt in favor of an isolated piece of land acquired sale, exchange, partition, or donation, when it is surrounded by other estates of the vendor, exchanger, co-owner, or donor (Art. 652, NCC). c. Right of way in favor of the vendor, exchanger, co-owner, or donor when his property is the one becomes isolated (Art. 653, NCC). d. Right of way granted to owner of an estate to carry materials through the estate of another when it is indispensable for the construction or repair of a building in his estate, after payment of indemnity (Art. 656, NCC). e. Right of way easem*nts for the passage of livestock (Art. 657, NCC). Requisites:
3. Property must be surrounded by estates of others; (Art. 649 [1], NCC) 4. Isolation must not be due to the claimant’s own act; (Art. 649 [4], NCC) 5. Easem*nt must be established at the point least prejudicial to the servient estate; and (Art. 650, NCC) 6. Payment of proper indemnity (Art. 649 [1], NCC). NOT compulsory if the isolation of the immovable is due to the proprietor’s own acts (Art. 649 [4], NCC). Right of way is granted without indemnity if land was acquired by and is surrounded by the other estates of the vendor, exchanger or coowner through: Sale, exchange or partition (Art. 652, NCC). Extinguishment 1. When the dominant estate is joined to another estate. (such as when the dominant owner bought and adjacent estate) which is abutting a public road, the access being adequate and convenient (Art. 655, 1st par., NCC). 2. When a new road is opened, giving access to the isolated estate (Art. 655, 2nd par., NCC). BOTH cases must substantially meet the needs of the dominant estate. Otherwise, the easem*nt may not be extinguished. The extinction is not automatic. (not ipso facto) If extinguished, must return the amount received as indemnity to the dominant owner without any interest. Voluntary easem*nt of right of way can only be extinguished by mutual agreement or by renunciation of the owner of the dominant estate (Rabuya, Property, 2021 p. 725).
Claimant must be an owner of enclosed immovable or one with real right; (Art. 649 [1], NCC) 2. There must be no adequate outlet to a public highway; (Art. 649 [1], NCC) 1.
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Q: Don was the owner of an agricultural land with no access to a public road. He had been passing through the land of Ernie with the latter’s acquiescence for over 20 years. Subsequently, Don subdivided his p roperty into 20 residential lots and sold them to different persons. Ernie blocked the pathway and refused to let the buyers pass through his land. a) Did Don acquire an easem*nt of right of way? Explain. b) Could Ernie close the pathway and refuse to let the buyers pass? Give reasons. c) What are the rights of the lot buyers, if any? Explain. (Bar 2005) A: (a) No, Don did not acquire an easem*nt of right of way. An easem*nt of right of way is discontinuous in nature — it is exercised only if a man passes over somebody’s land. Under Article 622 of the Civil Code, discontinuous easem*nts, whether apparent or not, may only be acquired by virtue of a title. The Supreme Court, in Abellana, Sr. vs. Court of Appeals. (G.R. No. 97039, April 24, 1992), ruled that an easem*nt of right of way being discontinuous in nature is not acquirable by prescription. Further, possession of the easem*nt by Don is only permissive, tolerated or with the acquiescence of Ernie. It is settled in the case of Cuaycong vs. Benedicto. (G.R. No. 9989, March 13, 1918) that a permissive use of a road over the land of another, no matter how long continued, will not create an easem*nt of way by prescription. (b) Yes, Ernie could close the pathway on his land Don has not acquired an easem*nt of right of way either by agreement or by judicial grant. Neither did the buyers. He has the right to exclude any person from the enjoyment and disposal of the land. This is an attribute of ownership that Ernie enjoys.
(c) Prior to the grant of an easem*nt, the buyers of the dominant estate have no other right than to compel grant of easem*nt of right of way. Since the properties of the buyers are surrounded by other immovables and has no adequate outlet to a public highway and the isolation is not due to their acts, buy ers may demand an easem*nt of a right of way provided proper indemnity is paid and the right of way demanded is the shortest and least prejudicial to Ernie (Villanueva vs. Velasco, G.R. No. 130845, November 27,2000). Q: Who has the burden of proof to show entitlement to an easem*nt of right of way? A: The burden of proving the requisites lies on the owner of the dominant estate (Cristobal, et.al., vs. CA, G.R. No. 125339 June 22, 1998). Q: The coconut farm of Federico is surrounded by the lands of Romulo. Federico seeks a right of way through a portion of the land of Romulo to bring his coconut products to the market. He has chosen a point where he will pass through a housing project of Romulo. The latter wants him to pass another way which is one kilometer longer. Who should prevail? (Bar, 2000) A: Romulo will prevail. Under Article 650 of the New Civil Code, the easem*nt of right of way shall be established at the point least prejudicial to the servient estate and where the distance from the dominant estate to a public highway is the shortest. In case of conflict, the criterion of least prejudice prevails over the criterion of shortest distance. Since the route chosen by Federico will prejudice the housing project of Romulo, Romulo has the right to demand that Federico pass another way even though it will be longer (Quimen vs. CA, G.R. No. 112331 May 29, 1996).
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Q: Which determines the width of the Easem*nt of Right of Way? A: Article 651 of the New Civil Code provides that the width of the easem*nt of right of way shall be that which is sufficient for the needs of the dominant estate, and may accordingly be changed from time to time. This is taken to mean that under the law, it is the needs of the dominant property which ultimately determine the width of the passage and these needs may vary from time to time (Encarnacion vs. CA, G.R. No. 77628, March 1991). Easem*nt of Party Wall (Arts. 658666, NCC)
3. In dividing fences, walls and live hedges of rural tenements; and 4. In ditches or drains between tenements (Art. 659, NCC). Rebuttal of presumption: 1. There is title to the contrary; 2. There is exterior sign to the contrary; and 3. There is proof to the contrary (Arts. 660 & 661, NCC). Rights of part owners:
c.
A common wall which separates two estates built by common agreement at the dividing line such that it occupies a portion of both estates on equal parts. Party Wall Shares of parties cannot be physically segregated but they can be physically identified.
No limitation as to use of the party wall for exclusive benefit of a party. Owner may free himself from contributing to the cost of repairs and construction of a party wall by renouncing all his rights thereto.
Presumptions
tantum)
of
Co-ownership Shares of the co-owners can be divided and separated physically but before such division, a co-owner cannot point to any definite portion of the property as belonging to him. None of the co-owners may use the community property for his exclusive benefit. Partial renunciation is allowed.
existence
(juris
1. In adjoining walls of buildings, up to common elevation; 2. In dividing walls of gardens and yards (urban);
1. To make use of the wall in proportion to their respective interests, resting buildings; 2. On it or inserting beams up to one-half of the wall’s thickness; and 3. To increase the height of the wall at his expense upon payment of proper indemnity to acquire half interest in any increase of thickness or height, paying a proportionate share in the cost of the work and of the land covered by the increase (Art. 644, NCC). Obligations of each part-owners: To contribute proportionately to the repair and maintenance unless he renounces his part-ownership (Art. 662, NCC). 2. If one part owner raises the height of the wall, he must bear the cost of maintenance of the additions, bear the increased expenses of preservation, bear the cost of construction, give additional land, if necessary, to thicken the wall (Art. 664, NCC). 1.
d. Easem*nt of Light and View (Arts. 667673, NCC) Refers to an easem*nt whereby the dominant estate enjoys the right to have free access to light, a little air, and a view overlooking the adjoining estate (Rabuya, Property, 2021 p. 732).
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No part-owner may, without the consent of the others, open through the party wall any window or aperture of any kind (NCC, Art. 667). Easem*nt of Light. (jus luminum) – The right to make openings under certain conditions in order to receive light from another’s tenement (Rabuya, Property, 2021, p. 732). Requisites: 1. Opening must not be greater than 30 centimeters square, made on the ceiling or on the wall; 2. There must be an iron grating; 3. There must be a wire screen; and 4. Opening must be at the height of the ceiling joists or immediately under the ceiling Easem*nt
prospectus)
of
View
(servidumbre
The right to make openings or windows, to enjoy the view through the estate of another and the power to prevent all constructions or work which would obstruct such view or make the same difficult. It necessarily includes easem*nt of light (Rabuya, Civil Law Reviewer Volume I, 2021, p. 701). The abutting owner may: 1. Close the openings if the wall becomes a party wall, unless there is a contrary stipulation (Art. 669 [1], NCC). 2. Block the light by constructing a building or wall, unless an easem*nt of light has been acquired (Art. 669 [3], NCC). 3. Ask for the reduction of the opening to the proper size. Restriction as to Views: Direct views: The distance of at least 2 meters between the wall and the boundary must be observed (Art. 670 [1], NCC).
Oblique views: (walls perpendicular or at an angle to the boundary line) must not be less than 60 cm between the boundary line to the nearest edge of the window (Art. 670 [2], NCC). e. Easem*nt of Drainage of Building (Arts. 674-676, NCC) The owner of a building shall be obliged to construct its roof or covering in such manner that the rain water shall fall on his own land or on a street or public place, and not on the land of his neighbor, even though the adjacent land may belong to two or more persons, one of whom is the owner of the roof. Even if it should fall on his own land, the owner shall be obliged to collect the water in such a way as not to cause damage to the adjacent land or tenement (Art. 674, NCC). The right to divert or empty the rain waters from one’s own roof or shed to the neighbor’s estate either drop by drop or through conduits (Rabuya, Property, 2021 p. 738). Requisites: 1. There must be no adequate outlet to the rain water because the yard or court of a house is surrounded by other houses; 2. The outlet to the water must be at the point where egress is easiest, and establishing a conduit for drainage; and 3. There must be payment of proper indemnity (Art. 676, NCC). Ownership of Rainwaters Pursuant to the provisions of the Water Code of the Philippines, rain waters falling on private lands shall belong to the State. However, any person who captures or collects water by means of cisterns, tanks or pools shall have exclusive control over such water and he shall also have the right to dispose of the same (Rabuya, Property, 2021 p. 738).
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f. Intermediate Distances (Arts. 677-681, NCC)
Fruits falling to adjacent land (Art. 681, NCC)
Article 679 of the New Civil Code prohibits the planting of trees near a tenement or piece of land belonging to another person, unless the distance requirement is observed, to wit:
Fruits which are naturally falling upon adjacent land belong to the owner of the said land to discourage the act of allowing branches to protrude over another’s land.
1. The distance authorized by local ordinances or customs of the place, if any; or 2. In default of the foregoing, at a distance of at least two. (2) meters from the dividing line of the estate in case of tall trees and at a distance of at least 50 centimeters in case of shrubs or small trees (Rabuya, Property, 2021 p. 740).
However, in the case of fruits naturally falling on a public property, the owner of the tree retains ownership.
Right to cut branches and Roots. If the branches of any tree should extend over a neighboring estate, tenement, garden or yard, the owner of the latter does not have the right to take the matter into his own hand by cutting off the branches extending on his property. Instead, he may demand that the protruding branches be cut-off by its owner. If his demand is not acted upon, he has to go to court to seek authority for the cutting of the protruding branches (Art. 680, NCC). With respect to the roots of a neighboring tree which penetrated into the land of another, the owner of the latter may himself cut off the roots found within his property. The reason for the difference is that with respect to the roots, the same belong to the owner of the land where it is found by reason of incorporation. This right of the adjacent owner does not prescribe unless he has been, by a formal act, prohibited by the owner of the tree from cutting off the roots of the tree, in which case, the 10-year prescriptive period for the establishment of a negative easem*nt will commence to run (Rabuya, Property, 2021 p. 741).
g. Easem*nt against Nuisance (Arts. 682-
683, NCC)
Every building or piece of land is subject to the easem*nt which prohibits the proprietor or possessor from committing nuisance through noise, jarring, offensive odor, smoke, heat, dust, water, glare and other causes. h. Easem*nt of Lateral and Adjacent Support (Arts. 684-687, NCC) The law prohibits any excavation upon one’s land if the same will deprive any adjacent land or building of sufficient lateral or subjacent support. The law prohibits any stipulation or testamentary provision allowing such kind of excavation. Any such stipulation or testamentary provision is expressly declared to be void.
Lateral - when the supported and the supporting lands are divided by a vertical plane.
Subjacent - when the supported land is above and the supporting land is beneath it (Rabuya, Civil Law Reviewer Vol. 1, 2017, p. 578 citing Restatement of the Law of Torts, Vol. IV, p. 184).
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B. VOLUNTARY EAsem*nT (Arts. 688-693, NCC) Every owner of a tenement or a piece of land may establish thereon the easem*nts which he may deem suitable, and in the manner and form which he may deem best (Art. 688, NCC). Except: If it contravenes laws, public policy or public order (Art. 688, NCC). The consent of all the co-owners are required on an undivided tenement, or piece of land (Art. 691, NCC). Right of Way Act. (R.A. 10752) The government can acquire private real property for national government infrastructure projects and its public service facilities, engineering works and service contracts, including those undertaken by government-owned and -controlled corporations (Sec. 4). This 1. 2. 3. 4.
can be effected by: Donation; Negotiated sale; Expropriation; and Other modes of acquisition authorized by existing laws (Sec. 4).
Negotiated Sale 1. The implementing agency shall offer to the property owner concerned the current market value of the land, the replacement cost of the structures and improvements and the current market value of the crops and trees therein; 2. The property owner shall be given 30 days to decide whether or not to accept the offer; and 3. (a) If the landowner accepts the offer: 50% of the agreed price of the land 70% of the price of the structure, improvements, corps and trees shall be paid upon execution of the Deed of Sale; (b) If the owner refuses the offer within the 30-day period:
The agency shall institute expropriation proceedings which may be instituted by any government or private legal counsel which may be deputized for that purpose (Sec. 5). Expropriation Proceedings. Upon filing of the complaint and the owner is notified of the action, the agency shall immediately deposit with the court in favor of the owner the amounts equivalent to the sum of: 1. 100% of the value of the land based on the current relevant zonal valuation of the BIR issued not more than 3 years prior to the filing of the complaint; 2. Replacement cost at current market value of the improvements and structures as determined by the agency, a government financial institution with experience with property appraisal and an independent property appraisal accredited by the BSP; 3. Current market value of the crops and trees as determined by a government financial institution or an independent property appraiser. 4. Once payment is made, the court is required to immediately issue an order to the agency to take possession of the land and start the implementation of the project. 5. If the writ is not issued within 7 days from the deposit, the counsel may file a motion for the issuance of the writ. 6. The court is obliged to determine the just compensation to be paid to the owner within 60 days form the date of the filing of the expropriation case. 7. Once the court’s decision becomes final: the difference between the deposited payment and the just compensation adjudged by the court has to be paid by the agency. (Sec. 6)
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Mode v. Title Mode Directly and immediately produces a real right. Cause Proximate cause Essence of the right which is to be created or transmitted.
Title Serves merely to give the occasion for its acquisition or existence. Means Remote cause Means whereby that “essence” is transmitted.
A. OCCUPATION
Figure. Illustration of the various easem*nts of the Code.
_________________________________ III. DIFFERENT MODES OF ACQUIRING OWNERSHIP Original Modes – result in the independent creation of a new right of ownership, when in effect, therefore is independent of the ownership of the third person, e.g. occupation, law, intellectual creation and acquisitive prescription (Rabuya, Property, 2021, p. 779).
Derivative Modes – an acquisition which depends on the existence of the right of a certain other person e.g. tradition, succession and donation (Rabuya, supra). Mode vs. Cause MODE
CAUSE Original Modes Occupation Condition of being without known owner. Work which includes Creation, discovery or intellectual creation. invention. Derivative Modes Law Existence of required conditions. Tradition Contract of the parties Donation Contract of the parties Prescription Possession in the concept of the owner. Succession Death
Occupation is a mode of acquiring ownership by the seizure or apprehension of things corporeal which have no owner with the intention of acquiring them and according to the rules laid down by law (3 Sanchez Roman, 209). Requisites: 1. Thing must be res nullius – a thing which never had an owner or has no owner, or which, by virtue of a previous abandonment (dereliction), has no owner at the time of its occupation; 2. Must be appropriable by nature or one that can be seized or apprehended; 3. Must be brought into the actual possession or control of the one professing to acquire it; and 4. Person must acquire it with the intention of acquiring ownership (Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 229-230). Possession v Occupation (Bar 1997, 2000) Occupation can take place only with respect to property without an owner while possession can refer to all kinds of property, whether with owner or without an owner. Occupation itself, when proper, confers ownership but possession does not by itself give rise to ownership (Suggested Answers, UPLC & PALS).
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As to acquisition of ownership
As to property involved As to ownership of the thing by another As to intent to acquire As to possession As to period As to leading to another mode of acquisition
Occupation Mode of acquiring ownership
Involves only corporeal personal property Requires the object be without an owner There must be intent to acquire ownership May not take place without some form of possession Short duration Cannot lead to another mode of acquisition
Possession Merely raises the presumption of ownership when exercised in the concept of owner Any kind of property The property may be owned by somebody May be had in the concept of a mere holder May exist without occupation Generally, longer May lead to another mode - prescription
Appropriation of Piece of Land The ownership of a piece of land cannot be acquired by occupation (Art. 714, NCC). Animals as Object of Appropriation Things appropriable by nature which are without an owner, such as animals that are the object of hunting and fishing, hidden treasure and abandoned movables, are acquired by occupation (Art.713, NCC). The right to hunt and to fish is regulated by special laws (Art.715, NCC). The owner of a swarm of bees shall have a right to pursue them to another’s land, indemnifying the possessor of the latter for the damage. If the owner has not pursued the
swarm, or ceases to do so within two consecutive days, the possessor of the land may occupy or retain the same. The owner of domesticated animals may also claim them within twenty days to be counted from their occupation by another person. This period having expired, they shall pertain to him who has caught and kept them (Art.716, NCC). Pigeons and fish which from their respective breeding places pass to another pertaining to a different owner shall belong to the latter, provided they have not been enticed by some article of fraud (Art.717, NCC). Whoever finds a movable, which is not treasure, must return it to its previous possessor. If the latter is unknown, the finder shall immediately deposit it with the mayor of the city or municipality where the finding has taken place (Art.719, NCC). The finding shall be publicly announced by the mayor for two consecutive weeks in the way he deems best. If the movable cannot be kept without deterioration, or without expenses which considerably diminish its value, it shall be sold at public auction eight days after the publication. Six months from the publication having elapsed without the owner having appeared, the thing found, or its value, shall be awarded to the finder. The finder and the owner shall be obliged, as the case may be, to reimburse the expenses (Ibid). If the owner should appear in time, he shall be obliged to pay, as a reward to the finder, one-tenth of the sum or of the price of the thing found (Art. 720, NCC). Animals as Object of Appropriation Wild beasts, birds, fishes, and in fact all animals which are still in their natural state of freedom become the property of the captor by
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virtue of occupation. This rule applies even though the capture be made on another’s land, without prejudice, however, to the liability of the captor for any damage resulting from his trespass. Limitations. The rule on acquisition of ownership by virtue of occupation stated in Article 713 of the New Civil Code does not apply to animals which are classified as rare, threatened or endangered species (Rabuya, Property, 2021 p. 806). Domestic Animals. They are considered as movable property. Hence, they are subject to the same rules governing the acquisition of ownership over other movables. If they are lost, their owner, as a rule, can recover them from the present possessor without need of indemnifying the latter subject to the qualifications stated under Art. 719. The ownership thereof may not be acquired by occupation unless these animals are abandoned by their owner (Rabuya, Property, 2021 p. 807808). Abandoned vs. Lost or Mislaid Properties. In the case of abandoned property, it is necessary that the spes recuperandi (hope of recovery or recapture) is gone and the animus revertendi (intent to recover) is given up. There is no real intention to abandon property, hence he has the right to reclaim such property and to recover the same if possible. In the case of lost and mislaid (or misplaced) property, however, the spes recuperandi and the animus revertendi are still exists. Hence, its ownership is not lost yet by its owner. So long as the property is not under the control of another person, the present owner does not lose both the ownership and possession of the same. However, if the misplaced property is already in the control of another person, its possession is already deemed lost. This is the difference between mislaid (misplaced
property) and lost property. But in the case of a lost property, note that it is only the possession which is considered lost by the owner, not his ownership thereof. The lost property is not, therefore, considered a res nullius but a res alicujus. Hence, its ownership may not be acquired by the finder through occupation (Rabuya, Property, 2021 p. 808-809). B. TRADITION Tradition (traditio) or delivery. As a mode of acquiring and transmitting ownership and other real rights, refers to the transfer of possession accompanied by an intention to transfer ownership of other real rights. Requisites: 1. Pre-existence of the right to be transmitted in the estate of the grantor, the same being a derivative mode of acquiring ownership; 2. Just cause or title (causa traditionis) for the transmission, such as sale; 3. Intention on the part of the grantor to grant and on the part of the grantee to acquire; 4. Capacity to transmit (on the part of the grantor) and capacity to acquire (on the part of the grantee); and 5. An act which gives it outward form, physically, symbolically or legally (Rabuya, Property, 2021, p. 782). Kinds of Tradition 1. Real Tradition. Real tradition (physical or actual delivery) takes place when the thing is placed in the control and possession. For movable, it is when the thing is transferred from hand to hand; if immovable, by certain material and possessory acts by the grantee (Rabuya, Property, 2021 p. 788). In the law of Sales, the thing sold is understood as delivered when it is placed in the control and possession of the vendee (Art. 1497, NCC).
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2. Constructive of Feigned Tradition. Delivery exists even when the change of possession is not actual or material but represented by other signs of acts indicative thereof.
contract or capacity, e.g. lessee (Rabuya, Property, 2021, p.789). There may also be tradition constitutum possessorium (Art. 1500, NCC).
Simbolica. The transfer of ownership is effected by the delivery of symbols of things which represent those to be delivered (Rabuya, Property, 2021, p.789).
e. Execution of Public Instrument. Recognized by law as equivalent to the delivery of the thing, which is the object of the contract.
With regard to movable property, its delivery may also be made by the delivery of the keys of the place or depository where it is stored or kept (Art. 1498, NCC).
3. Quasi Tradition. Indicate the transfer of
a. Traditio
b. Traditio Longa Manu. The transfer of ownership is effected by the grantor by simply pointing out to the grantee the things which are being transferred and which at the time must be within their sight (Rabuya, Property, 2021, p.788). c. Traditio Brevi Manu. The grantee has
already acquired actual control or possession of the thing, as when the thing is leased to him. A mere declaration on the part of the grantor that the grantee shall now hold the thing which is already in his control and possession, as owner, operates as a form of delivery (Rabuya, Property, 2021, p.789). The delivery of movable property may likewise be made by the mere consent or agreement of the contracting parties, if the thing sold cannot be transferred to the possession of the vendee at the time of the sale, or if the latter already had it in his possession for any other reason (Art. 1499, NCC). d. Traditio Constitutum Possessorium.
The reverse of traditio brevi manu. It is effected by a mere declaration on the part of the transferor that he will hold the thing for the transferee. This may take place when the owner of the thing alienates it but continues possessing it under another
rights or incorporeal things through the exercise of the rights by the grantee with the acquiescence of the grantor (Rabuya, Property, 2021, p.793). 4. Tradition by Operations by Law. Comprises all those cases not covered by the previous modes of delivery and by which tradition is effected solely by virtue of a legal precept (Ibid). C. DONATION 1. Features Definition: An act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it (Art. 725, NCC). It may also be defined as “a gratuitous contract whereby the donor divests himself, at present and irrevocably, of the thing given in favor of the done (Rabuya, Pre-bar Reviver in Civil Law, 2021, p. 233). Requisites: 1. The essential reduction of the patrimony of the donor; 2. The increase in the patrimony of the done; and 3. The intent to do an act of liberality or animus donandi (Heirs of Florencio vs. Heirs of De Leon, G.R. No. 149570, March 12, 2004).
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Donative intent is presumed present when one gives a part of one’s patrimony to another without consideration, and it is not negated when the person donating has other intentions, motives, or purposes which do not contradict donative intent. For a donation to exist, however, the intent to donate must be effectively carried out. Hence, a mere declaration of an intention or desire to donate is not a donation (Rabuya, Pre-law Reviver in Civil Law, 2021, p. 233). Limitations on Donation of Property a. Future property cannot be donated (Art. 751, NCC);
b. Present property that can be donated; i. If the donor has forced heirs: he cannot give or receive by donation more than what he can give or receive by will. ii. If the donor has no forced heirs: donation may include all present property provided he reserves in full ownership or in usufruct (Art. 750, NCC). c. The amount necessary to support him and those relatives entitled to support him; (Ibid) d. Property sufficient to pay the donor’s debt contracted prior to the donation; (Art. 758, NCC) e. Donation should not prejudice creditors (Art. 759, NCC); and f. Donee must reserve sufficient means for his support and for his relatives which are entitled to be supported by him (Art. 750, NCC). 2. Classifications a. Donation Inter Vivos - Those which take effect independently of the donor’s death (Rabuya, Property 2021, p. 823). Takes effect during the donor’s lifetime or independently of the donor’s death or when the full or naked ownership (nuda proprietas) of the donated properties
passes to the donee during the donor’s lifetime, not by reason of his death but because of the deed of donation (Rabuya, Property 2021, p. 233). Requisites: i. Must follow the formalities of donations; ii. Takes effect during the lifetime of the donor; iii. Cannot be revoked except for grounds provided by the law; iv. In case of impairment of the legitime, donations inter vivos are preferred to donations mortis causa; v. The right of disposition is completely transferred to the donee; and vi. Acceptance by donee must be during lifetime of donor. b. Donation Mortis Causa – When the donation takes effect only upon the donor’s death or when the full or naked ownership of the donated properties will pass to the donee only because of the donor’s death (Rabuya, Property 2021, p. 233). Formalities: It partakes of the nature of a testamentary provision. Characteristics: (i) Conveys no title or ownership to the transferee before the death of the transferor or what amounts to the same thing, that the transferor should retain the ownership (full or naked) and control of the property while alive; (ii) Before his death, the transfer should also be revocable by the transferor at will, ad nutuum; but revocability may be provided for indirectly by means of a reserved power in the donor to dispose of the properties conveyed; and (iii) The transfer is void if the transferor should survive the transferee (Rabuya, Pre-bar Reviver in Civil Law, 2021, p. 234).
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3. Distinctions Between Mortis Causa and Inter Vivos Donations
As to when it takes effect. As to recovability.
As formalities.
to
As to when property is transferred to the donee.
Donation mortis causa Takes effect only upon the donor’s death. Before his death, the transfer should also be revocable by the transferor at will. Partakes of the nature of a testamentary provision. Full or naked ownership of the donated properties will pass to the donee only because of the donor’s death.
Donation inter vivos Takes effect during the donor’s lifetime. Cannot be revoked except for grounds provided by the law. Must follow the formalities of donations. Full or naked ownership (nuda proprietas) of the donated properties passes to the donee during the donor’s lifetime.
c. Donation by Reason of Marriage
(Donation Propter Nuptias)
Those made in consideration of the marriage in favor of one or both of the prospective spouses and executed before the marriage (Art. 86, FC). d. Onerous Donation – imposes the donee a reciprocal obligation or a donation made for a valuable consideration, the cost of which is equal to or more than the thing donated (Republic vs. Silim, G.R. No. 140487, April 2, 2001). e. Simple/Modal/Conditional
ii. Remuneratory or Compensatory – made for the donee’s past services, which services do not amount to a demandable debt (Art. 726, NCC). iii. Modal – is one which imposes on one a prestation imposed on the donee may either be a burden or charge inferior in value to the property donated or service to be performed in the future (Art. 726, NCC). 4. Formalities Required How donation of movable/personal property is made and accepted 1. With simultaneous delivery a. If value is more than P5,000.00, donation and acceptance must be in writing (Art. 748 [3], NCC). b. If value is P5,000.00 or less: i. Can be made orally – but requires simultaneous delivery of the thing. Acceptance may be oral or written. ii. Can be made in writing – acceptance may be oral or written (Art. 748, NCC). 2. Without simultaneous delivery - The donation and acceptance must be in public or private instrument (Art. 748, NCC). How donation of immovable/real property is made and accepted 1. Made in public instrument; 2. Must be accepted, which acceptance may be made either in the same Deed of Donation or in a separate public instrument; and 3. If the acceptance is made in a separate instrument, the donor must be notified in an authentic form, and the same must be noted in both instruments (Rabuya, Property 2021, p. 237).
i. Simple – the underlying cause is plain gratuity or liberality. (Lagazo vs. CA,
G.R. No. 112796, March 5, 1998)
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Perfection The donation is perfected from the moment the donor knows of the acceptance by the done (Art. 734, NCC). Acceptance must be made during the lifetime of the donor and of the done (Art. 746, NCC). In case of donation mortis causa, acceptance is made only after the donor’s death because they partake of a will and thus governed by the rules on succession (Art. 728, NCC). Persons who donation
may
give
or
receive
1. Qualifications of a DONOR. Must have the capacity to contract and to dispose of his property (Art. 735, NCC). Rules: a. Every donation between spouses during the marriage shall be void except moderate gifts on the occasion of family rejoicing. The prohibition also applies to person living together as husband and wife without a valid marriage (Art. 87, FC). b. Every corporation has the power and capacity to make reasonable donations, including those for public welfare or for hospital, charitable, cultural, etc. However, it cannot give donations in aid of any political party or candidate or for purposes of partisan political activity. c. Guardian and trustee cannot alienate property entrusted to them (Art. 736, NCC). However, this is not absolute as this only applies to simple donation and not to donations which are onerous and beneficial to the beneficiary. d. Trustees, who have repudiated the trust and have acquired the properties by prescription, are allowed to donate said properties.
e. Donor’s capacity is determined as of the time of the perfection of the donation (Art. 737, NCC). 2. Qualifications of a DONEE. All persons who are not disqualified by law may accept donations (Art. 738, NCC). Rules: a. Donations made to incapacitated persons such as minors and those incapacitated to contract, the acceptance can be made by the parents or legal representatives (Art. 741, NCC). b. With regard to conceived and unborn children, the acceptance can be made by them if they were already born (Art. 742, NCC). c. Special disqualifications (Art. 739 and 740, NCC): i.
Those made between persons who were guilty of adultery or concubinage at the time of the donation; ii. Those made between persons found guilty of the same criminal offense, in consideration thereof; iii. Those made to a public officer or his wife, descendant and ascendants, by reason of his office; and iv. Donations by reason of unworthiness of the donee under Art.740, in relation to Arts. 1032 and 1027, except for paragraph 4 of Art. 1027. d. The donee must accept the donation personally, or through an authorized person with a special power for the purpose, or with a general and sufficient power, otherwise the donations are void (Art. 745, NCC).
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5. Limitations In general a. Donee may demand the delivery of the thing donated b. Donee is subrogated to the rights of the donor in the property (Art. 754, NCC). c. In donations propter nuptias, the donor must release the property from encumbrances, except servitudes (Art. 85, FC). d. Donor’s warranty exists if: i. Expressed ii. Donation is propter nuptias iii. Donation is onerous iv. Donor is in bad faith (Art. 754, NCC). e. When the donation is made to several donees jointly, they are entitled to equal portions, without accretion, unless the contrary is stipulated (Art. 753, NCC). Double Donations Donations of the same thing to two or more persons shall be governed by the provisions concerning the sale of the same thing to two or more different persons (Art. 744, NCC). Rule: Priority in time, priority in right.
(Prior est in tempore, potio res tiure)
a. If movable – one who first took possession in good faith b. If immovabale – one who recorded in registry or property in good faith i. No inscription, one who first took possession in good faith ii. In absence thereof, one who can present the oldest title (Art. 1544, NCC). Excessive/Inofficious donations 1. The donor at the time of donation either had no children or thought he had no more (Art. 760 and 761, NCC).
2. The donor had at least one child already
at the time he made the donation (Arts. 771-772, NCC).
The donation shall be revoked or reduced insofar as it exceeds the portion that may be freely disposed of by will, taking into account the whole estate of the donor at the time of the birth, appearance or adoption of a child (Art. 761). The action for revocation or reduction shall prescribe after four years from the birth of the first child, or from his legitimation, recognition, or adoption, or form the time information was received regarding the existence of the child believed to be dead (Art. 763, NCC). Scope of amount The donation may comprehend all the present property of the donor, or part thereof, provided he reserves, in full ownership or in usufruct, sufficient means for the support of himself, and of all relatives who, at the time of the acceptance of the donation, are by law entitled to be supported by the donor. Without such reservation, the donation shall be reduced in petition of any person affected (Art. 750, NCC). Donations cannot comprehend property (Art. 751, NCC).
future
By future property is understood anything which the donor cannot dispose of at the time of the donation (Art. 751, NCC). The provisions of Article 750 notwithstanding, no person may give or receive, by way of donation, more than he may give or receive by will (Art. 752, NCC). In fraud of creditors There being no stipulation regarding the payment of debts, the donee shall be responsible therefore only when the donation has been made in fraud of creditors. The donation is always presumed to be in fraud of
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creditors, when at the time thereof the donor did not reserve sufficient property to pay his debts prior to the donation (Art. 759, NCC). Void donations, donations Prohibited by Law: 1. By persons guilty of adultery or concubinage at the time of donation (Art. 739[1], NCC); 2. Between persons found guilty of same criminal offense, in consideration thereof. (Art. 739[2], NCC); 3. To a public officer or his or her spouse; descendants or ascendants, by reason of his or her office (Art. 739[3], NCC); 4. To a priest who heard confession of donor during latter’s illness or minister of gospel who extended spiritual aid to him during the same period (Art. 1027[1], NCC); 5. To relatives of such priest or minister within the 4th degree, the church, order, etc., to which such priest or minister may belong (Art. 1027[2], NCC); 6. By ward to the guardian before approval of final accounts (Art. 1027[3], NCC); 7. To attesting witness of the execution of a donation, if there is any, or to the spouse, parents, or children, or anyone claiming under them (Art. 1027[4], NCC); 8. To physician, surgeon, nurse, health officer or druggist who took care of the donor during last illness (Art. 1027[5], NCC); 9. By individuals, associations and corporations not permitted by law to make donations (Art. 1027[6], NCC); and 10. By spouses to each other during marriage, or to persons of whom the other spouse is a presumptive heir (Art. 87, FC). 6. Reduction and Revocation General rule: Once the donation is accepted, it is irrevocable (Gestopa vs. CA, G.R. No. 111904, October 5, 2000).
Exceptions: Birth, Adoption or Reappearance. (Art. 760, NCC) Every person having no children or descendants, legitimate or illegitimate, may be revoked or reduced in the following scenarios: a. if the donor, after the donation, should have legitimate or legitimated or illegitimate children, even though they be posthumous; b. if the child of the donor, who the latter believed to be dead when he made the donation, should turn out to be living; or c. if the donor subsequently adopts a minor child (Art. 760, NCC). Inofficious donations. (Art. 771, NCC) Action must be brought within five. (5) years after the death of the donor. The action is transmitted to the donor’s heirs as the donation shall be reduced as regards the excess at the time of the donor’s death. The donation takes effect during the lifetime of the donor subject to reduction only upon his death with regard to the excess. The donee appropriates the fruits as owner of the property (Art 771, NCC). Made in fraud of creditors. (Art. 1381 [3], NCC) The action for rescission must be brought within four years from the perfection of the donation, or at the latest from the time the creditor had knowledge of the donation. The right is transmissible to the heirs of the creditor or the latter’s successor-ininterest.
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The property affected shall be returned by the donee for the benefit of the creditor subject to the rights of innocent third persons. The fruits of the property affected shall also be returned. In case the donee acted in bad faith and it should be impossible for him to return the property affected due to any cause, he shall indemnify the donor’s creditor for damages suffered by the latter. Effects Upon revocation or reduction of the donation based on Article 760, the following effects are produced: 1. The property affected shall be returned, or if it cannot be returned, as its value. 2. If the property is mortgaged, the donor may redeem the mortgage, by paying the amount guaranteed, with a right to recover his payment from the donee. When the property cannot be returned, it shall be estimated at what it was worth at the time of the donation. 3. The donee shall return the fruits of property affected only from the filing of the complaint.
Acts of Ingratitude. (Art. 765, NCC) 1. If the donee should commit some offense against the person, honor or property of the donor, or of his wife or children under his parental authority. 2. 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 act has been committed against the donee himself, his wife, or children under his authority. 3. Unduly refuses to support the donor when the donee is legally or morally bound to do so. The maximum period of inalienability, when imposed by will is 20 years (Art. 870, NCC), unless a fideicommissary substitution has been established, in which case, the inalienability will last during the lifetime of the first heir (Art. 863, NCC). By analogy, the same maximum period of 20 years should apply to inalienability imposed by the donor on the donee, because this is also a gratuitous disposition; but the period may be longer when the donor provides for reversion under Article 757.
Prescription The prescriptive period of an action for revocation or reduction of the donation under Article 760 is four. (4) years reckoned from the birth of the first child, or from his legitimation, recognition or adoption, or from the judicial declaration of filiation, or from the time information was received regarding the existence of the child believed to be dead. If, however, the child dies prior to the filing of the action, it is believed that the action can no longer be brought (Art. 763 [1], NCC). This action is not subject to waiver or renunciation and is transmitted, upon the death of the donor, to his legitimate or illegitimate children and descendants (Art. 763 [2], NCC).
D. PRESCRIPTION Definition One acquires ownership and other real rights through the lapse of time in the manner and under the conditions laid down by law. In the same way, rights and actions are lost by prescription (Art. 1106, NCC). a. Types of prescription Acquisitive Prescription A mode of acquiring ownership and other real rights or losing rights or actions to enforce such rights through the lapse of time, in the manner laid down by law (Rabuya, Property, 2021, p. 794).
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a.
Ordinary Acquisitive Prescription Requires possession of things in good faith and with just title for the time fixed by law (Art. 1117, NCC).
ii. Capacity to acquire by prescription; iii. Object must be susceptible of prescription; iv. In the concept of an owner; and v. It must be public, peaceful and uninterrupted.
Requisites: i. Possession in good faith. In its positive aspect, the good faith of the possessor consists in the reasonable belief that the person from whom he received the thing was the owner thereof, and could transmit his ownership. In its negative aspect, it consists in the ignorance of the possessor of any flaw which would invalidate his title or mode of acquisition (Art. 1127 and 1128, 526, NCC). ii. Just title; There is just title when the adverse claimant came into possession of the property through one of the modes recognized by law for the acquisition of ownership or other real rights, but the grantor was not the owner or could not transmit any right and that the title is true and valid (Arts. 1129 and 1130, NCC). iii. Within the time fixed by law. (4 years for movables and 10 years for immovables); iv. In the concept of an owner; v. It must be public, peaceful and uninterrupted; vi. Capacity to acquire by prescription; and, vii. Object must be susceptible of prescription
Acquisitive Prescription is based on the assertion of a usurper of an adverse right for such a long period of time, uncontested by the true owner of the right, as to give rise to the presumption that the latter has given up such right in favour of the former (Tolentino, Civil Code of the Philippines, Vol. IV, p. 2). Prescription of ownership and other real rights Period of Prescription: Movables. (Art. 1132, NCC): The ownership of movables prescribes through uninterrupted possession of four years in good faith. (Ordinary) The ownership of personal property also prescribes through uninterrupted possession for eight years, without need of any other condition. (Extraordinary) As to the right to recover personal property lost or illegally deprived of or those acquired in public sale, fair, market or from merchant stores, Articles 559 and 1505 of the Civil Code shall apply. Immovables
b. Extraordinary Prescription
Acquisitive
Acquisition of ownership and other real rights without need of title or of good faith or any other condition (Art. 1137, NCC). Requisites: i. Within the time fixed by law (8 years for movables, 30 years for immovable);
Ownership and other real rights over immovable property are acquired by ordinary prescription through possession of ten years (Art. 1134, NCC). Ownership and other real rights over immovables also prescribe through uninterrupted adverse possession thereof for thirty years, without need of title or of good faith (Art. 1137, NCC).
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Rules for the computation of time necessary for prescription: 1. The present possessor may complete the period necessary for prescription by tacking his possession to that of his grantor or predecessor in interest. 2. It is presumed that the present possessor who was also the possessor at a previous time, has continued to be in possession during the intervening time, unless there is proof to the contrary. 3. The first day shall be excluded and the last day included (Art. 1138, NCC). 1. Distinctions Between Acquisitive and Extinctive Prescription Acquisitive Prescription Requires positive action of the possessor who is not the owner. Applicable to ownership and other real rights. Results in the acquisition of ownership or other real rights in a person as well as the loss of said ownership or real rights in another. Can be proven under the general issue without its being affirmatively pleaded.
Extinctive Prescription Requires inaction of the owner out of possession or neglect of one with a right to bring his action. Applicable to all kinds of rights, whether real or personal. Merely results in the loss of a real or personal right, or bars the cause action to enforce said right. Should be affirmatively pleaded and proved to bar the action or claim of the adverse party.
Extinctive Prescription It is the loss or extinguishment of property rights or actions through the possession by another of a thing for the period provided by law or through failure to bring the necessary action to enforce one’s right within the period fixed by law (Art. 1106 and 1339, NCC).
a. Characteristics: i.
One does not look to the act of the possessor but the neglect of the owner; ii. Requires inaction of the owner or neglect of one with a right to bring his action; iii. Applies to all kinds of rights, whether real or personal; iv. Produces the extinction of rights or bars a right of action; v. Results in the loss of a real or personal right, or bars the cause of action to enforce said right; and vi. Should be affirmatively pleaded and proved to bar the action or claim of the adverse party. b. Requisites: i.
Capacity to acquire by prescription; ii. The thing is capable of acquisition by prescription; iii. Possession of the thing under certain conditions; and iv. Lapse of time as provided for by law. 2. Disntinctions Between Prescription and Laches LACHES Concerned with effect of delay.
the
Extinctive
PRESCRIPTION Concerned with the fact of delay.
Question of inequity of permitting a claim to be enforced, this inequity being founded on some subsequent change in the condition or the relation of the parties.
A question or matter of time.
Equity; Not statutory
Statutory
Need not specifically pleaded.
Cannot be availed of unless it is specifically pleaded as an affirmative allegation.
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PRESCRIPTION OF ACTIONS PRESCRIPTIVE PERIOD Imprescriptible
5 years
ACTIONS To declare an inexistent or void contract.
Actions against the co-heirs for warranty of solvency the debtor in credits assigned in partition.
To quiet title. To demand a right of way. To bring an action for abatement of public nuisance.
Action for the declaration of the incapacity of an heir. (devisee or legatee) to succeed.
To enforce a trust. Probate of a will. To recover possession of a registered land under the land registration act by the registered owner. 30 years
All other actions whose period are not fixed by law, counted from the time the right of action accrues. 4 years
Real actions over immovables. (but not foreclosure) without prejudice to the acquisition of ownership or real rights by acquisitive prescription Actions upon contract.
a
Action to claim rescission of contracts.
written
Annulment of contracts for vice of consent.
Actions upon an obligation created by law.
Actions upon a Quasi- delict. Action to revoke or reduce donations based on birth, appearance or adoption of a child.
Actions upon a judgment from the time judgment becomes final. Actions among co-heirs to enforce warranty against eviction in partition. Mortgage action. 8 years
6 years
Action to recover movables without prejudice to acquisition of title for a shorter period or to the possessor’s title under Art. 559, 1505 and 1133. Actions upon an (verbal) contract. Actions upon contract.
a
oral quasi-
Action to revoke donations due to non-compliance of conditions. Action to rescind partition of deceased’s estate on account of lesion.
(Art. 1141). 10 years
Action for annulment of marriages. (except on the ground of insanity) and for legal separation counted from the occurrence of the cause.
Actions upon an injury to the rights of the plaintiff. (not arising from contract). 3 years
Actions under the eight hour labor law. Actions to recover losses in gambling. Money claims as a consequence of employeremployee relationship. Action to impugn legitimacy of a child if the husband or his heirs reside abroad.
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Prescription, when applicable a.
b.
h.
By offender. Movables possessed through a crime can never be acquired through prescription by the offender (Art. 1133, NCC).
c.
Actions to demand right of way. The easem*nt of right of way may not be acquired through prescription (Ronquillo vs. Roco, G.R. No. L-10619, February 28, 1958).
d.
To abate a nuisance. The abatement of a nuisance does not preclude the right of any person injured to recover damages for its past existence (Art. 697, NCC). Lapse of time cannot legalize any nuisance, whether public or private (Art. 698, NCC).
e.
Interruption of Prescription of actions 1. It is filed in court; 2. There is a written extrajudicial demand by the creditor; and 3. Written acknowledgement of the debt by the debtor (Art. 1155, NCC).
Registered lands. An action to recover a registered land by the owner (Sec. 47, P.D. No. 1529); and Right to petition for the issuance for the issuance of a Writ of Possession filed by the applicant for registered land (Sec. 44, Act No. 496).
Action to quiet title if plaintiff is in possession. If the plaintiff is in possession of property - action does not prescribe (Sapto vs. Fabiana, G.R. No. L-11285, May 16, 1958).
f.
Void contracts. (Art. 1410, NCC)
g.
Action to demand partition distinguished from laches.
as
No prescription shall run in favor of a coowner or co-heir against his co-owners or co-heirs so long as he expressly or impliedly recognizes the co-ownership (Art. 494, NCC).
Property of public dominion. (Heirs of Mario Malabanan vs. Republic, G.R. No. 179987, September 3, 2013)
IV. LAND TITLES AND DEEDS Land Title Evidence of the right of the owner or the extent of his interest and by means of which he can maintain control, and as a rule, assert his right to exclusive possession and enjoyment of the property (Evangelista, et.al., vs. Santiago, G.R. No. 157447. April 29, 2005). Deed A written instrument executed in accordance with law, wherein a person grants or conveys to another certain land, tenements or hereditaments (Pena, Registration of Land Titles and Deeds, 2008, p. 4). Land Registration A judicial or administrative proceeding whereby a persons’ claim over a particular land is determined and confirmed or recognized so that such land and the ownership thereof may be recorded in a public registry (Agcaoili, O., Property Registration Decree and Related Laws, 2011). In its strictest acceptation, it is the entry made in the property registry, which records solemnly and permanently the right of ownership and other real rights (Cheng vs. Genato, G.R. No. 129760, December 29, 1998). Land laws 1.
Public Land Act (C.A. No. 141, as amended)
a.
RA No. 11573
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Agricultural Free Patent Reform Act (RA No. 11231) Land Registration Act (Act No. 496) Cadastral Act (Act No. 2259, as amended) Property Registration Decree (PD 1529, as amended) a. RA No. 11573 Act Authorizing the Issuance of Free Patents to Residential Lands (RA No. 10023) Indigenous Peoples Right Act or IPRA of 1997 (R.A. No. 8371) b.
2. 3. 4.
5. 6.
Purpose of Registration in General: 1. 2.
3. 4.
To bind the land and third persons; (Aznar Brothers Realty vs. CA and Anying, et. al., G.R. No. 128102, March 7, 2000) Protection of innocent third persons; (Evangelista vs. Montano, et al., supra, G.R. No. L-5567, May 29, 1953) Certainty and incontestability in titles to land; (Estrellado vs. Martinez, G.R. No. L-23847, Nov. 18, 1925) Operates as a notice to the whole world; and (In Rem under sec. 2, P.D. 1529) (Gatioan vs. Gafud, G.R. No. L-21953, March 28, 1969)
General rule: A person dealing with registered land has a right to rely upon the fact of the Torrens Certificate of Title and to dispense with the need of inquiring further. Exception: When the party concerned has actual knowledge of facts and circ*mstances that should impel a reasonably cautious man to make such further inquiry (Crisostomo vs. Court of Appeals, GR No. 91383, May 31, 1991). Notes: 🕮 Registration does not vest title. 🕮 It is not a mode of acquiring ownership. 🕮 It is merely evidence of such title over a particular property. 🕮 Registration does not give the registrant a better right than what the registrant had prior to the registration (Agcaoili, O., Property Registration Decree and Related Laws, 2006, p. 62).
A. TORRENS SYSTEM 1. General Principles Torrens system Robert Torrens)
(Founded
by
Richard
A system for registration of land under which, upon the landowner’s application, the court may, after appropriate proceedings, direct the issuance of a certificate of title (Aquino, Land Registration and Related Proceedings, 2007, p.1 citing Black’s Dictionary). The Torrens System is not a means of acquiring titles to lands; it is merely a system of registration of titles to lands. Registration of a piece of land under the Torrens System does not create or vest title, because it is not a mode of acquiring ownership. A certificate of title is merely evidence of ownership or title over the particular property described therein. It cannot be used to protect a usurper from the true owner; nor can it be used as a shield for the commission of fraud; neither does it permit one to enrich himself at the expense of others (Lorzano vs. Tabayag, Jr., G.R. No. 189647, February 6, 2012). The Torrens system does not create or vest title. It only conforms and records title already existing and vested. It cannot be a shield for the commission of fraud. It does not protect a usurper from the true owner. It does not permit one to enrich himself at the expense of another (Purisima vs. Purisima, G.R. No. 200484, November 18, 2020, J. Hernando). NOTE: It was later amended and superseded by P.D. 1529, which took effect on June 11, 1978, otherwise known as the Property Registration Decree (PD 1529). Nature of the Torrens System 1. It is judicial in character; 2. The proceeding is in rem (enforceable against the whole world); 3. As to the matter of initiating the proceeding, it is voluntary in character;
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4. It is administrative and compulsory under Section 103 of P.D. No. 1529; and 5. It is conclusive against the whole world including the government. Purposes of the Torrens system To quiet title to land; to put a stop forever to any question of the legality of the title, except claims which were noted, at the time of registration, in the certificate, or which may arise subsequent thereto (Legarda and Prieto vs. Saleeby., G.R. No. L-8936, October 2, 1915). 2. To provide security of ownership, avoid possible conflicts of title in and to real property (Sps. Peralta vs. Heirs of Abalon, G.R. No. 183448, June 30, 2014). 3. To facilitate transactions relative to land giving the public the right to rely upon the face of the transfer Certificate of Title (TCT) and to dispense with the need of inquiring further, except when fraud is attendant (Republic vs. Umali, G.R. No. 80687, April 10, 1989). 4. To guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized (Agcaoili, O., Property Registration Decree and Related Laws, 2006, p. 8). 1.
Advantages of the Torrens System 1. It relieves the land of unknown liens or claims against it; 2. It substituted security for insecurity; 3. It reduced the cost of conveyances from pounds to shillings and the time occupied from months to days; 4. It exchanged brevity and clearness for obscurity and verbiage; 5. It simplified ordinary dealings on land that one may transact his own conveyancing; 6. It affords protection against fraud; 7. It restored just value on estates, held under good holding titles, but depreciated, in consequence of some blur or technical defect in title, and barred the reoccurrence of such similar faults;
8. No encumbrance, lien, or adverse claim can affect the land unless registered in the Registry book and annotated on the owner’s duplicate certificate; and 9. An assurance fund is provided to answer for damages which may be incurred by anyone deprived of his property through fraud or the operation of the Property Registration Decree (Pena, Registration of Land Titles and Deeds, 2008, p. 45-46). TORRENS TITLE Certificate of ownership issued by the land Register of Deeds, naming and declaring the owner of the real property described therein, free from all liens and encumbrances except such as may be expressly noted thereon or otherwise reserved by law (Pena, Registration of Land Titles and Deeds, 2008, p. 190). Effect: It can be conclusive against the whole world, including the government, and to a holder thereof in good faith it is guaranteed to be indefeasible, unassailable, and imprescriptible. General rule: Title once registered cannot be impugned, altered, changed, modified, enlarged and cannot be defeated by prescription. Exception: Subject to the right of a third person on principle of equity. Registration of lands under the Torrens System, by itself, cannot convert public lands into private lands (Chavez vs. PEA, G.R. No. 133250, May 6, 2003). Nature of Torrens Title 1. Cannot be collaterally attacked; 2. The issue of validity of a Torrens title, whether fraudulently issued or not, may be posed only in an action brought to impugn or annul it; 3. Conclusive evidence of ownership (Pena, Registration of Land Titles and Deeds, 2008, p. 190-192); 4. The title issued is indefeasible and cannot be lost by prescription (Pena, Registration of Land Titles and Deeds, 2008, p. 48-49).
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Probative Value Torrens Title may be received evidence in all courts of the Philippines and shall be conclusive as to all matters contained therein principally the identity of the owner of the covered land thereby and identity of the land (Pena, Registration of Land Titles and Deeds, 2008, p. 217). Certificate of Title It is mere evidence of ownership. It is not the title to the land itself, but a copy of the decree of registration. It is not a source of right. It merely confirms or records a title already existing, and the mere possession thereof does not make one the true owner of the property. 1. It cannot be defeated by adverse, open and notorious possession neither can it be defeated by prescription. 2. It cannot be collaterally attacked. 3. The Certificate of Title is indefeasible and imprescriptible and all claims to the parcel of land are quieted upon issuance of the said certificate. 4. General rule: A person dealing with registered land may safely rely upon the correctness of the Certificate of Title (CoT) issued thereof and the law will in no way oblige him to go beyond the CoT to determine the condition of the property (Dela Cruz vs. Dela Cruz, G. R. No. 146222, January 15, 2004). Exception: When the party concerned has actual knowledge of facts and circ*mstances that should impel a reasonably cautious man to make such further inquiry (Crisostomo vs. Court of Appeals, GR No. 91383, May 31, 1991). Types of Torrens Certificate of Title: 1. Original Certificate of Title -The first title issued in the name of the registered owner by the Register of Deeds covering a parcel of land which had been registered by virtue of a judicial or administrative proceeding.
2. Transfer Certificate of Title - The title issued by the ROD in favor of the transferee to whom the ownership of the already registered land had been transferred by virtue of a sale or other modes of conveyance (Sec. 43, P.D. 1529). General rule: A title once registered cannot be impugned, altered, changed, modified, enlarged, or diminished. It shall not be subject to collateral attack. Exception: Direct proceeding permitted by law, usually for the protection of innocent third persons. Note: A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law (Sec. 48, P.D. 1529). Effects of Registration under the Torrens System (Three Guiding Principles) The Mirror Principle The register is supposed to reflect the correct legal situation on the parcel; the register should reflect as accurately as possible the true state of title to land so that persons who propose to deal with land can discover all the facts relative to the title. Two Components of “Mirror Principle” 1. Certainty to the Identity of the Land the identity or metes and bounds of the land is accomplished through a survey; survey is a requirement before a land can be registered. Under CA 141 Sec. 8, only the following lands can be surveyed: a. Declared open to disposition or concession; b. Delimited and classified; c. Not reserved for public or quasi-public use; d. Not appropriated by the government; or e. Not private property.
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2. Certainty as to the Ownership of the Land - the identity of the landowners is ensured during original registration proceedings, cadastral registration proceedings, or through application for a public land grant; the personal circ*mstances of applicants are secured during the proceedings (Pena, Registration of Land Titles and Deeds, 2008, p. 265-266). Exceptions to the Applicability of the Mirror Principle 1) Purchaser acted in bad faith; 2) When the purchaser or mortgagee is a Financing institution; 3) Banks, as their business is one affected with public interest; 4) Where a person buys land not from the registered owner but from one whose right to the land has been merely Annotated on the Certificate of Title; 5) Purchaser of land where the certificate of title contains a notice of Lis pendens; 6) Sufficiently strong indications to impel closer inquiry into the location, boundaries, and condition of the lot; or 7) Purchaser with full knowledge of flaws and defects in the title. The Curtain Principle (or Indefeasibility of Titles) The principle means that the current certificate of title contains all the information about the title and it is not necessary for an interested person such as a potential purchaser to worry about any past dealings with the property (Sps. Cusi vs. Domingo, G.R. No. 195825, February 27, 2013). General rule: A historical search to verify that the title is good is unnecessary. Exceptions: (1) When the party concerned has actual knowledge of facts and circ*mstances that should impel a reasonably cautious man to make further inquiry; or (2) Where there is fraud.
The Insurance or Guarantee Principle The principle means that an insurance fund is in place to compensate anyone who suffers as a result of a mistake being made concerning the validity or accuracy of a title (Sec. 95, P.D. 1529). The idea behind the Torrens System is that the registry must guarantee the accuracy of every title to the land. If a result of human error, there is a mistake about the title to a piece of land and someone suffers a loss as a result they will be compensated by the fund. Exceptions to the 3 principles of the Torrens System a) Statutory liens and restrictions; b) Liens, claims, or rights which, under the law, are not required to appear of record in the Registry of Deeds; c) Unpaid real estate taxes levied and assessed within 2 years; d) Public highways/canals or private way if the title does not state that the boundaries of such highway have been determined; e) Disposition pursuant to the Agrarian Reform Law; f) Registered lands which are subject to burdens and incident as may arise by operation of law; g) Rights incidental to marital relation; h) Landlord and tenant relationship; i) Change the laws of descent; j) Restriction on Patents; k) Deferred Indefeasibility; l) Reconveyance; m) Reversion; or n) Caveat Emptor. Deferred Indefeasibility In Decree – the case cannot be reopened except if such decree was obtained by actual fraud, action should be filed within 1 year after the issuance of decree (Sec. 32, P.D. 1529).
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Constitutional Limitations
B. REGALIAN DOCTRINE (Jura Regalia)
Art. XII, Sec. 3 of the 1987 Constitution classified
Constitutional Basis
lands of the public domain into the following:
1. Agricultural – Those public lands acquired from Spain which are not timber or mineral lands (Mapa vs. Insular Government, G.R. No. L3793, February 19, 1908). 2. Forest or timber – P.D. No. 705 Sec. 3 defines the following:
All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State.
permanent forest or forest reserves, and forest reservations.
With the exceptionof agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State (Sec. 2, Par. (1), Article XII of the 1987 Constitution).
Public forest – mass of lands of the public domain
Concept
Forest lands – include the public forest, the
which has not been the subject of the present system of classification for the determination of which lands are needed for forest purposes and which are not.
Permanent forest or forest reserves – those lands of the public domain which have been the subject of the present system of classification and determined to be needed for forest purposes.
Note: Under P.D. No. 705, lands, which are 18% in slope, are not suitable to become alienable and disposable. As such, lands, which are already classified as alienable and disposable, revert to forestlands if they are 18% in slope. 3.
Mineral lands – Any area where mineral resources are found (R.A. No. 7923, Mining Act of 1995).
4.
National Parks – A forest reservation essentially for national wilderness character which has been withdrawn from settlement, occupancy or form of exploitation (RA No. 7586, National Integrated Protected Areas System Act).
All lands not otherwise appearing to be clearly within private ownership are presumed to belong to the State. No public land can be acquired by private persons without any grant, express or implied, from the Government. It is indispensable, therefore, that there is a showing of a title from the State. Occupation of public land in the concept of owner, no matter how long, cannot ripen into ownership and be registered as title (Republic vs. Santos III, G.R. No. 160453, November 12, 2012). Regalian Doctrine reserves to the State all minerals that may be found in public and even private land devoted to agricultural, industrial, commercial, residential or (for) any purpose other than mining. Thus, if a person is the owner of agricultural land in which minerals are discovered, his ownership of such land does not give him the right to extract or utilize the said minerals without the permission of the State to which such minerals belong (Republic vs. CA and Dela Rosa, G.R. No. No. L-43938, April 15, 1988). There is a presumption that all lands of the Public Domain belong to the State, and the burden of proof to overcome the presumption of ownership of lands of the public domain is on the person applying for registration (San Pedro, V., Essentials in Land Registration, 2020, p. 23-24).
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Application for Agricultural Free Patents File application before the Community Environment and Natural Resources Office (CENRO) of the DENR. For provinces with no CENRO, application shall be filed with the Provincial Community Environment and Natural Resources Office (PENRO). In case of conflicting claims among different claimants, the parties may seek the proper administrative and judicial remedies (Sec. 3, RA No. 11573). Exception to the Regalian Doctrine 1.
The Regalian Doctrine does not negate native title to lands held in private ownership since time immemorial (Cruz vs. Secretary of Environment and Natural Resources, G.R. No. 135385, December 6, 2000). Native title refers to ICCs/IPs' preconquest rights to lands and domains held under a claim of private ownership as far back as memory reaches. These lands are deemed never to have been public lands and are indisputably presumed to have been held that way since before the Spanish Conquest (Sec. 3 [l], R.A. No. 8371). Time immemorial possession for native title refers to a period when as far back as memory can go, certain ICCs/IPs are known to have occupied, possessed in the concept of owner, and utilized a defined territory devolved to them, by operation of customary law or inherited from their ancestors, in accordance with their customs and traditions (Sec. 3 [p], R.A. No. 8371). The Indigenous Peoples’ Rights Act of 1997 or the IPRA Law categorically declares ancestral lands and domains held by native title as never to have been public land. Domains and lands held under native title are, therefore, indisputably presumed to have never been public lands and are private.
C. NATIONALITY RESTRICTIONS ON LAND OWNERSHIP General rule: Private lands can be transferred or conveyed only to: 1. Filipino citizens; or 2. Corporations or associations incorporated in the Philippines, at least 60% of whose capital is owned by Filipino citizens. Exceptions: 1. In intestate succession, where an alien heir of a Filipino is the transferee of private land (Sec. 7, Art. XII, 1987 Constitution). 2. A natural born citizen of the Philippines who has lost his Philippine citizenship may be a transferee of private land, subject to limitation provided by law (Sec. 8, Art. XII, 1987 Constitution). Hence, land can be used only for residential purposes. In this case, he only acquires a derivative title. 3. Foreign states may acquire land but only for embassy and staff residence purposes. 4. Filipino citizenship is only required at the time the land is acquired. Thus, loss of citizenship after acquiring the land does not deprive ownership. NOTE: Restriction against aliens only applies to acquisition of ownership. Therefore: 1. Aliens may be lessees or usufructuaries of private lands. 2. Aliens may be mortgagees of land, as long as they do not obtain possession thereof and do not bid in the foreclosure sale. 3. Land tenure is not indispensable to the free exercise of religious profession and worship. A religious corporation controlled by non-Filipinos cannot acquire and own land, even for religious purposes (Bernas, The 1987 Constitution of the Republic of the Philippines: A Commentary, 2009 ed., pp. 1206).
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D. ORIGINAL REGISTRATION It takes place when the title to land is made of public record for the first time in the name of its lawful owner. It refers to the registration procedure from the filing of the application to issuance of the original certificate of title based on the decree of registration, patent, award, or grant (Sec. 14, P.D. 1529). Nature of Original Registration Judicial proceedings for the registration of lands throughout the Philippines shall be in rem and shall be used based on the Torrens System. Proceeding is brought before the Courts of First Instance to determine title or ownership of land on the basis of an application or answer opposition by a claimant in a cadastral registration (Sec. 2, P.D No. 1529). The Torrens System provides a mechanism to realize the purpose of obtaining the original registration of title to land. The person asserting title, referred to as applicant, has to initiate and apply before the proper court. Thereafter, a hearing is conducted to determine whether or not the applicant has title to the property and if he does have, a decree of confirmation and registration is entered to bind the land and quiet the title. It is incumbent upon the Administrator of land Registration Authority to issue the corresponding decree in the prescribed form of “Original Certificate of Title.” (Executive Order No. 292, Administrative Code of 1987). ORDINARY REGISTRATION (Under Act 496, as amended by P.D. No. 1529 and R.A. No. 11573) Nature of the Proceeding (In Rem) Land registration or judicial titling is an action in rem or property (subject matter of registration) and seeks judgment with respect to as against the whole world (Sec. 2, P.D. No. 1529).
Jurisdiction 1) The Regional Trial Courts are generally vested with exclusive original jurisdiction over judicial titling (B.P. 129 as amended by R.A. No.7691, otherwise known as the “Judiciary Reorganization Act of 1980”). 2) The RTC has jurisdiction where the assessed value of the property involved exceeds Php400,000.00. (Sec. 1, R.A. No. 11576). Register of Deeds (RD) Constitutes a public repository of records of instruments affecting registered or unregistered lands and chattel mortgages in the province or city wherein such office is situated (Sec. 10, P.D. 1529). RD’s duty to register is purely ministerial The Register of Deeds is entirely precluded by Sec. 10 of P.D. No. 1529 (formerly Sec. 4, R.A. 1151) from exercising his personal judgment and discretion when confronted with the problem of whether to register a deed or instrument on the ground that it is invalid. The determination of whether a document is valid or not is a function that belongs properly to a court of competent jurisdiction (Aquino, Land Registration and Related Proceedings, p.11, 2007). When RD may deny registration: 1) Where there are more than one copy of the owner’s duplicate certificate of title and not all such copies are presented to the Register of Deeds. 2) Where the voluntary instrument bears on its face an infirmity. Thus, if the conjugal character of the property subject of a deed of donation by the husband “is assumed” and 2/3 portion of the property was donated by the husband alone, then such donation clearly exceeds the 1/2 share that pertains to him.
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3) Where the validity of the instrument sought
to be registered is an issue in a pending suit. The registration may be suspended to await the final outcome of the case and the rights of the interested parties could be protected in the meantime by filing the proper notice of lis pendens (Aquino, Land Registration and Related Proceedings,2007, p.11-12).
1. WHO MAY APPLY Section 6 of R.A. No. 11573 provides that the following persons may file at any time, in the proper RTC in the province where the land is located, an application for registration of title to land, not exceeding 12 hectares, whether personally or through their duly authorized representatives: 1) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of alienable and disposable lands of the public domain not covered by existing certificates of title or patents under a bona fide claim of ownership for at least twenty (20) years immediately preceding the filing of the application for confirmation of title except when prevented by war or force majeure. They shall be conclusively presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under this section; or 2) Those who have acquired ownership of private lands or abandoned riverbeds by right of accession or accretion under the provisions of existing laws; or 3) Those who have acquired ownership of land in any other manner provided for by law. Requisites for Registration (Section 6 [1], Republic Act No. 11573) (a) The land applied for is alienable and disposable lands of the public domain;
(b) The land is not covered by existing certificate of title or patents; (c) That the applicant, by themselves or through their predecessors-in-interest have been in open, continuous, exclusive, and notorious possession and occupation; (d) That such possession and occupation is under a bona fide claim of ownership for at least 20 years immediately preceding the filing of application. Essential Requisites to Acquire Property by Accretion under Art. 457, NCC (Section 6 [2], Republic Act No. 11573) (a) That the accumulation of soil or sediment be gradual and imperceptible; (b) That it be the result of the action of the water of the rivers; and (c) That the land where the accretion takes place is adjacent to the bank of the river. Notes: 🕮 Riparian owner acquires automatic ownership of the abandoned bed without need of formal act of acquisition. 🕮 For accretion or alluvion to form part of registered land of riparian owner, the gradual alluvial deposits must be due to the effects of the river’s current. Deposits made by human intervention are excluded. Other Modes of Registration o o
Co-ownership: All the co-owners shall file the application jointly. Land sold under pacto de retro: Vendor a retro may file an application for the original registration of the land: Provided, however, that should the period for redemption expire during the pendency of the registration proceedings and ownership to the property consolidated in the vendee a retro, the latter shall be substituted for the applicant and may continue the proceedings.
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o
Trust: A trustee on behalf principal may apply for registration of any land held in the trustee, unless prohibited instrument creating the trust.
of the original trust by by the
Contents of decree of registration Every decree of registration issued shall bear the following: a)
2. DECREE OF REGISTRATION It is a document prepared in the prescribed form by the LRA Administrator, signed by him in the name of court, embodying the final disposition of the land by the court and such other data found in the record, including the name and other personal circ*mstances of the applicant, the technical description of the property, liens and encumbrances affecting it, and such other matters as determined by the court in its judgment.
b)
c) d) e)
It is issued by the Administrator of Land Registration who signs the decree of registration and attests the date and hour or its issuance (Sec. 31, P.D. 1529). The decree becomes final and incontrovertible after one (1) year from the date of its entry (Sec. 32, P.D. No. 1529). Decree cannot be issued pending appeal General Rule: The law does not limit the period within which the court may order the issuance of a decree of registration. Exception: Decree of Registration cannot be issued pending appeal. Effect of decree of registration 1) It binds the land, quiets title, subject only to such exceptions or liens as may be provided by law. 2) It is conclusive upon all persons including the national government and all branches thereof. Such conclusiveness does not cease to exist when the title is transferred to a successor (Sec. 31, P.D. 1529).
The date, hour and minute of its entry, and shall be signed; State whether the owner is married or unmarried, and if married, the name of the husband or wife; However, that if the land adjudicated by the court is conjugal property, the decree shall be issued in the name of both spouses; If the owner is under disability, it shall state the nature of disability, and if a minor, his age; Description of the land as finally determined by the court; and Set forth the estate of the owner, and also, in such manner as to show their relative priorities, all particular estates, mortgages, easem*nts, liens, attachments, and other encumbrances, including rights of tenantfarmers, if any, to which the land or owner's estate is subject, as well as any other matters properly to be determined in pursuance of this Decree (Sec. 31, P.D. No. 1529).
3. REVIEW OF DECREE OF REGISTRATION; INNOCENT PURCHASER FOR VALUE; RIGHTS OF IPV General rule: The decree of registration shall not be reopened or revised by reason of absence, minority, or other disability of any person adversely affected thereby, nor by any proceeding in any court for reversing judgments. Exception: Courts may reopen proceedings already closed by final decision or decree when application for review is filed not later than one year from and after the date of the entry of such decree of registration by the party aggrieved or deprived of land or of any estate or interest therein by such adjudication or confirmation of title obtained by actual fraud.
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Requisites: 1. The petitioner must have an estate or interest in the land; 2. He must show actual or extrinsic fraud in the procurement of the decree of registration; 3. The petition must be filed within one year from the issuance of the decree by the Land Registration Authority; and 4. The property has not yet passed to an innocent purchaser for value (Sec. 38, Act No. 496). Exception to exception: In no case shall such petition be entertained by the court where an innocent purchaser for value has acquired the land or an interest therein, whose rights may be prejudiced (Sec. 32, P.D. 1529). Innocent Purchaser for Value (IPV) One who buys property of another, without notice that some other person has a right to, or interest in, such property, and pays a full and fair price for the same, at the time such purchase, or before he has notice of the claim or interest of some other person in the property (Yap vs. Republic, G.R. No. 199810, March 15, 2017). One’s willful refusal to believe that a defect exists in the vendor’s title or the possibility of its existence will not make them innocent purchasers for value if a defect indeed occurs (Ende v. Roman Catholic Prelate, G.R. No. 191867, December 6, 2021, J. Hernando). Rights of IPV An innocent purchaser for value is entitled to the issuance of the deed of absolute sale and the transfer certificate of title in her favor, even if the disputed property has already been transferred to another due to a default in the third contract (Home Guaranty Corp. v. Manlapaz, G.R. No. 202820, January 13, 2021).
Effect of Failure to File Upon the expiration of said period of one year, the decree of registration and the certificate of title issued shall become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy by action for damages against the applicant or any other persons responsible for the fraud (Sec. 32, P.D. No. 1529). E. AN ACT IMPROVING THE CONFIRMATION PROCESS FOR IMPERFECT LAND TITLES (RA 11573), AMENDING CA 141 AND PD 1529 [SEE REPUBLIC V. PASIG RIZAL CO., INC., G.R. NO. 213207, FEBRUARY 15, 2022] Republic v. Pasig Rizal Co. Inc., G.R. No. 213207, February 15, 2022 Guidelines on the application of RA 11573 1. RA 11573 shall apply retroactively RA 11573 shall apply retroactively to all applications for judicial confirmation of title which remain pending as of September 1, 2021, or the date when RA 11573 took effect. 2. Claim of ownership for at least 20 years immediately preceding the filing of application shall be sufficient for purposes of judicial confirmation of title Beginning September 1, 2021, proof of “open, continuous, exclusive and notorious possession and occupation of alienable and disposable lands of the public domain not covered by existing certificates of title or patents under a bona fide claim of ownership for at least 20 years immediately preceding the filing of the application for confirmation” shall be sufficient for purposes of judicial confirmation of title, and shall entitle the applicant to a decree of registration.
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The shortened 20-year period under the new Section 14(1) grants possessors the right to seek registration without having to comply with the longer period of 30 years possession required for acquisitive prescription under the Civil Code. a.
b.
Absence of copy of relevant issuance, certification of DENR geodetic engineer must state: (i) the LC Map number; (ii) the Project Number; and (iii) the date of release indicated in the LC Map; and (iv) the fact that the LC Map forms part of the records of the NAMRIA and is therefore being used by DENR as such.
c.
The DENR geodetic engineer must be presented as witness for proper authentication of the certification in accordance with the Rules of Court.
Classification of land as alienable and disposable immediately places it within the commerce of man
The final proviso of the new Sec. 14(1) that, “They shall be conclusively presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under this section.” unequivocally confirms that the classification of land as alienable and disposable immediately places it within the commerce of man, and renders it susceptible to private acquisition through adverse possession.
F. CERTIFICATE OF TITLE It is the true copy of the decree of registration or the transcription thereof and, similar to the decree, shall also be signed by LRA Administrator (Sec. 39, P.D. No. 1529).
Presentation of additional evidence on land classification status
It is an absolute and indefeasible evidence of ownership of the property in favor of the person whose name appears therein.
The RTC and CA are directed, upon proper motion or motu proprio, to permit the presentation of additional evidence on land classification status based on the parameters set forth in Sec. 7 of RA 11573.
It takes effect upon the date of entry thereof, and the land covered thereby becomes a registered land on that date (Sec. 40, P.D. No. 1529).
b.
a.
Sec. 7 supersedes the requirements in T.A.N. Properties and Hanover. At present, the presentation of the (i) approved survey plan (ii) bearing a certification signed by a duly designated DENR geodetic engineer (iii) stating that the land subject of the application for registration forms part of the alienable and disposable agricultural land of the public domain, shall be sufficient proof of its qualification as such, Provided that (iv) the certification bears references to: (a) the relevant issuance (e.g., Forestry Administrative Order, DENR Administrative Order, Executive Order, or Proclamation); and (b) the LC Map number covering the subject land.
Transfer Certificate of Title It is the subsequent certificate of title that may be issued by the Register of Deeds pursuant to any voluntary or involuntary instrument relating to the same land (Sec. 43, P.D. No. 1529). Attributes and Limitation a. Free from Liens and Encumbrances General rule: Every registered owner receiving a certificate of title in pursuance of a decree of registration, and every subsequent purchaser taking a certificate of title for value and in good faith, shall hold the same free from all encumbrances.
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Exceptions: The following encumbrances remain attached to the certificate of title: 1. Those noted on the Certificate; 2. Liens, claims or rights arising or existing under the laws and Constitution of the Philippines which are not by law required to appear of record in the Registry of Deeds in order to be valid against subsequent purchasers or encumbrancers of record.; 3. Unpaid real estate taxes levied and assessed within two years immediately preceding the acquisition of any right over the land by an innocent purchaser for value, without prejudice to the right of the government to collect taxes payable before that period from the delinquent taxpayer alone; 4. Any public highway or private way established or recognized by law, or any government irrigation canal or lateral thereof, if the certificate of title does not state that the boundaries of such highway or irrigation canal or lateral thereof have been determined; and 5. Any disposition of the property or limitation on the use thereof by virtue of, or pursuant to, Presidential Decree No. 27 or any other law or regulations on agrarian reform (Sec. 44, P.D. No. 1529). General incidents of registered land Registered land shall be subject to such burdens and incidents as may arise by operation of law. It is not relieved from the following: a) Any rights incident to the relation of husband and wife, landlord and tenant, b) Liability to attachment or levy on execution, or c) Liability to any lien of any description established by law on the land and the buildings thereon, or on the interest of the owner in such land or buildings, d) Any rights or liability arising from change of the laws of descent, e) The rights of partition between co-owners, f) The right to take the same by eminent domain,
g) Liability to be recovered by an assignee in insolvency or trustee in bankcruptcy under the laws relative to preferences, h) Any rights or liability created by law and applicable to unregistered land (Article 46, P.D. No. 1529). b. Incontrovertible and Indefeasible General Rule: Upon the expiration of one year from and after the entry of the decree of registration and the certificate of title, the said decree and certificate shall become incontrovertible and indefeasible (Sec. 32, P.D. No. 1529). Exceptions: 1. If previous valid title of the same land exists; 2. When the land covered is not capable of registration; or 3. When the acquisition of certificate is attended by Fraud. c. Registered Land Prescription
not
Subject
to
No title to registered land in derogation of the title of the registered owner shall be acquired by prescription or adverse possession (Sec. 47, P.D. No. 1529). d. Certificate of Title not subject to collateral attack A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or canceled except in a direct proceeding in accordance with law (Sec. 48, P.D. No. 1529). e. Includes Improvements on Land General Rule: Torrens Certificate of title covers the lands described therein, together with all the buildings and improvements existing thereon.
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Exceptions: 1. An express Reservation shall have been annotated on the certificate; 2. Public thoroughfares as were already in existence at the time title was acquired; 3. Navigate streams within the registered property unless the boundaries or such stream had been expressly delimited in the registration plan (Pena, N., Registration of Land Titles and Deeds, 2008). Persons entitled to Duplicate Certificate of Titles a. Registered owners; and b. Each co-owner (Sec. 41, P.D. No. 1529). Splitting, or Consolidation of Titles Splitting of Titles – owners of two or more parcels of land described in a certificate of title, may petition to cancel the certificate and issue in lieu thereof several new certificates each covering one or such number of parcels as the owner may desire. Consolidation of Titles – a registered owner of several distinct parcels of land in separate certificates may, if he desires, cause all his certificate be cancelled and in lieu thereof have a single certificate for the whole land (Sec. 49, P.D. 1529). G. SUBSEQUENT REGISTRATION It refers to any transaction affecting an originally registered land and which, if in order, is registered in the Office of the Registry of Deeds concerned (Sec. 51, P.D. 1529). a) Simple transfer of rights A person takes the interest of the registered owner of a parcel of land as the same welldefined parcel.
b) Transfers changes
of
rights
with
property
In this kind of transfer, the parcel as a property and the interest thereat changes, as a result of the subdivision or consolidation of land parcels. The existing registers have to be updated due to subsequent changes in the boundaries of the parcels (Tiamson, E., Land Registration in the Philippines, pp.3). General Principles The mere execution of deed of sale, mortgages, leases or other voluntary documents serves only as: 1. A contract between the parties, and 2. As evidence of authority to the Register of Deeds to register such documents. They do not, in themselves, affect a conveyance or encumbrance on the land. The XPN to this rule is if the instrument is a WILL. It is settled in this jurisdiction that a sale of real estate, whether made as a result of a private transaction or of a foreclosure or execution sale, becomes legally effective against third persons only from the date of its registration (Campillo v. CA, G.R. No. L-564483, May 29, 1984). 1. VOLUNTARY DEALINGS It refers to deeds, instruments or documents, which are the results of the free and voluntary acts of the parties thereto. Kinds of voluntary dealings 1. 2. 3. 4. 5. 6. 7. 8.
Sales, conveyances or transfer of ownership over the titled property; Real property mortgages; Lease; Pacto de retro sale; Extra-judicial settlement; Free patent/homestead; Powers of attorney; and Trusts (Aquino, Land Registration and Related Proceedings, 2007, p. 184).
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Registration An innocent purchaser for value of registered land becomes the registered owner the moment he presents and files a duly notarized and valid deed of sale, and the same day is entered in the book and at the same time he surrenders or presents the owner’s duplicate certificate of title covering the land sold. Presentment of Certificate of Title is required to record the deed in the registry and to make memorandum on title. For entry to be considered as registration, payment of fees mandatory. For the entry to be considered to have the effect of registration there is still a need to comply with all that is required for entry and registration, including the payment of the prescribed fees (Durawood vs. Bona, G.R. No. 179884, January 25, 2012). Conveyances and Registered Owner
other
Dealings
by
1) Sale of Registered Land The GR is that one who buys from a person who is not the registered owner is not a purchaser in good faith. But in deciding the question of good faith, the legal environment of each case must be considered. Purchaser in good faith is one who buys property of another without notice that some other person has a right to, or interest in such property and prays in full and fair price for the same, at the time of such purchase, and before he has notice of the claim or interest of some other person in the property (Inquimboy vs. Cruz, G.R. No. L-13953, July 26, 1960).
Even if the sale was made by the same person, if the second sale was made when such person was no longer the owner of the property, because it had been acquired by the first purchaser in full dominion, the second purchaser cannot acquire any right (Consolidated Rural Bank, Inc. vs. CA G. R. No. 132161, January 17, 2005). The provision on double sale, Article 1544 of the Civil Code is not applicable in a case of multiple sales by a single vendor. More specifically, it covers a situation where a single vendor sold one and the same immovable property to two or more buyers. Rules of Preference (Article 1544, NCC) in cases of Double Sale of an Immovable a. The first registrant in good faith; b. Should there be no entry, the first in possession in good faith; and c. In the absence thereof, the buyer who presents the oldest title in good faith. Prior registration of the subject property does not by itself confer ownership or a better right over the property. Article 1544 requires that before the second buyer can obtain priority over the first, he must show that he acted in good faith throughout (i.e., in ignorance of the first sale and of the first buyer’s rights) from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession. Double Title General Rule: Prior title prevails.
Double Sale
A land registration court has no jurisdiction to order the registration of the land already decreed in the name of another in an earlier land registration case (Heirs of Gonzaga vs. CA, G.R. No. 130841, February 26, 2008).
In cases of double sale, the property belongs to the purchaser who first registers the transaction in his name in the registry of property.
It applies to subsequent owners who derives his title from the earlier title (Sales Enterprise, Inc. vs. IAC, G.R. No. L-67451, September 28, 1987).
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Exception: When there is infirmity in the prior title (Azarcon vs. Vallarta, G.R. No. L-43679, October 28, 1980). Two apparently valid titles, which one held valid: The principle that the earlier title prevails over a subsequent one applies when there are two apparently valid titles over a single property. The existence of the earlier valid title renders the subsequent title void because a single property cannot be registered twice (Oliveros vs. SMC, G.R. No. 173531, February 1, 2012). Effect of Failure to register As between the parties to a contract of sale, registration is not necessary to make it valid and effective, for actual notice is equivalent to registration. The act of registration shall be the operative act to convey and affect the land (Sec. 50, Act No. 496). Ministerial Duty to Register Upon presentation of a deed of conveyance of a registered land, together with the grantor’s duplicate certificate, the register of deeds shall: a. Make out in the registration book a new certificate of title; b. Prepare and deliver to the grantee an owner’s duplicate certificate of title; c. Note upon the original and duplicate certificates the date of transfer, the volume and page of the registration book where the new certificate is registered, and a reference by number to the last prior certificate; d. Require the surrender of the grantor’s duplicate certificate for purposes of cancellation; e. Cancel likewise the original certificate and f. File and indorse in the manner required the deed of conveyance presented for registration (Sec. 57, Act. No. 496). The duties enjoined upon the register of deeds by Sec. 57 of the Land Registration Act are clearly ministerial and mandatory in character not only
as is indicated by the auxiliary “shall” but by the nature of such functions required to be performed by him (In re Consulta filed by Attorney Vicente J. Francisco on behalf of Domingo Cabantog, G.R. No. L45192, April 10, 1939). Registration of Forged Deeds Although forged documents are generally null and void, they can legally be the root of a valid title when an innocent purchaser for value intervenes. However, this does not apply where the owner still holds a valid and existing Certificate of Title covering the same property. Where the mortgage is admittedly a forgery and the registered owner was not shown to have been negligent or in connivance with the forger, the mortgage cannot be enforced against the owner (Pena, Registration of Land Titles and Deeds, 2008, p. 760). “As between two innocent persons, one of whom must suffer the consequences of the breach of trust, the one who made it possible by his act of confidence must bear the loss.” This is the principle of equity applied when the fraud was made possible by the owner’s act in entrusting the certificate of title to another (De Lara vs. Ayroso, G.R. No. L-6122, May 31, 1954). 2) Mortgages and Leases
Sec. 60, P.D. No. 1529 requires deeds of
mortgage or lease and all instruments which assign, extend, discharge or otherwise deal with the mortgage or lease to be registered, and such deeds shall take effect upon the title only upon registration. Unless recorded, such deeds are not binding on third persons even though they are binding between the parties. Discharge: Sec. 62, P.D. No. 1529 allows the discharge or cancellation of a mortgage or lease on registered land by means of an instrument executed by the mortgagee or lessee in a form sufficient in law, which shall be filed with the Register of Deeds who shall make the appropriate memorandum upon the certificate of title.
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Discharge is done by: a. Creditor executing a public instrument canceling or releasing the mortgage; and b. After foreclosure, by an order of the court and submission of a final certificate of sale which cancels the old title (Sec. 62, P.D. No. 1529). 2. INVOLUNTARY DEALINGS An involuntary [instrument] dealing is one pertaining to a transaction affecting lands in which the registered owner’s cooperation is not needed and which transaction may even be done against his will (Autocorp Group v. CA, G.R. No. 157553, September 8, 2004). Kinds of Involuntary Dealings 1.
Attachment (Sec. 69, P.D. 1529)
2. Adverse claims (Sec. 70, P.D. 1529)
3. Notice of lis pendens (Sec. 76, P.D. 1529) 4. Mandamus (Sec. 73, P.D. 1529) 5. Sale on execution of judgment or sales for taxes (Sec. 74, P.D. 1529) 6. Forfeiture (Sec. 75, P.D. 1529) 7. Expropriation (Sec. 85, P.D. 1529) 8. Auction sale on foreclosure of mortgage (Sec. 74, P.D. 1529) Effect of Registration Entry thereof in the day book of the Register of Deeds is sufficient notice to all persons even if the owner’s duplicate certificate of title is not presented to the Register of Deeds (Sec. 31, P.D. 1529). The law does not require the presentation of the owner’s duplicate certificate of title and considers the annotation of such instrument upon the entry book, as sufficient to affect the real estate to which it relates (Autocorp Group v. CA, G.R. No. 157553, September 8, 2004).
a. ADVERSE CLAIM It is a notice to third persons that someone is claiming an interest on the property or has a better right than the registered owner thereof, and that any transaction regarding the disputed land is subject to the outcome of the dispute. Whoever claims any part or interest in registered land adverse to the registered owner, arising subsequent to the date of the original registration, may, if no other provision is made in this Decree for registering the same, make a statement in writing setting forth fully his alleged right or interest, and how or under whom acquired, a reference to the number of the certificate of title of the registered owner, the name of the registered owner, and a description of the land in which the right or interest is claimed (Sec. 70, P.D. No. 1529). Section 70 of PD 1529 does not limit the issues that may be resolved by the trial court in a petition for cancellation of adverse claim (Atty. Dominguez v. Bank of Commerce, G.R. No. 225207, September 29, 2021). Period of effectivity: 30 days from the date of registration; lapse of the 30-day period does not result in the automatic cancellation of the adverse claim (a petition for cancellation must first be filed) (Sec. 70 P.D. 1529). Requisites for Valid Adverse Claim 1. The claimant’s right or interest in registered land must be adverse to the registered owner; 2. Such right or interest must have arisen subsequent to the date of original registration; and 3. No other provision is made in the Decree for the registration of such right or claim (Sec. 70, P.D. No. 1529; Arrazola vs. Bernas, G.R. No. L-29740, November 10, 1978).
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Formal Requisites of an Adverse Claim for Purposes of Registration 1. Adverse claimant must state the following in writing: a. His allege right or interest; b. How and under whom such alleged right or interest is acquired; c. The description of the land in which the right or interest is claimed; and d. The number of the certificate of title of the registered owner; 2. Such statement must be signed and sworn to before a Notary public; and 3. Claimant shall state his Residence or place to which all notices may be served upon him (Sec. 70, P.D. No. 1529). Cancellation Before lapse of 30 days a. By party in interest: by filing a petition in the proper RTC for cancellation b. By claimant: by filing a sworn petition withdrawing his adverse claim. After lapse of 30 days a. b.
By party in interest: by filing a verified petition for cancellation; No 2nd adverse claim based on the same ground may thereafter be registered by the same claimant.
After cancellation, no adverse claim shall be registered by the same claimant. Cancellation of the adverse claim is still necessary to render it ineffective; otherwise, the inscription will remain annotated and shall continue as a lien upon the property (Sajonas vs. CA, G.R. No. 128563, March 25, 2004). The register of Deeds cannot unilaterally cancel the adverse claim. There must be a court hearing for the purpose (Diaz-Dutante vs. Ong. G.R. No. 130352, November 9, 1998).
Purpose of Adverse Claim To apprise third persons that there is a controversy over the ownership of the land and to preserve and protect the right of the adverse claimant during the pendency of the controversy. Such is registered by filing a sworn statement with the RD of the province where the property is located, setting forth the basis of the claimed right together with other data pertinent thereto. Annotation is a measure designed to protect the interest of a person over a piece of real property where the registration of such interest or right is not otherwise provided for by Act 496, now PD 1529. It serves as a warning to third parties dealing with the said property that someone is claiming an interest on the same or a better right than the registered on the same or a better right than the registered owner, and that any transaction regarding the disputed land is subject to the outcome of the disputed land is subject to the outcome of the dispute. Subsequent sale of the property covered by a certificate of title cannot prevail over an adverse claim, duly sworn to and annotated on the certificate of title previous to the sale (Sajonas vs. CA, G.R. No. 102377, July 5, 1996). b. NOTICE OF LIS PENDENS It literally means a pending suit. The doctrine of lis pendens refers to the jurisdiction, power or control, which a court acquires over property involved in a suit, pending the continuance of an action, and until final judgment. Puposes of lis pendens 1. To protect the rights of the party causing the registration of the lis pendens; and 2. To advise 3rd persons who purchase or contract on the subject property that they do so at the peril and subject to the result of the pending litigation (Agcaoili, Property
172
Registration Decree and Related Laws: Land Titles and Deeds, 2006, p. 548).
Notice of lis pendens This is an announcement to the whole world that a particular real property is in litigation. The inscription serves as a warning that one who acquires an interest over litigated property does so at his own risk, or that he gambles on the result of the litigation of the property (Marasigan vs. IAC, G.R. No. L-69303, July 23, 1987). The doctrine of lis pendens is founded upon reason of public policy and necessity, the purpose of which is to keep the subject matter of the litigation within the power of the Court until the judgment or decree shall have been entered; otherwise, by successive alienations pending the litigation, its judgment or decree shall be rendered abortive and impossible of execution (Laroza, et al. vs. D Guia, G.R. L-45252, Jan. 31, 1985). No action to recover possession of real estate, or to quiet title thereto, or to remove clouds upon the title thereof, or for partition, or other proceedings of any kind of court directly affecting the title to land or the use or occupation thereof or the buildings thereon, and no judgment, and no proceeding to vacate or reverse any judgment, shall have any effect upon registered land as against persons other than the parties thereto, unless a memorandum or notice stating the institution of such action or proceeding and the court wherein the same is pending, as well as the date of the institution thereof, together with a reference to the number of the certificate of title, and an adequate description of the land affected and the registered owner thereof. Shall have been filed and registered (Sec. 76, P.D. No. 1529, Property Registration Decree). A notice of lis pendens is proper in the following actions: 1. 2. 3. 4.
To recover possession of real estate; To quiet title thereto; To remove clouds upon the title thereof; For partition; and
5. Any other proceeding of any kind in court directly affecting the title to the land or the use or occupation thereof or the building thereon (Sec. 76, P.D. No. 1529, Sec. 14, Rule 13, Rules of Court). Notice of lis pendens is inapplicable in the following actions: 1. Proceedings for the recovery of money judgments 2. Preliminary Attachments 3. Proceedings on the probate of wills 4. Administration of the estate of deceased persons 5. Levies on execution 6. Foreclosure Effects of Lis Pendens 1. Keeps the subject matter of the litigation within the power of the court until the entry of final judgment so as to prevent the defeat of the latter by successive alienations. 2. Binds the purchaser of the land subject of the litigation to the judgment or decree that will be promulgated thereon whether such a purchaser is a bona fide purchaser or not. 3. Does not create a non-existent right or lien (Carrasco vs. CA, G.R. No. 123672, Dec. 14, 2005). Cancellation of Lis Pendens General rule: Notice of Lis Pendens cannot be cancelled while the action is pending (Agcaoli, supra). Exceptions: 1. When it is shown that the notice is for the purpose of molesting the adverse party; 2. When it is shown that it is not necessary to protect the right of the party who caused the registration thereof (Sec. 77, P.D. No. 1529; Sec. 19, Rule 13, Revised Rules of Court);
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3. Where the evidence so far presented by the plaintiff does not bear out the main allegations of the complaints; 4. Where the continuances of the trial are unnecessarily delaying the determination of the case to the prejudice of the defendant; 5. Upon verified petition of the party who caused the registration thereof; or 6. It is deemed cancelled after final judgment in favor of the defendant, or other disposition of the action such as to terminate all rights of the plaintiff to property involved (Noblejas, 2007, p. 438439). A notice of lis pendens may be cancelled: 1. Upon order of the court; or 2. Upon action by the register of Deeds, upon verified petition of the party who caused the registration thereof (Sec. 77, P.D. No. 1529). Cancellation before final judgment May be done upon proper showing that the notice is for the purpose of molesting the adverse party, or that it is not necessary to protect the rights of the party who caused it to be recorded (Sec. 77, P.D. No. 1529). A mere incident to a court action and may therefore be ordered by the court having jurisdiction of it at any given time (certificate of finality issued by the court will not suffice; should be done with judicial authority (Agcaoili, Property Registration Decree and Related Laws: Land Titles and Deeds, 2006, p. 556). Cancellation after final judgment Deemed cancelled upon the registration of a certificate of the Clerk of Court in which the action or proceeding was pending stating the manner of disposal thereof.
Notice to be carried over in subsequent transactions In case of subsequent sales or transfers, the Registry of Deeds is duty bound to carry over the notice of lis pendens on all titles to be issued. Otherwise, if he cancels any notice of lis pendens in violation of his duty, he may be held civilly and even criminally liable for any prejudice caused to innocent third persons (Marasigan vs. IAC, G.R. No. L-69303, July 23, 1987). Notice of Insolvency Whenever proceeding in bankruptcy or insolvency, or analogous proceedings, are instituted against a debtor who owns registered land, it shall be the duty of the officer serving the notice of the institution of such proceedings on the debtor to file a copy thereof with the office of the Register of Deeds of the province or city where the land of the debtor lies. The assignee or trustee appointed by the court in such proceedings shall be entitled to the entry of anew certificate of the registered land of the debtor or bankrupt, upon presenting and filing a certified copy of the assignment in insolvency or order or adjudication in bankruptcy with the insolvent’s or bankrupt’s duplicate certificate of title; but the new certificate shall state that it is entered to him as assignee in insolvency or trustee in bankruptcy or other proceedings, as the case may be (Sec. 83, P.D. No. 1529). Under the Insolvency law, creditors holding security shall vote for the election of an assignee. But if they fail to elect an assignee, or if vacancy occurs, the court shall appoint an assignee and fix the amount of his bond (Sec. 30 and 31, Act. No. 1956). H. NON-REGISTRABLE PROPERTIES These are properties of public dominion which, under existing legislation, are not the subject of private ownership and are reserved for public purposes.
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Constitutional Basis All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the XPN of agricultural lands, all other natural resources shall not be alienated (Art. XII, Sec. 2, 1987 Constitution).
9. 10. 11. 12. 13.
Reclaimed lands; Submerged areas; River banks; Lakes, rivers, creeks and lagoons; Reservations for public and semi-public purposes; 14. Protected areas; 15. Resources within ancestral domains; and 16. Others of similar character (Agcaoili, Property Registration Decree and Related Laws: Land Titles and Deeds, 2006).
Property of public dominion 1. Those intended for public use, such as roads, canals, rivers, torrent, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; 2. 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; and (Art. 420, NCC) 3. Non-registrable lands - These are properties of public dominion which, under existing legislation, are not the subject of private ownership and are reserved for public purposes. Reason behind their non-registrability Property of the public domain is beyond the commerce of man and not susceptible of private appropriation and acquisitive prescription. Occupation thereof in the concept of owner no matter how long cannot ripen into ownership and be registered as a title (Valiao vs. Republic, G.R. No. 170757, November 28, 2011). Kinds of Non-Registrable Lands 1. Property of public domain or those intended for public use, public service or development of the national wealth; 2. Forest or timber lands; 3. Water sheds; 4. Mangrove swamps; 5. Mineral lands; 6. National parks and plazas; 7. Military or naval reservations; 8. Foreshore lands;
Q: In 1913, Gov. Gen. Forbes reserved a parcel of land for provincial park purposes. Sometime thereafter, the court ordered said land to be registered in Ignacio & Carmen Palomo’s name. What is the effect of the act of Gov. Gen Forbes in reserving the land for provincial park purposes? A: As part of the reservation for provincial park purposes, they form part of the forest zone. It is elementary in the law governing natural resources that forest land cannot be owned by private persons. It is not registrable and possession thereof, no matter how lengthy, cannot be converted into private property, unless such lands are reclassified and considered disposable and alienable (Sps. Palomo, et. al. vs. CA, et. al., G.R. No. 95608, January 21, 1997). Q: Does land classified as forest lose its classification because it has been stripped of it forest cover? A: NO. A forested area classified as forest land of the public domain does not lose such classification simply because loggers or settlers may have stripped it of its forest cover. Parcels of land classified as forest land may actually be covered with grass or planted with crops by kaingin cultivators or other farmers. Forest lands do not have to be on mountains or in out of theway places. The classification of land is descriptive of its legal nature or status and does not have to be descriptive of what the land actually looks like. (Heirs of Jose Amunategui vs. Director of Forestry, G.R. No. L-27873, November 9, 1983).
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Foreshore land
Watershed
A strip of land that lies between the high and low water marks and is alternately wet and dry according to the flow of tide. It is that part of the land adjacent to the sea, which is alternately covered by the ordinary flow of tides. Foreshore lands are inalienable unless reclaimed by the government and classified as agricultural lands of the public domain (Chavez vs. Public Estates Authority, G.R. No. 133250, November 11, 2003).
It is a land area drained by a stream or fixed body of water and its tributaries have a common outlet for surface runoff.
NOTE: Seashore, foreshore land, and/or portions of the territorial waters and beaches, cannot be registered. Even alluvial formation along the seashore is part of the public domain and, therefore, not open to acquisition by adverse possession by private persons unless subsequently declared as no longer needed for public use (Id.). Mangrove swamps These are mud flats, alternately washed and exposed by the tide, in which grow various kindred plants which will not live except when watered by the sea, extending their roots deep into the mud and casting their seeds, which also germinate there. These constitute the mangrove flats of the tropics, which exist naturally, but which are also, to some extent, cultivated by man for the sake of the combustible wood of the mangrove and like trees as well as for the useful nipa palm propagated thereon (Montano vs. Insular Government, G.R. No. L-3714, January 26, 1909). Mineral lands Mineral land means any land where mineral resources are found. Mineral resources, on the other hand, mean any concentration of mineral/rocks with potential economic value (Sec. 4(aj) and (an), DENR Administrative Order No. 95-936, as amended). NOTE: Possession of mineral land, no matter how long, does not confer possessory rights (Atok-Big Wedge Mining Co. vs. Court of Appeals, GR No. 88883, Jan. 18, 1991).
Watershed reservation It is a forest land reservation established to protect or improve the conditions of the water yield thereof or reduce sedimentation (Sec. 3(l,m,n) , P.D. 1559, as amended). I. DEALINGS WITH UNREGISTERED LAND Legal Basis No deed, conveyance, mortgage, lease, or other voluntary instrument affecting land not registered under the Torrens system shall be valid, except as between the parties thereto, unless such instrument shall have been recorded in the manner herein prescribed in the office of the Register of Deeds for the province or city where the land lies. (a) The Register of Deeds for each province or city shall keep a Primary Entry Book and a Registration Book. The Primary Entry Book shall contain, among other particulars, the entry number, the names of the parties, the nature of the document, the date, hour and minute it was presented and received. The recording of the deed and other instruments relating to unregistered lands shall be effected by any of annotation on the space provided therefor in the Registration Book, after the same shall have been entered in the Primary Entry Book. (b) If, on the face of the instrument, it appears that it is sufficient in law, the Register of Deeds shall forthwith record the instrument in the manner provided herein. In case the Register of Deeds refuses its administration to record, said official shall advise the party in interest in writing of the ground or grounds for his refusal, and the latter may appeal the matter to the Commissioner of Land Registration in accordance with the provisions of Section 117 of this Decree. It shall
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be understood that any recording made under this section shall be without prejudice to a third party with a better right. (c) After recording on the Record Book, the Register of Deeds shall endorse among other things, upon the original of the recorded instruments, the file number and the date as well as the hour and minute when the document was received for recording as shown in the Primary Entry Book, returning to the registrant or person in interest the duplicate of the instrument, with appropriate annotation, certifying that he has recorded the instrument after reserving one copy thereof to be furnished the provincial or city assessor as required by existing law. (d) Tax sale, attachment and levy, notice of lis pendens, adverse claim and other instruments in the nature of involuntary dealings with respect to unregistered lands, if made in the form sufficient in law, shall likewise be admissible to record under this section. (e) For the services to be rendered by the Register of Deeds under this section, he shall collect the same amount of fees prescribed for similar services for the registration of deeds or instruments concerning registered lands (Sec. 113, P.D. 1529). Untitled Lands These are private lands that are not registered in the Register of Deeds and not covered by the Torrens System. It refers to bare ownership of land or ownership that has not been adjudicated either judicially or administratively and registered as Torrens title under P.D. 1529 (Noblejas, Registration of Land Titles and Deeds, 2007). Registration of instruments dealing with unregistered land The system of registration under the Spanish Mortgage Law, by express provision of Sec. 2 of the Property Registration Decree, has been discontinued and all lands registered under said
system which are not yet covered by Torrens titles shall be considered unregistered lands. However, all instruments affecting lands originally registered under the Spanish Mortgage Law may be recorded under Sec. 113 of the decree until the land shall have been brought under the operation of the Torrens system. The books of registration of the Revised Administrative Code, as amended by Act No. 3344, shall continue to be in force, provided that unregistered lands shall henceforth be registered under Sec. 113 (Agcaoili, Property Registration Decree and Related Laws: Land Titles and Deeds, 2006, p. 805). Where registered land has been the subject of a transaction and this was recorded under Act No. 3344, such recording does not bind third persons since registration thereunder refers to properties not registered under the Land Registration Act, and, hence, not effective for purposes of Art. 1544 of the Civil Code on double sales. Registration of instruments, in order to affect and bind the land, must be done in the proper registry (Soriano vs. Magali, G.R. No. L-15133, July 31, 1953). Recording by ministerial officers The opening paragraph of Sec. 113 declares in substance that no instrument or deed affecting rights to real property not registered under the Torrens system (Land Registration Act, now Property Registration Decree) shall be valid, except as between the parties thereto, until such instrument or deed shall have been registered in the manner prescribed therein. This provision cannot be interpreted to include conveyances made by ministerial officers, such as sheriff’s deeds. It contemplates only such instruments as may be created by the agreement of the parties (Williams vs. Suner, G.R. No. 25795, November 6, 1926). The fact that the vendee a retro of unregistered land did not object to the auction sale thereof does not safeguard the purchaser at auction even if the sheriff’s deed be registered in the Registry of Deeds since the provisions of Act No. 3344 do not apply to judicial sales (Laxamana vs. Carlos, G.R. No. 25797, December 13, 1932).
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The rule that the Register of Deeds must record a sheriff’s certificate of sale or sheriff's deed, upon demand made by the purchaser and tender of the necessary fee, is applicable not only to the situation where a single sale has been made by the sheriff but also to the situation where there is a succession of sales made at the instance of various creditors. The fact that a similar certificate of sale in favor of the first creditor has already been registered is no obstacle to the recording of the others (Pua Hermanos vs. Register of Deeds, G.R. No. 274349, September 10, 1927). Recording shall be without prejudice to a third party with "better right" It has been held that the inscription of a mortgage of unregistered land did not materially improve the petitioners' situation, for such inscription is without prejudice to third parties with a better right (Rivera vs. Moran, G.R. No. 24568, March 2, 1926). Better Right It refers to a right which must have been acquired by a third party independently of the unregistered deed such as title by prescription, and that has no reference to rights acquired under the unregistered deed itself. The mere registration of a sale in one's favor does not give him any right over the land if the vendor was not anymore, the owner of the land having previously sold the same to somebody else even if the earlier sale was unrecorded (Sabitsana vs. Muertegui, G.R. No. 181359, August 5, 2013; Relate to Art. 1608 of the Civil Code). Recording by Register of Deeds ministerial The Register of Deeds does not exercise a judicial or quasi-judicial power in the registration of sheriff’s deeds or certificates of sale. His duty with respect to the notation or recording of these instruments, so far at least as relates to unregistered property, is ministerial only; and the registration of such instruments adds nothing to their intrinsic effect (Agcaoili, Property Registration Decree and Related Laws: Land Titles and Deeds, 2006, p. 807).
NOTE: Registration in such cases is required merely as a means of notification of the purchasers' rights to the public. If the Register of Deeds refuses to register the instrument, he shall advise the party in interest in writing of the grounds for his refusal, and the latter may elevate the matter to the Administrator, Land Registration Authority, en consulta pursuant to Sec. 117 of the Property Registration Decree (Agcaoili, Property Registration Decree and Related Laws: Land Titles and Deeds, 2006, p. 807). No deed, conveyance, mortgage, lease, or other voluntary instrument affecting land not registered under the Torrens system shall be valid, except as between the parties thereto, unless such instrument shall have been recorded in the manner prescribed in the office of the Register of Deeds for the province or city where the land lies. 🕮 Tax sale, attachment and levy, notice of lis pendens, adverse claim and other instruments in the nature of involuntary dealings with respect to unregistered lands, if made in the form sufficient in law, shall likewise be admissible to record (Sec. 113, P.D. 1529). J. ASSURANCE FUND 1. Nature of Assurance Fund The Assurance Fund is a long-standing feature of our property registration system which is intended “to relieve innocent persons from
the harshness of the doctrine that a certificate is conclusive evidence of an indefeasible title to land.” (Stilianopoulos vs. Register of Deeds for Legazpi City, G.R. No. 224678 July 3, 2018).
It is created for the purpose of paying any damages which may result from an improper or illegal registration. All the people of the Philippine Archipelago may be taxed for the purpose of paying these damages if the "assurance fund" is not sufficient (Loewenstein vs. Page, G.R. No. L5599, March 22, 1910).
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Purpose The Assurance Fund is intended to relieve innocent persons from the harshness of the doctrine that a certificate is conclusive evidence of an indefeasible title to land (De Guzman Jr., vs. National Treasurer, G.R. No. 143281, August 3, 2000). Act No. 496 provides for an Assurance Fund to pay for the loss or damage sustained by any person who, without negligence on his part, is wrongfully deprived of any land or interest therein on account of the bringing of the same under the Act or registration of any persons as owner of the land (Agcaoili, 2015). 2. Conditions for Assurance Fund
Compensation
from
Requisites for recovery [SIFNI] 1. A person Sustains loss or damage, or is deprived of land of any estate or interest in land; 2. In consequencse of the bringing of the land under the operation of the Torrens system of arising after original registration of land; 3. Through Fraud or in consequence of any error, omission, mistake or misdescription in any certificate of title or in any entry or memorandum in the registration book; 4. Without Negligence on his part (Register of Deeds vs. Anglo, G.R. No. 171804, August 5, 2015); 5. Is barred or otherwise precluded under the provision of any law from bringing an action for the recovery of such land or the estate or interest therein (Sec. 95, P.D. No. 1529). Remedy of the person prejudiced To bring an action for damages against those who caused or employed the fraud, and if the latter are insolvent, an action against the Treasurer of the Philippines may be filed for recovery of damages against the Assurance Fund.
Reason: The right of the innocent purchaser for value must be respected and protected, even if the seller obtained his title through fraud (TenioObsequio vs. Court of Appeals, G.R. No. 107967, March 1, 1994). Conditions sine qua non 1. He must be the registered owner; or 2. As the holders of transfer certificates of title, that they be innocent purchasers in good faith and for value. There is no negligence on the part of the party sustaining the loss Moreover, there must be a showing that there is no negligence on the part of the party sustaining the loss or damage or deprivation of any land or interest therein (La Urbana vs. Bernardo, G.R. No. 41915, January 8, 1936). Breach of trust not a ground Section 101 of P.D. No. 1529 clearly provides that the Assurance Fund shall not be liable for any loss, damage or deprivation of any right or interest in land which may have been caused by a breach of trust, whether express, implied, or constructive (Guaranteed Homes, Inc. v. Heirs of Maria P. Valdez, G.R. No. 171531, January 30, 2009). Instead, the loss, damage or deprivation becomes compensable under the Assurance Fund when the property has been further registered in the name of an innocent purchaser for value (Stilianopoulos vs. Register of Deeds for Legazpi City, supra.). Limitation on the amount to be recovered The plaintiff cannot recover as compensation more than the fair market value of the land at the time he suffered the loss, damage, or deprivation thereof (Sec. 97, P.D. No. 1529). 3. Prescriptive Period Any action for compensation against the Assurance Fund by reason of any loss, damage or
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deprivation of land or any interest therein shall be instituted within a period of six (6) years from the time the right to bring such action first occurred (Sec. 102, P.D. No. 1529). Notes: 🕮 The right of action herein provided shall survive to the legal representative of the person sustaining loss or damage, unless barred in his lifetime. 🕮 If at the time such right of action first accrued the person entitled to bring such action was a minor or insane or imprisoned, or otherwise under legal disability, such person or anyone claiming from, by or under him may bring the proper action at any time within two years after such disability has been removed, notwithstanding the expiration of the original period of six years first above provided. K. RECONSTITUTION OF TITLE The reconstitution of a certificate of title denotes restoration in the original form and condition of a lost or destroyed instrument attesting the title of a person to a piece of land. The purpose of the reconstitution of title is to have, after observing the procedures prescribed by law, the title reproduced in exactly the same way it has been when the loss or destruction occurred (Gaoiran vs. Court of Appeals, G.R. No. 215925, March 7, 2022, J. Hernando). It does not determine or resolve the ownership of the land covered by the lost or destroyed title. A reconstituted title, like the original certificate of title, by itself does not vest ownership of the land or estate covered thereby (Alonso, et al. vs. Cebu Country Club, Inc., G.R. No. 130876, December 5, 2003). Reconstituted titles and legal effect as R.A. No. 26), unless extrajudicially. In
shall have the same validity the originals thereof (Sec. 7, the reconstitution was made contrast to the judicial
reconstitution of a lost certificate of title which is in rem, the administrative reconstitution is essentially ex parte and without notice. The reconstituted certificates of title do not share the same indefeasible character of the original certificates of title (Barstowe Philippines Corporation vs. Republic, G.R. No. 133110 March 28, 2007). Certificate of title must have been lost or destroyed For an order of reconstitution to be issued, it must be clearly shown that the certificate of title had been lost or destroyed. If a certificate of title has not been lost, but is in fact in possession of another person, then the reconstituted title is void and the court that rendered the decision had no jurisdiction. Reconstitution presupposes the existence of an original certificate of title which was lost or destroyed. If there was no loss or destruction, there is nothing to reconstitute (Gaoiran vs. Court of Appeals, G.R. No. 215925, March 7, 2022, J. Hernando). Purpose Its only purpose is to have the title reproduced, after observing the procedure prescribed by law, in the same form they were when the loss or destruction occurred. The process involves diligent circ*mspect evaluation of the authenticity and relevance of all the evidence presented for fear of the chilling consequences of mistakenly issuing a reconstituted title when in fact the original is not truly lost or destroyed (Dela Paz vs. Republic, G.R. No. 195726, November 20, 2017). Note: If what is lost is the duplicate of the Original Certificate of Title or Transfer Certificate of Title, the remedy is replacement of the lost duplicate certificate of title, not reconstitution. Requisites for the issuance of an order for reconstitution [DRILS] (a) that the certificate of title had been Lost or destroyed; (Juanita Pineda and Lilia Sayoc
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(b)
(c)
(d)
(e)
vs. Court of Appeals, G.R. No. 114172, August 25, 2003) that the Documents presented by petitioner are sufficient and proper to warrant reconstitution of the lost or destroyed certificate of title; that the petitioner is the Registered owner of the property or had an interest therein; that the certificate of title was In force at the time it was lost or destroyed; and (Republic vs. Sanchez, G.R. No. 212388, December 10, 2014) that the description, area and boundaries of the property are Substantially the same as those contained in the lost or destroyed certificate of title (Sec. 15, R.A. No. 26; Republic vs. Dagondon, G.R. No. 210540, April 19, 2016).
Jurisdictional requirements in petitions Notice of Hearing, thereof shall be: a) Published twice in successive issues of the Official Gazette; b) Posted on the main entrance of the provincial building and of the municipal building of the municipality or city, where the land is situated; and c) Sent by registered mail to every person named in said notice (Sec. 13 of R.A. 26). At the hearing, the petitioner shall submit proof of the publication, posting and service of the notice as directed by the court (Sec. 13, R.A. No. 26). The requirements under Sec. 12, on the contents of the petition, and Sec. 13, on the publication of the notice of petition, are mandatory and jurisdictional in nature. Hence, non-observance thereof fatally affects the whole proceedings in all its aspects and renders the same void (Republic vs. Heirs of Booc, et al., G.R. No. 207159, February 28, 2022, J. Hernando).
is itself mandatory to vest jurisdiction upon the court in order to allow said court to take the case on its merits. The non-observance of the requirement invalidates the whole reconstitution proceedings in the trial court (Heirs of Marcela Navarro v. Go, G.R. No. 176441, June 17, 2008). “Posting of notice at the place where the transfer certificate of title is situated” is not tantamount to compliance with the mandatory requirement that notice by registered mail or otherwise be sent of the person named in the notice. Publication of notice in the Official Gazette and the posting thereof in provincial capitol and city/municipal buildings would not be sufficient. The service of the notice of hearing to parties affected by the petition for reconstitution, notably actual occupant/s of the land, either by registered mail or hand delivery, must also be made (Subido vs. Republic, G.R. No. 152149, April 25, 2006). Kinds of Reconstitution Reconstitution of a lost or destroyed certificate of title may be done: 1. Judicially – in accordance with the special procedure laid down in R.A. No. 26; or 2. Administratively – in accordance with the provisions of R.A. No. 6732 (Dela Paz vs. Republic, G.R. No. 195726, November 20, 2017). A. Judicial It partakes of the nature of a land registration proceeding in rem. The registered owners, assigns, or any person having an interest in the property may file a petition for that purpose with RTC where property is located. Sources for Judicial Reconstitution of Title The petition for judicial reconstitution must be supported by the following sources as may be available, in the following order:
Thus, notwithstanding compliance with the notice by publication, the requirement of actual notice to the occupants and the owners of the adjoining property under Sections 12 and 13 of R.A. No. 26
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A. For Original Certificate of Transfer (OCT) [OCCADA] a. The Owner's duplicate of the certificate of title; b. The Co-owners’, mortgagee's, or lessee's duplicate of the certificate of title; c. A Certified copy of the certificate of title, previously issued by the register of deeds or by a legal custodian thereof; d. An Authenticated copy of the decree of registration or patent, as the case may be, pursuant to which the original certificate of title was issued; e. A Document, on file in the registry of deeds, by which the property, the description of which is given in said document, is mortgaged, leased or encumbered, or an authenticated copy of said document showing that its original had been registered; and f. Any other document which, in the judgment of the court, is sufficient and proper basis for reconstituting the lost or destroyed certificate of title (Sec. 2, R.A. 26). B. For Transfer Certificate of Title (TCT): [OCC-DAD] a. The Owner's duplicate of the certificate of title; b. The Co-owners’, mortgagee's, or lessee's duplicate of the certificate of title; c. A Certified copy of the certificate of title, previously issued by the register of deeds or by a legal custodian thereof; d. The Deed of transfer or other document, on file in the registry of deeds, containing the description of the property, or an authenticated copy thereof, showing that its original had been registered, and pursuant to which the lost or destroyed transfer certificate of title was issued; e. A Document, on file in the registry of deeds, by which the property, the description of which is given in said document, is mortgaged, leased or encumbered, or an authenticated copy of said document showing that its original had been registered; and
f.
Any other document which, in the judgment of the court, is sufficient and proper basis for reconstituting the lost or destroyed certificate of title (Sec. 3, R.A. 26).
Who may file For Sections 2(c), 2(d), 2(e), 2(f), 3(c), 3(d), 3(e), and/or 3(f), it shall be filed with the proper Court of First Instance, by the registered owner, his assigns, or any person having an interest in the property (Sec. 12, R.A. No. 26; Republic vs. Heirs of Julio Ramos, G.R. No. 169481, February 22, 2010). “Any other document” “Any other document” in Secs. 2(f) and 3(f) of R.A. No. 26 refers to documents similar to those mentioned in Sections (a), (b), (c), (d), and (e). The documents alluded to in Secs. 2(f) and 3(f) must be resorted to in the absence of those preceding in order. Only if the petitioner for reconstitution fails to show that he had, in fact, sought to secure such documents and failed to find them, can the presentation of “other document” as evidence in substitution be allowed (Republic vs. Tuastumban, G.R. No. 173210, April 24, 2009). Hence, a petition for reconstitution based on Section 2(f) of R.A. No. 26, with the survey plan and technical description presented as evidence, were held to be not competent and sufficient sources of reconstitution as they are mere additional documentary requirements (Republic vs. Heirs of Julio Ramos, G.R. No. 169481, February 22, 2010). However, if the bases for the reconstitution of the title are not only the plans and technical descriptions but also the legible duplicate copies of the titles and a host of other official documents, these are sufficient for the court to grant the petition for reconstitution (Republic vs. Abellanosa, G.R. No. 205817, October 6, 2020, J. Hernando).
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If the petitioner for reconstitution fails to show that he had, in fact, sought to secure such prior documents and failed to find them, the presentation of the succeeding documents as substitutionary evidence is proscribed (Republic vs. Tuastumban, supra.). Judgment of the Court The court shall issue an order of reconstitution if, after the hearing, it finds that: 1. The documents presented as supported by parole evidence or otherwise, are sufficient and proper to warrant the reconstitution of the lost or destroyed certificate of title; 2. The petitioner is the registered owner of the property or has an interest therein; 3. The said certificate of title was in force at the time it was lost or destroyed; 4. That the description, area and boundaries of the property are substantially the same as those contained in the lost or destroyed certificate of title (Sec. 15, R.A. No. 26). When all the basic requirements are met, the courts do not have the discretion to deny the reconstitution (Republic vs. Versoza, G.R. No. 173525, March 28, 2008). If the court finds that there is no sufficient evidence or basis to justify the reconstitution, the petition shall be dismissed. However, such dismissal shall not preclude the right of the party/ies entitled thereto to file an application for confirmation of his or their title under the provisions of the Land Registration Act (Sec. 15, R.A. No. 26). B. Administrative This is a summary procedure that may be availed of only in case of:
determined by the Administrator of the Land Registration Authority; 2. The number of certificates of titles lost or damaged should be at least ten percent (10%) of the total number in the possession of the Office of the Register of Deeds; 3. In no case shall the number of certificates of titles lost or damaged be less than five hundred (500); 4. Petitioner must have the duplicate copy of the certificate of title (Sec. 1, R.A. No. 6732, amending Sec. 110 of P.D. No. 1529). The application for administrative reconstitution shall be filed before the Office of the Registry of Deeds where the property is located. Sources for Administrative Reconstitution of Title a. Owner’s duplicate certificate of title; and if absent; or b. Co-owners’, mortgagee’s, or lessee’s duplicate of said certificate (Sec. 2, R.A. No. 6732). Recourse to courts Any interested party who by fraud, accident, mistake, or excusable negligence has been unjustly deprived or prevented from taking part in the proceeding may file a petition in the proper court to set aside the decision and to reopen the proceedings. The petition shall be verified and must be filed within sixty (60) days after the petitioner learns of the decision, but not more than six (6) months from the promulgation thereof (Sec. 10, R.A. No. 6732). “Proper court” The proper court referred to in Sec. 10, R.A. No. 6732 is the Regional Trial Court, a court of general jurisdiction, and not the Court of Appeals (Medina vs. Court of Appeals, G.R. No. 107595 February 2, 1994).
1. Substantial loss or destruction of land titles due to fire, flood or other force majeure as
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In contrast to judicial reconstitution of a lost certificate of title which is in rem, the administrative reconstitution is essentially ex parte and without notice. The reconstituted certificates of title do not share the same indefeasible character of the original certificates of title (Barstowe Philippines Corporation vs. Republic, G.R. No. 133110, March 28, 2007). Retroactive application The law provides for retroactive application thereof to cases fifteen (15) years immediately preceding 1989 (Sec. 14, R.A. No. 6732). V. WILLS AND SUCCESSION A. GENERAL PROVISIONS Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent of the value of the inheritance of a person are transmitted through his death to another or others either by his will or by operation of law (Art. 774, NCC).
Subject of Succession: DECEDENT/ TESTATOR and HEIRS/SUCCESSORS Decedent - A person whose property is transmitted through succession, whether or not he left a will. If he left a will, he is also called the testator (Art. 775, NCC). Heirs - Those who are called upon to succeed by universal title on the whole or to an aliquot portion thereof, either by will or by operation of law (Art. 782, par. 1, NCC). Object of Succession: INHERITANCE The inheritance includes all the property, rights and obligations of a person which are not extinguished by death (Art. 776, NCC). 2. Those which have accrued thereto since the opening of the succession (Art. 781, NCC). 1.
Transmission of Successional Rights The rights to the succession are transmitted from the moment of the death of the decedent (Art. 777, NCC).
Elements of Succession:
Conditions for Transmission
1. Causal element, which is the death of the decedent; 2. Objective element, which is the inheritance; 3. Subjective element, or the decedent and those who are called to succeed him, either by the decedent’s express will or by provision of law; 4. Acceptance of the inheritance by the person called to the succession (Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 241).
1. That indeed there has been death (either actual or presumed); 2. That the rights or properties are indeed transmissible or descendible; and 3. That the transferee is still alive (no predecease), willing (no repudiation) and is capacitated to inherit (Paras, Civil Code of the Philippines Annotated Wills and Succession, 2016, p. 12-13).
Succession Refers to the legal mode by which the inheritance is transmitted to the persons entitled to it surviving the decedent.
(Art. 774, NCC)
Inheritance Consists of the property and transmissible rights and obligations existing at the time of his death.
(Art. 776, NCC)
The decedent’s right to succeed is what is transmitted and not the right to the inheritance (Paras, Civil Code of the Philippines Annotated Wills and Succession, 2016, p. 13). Rules on Transmissibility of Rights and Obligations 1. Purely personal rights are extinguished by death; hence, they are not transmissible to the heirs.
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2. Patrimonial rights are generally transmissible to the heirs, unless otherwise provided by law or by the will of the testator. 3. Rights and obligations arising from contracts are generally transmissible to the heirs unless they are not transmissible by reason of their nature, by express agreement of the parties, or by express provision of law (Rabuya, Prebar Reviewer in Civil Law, 2021, p. 243). Death Contemplated a. Actual or Natural Death Death has been defined as the cessation of life. Life is not synonymous with civil personality. One need not acquire civil personality first before he/she could die (Continental Steel Manufacturing Corp. vs. Montano, G.R. No. 182836, October 13, 2009). If there is doubt, between two or more persons who are called to succeed each other, as to which of them died first, the person alleging the death of one prior to the other shall prove the same. In the absence of proof, it is presumed that they died at the same time and there shall be no transmission of rights from one to the other (Art. 43, NCC). b. Presumptive death for purposes of succession Presumptive death extraordinary.
may
be
ordinary
or
In case of presumptive death for purposes of opening the succession, a judicial declaration is not required and courts are without authority to issue the same (Tadeo-Matias vs. Republic, G.R. No. 230751, April 25, 2018). i. Ordinary Absence If a person has been absent, it being unknown whether or not he still lives, he shall be presumed dead for purposes of opening his succession after an absence of ten (10) years.
If he disappeared after the age of 75 years, an absence of five (5) years shall be sufficient (Art. 390, par. 2, NCC). ii. Extraordinary or Qualified Absence The following shall be presumed dead for all purposes, including the division of the estate among the heirs: 1. A person on board a vessel lost during a sea voyage, or an airplane which is missing, who has not been heard of for four (4) years since the loss of the vessel or airplane; 2. A person in the armed forces who has taken part in war, and has been missing for four (4) years; 3. A person who has been in danger of death under other circ*mstances and his existence has not been known for four years (Art. 391, NCC). Reckoning point of death - On the very day of the occurrence of the event from which death is presumed; and if such date cannot be fixed, the court shall determine (Rabuya, Civil Law Reviewer Vol. I, 2021, p. 854). Kinds of Succession 1. Testamentary – that which results from the designation of an heir, made in a will executed in the form prescribed by law (Art. 779, NCC). 2. Legal or Intestate – that which takes place by operation of law in the absence of a valid will (Art. 960, NCC). 3. Mixed – that which is effected partly by will and partly by operation of law (Art. 780, NCC). Kinds of Successors i. Compulsory heirs - Those who succeed by operation of law to some portion of the inheritance known as “legitime,” in an amount predetermined by law, of which they cannot be deprived by the testator, except by a valid disinheritance.
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ii. Voluntary or testamentary heirs - Those who are instituted by the express will of the testator, to succeed to the inheritance or the portion thereof of which the testator can freely dispose. Devisee- Person to whom gifts of real property are given by virtue of a will (Art. 782, NCC). Legatee - Person to whom gifts of personal property are given by virtue of a will (Art. 782, NCC). iii. Legal or intestate heirs - Those who succeed to the estate of the decedent who dies without a valid will, or to the portion of such estate not disposed of by will (Tolentino, Civil Code of the Philippines Vol. III, succession, p. 27). Distinctions between heirs and legatees or devisees Legatees or Devisees Amount of inheritance Inherit an Are always given a indeterminate or determinate thing or aliquot portion by the a fixed amount. decedent’s hereditary estate. Heirs
Extent of successional right Succeed to the Only succeed to the remainder of the determinate thing or properties after all the quantity which is debts and all the mentioned in the legacies and devices legacy or devise. have been paid or given. When exists Both in testamentary Only in testamentary and intestate succession. succession.
Instances where the distinctions between heirs and devisees/legatees are important: 1. Preterition - The effect is to annul entirely the institution of heirs, but legacies and devises shall be valid insofar as they are not inofficious (Art. 854, NCC).
2. Defective/Imperfect Disinheritance The effect is to annul the institution of heirs to the extent that the legitime of the disinherited heir is prejudiced, but legacies and devises shall be valid insofar as they are not inofficious (Art. 918, NCC). 3. After – acquired properties - As a rule, they are not included among the properties disposed of unless it should expressly appear in the will itself that such was the testator’s intention (Art. 793, NCC). This rule is applicable only to legacies and devises and not to the institution of heirs (Jurado, Comments & Jurisprudence in Succession, 2009 Ed, p. 28). B. TESTAMENTARY SUCCESSION 1. General Provisions Will – An act whereby a person is permitted, with the formalities prescribed by law, to control to a certain degree the disposition of his estate, to take effect after his death (Art. 783, NCC). 2. Characteristics of Wills a.
It is a statutory right – A person is only “permitted” with the formalities prescribed by law, to dispose of his estate effectively upon his death through a will (Rabuya, Civil Law Reviewer Vol. I, 2017, p. 724 citing Art. 783, NCC).
The making of a will should be considered subordinate to both the law and public policy (Paras, Civil Code of the Philippines Annotated Wills and Succession, 2016, p. 44). b. It is a strictly personal act – It cannot be left in whole or in part to the discretion of a third person or accomplished through the instrumentality of an agent or attorney (Art. 784, NCC). Acts which the testator cannot entrust to third persons: 1. The duration or efficacy of designation of heirs, devisees or legatees (Art. 785, NCC).
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2. The determination of portions which they are to take, when referred to by name (Art. 785, NCC). 3. Determination of whether or not a testamentary disposition is to be operative (Art. 787, NCC). The testator may only entrust to a third person: 1. The distribution of specific property or sums of money that he may leave in general to specified classes or causes, (Art. 786, NCC) provided that the testator has already determined the property or amount of money to be given. 2. The designation of persons, institutions or establishments to which such property or sums of money are to be given or applied, (Art. 786, NCC) provided that the testator has already determined the class or cause to be benefited (Rabuya, Civil Law Reviewer 1, 2017 Ed, p. 727). c.
It is a unilateral and individual act – It takes effect upon the death of the testator even if the testamentary dispositions become inoperative by reason of renunciation (Art. 832, NCC); and two or more persons cannot make a will jointly or in the same instrument, either for their reciprocal benefit or for the benefit of a third person (Art. 818, NCC).
d. It is a free and voluntary act – It must have been executed freely, knowingly, and voluntarily, otherwise it will be disallowed (Paras, Civil Code of the Philippines Annotated Wills and Succession, 2016, p. 44). e. It is a formal or a solemn act – It must be executed in accordance with the formalities prescribed by law (Art. 783, NCC). f.
It is a disposition of property - Testator must have animus testandi – intent to transfer title via a testamentary disposition, to take effect upon testator’s death (Art. 783, NCC).
g. It is a disposition mortis causa - It will take effect upon death (Art. 777, NCC). h. It is ambulatory and revocable - A will may be revoked by the testator at any time before his death (Art. 828, NCC). i.
The testator must have testamentary capacity.
3. Non-Delegability of a Testamentary Power Non-Delegability of a Testamentary Power Will-Making is a Strictly Personal Act The making of a will is a strictly personal act; it cannot be left in whole or in part to the discretion of a third person, or accomplished through the instrumentality of an agent or attorney (Art. 784, NCC). Doctrine of Prohibited Designation The duration or efficacy of the designation of heirs, devisees or legatees, or the determination of the portions which they are to take, when referred to by name, cannot be left to the discretion of a third person (Art. 785, NCC). The testator may not make a testamentary disposition in such manner that another person has to determine whether or not it is to be operative (Art. 787, NCC). The following cannot be left to the discretion of a third person: 1. The duration or efficacy of the designation of heirs, devisees or legatees; or (Art. 785, NCC) 2. The determination of the portions which they are to take, when referred to by name; (Art. 785, NCC) 3. The determination of whether or not the testamentary disposition is to be operative (Art. 787, NCC). Note: The heir is free to accept or renounce the testamentary benefit.
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When a Third Person May Be Entrusted The testator may entrust to a third person the distribution of specific property or sums of money that he may leave in general to specified classes or causes, and also the designation of the persons, institutions or establishments to which such property or sums of money are to be given or applied (Art. 786, NCC). The following, however, may be entrusted to a third person: 1. Distribution of specific property or sums of money that the testator may leave in general to specified classes or causes. 2. Designation of the persons, institutions or establishments to which such property or sums are to be given or applied (Art. 786, NCC). Requisites of Article 786: 1. The testator entrusts to a third person. 2. The distribution of specific property or sums of money. 3. These specific properties or sums of money are left in general to specific classes or causes. 4. There is the designation of the persons, institutions or establishments to whom such property or sums of money are to be given or applied. Note: Should the testator dispose of the whole or part of his property for prayers and pious works for the benefit of his soul, in general terms and without specifying its application, the executor, with the court's approval shall deliver one-half thereof or its proceeds to the church or denomination to which the testator may belong, to be used for such prayers and pious works, and the other half to the State, for the purposes mentioned in article 1013 (Art. 1029, NCC). Testamentary provisions in favor of the poor in general, without designation of particular persons or of any community, shall be deemed limited to the poor living in the domicile of the testator at the time of his death, unless it should clearly appear that his intention was otherwise (Art. 785, NCC).
Distinction between Article 785 and Article 786 Article 785 The heirs, legatees or devisees are named. There is no specific property or sums of money. What is delegated is the determination of the portion which shall go to the named heir, legatee or devisee.
Article 786 There is no such heir, legatee or devisee that is named. There is specific property or sums of money. There is a determination of the persons, establishments or institution or to whom the specific property or sums of money is to be given or applied.
4. Applicable Law as to Form and Substance of a Will Possible Different Interpretations If a testamentary disposition admits of different interpretations, in case of doubt, that interpretation by which the disposition is to be operative shall be preferred (Art. 788, NCC). Note: The will must be interpreted liberally in favor of validity. The intention and desires of the testator if clearly expressed in the will, constitute the fixed law of its interpretation (Vda. de Villanueva vs. Juico, L-16737, Feb. 28, 1962). When there is an imperfect description, or when no person or property exactly answers the description, mistakes and omissions must be corrected, if the error appears from the context of the will or from extrinsic evidence, excluding the oral declarations of the testator as to his intention; and when an uncertainty arises upon the face of the will, as to the application of any of its provisions, the testator's intention is to be ascertained from the words of the will, taking into consideration the circ*mstances under which it was made, excluding such oral declarations (Article 789, NCC).
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Kinds of Ambiguity 1. Patent or Extrinsic– appears on the face of the will itself. 2. Latent or Intrinsic– does not appear on the face of the will. Ambiguity is discovered by examination outside the will. Kinds of Latent or Intrinsic Ambiguity 1. Imperfect description of the heirs, legatees or devisees. 2. Imperfection description of the property to be given. 3. When two or more persons meet the description. 4. When two or more things/properties meets the description. How may the ambiguities be cured? 1. By examining the will itself. 2. Extrinsic evidence such as written declarations of the testator. Note: Extrinsic evidence taken from the alleged ORAL declarations of the testator should NOT be allowed, as this can result in fraud, confusion, and unfairness to the dead man whose words may be distorted or perjured. Rules for Interpretation of Words The words of a will are to be taken in their ordinary and grammatical sense, unless a clear intention to use them in another sense can be gathered, and that other can be ascertained. Technical words in a will are to be taken in their technical sense, unless the context clearly indicates a contrary intention, or unless it satisfactorily appears that the will was drawn solely by the testator, and that he was unacquainted with such technical sense (Art. 790, NCC). Ordinary Terms
Exception: If there is an intention to give it another meaning. Technical Terms General Rule: the words in a will shall be interpreted in its technical meaning. Exceptions: a. If the testator himself made the will and it is very clear that he is unacquainted or unfamiliar with the term; and b. If it is really the intention of the testator to give the technical word an ordinary meaning. Interpretation as a Whole The words of a will are to receive an interpretation which will give to every expression some effect, rather than one which will render any of the expressions inoperative; and of two modes of interpreting a will, that is to be preferred which will prevent intestacy (Art. 791, NCC). Effect of Invalid Dispositions The invalidity of one of several dispositions contained in a will does not result in the invalidity of the other dispositions, unless it is to be presumed that the testator would not have made such other dispositions if the first invalid disposition had not been made (Art. 791, NCC). General Rule: The invalid dispositions will not affect the valid ones. The will remains valid. Exception: The entire will is invalidated or the valid dispositions are invalidated is if it is the intention of the testator that both the valid and invalid dispositions are to be indivisible, such that the other dispositions cannot be given effect if the other dispositions turn out to be invalid.
General Rule: The words in a will shall be interpreted in its ordinary or literal meaning.
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General Rule Respecting After-Acquired Properties ARTICLE 793. Property acquired after the making of a will shall only pass thereby, as if the testator had possessed it at the time of making the will, should it expressly appear by the will that such was his intention (Art. 793, NCC). Note: Art. 793 only applies to devices and legacies and not to inheritance because inheritance comprises the universality or an aliquot portion of the estate. General Rule: Only those properties owned by the testator at the time of the execution of the will are included. Those acquired after the execution of the will are excluded. Exceptions: 1. If the testator expressly provides in his will that properties acquired after the execution of the will are included. 2. The effect of the execution of a codicil (Art. 836, NCC). 3. The legacy or device belonging to another person is void as a general rule because the testator cannot give what he does not own. But if the testator later acquires the ownership, the legacy or devise can be given effect (Article 930). 4. The legacy of credit or remission of debt (Art. 935, NCC). General Rule as to What Interest May Be Disposed of Every devise or legacy shall convey all the interest which the testator could devise or bequeath in the property disposed of, unless it clearly appears from the will that he intended to convey a less interest (Art. 794, NCC). General Rule: All of the testator’s rights in a property are transmitted because it is presumed that the testator intended to dispose his whole interest in the property.
Exceptions: 1. If it clearly appears in the will that the testator merely intends to convey a less interest. 2. If the testator clearly provided that he conveys a greater interest. 3. The testator can also give property which he knows is not owned by him. The validity of a will as to its form depends upon the observance of the law in force at the time it is made (Art. 795, NCC). Kinds of Validity of Wills 1. Formal or Extrinsic Validity – refers to the forms and solemnities and the formalities that have to be conformed and complied with in the execution of the will. 2. Intrinsic Validity – refers to the legalities of the provisions of wills. General Rules on Validity Basis Extrinsic Validity
TIME What must be observed is the law in force at the time the will is MADE (executed).
(Art. 795, NCC)
PLACE or COUNTRY What law must be observed depends: a) If the testator is a Filipino, he can observe Philippine laws (Article 804-814); or those in the country where “he may be” (Art. 815, NCC); or those in the country where he executes the will
(Art. 17, NCC) (lex loci celebrationis or locus regit actum).
b) If the testator is an alien who is abroad, he can follow the law of his domicile, or
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country where it is situated. However, intestate and testamentary succession, both with respect to:
his nationality or Philippine laws (Art. 816, NCC) or where he executes the will.
1) the order of succession 2) the amount of successional rights 3) and the intrinsic validity of testamentary provisions shall be regulated by the national law of the person whose succession is under consideration, whatever may be the nature of the property, and regardless of the country wherein said property may be found.’’ (Miciano vs. Brimo, 50 Phil. 867).
(Art. 17, NCC)
c) If the testator is an alien in the Philippines, he can follow the law of his nationality (Art. 817, NCC) or the laws of the Philippines, since he executes the will here. (Art. 17,
NCC) Intrinsic Validity
Successional rights are governed by the law in force at the time of the DECEDENT’S DEATH. (Art. 2263, NCC).
The national law of the decedent, that is, the law of his country or nationality regardless of the place of execution or the place of death.
(Art. 16, NCC).
Thus, a proviso in the will of an alien to the effect that his properties should be distributed in accordance with internal Philippine law, and not in accordance with his own national law, is void because said proviso contravenes Article 16, paragraph 2 of the Civil Code.
(Bellis vs. Bellis, L-23678, June 8, 1967)
Note: Real property as well as personal property is subject to the law of the
Provision in a foreigner’s will to the effect that his properties shall be distributed in accordance with Philippine law and not with his national law, is illegal and void, for his national law cannot be ignored in view of those matters that Article 10 — now Article 16 — of the Civil Code states said national law should govern (Testate Estate of Amos G. Bellis, et al. vs. Edward A. Bellis L-23678, June 6, 1967).
Instances when the intrinsic validity of wills of foreigners is governed by Philippine laws 1. Doctrine of Processual Presumption-In the absence of evidence of foreign laws, it is presumed that it is the same as Philippine law. Note: No judicial notice of foreign laws. The laws of a foreign jurisdiction do not prove themselves in our courts. The courts of the Philippine Islands are not authorized to take judicial notice of the laws of the various States of the American Union. Such laws must be proved as facts (Fleumer vs. Hix, 54 Phil. 610). 2. Renvoi Doctrine (referring back)-The testator is a Philippine resident and a national of another country. The national law of the decedent says that the intrinsic validity of a will should be governed by the domiciliary law or the law of his residence or domicile. Hence, Philippine law will be applied.
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5. Testamentary Capacity Governing Law: The capacity of a person to make a will shall be governed by his national law (Art. 15, NCC). When must exist: Testamentary Capacity must exist at the time of the execution of the will (Jurado, Comments and Jurisprudence on Succession, 2009 ed. p. 40). Only natural persons are qualified to make a will. General Rule: All natural persons are qualified to make a will. Exceptions: 1. He is expressly prohibited by law- All persons who are not expressly prohibited by law may make a will (Art. 796, NCC). 2. He is below 18 years of age at the time of its execution- Persons of either sex under eighteen years of age cannot make a will (Art. 797, NCC). 3. He is of unsound mind at the time of execution - In order to make a will it is essential that the testator be of sound mind at the time of its execution (Art. 798, NCC). Test of Soundness of Mind: To be considered as of sound mind, the testator must have the ability to know: a. The nature of the estate to be disposed of (Art. 799, NCC) – the testator must have a fairly accurate knowledge of what he owns (Rabuya, Civil Law Review Vol. I, 2021, p. 872). b. The proper objects of his bounty (Art. 799, NCC) – the testator should know under ordinary circ*mstances, his relatives in the most proximate degrees (Rabuya, Civil Law Review Vol. I, 2021, p. 872). c. The character of the testamentary act (Art. 799, NCC) - the testator must be aware
that the instrument he is executing is an act mortis causa which will dispose of his property upon his death (Rabuya, supra, at 872). General Rule: The law presumes that the testator is of sound mind (Art. 800, NCC). Exceptions: a. One month or less before the execution of the will, the testator was publicly known to be insane; and b. He was under guardianship at the time of making his will (Art. 800, NCC). Supervening incapacity does not invalidate an effective will, nor is the will of an incapacitated validated by supervening of capacity (Art. 801, NCC). There is no presumption of incapacity merely because of advanced years (Tolentino, Civil Code of the Philippines Vol. III, succession, p. 53). It is senile dementia and not senility that produces testamentary incapacity (Jurado, Comments and Jurisprudence on Succession, 2009 ed. p .46). Insane Delusions Not every insane delusion will render one incapable of making a will. A testator may have delusions regarding matters which do not affect or concern his testamentary act, and which have no influence upon the disposition which he makes of his estate. In such a case, if the testator is otherwise mentally qualified, the existence of such delusions would not invalidate his will (Tolentino, Civil Code of the Philippines Vol. III, Succession p. 55). Deaf, Dumb, and Blind Neither blindness, nor deafness and dumbness, nor all of them combined, will alone incapacitate a person to perform a testamentary act. If a person afflicted has testamentary capacity and can communicate his desires, no reason exists for rejecting his will (Tolentino, Civil Code of the Philippines Vol. III, Succession, p. 56).
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Other circ*mstances such as family relations, civil interdiction, prodigality, insolvency, alienage, and other similar nature, which ordinarily modify or limit capacity to act do not affect or restrict testamentary capacity (Jurado, Comments and Jurisprudence on Succession, 2009 ed. p.39). 6. Form of Notarial and Holographic Wills Kind of Wills Allowed Under the New Civil Code (a) Ordinary or notarial will — that which requires, among other things, an attestation clause, and acknowledgment before a notary public. (b) Holograph or holographic will — the most important feature of which is its being written entirely, from the date to the signature, in the handwriting of the testator. Here, neither an attestation clause nor an acknowledgment before a notary public is needed. Written Wills Every will must be in writing and executed in a language or dialect known to the testator (Art. 804, NCC). Note: The New Civil Code does not recognize the validity of nuncupative wills — wills orally made by the testator in contemplation of death, and before competent witnesses. A will that was written in a language not known to the illiterate testatrix is void because of the mandatory provision of article 804 of the Civil Code that every will must be executed in a language or dialect known to the testator. Thus, a will written in English, which was not known to the Igorot testator, is void and must be disallowed (Suroza vs. Judge Honrado, A.M. 2026 CFI, December 19, 1981). Notarial or Ordinary Will Every will, other than a holographic will, must be subscribed at the end thereof by the testator himself or by the testator’s name written by some other person in his presence, and by his express direction, and attested and subscribed by three
or more credible witnesses in the presence of the testator and of one another (Art. 805, NCC). The testator or the person requested by him to write his name and the instrumental witnesses of the will, shall also sign, as aforesaid, each and every page thereof, except the last, on the left margin, and all the pages shall be numbered correlatively in letters placed on the upper part of each page. The attestation shall state the number of pages used upon which the will is written, and the fact that the testator signed the will and every page thereof, or caused some other person to write his name, under his express direction, in the presence of the instrumental witnesses, and that the latter witnessed and signed the will and all the pages thereof in the presence of the testator and of one another. If the attestation clause is in a language not known to the witnesses, it shall be interpreted to them (Art. 806, NCC). Note: The requirements under Article 805 are to be strictly construed. A donation mortis causa must comply with the formalities prescribed by law for the validity of wills, “otherwise, the donation is void and would produce no effect.” Articles 805 and 806 of the Civil Code should have been applied (Echavez vs. Dozen Construction, G.R. No. 192916, October 11, 2010). Requirements for a Notarial or Ordinary Will Aside from the fundamental requisites that the testator be at least 18 years old, and possessed of a sound mind: a. The will must be in writing; b. The will must be executed in a language or dialect known to the testator; and c. The will must be subscribed (signed) at the end thereof by the testator himself or by the testator’s name written by another person in his presence, and by his express direction. Note: Subscription means the physical act of signing E-signatures cannot be affixed in a will because e-signatures are applicable only to transactions and contracts. Signature must
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appear not the physical end but at the logical end of the will. The presence of additional dispositions in a notarial will after the signature of the testator invalidates the entire will because it affects the form. In the Matter of the Will of Antero Mercado, the attestation clause is fatally defective for failing to state that Mercado caused Atty. Florentino Javier to write the testator’s name under his express direction. It is not here pretended that the cross appearing on the will is the usual signature of Mercado or even one of the ways by which he signed his name (Garcia vs. Lacuesta, G.R. No. L-4067, November 29, 1951). Tests of Presence a. Test of vision b. Test of position c. Test of mental apprehension d. Test of available senses Note: The phrase “in the presence” required by law simply means that position of the parties with relation to each other at the moment of the subscription of each signature, must be such that they may see each other sign if they choose to do so. The question whether the testator and the subscribing witnesses to an alleged will sign the instrument “in the presence” of each other does not depend upon proof of the fact that their eyes were actually cast upon the paper at the moment of its subscription by each of them, but that at that moment existing conditions and their position with relation to each other were such that by merely casting the eyes in the proper direction they could have seen each other sign (Nera vs. Rimando, G.R. No. L-5971, February 21, 1911). d. The will must be attested and subscribed by three or more credible witnesses in the presence of the testator and of one another. e. The testator or the person requested by him to write his name, and the instrumental witnesses of the will shall sign each and every page thereof except the last, on the left margin. f. All the pages shall be numbered correlatively in letters placed on the upper part of each page.
Note: As long as the page number has a physical location; the will is still valid. The page number may even be incorporated in the text of the document itself. If the will has only one page, the will is valid because you can easily detect whether there is loss of pages because if the one page is lost then there is no will to speak of. g. The attestation (attestation clause) shall provide: 1) the number of pages used — upon which the will is written; 2) that the testator signed (or expressly caused another person to sign) the will and every page thereof in the presence of the instrumental witnesses; and 3) that the instrumental witnesses witnessed and signed the will and all the pages thereof in the presence of the testator and of one another. Note: Attestation is the act of witnessing the execution of the will. It is a mental act. • Attestation clause is that clause of an ordinary or notarial will wherein the witnesses certify that the instrument has been executed before them and the manner of execution of the same. What do the subscribing witnesses attest to? 1. They attest to the genuineness of the signature of the testator. 2. They attest to the due execution of the will. Acknowledgment in Notarial Wills Every will must be acknowledged before a notary public by the testator and the witnesses. The notary public shall not be required to retain a copy of the will, or fi le another with the office of the Clerk of Court (Art. 806, NCC). Necessity of Acknowledgment The express requirement of Art. 806 of the New Civil Code is that the will is to be “acknowledged,’’ and not merely subscribed and sworn to. The acknowledgment coerces the testator and the
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instrumental witnesses to declare before an officer of the law that they had executed and subscribed to the will as their own free act or deed. A notarial will that is not acknowledged before a notary public by the testator and the witnesses is fatally defective, even if it is subscribed and sworn to before a notary public (Azuela vs. Court of Appeals, G.R. No. 122880, April 12, 2006). Acknowledgment vs Jurat In the case of Azuela vs. Court of Appeals, G.R. No. 122880, April 12, 2006: ACKNOWLEGMENT This is the act of one who has executed a deed in going before some competent officer or court and declaring it to be his act or deed. It involves an extra-step undertaken whereby the signor actually declares to the notary that the executor of the document has attested to the notary that the same is his own free act and deed.
JURAT A jurat is that part of an affidavit whereby the notary certifies that before him, the document was subscribed and sworn by the executor.
Note: Donations mortis causa partake of the nature of testamentary provisions (Art. 728) and as such, said deeds must be executed in accordance with the requisites on solemnities of wills and testaments under Arts. 805 and 806 (Maglasang, et al. vs. Heirs of Cabatingan, GR 131953, June 5, 2002). Rules When Testator is Deaf, or a DeafMute If the testator be deaf, or a deaf-mute, he must personally read the will, if able to do so; otherwise, he shall designate two persons to read it and communicate to him, in some practicable manner, the contents thereof (Art. 807, NCC). Rules if the Testator is Blind If the testator is blind, the will shall be read to him twice; once, by one of the subscribing witnesses, and again, by the notary public before whom the will is acknowledged (Art. 808, NCC).
Disqualification of Notary Public The notary public before whom the will is acknowledged cannot be one of the three witnesses to said will, in view of the absurdity of one person acknowledging something before himself (Cruz vs. Villasor, et al., GR L-32213, November 26, 1973). Substantial Compliance In the absence of bad faith, forgery, or fraud, or undue and improper pressure and influence, defects, and imperfections in the form of attestation or in the language used therein shall not render the will invalid if it is proved that the will was in fact executed and attested in substantial compliance with all the requirements of Article 805 (Art. 809, NCC). Requisites of Article 809: 1. The defects and imperfections refer to the form of the attestation or the language used therein; 2. There is no bad faith, forgery or fraud, or undue or improper pressure and influence; 3. The will was executed and attested in substantial compliance with all the requirements; and 4. The fact of such execution and attestation is proved. Summary of Formal requisites to be observed in the execution of Notarial Wills: 1. The will must be in writing (Art. 809, NCC); 2. It must be in the language or dialect known to the testator; 3. The will must be signed by the testator or by another person in his presence or under his express direction (Art. 805, NCC); 4. That the signing by the testator or by the person under his express direction and in his presence must be done in the presence of at least 3 instrumental witnesses; 5. That the will is attested and subscribed by at least 3 credible witnesses in the presence of the testator and of each and every one of them;
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6. That the will must be signed by the testator and by at least 3 credible witnesses on the left hand margin on each and every page; 7. That the will must be numbered correlatively in letters; 8. That the signing by the 3 witnesses must be done in the presence of the testator and each and every one of them; 9. There must be an Attestation clause stating therein the number of pages upon which the will is written, a statement that the testator signed the will or another person signed the will under the express direction of the testator; 10. The will is signed at the left margin by the testator and the 3 instrumental witnesses in the presence of the testator and of one another; 11. The will must be acknowledged before a notary public (Art. 806, NCC); 12. The will must be read twice by 2 persons designated by the testator if the testator is deaf or deaf-mute (Article 806); 13. If the testator is blind the will must be read to him once, by one of the subscribing witnesses, and again, by the notary public (Article 808); and 14. There must be substantial compliance with all the requirements of the law (Art. 809).
Probate of Holographic Wills Probate is the allowance of the will by the court after its due execution is proved. In the probate of a holographic will, it shall be necessary that at least one witness who knows the handwriting and signature of the testator explicitly declare that the will and the signature are in the handwriting of the testator. If the will is contested, at least three of such witnesses shall be required. In the absence of any competent witness referred to in the preceding paragraph, and if the court deem it necessary, expert testimony may be resorted to (Art. 811, NCC). Questions addressed proceedings:
Formalities for a Holographic Will a. The language must be known to the testator (Art. 804); b. The will must be entirely written in the hand of the testator himself (Art 810); c. The will must be DATED (Art. 810); d. The will must be SIGNED by the testator himself (Art. 810, NCC); e. There must be animus testandi; and f. It must be executed at the time that holographic wills are allowed, not before, the time of death being immaterial (Art. 796, NCC).
probate
a. question of identity b. question of testamentary capacity; and c. question of due execution Rules for the Probate of Holographic Wills 1.
Holographic Will A person may execute a holographic will which must be entirely written, dated, and signed by the hand of the testator himself. It is subject to no other form, and may be made in or out of the Philippines, and need not be witnessed (Art. 810, NCC).
during
2.
3.
If probate is UNCONTESTED, one witness who knows the handwriting of the testator must be presented and who must explicitly declare that the will and the signature are in the handwriting of the testator. If probate is CONTESTED, at least three of such witnesses shall be required to explicitly declare that the signature in the will is the genuine signature of the testator. In the absence of any competent witness referred to in the preceding paragraph, and if the court deem it necessary, expert testimony may be resorted to (Art. 811, NCC).
Dispositions Written Below the Signature In holographic wills, the dispositions of the testator written below his signature must be dated and signed by him in order to make them valid as testamentary dispositions (Art. 812, NCC).
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Note: • If there is no signature and date, then it is presumed that the testator has no testamentary intent as to his additional dispositions. • If dated without signature, the additional disposition is void. If signed only without date, the additional disposition is void. But the holographic will itself is not affected. • With respect to notarial wills, the presence of these additional dispositions will invalidate the entire will because in a notarial will, the signature should appear at the logical end. Those additional dispositions after the signature will invalidate the entire will. Rules for Curing Defects When a number of dispositions appearing in a holographic will are signed without being dated, and the last disposition has a signature and date, such date validates the dispositions preceding it, whatever be the time of prior dispositions (Art. 813, NCC). a. If the last disposition is SIGNED and DATED — 1. preceding dispositions which are SIGNED but NOT DATED are validated. 2. preceding dispositions which are NOT SIGNED but DATED are VOID. (This can be inferred from the wording of the law.) 3. preceding dispositions which are NOT SIGNED and NOT DATED are of course VOID, unless written on the SAME date and occasion as the latter disposition. b. The discussion in (a.) presupposes that the latter disposition was DATED and SIGNED by the testator HIMSELF. Therefore: 1. if done by ANOTHER, without the testator’s consent, same will not affect the previous dispositions, which remain VOID if in themselves VOID; and remain VALID if in themselves VALID. 2. if done by ANOTHER with the testator’s CONSENT, same effects as (1), because the latter disposition is not really HOLOGRAPHIC (not done by the testator himself).
Authentication Signature
of
Correction
by
Full
In case of any insertion, cancellation, erasure or alteration in a holographic will, the testator must authenticate the same by his full signature (Art. 814, NCC). General Rule: Only the erasure or insertion is void. The entire will itself is valid. Exception: When this insertion, cancellation, erasure or alteration is made in an essential part of the will. When this insertion, cancellation, erasure or alteration will affect the essence of the will then not only the insertion, cancellation, erasure or alteration is void but the entire will itself. Formalities of Wills Executed by Filipinos Abroad When a Filipino is in a foreign country, he is authorized to make a will in any of the forms established by the law of the country in which he may be. Such will may be probated in the Philippines (Art. 815, NCC). Formalities for Wills Executed by Aliens Abroad The will of an alien who is abroad produces effect in the Philippines if made with the formalities prescribed by the law of the place in which he resides, or according to the formalities observed in his country, or in conformity with those which this Code prescribes (Art. 816, NCC). Note: A will executed by a foreigner abroad may be probated in the Philippines although it has not been previously probated and allowed in the country where it was executed. The rules do not require proof that the foreign will has already been allowed and probated in the country of its execution. Moreover, our rules require merely that the petition for the allowance of a will must show, so far as known to the petitioner: (a) the jurisdictional facts;
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(b) the names, ages, and residences of the heirs, legatees, and devisees of the testator or decedent; (c) the probable value and character of the property of the estate; (d) the name of the person for whom letters are prayed; and (e) if the will has not been delivered to the court, the name of the person having custody of it (Palaganas vs. Palaganas, G.R. No. 169144, January 26, 2011).
Mutual or Reciprocal Wills
Formalities for Wills Executed by Aliens in the Philippines
Effect of Joint Wills Executed Abroad
A will made in the Philippines by a citizen or subject of another country, which is executed in accordance with the law of the country of which he is a citizen or subject, and which might be proved and allowed by the law of his own country, shall have the same effect as if executed according to the laws of the Philippines (Art. 817, NCC). Joint and Reciprocal Wills Two or more persons cannot make a will jointly, or in the same instrument, either for their reciprocal benefit or for the benefit of a third person (Art. 818, NCC). Note: Article 669 of the old Civil Code (Art. 818 of the New Civil Code) prohibits the making of a will jointly by two or more persons either for their reciprocal benefit or for the benefit of a third person. In other words, it is making such will conjointly or in the same document that is prohibited (Testate Estate of the late Bernabe Rodriguez, G.R. No. 1627-R, July 1, 1948). Joint Wills Joint will is one wherein the same testamentary instrument is made as the will of two or more persons, and it is jointly executed and signed by them.
Mutual or Reciprocal Wills are wills that provide that the survivor of the testators will succeed to all or some of the properties of the decedent. Note: Mutual wills or reciprocal wills by themselves are VALID, but if made in one instrument, they are void, not because they are reciprocal, but because they are joint. Joint wills, whether reciprocal or not, are void.
Wills, prohibited by the preceding article, executed by Filipinos in a foreign country shall not be valid in the Philippines, even though authorized by the laws of the country where they may have been executed (Art. 819, NCC).
Note: Article 819 is an expression of public policy and is clearly one exception to the rule of lex loci celebrationis. However, the prohibition refers only to Filipinos. Hence, if made by foreigners abroad, and valid in accordance with Article 816, the same should be considered as valid here. Joint Wills Executed by Foreigners 1. If executed abroad and valid in accordance with Article 816, same should be considered valid here. 2. If executed in the Philippines, the same should be considered VOID because although apparently allowed under Article 817, still Article 818, which refers specifically to joint wills, and which should be considered as an expression of public policy, should prevail.
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7. Witnesses to a Notarial (Qualification and Disqualifications)
Will
Rule If Will is Executed Abroad These disqualifications apply only if the will is executed in the Philippines.
Witnesses to Wills Any person of sound mind and of the age of eighteen years or more, and not blind, deaf or dumb, and able to read and write, may be a witness to the execution of a will mentioned in Article 805 of this Code (Art. 820, NCC).
Rules Regarding Convicted Witnesses
The following are witnesses to a will:
If pardoned and the pardon is by reason of innocence then you become qualified again to become a witness to a will because when you were acquitted because of innocence, that means you are trustworthy as witness.
disqualified
from
being
1. Any person not domiciled in the Philippines; 2. 2. Those who have been convicted of falsification of a document, perjury or false testimony (Art. 821, NCC). Note: A blind person, under Art. 808, can be a testator, but he cannot be a witness. Qualifications for Witnesses to Notarial Wills At the time of attesting (Arts. 820 and 821, NCC), the witness must: a. Be of sound mind (Art. 820, NCC) b. Be at least 18 years (Art. 820, NCC) c. Be able to read and write (Art. 820, NCC) d. Not be blind, deaf, or dumb (Art. 820, NCC) e. Be domiciled in the Philippines (Art. 821) f. Have not been CONVICTED (by final judgment) of FALSIFICATION of a document; PERJURY; or FALSE TESTIMONY (Art. 821, NCC) Note: It not essential for the witness to be able to speak and write the very language in which the will was written. It is not even essential for the witness to know the language in which the attestation has been written. It is sufficient that same be interpreted to him (Art. 805, NCC).
Conviction here should be by final judgment. Effect of Pardon
If the pardon is by reason of an executive clemency, you are still disqualified because the pardon erases only the penalty or the civil consequences of the conviction, but it does not change the fact that you are dishonest and untrustworthy. Disqualification of Notary Public Concerned The notary public before whom the notarial will is acknowledged is disqualified to be a witness to said will. It would be absurd for him as witness to be acknowledging something before himself as notary public (Cruz vs. Villasor, et al., GR L-32213, November 26, 1973). Effect of Subsequent Incapacity If the witnesses attesting the execution of a will are competent at the time of attesting, their becoming subsequently incompetent shall not prevent the allowance of the will (Art. 822, NCC). Witnesses Cannot Inherit If a person attests the execution of a will, to whom or to whose spouse, or parent, or child, a devise or legacy is given by such will, such devise or legacy shall, so far only as concerns such person, or spouse, or parent, or child of such person, or any one claiming under such person or spouse, or parent, or child, be void, unless there are three other competent witnesses to such will.
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However, such person so attesting shall be admitted as a witness as if such devise or legacy had not been made or given (Art. 823, NCC).
Note: The persons named in the Article are incapacitated to inherit, but not incapacitated as witnesses. Hence, only the part appertaining to them should be considered void.
Basis
Domicile
Revocation OUTSIDE the Philippines
If not domiciled in the Philippines
b) or follow law of place where testator was DOMICILED at the time.
The disqualification extends to 1. the witness 2. the spouse of the witness 3. the parent of the witness 4. the child of the witness 5. anyone claiming the right of said witness, spouse, parent, or child.
If domiciled in the Philippines (not provided for in the law)
Creditors as Witnesses
Note: The charge referred to here is a debt of the estate or of the testator. While a creditor who acts as a witness is disqualified to inherit, he is qualified to receive his credit, which after all cannot be considered a gift. 8. Conflict Rules Conflicts Rules for Revocation of Wills A revocation done outside the Philippines, by a person who does not have his domicile in this country, is valid when it is done according to the law of the place where the will was made, or according to the law of the place in which the testator had his domicile at the time; and if the revocation takes place in this country, when it is in accordance with the provisions of this Code (Art. 829, NCC).
a) follow law of the Philippines (since his domicile is here) — b) or follow the general rule of lex loci celebrationis of the REVOCATION. (Article 17, NCC)
Note: Other relatives of the witness, like his brother or sister, to whom a devise or legacy has been given, can get the inheritance.
A mere charge on the estate of the testator for the payment of debts due at the time of the testator’s death does not prevent his creditors from being competent witnesses to his will (Art. 824, NCC).
Applicable Law a) follow law of place where will was MADE
Revocation IN the Philippines
Whether or not the domicile is in the Philippines.
Follow Philippine (NCC)
law
Ways of Revocation No will shall be revoked except in the following cases: 1. By implication of law; or 2. By some will, codicil, or other writing executed as provided in case of wills; or 3. By burning, tearing, cancelling, or obliterating the will with the intention of revoking it, by the testator himself, or by some other person in his presence, and by his express direction. If burned, torn, cancelled, or obliterated by some other person, without the express direction of the testator, the will may still be established, and the estate distributed in accordance therewith, if its contents, and due execution, and the fact of its unauthorized destruction, cancellation, or obliteration are established according to the Rules of Court (Art. 830, NCC).
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Local or Domestic Ways of Revocation The Civil Code speaks of revocation in three ways: a. by implication or operation of law (totally or partially) b. by virtue of an overt act (like burning, tearing, cancelling, or obliterating totally or partially in some instances) c. by virtue of a revoking will or codicil (totally or partially, or expressly or impliedly). Overt Act Burning
Tearing
Cancelling
Obliterating
Requirement It is not required that the whole instrument is completely burned. Even if only a portion of the document is burned, it is considered to be an act of revocation. Either you tear or cut by means of your hands or scissors. A slight cut or a slight tear is sufficient to be considered an act of revocation. The greater the cut the greater is the presumption that there is animu revocandi on the part of the testator. If the codicil is torn, it is an act of tearing and both the will and codicil are revoked because a codicil is part of the will. When you place a mark or a line across the writings. If you place a mark or a line on the spaces, there is no cancellation. It is when you erase thru eraser or like you blot out. If what is blotted out is just some provisions, these provisions are considered to be revoked but the will remains valid.
Some instances implication of law
of
revocation
by
1. When after the testator has made a will, he sells, or donates the legacy or devise (Art. 957, NCC). 2. Provisions in a will in favor of a spouse who has given cause for legal separation shall be revoked by operation of law the moment a decree of legal separation is granted (Art. 106, NCC).
3. When an heir, legatee, or devisee commits an act of unworthiness (Art. 1032, NCC). 4. When a credit that had been given as a legacy is judicially demanded by the testator (Art. 936, NCC). 5. When one, some or all of the compulsory heirs have been preterited or omitted, the institution of heir is void (Art. 854, NCC). Kinds of Revocation Instrument
by
Subsequent
1. Express Revocation- When the new will or codicil contains a revocatory clause. 2. Implied Revocation –When the provisions in the subsequent wills or codicil are completely inconsistent with the provisions in the previous will. Requisites for the Application Revocation by Subsequent Instrument
of
1. There must be testamentary capacity AT THE TIME of revocation. 2. The subsequent instrument must be valid. 3. The subsequent will or instrument must contain a revocatory clause or be incompatible with the former will thereby showing intent to revoke. 4. The subsequent will or instrument must be admitted to probate. Doctrine of Conditional Revocation also called Dependent Relative Revocation The revocation made in the subsequent will must indeed be a definite one. A mere declaration that sometime in the future, the first would be revoked, is not enough. However, there is nothing wrong in making the revocation conditional, that is, the revocation takes place only if the condition is fulfilled (Molo vs. Molo, GR No. L-2538, September 21, 1951). Revocation by an Overt Act 1. There must be an overt act specified by the law.
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2. There must be a completion at least of the subjective phase of the overt act. 3. There must be animus revocandi or intent to revoke.
Note: The physical act of destruction of a will, like burning in this case, does not per se constitute an effective revocation, unless the destruction is coupled with animus revocandi on the part of the testator. It is not imperative that the physical destruction be done by the testator himself. It may be performed by another person but under the express direction and in the presence of the testator (Casiano vs. CA, 158 SCRA 451).
4. The testator at the time of revoking must have capacity to make a will. 5. The revocation must be done by the testator himself, or by some other person in his presence and by his express direction. Presumption A duly executed will has not been revoked. The burden of proof that the will is revoked lies upon the one who opposes the probate of the will which that person alleges has been revoked. Implied Revocation Thru Wills Subsequent wills which do not revoke the previous ones in an express manner, annul only such dispositions in the prior wills as are inconsistent with or contrary to those contained in the later wills (Art. 831, NCC). Note: Implied revocation may be total or partial. (Partial — if there is inconsistency only in certain provisions). Revocation Made in Subsequent Will A revocation made in a subsequent will shall take effect, even if the new will should become inoperative by reason of the incapacity of the heirs, devisees or legatees designated therein, or by their renunciation (Art. 832, NCC).
9. Modes of Revocation of Wills and Testamentary Dispositions A will may be revoked by the testator at any time before his death. Any waiver or restriction of this right is void (Art. 824, NCC). Revocation is an act of the mind terminating the potential capacity of a will to operate at the death of the testator manifested by some outward and visible act or sign symbolic thereof. Revocability of a Will a. Until the death of the testator, a will is ambulatory and revocable, since after all, the will concerns a disposition of properties and rights effective after death (57 Am. Jur. Wills, Sec. 15). b. The heirs do not acquire any vested right to the disposition in a will until after the testator’s death (Ibid.). c. Provisions in a will which are ordered to be effected immediately, even during the testator’s lifetime, are all right, provided the proper formalities and requisites are present, but they are not really testamentary disposition (Ibid.). a) Effect on the Recognition of a NonMarital Child The legitime of each of the acknowledged natural children and each of the natural children by legal fiction shall consist of one-half of the legitime of each of the legitimate children or descendants. The legitime of an illegitimate child who is neither an acknowledged natural, nor a natural child by legal fiction, shall be equal in every case to fourfifths of the legitime of an acknowledged natural child. The legitime of the illegitimate children shall be taken from the portion of the estate at the free disposal of the testator, provided that in no case shall the total legitime of such illegitimate children exceed that free portion, and that the legitime of the surviving spouse must first be fully satisfied (Art. 895, NCC).
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b) Theory Revocation
of
Dependent
Relative
This doctrine is known as that of dependent relative revocation, and is usually applied where the testator cancels or destroys a will or executes an instrument intended to revoke a will with a present intention to make a new testamentary disposition as a substitute for the old, and the new disposition is not made or, if made, fails of effect for same reason. The doctrine is not limited to the existence of some other document, however, and has been applied where a will was destroyed as a consequence of a mistake of law (68 C.J.P. 799). The rule is established that where the act of destruction is connected with the making of another will so as fairly to raise the inference that the testator meant the revocation of the old to depend upon the efficacy of a new disposition intended to be substituted, the revocation will be conditional and dependent upon the efficacy of the new disposition; and if, for any reason, the new will intended to be made as a substitute is inoperative, the revocation fails and the original will remains in full force (Gardner, pp. 232, 233.). c) Revocation Based on a False Cause Statement of False Cause General Rule: The institution is still valid and the statement of a false cause is considered not written. Exception: When it appears from the will that the testator would not have made such institution if he had known the falsity of such cause (Art. 850, NCC). As a consequence, the institution shall be annulled. Requisites for the Annulment of Institution by Reason of False Cause: 1. The cause is stated in the will; 2. It is shown to be false; and
3. It appears on the will that the testator would not have made the institution if he had known the falsity of the cause (Art. 850, NCC). 10. Heirs a) Compulsory heirs - those for whom the law has reserved a portion of the testator’s estate which is known as the legitime (Art. 887, NCC). Kinds of Compulsory Heirs Legitimate Testator Legitimate children and descendants In default of the foregoing, legitimate parents and ascendants Surviving spouse Illegitimate children Legitimate Testator
Illegitimate Testator Legitimate children and descendants Illegitimate children and descendants In default of the foregoing, illegitimate parents only Surviving spouse Illegitimate Testator
1.
Primary Compulsory Heirs: Those who have precedence and exclude other compulsory heirs. a. Legitimate a. Legitimate children and children and descendants - an descendants adopted child or legitimated child falls in this category 2. Secondary Compulsory Heirs: Those who succeed only in the absence of the primary compulsory heirs. a. Legitimate a. Illegitimate parents and parents only ascendants excluded by excluded by legitimate and legitimate children illegitimate children and descendants and descendants 3. Concurring Compulsory Heirs: Those who succeed together with the primary or the secondary compulsory heirs a. Surviving spouse a. Surviving spouse – the innocent – the innocent spouse in case of spouse in case of legal separation legal separation remains to be a remains to be a compulsory heir of compulsory heir of the other spouse the other spouse
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b.
Illegitimate children
b.
Illegitimate children - note that they become primary heirs in default of legitimate children and descendants thereby excluding illegitimate parents
(Rabuya, Civil Law Reviewer Vol. 1, 2021, pp. 952-966)
d.
legitime of the surviving spouse must first be satisfied before the legitimes of the illegitimate children. In case the total amount of the legitimes of all illegitimate children exceeds what remains of the free portion after deducting the legitime of the surviving spouse, they are subject to reduction (Tolentino, Civil Code of the Philippines Vol. III, Succession, p. 312).
Children and Descendants (Art. 888, NCC):
Parents and Ascendants
1. Legitimate
Their legitime is ½ of hereditary estate of their children and descendants (Art. 889, NCC).
This class includes legitimate children or descendants proper, legitimated children or descendants, and adopted children (Jurado, Comments and Jurisprudence on Succession, 2009 ed., p. 236). Their legitime is ½ of hereditary estate of the decedent, which is to be distributed equally among the children. The decedent may freely dispose of the remaining half, subject to the rights of illegitimate children and the surviving spouse. In case of different degrees of the decedent’s descendants, the proximity rule should apply. In every inheritance, the relative nearest in degree excludes the more distant ones, saving the right of representation when it properly takes place (Jurado, Comments and Jurisprudence on Succession, 2009 ed., p. 243). 2. Illegitimate The basis for the computation of the legitime of illegitimate children is the legitime of each legitimate child. Each illegitimate child is entitled to ½ of the legitime of a legitimate child. Limitations
In case of an in illegitimate parent The illegitimate parents of the deceased are compulsory heirs only when the latter does not have legitimate or illegitimate children or descendants (Tolentino, Civil Code of the Philippines Vol. III, Succession, p. 321). The presence of a surviving spouse of the deceased, however, does not exclude illegitimate parents as a compulsory heir (Tolentino, Civil Code of the Philippines Vol. III, Succession, p. 321). The legitime is ¼ for the illegitimate parent and ¼ for the surviving spouse. In case of an Adopting Parents The adoption shall give the adopter and adoptee reciprocal rights and obligations arising from the relationship of parent and child, including but not limited to: xxx ii. the rights of the adopter and adoptee to be legal and compulsory heirs of each other (Sec. 33, Art. VI, Rules and Regulations to Implement Domestic Adoption Act of 1998). Shares in Legitime (Art. 890, NCC) If both mother and father survive, they divide the legitime equally; but if only one of them survives, he gets the entire legitime (Tolentino, Civil Code of the Philippines Vol. III, Succession, p. 266).
a. Their filiation must be proved. b. Shares are taken from the free portion. c. If there is a surviving spouse concurring with legitimate and illegitimate children, the
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Surviving Spouse
2.
The condition of being a surviving spouse requires that there should have been a valid marriage between the deceased and the survivor (Tolentino, Civil Code of the Philippines Vol. III, Succession, p. 257). The marriage must be subsisting at the time of the death of one party, in order that the survivor can be called a widow or widower and thus be entitled to a legitime (Tolentino, Civil Code of the Philippines Vol. III, Succession, p. 259).
3.
4. 5. 6.
Art. 900, NCC General Rule: If the only survivor is the spouse, the legitime is ½ of hereditary estate of the decedent. Exception: If marriage is in articulo mortis, and the testator died within 3 months from marriage, the legitime is 1/3. Exception to the excepton: When they have been living as husband and wife for more than 5 years. Legitime is ½. Effect of Legal Separation 1. The widow or widower will be entitled to succeed only when he or she is the innocent spouse. 2. If death should occur during the pendency of the legal separation proceedings, the result of the suit should be awaited. 3. To exclude from legitime the guilty spouse. 4. If after such reconciliation, one of the spouses should die, the survivor gets his or her legitime, regardless of whether he or she is the guilty party (Tolentino, Civil Code of the Philippines Vol. III, Succession, pp. 259-260). Steps in determining compulsory heirs
the
legitime
of
1. Determination of the gross value of the estate at the time of the death of the testator (Art. 908, NCC);
7.
Determination of all debts and charges which are chargeable against the estate (Art. 908, NCC); Determination of the net value of the estate by deducting all the debts and charges from the gross value of the estate (Art. 908, NCC); Collation - addition of the value of all donations inter vivos to the net value of the estate (Art. 908, NCC); Determination of the amount of the legitime from the total thus found (Art. 908, NCC); Imputation of the value of all donations inter vivos made to compulsory heirs against their legitime and of the value of all donations inter vivos made to strangers against the disposable free portion and restoration to the hereditary estate if the donation is inofficious (Art. 909, NCC); Distribution of the residue of the estate in accordance with the will of the testator.
Rules on Donation 2. Donations given to children shall be charged to their legitime (Art. 909, NCC). 3. Donations made to strangers shall be charged to the free portion (Art. 909, NCC). 4. Donations which an illegitimate child may have received during the lifetime of his father or mother, shall be charged to his legitime (Art. 910, NCC). Donations are subject to reduction in cases where they are inofficious or if they exceed the disposable portion. b) Institution of Heirs It is an act by virtue of which a testator designates in his will the person or persons who will succeed him in his property and transmissible rights and obligation (Art. 840, NCC). Effect of Lack of Institution Rule: A will shall still be valid even though it should not contain an institution of heir or even if the institution does not comprise the entire estate, and even though the person so instituted
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should not accept the inheritance or should be incapacitated to succeed (Art. 841 [1], NCC). 1. In case of no institution of heir: Effect: If there is no institution of heir (which includes the designation of devisees and legatees), the estate shall pass to the legal heirs by intestate succession (Art. 841 [2], NCC). 2. In case the institution should not comprise the entire estate: Effect: If the institution does not comprise the entire estate, the remainder of the estate shall pass to the legal heir (Art. 841 [2], NCC). 3. In case of repudiation or incapacity: Effect: In such a case, the testamentary dispositions made in accordance with law shall be complied with and the remainder of the estate shall pass to the legal heirs (Art. 841 [2], NCC). Extent of Freedom of Disposition 1. No Compulsory Heirs – The testator may dispose by will of all his assets or any part of it in favor of any person having the capacity to succeed (Art. 842 [1], NCC). 2.
With Compulsory Heirs – The testator can only dispose of the remaining portion of the estate after satisfying the legitime of all compulsory heirs (Art. 842 [2], NCC) (Rabuya, Civil Law Reviewer Vol. I, 2021, p 950). How Designation is mad General Rule: The heir must be designated by his name and surname (Art. 843, NCC). Qualification: Even when the name is omitted but the testator has designated the heir in such a manner that there can be no doubt as to who has been instituted, the institution is valid (Art. 843 [2], NCC).
1. If two or more persons have same names: a. Testator must indicate some circ*mstance by which the instituted heir may be known (Art. 843, NCC). b. If no such circ*mstance has been provided, ambiguity may be resolved by extrinsic evidence or evidence aliunde (other than the oral declaration of the testator as to his intention) (Art. 789, NCC). c. An error in the name, surname or circ*mstances of the heir shall not vitiate the institution when it is possible to know the certainty of the person instituted (Art. 844 [1], NCC). d. If there is similarity of circ*mstance and the ambiguity cannot be resolved through the use of other proof and the person instituted cannot still be identified, none of them shall be an heir (Art. 844 [2], NCC). 2. Disposition in favor of unknown person is void, except: a. If the identity becomes certain by some event or circ*mstance provided in the will; or b. The disposition is in favor of a definite class or group of persons (Art. 845, NCC). It is important that the event or circ*mstance should appear in the will itself; it cannot be shown by extrinsic evidence, either oral or documentary (Rabuya, Civil Law Reviewer I, 2017 Ed. p. 825 citing III Tolentino, Civil Code of the Philippines, 176 1992 Ed). In order to be capacitated, the heir, devisee or legatee is required to be living at the time of the death of the testator (Art. 1025, NCC). Designation of Shares If the heirs are instituted without designation of shares, they shall inherit in equal parts (Art. 846, NCC).
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It should be understood as referring to heirs who are of the same class or juridical condition, and to the portion of the inheritance of which the testator can freely dispose (Tolentino, Civil Code of the Philippines Vol. III, succession p. 178). The legitime must first be satisfied before the instituted heirs without designation shall inherit in equal shares. Individual and Collective Institution If some are individually designated and others collectively, those collectively designated are considered as individually instituted unless it clearly appears that the intention of the testator was otherwise (Art. 847, NCC). E.g. “I designate as my heirs A and B and the children of C.” - The children of C shall be considered as individually instituted unless the testator clearly intended otherwise. Institution of Brothers and Sisters If instituted heirs are brothers and sisters, some of full blood and some of half-blood, the inheritance shall be distributed equally unless a different intention appears (Art. 848, NCC). In intestate succession, brothers and sisters of the full blood shall be entitled to a share double that of the brothers and sisters of the half-blood (Art. 1006, NCC). Instituting a Person and the Latter’s Children When the testator calls to the succession a person and his children, they are all deemed to have been instituted simultaneously and not successively, unless the contrary intention appears (Art. 849, NCC). If the testator institutes “A” and his five children as his heirs with respect to the disposable free portion of the inheritance, it is clear that such disposable portion shall be divided equally among “A” and the five children (Jurado, Comments and Jurisprudence on Succession, 2009 ed. p. 169).
Institution in Aliquot Parts (Not the Entire Inheritance) Institution of Only One Heir If the testator has instituted only one heir, and the institution is limited to an aliquot part of the inheritance, legal succession takes place with respect to the remainder of the estate (Art. 851, NCC).
Illustration: The estator in his will wrote: “I hereby institute my child, “A” as my heir who will inherit 3/4 of my estate.” – Here, intestate succession takes place to the remaining ¼ of the estate.
Institution of Several Heirs The same rule applies, if the testator has instituted several heirs each being limited to an aliquot part, and all the parts do not cover the whole inheritance (Art. 851, NCC).
Illustration: The testator in his will wrote: “I
hereby institute my children “A,” “B” and “C” as my heirs who will inherit 1/4, 1/8, and 1/8, respectively, of my estate.” – Here, intestate succession takes place to the remaining 1/2 of the estate.
However, if it was the intention of the testator that the instituted heirs should become sole heirs to the whole estate, or the whole free portion, as the case may be, and each of them has been instituted to an aliquot part of the inheritance and their aliquot parts together do not cover the whole inheritance, or the whole free portion, each shall be increased proportionally (Art. 852, NCC). If each of the instituted heirs has been given an aliquot part of the inheritance, and the parts together exceed the whole inheritance, or the whole free portion as the case may be, each part shall be reduced proportionally (Art. 853, NCC).
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Prior determination of heirship The Supreme Court has already abandoned the rule laid down in Ypon, Yaptinchay, Portugal, Reyes, Heirs of Gabatan vs. Court of Appeals, and other similar cases, which requires a prior determination of heirship in a separate special proceeding as a prerequisite before one can file an ordinary civil action to enforce ownership rights acquired by virtue of succession. In an En Banc decision penned by Justice Caguioa, the rule now provides that ”unless there is a pending special proceeding for the settlement of the decedent's estate or for the determination of heirship, the compulsory or intestate heirs may commence an ordinary civil action to declare the nullity of a deed or instrument, and for recovery of property, or any other action in the enforcement of their ownership rights acquired by virtue of succession, without the necessity of a prior and separate judicial declaration of their status as such.” This rule is more consistent with the clear dictates of Article 777 of the Civil Code that the rights of succession are immediately vested at the precise moment of the decedent’s death. From that point, the heirs are legally deemed to have acquired ownership of their share in the inheritance and not at the time of declaration of heirs, or partition, or distribution (Treyes vs. Larlar, G.R. No. 232579, September 08, 2020). (1) Limitations on the Institution of Heirs A will shall be valid even though it should not contain an institution of an heir, or such institution should not comprise the entire estate, and even though the person so instituted should not accept the inheritance or should be incapacitated to succeed. In such cases the testamentary dispositions made in accordance with law shall be complied with and the remainder of the estate shall pass to the legal heirs (Art. 841, NCC).
One who has no compulsory heirs may dispose by will of all his estate or any part of it in favor of any person having capacity to succeed. One who has compulsory heirs may dispose of his estate provided he does not contravene the provisions of this Code with regard to the legitime of said heirs (Art. 842, NCC). The testator shall designate the heir by his name and surname, and when there are two persons having the same names, he shall indicate some circ*mstance by which the instituted heir may be known. Even though the testator may have omitted the name of the heir, should he designate him in such manner that there can be no doubt as to who has been instituted, the institution shall be valid (Art. 843, NCC). When there is an imperfect description, or when no person or property exactly answers the description, mistakes and omissions must be corrected, if the error appears from the context of the will or from extrinsic evidence, excluding the oral declarations of the testator as to his intention; and when an uncertainty arises upon the face of the will, as to the application of any of its provisions, the testator's intention is to be ascertained from the words of the will, taking into consideration the circ*mstances under which it was made, excluding such oral declarations (Art. 789, NCC). (2) Collective Institution If some are individually designated and others collectively, those collectively designated are considered as individually instituted unless it clearly appears that the intention of the testator was otherwise (Art. 847, NCC). E.g., “I designate as my heirs A and B and the children of C.” - The children of C shall be considered as individually instituted unless the testator clearly intended otherwise.
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(3) Proscription Institution
Against
Successive
When the testator calls to the succession a person and his children they are all deemed to have been instituted simultaneously and not successively (Art. 849, NCC). (4) Institution Based on a False Cause General Rule: The statement of a false cause for the institution of an heir shall not vitiate the institution. The false cause shall always be considered as not written. The law presumes that in giving a legacy or devise or inheritance, the real motivation or the real cause is the liberality or generosity of the testator not the false cause. Exception: Unless it appears from the will that the testator would not have made such institution if he had known the falsity of such cause (Art. 850, NCC). c) Substitution of Heirs It is the designation by the testator of a person or persons to take the place of the heir or heirs first instituted (Tolentino, Civil Code of the Philippines Vol. III, p.201). Substitution is the appointment of another heir so that he may enter into the inheritance in default of the heir originally instituted (Art. 857, NCC). Effects of Substitution GENERAL RULE: The substitute is subject to the same charges and conditions imposed upon the instituted heir (Art. 862, NCC). Exceptions: 1. When the testator expressly provided in the will the contrary; or
2. When the charges or conditions are personally applicable only to the heir instituted (Art. 862, NCC). Kinds of Substitution 1. Simple — When a testator designates one or more persons to substitute the heir or heirs instituted in case such heir or heirs should die before him, or should not wish, or should be incapacitated to accept the inheritance (Art. 859, par.1, NCC). (1) Causes of Substitution General Rule: If the simple substitution is without a statement of the cases to which it refers, the same shall comprise incapacity, predeceases or renunciation. Exception: If the testator provides that substitution shall take place only in case of only one (e.g., predecease), it cannot take place by reason of repudiation or incapacity. Variations of Simple Substitution 1. Brief – when two or more persons are designated to substitute for one heir (Art. 860, NCC). 2. Compendious – when there is only one person designated to substitute for two or more heirs (Art. 860, NCC). If the substitutes named for any or all of several heirs instituted, substitution will take place even if only one renounces the inheritance, but only with respect to the share of such instituted heir (Tolentino, Civil Code of the Philippines Vol. III, Succession, p. 207). 3. Reciprocal – when two or more persons are reciprocally substitutes for each other (Art. 861, NCC).
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Extinguishment of Simple Substitution a) When the substitute predeceases the testator; b) When the substitute is incapacitated; c) When the substitute renounces the inheritance; d) When the institution of heirs is annulled; e) When the institution or substitution is revoked by the testator; and f) When a will is void or disallowed or revoked (Paras, Civil Code of the Philippines Annotated Wills and Succession, 2016, p.233234). 2. Fideicommissary Substitution (Compared With Testamentary Trusts)
Requisites
Fideicommissary Substitution
Testamentary Trusts
1) A first heir called primarily to the enjoyment of the estate (called fiduciary); 2) A second heir to whom the property is transmitted by the first heir (called the fideicommissary)
1) Sufficient words to raise a trust; 2) a definite subject; 3) a certain or ascertain object; statutes in some jurisdictions expressly or in effect so providing.
Fideicommissary – when the testator leaves his property to one person with the express charge that it be transmitted to another or others (Art. 863, NCC). Requisites: (Art. 863-865, NCC) i. A first heir called primarily to the enjoyment of the estate (called fiduciary); Recognized as an instituted heir, and is entitled to the enjoyment of property but he cannot alienate it (Tolentino, Civil Code of the Philippines Vol. III, Succession, p. 210-211).
ii. A second heir to whom the property is transmitted by the first heir (called the fideicommissary). Persons conceived are considered living, provided they are subsequently born with the requisites for civil personality (Tolentino, Civil Code of the Philippines Vol. III, Succession, p. 213). The second heir shall acquire a right to the succession from the time of the testator’s death, even though he should die before the fiduciary. The right to second heirs shall pass to his heirs (Art. 866, NCC). iii. An obligation clearly imposed upon the first heir to preserve and transmit the whole or part of the estate; and In the absence of an obligation on the part of the first heir to preserve the property for the second heir, there is no fideicommissary substitution (PCIB vs. Escolin. G.R. Nos. L-27860 and L-27896, March 29, 1974). Limitations Substitution
upon
Fideicommissary
1. The substitution must not go beyond one degree from the heir originally instituted. One degree means one generation (Art. 863, NCC). It follows that the fideicommissary can only be either a parent or child of the first heir (Rabuya, Civil Law Reviewer, Vol. I, 2021 Ed. p. 996 citing Ramirez vs. Vda. de Ramirez, G.R. No. L-27952, February 15, 1982). 2. Both the fiduciary and fideicommissary must be living at the time of death of the testator (Art. 863, NCC). 3. Substitution must not burden the legitime (Art. 864, NCC). 4. Substitution must be expressly made (Art. 865, NCC).
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Effects of Substitution
Valid
Fideicommissary
1. The right of the first heir with respect to the property is similar to that of a usufructuary. He is obliged to preserve and transmit the inherited property to the second heir. 2. The time of transmission depends upon the intention of the testator. If not provided for, it is understood to be at the time of death of the first heir. 3. The fideicommissary heir does not succeed the fiduciary for he acquires directly from the testator upon the latter’s death. A provision whereby the testator leaves to a person the whole or part of the inheritance, and to another the usufruct shall be valid. If he gives the usufruct to various persons, not simultaneously, but successively the provisions of Art. 863 shall apply (Art. 869, NCC). Void Fideicommissary Substitution 1. Fideicommissary substitution not made in an express manner. 2. Provisions which contain a perpetual probation to alienate, and even a temporary one beyond the time limit fixed in Art. 863. 3. Those which impose upon the heir the charge of paying to various persons successively beyond the limits prescribed in Art. 863, e.g., a certain income or pension. 4. Those which leave to a person the whole or part of the hereditary property in order that he may apply or invest the same according to secret instructions communicated to him by the testator (Art. 867, NCC). 5. The dispositions of the testator declaring all part of the estate inalienable for more than 20 years are void (Art. 870, NCC).
Effect of Void Fideicommissary Substitution If the foregoing prohibitions are violated, the fideicommissary substitution is considered as not written but the validity of the institution of the first heir is not affected. Hence, the first heir acquires the inheritance without the obligation of transmitting the same to the second heir (Art. 868, NCC). CONDITIONAL TESTAMENTARY DISPOSITIONS AND THOSE WITH A TERM Conditional Testamentary Disposition – When the acquisition or extinguishment of successional rights is made to depend upon the happening or non-happening of a future and uncertain event (Rabuya, Civil Law Reviewer, Vol. I, 2021, p. 1001). Testamentary Disposition with a Term When the demandability or extinguishment of successional rights is made to depend upon the arrival of a day certain or upon the happening of a future but certain event. The institution of an heir may be made conditionally, or for a certain purpose or cause (Art. 871, NCC). Conditions imposed by the testator upon the heirs shall be governed by the rules established for conditional obligations in all matters not provided for by this Section (Art. 884, NCC). General Rule: Testator is free to impose any condition, mode or term on testamentary dispositions. Exception: The testator cannot impose upon the legitime any burden, encumbrance, charge, term, condition or substitution of any kind whatsoever.
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Should he do so, the same is considered as not imposed (Art. 872, NCC). Exception to the Exception: The testator can forbid the partition of the inheritance, including the legitime, for not more than 20 years (Art. 1083, NCC). 11. Legitime LEGITIME It is that part of the testator’s property which he cannot dispose of because the law has reserved it for certain heirs, who are therefore called compulsory heirs (Art. 886, NCC).
Incomplete Legitime Any compulsory heir to whom the testator has left by any title less than the legitime belonging to him may demand the same be fully satisfied (Art. 906, NCC). Testamentary dispositions that impair or diminish the legitime of the compulsory heirs shall be reduced on petition of the same, insofar as they may be inofficious or excessive (Art. 907, NCC). a) Collation in Connection Computation of Legitime
With
the
Collation
Exceptions:
Every compulsory heir, who succeeds with other compulsory heirs must bring into the mass of the estate any property or right which he may receive from the decedent, during the lifetime of the latter, by way of donation, or any other gratuitous title, in order that it may be computed in the determination of the legitime of each heir, and in the account of partition (Art. 1061, NCC).
2. Valid and effective disinheritance (Art. 915, NCC); 3. The testator may forbid the partition of the inheritance including the legitime for not more than 20 years (Art. 1083, NCC); 4. Reserva Troncal (Art. 891, NCC); and 5. Family Home.
An act of returning or restoring to the common mass of the estate, either actually or fictitiously, any property which a person may have received from the decedent during the latter’s lifetime, but which is understood for legal purposes as an advance from inheritance (Jurado, Comments and Cases in Wills and Succession, 2009, p. 511).
Every renunciation or compromise as regards a future legitime between the person owning it and his compulsory heirs is void. (Art. 905, NCC)
When is Collation not Available
General Rule: The testator cannot deprive his compulsory heirs of their legitime. Neither can he impose upon the same burden, encumbrance, condition, or substitution of any kind whatsoever. (Art. 904, NCC).
Rationale: The heir does not acquire any right over the same until the death of the testator (Tolentino, Civil Code of the Philippines Vol. III, Succession, p. 323). The compulsory heir may claim the same upon death of the decedent, but they must bring to collation or whatever they may have received by virtue of the renunciation or compromise.
Collation shall not take place among compulsory heirs if the donor should have so expressly provided, or if the donee should repudiate the inheritance, unless the donation should be reduced as inofficious (Art. 1062, NCC). Operations related to collation: 1. Collation - adding to the mass of the hereditary estate the value of the donation or gratuitous disposition. 2. Imputing or Charging - crediting the donation as an advance on the legitime (if the donee is
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a compulsory heir) or on the free portion (if the donee is a stranger). 3. Reduction – determining to what extent the donation will remain and to what extent it is excessive or inofficious. 4. Restitution – return or payment of the excess to the mass of hereditary estate. What to Collate: 1. Any property or right received by gratuitous title during the testator’s lifetime (Art. 1061, NCC). 2. In cases of grandchildren: a. All that their parents would have brought to collation if alive. b. All that they may have received from the decedent during his lifetime (Art. 1064, NCC). 3. Any sums paid by a parent in satisfaction of the debts of his children, election expenses, fines and similar expenses (Art. 1069, NCC).
b) Table of Legitime Summary of the Amount of Legitime LC
LEGEND: Legitimate Children, including adopted and legitimated children
LPA IC IP SS CH FP
Legitimate Parents/Ascendants; Illegitimate Children; Illegitimate Parents; Surviving Spouse Compulsory Heirs Free Portion
SURVIVOR LEGITIME 1. When compulsory heir/s of the same kind survive alone 1 LC ½ of the hereditary estate of the father and mother
(Art. 888, NCC) 2 or more LCs
Properties not subject to collation 1. Absolutely no collation Expenses for support, education (elementary and secondary only), medical attendance, even in extraordinary illness, apprenticeship, ordinary equipment, or customary gifts (Art. 1067).
(Art. 888, NCC) LPA
½ of the hereditary estate of their children and descendants to be divided equally (Art. 889,
NCC)
IP
½ of the hereditary estate Parents of illegitimate children are compulsory heirs of the latter only in the case, when such child leaves neither LC, nor a SS, nor IC
2. Generally, not imputable to legitime: a. Expenses incurred by parents in giving their
children professional, vocational or other career unless the parents so provide or unless they impair the legitime (Art. 1068., NCC). b. Wedding gifts by parents and ascendants consisting of jewelry, clothing, and outfit except when they exceed 1/10 of the sum disposable by will (Art. 1070., NCC).
½ of the hereditary estate of the father and mother to be divided equally
(Art. 903, NCC) SS
½ of hereditary estate ⅓ if marriage was solemnized in articulo mortis and the testator died within 3 months from the time of the marriage ½ if the surviving spouse and the testator have been living as husband and wife for more than 5 years
(Art. 900, NCC)
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IC
½ of hereditary estate divided equally among the IC
2.
When Primary concurs with compulsory heirs 1LC; LC - ½ of the hereditary estate SS of the father and mother (Art.
888, NCC)
SS - ¼ of the hereditary estate to be taken from the FP (Art.
SS - share of that equal to a child to be taken from the FP
(Arts. 892, 897, NCC)
3.
When secondary concurs with concurring compulsory heirs LPA; LPA - ½ of the hereditary estate IC of their children and descendants to be divided equally (Art. 890, NCC) IC - ¼ of the hereditary estate to be taken from the FP (Art. 896,
892, NCC)
2 or more LC; SS
In case of legal separation, the SS may inherit if it was the deceased who had given cause for the same. (Art. 892, NCC) LC - ½ of the hereditary estate divided in equal portions (Art. 888, NCC); SS - share of that equal to a child to be taken from the FP
(Art. 892, NCC)
LC; IC
NCC)
LPA; SS
NCC)
SS - ¼ of the hereditary estate
(Art. 893, NCC)
LPA SS IC
LC - ½, in equal portions (Art. 888, NCC);
FC)
LC - ½ of the hereditary estate of the father and mother (Art.
888, NCC)
SS - ¼ of the hereditary estate to be taken from the FP (Art. 892,
NCC)
IC - ½ share of each LC (Art. 176,
FC)
2 or more LC; IC; SS
The legitime of the concurring CH are from the free portion. The share of the SS has preference over that of the IC, whose share may suffer reduction pro rata in case of insufficiency. (Art. 895, NCC) LC - ½ of the hereditary estate divided in equal portions (Art. 888, NCC); IC - ½ share of each LC (Art. 176,
FC)
LPA - ½ of the hereditary estate of their children and descendants to be divided equally (Art. 889,
NCC)
SS ⅛ of the hereditary estate from the FP (Art. 899, NCC)
IC - ½ share of each LC (Art. 176, 1 LC; SS; IC
LPA - ½ of the hereditary estate of their children and descendants to be divided equally (Art. 889,
IC - ¼ of the estate from the FP
(Art. 899, NCC)
IP; SS
IP - ¼ of the hereditary estate SS - ¼ of the hereditary estate
(Art. 903, NCC) 4. Concurrence among concurring compulsory heirs SS; SS - ⅓ of the hereditary estate IC ⅓ of the hereditary estate
(Art. 894, NCC)
Sample Problem: Testator with an estate of 1.0M was survived by his 2 LC, 4 ILC, spouse, 5 siblings and father. (1) Who are the compulsory heirs? (2) What is the legitime of each? Answer: 1. 2 LC, 4 ILC and spouse
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Siblings are not one of the compulsory heirs while the testator’s father being a secondary heir is excluded by the primary heirs. 2. Legitime of: 2 LC (½): 1.0M x ½ = 500K 500 / 2 = 250K for each LC Spouse (same as 1 LC): 250K 4 ILC (1/2 of 1 LC share): 250K / 2 = 125K Note that 125k multiplied to 4 is 500K, hence, the remaining amount of the estate is not sufficient. In such case, the 4 ILC will suffer a pro rata reduction, hence 1.0 M – (500K + 250K) = 250K 250K / 4 = 62.5K for each ILC c) Impairment of the Legitime The testator cannot deprive the compulsory heirs of his or her legitime except in cases of valid disinheritance. Neither can the testator deny the compulsory heirs their legitimate rights by giving them less than the amount that the law reserves as their lawful share or by distributing the estate in a way that would lessen or devalue their legitimate claims. The testator cannot also impose any conditions, substitutions, or burdens on the legitimate except the condition that the estate will not be divided for a period not exceeding twenty (20) years (Art. 870, NCC). d) Presumptive Legitime Presumptive Legitime is not defined in the law. Its definition must have been taken from Act 2710, the Old Divorce Law, which required the delivery to the legitimate children of "the equivalent of what would have been due to them as their legal portion if said spouse had died intestate immediately after the dissolution of the community of property."
As used in the Family Code, presumptive legitime is understood as the equivalent of the legitimate children's legitimes assuming that the spouses had died immediately after the dissolution of the community of property. Presumptive legitime is required to be delivered to the common children of the spouses when the marriage is annulled or declared void ab initio and possibly, when the conjugal partnership or absolute community is dissolved as in the case of legal separation. 12. Preterition It is the complete and total omission of a compulsory heir from the testator’s inheritance without the heir’s express disinheritance (Morales vs. Olondriz, G.R. No. 198994, February 3, 2016). The preterition or omission of one, some, or all of the compulsory heirs in the direct line, whether living at the time of the execution of the will or born after the death of the testator, shall annul the institution of heir; but the devises and legacies shall be valid insofar as they are not inofficious. If the omitted compulsory heirs should die before the testator, the institution shall be effectual, without prejudice to the right of representation (Art. 854, NCC). a) Requisites a. The heir omitted must be a compulsory heir in the direct line, whether ascending or descending (Rabuya, Pre-Bar Reviewer Civil Law, 2021, p. 288). Even if the surviving spouse is a compulsory heir, there is no preterition even if she is omitted from the inheritance, for she is not in the direct line. Preterition applies also to legally adopted child. Under Article 39 of P.D. No. 603, known as the Child and Youth Welfare Code, adoption gives to the adopted person the same rights and duties as if he were a legitimate child of the adopter and makes the adopted person a legal heir of the adopter (Acain vs. Intermediate Appellate Court, G.R. No. L-72706, October 27, 1987).
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All persons who are compulsory heirs are included within its scope, including illegitimate children and illegitimate father or mother (Tolentino, Civil Code of the Philippines Vol. III, Succession p. 189). b. The omission must be complete and total in character in such a way that the omitted heir does not and has not received anything at all from the testator by any title whatsoever (Jurado, Comments and Jurisprudence on Succession, 2009 ed. p.174). There is total omission, when the testator does not disinherit the heir, but leaves him nothing of the hereditary estate, whether or not he is mentioned in the will (Tolentino, Civil Code of the Philippines Vol. III, Succession, p.188). He must have received nothing by way of: 1. testamentary succession; 2. legacy or devise; 3. donation inter vivos; and 4. intestacy. If the heir was given a share, even if very small or minimal, there is no preterition. All he has to do is ask for the completion of his share (Reyes vs. Barreto-Datu, G.R. No. L-17818, January 25, 1967). c. The compulsory heir omitted should survive the testator (Jurado, Comments and Jurisprudence on Succession, 2009 ed. p.174). d. The omission of a compulsory heir in the will must be by mistake, inadvertence, or through an oversight, and not intentional, otherwise it will be a case of invalid disinheritance (Rabuya, Pre-Bar Reviewer Civil Law, 2021, p. 289).
2. Legacies and devises shall remain valid insofar as they are not inofficious. (Art. 854, NCC) If it impairs the legitime, they are merely reduced. 3. If a will does not institute any devisee or legatees, the preterition will result in total intestacy (Rabuya, Pre-Bar Reviewer Civil Law, 2021, p. 288 citing Morales vs. Olondriz). 13. Conditional Dispositions
Dispositions
and
a) Condition Not to Marry General Rule: An absolute prohibition not to contract a first or subsequent marriage is not a valid condition and shall be considered as not written (Art. 874, NCC). However, if the prohibition is not absolute and is relative as to persons, time, or place, such condition is valid and must be complied with, unless the testator practically renders it impossible for the heir to marry at all (Rabuya, Civil Law Reviewer I, 2021 Ed. p. 1006). Exception: If the prohibition is imposed on the widow or widower of the deceased spouse or the latter’s ascendants or descendants. However, this condition may not be validly imposed upon the legitime of the widow or widower (Rabuya, Civil Law Reviewer I, 2021 Ed. p. 1006). b) Disposition Captatoria It is one which imposes as condition that the heir shall make some provision in his will in favor of the testator or of any other person (Art. 875, NCC). Such disposition is void, without affecting the other provisions of the will.
b) Governing Law Effects of Preterition: 1. It annuls entirely the institution of heirs.
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Kinds of Conditions With regard to the cause upon which their fulfillment depends: Potestative
Casual As to definition One which One that does depends not depend exclusively upon upon the will the will of the of the heir, heir, devisee, or devisee, or legatee, and legatee, but must be upon the performed by him chance and/or personally. upon the will (Tolentino, Civil of a third Code of the person.
Philippines Vol. III, succession, p. 234)
(Tolentino, Civil Code of the Philippines Vol. III, succession, p. 234)
Mixed It depends jointly upon the will of the heir, devisee, or legatee and upon chance and/or the will of a third person. (Tolentino,
Civil Code of the Philippines Vol. III, succession, p. 234)
As to fulfillment It must be It shall be sufficient that it fulfilled by him as happens or be fulfilled at any soon as he learns time before or after the death of of the testator’s the testator unless he has death. provided otherwise. This rule shall not apply when the condition, already complied with, cannot be fulfilled again.
(Art. 876, NCC).
Should it have existed or should it have been fulfilled at the time the will was executed and the testator was unaware thereof, it shall be deemed complied with. If he had knowledge thereof, the condition shall be considered fulfilled only when it is of such nature that it can no longer exist or be complied with again (Art.
877, NCC).
c) Modal Institution It is the institution of an heir made for a certain purpose or cause (Arts. 881 and 882, NCC). While a condition suspends, but does not obligate, a mode obligates, but does not suspend.
In case of doubt, the institution, devise or legacy must be considered as modal (Jurado, Comments and Jurisprudence on Succession, 2009 ed., p. 229). 1. In a modal institution, the testator states: (1) the object of the institution, or (2) the purpose or application of the property left by the testator, or (3) the charge imposed by him upon the heir. 2. As a rule, an obligation imposed upon an heir is not considered a condition unless it clearly appears that such was the intention of the testator. Effect of mode: The instituted heir can claim immediately the delivery of the inheritance subject to the giving of security or bond for the compliance of his obligation. In case of failure to comply with the obligation, the instituted heir shall be compelled to return whatever he may have received by virtue of the institution, together with their fruits and interests (Rabuya, Civil Law Reviewer Vol. 1, 2021, p. 1009). 14. Void Testamentary Dispositions Cause of Intestacy That which takes place by operation of law in default of compulsory and testamentary succession. Not defined in the Civil Code. Legal succession is a mode of transmission mortis causa which takes place in the absence of the expressed will of the decedent embodied in a testament. Instances when Legal or Intestate Succession operates (Art. 960, NCC) 1. If a person dies without, or with a void will, or will has subsequently lost its validity. 2. When the will does not institute an heir. 3. Upon the expiration of term, or period of institution of heir. 4. Upon fulfillment of a resolutory condition attached to the institution of heir, rendering the will ineffective.
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5. When the will does not dispose of all the property belonging to the testator. Legal succession shall take place only with respect to the property which the testator has not disposed (mixed succession). 6. If the suspensive condition attached to the institution of the heir does not happen or is not fulfilled. 7. If the heir dies before the testator. If the heir repudiates the inheritance, there being no substitution, and no right of accretion takes place. 8. When the heir instituted is incapable of succeeding, except in cases provided in the New Civil Code. 9. When there’s preterition – intestacy may be total or partial depending on whether or not there are legacies or devises. Note: In all cases where there has been an institution of heirs, follow the ISRAI order: 1. If the Institution fails; Substitution occurs. 2. If there is no substitute, the Right of Representation applies in the direct descending line to the legitime if the vacancy is caused by predecease, incapacity, or disinheritance. 3. The right of Accretion applies to the free portion when the requisites in Art. 1016 are present. 4. The right of Accretion applies to the free portion when the requisites in Art. 1016 are present. 5. If there is no substitute, and the right of representation or accretion is not proper, the rules on Intestate succession shall apply. 15. Disinheritance a) Grounds for Disinheritance CHILDREN AND DESCENDANTS
PARENTS OR ASCENDANTS
SPOUSE
1.Leads a dishonorable life; 2.Accused the testator of a crime for which the law prescribes imprisonment for 6 years or
1.Abandonmen t of their children or inducing their daughters to live a corrupt or immoral life, or attempting against their
1.Conviction by final judgment of an attempt against the life of the testator, his/her descendants/asc endants. 2.Accusing the
more, if accusation has been found to be groundless: Accusation includes: a. Filing an information against the testator b. Acting as a witness against the testator 3.Convicted of adultery/concu binage with the spouse of the testator; 4.Conviction of a crime which carries with it the penalty of civil interdiction; 5.By fraud, violence, intimidation, or undue influence causes the testator to make a will or to change one already made 6.Conviction by final judgment of an attempt against the life of the testator, his/her spouse, ascendant/desc endant; 7.Refusal without justifiable cause to support the parent or ascendant; and 8.Maltreatment of the testator by word or deed. (Art. 919, NCC)
virtue; 2.Conviction by final judgment of an attempt against the life of the testator, his/her spouse, 3.Accusing the testator of a crime for which the law prescribes imprisonment for 6 years or more and accusation has been found to be false; 4.Conviction of adultery /concubinage with the spouse of the testator; 5.By fraud, violence, or intimidation or undue influence, causes the testator to make a will or to change one already made; 6.Loss of parental authority; 7.Refusal without justifiable cause to support the children/desce ndants; and 8.Attempt by one of the parents against the life of the other, unless there has been reconciliation between them. (Art. 920, NCC)
testator of a crime for which the law prescribes the imprisonment for 6 years or more and accusation has been found to be false; 3.By fraud, violence, or intimidation or undue influence, causes the testator to make a will or to change one already made; 4.Has given cause for legal separation; 5.Has given ground for loss of parental authority; and 6.Unjustifiable refusal to support the children or the other spouse. (Art. 921, NCC)
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b) Requisites for the Various Grounds for Disinheritance 1. Effected through a valid will (Art. 916, NCC); 2. Legal cause must be specified in the will itself (Art. 916, NCC); 3. For causes provided by law (Art. 918, NCC); 4. Cause must be true and proven to be true if challenged by the person disinherited (Art. 918, NCC); 5. Disinherited heir must be designated in a manner that there is no doubt as to his identity; 6. Unconditional (refers to suspensive condition) and total (Rabuya, Civil Law Reviewer Vol. I, 2021, p 1028).
16. Legacies and Devises a) Requisites for Validity All things and rights which are within the commerce of man may be bequeathed or devised (Art. 924, NCC). Persons Charged Any compulsory heir
Any voluntary heir
c) Effects of Reconciliation A subsequent reconciliation between the offender and the offended person deprives the latter of the right to disinherit and renders ineffectual any disinheritance that may have been made. If there is no will, it deprives the offended person of right to disinherit the offending person. If already disinherited, disinheritance already made is rendered ineffectual. There is no required form. It may be express or tacit (Rabuya, Civil Law Reviewer Vol. 1, p. 906-907). If the ground is unworthiness: Under Art. 1033, these causes of unworthiness shall be without effect if the testator had knowledge thereof at the time he made his will, or if having known of them subsequently, he should condone them in writing. If disinheritance is made, reconciliation renders the disinheritance ineffective. If there is express disinheritance, the heir will continue to be incapacitated to succeed even to his legitime, unless he is pardoned in writing or the testator makes a new will re-instituting him or reiterating the provisions of the former will wherein the heir is instituted (Tolentino, Civil Code of the Philippines Vol. III, succession, p.372).
Any legatee or devisee
No one is charged
Extent of Liability Shall not be liable for the charge beyond the amount of the free portion given to them. (Art. 925, NCC) His liability will extend only to the entire share received by him. (Rabuya, Civil Law Reviewer Vol. I, 2021, p 1010-1011) May be liable for the charge only to the extent of the value of the legacy or the devise received by them. (Art. 925, NCC) All shall be liable in the same proportion as they inherit. (Art. 926, NCC) This applies only in the absence of administration proceedings for the settlement of the decedent’s estate.
b) Property Not Owned by the Testator The legacy or devise of a thing belonging to another person is void, if the testator erroneously believed that the thing pertained to him. But if the thing bequeathed, though not belonging to the testator when he made the will, afterwards becomes his, by whatever title, the disposition shall take effect (Art. 930 NCC). c) Ineffective Legacies/Devises 1. Testator transforms the thing bequeathed in such a manner that it does not retain either the form or the denomination it had (Art. 957[1], NCC).
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2. Testator by any title or for any cause alienates the thing bequeathed, or any part thereof, it being understood that in the latter case the legacy or devise shall be without effect only with respect to the part alienated (Art. 957[2], NCC). Except: when the thing should again belong to the testator after alienation (Art. 957[2], NCC). 3. Thing bequeathed is totally lost during the lifetime of the testator, or after his death without the heirs fault. 4. Other causes: Nullity of the will, noncompliance with suspensive conditions affecting the bequests, sale of the thing to pay debts of the deaths during the settlement of his estates (Art. 957[3], NCC). C. INTESTATE SUCCESSION 1. Relationship Rules in relationship (Arts. 963 to 969, NCC) 1. Number of generations determines proximity. 2. Each generation forms a degree. 3. A series of degrees forms a line. 4. A line may be direct or collateral. Direct line is that constituted by the series of degrees among ascendants and descendants (ascending and descending) (Art. 964 [1], NCC). Collateral line is that constituted by the series of degrees among persons who are not ascendants or descendants, but who come from a common ancestor (Art. 964[2], NCC). 2. Causes of Intestacy (Art. 960, NCC) Legal or intestate succession takes place:
3. If the suspensive condition attached to the institution of heirs does not happen or is not fulfilled, or if the heir dies before the testator, or repudiates the inheritance, there being no substitution, and no right of accretion takes place; 4. When the heir instituted is incapable of succeeding, except in cases provided in the Code 3. Order of Intestate Succession Decedent is a Legitimate Child Legitimate children or descendants (LCD) Legitimate parents or ascendants (LPA) Illegitimate children or descendants (ICD)
Surviving spouse (SS) Brothers and sisters, nephews, nieces (BS/NN) Legitimate collateral relatives within the 5th degree
Decedent is an Illegitimate Child Legitimate children or descendants (LCD) Illegitimate children or descendants (LPA) Illegitimate parents (IP)
Surviving spouse (SS) Illegitimate brothers and sisters, nephews, nieces (IBS/NN) State
Decedent is an Adopted Child Legitimate children or descendants (LCD) Illegitimate children or descendants (ICD) Legitimate or illegitimate parents, or legitimate ascendants, adoptive parents Surviving spouse (SS) Brothers and sisters, nephews, nieces (BS/NN) State
(C5) State
1. If a person dies without a will, or with a void will, or one which has subsequently lost its validity; 2. When the will does not institute an heir to, or dispose of all the property belonging to the testator. In such case, legal succession shall take place only with respect to the property of which the testator has not disposed;
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4. Rule of Proximity and Rule of Equality a) Exceptions to the Rule of Proximity and Rule of Equality Rule of Proximity The relative nearest in degree excludes the farther one (Art. 962(1), NCC), (Arts. 987 and 1006, NCC). Rule of Equal Division
General Rule: The relatives who are in the
same degree shall inherit in equal shares [Arts. 962(2), 987 and 1006, CC]. Exception: 1. Rule of preference between lines. 2. Distinction between legitimate and illegitimate filiation. The ratio under the present law is 2:1 (Art. 983, in relation to Art. 895 as amended by Art. 176, FC). 3. Rule of division by line in the ascending line (Art. 987 (2), NCC). 4. Distinction between full-blood and half- blood relationship among brothers and sisters, as well as nephews and nieces (Art. 1006 and 1008, NCC). 5. Right of representation. 5. Determination of Heirs Jurisprudence dictates that the determination of who are the legal heirs of the deceased must be made in the proper special proceedings in court, and not in an ordinary suit for recovery of ownership and possession of property. This must take precedence over the action for recovery of possession and ownership. The Court has consistently ruled that the trial court cannot make a declaration of heirship in the civil action for the reason that such a declaration can only be made in a special proceeding. Under Section 3, Rule 1 of the 1997 Revised Rules of Court, a civil action is defined as one by which a party sues another for the enforcement or protection of a right, or the prevention or redress of a wrong while a special proceeding is a remedy by which a party seeks to establish a status, a right, or a particular
fact. It is then decisively clear that the declaration of heirship can be made only in a special proceeding inasmuch as the petitioners here are seeking the establishment of a status or right (Treyes v. Larlar, GR No. 232579, September 8, 2020). 6. Successional Barrier (The “Iron Curtain Rule”) Rule of Barrier between the legitimate family and the illegitimate family (the ironcurtain rule): The illegitimate family cannot inherit by intestate succession from the legitimate family and vice-versa (Art. 922, NCC). Note: In Aquino v. Aquino [G.R. No. 208912 (2021), the Supreme Court ruled that children, regardless of their parents’ marital status, can now inherit from their grandparents and other direct ascendants by right of representation. 7. Successional Rights of Adopted Children An adopted child succeeds to the property of the adopting parents in the same manner as a legitimate child (Art. 979 par 2, NCC). There is an exception to the 2nd paragraph of Art 979 of the Civil Code. The law provides that, “If the adopter is survived by legitimate parents or ascendants, and by an adopted person, the latter shall not have more successional rights than an acknowledged natural child. As long as there are legitimate children or descendants, the adopted child has the same share as one legitimate child (Paras, Civil Code of the Philippines Annotated Volume III, 2021 ed., p. 482). 8. Successional Rights of Adopting Parents In default of legitimate children and descendants of the deceased, his parents and ascendants shall inherit from him, to the exclusion of collateral relatives (Art. 985 NCC). In default of the father and mother, the ascendants nearest in degree shall inherit (Art. 987 par 1, NCC). If no legitimate parents, the adopting parents, if any, will take their place (Paras, Civil Code of the Philippines Annotated Volume III, 2021 ed., p. 480).
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9. Successional Rights of Marital and NonMarital Children Legitimate children and their descendants succeed the parents and other ascendants, without distinction as to sex or age, and even if they should come from different marriages (Art. 979 par 1, NCC). The term “legitimate” includes “legitimated”. Children who are legitimated by subsequent marriage shall enjoy the same rights as legitimate children. The effects of legitimation shall retroact to the time of the child’s birth. The effects of legitimation of children who died before the celebration of the marriage shall benefit their descendants (Paras, Civil Code of the Philippines Annotated Volume III, 2021 ed., p. 481). 10. Successional Rights of the Surviving Spouse In the absence of legitimate descendants and ascendants, and illegitimate children and their descendants, whether legitimate or illegitimate, the surviving spouse shall inherit the entire estate, without prejudice to the rights of brothers and sisters, nephews and nieces, should there be any, under Article 1001 (Art. 995, NCC). 11. Successional Relatives
Rights
of
Collateral
If there are no descendants, ascendants, illegitimate children, or a surviving spouse, the collateral relatives shall succeed to the entire estate of the deceased in accordance with the following articles (Art. 1003, NCC). D. PROVISIONS COMMON TO TESTATE AND INTESTATE SUCCESSION 1. Capacity to Succeed a) Incapacity by Reason of Unworthiness and Effects of Condonation
Fundamental Characteristics: 1. They are based on offenses committed by the disqualified person against the decedent which render him unworthy to succeed; 2. They are applicable not only in testamentary succession, but also in intestate succession; 3. Although they are relative in character, they are also total in a sense that if the heir disqualified is a compulsory heir, incapacity shall apply not only to the free portion, but ALSO TO THE LEGITIME (Jurado, Comments and Cases in Wills and Succession, 2009, p. 491). The following are incapable of succeeding by reason of unworthiness: 1. Parents who have abandoned their children or induced their daughters to lead a corrupt or immoral life, attempted against their virtue; 2. Person convicted of an attempt against the life of the testator, his, or her spouse, descendants, or ascendants; 3. Person who has accused the testator of a crime for which the law prescribes imprisonment for six years or more, if the accusation has been found groundless; 4. Person convicted of adultery or concubinage with the spouse of the testator; The spouse is not rendered unworthy to inherit from the decedent, but only the person with whom the spouse is guilty with (Jurado, supra). 5. Heir of full age who, having knowledge of the violent death of the testator, should fail to report it to an officer of the law within a month, unless the authorities have already taken action; this probation shall not apply to cases wherein, according to law, there is no obligation to make an accusation; This provision shall not apply to cases wherein, according to law, there is no obligation to make an accusation, e.g. Deaths occasioned by crime (violent deaths) are prosecuted de oficio or at the instance of the government (Jurado, supra). 6. Person who by fraud, violence, intimidation, or undue influence should cause the testator to make a will or to change one already made; 7. Person who by the same means prevents another from making a will, or from revoking one already made, or who supplants, conceals, or alters the latter’s will;
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8. Person who falsifies or forges a supposed will of the decedent (Art. 1032, NCC).
c) Incapacity by Reason of Possible Undue Influence
The causes of unworthiness shall be without effect if the testator had knowledge thereof at the time he made the will, or if, having known of them subsequently, he should condone them in writing (Art. 1033, NCC).
Fundamental Characteristics:
The moment the testator uses one of the causes for unworthiness as a ground for disinheritance, he thereby submits it to the rules on disinheritance. Thus, reconciliation renders the disinheritance ineffective (Rabuya, Civil Law Reviewer Vol. 1, 2021, p. 1033). There are grounds for disinheritance which are also causes of incapacity to succeed by reason of unworthiness. Among them are the abandonment of children, and the attempt to take the life of the testator, etc (Art. 1032, NCC). If the cause of unworthiness was made a ground for disinheritance and there is reconciliation, Art. 922 will govern, (the offended person is deprived of his right to disinherit) and NOT Art. 1033. In other words, the mere fact of reconciliation extinguishes the unworthiness and NO written document is needed for a condonation (Rabuya, supra). b) Incapacity by Reason of Morality (Art. 1028 in relation to Art. 739, NCC) The capacity based on this Article is not only relative but also partial in a sense that if the heir disqualified is also a compulsory heir, the incapacity shall apply only to the free portion given to him, but NOT THE LEGITIME. 1. Those made in favor of a person with whom the testator was guilty of adultery or concubinage at the time of the making of the will; 2. Those made in consideration of a crime of which both the testator and the beneficiary have been found guilty; 3. Those made in favor of a public officer or his spouse, descendants and ascendants, by reason of his public office.
a. These incapacities or disqualification are based either on possibility of undue influence or of interest. b. They are not only in testamentary succession; and c. They are not only relative in character but they are also partial in the sense that if the incapacitated or disqualified heir is a compulsory heir, only the free portion given to him is affected, but not his legitime (Jurado, supra, p. 483). 1. Priest/Minister – who heard the confession or gave spiritual aid to the testator during his last illness. The illness referred to must be the one in which the testator dies (Art. 1027[1], NCC). Requisites: a. The will must be made during the last illness of the testator; b. The spiritual ministration must have been extended during the last illness; c. The will was executed during or after the spiritual ministration (Jurado, supra, p. 484). 2. Relatives of such priest or minister of the gospel within the fourth degree, the church, order, chapter, community, organization, or institution to which such priest or minister may belong (Art. 1027[2], NCC). 3. Guardian with respect to testamentary dispositions given by a ward in his favor, before the final accounts of the guardianship have been approved, even if the testator should sign after the approval thereof (Art. 1027[3], NCC). Exception: Disqualification does not apply when the guardian is an: a. Ascendant b. Descendant c. Brother d. Sister e. Spouse
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4. Attesting witness to the execution of a will, the spouse, parents, or children, or any one claiming under such witness, any one claiming under such witness, spouse, parents, or children (Art. 1027[4], NCC). Exception: When there are 3 other witnesses to the execution of the will (Art. 823, NCC); 5. Physician, surgeon, nurse, health officer or druggist who took care of the testator during his last illness (Art. 1027[5], NCC). Requisites: a. The will was made during the last illness. b. The sick person must have been taken cared of during the last illness. c. Medical attendance was made. d. The will was executed during or after he was being cared of (Jurado, supra, p. 486). Exception: Does not apply if the one who took care of the testator is: a. spouse b. ascendant c. descendant (Juardo, supra, p. 486). 6. Individuals, associations, corporations not permitted by law to inherit (Art. 1027[6], NCC). 2. Right of Representation in Testacy and Intestacy A right created by fiction of law by virtue of which the representative is raised to the place and the degree of the person represented, and acquires the rights which the latter would have if he were living or if he could have inherited (Art. 970, NCC). a) Requisites and Limitations Important Rules in Representation: 1. Representation takes place only with respect to inheritance conferred by law (legal succession and compulsory succession) (Tolentino, Civil Code of the Philippines Vil. III, 1992, p 447). Hence, a voluntary heir may not be represented.
2. The representative inherits not from the person represented but from the one whom the latter would have succeeded (Art. 971, NCC). Hencea. Their capacity to succeed must be determined in relation to the decedent and not the person represented. b. An adopted child, who is not related by blood to the adopter, may not represent the adopter because the adopter is not related to the deceased. 3. Representation takes place in the direct descending line, but never in the ascending line. In the collateral line, it exists only in favor of nephews and nieces if they survive with their uncles and aunts (Art. 972, NCC). 4. An illegitimate child can represent their parents, if the latter are also of illegitimate filiation to the decedent-ascendant. But if the parent of the illegitimate child is legitimately filiated to the decedent-ascendant, an illegitimate child may not represent his parent by virtue of the iron barrier curtain rule (Art. 992, NCC). 5. Representation takes place only in case of predecease (Art. 992, NCC), incapacity (Art. 1035, NCC), and disinheritance (Art. 923, NCC). It does not take place in case of repudiation or renunciation. Consequences: 1. The son who repudiates the inheritance from his father does not lose the right to represent the latter in the inheritance from the grandfather. 2. Great grandson may be called to the inheritance even if grandfather should die before the great grandson has been conceived. 3. Son who cannot inherit from his father on the ground of unworthiness can still inherit from his grandfather by representing the latter, provided he himself is not unworthy with regard to the said grandfather.
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4. Since the person representing virtually succeeds to the inheritance, he must be possessed of all the qualities necessary for the right to inherit. 5. He succeeds not only to the rights but also the obligations which are transmissible. 6. An adopted child does not have the right of representation. The relationship created by the adoption is between only the adopting parents and the adopted child and does not extend to the blood relatives of either party (Sayson v. CA, G.R. Nos. 89224-25, January 23, 992). Situations and cases when representation takes place
right
they had children or descendants (Arts. 981 and 975, NCC). 4. When the illegitimate children represent their illegitimate parents who already died in the estate of their grandparents (Art. 989, NCC). 5. When nephews and nieces inherit together with their uncles and aunts, in representation of their predeceased parents who are brothers/sisters of their said uncles or aunts (Art. 1005, NCC). The right of representation can only represent a person immediately higher in degree.
of
Representation does not take place with respect to rights or inheritance voluntarily given by will, but rather, to right or inheritance conferred by law.
1. When a compulsory heir in the direct descending line has predeceased the predecessor, and is survived by his children or descendants (Art 856[2], NCC). 2. When a compulsory heir in the direct descending line is excluded from the inheritance due to incapacity or unworthiness and he has children or descendants (Art 1035, NCC). 3. When a compulsory heir in the direct descending line is disinherited and who has children or descendants. (Representation covers only the legitime) (Art. 923, NCC). 4. A devisee or legatee who died after the death of the testator may be represented by his heirs (Art. 954, NCC).
The adoptee has right to represent the adopting parent in the inheritance of the latter’s parents or ascendants (Pineda, Succession and Prescription, 2001 ed., pp. 376-378).
Testamentary Succession
Intestate Succession 1. When a legal heir in the direct descending line had predeceased the descendant and is survived by his children or descendants (Art. 981 and 982, NCC). 2. When a legal heir in the direct descending line is excluded from the inheritance by reason of incapacity or unworthiness. (This is also applied in testamentary succession) (Art. 1035, NCC). 3. When brothers or sisters (when there is no exclusion) had predeceased the decedent and
Representation in the Direct Descending Line - The right of representation takes place in the direct descending line, but never in the ascending line (Art. 972, NCC). The right of representation in the direct line takes place in the following cases: 1. When children concur with grandchildren, the latter being the children of other children who died before the decedent or who are incapable of succeeding the decedent. 2. When all children are dead or are incapable of succeeding the decedent and grandchildren concur with greatgrandchildren, the latter being the children of other children who died before the decedent or are incapable of succeeding the decedent. 3. When all children are dead or are incapable of succeeding the decedent leaving children or descendants of the same degree. Representation in Collateral Line 1. Right can only be exercised by nephews and nieces of the decedent.
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2. Right can be exercised by the nephews or nieces of the decedent if they will concur with at least one brother or sister of the decedent. 3. If they (nephews and nieces) are the only survivors, they shall inherit in their own right and not by right of representation. 4. Right of representation is possible only in intestate succession (Jurado, Comments and Jurisprudence on Succession, 2009 ed. pp. 392393). 3. Right of Accretion in Testamentary Succession and in Intestacy a) Requisites and limitations Accretion in Testamentary Succession Basis: Presumed will of decedent. Causes: In testamentary succession, accretion takes place in the following cases – (1) Renunciation or repudiation of inheritance; (2) incapacity; or (3) predecease (Rabuya, Civil Law Reviewer Vol. 1, 2021, p. 1057). Elements: a. Two or more persons are called to same inheritance, or to same portion thereof, jointly or pro indiviso; and b. There is vacancy in the inheritance as a result of predecease, incapacity or repudiation (Art. 1016, NCC). Accretion takes place only with respect to the free portion. There is no accretion with respect to the legitime. Accretion in Intestate Succession In intestate succession, repudiation will always give rise to accretion. In case of predecease and incapacity, if representation does not take place, other co-heirs inherit in their own right and not by right of accretion (Art. 1018, NCC).
4. Acceptance inheritance
and
repudiation
of
a) Form of repudiation Repudiation – an act by virtue of which an heir, legatee or devisee manifests his desire, in accordance with the formalities prescribed by law not to succeed to the inheritance, legacy or devise (Jurado, supra, p. 501). If the heir should die without having accepted or repudiated the inheritance, his right shall be transmitted to his heirs (Art. 1053). How Repudiation is made: 1. Public instrument; 2. Authentic instrument; 3. Petition presented to the court having jurisdiction over the testamentary or intestate proceedings (Art. 1051, NCC). b) Effects of Repudiation Compared to Predecease and Incapacity (and
Disinheritance)
Cause Vacancy
of
Repudiation Predecease Incapacity
Disinheritance
Testamentary Succession Legitime Free Portion Intestate Accretion Succession Representation Accretion Intestate Intestate Succession Succession Representation Accretion Intestate Intestate Succession Succession
Representation Intestate Succesion
-
Intestate Succession Accretion Representation Intestate Succession Representation Intestate Succession -
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OBLIGATIONS AND CONTRACTS I. OBLIGATIONS (Arts. 1156 to 1304, NCC) A. GENERAL PROVISIONS 1. Definition An obligation is a juridical necessity to give, to do, or not to do (Art. 1156, NCC). It is also defined as a juridical relation whereby a person (creditor) may demand from another (debtor) the observance of a determinative conduct (the giving, doing, or not doing), and in case of breach, may demand satisfaction from the assets of the latter (Makati Stock Exchange Inc. vs. Campos, G.R. No. 138814, 16 April 2009, Cited in Rabuya, Civil Law Reviewer Volume II, 2017 Ed., p. 3). The term juridical necessity in Article 1156 of the Civil Code implies the existence of legal sanctions that may be imposed upon the obligor (debtor) in case of breach of the obligation. Stated otherwise, the obligee (creditor) may seek appropriate reliefs from the courts in case of such breach (Rabuya, Obligations & Contracts, 2019 Ed., p. 5). It is a tie of law or a juridical bond by virtue of which one is bound in favor of another to render something — and this may consist in giving a thing, doing a certain act, or not doing a certain act (De Leon, Comments and Cases on Obligation, p. 1). The juridical tie between two or more persons, by virtue of which one of them, the creditor or obligee, has the right to demand of the other, the debtor or obligor, a definite prestation (Tolentino, Civil Code of the Philippines Volume 4, 1991 ed., p.55). Form of Obligation General rule: The law does not require any form in obligations arising from contracts for their validity or binding force (Art. 1356, NCC).
Exceptions: 1) When the form is essential to the validity of the contract as required by law (Art. 1346, NCC); 2) When the contract is unenforceable unless it is in a certain form, such as those under the Statute of Frauds as formulated in Art. 1403. 2. Essential Elements 1. Active subject (obligee or creditor); -The person demanding the performance of the obligation. It is he in whose favor the obligation is constituted, established or created (Paras, Civil Code of the Philippines Annotated Vol IV, 2008, p. 77). 2. Passive subject (obligor or debtor); -The one bound to perform the prestation to give, to do, or not to do (Paras, Civil Code of the Philippines Annotated Vol IV, 2008, p. 77). 3. Object (subject matter) - the prestation or the particular conduct required to be observed by the debtor (to give, to do or not to do);
Requisites for a valid Object:
1) must be lawful/licit 2) must be possible, physically and juridically 3) must be determinate or at least determinable according to preestablished elements 4) must be within the commerce of men
Different Kinds of Object or Prestations “to give” - prestation consists in the delivery of a movable or an immovable thing in order to create a real right, or for the use of the recipient, or for possession, or to return to its owner (e.g. obligation to deliver the thing in a contract of sale, deposit, lease, antichresis, pledge and donation) “to do” - includes all kinds of work or services. (e.g., contract of employment or professional services) “not to do” - consists in abstaining from some act. (e.g., duty not to create a nuisance)
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(Tolentino, Civil Code of the Philippines Volume 4, 1991 ed., p.57-58).
Real – if the prestation involved is that of giving or the obligation to give. Personal – if the prestation involved is that of doing or not doing, i.e., obligation to do or not to do (Paras, Civil Code of the Philippines Annotated Vol IV, 2008, p. 79).
Absence of any of the first three makes the object void. 4. Juridical tie (efficient cause or vinculum juris) - the efficient cause between the two subjects by reason of which the debtor is bound in favor of the creditor to perform the prestation (Paras, Civil Code of the Philippines Annotated Vol IV, 2008, p. 77). 3. Sources of Obligations (Arts. 1156 – 1157, NCC) 1. 2. 3. 4. 5.
Law; Contracts; Quasi-contracts; Acts or Omissions punished by Law Quasi-delict (Art. 1157. NCC).
This enumeration is exclusive. No obligation exists if its source is not one of those enumerated in Art. 1157 of the NCC (Sagrada vs. NACOCO , G.R. No. L-3756, June 30, 1952). Time of perfection General Rule: 1. Law – From the time designated by the law creating or regulating them; 2. Contracts –From the time of the perfection of the contract. e.g., meeting of the minds. Exceptions: a. When the parties made stipulation on the right
of the creditor to the fruits of the thing (Art. 1164, NCC); b. When the obligation is subject to a suspensive condition, it arises upon fulfillment of the condition (Art. 1181, NCC);
c. When the obligation is with a period, there is already an existing obligation but demandable only when the period expires or becomes due (Art. 1185, NCC); 3. Quasi Contracts, delicts, quasi-delict – From the time designated by the law creating or regulating them. 1. Law Law – Obligations derived from law are not to be presumed but must be expressly provided for by law (Art. 1158, NCC). (e.g., obligation to give legal support under the provisions of the Family Code). NOTE: If there is conflict between the NCC and a special law, the latter prevails unless the contrary has been expressly stipulated in the NCC (NCC, Art. 18; Paras, Civil Code of the Philippines Annotated Vol IV, 2008, p. 86). Determining whether an obligation arises from law or from some other source 1. Arises from law if it establishes obligation; 2. Arises from the act itself if the law merely recognizes the existence of an obligation generated by an act (Manresa). Examples: a. According to Art. 2014 of the NCC, a loser in a game of chance may recover his loss from the winner, with legal interest from the time he paid the amount lost (Leung Ben vs. O’Brien, G.R. No. L13602, April 6, 1918); b. The obligation of the spouses to support each other (Art. 195, FC); c. The obligation of the employers (Sec. 12, R.A. No. 4119); d. The obligations of the owners of the dominant and servient estates in legal easem*nts and others; (Arts. 627-630, NCC) e. The obligation to pay taxes (Sec. 23, NIRC).
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2. Contracts
Compliance in good faith
Contract - A Contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service (Art. 1305, NCC).
It means compliance or performance in accordance with the stipulations or terms of the contract or agreement.
Requisites of a contractual obligation 1. It must contain all the essential requisites of a contract (Art. 1318, NCC); and 2. It must not be contrary to law, morals, good customs, public order, and public policy (Art. 1306, NCC). Rules governing the obligations arising from contracts General Rule: Obligations arising from contracts shall be governed primarily by the stipulations, clauses, terms and conditions of the parties’ agreements.
Basis: Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith (Art. 19, NCC). 3. Quasi-Contract Quasi-contracts are those juridical relations arising from lawful, voluntary and unilateral acts, by virtue of which the parties become bound to each other, based on the principle that no one shall be unjustly enriched or benefited at the expense of another (Art. 2142, NCC). Characteristics of a quasi-contract
Exception: Contracts with prestations that are unconscionable or unreasonable (Bachrach vs. Golingco, G.R. No. L-13660, November 13, 1918).
1. It must be Lawful; 2. It must be Unilateral; and 3. It must be Voluntary (Paras, Civil Code of the Philippines Annotated Vol IV, 2008, p. 94).
Binding force of contractual obligations
Contract v Quasi-Contract
Obligations arising from contracts are governed primarily by the agreement of the contracting parties. Once perfected, valid contracts have the force of law between the parties who are bound to comply therewith in good faith, and neither one may without the consent of the other, renege therefrom (Tiu Peck vs. Court of Appeals, 221 SCRA 618, 1993). General Rule: Neither party may unilaterally evade his obligation in the contract. Exceptions: Unilateral evasion is allowed when the: 1. Contract authorizes such evasion; or 2. Other party assents thereto.
CONTRACT With consent whether express or implied.
QUASI-CONTRACT Unilateral act. There is no consent given whether express or implied.
The 2 Principal Kinds of Quasi-Contracts: 1. Negotiorum Gestio (unauthorized management); - arises when a person voluntarily takes charge of the management of the business or property of another without any power from the latter (Art. 2144, NCC). 2. Solutio indebiti (unjust enrichment)–takes place when a person receives something from another without any right to demand for it, and the thing was unduly delivered to him through mistake (Art. 2154, NCC).
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Application: a. Payment is made when there exists no binding relation between the payor, who has no duty to pay, and the person who received the payment; and b. The payment is made through mistake and not through liberality or some other cause. Basis: It is presumed that there was a mistake in the payment if something which had never been due or had already been paid was delivered; but he from whom the return is claimed may prove that the delivery was made out of liberality or for any other just cause (Art. 2163, NCC). 4. Acts or omissions punished by law (Delict) General Rule: Every person liable for felony is also civilly liable (Art. 100, RPC). Exceptions: Crimes of treason, rebellion, illegal possession of firearms and gambling. But a person who is not criminally liable may still be civilly liable (Jurado, Obligations and Contracts, 2010, pg. 11). Implied institution of the civil action in a criminal case GENERAL RULE: When a criminal action is instituted, the civil action for the recovery of the civil liability arising from the offense charged shall be deemed instituted with the criminal action (Sec. 1, Rule 111, Rules of Court). Exceptions: When the offended party: 1. Expressly waives the civil action; 2. Reserves the right to institute it separately; and 3. Institutes the civil action prior to the criminal action (Ibid.).
Reservation liability.
of
right
to
recover
civil
There is no more need for a reservation of the right to file the independent civil actions under Articles 32, 33, 34 and 2176 of the Civil Code. Note: The reservation and waiver referred to refer only to the civil action for the recovery of the civil liability arising from the offense charged. This does not include recovery of civil liability under Articles 32, 33, 34 and 2176 of the Civil Code of the Philippines arising from the same act or omission which may be prosecuted separately even without a reservation. Civil liability includes the following: 1. Restitution 2. Reparation of the damage caused 3. Indemnification for consequential damages (Art. 104, RPC). Acquittal in criminal case General Rule: The acquittal of the accused in a criminal case on the ground of reasonable doubt does not preclude the filing of a subsequent civil action and only preponderance of evidence is required to prove the latter. Exceptions: When the acquittal is on the basis that: 1. The accused did not commit the crime charged; or 2. There is a declaration in the decision of acquittal that no negligence can be attributed to the accused and that the fact from which the civil action might arise did not exist (NCC, Art. 29). Basis of civil liability Ex Delicto: Criminal liability shall give rise to civil liability only if the same felonious act or omission results in damage or injury to another and is the direct and proximate cause thereof (Romero Y Dominguez vs. People, G.R. 167546, July 17, 2009). In other words, there must be a PRIVATE offended party. Hence,
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in rebellion, treason or illegal possession of firearms, there is no civil liability ex delicto. 5. Quasi-Delict Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict (Art. 2176, NCC). The concept of quasi-delict as enunciated in Article 2176, includes not only injuries to persons but also damage to property. NOTE: A single act or omission may give rise to two or more causes of action. Thus, an act or omission may give rise to an action based on delict, quasi‐delict or contract. Elements of a quasi-delict 1. Negligent or wrongful act or omission; 2. Damage or injury caused to another; 3. Causal relation between such negligence or fault and damage; and 4. No pre-existing contractual relationship between the parties (Art. 2176, NCC). Instances when Art. 2176 is inapplicable 1. When there was a pre‐existing contractual relation because the breach of contract is the source of the obligation (Robles vs. Yap Wing, 41 SCRA 267, G.R. No. L-20442, October 4, 1971); NOTE: However, if the act that breaches the contract is tortuous, the pre‐existing contractual relation will not bar the recovery of damages (Singson vs. BPI, G.R. No. L-24837, June 27, 1968); 2. When the fault or negligence is punished by law as a crime, Art. 100 of RPC shall be applicable; 3. If the action for quasi‐delict is instituted after 4 years, it is deemed prescribed (Art. 1146, NCC);
4. When the injury suffered by a person is the result of a fortuitous event without human intervention (Art. 1174, NCC); 5. If there is no damage or injury caused to another (Walter A. Smith & Co. vs. Cadwallader Gibson Lumber Company, G.R. No. L-32640, December 29, 1930). Requisites for recovery: 1. Damages suffered by the plaintiff; 2. Fault or negligence of the defendant, or some other person for whose acts he must respond; and 3. The connection of cause and effect between the fault or negligence of the defendant and the damage incurred by the plaintiff (Indophil Textile vs. Engr. Adviento, G.R. 171212, August 4, 2014). TEST OF NEGLIGENCE: Would a prudent man, in the position of the person on whom negligence is attributed, foresee harm to the person injured as a reasonable consequence of the course about to be pursued (Picart vs. Smith, G.R. No. L-12219, March 15, 1918). Scope of Quasi-Delict: Culpa aquiliana (fault or negligence) covers not only acts “not punishable by law” but also acts criminal in character, whether intentional and voluntary or negligent (Safeguard Security Agency vs. Tangco, et. al., G.R. 165732, December 14, 2006). Hence, the same negligent act causing damages may produce two kinds of civil liability: (1) civil liability arising from a crime under Article 100 of the RPC, or (2) an action for quasi-delict or culpa extra-contractual under Article 2176 of the Civil Code (Cerezo vs. Tuazon, G.R. 141538, March 23, 2004). Prohibition against double recovery: The plaintiff cannot recover damages twice for the same act or omission of the defendant (Art. 2177, NCC).
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Delict v Quasi-Delict DELICT Affects public interest; Criminal act punishable under Penal Code;
is the
Punishable only if there is a penal law covering the crime committed
(Diana vs. Batangas Transportation, G.R. L4920, June 29, 1953). Guilt must be proved beyond reasonable doubt. Criminal liability is not subject to a compromise.
QUASI - DELICT Affects private concern only; Damage done is repaired by means of indemnification under the Civil Code; Punishes all acts in which any kind of fault or negligence intervenes
(Ibid.)
Guilt may be proved by preponderance of evidence. The civil liability can be compromised.
Pre-existing contractual obligation, not bar to recovery under Quasi-Delict: In fine, a liability for tort may arise even under a contract, where tort is that which breaches the contract (Loadmasters Custom Services vs. Glodel Brokerage, G.R. 179446, January 10, 2011). Stated differently, when an act which constitutes a breach of contract would have itself constituted the source of a quasi-delictual liability had no contract existed between the parties, the contract can be said to have been breached by tort, thereby allowing the rules on tort to apply (LRTA vs. Navidad, G.R. No. 145804, February 6, 2003). B. NATURE AND EFFECTS OF OBLIGATIONS A. Real Obligation (Obligation to Give)
It is determinate/specific when the object is particularly designated or physically segregated from all others of the same class (Art. 1460[1], NCC). It is indeterminate/generic when the object is designated merely by its class or genus. It is delimited generic when confined to a particular class e.g. An obligation to deliver one of my horses. Obligation to give a determinate or specific thing Accessory obligation
obligations
in
determinate
1. Obligation to deliver the thing agreed upon (Art. 1165, NCC). 2.
Obligation to take care of the thing with the proper diligence of a good father of a family, unless the law or the stipulation of parties requires another standard of care (Art. 1163, NCC).
General Rule: The diligence required is that of a good father of a family. Exceptions: a. If the law requires another standard of care b. If the parties stipulate another standard of care 3.
Obligation to deliver the fruits from the time the obligation to deliver (the principal thing) arises (Art. 1164, NCC); and
Every person obliged to give something is also obliged to take care of it with the proper diligence of a good father of a family, unless the law or the stipulation of the parties requires another standard of care (Art. 1163, NCC).
The creditor acquires a right to demand for the delivery of the fruits of the determinate thing due from the time the obligation to deliver the determinate thing arises (Art. 1164, NCC).
An obligation to give may either involve a determinate or generic thing.
4. Obligation to deliver all accessions and accessories of the thing, even though they may not have been mentioned (Art. 1166, NCC).
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5. To be liable for damages in case of breach of obligation by reason of delay, fraud, negligence or contravention of the tenor thereof (Art. 1170, NCC). Exception: The debtor is not liable in case the determinate thing was lost due to a fortuitous event (Art. 1174, NCC). Liability extends only to a breach which is voluntary in character, and not to one which is involuntary. However, this does not apply in case of loss of a generic thing. B. Obligation to give indeterminate or generic thing A thing is indeterminate if it is designated merely by its class or genus without any particular designation or segregation from all others of the same class (Gaisano Cagayan, Inc. vs. Insurance Co., of North America, G. R. No. 147839, June 8, 2006). Accessory obligations in generic obligation 1. To deliver a thing which is neither of superior or inferior quality (Art. 1246, NCC). 2. To be liable for damages in case of breach of the obligation by reason of delay, fraud, negligence, or contravention of the tenor thereof (Art. 1170, NCC). 3. In case the generic thing is lost due to a fortuitous event, the obligation is not extinguished based on the precept that the genus of a thing can never perish (genus nunquam peruit) (Paras, Civil Code of the Philippines Annotated Vol IV, 2008, p. 437). Remedies of the creditors: SPECIFIC OBLIGATION Specific performance
Rescission (action to rescind under Art. 1380, NCC)
GENERIC OBLIGATION Specific performance (delivery of anything belonging to the same species) Ask that the obligation be complied with at the debtor’s expense.
Resolution (action for cancellation under Art. 1191, NCC)
Resolution or specific performance, with damages in either case
(Art. 1191, NCC).
Damages, in both cases (Art. 1170, NCC) Note: May be exclusive or in addition to the above‐ mentioned remedies (Pineda, Obligations and
Contracts, 2000 ed, p. 37).
B. Personal Obligation (Obligation To Do Or Not To Do) Two kinds: 1. Positive obligation (Obligations to do) Considered breached if: (a) the debtor fails to do the obligation; or Remedies of the creditor in case of breach: i. To have the obligation performed or executed at the expense of the debtor (Art. 1157[2], NCC). Note: This does not apply if the prestation consists of an act where the personal or special qualification of the debtor is the principal motive for the establishment. In such cases, the creditor has no other remedy but demand for damages (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010, p.52-53). ii. To recover damages by reason of the breach of obligation (Art. 1170, NCC). (b) Even in case of performance but the same is done either in a poor manner or in contravention of the tenor of the obligation. Remedies of the creditor: i. To have the obligation performed or executed at the expense of the debtor (Art. 1157, NCC); ii. To ask that what has been poorly done be undone (Art. 1157, NCC); and, iii. To recover damages because of breach of the obligation (Art. 1170, NCC).
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2.
Negative obligation - if the prestation consists of not doing (e.g., negative easem*nts, (See Art. 616, NCC; particularly, easem*nts of light and view), (See Arts. 667-673, NCC).
Remedies in case of breach of negative obligation: i. To have it undone at the expense of the debtor (Art. 1168, NCC); and, ii. To ask for damages (Art. 1170, NCC). C. Transmissibility of Obligations Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has been no stipulation to the contrary (Art. 1178, NCC). General Rule: Rights are transmissible which can be alienated and transferred to third persons. Exceptions: 1. When they are intransmissible by their very nature, such as in the case of a personal right; 2. When there is a stipulation of the parties that they are not transmissible; 3. When they are not transmissible by operation of law (Paras, Civil Code of the Philippines Annotated Vol IV, 2008, p. 183). D. Performance of Obligations Payment means not only the delivery of money but also the performance, in any manner of an obligation (Art. 1232, NCC). Obligations To Give: It shall be understood to have been paid when the debtor has completely delivered the thing which he obligated himself to deliver.
Obligations To Do: It shall be understood to have been performed when the debtor has completely rendered the service which he has obligated himself to render. Obligations Not to Do: It shall be understood to have been complied with when the debtor has completely refrained from doing that which he had obligated himself to to do (Jurado, Obligations & Contracts, 2010 Ed., p. 232).
(This topic shall be further discussed in Payment or Performance as a mode of extinguishment of an obligation) 1. Breaches of Obligations Breach of an obligation occurs when there is a failure or refusal, by a party without legal reason or excuse to perform, in whole or in part the obligation or undertaking which is incumbent upon him (De Leon, Comments and Cases on Obligation, p. 143). Exceptio non adimpleti contractus The party who has not performed his part of the agreement is not entitled to sue Forms of breach of obligations: 1. Voluntary breach - Those causes which arise from the will of the parties. Debtor is liable for damages if he is guilty of: 1. Default (mora) 2. Fraud (dolo) 3. Negligence (culpa) 4. Breach through contravention of the tenor thereof 2.
Involuntary breach – debtor is unable to perform the obligation due to a fortuitous event, thus not liable for damages (Rabuya, Pre-bar Reviewer Civil Law, 2021 Ed., p. 346).
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Voluntary Breach of Obligations:
Under the first and second XPN, it is not enough that the law or the obligation fixes a period for the performance of the latter, if it does not expressly add that, upon the expiration thereof, delay shall commence. Hence, mere expiration of the period fixed by the parties will not cause delay (Palmares vs. CA, G.R. No. 126490, 31 March 1998).
1. Delay/Default (Mora) Ordinary delay The failure to perform an obligation on time.
Legal delay or mora The failure to perform an obligation on time which failure, constitutes a breach of the obligation.
Three Kinds of Default: 1. Mora Solvendi – There is delay on the part of the debtor. (a) Mora solvendi ex re – refers to obligation to give; (b) Mora solvendi ex persona – refers to obligation to do (Paras, Civil Code of the Philippines Annotated Vol. IV, 2008, p. 125). Requisites in order to consider debtor in default: 1. The obligation is demandable and already liquidated; 2. The debtor delays performance; and, 3. The creditor requires the performance judicially or extrajudicially (Aerospace Chemical Industries, Inc. vs. CA, G.R. No. 108129 cited by Jurado, 2010). Default in Positive Obligations (to give or to do) General Rule: The debtor is in delay or in default only if there has been a DEMAND made by the creditor, either judicial or extrajudicial in cases of positive obligations to give or to do (Art. 1169, NCC). Exceptions: Demand is no longer necessary in order to place the debtor in delay or in default: 1. The law expressly declares that demand is not necessary; 2. The stipulation of the parties expressly states that demand is not necessary;
3. The time is the controlling motive for the establishment of the contract. In determining whether time is of the essence of the contract, the ultimate criterion is the actual or apparent intention of the parties and before time may be so regarded by the court, there must be a sufficient manifestation, either in the contract itself or the surrounding circ*mstances of that intention (Lorenzo Shipping Corp. vs. BJ Marthel International, Inc., G.R. 145483, November 19, 2004). 4. Demand would be useless, as when the debtor has rendered the obligation beyond his power to perform (Art. 1169, NCC). Default in Negative Obligations (not to do) Default is not possible in negative obligations due to their special nature (Paras, Civil Code of the Philippines Annotated Vol. IV, 2008, p. 125). Effect of delay/default: Debtor is liable for damages (Art. 1170, NCC); Debtor is liable for a fortuitous event until he has affected the delivery (Art. 1165 last par., NCC); 3. Debtor is liable for interest in case of obligations to pay money or damages in other obligations. 1. 2.
Note: In the absence of extrajudicial demand, the interest shall commence from the filing of the complaint. 2. Mora Accipiendi – There is delay on the part of the creditor; The improper refusal of the lessor (creditor) to accept the rents tendered by the lessee places
235
said lessor in default (mora) and he must shoulder the subsequent accidental loss of the premises leased. The mora accipiendi of said lessor is not cured by the lessee’s failure to make consignation of the rejected payments, but the lessee remains obligated to pay the amounts he had tendered but did not deposit in court (Vda. de Villaruel, et al. vs. Manila Motor Co. & Colonizers, L10394, Dec. 3, 1958).
(The effects of mora accipiendi are discussed under consignation) Requisites of mora accipendi 1. An offer of performance by the debtor who has the required capacity; 2. The offer must be to comply with the prestation as it should be performed; and 3. The creditor refuses the performance without just cause (Solid Homes v. CA, cited in Rabuya, PreBar Reviewer in Civil Law, 2021 Ed, p.348). Effect of delay/default: 1. The creditor is guilty of breach of obligation. 2. He is liable for damages suffered, if any, by the debtor. 3. He bears the risk of loss of the thing due. 4. Where the obligation is to pay money, the debtor is not liable for interest from the time of the creditor’s delay. 5. The debtor may release himself from the obligation by the consignation of the thing or sum due. 3. Compensatio Morae – Delay of both parties existing in reciprocal obligations when neither of them has performed the prestation required. Concept of Reciprocal Obligations: ●
These are obligations arising from the SAME CAUSE, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be
performed SIMULTANEOUSLY such that the performance of one is conditioned upon the simultaneous fulfillment of the other (DBP vs. Guariña G.R. 160758, January 15, 2014). If a reciprocal obligation has a condition, the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated (Art. 1187[1], NCC). Requirement of Demand In reciprocal obligations, as in a contract of sale, the GR is that the fulfillment of the parties’ respective obligations should be simultaneous. Hence, no demand is generally necessary because, once a party fulfills his obligation and the other party does not fulfill his, the latter automatically incurs in delay. But when different dates for performance of the obligations are fixed, the default for each obligation must be determined by the rules given in the first paragraph of Art. 1169, NCC, that is, the other party would incur in delay only from the moment the other party demands fulfillment of the former's obligation. Thus, even in reciprocal obligations, if the period for the fulfillment of the obligation is fixed, demand upon the obligee is still necessary before the obligor can be considered in default and before a cause of action for rescission will accrue (Solar Harvest Inc. vs. Davao Corrugated Carton Corp. G.R. No. 176868, 26 July 2010). When delay occurs In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of
the parties fulfills his obligation, delay by the other begins (Art. 1169, last par., NCC). ●
Rescission of reciprocal obligations in Art. 1191, NCC is different from rescission of contracts in Art. 1383, NCC. The former is based on resolution due to a breach of faith by one party while the latter involves a subsidiary action due to lesion (Ong vs. CA, G.R. 97347, July 6, 1999).
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Effect of non-compliance of both parties in reciprocal obligations If neither party complies with his prestation, the default of one compensates for the default of the other. Art. 1191 v. 1380 (Recission) Rescission / Resolution (Art. 1191, NCC) Based on nonperformance or nonfulfillment of obligation. Action is instituted only by the injured party. Nonperformance by the other party is important.
Rescission (Art. 1380, NCC) Based on lesion or fraud upon creditors. Action is instituted by either party or by a third person. Nonperformance by the other party is immaterial.
2. Fraud in the performance of obligation Fraud is the deliberate and intentional evasion of the normal fulfillment of obligations. There is malice or bad faith (Art. 1170, NCC). Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void (Art. 1171, NCC). There is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to (Art. 1338, NCC). Kinds of Fraud (Dolo): 1. Incidental Fraud (Dolo Incidente) – Fraud is merely incidental to the performance of an already existing obligation. It renders the debtor liable for damages. 2. Causal Fraud (Dolo Causante) – Fraud is the very reason for the existence of the obligation. It is the fraud employed by one party to induce the other to enter into a contract with him. This is a ground to annul the contract Fraud is the deliberate and
intentional evasion of the normal fulfillment of obligations. There is malice or bad faith (Paras, Civil Code of the Philippines Annotated Vol. IV, 2008, p. 642). INCIDENTAL FRAUD During the performance of an existing obligation. Evading the normal fulfillment of an obligation.
Breach or nonfulfillment of the obligation.
Recover damages from the debtor.
CAUSAL FRAUD At the time of the birth of the obligation.
v.
When present
Securing the consent of the other party to enter in to contract.
Purpose
Voidable contract since consent is vitiated.
Result
Remedy of the innocent party
Annulment of the contract with damages.
(De Leon, Obligations and Contracts, 2010, p. 52-53)
In order that fraud may vitiate consent, it must be the causal (dolo causante), not merely the incidental (dolo incidente), inducement to the making of the contract (Tanke vs. DBP, G.R. No. 171428, November 11, 2013). 3. Negligence obligation
in
the
performance
of
Negligence or Culpa defined: It is the omission of that diligence which is required by the nature of the obligation and corresponds with the circ*mstances of the persons of the time and place (Art. 1173, NCC). It is the failure to observe for the protection of the interests of another person that degree of care, precaution and vigilance, which the circ*mstances justly demand, by reason of which such other person suffers injury (ANECO vs. Balen, G.R. No. 173146, 25
237
November 2009, cited in Rabuya, Civil Law Reviewer, Volume II, 2017 Ed., p. 42).
Source of obligation
breach or nonfulfillment of the contract
defendant’s negligent act or omission itself
Proof required for recovery
existence of the contract and of its breach/ nonfulfillment is sufficient prima facie to warrant recovery
negligence of the defendant must be proved
Availability of due diligence as a defense
not available as a defense
available as a defense
Kinds of Negligence (Culpa): 1. Culpa Contractual – Negligence is merely incidental to the performance of an already existing obligation. The source of obligation is contract and the occurrence of negligence during the performance of the obligation only renders the debtor liable for damages. 2. Culpa Extra-Contractual or Culpa Aquiliana - Negligence is the very source of the obligation. Without the negligence, there is no juridical tie between the parties (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010, p. 65). General rule: The diligence required is that of a good father of a family. Exceptions: 1. If the law requires another standard of care (e.g., in case of common carries, the diligence required is extraordinary diligence) 2. If the parties stipulate another standard of care In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation (Art. 2201, NCC). CULPA CONTRACTUAL
CULPA AQUILIANA
Character of negligence of defendant
merely an incident in the performance of an obligation
substantive and independent
Relationship of the parties
there is always a pre-existing contractual relation
there may or may not be a pre-existing contractual relation
4. Contravention of tenor of obligation It includes all cases of defective performance and even cases of non-performance attributable to the debtor even though there is no bad faith, malice or negligence (Art. 1167, NCC). Effect: It renders the debtor liable for damages (Art. 1170, NCC). Under Art. 1170, NCC, the phrase “in any manner contravene the tenor” of the obligation includes any illicit act which impairs the strict and faithful fulfillment of the obligation, or every kind of defective performance. Legal excuse for breach of obligation: fortuitous event A fortuitous event has been defined as one which could not be foreseen, or which though foreseen, is inevitable (Art. 1174, NCC; The Philippine American General Insurance, Co., Inc. vs. MGG Marine Services, Inc. G.R. No. 135645, March 8, 2002). A fortuitous event under Article 1174 may either be an “act of God”, or natural occurrences such as riots, strikes or wars (Philippine Communication Satellite Corp., vs. Globe Telecom, Inc., G.R. No. 147324, May 25, 2004). General Rule: The debtor is not liable for nonperformance of the obligation due to fortuitous event (Art. 1174, NCC). The obligation is extinguished.
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Requisites: To exempt the obligor from liability for a breach of an obligation by reason of a fortuitous event, the following requisites must concur: 1. Cause of the breach of the obligation must be independent of the will of the debtor; 2. Event must be either unforeseeable or unavoidable; 3. Event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner, and 4. Debtor must be free from any participation in, or aggravation of the injury to the creditor (Mondragon Leisure and Resorts Corp., vs. CA G. R. No. 154188, June 15, 2005). Exceptions: In the following cases, the debtor remains liable for non-performance of the obligation due to fortuitous event: 1. In cases expressly specified by law; If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the same interest, he shall be responsible for fortuitous event until he has effected the delivery (Art. 1165, last par., NCC). 2. When the stipulation of the parties provides to that effect (Art. 1174, NCC); 3. When the nature of the obligation requires the assumption of risk (Art. 1174, NCC); If the robbery takes place without any concurrent fault or negligence on the part of the debtor, it may exempt the debtor from liability (Hernandez vs. Chairman, COA, G.R. 71871, November 6, 1989). But the robbery is not considered fortuitous event if it takes place with the concurrent fault or negligence of the debtor. Hence, when the robbery took place in a pawnshop which is under the control of the petitioners, the latter are not exempt from liability because they failed to exercise the required degree of diligence (Sicam vs. Jorge, G.R. 159617, August 8, 2007). 4. When the object of the obligation is lost and the loss is due partly to the fault of the debtor.
5. When the loss occurs after the debtor is considered in delay (Art. 1165, NCC); 6. When the debtor promised to deliver the same thing to two or more persons who do not have the same interest (Art. 1165, NCC); 7. When the obligation to deliver arises from a criminal offense (Art. 1268, NCC); and, 8. When the obligation is generic (Art. 1263, NCC).
Effects of fortuitous event: 1. On determinate obligation – the obligation is extinguished 2. On generic obligation – the obligation is not extinguished (genus nun quam peruit – genus never perishes) (Art. 1263, NCC). Act of God v Act of Man ACT OF GOD
ACT OF MAN
Fortuitous event
Force majeure
Event which is absolutely independent of human intervention
Event caused by the legitimate or illegitimate acts of persons other than the obligor
e.g., Earthquakes, storms, floods, epidemics
e.g., Armed robbery, war
invasion,
NOTE: they both refer to causes independent of the will of the obligor Q: Kristina brought her diamond ring for cleaning to a jewelry shop which failed to fulfill its promise to return such a ring on February 1, 1999. Kristina went back to the shop on February 6, 1999 but she was informed that the ring was stolen by a thief the night before. Kristina filed an action for damages against the jewelry shop which put up the defense of force majeure. Will the action prosper or not? (2000 Bar)
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A: YES. The action will prosper. Since the defendant was already in default for not having delivered the ring when delivery was demanded by the plaintiff at due date, the defendant is liable for the loss of the thing and even when the loss was due to force majeure.
b.) YES. XY Corp. may unilaterally cancel the obligation but this is subject to the risk that the cancellation of the reciprocal obligation being challenged in court and if AB Corp. succeeds, then XY Corp. will be declared in default and be liable for damages.
The defendant who is obliged to deliver incurred delay from the time the plaintiff extrajudicially demands the fulfillment of the obligation (Art. 1169, NCC). The defendant shall be held liable for the loss of the thing even if it was due to a fortuitous event (Art. 1262, NCC).
c.) NO, under the principle of quantum meruit, AB Corp. had the right to retain payment corresponding to his percentage of accomplishment less the amount of damages suffered by XY Corp. because of the delay or default.
Q: AB Corp entered into a contract with XY Corp for the construction of the research and laboratory facilities of the XY Corp. XY Corp paid 50% of the 10M contract price. On the other hand, AB agreed to complete the work in 18months. After 17 months, work was only 45% completed as AB Corp experienced work slippage due to labor unrest.
Q: Jacinto Tanguilig constructed a windmill system for Vicente Herce, Jr. for P60,000 with a one-year guaranty. Herce made a downpayment of P30,000 and an installment payment of PI5,000, leaving a balance of Pi5,000. He refused to pay the balance because the windmill system collapsed after a strong wind hit the place. Is Tanguilig exempt from liability due to fortuitous event?
(a) Can the labor unrest be considered a fortuitous event? (b) Can XY Corp. unilaterally and immediately cancel the contract? (c) Must AB Corp. return the 50% down payment? (2008 Bar) A: a.) NO, Labor unrest is not a fortuitous event that will excuse AB Corp. from complying with its obligation of constructing the research and laboratory facilities of XY Corp. The labor unrest, which may even be attributed in large part to AB Corp. itself, is not the direct cause of noncompliance by AB Corp. It is independent of its obligation. It is similar to the failure of a DBP borrower to pay her loan just because her plantation suffered losses due to the cadangcadang disease. It does not excuse compliance with the obligation (DBP v. Vda. De Moll, G.R. No. L25802, January 31, 1972). AB Corp. could have anticipated the labor unrest which was caused by delays in paying the laborer’s wages. The company could have hired additional laborers to make up for the work slowdown.
A: No. In order for a party to claim exemption from liability due to fortuitous event, one requisite is that the event must be either unforeseeable or unavoidable. A strong wind in this case cannot be fortuitous, unforeseeable, or unavoidable. On the contrary, a strong wind should be present in places where windmills are constructed, otherwise the windmills will not turn. Given the newly-constructed windmill system, the same would not have collapsed had there been no inherent defect in it which could only be attributable to Tanguilig. When the windmill failed to function properly, it became incumbent upon Tanguilig to repair it in accordance with his guaranty and bear the expenses therefor (Jurado, Civil Law Reviewer, 2009, p. 717 citing Tanguilig vs. CA and Herce, G.R. No. 117190, January 2, 1997). 2. Remedies for Breach of Obligation 1. Specific Performance When positive personal obligation (obligation to do) is considered breached (Art. 1170, NCC).
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It may be breached in two ways: a. There is no performance at all; or b. There is performance but the same is either poor or in contravention of the tenor of the obligation. Remedies in cases of breach of: Positive Personal Obligation
Negative Personal Obligation
If there is failure to do what has been promised, the obligation may be executed by another person at the cost of the debtor. Same rule shall be observed if the obligor does it in contravention of the tenor of the obligation.
If it is still possible, the remedy is to demand that what has been done be undone at the expense of the debtor
(Art. 1167, NCC); OR
The creditor may demand that what has been poorly done be undone at the expense of the debtor (Art. 1167, par. 2).
(Art. 1168, NCC).
If undoing is no longer possible, either physically or legally, the remedy is simply indemnification for damages (Art. 1170,
NCC).
2. Rescission Cancellation of the contract or reciprocal obligation in case of breach on the part of one, which breach is violative of the reciprocity between the parties. This is properly called resolution (Art. 1191, NCC). To rescind is “to declare a contract void in its inception and to put an end to it as though it never were.’’ 3. Damages, in any Event The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible (Art. 1191[2], NCC).
The court shall decree the rescission claimed unless there be just cause authorizing the fixing of a period (Art. 1191 [3], NCC). This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law. Remedies are alternative The remedies of the injured or aggrieved party are alternative and not cumulative, that is, he is privileged to choose only one of the remedies, and not both, subject only to the exception in paragraph 2, to wit: he may also seek rescission even after he has chosen fulfillment if the latter should become impossible. But after choosing rescission of the obligation, he cannot thereafter demand its compliance, nor seek partial fulfillment under the guise of recovering damages (Siy vs. Court of Appeals, G.R. No. L-39778 1985). 4. Subsidiary Remedies of Creditors
1. Accion Subrogatoria General Rule: The law expressly grants to the creditor the right to exercise all of the rights and bring all of the actions which the debtor may have against third persons (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010 ed., p. 104). Exception: Purely personal rights in the sense that they are inherent in the person of the debtor. Requisites: 1. Debtor to whom the right of action properly pertains must be indebted to the creditor; 2. Creditor must be prejudiced by the inaction or failure of the debtor to proceed against the third person; 3. Creditor must have pursued or exhausted all the properties of the debtor, which are not exempted for execution.
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b. Accion Pauliana
C. DIFFERENT KINDS OF OBLIGATION
It refers to the right available to the creditor for the rescission of any act of the debtor which is in fraud and to the prejudice of his rights as a creditor. By its very nature, it is subsidiary in character (Art. 1383, NCC).
Classification As to the existence of a burden or condition.
Requisites: 1. There must be a credit prior to alienation; 2. Debtor has made a subsequent contract conveying a patrimonial benefit to a third person; 3. The creditor has no other legal remedy to satisfy his claim; 4. The act being impugned is fraudulent; and 5. The third person who received the property conveyed, if by onerous title, has been an accomplice in the fraud (Siguan vs. Lim, G.R. 134685, November 19, 1999).
c. Accion Directa The right of a person to go directly against another who is not a privy to the contract (Arts. 1652, 1608, 1729 and 1893, NCC). NOTE: 1. Subsidiary liability of sublessee for the rent (Art. 1652, NCC); 2. Right of sellers a retro to redeem property from persons other than the buyer a retro (Art. 1608, NCC); 3. Subsidiary liability of owners to laborers and material men (Art. 1729, NCC); and 4. The principal may sue the substitute of the agent with respect to the obligations which the substitute has contracted under the substitution (Art. 1893, NCC).
1. Pure Obligation It is an obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties. Pure obligations are demandable at once (Art. 1179 [1], NCC). Effect: Its effectiveness or extinguishment does not depend upon the fulfillment or non-fulfillment of a condition or upon the expiration of a term or period and characterized by the quality of its being IMMEDIATELY DEMANDABLE (Art. 1179, NCC).
Past Event Unknown to the Parties – A
“future knowledge of a past event” will determine whether or not an obligation will rise. An obligation which depends on such event is an obligation with a term since a past event is a certain event, and such event only affects the demandability of the obligation (e.g., an obligation to give monetary assistance after a survey of the aftermath of a calamity has been conducted; the amount thereof depends on the number of casualties thus surveyed) (Art. 1179 [1], NCC). 2. Conditional Obligation It refers to one where the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition (Art. 1181, NCC). 3. Obligation with a term That kind of obligation which is subject to the happening of the event which will surely happen, although the date may not be known as of the moment.
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Conditional Obligation v. with a period CONDITIONAL OBLIGATION A Condition is any future and uncertain event which wields an influence on a legal relationship (Jurado,
Comments and Jurisprudence on Obligations and Contracts, 2010 ed., p. 108). Affects the very existence of the obligation (Ibid). If the fulfillment of the condition is left to the sole will of the debtor, the obligation is void
(Art. 1182, NCC).
OBLIGATION WITH A TERM/PERIOD Any future but certain event (Jurado,
Comments and Jurisprudence on Obligations and Contracts, 2010 ed., p. 146).
b. Resolutory Condition (“Condition Subsequent”) – A future and uncertain event, the happening of which extinguishes obligations or rights already acquired. SUSPENSIVE CONDITION During the pendency of the condition:
Affects ONLY the demandability of the obligation (Ibid). If it is the designation of the period which is left to the exclusive will of the debtor, the obligation remains valid (Art. 1197,
NCC).
WHEN HIS MEANS PERMIT HIM TO DO SOthe obligation shall be considered to be one with a term, and not one with a condition dependent upon the sole will of the debtor which is void (Art. 1180, NCC). Kinds of Condition: 1.
real contracts which can only be perfected by delivery (Art.1187 [1], NCC).
Suspensive & Resolutory (Art. 1181, NCC)
a. Suspensive Condition (“Condition Precedent or antecedent”) – A future and uncertain event, the fulfillment of which gives rise to the obligation or acquisition of rights. Principle of Retroactivity in Suspensive Conditions: Once the condition is fulfilled, its effects must logically retroact to the moment when the essential elements, which gave birth to the obligation, have taken place. (day of the constitution of the obligation). The condition which is imposed is only accidental, not an essential element of the obligation. This is applied only to consensual contracts. No application to
RESOLUTORY CONDITION During the pendency of the condition:
The obligation and rights do not exist yet and the nature of the interest of the expectant creditor is but a mere hope or expectancy.
The obligation is immediately demandable as if it were a pure obligation (Art. 1179
Unlike other hopes or expectancies, however, it is protected by law.
If the obligation is already performed, the previous debtor becomes an expectant creditor entitled to bring the appropriate action to protect his hope or expectancy.
The obligation and rights do not exist yet and the nature of the interest of the expectant creditor is but a mere hope or expectancy. Unlike other hopes or expectancies, however, it is protected by law.
[1], NCC);
In case of payment by the DEBTOR by REASON OF MISTAKE: He has the right to recover the undue payment based on the PRINCIPLE OF SOLUTIO INDEBITI. The reason is that – the payment is not due since the obligation has not yet come into existence yet
(Art. 1188 [2], NCC).
RECOVERY shall be made prior to the fulfillment of the suspensive condition. Once the suspensive condition is fulfilled,
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effect of such conditional obligation shall retroact to the day of its constitution, thus, effectively barring any action from recovery based on SOLUTIO INDEBITI.
without prejudice to the existence of the preferred right of a third person in good faith. In obligations to do and not to do, the court shall determine, in each case, the retroactive effect of the condition that has been complied with
If the intention is to simply to make the delivery even prior to the fulfillment of the condition but upon the expectation that the condition would happen, it is just that the debtor be allowed to recover what he has paid if it will become clear that the event will not take place anymore. While there may be no mistake, the right of the payor to recover is based upon the principle of ACCION IN REM VERSO (Article 22,
(Art.1187, par.2, NCC).
Effect of loss of specific thing due during the pendency of condition 1. Loss of the thing due If the thing is lost without the fault of the debtor (and later on the condition is fulfilled), the obligation is extinguished (Art. 1189, par.1, NCC); EXCEPTIONS::
NCC).
Effects upon the fulfillment of the condition: The obligation and rights come into existence. If the obligation is to give, the effects of the happening of the condition shall retroact to the day of the constitution of the obligation. But when the obligation imposes reciprocal obligations, the fruits and interest during the pendency of the condition shall be deemed mutually compensated (Art. 1187,
par.1, NCC).
The rule of retroactivity of the effects of conditional obligation to give, once the condition has been fulfilled, is
Effects upon the fulfillment of the condition: Rights already acquired, as well as the obligations, are extinguished (Art. 1181, NCC). If the previous obligation is that of giving which has already been performed, the parties shall return to each other what they have received (Art.
1190, par.1, NCC), including fruits and interest.
Note: Restitution is ABSOLUTE such that everything that was received would have to be restored.
a. When by law, the obligor is liable even for fortuitous event; b. When by stipulation, the obligor is liable even for fortuitous event; or c. When the nature of the obligation requires the assumption of risks (Art. 1174, NCC). if the thing is lost through the fault of the debtor (and later on the condition is fulfilled), the obligation is converted into indemnification for damages (Art. 1189,
par.2, NCC);
2. In case of deterioration of the thing due If the thing deteriorates without the fault of the debtor (and later on the condition is fulfilled), the impairment is borne by the creditor (Art. 1189, par.3, NCC); If it deteriorates due to the fault of the debtor (and later on the condition is fulfilled), the creditor may choose between rescission and fulfillment, with damages in either case (Art. 1189, par.4, NCC); 3. In case of improvement of the thing due If the thing is improved by nature (and later on the condition is fulfilled), the improvement inures to the benefit of the creditor (Art. 1189, par.5, NCC);
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If the thing is improved at the expense of the debtor (and later on the condition is fulfilled), the debtor shall have no other right over the improvements than that granted to the usufructuary (Art. 1189, par.6, NCC). USUFRUCT gives a right to enjoy the property of another with the obligation of preserving its form and substance, unless the title constituting it or the law otherwise provides (Art. 562, NCC). A usufructuary is NOT ENTITLED TO REIMBURsem*nT of expenses he incurred in connection with the improvements that he may have introduced on the property. However, he has the RIGHT TO REMOVE the improvement if it will not cause injury to the property. In addition, he may also SET OFF HIS LIABILITY FOR DAMAGES caused to the property with the value of said improvements (Art.
579, NCC)
2. Potestative, Casual & Mixed Condition Potestative (“Facultative”)– The fulfillment of the condition is left to the exclusive will of one of the parties. ●
●
When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void (Art. 1182, NCC). It must be noted that Art. 1182 is applicable only to suspensive condition. NOTE: What is contemplated in the provision is a condition that is POTESTATIVE to the debtor and, at the same time SUSPENSIVE.
●
In other words, a condition at once FACULTATIVE and RESOLUTORY may be valid though the condition is made to depend upon the will of the debtor.
●
Where the so-called potestative condition is imposed not on the birth of the obligation but on its fulfillment, only the condition is avoided leaving unaffected the obligation itself (De Leon, Obligations and Contracts, 2010, p. 117).
OSMENA vs. RAMA The Court held that if that statement found in her acknowledgement of the indebtedness should be regarded as a condition, it was a condition dependent upon the exclusive will of the debtor and is therefore VOID. ONLY the potestative condition was held void because it referred merely to the fulfillment of an already existing indebtedness (Osmena vs. Rama, G.R. No. 4437, September 9, 1909). TRILLANA vs. QUEZON COLLEGE Where the potestative condition was imposed on the birth of the obligation and not on its fulfillment, the Court declared the OBLIGATION VOID pursuant to Article 1182 of NCC because the condition is dependent upon the debtor’s sole will (Trillana vs. Quezon College, G.R. No. L-5003, June 27, 1953). Casual – The fulfillment of the condition is left to the will of a third party or chance. Mixed – The fulfillment of the condition is left partially to the will of either of the parties and partly to the will of a third person or by chance. If the condition is casual or mixed, the obligation remains valid. Doctrine of Constructive Fulfillment When the condition is partly dependent upon chance, the will of a third party or upon the will of the debtor, the conditional obligation is valid. In this scenario, if the debtor voluntarily prevents the fulfillment of the condition partly dependent upon him, the condition is deemed fulfilled (Art. 1186, NCC). Requisites: 1. The condition is SUSPENSIVE; 2. The obligor actually prevents the fulfillment of the condition; and, 3. He acts voluntarily.
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●
There must be INTENT on the part of the obligor to prevent the fulfillment of the condition.
●
MERE INTENTION of the debtor to prevent the happening of the condition is INSUFFICIENT (Rabuya, Obligations and Contracts, 2019 ed, p. 103).
Constructive Fulfillment Conditional Obligation ●
Of
A
Mixed
When the condition was not fulfilled but the obligor (debtor) did all his power to comply with the obligation, the condition should be deemed satisfied.
3. Possible & Impossible Conditions a. Possible Condition – when it is capable of realization not only according to its nature, but also according to law, good customs and public policy. b. Impossible Condition – refers to conditions which are: Physical Impossibility 1. Physically impossible because they are incompatible or contrary to law and nature; Juridical Impossibility 1. Contrary to good customs or public policy; or 2. Prohibited by law. Effect upon the Obligation: If impossible condition is imposed --1. Ordinary Obligation: obligation itself becomes void (Art. 1183, NCC); 2. Simple or Remuneratory Donation: the donation remains valid because the condition is considered not imposed (Art. 727, NCC); 3. Onerous Donation: the donation becomes void because an onerous donation is
governed by the law on obligations and contract (Art. 733, in rel. to Art. 1183, NCC); and 4. Testamentary Disposition: the disposition remains valid because the impossible condition is considered not imposed, even if the testator provides otherwise (Art. 873, NCC); 5. Negative Condition: the obligation is valid but the condition shall be considered as not agreed upon (Art. 1183, NCC). ●
The obligation is VOID if it depends upon an impossible condition. But if the OBLIGATION is DIVISIBLE, that part thereof which is not affected by the impossible or unlawful condition shall be VALID (Art. 1183, NCC).
Positive & Negative Condition POSITIVE CONDITION A certain event must happen at a determinate time. Effects: The obligation is considered extinguished if: The period expires without the condition happening; or It is certain that the event will not take place, even before said period expires
(Art. 1184, NCC).
NEGATIVE CONDITION A certain event must not happen at a determinate time. Effects: In negative condition, the obligation becomes effective if: The period expires; Even before the expiration of the period, when it is certain that the event cannot happen; If no period is fixed, the intention of the parties, considering the nature of the obligation, shall determine the period. (Art. 1185,
NCC).
Effect of Breach of Both Parties: The liability of the first infractor shall be equitably tempered by the courts;
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If it cannot be determined which of the parties first violated the contract, the same shall be deemed extinguished, and each shall bear his own damages (Art. 1192, NCC).
Obligation with a Term/Period Obligations with a period are, therefore, those whose consequences are subjected in one way or another to the expiration of said term.
The above rules are deemed just. The first one is fair to both parties because the second infractor also derived or thought he would derive some advantage by his own act or neglect. The second rule is likewise just, because it is presumed that both at about the same time tried to reap some benefit.
Period – A term or period consists in a space of time which has an influence on obligations as a result of a judicial act, and either suspends their demandableness, or produces their extinguishment (Manresa, Commentaries on the Civil Code, Vol. 8, p. 153).
Examples:
Suspensive and Resolutory Terms:
Positive Condition
Suspensive (ex die) – The obligation becomes demandable only upon the arrival of a day certain (Art. 1193 [1], NCC).
If A says: “I am giving B my collection of law books but if my son, C, becomes a lawyer when he turns 25, those law books will have to be given back to C.” RIGHT OF B will become absolute from the moment C reaches 25 and has not graduated from law school, although he may eventually pass the bar examinations and become a lawyer afterwards.
Resolutory (in diem) – The obligation is immediately effective and demandable but will be extinguished when the period arrives (Art. 1193 [2], NCC). A Day Certain – Understood to be that which must necessarily come, although it may not be known when (Art. 1193 [3], NCC).
If C is still in his 2nd year in the College of Law when he turns 24, it is definite that the event will not take place.
PERIOD / TERM A future and certain time or event which must necessarily come;
CONDITION A future and uncertain event;
Negative Condition
Always refers to the future; Merely fixes the time or efficaciousness of an obligation.
May, under the law, refer even to the past; Causes an obligation to arise or to cease. (8
If A says: “I promise to give B a Rolex watch if she does not marry C before she turns 25.” This obligation shall become effective from the moment B reaches the age of 25 and remains a bachelorette, although she may marry C afterwards. The obligation shall also become effective if B marries another when she turns 24 for it is evident that the event which serves as a condition can no longer occur.
Manresa 153, 154).
Benefit of Period General Rule: If period is designated, it is presumed for the benefit of both the creditor and debtor (Art. 1196, NCC). Hence, the creditor cannot demand for early performance and neither may the debtor compel the creditor to accept an early performance. NOTE: This Article applies only where the parties to a contract themselves have fixed a period, and not to a case where the parties have authorized
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the Court to fix a reasonable term (Orit vs. Balrodgan Co., Ltd., L-12277, Dec. 29, 1959). Effect of Suspensive Term or Period The obligation becomes demandable only when the day certain arrives. The term or period does not, however, affect the existence of the obligation nor its effectivity. What is suspended by the term is only the demandability of the obligation (Art. 1193 [1], NCC). If delivery or payment has been made prior to the arrival of the day certain, the debtor is authorized to recover what has been delivered prematurely, together with fruits and interest but only if the debtor made the delivery or payment unaware of the period or believing that the obligation has become due and demandable (Art. 1195, NCC). As to the extent of what may be recovered: PRIOR TO ARRIVAL OF THE DAY CERTAIN
AFTER THE ARRIVAL OF THE DAY CERTAIN
In addition to the recovery of the sum paid the debtor is also entitled to recover interest over that sum at the legal rate provided that the action for recovery is made prior to the maturity of the obligation.
Obligation to pay the sum of money is already due and demandable, only the interest accruing from the date of payment up to the date of maturity of the obligation may be recovered (Rabuya,
Obligations and Contracts, 2019 ed, p. 133).
Generic Thing If the obligation is to give a generic thing and what has been delivered is something that produces fruits, both the thing and fruits actually received by the creditor may be recovered.
The obligation to give the generic thing is already due and demandable, only the fruits actually received by the creditor from the date of delivery up to the date of maturity of the obligation may be recovered.
Specific Thing If the obligation is to give a specific thing and what has been delivered is something that produces fruits, both the thing and the fruits actually received by the creditor, may be recovered, provided that the action for recovery is made prior to maturity of the obligation.
Both the thing and its fruits may no longer be recovered because the creditor is already entitled to both. NOTE: The obligation to give specific things, the creditor acquires a right over the fruits from the time the obligation was constituted even if not yet demandable unless the contrary otherwise agreed.
Effect if for the benefit of creditor alone: He cannot be compelled by the debtor to accept an early performance but he can compel the debtor to perform even prior to the arrival of the period. Effect for the benefit of cannot be compelled by the prior to the arrival of the compel the creditor to performance.
debtor alone: He creditor to perform period but he can accept an early
Instances where the debtor loses right to make use of period (in which case, the period becomes for the benefit of creditor alone): a. Debtor becomes INSOLVENT, unless he gives guaranty or security; b. Debtor FAILS TO FURNISH the promised security or guaranty; c. Debtor, by his act, IMPAIRS the guaranty or security, unless he gives a new security or guaranty; d. When guaranty or security DISAPPEARS thru FORTUITOUS EVENT; e. Debtor VIOLATES ANY UNDERTAKING in consideration of which the creditor agreed period; or f. Debtor ATTEMPTS to ABSCOND (Art. 1198, NCC) When May Court Fix the Period: a. No period is fixed but same is intended based from the nature of obligation and the circ*mstances (Art. 1197 [1], NCC);
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b. If the duration of period depends upon the will of the debtor; (Art. 1197[2], NCC) c. If debtor binds himself to pay when his means permit him to do so (Art. 1180, NCC). General rule: the court must first fix the period before an action for the enforcement of the obligation can be maintained. However, when such separate action would be a mere formality and would serve no purpose than to delay, such technicality need not be adhered to (Tiglao vs. Manila Railroad Co., 52 O.G. 179). Exceptions: (Rabuya, Obligations and Contracts, 2019 ed., p. 141-142) 1. When no period was intended by the parties. 2. When the obligation is payable on demand because it is a pure obligation and not one with a period. There must be a demand in order for the obligation to become due. In the absence of such demand, it follows that the obligation is not yet due, and this obligation may not be subject to compensation for lack of requisite under the law. 3. When the performance of the obligation was fixed “within a reasonable time” because a period was already fixed, a “reasonable time”; and all that the court should do is to determine if that reasonable time had already passed or not when suit was filed. 4. Where the law itself provides for the period. Once the period has been fixed by the court it becomes part of the contract, and it cannot be subsequently changed or extended by the court without the consent of both parties (Barretto vs. City of Manila, G.R. No. 4372, March 27, 1908). When the obligation is payable on demand, the obligation is without a term and, hence, the court cannot fix the period (People’s Bank & Trust Co. vs. Odom, G.R. No. L-43670, February 25, 1937). When what is left to the will of the debtor is only the duration of the period, the obligation is valid and said provision
authorizes the courts to fix the period (Art, 1197 (2), NCC).
Classification As to the grant of right to choose one prestation out of several, or to substitute the first one. Alternative and Facultative Obligations Kinds of obligations in case of plurality of objects: 1. Conjunctive – One where there are several prestations and all of them are due; 2. Distributive – One where one of two or more prestations are due. It may either be: a. Alternative – several prestations are due but the performance of one is sufficient to extinguish the obligation; or b. Facultative – only one prestation is due, but the debtor has reserved the right to substitute it with another (De Leon, Obligations and Contracts, 2010, p. 209). Facultative Obligation The choice to substitute another prestation lies only with the debtor (Art. 1206, par. 1, NCC). Substitution becomes effective only from the time it has been communicated to the creditor (De Leon, Obligations and Contracts, 2010, p. 209). Effect of loss of substitute: If the thing intended as a substitute is lost even due to the fault of the debtor, the latter is not liable because obligation simply ceases to be a facultative one. But if the loss of the substitute due to the fault of the debtor occurs after the substitution has been made, the obligation is converted into indemnification for damages (Art. 1206, 2nd par., NCC). If the principal obligation becomes impossible by fault or negligence of the creditor, the debtor cannot be compelled to perform the substitute
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(no more substitute, obligation becomes simple). Thus, obligation is extinguished. Alternative Obligation Several prestations are due but the performance of one is sufficient to extinguish the obligation. The right of choice belongs to the debtor, unless it has been expressly granted to the creditor. The right of choice may, in fact, be granted to a third person by express agreement of the parties (notification to both the debtor and creditor by the 3rd person of his choice) because said agreement is not prohibited by law nor contrary to morals, good customs, public order, or public policy (Art. 1200, 1st par., NCC). Limitations on exercise of right: following prestation cannot be chosen:
The
1. Those which are impossible; 2. Those which are unlawful; or 3. Those which could not have been the object of the obligation (Art. 1200, 2nd par., NCC). Choice becomes effective only from the time that it has been communicated to the other party (Art. 1201, NCC). After that, the obligation is converted into a simple obligation of performing the chosen prestation. If right of choice belongs to debtor: Prior To Election 1. And only one of the several prestations is practicable, the obligation becomes simple (Art. 1202, NCC); 2. And thru the creditor’s act, the debtor cannot make a choice in accordance with the terms of the obligation, the debtor may either rescind the contract with damages (Art. 1203, NCC) or choose to perform that which remains. 3. And all the prestations were lost due to the debtor’s fault, the creditor is entitled to recover the value of the last thing which
disappeared, or that of the service which last became impossible (Art. 1204, NCC). 4. If all prestations were lost by reason of fortuitous event, the obligation is extinguished and the debtor is not liable for damages (Arts. 1262 and 1264, NCC). If right of choice belongs to creditor: 1. If one of the prestations is lost due to debtor’s fault, the creditor may either choose from the remaining (without being entitled to damages) or the price of that which has disappeared (with the right to recover damages) (Art. 1205[2], NCC); 2. If all the prestations were lost due to debtor’s fault, the creditor may choose the price of any of them, with indemnity for damages (Art. 1205[3]. NCC). 3. If only one prestation is lost by fortuitous event, the creditor can still exercise the right of choice, hence, the obligation remains as alternative if there are several prestations left (Art. 1205[1], NCC). If only one prestation is left, obligation ceases to be an alternative one. After Election 1. If what was lost was the chosen prestation which, for all intents and purposes, is the only prestation which is due and demandable under the circ*mstances, the obligation is considered extinguished if it was lost without the fault of the debtor and before he has incurred in delay (Art. 1262, par 1, NCC). If the same was lost by reason of the debtor’s fault, his obligation is converted to indemnification for damages. 2. If what was lost was not the chosen prestation, the same does not affect the obligation because said prestation is not what is due (Rabuya, Obligations and Contracts, 2019 ed., pps. 152-153). Requirement of Communication of choice If the choice belongs to the creditor, he has to communicate his choice to the debtor.
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There is no required form. It may be ORAL, IN WRITING, TACITLY, OR OTHER UNEQUIVOCAL MEANS.
Classification As to the character responsibility or liability.
of
Joint and Solidary Obligations Joint Obligation- An obligation in which each debtor is liable only for a proportionate part of the debt, and the creditor is entitled to demand only a proportionate part of the credit form each debtor (Rabuya, Civil Law Reviewer Volume II, 2017 Ed., p. 78. Cited in Dy-Dumalasa vs. Fernandez, et al., G.R. No. 178760, 23 July 2009). It is defined as an obligation where there is a concurrence of several creditors, or of several debtors, or of several creditors and debtors, by virtue of which each of the creditors has a right to demand, and each of the debtors is bound to render, compliance with his proportionate part of the prestation which constitutes the object of the obligation (Rabuya, Obligations and Contracts, 2019 ed., p. 157). Presumption of Joint Obligation Presumption: Obligation is presumed joint if there is a concurrence of several creditors, of several debtors, or of several creditors and debtors in one and the same obligation (Art. 1207, NCC). Exceptions: 1. When the obligation expressly states that there is solidarity 2. When the law requires solidarity i.e. quasidelicts 3. When the nature of the obligation requires solidarity 4. When the nature or condition is imposed upon heirs or legatees, and the testament expressly makes the charge or condition in
solidum
5. When the solidary responsibility is imputed by a final judgment upon several defendants
Presumption of Equal Division Presumption: Credit or debit shall be presumed to be divided into as many equal shares as there are creditors or debtors (Art. 1208, NCC). Joint creditor cannot act in representation of the others, nor can a joint debtor be compelled to answer for the liability of others (Jurado, Comments and Jurisprudence in Obligations and Contracts, 2010, p. 181 – 182). Division of shares: 1. The co-creditors or co-debtors may regulate their rights or liabilities in their internal relations with each other; 2. In the absence of clear agreement, the law PRESUMES that the credit or debt is divided into as many equal shares as there are creditors or debtors (Art. 1208, NCC). Effect of Joint Divisible Obligation: Each creditor can demand only for the payment of his proportionate share of the credit, while each debtor can be held liable only for the payment of his proportionate share of the debt. Distinct character of each share: In joint obligation, the share pertaining to each creditor or debtor is distinct from the share pertaining to the others (Art. 1208, NCC). As a consequence – 1. As to demand: Demand made by one creditor upon one debtor produces the effects of default only with respect to the creditor who made the demand and the debtor upon whom the demand has been made, without affecting the others. 2. As to interruption of prescription: The interruption of prescription by the judicial demand of one creditor upon one debtor does not insure to the benefit of the other creditors nor interrupt the running of the prescriptive period as to other debtors. 3. As to personal defenses: The vices of each obligation arising from the personal defect of
251
a particular debtor or creditor do not affect the obligation or rights of the others. 4. As to Insolvency: The insolvency of one debtor does not increase the liability of his co-debtors. Joint Indivisible Obligation Indivisibility of an obligation does not necessarily give rise to solidarity nor does solidarity of itself imply indivisibility (Art. 1210, NCC). INDIVISIBILITY
SOLIDARITY
Refers to the prestation, which is not capable of partial performance.
Refers to the legal tie or vinculum juris defining the extent of liability of the parties.
Effect to Joint Creditors Each cannot demand more than his share.
Each may demand the full prestation.
Effect to Joint Debtors Each is only liable for his respective share.
Each has the duty to comply with entire prestation.
Reason: Indivisibility and solidarity refers to two distinct concepts. Solidarity refers to the vinculum that binds the parties and, therefore, principally to the subjects of the obligation. Indivisibility refers to the prestation or the object of the obligation (Arts. 1210, 1223 NCC). Test of Divisibility: Whether an obligation is divisible or not depends on whether the obligation is susceptible of partial fulfillment, according to the purpose of the said obligation (Rabuya, Pre-Bar Reviewer in Civil Law, 2021 Ed., p. 368). Concept of Joint Indivisible Obligation: It exists when the prestation is indivisible or incapable of partial performance and yet, there is plurality of subjects who are not bound solidarily. Legal Effects: 1. Since the obligation is joint, on the side of the debtors, each is liable only for a portion of
the debt; on the side of the creditors, each is entitled only to a portion of the credit. 2. Since the obligation is joint, if one of the debtors should be insolvent, the others shall not be liable for his share (Art. 1209, NCC). 3. But since the prestation is at the same time indivisible, compliance is possible only if all joint debtors shall act TOGETHER; therefore, the obligation can be enforced only by proceeding against all the debtors (Art. 1209, NCC). Effect of Breach: 1. If a creditor chooses specific performance, all debtors must be sued because the obligation can be performed only by the concurrence of all debtors (Art. 1209, NCC). 2. It also gives rise to indemnity for damages from the time anyone of the debtors does not comply with his undertaking; in which case, the debtors who may have been ready to fulfill their promises shall not contribute to the indemnity beyond the corresponding portion of the price of the thing or of the value of the service in which the obligation consist (Art. 1224, NCC). Only the debtor who was responsible for the breach shall be liable to pay damages. Solidary Obligation – an obligation where there is a concurrence of several creditors, or of several debtors, or of several debtors, or of several creditors and debtors in one and the same obligation wherein each one of the creditors has a right to demand entire compliance with the prestation, or that each one of the debtors is bound to render entire compliance as demanded (Art. 1207, NCC). Solidarity exists when: 1. The obligation expressly declares; 2. The law expressly requires solidarity; or 3. The nature of obligation requires solidarity (Art. 1207, NCC). These are the only instances when the obligation is solidary.
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Kinds of Solidarity: 1. Active – existing on the side of the creditors; 2. Passive – existing on the side of the debtors; or 3. Mixed – existing on both sides. Active Solidarity Distinguishing characteristic: There is an existence of mutual representation or mutual agency among the solidary creditors with powers to exercise the rights of other in the same manner as their rights (De Leon, Obligations and Contracts, 2010, p. 218). Effect of Demand: The debtor may pay anyone of the solidary creditors, but if any demand, either judicial or extrajudicial, is made by one of the solidary creditors, payment should be made only to him (Art. 1214, NCC). If the payment is made to the other creditors, that is a case of payment made to a wrong person. In case of mixed solidarity: 1. The creditor can validly refuse payment coming from debtors who were not recipient of the demand (the latter are considered third person); and 2. The debtor who received the demand is obliged to make payment only to the creditor who made the demand. In case of mixed solidarity, the prohibition in Article 1214 does not extend to other debtors upon whom no demand has been made, so each of the debtor can make a valid payment to a creditor who did not make the demand (Jurado, Comments and Cases on Obligations and Contracts, 2010, p. 197). Effect of condition: Solidarity may exist although the creditors and debtors may not be bound in the same manner and by the same periods and condition (Art. 1211, NCC). Only one is indispensable party: Where the obligation of the parties is solidary, either of the
parties is indispensable, and the other is not even a necessary because complete relief is available from either (Justice Jose Feria, Civil Procedure, 1969 Ed., p. 153 cited in Cerezo vs. Tuazon, G.R. 141538, March 23, 2004). Effect of Judgment: 1. If favorable, this inures to the benefit of the co-creditors pursuant (Article 1212, NCC); 2. If adverse: 1. It cannot be set up against the others if the same is founded on a cause personal to the plaintiff-creditor; 2. But if the judgment is founded on a cause not personal to the plaintiff-creditor, the same can be set up against the co-creditors because once an action is filed by a solidary creditor, he represents all the others and payment can be made only to him. Effect of beneficial act: Each one of the solidary creditors may do whatever may be useful to the others (Art. 1212, NCC). Hence, each solidary creditor may interrupt the running of the prescriptive period, constitute the debtor in default, or bring the suit so that the obligation may produce interest. Effect of prejudicial acts: 1. As far as the debtors are concerned, the acts are valid because of the principle of mutual representation which exists among the creditors (Art. 1215, NCC). 2. However, as far as the co-creditors are concerned, this prejudicial act does not prejudice the rights of the other creditors to recover their respective shares in the credit from the creditor who effected such prejudicial acts (Art. 1212, NCC). Effect of assignment of rights: Rule: A solidary creditor cannot assign his rights without the consent of the others (Art. 1213, NCC); but the assignment of rights to a co-creditor even without the consent of the other creditors is not prohibited.
253
Effect of violation of prohibition: The assignment is not valid. Hence, the assignee does not become a co-creditor. If payment is made to the assignee, such payment is made to a wrong person (Rabuya, Pre-Bar Reviewer in Civil Law, 2021 Ed., p. 365). Effect of condoning the solidary obligation: If remission covers the entire obligation, the obligation is totally extinguished (Art. 1215, NCC). 2. If remission is for the benefit of one of the debtors covering the latter’s entire share: 1. As far as the creditors are concerned, he is completely released; 2. But as far as the debtors are concerned, he remains a debtor in case of insolvency of one of the remaining debtors (Rabuya, Pre-Bar Reviewer in Civil Law, 2021 Ed., p. 366). 3. If remission is for the benefit of one of the debtors covering only part of the latter’s share, his character as a solidary debtor is not affected, both insofar as the creditors and debtors are concerned (Rabuya, Pre-Bar Reviewer in Civil Law, 2021 Ed., p. 366).
Effect of payment to a creditor: If one of the solidary creditors was able to collect the entire amount or debt of the solidary debtors, the obligation is totally extinguished, although there arises a consequent obligation on his part to render an account to his co-creditors (Art. 1215 [2], NCC). Passive Solidarity
1.
Effects of Novation: 1. Novation effected by substituting another person in place of the debtor – solidary debtor who effected the novation is liable for the acts of the new debtor in case there is a deficiency in performance or in case damages are incurred by other solidary creditors as a result of the substitution; (Rabuya, Pre-Bar Reviewer in Civil Law, 2021 Ed., p. 392) 2. Novation by subrogating a third person in the rights of the solidary creditor – obligation of the debtor remains the same; (Rabuya, Pre-Bar Reviewer in Civil Law, 2021 Ed., p. 393) 3. Novation by subrogating a third person in the rights of the solidary creditor – the creditor is responsible for such novation is liable to the other creditors for the share which corresponds to them in the obligation (Rabuya, Pre-Bar Reviewer in Civil Law, 2021 Ed., p. 393).
Each solidary debtor, insofar as the creditor or creditors are concerned, is the debtor of the entire amount; however, with respect to his codebtors, he is a debtor only to the extent of his share in the obligation. ●
Solidary obligation cannot lightly be inferred. There is a solidary liability only when the obligation expressly so states, when the law so provides or when the nature of the obligation so requires. In the dispositive portion of the labor arbiter, the word "solidary" does not appear (INIMACO vs. NLRC, G.R. No. 101723, May 11, 2000).
Passive Solidarity v. Surety PASSIVE SOLIDARITY SURETY Solidary Debtors Solidary Guaranty Distinctions Solidary debtor is liable for Liable only as to his the entire obligation own obligation Extent of Liability Primary Subsidiary Effects of Extension of time granted by creditor Solidary obligation is not Surety is released extinguished from the obligation
Characteristic of passive solidarity: Existence of a mutual guaranty among the solidary debtors. Hence: 1. Each is liable for the entire obligation and the creditor has the right to choose whom to be called upon to perform the obligation (Art. 1218, NCC). 2. Payment made by one of the solidary debtors extinguishes the obligation (Art. 1217, NCC).
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Effect of Demand upon a Debtor The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected (Art. 1216, NCC).
who obtained such remission, his character as a solidary debtor is not affected and continues to be so, both with respect to the creditors and the other solidary debtors. Effects of loss performance:
or
impossibility
of
1. If adverse to the defendant solidary debtor and the latter turns out to be insolvent, other debtors can still be sued until the debt is fully paid (Art. 1216, NCC). The judgment against the defendant-debtor cannot, however, be enforced against the others; a new action must be filed against the latter.
1. Without the fault of the debtors – obligation shall be extinguished; 2. If one of the debtors is at fault – all shall be responsible to the creditor for the price and damages without prejudice to their own action against the guilty or negligent debtor; 3. In case of a fortuitous event and one of the debtors is in delay – all shall be responsible to the creditor for the price and damages without prejudice to their own action against the guilty or negligent debtor (Art. 1221, NCC).
2. If favorable to defendant-debtor:
Defenses available to solidary debtors:
Effects of judgment:
a. And judgment is based on a defense personal to defendant, the others can avail of it as partial defense pertaining only to share of the defendant-debtor; b. If the judgment is based on the inexistence of the obligation, its unenforceability or some other cause inherent in the vinculum juris, judgment inures to the benefit of the other debtors who can avail of it as a total defense. In case of remission: 1. If what was remitted was the entire obligation in favor of one of the solidary debtors, the entire obligation is extinguished (Art. 1215, NCC), but the solidary debtor who obtained such remission is not entitled to reimbursem*nt (Art. 1220, NCC); 2. If what was remitted was only the whole portion pertaining to the solidary debtor who obtained such remission, he is considered completely released in so far as the creditors are concerned but he is still bound to his codebtors in case of insolvency of one of the remaining debtors; 3. If what was remitted was only a portion of the share pertaining to the solidary debtor
1. Defenses derived from the nature of the obligation such as payment, prescription, minority of all debtors. These defenses constitute as a total or complete defense; 2. Defenses personal to the defendant-debtor, which may either be: a. Insanity or minority, which operates as a complete defense of the defendant-debtor from liability. b. Special terms or conditions, which operate only as a partial defense applicable only to his portion. 3. Defenses personal to others: It operates only as a partial defense pertaining to the share of the debtors to whom it is available. Obligations with a Penal Clause One which an accessory undertaking is attached for the purpose of insuring its performance by virtue of which the obligor is bound to pay a stipulated indemnity or perform a stipulated prestation in case of breach. General Rule: In obligations with a penal clause, the penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance (Art. 1226 [1], NCC).
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Exceptions:
Limitation on the right of the creditor:
1. When there is a stipulation to the contrary; 2. Obligor refuses to pay the penalty; or 3. Guilty of fraud in the fulfillment of the obligation.
Neither can the creditor demand the fulfillment of the obligation and the satisfaction of the penalty at the same time, unless this right has been clearly granted him. However, if after the creditor has decided to require the fulfillment of the obligation, the performance thereof should become impossible without his fault, the penalty may be enforced (Art. 1227, NCC).
Penal Clause has been defined as an accessory obligation which the parties attach to a principal obligation for the purpose of insuring the performance thereof by imposing on the debtor a special prestation (generally consisting in the payment of a sum of money) in case the obligation is not fulfilled or is irregularly or inadequately fulfilled (Rabuya, Obligations and Contracts, 2019 ed., p. 212). Functions: 1. Provide for liquidated damages, and 2. To strengthen the coercive force of the obligation by the threat of greater responsibility in the event of breach (Rabuya, Obligations and Contracts, 2019 ed., p. 212). Penalty, when demandable: Upon breach or non-fulfillment of the principal obligation, the penalty stipulated becomes demandable, provided that it is not contrary to law, morals, customs, public order or public policy (Art. 1226 [2], NCC). Hence, the penalty cannot be demanded when the non-fulfillment of the obligation is not imputable to the fault or negligence of the debtor but to a fortuitous event or due to the fault of the creditor. But the burden of proof lies with the debtor. In order to avoid payment of penalty, he must be able to prove that the non-performance of the obligation is not due to his fault (Rabuya, Obligations and Contracts, 2019 ed., p. 213). Limitation on the right of debtor: The debtor cannot exempt himself from the performance of the obligation by paying the penalty, save in the case where this right has been expressly reserved for him (Art. 1227, NCC).
Proof of actual damages: Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be demanded (Art. 1228, NCC). When penalty may be reduced 1. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor; 2.
Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable (Art. 1229, NCC).
Effect of nullity of penal clause The nullity of the penal clause does not carry with it that of the principal obligation. The nullity of the principal obligation carries with it that of the penal clause (Art. 1230, NCC). Alternative v. With a Penal clause: ALTERNATIVE Two or more obligations are due but the performance of one extinguishes the obligation In case of impossibility of one of the obligations, the others still subsist. Hence, the obligation is not extinguished.
WITH PENAL CLAUSE There is only one principal obligation and in the case of non-performance of such will enforce the penal clause The impossibility of principal obligation extinguishes the penal clause.
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Debtor can choose which prestation to fulfill
Debtor cannot choose to pay penalty to avoid performance of the obligation, unless expressed.
Facultative v. With a Penal clause: FACULTATIVE
WITH PENAL CLAUSE
Debtor can make a substitution
Debtor cannot make such substitution unless expressly agreed by the parties Such right to demand both may be given
Creditor demand prestations
cannot both
D. EXTINGUISHMENT OF OBLIGATIONS Modes of extinguishment of an obligation. (Art. 1231, NCC)
of
extinguishing
A. Concept of Payment: Payment means not only the delivery of money but includes the performance, in any other manner, of an obligation (Art. 1232, NCC). Burden of Proof: One who pleads payment has the burden of proving it. Even where the plaintiff must allege non-payment, the GR is that the burden rests on the defendant to prove payment, rather than on the plaintiff to prove nonpayment. However, where the debtor introduces some evidence of payment, the burden of going forward with the evidence – as distinct from the general burden of proof – shift to the creditor, who is then under a duty of producing some evidence to show non-payment (Jimenez vs. NLRC, G.R. No. 116960, April 2, 1996; Royal Cargo Corp. vs. DFS Sports Unlimited, Inc., G.R. No. 158621, December 10, 2008). Characteristics of Payment:
1. Payment or performance 2. Loss of the thing due 3. Condonation or remission of debt 4. Confusion or merger 5. Compensation 6. Novation 7. Annulment 8. Rescission 9. Fulfillment of a resolutory condition 10. Prescription Other modes Obligation:
1. Payment or Performance
1. Identity - this refers to the rule that only the prestation agreed upon must be complied with. 2. Completeness - this refers to the rule that the thing or service in which the obligation consists must be completely delivered or rendered.
an
1. Renunciation or waiver by the the obligee or creditor; 2. Compromise; 3. Expiration of the resolutory term or period; 4. Death of one of the contracting parties in purely personal obligations; 5. The will of one of the contracting parties in certain contracts; and, 6. Agreement of both contracting parties or what is sometimes known as mutual assent or dissent (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010 ed., p. 230).
3. Indivisibility - this refers to the rule that the payment or performance must be indivisible. (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010 ed., p. 247-248) Requisites for Valid Payment: 1. It must be complete and regular (Art. 1233, NCC); 2. It must be tendered by the proper party (Arts. 1237-1238, NCC); 3. It must be made to the proper party (Art. 1240, NCC); 4. The payor and payee must be capacitated (Arts. 1240-1241, NCC); 5. There must be identity, in that the very thing or service due must be delivered or released (Arts. 1244 and 1246, NCC);
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6. It must be tendered in the proper place (Art. 1240, NCC). Payment must be complete and regular General Rule: An obligation is not considered paid unless there is complete and regular performance (Art. 1233 & 1235, NCC). Exceptions: a. Substantial Performance in Good Faith: when the obligation has been substantially performed in good faith (Art. 1234, NCC); and b. Waiver / Estoppel: when the creditor accepts performance, knowing its incompleteness and irregularity (Art. 1235, NCC). Partial Payments General Rule: The creditor cannot be compelled to accept partial payment, unless there is an express stipulation to that effect. However, the law does not prohibit the creditor from accepting partial payments (Art. 1248, NCC). The mere receipt of a partial payment is not, as a rule, equivalent to the required acceptance of performance as would extinguish the whole obligation. To imply that creditors accept partial payment as complete performance of their obligation, their acceptance must be made under circ*mstances that indicate their intention to consider the performance complete and to renounce their claim arising from the defect (Rabuya, Obligations and Contracts, 2019 ed., p. 277). Cited case: Selegna Mngt. And Devt. Corp vs.
UCPB, supra
EXCEPTIONS: 1. When there is an express stipulation to that effect. 2. Where the obligation is partly liquidated and partly unliquidated, in which case, the creditor may demand, and the debtor may effect the
payment of the former without waiting for the liquidation of the latter; 3. Where different prestations are subject to different conditions or terms. In order that the obligation may be considered extinguished by payment, it is necessary that the creditor acknowledges such full payment or proof of full payment is shown to the satisfaction of the court (Rabuya, Obligations and Contracts, 2019 ed., p. 226). Requisites of Substantial Performance in Good Faith 1. The obligor has made substantial performance, which is determinable by the unique circ*mstances of each case. 2. The obligor is in good faith (Art. 1234, NCC); Note: Even if the performance of the obligation is already substantial but the obligation is not fully complied with because of the debtor’s fault, the debtor may not invoke the principle of substantial performance (Rabuya, Obligations and Contracts, 2019 ed., p. 231). Effect of Substantial Performance in Good Faith: The debtor is completely released from the obligation despite his failure to completely perform the obligation and he may recover as though there had been a strict and complete fulfillment. Thus, the creditor cannot require the performance of the remainder as condition sine qua non to his liability (Rabuya, Obligations and Contracts, 2019 ed., p. 231-232). Waiver / Estoppel When the obligee accepts the performance, knowing its incompleteness or irregularity, and without expressing any protest or objection, the obligation is deemed fully complied with (Art. 1235, NCC).
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Payment must be made by the proper party Proper Party: The following can compel the creditor to accept the payment if the other requisites of valid payment are present: a. The debtor, his heirs, assignees, or duly authorized representative; or b. The person authorized by stipulation to make payment; c. Third person who has an interest in the fulfillment of the obligation, such as a surety or a guarantor. If the creditor refuses to accept payment made by any of these (3) persons, such refusal is without just cause and entitles the debtor to resort to consignation. In obligations to do, however, where the qualification and circ*mstances of the person of the debtor have been taken into account in establishing the obligation (referred to as intuiti personae), the creditor is not bound to accept payment or performance by a third person even when the latter has an interest in the fulfillment of the obligation (Rabuya, Obligations and Contracts, 2019 ed., p. 234).
2. Accommodation mortgagors and thirdparty pledgors - they are liable to pay the obligation in case the debtor defaults in the payment of the obligation, although their liability extends only up to the value of their properties. 3. Persons who are subsidiarily liable to pay the obligation (e.g., an employer who is subsidiarily liable to pay the civil liability of his employee arising from delict) (Rabuya, Obligations and Contracts, 2019 ed., p. 236). b. Unless there is a stipulation to the contrary (Art. 1236 [1], NCC). Effect of payment by a third person WITH/WITHOUT KNOWLEDGE OF THE DEBTOR With knowledge and consent of the debtor
Without knowledge of the debtor
Exceptions: a. If third person has interest in the fulfillment of the obligation; Interest referred to must be a pecuniary or material interest in the fulfillment of the obligation and not merely social or friendly interest (Rabuya, Obligations and Contracts, 2019 ed., p. 236). These third persons include: 1. Guarantor & Surety - they both guarantee the fulfillment of the debtor’s obligation.
Obligation extinguished.
is
Third person who pays the obligation may recover from the debtor; and
Rule of payment coming from third person: General Rule: The creditor cannot be compelled to accept payment coming from a third person.
EFFECT
He is subrogated to all the rights of the creditor. Obligation is extinguished but third person may recover only insofar as the payment has been beneficial to the said debtor. Third person is not subrogated to the rights of the creditor (Art. 1237,
NCC). Payment without intention of being reimbursed
Payment donation
NCC).
is
(Art.
deemed
1238,
However, donation necessitates consent of the debtor as in the case of the donee in ordinary donations (Art. 734,
NCC).
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Subrogation v. Reimbursem*nt SUBROGATION Debt is extinguished in one sense, but a new creditor, with exactly the same rights as the old one, appears on the scene.
REIMBURsem*nT The new creditor has different rights, imposing that there has indeed been an extinguishment of the obligation;
More than a personal action of recovery.
Only a personal action to recover the amount. (8
Manresa 269).
Subrogation is defined as the transfer of all the rights of the creditor to a third person, who thereby acquires all his rights against the debtor or against third persons (Rabuya, Pre-bar Reviewer in Civil Law, 2021 Ed., p. 393). Payor Must Be Capacitated General Rule: If the payor is not capacitated to make the payment, the payment is not valid. In obligations to give, payment made by one who does not have the free disposal of the thing due and capacity to alienate it shall not be valid (Art. 1239, NCC). The creditor can therefore refuse to accept the payment made by a person who is not the owner of the thing delivered. Should the paying debtor be incapacitated to alienate, the obligation would be VOIDABLE, but only at the instance of the debtor who is incapacitated and the same may not be interposed by the creditor. Exception: Voluntary payment of a sum of money or delivery of a fungible thing made by a minor between 18 and 21 years of age without the consent of his parent or guardian. In said case, the creditor who has spent or consumed the thing in good faith cannot be compelled to return what he has received for the law considers it as a Natural Obligation (Art. 1239, NCC in relation to Art. 234 and 236, FC as amended by RA 6809).
Payment should be made to the PROPER PARTY: 1. The person in whose favor the obligation has been constituted (original creditor); 2. Successor-in-interest of the original creditor; 3. Person authorized to receive it, whether such authorization comes from the creditor, agreement or provision of law (Art. 1240, NCC). Effect of payment made to wrong person General rule: Payment made by the debtor to the wrong party does not extinguish the obligation as to the creditor who is without fault or negligence, even if the debtor acted in utmost good faith and by mistake as to the person of the creditor, or through error induced by fraud of a third person (BPI v. CA, G.R. No. 104612, May 10, 1994). Exception: Payment made to a wrong person will be considered valid and shall extinguish the debtor’s obligation in the following instances: 1. If the payment has redounded to the creditor’s benefit (Art. 1241 [2], NCC); Ordinarily, it is the burden of the debtor to prove that his payment made to a wrong person has in fact redounded to the benefit of the creditor. But in the following instances, such benefit is presumed and need not be proved: a. If after payment, the third person acquires the creditor’s rights; b. If the creditor ratifies the payment to the third person; c. If by the creditor’s conduct, the debtor has been led to believe that the third person had authority to receive the payment (Art. 1241[2], NCC). The burden of proving the payment made to a wrong person has, in fact, redounded to the creditor’s benefit is incumbent upon the debtor for two reasons: 1. He was the one who committed the mistake of paying a wrong party; and
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2. He has the burden of proving that his obligation had already been extinguished (Rabuya, Obligations and Contracts, 2019 ed., p. 251).
Assignment of Credit
a. Possession of the credit is different from possession of the document evidencing the credit.
An agreement by virtue of which the owner of a credit (known as the assignor), by a legal causesuch as sale, dation in payment or exchange or donation, and without need of the debtor’s consent, transfers that credit and its accessory rights to another (known as the assignee), who acquires the power to enforce it, to the same extent as the assignor could have enforced it against the debtor.
Example: If A obtains possession of a promissory note payable to C and, without negotiation or assignment, the former obtains payment from the maker, such payment is not valid because A is merely a possessor of the document of the credit himself.
Note: The duty to pay does not depend on the consent of the debtor. Otherwise, all creditors would be prevented from assigning their credits because of the possibility of the debtor’s refusal to give consent. (Rabuya, Obligations and Contracts, 2019 ed., p. 254).
b. The possessor of the credit referred to in Article 1242 must be a wrong person who is not entitled to the payment but since the debtor acted in good faith, he is already released from the obligation.
Recipient of payment must be capacitated
Examples:
Exceptions:
i. If the promissory note is payable to bearer, the possessor thereof is a possessor of the credit itself and if the same is presented to the debtor for payment and the latter pays in good faith, the debtor is already released from the obligation even if the possessor is not actually entitled to the payment because the instrument was never assigned nor negotiated to him.
(1) If such incapacitated person has kept the thing delivered; or (2) insofar as the payment has been beneficial to the incapacitated person (Art. 1241 [1], NCC).
2. If made in good faith to a possessor of the credit (Art. 1242, NCC);
ii. But if the instrument was negotiated or assigned in favor of the possessor, the payment is valid not pursuant to Article 1242 but pursuant to the GR in Article 1240. In this case, the possessor is a proper party because he is a successor – in-interest of the original creditor. 3. If the debtor pays the creditor prior to acquiring knowledge of the latter’s assignment of his credit (Payment in Good Faith to Assignor of Credit) (Art. 1626, NCC).
General Rule: Payment made to a person who is incapacitated to administer his property is invalid and does not extinguish the obligation.
Payment after judicial order of retention Rule: If the debtor pays the creditor after he has been judicially ordered to retain the debt, it shall not be a valid payment (Art. 1243, NCC). “After the latter has been judicially ordered” refers to the date of receipt of the notice of such judicial order and not on the date of issuance. Thus, the payment made by the debtor to his creditor after the issuance of the judicial order but prior to notice of its issuance is valid because the debtor, at the time of payment, is not yet bound by the order issued by the court (Rabuya, Obligations and Contracts, 2019 ed., p. 255).
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Identity of Prestation What should payment consist of: 1. In specific or determinate obligations, what should be delivered is the thing due. (Art. 1244 [1], NCC); 2. In generic or determinate obligations,
the thing to be delivered must be in accordance with the quality and circ*mstances stated in the agreement. If the quality and circ*mstances have not been stated, the creditor cannot demand a thing of superior quality and neither may the debtor deliver a thing of inferior quality (Art. 1246, NCC);
Tender of payment in checks: Checks are not legal tender (PAL vs. CA, G.R. No. L-49188, January 30, 1990). Hence, the creditor may not be compelled to accept payment in the form of a check. This dictum does not, however, prevent a creditor from accepting a check as payment. In other words, the creditor has the option and discretion of refusing or accepting it (FEBTC vs. Diaz Realty, Inc., G.R. No. 138588, August 23, 2001). Payment Using Check General rule: A negotiable instrument or document is not a legal tender; however, it may constitute as a valid payment if: Exceptions:
3. In obligations to do or not to do, there shall be no substitution of another act or forbearance against the will of the creditor (Art. 1244 [2], NCC);
1. It had been encashed in case of checks; or 2. In case of a document, when it had been impaired through the fault of the creditor (Art. 1249, NCC).
4. In obligations to pay debts in money,
Sufficiency of tender of checks: The tender of check may be considered sufficient depending on the purpose, as follows:
the payment shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is the legal tender in the Philippines (Art. 1249 [1], NCC). Rules in Payment in Sum of Money: 1. The payment shall be made in the currently stipulated The parties may agree that the obligation or transaction shall be settled in a currency other than Philippine currency at the time of payment (R.A. No. 8183, expressly repealing Sec. 2, RA 529). Note: If it is not possible to deliver the currency stipulated or in the absence of such stipulation, the payment must be in the currency which is legal tender in the Philippines. Concept of Legal Tender: Such kind of currency which in a given jurisdiction can be used for the payment of debts, whether public or private, and which cannot be refused by the creditor.
1.
If what is involved is the payment of an obligation, the Civil Code provisions on payment of obligations, particularly Article 1249 thereof, are applicable (Philippine Airlines, Inc. vs. CA, G.R. No. L-49188, January 30, 1990);
However, when the case does not involve the payment of an obligation but the exercise of a right, i.e., the right of redemption, the Civil Code provisions on payment of obligations do not apply. What applies is the settled rule that a mere tender of a check is sufficient to compel redemption (Biana vs. Gimenez, G.R. No. 132768, September 9, 2005). A check may be used for the exercise of the right of redemption, the same being a right and not an obligation (Fortunado vs. CA, G.R. No. 78556, April 25, 1991). Effect of Extraordinary Inflation or Deflation: In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time
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of the establishment of the obligation (and not the value at the time of payment) shall be the basis of payment, unless there is an agreement to the contrary (Art. 1250, NCC).
2. In case of determinate obligations, the place of payment is wherever the thing might be at the moment the obligation was constituted (Art. 1251[2], NCC).
Extraordinary Inflation
1. Dacion en Pago or Dation in payment (Art. 1245)
Exists when there is a decrease or increase in the purchasing power of the Philippine currency which is unusual or beyond the common fluctuation in the value of said currency, and such increase or decrease could not have been reasonably foreseen or was manifestly beyond the contemplation of the parties at the time of the establishment of the obligation (Citibank, N.A. vs. Sabeniano, G.R. No. 156132, February 6, 2007). Requisites of Extraordinary Inflation: 1. That there was an official declaration of extraordinary inflation or deflation from the Bangko Sentral ng Pilipinas (BSP); 2. That the obligation was contractual in nature; 3. That the parties expressly agreed to consider the effects of the extraordinary inflation or deflation (Rabuya, Pre-bar Reviewer in Civil Law, 2021 Ed., p. 375). Note: Absent an official pronouncement or declaration by competent authorities of the existence of extraordinary inflation during a given period, the effects of extraordinary inflation are not to be applied (Telengtan Brothers & Sons, Inc. vs. United States Lines, Inc. G.R. No. 132284, February 25, 2006). Proper Place of Payment: General rule: Payment shall be made at the domicile of the debtor (Art. 1251 [3]. NCC). This rule applies even if the debtor changes his domicile in bad faith, except that the additional expenses shall be borne by the debtor (Art. 1251 [3], NCC). Exceptions: The foregoing rule does not apply— 1. If there is another place of payment designated in the obligation (Art. 1251[1], NCC); or
Concept: It is the alienation of property to the creditor in satisfaction of a debt in money (Fort Bonifacio Development Corp. vs. Yllas Lending Corp., G.R. No. 158997, October 6, 2008). ● It requires delivery and transmission of ownership of a thing owned by the debtor to the creditor as an accepted equivalent of the performance of the obligation. There is no dation in payment when there is no transfer of ownership in the creditor’s favor, as when the possession of the thing is merely given to the creditor by way of security (Ibid). In a true dacion en pago, the assignment of the property extinguished the monetary debt. Where the alienation of the properties was by way of security, and not by way of satisfying the debt, there is no dacion en pago (Ong vs. Roban Lending Corp., G.R. No. 172592, July 9, 2008). Dation in payment, a form of Novation Although in the modern concept what actually takes place in dacion en pago is an objective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale while the debt is considered as the purchase price (Filinvest Credit Corp. vs. Phil. Acetylene Co., Inc., G. R. No. L-50449, Jan. 30, 1982), the Civil Code classifies dacion en pago as a special form of payment. Hence, in dacion en pago, the obligation is extinguished by way of payment and not by novation. But what is considered as dacion en pago under the Code is the alienation of a property in favor of the creditor in satisfaction of a debt in money. Hence, if what is offered as payment in lieu of money is not a property but service, for example, it is not dacion en pago but a case of objective novation.
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Requisites of Dacion En Pago 1. There must be the performance of the prestation in lieu of payment (animus solvendi) which may consist in the delivery of a corporeal thing or a real right or a credit against the third person; 2. There must be some difference between the prestation due and that which is given in substitution (aliud pro alio); and 3. There must be an agreement between the creditor and debtor that the obligation is immediately extinguished by reason of the performance of a prestation different from that due (Lo v. KJS Eco-Formwork System Phil., Inc., G. R. No. 149420, Oct. 8, 2003). Governed by law on sales: Dacion en pago is governed by the law on sales (Art. 1245, NCC). The undertaking really partakes in one sense of the nature of sale, that is, the creditor is really buying the thing or property of the debtor, payment for which is to be charged against the debtor’s debt. As such, the essential elements of a contract of sale, namely, consent, object certain, and cause or consideration must be present (Filinvest Credit Corp. vs. Phil. Acetylene Co., Inc., supra; Lo vs. KJS Eco-Formwork System Phil., Inc., supra.). Effect of Dacion En Pago: The dation in payment extinguishes the obligation to the extent of the value of the thing delivered, either as agreed upon by the parties or as may be proved, unless the parties by agreement, express or implied, or by their silence, consider the thing as equivalent to the obligation, in which case the obligation is totally extinguished (Lopez vs. CA, G.R. No. L-26549, July 31, 1970). In other words, a dation in payment does not necessarily mean total extinguishment of the obligation. The obligation is totally extinguished only when the parties, by agreement, express or implied, or by their silence, consider the thing as equivalent to the obligation (Caltex Phils., Inc. vs. IAC, G. R. No. 72703, Nov. 13, 1992). As Distinguished from Cession
but he is under a state of insolvency, or that the debtor is generally unable to pay his liabilities as they fall due in the ordinary course of business or has liabilities that are greater than his assets. In cession, the debtor abandons all his properties or assets to his creditors so that the latter may sell the same and apply the proceeds to the satisfaction of their credits (Rabuya, Obligations and Contracts, 2019 ed., p. 272). b. Payment by Cession vs. Dation in Payment DACION EN PAGO Number of creditors is immaterial. Involves specific property or properties of the debtor.
The debtor is not under a state of financial difficulties because if the debtor is insolvent, he is generally prohibited from resorting to dacion en pago. Involves the delivery and transmission of ownership of a thing as an accepted equivalent of the performance of the obligation.
Extinguishes the obligation to the extent of the value of the thing delivered, either as agreed upon by the parties or as may be proved, unless the parties by agreement, express or implied, or by their silence, consider the thing as equivalent to the obligation, in which case, the obligation is totally extinguished.
PAYMENT BY CESSION Requires plurality of creditors. Involves the universality or the whole of the property of the debtor. Debtor is under a state of insolvency. The creditors do not acquire ownership over the properties of the debtor because the transfer of possession to them is only for the purpose of the sale of properties. Releases the debtor from responsibility only up to the extent of the net proceeds of the sale.
(Rabuya, Obligations and Contracts, 2019 ed., p. 272)
Payment by cession contemplates of a situation where the debtor is indebted to several creditors
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Extrajudicial Expenses, Who Shall Bear: The parties may freely stipulate as to who shall bear said expenses. In the absence of stipulation, said expenses shall be for the account of the debtor (Rabuya, Obligations and Contracts, 2019 ed., p. 274). The latter rule is fair because it is the debtor who has the burden of extinguishing the obligation. Judicial Expenses shall be governed by Rules of Court. Proper Place of Payment 1.
If the place of payment is designated in the obligation, the payment shall be made in said place (Art. 1251, NCC);
2. In the absence of stipulation and the obligation is to deliver a determinate thing, the payment shall be made in the place where the thing might be at the time of the constitution of the obligation (Ibid). 3. In any other case (or in the absence of stipulation and the obligation is other than the delivery of a determinate thing), the place of payment shall be the DOMICILE OF THE DEBTOR (Ibid). 2. Application of payment (Art. 1252-1254, NCC): Concept: It is the designation of the debt which is being paid by a debtor who has several obligations of the same kind in favor of the creditor to whom payment is made when the amount is not sufficient to cover all indebtedness. Requisites of application of payment: 1. There should be one debtor and one creditor; 2. There should be several debts between them of the same kind; 3. The payment is not sufficient to cover all indebtedness; and 4. The debts are all due, except when (a) the parties so stipulate or (b) the application is
made by the party with the benefit of the term (Art. 1252, NCC). Who has right to apply: General rule: Initially, it is the debtor who has the right to choose the debt to which his payment is to be applied. Such right must be exercised at the time of payment and not afterwards. Should the debtor fail to exercise such right at the time of payment, the same is extinguished. Thereafter, the creditor acquires the right to propose an application of payment which proposal does not bind the debtor unless he accepts the same (Art. 1252 [1], NCC). Exceptions: 1. If the debtor accepts from the creditor a receipt in which an application of the payment is made, the former cannot complain of the same, unless there is a cause for invalidating the contract (Art. 1252 [2], NCC; Art. 1330, NCC.); 2. If both the debtor and the creditor did not choose the debt to which the payment is to be applied first, the debt which is most onerous to the debtor, among those due (Art. 1254 [1] NCC). If the debts due are of the same nature and burden, the payment shall be applied to all of them proportionately (Art. 1254 [2] NCC). Application of payment to interest first: But if the debt produces interest, the debtor cannot apply his payment to the capital first prior to paying the interest because the law requires its application to interest first (Art. 1253, NCC). General rule: Payment shall first be applied to the interest and not to the principal shall govern if two facts exist: 1. The debt produces interest (e.g. the payment of interest is expressly stipulated). 2. The principal remains unpaid. Exception: When the creditor waives payment of the interest despite the presence of (1) and (2).
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Legal application of payment Debts which are not of same burden
5.
The creditors must accept the abandonment in their favor (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010, p. 275).
When debts due are not of the same burden, the rule is that the debt which is most onerous to the debtor shall be deemed to have been satisfied (Art. 1254, NCC).
c. Tender of Payment Consignation (Art. 1256-1257)
Preference of Credits
Effect of Non-Acceptance of Payment
TYPES OF DEBTS Principal v. Surety Interest Bearing v. Non-interest bearing Secured v. Non– secured
MORE ONEROUS Debt covering that of the principal Interest bearing debts A secured debt is more onerous than another which has no security
(Traders Insurance vs. Dy Eng Giok G.R. No. L09073, November 17, 1958) One in default while the others are not All other things being the same Liquidated v. Non liquidated
Debt in default Older obligation Liquidated
Debts are of the same burden: If the debts due are of the same nature and burden, the payment shall be applied to all of them proportionately (Art. 1254 [2], NCC). 3. Payment by Cession (Art. 1255) Concept: Cession or assignment consists in the abandonment of the totality of the property of the debtor in favor of the creditors in order that the same may be applied for the satisfaction of their credits (8 Manresa 321). Requisites: 1. There must be two or more debts; 2. There must be two or more creditors; 3. There must be one debtor who is insolvent; 4. The debtor must abandon his properties in favor of the creditors; and
and
The creditor’s unjust refusal to accept payment does not produce the effect of payment that will extinguish the debtor’s obligation. To have the effect of payment and the consequent extinguishment of the obligation to pay, the law requires the companion acts of tender of payment and consignation. Tender of payment must be followed by a valid consignation in order to produce the effect of payment and extinguish an obligation. Hence, where the creditor unjustly refuses to accept the payment, the debtor must comply with (2) conditions: (a) tender of payment; and (b) consignation of the sum due (Rabuya, Obligations and Contracts, 2019 ed., p. 286). Tender of Payment, Not Sufficient: Tender of payment even if valid, does not by itself produce legal payment, unless it is completed by consignation. The effect of a valid tender of payment is merely to exempt the debtor from payment of interest and/or damages. (PNB vs. Relativo, G. R. No. L-5298, Oct. 29, 1952). Well settled is the rule that tender of payment must be accompanied by consignation in order that the effects of payment may be produced (State Investment House, Inc. vs. Court of Appeals, G. R. No. 90676, June 19, 1991; Pasricha vs. Don Luis Dison Realty, Inc., G. R. No. 136409, March 14, 2008). Concept of “Tender of Payment” Tender of payment is the definitive act of offering the creditor what is due him or her, together with the demand that the creditor accept the same (Cinco v. CA, G. R. No. 151903, Oct. 9, 2009).
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Tender of payment presupposes not only that the obligor is able, ready, and willing, but more so, in the act of performing his obligation (Roman Catholic Bishop of Malolos, Inc. v. IAC, G.R. No. 72110, Novemver 16, 1990). In obligations to pay in money, tender of payment involves a positive act and unconditional act by the obligor of offering legal tender currency as payment to the obligee for the former’s obligation and demanding that the latter accept the same (Cebu International Finance Corp. vs. CA, G.R. No. 123031, October 12, 1999). Consignation Consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment, and it generally requires a prior tender of payment. Is the remedy for an unjust refusal to accept payment (Rabuya, Obligations and Contracts, 2019 ed., p. 292). The rationale for consignation is to avoid the performance of an obligation becoming more onerous to the debtor by reason of causes not imputable to him. If the debtor fails to consign the amounts due, his obligation necessarily becomes more onerous as he becomes liable for interest on the amounts he failed to pay (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010, p. 277). Consignation v. Tender of Payment: CONSIGNATION Deposit of the object of the obligation in a competent court in accordance with the rules prescribed by law, after refusal or inability of the creditor to accept the tender of payment. Judicial in character Principal act
TENDER OF PAYMENT Manifestation of the debtor to the creditor of his decision to comply immediately with his obligation.
Extra-judicial in character Preparatory act
(Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010, p. 277-278)
Requisites of Effectivity of Consignation: In order that consignation may be effective, the debtor must show that: 1. There was a debt due; 2. The consignation of the obligation had been made because the creditor to whom tender of payment was made refused to accept it, or because she was absent or incapacitated, or because several persons claimed to be entitled to receive the amount due or because the title to the obligation had been lost (Art. 1258, NCC); When Consignation Alone is Sufficient: Consignation generally requires a prior tender of payment. But in the following instances, consignation alone shall produce the effect of payment: a. When creditor is ABSENT; b. When creditor is UKNOWN; c. When creditor DOES NOT APPEAR at place of payment; d. When creditor is INCAPACITATED TO RECEIVE payment at the time it is due; e. When without just cause, creditor REFUSES TO GIVE RECEIPT; f. When TWO OR MORE PERSONS claim the same right to collect, and g. When TITLE OF THE OBLIGATION has been LOST (Art. 1256, NCC). Notice Requirement Previous notice of the consignation had been given to the person interested in the performance of the obligation (prior to consignation). The purpose of the notice is in order to give the creditor an opportunity to reconsider his unjustified refusal and to accept payment thereby avoiding consignation and the subsequent litigation. This previous notice is essential to the validity of the consignation and its lack invalidates the same. Sending to the creditor a tender of payment and notice of consignation may be done in the same act (Soco vs. Hon. Militante, G.R. L58961, June 28, 1983).
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When Notice Should Be Made 1. The amount due was placed at the disposal of the court; and 2. After the consignation had been made, the person interested was notified of the action. (after consignation). The reason for the notification to the persons interested in the fulfillment of the obligation after consignation had been made, which is separate and distinct from the notification which is made prior to the consignation is to enable the creditor to withdraw the goods or money deposited (B. E. San Diego, Inc. vs. Alzul, G. R. No. 169501, June 8, 2007; Banco Filipino Savings and Mortgage Bank vs. Diaz, G. R. No. 153134, June 27, 2006; Pabugais vs. Sahijwani, G.R. No. 156846, February 23, 2004). Note: The notices mentioned above are required to be given not only to the creditor but to ALL persons interested in the obligation (mandatory). Failure to prove any of these requirements is enough ground to render a consignation ineffective (void) (Allandale Sportsline, Inc., vs. The Good Development Corp., G.R. No. 164521, December 18, 2008; Insular Life Assurance Company, Ltd. vs. Toyota Bel-Air, Inc., G.R. No. 137884, March 28, 2008). Expenses of Consignation - The expenses of consignation, when properly made, shall be charged against the creditor (Art. 1259, NCC). Effects of Consignation Before Acceptance of the Creditor: Before the creditor has accepted the consignation, or before a judicial declaration that the consignation has been properly made, the debtor may withdraw the thing or the sum deposited, allowing the obligation to remain in force (Art. 1260, NCC). After the Acceptance of the Creditor: 1.
Once the consignation has been duly made, the debtor may ask the judge to order the cancellation of the obligation (Art. 1260, NCC);
2. If the creditor accepts the thing or amount deposited without contesting the validity or efficacy of the consignation, obligation is deemed extinguished (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010 ed., p. 287); 3. If the creditor contests the validity or efficacy of the consignation, the result is litigation (Supra). Retroactive Effect of Consignation The consignation has a retroactive effect and the payment is deemed to have been made at the time of the deposit of the thing in court or when it was placed at the disposal of the judicial authority (Rabuya, Obligations and Contracts, 2019 ed., p. 305). Contract of Lease with option to buy Consignation requires the existence of a debt. Hence, it does not apply to a case of a lessee with option to buy since the lessee was not indebted to the lessor for the purchase price. Here, the lessee is merely exercising a right of option and had no obligation to pay said price until execution of the deed of sale (Vda. De Quirino vs. Palarca, G.R. No. L28269, August 15, 1969). Right of Redemption While consignation of the tendered price is not always necessary because legal redemption is not made to discharge a pre-existing debt, a valid tender is indispensable, for the reasons already stated. Of course, consignation of the price would remove all controversy as to the redemptioner's ability to pay at the proper time (Conejero vs. CA, G.R. No. L-21812, April 29, 1966) November 26, 1986). In cases which involve the performance of an obligation and not merely the exercise of a privilege or right, the payment may be effected not by mere tender alone but by both tender and consignation. The rule is different in cases which involve an exercise of a right or privilege, such as an option contract, legal redemption or sale with right to repurchase, wherein tender of payment would be sufficient to preserve the right or
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privilege (Adelfa Properties, Inc. vs. CA, G.R. No. 111238, June 25, 1995). The essential requisites of a valid consignation must be complied with fully and strictly in accordance with the law (Arts 1256-1261, NCC). Substantial compliance is not enough (Soco vs. Militante, G.R. No. L-58961, June 28, 1983). 2. Loss of the Thing Due In Real Obligation A. Concept of Loss It is understood that the thing is lost when: 1. It perishes; 2. It goes out of commerce; or 3. It disappears in such a way that its existence is unknown or it cannot be recovered (Art. 1189, NCC). Not Applicable to Generic Obligation: Only a specific obligation can be extinguished by way of loss of the thing due. In a generic obligation, the loss or destruction of anything of the same kind does not extinguish the obligation (Art. 1263, NCC). This rule is based on the principle that the genus of a thing can never perish. Genus nunquam perit (Gaisano Cagayan, Inc. vs. Insurance Co. of North America, G. R. No. 147839, June 8, 2006). An obligation to pay money is generic; therefore, it is not excused by fortuitous loss of any specific property of the debtor (Gaisano Cagayan, Inc. vs. Insurance Co. of North America, supra). B. Requisites General rule: A determinate obligation is extinguished if the determinate thing is lost without the fault of the debtor and before he has incurred in delay (Art. 1262 [1], NCC). Effect of Loss in Determinate Obligations to Give: Before the loss of the determinate thing may result in the extinguishment of the obligation, it is necessary that the following requisites must concur:
1. The thing loss must be determinate; 2. Thing is loss without the fault of the debtor; 3. Thing is loss before the debtor has already incurred in delay (Art. 1262, NCC). C. Force Majeure General rule: If the determinate thing is loss due to a fortuitous event, the debtor is not liable. Exceptions: 1. When by law, the debtor is liable even for fortuitous event; 2. When by stipulation, the debtor is liable even for fortuitous event, or 3. When the nature of the obligation requires the assumption of risk (Art. 1262[2], NCC). 4. When the loss of the thing is due partly to the fault of the debtor; 5. When the loss of the thing occurs after the debtor has incurred in delay (Art. 1262[1] and Art. 1165[3], NCC); 6. When the debtor promised to deliver the same thing to two or more persons who do not have the same interest (Art. 1165[3], NCC); 7. When the obligation to deliver arises from a criminal offense (Art. 1268, NCC); and 8. When the obligation is generic (Art. 1263, NCC) (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010 ed., p. 289-290). Disputable presumption of fault on the part of debtor: If the thing is lost while in the possession of the debtor, he is presumed to be at fault, unless there is proof to the contrary. This presumption does not apply if the thing is lost on occasions of earthquake, flood, storm or other natural calamity (Art. 1265, NCC). In Positive Personal Obligation Concept of loss in positive personal obligation: An obligation to do is considered lost, therefore extinguished, if: 1. The prestation becomes either legally or physically impossible without the fault of the debtor (Art. 1266, NCC); or
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2. The service has become so difficult as to be manifestly beyond the contemplation of the parties (Art. 1267, NCC). ●
●
The obligation to pay rentals or deliver the thing in a contract of lease falls within the prestation “to give” hence, it is not covered within the scope of Article 1266 (PCC vs. CA, G.R. No. 116896, May 5, 1997). Article 1267, which enunciates the doctrine of unforeseen events, is not an absolute application of the principle of rebus sic stantibus, which would endanger the security of contractual relations. The parties to the contract must be presumed to have assumed the risks of unfavorable developments. It is therefore only in absolutely XPNal changes of circ*mstances that equity demands assistance for the debtor (Ibid.).
5. If the condonation is made expressly, it must comply with the formalities of donation. It is an essential characteristic of remission that it be gratuitous, that there is no equivalent received for the benefit given; once such equivalent exists, the nature of the act changes. It may become dation in payment when the creditor receives a thing different from that stipulated; or novation, when the object or principal conditions of the obligation should be changed; or compromise, when the matter renounced is in litigation or dispute and in exchange of some concession which the creditor receives (Dizon vs. CA. G. R. No. 140944, April 30, 2008; citing IV Tolentino, Civil Code, 1991 ed., p. 353).
If the determinate thing is lost through the fault of a third person, the obligation is extinguished since it was lost without the fault of the debtor (Art. 1262, NCC). The creditor acquires, however, all the rights of action which the debtor may have against third persons by reason of the loss (Art. 1269, NCC).
Formalities of Condonation: Implied condonation has no special form. But if the condonation is done expressly, it must conform with the following formalities, otherwise, the condonation is not valid— 1. If the obligation condoned involves a real property, the condonation and its acceptance must be made in a public instrument (Art. 749, in rel. to Art. 1270, NCC); 2. If the obligation condoned involves a personal property, the condonation and its acceptance must be in writing if the value of the personal property exceeds five thousand pesos (Art. 748, in rel. to Art. 1270, NCC).
3. Condonation
4. Confusion
Concept: It is an act of liberality by which the obligee, who receives no price or equivalent thereof, renounces the enforcement of the obligation, which is extinguished in its entirety or in part or aspect of the same to which the remission refers (8 Manresa 365).
Concept: It exists when the characters of the creditor and debtor are merged in the same person.
Remedy of creditor if thing is lost through fault of third person:
Requisites for Valid Condonation: 1. It must be gratuitous (Art. 1270 [1], NCC); 2. The obligation must be demandable at the time of the condonation; 3. The condonation must be accepted by the debtor (Art. 1270 [1], NCC); 4. It must not amount to an inofficious donation (Art. 1270 [2], NCC); and
Illustration: A executes a promissory note payable to the order of B. B uses it to pay C. Then C uses it to pay A. Requisites of Merger: 1.
It must take place in the person of the principal creditor and principal debtor (Art. 1276, NCC).
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If the merger involves a creditor and a guarantor, the obligation is not extinguished. However, when the merger takes place in the person of the guarantor, the accessory obligation is extinguished by the principal obligation continues (Art. 1276, NCC). 2.
It must be complete and definite, because if not complete, the obligation still subsists (2 Castan, 60.)
Kinds of Confusion or Merger: 1. As to cause or constitutions - Inter vivos or mortis causa; (1) Inter vivos is when it is constituted by agreement of the parties; (2) Mortis causa is constituted by succession. 2. As to extent or effect - Total or partial; (1) Total - If it results to the extinguishment of the entire obligation; (2) Partial - if it results in the extinguishment of only a part of the obligation (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010). Effects of Merger in Joint and Solidary Obligations:
Kinds of Compensation: 1. Legal – It takes place ipso jure when all the requisites of law are present (Mavest [USA], Inc. vs. Sampaguita Garment Corp., G. R. No. 127454, Sep. 21, 2005); 2. Conventional or Voluntary – It occurs when the parties agree to the mutual extinguishment of their credits or to compensate their mutual obligations even in the absence of some of the legal requisites (Mavest [USA], Inc. vs. Sampaguita Garment Corp., G. R. No. 127454, Sep. 21, 2005); Parties may agree upon the Compensation of Debts NOT Due Under Art. 1282, conventional or voluntary compensation is not limited to obligations which are not yet due. The parties may compensate by agreement any obligations, in which the objective requisites provided for legal compensation are not present. It is necessary, however, that the parties should have the capacity to dispose of credits which they compensate, because the extinguishment of the obligations in this case arise from their wills and not from law. 3.
1. Joint Obligation- merger does not extinguish a joint obligation except as regards the share corresponding to the creditor or debtor in whom the two characters concur (Art. 1277, NCC). 2. Solidary Obligation- merger has the effect of extinguishing the obligation (Art. 1215, NCC). 5. Compensation Concept: It is the offsetting of two obligations which are reciprocally extinguished to their concurrent amount between persons who, in their own right, are creditors and debtors of each other (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010, p. 309).
Judicial – It takes place by order of the court or by judicial decree (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010, p. 311.)
Minimum Requirement of Compensation: There must be the confluence of the characters of mutual debtors and creditors. Without this, the contracting parties cannot stipulate (in conventional compensation) to the compensation of their obligations, for the legal tie that binds contracting parties to their obligations would be absent. At least one party would be binding himself under an authority he does not possess (CKH Industrial and Development Corp. vs. CA, G.R. No. 111890, May 7, 1997). But while compensation, be it legal or conventional, requires the confluence in the parties of the characters of mutual debtors and creditors, their rights as such creditors, or their obligations as such debtors, need not spring from one and the same contract
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or transaction (Mavest [USA], Inc. vs. Sampaguita Garment Corp., supra.). A. Requisites - In order that legal compensation may be proper, the following requisites must be present – The parties must be creditors and debtors of each other in their own right (Art. 1278, NCC); They must be bound principally (Art. 1279 [1], NCC);
1. 2.
However, the law permits a guarantor to set up compensation as regards what the creditor may owe his principal debtor (Art. 1280, NCC). Thus, such guarantor may set up credits which personally belong to him and also credits which belong to his principal, the former under the GR. 3. Both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated (Art. 1279[2], NCC); 4. The two debts are due, liquidated and demandable (Art. 1279 [3] and [4], NCC); and 5. Over neither of them there be any retention or controversy, commenced in due time to the debtor (Art. 1279 [5], NCC).
without the consent of them (BPI vs. CA, 255 SCRA 571). Since this compensation takes place ipso jure, its effects arise on the very day on which all its requisites concur. When used as a defense, it retroacts to the date when its requisites are fulfilled (BPI v. CA, supra. Trinidad vs. Acapulco, G. R. No. 147477, June 27, 2006). B. Compensation of Rescissible or Voidable Debts This is an exception to the rule of demandability in order that compensation shall take place. This exception is justified by the fact that rescissible or voidable obligations are considered demandable while the vices with which they are tainted are not yet judicially declared. Consequently, if the action for rescission or annulment is not exercised, or is renounced, or if the debt or debts are ratified the obligation or obligations are susceptible of compensation (8 Manresa, 5th Ed., Bk. 1 p. 725, Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010 Ed, p. 320). C. Non-Compensable Debts - Compensation is prohibited in the following instances:
Article 1279 requires, among others, that in order that legal compensation shall take place, “the two debts be due” and “they be liquidated and demandable.” Compensation is not proper where the claim of the person asserting the set-off against the other is neither clear nor liquidated; compensation cannot extend to unliquidated, disputed claim existing from breach of contract (Silahis Marketing Corp. vs. IAC, G.R. No. L-74027, Dec. 7, 1989).
1. When one of the debts arises from a contract of deposit/depositum or from the obligations of a depositary (Art. 1287, NCC);
Effects of legal compensation: When all the foregoing requisites are present, compensation takes effect by operation of law, and extinguishes both debts to the concurrent amount, even though the creditors and debtors are not aware of the compensation (Art. 1290, NCC).
2. When one of the debts arises from the obligations of a bailee in commodatum (Art. 1287, NCC); 3. Over a claim for support due by gratuitous title (Art. 1287, NCC); 4. If one of the debts consists in civil liability arising from a penal offense (Art. 1288, NCC); 5. Over claims of the Government for taxes.
●
●
Legal compensation operates even against the will of the interested parties and even
● The relationship between a bank and its depositor is that of creditor and debtor. For this reason, a bank has the right to set-off the deposits in its hands for the payment of a depositor’s indebtedness (Equitable PCI Bank vs. Ng Sheung Ngor, G.R. No. 171545, December 19, 2007).
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●
Taxes cannot be subject to compensation for the simple reason that the government and the taxpayer are not the creditors and debtors of each other. There is a material distinction between a tax and debt. Debts are due to the Government in its corporate capacity, while taxes are due to the Government in its sovereign capacity. We find no cogent reason to deviate from the aforementioned distinction (Philex Mining Corp. vs. Commissioner of Internal Revenue, G. R. No. 125704, August 28, 1998; Caltex Philippines, Inc. vs. Commission on Audit, G.R. No. 92585, May 8, 1992).
Effect of assignment compensation:
upon
legal
1. An assignment made after compensation has legally taken place can produce no effect as against the debtor, and the only recourse of the assignee is an action for damages based on fraud or eviction against the creditorassignor (8 Manresa 413-414); Illustration: A is indebted to B for P500 and B is indebted to A for P300. Upon concurrence of all requisites, both debts become extinguished up to the concurrent amount of P300, so that A remains liable to B only for the balance of P300. But suppose A assigned his credit of P300 against B in favor of X, after compensation had taken place by operation of law, X would have acquired no credit enforceable against B, because of the extinguishment of said credit by compensation. 2. If the debtor consents to the assignment, he cannot set up against the assignee compensation which would have pertained to him against the creditor-assignor, unless the debtor notifies the assignor that he reserves his right to the compensation (Art. 1285 [1], NCC); Illustration: In the above example, if X consents that B assign the former’s indebtedness to him for P300, A cannot set up any defense of compensation. He has to pay B or his assignee X P500, unless in consenting to said assignment, A expressly reserved his right to the compensation.
3. If the creditor communicated the assignment to the debtor but the debtor did not consent thereto, the debtor may set up the compensation of debts previous to the assignment of the creditor but not of subsequent ones (Art. 1285 [2], NCC); Illustration: In the above example, if B assigns his credit of P500 against A in favor of X, communicating the same to A but without obtaining his consent, A may set up as against X his credit of P300 against B only and if said credit has become due and has given rise to compensation as against B’s credit of P500 before the assignment. 4. If the assignment is made without the knowledge of the debtor, such debtor may set against the assignee not only the compensation of all credits prior to the assignment, but also of later ones (even after the assignment) until he had knowledge of the assignment (Art. 1285 [3], NCC). Illustration: Suppose B’s credit against A matures on January 1 while A’s credit against B matures on January 30. A, on January 15, assigned his credit of P300 against B in favor of assignee X, and, B does not know of said assignment until February 1. Although the compensation has taken place 15 days after the assignment, B may still set up against the assignee X compensation which pertains to him against the assignor A in as much as said compensation occurred prior to February 1, when debtor B had knowledge of the assignment. 6. Novation (Arts. 1291-1304, NCC) a. Concept of Novation It is the extinguishment of obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing the object or principal conditions, or by substituting another in place of the debtor, or by subrogating a third person in the rights of the creditor. Unlike other modes of extinction of obligations, it is a juridical act with a dual function, namely, it extinguishes an
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obligation and creates a new one in lieu of the old (Rabuya, Civil Law Reviewer Volume II, 2017 Ed. p. 158-159). Kinds of Novation: 1. As to its effect: Extinctive – An old obligation is terminated by the creation of a new obligation that takes the place of the former (Quinto vs. People, G.R. No. 126712, April 14,1999). For example, if what is changed is any of the principal conditions of the obligation or terms and conditions, which are considered to be the essence of the obligation itself, the novation, is extinctive (Aquinley vs. Tibong, G.R. No. 166704, Dec. 20, 2006; Swagman Hotels and Travel, Inc. vs. CA, G. R. No. 161135, April 8, 2005). It has twin effects: first, it extinguishes the existing obligation and, second, it creates a new one in its stead. Q: The co-owners of a property entered into a Deed of Partial Partition and subsequently entered into a Memorandum of Agreement that they shall share alike and receive equal shares in the proceeds of the sale of the property subject of the partition. They, however, still respected the partition. Was there novation of the Deed of Partition with the execution of the MOA? A: No. There is no novation because there was no inconsistency between the two contracts, as they can stand together. Novation, in order to extinguish an obligation, should have the following requisites: i. There is a previous valid obligation; ii. The parties concerned agree to a new contract; iii. The old contract is extinguished; and iv. There is a new valid contract. In order for there to be implied novation, the old and the new obligations be on every point incompatible with each other (Jurado, Civil Law Reviewer, 2009, p. 797 citing Uraca vs. CA, G.R. No. 115158, September 5, 1997).
Q: Suppose that in a second and a new contract, the debtor acknowledges or ratifies the new contract, is there novation? Reason. A: No. There is no novation. It is clear that the first contract and the second contract can stand together, and consequently, there can be no incompatibility between them (Jurado, Civil Law Reviewer, 2009, p. 797 citing Millar vs. CA G.R. No. L29981, April 30, 1971). Modificatory– The old obligation subsists to the extent it remains compatible with the amendatory agreement (Quinto vs. People, G.R. No. 126712, April 14, 1999). For example, novation is merely modificatory where the change brought about by any subsequent agreement is merely incidental to the main obligation (e.g. a change in interest rates or an extension of time to pay). In this instance, the new agreement will not have the effect of extinguishing the first but will merely supplement it or supplant some but not all of its provisions (Aquintey vs. Tibong, Dec. 2006; Swagman Hotels and Travel, Inc. v. CA, G. R. No. 161135, April 8, 2005). 2. As to its essence: Real or Objective – Novation is effected by changing the object, cause or any of the principal conditions of the obligation (Rio Grande Oli Co. vs. Coleman [CA], 39 O. G 986); Personal or Subjective – Novation is effected by substituting the person of the debtor or by subrogating a third person in the rights of the creditor (Rio Grande Oli Co. vs. Coleman [CA], supra.). May either be expromision or delegacion. b. Expressed and Implied Novation 1. Requisites: 1. Previous valid obligation; The novation is void if the original obligation was void. This rule admits of two Exceptions: (1) when the annulment may be claimed only by the debtor; or (2) when ratification validates acts which are voidable (Art. 1298, NCC).
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2. Agreement of all parties to the new obligation; 3. Extinguishment of old obligation; and 4. Validity of the new obligation (Tiu Siuco vs. Habana, G.R. No. 21106, February 21, 1924). Express – The contracting parties incontrovertibly disclose that their object in executing the new contract is to extinguish the old one (Sueno vs. Land Bank of the Phil, G.R. No. G.R. No. 174711, Sep. 17, 2008); Novation is never presumed, and the animus novandi, whether totally or partially, must appear by express agreement of the parties, or by their acts that are too clear and unmistakable (Sueno vs. Land Bank of the Phil., supra.). In order to extinguish or discharge an obligation by novation the intent of the parties to do so (animus novandi) must be either expressed or else clearly apparent from the incompatibility “on all points” of the old and the new obligations (La Tondena, Inc. v. Alto Surety & Insurance Co., Inc. G.R. No. L10132, July 18, 1957). Implied – There is no express novation but there is irreconcilable incompatibility between the old and the new obligations (Sueno vs. Land Bank of the Phil;, supra.) or that the new obligations is on every point incompatible with the old one (Ajax Marketing & Development Corp. vs. CA, G. R. No. 118585, Sep. 14, 1995). In order that an obligation may be impliedly extinguished by another which substitutes the same, it is imperative that the old and the new obligations must be incompatible with each other (Art. 1292, NCC). Objective Novation – change of the object of the obligation, requisites of valid novation: The novation is void if the original obligation was void. This rule admits of two XPNs: (1) when the annulment may be claimed only by the debtor; or (2) when ratification validates acts which are voidable (Art. 1298, NCC).
If the new obligation is void, the original one shall subsist, unless the parties intended that the former relation should be extinguished in any event (Art. 1297, NCC). Novation of conditional obligation: If the original obligation was subject of a suspensive or resolutory condition, the new obligation shall be under the same condition, unless it is otherwise stipulated (Art. 1299, NCC). c. Expromission Distinguished
and
Delegacion
1. Expromission– substitution of debtors is effected with the consent of the creditor at the instance of the new debtor without the knowledge or against the will of the old debtor; 2. Delegacion – The debtor offers and the creditor accepts a third person who consents to the substitution so that the intervention and the consent of these three persons are necessary and they are respectively known as delegante, delegatario and delegado (Testate Estate of Mota vs. Serra, G.R. No. L-22825, February 14, 1925). Delegacion Distinguished Delegacion
and
Expromission Expromission
Person who Initiated the Substitution Old debtor
Third Person Consent of the Creditor It may be express or implied from his acts but not from his mere acceptance of payment by a third party. Consent of the Old debtor With the consent of the With or without the old debtor (since he knowledge of the debtor initiated the or against the substitution). will of the old debtor. Consent of Third Person Consent is needed but it Consent is needed. need not be given simultaneously Intention of Substitution Released from the obligation with the consent of the creditor.
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Rights of the New debtor With the debtor’s With the debtor’s consent – right of consent – right of reimbursem*nt and reimbursem*nt and subrogation subrogation. Without the consent ofthe old debtor or against his will – right to beneficial reimbursem*nt. Insolvency or Nonfulfillment of the obligation of the New debtor Shall not revive the With the debtor’s action of the latter consent - If the old against the original debtor gave his consent obligor. and the new debtor could not fulfill Original debtor shall be the obligation, the old held liable. debtor should be liable for the payment of his Insolvency of the new original obligation. debtor was already existing and of public Without the consent of knowledge or known to the old debtor or the original debtor at the against his will – the time of the delegation of new debtor’s insolvency the debt to the new or non-fulfillment of the debtor. obligation shall not give rise to any liability on the part of the original debtor.
For Novation by substitution of debtor to exist, the old debtor must be released from the obligation In novation effected by way of substituting the person of the debtor, it is essential that the old debtor be released from the obligation, and the third person or new debtor takes his place in the new relation. If the old debtor is not released, no novation occurs and the third person who has assumed the obligation of the debtor becomes merely a co-debtor or surety or a co-surety (Cochingyan, Jr. vs. R & B Surety and Insurance Co., Inc., G.R. No. L-47369, June 30, 1987, Lopez v. CA, 114 SCRA 67). Thus, the mere circ*mstance of the creditor accepting payments from a third person who acquiesced to assume the obligation of the debtor when there is clearly no agreement to release the
debtor from his responsibility does not constitute novation – at most, it only creates a juridical relation of co-debtorship or suretyship on the part of the third person to the contractual obligation of the debtor, and the creditor can still enforce the obligation against the debtor (Reyes vs. CA, G.R. No. 120817, November 4, 1996; Magdalena Estates, Inc. v. Rodriguez, G. R. No. L-18411, December 17, 1966). 1. Consent Required Whether the substitution is thru expromission or delegacion, the creditor’s consent is always necessary (Garcia vs. Khu Yek Chiong, G.R. No. 45154, March 31, 1938). The reason for the requirement of the creditor’s consent to such substitution is obvious. Substitution of one debtor for another may delay or prevent the fulfillment or performance of the obligation by reason of the temporary inability or insolvency of the new debtor (Rio Grande Oil Co. vs. Coleman, [CA], 39 O.G. 1410); 2. It is not necessary that the creditor should give his consent simultaneously with the execution of the new contract. He may do so afterwards (Testate Estate of Mota vs. Serra, 47 Phil. 464); 3. Creditor’s consent may be implied (Asia Banking Corporation vs. Elser, 54 Phil. 994). It is true that it need not be given simultaneously with those of the debtor and the third party who assumes the debtor’s obligation, nor is it necessary that it be given by the creditor in any particular or specific form, but it must be given by the creditor in one way or another (Rio Grande Oil Co. vs. Coleman, supra); 4. But the creditor’s acceptance of payments by a third party for the benefit of a debtor whose accounts the third party has assumed, without further facts does not constitute a novation (Pacific Commercial Co. vs. Sotto, 34 Phil. 237). 1.
Effect of substitution without the consent of the debtor If the substitution is without the knowledge or against the will of the debtor, the new debtor's insolvency or non-fulfillment of the obligations
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shall not give rise to any liability on the part of the original debtor (Art. 1294, NCC). 2. Effect of Insolvency of New Debtor The insolvency of the new debtor, who has been proposed by the original debtor and accepted by the creditor, shall not revive the action of the latter against the original obligor, except when said insolvency was already existing and of public knowledge, or known to the debtor, when the delegated his debt (Art. 1295, NCC). Effect of Objective Novation and Novation by Substitution of Debtor: 1. Generally, the extinction of the old obligation carries with it the extinction of the accessory obligations which are subordinate to and dependent upon the principal obligation thus extinguished; 2. However, accessory obligations subsist insofar as they may benefit third persons who have not given their consent to the novation (Art. 1296, NCC). Subrogation Concept: It is the transfer of all the rights of the creditor to a third person, who substitutes him in all his rights (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010, p349). d. Legal and Conventional Subrogation 1. Conventional – It takes place by the agreement of and requires the consent of the original parties (the debtor and original creditor) and of the third person (the new creditor) (Art. 1301, NCC); 2. Legal – It takes place by operation of law and is not to be presumed outside of the following cases: a. When a creditor pays another creditor who is preferred, even if the payment is without the debtor’s knowledge; b. When a third person interested in the fulfillment of the obligation pays the obligation, even if such payment is without the knowledge of the debtor
c.
without prejudice to the effects of confusion as to the latter’s share; When a third person, not interested in the obligation, pays the obligation but only if such payment is with the consent of the debtor, whether express or implied (Arts. 1300 and 1302, NCC).
Subrogation v. Assignment SUBROGATION The debtor’s consent is necessary. Extinguishes an obligation and gives rise to a new one. Nullity of an old obligation may be cured by subrogation, such that the new obligation will be perfectly valid (Ledonio vs.
Capitol Development Corp., G.R. No. 149040, July 4, 2007).
ASSIGNMENT Not required Refers to the same right which passes from one person to another. The nullity of an obligation is not remedied by the assignment of the creditor’s right to another.
In an assignment of credit, the consent of the debtor is not necessary in order that the assignment may fully produce the legal effects. What the law requires in an assignment of credit is not the consent of the debtor, but merely notice to him as the assignment takes effect only from the time he has knowledge thereof. A creditor may, therefore, validly assign his credit and its accessories without the debtor’s consent. On the other hand, conventional subrogation requires an agreement among the parties concerned – the original creditor, the debtor, and the new creditor. It is a new contractual relation based on the mutual agreement among all the necessary parties (Ledonio vs. Capitol Development Corp., G.R. No. 149040, July 4, 2007). If the approval of the debtor to the subrogation of a third person in place of the creditor is expressly required, the intention of the parties is that the transaction is one of conventional subrogation and not just an assignment of credit (Licaros vs. Gatmaitan, G.R. No. 142838, August 9, 2001).
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Effect of Subrogation: It transfers the credit, together with the rights annexed thereto (the right to the exercise of other accessory rights, such as the right to the mortgage or pledge), whether those rights be against the debtor or against third persons. (Art. 1303, NCC) This is true for legal subrogation. But in conventional subrogation, the effects thereof may be modified by the express agreement of the parties.
Difference Contract
Reimbursem*nt v. Subrogation: In case of reimbursem*nt, the person paying for another has only a personal action to recover what he has paid without the rights, powers and guaranties attached to the original obligation. In subrogation, the person who pays for another acquires not only the right to be reimbursed for what he has paid but also the other rights attached to the obligation originally contracted by the debtor (Jurado, Obligations and Contracts, 2010 Ed., p. 237).
a. Essential elements without which there can be no contract (3 Castan, 7th Ed., pp. 322-324). 1. Common (communes) those which are present in all contracts, such as consent, object certain and cause. 2. Special (especiales) those which present only in certain contracts, such as delivery in real contracts, or form in solemn ones. 3. Extraordinary(especialissimos) those which are peculiar to a specific contract (i.e., price in sales)
Effect of partial subrogation: In case of partial payment, the creditor, to whom partial payment has been made, may exercise his right for the remainder and he shall be preferred in his place to the person who has been subrogated in virtue of the partial payment of the same credit (Art. 1304, NCC).
b. Natural elements are those derived from the nature of the contract and ordinarily accompany the same. They are presumed by law, although they can be excluded by the contracting parties if they so desire (3 Castan, 7th Ed., p. 324).
B. CONTRACTS (Arts. 1305 to 1422, NCC) A. GENERAL PROVISIONS 1. Definition of a Contract A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service (Art. 1305, NCC). Number of parties to a contract There must be at least two persons or parties, because it is impossible for one to contract with himself. Note: A single person may create a contract by himself where he represents distinct interests subject to specific prohibitions of law against the presence of adverse or conflicting interests.
between
OBLIGATION Juridical necessity May exist without contract
Obligation
and
CONTRACT Source of obligation Cannot exist without obligation
2. Elements of a Contract
(a) Right to resolve (Art. 1191, NCC) (b) Warranties in sales contracts, implied Accidental elements are those which exist only when the parties expressly provide for them for the purpose of limiting or modifying the normal effects of the contract. (i.e., condition, terms or modes) (3 Castan, 7th Ed., p. 324). Stages of a Contract Negotiation- it begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of agreement of the parties; Perfection (or birth) — Here, the parties have at long last came to a definite agreement, the elements of definite subject matter and valid cause have been accepted by mutual consent
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(Paras, Civil Code of the Philippines, Annotated Vol. IV, 2008, p. 540).
Consequences of Perfection a. The parties are bound to the fulfillment of what has been EXPRESSLY STIPULATED (Art. 1315, NCC), and compliance thereof must be in GOOD FAITH (Art. 1159, NCC). b. The parties are ALSO bound to all the CONSEQUENCES which, according to their nature, may be in keeping with GOOD FAITH, USAGE, and LAW.
2. Contracts containing real rights; (Art. 1312, NCC) 3. Contracts entered into to defraud creditors; (Art. 1313, NCC) 4. Contracts which have been violated at the inducement of 3rd persons; (Art. 1314, NCC) 5. Quasi-contract of negotiorum gestio (Art. 2150, NCC). Liability of heirs for the contracted by the decedent
obligation
The heirs are liable for the obligation contracted by the decedent when the rights and obligations arising from the contract are transmissible:
Consummation (or death or termination) — Here the terms of the contract are performed, and the contract may be said to have been fully executed.
1. By their nature; 2. By stipulation; or 3. By provision of law. (Art. 1311, NCC)
B. BASIC PRINCIPLES OF A CONTRACT
2. Freedom to Stipulate (Autonomy of the Will) and its Limitations
1. Obligatory Force of a Contract Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith (Art. 1159, NCC). From the moment the contract is perfected, the parties are bound not only to the fulfilment of what has been expressly stipulated but also to all consequences which, according to their nature, may be in keeping with good faith. Also, the stipulations of the contract being the law between the parties, courts have no alternative but to enforce there as they were agreed upon and written (Pangilinan vs. CA, G.R. No. 83588, September 29, 1997). Persons affected by a Contract General Rule: 1. Parties to the contract; and 2. Their corresponding successors. Exceptions: 1. Contracts containing a stipulation in favor of a third person (pour autrui); (Art. 1311, NCC)
The contracting parties are accorded with liberality and freedom to establish stipulations, clauses, terms and conditions as they may deem appropriate, provided the same are not contrary to law, morals, good customs, public order or public policy (See Art. 1306, NCC). The right to enter into lawful contracts constitutes one of the liberties of the people of the state. If that right be struck down, or arbitrarily interfered with, there is substantial impairment of the liberty of the people under the constitution (Rabuya, Civil Law Reviewer Volume II, 2017 ed, p. 180, citing People vs. Pomar, G.R. No. L-22008, November 3, 1924). 3. Binding Effect of a Contract Contracts must bind the contracting parties, its validity or compliance cannot be left to the will of one of them (see Art. 1308, NCC). However, the performance of a contract can be left to the determination of third persons. The determination of the performance by a third person shall be obligatory upon both contracting parties from the moment it is made known to them (Art. 1310, NCC).
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The binding effect of any agreement between parties to a contract is premised on two settled principles: (1) that any obligation arising from contract has the force of law between the parties; and (2) that there must be mutuality between the parties based on their essential equality. Any contract which appears to be heavily weighed in favor of one of the parties so as to lead to an unconscionable result is void. Any stipulation regarding the validity or compliance of the contract which is left solely to the will of one of the parties, is likewise, invalid (Sps. Limso v. PNB, G.R. No. 158622, 27 Jan. 2016). 4. Privity of Contract Contracts can only bind the parties who entered into it, including their heirs and assigns, and it cannot prejudice a third person, even if he is aware of such contract and has acted with the knowledge thereof (See Art. 1311, NCC).
6. Neither of the contracting parties bears the
legal representation of the third person (Young vs. Court of Appeals, G.R. No. 79518, January 13, 1989).
Tort Interference - When a third person
induces a party to violate the contract (Art. 1314, NCC). Requisites to hold a third person not party to a contract liable: a. Existence of a valid contract b. Third person has knowledge of such contract c. Third person interferes without justification Third persons coming into possession of the object of the contract creating real rights (Art. 1312, NCC). Contracts entered into fraud of creditors (Art. 1313, NCC).
a. Concept
5. Consensuality of Contracts
General Rule: A contract is binding not only between parties but extends to the heirs, successors in interest, and assignees of the parties, provided that the contract involves transmissible rights by their nature, or by stipulation or by provision of law (Ibid).
a. Concept and Coverage Definition – Consensual contracts are those which are perfected by the mere agreements of the parties.
b. Exceptions to the Rule on Privity of Contracts:
General Rule: No particular form is required in order to make the contract binding and effective between the parties thereto.
Stipulation pour autrui (stipulation in favor of
a third person) – benefits deliberately conferred by parties to a contract upon third persons (Ibid). Requisites of Stipulation pour autrui: 1. Stipulation in favor of a third person. 2. The stipulation must be part, not whole of the contract; 3. Contracting parties must have clearly and deliberately conferred a favor upon third person; 4. Favor or benefit is not just an incidental benefit or interest. 5. Third person must have communicated his acceptance; and
b. Exceptions: a. When the law requires a contract to be in some form in order that it may be valid; or b. When the law requires a contract to be in some form in order that it may be enforceable, or that a contract be proved in a certain way (Art. 1356, NCC). c. Reformation of Instruments Definition – It is a remedy to conform to the real intention of the parties due to mistake, fraud, inequitable conduct, accident (Art. 1359, NCC).
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It is remedy in equity, whereby a written instrument is made or construed so as to express or conform to the real intention of the parties, where some error or mistake has been committed (Rabuya, Pre-Bar Reviewer in Civil Law, 2021 ed., p.417, citing Huibonhoa vs. CA, G.R. No. 95897, December 14, 1999). Requisites in Reformation of Instruments (B.F. Corporation vs. Form-Eze Systems, Inc., G.R. No. 192948, December 7, 2016) 1. Meeting of the minds to the contract 2. The true intention is not expressed in the instrument 3. It was not expressed by reason of (MAFI) 1. Mistake 2. Accident 3. Fraud 4. Inequitable conduct NOTE: If the mistake is mutual, in order for the instrument be reformed, the following requisites must be present: (FC³) 1. Mistake should be a fact; 2. Such mistake must be proved by clear and convincing evidence; and 3. The mistake should be common to both parties to the instrument (Rabuya, Pre-Bar Reviewer in Civil Law, 2021 ed., p.417). The facts upon which relief by way of reformation of the instrument is sought are put in issue by the pleadings. There must be a clear and convincing proof of the mistake, accident, fraud, or inequitable conduct (MAFI) Cases where Reformation is Allowed: When a mutual mistake of the parties causes the failure of the instrument to disclose the agreement (Art. 1361, NCC). 2. When one party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does not show their true intention, the former may 1.
ask for the reformation of the instrument (Art. 1362, NCC). 3. When one party was mistaken and the other knew or believed that the instrument did not state their real agreement, but concealed that fact from the former (Art. 1363, NCC). 4. When through ignorance, lack of skill, negligence, or bad faith on the part of the person drafting the instrument, does not express the true intention of the parties (Art. 1364, NCC). 5. If the parties agree upon the mortgage or pledge of real or personal property, but the instrument states that the property is sold absolutely or with right of purchase (Art. 1365, NCC). Reformation and Annulment of Contracts
Reformation of Instrument
Annulment of Contract
There is a Perfectly valid contract.
There is a defective contract by reason of mistake, fraud, inequitable conduct, or accident.
(Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010 ed., p. 488)
Cases where reformation IS NOT allowed 1. Simple, unconditional donations inter vivos; 2. Wills; 3. When the agreement is void; 4. When an action to enforce the instrument is filed (estoppel). 5. If by mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds of the parties— instead, the remedy is annulment of the contract and not reformation; (Article 1359b) 6. When the contract is unenforceable due to failure to comply with the Statute of Frauds (Rabuya, Obligations and Contracts, 2019 ed., p.547).
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Prescriptive Period for Reformation of Instruments
whose purpose can be fulfilled by themselves.
1. 10 years from the date of execution of the instrument (Pineda, Obligations and Contracts, 2000 ed., p. 483). 2. It may be ordered at the instance of:
iii) Accessory – those which can exist only as a consequence of, or in relation with, another prior contract.
a. If the mistake is mutual – either party or his successors in interest; otherwise; b. Upon petition of the injured party; or c. His heirs or assigns (Art. 1368, NCC). 3. In reformation of contracts, what is reformed is not the contract itself, but the instrument embodying the contract. 4. It follows that whether the contract is disadvantageous or not is irrelevant to reformation and therefore, cannot be an element in the determination of the period for prescription of the action to reform (Pineda, Obligations and Contracts, 2000 ed., p. 469). Who may Demand Reformation (Article 1367, 1368, and 1369) 1. If mistake is mutual-either party; 2. If mistake is not mutual-injured party, his heirs and assigns; 3. If mistake is not mutual-injured party, his heirs and assigns.
b) According to perfection i)
General rule: No particular form is required in order to make the contract binding and effective between the parties thereto. Exceptions: a. When the law requires a contract to be in some form in order that it may be valid; or b. When the law requires a contract to be in some form in order that it may be enforceable, or that a contract be proved in a certain way (Art. 1356, NCC). ii) Real – those which require not only the consent of the parties for their perfection, but also the delivery of the object by one party to the other. The real contracts referred to in Art 1316 are: (1) Deposit (2) Pledge (3) Commodatum, a loan where the identical object must be returned.
Classification of Contracts (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010 ed., p. 359-361) a) According to their relation to other contracts i)
Preparatory – those which have for their object the establishment of a condition in law which is necessary as a preliminary step towards the celebration of another subsequent contract.
ii) Principal – those which can subsist independently from other contracts and
Consensual – those which are perfected by the mere agreement of the parties.
c) According to Form i)
Common or Informal – those which require no particular form.
ii) Special or Formal – those which require some particular form. d) According to their purpose i)
Transfer of ownership – e.g., sale
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ii) Conveyance of use – e.g., commodatum iii) Rendition of service – e.g., agency
moment of the celebration of the contract, since it depends upon the happening of an uncertain event, thus charging the parties with the risk of loss or gain.
e) According to their subject matter i) Things – e.g., sale, deposit, pledge ii) Services – e.g., agency, lease of services f) According to the nature of the vinculum which they produce i)
Unilateral – those which give rise to an obligation for only one of the parties.
ii) Bilateral – those which give rise to reciprocal obligations for both parties. g) According to their cause i)
Onerous – those in which each of the parties aspire to procure for himself a benefit through the giving of an equivalent or compensation.
ii) Gratuitous – those in which one of the parties proposes to give to the other a benefit without any equivalent or compensation. iii) Remuneratory - one where a party gives something to another because of some service or benefit given or rendered by the latter to the former, where such service or benefit was not due as a legal obligation. The consideration of one is greater than the other’s. h) According to the risks involved i)
Commutative – those where each of the parties acquire an equivalent of his prestation and such equivalent is pecuniarily appreciable and already determined from the moment of the celebration of the contract. ii) Aleatory – those where each of the parties has to his account the acquisition of an equivalent of his prestation, but such equivalent, although pecuniarily appreciable, is not yet determined at the
i)
According to the names or norms regulating them i)
Nominate – those which have their own individuality and are regulated by special provisions of law.
ii) Innominate – those which lack individuality and are not regulated by special provisions of law. These are governed by the stipulation of the parties, the principles of Obligations of Contracts, Rules governing the most analogous nominate contracts, and the Customs of the place (Art. 1307, NCC). Kinds of innominate contracts: 1. 2. 3. 4.
Do ut des - I give that you give Do ut facias - I give that you do Facio ut des - I do that you give Facio ut facias - I do that you do
C. ESSENTIAL REQUISITES OF A CONTRACT There is no contract unless the following requisites concur: 1. Consent of the contracting parties; 2. Object certain which is the subject matter of the contract; and 3. Cause of the obligation which is established (Art. 1318, NCC) a. Consent (Art. 1319, NCC) It is the meeting of the minds between the parties on the subject matter and the cause of the contract, even if neither one has been delivered. Consent is manifested by the meeting of the offer and acceptance upon the thing and the cause which are to constitute the contract (Art. 1319 [1], NCC). Thus, an offer that is not accepted does not give rise to consent, and the contract does not
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come into existence (Gamboa v. Gonzales, G.R. No. L-5810, November 23, 1910). Definition Consent is the conformity of wills and with respect to contracts, it is the agreement of the will of one contracting party with that of another or others, upon the object and terms of the contract (4 Sanchez Roman 191; 8 Manresa 648 as cited in De Leon, Comments and Cases, 2019). Requisites of Consent: 1. There must be two or more parties. One person may represent two or more parties, unless there are contradictory or prejudicial interests involved (Art. 1490, NCC; Garchitorena vs. Sotelo, G.R. No. L-47868, November 13, 1942). 2. The parties must be capable or capacitated (hence, if one party is insane, the contract is merely voidable). 3. There must be no vitiation of consent. Example: There must be no fraud or intimidation, otherwise the contract is voidable. 4. There must be no conflict between what was expressly declared and what was really intended. Otherwise, the remedy may be reformation, as when the parties really intended to be bound, or else the contract is VOID, as when the contract is fictitious or absolutely simulated. 5. The intent must be declared properly (that is, whatever legal formalities are required must be complied with). Consent may either be expressed or implied (Clarin vs. Rulona, G.R. No. L-30786, February 20, 1984)
Meeting of the Minds 1. An offer that must be CERTAIN; 2. An acceptance that must be UNQUALIFIED and ABSOLUTE (Art. 1319, NCC). If the acceptance is qualified, e.g., by a condition, this merely constitutes a COUNTER-OFFER. Offer An offer is a proposal to enter into a contract. It must be one which is intended of itself to create legal relations on acceptance, and must be capable of creating a definite obligation and not a mere expression of desire or hope. A mere statement of willingness to enter into negotiations or a mere inquiry as to whether a person could make specified articles is not an offer (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010, p. 400). Distinguished from invitations to make an offer: If a proposal is nothing more than an invitation to the person to whom it is made to make an offer to the proposer, it is not such an offer that gives birth to a contract upon acceptance. Thus: 1. Unless it appears otherwise, business advertisem*nts of things for sale are not definite offers, but mere invitations to make an offer (Art. 1325, NCC). 2. Advertisem*nts for bidders are simply invitations to make proposals, and the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears (Art. 1326, NCC). Accordingly, the terms and conditions of the bidding disseminated by the proponent constitute the “advertisem*nt” to bid on the project. The bid proposals or quotations submitted by the prospective suppliers are the offers. And, the reply of the proponent, the acceptance or rejection of the offers (Jardine Davies, Inc. vs. CA, G.R. No. 128066, June 19, 2000).
Note: Acceptance of the offer may either be express or implied. (Art. 1320, NCC)
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Requisites of an effective offer: The terms of the offer must be reasonably certain or definite (Art. 1319, NCC) and there is an offer in the context of Article 1319 of the Civil Code only if the contract can come into existence by the mere acceptance of the offer without any further act on the part of the offeror (Paredes vs. CA, G.R. No. 112115, March 9, 2001);
1.
2. The offeror must have a serious intention to become bound by his offer; and 3. The offer must be communicated by the offeror to the offeree, resulting in the offeree’s knowledge of the offer. Termination of offer: 1. Thru the action of the offeree by rejecting the offer; or 2. Thru the action of the offeror by rejecting the offer; or 3. Thru operation of law by supervening illegality of the proposed contract, by lapse of time, by destruction of the subject matter of the offer, or by death, civil interdiction, insanity or insolvency of the offeror or offeree (Paras, Civil Code of the Philippines, Annotated Vol. IV, 2008, p. 613-614). 🕮
🕮
An offer, the acceptance of an offer and such other elements required under existing laws for the formation of contracts may be expressed in, demonstrated and proved by means of electronic data messages or electronic documents. No contract shall be denied validity or enforceability on the sole ground that it is in the form of an electronic data message or electronic document, or that any or all of the elements required under existing laws for the formation of contracts is expressed, demonstrated and proved by means of electronic data messages or electronic documents (Sec. 16[1], Electronic Commerce Act).
Revocation of offer: The offer may be revoked at any time prior to the perfection of the contract (Laudico vs. Arias, G.R. No. 16530, March 31, 1922). However, if the offer is encapsulated in an option contract (as when the option is supported by a consideration distinct from the price), the offer may not be withdrawn by the offeror within the period agreed upon without incurring liability for damages. Grounds rendering the Offer Ineffective 1. Death, civil interdiction, insanity or insolvency of either party before acceptance is conveyed; (Art. 1323, NCC) 2. Express or implied revocation ofthe offer by the offeree; 3. Qualified or conditional acceptance of the offer, which becomes counter-offer; 4. Subject matter becomes illegal or impossible before acceptance is communicated; and 5. Period given to the offeree to signify his acceptance has already lapsed. Definition of option contract: It is a preparatory contract in which one party grants to the other, for a fixed period and under specified conditions, the power to decide, whether or not to enter into a principal contract. It binds the party who has given the option, not to enter into the principal contract with any other person during the period designated, and, within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide to use the option (Carceller vs. Arias, G.R. No. 124791, February 10, 1999). Effects of Option Contract: 1.
2.
If supported by a consideration distinct and separate from the price, in which case, there is a perfected contract of option, and it would be a breach of that contract to withdraw the offer during the agreed period (Arts. 1324 and 1479, NCC). If the period is not itself founded upon or supported by a consideration, the offeror is still free and has the right to withdraw the offer before its acceptance, or, if an acceptance has been made, before the
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offeror’s coming to know of such fact, by communicating that withdrawal to the offeree (Art. 1324, NCC; Atkins, Kroll & Co. vs. Chua, G.R. No. L-9871, January 31, 1958, Rural Bank of Parañaque, Inc. vs. Remolado, G.R. No. 62051, March 18, 1985; Sanchez vs. Rigos, G.R. No. L-25494, June 14, 1972). Nonetheless, pending notice of its withdrawal, the accepted promise partakes of the nature of an offer which, if accepted, results in a perfected contract (Sanchez vs. Rigos, supra). Consideration in option contracts: ●
The consideration need not be monetary but could consist of other things or undertakings. However, if the consideration is not monetary, these must be things or undertakings of value, in view of the onerous nature of the option contract. Furthermore, when a consideration for an option contract is not monetary, said consideration must be clearly specified as such in the option contract or clause (Bible Baptist Church vs. CA, G.R. No. 126454, November 26, 2004; Eulogio v. Apes, G.R. No. 113638, April 15, 2005).
Earnest Money It is the payment made to a seller by the buyer to show his good faith. It will constitute as part of the purchase price, if the sale is finally consummated. If the sale is not concluded, the earnest money shall be returned to the would-bebuyer unless there is a contrary stipulation. OPTION MONEY Money given as a distinct consideration in an option contract Applies to a sale not yet perfected The would-be buyer gives the option money, he is not required to buy
EARNEST MONEY Part of the purchase price Given only where there is already a sale When earnest money is given, the buyer is bound to pay the balance
(Adelfa Properties, Inc. vs. CA, G.R. No. 111238, January 25, 1995)
Rejection and counter-offer: By rejecting the offer, the offeree thereby terminates the offer and his subsequent attempt to accept the previous offer will not result in its reinstatement. A “counter –offer” is the rejection of the original offer and the simultaneous making of a new offer (ABS-CBN Broadcasting Corp vs. Court of Appeals, G.R. No. 128690, January 21, 1999). Lapse of time: The offeror may fix the time of acceptance which must be complied with (Art. 1321, NCC). Thus, an offer terminates automatically when the period of time specified in the offer has lapsed. Death, insanity, civil interdiction or insolvency: The offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either the offeror or the offeree before acceptance is conveyed (Art. 1323, NCC). The contract is not yet perfected at any time before acceptance is conveyed; hence, the disappearance of either party or his loss of capacity, before perfection prevents the contractual tie from being formed (Villanueva vs. CA, G.R. No. 99357, January 27, 1992). Contract of Adhesion - one party has already a prepared form of a contract, containing the stipulations he desires, and he simply asks the other party to agree to them if he wants to enter into the contract (Paras, Civil Code of the Philippines, Annotated Vol. IV, 2008, p. 641). Acceptance Acceptance must be absolute: To be effective an acceptance must be absolute (Art. 1319 [1], NCC). Only an absolute or unqualified acceptance of a definite offer manifests the consent necessary to perfect a contract. (Weldon Construction Corp. vs. CA, G.R. No. L-35721, October 12, 1987). Effect of qualified acceptance: A qualified acceptance, or one that involves a new proposal, constitutes a counter-offer (Art. 1319 [1], NCC) and is a rejection of the original offer.
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NOTE: Offer or acceptance, or both, expressed in electronic form, is valid, unless otherwise agreed by the parties (electronic contracts). Acceptance not made in a manner as directed by the offeror constitutes a counter-proposal which extinguishes the offer and this may not be accepted by the original offeror (Pineda, 2009). A conditional acceptance is a counter-offer which extinguishes the offer. If not accepted by the offeror, there is no contract. An acceptance may be express or implied (Art. 1320, NCC). “Mirror-Image Rule” The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of the minds (Limketkai Sons Milling, Inc. vs. CA, G.R. No. 118509, March 29, 1996; ABS-CBN Broadcasting Corp. vs. CA, G.R. No. 128690, January 21, 1999). Consequently, when something is desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to generate consent because any modification or variation from the terms of the offer annuls the offer (ABS-CBN Broadcasting Corp. vs. CA, supra.). Manner and form of acceptance: 1. The offeror has a right to prescribe in his offer the time, place and manner of acceptance, all of which must be complied with (Art. 1321, NCC). 2. The acceptance may be expressed or implied (Art. 1320, NCC). 3. If an offer is made through an agent, it is deemed accepted from the moment acceptance is communicated to said agent (Art. 1322, NCC). 4. Presumed (by law) as when there is failure to repudiate hereditary rights within the period fixed by law (Art. 1057, NCC); or when there is SILENCE in certain specific cases as would tend to mislead the other party, and thus place the silent person in estoppel (Arts. 1670, 1870, 1871, 1872 and 1873, NCC).
Acceptance thru Letter or Telegram or Expedition Theory: Acceptance made by letter or telegram does not bind the offeror except from the time it came to his knowledge. The contract in such a case is presumed to have been entered into in the place where the offer was made (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010, p. 400). Cognition theory – A contract is perfected only from the time an acceptance of an offer is made known to the offeror. ● The Civil Code adopts the Cognition theory. The second paragraph of Article 1319 of the Civil Code provides that acceptance made by letter or telegram does not bind the offeror except from the time it came to his knowledge. ● As Differentiated to Manifestation Theory in which provides that the Offeree merely manifests his acceptance. Withdrawal of Acceptance: For a contract to arise, the acceptance must be made known to the offeror. Accordingly, the acceptance can be withdrawn or revoked before it is made known to the offeror (Jardine Davies, Inc., vs. CA, G.R. No. 128066, June 19, 2000). Capacity of Contracting Parties Importance of Legal Capacity: There is no effective consent in law without the capacity to give such consent. In other words, legal consent presupposes capacity (Delos Reyes vs. CA, G.R. No. 129103, September 9, 1999). Persons Incapable of Giving Consent: 1. Unemancipated minors. Under the regime of the Family Code, there are no longer unemancipated minors.
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Except: a. Contracts for necessaries (Art. 1489, NCC); b. Contracts by guardians or legal representatives and the court having jurisdiction had approved the same; c. When there is active misrepresentation on the part of the minor (minor is estopped); d. Contracts of deposit with the Postal Savings Bank provided that the minor is over 7 years of age; e. Contract of an insurance for life, health and the accident on the minor’s life; f. Upon reaching age of majority, they ratify the same NOTE: Because the law incapacitates them to give their consent to a contract, the only way by which any one of those enumerated above can enter into a contract is to act through a parent or guardian. If this requirement is not complied with, the result is a defective contract. If only one of the contracting parties is incapacitated to give his consent, the contract is voidable. If both of them are incapacitated to give their consent, the contract is unenforceable. (Art. 1390(1) & 1403(3), NCC). 2. Insane or demented persons; Contracts entered into during a lucid interval are valid. Contracts agreed into in a state of drunkenness or during a hypnotic spell are voidable (Art. 1328, NCC). Only insanity, which prevents a person from knowing the character of the act that he is performing as well as its legal effects, will be a ground for annulment (I Caguioa, 1967 ed., p. 7980). Thus, monomania, which is insanity on a certain point does not necessarily annul a contract except when the contract refers to that point where the person concerned is insane. 3. Deaf-mutes who do not know how to write If they know how to write (and consequently know how to read), it is submitted that the contract is valid, for then they are capable of understanding, and therefore capacitated to give consent.
Persons suffering from civil interdiction (Art. 34, RPC); 5. Incompetents under guardianship (Rule 9297, ROC); and 6. Other persons specially disqualified (Art. 1329, NCC). 4.
Old age or other physical infirmities: A person is not incapacitated to contract merely because of advanced years or by reason of physical infirmities, only when such age or infirmities impair his mental faculties to such extent as to prevent him from properly, intelligently, and fairly protecting his property rights, is he considered incapacitated. (Loyola vs. Court of Appeals, G.R. No. 115734, May 17, 1982) Contracts by Illiterates: Burden of Proof General Rule: Whoever alleges fraud or mistake in any transaction must substantiate his allegation. Exception: Where a party to a contract is illiterate, or cannot read nor understand the language in which the contract is written, the burden is on the party interested in enforcing the contract to prove that the terms thereof were fully explained to the former in a language understood by him (Art. 1332, NCC; Cayabyab vs. IAC, G.R. No. 75120, April 28, 1994). Status of contract where parties are incapacitated: If only one of the contracting parties is incapacitated to give his consent, the contract is voidable (Art. 1390 [1], NCC). If both parties are incapacitated to give their consent, the contract is unenforceable (Art. 1403 [3], NCC). Vitiation of Consent: A contract where consent is procured thru mistake, violence, intimidation, undue influence or fraud is voidable (Art. 1330, NCC).
Mistake and fraud affect the INTELLECT (which is
the faculty in the mind of man, the proper object
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of which is the TRUTH. They thus affect COGNITION). Cognition must be intelligent.
Violence, intimidation, and undue influence affect the WILL (which is the faculty in the mind of man, the proper object of which is the GOOD. They thus affect VOLITION). Volition must be free.
Mistake and fraud result in defects of the intellect; the others result in defects of the will (Paras, Civil Code of the Philippines, Annotated Vol. IV, 2008, p. 627).
Mistake (Art. 1331, NCC) Wrong conception and lack of knowledge with respect to a thing (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010 ed., p. 429). Mistake of Law: As a GR, mistake of law does not make a contract voidable because ignorance of the law does not excuse any one from its compliance (Art. 3, NCC; Luna, et al. vs. Linatoc, G.R. No. L-48403, August 28, 1942). Thus, ordinarily, it is only a mistake of fact which will vitiate consent rendering the contract voidable. There is, however, an XPN to this rule. According to Article 1334 of the Civil Code “mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated, may vitiate consent.” Mistake of Fact: One or both of the contracting parties believe that a fact exists when in reality it does not (Supra.). Requisites for Mistake of fact which to Vitiate Consent: 1. The error must be substantial regarding: a. The object of the contract (error in re): ●
When the thing constitutes the object of the contract is confused with another thing (Mistake as to Identity of the thing – error in corpore)
● ●
Mistake as to the substance of the thing (error in substantia) Mistake regarding the quantity of the thing (error in quantitate); if mistake refers only to accidental or secondary qualities, the contract is not rendered voidable (error in qualitate)
b. The conditions which principally moved or induced one of the parties c. Identity or qualifications (error in personae), but only if such was the principal cause of the contract. d. The error must be excusable (not caused by negligence). 2. The error must be a mistake of fact, and not of law (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010 ed., pp. 430-432). 3. A simple mistake of account, however, shall only give rise to its correction (Art. 1331, NCC). 4. An error so patent and obvious that nobody could have made it, or one which could have been avoided by ordinary prudence, cannot be invoked by the one who made it in order to annul his contract. (Alcasid vs. CA, G.R. No. 104751, October 7, 1994). Mutual Error Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated, may vitiate consent (Art. 1334, NCC). Violence and Intimidation (Art. 1335, NCC) There is Violence when in order to wrest consent, serious or irresistible force is employed. There is Intimidation when one of the contracting parties is compelled by a reasonable and wellgrounded fear of an imminent and grave evil upon his person or property, or upon the person or property of his spouse, descendants or ascendants, to give his consent.
289
Requisites of Violence:
Undue Influence (Art. 1337, NCC)
1. Force employed to wrest consent must be serious and irresistible; 2. It must be the determining cause for the party upon whom it is employed in entering into the contract (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010 ed., p. 436).
When a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice.
Requisites of Intimidation: 1. Reasonable and well-grounded fear of an imminent and grave evil upon his person, property, or upon the person or property of his spouse, descendants, or ascendants (Supra); 2. It must have been the reason why the contract was entered into NOTE: To determine the degree of the intimidation, the age, sex and condition of the person shall be borne in mind (Art. 1335, NCC). The threat must be of an unjust act, an actionable wrong. (Therefore, a threat to enforce one’s claim through competent authority, if the claim is just or legal, does not vitiate consent) (Art. 1335, last par., NCC). A threat to prosecute is not considered as intimidation (P. Agustinos vs. Del Rey, G.R. No. 32813, November 5, 1930; Sotto v. Mariano, [C.A.] 36 O.G. 1056). But, of course, an agreement not to prosecute on account of a crime is against public policy (Arroyo vs. Berwin, G.R. No. 10551, March 3, 1917 and Hibberd v. Rhode, G.R. No. 8418, December 9, 1915). Violence or Intimidation Caused by Third Person Even if a third person exercised the violence or intimidation, the contract may be annulled. This is because the consent is still vitiated (De Asis vs. Buenviaje, [C.A.] 45 O.G. 317).
Requisites for Undue Influence 1. Improper advantage; 2. Power over the will of another (reflected for example in a superior bargaining power) (Martinez vs. Hongkong and Shanghai Bank, G.R. No. L-5496, February 19, 1910); 3. Deprivation of the latter’s will of a reasonable freedom of choice (The influence exerted must be of a kind that overpowers the mind as to destroy the party’s free agency) (Coso vs. Fernandez Deza, G.R. No. L-16763, December 22, 1921). Circ*mstances to be Considered for the Existence of Undue Influence 1. Confidential, family, spiritual and other relations between the parties; 2. Mental weakness; 3. Ignorance; and 4. Financial distress (Art. 1337, NCC). NOTE: The enumeration is NOT exclusive. Moral dependence, indigence, mental weakness, tender age or other handicap are some of the circ*mstances to consider undue influence. Undue Influence Caused by Third Person Undue influence exercised by a third party vitiates consent, just like in the case of violence and intimidation (Memorandum to the Joint Congressional Committee on Codification, Mar. 8, 1951). Fraud Use of insidious words or machinations employed by one of the contracting parties in order to induce the other to enter into a contract, without them, he would not have agreed to (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010 ed., p. 444).
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Failure to disclose facts, when there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud. (Art. 1339, NCC) Kinds of Fraud 1.
Fraud in the PERFECTION of the contract (Supra):
a. Dolo causante (or causal fraud): Here, were it not for the fraud, the other party would not have consented (This is the fraud referred to in Art. 1338, NCC). Effect: The contract is VOIDABLE. b. Dolo incidente (or incidental fraud): Here, even without the fraud the parties would have agreed just the same, hence the fraud was only incidental in causing consent. Very likely though, different terms would have been agreed upon. Effect: The contract is valid, but there can be an action for damages (Woodhouse vs. Halili, G.R. No. L4811, July 31, 1953).
Fraud by Third Persons (Art. 1342, NCC) Misrepresentation by a third person does not vitiate consent, unless such misrepresentation has created substantial mistake and the same is mutual. ● Misrepresentation made in good faith is not fraudulent but may constitute error (Art. 1343, NCC). Simulation of a Contract It is the act of intentionally deceiving others by producing the appearance of a contract that really does not exist (absolute simulation) or which is different from the true agreement (relative simulation) (Art. 1345-1346, NCC). Kinds of Simulated Contracts 1. Absolutely simulated (simulados) fictitious contracts: Here, the parties do not intend to be bound.
2. Fraud in the PERFORMANCE of the obligation (Art. 1170, NCC).
Effect: The contract is VOID.
Requisites for Fraud: (Art. 1338, NCC)
2. Relatively simulated (disimulados) disguised contracts:
a. The fraud must have been serious; b. The insidious words or machinations must have induced the other party to enter into the contract c. The fraud should have been employed by one of the contracting parties or by third persons (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010 ed., p. 445). The parties must not be in pari delicto (mutual guilt), otherwise, neither party may ask for annulment. The contract would, therefore, be considered valid (Valdez vs. Sibal, G.R. No. L-26278, August 4, 1927).
Here, the parties conceal their true agreement. Effect: The parties are bound to the real or true agreement except — a. If the contract should prejudice a third person; or b. If the purpose is contrary to law, morals, good customs, public order, or public policy. B. Object (Art. 1347, NCC) Object of contract: Things which are not outside the commerce of men or rights or services which are not intransmissible can be the object of contracts (Art. 1347 [2], NCC).
291
NOTE: The most evident and fundamental requisite in order that a thing, right or service may be the object of a contract is that it should be in existence at the moment of the celebration of the contract, or at least, it can exist subsequently or in the future (De Leon, 2010). General rule: All things or services may be the object of contracts. Exceptions: 1. Things outside the commerce of men; 2. Intransmissible rights; 3. Future inheritance, except in cases expressly authorized by law; Exception: a. Under Art. 130 of the FC, which allows the future spouses to give or donate to each other in their marriage settlement their future property to take effect upon the death of the donor and to the extent laid down by the provisions of the NCC relating to testamentary succession; and b. Under Art. 1080 of the NCC, which allows a person to make a partition of his estate among his heirs by an act inter vivos, provided that the legitime of the compulsory heirs is not prejudiced (Jurado, Comments and Jurisprudence on Obligation and Contracts, 2019 Ed, p. 461). 4. Services which are contrary to law, morals, good customs, public order or public policy; 5. Impossible things or services; and 6. Objects which are not possible of determination as to their kind. Requisites for object of contracts: 1. The thing must be within the commerce of men; or the right must not be intransmissible (Art. 1347 [1], NCC); It should be susceptible of appropriation and transmissible from one person to another; 2. The thing or services must not be impossible (Art. 1348, NCC); in other words, it should exist at the moment of the celebration of the
contract, or, at least, it can exist subsequently or in the future. 3. It must be licit, in other words, it should not be contrary to law, morals, good customs, public order or public policy or it must be capable of coming into existence; and 4. It must be determinate, or at least, possible of determination, as to its kind (Art. 1349, NCC; 3 Castan 7th Ed., pp. 342-343; 8 Manresa, 5th Ed., Bk. 2, pp. 431-432). 3. Cause or Consideration (Art. 1350, NCC) Concept Cause is the essential reason which moves the contracting parties to enter into it. The cause is the immediate, direct and proximate reason which justifies the creation of an obligation through the will of the contracting parties (Uy vs. CA, G.R. No. 120465, Sept. 9, 1999). Requisites for Cause: 1.
2.
Cause must be lawful or not contrary to law, morals, good customs, public order or public policy (Art. 1352, NCC). A contract whose cause is contrary to law, morals, good customs, public order or public is void (Art. 1409 [1], NCC). Cause must be true, otherwise the contract is without cause and produces no effect whatever. The statement of a false cause in contracts shall render them void, if it should not be proved that they were founded upon another cause which is true and lawful (Art. 1353, NCC).
Presumption in favor of existence of cause: Although the cause is not stated in the contract, it is presumed that it exists and is lawful, unless the debtor proves the contrary (Art. 1354, NCC). Effect of inadequacy of cause: Unless specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence (Art. 1355, NCC).
292
Causes In:
contract (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010 ed., p. 466).
Onerous Contracts
Remuneratory Contracts
The undertaking or the promise of the thing or service by the other party.
The service or benefit which is remunerated.
Pure Beneficence/ Gratuitous Mere liberality of the benefactor.
Accessory Contracts
cause of the accessory contract is identical with that of the principal contract
Cause
Motive
Direct or most proximate reason of a contract.
Indirect reason.
or
remote
Objective or Juridical reason of a contract.
The Psychological or purely personal reasons.
Cause is always the same.
Motives differ contracting parties.
Illegality or Legality of the cause will affect the existence or validity of the contract.
Legality or illegality of the motives will not affect the existence of the contract.
B. Forms of Contracts Statutory Basis: (Art. 1356, NCC) Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. However, when the law requires that a contract be in some form in order that it may be valid or enforceable or that a contract be proved in a certain way, that requirement is absolute and indispensable. Rules in the form of contract: ▪ Contracts shall be obligatory, in whatever form they may have been entered into, provided all essential requisites for their validity are present. General Rule: Form consensual contracts.
is
not
required
in
Exceptions: When the law requires a contract be in certain form:
for
NOTE: There are times, however, when the boundary line between motive and cause disappears altogether. The motive may be regarded as causa when the contract is conditioned upon the attainment of the motive of either contracting party. In other words, motive becomes causa when it predetermines the purpose of the
a. TO BE VALID (This is true in formal or solemn contracts) b. TO BE ENFORCEABLE (This is true for the agreements enumerated under the Statute of Frauds, but of course this requirement may be waived by acceptance of benefits (partial) or by failure to object to the presentation of oral (parol) evidence (Art. 1403, NCC). c. FOR CONVENIENCE (This is true for the contracts enumerated for example under Art. 1358, NCC) The parties may compel each other to reduce the verbal agreement into writing (Art. 1357, NCC). Electronic Commerce Act Electronic documents shall have the legal effect, validity or enforceability as any other document or legal writing (Sec. 7, R.A. No. 8792).
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If the law requires that a document be in writing and the requirement therein is in the form of an obligation or whether the law simply provides consequences for the document not being presented or retained in its original from: Such requirement is met by an electronic document maintains its integrity and can be authenticated so as to be usable for subsequent reference. 1. The electronic document has remained complete and unaltered, apart from the addition of any endorsem*nt and any authorized change, or any change which arises in the normal course of communication, storage and display; and 2. The electronic document is reliable in the light of the purpose for which it was generated and in the light of all relevant circ*mstances (Sec. 7[a], RA No. 8792). If the law requires it to be in the original form, the requirement is met by an electronic document if: 1. There exists a reliable assurance as to the integrity of the document from the time when it was first generated in its final form; and 2. That document is capable of being displayed to the person to whom it is to be presented and no provision of the law shall apply to vary any and all requirements of existing laws on formalities required in the execution of documents for their validity (Sec. 7[b], R.A. No. 8792). Examples of formal contracts If the form is not complied with, Art. 1357 of the Civil Code cannot be availed of. “Art. 1357. If the law requires a document or other special form, as in the acts and contracts enumerated in the following article, the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised
simultaneously contract.”
with
the
action
upon
the
1. Donations of real property (these require a public instrument) (Art. 749, NCC). 2. Donations of personal property (these require a written contract or document if the donation exceeds P500) (Art. 748, NCC). 3. Stipulation to pay interest on loans, interest for the USE of the money (said stipulation must be in writing) (Art. 1956). 4. Transfer of large cattle (this requires the transfer of certificate of registration) (Sec. 523, Rev. Adm. Code). 5. Sale of land through an agent (the authority of the agent must be in writing; otherwise, the sale is null and void) (Art. 1874, NCC). 6. Contracts of antichresis (here the principal loan, and the interest of any, must be specified in writing; otherwise, the contract of antichresis is void) (Art. 2134, NCC). Right to compel each other to execute required form If the law requires a document or other special form, as in the acts and contracts enumerated in Article 1358 of the Civil Code, the contracting parties may compel each other to observe that form (Art.1357, NCC). But before the remedy granted under Article 1357 can be availed, it is necessary that the contract must have already been perfected (Art.1357, NCC) and that the same must have already been valid and enforceable as to formalities (Art.1356, NCC). Contracts which must appear in a public document to be valid are as follows: 1. Donations of immovable property (Art. 749, NCC). 2. Partnerships where immovable property or real rights are contributed to the common fund (Art. 1771 and 1773, NCC).
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Contracts which convenience
require
form
for
Necessity of Public Document in Article 1358, NCC The provision of Article 1358 of the Civil Code on the necessity of a public document is only for convenience, not for validity or enforceability (Dalion vs. CA, G.R. No. 78903, February 28, 1990). In other words, even if the contracts are required to appear in a public document pursuant to the provisions of Article 1358, they nevertheless remain valid and enforceable as between the parties thereto: 1. Acts and contracts which have for their object the creation, transmission, modification or extinguishment or real rights over immovable property; sales of real property or of an interest therein are governed by Articles 1403, No. 2, and 1405. 2. The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains. 3. The power to administer property, or any other power which has for its object an act appearing or which should appear in a public document, or should prejudice a third person. 4. The cession of actions or rights proceeding from an act appearing in a public document (Art. 1358, NCC). Contracts, which enforceability
require
form
for
Statute of frauds: (Art. 1403, par. 2 NCC) This law provides that the following agreement shall be unenforceable by action, unless the same, or some note or memorandum thereof, be in writing, and subscribed by the party charged, or by his agent; 1. Agreement that by its terms is not to be performed within a year from the making thereof;
The test to determine whether an oral contract is enforceable under the one-year rule of the Statute of Frauds is whether, under its own term, performance is possible within a year from the making thereof. If so, the contract is outside of the Statute of Frauds and need not be in writing to be enforceable. The broad view is that the Statute of Frauds applies only to agreements not to be performed on either side within a year from the making thereof. Agreements to be fully performed on one side within a year are taken out of the operation of the statute (National Bank vs. Philippine Vegetable Oil Co., G.R. No. L-25400, January 14, 1927). 2. Special promise to answer for the debt, default or miscarriage of another; Whether an oral promise to pay the debt of another is enforceable under the Statute of Frauds depends on whether such promise is an original one or collateral promise. The Statute applies only to a collateral promise, one which is made by a third party to answer for the debt or obligation of a primary party to a contract if that party does not perform. If the promise is an original or an independent one, that is, if the promissory becomes primarily liable for the payment of the debt, the promise is not within the Statute (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010 ed., p. 546). 3. Agreement made in consideration of marriage, other than a mutual promise to marry; A marriage settlement is an agreement made in consideration of marriage covered by the Statute of Frauds. Hence, it must be in writing (Art. 77, FC) in order to be enforceable. On the other hand, while donation propter nuptias are likewise made in consideration of the marriage, the same is no longer covered by the Statute because the requirement of form in donation propter nuptias is for validity (Art. 83, FC; in relation to Arts. 748-749, NCC).
295
4. Agreement for the sale of goods, chattels or things in action, at a price not less than P500.00; 5. Agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein; Not all agreements “affecting land” must be put in writing to attain enforceability (Hernandez vs. CA, supra). Under the Statute, such formality is only required of contracts involving leases for longer than one year, or for the sale of real property or of an interest therein (Art. 1403 [2][e], NCC). 6. A representation as to the credit of a third person. The note or memorandum, in fact, need not be contained in a single document; nor, when contained in two or more papers, need each paper to be sufficient as to contents and signature to satisfy the statute (Berg vs. Magdalena Estate, Inc., G.R. No. L-3784, October 17, 1952). Two or more writings properly connected may be considered together; matters missing or uncertain in one may be supplied or rendered certain by another, and their sufficiency will depend on whether, taken together, they meet the requirement of the statute as to contents and the requirements of the statute as to signature (Ibid.). That the exchange of written correspondences between the parties may constitute sufficient writing to evidence the agreement for purposes of complying with the Statute of Frauds (City of Cebu vs. Heirs of Rubi, G.R. No. 128579, April 29, 1999). Fundamental principles governing Statute of Frauds: 1.
The statute simply provides the method by which the contracts enumerated therein may be proved, but does not declare them invalid because they are not reduced to writing (Swedish Match, Ab vs. CA, G.R. No. 128120, October 20, 2004).
2.
The statute applies only to executory contracts and not to contracts which are either partially or totally performed (Averia vs. Averia, G.R. No. 141877, August 13, 2004).
If the rule were otherwise, the Statute of Frauds could be used to perpetuate fraud, which is contrary to its avowed purpose of preventing fraud (Carbonell vs. Poncio, G.R. No. L-11231, May 12, 1958). 3. Stated otherwise, the defense is applicable only if the action is either for specific performance of the oral contract or for recovery of damages arising from a violation thereof (Asia Productions Co., Inc. vs. Paño, G.R. No. 510518, January 27, 1992; citing Facturan vs. Sabanal, G.R. No. L-2090, September 27, 1948 and Eusebio v. Sociedad Agricola de Balarin, G.R. No. 21519, March 31, 1966). 4. The defense of the Statute of Frauds is personal to the contracting parties and may not be raised by strangers to the contract (Art. 1408, NCC; Ayson vs. CA, G.R. No. 223254, December 1, 2016). 5. The defense of the Statute of Frauds may be waived either by: (a) failing to object to the presentation of oral evidence to prove the contract, or (b) accepting benefits therefrom (Art. 1405, NCC). 6.
The Statute of Frauds refers to specific kinds of transactions and cannot apply to any other transaction that is not enumerated in Article 1403, paragraph 2, of the Civil Code (Cruz vs. J.M. Tuason & Co., Inc., G.R. No. L-23749, April 29, 1977; Western Mindanao Lumber Co., Inc. vs. Medalle, G.R. No. L-23213, October 28, 1977; Rosencor Development Corp. vs. Inquing, G. R. No. 140479, March 8, 2011).
An oral partition of real property is enforceable since partition is not a conveyance of property but simply a segregation and designation of the part of the property, which belongs to the co-owners (Vda. De Espina vs. Abaya, G.R. No. 45142, April 26, 1991).
296
A right of first refusal need not be written to be enforceable and may be proven by oral evidence since it is not by any means a perfected contract of sale of real property (Rosencor Development Corp. vs. Inquing, supra). An oral agreement creating an easem*nt of right-of-way is also enforceable since it is not a sale of real property or of an interest therein (Western Mindanao Lumber Co., Inc. vs. Medalle, G.R. No. L-23213, October 28, 1977). Statute of Frauds is not applicable when writing does not express the true intent of the parties, and one of such parties offers to prove by parol evidence the true agreement (Cuyugan vs. Santos, G.R. No. L-10265, March 3, 1916). Contracts that MUST be registered for VALIDITY: ● ●
Chattel mortgages (Art. 2140, NCC) Sale or transfer of large cattle (Cattle Registration Act)
D. DEFECTIVE CONTRACTS 1. RESCISSIBLE CONTRACTS They are the least infirm or defective. It contains all essential requisites of a valid contract, but by reason of injury or damage (lesion) to one of the parties or third persons, such as creditors, the contract may be rescinded. Thus, the defect is external. Until such contracts are rescinded in an appropriate proceeding, they remain valid and binding upon the parties thereto; (Rabuya, Obligations and Contracts, 2019 ed., p.558)
Rescission is a remedy granted by law to the contracting parties and even to third persons, to secure the reparation of damages caused to them by a contract, even if this should be valid, by restoration of things to their condition at the moment prior to the celebration of contract. It implies a contract, which even if eventually valid, produces lesion or a pecuniary damage to someone (Rabuya, Civil Law Reviewer Volume II, 2017 ed., p. 250). Thus its purpose is to make ineffective a contract validly entered into and,
therefore, obligatory under normal conditions (Ada vs. Baylon, G.R. No. 182435, August 13, 2012). The Civil Code uses rescission in two different contexts: (1) rescission on account of breach of contract under Article 1191; and (2) rescission by reason of lesion or economic prejudice under Article 1381 (Rabuya, Obligations and Contracts, 2019 ed., p.559). Characteristics of Rescissible Contract 1. Their defect consists in injury or damage either to one of the contracting parties or to third persons. 2. Before rescission, they are valid and, therefore, legally effective. 3. They can be attacked directly only, and not collaterally. 4. They can be attacked only either either by a contracting party or by a third person who is injured or defrauded. 5. They are susceptible of convalidation only by prescription, and not by ratification (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010 Ed, p.503). Nature of Rescissible Contracts under Article 1381 Contracts which are rescissible are valid contracts having all essential requisites of a contract, and therefore obligatory under normal conditions, but by reason of injury or damage, may be rescinded (Ada vs. Baylon, Supra.). Contracts Declared Rescissible Articles 1381 and 1382, NCC:
Under
1. Contracts entered into by guardians on behalf
of the ward and contract entered into by legal representatives on behalf of the absentee, if the ward or the absentee suffers lesion by more than ¼ of the value of the things which are the object of the contract (Art. 1381 [1] and [2], NCC). But if the court approved the contract, the same is not rescissible (Art. 1386, NCC); 2. Contracts undertaken in fraud of creditors (Art. 1381 [3], NCC);
297
3. Contracts, which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority (Art. 1381 [4], NCC); 4. All other contracts specially declared by law to be subject to rescission (Art. 1381 [5], NCC); and 5. Payments made in a state of insolvency for obligations to whose fulfilment the debtor could not be compelled at the time they were effected (Art. 1382, NCC). Rescission under Art. 1381 and Rescission By Mutual Consent Article 1295 (now Art. 1385) refers to contracts that are rescissible in accordance with law in the cases expressly fixed thereby, but it does not refer to contracts that are rescinded by mutual consent and for the mutual convenience of the contracting parties. The rescission in question was not originated by any of the causes specified in Articles 1291 and 1292 (now Arts. 1381 and 1382), nor is it any relief for the purposes sought by these articles. It is simply another contract for the dissolution of a previous one, and its effects, in relation to the contract so dissolved, should be determined by the agreement made by the parties, or by the application of other legal provisions, but not by Article 1295 (now Art. 1385), which is not applicable (Aquino vs. Tanedo, G.R. No. 12457, January 22, 1919). Requisites for Rescission of Contracts entered into on behalf of Wards and Absentees under Art. 1381 Nos. 1 and 2: 1. The contract must have been entered into by a guardian in behalf of his ward or by a legal representative in behalf of an absentee (Art. 1381 Nos. 1 and 2 NCC); 2. The ward or absentee must have suffered lesion of more than one-fourth of the value of the property which is the object of the contract (Art. 1381 Nos. 1 and 2 NCC); 3. The contract must have been entered into without judicial approval (Art. 1386, NCC);
4. There must be no other legal means for obtaining reparation for the lesion (Art. 1383, NCC); 5. The person bringing the action must be able to return whatever he may be obliged to restore (Art. 1385 par. 1, NCC); and 6. The object of the contract must not be legally in the possession of a third person who did not act in bad faith (Art. 1385, par. 2, NCC). NOTE: If the object of the contract is legally in the possession of a third person who did not act in bad faith, the remedy available to the person suffering the lesion is indemnification for damages and not rescission (Art. 1385, par. 3, NCC; Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010 ed., p. 507). Requisites for Rescission of Contracts in Fraud of Creditors under Art. 1381 No. 3
(accion pauliana)
There must be a credit existing prior to the celebration of the contract; 1. There must be a fraud, or at least, the intent to commit fraud, or at least, the intent to commit fraud to the prejudice of the creditor seeking the rescission; 2. The creditor cannot in any other legal manner collect his credit; and 3. The object of the contract must not be legally in the possession of a third person who did not act in bad faith. NOTE: If the object of the contract is legally in the possession of a third person who did not act in bad faith, the remedy available to the creditor is to proceed against the person causing the loss for damages (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010 ed., p. 508). The GR is that rescission requires the existence of creditors at the time of the alleged fraudulent alienation, and this must be proved as one of the bases of the judicial pronouncement setting aside the contract. Without any prior existing debt, there can neither be injury nor fraud. While it is necessary that the credit of the plaintiff in the accion pauliana must exist prior to the fraudulent
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alienation, the date of the judgment enforcing it is immaterial. Even if the judgment be subsequent to the alienation, it is merely declaratory, with retroactive effect to the date when the credit was constituted (Siguan vs. Lim, G.R. No. 134685 November 19, 1999). Presumptions of Fraud The law presumes that there is fraud of creditors in the following cases: 1. Alienation of property by gratuitous title if the debtor has not reserved sufficient property to pay all of his debts contracted before such alienations (Art. 1387 par. 1 NCC). 2. Alienation of property by onerous title if made by a debtor against whom some judgment has been rendered in any instance or some writ of attachment has been issued. The decision or attachment need not refer to the property alienated and need not have been obtained by the party seeking the rescission (Art. 1387 par. 2, NCC). Badges of Fraud The following circ*mstances have been denominated by the courts as badges of fraud. 1. The fact that the cause or consideration of the conveyance is inadequate. 2. A transfer made by a debtor after a suit has been begun and while it is pending against him. 3. A sale on credit by an insolvent debtor. 4. Evidence of large indebtedness or complete insolvency. 5. The transfer of all or nearly all of his property by a debtor, especially when he is insolvent or greatly embarrassed financially. 6. The fact that the transfer is made between father and son, when there are present others of the above circ*mstances. 7. The failure of the vendee to take exclusive possession of a.ll the property (Oria vs. Mcmicking, G.R. No. L-7003, January 18, 1912).
Acquisition by Third Party If in Good Faith - if the property is acquired by a purchaser in good faith and for value, the acquisition as far as the law is concerned is not fraudulent. The right of such purchaser over the property is legally superior to that of any other person even as against the creditor who is prejudiced by the conveyance. Consequently, the contract or conveyance is not rescissible (Honrado vs. Marcayda, 49 Off. Gaz. 1492, C.A.). If in Bad Faith - if the property is acquired by one who is not a purchaser in good faith and for value, it is clear that the contract or conveyance is rescissible and shall indemnify the latter for damages suffered by them on account of the alienation, whenever, due to any cause, it should be impossible for him to return them (Art. 1388, NCC). Requisites for Rescission of Contracts by Insolvent under Art. 1382 1. That it must have been made in a state of insolvency, and 2. That the obligation must have been one which the debtor could not be compelled to pay at the time such payment was effected (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010 ed., p. 509). Requisites of Rescission (as subsidiary remedy) The following are the requisites in order that the remedy of rescission may be availed of: 1. The contract must be validly agreed upon (Art.
1380; see Onglengco vs. Ozaeta and Hernandez, G.R. No. L-46685, January 20, 1940); 2. There must be lesion or pecuniary prejudice or damage to one of the parties or to a third person (Art. 1381, NCC); 3. The rescission must be based upon a case especially provided by law (Arts. 1380, 1381, 1382, NCC); 4. There must be no other legal remedy to obtain reparation for the damage (Art. 1383, NCC);
299
5. The party asking for rescission must be able to return what he is obliged to restore by reason of the contract (Art. 1385 par. 1, NCC); 6. The object of the contract must not legally be in the possession of third persons who did not act in bad faith (Ibid., par. 2, NCC); and 7. The period for filing the action for rescission must not have been prescribed (Art. 1389, NCC). Prescriptive Period General Rule: The action for rescission must be filed within four (4) years from accrual of the right of action (Art 1389, NCC). Exceptions: 1. For persons under guardianship the period shall begin from the termination of incapacity; and 2. For absentees, from the time the domicile is known (Art. 1389, NCC). Laches bars an action for rescission or annulment of a contract (Art. 1391 NCC). Extent of Rescission The entire contract need not be set aside if the damage can be repaired or covered by partial rescission. The rescission shall be only to the extent of the creditor’s unsatisfied credit (Art. 1384, NCC). Effect of Rescission 1. Obligation of mutual restitution 2. Abrogation of contract 3. Obligation of third person to restore (Art. 1358, NCC) 2. VOIDABLE CONTRACTS They are also valid until annulled unless there has been a ratification. In a voidable contract, the defect is caused by vice of consent.
contract but one of the parties is legally incapable of giving consent, or consent is vitiated by mistake, violence, intimidation undue influence, or fraud (Art. 1390, NCC). It is valid and binding and produces all its civil effects, until it is set aside by final judgement of a competent court in an action for annulment (Art. 1390, last par., NCC; Suntay vs. Cojuangco-Suntay, G.R. No. 183053, October 10, 2012). Nature and Characteristics 1. It is valid and binding and produces all its civil effects, until it is set aside by final judgment of a competent court. 2. However, it is defective because the consent of one of the parties was vitiated by want of capacity, error, violence, intimidation, undue influence, or deceit. Hence, may be annulled by an action in court 3. It may be rendered perfectly valid by ratification, which can be express or implied, such as by accepting and retaining the benefits of a contract. 4. The action for annulment is subject to the statute of limitations. In other words, the action for annulment may prescribe after the lapse of four years. 5. A voidable contract can be assailed only in a direct proceeding for that purpose and not collaterally (Niñal vs. Bayadog, G.R. No. 133778, March 14, 2000). Two kinds of voidable contracts: 1. Those where one of the parties is incapable of giving consent to a contract: and; 2. Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud (Art. 1390, NCC; Fule vs. CA, G.R. No. L-40502, November 29, 1976). But where both parties are incapable of giving consent, the contract is not merely voidable but enforceable (Art. 1403 [3], NCC).
Voidable or annullable contracts are those which possess all the essential requisites of a valid
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Differences between action for annulment and action for rescission ANNULMENT Based on vitiation of consent (Art. 1390,
NCC)
May be brought only by a party to the contract
(Arts. 1390 & 1397, NCC) Principal action (Art. 1390, NCC)
RESCISSION Based on lesion to one of the parties or a third person (Art. 1381, NCC) May also be brought by a third person who suffered damage by reason of the contract (Art. 1381, NCC) Merely subsidiary (Art.
1383, NCC)
Presupposes that the contract is legally defective (Art. 1390,
The contract was validly entered into (Art 1380,
Seeks imposition of sanction by law on the guilty party for reason of public interest (Ibid.) Allowed even if the plaintiff has been indemnified (Art. 1390,
Remedy allowed by law on ground of equity (Art.
NCC)
NCC)
1383, NCC)
Barred by indemnification
(Arts. 1383, 1384, NCC)
NCC)
Annulment under Article 1390 and rescission under Article 1191 are inconsistent remedies. A party pursuing the remedy of rescission impliedly admits the validity of the subject contract. If he demands annulment, he forfeits his right to seek rescission (De Leon & De Leon, Comments and Cases On Obligations and Contracts, 2014 ed., p. 820). Who may institute action for annulment? General Rule: In order for a party to have the necessary standing to institute action for annulment, the following requisites must be satisfied: 1. He must be a party obliged principally or subsidiary in the contract; and 2. He is not the person sui juris or the party responsible for the vice or defect (Art. 1397, NCC) Exception: A person who is not a party obliged principally or subsidiarily under a contract, may exercise an action for annulment of the contract if (a) he is prejudiced in his rights with respect to one of the contracting partises; and (b) he can
show detriment which would positively result to him from the contract in which he has no intervention (Teves vs. People’s Homesite & Housing Corp., G.R. No. L-21498, June 27, 1968). Prescriptive Period– Action for annulment must be brought within four (4) years (Art. 1391, NCC). This period shall begin: 1. In case of minority and incapacity, from the time the guardianship ceases; 2. In case of mistake or fraud, from the time of its discovery; 3. In case of intimidation, violence, or undue influence, from the time the defect ceases. Effects of ratification Ratification cleanses the contract from all its defects from the moment it was constituted (Art. 1396, NCC). The contract thus becomes valid (Art. 1390). Hence, the action to annul is extinguished (Art. 1392; Tan Ah Chan vs. Gonzalez, G.R. No. 28595, October 11, 1928). General Rule: Retroactivity ratification of contracts.
applies
in
Exception: When the rights of innocent third persons will be prejudiced, ratification will not take effect. How ratification can be effected: 1. It
can be effected either expressly or impliedly. An implied ratification is deemed made when the party entitled to ask for annulment, (1) with the knowledge of the reason which makes the contract voidable, (2) and such reason having ceased, (3) should execute any act evincing an intent to abide by the contract and implying an intention to waive his right to annul the same (Art. 1393, NCC). 2. If the defect consists in the incapacity of one of the parties, the ratification may be effected by the guardian of the incapacitated person (Art. 1394, NCC).
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3. It does not require the conformity of the contracting party who has no right to bring the action for annulment (Art. 1395, NCC). Requisites for Ratification: 1. The contract must be voidable and annullable; 2. Ratification is made with knowledge of the reason which makes the contract voidable (Art. 1393 NCC); 3. At the time it is made, the reason which makes the contract voidable has already ceased (Art. 1393, NCC); 4. It is effected by the party who has the right to bring the action for annulment (Art. 1395, NCC). Effects of Annulment Decree: General Rule: The effect of a juridical decree annulling voidable contract is to restore to the contracting parties their original condition before the contract, and hence, they are required to make mutual restitution of the subject matter, with its fruits, and the price with its interest. In obligations to render service, the value thereof shall be the basis for damages (Art. 1398, NCC). Exception: When the defect of the contract consists in the incapacity of one of the parties, the incapacitated person IS NOT obliged to make restitution EXCEPT INSOFAR as he has been benefited by the thing or price received by him (Art. 1399, NCC). As long as one of the contracting parties does not restore what in virtue of the decree of annulment he is bound to return, the other cannot be compelled to comply with what is incumbent upon him (Art. 1402, NCC). Effect of loss of object of contract: If lost by Defendant: 1. Through his fault, he is obliged to return the fruits received, the value of the thing at the time of loss, with interest from the same date (Art. 1400, NCC); 2. If the loss is without fault on the part of the defendant, but by fortuitous event, the action
for annulment is extinguished by loss of the thing only when such loss is due to the fault or fraud of the person entitled to ask for annulment. The defendant is free from liability (Tolentino, Civil Code of the Philippines Volume 4, 1991 ed.,p. 613-614). If lost by party who has right to annul (plaintiff): 1. Through his fault or fraud, the action for annulment is extinguished (Art. 1404, NCC), even if at the time of the loss, the plaintiff was still minor or was insane (Report of the Code Commission March 8, 1951). 2. Through fortuitous event and without his fault, the action for annulment is not extinguished. Hence, if the plaintiff offers the value of the thing at the time of the loss (without need of paying interest thereon), the defendant can be obliged to make restitution (Tolentino, Civil Code of the Philippines Volume 4, 1991 ed., p. 613-614). The action for annulment is extinguished only when the loss of the object of the contract is due to the fault or fraud of the plaintiff (or the party entitled to ask for annulment (Art. 1401, NCC). 3. UNENFORCEABLE CONTRACTS They cannot be sued upon or enforced unless they are ratified. As regards the degree of defectiveness, voidable contracts are further away from absolute nullity than unenforceable contracts. In other words, an unenforceable contract occupies an intermediate ground between a voidable and a void contract. Nature and Characteristics: 1. They cannot be sued upon or enforced unless they are ratified (Art. 1403, NCC), as distinguished rescissible and annullable contracts which produce legal effects unless they are set aside by a competent court. 2. Although valid, are unenforceable unless they are ratified. The defect of the contract can be cured by ratification.
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3. They cannot be assailed by third persons (Art. 1408, NCC). In other words, the defense of unenforceability of contracts is personal only to the parties to the contract.
his willingness to ratify the agent’s acts, a third person cannot set up the fact that the agent has exceeded his powers (Art. 1901, NCC).
Three kinds of unenforceable contracts:
Statute of Frauds
1. Those entered into in the name of another without the latter’s authority or legal representation, or beyond the agent’s power; 2. Those that do not comply with the Statute of Frauds; and 3. Those where both parties are incapable of giving consent to a contract (Art. 1403, NCC).
Form required: Only formality required is that the contract or agreement must be in writing and subscribed by the party charged or by his agent (Art. 1403[2], NCC).
Without or Excess of Authority:
(a) An agreement that by its terms is not to be performed within a year from the making thereof;
1. If the agent contracts without authority: a. And the contract involves the sale of a parcel of land or any interest therein belonging to the principal, the sale is void (Art. 1874, NCC); b. And the principal does not ratify the contract, the contract is void as to the alleged principal but the agent is personally liable to the party with whom he contracted; c. The third person with whom the agent
contracted may revoke the contract prior to its ratification by the principal (Art. 1317, NCC). 2. If the agent exceeds his authority and the principal does not ratify the contract: a. The principal is not bound (Art. 1910, NCC) except when he allows the agent to act as though the latter had full powers, he becomes solidarily liable with the agent (Art. 1911 NCC). b. The agent is personally liable to the party with whom he contracts if he did not give such party sufficient notice of his powers (Art. 1897, NCC).
Contracts under Statute of Frauds (Art. 1403 No. 2)
It is well-settled that this refers only to agreements which by their terms are not to be performed on either side within a year from the execution thereof. Hence, those which are to be fully performed on one side within a year are taken out of the operation of the statute (Phil. National Bank vs. Phil. Vegetable Oil Co., G.R. No. L25400, January 14, 1927). (b) A special promise to answer for the debt, default, or miscarriage of another; The true test as to whether a promise is within the statute has been said to lie in the answer to the question whether the promise is an original or a collateral one. If the promise is an original or an independent one, that is, if the promisor becomes thereby primarily liable for the payment of the debt, the promise is not within the statute. But, on the other hand, if the promise is collateral to the agreement of another and the promisor becomes merely a surety, the promise must be in writing. Just what is the character of a promise as original (Reiss vs. Memije, G.R. No. L-5447, March 1, 1910). (c) An agreement made in consideration of marriage, other than a mutual promise to marry;
3. If the agent exceeds his authority and the
principal ratifies the contract or has signified
303
(d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum; (e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein; Obviously, an agreement creating an easem*nt of right-of way is not one of those contracts covered by the statute of frauds since it is not a sale of real property or of an interest therein (Western Mindanao Co. vs. Medalle, G.R. No. L-23213, October 28, 1977). (f) A representation as to the credit of a third person. When a contract is enforceable under the Statute of Frauds, and a public document is necessary for its registration in the Registry of Deeds, the parties may avail themselves of the right under Article 1357 (Art. 1406 NCC). Performance of Contract Rule: Statute of Frauds is applicable only to those contracts which are executory and not to those which have been consummated either totally or partially (Arroyo vs. Azur, G.R. No. L-18682, June 30, 1965). Rationale: The Statute of Frauds was enacted for the purpose of preventing frauds. Hence, it should not be made the instrument to further them (Phil. National Bank vs. Phil. Vegetable Oil Co., G.R. No. L-25400, January 14, 1927).
Ratification of unenforceable contracts: 1. For contracts infringing the Statute of Frauds, they are ratified either by: a. Failure to object to the presentation of oral evidence to prove the contract; or b. Acceptance of the benefits under the contract (Art. 1405, NCC); 2. For contracts which are unenforceable by reason of incapacity of both parties: a. The ratification may be made by the parents or guardian of the incapacitated; b. If the contract is ratified by the parent or guardian of one of the contracting parties, the contract becomes voidable because such ratification shall give the contract the same effect as if only one of them were incapacitated (Art. 1407, NCC.); If the ratification is made by the parents or guardians of both the contracting parties, the contract is considered validated from the inception (Art. 1407, NCC). Express Trust Concerning Real Property It will be observed that while the Statue of Frauds makes no mention of it, still under Art. 1443 of the Civil Code, “no express trusts concerning immovable or any interest therein may be proved by parol (oral) evidence.” Hence, we can safely conclude that the Statute of Frauds also applies to express conventional trusts (Paras, Civil Code of the Philippines Annotated, 2008, p 806). Rule on Authority of the Agent to Sell Land or Any Interest Therein Under Art. 1874 of the NCC, “when a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. Thus, the law provides sale is not merely unenforceable but void (Paras, Civil Code of the Philippines Annotated, 2008, p 811).
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4. VOID OR INEXISTENT CONTRACTS – They are absolutely null and void. They have no legal effect at all and cannot be ratified. These contracts are absolute nullity and produce no effect, as if it had never been executed or entered into: a. Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy (Art. 1409 [1], NCC.);
Cause is the essential reason which moves the
parties to enter into [a contract]. [It] should be distinguished from motive, which is the particular reason of a contracting party which does not affect the other party (Uy vs. CA, G.R. No. 120465, Sept. 9, 1999). For example, in a contract of sale of a piece of land, such as in this case, the cause of the vendor entering into the contract is to obtain the price, and for the vendee, NHA it is the acquisition of the land. The motive of the NHA, on the other hand, is to use said lands for housing (Id.). General Rule: It is illegality or immorality of the cause which renders the contract void and, ordinarily, a party’s motives for entering into the contract do not affect the contract (Uy vs. CA, G.R. No. 120465, Sept. 9, 1999). Exception: When the motive predetermines the purpose of the contract, the motive may be regarded as the cause (Liguez vs. CA, G.R. No. 11240, Dec. 18, 1957). When they blend to that degree, and the motive is unlawful, then the contract entered into null and void (Olegario vs. CA, G.R. No. 104892, November 14, 1994). b. Those which are absolutely simulated or fictitious (Art. 1409 [2], NCC); c. Those whose cause or object did not exist at the time of the transaction (Art. 1409 [3], NCC.); d. Those whose object is outside the commerce of men (Art. 1409 [4], NCC); e. Those which contemplate of an impossible service (Art. 1409 [5], NCC.);
At the time of delivery or consummation stage of sale, it is required that the seller be the owner of the thing sold; otherwise, he will not be able to comply with his obligation to transfer ownership to the buyer. It is at the consummation stage where the principle of nemodat qud non habet applies (Cavite Development Bank vs. Lim, G.R. No. 131679, February 1, 2000). When the sellers can no longer deliver the object of the sale to the buyers, as the buyers themselves have already acquired title and delivery thereof from the rightful owner, the contract of sale is not valid. Thus, such contract may be deemed to be inoperative and may thus fall, by analogy, under item No. 5 of Article 1409 of the Civil Code (Nool vs. CA, G.R. No. 116635, July 24, 1997). Those where the intention of the parties relative to the principal object of the contract cannot be ascertained (Art. 1409[6], NCC); g. Those expressly prohibited or declared void by law (Art. 1409 [7], NCC.). f.
The principle of in pari delicto cannot be invoked with respect to inexistent contracts (Modina vs. CA, 109355, October 29, 1999). It can only be invoked in relation to void contracts. Hence, the latter may eventually produce legal effects while the former cannot produce any effect whatsoever. Void Contracts vs. Inexistent Contracts VOID CONTRACTS Those which because of certain defects, generally produce no effect at all.
If nullity proceeds from illegality, it will produce barring effect
INEXISTENT CONTRACTS Refer to agreements which lack one or some or all of the elements (i.e., consent, object, and cause) or do not comply with the formalities which are essential for the existence of a contract. Absolutely cannot any legal effect.
produce
305
May prescribe according to Statute of Limitations
G.R. No. 75197, June 22, 1987). But if any party should bring an action to enforce it, the other party can simply set up the nullity of the contract or its non-existence as defense.
Imprescriptible
Although not barred by prescription, the right to have a contract declared void ab initio may be barred by laches (MWSS vs. CA, G.R. Nos. 126000 & 128520, October 7, 1988). Characteristics contracts:
of
void
or
inexistent
1. The contract produces no effect whatsoever either against or in favour of anyone following the principle quod nullum est nullum producit
effectum.
2. Void or inexistent contracts cannot be ratified (Ouano vs. CA, G.R. No. L-40203, August 21, 1990) It cannot give rise to a valid contract. (Art. 1422, NCC). The defect of a void or inexistent contract is permanent (Teja Marketing vs. IAC, G.R. No. L-65510, March 9, 1987). Mere lapse of time cannot produce its efficacy (Fomilda vs. Branch 164 RTC IVth Judicial Region, Pasig, G.R. No. 72306, January 24, 1989). Hence, it cannot be validated either by time or ratification (Palmera vs. Civil Service Commission, G.R. No. 110168, August 4, 1994). 3. Void contract cannot be novated. 4. The right to set up the defense of inexistence or absolute nullity cannot be waived (Fomilda v. Branch 164 RTC IV Judicial Region, Pasig, G.R. No. 72306, January 24, 1989). 5. The inexistence or absolute nullity of a contract cannot be invoked by a person whose interests are not directly affected (Art. 1421, NCC; Chavez vs. PCGG, G.R. No. 130716, December 9, 1998). Necessity of action to declare contract inexistent or void: If purely executory- If the void or inexistent contract is still fully executory, there is no need for such an action (Razon vs. Phils. Ports Authority,
If already executed- If the void or inexistent contract had already been executed, an action to declare non-existence of the contract or its nullity can be maintained for the purpose of recovering what has been given by virtue of that contract (Rongavilla vs. CA, G.R. No. 83974, August 14, 1998). The reason for this rule is that nobody can take the law into his own hands. 1. Pactum Commissorium 2130, NCC)
(Arts.
2088,
A stipulation whereby the thing pledged or mortgage or under antichresis shall automatically become the property of the creditor in the event of non-payment of the debt within the term fixed. This is forbidden by law and any stipulation to this effect is declared null and void (Art. 2088, NCC). However, only the prohibited stipulation is void and shall not affect the validity of the principal obligation. Requisites of Pactum Commissorium: a. A pledge, mortgage, or antichresis of property by way of security for the payment of the principal obligation; b. A stipulation for an automatic appropriation by the creditor of the property in the event of non-payment of the obligation within the stipulated period. 2. Pactum De Non Alienando (Art. 2130, NCC)
A stipulation forbidding the owner from alienating the immovable mortgage shall be void for being contrary to public policy inasmuch as the transmission of property should not be unduly impeded.
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3. Pactum Leonina (Art. 1799, NCC) In a contract of partnership, none of the partners can be excluded from participation in the profits and losses. Principle of In Pari Delicto (Art. 1411 and 1412, NCC) General Rule:
Art. 1411. When the nullity proceeds from the
illegality of the cause or object of the contract, and the act constitutes a criminal offense, both parties being in pari delicto, they shall have no action against each other, and both shall be prosecuted. Moreover, the provisions of the Penal Code relative to the disposal of effects or instruments of a crime shall be applicable to the things or the price of the contract. This rule shall be applicable when only one of the parties is guilty; but the innocent one may claim what he has given, and shall not be bound to comply with his promise.
Art. 1412. If the act in which the unlawful or
forbidden cause consists does not constitute a criminal offense, the following rules shall be observed: (1) When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other's undertaking; (2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or ask for the fulfillment of what has been promised him. The other, who is not at fault, may demand the return of what he has given without any obligation to comply with his promise.
that the fault of one party is more or less equal or equivalent to the fault of the other party (Bough vs. Cantiveros, G.R. No. 13300, September 29, 1919). Exceptions: (1) Payment of usurious interest. In such case, the law allows the debtor to recover the interest paid in excess of that allowed by the usury laws, with interest thereon from the date of payment (Art. 1413, NCC). (2) Payment of money or delivery of property for an illegal purpose, where the party who paid or delivered repudiates the contract before the purpose has been accomplished, or before any damage has been caused to a third person. In such case, the courts may allow such party to recover what he has paid or delivered, if the public interest will thus be sub served (Art. 1414 NCC). (3) Payment of money or delivery of property by an incapacitated person. In such case, the courts may allow such person to recover what he has paid or delivered, if the interest of justice so demands (Art. 1415, NCC). (4) Agreement or contract which is not illegal per se but is merely prohibited by law, and the prohibition is designed for the protection of the plaintiff. In such case, such plaintiff, if public policy is thereby enhanced, may recover what he has paid or delivered (Art. 1416, NCC). (5) Payment of any amount in excess of the maximum price of any article or commodity fixed by law. In such case, the buyer may recover the excess (Art. 1417, NCC). (6) Contract whereby a laborer undertakes to work longer than the maximum number of hours fixed by law. In such case, the laborer may demand for overtime pay (Art. 1418, NCC). (7) Contract whereby a laborer accepts a wage lower than the minimum wage fixed by law. In such case, the laborer may demand for the deficiency (Art. 1419, NCC).
The rule is expressed in the maxims: “Ex dolo malo non oritur actio’’ and “In pari delicto potior est conditio defendantis.’’ The law will not aid either party to an illegal agreement; it leaves them where they are. Of course, this presupposes
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Divisible Contracts (Art. 1420, NCC) Article 1420 of the New Civil Code provides in this regard: "In case of a divisible contract, if the illegal terms can be separated from the legal ones, the latter may be enforced." In simple loan with stipulation of usurious interest, the prestation of the debtor to pay the principal debt, which is the cause of the contract (Article 1350, NCC), is not illegal. The illegality lies only as to the prestation to pay the stipulated interest; hence, being separable, the latter only should be deemed void, since it is the only one that is illegal (Angel Jose vs. Chelda, G.R. No. L-25704, April 24, 1968). Where the contract is divisible (or severable) that is, the consideration is made up of several parts, and the illegal ones can be separated from the legal portions, without doing violence to the intention of the parties, the latter may be enforced. This rule, however, is subject to the contrary intention of the parties (De Leon, Obligations and Contracts, 2010, p. 818). Divisible Contract v. Divisible Obligation It must be noted that a divisible contract is different from a divisible obligation. Divisible contract refers to the divisibility of the cause while divisible obligation refers to the capability of partial fulfillment (De Leon, Obligations and Contracts, 2010, p. 820). Example: S paid P1,000.00 as annual subscription to a weekly magazine to be delivered every week. The contract is indivisible but the obligation is divisible. If the agreement is that the publisher will deliver the magazine every week and S will pay P25.00 upon such delivery, the contract is divisible. The obligations of the parties are likewise divisible (De Leon, Obligations and Contracts, 2010, p. 820).
RESCISSION under Art. 1381 vs. from rescission or RESOLUTION of reciprocal obligation under Art. 1191 ART. 1381
ART. 1991
As to nature of remedy Rescission is a Rescission is a principal subsidiary remedy remedy As to basis The ground is lesion or The ground is breach of economic prejudice faith by the defendant that violates the reciprocity between the parties As to who may be considered “injured party” The action may be The action can be availed availed of even by a of only by a party to a third party (as in the contract. case of accion
pauliana)
As to applicability to kinds of obligations Rescission applies to all kinds of obligations
Rescission applies exclusively to reciprocal obligations As to prescriptive period
4 years from accrual of right of action
Either 10 years (for written contracts) or 6 years (for oral contracts) As to discretionary power of court
If the ground is proved, the court has no discretion but to order rescission
The court has discretionary power not to grant rescission if there is just cause for the fixing period.
(De Leon, Obligations and Contracts, 2010, p. 713 to 714)
In Heirs of Quirong vs. DBP (GR 173441, December 3, 2009), the Court distinguished Resolution from Rescission: “The remedy of "rescission" is not confined to the rescissible contracts enumerated under Article 1381. Article 1191 of the Civil Code gives the injured party in reciprocal obligations, such as what contracts are about, the option to choose between fulfillment and "rescission." Arturo M. Tolentino, a well-known authority in civil law, is quick to note, however, that the equivalent of Article 1191 in the old code actually uses the term
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"resolution" rather than the present "rescission." The calibrated meanings of these terms are distinct. "Rescission" is a subsidiary action based on injury to the plaintiff’s economic interests as described in Articles 1380 and 1381. "Resolution," the action referred to in Article 1191, on the other hand, is based on the defendant’s breach of faith, a violation of the reciprocity between the parties. As an action based on the binding force of a
written contract, therefore, rescission (resolution) under Article 1191 prescribes in 10 years. Ten years is the period of prescription of actions based on a written contract under Article 1144.”
SUMMARY OF DEFECTIVE CONTRACTS:
DEFECT
LEGAL EFFECT
REMEDY GROUNDS NECESSITY DAMAGE
OF
SUSCEPTIBILITY OF RATIFICATION
PRESCRIPTION CURABILITY BY PRESCRIPTION ASSAILABILITY BY THIRD PERSONS
RESCISSIBLE CONTRACTS
VOIDABLE CONTRACTS
Economic damage to a party or to a third party; declaration by law Valid and legally enforceable until judicially rescinded
Vitiation Consent
Rescission or rescissory action Arts. 1381-1382, NCC Necessary
Annulment of contract Art. 1390, NCC
Susceptible but not of ratification proper Prescriptible – Action for rescission prescribes after 4 years
May susceptible
Curable
Curable
Assailable by a party or by a third party who suffered damage
Assailable only by a party to the contract
of
Valid and legally enforceable until judicially annulled
Not necessary
be
Prescriptible Action for annulment prescribes after 4 years
UNENFORCEABLE CONTRACTS
VOID/ INEXISTENT
Without or in excess of authority, or does not comply with Statute of Frauds or incapacity of both parties Inoperative until ratified; Cannot be enforced by court action without proper ratification Only personal defense
Illegality (void) or absence or absolute lack of any of essential requisite of a contract (inexistent) None
Art. 1403, NCC
Declaration of nullity of contract Art. 1409, NCC
Not necessary
Not necessary
May be susceptible
Not Susceptible
Action for recovery; specific performance or damages prescribes (10 years if based on a written contract; 6 years if unwritten) Not Curable
Imprescriptible
Assailable only by a party to the contract
Assailable by a party or by a third party who suffered damage
Not curable
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B. NATURAL OBLIGATIONS (Arts. 1423 to 1430, NCC)
(Dela Cruz vs. Northern Theatrical Enterprises, Inc. et. al., G.R. No. L-7089, August 31, 1954).
Distinguished from Civil Obligations:
Extinctive Prescription
1. Civil obligations give a right of action to compel their performance.
When a right to sue upon a civil obligation has lapsed by extinctive prescription, the obligor who voluntarily performs the contract cannot recover what he has delivered or the value of the service he has rendered (Art. 1424, NCC).
2. Natural obligations, not being based on positive
law but on equity and natural law, do not grant a right of action to enforce their performance, but after voluntary fulfilment by the obligor, they authorize the retention of what has been delivered or rendered by reason thereof (Art. 1423, NCC). Distinguished from Moral Obligations 1. Natural Obligations – There is a juridical tie between the parties which is not enforceable by court action. Its performance produces legal effects which the courts recognize and protect. 2. Moral Obligations – there is no juridical tie whatsoever. Its voluntary fulfillment does not produce any legal effect which the courts recognize and protects (Jurado, Comments and Jurisprudence on Obligations and Contracts, 2010, p. 635-636). Voluntary Fulfilment Voluntary fulfilment means that the debtor complied with the same even if he knew that he could not have been legally forced to do so. Thus, payment through a coercive process of the writ of execution issued at the instance and insistence of the prevailing party is NOT considered voluntary and the provisions of the law on natural obligations cannot be applied thereto (Manila Surety & Fidelity Co. vs. Lim, G.R. No.L-9343, December 29, 1959). No Juridical Tie in Moral Obligations While there is a juridical tie in natural obligations, there is none in moral obligations. Thus, giving legal assistance to one’s employee (accused of a crime) is merely a moral obligation, and the employee cannot recover attorney’s fee from the employer
Effect of Extinctive Prescription: By virtue of which, a right or property has been lost. Payment by Third Person When without the knowledge or against the will of the debtor, a third person pays a debt which the obligor is not legally bound to pay because the action thereon has prescribed, but the debtor voluntarily reimburses the third person, the obligor cannot recover what he has paid (Art. 1425, NCC). If payment is made with the consent of the debtor, a civil obligation arises. Contracts by Minors When a minor who has entered into a contract without the consent of the parent or guardian, after the annulment of the contract voluntarily returns the whole thing or price received, notwithstanding the fact that he has not been benefited thereby, there is no right to demand the thing or price thus returned (Art. 1426, NCC). Contracts by minors; when there has been annulment: This applies to minors when the contract was without parental consent. Here after annulment, there was a voluntary return ● When a minor who has entered into contract without the consent of the parent or guardian, pays a sum of money or
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delivers a fungible thing in the fulfilment of the obligation, there shall be no right to recover the same from the obligee who has spent or consumed it in good faith (Art. 1427, NCC). Performance after an Action to Enforce a Civil Obligation has failed When, after an action to enforce a civil obligation has failed the defendant voluntarily performs the obligation, he cannot demand the return of what he has delivered or the payment of the value of the service he has rendered (Art. 1428, NCC). Rule in case of Payment of Debts Beyond Value of the Decedent’s Estate
SPECIAL CONTRACTS I. SALES A. DEFINITION REQUISITES
AND
ESSENTIAL
Sales Defined By the contract of sale, one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent (Art. 1458, NCC). ●
When a testate or intestate heir voluntarily pays a debt of the decedent exceeding the value of the property which he received by will or by law of intestacy from the estate of the deceased, the payment is valid and cannot be rescinded by the payer (Art. 1429, NCC).
The contract of sale is not a mode for acquisition or transmission of ownership; it only creates title (San Lorenzo Development Corp. vs. CA, G. R. No. 124242, Jan. 21, 2005).
Heirs inherit only to the extent of the value of the inheritance.
Essential Requisites of a Valid Contract of Sale – ART. 1505, NCC
Payment of Legacies despite the fact that the Will is Void
a. Consent or meeting of the minds to transfer ownership in exchange for the price
When a will is declared void because it has not been executed in accordance with the formalities required by law, but one of the intestate heirs, after the settlement of the debts of the deceased, pays a legacy in compliance with a clause in the defective will, the payment is effective and irrevocable (Art. 1430, NCC).
●
Being a consensual contract, contract of sale is perfected at moment there is a “meeting of minds” upon the thing which is object of the contract and upon price (Art. 1475, NCC).
If the will is void, the legacy would also be void and the deceased is considered to have died without a will.
●
There may be a sale against the will of the owner in case of expropriation and the three different kinds of sale under the law – ordinary execution sale, judicial foreclosure sale, and extrajudicial foreclosure sale (Paras, Civil Code of the Philippines Annotated, 2008, p. 12).
the the the the the
311
Requisites: a. Capacity b. Offer and acceptance, and c. No vitiation of consent b. Determinate or determinable subject matter – which refers to the determinate thing which is the object of the contract. c. Price certain in money or its equivalent. It is not enough for the parties to agree on the price of the property, but they must also agree on the manner of payment of the price of the property to give rise to a binding and enforceable contract of sale or contract to sell. This is because the agreement as to the manner of payment goes into the price, such that a disagreement on the manner of payment is tantamount to a failure to agree on the price (Boston Bank of the Phil. vs. CA, G.R. No. 158149, February 9, 2006, Mernelego vs. Banco Filipino Savings and Mortgage Bank, G.R. No. 161524, January 27, 2006). NOTE: The absence of any essential elements negates the existence of a perfected contract of sale (Dizon vs. CA, G.R.122544, June 28, 1999) even when earnest money or down payment has been paid (Manila Metal Container Corp. vs. PNB, G.R. No. 166862, December 20, 2006). B. CONTRACT OF SALE Being a consensual contract, the contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price (Art. 1475, NCC).
Exceptions: a. Where form is required in order that a contract may be enforceable. Under the Statute of Frauds, the following contracts must be in writing; otherwise, they shall be unenforceable by action: 1. Sale of personal property at a price not less than P500.00; 2. Sale of real property or an interest therein regardless of the price involved; and 3. Sale of property not to be performed within a year from the date thereof regardless of the nature of the property and the price involved (Art. 1403[2], a, d, e], NCC). b. Where the “applicable statute” requires that the contract of sale be in a certain form for its validity (Art. 1356, NCC); 1. Sale of large cattle (Art. 1581, NCC). 2. Sale of a piece of land or interest therein through agent is required to be in writing, otherwise the sale thereof by the agent would be void (Art. 1874, NCC). 3. Sale of land by non-Muslim hill tribe cultural minorities of the Philippines is void if not approved by National Commission of Indigenous Peoples (R.A. No. 8371).
The form of a contract refers to the manner in which it is executed or manifested.
c. Where form is required only for the convenience of the parties (De Leon, Comments and Cases on Sales and Lease, 2005, p. 115).
General Rule: Contract of sale may be entered into in any form provided all the essential requisites for its validity are present (Art. 1356, NCC). It may be in writing, it may be oral, it may be partly in writing and partly oral, or it may even be inferred from the conduct of the parties (Art. 1483, NCC).
STATUTE OF FRAUDS: Note that if a particular form is required under the statute of frauds and the same is not followed, the sale is valid, but it is unenforceable even as to the parties to the contract of sale.
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Kinds of Contract of Sales as to Presence or Absence of Conditions (1997, 2001 Bar)
●
Contracts entered into during intervals by insane or demented persons are generally valid (Art. 1328, NCC); whereas, those entered into in a state of drunkenness, or during hypnotic spell, are merely voidable (Art.1328, NCC). Contracts entered into by such legally incapacitated persons are not void, but merely voidable, subject to annulment or ratification (Art. 1393, NCC).
●
A capacitated person CANNOT file an action for annulment using incapacity of the incapacitated party as the basis.
a. Absolute Sale - where the sale is not subject to any condition whatsoever and where title passes to the buyer upon delivery of the thing sold. b. Conditional Sale - where the sale contemplates a contingency, and in general, where the contract is subject to certain conditions. If the condition is imposed on an obligation of a party (e.g., ejection by the vendor of squatters within a certain period before delivery of property) not upon the perfection of the contract itself, which is not complied with, the other party may either refuse to proceed or waive said condition (De Leon, Comments and Cases on Sales and Lease, 2005, p. 16). Parties to the Contract of Sale 1. Seller – one who sells and transfers the thing and ownership to the buyer; 2. Buyer – one who buys the thing upon payment of the consideration agreed upon Capacity of Parties (ARTS. 1489-1492, NCC) General Rule: All persons, whether natural or juridical, who can bind themselves, have legal capacity to buy and sell (Art. 1489, par. 1, NCC). Exception: Those incapacitated to enter into contracts 1. Absolute incapacity - cannot bind themselves in any case 2. Relative incapacity - exists only with reference to certain persons or a certain class of property 3. Specific incapacity/Special disqualifications
He is disqualified from alleging the incapacity of the person whom he contracts (Art. 1397, NCC). Obligation to make restitution in a defective contract, where such defect consists in the incapacity of a party. General Rule: The incapacitated person is not obliged to make any restitution. Exception: Insofar as he has been benefited by the thing or price received by him (Art. 1399, NCC). Sale to a Minor Rule: The contract is voidable. But where necessaries are sold and delivered to a minor or other person without capacity to act, the incapacitated person must pay a reasonable price therefore (Art. 1489 [2], NCC). Necessaries cover everything indispensable for sustenance, dwelling, clothing, medical attendance, education, and transportation (Art. 194, FC).
313
Relative Incapacity: a.
Married Persons
General Rule: Sale between husband and wife is void (Art. 1490, NCC; Camia De Reyes vs. Reyes de Ilano, G.R. No. L-42092, October 28, 1936). The prohibition applies – a. To sales in legal redemption, compromise and renunciations (Art. 1492, NCC); and b. To common-law spouses (Calimlim-Canullas vs. Fortun, G.R. No. L-57499, June 22, 1984). Rationale: The reason behind the prohibition is to protect third persons who may have contracted with a spouse, believing in the existence of certain properties, and who could easily be defrauded by removing such property by transfer to the other spouse (Perez vs. Perez-Senerpida, G.R. No. 233365, March 24, 2021). Exceptions: a. Separation of property in marriage settlement, OR b. Judicial separation of property (Art. 1490, NCC). Who may question validity of sale: a. The heirs of the spouses who have been prejudiced, prior creditors and the State when it comes to the payment of the proper taxes due on the transactions (Medina vs. CIR, G.R. No. L-15113, January 28, 1961). b. However, the spouses, since they are parties to an illegal act, cannot avail themselves of the illegality of the sale on the ground of in pari delicto and creditors who became such only after the prohibited sale (Medina vs. CIR, supra). OBLIGATIONS OF THE PARTIES General Obligations of the Vendor: 1. Transfer the ownership 2. Deliver the thing sold (Arts. 1458 and 1495)
3. Deliver the fruits and accessories (Arts. 1164, 1166, and 1537); 4. Make Warranties (Arts. 1545 - 1581) can be waived or modified; warranty is not an essential element of the contract of sale; 5. Take care of the thing, pending delivery, with diligence of a good father of a family unless law or parties stipulate another standard (Art. 1163); 6. Pay for the expenses for the execution and registration of the sale, unless there is stipulation to the contrary 7. Accord the buyer the right to examine the goods (Art. 1584); 8. Enter into contract with the carrier on behalf of the buyer as may be reasonable under the circ*mstances (Art. 1523); 9. Notify the buyer regarding necessity to insure goods if it is usual to insure them OBLIGATION OF THE TRANSFER OWNERSHIP
SELLER
TO
Not required at the time of the perfection of the contract, but required only at the time of delivery (Art. 1459, NCC). Hence, a perfected contract of sale cannot be challenged on the ground of the seller’s non-ownership of the thing sold at the time of the perfection of the contract of sale (Quijada vs. CA, G.R. No. 126444, December 4, 1998; Cavite Development Bank vs. Sps. Lim G.R. No. 131679, February 1, 2000). When Thing is Deemed Delivered The thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee (Art. 1497, NCC). Delivery – the absolute giving up of the control and custody of the property on the part of the vendor, and the assumption of the same
314
by the vendee (Equatorial Realty Dev. vs. Mayfair Theatre, G.R. No. 106063, November 21, 1996). Types of Delivery: Delivery may be effected in any of the following ways or modes: 1. by actual or real delivery (Art. 1497, NCC); 2. by constructive or legal delivery (Arts. 1498-1501, NCC); or 3. by delivery in any other manner signifying an agreement that the possession is transferred to the vendee (De Leon, Comments and Cases on Sales and Lease, 2005, p. 166). Actual Delivery. Thing sold is placed under the control and possession of the vendee (Art. 1497, NCC) or his agent (Alliance Tobacco Corp., Inc. vs. Phil. Virginia Tobacco Administration, G.R. No. L-66944, November 13, 1989). Constructive delivery is a general term comprehending all those acts which, although not conferring physical possession of the thing, have been held by construction of law equivalent to acts of real delivery (Banawa vs. Mirano, G.R. No. L-24750, May 16, 1980). Constructive delivery may be effected in any of the following ways or modes: 1. by the execution of a public instrument (Art. 1498, par. 1., NCC); 2. by symbolical tradition or traditio symbolica (ibid., par. 2); 3. by traditio longa manu (Art. 1499, NCC); 4. by traditio brevi manu (Ibid.); by traditio constitutum possessorium (Art. 1500, NCC); or by quasi-delivery or quasi-traditio (Art. 1501, NCC). 1. Execution of Public Instruments When the sale of movable or immovables is made through a public instrument, the execution thereof
shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred (Art. 1498, NCC). Sale of thing not subject to control of vendor: Delivery by the execution of a public instrument is equivalent to actual delivery only where the thing is subject to the control of the vendor and there is no impediment that may prevent the passing of the property from the hands of the vendor into those of the vendee. The thing sold must be placed in his control in order that it can be said that delivery has been effected (Addison vs. Felix Tioco, G.R. No. L-12342, August 3, 1918). Execution of Special Power of Attorney to Agent; Not a Delivery A special power of attorney authorizing the agents to execute a deed of sale over the property can by no means be interpreted as delivery or conveyance of ownership over said property (Torcuator vs. Bernabe, G.R. No. 134219, June 8, 2005). 2. Symbolical Tradition or Traditio Symbolica As to movable property, its delivery may also be made by the delivery of the keys of the place or depository where it is stored or kept (Art. 1498, NCC). 3. Traditio Longa Manu This mode of delivery takes place by the mere consent or agreement of the contracting parties as when the vendor merely points to the thing sold which shall thereafter be at the control and disposal of the vendee (De Leon, Obligations and Contracts, 2005, p. 181).
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4. Traditio Brevi Manu This mode of legal delivery happens when the vendee has already the possession of the thing sold by virtue of another title as when the lessor sells the thing leased to the lessee. Instead of turning over the thing to the vendor so that the latter may, in turn, deliver it, all these are considered done by action of law (De Leon, Obligations and Contracts, 2005, p. 181).
OBLIGATIONS OF THE VENDEE General Obligations of Vendee: 1. Payment of price; 2. Accepting the delivery of thing sold; and 3. Bear the expenses for the execution and registration of the sale and putting the goods in a deliverable state, if such is the stipulation (Art. 1488, NCC).
5. Constitutum Possessorium Rule on right of buyer to examine This mode of constructive delivery takes effect when at the time of the perfection of the sale, the seller held possession of the subject matter in the concept of owner, and pursuant to the contract, the seller continues to hold physical possession thereof no longer in the concept of an owner, but as a lessee or any other form of possession other than in the concept of owner and pursuant to sale, he would now hold possession in the concept of an owner (Villanueva, Law on Sales, 2009, p. 230).
General Rule: If not previously examined by buyer and no stipulation to contrary, delivery is not deemed accepted unless buyer has reasonable opportunity to examine the delivered goods (Art. 1584 [1], NCC). Buyer has, upon request and unless there is contrary agreement, the right to examine the goods when seller tenders delivery of the same (Art. 1584 [2], NCC).
Used to indicate the transfer of rights or incorporeal things through the exercise of the rights by the grantee with the acquiescence of the grantor (Rabuya, Civil Review I, 2021 Ed., p. 746).
Exception: C.O.D – When the terms indicate that goods shall not be delivered by the carrier to the buyer until he has paid the price. The buyer is not entitled to examine the goods before the payment of the price (Art. 1584, NCC).
Delivery of Incorporeal Thing
Seller’s Warranty
Delivery of incorporeal thing is effected: 1. by the execution of a public instrument (Art. 1498, NCC); or 2. when that mode of delivery is not applicable, by the placing of the titles of ownership in the possession of the vendee (Art. 1501, NCC); or 3. by allowing the vendee to use his rights as new owner with the consent of the vendor (Art. 1501, NCC).
In the absence of express or implied agreement of the parties, acceptance of the goods by the buyer shall not discharge the seller from liability in damages or other legal remedy for breach of any promise or warranty in the contract of sale (Art. 1586, NCC).
6. Quasi-traditio
Refusal to Accept Unless otherwise agreed, where goods are delivered to the buyer, and he refuses to accept them, having the right to do so, he is not bound to return them to the seller, but it is sufficient if he notifies the seller that he refuses to accept them (Art. 1587, NCC). However, when
316
the buyer's refusal to accept the goods is without just cause, the title thereto passes to him from the moment they are placed at his disposal (Art. 1588, NCC). Circ*mstances goods:
indicating
acceptance
b.
c.
of
1. Express acceptance ● When buyer intimates to the seller that he has accepted them; 2. Implied acceptance ● When goods have been delivered to buyer and he does any act in relation to them which is inconsistent with the ownership of the seller; or ● When, after the lapse of a reasonable time, buyer retains the goods without intimating to seller that he has rejected them (Art. 1585, NCC). Effect of acceptance on seller’s breach: 1. Seller remains liable for damages or other legal remedy for breach of any promise or warranty in the contract of sale, in the absence of agreement to the contrary. 2. But the buyer must give notice to the seller of such breach within a reasonable time after the buyer knows, or ought to know of such breach; otherwise, the seller is not liable (Art. 1586, NCC). Other Obligations of the Buyer 1. Duty of buyer to take care of goods without obligation to return (Art. 1587, NCC); 2. To be liable for a depositary if he voluntarily constitutes himself as such (Art. 1587, NCC); and 3. Pay interest for the period between the delivery of the thing and the payment of the price in the following circ*mstances: a. Should it have been so stipulated;
1.
Should the thing sold and delivered produce fruits or income; Should he be in default, from the time of judicial or extrajudicial demand for the payment of the price (Art. 1589, NCC).
Contract to Sell
A contract to sell is a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price (Nabus v Pacson, GR No. 161318, November 25, 2009). CONTRACT OF SALE V. CONTRACT TO SELL Contract of Sale
Contract to Sell
As to transfer of ownership Ownership is transferred to the buyer upon delivery of the object to him. Note: Vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded
Ownership is transferred upon full payment of the purchase price. Note: Prior to full payment, ownership is retained by the seller.
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As to numbers of contracts There is only one contract executed between the seller and the buyer.
There are two contracts: 1. The contract to sell. (Preparatory to sale) 2. The deed of absolute sale. (The principal contract is executed after full payment of the purchase price.)
As to payment as a condition Non-payment of the price is a resolutory condition. Vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded.
Full payment of the price is a positive suspensive condition. Note: Failure to fully pay the price is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective
(Uy & Sons, Inc. v Valbueco Inc., G.R. No.o. 179594, September 11, 2013). The non-payment of the purchase price renders the contract to sell without force and effect
(Tumibay v. Lopez, GR No. 171692, June 3, 2013). As to remedies available 1. Specific Performance 2. Rescission 3. Damages
1. 2.
Resolution Damages
(De Leon, Comments and Cases on Sales and Lease, 2005, p. 22)
Importance of Distinctions Between Contract to Sell and Conditional Contract of Sale: In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such cases. Title to the property will transfer to the buyer after registration because there is no defect in the owner-seller’s title per se, but the latter may be sued for damages by the intending buyer (United Muslim and Christian Urban Poor Association, Inc. vs. Bryc-V Development Corp., G.R. No. 179653, July 31, 2009). ●
In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the seller’s title thereto. In fact, if there had been a previous delivery of the subject property, the seller’s ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, a second buyer of the property who may have had actual or constructive knowledge of such defect in the seller’s title, or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Second buyer cannot defeat the first buyer’s title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale (Ibid.).
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2. Option Contract
3. Right of First Refusal
Option Contract; Concept; Effects
Right of First Refusal; Concepts
Option Contract as a privilege existing in one person, for which he had paid a consideration and which gives him the right to buy certain merchandise or certain specified property, from another person, if he chooses, at any time within the agreed period at a fixed price (Enriquez de la Cavada v. Diaz, G.R. No. L-11668, April 1, 1918).
It is a contractual grant on the part of the owner that if he decides to sell the property in the future, he would first negotiate its sale to the promisee (Villanueva, Law on Sales, 2009, p. 156).
Nature of Option Contracts 1. It is a preparatory contract, separate and distinct from the main contract itself (subject matter of the option) which the parties may enter into upon the consummation of the option; 2. An option must be supported by a consideration distinct from the price (De Leon, Comments and Cases on Sales and Lease, 2005, p. 82). Obligations of the Offeror in Option Contracts: 1. Personal obligation not to offer to any third party the sale of the object of the option during the option period; 2. Personal obligation not to withdraw the offer or option during option period; and 3. Obligation to hold the subject matter for sale to the offeree in the event that offeree exercises his option during the option period (Vazquez v. Ayala Corp., G.R. No. 149734, November 19, 2004). Effect When Option is Without Separate Consideration Option contract would be void, as a contract, but would still constitute a valid offer; so that if the option is exercised prior to its withdrawal, that is equivalent to an offer being accepted prior to withdrawal and would give rise to a valid and binding sale (De Leon, Comments and Cases on Sales and Lease, 2005, p. 83).
A contract of lease which gave the lessee a 30day exclusive option to purchase the leased property in the event the lessor should desire to sell the same, such contractual stipulation which does not provide for a price certain nor the terms of payment, actually grants a right for first refusal and is not an option clause or an option contract (In the case of Equatorial Realty Dev., Inc. v. Mayfair Theater, Inc., G.R. No. 106063, November 21, 1996). Right of First Refusal Must be in Writing: When right of first refusal is not stipulated in the lease contract, it cannot be exercised, and verbal grants of such right cannot be enforceable since the right of first refusal must be clearly embodied in a written contract Effect of Sale of Property in Violation of Right of First Refusal: A contract of sale entered into in violation of a right of first refusal of another person, while valid, is rescissible. A third-party who bought the property from the seller who violated the right of first refusal granted to the lessee of the property cannot claim to be a stranger to the arrangement and not a proper party in the action for rescission since such buyer actually steps into the shoes of the owner-lessor of the property by virtue of his purchase and assumed all the obligations of the lessor under the lease contract, especially when the complaint prayed for the annulment of the sale of the property to him (Parañaque Kings Enterprises, Inc. v. Court of Appeals, G.R. No. 111538, February 26, 1997).
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Q: In a 20-year lease contract over a building, the lessee is expressly granted a right of first refusal should the lessor decide to sell both the land and building. However, the lessor sold the property to a third person who knew about the lease and in fact agreed to respect it. Consequently, the lessee brings an action against both the lessor-seller and the buyer (a) to rescind the sale and (b) to compel specific performance of his right of first refusal in the sense that the lessor should be ordered to execute a deed of absolute sale in favor of the lessee at the same price. The defendants contend that the plaintiff can neither seek rescission of the sale nor compel specific performance of a "mere" right of first refusal. Decide the case. (1998 Bar) A: Yes, the action for rescission of the offending sale and specific performance of the right of first refusal will prosper. In a case with similar facts (Equatorial Realty Dev., Inc. v. Mayfair Theater, Inc., supra), the Court ruled to sustains both action to rescind the offending sale and the specific performance because the buyer in the subsequent sale knew the existence of right of first refusal, hence in bad faith.
Earnest Money distinguished from Option Money Earnest Money
Option Money
As to Money Given Forms part purchase price.
of
Money given as a distinct consideration for an option contract.
As to Perfection Given only where there is already a sale.
Applies to a sale not yet perfected.
Obligation of the buyer Buyer is bound to pay the balance.
Buyer is not required to buy but may even forfeit it depending on the terms of the option.
C. EARNEST MONEY Earnest money, called “arras,” is something of value to show that the buyer was really in earnest, and given to the seller to bind the bargain (See 14 Words and Phrases, p. 23). It is part of the purchase price, hence, is a proof of the perfection of the contract (Art. 1482, NCC).
D. DOUBLE SALES There is double sale when same property is sold by the same vendor to different vendees (Art. 1544, NCC). Requisites of Double Sales 1. The two (or more) sales transactions must constitute valid sales; 2. The two (or more) sales transactions must pertain to exactly the same subject matter; 3. The two (or more) buyers at odds over the rightful ownership of the subject matter must each represent conflicting interests; and
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4. The two (or more) buyers at odds over the rightful ownership of the subject matter must each have bought from the very same seller (Cheng vs. Genato, G.R. No. 129760, December 29, 1998). Rules in Case of Double Sales The conflicting rights of said vendees in case of double sales shall be resolved in accordance with the following rules: 1.
When subject matter is movable - the ownership shall be acquired by the vendee who first takes possession in good faith (Art. 1544, NCC; Villa Rey Transit, Inc. vs. Ferrer, G.R. No. L-23893, October 29, 1968).
2. When subject matter is immovable a. Registration in good faith: The vendee who first registers the sale in good faith in the Registry of Property has a preferred right over another who has not registered his title even if the latter is in actual possession of the immovable property. b. Possession in good faith: In the absence of registration, the vendee who first takes possession in good faith; and c. Oldest title in good faith: In the absence of both registration and possession, the vendee who presents the oldest title in good faith (Art. 1544, NCC). ●
Art. 1544 does not apply to land application under the Torrens System.
Concept of Purchaser in Good Faith He is deemed a possessor in good faith who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it (Art. 526, NCC). When a piece of land is in the actual possession of persons other than the seller, the buyer must be
wary and should investigate the rights of those in possession. Without making such inquiry, one cannot claim that he is a buyer in good faith (Rosaroso vs. Doria, G.R. No. 194846 June 19, 2013). Effect if seller is not the owner at the time of delivery: If the seller is not the owner, the sale is null and void (nemo dat quod non habet). The seller is liable for damages for breach of his obligation to transmit ownership to the buyer (Rabuya, Pre-bar Reviewer in Civil Law, 2021 Ed., p. 446-447). Sale by a Person Having a Voidable Title General Rule: In a sale by the non-owner, the buyer acquires no better title to the goods than the seller had (he merely steps into the shoes of the seller). Exceptions: (True Owner Cannot Recover): 1. Owner is estopped or precluded by his conduct (Art. 1505, NCC); 2. Sale made by the registered or apparent owner in accordance with registration laws (Art. 1505, NCC); 3. Sales sanctioned by judicial or statutory authority (Art. 1505, NCC); 4. Purchases in a merchants store, fairs or markets; the thing must be on display to make it part of the goods for sale to bar recovery by the true owner (Art. 1505, NCC); 5. When a person who is not the owner sells and delivers a thing, and subsequently acquires title thereto (Art. 1434, NCC); 6. When the seller has a voidable title which has not been avoided at the time of the sale (Art. 1506, NCC) 7. Sale by co-owner of whole property or a definite portion thereof;
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8.
Special rights of unpaid seller (Arts. 15261533, NCC). ● When a non-owner who sells and delivers a thing subsequently acquires title thereto, the title passes by operation of law to the buyer (Art. 1434, NCC).
●
●
E. RISK OF LOSS ●
Effect of Loss of Thing Sold The thing is lost when it perishes or goes out of commerce or disappears in such a way that its existence is unknown or it cannot be recovered (Art. 1189, NCC). a. If occurs prior to perfection, the seller bears the loss, being the owner of the thing ( res perit domino). b. If loss occurs at the time of perfection: ● If subject matter has been “entirely” lost, contract shall be without any effect (Art. 1493, NCC). ●
First view: Seller is released from his obligation to deliver but buyer’s obligation to pay subsists (Paras, Vol. V, 1990 ed., p. 58; Padilla, Civil Code, 1972, Ed., p. 840-841). Hence, the buyer bears the risk of loss. Second view: Counter-prestation is also extinguished (IV Tolentino, Civil Code, 1991 ed., 337). Hence, risk of loss is borne by the seller and buyer need not pay the price. ●
If the subject matter has been lost in part only, the buyer may choose between: withdrawing from the contract; or demanding the remaining part, paying its price in proportion to the total sum agreed upon (Id).
c. If loss occurs after perfection but before delivery (Villanueva, Law on Sales, 2009, p. 348): ● If lost without fault of the vendor, obligation is extinguished. ● If lost through the fault of the vendor, he is obliged to pay damages.
If the thing deteriorates without fault of the vendor, impairment is borne by vendee. If it deteriorates through fault of the vendor, vendee may choose between rescission of obligation and its fulfillment, with indemnity for damages in either case. If loss without seller’s fault: Two views:
d.
View of Tolentino is more just and equitable and in conformity with the principle of res perit domino. At any rate, the Supreme Court had the occasion to hold that after perfection but before delivery, the risk of loss is borne by the seller under the rule of res perit domino (Union Motors vs. CA, G.R. No. 117187, July 20, 2001; Chrysler Philippines vs. CA, G.R. No. L-55684, December 19, 1984). If loss and deterioration occur after delivery:
General Rule: When ownership over goods has been transferred to the buyer, goods are buyer’s risk (Art. 1504, NCC).
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Exceptions: a. When delivery is made to buyer in pursuance of contract and ownership is retained by seller merely to secure performance of buyer’s obligations, goods are still at buyer’s risk from time of such delivery (Art. 1504, NCC). b. Where actual delivery is delayed thru fault of either buyer or seller, goods are at risk of party in fault (Art. 1504, NCC). Loss in case of specific goods In the case of sale of specific goods, and without the knowledge of the seller, the goods have perished in part or wholly or in a material part so deteriorated in quality as to be substantially changed in character, the buyer may at his option: treat sale as avoided; or treat sale as valid in all of the existing goods or in so much thereof as have not deteriorated, and as binding the buyer to pay the agreed price for the goods in which the ownership will pass, if the sale was divisible (Art. 1494, NCC). F. BREACH OF CONTRACT REMEDIES a. Remedies of the Seller 1. Action for payment of the price (Art. 1595); 2. Action for damages for non-acceptance of the goods (Art. 1596); 3. Action for rescission (Art. 1597).
b. Remedies of the Buyer 1. Action for specific performance (Art. 1598); 2. Action for rescission or damages for breach of warranty (Art. 1599).
c.
Remedies of the Seller for Breach of Contract in Case of Movables
1. Ordinary Remedies Movables in General – Action to rescind the sale (Art. 1593). Sale of Goods: 1.
Action for specific performance when ownership has been transferred to the buyer (Art. 1595, NCC). 2. Treat the goods as the buyer’s and may maintain an action for the price - When the ownership in the goods has not passed, if they cannot readily be resold for a reasonable price, the seller may offer to deliver the goods to the buyer, and, if the buyer refuses to receive them, may notify the buyer that the goods are thereafter held by the seller as bailee for the buyer (Art. 1595, NCC). When buyer wrongfully refuses to accept goods:
neglects
/
The seller may maintain an action against him for damages for non-acceptance in accordance with the following: a. The seller of the goods who has not been paid or to whom the price has not been tendered. b. The seller of the goods, in case a bill of exchange or other negotiable instrument has been received as conditional payment, AND the condition on which it was received has been broken by reason of the dishonor of the instrument, insolvency of the buyer or otherwise (Villanueva, Law on Sales, 2009, p. 363).
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Remedies of Unpaid Seller: 1. Possessory lien over the goods; ● Right of lien is not affected by any sale, or other disposition of the goods which the buyer may have made, unless the seller assented thereto. If a negotiable document of title has been issued for goods, no seller’s lien shall defeat the right of any purchaser for value and in good faith to whom such document has been negotiated, whether such negotiation be prior or subsequent to the notification to the carrier, or other bailee who issued such document, of the seller’s claim to a lien (Art. 1535, NCC). ● It is exercisable only in the following instances: a. Where the goods have been sold without any stipulation as to credit; b. Where the goods have been sold on credit, but the term of credit has expired; c. Where the buyer becomes insolvent (Art. 1527, NCC). 2. Right of stoppage in transit after he has parted with the possession of the goods and the buyer becomes insolvent; ● The unpaid seller may resume possession of the goods at any time while they are in transit, and he will then become entitled to the same rights in regard to the goods as he would have had if he had never parted with the possession (Villanueva, Law on Sales, 2009, p. 371). ●
shall defeat the right of any purchaser for value and in good faith to whom such document has been negotiated, whether such negotiation be prior or subsequent to the notification to the carrier, or other bailee who issued such document, of the seller’s claim to a lien (Art. 1535, NCC). 3. Special Right of resale; ● Unpaid seller may exercise special right of resell under the following circ*mstances: a. The goods are of perishable nature; b. Where the seller has been expressly reserved in case the buyer should make default; or c. Where the buyer has been in default in the payment of the price for an unreasonable time (Art. 1533, NCC). ● Unpaid seller, without need of first rescinding the contract judicially, is entitled to resell the same, and if he is obliged to sell it for less than the contract price, the buyer is liable for the difference (Katigbak vs. Court of Appeals, G.R. No. L-16480, January 31, 1962).
If a negotiable document of title has been issued for goods, no seller’s right to stoppage in transitu
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4. Special Right to rescind the sale; ● Notwithstanding that the ownership in the goods may have passed to the buyer, the unpaid seller has a special right to extrajudicially rescind the sale. ● Unpaid seller may exercise special right to rescind the sale under the following circ*mstances: a. The seller has expressly reserved the right to do so in case the buyer should make default; or b. The buyer has been in default in the payment of the price for an unreasonable time. 5. Action for the price;
Effect of Failure to Pay: Failure of the vendee to pay the price after the execution of the contract does not make the sale null and void for lack of consideration but results at most in default on the part of the vendee, for which the vendor may exercise his legal remedies (Balatbat vs. CA, G.R. No. 109410, August 28, 1996). Failure to pay the consideration results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract (Buenaventura vs. CA, G.R. No. 126376, November 20, 2003). When Vendee Liable to Pay Interest: 1. If it has been so stipulated; 2. If the thing sold and delivered produce fruits or income; or 3. If the buyer be in default, from the time of judicial or extrajudicial demand for the payment of price (Art. 1589, NCC). 4. Action for damages
1. Recto Law SALE OF PERSONAL/MOVABLES PROPERTY THRU INSTALLMENT (AS AMENDED BY RECTO LAW, ACT NO. 4122) Remedies of Vendor: In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: a. Exact fulfillment of the obligation, should the vendee fail to pay at least one installment; b. Cancel the sale, should the vendee’s failure to pay cover two or more installments; c. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee’s failure to pay cover two or more installments (Art. 1484, NCC). Foregoing remedies are alternative and not cumulative. If the creditor chooses one remedy, he cannot avail himself of the other two (Delta Motors Sales Corp. vs. Niu Kim Duan, G.R. No. 61043, September 2, 1992; Elisco Tool Manufacturing Corp. vs. CA, G.R. No. 109966, May 31, 1999). What constitute “sale on installment” 1. The price must be payable in several installments (Levy Hermanos, Inc. vs. Gervacio, G.R. No. L-46306, October 27, 1939). 2. The Recto law does not apply to a sale where there is an initial payment and the balance is payable in the future. This is not a sale on installment (Id.). A. Specific Performance General Rule: The GR is that when the seller has chosen specific performance, he can no longer seek for rescission nor foreclosure of the chattel mortgage constituted on the thing sold. The seller is deemed to have chosen specific
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performance, thereby foreclosing resort to the other two remedies, when he files an action in court for recovery. Exception: Even if the seller had chosen specific performance, but if the same becomes impossible, the seller may still choose rescission (Art. 1191, NCC). ●
In Chieng vs. Sps. Santos (G.R. No. 169647, Aug. 31, 2007), involving a real estate mortgage obligation, the Supreme Court held that the filing of the criminal cases for violation of B.P. Blg. 22 where the civil action for recovery of the amount of the checks is impliedly instituted (Sec. 1[b] of Rule 111 of the 2000 Rules on Criminal Procedure), the remedy of collection suit is deemed to have been availed, thus barring the complainant from subsequently resorting to an action for foreclosure.
B. Rescission/Cancellation of Sale When remedy is deemed chosen: The rule is that the seller is deemed to have chosen the remedy of rescission, and can no longer avail of the other two remedies, when he has clearly indicated to end the contract, such as: (1) when he sends a notice of rescission; or (2) takes possession of the subject matter of the sale; or (3) when he files an action for rescission. Forfeiture of installment or rentals paid: General Rule: As a rule, rescission obliges the parties to make mutual restitution (Art. 1385, NCC). Hence, the payments must be returned. Exception: A stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circ*mstances (Art. 1486, NCC).
Effects of rescission: It abrogates the contract from the very beginning, subject to the provisions of Article 1486 allowing the vendor to retain installments payments if there is such stipulation and the same is not unconscionable under the circ*mstances. ●
As a consequence, the seller is barred from exacting payment from the buyer the balance of the price (Nonato vs. IAC, G.R. No. L-67181, November 22, 1985; Delta Motor Sales Corp. vs. Niu Kim Duan, supra.). The same is not consistent with the remedy of rescission.
C. Foreclosure of Chattel Mortgage: When remedy is deemed chosen: General Rule: Where the mortgagee elects a remedy of foreclosure, the law requires the actual foreclosure of the mortgaged chattel Thus, in Manila Motor Co. vs. Fernandez (G.R. No. L-8377, August 28, 1956), the Court held that it is the actual sale of the mortgaged chattel in accordance with Sec. 14 of Act No. 1508 that would bar the creditor (who chooses to foreclose) from recovering any unpaid balance (Pacific Commercial Co. vs. De la Rama, G.R. No. 47771, June 17, 1941). And it is deemed that there has been foreclosure of the mortgage when all the proceedings of the foreclosure, including the sale of the property at public auction, have been accomplished (Macondray & Co., Inc. vs. Tan, G.R. No. 45105, November 26, 1938). Exception: Although no actual foreclosure as contemplated under the law has taken place but since the vehicle is already in the possession of the creditor and it has persistently and consistently avowed that it elects the remedy of foreclosure, the creditor can be directed to foreclosure the said vehicle without more (Magna Financial Services Group,
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Inc. vs. Colarina, G.R. No. 158635, December 9, 2005).
lessee of the possession or enjoyment of the thing (PCI Leasing and Finance Inc. vs. Giraffe‐ X Creative Imaging, Inc., G.R. No. 142618, July 12, 2007).
Effect of foreclosure of mortgage: General Rule: In case of foreclosure, the creditormortgagee shall have no further action against the purchaser to recover “any unpaid balance of the price.” Any agreement to the contrary shall be void. This is known as the Recto Law (Art. 148[3], NCC). Notwithstanding the language of the law, current jurisprudence upholds the full barring effect in recovery to include damages, interests and attorney’s fees (and not only the balance of the purchase price). Exception: However, where the mortgagor plainly refuses to deliver the chattel subject of the mortgage upon his failure to pay two or more installments, or if he conceals the chattel to place it beyond the reach of the mortgagee, the creditormortgagee is allowed to recover the expenses properly incurred in effecting seizure of the chattel and reasonable attorney’s fees in prosecuting the action for replevin (Filipinas Investment & Finance Corp., vs. Ridad, G.R. No. L-27645, November 28, 1969). The seller can no longer proceed to foreclose on the real estate mortgage because if the guarantor should be compelled to pay the balance of the purchase price, the guarantor will in turn be entitled to recover what he has paid from the debtor vendee; so ultimately, it will be the buyer who will be made to bear the payment of the balance of the price, despite the earlier foreclosure of the chattel mortgage given by him (Cruz v. Filipinas Investment & Finance Corp., G.R. No. L-27645, November 28, 1969). Applicability of Recto Law: The Recto law applies also to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing (Art. 1485, NCC). ●
This law covers contracts of sale of personal property by installments (Act No. 4122). It is also applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the
●
In choosing, through replevin, to deprive the lessee-buyer of possession of the leased equipment, the lessorseller waived its right to bring an action to recover unpaid rentals on the said leased items. The condition that the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose of applying Article 1485 was fulfilled upon filing of the lessor-seller of the complaint for a sum of money with prayer for replevin to recover possession of the office equipment. By virtue of writ of seizure issued by the court, the lessor-seller has effectively deprived lessee-buyer of their use, a situation which, by force of Recto Law, in turn precludes the former from maintaining an action for recovery of “accrued rentals” or the recovery of the balance of the purchase price plus interest (PCI Leasing and Finance, Inc. vs. Giraffe-X Creative Imaging, Inc., supra).
2. Maceda Law SALE OF IMMOVABLE PROPERTY THRU INSTALLMENT (MACEDA LAW, R.A. 6552) Applies to sale or financing of real estate on installment payments, including residential condominium apartments. The MACEDA law applies to sale of real estate on installments, whether the contract be one of contract to sell (Villanueva, Sales, 2009 Ed., p. 432; Rillo vs. CA, G.R. No. 125347, June 19, 1997).
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Requisites: 1. Transactions or contracts involving the sale OR financing of real estate on installment payments, including residential condominium apartments; and 2. Buyer defaults in payment of succeeding installments. Not Applicable: 1. Sale of industrial lots 2. Sale of commercial buildings 3. Sale of urban land covered by Urban Land Reform and agricultural land under Agrarian Reform Law 4. Sale of lands payable in straight terms Rights of the Buyer If Buyer Has Paid At Least 2 Years of Installments: 1. The buyer must pay, without additional interest, the unpaid installments due within the total grace period earned by him. There shall be one (1) month grace period for every one (1) year of installment payments made. This right shall be exercised by the buyer ONLY once in every 5 years of the life of the contract AND its extensions. 2.
Actual cancellation can only take place after 30 days from receipt by the buyer of the notice of cancellation OR demand for rescission by a notarial act AND upon full payment of the cash surrender value to the buyer t of the cash surrender value to the buyer (Olympia Housing vs. Panasiatic, G.R. No. 140468 January 16, 2003). ●
payments made. After five (5) years of installments, there shall be an additional 5% every year but not to exceed 90% of the total payments made. 3. The buyer shall have the right to sell his rights or assign the same to another person OR to reinstate the contract by updating the account during the grace period and before actual cancellation of the contract. 4. The buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase price any time without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property. If Buyer Has Paid Less Than Two Years Of Installments: 1. Buyer is entitled to pay unpaid installments within a grace period of NOT less than 60 days from the date the installments became due. Within the grace period, buyer also has the right to assign his rights. 2. After the grace period, seller may cancel the contract AFTER 30 days from receipt of the buyer of notice of cancellation or demand for rescission by a notarial act. 3. Here, there is no cash surrender value. Maceda Law, MANDATORY: Any stipulation of the parties contrary to the foregoing rules shall be null and void (Sec. 7, R.A. No. 6552).
The seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to 50% of the total
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Sale of Immovable Property In General Anticipatory breach (No Actual Breach): Seller may sue for rescission of sale of immovable property even in the absence of actual breach by buyer, if the following conditions are present: 1. Seller has already delivered the immovable property but the buyer has not yet paid the price; and 2. Seller has reasonable grounds to fear the loss of the immovable property and its price (Art. 1591, NCC). Where there was actual breach (buyer failed to pay agreed price within agreed period): 1. Buyer may still pay after the expiration of the period as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant the buyer a new term (Art. 1592, NCC). 2. The foregoing rule applies even if the contract provides for its automatic rescission upon failure of the buyer to pay the price at the time agreed upon (Art. 1592, NCC). 3. An offer to pay prior to the demand for rescission is sufficient to defeat the seller’s right under Article 1592 of the Civil Code (Art. 1592, NCC). 4. Under the provisions of Article 1592, the demand for rescission must either be judicial or by notarial act. A letter informing the buyer of the automatic rescission of an agreement does not amount to a demand for rescission if it is not notarized (Laforteza vs. Machuca, G.R. No. 137552, June 16, 2000); 5. The foregoing rules (or Article 1592) does not apply in the following: a. Cases covered by R.A. No. 6552 (or
Maceda Law) b. Contracts to sell – Article 1592 of the NCC, requiring demand by suit
c.
or by notarial act in case the vendor of realty wants to rescind does not apply to a contract to sell but only to contract of sale (Pangilinan vs. CA, G.R. No. 83588, September 29, 1997); Sale on installment of real estate where parties have laid down the procedure to be followed in the event vendee failed to fulfill his obligation (Torralba vs. Delos Angeles, G.R. No. L-27592, February 14, 1980).
Remedies of Buyer Action for Specific Performance (Art. 1598, NCC): 1. When a seller has broken a contract to deliver specific or ascertained goods, the buyer may ask for specific performance, without giving seller the option to retain the goods on payment of damages. 2. Judgment may be unconditional, or upon such terms and conditions as to damages, payment of the price and otherwise, as the court may deem just (Art. 1598, NCC). In case of breach of warranty by seller: Buyer may, at his election – 1. Accept or keep goods and set up against the seller, the breach of warranty by way of recoupment in diminution or extinction of price; 2. Accept or keep goods and maintain an action against seller for damages for breach of warranty; 3. Refuse to accept goods, and maintain an action against seller for damages for breach of warranty; or
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4. Rescind contract of sale and refuse to receive goods or if goods have already been received, return them or offer to return them to seller and recover the price or any part thereof, which has been paid (Art. 1599, NCC).
Right to Suspend Payment: 1. In sales not involving subdivision or condominium projects: a. Grounds for suspension of payment: 1. The vendee is disturbed in the possession or ownership of the thing acquired; or 2. Vendee has reasonable grounds to fear such disturbance, by a vindicatory action or for a foreclosure of mortgage (Art. 1590 NCC). ● But a mere act of trespass does not authorize the suspension of the payment of the price (Art. 1590, NCC).
Remedy of Rescission by Buyer (Art. 1599, NCC): 1. Not entitled to rescind: a. If he knew of breach of warranty when he accepted the goods without protest; b. If he fails to notify the seller within a reasonable time of the election to rescind; c. If he fails to return or offer to return the goods to the seller in substantially as good condition as they were in at the time the ownership was transmitted to the buyer. 2. If entitled to rescind and elected to do so (Art. 1599, NCC): a. He shall cease to be liable for the price upon returning or offering to return the goods. b. If price or any part thereof has already been paid, seller shall be liable to repay so much thereof as has been paid, concurrently with the return of the goods, or immediately after an offer to return of the goods, or immediately after an offer to return the goods in exchange for repayment of the price. c. If the seller refuses to accept an offer of buyer to return the goods, the buyer is deemed to hold the goods as bailee for seller, but subject to a lien to secure payment of any portion of the price, which he has been paid, and with remedies for the enforcement of such lien.
b. Remedies of buyer: He may suspend payment of the price until the vendor has caused the disturbance or danger to cease. But this remedy of suspension may not be availed of if the seller gives security for the return of the price or it has been stipulated that, notwithstanding any such contingency, the vendee shall be bound to make the payment (Art. 1590, NCC). 2. In sales involving subdivision condominium projects:
or
Ground for suspension of payment: Failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying the same (Sec. 23, PD 957). b. Alternative remedies of the buyer: 1. The buyer may suspend payment and wait for further development; or (2) he may demand reimbursem*nt of the a.
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2.
3.
total amount paid (Sec. 23, P.D. No. 957). In case of the first option, the owner/developer may not forfeit the installment payments made by the buyer (Sec. 23, PD 957). He may not also be ousted from the subdivision (Relucio vs. BrillanteGarfin, G.R. No. 76518, July 13, 1990). In case of the second option, the notice of informing the developer of the intention not to remit further payments on account of nondevelopment of the subdivision, and the demand for refund, can be made at the same time (Casa Filipina Realty Corp. vs. Office of the Pres., G.R. No. 99346, February 7, 1995).
G. EXTINGUISHMENT OF THE SALE The same grounds by which obligations in general are extinguished, also apply to the extinguishment of the obligations arising from contracts of sale. They include payment of the price or performance, loss of the subject matter, condonation or remission, confusion or merger of the rights of creditor and debtor, compensation, novation, annulment, rescission, fulfillment of a resolutory condition, and prescription.
a. Cancellation of sale of personal property payable in installments (Art. 1484, NCC). b. Resale of goods by the unpaid seller (Art. 1532, NCC). c. Rescission of the sale by the unpaid seller (Art. 1534). d. Rescission by the buyer in case of partial eviction (Art. 1556). e. Rescission by the buyer in case of breach of warranty against hidden defects (Art. 1567). f. Rescission by the buyer of sale of animals with redhibitory defects (Art. 1580); 3. By redemption, whether conventional or legal. 1.
That which takes place when 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 contract, other legitimate payments made by reason of the sale, as well as necessary and useful expenses made on the thing sold (Arts. 1601 and 1616, NCC). ●
Payment or performance only extinguishes the obligations to which they pertain to in a contract of sale, but not necessarily the contract itself, since the relationship between buyer and seller remains after performance or payment, such as the continuing enforceability of the warranties of the seller (Villanueva, Law on Sales, 2009 Ed., p. 515). Causes of Extinguishment: (Arts. 1600, 1231, NCC)
Conventional Redemption
The GR in redemption is that it is not sufficient that a person offering to redeem manifests his desire to do so. The statement of intention must be accompanied by an actual and simultaneous tender of payment for the full amount of the repurchase price (BPI Family Savings Bank, Inc. vs. Veloso, G.R. No. 141974, August 9, 2004).
1. Same causes as all other obligations; 2. By various causes of extinguishment in Title VI (Sales) such as:
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Period of Conventional Redemption: 1. When no period is fixed: If the right of redemption was agreed upon but there was no stipulation as to the period within which the right shall be exercised, the period of redemption shall be four years from the date of the contract (Art. 1606, NCC). 2. When a period is fixed by the parties: a. If the period does not exceed ten years- such as when the right to repurchase shall be exercised within five years, then the period shall be five years from the date of the contract. If the period exceeds ten years, then the period shall be ten years from the date of the contract, the stipulation as to the excess being null and void (Montiero vs. Salgado, G.R. Nos. 7287, 7288, March 29, 1914). b. When the period agreed upon is indefinite, such as when the repurchase may be made “at any time”, the repurchase may be exercised within ten years from the date of the contract. c.
In case there was a civil action between the parties the vendor may still exercise the right to repurchase within thirty days from the time final judgment was rendered in a civil action on that basis that the contract was a true sale with a right to repurchase (Art. 1606, NCC).
Effect of failure to exercise right of repurchase Ownership is consolidated in the vendee. However, in case of real property, a judicial order, after the vendee has been duly heard, is required for the purpose of recording the consolidation in the Registry of Property (Art. 1607, NCC). Against whom available
right
to
repurchase
a. The vendee a retro (original vendee) If the vendee should leave several heirs, the action for redemption cannot be brought against each of them except for his own share, whether the thing be undivided, or it has been partitioned among them. But if the inheritance has been divided, and the thing sold has been awarded to one of the heirs, the action for redemption may be instituted against him for the whole (Art. 1615, NCC). b. Every possessor whose right is derived from the vendee a retro, even if no mention is made in the second contract of the right to repurchase, provided the right has been recorded in the Register of Deeds, or even if the right is not registered, but the possessor has knowledge of the existence of the right (Art. 1608, Mortgage Law, Land Registration Law).
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Distinguished from Option to Buy RIGHT TO REDEEM
whereby ownership is transmitted by onerous title (Art. 1619, NCC). Thus, this right is not available if the transfer of ownership is by gratuitous title.
OPTION TO PURCHASE
Not a separate contract but merely part of a main contract of sale.
Generally, principal contract.
Does not need its separate consideration in order to be valid and effective.
To be valid, it must have a consideration separate and distinct from purchase price.
Cannot exceed 10 years.
May be beyond 10 years.
There must be a tender of payment of the amount required by law, including consignment thereof if tender of payment cannot be made effectively on the buyer.
it
is
May be exercised by notice of its exercise to the offeror.
(De Leon, Comments and Cases on Sales and Lease, 2005, p. 382).
Exercise of the Right to Redeem Obligations of Vendor A Retro When He Exercises Right to Repurchase (Art. 1616, NCC): 1. Return to vendee price of sale; 2. Pay expenses of the contract and other legitimate payments made by reason of sale; and 3. Pay all necessary and useful expenses made on the thing sold. 2.
Legal Redemption
The right to be subrogated upon the same terms and conditions stipulated in the contract, in the place of one who acquires a thing by purchase or dation in payment, or by any other transaction
Instances of legal redemption under civil code: 1. Redemption by other co-owners or any one or some of them. If a co-owner sells his undivided share to a third person. If two or more co-owners desire to exercise the right, they may only do so in proportion to the share they may respectively have in the thing owned in common (Art. 1620, NCC). 2.
Redemption by other co-heirs, or by any one of them. If a co-heir sells his hereditary right to a stranger (Art. 1088, NCC).
3. Redemption by owner of adjoining land: a. In case of rural – If the owner alienates it to a third person, the area of which does not exceed one hectare. If two or more adjoining owners desire to exercise the right at the same time, the owner of the smaller area shall be preferred; and should both lands have the same area, the one who first requested the redemption (Art. 1621, NCC).
b.
In case of urban land – If owner 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 resale has not yet
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been perfected, an owner of adjoining land shall have a right of pre-emption; 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 preemption or redemption as the case may be, the owner whose intended use of the land appears best justified shall be preferred (Art. 1622, NCC). 4.
Redemption by a debtor: if a credit or other incorporated right in litigation be sold by the creditor to a third person (Art. 1634, NCC).
Period of Redemption/Pre-emption: The right of legal redemption shall not be exercised except within 30 days from the notice in writing by the prospective seller, or seller, as the case may be. The deed of sale shall not be recorded in the Registry of Property unless accompanied by an affidavit of the seller that he has given written notice thereof to all possible redemptioners (Art. 1623, NCC).
Assignment of Credits Definition An assignment of credit has been defined as the process of transferring the right of the assignor to the assignee who would then have the right to proceed against the debtor. The assignment may be done gratuitously or onerously, in which case, the assignment has an effect similar to that of a sale (Abelardo B. Licaros vs. Antonio P. Gatmaitan, G.R. No. 142838, August 9, 2001). Perfection An assignment of creditors and other incorporeal rights shall be perfected in accordance with the provisions of Article 1475 (Art. 1624, NCC). ·
Redemption v. Pre-emption: Redemption
Pre-emption
Effected after the sale.
Effected prior to sale.
Directed against third persons who bought the property.
Directed against the prospective vendor who is about to resell the property.
May be exercised only where there is prospective resale of a small piece of urban land bought by the prospective vendor merely for speculation.
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract, and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts.
Effects: 1. An assignment of a credit, right or action shall produce no effect as against a third person, unless it appears in a public instrument, or the instrument is recorded in the Registry of Property in case the assignment involves real property (Art. 1625, NCC). 2. The debtor who, before having knowledge of the assignment, pays his creditor shall be released from the obligation (Art. 1626, NCC). 3. The assignment of a credit includes all the accessory rights, such as a guaranty, mortgage, pledge or preference (Art. 1627, NCC).
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4. The vendor in good faith shall be responsible for the existence and legality of the credit at the time of the sale, unless it should have been sold as doubtful; but not for the solvency of the debtor, unless it has been so expressly stipulated or unless the insolvency was prior to the sale and of common knowledge. Even in these cases he shall only be liable for the price received and for the expenses specified in No. 1 of Article 1616. The vendor in bad faith shall always be answerable for the payment of all expenses, and for damages (Art. 1628, NCC). 5. In case the assignor in good faith should have made himself responsible for the solvency of the debtor, and the contracting parties should not have agreed upon the duration of the liability, it shall last for one year only, from the time of the assignment if the period had already expired (Art. 1629, NCC). If the credit should be payable within a term or period which has not yet expired, the liability shall cease one year after the maturity (Ibid). 6. One who sells an inheritance without enumerating the things of which it is composed, shall only be answerable for his character as an heir (Art. 1630, NCC). 7. One who sells for a lump sum the whole of certain rights, rents, or products, shall comply by answering for the legitimacy of the whole in general; but he shall not be obliged to warrant each of the various parts of which it may be composed, except in the case of eviction from the whole or the part of greater value (Art. 1631, NCC). Obligation of the Vendor: Should the vendor have profited by some of the fruits or received anything from the inheritance sold, he shall pay the vendee thereof, if the contrary has not been stipulated (Art. 1632, NCC).
Obligation of the Vendee: Art. 1633. The vendee shall, on his part, reimburse the vendor for all that the latter may have paid for the debts of and charges on the estate and satisfy the credits he may have against the same, unless there is an agreement to the contrary (Art. 1633, NCC). Extinguishment: When a credit or other incorporeal right in litigation is sold, the debtor shall have a right to extinguish it by reimbursing the assignee for the price the latter paid therefor, the judicial costs incurred by him, and the interest on the price from the day on which the same was paid. H. EQUITABLE MORTGAGE (Arts. 16021604, NCC) One which, although lacking in some formality, or form, or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law (Dorado Vda. De Delfin vs. Dellota, G.R No. 143697, January 28, 2008; Deheza-Inamarga vs. Alano, G.R. No. 171321, December 18, 2008). Essential Elements: 1. That the parties entered into a contract denominated as a contract of sale; and 2. That their intention was to secure an existing debt by way of mortgage (Bacungan vs. CA, G.R. No. 170282, December 18, 2008). Contracts presumed to be an equitable mortgage: A contract of sale with a right to repurchase and other contracts purporting to be an absolute sale, shall be presumed to be an equitable mortgage, in any of the following cases:
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1. When the price of a sale with a right to repurchase is unusually inadequate; 2. When the vendor remains in possession as lessee or otherwise; 3. When the period for the exercise of the right to repurchase is extended; 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. When the real intention of the parties is that the transaction shall secure the payment of a debt or the transaction shall secure the payment of a debt or the performance of any other obligation (De Leon, Comments and Cases on Sales and Lease, 2005, p. 389). ● The presumption of equitable mortgage created in Article 1602 of the CC is not conclusive – It may be rebutted by competent and satisfactory proof of the contrary (Santiago vs. Dizon, G.R. No. 172771, January 31, 2008). Remedy: The apparent vendor may ask for the reformation of the instrument (Art. 1605, NCC). I. PACTO DE RETRO SALE The essence is that title and ownership of the property sold is immediately vested in the vendee a retro, subject to the restrictive condition of repurchase by the vendor a retro within the period provided in Article 1606 of the New Civil Code, to wit: the failure of the vendee a retro to repurchase the property vests upon the latter by operation of law the absolute title and ownership over the property sold (Misterio vs. Cebu State College of Science and Technology, G.R. No. 152199, June 23, 2005). A credit or other incorporeal right shall be considered in litigation from the time the complaint concerning the same is answered.
The debtor may exercise his right within thirty days from the date the assignee demands payment from him (Art. 1634, NCC). Exceptions - From the provisions of the preceding article shall be excepted the assignments or sales made: 1. To a co-heir or co-owner of the right assigned; 2. To a creditor in payment of his credit; 3. To the possessor of a tenement or piece of land which is subject to the right in litigation assigned (Art. 1635, NCC). II. LEASE A. KINDS OF LEASE Two Kinds of Contract of Lease 1. Contract of Lease (proper) – it is a lease of things, or when the subject matter is a thing. 2. Contract for Piece of Work – it is a lease of service, or when the subject matter is a service (Art. 1642, NCC). Contract of Lease of Things It is a contract involving the grant of temporary use or enjoyment of a property to another in consideration of the payment of a price certain in money or its equivalent (called rent) (Art. 1643, NCC). "Rent" may be defined as the compensation either in money, provisions, chattels, or labor, received by the owner of the soil from the occupant thereof. It is defined as the return or compensation for the possession of some corporeal inheritance and is a profit issuing out of lands or tenements, in return for their use. It is that which is to be paid for the use of land, whether in money, labor or other thing agreed upon (Tolentino and Manio vs. Gonzales SyChiam, G.R. No. 26085, August 12, 1927).
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Subject-matter
Essential Requisites of Contract of Lease
It can either be real or personal property.
1) Consent
General Rule: As to personal property, consumable goods cannot be the subject matter of a contract of lease.
As in all contracts, consent is an essential requisite in a contract of lease.
Exception: When they are merely to be exhibited or when they are accessory to an industrial establishment (Art. 1645, NCC).
But take note that the people who are prohibited from entering in a contract of sale under Arts. 1490 and 1491 cannot also enter into a contract of lease (Art. 1646, NCC).
Characteristic of Lease of things:
Disqualified under Art. 1490, NCC
1. 2. 3. 4. 5. 6.
The husband and the wife cannot sell property to each other, except:
Consensual Contract Onerous (essentially onerous) Bilateral Nominate Principal Cumulative
A contract of lease is a consensual, bilateral, onerous and commutative contract by which the owner temporarily grants the use of his property (Chua Tee Dee vs. Court of Appeals, G.R. No. 135721, May 27, 2004) or rendering of some service to another who undertakes to pay the rent. Being a consensual contract, it is perfected at the moment there is a meeting of the minds on the thing and the cause and consideration, which are to constitute the contract (Bugatti vs. Court of Appeals, G.R. No. 138113, October 17, 2000; citing Vitug, Compendium of Civil Law and Jurisprudence, 1993 edition, 653-654). General Rule: Without the agreement of both parties, no contract of lease can be said to have been created or established. Nobody can force an owner to lease out his property if he is not willing (Pagurayan vs. Reyes, G. R. No. 15477, July 23, 2008). Exception: In industrial accession where both the landowner and the builder may not be compelled to buy the land because the value of the building or of trees, the builder can be required to pay reasonable rent (Art. 448, NCC).
a) When a separation of property was agreed upon in the marriage settlements; or b) When there has been a judicial separation of property under article 191. Disqualified under Art. 1491, NCC The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: a) The guardian, (as to) the property of the person or persons who may be under his guardianship; b) Agents, (as to) the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; c) Executors and administrators, (as to) the property of the estate under administration; d) Public officers and employees, (as to) the property of the State or of any subdivision thereof, or of any government-owned or controlled corporation, or institution, the administration of which has been entrusted to them; this provision shall apply to judges and government experts
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who, in any manner whatsoever, take part in the sale; e) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, (as to) the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession; or f) Any others specially disqualified by law. If the lease is to be recorded in the Registry of Property, the following cannot constitute the same without proper authority; (a) the husband, with respect to the paraphernal property of the wife; (b) the father or guardian as to the property of the minor or ward; (c) and the manager, without special power (Art. 1647, NCC). 2) Object The object of the lease must be within the commerce of man, otherwise, it is void (De Leon, Comments and Cases on Sales and Lease, 2005, p. 562). 3) Cause Cause of the lease contract according to subject matter: Lease of thing – the consideration for the lessor is the payment of rental Lease of work or service - it is the compensation to be paid by the other party Lease of right – it is the payment of royalties which is the cause and consideration of the one leasing the right to another (De Leon, Comments and Cases on Sales and Lease, 2005, p. 707).
Formalities required: 1. A contract of lease is not required to be in any form in order to be valid. 2. But for the purpose of enforceability, the Statute of Frauds requires that the contract be in writing or be in some note or memorandum signed by the party charged, if “the agreement for the leasing is for a longer period than one year (Art. 1403[2][e], NCC). 3. The requirement of the Statute of Frauds is also necessary in case of agreement to renew the lease. In (Fernandez v. CA, G.R. No. 80231, October 18, 1988), where it was alleged that the respondent had assured the petitioner over a telephone conversation that the former would willingly renew the lease for another ten years upon expiration of the original, the Court held that such alleged verbal assurance of renewal of a lease is inadmissible to qualify the terms of the written lease agreement under the parole evidence rule and unenforceable under the Statute of Frauds. 4. In lease of real property, the recording with the Registry of Deeds of the lease contract is only for the purpose of binding third persons (Art. 1648, NCC). Lessor need not be owner The lessor need not be the owner of the property leased (Ballesteros vs. Abion, G.R. No. 143361, February 9, 2006), because lease does not involve transfer of ownership. However, the lessor must have a right (e. g. usufructuary or lessee) or at least an authority (e.g., as an agent of the owner, usufructuary, or lessee), otherwise, the contract is legally inexistent for lack of an object certain. Under Articles. 1318 and 1409(3) of the CC, contracts the cause or object of which did not exist at the
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time of the transaction are inexistent and void ab initio (Ballesteros vs. Abion, supra.). The lessee may sublet the thing leased, in whole or in part, without prejudice to his responsibility for the performance of the contract toward the lessor (Art. 1650, NCC). Lease of Rural and Urban Lands Lease of Rural Lands v. Lease of Urban Lands RURAL LANDS
URBAN LANDS Scope Product producing lands Non-product producing lands Purpose Regardless of site, if the Lands leased principally principal purpose is to for purposes of obtain products from the residence are called soil, the lease is of rural urban lands.
lands. (De Leon, Comments and Cases on Sales and Lease, 2005, p. 590)
Rule on Assignment of Lease or sublease: Sublease - A separate and distinct contract of lease wherein the original lessee becomes a sublessor to a sublessee. General Rule: Lessee cannot assign without the consent of the lessor (Art. 1649, NCC). Exception: Unless expressly prohibited (Art. 1650, NCC). The assignment constitutes a novation by substituting the person of the debtor-lessee; hence, creditor-lessor’s consent is necessary. Effects of sublease 1. The sublease is without prejudice to the responsibility of the lessee for the performance of the contract toward the lessor (Art. 1650, NCC); 2. Sublessee is bound to the lessor for all acts which refer to the use and preservation of the
thing leased in the manner stipulated between lessor and the lessee (Art. 1650, NCC); 3. Sublessee is subsidiarily liable to lessor for any rent due from the lessee. However, sublessee shall not be responsible beyond the amount of rent due from him, in accordance with the terms of the sublease, at the time of the extrajudicial demand by the lessor (Art. 1652, NCC); 4. Payments of rent in advance by sublessee shall be deemed not to have been made, so far as the lessor’s claim is concerned, unless said payments were effected in virtue of custom of the place (Art. 1652, NCC). B. RIGHTS AND OBLIGATIONS OF THE LESSOR Obligations of Lessor: 1. Delivery of object of contract in such a condition as to render it fit for the use intended; 2. Making of necessary repairs in order to keep leased premises suitable for the use to which it has been devoted, unless there is a stipulation to the contrary; 3. Maintaining the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the contract (Art. 1654, NCC); and 4. If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee one-half (½) of the value of the improvements at that time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon the property leased than is necessary (Art. 1678, NCC).
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Remedies of Lessor In case lessor should not comply with the foregoing obligations, lessee may: 1. Rescind the contract with damages; 2. Recover damages only, allowing the contract to remain in force (Art. 1659, NCC); 3. Hold the sublessee liable for all acts which refer to the use and preservation of the things leased (Art. 1651, NCC); or 4. Hold the sublessee subsidiarily liable for any rent due from the lessee (Art. 1652, NCC); Effect of destruction of thing leased by fortuitous event a) Total Destruction- the lease is extinguished b) Partial Destruction- the lessee may choose between a proportional reduction of the rent and a rescission of the lease (Art. 1655, NCC). Rule on Alteration of Form Lessor cannot alter the form of the thing leased in such a way as to impair the use to which the thing is devoted under terms of the lease (Art. 1661, NCC). Rule in case of urgent repairs: 1. If repairs are urgent and cannot be deferred until the termination of the lease, the lessee is obliged to tolerate it although it may be annoying to him and he may be deprived of a part of the property for which the lessee has been deprived. 2. If repairs last more than 40 days, rent shall be reduced in proportion to the time and the part of the property for which to the time and the part of the property for which the lessee has been deprived. 3. If by reason of the repairs, the portion, which the lessee and his family need for their dwelling, becomes uninhabitable, lessee may rescind the contract if the main purpose of the lease is to provide a dwelling place for the lessee.
4. If lessor fails to make urgent repairs, the lessee, in order to avoid an imminent danger, may order the repairs at the lessor’s cost (Art. 1663, last par., NCC). C. RIGHTS AND OBLIGATIONS OF THE LESSEE Obligations of Lessee: 1. Pay the price of the lease according to terms stipulated. 2. Use the thing leased as a diligent father of a family, devoting it to the use stipulated; and in the absence of stipulation, to that which may be inferred from nature of thing leased, according to custom of place. 3. Pay expenses for the deed of lease (Art. 1657, NCC); 4. Lessee is obliged to inform the lessor, within shortest possible time, of every usurpation or untoward act which any third person may have committed or may be openly preparing to carry out upon the thing leased, failure to do so shall render the lessee liable for damages which, through his negligence, may be suffered by the proprietor (Art. 1663, NCC). 5. Lessee is obliged to advise the owner, with the same urgency, of need of all necessary repairs included in No. 2 of Article 1654. Failure to do so shall render the lessee liable for damages, which, through his negligence, may be suffered by the proprietor (Art. 1663, NCC). 6. Lessee is responsible for deterioration or loss of thing leased. a. Exception: He is not liable if he proves that it took place without his fault. b. Presumption of fault does not apply: When destruction is due to earthquake, flood storm, or other natural calamity (Art. 1667, NCC). 7. Lessee is also liable for any deterioration caused by members of his household and by guests and visitors (Art. 1668, NCC). 8. Lessee is obliged to return thing leased, upon termination of the leased, in the
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same condition as when he received it, except what has been lost or impaired; a) By lapse of the time; b) By ordinary wear and tear, c) By reason of an inevitable cause (Art. 1665, NCC). Introduction of useful improvements: 1. Lessee may introduce useful improvements on the leased premises provided he does not alter the form and substance of the property leased (Art. 1678, NCC). 2. But he has no right of retention and reimbursem*nt, which rightfully belongs to a builder in good faith; otherwise, such a situation would allow the lessee to easily “improve” the lessor out of its property (SulosaNayon, Inc. vs. Nayong Pilipino Foundation, G.R. No. 170923, January 20, 2009). 3. In this situation, the lessor has the option of paying one-half of the value of the improvements which the lessee made in good faith, which are suitable for the use for which the lease is intended, and which have not altered the form and substance of the land (Art. 1678, NCC). 4. Should the lessor refuse to reimburse said amount, the lessee may remove the improvement, even though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon the property leased than what is necessary (Art. 1678, NCC). 🕮 A lessee, in order to be entitled to one-half the value of the improvements introduced by him in the leased premises, or to remove them should the lessor refuse to reimburse the half value thereof, must show that the same were introduced in good faith; are useful; suitable to the use for which the lease is intended without altering the form and substance of the premises (Imperial Insurance, Inc. vs. Simon, G.R. No. 83545, August 11, 1989).
Introduction of Ornamental Objects: 1. Lessee may introduce ornamental objects on the leased premises provided he does not alter the form and substance of the property leased (Art. 1678, NCC). 2. He is not entitled to any reimbursem*nt with regard to ornamental expenses. 3. But may remove the ornamental objects, provided no damage is caused to the principal thing, and the lessor does not choose to retain them by paying their value at the time the lease is extinguished (Art. 1678, NCC). Duration and termination of lease Duration: 1. Period may either be definite or indefinite. 2. But the period cannot be more than 99 years (Art. 1643, NCC). If the period is more than 99 years, the lease is considered terminated after the end of 99 years. After that, it will be a lease for an indefinite term (Commentaries and Jurisprudence on the Civil Code of the Philippines, Volume V Tolentino, 1992 ed., 209). Lease for fixed or definite period: 1. It ceases upon the day fixed, without need of demand (Art. 1669, NCC). 2. Implied new lease (tácita reconducción) – If at the end of the contract the lessee should continue enjoying the thing leased for 15 days with the acquiescence of the lessor, and unless a notice to the contrary by either party has previously been given, it is understood that there is an implied new lease, not for the period of the original contract, but for the time established in Articles 1682 and 1687 of the NCC. The other terms of the original contract shall be revived (Art. 1670, NCC). 3. If the lessee continues enjoying the thing after the expiration of the contract, over the lessor’s objection, the lessee shall be
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subject to the responsibilities of a possessor in bad faith (Art. 1671, NCC). A notice to vacate constitutes an express act on the part of the lessor that he no longer consents to the continued occupation by the lessee of the property (Josefa vs. San Buenaventura, G.R. No. 163495, May 8, 2009). Lease for not fixed or indefinite period If leased property is rural lands: 1. Shall be for all the time necessary for the gathering of the fruits which the whole estate leased may yield in one year; or 2. Which it may yield once, although two or more years have to elapse for the purpose (Art. 1682, NCC). If leased property is urban lands: 1. Shall be year to year, if the rent agreed upon is annual; 2. Shall be from month to month, if it is monthly; - However, courts may fix a longer term for the lease after the lessee has occupied the premises for over one year. 3. Shall be from week to week, if the rent is weekly; - However, courts may likewise determine a longer period after the lessee has been in possession for over six months. 4. Shall be from day to day, if the rent is to be paid daily However, courts may also fix a longer period after the lessee has stayed in the place for over one month (Art. 1687, NCC).
III. AGENCY A. NATURE, FORM AND KINDS Concept It is a contract whereby a person (agent) binds himself to render some service or to do something in representation or on behalf of another (principal), with the consent or authority of the latter (Art. 1868, NCC). Elements of a Contract of Agency In the case of Tuazon vs. Ramos (G.R. No. 156262 July 14, 2005), the Court had the occasion to set forth the elements of agency, thus: 1. The parties’ consent, express or implied, to establish the relationship; 2. The object, which is the execution of a juridical act in relation to a third person; 3. The representation, by which the one who acts as an agent does so, not for oneself, but as a representative; and 4. The limitation that the agent acts within the scope of his or her authority. Parties to a Contract of Agency 1. Principal – The person represented by the agent and from whom the latter derives his authority; he is the party primarily and originally concerned in the contract of agency: a. May be a natural or juridical person; and b. Must be capacitated to enter into a contract (De Leon, Comments and Cases on Partnership, Agency and Trusts, 2019, p. 338). 2. Agent – He who acts for and represents the principal and from whom he derives his authority (De Leon, Comments and Cases on Partnership, Agency and Trusts, 2019, p. 328).
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General rule: Anyone can be an agent. His capacity is usually immaterial. It is the capacity of the principal that is controlling since the contract is really entered into by the principal. In the case of the agent, since he assumes no personal liability, he does not have to possess full capacity to act for himself insofar as third persons are concerned. Exception: However, some mental capacity is necessary as an agent, and, therefore, persons who are absolutely incapacitated, such as insane persons, cannot be agents (2 C.J.S. 1041) as they are completely incapable of understanding the task to be performed. Principals should appoint agents who are able to make sound decisions in carrying out the agency (De Leon, Comments and Cases on Partnership, Agency, and Trusts, 2019, p. 333). Theory of Imputed Knowledge
4. Onerous – It is presumed to be for a compensation unless there is proof to the contrary (Art. 1875, NCC). 5. Consensual – It is perfected by mere consent. 6. Nominate – It has a name given to it by law (Art. 1868, NCC). 7. Commutative – The parties give and receive almost equivalent values; hence, there is real fulfillment (De Leon, Comments and Cases on Partnership, Agency, and Trusts, 2010, p. 325). Object or Subject Matter General rule: The object of every contract of agency is the execution of a juridical act in relation to a third person (Rallos vs. Felix Go Chan & Sons Realy Corp., 81 SCRA 251, 1978).
The knowledge of the agent is imputed to the principal even though the agent never communicated such knowledge to the principal (see Art. 1821). Thus, it is only logical that the agent is required to notify the principal of all matters that came to his attention that are material to the subject matter of the agency (De Leon, Comments and Cases on Partnership, Agency, and Trusts, 2010, p. 344).
Exceptions:
Exceptions: to the Rule
General Rule: Agency may be written or oral unless the law requires a specific form (Art. 1869, NCC).
1. 2. 3.
Where the agent’s interests are adverse to those of the principal; Where the agent’s duty is not to disclose the information, as where he is informed by way of confidential information; and Where the person claiming the benefit of the rule colluded with the agent to defraud the principal (Teller, op. cit., p.150).
Characteristics of Contract of Agency 1. Principal – It can stand by itself. 2. Preparatory – It is a means by which other contracts may be entered into. 3. Bilateral – The parties are bound reciprocally to each other.
a) Peculiarly personal acts may not be delegated. b) Illegal or unlawful acts may not be delegated. Forms of Agency
Exceptions: 1. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void (Art. 1874, NCC). 2. When required to make the contract effective against third persons (De Leon, Comments and Cases on Partnership, Agency, and Trusts, 2019, p. 381). 3. When required for the purpose of proving existence of the contract (De Leon, Comments and Cases on Partnership, Agency, and Trusts, 2019, p. 381).
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Kind and Classification of Agency A. According to Form (Art. 1869, NCC) EXPRESS AGENCY – One where the agent has been actually authorized by the principal, either orally or in writing. 1.
Oral Agreement – An oral agency is valid unless the law requires a specific form (Art. 1869, NCC).
As to Persons Who are Present
The acceptance of agency may be implied if the principal delivers his power of attorney to the agent and the agent receives it without any objection (Art. 1870, NCC).
As to Persons Who are Absent
General Rule: The acceptance of the agent cannot be implied from his silence.
Exceptions::
2. Written Agreement: a. Those that require a specific power of attorney, such as those enumerated under Art. 1878. The act performed is not enforced against the principal if the power of attorney is not special. b. When the sale of a piece of land or an interest therein (such as easem*nt and usufruct) is made through an agent, the authority of the agent must be in writing otherwise the sale is void (Art. 1874, NCC). Implied Agency – One, which is implied from: 1. 2. 3. 4.
Acts of the principal; Silence of the principal; Lack of action of the principal; or Failure of the principal to repudiate the agency knowing that another person is acting in his behalf without authority (Art. 1869, NCC).
As indicated in Article 1869, the principal must know “that the person is acting on his behalf without authority” for an agency to be implied (De Leon, Comments and Cases on Partnership, Agency and Trusts, 2010, p. 373). Acceptance by the agent may also be express, or implied from his acts which carry out the agency, or from his silence or inaction according to the circ*mstances (Art. 1870, NCC).
1. When the principal transmits his power of attorney to the agent, who receives it without any objection. 2. When the principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he is habitually engaged as an agent, and he did not reply to the letter or telegram (Art. 1871, NCC). B. According to Extent (Art. 1876, NCC) General Agency – One that comprises all the business of the principal. Special Agency – One that comprises one or more specific transactions (De Leon, Comments and Cases on Partnership, Agency, and Trusts, 2010, p. 403). C. According to Authority Conferred Agency Couched in General Terms (General Power of Attorney) - This comprises only acts of administration. This is true even if the principal should state: a. That he withholds no power; or b. That the agent may execute acts as he may consider appropriate; or c. Even though the agency should authorize a general and unlimited management (Art. 1877, NCC).
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A general agency must not be confused with one couched in general terms which is a special agency when it involves only one or more specific transactions (De Leon, Comments and Cases on Partnership, Agency and Trusts, 2010, p. 403). Effect: The authority conferred in general terms is confined to acts of administration. They are those that do not involve acts of dominion, such as alienations, except where they are incidental to the authority to administer. Agency Couched in Specific Terms – A special power of attorney is required for the performance of the following specific acts: a. To make such payments as are not usually considered as acts of administration; b. To effect novation which put an end to obligations already in existence at the time the agency was constituted; c. To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired; d. To waive any obligation gratuitously; e. To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration; f. To make gifts, except customary ones for charity or those made to employees in the business managed by the agent; g. To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration; h. To lease any real property to another person for more than one year; i. To bind the principal to render some service without compensation; j. To bind the principal in a contract of partnership; k. To obligate the principal as a guarantor or surety; l. To create or convey real rights over immovable property; m. To accept or repudiate an inheritance;
n. To ratify or recognize obligations contracted before the agency; and o. Any other act of strict dominion (Art. 1878, NCC). Powers not included: 1. Special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell (Art. 1879, NCC). 2. Special power to compromise does not authorize submission to arbitration (Art. 1880, NCC). Agency is generally not presumed The relation between principal and agent must exist as a fact. However, a presumption of agency may arise in cases where an agency may arise by operation of law or to prevent unjust enrichment (De Leon, Comments and Cases on Partnership, Agency and Trusts, 2010, p. 375). GENERAL V. SPECIAL AGENCY GENERAL AGENT SPECIAL AGENT Scope of Authority Usually authorized to do Authorized to do only all acts connected with one or more specific acts the business in which he in pursuance of is engaged. particular instructions or with restrictions necessarily implied from the act to be done. Continuity Conducts a series of Usually involves a single transactions involving a transaction or a series of continuity of service. transactions not involving continuity of service. Extent to which agent may bind principal Binds his principal by an Cannot bind his principal act within the scope of in a manner beyond or his authority although it outside the specific acts may be contrary to his which he is authorized to special instructions. perform.
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Termination of authority Apparent authority does Termination effective as not terminate by mere to third party unless revocation of authority agency was for purpose without notice to third of contracting with that parties. third party. Construction of instructions of principal Statement of principal Authority of the agent with respect to the must be strictly agent’s authority would construed. ordinarily be regarded as advisory only.
D. Other Kinds of Agency 1. Doctrine of Agency by Necessity By virtue of the existence of an emergency, the authority of an agent is correspondingly enlarged in order to cope with the exigencies or the necessities of the moment. The five conditions laid down for authority of agency by necessity are:
Elements: For an agency by estoppel to exist, the following must be established: (1) the principal manifested a representation of the agent’s authority or knowingly allowed the agent to assume such authority; (2) the third person, in good faith, relied upon such representation; and (3) relying upon such representation, such third person has changed his position to his detriment. An agency by estoppel, which is similar to the doctrine of apparent authority, requires proof of reliance upon the representations, and that, in turn, needs proof that the representations predated the action taken in reliance (Lintonjua vs. Eternit Corporation, G.R. No. 144805, June 8, 2006).
1. The real existence of an emergency; 2. Inability of the agent to communicate with the principal; 3. Exercise of the additional authority for the principal’s own protection; 4. The adoption of fairly reasonable means, premises duly considered; and 5. The ceasing of the authority the moment the emergency no longer demands the same (Paras, Civil Code of the Philippines Annotated, 2008, p. 785).
AGENCY BY ESTOPPEL Between the principal and the agent In an implied agency, In an agency by the agent is a true estoppel (caused for agent, with rights and instance by estoppel on duties of an agent. the part of the agent), the “agent” is not a true agent; hence he has no rights as such. As to third persons
2. Agency By Estoppel
In an implied agency, the principal is always liable.
There is agency by estoppel where a person, by words or conduct, represents or permits it to be represented that another person is his agent. In such a case, he is stopped to deny the agency as against third persons who have dealt, on the faith of such representation, with the person so held out as agent, even if no agency existed in fact.
In an implied agency, the agent is never personally liable.
IMPLIED AGENCY
If the estoppel is caused by the principal, he is liable, but only if the third person acted on the misrepresentation. If the estoppel is caused by the agent, it is only the agent who is liable, never the alleged principal.
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3. Agency by Operation of Law
Effect of agent acting in his own name:
The heirs’ duty to continue the agency after the death of the agent arises from what may be termed as an agency by operation of law or a presumed or tacit agency (11 Manresa 588; Arts. 1884, par. 2, 1885, 1929, and 1931). Of course, the heirs can continue the agency only temporarily for, as we have seen, the essence of the contract is personal confidence. The principal has a right to an agent of his choice. There is nothing to suggest that he would or should expect the authority to pass to the agent’s heirs or personal representatives (De Leon, 2010, supra, p.618).
1. Principal has no right of action against the third person with whom the agent has contracted (Art. 1883, NCC). 2. Third person has no right of action against the principal (Id). 3. Agent is the one directly bound in favor of contracted as if the transaction were his own, except when the contract involves things belonging to the principal (Art. 1883[2], NCC).
B. OBLIGATIONS OF THE AGENT To bind principal (Arts. 1897-1902) Requisites in order to bind principal by agent’s acts: a) Agent must act within the scope of his authority (Art. 1881, NCC); and b) Agent must act in the name of the principal. Effect of Acting Beyond Scope of Authority: General rule: Principal is not bound. A contract entered into by an agent who has acted beyond his powers is unenforceable, unless it is ratified by the principal (Art. 1317 and 1403[1], NCC). Exceptions: Principal is liable in the following situations even if the agent acted beyond the scope of his authority – 1. When the principal ratifies the agent’s act, either expressly or impliedly (Art. 1910, NCC). 2. Principal is solidarily liable if he allowed the agent to act as though the latter had full powers (Art. 1911, NCC). 3. If the limitations to the agent’s authority is known only between the agent and principal and not to third persons (Art. 1900, NCC). 4. Where the principal placed in the hands of the agent instruments signed by him in blank.
Acts, which may be delegated to an agent (subject matter of agency): General rule: What he may do in person, he may do through another (Qui facit per alium facit per se). Exceptions: 1. Peculiarly personal acts; and 2. Illegal acts Delegation of Authority (Sub-Agent): When permissible: Agent may appoint a substitute if the principal has not prohibited him from doing so (Art. 1892, NCC). Effect as between principal and third person: If substitution is not prohibited: The acts of the substitute will produce the same effect between the principal and third persons as if they were those of the agent himself. If substitution is prohibited: All acts of the substitute appointed against the prohibition of the principal shall be void (Art. 1892, last par., NCC). Effects as between principal and agent: If agent is not empowered to appoint a substitute but not prohibited: Agent shall be
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responsible for the acts of the substitute (Art. 1892[1], NCC). If agent is empowered:
b. If Agency Was Accepted 1. Obligation to act within the scope of authority
a) But principal did not designate a particular person: Agent is responsible for the acts of the substitute if the substitute was notoriously incompetent or insolvent (Art.
The agent must act within the scope of his authority. He may do such acts as may be conducive to the accomplishment of the purpose of the agency (Art. 1881, NCC).
b) But principal designated a particular person: Substitution is the act of the principal himself rather than of the agent. Consequently, the agent is totally and absolutely exempt from responsibility for the acts of the sub-agent. c) If agent is prohibited from appointing substitute: The agent acts beyond the scope of his authority and shall be held liable for whatever damage that may result.
Other acts performed by an agent which are deemed to be within the scope of his authority:
1892, NCC).
Effect as between principal and substitute: Both substitute and agent are directly and personally liable to the principal for the acts of substitute if a) Agent appoints a substitute although not empowered to do so; or b) Even if empowered, agent selects a substitute who is notoriously incompetent or insolvent (Art. 1893, NCC). Duties and Liabilities of Agent to Principal a. If Agency was declined – In case a person declines an agency: a) Such person is bound to observe the diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner until the latter should appoint an agent or take charge of the goods (Art. 1885, NCC). b) The owner, as soon as practicable, must either appoint an agent or take charge of the goods (Art. 1885, NCC).
a. Acts performed in a manner more advantageous to the principal than that specified by him (Art. 1882, NCC). b. So far as third persons are concerned, if such performed act is within the terms of the power of attorney, as written, even if the agent has in fact exceeded the limits of his authority according to an understanding between the principal and the agent (Art. 1900, NCC). 2. Obligation to carry out agency What constitutes “carrying out” – It means to perform whatever acts may be necessary to bring the business to conclusion. The agent, even if he should withdraw from the agency for a valid reason, must continue to act until the principal has had reasonable opportunity to take the necessary steps to meet the situation (Art. 1929, NCC). Effect of principal’s death Though death of the principal extinguishes the agency (Art. 1919[3], NCC) agent is obligated to finish the business already begun on the death of the principal, should delay entail any danger (Art. 1884[2], NCC).
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Liability for performance
damages
in
case
of
non-
Agent is liable for damages which, through his nonperformance, the principal may suffer (Art. 1884[1], NCC). But if, after non-performance, the principal confers a second mandate for the same purpose, this will bar an action for damages as it constitutes a tacit assent to the conduct of the agent under the first agency. Cases when an agent is not bound to carry out the agency – If its execution would manifestly result in loss or damage to the principal (Art. 1888, NCC).
If the agent has been empowered to borrow money, he may himself be the lender at the current rate of interest (Art. 1890, NCC). If he has been authorized to lend money at interest, he cannot borrow it without the consent of the principal (Art. 1890, NCC). Prohibition against buying property of principal: An agent cannot, without his principal’s consent purchase, whether directly or indirectly, and even at public or judicial sale, property, which he is authorized to sell or administer (Art. 1491, NCC).
3. Obligation to advance necessary funds
6. Duty to render account
General Rule: Agent is not bound to advance the necessary funds to carry out the agency.
Every agent is bound:
Exception: Unless there is stipulation to that effect. Exception to Exception: Even if there is a stipulation that the agent should advance the necessary funds, he is not obliged to do so if the principal is insolvent (Art. 1886, NCC). 4. Obligation to obey instructions In the execution of the agency, the agent shall act in accordance with the instructions of the principal (Art. 1887, NCC). In default of instructions: Agent shall do all that a good father of a family would do, as required by the nature of the business (Art. 1887, NCC). 5. Obligation to observe good faith and loyalty An agent is a fiduciary with respect to the matters within the scope of his agency. If, there is a conflict between his interests and those of the principal, he should prefer his own; he shall be liable for damages (Art. 1889, NCC).
a) To render an account of his transactions; and b) 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 (Art. 1891, NCC). 7. Obligation to pay interest a) On sums he has applied to his own use from the day on which he did so; and b) On those which he still owes after the extinguishment of the agency (Art. 1896, NCC). 8. Obligation to observe diligence Diligence required is bonus pater familias. The agent is responsible not only for fraud, but also for negligence (Art. 1909, NCC). The negligence of the agent shall be judged with more or less rigor by the courts, according to whether the agency was or was not for compensation (Art. 1909, NCC).
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Commission Agent
4. Collect credits:
It is one engaged in the purchase and sale for a principal of personal property, which for this purpose, has to:
Effect of failure to collect credits when due and demandable: a) Commission agent becomes liable to principal for damages. b) Unless: he proves that he exercises due diligence for that purpose (Art. 1908, NCC).
1. Care and custody of goods: The commission agent shall be responsible for the goods received by him in the terms and conditions and as described in the consignment, unless upon receiving them he should make a written statement of the damage and deterioration suffered by the same (Art. 1903, NCC). If the commission agent handles goods of the same kind and mark belonging to different owners, he has the obligation to distinguish them by countermarks, and to designate the merchandise respectively belonging to each principal (Art. 1904, NCC). 2. Care of cash He is not the insurer of the safety of the money. But he must observe diligence of a good father of a family. 3. Sell on credit: Duty not to sell on credit: A commission agent cannot, without the express or implied consent of the principal, sell on credit (Art. 1905, NCC). Effect of sale on credit: If not authorized: The principal may demand from him payment in cash, but the commission agent shall be entitled to any interest or benefit, which may result from such sale (Art. 1905, NCC). If authorized: Should the commission agent, with authority of the principal, sell on credit, he shall so inform the principal, with a statement of the names of the buyers. Should he fail to do so, the sale shall be deemed to have been made for cash insofar as the principal is concerned (Art. 1906, NCC).
Del Credre Agent - A commission agent who receives on sale a guaranty commission, in addition to the ordinary commission. The guaranty commission is given in return for the risk of collecting the credit. Effects: He guarantees the risk of collection and he shall pay the principal the proceeds of the sale on the same terms agreed upon with the purchaser, if the latter is not able to pay (Art. 1907, NCC). b) Either the principal or the del credere agent may sue the purchaser and the suit of one will bar the subsequent suit of the other. a)
“Doctrine of Procuring Cause” – If the agent is the procuring cause of the sale – that the measures employed by him and the efforts he exerted resulted in the sale – he is entitled to the payment of the commission (Ramos vs. CA, G.R. No. 25463, April 4, 1975). In case of two or more Agents (Joint Agents): The responsibility of two or more agents, even though they have been appointed simultaneously is merely joint and not solidary, unless solidarity has been expressly stipulated (Art. 1894, NCC). IRREVOCABLE AGENCY The agency is not revocable at will if — 1. If a bilateral contract depends upon it. 2. If the agency is a means of fulfilling an obligation already contracted
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3. If a partner is appointed manager of partnership in the contract of partnership and his removal from the management is unjustifiable (Art. 1927, NCC). C. OBLIGATIONS OF THE PRINCIPAL 1. Obligation to pay compensation General Rule: Agency is presumed to be for compensation (Art. 1875, NCC). Exception: Unless there is proof to the contrary (Art. 1875, NCC). 2. Obligation to advance funds Principal is obliged to advance funds necessary for the execution of the agency upon the request of the agent (Art. 1912, NCC). When an agent is obliged to advance funds If there is a stipulation to that effect. But, notwithstanding such stipulation, he cannot be obliged to do so if the principal is insolvent (Art. 1886, NCC). Right of agent who made such advances He is entitled to be reimbursed, even if the business or undertaking was not successful, provided the agent was free from all fault (Art. 1912[2], NCC). b) Such reimbursem*nt shall include interest on the sums advanced, from the day on which the advance was made (Art. 1912[3] NCC). a)
Instances where principal is not liable for expenses incurred by agent:
c) When agent incurred them with knowledge that an unfavorable result would ensue, if the principal was not aware thereof. d) When it was stipulated that the expenses would be borne by the agent, or that the latter would be allowed only a certain sum (Art. 1918, NCC). 3. Obligation to indemnify agent for damages Requisites: a) Agent suffers damage as a result of the execution of agency; and b) The agent is free from fault or negligence (Art. 1913, NCC). Agent’s Lien 1. Agent may retain in pledge the things which are the object of the agency until the principal effects the reimbursem*nt and pays the advances made by the agent; and 2. The damages suffered by the agent in executing the agency (Art. 1914), the enforcement of the lien is the same as that required in foreclosing a pledge. If there be several principals (joint principals): If there are several principals who have appointed the agent for a common transaction or undertaking, they shall be solidarily liable to the agent for all the consequences of the agency (Art. 1915, NCC).
a) If the agent acted in contravention of principal’s instructions, unless the latter should wish to avail himself of the benefits derived from the contract. b) When expenses were due to the fault of the agent.
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Rights and liabilities between principal and third person
3. And contract is beyond the scope of agent’s authority:
For contracts contracted by agent as such (in behalf of principal) and contract is within scope of agent’s authority:
a. Principal is not bound except when he ratifies it expressly or tacitly (Art. 1910[2], NCC). The contract is unenforceable (Art. 1317 and 1403[1], NCC).
1. The cause of action of third person is against the principal, unless the agent expressly binds himself. 2. Agent is not personally liable to third person with whom he contracts, unless he expressly binds himself (Art. 1897, NCC). 3. Principal is bound. He must comply with the obligations which the agent may have contracted (Art. 1910, NCC).
b. Exceptions:: Principal notwithstanding the fact exceeded his authority— ▪
If the limits of the agent’s authority is known only to the principal and agent and the party with whom the agent contacted is not aware of the limits of the powers granted by the principal (Art. 1898 and 1900, NCC).
▪
If the principal allowed the agent to act as though the latter had full powers, in which case, the principal is solidarily liable with the agent (Art. 1911, NCC).
When agent deemed to have acted within scope of his authority as to third persons 1. If authority is in writinga. Act is deemed to have been performed within the scope of the agent’s authority if the same is within the terms of the power of attorney as written, even if the agent has in fact exceeded the limits of his authority according to an understanding between the principal and the agent (Art. 1900, NCC). b. Private or secret orders and instructions of the principal do not prejudice third persons who have relied upon the written power of attorney or instructions shown them (Art. 1902, NCC). c. For this purpose, a third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power of attorney or the instructions as regards the agency (Art. 1902, NCC). 2. If authority is not in writing – rule is that every person dealing with an assumed agent is put upon inquiry and must discover upon his peril, if he would hold the principal liable, not only upon the fact of the agency but the nature and extent of the authority of the agent.
is bound that agent
Agent is personally liable to the person he contracted with if— 1) He exceeds his authority, without giving such party sufficient notice of his powers (Art. 1897, NCC). 2) He exceeds his authority and he undertook to secure the principal’s ratification (Art. 1898, NCC). For Contracts Executed by Agent in His Own Name: Principal has no right of action against the person with whom the agent has contracted, except when the contract involves things belonging to principal (Art. 1883, NCC). 2. Such third person likewise has no cause of action against the principal, except when the contract involves things belonging to principal (Art. 1883, NCC). 3. Agent is the one directly bound to the person whom he contracted with, except 1.
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when the contract involves things belonging to principal (Art. 1883, NCC). 4. The XPN does not apply when the agent acted beyond the scope of his authority. 5. If the principal ratifies the contract and has signified his willingness to ratify the agents acts, the same becomes enforceable between the parties and the third person with whom the agent contracted with cannot set up the fact the agent exceed his powers (Art. 1901, NCC). Double sale by principal and agent Situation: Two persons contract with regard to the same thing, one of them with the agent and the other with the principal, and the two contracts are incompatible with each other. Whose contract is preferred: That of prior date shall be preferred, without prejudice to the provisions of Article 1544 on double sale (Art. 1916, NCC). Who is liable to the person whose contract is rejected: 1. If the principal has agent acted in good faith, the principal is liable. The agent is not liable 2. If the agent has acted in bad faith, only the agent is liable for damages. The principal is not liable (Art. 1917, NCC). When is Principal Liable for Delict/Quasidelict Committed by Agent: 1. Person sought to be held must stand in relation of principal to the one committing the act; and 2. Act of the agent must have been done within the scope of his authority (De Leon, Comments and Cases on Partnership, Agency, and Trusts, 2010, p. 518). D. MODES OF EXTINGUISHMENT 1. Revocation by principal; 2. Withdrawal of the agent; 3. Death, civil interdiction, insanity or insolvency of the principal or of the agent;
4. Dissolution of the firm or corporation which entrusted or accepted the agency; 5. Accomplishment of the object or purpose of the agency; 6. Expiration of the period for which the agency was constituted (Art. 1919, NCC). Note: The list is not exclusive. 1. Revocation of agency by principal Revocable at will: The principal may revoke the agency at will and compel the agent to return the document evidencing the agency (Art. 1920, NCC). When two or more principals have granted a power of attorney for a common transaction, any one of them may revoke the same without the consent of the others (Art. 1925, NCC). Manner of revocation: Either express or implied (Art. 1920, NCC). There is implied revocation in the following— 1. When a new agent is appointed for the same business or transaction (Art. 1923, NCC). 2. When the principal directly manages the business entrusted to the agent, dealing directly with third persons (Art. 1924, NCC). 3. When a special power of attorney is granted to another, it revokes the general power of attorney as regards the special matter involved in the general power (Art. 1926, NCC). Necessity and sufficiency of notice of revocation: Between principal and third person – If agent had general powers: Notice of revocation in a newspaper of general circulation is a sufficient warning to third persons (Art. 1922, NCC).
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Without such notice, revocation does not prejudice third persons who acted in good faith and without knowledge of the revocation (Art. 1922, NCC). If Agency is for contracting with specified persons: The specified persons who contracted with the agent shall not be prejudiced if notice of revocation is not given (Art. 1922, NCC). Between principal and agent – Agent must be notified. 2. Withdrawal by Agent Manner: By giving due notice to the principal (Art. 1928, NCC). Liabilities of agent incident to withdrawal: ▪
▪
If the principal suffers damage by reason of withdrawal, agent is liable for damages unless he based his withdrawal upon the impossibility of continuing the performance of the agency without grave detriment to himself (Art. 1928, NCC). If the withdrawal is for valid reason, agent must continue to act until principal has had reasonable opportunity to take necessary steps to meet the situation (Art. 1929, NCC).
3. Death of Principal General Rule: Death of principal results in the extinguishment of agency (Art. 1919[3], NCC). Exceptions: 1. It agency has been constituted in the common interest of both principal and agent. 2. If agency has been constituted in the interest of a third person who has accepted the stipulation in his favor (Art. 1930, NCC). Obligation of agent upon extinguishment of agency by reason of death of principal: He must finish the business already begun on the death
of the principal, should delay entail any danger (Art. 1884[2], NCC). Acts done by agent prior to notice of death of principal or of any other cause which extinguished agency: Considered valid and fully effective with respect to third persons who may have contracted with the agent in good faith (Art. 1931, NCC). 4. Civil Interdiction, insolvency
insanity,
and
Person with these qualities cannot give valid consent to a contract (Arts. 1327 and 1329, NCC). Civil interdiction shall deprive the offender during the time of his sentence of the rights of parental authority, or guardianship, either as to the person or property of any ward, of marital authority, of the right to manage his property and of the right to dispose of such property by any act or any conveyance inter vivos (Art. 34, RPC). 5. Dissolution of a Firm or Corporation Dissolution of a firm or corporation which entrusted (as principal) or accepted (as agent) the agency, extinguishes its juridical existence as far as the right to go on doing ordinary business is concerned, except for the purpose of winding up its affairs. 6. Accomplishment of object or purpose Termination of agency ipso facto At least as between the parties, principal and agent, the fulfillment of the purpose for which the agency is created ipso facto terminates the agency, even though expressed to be irrevocable. Continued existence of authority illogical When the object or purpose of the agency is accomplished and nothing else remains to be done, there would be no sense in continuing the relationship beyond that point.
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7. Expiration of term
1. Kinds of Contracts of Loan
Term specified
1. Commodatum – where the bailor (lender) delivers to the bailee (borrower) a nonconsumable thing so that the latter may use it for a given time and return the same thing (i.e. identical thing); and
Where an agency, by the terms of the original agreement, is created for a fixed period or is to end at a certain time, the expiration of such period or the arrival of that time, obviously results in the termination of the relationship, even though the purpose for which the agency was created has not been accomplished (De Leon, Comments and Cases on Partnership, Agency and Trusts, 2010, p. 578-579). Term not specified If no time is specified, it terminates at the end of a reasonable period of time (Ibid, p. 579). Period implied The period may be implied from the terms of the agreement, the purpose of the agency, and the circ*mstances of the parties (Ibid).
2. Mutuum or Simple Loan – where the lender delivers to the borrower money or other consumable thing upon the condition that the latter shall pay the same amount of the same kind and quality (Art. 1933, New Civil Code); (De Leon, 2013). Distinctions COMMODATUM
MUTUUM
As to the type Loan of Use (Art. 1935,
NCC)
Loan of Consumption
As to purpose
IV. CREDIT TRANSACTIONS A. LOANS A contract wherein 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, or money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid (Art. 1933, NCC).
The purpose is the use of the thing borrowed and the obligation to return the very same thing (Arts.
1933, NCC).
NOTE: Use of the fruits is not included, unless expressly provided for in the contract (Arts. 1935
Unilateral Contract - once the subject matter has been delivered, it creates obligations on the part of only one of the parties (i.e. borrower) (De Leon, Comments and Cases on Credit Transactions, 2010, p. 6).
(Arts. 1953, NCC).
and 1940, NCC).
Characteristics Real Contract– delivery of the thing loaned is necessary for the perfection of the contract.
The purpose is to consume the thing borrowed and with the obligation to repay its equivalent in kind, quality and quantity
As to object May either be Movable or Immovable, and if it is movable property, it is ordinarily consumable (Art.
1937, NCC).
The object is always movable property and it is always money or the other consumable property.
GR: The object of the contract is non-fungible or non-consumable. XPN: The object may be
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consumable, provided that the purpose is not for consumption but for exhibition (Art. 1936, NCC).
As to Extinguishment
May be gratuitous or onerous.
GR: For the return of the thing, the lender must wait for the expiration of the period agreed upon or the accomplishment of the use for which the commodatum has been constituted (Art.
(Example: if interest is payable)
Exceptions::
As to consideration Essentially gratuitous. NOTE: If onerous or compensation is paid, then the contract may be Lease
(Art. 1935, NCC).
As to ownership of the thing Bailor/Lender retains ownership of the thing delivered (Art. 1933, NCC).
Bailee/borrower becomes the owner of the thing delivered.
The bailor/lender need not be the owner of the thing loaned (Art. 1938, NCC).
The lender must be the owner or at least capable of transferring ownership.
As to duty of borrower There is an obligation to return the very same / specific thing loaned.
To pay its equivalent in kind, quality and quantity. Reason: The bailee or the borrower becomes the owner, hence, there is no obligation to return the very same thing loaned.
As to the effect of the death of the lender Death of the lender or the borrower extinguishes commodatum because it is purely personal in character
Death of the lender does not extinguish the loan. It is not purely personal.
(Art. 1939[1], NCC).
As to who bears the loss Generally, the bailor bears the loss of the thing due to fortuitous event (Art. 1942,
NCC).
The bailee-borrower bears the loss of the thing delivered. Res Perit Domino.
The lender-bailor must wait for the expiration of the period agreed upon for the payment of the loan.
1946, NCC).
(1) In case of Urgent Need; (2) In Precarium; (3) In case of acts of ingratitude by the bailee.
(Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 515; Paras, Comments and Cases on Credit Transactions)
Note: Both contracts shall not be perfected until the delivery of the object of the contract (Art. 1934, NCC). A thing is consumable when it cannot be used in a manner appropriate to its nature without being consumed (Art. 418, NCC). On the other hand, a non-consumable thing is a movable thing which can be used in a manner appropriate to its nature without it being consumed (Ibid.). COMMODATUM Commodatum – an essentially gratuitous contract where the bailor (lender) delivers to the bailee (borrower) a non-consumable thing so that the latter may use the same for a certain time and return after using it, without compensation (Art. 1933, NCC). An essential feature of the commodatum is that the use of the thing belonging to another shall for a certain period (Mina vs. Pascual, G.R. No. L8321, October 14, 1913).
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Parties to a commodatum 1. Bailor/Comodatario/Commodans – The giver/ lender; the party who delivers the possession or custody of the thing bailed; and 2. Bailee/Comodante/Commodatarius – The recipient/ borrower; the party who receives the possession or custody of the thing thus delivered. Kinds of a contract of commodatum 1. Ordinary Commodatum – use by the borrower of the thing is for a certain period of time. 2.
Precarium - one whereby the bailor may demand the thing loaned at will (Art. 1947, NCC).
Object of a contract of commodatum: General Rule: Non-consumable, so that the bailee may use the same for a certain time and return it (Art. 1933, NCC). Exception: Consumable goods may be the subject of commodatum if the purpose of the contract is not the consumption of the object, as when it is merely for exhibition (Article 1936, NCC). If consumable goods are loaned only for ad ostentationem or for purposes of exhibition, or when the intention of the parties is to lend consumable goods and to have the very same goods returned at the end of the period agreed upon, the loan is a commodatum and not a mutuum. The rule is that the intention of the parties thereto shall be accorded primordial consideration in determining the actual character of a contract (Producers Bank of the Philippines vs. Court of Appeals, G.R. No. 115324, February 19, 2003). Commodatum is purely personal in character. (Art. 1939, NCC)
No Transfer of Ownership The bailor (lender) retains the ownership of the thing loaned. Hence, the bailor in commodatum need not be the owner of the thing loaned (Art. 1938, NCC). The real right that is transferred is merely possession and not ownership; hence, all that is necessary for the bailor is to have: (1) possessory interest and the right to use; and (2) the right to transfer such right to use and possess. Hence, a usufructuary or a lessee in a contract of lease can be a bailor in commodatum with respect to the object of usufruct or lease. The usufructuary or a lessee can allow another to use the thing temporarily. However, this right is subject to the restrictions imposed under the contract between the owner, on one hand, and the lessee or usufructuary, on the other hand. Bailor must have the right to convey the use of the thing While it is not required that the bailor has the right to dispose of the thing itself in an absolute manner, the bailor must have the right to convey the use of the thing. Hence, the bailor cannot constitute a commodatum if the use of the thing is personal to him only or if his right is subject to a contractual prohibition to convey any right (Aquino, Essentials of Credit Transactions and Insolvency Law (2021), p. 24-26). Kinds of Commodatum 1. Ordinary Commodatum – use by the borrower of the thing is for a certain period of time 2. Precarium- one whereby the bailor may demand the thing loaned at will It exists in the following cases:
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a. Neither the duration nor purpose of the contract is stipulated; or b. The use of the thing is merely tolerated by the owner. Obligations of the Bailor and the Bailee Obligations of the Bailor (Art. 1946 to Art. 1952, NCC) 1. To respect the duration of the loan. Reason: The bailor is bound by the terms of the contract of commodatum which is for a certain time. General Rule: Allow the bailee the use of the thing loaned for the duration of the period stipulated or until the accomplishment of the purpose for which the commodatum was instituted. Exceptions: a. In case of urgent need In which case, the bailor may demand its return or temporary use; Reason: Commodatum is essentially gratuitous (Art. 1946, NCC). b. If the bailee commits any act of ingratitude specified in Art. 765. The bailor may then demand immediate return of the thing (Art. 1948, NCC). Acts of Ingratitude under Art. 765. ● If the bailee should commit some offenses against the person, honor or property of the bailor, or of his wife, children under his parental authority; ● If the bailee imputes to the bailor any criminal offense, or any act involving moral turpitude, even though he should prove it, unless the crime or the act has been committed against the bailee himself; ● If the bailee unduly refuses the bailor support when the bailee is legally or morally bound to give support; (Tolentino, Civil Code of the Philippines Vol. 5, 1992 ed., p.448)
Reason: The contract is void (Art. 1409[1] and [7]) 2. To refund to the bailee extraordinary expenses 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 (Art. 1949 [1], NCC). 3. To be liable to the bailee for damages for known hidden flaws (Art. 1951, NCC). Requisites: a. Existence of flaw or defect in the thing loaned; b. The flaw or defect is hidden; c. The bailor is aware thereof; d. The bailee is not aware thereof; and e. The bailee suffers damages by reason of said flaw or defect. If the above requisites concur, the bailee has the right of retention for damages (Art. 1944 NCC). The bailor cannot exempt himself from the payment of expenses or damages by abandoning the thing to the bailee. Reason: The expenses or damages may exceed the value of the thing loaned (Art. 1952, NCC). If in making use of the thing, the bailee incurred expenses other than ordinary and extraordinary expenses, he is NOT entitled to reimbursem*nt (Art. 1950, NCC). Obligations of the Bailee (Arts. 1941-1945) Principal Obligations:
1. Take care of the thing with diligence of a good father of a family (Art. 1163, 1169, 1170 and 1173).
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2. If a person is obliged to return a
determinate thing, he must exercise the diligence of a good father of a family in taking care of the thing. The bailee is liable for breach of this duty; hence, the bailee is liable for any loss due to his negligence.
a fortuitous event for otherwise they would not have appraised the thing; (Republic v. Bagtas, GR. No. L-17474 October 25, 1962) d. When, being able to save either of the thing borrowed or his own things, he chose to save the latter; or Reason: Bailee’s ingratitude e. When the bailee devoted the thing for any purpose different from that for which it has been loaned (Art. 1942, NCC).
3.
Use the thing loaned only for the purpose for which it was loaned and not for any other purpose (Art. 1935, 1939(2), 1942[1], NCC).
4.
Return the thing upon expiration of terms or upon accomplishment of purpose (Art. 1933, NCC).
3. Liability for the deterioration due to the use of the thing.
General rule: The bailee has no right to retain the thing loaned as security for claims he has against the bailor even for extraordinary expenses.
General rule: Bailee is not liable for the deterioration of the thing loaned due only to the use thereof and without his fault (Art. 1943, NCC).
Exception: for a claim for damages suffered because of the flaws of the thing loaned (Art. 1944, NCC).
This refers only to the normal use of the thing loaned.
Other obligations
Exceptions:
1. To pay for the ordinary expenses for the use and preservation of the thing loaned (Art. 1941, NCC). 2. To be liable for the loss of the thing, even if it should be through a fortuitous event, in the following cases:
● If expressly stipulated; ● If guilty of fault or negligence; (Art. 1170, NCC) ● If he devoted the thing to any purpose different from that for which it has been loaned; (Art.1942[1], NCC) or ● If he uses the thing beyond the period stipulated.
a. When he keeps it longer than the period stipulated, or after the accomplishment of its use; Reason: Delay (Arts. 1165, 1169, and 1170, NCC) b. When he lends or leases it to third persons who are not members of his household; Reason: Commodatum is purely personal (Art. 1939, NCC). c. When the thing loaned has been delivered with appraisal of its value unless there is a stipulation exempting the bailee from responsibility in case of fortuitous event; Reason: The law presumes that the parties intended that the borrower shall be liable for the loss of the thing even if due to
4. To pay for extraordinary expenses arising from the actual use of the thing by the bailee, which shall be borne equally by both the bailor and the bailee, even though the bailee acted without fault, unless there is a stipulation to the contrary (Art. 1949[2], NCC). General rule: The bailee has no right to retain the thing loaned as security on the ground that the bailor owes him something, even though it may be by reason of expenses (Art. 1944, NCC).
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Exception: For damages suffered by the bailee because of the hidden flaws of things known to the bailor (Art. 1951, NCC). ▪
In a contract of deposit, when there are two or more bailees to whom a thing is loaned in the same contract, such relationship will be deemed solidary (Art. 1945, NCC).
▪
This is an exception by express provision of law to the general rule that the concurrence of two or more parties in the same obligation gives rise only to a joint obligation (Arts. 1207, 1208, NCC).
▪
As a general rule, under Art. 1933, the subject matter of commodatum must be non‐ consumable because the thing must be returned. Nonetheless, by way of an exception, consumable goods may be the object of commodatum if the purpose is not to consume them such as when they were loaned merely for ad ostentationem or exhibition purposes. After the affair, the same and identical goods shall be returned to the lender or bail (Art. 1936, NCC).
▪
The bailee in commodatum acquires only the use of the thing loaned but not its fruits (Art. 1935, NCC).
Obligations of the Bailor 1.
To respect the duration of the loan because the bailor is bound by the terms of the contract of commodatum which is for a certain time (Art. 1946, NCC).
General rule: Allow the bailee the use of the thing loaned for the duration of the period stipulated or until the accomplishment of the purpose for which the commodatum has been constituted (Art. 1946, NCC). Exceptions: (a) In case of urgent need in which case the bailor may demand its return or temporary use, in which the contract of commodatum shall be
suspended while the thing is in the possession of the bailor (Art. 1946, NCC). Reason: Commodatum gratuitous. (b) When
the
contractual
is
essentially
relation
is
a
precarium, or one whereby the bailor may demand the thing loaned at will.
It exists in the following cases: a. The duration of the contract is not stipulated; or b. The purpose of the contract is not stipulated; or c. The use of the thing is merely tolerated by the owner (Art. 1947, NCC). (c) The bailor may demand immediate return
of the thing if the bailee commits any act of ingratitude as specified in Art. 765 (Art. 1948, NCC): a. If the bailee should commit some offenses against the person, honor or property of the bailor, or of his wife, children under his parental authority; b. If the bailee imputes to the bailor any criminal offense, or any act involving moral turpitude, even though he should prove it, unless the crime or the act has been committed against the bailee himself, his wife or children under his authority; c. If the bailee unduly refuses the bailor support when the bailee is legally or morally bound to give support; and d. If the loan is for illegal or immoral use. Reason: The contract is void (Art. 1409[1] and [7], NCC, Tolentino, Civil Code of the Philippines Vol. 5, 1992 ed., p.448). 2. To refund to the bailee the extraordinary expenses for the preservation of the thing loaned. General rule: The bailee shall bring the same to the knowledge of the bailor before incurring them.
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Exception: When the expenses are so urgent that the reply to the notification cannot be awaited without danger (Art. 1949 [1], NCC). 3. Unless there’s stipulation to the contrary, to be equally liable with the bailee for extraordinary expenses, even without his own fault, arising from the actual use of the thing by such bailee (Art. 1949 [2], NCC). 4. To be liable to the bailee for damages for hidden flaws known to him which he did not disclose to the bailee (Art. 1951, NCC). The bailee has the right of retention for damages when the following requisites are present: (Art. 1944 NCC) Requisites: (FHANS) a. Existence of flaw or defect in the thing loaned; b. The flaw or defect is hidden; c. The bailor is aware thereof; d. The bailee is not aware thereof; and e. The bailee suffers damages by reason of said flaw or defect. Extinguishment of Commodatum The provisions of the New Civil Code on commodatum include the following non-exclusive grounds for extinguishing the contract: 1. Expiration of the term agreed upon; 2. Accomplishment of the stipulated purpose or use of the thing; 3. Return of the thing with the consent of the bailor; 4. Return of the thing in case the agreement is precarium (Art. 1947, NCC); 5. Return of the thing for acts of ingratitude (Art. 1948, NCC); and 6. Death of a party (Arts. 133 & 1178, NCC).
Abandonment The bailor cannot exempt himself from the payment of expenses or damages by abandoning the thing to the bailee (Art. 1952, NCC). MUTUUM Mutuum – A contract whereby one of the parties delivers money or other consumable things with the understanding that the same amount of the same kind and quality shall be paid (Art. 1933, NCC). Nature of a contract of Mutuum 1. The purpose of the contract is consumption; 2. The subject-matter is either money or consumable property; 3. Ownership passes to the borrower; 4. It is a real contract; 5. It may be gratuitous or with stipulation to pay interest; and 6. It is a unilateral contract (Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 516-517). It involves the return of the equivalent amount only and not the identical thing because the borrower acquires ownership of the money or the consumable thing loaned (Art. 1978, NCC). A loan of money may be payable in kind (Art. 1958, NCC). Object of a Contract of Loan Fungible Things The contract of mutuum requires the receipt of money or other fungible things. Fungible things are those properties that can be replaced by another property of the same kind, quantity and quality. One unit of the property is equivalent to or is deemed to be the equivalent of and replaceable with another unit of the same kind, quantity and quality. The fungibility of property is a question of intent of
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the parties (Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. 5, 1992 Ed., p. 442,). General rule: Non-fungible things are irreplaceable. They must be returned to the lender after the purpose of the loan has been accomplished. Exceptions: Non-fungible things may be replaced by agreement of the parties. In such cases, the contract is barter and not a loan. Notes: A person who receives a loan of money or any other fungible thing acquires the ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and quantity (Art. 1953, NCC).
borrower shall pay its value at the time of the perfection of the loan (Art. 1955 [2], NCC). Legal Tender Legal Tender Power - All notes and coins issued by the Bangko Sentral ng Pilipinas shall be fully guaranteed by the Government of the Republic of the Philippines and shall be [the only] legal tender in the Philippines for all debts, both public and private (Section 52 of Republic Act No. 7653 a.k.a. The New Central Bank Act). BSP Circular No. 537, Series of 2006
Type of Coins
Maximum amount
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 shall be considered a barter (Art. 1954, NCC).
One (1) Peso, Five Ten (10) Pesos (5) Pesos and Ten (10) Pesos
One Thousand (1,000) Pesos
Perfection of a Contract of Mutuum
One (1) Centavo, Five (5) Centavos, Ten (10) Centavos, and Twenty-Five (25) Centavos
One Hundred (100) Pesos
It is only after the checks have been cashed by the debtor that the contract may be deemed perfected. (Art. 1249, NCC) Mere issuance of checks to the debtor does not perfect the contract of loan. Forms of Payment 1.
2.
If the thing loaned is money- payment must be made in the currency stipulated, otherwise that which is legal tender in the Philippines (Arts. 1955 [1] and 1249, NCC). In case of extraordinary inflation or deflation, payment shall be in the value of the currency at the time of the creation of the obligation (Art. 1250, NCC). A loan of money may be payable in kind (Art. 1958, NCC). If other than money- payment shall be of another thing of the same kind, quality and quantity. In case it is impossible to do so, the
Obligations of a borrower: 1. Pay the creditor an equal amount of the same kind and quality (Art. 1953, NCC). 2. Pay interest, if stipulated in writing (Art. 1956, NCC). The destruction of the thing loaned does not extinguish one’s obligation to pay because his obligation is not to return the thing loaned but to pay a generic thing (De Leon, Comments and Cases on Credit Transactions, 2016, p. 62). 2. INTEREST It is the compensation to be paid by the borrower for the use of the money lent to him by the lender. It is paid either as compensation for the use of money (monetary interest) or as damages (compensatory interest) (Andreas vs. Bank of the Philippine Islands, G.R. No. 23836,
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September 9, 1925; Asian Terminals, Inc., vs. Padoson Stainless Steel Corporation, G.R. No. 211876, June 25, 2018).
Kinds of Interest: 1. Simple interest – that which is paid for the principal at a certain rate fixed or stipulated by the parties. 2. Compound interest – that which is imposed interest due and unpaid. The accrued interest is added to the principal sum and the whole is treated as a new principal upon which the interest for the next period is calculated. 3. Legal interest – that which the law directs to be charged in the absence of any agreement as to the rate between the parties. Rate of Legal Interest: The legal rate of interest is now 6% per annum even for loans/forbearance of money, goods, or credit under BSP Circular No. 799, Series of 2013 dated June 21, 2013 that took effect on July 1, 2013 (Nacar vs. Gallery Frames, Inc., G.R. No. 189871, August 13, 2013; Sps. Andal v. PNB, G.R. No. 19420, November 27, 2013). 4. Lawful interest – that which the laws allow or do not prohibit. 5. Unlawful or usurious interest – paid or stipulated to be paid beyond the maximum fixed by law (De Leon, Comments on Credit Transactions, 2016 Ed p. 67-69). 6. Monetary or conventional interest compensation set by the parties for use or forbearance of money. The payment of regular interest constitutes the price or cost of the use of money and thus, until the principal sum due is returned to the creditor, regular interest continues to accrue since the debtor continues to use such principal amount. It has been held that for a debtor to continue in possession of the principal of the loan and to continue to use the same after maturity of the loan without payment of the monetary interest, would constitute unjust enrichment on the part of the debtor at the expense of the creditor (Frias vs. San Diego-Sison, G.R. No. 155223, April 4, 2007).
7.
Compensatory/Penalty/Indemnity interest - interest that may be imposed by law or by courts as penalty for damages
(Hun Hyung Park vs. Eung Won Choi, G.R. No. 220826, March 27, 2019); this refers
to damages paid arising from delay in paying a fixed sum of money or delay in assessing and paying damages (Sps. Abella vs. Sps. Abella, G.R. No. 195166, July 9, 2015). If a particular rate of interest has been expressly stipulated by the parties, that interest, not the legal rate of interest shall be applied (Casa Filipina Development Corporation vs. Deputy Executive Secretary, G.R. No. 96494, May 28, 1992). Formula for Interest Computation TOTAL AMOUNT DUE = [principal - partial payments made] + [interest + interest on interest], where: Interest = remaining balance x 6% per annum x number of years from due date (Date when demand was made) until full satisfaction/ payment. Interest on interest = interest computed as of the filing of the complaint x 6% x number of years until full satisfaction/payment. (PCI Leasing and Finance, Inc. vs. Trojan Industries Inc., et al., G.R. No. 176381, December 15, 2010)
Payment of unstipulated interest 1. Where unstipulated interest is paid by mistake, the debtor may recover, this would be a case of solutio indebiti or undue payment; or 2. Where the unstipulated interest is paid voluntarily because the debtor feels morally obliged to do so, there can be no recovery as in the case of natural obligations.
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Requisites for Demandability of Interest 1. Must be expressly stipulated; Exception: a. Indemnity for damages (Art. 2209, NCC); and b. Interest accruing from unpaid interest (Art 2212, NCC). 2. Must be lawful; and 3. Must be in writing. Requisites Interest
for
Recovery
of
Compound
General Rule: Accrued/Unpaid interest shall not earn interest. Exceptions: 1. When judicially demanded as provided in Art. 2212, interest due shall earn legal interest from the time it is judicially demanded although the obligation may be silent upon this point. 2. When there is an express stipulation made by the parties that the interest due and unpaid shall be added to the principal obligation and the resulting total amount shall earn interest.
1. Obligation regardless of source is breached – the contravenor shall be liable for damages under Title XVIII on Damages of the NCC; 2. Award of interest in the concept of actual or compensatory damages the rate of interest shall be as follows: a. When the obligation breached consists of payment of sum of money, the interest due shall be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default. b. When an obligation, not consisting of a loan or forbearance of money, is breached, an interest on the amount of damages may be imposed at the discretion of the court at the rate of 6% per annum. No interest shall be adjudged on unliquidated claims or damages, except when or until the demand can be established with reasonable certainty.
Guidelines for the application of proper interest rates 1. Stipulated rate shall apply. 2. When an obligation is breached, the contravener may be held liable for damages. 3. When the obligation breached consists of forbearance of money, in the absence of stipulation, the rate shall be the legal rate computed from default. The interest due shall itself earn legal interest from the time it is judicially demanded. 4. If the obligation does not consist of forbearance of money, the rate of interest shall be 6% per annum. In Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013, the Supreme Court modified the guidelines laid down in the case of Eastern Shipping Lines to embody BSP Circular No. 799 s. of 2013:
3. When the judgment of the court awarding the sum of money becomes final and executory, the rate of legal interest shall be 6% per annum from finality until satisfaction. ●
When the agreed rate is iniquitous and unconscionable, the courts may reduce the same as reason and equity demand (Imperial v. Jaucian, G.R. No. 149004 April 14, 2004).
●
The right to interest arises by reason of the contract (stipulation in writing) or by reason of delay or failure to pay principal on which interest is demanded (Baretto v. Santa Marina, G.R. No. 11908, Feb. 4, 1918).
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●
If the obligation consists of the payment of a sum of money, and the debtor incurs delay, the indemnity for damages shall be the payment of legal interest (Philrock, Inc. v. Construction Industry Arbitration Commission, G.R. Nos. 132848‐49, June 25, 2001).
When payment of monetary interest is allowed: 1. There was an express stipulation for the payment of interest; and 2. The agreement for the payment of interest was reduced in writing. The concurrence of the two conditions is required for the payment of monetary interest. Thus, collection of interest without any stipulation therefore in writing is prohibited by law (Siga‐an v. Villanueva, G.R. No. 173227, Jan. 20, 2009). Finance charge refers to interest, fees, service charges, discounts and such other charges incident to the extension of credit (R.A. No. 3765, otherwise known as Truth in Lending Act. Sec. 3). Unconscionable Interest Rates Parties are free to enter into agreements and stipulations as to the terms and conditions of their contract, but such freedom is not absolute. Thus, the stipulation as to interest may be considered void if it is unconscionable. Only the interest is void; the principal obligation is not affected by the invalidity of the stipulation as to interest (Limso vs. Philippine National Bank, G.R. Nos. 158622, 169441, 172958, 173194, 196958, 197120, 205463, January 27, 2016). As case law instructs, the imposition of an unconscionable rate of interest on a money debt, even if knowingly and voluntarily assumed, is immoral and unjust. It is tantamount to a repugnant spoliation and an iniquitous deprivation of property, repulsive to the common sense of man. It has no support in law, in principles of justice, or in the human conscience nor is there any reason whatsoever which may justify such imposition as righteous and as one that may be sustained within
the sphere of public or private morals (Sps. Albos vs. Spouses Embisan, et al, G.R. No. 210831, November 26, 2014). It is also worth stressing that interest rates whenever unconscionable may still be declared illegal. There is certainly nothing in said circular which grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets (Castro vs. Tan, G.R. No. 168940, November 24, 2009). B. DEPOSIT A contract constituted from the moment a person receives a thing belonging to another with the obligation of safely keeping it and returning the same. If the safekeeping of the thing delivered is not the principal purpose of the contract, there is no deposit but some other contract (Art. 1962, NCC). Principal Purpose: “Safekeeping” If Safekeeping is not the principal purpose it may be either: (a) commodatum; (b) lease; or (c) agency. The depositor need not be the owner of the thing deposited because the purpose of the contract is safekeeping and not transfer of ownership. The depositary cannot dispute the title of the depositor (Art. 1984[1], NCC). The depository is in estoppel. He is estopped from asserting title to the thing leased or received, as against the lessor or bailor (Art. 1436, NCC). Characteristics of deposit: 1. Real Contract - contract is perfected by the delivery of the subject matter. Where there has been no delivery, there is merely an agreement to deposit, which however is binding and enforceable upon the parties.
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2. Unilateral – when gratuitous because only the depositary has an obligation. 3. Bilateral – If with compensation because it gives rise to obligations on the part of both the depositary and depositor. 4. Voluntary as a general rule 5. Gratuitous as a general rule (De Leon, Comments and Cases on Credit Transactions, 2016, p. 144). Subject Matter of Deposit 1. For extrajudicial deposit only MOVABLE/PERSONAL property may be the object of EXTRAJUDICIAL deposit, whether voluntary or necessary. The provisions do not embrace incorporeal or intangible property, like rights and actions. 2. For judicial deposit- may cover MOVABLE as well as IMMOVABLE property, its purpose being to protect the rights of the parties to a suit. Kinds of Deposit: A. Judicial (sequestration) – when an attachment or seizure of property in litigation is ordered (Art. 2005, NCC). B. Extra-judicial 1. Voluntary – delivery is made by the will of the depositor or by 2 or more persons each of whom believes himself entitled to the thing deposited (Arts. 1968-1995, NCC). 2. Necessary – made in compliance with (1) a legal obligation; or (2) on occasion of any calamity; or (3) by travelers in hotels and inns; or (4) by travelers with common carriers. ●
The prevailing rule is that the relation between a bank renting out safety-deposit boxes and its customer with respect to the contents of the box is that of a bailor and bailee, the bailment being for hire and manual benefit (CA AgroIndustrial Dev. Corp. v. C.A., Mar. 3, 1993, G.R. No. 90027).
Another difference between a voluntary deposit and necessary deposit is that in the former, the depositor is free to choose the depositary, in the latter, there is lack of free choice in the depositor (De Leon, Comments and Cases on Credit Transactions, 2016, p. 158). Extra-judicial deposit does not include incorporeal/intangible property such as right and actions for it follow the person of the owner. General Rule: A contract of deposit is gratuitous (Art. 1965, NCC). Exceptions: 1. When there is a contrary stipulation; 2. The depositary is engaged in the business of storing goods; or 3. The property is saved from destruction without the knowledge of the owner. RULES ON THE CAPACITY OF DEPOSITARY AND DEPOSITOR Depositary Depositary (capacitated) (incapacitated) Depositor Depositor (incapacitated) (Art. (capacitated) (Art. 1970) 1971) Depositary is subject to Depositary does not ALL the obligations of a incur obligations of a depositary whether or depositary not the depositor is capacitated. Depositary must return Depositary, however is the property either to: liable to: a) Return the a) The legal thing representative deposited of the while still in his incapacitated; possession; or or b) Pay the b) The depositor depositor the himself if he amount by should acquire which he may capacity. have benefited himself with the thing or its price subject to the right of any
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third person who acquired the thing in good faith.
General obligations of Depositary 1. To keep the thing safe (Art. 1972, NCC). Depositary is liable if the loss occurs through his fault or negligence even if the thing is insured. The loss of the thing while in his possession ordinarily raises the presumption of fault on his part. The required degree of care is greater when: a. Stipulated; b. It is the depositary who voluntarily offered to keep the thing; c. The deposit is compensated; or d. The deposit produces benefit to the depositary (Tolentino, Civil Code of the Philippines Vol. 5, 1992 ed., p. 460); 2. To return the thing (Art. 1972, NCC). Person to whom the thing deposited must be returned a.
Depositor, to his heirs and successors, or the person who may have been designated in the contract. ●
If 2 or more persons each claiming to be entitled to a thing, the depositary can file an action to compel the depositors to settle their conflicting claims among themselves in the nature of interpleader (Sec. 1 Rule 62, ROC).
b. Guardian or administrator of the person who made the deposit or the latter himself should acquire capacity (Art. 1970, NCC). c.
Legal representative of the depositor should the latter subsequently lose his capacity during the deposit (Art. 1986, NCC).
Time of return General Rule: Upon demand even though a specified period of time for such return may have been fixed. Exceptions: a. When the thing is judicially attached while in the depositary’s possession; b. Should he have been notified of the opposition of a 3rd person to the return or removal of the thing deposited in such instance, the depositary must immediately inform the depositor of the attachment or opposition (Art. 1988, NCC); or c. If the deposit is gratuitous, the depositary may return the thing deposited notwithstanding that a period has been fixed for the deposit if justifiable reasons exist for its return. If the depositor refuses to receive it, the depositary may secure its consignation from the court (Art. 1989, NCC). ●
If the deposit is for a valuable consideration, period must be followed even if the depositary suffers inconvenience as a consequence (Art.1989, NCC).
What to return a. Product, accessories, and accessions of the thing deposited (Art. 1983, NCC). b. If by force majeure or government order, the depositary loses the thing, and receives money or another thing in its place, he shall deliver the sum or other thing to the depositor (Art. 1990, NCC). Where to return a. Place agreed upon by the parties; or b. At the place where the thing deposited might be even if it should not be the same place where the deposit was made provided there was no malice on the part of the depositary; (Art. 1987)
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3. Not to deposit the thing with a 3rd person unless authorized by express stipulation (Art. 1973, NCC).
control of the safety deposit boxes was not given to the joint renters (CA Agro v. CA, G.R. No. 90027 March 3, 1993).
Reason: Deposit is founded on trust and confidence.
6. Not to commingle things deposited if so stipulated (Art. 1976, NCC).
The depositary is liable for the loss under the following:
Depositary can only commingle if the articles are of the same kind and quality. In case of commingling, each depositor shall be entitled to each portion of the entire mass as the amount deposited by him bears to the whole.
a. He transfers the deposit with a 3rd person without authority, although there is no negligence on his part and the third person; b. He deposits the thing with a 3rd person who is manifestly careless and unfit, although authorized, even in the absence of negligence; or c. The thing is lost through the negligence of his employees whether the latter are manifestly careless or not. 4. To change the way of the deposit if under the circ*mstances, the depositary may reasonably presume that the depositor would consent to the change if he knew of the facts of the situation, provided, that the former notifies the depositor thereof and wait for his decision, unless delay would cause danger (Art. 1974, NCC). 5. If the thing deposited should earn interest (Art. 1975, NCC): a. To collect interest and the capital itself as it falls due; and b. To take steps to preserve its value and rights with regards to it. ●
●
A contract for the rent of safety deposit boxes is a special kind of deposit; hence, it is not to be strictly governed by the provisions on deposit. The relation between the bank and its customer is that of a bailor and bailee, the bailment being for hire and mutual benefit (CA Agro v. CA, G.R. No. 90027 March 3, 1993). It cannot be characterized as an ordinary contract of lease because full and absolute
7. Not to make use of the thing deposited unless authorized (Art. 1977, NCC). General Rule: Deposit is not for use of the thing. Use by the depositary would make him liable for damages. Exceptions: a. When the preservation of the thing deposited requires its use; b. When authorized by the depositor (the authorization shall not be presumed and its existence must be proved (Art. 1977, NCC). Effect if permission to use is given If the thing deposited is non-consumable, the contract is a commodatum, unless safekeeping is still the principal purpose. If the thing deposited consists of consumable things, the contract is converted into a simple loan or mutuum unless safekeeping is still the principal purpose in which case it is called an irregular deposit (e.g. bank deposit) (De Leon, Comments and Cases on Credit Transactions, 2016, p. 180). a. To be liable for loss even through a fortuitous event (Art. 1979, NCC); If stipulated; b. If he uses the thing without the depositor’s permission; c. If he delays its return; or
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d. If he allows others to use it. When the thing deposited is delivered sealed and closed: (Art. 1981, NCC) a. To return the thing deposited in the same condition; b. To pay for damages should the seam or lock be broken through his fault, which is presumed unless proven otherwise; and c. To keep the secret of the deposit when the seal or lock is broken with or without his fault. ●
The depositary is authorized to open the thing deposited which is closed and sealed when: (Art. 1982, NCC)
a. There is presumed authority; or b. There is a necessity to do so. 8. To pay interest on sums converted to personal use if the deposit consists of money (Art. 1983, NCC). Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loans (Art. 1980, NCC). A bank can compensate or set-off the deposit in its hands for the payment of any indebtedness to it on the part of the depositor. In true deposit, such compensation or set-off is NOT allowed. 11. To advise the true owner that a deposit has been made should he discover that the thing deposited was stolen from the owner (Art. 1984, NCC). If the owner despite such information, does not claim it within the period of 1 month, the depositary shall be relieved from all responsibility by returning the same to the depositor (De Leon, Comments and Cases on Credit Transactions. 2016, p. 198).
Rule when there are two or more depositors. (Art. 1985) 1. If the thing deposited is divisible and depositors are not solidary, each depositor can demand only his proportionate share thereto. 2. If obligation is solidary or if the thing is not divisible, Rules on Active Solidarity shall apply.i.e. each one of the solidary depositors may do whatever may be useful to the others but not anything which may be prejudicial to the latter; (Art. 1212, NCC) and the depositary may return the thing to anyone of the solidary depositors unless a demand, judicial or extrajudicial, for its return has been made by one of them in which case, delivery should be made to him (Art. 1214, NCC). 3. Return to one of the depositors stipulated. The depositary is bound to return it only to the person designated although the latter has not made any demand for its return. ●
The depositary may retain the thing in pledge until payment of what may be due him by reason of the deposit (Art. 1994, NCC).
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 (Art. 1991, NCC). Obligations of the Depositor 1. To pay expenses for preservation (contemplates ordinary and extraordinary & necessary expenses). a. If the deposit is gratuitous, the depositor is obliged to reimburse the depositary for expenses incurred for the preservation of the thing deposited; (Art. 1992)
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b. If the deposit is for valuable consideration, expenses for preservation are borne by the depositary due to the character of the thing deposited. General rule: The depositor shall reimburse the depositary for any loss arising from the character of the thing deposited (Art. 1993, NCC). Exceptions: 1. At the time of the deposit, the depositor was not aware of the dangerous character of the thing; 2. When the depositor was not expected to know the dangerous character of the thing; 3. When the depositor notified the depositary of the same; or 4. The depositary was aware of it without advice from the depositor (Art. 1993, NCC). Extinguishment of voluntary deposit (Art. 1995, NCC) - Same as the modes of extinguishment of obligations in Art. 1231 of the New Civil Code. A deposit is extinguished under the following circ*mstances: 1. Upon the loss or destruction of the thing deposited; 2. In case of gratuitous deposit, upon the death of either the depositor or the depositary (Art. 1995, NCC); or 3. Other causes, such as return of the thing, novation, merger, expiration of the term, fulfillment of the resolutory condition, etc (Art. 1231, NCC). ●
A deposit for compensation is not extinguished by the death of either party because, unlike a gratuitous deposit, an onerous deposit is not personal in nature (De Leon, Comments and Cases on Credit Transactions, 2010 ed., p. 145).
Necessary Deposits 1. Made in compliance with a legal obligation. 2. Made on the occasion of any calamity such as fire, storm, flood, pillage, shipwreck or other similar events. (deposito miserable) 3. Made by travelers in hotels and inns or by travelers with common carrier (Art. 1996, NCC). Deposit by travelers in hotels and inns The keepers of hotels or inns shall be responsible as depositaries for the deposit of effects made by travelers, provided: 1. Notice was given to them or to their employees of the effects brought by the guest; and 2. The guest takes the precautions, which said hotel-keepers or their substitutes advised, relative to the care and vigilance of their effects. This also applies to deposits made to common carriers (Art. 1754, NCC). ●
Liability extends to vehicles, animals and articles, which have been introduced or placed in the annexes of the hotel (Art. 1999, NCC).
●
Liability shall EXCLUDE losses, which proceed from force majeure. The act of a thief or robber is not deemed force majeure unless done with the use of arms or irresistible force (Art. 2000, NCC).
●
The hotelkeeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the loss of articles brought by the guest. Any stipulation to such effect shall be void (Art. 2000, NCC).
●
Notice is necessary only for suing civil liability but not criminal liability (Art. 2003, NCC).
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Hotelkeeper is liable when the loss or injury is caused by: 1. His servants or employees as well as by strangers provided that the notice has been given and proper precautions (Art. 2180, NCC); and 2. The act of a thief or robber done without the use of arms and irresistible force, for in this case, the hotel-keeper is apparently negligent (Art. 2001, NCC). Hotel-keeper is not liable when the loss or injury is caused by: 1. Force majeure, theft or robbery by a stranger with the use of irresistible force; 2. The acts of guests, his family, servants or visitors; or 3. Arises from the character of the things brought into the hotel.
●
The depositary may change the manner of the deposit if 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 (Art. 1974, NCC).
Effect if the depositary has permission to use the thing deposited General rule: The contract loses the concept of a deposit and becomes a loan or commodatum. Exception: Where safekeeping is still the principal purpose of the contract (Art. 1978, NCC). ●
C. Judicial or Sequestration Deposit Judicial Deposit or sequestration takes place when an attachment or seizure of property in litigation is ordered (Art. 2005, NCC). JUDICIAL
If the depositary has not been paid the amount due to him the depositary may retain the thing in pledge until full payment of what may be due him by reason of the deposit (Art. 1994, NCC).
EXTRA-JUDICIAL
Creation By order of the court.
By the will of the parties or by contract.
Purpose For security or to insure the right of a party to a property or to recover in case of favorable judgment.
For custody safekeeping.
and
Subject Matter Movables or immovable, but generally immovable.
Movables only.
Cause Always onerous.
Maybe onerous gratuitous.
or
When must the thing be returned Upon order of the court or when litigation is ended.
Upon demand of the depositor.
The permission shall not be presumed, and its existence must be proved.
●
Bank deposits are in the nature of irregular deposits. They are really loans because they earn interest. All kinds of bank deposits, whether fixed, savings or current, are to be treated as loans and are to be covered by the law on loans. Current and savings deposits are loans to a bank because it can use the same. Serrano, in making time deposits that earn interest with OBM was in reality a creditor of the respondent bank, and not a depositor. The bank was in turn a debtor of Serrano. Failure of OBM to honor the time deposits is failure to pay its obligation as a debtor and not a breach of trust arising from a depositary’s failure to return the subject matter of the deposit (Serrano v. Central Bank, G.R. No. 30511, Feb. 14, 1980).
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C. GUARANTY AND SURETYSHIP Guaranty By guaranty, a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so (Art. 2047, NCC). Characteristics of Guaranty 1.
2. 3. 4. 5. 6.
7.
8.
Gratuitous. A guaranty is gratuitous, unless there is a stipulation to the contrary; (Article 2048, NCC) Accessory. Guaranty secures the payment of a principal obligation, hence, it cannot exist without a principal obligation; Subsidiary. The guarantor will pay only if the principal debtor cannot pay and has no properties to answer for the obligation; Conditional. Certain conditions (i.e., the requirement of exhaustion) must be complied with before the guarantor can be made liable; Unilateral. The obligation is only on the part of the guarantor in favor of the creditor. The debtor need not even give his consent; Express. A guaranty is not presumed; it must be express and cannot extend to more than what is stipulated therein; (Article 2055, NCC) Covered by Statutes of Fraud. Guaranty which is a collateral contract, is a promise to answer for a debt, hence, it must be in writing; and (Ewan, MacKendrick, Goode on Commercial Law, 2010 Ed., p.880, hereinafter referred to as Goode, p. 880) Prospective. A contract of guaranty or suretyship is only prospective, and not retroactive in operation unless a contrary intent is clearly shown. Consequently, the guarantor or surety is entitled to assume that the notice provided by the surety bond did not, and was not intended to include any defaults incurred prior to his acceptance (Pastoral vs. Mutual Security Insurance Corp., G.R. No. L-20469, August 31, 1965).
Classifications of Guaranty
1. In the broad sense:
a. Personal – the guaranty is the credit given
by the person who guarantees the fulfillment of the principal obligation. b. Real – the guaranty is the property, movable or immovable.
2. As to its Origin:
a. Conventional – agreed upon by the parties. b. Legal – one imposed by virtue of a provision of a law. c. Judicial – one which is required by a court to guarantee the eventual right of one of the parties in a case.
3. As to consideration:
a. Gratuitous – the guarantor does not receive any price or remuneration for acting as such. b. Onerous – the guarantor receives valuable consideration.
4. As to the Person Guaranteed:
a. Single or simple – one constituted solely to guarantee or secure performance by the debtor of the principal obligation. b. Double or sub-guaranty – one constituted to secure the fulfillment by the guarantor of a prior guaranty (as opposed to where there is a coguarantor, meaning, two or more persons will be guarantors for the same principal obligation)
5. As to Scope and Extent:
a. Definite – the guaranty is limited to the principal obligation only, or to a specific portion thereof. b. Indefinite or simple – one which not only includes the principal obligation but also all its accessories including judicial costs.
6. As to whether it covers future debts:
a. Continuing – one where it is given as security for future debts, the amount of which is not yet known. b. Not continuing – one where the
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contract does not stipulate that the security covers future debts (Art. 2053, NCC). A guaranty may be conventional, legal or judicial, gratuitous, or by onerous title. It may also be constituted, not only in favor of the principal debtor, but also in favor of the other guarantor, with the latter’s consent, or without his knowledge, or even his objection (Art. 2051, NCC). An unconditional guaranty is still subject to the condition that the principal debtor should default in his obligation first before resort to the guarantor could be had. A conditional guaranty, on the other hand, is one which depends upon some extraneous event, beyond the mere default of the principal, and generally upon notice of the principal's default and reasonable diligence in exhausting proper remedies against the principal (Philippine Export and Foreign Loan Guarantee Corp. vs. V.P. Eusebio Construction Corp., et al., G.R. No. 140047, July 13, 2004.). Parties to a Guaranty 1. Principal-obligor - the person whose obligation is secured by the guarantor. 2. Obligee - the person in whose favor the guarantee is made; he will be paid or reimbursed if the principal fails to perform his obligation and the proper procedure is complied with. 3. Guarantor - agrees to enter into a contract to accommodate the obligor either gratuitously or for consideration. The obligor cannot claim that he is only a mere guarantor of his own obligation. One cannot be both the primary debtor and the guarantor of his own debt. This is inconsistent with the very purpose of a guarantee that is for the creditor to proceed against a third person if the debtor defaults in his obligation. Certainly, to accept such an argument would make a mockery of commercial transactions (Velasquez vs. Solidbank Corp., G.R. No. 157309, March 28, 2008).
Similarly, it was held in one case that it is absurd to accept the submission of the petitioner that he signed as surety as a representative of a corporation if the latter corporation is also the principal debtor. The principle behind suretyship will be negated if the allegation will be accepted because the borrower cannot at the same time be a guarantor/surety to assure the fulfillment of its own loan application. The Court therefore concluded that the petitioner signed in his personal capacity as surety of the corporation’s loan (Madrigal vs. DOJ, G.R. No. 168903, June 18, 2014). Qualifications of Guarantors If the debtor is obligated to furnish a guarantor or surety, he must present one with the following characteristics: 1. The guarantor must possess integrity; 2. He must have capacity to bind himself; 3. He must have sufficient property to answer for the obligation which he guarantees; 4. He shall be subject to the jurisdiction of the court of the place where this obligation is to be complied with (Art. 2056, NCC). Replacement of the Guarantor General rule: If the guarantor should be convicted in the first instance of a crime involving dishonesty (even while appeal is pending) or should become insolvent, the creditor may demand another who has all the qualifications required in Article 2056. Exception: The creditor has required and stipulated that a specified person should be the guarantor. This means that the creditor should bear the risk that the guarantor is not qualified if he himself chose the guarantor (Art. 2057, NCC).
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Consent Guaranty may be entered into even against the will or without the consent of the debtor. A married woman may guarantee an obligation without the husband's consent, but shall not thereby bind the conjugal partnership, except in cases provided by law (Art. 2049, NCC). Thus, only the separate properties of the spouses are bound by the guarantee. It shall also be noted that, under the Absolute Community of Property regime under the present Family Code, the spouses shall have joint administration of the community properties. The rule is that the obligations of one spouse shall not be chargeable to the absolute community properties unless the same has redounded to the benefit of the family (AQUINO, Essentials of Credit Transactions and Insolvency Law (2021), p. 235). If the money or services are given to other person or entity and the husband acted only as a surety or guarantor, the transaction cannot by itself be deemed an obligation for the benefit of the conjugal partnership. It is for the benefit of the principal debtor and not for the surety or his family. No presumption is raised that, when a husband. enters into a contract of surety or accommodation agreement, it is for the benefit of the conjugal partnership. To hold the conjugal partnership liable for an obligation pertaining to the husband alone defeats the objective of the Civil Code to protect the solidarity and well-being of the family as a unit (Security Bank vs. Mar Tierra Co., G.R. No. 143382, November 29, 2006). If a guaranty is entered into without the knowledge or consent, or against the will of the principal debtor, the provisions of Articles 1236 and 1237 shall apply (Art. 2050, NCC). Thus, the payment made by the guarantor shall be considered payment by a third person.
A. Effects if debtor did not consent 1) General Rule: reimbursem*nt.
- the guarantor can recover only insofar as the payment has been beneficial to the debtor - the same defenses which could have been set up against the creditor can be set up against the paying guarantor. - the debtor who was the contractor of the project had valid defenses against the obligee (Philippine Export and Foreign Loan Guarantee Corp. vs. V.P. Eusebio Construction, Inc., et al., G.R. No. 140047, July 13, 2004). - Exception: The agreement between
the creditor and the debtor may stipulate that payment may be secured from a third person who will act as a guarantor. It may also be stipulated that the guarantor may be secured even without prior notice to the debtor (Article 1236, NCC). 2) The guarantor subrogation.
has
no
right
of
- Whoever pays on behalf of the debtor
without the knowledge or against the will of the latter, cannot compel the creditor to subrogate him in his rights, such as those arising from a mortgage, guaranty, or penalty (Art. 1237, NCC).
B. Acceptance by the creditor Where there is merely an offer of, or proposition for, a guaranty, or merely a conditional guaranty in the sense that it requires action by the creditor before the obligation becomes fixed, it does not become a binding obligation until it is accepted and, unless there is a waiver of notice, until notice of such acceptance is given to, or acquired by, the guarantor, or until he has notice or knowledge that the creditor has performed the conditions, and intends to act upon the guaranty (Philippine National Bank vs. Garcia, G.R. No. 23175, March 18, 1925).
There is a limited right of
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The acceptance need not necessarily be express or in writing but may be indicated by acts amounting to acceptance (National Bank vs. Escueta, G.R. No. L-26118, December 31, 1926.). Where, upon the other hand, the transaction is not merely an offer of guaranty but amounts to a direct or unconditional promise of guaranty, unless notice of acceptance is made a condition of the guaranty, all that is necessary to make the promise binding is that the promisee should act upon it, and notice of acceptance is not necessary, the reason being that the contract of guaranty is unilateral (Visayan Surety and Insurance Corporation vs. Laperal, G. R. No. 46515, June 14, 1940). Consideration A guaranty is gratuitous, unless there is a stipulation to the contrary. The cause of the contract is the same cause, which supports the obligation as to the principal debtor (Art. 2048, NCC). The peculiar nature of a guaranty or surety agreement is that it is regarded as valid despite the absence of any direct consideration received by the guarantor or surety either from the principal debtor or from the creditor; a consideration moving to the principal alone will suffice (Garcia vs. CA, G.R. No. 80201, November 20, 1990). It is never necessary that the guarantor or surety should receive any part or benefit, if such there be, accruing to the principal (Willex Plastic Industries Corp. vs. CA, G.R. No. 103066, April 25, 1996). With respect to the creditor, the consideration in guaranty is the same consideration in the principal contract. "The consideration which supports the obligation as to the principal debtor is a sufficient consideration to support the obligation of the sureties." (C.C. Pyle vs. Johnson, G.R. No. L-3755, November 23, 1907). The true consideration of the contract may be the detriment suffered by the plaintiffs in the former action in dismissing that proceeding, and it is immaterial that no benefit may have accrued either to the principal or his guarantor (Severino vs.
Severino, G.R. No. 34642, September 24, 1931).
Interpretation The interpretation of a gratuitous guaranty or surety arrangement is liberal in favor of the gratuitous surety or guarantor, except for compensated sureties which are offered by surety companies, organized for the purpose of conducting an indemnity business at established rates of compensation (Aquino, Essentials of Credit Transactions and Insolvency Law, 2021, p. 235). Obligations Secured by Guaranty 1. Valid obligations; (Art. 2052, NCC) 2. Voidable obligations, unless it is annulled by proper action in court; (Art. 2052, NCC) 3. Unenforceable obligations; (Article 2052, NCC) 4. Natural obligations - When the debtor himself offers a guaranty for his liability, thereby transforming the obligation from a natural into a civil one; (Art. 2052, NCC) and 5. Conditional obligations – In the case of suspensive condition, it’s happening gives rise to the principal obligation and hence, it also gives rise to the accessory obligation (Art. 2053, NCC). A valid principal obligation is necessary in a contract of guaranty since guaranty is an accessory contract; it is an indispensable condition for its existence that there must be a principal obligation. Hence, if the principal obligation is void, it is also void (Sps. Rigor vs. Consolidated Orix Leasing and Finance Corporation, G.R. No. 136423, August 20, 2002). There can be a guaranty for: 1. Present debts; and 2. Future debts, even if the amount is not yet known (Art. 2053, NCC).
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There can be no claim against the guarantor until the debt is liquidated. (Article 2053, NCC) Liquidated debt – a debt for the price of goods to be delivered in the future is liquidated when it is for a price fixed by the contract and the seller offers to deliver said goods within the period stipulated and according to the terms of the contract (Smith, Bell & Co. vs. Phil. National Bank, G.R. No. 16482, February 1, 1992). Continuing Guaranty By executing a continuing guaranty or suretyship agreement, the principal debtor places himself in a position to enter into the projected series of transactions with its creditor; with such suretyship or guaranty agreement, there would be no need to execute separate contracts or bond (in surety) for each financing or credit accommodation extended to the principal debtors (Atok Finance Corporation vs. Court of Appeals, G.R. No. 80078, May 18, 1993; Fortune Motors (Phils) Corp. vs. The Hon. Court of Appeals, G.R. No. 112191, February 7, 1997; See also Lim vs. Security Bank Corporation, G.R. No. 188539, March 12, 2014; Saludo, Jr. vs. Security Bank Corporation, G.R. No. 184041, October 13, 2010). A continuing guaranty is one which is not limited to a single transaction, but which contemplates a future course of dealing, covering a series of transactions, generally for an indefinite time or until revoked. It is prospective in its operation and is generally intended to provide security with respect to future transactions within certain limits, and contemplates a succession of liabilities, for which, as they accrue, the guarantor becomes liable. Otherwise stated, a continuing guaranty is one which covers all transactions, including those arising in the future, which are within the description or contemplation of the contract of guaranty, until the expiration or termination thereof. A guaranty shall be construed as continuing when by the terms thereof it is evident that the object is to give a standing credit to the principal debtor to be used from time to time either indefinitely or until a certain period, especially if the right to recall the guaranty is expressly reserved. Hence, where the contract of guaranty states that
the same is to secure advances to be made "from time to time" the guaranty will be construed to be a continuing one (Dino vs. Hon. Court of Appeals, G.R. No. 89775, November 26, 1992). The continuing nature of the obligation of the guarantor or surety must be expressly provided for (Willex Plastic Industries Corp. vs. Hon. Court of Appeals, G.R. No. 103066, April 25, 1996). Of course, a surety is not bound under any particular principal obligation until that principal obligation is born. But there is no theoretical or doctrinal difficulty inherent in saying that the suretyship agreement itself is valid and binding even before the principal obligation intended to be secured thereby is born, any more that there would be in saying that obligations which are subject to a condition precedent are valid and binding before the occurrence of the condition precedent (Atok Finance Corporation vs. Court of Appeals, G.R. No. 80078, May 18, 1993). Debts to be Guaranteed If it be simple or indefinite, it shall compromise not only the principal obligation, but also all its accessories, including the judicial costs, provided with respect to the latter, that the guarantor shall only be liable for those costs incurred after he has been judicially required to pay (Art. 2055, NCC). Accessories under Article 2055 include damages, interest and charges, and judicial costs incurred after the principal debtor is judicially required to pay." Attorney's fees may also be imposed whenever appropriate (Dino vs. Hon. Court of Appeals, G.R. No. 89775, November 26, 1992). Unless a specific period is fixed in the contract or the bond, the obligation of the surety subsists so long as the principal obligation subsists.
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Amount of the debt guaranteed A guarantor or surety may bind himself for less, but not for more than the principal debtor, both as regards the amount and the onerous nature of the conditions. Should he have bound himself for more, his obligations shall be reduced to the limits of that of the debtor (Eastern Assurance and Surety Corp. vs. Con-Field Construction and Development Corp., G.R. No. 159731, April 22, 2008). Similarly, the interest that the surety is obligated to pay may be less than the interest that is being charged by the creditor (Philippine National Bank vs. Escueta, G.R. No. L-26118, December 31, 1926). Compensatory interest If a surety upon demand fails to pay, he can be held liable for interest, even if in thus paying, the liability becomes more than that in the principal obligation. The increased liability is not because of the contract but because of the default and the necessity of judicial collection. It should be noted, however, that the interest runs from the time the complaint is filed, not from the time the debt becomes due and demandable (Philippine National Bank vs. Luzon Surety Co., Inc., G.R. No. L-29587, November 28, 1975). Benefit of Excussion The guarantor cannot be compelled to pay the creditor unless: 1. the creditor has exhausted all the property of the principal debtor, and 2. the creditor has resorted to all of the legal remedies against debtor (Art. 2058, NCC). It is axiomatic that the liability of the guarantor is only subsidiary. All the properties of the principal debtor must first be exhausted before his own is levied upon. Thus, the creditor may hold the guarantor liable only after judgment has been obtained against the principal debtor and the latter is unable to pay, for obviously the exhaustion of the principal’s property – the benefit of which the guarantor claims – cannot even begin to take place before judgment has been obtained (Baylon vs. CA, G.R. No. 109941, August 17, 1999).
It should be clarified that excussion is not a condition sine qua non for the institution of an action against a guarantor (Prudential Bank vs. Intermediate Appellate Court, et. al., G.R. No. 74886, December 8, 1992). Although an ordinary personal guarantor not a mortgagor or pledgor may demand the aforementioned exhaustion, the creditor may, prior thereto, secure a judgment against said guarantor, who shall be entitled, however, to a deferment of the execution of said judgment against him until after the properties of the principal debtor shall have been exhausted to satisfy the obligation involved in the case (Southern Motors, Inc. vs. Barbosa, G.R. No. L-9306. May 25, 1956). When excussion is not required. 1. If the guarantor has expressly renounced it; 2. If he has bound himself solidarily with the debtor; 3. In case of insolvency of the debtor; 4. When the guarantor has absconded, or cannot be sued within the Philippines unless he has left a manager or representative; 5. If it may be presumed that an execution on the property of the principal debtor would not result in the satisfaction of the obligation; 6. If the guarantor did not set it up against the creditor upon the latter's demand for payment from him; and 7. If the guarantor did not point out the creditor available property of the debtor within Philippine territory, sufficient to cover the amount of the debt (Arts. 2059 and 2060, NCC). Waiver of excussion The guarantor is not entitled to the benefit of excussion where the guarantor clearly waived this right and remedy by making the payment of an obligation that was yet to be shown to be rightfully due the creditor and demandable of
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the principal debtor (Philippine Export and Foreign Loan Guarantee Corp. vs. V.P. Eusebio Construction Corp., et al., G.R. No. 140047, July 13, 2004). Special Security It is accepted that guarantors have no right to exhaustion of the properties of the principal debtor, under Article 2058 of the New Civil Code, where a pledge or mortgage has been given as a special security (Philippine American General Insurance Company, Inc. vs. Ramos, G.R. No. L-20978, February 28, 1966). Duties of the Guarantor in Excussion 1. the guarantor must set up the benefit of excussion against the creditor upon the latter's demand for payment from him; and 2. the guarantor must point out to the creditor available property of the debtor within Philippine territory, sufficient to cover the amount of the debt. Failure to comply with these requirements forecloses his right to set up the defense of excussion (Bitanga vs. Pyramid Construction Engineering Corporation, G.R. No. 173526, August 28, 2008). A guarantor who desires to avail himself of the benefit of excussion must demand it in limine, on the institution of proceedings against him. He must, moreover, point out to the creditor property of the principal debtor, not encumbered, subject to seizure and must furnish a sufficient sum to have the excussion carried into effect. A plea which does not meet these requirements must be disregarded. The property pointed out by the sureties is not sufficient to pay the indebtedness; it is not salable; it is so encumbered that third parties have full possession under claim of ownership without leaving to the absconding guardian a fractional or reversionary interest without determining first whether the claim of one or more of the occupants is well founded. The guarantor is not entitled to the benefit of excussion if in all these respects the guarantor has failed to meet the requirements of the Civil Code (Arroyo vs. Jungsay, G.R. No. L-10168, July 22, 1916).
Right to Protection A compromise between the creditor and the principal debtor benefits the guarantor but does not prejudice him. That which is entered into between the guarantor and the creditor benefits but does not prejudice the principal debtor (Art. 2063, NCC). Right to Indemnification The guarantor who pays for a debtor must be indemnified by the latter (Art. 2066, NCC). If a guaranty is entered into without the knowledge or consent, or against the will of the principal debtor, the provisions of Article 1236 and 1237 shall apply (Art. 2050, NCC). Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor (Art. 1236, NCC). Right to Subrogation The guarantor who pays is subrogated by virtue to all the rights which the creditor had against the debtor (Art. 2067, NCC). Whoever pays on behalf of the debtor without the knowledge or against the will of the latter, cannot compel the creditor to subrogate him in his rights, such as those arising from a mortgage, guaranty, or penalty (Art. 1237, NCC). Rights of Co-Guarantors Should there be several guarantors of only one debtor and for the same debt, the obligation to answer for the same is divided among all. The creditor cannot claim from the guarantors except the shares which they are respectively bound to pay, unless solidarity has been expressly stipulated (Art. 2065, NCC).
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Effects of Guaranty between the Guarantor and the Creditor
When guarantor not entitled to the benefit of excussion (Art. 2059, NCC)
Benefit of Excussion or Exhaustion (Art.
1. Renunciation has been expressly made by the guarantor; 2. It would be useless because execution on the property of the principal debtor would not after all result in the satisfaction of the obligation; (Not necessary that the debtor be judicially declared insolvent or bankrupt) 3. When guarantor has bound himself solidarily with the principal debtor; 4. Insolvency of the debtor; (Must be actual; proven by unsatisfied writ of execution) 5. When the debtor has absconded or cannot be sued within the Philippines, unless he has left a manager or representative; 6. If he is a judicial bondsman or sub-surety; 7. If he fails to interpose it as a defense before judgment is rendered against him; 8. If the guarantor does not set up the benefit against the creditor upon the latter’s demand for payment from him; a. Demand can be made only after judgment on the debt b. Demand must be actual; joining the guarantor in the suit against the principal debtor is not the demand intended by law 9. Where the pledge or mortgage has been given by him as special security.
1.
2058, NCC)
a. The creditor may hold the guarantor liable only after judgment has been obtained against the principal debtor and the latter is unable to pay (Aglibot vs. Santia, G.R. No. 185945, December 05, 2012); and b. Point out the available property (not in litigation or encumbered) of the debtor within the Philippines, sufficient to cover the amount of the debt (Art. 2060, NCC). There is nothing procedurally objectionable in impleading the guarantor under the rule on permissive joinder of parties. "This is the equity rule relating to multifariousness. It is based on trial convenience and is designed to permit the joinder of plaintiffs or defendants whenever there is a common question of law or fact. It will save the parties unnecessary work, trouble and expense (Prudential Bank vs. Intermediate Appellate Court, G.R. No. 74886, December 8, 1992). It is useless to speak of a guarantor when no debtor has been held liable for the obligation that was allegedly secured by such guarantee. The creditor must first obtain a judgment against the principal debtor before assuming to run after the alleged guarantor (Baylon vs. Court of Appeals, G.R. No. 109941, August 17, 1999). Effect of failure of the creditor to exhaust and resort to all legal remedies The creditor shall suffer the loss but only to the extent of the said property, for the insolvency of the debtor resulting from such negligence (Art. 2061, NCC). Not applicable to a contract of suretyship (Arts. 2047[2]2 and 2059[2] NCC).
Benefit of Division Should there be several guarantors of only one debtor and for the same debt, the obligation to answer for the same is divided among all (Art. 2065 [1], NCC). Thus, the obligation shall be joint among the creditors. The benefit of division against the coguarantors ceases in the same cases and for the same reasons as the benefit of excussion against the principal ceases (Art. 2065 [2], NCC).
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Effect if the division is solidary The guaranty agreement may stipulate that the obligation of the co-guarantors is solidary. This relates to the agreement between the guarantors on one hand and the creditor on the other. However, solidarity of the obligation of the guarantors may also be limited to the liability between themselves (Art. 2065 [1], NCC; Tupas IV & Tupas vs. Court of Appeals, G.R. No. 145578, November 18, 2005). Solidary Guaranty Clause This is a provision that makes the guarantors solidarily liable. This does not make the guarantors solidarily liable with the debtor. The clause "we jointly and severally agree and undertake" refers to the undertaking of the two (2) parties who are to sign it or to the liability existing between themselves. It does not refer to the undertaking between either one or both of them on the one hand and the petitioner on the other with respect to the liability described under the trust receipt. Elsewise stated, their liability is not divisible as between them, i.e., it can be enforced to its full extent against any one of them (Prudential Bank vs. Intermediate Appellate Court, December 8, 1992). Rights of the Guarantor after Payment of the Principal’s Obligation: 1. Reimbursem*nt The guarantor who pays is subrogated by virtue thereof to all the rights which the creditor had against the debtor which comprises of: (Art. 2067) a. Total amount of the debt; b. Interest (legal) from the time payment was made known to the debtor; c. Expenses incurred by the guarantor after having notified the debtor that payment had been demanded of him; and d. Damages, if they are due (Art. 2066, NCC).
Exceptions: to guarantor are right to reimbursem*nt: 1. Where the guaranty is constituted without the knowledge or against the will of the principal debtor, the guarantor can recover only insofar as the payment had been beneficial to the debtor; (Art. 1236, NCC) 2. Payment by a 3rd person who does not intend to be reimbursed by the debtor is deemed to be a donation, which, however, requires the debtor’s consent. But the payment is in any case valid as to the creditor who has accepted it; (Art. 1238, NCC) 3. Waiver of the right to demand reimbursem*nt; and 4. In case there is double payment if the conditions under Article 2071 are present.
Double Payment General rule: The creditor, and not the debtor shall be liable to the guarantor for reimbursem*nt if the debtor already paid so long as the following requisites concur: 1. The guarantor has paid without notifying the debtor; 2. The debtor is not aware of the payment; and 3. The debtor repeats the payment (Art. 2070, NCC). Exception: (debtor is liable) 1. The guaranty is gratuitous; 2. The guarantor was prevented by a fortuitous event from advising the debtor of the payment; and 3. The creditor becomes insolvent (Ibid).
2. Subrogation Subrogation transfers to the person subrogated, the credit with all the rights thereto appertaining either against the debtor or against 3rd persons,
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be they guarantors or possessors of mortgages, subject to the stipulation in conventional subrogation. The guarantor who pays is subrogated by virtue thereof to all the rights, which the creditor had against the debtor. If the guarantor has compromised with the creditor, he cannot demand of the debtor more than what he has really paid (Art. 2067, NCC). This right of subrogation is necessary to enable the guarantor to enforce the indemnity given in Art. 2066. It arises by operation of law upon payment by the guarantor. It is not necessary that the creditor cede to the guarantor the former’s rights against the debtor. It is not a contractual right. The right of guarantor who has paid a debt to subrogation does not stand upon contract but upon the principles of natural justice. The guarantor is subrogated by virtue of the payment to the right of the creditor, not those of the debtor. If the guarantor paid a smaller amount by virtue of a compromise, he cannot demand more than he actually paid. Guarantor cannot exercise the right of redemption of his principal (Umutia & Co. vs. Moreno et al., G.R. No. 8147, Oct. 26, 1914). Effect of Compromise If the guarantor has compromised with the creditor, he cannot demand of the debtor more than what he has really paid (Art. 2067, NCC). Effect if Principal Obligation is Solidary It has been opined that if the guaranty is in favor of all or any of the solidary debtors, there is subrogation in the rights of the creditor against all the solidary debtors if the guarantor paid the total obligation. The guarantor may claim reimbursem*nt from any one of the solidary debtors. However, if the liability of the debtors is solidary and the guaranty is in favor only of one of the solidary debtors, the guarantor who paid the total obligation may claim reimbursem*nt from the solidary debtor in whose behalf he paid the principal obligation. He may also claim reimbursem*nt from the other solidary debtors but only up to the extent of the share of each debtor. With respect to the other
solidary debtors, he has the same right of reimbursem*nt as the debtor in whose behalf he paid (AQUINO, Essentials of Credit Transactions and Insolvency Law (2021), p. 258). Effect of payment by guarantor 1. Without notice to debtor – The debtor may interpose against the guarantor those defenses which he could have set up against the creditor at the time the payment was made, e.g., the debtor can set up against the guarantor the defense of previous extinguishment of the obligation by payment (Art. 2068, NCC). 2. Before maturity – The guarantor is not entitled to reimbursem*nt unless the payment was made with the consent or has been ratified by the debtor. Ratification may be express or implied (Art. 2069, NCC). Notice to the debtor: General rule: Before the guarantor pay the creditor, he must first notify the debtor, otherwise the latter may set up defenses he could have set up against the creditor (Art. 2068, NCC). If he fails to give such notice and the debtor repeats payment, the guarantor can only collect from the creditor and guarantor has no cause of action against the debtor for the return of the amount paid by guarantor even if the creditor should become insolvent (Art. 2070, NCC). Exceptions: The guarantor can still claim reimbursem*nt from the debtor in spite of lack of notice if the following conditions are present: 1. Guarantor was prevented by fortuitous event to advise the debtor of the payment; 2. The creditor becomes insolvent; and 3. The guaranty is gratuitous (Article 2070, NCC).
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When Guarantor May Proceed Against Principal Debtor Even Before Payment General rule: Guarantor has no cause of action against debtor until after the former has paid the obligation. Exceptions: The guarantor, even before having paid, may proceed against the principal debtor: 1. When he is sued for the payment; 2. In case of insolvency of the principal debtor; 3. When the debtor has bound himself to relieve him from the guaranty within a specified period, and this period has expired; 4. When the debt has become demandable, by reason of the expiration of the period for payment; 5. After the lapse of ten years, when the principal obligation has no fixed period for its maturity, unless it be of such nature that it cannot be extinguished except within a period longer than ten years; 6. If there are reasonable grounds to fear that the principal debtor intends to abscond; or 7. If the principal debtor is in imminent danger of becoming solvent (Art. 2071, NCC). In all cases, the action of the guarantor is to obtain release from the guaranty, or to demand a security that shall protect him from any proceedings by the creditor and from the danger of insolvency of the debtor. (Art. 2071, NCC) Art. 2071 is applicable and available to the surety (Manila Surety & Fidelity Co., Inc. vs. Batu Construction & Co., G.R. No. L-9353, May 21, 1957). Effect of Failure to Pay the Guarantor The guarantor is not entitled to the release from liability even if the debtor failed to pay the consideration for acting as a guarantor. The liability to the creditor who has accepted the guaranty remains subject to his right of reimbursem*nt and payment of the consideration agreed upon with the debtor (Aquino, Essentials of Credit Transactions and Insolvency Law, 2021, p. 260).
Remedies remedies)
of
Guarantor
(Alternative
1. Obtain release from the guaranty (can only be exercised against the principal debtor); or 2. Demand a security that shall protect him from any proceedings by the creditor, and against the danger of insolvency of the debtor (Art. 2071, NCC). ART. 2066
ART. 2071
Provides for the enforcement of the rights of the guarantor/surety against the debtor after he has paid the debt.
Provides for the guarantor’s protection before he has paid but after he has become liable.
Gives a right of action after payment.
Protective remedy before payment.
Substantive right
Preliminary remedy
Guarantor of 3rd person, at the request of another, may demand payment from any of the following: 1. Person who requested him to be a guarantor; or 2. Debtor (Art. 2072, NCC). Right to contribution of co-guarantor who pays When there are two or more guarantors of the same debtor and for the same debt, the one among them who has paid may demand of each of the others the share which is proportionally owing from him (Art. 2073, NCC). Restrictions It is required that the payment made to the creditor by the guarantor who is seeking for the reimbursem*nt from his co-guarantor(s) the share which is proportionately owing him, must have been made:
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a. by virtue of a judicial demand; or b. because the principal debtor is insolvent (Sadaya vs. Sevilla, G.R. No. L-17845, April 27, 1967). Effect of insolvency of any co-guarantor: If any of the guarantors should be insolvent, his share shall be borne by the others, including the paying guarantor, in the same proportion (Article 2073, NCC). Defenses The co-guarantors may set up against the one who paid, the same defenses which would have pertained to the principal debtor against the creditor, and which are not purely personal to the debtor (Art. 2074, NCC). Liability of sub-guarantor insolvency of guarantor
in
case
of
A sub-guarantor is liable to the co-guarantors in the same manner as the guarantor whom he guaranteed (Art. 2075, NCC). Extinguishment of Guaranty 1. Extinguished at the same time as the obligation of the debtor; (Art. 2076, NCC) 2. If the creditor voluntarily accepts immovable or other property in payment of the debt, even if he should afterwards lose the same through eviction; (Art. 2077, NCC) 3. Release by the creditor in favor of one of the guarantors, without the consent of the others, benefits all to the extent of the share of the guarantor to whom it has been granted; (Art. 2078, NCC) 4. Whenever by some act of the creditor, the guarantors even though they are solidarily liable cannot be subrogated to the rights, mortgages and preferences of the former; (Art. 2080, NCC) 5. For the same causes as all other obligations under Art. 1231; or 6. Extension granted to the debtor by the creditor without the consent of the guarantor. However, the mere failure on the part of the creditor to demand payment after the debt has become due
does not of itself constitute any extension of time referred to herein (Art. 2079, NCC). The guarantor may also set up against the creditor all the defenses which pertain to the principal debtor and are inherent in the debt; but not those that are purely personal to the debtor (Art. 2081, NCC). Exceptions: 1. 2. 3. 4. 5.
Creditor did not collect from 3rd persons; Obligations payable in installments; Waiver by guarantor; Extension granted by creditor on bond; or Extension granted to first tier obligors cannot prejudice second tier parties.
Legal and Judicial Bonds Bonds The obligation of a surety often appears in the form of a bond. The surety business of insurance companies usually takes the forms of issuance of bonds. Kinds of Bonds: 1.
Fidelity Bond is a bond that answers for the loss of an employer who is the obligee, for the dishonesty of the employee (Act No. 2711).
2. Surety Bond may be further classified into the following: (1) Contract Bonds which include (a) Bid Bond, (b) Performance Bond, (c) Payment Bond, and (d) Maintenance Bond; (2) Legal Bonds; and (3) Judicial Bonds; 3. Contract Bonds. As the term implies, this bond guarantees the performance of contractual obligations. a. Bid Bond – has for its purpose the assurance of the owner of the project, the good faith of the bidder and that the
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bidder will enter into a contract with the project owner should his proposal be accepted. b.
c.
Performance Bond - is designed to afford the project owner security that the bidder (the contractor) will faithfully comply with the requirements of the contract awarded to the contractor and make good damages sustained by the project owner in case of the contractor’s failure to so perform (Trade and Investment Development Corporation of the Phils vs. Roblett Industrial and Construction Corporation, et al., No. 139290, November 11, 2005). Payment Bond – secures the payment of bills for the labor and materials used in building a project.
d. Maintenance Bond – answers for breach of warranties in a building project; the principal agrees to correct poor workmanship and to replace defective materials. 4. Legal Bonds. are bonds that are submitted “in virtue of a provision of law.” (Article 2082, NCC). This includes “License and Permit Bonds” which are bonds imposed by law to guarantee that the persons concerned will comply with the provisions of the license or permit issued to him. 5. Judicial Bonds. are bonds that are issued in virtue of judicial orders and/or pursuant to the Rules of Court. Examples are: a.
any and all damages that the opposing party may suffer if it will sustain the inferior court’s decision.
Replevin Bond – is a bond posted by the petitioner to repossess a personal property. The purpose of this bond is to answer for any and all expenses that the opposing party may suffer if the petitioner is not entitled to the remedy of repossession (Rule 60, Rules of Court).
b. Supersedeas Bond – is a bond posted by the losing party as a requirement for perfecting an appeal. The purposes of the bond are to stay the execution of the judgment pending appeal and to answer for
c.
Administrator’s Bond – a precondition for the issuance of the letter of administration. It is a security for the satisfaction of any judgment. The property subject of the attachment is a real or immovable property (Rule 81, Rules of Court).
d.
Attachment Bond – it guarantees the payment of all costs which may be adjudged to the adverse party and all damages which he may sustain by reason of attachment if the court finds that the principal is not entitled to the remedy of attachment (Rule 57, Rules of Court).
e. Heir’s Bond – It answers for the payment of any claim by an heir who has been deprived of his lawful participation in the estate and/ or any creditor who has a claim against the estate which has not been paid (Rule 74, Rules of Court). f.
Injunction Bond - shall finally adjudge that the plaintiff was not entitled to such provisional remedy. A preliminary injunction bond is an order by the court at any stage of an action prior to final judgment, requiring a person to refrain from doing a particular act. It shall answer for all the damages which the party enjoined by order of injunction is directed, in such amount the court may fix (Rule 58, Rules of Court). The rules on the issuance of the Certificates of Accreditation and Authority for corporate surety bonds are embodied in Circular No. 04-970-SC entitled Guidelines on Corporate Surety Bond issued by the Supreme Court on August 6, 2004.
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Benefit of Excussion Not Available to Judicial Bondsman and Sub-surety A judicial bondsman cannot demand the exhaustion of the property of the principal debtor. A sub-surety in the same case, cannot demand the exhaustion of the property of the debtor or the surety (Art. 2084, NCC). Surety A contract of surety is an agreement where a party called the surety guarantees the performance by another party called the principal or obligor of an obligation or undertaking in favor of a third party called the obligee. Specifically, suretyship is a contractual relation resulting from an agreement whereby one person, the surety, engages to be answerable for the debt, default or miscarriage of another, known as the principal (Visayan Surety & Insurance Corp. vs. Court of Appeals, G.R. No. 127261, September 7, 2001). The Court expounds that a surety’s liability is joint and several, limited to the amount of the bond, and determined strictly by the terms of contract of suretyship in relation to the principal contract between the obligor and the obligee. It bears stressing, however, that although the contract of suretyship is secondary to the principal contract, the surety’s liability to the obligee is nevertheless direct, primary and absolute (The Manila Insurance Company, Inc. vs. Sps. Amurao, G.R. No. 179628, January 16, 2013). Suretyship is deemed to be an insurance contract only if made by a surety who or which, as such, is doing an insurance business, i.e., making or proposing to make, as surety, any contract of suretyship as a vocation and not merely incidental to any other legitimate business or activity of the surety (De Leon, The Insurance Code of the Philippines, 2010, p. 42). Characteristics 1. It is an accessory contract because its validity depends upon the existence of a principal obligation guaranteed by it. It
cannot exist without a valid obligation (Art. 2052, NCC). It is indispensable that there must be a principal contract, thus, if the principal obligation is void, it also voids. 2. It is subsidiary and conditional because it takes effect only when the principal fails in his obligation subject to certain limitations (Government vs. Tizon, G.R. No. L-22108, August 30, 1967). Parties to a contract of suretyship: 1. Principal – is the person whose obligation is secured by the bond or suretyship. He is the person who agrees to perform certain acts – the person who fulfills certain obligations (Aquino, Essentials of Credit Transactions and Banking Laws, 2015, p.235). 2. Surety – is the party who answers for the debt, default or obligations of the principal. The liability of surety or sureties shall be joint and several with the obligor and shall be limited to the amount fixed in the agreement (Ibid.). 3. Obligee – the oblige is the person in whose favor the bond is issued or the undertaking of the surety is made. He will be paid or reimbursed if the principal fails to perform his obligation. In relation to the obligation of the principal and the surety, the obligee is the creditor or the active subject (Ibid). Nature of liability of surety 1. Solidary; 2. Limited to the amount of the bond; and 3. Determined strictly by the terms of the contract of suretyship in relation to the principal contract between the obligor and the obligee (Sec. 176, Insurance Code of the Philippines [ICP]). A surety is merely a collateral contract.
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Obligations Secured
As to litigation requirement
A continuing guaranty or suretyship covers all transactions, including those arising in the future, which are within the description or contemplation of the contract of guaranty until the expiration or termination thereof. A guaranty may be given to secure even future debts; the amount of which may not be known at the time the guaranty is executed. This is the basis for contracts denominated as continuing guaranty or suretyship. It covers all transactions, including those arising in the future, which are within the description or contemplation of the contract of guaranty, until the expiration or termination thereof (Diño vs. CA, G.R. No. 89775, November 26, 1992). Surety Distinguished from Standby Letter of Credit STANDBY LETTER OF CREDIT
SURETYSHIP
As to the effect of nonperformance of the obligation
The beneficiary reasonably expects that he will receive cash in the event of nonperformance. The Standby letter of credit has this opposite effect of the surety contract: it reverses the financial burden of parties during litigation.
Upon the obligor's default, the surety undertakes to complete the obligor’s performance, which often involves costs of determining whether the obligor defaulted (a matter over which surety and the beneficiary often litigate) plus the cost of performance.
In standby credit, the beneficiary avoids the burden of litigation and receives his money promptly upon presentation of the required documents. It may be that the applicant has, performed his obligation and that the beneficiary’s presentation of those documents is not rightful.
In the surety contract setting, there is no duty to indemnify the beneficiary until the beneficiary establishes the face of the obligor’s performance. The beneficiary may have to establish the fact in litigation.
As to who holds the money During litigation to determine whether the applicant has in fact breached the obligation to perform, the beneficiary, not the applicant, holds the money.
During the litigation, the surety holds the money and the beneficiary bears most of the cost of delay in performance.
Parties that use a standby credit and courts construing such a credit should understand this allocation of burdens. There is a tendency in some quarters to overlook this distinction between surety contracts and standby credit and to reallocate burdens by permitting the obligor or the issuer to litigate the performance question before payment to the beneficiary (Transfield Philippines, Inc. vs. Luzon Hydro Corporation, et al., G.R. No. 146717, November 22, 2004, citing J. Dolan, The Law on Letters of Credit, Revised Ed. 2000).
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Surety Distinguished from Guaranty GUARANTY
SURETYSHIP
As to existence of liability Liability depends upon an independent agreement to pay the obligation if the primary debtor fails to do so.
Surety assumes liability as regular party to the undertaking.
As to collateral Collateral undertaking
Original promisor
As to order of liability Guarantor is secondarily liable.
Surety primarily liable.
As to what is protected Insurer of the insolvency of debtor.
Insurer of the debt.
As to availment of the benefit of excussion Guarantor can avail of benefit of excussion and division in case the creditor proceeds against him.
Surety cannot avail of such benefit.
As to when discharged Often discharged by the mere indulgence of the creditor or want of notice of default.
Not discharged by mere indulgence of the creditor or want of notice of default.
As to the right to the property/assets of the debtor Has the right to have all the property of the debtor and legal remedies against the debtor first exhausted before he can be compelled to pay the creditor.
Not entitled to the benefit of exhaustion of the debtor’s assets.
Guaranty and surety are nearly related for there is a promise to answer for the debt or default of another. Surety is usually bound with his principal by the same instrument executed at the same time and on the same consideration. The guarantor’s own separate undertaking is often supported by a consideration separate from that supporting the contract of the principal; the original contract of his principal is not his contract (Phil. Export & Foreign Loan Guarantee Corp. vs. V.P. Usebio Construction, Inc., G.R. No. 140047, July 13, 2004).
As to when liable to pay Guarantor binds himself to pay if the principal CANNOT PAY.
Surety undertakes to pay if the principal does not pay.
As to notice requirement Not bound to take notice of the nonperformance of his principal.
Held to know every default of his principal.
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Surety distinguished Obligations SOLIDARY OBLIGATIONS
from
Solidary
SURETYSHIP
As to who is liable Solidarity signifies that the creditor can compel any one of the joint and several debtors to answer the entirety of the principal debt.
The surety alone answers for the entirety of the principal debt.
As to additional liability Solidary co-debtor has no other rights than those bestowed upon him in Section 4, Chapter 3, Title I, Book IV of the Civil Code.
Surety, outside of the liability, assumes to pay the debt before the property of the principal debtor has been exhausted, retains all the other rights, actions and benefits which pertain to him.
As to reimbursem*nt In the case of joint and several debtors, the solidary debtor who effected the payment to the creditor may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made.
In contrast, even as the surety is solidarily bound with the principal debtor to the creditor, the surety who does pay the creditor has the right to recover the full amount paid, and not just any proportional share, from the principal debtor or debtors.
Solidary debtor will not be able to recover from the co-debtors the full amount already paid to the creditor, because the right to recovery extends only to the proportional share of the other co-debtors, and not as to the particular proportional share of the solidary debtor who already paid.
Right to full reimbursem*nt falls within the other rights, actions and benefits which pertain to the surety by reason of the subsidiary obligation assumed by the surety.
(Escaño vs. Ortigas, Jr., G.R. No. 151953, June 29, 2007)
D. MORTGAGE Real estate mortgage (REM) is a contract whereby the debtor secures to the creditor the fulfillment of the principal obligation, specially subjecting to such security immovable property or real rights over immovable property in case the principal obligation is not fulfilled at the time stipulated (12 Manresa 467). Characteristics of real mortgage 1. It is a real right; 2. It is an accessory contract; NOTE: If the principal obligation is VOID, the mortgage is also VOID (Reyes v. Gonzales, [C.A.] 45 O.G. No. 2, p. 831). But if a mortgage is void because it was not made by the owner of the property, the principal contract of loan may still be valid (PNB v. Rocha, G.R. No. L-32260, December 29, 1930). 3. It is indivisible; 4. It is inseparable; NOTE: The mortgage adheres to the property, regardless of who its owner may subsequently be (McCullough v. Veloso, 46 Phil. 1).
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5. 6. 7. 8. 9. 10.
It is real property; It is subsidiary; It is a limitation on ownership; It can secure all kinds of obligations; The property cannot be appropriated; and The mortgage is a lien.
Kinds of Real Mortgages
NOTE: A recorded Real Estate Mortgage is a right in rem, a lien on the property whoever its owner may be (Rabuya, 2017). Registration operates as a notice of the mortgage to others, but neither adds to its validity nor converts an invalid mortgage into a valid one between the parties.
1. Voluntary or Conventional mortgage – It is constituted voluntarily by the contracting parties; 2. Legal mortgage – It is required by law to be executed in favor of certain persons; and (Arts. 2125, par. 2; 2082 and 2083, NCC). 3. Equitable mortgage – The intention of the parties is to make the immovable as a security for the performance of the obligation but the formalities of a real mortgage are not complied with.
The person in whose favor the law establishes a mortgage has the right to demand the execution and the recording of the document in which the mortgage is formalized [Art. 2152(2), NCC].
Its consideration in mortgage is the same as of the principal contract from which it receives its life, and without which it cannot exist as an independent contract (China Banking Corp. v. Lichauco, G.R. No. L22001, November 4, 1924).
To claim from a third person in possession of the mortgaged property the payment of the part of the credit secured by the property which said third person possesses (Art. 2129, NCC).
Requisites of a contract of mortgage 1. That they be constituted to secure the fulfillment of a principal obligation; 2. That the pledger or mortgagor be the absolute owner of the thing pledge; 3. That the person constituting the mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose;
Rights of Mortgagor Right to Alienate the mortgaged property but the mortgage shall remain attached to the property (Art. 2130, NCC).
Prior demand must have been made on the debtor and the latter failed to pay (Bank of the Philippine Islands v. V. Concepcion E. Hijos, G.R. No. 27701, July 21, 1928). Right to Possession The mortgagee has no right or claim to the possession of the property. Such possession is only a security for the payment of the sum borrowed. The debtor merely subjects the property to a lien but the ownership thereof is not parted (De Leon, 2013).
4. It must appear in a public instrument (Art. 2125, NCC); and
One’s status as a mortgagee cannot be the basis of possession (Recebido v. People GR No. 141931, December 4, 2000).
5. Recording in the Registry of Property is necessary to bind third persons.
Effects of Mortgage 1. It creates a real right; and 2. It creates merely an encumbrance.
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Registration of Mortgage
Extent of Mortgage
Registration of a mortgage is a matter of right. By executing the mortgage, the mortgagor is understood to have given his consent to its registration, and he cannot be permitted to revoke it unilaterally.
General Rule: following:
Registration operates as a notice of the mortgage to others, but neither adds to its validity nor converts an invalid mortgage into a valid one between the parties (Philippine Charity Sweepstakes Office (PCSO) vs. New Dagupan Metro Gas Corporation, G.R. No.173171, July 11, 2012). Effect of Registration as To Better Right of Third Parties A registered mortgage right over property previously sold is inferior to the buyer’s unregistered right. Reason: If the original owner had sold the thing, then he no longer had ownership and free disposal of it so as to be able to mortgage it (State Investment House, Inc. v. CA, G.R. No. 115548, March 5, 1996). Prohibition Mortgaged Consent
against Encumbrance of Land, Without Mortgagors’
In this case, rights over the property, which came into existence after the execution of the deed, cannot be annotated as an adverse claim on the title of the land over the mortgagee’s opposition (Rivera v. Peña, G.R. No. L-11781, March 24, 1961). Subsequent Registration of an Adverse Claim A prior registration of a lien creates a preference. Hence, the subsequent annotation of an adverse claim cannot defeat the rights of the mortgagee or the purchase at the auction sale whose rights are derived from a prior mortgage validly registered.
Mortgage extends to the
1. Natural accessions; 2. Improvements; 3. Growing fruits; 4. Rents or income not yet received when the obligation becomes due; and 5. Amount of indemnity granted or owing to the proprietor from: a. Insurance proceeds; or b. Expropriation price (Art. 2127, NCC). Reason: Ownership of such accessions and accessories and improvements subsequently introduced also belongs to the mortgagor who is the owner of the principal (Castro, Jr. v. Court of Appeals, G.R. No. 97401, December 6, 1995). Exemptions: 1. Express stipulation excluding them; or 2. Evidence sufficiently overthrowing the presumption that the mortgagor owns the mortgaged property. Mortgagee in Good Faith A mortgagee has a right to rely in good faith on the certificate of title of the mortgagor of the property given as security and in the absence of any sign that might arouse suspicion, has no obligation to undertake further investigation. Hence, even if the mortgagor is not the rightful owner of, or does not have a valid title to, the mortgaged property, the mortgagee in good faith is nonetheless entitled to protection (De Leon, 2013). The doctrine does not apply to a situation where the title is still in the name of the rightful owner and the mortgagor is a different person pretending to be the owner. In such a case, the mortgagee is not an innocent mortgagee for value and the registered owner will generally
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not lose his title (Ereña vs. Querrer-Kauffman, G.R. No. 16585, June 22, 2006). Stipulations on Mortgage Contract 1. Including after-acquired properties Status: Valid Purpose: To maintain, to the extent of the allowed by the circ*mstances, the original value of the property given as a security. Such stipulation is common where the properties given as collateral are perishable or subject of inevitable wear and tear. 2. Blanket or Dragnet Clause Status: Valid It is a clause which operates as a convenience and accommodation to the borrowers as it makes available additional funds without their having to execute additional security documents, thereby saving time, travel, loan closing costs, costs of extra legal services, recording fees, etc. 3. Forbidding of alienation or assignment of mortgage credit. Status: Void (Art. 2130, NCC) In case of alienation, the transferee is bound to respect the encumbrance because being a real right, the property remains to the fulfillment of the obligation for whose guaranty it was constituted. An assignment of a credit, right or action shall produce no effect as against third persons, unless it appears in a public instrument, or the instrument is recorded in the Registry of Property in case the assignment involves real property (Art. 1625, NCC) 4. Stipulation requiring mortgagee’s consent before alienation. Status: Valid and binding but only in the sense that the mortgagee cannot be compelled to recognize the sale while the loan is unpaid. The sale of the property does not affect the right of the registered mortgagee to foreclose on the same even if the ownership has been transferred to another. Such stipulation nonetheless contravenes public policy, being an undue impediment or interference on the transmission of property. 5. Grant of First Refusal Status: Valid The consideration for the loan-mortgage may be said to include the consideration for the right of first refusal. 6. Acceleration Clause Status: Valid (Luzon Development Bank v. Conquilla,
G.R. No. 163338, September 21, 2005)
A stipulation stating that on the occasion of the mortgagor’s default, the whole sum remaining unpaid automatically becomes due and payable. 7. Stipulation of Upset Price or TIPO Status: Void (property should be sold to the highest bidder) Upset Price or TIPO is the minimum price at which the property shall be sold at a public auction.
FORECLOSURE MORTGAGE
OF
REAL
ESTATE
Causes of Action of Mortgage-Creditor Mortgage-creditor has a single cause of action against the mortgage-debtor, which is to recover the debt, but he has the option to either: 1. File a personal action for collection of sum of money; or 2. Institute a real action to foreclose on the mortgaged property. Foreclosure is a remedy available to the mortgagee by which he subjects the mortgaged property to the satisfaction of the obligation. NOTE: If he chooses foreclosure of mortgage, he enforces his lien by the sale on foreclosure of the mortgage property. The proceeds of the sale will be applied to the satisfaction of the debt. With this remedy, he has a prior lien on the property. In case of deficiency, the mortgagee has the right to claim for deficiency resulting from the price obtained in the sale of real property at public auction and the outstanding obligation at the time of the foreclosure proceedings (Rabuya, 2017). Kinds of Foreclosure 1. Judicial – Governed by Rule 68, Rules of Court; A judicial foreclosure is an action quasi in rem (Ocampo v. Domalanta, G.R. No. L-21011, August 30, 1967).
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Steps in Judicial Foreclosure 1. Judicial action brought to the proper court having jurisdiction; 2. Order by the court for mortgagor to pay mortgage debt if the court finds the complaint to be well-founded, within a period of not less than 90 days nor more than 120 days from the entry of judgment; 3. Sale to the highest bidder at a public auction if the mortgagor fails to pay at the time directed in the court order; 4. Confirmation of the sale, which operates to divest the rights of all parties to the action and vest their rights to the purchaser; 5. Execution of judgment in the manner provided by law on mortgages, the parties not being authorized to change the procedure prescribed; (Piano v. Cayanong, G.R, No. L18603, February 28, 1963) NOTE: The proper remedy to seek reversal of a judgment in an action for foreclosure is an appeal from the judgment itself or from the order confirming the sale of the foreclosed real estate (Sps. Agbada v. Inter-Urban Developers, Inc., G.R. No. 144029, September 19, 2002). 6. Application of the proceeds of the sale; and a. Costs of sale; b. Amount due the mortgagee; c. Claims of junior encumbrancers or persons holding subsequent mortgages in the order of priority; and d. The balance, if any, shall be paid to the mortgagor, or his duly authorized agent, or the person entitled to it; and 7. Execution of sheriff’s certificate. NOTE: In the absence of a certificate of sale, no title is passed by the foreclosure proceedings to the vendee.
Action for Foreclosure of Mortgage Survive the Death of Mortgagor An action for foreclosure of a mortgage survives the death of the mortgagor because the claim is not a pure money claim but an action to enforce a mortgage lien. Being so, the judgment rendered therein may be enforced by a writ of execution. The action may be prosecuted by the interested person against the executor or administrator independently of the testate or intestate proceedings of the settlement of the mortgagor’s estate “for the reason that such claims cannot in any just sense be considered claims against the estate, but the right to subject specific property to the claim arises from the contract of the debtor whereby he has during life set aside certain property for its payment, and such property does not, except in so far as its value may exceed the debt, belong to the estate.” (Testamentaria de Don Amadeo Matute Olave v. Canlas, G.R. No. L-12709, February 28, 1962). Remedies of the Mortgagee In Case Of Death of the Debtor 1. To waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim; 2. To foreclose the mortgage judicially and prove any deficiency as an ordinary claim; or 3. To rely on the mortgage exclusively, foreclosing the same at any time before it is barred by prescription, without the right to file claim for any deficiency (Maglaque v. Planters Development Bank, G.R. No. 109472, May 18, 1999). NOTE: A foreclosure sale (in judicial foreclosure) is not complete until it is confirmed and before such confirmation, the court retains control of the proceedings by exercising sound discretion in regard to it either granting or withholding confirmation as the rights and interests of the parties and the ends of justice may require (Rural Bank of Oroquieta v. CA, No. 53466, November 10, 1980).
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There can be no redemption of the property after confirmation. Such confirmation retroacts to the date of the auction sale. After the confirmation, the previous owners lose any right they may have had over the property, which rights in turn vested on the Purchaser of the property (Lonzame v. Amores, G.R. No. L-53620, January 31, 1985). Right to Recover Deficiency General Rule: Mortgagee has the right to recover deficiency by way of mere motion. Exception: When the mortgage was executed by a third person to secure the obligation of a debtor, such third person not having assumed personal liability for the payment of the debt, the extent of recovery in the judgment foreclosure shall be limited to the purchase price at the foreclosure sale. The remedy of the mortgagee in such case is to proceed against the debtor in an ordinary action for sum of money to recover the balance of debt due (Rabuya, 2017). 2. Extrajudicial – The mortgagee is given a SPA to sell the mortgaged property (Act No. 3135). An extrajudicial foreclosure may only be affected if in the mortgage contract covering a real estate, a clause is incorporated therein giving the mortgagee the power, upon default of the debtor, to foreclose the mortgage by an extrajudicial sale of the mortgage property (Act No. 3135, Sec. 1, as amended by Act No. 4148). Steps in Extrajudicial Foreclosure of Real Estate Mortgage under Chattel Mortgage (AM No. 99- 10-05-0, January 15, 2000, Further Amended On August 7, 2001) 1. Filing of an application before the Executive Judge through the Clerk of Court; In extrajudicial foreclosure of real mortgages in different locations covering a single indebtedness, only one filing fee corresponding to such debt shall be collected.
2. Clerk of court will examine whether the following requirements of the law have been complied with: a. Posting of notice in not less than 20 days in at least three public places of the municipality or city where the property is situated. Notices are given to secure bidders and to prevent a sacrifice of the property; (Sps. Suico v. Philippine National Bank, G.R. No. 170215, August 28, 2007) b. Publication (if property is worth more than P400.00) once a week for at least three consecutive weeks in a newspaper of general circulation in the city or municipality. The notice shall be published in a newspaper of general circulation pursuant to Section 1, P.D. 1079. 3. The application shall be raffled among different sheriffs; 4. An auction sale may be had even with just one (1) participating bidder. The name/s of the bidder/s shall be reported by the Sheriff or the Notary Public, who conducted the sale to the Clerk of Court before the issuance of the certificate of sale; (As amended by the January 30, 2001 Resolution paragraph 5 of A.M. No. 99-10-050; Sps. Certeza et.al. v. Phil. Savings Bank, G.R. No. 190078, March 5, 2010). The indivisibility of a real estate mortgage is not violated by conducting two separate proceedings on mortgaged properties located in different cities or municipalities as long as each parcel of land is answerable for the entire debt (Sps. Yu v. Philippine Commercial International Bank, G.R. No. 147902, March 17, 2006). No sale can be legally made outside the province in which the property sold is situated, such sale shall be made in said place or in the municipal building of the municipality in which the property or part thereof is situated (Act No. 3135, Sec. 2). 5. The clerk of court shall issue a certificate of payment indicating the amount of
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indebtedness, the filing fees collected, the mortgages sought to be foreclosed, the description of the real estates and their respective locations; 6. The certificate of sale must be approved by the Executive Judge; and 7. After the redemption has expired, the clerk of court shall archive the records. NOTE: The law covers only real estate mortgages. It is intended merely to regulate the extrajudicial sale of the property mortgaged if and when the mortgagee is given a special power or express authority to do so in the deed itself or in a document annexed thereto (Luna v. Encarnacion, G.R. No. L-4637, June 30, 1952; Ponce de Leon v. Rehabilitation Finance Corp., G.R. No. L-24571, December 18, 1970). The authority to sell is not extinguished by the death of either mortgagor or mortgagee. It is an essential and inseparable part of bilateral agreement (Perez v. PNB, G.R. No. L21813, July 30, 1996). REDEMPTION OF MORTGAGE Redemption is a transaction by which the mortgagor reacquires or buys back the property which may have passed under the mortgage or divests the property of the lien which the mortgage may have created. Persons entitled redemption
to
exercise
right
of
●
Mortgagor or one in privity of title with the mortgagor; and
●
Successors-in-interest under Sec. 29, Rule 39, Rules of Court.
E. PLEDGE
enterprise (MSMEs), by establishing a unified and modern legal framework for securing obligations with personal property (Sec. 2 of R.A. No. 11057). Effect on the laws governing Pledge and Chattel Mortgage 1. PPSA repealed the provisions of the civil code on Pledge (Art. 2085 – 2123), Chattel Mortgage (Art. 2140- 2141) and Sec. 1-16 of the Chattel Mortgage law (Act. No. 1508) (Sec. 9.01 of PPSA IRR.). 2. No more Pledge and Chattel Mortgage, under the PSSA, contracts creating a security interest over a movable property are referred to simple as “security agreement” (Rabuya, PreBar Reviewer in Civil Law, 2021 Ed, 553). Requisites: The following are the requisites of a security agreement: 1. The debtor must have an existing obligation to the creditor; 2. There is intent by the parties, including the grantor, to create a security interest to secure performance of the principal obligation; 3. The agreement to create a security interest must be in writing; 4. The parties must sign the security agreement; 5. The security agreement must identify the secured obligation; and 6. The security agreement must identify the property that will serve as the collateral (Aquino, Essentials of credit transactions and insolvency law, 2021 Ed, 438-439). Parties of a security agreement: 1. Grantor 2. Secured Creditor
PERSONAL PROPERTY SECURITIES ACT (PPSA) (Republic Act [RA] No. 11057 approved on August 17, 2018). It is the policy of the State to promote economic activity by increasing access to least cost credit, particularly for micro, small, and medium
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Definitions and Scope (Sec. 3 of R.A. No. 11057; IRR of R.A. No. 11057) Commodity contract – a commodity futures contract, an option on a commodity futures contract, a commodity option, or another contract if the contract of option is: 1. Traded on or subject to the rules of a board of trade that has been designated as a contract market for such a contract; or 2. Traded on a foreign commodity board of trade, exchange, or market, and is carried on the books of a commodity intermediary for a commodity customer. Competing claimant – a creditor of a grantor or other person with rights in an encumbered asset that may be in competition with the rights of a secured creditor in the same encumbered asset. Consumer goods – Goods that are used or acquired for use primarily for personal, family or household purposes. Control agreement – an agreement in writing between the grantor and secured creditor which perfects the security interests over intangible asset. 1. With respect to securities, means an agreement in writing among the issuer or the intermediary, the grantor and the secured creditor, according to which the issuer or the intermediary agrees to follow instructions from the secured creditor with respect to the security, without further consent from the grantor. 2. With respect to rights to deposit account, means an agreement in writing among the deposit-taking institution, the grantor and the secured creditor with respect to the payment of funds credited to the deposit account without further consent from the grantor. 3. With respect to commodity contracts, means an agreement in writing among the grantor, secured creditor, and intermediary, according to which the commodity intermediary will apply any value distributed on account of the commodity contract as
directed by the secured creditor without further consent by the commodity customer or grantor. F. ANTICHRESIS Antichresis is a contract whereby the creditor acquires the right to receive the fruits of an immovable of the debtor, with the obligation to apply them to the payment of interest, if owing, and thereafter to the principal of his credit (Art. 2132, NCC) (1995, 1996, 2007 BAR). Characteristics of Antichresis 1. Accessory contract; 2. Formal contract – the amount of the principal and of the interest must both be in writing (Art. 2134, NCC); NOTE: Delivery of possession of the immovable is not essential to the perfection of the contract of antichresis so that this contract is classified as consensual contract. Nevertheless, the creditor takes and retains possession of the property until payment of debt (Rabuya, 2017). 3. It deals only with immovable property; 4. It is a real right; 5. The creditor has the right to receive the fruits of the immovable; 6. It can guarantee all kinds of valid obligations (Arts. 2091 & 2139, NCC); and 7. Indivisible in nature (Art. 2090, NCC). NOTE: It is not essential that the loan should earn interest in order that it can be guaranteed with a contract of antichresis. Antichresis is susceptible to guaranteeing all kinds of obligations, pure or conditional (Javier v. Valliser, (CA) N. 2648-R, April 29, 1950; Sta. Rosa v. Noble, 35 O.G. 27241). NOTE: For the contract of antichresis to be valid, Article 2134 of the Civil Code requires that "the amount of the principal and of the interest shall be specified in writing; otherwise
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the contract of antichresis shall be void." In this case, the Heirs of Adolfo were indisputably unable to produce any document in support of their claim that the contract between Adolfo and Bangis was an antichresis, hence, the CA properly held that no such relationship existed between the parties. On the other hand, the Heirs of Bangis presented an Extra-Judicial Settlement with Absolute Deed of Sale to justify their claimed ownership and possession of the subject land. However, notwithstanding that the subject of inquiry is the very contents of the said document, only its photocopy was presented at the trial without providing sufficient justification for the production of secondary evidence, in violation of the best evidence rule embodied under Section 3 in relation to Section 5 of Rule 130 of the Rules of Court. In sum, the Heirs of Bangis failed to establish the existence and due execution of the subject deed on which their claim of ownership was founded. Consequently, the RTC and CA were correct in affording no probative value to the said document (Aniceto Bangis substituted by his Heirs vs. Adolfo, G.R. No. 190875, June 13, 2012). Determination Antichresis
of
the
Amount
Paid
In
The amount of payment in antichresis is determined by the actual market value of the fruits at the time of the application thereof to the interest and the principal shall be the measure of such application (Art. 2133, NCC). Parties to a Contract of Antichresis 1. Antichretic creditor – one who receives the fruits on the immovable property of the debtor. 2. Antichretic debtor – one who pays his debt through the application of the fruits of his immovable property. Rights of Antichretic Creditor 1. 2.
Right to fruits and income of the thing; (Art. 2132, NCC) Retain the thing until debt is paid; (Art. 2136, NCC)
NOTE: The property delivered stands as security for the payment of the obligation of the debtor in antichresis. Hence, the debtor cannot demand its return until indebtedness is satisfied and the property is redeemed (Macapinlac v. Gutierrez Repide, G.R. No. 18574, September 20, 1992). 3. Have the thing sold upon non-payment at maturity; (Art. 2137) NOTE: In this case, the Rules of Court on the rules on foreclosure of mortgages shall apply. 4. Preference to the proceeds of the sale of the thing; and 5. To be reimbursed for his expense for machinery and other improvements on the land, and for the sums paid as land taxes. Obligations of an Antichretic Creditor 1. Pay the taxes and charges assessable against the property like real estate taxes and others (Art. 2136), unless there is stipulation to the contrary; NOTE: The creditor has to pay the taxes even if the fruits be insufficient. If he does not pay taxes, he is, by law, required to pay indemnity for damages to the debtor (Pando v. Gimenez, G.R. No. 31816, February 15, 1930). Creditor may avoid such obligation by compelling the debtor to reacquire enjoyment of the property, unless there is a stipulation to the contrary; (Art. 2136 [2], NCC) 2. Bear the necessary expenses for the preservation and repair of the property; 3. Apply the fruits received for payment of the outstanding interests, if any, and thereafter of the principal; (Art. 2132, NCC) 4. To render an account of the fruits to the debtor (Diaz vs. De Mendezona, G.R. No. L24824, January 30, 1926).
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Rule on the Application of the Fruit upon the Debt The application of the fruit upon the debt must be expressly agreed between the creditor and the debtor that the former, having been given possession of the properties given as security, is to apply their fruits to the payment of interest, if owing, and thereafter to the principal of his credit (Art. 2132, NCC). Return of the Property of the Antichretic Debtor The antichretic debtor can only demand the return of the property after having fully paid his obligations to the creditor. It is not fair for the debtor to regain the possession of the property when his debt has not been fully paid. Until there is full payment of the obligation, the property shall stand as security therefor (Macapinlac v. Gutierrez Repide, G.R. No. 18574, September 20, 1922). Remedy of the Creditor Nonpayment of His Credit
In
Case
Of
Creditor does not acquire ownership of the real estate since what was transferred is not the ownership but merely the right to receive fruits (Art. 2132, NCC). 1. File an action for specific performance; or 2. File a petition for the public sale of the property (Barretto v. Barretto, G.R. No. 11933, December 1, 1917). NOTE: Parties may agree on an extrajudicial foreclosure in the same manner as they are allowed in contracts of mortgage and pledge (Tavera v. El Hogar Filipino, Inc., G.R. No. L-45963, October 12, 1939). A stipulation authorizing the antichretic creditor to appropriate the property upon non-payment of the debt within the period agreed upon is void (Art. 2088, NCC).
V. COMPROMISE A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commended (Art. 2028, NCC). Kinds of Compromise 1. Judicial Compromise – to end litigation; or 2. Extrajudicial compromise – to prevent litigation (Armed Forces of the Philippines v. CA, G.R. No. 126745, July 26, 1999). Advantage of compromise A reciprocal concession inherent in a compromise agreement assures benefits for the contracting parties. a. For the defeated litigant, liability arising from the judgment may be reduced. b. As to the prevailing party, a compromise agreement assures receipt of payment (Magbanua v. Uy, G.R. No. 161003, May 6, 2005). Requisites of a valid compromise: 1. Must not be contrary to law, morals, good customs and public policy; 2. Must have been freely and intelligently executed between the parties; and (Magbanua v. Uy, G.R. No. 161003, May 6, 2005) 3. It must comply with the law of contracts. Matters which cannot be compromised: 1. 2. 3. 4. 5. 6.
Civil status of persons; Validity of a marriage or legal separation; Any ground for legal separation; Future support; Jurisdiction of courts; and, Future legitime (Art. 2035, NCC).
397
Instances where civil action or proceeding shall be suspended:
2. Regard it as rescinded and insist upon his
1. If willingness to discuss a possible compromise is expressed by one or both parties; and 2. If it appears that one of the parties, before the commencement of the action or proceeding, offered to discuss a possible compromise but the other party refused the offer (Art. 2030, NCC).
Compromise agreement between the creditor and the principal debtor
Effect of compromise
In a compromise between the creditor and the guarantor to the principal debtor, if compromise is beneficial to the principal debtor, it is valid; otherwise, it is not binding upon him (Art. 2063, NCC).
It has an effect of res judicata but there shall be no execution except in accordance with a judicial compromise (Art. 2037, NCC). Compromise After Final Judgement If a litigation has been decided by final judgement, a compromise should be agreed by the upon, either by either or both parties being unaware of the existence of the final judgement, the compromise may be rescinded (Art. 2040, NCC). Status of the Compromise Agreement It is valid but rescissible at the option of the parties (Magbanua v. Uy, G.R. No. 161003, May 6, 2005). The principle of novation supports the validity of a compromise after final judgment. For an obligation to be extinguished by another, the law requires either of these two conditions: (1) the substitution is unequivocally declared; or (2) the old and the new obligations are incompatible on every point. A compromise of a final judgment operates as a novation of the judgment obligation, upon compliance with either requisite (Magbanua v. Uy, G.R. No. 161003, May 6, 2005). Remedies of a party when the other refuses or fail to abide by a valid compromise 1. The other party may enforce the compromise; or
original demand (Art. 2041, NCC).
A compromise between the creditor and the principal debtor is valid if the compromise is beneficial to the guarantor; otherwise, it is not binding upon him (Art. 2063, NCC).
To be binding, it must benefit both the guarantor and the debtor. VI. QUASI-CONTRACTS Quasi-Contract Quasi-contracts are those juridical relations arising from lawful, voluntary and unilateral acts, by virtue of which the parties become bound to each other, based on the principle that no one shall be unjustly enriched or benefited at the expense of another (Art. 2142, NCC). Characteristics of a quasi-contract 1. It must be Lawful; 2. It must be Unilateral; and 3. It must be Voluntary (Art. 2142, NCC) The 2 Principal Kinds: 1. Negotiorum management) ●
Gestio
(unauthorized
arises when a person voluntarily takes charge of the management of the business or property of another without any power from the latter (Art. 2144, NCC).
398
2. Solutio Indebiti (unjust enrichment) ●
takes place when a person receives something from another without any right to demand for it, and the thing was unduly delivered to him through mistake (Art. 2154, NCC).
A. NEGOTIORUM GESTIO A juridical relation which arises whenever a person voluntarily takes charge of the agency or management of the business or property of another without any power or authority from the latter (Art. 2144, NCC). Requisites: 1. An “officious manager” or “gestor” voluntarily assumes the management or agency of the business or property of another; 2. Property or business must be neglected or abandoned; otherwise what results is a case of unenforceable contract and not negotiorum gestio; and 3. No authorization from the owner, whether express or implied, otherwise what results is a contract of agency and not negotiorum
gestio.
NOTE: A contract is unenforceable if entered into the name of another by one who has been given no authority or legal representation, or who has acted beyond his powers (Art. 1403 [1], NCC). Assumption of agency or management must be done in good faith. Obligations Created
2. He is personally liable to third persons with whom he contracted with unless: (a) the owner has ratified the management; or (b) the contract refers to things pertaining to the owner (Art. 2152, NCC). b. On the part of the owner 1. If he enjoys the advantages of the unauthorized management, he shall be liable to the officious manager: 1) for obligations incurred in his interest; 2) for reimbursem*nt of necessary and useful expenses incurred by the latter; and 3) for reimbursem*nt of damages which the latter may have suffered in the performance of his duties. 2. If he did not derive benefit but the management had for its purpose the prevention of imminent and manifest loss, the owner shall also be liable for the foregoing obligations. 3. If he did not derive benefit and although there has been no imminent and manifest danger, he shall still be liable for the foregoing obligations provided that: (a) the officious manager has acted in good faith; and (b) the property or business is intact, ready to be returned to the owner (Arts. 2150 & 2151, NCC). B. SOLUTIO INDEBITI
On the part of the officious manager 1. He is obliged to continue with the management or agency until the termination of the affair and its incidents, unless he requires the owner to substitute for him if the latter is in a position to do so (Art. 2144, NCC).
If something is received when there is no right to demand it and it was unduly delivered through mistake, the obligation to return it arises (Art. 2154, NCC).
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Requisites: 1. Payment is made when there exist no binding relation between the payor, who has no duty to pay, and the person who received the payment; and 2. Payment is made through mistake and not through liberality or some other cause (Commissioner of Internal Revenue v. MERALCO, G.R. 181459, June 9, 2014). Compared to accion in rem verso Accion in rem verso is an action for recovery for what has been paid or delivered without just cause or legal ground. It is an auxiliary action available only when there is no other remedy based on contract, quasi contract, crime or quasi delict (Rabuya, Civil Law Reviewer I, 2017, p. 24-25). In solutio indebiti, mistake is an essential element while in accion in rem verso, it is not necessary that there should be mistake in the payment (I Tolentino, Civil Code of the Phil., 1992, p. 76). Solutio indebiti which arises whenever a person unduly delivers a thing through the mistake to another who has no right to demand it (Jurado, Civil Law Reviewer, 2009, p. 1151). VII. TORTS A. PRINCIPLES Tort is an unlawful violation of private right, not created by contract and which gives rise to action for damages (Aquino, Torts and Damages, 2019). It is an act or omission producing an injury to another, without any previous existing lawful relation of which the said act or omission may be said to be a natural outgrowth or incident (Robles v. Castillo, 61 O.G. 1220, 5 C.A.R. [2s] 213). “Tort” consists in the violation of a right given or the omission of a duty imposed by law. Simply stated, tort is a breach of legal duty (Naguiat vs. NLRC, G.R. No. 116123, March 13, 1997).
ELEMENTS: 1. Duty 2. Breach 3. Injury 4. Proximate Causation (Garcia vs. Salvador, G.R. No. 168512, March 20, 2007) 1. ABUSE OF RIGHTS Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith (Art. 19, New Civil Code). A right, though by itself legal because recognized or granted by law as such, may nevertheless become the source of some illegality (Tocoms Philippines, v. Philips Electronics, 2020 citing Globe Mackay Radio and Cable Corp. v. CA). ELEMENTS: 1. 2. 3.
There is a legal right or duty; The legal right or duty is exercised in bad faith; and The exercise is for the sole intent of prejudicing or injuring another (Albenson Enterprises v. Court of Appeals in relation to Sec. 19, NCC).
Malice or bad faith is at the core of an abuse of right (Chevron Philippines, Inc. v. Mendoza, G.R. Nos. 211533 & 212071, 2019). Malice or bad faith implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity (California Clothing Inc. v. Quiñones, G.R. No. 175822, 2013). The existence of malice or bad faith is the fundamental element in abuse of right. In an action to recover damages based on malicious prosecution, it must be established that the prosecution was impelled by legal malice (Magbanua v. Junsay, 544 Phil. 349, 367, 2007).
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2. UNJUST ENRICHMENT Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him (Art. 22, New Civil Code). Even when an act or event causing damage another's property was not due to the fault negligence of the defendant, the latter shall liable for indemnity if through the act or event was benefited (Art. 23, New Civil Code).
to or be he
There is unjust enrichment when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience (Philippine Realty and Holdings Corporation v. Ley Construction and Development Corporation, 667 Phil. 32, 65, 2011). ELEMENTS: 1. A person is unjustly benefited; 2. Such benefit is derived at the expense of or with damages to another; and 3. The aggrieved party has no other action based on a contract, quasi-contract, crime, quasidelict, or any other provision of law (Grandteq Industrial Steel Products, Inc., v. Margallo, G.R. No. 181393, July 28, 2009). 3. LIABILITY WITHOUT FAULT Nature of Strict Liability There is strict liability if one is made liable dependent on fault, negligence or intent after establishing certain facts specified by law. Strict liability tort can be committed even if reasonable care was exercised and regardless of the state of mind of the actor at that time (Aquino, Torts and Damages, 2019). A. ANIMALS The possessor of an animal or whoever may make use of the same is responsible for the damage
which it may cause, although it may escape or be lost. This responsibility shall cease only in case the damage should come from force majeure or from the fault of the person who has suffered damage (Art. 2183, New Civil Code). The language of the provision reveals an evident intent to make the possessor or whoever makes use of the animal, liable independent of fault. The only exception is when the damage was caused by force majeure or by the person who suffered the damage (Aquino, Torts and Damages, 2019). Ownership is immaterial. What must be determined is the possession of the dog that admittedly was staying in the house in question, regardless of the ownership of the dog or of the house. It makes no distinction as to the kind of animal. This is applicable whether the animal is domestic or wild (Vestil v. IAC, 1989). B. FALLING OBJECTS The head of a family that lives in a building or a part thereof, is responsible for damages caused by things thrown or falling from the same (Art. 2193, New Civil Code). It is evident from language that the liability is absolute. It does not indicate a presumption or admit proof of care (Reyes and Puno, p. 165). The term head of the family is not limited to the owner of the building and it may even include the lessee thereof (Dingcong vs. Kanaan, 72 Phil. 14). The head of the family may recover from the person who caused the damage. The liability is solidary (Art. 2194, New Civil Code). C. LIABILITY OF EMPLOYERS Owners of enterprises and other employers are obliged to pay compensation for the death of or injuries to their laborers, workmen, mechanics or other employees, even though
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the event may have been purely accidental or entirely due to a fortuitous cause, if the death or personal injury arose out of and in the course of the employment. The employer is also liable for compensation if the employee contracts any illness or disease caused by such employment or as the result of the nature of the employment. If the mishap was due to the employee's own notorious negligence, or voluntary act, or drunkenness, the employer shall not be liable for compensation. When the employee's lack of due care contributed to his death or injury, the compensation shall be equitably reduced (Art. 1171, New Civil Code). Employer’s Liability for Injuries Caused by Co-Worker (Art. 1172, New Civil Code) 1. It should be noted, however, that if the death or injury is due to the negligence of a fellowworker, the latter and the employer shall be solidarily liable for compensation. 2. If a fellow-worker’s intentional or malicious act is the only cause of the death or injury, the employer shall not be answerable, unless it should be shown that the latter did not exercise due diligence in the selection or supervision of the plaintiff’s fellow-worker. 4. ACTS CONTRARY TO LAW Every person who, contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for the same (Art. 20, New Civil Code). Article 20 speaks of the general sanction for all other provisions of law which do not especially provide for their own sanction (Albenson Enterprises Corp. v. CA G.R. No. 88694, 1993). There is a common element under Articles 19 and 21, and that is, the act must be intentional. However, Article 20 does not distinguish: the act may be done either "willfully", or "negligently" (Albenson Enterprises Corp. v. CA G.R. No. 88694, 1993).
Under Article 20, there is no requirement that the act must be directed at a specific person, but it suffices that a person suffers damage as a consequence of a wrongful act of another in order that indemnity could be demanded from the wrongdoer (Petrophil Corp. v. CA, G.R. No. 122796, 2001). 5. ACTS CONTRARY TO MORALS Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage (Art. 21, New Civil Code). Damages are recoverable even if no positive law was violated. There are cases when it is apparent that an act complained of is against morals. However, all cases are determined on a case-to-case basis with duly established factual background in mind (Aquino, Torts and Damages, 2019). Elements of Acts Contrary to Morals 1. There is an act which is illegal 2. The act is contrary to morals, good customs, public order or public policy; and 3. That the act is done with intent to injure (Albenson Enterprises v. CA in relation to Sec. 21, NCC). B. CLASSIFICATION OF TORTS 1. INTENTIONAL TORTS It includes conduct where the actor desires to cause the consequences of his act or believes the consequences are substantially certain to result from it (Black’s Law Dictionary). Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage (Art. 21, New Civil Code).
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Every person criminally liable for a felony is also civilly liable (Art. 100, Revised Penal Code). 2. NEGLIGENT TORTS Voluntary acts or omissions which result in injury to others, without intending to cause the same. The actor fails to exercise due care in performing such acts or omissions. Actionable negligence may either be culpa contractual, culpa aquiliana and criminal negligence. Thus, an action for damages for the negligent act may be based on contract, quasi-delict or delict. The bases of liability are separate and distinct from each other even if only one act or omission is involved (Aquino, Torts and Damages, 2019). 3. STRICT LIABILITY A person whose actions caused harm to another may be held responsible for that harm simply because he had acted. In other words, he is liable although without fault (De Leon, Comments and Cases on Torts and Damages, 2004). CONSUMER ACT: PRODUCT AND SERVICE IMPERFECTION LIABILITY The suppliers of durable or nondurable consumer products are jointly liable for imperfections in quality that render the products unfit or inadequate for consumption for which they are designed or decrease their value, and for those resulting from inconsistency with the information provided on the container, packaging, labels or publicity messages/advertisem*nt, with due regard to the variations resulting from their nature, the consumer being able to demand replacement to the imperfect parts (Art. 100, Consumer Act). Manufacturers and processors of foodstuffs, drinks, toilet articles and similar goods shall be liable for death or injuries caused by any noxious or harmful substances used, although no contractual relation exists between them and the consumers (Art. 2187, New Civil Code).
POSSESSOR AND USER OF ANIMAL The possessor of an animal or whoever may make use of the same is responsible for the damage which it may cause, although it may escape or be lost. This responsibility shall cease only in case the damage should come from force majeure or from the fault of the person who has suffered damage (Art. 2187, New Civil Code). NUISANCE Every successive owner or possessor of property who fails or refuses to abate a nuisance in that property started by a former owner or possessor is liable therefore in the same manner as the one who created it (Art. 696, New Civil Code). C. THE TORTFEASOR 1. JOINT TORTFEASOR Joint Tortfeasors are those who command, instigate, promote, encourage, advise, countenance, cooperate in, aid or abet the commission of a tort, or approve of it after it is done, if done for their benefit. They are also referred to as those who act together in committing wrong or whose acts, if independent of each other, unite in causing a single injury (Ruks Konsult and Construction v. Adworld Sign and Advertising Corp., G.R. No. 204866, January 21, 2015). SOLIDARY LIABILITY The responsibility of two or more persons who are liable for quasi-delict is solidary (Art. 2194, New Civil Code). Each is liable as principals, to the same extent and in the same manner as if they had performed the wrongful act themselves (Ruks Konsult and Construction v. Adworld Sign and Advertising Corp., G.R. No. 204866, January 21, 2015).
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2. DIRECT TORTFEASORS Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter (Art. 2176, New Civil Code) Every person legally responsible is liable for a tort committed by him provided it is the proximate cause of an injury to another (De Leon, Torts and Damages). Pursuant to a vicarious liability, a corporation may be held directly and primarily liable for tortious acts of its officers or employees (Philippine National Bank v. CA, G.R. No. L-2715, 1978). D. QUASI-DELICT OR CULPA AQUILIANA Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter (Art. 2176, NCC). The concept of quasi-delict in Art. 2176 is broad; it includes not only injuries to persons but also damage to property (Cinco vs. Canonoy, G.R. No. L33171, May 31, 1979). Quasi-delict being a separate legal institution A quasi-delict or "culpa aquiliana" is a separate legal institution under the Civil Code, with a substantivity all its own, and individuality that is entirely apart and independent from a delict or crime. This refers to the fact that a distinction exists between the civil liability arising from a crime and the responsibility for quasi-delicts or culpa extra contractual. (Barredo
v. Garcia, G.R. No. 48006, July 8, 1942)
ELEMENTS: (1) an act or omission; (2) the presence of fault or negligence in the performance or non-performance of the act; (3) injury; (4) a causal connection between the negligent act and the injury; and (5) no pre-existing contractual relation (St. Martin Polyclinic, Inc. vs. LWU Construction Corporation, GR No. 217426, Dec. 4, 2017). CULPA AQUILIANA v. CULPA CONTRACTUAL v. CULPA CRIMINAL Culpa Aquiliana
Culpa Contractual
As to Nature of Liability Fault or Obligation arises negligence from the breach of resulting in the contract because damage or injury of the defendant's to another (Art. failure to exercise 2176, NCC). due care in its performance (Art.
Culpa Criminal Existence of a law clearly punishing the act (Nullum crimen sine lege).
1173, NCC).
As to the Nature of Negligence Direct, Negligence is merely Direct, substantive and incidental to the substantive independent performance of an and (Huang vs. obligation already independent Philippine existing because of a Hoteliers, Inc. GR contract (Huang vs.
No. 180440, December 5, 2012).
Philippine Hoteliers Inc., GR No. 180440, Dec. 5, 2012).
As to the Proof Needed Preponderance of Preponderance of Guilt beyond evidence (Rule evidence (Rule 133, reasonable 133, Section 1, Section 1, Rules of doubt (Ibid.).
Rules of Court; Casupanan vs. Laroya, GR No. 145391, August 26, 2002).
Court; Barredo vs. Garcia, GR No. L48006, July 8, 1942).
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As to the Existence of Pre-Existing Contractual Obligation No pre-existing There is a pre- No preobligation existing obligation (a existing (except the duty contract, either obligation. to be careful in all express or implied) human (Ibid.) actuations
(Huang vs. Philippine Hoteliers, Inc. GR No. 180440, December 5, 2012).
As to the Employer’s Defense of Exercising the Diligence of “Good Father of a Family” in the Selection and Supervision of his Employees As a GR, it is a Not a complete and This is not complete and proper defense. proper proper defense. defense. The However, even if employee’s the employer can guilt is prove the automatically diligence in the the selection and employer’s supervision of the civil employee, still if guilt, if the he ratifies the former is wrongful acts or insolvent. takes no step to avert further damage, the employer would still be liable.
(Spouses Fontanilla vs. Hon. Maliaman, GR No. L-55963, December 1, 1989).
As to Burden of Proof Ordinarily, the As long as victim has to it is proved that prove negligence there was a contract of the defendant. and that it was not (Cangco vs. carried out, it is Manila Railroad presumed that the Company, GR No. debtor is at fault, and L-12191, October it is his duty to prove 14, 1918). that there was no negligence in carrying out the terms of the contract.
Accused is presumed innocent until the contrary is proved, so prosecution has the burden of proving the negligence of the accused.
As to the Nature of the Right Violated Private Right Private Right Public Right As to the Governing Law Governed by Governed by Arts. Article 2176; 1170-1174 of the Articles 1172- Civil Code. 1174 are also applicable (Art.
Governed by Article 365 of the Revised Penal Code.
2178, NCC).
E. PROXIMATE CAUSE 1.CONCEPT In order for liability from negligence to arise, there must be not only proof of damage and negligence, but also proof that the damage was the consequence of the negligence (Abrogard vs. Cosmos Bottling Company, Inc., G.R. No. 164749, March 15, 2017). The proximate cause is that “which in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury and without which the result would not have occurred.” (38 Am. Jur. 695; Fernando vs. Court of Appeals, G.R. No. 92087, May 8, 1992).
405
This doctrine is applicable only in actions for quasidelict, not in actions involving breach of contract. Test of proximate cause Cause-in-fact test: must determine if defendant’s negligence was the cause-in-fact of the damage to plaintiff; the inquiry stops if it was not 1. But-For or Sine Qua Non Test Conduct is cause-in-fact if the damage would not have resulted had there been no negligence on the part of the defendant; conduct is not cause-in-fact of the plaintiff’s damage if the accident could not have been avoided in the absence of defendant’s negligent conduct. 2. Substantial Factor Test The negligent conduct is the cause-in-fact of the damage if it was a substantial factor in producing the injuries; the causes set in motion by the defendant must continue until the moment of the damage, or at least down the setting in motion of the final active injurious force which immediately produced or preceded the damage. 3. NESS Test The act or omission is a cause-in-fact if it is a necessary element of a sufficient set; whether a particular condition qualifies as a substantially relevant factor will depend on whether it was necessary to complete a set of conditions jointly sufficient to account for the given occurrence. Efficient intervening cause An efficient intervening cause is one that destroys the causal connection between the negligent act and injury and thereby negatives liability (Novus actus interviens) (Morril v. Morril, 60 ALR 102, 104 NJL 557). Remote Cause That cause which some independent force merely took advantage of to accomplish something not the natural effect thereof. It cannot be considered the legal cause of the damage (Aquino, Torts and Damages, p. 318, 2013).
Concurrent Cause Where several causes producing an injury are concurrent and each is an efficient cause without which the injury would not have happened, the injury may be attributed to all or any of the causes and recovery may be had against any or all of the responsible persons although under the circ*mstances of the case, it may appear that one of them was more culpable, and that the duty owed by them to the injured person was not the same. No actor's negligence ceases to be a proximate cause merely because it does not exceed the negligence of other actors. Each wrongdoer is responsible for the entire result and is liable as though his acts were the sole cause of the injury (Ruks Konsult and Construction v Adworld Sign and Advertising Corp., G.R. No. 204886, 2015). There is no exact mathematical formula to determine proximate cause. It is based upon mixed considerations of logic, common sense, policy and precedent. Plaintiff must, however, establish a sufficient link between the act or omission and the damage or injury. That link must not be remote or farfetched; otherwise, no liability will attach. The damage or injury must be a natural and probable result of the act or omission (Dy Teban v. Jose Ching, G.R. No. 161803, February 4, 2008). 2. DOCTRINE OF LAST CLEAR CHANCE In essence, the doctrine of last clear chance is to the effect that where both parties are negligent but the negligent act of one is appreciably later in point of time than that of the other, or where it is impossible to determine whose fault or negligence brought about the occurrence of the incident, the one who had the last clear opportunity to avoid the impending harm but failed to do so, is chargeable with the consequences arising therefrom (Canlas v. GA, G.R. No. 112160, February 28, 2000).
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The doctrine of last clear chance states that a person who has the last clear chance or opportunity of avoiding an accident, notwithstanding the negligent acts of his opponent, is considered in law solely responsible for the consequences of the accident (Engada v. CA, GR 140698, June 20, 2003). The negligence of the plaintiff does not preclude a recovery for the negligence of the defendant where it appears that the defendant, by exercising reasonable care and prudence, might have avoided injurious consequences to the plaintiff notwithstanding the plaintiff’s negligence. Even though a person’s own acts may have placed him in a position of peril, and an injury results, the injured person is entitled to recovery (Rabuya, Prebar Reviewer in Civil Law, 2021, p. 569). ELEMENTS: 1. The plaintiff placed themselves in the situation of danger because of their own negligence, became unable to escape from such position by the use of ordinary care, either because it became physically impossible for him to do so or because he was totally unaware of the danger; 2. The defendant knew that the plaintiff was in a position of danger and further knew, or in the exercise of ordinary care, should have known, that the plaintiff was unable to escape therefrom; and 3. That thereafter, the defendant had the last clear chance to avoid the accident by the exercise of ordinary care but failed to exercise such last clear chance, and the accident occurred as a proximate result of such failure (De Leon, Comments and Cases on Torts and Damages, 2004, p. 250). When inapplicable This doctrine of last chance has no application to a case where a person is to act instantaneously, and if the injury cannot be avoided by using all means available after the peril is or should have been discovered (Ibid).
It applies in a suit between the owners and drivers of colliding vehicles. It does not arise where a passenger demands responsibility from the carrier to enforce its contractual obligations. For it would be inequitable to exempt the negligent driver and its owners on the ground that the other driver was likewise guilty of negligence (Philippine Rabbit Bus Lines, Inc. vs. Intermediate Appellate Court, et al. G.R. Nos. 66102-04, August 30, 1990). Who may invoke: Plaintiff When the doctrine is not applicable (a) Joint tortfeasors (b) Defendants concurrently negligent (c) As against 3rd persons F. VICARIOUS LIABILITY It is also known as the doctrine of imputed negligence. A person is not only liable for one’s own quasidelictual acts, but also for those persons for whom one is responsible for (Art. 2180, NCC). Persons Vicariously Liable (Art. 2180, NCC) (PGOM-EST) 1. Parents are responsible for the damages caused by the children below 21 years old who live in their company; 2. Guardians are liable for damages caused by the wards below 21 years old or incapacitated persons who are under their authority and live in their company; 3. The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their functions; 4. Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their
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assigned tasks, even though the former are not engaged in any business or industry; 5. The State is responsible in like manner when it acts through a special agent; but not when the damage has been caused by the official to whom the task done properly pertains, in which case what is provided in article 2176 shall be applicable; 6. Teachers or heads of establishment of arts and trades shall be liable for damages caused by their pupils and students or apprentices, so long as they remain in their custody. NOTE: The responsibility treated in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage (Art. 2180, NCC). NOTE: Whoever pays for the damage caused by his dependents or employees may recover from the latter what he has paid or delivered in satisfaction of the claim (Art. 2181, NCC). Liability of Parents and Other Exercising Parental Authority
Persons
The basis of liability of parents for the acts or omissions of their minor children is the parental authority that they exercise over them. Their liability is a necessary consequence of such authority which includes instructing, controlling and disciplining the child (Tamargo vs. CA, G.R. No. 85044, June 3, 1992). a. If Child is Minor Parents and other persons exercising parental authority shall be civilly liable for the injuries and damages caused by the acts or omissions of their unemancipated children living in their company and under their parental authority (Art. 221, FC). b. If at Least 18 but Below 21 The vicarious liability of the parents or guardians exercising parental authority shall continue to be applicable provided the following conditions are satisfied:
i. ii.
the age of the child is at least 18 but below 21; the child is living in their company (Art. 2180, NCC).
c. In the Absence of Both Parents or Guardian The parental authority shall be exercised by the following persons: a) The surviving grandparents; b) The oldest brother or sister, over twenty-one years of age, unless unfit or disqualified; and c) The child’s actual custodian, over twenty-one years of age, unless unfit or disqualified (Arts. 214 and 216, FC). Hence, they are civilly liable only in such cases where both parents are dead, absent or otherwise incapacitated to perform their duty. Liability of Employers Owners and managers of an establishment or enterprise are responsible for damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their functions. Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry (Art. 2180, NCC). When the employee causes damage due to his own negligence while performing his own duties, there arises the juris tantum presumption that the employer is negligent (Reyes vs. Doctrolero, G.R. No. 185597, August 2, 2017). Requisites for Employer’s Presumed Liability 1. Existence of an employer-employee relationship; and 2. That the employee caused the injury while he acted within the scope of his or her assigned tasks (Caravan Travel and Tours International, Inc. vs. Abejar, 783 SCRA 368 (2016).
408
The burden of proving that the employee was acting within the scope of his assigned task is incumbent upon the plaintiff and not the employer (Rabuya, Prebar Reviewer in Civil Law, 2021, p. 575).
performance of a specified work or for the supply of manpower, assumes responsibility over the employees of the latter (NPC v. CA, G.R. No. 119121, August 14, 1998)
Employer’s Defense
Registered Owner Rule
To avoid liability for a quasi-delict committed by his employee, an employer must overcome the presumption by presenting convincing proof that he exercised the care and diligence of a good father of a family in the selection and supervision of his employee (Aquino, Torts and Damages, 2005, p.701702).
It is well settled that in case of motor vehicle mishaps, the registered owner of the motor vehicle is considered as the employer of the tortfeasor-driver, and is made primarily liable for the tort committed by the latter under Article 2176, in relation with Article 2180, of the Civil Code (Filcar Transport Services vs. Jose A. Espinas, G.R. No. 174156, June 20, 2012).
Thus, in the selection of its prospective employees, the employer is required to examine them as to their qualifications, experience, and service records (Mercury Drug v. Huang, G.R. No. 172122, June 22, 2007). With respect to the supervision of its employees, the employer should formulate standard operating procedures, monitor their implementation, and impose disciplinary measures for their breach (Ibid.). To establish compliance with these requirements, employers must submit concrete proof, including documentary evidence (Ibid.). Nature of the Liability The liability of the employer for the negligent conduct of the subordinate is direct and primary (Aquino, Torts and Damages, 2005, p. 688). Principal held liable over damages caused by its Labor-only Contractor’s employees In labor-only contracting, an employer-employee relationship between the principal employer and the employees of the "labor-only" contractor is created. The principal employer is responsible to the employees of the "labor-only" contractor as if such employees had been directly employed by the principal employer. It is axiomatic that any person (the principal employer) who enters into an agreement with a job contractor, either for the
The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or that any damage or injury is caused by the vehicle on the public highways, responsibility therefore can be fixed on a definite individual, the registered owner. Instances are numerous where vehicles running on public highways caused accidents or injuries to pedestrians or other vehicles without positive identification of the owner or drivers, or with very scant means of identification. It is to forestall these circ*mstances, so inconvenient or prejudicial to the public, that the motor vehicle registration is primarily ordained, in the interest of the determination of persons responsible for damages or injuries caused on public highways (Erezo, et al. vs. Jepte, G.R. No. L-9605, September 30, 1957). 🕮 The defense of due diligence in the selection and supervision of the employee is not available if the defendant is sued under the Revised Penal Code. 🕮 One who hires an independent contractor but controls the latter’s works is responsible also for the latter’s negligence (Cuison vs. Norton and Harrison Co., G.R. No. L-32774, October 14, 1930).
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Liability of Teachers
Schools,
Administrators
and
begun or has already ended (Amadora vs. CA, G.R. No. L-47745, April 15, 1988).
Teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils and students or apprentices, so long as they remain in their custody (Art. 2180, NCC).
A student not at attendance in school cannot be in recess
This is applicable to all schools, academic as well as non-academic. The school, its administrators and teachers, or the individual, entity or institution engaged shall have special parental authority and responsibility over the minor child while under their supervision, instruction or custody. RATIONALE: so long as the student remains in the custody of a teacher, the latter "stands, to a certain extent, in loco parentis [as to the student] and [is] called upon to exercise reasonable supervision over the conduct of the [student]." The school and its heads and teachers exercise protective and supervisory custody over the pupils and students for as long as they are at attendance in the school, including recess time (Salvosa v. IAC, G.R. No. 70458, October 5, 1988). Special Parental Children
Authority
Over
Minor
Authority and responsibility shall apply to all authorized activities whether inside or outside the premises of the school, entity or institution (Art. 218, FC). Thus, such authority and responsibility applies to field trips, excursions and other affairs of the pupils and students outside the school premises whenever authorized by the school or its teachers (St. Mary’s Academy v. Carpitanos, G.R. No. 143363, February 6, 2002). When student is considered under custody The student is in the custody of the school authorities as long as he is under the control and influence of the school and within its premises, whether the semester or school year has not yet
A "recess," as the concept is embraced in the phrase "at attendance in the school" contemplates a situation of temporary adjournment of school activities where the student still remains within call of his mentor and is not permitted to leave the school premises, or the area within which the school activity is conducted. Recess by its nature does not include dismissal. Likewise, the mere fact of being enrolled or being in the premises of a school without more does not constitute "attending school" or being in the "protective and supervisory custody" of the school, as contemplated in the law (Salvosa v. IAC, G.R. No. 70458, October 5, 1988). School must exercise diligence over science experiments The school must take affirmative steps to avert damage and injury to its students although it had full information on the nature of dangerous science experiments conducted by the students during class; the school must install safety measures to protect the students who conduct experiments in class; and the school must provide protective gears and devices, specifically goggles, to shield students from expected risks and dangers (St. Joseph’s College v. Miranda, G.R. No. 182353, June 29, 2010). Enrollment Contract Rule Institutions of learning have the “built-in” obligation of providing a conducive atmosphere for learning, an atmosphere where there are no constant threats to life and limb, and one where peace and order are maintained (PSBA vs. CA, G.R. No. 84698, February 4, 1992).
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Liability of Schools
Governmental or Proprietary
General Rule: Schools are not liable as party defendants.
Certain functions and activities, which can be performed only by the government, are more or less generally agreed to be "governmental" in character, and so the State is immune from tort liability (Ibid.).
Exceptions: 1. Schools are expressly made liable (Art. 218, FC). 2. School’s liability as an employer (St. Francis High School vs. CA, G.R. No. 82465, February 25, 1991). 3. School has liability based on contract (PSBA case); thus: a. If the culprit is a teacher, sue the school as an employer (St. Francis High School vs. CA, G.R. No. 82465, February 25, 1991) b. If the culprit is a stranger, sue the school based on contract (PSBA vs. CA, G.R. No. 84698, February 4, 1992). c. If the culprit is a student, apply Art. 2180.
On the other hand, a service which might as well be provided by a private corporation, and particularly when it collects revenues from it, the function is considered a "proprietary" one, as to which there may be liability for the torts of agents within the scope of their employment (Ibid.). Test of Liability 1. If Discharging Government Functions
NOTE: if the person under custody is a minor, those exercising special parental authority are principally and solidarily liable for damages caused by the acts or omissions of the unemancipated minor under their supervision, instruction, or custody (Art. 219, FC).
General Rule: If the injury is caused in the course of the performance of a governmental function or duty, the principle of non-suability of the State applies. Hence, the State is not liable (DOH vs. Phil Pharma, G.R. No. 182358, February 20, 2013).
Liability of the State
Exception: The State is liable only for torts caused by its special agents, specially commissioned to carry out the acts complained of outside of such agent’s regular duties (E. Merritt vs. Government of the Philippine Islands, G.R. No. L-11154, March 21, 1916).
The liability of the State has two aspects: (1) Its public or governmental aspect where it is liable for the tortious acts of special agents only; (2) Its private or business aspect where it becomes liable as an ordinary employer. The State is responsible in like manner when it acts through a special agent; but not when the damage has been caused by the official to whom the task done properly pertains, in which case what is provided in article 2176 shall be applicable (Art. 2180, NCC). The State assumes a limited liability for the damage caused by the tortious acts or conduct of its special agent (Fontanilla v. Maliaman, G.R. No. 55963, December 1, 1989; G.R. No. 55963, February 27, 1991).
Exception to Exception: The State is not liable for the damage caused by public officials who are in the performance of their usual governmental functions. The said public official may be held liable for the commission of quasidelict (Art. 2180, NCC). 2. If Discharging Functions
Private
or
Proprietary
If the State or the LGUs engages in private or proprietary functions, it becomes liable as an ordinary employer.
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▪
▪
Provinces, Cities and Municipalities are liable for damages for the death or injuries suffered by any person, by reason of the defective condition of roads, streets, bridges, public buildings, and other public works under their control and supervision. Under Article 2189 of the Civil Code, it is not necessary for the liability therein established to attach that the defective roads or streets belong to the province, city or municipality from which responsibility is exacted. What said article requires is that the province, city or municipality have either "control or supervision" over said street or road (City of Manila vs. Teotico G.R. No. L-23052 Jan. 29, 1968).
Joint tortfeasors Joint tortfeasors are two or more persons who act together in committing a wrong, or contribute to its commission, or assist or participate therein actively and with common intent, so that injury results to a third person from the joint wrongful act of the wrongdoers (De Leon, Comments and Cases on Torts and Damages, 2004, p 17). Liability of Joint Tortfeasor Joint tortfeasors are solidarily liable for the resulting damage of a wrongful act, (Art. 2194, NCC) Joint tort-feasors are each liable as principals, to the same extent and in the same manner as if they had performed the wrongful act themselves. It is likewise not an excuse for any of the joint tortfeasors that individual participation in the tort was insignificant as compared to that of the other (Malvar vs. Kraft Foods, G.R. No. 183952, September 9, 2013). G. RES IPSA LOQUITUR
Res ipsa loquitur is a Latin phrase which literally means “the thing or the transaction speaks for itself.” It holds a defendant liable where the thing which caused the injury complained of is shown to be under the latter’s management and the accident
is such that, in the ordinary course of things, cannot be expected to happen if those who have its management or control use proper care (Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 570). ELEMENTS: 1. The accident is of a kind which ordinarily does not occur in the absence of someone's negligence; 2. It is caused by an instrumentality within the exclusive control of the defendant or defendants; and 3. The possibility of contributing conduct which would make the plaintiff responsible is eliminated (Ramos vs. CA, G.R. No. 124354, December 29, 1999). Latest Development (Pacalna Sanggacala vs. National Power Corporation, G.R. No. 209538, July 7, 2021) Several property owners along Lake Lanao sued NPC for damages arising from NPC’s refusal to open Agus Regulation Dam whenever there was overflooding. Tort law can be used to address environmental harms to well-defined areas or specific persons, or a class of persons, when readily supported by general and specific causation and closely fits the elements of a tort cause of action. The Supreme Court found NPC negligent due to established evidence and application of doctrine of res ipsa loquitur. Where the thing which causes injury is shown to be under the management of the defendant, and the accident is such as in the ordinary course of things does not happen if those who have the management use proper care, it affords reasonable evidence, in the absence of an explanation by the defendant, that the accident arose from want of care. NPC’s negligence in operating the Agus Regulation Dam caused inundation and damage to petitioners’ properties shows a
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general and specific causation, and closely fits the traditional elements of a tort cause of action. H. DAMNUM ABSQUE INJURIA Under this principle, the proper exercise of a lawful right cannot constitute a legal wrong for which an action will lie although the act may result in damage to another, for no legal right has been evaded (Custodio vs. CA, G.R. No. 116100, February 9, 1996). Damnum absque injuria, or damage without injury, arises when the loss or harm was not the result of a violation of a legal duty. Plaintiff must establish that such injuries resulted from a breach of duty which the defendant owed to the plaintiff — a concurrence of injury to the plaintiff and legal responsibility by the person causing it (Pacalna Sanggacala vs. National Power Corporation, G.R. No. 209538, July 7, 2021). DAMNUM ET INJURIA v. DAMNUM ABSQUE INJURIA
I. DEFENSES DEATH is not a defense, and the case will continue through the legal representative. Complete Defenses 1. 2. 3. 4. 5. 6. 7. 8. 9.
Plaintiff’s negligence Due diligence Fortuitous event Damnum absque injuria Authority of law Assumption of risk Doctrine of last clear chance Prescription Waiver
Plaintiff’s Negligence If the cause of the injury or damage is the plaintiff’s negligence, then the defendant must not be held liable. Assumption of Risk
Damnum Et Injuria
Damnum Absque Injuria
As to invasion of legal right Legal Injury or the illegal invasion of a legal right.
Actual damage sustained by a person (harm or loss to his person or property) that is not considered by law as an injury (i.e., legal injury).
As to resulting legal injury Damage resulting in legal injury.
Damage does not result in a legal injury since the loss or harm was not the result of a violation of a legal duty or right.
As to who borne the consequences Consequences must be borne by the one who caused the damage.
Consequences must be borne by the injured person alone.
Volenti non fit injuria: "to a willing person, injury is not done” Doctrine of Last Clear Chance The person who has the last fair chance to avoid the impending harm and fails to do so is chargeable with the consequences, without reference to the prior negligence of the other party (Picart vs. Smith, G.R. L-12219, March 15, 1918). It must be shown that both parties were negligent but the negligent act of one was appreciably later in time than that of the other. It may also apply when it is impossible to determine who caused the resulting harm, thus, the one who had the last opportunity to avoid the impending harm and failed to do so will be held liable (Ofracio vs. People, G.R. No. 221981, November 4, 2020).
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Partial Defenses 1. Contributory negligence 2. Fortuitous event Contributory negligence Conduct on the part of the injured party, contributing as a legal cause to the harm he has suffered, which falls below the standard which he is required to conform for his own protection (NPC vs. Heirs of Casionan, G.R. No. 165969, November 27, 2008). A person claiming damages for the negligence of another has the burden of proving the existence of such fault or negligence causative thereof (PLDT vs. CA, G.R. No. 57079, Sept. 29, 1989). J. NEGLIGENCE Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would not do (Layugan vs. IAC G.R. NO. 73998, November 14, 1998). The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circ*mstances of the persons, of the time and of the place (Art. 1173, NCC). The defendant is not guilty of negligence if in doing the alleged negligent act, he used that reasonable care and caution which an ordinary prudent person would have used in the same situation (Picart vs. Smith, G.R. No. L-12219 March 15, 1918). Standard of diligence provided for under the NCC: Bonus Pater Familias or that of a good father of a family (Art. 1163, NCC). The law requires a man to possess ordinary capacity to avoid harming his neighbors unless a clear and manifest incapacity is shown; but it does not generally hold him liable for unintentional injury unless, possessing such capacity, he might ought to
have foreseen the danger (Corliss vs. Manila Railroad Co., G.R. No. L-21291, March 28, 1969). If the law or contract does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required (Art. 1173 [2], NCC). Degrees of negligence 1. Simple Negligence - Want of slight of care and diligence only (LBC Air Cargo vs. CA, G.R. No. 101683 February 23, 1995). 2. Ordinary Negligence - results when an individual fails to do something a reasonably careful person would do or does something a reasonably careful person would not do in that type of situation (Aquino, Torts and Damages, 2005, p. 129-130). 3. Gross Negligence - heedless and palpable violation of the legal obligation to others' rights (Ibid). 1. STANDARD OF CARE One who suddenly finds himself in a place of danger, and is required to act without time to consider the best means that may be adopted to avoid the impending danger, is not guilty of negligence, if he fails to adopt what subsequently and upon reflection may appear to have been a better method, unless the danger in which he finds himself is brought about by his own negligence (DELSAN Transport Lines, vs. C&A Construction, Inc., G.R. No. 156034, October 1, 2003). Diligence required of motorists While the duty of using reasonable care falls alike on a motorist and a bicyclist, due to the inherent differences in the two vehicles, more care is required from the motorist to fully discharge the duty than from the bicyclist. Simply stated, the physical advantages that the motor vehicle has over the bicycle make it more
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dangerous to the bicyclist than vice versa (Heirs of Completo vs. Albayda, G.R.172200, July 6, 2010). Diligence required of gun store owners A higher degree of care is required of someone who has in his possession or under his control an instrumentality extremely dangerous in character, such as dangerous weapons or substances (Pacis vs. Morales, G.R. No. 169467, February 25, 2010). Diligence required of children The standard of conduct to which a child must conform for his own protection is that degree of care ordinarily exercised by children of the same age, capacity, discretion, knowledge and experience under the same or similar circ*mstances (Ylarde vs. Aquino, G.R. No. L-33722 July 29, 1988). Diligence required of pharmacists The highest practicable degree of prudence, thoughtfulness, and vigilance, and most exact and reliable safeguards consistent with the reasonable conduct of the business, in order that human life may not constantly be exposed to the danger flowing from the substitution of deadly poisons for harmless medicine. In other words, the care required must be commensurate with the danger involved, and the skill employed must correspond with the superior knowledge of the business which the law demands (US vs. Pineda, G.R. No. L-12858, January 22, 1918). Diligence required of physicians A physician’s duty to his patient relates to his exercise of the degree of care, skill and diligence which physicians in the same general neighborhood, and in the same general line of practice, ordinarily possess and exercise in like cases (Dela Torre vs. Imbuido, G.R. No. 192973 September 29, 2014). Unreasonable risk of harm An act may be negligent if it is done without the competence that a reasonable person in the
position of the actor would recognize as necessary to prevent it from creating an unreasonable risk of harm to another. Those who undertake any work calling for special skills are required not only to exercise reasonable care in what they do but also possess a standard minimum of special knowledge and ability. Every man who offers his services to another, and is employed, assumes to exercise in the employment such skills he possesses, with a reasonable degree of diligence. In all these employments where peculiar skills is requisite, if one offers his services he is understood as holding himself out to the public as possessing the degree of skill commonly possessed by others in the same employment, and if his pretensions are unfounded, he commits a species of fraud on every man who employs him in reliance on his public profession (De Leon, Comments and Cases on Torts and Damages, 2004, p. 192). 2. PRESUMPTIONS OF NEGLIGENCE In motor vehicle mishaps Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been negligent if at the time of the mishap, he was violating any traffic regulation (Art. 2185, NCC). There is no presumption of negligence if there was no causal connection between the traffic violation and the injury (Tison vs. Sps Pomasin, G.R.173180, 2012). Possession of dangerous weapons or substance There is a prima facie presumption of negligence on the part of the defendant if the death or injury results from his possession of dangerous weapons or substances, such as firearms and poison, except when the possession or use thereof is indispensable in his occupation or business (Art. 2188, NCC).
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Common carriers There is a presumption of negligence when there is a breach of contract (Art. 1733, NCC).
Injury v. Damage
Contributory negligence of plaintiff Contributory negligence is conduct on the part of the plaintiff which falls below the standard of conduct to which he should conform for his own protection and cooperates with the negligence of the defendant in bringing about the plaintiff’s harm. The plaintiff may recover damages but the courts shall mitigate the damages to be awarded (Art. 2179, NCC).
Damage is the loss, hurt, or harm which results from the injury. Damages is the recompense or compensation awarded for the damage suffered (Custodio vs. CA, G.R. No. 116100, February 9, 1996).
NOTE: What is applicable in our jurisdiction is the “modified’’ form of comparative negligence. This is evident from the language of Article 2179. When negligence of the plaintiff is the sole cause or the proximate cause of his injury, he cannot recover, but if his negligence only contributes remotely or otherwise but not proximately, to his injury, he is deemed partly responsible and his recovery shall be diminished in proportion to the amount of fault attributable to him (De Leon, Comments and Cases on Torts and Damages, 2004, p. 239-240). K. DAMAGES GENERAL PROVISIONS Damages – A sum of money which the law awards or imposes as pecuniary compensation, recompense or satisfaction for an injury done or a wrong sustained as a consequence of the breach of some duty or violation of some right (PNB vs. RBL Enterprise, G. R. No. 149569, May 28, 2004). The pecuniary compensation, recompense or satisfaction for an injury sustained, or as otherwise expressed, the pecuniary consequences, which the law imposes for the breach of some duty or violation of some rights (People vs. Ballesteros G.R. No. 120921, January 29, 1998). Damage – the detriment, injury or loss which is occasioned by reason of fault of another in the property or person (De Leon, Comments and Cases on Torts and Damages, 2004, p. 628).
Injury is the illegal invasion of a legal right.
Classification of Damages A. Under Art. 2197 of the New Civil Code: 1. Moral 2. Exemplary or corrective 3. Nominal 4. Temperate or moderate 5. Actual or compensatory 6. Liquidated B. According to purpose 1. Compensatory 2. Punitive C. According to manner of determining the amount of indemnity 1. Conventional: if stipulated by the parties to a contract 2. Non-Conventional: if it is not agreed upon or predetermined Special and ordinary Ordinary damages are those which necessarily and by implication of law result from the act or omission complained of. Special damages are those which result directly but not necessarily or by implication of law, from the act or omission complained of and exist only because of special circ*mstances. The first may be awarded without the second, while the second, when proper, are added to the first (De Leon, Comments and Cases on Torts and Damages, 2004, p. 561).
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1. KINDS OF DAMAGES A. ACTUAL AND COMPENSATORY DAMAGES Actual or compensatory damages are those awarded in satisfaction of, or in recompense for, loss or injury sustained. They proceed from a sense of natural justice and are designed to repair the wrong that has been done, to compensate for the injury inflicted and not to impose a penalty. In actions based on torts or quasi-delicts, actual damages include all the natural and probable consequences of the act or omission complained of. (Art. 2199, NCC).
Credence can be given only to claims duly supported by receipts (ComSavings Bank vs. Spouses Danilo, G.R. No. 170942, August 28, 2013). Claimants must produce competent proof or the best evidence obtainable such as receipts to justify an award therefore. Actual or compensatory damages cannot be presumed but must be proved with reasonable certainty (People vs. Ereño, G.R. No. 124706, February 22, 2000). Requisites to award actual damages:
compensatory
1. The loss is alleged and proved; 2. The loss is not speculative (General Enterprises, Inc. vs. Lianga Bay Logging, Co., Inc., G.R. No. L-18487, August 31, 1964).
1. One is the loss of what a person already possesses (daño emergente); 2. Failure to receive as a benefit that would have pertained to him (lucro cesante).
Component elements of actual damages/actual damages may be recovered
Two kinds damages:
of
actual
or
The purpose of the law in awarding actual damages is to repair the wrong that has been done, to compensate for the injury inflicted, and not to impose a penalty (Algarra vs. Sandejas, G.R. No. 8385, March 24, 1914). Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages. In the absence of competent proof on the actual damage suffered, a party is entitled to nominal damages, which, as the law says, is adjudicated in order that a right of the plaintiff, which has been violated or invaded by defendant, may be vindicated and recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered (PNOC Shipping and Transport Corporation vs. CA, G.R. No. 107518, October 8, 1998).
1. For loss or impairment of earning capacity in case of temporary or permanent physical injury (Art. 2205, NCC). 2. For injury to the plaintiff’s business standing or commercial credit (Art. 2205, NCC). 3. For attorney’s fees and expenses of litigation. 4. Interest 5. For the value of the loss suffered (Art. 2200, NCC). 6. Unrealized profits (Art. 2200, NCC) 7. Indemnity for Death and loss of earning capacity of the deceased (Art. 2206 NCC). 8. Support for Compulsory Heirs When victim is unknown The fact that the victim remains unknown and no heirs have come forward, does not warrant the elimination of civil indemnity (People vs. Guzman, G.R. No. 8385, April 25, 1994).
Manner of Determination
Proving the loss
To justify an award for actual damages, there must be competent proof of the actual amount of loss.
General Rule: Loss must be proved before one can be entitled to damages.
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Exceptions: Loss need not be proved in the following cases:
labor laws (Philippine Hawk Corporation vs. Vivian Tan Lee, G.R. 166869, Feb. 16, 2010).
1. Liquidated damages previously agreed upon (Art. 2226, NCC). Liquidated damages take the place of actual damages except when additional damages are incurred. 2. Forfeiture of bonds in favor of the government for the purpose of promoting public interest or policy (Far Eastern Surety and Insurance Co. vs. CA, No. L-12019, October 16, 1958). 3. Loss is presumed (Manzanares vs. Moreta, G.R. No. 12306, October 22, 1918). 4. When the penalty clause is agreed upon in the contract between the parties (Art. 1226, NCC).
If amount admitted by a party
How to ascertain amount of actual and compensatory damage (Evidence of Actual Damage) The amount of the damages should be determined with reasonable certainty. It cannot be simply based on the mere allegation of a witness without any tangible claim, such as receipts or other documentary proofs to support such claim (Consolidated Industrial Gases, Inc. vs. Alabang Medical Center, Inc., G.R. No. 181983, November 13, 2013). The rule also applies to civil and criminal cases (People vs. Abaño y Cañares, G.R. No. 188323, February 21, 2011). General Rule: Documentary evidence should be presented to substantiate the claim for damages for loss of earning capacity. Exception: Damages for loss of earning capacity may be awarded despite the absence of documentary evidence when:
Even if there are no receipts and yet the amount claimed is admitted by a party, it should be granted (People vs. Abolidor, G.R. No. 133380, February 13, 2004). Determination of amount of damages recoverable Much is left to the discretion of the court considering the moral and material damages involved. There can be no exact or uniform rule for measuring the value of a human life. The life expectancy of the deceased or of the beneficiary, whichever is shorter, is an important factor. Other factors that are usually considered are: 1. Pecuniary loss to plaintiff or beneficiary; 2. Loss of support; 3. Loss of service; 4. Loss of society; 5. Mental suffering of beneficiaries; and 6. Medical and funeral expenses. The formula that has gained acceptance over time has limited recovery to net earning capacity. The premise is obviously that net earning capacity is the person’s capacity to acquire money, less the necessary expense for his own living (Philtranco Service Enterprises vs. Felix Paras and Inland Trailways Inc., G.R. No. 161909, April 25, 2012).
1. The deceased is self-employed and earning less than the minimum wage under current labor laws, in which case, judicial notice may be taken of the fact that in the deceased's line of work no documentary evidence is available; or
Computation of Unearned Income
2. The deceased is employed as a daily wage worker earning less than the minimum wage under current
Legend: Net Earning Capacity = Life Expectancy x (Gross Annual Income – Living Expenses)
Formula: Net Earning Capacity (x) = Life Expectancy X (Gross Annual Income LESS Living Expenses)
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Life Expectancy = 2/3 x (80 – Age of the Deceased) Living Expenses = 50% of gross annual income. Basis of Life Expectancy Life expectancy should not be based on the retirement age of government employees, which is pegged at 65. In calculating the life expectancy of an individual for the purpose of determining loss of earning capacity under Art. 2206 (1) of the NCC, it is assumed that the deceased would have earned income even after retirement from a particular job (Smith Bell Dodwell Shipping Agency Corp. vs. Borja, G.R. No. 143008, June 10, 2002). Heirs cannot claim as damages the full amount of earnings of the deceased Said damages consist, not of the full amount of his earnings, but of the support they received or would have received from him had he not died in consequence of the negligence of the bus' agent. Stated otherwise, the amount recoverable is not loss of the entire earning, but rather the loss of that portion of the earnings which the beneficiary would have received. In other words, only net earnings, not gross earnings, are to be considered. In fixing the amount of that support, the "necessary expenses of his own living" should be deducted from his earnings. Earning capacity, as an element of damages to one's estate for his death by wrongful act, is necessarily his net earning capacity or his capacity to acquire money, less the necessary expense for his own living (Villa Rey Transit, Inc. vs. CA, et al., G.R. No. L-25499, Feb. 18, 1970). Medical Expenses are in the nature of actual damage Medical expenses are in the nature of actual damages which should be duly proved and the award for actual damages cannot be made on the basis of the doctor’s prescription alone (People vs. Enguito, G.R. No. 128812, Feb 28, 2000).
Adjustment fees do not constitute actual damages Adjustment fees and expense of drivers in the recovery of cargo lost at sea done voluntarily, though unsuccessfully, does not constitute actual damages (Schmitz Transport & Brokerage Corp. vs. Transport Venture, Inc., G.R. No. 150255, April 22, 2005). Attorney’s Litigation
Fees
and
Expenses
of
In the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered, except: 1. When exemplary damages are awarded; 2. When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest; 3. In criminal cases of malicious prosecution against the plaintiff; 4. In case of a clearly unfounded civil action or proceeding against the plaintiff; 5. Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and demandable claim; 6. In actions for legal support; 7. In actions for the recovery of wages of household helpers, laborers and skilled workers; 8. In actions for indemnity under workmen’s compensation and employer’s liability laws; 9. In a separate civil action to recover civil liability arising from a crime; 10. When at least double judicial costs are awarded; 11. In any other case where the court deems it just and equitable that attorney’s fees and expenses fees are proper if the parties stipulate it.
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The law allows a party to recover attorney’s fees under a written agreement. Article 2208 of the Civil Code provides that an award of attorney’s fees is proper if the parties stipulate it. Article 2208 allows attorney’s fees to be awarded by a court when its claimant is compelled to litigate with third persons or to incur expenses to protect his interest by reason of an unjustified act or omission of the party from whom it is sought. The matter cannot and should not be left to speculation and conjecture (Spouses Hernandez, et al. vs. Dolor, et al, G.R. No. 160286, July 30, 2004). Two concepts of Attorney’s fees 1. Ordinary – reasonable compensation paid to a lawyer by this client for the legal services he has rendered to the latter. Basis: The fact of employment of the lawyer by the client To whom payable: Lawyer 2. Extraordinary – indemnity for damages ordered by the court to be paid by the losing party in litigation to the prevailing party. They are actual damages due to the plaintiff (Art. 2208, NCC). Basis: Any cases authorized by law To whom payable: Client Payable not only to the lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as additional compensation or as part thereof (Benedicto vs. Villaflores, G.R. No. 185020, October 6, 2010). In all cases, the attorney’s fees and expenses of litigation must be reasonable. Interest The Code Commission included provisions in the Civil Code allowing interest on damages because they believed that “such interest is in fact a part of the loss suffered” (Arts. 2209-2213).
Interest may be recovered from: 1. Obligation consisting in payment of a sum of money, and debtor incurs delay (Art. 2209, NCC). 2. Breach of contract, in the discretion of the court (Art. 2210, NCC). 3. Crimes and quasi-delicts, at the discretion of the court (Art.2211, NCC). 4. When obligation is judicially demanded (Art. 2212, NCC). 5. Unliquidated claims or damages in which the demand when established with reasonable certainty (Art. 2213, NCC). Interest on Damages: 1. Six percent (6%) per annum if the obligation consists in the payment of a sum of money, and the debtor incurs in delay and there being no stipulation to the contrary (Art. 2209, NCC). 2. Interest due shall earn legal interest (6% per annum) from the time it is judicially demanded, not from default, even if the obligation is silent on the matter (Art. 2212, NCC). 3. Interest cannot be recovered upon unliquidated claims or damages, except when the demand can be established with reasonable certainty (Art. 2213, NCC). 4. In quasi-delicts, the contributory negligence of the plaintiff shall reduce the damages that he may recover (Art. 2214, NCC). When obligation is breached and it consists in payment of a sum of money (ie. Loan or forbearance of money), the interest due should be that which may have been stipulated in writing (Art. 1956, NCC). Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded (Art. 2212, NCC). In the absence of stipulation, the interest shall be computed from default, i.e., from judicial or extrajudicial demand. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court (Art. 2210, NCC) at the rate of 6% per annum (Art.
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2209, NCC). No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty (Art 2216, NCC). Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
Extent or Scope of Actual Damages To enable an injured party to recover actual or compensatory damages, he is required to prove the actual amount of loss with reasonable degree of certainty premised upon competent proof and on the best evidence available. The burden of proof is on the party who would be defeated if no evidence would be presented on either side. He must establish his case by a preponderance of evidence which means that the evidence, as a whole, adduced by one side is superior to that of the other.
In other words, damages cannot be presumed and courts, in making an award must point out specific facts that could afford a basis for measuring whatever compensatory or actual damages are borne (PNOC Shipping and Transport Corporation vs. CA, G. R. No. 107518, October 8, 1998).
Extent in Contracts and Quasi-Contracts In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted (Art. 2201, NCC). In contracts and quasi-contracts and in case of fraud, bad faith, malice or wanton attitude, the
obligor shall be responsible for all damages which may be reasonably attributed to the nonperformance of the obligation (Art. 2202, NCC). Extent in crimes and quasi-delicts: In crimes and quasi-delicts, the defendant shall be liable for all damages, which are the natural and probable consequences of the act or omission complained of. It is not necessary that such damages have been foreseen or could have reasonably been foreseen by the defendant (Art. 2202, NCC).
Restitutio in Integrum The basic principle for the measure of damages in integrum. The amount to be awarded to the plaintiff should be that sum of money which will put the party who has been injured or who has suffered in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation. Consequently, the damages are measured on plaintiff’s loss and not on defendant’s gain. By way of XPN, damages are measured by the benefit that has accrued to the defendant in certain cases (Aquino, Torts and Damages, 2005, p. 850-851). Damage to Property Where goods were destroyed by the wrongful act of the defendant, the plaintiff is entitled to their value at the time of destruction. Normally, the award is the sum of money which plaintiff would have to pay in the market for identical or essentially similar good, plus in proper cases, damages for the loss of use during the period before replacement. In cases of profitearning chattels, what has to be assessed is the value of the chattel to its owner as a going concern at the time and place of the loss. With respect to real property, the measure of damage for a permanent injury is ordinarily the difference between the reasonable market
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value of the property immediately before and after the injury. In case of total loss, the value of the real property at the time and place of the loss must also be assessed and such assessed value is the measure of the damage due to the plaintiff. Where the plaintiff was merely deprived of his possession, said plaintiff is entitled to the value or use of the premises. Thus the rental value should be assessed against the plaintiff for tress-pass or illegal occupation of the house (Aquino, Torts and Damages, 2004, p. 853-854). Damages in crimes and quasi-delicts causing death The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos, even though there may have been mitigating circ*mstances. In addition: a. The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be assessed and awarded by the court, unless the deceased on account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death; b. If the deceased was obliged to give support according to the provisions of article 291, the recipient who is not an heir called to the decedent’s inheritance by the law of testate or intestate succession, may demand support from the person causing the death, for a period not exceeding five years, the exact duration to be fixed by the court; c. The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased (Art. 2206, NCC). If the plaintiff is asking for damages for his own injury or for the death of his relative, said plaintiff is entitled to the amount of medical expenses as
well as other reasonable expenses that he incurred to treat his or his relative’s injuries. Courts may also award monthly payments to that person who was injured to answer for his future medical expenses. In proper cases, the award of damages may likewise include the amount spent for the plastic surgery of the plaintiff or any procedure to restore the part of the body that was affected. In case of death, the plaintiff is entitled to the amount that he spent during the wake and funeral of the deceased. However, it has been ruled that expenses after burial are not compensable. Damages in Rape Civil indemnity, which is actually in the nature of actual or compensatory damages, is mandatory upon the finding of the fact of rape. The case law also requires automatic award of moral damages to a rape victim without need of proof because from the nature of the crime, it can be assumed that she has suffered moral injuries entitling her to such award. Such award is separate and distinct from civil indemnity (People vs. Astrologo, G.R. No. 169873, June 8, 2007). The commission of an offense has a two (2)pronged effect, one (1) on the public as it breaches the social order, and the other upon the private victim as it causes personal sufferings—each effect is respectively addressed by the prescription of heavier punishment for the accused and by an award of additional damages to the victim. Although it is essential to observe the requirements imposed by Secs. 8 and 9 of Rule 110 of the Revised Rules of Criminal Procedure, as amended, the requirements should affect only the criminal liability of the accused, which is the State’s concern, and should not affect the civil liability of the accused, which is for the benefit of the injured party.
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Where the special qualifying circ*mstances of age and relationship, although not alleged in the information, are nonetheless established during the trial, the award of civil indemnity and moral damages in a conviction for simple rape should equal the award of civil indemnity and moral damages in convictions for qualified rape (People vs. Bartolini, G.R. No. 179498, August 3, 2010). B. MORAL DAMAGES Designed to compensate the claimants for actual injury and is not meant to enrich the complainant at the expense of the defendant. Moral damages include (FMP-BMW-SSS): 1. Physical suffering 2. Mental anguish 3. Fright 4. Serious anxiety 5. Besmirched reputation 6. Wounded feelings 7. Moral shock 8. Social humiliation 9. Similar injury (Art. 2217, NCC) Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant’s wrongful act for omission (Art. 2217, NCC). Moral damages apply both to natural and juridical persons. It is only when a juridical person has good reputation that is debased, resulting in social humiliation, that moral damages may be awarded (San Fernando Regala Trading, Inc. vs. Cargil Philippines, Inc., G.R. No. 178008, October 9, 2013). When recoverable: 1. In a criminal offense resulting in physical injuries 2. In quasi-delicts causing physical injuries; 3. In cases of seduction, abduction, rape, or other lascivious acts; 4. In cases of adultery or concubinage; 5. In illegal or arbitrary detention or arrest; 6. In illegal search; 7. In libel, slander or any other form of defamation; 8. In malicious prosecution;
9. In acts mentioned in Article 309 of NCC; 10. In acts and actions referred to in articles 21. 26, 27, 28, 29, 30, 32, 34, and 35; 11. In breaches of contract where the defendant acted fraudulently or in bad faith (Arts. 2219-2220, NCC). The parents of the female seduced, abducted, raped, or abused may also recover moral damages (Art. 2219, NCC). The spouse, descendants, ascendants, and brothers and sisters may bring the action mentioned in Article 309 CC, in the order named. Requisites: 1. There must be an injury, whether physical, mental or psychological, clearly sustained by the claimant; 2. There must be a culpable act or omission factually established; 3. The wrongful act or omission of the defendant is the proximate cause of the injury sustained by the claimant; and, 4. The award of damages is predicated on any of the cases stated in Article 2219 of the NCC (Francisco vs. Ferrer, Jr. G.R. No. 142029, February 28, 2001). Article 309, NCC. Any person who shows disrespect to the dead, or wrongfully interferes with a funeral shall be liable to the family of the deceased for damages, material and moral. Corporations and other artificial beings are not entitled to recover moral damages. General Rule: A juridical person is generally not entitled to moral damages because, unlike a natural person, it cannot experience physical suffering or such sentiments as wounded feelings, serious anxiety, mental anguish or moral shock (Filipinas Broadcasting vs. Ago Medical, G.R.No. 141994, January 17, 2005). Exception: Unless the corporation enjoyed good reputation that the offender debased and besmirched.
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An appeal in a criminal case opens the whole case for review and this 'includes the review of the penalty, indemnity and damages. Even if the offended party had not appealed from said award, and the only party who sought a review of the decision of said court was the accused, the court can increase damages awarded (Sumalpong vs. CA, G.R. No. 123404, 1997). C. NOMINAL DAMAGES Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him (Art. 2221, NCC). When awarded: The court may award nominal damages in every obligation arising from any source enumerated in Article 1157, or in every case where any property right has been invaded (Art. 2222, NCC). Award of nominal damages is in lieu of actual, moral, temperate or liquidated damages. Purpose of nominal damages In order that a right of the plaintiff which has been violated or invaded by the defendant may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him (Art. 2221, NCC). Nominal damages cannot co-exist with compensatory damages. Nominal damages are adjusted in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him (LRTA vs. Navidad, G.R. No. 145804, February 6, 2003). Elements: 1. There exists a right of plaintiff; 2. The resulting damage must not be capable of pecuniary estimation; 3. There is a violation of such right; and 4. The purpose of the award is not to indemnify but to vindicate or recognize right violated.
The adjudication of nominal damages shall preclude further contest upon the right involved and all accessory questions (Art. 2223, NCC). No proof of pecuniary loss is likewise necessary in order that moral, nominal, temperate, liquidated or exemplary damages may be adjudicated, and it is quite enough that proof of damage or injury is adduced (People of the Philippines v. Dianos G.R. No. 119311 October 7, 1998). D. TEMPERATE OR MODERATE DAMAGES These are damages, which are more than nominal but less than compensatory, and may be recovered when the court finds that some pecuniary loss has been suffered, but its amount cannot be proved with certainty (Art. 2224, NCC). These are damages the amount of which is left to the sound discretion of the court (Pineda, Torts and Damages, 2004, p. 224). E. LIQUIDATED DAMAGES Liquidated damages are those agreed upon by the parties to a contract, to be paid in case of breach thereof (Art. 2226, NCC). It cannot coexist with actual damages (Art. 2226, NCC). Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable (Art 2227, NCC). It is necessary that there be a contract the violation of which gives rise to the liquidated damages stipulated upon (Pineda, Torts and Damages, 2004, p. 232). Rules governing in case of breach of contract: Interest recoverable for damages in a breach of contract is left to the discretion of the court. It is computed not from the date of filing of the
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complaint but from the date the judgment of the trial court is rendered (De Leon, Torts and Damages, 2010, p. 669).
damages. Nominal Damages may be awarded together with attorney's fees (Pineda, Torts and Damages, 2004, p. 225).
F. EXEMPLARY OR CORRECTIVE DAMAGES
Temperate damages may be recovered when the court finds that some pecuniary loss has been suffered but the loss is incapable of pecuniary estimation and that such award is reasonable (Arts. 2224-2225, NCC).
Imposed by way of example of correction for public good in addition to the moral, temperate, liquidated or compensatory damages (Art. 2229, NCC). Exemplary damages are required by public policy, for wanton acts must be suppressed. They are mere additions to actual, moral, temperate and liquidated damages which may or may not be granted at all depending upon the necessity of setting an example for the public good as a form of deterrent to the repetition of the same act by any one (Pineda, Torts and Damages, 2004, p. 234). 2. When Damages May be Recovered Actual Damages may be recovered when the aggrieved party’s property, business, trade, profession, or occupation suffered pecuniary loss. There must be competent proof of actual amount of loss to justify actual damages. Credence can be given only to claims which are duly supported by receipts (People vs. Guillermo, G.R. No. 113787. January 28, 1999). Moral damages can be awarded if the cases file fall within article 2219 and article 2220 of the civil code. It must be established that the act or omission of the defendant is the proximate cause of the damage or injury suffered by the plaintiff (Pineda, Torts and Damages, 2004). It is not enough that injuries have arisen; it is essential that they have sprung from a wrongful act, omission, fraud, malice, or bad faith which was the proximate cause thereof (Guita vs. CA, G.R. No. L-60409, November 11, 1985). Nominal damages for the vindication of a right violated cannot be awarded together with compensatory damages. Where the court has already awarded compensatory and exemplary damages, that is already a juridical recognition that plaintiff’s right was violated. The award of actual, moral, temperate or moderate damages precludes
Exemplary Damages may be recovered in criminal offenses (Art. 2230, NCC); In quasidelicts (Art. 2231, NCC) or; In contracts and quasi-contracts (Art. 2232, NCC). It is for the court to decide whether or not they should be adjudicated (Art. 2233, NCC). Claimant must prove that he is entitled to moral, temperate or compensatory damages even if liquidated damages have been agreed on in order that exemplary damages may be awarded (Art. 2234, NCC). L. DAMAGES IN CASE OF DEATH 1. Moral damages 2. Exemplary damages 3. Attorney's fees and expenses for litigation 4. Indemnity for death 5. Indemnity for loss of earning capacity 6. Interest in proper cases (People vs. Tolentino, G.R. No. 176385, February 26, 2008). The law requires payment of P3,000.00 to the heirs of the deceased. The fixed amount of three thousand pesos is in addition to any damage that may have resulted because of the act or omission of the defendant including medical expenses and loss of earning capacity. It should be noted, however, that the SC had repeatedly increased the amount of indemnity from three thousand pesos in order to reflect the current value of currency and prevailing inflation. The current amount of fixed damages as increased by the Court is P75, 000.00 (People vs. Buyagan, G.R. No. 187733, February 8, 2012).
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Death indemnity was granted by the court in the amount of P50,000 for the death of the passengers (Sulpicio Lines, Inc. vs. Curso, et al., G.R. No. 157009, March 17, 2010). The plaintiff is entitled to the amount that he spent during the wake and funeral of the deceased. However, it has been ruled that expenses after the burial are not compensable (Sulpicio Lines, Inc. vs. Curso, et al., G.R. No. 157009, March 17, 2010). M. DUTY OF INJURED PARTY The party suffering loss or injury must exercise the diligence of a good father of a family to minimize the damages resulting from the act or omission in question (Art. 2203, NCC). One who is injured then by the wrongful or negligent act of another should exercise reasonable care and diligence to minimize the resulting damage. Anyway, he can recover from the wrongdoer money lost in reasonable efforts to preserve the property injured and for injuries incurred in attempting to prevent damage to it. It is the burden of defendant to show satisfactorily not only that the injured party could have mitigated his damages but also the amount thereof; failing in this regard, the amount of damages awarded cannot be proportionately reduced (Lim vs. CA, G.R. No. 125817, January 16, 2002).
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