2005 CENTRALIZED BAR OPERATIONS

CIVIL LAW

MOST FREQUENTLY ASKED TOPICS IN CIVIL LAW

Source: U.P. Law Center
Persons and Family Relations
TOPIC: REQUIREMENTS FOR THE VALIDITY OF MARRIAGE (1989, 1990, 1992, 1993, 1994, 1996, 1997, 1998, 1999, 2002) I What is the status of the following marriages and why? A. B. C. D. E. A marriage between two 19-year olds without parental consent. A marriage between two 21-year olds without parental advice. A marriage between two Filipino first cousins in Spain where such marriage is valid. A marriage between two Filipinos in Hong Kong before a notary public. A marriage solemnized by a town mayor three towns away from his jurisdiction. (1999)

ANSWERS: A. The marriage is voidable. The consent of the parties to the marriage was defective. Being below 21 years old, the consent of the parties is not full without the consent of their parents. The consent of the parents of the parties to the marriage is indispensable for its validity. B. Between 21-year olds, the marriage is valid despite the absence of parental advice, because such absence is merely an irregularity affecting a formal requisite i.e., the marriage licenseand does not affect the validity of the marriage itself. This is without prejudice to the civil, criminal, or administrative liability of the party responsible therefore. C. By reason of public policy, the marriage between Filipino first cousins is void [Art. 38, par. (1), FC], and the fact that it is considered a valid marriage in a foreign country in this case, Spain does not validate it, being an exception to the general rule in Art. 26 of said Code which accords validity to all marriages solemnized outside the Philippines x x x and valid there as such. D. It depends. If the marriage before the notary public is valid under Hong Kong law, the marriage is valid in the Philippines. Otherwise, the marriage that is invalid in Hong Kong will be invalid in the Philippines. E. Under the Local Government Code, a town mayor may validly solemnize a marriage but said law is silent as to the territorial limits for the exercise by a town mayor of such authority. However, by analogy, with the authority of members of the judiciary to solemnize a marriage, it would seem that the mayor did not have the requisite authority to solemnize a marriage outside of his territorial jurisdiction. Hence, the marriage is void, unless it was contracted with either or both parties believing in good faith that the mayor had the legal authority to solemnize this particular marriage [Art. 35, par. (2), FC].

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ALTERNATIVE ANSWERS: C. The marriage is void. Under Article 26 of the Family Code, a marriage valid where celebrated is valid in the Philippines except those marriages enumerated in said Article which marriages will remain void even though valid where solemnized. The marriage between first cousins is one of those marriages enumerated therein, hence, it is void even though valid in Spain where it was celebrated. D. If the two Filipinos believed in good faith that the Notary Public is authorized to solemnize marriage, then the marriage is valid. E. The marriage is valid. Under the Local Government Code, the authority of a mayor to solemnize marriages is not restricted within his municipality implying that he has the authority even outside the territory thereof. Hence, the marriage he solemnized outside his municipality is valid. And even assuming that his authority is restricted within his municipality, such marriage will, nevertheless, be valid because solemnizing the marriage outside said municipality is a mere

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irregularity applying by analogy the case of Navarro vs. Domagtoy, 259 SCRA 129. In this case, the Supreme Court held that the celebration by a judge of a marriage outside the jurisdiction of his court is a mere irregularity that did not affect the validity of the marriage notwithstanding Article 7 of the Family Code which provides that an incumbent member of the judiciary is authorized to solemnize marriages only within the courts jurisdiction. OTHER ALTERNATIVE ANSWERS: C. By reason of Article 15 in relation to Article 38 of the Civil Code, which applies to Filipinos wherever they are, the marriage is void. E. The marriage is void because the mayor has no authority to solemnize marriage outside his jurisdiction. II On Valentines Day, 1996, Elias and Fely, both single and 25 years of age, went to the city hall where they sought out a fixer to help them obtain a quickie marriage. For a fee, the fixer produced an ante-dated marriage license for them, issued by the Civil Registrar of a small remote municipality. He then brought them to a licensed minister in a restaurant behind the city hall, and the latter solemnized their marriage right there and then. A. Is their marriage valid, void, or voidable? B. Would your answer be the same if it should turn out that the marriage license was spurious? Explain. (1996) ANSWERS: A. The marriage is valid. The irregularity in the issuance of a valid license does not adversely affect the validity of the marriage. The marriage license is valid because it was in fact issued by a Civil Registrar (Arts. 3 and 4, FC). B. No, the answer would not be the same. The marriage would be void because of the absence of a formal requisite. In such a case, there was actually no valid marriage license. ALTERNATIVE ANSWER: A. It depends. If both or one of the parties was a member of the religious sect of the solemnizing officer, the marriage is valid. If none of the parties is a member of the sect and both of them were aware of the fact, the marriage is void. They cannot claim good faith in believing that the solemnizing officer was authorized because the scope of the authority of the solemnizing officer is a matter of law. If, however, one of the parties believed in good faith that the other was a member of the sect, then the marriage is valid under Article 35(2), FC. In that case, the party in good faith is acting under a mistake of fact, not a mistake of law. TOPIC: PROPERTY RELATIONS BETWEEN HUSBAND AND WIFE (1989, 1992, 1994, 1995, 1998, 2000) I In 1973, Mauricio, a Filipino pensioner of the U.S. Government, contracted a bigamous marriage with Erlinda, despite the fact that his first wife, Carol, was still living. In 1975, Mauricio and Erlinda jointly bought a parcel of Riceland, with the title being placed jointly in their names. Shortly thereafter, they purchased another property (a house and lot) which was placed in her name alone as the buyer. In 1981, Mauricio died, and Carol promptly filed an action against Erlinda to recover both the Riceland and the house and lot, claiming them to be conjugal property of the first marriage. Erlinda contends that she and the late Mauricio were co-owners of the Riceland; and with respect to the house and lot, she claims she is the exclusive owner. Assuming she fails to prove that she had actually used her own money in either purchase, how do you decide the case? (1998) ANSWER: Carols action to recover both the Riceland and the house and lot is well-founded. Both are conjugal property in view of the failure of Erlinda, the wife in a bigamous marriage, to prove that her

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own money was used in the purchases made. The Supreme Court in a case applied Art. 148, Family Code, despite the fact that the husbands death took place prior to the effectivity of said law. However, even under Art. 144, Civil Code, the same conclusion would have been reached in view of the bigamous nature of the second marriage. ANOTHER ANSWER: Under Art. 148 of the FC, which applies to bigamous marriages, only the properties acquired by both parties through their actual joint contribution of money, property or industry shall be owned by them in common in proportion to their respective contributions. Moreover, if one of the parties is validly married to another, his share in the co-ownership shall accrue to the absolute community/conjugal partnership existing in such valid marriage. Thus, in this case, since Erlinda failed to prove that she used her own money to buy the Riceland and house and lot, she cannot claim to be the co-owner of the Riceland nor the exclusive owner of the house and lot. Such properties are Mauricios. And since his share accrues to the conjugal partnership with carol, Carol can validly claim such properties to the exclusion of Erlinda (Art. 144, Civil Code). II In 1970, Bob and Issa got married without executing a marriage settlement. In 1975, Bob inherited from his father a residential lot upon which, in 1981, he constructed a two-room bungalow with savings from his own earnings. At that time, the lot was worth P800,000 while the house, when finished cost P600,000. In 1989, Bob died, survived only by his wife, Issa and his mother, Sofia. Assuming that the relative values of both assets remained at the same proportion: A. State whether Sofia can rightfully claim that the house and lot are not conjugal but exclusive property of her deceased son. B. Will your answer be the same if Bob died before August 3, 1988? (1998) ANSWERS: A. Since Bob and Issa got married in 1970, then the law that governs is the New Civil Code (Persons), in which case, the property relations that should be applied as regards the property of the spouses is the system of relative community or conjugal partnership of gains (Art. 119, Civil Code). By conjugal partnership of gains, the husband and wife place in a common fund the fruits of their separate property and the income from their work or industry (Article 142, Civil Code). In this instance, the lot inherited by Bob in 1975 is his own separate property, he having acquired the same by lucrative title (Art. 148, par. 2, Civil Code). However, the house constructed from his own savings in 1981 during the subsistence of his marriage with Issa is conjugal property and not exclusive property in accordance with the principle of reverse accession provided for in Art. 158, Civil Code. B. Yes, the answer would still be the same. Since Bob and Issa contracted their marriage way back in 1970, then the property relations that will govern is still the relative community or conjugal partnership of gains (Art. 119, Civil Code). It will not matter if Bob died before or after August 3, 1988 (effectivity of the Family Code), what matters is the date when the marriage was contracted. As Bob and Issa contracted their marriage way back in 1970, the property relation that governs them is still the conjugal partnership of gains. (Art. 158, Civil Code) ALTERNATIVE ANSWERS: A. Sofia, being her deceased sons legal heir concurring with his surviving spouse (Arts. 985, 986, and 997, Civil Code), may rightfully claim that the house and lot are not conjugal but belong to the hereditary estate of Bob, the value of the land being more than the cost of the improvement (Art. 120, FC). B. If Bob died before August 3, 1988, which is the date the Family Code took effect, the answer will not be the same. Art. 158, Civil Code, would then apply. The land would then be deemed conjugal, along with the house, since conjugal funds were used in constructing it. The husbands estate would be entitled to reimbursement of the value of the land from conjugal partnership funds.

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III

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For five years since 1989, Tony, a bank vice-president, and Susan, an entertainer, live together as husband and wife without the benefit of marriage although they were capacitated to marry each other. Since Tonys salary was more than enough for their needs, Susan stopped working and merely kept the house. During that period, Tony was able to buy a lot and house in a plush subdivision. However, after five years, Tony and Susan decided to separate. A. Who will be entitled to the house and lot? B. Would it make any difference if Tony could not marry Susan because he was previously married to Alice from whom he is legally separated? (2000) ANSWERS: A. Tony and Susan are entitled to the house and lot as co-owners in equal shares. Under Article 147 of the Family Code, when a man and a woman who are capacitated to marry each other lived exclusively with each other as husband and wife, the property acquired during their cohabitation are presumed to have been obtained by their joint efforts , work or industry and shall be owned by then in equal shares. This is true even though the efforts of one of them consisted merely in his or her care and maintenance of the family and of the household. B. Yes, it would make a difference. Under Article 148 of the Family Code, when the parties to the cohabitation could not marry each other because of an impediment, only those properties acquired by both of them through their actual joint contribution of money, property, or industry shall be owned by them in common in proportion to their respective contributions. The efforts of one of the parties in maintaining the family and household are not considered adequate contribution in the acquisition of the properties. Since Susan did not contribute to the acquisition of the house and lot, she has no share therein. If Tony cohabited with Susan after his legal separation from Alice, the house and lot is his exclusive property. If he cohabited with Susan before his legal separation from Alice, the house and lot belongs to his community or partnership with Alice. IV Luis and Rizza, both 26 years of age and single, live exclusively with each other as husband and wife without the benefit of marriage. Luis is gainfully employed. Rizza is not employed, stays at home, and takes charge of the household chores. After living together for a little over twenty years, Luis was able to save from his salary earnings during that period the amount of P200,000 presently deposited in a bank. A house and lot worth P500,000 was recently purchased for the same amount by the couple. Of the P500,000 used by the common-law spouses to purchase the property, P200,000 had come from the sale of palay harvested from the hacienda owned by Luis and P300,000 from the rentals of a building belonging to Rizza. In fine, the sum of P500,000 had been part of the fruits received during the period of cohabitation from their separate property. A car worth P100,000 being used by the common-law spouses, was donated just months ago to Rizza by her parents. Luis and Rizza now decide to terminate their cohabitation, and they ask you to give them your legal advice on the following: A. How, under the law, should the bank deposit of P200,000, the house and lot valued at P500,000 and the car worth P100,000 be allocated to them? B. What would your answer be (to the above question) had Luis and Rizza been living together all the time, i.e., since twenty years ago, under a valid marriage? (1997) ANSWERS: A. Art. 147 of the FC provides in part that when a man and a woman who are capacitated to marry each other, live exclusively with each other as husband and wife without the benefit of marriage or under a void marriage, their wages and salaries shall be owned by them in equal shares and the property acquired by both of them through their work or industry shall be governed by the rules of co-ownership. In the absence of proof to the contrary, properties acquired while they lived together shall be presumed to have been obtained by their joint efforts, work or industry, and shall be owned by them in equal shares. A party who did not participate in the acquisition by the other party of any property shall be deemed to have contributed jointly in the acquisition thereof if the formers efforts consisted in the care and maintenance of the family and of the household.

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Thus: 1) The wages and salaries of Luis in the amount of P200,000 shall be divided equally between Luis and Rizza. 2) The house and lot valued at P500,000 having been acquired by both of them through work or industry shall be divided between them in proportion to their respective contribution, in consonance with the rules on co-ownership. Hence, Luis gets 2/5 while Rizza gets 3/5 of P500,000. 3) The car worth P100,000 shall be exclusively owned by Rizza, the same having been donated to her by her parents. B. The property relations between Luis and Rizza, their marriage having been celebrated 20 years ago (under the Civil Code) shall be governed by the conjugal partnership of gains, under which the husband and wife place in common fund the proceeds, products, fruits and income from their separate properties and those acquired by either or both spouses through their efforts or by chance, and upon dissolution of the marriage or of the partnership, the net gains or benefits obtained by either or both spouse shall be divided equally between them (Art. 142, Civil Code). Thus: 1) The salary of Luis deposited in the bank in the amount of P200,000 and the house and lot valued at P500,000 shall be divided equally between Luis and Rizza. 2) However, the car worth P100,000 donated to Rizza by her parents shall be considered to her own paraphernal property, having been acquired by lucrative title (par.2, Art.148, Civil Code) TOPIC: ADOPTION (1989, 1996, 1998, 2000, 2001) I Sometime in 1990, Sarah, born a Filipino but by then a naturalized American citizen, and her American husband Tom, filed a petition in the RTC of Makati, for the adoption of the minor child of her sister, a Filipina. Can the petition be granted? (2000) SUGGESTED ANSWER: It depends. If Tom and Sarah have been residing in the Philippines for at least 3 years prior to the effectivity of RA 8552, the petition may be granted. Otherwise, the petition cannot be granted because the American husband is not qualified to adopt. While the petition for adoption was filed in 1990, it was considered refiled upon the effectivity of RA 8552, the Domestic Adoption Act of 1998. This is the law applicable, the petition being still pending with the lower court. Under the Act, Sarah and Tom must adopt jointly because they do not fall in any of the exceptions where one of them may adopt alone. When husband and wife must adopt jointly, the Supreme Court has held in a line of cases that both of them must be qualified to adopt. While Sarah, an alien, is qualified to adopt under Section 7(b)(i) of the Act for being a former Filipino citizen who seeks to adopt a relative within the 4th degree of consanguinity or affinity, Tom, an alien is not qualified because he is neither a former Filipino citizen nor married to a Filipino. One of them not being qualified to adopt, their petition has to be denied. However, if they have been residents of the Philippines three years prior to the effectivity of the Act and continues to reside here until the decree of adoption is entered, they are qualified to adopt the nephew of Sarah under Section 7(b) thereof, and the petition may be granted. ALTERNATIVE ANSWER: Since the petition was filed before the effectivity of the Domestic Adoption Act of 1998, the Family Code is the law applicable. Under the FC, Sarah and Tom must adopt jointly because they do not fall in any of the exceptions where one may adopt alone. Under a long line of cases decided by the Supreme Court, when husband and wife must adopt jointly, both of them must be qualified to adopt. While Sarah is qualified to adopt under Article 184(3)(a) for being a former Filipino citizen who seeks to adopt a relative by consanguinity, Tom is not. He is not a former Filipino citizen and neither is he married to a Filipino. One of them not being qualified to adopt, the petition must be denied.

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TOPIC: DECLARATION OF NULLITY ANNULMENT (grounds, declarations and effects) (1991, 1993, 1995, 1996, 1997, 2002) LEGAL SEPARATION (grounds and effects) (1989, 1994, 1996, 1997, 2002) I Bert and Baby were married to each other on December 23, 1988. Six months later, she discovered that he was a drug addict. Efforts to have him rehabilitated were unsuccessful. Can Baby ask for annulment of marriage, or legal separation? Explain. (1996) ANSWER: No, Baby cannot ask for annulment of her marriage or for legal separation because both these actions have already prescribed. While concealment of drug addiction existing at the time of marriage constitutes fraud under Art. 46 of the FC which makes the marriage voidable under Art. 45 of the FC, the action must, however, be brought within 5 years from the discovery thereof under Article 47(3), FC. Since the drug addiction of Bert was discovered by Baby in June 1989, the action had already prescribed in June of 1994. Although drug addiction is a ground for legal separation under Art. 55(5) and Art. 57 of the FC requires that the action must be brought within 5 years from the occurrence of the cause. Since Bert had been a drug addict from the time of the celebration of the marriage, the action for legal separation must have been brought not later than 23 December 1993. Hence, Baby cannot, now, bring action for legal separation. II A. Give a brief definition or explanation of the term "psychological incapacity" as a ground for the declaration of nullity of a marriage. B. If existing at the inception of marriage, would the state of being of unsound mind or the concealment of drug addiction, habitual alcoholism, homosexuality or lesbianism be considered indicia of psychological incapacity? Explain. C. If drug addiction, habitual alcoholism, lesbianism or homosexuality should occur only during the marriage, would these constitute grounds for a declaration of nullity or for legal separation, or would they render the marriage voidable? (2002) ANSWERS: A. "Psychological incapacity" is a mental disorder of the most serious type showing the incapability of one or both spouses to comply with the essential marital obligations of love, respect, cohabitation, mutual help and support, trust and commitment. It must be characterized by juridical antecedence, gravity and incurability and its root causes must be clinically identified or examined. (Santos v. CA, 240 SCRA 20 1995]) B. ln the case of Santos v. Court of Appeals, 240 SCRA 20 (1995), the Supreme Court held that being of unsound mind, drug addiction, habituaI alcoholism, lesbianism or homosexuality may be indicia of psychological incapacity, depending on the degree of severity of the disorder. However, the concealment of drug addiction, habitual alcoholism, lesbianism or homosexuality is a ground for annulment of marriage. C. ln accordance with law, if drug addiction, habitual alcoholism, lesbianism or homosexuality should occur only during the marriage, they: 1) Will not constitute as grounds for declaration of nullity (Art 36, Family Code); 2) Will constitute as grounds for legal separation (Art. 55, FC); and 3) Will not constitute as grounds to render the marriage voidable (Art. 45 and 46, FC). III Cadio and Corona contracted marriage on June 1, 1982. A few days after the marriage, Corona discovered that Cadio was a homosexual. As homosexuality was not a ground for legal separation under the Civil Code, there was nothing that Corona could do but bear with her problem. The couple,

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however, started to live separately. With the enactment of the Family Code, Corona decided to be legally separated from Cadio based on the new ground of homosexuality. Corona brought her action for legal separation on September 15, 1988. Will the action prosper? Give your reasons. (1989) ANSWER: Yes, the action will prosper because the cause arose only on August 3, 1988, the effectivity of the Family Code, and the action had not yet prescribed. ALTERNATIVE ANSWER: The action will prosper. The offense of homosexuality as a continuing offense can be a ground for legal separation. The prescriptive period of five years will apply only when the offense has a fixed period of time and, therefore, the date of its occurrence can be computed.

CIVIL LAW

Property
TOPIC: USUFRUCT IN GENERAL, RIGHTS AND OBLIGATIONS OF THE USUFRUCTUARY AND EXTINGUISHMENT OF THE USUFRUCT (1989, 1995, 1996, 1997, 1998) I 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 did not extinguish the usufruct. Whose contention should be accepted? (1997) ANSWER: Petronilas 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 Petronilas son. Thus, the general rule and not the exception should apply in this case. ALTERNATIVE ANSWER: This is a usufruct which is clearly intended for the benefit of Manuel until he reaches 30 years of age, with Petronila serving only as a conduit, holding the property in trust for his benefit. The death of Manuel at the age of 26, therefore, terminated the usufruct. TOPIC: RIGHT OF ACCESSION (1989, 1992, 2000, 2001) I Demetrio knew that a piece of land bordering the beach belonged to Ernesto. However, since the latter was studying in Europe and no one was taking care of the land, Demetrio occupied the same and constructed thereon nipa sheds with tables and benches which he rented out to people who wanted to have a picnic by the beach. When Ernesto returned, he demanded the return of the land. Demetrio agreed to do so after he has removed the nipa sheds. Ernesto refused to let Demetrio remove the nipa sheds on the ground that these already belonged to him by right of accession. Who is correct? (2000) ANSWER: Ernesto is correct. Demetrio is a builder in bad faith because he knew beforehand that the land belonged to Demetrio. Under Art. 449 of the NCC, one who builds on the land of another loses

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what is built without right to indemnity. Ernesto becomes the owner of the nipa sheds by right of accession. Hence, Ernesto is well within his right in refusing to allow the removal of the nipa sheds. II Subsequent to the original registration of a parcel of land bordering a river, its area was increased by accession. This additional area was not included in the technical description appearing on the Torrens Certificate of Title having been acquired subsequent to the registration proceedings. May such additional area be acquired by third persons thru prescription? Give your reasons. (1989) ANSWER: The Land Registration Law provides that no title in derogation of the registered owner may be acquired by adverse possession or acquisitive prescription. Since the law refers to registered lands, the accession mentioned in this question may be acquired by a third person through adverse possession or acquisitive prescription. ALTERNATIVE ANSWER: If the accession is man made, then it cannot be considered as private property. It belongs to the public domain, and, therefore, cannot be acquired by adverse possession or acquisitive prescription. TOPIC: BUILDER IN GOOD FAITH (1992, 1999, 2000, 2001) I Bartolome constructed a chapel on the land of Eric. What are Bartolomes rights if he were: A. A possessor of the land in good faith? B. A possessor of the land in bad faith? C. A usufructuary of the land? D. A lessee of the land? (1996) ANSWERS: A. A chapel is a useful improvement. Bartolome may remove the chapel if it can be removed without damage to the land, unless Eric chooses to acquire the chapel. In the latter case, Bartolome has the right to the reimbursement of the value of the chapel with right of retention until he is reimbursed. (Art. 448 in relation to Art. 546 and 547, NCC).

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B. C.

Bartolome, under Art. 449 of the NCC, loses whatever he built, without any right to indemnity. Bartolome has the right to remove the improvement if it is possible to do so without causing damage to the property (Art. 579, NCC). He may also set off the improvement against any damages which the property held in usufruct suffered because of his act or the acts of his assignee. (Art. 580, NCC) The owner of the land, as lessor, can acquire the improvement by paying for one-half of its value. Should the lessor refuse to reimburse said amount, the lessee may remove the improvement, even though the principal thing may suffer damage thereby (Art. 1678, NCC).

D.

ALTERNATIVE ANSWERS: A. Assuming that Eric acted in good faith, Bartolomes rights will depend upon what option Eric chooses. Eric, the owner of the land, may choose to acquire the chapel, which is a useful expense or to sell the land to the builder (Bartolome). If Eric chooses to acquire the chapel, he has the right to reimbursement for useful expenses, with a right of retention until paid. If Eric chooses to sell the land to Bartolome, Bartolome may refuse to buy the land if the value of the land is considerably more than the value of the building, in which case, there will be a forced lease between them.

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B. It is the owner of the land who has the right to acquire the chapel without paying indemnity, plus damages, or to require Bartolome to remove the chapel, plus damages or to require Bartolome to buy the land, without any option to refuse to buy it. (Arts. 449 and 458, NCC) If Eric acted in bad faith, then his bad faith cancels the bad faith of Bartolome, and both will be taken to have acted in good faith. (Art. 453, NCC)

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ADDITIONAL ANSWER: A. If Eric acted in good faith, then Bartolome has the right of absolute removal of the chapel, plus damages. However, if Eric chooses to acquire the chapel, then Bartolome has the right to reimbursement, plus payment of damages, with right of retention (Art. 454 in relation to Art. 447, NCC) II Mike built a house on his lot in Pasay City. Two years later, a survey disclosed that a portion of the building actually stood on the neighboring land of Jose, to the extent of 40 square meters. Jose claims that Mike is a builder in bad faith because he should know the boundaries of his lot, and demands that the portion of the house which encroached on his land should be destroyed or removed. Mike replies that he is a builder in good faith and offers to buy the land occupied by the building instead. A. Is Mike a builder in good faith or bad faith? Why? B. Whose preference should be followed? Why? (2001) ANSWERS: A. Yes, Mike is a builder in good faith. There is no showing that when he built his house, he knew that a portion thereof encroached on Joses lot. Unless one is versed in the science of surveying, he cannot determine the precise boundaries or location of his property by merely examining is title. In the absence of contrary proof, the law presumes that the encroachment was done in good faith [Technogas Phils. vs. CA, 268 SCRA 5, 15 (1997)] B. None of the preferences should be followed. The preference of Mike cannot prevail because under Art. 448 of the CC, it is the owner of the land who has the option or choice, not the builder. On the other hand, the option belongs to Jose, he cannot demand that the portion of the house encroaching on his land be destroyed or removed because this is not one of the options given by law to the owner of the land. The owner may choose between the appropriation of what was built after payment of indemnity, or to compel the builder to pay for the land of the value of the land is not considerably more than that of the building. Otherwise, the builder shall pay rent for the portion of the land encroached. ALTERNATIVE ANSWERS: A. Mike cannot be considered a builder in good faith because he built his house without first determining the corners and boundaries of his lot to make sure that his construction was within the perimeter of his property. He could have done this with the help of a geodetic engineer as an ordinary prudent and reasonable man would do under the circumstances. B. Jose s preference should be followed. He may have the building removed at the expense of Mike, appropriate the building as his own, oblige Mike to buy the land and ask for damages in addition to any of the three options. (Arts. 449, 450, 451, CC) TOPIC: EASEMENT (CONCEPT, KINDS, AND EFFECTS) ( 1993, 1995, 1996, 2000, 2001, 2002) I 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 easement 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? (2002)

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ANSWER: Hernando is wrong. It is true that Lauros land is burdened with the natural easement to accept or receive the water which naturally and without interruption of man descends from a higher estate to a lower estate. However, Hernando has constructed a waste disposal lagoon for his piggery and it is this waste water that flows downward to Lauro's land. Hernando has, thus interrupted the flow of water and has created and is maintaining a nuisance. Under Art. 697 of the CC, abatement of a nuisance does not preclude recovery of damages by Lauro even for the past existence of a nuisance. The claim for damages may also be premised on Art. 2191 (4) of the CC. ALTERNATIVE ANSWER: Hernando is not correct. 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. v. CA, 330 SCRA 145 [2000]). The owner of the higher estate may be compelled to pay damages to the owner of the lower estate. II Emma bought a parcel of land from Equitable-PCI Bank, which acquired the same from Felisa, the original owner. Thereafter, Emma discovered that Felisa had granted a right of way over the land in favor of the land of Georgina, which had no outlet to a public highway, but the easement was not annotated when the servient estate was registered under the Torrens system. Emma then filed a complaint for cancellation of the right of way, on the ground that it had been extinguished by such failure to annotate. How would you decide the controversy? (2001) ANSWER: The complaint for cancellation of easement of right of way must fail. The failure to annotate the easement upon the title of the servient estate is not among the grounds for extinguishing an easement under Art. 631 of the Civil Code. Under Art. 617, easements are inseparable from the estate to which they actively or passively belong. Once it attaches, it can only be extinguished under Art. 631, and they exist even if they are not stated or annotated as an encumbrance on the Torrens title of the servient estate. (II Tolentino 326, 1987 ed.) ALTERNATIVE ANSWER: Under Section 44, PD No. 1529, every registered owner receiving a certificate of title pursuant to a decree of registration, and every subsequent innocent purchaser for value, shall hold the same free from all encumbrances except those noted on said certificate. This rule, however, admits of exceptions. Under Act 496, as amended by Act No. 2011, and Section 4, Act 3621, an easement if not registered shall remain and shall be held to pass with the land until cut-off or extinguished by the registration of the servient estate. However, this provision has been suppressed in Section 44, PD NO. 1529. In other words, the registration of the servient estate did not operate to cut-off or extinguish the right of way. Therefore, the complaint for the cancellation of the right of way should be dismissed. III A. What is easement? Distinguish easement from usufruct. B. Can there be (1) an easement over a usufruct? (2) a usufruct over an easement? (3) an easement over another easement? Explain. (1995) ANSWERS: A. An easement or servitude is an encumbrance imposed upon an immovable for the benefit of another immovable belonging to a different owner. (Art. 613, 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). An easement or servitude is an encumbrance imposed upon an immovable for the benefit of another immovable belonging to a different owner (Art. 613, NCC).

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B. (1) There can be no easement over a usufruct. Since an easement may be constituted only on a corporeal immovable property, no easement may be constituted on a usufruct which is not a corporeal right. (2) There can be no usufruct over an easement. While a usufruct may be created over a right, such right must have an existence of its own independent of the property. A servitude cannot be the object of a usufruct because it has no existence independent of the property to which it attaches. (3) There can be no easement over another easement for the same reason as in (1). An easement, although it is a real right over an immovable, is not a corporeal right. There is a Roman maxim which says that: There can be no servitude over another servitude. ALTERNATIVE ANSWERS: A. Easement is an encumbrance imposed upon an immovable for the benefit of another immovable belonging to a different owner in which case it is called real or predial easement, or for the benefit of a community or group of persons in which case it is known as a personal easement. The distinctions between usufruct and easement are: a. Usufruct includes all uses of the property and for all purposes, including jus fruendi. Easement is limited to a specific use. b. Usufruct may be constituted on immovable or movable property. Easement may be constituted only on an immovable property. c. Easement is not extinguished by the death of the owner of the dominant estate while usufruct is extinguished by the death of the usufructuary unless a contrary intention appears. d. An easement contemplates two (2) estates belonging to two (2) different owners; a usufruct contemplates only one property (real or personal) whereby the usufructuary uses and enjoys the property as well as its fruits, while another owns the naked title during the period of the usufruct. e. A usufruct may be alienated separately from the property to which it attaches, while an easement cannot be alienated separately from the property to which it attaches. B. (2) There cannot be a usufruct over an easement since an easement presupposes two (2) tenements belonging to different persons and the right attaches to the tenement and not to the owner. While a usufruct gives the usufructuary a right to use, right to enjoy, right to the fruits, and right to possess, an easement gives only a limited use of the servient estate. However, a usufruct can be constituted over a property that has in its favor an easement or one burdened with a servitude. The usufructuary will exercise the easement during the period of the usufruct. TOPIC: DONATION (1990, 1991, 1993, 1996, 1997, 1998, 1999, 2000) I Spouses Michael and Linda donated a 3-hectare residential land to the City of Baguio on the condition that the city government would build thereon a public park with a boxing arena, the construction of which shall commence within six (6) months from the date the parties ratify the donation. The donee accepted the donation and the title to the property was transferred in its name. Five years elapsed but the public park with the boxing arena was never started. Considering the failure of the donee to comply with the condition of the donation, the donor-spouses sold the property to Ferdinand who then sued to recover the land from the city government. Will the suit prosper? (1991) ANSWER: Ferdinand has no right to recover the land. It is true that the donation was revocable because of breach of the conditions. But until and unless the donation is revoked, it remained valid. Hence, Spouses Michael and Linda had no right to sell the land to Ferdinand. One cannot give what he does not have. What the donors should have done first was to have the donation annulled or revoked. And after that was done, they could validly have disposed of the land in favor of Ferdinand.

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ALTERNATIVE ANSWER: Until the contract of donation has been resolved or rescinded under Article 1191 of the CC or revoked under Article 764 of the CC, the donation stands effective and valid. Accordingly, the sale made by the donor to Ferdinand cannot be said to have conveyed title to Ferdinand, who, thereby, has no cause of action for recovery of the land acting for and in his behalf. ANOTHER ALTERNATIVE ANSWER: The donation is onerous. And being onerous, what applies is the law on contracts, and not the law on donation (De Luna vs. Abrigo, 81 SCRA 150). Accordingly, the prescriptive period for the filing of such an action would be the ordinary prescriptive period for contracts which may either be six or ten depending upon whether it is verbal or written. The filing of the case five years later is within the prescriptive period and, therefore, the action can prosper. ANOTHER ALTERNATIVE ANSWER: The law on donation lays down a special prescriptive period in the case of breach of condition, which is four years from non-compliance thereof (Article 764 CC). Since the action has prescribed, the suit will not prosper. II On July 27, 1997, Pedro mailed in Manila a letter to his brother, Jose, a resident of Iloilo City, offering to donate a vintage sports car which the latter had long been wanting to buy from the former. On August 5, 1997, Jose called Pedro by cellular phone to thank him for his generosity and to inform him that he was sending by mail his letter of acceptance. Pedro never received that letter because it was never mailed. On August 14, 1997, Pedro received a telegram from Iloilo informing him that Jose had been killed in a road accident the day before (August 13, 1997). A. Is there a perfected donation? B. Will your answer be the same if Jose did mail his acceptance letter but it was received by Pedro in Manila days after Joses death? (1998) ANSWERS: A. None. There is no perfected donation. Under Art. 748 of the CC, the donation of a movable may be made orally or in writing. If the value of the personal property donated exceeds P5,000, the donation and the acceptance shall be made in writing. Assuming that the value of the thing donated, a vintage sports car, exceeds P5,000, then the donation and the acceptance must be in writing. In this instance, the acceptance of Jose was not in writing, therefore, the donation is void. Upon the other hand, assuming that the sports car costs less than P5,000, then the donation may be oral, but still, the simultaneous delivery of the car is needed and there being none, the donation was never perfected. B. Yes, the answer is the same. If Joses mail containing his acceptance of the donation was received by Pedro after the formers death, then the donation is still void because under Article 734 of the CC, the donation is perfected the moment the donor knows of the acceptance by the donee. The death of Jose before Pedro could receive the acceptance indicates that the donation was never perfected. Under Article 746 acceptance must be made during the lifetime of both the donor and the donee.

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Wills and Succession

TOPIC: WILLS IN GENERAL (1989, 1993, 1995, 1996, 1998, 2000) I Manuel, a Filipino, and his American wife Eleanor, executed a Joint Will in Boston, Massachusetts when they were residing in said city. The law of Massachusetts allows the execution of joint wills. Shortly thereafter, Eleanor died. Can the said Will be probated in the Philippines for the settlement of her estate? (2000)

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ANSWER: Yes, the will may be probated in the Philippines insofar as the estate of Eleanor is concerned. While the Civil Code prohibits the execution of joint wills here and abroad, such prohibition applies only to Filipinos. Hence, the joint will which is valid where executed is valid in the Philippines but only with respect to Eleanor. Under Article 819, it is void with respect to Manuel whose joint will remains void in the Philippines despite being valid where executed. TOPIC: INTESTATE SUCCESSION (1992, 1995, 1996, 1997, 1998, 1999, 2000, 2003) I A. Luis was survived by two legitimate children, two illegitimate children, his parents, and two brothers. He left an estate of P1 million. Who are the compulsory heirs of Luis, how much is the legitime of each, and how much is the free portion of his estate if any? B. Suppose Luis, in the preceding question (a), died intestate. Who are his intestate heirs, and how much is the share of each in his estate? (2003) ANSWERS: A. The compulsory heirs are the two legitimate children and the two illegitimate children. The parents are excluded by the legitimate children, while the brothers are not compulsory heirs at all. Their respective legitimes are: (1) The legitime of the two (2) legitimate children is one-half (1/2) of the estate (P500,000) to be divided between them equally, or P250,000 each . (2) The legitime of each illegitimate child is one-half (1/2) the legitime of each legitimate child or P125,000. Since the total legitimes of the compulsory heirs is P750,000, the balance of P250,000 is the free portion. B. The intestate heirs are the two (2) legitimate children and the two (2) illegitimate children. In intestacy the estate if the decedent is divided among the legitimate and illegitimate children such that the share of each illegitimate child is one-half the share of each legitimate child. Their shares are: For each legitimate child P333,333.33 For each illegitimate child P166,666.66 (Art. 983, NCC; Art. 176, FC)

Obligations and Contracts

TOPIC: CONTRACTS IN GENERAL (concept, kinds, requirements for validity and remedies) (1989, 1990, 1991, 1992, 1993, 1996, 1998, 2002) I

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Roland, a basketball star, was under contract for one year to play-for-play exclusively for Lady Love, Inc. However, even before the basketball season could open, he was offered a more attractive pay plus fringe benefits by Sweet Taste, Inc. Roland accepted the offer and transferred to Sweet Taste. Lady Love sues Roland and Sweet Taste for breach of contract. Defendants claim that the restriction to play for Lady Love alone is void, hence, unenforceable, as it constitutes an undue interference with the right of Roland to enter into contracts and the impairment of his freedom to play and enjoy basketball. Can Roland be bound by the contract he entered into with Lady Love or can he disregard the same? Is he liable at all? How about Sweet Taste? Is it liable to Lady Love? (1991) ANSWER: Roland is bound by the contract he entered into with Lady Love and he cannot disregard the same, under the principles of obligations and contracts. Obligations arising from contracts have the force of law between the parties.

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Yes, Roland is liable under the contract as far as Lady Love is concerned. He is liable for damages under Article 1170 of the CC since he contravened the tenor of his obligation. Not being a contracting party, Sweet Taste is not bound by the contract but it can be held liable under Art. 1314. The basis of its liability is not prescribed by contract but is founded on quasidelict, assuming that Sweet Taste knew of the contract. Art. 1314 of the CC provides that any third person who induces another to violate his contract shall be liable for damages to the other contracting party. ALTERNATIVE ANSWER: It is assumed that Lady Love knew of the contract. Neither Roland nor Sweet Taste would be liable, because the restriction in the contract is violative of Article 1306 as being contrary to law, morals, good custom, public order, or public policy. II Printado is engaged in the printing business. Suplico supplies printing paper to Printado pursuant to an order agreement under which Suplico binds himself to deliver the same volume of paper every month for a period of 18 months, with Printado in turn agreeing to pay within 60 days after each delivery. Suplico has been faithfully delivering under the order agreement for 10 months but thereafter stopped doing so, because Printado has not made any payment at all. Printado has also a standing contract with publisher Publico for the printing of 10,000 volumes of school textbooks. Suplico was aware of said printing contract. After printing 1,000 volumes, Printado also fails to perform under its printing contract with Publico, Suplico sues Printado for the value of the unpaid deliveries under their order agreement. At the same time Publico sues Printado for damages for breach of contract with respect to their own printing agreement. In the suit filed by Suplico, Printado counters that: a) Suplico cannot demand payment for deliveries made under their order agreement until Suplico has completed performance under said contact; b) Suplico should pay damages for breach of contract; and c) Suplico should be liable for Printado's breach of his contract with Publico because the order agreement between Suplico and Printado was for the benefit of Publico. Are the contentions of Printado tenable? Explain your answer as to each contention. (2002) SUGGESTED ANSWER: No, the contentions of Printado are untenable. a) Printado having failed to pay for the printing paper covered by the delivery invoices on time, Suplico has the right to cease making further delivery. And the latter did not violate the order agreement (Integrated Packaging Corp. v. Court of Appeals, (333 SCRA 170, G.R. No. 115117, June 8, 2000.)

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b) Suplico cannot be held liable for damages, for breach of contract, as it was not he who violated the order agreement, but Printado.

c)

Suplico cannot be held liable for Printado's breach of contract with Publico. He is not a party to the agreement entered into by and between Printado and Publico. Theirs is not a stipulation pour autrui. {Aforesaid] Such contracts could not affect third persons like Suplico because of the basic civil law principle of relativity of contracts which provides that contracts can only bind the parties who entered into it, and it cannot favor or prejudice a third person, even if he is aware of such contract and has acted with knowledge thereof. (Integrated Packaging Corp. v. CA, supra.) TOPIC: EXTINGUISHMENT OF OBLIGATIONS (1989, 1992, 1994, 1998, 2000, 2001, 2002) I In 1978, Bobby borrowed P1,000,000 from Chito payable in two years. The loan, which was evidenced by a promissory note, was secured by a mortgage on real property. No action was filed by Chito to collect the loan or to foreclose the mortgage. But in 1991, Bobby, without receiving any amount from Chito, executed another promissory note which was worded exactly as the 1978 promissory note, except for the date thereof, which was the date of its execution. Can Chito demand payment on the 1991 promissory note in 1994? (1994)

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ANSWER: Yes, Chito can demand payment on the 1991 promissory note in 1994. Although the 1978 promissory note for P1 million payable two years or in 1980 became a natural obligation after the lapse of ten (10) years, such natural obligation can be a valid consideration of a novated promissory note dated in 1991 and payable two years later or in 1993. All the elements of an implied real novation are present: a) an old valid obligation; b) a new valid obligation; c) capacity of the parties; d) animus novandi or intention to novate; and e) The old an new obligation should be incompatible with each other on all material points (Art. 1292). The two promissory notes cannot stand together, hence, the period of prescription of ten (10) years has not yet lapsed. II Arturo borrowed P500,000 from his father. After he had paid P300,000, his father died. When the administrator of his fathers estate requested payment of the balance of P200,000, Arturo replied that the same had been condoned by his father as evidenced by a notation at the back of his check payment for the P300,000 reading: In full payment of the loan. Will this be a valid defense in an action for collection? (2000) ANSWER: It depends. If the notation in full payment of the loan was written by Arturos father, there was an implied condonation of the balance that discharges the obligation. In such case, the notation is an act of the father from which condonation may be inferred. The condonation being implied, it need not comply with the formalities of a donation to be effective. The defense of full payment will, therefore, be valid. When, however, the notation was written by Arturo himself, it merely proves his intention in making that payment but in no way does it bind his father (Yam vs. CA, GR No. 104726, 11 February 1999). In such case, the notation was not the act of his father from which condonation may be inferred. There being no condonation at all, the defense of full payment will not be valid. ALTERNATIVE ANSWER: If the notation was written by Arturos father, it amounted to an express condonation of the balance which must comply with the formalities of a donation to be valid under the 2 nd par. Of Article 1270 of the NCC. Since the amount of the balance is more than P5,000, the acceptance by Arturo of the condonation must also be in writing under Article 748. There being no acceptance in writing by Arturo, the condonation is void and the obligation to pay the balance subsists. The defense of full payment is, therefore, not valid. In case the notation was not written by Arturos father, the answer is the same as the answers above.

CIVIL LAW

Sales and Lease

Red Notes in Civil Law

TOPIC: MACEDA LAW ( 1989, 1999, 2000) I What are the so-called Maceda and Recto laws in connection with sales on installments? Give the most important features of each law. (1999) ANSWER: The Maceda Law (R.A. 655) is applicable to sales of immovable property on installments. The most important features are (Rillo vs. CA, 247 SCRA 461): 1. After having paid installments for at least two years, the buyer is entitled to a mandatory grace period of one month for every year of installment payments made, to pay the unpaid installments without interest.

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If the contract is cancelled, the seller shall refund to the buyer the cash surrender value equivalent to 50% of the total payments made, and after five years of installments, an additional 5% every year but not to exceed 90% of the total payments made. 2. In case the installments paid were less than 2 years, the seller shall give the buyer a grace period of not less than 60 days. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after 30 days from receipt by the buyer of the notice of cancellation or demand for rescission by notarial act. The Recto Law (Art, 1484) refers to sale of movables payable in installments and limiting the right of seller, in case of default by the buyer, to one of three remedies: (a) exact fulfillment; (b) cancel the sale if two or more installments have not been paid; (c) foreclose the chattel mortgage on the things sold also in case of default of two or more installments, with no further action against the purchaser. II Priscilla purchased a condominium unit in Makati City from the Citiland Corporation for a price of P10 million, payable P3 million down and the balance with interest thereon at 14% per annum payable in sixty (60) equal monthly installments of P198,333.33. They executed a Deed of Conditional Sale in which it is stipulated that should the vendee fail to pay three (3) successive installments, the sale shall be deemed automatically rescinded without the necessity of judicial action and all payments made by the vendee shall be forfeited in favor of the vendor by way of rental for the use and occupancy of the unit and as liquidated damages. For 46 months, Priscilla paid the monthly installments religiously, but on the 47th and 48th months, she failed to pay. On the 49th month, she tried to pay the installments due but the vendor refused to receive the payments tendered by her. The following month, the vendor sent her a notice that it was rescinding the Deed of Conditional Sale pursuant to the stipulation for automatic rescission, and demanded that she vacate the premises. She replied that the contract cannot be rescinded without judicial demand or notarial act pursuant to Article 1592 of the Civil Code. A. Is Article 1592 applicable? B. Can the vendor rescind the contract? (2000)

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ANSWERS: A. Article 1592 of the Civil Code does not apply to a conditional sale. In Valarao vs. CA, 304 SCRA 155 the Supreme Court held that Article 1592 applies only to a contract of sale and not to a Deed of Conditional Sale where the seller has reserved title to the property until full payment of the purchase price. The law applicable is the Maceda Law. B. No, the vendor cannot rescind the contract under the circumstances. Under the Maceda Law, which is the law applicable, the seller on installment may not rescind the contract till after the lapse of the mandatory grace period of 30 days for every one year of installment payments, and only after 30 days from notice of cancellation or demand for rescission by a notarial act. In this case, the refusal of the seller to accept payment from the buyer on the 49th month was not justified because the buyer was entitled to 60 days grace period and the payment was tendered within that period. Moreover, the notice of rescission served by the seller on the buyer was not effective because the notice was not by a notarial act. Besides, the seller may still pay within 30 days from such notarial notice before rescission may be effected. All these requirements for a valid rescission were not complied with by the seller. Hence, the rescission is invalid. TOPIC: LEASE IN GENERAL AND THE RIGHTS AND OBLIGATIONS OF THE LESSOR AND LESSEE (1990, 1993, 1996, 1997, 1999, 2001)

I 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)

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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) ANSWER: The action filed by the lessee, for both rescission of the offending sale and specific performance of the right of first refusal which was violated, should prosper. The ruling in Equatorial Realty Development, Inc. vs. Mayfair theater, Inc. (264 SCRA 483), a case with similar facts, sustains both rights of actions because the buyer in the subsequent sale knew the existence of right of first refusal, hence in bad faith. ANOTHER ANSWER: The action to rescind the sale and to compel the right of first refusal will not prosper. (Ang Yu Asuncion vs. CA, 238 SCRA 602). The Court ruled in a unanimous en banc decision that the right of first refusal is not founded upon contract but on a quasi-delictual relationship covered by the principles of human relations and unjust enrichment (Art. 19, et seq. Civil Code). Hence the only action that will prosper according to the Supreme Court is an action for damages in a proper forum for the purpose. TOPIC: SUB LEASE (concept and effects) (1990, 1994, 1999, 2000) I A leased a parcel of land to B for a period of two years. The lease contract did not contain any express prohibition against the assignment of the leasehold or the subleasing of the leased premises. During the third year of the lease, B subleased the land to C. In turn, C, without As consent, assigned the sublease to D. A then filed an action for the rescission of the contract of lease on the ground that B has violated the terms and conditions of the lease agreement. If you were the judge, how would you decide the case, particularly with respect to the validity of: A. Bs sublease to C? and B. Cs assignment of the sublease to D? Explain your answers. (1990) ANSWERS: A. Bs sublease to C is valid. Although the original period of two years for the lease contract has expired, the lease continued with the acquiescence of the lessor during the third year. Hence, there has been an implied renewal of the contract of lease. Under Art. 1650 of the Civil Code, the lessee may sublet the thing leased, in whole or in part, when the contract of lease does not contain any express prohibition (Arts. 1650, 1670, CC). As action for rescission should not prosper on this ground. B. Cs assignment of the sublease to D is not valid. Under Art. 1649 of the CC, the lessee cannot assign the lease without the consent of the lessor, unless there is a stipulation to the contrary. There is no such stipulation in the contract. If the law prohibits assignment of the lease without the consent of the lessor, all the more would the assignment of a sublease be prohibited without such consent. This is a violation of the contract and is a valid ground for rescission by A. TOPIC: CONTRACT TO SELL (NATURE AND EFFECTS) (1997, 1999, 2001) Arturo gave Richard a receipt which states: Receipt Received from Richard as down payment For my 1995 Toyota Corolla with Plate No. XYZ-123 --------------------------------------P50,000.00 Balance payable: 12/30/01 ----------------------------P50,000.00 I

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September 15, 2001. (Sgd.) Arturo Does this receipt evidence a contract to sell? Why? (2001) ANSWER: It is a contract of sale because the seller did not reserve ownership until he was fully paid. II State the basic difference (only in their legal effects) A. B. Between a contract to sell, on the one hand, and a contract of sale, on the other; Between a conditional sale, on the one hand, and an absolute sale, on the other hand. (1997)

ANSWERS: A. In a contract of sale, ownership is transferred to the buyer upon delivery of the object to him while in a contract to sell, ownership is retained by the seller until the purchase price is fully paid. In a contract to sell, delivery of the object does not confer ownership upon the buyer. In a contract of sale, there is only one contract executed between the seller and the buyer, while in a contract to sell, there are two contracts, first the contract to sell (which is conditional or preparatory sale) and a second, the final deed of sale or the principal contract which is executed after full payment of the purchase price. A conditional sale is one where the vendor is granted the right to unilaterally rescind the contract predicated on the fulfillment or non-fulfillment, as the case may be, of the prescribed condition. An absolute sale is one where the title to the property is not reserved to the vendor or if the vendor is not granted the right to rescind the contract based on the fulfillment or nonfulfillment, as the case may be, of the prescribed condition.

B.

Partnership, Agency and Trusts

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TOPIC: CONCEPT OF PARTNERSHIP (1989, 1992, 1997, 2001) I W, X, Y and Z organized a general partnership with W and X as industrial partners and Y and Z as capitalist partners. Y contributed P50,000 and Z contributed P20,000 to the common fund. By a unanimous vote of the partners, W and X were appointed managing partners, without any specification of their respective powers and duties. A applied for the position of Secretary and B applied for the position of Accountant of the partnership. The hiring of A was decided upon by W and X, but was opposed by Y and Z. The hiring of B was decided upon by W and Z, but was opposed by X and Y. (1992) ANSWER: A should be hired as Secretary. The decision for the hiring of A prevails because it is an act of administration which can be performed by the duly appointed managing partners, W and X. B cannot be hired, because in case of a tie in the decision of the managing partners, the deadlock must be decided by the partners owning the controlling interest. In this case, the opposition of X and Y prevails because Y owns the controlling interest (Art. 1801, CC). Who of the applicants should be hired by the partnership? Explain and give your reasons.

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II X used his savings from his salaries amounting to a little more than P2,000 as capital in establishing a restaurant. Y gave the amount of P4,000 to X as financial assistance with the understanding that Y would be entitled to 22% annual profits derived from the operation of the restaurant. After the lapse of 22 years, Y filed a case demanding his share in the said profits. X denied that there was a partnership and raised the issue of prescription as y did not assert his rights anytime within ten (10) years from the start of the operation of the restaurant. Is Y a partner of X in the business? Why? What is the nature of the right to demand ones share in the profits of a partnership? Does the right prescribe? (1989) ANSWER: Yes, because there is an agreement to contribute to a common fund and an intent to divide profits. It is founded upon an express trust. It is imprescriptible unless repudiated. ALTERNATIVE ANSWER: No, Y is not a partner because the amount is extended in the form of a financial assistance and therefore it is a loan, and the mere sharing of profits does not establish a partnership. The right is founded upon a contract of loan whereby the borrower is bound to pay principal and interest like all ordinary obligations. Yes, his right prescribes in six or ten years depending upon whether the contract is oral or written. 1. 2. 3. III Can a husband and wife for a limited partnership to engage in real estate business, with the wife being a limited partner? Can two corporations organize a general partnership under the Civil Code of the Philippines? Can a corporation and an individual form a general partnership? (1994)

ALTERNATIVE ANSWERS: 1. Yes, the Civil Code prohibits a husband and wife from constituting a universal partnership. Since a limited partnership is not a universal partnership, a husband and wife may validly form one. 2. No. A corporation is managed by its board of directors. If the corporation were to become a partner, co-partners would have the power to make the corporation party to transactions in an irregular manner since the partners are not agents subject to the control of the Board of Directors. But a corporation may enter into a joint venture with another corporation as long as the nature of the venture is in line with the business authorized by its charter. (Tuason & Co., Inc. vs. Bolano, 95 Phil 106) 3. No, for the same reasons given in the Answer to Number 2 above. OTHER ALTERNATIVE ANSWERS: 1. Yes. While spouses cannot enter into a universal partnership, they can enter into a limited partnership pr be members thereof (CIR vs. Suter, et al., 27 SCRA 152). 2. As a general rule a corporation may not form a general partnership with another corporation or an individual because a corporation may not be bound by persons who are neither directors nor officers of the corporation. However, a corporation may form a general partnership with another corporation or an individual provided the following conditions are met: (a) The Articles of Incorporation of the corporation expressly allows the corporation to enter into partnerships; (b) The Articles of Partnership must provide that all partners will manage the partnership, and they shall be jointly and severally liable; and (c) In case of foreign corporation, it must be licensed to do business in the Philippines. ANOTHER ALTERNATIVE ANSWER: 3. No. A corporation may not be a general partner because the principle of mutual agency in general partnership allowing the other general partner to bind the corporation will violate the corporation law principle that only the board of directors may bind the corporation.

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TOPIC: CONTRACT OF AGENCY (1992, 1994, 1997, 1999, 2000, 2001) I Prime Realty Corporation appointed Nestor the exclusive agent in the sale of lots of its newly developed subdivision. Prime Realty told Nestor that he could not collect or receive payments from the buyers. Nestor was able to sell ten lots to Jesus and to collect the down payments for said lots. He did not turn over the collections to Prime Realty. Who shall bear the loss for Nestors defalcation, Prime Realty or Jesus? (1994) ALTERNATIVE ANSWER: The general rule is that a person dealing with an agent must inquire into the authority of that agent. In the present case, if Jesus did not inquire into that authority, he is liable for the loss due to Nestors defalcation unless Article 1900, CC governs, in which case the developer corporation bears the loss. Art. 1900 CC provides: So far as third persons are concerned, an act is deemed to have been performed within the scope of the agents authority, if such act is within the terms of the power of attorney, as written, even if the agent has in fact exceeded the limits of his authority according to an understanding between the principal and the agent. However, if Jesus made due inquiry and he was not informed by the principal Prime Realty of the limits of Nestors authority, Prime Realty shall bear the loss. ANOTHER ALTERNATIVE ANSWER: Considering that Prime Realty Corporation only told Nestor that he could not receive or collect payments, it appears that the limitation does not appear in his written authority or power of attorney. In this case, insofar as Jesus, who is a third person, is concerned, Nestors acts of collecting payments is deemed to have been performed within the scope of his authority (Article 1900, CC). Hence, the principal is liable. However, if Jesus was aware of the limitation of Nestors power as an agent, and prime Realty Corporation does not ratify the sale contract, then Jesus shall be liable (Art. 1898, CC). II A. X appoints Y as his agent to sell his products in Cebu City. Can Y appoint a sub-agent and if he does, what are the effects of such appointment? B. A granted B the exclusive right to sell his brand of Maong pants in Isabela, the price for his merchandise payable within 60 days from delivery, and promising B a commission of 20% on all sales. After the delivery of the merchandise to B but before he could sell any of them, Bs store in Isabela was completely burned without his fault, together with all of As pants. Must B pay A for his lost pants? Why? (1999) ANSWERS: A. Yes, the agent may appoint a substitute or sub-agent if the principal has not prohibited him from doing so, but he shall be responsible for the acts of the substitute: (1) when he was not given the power to appoint one; (2) when he was given such power, but without designating the person, and the person appointed was notoriously incompetent or insolvent; B. The contract between A and B is a sale not an agency to sell because the price is payable by B upon 60 days from delivery even if B is unable to resell it. If B were an agent, he is not bound to pay the price if he is unable to resell it. As a buyer, ownership passed to B upon delivery and, under Art. 1504 of the CC, the things perishes with the owner. Hence, B must still pay the price. TOPIC: TRUST (1993, 1995, 1997, 1998) I

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In 1980, Maureen purchased two lots in a plush subdivision registering Lot 1 in her name and Lot 2 in the name of her brother Walter with the latters consent. The idea was to circumvent a subdivision policy against the acquisition of more than one lot by one buyer. Maureen constructed a house on Lot 1 with an extension on Lot 2 to serve as a guest house. In 1987, Walter who had suffered serious business losses demanded that Maureen remove the extension house since the lot on which the extension was built was his property. In 1992, Maureen sued for the reconveyance to her of Lot 2 asserting that a resulting trust was created when she had the lot registered in Walters name even if she paid the purchase price. Walter opposed the suit arguing that assuming the existence of a resulting trust the action of Maureen has already prescribed since ten years have already elapsed from the registration of the title in his name. Decide. Discuss fully. (1995) ANSWER: This is a case of an implied resulting trust. If Walter claims to have acquired ownership of the land by prescription of if he anchors his defense on extinctive prescription, the ten year period must be reckoned from 1987 when he demanded that Maureen remove the extension house on Lot 2 because such demand amounts to an express repudiation of the trust and it was made known to Maureen. The action for reconveyance filed in 1992 is not yet barred by prescription (Spouses Huang vs. CA, Sept. 13, 1994).

CIVIL LAW

Credit Transactions
TOPIC: MORTGAGE (1992, 1999, 2001) / PLEDGE (1994, 1996, 1999) I To secure a loan obtained from a rural bank, Purita assigned her leasehold rights over a stall in the public market in favor of the bank. The deed of assignment provides that in case of default in the payment of the loan, the bank shall have the right to sell Puritas rights over the market stall as her attorney-in-fact, and to apply the proceeds to the payment of the loan. A. Was the assignment of leasehold rights a mortgage or a cession? B. Assuming the assignment to be a mortgage, does the provision giving the bank the power to sell Puritas rights constitute pactum commissorium or not? Why? (2001) ANSWERS: A. The assignment was a mortgage, not a cession, of the leasehold rights. A cession would have transferred ownership to the bank. However, the grant of authority to the bank to sell the leasehold rights in case of default is proof that no such ownership was transferred and that a mere encumbrance was constituted. There would have been no need for such authority had there been a cession. B. No, the clause in question is not a pactum commissorium. It is pactum commissorium when default in the payment of the loan automatically vests ownership of the encumbered property in the bank. In the problem given, the bank does not automatically become the owner of the property upon default of the mortgagor. The bank has to sell the property and apply the proceeds to the indebtedness. II A. Distinguish a contract of chattel mortgage from a contract of pledge. B. Are the right of redemption and the equity of redemption given by law to a mortgagor the same? Explain. C. X borrowed money from Y and gave a piece of land as security by way of mortgage. It was expressly agreed between the parties in the mortgage contract that upon non-payment of the debt on time by X, the mortgaged land would already belong to Y. If X defaulted in paying, would Y now become the owner of the mortgaged land? Why? D. Suppose in the preceding question, the agreement between X and Y was that if X failed to pay the mortgage debt on time, the debt shall be paid with the land mortgaged by X to Y. Would your answer be the same as in the preceding question? Explain. (1999)

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ANSWERS: A. In a contract of chattel mortgage possession belongs to the creditor, while in a contract of pledge possession belongs to the debtor. A chattel mortgage is a formal contract while a pledge is a real contract. A contract of chattel mortgage must be recorded in a public instrument to bind third persons while a contract of pledge must be in a public instrument containing description of the thing pledged and the date thereof to bind third persons. B. The equity of redemption is different from the right of redemption. Equity of redemption is the right of the mortgagor after judgment in a judicial foreclosure to redeem the property by paying to the court the amount of the judgment debt before the sale or confirmation of the sale. On the other hand, right of redemption is the right of the mortgagor to redeem the property sold at an extra-judicial foreclosure by paying to the buyer in the foreclosure sale the amount paid by the buyer within one year from such sale. C. No, Y could not become the owner of the land. The stipulation is in the nature of pactum commissorium which is prohibited by law. The property should be sold at public auction and the proceeds thereof applied to the indebtedness. Any excess shall be given to the mortgagor. D. No, the answer would not be the same. This is a valid stipulation and does not constitute pactum commissorium. In pactum commissorium, the acquisition is automatic without need of any further action. In the instant problem another act is required to be performed, namely, the conveyance of the property as payment (dacion en pago). III In 1982, Steve borrowed P400,000 from Danny, collateralized by a pledge of shares of stock of Concepcion Corporation worth P800,000. In 1983, because of the economic crisis, the value of the shares pledged fell to only P100,000. Can Danny demand that Steve surrender the other shares worth P700,000? ALTERNATIVE ANSWER: No. Bilateral contracts cannot be changed unilaterally. A pledge is only a subsidiary contract, and Steve is still indebted to Danny for the amount of P400,000 despite the fall in the value of the stocks pledged. ANOTHER ALTERNATIVE ANSWER: No. Dannys right as pledgee is to sell the pledged shares at a public sale and keep the proceeds as collateral for the loan. There is no showing that the fall in the value of the pledged property was attributable to the pledgers fault or fraud. On the contrary, economic crisis was the culprit. Had the pledgee been deceived as to the substance or quality of the pledged shares of stock, he would have had the right to claim another thing in their place or to the immediate payment of the obligation. This is not the case here.

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Torts and Damages

TOPIC: QUASI-DELICT (1990, 1991, 1996, 1998, 2002, 2003) I As a result of a collision between a taxicab owned by A and another taxicab owned by B, X, a passenger of the first taxicab, was seriously injured. X later filed a criminal action against both drivers. A. Is it necessary for X to reserve his right to institute a civil action for damages against both taxicab owners before he can file a civil action for damages against them? Why? B. May both taxicab owners raise the defense of due diligence in the selection and supervision of their drivers to be absolved from liability for damages to X? Reason. (2003)

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ANSWERS: A. It depends. If the separate civil action is to recover damages arising from the criminal act, reservation is necessary. If the civil action against the taxicab owners is based on culpa contractual, or on quasi-delict, there is no need for reservation. B. It depends. If the civil action is based on quasi-delict the taxicab owners may raise the defense of diligence of a good father of a family in the selection and supervision of the driver; if the action against them is based on culpa contractual or civil liability arising from a crime, they cannot raise the defense. ALTERNATIVE ANSWER: A. No, such reservation is not necessary. Under Section 1 of Rule 111 of the 2000 Rules of Criminal Procedure, what is deemed instituted with the criminal action is only the action to recover civil liability arising from the crime or ex delicto. All the other civil actions under Articles 32, 33, 34, and 2176 of the NCC are no longer deemed instituted, and may be filed separately and prosecuted independently even without any reservation in the criminal action (sec. 3 Rule 111, Ibid.). The failure to make a reservation in the criminal action is not a waiver of the right to file a separate and independent civil action based on these articles of the NCC (Casupanan vs. Laroya GR No. 145391, August 26, 2002). TOPIC: LIABILITY OF THE EMPLOYER AND THE DRIVER IN CASE OF ACCIDENT (1992, 2000, 2001, 2002)

I A van owned by Orlando and driven by Diego, while negotiating a downhill slope of a city road, suddenly gained speed, obviously beyond the authorized limit in the area, and bumped a car in front of it, causing severe damage to the car and serious injuries to its passengers. Orlando was not in the car al the time of the incident. The car owner and the injured passengers sued Orlando and Diego for damages caused by Diego's negligence. In their defenses, Diego claims that the downhill slope caused the van to gain speed and that, as he stepped on the brakes to check the acceleration, the brakes locked, causing the van to go even faster and eventually to hit the car in front of it. Orlando and Diego contend that the sudden malfunction of the van's brake system is a fortuitous event and that, therefore, they are exempt from any liability. A. B. C. Is this contention tenable? Explain. Explain the concept of vicarious liability in quasi-delicts. Does the presence of the owner inside the vehicle causing damage to a third party affect his liability for his driver's negligence? Explain. (2002)

ANSWERS: A. No. Mechanical defects of a motor vehicle do not constitute fortuitous event, since the presence of such defects would have been ready detected by diligent maintenance check. The failure to maintain the vehicle in safe running condition constitutes negligence. B. The doctrine of vicarious liability is that which renders a person liable for the negligence of others for whose acts or omission the law makes him responsible on the theory that they are under his control and supervision. C. ln motor vehicle mishaps, the owner is made solidarily liable with his driver if he (owner) was in the vehicle and could have, by the use of due diligence, prevented the mishap. (Caedo v. Yu Khe Thai, 26 SCRA 410 [1968]). However, this question has no factual basis in the problem given, in view of the express given fact that "Orlando was not in the car at the time of the time of the incident.

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TOPIC: DAMAGES (1992, 1993, 1994, 2002) I On January 5, 1992, Nonoy obtained a loan of P1 million from his friend Raffy. The promissory note did not stipulate any payment for interest. The note was due on January 5, 1993 but before this date the two became political enemies. Nonoy, out of spite, deliberately defaulted in paying the note, thus forcing Raffy to sue him. A. What actual damages can Raffy recover? B. Can Raffy ask for moral damages from Nonoy? C. Can Raffy ask for nominal damages? D. Can Raffy ask for temperate damages? E. Can Raffy ask for attorneys fees? (1994) ANSWERS: A. Raffy may recover the amount of the promissory note of P1 million, together with interest at the legal rate from the date of judicial and extrajudicial demand. In addition, however, inasmuch as the debtor is in bad faith, he is liable for all damages which may be reasonably attributed to the nonperformance of the obligation (Art. 2201(2), NCC). B. Yes, under Art. 2220, NCC moral damages are recoverable in case of breach of contract where the defendant acted fraudulently or in bad faith. C. Nominal damages may not be recoverable in this case because Raffy may already be indemnified of his losses with the award of actual and compensatory damages. Nominal damages are adjudicated only 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. 2231, CC). D. Raffy may ask for, but would most likely not be awarded temperate damages, for the reason that his actual damages may already be compensated upon proof thereof with the promissory note. Temperate damages may be awarded only when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty (Art. 2224, CC).

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E. Yes, under par. 2, Art. 2208 of the CC, considering that Nonoys act or omission has compelled Raffy to litigate to protect his interests. Furthermore, attorneys fees may be awarded by the court when it is just and equitable (Art. 2208(110), CC).

Land Titles and Deeds

TOPIC: PRESCRIPTION AND LACHES (1990, 1998, 2000, 2002, 2003) I Louie, before leaving the country to train as a chef in a five-star hotel in New York, USA, entrusted to his first-degree cousin Dewey an application for registration, under the Land Registration Act, of a parcel of land located in Bacolod City. A year later, Louie returned to the Philippines and discovered that Dewey registered the land and obtained an Original Certificate of Title over the property in his (Deweys) name. Compounding the matter, Dewey sold the land to Huey, an innocent purchaser for value. Louie promptly filed an action for reconveyance of the parcel of land against Huey. A. Is the action pursued by Louie the proper remedy? B. Assuming that reconveyance is the proper remedy, will the action prosper if the case was filed beyond one year, but within ten years, from the entry of the decree of registration?

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ANSWERS: A. An action for reconveyance against Huey is not the proper remedy, because Huey is an innocent purchaser for value. The proper recourse is for Louie to go after Dewey for damages by reason of the fraudulent registration and subsequent sale of the land. If Dewey is insolvent, Louie may file a claim against the Assurance Fund (Heirs of Pedro Lopez vs. De Castro 324 SCRA 591 [2000] citing Sps. Eduarte vs. CA, 323 Phil 462 [1996]). B. Yes, the remedy will prosper because the action prescribes in ten (10) years, not within one (1) year when a petition for the reopening of the registration decree may be filed. The action for reconveyance is distinct from the petition to reopen the decree of registration (Grey Alba vs. Dela Cruz, 17 Phil 49 [1910]). There is no need to reopen the registration proceedings, but the property should just be reconveyed to the real owner. The action for reconveyance is based on implied or constructive trust, which prescribes in ten (10) years from the date of issuance of the original certificate of title. This rule assumes that the defendant is in possession of the land. Where it is the plaintiff who is in possession of the land, the action for reconveyance would be in the nature of a suit for quieting of title which action is imprescriptible (David vs. Malay, 318 SCRA 711 [1999]). II In 1960, an unregistered parcel of land was mortgaged by owner O to M, a family friend, as collateral for a loan. O acted through his attorney in fact, son, S, who was duly authorized by way of a special power of attorney, wherein O declared that he was the absolute owner of the land, that the tax declarations/receipts were all issued in his name, and that he has been in open, continuous and adverse possession in the concept of owner. As O was unable to pay back the loan plus interest for the past five (5) years, M had to foreclose the mortgage. At the foreclosure sale, M was the highest bidder. Upon issuance of the sheriffs final deed of sale and registration in January, 1966, the mortgage property was turned over to Ms possession and control. M has since then developed the said property. In 1967, O died, survived by sons S and P. In 1977, after the tenth (10th) death anniversary of his father O, son P filed a suit to annul the mortgage deed and subsequent sale of the property, etc., on the ground of fraud. He asserted that the property in question was conjugal in nature actually belonging, at the time of the mortgage, to O and his wife, W, whose conjugal share went to their sons (S and P) and to O. A. Is the suit filed by P barred by prescription? Explain your answer. B. After the issuance of the sheriffs final deed of sale in 1966 in this case, assuming that M applied for registration under the Torrens System and was issued a Torrens Title to the said property in question, would that added fact have any significant effect on your conclusion? State your reason. (1990) ANSWERS: A. Under Art. 173, CC, the action is barred by prescription because the wife had only ten (10) years from the transaction and during the marriage to file a suit for the annulment of the mortgage deed.

CIVIL LAW

Red Notes in Civil Law

B. If M had secured a Torrens Title to the land, all the more S and P could not recover because if at all their remedies would be: 1. A Petition to Review the Decree of registration. This can be availed of within one (1) year from the entry thereof, but only upon the basis of actual fraud. There is no showing that M committed actual fraud in securing his title to the land; or 2. An action in personam against M for the reconveyance of the title in their favor. Again, this remedy is available within four (4) years from the date of the discovery of the fraud but not later than ten (10) years from the date of registration of the title in the name of M. ALTERNATIVE ANSWER: A. The mortgage contract executed by O, if at all, is only a voidable contract since it involves a conjugal partnership property. The action to annul the same instituted in 1977, or eleven years after the execution of the sheriffs final sale, has obviously prescribed because:

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An action to annul a contract on the ground of fraud must be brought within four (4) years from the date of discovery of the fraud. Since this is in essence an action to recover ownership, it must be reckoned from the date of execution of the contract or from the registration of the alleged fraudulent document with the assessors office for the purpose of transferring the tax declaration, this being unregistered land (Bael vs. IAC, GR No. L-74423 January 30, 1989, 169 SCRA 617). 2. If the action is to be treated as an action to recover ownership of land, it would have prescribed just the same because more than ten (10) years have already elapsed since the date of the execution of the sale. 1. ANOTHER ALTERNATIVE ANSWER: A. The action to recover has been barred by acquisitive prescription in favor of M considering that M has possessed the land under a claim of ownership for ten (10) years with a just title. TOPIC: TORRENS SYSTEM (1990, 1991, 1994, 1998, 2001) I Section 70 of PD 1529, concerning adverse claims on registered land, provides a 30-day period of effectivity of an adverse claim, counted from the date of its registration. Suppose a notice of adverse claim based upon a contract to sell was registered on March 1, 1997 at the instance of the BUYER, but on June 1, 1997, or after the lapse of the 30-day period, a notice of levy on execution in favor of a JUDGMENT CREDITOR was also registered to enforce a final judgment for money against the registered owner. Then, on June 15, 1997 there having been no formal cancellation of his notice of adverse claim, the BUYER pays to the seller-owner the agreed purchase price in full and registers the corresponding deed of sale. Because the annotation of the notice of levy is carried over to the new title in his name, the BUYER brings an action against the JUDGMENT CREDITOR to cancel such annotation, but the latter claims that his lien is superior because it was annotated after the adverse claim of the BUYER had ipso facto ceased to be effective. Will the suit prosper? (1998) ANSWER: The suit will prosper. While an adverse claim duly annotated at the back of a title under Sec. 70 of PD 1529 is good only for 30 days, cancellation thereof is still necessary to render it ineffective, otherwise, the inscription thereof will remain annotated as a lien on the property. While the life of adverse claim is 30 days under PD 1529, it continuous to be effective until it is cancelled by formal petition filed with the Register of Deeds. The cancellation of the notice of levy is justified under Sec. 108 of PD 1529 considering that the levy on execution cannot be enforced against the buyer whose adverse claim against the registered owner was recorded ahead of the notice of levy on execution. II In 1960, an unregistered parcel of land was mortgaged by owner O to M, a family friend, as collateral for a loan. O acted through his attorney in fact, son, S, who was duly authorized by way of a special power of attorney, wherein O declared that he was the absolute owner of the land, that the tax declarations/receipts were all issued in his name, and that he has been in open, continuous and adverse possession in the concept of owner. As O was unable to pay back the loan plus interest for the past five (5) years, M had to foreclose the mortgage. At the foreclosure sale, M was the highest bidder. Upon issuance of the sheriffs final deed of sale and registration in January, 1966, the mortgage property was turned over to Ms possession and control. M has since then developed the said property. In 1967, O died, survived by sons S and P. In 1977, after the tenth (10th) death anniversary of his father O, son P filed a suit to annul the mortgage deed and subsequent sale of the property, etc., on the ground of fraud. He asserted that the property in question was conjugal in nature actually belonging, at the time of the mortgage, to O and his wife, W, whose conjugal share went to their sons (S and P) and to O. C. Is the suit filed by P barred by prescription? Explain your answer.

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D. After the issuance of the sheriffs final deed of sale in 1966 in this case, assuming that M applied for registration under the Torrens System and was issued a Torrens Title to the said property in question, would that added fact have any significant effect on your conclusion? State your reason. (1990) ANSWERS: A. Under Art. 173, CC, the action is barred by prescription because the wife had only ten (10) years from the transaction and during the marriage to file a suit for the annulment of the mortgage deed. B. If M had secured a Torrens Title to the land, all the more S and P could not recover because if at all their remedies would be: 3. A Petition to Review the Decree of registration. This can be availed of within one (1) year from the entry thereof, but only upon the basis of actual fraud. There is no showing that M committed actual fraud in securing his title to the land; or 4. An action in personam against M for the reconveyance of the title in their favor. Again, this remedy is available within four (4) years from the date of the discovery of the fraud but not later than ten (10) years from the date of registration of the title in the name of M. ALTERNATIVE ANSWER: A. The mortgage contract executed by O, if at all, is only a voidable contract since it involves a conjugal partnership property. The action to annul the same instituted in 1977, or eleven years after the execution of the sheriffs final sale, has obviously prescribed because: 3. An action to annul a contract on the ground of fraud must be brought within four (4) years from the date of discovery of the fraud. Since this is in essence an action to recover ownership, it must be reckoned from the date of execution of the contract or from the registration of the alleged fraudulent document with the assessors office for the purpose of transferring the tax declaration, this being unregistered land (Bael vs. IAC, GR No. L-74423 January 30, 1989, 169 SCRA 617). 4. If the action is to be treated as an action to recover ownership of land, it would have prescribed just the same because more than ten (10) years have already elapsed since the date of the execution of the sale. ANOTHER ALTERNATIVE ANSWER: A. The action to recover has been barred by acquisitive prescription in favor of M considering that M has possessed the land under a claim of ownership for ten (10) years with a just title.

CIVIL LAW

Conflicts of Law
TOPIC: ARTICLE 17, NCC (1991, 1993, 2002) / DOCTRINE OF FORUM NON CONVENIENS (DEFINITION) (1994, 2002)

I Felipe is a Filipino citizen. When he went to Sydney for vacation, he met a former business associate, who proposed to him a transaction which took him to Moscow. Felipe brokered a contract between Sydney Coals Corp. (Coals), an Australian firm, and Moscow Energy Corp. (Energy), a Russian firm, for Coals to supply coal to Energy on a monthly basis for three years. Both these firms were not doing, and still do not do, business in the Philippines. Felipe shuttled between Sydney and Moscow to close the contract. He also executed in Sydney a commission contract with Coals and in Moscow with Energy, under which contracts he was guaranteed commissions by both firms based on a percentage of deliveries for the three-year period, payable in Sydney and in Moscow, respectively, through deposits in accounts that he opened in the two cities. Both firms paid Felipe his commission for four months, after which they stopped paying him. Felipe learned from his contacts, who are residents of Sydney and Moscow, that the two firms talked to each other and decided to cut him off. He now files suit in Manila against both Coals and Energy for specific performance. A. Define or explain the principle of "lex loci contractus." B. Define or explain the rule of "forum non conveniens."

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C.

Should the Philippine court assume jurisdiction over the case? Explain. (2002)

ANSWERS: A. Lex loci contractus may be understood in two senses, as follows: It is the law of the place where contracts, wills, and other public instruments are executed and governs their forms and solemnities, pursuant to the first paragraph of Article 17 of the Civil Code; or It is the proper law of the contract; i.e., the system of law intended to govern the entire contract, including its essential requisites, indicating the law of the place with which the contract has its closest connection or where the main elements of the contract converge. As illustrated by Zalamea v. Court of Appeals (228 SCRA 23 [I1993]), it is the law of the place where the airline ticket was issued, where the passengers are nationals and residents of, and where the defendant airline company maintained its office. B. Forum non conveniens means that a court has discretionary authority to decline jurisdiction over a cause of action when it is of the view that the action may be justly and effectively adjudicated elsewhere. C. No, the Philippine courts cannot acquire jurisdiction over the case of Felipe. Firstly, under the rule of forum non conveniens, a Philippine court or agency may assume jurisdiction over the case if it chooses to do so provided: (1) that the Philippine court is one to which the parties may conveniently resort to; (2) that the Philippine court is in a position to make an intelligent decision as to the law and the facts; and (3) that the Philippine court has or is likely to have power to enforce its decision.37 The conditions are unavailing in the case at bar. The Philippine court is not a convenient forum as all the incidents of the case occurred outside the Philippines. Neither are both Coals and Energy doing business inside the Philippines. Secondly, the contracts were not perfected in the Philippines. Under the principle of lex loci contractus, the law of the place where the contract is made shall apply. Lastly, the Philippine court has no power to determine the facts surrounding the execution of said contracts. And even if a proper decision could be reached, such would have no binding effect on Coals and Energy as the court was not able to acquire jurisdiction over the said corporations. (Manila Hotel Corp. v. NLRC, 343 SCRA 1,13-14 [2000]) ALTERNATIVE ANSWER: A. Under the doctrine of lex loci contractus, as a general rule, the law of the place where a contract is made or entered into governs with respect to its nature and validity, obligation and interpretation. This has been said to be the rule even though the place where the contract was made is different from the place where it is to be performed, and particularly so, if the place of the making and the place of performance are the same (United Airline v. CA, G.R, No. 124110, April 20, 2001).

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BAR TYPE QUESTIONS

Persons and Family Relations
QUESTION No.1: Four employees of Act Theater Inc. were apprehended by the police officers for allegedly tampering a water meter. On the basis of the foregoing, the Metropolitan Waterworks and Sewerage System cut the water service connection of Act Theater a few hours after a notice to such effect was served upon the latter. Did MWSS properly exercise its proprietary rights? ANSWER: NO. Concededly, MWSS, as the owner of the utility providing water supply to certain consumers including the respondent, had the right to exclude any person from the enjoyment and disposal thereof. However, the exercise of rights is not without limitations. Having the right should not be confused with the manner by which such right is to be exercised. Article 19 of the New Civil Code states that Every person must, in the exercise of his rights and in the performance of his

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duties, act with justice, give everyone his due, and observe honesty and good faith. When a right is exercised in a manner which discards these norms resulting in damage to another, a legal wrong is committed for which actor can be held accountable. In this case, MWSS failed to act with justice and gave Theater Act what is due to it when the former unceremoniously cut off the latters water service connection. (Metropolitan Waterworks and Sewerage System vs Act Theater Inc., GR No. 147076, June 17, 2004) QUESTION No.2: The spouses Pahang obtained a loan from Metrobank. The said loan was secured by a real estate mortgage on a parcel of land owned by the spouses Pahang. For failure of the latter to settle their obligation, Matrobank extrajudicially foreclosed the real estate mortgage and the mortgaged property was sold to Metrobank as the highest bidder. Before the expiration of the one-year redemption period, the spouses Pahang filed a complaint for annulment of extrajudicial sale alleging that Metrobank bloated their obligation to frustrate their chances of paying the loan. After the expiration of the one-year redemption period, Metrobank consolidated its ownership over the foreclosed property and, thereafter, filed a petition for Writ of Possession. This was opposed by the spouses Pahang on the ground that the complaint filed by them is a prejudicial question which warranted the suspension of the proceedings before the court. Is the complaint filed by the spouses Pahang a prejudicial question to Metrobanks petition for the issuance of a Writ of Possession? ANSWER: NO. A prejudicial question is one that arises in a case the resolution of which is a logical antecedent of the issue involved therein, and the cognizance of which pertains to another tribunal. It generally comes into play in a situation where a civil action and a criminal action are both pending and there exists in the former an issue that must be preemptively resolved before the criminal action may proceed because howsoever the issue raised in the civil action is resolved would be determinative juris et de jure of the guilt or innocence of the accused in the criminal case. The complaint of the petitioners for annulment of extrajudicial sale is a civil action and the respondents petition for the issuance of a writ of possession is but an incident in the land registration case and, therefore no prejudicial question can arise from the existence of the two actions. (Spouses Pahang vs Vestil, GR No. 148595, July 12, 2004) QUESTION No.3: Rodolfo and Marietta were married on March 5, 1959. On December 6, 1992, Rodolfo left the conjugal home and abandoned Marietta and their children. In the meantime, Rodolfo, who was desirous of contracting another marriage, filed a petition for the declaration of the nullity of his marriage with Marrieta on the ground of psychological incapacity. Fully aware that Marrieta had already transferred to another residence, Rodolfo still indicated in his petition that summons can be served upon Marrieta in her previous address. As a consequence of which, Marrieta did not receive any summons and failed to file an answer. The court, upon motion, declared Marrieta in default and allowed Rodolfo to adduce evidence ex parte. The public prosecutor who appeared for the state offered no objection to the motion of Rodolfo. The court rendered a decision declaring the marriage of Rodolfo and Marrieta void ab initio. Was the grant of annulment of marriage by default proper? ANSWER: NO. The actuations of the trial court and the public prosecutor are in defiance of Article 48 of the Family Code. A grant of annulment of marriage or legal separation by default is fraught with the danger of collusion. Hence, in all cases for annulment, declaration of nullity of marriage and legal separation, the prosecuting attorney or fiscal is ordered to appear on behalf of the state for the purpose of preventing any collusion between the parties and to take care that their evidence is not fabricated or suppressed. If the defendant-spouse fails to answer the complaint, the court cannot declare him or her in default but instead, should order the prosecuting attorney to determine if collusion exists between the parties. The prosecuting attorney or fiscal may oppose the application of legal separation or annulment through the presentation of his own evidence, if in his opinion, the proof adduced is dubious and fabricated. (Ancheta vs Ancheta, GR No. 145370, March 4, 2004) QUESTION No.4: Alfredo and Encarnacion were married on January 8, 1960. During the subsistence of their marriage, they acquired 100,000 shares of stock in Citycorp and registered the same in the name of Alfredo.

CIVIL LAW

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On September 26, 1978, the Philippine Blooming Mills Company, Inc (PBMCI)obtained a loan from Allied Bank. As added security for the said loan, Alfredo, as the Executive Vice President of PBMCI executed a continuing guarantee with Allied Bank binding himself to jointly and severally guarantee the payment of all the PBMCI obligations owing to Allied Bank. PBMCI failed to settle its obligation with Allied Bank. Allied Bank filed an application for a writ of preliminary attachment which was granted by the court. As a consequence of which, the sheriff levied on attachment the 100,000 shares of Citycom stocks in the name of Alfredo. Encarnacion, assisted by Alfredo, thereafter filed a Motion to Set Aside the levy on attachment. Should the Motion to Set Aside the levy on execution be granted? ANSWER: YES. Article 160 of the New Civil Code provides that all the properties acquired during the marriage are presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband, or to the wife. It is not even necessary to prove that the properties were acquired with funds of the partnership. As long as the properties were acquired by the parties during the marriage, they are presumed to be conjugal in nature. In fact, even when the manner in which the properties were acquired does not appear, the presumption will still apply, and the properties will still be considered conjugal. In this case, the evidence adduced by Encarnacion is that the 100,000 shares of stocks in Citycorp were issued and registered in its corporate books in the name of Alfredo when the said corporation was incorporated on May, 14, 1979. This was done during the subsistence of the marriage of Alfredo and Encarnacion. The shares of stock are thus presumed to be the conjugal partnership property of Alfredo and Encarnacion. The barefaced fact that the shares of stocks were registered in the corporate books of Citycorp solely in the name of Alfredo does not constitute proof that Alfredo, not the conjugal partnership, owned the same. (Ching vs Court of Appeals, GR No. 124642, February 23, 2004) Note: Under the Family Code, Article 93, the presumption is that property acquired during the marriage belong to the community, unless it is proved that it is one of those exclused therefrom. The presumption in Article 116 of the Family Code will only arise if the future spouses agree in their marriage settlements that the regime of conjugal partnership of gains shall govern their property relations during the marriage pursuant to Article 105 FC.

Property
QUESTION No.1: The spouses Pascua executed a Deed of Absolute Sale over their property and the improvements thereon in favor of the spouses Chua. On the basis of the said deed, Transfer Certificate of Title No. 87610 over the property was issued to the latter. The spouses Chua thereafter demanded that the spouses Apostol vacate the property but the latter stubbornly refused to do so claiming, among others, that they bought the said property and have been in possession of the same in the concept of an owner though they were not able to register the deed of sale. The spouses Chua filed a complaint for unlawful detainer against the spouses Apostol. The latter, on the otherhand, filed a complaint for annulment of the deed of sale and TCT and for reconveyance. Can the spouses Apostol be dispossessed of the property notwithstanding the fact that they are possessors in the concept of owner? ANSWER: YES. The subject property is registered under the Torrens System in the names of the spouses Chua whose title to the property is presumed legal and cannot be collaterally attacked, much less in an action for unlawful detainer. It is an accepted rule that a person who has a Torrens title over the property is entitled to the possession thereof. In Javelosa vs CA (265 SCRA 493), the Supreme Court declared that the registered owners are entitled to the possession of the property covered by the said title from the time such title was issued in their favor. Moreover, the fact that the respondents were never in prior physical possession of the subject land is of no moment, as prior physical possession is necessary only in forcible entry cases. (Spouses Apostol vs Court of Appeals, GR No. 125375. June 17, 2004)

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CIVIL LAW

QUESTION No.2: Jose is the owner of a parcel of land situated in San Agustin, Dasmarinas, Cavite. Sometime in the middle of 1970, Paolo, the brother of Jose who was then the president of Cavite Electric Cooperative, verbally requested the latter to grant National Power Corporation the right of way over a portion of the subject property and to allow it to install wooden electrical posts and transmission lines for the electrification of Puerto Azul. Jose acceded to the said request but upon the condition that the said installations would only be temporary in nature. Sometime in 1994 and thereafter in 1995, agents of NPC entered the property of Jose and conducted engineering surveys thereon for the purpose of erecting an all-steel transmission line tower. Jose thereupon filed an action for a sum of money and damages alleging therein that contrary to their verbal agreement, NPC continued to use his property for its wooden electrical posts and transmission lines without compensating him therefore. Instead of filing an answer, NPC filed a motion to dismiss on the ground that it had already acquired by prescription the easement of right-of-way over that portion of Joses property where its posts and transmissions were established. Has NPC acquired by prescription the easement of right of way? ANSWER: NO. Article 620 of the Civil Code reads: Continuous and apparent easements are acquired either by virtue of a title or by prescription of then years. Prescription as a mode of acquisition requires the existence of the following: (1) capacity to acquire by prescription; (2) a thing capable of acquisition by prescription; (3) possession of the thing under certain conditions; and (4) lapse of time provided by law. Acquisitive prescription may either be ordinary, in which case the possession must be in good faith and with just title, or extraordinary, in which case there is neither good faith nor just title. In either case, there has to be possession which must be in the concept of an owner, public, peaceful, and uninterrupted. As a corollary, Article 1119 of the NCC provides that: Acts of possessory character executed in virtue of license or by mere tolerance of the owner shall not be available for the purposes of possession. In the present case, the facts reveal that NPCs possession of that portion of Joses property where it erected the wooden posts and transmission lines was merely upon the tolerance of the latter. Accordingly, this permissive use by NPC of that portion of the subject property, no matter how long continued, will not create an easement of right of way by prescription. (NPC vs. Spouses Campos Jr. GR no. 143643 June 27, 2003) QUESTION No.3: Teresa owned a residential lot with the certificate of title in her name. In 1960, she allowed Rosendo to construct a house on the said lot and stay therein without any rentals therefore. In 1966, she leased the property to Bienvenido Santos and assigned her leasehold rights to the Second Quezon City Development Bank, to which she had an outstanding loan. Teresa died in 1978. In deference to her wishes, her heirs allowed Rosendo to stay in the property. Rosendo died in 1995. The heirs of Teresa thereafter filed an ejectment suit against the heirs of Rosendo after the later refused to vacate the property despite repeated demands. The heirs of Rosendo interposed the defense that Teresa donated the parcel of land to Rosendo in 1976. They produced as evidence the photocopy of the deed of donation. An examination of the deed reveals that the same is notarized and appears to have complied with all the requisites of donation. Hence, its validity, according to the heirs of Rosendo, must be presumed. It appears however, that the title to the property remained with Teresa; that the Deed of Donation was not registered in the Office of the Register of Deeds; nor was the deed annotated in the certificate of title. a) Do the heirs of Rosendo have the better right of possession? b) What are the essential elements of a valid donation? c) Is registration of the Deed of Donation necessary for its validity? ANSWERS: a) NO. The fundamental principle is that a certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein as the registered owner. The registered owner has the right to posses, enjoy and dispose of the property without any limitations other than those imposed by law. Furthermore, the following facts and circumstances engender veritable doubts as to whether they have a better right of possession: the fact that the title to the property

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remained with Teresa, and that no new title had been issued in the name of Rosendo because the deed was not registered in the Office of the Register of Deeds; the fact that the deed was not annotated at the dorsal portion of the certificate of title; and the fact that it was only after eighteen years, after the heirs of Rosendo were sued for ejectment, that this defense of donation came out for the first time. b) The essential elements of donation are as follows: (a) the essential reduction of the patrimony of the donor; (b) the increase in the patrimony of the donee; (c) the intent to do an act of liberality or animus donandi. When applied to a donation of an immovable property, the law further requires that the donation be made in the same deed or in a separate public instrument; in cases where the acceptance is made in a separate instrument, it is mandated that the donor be notified thereof in an authentic form, to be noted in both instruments. c) NO. In order that the donation of an immovable property may be valid, it must be made in a public document. Registration of the deed in the Office of the Register of Deeds or in the Assessors Office is not necessary for it to be considered valid and official. Registration does not vest title; it is merely evidence of such title over a particular parcel of land. The necessity of registration comes into play only when the rights of third persons are affected.

Obligations and Contracts

QUESTION No. 1: Concepcion and her sister, Nieves were co-owners of a parcel of land. Nieves and her husband Angel constructed on the said property a two-storey commercial building. Concepcion thereafter acquired her undivided share of the property by virtue of a court order which had become final and executory. She then filed a complaint for unlawful detainer against Nieves and Angel which was decided by the MTC in her favor. Concepcion subsequently executed a deed of absolute sale covering her undivided share to Iluminada who made a partial payment of the purchase price and promised, pursuant to the contract, to pay the balance upon delivery by Concepcion of the corresponding certificate of title. After the death of Concepcion, Iluminada filed a complaint for the revival and execution of the decision of the MTC in the unlawful detainer case. She alleged therein that she is the successor in interest of Concepcion, and as such, she acquired the right of action to enforce the abovementioned decision of the MTC. Nieves and Angel, on the otherhand, maintains that the complaint should be dismissed because Concepcion had not yet paid the balance of the purchase price of the property, and as such, had not acquired title over the lot and the right to evict them. This is so because they maintained that the deed of absolute sale executed by Concepcion in favor of Iluminada was an executory, and not an executed deed; hence, the failure of Iluminada to pay the balance of purchase price during the lifetime of Conception rendered the sale null and void. Iluminada, thereafter, consigned before the court, after the lapse of 21 years from the execution of the deed of absolute sale, the amount representing the balance of the purchase price and filed a motion for the execution of the decision of the MTC in the unlawful detainer case. a) Did Iluminadas failure to pay the balance of the purchase price render the sale null and void? b) What is the effect of Iluminadas act of consigning the balance of the purchase price before the court? ANSWERS: a) NO. In a perfected contract of sale of realty, the right to rescind the said contract depends upon the fulfillment or non-fulfillment of the prescribed condition. The Supreme Court has held in a number of cases that the non-payment of the purchase price of property is a resolutory condition for which the remedy is either rescission or specific performance under Article 1191 of the New Civil Code. This is true for reciprocal obligations where the obligation is a resolutory condition of the other. The vendee is entitled to retain the purchase price or a part of the purchase price of realty if the vendor fails to perform any

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essential obligation of the contract. Such right is premised on the general principles of reciprocal obligations. Iluminada paid the downpayment of the purchase price. By the terms of the contract, the obligation of the vendee to pay the balance of the purchase price ensued only upon the issuance of the certificate of title by the Register of Deeds over the property sold to and under the name of the vendee, and delivery thereof by the vendor Concepcion to the latter. Concepcion failed to secure a certificate of title over the property. When she died, her obligation to deliver the said title to the vendee devolved upon her heirs, including Nieves. The said heirs, including Nieves failed to do so, despite lapse of eighteen years since Concepcions death. b) The consignation by the vendee of the purchase price of the property is sufficient to defeat the right of the petitioners to demand for a rescission of the said deed of absolute sale. It bears stressing that when the vendee consigned part of the purchase price with he Court and secured title over the property in her name, the heirs of Concepcion, including the petitioners, had not yet sent any notarial demand for the rescission of the deed of absolute sale to the vendee, or filed any action for the rescission of the said deed with the appropriate court. Although Iluminada consigned consigned with the court an amount short of the purchase price, it cannot be claimed that Concepcion was an unpaid seller because under the deed of sale, she was still obligated to transfer the property in the name of the vendee, which she failed to do. According to Article 1167 of the NCC: If a person obliged to do something fails to do it, the same shall be executed at his cost. The same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore, it may be decreed that what has been poorly done be undone. (Gil vs Court of Appeals, GR No.127206. September 12, 2003)

CIVIL LAW

QUESTION No.2: Alfred, an Australian citizen, met Ederlina, a Filipina who was working in Australia as a masseuse. Ederlina is married to Klaus, a German citizen. When the two became close, Alfred convinced Ederlina to return to the Philippines and establish her own business there with the former providing for the capital. While in the Philippines, the two purchased a number of real estate with the use of Alfreds money though the deed of absolute sale designated Ederlina as the vendee. Their relationship, however, did not work out. As a consequence of which, Alfred now demands that Ederlina execute the corresponding deeds of transfer over the disputed properties in his name so that he can sell the same at public auction and recover the value of the same. It is his contention that since it was his money which was used in purchasing the properties, the same belongs to him as the real vendee. a) Will Alfred be allowed to recover the properties on the basis of Article 1412 of the Civil Code? b) Will he be allowed to recover on the ground that the agreement is not illegal per se pursuant to Article 1416? c) Will the denial of relief to Alfred not run counter to Article 22 of the New Civil Code? ANSWERS: a) NO. A contract that violates the Constitution and the law, is null and void and vests no rights and creates no obligations. It produces no legal effect at all. Alfred, being a party to an illegal contract cannot come into a court of law and ask to have his illegal objective carried out. One who looses his money or property by knowingly engaging in a contract or transaction which involves his own moral turpitude may not maintain an action for his losses. The law will not aid either party to an illegal contract or agreement; it leaves the parties where it finds them. Under Article 1412 of the New Civil Code, the petitioner cannot have the subject properties deeded to him or allow him to recover the money he had spent for the purchase thereof. Equity as a rule will follow the law and will not permit that to be done indirectly, which, because of public policy, cannot be done directly. Where the wrong of one party equals that of the other, the defendant is in the stronger position it signifies that in such situation, neither a court of equity nor a court of law will administer a remedy. b) NO. Alfred cannot find solace in Article 1416 NCC which reads: When the agreement is not illegal per se but is merely prohibited, and the prohibition by the law is designated for the protection of the plaintiff, he may, if public policy is thereby enhanced , recover what he has paid or delivered. The provision applies only to those contracts which are merely

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c)

prohibited, in order to benefit private interests. It does not apply to contracts void ab initio. The sales of three parcels of land in favor of Alfred who is a foreigner is illegal per se. The transactions are void ab initio because they were entered into in violation of the Constitution. To allow Alfred to recover the properties or the money used in the purchase of the same would be subversive of public policy. NO. The said provision is expressed in the maxim: Memo cum alterius deter detremento protest (No person should unjustly enrich himself at the expense of another). An action for recovery of what has been paid without just cause has been designated as an accion in rem verso. The provision does not apply if, as in this case, the action is proscribed by the Constitution or by the application of the pari delicto doctrine. It may be unfair and unjust to bar Alfred from filing an accion in rem verso over the subject properties, or from recovering the money he paid for the sid properties, but as Lord Mansfield stated in the early case of Holman vs Johnson: the objection that a contract is immoral or illegal as between the plaintiff and the defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake that the objection is ever allowed; but it is founded on general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff. (Frenzel vs Catito, GR No.143958, July 11, 2003)

QUESTION No.3: Angelica and her children were the registered owners of 3 parcels of land. These properties were tenanted and tilled by farmers. The said farmers assigned their rights to the land in favor of Herminio in consideration of P50/ sqm to be payable when the legal impediments to the sale of the said land ceased to exist. Herminio demanded for the implementation of the contract. The latter, however, desisted and informed Herminio that they were rescinding the contract and they will instead sell their rights to the Lacsons who offered him better terms. Are the Lacsons guilty of interference? Answer: No. Under Art. 1314 of the NCC any third person who induces another to violate his contract shall be liable for damages to the other contracting party. It has been held that the pleader has the burden of proving: 1) the existence of a valid contract; 2) knowledge by the third person of the existence of the contract; and 3) interference by the third person in the contractual relation without legal justification. One who is not a party to a contract and who interferes thereon is not necessarily an officious or malicious intermeddler. Where there was no malice in the interference of a contract, and the impulse behind ones conduct lies in a proper business interest rather than in wrongful motives, a party cannot be a malicious interferer. Where the alleged interferer is financially interested, and such interest motivates his conduct, it cannot be said that he is an officious or malicious intermeddler. Such is the case at bar. (Tayag vs. LacsonGR # 134971 March 25, 2004)

San Beda College of Law

Wills and Succession

QUESTION No.1: On September 20, 1953, Pastor Lim married Rufina Luy. During the early part of their marriage, Pastor established a number of family corporations using their conjugal funds. Among these corporations was Skyline International Corporation wherein the spouses Lim were incorporators and employees. In 1971, Rufina filed a petition for legal separation on the ground of infidelity against Pastor. The court granted the same and upon motion ordered the sheriff to have the properties of Skyline levied to answer for the award of support granted to Rufina. On August 21, 1987, Speed Distributing Corporation was registered with SEC with Pastor as one of the incorporators. Then on June 21, 1991, Leslim Corporation was also registered with SEC with Pastor as the majority shareholder. On June 11, 1994, Pastor died intestate and was survived by his wife who was thereafter appointed as special administratrix of Pastors estate. It appears that on two occasions, Leslim Corporation sold to Speed Distributing Corp. parcels of land. Upon knowing this, Rufina filed a complaint against Speed for the nullification of the deed of sale executed by Leslim in its favor. She alleged that the subject properties, although registered in the name of those entities, were acquired by Pastor during their marriage. She further alleged that the sale was unauthorized since at the time of its execution, her

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husband who was major stockholder, was already dead and could no longer manifest his approval over the same. Can Rufina legally question the validity of the sale? Answer: Yes. Rufina filed the complaint as one of the heirs of Pastor, who died intestate. She was, in fact, the surviving spouse of the deceased, a compulsory heir by operation of law. The general rule under the law on succession is that successional rights are transmitted from the moment of death of the decedent and compulsory heirs are called upon to succeed by operation of law to the inheritance without the need of further proceedings. Under Art. 776, NCC, inheritance includes all the properties, rights and obligations of a party, not extinguished by his death. Although Rufina was appointed by the probate court as special administratrix of the estate of Pastor, she had the right, apart from her being a special administratrix, to file the complaint against Speed for the nullification of the deed of absolute sale. A prior settlement of the estate or even the appointment of Rufina as administratrix, is not necessary for any of Pastors heirs to acquire legal capacity to sue. As successors who stepped into the shoes of their decedent upon his death, they can commence any action originally pertaining to the decedent. From the moment of Pastors death, all his rights not extinguished by his death were transmitted to his heirs. (Speed Distributing Corp. vs. CA, GR No. 149351, March 17, 2004)

CIVIL LAW

Sales and Lease

QUESTION No.1: Agricom leased its rubber plantation to Pioneer Enterprises. As a consequence of which, Agricom terminated its employees in the plantation and gave them their separation pay. While Pioneer was managing the plantation, some of Agricoms severed employees filed a complaint for illegal dismissal against Agricom and Pioneer which was decided by the labor arbiter in favor of the employees. Some individuals fenced certain portions of the plantation, went to the office of Pioneer bringing tax declarations and claimed that they were the owners of the same. Pioneer defaulted in its payment of the monthly rental. Agricom thereafter filed a complaint for sum of money with damages. In its answer, Pioneer maintained that she had the right to suspend payment of the rentals since Agricom failed to maintain her in peaceful and adequate enjoyment of the leased property. a) Does Agricom have the obligation to maintain the lessee in peaceful and adequate enjoyment of the property? b) Granting that the above obligation exists, was Agricom able to comply with the same? ANSWERS: a) YES. As lessor, the Agricom had the duty to maintain Pioneer in the peaceful and adequate enjoyment of the leased premises. Such duty was made as part of the contract of lease entered into by the parties. Even if it had not been so, the lessor is still duty-bound under Article 1654(3) of the Civil Code. b) YES. The duty to maintain the lessee in the peaceful and adequate enjoyment of the lease for the duration of the contract mentioned in Article 1654 (3) is merely a warranty that the lessee shall not be disturbed in his legal, and not physical, possession. In the case at bar, no action to quiet title was filed by any of the said claimants against Pioneer during the time that it occupied the premises. When Pioneers representative saw that a portion of the leased premises was being fenced by the claimants, it had all the right to sue the intruders who had disturbed its physical possession as provided in Article 1664 of the New Civil Code. However, Pioneer did not file any suit against the claimants. Patently, then, Pioneer had not been disturbed in its legal possession of the property in derogation of Article 1654 of the New Civil Code. (Chua Tee Dee vs Court of Appeals, GR No.135721. May 27, 2004) QUESTION No.2: Orlando obtained a loan from Philippine Savings bank payable within a period of one year in quarterly installments of P29,190.28. The said loan was secured by a real estate mortgage covering Orlandos property. On December 26, 1985, Orlando, as vendor, and Rogelio as vendee executed a Deed of Sale with Assumption of Mortgage over the said property. A month later, Orlando executed a Contract to Sell involving the same property in favor of Rogelio for P250,000.00. In the said

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document, he obliged himself to execute a deed of absolute sale over the property in favor of Rogelio upon the full payment of the purchase price thereof. The contract futher obliged Rogelio to pay the said amount to PSB as part of the purchase price. Rogelio paid the first, second and third quarterly installments in Orlandos name with PSB. However, on November 27, 1986, Orlando was notified by PSB that his loan would mature on December 24 of that year. Fearing that Rogelio would not be able to pay the last installment, Orlando was compelled to pay the same. Orlando sent a notice to Rogelio that he was ready to execute the deed of absolute sale and turn over the title to the property upon latters remittance of the amount which Orlando paid to PSB. On December 24, 1986, Rogelio went to PSB to pay the last installment and informed the latter that Orlando had executed a deed of sale with assumption of mortgage in his favor. PSB however refused to accept the payment and informed Rogelio that it was not bound by the said deed. Rogelio thereafter filed a complaint for specific performance against Orlando. a) What is the nature of the contract entered into between Orlando and Rogelio? b) What is the effect of Rogelios failure in paying the last installment to PSB? c) What remedy, if any, is available to Rogelio? ANSWERS: a) CONTRACT TO SELL. It bears stressing that Orlando and Rogelio executed two interrelated contracts, vis: the Deed of Sale with Assumption of Mortgage and the Contract to Sell. To determine the intention of the parties, the two contracts must be read and interpreted together. Under the two contracts, Orlando bound and obliged himself to execute a deed of absolute sale over the property and transfer title thereon to Rogelio after the payment of the full purchase price of the property, inclusive of the quarterly installments due on the petitioners loan with PSB. Construing the contracts together, it is evident that the parties executed a contract to sell and not a contract of sale. It is well established that where the seller promised to execute a deed of absolute sale upon completion of payment of the purchase price by the buyer, the agreement is contract to sell. b) In contracts to sell, where ownership is retained by the seller until the payment of the price in full, such payment is a positive suspensive condition , failure of which is not really a breach but an event that prevents the obligation of the vendor Orlando to convey title in accordance with Article 1184 of the Civil Code. The non-fulfillment by Rogelio of his obligation to pay, which is a suspensive condition to the obligation of Orlando to sell and deliver the title to the property, rendered the contract to sell ineffective and without force and effect. The parties stand as if the conditional obligation had never existed. Article 1191 will not apply because it presupposes an obligation already extant. There can be no rescission of an obligation that is still non-existing, the suspensive condition not having happened. c) Rogelio may reinstate the contract to sell by paying the amount paid by Orlando to PSB when the latter settled the last installment, and Orlando may agree thereto and accept Rogelios late payment. In this case, Orlando had already decided before and after Rogelio filed the complaint to accept the payment and to execute the deed of absolute sale over the property and cause the transfer of the title of the subject property to Rogelio. (Rayos vs Court of Appeals, GR No. 135528, July 14, 2004)

San Beda College of Law

Partnership, Agency and Trusts

QUESTION No.1: The heirs of Tecson and Eleosida are the owners of a parcel of land covered by TCT Nos. T-36766 and T-36745 respectively. The abovementioned owners are represented by Mary. On one occasion, Mary met Antonio and Aurelio who offered to purchase the property, of which the former agreed. Antonio and Aurelio thereafter demanded that a deed of absolute sale be executed by Mary pursuant to their verbal agreement. When the said demand reached Mary, she sent a letter to Antonio and Aurelio informing them that she is no longer selling the property as she was encountering problems with the tenants thereon.

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Antonio and Aurelio subsequently filed a complaint for specific performance with damages against Mary and the registered owners of the parcels of land grounded on the alleged perfected contract of sale as evidenced by the letter sent to them by Mary. a) Was there a perfected contract of sale? b) Was the letter sent by Grace a sufficient note or memorandum of the perfected contract to remove the same from the coverage of the statute of frauds? ANSWERS: a) NO. There is no documentary evidence that the respondent-owners authorized respondent Mary to sell their properties to another. Article 1878 of the New Civil Code provides that a special power of attorney is necessary to enter into a contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration, or to create or convey real rights over immovable property, or for any other act of strict dominion. Any sale of real property by one purporting to be the agent of the registered owner without any authority therefore in writing from the said owner is null and void. He declarations of the agent alone are generally insufficient to establish the fact or extent of her authority. b) NO. Contrary to Antonio and Aurelios contention, the letter sent by Grace is not a note or memorandum within the context of Article 1403 (2) of the New Civil Code because it does not contain the following: (a) all the essential terms and conditions of the sale of the properties; (b) an accurate description of the property subject of the sale; and (c) the names of the respondents-owners of the properties. (Litonjua vs Fernandez, GR No.148116. April 14, 2004)

CIVIL LAW

Credit transactions
QUESTION No.1: The spouses Serrano obtained a loan from GSIS secured by a real estate mortgage upon a house and lot owned by the former. The spouses Serrano executed on June 3, 1969 a deed of absolute sale with partial assumption of mortgage over the property in favor of the spouses Geli who immediately took possession of the same. The spouses Geli failed to settle their obligation. As a consequence of which, GSIS filed a complaint for the rescission of the deed of absolute sale with partial assumption of mortgage. The court thereafter ordered the rescission of the said deed. The spouses Geli elevated the case to the Court of Appeals. During the pendency of the appeal, GSIS foreclosed the real estate mortgage over the property. During the auction sale, the property was awarded to GSIS as the highest bidder and a certificate of sale was issued to it on August 30, 1986. Unknown to both the spouses Serrano and the Court of Appeals, the spouses Geli paid the redemption price on October 30, 1987 and a certificate of redemption was executed by GSIS in their favor. The Court of Appeals however dismissed the appeal and the same became final and executory. (optional) The spouses Geli thereafter filed a petition for certiorari praying for the nullification of the order of the trial court. They alleged that when they paid the redemption price to the GSIS, their appeal of the decision of the lower court was still pending before the CA. Consequently, under the terms of the deed of absolute sale with assumption of mortgage which was still standing at that time, they were ipso facto subrogated to the rights of the spouses Serrano as mortgagors of the property; hence, they became owners of the property and were entitled to the possession thereof. Did the act of the spouses Geli in redeeming the property and of GSIS in executing the certificate of redemption in favor of the former operated to vest in them the ownership over the same? ANSWER: NO. Before the lapse of the one year period, the mortgagor-debtor remains the owner of the property. The right acquired by the purchaser at public auction is merely inchoate until the period of redemption has expired without the right being exercised by the redemptioner. Such right becomes absolute only after the expiration of the redemption period without the right of redemption having been exercised. In this case, there is no showing that that the sheriffs certificate of sale in favor of the GSIS has been registered in the Office of the register of Deed and if so, when it was in fact registered in the said office. It cannot thus be argued that when the spouses Geli paid the redemption price in full payment of the account of the spouses Serrano, the one year period to redeem the property had by

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then lapsed. Hence, the spouses Serrano remained the owners of the property. The GSIS never acquired title over the property and could not have conveyed and transferred ownership over the same when it executed the certificate of redemption to and in the name of the spouses Serrano. (Serrano vs Court of Appeals, GR No. 133883, December 10, 2003) QUESTION No.2: Franklin was asked by his friend Angeles to help Arturo in incorporating his business by depositing a certain amount of money in the bank account of Sterela Marketing. Angeles assured Vives that he could withdraw the said amount from the same account in a months time. Relying on the aforementioned assurances and representations, Franklin issued a check in the amount of P200,000.00 in favor of Sterela Marketing. Franklin thereafter went to Producers Bank to verify if his money was still intact. He was however informed that part of the money in the account had been withdrawn by Arturo and that the remaining P90,000.00 could not be withdrawn since it had to answer for some postdated checks issued by Arturo. Arturo issued a postdated check in the amount of P212,000.00 in favor of Franklin which was however dishonored upon presentment. As a consequence of which, Franklin filed an action for recovery of sum of money. a) Was the transaction between Franklin and Arturo one of loan or commodatum? b) Can a consumable thing be a subject of commodatum? ANSWER: a) COMMODATUM. Franklin agreed to deposit his money in the savings account of Sterela specifically for the purpose of making it appear that the same had sufficient capitalization for incorporation, with the promise that the amount shall be returned within thirty days. Franklin merely accommodated Arturo by lending his money without consideration as favor to his good friend Angeles. It was however clear to the parties that the money will not be removed from Sterelas savings accountand would be returned to Franklin after thirty days. Arturos attemps to return to Franklin the amount of P200,000.00 together with an additional P12,000.00, allegedly representing interest on the mutuum, did not convert the transaction from the commodatum into a mutuum because such was not the intent of the parties and because the additional P12,000.00 corresponds to the fruits of the lending of the P200,000.00. Article 1935 of the Civil Code expressly states that the bailee in commodatum acquires the use if the thing loaned but not the fruits. As such, it was only proper for Arturo to remit to Franklin the interest accruing to the latters money deposited with Producers Bank. b) YES. There are some instances where a commodatum may have for its object a consumable thing. Article 1936 of the New Civil Code provides that Consummable 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 distribution. Thus, if consumable goods are loaned only 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. (Producers Bank of the Philippines vs CA, GR No.115324, February 19, 2003) QUESTION No.3: Superlines Transportation Co. decided to acquire five new buses from Diamond Motors. ICC Leasing agreed to finance the purchase of the said buses in the amount of P13 Million via a loan upon the condition that the buses shall be used as security for the loan. Superlines however defaulted in the payment of its obligation to ICC. As a consequence of which, ICC extrajudicially foreclosed the chattel mortgage. During the auction sale, ICC offered a bid of P7 Million for the motor vehicles and was declared the winning bidder, resulting in the deficiency of P6 Million from the total amount of the loan. a) Is Article 1484 (3) of the Civil Code applicable in the present case? b) Is Superlines still liable for the P6 Million deficiency? ANSWERS: a) NO. Article 1484 (3) of the New Civil Code is inapplicable to the instant transaction between the parties. It was Diamond Motors and not ICC which sold the subject buses to Superlines. No evidence had been presented by Superlines to show that ICC bought the said buses from

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Diamond Motors Corporation under a special arrangement and that ICC sold the buses to Superlines. Article 1484 (3) is applicable only where there is vendor-vendee relationship between the parties and since ICC did not sell the buses to Superlines, the latter cannot invoke the said law. YES. Applying the Chattel Mortgage Law, it is settled that if in an extra-judicial foreclosure of a chattel mortgage a deficiency exists, an independent civil action may be instituted for the recovery of the said deficiency. To deny the mortgagee the right to maintain an action to recover the deficiency after foreclosure of the chattel mortgage would be to overlook the fact that the chattel mortgage is only given as security and not as payment for the debt in case of failure of payment. Both the Chattel Mortgage Law and Act 3135 governing extrajudicial foreclosure of real estate mortgage, do not contain any provision, expressly or impliedly, precluding the mortgagee from recovering deficiency of the principal obligation. (Superlines Transportation Company vs ICC Leasing and Financing Corporation, GR No. 150673, February 28, 2003)

CIVIL LAW

b)

Torts and Damages

QUESTION No.1: Errol was found guilty beyond reasonable doubt by the RTC of Romblon for the murder, qualified by abuse of superior strength, of Alejandro. The court sentenced him to suffer the penalty of reclusion perpetua and ordered him to pay the heirs of Alejandro the following: a) P50,000.00 as civil indemnity; b) actual damages based on the testimony that the heirs incurred burial and other expenses as a consequence of Alejandros death; and c) P25,000.00 as exemplary damages. a) Was the court correct in awarding P50,000.00 as civil indemnity? b) Was the court correct in awarding actual damages? c) Was the court correct in awarding exemplary damages? ANSWERS: YES. Conformably to recent jurisprudence, the amount of P50,000.00 for civil indemnity should be sustained. Artcile 2206 of the Civil Code provides that when death occurs as a result of a crime, the heirs of the deceased are entitled to be indemnified without need of any proof thereof. b) NO. While there was testimony that the heirs incurred burial and other expenses resulting from the death of Alejandro, no competent evidence was presented to prove his claim. Under Artile 2199 of the Civil Code, a party is entitled to compensation only for such pecuniary loss suffered by him as he has duly proved. Only substantiated an proven expenses, or those that appear to have been genuinely incurred in connection with the death , wake or burial of the victim will be recognized. However, under Article 2224 of the same Code, temperate damages may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty. In the present case, the heirs of Alejandro clearly incurred funeral and burial expenses. Hence, the award of temperate damages is justified. c) YES. Given the attendance of the qualifying circumstance of abuse of superior strength, the award of exemplary damages in the amount of P25,000.00 to the heirs of the victim in accordance with Article 2230 of the Civil Code, is in order. (People vs Lachica, GR No.131915. September 3, 2003) a) QUESTION No.2: Zamboanga Development Corporation (ZDC) obtained from United Coconut Planters Bank (UCPB) in which the spouses Teofilo Ramos, Sr. and Amelita Ramos acted as sureties. Teofilo Sr. was the Executive Officer of the Iglesia ni Cristo. For failure of ZDC to settle its obligation, UCPB filed a complaint (Civil Case 16453) for a sum of money against it and the sureties. Judgment was rendered in favor of UCPB. A writ of execution was thereafter issued which contained the name Teofilo Ramos. In the process of implementing the above writ, UCPB was informed by one of its appraisers that they have located a house and lot covered by TCT 275167 owned by Teofilo C.

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Ramos, President and Chairman of the Borad of Directors of the Ramdustrial Corporation, and married to Rebecca Ramos. Meanwhile, Ramdustrial Corp. who was in need of money to participate in a bidding project of San Miguel Corporation, applied for a loan with UCPB using the house and lot owned by Teofilo C. Ramos as collateral therefore. Much to their surprise, they were informed by UCPB that it had to hold in abeyance any action on its loan application because a notice of levy was annotated on the title of the property belonging to Teofilo C. Ramos. As a consequence of which, Teofilo C. Ramos has to rush to the hospital due to hypertension problems and Ramdustrial Corporation forfeited its chances to participate in the bidding. Teofilo C. Ramos thereafter filed a complaint praying that judgment be rendered ordering UCPB to pay moral and exemplary damages on account of its negligence. a) Was UCPB negligent? b) Is the award of moral damages proper? c) Is the award of exemplary damages proper? ANSWERS: a) YES. In determining whether or not the petitioner acted negligently, the constant test is: Did the defendant in doing the negligent act use that reasonable care and caution which an ordinary prudent person would have used in the same situation? If not, then he is guilty of negligence. UCPB has access to more facilities in confirming the identity of their judgment debtors. It should have acted more cautiously, especially since some uncertainty had been reported by the appraiser whom it had tasked to make verifications. It appears that UCPB treated the uncertainty as a flimsy matter. It placed more importance on the information regarding the marketability and market value of the property, utterly disregarding the identity of the registered owner thereof. Furthermore, the name of the judgment debtor in Civil Case 16453 was Teofilo Ramos, Sr.. The name of the owner of the property covered by TCT 275167 was Teofilo C. Ramos. It behoved upon UCPB to ascertain whether Teofilo Ramos Sr. in Civil Case 16453 was the same person who appeared as the owner of the property covered by the said title. If the petitioner had done so, it should have surely discovered that the respondent was not the surety and the judgment debtor in Civil Case 16453. UCPB failed to do so, and merely assumed that the respondent and the judgment debtor Teofilo Ramos Sr. were one and the same person. b) YES. For the award of moral damages to be granted, the following must exist: (1) there must be an injury clearly sustained by the claimant, whether physical, mental, or psychological; (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 for damages is predicated on any of the cases stated in Article 2219 of the Civil Code. In the case at bar, all the four requisites are present. First, Teofilo C. Ramos sustained injuries in that his physical health and cardio-vascular ailment were aggravated; his fear that his one and only property would be foreclosed, hounded him endlessly; and his reputation as mortgagor has been tarnished. Second, the annotation of the notice of levy on the TCT of Teofilo C. Ramos was wrongful, arising as it did from UCPBs negligent act of allowing the levy without verifying the identity of its judgment debtor. Third, such wrongful levy was the proximate cause of Teofilos misery. Fourth, the award for damages is predicated on article 2219 of the Civil Code, particularly No. 10 thereof (Acts and actions referred to in Article 21, 26, 27, 28, 29, 30, 32, 34, and 35). c) NO. Teofilo C. Ramos failed to show that UCPB acted with malice and bad faith. It is a requisite in the grant of exemplary damages that the act of the offender must be accompanied by bad faith or done in wanton, fraudulent, or malevolent manner. QUESTION No. 3: The RTC of Malolos, Bulacan, convicted Trinidad, Sampaga, and Corona of murder and was sentenced accordingly. As to the civil liability of the accused, the trial court awarded, among others, the sum of P500,000 for loss of earning capacity of the victim based solely on the testimony of Josephine, the victims daughter.

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Was the award proper? Answer: No. The award of P500,000 to the heirs of the victim for the latters unearned income is barren of factual basis. The prosecution was mandated to adduce documentary evidence to prove the same. The bare testimony of Josephine is not sufficient basis for the award. Compensation for lost income is in the nature of damages, and requires adequate proof thereof. For loss of income due to death, there must be unbiased proof of the deceaseds average income as well as proof of average expenses. The award for lost income refers to the net income of the deceased; that is the total income less average expenses. No proof of the victims average expenses was adduced in evidence; as such, there can be no reliable estimate of lost earnings. Indeed, the award of the trial court was based merely on speculation and surmises. (People vs. Sampaga, GR No. 139823, March 12, 2004)

CIVIL LAW

Land Titles and Deeds

QUESTION No.1: Angel filed a petition for registration of a parcel of land on June 22, 1994 claiming that he has been in actual, open, continuous and notorious possession, in the concept of an owner over the same. It appears that he likewise filed a foreshore lease application over the same land in 1977. During the trial, the court ordered the LRA and the CENRO to file with it a report on the status of the subject land. The court thereafter rendered a decision on May 3 1995 granting the petition. The said decision became final and executory. The Office of the Solicitor general subsequently filed a petition for annulment of the above judgment on the ground that based on the report of the LRA which was received by it on June 22, 1995, the land applied for is foreshore land. a) What is the nature and classification of foreshore land? b) Will the action of the Republic through the OSG prosper? ANSWERS: a) NO. Foreshore land is that strip of land that lies between the high and low water marks and is alternatively wet and dry to the flow of the tide. It is that part of the land adjacent to the sea, which is alternatively covered and left dry by the ordinary flow of tides. It is part of the alienable land of the public domain and may be disposed of only by lease and not otherwise. Foreshore land remains part of the public domain and is outside the commerce of man. It is not capable of private appropriation. b) YES. Even if the decision of the RTC has become final and executory, the action for annulment of judgment should be sustained since it is impressed with public interest. The State has to protect its interests and cannot be bound by, or estopped from, the mistakes or negligent acts of its officials or agents, mush more, non-suited as a result thereof. Furthermore, Angel had in fact filed a foreshore lease application in 1977 and paid the corresponding fees thereon. There is therefore doubt to Angels claim that he had been in actual, open, notorious, and continuous possession in the concept of an owner.(Republic vs Court of Appeals, GR No. 126316, June 25, 2004) QUESTION No.2: On December 27, 1976, Francisco filed a petition for registration of the three parcels of land. He alleged therein that there were hardly any big trees in the subject property and that he and his predecessors-in-interest even planted bananas, cassava, coconut trees and camotes on the same. He further alleged that he had been in actual, open, notorious and continuous possession of the property in the concept of owner. The application was opposed by the Director of Lands on the ground that the subject property was forest land and was only reclassified as alienable and disposable only on April 16, 1973. a) Should the petition for registration be granted? b) Is the absence of big trees conclusive as regards to the classification of a parcel of land as not belonging to forest land? ANSWERS: a) NO. Under Section 6 of Commonwealth Act No.141, the classification and reclassification of public lands into alienable or disposable, mineral or forest land is the prerogative of the Executive Department. The rule on the confirmation of imperfect title does not apply unless

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b)

and until the land classified as forest land is released in an official proclamation to that effect so that it may form part of the disposable agricultural lands of the public domain. Francisco failed to adduce in evidence any certification from the Bureau of Lands or the Bureau of Forestry to the effect that the property is alienable or disposable. Furthermore, since the property was reclassified as alienable and disposable only on April 16, 1973 and Francisco filed his application only on December 27, 1976, he irrefragably failed to prove his possession of the property for the requisite thirty (30)-year period. 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 to crops by Kaingin cultivators or other farmers. Forest Lands do not have to be in the mountains or in out of the way places. Swampy areas covered by mangrove trees, nipa palms and other trees growing in brackish or sea water may also be classified as forest land. The classification is descriptive of its legal nature or status and does not have to be descriptive of what the land actually looks like. (Zarate vs Director of Lands, GR No. 131501, July 14, 2004)

QUESTION No.3: The spouses Zulueta obtained from GSIS various loans secured by real estate mortgages over parcels of land. The spouses Zulueta failed to pay their loans which prompted GSIS to foreclose the real estate mortgages. During the auction sale, some of the mortgaged properties were awarded to GSIS. However, some lots which were covered by the mortgaged titles were expressly excluded from the auction since those that were sold were sufficient to pay for all the mortgage debts. This notwithstanding, GSIS included the excluded lots when it executed on November 25, 1975 an Affidavit of Consolidation of Ownership on the basis of which, certificates of title over the same were issued in the name of GSIS. Zulueta thereafter transferred his rights over the excluded lots to Eduardo in 1989 who consequently demanded from GSIS the return of the said excluded lots. Eduardo then filed on May 7, 1990 a complaint for reconveyance of real estate against the GSIS. a) Can GSIS legally claim ownership over the excluded properties on the basis of the certificates of title over the same which were issued in its name? b) Has the action for reconveyance prescribed? ANSWERS: a) NO. Even if titles over the lots had been issued in the name of the GSIS, still it could not legally claim ownership and absolute dominion over them because indefeasibility of title under the Torrens system does not attach to titles secured by fraud or misrepresentation. The fraud committed by GSIS in the form of concealment of the existence of said lots and failure to return the same to the real owners after their exclusion from the foreclosure sale made GSIS holders in bad faith. It is well settled that a holder in bad faith of a certificate of title is not entitled to the protection of the law for the law cannot be used as a shield for fraud. b) NO. Article 1456 of the Civil Code provides: If the property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. An action for reconveyance based on implied or constructive trust prescribes in ten years from the alleged fraudulent registration or date of issuance of the certificate of title over the property. The general rule that the discovery of fraud is deemed to have taken place upon the registration of real property because it is considered a constructive notice to all persons does not apply in this case. The case in point is Samonte vs Court of Appeals where the Supreme Court reckoned the prescriptive period for the filing of the action based on implied trust from the actual discovery of the fraud. Santiago came know of GSIS fraudulent acts only in 1989 and the complaint was filed in 1990. Following the Courts pronouncement in Samonte, the institution of the action for reconveyance was thus well within the prescriptive period. (GSIS vs Santiago, GR No. 155206, October 28, 2003) QUESTION No. 4: In August 1950, the Republic of the Philippines filed an application with the cadastral court claiming ownership over certain properties which covered Lot 4329. Guillermo

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filed an answer claiming therein a right over Lot 4329. Guillermo died during the pendency of the case. Gregorio, who claimed to be the only son of Guillermo, substituted the latter, and to him, Lot 4329 was adjudicated by the court. The decision became final and executory. On July 8, 1985, OCT No. 0-6,151 was issued in the name of Gregorio. Sometime thereafter, the brothers and sisters of Guillermo filed a complaint for recovery of possession with damages against Gregorio, alleging that Guillermo died single and without issue and that Gregorio obtained title to the property through fraud deceit and gross misrepresentation. They prayed that Gregorios title be cancelled and the property be reconveyed to them. After the trial, the court declared that Gregorio has not sufficiently proved that he is the son of Guillermo but ruled that he has the right of possession of the disputed property. Is Gregorio entitled to the possession of the disputed property? ANSWER: YES. Gregorio was able to obtain a title in his name over the questioned property after the cadastral proceedings instituted by the Republic. This Torrens title is now a conclusive evidence of his ownership of the subject land. After the expiration of the one-year period from the issuance of the decree of registration, the said certificate of title became incontrovertible. In fine, whether or not his title was obtained fraudulently is beyond the competence of the Supreme Court to determine. The issue should have been raised during the proceeding before the cadastral court. A Torrens title cannot be collaterally attacked, the issue on the validity of title, i.e. whether or not it was fraudulently issued can only be raised in an action expressly instituted for that purpose. The prayer for the cancellation of Gregorios title and the reconveyance of the same to brothers and sisters of Guillermo is legally impossible. To sustain the said action would be inconsistent with the rule that the act of registration is the operative act that conveys a parcel of land to its registered owner under the Torrens system. What we are emphasizing is that, although Gregorio has not sufficiently proved his filiation to the late Guillermo, the fact that he has a legal title over the subject land entitles him to possession thereof, pending the final determination of the validity of the title issued to him in an appropriate proceeding.

CIVIL LAW

DOCTRINES OF SELECTED LANDMARK CASES IN CIVIL LAW

Persons and Family Relations
WAIVER OF RIGHTS A stipulation requiring the recipient of a scholarship grant to waive 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 institution. Thus, conceived, it is not only inconsistent with sound policy, but also with good morals. (Cui vs. Arellano University)

Red Notes in Civil Law

ACTS CONTRA BONUS MORES Applying Art. 21, the Supreme Court ruled that a married man had seduced a girl through an ingenious and tricky scheme, i.e. on the pretext of teaching her how to pray the rosary, to the extent of making her fall in love with him. Verily, he has committed an injury to the girls family in a manner contrary to morals, good customs and public policy. (Pe vs Pe) However, the Supreme Court denied the award of moral damages based on the fact that for one year, from 1958-1959, the plaintiff, a woman of adult age, maintained intimate sexual relations with defendant, with repeated acts of intercourse. Such conduct is incompatible with the idea of seduction. Plainly, there is here voluntariness and mutual passion; for had the plaintiff been deceived, had she surrendered exclusively because of the deceit, artful persuasions and wiles of defendant, she would not have again yielded to his embraces, much less for one year without exacting early fulfillment of the alleged promises of marriage and would

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have cut short all sexual relations upon finding that defendant did not intend to fulfill his promises. Hence, no case is made under Art. 21 of Civil Code. (Tanjanco vs CA) While a breach of promise to marry is not actionable, it has been held that to formally set a wedding and go through and spend for all the wedding preparation and publicity, only to walk out of it when the matrimony was about to be solemnized is a different matter. This palpably and unjustifiably contrary to good customs for which the defendant must be held answerable for damages in accordance with Art. 21 of the Civil Code. (Wassmer vs. Velez) The obligation of cohabitation of husband and wife is not enforceable by contempt proceedings. In private relations, physical coercion is barred under the the old maxim Nemo potest preciso cogi ad factum. However, the refusal of the wife to perform her wifely duties, her denial of consortium and her desertion of her husband would certainly constitute a willful infliction of injury upon her husbands feelings in a manner which is contrary to morals, good customs and public policy for which Arts. 21 and 2210 (10) of the CC authorize an award for moral damages. (Tenchavez vs. Escano) NATIONALITY It is true that owing to the nationality principle embodied in Article 15 of the Civil Code, only Philippine nationals are covered by the policy against absolute divorces the same being considered contrary to our concept of public policy and morality. However, aliens may obtain divorces abroad, which may be recognized in the Philippines, provided they are valid according to their national law. Hence, an American National who had divorced a Filipina wife cannot justifiably maintain that under our laws, the Filipina, despite the divorce, has to be considered still married to him and still subject to a wifes obligation. A Filipina should not be discriminated against in her own country if the ends of justice are to be served. She should not be obliged to live with him, to support him, or to observed respect and fidelity to the ex-husband, and the latter should not continue to be one of her heirs with possible write to conjugal properties. (Van Dorn vs. Romillo, L-68470, Oct. 8, 1985) The decree of divorce obtained by a German national and its legal effects may be recognized in the Philippines insofar as the foreigner is concerned in view of the nationality principle in our civil law on the matter of status of persons. The said German national can no longer be considered as the offended party in case his former wife actually has carnal knowledge with another, because in divorcing her, he already implicitly authorized the woman to have sexual relations with others. (Pilapil vs. Ibay-Somera, GRN 80116, June 30, 1980)

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PREJUDICIAL QUESTION A prejudicial question is one which arises in a case the resolution of which is a logical antecedent of the issue involved therein. It must appear not only that the civil case involves facts upon which the criminal action is based, but also that the resolution of the issues raised in the civil action would necessarily be determinative of the criminal case. Rules of Court, Rule 111, Sec. 5. Elements of prejudicial question. - The two (2) essential elements of a prejudicial question are: (a) the civil action involves an issue similar or intimately related to the issue raised in the criminal action; and (b) the resolution of such issue determines whether or not the criminal action may proceed. He who contracts a second marriage before the judicial declaration of nullity of the first marriage assumes the risk of being prosecuted for bigamy, and in such a case the criminal case may not be suspended on the ground of the pendency of a civil case for declaration of nullity. Otherwise, all that an adventurous bigamist has to do is to disregard Article 40 of the Family Code, contract a subsequent marriage and escape a bigamy charge by simply claiming that the first marriage is void and that the subsequent marriage is equally void for lack of a prior judicial declaration of nullity of the first. A party may even enter into a marriage aware of the absence of a requisite - usually the marriage license - and thereafter contract a subsequent marriage without obtaining a declaration of nullity of the first on the assumption that the first marriage is void. Such scenario would render nugatory the provisions on bigamy. (Bobis vs. Bobis, GRN 138509, July 31, 2000)

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CIVIL LAW

JURIDICAL PERSONALITY The Roman Catholic Church is a corporation by prescription, with acknowledged juridical personality, inasmuch as it is an institution which antedated, by almost a thousand years, any other personality in Europe, and which existed when Grecian eloquence still flourished in Antioch and when idols where still worshipped in the temple of Mecca. (Barlin vs. Ramirez) The estate of a deceased person should be considered an artificial or juridical person for the purposes of the settlement and distribution of his estate which, of course, include the exercise during the judicial administration thereof of those rights and the fulfillment of those obligations of his which survived after his death. (Limjoco vs. Intestate Estate of Pedro Fragrante) Parents of an unborn fetus cannot sue damages on its behalf. A husband of a woman who voluntarily procured her abortion could not recover damages from the physician who caused the same. Since an action for pecuniary damages on account of personal injury or death pertains primarily to the injured, no such right of action could derivatively accrue to the parents or heirs of an unborn child. In fact, even if the cause of action did accrue on behalf of the unborn child, the same was extinguished by its pre-natal death, since no transmission can take place from one that lacked juridical personality. It is no answer to invoke the provisional personality of a conceived child under Article 40 of the Civil Code because the same Article expressly limits such provisional personality by imposing the condition that the child should be subsequently born alive. This is not to say that the parents are not entitled to collect any damages at all. But such damages must be those inflicted directly upon them, as distinguished from the injury or violation of the rights of the deceased, his right to life and physical integrity. Because the parents can not expect either help, support or services from an unborn child, they would normally be limited to moral damages for the illegal arrest of the normal development of the spes hominis that was the foetus, i.e., on account of distress and anguish attendant to its loss, and the disappointment of their parental expectations (Civil Code, Art. 2217), as well as to exemplary damages, if the circumstances should warrant them (Art. 2230). (Geluz vs. Court of Appeals, 2 SCRA 801) CIVIL PERSONALITY Even if the spouse present has a well-founded belief that the absent spouse was already dead, a summary proceeding for the declaration of presumptive death is necessary in order to contract a subsequent marriage, a mandatory requirement which has been precisely incorporated into the Family Code to discourage subsequent marriages where it is not proven that the previous marriage has been dissolved or a missing spouse is factually or presumptively dead, in accordance with pertinent provisions of law. (Navarro vs. Domagtoy, GRN MTJ-96-1088, July 19, 1996) The fact that the Judge who solemnized the marriage did not sign the marriage contracts or certificates of those marriages he solemnized without a marriage license, there were no dates placed in the marriage contracts to show when they were solemnized; the contracting parties were not furnished their marriage contracts and the Local Civil Registrar was not being sent any copy of the marriage contract, will not absolve him from liability. By solemnizing alone a marriage without a marriage license he as the solemnizing officer is the one responsible for the irregularity in not complying with the formal requisites of marriage and under Article 4(3) of the Family Code of the Philippines, he shall be civilly, criminally and administratively liable. (Cosca vs. Judge Palaypayon, 55 SCAD 759) DOMICILE AND RESIDENCE Domicile In Article 50 of the NCC was construed in Ong vs Republic as an individuals permanent home; a place to which whenever absent for business or pleasure, one intends to return and depends on facts and circumstances in the sense that they disclose intent. Domicile includes the twin elements of the fact of residing and the animus manendi. Residence implies the factual relationship of an individual to a certain place. The essential distinction between residence and domicile in law is that the former involves the intent to leave when the purpose for which the resident has taken up his abode ends. One may seek a place for

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purposes such as pleasure, business or health. If a persons intent be to remain, it becomes his domicile. It is thus normal for an individual to have different residences in various places. However, a person can only have a single domicile unless he successfully abandons his domicile in favor of another domicile of choice. (Romualdez-Marcos vs. Commission on Elections, 248 SCRA 300) REQUISITES OF MARRIAGE A marriage under a license is not invalidated by the fact that the license was wrongfully or fraudulently obtained without prejudice to the prosecution of the parties and the solemnizing officer does not have to investigate whether or not the license has been properly issued. (People vs. Belen) The absence of any formal requisites of marriage shall generally render the marriage void ab initio; and while an irregularity in the formal requisites shall not affect the validity of the marriage, the party responsible for their irregularity shall be civilly, criminally, administratively liable. (Cosca vs. Judge Palaypayon, 55 SCAD 759) In order to classify a marriage in articulo mortis, the law does not require that the party who is at point of death must die immediately after the celebration of the marriage. All that is necessary is that the parties, including the person solemnizing the marriage must be convinced that there was imminent danger of death (Loria vs. Felix, GRN L-9005, June 20, 1958) VOID AND VOIDABLE MARRIAGES The senseless and protracted refusal of one of the parties of sexual cooperation for the procreation of children is equivalent to psychological incapacity. Absence of finding as to the one who refused to have sex is immaterial because the action to declare a marriage void may be filed by either party, even the psychologically incapacitated one. (Chi Ming Tsoi vs. Court of Appeals, 266 SCRA 324) Working on the assumption that Pepito and Norma have lived together as husband and wife for five years without the benefit of marriage, that five-year period should be computed on the basis of a cohabitation as "husband and wife" where the only missing factor is the special contract of marriage to validate the union. In other words, the five-year common-law cohabitation period, which is counted back from the date of celebration of marriage, should be a period of legal union had it not been for the absence of the marriage. This 5-year period should be the years immediately before the day of the marriage and it should be a period of cohabitation characterized by exclusivity meaning no third party was involved at any time within the 5 years and continuity that is unbroken. Otherwise, if that continuous 5-year cohabitation is computed without any distinction as to whether the parties were capacitated to marry each other during the entire five years, then the law would be sanctioning immorality and encouraging parties to have common law relationships and placing them on the same footing with those who lived faithfully with their spouse. (Ninal vs. Bayadog, GR No. 133778, March 14, 2000) For Article 34 of the Family Code on legal ratification of marital cohabitation to apply, the following requisites must concur: 1. The man and woman must have been living together as husband and wife for at least five years before the marriage; 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; 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]; and 5. The solemnizing officer must execute a sworn statement that he had ascertained the qualifications of the parties and that he had found no legal impediment to their marriage (Manzano vs. Sanchez G.R. No. MTJ-00-1329, March 08, 2001)

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Under the Family Code, there must be a judicial declaration of the nullity of a previous marriage before a party thereto can enter into a second marriage. Article 40 of the Family Code is applicable to remarriages entered into after the effectivity of the Family Code regardless of the date of the first marriage. Said Article is given retroactive effect insofar as it does not prejudice vested or acquired rights in accordance with the New Civil Code and other laws. (Atienza vs. Brillantes, 243 SCRA 32) A distinction should be made between the case of a woman who was already 3 or 4 months pregnant at the time of marriage and one who is already 6 or 7 months pregnant. In the former, concealment is possible and consequently, the marriage can be annulled by reason of fraud. In the latter concealment is not possible. According to medical authorities, even on the 5th month of pregnancy, the enlargement of a woman's abdomen is still below the umbilicus, that is to say, the enlargement is limited to the lower part of the abdomen so that it is hardly noticeable and may, if noticed, be attributed only to fat formation on the lower part of the abdomen. It is only on the 6th month of pregnancy that the enlargement of the woman's abdomen reaches a height above the umbilicus, making the roundness of the abdomen more general and apparent. If, as claimed by plaintiff, defendant is "naturally plump", he could hardly be expected to know, merely by looking, whether or not she was pregnant at the time of their marriage, more so because she must have attempted to conceal the true state of affairs. (Aquino vs. Delizo, G.R. No. L-15853, July 27, 1960) LEGAL SEPARATION An action for legal separation which involves nothing more than the bed-and board separation of the spouses is purely personal. Being personal in character, it follows that the death of one party to the action causes the death of the action itself. (Lapuz Sy vs. Eufemio, 43 SCRA 177) The mere circumstance that defendant told the Fiscal that she "liked also" to be legally separated from her husband, is no obstacle to the successful prosecution of the action. Confession of judgment usually happens when the defendant appears in court and confesses the right of plaintiff to judgment or files a pleading expressly agreeing to the plaintiffs demand. Here there was only an extrajudicial admission and NOT a confession of judgment. Yet, even supposing that the above statement of defendant constituted practically a confession of judgment, inasmuch as there is evidence of the adultery independently of such statement, the decree may and should be granted, since it would not be based on her confession, but upon evidence presented by the plaintiff. What the law prohibits is a judgment based exclusively or mainly on defendant's confession. If a confession defeats the action ipso facto, any defendant who opposes the separation will immediately confess judgment, purposely to prevent the giving of the decree. (Ocampo vs. Florenciano, L-13553, February 23, 1960) JUDICIAL OF DECLARATION OF NULLITY For purposes of remarriage, the only legally acceptable basis for declaring a previous marriage an absolute nullity is a final judgment declaring such previous marriage void, whereas, for purposes other than remarriage, other evidence is acceptable. (Domingo vs. CA) Parties to the marriage should not be permitted to judge for themselves its nullity, for the same must be submitted to the judgment of the competent courts and only when the nullity of the marriage is so declared can it be held as void, and so long as there is no such declaration, the presumption is that the marriage exists for all intents and purposes. Therefore, he who cohabits with a woman not his wife, before the judicial declaration of nullity of the marriage, assumes the risk of being prosecuted for concubinage. (Beltran vs. People, June 20, 2000)

CIVIL LAW

Red Notes in Civil Law

CUSTODY OF MINOR CHILDREN In all cases involving the custody, care, education and property of children, the latter's welfare is paramount. The provision that no mother shall be separated from a child under seven (7) years of age, will not apply where the Court finds compelling reasons to rule otherwise. One compelling reason to separate a child from the mother is when she has a common-law (or live-in)

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relationship with another man. Such a scenario will not afford the minor child that desirable atmosphere where she can grow and develop into an upright and moral-minded person. In all controversies regarding the custody of minors, the foremost consideration is the moral, physical and social welfare of the child concerned, taking into account the resources and moral as well as social standing of the contending parents. (Cervantes vs. Fajardo, GRN 79955, January 27, 1989) In ascertaining the welfare and best interests of the child, courts are mandated by the Family Code to take into account all relevant considerations. If a child is under seven years of age, the law presumes that the mother is the best custodian. The presumption is strong but it is not conclusive. It can be overcome by "compelling reasons." If a child is over seven, his choice is paramount but, again, the court is not bound by that choice. In its discretion, the court may find the chosen parent unfit and award custody to the other parent, or even to a third party as it deems fit under the circumstances. (Espiritu vs. CA, GRN 115640, March 15, 1995) PROPERTY RELATIONS The provisions of the Family Code highlight the underlying concern of the law for the conservation of the conjugal partnership; for the husbands duty is to protect and safeguard, if not augment, not to dissipate it. This is the underlying reason why the Family Code clarifies that the obligations entered into by one of the souses must be those that redound to the benefit of the family and that the measure of the partnerships liability is to the extent that the family is benefited. In the case at bar, while the husband is solidarily liable with AIDC, such liability under the Family Code is restricted by Article 122(1) so that debts fro which the husband is liable may not be charged against the conjugal partnership. (Ayala Investment and Development Corp. vs. CA, 286 SCRA 272) In donations propter nuptias the marriage is really a consideration, but not in the sense of being necessary to give birth to the obligation, which makes the fact that the marriage did not take place a cause for the revocation of such donations, thus taking it for granted that there may be a valid donation propter nuptias even without marriage, since that which has not existed cannot be revoked. The marriage in a donation propter nuptias is rather a resolutory condition which, as such presupposes the existence of the obligation which may be resolved or revoked, and not a condition necessary for the birth of the obligation. (Solis vs. Barroso, GRN 27939, October 30, 1928) The words in Article 161 of the New Civil Code "all debts and obligations contracted by the husband for the benefit of the conjugal partnership "do not require that actual profit or benefit must accrue to the conjugal partnership from the husband's transaction," but it suffices that the transaction should be one that normally would produce such benefit for the partnership." (G-Tractors vs. CA, GRN 57402, February 28, 1985) Under Article 128 of the Family Code, the aggrieved spouse may petition for judicial separation of property either on the ground of abandonment without just cause or on the ground of failure to comply with obligations to the family. Abandonment implies a departure by one spouse without the intent to return, followed by prolonged absence without just cause, and without, in the meantime, providing in the least for ones family although able to do so. There must be absolute cessation of marital relations, duties and rights, with the intention of perpetual separation. (PastoraJo vs. CA, 216 SCRA 692) PROPERTY REGIME OF UNIONS WITHOUT MARRIAGE The donation made between parties guilty of adultery at the time of the donation is void. Article 87 of FC provides that the prohibition against donations between spouses now applies to donations between persons living together husband and wife without a valid marriage, for otherwise the condition of those who incurred guilt would run out to be better than those in the legal union. The property relation cannot be considered to be governed by the law on co-ownership for failure of spouse to prove that she contributed money to the purchase price of the real property. It should belong to conjugal partnership. Under article 148 of FC, only the properties acquired by both of the parties through their actual joint contribution of money, property, or industry shall be owned by them in common in

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proportion to their respective contributions. Actual contribution is required in Article 148 of FC, in contrast Art 147 of FC, which states that efforts in the care and maintenance of the family are regarded as contribution to the acquisition of common property by one who has no salary or income or work or industry. If actual contribution of the party is not proved, there will be no co ownership and no presumption of equal shares. (Agapay vs Palang, 85 SCAD 145) Under Article 148 of the Family Code, a man and a woman who are not legally capacitated to marry each other, but who nonetheless live together conjugally, may be deemed co-owners of a property acquired during the cohabitation only upon proof that each made an actual contribution to its acquisition. Hence, mere cohabitation without proof of contribution will not result in a coownership. (Tumlos vs. Fernandez, GRN 137650, April 12, 2000) FAMILY HOME Under Article 162 of the Family Code, it is provided that the provisions of this Chapter shall also govern existing family residences insofar as said provisions are applicable. It does not mean that Articles 152 and 153 of the Family Code have retroactive effect such that all existing family residences are deemed to have been constituted as family homes at the time of their occupation prior to the effectivity of the Family Code and are exempt from execution for the payment of obligations incurred before the effectivity of the Family Code. Article 162 simply means that all existing family residences at the time of the effectivity of the Family Code, are considered family homes and are prospectively entitled to the benefits accorded to a family home under the Family Code. Article 162 does not state that provisions of chapter 2, Title V have a retroactive effect. (Manacop vs. Court of Appeals 277 SCRA 64) PATERNITY AND FILIATION Husband died on January 1, 1948. The boy whose legitimacy is in question was born on June 17, 1943. That boy is presumed to be the legitimate son of said husband and his wife, he having been born within three hundred days following the dissolution of the marriage. That presumption can only be rebutted by proof that it was physically impossible for the husband to have had access to his wife during the first 120 days of the 300 next preceding the birth of the child. The fact that the wife has committed adultery cannot overcome this presumption. The fact that the husband was seriously sick is not sufficient to overcome the presumption of legitimacy. Just because tuberculosis is advanced in a man does not necessarily mean that he is incapable of sexual intercourse. There are cases where persons suffering from tuberculosis can do the carnal act even in the most crucial stage of health because then they seemed to be more inclined to sexual intercourse. (Andal vs. Macaraig, 89 PHIL 165) According to Article 167 of the Family Code, the child shall still be legitimate, although the mother may have declared against his legitimacy. This law likewise applies to such instances where the mother may have been sentenced as an adulteress. There are three reasons for this provision: 1. In a fit of anger, or to arouse jealousy in the husband, the wife may have made this declaration; 2. The child should not be under the mercy of the passion of the parents. Thus, the husband whose honor has been offended, being aware of his wifes adultery, may have obtained from the latter by means of coercion, a confession against the legitimacy of the child, which, in reality, may only be a confession of guilt. Or the wife out of vengeance or spite, may declare the child as not her husbands although the statement is false. 3. Where the woman cohabits during the same period with two men, nobody can determine who is really the father of the child The modern rule is that, in order to overthrow the presumption of legitimacy, it must be shown beyond reasonable doubt that there was no access as could have enabled the husband to be the father of the child. Sexual intercourse is to be presumed where personal access is not disproved, unless such presumption is rebutted by evidence to the contrary; where sexual intercourse is presumed or proved, the husband must be taken to be the father of the child. (Macadangdang vs. CA, 100 SCRA 79)

CIVIL LAW

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Blood grouping test can establish conclusively that the man is not the father of the child but not necessarily that a man is the father of a particular child. It may have some probative value if the blood type and the combination in the child is rare. Thus, it is now up to the discretion of the judge whether to admit the results. (Jao vs. CA, 152 SCRA 359) PROOF OF FILIATION To be sufficient recognition, the birth certificate must be signed by the father and mother jointly, or by the mother alone if the father refuses, otherwise, she may be penalized. And if the alleged father did nothing in the birth certificate, the placing of his name by the mother, or doctor or registry is incompetent evidence of paternity of the child. If the birth certificate is not signed by the alleged father, it cannot be taken as record of birth to prove recognition of the child, nor can said birth certificate be taken as a recognition in a public instrument. While baptismal certificates may be considered public documents, they are evidence only to prove the administration of the sacraments on the dates specified, but not the veracity of the statements or declarations made therein with respect to the baptized persons kinsfolk. (Reyes vs. CA, GRN 39537, March 19, 1985) Continuous does not mean that the concession of status shall continue forever but only that it shall not be of intermittent character while it continues. The possession of such status means that the father has treated the child as his own, directly and not through others, spontaneously and without concealment though without publicity. There must be a showing of the permanent intention of the supposed father to consider the child as his own, by continuous and clear manifestation of paternal affection and care. (Mendoza vs. CA, 201 SCRA 675) The paternal affection and care must not be attributed to pure charity. Such acts must be of such a nature that they reveal not only the conviction of paternity, but also the apparent desire to have and treat the child as such in all relations in society and in life, not accidentally, but continuously. (Jison vs. CA) The SC in Lim vs. CA, ruled that petitioner was the father of his illegitimate children because the evidences convincingly show this. Hence, it was the petitioner who paid the bills for the hospitalization of the mother when she gave birth. He was the one who caused the registration of the name of the child using his surname in the birth certificate. He also wrote handwritten letters to the mother and the child stating his promise to be a loving and caring husband and father to both of you. There were also pictures of the petitioner on various occasions cuddling the child. LEGITIMATION Natural children by legal fiction cannot be legitimated. Under Article 269, NCC, only natural children can be legitimated. Children born outside of wedlock of parents who, at the time of the conception of the former, were not disqualified by any impediment to marry each other, are natural children. Since the children were born when there was a valid subsisting marriage of their father with another woman, they cannot be natural. Legitimation is a right granted by law only to natural children who, because their parents could have legally married at the time they were conceived, cannot be substantially differentiated from legitimate children once their parents do marry after their birth. This is because said parents can marry any time, there being no legal impediment preventing them from validly contracting marriage. The situation obtaining respecting legitimate children and legitimated natural children is certainly distinct from that respecting adulterous children because the parents of adulterous children are admittedly incapacitated to marry each other at the time said children were conceived. It may easily be said, thus, that to interpret the law as allowing adulterous children to be put on equal footing with the legitimate children, would be putting a premium on adulterous relationships, which is frowned upon by the society itself. (De Santos vs. Judge Angeles, 66 SCAD 510) ADOPTION

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The fact that a dual relationship will result (sister-brother, by nature; parent and child, by fiction of law) is immaterial. After all, such double relationship may occur in other cases, e.g. persons who are already related by blood or affinity may still marry, as long as the relationship does not fall under the cases where a marriage is prohibited by law. (Santos vs. Republic, 21 SCRA 379) If an alien adopts a Filipino child, our Civil Code cannot confer on the child the nationality of the adopter. This would be a matter of foreign law. (Chin Leng vs. Galang, 104 PHIL 1058) Where the petition for adoption was granted after the child had shot and killed a girl, the SC did not consider the retroactive effect to the decree of adoption so as to impose a liability upon the adopting parents accruing at the time when the adopting parents had no actual or physical custody over the adopted child. Retroactive effect may perhaps be given to the granting of the petition for adoption where such is essential to permit the accrual of some benefit or advantage in favor of the adopted child. To hold that parental authority had been retroactively lodged in the adopting parents so as to burden them with liability for a tortious act that they could not have foreseen and which they could have prevented would be unfair and unconscionable. (Tamargo vs. CA 209 S 518) It was months after the effectivity of R.A. No. 8552 that herein petitioner filed an action to revoke the decree of adoption granted in 1975. By then, the new law, had already abrogated and repealed the right of an adopter under the Civil Code and the Family Code to rescind a decree of adoption. Consistently with its earlier pronouncements, the Court should now hold that the action for rescission of the adoption decree, having been initiated by petitioner after R.A. No. 8552 had come into force, no longer could be pursued. It is still noteworthy, however, that an adopter, while barred from severing the legal ties of adoption, can always for valid reasons cause the forfeiture of certain benefits otherwise accruing to an undeserving child. For instance, upon the grounds recognized by law, an adopter may deny to an adopted child his legitime and, by a will and testament, may freely exclude him from having a share in the disposable portion of his estate. (Lahom v. Sibulo, G.R. No. 143989, July 14, 2003) SUPPORT The wife, who is forced to leave the conjugal abode by her husband without fault on her part, may maintain an action against the husband for separate maintenance when she has no other remedy notwithstanding the provisions of Article 149 of the Civil Code giving the person who is obliged to furnish support the option to satisfy it either by paying a fixed pension or by receiving and maintaining in his own home the one having the right to the same. Article 152 of the Civil Code gives the instances when the obligation to give support shall cease. The failure of the wife to live with her husband is not one of them. A husband cannot, by his own wrongful act, relieve himself from the duty to support his wife imposed by law; and where a husband by wrongful, illegal and unbearable conduct, drives his wife from the domicile fixed by him, he cannot take advantage of her departure to abrogate the law applicable to the marital relations and repudiate his duties thereunder. (Goitia vs. Campos Rueda) If the wife commits adultery, she loses the right to be supported. So if the wife claims support and the husband sets up adultery as a defense, he should be allowed to introduce preliminary evidence as to why support should not be granted. (Mangoma vs. Macadaeg and Bautista, 90 PHIL 508)

CIVIL LAW

Red Notes in Civil Law

PARENTAL AUTHORITY Parental authority and responsibility are inalienable and may not be transferred or renounced except in cases authorized by law. The right attached to parental authority, being purely personal, the law allows a waiver of parental authority only in cases of adoption, guardianship and surrender to a children's home or an orphan institution. When a parent entrusts the custody of a minor to another, such as a friend or godfather, even in a document, what is given is merely temporary custody and it does not constitute a renunciation of parental authority. Even if a definite renunciation of parental

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authority is manifest, the law still disallows the same. The father and mother, being the natural guardians of unemancipated children, are duty-bound and entitled to keep them in their custody and company. (Sagala-Eslao vs. CA, 266 SCRA 317)

Property
CLASSIFICATION OF PROPERTY Further analysis of Article 334 will show that in the case of immovables by destination, the Code requires that they be placed by the owner of the tenement, in order to acquire the same nature or consideration of real property; but in cases of immovable by incorporation, such as houses, trees, plants, etc., the Code nowhere requires that the attachment or incorporation be made by the owner of the land. The only criterion is the union with the soil. It follows from the foregoing that a true building is immovable or real property, whether it is erected by the owner of the land or by a usufructuary or lessee. (Ladera vs Hodges, 48 OG 5374, September 23, 1952) Movable equipment to be immobilized in contemplation of the law must be first essential and principal elements of the 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. The tools and equipments in question, by their nature, are not essential and principal elements of petitioners business of transporting passengers and cargoes by motor trucks. They are merely incidentals acquired as movables and used only for expediency to facilitate and/r improve its service. The provision also requires that the industry or works be carried on in a building or on a piece of land. The equipment in question are destined only to repair or service the transportation business, which is not carried on in a building or permanently on a piece of land. (Mindanao Bus Company vs. City Assessor and Treasurer, GR No. L-17870, September 29, 1962) PROPERTY IN RELATION TO THE PERSON WHERE IT BELONGS As property of public dominion, the Roppongi lot is outside the commerce of man. It cannot be alienated. Its ownership is a special collective ownership for general use and enjoyment, an application to the satisfaction of collective needs, and resides in the social group. The purpose is not to serve the state as a juridical person, but the citizens. The Roppongi property is correctly classified under paragraph 2 of Article 420 of the NCC as property belonging to the state and intended for some public service. The fact that the Roppongi site has not been used for a long time for actual embassy service does not automatically convert it to patrimonial property. A property continues to be part of public domain, not available for private appropriation or ownership until there is a formal declaration on the part of the government to withdraw it from being such. (Laurel vs. Garcia, 187 SCRA 797) Properties of the local government which are devoted to public service are deemed public and are under the absolute control of Congress. Hence, local governments have not the authority whatsoever to control or regulate the use of public properties unless specific authority is vested upon them by the Congress. Article 424 of the Civil Code lays down the basic principle that properties of public dominion devoted to public use and made available to the public in general are outside the commerce of man and cannot be disposed of or leased by the local government unit to private persons. (Macasiano vs Diokno, GRN 97764, August 10, 1992) 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. In the instant case, the land which was originally classified as forest land ceased to be so and became mineral once the mining claims were perfected. It would not become agricultural, even if only partly so, just because it was enclosed with a fence and was cultivated by those who were unlawfully occupying the surface. (Republic vs. CA, GR No. L-43938, April 15, 1988). OWNERSHIP

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We stress again that possession and ownership are distinct legal concepts. Ownership exists when a thing pertaining to one person is completely subjected to his will in a manner not prohibited by law and consistent with the rights of others. Ownership confers certain rights to the owner, one of which is the right to dispose of thing by way of sale. Atty. Pedro Garcia and his wife Remedios exercised their right to dispose of what they owned when they sold the subject property to the Magpayo spouses. On the otherhand, possession is defined as the holding of a thing or the enjoyment of a right. Possession may be had in one of two ways, possession in the concept of an owner and possession of a 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. The record shows that petitioner occupied the property not in the concept of an owner for his stay was merely tolerated by his parents. Consequently, it is of no moment that he was in possession of the property at the time of the sale to the Magpayos. It was not a hindrance to a valid transfer of ownership. (Garcia vs CA, GRN 133140, August 10, 1999) The principle that the owner or lawful possessor of 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 is inapplicable to the case at bar. For having been given 20 days within which to vacate the lot, complainant did not, within said period invade or usurp said lot. She had merely remained in possession thereof, even though the hacienda owner may have become its copossessor. Caisip, et al did not repel or prevent in actual or threatened physical invasion or usurpation. They expelled Gloria from a property of which she and her husband were in possession even before the action for forcible entry was filed against them, despite the fact that the sheriff had explicitly authorized them to stay in said property within the period and had expressed the view that he could not oust them therefrom within the period without judicial order therefore. (Caisip vs. People, GR No. L-28716, November 18, 1970) The doctrine of self-help enunciated by Art. 429 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 the property. (German Management and Services, Inc. vs. CA, GR No. 76216, September 14, 1989) The law recognizes in the owner the right to enjoy and dispose of a thing, without other limitations than those established by law. It is within the right of an owner, to enclose on a fence their property. Article 430 of the Civil Code provides that 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. A person has a right to the natural use and enjoyment of his own property, according to his pleasure, for all the purposes to which such property is usually applied. As a general rule, therefore, there is no cause of action for acts done by one person upon his own property in a lawful and proper manner, although such acts incidentally cause damage or an unavoidable loss to another, as such damage or loss is damnum absque injuria. When the owner of property makes use thereof in the general and ordinary manner in which the property is used, such as fencing or enclosing the same as in this case, nobody can complain of having been injured, because the inconvenience arising from said use can be considered as a mere consequence of community life. (Custodio vs. CA, GR No. 116100, February 9, 1996)

CIVIL LAW

Red Notes in Civil Law

It must be stressed that the use of ones property is not without limitations. Adjoining landowners have mutual and reciprocal duties which require that each must use his land in a reasonable manner so as not to infringe upon the rights and interests of others. Although we recognize the right of an owner to build structures on his land, such structures must be so constructed and maintained using all reasonable care so that they cannot be dangerous to adjoining landowners and can withstand the usual and expected forces of nature. If the structure causes injury and damage to an adjoining landowner, the latter can claim indemnification for the injury or damage suffered. (Andamo vs IAC, 191 SCRA 195) ACCESSION CONTINUA The owner of the building erected in good faith on a land owned by another, is entitled to retain the possession of the land until he is paid the value of his building, under article 453. The owner of the land, upon the other hand, has the option, either to pay for the building or to sell his

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land to the owner of the building. But he cannot, as respondents here did, refuse both to pay for the building and to sell the land and compel the owner of the building to remove it from the land where it is erected. He is entitled to such removal only when, after having chosen to sell his land, the other party fails to pay for the same. (Ignacio vs. Hilario, GR NO. L-175, April 30, 1946) Under the terms of Articles 448 and 546 of the Civil Code, it is true that the owner of the land has the right to choose between appropriating the building by reimbursing the builder of the value thereof or compelling the builder in good faith to pay for his land. Even this second right cannot be exercised if the value of the land is considerably more than that of the building. In addition to the right of the builder to be paid the value of his improvement, Article 546 gives him the corollary right of retention of the property until he is indemnified by the owner of the land. There is nothing in the language of these two articles which would justify the conclusion that, upon failure of the builder to pay for the value of the land, when such is demanded by the landowner, the latter becomes automatically the owner of the improvements. When the builder in good faith fails to pay the value of the land when such is demanded by the landowner, the parties may resort to the following remedies: (1) The parties may decide to leave things as they are and assume the relation of lessor and lessee, and should they disagree as to the amount of the rental, then they can go to court to fix that amount; (2) Should the parties not agree to assume the relation of lessor and lessee, the owner of the land is entitled to have the improvement removed; and (3) The land and the improvement may be sold at public auction, applying the proceeds first to the payment of the value of the land and the excess, if any, delivered to the owner of the improvement in payment thereof. (Filipinas Colleges, Inc. vs. Timbang, GR No. L12812, September 29, 1959) The Civil Code confirms certain time-honored principles of the law of property. One of these is the principle of accession whereby the owner of property acquires not only that which it produces but that which is united to it either naturally or artificially. Whatever is built, planted or sown on the land of another, and the improvements or repairs made thereon, belong to the owner of the land. Where, however, the planter, builder, or sower has acted in good faith, a conflict of rights arises between the owners and it becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land. In view of the impracticability of creating what Manresa calls state of forced co-ownership, the law has provided a just and equitable solution by giving the owner of the land the option to acquire the improvements after payment of the proper indemnity or to oblige the builder or planter to pay for the land and the sower to pay the proper rent. It is the owner of the land who is allowed to exercise the option because his right is older and because, by the principle of accession, he is entitled to the ownership of the accessory thing. (Bernardo vs. Bataclan, GR No. 44606, November 28, 1938) When the co-ownership is terminated by a partition and it appears that the house of an erstwhile co-owner has encroached upon a portion pertaining to another co-owner which was however made in good faith, then the provisions of Article 448 should apply to determine the respective rights of the parties. When the court adopted the workable solution and ordered the owner of the land to sell to private respondents, the part of the land they intended upon, it deprived the petitioner of his right to choose. Such ruling contravened the explicit provisions of Article 448 to the effect that the owner of the landshall have the right to appropriateto oblige the one who builtto pay the price of the land the law is clear and unambiguous when it confers the right of choice upon the landowner and not upon the builder and the courts. Thus, the right to appropriate the works or improvements or to oblige the builder to pay the price of the land belongs to the landowner. (Ignao vs. IAC, GR NO. 72876, January 18, 1991) Article 448 does not apply to a case where the owner of the land is the builder, sower, or planter who then later loses ownership of the land by sale or donation. Nevertheless, the provision therein on indemnity may be applied by analogy considering that the primary intent of Article 448 is to avoid a state of forced co-ownership and that the parties in the main agree that Articles 448 and 546 of the Civil Code are applicable and indemnity for the improvements may be paid although they differ as to the basis of the indemnity. (Pecson vs. CA, GR No. 115814,May 26, 1995)

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CIVIL LAW

The registered owner is not presumed to know the metes and bounds of his own land, and therefore is not in bad faith if he mistakenly builds on an adjoining land. There is no question that when petitioner purchased the land, the buildings and other structures were already in existence. Article 527 of the Civil Code presumes good faith by the builder of the encroaching structures, the latter should be presumed to have built them in good faith. It is presumed that possession continues to be enjoyed in the same character in which it was acquired, until the contrary is proved. Good faith consists in the belief of the builder that the land he is building on is his, and his ignorance of any defect or flaw in title. The good faith ceases from the moment defects in the title are made known to the possessor, by extraneous evidence or by suit for recovery of the property by the true owner. (Technogas vs. CA, GR No. 108894, February 10, 1997) ACCESSION NATURAL Accretion benefits a reparian owner when the following requisites are present: (1) that the deposit be gradual and imperceptible; (2) that it resulted from the effects of the current of the water; and (3) that the land where accretion takes place is adjacent to the bank of a river. The appellate court confirmed that the accretion on the western bank of the Cagayan River had been going on from 1919 up to 1968 or for a period of 49 years adding 50 hectares of land to private respondents property. The private respondents' ownership of the accretion to their lands was not lost upon the sudden and abrupt change of the course of the Cagayan River in 1968 or 1969 when it reverted to its old 1919 bed, and separated or transferred said accretions to the other side of the river. Articles 459 and 463 of the New Civil Code apply to this situation. (Agustin vs. IAC, GRN 6607576, July 5, 1990) Accretion is the process whereby the soil is deposited while alluvium is the soil deposited on the estate fronting the riverbank. The owner of such estate is called the reparian owner. The alluvium, by mandate of Art. 457 of the Civil Code is automatically owned by the reparian owner from the moment the soil deposit can be seen but it is not automatically registered property. (Navarro vs. IAC, GRN 68166, February 12, 1997) QUIETING OF TITLE Prescription cannot be invoked for it is aphoristic that an action to quiet title to property in ones possession is imprescriptible. The rationale for this rule is that the owner of a real property who is in possession thereof may wait until his possession is invaded or his title is attacked before taking steps to vindicate his right. Possession is a continuing right as is the right to defend such possession. So it has been determined that an owner of real property in possession has a continuing right to invoke a court of equity to remove a cloud that is a continuing menace to his title. (Pingol vs. CA, GRN 102909, September 6, 1993) CO-OWNERSHIP Pursuant to Article 493 of the Civil Code, it may be deduced that since a co-owner is entitled to sell his undivided share, a sale of the entire property by one co-owner without the consent of the other co-owners is not null and void. However, only the rights of the co-ownerseller are transferred, thereby making the buyer a co-owner of the property. The proper action in cases like this is not for the nullification of the sale or for the recovery of the thing owned in common from the third person who substituted the co-owner/s who alienated their shares; but the DIVISION of the common property as it continued to remain in the possession of the co-owners who possessed and administered it. Neither recovery of possession nr restitution can be granted since the defendant buyers are legitimate proprietors and possessors in joint ownership of the common property claimed. (Bailon-Casilao vs CA, GRN L78178, April 15, 1988) No prescription shall run in favor of a co-owner against his co-owner or co-heirs so long as he expressly or impliedly recognizes the co-ownership. Co-owners cannot acquire by prescription the share of the other co-owners, absent a clear repudiation of the co-ownership clearly communicated to the other co-owners.

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An action for partition does not prescribe. Article 497 provides that the assignees of the coowners may take part in the partition of the common property and Article 494 that each co-owner may demand at any time the partition of the common property, a provision which implies that the action to demand partition is imprescriptible or cannot be barred by laches. (Del Banco vs. IAC, GR No. 72694, December 1, 1987) The fact is clear that the co-ownership of the parcels of land was terminated when the coowners drew up a subdivision plan and actually occupied their respective portions in the plan, a title issued accordingly. Where co-owned property had been subdivided already, a right of legal redemption by a co-owner does not arise even though conveyance took place before partition agreement and approval by he intestate court thereof as to the portion under intestate proceedings. (Caro vs.Court of Appeals, GR No. L-46001, March 25, 1982) An action for partition may be seen to present simultaneously two principal issues. First, there is the issue whether the plaintiff is indeed a co-owner of the property sought to be partitioned. Second, assuming that the plaintiff successfully hurdles the first issue, there is the secondary issue of how the property is to be divided between plaintiff and defendant(s) i.e., what portion should go to which co-owner. Functionally an action for partition may be seen to be at once an action for declaration of co-ownership and of segragation and conveyance of a determinate portion of the property involved. This is sustained by public policy which abhors multiplicity of actions. (Roque vs. IAC, GR No. 75886, August 30, 1998) Any co-owner may file an action under Article 487 not only against a third person, but also against another co-owner who takes exclusive possession and asserts exclusive ownership of the property. In the latter case, however, the only purpose of the action is to obtain recognition of the co-ownership. The plaintiff cannot seek exclusion of the defendant from the property because as co-owner he has a right of possession. The plaintiff cannot recover any material or determinate part of the property. (DE GUIA vs. COURT OF APPEALS, G.R. No. 120864, October 8, 2003) POSSESSION In ejectment cases, the only issue for resolution is who is entitled to the physical and material possession of the property involved, independent of any claim of ownership. Anyone of the litigants who can prove prior possession de facto may recover such possession even from the owner himself. This rule holds true regardless of the character of a partys possession, provided that he has in his favor priority in time which entitles him to stay on the property until he is lawfully ejected by a person having a better right by either accion publiciana or accion reinvidicatoria. Prior possession over the property, however, is not synonymous with his right of ownership over the same. Resolution of issue of possession is far from the resolution of the issue of ownership. Forcible entry is merely a quieting process and never determines the actual title to an estate. (Somodio vs. CA, G.R. No. 82680, August 13, 1994) Respondent Guevarra, having been unlawfully deprived of the diamond ring in question, was entitled to recover it from petitioner who was found in possession of the same (Article 559 of the Civil Code). The only exception the law allows is when there is acquisition in good faith of the possessor at a public sale, in which case the owner cannot obtain its return without reimbursing the price. The right of the owner cannot be defeated even by proof that there is good faith in the acquisition by the possessor. The right of the owner to recover personal property acquired in good faith by another is based on his being dispossessed without his consent. Possession in good faith does not really amount to title, for the reason that Article 1132 of the Code provides for a period of acquisitive prescription for movables through uninterrupted possession for four years in good faith. The title of the possessor in good faith is not that of ownership, but is merely a presumptive title sufficient to serve as a basis for acquisitive prescription. Article 559 assumes that where the possessor is as yet not the owner; for it is obvious that where the possessor has come to acquire indefeasible title by, let us say, adverse possession for the necessary period, no proof of loss or illegal deprivation could avail the former owner of the chattel.

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He would no longer be entitled to recover it under any condition. (De Garcia vs. CA, G.R. NO. L20264, January 30, 1971) It is quite clear that a party who has lost a movable or has been unlawfully deprived thereof can recover the same from the present possessor even if the latter acquired it in good faith and has, therefore, title thereto for under the first sentence of Article 559 of the Civil Code, such manner of acquisition is equivalent to title. There are three requisites to make the possession of movable property equivalent to title, namely: a) the possession should be in good faith; b) the owner voluntarily parted with the possession of the thing; and c) the possession is in the concept of owner. Undoubtedly, one who has lost a movable or who has been unlawfully deprived of it cannot be said to have voluntarily parted with the possession thereof. In the case at bar, there was a perfected unconditional contract of sale between private respondent and the original vendee. The former voluntarily caused the transfer of the certificate of registration of the vehicle in the name of the first vendee- even if the said vendee was represented by someone who used a fictitious name and likewise voluntarily delivered the cars and the certificate of registration to the vendees alleged representative; title thereto was forthwith transferred to the vendee. (Ledesma vs CA, GRN 86051, September 1, 1992) The respondents, by their own admission are in possession of the disputed land. There is no evidence that they were possessors in bad faith. However, their good faith ceased when they were served with summons to answer the complaint (Article 528, Civil Code). As possessors in bad faith from the service of the summons they shall reimburse the fruits received and those which the legitimate possessor could have received. (Cordero vs. Cabral, L-36789, July 25, 1983) USUFRUCT Usufruct gives a right to enjoy the property of another with the obligation of preserving its form and substance. Only the jus utendi and jus fruendi over the property is transferred to the usufructuary. The owner of the property maintains the jus disponendi or the power to alienate, encumber, transform, and even destroy the same, although he cannot alter the propertys form or substance, or do anything which is prejudicial to the usufructuary. There is no doubt that the owner may validly mortgage the property in favor of a third person and the law provides that, in such a case, the usufructuary shall not be obliged to pay the debt of the mortgagor, and should not the immovable be attached or sold judicially or the payment of the debt, the owner shall be liable to the usufructuary for whatever the latter may lose by reason thereof. (Hemedes vs. CA, G.R. No. 107132, October 8, 1999) EASEMENTS An easement of right of way though it may be apparent, is nevertheless, discontinuous or intermittent and therefore cannot be acquired through prescription, but only by virtue of a title. (Ronquillo vs Roco, GRN L-10619, February 28, 1958) The owner of the dominant estate may validly claim a compulsory right of way only after he has established the existence of four requisites, to wit: (1) the (dominant) estate is surrounded by other immovables and is without adequate outlet to a public highway; (2) after payment of the proper indemnity; (3) the isolation was not due to the proprietors acts; and (4) the right of way is claimed at a point least prejudicial to the servient estate. Additionally, the burden of proving the existence of the foregoing prerequisites lies on the owner of the dominant estate. Under Article 650, it shall be established upon two criteria: (1) at the point least prejudicial to the servient estate; and (2) where the distance to a public highway may be the shortest. Each case must be weighed according to its individual merits, and judged according to the sound discretion of the court. (Constabella Corp. vs CA, G.R. No. 80511, January 25, 1991) Article 651 of the Civil Code provides that the width of the easement 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.

CIVIL LAW

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Since the easement to be established in favor of petitioner is of continuous and permanent nature, the indemnity shall consist of the value of the land occupied and the amount of the damage caused to the servient estate. Generally, the right of way may be demanded; (1) when there is absolutely no access to a public highway, and (2) when, even if there is one, it is difficult or dangerous to use or is grossly insufficient. (Encarnacion vs. CA, G.R. No. 77628, March 11, 1991) Article 650 of the Civil Code explicitly states that the easement of right of way shall be established at the point least prejudicial to the servient estate and insofar as consistent with this rule, where the distance from the dominant estate to a public highway may be the shortest. The criterion of least prejudice to the servient estate must prevail over the criterion of shortest distance although this is a matter of judicial appreciation. Where the easement may be established on any of several tenements surrounding the dominant estate, the one where the way is shortest and will cause the least damage should be chosen. However, if these two circumstances do not concur in a single tenement, the way which will cause the least damage should be used, even if it will not be the shortest. (Quimen vs CA, GR No. 112331, May 29, 1996) The facts of the case bears sufficient indubitable proofs that the properties concerned had intended and had indeed constituted a voluntary easement of right of way over Mangyan Road, and like any other contract, the same could be extinguished only by mutual agreement or by renunciation of the owner of the dominant estate. (La Vista Association vs CA, GRN 95252, September 5, 1997) Article 684 of the Civil Code is a new provision. A reading of Article 684 shows that the duty of an adjacent owner not to deprive the adjacent land or building of sufficient lateral or subjacent support is an absolute one. It does not depend upon the degree of care and precaution made by the proprietor in making the excavation or building on this land. Even if the adjacent owner had taken the proper care and precaution, if the adjacent land or building is deprived of sufficient lateral or subjacent support, as a result of which it is damaged, we believe that the adjacent owner shall be liable for the damage caused. (De Jesus vs Howmart Corp. No. 44191-R, August 28, 1974) DONATION A donation which purports to be one inter vivos but withholds from the donee the right to dispose of the donated property during the donees lifetime is in truth one mortis causa. In a donation mortis causa the right of disposition is not transferred to the donee while the donor is still alive. In the instant case, the donees did not get the possession of the property donated. They did not acquire the right to the fruits thereof, or any other right of dominion over the property this would accrue to them only after 10 years from Montinolas death. They were therefore simply paper owners of the donated property. Indeed, the donation in question was a donation mortis causa, contemplating a transfer of ownership to the donees only after the donors demise. (Sicad vs. CA, G.R. No. 125888, August 13, 1998) Although the non-registration of a deed of donation shall not affect its validity, the necessity of registration comes into play when the rights of third persons are affected, as in the case at bar. It is actually the act of registration that operates to convey registered land or affect title thereto. (Gonzales vs. CA, GR No. 110335, June 18, 2001) The stipulation in the contact providing for the automatic reversion of the donated property to the donor upon non-compliance is valid. It is in the nature of an agreement granting a party the right to rescind a contract unilaterally in case of breach without going to court. Upon the happening of the resolutory condition of non-compliance with the condition of the contact, the donation is automatically revoked without need of a judicial declaration to that effect. (De Luna vs. Abrigo, G.R. No. 57455, January 18, 1990) Once a donation is accepted, the donee becomes the absolute owner of the property donated. Although the donor may impose certain conditions in the deed of donation, the same must

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not be contrary to law, morals, good customs, public order and public policy. The condition imposed in the deed of donation in the case before us constitutes a patently unreasonable and undue restriction on the right of the donee to dispose of the property donated, which right is an indispensable attribute of ownership. Such a prohibition against alienation, in order to be valid, must not be perpetual or for an unreasonable period of time. (Roman Catholic Archbishop of Manila vs. CA, G.R. No. 77425, June 19, 1991) As found in Tolentinos Commentaries and Jurisprudence on the Civil Code, all crimes which offend the donor show ingratitude and are causes for revocation. Petitioners attempt to categorize the offenses according to their classification under the Revised Penal Code is therefore unwarranted considering that illegal detention, threats and coercion are considered as crimes against the person of the donor despite the fact that they are classified as crimes against personal liberty and security under the Revised Penal Code. (Eduarte vs CA, GR No. 105944, February 9, 1996)

CIVIL LAW

Wills and Succession

CONCEPT OF SUCCESSION The right to a persons succession are transmitted from the moment of his death, and do not vest in his heirs until such time. Property which Doa Catalina (decedent) had transferred or conveyed to other persons during her lifetime no longer formed part of her estate at the time of her death to which her heirs may lay claim. Had she died intestate, only the property that remained in her estate at the time of her death devolved to her legal heirs; and even if those transfers were, one and all, treated as donations, the right arising under certain circumstances to impugn and compel the reduction or revocation of a decedents gifts inter vivos does not inure to the respondents (nephews and nieces of Doa Catalina) since neither they nor the donees are compulsory or forced heirs. (Mariano Locsin, et al. vs. CA, G.R. No. 89783, February 19, 1992) FORMALITIES OF WILLS NOTARIAL WILL Failure of the attestation clause to state the number of pages would have been fatal defect were it not for the fact that, in this case, it is discernible from the entire will that it is really and actually composed of only two pages duly signed by the testatrix and her instrumental witnesses. (Taboada vs. Rosal, 118 SCRA 195) The language used in the attestation clause likewise need not even be known to the attesting witnesses. Art. 805 merely requires that, in such a case, the attestation clause shall be interpreted to said witnesses. (Caneda vs. CA 222 SCRA 781) Attestation clause which does not state that the testament was signed by the witnesses in the presence of one another and the testator renders the will void. Omission which can be supplied by an examination of the will itself, without the need of resorting to extrinsic evidence, will not be fatal and correspondingly, would not obstruct the allowance to probate of the will being assailed. However, those omissions which cannot be supplied except by evidence aliunde would result in the invalidation of the attestation clause and ultimately, the will itself. While it may be true that the attestation clause is indeed subscribed at the end thereof and at the left margin of each page by the three attesting witnesses, it certainly cannot be conclusively inferred therefrom that the said witnesses affixed their respective signatures in the presence of the testator and of each other since, as petitioners correctly observed, the presence of said signatures only establishes the fact that it was indeed signed, but it does not prove that the attesting witnesses did subscribe to the will in the presence of the testator and of each other. The execution of a will is supposed to be one act so that where the testator and the witnesses sign on various days or occasions and in various combinations, the will cannot be stamped with the imprimatur of effectivity. Furthermore, the rule on substantial compliance in Article 809 cannot be invoked or relied on by respondents since it presupposes that the defects in the attestation clause can be cured or supplied by the text of the will or a consideration of matters apparent therefrom which would provide the data not expressed in the attestation clause or from which it may necessarily be gleaned or clearly inferred that the acts not stated in the omitted textual requirements were actually

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complied with in the execution of the will. In other words, the defects must be remedied by intrinsic evidence supplied by the will itself. (Caneda vs. CA, 222 SCRA 781) In our opinion, the attestation clause is fatally defective for failing to state that Antero Mercado caused Atty. Florentino Javier to write the testator's name under his express direction, as required by section 618 of the Code of Civil Procedure. The herein petitioner (who is appealing by way of certiorari from the decision of the Court of Appeals) argues, however, that there is no need for such recital because the cross written by the testator after his name is a sufficient signature and the signature of Atty. Florentino Javier is a surplusage. Petitioner's theory is that the cross is as much a signature as a thumbmark, the latter having been held sufficient by this Court in several cases. It is not here pretended that the cross appearing on the will is the usual signature of Antero Mercado or even one of the ways by which he signed his name. After mature reflection, we are not prepared to liken the mere sign of a cross to a thumbmark, and the reason is obvious. The cross cannot and does not have the trustworthiness of a thumbmark. (Garcia vs. Lacuesta) In the case at bench, the autoptic proference contradicts the testimonial evidence produced by petitioner. The will and its codicil, upon inspection by the respondent court, show in black and white or more accurately, in black and blue-that more than one pen was used by the signatories thereto. Thus, it was not erroneous nor baseless for respondent court to disbelieve petitioner's claim that both testamentary documents in question were subscribed to in accordance with the provisions of Art. 805 of the Civil Code. (Calde vs. CA, 233 SCRA 376) The notary public before whom the will was acknowledged cannot be considered as the third instrumental witness since he cannot acknowledge before himself his having signed the will. To acknowledge before means to avow; to own as genuine, to assent, to admit, and before means in front or preceding in space or ahead of. Consequently, if the third witness were the notary public himself, he would have to avow, assent or admit his having signed the will in front of himself. This cannot be done because he cannot split his personality into two so that one will appear before the other to acknowledge his participation in the making of the will. The function of a notary public is, among others, to guard against any illegal or immoral arrangements. That function would defeated if the notary public were one of the attesting witnesses. For then he would be interested in sustaining the validity of the will as it directly involves himself and validity of his own act. It would place him in an inconsistent position and the very purpose of the acknowledgement. Which is to minimize fraud would be thwarted (Cruz vs. Villasor, 54 SCRA 31)

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Article 808 applies not only to blind testators but also to those who, for one reason or another, are incapable of reading their wills. Since Alvarado (testator) was incapable of reading the final drafts of his will and codicil due to his poor, defective, or blurred vision, there can be no other course but to conclude that he comes within the scope of the term blind as it is used in Article 808. In the case at bar, as testified to by the three instrumental witnesses, the notary public and by the lawyer who drafted the 8-paged will who were present in the execution, the testator did not read the final draft of the will himself. Instead, the lawyer who drafted the will read the same aloud in the presence of the testator, the three instrumental witnesses and the notary public. The latter four followed the reading with their own respective copies previously furnished them. Although there should be strict compliance with the substantial requirements of the law in order to insure the authenticity of the will, formal imperfections should be brushed aside when they do not affect its purpose and which, when taken into account, may only defeat the testators will. (Alvarado vs. Gaviola, G.R. No. 74695, September 14, 1993) HOLOGRAPHIC WILL A reading of Article 813 of the Civil Code shows that its requirement affects the validity of the dispositions contained in the holographic will, but not its probate. If the testator fails to sign and date some of the dispositions, the result is that these dispositions cannot be effectuated. Such failure, however, does not render the whole testament void.

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Likewise, a holographic will can still be admitted to probate, notwithstanding noncompliance with the provisions of Article 814. (Ajero vs. Court of Appeals, 236 SCRA 488) If the holographic will has been lost or destroyed and no other copy is available, the will cannot be probated because the best and only evidence is the handwriting of the testator in said will. It is necessary that there be a comparison between sample handwritten statements of the testator and the handwritten will. But a photostatic copy or Xerox copy of the holographic will may be allowed because comparison can be made with the standard writings of the testator. (Rodelas vs. Aranza, 119 SCRA 16) Ordinarily, when a number of erasures, corrections, and interlineations made by the testator in a holographic will have not been noted under his signature, the will is not thereby invalidated as a whole, but at most only as respects the particular words erased, corrected or interlined. However, when the holographic will in dispute had only one substantial provision, which was altered by substituting the original heir with another, but which did not carry the requisite of full authentication by the full signature of the testator, the effect must be that the entire will is voided or revoked for the simple reason that nothing remains in the will after that which could remain valid. (Kalaw vs. Relova, 132 SCRA 237) As a general rule, the date in a holographic will should include the day, month and year of its execution. However, when as in the case at bar, there is no appearance of fraud, bad faith, undue influence and pressure and the authenticity of the will is established and the only issue is whether or not the date FEB./61 appearing on the holographic will is a valid compliance with Article 810 of the Civil Code, probate of the will should be allowed under the principle of substantial compliance. (Roxas vs. De Jesus, 134 SCRA 245) The law does not specify a particular location where the date should be placed in the will. The only requirements are that the date be in the will itself and executed in the hand of the testator. These requirements are present in the subject will. (Labrador vs. CA, 184 SCRA 170) We are convinced, based on the language used, that Article 811 of the Civil Code is mandatory. The word "shall" connotes a mandatory order. We have ruled that "shall" in a statute commonly denotes an imperative obligation and is inconsistent with the idea of discretion and that the presumption is that the word "shall," when used in a statute is mandatory." Laws are enacted to achieve a goal intended and to guide against an evil or mischief that aims to prevent. In the case at bar, the goal to achieve is to give effect to the wishes of the deceased and the evil to be prevented is the possibility that unscrupulous individuals who for their benefit will employ means to defeat the wishes of the testator. So, we believe that the paramount consideration in the present petition is to determine the true intent of the deceased. An exhaustive and objective consideration of the evidence is imperative to establish the true intent of the testator. (Codoy vs. Calugay, GRN 123486, August 12, 1999)

CIVIL LAW

PROBATE OF WILLS In a proceeding for the probate of a will, the courts area of inquiry is limited to an examination of, and resolution on, the extrinsic validity of the will, the due execution thereof, the testatrixs testamentary capacity and the compliance with the requisites or solemnities prescribed by law. The intrinsic validity of the will normally comes only after the court has declared that the will has been duly authenticated. However, where practical considerations demand that the intrinsic validity of the will be passed upon, even before it is probated, the Court should meet the issue. If the case were to be remanded for probate of the will, nothing will be gained. On the contrary, this litigation would be protracted. And for aught that appears in the record, in the event of probate or if the court rejects the will, probability exists that the case will come up once again before us on the same issue of the intrinsic validity or nullity of the will. RESULT: waste of time, effort, expense, plus added anxiety. (Nuguid vs. Nuguid, 17 SCRA 449)

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In Nepomuceno vs CA (139 SCRA 207), the Court ruled that the court can inquire as to the intrinsic validity of the will because there was an express statement that the beneficiary was a mistress. The fact that the will has been allowed without opposition and the order allowing the same has become final and executory is not a bar to the presentation of a codicil, provided it complies with all the formalities for executing a will. It is not necessary that the will and codicil be probated together as the codicil may be concealed by an interested party. They may be probated one after the other. (Macam vs. Gatmaitan 60 Phil 358) The employment of undue influence by Heracio was not mutually repugnant to fraud as petitioner insists, for it was the means employed by Heracio to defraud his brothers and sisters of their share in Don Cayetanos estate. There was fraud because Don Cayetano was not apprised that the document he was signing with Co, Barredo and Lim was a second will revoking the dispositions of property that he made in his first will. Had he been aware that it was a second will, and if it were prepared at his own behest, he would not have denied that he made it. He would probably have caused it to be probated while he was still alive, as he did with his first will (Revilla vs. CA 217 SCRA 583) PRETERITION Preterition consists in the omission on the testators will of the forced heirs or anyone of them either because they are not mentioned therein, or, though mentioned, they are neither instituted as heirs nor are expressly disinherited. Insofar as the widow is concerned, Article 854 of the Civil Code may not apply as she does not ascend or descend from the testator, although she is compulsory heir. Stated otherwise, 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. However, the same thing cannot be said of the other respondent Virginia A. Fernandez, whose legal adoption by the testator has not been questioned by the petitioner. 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. It cannot be denied that she was totally omitted and preterited in the will of the testator and that both adopted child and the widow were deprived of at least their legitimate. Neither can it be denied that they were not expressly disinherited. Hence, this is a clear case of preterition of the legally adopted child. (Acain vs. Intermediate Appellate Court, 155 SCRA 100)

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Preterition is the omission of the heir in the will, either by not naming him at all or, while mentioning him asfather, son, etc., by not instituting him as heir without disinheriting him expressly, nor assigning to him some part of the testators estate. Whether the testator gave a legacy to a person, whom he characterized in the testamentary provision as not related to him, but later this person was judicially declared to be his acknowledged natural child, the case is not a case of preterition but a case of completion of legitime. The institution in the will would not be annulled. There would be no intestacy. (Aznar vs. Duncan, 17 SCRA 590) SUBSTITUTION OF HEIRS Scaevola, Maura, and Traviesas construe degree as designation, substitution, or transmission. The Supreme Court of Spain has decidedly adopted this construction. From this point of view, there can be only one transmission or substitution, and the substitute need not be related to the first heir. Manresa, Morell, and Sanchez Roman however, construe the word degree as generation, and the present Code providing that the substitution shall not go beyond one degree from the heir originally instituted. The Code thus clearly indicates that the second heir must be related to and be one generation from the first heir. From this, it follows that the fideicommissary can only be either a child or a parent of the first heir. These are the only relatives who are one generation or degree from the fiduciary. (Ramirez vs. Ramirez, G.R. No. L-27952 February 15,1982)

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Indeed, legally speaking, Mrs. Hodges will provides neither for a simple or vulgar substitution under Article 859 of the Civil Code nor for a fideicommissary substitution under Article 863 thereof. There is no vulgar substitution therein because there is no provision for either (1) predecease of the testator by the designate heir or (2) refusal or (3) incapacity of the latter to accept the inheritance, as required by Article 859; and neither is there a fideicommissary substitution therein because obligation is imposed thereby upon Hodges to preserve the estate or any party thereof for anyone else. (PCI Bank vs. Escolin, G. R. Nos. L-27860-96 and L-27936-37, March 29, 1974) MODAL INSTITUTION The institution of an heir in the manner prescribed in Article 882 is what is known in the law of succession as an institucion sub modo or a modal institution. In a modal institution, the testator states (1) the object of institution, (2) the purpose or application of the property left by the testator or, (3) the charge imposed by the testator upon the heir. A mode imposes an obligation upon the heir or legatee but it does not affect the efficacy of his rights to the succession. On the other hand, in a conditional testamentary disposition, the condition must happen or be fulfilled in order for the heir to be entitled to succeed the testator. The condition suspends but does not obligate; and the mode obligates but does not suspend. To some extent, it is similar to a resolutory condition. Then, too since testamentary disposition are generally acts of liberality, an obligation imposed upon the heir should not be considered a condition unless it clearly appears from the Will itself that such was the intention of the testator. In case of doubt, the institution should be considered as modal and not conditional. (Rabadilla vs. CA, 334 SCRA 523) INTESTATE SUCCESSION Article 992 of the New Civil Code is not applicable because involved here is not a situation where an illegitimate child would inherit ab intestato from a legitimate sister of his father, which is prohibited by the aforesaid provision of law. Rather, it is a scenario where an illegitimate child inherits from his father, the latter's share in or portion of, what the latter already inherited from the deceased sister, Evarista. As opined by the Court of Appeals, the law in point in the present case is Article 777 of the New Civil Code, which provides that the rights to succession are transmitted from the moment of death of the decedent. Since Evarista died ahead of her brother Francisco, the latter inherited a portion of the estate of the former as one of her heirs. Subsequently, when Francisco died, his heirs, namely: his spouse, legitimate children, and the private respondent, Joselito, an illegitimate child, inherited his (Francisco's) share in the estate of Evarista. It bears stressing that Joselito does not claim to be an heir of Evarista by right of representation but participates in his own right, as an heir of the late Francisco, in the latter's share (or portion thereof) in the estate of Evarista. The present case relates to the rightful and undisputed right of an heir to the share of his late father in the estate of the decedent Evarista, ownership of which had been transmitted to his father upon the death of Evarista. There is no legal obstacle for private respondent Joselito, admittedly the son of the late Francisco, to inherit in his own right as an heir to his father's estate, which estate includes a one-third (1/3) undivided share in the estate of Evarista. (Dela Merced vs. Dela Merced)

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COLLATION We agree with the respondent court that there is nothing in the above provisions expressly prohibiting the collation of the donated properties. As the said court correctly observed, the phrase "sa pamamagitan ng pagbibigay na di na mababawing muli" merely described the donation as "irrevocable" and should not be construed as an express prohibition against collation. The fact that a donation is irrevocable does not necessarily exempt the subject thereof from the collation required under Article 1061. We surmise from the use of such terms as "legitime" and "free portion" in the deed of donation that it was prepared by a lawyer, and we may also presume he understood the legal consequences of the donation being made. It is reasonable to suppose, given the precise language of the document, that he would have included therein an express prohibition to collate if that had been the donor's intention.

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Anything less than such express prohibition will not suffice under the clear language of Article 1062. The suggestion that there was an implied prohibition because the properties donated were imputable to the free portion of the decedent's estate merits little consideration. Imputation is not the question here, nor is it claimed that the disputed donation is officious. The sole issue is whether or not there was an express prohibition to collate, and we see none. The intention to exempt from collation should be expressed plainly and unequivocally as an exception to the general rule announced in Article 1062. Absent such a clear indication of that intention, we apply not the exception but the rule, which is categorical enough. (De Roma vs. CA, L46903, July 23, 1987) PARTITION Article 1056 of the Civil Code of 1889 authorizes a testator to partition inter vivos of his property, and distribute them among his heirs, and that this partition is not necessarily either a donation nor a testament, but an instrument of a special character, sui generis, which is recoverable at any time by the causante during his lifetime, and does not operate as a conveyance of title until his death. It derives its binding force on the heirs from the respect due to the will of the owner of the property, limited only by the creditors and the intangibility of the legitime of the forced heirs. That such partition is not governed by the rules of wills or donations inter vivos is a consequence of its special nature. (Mang-oy vs. CA, 144 SCRA 33) Article 1080 of the New Civil Code allows a person to make a partition of his estate either by an act inter vivos or by will and such partition shall be respected insofar as it does not prejudice the legitime of the compulsory heirs. While the law prohibits contracts upon future inheritance, the partition by the parent, as provided in Art. 1080, is a case expressly authorized by law. Art. 1080 of the Civil Code clearly gives a person two options in making a partition of his estate; either by an act inter vivos or by WILL. When a person makes a partition by will, it is imperative that such partition must be executed in accordance with the provisions of the law on wills; however, when the person makes the partition of his estate by an act inter vivos, such partition may even be oral or written, and need not be in a form of will, provided that the partition does not prejudice the legitime of compulsory heirs. (Chavez vs. Intermediate Appellate Court, 191 SCRA 211)

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SOURCES OF OBLIGATIONS While the carrier is not an insurer of the safety of the passengers, it should nevertheless be held to answer for the flaws of its equipment if such flaws were at all discoverable. In this connection, the manufacturer of the defective appliance is considered in law the agent of the carrier, and the good repute of the manufacturer will not relieve the carrier from liability. The rationale of the carrier's liability is the fact that the passenger has no privity with the manufacturer of the defective equipment; hence, he has no remedy against him, while the carrier usually has. (Necesito vs. Paras, L-10605, June 30, 1958) NATURE AND EFFECT OF OBLIGATIONS It is axiomatic that 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. It will not do, however, to dispose of the controversy by simply declaring that the contract between the parties had not been validly cancelled and was therefore still in force, and that Agcaoili could not be compelled by the GSIS to pay the stipulated price of the house and lot subject of the contract until and unless it had first completed construction of the house. In this case, the Court cannot require specific performance of the contract in question according to its literal terms, as this would result in inequity. The prevailing rule is that in decreeing specific performance equity requires not only that the contract be just and equitable in its provisions, but that the consequences of specific

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performance likewise be equitable and just. The general rule is that this equitable relief will not be granted if, under the circumstances of the case, the result of the specific enforcement of the contract would be harsh, inequitable, oppressive, or result in an unconscionable advantage to the plaintiff. In the exercise of its equity jurisdiction, the Court may adjust the rights of parties in accordance with the circumstances obtaining at the time of rendition of judgment, when these are significantly different from those existing at the time of generation of those rights. (Agcaoili vs. GSIS, G. R. No. 30056, August 30, 1988) KINDS OF OBLIGATIONS A stipulation providing for the term of lease as for as long as the defendant needed the premises and can meet and pay said increases is invalid because it is a purely potestative condition and it leaves the effectivity and enjoyment of the leasehold rights to the sole and exclusive will of the lessee. Mutuality does not obtain in such a contract of lease and no equality exists between the lessor and lessee since the life of the contract is dictated solely by the lessee. (Lao Lim vs. CA, 191 SCRA 150) RESCISSION OF OBLIGATIONS Petitioners breach of the agreement does not warrant a resolution of the contract. While it is true that in reciprocal obligations, such as the contract of purchase and sale in this case, the power to rescind is implied and any of the contracting parties may, upon non-fulfillment by the other party of his part of the obligation, resolve the contract, rescission will not be permitted for a slight or casual breach of the contract. Rescission may be had only for such breaches that are so substantial and fundamental as to defeat the object of the parties in making the agreement. The two aforementioned conditions that were breached by petitioners are not essential for the fulfillment of the obligations to sell on their part but merely an incidental undertaking. The rescission of the contract may not be allowed on this ground alone. (Ang vs. CA, 170 SCRA 286) Article 1191 refers to judicial rescission. It does not apply if there is an express stipulation to rescind, in which case such stipulation must prevail. There is nothing in the law which prohibits the parties from entering into an agreement that violation of the terms of the contract would cause its cancellation without court intervention. Said stipulation is in the nature of facultative resolutory condition (Angeles vs. Calasanz, 135 SCRA 323). The rule that the injured party, can only choose between fulfillment and rescission of the obligation, and cannot have both. applies when the obligation is possible of fulfillment. If, as in this case, the fulfillment has become impossible, Article 1191 allows the injured party to seek rescission even after he has chosen fulfillment. (Ayson-Simon vs. Adamos, 131 SCRA 439) Well settled is the rule, as held in previous jurisprudence that judicial action for the rescission of a contract is not necessary where the contract provides that it may be cancelled for violation of any of its terms and conditions. However, even in the cited cases, there was at least a written notice sent to the defaulter informing him of the rescission. The act of a party in treating a contract as cancelled should be made known to the other. In other words, resolution of reciprocal contracts may be made extrajudicially unless successfully impugned in Court. If the debtor impugns the declaration it shall be subject to judicial determination. (Jison vs. Court Of Appeals, 164 SCRA 339) In reciprocal obligations, the obligation of one is a resolutory condition of the obligation of the other, the non-fulfillment of which entitles the other party to rescind the contract. It does not apply to a case where there are two separate and distinct obligations, each independent of the other. (Songcuan v. IAC, 191 SCRA 28) OBLIGATIONS WITH A PERIOD The only action that can be maintained is an action to ask the court to fix the duration of the term or period. The fulfillment of the obligation itself cannot be demanded until after the court has fixed the period for compliance therewith, and such period has arrived. However, such

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technicality need not be adhered to when a prior and separate action would be a mere formality and would serve no other purpose than to delay (Borromeo vs. CA, 47 SCRA 65). OBLIGATIONS WITH A PENAL CLAUSE Where a contract of sale of real property imposes a special condition upon the vendee to construct a house thereon and complete at least 50% of such construction within two years otherwise the surety bond would be forfeited in favor of the vendor, such special obligation is in reality an obligation with a penal clause and the obligors liability may be mitigated pursuant to Art 1229 of the NCC, considering that the penalty is intended not to indemnify the vendor for any damage it might suffer as a result of a breach of contract, but rather to compel performance. (Makati Development Corp vs. Empire Insurance Co., 20 SCRA 557) LEGAL TENDER Granting that petitioner had never encashed the check, his failure to do so for more than ten (10) years undoubtedly resulted in the impairment of the check through his unreasonable and unexplained delay. While it is true that the delivery of a check produces the effect of payment only when it is cashed, pursuant to Art. 1249 of the Civil Code, the rule is otherwise if the debtor is prejudiced by the creditor's unreasonable delay in presentment. The acceptance of a check implies an undertaking of due diligence in presenting it for payment, and if he from whom it is received sustains loss by want of such diligence, it will be held to operate as actual payment of the debt or obligation for which it was given. It has, likewise, been held that if no presentment is made at all, the drawer cannot be held liable irrespective of loss or injury unless presentment is otherwise excused. This is in harmony with Article 1249 of the Civil Code under which payment by way of check or other negotiable instrument is conditioned on its being cashed, except when through the fault of the creditor, the instrument is impaired. The payee of a check would be a creditor under this provision and if its nonpayment is caused by his negligence, payment will be deemed effected and the obligation for which the check was given as conditional payment will be discharged. (Papa vs. A.U. Valencia and Co., Inc., GRN 105188, January 23, 1998) In the case at bar, the check involved is not an ordinary bill of exchange but a manager's check. A manager's check is one drawn by the bank's manager upon the bank itself. It is similar to a cashier's check both as to effect and use. A cashier's check is a check of the bank's cashier on his own or another check. In effect, it is a bill of exchange drawn by the cashier of a bank upon the bank itself, and accepted in advance by the act of its issuance. It is really the bank's own check and may be treated as a promissory note with the bank as a maker. The check becomes the primary obligation of the bank which issues it and constitutes its written promise to pay upon demand. The mere issuance of it is considered an acceptance thereof. If treated as promissory note, the drawer would be the maker and in which case the holder need not prove presentment for payment or present the bill to the drawee for acceptance. Even assuming that presentment is needed, failure to present for payment within a reasonable time will result to the discharge of the drawer only to the extent of the loss caused by the delay. Failure to present on time, thus, does not totally wipe out all liability. In fact, the legal situation amounts to an acknowledgment of liability in the sum stated in the check. In this case, the Gueco spouses have not alleged, much less shown that they or the bank which issued the manager's check has suffered damage or loss caused by the delay or non-presentment. Definitely, the original obligation to pay certainly has not been erased. (The International Corporate Bank (now UNION BANK OF THE PHILIPPINES) vs. Sps. Francis S. Gueco and Ma. Luz Gueco, G.R. No. 141968. February 12, 2001) On the issue of prescription, PCIBank claims that the action of Ford had prescribed because of its inability to seek judicial relief seasonably, considering that the alleged negligent act took place prior to December 19, 1977 but the relief was sought only in 1983, or seven years thereafter. The statute of limitations begins to run when the bank gives the depositor notice of the payment, which is ordinarily when the check is returned to the alleged drawer as a voucher with a

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statement of his account, 39 and an action upon a check is ordinarily governed by the statutory period applicable to instruments in writing. Our laws on the matter provide that the action upon a written contract must be brought within ten years from the time the right of action accrues. Hence, the reckoning time for the prescriptive period begins when the instrument was issued and the corresponding check was returned by the bank to its depositor (normally a month thereafter). Applying the same rule, the cause of action for the recovery of the proceeds of Citibank Check No. SN 04867 would normally be a month after December 19, 1977, when Citibank paid the face value of the check in the amount of P4,746,114.41. Since the original complaint for the cause of action was filed on January 20, 1983, barely six years had lapsed. Thus, we conclude that Ford's cause of action to recover the amount of Citibank Check No. SN 04867 was seasonably filed within the period provided by law (Philippine Commercial International Bank (formerly INSULAR BANK OF ASIA AND AMERICA) vs. Court of Appeals and Ford Philippines, Inc. and Citibank, N.A G.R. No. 121413. January 29, 2001) EXTINGUISHMENT OF OBLIGATIONS Payment is a mode of extinguishing an obligation. Article 1240 of the Civil Code provides that payment shall be made to the person in whose favor the obligation has been In a contract involving reciprocal obligations, the rules on when a party may be declared in default are found in Article 1169: Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.x x x 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. The payments were purportedly made to a "supervisor" of the private respondent, who was clad in an SMC uniform and drove an SMC van. He appeared to be authorized to accept payments as he showed a list of customers' accountabilities and even issued SMC liquidation receipts which looked genuine. Unfortunately for petitioner Francisco Culaba, he did not ascertain the identity and authority of the said supervisor, nor did he ask to be shown any identification to prove that the latter was, indeed, an SMC supervisor. The petitioners relied solely on the man's representation that he was collecting payments for SMC. Thus, the payments the petitioners claimed they made were not the payments that discharged their obligation to the private respondent. (Culaba vs. CA, G.R. No. 125862, April 15, 2004) Novation of a contract cannot be presumed. In order that an obligation may be extinguished by another which substitutes the same, it is imperative that it be so declared in unequivocal terms or that the old and new obligation be on every point incompatible with each other. The legal doctrine is that an obligation to pay a sum of money is not novated in a new instrument by changing the term of payment and adding other obligation not incompatible with the old one. It is not proper to consider an obligation novated as in the case at bar by mere granting of extension of payment which do not even alter its essence. (Garcia vs. CA, 191 SCRA 493) Novation in whatever form it may be, whether subjective or objective, must have to be with the consent of the creditor. There can be novation without the consent of the debtor (expromision) but there can never be novation without the consent of the creditor. The reason is that a new contract is being created between the new creditor and the new debtor. An agreement is needed for the effect of an extraordinary inflation to be taken into account to alter the value of the currency at the time of the establishment of the obligation which as a rule, is always the determinative element, to be varied by agreement that would find reason only in the supervention of extraordinary inflation or deflation. Moreover, in his concurring opinion in the same case, Justice Claudio Teehankee stated: "I concur in the result with the observation that the statements in the main opinion re the applicability or non-applicability of Article 1250 of the Civil Code should be taken as obiter dicta, since said article may not be invoked nor applied without a proper declaration of extraordinary inflation or deflation of currency by the competent authorities. (Mobil Oil Phils. vs. CA, 180 SCRA 651) Extraordinary inflation 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

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currency, and such decrease or increase could not have been reasonably foreseen or was manifestly beyond the contemplation of the parties at the time of the establishment of the obligation. While appellant's voluminous records and statistics proved that there has been a decline in the purchasing power of the Philippine peso, this downward fall of the currency cannot be considered "extraordinary." It is simply a universal trend that has not spared our country. (Filipino Pipe and Foundry vs. NAWASA, L-43446, May 3, 1988) Where a timely and valid tender of payment is made pursuant to the exercise of a right it is sufficient, without consignation, to preserve such right. Consignation referred to in Art 1256 of the Civil Code is inapplicable to a lease with option to buy because said provision refers to consignation as one of the means for the payment or discharge of a debt whereas the lessee was not indebted to the lessor for the price of the leased premises. The lessee merely exercised a right of option and had no obligation to pay said price until execution of the deed of sale in his favor, which the lessor referred to do. (Francisco vs. Bautista, 192 SCRA 388) An offer to redeem to be properly effected can either be through a formal tender with consignation or by filing a complaint in court coupled with consignation of the redemption price within the prescribed period. It must be stressed however that in making a repurchase it is not sufficient that a person offering to redeem merely manifests his desire to repurchase. This statement of intention must be accompanied by an actual and simultaneous tender of payment which constitutes the legal use or exercise of the right to repurchase. (Quio vs. CA, 291 SCRA 249) The deposit of the rentals with the bank is not the consignation contemplated by law. What the law requires is the deposit of the thing due at the disposal of judicial authority before whom the tender of payment shall be proved in a proper case. (Ercillio vs. CA, 192 SCRA 163) An individual who is not a forced heir, creditor or party to a contract of sale made during the life of the grantor cannot bring an action to annul said voluntary deed of sale to the grantee because under the law, an action to annul a contract entered into with all the requisites mentioned in Art. 1261 whenever they are tainted with the vice which validate them in accordance with law may be brought, not only by any person principally bound or who made them but also his heir to whom the right and obligation arising from the contract are transmitted. (Concepcion vs. Sta. Ana, L-227, December 29, 1950) AUTONOMY OF CONTRACTS Contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy." However, where one of the conditions stated in a contract is a prohibition to sell to third parties, the same is contrary to public policy because it virtually amounts to a perpetual restriction on the right of ownership, specifically the owner's right to freely dispose of his properties. Any such prohibition, indefinite and unlimited 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. (Leal v. IAC, G.R. No. L-65425, November 5, 1987) Article 1257 of the Civil Code is confined to the enforcement of stipulations in favor of third persons. The history of the doctrine and the meaning of the word stipulation require that the benefit claimed by a third person must be one intended to be conferred upon him by the parties. The article does not lend its aid to an incidental benefit which a third person may have in the performance of the contract. The intent of the contracting parties to benefit a third person must be clearly expressed. (Uy Tam and Uy Yet vs. Leonard, 30 Phil. 471) CONSENT The acceptance of an offer must therefor be unqualified and absolute. In other words, it must be identical in all respects with that of the offer so as to produce consent or meeting of the minds. This was not the case herein considering that petitioner's acceptance of the offer was qualified, which amounts to a rejection of the original offer. (Limketkai Sons v. CA, 255 SCRA 626)

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An offer made inter praesentes must be accepted IMMEDIATELY. If the parties intended that there should be an express acceptance, the contract will be perfected only upon knowledge by the offeror of the express acceptance by the offeree of the offer. An acceptance which is not made in the manner prescribed by the offeror is NOT EFFECTIVE BUT A COUNTER-OFFER which the offeror may accept or reject. (Malbarosa vs. CA, et al., G.R. # 125761, April 30, 2003) MUTUALITY OF CONTRACTS 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. (Almeda v. CA, 256 SCRA 292) STATUTE OF FRAUDS As correctly found by the appellate court, the occupation and construction of the improvements made by petitioners on the disputed property are clear acts of ratification and enforcement. In other words, the erection of these structures on the subject lot indicates that the lease contract was already in effect. The Statute of Frauds applies only to executory and not completed, executed or partially executed contracts. Thus, where as in this case, one party has performed his obligation, oral evidence will be admitted to prove the agreement. (Camara vs. Malabao, G.R. No. 154650. July 31, 2003) A contract need not be contained in a single writing. It may be collected from several different writings which do not conflict with each other and which, when connected, show the parties, subject matter, terms and consideration, as in contracts entered into by correspondence. A contract may be encompassed in several instruments even though every instrument is not signed by the parties, since it is sufficient if the unsigned instruments are clearly identified or referred to and made part of the signed instrument or instruments. (BF Corporation v. CA, 288 SCRA 267) An exception to the unenforceability of contracts pursuant to the Statute of Frauds is the existence of a written note or memorandum evidencing the contract. The memorandum may be found in several writings, not necessarily in one document. (Limketkai Sons v. CA, 250 SCRA 523) RESCISSION In countless times there has been confusion between rescission under Articles 1381 and 1191 of the Civil Code. Through this case we again emphasize that rescission of reciprocal obligations under Article 1191 is different from rescissible contracts under Chapter 6 of the law on contracts under the Civil Code. While Article 1191 uses the term rescission, the original term used in Article 1124 of the old Civil Code, from which Article 1191 was based, was resolution. Resolution is a principal action that is based on breach of a party, while rescission under Article 1383 is a subsidiary action limited to cases of rescission for lesion under Article 1381 of the New Civil Code. (Rivera vs. Del Rosario, G.R. No. 144934. January 15, 2004)

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Sales
ABSOLUTE AND CONDITIONAL SALES A deed of sale, even though denominated as a Deed of Conditional Sale is absolute in nature in the absence of stipulation that the title to the property sold is reserved in the vendor or that the latter has the right to unilaterally rescind the contract upon the non-payment within a fixed period. (Dignos vs. Court of Appeals, 158 SCRA 375) OBJECT OF A CONTRACT OF SALE

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within the prohibitive period of five (5) years. This prohibition is mandatory and any sale made in violation thereof is null and void. This is true even if the sale involved is not voluntary, such as a judicial sale. For the purpose of compliance with the law, it is immaterial that the satisfaction of debt by alienation or encumbrance was made voluntarily or not. (Artates vs. Urbi, 37 SCRA 395) A bilateral promise to buy and sell and the agency to sell, entered into within five (5) years from the date of the issuance of the homestead patent is in violation of the Public Land Law although the execution of the sale was deferred until after the expiration of the five-year prohibitory period. To all intents and purposes, there was an actual sale perfected during the period of prohibition except that it was reciprocally demandable thereafter. The stipulation deferring the effects of the sale was merely a device to circumvent the prohibition. Thereafter, a compromise agreement wherein a grantee of a public land promised to sell the same and entered into within the prohibitory period of five years is null and void ab initio. (Heirs of Enrique Zambales vs. CA, 120 SCRA 897) A contract of sale or purchase of goods to be delivered at a future time, if entered into without the intention of having any goods pass from one party to another, but with an understanding that at the appointed time, the purchaser is merely to receive or pay the difference between the contract and the market prices, is illegal. Such contract falls under the definition of futures in which the parties merely gamble on the rise or fall in prices and is declared null and void by law. (Art. 2018, NCC) (Onapal Phil. Commodities, Inc. vs. CA [1993]) CONTRACT OF SALE vs. AGENCY TO SELL When one undertakes to deliver a thing at a stipulated price to another who is to pay the price in a moment agreed upon, such constitutes the essential features of a contract of sale and excludes the legal conception of an agency or order to sell. The contract entered into by the parties was that the plaintiff was to furnish the defendant with the beds which the latter might order at a stipulated price and that the defendant was to pay the price in the manner agreed upon. This contract contains the essential features of a contract of sale unlike in an agency whereby the agent receives the thing to sell it and does not pay its price but delivers to the principal the price he obtains from the sale of the thing to a third person and if he does not succeed in selling it, returns it. (Quiroga vs. Parsons Hardware Company, 38 Phil 501) CONTRACT OF SALE vs. CONTRACT FOR A PIECE OF WORK Selling or distribution is an essential ingredient of manufacturing. Manufacture, thereof, of products for the general market involves the sale and distribution thereof and cannot be regarded as contract for a piece of work, which the manufacturing of goods especially upon the special order of customers, and not for the general market. A contract for the sale of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not is a contract for the sale of goods (Concrete Aggregates, Inc. vs. Court Of Tax Appeals, 185 SCRA 461). PERFECTION OF CONTRACT OF SALE A definite agreement on the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale. This is so because the agreement as to the manner of payment goes into the price such that a difference or disagreement in the manner of payment is tantamount to a failure to agree on the price. Definiteness as to the price is an essential element of a binding agreement to sell personal property. In the case, nothing on the agreement mentioned about the full purchase price and the manner the installments were to be paid. (Toyota Shaw, Inc. vs. Court Of Appeals, 244 SCRA 321) EQUITABLE MORTGAGE One which lacks the proper formalities, form of words, or other requisites prescribed by law for a mortgage, but shows the intention of the parties to make the property subject of the

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contract as security for a debt and contains nothing impossible or contrary to law (Cachola vs. CA 208 SCRA 496) PROMISE TO BUY AND SELL VS ACCEPTED UNILATERAL PROMISE TO BUY OR TO SELL While it is true that under Art. 1324 of the Civil Code, the general rule regarding offer and acceptance is that, when the offeror gives to the offeree a certain period to accept, the offer may be withdrawn at anytime before acceptance when the option is not founded upon consideration distinct from price. This general rule must be interpreted as modified by the provision of Article 1479 which applies to a promise to buy and sell specifically. This rule requires that a promise to sell to be valid, must be supported by a consideration distinct from the price, which means that the option can still be withdrawn, even if accepted, if the same is not supported by any consideration. (Southwestern Sugar and Molasses Co. vs. Atlantic Gulf And Pacific, Co., 97 SCRA 249) The acceptance of an offer to sell a determinate thing for a price certain creates a bilateral contract to sell and to buy. The offer, upon acceptance, ipso facto assumes the obligations of a purchaser. If an option is given without consideration, it is a mere offer of contract of sale, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale even though the option was not supported by a sufficient consideration. (Atkins, Kroll and Company vs, Cua Hian Tek, 102 SCRA 948) There is no conflict between Articles 1324 and 1479. An accepted unilateral promise to sell partakes the nature of an option, which, although not binding as contract in itself because of lack of separate consideration, generates a bilateral contract of purchase and sale upon acceptance. Article 1324 of the Civil Code which presumes the existence of a consideration in every contract applies to contracts in general, whereas the second paragraph of Article 1479 thereof refers to sales in particular and more specifically to an accepted unilateral promise to buy or to sell. (Sanchez vs. Rigos, 45 SCRA 368) An extension of the period to redeem the property after the redemption period granted by the President and Manager of a bank after the expiration of the redemption period could only relate to the matter of resale of the property, not redemption. Even if it were to be understood as an extension of the period of redemption, the bank is not bound by the promise not only because it was not approved or ratified by the Board of Directors but also because, and more distinctively, it was a promise not supported by a consideration distinct from the repurchase price. (Natino vs. Intermediate Appellate Court, 197 SCRA 323) In a unilateral promise to sell, where the debtor fails to withdraw the promise before the acceptance by the creditor, the transaction becomes a bilateral contract to sell and to buy because upon the acceptance by the creditor of the offer to sell by the debtor, there is already a meeting of the minds of the parties as to the thing which is determinate and the price which is certain. In which case, the parties may reciprocally demand performance. An optional contract is a privilege existing only in one party the buyer. For a separate consideration paid, he is given the right to purchase or not, a certain merchandise or property, at any time within the agreed period, at a fixed price. It is the duty of the vendor to remain open the offer until the agreed period expires. The purchaser is then given the option to decide to purchase or not and may not be compelled to exercise the option to buy before the term expires. (Serra vs. Court of Appeals, 229 SCRA 60) OBLIGATION OF THE VENDEE TO PAY THE PRICE A grace period granted the vendee in case of failure to pay the amount/s due is a right not an obligation. The grace period must not be likened to an obligation, the non-payment of which, under Article 1169 of the Civil Code, would still generally require judicial or extra-judicial demand before default can be said to arise (Bricktown Devt Corp vs. Amor Tierra Devt Corp. 57SCRA437) RIGHT OF FIRST REFUSAL In the instant case, the right of first refusal is integrated in the contract of lease. Thus, it is incorrect to say that there is no consideration in an agreement of right of first refusal. The contractual stipulation is part and parcel of the whole contract of lease. Hence, the consideration

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for the lease includes the consideration for the right of first refusal. Rescission is a relief allowed for the protection of one of the contracting parties and even third persons from all injury and damage the contract may cause or to protect some incompatible and preferred right by the contract. (Equatorial Realty Development vs. Mayfair Theater Inc., 264 SCRA 483) The basis of the right of first refusal must be the current offer to sell of the seller, or offer to purchase of any prospective buyer. Only after the optionee fails to exercise its right of first priority under the same terms and within the period contemplated, could the owner validly offer to sell the property to a third person, again, under the same terms as offered to the optionee. (Paranaque Kings Enterprises, Inc. v. CA GR No. 111538, February 26, 1997) A right of first refusal means identity of terms and conditions to be offered to the lessee and all other prospective buyers and a contract of sale entered into in violation of a right of first refusal of another person, while valid, is rescissible. (Riviera Filipina, Inc. v. CA GR No. 117355, April 5, 2002) WHO BEARS THE RISK OF LOSS The disappearance or loss of property which the owner intended or attempted to sell can only interest the owner, who should suffer the loss, and not a third party who has acquired no rights nor incurred any liability with respect thereto. In the case, the sale was not perfected for failure of the owner to comply with the condition. It follows that the loss of the vessel should be borne by the owner. (Roman vs. Grimalt, 6 Phil 96) The issuance of sales invoice does not prove transfer of ownership of the thing sold either actually or constructively. In all forms of delivery, it is necessary that the act of delivering whether constructive or actual be coupled with the intention to transfer ownership and to deliver the thing. Article 1496 of the Civil Code which provides that in the absence of an express assumption of risk by the buyer, the things sold remain at the sellers risk until the ownership thereof is transferred to the buyer. (Norkis Distributors, Inc. vs. CA, 193 SCRA 694) RECTO LAW In sales on installments, where the action instituted is for specific performance and the mortgaged property is subsequently attached and sold, the sale thereof does not amount to a foreclosure of the mortgage, hence, the seller-creditor is entitled to deficiency judgment. The attachment and subsequent sale on public auction of the property was merely an incident to an ordinary civil action and cannot be considered as equivalent to the remedy of foreclosure. (Southern Motors, Inc. vs. Moscoso, 2 SCRA 163) If the guarantor should be compelled to pay the balance of the purchase price, the guarantor will in turn be entitled to recover what she has paid from the debtor-vendee pursuant to Article 2066 of the Civil Code, so that ultimately, it would be the vendee who will be made to bear the payment of the balance of the price, despite the earlier foreclosure of the chattel mortgage. Thus, the protection given by Article 1484 would be indirectly subverted, and public policy overturned. Therefore, foreclosure of the chattel mortgage releases the guarantor. (Pascual vs. Universal Motors Corp., 61 SCRA 121) DELIVERY AS A MODE OF TRANSFERRING OWNERSHIP The execution of a public instrument is equivalent to the delivery of the thing which is the object of the contract, but in order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. (Addison vs. Felix and Tioco, 38 Phil 404) Ownership is not transferred by perfection of the contract of sale but by delivery, either actual or constructive. This is true even if the purchase has been made on credit or payment of the purchase price is not essential to the transfer of ownership as long as the property sold has been

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delivered. Ownership is acquired from the moment the thing sold was delivered to the vendee, as when it is placed in his control and possession. (Sampaguita Pictures, Inc. vs. Jalwindor Manufacturers Inc., 43 SCRA 420) ARTICLE 1491 The prohibition mandated by paragraph 2 of Article 1491 in relation to Article 1409 of the Civil Code does not apply where the sale of the property in dispute was made under a special power inserted in or attached to the real estate mortgage pursuant to Act no. 3135, as amended. Under Section 5 of such Act, the title of the mortgagee-creditor over the property cannot be impeached or defeated on the ground that the mortgagee cannot be a purchaser of his own sale. (Fiestan vs. CA,, 185 SCRA 757) ARTICLES 1506 AND 559 The right of the owner to recover personal property acquired in good faith by another is based on his being dispossessed without his consent. The common law principle that where one of the two innocent persons must suffer by a fraud perpetrated by another, the law imposes upon the party who by his misplaced confidence, has enabled the fraud to be committed cannot be applied to a person unlawfully deprived covered by an express provision of the Civil Code specifically Article 559. Between a common law principle and a statutory provision, the latter must prevail. (Concurring opinion of Justice Teehankee) Unlawful deprivation is not merely contained in the specific sense of deprivation by robbery or theft but extends to all cases where there has been no valid transmission of ownership, including depositary or lessee who sold the same. It extends to all cases where there has been no valid transmission of ownership. (Dizon vs. Suntay, 47 SCRA 160) Possession of movable property acquired in good faith is equivalent to a title. Hence, where there was a perfected contract of sale, it cannot be said that there is unlawful deprivation so as to warrant recovery from a purchaser in good faith without reimbursement. (EDCA Publishing And Distributing Corp. vs. Santos, 184 SCRA 614) DOUBLE SALE The first purchaser is necessarily a purchaser in good faith. Such good faith subsists and continues to exist even if the first purchaser subsequently is informed of the existence of a second sale. The governing principle here is first in time, stronger in right. The knowledge gained by the first buyer of the second sale cannot defeat the first buyers good faith and the right to register first. But conversely, knowledge gained by the buyer of the first sale defeats his rights even if he be the one to register first as he then acts in bad faith. It has to be noted that knowledge is tantamount to registration. (Carbonell vs. Court Of Appeals, 69 SCRA 99) Where one of two conflicting sales of a piece of land was executed before the land was registered, while the other was an execution sale made after the land had been registered, what should apply is Section 35, Rule 39 (not Article 1544) which provides that purchaser of execution sale acquires only the rights of the judgment debtor to the property as of the time of the levy. Therefore, a prior sale, although unregistered cannot be deemed to be automatically cancelled upon subsequent issuance of the Torrens title over the land. (Dagupan Trading Co. vs. Macam, 14 SCRA 99) Knowledge of a prior transfer of a registered property by a subsequent purchaser makes him a purchaser in bad faith which vitiates his title and creates no right as against the first purchaser. The knowledge contemplated here must be continuing- from the time of acquisition until the title is transferred to him by registration a failing registration by delivery of possession. The second buyer must show continuing good faith and innocence or lack of knowledge of the first sale until his contract ripens into full ownership through prior registration as provided by law. (Cruz vs. Cabana, 129 SCRA 656)

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As between two purchasers, the one who registered the sale in his favor has a preferred right over the other who has not registered his title, even if the latter is in actual possession of the immovable property. (Tanedo vs. Court Of Appeals, 252 SCRA 80) Article 1544 does not apply to land not registered under the Torrens system. The provisions in Act No. 3344 should be made applicable, which states that registration of instruments affecting unregistered lands is without prejudice to a third party with a better right. This is because the purchaser of unregistered land at a sheriffs execution sale only steps into the shoes of the judgment debtor, and merely acquires the latters interest in the property sold as of the time the property was levied upon. (Radiowealth Finance Co. vs. Palileo, 197 SCRA 245) Where a person claims to have superior proprietary rights over another on the ground that he derived his title from a sheriff's sale registered in the Registry of Property, Article 1544 of the Civil Code will apply only if said execution sale of real estate is registered under Act 496. Unfortunately, the subject property was still untitled when it was already acquired by bank (first buyer) by virtue of a final deed of conveyance. On the other hand, when the second buyer purchased the same property, it was covered under the Torrens System. At the time of the execution and delivery of the sheriff's deed of final conveyance the disputed property was already covered by the Land Registration Act and the Original Certificate of Title was likewise already entered in the registration book of the Register of Deeds as of April 17, 1984. Thus, from said date, the subject property was already under the operation of the Torrens System. Under the said system, registration is the operative act that gives validity to the transfer or creates a lien upon the land. Moreover, the issuance of a certificate of title had the effect of relieving the land of all claims except those noted thereon. Accordingly, the second buyer in dealing with the subject registered land, were not required by law to go beyond the register to determine the legal condition of the property. They were only charged with notice of such burdens on the property as were noted on the register or the certificate of title. To have required them to do more would have been to defeat the primary object of the Torrens System which is to make the Torrens Title indefeasible and valid against the whole world. (Naawan Community Rural Bank v. CA) BREACH OF WARRANTY As a general rule, there is no implied warranty in a sale of second hand goods. However, this general rule is not without exceptions. Article 1562 of the Civil Code states that where the buyer expressly or by implication makes known to the seller the particular purpose for which the goods are acquired and it appears that the buyer relied on the sellers skill or judgment, there is an implied warranty that the goods shall be reasonably fit for such purpose. In the certification that the machine was in A1 condition must be considered an express warranty and their binding on the seller. Such condition or certification was a condition sine qua non for the release of the petitioners loan which was used for the payment of the purchase price. Seller must be bound by it. (Moles vs. Intermediate Appellate Court, 169 SCRA 777) While it is true that Article 1571 of the Civil Code provides for a prescriptive period of six months for a rehibitory action, a cursory of the preceding ten articles will reveal that said rule may be applied only in case of implied warranties. In case of express warranty, the prescriptive period is the one specified in the warranty and in the absence of such period, the general rule on rescission of contracts which is four (4) years shall apply. (Villostas vs. Court Of Appeals, 210 SCRA 490) RIGHT OF REDEMPTION Where the true intention of the parties show that the transaction shall secure the payment of the debt, such a transaction shall be presumed to be an equitable mortgage under paragraph 6 of Article 1602. Settled is the rule that to create the presumption enunciated by Article 1602, the existence of one circumstance is enough. (Ramos vs. Court Of Appeals, 180 SCRA 635) While in ordinary sales for reason and equity a transaction may be invalidated on the ground of inadequacy of price or when such inadequacy shocks ones conscience as to justify the courts to interfere, such does not follow when the law gives to the owner the right to redeem as when a sale is

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made at public auction, upon the theory that the lower the price, the easier it is for the owner to effect the redemption. And so it was aptly said that when there is the right to redeem, inadequacy of the price should not be material because the judgment debtor may redeem the property. (De Leon vs. Salvador, 36 SCRA 567) Co-heirs may redeem the shares sold by any of their co-heirs within 30 days from written notice of the sale. However, strict application of this legal mandate would amount to injustice when there is an actual knowledge though no written notice is given. In such case, mere technicality should not defeat the purpose of the law, i.e. to notify the redemptioners whose actual knowledge is equivalent to notice. (Alonzo vs. Intermediate Appellate Court, 150 SCRA 259) A formal offer to redeem, accompanied by a bona fide tender of payment of redemption price is not essential where the right to redeem is exercised through a judicial action within the redemption period and simultaneously depositing the redemption price. The filing of action itself is equivalent to a formal offer to redeem. There is actually no prescribed form for an offer to redeem to be properly effected, what is paramount is the availment of the right to legally redeem within the fixed period. (Lee Chuy Realty Corp. vs. Court Of Appeals, 250 SCRA 596) While it is true that written notice by the vendor is required by law under Article 1623, it is equally true that the same Article 1623 does not prescribe 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 starts running and the redemptioner has no real cause to complain. (Etcuban vs. Court Of Appeals, 148 SCRA 587)

CIVIL LAW

Lease
When rental is paid monthly and the term had not been expressly agreed upon, the lease is understood under Article 1687 to be terminated or terminable from month-to-month. An extension by the contract of lease may only be sought by the tenant before, not after, the termination of the lease. (Yek Seng Co. vs. Court Of Appeals, 205 SCRA 305) Although the lease is on a month-to-month basis and may be terminated at the end of every month, in the absence of proper notice to vacate, the lease continues to be in force and cannot be deemed to have expired as of the end of the month automatically. Neither can the non-payment of the rent be ground for termination without a demand to pay and to vacate. (Yap vs. Cruz, 208 SCRA 692) An express agreement which gives the lessee the sole option to renew the lease is frequent and, subject to statutory restriction valid and, binding. This option which is provided in the same lease agreement is fundamentally part of the consideration in the contract and is no different from any other provision of the lease carrying an undertaking on the part of the lessor to act conditioned on the performance by the lessee. It cannot be avoided on the ground that it lacks mutuality. And while the lessee has the right to choose to continue the lease or not, and the lessor accepts, both parties are bound by the new lease contract. (Allied Banking Corporation vs. Court Of Appeals, 284 SCRA 357) BP 877 erased the distinction between oral and written leases in so far as expiration of the lease period as a ground for judicial ejectment is concerned. Therefore, the lease, although orally executed, may be for a definite period if it paid on a monthly basis; therefore, the period is from month to month. Therefore, finally, any express exception of PD No. 20, judicial ejectment lies when the lease is for a definite period or when the fixed or definite period agreed upon has expired. (Heirs Of Fausta Dimaculangan vs. Intermediate Appellate Court, 170 SCRA 393) BP 25 expressly sanctions bank deposits as a sufficient and valid alternative to judicial consignation. Lease on a month-to-month basis can be validly terminated by the lessor at the end of any given month upon prior notice. The lessor is granted the right to eject the lessee, being an excepted case under the Rental Control Law, after prior notice of such termination and demand to vacate the leased premises. (Inductivo vs. Court Of Appeals, 229 SCRA 380)

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Stipulations in a lease contract expressly warranting that the leased premises shall be used exclusively by the lessee for a specific purpose and that the lessee shall not directly or indirectly assign its right of lease over the leased premises are consistent with Art. 1649 of the Civil Code which provides that the lessee cannot assign the lease without the consent of the lessor, unless there is a stipulation to the contrary. It has been held that the consent of the lessor is necessary because the assignment of the lease would involve the transfer, not only of rights, but also of obligations. It constitutes a novation by a substitution of the person of one of the parties. (Bangayan v. CA, 278 SCRA 379)

Partnership
CONCEPT OF PARTNERSHIP While it has been held that as between themselves the rights of the stockholders in a defectively incorporated association should be governed by the supposed charter and the laws of the state relating thereto and not by the rules governing partners, it is ordinarily held that persons who attempt, but fail, to form a corporation and who carry on business under the corporate name occupy the position of partners inter se. However, such a relation does not necessarily exist, for ordinarily persons cannot be made to assume the relation of partners, as between themselves, when their purpose is that no partnership shall exist, and it should be implied only when necessary to do justice between the parties; thus, one who takes no part except to subscribe for stock in a proposed corporation which is never legally formed does not become a partner with other subscribers who engage in business under the name of the pretended corporation, so as to be liable as such in an action for settlement of the alleged partnership and contribution. A partnership relation between certain stockholders and other stockholders, who were also directors, will not be implied in the absence of an agreement, so as to make the former liable to contribute for payment of debts illegally contracted by the latter. (Pioneer Insurance vs. CA, GRN 84197, July 28, 1989) It is true that the complaint also states that the plaintiff is "represented herein by its Managing Partner Gregorio Araneta, Inc.", another corporation, but there is nothing against one corporation being represented by another person, natural or juridical, in a suit in court. The contention that Gregorio Araneta, Inc. can not act as managing partner for plaintiff on the theory that it is illegal for two corporations to enter into a partnership is without merit, for the true rule is that "though a corporation has no power to enter into a partnership, it may nevertheless enter into a joint venture with another where the nature of that venture is in line with the business authorized by its charter." (J.M.T. Wason and Co., Inc. vs. Bolanos, L-4935, May 28, 1968) They were co-owners pure and simple. To consider them as partners would obliterate the distinction between a co-ownership and a partnership. The petitioners were not engaged in any joint venture by reason of that isolated transaction. Their original purpose was to divide the lots for residential purposes. If later on they found it not feasible to build their residences on the lots because of the high cost of construction, then they had no choice but to resell the same to dissolve the co-ownership. The division of the profit was merely incidental to the dissolution of the co-ownership which was in the nature of things a temporary state. It had to be terminated sooner or later. (Obillos vs CIR, L-68118, October 29, 1985) The legal concept of a joint venture is of common law origin. It has no precise legal definition, but it has been generally understood to mean an organization formed for some legal purpose. It is in fact hardly distinguishable from the partnership, since their elements are similar community of interest in the business, sharing of profits and losses, and a mutual right of control. The main distinction cited by most common law jurisdictions is that the partnership contemplates a general business with some degree of continuity, while the joint venture is formed for the execution of a single transaction, and is thus of a temporary nature. This observation is not entirely accurate in this jurisdiction, since under the Civil Code, a partnership may be particular or universal, and a particular partnership may have for its object a specific undertaking. It would seem therefore that under Philippine law, a joint venture is a form of partnership and should thus be governed by the law of partnerships. The

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Supreme Court has however recognized a distinction between these two business forms, and has held that although a corporation cannot enter into a partnership contract, it may however engage in a joint venture with others. Moreover, the usual rules as regards the construction and operations of contracts generally apply to a contract of a joint venture. (Aurbach v. Sanitary Wares Manufacturing Corp., 180 SCRA 130) OBLIGATIONS OF THE PARTNERS It is not disputed that the prohibition against an industrial partner engaging in business for himself seeks to prevent any conflict of interest between the industrial partner and the partnership, and to insure faithful compliance by said partner with his prestation. There is no pretense, however, even on the part of appellants that appellee is engaged in any business antagonistic to that of appellant company, since being a Judge of one of the branches of the City Court of Manila can hardly be characterized as a business. (Evangelista & Co. vs. Abad Santos, L-31684, June 28, 1973) Above all other persons in business relations, partners are required to exhibit towards each other the highest degree of good faith. In fact the relation between partners is essentially fiduciary, each being considered in law, as he is in fact, the confidential agent of the other. It is therefore accepted as fundamental in equity jurisprudence that one partner cannot, to the detriment of another, apply exclusively to his own benefit the results of the knowledge and information gained in the character of partner. And this rule has even been applied to a renewal taken in the name of one partner after the dissolution of the firm and pending its liquidation. (Pang Lim vs. Lo Seng, GRN 16318, October 21, 1921 ) Parenthetically, the appellees' statement that the beneficial right over the fishpond in question is the "specific partnership property" contemplated by Art. 1811 of the Civil Code, is incorrect. A reading of the said provision will show that what is meant is tangible property, such as a car, truck or a piece of land, but not an intangible thing such as the beneficial right to a fishpond. If what the appellees have in mind is the fishpond itself, they are grossly in error. A fishpond of the public domain can never be considered a specific partnership property because only its use and enjoyment-never its title or ownership-is granted to specific private persons. (Deluao vs Casteel, L21906, December 18, 1968) In short, while the liability of the partners are merely joint in transactions entered into by the partnership, a third person who transacted with said partnership can hold the partners solidarily liable for the whole obligation if the case of the third person falls under Articles 1822 or 1823. The obligation is solidary because the law protects him who in good faith relied upon the authority of a partner, whether such authority is real or apparent. That is why under Article 1824 of the Civil Code all partners, whether innocent or guilty, as well as the legal entity which is the partnership, are solidarily liable. Our construction of the article (Article 1797, NCC) is that it relates exclusively to the settlement of the partnership affairs, among the partners themselves and has nothing to do with the liability of the partners to third persons; that each one of the industrial partners is liable to third persons for the debts of the firm; that if he has paid such debt out of his private property during the life of the partnership, when its affairs are settled he is entitled to credit for the amount so paid, and if it results that there is not enough property in the partnership to pay him, then the capitalist partners must pay him. (La Compania Maritima vs. Muoz, 9 PHIL 326 ) (Article 1797, NCC) is susceptible of two different interpretations of which that given it in the Compaia Maritima case, supra, i.e., that it relates merely to the distribution of losses among the partners themselves in the settlement of the partnership affairs and has no reference to partnership obligations to third parties, appears to us to be the more logical. There is a marked distinction between a liability and a loss, and the inability of a partnership to pay a debt to a third party at a particular time does not necessarily mean that the partnership business, as a whole, has been operated at a loss. The partnership may have outstanding credits which for the moment may be unavailable for the payment of debts, but which eventually may be realized upon and yield profits more than sufficient to cover all losses. Bearing this in mind it will be found that there in reality is no conflict between the two articles quoted; one speaks of liabilities, the other of losses. (Pacific Commercial Co. vs. Aboitiz & Martinez, GRN 25007, March 2, 1926 )

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The partnership has a juridical personality separate and distinct from that of each of the partners. Since the capital was contributed to the partnership, not to petitioners, it is the partnership that must refund the equity of the retiring partners. Since it is the partnership, as a separate and distinct entity, that must refund the shares of the partners, the amount to be refunded is necessarily limited to its total resources. In other words, it can only pay out what it has in its coffers, which consists of all its assets. However, before the partners can be paid their shares, the creditors of the partnership must first be compensated. After all the creditors have been paid, whatever is left of the partnership assets becomes available for the payment of the partners shares. (VILLAREAL vs. RAMIREZ, G.R. No. 144214, July 14, 2003) DISSOLUTION The heir ordinarily (and we did not say "necessarily") becomes a limited partner for his own protection, because he would normally prefer to avoid any liability in excess of the value of the estate inherited so as not to jeopardize his personal assets. But this statutory limitation of responsibility being designed to protect the heir, the latter may disregard it and instead elect to become a collective or general partner, with all the rights and privileges of one, and answering for the debts of the firm not only with the inheritance but also with the heir's personal fortune. This choice pertains exclusively to the heir, and does not require the assent of the surviving partner. The Articles did not provide that the heirs of the deceased would be merely limited partner; on the contrary, they expressly stipulated that in case of death of either partner "the co-partnership . . . will have to be continued" with the heirs or assigns. It certainly could not be continued if it were to be converted from a general partnership into a limited partnership, since the difference between the two kinds of associations is fundamental; and specially because the conversion into a limited association would leave the heirs of the deceased partner without a share in the management. Hence, the contractual stipulation does actually contemplate that the heirs would become general partners rather than limited ones. Of course, the stipulation would not bind the heirs of the deceased partner should they refuse to assume personal and unlimited responsibility for the obligations of the firm. The heirs, in other words, cannot be compelled to become general partners against their wishes. But because they are not so compellable, it does not legitimately follow that they may not voluntarily choose to become general partners, waiving the protective mantle of the general laws of succession. And in the latter event, it is pointless to discuss the legality of any conversion of a limited partner into a general one. The heir never was a limited partner, but chose to be, and became, a general partner right at the start. (Goquiolay vs. Sycip, L-11840, December 10, 1963)

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While an unregistered commercial partnership has no juridical personality, nevertheless, where two or more persons attempt to create a partnership failing to comply with all the legal formalities, the law considers them as partners and the association is a partnership in so far as it is a favorable to third persons, by reason of the equitable principle of estoppel. It results that if the law recognizes a defectively organized partnership as de facto as far as third persons are concerned, for purposes of its de facto existence it should have such attribute of a partnership as domicile (for purposes of the Chattel Mortgage Law). (McDonald vs. National City Bank of New York) What is important for present purposes is that, not only the retiring partners but also the new partnership itself which continued the business of the old, dissolved, one, are liable for the debts of the preceding partnership. In Singson, et al. v. Isabela Saw Mill, et al., the Court held that under facts very similar to those in the case at bar, a withdrawing partner remains liable, to a third party creditor of the old partnership. The liability of the new partnership, upon the other hand, in the set of circumstances obtaining in the case at bar, is established in Article 1840 of the Civil Code. (Yu vs. NLRC, GRN 97212, June 30,1993) The birth and life of a partnership at will is predicated on the mutual desire and consent of the partners. The right to choose with whom a person wishes to associate himself is the very foundation and essence of that partnership. Its continued existence is, in turn, dependent on the constancy of that mutual resolve, along with each partner's capability to give it, and the absence of a cause for dissolution provided by the law itself. Verily, any one of the partners may, at his sole

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pleasure, dictate a dissolution of the partnership at will. He must, however, act in good faith, not that the attendance of bad faith can prevent the dissolution of the partnership but that it can result in a liability for damages. In passing, neither would the presence of a period for its specific duration or the statement of a particular purpose for its creation prevent the dissolution of any partnership by an act or will of a partner. Among partners, mutual agency arises and the doctrine of delectus personae allows them to have the power, although not necessarily the right, to dissolve the partnership. An unjustified dissolution by the partner can subject him to a possible action for damages. (Ortega vs CA, GRN 109248, July 3, 1995) LIMITED PARTNERSHIP To establish a limited partnership there must be, at least, one general partner and the name of at least one of the general partners must appear in the firm name. But neither of these requirements has been fulfilled. The general rule is that those who seek to avail themselves of the protection of laws permitting the creation of limited partnerships must show a substantially full compliance with such laws. A limited partnership that has not complied with the law of its creation is not considered a limited partnership at all, but a general partnership in which all the members are liable (Teck Seing & Co. vs Jo Chung Cang, GRN 1989, September 6, 1923)

CIVIL LAW

Agency
The management contract was a contract of lease of services. In both agency and lease of services, one of the parties binds himself to render some service to the other party. Agency, however, is distinguished from lease of work or services in that the basis of agency is representation, while in the lease of work or services, the basis is employment. Agency is a preparatory contract, as agency does not stop with the agency because the purpose is to enter into other contracts. The most characteristic feature of an agency relationship is the agents power to bring about business relations between his principal and third persons. The agent is destined to execute juridical acts. Lease of services contemplate only material acts. (Nielson & Co. vs. Lepanto Consolidated Mining Co., L-21601, December 17, 1966 ) A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration. The express mandate required by law to enable an appointee of an agency (couched) in general terms to sell must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned. For the principal to confer the right upon an agent to sell real estate, a power of attorney must so express the powers of the agent in clear and unmistakable language. When there is any reasonable doubt that the language so used conveys such power, no such construction shall be given the document. It is therefore clear that by selling to respondent Perez a portion of petitioner's land through a compromise agreement, Villamil-Estrada acted without or in obvious authority. The sale ipso jure is consequently void. So is the compromise agreement. (Cosmic Lumber Corp. vs. CA, GRN 114311, November 29, 1996) The difficulty in distinguishing between contracts of sale and the creation of an agency to sell has led to the establishment of rules by the application of which this difficulty may be solved. The decisions say the transfer of title or agreement to transfer it for a price paid or promised is the essence of sale. If such transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as a debtor for the agreed price and not merely as an agent who must account for the proceeds of a resale, the transaction is a sale; while the essence of an agency to sell is the delivery to an agent, not as his property, but as the property of the principal, who remains the owner and has the right to control sales, fix the price, and terms, demand and receive the proceeds less the agent's commission upon sales made. (Ker & Co., Ltd. vs. Lingad) The sale proscribed by a special power to mortgage under Article 1879 is a voluntary and independent contract, and not an auction sale resulting from extrajudicial foreclosure, which is precipitated by the default of a mortgagor. Absent that default, no foreclosure results. The

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stipulation granting an authority to extrajudicially foreclose a mortgage is an ancillary stipulation supported by the same cause or consideration for the mortgage and forms an essential or inseparable part of that bilateral agreement. The power to foreclose is not an ordinary agency that contemplates exclusively the representation of the principal by the agent but is primarily an authority conferred upon the mortgagee for the latter's own protection. That power survives the death of the mortgagor. It matters not that the authority to extrajudicially foreclose was granted by an attorney-infact and not by the mortgagor personally. The stipulation in that regard, although ancillary, forms an essential part of the mortgage contract and is inseparable therefrom. No creditor will agree to enter into a mortgage contract without that stipulation intended for its protection. (Bicol Savings & Loan Assoc. vs. CA, GRN 85302, March 31, 1989)

Trust
The "mistake" or "fraud" that results in an implied trust being impressed upon the property involved, may be the mistake or fraud of a third person, and need not be a mistake or fraud committed directly by the trustee himself under the implied trust. Accordingly, in the instant case, an implied trust was established upon the land acquired by Atty. Pascua even though the operative mistake was a mistake of respondent trial judge. A constructive trust, otherwise known as a trust ex maleficio, a trust ex delicto, a trust de son tort, an involuntary trust, or an implied trust, is a trust by operation of law which arises contrary to intention and in invitum, against one who, by fraud, actual or constructive, by duress or abuse of confidence, by commission of wrong, or by any form of unconscionable conduct, artifice, concealment, or questionable means, or who in any way against equity and good conscience, either has obtained or holds the legal right to property which he ought not, in equity and good conscience, hold and enjoy. It is raised by equity to satisfy the demands of justice. However, a constructive trust does not arise on every moral wrong in acquiring or holding property or on every abuse of confidence in business or other affairs; ordinarily such a trust arises and will be declared only on wrongful acquisitions or retentions of property of which equity, in accordance with its fundamental principles and the traditional exercise of its jurisdiction or in accordance with statutory provision, takes cognizance. It has been broadly ruled that a breach of confidence, although in business or social relations, rendering an acquisition or retention of property by one person unconscionable against another, raises a constructive trust. And specifically applicable to the case at bar is the doctrine that a constructive trust is substantially an appropriate remedy against unjust enrichment. It is raised by equity in respect of property, which has been acquired by fraud, or where, although acquired originally without fraud, it is against equity that it should be retained by the person holding it. (Sumaoang vs. RTC Judge, GRN 78173, October 26, 1992) Before a person can sue for the benefit of another under a trusteeship, he must be trustee of an express trust. (The provision in the Rules of Court regarding representative parties) does not apply in cases of implied trust, that is, a trust which may be inferred merely from the acts of the parties or from other circumstances. (PAL vs. Heald Lumber Co.) As differentiated from constructive trusts, where the settled rule is that prescription may supervene, in resulting trust, the rule of imprescriptibility may apply for as long as the trustee has not repudiated the trust. Once the resulting trust is repudiated, however, it is converted into a constructive trust and is subject to prescription. A resulting trust is repudiated if the following requisites concur: a) the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui qui trust; b) such positive acts of repudiation have been made known to the cestui qui trust; and c) the evidence thereon is clear and convincing. In Tale v. Court of Appeals, the Court categorically ruled that an action for reconveyance based on an implied or constructive trust must perforce prescribe in ten (10) years, and not otherwise, thereby modifying previous decisions holding that the prescriptive period was four (4) years.

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After all, so long as the trustee recognizes the trust, the beneficiary may rely upon the recognition, and ordinarily will not be in fault for omitting to bring an action to enforce his rights. There is no running of the prescriptive period if the trustee expressly recognizes the resulting trust. Since the complaint for breach of trust was filed by respondent-spouses two (2) months after acquiring knowledge of the sale, the action therefore has not yet prescribed. (O Laco vs. Co Cho Chit, GRN 58010, March 31,1993) A resulting trust is an intent-enforcing trust, based on a finding by the court that in view of the relationship of the parties their acts express an intent to have a trust, even though they did not use language to that effect. The trust is said to result in law from the acts of the parties. However, if the purpose of the payor of the consideration in having title placed in the name of another was to evade some rule of the common or statute law, the courts will not assist the payor in achieving his improper purpose by enforcing a resulting trust for him in accordance with the "clean hands" doctrine. The court generally refuses to give aid to claims from rights arising out of an illegal transaction, such as where the payer could not lawfully take title to land in his own name and he used the grantee as a mere dummy to hold for him and enable him to evade the land laws, e.g., an alien who is ineligible to hold title to land, who pays for it and has the title put in the name of a citizen (Ramos vs. CA, 232 SCRA 348) An action for reconveyance of a parcel of land based on an implied or constructive trust prescribes in ten years, the point of reference being the date of registration of the deed or the date of the issuance of the certificate of title over the property, but this rule applies only when the plaintiff, or the person enforcing the trust is not in possession of the property, since if a person claiming to be the owner thereof is in actual possession of the property, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe. The reason for this is that, one who is in actual possession of a piece of land claiming to be the owner thereof, may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession. (Vda de Cabrera v. CA, 267 SCRA 339) Credit Transactions LOAN, MORTGAGE AND COMMODATUM The chattel mortgage on the crops growing on appellants land simply stood as a security for the fulfillment of appellants obligation covered by the five promissory notes, and the loss of the crops did not extinguish his obligation to pay, because the account could still be paid from other sources aside from the mortgaged crops. (Republic vs Grijaldo, L-20240, December 31, 1965) It was indeed a patent error on the part of the Trial Court to hold the deeds of real estate mortgage as contracts of guaranty, giving to the mortgagors the benefit of excussion. A mortgage is clearly and completely different from a guaranty.

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A real estate mortgage, on the other hand, is a contract embodied in a public instrument recorded in the Registry of Property, by which the owner of an immovable (or an alienable real right imposed upon immovables) directly and immediately subjects it, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted. "It is a contract in which the debtor guarantees to the creditor the fulfillment of a principal obligation, subjecting for the faithful compliance therewith a real property in case of nonfulfillment of said obligation at the time stipulated." While both a contract of guaranty (or suretyship) and one of mortgage have as their object the assurance or guarantee of the performance of a particular principal obligation, in a contract of guaranty, no property is given for this purpose at all; reliance is solely placed on the solvency or credit of the guarantor or surety. In a mortgage, however, it is property) immovable or movable, that is specifically encumbered and subjected to that function of assuring or guaranteeing the satisfaction of that principal obligation. It is the property, rather than the individual financial capacity of the guarantor or surety, that is chiefly relied upon to answer for or guarantee the payment of the debt.

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Indeed, the rule is that a third party creating a mortgage over his property to guarantee the obligation of a principal debtor, may not be held personally liable for the obligation, his liability being limited to the value of the property mortgaged. It is of the essence of contracts of mortgage that when the principal obligation becomes due, the things in which the pledge or mortgage consists may be alienated for the payment to the creditor. The action or proceeding against the guarantor or surety is a personal one, and in personam. That against the mortgagor is a real action, as well as quasi in rem. (Distileria Limtuaco vs. IAC) The Mortgagor and Mortgagee have no right to waive the posting and publication requirements under Act. No. 3135. Notices are given to secure bidders and prevent a sacrifice of the property. Clearly, the statutory requirements of posting and publication are mandated, not for the mortgagors benefit, but for the public or third persons. Lack of republication of notice of foreclosure sale made subsequently after the original date renders such sale void (PNB vs. Nepomuceno Productions Inc., G.R. No. 139479 December 27, 2002). In a contract of commodatum, one of the parties delivers to another something not consumable so that the latter may use the same for a certain time and return it. An essential feature of commodatum is that it is gratuitous. Another feature of commodatum is that the use of the thing belonging to another is for a certain period. Thus, the bailor cannot demand the return of the thing loaned until after expiration of the period stipulated, or after accomplishment of the use for which the commodatum is constituted. If the bailor should have urgent need of the thing, he may demand its return for temporary use. If the use of the thing is merely tolerated by the bailor, he can demand the return of the thing at will, in which case the contractual relation is called a precarium. Under the Civil Code, precarium is a kind of commodatum. (PAJUYO vs. COURT OF APPEALS, G.R. No. 146364 , June 3, 2004) REDEMPTION After said foreclosure and sale, what remains is the right vested by law in favor of the Tolentinos to redeem the properties within the prescribed period. This right of redemption is an absolute privilege, the exercise of which is entirely dependent upon the will and discretion of the redemptioners. There is, thus, no legal obligation to exercise the right of redemption. Should they choose not to exercise it, nobody can compel them to do so nor will such choice give rise to a cause of action in favor of the purchaser at the auction sale. In fact, the relationship between said purchaser and the redemptioners is not even that of creditor and debtor. On the other hand, if the redemptioners choose to exercise their right of redemption, it is the policy of the law to aid rather than to defeat the right of redemption. It stands to reason therefore, that redemptions should be looked upon with favor and where no injury is to follow, a liberal construction will be given to our redemption laws as well as to the exercise of the right of redemption. We are not, by this decision, sanctioning the use of a check for the payment of obligations over the objection of the creditor. What we are saying is that a check may be used for the exercise of the right of redemption, the same being a right and not an obligation. The tender of a check is sufficient to compel redemption but is not in itself a payment that relieves the redemptioner from his liability to pay the redemption price. In other words, while we hold that the private respondents properly exercised their right or redemption, they remain liable of course, for the payment of the redemption price. (Fortunado vs. CA, GRN 7855, April 25, 1991) PLEDGE The Court of Appeals found that the deeds of assignment were contracts of pledge, but, as the collateral was also money or an exchange of "peso for peso," the provision in Article 2112 of the Civil Code for the sale of the thing pledged at public auction to convert it into money to satisfy the pledgor's obligation, did not have to be followed. All that had to be done to convert the pledgor's time deposit certificates into cash was to present them to the bank for encashment after due notice to the debtor. The encashment of the deposit certificates was not a pacto commissorio which is prohibited under Art. 2088 of the Civil Code. A pacto commissorio is a provision for the automatic appropriation

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of the pledged or mortgaged property by the creditor in payment of the loan upon its maturity. The prohibition against a pacto commissorio is intended to protect the obligor, pledgor, or mortgagor against being overreached by his creditor who holds a pledge or mortgage over property whose value is much more than the debt. Where, as in this case, the security for the debt is also money deposited in a bank, the amount of which is even less than the debt, it was not illegal for the creditor to encash the time deposit certificates to pay the debtors' overdue obligation, with the latter's consent. (Yau Chu vs. CA, GRN 78519, September 26, 1989) INTEREST A mere offer to pay, not accompanied or promptly followed by consignation in court of the amount tendered but refused by the creditor, is not sufficient to cause cessation of the running of interest. Thus, in Llamas vs. Abaya, the Supreme Court stressed that a written tender of payment alone, without consignation in court of the sum due, does not suspend the accruing of regular or monetary interest. (Masantol Rural Bank, Inc. vs. CA, GRN 97132, December 10, 1991) 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 at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, or where the pleadings of the plaintiff in the trial court did not spell such amounts with certitude, 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. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. (Eastern Shipping Lines Inc. v. CA, GRN 97412, July 12, 1994) USURY LAW We agree with petitioners that the stipulated rate of interest at 5.5% per month on the P500,000.00 loan is excessive, iniquitous, unconscionable and exorbitant. However, we can not consider the rate "usurious" because this Court has consistently held that Circular No. 905 of the Central Bank, adopted on December 22, 1982, has expressly removed the interest ceilings prescribed by the Usury Law and that the Usury Law is now "legally inexistent". Nevertheless, we find the interest at 5.5% per month, or 66% per annum, stipulated upon by the parties in the promissory note iniquitous or unconscionable, and, hence, contrary to morals ("contra bonos mores,") if not against the law. The stipulation is void. The courts shall reduce equitably liquidated damages, whether intended as an indemnity or a penalty if they are iniquitous or unconscionable. Consequently, the CA erred in upholding the stipulation of the parties. Rather, we agree with the trial court that, under the circumstances, interest at 12% per annum, and an additional 1% a month penalty charge as liquidated damages may be more reasonable. (Medel vs. CA, 299 SCRA 481) While the Usury Law ceiling on interest rates was lifted by Central Bank Circular No. 905, nothing in the said circular 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. (Solangon v. Salazar, GRN 97412, July 12, 1994)

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Central Bank Circular No. 905, December 10, 1982 does not apply to all kinds of obligations (e.g. from a contract of sale) and all kinds of monetary judgment. The judgments spoken of and referred to are judgments in litigation involving loans or forbearance of any money, goods or credits, or to cases where money is transferred from one person to another and the obligation to return the same or a portion thereof is adjudged. Any other kind of monetary judgments which has nothing to do with nor involving loans or forbearance of any money, goods and credits does not fall within the coverage of the Usury Law for it is not within the ambit of the authority granted by the Central Bank. Thus, where the decision sought to be executed is one rendered in an action for damages for injury to persons or loss of property, the law applicable is Article 2209 of the Civil Code. (Food Terminal, Inc. v. CA, 262 SCRA 339) Central Bank Circular No. 905 which took effect on January 1, 1983, and removed the ceiling on interest rates for secured and unsecured loans , regardless of maturity, cannot be made to retroactively apply to a contract executed earlier while the Usury Law was in full force and effect. It is an elementary rule of contracts that the laws, in force at the time the contract was made and entered into govern it. A Central Bank Circular cannot repeal a law. Only a law can repeal another law. Thus, retroactive application of a Central Bank Circular cannot, and should not, be presumed. (First Metro Investment Corp. vs. Este Del Sol) ESCALATION CLAUSES It is now, clear that from March 17, 1980, escalation clauses to be valid should specifically provide: (I) that there can be an increase in interest if increased by law or by the Monetary Board; and (2) in order for such stipulation to be valid, it must include a provision for reduction of the stipulated interest in the event that the applicable maximum rate of interest is reduced by law or by the Monetary Board. Escalation Clauses are not basically wrong or 'legally objectionable so long as they are not solely potestative but based on reasonable and valid grounds. Here, as clearly demonstrated above, riot only the increases of the interest rates on the basis of the escalation clause patently unreasonable and unconscionable, but also there are no valid and reasonable standards upon which the increases are anchored. (Spouses Almeda vs CA, 256 SCRA 292) DEPOSIT A contract for the rent of safety deposit boxes is not an ordinary contract of lease of things but a special kind of deposit; hence, it is not to be strictly governed by the provisions on deposit. The prevailing rule in the United States is that the relation between a bank renting out safe deposit boxes and its customer with respect to the contents of the box is that of bailor and bailee. Thus: Where a safe-deposit company leases a safe-deposit box or safe and places therein his securities or other valuables, the relation of bailee and bailor is created between the parties to the transaction as to such securities or other valuables; the fact that the safe-deposit company does not know, and that it is not expected that it shall know, the character or description of the property which is deposited in such safe-deposit box or safe does not change that relation. That access to such safe-deposit box can be had only by the use of a key retained by the lessee (whether it is the sole key or one to be used in connection with one retained by the lessor) does not operate to alter the foregoing rule. (CA AgroIndustrial Devt Corp vs. CA, 219 SCRA 426) GUARANTEE 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. 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,

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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 states that the guaranty is to secure advances to be made "from time to time," it will be construed to be a continuing one. (PHILIPPINE BLOOMING MILLS, INC. vs COURT OF APPEALS, GR No. 142381, OCTOBER 15, 2003) CONCURRENCE AND PREFERENCE OF CREDITS Those provisions may be seen to classify credits against a particular insolvent into three general categories, namely: (a) Special preferred credits listed in Articles 2241 and 2242, (b) Ordinary preferred credits listed in Article 2244; and (c) Common credits under Article 2245. Turning first to special preferred credits under Articles 2241 and 2242, it should be noted at once that these credits constitute liens or encumbrances on the specific movable or immovable property to which they relate. Article 2243 makes clear that these credits "shall be considered as mortgages or pledges of real or personal property, or liens within the purview of legal provisions governing insolvency." It should be emphasized in this connection that "duties, taxes and fees due [on specific movable property of the insolvent] to the State or any subdivision thereof" (Article 2241 [1]) and "taxes due upon the [insolvent's] land or building (2242 [1])" stand first in preference in respect of the particular movable or immovable property to which the tax liens have attached. Article 2243 is quite explicit: "[T]axes mentioned in number 1, Article 2241 and number 1, Article 2242 shall first be satisfied" The claims listed in numbers 2 to 13 in Article 2241 and in numbers 2 to 10 in Articles 2242, all come after taxes in order of precedence; such claims enjoy their privileged character as liens and may be paid only to the extent that taxes have been paid from the proceeds of the specific property involved (or from any other sources) and only in respect of the remaining balance of such proceeds. What is more, these other (non-tax) credits, although constituting liens attaching to particular property, are not preferred one over another inter se. Provided tax liens shall have been satisfied, non-tax liens or special preferred credits which subsist in respect of specific movable or immovable property are to be treated on an equal basis and to be satisfied concurrently and proportionately. Put succinctly, Articles 2241 and 2242 jointly with Articles 2246 to 2249 establish a two-tier order of preference. The first tier includes only taxes, duties and fees due on specific movable or immovable property. All other special preferred credits stand on the same second tier to be satisfied, pari passu and pro rate; out of any residual value of the specific property to which such other credits relate. Credits which are specially preferred because they constitute liens (tax or non-tax) in turn, take precedence over ordinary preferred credits so far as concerns the property to which the liens have attached. The specially preferred credits must be discharged first out of the proceeds of the property to which they relate, before ordinary preferred creditors may lay claim to any part of such proceeds, the value of the specific property involved is greater than the sum total of the tax liens and other specially preferred credits, the residual value will form part of the "free property" of the insolvent-i.e., property not impressed with liens by operation of Articles 2241 and 2242. if, on the other hand, the value of the specific movable or immovable is less than the aggregate of the tax liens and other specially preferred credits, the unsatisfied balance of the tax liens and other such credits are to be treated as ordinary credits under Article 2244 and to be paid in the order of preference there set up. In contrast with Articles 2241 and 2242, Article 2244 creates no liens on determinate property which follow such property. What Article 2244 creates are simply rights in favor of certain creditors to have the cash and other assets of the insolvent applied in a certain sequence or order of priority. Only in respect of the insolvent's "free property" is an order of priority established by Article 2244. In this sequence, certain taxes and assessments also figure but these do not have the same kind of overriding preference that Articles 2241 No. 1 and 2242 No. 1 create for taxes which constitutes liens on the taxpayer's property. (Republic vs. Peralta, 150 SCRA 37) Torts and Damages

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NEGLIGENCE In order that there may be recovery for an injury, however, it must be shown that the injury for which recovery is sought must be the legitimate consequence of the wrong done; the connection between the negligence and the injury must be a direct and natural sequence of events, unbroken by intervening efficient causes. In other words, the negligence must be the proximate cause of the injury. For, negligence, no matter in what it consists, cannot create a right of action unless fit is the proximate cause of the injury complained of. And the proximate cause of an injury is that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred. (St. Marys Academy vs. Carpitanos G.R. No. 143363) ATTRACTIVE NUISANCE The attractive nuisance doctrine generally is not applicable to bodies of water, artificial as well as natural, in the absence of some unusual condition or artificial feature other that the mere water and its location. The reason why a swimming pool or pond or reservoir of water is not considered an attractive nuisance is that; Nature has created streams, lakes and pools which attract children. Lurking in their waters is always the danger of drowning. Against this danger children are early instructed so that they are sufficiently presumed to know the danger; and if the owner of private property creates an artificial pool on his own property, merely duplicating the work of nature without adding any new danger, he is not liable because of having created an attractive nuisance. (Hidalgo Enterprises, Inc. vs. Balandan 91 Phil 488) EMERGENCY RULE Under the emergency rule adopted by this court, an individual who suddenly finds himself in a situation of danger and is required to act without much time to consider the best means that may be adopted to avoid the impending danger, is not guilty of negligence if he fails to undertake what subsequently and upon reflection may appear to be a better solution, unless the emergency was brought by his own negligence. In this jurisdiction, contributory negligence of the plaintiff merely results in mitigation of liability. Under this rule, contributory negligence is defined as conduct on the part oft the injured party, contributing as a legal cause to the harm he has suffered, which falls below the standard to which he is required to conform for his own protection. While the emergency rule applies to those cases in which reflective thought or the opportunity to adequately weigh a threatening situation is absent, the conduct which is required of an individual in such cases is dictated not exclusively by the suddenness of the event which absolutely negates throughful care, but by the over-all nature of the circumstances (Valenzuela vs. CA 253 SCRA 303) SPECIAL RULES Since negligence may be a felony and a quasi delict and required discernment as a condition of liability, either criminal or civil, a child under nine years of age is by analogy, conclusively presumed to be incapable of negligence; and that the presumption of lack of discernment or incapacity for negligence in the case of a child over nine but under fifteen years of age is rebuttable one, under our law. The rule therefore is that a child under nine years if age must be conclusively presumed incapable of contributory negligence as a matter of law. (Jarco Mktg Corp et al vs. CA, GRN 129792, December 21, 1999) The law fixed no arbitrary age at which a minor can be said to have the necessary capacity to understand and appreciate the nature and consequences of his own acts, so as to make it negligence on his part to fail to exercise with due care and precaution in the commission of such acts; and indeed it would be impracticable and perhaps impossible so to do, for in the very nature of things the question of negligence necessarily depends on the ability of the minor to understand the character of his own acts and their consequences; and the age at which a minor can be said to have such ability

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will necessarily vary in accordance with the varying nature of the infinite variety of acts which may be done by him. (Taylor vs. Manila Electric Railroad and Light Co. 16 Phil 8) When a person holds himself out as being competent to do things requiring professional skill, he will be held liable for negligence if he fails to exhibit the care and skill of one ordinarily skilled in the particular work which he attempts to do. (Cullion Ice Fish And Electric Co. vs. Phil Motors Corp 55 Phil 129) AFFIRMATIVE DUTIES AND MISCELLANEOUS ACTIVITIES Doctors are protected by a special rule of law. They are not guarantors of care. They do not even warrant a good result. They are not insurers against mishaps or unusual consequences. Furthermore, they are not liable for honest mistakes of judgment. Whether of not a physician has committed an inexcusable lack o precaution in the treatment of his patient is to be determined according to the standard of care observed by other members of the profession in good standing under similar circumstances bearing in mind the advanced state of the profession at the time of treatment of the present state of medical science. (Dr. Ninevetch Cruz vs. CA 282 SCRA 188) Under the captain of the ship doctrine, the surgeon is liked to a ship captain who must not only be responsible for the safety of the crew but also of the passengers of the vessel. The head surgeon is made responsible for everything that goes wrong within the four corners of the operating room. It enunciates the liability of the surgeon not only for the wrongful acts of those who are under his physical control but also those wherein he has extension of control. (Ramos vs. CA G.R. No. 124354, December 29, 1999) There is no employer-employee relationship between DLSMC and Drs. Gutierrez and Hosaka which would hold DLSMC solidarily liable for the injury suffered by petitioner Erlinda under Article 2180 of the Civil Code because of the following reasons: 1) a hospital does not hire or engage the services of a consultant, but rather, accredits the latter and grants him or her the privilege of maintaining a clinic and/or admitting patients in the hospital upon a showing by the consultant that he or she possesses the necessary qualifications, such as accreditation by the appropriate board, evidence of fellowship and references; 2) it is not the hospital but the patient who pays the consultants fee for services rendered by the latte; 3) a hospital does not dismiss a consultant, instead, the latter may lose his or her accreditation or privileges granted by the hospital; and 4) when a doctor refers a patient for admission in a hospital, it is the doctor who prescribes the treatment to be given to said patient. The contract between the consultant and the patient is separate and distinct the contract between the hospital and the patient. The first has for its object the rendition of medical services by the consultant to the patient, while the second concerns the provision by the hospital of facilities and services by its staff such as nurses and laboratory personnel necessary for the proper treatment of the patient. (Ramos vs. CA GR No 124354, April 11, 2002) The general principle is that the violation of a statute or ordinance is not rendered remote as the cause of an injury by the intervention of another agency if the occurrence of the accident, in the manner in which it happened, was the very thing which the statute or ordinance was intended to prevent. To consider the violation of the ordinance as the proximate cause of the injury does not portray the situation in its true perspective; it would be more accurate to say that the overcrowding at the stairway was the proximate cause and that it was precisely what the ordinance intended to prevent by requiring that there be two stairways instead of only one. (Mercedes M. Teague vs. Elena Fernandez 51 SCRA 181) DOCTRINE OF RES IPSA LOQUITUR Where the thing which caused the injury complained of is shown to be under the management of defendant or his servants and the accident is such as in the ordinary course of things does not happen if those who have its management or control use proper care, it affords reasonable evidence, in absence of explanation by defendant, accident arose from want of care (Doctrine of Res Ipsa Loquitur). (Africa vs. Caltex, L-12986, March 31, 1966)

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The defendants negligence is presumed or inferred when the plaintiff establishes the requisites for the application of res ipsa loquitur. Once the plaintiff makes out a prima facie case of all the elements, the burden then shifts to defendant to explain. The presumption may be rebutted or overcome by other evidence and, under appropriate circumstances a disputable presumption, such as that of due care or innocence, may outweigh the inference. It is not for the defendant to explain or prove its defense to prevent the presumption or inference fro arising. Evidence by the defendant of say, due care, comes into play only after the circumstances for the application of the doctrine has been established. (D.M. Consunji, Inc. vs. CA G.R. No. 137873, April 20, 2001) The doctrine of res ipsa loquitur is not applicable if there is direct proof of absence or presence of negligence. As early as 1910, the Supreme Court already explained that the doctrine merely creates a prima facie case, and applies only in the absence of proof of the circumstances under which the act complained of was performed. It is something invoked in favor of the plaintiff in the absence of proof. If there is sufficient proof showing the conditions and circumstance under which the injury occurred, the creative reason for the doctrine disappears. (S.D. Martinez, et al. vs. William Van Buskirk G.R. No. L-5691) DOCTRINE OF LAST CLEAR CHANCE The doctrine of last clear chance simply means that the negligence of a claimant does not preclude a recovery for the negligence of the defendant where it appears that the latter, by exercising reasonable care and prudence, might have avoided injurious consequences to claimant notwithstanding his negligence. The doctrine applies only in a situation where the plaintiff was guilty of prior or antecedent negligence but the defendant, who had the last fair chance to avoid the impending harm and failed to do so is made liable for all the consequences of the accident notwithstanding the prior negligence of the plaintiff. (Pantranco North Express vs. Baesa citing Ong vs. Metropolitan Water District and Picart vs. Smith) VICARIOUS LIABILITY The civil liability imposed upon parents for the torts of their minor children living with them, may be seen to be based upon the parental authority vested by the Civil Code upon such parents. The civil law assumes that when a minor living with its parents commits a tortuous act, the parents were negligent in the performance of their legal and natural duty closely to supervise the child who is in their custody and control. Parental liability is in other words, anchored upon parental authority coupled with presumed parental dereliction in the discharge of the duties accompanying such authority. The parental dereliction is, of course, only presumed and the presumption can be overturned under Article 2180 of the Civil Code by proof that the parents had exercised all the diligence of a good father of a family to prevent the damage. (Macario Tamargo vs. CA 209 SCRA 518) As long as it can be shown that the student is in the school premises in pursuance of a legitimate student objective, in the exercise of a legitimate student right, and even in the enjoyment of a legitimate student privilege, the responsibility of the school authorities over the student continues. Indeed, even if the student should be doing nothing more than relaxing in the campus in the company of his classmates and friends and enjoying the ambience and atmosphere of the school, he is still within the custody and subject to the discipline of school authorities under the provision of Article 2180. (Amadora vs. court of Appeals, 160 SCRA 274) It had been stressed that Article 2180 plainly provides that the damage should have been caused or inflicted by pupils or students or the educational institution sought to be held liable for the acts of its pupils or students while in its custody. However, this material situation does not exist in the present case for, as earlier indicated, the assailants of Carlitos were not students of the PSBA, for whose acts the school could be made liable. (Philippine School of Business Administration vs. CA, 205 SCRA 729) DOCTRINE OF RESPONDEAT SUPERIOR

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The case at bar is clearly within the coverage of Articles 2176 and 2177, in relation to Article 2180, of the Civil Code provisions on quasi-delicts. The responsibility imposed by this article arises by virtue of a presumption juris tantum of negligence on the part of the persons made responsible under the article, derived from their failure to exercise due care and vigilance over the acts of subordinates to prevent them from causing damage. Negligence is imputed to them by law, unless they prove the contrary. Thus, the last paragraph of the article says that such responsibility ceases if it is proved that the persons who might be held responsible under it exercised the diligence of a good father of a family (diligentissimi patris familias) to prevent damage. It is clear, therefore, that is it not representation, nor interest, nor even the necessity of having somebody else answer for the damages caused by the persons devoid of personality, but it is the non-performance of certain duties of precaution and prudence imposed upon the persons who become responsible by civil bond uniting the actor to them, which forms the foundation of such responsibility. The above rule is, of course, applicable only where there is employer-employee relationship, although it is not necessary that the employer be engaged in business or industry. Whether or not engaged in any business or industry, the employer under Article 2180 is liable for torts committed by his employees within the scope of their assigned tasks. But, it is necessary first to establish the employment relationship. Once this is done, the plaintiff must show, to hold the employer liable that the employee was acting within the scope of his assigned task when the tort complained of was committed. It is only then that the defendant, as employer, may find it necessary to interpose the defense of due diligence in the selection and supervision of employees. The diligence of a good father of a family required to be observed by employers to prevent damages under Article 2180 refers to due diligence in the selection and supervision of employees in order to protect the public. (Metro Manila Transit Corp. vs. Court of Appeals GR. NO. 116617, November 16, 1998) The responsibility of employers for the negligence of their employees in the performance of their duties is primary, that is, the injured party may recover from the employers directly, regardless of the solvency of their employees. Employers may be relieved of responsibility of the negligent acts of their employees within the scope of their assigned tasks only if they can show that they observe all the diligence of a good father of a family to prevent damage. For this purpose, they have the burden of proving that they have indeed exercised such diligence, both in the selection of the employee who committed the quasi-delict and in the supervision of the performance of his duties. In the selection of prospective employees, employers are required to examine them as to their qualifications, experience, and service records. On the other hand, with respect to the supervision of employees, employers should formulate standard operating procedures, monitor their implementation, and impose disciplinary measures for breaches thereof. (Metro Manila Transit Corp. vs. Court of Appeals GR. NO. 116617, November 16, 1998) The liability imposed by Art. 2180 arises by virtue of a presumption juris tantum of nerligence on the part of the persons made responsible thereunder, derived from their failure to exercise due care and vigilance over the acts of subordinates to prevent them from causing damage. Article 2180 is hardly applicable in the case under consideration because the private respondent being engaged in rent-a-car business was only the owner of the car leased to its client. As such, there was no viculum juris between them as employer and employee. (FGU Insurance Corporation vs. CA G.R. No. 118889, March 23, 1998) In an action based on quasi delict, the registered owner of a motor vehicle is solidarily liable for the injuries and damages caused by the negligence of the driver, in spite of the fact hat the vehicle may have already been the subject of an unregistered Deed of Sale in favor the another person. Unless registered with the Land Transportation Office, the sale while valid and binding between the parties does not affect third parties, especially the victims of accidents involving the said transport equipment. (Equitable Leasing Corporation vs. Suyom G.R. No. 143360) 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.

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The registered owner is not allowed by law to prove the real owner of the vehicle. Were a registered owner allowed to evade responsibility by proving who the supposed transferee or owner is, it would be easy for him, by collusion with others or otherwise, to escape said responsibility and transfer the same to an indefinite person, or to the one who possesses no property with which to respond financially for the damage or injury done. (BA Finance Corporation vs. CA, G.R. No. 98275, November 13, 1992) Damages ACTUAL OR COMPENSATORY DAMAGES In computing the award for loss of income, only net earnings, not gross earnings, are to be considered; that is, the total of the earnings less expenses necessary in the creation of such earnings or income, less living and other incidental expenses. When there is no showing that the living expenses constituted a smaller percentage of the gross income, we fix the living expenses at half of the gross income. The 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 purposes of determining loss of earning capacity under Article 2206(1) of the Civil Code, 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, GRN 143008, June 10, 2002) LOSS OF PROFITS When it is shown that a plaintiffs business is a going concern with a fairly steady average profit on the investment, it may be assumed that had the interruption to the business through defendants wrongful act not occurred, it would have continued producing this average income so long as is usual with the things of that nature. When in addition to the previous average income of the business it is further shown what the reduced receipts of the business are immediately after the cause of the interruption has been removed, there can be no manner of doubt that a loss of profit has resulted from the wrongful act of the defendant. Profits are not excluded from recovery because they are profits; but when excluded, it is on the ground that there are no criteria by which to estimate the amount with certainty on which the adjudications of courts, and the findings of juries should be based. (Algarra vs. Sandejas, 27 Phil. 284 citing Brigham vs. Carlisle)

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NOMINAL DAMAGES Nominal damages cannot co-exist with actual or compensatory damages. (Armovit vs. Court of Appeals, 184 SCR 476) TEMPERATE DAMAGES Well-settled is the rule that actual damages which may be claimed by the plaintiff are those suffered by him as he has duly proved. Our rules on actual or compensatory damages generally assume that at the time of litigation, the injury suffered as a consequence of an act of negligence has been completed and that the cost can be liquidated. However, these provisions neglect to take into account those situations, as in this case, where the resulting injury might be continuing and possible future complications directly arising from the injury, while certain to occur, are difficult to predict. In these cases, the amount of damages which should be awarded, if they are to adequately and correctly respond to the injury caused, should be one which compensates for pecuniary loss incurred and proved, up to the time of trial; and one which would meet pecuniary loss certain to be suffered but which could not, from the nature of the case, be made with certainty. In other words, temperate damages can and should be awarded on top of actual or compensatory damages in instances where the injury is chronic and continuing. And because of the unique nature of such cases, no incompatibility arises when both actual and temperate damages are provided for. The reason is that these damages cover two distinct phases.

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As it would not be equitable - and certainly not in the best interests of the administration of justice - for the victim in such cases to constantly come before the courts and invoke their aid in seeking adjustments to the compensatory damages previously awarded - temperate damages are appropriate. The amount given as temperate damages, though to a certain extent speculative, should take into account the cost of proper care (Ramos vs. CA, GR No. 124354 December 29, 1999). Land Titles and Deeds [COMPILED BY: ATTY. CIRIACO CRUZ] FRAUD A title issued pursuant to a patent under administrative proceeding is as indefeasible as a title secured in a judicial proceeding. But even after the lapse of one year from the issuance of the patent, the government may still initiate an action for reversion of the land to the public domain if the land is titled through fraud or misrepresentation as when the applicant stated that the subject land is exclusively possessed by him when in truth it overlaps the land of an adjacent owner. (Republic of the Philippines vs. CA and Heirs of Bullongan, 255 SCRA 335). Generally, a forged deed is void but it can be the root of a valid title if registered in the name of the forger then transferred to an innocent purchaser for value absent any showing that the buyer had any part in the anomaly. Hence, the rights of the innocent purchaser for value must be respected. The proper recourse of the true owner is to bring an action for damages against the party who caused the fraud. (Eduarte vs. CA, 253 SCRA 391). A party deprived of his land by confirmation of title through actual fraud may seek for reopening of a decree of registration within one year from the issuance of the decree of registration. Before the expiration of the one-year period from the entry of the decree, the court retains control of the decision which, after hearing and actual fraud was proved to exist, may adjudicate the land to any party entitled thereto. (Heirs of Manuel Roxas and Trinidad De Leon vs. CA, 270 SCRA 309). Actual fraud or extrinsic fraud proceeds from the intentional deception produced by means of misrepresentation or concealment of a material fact. Extrinsic fraud prevents the party from presenting his entire case to the court. (Heirs of Manuel Roxas and Trinidad De Leon vs. CA, 270 SCRA 309). Fraud is extrinsic or collateral where a litigant commits acts outside of the trial of the case the effect of which prevents a party from having a trial, a real contest or from presenting his case to the court, or where it operates upon matters pertaining, not to the judgment itself, but to the manner in which it was procured so that there is no fair submission of the controversy. Accordingly, use of forged document or perjured witness are not extrinsic fraud as it does not preclude the participation of any party in the proceedings. (Strait Times, Inc. vs. CA, 294 SCRA 714). Constructive trust is created in equity in order to prevent unjust enrichment. Thus, one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, so hold has no valid title to said property and therefore cannot dispose of the same. Hence, a widower who adjudicates the entire conjugal property to himself holds the children's share in the property in trust. (Marquez vs. CA, 300 SCRA 653). A certificate of title cannot be used as a shield to perpetuate fraud. Any false statement in the application for a land patent shall ipso facto produce the cancellation of the same even after the lapse of one year from issuance of said patent pursuant to Section 101 of the Public Land Act wherein an action may be undertaken for the reversion of the land to the public domain. (Francisco Baguio vs. Republic, et al., 301 SCRA 450). GOOD FAITH; INNOCENT PURCHASER FOR VALUE One who deals with property covered by the Torrens system of registration need not go beyond the title to determine the condition of the property. (Legarda vs. CA, 280 SCRA 642).

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A person dealing with registered land has the right to rely on the Torrens certificate of title without the need of inquiring further. Hence, a purchaser who buys property without notice that some other person has a right to or interest in such property and pays a full fair price for the property is a buyer in good faith. (Sandoval vs. CA, 260 SCRA 283). A person in good faith and for value is defined as 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 of the time of the purchase or before he has notice that other person has a right to, or interest in, the property. As a rule, he who asserts the status of a purchaser in good faith and for value has the burden of proving said assertion. As is the common practice in the real estate industry, an ocular inspection of the premises is a safeguard a cautious and prudent purchaser usually takes and should he find out that the land is occupied by anybody else other than the seller who is not in actual possession, it is incumbent upon the purchaser to verify the extent of the occupants' possessory rights. (Spouses Sonya Mathay and Ismael Mathay, Jr. vs. CA, 295 SCRA 356). An RTC court sitting as a land registration court may determine the validity of an adverse claim. Purchaser in good faith and for value is one who buys the 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 on the time of the purchase or before he has notice of the claims or interest of some other person in the property. (GSIS vs. CA, 240 SCRA 737). OWNERSHIP / POSSESSION An action for reconveyance of a parcel of land based on constructive or implied trust prescribes in 10 years reckoned from the issuance of title or date of registration. This rule applies only when plaintiff or party enforcing the trust is not in possession of the property, but if he is in possession thereof, the right to seek reconveyance, which in effect is an action to quiet title, does not prescribe. (Cabrera vs. CA and Felicio, et al., 267 SCRA 339). A party's failure to raise a restraining arm or a shout of dissent to another party's possession of a parcel of land in a span of 30 years is contrary to his claim of ownership. (Heirs of Teodoro Dela Cruz vs. CA, et al., 298 SCRA 172). Torrens system does not vest title because it is not recognized as a mode of acquiring ownership. While registered land under the system makes the title thereto imprescriptible, the same may be lost by laches caused by a party's inaction or passivity in asserting his rights over the disputed property. (Santiago vs. CA, 278 SCRA 803). Tax declaration and tax receipts become strong evidence of ownership acquired by prescription when accompanied by proof of actual possession. (Oclarit vs. CA, 233 SCRA 39). PUBLIC LANDS A title may be confirmed under Section 48 of the Public Land Act (PLA) only if it pertains to alienable lands of the public domain but unless such assets are reclassified and considered disposable and alienable, occupation thereof in the concept of owner, no matter how long, cannot ripen into ownership and be registered as a title. Section 48(b) of the PLA was clarified by PD 1073 that said section applied only to alienable and disposable lands of the public domain. (De Ocampo vs. Arlos, 343 SCRA 716) Sales patents fraudulently obtained are invalid and the State should initiate the suit to recover the property thru the Solicitor General and not by a supposedly aggrieved party who has no personality to initiate such litigation. (De Ocampo vs. Arlos, 343 SCRA 716) The Regalian Doctrine which forms part of our land laws is a revered and long standing principle. It must however be applied together with the constitutional provision on social justice and land reform, and must be interpreted in a way as to avoid manifest unfairness and injustice. But when the land of public domain is in danger of ruthless exploitation, fraudulent titling or other

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questionable practice, a strict application of the law is warranted. (Director of Lands vs. Funtilar, 142 SCRA 57) Rules on confirmation of title do not apply unless the land classified as forest is released in an official proclamation by the Executive branch of the government. Hence, possession of forest lands no matter how long cannot ripen into ownership. (Heirs of Amunategui vs. Director of Forestry, 126 SCRA 69) RA 8371 known as Indigenous Peoples Rights Act (IPRA) that grants to indigenous cultural communities the ownership of ancestral lands and domains held by them under native title are undisputably presumed private lands because they have been held that way since before the Spanish conquest or as far as memory reaches. The State by recognizing the right of tribal Filipinos to their ancestral lands and domains has effectively upheld their right to live in a culture distinctly their own as enunciated in Article III of the Constitution, hence, the IPRA Law is in consonance with and not violative of the Constitution. (Cruz vs. Sec. of DENR, et al., 347 SCRA 128) If public land was titled but turned out to be forest land instead of agricultural land, the one year period to file a review of the decree does not apply. On the contrary, the land may revert to the public domain upon petition of the Solicitor General. (Republic vs. CA and Heirs of Ribaya, 258 SCRA 223). Absent any publication in any newspaper of general circulation, the land registration court cannot validly confirm and register the title of the applicant. Publication of the notice of initial hearing in the Official Gazette is not enough to confer jurisdiction to the court because the law requires publication also in a newspaper. The word "shall" denotes an imperative and thus indicates the mandatory character of the statute that publication shall be in the Official Gazette and a newspaper of general circulation. (Director of Lands vs. CA, 276 SCRA 276). Periods required in possession and occupation of public land to qualify as claimant: Section 48(b) of the PLA - December 1, 1936 - those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of agricultural lands of the public domain under a bona fide claim of acquisition of ownership except as against the government since July 26, 1894. RA 1942 - June 22, 1957 - amended Section 48(b) of the PLA by prescribing open, continuous, exclusive and notorious possession and occupation for at least 30 years immediately preceding the filing of the application for confirmation of title. PD 1073 - January 23, 1977 - amended further Section 48(b) of the PLA by stating that these provisions shall apply only to alienable and disposable lands of the public domain which have been in open, continuous, exclusive and notorious possession and occupation by the applicant himself or through his predecessors-in-interest under a bona fide claim of acquisition of ownership since June 12, 1945. (See also Section 14 of PD 1529) Accordingly, the period of 30 years of open, continuous, exclusive and notorious possession and occupation would not suffice to confer title to a settler, particularly so when the President reserves said public land for a public purpose. (Republic Opol National Secondary Technical School vs. Nicanor Doldol, 295 SCRA 359). Foreshore lands or submerged areas which may be reclaimed under RA 1899 by local governments are part of the public domain which could only be subject of reclamation by the national government under PD 3-A. The authority granted to local governments to undertake reclamation projects was a mere grant by the sovereign which, in the exercise of police power, may be withdrawn as shown in PD 3-A. (Republic vs. CA and Pasay City, et al. (Cultural Center), 299 SCRA 199). Under Section 101 of the PLA, an action for reversion to the public domain of land fraudulently titled may be initiated even after the lapse of one year as said action is not barred by prescription. (Francisco Baguio vs. Republic, et al., 301 SCRA 450). The government's prolonged inaction for 20 years whereby it failed to correct and recover the increased area in the land of a private party militates against its cause as it is tantamount to laches

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which is the failure or neglect for unreasonable length of time to do that which by exercising due diligence could have been done earlier. While the general rule is that the State cannot be put in estoppel by the mistakes and errors of its officials and its agents, this is subject to exception if it would operate to defeat the effective operation of a policy adopted to protect the public. The government must not be allowed to deal dishonorably with its citizens and must not play an ignoble part or do a shabby thing. (Republic vs. CA and St. Jude Enterprises, 301 SCRA 3). DECREE OF REGISTRATION As long as a final decree has not been entered by the LRA and the period of one year has not yet elapsed from the date of entry of such decree the title is not finally adjudicated and the decision of the court in the registration proceedings continues to be under the control and sound discretion of the court rendering it. (Ramos vs Rodriguez, 244 SCRA 418). When the court decision has become final and the court directs the LRA to issue a decree of registration, the LRA is not legally obligated to follow the court's order when the land sought to be registered is discovered to have been already decreed and titled in the name of another. (Ramos vs Rodriguez, 244 SCRA 418). CERTIFICATE OF TITLE A title over registered land cannot be defeated even by adverse, open and notorious possession nor prescription; neither could ownership be proven thru tax payment receipts or tax declarations as they are not conclusive evidence of ownership. (Cervantes vs. CA and Francisco, 352 SCRA 47) Indefeasibility of title does not attach to a Torrens title secured by fraud and misrepresentation. (Baguio vs. Republic, 301 SCRA 450) The issue of validity of title, i.e. whether or not it was fraudulently issued can only be raised in an action expressly initiated for that purpose. Otherwise stated, a collateral attack impugning the validity of the title in a suit for recovery of ownership is an indirect challenge to the final judgment and decree of registration. (Villanueva vs. CA and Santiago, 351 SCRA 12) Title once registered under the Torrens system should not thereafter be altered, changed, modified or diminished except in a direct proceeding permitted by law as provided in Section 48 of PD 1529 disallowing collateral attack of a Torrens title. (Seville vs. Natl Devt Co., 351 SCRA 112) Torrens title acquires the character of indefeasibility one year from the entry of the decree of registration. Hence, even if the decision of the land registration court has reached finality, the court still retains control and may alter or modify the same if the decree of registration has not been issued by the LRA. (Divina vs. CA, et al., 352 SCRA 527) Real purpose of Torrens system of registration is to quiet title to land and put a stop to any question of legality of title except claims which have been recorded in the certificate of title at the time of registration. Every registered owner and every subsequent purchaser for value in good faith holds title to land free from all encumbrances, except those provided by law. Hence, a registered owner who executed a deed of sale in favor of another without any consideration (except their common-law relationship) and caused the registration of said conveyance validly transmits the property which can be conveyed to an innocent purchaser for value. (Gloria Cruz vs. CA and Romy Suzara, 281 SCRA 492). Where 2 certificates of title purport to cover the same land, the certificate bearing the earlier date prevails. Hence, in cases where two certificates cover the same land, a certificate of title is not conclusive evidence of title if it is shown that the land had already been registered and an earlier certificate is in existence. (MWSS vs. CA, 215 SCRA 783).

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Certificate of title merely confirms or records the title already existing and vested. They cannot be used to protect a usurper from the true owner nor can they be used as a shield for the commission of fraud nor to permit one to enrich himself at the expense of another. Hence, one who loses his property and review of decree is no longer available, the equitable remedy of reconveyance may be resorted to. (Esquivas vs. CA, 272 SCRA 803). A land registration proceeding is in rem and therefore a decree of registration issued thereafter is binding upon and conclusive against all persons including the government. A decree of registration that has become final shall be conclusive not only on questions actually contested and determined but also upon all matters that ought to be litigated or decided in land registration proceedings. (Teofilo Cacho vs. CA, 269 SCRA 359). A certificate of title is not conclusive evidence of title if it is shown that the same land had already been registered and an earlier certificate for the same is in existence. Where two titles have been issued on different dates to two different persons for the same parcel of land, even if both are presumed to be titleholders in good faith, it does not necessarily follow that he who holds the earlier title should prevail. Assuming that there was regularity in registration leading to the issuance of title, the better approach is to trace the original certificate from which the certificates of title in dispute were derived. Should there be one common original title, the transfer certificate issued on an earlier date along the line must prevail absent any anomaly or irregularity tainting the process of registration. (Spouses Sonya Mathay and Ismael Mathay, Jr. vs. CA, 295 SCRA 356). Every person dealing with registered land may safely rely on the correctness of the certificate of title to determine the condition of the property. Thus, all the property of the marriage are presumed to belong to the conjugal partnership unless it be proved that it pertains exclusively to the husband or wife. (Heirs of the Spouses Benito Ganico vs. CA, 281 SCRA 495). When the certificate of title is issued in the name of the original buyer on installment who died before completion of payment, the heirs who continued the installment payments may invoke Section 108 of PD 1529 to correct the error and have the land registered in their names. (Ernesto Dawson, et al., vs. Register of Deeds of Quezon City and RTC, QC, 295 SCRA 733, citing the case of Cruz vs. Tan, 93 Phil 348). LACHES Laches is the failure or neglect for an unreasonable and unexplained length of time to do that which by exercising due diligence could or should have been done earlier or negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or has declined to assert it. (Margolles vs. CA, 230 SCRA 97). ADVERSE CLAIM The purpose of the annotation of adverse claim is to protect the interest of a person over real property where the registration of such right or interest is not otherwise provided under the Torrens system. Mere registration of adverse interest does not make such claim valid nor is it permanent in character because judicial determination of the issue of ownership is still necessary. (Garbin vs. CA, 253 SCRA 187). While the law states that the adverse claim is effective within 30 days, the annotation thereof remains and cancellation is necessary, otherwise the inscription will continue as a lien on the title. To limit to 30 days the effectivity of an adverse claim will defeat the very purpose for which the law provides for the remedy of inscription of the adverse claim. Hence, a sheriff's levy on property already covered by an adverse claim is considered subservient to said claim. (Sajonas vs. CA, 250 SCRA 737). A court sitting as a land registration court may determine the validity of an adverse claim and, if found to be invalid, order the cancellation of said adverse claim. (GSIS vs. CA, 240 SCRA 737). A notice of adverse claim annotated on the title of a registered owner remains valid even after the lapse of thirty (30) days. As long as no petition for its cancellation has been filed, the notice of adverse claim remains. A hearing must first be conducted wherein the parties are given the

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opportunity to prove the propriety or impropriety of the adverse claim. Hence, the cancellation automatically being done by the Register of Deeds after the lapse of 30 days from registration is improper. (Rogelio Duarte vs. CA, et al., 298 SCRA 388). LIS PENDENS Once annotated upon the original copy of the title, the notice of lis pendens is an announcement to the whole world that a particular real property is in litigation serving as a warning that one who acquires an interest over said property does so at his own risk. (Yu vs. CA, 251 SCRA 509). The notice of lis pendens is but an incident in an action. It does not affect the merits thereof. It is intended merely to constructively advice or warn all people who deal with the property that they deal with it at their own risk and whatever rights they may acquire in the property are subject to the result of the action. (Heirs of Maria Marasigan vs. IAC, 152 SCRA 253). RECONSTITUTION Reconstitution of lost or destroyed certificates in the office of the RD can be done only thru judicial proceedings. Notice of hearings shall be sent to the RD and the LR Commissioner. When it is conceded that some deficiencies exist in the formal requisites for the issuance of a transfer certificate of title covering a parcel of land with an increased or expanded area, and where the Register of Deeds noting such facts has recommended the cancellation of the certificate of title pursuant to LRC Circular No. 167, there is a serious or substantial controversy as to the ownership of the expanded area. This kind of controversy can only be heard in the exercise of the courts general jurisdiction, the proper remedy would be a petition for declaratory relief under Section 64 of the Rules of Court. (Santos vs. Aquino, GR No. 32949, Nov. 28, 1980). In reconstitution of allegedly lost certificate of title, greatest caution must be exercised in acting on such petitions, especially when it is filed after an inexplicable delay of 25 years. It is mandatory that: Aside from publication, actual and personal notice be duly served to indispensable parties, i.e. the actual owners and possessors of the land involved; The land has in fact been previously registered under Act 496 but the corresponding certificate of title has been lost or destroyed. In other words, the title is no longer subsisting. The reconstitution of a certificate of title literally and within the meaning of RA 26 denotes the restoration of the instrument which is supposed to have been lost or destroyed in its original form and condition. Courts must proceed with extreme caution in proceedings for reconstitution of titles under RA 26, and should not only require strict compliance therewith but also establish the identity of every person who files the petition. If filed by some other person than the registered owner, no effort should be spared to assure itself of the authenticity and due execution of petitioner's authority to institute the proceedings. It should avoid itself being unwittingly used as a tool of swindlers and impostors robbing someone of his title. (Heirs of Pedro Pinoto vs. Hon. Jude Dulay, GR No. 58694, July 2, 1990). The essential requirements in the reconstitution of title are the following: 1. Notice of petition should be published in the Official Gazette and posted on the main entrance of the provincial and municipal building where the land is situated; 2. The notice should state the number of the lost or destroyed title, the name of the registered owner, occupants or persons in possession; the names of adjoining owners and interested parties; the area and boundaries of the property and stating the date on which all interested parties must appear; 3. Copy of the notice must also be sent by registered mail or otherwise to every person named therein or to the occupant or adjoining owners whose addresses are known, at least 30 days prior to the hearing; and

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4. At the date of the hearing of the petition, the petitioner must submit proof of publication, posting and service of notice as required by the court. (Calalang vs. Registry of Deeds of Quezon City, 231 SCRA 88; Ortigas vs. Velasco, 234 SCRA 455).

CIVIL LAW

JURISDICTION The distinction between general jurisdiction vested in the RTC and the limited jurisdiction when acting as a land registration court has been eliminated by Section 2 of PD 1529. Hence, the RTCs now have authority to act on questions after original registration with power to hear and decide substantial and contentious issues to avoid multiplicity of suits. (Ignacio vs. CA, 246 SCRA 243). The land registration court has no jurisdiction to adjudicate the issue regarding the existence or non-existence of tenancy relationship under RA 3844 (Agricultural Reform Code, as amended by RA 6389) since exclusive jurisdiction over such relationship was vested by law in the Court of Agrarian Relations, now the Regional Trial Court pursuant to BP 129. (Ouano vs. CA, 237 SCRA 122). PD 1529 abolished the difference between the general jurisdiction of regular courts and the limited jurisdiction of the land registration court such that pursuant to Section 2 of PD 1529, the court may issue a writ of possession to effectuate the result of a tax sale, citing the leading case of Averia vs. Caguioa, 146 SCRA, where it was declared that a land registration court has jurisdiction to decide contentious and substantial issues after original registration. (Cloma vs. CA, 234 SCRA 665). No voluntary instrument shall be registered by the Register of Deeds unless the owner's duplicate certificate is presented together with the instrument except in some cases or upon order of the court for cause shown. Any lien annotated on the previous certificate of title which subsist should be incorporated in or carried over to the new TCT. (Leticia Ligon vs. CA and Iglesia ni Kristo, 244 SCRA 693). EXPROPRIATION Under RA 7279, lands for socialized housing are to be acquired by the government in the following order: 1. government lands 2. alienable lands 3. unregistered lands or idle lands 4. privately owned lands When privately owned lands are to be expropriated, two conditions must be complied with, namely: 1. resorted to only when other modes are exhausted 2. lands owned by small property owners are exempt from expropriation for social housing. (City of Mandaluyong vs. Aguilar, et al., 350 SCRA 487)

Among other things

Land Titles and Deeds RESTRICTION ON ACQUISITION OF REAL PROPERTY 1. Sale of lands to aliens is void as it violates the Constitution, which disallows aliens to acquire lands. Both vendor and vendee are in pari delicto and the Courts will not allow protection to either party. The government may annul the sale at anytime because prescription does not run against the government (Lee vs. Republic of the Philippines, 366 SCRA).

INTER ALIA

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2. Natural-born Filipino citizens who have lost their Filipino citizenship may now acquire not more than 3 hectares of land if it is rural and not more than 5000 square meters if residential. (RA 8179) EFFECT OF P.D. 1529 ON SPANISH TITLES 1. Cannot be used as evidence to prove title (Estate of Don Mariano de San Pedro, 265 SCRA) 2. The same may be registered under the system of registration for unregistered land. (Act 3344) 3. Those not registered under the LRA are not considered registered at all. EFFECT OF P.D. 1529 ON THE SYSTEM OF REGISTRATION OF UNREGISTERED LAND 1. Involuntary transaction like attachment and the like on unregistered land may now be registered in the Register of Deeds. 2. Any question regarding registration in the Register of Deeds may now be elevated by way of consulta to the Land Registration Administration. PURPOSE AND EFFECT OF REGISTRATION OF LAND UNDER THE LRA 1. Purpose the legislative intent in providing a system of registration is to afford a mode of publicity so that persons dealing with real property may search records and thereby acquire security against instruments, the execution of which has not been revealed. Hence, a permanent record of landholdings and transactions thereon is maintained in order to prevent fraudulent claims to land by concealment of unregistered transactions. 2. Effect Recording of conveyance constitute notice to all whereas, it is presumed that the purchaser has examined every document of record (Garcia vs. Court of Appeals, 95 SCRA 380). 3. Real Purpose of Torrens System to quiet title already existing and to stop forever any question as to its legality. Once title is registered, the owner may rest secure without waiting in the portals of the Court to avoid possibility of losing his land. (Ching vs. Court of Appeals, 181 SCRA; National Grains Authority vs. Court of Appeals, 157 SCRA) OBJECT OF REGISTRATION

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Object of registration Only real property is the object of registration. While land literally means the bare soil of the earth, it includes whatever may be found on its surface and under it. But forest land, even if it is stripped of trees and forest cover are not susceptible of private ownership much less of registration by private persons unless reclassified or released from forest to alienable and disposable land of the public domain by official proclamation (Director of Forest Management vs. Valeriano, 129 SCRA). THE DIFFERENT MODES OF ACQUIRING LAND TITLES 1. 2. 3. 4. Public grant such as homestead patent, free patent or sales patent under CA 141. Private grant like donation, sale, etc. Adverse possession or prescription Accretion to the owners of the land adjoining banks of rivers belong the accretion, which they gradually receive from the effects of the current of the rivers and not from the sea (Ignacio vs. Director of Lands, 108 Phil; Binoloy vs. Manalo, 195 SCRA). Should accretion take place while application for registration is pending, there is a need for filing a new application for registration of the additional land and not merely awarding the application (Cureg vs. IAC, 177 SCRA). 5. Involuntary alienation such as expropriation proceedings, escheat, execution sale, tax sale. 6. Descent or device testate and intestate succession. 7. Reclamation under the Philippine Law of Waters, only the government may initiate reclamation projects (Government vs. Cabangis, 53 Phil 112). Under RA 1899, the national

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government granted to municipalities and chartered cities the authority to undertake and carry out reclamation projects but was revoked by P.D. 3-A and only the national government may undertake such projects (RP vs. Pasay city, et al., 299 SCRA 199 Cultural Center). TITLE BY EMANCIPATION PATENT OR GRANT UNDER P.D. 27 AND RA 6657 RA 6657 did not repeal or supersede P.D. 27. While RA 6657 covers all public and private agricultural lands, P.D. 27 covers rice and corn lands (Sigre vs. Court of Appeals). LANDS SUBJECT OF ORIGINAL REGISTRATION 1. Private lands lands segregated from general mass of the public domain by any form of grant by the State and which are in possession of the original grantee or their successors in interest. 2. Public agricultural land to which claimants have acquired incomplete title within the contemplation of section 48 of the Public Land Act. VARIOUS METHODS OF BRINGING LANDS UNDER THE OPERATION OF THE TORRENS SYSTEM 1. Judicial voluntary and compulsory a. Voluntary Sec 14-39 P.D. 1529 b. Compulsory instituted in Court by the State under the Cadastral Act (Act 2259) 2. Administrative where government grants, alienates, or conveys lands by way of patent, said grant, deed, or instrument must be registered in the Register of Deeds so as to be covered by the Land Registration Act. (Sec 103, P.D. 1529) EFFECT OF FAILURE TO REGISTER LAND UNDER THE TORRENS SYSTEM OF REGISTRATION Recording is not indispensable to prove ownership, under Art. 709, NCC, property not recorded in the Register of Deeds will not prejudice third persons provided it is not registered in the name of third persons and that he has been in quiet andpeaceful possession thereof. Possession here is in accordance with Art. 524, NCC, which contemplates not only material but also symbolic possession (Quimson vs. Rosete, 87 Phil. 189). NATURE OF LAND REGISTRATION PROCEEDINGS In rem, based on the generally accepted principle underlying the Torrens system wherein all the world are made parties defendants. Relatedly, a decree of registration that has become final shall be deemed conclusive not only on questions actually contended and determined but also upon all matters that might be litigated in the land registration proceedings (Cacho vs. Court of Appeals, 269 SCRA) NATURE OF JURISDICTION OF RTC OVER REGISTRATION OF TITLE 1. RTC exercises plenary jurisdiction over all applications for any registration including improvement and interest thereon and over all petitions filed after original registration (Ignacio vs. Court of Appeals, 246 SCRA; Averia vs. Caguioa, 146 SCRA; PNB vs. International Corporate Bank, 199 SCRA) 2. Delegated jurisdiction RA 7691 allows inferior courts to hear and determine land registration cases where there is no controversy or where the value of the property does not exceed P100, 000. FUNCTIONS OF THE REGISTER OF DEEDS 1. General function Duty to register instrument presented for registration with all requisites for registration being present. 2. Ministerial functions He performs ministerial functions with reference to registration of deeds, encumbrances, instruments and the like (Baranda vs. Gustilo, 165 SCRA). He cannot exercise personal judgment and discretion when confronted with the problems of whether to

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register an instrument on the ground that it is invalid as this is a function of the court (Almirol vs. Register of Deeds of Agusan, 22 SCRA). WHEN MAY REGISTER OF DEEDS DENY REGISTRATION OF VOLUNTARY INSTRUMENTS 1. Where there are more than one copy and owners duplicate and not all are presented. 2. When the document on its face bears infirmity. 3. When the validity of the instrument sought to be registered is in issue pending in Court (Balbon vs. Register of Deeds of Ilocos sur, 28 SCRA). May an applicant whose predecessor in interest was denied registration now apply for the registration of the same land? Yes, provided that he has acquired an imperfect title thereto by open, continuous, exclusive, notorious possession and occupation of the land under a bona fide claim of ownership (Director of Lands vs. Pastor, 106 SCRA; DL Management Bureau vs. Court os Appeals, 205 SCRA) Nature of proceedings in land registration under P.D. 1529 and the Public Land Act (CA 141) Nature of proceedings in land registration under P.D. 1529 and the Public Land Act (CA 141) particularly Section 48 thereof are the same in that both are against the whole world, both take the nature of judicial proceedings and the decree of registration issued under both laws are conclusive and final, and the proceedings therein are governed by the same court procedure and laws of evidence. What is the required period of possession and occupation necessary to be proved? Since June 12, 1945, under Section 14, P.D. 1529 as interpreted by the Supreme Court in RP vs. Doldol, 295 SCRA. WHAT IS THE PERIOD WITHIN WHICH TO SECURE JUDICIAL CONFIRMATION OF TITLE OR ADMINISTRATIVE LEGALIZATION OF TITLE? Under RA 9176, the period within which to file petitions for judicial confirmation or administrative legalization of title had been extended to December 31, 2020. Extent of proof required of an applicant for registration

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1. Land is alienable and disposable (Director of Lands vs. Buyco, 216 SCRA). 2. Open, continuous, exclusive, and notorious possession of the land since June 12, 1945 (Sec 14, P.D. 1529 and RP vs. Doldol) under a bona fide claim of ownership. MAY PRIVATE CORPORATIONS APPLY FOR REGISTRATION OF PUBLIC LANDS? Private corporations or associations are not allowed by the 1973 and 1987 Constitution but the prohibition does not apply if at the time of registration proceedings, the land was already private lands (Director of Lands vs. IAC and ACME Plywood, 146 SCRA; Natividad vs. Court of Appeals, 202 SCRA). HOW IS POSSESSION PROVED? 1. Under Sec 48, PLA possession must be accompanied by occupation since the two words are separated by the conjunction AND, hence possession must not be by mere fiction or constructive possession. 2. Nature of possession it is open when it is patent, visible, apparent, notorious and not clandestine. Continuous when not interrupted or occasional. Exclusive when possessor had exclusive dominion over the land and appropriate it to his own benefit (Director of Lands vs. CA and Manlapaz, 209 SCRA).

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PURPOSE AND EFFECT OF PUBLICATION 1. Confers jurisdiction over the land applied for upon the court. 2. To charge the whole world with knowledge of the application and invite them to take part in the case and assert and prove their right to the property. a. However, publication is never meant to dispense with the requirement of mailing and posting which are mandatory and jurisdictional (RP vs. Marasigan, 198 SCRA 219). b. Also, publication once in a newspaper of general circulation is mandatory and jurisdictional (Director of Lands vs. Court of Appeals, 276 SCRA). c. A defective publication deprives the Court of jurisdiction and therefore lacks authority over the whole case and all its aspects (Po vs. RP, 40 SCRA; Register of Deeds of Malabon vs. RTC Malabon, 181 SCRA). d. Where actual publication of notice of initial hearing was after the hearing itself or where the Official Gazette containing the notice was released for publication only after said hearing, the publication is defective (RP vs. Court of Appeals, 236 SCRA). EFFECT OF ORDER OF DEFAULT All persons and the whole world except only those who had appeared and filed pleadings in the case are bound by said default order (Cachero vs. Marzan, 190 SCRA). WHEN IS DEFAULT ORDER IMPROPER? Where oppositor filed opposition but did not appear on date of initial hearing, it was improper for the court to declare him in default and the remedy is not appeal but certiorari (Director of Lands vs. Santiago, 160 SCRA; Omico Mining vs Vallejos, 63 SCRA). BURDEN OF APPLICANT IN LAND REGISTRATION PROCEEDINGS He must show that he is the real and absolute owner of the property in fee simple and overcome the presumption that the land is a part of the public domain (RP vs. Lee, 197 SCRA; Director of Lands vs. Sayo, 191 SCRA). In petitions for confirmation of imperfect title it is required to show that the applicant is in open, continuous, exclusive and notorious possession and occupation of the land under bona fide claim of ownership within the period required by law (since June 12, 1945 or earlier). Even if there is no opposition, applicant must prove his claim and submit his evidence and not rely on the weakness of the evidence of the opposition (Director of ands vs. Buyco, 216 SCRA). PROOF OF IDENTITY OF LAND MAY CONSIST OF 1. Survey plan approved by Director of Lands (Republic Cement Corp. vs. Court of Appeals, 198 SCRA). 2. Tracing cloth plan and the blue print copies thereof (Director of Lands vs. Reyes, 68 SCRA; Heirs of Isabel Tesalora, 236 SCRA). 3. Technical description duly signed by Geodectic Engineer (RP vs. Court of Appeals, 301 SCRA). 4. Tax Declaration if there are discrepancies of area and boundary in Tax Declaration and technical description such differences are common as measurements in Tax Declarations are based on more estimation rather than computation (Director of Lands vs. Fontillas, 402 SCRA). WHAT EVIDENCE IS NECESSARY TO PROVE OWNERSHIP? 1. Documentary evidence must not only prove the identity of the land but also genuineness of title (Republic Cement Corp. vs. Court of Appeals, 198 SCRA). a. Tax declaration and real tax payments not conducive proof of ownership but indicia of possession (Ordoez vs. Court of Appeals, 188 SCRA; Director of Lands vs. IAC, 195 SCRA).

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b. Presidential issuance and legislative acts (RP represented by Mindanao Medical Center vs. Court of Appeals, 73 SCRA; International Hardwood & Veneer Corp. vs. University of the Philippines, 200 SCRA). c. Spanish title already inapplicable and may not be used as evidence (Intestate Estate of Don Mariano de San Pedro, 265 SCRA where P.D. 892 was applied). 2. Testimonial evidence showing among others possession and occupation of the land in the manner and period prescribed by law. PROOFS NOT SUFFICIENT TO ESTABLISH PRIVATE RIGHTS OR OWNERSHIP 1. Compromise agreement among the parties where they agreed that they have rights and interest over the land and allocated portions to each of them. 2. Survey plan approved by Director of Lands (RP vs. Court of Appeals, 154 SCRA). ORDER OF TRIAL SAME AS ORDINARY CIVIL ACTION Order of trial inland registration cases is the same as ordinary civil action (Rule 30, 1997 Rules of Court). Sec 34 P.D. 1529 expressly states that the Rules of Court are applicable to land registration cases. Basis of court judgment Section 29 P.D. 1529 provides that all conflicting claims of ownership in the land shall be determined by the court. Judgment5 of the court shall be based on the evidence presented by the parties AND reports of LRA and Bureau of Lands. The court is empowered to wield its judicial power to compel LRA to speed up the investigation and submission of is report and recommendation (Ramos vs. Rodriguez, 244 SCRA). PROPERTY SUBJECT OF ADJUDICATION BY THE COURT Only property claimed by applicant can be adjudicated by the Court, hence if he asserts ownership and submits evidence only for a portion of a lot, the inclusion of a portion of a lot not claimed is void ( Almarza vs. Arguelles, 156 SCRA). REPORT OF LRA AND LAND MANAGEMENT BUREAU REQUIRED TO BE CONSIDERED TOGETHER WITH EVIDENCE PRESENTED

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If submitted later but not beyond one year after the issuance of decree, the Court may still cause a change in the decision (Gomez vs. Court of Appeals, 168 SCRA; Ramos vs. Rodriguez, 244 SCRA). WHEN MAY WRIT OF POSSESSION WILL ISSUE A writ of possession in land registration cases is a mere part judgment incident. The judgment carries with it delivery of possession which is inherent in ownership and it may issue even if there is an appeal (Vencilao vs. Vano). Writ of possession does not prescribe and Rule 39 of the Rules of Court regarding enforcement of judgment by motions in civil cases has no application in land registration proceedings (Heirs of Cristobal Marcos vs. De Banuuar, 25 SCRA). Effect of Decree of Registration It binds the land, quiets title thereto and it is conclusive upon all persons, including the government and bars re-litigation after 1 year (Ylarde vs. Lichauco, 42 SCRA). MINISTERIAL DUTY OF LRA Duty of LRA to issue decree of registration is ministerial, hence LRA cannot exercise discretion but is duty bound to refer matter to the court per Sec 6(2) P.D. 1529. However, LR

2005 CENTRALIZED BAR OPERATIONS

Administrator is not bound to issue decree if land had earlier been registered (Ramos vs. Rodriguez, 244 SCRA). Exceptions to indefeasibility of title after one year from date of entry of decree 1. When a valid title already covers the land (Reg. Of Deeds vs. PNB, 13 SCRA). 2. Land not capable of registration (Martinez vs. Court of Appeals, 56 SCRA). 3. Fraudelent registration where LRA could not be used to perpetuate fraud (Bonales vs. IAC, 166 SCRA). DISTINCTION BETWEEN VOLUNTARY AND INVOLUNTARY REGISTRATION 1. Voluntary Innocent purchaser for value becomes registered owner the moment he presents and files a duly notarized document (deed of sale) and the same is entered in the primary entry book and at the same time presents duplicate owners copy and pays registration fees because what remains to be done lies not in his power to perform (Garcia vs. Court of Appeals, 95 SCRA). 2. Involuntary mere entry in the primary entry book sufficient notice to all even if owners duplicate copy is not presented to Register of Deeds. EFFECT OF REGISTRATION IN RD Registration of the document in the Register of Deeds is the operative act that transmits title. Absent such registration conveyance does not bind the land (Villaluz vs Neme, 7 SCRA). This rule also applies to sale on execution or foreclosure (Cempillo vs. Court of Appeals, 129 SCRA; PNB vs. Court of Appeals, 98 SCRA). INDEFEASIBILITY OF THE CERTIFICATE OF TITLE Buyers and mortgages not required to go beyond certificate of title. They are only charged with notice of burden on property which are noted on the face of the register or certificate of title (Ibarra vs. Ibarra, 156 SCRA; Bel Air Village Association vs. Dionisio, 174 SCRA). When there is nothing on certificate of title to indicate any cloud or vice in ownership or encumbrance thereon, the purchaser is not required to explore further than what the certificate of title indicates in quest for any hidden defect (Centeno vs. Court of Appeals, 139 SCRA; Pino vs. Court of Appeals, 198 SCRA). EXCEPTION TO THE RULE THAT BUYERS NEED NOT GO BEYOND THE FACE OF THE TITLE 1. When purchaser neglects to make necessary inquiries and closes his eyes to facts which should have put a reasonable man on his guard (Egao vs. Court of Appeals, 174 SCRA). 2. Transactions with banks and other financial institutions (Navarro vs. Second Laguna Development Bank, G.R. No. 129 428, February 2003; Dela Merced vs. GSIS, 365 SCRA; Tomas vs. Tomas, 98 SCRA). 3. When buyer relied upon rights of vendee based on annotated transaction (Guererro vs. Court of Appeals, 39 SCRA; Santiago vs. Court of Appeals, 247 SCRA).

CIVIL LAW

Red Notes in Civil Law

Conflicts of Law Nationality Law Theory Laws relating to Family rights and duties or to the status, condition, and legal capacity of persons are binding upon citizens of the Philippines even though living abroad (Art. 15, Civil Code). By analogy then, the status, condition and legal capacity of a foreigner sojourning in the Philippines shall be governed by his national law. Article 21 of the Family Code requires that when either or both parties contracting marriage are foreigners, they shall submit a certificate of legal capacity to contract marriage issued by their

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diplomatic or consular offices before a marriage license can be obtained. If a license is issued without the certificate of legal capacity, the subsequent marriage will still be valid without prejudice to the appropriate civil, criminal or administrative action against the party responsible for the irregularity in the formal requisite. As a rule, the validity of absolute divorce is not recognized in the Philippines because of public policy considerations. But an American who consented to a divorce from a Filipino wife, cannot claim any interest in the property of his Filipino spouse in the Philippines on the ground that the divorce is not valid here. Since under his national law the validity of divorce is recognized, he ceased to become the spouse of the Filipino. Also, a German national who obtained a divorce in his country, cannot file adultery charges against his Filipino wife as he can no longer be considered an offended spouse. In both instances, the status of a foreigner shall be governed by his national law. A foreigner may adopt in the Philippines provided that, in addition to the qualifications required of Filipino adopters, the following requirements are present: diplomatic relations; 3 years continuous residence prior to application and until issuance of decree; legal capacity to adopt under his national law; and his national law allows adoptee to enter his country. Inter-country adoption is a socio legal process for the adoption of a Filipino Child by a foreigner or a Filipino permanently residing where the petition is filed, the supervised trial custody undertaken, and the decree of adoption issued outside the Philippines. The formal validity of a contract of governed by the law of the place of execution (lex loci celebrationis or lex contractus); capacity to contract by the national law of the contracting pary; intrinsic validity by the law intended by the parties to govern (lex intentionis) provided that said law must have a substantive relationship or connection to the transaction, contract or parties; and the performance by the law intended or by the law of the place of performance (lex solutionis). Contracts for International Air Transportation When a passenger files 2 causes of action arising from a.) theft/slashing of his luggage; and b.) shabby treatment or humiliation he suffered from airline personnel, the rules and limits provide in the Warsaw Convention will apply only to the first cause of action but not to the second. The Warsaw Convention is not applicable to cases of malice, bad faith, bumping off, barbaric acts, humiliation, and other torts; it does not regulate or exclude liability for other breaches of contract by the carrier, or misconduct of its employees, or for some other exceptional type of damages. Intrinsic validity of will and capacity to succeed are governed by the national law of the decedent: Formal or extrinsic validity of a will executed by a.) Filipino abroad governed by law of place of execution or Philippine law; b.) Alien abroad governed by his national law, law of place of residence, or Philippine law; c.) Alien in the Philippines governed by his national law or Philippine law.

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SUGGESTED ANSWERS TO THE 2004 BAR EXAMINATION QUESTIONS IN CIVIL LAW

QUESTION NO. I

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A. Mr. ZY lost P100,000 in a card game called Russian poker, but he had no more cash to pay in full the winner at the time the session ended. He promised to pay PX, the winner, two weeks thereafter. But he failed to do so despite the lapse of two months, so PX files in court a suit to collect the amount of P50,000 that he won but remained unpaid. Will the collection suit against ZY prosper? Could Mrs. ZY file in turn a suit against PX to recover the P100,000 that her husband lost? Reason. (5%) SUGGESTED ANSWER: A. 1) The suit by PX to collect the balance of what he won from ZY will not prosper. Under Article 2014 of the Civil Code, no action can be maintained by the winner for the collection of what he has won in a game of chance. Although poker may depend in part on ability, it is fundamentally a game of chance. 2) If the money paid by ZY to PX was conjugal or community property, the wife of ZY could sue to recover it because Article 117(7) of the Family Code provides that losses in gambling or betting are borne exclusively by the loser-spouse. Hence, conjugal or community funds may not be used to pay for such losses. If the money were exclusive property of ZY, his wife may also sue to recover it under Article 2016 of the Civil Code if she and the family needed the money for support. ALTERNATIVE ANSWER to I_A (2): A. 2) Mrs. ZY cannot file a suit to recover what her husband lost. Art.2014 of the Civil Code provides that any loses in a game of chance may recover his loss from the winner, with legal interest from the time he paid the amount lost. This means that only he can file the suit. Mrs. ZY cannot recover as a spouse who has interest in the absolute community property or conjugal partnership of gains, because under Art 117(7) of the Family Code, losses are borne exclusively by the loser-spouse. Therefore, these cannot be charged against absolute community property or conjugal partnership of gains. This being so, Mrs. ZY has no interest in law to prosecute and recover as she has no legal standing in court to do so. B. TX filed a suit for ejectment against BD for non-payment if condominium rentals amounting to P150,000. During the pendency of the case, BD offered and TX accepted the full amount due as rentals from BD, who then filed a motion to dismiss the ejectment suit on the ground that the action is already extinguished. Is BDs contention correct? Why or why not? Reason. (5%) SUGGESTED ANSWER: B. BDs contention is not correct. TX can still maintain the suit for ejectment. The acceptance by the lessor of the payment by the lessee of the rentals in arrears even during the pendency of the ejectment case does not constitute a waiver or abandonment of the ejectment case. (Spouses Clutario v. CA, 216 SCRA 341 [1992]).

CIVIL LAW

Red Notes in Civil Law

QUESTION NO. II A. Distinguish briefly by clearly between: 1. Mutuum and commodatum. 2. Substitute parental authority and special parental authority. 3. Civil obligation and natural obligation. 4. Inexistent contracts and annullable contracts. 5. Domiciliary theory and nationality theory of personal law. (5%) SUGGESTED ANSWER: A. The distinctions are as follows:

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1.

In mutuum, the object borrowed must be a consumable thing, the ownership of which is transferred to the borrower who incurs the obligation to return the same consumable to the lender in an equal amount, and of the same kind and quality. In commodatum, the object borrowed is usually anon-consumable thing, the ownership of which is not transferred to the borrower who incurs the obligation to return the very thing to the lender.

2. In substitute parental authority, the parents lose their parental authority in favor of the substitute who acquires it to the exclusion of the parents. In special parental authority, the parents or anyone exercising parental authority does not lose parental authority. Those who are charged with special parental authority exercise such authority only during the time that the child is in their custody or supervision. Substitute parental authority displaces parental authority while special parental authority concurs with parental authority. 3. Civil obligation is a juridical necessity to give, to do and not to do. It gives the creditor the legal right to compel by an action in court the performance of such obligation. A natural obligation is based in equity and natural law. There is no legal right to compel performance thereof but if the debtor voluntarily pays it, he cannot recover what was paid. Inexistent contracts are considered as not having been entered into and therefore, void ab initio. They do not create any obligation and cannot be ratified or validated, as there is no agreement to ratify or validate. On the other hand, annullable or voidable contracts are valid until invalidated by the court but may be ratified. In inexistent contracts, one or more requisites of a valid contracts are absent. In annullable contracts, all the elements of a contract are present except the consent of one of the contracting parties was vitiated or one of them has no capacity to give consent. 5. Domiciliary Theory posits that the personal status and rights of a person are governed by the law of his domicile or the place of his habitual residence. The Nationality Theory, on the other hand, postulates that it is the law of the persons nationality that governs such status and rights. B. DT and MT were prominent members of the frequent travelers club of FX Airlines. In Hong Kong, the couple were assigned seats in Business Class for which they had bought tickets. On checking in, however, they were told that they were upgraded by computer to First Class for the flight to Manila because the Business Section was overbooked. Both refused to transfer despite better seats, food, beverage and other services in First Class. They said they had guests in Business Class they should attend to. They felt humiliated, embarrassed and vexed, however, when the stewardess allegedly threatened to offload them if they did not avail of the upgrade. Thus they gave in, but during the transfer of luggage, DT suffered pain in his arm and wrist. After arrival in Manila, they demanded an apology from FXs management as well as indemnity payment. When none was forthcoming, they sued the airline for a million pesos in damages. Is the airline liable for actual and moral damages? Why or why not? Explain briefly. (5%) SUGGESTED ANSWER:

4.

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B. FX Airlines committed breach of contract when it upgrade DT and MT, over their objections, to First Class because they had contracted for Business Class passage. However, although there is a breach of contract, DT and MT are entitled to actual damages only for such pecuniary losses suffered by them as a result of such breach. There seems to be no showing that they incurred such pecuniary loss. There is no showing that the pain in DTs arm and wrist resulted directly from the carriers acts complained of. Hence, they are not entitled to actual damages. Moreover, DT could have avoided the alleged injury by requesting the airline staff to do the luggage transfer as a matter of duty on their part. There is also no basis to award moral damages for such breach of contract because the facts of the problem do not show bad faith or fraud on the part of the airline. (Cathay Pacific v. Vasquez, 399 SCRA 207 [2003]). However, they may recover moral damages if the cause of action is based on Article 21 of the Civil Code for the humiliation and embarrassment they felt when the stewardess threatened to offload them if they did not avail of the upgrade. ALTERNATIVE ANSWER: If it can be proved that DTs pain in his arm and wrist occasioned by the transfer of luggage was caused by fault or negligence on the part of the airlines stewardess, actual damages may be recovered. The airline may be liable for moral damages pursuant to Art. 2219 (10) if the cause of action is based of Article 21 or an act contrary to morals in view of the humiliation suffered by DT and MT when they were separated from their guests and were threatened to be offloaded. QUESTION NO. III A. RN and DM, without any impediment to marry each other had been living together without benefit of church blessings. Their common-law union resulted in the birth of ZMN. Two years later, they got married in a civil ceremony. Could ZMN be legitimated? Reason (5%)

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SUGGESTED ANSWER: A. ZMN was legitimated by the subsequent marriage of RN and DM because at the time he was conceived, RN and DM could have validly married each other. Under the Family Code, children conceived and born outside of wedlock of parents who, at the time of the formers conception, were not disqualified by any impediment to marry each other are legitimated by the subsequent marriage of the parents. B. Dr. ALX is a scientist honored for work related to the human genome project. Among his pioneering efforts concern stem cell research for the cure of Alzheimers disease. Under corporate sponsorship, he helped develop a microbe that are and digested oil spills in the sea. Now he leads a college team for cancer research in MSS State. The team has experimented on a mouse whose body cells replicate and bear cancerous tumor. Called oncomouse, it is a lifeform useful for medical research and it is a novel creation. Its body cells do not naturally occur in nature but are the product of mans intellect, industry and ingenuity. However, there is a doubt whether local property laws and ethics would allow rights of exclusive ownership of any life-form. Dr. ALX needs your advice: (1) whether the reciprocity principle in private international law could be applied in our jurisdiction; and (2) whether there are legal and ethical reasons that could frustrate his claim of exclusive ownership over the life-form called oncomouse in Manila? What will be your advice to him? (5%) SUGGESTED ANSWER: B. (1) The reciprocity principle in private international law may be applied in our jurisdiction. Section 3 of R.A. 8293, the Intellectual Property Code, provides for reciprocity as follows: Any person who is a national, or who is domiciled, or has a real and effective industrial establishment in a country which is a party to any convention, treaty or agreement relating

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to intellectual property rights or the repression of unfair competition, to which the Philippines is also a party, or extends reciprocal rights to nationals of the Philippines by law, shall be entitled to benefits to the extent necessary to give effect to any provision of such convention, treaty or reciprocal law, in addition to the rights to which any owner of an intellectual property right is otherwise entitled by this Act. (n) To illustrate: the Philippines may refrain from imposing a requirement of local incorporation or establishment of a local domicile for the protection of industrial property rights of foreign nationals (citizens of Canada, Switzerland, U.S.) if the countries of said foreign nationals refrain from imposing said requirement on Filipino citizens. ALTERNATIVE ANSWER: Reciprocity principle cannot be applied in our jurisdiction because the Philippines is a party to the TRIPS agreement and the WTO. The principle involved is the most-favored nation clause which is the principle of non-discrimination. The protection afforded to intellectual property protection in the Philippines also applies to other members of the WTO. Thus, it is not really reciprocity principle in private international law that applies, but the most-favored nation clause under public international law. (2) There is no legal reason why oncomouse cannot be protected under the law. Among those excluded from patent protection are plant varieties or animal breeds, or essentially biological process for the production of plants and animals (Section 22.4 Intellectual Property Code, R.A. No. 8293). The oncomouse in the problem is not an essentially biological process for the production of animals. It is a real invention because its body cells do not naturally occur in nature but are the product of mans ingenuity, intellect and industry. The breeding of oncomouse has novelty, inventive step and industrial application. These are the three requisites of patentability. (Sec 29, IPC) There are no ethical reasons why Dr. ADX and his college team cannot be given exclusive ownership over their invention. The use of such genetically modified mouse, useful for cancer research, outweighs considerations for animal rights. There are no legal and ethical reasons that would frustrate Dr. ALXs claim of exclusive ownership over oncomouse. Animals are property capable of being appropriated and owned. In fact, one can own pet dogs or cats, or any other animal. If wild animals are capable of being owned, with more reason animals technologically enhanced or corrupted by mans invention or industry are susceptible to exclusive ownership by the inventor. ALTERNATIVE ANSWER: The oncomouse is a higher life form which does not fall within the definition of the term invention. Neither may it fall within the ambit of the term manufacture which usually implies a non-living mechanistic product. The oncomouse is a better regarded as discovery which is the common patrimony of man. ALTERNATIVE ANSWER: The oncomouse is a non-patentable invention. Hence, cannot be owned exclusively by its inventor. It is a method for the treatment of the human or animal body by surgery or therapy and diagnostic methods practiced on said bodies are not patentable under Sec. 22 of the IPC. QUESTION NO. IV

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A. JV, owner of a parcel of land, sold it to PP. But the deed of sale was not registered. One year later, JV sold the parcel again to RR, who succeeded to register the deed and to obtain a transfer certificate of title over the property in his own name. Who has the better right over the parcel of land, RR of PP? Why? Explain the legal basis for your answer. (5%) SUGGESTED ANSWER: A. It depend on whether of not RR is an innocent purchaser for value. Under the Torrens System, a deed or instrument operated only as a contract between the parties as evidence of authority to the Register of Deeds to make the registration. It is the registration of the deed or the instrument that is the operative act that conveys or affects the land. (Sec. 51, P.D. 1529). In cases of double sale of titled land, it is a well-settled rule that the buyer who first registers the sale in good faith acquires a better right to the land. (Art. 1544, Civil Code). Persons dealing with property covered by Torrens title are not required to go beyond what appears on its face. (Orquiola v. CA 386, SCRA 301, [2002]; Domingo v. Roces 401 SCRA 197, [2003]). Thus, absent any showing that RR knew about, or ought to have known the prior sale of the land to PP or that he acted in bad faith, and being first to register the sale, RR acquired a good and a clean title to the property as against PP. B. CX executed a special power of attorney authorizing DY to secure a loan from any bank and to mortgage his property covered by the owners certificate of title. In securing a loan from Mbank, DY did not specify that he was acting for CX in the transaction with said bank. Is CX liable for the bank loan? Why or why not? Justify your answer. (5%) SUGGESTED ANSWER: B. CX is liable for the bank loan because he authorized the mortgage on his property to secure the loan contracted by DY. If DY later defaults and fails to pay the loan, CX is liable to pay. However, his liability is limited to the extent of the value of the said property. ALTERNATIVE ANSWER: CX is not personally liable to the bank loan because it was contracted by DY in his personal capacity. Only the property of CX is liable. Hence, while CX has authorized the mortgage on his property to secure the loan of DY, the bank cannot sue CX to collect the loan in case DY defaults thereon. The bank can only foreclose are not sufficient to pay the loan in full, the bank cannot run after CX for the deficiency. ALTERNATIVE ANSWER: While as a general rule the principal is not liable for the contract entered into by his agent in case the agent acted in his own name without disclosing his principal, such rule does not apply if the contract involves a thing belonging to the principal. In such case, the principal is liable under Article 1883 of the Civil Code. The contract is deemed made on his behalf (Syjuco v. Sy-juco 40 Phil. 634 [1920]). ALTERNATIVE ANSWER: CX would not be liable for the bank loan. CXs property would also not be liable on the mortgage. Since DY did not specify that he was acting for CX in the transaction with the bank, DY in effect acted in his own name. In the case of Rural Bank of Bombon v. CA, 212 SCRA, (1992), the Supreme Court, under the same facts, ruled that in order to bind the

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principal by a mortgage on real property executed by an agent, it must upon its face purport to be made, signed and sealed in the name of the principal, otherwise, it will bind the agent only. It is not enough merely that the agent was in fact authorized to make the mortgage, if he, has not acted in the name of the principal. Neither is it ordinarily sufficient that in the mortgage the agent describes himself as acting by virtue of a power of attorney, it in fact the agent has acted in his own name and has set his own hand and seal to the mortgage. There is no principle of law by which a person can become liable on a real estate mortgage which she never executed in person or by attorney in fact. QUESTION NO. V A. DPO went to a store to buy a pack of cigarettes worth P225.00 only. He gave the vendor RRA, a P500-peso bill. The vendor gave him the pack plus P375.00 change. Was there a discount, an oversight, or an error in the amount given? What would be DPOs duty, if any, in case of an excess in the amount of change given by the vendor? How is this situational relationship between DPO and RRA denominated? Explain (5%) SUGGESTED ANSWER: A. There was error in the amount of change given by RRA. This is a case of solutio indebiti in that DPO received something that is not due him. He has the obligation to return the P100.00; otherwise, he will unjustly enrich himself at the expense of RRA. (Art. 2154, Civil Code) ALTERNATIVE ANSWER: DPO has the duty to return to RRA the excess P100 as trustee under Article 1456 of the Civil Code which provides: If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. There is, in this case, an implied or constructive trust in favor of RRA. B. OJ was employed as professional driver of MM Transit bus ownd by Mr. BT. In the course of his work, OJ hit a pedestrian who was seriously injured and later died in the hospital as a result of the accident. The victims heirs sued the driver and the owner of the bus for damages.

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Is there a presumption in this case that Mr. BT, the owner, had been negligent? If so, us the presumption absolute or not? Explain. (5%) SUGGESTED ANSWER: B. Yes, there is a presumption of negligence on the part of the employer. However, such is rebuttable. The liability of the employer shall cease when they prove that they observed the diligence of a good father of a family to prevent damage (Article 2180, Civil Code). 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, rebuttable only by proof of observance of the dilignece of a good father of a family (Metro Manila Transit v. CA, 223 SCRA 521 [1993]; Delsan Transport Lines v. C&A Construction, 412 SCRA 524 [2003]). Likewise, if the driver is charged and convicted in a criminal case for criminal negligence, BT is subsidiarily liable for the damages arising from the criminal act. QUESTION NO. VI

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A. ABC loaned to MNO P40,000 for which the latter pledged 400 shares of stock in XYZ Inc. it was agreed that if the pledgor failed to pay the loan with 10% yearly interest within four years, the pledgee is authorized to foreclose on the shares of stock. As required, MNO delivered possession of the shares to ABC with the understanding that the shares would be returned to MNO upon the payment of the loan. However, the loan was not paid on time. A month after 4 years, may the shares of stock pledged be deemed owned by ABC or not? Reason. (5%) SUGGESTED ANSWER: A. The shares of stock cannot be deemed owned by ABC upon default of MNO. They have to be foreclosed. Under Article 2088 of the Civil Code, the creditor cannot appropriate the things given by way of pledge. And even if the parties have stipulated that ABC becomes the owner of the shares in case MNO defaults on the loan, such stipulation is void for being a pactum commissorium. B. As an agent, AL was given a guarantee commission, in addition to his regular commission, after he sold 20 units of refrigerators to a customer, HT Hotel. The customer, however, failed to pay for the units sold. ALs principal, DRBI, demanded from AL payment for the customers accountability. AL objected, on the ground that his job was only to sell and not to collect payment for units bought by the customer. Is ALs objection valid? Can DRBI collect from him or not? Reason. (5%) SUGGESTED ANSWER: B. No, ALs objection is not valid and DRBI can collect from AL. Since AL accepted a guarantee commission, in addition to his regular commission, he agreed to bear the risk of collection and to pay the principal the proceeds of the sale on the same terms agreed upon with the purchaser (Article 1907, Civil Code) QUESTION NO. VII A. PH and LV are HK Chinese. Their parents are now Filipino citizens who live in Manila. While still students in MNS State, they got married although they are first cousins. It appears that both in HK and in MNS State first cousins could marry legally. They plan to reside and set up business in the Philippines. But they have been informed, however, that the marriage of first cousins here us considered void from the beginning by reason of public policy. They are in a dilemma. They dont want to break Philippine law, much less their marriage vow. They seek your advice on whether their civil status will be adversely affected by Philippine domestic law? What is your Advise? (5%) SUGGESTED ANSWER: A. My advise is as follows: The civil status of PH and LV will not be adversely affected by Philippine law because they are nationals of Hong Kong and not Filipino citizens. Being foreigners, their status, conditions and legal capacity in the Philippines are governed by the law of Hong Kong, the country of which they are citizens. Since their marriage is valid under Hong Kong law, it shall be valid and respected in the Philippines. B. In a class suit for damages, plaintiffs claimed they suffered injuries from torture during the martial law. The suit was filed upon President EMs arrival on exile in HI, a U.S. state. The court in HI awarded plaintiffs the equivalent of P100 billion under the U.S. law on alien tort claims. On appeal, EMs Estate raised the issue of prescription. It argued that since said U.S. law is silent on

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the matter, the court should apply: (1) HIs law setting a two-year limitation on tort claims; or (2) the Philippine law which appears to require the claims for personal injury arising from martial law be bought within one year. Plaintiffs countered that provisions of the most analogous federal stature, the Torture Victims Protection Act, should be applied. It sets ten years as the period of prescription. Moreover, they argued that equity could toll the statute of limitations. For it appeared that EM had procured Constitutional amendments granting himself and those acting under his direction immunity from suit during the tenure. In this case, has prescription set in or not? Considering the differences in the cited laws, which prescriptive period should be applied: one year under the Philippine law, two years under HIs law, ten years under U.S. federal law, or none of the above. Explain. (5%) SUGGESTED ANSWER: B. The US Court will apply US law, the law of the forum, in determining the applicable prescriptive period. While US law is silent on this matter, the US Court will not apply Philippine law in determining the prescriptive period. It is generally affirmed as a principle in private international law that procedural law is one of the exceptions to the application of foreign law by the forum. Since prescription is a matter of procedural law even in Philippine jurisprudence, (Cadalin v. POEA/NLRC/ Brown and Root International, 238 SCRA 721 [1994]), the US Court will apply either HI or Federal law in determining the applicable prescriptive period and not Philippine law. The Restatement of American law affirms this principle. QUESTION NO. VIII A. A Filipino couple, Mr. and Mrs. BM, Jr., decided to adopt YV, and orphan from St. Claires orphanage in New York City. They loved and treated her like a legitimate child for they have none of their very own. However, BM, Jr., died in an accident at sea, followed to the grave a year later by his sick father, BM, Sr. Each left a sizable estate consisting of bank deposits, lads and buildings in Manila. May the adopted child, YV, inherit from BM, Jr.? May she also inherit from BM, Sr.? Is there a difference? Why? Explain. (5%) SUGGESTED ANSWER:

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A. YV can inherit from BM, Jr. The succession to the estate of BM, Jr. is governed by Philippine law because he was a Filipino when he died (Article 16, Civil Code). Under Article 1039 of the Civil Code, the capacity of the heir to succeed is governed by the national law of the decedent and not by the national law of the heir. Hence, whether or not YV can inherit from BM, Jr. is determined by Philippine law. Under Philippine law, the adopted inherits form the adopter as a legitimate child of the adopter. YV, however, cannot inherit, in his own right, from the father of the adopter, BM, Sr., because she is not a legal heir of BM, Sr. The legal fiction of adoption exists only between the adopted and the adopter. (Teotico v. Del Val 13 SCRA 406 [1965]). Neither may he inherit from BM, Sr. by representing BM, Jr. because in representation, the representative must be a legal heir not only of the person he is representing but also of the decedent from whom the represented was supposed to inherit (Article 973, Civil Code). B. Mr. XT and Mrs. YT have been married for 20 years. Suppose the wife, YT, died childless, survived only by her husband, XT. What would be the share of XT from her estate as inheritance? Why? Explain. (5%) SUGGESTED ANSWER:

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B. Under the Civil Code, the widow or widower is a legal and compulsory heir of the deceased spouse. If the widow is the only surviving heir, there being no legitimate ascendants, descendants, brothers and sisters, nephews and nieces, she gets the entire estate. QUESTION NO. IX A. The parties in a contract of loan of money agreed that the yearly interest is 12% and it can be increased if there is a law that would authorize the increase of interest rates. Suppose OB, the lender, would increase by 5% the rate of interest to be paid by TY, the borrower, without a law authorizing such increase, would OBs action be just and valid? Why? Has TY a remedy against the imposition of the rate increase? Explain. (5%) SUGGESTED ANSWER: A. OBs action is not valid. The debtor cannot be required to pay the increase in interest there being no law authorizing it, as stipulated in the contract. Increasing the rate in the absence of such law violates the principle of mutuality of contracts. ALTERNATIVE ANSWER: Even if there was a law authorizing the increase in interest rate, the stipulation is still void because there is no corresponding stipulation to decrease the interest due when the law reduces the rate of interest. B. Don, an American businessman, secured parental consent for the employment of five minors to play certain roles in two movies he was producing at home in Makati. They worked at odd hours of the day and night, but always accompanied by parents or other adults. The producer paid the children talent fees at rates better that adult wages. But the social worker, DEB, reported to OSWD that these children often missed going to school. They sometimes drank wine, aside from being exposed to drugs. In some scenes, they were filmed naked or in revealing costumes. In his defense, DON contended all these were part of artistic freedom and cultural creativity. None of the parents complained, said DON. He also said they signed a contract containing a waiver of their right to file any complaint in any office or tribunal concerning the working conditions of their children acting in the movies. Is the waiver valid and binding? Why or why not? Explain. (5%) SUGGESTED ANSWER: B. The waiver is not valid. Although the contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, they may not do so if such are contrary to law, morals, good customs, public order, or public policy (Article 1306, Civil Code). The parents waiver to file a complaint concerning the working conditions detrimental to the moral well-being of their children acting in the movies is in violation of the Family Code and Labor laws. Thus, the waiver is invalid and not binding. The Child Labor Law is a mandatory and prohibitory law and the rights of the child cannot be waived as it is contrary to law and public policy. QUESTION NO. X A. BONI and ANNE met while working overseas. They became sweethearts and got engaged to be married in New Years Eve aboard a cruise ship in the Caribbean. They took the proper license to marry in New York City, where there is a Filipino consulate. But as planned, the wedding ceremony was officiated by the captain of the Norwegian-registered vessel in a private suit among selected friends.

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Back in Manila, ANNE discovered that BONI had been married in Bacolod City 5 years earlier but divorced in Oslo only last year. His first wife was also a Filipina but now based in Swede. BONI himself is a resident of Norway where he and ANNE plan to live permanently. ANNE retains your services to advise her on whether her marriage to BONI is valid under Philippine law? Is there anything else she should do under the circumstances? (5%) SUGGESTED ANSWER: A. If BONI us still a Filipino citizen, his legal capacity is governed by Philippine Law (Art. 15 Civil Code). Under Philippine Law, his marriage to ANNE is void because of a prior existing marriage which was not dissolved by the divorce decreed in Oslo. Divorce obtained abroad by a Filipino is not recognized. If BONI was no longer a Filipino citizen, the divorce is valid. Hence, his marriage to ANNE is valid if celebrated in accordance with the law of the place where it was celebrated. Since the marriage was celebrated aboard a vessel of Norwegian registry, Norwegian law applies. If the Ship Captain has authority to solemnize the marriage aboard his ship, the marriage is valid and shall be recognized in the Philippines. As to the second question, if BONI is still a Filipino, ANNE can file an action for declaration of nullity of marriage to him. B. In his lifetime, a Pakistani citizen, ADIL, married three times under Pakistani law. When he died an old widower, he left behind six children, two sisters, three homes, and an estate worth at least 30 million pesos in the Philippines. He was born in Lahore but last resided in Cebu City, where he had a mansion and where two of his youngest children now live and work. Two of his oldest children are farmers in Sulu, while two middle-aged children are employees in Zamboanga City. Finding that the deceased left no will, the youngest son wanted to file intestate proceedings before the Regional Trial Court of Cebu City. two other siblings objected, arguing that it should be in Jolo before a Sharia court since his lands are in Sulu. But ADILs sisters in Pakistan want the proceedings held in Lahore before a Pakistani court. Which court has jurisdiction and is the proper venue for the intestate proceedings? The law of which country shall govern succession to his estate? (5%)

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SUGGESTED ANSWER: B. In so far as the properties of the decedent located in the Philippines are concerned, they are governed by Philippine law (Article 16, Civil Code). Under Philippine law, the proper venue for the settlement of the estate is the domicile of the decedent at the time of his death. Since the decedent last resided in Cebu City, that is the proper venue for the intestate settlement of his estate. However, the successional rights to the estate of ADIT are governed by Pakistani law, his national law, under Article 16 of the Civil Code.

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