Memory Aid in Civil Law With 2017 Updates

Memory aid in Civil Law with 2017 updates
PERSONS AND FAMILY RELATIONS

I. NEW CIVIL CODE
took effect on August 30, 1950
Effectivity of laws
GENERAL RULE: Laws take effect 15 days following the completion of its publication
EXCEPTION: Unless otherwise provided by the law. This refers to the 15 day period and NOT to the
requirement of publication. (Tanada vs. Tuvera)
NOTE: Administrative rules and regulations must also be published if their purpose is to enforce or
implement existing laws pursuant to a valid delegation. The publication must be in full since its purpose is to
inform the public of the contents of the law. (Phil. Intl Trading Corp. vs. Angeles)
Ignorance of the law excuses no one

considered a CONCLUSIVE presumption and applies only to mandatory and prohibitory laws.
(Consunji vs. CA)
Non-retroactivity of laws
GENERAL RULE: Laws have no retroactive effect.
EXCEPTIONS: (UCIPELT)
1. Unless the law otherwise provides
2. Curative statutes
3. Interpretative statutes
4. Procedural/remedial
5. Emergency laws
6. Laws creating new rights
7. Tax laws
8. Penal Laws favorable to the accused
EXCEPTIONS TO THE EXCEPTIONS:
1. Ex post facto laws
2. Laws that impair obligation of contracts
Acts Contrary To Law
GENERAL RULE: Acts which are contrary to mandatory or prohibitory laws are void.
EXCEPTIONS:
1. When the law itself authorized its validity (ex. lotto, sweepstakes)
2. When the law makes the act only voidable and not void (ex. voidable contracts where consent is
vitiated)
3. When the law makes the act valid but punishes the violator (ex. marriage solemnized by a person
without legal authority)
Waiver of rights (Art. 6)

Requisites: (EKI)
1. Existence of a right
2. Knowledge of the existence of a right
3. Intention to relinquish the right
GENERAL RULE: Rights can be waived.

EXCEPTIONS:
1. If the waiver is contrary to law, public order, public policy, morals or good customs (LPPMG)
2. If the waiver is prejudicial to a third party with a right recognized by law.
NOTE: 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)
Laws applicable (Art. 15)

1. Penal laws and laws of public security
territoriality rule governs
laws of the Philippines will govern upon ALL those who live or sojourn in it
2. Laws relating to family rights and duties, or to the status, condition and legal capacity of persons
nationality rule applies
laws of the Philippines will govern its citizens, regardless of their residence
EXCEPTION: When a marriage between a Filipino citizen and a foreigner is validly celebrated and a
divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to remarry, the
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Filipino spouse shall likewise have the capacity to remarry under Philippine law. (Article 26(2) Family
Code)
NOTE: domiciliary rule supplants the nationality rule in cases involving stateless persons
3. Laws on property
lex rei sitae applies
real property, as well as personal property is subject to the law of the country where it is situated
4. Laws on forms and solemnities

lex loci celebrationis applies
Rules on Personal Law

DOMICILIARY RULE NATIONALITY RULE
Basis for determining personal law of an basis for determining personal law of an
individual is his domicile individual is his citizenship
LEX NATIONALII LEX REI SITAE LEX LOCI

CELEBRATIONIS
Art. 15, CC Art. 16, CC Art. 17, CC
Citizenship is the basis Law of the place where the Law of the place where the
for determining the property is situated is the contract was executed is the
personal law basis for determining law basis for determining law
applicable applicable applicable
Covers family rights & Covers both real & Covers only the forms &
duties, status, personal property solemnities (extrinsic validity)
condition & legal
capacity
Exception: Exceptions: Exceptions:
Art. 26, par. 2 of (CIAO) 1. Art. 26, par. 1 of Family
Family Code 1. Capacity to succeed Code (marriage involving
2. Intrinsic validity of the Filipinos solemnized abroad,
will when such are void in the
3. Amount of successional Philippines)
rights 2. Intrinsic validity of contracts
4. Order of succession
Renvoi Doctrine
Where the conflict rules of the forum refer to a foreign law, and the latter refers it back to the
internal law, the latter (law of the forum) shall apply.
NOTE: If the foreign law refers it to a third country, the said countrys laws shall govern, and is referred to
as the transmission theory.
Doctrine of Processual Presumption

The foreign law, whenever applicable, should be proved by the proponent thereof; otherwise, such
law shall be presumed to be exactly the same as the law of the forum.
Rule on Prohibitive Laws

GENERAL RULE: Prohibitive laws concerning persons, their acts or property and laws which have for
their object public order, public policy or good customs are not rendered
ineffective by laws, judgments promulgated or conventions agreed upon in foreign country.
EXCEPTION: Art. 26, par. 2 Family Code

Example: Divorce law
Human Relations
Every person must, in the exercise of his rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and good faith. (Art. 19 of NCC)
NOTE: The elements of an abuse of right under Art. 19 are:

1. There is a legal right;
2. Which is exercised in bad faith;
3. For the sole intent of prejudicing or injuring another. (Albenson Ent. Corp. vs. CA)
The SC in Velayo vs. Shell held the defendant liable under Art. 19 for disposing of its property (a
perfectly legal act) in order to escape the reach of a creditor. Likewise, in Globe Mackay Cable and Radio
Corp.
vs. CA, the employer corporation was held liable for damages for an abusive manner in dismissing an
employee, as well as for the inhuman treatment the latter got from them.
Every person who, contrary to law, willfully or negligently causes damage to another, shall
indemnify the latter for the same. (Art. 20 of NCC)
Any person who willfully causes loss or injury to another in a manner that is contrary to morals,
good customs or public policy shall compensate the latter for the damage. (ART. 21 of NCC)
NOTE: Art. 21 deals with acts contra bonus mores, and has the following elements:
1. There is an act which is legal;
2. But which is contrary to morals, customs, public order;
3. and it is done with intent to injure.
Arts. 19, 20 and 21 are related to each other and, under these articles, an act which
causes injury to another may be made the basis for an award of damages.
There is a common element under Arts. 19 and 21, and that is, the act must be done intentional. However,
Art. 20 does not distinguish, the act may be done either willfully or negligently. (Albenson Ent. Corp.
vs. CA)
The SC in Pe vs. Pe, applying Art. 21 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.
However, in Tanjanco vs. CA, the SC 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 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.
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)
Prejudicial Question
GENERAL RULE: If both criminal and civil cases are filed in court, the criminal case takes precedence.
EXCEPTION: When there is a prejudicial question or a question that arises in a case, the resolution of
which is a logical antecedent of the issue involved herein, and the cognizance of which pertains to
another tribunal.
Requisites (Sec. 7, Rule 111, Rules of Court)
a. Previously instituted civil action involves an issue similar or intimately related to the issue raised
in the subsequent criminal action, and
b. The resolution of such issue determines whether or not the criminal action may proceed
NOTE: The Civil Code has suppletory application in matters governed by special laws
PERSONS
CIVIL PERSONALITY - aptitude of being the subject, active or passive, of rights and obligations
JURIDICAL CAPACITY CAPACITY TO ACT

Fitness to be the subject of legal Power to do act with legal effects
relations
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Passive Active
Inherent Merely acquired
Lost only through death Lost through death and other causes
Can exist without capacity to act Cannot exist without juridical capacity
Cannot be limited or restricted Can be restricted, modified or limited

(by law or public policy such as
minority, bigamous marriage,
incesstuous marriage, et al
THEORIES ON CAPACITY TO ACT
THEORY OF GENERAL THEORY OF

CAPACITIES SPECIAL CAPACITIES
Applies to natural persons Applies to juridical persons
One has the ability to do all things This limits the power of juridical persons
with legal effects except only in only to those that are expressly conferred
those specific circum-stances where upon them or those which can be implied
the capacity to act is restrained therefrom or incidental thereto
Natural Persons
GENERAL RULE: Birth determines personality.

EXCEPTION: The law considers the conceived child as born for all purposes favorable to it if born
alive. Therefore, the child has a presumed personality, which has two characteristics:
1. limited; and
2. provisional/conditional (Quimiguing vs. Icao)
NOTES:
The presumption as to the childs personality applies only in cases beneficial to the child.
The concept of provisional personality CANNOT be invoked to obtain damages for and in behalf of an
aborted child. (Geluz vs. CA)
Life is not synonymous with civil personality. The acquisition of civil personality is not required befor a
person may be declared dead. Death is merely the cessation of life. (Continental Steel vs. Ortillano)
When is a Child Considered Born?

GENERAL RULE: For civil purposes, the fetus is considered born if it is alive at the time it is completely
delivered from the mothers womb.
EXCEPTION: If the fetus had an intrauterine life of less than 7 months, it is not deemed born if it dies
within 24 hours after its complete delivery from the maternal womb.
Presumption of survivorship
Two or more persons, called to succeed each other, shall be presumed to have died at the same
time, subject to the following conditions:
1. parties are heirs to one another
2. no proof as to who died first
3. with doubt as to who died first
NOTE: Article 43 applies when the parties are called to succeed each other. But if the parties are not called
to succeed each other, Rule 131, Sec. 3 (jj) of the Rules of Court applies. Both are to be applied only in the
absence of facts.
Juridical persons
WHO:
a. State and its political subdivisions
b. Corporations, institutions and entities for public purpose or interest
c. Corporations, partnership and associations for private interest
HOW CREATED: For (a) and (b), by the laws creating or recognizing them; private corporations are
governed by BP 68 and partnership and associations are governed by the provisions of this Code concerning
partnerships.
NOTE: 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)
Cessation of Civil Personality

1. If natural persons: by death
2. If juridical persons: by termination of existence
CITIZENSHIP AND DOMICILE
RESIDENCE DOMICILE
Used to indicate a PLACE OF ABODE, denotes a FIXED PERMANENT
whether permanent or temporary RESIDENCE, which when absent, one has the
intention of returning
There can be several places of residence There can only be ONE place of domicile
Elements of Domicile
a. Physical presence in a fixed place
b. Intention to remain permanently (animus manendi)
Kinds of Domicile
1. Domicile of origin - received by a person at birth.
2. Domicile of choice - the place freely chosen by a person sui juris.
3. Constructive domicile - assigned to a child by law at the time of his birth.
II.FAMILY CODE
took effect August 3, 1988
MARRIAGE
A special contract of permanent union between a man and a woman entered into in accordance with law
for the establishment of conjugal and family life. Its nature, consequences and incidents are fixed by
law and cannot be the subject of stipulation.
Essential requisites: (LC)

1. Legal capacity of the contracting parties, who must be a male and a female
2. Consent freely given in the presence of a solemnizing officer
Formal requisites: (ALM)

1. Authority of the solemnizing officer
2. Valid Marriage License
3. Marriage ceremony where the contracting parties appear before the solemnizing officer, with their
personal declaration that the take each other as husband and wife in the presence of not less than two
witnesses of legal age
Effects:
1. Absence of essential or formal requisites
the marriage is void ab initio
2. Defect in any of the essential requisites
The is marriage voidable
3. Irregularity in any of the formal requisites
Does NOT affect the validity of the marriage BUT will hold the party responsible for such
irregularity liable
Persons Authorized To Solemnize Marriages: (PMJCCC)

1. priests, rabbis, and ministers of any church
2. municipal and city mayors
3. members of the judiciary
4. ship captains or air plane chiefs (only in articulo mortis)
5. commanders of military unit, in the absence of chaplain (only in articulo mortis)
6. consul generals, consuls or vice-consuls
Note: Mayors may solemnize marriage per LGC
Authorized Venues Of Marriage

GENERAL RULE: Must be solemnized publicly, and not elsewhere, in the:
1. chambers of the judge or in open court
2. church, chapel or temple
3. office of consul-general, consul or vice-consul
EXCEPTIONS:
1. marriage at the point of death (articulo mortis);
2. marriage in remote places
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3. marriage at a house or place designated by the parties with the written request to the solemnizing
officer
Marriages Exempt From License Requirement: (MOLAR)

1. among Muslims or members of ethnic cultural communities, provided such were solemnized in
accordance with their customs, rites and practices
2. solemnized outside the Phil. where NO marriage license is required by the country where they were
solemnized
3. of a man and a woman who have lived together as husband and wife for at least 5 years and without
legal impediment to marry each other
NOTE: The 5-year period should be computed on the basis of a cohabitation as husband and wife
where the only missing factor is the marriage contract to validate the union. 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 (Ninal vs. Bayadog, GR No. 133778 March 14, 2000).
NOTE: In the case of Manzano vs. Sanchez (G.R. No. MTJ-00-1329, March 08, 2001), the Supreme
Court laid down the requisites to avail the exemption under Article 34 of the Family Code:
a. The man and woman must have been living together as husband and wife for at least five years
before the marriage;
b. The parties must have no legal impediment to marry each other;
c. The fact of absence of legal impediment between the parties must be present at the time of
marriage;
d. 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
e. 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
4. in articulo mortis
5. in remote places
NOTE: A marriage license is valid only for 120 days from date of issue, in any part of the Philippines.
Foreign Marriages
Validity of marriage:
GENERAL RULE: Where one or both parties to the marriage are citizens of the Philippines, the foreign
marriage is valid in this country if solemnized in accordance with the laws of the country of celebration.
EXCEPTIONS: Foreign marriages shall not be recognized in the Philippines if prohibited because:
(MABB-PIP)
1. contracted by a national who is below 18 years of age
2. bigamous or polygamous (except as provided for in Art. 41, FC)
3. contracted through mistake of one party as to the identity of the other
4. contracted following the annulment or declaration of nullity of a previous marriage but before
partition
5. void due to psychological incapacity
6. incestuous
7. void for reasons of public policy
Validity of divorce:
GENERAL RULE: A divorce validly obtained abroad by the alien spouse, capacitating him/her to remarry
can allow the Filipino to remarry.
EXCEPTION: The rule will not apply if the divorce was obtained by the Filipino spouse.
NOTE: A Filipino wife remains the lawful wife of the Filipino husband despite a decree of divorce obtained
abroad by the wife. However, if the wife is already a foreigner at the time of the divorce, she ceases to
be the lawful wife of the Filipino husband. This, notwithstanding, if at the time of the marriage the wife
was still a Filipino, and subsequently acquires citizenship of another country, thereby rendering her to have
the legal capacity to obtain a decree of divorce, the Filipino husband remains a spouse of the former. This
situation is not covered by Art. 26, par.2 which requires that, at the time of the marriage, one of the parties is
already an alien.
VOID MARRIAGES
A. Due to absence of any of the essential requisites: (BB-LAPIS)
1. contracted by any party below 18 years of age even with parental consent
2. solemnized by any person not legally authorized to perform marriages unless one or both of the parties
believed in good faith that the solemnizing officer had the legal authority to do so
3. solemnized without a license except as otherwise provided
4. bigamous or polygamous marriages
5. marriages contracted through mistake of one of the parties as to the identity of the other
6. subsequent marriages that are void under Article 53 (subsequent marriages without liquidation of the
CPG/ACP of former marriage and partition) of the Family Code
7. contracted by a party who at the time of the marriage was psychologically incapacitated
B. Incestuous marriages, whether the relationship be legitimate or illegitimate (Article 37):

1. between ascendants & descendants of any degree

2. between brothers & sisters whether full or half-blood
C. Those contrary to public policy (Article 38): (SCAPS-SAKA)

1. between collateral blood relatives whether legitimate or illegitimate up to the 4th civil degree
2. between step-parents & step children
3. between parents-in-law & children-in-law
4. between the adopting parent & the adopted child
5. between the surviving spouse of the adopting parent & the adopted child
6. between the surviving spouse of the adopted child & the adopter
7. between an adopted child & a legitimate child of the adopter
8. between the adopted children of the same adopter
9. between parties where one, with the intention to marry the other, killed the latters spouse, or his/her
spouse.
NOTE: Under the FC, the following can now marry each other:
a.Brother-in-law and sister-in-law;
b. Stepbrother and stepsister;
c.Guardian and ward;
d. Adopted and illegitimate child of the adopter;
e. Parties who have been convicted of adultery or concubinage.
D. Void subsequent marriages

1. without judicial declaration of nullity of previous void marriage (Article 40)
2. without judicial declaration of presumptive death of absent spouse (Article 41)
3. where the spouse was presumed dead, and both the present spouse and would-be spouse were in bad
faith in contracting marriage (Article 44)
NOTE: Where there was failure to record in the civil registry and registry of property the judgment of
annulment or of absolute nullity of the marriage, partition and distribution of the property of the spouses and
the delivery of the childrens presumptive legitimes it shall not affect third persons (Articles 52-53).
NOTE: Even if a marriage is void, it must be declared void first because the parties cannot decide for
themselves the invalidity of their marriage.
VOID VOIDABLE
Decree of nullity Decree of annulment
Never be ratified Ratified by free cohabitation
Attacked directly or collaterally Attacked directly only
Co-ownership Conjugal Partnership
Always void Valid until annulled
Action for declaration of nullity does not Action prescribes
prescribe
Psychological Incapacity
no exact definition but is restricted to psychological incapacity to comply with the essential marital
obligations of marriage
involves a senseless, protracted and constant refusal to comply with the essential marital obligations by
one or both of the spouses although he, she or they are physically capable of performing such
obligations (Chi Ming Tsoi vs. CA)
Essential elements: (MAVFFCCI)

a. Mental condition
b. Applies to a person who is maritally contracted to another
c. Marriage entered into with volition
d. Failure to perform or comply with the essential obligations in marriage
e. Failure to perform is chronic
f. Cause is psychological in nature
g. Cause is serious, with juridical antecedence and must be incurable
h. Incapacity results in the failure of the marriage.
JURISPRUDENTIAL GUIDELINES: (Republic vs. Molina)

1. burden of proof belongs to the plaintiff
2. root cause of the psychological incapacity must be:
a. medically or clinically identified
b. alleged in the complaint
c. sufficiently proven by experts
d. explained in the decision
3. incapacity must be existing at the time of the celebration of marriage (juridical antecedence)
4. incapacity must be permanent or incurable
5. illness is grave enough to bring about disability to assume marital obligations
6. marital obligations refer to Art. 68-71 of FC as well as Art. 220,221 and 225 of the FC
7. interpretations of the National Appellate Matrimonial Tribunal of the Catholic Church of the Philippines
while not controlling should be given great respect.
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8. trial court must order the prosecuting attorney or fiscal and the Solicitor General to appear for the state.
JUDICIAL OF DECLARATION OF NULLITY

The absolute nullity of a previous marriage may be invoked for purposes of remarriage on the basis
solely of a final judgment declaring such previous marriage void.
NOTES:
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)
In a case for concubinage, the accused need not present a final judgment declaring his marriage
void for he can adduce evidence in the criminal case of the nullity of his marriage other than proof of a
final judgment declaring his marriage void. Hence, the pendency of the civil action for nullity of
marriage does not pose a prejudicial question in a criminal case for concubinage.
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)
BIGAMOUS MARRIAGES
GENERAL RULE: A marriage contracted by any person during the subsistence of a previous valid
marriage shall be null and void.(Gomez vs. Lipana)
EXCEPTIONS: When the following conditions concur, the subsequent bigamous marriage shall
be valid:
1. absence of the other spouse must have been for four consecutive years, or two years where there
was danger of death
2. well-founded belief of the present spouse that absent spouse was already dead
3. judicial declaration of presumptive death
EFFECTS OF TERMINATION OF SUBSEQUENT MARRIAGE: (ICADI)

1. Children of the subsequent marriage conceived prior to its termination shall be considered legitimate;
2. The absolute community or conjugal partnership shall be dissolved and liquidated. If either spouse
acted in bad faith, his/her share in the net profits shall be forfeited:
a. in favor of the common children;
b. if none, in favor of the children of the guilty spouse by previous marriage; or
c. in default of children, in favor of the innocent spouse;
3. Donations by reason of the marriage remain valid except if the donee contracted the marriage in bad
faith;
4. The innocent spouse may revoke the designation of the spouse in bad faith as the beneficiary in any
insurance policy; and
5. The spouse who contracted the subsequent marriage in bad faith shall be disqualified to inherit from the
innocent spouse by testate or intestate succession.
NOTE: The above effects apply in voidable bigamous marriages. Except for (1), the above effects also
apply to marriages which are annulled or declared void ab initio under Art. 40 of the Code.
DECLARATION OF PRESUMPTIVE DEATH

Requisites: (MR-BF)
1. That the absentee spouse has been missing for 4 consecutive years or 2 consecutive years if the
disappearance occurred where there is danger of death under circumstances laid down in Art.391 of the
NCC
2. The present spouse wishes to remarry;
3. The present spouse has well-founded belief that the absentee is Dead;
4. The present spouse files a summary proceeding for the declaration of presumptive death. NOTE: NO
NEED FOR THE DECLARATION OF PRESUMTPIVE DEATH IF SPOUSE IS ABSENT FOR
7 OR MORE CONSECUTIVE YEARS.
NOTE: The present spouse must establish that he had a well-founded belief required by law that his absent
wife was already dead that would sustain the issuance of a court order declaring presumptive death. In the
case of RP vs. Nolasco, The SC believed that respondent Nolasco failed to conduct a search for his missing
wife with such diligence as to give rise to a well-founded belief that she is dead. When he arrived in San
Jose, Antique after learning of his wifes departure, instead of seeking the help of local authorities or of the
British embassy, he secured another seamans contract and went to London, a vast city of many millions of
inhabitants, to look for her there. (RP vs. Nolasco)
Effect of Reappearance of Absent Spouse:

GENERAL RULE: The subsequent bigamous marriage under Article 41 remains valid despite
reappearance of the absentee spouse.
EXCEPTION: If the reappearance was made in a sworn statement recorded in the civil registry, the
subsequent marriage is automatically terminated.
EXCEPTION TO THE EXCEPTION: If there was a previous judgment annulling or declaring the first
marriage a nullity, the subsequent bigamous marriage remains valid.
VOIDABLE MARRIAGES
Grounds: (UP-FAVS)
1. Age of the party in whose behalf it is sought to have the marriage annulled was 18 years of age or over
but below 21, and the marriage was solemnized without the consent of the parents, guardian or person
exercising substitute parental authority over the party, in that order, and both lived together as husband
and wife;
2. Unsound mind of either party
3. Fraudulent means of obtaining consent of either party
4. Vitiated consent of either party through force, intimidation or undue influence
5. Physical incapability of either party to consummate the marriage with the other, and such incapacity
continues and appears to be incurable
6. Sexually-transmissible disease of either party found to be serious and appears to be incurable
NOTE: Mode of ratification for Nos. 1-4 is COHABITATION. In Nos. 5 & 6, there is no ratification to speak
of since the defect is permanent. The latter can be convalidated only by prescription, i.e. 5 years from the
date of marriage. Specifically, in no.5, the healthy spouse may still annul the marriage within 5yrs. after
celebration.
Circumstances amounting to Fraud under Article 46: (SPND)

1. Non-disclosure of a previous conviction by final judgment of the other party of a crime involving moral
turpitude;
2. Concealment by the wife of the fact that at the time of the marriage, she was Pregnant by a man other
than her husband;
3. Concealment of a Sexually transmissible disease, regardless of its nature, existing at the time of the
marriage; and
4. Concealment of Drug addiction, habitual alcoholism, homosexuality or lesbianism existing at the time
of the marriage.
NOTES:
Misrepresentation as to character, health, rank, fortune or chastity is not a ground for annulment.
The enumeration in Article 46 is EXCLUSIVE. (Anaya vs. Palaroan)
Ground (F2I2NS) Persons Who May Sue Prescriptive Period

1.Force, Injured party w/in 5 years from the time the force,
intimidation, or intimidation, or undue influence ceased
undue influence
2. Fraud Injured party w/in 5 years from the dis-covery of fraud
3. Impotence Injured party w/in 5 years after the celebration of the
marriage
4. Insanity (a) sane spouse who has no (a) anytime before the death of either party
knowledge of the insanity (b) anytime before the death of either party
(b) relatives, guardians or (c) during lucid interval or after regaining
persons ha-ving legal sanity
charge of the insane
(c) insane spouse
5. Non- consent (a) parent/ legal guardian (a) anytime before the no consent party
having charge of the no- reaches 21
consent party (b) w/in 5 years after reaching 21
(b) no consent party
6. STD Injured party w/in 5 years after the celebration of the
marriage
NOTE: In Nos. 1, 2, 4, and 5, when cohabitation takes place after the defect ceases to exist, the prescriptive
period is rendered moot and academic. Whichever comes first may convalidate the marriage: Cohabitation
or Prescription.
Requisites for annulment due to Impotence under Art.45(5) (CUPIN)

a.Impotence exists at the time of the celebration of the marriage
b. The impotence is permanent
c. incurable
d. The impotence is unknown to the other spouse
e.The other spouse must not also be impotent
Doctrine of Triennial Cohabitation

presumption that the husband is impotent should the wife still remain a virgin after 3 years of living
together with her husband.
Requisites for annulment due to Disease under Article 45(6) (ICSIIF)

1. Either party is inflicted with a sexually transmissible disease (STD)
Page 9 of 193
ADDITIONAL REQUIREMENTS FOR ANNULMENT OR DECLARATION OF NULLITY

1. Prosecuting attorney or fiscal should:
a. Take steps to prevent collusion between the parties
b. Take care that evidence is not fabricated or suppressed
2. The following must be accomplished:
a. Partition and distribution of the properties of the spouses
b. Delivery of the childrens presumptive legitimes
c. Recording of the judgment of annulment or absolute nullity.
NOTES:
There will be collusion only if the parties had arranged to make it appear that a ground existed or had
been committed although it was not, or if the parties had connived to bring about a matrimonial case
even in the absence of grounds therefore. (Ocampo vs. Florenciano)
A grant of annulment of marriage or legal separation by default is fraught with danger of collusion. 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.
However, petitioners vehement opposition to the annulment proceedings negates the conclusion
that collusion existed between the parties. Under these circumstances, the non-intervention of a
prosecuting attorney to assure lack of collusion between the contending parties is not fatal to the validity
of the proceedings in the trial court. (Tuason vs. CA, GR 116607, April 10, 1996)
RULE ON DECLARATION OF ABSOLUTE NULLITY OF VOID MARRIAGES AND

ANNULMENT OF VOIDABLE MARRIAGES (A.M. 00-11-01-SC)
took effect on March 15, 2003
this Rule shall govern petitions for declaration of absolute nullity of void marriages and annulment of
voidable marriages under the Family Code of the Philippines.
the Rules of Court has suppletory application
for a more comprehensive discussion on the procedural aspects of the Rule, please refer to the
Remedial Law Memory Aid.
LEGAL SEPARATION
Grounds: (SAMBA-LIPAD)
1. repeated physical violence or grossly abusive conduct directed against the petitioner, a common child,
or a child of the petitioner
2. attempt of the respondent to corrupt or induce the petitioner, a common child, or a child of the
petitioner, to engage in prostitution, or connivance in such corruption or inducement
3. attempt by the respondent against the life of the petitioner
4. final judgment sentencing the respondent to imprisonment of more than 6 years even if pardoned
5. drug addiction or habitual alcoholism of the respondent
6. lesbianism or homosexuality of the respondent
7. abandonment of the petitioner by the respondent without justifiable cause for more than 1 year
8. physical violence or moral pressure to compel petitioner to change religious or political affiliation
9. contracting by respondent of a subsequent bigamous marriage; and
10. sexual infidelity or perversion.
NOTES:
Cooling-off Period 6 months period designed to give the parties enough time to further contemplate
their positions with the end in view of attaining reconciliation between them.
The enumeration in Article 55 regarding legal separation is EXCLUSIVE. (Lacson vs. San Jose-Lacson)
Grounds for denial of petition:

(CCCC-MP-DR)
a. Condonation -NOTE: failure of the husband to look for his adulterous wife is NOT condonation to
wife's adultery. (Ocampo vs. Florenciano)
b. Consent
c. Connivance
d. Collusion
e. Mutual Guilt
f. Prescription
g. Death of either party during the pendency of the case (Lapuz-Sy vs. Eufemio)
h. Reconciliation of the spouses during the pendency of the case
Effects of filing petition:

a. The spouses shall be entitled to live separately from each other.
b. The husband shall have no more right to have sexual intercourse with his wife.
c. In the absence of an agreement between the parties, the court shall designate the husband, the wife, or a
3rd person to manage the absolute community or conjugal partnership property.
Effects of decree of legal separation:

a. The spouses shall be entitled to live separately from each other but the marriage bond is not severed.
b. The absolute community or conjugal partnership shall be dissolved and liquidated.
c. The custody of the minor children shall be awarded to the innocent spouse subject to the provisions of
Art. 213 of the Code.
d. The offending spouse shall be disqualified from inheriting from the innocent spouse by intestate
succession and the provisions in favor of the offending spouse made in the will of the innocent spouse
shall be revoked by operation of law.
e. The innocent spouse may revoke the donations made by him/her in favor of the offending spouse, as
well as the designation of the latter as beneficiary in any insurance policy, even if the designation be
irrevocable.
Effects of Reconciliation of the Spouses:

a. The legal separation proceedings, if still pending, shall thereby be terminated at whatever stage.
b. The final decree of legal separation shall be set aside, but the separation of property and any forfeiture
of share of the guilty spouse already effected shall subsist, unless the spouses agree to revive their
former property regime.
RULE ON LEGAL SEPARATION
(A.M. 02-11-11-SC)
took effect on March 15, 2003
this Rule shall govern petitions for legal separation under the Family Code in the Philippines; the Rules
of Court shall apply suppletorily
please refer to the Remedial Law Memory Aid for the procedural provisions of the Rule
MARITAL RIGHTS AND OBLIGATIONS

(JL-FORM)
1. live together
2. observe mutual love, respect & fidelity
3. render mutual help & support
4. fix the family domicile
5. joint responsibility for the support of the family
6. management of the household
Exercise of Profession
GENERAL RULE: Husband & wife can engage in any lawful enterprise or profession without the
consent of the other.
EXCEPTION: Upon objection of the other spouse only on valid, serious and moral grounds, may the
formers consent be necessary.
Property Relations Between Husband & Wife

Governed by:
1. marriage settlements executed before the marriage or antenuptial agreements
2. provisions of the Family Code
3. local customs (when spouses repudiate absolute community)
MARRIAGE SETTLEMENTS
It is a contract entered into by the future spouses fixing the matrimonial property regime that should
govern during the existence.
Requisites:
1. made before celebration of marriage
2. in writing (even modifications)
3. signed by the parties
4. not prejudice third persons unless registered in the civil registry
5. to fix terms and conditions of their property relations
6. additional signatories
a. 18-21: parents
b. civil interdictees & disabled: guardian
Not applicable when:

1. both spouses are aliens, even if married in the Philippines
2. as to extrinsic validity of contracts
3. contrary stipulation
DONATIONS BY REASON OF MARRIAGE

Requisites: (COBB)
1. made before celebration of marriage
2. in consideration of marriage
3. in favor of one or both future spouses
BASES DONATIONS ORDINARY DONATIONS

PROPTER
NUPTIAS
Page 11 of 193
Formalities Governed by the rules on ordinary Governed by rules on donations

donations except that if future (Arts. 725-773, NCC)
property is donated, it must conform
with formalities of wills
Present May be donated but up to 1/5 of No limit except that donor shall leave
Property donors present property property enough for his support
Future May be included provided donation is Cannot be included
property mortis causa
Grounds forArt. 86, FC Arts. 760, 764, & 765, NCC
revocation
Rule on Donation Between Spouses During Marriage

GENERAL RULE: VOID, either direct or indirect donation
EXCEPTIONS:
1. moderate gifts on occasions of family celebrations
2. donations mortis causa
NOTE: This rule also applies to common-law spouses. (Article 87, Family Code)
Grounds for Revocation (VIRAL-CN)

1. marriage Not celebrated or declared Void ab initio except those made in marriage settlements
2. marriage without parental Consent
3. marriage is Annulled and donee is in bad faith
4. upon Legal separation, the donee being the guilty spouse
5. complied Resolutory condition
6. donee commits acts of Ingratitude
SYSTEM OF ABSOLUTE COMMUNITY (AC)

The property regime of the spouses in the absence of a marriage settlement or when the marriage is
void. This is so because it is more in keeping with Filipino culture.
GENERAL RULE: Community property shall consist of all property owned by the spouses at the time of
the marriage or acquired thereafter.
EXCEPTIONS: (BEG)
1. property acquired before the marriage by either spouse who has legitimate descendants by a former
marriage
2. property for personal and exclusive use except jewelry
3. property acquired during the marriage by gratuitous title, except when the donor, testator or grantor
expressly provides otherwise
NOTE: No waiver of rights allowed during the marriage except in case of judicial separation of property.
The waiver must be in a public instrument.
Administration of the community property

GENERAL RULE: It shall belong to both spouses jointly.
EXCEPTIONS:
1. In case of disagreement, husbands decision shall prevail.
2. In case one spouse is incapacitated or unable to participate in the administration of the common
properties, other spouse may assume sole powers.
NOTE: These powers do not include:
a. Disposition
b. encumbrance
NOTE: Any alienation or encumbrance is void if without the written consent of the other spouse
Rule on Game of Chance

LOSS: Shall be borne by the loser-spouse and shall not be charged to the community property
WINNINGS: Shall form part of the community property
Steps in Liquidation of AC: (IP-DDP)

1. Inventory
a. Inventory of Community Property
b. Inventory of separate property of the wife
c. Inventory of separate property of the husband
2. Payment of Community Debts
First, pay out of community assets, if not enough, husband and wife are solidarily liable
3. Delivery to each spouse his/her separate property if any
4. Division of the net community assets
5. Delivery of presumptive legitimes, if any, to the children
CONJUGAL PARTNERSHIP OF GAINS (CP)

It is that formed by a husband and wife whereby they place in a common fund the fruits of their separate
property, and the income from their work or industry, the same to be divided between them equally (as a
general rule) upon the dissolution of the marriage or the partnership.
Conjugal Partnership Property: (LC2 FONT)

1. obtained from labor, industry, work or profession
2. acquired by chance
3. acquired during the marriage with conjugal funds
4. fruits of the conjugal property
5. acquired through occupation
6. net fruits of their exclusive property
7. share of either spouse in hidden treasure
Exclusive Property Of Each Spouse: (OGRE)

1. that which is brought to the marriage as his/her own
2. acquired during the marriage by gratuitous title
3. acquired by right of redemption, barter or exchange with property belonging to either spouse
4. purchased with exclusive money of either spouse
Rules In Cases Of Improvement Of Exclusive Property

1. Reverse Accession if the cost of the improvement and the plus value is more than the value of the
principal property at the time of the improvement, the property becomes conjugal
2. Accession if the cost of the improvement of the plus value is equal to or less than the value of the
principal property at the time of the improvement, the entire property becomes the exclusive property of
the spouse.
NOTE: SUBJECT TO REIMBURSEMENT.
Steps In Liquidation Of CP: (DIRDO-DIP)

1. Inventory of the Conjugal Partnership of Gains assets
2. Restitution of advances made to each spouse
3. Payment of debts to each spouse
4. Payment of obligations to third parties
5. Delivery of exclusive properties
6. Payment of losses and deterioration of movables belonging to each spouse
7. Delivery of presumptive legitimes
8. Division of the net conjugal partnership properties
NOTE: Property bought on installments paid partly from exclusive funds of the spouses and partly form
conjugal funds:
a. If full ownership was vested before the marriage it shall belong to the buyer-spouse
b. If full ownership was vested during the marriage - it shall belong to the conjugal partnership
Charges Upon and Obligations Of AC and CP:

1. Support for family except for illegitimate children of either spouse;
2. Debts and obligations which must have been contracted:
a. by administrator-spouse for the benefit of the family;
b. by both spouses; or
c. by one spouse with the consent of the other;
3. Debts and obligations without marital consent provided the family was benefited;
4. All taxes, liens, charges and expenses including major or minor repairs upon the community or conjugal
property;
NOTE: However, in conjugal partnership, actual use need not be proved because it is presumed.
5. All taxes and expenses for mere preservation made during the marriage upon the exclusive property of
either spouse used by the family;
6. Expenses for education or self-improvement of either spouse;
7. Ante-nuptial debts of either spouse insofar as they have redounded to the benefit of the family;
8. The value of what is donated or promised by both spouses in favor of their common legitimate children
for education or self-improvement; and
9. Expenses of litigation between spouses unless found to be groundless.
NOTES:
The separate properties shall be solidarily and subsidiarily liable for the obligations if the community or
conjugal properties are insufficient.
The absolute community property shall also be liable for ante-nuptial debts mentioned above, support of
illegitimate children, and liabilities incurred by either spouse by reason of a crime or quasi-delict in case
of insolvency of the exclusive property of the debtor-spouse. Payment of which shall be advanced by
the absolute community property, subject to deduction from the share of the debtor-spouse.
The conjugal partnership property shall likewise be liable for the payment of the personal debts of either
spouse insofar as they have redounded to the benefit of the family.
Indirect benefits that might accrue to a husband in his signing a surety or guarantee agreement not in
favor of the family but in favor of his employer corporation are not the benefits that can be considered
as giving a direct advantage accruing to the family. Hence, the creditors cannot go against the conjugal
partnership property of the husband in satisfying the obligation subject of the surety agreement. A
contrary view would put in peril the conjugal partnership property by allowing it to be given
gratuitously as in cases of donation of conjugal partnership property, which is prohibited. (Ayala
Investment Corp. vs. CA)
Page 13 of 193
Grounds For Termination Of Absolute Community And Conjugal Partnership: (LADS)

1. decree of legal separation
2. annulment or declaration of nullity of marriage
3. death of either spouses
4. judicial separation of property
REGIME OF SEPARATION OF PROPERTY

Causes: (CLAAPS)
a. petitioners spouse has been sentenced with a penalty which carries with it civil interdiction;
b. loss of parental authority of the petitioners spouse as decreed by the court;
c. petitioners spouse has been judicially declared an absentee;
d. abandonment by the petitioners spouse and failure to comply with the obligations to the family;
e. spouse granted power of administration in marriage settlement abused such power; and
f. at the time of the petition, spouses are separated in fact for at least 1 year and the possibility for
reconciliation is highly improbable.
NOTE: The spouses contribute to the family expenses proportionately with their income and the value of
their properties. However, the liability of the spouses to the creditors for family expenses is solidary.
PROPERTY REGIME OF UNIONS WITHOUT MARRIAGE

Art. 147 Art. 148
Applicability 1. Without legal 1. With legal impediment to marry
impediment to marry 2. Adulterous relationships
2. Void marriages due to 3. Bigamous or polygamous marriages
absence of formal 4. Incestuous void marriages under Art. 37
requisite 5. Void marriages by reason of public policy under
Art. 38
Salaries & Owned in equal shares Separately owned by the parties
Wages
Property Belongs to such party Belongs to such party
Acquired provided there is proof
Exclusively by that he/she acquired it by
Either Party exclusive funds
Property Governed by the rules Owned by them in common in proportion to their

Acquired by on co-ownership respective contributions
Both Parties
Presump-tion Presumption of joint No presumption of joint acquisition. When there is
(prima facie) acquisition and equal evidence of joint acquisition but none as to the
sharing as to property extent of actual contribution, there is a
acquired while they live presumption of equal sharing.
together.
Forfeiture When only one of the If one of the parties is validly married to another,
parties is in good faith, his/her share in the co-ownership shall accrue to
the share of the party in the absolute community or conjugal partnership
bad faith in the co- existing in such valid marriage.
ownership shall be If the party who acted in
forfeited:
a. in favor of their
common children; or
b. in default of or in
case
of waiver by any or all of bad faith is not validly married to another or if
the common children or both parties are in bad faith, such share shall be
their descendants, in forfeited in the manner provided in the last
favor of the innocent paragraph of Article 147.
party.
NOTE: Under Art. 148, 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 proportion to their respective
contributions. It must be stressed that actual contribution is required by this provision, in contrast to Art.
147 which state that efforts in the care and maintenance of the family and household, are regarded as
contributions to the acquisition of common property by one who has no salary or income or work or
industry. If the actual contribution of the party is not proved, there will be no co-ownership and no
presumption of equal shares. (Agapay vs. Palang). Hence, mere cohabitation without proof of contribution
will not result in a co-ownership. (Tumlos vs. Fernandez).
THE FAMILY
Basic social institution which public policy cherishes and protect hence, no suit between members of the
family shall prosper unless the compromise between the parties have failed
FAMILY RELATIONS INCLUDE:

1. between husband and wife

2. between parents and children
3. among ascendants and descendants
4. among brothers and sisters whether full or half-blood
FAMILY HOME
GENERAL RULE: The family home is exempt from execution, forced sale or attachment.
EXCEPTIONS: (PLMN)
1. debts incurred prior to constitution
2. debts due to laborers, mechanics, architects, builders, material men and others who have rendered
service or furnished materials for the construction of the building
3. debts secured by mortgages
4. non-payment of taxes
Guidelines:
1. deemed constituted from time of actual occupation as a family residence
2. must be owned by person constituting it
3. must be permanent
4. rule applies to valid and voidable and even to common-law spouses under Articles 147 and 148
5. continues despite death of one or more spouses or unmarried head of the family for 10 years, or as long
as a minor beneficiary lives
6. can constitute one (1) family home only
PATERNITY AND FILIATION
Rule on Children Conceived as a Result of Artificial Insemination

Status is legitimate child, provided both husband and wife authorized or ratified the insemination in a
written instrument which they executed and signed before the birth of the child
Legitimate Children
GENERAL RULE: Only those who are conceived or born during a valid marriage
EXCEPTIONS: (CAVALAC)
Those children who are
1. Conceived as a result of artificial insemination
2. Born of a voidable marriage before decree of annulment
3. Conceived or born before judgment of annulment or absolute nullity under Art. 36 has become final
& executory
4. Conceived or born of subsequent marriage under Art. 53
5. Of mothers who may have declared against its legitimacy or was sentenced as an adultress
6. Legally adopted
7. Legitimated, conceived and born outside of wedlock of parents without impediment at the time of
conception and had subsequently married
Illegitimate Children
GENERAL RULE: Those conceived and born outside a valid marriage are illegitimate.
EXCEPTIONS: Children who are:
1. born of marriages which are void ab initio such as bigamous and incestuous marriages and
marriage was declared void for being contrary to law and public policy
2. of voidable marriages born after the decree of annulment
Rules on Impugning Legitimacy

A. Grounds (PBA)
1. physical impossibility of the husband to have sexual intercourse with his wife within the 1 st 120 days of
the 300 days immediately preceding the childs birth, due to:
a. physical incapacity of the husband;
b. husband and the wife were living separately; or
c. serious illness of the husband which absolutely prevented sexual intercourse
2. biological or scientific proof that the child could not have been that of the husband; and
3. written authorization or ratification of either parent for artificial insemination was obtained through
mistake, fraud, violence, intimidation or undue influence.
B. Prescriptive periods
1. one year, from knowledge of birth or recording in the civil register, if husband or heirs lives in the
SAME city/municipality
2. two years, if resides in the Phils.
3. three years, if abroad
C. Parties
GENERAL RULE: Only the husband may impugn
EXCEPTION: The heirs, if the husband dies before the end of the prescription of the action, or after filing
complaint, or child was born after death
Page 15 of 193
NOTE: The question of legitimacy cannot be collaterally attacked, it can be impugned only in a direct
action.
Rule on the Status of Children born after 300 days following Termination of Marriage
A. Requisites (TS-WBN)
1. first marriage terminated
2. mother contracted subsequent marriage
3. subsequent marriage was contracted within 300 days after termination of previous marriage
4. child was born
5. no evidence as to status of child
B. Rules as to whom the child belongs

1. to first marriage, if child was born before the lapse of 180 days after celebration of 2 nd marriage
provided born within 300 days after termination of the 1st marriage.
2. to second marriage, if child was born after 180 days following celebration of 2 nd marriage whether born
within 300 days after termination of 1st marriage or afterwards.
Proof of Filiation
GENERAL RULE: Filiation of legitimate (or illegitimate) children is established by any of the following:
1. The record of birth appearing in the civil registrar or a final judgment
2. An admission of legitimate (or illegitimate) filiation in a public document or a private handwritten
instrument and signed by the parent concerned.
EXCEPTION: In the absence of any of the foregoing evidence, such legitimate or illegitimate filiation
shall be proved by:
1. Open and continuous possession of the status of a legitimate or illegitimate child;
2. Any other means allowed by the Rules of Court and special laws.
NOTES:
Continuous does not mean that the concession of status shall continue forever but only that it shall not
be of an intermittent character while it is continuous. 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 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). 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.
In view of the fact that filiation may be proved by any means allowed by the Rules of Court and
special laws this may consist of baptismal certificate, a judicial admission, a family bible in which his
name has been entered, common reputation respecting his pedigree, admission by silence, the testimony
of witnesses and such other kinds of proof admissible under Rule 130 of RC. (Mendoza vs. CA) For a
baptismal certificate to be proof of filiation under the Rules of Court, it must be shown that the father
therein participated in the preparation of the same. A birth certificate not signed by the alleged father
indicated in said certificate is not competent evidence of paternity. (Fernandez vs. CA)
Proof of filiation of petitioners to the late Enrique Baluyut is not sufficient to confer upon them any
hereditary right in the estate of the deceased. What is necessary to be established by an illegitimate not
natural child in order that he may be entitled to successional rights under Art 887 of NCC, is not the fact
of his bare filiation but a filiation acknowledged by the putative parent.(Baluyut vs. Baluyut)
Rights of the Children

LEGITIMATE ILLEGITIMATE
Use of father & mothers surname Use of mothers surname
NOTE: However, RA 9255 amended Article
176, FC
Receive support from parents Receive support according to FC
Entitled to the legitime & other Legitime is of the legitime of a legitimate
successional rights child
R.A. No. 9255

An Act Allowing Illegitimate Children to use the surname of their Father, amending for the purpose
Article 176 of EO No. 209, otherwise known as the "FAMILY CODE OF THE PHILIPPINES":
Approved February 24, 2004
Illegitimate children may use the surname of their father if:

1. their filiation has been expressly recognized by the father through the record of birth appearing in the
civil register, or
2. when an admission in a public document or private handwritten instrument is made by the father
LEGITIMATION
Requisites: (NIM)
a. The child is illegitimate
b. The parents at the time of the childs conception are not disqualified from marrying each other
c. There is a valid marriage subsequent to the childs birth
ADOPTION
A. Domestic Adoption Act of 1998
(R.A. NO. 8552)
Who may adopt: (LPG-CANE)

1. Filipino Citizen:
a. of legal age
b. in a position to support and care for his/her children in keeping with the means of the family
c. good moral character
d. in possession of full civil capacity or legal rights
e. at least 16 years older than the adoptee, except when:
1) adopter is the biological parent of the adoptee
2) adopter is the spouse of the adoptees parent
f. has not been convicted of any crime involving moral turpitude
g. emotionally and psychologically capable of caring for children
2. Alien:
a. same qualifications as a Filipino
b. country has diplomatic relations with the Phil.
c. has been living in the Phil. for at least three (3) continuous years prior to the application for
adoption and maintains such residence until the adoption decree is entered, except when
1) former Filipino citizen who seeks to adopt a relative within the 4 th degree of consanguinity
or affinity
2) one who seeks to adopt the legitimate or illegitimate child of his/her Filipino spouse
3) one who is married to a Filipino citizen and seeks to adopt jointly with his/her spouse a
relative within the 4th degree of consanguinity or affinity of the Filipino spouse
d. certified to have legal capacity to adopt by his/her diplomatic or consular office
e. certified by said office that his government allows the adoptee to enter his/her country as
his/her adopted child
3. Guardian with respect to the ward after termination of the guardianship and clearance of his/her
financial accountabilities
Pre-Adoption Services
the DSWD shall provide for the following services:
a. counselling services for the biological parents, prospective adoptive parents and prospective
adoptee
b. exhaust all efforts to locate the biological parents, if unkown
Rule on Adoption by Spouses

GENERAL RULE: The husband and the wife shall JOINTLY adopt.
EXCEPTIONS:
1. one spouse seeks to adopt the legitimate child of the other
2. one spouse seeks to adopt his/her own illegitimate child
3. the spouses are legally separated
Who may be adopted:

1. any person below 18 years of age who has been voluntarily committed to the DSWD under P.D. 603 or
judicially declared available for adoption
2. legitimate stepchild
3. illegitimate stepchild
4. qualified adult, who, prior to the adoption, has been consistently considered by the adopter as his/her
own child since minority;
5. child whose adoption has been previously rescinded
6. child whose biological or adoptive parents have died, provided that no proceedings shall be initiated
within 6 months from the time of death of said parents
Consent in Adoption (BAILAS)

The WRITTEN CONSENT to the adoption is required in the following cases:
1. the adoptee, if 10 years of age or over
2. biological parents or government instrumentality
3. the legitimate/adopted children, 10 years old or over, of the adopter and adoptee
4. the illegitimate children, 10 years old or over, of the adopter if living with the adopter and the latter's
spouse
5. spouse of the adopter and adoptee
Page 17 of 193
Effectivity of Decree of Adoption
a decree of adoption shall be effective as of the date the original petition was filed. It applies also in
case the petitioner(s) dies before the issuance of the decree of adoption to protect the interest of the adoptee.
NOTE: 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)
Effects of Adoption: (SAL)

1. Severance of legal ties between the biological parents and the adoptee and the same shall be vested in
the adopters.
EXCEPTION: if the biological parent is the spouse of the adopter
2. Adoptee shall be considered as a legitimate child of the adopter(s) for all intents and purposes.
3. In legal or intestate succession, the adoptee and the adopter(s) shall have reciprocal rights of succession
without distinction from legitimate filiation. However, if there is a will, the rules on testamentary
succession shall be followed.
Rescission of Adoption
Grounds: (ASAR)
1. attempt on the life of the adoptee
2. sexual assault or violence
3. abandonment and failure to comply with parental obligations
4. repeated physical or verbal maltreatment by the adopter
NOTES:
Only the adoptee is given the right to rescind the decree of adoption
The adopter can NOT rescind the decree of the adoption but he or she may disinherit the adoptee.
Effects:
a.Parental authority of adoptees biological parents or legal custody of DSWD shall be restored if adoptee is
still a minor or incapacitated.
b. Reciprocal rights and obligations of the adopter(s) and the adoptee to each other shall be extinguished.
c.The amended certificate of birth of the adoptee shall be cancelled and its original shall be restored.
d. Succession rights shall revert to its status prior to the adoption, but vested rights shall not be affected.
B. Inter-Country Adoption Act of 1995 (R.A. No. 8043)
Inter-Country Adoption
The socio-legal process of adopting a Filipino child by a foreigner or a Filipino citizen permanently
residing abroad where the petition is filed, the supervised trial custody is undertaken, and the decree of
adoption is issued outside the Philippines.
Who may be adopted:

a. Only a legally-free child may be the subject of inter-country adoption
NOTE: Legally-free Child - a child who has been voluntarily or involuntarily committed to the DSWD of
the Philippines, in accordance with the Child Youth and Welfare Code.
b. No child shall be matched to a foreign adoptive family unless it is satisfactorily shown that the child
cannot be adopted locally.
Who may adopt:

Any alien or Filipino citizen permanently residing abroad may file an application for inter-country
adoption of a Filipino child if he/she:
1. is at least 27 years of age and at least 16 years older than the child to be adopted, at the time of the
application unless the adopter is the parent by nature of the child to be adopted or the spouse of such
parent
2. if married, his/her spouse must jointly file for the adoption
3. has the capacity to act and assume all rights and responsibilities of parental authority under his national
laws, and has undergone the appropriate counselling from an accredited counsellor in his/her country
4. has not been convicted of a crime involving moral turpitude
5. is eligible to adopt under his/her national law
6. is in a position to provide the proper care and support and to give the necessary moral values and
example to all his children, including the child to be adopted
7. agrees to uphold the basic rights of the child as embodied under Philippine laws, the U.N. Convention
on the Rights of a Child, and to abide by the rules and regulations issued to implement the Inter-
Country Adoption Act
8. comes from a country with whom the Philippines has diplomatic relations and whose government
maintains a similarly authorized and accredited agency and that adoption is allowed under his/her
national laws
9. possesses all the qualifications and none of the disqualifications under the Inter-Country Adoption Act
and other applicable Philippine laws
Inter-Country Adoption Board

acts as the central authority in matters relating to inter-country adoption.
The Board shall ensure that all possibilities for the adoption of the child under the Family Code have
been exhausted and that inter-country adoption is in the best interest of the child.
Trial Custody:
6 months from the time of placement
1. starts upon actual physical transfer of the child to the applicant who, as actual custodian, shall exercise
substitute parental authority over the person of the child.
2. the adopting parent(s) shall submit to the governmental agency or authorized and accredited agency,
which shall in turn transmit a copy to the Board, a progress report of the childs adjustment.
NOTES:
If the pre-adoptive relationship is found unsatisfactory by the child or the applicant or both, or if the
foreign adoption agency finds that the continued placement of the child is not in the childs best interest,
said relationship shall be suspended by the Board and the foreign adoption agency shall arrange for the
childs temporary care.
If a satisfactory pre-adoptive relationship is formed between the applicant and the child, the Board shall
submit the written consent to the adoption to the foreign adoption agency within 30 days after receipt of
the latters request.
A copy of the final decree of adoption of the child, including certificate of citizenship/naturalization
whenever applicable, shall be transmitted by the foreign adoption agency to the Board within 1 month
after its issuance.
NOTE: For a comprehensive discussion of the procedural aspects of adoption, please refer to A.M. No. 02-
06-02-SC or the Remedial Law Memory Aid
SUPPORT
everything indispensable for sustenance, dwelling, clothing, medical attendance, education and
transportation in keeping with the financial capacity of the family
Kinds: (LJC)
1. Legal that which is required or given by law
2. Judicial required by the court to be given whether pendente lite or in a final judgment
3. Conventional given by agreement
Characteristics: (PIN-ERV)
1. Personal
2. Intransmissible
3. Not subject to waiver or compensation
4. Exempt from attachment or execution
5. Reciprocal on the part of those who are by law bound to support each other
6. Variable
Persons obliged to support each other:

1. spouses
2. legitimate ascendants and descendants
3. parents and their legitimate children and the legitimate and illegitimate children of the latter
4. parents and their illegitimate children and the legitimate and illegitimate children of the latter
5. legitimate brothers and sisters whether full or half-blood
NOTE: Support shall be in proportion to the resources or means of the giver and to the necessities of the
recipient.
Order of liability if several persons are obliged to give support:

1. spouse
2. descendants in the nearest degree
3. ascendants in the nearest degree
4. brothers and sisters
NOTES:
When the obligation to give support falls upon 2 or more persons payment shall be divided between
them in proportion to the resources of each, but in case of urgent need and special circumstances, the
court may order one of them to furnish the support provisionally subject to the right to claim from the
other obligors the share due them
When two or more recipients at the same time claim for support and the obligor does not have sufficient
means to satisfy all claims:
a. the order of liability provided by law shall be followed
b. if the concurrent obligees should be the spouse and child subject to parental authority, the child
shall be preferred
Page 19 of 193
PARENTAL AUTHORITY (PA)
Rules as to the exercise of PA:

1. The father and the mother shall JOINTLY exercise parental authority over the persons of their common
children. In case of disagreement, the fathers decision shall prevail UNLESS there is a judicial order to
the contrary
2. If the child is illegitimate, parental authority is with the mother.
Parental Preference Rule

the natural parents, who are of good character and who can reasonably provide for the child are
ordinarily entitled to custody as against all persons
Rule in case of legal separation of parents:

parental authority is exercised by the parent designated by the court.
GENERAL RULE: No child under 7 years of age shall be separated from the mother.
EXCEPTION: When the court finds compelling reason to order otherwise.
NOTE: Paramount consideration in matters of custody of a child is the welfare and well-being of the child.
(Tonog vs. CA)
Persons Exercising Substitute PA:
1. surviving grandparent
2. oldest brother or sister over 21 years of age unless unfit or disqualified
3. actual custodian unless unfit or disqualified
Persons Exercising Special PA:

1. school
2. administrators and teachers
3. individual, entity or institution engaged in child care
NOTES:
Parental authority and responsibility are inalienable and may not be transferred and renounced except in
cases authorized by law.
Parents may exercise parental authority over their childs property
Kinds of Properties of a Minor

ADVENTITIOUS PROFECTITIOUS
1. earned or acquired by the child through his 1. property given by the parents to the child for the
work or industry by onerous or gratuitous title latter to administer
2. owned by the child 2. owned by the parents
3. child is also the usufructuary, but the childs use 3. parents are the usufructuary
of the property shall be secondary to the collective
daily needs of the family
4. property administered by the parents 4. property administered by the child
Termination of PA
PERMANENT TEMPORARY
1. death of the parents 1. adoption of the child
2. death of the child 2. appointment of a general guardian
3. emancipation of the child 3. judicial declaration of abandonment
4. subjected child to sexual abuse 4. final judgment
divesting the parents of parental authority
5. judicial declaration of absence or inca-pacity of
the parents exercising parental authority over the
child
Grounds for suspension of PA (CHOBAN)

1. conviction of a crime with the penalty of civil interdiction
2. harsh or cruel treatment against the child
3. orders, counsel and example which are corrupting, given by the person exercising authority
4. begging is compelled of the child
5. acts of lasciviousness, allowed for the child to be subjected to, or himself subjects the child to
6. negligence, which is culpable, committed by the person exercising authority
FUNERALS
GENERAL GUIDELINES
1. duty and right to make arrangement in funerals in accordance with Article 199, FC
2. the funeral shall be in keeping with the social position of the deceased
3. the funeral shall be in accordance with the expressed wishes of the deceased
a. in the absence of the expressed wishes, his religious beliefs or affiliation shall determine
b. in case of doubt, the persons in Article 199, FC shall decide
4. any person who disrepects the dead or allows the same shall be liable for damages
Grounds for Change of First Name or Nickname under R.A. No. 9048 (An act authorizing City or
Municipal Civil Registrar or the Consul General to Correct a Clerical or Typographical Error in an Entry
and/or Change of First Name or Nickname in the Civil Registrar Without need of a Judicial Order,
Amending for this Purpose Articles 376 and 412 of the Civil Code))
1. The petitioner finds the first name or nickname to be ridiculous, tainted with dishonour or extremely
difficult to write or pronounce
2. The new first name or nickname has been habitually and continuously used by the petitioner and he has
been publicly known by that first name or nickname in the community
3. The change will avoid confusion
NOTE: Please refer to Remedial Law Memory Aid for a comprehensive discussion of the procedural
aspects of change of name.
ABSENCE
DECLARATION OF ABSENCE
WITHOUT ADMINISTRATOR WITH ADMINISTRATOR
2 years from the lapse of time without news 5 years from the lapse of time without news
about the absentee or since the receipt of the about the absentee or since the receipt of the
last news last news
PRESUMPTION OF DEATH
ORDINARY ABSENCE EXTRAORDINARY/ QUALIFIED

ABSENCE
a. 7 YEARS, person presumed dead for all For all purposes including those of opening
purposes except for those of opening succession, a period of 4 YEARS, and for
succession (No need for a declaration of purposes of remarriage of the spouse
presumptive death) Note amended by Art. present, a period of 2 YEARS, is sufficient
41FC) under the following circumstances:
b. 10 YEARS, person presumed dead for a. person on board a vessel lost during a
purposes of opening succession except if he sea voyage or an aeroplane which is
disappeared after the age of 75, in which case, missing; period is counted from the loss of
a period of 5 years is sufficient the vessel or aeroplane
c. 4 YEARS, person presumed dead for b. person in the armed forces who has
purposes of remarriage of the spouse present taken part in war
(requires declaration of presumptuive death) c. person in danger of death under other
circumstances and his existence has not
been known
NOTES on RA 7610:
1. Children are not to be prosecuted as child prostitutes hence not to be called child prostitutes but
shall be regarded as children exploited in prostitution.
2. Vagrancy has been decriminalized.
SUMMARY PROCEEDINGS UNDER THE FAMILY CODE

Art. 41. Declaration of presumptive death.
Art. 51. Petition for the delivery of presumptive legitime.
Art. 69. The fixing of the family home.
Art. 73. In case of disagreement in the practice of profession of the spouses.
Art. 96. In case of disagreement in the administration of property.
Art. 124. Issues involving the administration and enjoyment of the conjugal partnership.
Art. 217. Parental authority over foundlings, abandoned neglected or abused children and other children
similarly situated.
Art. 223. Petition for an order providing for disciplinary measures over the child.
Art. 225. Issues over legal guardianship over the property of the unemancipated common child.
Art. 239. Petition for judicial authorization for a transaction where the consent of the other spouse is
required by law but such consent is withheld or cannot be obtained.
Page 21 of 193
PROPERTY
PROPERTY
All things which are, or may be the object of appropriation
Requisites: (USA)
1. utility
2. substantivity or individuality
3. appropriability
Res nullius things belonging to no one.

Rec comunes things belonging to all
Res alipujos things beloning to only one.
I. As to mobility of property:
A. REAL OR IMMOVABLE PROPERTIES (Art. 415 NCC)
1. land, buildings, roads and constructions of all kinds adhered to the soil;
2. trees, plants and growing fruits, while they are attached to the land or form an integral part of an
immovable;
3. everything attached to an immovable in a fixed manner in such a way that it cannot be separated
therefrom without breaking the material or deterioration of the object;
4. statues, reliefs, paintings or other objects for use or ornamentation, placed in buildings or on lands by
the owner of the immovable in such a manner that it reveals the intention to attach them
permanently to the tenements;
5. machinery, receptacles, instruments or implements intended by the owner of the tenement for an
industry or works which may be carried on in a building or on a piece of land, and which tend
directly to meet the needs of the said industry or works;
Requisites:
a. made by owner
b. industry or works carried on building or on land
c. machines, etc must tend directly to meet needs of the industry or works
d. machines, etc. must be essential and principal elements of the industry.
6. animal houses, pigeon-houses, beehives, fishponds or breeding places of similar nature, in case their
owner has placed or preserved them, with the intention to have them permanently attached to the
land, and forming a permanent part of it; the animals in those places are included;
7. fertilizer actually used on a piece of land;
8. mines, quarries and slag dumps, while the matter thereof forms part of the bed, and waters either
running or stagnant;
9. docks and structures which, though floating, are intended by their nature and object to remain at a
fixed place on a river, lake or coast; and
10. contracts for public works, and servitudes and other real rights over immovable property
Categories: (NIDA)
a) Real by nature it cannot be carried from place to place (pars. 1 & 8, Art. 415, Civil Code)
b) Real by incorporation attached to an immovable in a fixed manner to be an integral part thereof
(pars. 1-3 Art. 415, Civil Code)
c) Real by destination placed in a n immovable for the utility it gives to the activity carried thereon
(pars. 4-7 and 9 Art. 415, Civil Code)
d) By analogy it is so classified by express provision of law (par. 10, Art. 415, Civil Code)
B. PERSONAL OR MOVABLE PROPERTIES (ART. 416)

1. those movables susceptible of appropriation which are not included in the preceding article;
2. real property which by any special provision of law is considered as personalty; (CONTRACTS)
3. forces of nature which are brought under control of science;
4. in general, all things which can be transported from place to place without impairment of the real
property to which they are fixed;
5. obligations and actions which have for their object movables or demandable sums; and
6. shares of stock of agricultural, commercial and industrial entities, although they have real estate.
TESTS:
a) By exclusion: movables are everything not included in Art. 415.
b) By description: an object is movable if it possesses:
1) Ability to change location
2) Without substantial injury to the immovable to which it is attached.
Classification of Movables
1. consumable cannot be utilized w/o being consumed
2. non-consumable
3. Fungible may be replaced with another of the same kind.
4. Non-fungible
Important Doctrines/principles on immovable and movable properties:

a) A Building is an immovable even if not erected by the owner of the land. The only criterion is union or
incorporation with the soil. (Ladera vs. Hodges, 48 O.G. 4374).
b) Parties to a contract may by agreement treat as personal properties that which by nature would be real
property; and it is a familiar phenomenon to see things classes as real property for purposes of taxation
which on general principle might be considered personal property (Standard Oil Co. vs. Jaranillo, 44
Phil 631).
c) For purposes of attachment and execution and for purposes of the Chattel Mortgage Law, ungathered
products have the nature of personal property. (Sibal vs. Valdez, 50 Phil, 512).
d) The human body, whether alive or dead, is neither real nor personal property, for it is not even property
at all, in that it generally cannot be appropriated. Under certain conditions, the body of a person or parts
thereof may be subject matter of a transaction. (See RA No. 349, RA No. 7170, RA No. 7719).
e) What is the effect of temporary separation of movables from the immovables to which they have been
attached?
2 Views:
1) They continue to be regarded as immovables.
2) Fact of separation determines the condition of the objects thus recovering their condition as
movables.
* the latter view is supported by Paras and Tolentino who maintains that the failure of the codifiers to
reproduce the provision of the partidas on the matter is an indication that they did not intend the rule to
continue.
f) A building that is to be sold or mortgaged and which would be immediately demolished may be
considered personal property and the sale or mortgage thereof would be a sale of chattel, or a chattel
mortgage respectively, for the true object of the contract would be the materials.
II. Property in Relation to the Person to Whom It Belongs

(Art. 419-425)
A. PROPERTY OF PUBLIC DOMINION
Concept: It is not owned by the state but pertains to the state, which, as territorial sovereign exercises
certain juridical prerogatives over such property. The ownership of such properties is in the social
group, whether national, provincial or municipal.
Purpose: To serve the citizens and not the state as a juridical person.
Kinds:
1. Those intended for public use (roads, shores, bridges, parks, etc)
2. Those which are not for public use but intended for public service (ex. City halls,
Airports,firetrucks, Police car)
3. Those intended for the development of the national wealth (Natural resources)
CHARACTERISTICS:
1. Outside the commerce of man
2. Inalienable. But when no longer needed for public use or service, may be declared patrimonial
property. In Laurel vs. Garcia (187 SCRA 797), the Supreme Court held that whether or not the
Roppongi and related properties will eventually be sold is a policy determination where both the
President and Congress must concur.
3. Cannot be acquired by prescription
4. Not subject to attachment or execution
5. Cannot be burdened with easements
NOTE: They cannot be registered under the land registration law and be the subject of a Torrens title.
The character of public property is not affected by possession or even a Torrens Title in favor of private
persons. (Palanca vs. Commonwealth, 69 Phil. 449).
C. PATRIMONIAL PROPERTY OF THE STATE
(Article 421. All other property of the State, which is not of

the character stated in the preceding article, is
patrimonial property.)
o Property of the State owned by it in its private or proprietary capacity.

o the state has the same rights over this kind of property as a private individual in relation to his
own private property
o Rquires consent of congress before they may be alienated.
C. PROPERTY OF LOCAL GOVERNMENT UNITS (LGUs)

1. Property for public use consist of roads, streets, squares, fountains, public waters, promenades and
public works for public service paid for by the LGUs
2. Patrimonial Property all other property possessed by LGUs without prejudice to provisions of special
laws
NOTE: In the case of Province of Zamboanga Del Norte vs. City of Zamboanga, the Supreme Court
categorically stated that this court is not inclined to hold that municipal property held and devoted to
public service is in the same category as ordinary private property. The classification of municipal
property devoted for distinctly governmental purposes as public should prevail over the Civil Code in
this particular case. Here, the Law of Municipal Corporations was considered as a special law in the
context of Article 424 of the NCC.
Page 23 of 193
D. PROPERTY OF PRIVATE OWNERSHIP

refers to all property belonging to private persons either individually or collectively and those
belonging to the State and any of its political subdivisions which are patrimonial in nature
Muebles or furniture generally has for its principal object the furnishing or ornamenting of a building.
Note that there are exceptions to this definition and are generally not included as furniture unless the
law or the individuals declaration include them.
OWNERSHIP
(Art. 427 439)
-The right to enjoy, dispose, and recover a thing without further limitations than those established by
law or the will of the owner.
Rights included (Art. 428-429):

1. Right to enjoy: (PUFA)
a) to possess (jus possidendi)
b) to use (jus utendi)
c) to the fruits (jus fruendi) and accessions
d) to abuse (jus abutendi)
2. Right to dispose: (DATE)
a) to destroy
b) to alienate
c) to transform
d) to encumber
3. Right to vindicate: (RP)
a) pursuit
b) recovery
4. Right to exclude: (ER)
a) to enclose, fence and delimit
b) to repel intrusions even with force
Limitation on Ownership
1. general limitations for the benefit of the state (eminent domain, police power, taxation)
2. specific limitations imposed by law (servitude, easements)
3. specific limitations imposed by party transmitting ownership (will, contract)
4. limitations imposed by owner himself (voluntary servitude, mortgages, pledges)
5. inherent limitations arising from conflicts with other similar rights (contiguity of property)
6. owner cannot make use of a thing which shall injure/prejudice rights of 3rd persons (neighbors)
7. acts in state of necessity law permits injury or destruction of things owned by another
provided this is necessary to avert a greater danger (with right to indemnity vs. principle of
unjust enrichment)
8. true owner must resort to judicial process when thing is in possession of another; law creates
a disputable presumption of ownership to those in actual possession
a) identify property
b) show that he has better title
Characteristics: (EGEIP)
1. Ownership is Elastic power/s may be reduced and thereafter automatically recovered upon the
cessation of the limiting rights.
2. General the right to make use of all the possibilities or utility of the thing owned, except those
attached to other real rights existing thereon.
3. Exclusive there can only be one ownership over a thing at a time. There may be two or more owners
but ONLY ONE ownership.
4. Independence It exists without necessity of any other right
5. Perpetuity ownership lasts as long as the thing exists. It cannot be extinguished by non user but only
by adverse possession.
De Facto case of Eminent Domain

expropriation resulting from the actions of nature as in one case where land becomes part of one sea.
The owner loses his property in favor of the state without any compensation.
Principle of Self-Help
right of the owner or lawful possessor to exclude any person from the enjoyment and disposal of the
property by the use of such force as may be necessary to repel or prevent actual or threatened
unlawful physical invasion or usurpation of his property.
Requisites: (RONA)
1. reasonable force
2. owner or lawful possessor is the person who will exercise
3. no delay in ones exercise
4. actual or threatened physical invasion or usurpation
GENERAL RULE: A person cannot interfere with the right of ownership of another.
EXCEPTION: Doctrine of Incomplete Privilege or State of Necessity (Article 432)
Requisites: (ID)
1. Interference necessary
2. Damage to another much greater than damage to property
LEGAL REMEDIES TO RECOVER POSSESSION OF ONES PROPERTY

1. Personal property: Replevin
REPLEVIN - remedy when the complaint prays for the recovery of the possession of personal property.
2. Real Property:
a. ACCION INTERDICTAL
Nature: summary action to recover physical or material possession only. It consists of the
summary actions of:
1. Forcible entry
Action for recovery of material possession of real property when a person originally in
possession was deprived thereof by force, intimidation, strategy, threat or stealth
2. Unlawful Detainer
Action for recovery of possession of any land or building by landlord, vendor, vendee, or other
person against whom the possession of the same was unlawfully withheld after the expiration
or termination of the right to hold possession, by virtue of any contract.
Forcible Entry Unlawful Detainer

As to when possession became unlawful
Possession of the defendant is unlawful from Possession is inceptively lawful but becomes
the beginning as he acquires possession by illegal from the time defendant unlawfully
Force, intimidation, strategy, threat or stealth withholds possession after the expiration or
termination of his right thereto.
As to the necessity of demand
No previous demand for the defendant to Demand is jurisdictional if the ground is non-
vacate is necessary payment of rentals or failure to comply with the
lease contract
As to necessity of proof of prior physical possession

Plaintiff must prove that he was in prior Plaintiff need not have been in prior physical
physical possession of the premises until he possession
was deprived thereof by the defendant
As to when the 1 year period is counted from
1 year period is generally counted from the 1 year period is counted from the date of last
date of actual entry on the land demand or last letter of demand
b. ACCION PUBLICIANA
Nature: Ordinary civil proceeding to recover the better right of possession, except in cases of
forcible entry and unlawful detainer. The involved is not possession de facto but possession de
jure.
c. ACCION REIVINDICATORIA
Nature: action to recover real property based on ownership. Here, the object is the recovery of
the dominion over the property as owner.
Requisites:
1. Identity of the Property
2. Plaintiffs title to the property
Surface Rights
The owner of parcel of land is the owner of its surface and everything under it.
The economic utility which such space or subsoil offers to the owner of the surface sets the limit of the
owners right to the same.
HIDDEN TREASURE
(Art. 439)
Definition: any hidden or unknown deposit of money, jewelry or other precious objects, the lawful
ownership of which does not appear.
GENERAL RULE: It belongs to the owner of the land, building or other property on which it is found.
EXCEPTIONS: The finder is entitled to provided:
1. Discovery was made on the property of another, or of the state or any of its political subdivisions;
2. The finding was made by chance;
3. The finder is not a co-owner of the property where it is found;
4. The finder is not a trespasser;
5. The finder is not an agent of the landowner;
6. The finder is not married under the absolute community or the conjugal partnership system
(otherwise his share belongs to the community).
ACCESSION
(Art. 432-475)
The right by virtue of which the owner of a thing becomes the owner of everything that it may produce
Page 25 of 193
or which may be inseparably united or incorporated thereto, either naturally or artificially.
Classifications:
1. Accession Discreta the right pertaining to the owner of a thing over everything produced thereby
Kinds of Fruits
a. natural fruits spontaneous products of the soil and the young and other products of animals
b. industrial fruits those produced by lands of any kind through cultivation or labor
c. civil fruits rents of buildings, price of leases or lands and the amount of perpetual or life
annuities or other similar income
GENERAL RULE: To the owner belongs the natural, industrial, and civil fruits.
EXCEPTIONS: If the thing is: (PULA)
a) in possession of a possessor in good faith;
b) subject to a usufruct;
c) leased or pledged; or
d) in possession of an antichretic creditor
2. Accession Continua the right pertaining to the owner of a thing over everything that is
incorporated or attached thereto either naturally or artificially; by external forces.
a. With respect to real property
i. accession industrial
building, planting or sowing
ii. accession natural
alluvium, avulsion, change of river course, and formation of islands
b. With respect to personal property
i. adjunction or conjuction- the union of two things belonging to different
owners.
ii. commixtion or confusion- Union of materials where the components lose their
identity.
COMMIXTION: MIXTURE OF SOLIDS;

CONFUCION: MIXTURE OF LIQUIDS
iii. specification- It is the transformation of anothers material by the application

of labor. The material becomes a thing of different kind.
Basic Principles: (GONE BAD)

1. He who is in good faith may be held responsible but will not be penalized.
2. To the owner of a thing belongs the extension or increase of such thing.
3. Bad faith of one party neutralizes the bad faith of the other.
4. There should be no unjust enrichment at the expense of others.
5. Bad faith involves liability for damages.
6. Accessory follows the principal.
7. Accession exists only if the incorporation is such that separation would either seriously
damage the thing or diminish its value.
Right of Accession with respect to Immovable Property

NOTE: See TABLES
Important Doctrines/Principles:
a) Under Art 448, the landowner may not refuse both to pay for the building and to sell the land and
instead seek to compel the owner of the building to remove the building from the land. He is entitled to
such removal ONLY when, after having chosen to sell the land, the other party fails to pay for said land.
(Ignacio vs. Hilario, 76 Phil. 605)
b) Should no other arrangement be agreed upon, the owner of the land does not automatically become the
owner of the improvement. (Filipinas Colleges, Inc. vs. Timbang, 106 Phil. 247)
c) Article 448 is not applicable where a person constructs a house on his own land and then sells the land,
not the building. (Coleongco vs. Regalado, 27 Phil 387)
d) Article 448 does not apply to cases which are governed by other provisions of law such as co-
ownership, usufruct, agency, lease.
e) The provision on indemnity in Art. 448 may be applied by analogy considering that the primary intent
of the law is to avoid a state of forced co-ownership especially where the parties in the main agree that
Articles 448 and 546 are applicable and indemnity for the improvements may be paid although they
differ as to the basis of the indemnity. (Pecson vs. CA 244 SCRA 407).
ACCESSION NATURAL
1. Alluvion or alluvium increment which lands abutting rivers gradually receive as a result of the current
of the waters.
Concept: it is the gradual deposit of sediment by the natural action of a current of fresh water (not
sea water, the original identity of the deposit being lost.
Requisites:
a) the deposit be gradual and imperceptible
b)that it be made through the effects of the current of the water
c) that the land where accretion takes place is adjacent to the banks of the river.
NOTES:
The owners of the lands adjoining the banks of the river (riparian lands) shall own the accretion which
they gradually receive.
Accretion operates ipso jure. However, the additional area is not covered by a Torrens title and the
riparian owner must register the additional area.
Doctrines:
a) Where the deposit is by sea water, it belongs to the state
b) A gradual change of bed is also governed by the rules of alluvium (Canas vs. Tuason 5 Phil. 689)
2. Avulsion the transfer of a known portion of land from one tenement to another by the force of the
current. The portion of land must be such that it can be identified as coming from a definite tenement.
Requisites:
a) The segregation and transfer must be caused by the current of a river, creek or torrent.
b) The segregation and transfer must be sudden or abrupt
c) The portion of land transported must be known or identified
NOTES:
The owner must remove the transported portion within two years to retain ownership
In case of uprooted trees, the owner retains ownership if he makes a claim within 6 months. This refers
only to uprooted trees and does not include trees which remain planted on a known portion of land
carried by the force of the waters. In this latter case, the trees are regarded as accessions of the land
through gradual changes in the course of adjoining stream. (Payatas vs. Tuazon)
Registration under the Torrens system does not protect the riparian owner against diminution of the area
of his land through gradual changes in the course of adjoining stream (Payatas vs. Tuazon).
Alluvium Avulsion
1. gradual and imperceptible 1. sudden or abrupt process
2. soil cannot be identified 2. identifiable and verifiable
3. belongs to the owner of the property 3. belongs to the owner from whose property
to which it is attached it was detached
4. merely an attach-ment 4. detachment followed by attachment
3.Change of course of rivers

Requisites:
a) There must be a natural change in the course of the waters of the river
b) The change must be abrupt or sudden
NOTES:
Once the river bed has been abandoned, the owners of the invaded land become owners of the
abandoned bed to the extent provided by this article. No positive act is needed on their part, as it is
subject thereto ipso jure from the moment the mode of acquisition becomes evident.
It does not apply to cases where the river simply dries up because there are no persons whose lands are
occupied by the waters of the river.
4. Formation of Islands
RULES ON OWNERSHIP
a. If formed by the sea:
1) within territorial waters - State
2) outside territorial waters to the first occupant
b. If formed in lakes, or navigable or floatable rivers - State
c. If formed on non-navigable or non-floatable rivers:
1) if nearer to one margin or bank to the nearer reparian owner
2) if equidistant from both banks- to the reparian owners, by halves.
NOTE: There is no accession when islands are formed by the branching of a river; the owner retains
ownership of the isolated piece of land.
Right of Accession with respect to movable property

Basic Principle: Accession exists only if separation is not feasible. Otherwise, separation may be
demanded.
KINDS (accession continua as to movables):

1. Adjunction
the union of two things belonging to different owners, in such a manner that they cannot be
separated without injury, thereby forming a single object.
Requisites
Page 27 of 193
a)the two things must belong to different owners

b) that they form a single object, or that their separation would impair their nature
Kinds:
a. inclusion or engraftment
b. soldadura or soldering
c. escritura or writing
d. pintura or painting
e. tejido or weaving
Tests to determine principal:
a. the rule of importance and purpose
b. that of greater value
c. that of greater volume
d. that of greater merits
Rules:
a) Adjunction in good faith by either owner:
GENERAL RULE: accessory follows the principal.
EXCEPTIONS if the accessory is much more precious than the principal, the owner of the accessory
may demand the separation even if the principal suffers some injury
b) Adjunction in bad faith by the owner of the principal

option of the owner of the accessory:
i) to recover the value plus damages
ii) to demand separation plus damages
c) Adjunction in bad faith by the owner of the accessory

i) he loses the accessory
ii) he is liable for damages
When separation of things allowed:

a. separation without injury
b. accessory is more precious than the principal
c. owner of the principal acted in bad faith
2. Mixture
Union of materials where the components lose their identity.
Kinds:
a. Commixtion mixture of solids
b. Confusion mixture of liquids
Rules:
a. By the will of both owners or by accident: each owner acquires an interest in proportion to the
value of his material
b. By one owner in good faith: apply rule(a)
c. By one owner in bad faith:
i) he loses all his rights to his own material
3. Specification
It is the transformation of anothers material by the application of labor. The material becomes a
thing of different kind.
Labor is the principal
Rules:
a) Owner of the principal (worker) in good faith:
i) maker acquires the new thing
ii) he must indemnify the owner of the material
EXCEPTION: if the material is more valuable than the resulting thing, the owner of the material
has the option:
1) to acquire the work, indemnifying for the labor, or
2) to demand indemnity for the material
b) owner of the principal (worker) in bad faith: the owner of the material has the option:
i) to acquire the result without indemnity
ii) to demand indemnity for the material plus damages
c) Owner of the material in bad faith
i) he loses the material
Adjunction Specification
Mixture
1. Involves at least 2 things Involves at least 2 things May involve one thing (or more)
but form is changed
2. Accessory follows the Co-ownership results Accessory follows the principal
principal
3. Things joined retain their Things mixed or confused may The new object retains or preserves
nature either retain or lose their the nature of the original object.
respective natures
QUIETING OF TITLE
It is an equitable action quasi in rem to determine the condition of the ownership or the rights to
immovable property, and remove doubts thereon.
Requisites:
1. plaintiff must have a legal or equitable title to, or interest in the real property which is the subject matter
of the action;
2. there must be a cloud in such title;
3. such cloud must be due to some instrument, record, claim, encumbrance or proceeding which is
apparently valid but is in truth invalid, ineffective, voidable or unenforceable, and is prejudicial to the
plaintiffs title; and
4. plaintiff must return to the defendant all benefits he may have received from the latter, or reimburse him
for expenses that may have redounded to his benefit.
Prescriptive Period:
1. plaintiff in possession imprescriptible
2. plaintiff not in possession 10 (ordinary) or 30 years (extraordinary)
Action to quiet title Action to remove a cloud on title
PURPOSE
to put an end to troublesome litigation in respect to to remove a possible foundation for a future hostile
the property involved claim
NATURE OF THE ACTION
remedial action involving a present adverse claim Preventive action to prevent a future cloud on the title
The action to quiet title does not apply:

a) to questions involving interpretation of documents
b) to mere written or oral assertions of claims; EXCEPT:
i) if made in a legal proceeding
ii) if it is being asserted that the instrument or entry in plaintiffs favor is not what it purports to be
c) to boundary disputes
d) to deeds by strangers to the title UNLESS purporting to convey the property of the plaintiff
e) to instruments invalid on their face
f) where the validity of the instrument involves pure questions of law
Ruinous Buildings and Trees in Danger of Falling:

As to buildings the owners is obliged to demolish or execute necessary work to prevent the building
from falling. Should he fail to do so, the authorities shall order its demolition at the expense of the
owner, or take measures to insure public safety.
The complainant must show that his property is adjacent to the dangerous construction, or must have to
pass by necessity in the immediate vicinity.
The owner is responsible for damages to others due to lack of necessary repairs. However, if the
damage is caused by defects in the construction, then the builder is responsible for the damages.
CO-OWNERSHIP
(Art. 484-501)
Definition: the right of common dominion which two or more persons have in a spiritual part of a thing
which is not physically divided.
Concept: co-ownership exists where the ownership of a thing physically undivided pertains to more
than one person.
Characteristics:
a)plurality of subjects (the co-owners)
b)there is a single object which is not materially divided
c) there is no mutual representation by the co-owners
d)it exist for the common enjoyment of the co-owners
e) it has no distinct legal personality
f) it is governed first of all by the contract of the parties; otherwise, by special legal provisions, and in
default of such provisions, by the provisions of Title III on co-ownership
Sources:
1. Law
2. Contract
Page 29 of 193
3. Chance
4. Occupation
5. Succession
6. Testamentary disposition or donation inter vivos
Co-ownership Partnership
1. Can be created without the formalities of a 1. Can be created only by contract, express or implied
contract
2. Has no juridical or legal personality 2. Has juridical personality distinct from the partners
3. Purpose is collective enjoyment of the thing 3. Purpose is to obtain profits
4. Co-owner can dispose of his shares without 4. A partner, unless authorized cannot dispose of his
the consent of the others with the transferee share and substitute another as a partner in his place
automatically becoming a co-owner
5. There is no mutual representation 5. A partner can generally bind the partnership
6. Distribution of profits must be 6. Distribution of profits is subject to the stipulation of

proportional to the respective interests of the parties
the co-owners
7. A co-ownership is not dissolved by the 7. Death or incapacity dissolves the partnership

death or incapacity of a co-owner
8. no public instrument needed even if real 8. May be made in any form except when real property
property is the object of the co-ownership is contributed
9. An agreement to keep the thing undivided 9. There may be agreement as to a definite term without
for a period of more than 10 years is void limit set by law
Rules:
1. Rights of each co-owner as to the thing owned in common: USBRAP-LDP
a) To use the thing owned in common
Limitations:
i) use according to the purpose for which it was intended
ii) interest of the co-ownership must not be prejudiced
iii) other co-owners must not be prevented from using it according to their own rights
b) To share in the benefits and charges in proportion to the interest of each.

NOTE: Any stipulation to the contrary is void.
c) To the benefits of prescription: prescription by one co-owner benefits all.
d) Repairs and taxes: to compel the others to share in the expenses of preservation even if incurred
without prior notice.
NOTE: The co-owner being compelled may exempt himself from the payment of taxes
and expenses by renouncing his share equivalent to such taxes and expenses. The value of
the property at the time of the renunciation will be the basis of the portion to be renounced.
e) Alterations: to oppose alterations made without the consent of all, even if beneficial.
NOTES:
Alteration is an act by virtue of which a co-owner changes the thing from the state in which the
others believe it should remain, or withdraws it from the use to which they desire it to be
intended.
Expenses to improve or embellish are decided by the majority
f) To protest against seriously prejudicial decisions of the majority
g) Legal redemption: to be exercised within 30 days from written notice of sale of an undivided share
of another co-owner to a stranger
h) To defend the co-ownerships interest in court
i) To demand partition at any time
Partition is the division between 2 or more persons of real or personal property which they own in
common so that each may enjoy and possess his sole estate to the exclusion of and without
interference from others
GENERAL RULE: Partition is demandable by any of the co-owners as a matter of right at any
time.
EXCEPTIONS:
i. When there is a stipulation against it; but not to exceed 10 years.
ii. When the condition of indivision is imposed by the donor or testator; but
not to exceed 20 years.
iii. When the legal nature of the community prevents partition.

iv. When partition would render the thing unserviceable.
v. When partition is prohibited by law
vi. When another co-owner has possessed the property as exclusive owner for
a period sufficient to acquire it by prescription.
Note: an oral partition is valid.
2. The following questions are governed by the majority of interests:

a) Management
Minority may appeal to the court against the majoritys decision if the same is seriously prejudicial.
b) Enjoyment
c) Improvement or embellishment
3. Rights as to the ideal share of each co-owner:

a) Each has full ownership of his part and of his share of the fruits and benefits
b) Right to substitute another person its enjoyment, EXCEPT when personal rights are involved
c) Right to alienate, dispose or encumber
d) Right to renounce part of his interest to reimburse necessary expenses incurred by another co-owner
e) Transactions entered into by each co-owner only affect his ideal share.
EXTINGUISHMENT OF CO-OWNERSHIP (CALSTEP)

1. consolidation or merger in one co-owner
2. acquisitive prescription in favor of a third person or a co-owner who repudiates the co-ownership
3. loss or destruction of property co-owned
4. sale of property co-owned
5. termination of period agreed upon by the co-owners
6. expropriation
7. judicial or extra-judicial partition
CONDOMINIUM ACT
(R.A. NO. 4726)
CONDOMINIUM
Sec. 2. A condominium is an interest in real property consisting of separate interest in a unit in a
residential, industrial or commercial building and an undivided interest in common, directly or
indirectly, in the land on which it is located and in other common areas of the building. A condominium
may include, in addition, a separate interest in other portions of such real property. Title to the common
areas, including the land, or the appurtenant interests in such areas, may be held by a corporation
specially formed for the purpose (hereinafter known as the "condominium corporation") in which the
holders of separate interest shall automatically be members or shareholders, to the exclusion of others,
in proportion to the appurtenant interest of their respective units in the common areas.
Any transfer or conveyance of a unit or an apartment, office or store or other space therein, shall include
transfer or conveyance of the undivided interest in the common areas or, in a proper case, the
membership or shareholdings in the condominium corporation: provided, however, that where the
common areas in the condominium project are held by the owners of separate units as co-owners
thereof, no condominium unit therein shall be conveyed or transferred to persons other than Filipino
citizens or corporations at least 60% of the capital stock of which belong to Filipino citizens, except in
cases of hereditary succession.
GENERAL RULE: Common areas shall remain undivided, and there shall be no judicial partition thereof:
EXCEPTIONS:
1. When the project has not been rebuilt or repaired substantially to its state prior to its damage or
destruction 3 years after damage or destruction which rendered a material part thereof unfit for use;
2. When damage or destruction has rendered or more of the units untenantable and that the
condominium owners holding more than 30% interest in the common areas are opposed to
restoration of the projects;
3. When the project has been in existence for more than 50 years, that it is obsolete and uneconomic,
and the condominium owners holding in aggregate more than 50% interest in the common areas
are opposed to restoration, remodeling or modernizing;
4. When the project or a material part thereof has been condemned or expropriated and the project is
no longer viable, or that the condominium owners holding in aggregate more than 70% interest in the
common areas are opposed to the continuation of the condominium regime;
5. When conditions for partition by sale set forth in the declaration of restrictions duly registered have
been met.
Sec. 8. Where several persons own condominiums in a condominium project, an action may be brought
by one or more such persons for partition thereof by sale of the entire project, as if the owners of all of
the condominiums in such project were co-owners of the entire project in the same proportion as their
interests in the common areas: Provided, however, That a partition shall be made only upon a showing:
(a) That three years after damage or destruction to the project which renders material part thereof
unit for its use prior thereto, the project has not been rebuilt or repaired substantially to its state prior to
its damage or destruction, or
Page 31 of 193
(b) That damage or destruction to the project has rendered one-half or more of the units therein
untenantable and that condominium owners holding in aggregate more than thirty percent interest
in the common areas are opposed to repair or restoration of the project; or
(c) That the project has been in existence in excess of fifty years, that it is obsolete and uneconomic,
and that condominium owners holding in aggregate more than fifty percent interest in the common
areas are opposed to repair or restoration or remodeling or modernizing of the project; or
(d) That the project or a material part thereof has been condemned or expropriated and that the project
is no longer viable, or that the condominium owners holding in aggregate more than seventy percent
interest in the common areas are opposed to continuation of the condominium regime after
expropriation or condemnation of a material portion thereof; or
(e) That the conditions for such partition by sale set forth in the declaration of restrictions, duly
registered in accordance with the terms of this Act, have been met.
WATERS
Classification
a) Waters public per se (water is the principal; the bed follows the character of the water (See Arts. 502
[1] and 502 [2])
b) Waters public or private according to their bed (water is accessory to bed)
c) Waters public by special provision
POSSESSION
Concept: the material holding or control of a thing or the enjoyment of a right.
Requisites:
1. occupancy, apprehension, or taking
2. deliberate intention to possess
3. by virtue of ones own right
Degrees:
1. possession without any title whatsoever
2. possession with juridical title
3. possession with just title sufficient to transfer ownership
4. possession with a title in fee simple
Classes:
a) In ones own name where possessor claims the thing for himself
b) In the name of another for whom the thing is held by the possessor
c) In the concept of owner possessor of the thing or right , by his actions, is considered or is believed by
other people as the owner, regardless of the good or bad faith of the possessor
d) In the concept of holder possessor holds it merely to keep or enjoy it, the ownership pertaining to
another person; possessor acknowledges in another a superior right which he believes to be ownership.
NOTE: None of these holders assert a claim of ownership in himself over the thing but they may be
considered as possessors in the concept of owner, or under claim of ownership, with respect to the right they
respectively exercise over the thing.
e) In good faith possessor is not aware that there is in his title or mode of acquisition a defect that
invalidates it
Requisites:
1. Ostensible title or mode of acquisition
2. Vice or defect in the title
3. Possessor is ignorant of the vice or defect and must have an honest belief that the thing belongs
to him
NOTE: Gross and inexcusable ignorance of the law may not be the basis of good faith, but possible,
excusable ignorance may be such basis. (Kasilag vs Roque, 69 PHIL 217)
f) In bad faith possessor is aware of the invalidating defect in his own title.
NOTES:
Only personal knowledge of the flaw in ones title or mode of acquisition can make him a possessor in
bad faith. It is not transmissible even to an heir.
Possession in good faith ceases from the moment defects in his title are made known to the possessor.
This interruption of good faith may take place at the date of summons or that of the answer if the date of
summons does not appear. However, there is a contrary view that the date of summons may be
insufficient to convince the possessor that his title is defective.
Presumptions in favor of possessor:

1. of good faith
2. of continuity of initial good faith
3. of enjoyment in the same character in which possession was acquired until the contrary is proved
4. of non-interruption in favor of the present possessor
5. of continuous possession by the one who recovers possession of which he was wrongfully deprived
6. of extension of possession of real property to all movables contained therein
Object of possession:
GENERAL RULE: All things and rights susceptible of being appropriated
EXCEPTIONS:
1. Res communes
2. Property of public dominion
3. Discontinuous servitudes
4. Non-apparent servitudes
Acquisition of possession:
Manner
1. Material occupancy of the thing
2. Subjection to the action of our will
3. Proper acts and legal formalities established for acquiring such right.
Conflicts between several claimants:

GENERAL RULE: Possession cannot be recognized in two different personalities except in case of co-
possession when there is no conflict
Criteria in case of dispute:

1. present/actual possessor shall be preferred
2. if there are two possessors, the one longer in possession
3. if the dates of possession are the same, the one with a title
4. if all the above are equal, the fact of possession shall be judicially determined, and in the meantime,
the thing shall be placed in judicial deposit
Subject Possessor in good faith Possessor in bad faith

a. Fruits gathered a. to possessor a. to owner
b. Cultivation Expenses of b. not reimbursed to possessor b. reimbursed to possessor

gathered fruits
c. Fruits pending and c. prorated according to time c. to owner
charges
d. Production expenses of d. indemnity pro rata to possessor d. no indemnity
pending fruits (owners option)
i. in money, or
ii. by allowing full cultivation
and gathering of all fruits
e. Necessary expenses e. reimbursed to possessor; e. reimbursed to possessor;
retention no retention
f.. Useful expenses f. reimbursed to possessor f. no reimbursement
(owners option)
i. initial cost
ii. plus value
may remove if no reimburse-
ment, and no damage is caused to
the principal by the removal
g. Ornamental expenses g. reimbursement at owners g. owners option:
option: i. removal, or
i. removal if no injury, or ii. value at time of recovery
ii. cost without removal
h. Taxes and charges h. taxes and charges h. taxes and charges
i. on capital i. charged to owner i. charged to owner
ii. on fruits ii. charged to possessor ii. charged to owner
iii. charges iii. prorated iii. to owner
i. Improvements no longer i. no reimbursement i. no reimbursement
existing
j. Liability for accidental j. only if acting with fraudulent j. liable in every case
loss or deterioration intent or negligence, after
summons
k. Improvements due to k. to owner or lawful possessor k. to owner or lawful
time or nature possessor
M. Loss due to caso Not liable Liable
frortuito
Doctrine of Constructive Possession one who has material possession of a part of a property is deemed to
have possession of the whole property.
Page 33 of 193
Possession of movables
Possession of movables in good faith is equivalent to title.
Requisites:
a) possession is in good faith
b) the owner has voluntarily parted with the possession of the thing
c) possessor is in the concept of owner
One who has lost or has been unlawfully deprived of it , may recover it from whomsoever
possesses it, ordinarily, without reimbursement.
Doctrines:
a) owner of the thing must prove (1) ownership of the thing and (2) loss or unlawful deprivation; or bad
faith of the possessor
b) Where the owner acts negligently or voluntarily parts with the thing owned, he cannot recover it from
the possessor
c) The owner may recover the movable in case of loss or involuntary deprivation; but must reimburse the
price paid if possessor acquired the thing in good faith and at a public sale.
Loss of possession:
1. By the will of the possessor
a) Abandonment
b) Transfer or conveyance
2. Against the will of the possessor
a) Eminent domain
b) Acquisitive prescription
c) Judicial decree in favor of better right
d) Possession of another for more than one year
NOTE: this refers to possession de facto where the possessor loses the right to a summary action; but
he may still bring action publiciana or reivindicatoria
e) By reason of the object

i. destruction or total loss of the things
ii. withdrawal from commerce
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.
Characteristics:
a. Real right
b. Of temporary duration
c. To derive all advantages from the thing due to normal exploitation
d. may be constituted on real or personal property, consumable or non-consumable, tangible or
intangible, the ownership of which is vested in another
e. transmissible
GENERAL RULE: Usufructuary is bound to preserve the form and substance of the thing in
usufruct.
EXCEPTION: Abnormal usufruct whereby the law or the will of the parties may allow the
modification of the substance of the thing.
Usufruct Lease
1. Always a real right 1. Generally a personal right
2. Person creating the usufruct should be the 2. Lessor may not be the owner
owner or his duly authorized agent
3. May be created by law, by contract, by will 3. Generally created by contract
of the testator, or by prescription
4. As a rule, usufruct covers all the fruits and 4.Lease generally refers to uses only
all the uses and benefits of the entire property
5. Involves a more or less passive owner who 5. Lease involves a more active owner or
allows the usufructuary to enjoy the object lessor who makes the lessee to enjoy
given in usufruct
6. Pays for ordinary repairs and taxes on the 6. Lessee is not generally under obligation to
fruits undertake repairs or pay taxes
Special Usufructs
a) of pension or income (Art 570)
b) of property owned in common (Art. 582)
c) of cattle (livestock) (Art. 591)
d) on vineyards and woodlands (Art. 575-576)
e) on a right of action (Art. 578)
f) on mortgaged property (Art. 600)
g) over the entire patrimony (Art. 598)
h) over things which gradually deteriorate (Art. 573)

i) of consumable property (Art 574)
(Normal usufruct if the same thing is to be returned; abnormal if a substitute may be returned)
Rights of the Usufructuary

1. As to the thing and its fruits
a. To receive and benefit from the fruits
b. To enjoy any increase through accessions and servitudes
c. To the half of the hidden treasure he accidentally finds
d. To lease the thing, generally, for the same or shorter period as the usufruct.
e. To improve the thing without altering its form and substance
f. Right to set-off the improvements he may have made on the property against any damage to
the same
g. To retain the thing until he is reimbursed for advances for extraordinary expenses and taxes
on the capital (possessory lien)
h. To collect reimbursements from the owner for indispensable extraordinary repairs, taxes on
the capital he advanced, and damages caused to him.
i. To remove improvements made by him if the same will not injure the property
2. As to the usufruct itself

a. To mortgage the right of usufruct except parental usufruct
b. To alienate the usufruct
Obligations of the usufructuary:

1. Before exercising the usufruct:
a. To make an inventory of the property (with description and appraisal of the property)
b. To give a bond, EXCEPT
1) when no prejudice would result
2) when the usufruct is reserved by the donor or parents
3) in cases of caucion juratoria where the usufructuary, being unable to file the required bond or
security, files a verified petition in the proper court asking for the delivery of the house and
furniture necessary for himself and his family without any bond or security.
takes an oath to take care of the things and restore them
property cannot be alienated or encumbered or leased because this would mean that the
usufructuary does not need it.
NOTE:
If no one will be injured, the posting of a bond and the making of an inventory may be be
excused.
Effects of failure to post bond:

a. owner shall have the following options:
i. receivership of realty, sale of movables, deposit of securities, or
investment of money; OR
ii. retention of the property as administrator
b. the net product shall be delivered to the usufructuary
c. usufructuary cannot collect credits due or make investments of the capital without the consent
of the owner or of the court until the bond is given.
2. During the usufruct:

a. To take care of the property
b. To replace with the young thereof animals that die or are lost in certain cases when the usufruct is
constituted on flock or herd of livestock
c. To make ordinary repairs
d. To notify the owner of urgent extra-ordinary repairs
e. To permit works and improvements by the naked owner not prejudicial to the usufruct
f. To pay annual taxes and charges on the fruits
g. To pay interest on taxes on capital paid by the naked owner
h. To pay debts when the usufruct is constituted on the whole patrimony
i. To secure the naked owners or courts approval to collect credits in certain cases
j. To notify the owner of any prejudicial act committed by third persons
k. To pay for court expenses and costs regarding usufruct.
3. At the termination of the usufruct:

a. To return the thing in usufruct to the owner unless there is a right of retention
b. To pay legal interest on the amount spent by the owner for extraordinary repairs or taxes on the
capital
c. To indemnify the owner for any losses due to his negligence or of his transferees
Extinguishment of Usufruct: (PT2DERM)

1. Prescription
2. Termination of right of the person constituting the usufruct
Page 35 of 193
3. Total loss of the thing

4. Death of the usufructuary, unless contrary intention appears
5. Expiration of the period or fulfillment of the resolutory condition
6. Renunciation of the usufructuary
7. Merger of the usufruct and ownership in the same person
EASEMENT OR SERVITUDE
EASEMENT OR SERVITUDE is an encumbrance imposed upon an immovable for the benefit of a
community or one or more persons or for the benefit of another immovable belonging to a different owner.
Concept: it is a real right, constituted on the corporeal immovable property of another, by virtue of
which the owner of the latter has to refrain from doing or must allow something to be done on his
property, for the benefit of another person or tenement.
Characteristics:
a) It is a real right but will affect third persons only when duly registered
b) It is enjoyed over another immovable, never on ones own property
c) It involves two neighboring estates (in case of real easements)
d) It is inseparable from the estate to which it is attached, and, therefore, cannot be alienated
independently of the estate
e) It is indivisible for it is not affected by the division of the estate between two or more persons
f) It is a right limited by the needs of the dominant owner or estate, without possession
g) It cannot consist in the doing of an act unless the act is accessory in relation to a real easement
h) It is a limitation on the servient owners rights of ownership for the benefit of the dominant owner;
and, therefore, it is not presumed
Classification:
1. As to its exercise:
a) Continuous Easements those the use of which is, or may be, incessant without the
intervention of any act of man
b) Discontinuous Easements those which are used at intervals and depend upon the acts of man
2. As to the indication of their existence:

a) Apparent Easements those which are made known and are continually kept in view by
external signs that reveal the use and enjoyment of the same
b) Non-apparent Easements those which show no external indication of their existence
3. As to duty of servient owner

a) Positive the servient owner must allow something to be done in his property or do it himself.
These are called servitudes of intrusion and or/service
b) Negative the servient owner must refrain from doing something which he could lawfully do
if the easement did not exist
Easement Lease
1. Real right, whether registered or not Real right only when it is registered, or when
its subject matter is real property and the
duration exceeds one year
2. Imposed only on real property May involve either real or personal

3. There is a limited right to the use of real Limited right to both the possession and use
property of another but without the right of of anothers property
possession
Easement Usufruct Modes

1. Imposed only on real property May involve either real or personal of
property
2. Limited to particular or specific use of Includes all the uses and the fruits of the
the servient estate property
3. A non-possessory right over an Involves a right of possession in an
immovable immovable or immovable
4. Not extinguished by the death of the Extinguished by the death of the

dominant owner usufructuary
Acquisition: (PDFAT)
1. by prescription of 10 years (continuous and apparent easements)
2. by deed of recognition
3. by final judgment
4. by apparent sign established by the owner of two adjoining estates
5. by title
Dominant Owner
Rights
1. To exercise all the rights necessary for the use of the easement
2. To make on the servient estate all the works necessary for the use and preservation of the servitude
3. To renounce the easement if he desires to exempt himself from contribution to necessary expenses
4. To ask for mandatory injunction to prevent impairment of his use of the easement
Obligations:
1. Cannot render the easement or render it more burdensome
2. Notify the servient owner of works necessary for the use and preservation of the servitude
3. Choose the most convenient time and manner in making the necessary works as to cause the least
inconvenience to the servient owner
4. Contribute to the necessary expenses if there are several dominant estates
Servient Owner
Rights:
1. To retain ownership and possession of the servient estate
2. To make use of the easement, unless there is agreement to the contrary
3. To change the place or manner of the easement, provided it be equally convenient
Obligations:
1. Cannot impair the use of the easement
2. Contribute to the necessary expenses in case he uses the easement, unless there is an agreement to
the contrary
Extinguishment of Easements:
(REMAIN BREW)
1. Redemption agreed upon
2. Expiration of the term or fulfillment of the resolutory condition
3. Merger of ownership of the dominant and servient estate
4. Annulment of the title to the servitude
5. Permanent Impossibility to use the easement
6. Non-user for 10 years
a. discontinuous: counted from the day they ceased to be used
b. continuous: counted from the day an act adverse to the exercise takes place
7. Bad condition - when either or both estates fall into such a condition that the easement could not
be used
8. Resolution of the right to create the servitude, i.e. in case of pacto de retro, when the property is
redeemed
9. Expropriation of the servient estate
10. Waiver by the dominant owner
EASEMENT FOR WATERING CATTLE

This is really a combined easement for drawing of water and right of way
Requisites:
a) must be imposed for reasons of public use
b) must be in favor of a town or village
c) indemnity must be paid
EASEMENT OF AQUEDUCT
The right arising from a forced easement by virtue of which the owner of an estate who desires to avail
himself of water for the use of said estate may make such waters pass through the intermediate estate
with the obligation of indemnifying the owner of the same and also the owner of the estate to which the
water may filter or flow.
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Character: apparent and continuous

Requisites:
a) dominant owner must prove that he has the capacity to dispose of the water
b) that the water is sufficient for the intended use
c) that the course is most convenient, and least onerous to the 3rd person
d) payment of indemnity
RIGHT OF WAY
The right granted to the owner of an estate which is surrounded by other estates belonging to other
persons and without an adequate outlet to a public highway to demand that he be allowed a passageway
throughout such neighboring estates after payment of proper indemnity (Art. 649-656 NCC)
Requisites:
1. Claimant must be an owner of enclosed immovable or one with real right
2. There must be no adequate outlet to a public highway
3. Right of way must be absolutely necessary
4. Isolation must not be due to the claimants own act
5. Easement must be established at the point least prejudicial to the servient estate
6. Payment of proper indemnity
it is the needs of the dominant property which ultimately determine the width of the passage, and these
needs may vary from time to time (Encarnacion vs. CA, 195 SCRA 72).
Special cause of extinction: the opening of a public road, or joining the dominant tenement to another
with exit on a public road.
NOTES:
1. the extinction is NOT automatic. There must be a demand for extinction coupled with
tender of indemnity by the servient owner.
2. Cannot be acquired by prescription because it is not continuous.
3. Railroad tracts signifies that the easement of right of way is apparent but nevertheless
remains discontinuous.
PARTY WALL
a common wall which separates 2 estates built by common agreement at the dividing line such that it
occupies a portion of both estates on equal parts.
Party Wall Co-ownership

1. Shares of parties cannot be physically segregated Shares of the co-owners can be divided and separated
but they can be physically identified physically but before such division, a co-owner cannot
point to any definite portion of the property as belonging
to him
2. No limitation as to use of the party wall for None of the co-owners may use the community property
exclusive benefit of a party for his exclusive benefit
3. Owner may free himself from contributing to the Partial renunciation is allowed
cost of repairs and construction of a party wall by
renouncing all his rights thereto
Presumptions of existence (juris tantum):

1. in adjoining walls of buildings, up to common elevation
2. in dividing walls of gardens and yards (urban)
3. in dividing fences, walls and live hedges of rural tenements
4. in ditches or drains between tenements
Rebuttal of presumption:
1. title
2. by contrary proof:
3. by signs contrary to the existence of the servitude (Arts. 660 & 661)
NOTE: if the signs are contradictory, they cancel each other
Rights of part owners:

1. to make use of the wall in proportion to their respective interests, resting buildings on it or inserting
beams up to one-half of the walls thickness
2. to increase the height of the wall
a. at his expense
b. upon payment of proper indemnity
c. to acquire half interest in any increase of thickness or height, paying a proportionate share in
the cost of the work and of the land covered by the increase
Obligations of each part-owners:

1. to contribute proportionately to the repair and maintenance unless he renounces his part-ownership
2. if one part owner raises the height of the wall, he must:
a. bear the cost of maintenance of the additions
b. bear the increased expenses of preservation
c. bear the cost of construction
d. give additional land, if necessary, to thicken the wall
LIGHT AND VIEW

1. Easement of Light (jus luminum) - right to admit light from the neighboring estate by virtue of the
opening of a window or the making of certain openings.
Requisites:
a. opening must not be greater than 30 centimeters squared, made on the ceiling or on the wall; and
b. there must be an iron grating
2. Easement of view (jus prospectus) the right to make openings or windows, to enjoy the view through
the estate of another and the power to prevent all constructions or work which would obstruct such view
or make the same difficult. It necessarily includes easement of light
Restrictions on openings in ones own wall when contiguous (less than 2m) to anothers tenement:
1. it cannot exceed 1 foot sq. (30 cm each side)
2. openings must be at the height of the joists, near the ceiling (Choco vs. Santamaria, 21 Phil 132)
3. the abutting owner may:
a. close the openings if the wall becomes a party wall
b. block the light by building or erecting his own wall unless a servitude is acquired by title or
prescription
c. ask for the reduction of the opening to the proper size
Restrictions as to views
1. Direct views: the distance of 2 METERS between the wall and the boundary must be observed
2. Oblique views: (walls perpendicular or at an angle to the boundary line) must not be less than 60cm
from the boundary line to the nearest edge of the window
NOTE: Any stipulation permitting lesser distances is void.
Modes of acquisition
1. by title
2. by prescription
a. positive counted from the time of the opening of the window, if it is through a party wall
b. negative counted from the formal prohibition on the servient owner.
NOTE: mere non-observance of distances prescribed by Art. 670 without formal prohibition, does not give
rise to prescription
VOLUNTARY EASEMENTS
Constituted by the will of the parties or of a testator.
The owner possessing capacity to encumber property may constitute voluntary servitude. If there are
various owners, ALL must consent; but consent once given is not revocable
Voluntary easements are established in favor of:
1. predial servitudes:
a. for the owner of the dominant estate
b. for any other person having any juridical relation with the dominant estate, if the owner ratifies
it.
2. personal servitudes: for anyone capacitated to accept.
NUISANCE
Any act, omission, establishment, business or condition of property or anything else which: (ISAHO)
1. Injures/endangers the health or safety of others;
2. Shocks, defies or disregards decency or morality;
3. Annoys or offends the senses;
4. Hinders or impairs the use of property; or
5. Obstructs or interferes with the free passage to any public highway or street, or body of water.
Classes:
1. Per se nuisance at all times and under all circumstances regardless of location and surrounding.
May be abated extra-judicially.
2. Per accidens nuisance by reason of circumstances, location, or surroundings. Subject to judicial
abatement.
3. Public affects the community or a considerable number of persons.
4. Private affects only a person or a small number of persons.
Doctrine of Attractive Nuisance:

One who maintains on his premises dangerous instrumentalities or appliances of a character likely to
attract children in play and who fails to exercise ordinary care to prevent children from playing
therewith or resorting thereto is liable to a child of tender years who is injured thereby, even if the child
is technically a trespasser in the premises.
Note: an artificial body of water such as a swimmibng pool or water tank or other that imitates
nature are not attractive nuisance.
Remedies against public nuisance: (PCE)

1. Prosecution under the RPC or local ordinance
2. Civil Action
3. Extrajudicial Abatement
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Remedies against private nuisance: (CE)

1. Civil Action
2. Extrajudicial Abatement
Extrajudicial Abatement
Requisites:
1. nuisance must be specially injurious to the person affected;
2. no breach of peace or unnecessary injury must be committed;
3. prior demand;
4. prior demand has been rejected;
5. approval by district health officer and assistance of local police; and
6. value of destruction does not exceed P3,000.
Notes:
1. a nuisance that is not a nuisance per se cannot be abated without judicial order.
2. the MMDA has no authority to declare a property nuisance. Only the courts can.
THEORY OF MODE AND TITLE
MODE is the specific cause which gives rise to ownership, as the result of the presence of a special
condition of things, of the aptitude and intent of persons, and of compliance with the conditions
established by law. This is the proximate cause of the acquisition.
TITLE is the juridical justification for the acquisition or a transfer of ownership or other real right.
This is the remote cause of the acquisition.
DIFFERENT MODES (and TITLES) of ACQUIRING OWNERSHIP
Modes of acquiring ownership Titles of acquiring ownership

A. Original Modes
1. Occupation 1. Condition of being without known
owner
2. Work which includes Intellectual creation 2. Creation, discovery or invention
B. Derivative modes
3. Law 3. Existence of required conditions
4. Tradition (delivery) 4. Contract of the parties
5. Donation 5. Contract of the parties
6. Prescription 6. Possession in the concept of owner
7. Succession 7. Death
OCCUPATION
a mode of acquiring ownership by the seizure of things corporeal which have no owner, with the
intention of acquiring them, and according the rules laid down by law.
Requisites:
1. there must be seizure of a thing
2. the thing seized must be corporeal personal property
3. the thing must be susceptible of appropriation by nature
4. the thing must be without an owner
5. there must be an intention to appropriate
Specific instances:
1. hunting and fishing
2. finding of movables which do not have an owner
3. finding of abandoned movables
4. finding of hidden treasure
5. catching of swarm of bees that has escaped from its owner, under certain conditions
6. catching of domesticated animals that have escaped from their owners, under certain conditions
7. catching of pigeons without fraud or artifice
8. transfer of fish to another breeding place without fraud or artifice
Note: Lands cannot be acquired by occupation although occupation may give rise to acquisition by
prescription.
TRADITION/DELIVERY
a mode of acquiring ownership as a consequence of certain contracts, by virtue of which, the object is
placed in the control and possession of the transferee, actually or constructively.
Kinds:
1. Real Tradition - actual delivery
2. Constructive Tradition
a. traditio symbolica parties make use of a token or symbol to represent the thing delivered
b. traditio longa manu by mere consent of the parties if the thing sold cannot be transferred to
the possession of the vendee at the time of the sale
c. traditio brevi manu when the vendee already has possession of the thing sold by virtue of
another title (Lessee purchased the leased property)
d. traditio constitutum possessorium when the vendor continues in possession of the thing sold
not as owner but in some other capacity. (lessor sold proerty but leased it from new owner.)
3. Quasi-tradition exercise of the right of the grantee with the consent of the grantor
4. Tradicion por ministerio de la ley delivery by operation of law
6. Tradition by public instrument
Requisites:
1. right transmitted should have previously existed in the patrimony of the grantor
2. transmission should be by just title
3. grantor and grantee should have intention and capacity to transmit and acquire
4. transmission should be manifested by some act which should be physical, symbolical or legal
DONATION
Donation - an act of liberality whereby a person disposes gratuitously of a thing or right in favor of
another who accepts it
Requisites: CIDA
1. donor must have capacity to make the donation
2. he must have donative intent (animus donandi)
3. there must be delivery
4. donee must accept or consent to the donation
Essential features/elements of a true donation:

a) Alienation of property by the donor during his lifetime, which is accepted
b) Irrevocability by the donor
c) Intention to benefit the donee (animus donandi)
d) Consequent impoverishment of the donor (diminution of his assets)
Classification:
1. As to effectivity:
a. inter vivos
b. mortis causa
c. propter nuptias
2. As to perfection/extinguishment:
a. pure
b. with a condition
c. with a term
3. As to consideration:
a. simple - gratuitous
b. remuneratory or compensatory made on account of donees merits
c. modal imposes upon the donee a burden which is less than the value of the thing donated
Donation Inter Vivos Donation Mortis Causa

1. Takes effect independently of the donors death Takes effect upon the death of the donor
2. Title conveyed to the donee before the donors Title conveyed upon donors death
death
3. Valid if donor survives donee Void if donor survives donee
4. Generally irrevo-cable during donors lifetime Always revocable
5. Must comply with the formalities required by Must comply with the formalities required by law for
Arts. 748 and 749 of the Code the execution of wills
Donations prohibited by law:

1. Made by persons guilty of adultery or concubinage at the time of donation;
2. Made between persons found guilty of the same criminal offense in consideration thereof;
3. Made to a public officer or his/her spouse, descendants or ascendants in consideration of his/her office;
4. Made to the priest who heard the confession of the donor during the latters last illness, or the minister
of the gospel who extended spiritual aid to him during the same period;
Page 41 of 193
5. Made to relatives of such priest, etc. within the 4th degree, or to the church to which such priest belongs;
6. Made by a ward to the guardian before the approval of accounts;
7. Made to an attesting witness to the execution of donation, if there is any, or to the spouse, parents, or
children, or anyone claiming under them.
8. Made to a physician, surgeon, nurse, health officer or druggist who took care of the donor during his/her
last illness;
9. Made by individuals, associations or corporations not permitted by law to make donations; and
10. Made by spouses to each other during the marriage or to persons of whom the other spouse is a
presumptive heir.
11. Donations in fraud of creditors
12. inofficious donations
Forms of donations:
1. Donations of movable property:
a. With simultaneous delivery of property donated:
i. it may be oral/written P5,000 or less;
ii. if value exceeds P5,000 written in public or private document
b. Without simultaneous delivery:
the donation and acceptance must be written in a public or private instrument, regardless of
value
2. Donation of immovable property:

a. must be in a public instrument specifying the property donated and the burdens assumed by
donee, regardless of value
b. acceptance must be either:
i. in the same instrument; or
ii. in another public instrument, notified to the donor in authentic form, and noted in both deeds
NOTE: Expression of gratitude to the donor without express acceptance was held a sufficient acceptance
(Cuevas vs Cuevas)
LIMITATIONS ON DONATION OF PROPERTY

1. Future property cannot be donated.
2. Present property that can be donated:
a) if the donor has forced heirs: he cannot give or receive by donation more than he can give or
receive by will
b) if the donor has no forced heirs: donation may include all present property provided he reserves in
full ownership or in usufruct:
1) the amount necessary to support him, and
2) those relatives entitled to support from him
3) property sufficient to pay the donors debt contracted prior to the donation.
3. Donation should not prejudice creditors
4. Donee must reserve sufficient means for his support and for his relatives which are entitled to be
supported by him.
EFFECTS OF DONATION (Art. 754 NCC)

1. donee may demand the delivery of the thing donated
2. donee is subrogated to the rights of the donor in the property
3. in donations propter nuptias, the donor must release the property from encumbrances, except servitudes
4. donors warranty exists if
a. expressed
b. donation is propter nuptias
c. donation is onerous
d. donor is in bad faith
5. when the donation is made to several donees jointly, they are entitled to equal portions, without
accretion, unless the contrary is stipulated
Payment of the donors debt by the donee

1. If there is express stipulation: the donee is to pay only debts contracted before the donation, if not
otherwise specified; but the donee answers only up to the value of the property donated, if no stipulation
is made to the contrary
2. If there is no stipulation: the donee is answerable for the debts of the donor only in case of fraud against
creditors.
ACTS OF INGRATITUDE
1. If the donee should commit some offense against the person, honor or property of the donor, or of his
wife or children under his parental authority
2. If the donee imputes to the donor any criminal offense, or any act involving moral turpitude, even
though he should prove it, unless the crime or act has been committed against the donee himself, his
wife or children under his authority
3. Refusal to support the donor
PRESCRIPTION
Kinds:
1. Acquisitive prescription - one acquires ownership and other real rights through the lapse of time in
the manner and under the conditions laid down by law.
a. Ordinary acquisitive prescription: requires possession of things in good faith and with just title for
the time fixed by law
b. Extraordinary acquisitive prescription: acquisition of ownership and other real rights without need
of title or of good faith or any other condition
Requisites:
1) capacity to acquire by prescription
2) a thing capable of acquisition by prescription
3) possession of thing under certain conditions
4) lapse of time provided by law
2. Extinctive Prescription rights and actions are lost through the lapse of time in the manner and under
the conditions laid down by law.
Acquisitive prescription Extinctive prescription

1. relationship between the occupant and the 1. one does not look to the act of the possessor
land in terms of possession is capable of but to the neglect of the owner
producing legal consequences; it is the
possessor who is the actor
2. requires possession by a claimant who is not 2. requires inaction of the owner or neglect of
the owner one with a right to bring his action
3. applicable to ownership and other real rights 3. applies to all kinds of rights, whether real or
personal
4. vests ownership or other real rights in the 4. produces the extinction of rights or bars a
occupant right of action
5. results in the acquisition of ownership or 5. results in the loss of a real or personal
other real rights in a person as well as the loss of right, or bars the cause of action to enforce
said ownership or real rights in another said right
6. can be proven under the general issue without 6. should be affirmatively pleaded and proved
its being affirmatively pleaded to bar the action or claim of the adverse party
Period of Prescription
Movables Immovables
1. Good Faith
4 years 10 years
2. Bad Faith
8 years 30 years
Rules on Computation of Period:

1. The present possessor may complete the period necessary for prescription by tacking his possession to
that of his grantor or predecessor
2. It is presumed that the present possessor who was also the possessor at a previous time, has continued to
be in possession during the intervening time, unless there is proof to the contrary
3. The first day shall be excluded and the last day included
Persons Against Whom Prescription runs:

1. Minors and other incapacitated persons who have parents, guardians or other legal representatives
2. Absentees who have administrators
3. Persons living abroad who have managers or administrators
4. Juridical persons, except the state and its subdivision
Persons against whom prescription does NOT run:

1. Between husband and wife, even though there be separation of property agreed upon in the marriage
settlements or by judicial decree.
2. Between parents and children, during the minority or insanity of the latter
3. Between guardian and ward during the continuance of the guardianship
Prescriptive Actions Prescriptive period Actions

Period
Page 43 of 193
a) Imprescriptible to declare an g) 4 YEARS action to revoke

inexistent or void donations due to
contract non-compliance of
to quiet title conditions
to demand a action to rescind
right of way partition of
to bring an deceaseds estate
action for on account of
abatement of lesion
public nuisance action to claim
to demand rescission of
partition in co- contracts
ownership annulment of
to enforce a contracts for vice
trust of consent
probate of a will actions upon a
to recover quasi-delict
possession of a action to revoke
registered land or reduce donations
under the Land based on birth,
Registration Act appearance or
by the registered adoption of a child
owner actions upon an
injury to the rights
of the plaintiff (not
arising from
contract)
b) 30 YEARS real actions over h) 3 YEARS actions under the

immovables (but eight hour labor
not foreclosure) law
without prejudice actions to recover
to the acquisition losses in gambling
of ownership or money claims as a
real rights by consequence of
acquisitive employer-
prescription employee
relationship
action to impugn
legitimacy of a
child if the husband
or his heirs reside
abroad
c) 10 YEARS actions upon a i) 2 YEARS action to impugn

written contract legitimacy of a
actions upon an child if the husband
obligation created or his heirs are not
by law residing in the city
actions upon a or municipality of
judgment from the birth
time judgment
becomes final
actions among
co-heirs to
enforce warranty
against eviction in
partition
Mortgage action
d) 8 YEARS action to j) 1 YEAR action to impugn

recover movables legitimacy of a
without prejudice child if the husband
to acquisition of or his heirs are
title for a shorter residing in the city
period or to the or municipality of
possessors title birth
under Arts. 559, forcible entry
1505 and 1133 and unlawful
detainer
Defamation
Revocation of
donation on the
ground of
ingratitude
Rescission or for
damages if
immovable is sold
with an apparent
burdens or
servitude
action for
warranty of
solvency in
assignment of
credits
actions for loss or
damage to goods
under the COGSA
e) 6 YEARS actions upon an k) 6 MONTHS actions for

oral (verbal) warranty against
contract hidden defects or
actions upon a encumbrances over
quasi-contract the thing sold
f) 5 YEARS action for l) 40 DAYS redhibitory action

annulment of based on faults or
marriages (except defects of animals
on the ground of
insanity) and for
legal separation
counted from the
occurrence of the
cause
actions against
the co-heirs for
warranty of
solvency the
debtor in credits
assigned in
partition
action for the
declaration of the
incapacity of an
heir (devisee or
legatee) to
succeed)
all other actions
whose periods are
not fixed by law,
counted from the
time the right of
action accrues
WILLS AND SUCCESSION
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SUCCESSION
A mode of acquisition by virtue of which the property, rights and obligations to the extent of the
value of the inheritance, of a person are transmitted through his death to another or others either by his will
or by operation of law. (Art. 774)
Kinds:
1. Testamentary or Testacy (by will);
2. Legal or intestacy (by operation of law based on the decedents presumed will);
3. Mixed (Partly Testamentary and Legal); and
4. Partition inter vivos (to a certain degree).
Elements:
1. DECEDENT (subjective element)
2. SUCCESSORS (subjective element)
3. Heirs - those who are called to the whole or to an aliquot portion of the inheritance either by will or
by operation of law
i. Voluntary those instituted by the testator in his will, to succeed to the inheritance or the
portion thereof of which the testator can freely dispose.
ii. Compulsory or Forced those who succeed by force of law to some portion of the
inheritance, in an amount predetermined by law, known as the legitime.
iii. Legal or Intestate those who succeed to the estate of the decedent who dies without a valid
will, or to the portion of such estate not disposed of by will.
3. Devisees or legatees - persons to whom gifts of real or personal property are respectively given by
virtue of a will
NOTE: The distinctions between heirs and devisees/legatees are significant in these cases:
a. Preterition (pretermission)
b. Imperfect disinheritance
c. After-acquired properties
d. Acceptance or non-repudiation of the successional rights.
4. DEATH OF THE DECEDENT (casual element)

a. Moment when rights to succeed are transmitted (Art 777)
b. However, a person may be presumed dead for the purpose of opening his succession
(see rules on presumptive death). In this case, succession is only of provisional character
because there is always the chance that the absentee may still be alive.
5. Inheritance (objective element);
NOTE: Whatever may be the time when actual transmission takes place, succession takes place in any event
at the moment of the decedents death. (Lorenzo vs. Posadas 64 Phil 353)
SUCCESSION - Refers to the legal mode by which inheritance is transmitted to the persons entitled to it.
Succession is a mode of acquisition by virtue of which the property, rights and obligations to the
extent of the value of the inheritance, of a person are transmitted through his death to another or others
either by his will or by operation of law. (Art. 774 NCC)
INHERITANCE - Refers to the universality or entirety of the property, rights and obligations of a person
who died
Inheritance includes:
1. PROPERTY, RIGHTS AND OBLIGATIONS NOT EXTINGUISHED BY DEATH
General rules on rights and obligations extinguished by his death
a. Rights which are purely personal are by their nature and purpose intransmissible for
they are extinguished by death (e.g. those relating to civil personality, family rights,
discharge of office).
b. Rights which are patrimonial or relating to property are generally part of inheritance as
they are not extinguished by death.
c. Rights of obligations are by nature transmissible and may constitute part of inheritance
both with respect to the rights of the creditor and as regards to the obligations of the
debtor.
2. ALL WHICH HAVE ACCRUED THERETO SINCE THE OPENING OF

SUCCESSION (Article 781 Civil Code)
I. TESTAMENTARY SUCCESSION
A. CONCEPT
WILL - an act whereby a person is permitted, with the formalities prescribed by law, to control to a certain
degree the disposition of his estate to take effect after his death (Art. 783)
NOTE: Thus, a document that does not purport to dispose of ones estate either by the institution of heirs or
designation of devisees/legatees or, indirectly, by effecting a disinheritance, is not to be governed by the law
on testamentary succession but by some other applicable laws.
Kinds of Wills:
1. Notarial or ordinary
2. Holographic
Characteristics of a Will:
1. UNILATERAL
2. STRICTLY PERSONAL ACT - The disposition of property is solely dependent upon the testator.
NOTE: The following acts MAY NOT be left to the discretion of a third person: (Article 785, 787 Civil
Code)
1. duration or efficacy of the designation of heirs, devisees or legatees;
2. determination of the portions which they are to take, when referred to by name; and
3. determination of whether or not the testamentary disposition is to be operative.
NOTE: However, the following acts MAY be entrusted to a third person: (Article 786 Civil Code)
a. distribution of specific property or sums of money that he may
leave in general to specified classes or causes; and
b. designation of the persons, institutions or establishments to
which such property or sums are to be given or applied.
3. FREE AND VOLUNTARY ACT Any vice affecting the testamentary freedom can cause the
disallowance of the will.
4. FORMAL AND SOLEMN ACT The formalities are essential for the validity of the will.
5. ACT MORTIS CAUSA
6. AMBULATORY AND REVOCABLE DURING THE TESTATORS LIFETIME
7. INDIVIDUAL ACT Two or more persons cannot make a single joint will, either for their reciprocal
benefit or for another person. However, separate or individually executed wills, although containing
reciprocal provisions (mutual wills), are not prohibited, subject to the rule on disposicion captatoria.
8. DISPOSITION OF PROPERTY
B. INTERPRETATION OF WILLS (ARTS. 788-792)

1) The testators intent (animus testandi), as well as giving effect to such intent, is primordial. It is
sometimes said that the supreme law in succession is the intent of the testator. All rules of
construction are designed to ascertain and give effect to that intention. It is only when the intention
of the testator is contrary to law, morals, or public policy that it cannot be given effect.
2) In case of doubt, that interpretation by which the disposition is to be operative shall be preferred.
That construction is to be adopted which will sustain and uphold the will in all its parts, if it can be
done consistently with the established rules of law.
Kinds of Ambiguities: (Article 786)

1. LATENT OR INTRINSIC AMBIGUITIES
that which does not appear on the face of the will and is discovered only by extrinsic evidence.
2. PATENT OR EXTRINSIC AMBIGUITIES that which appears on the face of the will itself
NOTES:
1. There is no distinction between patent and latent ambiguities, in so far as the admissibility of parol
or extrinsic evidence to aid testamentary disposition is concerned.
2. Extrinsic evidence to explain ambiguities in a will cannot include oral declarations of the testator as
to his intention.
3. The validity of a will as to its form depends upon the observance of law in force at the time it is
made. (Art. 795).
4. If a law different from the law in force at the time of the execution of the will goes into effect
before or after the death of the testator, such a law shall not affect the validity of the will, provided
that such will was duly executed In accordance with the formalities prescribed by law in force at
the time it was made.
AFTER-ACQUIRED PROPERTY (Art. 793)

Gen. Rule: Property acquired during the period between the execution of the will and the death of the
testator is NOT included among the property disposed of.
Exception: When a contrary intention expressly appears in the will
NOTE: This rule applies only to legacies and devises and not to institution of heirs.
C. TESTAMENTARY CAPACITY
refers to the ability as well as the power to make a will.
- must be present at the time of the execution of the will.
Requisites:
1. At least 18 years of age
2. Of sound mind, i.e., the ability to know:
a. the nature of the estate to be disposed of;
b. the proper objects of his bounty; and
c. the character of the testamentary act.
NOTE: The law presumes that the testator is of sound mind, UNLESS:
Page 47 of 193
1. he, one month or less, before making his will, was publicly known to be insane; or
2. was under guardianship at the time of making his will. (Torres and Lopez de Bueno vs. Lopez 48
Phil 772)
3. In both cases, the burden of proving sanity is cast upon proponents of the will.
Effect of Certain Infirmities:

1. mere senility or infirmity of old age does not necessarily imply that a person lacks testamentary
capacity;
2. physical infirmity or disease is not inconsistent with testamentary capacity;
3. persons suffering from idiocy (those congenitally deficient in intellect), imbecility (those who are
mentally deficient as a result of disease), and senile dementia (peculiar decay of the mental faculties
whereby the person afflicted is reduced to second childhood) do not possess the necessary mental
capacity to make a will;
4. an insane delusion which will render one incapable of making a will may be defined as a belief in
things which do not exist, and which no rational mind would believe to exist;
5. f the insane delusion touches to subject matter of the will, testamentary disposition is void.
6. a deaf-mute and blind person can make a will (i.e. Art. 807-808). A blind man with a sound and
disposing mind can make a holographic will.
7. an intoxicated person or person under the influence of drugs may make a will as there is no complete
loss of understanding.
Exception: where the testator has used intoxicating liquor or drugs excessively to such an extent as to impair
his mind, so that at the time the will is executed, he does not know the extent and value of his property, or
the names of persons who are the natural objects of his bounty, the instrument thus executed will be denied
probate for lack of testamentary capacity.
D. FORMALITIES OF WILLS
(EXTRINSIC VALIDITY)
COMMON FORMALITIES
1. Every will must be in writing; and
2. Executed in a language or dialect known to the testator.
SPECIAL FORMALITIES
I. NOTARIAL OR ORDINARY WILL

a. SUBSCRIPTION made at the end thereof by the testator himself or by the testator's name written
by some other person in his presence and by his express direction;
b. Subscription refers to the manual act of testator and also of his instrumental witnesses of affixing
their signature to the instrument.
c. ATTESTATION AND SUBSCRIPTION - (evidenced by an attestation clause) by 3 or more
credible witnesses in the presence of the testator and of one another;
d. Attestation consists in the act of witnesses of witnessing the execution of the will in order to see
and take note mentally that such will has been executed in accordance with requirements prescribed
by law.
ATTESTATION SUBSCRIPTION
1. an act of the senses 1. an act of the hand
2. mental act 2. mechanical act
3. purpose is to render 3. purpose is identification
available proof during
probate of will
MARGINAL SIGNATURES affixed by the testator or the person requested by him to write his name and
the instrumental witnesses of the will on each and every page thereof, except the last, on the left margin;
Exceptions to the rule that all of the pages of the will shall have to be signed on the left margin by the
testator and witnesses::
a. in the last page, when the will consists of two or more pages;
b. when the will consists of only one page;
c. when the will consists of two pages, the first of which contains all the testamentary dispositions and
is signed at the bottom by the testator and the witnesses and the second contains only the attestation
clause duly signed at the bottom by the witnesses.
Note: The inadvertent failure of one witness to affix his signature to one page of a testament, due to the
simultaneous lifting of two pages in the course of signing, is not per se sufficient to justify denial of probate
(Icasiano vs. Icasiano II SCRA 422).
PAGE NUMBERINGS Written correlatively in letters placed on the upper part of each page;
NOTE: This is not necessary when all of the dispositive parts of a will are written on one sheet only.
ACKNOWLEDGMENT Done before a notary public by the testator and the instrumental witnesses.
NOTE: 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. 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. To allow such would have the effect of having only two attesting witnesses to the will
which would be in contravention of Arts. 805 and 806. (Cruz vs. Villasor 54 SCRA 31)
MANNER OF SIGNING:
1) The use of any signature, marks or design intended by the testator to authenticate renders the will
sufficiently signed by the testator.
2) A signature by mark will be sufficient even if at the time of placing it, the testator knew how to
write and is able to do so.
3) It is sufficiently signed by writing his initials, or his first name, or he may use even an assumed
name.
4) A complete signature is not essential to the validity of a will, provided the part of the name written
was affixed to the instrument with intent to execute it as a will.
ATTESTATION CLAUSE
- memorandum or record of facts wherein the witnesses certify that the will has been executed before them,
and that it has been executed in accordance with the formalities prescribed by law.
Absence of this clause will render the will a nullity.
It must state the following ESSENTIAL FACTS:

the number of pages used upon which the will is written;
1) HOWEVER, even if number of pages is omitted in the AC BUT if there is an acknowledgment
clause which states the number of pages or the will itself mentioned such number of pages, it may
still be considered valid applying the Liberal Interpretation of the law. (Tabuada vs. Rosal)
2) the fact that the testator signed the will and every page thereof, or caused some other person to
write his name, under his express direction, in the presence of the instrumental witnesses;
3) When the testator expressly caused another to sign the formers name, this fact must be recited in
the attestation clause. Otherwise, the will is fatally defective. (Garcia vs. Lacuesta 90 Phil 489)
4) that the witnesses witnessed and signed the will and all the pages thereof in the presence of the
testator and of one another.
TEST OF PRESENCE: Not whether they actually saw each other sign, but whether they might have seen
each other sign had they chosen to do so considering their mental and physical condition and position with
relation to each other at the moment of inscription of each signature. (Jaboneta vs. Gustilo)
1) In the case of an ordinary or attested will, its attestation clause need not be written in a language or
dialect known to the testator since it does not form part of the testamentary disposition.
2) 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)
Effects of defects or imperfections in the Attestation Clause:

1) If the defect of the attestation clause goes into the very essence of the clause itself or consists in the
omission of one, some, or all of the essential facts, and such omission cannot be cured by an
examination of the will itself, the defect is substantial in character, as a consequence of which the
will is invalidated.
2) However, In the absence of bad faith, forgery, fraud, or undue and improper pressure and influence,
defects and imperfections in the form of attestation or in the language used therein shall not render
the will invalid if it is proved that the will was in fact executed and attested in substantial
compliance with Art. 805 (formal requirements). This is known as the DOCTRINE OF
LIBERAL INTERPRETATION (Art. 809)
Purposes of requiring witness to attest and to subscribe to a will:

1) identification of the instrument
2) protection of the testator from fraud and deception
3) the ascertainment of the testamentary capacity of the testator.
NOTE: Certain points to consider (Tolentino)

1) Mere knowledge by testator that another is signing, and acquiescing in it, there being no express
direction, is NOT sufficient.
2) Not required that the name of the person who writes the testators name should also appear on the
will; enough that testators name is written.
3) If the required numbers of attesting witness are competent, the fact that an additional witness, who
was incompetent also attested to the will, cannot impair the validity.
4) Immaterial in what order the acts are performed provided the signature or acknowledgment by the
testator and the attestation of the witnesses be accomplished in one occasion, and as part of one
transaction.
Page 49 of 193
5) The law refers to page and not to sheet or leaf or folio, so every page used in the will should be
signed on the left margin.
6) An attestation clause need be signed ONLY by the witnesses and not by the testator as it is a
declaration made by the witnesses.
7) date of will:
a) ordinary will: not an essential part;
b) holographic will: an essential part.
c) Failure or error to state the place of execution will not invalidate the will.
d) Signing of a will by the testator and witnesses and acknowledgment before a notary public,
need not be a single act.
e) Testamentary capacity must also exist at the time of acknowledgment.
ADDITIONAL REQUIREMENTS FOR SPECIAL CASES

1. Deaf or deaf-mute testator:
a) personal reading of the will, if able to do so; OR
b) if not possible, designation of 2 persons to read the will and communicate to him, in some
practicable manner, the contents thereof. (Article 807)
2. Blind testator:
Double-reading requirement:
a) first, by one of the subscribing witnesses, AND
b) second, by the notary public before whom the will is acknowledged. (Article
808)
Art. 808 applies not only to blind testators but also to those who, for one reason or another are
incapable of reading their wills (e.g. poor, defective or blurred vision).
In a case where the testator did not read the final draft of the will, but the lawyer who drafted the
document, read the same aloud in the presence of the testator, 3 witnesses, and notary public, the
Court held that the formal imperfections should be brushed aside when the spirit behind the law
was served though the letter was not. (Alvarado vs. Gaviola 226 SCRA 347)
WITNESS TO NOTARIAL WILLS (ARTS. 820 & 821)
Requirements:
1) of sound mind;
2) able to read and write;
3) not blind, deaf or dumb;
4) at least 18 years of age;
5) domiciled in the Philippines;
6) has not been convicted of falsification of a document, perjury, or false testimony
NOTE:
1. A witness need not know the contents of the will, and need not be shown to have had a good
standing in the community where he lives. Also, the acknowledging notary public cannot be one of
the 3 minimum numbers of witnesses.
2. Interested witness
3. A witness to a will who is incapacitated from succeeding from the testator by reason of a
devise/legacy or other testamentary disposition therein in his favor, or in favor of his spouse,
parent, or child. However, his competence as a witness subsists.
II. HOLOGRAPHIC WILL (Article 810)

1. entirely written by the hand of the testator;
2. entirely dated by the hand of the testator; and
3. entirely signed by the hand of the testator.
NOTE: The law exacts literal compliance with these requirements. HENCE, THE DOCTRINE OF
LIBERAL INTERPRETATION CANNOT BE APPLIED.
Nevertheless, the Court held in a case that as a general rule, the date in a holographic will should
include the day, month, and year of its execution. However, when 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 will is a valid compliance with Art. 810, probate of the holographic
will should be allowed under the principle of substantial compliance. (In the matter of Intestate Estate of
Andres de Jesus and Bibiana Roxas de Jesus, 134 SCRA 245)
Rule in case of insertion, cancellation, erasure or alteration:

Testator must authenticate the same by his FULL SIGNATURE. (Article 814)
NOTE: In the case of Kalaw vs. Relova (134 SCRA 241), the holographic will in dispute had only one
substantial provision, which was altered by substituting the original heir with another, but which alteration
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.
Effects of words written by another and inserted in the words written by the testator:
1. If the insertion was made after the execution of the will, but without the consent of the testator,
such insertion is considered as not written, because the validity of the will cannot be defeated by the
malice or caprice of third person.
2. If the insertion after the execution of the will was with the consent of the testator, the will remains
valid but the insertion is void.
3. If the insertion after the execution is validated by the testator by his signature thereon, then the
insertion becomes part of the will, and the entire will becomes void, because of failure to comply
with the requirement that it must be wholly written by the testator.
4. If the insertion made by a third person is made contemporaneous to the execution of the will, then
the will is void because it is not written entirely by the testator.
Probate of Holographic Will

1. If UNCONTESTED, requires that at least 1
witness who knows the handwriting and signature of the testator explicitly declare that the will
and signature are in the handwriting of the testator; if no witness, expert testimony may be
resorted to.
2. If CONTESTED, requires at least 3 of such
credible witnesses, if none expert witness.
NOTE:
a) Where the testator himself petitions for the probate of his holographic will and no contest is file, the
fact that he affirms that the holographic will and the signature are in his own handwriting, shall be
sufficient evidence thereof. If the holographic will is contested, the burden of disproving the
genuineness and due execution thereof shall be on the contestant.
b) A photostatic or xerox copy of a lost or destroyed holographic will may be admitted because the
authenticity of the handwriting of the deceased can be determined by the probate court, as
comparison can be made with the standard writings of the testator. (Rodelas vs. Aranza, 119 SCRA
16)
GOVERNING LAW ON FORMALITIES

1. As to time:
The validity of a will as to its form depends upon the observance of the law in force at the time it is
made. Its intrinsic validity, however, is judged at the time of the decedents death by the law of his
nationality.
2. As to place:
a. Filipino testator executing a will in the Philippines: Philippine law
b. Filipino testator executing a will outside of the Philippines: either
i. The law of the country in which it is executed; or
ii. The law of the Philippines.
c. Alien testator executing a will in the Philippines: either
i. The law of the Philippines; or
ii. he law of the country of which he is a citizen or subject.
d. Alien testator executing a will outside of the Philippines: either
i. The law of the place where it is executed; or
ii. The law of the place in which he resides; or
iii. The law of his country; or
iv. The law of the Philippines.
Aspects of the will governed by National Law of the Decedent (Article 1039 and Article 16 Civil Code)
1. Order of succession
2. Amount of successional rights
3. Intrinsic validity
4. Capacity to succeed
Joint will a single testamentary instrument which contains the wills of two or more persons, jointly
executed by them, either for their reciprocal benefit or for the benefit of a third person
--will of 2 or more persons is made in the same instrument and is jointly signed by them. This is a VOID
WILL.
Mutual wills wills executed pursuant to an agreement between two or more persons to dispose of their
property in a particular manner, each in consideration of the other
--separate wills of 2 persons, which are reciprocal in their provisions.
Reciprocal wills- wills in which the testators name each other as beneficiaries under similar testamentary
plans
NOTE: A will that is both joint and mutual is one executed jointly by two or more persons, the provisions of
which are reciprocal and which shows on its face that the devises are made in consideration of the other.
Such is prohibited.
Page 51 of 193
Reasons:
1. will is purely personal and unilateral act
2. contrary to the revocable character of a will
3. may expose the testator to undue influence, and may even induce one of the testators to
kill the other.
NOTE: Joint wills executed by Filipinos in a foreign country shall not be valid in the Philippines, even
though authorized by the foreign country in which they may have been executed (Article 819 Civil Code).
This prohibition is applicable only in joint wills executed by Filipinos in a foreign country; it does
NOT APPLY to joint wills executed by aliens.
CODICIL AND INCORPORATION BY REFERENCE
CODICIL
A supplement or addition to a will, made after the execution of a will and annexed to be taken as a
part thereof, by which any disposition made in the original will is explained, added to, or altered. (Article
825)
NOTE: To be effective, it must be executed as in the case of a will. Its execution has the effect of
republishing the will as modified.
INCORPORATION BY REFERENCE
(ART 827)
1. Contemplates only lists of properties, books of accounts, and inventories.
2. Provisions which are in the nature of testamentary dispositions must be contained in the will itself.
Requisites for a valid incorporation by reference: (ART 827)

1. The document or paper referred to in the will must be in existence at the time of the execution of
the will;
2. The will must clearly describe and identify the same, stating among other things the number of
pages thereof;
3. It must be identified by clear and satisfactory proof as the document or paper referred to therein;
4. It must be signed by the testator and the witnesses on each and every page, except in case of
voluminous books of account or inventories.
REVOCATION OF WILLS AND TESTAMENTARY DISPOSITIONS
REVOCATION
An act of the mind, terminating the potential capacity of the will to operate at the death of the
testator, manifested by some outward or visible act or sign, symbolic thereof. Such right to revoke a will
cannot be waived or restricted.
LAWS WHICH GOVERN REVOCATION (ART 829)

1. If the revocation takes place in the Philippines, whether the testator is domiciled in the Philippines
or in some other country, it is valid when it is in accordance with the laws of the Philippines
2. If the revocation takes place outside the Philippines, by a testator who is domiciled in the
Philippines, it is valid when it is in accordance with the laws of the Philippines
3. Revocation done outside the Philippines, by a testator who does not have his domicile in this
country, is valid when it is done according to the:
a. laws of the place where the will was made, or
b. laws of the place in which the testator had his domicile at the time of revocation;
MODES OF REVOCATION (ART 830)

1. By implication of law:
a. legal separation revokes testamentary provisions in favor of the offending spouse;
b. preterition revokes the institution of heir;
c. judicial action for recovery of debt revokes a legacy of credit/remission of debt;
d. transformation, alienation, or loss of bequeathed property revokes a legacy of such property;
e. act of unworthiness by an heir, devisee/legatee revokes testamentary provisions in his favor;
f. if both spouses of the subsequent marriage acted in bad faith, said marriage shall be void ab initio
and testamentary dispositions made by one in favor of the other are revoked by operation of law
(Art. 44, Family Code); and
g. void ab initio or annulled marriages revoke testamentary dispositions made by one spouse in favor
of the other (Art. 50, Family Code).
2. By some will, codicil, or other writing, executed as provided in case of wills, which may either be:
a. Express when there is a revocatory clause expressly revoking the previous will or a part thereof
b. Implied when the provisions thereof are partially or entirely inconsistent with those of the
previous will
NOTE: While express revocation may be effected by a subsequent will, or a codicil, or a nontestamentary
writing executed as provided in case of wills, implied revocation may be effected only by either a
subsequent will, or a codicil.
3. By burning, tearing, cancelling, or obliterating the will.

Requisites:
a. testamentary capacity at the time of performing the act of destruction;
b. intent to revoke (animus revocandi);
c. actual physical act of destruction;
d. completion of the subjective phase; and
e. performed by the testator himself or by some other person in his presence and express direction
(THE LIST IS EXCLUSIVE.)
NOTE: The act of revocation is a personal act of the testator. He cannot delegate to an agent the authority to
do the act for him. Another person, however, may be selected by him as an instrument and directed to do the
revocatory acts in his presence. A destruction not accomplished in the testators presence is an ineffective
revocation of the will.
DOCTRINE OF PRESUMED REVOCATION

a. Whenever it is established that the testator had in his possession or had ready access to the will, but
upon his death it cannot be found or located, the presumption arises that it must have been revoked
by him by an overt act.
b. Where it is shown that the will was in custody of the testator after its execution, and subsequently, it
was found among the testators effects after his death in such a state of mutilation, cancellation or
obliteration as represents a sufficient act of revocation, it will be presumed in the absence of
evidence to the contrary, that such act was performed by the testator with the intention of revoking
the will.
DOCTRINE OF DEPENDENT RELATIVE REVOCATION (ART 832)

a. revocation subject to a condition does not revoke a will unless and until the condition occurs .
Thus, where a testator revokes a will with the proven intention that he would execute another
will, his failure to validly make a latter will would permit the allowance of the earlier will.
b. Where the act of destruction is connected with the making of another will so as fairly to raise
the inference that the testator meant the revocation of the old to depend upon the efficacy of
the new disposition intended to be substituted, the revocation will be conditional and dependent
upon the efficacy of the new disposition; and if for any reason, the new will intended to be made
as a substitute is inoperative, the revocation fails and the original will remains in full force
(Vda. De Molo vs. Molo 90 Phil 37).
RATIO: THE LAW PRESUMES THE DECEDENT PREFER TESTACY OVER INTESTACY!
Revocation by mistake
A revocation of a will based on a false cause or an illegal cause is null and void. Thus, where a
testator by a codicil or later will, expressly grounding such revocation on the assumption of fact which turns
out to be false, as where it is stated that the legatees/devisees named therein are dead, when in fact, they are
living, the revocation does not take effect.
Notes:
1. Revocation takes effect immediately under the principle of instanter although the will takes
effect after the death of the testator.
2. An expressly revoked will cannot be revived by the revocation of the expressly revoking will.
3. The revocation of an impliedly revoking will shall revive the impliedly revoked will.
4. The disallowance of an expressly revoking will shall revived the expressly revoked will under the
principle of dependent relative revocation.
5. The destruction of the only copy of a holographic will expressly revoking an earlier notarial will
shall revive the expressly revoked notarial will as if it were not revoked at all.
REPUBLICATION AND REVIVAL OF WILLS
REPUBLICATION
a. The act of the testator whereby he reproduces in a subsequent will (express) the dispositions
contained in a previous will which is void as to its form, or he executes a codicil (constructive) to
his will.
b. Its purpose is to cure the will of its formal defects.
NOTES:
a. To republish a will void as to its form, all the dispositions must be reproduced or copied in the new
or subsequent will;
b. To republish a will valid as to its form but already revoked the execution of a codicil which makes
reference to the revoked will is sufficient.
Effects of Republication by virtue of a Codicil:
Page 53 of 193
a. Codicil revives the previous will

b. The old will is republished as of the date of the codicil makes it speak, as it were, from the new
and later date.
c. A will republished by a codicil is governed by a statute enacted to the execution of the will, but
which was operative when the codicil was executed.
REPUBLICATION REVIVAL
1. Takes place by an act of the testator 1. Takes place by operation of law.
2. Corrects extrinsic and intrinsic defects. 2. Restores a revoked will
REVIVAL
The restoration to validity of a will previously revoked by operation of law (implied revocation).
PRINCIPLE OF INSTANTER
The express revocation of the first will renders it void because the revocatory clause of the second
will, not being testamentary in character, operates to revoke the previous will instantly upon the execution of
the will containing it.
NOTE: In implied revocation, the first will is not instantly revoked by the second will because the
inconsistent testamentary dispositions of the latter do not take effect immediately but only after the death of
the testator.
ALLOWANCE AND DISALLOWANCE OF WILLS
PROBATE
a. A special proceeding mandatorily required for the purpose of establishing the validity of a will.
b. The statute of limitations is not applicable to probate of wills.
Questions determinable by the probate court: (ICE)

1. identity of the will;
2. testamentary capacity of the testator at the time of the execution of the will; and
3. due execution of the will.
GENERAL RULE: In probate proceeding, the courts area of inquiry is limited to an examination of, and
resolution on the extrinsic validity if the will, the due execution thereof, the testatrixs testamentary capacity
and the compliance with the requisites or solemnities prescribed by law. The probate court cannot inquire
into the intrinsic validity of testamentary provisions.
EXCEPTION: Practical considerations, e.g. when the will is intrinsically void on its face.
In Nuguid vs Nuguid (17 SCRA 449), the Supreme Court held that, 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.
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.
NOTES:
Criminal action will not lie against the forger of a will which had been duly admitted to probate by
a court of competent jurisdiction. (Mercado vs. Santos 66 Phil. 215)
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)
When a will is declared void because it has not been executed in accordance with the formalities
required by law, but one of the intestate heirs, after the settlement of the debts of the deceased, pays a legacy
in compliance with a clause in the defective will, the payment is effective and irrevocable (Article 1430,
NCC; Natural Obligations).
Grounds for Disallowance of a Will (ART 839)

1. Formalities required by law have not been complied with;
2. Testator was insane, or otherwise incapable of making a will, at the time of its execution;
3. Will was executed through force or under duress, or the influence of fear, or threats;
4. Will was procured by undue and improper pressure and influence, on the part of the beneficiary or
of some other person;
5. Signature of the testator was procured by fraud;
6. Testator acted by mistake or did not intend that the instrument he signed should be his will at the
time of affixing his signature thereto.
NOTE: GROUNDS ARE EXCLUSIVE.
Notes:
1. Fair arguments, persuasion, appeal to emotions, and entreaties which, without fraud or deceit or
actual coercion, compulsion or restraint do not constitute undue influence sufficient to invalidate a
will. (Barreto vs. Reyes 98 Phil 996)
2. Burden is on the person challenging the will to show that such influence was exerted at the time of
its execution.
3. To make a case of UNDUE INFLUENCE, the free agency of the testator must be shown to have
been destroyed; but to establish a ground of contest based on FRAUD, free agency of the testator
need not be shown to have been destroyed.
4. Allegations of fraud and undue influence are mutually repugnant and exclude each other; their
joining as grounds for opposing probate shows absence of definite evidence against the validity of
the will (Icasiano vs. Icasiano 11 SCRA 422)
REVOCATION DISALLOWANCE
1. voluntary act of the testator. 1. given by judicial decree.

2. with or without cause. 2. must always be for a legal cause.
3. may be partial or total. 3. always total except: when the ground of fraud or influence
for example affects only certain portions of the will.
I. INSTITUTION OF HEIRS (ARTS. 840-856)
INSTITUTION
1. An act by virtue of which a testator designates in his will the person or persons who are to succeed
him in his property and transmissible rights and obligations. (Art 840)
2. The proper test in order to determine the validity of an institution of heir is the possibility of finally
ascertaining the identity of the instituted heir by intrinsic or extrinsic evidence.
PRESUMPTIONS
1. Presumption of Equality Heirs instituted without designation of shares shall inherit in equal parts.
This is limited only to the case where all of the heirs are of the same class or juridical condition,
and where there are compulsory heirs among the heirs instituted, it should be applied only to the
disposable free portion.
2. Presumption of Individuality When the testator institutes some heirs individually and others
collectively, those collectively designated shall be considered as individually instituted, unless it
clearly appears that the intention of the testator was otherwise.
3. Presumption of Simultaneity when the testator calls to the succession a person and his children,
they are all deemed to have been instituted simultaneously and not successively.
INSTITUTION BASED ON A FALSE CAUSE (Article 850)

GENERAL RULE: The statement of a false cause for the institution of an heir shall be considered as not
written.
Reason: Generosity of the testator is the real cause of the testamentary disposition.
EXCEPTION: If it appears from the face of the will that the testator would not have made the institution
had he known the falsity of the cause.
Example: Where the person instituted is a total stranger to the testator, it is obvious that the real
cause of the testamentary disposition is not the generosity of the testator but the fact itself which turned out
to be false.
REQUISITES FOR THE ANNULMENT OF INSTITUTION OF HEIRS:

1. cause of institution of heirs must be stated in will;
2. cause must be shown to be false;
3. it must appear from the face of the will that the testator would not have made the institution had he known
the falsity of the cause.
Where the one-sentence will institutes the petitioner as the sole, universal heir and preterits the
parents of the testatrix, and it contains no specific legacies or bequests, such universal institution of
petitioner, by itself, is void. Intestate succession ensues. (Nuguid vs. Nuguid, et al. 17 SCRA 449)
PRETERITION (ART. 854)

Omission in the testators will of one, some, or all of the compulsory heirs in the direct line,
whether living at the time of the execution of the will or born after the death of the testator.
Requisites:
1. The heir omitted must be a compulsory heir in the direct line;
2. The omission must be complete and total in character; and
3. The compulsory heir omitted must survive the testator.
There is no total omission when:
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a. A devise/legacy has been given to the heir by the testator

b. A donation inter vivos has been previously given to the heir by the testator; or
c. Anything is left from the inheritance which the heir may get by way of intestacy.
NOTE: In the above cases, the remedy of the heir is completion of legitime under Art. 906, in case the value
of the property received is less than the value of the legitime.
Effects of Preterition:
1. It annuls the institution of heir;
2. The devises and legacies are valid insofar as they are not inofficious; and
3. If the omitted compulsory heir should die before the testator, the institution shall be effectual,
without prejudice to the right of representation.
NOTE: In case of omission without preterition, the rule in Art. 855 should be followed. The suggested
alternate phrasing of Dr. Tolentino to the said article is: The share of the compulsory heir omitted in a will
must be first taken from the part of the estate not disposed of by the will, if any; if that is not sufficient, so
much as may be necessary must be taken proportionally from the shares of the heirs given to them by will.
Notes:
1. Where the deceased left no descendants, legitimate or illegitimate, but she left forced heirs in the
direct ascending lineher parents, and her holographic will does not explicitly disinherit them but
simply omits them altogether, the case is one of preterition of parents, not a case of ineffective
disinheritance. (Nuguid vs. Nuguid 17 SCRA 449)
2. Preterition of the surviving spouse (SS) does not entirely annul the institution of the heir since SS is
not a compulsory heir in the direct line. However, since Article 842 protects the legitime of the SS,
the institution is partially annulled by reducing the rights of the instituted heir to the extent
necessary to cover the legitime of SS. (Tolentino)
EFFECT OF PREDECEASE
--an heir who dies before the testator shall transmit no right to his own heirs (rule is absolute with respect to
a voluntary heir)
--what is transmitted to the representatives of compulsory heir is his right to the legitime and not to the free
portion
EFFECT OF INCAPACITY
--A voluntary heir who is incapacitated to succeed from testator shall transmit no right to his own heirs.
--compulsory heir may be represented, but only with respect to his legitime
EFFECT OF REPUDIATION
--whether voluntary or compulsory, the heir who repudiates his inheritance cannot transmit any right to his
own heirs.
SUBSTITUTION OF HEIRS
(ARTS 857-870)
SUBSTITUTION
The act by which the testator designates the person or persons to take the place of the heir or heirs
first instituted (Tolentino). It may be considered as a subsidiary and conditional institution.
Kinds:
1. Simple or Common (that which takes place when the testator designates one or more persons to
substitute the heirs/s instituted in case such heir/s should die before him, or should not wish, or
should be incapacitated to accept the inheritance)
2. Brief or Compendious: brief (there are two or more persons designated by the testator to substitute
for only one heir), compendious (one heir is designated to take the place of two or more heirs)
Instances when substitution takes place:

a. instituted heir predeceases the testator;
b. incapacity of the instituted heir to succeed from the testator; and
c. repudiation of the inheritance.
Effect of substitution:
General rule: once the substitution has taken place, the substitute shall not only take over the share that
would have passed to the instituted heir, but he shall be subject to the same charges and conditions imposed
upon such instituted heir.
Exceptions:
(1) When the testator has expressly to the contrary;
(2) When the charges or conditions are personally applicable only to the heir instituted.
Fideicommissary
Requisites:
a. First heir (fiduciary) called to the succession.
b. An obligation clearly imposed upon such first heir to preserve the property and to transmit
it to the second heir.
c. Second heir (fideicommissary) to whom the property is transmitted by the first heir.
Without the obligation clearly imposing upon the first heir the preservation of the property and its
transmission to the second heir, there is no fideicommissary substitution (Rabadilla vs. CA 334 SCRA 522)
NOTE: Pending transmission of property, the fiduciary is entitled to all the rights of a usufructuary,
although the fideicommissary is entitled to all the rights of a naked owner.
Limitations:
a. Substitution must not go beyond one degree from the heir originally instituted.
b. Degree means degree of relationship.
c. Fiduciary and fideicommissary must be living at the time of the death of the testator.
d. Substitution must not burden the legitime of compulsory heirs.
e. Substitution must be made expressly.
A fideicommissary substitution is void if the first heir is not related in the 1st degree to the second heir
(Ramirez vs. Vda. De Ramirez 111 SCRA 704)
CONDITIONAL, MODAL TESTAMENTARY DISPOSITIONS, AND TESTAMENTARY

DISPOSITIONS WITH A TERM (ART 871-885)
GENERAL RULE: The institution of an heir may be made 1) conditionally, 2) for a term, or 3) for a
certain purpose or cause (modal). Conditions, terms, and modes however, are not presumed; they must be
clearly expressed in the will. The condition must fairly appear from the language of the will. Otherwise, it
is not binding.
LIMITATIONS:
1. The testator cannot impose any charge, burden, encumbrance, condition, or substitution
whatsoever upon the legitime of compulsory heirs.
2. Impossible conditions and those contrary to law or good customs are presumed to have been
imposed erroneously or through oversight, thus, are considered as not imposed.
3. An absolute condition not to contract a first marriage is always void and will be considered as not
written.
4. An absolute condition not to contract a subsequent marriage is generally void, unless imposed
upon a widow or widower by the deceased spouse or by the latters ascendants or descendants.
Even so, however, the legitime of the surviving spouse cannot be impaired.
An absolute condition not to contract marriage when validly imposed is resolutory in character.
Consequently, if the testator institutes his wife as heir subject to the condition that she will never marry
again, she immediately acquires a right to the inheritance upon the death of testator, but if she violates the
condition by contracting a 2nd marriage, she loses her right to said inheritance.
NOTE: However, the following relative conditions regarding marriage have been considered as
valid and binding:
a. generic condition to contract marriage;
b. specific condition to contract marriage with a determinate person; and
c. specific condition not to contract marriage with a determinate person.
5. Any disposition made upon the condition that the heir shall make some provisions in his will in
favor of the testator or of any other person shall be void (disposicion captatoria).
6. Conditions imposed by the testator upon the heirs shall be governed by the rules established for
conditional obligations in all matters not provided for by the law on succession.
Kinds of Conditions
1. Potestative Condition depends exclusively upon the will of the heir, devisee, or legatee, and
must be performed by him personally.
2. Causal Condition depends upon the will of the heir, devisee, or legatee, but upon the will of a
third person.
3. Mixed depends jointly upon the will of the heir, devisee, or legatee and upon chance and/or
will of a third person.
Fulfillment of Conditions:
1. Potestative Conditions must be fulfilled after the death of the testator (except when it has already
been fulfilled and is of such nature that it cannot be repeated);
2. Causal or mixed conditions may be fulfilled either before or after such death, unless the testator
has provided otherwise.
MODAL INSTITUTION (INSTITUCION SUB MODO)

Attachment by the testator to an institution of heir, or to a devise or legacy, of a statement of the:
a. object of the institution;
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b. application of the property left by testator; or

c. charge imposed by him.
NOTES:
When in doubt as to whether there is a condition or merely a mode, consider the same as mode.
When in doubt as to whether there is a mode or merely a suggestion, consider same only as a
suggestion.
The condition suspends but does not obligate; the mode obligates but does not suspend (for he
who inherits with a mode is already an heir; one who inherits conditionally is not yet an heir)
DOCTRINE of CONSTRUCTIVE FULFILLMENT: When without the fault of the fault of the heir, an
institucion sub modo cannot take effect in the exact manner stated by the testator, it shall be complied with
in a manner most analogous to and in conformity with his wishes.
NOTE:
If the condition is casual, the doctrine is not applicable since the fulfillment of the event which
constitutes the condition is independent of the will of the heir, devisee/legatee. If the condition is potestative
or mixed, the doctrine is applicable.
LEGITIMES
(ARTS 886 914)
LEGITIME
1. That part of the testators property which he cannot dispose of because the law has reserved it for
certain heirs who are, therefore, called compulsory heirs.
2. The course of action to enforce a legitime accrues upon the death of the donor-decedent since it is
only then that the net estate may be ascertained and on which basis, the legitime may be
determined. (Imperial vs. CA 316 SCRA 313)
NOTE: One half of the estate is always reserved for the primary or secondary compulsory heirs. The other
half is what is termed under the NCC as the free portion from which the legitime of the concurring
compulsory heirs are taken. This free portion is different from the disposable free portion over which
the testator has testamentary control. The disposable free portion is that which remains after the legitime
has been covered.
COMPULSORY HEIRS (CH)

Those for whom the legitime is reserved by law, and who succeed whether the testator likes it or not.
They cannot be deprived by the testator of their legitime except by disinheritance properly effected.
Kinds of Compulsory Heirs:

1. Primary those who have precedence over and exclude other CH. E.g. LCD.
2. Secondary those who succeed only in the absence of the primary CH. E.g. LPA or IP.
3. Concurring those who succeed together with the primary or secondary CH. E.g. ICD and SS.
If the testator is a If the testator is an

LEGITIMATE person ILLEGITIMATE person
1. Legitimate children and 1. Legitimate children and
descendants (LCD) descendants (LCD)
2. In default of the foregoing, 1. Illegitimate children and

legitimate parents and ascendants descendants (ICD)
(LPA)
3. Surviving spouse (SS) 3. In default of the foregoing,

illegitimate parents only (IP)
4. Illegitimate children and 4. Surviving spouse (SS)

descendants (ICD)
NOTES:
See Sections 17 & 18 of R.A. 8552.
By force of the Family Code, adopted children are deemed legitimate children of the adopters.
By force of the Family Code, IC without distinction and so long as their filiation is duly established
or proved in accordance with law, are each entitled to 1/2 of the legitime of a LC, thus abrogating
the 5:4 ratio between natural and non-natural IC.
RULES:
1. Direct descending line
a. Rule of preference between lines
b. Rule of proximity
c. Right of representation ad infinitum in case of predecease, incapacity, or
disinheritance (LC: LD only; IC: both LD and ID)
d. If all the LC repudiate their legitime, the next generation of LD succeed in their own
right
2. Direct ascending line

a. Rule of division by lines
b. Rule of equal division
3. Non-impairment of legitime
TABLE OF LEGITIMES
SURVIVOR LEGITIME NOTES

LC Divide by the # of LC, whether they survive
alone or with concurring CH.
SS
1 LC Note: share of SS to be taken from free portion.
SS
2 or more LC Note: share of SS to be taken from free portion.
SS equal to 1 LC
LC
IC of 1 LC
LC All the concurring CH get from the half free
SS portion, the share of the SS having preference
IC of 1 LC over that of the IC, whose share may suffer
reduction pro rata because there is no preference
among themselves.
LPA Whether they survive alone or with concurring
CH.
LPA
IC IC succeed in the in equal shares.
LPA
SS
LPA
SS 1/8
IC
IC Divide equally among the IC.
SS 1/3
IC 1/3
SS 1/3 if marriage is in articulo mortis and deceased
spouse dies within 3 mos. after the marriage.
if been living together for at least 5 years
0 if spouse gave reason for legal separation
IP
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IP -excluded- Children inherit in the amounts established in

Any child It depends the foregoing rules.
IP Only the parents of IC are included.

SS Grandparents and other ascendants are excluded.
STEPS IN DETERMINING THE LEGITIME OF COMPULSORY HEIRS:

1. Determination of the gross value of the estate at the time of the death of the testator;
2. Determination of all debts and charges which are chargeable against the estate;
3. Determination of the net value of the estate by deducting all the debts and charges from the gross value
of the estate;
4. Collation or addition of the value of all donations inter vivos to the net value of the estate;
5. Determination of the amount of the legitime from the total thus found;
6. Imputation of the value of all donations inter vivos made to compulsory heirs against their legitime and
of the value of all donations inter vivos made to strangers against the disposable free portion and
restoration to the hereditary estate if the donation is inofficious; and
7. Distribution of the residue of the estate in accordance with the will of the testator
COLLATION
1. Fictitious mathematical process of adding the value of the thing donated to the net value of the
hereditary estate (Art. 908 and Arts. 1061-1077).
2. Act of charging or imputing such value against the legitime of the compulsory heir to whom the thing
was donated (Arts. 1061-1077).
3. Actual act of restoring to the hereditary estate that part of the donation which is inofficious in order not
to impair the legitime of compulsory heirs.
RESERVA TRONCAL (ART 891)

The reservation by virtue of which an ascendant who inherits from his descendant any property
which the latter may have acquired by gratuitous title from another ascendant or a brother or
sister, is obliged to reserve such property for the benefit of relatives who are within the 3rd degree
and who belong to the line from which such property came.
It constitutes as an exception to both the system of legitime and the order of intestate succession.
Purposes:
1. To reserve certain property in favor of certain persons;
2. To prevent persons outside a family from acquiring, by some chance or accident, property which
otherwise would have remained with the said family;
3. To maintain a separation between paternal and maternal lines.
NOTE: Considering the rationale for reserva troncal which is to ultimately revert ownership of property that
originally belongs to a line of relatives but which by force of law passes to a different line, the
reserva would have no reason to arise where the ascendants who acquire the property themselves
belong to the line of relatives from which the property was, in turn, acquired by the descendant.
Requisites:
1. The property should have been acquired by operation of law by an ascendant (reservista) from his
descendant (propositus) upon the death of the latter.
2. The property should have been previously acquired by gratuitous title by the descendant
(propositus) from another ascendant or from a brother or sister (originator).
3. The descendant (propositus) should have died without any legitimate issue in the direct descending
line who could inherit from him.
Personal elements:
1. Originator the ascendant, or brother or sister from whom the propositus had acquired the property by
gratuitous title (e.g. donation, remission, testate or intestate succession);
2. Propositus the descendant who died and from whose death the reservista in turn had acquired the
property by operation of law (e.g. by way of legitime or intestate succession). The so-called arbiter of the
fate of the reserva troncal.
3.Reservista the ascendant, not belonging to the line from which the property came (Justice Vitug) that is
the only compulsory heir and is obliged to reserve the property.
NOTE: Dr. Tolentino is of the view that even if the reservista and the originator belong to the same line,
there is still an obligation to reserve.
4.Reservatarios the relatives of the propositus within the 3rd degree and who belong to the line from
which the property came and for whose benefit the reservation is constituted. They must be related by blood
not only to the propositus but also to the originator.
NOTE: All personal elements must be joined by bonds of legitimate relationship.

NOTE: In determining the right of the reservatarios over the reservable property, there are 2 events to
consider:
1. Death of propositus: all qualified reservatarios acquire an inchoate right. Reservista owns the
property subject to a resolutory condition.
2. Death of reservista: surviving reservatarios acquire a perfect right.
NOTE: The NCC did not provide for the rules on how the reservatarios would succeed to the reservista.
However, the following rules on intestacy have been consistently applied:
a. Rule of preference between lines
b. Rule of proximity
c. Right of representation (provided that the representative is a relative of the descendant- propositus
within 3rd degree, and that he belongs to the line from which the reservable property came)
d. Full blood/double share rule in Art. 1006
Property subject to reservation: must be the same property which the reservista had acquired by
operation of law from propositus upon the death of the latter and which the latter, in turn had acquired by
gratuitous title during his lifetime from another ascendant, brother/sister.
Obligations of Reservista:
(1) To make an inventory of all reservable property;
(2) To appraise value of all reservable movable property;
(3) To annotate in Registry of property the reservable character of all reservable immovable property;
(4) To secure by mortgage (a) restitution of movables not alienated, (b) payment of damages caused by
his fault or negligence, (c) return of price received for movables alienated and (d) payment of value
of immovable alienated.
A reservatorio may dispose of his expentancy to the reservable property during pendency of the
reserve in its uncertain and conditional form. If he dies before the reservista, he has not transmitted
anything, but if he survives such reservista, the transmission shall become effective.
A will may prevent the constitution of a reserva. In case of testate succession, only the legitime
passes by operation of law. The propositus may, by will, opt to give the legitime of his ascendant without
giving to the latter properties he had acquired by gratuitous title from another ascendant, or brother or sister.
In such case, a reserva troncal is avoided.
However, if the ascendant was not disentitled in the will to receive such properties, the reserva
minima rule (proportional reserva) should be followed. The rule holds that all property passing to the
reservista must be considered as passing partly by operation of law and partly by will of the propositus.
Thus, one half of the properties acquired by gratuitous title should be reservable, and the other half should
be free.
Causes for Extinguishment of Reserva Troncal:

1. Death of reservatarios;
2. Death of all relatives of propositus within the 3rd degree who belong to the line from which the
property came;
3. Loss of the reservable property for causes not due to the fault or negligence of the reservista.
4. Waiver or renunciation by the reservatarios;
5. Prescription of the right of the reservatarios, when the reservista holds the property adversely
against them in the concept of an absolute owner;
6. Registration by the reservista of the property as free property under the Land Registration Act
M. DISINHERITANCE (ART 915 923)

A testamentary disposition by which a person is deprived of, or excluded from, the inheritance to which
he has a right.
A disinheritance properly effected totally excludes the disinherited heir from the inheritance. The
disinherited heir is deprived not only of the legitime but also of such part of the free portion that would
have passed to him by a previous will (which is revoked, as inconsistent with, the subsequent
disinheritance) or by intestate succession.
Requisites:
1. Effected only through a valid will;
2. For a cause expressly stated by law;
3. Cause must be stated in the will itself;
4. Cause must be certain and true;
5. Unconditional;
6. Total; and
7. The heir disinherited must be designated in such a manner that there can be no doubt as to his
identity.
Effects of Disinheritance:
1. Deprivation of the compulsory heir who is disinherited of any participation in the inheritance
including the legitime.
2. The children/descendants of the person disinherited shall take his or her place and shall preserve the
rights of compulsory heirs with respect to the legitime.
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3. The disinherited parent shall not have the usufruct or administration of the property which
constitutes the legitime.
IMPERFECT DISINHERITANCE
A disinheritance which does not have one or more of the essential requisites for its validity.
Effects:
1. If testator had made disposition of the entire estate: annulment of the testamentary dispositions only in
so far as they prejudice the legitime of the person disinherited; does not affect the dispositions of the
testator with respect to the free portion.
2. If testator did not dispose of the free portion: compulsory heir is given all that he is entitled to receive as
if the disinheritance has not been made, without prejudice to lawful dispositions made by the testator in
favor of others.
3. Devises, legacies and other testamentary dispositions shall be valid to such extent as will not impair the
legitime.
PRETERITION DISINHERITANCE
1. deprivation of a compulsory heir 1. deprivation of a compulsory
of his legitime is tacit heir of his legitime is express.
2. may be voluntary but the law 2. always voluntary.

presumes that it is involuntary
3. law presumes that there has been 3. done with a legal cause.
merely an oversight or mistake on
the part of the testator.
4. omitted heir gets not only his 4. if disinheritance is not lawful,

legitime but also his share in the compulsory heir is merely
free portion not disposed of by way restored to his legitime.
of legacies/ devises.
Common Causes for Disinheritance of children or descendants, parents or ascendants, and spouse:
1. When the heir has been found guilty of an attempt against the life of the testator, his/her descendants or
ascendants, and spouse in case of children and parents;
2. When the heir has accused the testator of a crime for which the law prescribes imprisonment for 6 years
or more, if the accusation has been found groundless;
3. When the heir by fraud, violence, intimidation, or undue influence causes the testator to make a will or
to change one already made;
4. Refusal without justifiable cause to support the testator who disinherits such heir.
Peculiar Causes for Disinheritance

1. Children/Descendants:
a. When the child/descendant has been convicted of adultery or concubinage with the spouse of the
testator;
b. Maltreatment of the testator by word or deed by the child/descendant;
c. When the child/descendant leads a dishonorable or disgraceful life; Conviction of a crime which
carries with it a penalty of civil interdiction.
2. Parents/Ascendants:
a. When the parents have abandoned their children or induced their daughters to live a corrupt or
immoral life, or attempted against their virtue;
b. When the parent/ascendant has been convicted of adultery or concubinage with the spouse of the
testator;
c. Loss of parental authority for causes specified in the Code; and
d. Attempt by one of the parents against the life of the other, unless there has been reconciliation
between them.
3. Spouse:
a. When the spouse has given cause for legal separation; When the spouse has given grounds for the
loss of parental authority.
Revocation of Disinheritance:
1. Reconciliation;
2. Subsequent institution of the disinherited heir; and
3. Nullity of the will which contains the disinheritance.
NOTE: Once disinheritance has been revoked or rendered ineffectual, it cannot be renewed except for causes
subsequent to the revocation or based on new grounds.
RECONCILIATION
It is the resumption of genuine cordial relationship between the testator and the disinherited heir,
approximating that which prevailed before the testator learned of the cause for disinheritance,
reciprocally manifested by their actions subsequent to the act of disinheritance.
A subsequent reconciliation between the offender and the offended person deprives the latter of the right
to disinherit, and renders ineffectual any disinheritance that may have been made. (Art. 922)
NOTES:
Mere civility which may characterize their relationship, a conduct that is naturally expected of every
decent person, is not enough.
In order to be effective, the testator must pardon the disinherited heir. Such pardon must specifically
refer to the heir and to the acts causing the disinheritance. The heir must accept the pardon.
No particular form is required. It may be made expressly or tacitly.
NOTE: Where the cause for disinheritance is likewise a ground for unworthiness to succeed, what is the
effect of a subsequent reconciliation upon the heirs capacity to succeed?
1. If disinheritance has been made: Rule on reconciliation applies. The disinheritance becomes ineffective.
2. If disinheritance has not been made: Rule on reconciliation does not apply. The heir continues to be
incapacitated to succeed unless pardoned by the testator under Art. 1033. The law effects the
disinheritance.
N. LEGACIES AND DEVISES (ARTS. 924 959)
Persons charged with legacies and devises:

(1) compulsory heir;
(2) voluntary heir;
(3) legatee or devisee;
(4) estate
NOTES:
If the will is silent with regard to the person who shall pay or deliver the legacy/devise, there is a
presumption that such legacy or devise constitutes a charge against the decedents estate.
Since legacies and devises are to be taken from the disposable free portion of the estate, thus, the
provisions on institution of heirs are generally applicable to them.
STATUS OF PROPERTY GIVEN BY EFFECT ON THE

LEGACY/DEVISE LEGACY/DEVISE
1. Belonging to the testator at the time of the

execution of the will until his death Effective
2. Belonging to the testator at the time of the

execution of the will but alienated in favor of Revoked
a 3rd person
3. Belonging to the testator at the time of the No revocation. There is a clear

execution of the will but alienated in favor of intention to comply with legacy or
the legatee/devisee gratuitously devise.
4. Belonging to the testator at the time of the Legatee/devisee can demand

execution of the will but alienated in favor of reimbursement from the heir or
the legatee or devisee onerously estate
5. Not belonging to the testator at the time the

will is executed but he has ordered that the Effective
thing be acquired in order that it be given to
the legatee/devisee
6. Not belonging to the testator at the time the

will is executed and the testator erroneously Void
believed that the thing pertained to him
7. Not belonging to the testator at the time the Effective

will is executed but afterwards becomes his
by whatever title
8. Already belonged to the legatee/devisee at

the time of the execution of the will even Ineffective
though another person may have interest
therein
Page 63 of 193
ART. 911 ART. 950

9.Order
Already belonged to the
of preference: legatee or devisee
(LIPO) Order of preference: (RPSESO)
at the time of the execution of the will even Ineffective
though it may have been subsequently
alienated by him
1. Legitime of compulsory heirs 1. Remuneratory L/D
2. Donations inter vivos 2.Preferential L/D
3. Preferential
10.Testator had legacies or devices
knowledge 3.L forLegatee/devisee
that the thing support can claim nothing
4. All otherbelonged
bequeathed legacies to
or adevices pro 4.L
third person and forby
education
virtue of the legacy/devise
the rata
legatee/devisee acquired the property 5.L/D of a specific, determinate thing
gratuitously after the execution of the will which forms a part of the estate
All others pro rata
Application: Application:
11.Testator had knowledge that the thing Legatee/devisee can demand
(1) When belonged
bequeathed the reduction is necessary
to a third person and(1)
the When there are no from
reimbursement compulsory heirsor
the heir
to preserve the legitime of and
legatee/devisee acquired the property by estate the entire estate is distributed by the
compulsory
onerous title heirs from impairment testator as legacies or devises; or
whether there are
IMPERFECT PRETERITION
DISINHERITANCE
donations inter vivos or not; or (2) When there are compulsory heirs but
(2) When,
1. Thealthough, the legitimemay
person disinherited has 1.their
Thelegitime
person has already
omitted been
must be provided
a
been preserved by the testator
be any compulsory heir himself for by theheir
compulsory testator and there
in the direct line are no
there are donations inter vivos. donations inter vivos.
2. Always express 2. Always implied
3.Always intentional 3. May be intentional or

unintentional
4. Effect: Partial annulment of 4. Effect: Total annulment of

institution of heirs institution of heirs
NOTES:
In case of reduction in the above cases, the inverse order of payment should be followed.
When the question of reduction is exclusively among legatees and devisees themselves, Article 950
governs; but when there is a conflict between compulsory heirs and devisees and legatees, Article 911
applies.
GROUNDS FOR REVOCATION OF LEGACIES AND DEVISES (ART 957)
1. Testator transforms the thing bequeathed in such a manner that it does not retain either the form or
the denomination it had.
2. Testator by any title or for any cause alienates the thing bequeathed, or any part thereof, it being
understood that in the latter case the legacy or devise shall be without effect only with respect to the part
alienated.
Except: when the thing should again belong to the testator after alienation.
3. Thing bequeathed is totally lost during the lifetime of the testator, or after his death without the
heirs fault
4. Other causes: nullity of the will; noncompliance with suspensive conditions affecting the bequests;
sale of the thing to pay the debts of the deceased during the settlement of his estate.
NOTE: LIST IS NOT EXCLUSIVE
II. LEGAL OR INTESTATE SUCCESSION

That which is effected by operation of law in the absence or default of a will.
CAUSES OF INTESTACY
1. If a person dies without a will, or with a void will, or one which has subsequently lost its validity;
2. Absence of an institution of heir;
3. Partial institution of heir. In such case, intestacy takes place as to the undisposed portion (mixed
succession);
4. Non-fulfillment of suspensive condition attached to the institution of heir;
5. Predecease of the instituted heir;
6. Repudiation by the instituted heir;
7. Incapacity of instituted heir;
8. Preterition. Intestacy may be total or partial depending on whether or not there are legacies/devises;
9. Fulfillment of resolutory condition;
10. Expiration of term or period of institution;
11. Non-compliance or impossibility of compliance with the will.
NOTE: In all cases where there has been an institution of heir, follow the I.S.R.A.I. order of Justice Paras. If
the Institution fails, Substitution occurs. If there is no substitute, the right of Representation applies in the
direct descending line to the legitime if the vacancy is caused by predecease, incapacity, or
disinheritance. The right of Accretion applies to the free portion when the requisites in Art. 1016 are
present. If there is no substitute, and the right of Representation or Accretion does not apply, the rules on
Intestate succession shall take over.
A. RULES
1. Rule of Preference between lines
Those in the direct descending line shall exclude those in the direct ascending and collateral lines,
and those in the direct ascending line shall, in turn, exclude those in the collateral line.
2. Rule of Proximity
The relative nearest in degree excludes the more distant ones, saving the right of representation when it
properly takes place.
This rule is subject to the rule of preference between lines.
3. Rule of Equal Division
Relatives in the same degree shall inherit in equal shares.
EXCEPTIONS:
a) Division in the ascending line (between paternal and maternal grandparents);
b) Division among brothers and sisters, some of whom are of the full and others of half blood; and
c) Division In cases where the right of representation takes place.
NOTE: This rule is subject to the rule of preference between lines.

4. Rule of Barrier between the legitimate family and the illegitimate family
The illegitimate family cannot inherit by intestate succession from the legitimate family and vice-versa.
5. Rule of Double Share for full blood collaterals
When full and half-blood brothers or sisters, nephews or nieces, survive, the full blood shall take a
portion in the inheritance double that of the half-blood.
NOTE: In case of a disposition made in general terms under Article 959, only the Rule of Proximity applies.
B. RELATIONSHIP (ARTS. 963 969)

1. Number of generations determines proximity.
2. Each generation forms a degree.
3. A series of degrees forms a line.
4. A line may be direct or collateral. A direct line is that constituted by the series of degrees among
ascendants and descendants (ascending and descending).
Page 65 of 193
5. A collateral line is that constituted by the series of degrees among persons who are not ascendants or
descendants, but who come from a common ancestor.
6. Full blood: same father and mother; half blood: only one of either parent is the same.
7. In adoption, the legal filiation is personal and exists only between the adopter and the adopted. The
adopted is deemed a legitimate child of the adopter (AP), but still remains as an intestate heir of his
natural parents and other blood relatives.
C. RIGHT OF REPRESENTATION (RR)

(ARTS. 970 977)
A right created by fiction of law, by virtue of which the representative is raised to the place and
degree of the person represented, and acquires the rights which the latter would have if he were living or if
he could have inherited. The representative is called to the succession by the law not by the person
represented. He succeeds the one whom the person represented would have succeeded.
NOTES:
In the direct line, representation takes place ad infinitum in the direct descending line, never in the
ascending.
In the collateral line, representation takes place only in favor of the children of brothers or sisters
(nephews and nieces), whether of the full or half-blood, and only if they concur with at least 1 uncle or
aunt.
1.Testamentary Succession
a) When a compulsory heir in the direct descending line had predeceased the testator and was
survived by his children or descendants.
b) When a compulsory heir in the direct descending line is excluded from the inheritance due to
incapacity or unworthiness and he has children or descendants.
c) When a compulsory heir in the direct descending line is disinherited and he has children or
descendants; representation covers only the legitime.
d) A legatee/devisee who died after the death of the testator may be represented by his heirs.
Note: There is no representation for those who repudiates!
2.Intestate Succession
a) When a legal heir in the direct descending line had predeceased the decedent and was survived by
his children or descendants.
b) When a legal heir in the direct descending line is excluded from the inheritance due to incapacity
or unworthiness and he has children or descendants.
c) When brothers or sisters had predeceased the decedent and they had children or descendants.
d) When illegitimate children represent their illegitimate parents who already died in the estate of
their grandparents.
e) When nephews and nieces inherit together with their uncles and aunts in representation of their
deceased parents who are the brothers or sisters of said uncles and aunts.
D. INTESTATE OR LEGAL HEIRS

Those who are called by law to the succession either in the absence of a will or of qualified heirs,
and who are deemed called based on the presumed will of the decedent.
REGULAR ORDER OF SUCCESSION (Decedent is a legitimate person):

1. Legitimate children or descendants (LCD)
2. Legitimate parents or ascendants (LPA)
3. Illegitimate children or descendants (ICD)
4. Surviving spouse (SS)
5. Brothers and sisters, nephews and nieces (BS/NN)
6. Other collateral relatives within the 5th degree (C5)
7. State
IRREGULAR ORDER OF SUCCESSION (Decedent is an illegitimate person):

1. Legitimate children or descendants (LCD)
2. Illegitimate children or descendants (ICD)
3. Illegitimate parents (IP)
4. Surviving spouse (SS)
5. Brothers and sisters, nephews and nieces (BS/NN)
6. State
ORDER OF CONCURRENCE
1. LCD, ICD, and SS
2. LPA, ICD, and SS
3. ICD and SS
4. SS and IP
5. BS/NN and SS
6. C5 (alone)
7. State (alone)
TABLE OF INTESTATE SHARES
SURVIVOR INTESTATE SHARE

Any class alone Entire estate
1 LC
SS
2 or more LC Consider SS as 1 LC, then divide estate by total
SS number.
LPA
SS
LPA
SS 1/4
IC 1/4
IP
SS
(The law is silent. Apply concurrence theory.)
SS
BS/NN
1 LC (1/2) First, satisfy legitimes. Estate would be
SS (1/4) insufficient. Reduction must be made according to
IC (1/4) the rules on legitimes. The legitimes of LCD and
SS shall always be first satisfied in preference to
the ICD.
2 or more LC First, satisfy legitimes. There would be an excess
SS in the estate. Distribute such excess in the
IC proportion 1:2:2, in accordance with the
concurrence theory.
CARDINAL PRINCIPLES OF INTESTATE SUCCESSION (Justice Paras)

1. Even if there is an order of intestate succession, the Compulsory Heirs (CH) are never excluded. The
Civil Code follows the concurrence theory, not the exclusion theory.
2. Right of Representation (RR) in the collateral line occurs only in intestate succession, never in
testamentary succession because a voluntary heir cannot be represented (collateral relatives are not CH).
3. The intestate shares are either equal to or greater than the legitime.
GENERAL RULE: Grandchildren always inherit by RR, provided representation is proper.

EXCEPTION: Whenever all the children repudiate, the grandchildren inherit in their own right because
RR would not be proper.
4. Nephews and nieces inherit either by RR or in their Own Right (OR).

a. RR: when they concur with aunts and uncles (provided that RR is proper)
b. OR: when they do not concur with aunts and uncles.
5. ICD of legitimates cannot represent because of the barrier, but both the ICD and LCD of illegitimates
can.
6. There can be reserva troncal in intestate succession.
7. A renouncer can represent, but cannot be represented.
8. A person who cannot represent a near relative cannot also represent a relative farther in degree.
III. MIXED SUCCESSION OR PARTIAL INTESTACY
Succession that is effected partly by will and partly by operation of law.
RULES:
Page 67 of 193
1. The law of legitimes must be brought into operation in partial intestacy, because the testamentary
dispositions can affect only the disposable free portion but never the legitimes.
2. If among the concurring intestate heirs there are compulsory heirs, whose legal or intestate portions
exceed their respective legitimes, then the amount of the testamentary disposition must be deducted
from the disposable free portion, to be borne by all the intestate heirs in the proportions that they are
entitled to receive from such disposable free portion as intestate heirs.
3. If the intestate share of a compulsory heir is equal to his legitime, then the amount of the testamentary
disposition must be deducted only from the intestate shares of the others, in the proportions stated
above.
4. If the testamentary dispositions consume the entire disposable free portion, then the intestate heirs who
are compulsory heirs will get only their legitime, and those who are not compulsory heirs will get
nothing.
IV. PROVISIONS COMMON TO TESTAMENTARY AND INTESTATE SUCCESSIONS
A. RIGHT OF ACCRETION (A)

(ARTS 1015 1023)
A right by virtue of which, when two or more persons are called to the same inheritance, devise or
legacy, the part assigned to one who renounce or cannot receive his share, or who died before testator, is
added or incorporated to that of his co-heirs, co-devisees, or co-legatees.
A right based on the presumed will of the deceased that he prefers to give certain properties to
certain individuals, rather than to his legal heirs.
Requisites:
1. 2 or more persons must have been called to the same inheritance, legacy or devise, or to the same
portion thereof, pro indiviso; and
2. there must be a vacancy in the inheritance, legacy or devise (caused by predecease, incapacity,
repudiation, nonfulfillment of suspensive condition or void or ineffective testamentary dispositions.)
EFFECTS of PREDECEASE, INCAPACITY, DISINHERITANCE, or REPUDIATION

in both TESTAMENTARY and INTESTATE SUCCESSION
CAUSE OF TESTAMENTARY INTESTATE

VACANCY SUCCESSION SUCCES-SION
Legitime Free Portion (IS)
Predecease 1. RR 1. A 1. RR
2. IS 2. IS 2. IS
Incapacity 1.RR 1. A 1.RR
2.IS 2. IS 2.IS
Disinheritance 1.RR _ _
2.IS
Repudiation IS A A
Summary:
(A) In testamentary succession:
(1) Legitime:
(a) In case of predecease of an heir, there is representation if there are children or descendants; if none, the
others inherit in their own right.
(b) In case of incapacity, results are the same as in predecease.
(c) In case of disinheritance, results are the same as in predecease.
(d) In case of repudiation by an heir, the others inherit in their own right.
(2) Disposable free portion:

Accretion takes place when requisites are present; but if such requisites are not present, the others inherit in
their own right.
(B) In intestate succession:

(1) In case of predecease, there is representation if there are children or descendants; if none, the others
inherit in their own right.
(2) In case of incapacity, results are the same as in predecease.
(3) In case of repudiation, there is always accretion.
B. CAPACITY TO SUCCEED BY WILL OR BY INTESTACY (ARTS. 1024 1040)
Requisites:
1. The heir, legatee/devisee must be living or in existence at the moment the succession opens; and
2. He must not be incapacitated or disqualified by law to succeed.
THE FOLLOWING ARE INCAPABLE OF SUCCEEDING:

A. Based on Undue Influence or Interest: (PIGRAP)
1. Priest who heard the confession of the testator during his last illness, or the minister of the gospel who
extended spiritual aid to him during the same period;
2. Individuals, associations and corporations not permitted by law to inherit;
3. Guardian with respect to testamentary dispositions given by a ward in his favor before the final accounts
of the guardianship have been approved, even if the testator should die after the approval thereof;
nevertheless, any provision made by the ward in favor of the guardian when the latter is his ascendant,
descendant, brother, sister, or spouse, shall be valid;
4. Relatives of such priest or minister of the gospel within the 4th degree, the church, order, chapter,
community, organization or institution to which such priest or minister may belong;
5. Attesting witness to the execution of a will, the spouse, parents or children, or any one claiming under
such witness, spouse, parents or children; and
6. Physician, surgeon, nurse, health officer or druggist who took care of the testator during his last illness.
B. Based on Morality or Public Policy

(ART 739)
1. Those made in favor of a person with whom the testator was guilty of adultery or concubinage at the time
of the making of the will.
2. Those made in consideration of a crime of which both the testator and the beneficiary have been found
guilty.
3. Those made in favor of a public officer or his spouse, descendants and ascendants, by reason of his public
office
C. Based on Acts of Unworthiness (A4F3P)

1. Parents who have abandoned their children or induced their daughters to lead a corrupt or immoral life, or
attempted against their virtue;
2. Any person who has been convicted of an attempt against the life of the testator, his/her spouse,
descendants or ascendants;
3. Any person who has accused the testator of a crime for which the law prescribes imprisonment for 6 years
or more, if the accusation has been found groundless;
4. Any person convicted of adultery or concubinage with the spouse of the testator;
5. Any heir of full age who, having knowledge of the violent death of the testator, should fail to report it to
an officer of the law within a month, unless the authorities have already taken action; this prohibition shall
not apply to cases wherein, according to law, there is no obligation to make an accusation;
6. Any person who by fraud, violence, intimidation, or undue influence should cause the testator to make a
will or to change one already made;
7. Any person who falsifies or forges a supposed will of the decedent; and
8. Any person who by the same means prevents another from making a will, or from revoking one already
made, or who supplants, conceals, or alters the latter's will.
NOTE: The moment the testator uses one of the acts of unworthiness as a cause for disinheritance, he
thereby submits it to the rules on disinheritance. Thus, reconciliation renders the disinheritance ineffective.
PARDON OF ACTS OF UNWORTHINESS
EXPRESS IMPLIED
1. made by the execution of a document or 1. effected when testator makes a will
any writing in which the decedent condones instituting the unworthy heir with
the cause of incapacity knowledge of the cause of incapacity
2. cannot be revoked 2. revoked when the testator revokes the

will or the institution
C. ACCEPTANCE AND REPUDIATION OF INHERITANCE (ARTS. 1041 1057)
Characteristics: (VIR)
1. Voluntary and free
2. Irrevocable, except if there is vitiation of consent or an unknown will appears
3. Retroactive
Requisites:
1. certainty of the death of the decedent
2. certainty of the right to the inheritance
Page 69 of 193
Acceptance vs. Repudiation:

(1) Acceptance involves the confirmation of transmission of successional rights, while repudiation
renders such transmission ineffective.
(2) Repudiation is equivalent to an act of disposition and alienation.
(3) The publicity required for repudiation is necessary for the protection of other heirs and also of
creditors.
Form of Acceptance
1. Express Acceptance one made in a public or private document.
2. Tacit Acceptance one resulting from acts by which the intention to accept is necessarily implied or
which one would have no right to do except in the capacity of an heir
Tacit acceptance is presumed from certain acts of the heir as:

1. When heir sells, donates, or assigns his right.
2. When heir renounces it for the benefit of one or more heirs.
3. When renunciation is in favor of all heirs indiscriminately for consideration
4. Other acts of tacit acceptance
a. heir demands partition of the inheritance
b. heir alienates some objects of the inheritance
c. Under Art 1057, failure to signify acceptance or repudiation within 30 days after an order of
distribution by the probate court.
REPUDIATION must be made in a public instrument (acknowledged before a notary public) or

authentic document (equivalent of an indubitable writing or a writing whose authenticity is admitted or
proved) or by petition presented to the court having jurisdiction over the testamentary or intestate
proceeding.
Reason for formality: Law considers that the act of repudiation is more solemn than the act of
acceptance and that repudiation produces a more violent and disturbing consequences.
Heir in two capacities: An heir who is such by will and by law, and he repudiates the inheritance as
a testamentary heir, will be considered to have repudiated the inheritance as a legal heir. But when an heir
repudiates as a legal heir, he may later on accept as a testamentary heir.
D. COLLATION (ARTS. 1061-1077)

Every compulsory heir, who succeeds with other compulsory heirs must bring into the mass of the
estate any property or right which he may received from the decedent, during the lifetime of the latter, by
way of donation, or any other gratuitous title, in order that it may be computed in the determination of the
legitime of each heir, and in the account of partition. (Art. 1061)
An act of returning or restoring to the common mass of the estate, either actually or fictitiously, any
property which a person may have received from the decedent during the latters lifetime, but which is
understood for legal purposes as an advance from inheritance.
OPERATIONS RELATED TO COLLATION

1. Collation adding to the mass of the hereditary estate the value of the donation or gratuitous
disposition
2. Imputing or Charging crediting the donation as an advance on the legitime (if the donee is a
compulsory heir) or on the free portion (if the donee is a stranger)
3. Reduction determining to what extent the donation will remain and to what extent it is excessive
or inofficious.
4. Restitution return or payment of the excess to the mass of hereditary estate.
Persons obliged to collate

1. GENERAL RULE: compulsory heirs
EXCEPTIONS:
a. When the testator should have so expressly provided; and
b. When the compulsory heir should have repudiated his inheritance
2. Grandchildren who survive with their uncles, aunts, or 1st cousins, and inherit by right of
representation.
NOTE: Grandchildren may inherit from grandparent in their own right (i.e. heirs next in degree) and not by
right of representation if their parent repudiates the inheritance of the grandparent, as no living person can be
represented except in cases of disinheritance and incapacity. In such case grandchildren are not obliged to
bring to collation what their parent has received gratuitously from their grandparent)
What to collate:
1. Any property or right received by gratuitous title during the testators lifetime
2. All that they may have received from the decedent during his lifetime
3. All that their parents would have brought to collation if alive
Properties not subject to collation (2nd concept):

1. Absolutely no collation (all concepts):

a. Expenses for support, education (elementary and secondary only), medical attendance, even in
extraordinary illness, apprenticeship, ordinary equipment, or customary gifts (Art. 1067).
2. Generally not imputable to legitime:
a. Expenses incurred by parents in giving their children professional, vocational or other career unless
the parents so provide, or unless they impair the legitime.
b. Wedding gifts by parents and ascendants consisting of jewelry, clothing, and outfit except when
they exceed 1/10 of the sum disposable by will.
E. PARTITION AND DISTRIBUTION OF ESTATE (ARTS. 1078 1105)

It is the separation, division and assignment of a thing held in common among those to whom it
may belong. It includes every act which is intended to put an end to indivision among co-heirs, and legatees
or devisees, although it should purport to be a sale, exchange, compromise, or any other transaction. It is not
subject to any form.
Who may effect partition:

1. decedent himself during his lifetime by an act inter vivos or by will;
2. heirs themselves;
3. competent court;
4. 3rd person designated by the decedent.
Who can demand partition:

1. compulsory heir;
2. voluntary heir;
3. legatee or devisee;
4. any person who has acquired interest in the estate.
When partition cannot be demanded: (PAPU)

1. when expressly prohibited by the testator himself for a period not exceeding 20 years;
2. when the co-heirs agreed that the estate shall not be divided for a period not exceeding 10 years,
renewable for another 10 years;
3. when prohibited by law;
4. when to partition the estate would render it unserviceable for the use for which it is intended.
Prohibition to Partition
1. The prohibition to partition for a period not exceeding 20 years can be imposed on the legitime.
2. If the prohibition to partition is for more than 20 years, the excess is void.
3. Even if a prohibition is imposed, the heirs by mutual agreement can still make the partition.
PARTITION INTER VIVOS (ART 1080)

It is one that merely allocates specific items or pieces of property on the basis of the pro-indiviso shares
fixed by law or given under the will to heirs or successors.
NOTE: Partition is not itself a mode of acquiring ownership, nor a title therefore. This partition, being
predicated on succession, necessitates relationship to the decedent (in case of intestacy) or a will duly
probated (in case of testacy). A partition inter vivos made in favor of intestate heirs could be operative.
Dispositions, however, to non-intestate heirs may suffer an impediment unless based on a valid will, except
perhaps when such dispositions are intended to take effect during the life of the testator and the formalities
of donations are properly complied with.
EFFECTS OF INCLUSION OF INTRUDER IN PARTITION:

1. Between a true heir and several mistaken heirs partition is VOID.
2. Between several true heirs and a mistaken heir transmission to mistaken heir is VOID.
3. Through error or mistake, share of true heir is allotted to mistaken heir partition shall not be rescinded
unless there is bad faith or fraud on the part of the other persons interested, but the latter shall be
proportionately obliged to pay the true heir of his share
NOTE: partition with respect to the mistaken heir is VOID.
A VOID WILL MAY BE A VALID PARTITION:

1. If the will was in fact a partition; and
2. If the beneficiaries in the void will were legal heirs.
Private International Law or Conflict of Laws

That part of the Municipal Law of a State which directs its courts and Administrative agencies,
when confronted with a legal problem involving a foreign element, whether or not they should apply a
foreign law or foreign laws.
Elements:
(1) Conflict of Laws is part of the municipal law of the State;
(2) There is a directive to courts and administrative agencies;
(3) There is a legal problem involving a foreign element; and
(4) There is either an application or non-application of a foreign law or foreign laws.
Page 71 of 193
Nature of Conflicts Rules: It is a part of the national law of every state.
NOTE: A factual situation that cuts across territorial lines and is affected by diverse laws of two or more
States is said to contain a foreign element.
Functions:
1. To provide rules in deciding cases where either the parties, events or transactions are linked to more
than one state jurisdiction;
2. To promote stability and uniformity of remedies / solutions regardless of place of suit.
PRIVATE
International Law
As to nature or character
1. International in National, municipal
character as it or local in character
applies in the
international sphere
As to sources
2. Custom, treaty Generally derived
and general from the internal law
principles of law of each state; except
recognized by any conflict of laws
civilized nations and question which is
juridical decisions governed by a treaty
and teachings of the (e.g. Hague
most highly Convention on the
qualified publicists Conflicts of law
relating to the Form
of Testamentary
Dispositions)
most highly Hague Convention
qualified publicists on the Conflicts of
law relating to the
Form of
Testamentary
Dispositions)
As to applicability
3. Governs rights Deals with rights
and obligations of and obligations of
States and their private individuals
relationships among and their private
themselves transactions which
involve a foreign
element
As to persons involved
4. Governs only Governs individuals
states and or corporations
internationally
recognized
organizations
As to transactions
5. Recognizes trans- Assumes control
actions in which over transactions
sovereign States are strictly private in
interested nature
As to remedies
6. In case of All remedies are
violation of provided by
International Law, municipal laws of
the State may resort the State, such as
to diplomatic resort to courts and
protest, negotiation, administrative
arbitration or tribunals
adjudication by
filing cases before
international
tribunals or may
even resort to use of
force or go to war
Sources:
1. Civil Codes of different countries
2. Constitution which contains principles on nationality and comity
3. Special statues (E.g. Corporation Code, General Banking Law, etc.)
4. Treaties and International conventions
5. Treatises, commentaries and studies of learned jurists
6. Judicial decisions
7. International customs
JURISDICTION
I. JURISDICTION OVER THE PERSON

Acquired by the voluntary appearance of a party and his submission to authority or by service of
summons.
1. Jurisdiction over the person of the plaintiff is acquired from the moment he invokes the aid of the
court and voluntarily submits himself by institution of the suit through proper pleadings.
2. Jurisdiction over the person of the defendant is acquired through:
a. voluntary appearance or
b. personal or substituted service of summons (section 6 and 7 Rule 14 of the Revised Rules of Court)
II. JURISDICTION OVER PROPERTY

Results either from the seizure of property under a legal process or from the institution of legal
proceedings wherein the courts power over the property is recognized and made effective.
This kind of jurisdiction is referred to as in rem jurisdiction in contrast to in personam jurisdiction
Another form of jurisdiction is quasi in rem which affects only the interests of particular persons in
the thing.
NOTE: Summons by publication is authorized in three cases:

1. If the action is in rem, or
2. quasi in rem, or
3. involves the personal status of the plaintiff
Where the suit is in personam, jurisdiction over the defendant must be acquired by voluntary appearance or
by personal/substituted service of summons. However, service by publication may be allowed in accordance
with Sec 14, Rule 14 of Revised Rules of Court (defendant whose identity or whereabouts are unknown).
Minimum Contacts Test and Fundamental Fairness Test

Due process requires only that in order to subject a defendant to a judgment in personam, if he is
not present within the territory of the forum he should have certain minimum contacts with it such that the
maintenance of the suit does not offend traditional notions of fair play and substantial justice.
In both in rem and quasi-in rem, all that due process requires is that defendant be given adequate
notice and opportunity to be heard which are met by service of summons by publication.
Long-arm Statutes
Statutes which specify the kinds of contacts upon which jurisdiction will be asserted over a
defendant outside of state territory.
III. JURISDICTION OVER THE SUBJECT MATTER
The test of jurisdiction is whether or not the law vests upon the tribunal the power to enter upon the
inquiry.
WAYS OF DISPOSING OF CONFLICTS CASES:

1. Dismiss the case, either because of lack of jurisdiction or refusal to assume jurisdiction pursuant to
the doctrine of forum non conveniens; or
2. Assume jurisdiction over the case and apply the law of the forum; or
3. Assume jurisdiction over the case and apply foreign law.
Theory of Comity the application of foreign legal systems in cases involving foreign element is
proper because their non-application would constitute a disregard of foreign sovereignties, a lack of comity
towards foreign states.
Principle of forum non conveniens

A court may resist imposition upon its jurisdiction even when jurisdiction is authorized by law. The
reason given for refusal to assume jurisdiction is that to do so would prove inconvenient for the forum.
In sustaining a plea of forum of non conveniens, public and private interests should be weighed:
1. Private Interest of the litigant
a. Ease of access to source of proof
b. Availability of compulsory process for attendance of unwilling witnesses
c. Cost of obtaining and attendance of willing witnesses
d. Possibility of viewing the premises if appropriate
e. Other practical problems that make trial of the case easy, expeditious and inexpensive
2. Public Interest
a. Administrative difficulties encountered when courts dockets are clogged
b. Appropriateness of having the trial in a court familiar with the applicable state law.
GENERAL RULE: No rule of Private International Law would be violated if the courts should decide
to dispose of all cases, whether domestic or conflicts cases, according to the internal law of the forum
EXCEPTION: Where a foreign, sovereign, diplomatic official, or public vessel or property of another
State is involved, or where a State has, by treaty, accepted limitations upon its jurisdiction over certain
persons or things.
INSTANCES JUSTIFYING THE APPLICATION OF INTERNAL LAW TO CONFLICTS CASES:

1. Where application of internal law is decreed;
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2. Where there is failure to plead and prove foreign law;

3. Where a case involves any of the exceptions to the application of foreign law:
a) When the enforcement of the foreign law would run counter to an important public policy of the
forum;
b) Where the application of the foreign law would infringe good morality;
c) Where the foreign law is penal in nature;
d) Where the foreign law is procedural in nature;
e) When the question involves immovable property of the forum;
f) Where the foreign law is fiscal or administrative in nature;
g) Where the application of foreign law would involve injustice or injury to the citizens or residents of
the forum; and
h) Where the application of foreign law would endanger the vital interests of the State.
CHOICE OF LAW
APPROACHES TO CHOICE OF LAW

A. Traditional or Single-aspect method
theories which have traditionally concentra-ted on one element of a situation in order to connect a
case to a particular legal community
1. Vested Rights Theory
o Rights acquired in one country must be recognized and legally protected in other countries. The
forum will not apply before a law but will simply recognize the right vested by said law.
2. Local Law Theory
o In conflict problems, the court does not enforce a foreign law but a right created by its own law by
treating a case as a purely domestic case that does not involve a foreign element.
3. Cavers' Principle of Preference
o Choice of law should be determined by considerations of justice and social expediency and should
not be the result of mechanical application of the rule or principle of selection.
B. Modern or Multi-aspect method

approach where all the important factors of the case both territorial and non-territorial, are analyzed
and the applicable law is arrived at by rationally elaborating and applying the policies and purposes
underlying the particular legal rules that come in question as well as the needs of the interstate or
international intercourse.
1. Place of the Most Significant Relationship

Adopts an approach which identifies a plura-lity of factors that must be considered in the light of
choice of law principles.
2. Interest Analysis
Urges the resolution of conflict problems by looking at the policy behind the laws of the involved
states and the interests each state had in applying its own law.
3. Comparative impairment
Calls for subordination of the state objective which would be least impaired.
4. Functional Analysis
Looks into the general policies of the states (beyond those reflected in its substantive laws) and to
policies or values relating to effective and harmonious intercourse between states
5. Choice-influencing Considerations
Courts will prefer rules of law, whether they are forum law or another states law as long as they
make good socioeconomic sense for the time the court speaks and are sound in view of present day
conditions.
These are five major choice-influencing considerations which would lead the courts to the choice-
of-law decisions in a given case:
a. predictability of results;
b. maintenance of interstate and international order;
c. simplification of judicial task;
d. application of better rule law; and
e. advancement of forums interests.
6. Convenient Theory (forum conveniens)
the application of a foreign law in such a convenient forum, which implies a susbstantial connection
with a given conflict problem must be analytically understood as an exception from the basic rule calling
for the application of the lex fori.
TEST FACTORS OR POINTS OF CONTACT

Circumstances which may serve as the possible test for the determination of applicable law
The most important of these points are the following:
1. The nationality of a person, his domicile, his residence, his place of sojourn, or his origin.
2. The seat of legal or juridical person, such as a corporation.
3. The situs of a thing, that is the place where the thing is, or is deemed to be situated. In particular,
the lex situs is decisive when real rights are involved.
4. The place where an act has been done, the locus actus, such as the place where a contract has been
made, a marriage celebrated, a will signed or a tort committed. The lex loci actus is particularly important in
contracts and torts.
5. The place where the act is intended to come into effect, the place of performance of contractual
duties, or the place where the power of attorney is to be exercised
6. The intention of the contracting parties as to the law that should govern the agreement, the lex loci
intentionis
7. The place where judicial and administrative proceedings are instituted or done. The lex fori the
law of the forum because matters of procedure not going to the substance of the claim involved are
governed by it; and because lex fori applies whenever the content of the otherwise applicable law is
excluded from application in a given case for the reason that it falls under one of the exceptions to the
application of the foreign law
8. The flag of the ship, which in many cases is decisive of practically all legal relationships of the ship
and of its master or owner as such. It also covers contractual relationships, particularly contracts of
affreightment
NOTE: The Philippines follows the Single-aspect method and our conflicts rules are mostly found in the
Civil Code (Article 15, 16, 17). These rules specify the geographical location from where the governing law
is found, consistent with the traditional approach to choice of law. The difficulty in following these
territorially rigid rules is the inherent rigidity and unjust decisions that may result in its application. To
avoid these, courts have resorted to characterization and renvoi which operate as escape devices
CHARACTERIZATION
The process by which a court at the beginning of the choice of law process assigns a disputed
question to the proper area in substantive law.
Three stages in Characterization:

1. The problem of classification
2. The characterization of the point of contact or the connecting factor
3. The extent of the application of the law that is chosen as applicable to the conflicts case
2 Types of Characterization:
1. Subject Matter Characterization calls for the classification of a factual situation into a legal
category.
2. Substance-Procedure Dichotomy directs to what extent the court will apply foreign law.
NOTE: If issue is substantive, apply foreign law, but if procedural, forum law.
I. Statute of Frauds
a. Substantive - if the words of the law relate to forbidding the obligation.
b. Procedural - if the law forbids the enforcement of the obligation.\
II. Statute of Limitations and Borrowing Statutes

1. Statute of limitations
a. Substantive - when the limitation was directed to the newly created liability specifically to warrant
a qualification of the right (specificity test).
b. Procedural - if it operates to bar only the legal remedy without impairing the substantive right
involved.
2. Borrowing statute
directs the state of the forum to apply the foreign statute of limitations to the pending claims based
on a foreign law
NOTE: the characterization of a statute of limitation into procedural or substantive becomes irrelevant when
the country of the forum has a borrowing statute. It has the practical effect of treating the foreign statute of
limitation as one of substance.
Depecage
The phenomenon where the different aspects of the case involving a foreign element may be
governed by different systems of law.
Allows the other relevant interests of the parties to be addressed; permits the courts to arrive at a
functionally sound result without rejecting the methodology of the traditional approach
PROOF OF FOREIGN LAW

1. By pleading and proof
a. Written law
i. By official publication
ii. Copy attested by officer having legal custody plus a certificate with seal from secretary of embassy,
legation, consul general, consul, vice consul, consular agent or any officer in the foreign service of the
Philippines stationed in the foreign country to the effect that said officer has custody (Section 24 Rule 132 of
the Revised Rules of Court)
b. Unwritten law by testimony of experts or writings of jurists
2. Judicial Notice (when the laws are already within the actual knowledge of the court, such as when
they are well and generally known or they have been actually ruled upon in other cases before it and none of
the parties concerned claim otherwise PCIB vs. Escolin 56SCRA266)
3. To conclude that the parties who fail to introduce proof as to the content of a foreign law acquiesce
to the application of the forum law.
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proceeds from the theory that the basic law is the law of the forum and when the claimed applicable
foreign law is not proved, then the court has no reason to displace the basic law
4. Presumption that the foreign law is the same as the law of the forum (Doctrine of Processual
Presumption)
PERSONAL LAW
The law which governs persons, legal condition, capacity, civil status, etc.
NOTE: Personal law governs a person wherever he goes. The personal law of an individual is either his
national law or the law of his place of domicile.
A. Nationality Law Theory

The Philippines adheres to the nationality law theory. Article 15 of the Civil Code provides that
Laws relating to family rights and duties, or to the status, condition, and legal capacity of persons are
binding upon Filipino citizens, even though living abroad.
It is for each State to determine who are its nationals (Hague Convention). Thus, the Philippine
Constitution enumerates those who are citizens of the Philippines.
Problems in Applying the Nationality Principle

1. Dual or Multiple Citizenship
This arises from the concurrent application of jus soli and jus sanguinis
a. In matters of status, he is usually considered by the forum as exclusively its own national, his
additional foreign nationality is disregarded
b. In case the litigation arises in a third country, the law most consistently applied is that of the
country of which the person is not only a national but where he also has his domicile or habitual residence,
or in the absence thereof, his residence.
NOTE: Hague Convention on Conflict of Nationality Laws formulated the following principle in Article 5:
a third state shall, of the nationalities which any such person possesses, recognize exclusively in its
territory either the nationality of the country of which he is habitually and principally resident, or the
nationality of the country with which in the circumstances he appears to be in fact most closely connected.
2. Statelessness
Stateless persons are generally subject to the law of their domicile or habitual residence, and in
default thereof, to the law of their temporary residence.
A person may become stateless by the following means:

a. Deprived of his citizenship for any cause, such as commission of a crime;
b. Renounciation of ones nationality by certain acts, express or implied;
c. Voluntary release from his original state;
d. If born in a country which recognizes only the principle of jus sanguinis of parents whose law
recognizes only the principle of jus soli.
NOTE: Convention on the Reduction of Statelessness adopted in 1961 mandates that the jus sanguini
country grant its nationality to a person born within its territory if he would otherwise be stateless, and the
jus soli country to extend its nationality to a person who would otherwise be considered stateless when one
of his parents is a citizen of the contracting state.
B. Domiciliary Theory
The individuals private rights, condition, status, and capacity are determined by his physical
location.
NOTE: The forum determines domicile according to its own standards.
General Rules on Domicile:

1. No person shall be without domicile
2. A person cannot have 2 simultaneous domiciles.
3. Every natural person, as long as he is free and sui juris, may change his domicile at pleasure.
4. Domicile once acquired is retained unless a new one is gained.
5. The presumption is in favor of the continuance of domicile. The burden of proof is on the one who
alleges that a change of domicile has taken place.
6. To acquire a domicile a fresh domicile, residence and intention must concur; to retain an existing
domicile, either residence there or intention to remain must be present; to abandon a domicile, residence in a
new place and intention to abandon the old place must concur
Legal Classification of Domicile

1. Domicile of origin
Persons domicile at birth
Legitimate childs domicile of origin is that of his father and an illegitimate childs is that of his
mother
Upon emancipation, the child may acquire a domicile of choice
2. Constructive Domicile
a domicile assigned by operation of law to persons legally incapable of choosing their own
domicile (e.g. minors, mentally disabled)
3. Domicile of Choice (voluntary domicile)
place freely chosen by a person sui juris
to acquire domicile of choice, there must be a concurrence of physical presence in the new place
and unqualified intention to make that place ones home.
PERSONAL STATUS & CAPACITY

In the determination of status and capacity of persons, our Civil Code follows the nationality
principle when dealing with Filipinos.
When dealing with aliens, it depends on which principle their country follows but if the alien is in
the Philippines, the nationality theory is applied by implication.
RENVOI
A procedure whereby a legal matter presented is referred by the conflict of laws rules of the forum
to a foreign state, the conflict of laws rule of which, in turn refers the matter back to the law of the forum
(remission) or a third state (transmission).
It literally means a referring back
4 WAYS OF TREATING THE RENVOI PROBLEM

1. Rejection
If the conflicts rules of the forum refer the case to the law of another state, it is deemed to mean
only the internal law of that state. Thus, the court will apply the foreign law.
2. Acceptance
If the conflicts rules of the forum refer the case to the law of another state, it is deemed to include
the totality of the foreign law (internal law and conflicts of laws rules). Thus, the court will recognize the
referral back and apply local law.
3. Mutual Desistment Theory
The forum court upon reference to another states law sees that such law is limited in application to
its own nationals domiciled in its territory and has no provision for application to nationals domiciled
outside of the territory. Hence, the local court will apply local law.
This has the same result as the acceptance of the renvoi doctrine but the process used by the forum
court is to desist applying the foreign law
4. Foreign Court Theory
Forum court assumes the same position that the foreign court would take if the case is litigated in
the foreign state.
Double Renvoi
It is that which occurs when the local court, in adopting the foreign court theory, discovers that the
foreign court accepts the renvoi.
Transmission
It is the process of applying the law of a foreign state through the law of a second foreign state.
CHOICE OF LAW PROBLEMS
I. FAMILY RELATIONS
Under the New Civil Code, questions of family rights, duties, status, conditions and capacity are
governed by lex nationalii.
A. MARRIAGE
1. Extrinsic validity - governed by lex loci celebrationis.
GENERAL RULE:
a. All states recognize as valid those marriages celebrated in foreign countries if they comply with the
formalities prescribed therein (Hague Convention).
b. The forms and solemnities of contracts, wills and other public instruments, shall be governed by the
laws of the country in which they were executed (Article 17 Civil Code).
c. All marriages solemnized outside the Philippines, in accordance with the laws in force in the
country where they were solemnized, and valid there as such, shall also be valid in this country (Article 26
Family Code).
EXCEPTIONS: The following are void marriages in the Philippines even if valid in the foreign country
where celebrated:
a. When either or both parties are below 18 years of age even with parental consent;
b. Bigamous and polygamous marriages;
c. Mistake as to identity of a contracting party;
d. A subsequent marriage performed without recording in the Civil Registry the judgment of
annulment or declaration of nullity, partition and distribution of properties and the delivery of the childrens
presumptive legitimes;
e. Marriages where either spouse is psychologically incapacitated;
f. Incestuous marriages; and
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g. Void marriages by reason of public policy.
NOTE: These exceptions put into issue the capacity of the parties to enter into the marriage and therefore
relate to the substantive requirement for marriage. Since the personal law of the parties, e.g., the national
law of Filipinos, governs the questions of intrinsic validity of marriages between the Filipinos abroad, the
above enumerations are exceptions to lex loci celebrationis precisely because they are controlled by lex
nationalii
Rules on Extrinsic Validity of certain situations:

1. Proxy marriages
GENERAL RULE: where permitted by the law of the place where the proxy participates in the
marriage ceremony, are entitled to recognition in countries adhering to lex loci celebrationis rule, at least
insofar as formal validity is concerned.
NOTE: Internal Philippine law does not sanction proxy marriages, it is doubtful whether this will
be recognized here.
2. Common law marriages
GENERAL RULE: if valid in the State where the parties cohabitated while holding themselves
out as man and wife, it is given recognition in sister States which do not permit this informal method of
entering into the marital status
NOTE: common law marriages are not recognized under the Philippine internal law
3. Marriage on board a vessel on High seas
since nation whose flag the ship is flying has jurisdiction over the ship, the rule is that compliance
with this law is required for a marriage to be validly contracted
4. Consular marriages
for states, including the Philippines (Article 10 Family Code), which authorize their consular or
diplomatic agents in foreign countries to solemnize marriages in accordance with their domestic laws
marriage performed by a consular and diplomatic agent empowered by the sending state to officiate
marriage is valid in the receiving state only if the latter has agreed to his acting in that capacity.
2. Intrinsic validity - controlled by the parties personal laws (either domiciliary or nationality).
Effects of Marriage
1. Personal relations between the spouses
governed by the national law of the parties
NOTE: if the spouses have different nationalities, generally the national law of the husband may prevail as
long as said law is not contrary to law, customs and good morals of the forum.
2. Property relations between the spouses

The Hague Convention declares that the governing law on matrimonial property regime is:
a. The internal law designated by the spouses before the marriage
b. In the absence thereof, the internal law of the state in which the spouses fix their 1st habitual residence
Philippine Rule on property relations:

In the absence of a contrary stipulation in the marriage settlements, the property relations of the
spouses shall be governed by Philippine laws, regardless of the place of the celebration of the marriage and
their residence.
This rule shall not apply:
1. Where both spouses are aliens;
2. With respect to the extrinsic validity of contracts affecting property not situated in the Philippines
and executed in the country where the property is located; and
3. With respect to the extrinsic validity of contracts entered into in the Philippines but affecting
property situated in a foreign country whose laws require different formalities for their extrinsic validity.
(Article 80 Family Code)
Doctrine of Immutability of Matrimonial Property Regime

That the change of the nationality on the part of the husband or the wife or of both does not affect
the original property regime EXCEPT when the law of the original nationality itself changes the marital
regime hence, the property regime has to change accordingly.
B. DIVORCE AND SEPARATION

Hague convention provides that the granting of divorce or separation must comply with the national
law of the spouses and the law of the place where the application for divorce is made.
Grounds for divorce are dictated by lex fori.
GENERAL RULE: We only observe relative divorce (legal separation) in the Philippines. Divorce
decrees obtained by Filipinos abroad have no validity and no effects thereof are recognized in this
jurisdiction.
EXCEPTION: Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a
divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to remarry, the
Filipino spouse shall have capacity to remarry under Philippine law (Article 26, Family Code).
C. ANNULMENT AND DECLARATION OF NULLITY

1. For states that follow the traditional approach grounds would follow lex loci celebrationis.
2. For states that are policy-centered - applicable law is the law of the state of marital domicile.
D. PARENTAL RELATIONS
Determination of Legitimacy of a Child
Legitimacy of the child is governed by the personal law of the parents (either domiciliary or
nationality).
Philippine rule:
The legitimacy of the child is governed by the national law of the parents.
If parents belong to different nationalities, legitimacy of the child is governed by the national law of
the father.
Personal law of the illegitimate child is the mothers personal law.
NOTE: However, in the case of Tecson vs. COMELEC, Ronald Allan Kelly Poe and Fornier (GR No.
161434, March 3, 2004), the Supreme Court held that providing neither conditions nor distinctions, the 1935
Constitutions states that among the citizens of the Philippines are those whose fathers are citizens of the
Philippines.
The 1935 Constitution confers citizenship to all persons whose fathers are Filipino citizens
regardless of whether the children are legitimate or illegitimate.
If the child is later legitimated, personal law of the child follows that of the father.
Parental Authority over the Child

Personal law of the father controls the rights and duties of parents and children
NOTE: Reference to the personal law of the father may result in joint exercise of parental authority by
father and mother (e.g. Article 221 Family Code).
Fathers personal law could grant parental authority to the mother of the illegitimate children (e.g.
Article176 Family Code)
E. ADOPTION
Under the Domestic Adoption Act of 1998, an alien may adopt provided that he is:
1. of legal age,
2. in possession of full civil capacity and legal rights,
3. of good moral character,
4. no conviction of any crime involving moral turpitude,
5. emotionally and psychologically capable of caring for children,
6. at least sixteen years older than the adoptee,
7. in a position to support and care for his children,
8. his country has diplomatic relations with the Philippines,
9. residence in the Philippines for at least three continuous years prior to the filing of the application
for adoption and maintains such residence until the adoption decree is entered,
10. certificate of legal capacity to adopt in his country to be issued by his diplomatic or consular office,
and
11. his government allows the adoptee to enter his country as his adopted son/daughter
The requirement on residency and certificate of qualification to adopt may be waived for the
following:
a. a former Filipino citizen who seeks to adopt a relative within the fourth (4th) degree of
consanguinity or affinity; or
b. one who seeks to adopt the legitimate son/daughter of his/her Filipino spouse; or
c. one who is married to a Filipino citizen and seeks to adopt jointly with his/her spouse a relative
within the fourth (4th) degree of consanguinity or affinity of the Filipino spouse.
The requirement of sixteen years difference between the adopter and the adoptee is not applicable if
the adopter is:
i. the biological parent of the adoptee
ii. the spouse of the adoptees parent
Inter-Country Adoption
A socio-legal process of adopting a Filipino child by a foreigner or a Filipino citizen permanently
residing abroad where the petition is filed, the supervised trial custody is undertaken, and the decree of
adoption is issued outside the Philippines.
II. PROPERTY
A. CONTROLLING LAW
1. Immovable property governed by lex situs.
2. Movable property may be governed by:
a. lex domicilii law of the owners domicile.
b. lex situs - the law of the place where the property is located.
c. lex loci actus law of the place where the transaction is completed.
d. proper law law of the state which has the most real connection with the transfer.
Philippine Rule:
Real property as well as personal property is subject to the law of the country where it is situated
(lex situs). (Article 16 Civil Code).
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Rationale for lex situs or lex rei sitae rule: the property being physically part of the country should
be subject to the laws thereof.
B. CAPACITY TO TRANSFER OR ACQUIRE PROPERTY

governed by lex situs.
C. EXTRINSIC AND INTRINSIC VALIDITY OF CONVEYANCES

GENERAL RULE: Governed by lex situs.
EXCEPTIONS:
1. Where the transaction does not affect transfer of title or ownership of the land
proper law of the transaction will govern, which may be lex intentionis or lex voluntatis.
2. When real property is offered by way of security for the performance of an obligation:
a. Mortgage of the land is governed by lex situs
b. Loan contract is governed by rules of ordinary contracts.
3. Testate or intestate succession or capacity to succeed governed by the national law of the
decedent.
4. Under a policy centered approach, when the situs of the movable at the time of the transfer was
insignificant or accidental.
5. When the issue involves consideration other than the validity and effect of the transfer the court
may look into the law of another state which has a real interest in applying its law.
D. SPECIAL TYPES OF MOVABLE PROPERTY

1. Choses in possession (tangible physical objects)
GENERAL RULE: governed by the law of the place where the property is located at the time of
transaction determines the creation and the transfer of interests (lex situs)
Rules governing different kinds of transfers:

a. voluntary transfers of interests in chattels (other than assignment for the benefit of creditors)
validity and effect of conveyance as between the parties are determined by the local law of the State which,
with respect to the particular issue, has the most significant relationship to the parties.
b. acquisitions of title by operation of law (e.g. acquisition by prescription or adverse possession,
validity and priority of attachments, levies of execution, statutory liens) governed by lex situs
Rules governing goods in transitu:

a. Seizure and arrest Where the owners creditors seize the goods in transit, the result is that the
transport is discontinued and a temporary resting place is thereby created. On the law of this place will
depend on whether the seizure was lawful or whether he has acquired a lien, pledge, privilege, or a similar
right or what pertains to that right.
b. Disposition of goods questions arising from transactions involving movables in transit may be
resolved by law of any place having substantial connection with the transaction which will uphold its
validity. The owner is thus permitted to choose between several legal systems:
1. Law of the temporary resting place (e.g. interim port)
2. Lex loci actus
3. Law of the place of destination
4. Law of the last real situs of goods
Rules governing Means of Transport:

a. in case of sea going vessels the law of the flag ; or
b. as in states consisting of several countries (e.g.United Kingdom) the place of registry.
2. Choses in action (intangible movables)

a. Debts
i. Voluntary transfer or assignment of choses in action - there are 3 theories as to the law which
should govern:
a) Law of the domicile of the owner
b) Law of the place where the assignment was executed
c) Law of the place where the debt is recoverable
ii. Involuntary transfer of choses in action
(e.g. garnishment) - governed by the law of the state where jurisdiction is effectively exercisable against the
garnishee.
NOTE: Jurisdiction to which the garnishee is amenable is the jurisdiction of the country where the debt can
be recovered, i.e., in any country in which the debtor is present or can be served effectively with process.
b. Negotiable instrument governed by the law of the place indicated in the instrument or place of
delivery.
c. Corporate shares as against the corporation and third persons, the transfer or assignment are
governed by the law of the place of incorporation.
d. Goodwill - governed by the law of principal place of business.
III. CONTRACTS
A. Extrinsic validity governed by lex loci celebrationis.

B. Intrinsic validity there are 3 possible laws that govern:
a. law of the place where the contract is made or lex loci contractus
b. law of the place of performance or lex loci solutionis
c. law intended by the parties or lex loci intentionis
Philippine rule:
The contracting parties may establish such stipulations, clauses, terms, conditions as they may
deem convenient provided that they are not contrary to law, morals, good customs, public order, or public
policy (Article 1306 Civil Code)
NOTE: Hence, when the parties stipulate that the contract be governed by the specific law, such will be
recognized (lex loci intentionis) subject to the limitation that it is not against the law, morals and public
policy of the forum.
In the absence of an effective choice of law, express or implied, the contract will be governed, with
respect to the particular issue involved, by the law which has the closest and most substantial connection
with the transaction and the parties
C. Capacity to enter into contracts determined by the personal laws of the contracting parties (either
nationality or domiciliary)
D. Choice of law issues in Conflicts Contract Cases

1. Choice of Forum Clause
parties may stipulate on the venue of the suit in case of litigation concerning the contract.
However, a case arising from a contract will be litigated in the forum chosen by the parties if the choice of
forum clause specifically identifies it as the only venue.
when there is no fraud or overreaching, and there is no showing that the choice-of forum clause
would be unreasonable and unjust, the clause must be given effect.
2. Contracts with Arbitration Clause

In the Philippines, the provisions of the Civil Code on arbitration and the arbitration law RA 876
embodies a clear legislative policy in favor of settling controversies by a method considered more
expeditious, less expensive and with greater chance in some cases for substantial justice.
Many courts apply to arbitration agreements the law of whatever place the parties have designated
as governing, thus sustaining their agreement to arbitrate.
3. Adhesion Contracts
Adhesion contracts are not entirely prohibited. The one who agrees to the contract is in reality free
to reject it entirely; if he adheres, he gives his consent.
When there is no proof of arbitrariness, abuse of power, or gross negligence, the contract or
stipulation will be enforced. Such contract is valid if it is reasonable and just under the circumstances, and
has been fairly and freely agreed upon.
When there is an oppressive use of superior bargaining power, a Philippine court may be justified in
refusing to apply the contract or a stipulation thereof on the ground that there is no real arms-length
transaction between the contracting parties.
4. Special Contracts
a. Sale or Barter of goods governed by lex situs.
b. Simple loan granted by financial institutions law of the permanent place of business.
c. Loan granted by a private individual or where subject matter of loan is personal law where the
loan was obtained.
d. Pledge, Chattel mortgage, antichresis lex situs.
e. Transportation by Sea:
i. Philippine ports to Foreign ports law of the country of destination
ii. Foreign ports to Philippine ports
Civil Code primary law
Code of Commerce
Carriage of Goods by Sea Act
f. International Air Transportation governed by the Warsaw Convention
NOTES:
Convention applies to all international carriage of person, baggage or goods performed by aircraft
for hire. It does not apply to carriage of mail and postal packages.
liability of carrier for loss destruction and deterioration of goods transported to the Philippines from
a foreign country is governed primarily by the Civil Code and not by Warsaw Convention.
the limit of liability for baggage lost is $1,000 and for death of passenger is at $100,000 (Alitalia
vs. IAC and Pablo 192SCRA9)
period of responsibility includes the time during which baggage or goods are in the charge of the
carrier, whether in an airport or in any place, whatsoever.
It does not operate as an exclusive enumeration of instances when a carrier shall be liable for
breach of contract or as an absolute limit of the extent of liability nor does it regulate or exclude liability for
other breaches of contract by the carrier, misconduct of its employees, or for some particular or exceptional
type of damage.
limits of liability shall not apply if it is proved that the damage resulted from an act or omission of
the carrier his servants or agents done with intent to cause damage or recklessly and with knowledge that
damage would probably result, provided that it is proved that the servant or agent is acting within the scope
of the employment.
suits may be prosecuted in any of the following places at the option of the plaintiff-passenger:
1. court of the domicile of the carrier
Page 81 of 193
2. court of the principal place of business of the carrier

3. court where the carrier has a place of business through which the contract was made
4. court of the place of destination
the action will prescribe if it is not brought within two years from the:
1. date of arrival at the destination
2. date on which the aircraft ought to have arrived
3. date on which the transportation stopped
NOTE: the method of counting the period of limitation is determined by the law of the forum (lex fori)
With respect to transportation by successive carriers:
each of the carrier who accepts the passengers or baggage shall be subject to the rules set out in the
convention and shall be deemed as one of the contracting parties insofar as the contract deals with that part
of the transportation which is performed under his supervision.
the passenger or representative can take action only against the carrier who performed the
transportation during which the accident or delay occurred, unless by express agreement the first carrier has
assumed the responsibility for the entire journey.
as regards baggage or goods, the passenger or consignor shall have a right of action against the first
carrier, and the passenger or consignee shall have the right of action against the last carrier. Furthermore,
each may take an action against the carrier who performed the transportation during which the loss, damage
or delay took place. These carriers shall be jointly and severally liable to the passenger, or to the consignor
or consignee.
In cases where the convention does not apply, the Second Restatement holds that the validity of the
contract of carriage as well as the rights created thereby are determined, in the absence of an effective choice
of law by the parties, by the local law of the state from which the passenger departs or the goods are
dispatched, unless with respect to the particular issue, some other State has a more significant relationship to
the contract and to the parties.
IV. WILLS AND ADMINISTRATION OF ESTATES

1. Law governing the Extrinsic validity of wills:
a) testator is a Filipino
i. will is executed in the Philippines Philippine law
ii. will is executed in a foreign country
Lex loci celebrationis governed by the laws of the country in which will is executed; or
Philippine law
b) testator is an Alien
i. will is executed in the Philippines
Philippine law; or
National law of the testator
ii. will is executed in a foreign country
National law of the testator; or
Law of Domicile; or
Lex loci celebrationis; or
Philippine law
NOTE: Joint wills executed by Filipinos whether in the Philippines or abroad, even though authorized by
the foreign country in which they may have been executed, shall not be valid in the Philippines (Article 819
Civil Code).
This prohibition does not apply to joint wills executed by aliens, hence a joint will executed by
aliens in a state where such will is valid shall be considered as valid in the Philippines. As to joint wills
executed by aliens in the Philippines, although the law is silent, it has been suggested that in accordance
with the express policy of Article 819 of the Civil Code, said will should not be probated if it affects the
heirs in the Philippines.
2. Intrinsic validity of wills governed by the national law of the person whose will is under consideration.
3. Interpretation of wills governed by the decedents national law
4. Revocation of wills
If the revocation takes place in the Philippines, whether the testator is domiciled in the Philippines
or in some other country, it is valid when it is in accordance with the laws of the Philippines
If the revocation takes place outside the Philippines, by a testator who is domiciled in the
Philippines, it is valid when it is in accordance with the laws of the Philippines
Revocation done outside the Philippines, by a testator who does not have his domicile in this
country, is valid when it is done according to the:
c. law of the place where the will was made, or
d. law of the place in which the testator had his domicile at the time of revocation;
5. Probate of wills being procedural in character, the law of the forum governs procedural matters.
6. Administration of Estates Philippine law and procedure follow the main principle of territorialism. The
axiom is that the law of the domicile governs distribution but the law of the State appointing the
administrator or executor governs administration. Hence, administration is governed by the law of the state
where the administration takes place or lex fori.
NOTE: The Administration extends only to the assets of the decedent found within the state or country
where it was granted so that an administrator appointed in one state has no power over the property in
another state or country. To administer the property situated in a foreign state, the administrator must be re-
appointed, or a new one named in that state.
V. TORTS
Lex loci delicti comissi or law of the place where the alleged tort was committed will govern.
Concepts of Place of Wrong

1. Place of injury (common-law concept) looks to the place where the last event necessary to make an
actor liable for an alleged tort occurs.
2. Place of conduct view the situs of torts as the place where the tortuous act was committed.
Obligation theory
The tortuous act gives rise to an obligation, which is transitory and follows the person committing the
tortuous act and may be enforced wherever he may be found.
Theory of Most Significant Relationship

An action for tort may be filed in the country where it has the most significant relationship. In determining
the state which has the most significant relationship, the following factors are to be taken into account:
1. Place where the injury occurred
2. Place of conduct
3. Domicile, residence, nationality, place of incorporation and place of business
4. Place where relationship between the parties is centered
Conditions for the Enforcement of Tort Claims

1. The foreign tort is based on a civil action and not on a crime;
2. The foreign tort is not contrary to the public policy of the forum; and
3. The judicial machinery of the forum is adequate to satisfy the claim.
Philippine rule on foreign torts:

There is no governing specific statutory law but courts may give due course on the theory of vested
rights or most significant relationship provided that there are minimum contacts and the defendant can be
served with summons.
VI. CRIMES
GENERAL RULE: Lex loci delicti or the law of the place where the crime was committed will govern since
it determines the specific law by which the criminal is to be penalized and at the same time designates the
state that has jurisdiction to punish him.
EXCEPTIONS:
1. crimes committed by state officials, diplomatic representatives and officials of recognized international
organizations.
NOTE: This is based on the theory of state immunity from suits
2. crimes committed on board a foreign vessel even if within the territorial waters of the coastal state, as
long as the effect of such crime does not affect the peace and order of the coastal state
3. Crimes which, although committed by Philippine nationals abroad are punishable under the local law
pursuant to the protective principle of criminal jurisdiction (i.e. Article 2 of the Philippine Revised
Penal Code)
VII. BUSINESS ASSOCIATIONS

1. Corporation/Partnership
Personal law
GENERAL RULE: Personal law is the law of the state where it was incorporated or formed.
EXCEPTIONS:
a. Constitutional and Statutory Restrictions (Art. XII)
b. Control test during war courts may pierce the veil of corporate identity and look into the
nationality of stockholders to determine citizenship of the corporation
Domicile or residence of foreign corporations

when not fixed by the law creating them, it shall be understood to be the place where their legal
representation is or where they exercise their principal functions.
NOTE: A foreign corporation granted license to operate in the Philippines acquires domicile here.
Jurisdiction over Foreign Corporations

with the consent of the state a foreign corporation will be recognized and will be allowed to transact
business in any state which gives it consent. This consent doctrine is established in section 125, 126, 127,
and 128 of the Corporation Code of the Philippines
NOTE: all foreign corporations lawfully doing business here in the Philippines shall be bound by all laws
rules and regulations applicable to domestic corporations except provisions for the creation, formation,
organization or dissolution of corporations or those which fix the relations the relations, liabilities,
responsibilities or duties of stockholders, members or officers of the corporation to each other.
NOTE: service of summons upon foreign corporations doing business in the Philippines may be made on:
1. Its resident agent;
Page 83 of 193
2. In the absence thereof, process will be served on the government official designated by law or any of its
officers or agent within the Philippines; and
3. on any officer or agent of said corporation in the Philippines
4. serving summons through diplomatic channels
Right of a Foreign Corporation to bring suit

GENERAL RULE: No foreign Corporation transacting business in the Philippines without a license, or its
successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any
court or administrative agency of the Philippines but such corporation may be sued or proceeded against
before Philippine courts or administrative tribunals on any valid cause of action recognized under the
Philippine laws (Section 133 Corporation Code). Hence, acquisition by a foreign Corporation of a license to
transact business in the Philippines is an essential prerequisite for the filing of suits before courts.
EXCEPTIONS:
1. Isolated transactions
2. Action to protect trademark, trade name, goodwill, patent or for unfair competition
3. Agreements fully transacted outside the Philippines
4. Petition filed is merely a corollary defense in a suit against it
Effect of Failure to Secure a license to Transact Business

The foreign corporation which does business in the Philippines without a license has no right to sue
in the Philippines, but can still be sued. Although the contracts entered into may be valid as between the
parties, it may not be enforced in the Philippine courts.
2. Trusts
When the trust contains an express choice of law provision, that law shall be applied.
In the absence of express provision, the courts will deem controlling the law that will sustain the validity of
the trust.
FOREIGN JUDGMENTS
Foreign judgment
Decisions rendered outside the forum and encompasses judgments, decrees and orders of courts of
foreign countries.
Recognition of foreign judgment

Passive act of giving effect to a judgment of another forum without necessarily filing an action in
the forum giving effect to the judgment.
Enforcement of foreign judgment

A foreign judgment is enforced when, in addition to being recognized, a party is given affirmative
relief to which the judgment entitles him and it necessarily requires the filing of an action.
Requisites for Recognition or Enforcement:

1. The foreign judgment was rendered by a judicial or quasi-judicial tribunal which had jurisdiction over
the parties and the case;
2. Judgment must be valid under the laws of the court that rendered it;
3. Judgment must be final and executory to constitute res judicata in another action;
4. State where the foreign judgment was obtained allows recognition or enforcement of Philippine
judgments;
5. Judgment must be for a fixed sum of money;
6. Foreign judgment must not be contrary to the public policy or good morals of the country where it is to
be enforced; and
7. Judgment must not have been obtained by fraud, collusion, mistake of fact or law.
Philippine rule:
The effect of a judgment or final order of a tribunal of a foreign country, having jurisdiction to render the
judgment or final order is as follows:
(a) In case of a judgment or final order upon a specific thing, the judgment or final order is conclusive upon
the title to the thing; and
(b) In case of a judgment or final order against a person, the judgment or final order is presumptive
evidence of a right as between the parties and their successors in interest by a subsequent title.
In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of
notice to the party, collusion, fraud, or clear mistake of law or fact (Rule 39, Sec. 48 of the 1997 Rules of
Civil Procedure).
PARTNERSHIP
PARTNERSHIP
(Art. 1767)
By the contract of partnership two or more persons bind themselves to contribute money, property
or industry to a common fund, with the intention of dividing the profits among themselves.
Two or more persons may also form a partnership for the exercise of a profession.
A partnership has a juridical personality which is separate and distinct from that of the partners.
A partnership may sue and be sued in its name or by its duly authorized representatives. A managing
partner of the partnership may execute all acts of administration including the right to sue debtors of the
partnership in the case of their failure to pay their obligation when it becomes demandable. (Tai Tong
Chuache & Co. vs. Insurance Commission 158 SCRA 336 [1988])
FORM OF PARTNERSHIP CONTRACT

GENERAL RULE: No special form is required for the validity or existence of the contract of partnership.
EXCEPTIONS:
1. Where immovable property or real rights are contributed, the partnership contract shall be void unless:
a. It is reduced to writing in a public instrument (Art. 1771).
b. An inventory of the property contributed is made, signed by the parties and attached to the public
instrument. (Art.1773).
A partnership contract which states that the partnership is established to
operate a fishpond is not rendered void because no inventory of the fishpond was made (where it did
not clearly appear in the articles of partnership that the real property had been contributed by anyone
of the partners). (Agad vs. Mabolo and Mabolo Agad and Co., 23 SCRA 1223[1968])
2. Where the contract is by its terms not to be performed within a year from the making thereof, such
partnership contract is covered by the statute of frauds and thus requires a written agreement to be
enforceable.
3. Where the contract of partnership has a capital of 3,000 pesos or more, in money or property, it shall
appear in a public instrument and must be recorded in the Office of the Securities and Exchange
Commission. However, a partnership has a juridical personality even in case of failure to comply with
this requirement.
Requisites:
1. intention to create a partnership
2. common fund obtained from the contributions
3. joint interest in the profits
Essential Features:
1. there must be a valid contract;
2. the parties must have legal capacity to enter into the contract;
NOTE: With regard to number 2 (legal capacity of contracting parties), individuals not
legally incapacitated to contract and partnerships may enter into a contract of partnership.
With respect to corporations, the court held in Aurbach vs. Sanitary Wares Manufacturing
Corporation 180 SCRA 130 [1989] that although a corporation cannot enter into a partnership
contract, it may however engage in a joint venture with others. A joint venture has been
generally understood to mean an organization formed for some temporary purpose.
There is nothing against one corporation being represented by a natural or juridical person in a
suit in court, for the true rule is that although a corporation has no power to enter 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 the charter. (JM Tuazon and Co., Inc vs.
Bolanos 95 PHIL 106 [1954])
3. There must be mutual contribution of money, property and industry to a common fund.
NOTE: A partnership of a civil nature was formed because Gatchalian & Co. put up money to buy a
sweepstakes ticket for the sole purpose of dividing equally the prize which they may win as they did in fact
in the amount of P50,000. (Gatchalian vs. CIR 67 PHIL 666 [1939])
Where the father sold his rights over 2 parcels of land to his 4 children so they can build their
residences, but the latter after 1 year sold them and paid the capital gains, they should not be treated to have
formed an unregistered partnership and taxed corporate income tax on the sale and on dividend income tax
on their shares of the profits from the sale. (Obillos Jr. vs. CIR [1985])
4. the object must be lawful; and

5. the primary purpose must be to obtain profits
Partnership Co-ownership
1. Creation
Always created by a contract, Generally created by law, but
either express or implied may exist even without a contract
2. Juridical personality
Has a juridical personality Has no juridical personality
separate and distinct from that of
each partner
3. Purpose
Realization of profits Common enjoyment of a thing or
right; does not necessarily
involve sharing of profits
Page 85 of 193
4. Duration
No limitation upon the duration An agreement to keep the thing
is set by law undivided for more than 10 years
is not allowed
5. Transfer of interests
A partner may not dispose of his A co-owner can dispose of his
individual interest in the share without the consent of the
partnership so as to make the others
assignee a partner without
unanimous consent
6. Power to act with third persons
In the absence of stipulation to A co-owner cannot represent the
the contrary, a partner may bind co-ownership
the partnership
7. Dissolution
Death or incapacity of a partner Death or incapacity of a co-
results in the dissolution of owner does not necessarily
partnership dissolve the co-ownership
8. Agency or representation
As a rule, there is mutual agency As a rule, there is no mutual
representation (although it is
enough for a co-owner to bring
an action for ejectment against a
stranger)
9. Profits
May be stipulated upon Must always depend upon
proportionate shares and any
stipulation to the contrary is
VOID (Art.485)
10. Form
May be in any from except when No public instrument is needed
real property is contributed (here even if real property is the object
a public instrument is required) of the co-ownership
KEY: CNJ PMERET2 - FPG

Partnership Corporation
1. Creation
Created by mere agreement of the Created by law or by operation of law
parties
2. Number of incorporators
May be organized by at least two Requires at least five incorporators
persons (except a corporation sole)
3. Commencement of juridical personality

Acquires juridical personality from Acquires juridical personality from
the moment of execution of the the date of issuance of the certificate
contract of partnership of incorporation by the Securities and
Exchange Commission
4. Powers
Partnership may exercise any Corporation can exercise only the
power authorized by the partners powers expressly granted by law or
(provided it is not contrary to law, implied from those granted or
morals, good customs, public order, incident to its existence
public policy)
5. Management
When management is not agreed The power to do business and manage
upon, every partner is an agent of its affairs is vested in the board of
the partnership directors or trustees
6. Effect of mismanagement
A partner as such can sue a co- The suit against a member of the
partner who mismanages board of directors or trustees who
mismanages must be in the name of
the corporation
7. Right of succession
Partnership has no right of Corporation has right of succession
succession
8. Extent of liability to third persons
Partners are liable personally and Stockholders are liable only to the
subsidiarily (sometimes solidarily) extent of the shares subscribed by
for partnership debts to third them

persons
9. Transferability of interest
Partner cannot transfer his interest Stockholder has generally the right to
in the partnership so as to make the transfer his shares without prior
transferee a partner without the consent of the other stockholders
unanimous consent of all the because corporation is not based on
existing partners because the this principle
partnership is based on the principle
of delectus personarum
10. Term of existence
partnership may be established for corporation may not be formed for a
any period of time stipulated by the term in excess of 50 years extendible
partners to not more than 50 years in any one
instance
11. Firm name
limited partnership is required by corporation may adopt any name
law to add the word Ltd. To its provided it is not the same as or
name similar to any registered firm name
12. Dissolution
may be dissolved at any time by can only be dissolved with the
any or all of the partners consent of the State
13. Governing Law
governed by the contract and the governed by the Corporation Code
Civil Code
JOINT VENTURE
It is hardly distinguishable from partnership, since their elements are similar, i.e. community of interest
in the business, sharing of profits and losses, and a mutual right of control.
The main distinction in common law jurisdiction is that partnership contemplates a general business
with some degree of continuity, while joint venture is formed for the execution of a single transaction
and is thus of temporary nature
In Kilosbayan, Incorporated vs. Guingona, Jr 232 SCRA 110 [1994], the court defined a joint venture as
an association of persons or companies jointly undertaking some commercial enterprise; generally all
contribute assets and share risks. Its requisites are:
a. A community of interest in the performance of the subject matter;
b. A right to direct and govern the policy in connection therewith;
c. Duty to share profits and losses.
NOTE: Under the Civil Code, a partnership may be particular or universal, and a particular partnership may
have for its object a specific undertaking. Hence, a joint venture may be treated like any other contract,
innominate in nature to be regulated and governed primarily by the stipulations of the parties thereto and
suppletorily by the general provisions of the Civil Code on obligations and contracts, by rules governing the
most analogous contracts (e.g. law on partnership), and by the customs of the place.
Other Similar Contracts

1. Collaboration- the act of working together in a joint project.
2. Association- act of a number of persons uniting together for some special purpose or business.
RULES TO DETERMINE EXISTENCE OF PARTNERSHIP (ART 1769)

1. GENERAL RULE: Persons who are not partners as to each other are not partners as to third persons.
EXCEPTION: partnership by estoppel
2. Co-ownership of a property does not itself establish a partnership, even though the co-owners share in
the profits derived from the incident of joint ownership.
3. Sharing of gross returns alone does not indicate a partnership, whether or not the persons sharing them
have a joint or common right or interest in any property from which the returns are derived.
4. Receipt of share in the profits is a strong presumptive evidence of partnership. However, no such
inference will be drawn if such profits were received in payment:
(a) as a debt by installments or otherwise; (b) as wages of an employee or rent to a
landlord;
(c) as an annuity to a widow or representative of a deceased partner;
(d) as interest on a loan, though the amount of payment vary with the profits of the business; and
(e) as the consideration for the sale of a goodwill of a business or other property by installments or
otherwise.
CLASSIFICATION OF PARTNERSHIP
1. as to object:
Page 87 of 193
a) universal partnership
i. universal partnership of all present property
ii. universal partnership of profits
b) particular partnership
2. as to liability of partners:
a) general partnership
b) limited partnership
3. as to duration:
a) partnership at will
b) partnership with a fixed period
4. as to legality of existence:
a) de jure partnership
b) de facto partnership
5. as to representation to others:
a) ordinary or real partnership
b) ostensible or partnership by estoppel
6. as to publicity:
a) secret partnership
b) notorious or open partnership
7. as to purpose:
a) commercial or trading
b) professional or non-trading
UNIVERSAL PARTNERSHIP
1. A universal partnership of all present property is one wherein the partners contribute all the property
which actually belong to them to a common fund, with the intention of dividing the same among themselves,
as well as all the profits which they may acquire therewith.
In a universal partnership of all present property, the property which belongs to each of the partners at
the time of the constitution of the partnership, becomes the common property of all the partners, as well as
the profits which they may acquire therewith.
A stipulation for the common enjoyment of any other profits may also be made; but the properties
which the partners may acquire subsequently by inheritance, legacy or donation cannot be included in such
stipulation, except the fruits thereof.
Where the articles of partnership do not specify the nature of the universal partnership, whether it is one
of present property or of profits only, it will be presumed that the parties intended merely a partnership
of profits.
NOTE: Future properties cannot be contributed. Thus, property subsequently acquired by (1) inheritance,
(2) legacy or (3) donation cannot be included by stipulation except the fruits thereof.
2. A universal partnership of profits is one which comprises all that the partners may acquire by their
industry or work during the existence of the partnership and the usufruct of movable or immovable property
which each of the partners may posses at the time of the celebration of the contract.
Movable or immovable property which each of the partners may possess at the time of the celebration
of the contract shall continue to pertain exclusively to each, only the usufruct passing to the partnership.
NOTE: Persons who are prohibited from giving each other any donation or advantage cannot enter into a
universal partnership. (Art. 739, Art. 87, Family Code)
Profits acquired by their partners through chance (i.e. lottery) without employment of any physical
or intellectual efforts are not included.
PARTNERSHIP
A particular partnership is one which has for its object determinate things, their use and fruits, or a
specific undertaking, or the exercise of a profession or vocation.
GENERAL PARTNERSHIP
A partnership consisting of general partners who are liable pro rata and subsidiarily and sometimes
solidarily with their separate property for partnership debts.
LIMITED PARTNERSHIP
One formed by two or more persons having as members one or more general partners and one or
more limited partners, the latter not being personally liable for the obligations of the partnership.
PARTNERSHIP AT WILL
A partnership wherein no time is specified and is not formed for a particular undertaking or venture
and which may be terminated at anytime by mutual agreement of the partners, or by the will of anyone
partner alone; or one for a fixed term or particular undertaking but has been continued by the partners after
termination of such term or particular undertaking without express agreement.
PARTNERSHIP WITH A FIXED TERM

A partnership wherein the term for which the partnership is to exist is fixed or agreed upon or one
formed for a particular undertaking, and upon the expiration of the term or completion or the particular
enterprise, the partnership is dissolved, unless continued by the partners.
OTHER KINDS OF PARTNERSHIP

1. De Jure Partnership- one which has complied will all the legal requirements for its establishment.
2. De Facto Partnership- one which has failed to comply with all the legal requirements for its
establishment.
3. Ordinary or real partnership- one which actually exists among the partners and also as to third
persons.
4. Ostensible partnership or partnership de facto- one which in reality is not a partnership, but is
considered a partnership only in relation to those who, by their conduct or admission, are precluded to
deny or disprove its existence.
5. Secret partnership- one wherein the existence of certain persons as partners is not avowed or made
known to the public by any of the partners.
6. Open or notorious partnership- one whose existence is avowed or made known to the public by the
members of the firm.
7. Commercial or trading partnership- one formed for the transaction of business.
8. Professional or non-trading partnership- one formed for the exercise of a profession.
CLASSIFICATION OF PARTNERS
1. as to CONTRIBUTION:
a) Capitalist partner- one who contributes money or property to the common fund.
b) Industrial partner- one who contributes only his industry or personal service. Note: do not share in
the lossess.
2. as to LIABILITY:
a) General partner- one whose liability to third persons extends to his
separate property, he may either be a capitalist or industrial partner.
b) Limited partner- one whose liability to third persons is limited to his capital contribution.
3. as to MANAGEMENT:
a) Managing partner- one who manages the business or affairs of the partnership; he may be appointed
in the articles of partnership or after constitution of the partnership.
b) Silent partner- one who does not take any active part in the business although he may be known to
be a partner.
c) Liquidating partner- one who takes charge of the winding up of the partnership affairs upon
dissolution.
4. Miscellaneous:
a) Ostensible partner- one who takes active part and known to the public as a partner in the business,
whether or not he has actual interest in the firm.
b) Secret partner- one who takes active part in the business by is not known to be a partner by outside
parties nor held out as a partner by the other partners. c) Dormant partner- one who does not take active
part in the business and is not known or held out as partner.
KEY: CP2L
Capitalist Industrial Partner
Partner
1. as to contribution
contributes money or property contributes his industry
(mental or physical)
2. as to prohibition to engage in other business
Cannot generally engage in the cannot engage in any business

same or similar enterprise as that of for himself
his firm
3. as to profits
1. shares in the profits according to receives a just and equitable
agreement thereon; share
2. if none, pro rata to his
contribution
Page 89 of 193
4. as to losses
1. first, the stipulation as to losses; exempted as to losses (as
2. if none, the agreement as to between partners); but is
profits; liable to third persons,
3. if none, pro rata to contribution without prejudice to
reimbursement from the
capitalist partners
OBLIGATIONS OF PARTNERS AMONG THEMSELVES:
I. Obligation with respect to contribution of property

a) To contribute what had been promised
b) To answer for eviction in case the partnership is deprived of determinate property contributed
c) To answer to the partnership for the fruits of the property the contribution of which is delayed, from
the date they should have been contributed to the time of actual delivery
d) To preserve the property with the diligence of a good father of a family pending delivery to the
partnership
e) To indemnify the partners for any damages caused to it by the retention of the same or by delay in
its contribution.
II. Obligations with respect to contribution of money and money converted to personal use
a) To contribute on the date due the amount he has undertaken to contribute to the partnership
b) To reimburse any amount he may have taken from the partnership coffers and converted to his own
personal use
c) To pay the agreed or legal interest, if he fails to pay his contribution on time or in case he takes any
amount from the common fund and converted to his own personal use
d) To indemnify the partnership for the damages caused to it by the delay in the contribution or the
conversion of any sum for his personal benefit.
III. Obligation Not to Engage in Other Business for Himself

1. Industrial partner- cannot engage in any business for himself unless the partnership expressly permits
him to do so. The other partners have the remedy of either excluding the erring partner from the firm or
of availing themselves of the benefits which he may have obtained.
Note: The prohibition is absolute and applies whether the industrial partner is to engage in the same
business in which the partnership is engaged or in any kind of business. It is clear that the reason for the
prohibition exists in both cases, which is to prevent any conflict of interest between the industrial
partner and the partnership and to insure faithful compliance by said partner with his prestation
(Evangelista & Co. vs. Abad Santos, 51 SCRA 416, 1973)
2. Capitalist partner- The prohibition extends only to any operation which is of the same kind of business
in which the partnership is engaged unless there is a stipulation to the contrary.
IV. Obligation to Contribute Additional Capital

As a general rule, a capitalist partner is not bound to contribute to the partnership more than what
he agreed to contribute but in case of an imminent loss of the business, and there is no agreement to the
contrary, he is under obligation to contribute an additional share to save the venture. If he refuses to
contribute, he shall be obliged to sell his interest in the partnership to other partners.
V. Obligation of Managing Partner who Collects Debt

Where a person is separately indebted to the partnership and to the managing partner at the same
time, any sum received by the managing partner shall be applied to the two credits in proportion to their
amounts, except where he received it entirely for the account of the partnership, in which case the whole
sum shall be applied to the partnership credit only.
Requisites for the application of the rule:

1) There exists two debts, one where the collecting partner is creditor, the other, where the partnership is
creditor.
2) Both debts are demandable
3) The partner who collects is authorized to manage and actually manages the partnership.
VI. Obligation of Partner Who Receives Share in Partnership Credit

A partner who receives, in whole or in part, his share in the partnership, when the others have not
collected theirs, shall be obliged, if the debtor should thereafter become insolvent, to bring to the partnership
capital what he received even though he may have given receipt for his share only.
Requisites for application of rule:

1) A partner has received, in whole or in part, his share in the partnership credit
2) The other partners have not collected their shares.
3) The partnership debtor has become insolvent.
VII. Obligation of Partner for Damages to Partnership

Every partner is responsible to the partnership for damages suffered by it through his fault. He cannot
compensate them with the profits and benefits which he may have earned for the partnership by his industry.
VIII. Duty to Render Information

Partners shall render on demand true and full information of all things affecting the partnership to
any partner or the legal representative of any deceased partner of any partner under legal disability.
IX. Obligation to account for any benefit and hold as trustee unauthorized personal profits
Every partner must account to the partnership for any benefit, and hold as trustee for it any profits
derived by him without the consent of the other partners from any transaction connected with the formation,
conduct, liquidation of the partnership or form any use by him of its property.
RIGHTS OF A PARTNER:
1. Property rights of a partner
a) His rights in the specific partnership property
b) His interest in the partnership
c) His right to participate in the management
2. Right to reimbursement for amounts advanced to the partnership and to indemnification for risks in
consequence of management
3. Right to associate with another person in his share
4. Right of access and inspection of partnership books
5. Right to true and full information of all things affecting the partnership
6. Right to a formal account of partnership affairs under certain circumstances
NOTE: The ten year period to demand an accounting by a partner begins at the dissolution of the
partnership.
7. Right to have partnership dissolved under certain conditions.
RULES FOR DISTRIBUTION OF PROFITS AND LOSSES

1. Distribution of profits
a) According to their agreement (but not inequitously to defeat Art.1799)
b) If none,
1) Share of capitalist partner shall be in proportion to his capital contribution
2) Industrial partner shall receive such share as may be just and equitable under the circumstances
2. Distribution of losses
a) According to their agreement as to losses (but not inequitously to defeat Art.1799)
b) If none, according to their agreement as to profits
c) If none, in proportion to his capital contribution, but the purely industrial partner shall not be
liable for the losses
GENERAL RULE: A stipulation excluding a partner from any share in the profits or losses is VOID
(Pactum Leonina) (Article 1799)
EXCEPTION: Article 1797(2) excludes an industrial partner from losses. Thus, a stipulation excluding
an industrial partner from losses is VALID, but he is NOT exempted from liability insofar as third persons
are concerned.
NOTE: In general, LIABILITY refers to responsibility towards third persons, and LOSSES refers to
responsibility as among partners
CONTRACT OF SUB-PARTNERSHIP
One formed between a member of a partnership and a third person for a division of profits owing to him
from the partnership enterprise.
It is a partnership within a partnership distinct and separate from the main or principal partnership.
NOTE: In the absence of unanimous consent of all the partners, a sub-partner does not become a member of
the partnership. Hence, a sub-partner does not acquire the rights of a partner nor is he liable for its debts
PROPERTY RIGHTS OF A PARTNER

1. Right to specific partnership property
contemplates tangible property
The specific partnership property belongs to the partnership as a separate juridical personality. The
partners have no actual interest in it until after dissolution.
equal right with other partners to possess specific partnership property for partnership purposes
not assignable, except in connection with the assignment of rights of all partners in the same property
not subject to attachment or execution, except on a claim against the partnership
not subject to legal support
NOTE: Any immovable property or an interest therein may be acquired in the partnership name. The title
so acquired may be conveyed only in the partnership name subject to the provisions of Article 1819 of the
Civil Code.
2. Interest in the partnership

share in the profits and surplus
A partner actually owns his respective share.
Effects of conveyance by a partner

of his interest in the partnership
Page 91 of 193
1. conveyance of his whole interest partnership may either remain or be dissolved

2. assignee does not necessarily become a partner
3. assignee cannot interfere in the management or administration of the partnership business or affairs
4. assignee cannot demand information, accounting and inspection of the partnership books
Remedies of separate
judgment creditor of a partner
Application for a charging order after securing judgment on his credit to subject the interest of the
debtor partner with payment of unsatisfied amount of the judgment debt
Redemption of interest charged

1. General partnership
a) with separate property of a partner; or
b) with partnership property, with the consent of all the partners whose interests are not so charged or
sold
2. Limited partnership (interest of limited partner)
a) with separate property of any general partner but NOT with partnership property
3. Right to participate in the management
MANAGEMENT OF PARTNERSHIP
I. When the manner of management has been provided for in the partnership agreement
A. When a managing partner has been appointed

1) Appointment in the articles of partnership
a. Power is irrevocable without just or lawful cause
i. to remove him for JUST cause, vote of partners representing controlling interest is necessary
ii. to remove him without just cause or for an UNJUST cause, there must be unanimity
including his own vote
b. Extent of power
i. if he acts in good faith, he may do all acts of ADMINISTRATION, despite opposition of
his partners
ii. if in bad faith, he cannot.
2) Appointment other than in the articles of partnership

a. Power to act may be revoked at any time, with or without just cause
b. Extent of power: as long as he remains manager, he can perform all acts of administration, but if
others oppose and he persists, he can be removed
B. When two or more managing partners have been entrusted with the management of partnership
1) Without specification of their respective duties and without stipulation requiring unanimity of
action
GENERAL RULE: Each managing partner may execute all acts of administration
EXCEPTION: If any of the managing partners should oppose,
a) Decision of the majority of the managing partners shall prevail
b) In case of a tie, decision of the partners representing the controlling interest shall prevail
2) With stipulation requiring unanimity of action

GENERAL RULE: Unanimous consent of all the managing partners shall be necessary for the
validity of the acts and absence or inability of any managing partner cannot be alleged
EXCEPTION: When there is an imminent danger of grave or irreparable injury to the
partnership, partner may act alone without the consent of the partner who is absent or under
disability
II. When manner of management has not been agreed upon

a) All partners shall be considered managers and agents
b) Unanimous consent required for alteration of immovable property
OBLIGATIONS OF PARTNERS TO THIRD PERSONS

I. Liability for contractual obligations (ART 1816)
1. All partners, including industrial partners, are personally liable with all their property. Their
individual liability is pro rata and subsidiary, unless otherwise stipulated
2. Liability of partnership for acts of partners
a) Acts for apparently carrying on in the usual way the business of the partnership
GENERAL RULE: Act binds the partnership.
EXCEPTION: Partnership is not bound if:
i. acting partner has in fact no authority and
ii. the third person knows that the acting partner has no authority
b) Acts of Strict Dominion or Ownership (acts which are not apparently for carrying on in the
usual way the business of the partnership)
GENERAL RULE: Act does not bind the partnership.
EXCEPTION: Partnership is bound if:
i. the act is authorized by all the partners; or
ii. they have abandoned the business
c) Acts in contravention of a restriction on authority
i. Partnership is not liable to third persons having actual or presumptive knowledge of the
restrictions
II. Liability arising from partners tort (ART 1822) or Breach of Trust (ART 1823)
1. Where, by any wrongful act or omission of any partner acting in the ordinary course of business of
the partnership or with authority of his co-partners, loss or injury is caused to any person, not being
a partner in the partnership (Article 1822)
2. Where one partner, acting within the scope of his apparent authority, receives money or property of
a third person and misapplies it (Article 1823)
3. Where the partnership, in the course of its business, receives money or property and it is misapplied
by any partner while it is in the custody of the partnership (Article 1823)
NOTE: All partners are solidarily liable with the partnership for any penalty or damage arising from a
partnership tort or breach of trust
III. Criminal liability of partnership

Partnership liability does not extend to criminal liability where the wrongdoing is regarded as individual
in character. But where the crime is statutory, especially when it involves a fine rather than
imprisonment, criminal liability may be imposed
LIABILITY OF STOCKHOLDERS IN A DEFECTIVELY FORMED CORPORATION

It is ordinarily held that persons who attempt but fail to form a corporation and carry on business under
the corporate name occupy the position of partners inter se. Thus where persons associate themselves
together under articles to purchase property to carry on a business, and their organization is so defective
as to come short of creating a corporation within the statute, they become in legal effect partners inter-
se.
Exception: One who takes no part except to subscribe for stock in a proposed corporation, which was
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. (Pioneer Insurance & Surety Corporation vs. Court of Appeals,
175 SCRA 668 [1989].)
PRINCIPLE OF DELECTUS PERSONARUM
A rule inherent in every partnership wherein no one can become a member of the partnership without
the consent of all the partners.
NOTE: This element of delectus personae is true only in case of a general partner, but NOT as regards a
limited partner.
MUTUAL AGENCY
Partnership is a contract of mutual agency, each partner acting as a principal on his own behalf, and as
an agent of his co-partners and the partnership.
Requisites When A Partner Binds The Partnership

1. when he is expressly or impliedly authorized
2. when he acts in behalf and in the name of the partnership
PARTNERSHIP BY ESTOPPEL
Arises when a person, by words spoken or written or by conduct, represents himself or consents to
another representing him to anyone, as partner in an existing partnership, or with one or more persons
not actual partners; he is liable to any such person to whom such representation has been made, who
has, on the faith of such representation given credit to the actual or apparent partnership. (Art 1825)
NOTE: Art. 1825 does not create a partnership as between the alleged partners. A contract, express or
implied is essential to the creation of partnership. The law considers them partners and the association as a
partnership insofar as it is favorable to third persons. However, partnership liability is created only in favor
of persons who on the faith of such representation has given credit to the actual or apparent partnership
DISSOLUTION
Change in the relation of the partners caused by any partner ceasing to be associated in carrying on the
business. (Article 1828)
It is the point in time when the partners cease to carry on the business together. It represents the demise
of a partnership.
NOTE: The dissolution of a partnership must not be understood in the absolute and strict sense so that at the
termination of the object for which it was created the partnership is extinguished. (Testate of Mota vs. Serra,
47 PHIL 464, 1926.)
Dissolution does not automatically result in the termination of the legal personality of the partnership, nor
the relations of the partners among themselves who remain as co-partners until the partnership is terminated.
Note: Assignment of interest to a non-partner will not dissolve the partnership.
WINDING UP
Page 93 of 193
Process of settling the partnership business or affairs after dissolution.
TERMINATION
Point in time when all partnership affairs are wound up or completed and is the end of the partnership
life.
CAUSES OF DISSOLUTION
1. Extrajudicial dissolution (ART 1830) - the parties may agree to expand the grounds provided under
Art 1830 but NOT to delimit them. The causes enumerated are as follows:
a. Without violation of the agreement between the partners
i. By the termination of the definite term or particular undertaking specified in
the agreement;
ii. By the express will of any partner, who must act in good faith, when no definite
term or particular undertaking is specified;
iii. By the express will of all the partners who have not assigned their interest or
suffered them to be charged for their separate debts, either before or after the termination
of any specified term or particular undertaking;
iv. By the expulsion of any partner from the business bona fide in accordance with
such power conferred by the agreement between the partners;
b. In contravention of the agreement between the partners, where the circumstances do nor
permit a dissolution under any other provision of this article by the express will of any partner at
any time.
c. By any event which makes it unlawful for the business of the partnership to be carried on
or for the members to carry it on in partnership.
d. When a specific thing, a partner had promised to contribute, perishes before its delivery.
Or where the partner only contributed the use or enjoyment of the thing and has reserved ownership
thereof, its loss, before or after delivery dissolves the partnership.
e. By the death of any partner;
f. By the insolvency of any partner or the partnership;
g. By the civil interdiction of any partner;
2. Judicial dissolution (ART 1831) - when so decreed by the court, the presiding judge may place the
partnership under receivership and direct an accounting to be made towards winding up the partnership
affairs.
On application by or for any partner, the court shall decree a dissolution whenever:
a. A partner has been declared insane in any judicial proceeding or is shown to be of unsound
mind;
b. A partner becomes in any other way incapable of performing his part of the partnership
contract;
c. A partner has been guilty of such conduct as tend to affect prejudicially the carrying on of
the business;
d. A partner willfully or persistently commits a breach of the partnership agreement, or
otherwise so conducts himself in matters relating to the partnership business that it is not
reasonably practicable to carry on the business in partnership with him.
e. The business of the partnership can only be carried on in a loss;
f. Other circumstances render a dissolution equitable.
On application of the purchaser of a partners interest under Article 1813 or 1814:
a. After the termination of the specified term or particular undertaking;
b. At any time if the partnership was a partnership at will when the interest was assigned
or when the charging order was issued.
EFFECTS OF DISSOLUTION
A. As to partners authority to act for the partnership
GENERAL RULE: Dissolution terminates all authority of any partner to act for the partnership
EXCEPTIONS:
1. Acts necessary to wind up partnership affairs
2. Acts necessary to complete transactions begun but not then finished
Note: Thus, dissolution terminates the ACTUAL authority of a partner to undertake NEW business for
the partnership
QUALIFICATIONS TO THE GENERAL RULE:

1. With respect to the partners (in so far as partners themselves are concerned)
a) Dissolution is not by act, insolvency or death of a partner: General Rule applies. Hence, dissolution
terminates the ACTUAL authority of a partner to undertake NEW business for the partnership
b) Dissolution is by act, insolvency or death of a partner:
GENERAL RULE: Authority of partners inter se to act for the partnership is NOT deemed
terminated. Thus, each partner is liable to his co-partners for his share of any liability created by
any partner acting for the partnership as if the partnership has not been dissolved
EXCEPTIONS:
1) The cause of dissolution is the ACT of a partner and the acting partner had KNOWLEDGE of
such dissolution
2) The cause of dissolution is the DEATH or INSOLVENCY of a partner and the acting partner
had KNOWLEDGE or NOTICE of such dissolution
2. With respect to persons not partners (third persons)

a) When partnership is bound to third persons after dissolution
1) Act appropriate for winding up partnership affairs
2) Act appropriate for completing unfinished transactions
3) Completely NEW transaction which would bind the partnership if dissolution had not taken
place provided: the other party is in good faith, meaning:
i. Previous creditor (had previously extended credit) AND he had NO KNOWLEDGE or
NOTICE of the dissolution, OR
ii. NOT a previous creditor AND the fact of dissolution had not been published in a
newspaper of general circulation
b) When partnership is NOT bound to third persons after dissolution
1) Where partnership was dissolved because it was unlawful to carry on the business, except
when the act is for winding up
2) Where the acting partner in the transaction has become insolvent
3) Where the partner is unauthorized to wind up, except if the transaction is with third persons in
good faith (under the same circumstances as defined above)
4) Where act is NOT appropriate for winding up partnership affairs or for completing unfinished
transactions
5) completely NEW transaction which would bind the partnership if dissolution had not taken
place with third persons in bad faith
B. As to partners existing liability

GENERAL RULE: Dissolution does not automatically discharge the existing liability of any partner
EXCEPTION: A partner may be relieved from all existing liabilities upon dissolution ONLY by an
agreement between:
1. Partner concerned
2. Other partners
3. Partnership creditors
Note: The consent of the partnership creditors and the other partners to the novation may be implied
from their conduct.
RIGHTS OF A PARTNER UPON DISSOLUTION

1. Where dissolution is NOT in contravention of the partnership agreement
a) To have partnership property applied to discharge partnership liabilities
b) To receive in cash his share of the surplus
2. Where dissolution is in contravention of the partnership agreement
a) Rights of a partner who has not caused the dissolution wrongfully
1) To have partnership property applied to discharge partnership liabilities
2) To receive in cash his share of the surplus
3) To be indemnified for damages caused by the partner guilty of the wrongful dissolution
4) To continue the business in the same name during the agreed term of the partnership, by
themselves or jointly with others
5) To possess partnership property should they decide to continue the business
b) Rights of a partner who has wrongfully caused the dissolution
1) If the business is not continued by the other partners
i. To have partnership property applied to discharge partnership liabilities
ii. To receive in cash his share of the surplus less damages caused by his wrongful dissolution
2) If the business is continued
i. To have the value of his interest in the partnership at the time of the dissolution, surplus
less damages caused by his wrongful dissolution to his co-partners, ascertained and paid in
cash or secured by a bond approved by the court; AND
ii. To be released from all existing and future liabilities
NOTE: The value of the goodwill of the business is not considered in ascertaining the value of
the interest of the guilty partners.
RIGHTS OF A PARTNER WHERE PARTNERSHIP CONTRACT IS RESCINDED ON THE

GROUND OF FRAUD OR MISREPRESENTATION
(NOTE: The following are the rights of the partner entitled to rescind)
1. Right of LIEN on, or RETENTION of, the surplus of partnership property after satisfying partnership
liabilities for any sum of money paid or contributed by him
2. Right of SUBROGATION in place of the partnership creditors after payment of partnership liabilities;
and
3. Right of INDEMNIFICATION by the guilty partner against all debts and liabilities of the partnership
MANNER OF WINDING UP
1. Extrajudicial by the partners themselves without the intervention of the court
2. Judicial under the control and direction of the court upon proper cause shown by any partner, his legal
representative or his assignee
PERSONS AUTHORIZED TO WIND UP

1. partners designated by the agreement
2. in the absence of such agreement, all partners who have not wrongfully dissolved the partnership
3. legal representative of last surviving partner not insolvent
ORDER OF PAYMENT IN WINDING UP
Page 95 of 193
1. General Partnership (ART 1839 (2))

a) those owing to creditors other than partners
b) those owing to partners other than for capital or profits
c) those owing to partners in respect of capital
d) those owing to partners in respect of profits
2. Limited Partnership (ART 1863)
a) those owing to creditors, except those to limited partners on account of their contribution, and to
general partners
b) those owing to limited partners in respect of their share of the profits and other compensation by
way of income
c) those owing to limited partners in respect of their capital contributions
d) those owing to general partners other than for capital and profits
e) those owing to general partners in respect of profits
f) those owing to general partners in respect of capital
DOCTRINE OF MARSHALLING OF ASSETS (Article 1839(8))

1. Partnership creditors have preference in partnership assets
2. Separate or individual creditors have preference in separate or individual properties
3. Anything left from either goes to the other
PARTNERS LIEN
Right of every partner to have the partnership property applied to discharge partnership liabilities AND
to have the surplus assets, if any, distributed in cash to the respective partners, after deducting what may
be due to the partnership from them as partners.
LIMITED PARTNERSHIP
One formed by two or more persons having as members one or more general partners and one or more
limited partners, the latter not being personally liable for partnership debts.
NOTE: The Supreme Court, declared a firm to be a general partnership in a case where it appears that the
inclusion of Ltd. (limited) in the firm was only a subterfuge resorted to by the partners in order to evade
liability for possible losses, while assuming their enjoyment of advantages to be derived from the relation.
Jo Chung Cang vs. Pacific Commercial Co. 45 PHIL 142 [1923]). In other words if the parties intended a
general partnership, they are general partners although their purpose is to avoid the creation of such a
relation.
Characteristics of Limited Partnership

1. Limited partnership is formed by substantial compliance in good faith with the statutory requirements
2. One or more general partners control the business and are personally liable to creditors
3. One or more limited partners contribute to the capital and share in the profits but do not participate in
the management of the business and are not personally liable for partnership obligations beyond the
amount of their capital contributions
4. The limited partners may ask for the return of their capital contributions under the conditions prescribed
by law
5. The partnership debts are paid out of the common fund and the individual properties of the general
partners
General Partner/
Limited Partner/Partnership
Partnership
1. Extent of liability
Limited partners liability extends only to General partner is personally liable
his capital contribution for partnership obligations
2. Right to participate in the management of partnership

Limited partner has no share in the General partners have an equal right
management of a limited partnership and in the management of the business
renders himself liable to partnership (when the manner of management
creditors as a general partner if he takes has not been agreed upon)
part in the control of the business
3. Contribution
Limited partner must contribute cash or General partner may contribute
property to the partnership but not services money, property or industry to the
partnership
4. Proper party to proceedings by or against the partnership
Limited partner is not a proper party to General partner is the proper party to
proceedings by or against a partnership proceedings by or against a
Unless: partnership
1. he is also a general partner, or
2. where the object of the proceeding is to
enforce a limited partners right against
or liability to the partnership
5. Transferability of interest
Limited partners interest is freely General partners interest in the

assignable, with assignee acquiring all the partnership may not be assigned as to
rights of the limited partner subject to make the assignee a new partner
certain qualifications without the consent of the other
partners, although he may associate a
third person with him in his share
6. Inclusion of partners name in the firm name
As a general rule, name of a limited partner Name of a general partner may

must not appear in the firm name appear in the firm name
7. Prohibition to engage in other business
No such prohibition in the case of a limited General partner is prohibited from

partner who is considered a mere engaging in a business which is of
contributor to the partnership the SAME kind of business in which
the partnership is engaged, if he is a
capitalist partner, or in ANY of
business for himself if he is an
industrial partner
8. Effect of retirement, death, insanity or insolvency
Retirement, death, insanity or insolvency of Retirement, death, insanity or

a limited partner does not dissolve the insolvency of a general partner
partnership for his executor or administrator dissolves the partnership
shall have the rights of a
limited partner for the purpose of selling his
estate
9. Creation
Limited partnership is created by the General partnership, as a general
members after substantial compliance in rule, may be constituted in any form
good faith with the requirements set forth by contract or conduct of the
by law partnership
10. Members of the partnership

Composed of one or more general partners Composed only of general partners
and one or more limited partners
11. Firm name
Firm name must be followed by the word No such requirement
Limited
12. Rules governing dissolution and winding up
Governed by Art. 1839 Governed by Art. 1863
ESSENTIAL REQUIREMENTS FOR FORMATION OF LIMITED PARTNERSHIP

1. A certificate or articles of limited partnership which states the matters enumerated in Article 1844,
which must be signed and sworn;
2. Such certificate must be filed for record in the Office of the Securities and Exchange Commission.
NOTE: A strict compliance with the legal requirements is not necessary. It is sufficient that there is
substantial compliance in good faith. If there is no substantial compliance, the partnership becomes a general
partnership as far as third persons are concerned, in which all the members are liable as general partners. (Jo
Chung Cang vs. Pacific Commercial Co., 45 PHIL 142 [1923].)
However, a firm which fails to substantially comply with the formal requirements of a limited
partnership is a general partnership only as to its relations to third persons. The firm is a limited partnership,
subject to all rules applicable to such partnership; and as between the partners they are bound by their
agreement; and that all the limited partners relations to his co-partners and their obligations to him growing
out of the relation remain unimpaired.
As to third persons or creditors guilty of estoppel, the firm shall not be treated as a general
partnership despite lack of substantial compliance to the requirements of a limited partnership. If creditors
deal with the firm as a limited partnership, they will be estopped from insisting that there is no such
partnership, or that the terms of the partnership were not sufficiently stated in the notice of its formation. (40
Am. Jur. 476.)
Page 97 of 193
CONTENTS OF THE CERTIFICATE OR ARTICLES OF LIMITED PARTNERSHIP

1. Name of the partnership, adding thereto the word limited;
2. Character of the business;
3. Location of the principal place of business;
4. Name and place of residence of each member, general and limited partners being respectively
designated;
5. Term for which the partnership is to exist;
6. Amount of cash and description of and the agree value of the other property contributed by each limited
partner;
7. Additional contributions to be made by each limited partner and the times at which or events on the
happening of which they shall be made;
8. Time, if agreed upon, when to contribution of each limited partner is to be returned;
9. Share in the profits or other compensation by way of income which each limited partner shall receive by
reason of his contribution;
10. Right, if given, of a limited partner to substitute an assignee as contributor in his place, and the terms
and conditions of the substitution;
11. Right, if given, of the partners to admit additional partners;
12. Right, if given, of one or more of the limited partners to priority over other limited partners, as to
contributions or as to compensation by way of income, and the nature of such priority;
13. Right, if given, of the remaining general partner or partners to continue the business on the death,
retirement, civil interdiction, insanity or insolvency of a general partner; and
14. Right, if given, of a limited partner to demand and receive property other than cash in return of his
contribution.
LIABILITY FOR FALSE STATEMENT IN CERTIFICATE

Any partner to the certificate containing a false statement is liable to one who suffers loss by
reliance on such certificate provided the following requisites are present:
1. He knew the statement to be false at the time he signed the certificate, or subsequently having
sufficient time to cancel or amend it or file a petition for its cancellation or amendment, he failed to do
so;
2. The person seeking to enforce liability has relied upon the false statement in transacting business with
the partnership;
3. The person suffered a loss as a result of reliance upon such false statement.
MANAGEMENT OF LIMITED PARTNERSHIP

A general partner in a limited partnership is vested with the entire control of the firms business and has
all the rights and powers and is subject to all the liabilities and restrictions of a partner in a general
partnership.
A general partner in a limited partnership however has no authority, without written consent or
ratification of all limited partners, to:
1. Do any act in contravention of the certificate;
2. Do any act which would make it impossible to carry on the ordinary business of the
partnership;
3. Confess judgment against the partnership;
4. Possess partnership property, or assign their rights in specific partnership property, for
other that a partnership purpose;
5. Admit a person as a general partner;
6. Admit a person as a limited partner, unless the right to do so is given in the certificate
7. Continue the business with the partnership property on the death, retirement, insanity, civil
interdiction or insolvency of a general partner, unless the right to do so is given in the certificate.
A limited partner is liable as a general partner for the firms obligations if he takes part or interferes in
the management of the business.
RIGHTS OF A LIMITED PARTNER

KEY: BIF2AR2
1. To have the partnership books kept at the principal place of business of the partnership
2. To inspect, at a reasonable hour, partnership books and copy any of them
3. To demand true and full information of the things affecting the partnership
4. To demand a formal account of the partnership affairs whenever circumstances render it just and
reasonable
5. To ask for dissolution and winding up by decree of court
6. To receive a share in the profits or other compensation by way of income
provided: that the partnership assets are in excess of partnership liabilities after such payment
7. To receive the return of his contribution provided:
a) All the liabilities of the partnership have been paid OR the partnership assets are sufficient to
pay partnership liabilities
b) The consent of all the members (general and limited partners) has been obtained
EXCEPTION:
When the return of the contribution may be rightfully demanded:
1) On the dissolution of the partnership
2) Upon the arrival of the date specified in the certificate for the return
3) After he has given 6 months notice in writing to all other partners, if no time is specified in
the certificate their for the return of the contribution or for the dissolution of the
partnership
c) The certificate is cancelled or so amended as to set forth the withdrawal or reduction
LIABILITIES OF A LIMITED PARTNER

1. Liability for unpaid contribution
a) For the difference between his contribution as actually made and that stated in the certificate as
having been made; AND
b) For any unpaid contribution which he has agreed in the certificate to make in the future at the time
and the conditions stated in the certificate
2. Liability as trustee
a) Specific property stated in the certificate as contributed by him, but which was not contributed or
which has been wrongfully returned; AND
b) Money or other property wrongfully paid or conveyed to him on account of his contribution
NOTE: These liabilities can be waived or compromised only by consent of all the members; but a waiver or
compromise shall NOT affect the right of a creditor of a partnership who extended credit or whose claim
arose after the filling and before the cancellation or amendment of the certificate, to enforce such liabilities.
SUBSTITUTED LIMITED PARTNER

A person admitted to all the rights of a limited partner who has died of has assigned his interest in the
partnership.
GENERAL RULE: He has all, the rights and powers, and is subject to all the restrictions and liabilities of
his assignor.
EXCEPTION: Those liabilities which he was ignorant at the time he became a limited partner AND which
could not be ascertained from the certificate.
REQUISITES IN ORDER THAT THE ASSIGNEE MAY BECOME A SUBSTITUTED LIMITED

PARTNER
1. All the members must consent to the assignee becoming a substituted limited partner, OR the limited
partner, being empowered by the certificate must give the assignee the right to become a limited partner
2. The certificate must be amended in accordance with Art.1865
3. The certificate as amended must be registered in the Securities and Exchange Commission
ALLOWABLE TRANSACTIONS OF A LIMITED PARTNER

Being merely a contributor to the partnership is not prohibited from:
1. granting loans to the partnership
2. transacting other business with the partnership
3. receiving a pro rata share of the partnership assets with the general creditors if he is NOT also a general
partner
NOTE: In transacting a business with the partnership as a non-member, the limited partner is considered a
non-partner creditor
PROHIBITED TRANSACTIONS OF A LIMITED PARTNER

1. receiving or holding as collateral security any partnership property; or
2. receiving any payment, conveyance, or release from liability if it will prejudice the partnership creditors
NOTES:
Violation of the prohibition will give rise to the presumption that it has been made to defraud
partnership creditors
The prohibition is NOT ABSOLUTE, there is no such prohibition if the partnership assets are sufficient
to discharge partnership liabilities to persons not claiming as general or limited partners.
AGENCY
CONTRACT OF AGENCY
A contract whereby a person (agent) binds himself to render some service or to do something in
representation or on behalf of another (principal), with the consent or authority of the latter. (Article
1868)
The parties to the contract are:

1. Principal- one whom the agent represents and from whom he derives authority; he is the person
represented.
2. Agent- one who acts for and represents another; he is the person acting in a representative capacity.
AGENCY LEASE OF SERVICES
Page 99 of 193
1. Principle of representation is 1. Principle of employment is

applied. applied.
2. Extinguished at will of the 2. Concurrence of parties is
principal. necessary.
3. Agent exercise discretionary 3. Employee exercise ministerial
power to attain an end for which he functions only.
was appointed.
4. Preparatory Contract 4. Principal Contract
AGENCY TO SELL SALE

1. Agent receives the goods as the 1. The buyer receives goods as
goods of the principal. owner
2. Agent delivers the proceeds of 2. Buyer pays the price.
the sale
3. Agent can return the object in 3. the buyer, as a rule, cannot return
case he is unable to sell the same the object sold
4. Bound to act according to the 4. The buyer can deal with the thing
instructions of his principal. as he please being the owner.
PURPOSE OF AGENCY
The purpose of agency is to extend the personality of the principal through the facility of the agent. It
enables the activity of man which is naturally limited in its exercise by the impositions of his
physiological conditions to be legally extended by permitting him to be constructively present in many
different places and to perform diverse juridical acts and carry on many different activities through
another when physical presence is impossible or inadvisable at the same time. (11 Manresa 434)
ELEMENTS OF AGENCY
A. Consent
Any person or entity having juridical capacity and capacity to act and not otherwise disqualified, may
enter into an agency.
But as regards the party with whom the agent acts or contracts, the legal capacity of the principal rather
than the agent, is of the greater import.
B. Object
the services to be undertaken by the agent
may cover all acts pertaining to a business of the principal (general agency) or one or more specific
transactions (special agency)
the extent of the agents authority to act, whether it be a general or a special agency, depends on how the
agency is couched.
C. Cause
May be onerous or gratuitous but presumed for compensation
NOTE: The agent may not be deprived of his right to compensation by an unjustified revocation of the
agency
KINDS OF AGENCY
1. as to manner of creation
a) express- one where the agent has been actually authorized by the principal, either orally or in
writing;
b) implied- one which is implied from the
i. acts of the principal- from his silence or lack of action, or his failure to repudiate
the agency knowing that another person is acting on his behalf without authority.
ii. Acts of the agent- when he carries out the agency, or from his silence or inaction
according to the circumstances.
2. as to its character
a) gratuitous- one where the agent receives no compensation for his services.
b) compensated or onerous- one where the agent receives compensation for his services.
3. as to extent of business covered

a) general- one which comprises all the business of the principal;
b) special- one which comprises one or more specific transactions.
4. as to authority conferred
a) couched in general terms- one which is created in general terms and is deemed to comprise
only acts of administration;
b) couched in specific terms- one authorizing only the performance of a specific act or acts.
5. as to its nature and effects

a) ostensible or representative- one where the agent acts in the name and in representation of the
principal.
b) simple or commission- one where the agent acts in his own name but for the account of the
principal.
ACTS WHICH MAY BE DELEGATED TO AN AGENT

GENERAL RULE: What a man may do in person, he may do thru another.
EXCEPTIONS:
1. Personal acts- if personal performance is required the doing of an act by a person on behalf of another
does not constitute performance by the latter.
a) Voting during an election;
b) Making a will;
c) Making statements which are required to be done under oath;
d) A member of the board of directors or trustees in a corporation cannot validly act as such by
proxy
e) An agent cannot delegate to a sub-agent the performance of acts which he has been appointed
to perform in person.
2. Criminal Acts or Acts not allowed by law- There can be no agency in the perpetration of a crime or
unlawful act.
Examples:
a) An alien principal using an agent to acquire lands;
b) Persons who, because of their position and relation with the persons under their charge or
property under control, are prohibited from acquiring said property and cannot do so through an
agent.
FORM OF AGENCY
Agency may be express or implied from the acts of the principal, from his silence or lack of action, or
his failure to repudiate the agency, knowing that another person is acting on his behalf without authority.
(Article 1869)
NOTE: In an implied agency, the principal is still bound by the acts of the agent just as in case of express
agency
GENERAL RULE: There are no formal requirements governing the appointment of an agent. The agents
authority may be oral or written. It may be in a public or private writing.
EXCEPTION: When the law requires a specific form
Example: Sale of a piece of land or any interest therein through an agent:
NOTES:
authority to sell must be in writing; otherwise the sale is VOID (Art.1874)
the sale itself should be in writing in order to be enforceable.
The authority of an agent to execute a contract of sale of real estate must be conferred in writing and
must give him specific authority, either to conduct the general business of the principal or to execute a
binding contract containing terms and conditions which are in the contract he did execute. ( Dizon et al.
vs. CA et al., GR 124741, January 28, 2003)
FORM OF ACCEPTANCE BY AGENT
Acceptance by the agent may also be express or implied from his acts which carry out the agency, or
from his silence or inaction according to the circumstances
Kinds of Implied Acceptance

1. Where persons are present
Acceptance may be implied if:
a. principal delivers his power of attorney to the agent and
b. agent receives it without any objection
2. Where persons are absent
GENERAL RULE: Acceptance cannot be implied from silence of the agent
EXCEPTION:
1. principal transmits his power of attorney to the agent, who receives it without any objection;
2. principal entrusts to him by letter or telegram a power of attorney with respect to the business in
which he is habitually engaged as an agent, and he did not reply to the letter or telegram
IMPLIED ACCEPTANCE AGENCY BY ESTOPPEL
1. De Jure Agent 1. Not really an agent

2. Binds the principal for acts 2. Only the purported agent is
within the scope of his authority. liable.
RULE ON AGENCY BY ESTOPPEL
Page 101 of 193

One who clothes another with apparent authority as his agent, and holds him out to the public as such,
cannot be permitted to deny the authority of such person in good faith, and in the honest belief that he is
what he appears to be. (Cuison vs. CA, GR.88531, October 26, 1993)
CLASSES AND KINDS OF AGENTS

1. Universal Agent- one employed to do all acts that the principal may personally do, and which he can
lawfully delegate to another the power of doing.
2. General Agent- one employed to transact all the business of the principal, or all the business of a
particular kind or in a particular place, or in other words to do all acts, connected with a particular trade,
business or employment.
3. Special or Particular Agent- one authorized to act in one or more specific transactions, or to do one or
more specific acts, or to act upon a particular occasion.
General Agent Special Agent
1. Scope of Authority
Usually authorized to do all acts Authorized to do only acts in

connected with the business or pursuance of particular instructions
employment in which he is engaged. or with restrictions necessarily
implied from the acts to be done
2. Continuity
Conducts a series of transactions Usually involves a single transaction

involving a continuity of service. or a series of transactions not
involving continuity
3. Extent by which agent may bind principal
Binds his principal by an act within Cannot bind his principal in a
the scope of his authority although it manner beyond or outside the
may be contrary to his special specific acts which he is authorized
instructions to perform on behalf of the principal
4. Termination of Authority
Apparent authority does not terminate Mere revocation is effective to
by the mere revocation of his terminate the authority as to third
authority without notice to the third persons because the third person has
party a duty to inquire
5. Construction of Instructions of Principal

Statement of principal with respect Authority of agent
to the agents authority would must be strictly pursued
ordinarily regarded as advisory
only
SPECIAL POWER OF ATTORNEY (SPA)

An instrument in writing by which one person, as principal, appoints another as his agent and confers
upon him the authority to perform certain specified acts or kinds of acts on behalf of the principal.
NOTE: It need not be notarized; except where it is executed in a foreign country, must be certified in
accordance with the Rules of Court.
INSTANCES WHERE SPA IS NECESSARY

(ART 1878) (PECWEM- LLB- BOCARO)
1. To make such payments as are not usually considered as acts of administration;
2. To effect novation which put an end to obligations already in existence at time the agency was
constituted;
3. To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to
waive objections to the venue of an action or to abandon a prescription already acquired;
4. To waive any obligation gratuitously;

5. To enter into any contract by which the ownership of an immovable is transmitted or acquired either
gratuitously or foe a valuable consideration;
6. To make gifts, except customary ones for charity or those made to employees in the business managed
by the agents;
7. To loan or borrow money, unless the latters act be urgent and indispensable for the preservation of the
things which are under administration;
8. To lease any real property to another person for more than one year;
9. To bind the principal to render some service without compensation;
10. To bind the principal in a contract of partnership;
11. To obligate the principal as guarantor or surety;
12. To create or convey real rights over immovable property;

13. To accept or repudiate an inheritance;
14. To ratify or recognize obligations contracted before the agency;
15. Any other act of strict dominion.
NOTE: a third person with whom the agent wishes to contract on behalf of the principal may require the
presentation of the power of attorney or the instructions as regards the agency; except private or secret
orders.
NOTE: The scope of the agents authority is what appears in the written terms of the power of attorney.
While third persons are bound to inquire into the extent or scope of the agents authority, they are not
required to go beyond the terms of the written power of attorney. Third persons cannot be adversely affected
by an understanding between the principal and his agent as to the limits of the latters authority. In the same
way, third persons need not concern themselves with instructions given by the principal to his agent outside
the written power of attorney. (Siredy Enterprises, Inc. vs. CA, et al. GR 129039, September 27, 2002)
NOTES:
SPA to sell does not include the power to mortgage; and vice versa.
SPA to mortgage includes the power to allow the extrajudicial foreclosure of the mortgaged property.
SPA to compromise does not authorize submission to arbitration
SPA for an agent to institute any action in court to eject all persons in the principals lots so that the
principal could take material possession thereof, and for this purpose, to appear at the pre-trial and enter
into any stipulation of facts and/or compromise agreement but only insofar as this is protective of the
rights and interests of the principal in the property, does not grant any power to the agent to sell the
subject property nor a portion thereof. (Cosmic Lumber Corp vs. CA 265 SCRA 168)
EFFECT OF LACK OF SPA WHERE ONE IS REQUIRED: UNENFORCEABLE

When principal bound by act of agent
1. Agent must act within the scope of his authority
2. Agent must act in behalf of the principal
NOTE: The limits of the agents authority shall not be considered exceeded should it have been performed
in a manner more advantageous to the principal than that specified by him.
When a person NOT bound by act of another
1. Latter acts without or beyond the scope of his authority in the formers name; and
2. Latter acts within the scope of his authority but in his own name (UNDISCLOSED PRINCIPAL), except
when the transaction involves a thing belonging to the principal. In such case, the contract is deemed as
entered between the principal and the third person.
EFFECTS OF AGENTS ACTS

1. With Authority
a. in principals name valid; principal is bound; agent not personally liable unless he bound himself
(Article 1897)
b. in his own name Apply Article 1883; generally not binding on the principal; agent and stranger
are the only parties, except regarding things belonging to the principal or when the principal ratifies
the contract or derives benefit therefrom.
2. Without Authority
a. in principals name unauthorized and unenforceable but may be ratified, in which case, may be
validated retroactively from the beginning (Article 1407)
b. in his own name valid, whether or not the subject matter belongs to the principal, provided that at
the time of delivery, the agent can transfer legally the ownership of the thing. Otherwise, he will
be held liable for breach of warranty against eviction; Article 1883 does NOT apply
OCCASIONS WHEN PRINCIPAL IS BOUND BY THE ACTS OF THE AGENT BEYOND THE
LATTERS POWERS
General Rule: The principal is not bound by the acts of the agent beyond his limited powers.
Exceptions:
1. Where the principals acts have contributed to deceive the third person in good faith;
2. Where the limitations upon the power created by him could not have been known by the third person;
3. Where the principal has placed in the hands of the agent instruments signed by him in blank (Strong vs.
Gutierrez Repide 6 PHIL 680 [1906])
4. Where the principal has ratified the acts of the agent.
Doctrine of Agency by Necessity

By virtue of the existence of an emergency, the authority of an agent is correspondingly enlarged in
order to cope with the exigencies or the necessities of the moment
Requisites:
1. Real existence of an emergency
2. Inability of the agent to communicate with the principal
3. Exercise of the additional authority for the principals own protection
4. Adoption of fairly reasonable means, premises duly considered
Page 103 of 193

NOTE: Agency can never be created by necessity; what is created is additional authority in an agent
appointed and authorized before the emergency arose.
GENERAL OBLIGATIONS OF AGENT TO PRINCIPAL:

1. To act with utmost good faith and loyalty for furtherance of principals interests
2. To obey all lawful orders and instructions of principal within the scope of the agancy
3. To exercise reasonable care, skill and diligence
SPECIFIC OBLIGATIONS OF AGENT TO PRINCIPAL

1. To carry out the agency which he has accepted
2. To answer for damages which through his performance the principal may suffer
3. To finish the business already begun on the death of the principal should delay entail any danger
4. To observe diligence of a good father of a family in the custody and preservation of the goods
forwarded to him by the owner in case he declines an agency, until an agent is appointed
5. To advance the necessary funds should there be a stipulation to do so
6. To act in accordance with the instructions of the principal, and in default thereof, to do all that a good
father of a family would do
7. Not to carry out the agency if its execution would manifestly result in loss or damage to the principal
8. To answer for damages if there being a conflict between his interest and those of the principal, he should
prefer his own
9. Not to loan to himself if he has been authorized to lend money at interest
10. To render an account of his transactions and to deliver to the principal whatever he may have received
by virtue of the agency
11. To distinguish goods by countermarks and designate the merchandise respectively belonging to each
principal, in the case of a commission agent who handles goods of the same kind and mark, which
belong to different owners
12. To be responsible in certain cases for the acts of the substitute appointed by him
13. To pay interest on funds he has applied to his own use
14. To inform the principal, where an authorized sale of credit has been made, of such sale
15. To bear the risk of collection, should he receive also on sale, a guarantee commission
16. To indemnify the principal for damages for his failure to collect the credits of his principal at the time
that they become due
17. To be responsible for fraud or negligence
NOTE: A stipulation exempting the agent from the obligation to render an account shall be VOID.
GENERAL RULE: Knowledge of agent is knowledge of principal.
EXCEPTIONS
1. Agents interests are adverse to those of the principal
2. Agents duty is not to disclose the information (confidential information)
3. Where the person claiming the benefit of the rule colludes with the agent to defraud the principal
SUB-AGENT
A person to whom the agent delegates, as his agent, the performance of an act for the principal which
the agent has been empowered to perform through his representative.
NOTE: The agent may appoint a substitute (sub-agent) except when he has been prohibited by the
principal. (ART 1892)
Instances when agent shall be responsible for the acts of the substitute:
1. when he was not given the power to appoint; or
2. when he was given such power but without designating the person, and the person appointed was
notoriously incompetent or insolvent.
3. in these two cases the principal may further bring an action against the substitute with respect to the
obligations which the latter has contracted under the substitution.
NOTE: All acts of the substitute appointed against the prohibition of the principal shall be VOID.
JOINT AGENTS
Agents appointed by one or more principals under such circumstances as to induce the inference that it
was the principals intent that all should act in conjunction in consummating the transaction for which
they were appointed.
Their responsibility is JOINT; except if solidarity has been expressly stipulated.
If solidarity has been agreed upon, each agent is responsible for the:
a. non-fulfillment of the agency
b. fault or negligence of his fellow agents; except when the fellow agents acted beyond the scope of
their authority.
NOTE: innocent agent has a right later on to recover from the guilty or negligent agent (ART 1217(2))
Instances when agent may incur personal liability:
1. When the agent expressly binds himself
NOTE: The individual liability of the agent can be considered a further security in favor of the creditor
and does not affect or preclude the liability of the principal; both are liable
2. When agent exceeds his authority
3. When agent by his acts prevents performance on the part of the principal
4. When a person acts as an agent without authority or without a principal
5. A person who acts as an agent of an incapacitated principal unless the third party was aware of the
incapacity at the time of the making of the contract
FACTOR/COMMISSION AGENT
- One engaged in the purchase and sale for a principal of personal property, which for this purpose, has to be
placed in his possession and at his disposal.
If the commission agent received goods consigned to him, he is responsible for any damage or
deterioration suffered by the same in the terms and conditions and as described in the consignment.
The commission agent who handles goods of the same kind and mark, which belong to different
owners, shall distinguish them by countermarks, and designate the merchandise respectively belonging
to each principal.
A commission agent can sell on credit only with the express or implied consent of the principal. If such
sale is made without authority, the principal is given two alternatives:
i. He may require payment in cash, in which case any interest or benefit from the sale on credit
shall belong to the agent since the principal cannot be allowed to enrich himself at the agents
expense;
ii. He may ratify the sale on credit in which case it will have all the risks and advantages to him.
If the commission agent is authorized to sell on credit, he shall inform the principal with a statement of
the names of the buyers. With such statement, the sale shall be deemed to be for cash as far as the
principal is concerned.
The commission agent who does not collect the credits of his principal at the time when they become
due and demandable shall be liable for damages, unless he proves the exercise of due diligence for that
purpose.
BROKER
A middleman or intermediary who, in behalf of others and for a commission or fee, negotiates
contracts/transactions relating to real or personal property.
Factorage
Compensation of a factor or commission agent.
Ordinary Commission
Compensation for the sale of goods which are placed in his possession or at his disposal.
Guaranty Commission (Del credere)

Fee that is given in return for the risk, which the agent has to bear in the collection of credits.
An agent with a del credere commission is liable to the principal if the buyer fails to pay or is incapable
of paying.
GENERAL OBLIGATIONS OF PRINCIPAL TO AGENT

Duties and liabilities of the principal are primarily based upon the contract and the validity of the
contract between them
SPECIFIC OBLIGATIONS OF PRINCIPAL TO AGENT (CARIP)

1. To comply with all the obligations which the agent may have contracted within the scope of his
authority and in the name of the principal
2. To advance to the agent, should the latter so request, the sums necessary for the execution of the agency
3. To reimburse the agent for what the latter has advanced (plus interest), even if the business was not
successful, provided the agent was free from fault
4. To indemnify the agent for all the damages, which the execution of the agency may have caused the
latter without fault or negligence on his part
NOTE: The agent may retain in pledge the things which are the object of the agency until the principal
effects this reimbursement and pays the indemnity.
5. To pay the agent the compensation agreed upon, or if no compensation was specified, the reasonable
value of the agents services
LIABILITY OF PRINCIPAL FOR TORT OF AGENT RULE: The principal is civilly liable to third
persons for torts of an agent committed at the principals direction or in the course and within the
scope of the agents authority.
Reason for liability: The rule is based upon the principle that he who does an act through another does it
himself.
CONDITIONS FOR RATIFICATION

1. principal must have capacity and power to ratify
Page 105 of 193

2. principal must have had knowledge of material facts

3. principal must ratify the acts in its entirety
4. act must be capable of ratification
5. act must be done in behalf of the principal
ESTOPPEL BY PRINCIPAL
Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the
former allowed the latter to act as though he had full powers.
JOINT PRINCIPALS
Two or more persons who appoint an agent for a common transaction or undertaking.
Liability: solidarily liable to the agent for all the consequences of the agency.
Requisites of solidary liability:
1. There are two or more principals
2. The principals have all concurred in the appointment of the same agent; and
3. The agent is appointed for a common transaction or undertaking
NOTE: Any one of them may revoke the agency
RULES ON DOUBLE SALE BY PRINCIPAL AND AGENT

1 When two persons contract with regard to the same thing, one of them with the agent and the other with
the principal, and the two contracts are incompatible with each other, that of prior date shall be
preferred, without prejudice to Article 1544(double sale).
2 If the agent has acted in good faith, the principal shall be liable in damages to the third person whose
contract must be rejected. If the agent is in bad faith, he alone shall be responsible.
Instances when principal is not liable for the expenses incurred by the agent:
1. if the agent acted in contravention of the principals instructions, unless the latter should wish to avail
himself of the benefits derived from the contract;
2. when the expenses were due to the fault of the agent;
3. when the agent incurred them with knowledge that an unfavorable result would ensure, if the principal
was not aware thereof;
4. when it was stipulated that the expenses would be borne by the agent, or that the latter would be allowed
only a certain sum.
MODES OF EXTINGUISHMENT OF AGENCY (EDWARD)

1. Expiration of the period
2. Death, civil interdiction, insanity or insolvency of the principal or of the agent
3. Withdrawal of the agent
agent may withdraw by giving notice to the principal, but must indemnify the principal for damages
that he may suffer by reason of such withdrawal.
4. Accomplishment of the object or the purpose of the agency
5. Revocation
6. Dissolution of the firm or corporation, which entrusted or accepted the agency.
Instances when death of principal does not terminate agency

1. If the agency has been constituted in the common interest of the principal and the agent
2. If it has been constituted in the interest of a third person who has accepted the stipulation in his favor
Revocation of Agency by Principal

GENERAL RULE: Agency is revocable at will of the principal, regardless of the term of the agreement.
EXCEPTIONS:
1. If a bilateral contract depends upon it;
2. If it is the means of fulfilling an obligation already contracted;
3. If a partner is appointed manager of a partnership and his termination is unjustifiable; and
4. If it is created not only for the interest of the principal but also for the interest of third persons, who
have accepted the stipulation in their favor
Agency coupled with an interest

An agency wherein the agent has acquired some interest of his own in the execution of the authority
granted to him, in addition to his mere interest in the contract of employment with the resulting gains.
The agency becomes merely a part of another obligation or agreement, or an incidental element thereof
so it cannot be unilaterally revoked.
NOTE: However, in Coleongco vs. Claparals (10 SCRA 577), the SC made a sweeping statement that
coupled with an interest or not, the authority (agency) can certainly be revoked for a just cause.
Implied Revocation may be effected:
1. By the act of the principal in appointing another agent for the same business or transaction;
2. By the act of the principal in directly managing the business entrusted to the agent; or
3. By the act the principal in subsequently granting a special power of attorney as regards the same
business to another agent, where he had previously granted a general power of attorney to one agent.
TRUSTS
TRUST
A legal relationship between one person having an equitable ownership in property and another owning
the legal title to such property.
CLASSIFICATIONS
1. Effectivity - from the viewpoint of whether they become effective after the death of the trustor or during
his life, it may be either:
a. testamentary trusts
b. trusts inter vivos (sometimes called living trusts)
2. Creation - from the viewpoint of the creative force bringing them into
existence, it may be either:
Express trust - created by the intention of the trustor or of the parties
Implied trust - one which comes into being by operation of law. This may be either:
1) Resulting trust - one in which the intention to create a trust is presumed by law to exist from the
transaction and facts of the case
2) Constructive trust - one imposed by law irrespective of and even contrary to the intention of the
parties. It is designed to promote justice, frustrate fraud and prevent unjust enrichment.
TRUST CONTRACT
Always involves owner-ship, A legal obligation based on an undertaking
embracing a set of rights and duties supported by a consideration, which
fiduciary in character which may be obligation may or may not be fiduciary in
created by a declaration without character.
consideration.
TRUST DONATION
1. An existing legal relationship and There is a transfer of property as well as
involves the separation of legal and the disposition of both legal and equitable
equitable title ownership except in cases of gifts in trust.
2. The beneficiary of a trust may 2. The donee must comply with the legal
demand performance of the obligation requirements in accepting donations.
without having formally accepted the
benefit of the trust in public document,
upon mere acquiescence in the
formation of the trust and acceptance
under the second paragraph of article
1311(stipulations pour autrui).
Persons involved in the creation of a trust:

1. Trustor - the one who intentionally creates a trust
2. Trustee - the person who holds the legal title to the trust property for the benefit of another and with
certain powers and subject to certain duties
3. Beneficiary or the cestui que trust - the one who has the equitable interest in the property and enjoys the
benefit of administration by the trustee. He may be a natural person or a legal entity. The trustor may
establish a trust with himself as the beneficiary (usual case).
ELEMENTS OF EXPRESS TRUST

1. Competent trustor and trustee;
2. Ascertainable trust res; and
3. Sufficiently certain beneficiaries.
TRUST PROPERTY
The concept of a trust arises from or is the result of a fiduciary relation between the trustee and the cestui
que trust as regards certain property- real, personal, funds or money, choses in action held by the trustee.
(Pacheco vs. Arro, 85 PHIL 505 )
The trust property is owned by two or more persons at the same time, the relation between the two
owners being such that one of them is under an obligation to use his ownership for the benefit of the other.
The trustee is not a mere agent but an owner. But his ownership is a mere matter of form rather than
substance, and nominal rather than real.
RESULTING TRUST CONSTRUCTIVE

TRUST
1. Intention to create trust:
The intent of the parties to The trust is created irrespective of or
create a trust is presumed or even contrary to the intention of the
Page 107 of 193

implied by law from the nature parties to promote justice, frustrate

of their transaction fraud and to prevent unjust
enrichment.
2. Prescriptive period:
The 10 year prescriptive period The 10 year prescriptive period shall
shall be counted from the time be counted from the time that the
repudiation is made known to constructive trust arises.
beneficiary.
3. Examples:
Illustrated in Articles 1448, Illustrated in Articles
1449, 1451, 1452, 1453 1450, 1454, 1455, 1456
IMPLIED TRUST
EXPRESS TRUST
1. As to creation
Created by the intention of the Come into being by operation
parties of law.
2. As to proof of trust
An express trust over an immovable An implied trust over an
property or any interest therein immovable or any interest
cannot be proved by parol evidence therein may be proved by oral
evidence.
3. As regards repudiation of trust

An express repudiation made known In constructive trusts, even if
to the beneficiary is necessary in there is no repudiation, laches
order that laches or acquisitive may bar an action to enforce an
prescription may bar an action to implied trust.
enforce an express trust.
PROOF OF TRUST
GENERAL RULE: trust whether express or implied may be proved by parol or oral evidence
EXCEPTION: An express trust over an immovable property or any interest therein. This latter
requirement however is not for validity but only for purposes of proof.
NOTES:
Trusts cannot be established in violation of law. Trust is founded in equity such that it cannot
result from a contract formed for an illegal purpose.
Neither may a trust be created for the purpose of evading a legal prohibition. Example: there cannot be
a trust created for the purpose of obtaining homestead patents, in favor of a person already disqualified
to obtain additional homesteads.
Necessity of Acceptance to the creation and validity of trust relationship

1. Acceptance of the trustee
The acceptance of the trustee is not necessary to its existence and validity since if he declines, the courts
will appoint a trustee to fill the office that he declines. (see Sec.3 Rule 98 of the Rules of Court).
NOTE: But a trustees acceptance of the trust is necessary to charge him with the office of the trustee and
the administration of the trust and to vest the legal title in him.
2. Acceptance of the beneficiary

The acceptance by the beneficiary is essential to the creation and validity of a trust. However, such
acceptance is presumed if there is no proof to the contrary and the trust does not impose any onerous
condition upon the beneficiary.
Requisites for a Trustee to claim title by prescription:

1. He has performed open and unequivocal acts of repudiation
2. Such positive acts of repudiation have been made known to the beneficiary or the cestui que trust
3. The evidence thereon should be clear and convincing and
4. The period fixed by law has expired. (10 years from the time that the repudiation is made known to the
beneficiary in cases of express trust or resulting trust while 10 years from the time a constructive trust
arises).
In order that a trustee may sue or be sued alone, it is essential that his trust should be express, that is a
trust created by the direct and positive acts of the parties, by some writing deed or will, or by
proceedings in court. Rule 3, sec 3 does not apply in cases of implied trust that is, a trust which may be
inferred merely by the acts of the parties or from other circumstances. (PAL vs. Heald Lumber Co.)
NOTES:
the 10-year prescriptive period in case of implied trust begins to run from the date the trustee repudiates
the express trust. In the case Sps. Pascual, et al. vs. CA, et al. GR 115925, August 15, 2003, it was held
that repudiation takes place when the adverse party registers the land.
the 4-year prescriptive period under Article 1391 applies only if the fraud does not give rise to an
implied trust, and the action is to annul a voidable contract under Article 1390.
TRUST PURSUIT RULE

Equity will pursue property that is wrongfully converted by the fiduciary, or otherwise compel
restitution to the beneficiary. A trust will follow the property through all changes in its state and form,
provided its product or proceeds are capable of identification.
IMPLIED TRUST
Are those, without being express, are deducible from the nature of the transaction as matters of
intention, or which are superinduced on the transaction by operation of law, as matters of equity
independently of the particular intention of the parties.
KINDS OF IMPLIED TRUSTS

1. Purchase money resulting trust (Article 1448) There is a resulting trust when property is sold, and the
legal estate is granted to one party but the price is paid by another party for the purpose of having the
beneficial interest of the property.
To give rise to a purchase money resulting trust, it is essential that there be:
a) an actual payment of money, property or services or an equivalent, constituting valuable
consideration;
b) and such consideration must be furnished by the alleged beneficiary of a resulting trust.
EXCEPTIONS:
a) Where A pays the purchase money and title is conveyed by absolute deed to As child or to a person
to whom A stands in loco parentis and who makes no express promise, a trust does not result, the
presumption being that a gift was intended;
b) Where an actual contrary intention is proved;
c) Where the purchase is made in violation of an existing statute and in evasion of its express
provision, no trust can result in favor of the party who is guilty of fraud. (Tigno vs. Court of Appeals
280 SCRA 262 [1997])
2. Donations made to a person but the beneficial interest is vested in another. The donee is the trustee
while the designated third person is the beneficiary. (ART 1449).
3. Purchase with borrowed funds and the conveyance is made to lender to secure payment of debt. ART
1450 )
4. Legal title to land inherited by heir placed in the name of another. (Article 1451)
5. Legal title to property purchased taken in one co-owner. (ART 1452)
6. Conveyance under a promise to hold for, or transfer to another. (ART 1453)
7. Absolute conveyance to a person to secure performance of grantors obligation.
8. (ART 1454)
9. Purchase of property with use of trust funds (ART 1455)
10. Acquisition of property through mistake or fraud. (ART 1456).
NOTE: 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
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 property, does not prescribe.
Requisites before period or prescription may start in regard to an action based on an implied
trust:
a) the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui que
trust.
b) Such positive acts of repudiation have been made know to the cestui que trust; and
c) Evidence thereon is clear and positive. (Vda. De Cabrera vs. Court of Appeals 267 SCRA
339 [1997].)
NOTE: The enumeration is not exclusive.
Other examples of implied trust:

1. The registration of land under torrens in the name of one person do not bar evidence to show it was only
held in trust for another.
2. Certificate of registration of vehicle placed in the name of a person although the price was not paid by
him but by another.
3. One arising from the agents willful violation of the trust reposed in him by the principal by buying for
himself the property he was supposed to buy for the principal who designated and appointed him to
negotiate with the owner.
Page 109 of 193

4. In consonance with the trust fund doctrine in Corporation Law, the assets of the corporation, as
represented by the capital stock, are regarded as trust fund to be maintained unimpaired for the
payment of corporate creditors.
LAND REGISTRATION
LAND REGISTRATION
Purposes:
1. To quiet title to land and to stop forever any question as to the legality of said title.
2. To provide a means of publication
TORRENS SYSTEM
A system for registration of land under which, upon the landowners application, the court may, after
appropriate proceedings, direct the issuance of a certificate of title.
Purposes:
1. To avoid possible conflicts of title regarding real property,
2. To facilitate transactions relative thereto by giving the public the right to rely upon the face of the
Torrens certificate of title and to dispense with the need of inquiring further
EXCEPT when the party concerned has actual knowledge of facts and circumstances that should imply a
reasonably cautious man to make such further inquiry.
NOTE:
Registration was never intended as a means of acquiring ownership. (Republic vs. CA, 131 SCRA
539).
Registration is not equivalent to title. Under the Torrens system, registration only gives validity to
the transfer or creates a lien upon the land. It was not established as a means of acquiring title to the
private land because it merely confirms, but does not confer, ownership (Lu vs Manipon, 381 SCRA
788)
Lands granted under Spanish Mortgage Law which are not yet covered by certificate of title under
Torrens System are considered as unregistered lands. (Sec. 3 P.D. 1529)
TORRENS TITLE
Certificate of ownership issued by the Register of Deeds, naming and declaring the owner of the
real property described therein, free from all liens and encumbrances except such as may be expressly
noted thereon or otherwise reserved by law.
Conclusive against the whole world, including the government and to a holder thereof in good faith,
it is guaranteed to be indefeasible, unassailable, and imprescriptible.
Title once registered cannot be impugned, altered, changed, modified, enlarged, or diminished
except in some direct proceeding permitted by law.
Probative Value: Torrens Title may be received in evidence in all courts of the Philippines, and
shall be conclusive as to all matters contained therein, principally the identity of the owner of the
covered land thereby.
MODES OF ACQUIRING TITLE: (PREPA2ID)

1. Public grant
based on the Public Land Acts
obtained through issuance of Spanish Govt. of Royal Grants and concessions to discoverers and
settlers.
2. Reclamation
filling up of parts of the sea for conversion to land.
The SC has ruled that only the National Government may engage in reclamation projects. (Republic
vs. CA, 299 SCRA 199; P.D. 3-A.)
3. Emancipation patent or grant
based on P.D. No. 27 (CARP of 1972)
for the purpose of ameliorating the sad plight of farmers and of releasing them from the bondage of
the soil.
4. Private grant or voluntary transfer
5. Adverse possession or prescription
Adverse possession actual possession of land in opposition to all other claimants.
Prescription possession of land for required number of years and assertion of ownership through
an interrupted actual possession of property within the period of time prescribed by law.
6. Accretion
3 Requisites for accretion:
a) deposition of soil or sediment be gradual and imperceptible;

b)result of the action of waters of the river;
c) land where accretion takes place is adjacent to bank of rivers or sea coast.
Accretion does not automatically become registered. It needs new registration.
Accretions on the bank of a lake, like Laguna de Bay, belong to the owners of the estate to which
they have been added, while accretion on the sea bank still belongs to the public domain, and is not
available for private ownership until formally declared by the government to be no longer needed for
public use. (Republic vs. Amanda vda. De Castillo, 163 SCRA 286)
Registration does not protect the riparian owner against diminution of land through accretion. If
alluvium is wiped away, registration is rendered of no effect because subject is gone.
7. Involuntary alienation
E.g. eminent domain/expropriation
8. Descent or devise
By descent, title is acquired when an heir succeeds the deceased owner in testate or intestate.
By devise, person acquires land from one who may not be a relative, if he is named in the
deceaseds will.
Administration of the Torrens System

1. Land Registration Authority (LRA)
Agency of the government charged with the execution of laws relative to the registration of lands and
under executive supervision of DOJ. (Sec. 4 P.D. 1529)
Functions of the Administrator:

a. Issue decrees of registration pursuant to final judgments of the courts in land registration
proceedings and cause the issuance by the Registers of Deeds of the corresponding certificates of
title.
b. Exercise supervision and control over all Registers of Deeds and other personnel of the
Commission.
c. Resolve cases elevated en consulta by or on appeal from the decision of the Register of Deeds
d. Exercise executive supervision over all clerks of court and personnel of the courts with respect to
the discharge of their duties and functions in relation to the registration of lands
e. Implement all orders, decisions, and decrees promulgated relative to the registration of lands and
issue, subject to the approval of the Secretary of Justice, all needful rules and regulations
f. Verify and approve subdivision, consolidation, and consolidation-subdivision survey plans of
properties titled under Act 496 and PD 1529 except those covered by PD 957.
g. Acts as clerk of court in land registration proceedings
2. Register of Deeds (RD)

The public repository of records of instruments affecting registered or unregistered lands and chattel
mortgages in the province or city wherein such office is located. (Sec. 10, P.D. 1529)
Function: To immediately register an instrument presented for registration dealing with real or personal
property which complies with all the requisites for registration.
DOCTRINES:
The function of the Register of Deeds with reference to the registration of deeds, encumbrances,
instruments and the like is ministerial in nature (Baranda vs. Gustilo, 165 SCRA 757)
The law on registration does not require that only valid instruments shall be registered. If the purpose
of registration is merely to give notice, then questions regarding the effect or invalidity of instruments
are expected to be decided after, not before registration. It must follow as a necessary consequence that
registration must first be allowed, and validity or effect litigated afterwards. (Almirol vs. The Register of
Deeds of Agusan, 22 SCRA 1152)
Instances when RD may deny registration:

1. Where there are more than 1 copy of the owners duplicate certificate of title and not all such copies are
presented in the Register of Deeds
2. Where the voluntary instrument bears on its face infirmity
3. Where the validity of the instrument sought to be registered is in issue in a pending court suit
4. When the document is not verified and notarized (Gallardo vs. IAC, 155 SCRA 248)
Note:
A deed of sale executed in a place other than where the property is located does not affect extrinsic
validity of the instrument as long as the notary public concerned has authority to acknowledge the
document executed within his territorial jurisdiction.
Notarial acknowledgment attaches full faith and credit to document and vests upon it presumption
of regularity. (Sales vs. CA, 211 SCRA 885, 865)
Ways of Registering Title

1. Judicial
filing of petition with the regular courts
issuance of a decree by LRA
issuance of Original Certificate of Title (OCT) by Register of Deeds
2. Administrative
filing of application at CENRO/ PENRO
Page 111 of 193

forwarded to the Reg. Director and/or DENR for the issuance of patent and Register of Deeds for
issuance of OCT
Registrable Lands:
1. Alienable public agricultural lands
2. Private lands
Non-registrable lands:
Those found in Civil Code provisions dealing with non-registrable properties (e.g. property of public
dominion)
Specific kinds of non-registrable properties or lands:

a. Forest or timberland, public forest, & forest reserve
b. Mangrove swamps
c. Mineral lands
d. Foreshore land & seashore
NOTE: Foreshore land is the strip of land that lies between the high and low water marks and is
alternatively wet and dry according to the flow of the tide. It is part of the public domain and not
susceptible of disposition except by lease (Roble vs. Arbase)
e. Navigable rivers, streams & creeks
f. Lakes
g. Military Reservations
h. Watershed
i. Grazing lands
j. Previously titled land
k. Alluvial deposit along river when man-made
SYSTEMS OF REGISTRATION
1. ORIGINAL REGISTRATION UNDER PD NO. 1529

NATURE: proceeding brought before the Regional Trial Court ( as a land registration court) to
determine title or ownership of land on the basis of an application for registration or answer by a
claimant in a cadastral registration.
Kinds of Original Registration
1. Voluntary by filing with the proper court
a) Under P.D. No. 1529 (Property Registration Decree)
b) Under Sec. 48 of CA No. 141, Public Land Act
2. Involuntary cadastral proceedings
compulsory registration initiated by the government, to adjudicate ownership of land
involuntary on the part of the claimants but they are compelled to substantiate their claim or interest
through an answer
A. REQUISITES (STEPS) IN ORDINARY LAND REGISTRATION PROCEEDINGS (P.D. 1529): (SFS-TP-

SFH-PIEST)
The following requisites must also be complied with in the confirmation of imperfect or incomplete title
under Section 48 (b) of the Public Land Act
1. Survey of the land by the Bureau of Lands or a duly licensed private surveyor;
NOTES:
must be drawn in a tracing cloth plan
approved ONLY by the Director of Land Management (authority of LRA to approve such plan was
withdrawn by P.D. 239 dated July 9, 1983)
2. Filing of Application for Registration by the applicant;

NOTES:
always at the RTC of the province, city or municipality where property is situated.
it is then indorsed to the MTC if there is no controversy over the land or its value is less than
P100,000
in cases of delegated jurisdiction to the MTC, appeal is direct to the Court of Appeals
Bureau of Land must always be furnished with a copy of the petition and all pertinent documents
If land is situated between boundaries of two provinces, application must be filed:
a) boundaries are not defined in the RTC of the place where it is declared for taxation purposes;
b) boundaries are defined separate plan for each portion must be made by surveyor and a separate
application for each lot must be filed with appropriate RTC.
3. Setting of date for initial hearing by the court;
4. Transmittal of Application and date of initial hearing together with all documents or other evidences
attached thereto by the Clerk of Court to the Land Registration Authority;
5. Publication of Notice of Filing of Application and date and place of hearing once in the Official Gazette
and once in a newspaper of general circulation in the Philippines;
NOTES:
it is at this point that the court acquires jurisdiction over the subject matter
this is done by the Administrator who acts as the clerk of court
6. Service of Notice upon contiguous owners, occupants and those known to have interest in the property
by the sheriff;
7. Filing of Answer or Opposition to Application by any person whether named in the notice or not;
8. Hearing of the case by the court;
NOTES:
Republication or amendment of technical description of land is necessary when there is substantial
increase of the area of the land. If increase is merely minimal, no republication is needed. ( Benin
vs. Tuason, 57 SCRA 531)
9. Promulgation of judgment by the court;
10. Issuance of decree or order by the court declaring the decision final and instructing the Land
Registration Authority to issue a Decree of Confirmation and Registration;
NOTES:
it is not the court BUT the LRA which issues the decree of confirmation and registration
1 year after issuance of decree, it becomes incontrovertible and amendments of the same will not be
allowed except merely in case of clerical errors.
Decree of registration may be reviewed on the ground of fraud and must be filed within 1 year from
entry of the decree.
11. Entry of Decree in the Land Registration Authority;
NOTE: This serves as the reckoning date to determine the 1-year period from which one can impugn
the validity of the registration.
12. Sending of copy of Decree to the corresponding Register of Deeds; and
13. Transcription of Decree in the registration book and issuance of Owners Duplicate Original Certificate
of Title of the applicant by the Register of Deeds upon payment of the prescribed fees.
B. Persons Who May Apply for Registration: (Sec. 14, PD No. 1529)
1. THOSE WHO, BY THEMSELVES OR THROUGH THEIR PREDECESSORS-IN-INTEREST,
HAVE BEEN IN OPEN, CONTINUOUS, EXCLUSIVE AND NOTORIOUS POSSESSION AND
OCCUPATION OF ALIENABLE AND DISPOSABLE LANDS OF THE PUBLIC DOMAIN
UNDER A BONA FIDE CLAIM OF OWNERSHIP SINCE JUNE 12, 1945, OR EARLIER;
2. Those who have acquired ownership of private lands by prescription under the provisions of existing
laws;
3. Those who have acquired ownership of private lands or abandoned river beds by right of accession or
accretion; and
4. Those who have acquired ownership of land in any other manner provided for by law.
NOTES:
All these persons must be natural-born Filipino Citizens. However, by way of exception, juridical
persons may apply for registration of leased agricultural and disposable lands not exceeding 1,000
hectares in area for a period of 25 years and renewable for not more than 25 years. (Sec. 3, Chapter
XII, 1987 Constitution)
Notwithstanding the prohibition in the 1973 and 1987 Constitutions against private corporations
holding lands of the public domain except by lease, still a private corporation may institute
confirmation proceedings under Section 48(b) of Public Land Act if, at the time of institution of the
registration proceedings, the land was already private land. (Dir. of Lands vs. IAC and ACME
Plywood, 146 SCRA 509)
C. Persons who cannot file an application for registration

1. A public land sales applicant insofar as the land covered by his sales application is concerned. Reason:
he acknowledged that he is not the owner of the land and that the same is public land. [ Palawan
Agricultural and Industrial Co., Inc. vs. Dir. of Lands, 44 SCRA 15 (1972)]
2. A mortgagee or his successor in interest to the mortgage, notwithstanding the lapse of the period for the
mortgagor to pay the loan secured to redeem it. Reason: such act would amount to a pactum
commissorium which is against good morals and public policy. [Reyes vs. Sierra, 93 SCRA 472, 480
(1979)]
3. An antichretic creditor cannot also acquire by prescription the land surrendered to him by the debtor.
Reason: His possession is not in the concept of owner. [Ramirez vs. CA, 144 SCRA 292, 301 (1996)]
4. A person or entity whose claim of ownership to land had been previously denied in a reivindicatory
action. [Kidpales vs. Baguio Mining Co., 14 SCRA 913, 916, 918 (1965)]
D. Amendments to application that require publication

RULES:
The court may order, at any time, an application to be amended by striking out one or more of the
parcels of land applied for or by a severance of the publication (Sec. 18 P.D. 1529)
Amendments to the application including joinder, substitution, or discontinuance as to the parties may
be allowed by the court at any stage of the proceedings upon just and equitable terms. In such cases,
publication is not necessary.
Publication and notice are necessary where the amendment to the application consists in:
a. substantial change in the boundaries
b. an increase in the area of the land applied for
c. the inclusion of additional land
NOTE:
Page 113 of 193

purpose of the new publication is to give notice to all persons concerned regarding the amended
application. Without a new publication, the registration court cannot acquire jurisdiction over the
area covered by the original application, and the decision of the registration court would be a nullity
insofar as the decision concerns the newly included land. (Benin vs. Tuason, 57 SCRA 531)
an amendment due to change of name of the applicant does not require republication [Dir. of Lands
vs. IAC, 219 SCRA 399, 345 (1993)]
2. SUBSEQUENT REGISTRATION
Where incidental matters after original registration may be brought before the land registration court by
way of motion or petition filed by the registered owner or a party in interest.
Rules as to the necessity and effects of registration in general
a. Except a will that purports to convey or affect a registered land, the mere execution of deeds of
sale, mortgages, leases or other voluntary documents serves only 2 purposes: (1) as a contract
between the parties thereto and (2) as evidence of authority to the RD to register such documents
b. It is only the act of registering the instrument in the Register of Deeds of the province of city where
the land lies which is the operative act that conveys ownership or affects the land insofar as third
persons are concerned.
c. The act of registration creates a constructive notice to the whole world of such voluntary or
involuntary instrument or court writ or process.
Scope of Subsequent dealings with registered land

Voluntary Dealings Involuntary Dealings
1. Concept Refer to deeds, Refer to such writ order
instruments or or process issued by a
documents which are court of record affecting
results of the free and registered land which by
voluntary acts of the law should be registered
parties thereto to be effective, and also
to such instruments
which are not the willful
acts of the registered
owner and which may
have been executed even
without his knowledge or
against his consent.
2. Kinds - sale - attachment
- real property - mandamus
mortgage - sale on execution of
- lease judgement or sales for
- pacto de retro sale taxes
-extra-judicial - adverse claims
settlement - notice of lis pendens
- free patent/
homestead
- powers of attorney
- trusts
3. Effects of An innocent purchaser Entry thereof in the day
registration for value of registered book of the Register of
land becomes the Deeds is sufficient notice
registered owner the to all persons even if the
moment he presents owners duplicate
and files a duly certificate of title is not
notarized and valid presented to the Register
deed of sale and the of Deeds.
same is entered in the
day book and at the
same time he
surrenders or presents
the owners duplicate
certificate of title
covering the land sold.
Rules and Doctrines:

1. Voluntary Dealings
In voluntary sale of land, the registration of the instrument is the operative act that transmits or
transfers title.
Where there is nothing on the certificate of title to indicate any cloud or vice in the ownership of
the property, or any encumbrance thereon, the purchaser is not required to explore further than what
the Torrens title upon its face indicates in quest for any hidden defect or inchoate right that may
subsequently defeat his right thereto. (Fule vs. Legare. GR No. 17951)
The exception to the above rule is embodied in the case of Dela Merced vs. GSIS (365 SCRA 1)
where the court ruled that when the purchaser or mortgagee is a financing institution, the general
rule that a purchaser or mortgagee of the land is not required to look further than what appears on
the face of the title does not apply.
Every person dealing with registered land may safely rely on the correctness of the certificate of
title issued therefore and the law will in no way oblige him to go behind the certificate to determine
the condition of the property. Even if a decree in a registration proceeding is infected with nullity,
still, an innocent purchaser for value relying on a Torrens title issued in pursuance thereof is
protected (Cruz vs. CA & Suzara, 281 SCRA 491)
Although generally a forged or fraudulent deed is a nullity and conveys no title, however, there are
instances when such a fraudulent document may become the root of a valid title. One such
instance is where the certificate of title was already transferred from the name of the true owner to
the forger, and while it remained that way, the land was subsequently sold to an innocent purchaser.
(Fule vs Legare)
In the case of Tomas vs. Tomas (GR No. L-36897) the Supreme Court ruled that above rule cannot
be applied where the owner still holds a valid and existing certificate of title covering the same
property because the law protects the lawful holder of a registered title over the transfer of a
vendor, bereft of any transmissible right
Well settled is the rule that all persons dealing with property covered by Torrens certificate of title
are not required to go beyond what appears on the face of the title. When there is nothing on the
COT indicating any cloud or vice in the ownership of the property, or any encumbrance thereon, the
purchaser is not required to explore further than what the Torrens Title upon its face indicates in
quest for any hidden defect or inchoate right that may subsequently defeat his right thereto.
[Centeno vs CA, 139 SCRA 545, 555 (1985)]
Exceptions for applicability:
1) purchaser in bad faith [Egao vs. CA, 174 SCRA 484, 492 (1989)];
2) sufficiently strong indications to impel closer inquiry into the location, boundaries and condition
of the lot. (Francisco vs. CA 153 SCRA 330, 336, 337);
3) where a person buys land not from the registered owner but from one whose right to the land has
been merely annotated on the COT. (Quiniano vs. CA 39 SCRA 221);
4) purchaser of land the certificate of title contains a notice of lis pendens;
5) purchaser with full knowledge of flaws and defects in the title.(Bernales vs. IAC 166 SCRA 519,
524; Lu vs. Manipon, 381 SCRA 788)
2. Involuntary Dealings
Involuntary dealings affecting registered land which must be registered:
a. attachments
b. sale on execution or for taxes or for any assessment
c. adverse claim
d. notice of lis pendens
Claim or interest is adverse when:

a. claimants right or interest in registered land is adverse to the registered owner;
b. such right arose subsequent to date of original registration;
c. no other provision is made in the Decree for the registration of such right or claim
(Sec. 70, 1st par., P.D. 1529)
Formal requisites of an adverse claim for purposes of registration:
a) adverse claimant must state the following in writing:
1) his alleged right or interest
2) how and under whom such alleged right or interest is acquired
3) the description of the land in which the right or interest is claimed
4) the certificate of title number
b) such statement must be signed and sworn to before a notary public
c) claimant shall state his residence or place to which all notices may be served upon him
an adverse claim is a notice to third persons that someone is claiming an interest on the property or has a
better right than the registered owner thereof, and that any transaction regarding the disputed land is
subject to the outcome of the dispute (Sajonas vs CA, [GR No. 102377, July 5, 1996)
notice of lis pendens is intended to constructively advise, or warn all people who deal with the property
that they so deal with it at their own risk, and whatever rights they may acquire in the property in any
voluntary transaction are subject to the results of the action, and may well be inferior and subordinate to
those which may be finally determined and laid down therein. (Heirs of Maria Marasigan vs IAC. 152
SCRA 253).
Page 115 of 193

Notice of lis pendens is proper in the following cases:

1. to recover possession of real estate
2. to quiet title thereto
3. to remove clouds upon the title thereof
4. for partition, and
5. any other proceeding of any kind in court directly affecting the title to the land or the use of occupation
thereof or the building thereon.
When notice of lis pendens inapplicable: (PAPAL)

1. proceedings for the recovery of money judgments
2. attachments
3. proceedings on the probate of wills
4. administration of the estate of deceased persons
5. levies on execution
6. Foreclosure
NOTE: notice of lis pendens may be cancelled in the following cases before final judgment upon order of
the court:
1. when it is shown that the notice is for the purpose of molesting the adverse party
2. when it is shown that it is not necessary to protect the right of the party who caused the registration
thereof
3. where the evidence so far presented by the plaintiff does not bear out the main allegations of the
complaint
4. where the continuances of the trial are unnecessarily delaying the determination of the case to the
prejudice of the defendant
5. upon verified petition of the party who caused the registration thereof
6. it is deemed cancelled after final judgment in favor of defendant, or other disposition of the action such
as to terminate all rights of the plaintiff to property involved.
JUDICIAL CONFIRMATION OF IMPERFECT OR INCOMPLETE TITLE

Applicants:
1. Filipino citizens who by themselves or through their predecessors-in-interest have been in open,
continuous, exclusive and notorious possession and occupation of alienable and disposable lands of
public domain under a bona fide claim of acquisition since June 12, 1945 or prior thereto or since
time immemorial (CA No. 141, Section 48, as amended by PD No. 1073, Sec. 4).
2. Filipino citizens who by themselves or their predecessors-in-interest have been, prior to the
effectivity of PD 1073 on January 25, 1977, 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, for at least 30 years, or at least since January 24, 1947 (RA No. 1942).
3. Private corporations or associations which had acquired lands from Filipino citizens who had
possessed the same in the manner and for the length of time indicated in paragraphs 1 and 2 above
4. Natural-born citizens of the Philippines who have lost their citizenship and who has the legal
capacity to enter into a contract under Philippine laws may be a transferee of private land up to a
maximum area of 5,000 sq,m, in case of urban land or 3 hectares in case of rural land to be used by
him for business or other purposes. (Section 5, RA No. 8179)
NOTE: When the conditions set by law are complied with, the possessor of the land, by operation of law,
acquires a right to a grant, a government grant, without the necessity of a certificate of the title being issued.
The law, as presently phrased, requires that possession of lands of the public domain must be from June 12,
1945 or earlier, for the same to be acquired through judicial confirmation of imperfect title. (Republic vs
Doldol. 295 SCRA 359)
Applicant Must Prove:

1. That the land is alienable and disposable land of public domain; and
2. That they have been in open, continuous, exclusive, and notorious possession and occupation of the land
for the length of time and in the manner and concept provided by law.
Extended period for filing of application: Section 1, RA No. 9176 provides in part that The time to
be fixed in the entire archipelago for the filing of applications under this chapter shall not extend
beyond 31 December 2020. Provided that the area applied for does not exceed twelve (12) hectares.
Section 3 of RA No. 7196 provides that All pending applications filed before the effectivity of this
amendatory act shall be treated as having been filed in accordance with the provisions of this Act.
Filing of Application (Extent of Jurisdiction)
GENERAL RULE: Application for land registration shall be filed with the RTC of the province or city
where the land is situated.
DOCTRINES:
PD No. 1529 has eliminated the distinction between the general jurisdiction vested in the RTC and the
limited jurisdiction conferred upon it by the former law when acting merely as land registration court.
Aimed at avoiding multiplicity of suits, the change has simplified registration proceedings by conferring
upon the regional trial courts the authority to act not only on original applications but also those filed
after original registration, with power to hear and determine all questions arising upon such applications
or petitions. (Averia vs. Caguioa. 146 SCRA 459 ; Ignacio vs CA 246 SCRA 242)
The issues raised before the RTC sitting as a land registration or cadastral court involved substantial or
controversial matters and, consequently, beyond said courts jurisdiction. The issues may be resolved
only by a court of general jurisdiction. Thus, petitions under Secs. 75 and 108 of PD 1529 can be taken
cognizance of by the RTC sitting as a land registration or cadastral court but relief under said sections
can only be granted if there is unanimity among the parties, or that there is no adverse claim or serious
objection on the part of any party in interest; otherwise, the case becomes controversial and should be
threshed out in an ordinary case or in the case where the incident properly belongs. ( Tagaytay-Taal vs.
CA. 273 SCRA 182)
EXCEPTION: Delegated Jurisdiction of the MTC to hear and determine cadastral or land registration
cases covering lots where there is no controversy or opposition, or contested lots, the value of which does
not exceed P100,000.00
Publication, Mailing, and Posting Requirements: (PMP)
- compliance is mandatory and jurisdictional [Republic vs. Marasigan, 198 SCRA 219 (1991)]
1. Publication of notice of initial hearing

Official Gazette and newspaper of general circulation (Sec. 23, P.D. 1529)
Purposes:
a. To confer jurisdiction over the land applied for upon the court
b. To charge the whole world with knowledge of the application of the land involved
NOTE: If it is later shown that the decree of registration had included land or lands not included in the
original application as published, then the registration proceedings and the decree of registration must be
declared null and void insofar but only insofar- as the land not included in the publication is concerned.
This is so because the court did not acquire jurisdiction over the land not included in the publication- the
publication being the basis of the jurisdiction of the court. (Benin vs. Tuason. 57 SCRA 531)
If difference is not so substantial as it would not affect the identity of the land, republication is not
necessary.
If the amendment of the survey plan during the registration proceedings does not involve an addition,
but on the contrary, a reduction of the original area that was published, no new publication is required.
[Republic vs. CA, 71 SCRA 665 (1996)]
Publication alone in newspaper of general circulation would not suffice to confer jurisdiction to RTC. It
must be published in the Official Gazette in order that jurisdiction to court be conferred.
2. Mailing
Mailing of the Notice of Hearing
Administrator of Land Registration Authority shall cause a copy of the notice of initial hearing of the
application to be mailed to the following:
a) Every person named in the notice whose address is known
b) Secretary of DPWH, Provincial Governor, and Mayor of the municipality or city, as the case may
be, in which the land lies, if applicant requests to have the line of a public way or road determined
c) Secretary of DAR, Solicitor General, Director of Land Management, Director of Mines and/or
Director of Fisheries and Aquatic Resources, as the case may be, if the land borders on a river,
navigable stream or shore, or on an arm of the sea where a river or harbor line has been established,
or on a lake, or if it otherwise appears from the application that a tenant-farmer or the national
government may have a claim adverse to the applicant.
c) Posting
Posting of the copy of the Notice of Hearing is a duty of the Sheriff which must be made at least 14
days before date of initial hearing, in conspicuous places.
NOTE: Certification of the Administrator of LRA and of the Sheriff concerned to the effect that the notice
of initial hearing, as required by law, has been complied with shall be filed in the case before the date of
initial hearing, and shall be conclusive proof of such fact (Secion 24, P.D. 1529).
NOTE: Service of Notice upon contiguous owners:

indispensable
lack of service constitutes extrinsic fraud
Answer or Opposition
oppositor to an application need not be named in the notice of initial hearing.
adverse claimants must set forth in their answer all their objections to the application and must claim an
interest to the property applied for, based on a right of dominion or some other real right independent of,
and not at all subordinate, to the rights of the government.
Page 117 of 193

The following may be proper oppositors:

1. a homesteader who have not yet been issued his title but who had fulfilled all the conditions required by
law to entitle him to a patent;
2. a purchaser of friar land before the issuance of the patent to him; and
3. persons who claim to be in possession of a tract of public land and have applied with the Bureau of
Lands for its purchase.
Evidence
The applicant must prove:
1. that the land applied for has been declassified from the forest or timber zone and is a public agricultural
land, is alienable and disposable, or otherwise capable of registration.
NOTE: Specific evidence
a) Presidential proclamation
b) Executive Order
c) Administrative Order issued by the Secretary of DENR
d) Bureau of Forest Development Land Classification Map
e) Certification by Director of Forestry
f) Investigation reports of Bureau of Lands investigator
g) Legislative act or by statute
2. The identity of the land
NOTE: Proof of Identity of land

a) Survey plan in general
b) Tracing cloth plan and blue print copies of plan
c) Technical description of the land
d) Tax declarations
e) Boundaries and area
3. Possession and occupation of the land for the length of time and in the manner required by law
Effect of Possession
General Rule: Open, exclusive and undisputed possession of alienable public land for the period prescribed
by law creates the legal fiction whereby the land, upon completion of the requisite period ipso jure and
without need of judicial or other sanctions, ceases to be public land and becomes private property.
The present possessor may complete the period necessary for prescription by tacking his
possession to that of his grantor or predecessor-in-interest (Article 1138, Civil Code)
Tacking of possession is allowed only when there is privity of contract or relationship
between the previous and present possessors [South City Homes, Inc. vs. Republic, 185 SCRA 700
(1990)]
Insufficient proofs of possession:

a) mere casual cultivation of portions of the land by claimant. Reason: possession is not exclusive and
notorious so as to give rise to a presumptive grant from the State (Republic vs. Vera, 120 SCRA 210;
Director of Lands vs. Reyes 68 SCRA 177)
b) tax declaration of land sought to be registered which is not in the name of applicant but in the name of
deceased parents of an oppositor. Reason: possession of applicant is not completely adverse or open, nor
it is truly in the concept of an owner. (Sunga vs. De Guzman, 90 SCRA 618);
c) holding of property by mere tolerance of the owner. Reason: holder is not in the concept of owner and
possessory acts no matter how long do not start the running of the period of prescription. (Ordoez vs.
CA, 188 SCRA 109);
d) where applicants tacked their possession to that of their predecessor-in-interest but they did not present
him as witness or when no proofs of what acts of ownership and cultivation were performed by the
predecessor (Dir. of Lands vs. Datu, 115 SCRA 25)
e) mere failure of Fiscal representing the State to cross-examine the applicant on the claimed possession
[Republic vs. Lee, 197 SCRA 1320 (1991)];
f) possession of other persons in the land applied for impugns the excusive quality of the applicants
possession (Dir. of Lands vs. CA and Salazar, 133 SCRA 701)
NOTE: Proof of private ownership

a. Spanish title, impending cases
NOTE: Although Spanish titles are now inadmissible and ineffective as proof of ownership in land
registration proceedings filed after Aug. 16, 1976, so that all lands granted under the Spanish mortgage
law system of registration which are not yet covered by a certificate of title issued under the Torrens
system are deemed as unregistered land, there are still cases in court which particularly involve
possessory information titles
b. Tax declarations and tax payments

NOTES:
While tax declarations and real estate tax receipts are not conclusive evidence of
ownership, if presented as documentary evidence coupled with proof of actual possession for the period
required by law of the land, they are evidences of ownership. (Heirs of Maningding vs CA 276 SCRA).
Moreover, even if belatedly declared for taxation purposes, it does not negate possession especially if
there is no other claimant of the land (RP vs CA and Divinaflor 349 SCRA)
Where the taxes for 31 years, 1946 to 1976, were paid only in 1976, a few months prior to filing of
the application, such payment does not constitute sufficient proof that applicant has bona fide claim of
ownership during those years prior to filing of the application [Republic vs. CA, 131 SCRA 140 (1984)]
Mere failure of the owner of the land to pay the realty tax thereon does not warrant a conclusion that
there was abandonment of his right to the property (Reyes vs. Sierra, 93 SCRA 472)
c. Presidential issuances and Legislative acts

NOTES:
constitutive of a fee simple title or absolute title in favor of the grantee (Republic rep. by
Mindanao Medical Center vs. CA, 73 SCRA 146)
a law or statute which ceded or transferred in full ownership a reserve area in favor of a
govt. institution thereby effectively transferred ownership to transferee. [Intl Hardwood and Veneer
Co. of the Phils. vs. U.P., 200 SCRA 554 (1991)]
d. Other kind of proof

1. Testimonial evidence (i.e. accretion is on a land adjacent to a river. Any evidence that accretion was
formed through human intervention negates the claim [Binalay vs. Manalo, 195 SCRA 374 (1991)];
2. Deeds of sale;
Proofs insufficient to establish private right or ownership:

a) compromise agreement among parties to a land registration case where they have rights and interest
over the land and allocated portions thereof to each of them;
NOTE: assent of Dir. Of Lands and Dir. of Forest Management to compromise agreement did not
and could not supply the absence of evidence of title required of the applicant [Republic vs. Sayo, 191
SCRA 71 (1990)]
b) decision in an estate proceeding of a predecessor-in-interest of an applicant which involves a property
over which the decedent has no transmissible right, and in other cases where issue of ownership was not
definitely passed upon (Dir. of Lands vs. IAC, 195 SCRA 38);
c) survey plan of an inalienable land.
NOTE: Such plan does not convert such land into alienable land, much less private property
[Republic vs. CA, 154 SCRA 476 (1987)]
HEARING, JUDGMENT, AND POST JUDGMENT INCIDENTS IN ORDINARY LAND

REGISTRATION
A. Hearing
The court may:
1. hear the parties and their evidence; or
NOTE: In the exercise of delegated jurisdiction, the MTC can no longer appoint commissioners
2. refer the case or any part thereof to a referee or commissioner.
NOTE: While referee can receive evidence and objections, it has no power to rule on the case. Its main
duty is to receive evidence and submit its findings and recommendations to the court.
NOTE: Muniments of title: instruments or written evidences which applicant holds or possesses to
enable him to substantiate and prove title to his estate.
B. Judgment
2 duties of the court:
1. Render judgment, declare the same final, and cause the decisions entry; and
2. Order the LRA to issue decree of registration.
Doctrines
Only claimed property or a portion thereof can be adjudicated. If the applicant asserts ownership to and
submits evidence only for a portion of a lot, the inclusion of the portion not claimed by the applicant is
void and of no effect for a land registration court has no jurisdiction to decree a lot to a person who put
no claim to it and who never asserted any right of ownership over it (Almarza vs Arguelles 156 SCRA
718).
A land registration court has no jurisdiction to adjudge a land to a person who has never asserted any
right of ownership thereof (Caragay-Layno vs. CA, 133 SCRA 718)
The court may reverse its decision even after the LRA has already issued the decree of registration
(Gomez vs CA 168 SCRA 503).
NOTE: The judgment becomes final upon the lapse of 15 days counted from receipt of notice of the
judgment. However, notwithstanding the lapse of the 15-day period from receipt of judgment by the parties,
the court continues to retain control over the case until the expiration of 1 year after the entry of decree of
registration by the LRA.
C. Post-Judgment Incidents
a. Writ of possession
Page 119 of 193

GENERAL RULE: The judgment adjudicating ownership to the successful applicant impliedly carries with
it the delivery of possession if he is deprived, since the right of possession is inherent in that of ownership
EXCEPTIONS:
1. A writ of possession does not lie in a land registration case against a person who entered the property
after issuance of the final decree and who had not been a party in the case
2. A writ of possession cannot be issued in a petition for reconstitution of allegedly lost or destroyed
certificate of title.
b. Writ of demolition
- a complement of the writ of possession, without which the latter would be ineffective ( Lucero vs. Loot 25
SCRA 678)
DECREE OF REGISTRATION
This is the decree issued by the LRA pursuant to the order of the court. As such, the decree has been
considered as the condensed form of the courts judgment.
The decree of registration binds the land, quiets title thereto, subject only to such exceptions or liens as
may be provided by law. It is conclusive upon all persons including the national government and all
branches thereof, whether mentioned by name in the application or notice, the same being included in
the general description To All Whom It May Concern. And such conclusiveness does not cease to
exist when the title is transferred to a successor. (Melgar vs. Pagayon. 21 SCRA 841)
The duty of the land registration officials to issue the decree of registration is ministerial in the sense
that they act under the orders of the court and the decree must be in conformity with the court judgment
and with the data found in the record. However, if they are in doubt upon any point in relation to the
preparation and issuance of the decree, they are duty bound to refer the matter to the court. They act in
this respect, as officials of the court. The administrator is thus not legally obligated to issue the decree
where, upon his verification, he finds that subject land has already been decreed and titled in anothers
name. (Ramos vs. Rodriguez, 244 SCRA 418)
Contents: (Sec. 31 P.D. 1529)

a. Date, hour and minute of its entry
b. It shall state whether the owner is married or unmarried, and if married, the name of spouse: provided
that if the land is conjugal property, the decree shall be issued in the name of both spouses
c. If the owner is under disability, the nature of such disability, and if a minor, his age
d. Description of the land and shall set forth the estate of the owner, and also, in such manner as to show
their relative priorities, all particular estates, mortgages, easements, liens, attachments, and other
encumbrances
e. Other matters to be determined in pursuance of law
CERTIFICATE OF TITLE
This is the true copy of the decree of registration or the transcription thereof and like the decree shall
also be signed by LRA Administrator (Sec. 39, PD No. 1529)
It takes effect upon the date of entry thereof, and the land covered thereby becomes registered land on
that date
Registration does not vest title. It is merely evidence of such title over a particular property. And a
Torrens certificate is the best evidence of ownership over registered land. (Villanueva vs. CA, 198 SCRA
472; Chavez vs. PEA & Amari Coast Bay Devt. Corp., 384 SCRA 153)
However, simple possession of a certificate of title does not necessarily make the holder thereof a true
owner of all the property described therein, such as when title includes by mistake or oversight, land
which can no longer be registered under the Torrens system, as when the same land has already been
registered and an earlier certificate for the same land is in existence. (Caragay-Layno vs. CA, 133 SCRA
718)
In determining whether a property belongs to the conjugal partnership or paraphernal property of one of
the spouses, it is important to note in whose name or names the title is registered. This is so because the
certificate of the title does not establish the time of the acquisition of the property. It only confirms a
pre existing title. (Ponce de Leon vs Rehabilitation Finance Corp., 36 SCRA 289)
Attributes and Limitations on certificates of title and registered lands:

1. Free from liens and encumbrances
Claims and liens of whatever character existing against the land prior to the issuance of the certificate of
title are cut off by such certificate and the certificate so issued binds the whole world, including the
government.
EXCEPTIONS:
a. Those noted on the certificate
b. Liens claims or rights arising or existing under the laws and the Constitution, which are not by law
required to appear of record in the Register of Deeds in order to be valid
c. Unpaid real estate taxes levied and assessed within 2 years immediately preceding the acquisition
of the right over the land by an innocent purchaser for value
d. Any public highway, or private way established or recognized by law, or any government irrigation
canal or lateral thereof, if the certificate of title does not state the boundaries of such highway or
irrigation canal or lateral thereof have been determined
e. Any disposition of the property or limitation on the use thereof pursuant to P.D. 27 or any other
law or regulations on agrarian reform.
2. Incontrovertible and indefeasible

GENERAL RULE: Upon expiration of 1 year from and after the entry of the decree of registration in the
LRA, the decree and the corresponding certificate of title becomes incontrovertible and indefeasible.
EXCEPTIONS:
a. If previous valid title of the same land exists
b. When land covered is not capable of registration
c. When acquisition of certificate is attended by fraud
3. Registered land not subject to prescription

Thus, even adverse, notorious and continuous possession under claim of ownership for the period fixed
by law is ineffective against a Torrens title. (JM Tuason and Co. Inc. vs. CA, 93 SCRA 146)
The fact that title to land was lost does not mean that the land ceased to be registered land before the
reconstitution of its title. It cannot perforce be acquired by prescription. (Rivera vs. CA, 244 SCRA
218)
3. CERTIFICATE OF TITLE NOT SUBJECT TO COLLATERAL ATTACK

Sec 48. P.D. 1529 A certificate of title shall not be subject to collateral attack. It cannot be altered,
modified, or cancelled except in a direct proceeding in accordance with law.
General Incidents of Registered Land

Registered land or the owners thereof are not relieved from the following:
a. From any rights incident to the relation of husband and wife, landlord and tenant
b. From liability to attachment or levy on execution
c. From liability to any lien of any description established by law on the land and buildings thereon,
or in the interest of the owner in such land or building
d. From any right or liability that may arise due to change of the law of descent
e. From the rights of partition between co-owners
f. From the right of government to take the land by eminent domain
g. From liability to be recovered by an assignee in insolvency or trustee or bankruptcy under the laws
relative to preferences
h. From any other rights or liabilities created by law and applicable to unregistered land
CADASTRAL REGISTRATION
a proceeding in rem, initiated by the filing of a petition for registration by the government, not by the
persons claiming ownership of the land subject thereof, and the latter are, on the pain of losing their
claim thereto, in effect compelled to go to court to make known their claim or interest therein, and to
substantiate such claim or interest
NOTE: Here, the government does not seek the registration of land in its name. The objective of the
proceeding is the adjudication of title to the lands or lots involved in said proceeding.
Procedure:
1. Notice of cadastral survey published once in OG and posted in conspicuous place; copy furnished
mayor and barangay captain
2. Notice of date of survey by BLM and posting in bulletin board of the municipal building of the
municipality or bario, and shall mark the boundaries of the lands by monuments set up in proper places
thereon
3. Cadastral survey
4. Filing of petition
5. Publication, mailing, and posting
NOTE: Publication of Notice of Initial Hearing to be published twice in successive issues of the Official
Gazette
6. Filing of Answer
7. Hearing of the case
8. Decision
9. Issuance of Decree and Certificate of Title
Actions taken by the Cadastral court of the trial:

1. Judgment or decision which adjudicates ownership of the land involved in favor of one or more
claimants. This is the decree of the court.
2. Declaration by the court that the decree is final and its order for the issuance of the Certificate of Title
by the LRA
3. Registration of the decree by the LRA and issuance of the corresponding Certificate of Title
Page 121 of 193

Doctrine: The Cadastral court is not limited to merely adjudication of ownership in favor of one or more
claimants. If there are no successful claimants, the property is declared public land. Additionally, while the
court has no jurisdiction to adjudicate lands already covered by a Certificate of Title, it is nonetheless true
that this rule only applies where there exists no serious controversy as to the certificates authenticity vis--
vis the land covered therein. (Republic vs Vera 120 SCRA 210; Widows and Orphans Assoc., Inc. vs CA 201
SCRA 165.)
P.D. No. 1529 CADASTRAL

1. Nature of Registration
Voluntary Compulsory
2. Applicant
Landowner Director of Lands
3. Lands Covered
Usually involves private land; it may also refer all classes of lands are included
to public agricultural lands if the object of the
action is confirmation of an imperfect title
4. Parties
Applicant and opponent Landowners must come to court as claimants of
their own lands
5. Purpose
Petitioner comes to court to confirm his title Government asks the court to settle and
and seeks the registration of the land in his adjudicate the title of the land
name
6. Person who Requests the Survey
Landowner Government
7. Effect of Judgment
No adverse claim; if the applicant fails to prove if none of the applicants can prove that he is
his title, his application may be dismissed entitled to the land, the same shall be declared
without prejudice (no res judicata) public (res judicata)
REMEDIES OF AGGRIEVED PARTY IN REGISTRATION PROCEEDINGS
1. New Trial
Grounds: (Section1 Rule 37,Rules of Court)
a. fraud, accident, mistake or excusable negligence which ordinary prudence could not have guarded
against
b. newly discovered evidence
c. award of excessive damages, or insufficiency of the evidence to justify the decision
Period of filing: within the 15-day period for perfecting an appeal
2. Relief from Judgment

Nature: subsidiary remedy, i.e. may be availed only when the judgment has become final and a new
trial is not available
Grounds: when a judgment is entered against a party through fraud, accident, mistake, or excusable
negligence, such party may file a petition in the court that rendered such judgment praying that the said
judgment be set aside.
Period of filing: within 60 days after the petitioner learns of the judgment, order, or proceeding and not
more than 6 months after such judgment or order was entered or such proceeding was taken.
3. Appeal
under P.D. 1529, judgments and orders in land registration cases are appealable to the Court of Appeals
or to the Supreme Court in the same manner as ordinary actions
must be filed within 15 days from receipt of the judgment or final order appealed from.
4. Petition for Review (of a DECREE)

any person may file a petition for review to set aside the decree of registration on the ground that he was
deprived of their opportunity to be heard in the original registration case not later than one (1) year after
the entry of the decree.
NOTE: It is a petition for REVIEW OF JUDGEMENT when it is filed after rendition of the decision but
before the entry of the decree of registration. And it is a petition for REVIEW OF THE DECREE when it is
filed within the one year period after such entry.
Grounds for review of the decree:

a) actual or extrinsic fraud refers to any fraudulent act of the successful party in a litigation which is
committed outside the trial of a case against the defeated party, his agents, attorneys or witnesses,
whereby defeated party is prevented from presenting full and fairly his side.
b)fatal infirmity in the decision for want of due process (Tiongco vs, De la Merced, 58, SCRA 89);
c) lack of jurisdiction of the court
Requisites for REVIEW OF THE DECREE:
a. petitioner has a real and dominical right
b. he has been deprived thereof
c. through fraud (actual/extrinsic)

d. petition is filed within one year from issuance of the decree
e. the property has not yet passed to an innocent purchaser for value
5. Action for Reconveyance

an action seeking to transfer or reconvey the land from the registered owner to the rightful owner
may be filed even after the lapse of one year from entry of the decree of registration as long as the
property has not been transferred or conveyed to an innocent purchaser for value.
an action for reconveyance does not aim or purport to reopen the registration proceedings and set aside
the decree of registration but only to show that the person who secured the registration of the questioned
property is not the real owner thereof. The action, while respecting the decree as incontrovertible, seeks
to transfer or reconvey the land from the registered owner to the rightful owner. (Esconde vs Borlongay,
152 SCRA 603)
Grounds for Reconveyance and corresponding period of prescription
Grounds Prescriptive Period

1. Fraud 4 years from the discovery of the fraud (deemed to
have taken place from the issuance of the original
certificate of title)
2.Implied or constructive 10 years from the date of the issuance of the OCT
trust or TCT
the above rule does not apply where the person
enforcing the trust is in actual possession of the
property because he is in effect seeking to quiet title to
the same which is imprescriptible
3. Express trust not barred by prescription
4. Void Contract imprescriptible
6. Action for Damages

May be resorted to when a petition for review and an action for reconveyance is no longer possible
because the property has passed to an innocent purchaser for value and in good faith.
an ordinary action for damages prescribes in ten (10) years after the issuance of the Torrens title over the
property.
7. Action for Compensation from Assurance Fund

Requisites:
a) The aggrieved party or the suitor sustained loss or damage, or is deprived of land or any estate or
interest therein;
b) Such loss, damage or deprivation
1) was occasioned by the bringing of the land under the operation of the Torrens system, or
2) arose after original registration of land
c) The loss, damage or deprivation was due to:
1) fraud, or
2) any error, omission, mistake or misdescription in any certificate of title or in any entry or
memorandum in the registration book
d) There was no negligence on his part
e) He is barred or precluded under the provisions of PD 1529 or under the provision of any law from
bringing an action for the recovery of such land or the estate or interest therein;
f) The action has not prescribed.
must be instituted within a period of 6 years from the time the right to bring such action first occurred-
which is the date of issue of the certificate of title.
8. Cancellation Suits
Where two certificates are issued to different persons covering the same land, the title earlier in date
must prevail
The latter title should be declared null and void and ordered cancelled.
9. Annulment of judgment
May only be availed of when the ordinary remedies of new trial, petition for relief, or other appropriate
remedies are no longer available through no fault of petitioner (Linzag vs. Court of Appeals, 291 SCRA
304)
10. QUIETING OF TITLE
Page 123 of 193

An action that is brought to remove clouds on the title to real property or any interest therein, by reason
of any instrument, record, claim, encumbrance or proceeding which is apparently valid or effective but
is in truth and in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said
title. (Art. 476 Civil Code)
It is an ordinary civil remedy [Sy, Sr. vs. IAC, 162 SCRA 130 (1988)]
Aside from the registered owner, a person who has an equitable right or interest in the property may
likewise file such action (Mamadsul vs. Moson, 190 SCRA 82, 89)
11. CRIMINAL ACTION

State may criminally prosecute for perjury the party who obtains registration through fraud, such as by
stating false assertions in the sworn answer required of applicants in cadastral proceedings (People vs.
Cainglet, 16 SCRA 749)
LAND PATENTS
Kinds:
To Whom Granted Requirements
1. Homestead Patent to any Filipino citizen over does not own more than 24
the age of 18 years or head of a hectares of land in the Phils. or has
family not had the benefit of any
gratuitous allotment of more than
24 hectares
must have resided continuously
for at least 1 year in the
municipality where the land is
situated
must have cultivated at least
1/5 of the land applied for
2. Free Patent to any natural born citizen does not own more than 12
of the Phils. hectares of land
has conti-nuously occupied and
cultivated, either by himself or his
predecessors-in- interest tract/s of
agricultural public land subject to
disposition
3. Sales Patent citizens of the Phils. of to have at least 1/5 of the land
lawful age or such citizens not broken and cultivated within 5
of lawful age who is head of a years from the date of the award
family may purchase public shall have established actual
agricultural land of not more occupancy, cultivation and
than 12 hectares improvement of at least 1/5 of the
land until the date of such final
payment
4. Special Patents to Non-Christian Filipinos Secretary of the DILG shall
under Sec. 84 of the Public certify that the majority of the
Land Act. non-Christian inhabitants of any
given reservation have advanced
sufficiently in civilization
NOTE: when a free patent title is issued to an applicant and the sea water moves toward the estate of the
title holder, the invaded property becomes part of the foreshore land. The land under the Torrens system
reverts to the public domain and the title is annulled. (Republic vs CA and Josefina Morato, 281 SCRA)
Restriction on Alienation/Encumbrance of Lands titled Pursuant to Patents:

1. Lands acquired under free patent or homestead patent is prohibited, except if in favor of the
government, 5 years from and after the issuance of the patent or grant (RP vs Heirs of Felipe Alejaga,
Sr., 939 SCRA 361)
2. Transfer or conveyance of any homestead after 5 years and before 25 years after issuance of title
without the approval of the Secretary of DENR
Actions against improper, illegal issuance of patents

1. Reversion suits
The objective is the cancellation of the certificate of title and the consequential reversion of the land
covered thereby to the State.
Grounds for reversion:
a. Violation of Sections 118, 120, 121 and 122 of the Public Land Act (eg. Alienation or sale of homestead
executed within the 5 year prohibitory period)
b. When land patented and titled is not capable of registration
c. Failure of the grantee to comply with conditions imposed by law to entitle him to a patent or grant
d. When area is an expanded area (see Republic vs. Heir of Villa Abrille, 71 SCRA 57)
e. When the land is acquired in violation of the Constitution; eg. Land acquired by an alien may be
reverted to the State.
NOTE: indefeasibility of title, prescription, laches and estoppel do not bar reversion suits
2. Cancellation Suits
it is the aggrieved private party that institutes the action [Agne vs. Dir. of Lands, 181 SCRA 793 (1990)]
3. Action for Reconveyance (see discussion on page 16)
RECONSTITUTION OF CERTIFICATE OF TITLE

Meaning: The restoration of the instrument which is supposed to have been lost or destroyed in its
original form and condition, under the custody of Register of Deeds.
Purpose: to have the same reproduced, after proper proceedings, in the same form they were when the
loss or destruction occurred. (Heirs of Pedro Pinote vs. Dulay, 187 SCRA 12)
Kinds:
1) Judicial - partakes the nature of a land registration proceeding in rem.
2) Administrative - may be availed of only in case of:
a. Substantial loss or destruction of the original land titles due to fire, flood, or other force majeure as
determined by the Administrator of the Land Registration Authority;
b. The number of certificates of title lost or damaged should be at least 10% of the total number in the
possession of the Office of the Register of Deeds;
c. in no case shall the number of certificates of title lost or damaged be less than P500; and
d. Petitioner must have the duplicate copy of the certificate of title. (RA 6732)
NOTE: The law provides for retroactive application thereof to cases 15 years immediately preceding 1989.
NOTE: When the duplicate title of the landowner is lost, the proper petition is not reconstitution of title, but
one filed with the court for issuance of new title in lieu of the lost copy.
Sources for Judicial Reconstitution of Title:
1. For OCT (in the following order):

a. Owners duplicate of the certificate of title
b. Co-owners, mortgagees or lessees duplicate of said certificate
c. Certified copy of such certificate, previously issued by the Register of Deeds
d. Authenticated copy of the decree of registration or patent, as the case may be, which was the basis
of the certificate of title
e. Deed or mortgage, lease or encumbrance containing description of property covered by the
certificate of title and on file with the Registry of Deeds, or an authenticated copy thereof
f. Any other document which, in the judgment of the court, is sufficient and proper basis for
reconstitution.
2. For TCT
a. Same as sources a), b), and c) for reconstitution of OCT
b. Deed of transfer or other document containing description of property covered by transfer
certificate of title and on file with the Registry of Deeds, or an authenticated copy thereof
c. same as sources e) and f) for reconstitution of OCT.
Sources for Administrative Reconstitution of Title
1. owners duplicate of the certificate of title
2. co-owners, mortgagees, or lessees duplicate of said certificate
Publication, Mailing and Posting in petitions for reconstitution of title

Rules:
a. Notice thereof shall be published twice in successive issues of the Official Gazette
b. Must be posted on the main entrance of the provincial building and of the municipal building of the
municipality or city where the land is situated
c. to be sent by registered to every person named in said notice
NOTE: The above requirements are mandatory and jurisdictional (Metropolitan Waterworks and
Sewerage System vs. Sison, 124 SCRA 394)
OTHER PETITIONS/TRANSACTIONS AFTER ORIGINAL REGISTRATION

1. Amendment and alteration of Certificate of Title
Grounds:
a. When registered interests of any description, whether vested, contingent, or inchoate have
terminated and ceased
b. When new interests have arisen or been created which do not appear upon the certificate
c. When any error, omission, or mistake was made in entering a certificate or any memorandum
thereon or on any duplicate certificate
d. When the name of any person on the certificate has been changed
e. When the registered owner has been married, or, registered as married, the marriage has terminated
and no right or interest of heirs or creditors will thereby be affected
Page 125 of 193

f. When a corporation, which owned registered land and has been dissolved, has not conveyed the
same within 3 years after its dissolution
g. When there is a reasonable ground for the amendment or alteration of title.
NOTE: The court has no jurisdiction or authority to reopen the judgment or decree of registration; nor
impair the title or other interest of a purchaser holding a certificate for value and in good faith, or his heirs
and assigns, without his or their written consent. After due hearing, the court may only:
a. Order the entry or cancellation of a new certificate
b. Order the entry or cancellation of a memorandum upon a certificate, or
c. Grant any other relief upon such terms and conditions as it may consider proper (Secs. 107 and 108,
PD 1529)
2. Surrender of withheld duplicate certificate of title

Grounds:
a. When it is necessary to issue a new certificate of title pursuant to any involuntary instrument which
divests the title of the registered owner against his consent
b. Where a voluntary instrument cannot be registered by reason of the refusal or failure of the holder
to surrender the owners duplicate certificate of title; and
c. Where the owners duplicate certificate is not presented for amendment or alteration pursuant to a
court order
3. Replacement of lost duplicate certificate of title

due notice under oath shall be sent by the owner or by someone in his behalf to the Register of Deeds
of the province of city where the land lies as soon as the loss or theft is discovered. ( Section 109, PD
1529)
Petition for replacement should be filed with the RTC of the province or city where the land lies.
Notice to Solicitor General by petitioner is not imposed by law but it is the Register of Deeds who
should request for representation by the Solicitor General (Republic vs. CA, 317 SCRA 504)
A proceeding where the certificate of title was not in fact lost or destroyed is null and void for lack of
jurisdiction and the newly issued duplicate is also null and void. (New Durawood Co., Inc. vs. CA, 253
SCRA 740)
CREDIT TRANSACTIONS
CREDIT TRANSACTIONS
All transactions involving the purchase or loan of goods, services, or money in the present with a
promise to pay or deliver in the future
Contracts of security
Types:
1. Secured transactions or contracts of real security - supported by a collateral or an encumbrance of
property
2. Unsecured transactions or contracts of personal security - supported only by a promise or personal
commitment of another such as a guarantor or surety
Security
Something given, deposited, or serving as a means to ensure fulfilment or enforcement of an obligation
or of protecting some interest in property
Types of Security
a. personal when an individual becomes surety or guarantor
b. real or property when a mortgage, pledge, antichresis, charge or lien or other device used to
have property held, out of which the person to be made secure can be compensated for loss
Bailment
The delivery of property of one person to another in trust for a specific purpose, with a contract, express
or implied, that the trust shall be faithfully executed and the property returned or duly accounted for
when the special purpose is accomplished or kept until the bailor claims it.
Parties:
1. bailor - the giver; one who delivers property
2. bailee- the recipient; one who receives the custody or possession of the thing thus delivered
LOAN (Articles 1933 1961)
A contract
wherein one of the parties delivers to another, either something not consumable so that the latter may
use the same for a certain time and return it or money or other consumable thing, upon the condition
that the same amount of the same kind and quality shall be paid. (Art 1933)
Characteristics:
1. Real Contract delivery of the thing loaned is necessary for the perfection of the contract
NOTE: An accepted promise to make a future loan is a consensual contract, and therefore binding upon
the parties but it is only after delivery, will the real contract of loan arise. (Art 1934)
2. Unilateral Contract - once the subject matter has been delivered, it creates obligations on the part of
only one of the parties (i.e. borrower).
Kinds:
1. Commodatum when the bailor (lender) delivers to the bailee (borrower) a non-consumable thing so
that the latter may use it for a certain time and return the identical thing.
Kinds of commodatum:
a. Ordinary Commodatum use by the borrower of the thing is for a certain period of time
b. Precarium - one whereby the bailor may demand the thing loaned at will and it exists in the
following cases:
i. neither the duration nor purpose of the contract is stipulated
ii. the use of the thing is merely tolerated by the owner
2. Simple loan or mutuum where the lender delivers to the borrower money or other consumable thing
upon the condition that the latter shall pay the same amount of the same kind and quality.
Commodatum Mutuum
Key: COPS-LOTR
1. Object
Non-consumable Consumable
2. Cause
Gratuitous May or may not be
gratuitous
3. Purpose
Use or temporary Consumption
possession
4. Subject Matter
Real or personal Only personal
property property
5. Ownership of the thing
Retained by the Passes to the debtor
bailor
6. Thing to be returned
Exact thing loaned Equal amount of the
same kind and
quality
7. Who bears risk of loss
Bailor Debtor
8. When to return
In case of urgent Only after the
need, even before the expiration of the
expiration of the term
term
Loan Credit
Delivery by one party Ability of a person to
and the receipt of borrow money or
other party of a given things by virtue of
sum of money or the trust or
other consumable confidence reposed
thing upon an by the lender that he
agreement, express or will pay what he
implied, to repay the promised.
same.
Page 127 of 193

Loan Credit
1. Interest taken at Interest is taken in
the expiration of the advance
credit
2. Always on a Always on a single
double name paper name paper (i.e.
(two signatures promissory note with
appear with both no indorse-ment
parties held liable for other than the maker)
payment)
COMMODATUM (Articles 1935 1952)

Nature:
1. PURPOSE: Bailee in commodatum acquires the temporary use of the thing but not its fruits (unless
stipulated as an incidental part of the contract).(Art 1935)
Use must be temporary, otherwise the contract may be a deposit.
2. CAUSE: Essentially gratuitous; it ceases to be a commodatum if any compensation is to be paid by the

borrower who acquires the use, in such case there arises a lease contract.
Similar to a donation in that it confers a benefit to the recipient. The presumption is that the bailor
has loaned the thing for having no need therefor.
3. SUBJECT MATTER: Generally non-consumable whether real or personal but if the consumable
goods are not for consumption as when they are merely for exhibition, consumable goods may be the
subject of the commodatum. (Art 1936)
4. Bailor need not be the owner of the thing owned (Art. 1938) since by the loan, ownership does not pass
to the borrower.
A mere lessee or usufructuary may lend but the borrower or bailee himself may not lend nor lease
the thing loaned to him to a third person (Art 1932[2])
5. Purely Personal (Art 1939):

Death of either party terminates the contract unless by stipulation, the commodatum is transmitted
to the heirs of either or both parties.
Bailee can neither lend nor lease the object of the contract to a third person.
NOTE:Use of the thing loaned may extend to members of the bailees household except:
a. contrary stipulation;
b. nature of the thing forbids such use
Obligations of the Bailee: (Arts 1941 1945)

1. To pay for the ordinary expenses for the use and preservation of the thing loaned. (Art 1941)
2. To be liable for the loss of the thing even if it should be through a fortuitous event in the following
cases: (KLAS D)
a. when he keeps it longer than the period stipulated, or after the accomplishment of its use
b. when he lends or leases it to third persons who are not members of his household
c. when the thing loaned has been delivered with appraisal of its value
d. when, being able to save either of the thing borrowed or his own things, he chose to save the latter;
or
e. when the bailee devoted the thing for any purpose different from that for which it has been loaned
(Art 1942)
3. To be liable for the deterioration of thing loaned (a) if expressly stipulated; (b) if guilty of fault or
negligence; or (c) if he devotes the thing to any purpose different from that for which it has been loaned
4. To pay for extraordinary expenses arising from the actual use of the thing by the bailee, which shall be
borne equally by both the bailor and the bailee, even though the bailee acted without fault, unless there
is a stipulation to the contrary (Art 1949 par 2)
5. To return the thing loaned
The bailee has no right to retain the thing loaned as security for claims he has against the bailor
even for extraordinary expenses except for a claim for damages suffered because of the flaws of the
thing loaned.
NOTES:
However, the bailees right extends no further than retention of the thing loaned until he is
reimbursed for the damages suffered by him.
He cannot lawfully sell the thing to satisfy such damages without courts approval.
In case there are two or more bailees, their obligation shall be solidary.
Obligations of the bailor (Art 1946 Art 1952):

1. To respect the duration of the loan
GENERAL RULE: Allow the bailee the use of the thing loaned for the duration of the period
stipulated or until the accomplishment of the purpose for which the commodatum was instituted.
EXCEPTIONS:
a. In case of urgent need in which case bailee may demand its return or temporary use;
b. The bailor may demand immediate return of the thing if the bailee commits any act of
ingratitude specified in Art. 765.
2. To refund to the bailee extraordinary expenses for the preservation of the thing loaned, provided the
bailee brings the same to the knowledge of the bailor before incurring them, except when they are so
urgent that the reply to the notification cannot be awaited without danger.
3. To be liable to the bailee for damages for known hidden flaws.

Requisites:
a. There is flaw or defect in the thing loaned;
b. The flaw or defect is hidden;
c. The bailor is aware thereof;
d. He does not advise the bailee of the same; and
e. The bailee suffers damages by reason of said flaw or defect
NOTES:
IF THE ABOVE REQUISITES CONCUR, THE BAILEE HAS THE RIGHT OF RETENTION
FOR DAMAGES.
The bailor cannot exempt himself from the payment of expenses or damages by abandoning the
thing to the bailee.
SIMPLE LOAN OR MUTUUM (Art 1953 1961)
A contract whereby one party delivers to another, money or other consumable thing with the
understanding that the same amount of the same kind and quality shall be paid. (Art. 1953)
NOTES:
The mere issuance of the checks does not result in the perfection of the contract of loan. The Civil Code
provides that the delivery of bills of exchange and mercantile documents, such as checks, shall produce
the effect of payment only when they have been encashed (Gerales vs. CA 218 SCRA 638). It is only
after the checks have produced the effect of payment that the contract of loan may be deemed perfected.
The obligation is to pay and not to return because the consumption of the thing loaned is the
distinguishing character of the contract of mutuum from that of commodatum.
No estafa is committed by a person who refuses to pay his debt or denies its existence.
Simple Loan/Mutuum Rent
1. Delivery of money Delivery of some

or some consumable non-consumable
thing with a promise thing in order that the
to pay an equivalent other may use it
of the same kind and during a certain
quality period and return it to
the former.
2. There is a transfer There is no transfer

of ownership of the of ownership of the
thing delivered thing delivered
3. Relationship Relationship is that of

between the parties is a landlord and tenant
that of obligor-
obligee
4. Creditor receives Owner of the

payment for his loan property rented
receives
compensation or
price either in money,
provisions, chattels,
or labor
from the occupant

thereof in return for
its use (Tolentino vs
Gonzales, 50 Phil
558 1927)
Loan Sale
Page 129 of 193

1. Real contract Consensual contract
2. Generally Bilateral and

unilateral because reciprocal
only borrower has
obligations
NOTE: If the property is sold, but the real intent is only to give the object as security for a debt as when
the price is comparatively small there really is a contract of loan with an equitable mortgage.
Commodatum/
Barter
Mutuum
1. Subject matter is Subject matter is non-

money or fungible fungible, (non
things consumable) things
2. In commodatum, The thing with

the bailee is bound to equivalent value is
return the identical given in return for
thing borrowed when what has been
the time has expired received
or purpose served
3. Mutuum may be Onerous, actually a

gratuitous and mutual sale
commodatum is
always gratuitous
Form of Payment (Art 1955):

1. If the thing loaned is money - payment must be made in the currency stipulated, if it is possible;
otherwise it is payable in the currency which is legal tender in the Philippines and in case of
extraordinary inflation or deflation, the basisi of payment shall be the value of the currency at the time
of the creation of the obligation
2. If what was loaned is a fungible thing other than money - the borrower is under obligation to pay the
lender another thing of the same kind, quality and quantity. In case it is impossible to do so, the
borrower shall pay its value at the time of the perfection of the loan.
Interest
The compensation allowed by law or fixed by the parties for the loan or forbearance of money, goods or
credits
Requisites for Demandability: (ELI)
1. must be expressly stipulated
Exceptions:
a. indemnity for damages
b. interest accruing from unpaid interest
2. must be lawful
3. must be in writing
Compound Interest
GENERAL RULE: Unpaid interest shall not earn interest.
EXCEPTIONS:
1. when judicially demanded
2. when there is an express stipulation (must be in writing in view of Art. 1956)
Guidelines for the application of proper interest rates

1. If there is stipulation: that rate shall be applied
2. The following are the rules of thumb for the application/imposition of interest rates:
a) When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-
delicts is breached, the contravenor can be held liable for damages.
b) With regard particularly to an award of interest in the concept of actual and compensatory damages,
the rate of interest, as well as the accrual thereof, is imposed, as follows:
i. When the obligation breached consists of payment of a sum of money (loan or forbearance of
money), the interest shall be that which is stipulated or agreed upon by the parties. In absence
of an agreement, the rate shall be the legal rate (i.e. 12% per annum) computed from default.
NOTE: The interest due shall itself earn legal interest from the time it is judicially demanded
ii. In other cases, the rate of interest shall be six percent (6%) per annum.
NOTE: No interest, however, shall be adjudged on unliquidated claims or damages except
when or until the demand can be established with reasonable certainty. When the demand
cannot be established, the interest shall begin to run only from the date of the judgment of the
court is made.
iii. 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 i or ii 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 vs. CA, July 12, 1994)
NOTES:
Central Bank Circular No. 416 fixing the rate of interest at 12% per annum deals with loans,
forbearance of any money, goods or credits and judgments involving such loans, or forbearance in the
absence of express agreement to such rate
Interest as indemnity for damages is payable only in case of default or non-performance of the contract.
As they are distinct claims, they may be demanded separately. (Sentinel Insurance Co., Inc. vs CA, 182
SCRA 517)
Central Bank Circular No. 905 (Dec. 10, 1982) removed the Usury Law ceiling on interest rates for
secured and unsecured loans, regardless of maturity.
Validity of unconscionable interest rate in a loan

Supreme Court in Sps. Solangon vs. Jose Salazar, G.R. No. 125944, June 29, 2001, said that since
the usury law had been repealed by CB Cir. No. 905 there is no more maximum rate of interest and the rate
will just depend on the mutual agreement of the parties (citing Lim Law vs. Olympic Sawmill Co., 129 SCRA
439). But the Supreme Court said that nothing in said circular grants lenders carta blanche authority to raise
interest rates to level which will either enslave their borrowers or lead to a hemorrhaging of their assets
(citing Almeda vs. CA, 256 SCRS 292). In Medel vs. CA, 299 SCRA 481, it was ruled that while stipulated
interest of 5.5% per month on a loan is usurious pursuant to CB Circular No. 905, the same must be
equitably reduced for being iniquitous, unconscionable and exorbitant. It is contrary to morals, (contra
bonos mores). It was reduced to 12% per annum in consonant with justice and fair play.
DEPOSIT (Articles 1962 2009)
A contract constituted from the moment a person receives a thing belonging to another, with the
obligation of safely keeping it and of returning the same.
Characteristics:
1. Real Contract - contract is perfected by the delivery of the subject matter.
2. Unilateral (gratutitous deposit) - only the depositary has an obligation.
3. Bilateral (onerous deposit) - gives rise to obligations on the part of both the depositary and
depositor.
Deposit Mutuum
1. Purpose
Principal purpose is safekeeping or Principal purpose is consumption
custody
2. When to Return
Depositor can demand the return of the The lender must wait until the expiration
subject matter at will of the period granted to the debtor
3. Subject Matter
Subject matter may be movable or Subject matter is only money or other
immovable property fungible thing
4. Relationship
Relationship is that of lender (creditor) and Relationship is that of depositor and
borrower (debtor). depositary.
5. Compensation
There can be compensation of credits. NO compensation of things deposited with
each other (except by mutual agreement).
Deposit Commodatum
1. Purpose is Safekeeping 1. Purpose is the transfer of the use
Page 131 of 193

2. May be gratuitous 2. Essentially and always gratuitous
3. Movable/corporeal things only in case 3. Both movable and immovable may be

of extrajudicial deposit the object
Kinds of Deposit:
1. Judicial (Sequestration) takes place when an attachment or seizure of property in litigation is
ordered.
2. Extra-judicial
a. Voluntary one wherein the delivery is made by the will of the depositor or by two or more persons
each of whom believes himself entitled to the thing deposited. (Arts 1968 1995)
b. Necessary one made in compliance with a legal obligation, or on the occasion of any calamity, or
by travellers in hotels and inns (Arts 1996 - 2004), or by travellers with common carriers (Art 1734
1735).
NOTE: The chief difference between a voluntary deposit and a necessary deposit is that in the former,
the depositor has a complete freedom in choosing the depositary, whereas in the latter, there is lack of
free choice in the depositor.
Judicial Extra-judicial
1. Creation
Will of the court Will of the parties or contract
2. Purpose
Security or to insure the right of a party to Custody and safekeeping
property or to recover in case of favorable
judgment
3. Subject Matter
Movables or immovables, Movables only
but generally immovables
4. Cause
Always onerous May be compen-sated or not, but generally
gratuitous
5. When must the thing be returned

Upon order of the court or when litigation is Upon demand of depositor
ended
6. In whose behalf it is held

Person who has a right Depositor or third person designated
GENERAL RULE: Contract of deposit is gratuitous (Art 1965)

EXCEPTIONS:
1. when there is contrary stipulation
2. depositary is engaged in business of storing goods
3. property saved from destruction without knowledge of the owner
NOTES:
Article 1966 does not embrace incorporeal property, such as rights and actions, for it follows the person
of the owner, wherever he goes.
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 relation
between a bank and its customer is that of a bailor and bailee. (CA Agro vs CA, 219 SCRA 426)
Obligations of the Depositary (Art 1972 1991):
1. To keep the thing safely (Art 1972)

Exercise over the thing deposited the same diligence as he would exercise over his property
2. To return the thing (Art 1972)
Person to whom the thing must be returned:
a. Depositor, to his heirs and successors, or the person who may have been designated in the contract
b. If the depositary is capacitated - he is subject to all the obligations of a depositary whether or not the
depositor is capacitated. If the depositor is incapacitated, the depositary must return the property to
the legal representative of the incapacitated or to the depositor himself if he should acquire capacity
(Art 1970).
c. If the depositor is capacitated and the depositary is incapacitated - the latter does not incur the
obligation of a depositary but he is liable:
i..to return the thing deposited while still in his possession;
ii.to pay the depositor the amount which he may have benefited himself with the thing or its price
subject to the right of any third person who acquired the thing in good faith (Art 1971)
Time of return:
a. Upon demand even though a specified period or time for such return may have been fixed except
when the thing is judicially attached while in the depositarys possession or should he have been
notified of the opposition of a third person to the return or the removal of the thing deposited. (Art
1998)
b. If deposit gratuitous, the depositary may return the thing deposited notwithstanding that a period
has been fixed for the deposit if justifiable reasons exists for its return.
c. If the deposit is for a valuable consideration, the depositary has no right to return the thing
deposited before the expiration of the time designated even if he should suffer inconvenience as a
consequence.(Art 1989)
What to return: product, accessories, and accessions of the thing deposited (Art 1983)
3. Not to deposit the thing with a third person unless authorized by express stipulation (Art 1973)
The depositor is liable for the loss of the thing deposited under Article 1973 if:
a. he transfers the deposit with a third person without authority although
there is no negligence on his part and the third person;
b. he deposits the thing with a third person who is manifestly careless or
unfit although authorized even in the absence of negligence; or
c. the thing is lost through the negligence of his employees whether the
latter are manifestly careless or not.
4. If the thing deposited should earn interest (Art 1975):
a. to collect interest and the capital itself as it fall due
b. to take steps to preserve its value and rights corresponding to it
5. Not to commingle things deposited if so stipulated (Art 1976)
6. Not to make use of the thing deposited unless authorized (Art 1977)
GENERAL RULE: Deposit is for safekeeping of the subject matter and not for use. The unauthorized
use by the depositary would make him liable for damages.
EXCEPTIONS:
1. When the preservation of the thing deposited requires its use
2. When authorized by the depositor
NOTE: The permission to use is NOT presumed except when such use is necessary for the preservation
of the thing deposited.
Effect if permission to use is given (Art 1978):

1. If thing deposited is non-consumable, the contract loses the character of a deposit and
acquires that of a commodatum despite the fact that the parties may have denominated it as a
deposit, unless safekeeping is still the principal purpose.
2. If thing deposited consists of money/consumable things, the contract is converted into a simple loan
or mutuum unless safekeeping is still the principal purpose in which case it is called an irregular
deposit. Example: bank deposits are irregular deposits in nature but governed by law on loans.
7. When the thing deposited is delivered sealed and closed :
a. to return the thing deposited in the same condition
b. to pay for damages should the seal or lock be broken through his fault, which is presumed unless
proved otherwise
c. to keep the secret of the deposit when the seal or lock is broken with or without his fault (Art 1981)
NOTE: The depositary is authorized to open the thing deposited which is closed and sealed when
(Art 1982):
i. there is presumed authority (i.e. when the key has been delivered to him or the instructions of the
depositor cannot be done without opening it)
ii.necessity
8. To change the way of the deposit if under the circumstances, the depositary may reasonably presume
that the depositor would consent to the change if he knew of the facts of the situation, provided, that the
former notifies the depositor thereof and wait for his decision, unless delay would cause danger
9. To pay interest on sums converted to personal use if the deposit consists of money (Art 1983)
10. To be liable for loss through fortuitous event (SUDA): (Art 1979):
a. if stipulated
b. if he uses the thing without the depositor's permission
c. if he delays its return
d. if he allows others to use it, even though he himself may have been authorized to use the same
NOTES:
Page 133 of 193

Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the
provisions concerning simple loan. (Art 1980)
The general rule is that a bank can compensate or set off the deposit in its hands for the payment of any
indebtedness to it on the part of the depositor. In true deposit, compensation is not allowed.
Irregular deposit Mutuum
1. The consumable 1. Lender is bound

thing deposited may by the provisions of
be demanded at will the contract and
by the depositor cannot demand
restitution until the
time for payment, as
provided in the
contract, has arisen
2. The only benefit is 2. Essential cause for

that which accrues to the transaction is the
the depositor necessity of the
borrower
3. The irregular 3. Common creditors

depositor has a enjoy no preference
preference over other in the distribution of
creditors with respect the debtors property
to the thing deposited
Rule when there are two or more depositors (Art 1985):

1. If thing deposited is divisible and depositors are not solidary: Each depositor can demand only his
proportionate share thereto.
2. If obligation is solidary or if thing is not divisible: Rules on active solidarity shall apply, i.e. each one of
the solidary depositors may do whatever may be useful to the others but not anything which may be
prejudicial to the latter, (Art. 1212) and the depositary may return the thing to anyone of the solidary
depositors unless a demand, judicial or extrajudicial, for its return has been made by one of them in
which case, delivery should be made to him (Art. 1214).
3. Return to one of depositors stipulated. The depositary is bound to return it only to the person designated
although he has not made any demand for its return.
NOTES:
The depositary may retain the thing in pledge until full payment of what may be due him by reason of
the deposit (Art 1994).
The depositors heir who in good faith may have sold the thing which he did not know was deposited,
shall only be bound to return the price he may have received or to assign his right of action against the
buyer in case the price has not been paid him (Art 1991).
Obligations of the Depositor (Art 1992 1995):
1. To pay expenses for preservation

a. If the deposit is gratuitous, the depositor is obliged to reimburse the depositary for expenses
incurred for the preservation of the thing deposited (Art 1992)
b. If the deposit is for valuable consideration, expenses for preservation are borne by the depositary
unless there is a contrary stipulation
2. To pay loses incurred by the depositary due to the character of the thing deposited
GENERAL RULE: The depositor shall reimburse the depositary for any loss arising from the character of
the thing deposited.
EXCEPTIONS:
1. at the time of the deposit, the depositor was not aware of the dangerous character of the thing
2. when depositor was not expected to know the dangerous character of the thing
3. when the depositor notified the depository of the same
4. the depositary was aware of it without advice from the depositor
Extinguishment of Voluntary Deposit (Art 1995)
1. Loss or destruction of the thing deposited

2. In case of gratuitous deposit, upon the death of either the depositor or the depositary
3. Other causes, such as return of the thing, novation, merger, expiration of the term fulfilment of the
resolutory condition, etc (Art 1231)
Necessary Deposits
1. Made in compliance with a legal obligation
2. Made on the occasion of any calamity such as fire, storm, flood, pillage, shipwreck or other similar
events (deposito miserable)
3. Made by travellers in hotels and inns or by travellers with common carrier
Deposit by Travellers in hotels and inns:

The keepers of hotels or inns shall be responsible as depositaries for the deposit of effects made by
travellers provided:
a. Notice was given to them or to their employees of the effects brought by the guest; and
b. The guests take the precautions which said hotel-keepers or their substitutes advised relative to the
care and vigilance of their effects.
NOTES:
Liability extends to vehicles, animals and articles which have been introduced or placed in the annexes
of the hotel.
Liability shall EXCLUDE losses which proceed from force majeure. The act of a thief or robber is not
deemed force majeure unless done with the use of arms or irresistible force.
The hotel-keeper cannot free himself from the responsibility by posting notices to the effect that he is
not liable for the articles brought by the guest. Any stipulation to such effect shall be void.
Notice is necessary only for suing civil liability but not in criminal liability.
GUARANTY (Articles 2047 2084)
A contract whereby a person (guarantor) binds himself to the creditor to fulfil the obligation of the
principal debtor in case the latter fail to do so.
Classification of Guaranty:
1. In the Broad sense:
a. Personal - the guaranty is the credit given by the person who guarantees the fulfilment of the
principal obligation.
b. Real - the guaranty is the property, movable or immovable.
2. As to its Origin
a. Conventional - agreed upon by the parties.
b. Legal - one imposed by virtue of a provision of a law.
c. Judicial - one which is required by a court to guarantee the eventual right of one of the parties in a
case.
3. As to Consideration
a. Gratuitous - the guarantor does not receive any price or remuneration for acting as such.
b. Onerous - the guarantor receives valuable consideration.
4. As to the Person guaranteed
a. Single - one constituted solely to guarantee or secure performance by the debtor of the principal
obligation.
b. Double or sub-guaranty - one constituted to secure the fulfilment by the guarantor of a prior
guaranty.
5. As to Scope and Extent
a. Definite - the guaranty is limited to the principal obligation only, or to a specific portion thereof.
b. Indefinite or simple - one which not only includes the principal obligation but also all its
accessories including judicial costs
SURETYSHIP
A contract whereby a person (surety) binds himself solidarily with the principal debtor
A relation which exists where one person (principal) has undertaken an obligation and another person
(surety) is also under a direct and primary obligation or other duty to the obligee, who is entitled to but
one performance, and as between the two who are bound, the second rather than the first should perform
(Agro Conglomerates, Inc. vs. CA, 348 SCRA 450)
NOTES:
The reference in Article 2047 to solidary obligations does not mean that suretyship is withdrawn from
the applicable provisions governing guaranty. A surety is almost the same as a solidary debtor, except
that he himself is a principal debtor.
In suretyship, there is but one contract, and the surety is bound by the same agreement which binds the
principal. A surety is usually bound with the principal by the same instrument, executed at the same
time and upon the same consideration (Palmares vs CA, 288 SCRA 422)
It is not for the obligee to see to it that the principal debtor pays the debt or fulfill the contract, but for
the surety to see to it that the principal debtor pays or performs (Paramount Insurance Corp vs CA, 310
SCRA 377)
Nature of Suretys undertaking:
1. Liability is contractual and accessory but direct
Page 135 of 193

NOTE: He directly, primarily and equally binds himself with the principal as original promisor,
although he possesses no direct or personal interest over the latters obligation, nor does he receive any
benefits therefrom. (PNB vs CA, 198 SCRA 767)
2. Liability limited by the terms of the contract.
NOTE: It cannot be extended by implication beyond the terms of the contract (PNB vs CA, 198 SCRA
767)
3. Liability arises only if principal debtor is held liable.
NOTES:
The creditor may sue separately or together the principal debtor and the surety. Where there are
several sureties, the obligee may proceed against any one of them.
In the absence of collusion, the surety is bound by a judgment against the principal even though he
was not a party to the proceedings. The nature of its undertaking makes it privy to all proceedings
against its principal (Finman General Assurance Corp. vs. Salik, 188 SCRA 740)
4. Surety is not entitled to the benefit of exhaustion

NOTE: He assumes a solidary liability for the fulfilment of the principal obligation (Towers Assurance
Corp vs. Ororama Supermart, 80 SCRA 262) as an original promissory and debtor from the beginning.
5. Undertaking is to creditor and not to debtor.
NOTE: The surety makes no covenant or agreement with the principal that it will fulfil the obligation
guaranteed for the benefit of the principal. Such a promise is not implied by law either; and this is true
even where under the contract the creditor is given the right to sue the principal, or the latter and the
surety at the same time. (Arranz vs. Manila Fidelity & Surety Co., Inc., 101 Phil. 272)
6. Surety is not entitled to notice of principals default
NOTE: The creditor owes no duty of active diligence to take care of the interest of the surety and the
surety is bound to take notice of the principals default and to perform the obligation. He cannot
complain that the creditor has not notified him in the absence of a special agreement to that effect.
(Palmares vs CA, 288 SCRA 422)
7. Prior demand by the creditor upon principal is not required
NOTE: As soon as the principal is in default, the surety likewise is in default.
8. Surety is not exonerated by neglect of creditor to sue principal
Characteristics of Guaranty and Suretyship:
1. Accessory - It is indispensable condition for its existence that there must be a principal obligation.
NOTES:
Guaranty may be constituted to guarantee the performance of a voidable or unenforceable contract.
It may also guarantee a natural obligation. (Art 2052)
The guarantor cannot bind himself for more than the principal debtor and even if he does, his
liability shall be reduced to the limits of that of the debtor.
2. Subsidiary and Conditional - takes effect only in case the principal debtor fails in his obligation.
NOTES:
The guarantor cannot bind himself for more than the principal debtor and even if he does, his
liability shall be reduced to the limits of that of the debtor. But a guarantor may bind himself for
less than that of the principal (Art 2054)
A guaranty may be given as security for future debts, the amount of which is not yet known; there
can be no claim against the guarantor until the debt is liquidated. A conditional obligation may also
be secured. (Art 2053)
3. Unilateral - may be entered even w/o the intervention of the principal debtor, in which case Art. 1236
and 1237 shall apply and it gives rise only to a duty on the part of the guarantor in relation to the
creditor and not vice versa.
4. Nominate
5. Consensual
6. It is a contract between the guarantor/surety and creditor.
NOTES:
Acceptance of guaranty by creditor and notice thereof to guarantor:
In declaring that guaranty must be express, the law refers solely and exclusively to the
obligation of the guarantor because it is he alone who binds himself by his acceptance. With
respect to the creditor, no such requirement is needed because he binds himself to nothing.
However, when there is merely an offer of a guaranty, or merely a conditional guaranty, in the
sense that it requires action by the creditor before the obligation becomes fixed, it does not
become binding until it is accepted and until notice of such acceptance by the creditor is given
to, or acquired by, the guarantor, or until he has notice or knowledge that the creditor has
performed the condition and intends to act upon the guaranty.
But in any case, the creditor is not precluded from waiving the requirement of notice.
The consideration of the guaranty is the same as the consideration of the principal obligation.
The creditor may proceed against the guarantor although he has no right of action against the
principal debtor.
7. Not presumed. It must be expressed and reduced in writing.
NOTE: A power of attorney to loan money does not authorize the agent to make the principal liable as a
surety for the payment of the debt of a third person. (BPI vs. Coster, 47 Phil. 594)
8. Falls under the Statute of Frauds since it is a special promise to answer for the debt, default or
miscarriage of another.
9. Strictly interpreted against the creditor and in favor of the guarantor/surety and is not to be extended
beyond its terms or specified limits. (Magdalena Estates, Inc. vs Rodriguez, 18 SCRA 967) The rule of
strictissimi juris commonly pertains to an accommodation surety because the latter acts without motive
of pecuniary gain and hence, should be protected against unjust pecuniary impoverishment by imposing
on the principal, duties akin to those of a fiduciary.
NOTES:
The rule will apply only after it has been definitely ascertained that the contract is one of suretyship
or guaranty. It cannot be used as an aid in determining whether a partys undertaking is that of a
surety or guarantor. (Palmares vs CA, 288 SCRA 292)
It does not apply in case of compensated sureties.
10. It is a contract which requires that the guarantor must be a person distinct form the debtor because a
person cannot be the personal guarantor of himself.
NOTE: However, in a real guaranty, like pledge and mortgage, a person may guarantee his own
obligation with his personal or real properties.
Guaranty Suretyship
1. Liability depends upon an independent 1. Surety assumes liability as regular party

agreement to pay the obligation if primary to the undertaking
debtor fails to do so
2. Collateral under-taking 2. Surety is an original promisor
3. Guarantor is secondarily liable 3. Surety is primarily liable
4. Guarantor binds himself to pay if the 4. Surety undertakes to pay if the principal
principal CANNOT PAY DOES NOT PAY
5. Insurer of solvency of debtor 5. Insurer of the debt
6. Guarantor can avail of the benefit of 6. Surety cannot avail of the benefit of
excussion and division in case creditor excussion and division
proceeds against him
Indorsement Guaranty
1. Primarily of transfer 1. Contract of security
2. Unless the note is promptly presented for 2. Failure in either or both of these
payment at maturity and due notice of particulars does not generally work as an
dishonor given to the indorser within a absolute discharge of a guarantors liability,
reasonable time he will be discharged abso- but his is discharged only to the extent of
lutely from all liability thereon, whether he the loss which he may have suffered in
has suffered any actual damage or not consequence thereof
3. Indorser does not warrant the solvency. 3. Guarantor warrants the solvency of the
He is answerable on a strict compliance promisor
with the law by the holder, whether the
promisor is solvent or not
4. Indorser can be sued as promisor 4. Guarantor cannot be sued as promisor
Guaranty Warranty
A contract by which a person is bound to An undertaking that the title, quality, or
another for the fulfilment of a promise or quantity of the subject matter of the contract
engagement of a third party is what it has been represented to be, and
relates to some agreement made ordinarily
by the party who makes the warranty
NOTES:
A guaranty is gratuitous, unless there is a stipulation to the contrary. The cause of the contract is the
same cause which supports the obligation as to the principal debtor.
Page 137 of 193

The peculiar nature of a guaranty or surety agreement is that is is regarded as valid despite the absence
of any direct consideration received by the guarantor or surety either from the principal debtor or from
the creditor; a consideration moving to the principal alone will suffice.
It is never necessary that the guarantor or surety should receive any part or benefit, if such there be,
accruing to the principal. (Willex Plastic Industries Corp. vs. CA, 256 SCRA 478)
Double or sub-guaranty (Art 2051 2nd par)

One constituted to guarantee the obligation of a guarantor
Continuing guaranty (Art 2053)

One which is not limited to a single transaction but which contemplates a future course of dealings,
covering a series of transactions generally for an indefinite time or until revoked.
NOTES:
Prospective in operation (Dio vs CA, 216 SCRA 9)
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 (Dio vs CA, 216 SCRA 9)
Future debts may also refer to debts existing at the time of the constitution of the guaranty but the
amount thereof is unknown and not to debts not yet incurred and existing at that time.
Exception to the concept of continuing guaranty is chattel mortgage. A chattel mortgage can only
cover obligations existing at the time the mortgage is constituted and not those contracted subsequent to
the execution thereof (The Belgian Catholic Missionaries, Inc. vs. Magallanes Press, Inc., 49 Phil 647).
An exception to this is in case of stocks in department stores, drug stores, etc. (Torres vs. Limjap, 56
Phil 141).
Extent of Guarantors liability: (Art 2055)

1. Where the guaranty definite: It is limited in whole or in part to the principal debt, to the exclusion of
accessories.
2. Where guaranty indefinite or simple: It shall comprise not only the principal obligation, but also all its
accessories, including the judicial costs, provided with respect to the latter, that the guarantor shall only
be liable for those costs incurred after he has been judicially required to pay.
Qualifications of a guarantor: (Arts 2056-2057)

1. possesses integrity
2. capacity to bind himself
3. has sufficient property to answer for the obligation which he guarantees
NOTES:
The qualifications need only be present at the time of the perfection of the contract.
The subsequent loss of the integrity or property or supervening incapacity of the guarantor would not
operate to exonerate the guarantor or the eventual liability he has contracted, and the contract of
guaranty continues.
However, the creditor may demand another guarantor with the proper qualifications. But he may waive
it if he chooses and hold the guarantor to his bargain.
Benefit of Excussion (Art 2058)
The right by which the guarantor cannot be compelled to pay the creditor unless the latter has exhausted
all the properties of the principal debtor, and has resorted to all of the legal remedies against such
debtor.
NOTE:
Not applicable to a contract of suretyship (Arts 2047, par. 2; 2059[2])
Cannot even begin to take place before judgment has been obtained against the debtor (Baylon vs CA,
312 SCRA 502)
When Guarantor is not entitled to the benefit of excussion: (PAIRS)

1. If it may be presumed that an execution on the property of the principal debtor would not result in the
satisfaction of the obligation
Not necessary that the debtor be judicially declared insolvent or bankrupt
2. When he has absconded, or cannot be sued within the Philippines unless he has left a manager or
representative
3. In case of insolvency of the debtor
Must be actual
4. If the guarantor has expressly renounced it
5. If he has bound himself solidarily with the debtor
Other grounds: (BIPS)

6. If he is a judicial bondsman or sub-surety
7. If he fails to interpose it as a defense before judgment is rendered against him
8. If the guarantor does not set up the benefit against the creditor upon the latters demand for payment
from him, and point out to the creditor available property to the debtor within Philippine territory,
sufficient to cover the amount of the debt (Art 2060)
Demand can be made only after judgment on the debt
Demand must be actual; joining the guarantor in the suit against the principal debtor is not the
demand intended by law
9. Where the pledge or mortgage has been given by him as special security
Benefit of Division (Art 2065)

Should there be several guarantors of only one debtor and for the same debt, the obligation to answer
for the same is divided among all.
Liability: Joint
NOTES:
The creditor can claim from the guarantors only the shares they are respectively bound to pay except
when solidarity is stipulated or if any of the circumstances enumerated in Article 2059 should take
place.
The right of contribution of guarantors who pays requires that the payment must have been made (a) in
virtue of a judicial demand, or (b) because the principal debtor is insolvent (Art 2073).
If any of the guarantors should be insolvent, his share shall be borne by the others including the paying
guarantor in the same joint proportion following the rule in solidary obligations.
The above rule shall not be applicable unless the payment has been made in virtue of a judicial demand
or unless the principal debtor is insolvent.
The right to contribution or reimbursement from his co-guarantors is acquired ipso jure by virtue of said
payment without the need of obtaining from the creditor any prior cession of rights to such guarantor.
The co-guarantors may set up against the one who paid, the same defenses which have pertained to the
principal debtor against the creditor and which are not purely personal to the debtor. (Art 2074)
Procedure when creditor sues: (Art. 2062)

The creditor must sue the principal alone; the guarantor cannot be sued with his principal, much less
alone except in Art. 2059.
1. Notice to guarantor of the action

The guarantor must be NOTIFIED so that he may appear, if he so desires, and set up defenses he
may want to offer.
If the guarantor appears, he is still given the benefit of exhaustion even if judgment should be
rendered against him and principal debtor. His voluntary appearance does not constitute a
renunciation of his right to excussion (see Art. 2059(1)).
Guarantor cannot set up the defenses if he does not appear and it may no longer be possible for him
to question the validity of the judgment rendered against the debtor.
2. A guarantor is entitled to be heard before and execution can be issued against him where he is not a
party in the case involving his principal (procedural due process).
Guarantors Right of Indemnity or Reimbursement (Art 2066)

GENERAL RULE: Guaranty is a contract of indemnity. The guarantor who makes payment is entitled to
be reimbursed by the principal debtor.
NOTE: The indemnity consists of: (DIED)

1. Total amount of the debt no right to demand reimbursement until he has actually paid the debt,
unless by the terms of the contract, he is given the right before making payment. He cannot collect
more than what he has paid.
2. Legal interest thereon from the time the payment was made known (notice of payment in effect a
demand so that if the debtor does not pay immediately, he incurs in delay) to the debtor, even
though it did not earn interest for the creditor. Guarantors right to legal interest is granted by law
by virtue of the payment he has made.
3. Expenses incurred by the guarantor after having notified the debtor that payment has been
demanded of him by the creditor; only those expenses that the guarantor has to satisfy in
accordance with law as a consequence of the guaranty (Art. 2055) not those which depend upon his
will or own acts or his fault for these are his exclusive personal responsibility and it is not just that
they be shouldered by the debtor.
4. Damages if they are due in accordance
with law. General rules on damages apply.
Page 139 of 193

EXCEPTIONS:
1. Where the guaranty is constituted without the knowledge or against the will of the principal debtor,
the guarantor can recover only insofar as the payment had been beneficial to the debtor (Art. 2050).
2. Payment by a third person who does not intend to be reimbursed by the debtor is deemed to be a
donation, which, however, requires the debtors consent. But the payment is in any case valid as to
the creditor who has accepted it (Art. 1238).
3. Waiver of the right to demand reimbursement.
Guarantors right to Subrogation (ART.2067)
Subrogation transfers to the person subrogated, the credit with all the rights thereto appertaining either
against the debtor or against third persons, be they guarantors or possessors of mortgages, subject to
stipulation in conventional subrogation.
NOTE: This right of subrogation is necessary to enable the guarantor to enforce the indemnity given in Art.
2066.
It arises by operation of law upon payment by the guarantor. It is not necessary that the creditor cede to
the guarantor the formers rights against the debtor.
It is not a contractual right. The right of guarantor who has paid a debt to subrogation does not stand
upon contract but upon the principles of natural justice.
The guarantor is subrogated by virtue of the payment to the rights of the creditor, not those of the
debtor.
Guarantor cannot exercise the right of redemption of his principal (Urrutia & Co vs Morena and
Reyes, 28 Phil 261)
Effect of Payment by Guarantor

1. Without notice to debtor: (Art 2068)
The debtor may interpose against the guarantor those defenses which he could have set up against
the creditor at the time the payment was made, e.g. the debtor can set up against the guarantor the
defense of previous extinguishment of the obligation by payment.
2. Before Maturity (Art 2069)

Not entitled to reimbursement unless the payment was made with the consent or has been ratified
by the debtor
Effect of Repeat Payment by debtor: (Art 2070)

GENERAL RULE: Before guarantor pays the creditor, he must first notify the debtor (Art. 2068). If he
fails to give such notice and the debtor repeats payment, the guarantor can only collect from the creditor and
guarantor has no cause of action against the debtor for the return of the amount paid by guarantor even if the
creditor should become insolvent.
EXCEPTION: The guarantor can still claim reimbursement from the debtor in spite of lack of notice if the
following conditions are present: (PIG)
a. guarantor was prevented by fortuitous event to advise the debtor of the payment; and
b. the creditor becomes insolvent;
c. the guaranty is gratuitous.
Right of Guarantor to proceed against debtor before payment

GENERAL RULE: Guarantor has no cause of action against debtor until after the former has paid the
obligation
EXCEPTION: Article 2071
NOTES:
Article 2071 is applicable and available to the surety. (Manila Surety & Fidelity Co., Inc. vs Batu
Construction & Co., 101 Phil 494)
Remedy of guarantor:
(a) obtain release from the guaranty; or
(b) demand a security that shall protect him from any proceedings by the creditor, and against the
danger of insolvency of the debtor
Art. 2066 Art. 2071

Provides for the enforcement of the rights of Provides for his protection before he has paid
the guarantor/surety against the debtor after he but after he has become liable
has paid the debt
Gives a right of action after payment Protective remedy before payment.
Substantive right Preliminary remedy
Extinguishment of guaranty: (RA2CE2)

1. Release in favor of one of the guarantors, without the consent of the others, benefits all to the extent of
the share of the guarantor to whom it has been granted (Art 2078);
2. If the creditor voluntarily accepts immovable or other properties in payment of the debt, even if he
should afterwards lose the same through eviction or conveyance of property (Art 2077);
3. Whenever by some act of the creditor, the guarantors even though they are solidarily liable cannot be
subrogated to the rights, mortgages and preferences of the former (Art 2080);
4. For the same causes as all other obligations (Art 1231);
5. When the principal obligation is extinguished;
6. Extension granted to the debtor by the creditor without the consent of the guarantor (Art 2079)
BOND
An undertaking that is sufficiently secured, and not cash or currency
Bondsman (Art 2082)

A surety offered in virtue of a provision of law or a judicial order. He must have the qualifications
required of a guarantor and in special laws like the Rules of Court.
NOTES:
Judicial bonds constitute merely a special class of contracts of guaranty by the fact that they are given
in virtue of a judicial order.
If the person required to give a legal or judicial bond should not be able to do so, a pledge or mortgage
sufficient to cover the obligation shall admitted in lieu thereof (Art 2083)
A judicial bondsman and the sub-surety are NOT entitled to the benefit of excussion because they are
not mere guarantors, but sureties whose liability is primary and solidary. (Art 2084)
PLEDGE, MORTGAGE AND ANTICHRESIS

I. Common Elements of Pledge, Mortgage, and Antichresis (Articles 2085 2092)
A. Essential Requisites (SOD) (Art 2085)

1. Secures the fulfillment of a principal obligation;
2. Pledgor, mortgagor, antichretic debtor must be the absolute owner of the thing pledged or mortgaged;
and
The reason being that in anticipation of a possible foreclosure sale in case of default which is still a
sale, the rule is that the seller must be the owner of the thing sold (Cavite Development Bank vs.
Lim, 324 SCRA 346)
3. Pledgor, mortgagor, antichretic debtor must have free disposal of their property, or be legally authorized
for such purpose.
NOTES:
Third persons can pledge or mortgage their own property to secure the principal obligation.
It is not necessarily void simply because the accommodation pledgor or mortgagor did not benefit from
the same. So long as valid consent was given, the fact that the loan was given solely for the benefit of
the principal debtor would not invalidate the mortgage (GSIS vs CA, 170 SCRA 533)
The accommodation pledgor or mortgagor, without expressly assuming personal liability for such debt,
is not liable for the payment of any deficiency, should the property not be sufficient to cover the debt
(Bank of America vs. American Realty Corporation, 321 SCRA 659).
The accommodation pledgor or mortgagor is not solidarily bound with the principal obligor but his
liability extents only to the property pledged or mortgaged. Should there be any deficiency, the creditor
has recourse on the principal debtor who remains to be primarily bound.
The law grants to the accommodation pledgor or mortgagor the same rights as a guarantor and he
cannot be prejudiced by any waiver of defense by the principal debtor.
B. Prohibition against Pactum Commissorium (Art 2088; 2137)
Pactum Commissorium
Stipulation whereby the thing pledged or mortgaged, or under antichresis shall automatically become
the property of the creditor in the event of non-payment of the debt within the term fixed.
Requisites:
1. There should be a pledge, mortgage, or antichresis of property by way of security for the payment
of the principal obligation; and
2. There should be a stipulation for an automatic appropriation by the creditor of the property in event
of nonpayment of the obligation within the stipulated period.
Page 141 of 193

GENERAL RULE: Pactum Commissorium is forbidden by law and is declared null and void.
EXCEPTION: The pledgee may appropriate the thing pledged if after the first and second auctions, the
thing is not sold. (Art 2112)
NOTE: The security contract remains valid; only the prohibited stipulation is void.
C. Capability to secure all kinds of obligations, i.e. pure or conditional (Art 2091)
D. Indivisibility (Art 2089)

GENERAL RULE: A pledge, mortgage, or antichresis is indivisible, even though the debt may be divided
among the successors in interest of the debtor or of the creditor.
Their indivisibility is not affected by the fact that the debtors are jointly or not solidarily liable.
Consequences of indivisibility:
1. Single thing Every portion of the property pledged or mortgaged is answerable for the whole
obligation
2. Several things All of the several things pledged or mortgaged are liable for the totality of the debt
3. Debtors heir/creditors heir - Neither the debtors heir who has paid part of the debt cannot ask for
proportionate extinguishment, nor creditors heir who received his share of the debt return the pledge or
cancel the mortgage as long as the debt is not completely satisfied.
EXCEPTIONS:
1. Where each one of several things guarantees a determinate portion of the credit
2. Where only a portion of the loan was released
3. Where there was failure of consideration.
4. Where there is no debtor-creditor relationship
NOTES:
The mere embodiment of a real estate mortgage and a chattel mortgage in one document does not have
the effect of fusing both securities into an indivisible whole.
The mortgagee, therefore, may legally foreclose the real estate mortgage extrajudicially and waive the
chattel mortgage foreclosure, and maintain instead a personal action for the recovery of the unpaid
balance of the credit (Phil. Bank of Commerce vs. Macadaeg, 109 Phil 981)
E. When the principal obligation becomes due, the things in which the pledge, mortgage, or antichresis
consists may be alienated for the payment to the creditor. (Art. 2087)
NOTES:
If the debtor fails to comply with the obligation at the time it falls due, the creditor is merely entitled to
move for the sale of the thing pledged or mortgaged in order to collect the amount of his claim from the
proceeds.
If he wishes to secure a title to the mortgaged property, he can buy it in the foreclosure sale
(Montevirgin vs. CA, 112 SCRA 641)
F. Pledgor, mortgagor, antichretic debtor retains ownership of the thing given as a security
PLEDGE (Arts 2093 2123)

A contract wherein the debtor delivers to the creditor or to a third person a movable or document
evidencing incorporeal rights for the purpose of securing fulfilment of a principal obligation with the
understanding that when the obligation is fulfilled, the thing delivered shall be returned with all its fruits
and accessions.
Special Requisites (in addition to the common essential requisites):

1. Possession of the thing pledged must be transferred to the creditor or a third person by agreement (Art
2093);
2. It can only cover movable property and incorporeal rights evidenced by documents of title and the
instruments proving the right pledged shall be delivered to the creditor, and if negotiable must be
endorsed (Art 2094); and
3. The description of the thing pledged and the date must appear in a public instrument to bind third
persons, but not for the validity of the contract (Art 2096).
Kinds:
1. Conventional /Voluntary created by contract
2. Legal created by operation of law (examples: Art. 546, 1731 and 1914 NCC)
NOTES:
The provisions of possession, care and sale of the thing as well as on the termination of the pledge
governing conventional pledges are applicable to pledges created by operation of law (Art 2121)
Unlike, however, in conventional pledge where the debtor is not entitled to the excess unless it is
otherwise agreed, in legal pledge, the remainder of the price of the sale after payment of the debt and
expenses, shall be delivered to the debtor.
In legal pledge, there is no definite period for the payment of the principal obligation. The pledgee must
make a demand for the payment of the amount due him; otherwise he cannot exercise the right of sale at
public auction (Art 2122)
Characteristics:
1. Real contract it is perfected by the delivery of the thing pledged by the
debtor who is called the pledgor to the creditor who is called the pledgee, or to a third person by
common agreement;
2. Accessory contract it has no independent existence of its own;
3. Unilateral contract it creates an obligation solely on the part of the
creditor to return the thing subject thereof upon the fulfilment of the principal obligation; and
4. Subsidiary contract the obligation incurred does not arise until the
fulfilment of the principal obligation which is secured.
Consideration in pledge:
Insofar as the pledgor is concerned, the cause is the principal obligation.
If the pledgor is not the debtor, the cause is the compensation stipulated for the pledge or the mere
liberality of the pledgor.
Extent of pledge: Unless stipulated otherwise, pledge extends to the fruits, interests or earnings of the thing.
Rights and Obligations of a Pledgor

Rights Obligations
1. To demand return in case of reasonable 1. To advise the pledgee of the flaws of the
grounds to fear destruction or impairment of thing (Art 2101)
the thing without the pledgees fault, subject 2. Not to demand the return of the thing until
to the duty of replacement (Art 2107) after full payment of the debt, including
2. To bid and be preferred at the public interest due thereon and expenses incurred for
auction (Art 2113) its preservation (Art 2105)
3. To alienate the thing pledged provided the
pledgee consents to the sale (Art 2097)
4. To ask that the thing pledged be deposited
(Arts 2104 & 2106)
Rights of the Pledgee

KEY: D SBC BA2R2OPS2
1. Option to demand replacement or immediate payment of the debt in case of deception as to substance or
quality (Art 2109)
2. To sell at public auction in case of reasonable grounds to fear destruction or impairment of the thing
without his fault (Art 2108)
3. To bring actions pertaining to the owner (Art 2103)
4. To choose which of several things pledged shall be sold
5. To bid at the public auction (Art 2113)
6. To appropriate the thing in case of failure of the 2nd public auction (Art 2112)
7. To apply said fruits, interests or earnings to the interest, if any, then to the principal of the credit (Art
2102)
8. To retain excess value received in the public sale (Art 2115)
9. To retain the thing until after full payment of the debt (Art 2098)
10. To be reimbursed for the expenses made for the preservation of the thing pledged (Art 2099)
11. To object to the alienation of the thing
12. To possess the thing (Art 2098)
13. To sell at public auction in case of non-payment of debt at maturity (Art 2112)
To choose which of the several things pledged shall be sold (Art 2119)
14. Option to demand replacement or immediate payment of the debt in case of deception as to substance or
quality (Art 2109)
15. To sell at public auction in case of reasonable grounds to fear destruction or impairment of the thing
without his fault (Art 2108)
16. To bring actions pertaining to the owner (Art 2103)
17. To choose which of several things pledged shall be sold
18. To bid at the public auction (Art 2113)
19. To appropriate the thing in case of failure of the 2nd public auction (Art 2112)
20. To apply said fruits, interests or earnings to the interest, if any, then to the principal of the credit (Art
2102)
21. To retain excess value received in the public sale (Art 2115)
Page 143 of 193

22. To retain the thing until after full payment of the debt (Art 2098)
23. To be reimbursed for the expenses made for the preservation of the thing pledged (Art 2099)
24. To object to the alienation of the thing
25. To possess the thing (Art 2098)
26. To sell at public auction in case of non-payment of debt at maturity (Art 2112)
27. To choose which of the several things pledged shall be sold (Art 2119)
Obligations of the Pledgee

KEY: CUDA3
1. Take care of the thing with the diligence of a good father of a family (Art 2099)
2. Not to use thing unless authorized or by the owner or its preservation requires its use (Art 2104)
3. Not to deposit the thing with a 3rd person unless so stipulated (Art 2100)
4. Responsibility for acts of agents and employees as regards the thing (Art 2100)
5. To advise pledgor of danger to the thing (Art 2107)
6. To advise pledgor of the result of the public auction (Art 2116)
RIGHT OF PLEDGOR TO SUBSTITUTE THING PLEDGED (ART.2107)

Requisites:
1. The pledgor has reasonable grounds to fear the destruction or impairment of the thin pledged
2. There is no fault on the part of the pledgee
3. The pledgor is offering in place of the thing, another thing in pledge which is of the same kind and
quality as the former
4. The pledge does not choose to exercise his right to cause the thing pledged to be sold at public
auction
NOTE: The pledgees right to have the thing pledged sold at public sale granted under the Article 2108 is
superior to that given to the pledgor to substitute the thing pledged under Article 2107.
Prohibition against double pledge

Property which has been lawfully pledged to one creditor cannot be pledged to another as long as the
first one subsists.
NOTE: Possession of a creditor of the thing pledged is an essential requisite of pledge.
Extinguishment of Pledge (CRAPS)

1. For the same causes as all other obligations (Art 1231) PaLoConMeConNo
2. Return of the thing pledged by the pledgee to the pledgor (Art 2110)
3. Statement in writing by the pledgee that he renounces or abandons the pledge (Art 2111)
4. Payment of the debt (Art 2105)
5. Sale of thing pledged at public auction (Art 2115)
NOTE: The possession by the debtor or owner of the thing pledged subsequent to the perfection of the
pledge gives rise to a prima facie presumption that the thing has been returned and, therefore, that the pledge
has been extinguished but not the principal obligation itself. (Art 2110)
Requirements for sale of thing pledged at public auction: (Art 2112)

1. The debt is due and unpaid
2. Sale must be at a public auction
3. there must be notice to the pledgor and owner, stating the amount due
4. Sale must be with the intervention of a notary public
Effect of sale of the thing pledged: (Art 2115)

1. The sale of the thing pledged shall extinguish the principal obligation, whether or not the proceeds of
the sale are equal to the amount of the principal obligation, interest and expenses in a proper case
2. If the price of the sale is more than the amount due the creditor, the debtor is not entitled to the excess
unless the contrary is provided
3. If the price of the sale is less, the creditor is not entitled to recover the deficiency even if there is a
stipulation to that effect
REAL ESTATE MORTGAGE (Articles 2124-2131)
A contract whereby the debtor secures to the creditor the fulfilment of a principal obligation, specially
subjecting to such security immovable property or real rights over immovable property in case the
principal obligation is not complied with at the time stipulated.
Characteristics of the contract:

1. Real
2. Accessory
3. Subsidiary
4. Unilateral it creates only an obligation on the part of the creditor who must free the property from
the encumbrance once the obligation is fulfilled.
NOTES:
As an accessory contract, its consideration is that of the principal contract from which it receives
life.
A mortgage does not involve a transfer, cession or conveyance of property but only constitutes a lien
thereon. Until discharged, it follows the property wherever it goes and subsists notwithstanding changes
of ownership.
A mortgage gives the mortgagee no right or claim to the possession of the property, and therefore, a
mere mortgagee has no right to eject an occupant of the property mortgaged unless the mortgage should
contain some provision to that effect. The only right of a mortgagee in case of non-payment of a debt
secured by mortgage would be to foreclose the mortgage and have the encumbered property sold to
satisfy the outstanding indebtedness. If the possession is transferred to the mortgagee, it must not
expressly be for purpose of applying the fruits to the interest then to the principal of the credit, for then
it would be an antichresis.
It is not an essential requisite that the principal of the mortgage credit bears interest, or that the interest
as compensation for the use of the principal and enjoyment of its fruits be in the form of a certain
percent thereof.

1. It can cover only immovable property and alienable real rights imposed upon immovables (Art 2124);
2. It must appear in a public instrument (Art. 2125); and
3. Registration in the registry of property is necessary to bind third persons, but not for the validity of the
contract (Art 2125).
An order for foreclosure cannot be refused on the ground that the mortgage had not been registered
provided no innocent third parties are involved.
NOTE: Where a mortgage is not valid or false, the principal obligation which it guarantees is not rendered
null and void. What is lost only is the right to foreclose the mortgage as a special remedy for satisfying or
settling the indebtedness which is the principal obligation but the mortgage deed remains as evidence or
proof of a personal obligation of the debtor and the amount due to the creditor may be enforced in an
ordinary personal action.
Kinds:
1. Voluntary agreed to by the parties or constituted by the will of the owner of the property on which it is
created
2. Legal one required by law to be executed in favour of certain persons
The persons in whose favour the law establishes a mortgage have no other right than to demand the
execution and the recording of the document in which the mortgage is formalized (Art 2125 par 2)
3. Equitable one which, although lacking the formalities of a mortgage, shows the intention of the parties
to make the property a security for a debt
PLEDGE REAL MORTGAGE

1. Constituted on movables 1. Constituted on immovables
2. Property is delivered to pledgee or by common 2. Delivery is not necessary
consent to a third person
3. Not valid against third persons unless a 3. Not valid against third persons unless registered
description of the thing pledged and date of pledge
appear in a public instrument
Extent of Mortgage:
Absent express stipulation to the contrary, the mortgage includes the accessions, improvements,
growing fruits and income of the property not yet received when the obligation becomes due and to the
amount of the indemnity granted or owing to the proprietor from the insurers of the property mortgaged,
or in virtue of expropriation for public use (Art 2127)
Object of Mortgage:
Future property cannot be an object of a contract of mortgage (Art 2085[2]) However, a stipulation
subjecting to the mortgage lien, properties (improvements) which the mortgagor may subsequently
acquire install, or use in connection with real property already mortgaged belonging to the mortgagor is
valid (Peoples Bank and Trust Co. vs. Dahican Lumber Co., 20 SCRA 84)
Special Rights:
1. Mortgagor - To alienate the mortgaged property but the mortgage shall remain attached to the property.
NOTE: A stipulation forbidding the owner from alienating the immovable mortgage shall be void (Art
2130) being contrary to public policy inasmuch as the transmission of property should not be unduly
impeded.
2. Mortgagee - To claim from a 3rd person in possession of the mortgaged property the payment of the part
of the credit secured by the which said third person possesses (Art 2129)
NOTE: It is necessary that prior demand for payment must have been made on the debtor and the latter
failed to pay (BPI vs Concepcion & Hijos, Inc., 53 Phil 906)
Foreclosure
The remedy available to the mortgagee by which he subjects the mortgaged property to the satisfaction
of the obligation to secure that for which the mortgage was given
Page 145 of 193

NOTES:
It denotes the procedure adopted by the mortgagee to terminate the rights of the mortgagor on the
property and includes the sale itself (DBP vs Zaragoza, 84 SCRA 668)
Foreclosure is valid where the debtor is in default in the payment of his obligation (Gobonseng, Jr. vs
CA, 246 SCRA 472)
Kinds:
1. Judicial ordinary action for foreclosure under Rule 68 of the Rules of Court
2. Extrajudicial when mortgagee is given a special power of attorney to sell the mortgaged property by
public auction, under Act No. 3135
3.
Judicial foreclosure Extrajudicial foreclosure

1. There is court intervention 1. No court intervention
2. Decisions are appealable 2. Not appealable because it is
immediately executory
3. Order of court cuts off all rights of 3. Foreclosure does not cut off right of
the parties impleaded all parties involved
4. There is equity of redemption 4. There is right of redemption
except on banks which provides for a
right of redemption
5. Period of redemption starts from 5. Period to redeem start from date of
the finality of the judgment until order registration of certificate of sale
of confirmation
6. No need for a special power of 6. Special power of attorney in favor
attorney in the contract of mortgage of mortgagee is needed in the contract
NOTES:
A foreclosure sale retroacts to the date of registration of the mortgage and that a person who takes a
mortgage in good faith and for valuable consideration, the record showing clear title to the mortgagor,
will be protected against equitable claims on the title in favor of third persons, of which he had no actual
or constructive notice (St. Dominic Corporation vs. IAC 151 SCRA 577).
Where there is a right to redeem, inadequacy of price is not material because the judgment debtor may
reacquire the property or else sell his right to redeem and thus recover any loss he claims to have
suffered by reason of the price obtained at the auction sale and consequently not sufficient to set aside
the sale. Mere inadequacy of the price obtained at the sheriffs sale will not be sufficient to set aside the
sale unless the price is so inadequate as to shock the conscience of the court taking into consideration
the peculiar circumstances attendant thereto. (Sulit vs. CA, 268 SCRA 441)
Should there remain a balance due to the mortgagee after applying the proceeds of the sale, the
mortgagee is entitled to recover the deficiency. This rule applies both to judicial and extra-judicial
foreclosure real mortgage.
The action to recover a deficiency after foreclosure prescribes after 10 years from the time the right of
action accrues (Arts 1142 & 1144).
Stipulation of upset price or tipo

It is a stipulation in a mortgage of real property of minimum price at which the property shall be sold, to
become operative in the event of a foreclosure sale at public auction. It is null and void for the property
must be sold to the highest bidder. Parties cannot, by agreement, contravene the law and interfere with
the lawful procedure of the courts (BPI vs Yulo, 31 Phil 476)
Extrajudicial foreclosure real property (Act No. 3135)
The law covers only real estate mortgages. It is intended merely to regulate the extrajudicial sale of the
property mortgaged if and when the mortgagee is given a special power of express authority to do so in
the deed itself or in a document annexed thereto.
The authority to sell is not extinguished by the death of the mortgagor (or mortgagee) as it is an
essential and inseparable part of a bilateral agreement (Perez vs PNB, 17 SCRA 833).
No sale can be legally made outside the province in which the property sold is situated; and in case the
place within said province in which the sale is to be made is the subject of stipulation, such sale shall be
made in the said place in the municipal building of the municipality in which the property or part
thereof is situated.
Procedure for extrajudicial foreclosure of both real estate mortgage under Act No. 3135 and chattel
mortgage under Act No. 1508 (A.M. No. 99-10-05-0, January 15, 2000)
1. Filing of application before the Executive Judge through the Clerk of Court
2. Clerk of Court will examine whether the requirement of the law have been complied with, that is,
whether the notice of sale has been posted for not less than 20 days in at least three (3) public places of
the municipality or city where the property is situated, and if the same is worth more than P400.00, that
such notice has been published once a week for at least three (3) consecutive weeks in a newspaper of
general circulation in the city of municipality
3. The certificate of sale must be approved by the Executive Judge

4. Where the application concerns extrajudicial foreclosure of real mortgages in different locations
covering one indebtedness, only one filing fee corresponding to such debt shall be collected
5. The Clerk of Court shall issue certificate of payment indicating the amount of indebtedness, the filing
fees collected, the mortgages sought to be foreclosed, the description of the real estates and their
respective locations
6. The notice of sale shall be published in a newspaper of general circulation pursuant to Section 1, PD
No. 1079
7. The application of shall be raffled among all sheriffs
8. After the redemption period has expired, the Clerk of Court shall archive the records.
9. No auction sale shall be held unless there are at least two (2) participating bidders, otherwise the sale
shall be postponed to another date. If on the new date set forth for the sale there shall not be at least two
bidders, the sale shall then proceed. The names of the bidders shall be reported to the Sheriff of the
Notary Public, who conducted the sale to the Clerk of Court before the issuance of the certificate of
sale.
NOTES:
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. Failure to comply with the statutory requirements as to publication of notice
of auction sale constitutes a jurisdictional defect which invalidates the sale.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).
Sec 3 of Act 3135 does not require personal or any particular notice on the mortgagor much less on his
successors-in-interest where there is no contractual stipulation therefor. Hence, unless required in the
mortgage contract, the lack of such notice is not a ground to set aside a foreclosure sale.
Neither does Sec 3 require posting of notice of sale on the mortgage property and the certificate of
posting is not required, much less considered indispensable, for the validity of a foreclosure sale.
Redemption
It is the transaction by which the mortgagor reacquires or buys back the property which may have
passed under the mortgage, or divests the property of the lien which the mortgage may have created.
NOTES:
A sale by the mortgagor to a third party of the mortgaged property during the period for redemption
transfers only the right to redeem the property and the right to possess, use and enjoy the same during
said period.
Where sale with assumption of mortgage not registered and made without the consent of the mortgagee,
the buyer, thereof, was not validly substituted as debtor and, hence, had no right to redeem (Bonnevie
vs. CA, 125 SCRA 122).
Kinds:
1. Equity of Redemption right of mortgagor to redeem the mortgaged property after his default in the
performance of the conditions of the mortgage within the 90-day period from the date of the service of
the order of foreclosure or even thereafter but before the confirmation of the sale. Applies to judicial
foreclosure of real mortgage and chattel mortgage foreclosure.
NOTE: Redemption of the banking institutions is allowed within one year from confirmation of sale.
2. Right of Redemption right of mortgagor to redeem the mortgaged property within one year from the
date of registration of the certificate of sale. Applies only to extrajudicial foreclosure of real mortgage.
NOTE: The right of redemption, as long as within the period prescribed, may be exercised irrespective of
whether or not the mortgagee has subsequently conveyed the property to some other party (Sta. Ignacia
Rural Bank, Inc. vs. CA, 230 SCRA 513)
Period of Redemption
1. Extra-judicial (Act #3135)
a. natural person one year from registration of the certificate of sale with Registry of Deeds
b. juridical person same rule as natural person
c. juridical person (mortgagee is bank) - three months after foreclosure or before registration of
certificate of foreclosure which ever is earlier (sec. 47, of General Banking Law)
2. Judicial before confirmation of the sale by the court
NOTE: Allowing a redemption after the lapse of the statutory period, when the buyer at the foreclosure sale
does not object but even consents to the redemption, will uphold the policy of the law which is to aid rather
than defeat the right of redemption. There is nothing in the law which prevents a waiver of the statutory
period for redemption (Ramirez vs CA, 219 SCRA 598).
Amount of the redemption price:

1. Mortgagee is not a bank (Act No. 3135, in relation to Sec. 28, Rule 39 of Rules of Court)
Page 147 of 193

a. purchase price of the property

b. 1% interest per month on the purchase price
c. taxes paid and amount of purchasers prior lien, if any, with the same rate of interest computed from
the date of registration of sale, up to the time of redemption
2. Mortgagee is a bank (GBL 2000)
a. amount due under the mortgage deed
b. interest
c. cost and expenses
NOTE: Redemption price in this case is reduced by the income received from the property
ANTICHRESIS (Articles 2132 -2139)
A contract whereby the creditor acquires the right to receive the fruits of an immovable of the debtor,
with the obligation to apply them to the payment of the interest, if owing, and thereafter to the principal
of his credit (Art 2132)
Characteristics
1. Accessory contract it secures the performance of a principal obligation
2. Formal contract it must be in a specified form to be valid, i.e., in writing. (Art 2134)

1. It can cover only the fruits of an immovable property; (Art 2132)
2. Delivery of the immovable is necessary for the creditor to receive the fruits and not that the contract
shall be binding;
3. Amount of principal and interest must be specified in writing (Art. 2134); and
4. Express agreement that debtor will give possession of the property to creditor and that the latter will
apply the fruits to the interest, if any, then to the principal of his credit. (Art 2132)
NOTE: The obligation to pay interest is not of the essence of the contract of antichresis, there being nothing
in the Code to show that antichresis is only applicable to securing the payment of interest-bearing loans. On
the contrary, antichresis is susceptible of guaranteeing all kinds of obligations, pure or conditional.
Antichresis Pledge
1. Refers to real property 1. Refers to personal property
2. Perfected by mere consent 2. Perfected by delivery of the thing pledged

3. Consensual contract 3. Real Contract
Antichresis Real Estate Mortgage

1. Property is delivered to creditor 1. Debtor usually retains possession of the
property
2. Creditor acquires only the right to receive the 2. Creditor does not have any right to receive the
fruits of the property, hence, it does not produce a fruits; but the mortgage creates a real right over
real right the property
3. The creditor, unless there is stipulation to the 3. The creditor has no such obligation
contrary, is obliged to pay the taxes and charges
upon the estate
4. It is expressly stipulated that the creditor given 4. There is no such obligation on part of
possession of the property shall apply all the mortgagee
fruits thereof to the payment of interest, if owing,
and thereafter to the principal
Subject matter of both is real property
Obligations of antichretic creditor:
1 To pay taxes and charges on the estate, including necessary expenses

NOTE: Creditor may avoid said obligation by:
a. compelling debtor to reacquire enjoyment of the property or
b. by stipulation to the contrary

2 To apply all the fruits, after receiving them, to the payment of interest, if owing, and thereafter to the
principal
3 To render an account of the fruits to the debtor
4 To bear the expenses necessary for its preservation and repair
Remedies of creditor in case of non-payment of debt
1. Bring an action for specific performance; or

2. Petition for the sale of the real property as in a foreclosure of mortgages under Rule 68 of the
Rules of Court.(Art 2137)
NOTES:
The parties, however, may agree on an extrajudicial foreclosure in the same manner as they are
allowed in contracts of mortgage and pledge (Tavera vs. El Hogar Filipino, Inc., 68 Phil 712).
A stipulation authorizing the antichretic creditor to appropriate the property upon the non-
payment of the debt within the agreed period is void (Art 2088).
CHATTEL MORTGAGE (Articles 2140-2141)
A contract by virtue of which personal property is recorded in the Chattel Mortgage Register as a
security for the performance of an obligation (Art 2140).
Characteristics
1. Accessory contract it is for the purpose of securing the performance of a principal obligation
2. Formal contract registration in the Chattel Mortgage Register is indispensable for its validity
3. Unilateral contract it produces only obligations on the part of the creditor to free the thing from the
encumbrance on fulfilment of the obligation.

1. It can cover only personal or movable property in general; however, the parties may treat as personal
property that which by its nature would be real property;
2. Registration of the mortgage with the Chattel Mortgage Register where the mortgagor resides; if
property is located in a different province, registration in both provinces required;
3. Description of the property as would enable the parties or other persons to identify the same after
reasonable investigation and inquiry; and
4. Accompanied by an affidavit of good faith to bind third persons, but not for the validity of the contract.
5. It can cover only obligations existing at the time the mortgage is constituted.
NOTE: A mortgage containing a stipulation in regard to future advances in the credit will take effect
only from the date the same are made and not from the date of the mortgage ( Jaca vs Davao Lumber
Co., 113 SCRA 107)
Effect of registration: Creates a real right

The registration of the chattel mortgage is an effective and binding notice to other creditors of its
existence and creates a real right or a lien which, being recorded, follows the chattel wherever it goes.
The registration gives the mortgagee symbolical possession (Northern Motors, Inc. vs. Coquia, 68
SCRA 374).
Effect of failure to register chattel mortgage in the chattel mortgage registry

Article 2140 makes the recording in the Chattel Mortgage Register an essential requisite but if the
instrument is not recorded, the mortgage is nevertheless binding between the parties. But the person in
whose favour the law establishes a mortgage has no other right than to demand the execution and the
recording of the document.
Chattel Mortgage Pledge

1. Delivery of the personal property to the mortgage 1. Delivery of the thing pledged is necessary
is not necessary
2. registration in the Chattel Mortgage Registry is 2. registration not necessary to be valid

necessary for its validity
3. If property is foreclosed, the excess over the 3. Debtor is not entitled to excess unless otherwise
amount due goes to the debtor agreed or except in case of legal pledge
4. If there is deficiency after foreclosure, creditor is 4. If there is deficiency, creditor is not entitled to
entitled to recover the deficiency from the debtor, recover notwithstanding any stipulation to the
except under Art. 1484 contrary
Subject matter of both is movable property
Page 149 of 193

Affidavit of Good Faith

Oath in a contract of chattel mortgage wherein the parties "severally swear that the mortgage is made
for the purpose of securing the obligation specified in the conditions thereof and for no other purposes
and that the same is a just and valid obligation and one not entered into for the purpose of fraud. (Sec.
5, Chattel Mortgage Law)
Effect of absence
The special affidavit is required only for the purpose of transforming an already valid mortgage into
preferred mortgage. Thus, it is not necessary for the validity of the chattel mortgage itself but only to
give it a preferred status. In other words, its absence vitiates the mortgage only as against third persons
without notice like creditors and subsequent encumbrancers.
Foreclosure of Chattel Mortgage

NOTES:
Foreclosure sale in chattel mortgage is by public auction under Act No. 1508, but the parties may
stipulate that it be by private sale.
The mortgagee may, after thirty (30) days from the time of the condition broken, cause the mortgaged
property to be sold at public auction by a public officer. The 30-day period is also a grace period for the
mortgagor to discharge the mortgage obligation. After the sale of the chattel at public auction, the right
of redemption is no longer available to the mortgagor (Cabral vs. Evangelista, 28 SCRA 1000).
Application of proceed of sale:

1. Costs and expenses of keeping and sale
2. Payment of the obligation secured by the mortgage
3. Claims of persons holding subsequent mortgages in their order
4. The balance, if any, shall be paid to the mortgagor or person holding under him
NOTES:
The creditor may maintain an action for the deficiency, except if the chattel mortgage is constituted as
security for the purchase of personal property payable in instalments (Art. 1484).
The action for deficiency may be brought within ten (10) years from the time the cause of action accrues
(Arts 1141 and 1142).
Only equity of redemption is available to the mortgagor; the latter can no longer redeem after the
confirmation of the foreclosure sale.
Right of redemption
When the condition of a chattel mortgage is broken the following may redeem:
a) mortgagor;
b) person holding a subsequent mortgage; or
c) subsequent attaching creditor.
An attaching creditor who so redeems shall be subrogated to the rights of the mortgagee and entitled to
foreclose the mortgage in the same manner that the mortgagee could foreclose it.
The redemption is made by paying or delivering to the mortgagee the amount due on such mortgage and
the costs, and expenses incurred by such breach of condition before the sale thereof (Sec 13, Act No.
1508).
Right to possession of foreclosed property

1. Real mortgage After the redemption period has expired, the purchaser of the property has the right to a
conveyance and to be placed in possession thereof.
NOTES:
Purchaser is not obliged to bring a separate suit for possession. He must invoke the aid of the courts
and ask for a WRIT OF POSSESSION.
Section 7 of Act No. 3135 allows the purchaser to take possession of the foreclosed property during
the period of redemption upon filing of an ex parte application and approval of a bond.
2. Chattel mortgage When default occurs and the creditor desires to foreclose, the creditor has the right
to take the property as a preliminary step for its sale.
NOTE: Where the debtor refuses to yield the property, the creditors remedy is to institute an action
either to effect judicial foreclosure directly or to secure possession (REPLEVIN) as a preliminary to the
sale contemplated in Section 14 or Act. No. 1508
CONCURRENCE AND PREFERENCE OF CREDITS

(Articles 2236 2251)
Concurrence of Credits
Possession by two or more creditors of equal rights or privileges over the same property or all of the
property of the debtor
Preference of Credits
Right held by a creditor to be preferred in the payment of his claim above others out of the debtors
assets.
NOTES:
The rules on preference of credits apply only when two or more creditors have separate and distinct
claims against the same debtor who has insufficient property.
Preference creates no lien on property, and, therefore, gives no interest in property, specific or general,
to the preferred creditor but a preference in application of the proceeds after the sale. (Molina vs.
Somes, 31 Phil. 76)
The preferential right of credit attains significance only after the properties of the debtor have been
inventoried and liquidated, and the claims held by his various creditors have been established. (DBP vs.
NLRC, 183 SCRA 328)
Preference of Credit Lien

Applies only to claims which do not Creates a charge on a particular
attach to specific properties property
Liability of debtors property for his obligations

GENERAL RULE: Debtor is liable with all his property, present and future, for the fulfilment of his
obligations. (Art 2236)
EXEMPT PROPERTY:
1. Present property those provided under Arts. 155 and 205 of the Family Code, Sec. 13, Rule 39 of
the Rules of Court, and Sec. 118 of the Public Land Act
2. Future property a debtor who obtains a discharge from his debts on account of his insolvency, is
not liable for the unsatisfied claims of his creditors with said property subject to certain exceptions
expressly provided by law. (Secs. 68, 69, The Insolvency Law [Act No. 1956])
3. Property under legal custody and those owned by municipal corporations necessary for
governmental purposes
General Categories of Credit:
1. Special Preferred Credits - those listed in Arts. 2241 and 2242 shall be considered as mortgages and
pledges of real or personal property or liens (Art. 2243). Hence, they are not included in the insolvent
debtor's assets.
NOTES:
Arts. 2241 and 2242 do not give the order of preference or priority of payment. They merely enumerate
the credits which enjoy preference with respect to specific movables or immovables. With respect to the
same specific movables or immovables, creditors, with the exception of the State (No. 1), merely concur.
They only find application when there is a concurrence of credits, i.e., when the same specific
property of the debtor is subjected to the claims of several creditors and the value of such property is
insufficient to pay in full all the creditors. In such a situation, the question of preference will arise.
Article 2242 makes no distinction between registered and unregistered vendors lien (No. 2). Hence, any
lien of that kind enjoys the preferred credit status. Unlike the unpaid price of real property sold,
mortgage credits (No. 5), in order to be given preference, should be recorded in the Registry of Property.
But a recorded mortgage credit is superior to an unrecorded unpaid vendors lien (De Barretto vs.
Villanueva, 1 SCRA 288)
The priority rule applies to credits annotated in the Registry of Property. As to credits mentioned in No.
7 of Article 2242, there is preference among the attachments or executions according to the order of the
time they were levied upon the property. The pro rata rule in Article 2249 does not apply; otherwise, the
result would be absurd. The preference of a credit annotated by an attachment or execution could be
defeated by simply obtaining a writ of attachment or execution, no matter how much later (Manabat vs
Laguna Federation of Facomas, Inc., 19 SCRA 621).
The last paragraph of Article 2241 applies only when the right of ownership in such property
continues in the debtor, and, therefore, it is not applicable to cases where the debtor has parted with his
ownership therein, as where he has sold the property (Pea vs. Mitchell, 9 Phil 587)
2. Ordinary Preferred Credits - those listed in Art. 2244 as amended by Art. 110 of the Labor Code.
NOTES:
The provision not only enumerates the preferred credits with respect to other property, real and personal,
of the debtor, but also gives their order of preference in the order named.
Page 151 of 193

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 favour of certain creditors to have
the cash and other assets of the insolvent applied in a certain sequence or order of priority.
Article 2244, particularly par (14) item (1) thereof, is not applicable to obligations of the State as it is a
recognized doctrine that the State is always solvent. It is inconceivable for the State to voluntarily
initiate insolvency or general liquidation proceedings or to be subjected to such proceedings under its
own laws.
3. Common Credits those listed under Art. 2245, which shall be paid pro rata regardless of dates.
NOTE: Ordinary Preferred and Common Credits cover only free property of the debtor, or those not
subjected to Special Preferred Credit.
Effects of Article 110 of Labor Code to Art 2244:

1. Removed the one-year limitation found in No. 2 of Art. 2244
2. Moving up the claims for unpaid wages (and other monetary claims) of laborers or workers of insolvent
from second priority to first priority in the order of preference established by Art. 2244
NOTES:
In case of bankruptcy or liquidation of the employers business, the unpaid wages and other monetary
claims of the employees shall be given first preference and shall be paid in full before the claims of the
government and other creditors may be paid. The terms, declaration of bankruptcy, or judicial
liquidation have been eliminated, nevertheless, according to the SC, bankruptcy or liquidation
proceedings are still necessary for the operation of the preference accorded to workers under Art. 110 of
the Labor Code. (DBP vs. NLRC 183 SCRA 328; RA No. 6715 Sec 10)
In case of rehabilitation, the preference of credit granted to employees under Art 110 of the Labor Code
is not applicable (Rubberworld [Phils.] vs CA, 305 SCRA 722).
Refectionary Credit
Indebtedness incurred in the repair or reconstruction of something previously made, such repair or
reconstruction being made necessary by the deterioration or destruction of the thing as it formerly
existed.
ORDER OF PREFERENCE OF CREDITS
Arts. 2241 and 2242, jointly with Arts. 2246 to 2249 establish a two-tier order of preference:
1. First tier includes taxes, duties and fees due on specific movable or immovable property;
2. Second tier all other special preferred (non-tax) credits shall be satisfied pro-rata, out of any residual
value of the specific property to which such credits relate.
NOTES:
The pro-rata rule does not apply to credits annotated in the Registry of Property by virtue of a judicial
order, by attachments and executions, which are preferred as to later credits. In satisfying several
credits annotated by attachments or executions, the rule is still preference according to the priority of
the credits in the order of time.
In order to make the pro rating provided in Art 2249 fully effective, the preferred creditors enumerated
in Nos. 2 to 14 of Art 2242 must necessarily be convened, and the import of their claims ascertained.
There must be first some proceeding where the claims of all the preferred creditors may be bindingly
adjudicated, e.g. insolvency, settlement of decedents estate, or other liquidation proceedings except
where there are not more than one creditor.
Credits which do not enjoy any preference with respect to specific property because they are not among
those mentioned in Arts. 2241 and 2242 and those while included in said articles are unpaid because the
value of the property to which the preference refers is less than the preferred credit or credits, shall be
satisfied in the order established in Art. 2244 with reference to other real and/or personal property.
Common credits or those which do not fall under Arts. 2241, 2242, and 2244 do not enjoy any
preference and shall be paid pro rata regardless of dates.
S A L E S
SALE
A nominate contract whereby one of the contracting parties obligates himself to transfer the ownership
of and to deliver a determinate thing and the other to pay therefor a price certain in money or its
equivalent.
NOTES: Delivery and payment in a contract of sale are so interrelated and intertwined with each other that
without delivery of the goods there is no corresponding obligation to pay. The two complement each other.
It is clear that the two elements cannot be dissociated, for the contract of purchase and sale is essentially a
bilateral contract, as it gives rise to reciprocal obligations. (Pio Barretto Sons, Inc. vs. Compania Maritima,
62 SCRA 167).
Neither is the delivery of the thing bought nor the payment of the price necessary for the perfection of
the contract of sale. Being consensual, it is perfected by mere consent.
Elements:
a. Essential elements those without which, there can be no valid sale:
1. Consent or meeting of minds
2. A Determinable subject matter
3. Price certain in money or its equivalent
b. Natural elements inherent in the contract, and which in the absence of any contrary provision, are
deemed to exist in the contract:
1. Warranty against eviction
2. Warranty against hidden defects
c. Accidental elements may be present or absent depending on the stipulation of the parties (e.g.:
conditions, interest, penalty, time or place of payment, etc.)
Characteristics:
1. Principal
2. Consensual;
3. Bilateral;
4. Nominate;
5. Commutative; In some cases, aleatory (emptio spei);
6. Onerous.
* Aleatory contract: one of the parties or both reciprocally bind themselves to give or to do something in
consideration of what the other shall give or do upon the happening of an event which is uncertain, or which
is to occur at an indeterminate time. (Ex: Sale of sweepstakes ticket)
Contract to sell
exclusive right and privilege to purchase an object.
a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the
subject property despite delivery thereof to the prospective buyer binds himself to sell the said property
exclusively to the prospective buyer upon fulfilment of the condition agreed upon, that is, full payment
of the purchase price.
NOTE: Absent a proviso in the contract that the title to the property is reserved in the vendor until full
payment of the purchase price or a stipulation giving the vendor the right to unilaterally rescind the contract
the moment the vendee fails to pay within the fixed period, the transaction is an absolute contract of sale and
not a contract to sell. (Dignos vs. CA [1988])
* The contract of sale by itself is not a mode of acquiring ownership. The contact transfers no real rights; it
merely causes certain obligations to arise.
Contract of Sale Contract to Sell

1. Title passes to the buyer upon 1. Ownership is reserved in the seller
delivery of the thing sold and is not to pass until full payment of
the purchase price
2. Non-payment of the price is a 2. Full payment is a positive
negative resolutory condition and suspensive condition, the failure of
the remedy of the seller is to exact which is not a breach casual or
fulfilment or to rescind the contract serious but simply prevents the
obligation of the vendor to convey title
from having binding force
3. Vendor loses and cannot recover 3. Title remains in the vendor if the
ownership of the thing sold and vendee does not comply with the
delivered until the contract of sale condition precedent of making
is resolved and set aside payment at the time specified in the
contract
Conditional Sale Contract to Sell

As to reservation of title to the subject property
Page 153 of 193

In both cases the seller may reserve the title to the subject property until fulfillment of the
suspensive condition i.e. full payment of the price
As to effect of fulfillment of suspensive condition

1. Upon fulfillment of the suspensive 1. Upon fulfillment of the suspensive condition,
condition, the contract of sale is thereby which is the full payment of the purchase price,
perfected, such that if there had been ownership will not automatically transfer to the
previous delivery of the subject buyer although the property may have been
property to the buyer, ownership previously delivered to him. The prospective seller
thereto automatically transfers to the still has to convey title to the prospective buyer by
buyer by operation of law without any entering into a contract of absolute sale.
further act by the seller.
As to effect of sale of the subject property to 3rd persons

1. Constructive /actual knowledge on 1. Third person buying the property despite
the part of the 2nd buyer of the defect in fulfilment of the suspensive condition cannot be
the sellers title renders him not a deemed a buyer in bad faith and prospective buyer
registrant in good faith. Such second cannot seek the relief of reconveyance of property.
buyer cannot defeat the first buyers Exception: If There was no previous sale of the
title. Ratio: Fulfilment of the property.
suspensive conditions affects the
sellers title to the property and
previous delivery of the property
automatically transfers ownership/title
to the buyer.
SALES
OBJECTS OF SALE
Requisites:
1. THINGS:
a) determinate or determinable (Arts. 1458, 1460)
b) lawful (Arts 1347, 1409 [1,4]
c) should not be impossible (Art. 1348) e.g. must be within the commerce of man
2. RIGHTS must be transmissible
Exceptions:
-future inheritance
- service
Emptio rei speratae Emptio spei

1. Sale of an expected thing 1. Sale of a mere hope or expectancy that the
thing will come to existence; Sale of the hope
itself
2. Sale is subject to the condition that the 2. Sale produces effect even if the thing does
thing will exist; if it does not, there is no not come into existence, unless it is a vain
contract hope
3. The uncertainty is with regard to the 3. The uncertainty is with regard to the
quantity and quality of the thing and not the existence of the thing
existence of the thing
4. Object is a future thing 4. Object is a present thing which is the hope
or expectancy
NOTE: In case of doubt the presumption is in favor of emptio rei speratae which is more in keeping with
the commutative character of the contract
Goods which may be Object of Sale

a. Existing goods goods owned or possessed by the seller.
b. Future goods goods to be manufactured, raised or acquired by the seller after the perfection of the
contract.
NOTES:
A sale of future goods is valid only as an executory contract to be fulfilled by the acquisition and
delivery of goods specified.
While there can be sale of future property, there can generally be no donation of future property ( Article
751 Civil Code)
Future inheritance cannot be sold.
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])
Instances when the Civil Code recognizes sale of things not actually or already owned by the seller
at the time of the sale:
1. Sale of a thing having potential existence (Article 1461)
2. Sale of future goods (Article 1462)
3. Contract for the delivery at a certain price of an article which the vendor in the ordinary course of the
business manufactures or procures for the general market, whether the same is on hand at the time or
not (Article 1467)
Sale Agency to sell

1. Buyer receives the goods as 1. Agent receives the goods as goods of the
owner principal who retains his ownership over them
2. Buyer pays the price 2. Agent delivers the price which in turn he got
from his buyer
3. Buyer, as a general rule, 3. Agent can return the goods in case he is unable
cannot return the object sold to sell the same to a third person
4. Seller warrants the thing sold 4. Agent makes no warranty for which he assumes
personal liability as long as he acts within his
authority and in the name of the seller
5. Buyer can deal with the thing 5. Agent in dealing with the thing received, must
sold as he pleases being the act and is bound according to the instructions of the
owner principal
Contract for Piece of Work Sale

1. The thing transferred is one not in 1. The thing transferred is one which
existence and which never would have would have existed and would have been
existed but for the order of the party desiring the subject of sale to some other person,
to acquire it even if the order had not been given
2. The services dominate the contract even 2. The primary objective of the contract is
though there is a sale of goods involved a sale of the manufactured item; it is a
sale of goods even though the item is
manufactured by labor furnished by the
seller and upon previous order of the
customer
3. Not within the Statute of Frauds 3. Within the Statute of Frauds
Rules to determine if the contract is one of Sale or Piece of work:

a. If ordered in the ordinary course of business sale
b. If manufactured specially for the customer and upon his special order, and not for the market
piece of work
SCHOOLS OF THOUGHT:
a) Massachusetts rule: If specifically done at the order of another, this is a contract for a piece of
work. (Philippine application)
b) New York rule: If thing already exists-SALE; if not-WORK
c) English rule: If material is more valuable-SALE; if skill is more valuable-WORK
BARTER
Page 155 of 193

contract whereby one of the parties binds himself to give one thing in consideration of the other's
promise to give another thing.
NOTE: The only point difference between contract of sale and barter is in the element which is present in
sale but not in barter, namely: price certain in money or its equivalent
NOTE: If the consideration is partly in money and partly in another thing, determine:
a. The manifest intention of the parties
b. If the intent is not clear, apply the following rules:
1. If the thing is more valuable than money barter
2. If the money and the thing are of equal value sale
3. If the thing is less valuable than money sale
Sale Dation in Payment

1. No pre-existing credit 1. Pre-existing credit
2. Obligations are created 2. Obligations are extinguished
3. Consideration on the part of the seller is the 3. Consideration of the debtor is the
price; on the part of the buyer is the acquisition of extinguishment of the debt; on the part of the
the object creditor, it is the acquisition of the object
offered in lieu of the original credit
4. Greater freedom in determining the price 4. Less Freedom in determining the price
5. Buyer still has to pay the price 5. The payment is received by the debtor
before the contract is perfected.
PRICE
The sum stipulated as the equivalent of the thing sold and also every incident taken into consideration
for the fixing of the price, put to the debit of the vendee and agreed to by him.
Requisites:
1. Certainty or ascertainable at the time of perfection
2. Real, not fictitious
3. In some cases, must not be grossly inferior to the value of the thing sold.
4. Paid in money or its equivalent
Certainty
It is not necessary that the certainty of the price be actual or determined at the time of the
execution of the contract. The price is certain in the following cases:
1. If the parties have fixed or agreed upon a definite amount;
NOTE: The fixing of the price can never be left to the discretion of one of the contracting
parties. However if the price fixed by one of the parties is accepted by the other, the sale is
perfected.
2. If it be certain with reference to another thing certain
3. If the determination of the price is left to the judgment of a specified person or persons even
before such determination
4. In the cases provided under Art. 1472 NCC
Effect when the price is fixed by the third person designated:

GENERAL RULE: Price fixed by a third person designated by the parties is binding upon them.
EXCEPTIONS:
1. When the third person acts in bad faith or by mistake
2. When the third person disregards the specific instructions or the procedure marked out by
the parties
Effect when the price is not fixed by the third person designated:
1. If the third person refuses or cannot fix the price, the contract shall become ineffective,
unless the parties subsequently agree upon the price
2. If the third person is prevented from fixing the price by the fault of the seller or buyer, the
party not in fault may obtain redress against the party in fault
Effect of Gross Inadequacy of Price:

1. Voluntary sales
GENERAL RULE: Mere inadequacy of the price does not affect validity of the sale.
A valuable consideration, however small or nominal, if given or stipulated in good faith is, in the
absence of fraud, sufficient.(Rodriguez vs. CA, 207 SCRA 553)
Future inheritance cannot be sold.
EXCEPTIONS:
a. Where low price indicates vice of consent, sale may be annulled; or contract is presumed to
be an equitable mortgage
b. Where the price is so low as to be shocking to conscience, sale may be set aside.
2. Involuntary or Forced sales

GENERAL RULE: Mere inadequacy of the price is not a sufficient ground for the cancellation of
the sale if property is real.
EXCEPTIONS:
a. Where the price is so low as to be shocking to the moral conscience, judicial sale of personal
property will be set aside
b. In the event of a resale, a better price can be obtained
NOTE: The validity of the sale is not necessarily affected where the law gives to the owner the right
to redeem, upon the theory that the lesser the price, the easier it is for the owner to effect redemption.
Effect where price is simulated

1. If it is shown to have been in reality a donation or some other act or contract
Page 157 of 193

The sale is void but the act or contract may be valid as a donation
2. If not
The contract is void and inexistent
Effect of Failure to determine price:

1. Where contract executory
The contract is inefficacious
2. Where the thing has been delivered to and appropriated by the buyer
The buyer must pay a reasonable price therefore
Reasonable price generally the market price at the time and place fixed by the contract or by law
for the delivery of the goods
PERFECTION OF SALE
GENERAL RULE: It is perfected at the moment there is meeting of the minds upon a determinate
thing (object), and a certain price (consideration), even if neither is delivered. A choice between
rescission and fulfilment, with damages in either case)
NOTE: Sale is a consensual contract; Hence, delivery and payment are not essential for its
perfection
EXCEPTION: When the sale is subject to a suspensive condition by virtue of law or stipulation.
* The terms and conditions of payment are merely accidental, not essential elements of the contract
of sale except where the partied themselves stipulate that in addition to the subject-matter and the
price, they are essential or material to the contract.
Requirements for perfection

a. When parties are face to face
When an offer is accepted without conditions or qualifications
NOTES:
A conditional acceptance is a counter-offer
when negotiated thru phone it is as if it is negotiated face to face
b. When contract is thru correspondence or thru telegram
When the offeror receives or has knowledge of the acceptance by the offeree
NOTE: If the buyer has already accepted but the seller does not know yet of the acceptance, the
seller may still withdraw
c. When a sale is subject to a suspensive condition
From the moment the condition is fulfilled
TRANSFER OF OWNERSHIP
GENERAL RULE: While a contract of sale is consensual, ownership of the thing sold is acquired
only upon its delivery, actual or constructive, to the buyer. (Daus vs. Sps. De Leon, 16 June 2003)
This is true even if the purchase has been made on credit. Payment of the purchase price is
not essential to the transfer of ownership, as long as the property sold has been delivered.
(Sampaguita Pictures, Inc vs. Jalwindor Manufacturers, Inc. 93 SCRA 420)
Nonpayment only creates a right to demand payment or to rescind the contract, or to
criminal prosecution in the case of bouncing checks. (EDCA Publishing and Distributing
Corp. vs. Santos, 184 SCRA 614)
EXCEPTIONS:
1. Contrary stipulation or Pactum reservati dominii (a perfected conditional contract of sale OR
contractual reservation of title) a stipulation, usually in sales by installment, whereby, despite
delivery of the property sold, ownership remains with the seller until full payment of the
price is made. IT IS NOT A CONTRACT TO SELL.
2. Contract to sell - a preparatory contract. Upon full payment, a contract of sale is executed.
3. Contract of insurance a perfected contract of sale, even without delivery, vests in the vendee an
equitable title, an existing interest over the goods sufficient to be the subject of insurance
RULES GOVERNING AUCTION SALES

1. Sales of separate lots by auction are separate contracts of sale.
2. Sale is perfected by the fall of the hammer
3. Seller has the right to bid in the auction, provided:
a) such right was reserved
b) notice was given that the sale was subject to a right to bid on behalf of the seller
c) right is not prohibited by law or by stipulation
4. Advertisements for bidders are simply invitations to make proposals, and the advertiser is not
bound to accept the highest or lowest bidder, unless the contrary appears.
EFFECT OF PROMISE TREATED UNDER ART. 1479 Civil Code:

1. Accepted unilateral promise to sell or buy
Only one makes the promise, this promise is accepted by the other. Example: A promises to sell
to B, B accepts the promise, but does not in turn promise to buy.
does not bind the promissor even if accepted and may be withdrawn anytime.
NOTE: Pending notice of its withdrawal, the accepted promise partakes the nature of an offer to sell
which if accepted, results in a perfected contract of sale (Sanchez vs. Rigos 45 SCRA3 68). In other
words, if the acceptance is made before withdrawal, it constitutes a binding contract of sale although
the option is given without consideration.
if the promise is supported by a consideration distinct and separate from the price (option
money), its acceptance will give rise to a perfected contract.
2. Bilateral promise to buy and sell

One party accepts the others promise to buy and the latter, the formers promise to sell a
determinate thing for a price certain
it is reciprocally demandable
It requires no consideration distinct from the selling price
NOTE: this is as good as a perfected sale. No title of dominion is transferred as yet, the parties
being given only the right to demand fulfillment or damages.
Policitation
An unaccepted unilateral promise to buy or sell. Even if accepted by the other party, it does
not bind the promissor and maybe withdrawn anytime. This is a mere offer, and has not yet been
converted into a contract.
Option contract
A contract granting a privilege in one person, for which he has paid a consideration, which
gives him the right to buy certain merchandise, at anytime within the agreed period, at a fixed
price.
An option without consideration is void and the effect is the same as if there was no option
* However, in Sanchez vs. Rigos (1972), even though the option was not supported by a
consideration, the moment it was accepted, a perfected contract of sale resulted, applying Art. 1324 of
the NCC. In view of the ruling of the Supreme Court, the only importance of the consideration for
an option is that the option cannot be withdrawn by the grantor after acceptance.
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* In an option to buy, the party who has an option may validly and effectively exercise his right by
merely notifying the owner of the formers decision to buy and expressing his readiness to pay the
stipulated price.
Right of First Refusal

It is a right of first priority all things and conditions being equal; there should be identity of
the terms and conditions to be offered to the optionee and all other prospective buyers, with
optionee to enjoy the right of first priority. A deed of sale executed in favor of a third party
who cannot be deemed a purchaser in good faith, and which is in violation of the of the
right of first refusal granted to the optionee is NOT voidable under the Statute of Frauds,
such contract is valid BUT rescissible under Article 1380 to 1381(3) of the New Civil Code
(Guzman Bocaling & Co. vs. Bonnavie; Riviera Filipina, Inc vs. CA et.al. GR No. 117355, April
5, 2002).
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
(Paraaque Kings Enterprises, Inc. vs. CA GR No. 111538, February 26, 1997)
The lessees right of first option to buy the leased property in case of its sale is but a part of the
bigger right to lease the said property from the lessor. The option was given to the lessee
because she was the lessee of the subject property. It was a component of the consideration of
the lease. The option was by no means an independent right which can be exercised by the
lessee. If the lessee is barred by the contract from assigning her right to lease the subject
property to any other party, the lessee is similarly barred to assign her first option to buy the
leased property to another. (Bangayan et.al vs. CA and Lim GR No.123581, August 29, 1997)
Earnest money or ARRAS is something of value to show that the buyer was really in earnest,
and given to the seller to bind the bargain. It is considered as:
a) part of the purchase price
b) proof of perfection of the contract
*It shall be deducted from the total price.
Earnest money Option money

1. Title passes to the buyer upon delivery 1. Ownership is reserved to the seller and is
of the thing sold not to pass until full payment
2. In case of non-payment, an action 2. In case of non-payment, there can

for specific performance or for rescission be action for specific performance
can be filed by the injured party
3. Part of the purchase price 3. Money given as a distinct consideration

for an option contract
4. When given, the buyer is bound to pay 4. The would-be buyer is not required to
the balance buy
5. Given when there is already a sale 5. Applies to a sale not yet perfected
RULES ON RISK OF LOSS AND DETERIORATION:

a. The thing sold is lost before perfection: Seller bears the loss.
b. The thing sold is lost at the time of perfection: Contract is void or inexistent.
c. The thing sold is lost after perfection, but before delivery:
GENERAL RULE: Who bears the risk of loss is governed by the stipulations in the contract
In the absence of any stipulation:
First view:
Buyer bears the loss as an exception to the rule of res perit domino.
EXCEPTIONS:
1. when object sold consists of fungible goods for a price fixed according to weight, number or
measure
2. seller is guilty of fraud, negligence, default or violation of contractual terms
3. object sold is generic
(Civil Code of the Philippines, Paras)
NOTE: This view conforms with Manresas view. Buyer would have been the one to profit from
the thing had it not been lost or destroyed.
Contrary view:
Where the ownership is transferred by delivery, as in our code, the application of the axiom
res perit domino, imposes the risk of loss upon the vendor; hence, if the thing is lost by
fortuitous event before delivery, the vendor suffers the loss and cannot recover the price from the
vendee (Commentaries and Jurisprudence on the Civil Code of the Philippines, Tolentino)
d. The thing is lost after delivery: Buyer bears the loss.
Question: If one does not comply, the other need not pay?
Answer: True. But this only applies when the seller is able to deliver but does not.
EFFECT OF LOSS AT THE TIME OF SALE:

a. Thing entirely lost at the time of perfection: Contract is void and inexistent
b. Thing only partially lost: Vendee may elect between withdrawing from the contract or
demanding the remaining part, paying its proportionate price
Sale by description
A sale where a seller sells things as being of a certain kind, buyer merely relying on the sellers
representations or descriptions.
There is warranty that the thing sold corresponds to the representations or descriptions.
Sale by sample
A sale where a small quantity of a commodity is exhibited by the seller as a fair specimen of the
bulk, which is not present and as to which there is no opportunity to inspect or examine.
NOTE: The mere exhibition of the sample does not necessarily make it a sale by sample. This
exhibition must have been the sole basis or inducement of the sale.
There is warranty that the bulk of the commodity will correspond in kind, quality, and character
with the sample exhibited.
NOTE: In a sale by sample and by description, there is a two-fold warranty.
RIGHTS OF BUYER:
1) Return the thing and recover the money paid, or
2) Retain the thing and sue for the breach of warranty.
Page 161 of 193

PURCHASE BY MINORS: Contract is generally voidable but in case of necessaries, where

necessaries are sold and delivered to a minor or other person without capacity to act, he must pay a
reasonable price therefore. Necessaries are those in Art. 290.
FORMALITIES OF CONTRACT OF SALE
GENERAL RULE: Sale is a consensual contract and is perfected by mere consent.

EXCEPTIONS: In order to be enforceable by action, the following must be in writing:
1. Sale of personal property at a price not less than P500
2. Sale of real property or an interest therein
3. Sale of property not to be performed within a year from the date thereof
4. Applicable statute requires that the contract of sale be in a certain form
NOTE: Statute of Frauds is applicable only to executory contracts and not to contracts which are
totally or partially performed.
CAPACITY TO BUY OR SELL

GENERAL RULE: All persons who can bind themselves also have legal capacity to buy and sell.
EXCEPTIONS:
1. Absolute incapacity (minors, demented persons, imbeciles, deaf and dumb, prodigals, civil
interdictees) - party cannot bind themselves in any case.
2. Relative incapacity incapacity exists only with reference to certain persons or a certain
class of property
Relative Incapacity
A. Husband and wife (Art. 1490): Generally, a sale by one spouse to another is void.
The husband and wife cannot sell property to each other except:
1. When a separation of property was agreed upon by the spouses
2. When there has been a judicial separation of property under Article 134 and 135 of the
Family Code
B. Incapacity by reason of relation to property (Art. 1491)

The following persons cannot acquire property by purchase, even at a public auction, either in
person or through the mediation of another: (GAEP-JO)
1. the guardian, with respect to the property of his ward;
2. agents, with respect to the property whose administration or sale may have been entrusted to
them, unless the consent of the principal has been given;
3. executor or administrator, with respect to the property of the estate under administration;
4. public officers and employees, with respect to the properties of the government, its political
subdivisions, or GOCCs, that are entrusted to them;
5. judges, justices, prosecuting attorneys, clerks of courts, etc., with respect to the property in
custogia legis; and
6. any other person specially disqualified by law.
Examples of persons especially disqualified by law:

a. Aliens who are disqualified to purchase agricultural lands
b. An unpaid seller having a right of lien or having stopped the goods in transitu, who is
prohibited from buying the goods either directly or indirectly in the resale of the same, at
public or private sale which he may make
c. The officer holding the execution, or his deputy.
NOTE: While those disqualified under Arts. 1490 and 1491 may not become lessees (Art.
1646), still aliens may become lessees even if they cannot buy lands.
Effect of violation:
a) With respect to nos. 1 to 3: the sale is VOIDABLE.
Reason: only private rights, which are subject to ratification are violated
NOTE: In the case of Lao vs. Genato, 137 SCRA 77, the Supreme Court found that the sale
by the administrator of certain properties of the estate in order to settle the existing
obligations of the estate was made to the administrators son for a grossly low price.
Furthermore, the said sale was not submitted to the probate court for approval as mandated
by the order authorizing the administrator to sell. The sale was indubitably illegal, irregular
and fictitious, and the courts approval of the assailed compromise agreement violated
Article 1491 and cannot work to ratify a fictitious contract which is non-existent and void
from the very beginning
b) With respect to nos. 4 to 6: the sale is NULL AND VOID.
Reason: violation of public policy cannot be subject to ratification
OBLIGATIONS OF THE VENDOR: (WPD-TT)

1. Transfer ownership (cannot be waived)
2. Deliver the thing sold (cannot be waived)
3. Warrant against eviction and against hidden defects (can be waived or modified since warranty
is not an essential element of the contract of sale)
4. Take care of the thing, pending delivery, with proper diligence (Article 1163)
5. Pay for the expenses of the deed of sale, unless there is stipulation to the contrary
DELIVERY
Is a mode of acquiring ownership, as a consequence of certain contracts such as sale, by virtue of
which, actually or constructively, the object is placed in the control and possession of the vendee.
Delivery of the thing together with the payment of the price, marks the consummation of the
contract of sale(PNB vs. Ling, 69 Phil. 611)
In all forms of delivery, it is necessary that the act of delivery be coupled with the intention
of delivering the thing. The act without the intention is insufficient. (Norkis Distributor, Inc.
vs. CA, 195 SCRA 694)
Kinds:
1. Actual or real placing the thing under the control and possession of the buyer.
2. Legal or constructive delivery is represented by other signs or acts indicative thereof
a. delivery by the execution of a public instrument.
NOTE: Gives rise only to a prima facie presumption of delivery which is destroyed when actual
delivery is not effected because of a legal impediment (Ten Forty Realty vs. Cruz, 10 Sept. 2003)
b. traditio symbolica - to effect delivery, the parties make use of a token or symbol to
represent the thing delivered
c. traditio longa manu seller pointing out to the buyer the things which are transferred,
which at the time must be in sight.
d. traditio brevi manu buyer simply continues in possession of the thing but under title of
ownership.(lessee to owner-possessor)
e. traditio constitutum possessorium seller continues in possession but under a different title
other than ownership. (owner to lessee)
3. Quasi-tradition delivery of rights, credits or incorporeal property, made by:
a. placing titles of ownership in the hands of buyer
b. allowing buyer to make use of rights
4. Tradition by operation of law
Page 163 of 193

Constructive delivery requires three things before ownership may be transferred:

1. The seller must have control over the thing
2. The buyer must be put under control
3. There must be the intention to deliver the thing for purposes of ownership
When is the vendor not bound to deliver the thing sold:
1. If the vendee has not paid him the price
2. If no period for payment has been fixed in the contract
3. Even if a period for payment has been fixed in the contract, if the vendee has lost the right to
make use of the same.
Sale or return
Property is sold, but the buyer, who becomes the owner of the property on delivery, has the
option to return the same to the seller instead of paying the price.
NOTES:
It is a kind of sale with a condition subsequent.
The buyer must comply with the express or implied conditions attached to the return privilege;
otherwise, the sale becomes absolute.
Buyer, being the owner, bears the risk of loss
Sale on trial, approval, or satisfaction

A contract in the nature of an option to purchase if the goods prove to be satisfactory, the
approval of the buyer being a condition precedent.
Rules:
1. title remains in the seller
2. risk of loss remains with seller except when the buyer is at fault or has agreed to bear the loss
3. buyer must give goods a trial, except where it is evident that it cannot perform the work
4. period within which buyer must signify his acceptance runs only when all the parts essential for
the operation of the object have been delivered.
5. if it is stipulated that a third person must satisfy approval or satisfaction, the provision is valid,
but the third person must be in good faith. If refusal to accept is not justified, seller may still sue.
6. Generally, the sale and delivery to a buyer who is an expert on the object purchased is not a sale
on approval, trial, or satisfaction.
Sale or return Sale on Trial

1. Subject to a 1. Subject to a
resolutory suspensive condition
condition
2. Depends 2. Depends on the
entirely on the character or quality
will of the buyer of the goods
3. Ownership 3. Ownership
passes to the remains in the seller
buyer on delivery until buyer signifies
and subsequent his approval or
return reverts acceptance to the
ownership in the seller

seller
4. Risk of loss or 4. Risk of loss

injury rests upon remains with the
the buyer seller
Instances where Seller is still the Owner despite Delivery:

1. Sale on trial, approval or satisfaction
2. Contrary intention appears by the term of the contract;
3. Implied reservation of ownership (Article 1503)
a. If under the bill of lading, the goods are deliverable to seller or agent or their order;
b. If the bill of lading, although stating that the goods are to be delivered to the buyer or his
agent, is kept by the seller or his agent;
a. When the buyer, although the goods are deliverable to order of buyer, and although the bill
of lading is given to him, does not honor the bill of exchange sent along with it.
Transfer of ownership where goods sold delivered to carrier

General Rule: Delivery to the carrier is deemed to be delivery to the buyer
Exception: Where the right of possession or ownership of specific goods sold is reserved
SALE OF GOODS BY A NON-OWNER

GENERAL RULE: Buyer acquires no title even if in good faith and for value under the maxim
Nemo dat quid non habet (You cannot give what you do not have).
EXCEPTIONS: (SMERVS)
1. Owner is estopped or precluded by his conduct
2. When sale is made by the registered owner or apparent owner in accordance with recording
or registration laws
3. Sales sanctioned by judicial or statutory authority
4. Purchases in a merchant's store, fairs or markets
5. When a person who is not the owner sells and delivers a thing, subsequently acquires title
thereto (Art. 1434)
6. When the seller has a voidable title which has not been avoided at the time of the sale (Art.
1506)
* Unlawful deprivation is no longer limited to a criminal act. There is Unlawful Deprivation where
there is no valid transmission of ownership.
Place of delivery of goods

1. Where there is an agreement, place of delivery is that agreed upon
2. Where there is no agreement, place of delivery determined by usage of trade
3. Where there is no agreement and no prevalent usage, place of delivery is the sellers place
4. In any other case, place of delivery is the sellers residence
5. In case of specific goods, which to the knowledge of the parties at the time the contract was
made were in some other place, that place is the place of delivery, in the absence of agreement or
usage of trade to the contrary
Time of delivery of goods

1. Stipulated time
2. In the absence thereof, within a reasonable time
Page 165 of 193

NEGOTIABLE DOCUMENT OF TITLE (NDT)

A document of title in which it is stated that the goods referred to therein will be delivered to the
bearer, or to the order of any person named in such document.
May be negotiated by delivery or indorsement.
The document is negotiable if:

1. The goods are deliverable to the bearer; or
2. If the goods are deliverable to the order of a certain person
Persons who may negotiate NDT:

1. The owner; or
2. Any person to whom the possession or custody thereof has been entrusted by the owner, if by the
terms of the document the bailee issuing the document undertakes to deliver the goods to the
order of the person to whom the possession or custody of the document has been entrusted or if
at the time of such entrusting the document in such form that it may be negotiated by delivery.
* If the holder of a negotiable document of title (deliverable to bearer) entrusts the document to a
friend for deposit, but the friend betrays the trust and negotiates the document by delivering it to
another who is in good faith, the said owner cannot impugn the validity of the negotiation. As
between two innocent persons, he who made the loss possible shall bear the loss, without prejudice to
his right to recover from the wrongdoer.
RIGHTS OF PERSON TO WHOM DOCUMENT HAS BEEN NEGOTIATED:

1) The title of the person negotiating the document, over the goods covered by the document;
2) The title of the person (depositor or owner) to whose order by the terms of the document the goods
were to be delivered, over such goods;
3) The direct obligation of the bailee to hold possession of the goods for him, as if the bailee had
contracted to him directly
NOTE; Mere transferee does not acquire directly the obligation of the bailee (in Art. 1513). To
acquire it, he must notify the bailee.
WHO CAN DEFEAT RIGHTS OF TRANSFEREE:

1. Creditor of transferor
2. Transferor
3. Subsequent purchaser
RULES WHEN QUANTITY IS LESS THAN AGREED UPON:

1. Buyer may reject; or
2. Buyer may accept what has been delivered, at the contract rate
RULES WHEN QUANTITY IS MORE THAN AGREED UPON:

1. Buyer may reject all; or
2. Buyer may accept the goods agreed upon and reject the rest; or
3. Buyer may accept all and must pay for them at the contract rate
NOTE: Acceptance, even if not express may be implied when the buyer exercises acts of ownership
over the excess goods.
RULES WHEN GOODS MIXED WITH GOODS OF DIFFERENT DESCRIPTION:

Buyer may accept the goods which are in accordance with the contract and reject the rest
NOTE: If the subject matter is indivisible, in case of delivery of larger quantity of goods or of mixed
goods, the buyer may reject the whole of the goods
DELIVERY TO THE CARRIER

GENERAL RULE: Where the seller is authorized or required to send the goods to the buyer,
delivery to the carrier is delivery to the buyer.
EXCEPTIONS:
1. When a contrary intention appears
2. Implied reservation of ownership under pars. 1,2,3 of Art. 1503
Kinds of Delivery to the Carrier

a. C.I.F. (cost, insurance, freight) signify that the price fixed covers not only the costs of the
goods, but the expense of the freight and the insurance to be paid by the seller
b. F.O.B. (free on board) goods are to be delivered free of expense to the buyer to the point
where they are F.O.B. The point of F.O.B., either at the point of shipment or the point of
destination, determines when the ownership passes.
NOTE: the terms C.I.F. and F.O.B. merely make rules of presumption
c. C.O.D. (collect on delivery) the carrier acts for the seller in collecting the purchase price,
which the buyer must pay to obtain possession of the goods.
SELLERS DUTY AFTER DELIVERY TO CARRIER

1. To enter on behalf of buyer into such contract reasonable under the circumstances
2. To give notice to buyer regarding necessity of insuring the goods
PAYMENT OF THE PURCHASE PRICE

GENERAL RULE: The seller is not bound to deliver the thing sold unless the purchase price has
been paid.
EXCEPTION: The seller is bound to deliver even if the price has not been paid, if a period of
payment has been fixed.
Sale of Real Property by Unit

Entire area stated in the contract must be delivered
When entire area could not be delivered, vendee may:
1. Enforce the contract with the corresponding decrease in price
2. Rescind the sale:
a. If the lack in area is at least 1/10 than that stated or stipulated
b. If the deficiency in quality specified in the contract exceeds 1/10 of the price agreed upon
c. If the vendee would not have bought the immovable had he known of its smaller area of
inferior quality irrespective of the extent of lack of area or quality
Sale for a Lump Sum (A Cuerpo Cierto)

Vendor is obligated to deliver all the land included within the boundaries, regardless of whether
the real area should be greater or smaller
Ordinarily, there can be no rescission or reduction or increase whether the area be greater or
lesser, unless there is gross mistake.
NOTE: The Civil Code presumes that the purchaser had in mind a particular piece of land and that
he ascertained its area and quality before the contract of sale was perfected. If he did not do so, or if
having done so he made no objection and consented to the transaction, he can blame no one but
himself (Teran vs. Villanueva Viuda de Riosa 56 Phil 677).
What is important is the delivery of all the land included in the boundaries.
DOUBLE SALE (Art. 1544)

Requisites: VOCS
1. two or more transactions must constitute valid sales;
2. they must pertain exactly to the same object or subject matter;
3. they must be bought from the same or immediate seller; AND
Page 167 of 193

4. two or more buyers who are at odds over the rightful ownership of the subject matter must
represent conflicting interests.
Rules of preference:
1. Personal Property
a. first possessor in good faith
2. Real Property
a. first registrant in good faith
b. first possessor in good faith
c. person with oldest title in good faith
NOTES:
Purchaser in Good Faith 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 at the
time of such purchase or before he has notice of the claim or interest of some other person in the
property (Veloso vs. CA).
Registration requires actual recording; if the property was never really registered as when the
registrar forgot to do so although he has been handed the document, there is no registration.
Possession is either actual or constructive since the law made no distinction (Sanchez vs. Ramos
40 Phil614)
Possession in Art.1544 includes not only material but also symbolic possession (Ten Forty Realty
vs. Cruz, 10 Sept. 2003.)
Title means title because of sale, and not any other title or mode of acquiring property (Lichauco
vs. Berenguer 39 Phil 642)
Hernandez vs. Katigbak Rule: When the property sold on execution is registered under Torrens,
registration is the operative act that gives validity to the transfer or creates a lien on the land, and
a purchaser on execution sale is not required to go behind the registry to determine the conditions
of the property. Exception: Where the purchaser had knowledge, prior to or at the time of the
levy, of such previous lien or encumbrance, his knowledge is equivalent to registration.
CONDITION
Effect of Non-fulfillment of Condition
1. If the obligation of either party is subject to any condition and such condition is not fulfilled,
such party may either:
a. refuse to proceed with the contract
b. proceed with the contract , waiving the performance of the condition.
2. If the condition is in the nature of a promise that it should happen, the non-performance of
such condition may be treated by the other party as breach of warranty.
NOTE: A distinction must be made between a condition imposed on the perfection of a contract and
a condition imposed merely on the performance of an obligation. The failure to comply with the first
condition would prevent the juridical relation itself from coming into existence, while failure to
comply with the second merely gives the option either to refuse or proceed with the sale or to waive
the condition.
The mere fact that the second contract of sale was perfected in good faith is not sufficient if,
before title passes, the second vendee acquires knowledge of the first transaction. The good faith
or innocence of the posterior vendee needs to continue until his contract ripens into ownership by
tradition or registration. (Palanca vs. Dir. Of Lands, 46 PHIL 149)
EFFECT IF BUYER HAS ALREADY SOLD THE GOODS:

General Rule: The unpaid sellers right to lien or stoppage in transitu remains even if buyer has sold
the goods.
Except:
1) When the seller has given consent thereto, or
2) When the buyer is a purchaser in good faith for value of a negotiable document of title.
WARRANTY
a statement or representation made by the seller of goods, contemporaneously and as a part of
the contract of sale, having reference to the character, quality, or title of the goods, and by which
he promises or undertakes to insure that certain facts are or shall be as he then represents.
Kinds:
1. EXPRESS any affirmation of fact or any promise by the seller relating to the thing if the
natural tendency of such affirmation or promise is to induce the buyer to purchase the same and
if the buyer purchases the thing relying thereon
NOTE: A mere expression of opinion, no matter how positively asserted, does not import a warranty
unless the seller is an expert and his opinion was relied upon by the buyer.
2. IMPLIED - that which the law derives by implication or inference from the nature of the
transaction or the relative situation or circumstances of the parties, irrespective of any intention
of the seller to create it.
a. Warranty against eviction
b. Warranty against hidden defects
c. Warranty as to Fitness and Merchantability
NOTE: An implied warranty is a natural, not an essential element of a contract, and is deemed
incorporated in the contract of sale. It may however, be waived or modified by express stipulation.
(De Leon)
There is no implied warranty as to the condition, adaptation, fitness or suitability or the quality of an
article sold as a second-hand article. But such articles might be sold under such circumstances as to
raise an implied warranty.
* A certification issued by a vendor that a second-hand machine was in A-1 condition is an express
warranty binding on the vendor. (Moles vs. IAC [1989])
A. Warranty against eviction

Warranty in which the seller guarantees that he has the right to sell the thing sold and to transfer
ownership to the buyer who shall not be disturbed in his legal and peaceful possession thereof.
Elements:
1. vendee is deprived, in whole or in part, of the thing purchased;
2. the deprivation is by virtue of a final judgment;
3. the judgment is based on a prior right to the sale or an act imputable to the vendor;
4. the vendor was summoned in the suit for eviction at the instance of the vendee; AND
5. no waiver of warranty by the vendee.
Vendor's liability shall consist of:

1. Total eviction: (VICED)
a. Value of the thing at the time of eviction;
b. Income or fruits if he has been ordered to deliver them to the party who won the suit;
c. Costs of the suit;
d. Expenses of the contract; AND
e. Damages and interests if the sale was in bad faith.
2. Partial eviction:
a. to enforce vendors liability for eviction (VICED); OR
b. to demand rescission of contract.
Page 169 of 193

Question: Why is rescission not a remedy in case of total eviction?

Answer: Rescission contemplates that the one demanding it is able to return whatever he has received
under the contract. Since the vendee can no longer restore the subject-matter of the sale to the vendor,
rescission cannot be carried out.
* The suit for the breach can be directed only against the immediate seller, not sellers of the seller
unless such sellers had promised to warrant in favor of later buyers or unless the immediate seller has
expressly assigned to the buyer his own right to sue his own seller.
NOTE: The disturbance referred to in the case of eviction is a disturbance in law which requires that
a person go to the courts of justice claiming the thing sold, or part thereof and invoking reasons. Mere
trespass in fact does not give rise to the application of the doctrine of eviction.
Vendors liability is waivable but any stipulation exempting the vendor from the obligation to
answer for eviction shall be void if he acted in bad faith.
Kinds of Waiver:
a. Consciente voluntarily made by the vendee without the knowledge and assumption of
the risks of eviction
NOTE: vendor shall pay only the value which the thing sold had at the time of eviction
b. Intencionada made by the vendee with knowledge of the risks of eviction and
assumption of its consequences
EFFECT: vendor not liable
NOTE: Every waiver is presumed to be consciente. To consider it intencionada, it must be

accompanied by some circumstance which reveals the vendors knowledge of the risks of eviction
and his intention to submit to such consequences.
WHERE IMMOVABLE SOLD ENCUMBERED WITH NON-APPARENT BURDEN

1. Right of vendee
a) recission, or
b) indemnity
2. When right cannot be exercised:

a) if the burden or servitude is apparent
b) if the non-apparent burden or servitude is registered
c) if vendee had knowledge of the encumbrance, whether it is registered or not
3. When action must be brought
- within ONE YEAR from the execution of the deed of sale
B. Warranty against hidden defects

Warranty in which the seller guarantees that the thing sold is free from any hidden faults or
defects or any charge or encumbrance not declared or known to the buyer.
Elements: (SHENPW)
1. defect must be Serious or important;
2. it must be Hidden;
3. it must Exist at the time of the sale;
4. vendee must give Notice of the defect to the vendor within a reasonable time;
5. action for rescission or reduction of price must be brought within the proper Period (within 6
mos. from delivery of the thing or 40 days from date of delivery in case of animals); and
6. no Waiver of the warranty.
Remedies of the Vendee:

a. Accion redhibitoria (rescission)
b. Accion quanti minoris (reduction of the price)

NOTES:
Hidden faults or defects pertain only to those that make the object unfit for the use for which it
was intended at the time of the sale.
This warranty in Sales is applicable in Lease (Yap vs. Tiaoqui 13Phil433)
Effect of loss of thing on account of hidden defects:

1. If vendor was aware of hidden defects, he shall bear the loss and vendee shall have the right to
recover: (PED)
a. the price paid
b. expenses of the contract
c. damages
2. If vendor was not aware, he shall be obliged to return: (PIE)
a. price paid
b. interest thereon
c. expenses of the contract if paid by the vendee
Effect if the cause of loss was not the hidden defect

If the thing sold had any hidden fault at the time of the sale, and should thereafter be lost by
a (1) fortuitous event OR (2) through the fault of the vendee:
the vendee may demand of the vendor the price which he paid less the value of the thing at
the time of its loss.
NOTE: the difference between the price paid and the value of the thing at the time of its loss
represents the damage suffered by the vendee and the amount which the vendor enriched himself
at the expense of the vendee
If the vendor acted in bad faith:
vendor shall pay damages to the vendee
C. Implied Warranties of Quality

Warranty of Fitness
Warranty in which the seller guarantees that the thing sold is reasonably fit for the known
particular purpose for which it was acquired by the buyer
GENERAL RULE: There is no implied warranty as to the quality or fitness for any particular
purpose of goods under a contract of sale
EXCEPTIONS:
1. Where the buyer, expressly or by implication manifests to the seller the particular purpose
for which the goods are required
2. Where the buyer relies upon the sellers skill or judgment
Warranty of Merchantability
Warranty in which the seller guarantees, where the goods were bought by description, that they
are reasonably fit for the general purpose for which they are sold
It requires identity between what is described in the contract AND what is tendered, in the sense
that the latter is of such quality to have some value
Instances where implied warranties are inapplicable:

1. As is and where is sale - vendor makes no warranty as to the quality or workable condition of the
goods, and that the vendee takes them in the condition in which they are found and from the
place where they are located.
2. Sale of second-hand articles
3. Sale by virtue of authority in fact or law
Page 171 of 193

Caveat Venditor (Let the seller beware): the vendor is liable to the vendee for any hidden faults
or defects in the thing sold, even though he was not aware thereof.
Caveat Emptor (Let the buyer beware): requires the purchaser to be aware of the supposed title
of the vendor and one who buys without checking the vendors title takes all the risks and losses
consequent to such failure.
RULES IN CASE OF SALE OF ANIMALS

1. When two or more animals have been sold at the same time and the redhibitory defect is in one, or
some of them but not in all, the general rule is that the redhibition will not affect the others without it.
It is immaterial whether the price has been fixed for a lump sum for all the animals or for a separate
price for each.
2. No warranty against hidden defects of animals sold at fairs or at public auctions, or of livestock
sold as condemned. This is based on the assumption that the defects must have been clearly known
to the buyer.
3. Sale of animals shall be void when:
a) animals sold are suffering from contagious disease
b) if the use or service for which they are acquired has been stated in the contract, and they are
found to be unfit therefor
4. Limitation of the action: 40 days from the date of their delivery to the vendee
5. Vendor shall be liable if the animal should die within 3 days after its purchase if the disease which
caused the death existed at the time of the contract
OBLIGATIONS OF THE VENDEE:

A. Principal Obligations:
1. To accept delivery
2. To pay the price of the thing sold in legal tender unless another mode has been agreed upon
NOTE: 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)
B. Other Obligations
1. To take care of the goods without the obligation to return, where the goods are delivered to the
buyer and he rightfully refuses to accept
NOTES:
The buyer in such a case is in the position of a bailee who has had goods thrust upon him
without his assent. He has the obligation to take reasonable care of the goods but nothing
more can be demanded of him.
The goods in the buyers possession under these circumstances are at the sellers risk
2. To be liable as a depositary if he voluntarily constituted himself as such
3. To pay interest for the period between delivery of the thing and the payment of the price in the
following cases:
a. Should it have been stipulated
b. Should the thing sold and delivered produce fruits or income
c. Should he be in default, from the time of judicial or extra-judicial demand for the payment
of the price
Pertinent Rules:
1. The vendor is not required to deliver the thing sold until the price is paid nor the vendee to pay
the price before the thing is delivered in the absence of an agreement to the contrary ( Article
1524).
2. If stipulated, the vendee is bound to accept delivery and to pay the price at the time and place
designated;
3. If there is no stipulation as to the time and place of payment and delivery, the vendee is bound to
pay at the time and place of delivery
4. In the absence of stipulation as to the place of delivery, it shall be made wherever the thing might
be at the moment the contract was perfected (Article 1251)
5. If only the time for delivery has been fixed in the contract, the vendee is required to pay even
before the thing is delivered to him; if only the time for payment has been fixed, the vendee is
entitled to delivery even before the price is paid by him (Article 1524)
Ways of accepting goods:

1. Express acceptance
2. Implied acceptance
a. When buyer does an act which only an owner can do,
b. Failure to return goods after reasonable lapse of time
NOTES:
The retention of goods is strong evidence that the buyer has accepted ownership of the goods.
Delivery and acceptance are two separate and distinct acts of different parties
Delivery is an act of the vendor and one of the vendors obligations; vendee has nothing to
do with the act of delivery by the vendor
Acceptance is an obligation of the vendee; acceptance cannot be regarded as a condition to
complete delivery;
seller must comply with the obligation to deliver although there is no acceptance yet by the
buyer
Acceptance by the buyer may precede actual delivery; there may be actual receipt without
acceptance and there may be acceptance without receipt
Unless otherwise agreed upon, acceptance of the goods by the buyer does not discharge the seller
from liability for damages or other legal remedy like for breach of any promise or warranty
When vendee may suspend payment of the price:

1. If he is disturbed in the possession or ownership of the thing bought
2. If he has well-grounded fear that his possession or ownership would be disturbed by a
vindicatory action or foreclosure of mortgage
NOTES:
If the thing sold is in the possession of the vendee and the price is already in the hands of the
vendor, the sale is a consummated contract and Article 1590 is no longer applicable. Article
1590, presupposes that the price or any part thereof has not yet been paid and the contract is not
yet consummated.
Under Article 1590, the vendee has no cause of action for rescission before final judgement,
otherwise the vendor might become a victim of machinations between the vendee and the third
person
Disturbance must be in possession and ownership of the thing acquired
If the disturbance is caused by the existence of non-apparent servitude, the remedy of the buyer
is rescission, not suspension of payment.
When vendee cannot suspend payment of the price even if there is disturbance in the possession
or ownership of the thing sold:
1. if the vendor gives security for the return of the price in a proper case
2. if it has been stipulated that notwithstanding any such contingency, the vendee must make
payment (see Article 1548 par.3)
3. if the vendor has caused the disturbance or danger to cease
4. if the disturbance is a mere act of trespass
5. if the vendee has fully paid the price
Page 173 of 193

REMEDIES FOR BREACH OF CONTRACT
A. Remedies of the seller

1. Action for payment of the price (Art. 1595)
2. Action for damages for non-acceptance of the goods (Art. 1596)
3. Action for rescission (Art. 1597)
B. Remedies of the buyer

1. Action for specific performance (Art. 1598)
2. Action for rescission or damages for breach of warranty (Art 1599)
A. REMEDIES OF THE SELLER FOR BREACH OF CONTRACT
IN CASE OF MOVABLES
1. Ordinary Remedies
a. Movables in General Failure of the vendee to appear to receive delivery or, having
appeared, failure to tender the price at the same time, unless, a longer period for its payment
has been stipulated
action to rescind the sale (Art. 1593)
b. Sale of Goods
action for the price (Art. 1595)
action for damages (Art. 1596)
2. Unpaid Seller
Types:
a. The seller of the goods who has not been paid or to whom the price has not been tendered
b. The seller of the goods, in case a bill of exchange or other negotiable instrument has been
received as conditional payment, AND the condition on which it was received has been
broken by reason of the dishonor of the instrument, insolvency of the buyer or otherwise.
Remedies:
1. Possessory lien over the goods
2. Right of stoppage in transitu after he has parted with the possession of the goods and the
buyer becomes insolvent
3. Special Right of resale
4. Special Right to rescind the sale
5. Action for the price
6. Action for damages
3. Article 1484 or Recto Law

Remedies of vendor in sale of personal property by installments
Requisites:
1. Contract of sale
2. Personal property
3. Payable in installments
4. In the case of the second and third remedies, that there has been a failure to pay two or more
installments
NOTE: Apply likewise to contracts purporting to be leases of personal property with option to
buy
Art. 1484 does not apply to a sale:
1. Payable on straight terms (partly in cash and partly in one term)
2. Of Real property
Remedies:
1. Specific performance upon vendees failure to pay
NOTE: Does not bar full recovery for judgment secured may be executed on all personal and
real properties of the buyer which are not exempt from execution (Palma v. CA.)
2. Rescission of the sale if vendee shall have failed to pay two or more installments
NOTES:
Nature of the remedy which requires mutual restitution bars further action on the
purchase price (Nonato vs. IAC.)
GENERAL RULE: cancellation of sale requires mutual restitution, that is all partial
payments of price or rents must be returned
EXCEPTIONS: a stipulation that the installments or rents paid shall not be returned to the
vendee or lessee shall be valid insofar as the same may not be unconscionable under the
circumstan-ces (Article 1486).
3. Foreclosure of the chattel mortgage on the thing sold if vendee shall have failed to pay two
or more installments. In this case, there shall be no further action against the purchaser
to recover unpaid balance of the price.
NOTES:
Further recovery barred only from the time of actual sale at public auction conducted pursuant to
foreclosure (Macondray vs. Tan.)
Other chattels given as security cannot be foreclosed if they are not subject of the installment
sale (Ridad vs. Filipinas investment and Finance Corp. GR 39806, Jan. 28, 1983)
If the vendor assigns his right to a financing company, the latter may be regarded as a collecting
agency of the vendor and cannot therefore recover any deficiency from the vendee (Zayas vs. Luneta
Motors Co.)
When the vendor assigns his credit to another person, the latter is likewise bound by the same
law. Accordingly, when the assignee forecloses on the mortgage, there can be no further recovery of
the deficiency and the vendor-mortgagee is deemed to have renounced any right thereto (Borbon II
vs. Servicewide Specialist, Inc. 258SCRA658)
NOTE: However, Article 1484(3) does NOT bar one to whom the vendor has assigned on with a
recourse basis his credit against the vendee from recovering from the vendor the assigned credit
in full although the vendor may have no right of recovery against the vendee for the deficiency
(Filipinas Invest. & Finance Corp. vs. Vitug, Jr. 28SCRA658)
NOTE: Remedies are alternative and exclusive
IN CASE OF IMMOVABLES
1. Ordinary Remedies
a. In case of anticipatory breach
rescission (Article 1591)
b. Failure to pay the purchase price
rescission upon judicial or notarial demand for rescission (Article 1592)
the vendee may pay, even after the expiration of the period, as long as no demand for
rescission has been made upon him
NOTE: Article 1592 does not apply to:

1) Sale on instalment of real estate
2) Contract to sell
3) Conditional sale
4) Cases covered by RA 6552: Realty Installment buyer protection act
4. R.A. No. 6552 or Maceda Law Note: there must be a notarial or judicial notice
Page 175 of 193

An Act to Provide Protection to buyers of Real Estate on Installment Payments

Law governing sale or financing of real estate on installment payments
Requisites:
1. transactions or contracts involving the sale OR financing of real estate on installment
payments, including residential condominium apartments; and
2. buyer defaults in payment of succeeding installments.
Rights of the buyer:

A. If Buyer has paid at least two (2) years of installments
1. The buyer must pay, without additional interest, the unpaid installments due within the
total grace period earned by him. There shall be one (1) month grace period for every
one (1) year of installment payments made
NOTE: This right shall be exercised by the buyer ONLY once in every 5 years of the
life of the contract AND its extensions.
2. Actual cancellation can only take place after 30 days from receipt by the buyer of the
notice of cancellation OR demand for rescission by a notarial act AND upon full
payment of the cash surrender value to the buyer (Olympia Housing vs. Panasiatic, 16
January 2003.)
NOTE: The seller shall refund to the buyer the cash surrender value of the payments on
the property equivalent to 50% of the total payments made. After five (5) years of
installments, there shall be an additional 5% every year but not to exceed 90% of the
total payments made
3. The buyer shall have the right to sell his rights or assign the same to another person OR
to reinstate the contract by updating the account during the grace period and before
actual cancellation of the contract
4. The buyer shall have the right to pay in advance any installment or the full unpaid
balance of the purchase price any time without interest and to have such full payment of
the purchase price annotated in the certificate of title covering the property.
B. If Buyer has paid less than 2 years of installments

1. The seller shall give the buyer a grace period of NOT less than 60 days from the date the
installment became due. 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 the demand for rescission of contract by a notarial act.
2. Same No. 3 and 4 paragraph A above
NOTE: Down payments, deposits or options on the contract shall be included in the computation of
the total number of installment payments made
Remedies of Unpaid Seller

I. Possessory Lien
When may be exercised:
1. Where the goods have been sold without any stipulation as to credit
2. When the goods have been sold on credit, but the term of credit has expired
3. Where the buyer becomes insolvent
When lost:
1. Delivery of the goods to a carrier or bailee for the purpose of transmission to the buyer
without reserving ownership or right of possession
2. When the buyer lawfully obtains possession of the goods
3. By waiver of the lien
NOTE: Possessory lien is lost after the seller loses possession but his lien as an unpaid seller
remains; hence he is still an unpaid creditor with respect to the price of specific goods sold. His
preference can only be defeated by the governments claim to the specific tax on the goods themselves
(Arts. 2247 and 2241).
NOTE: The bringing of an action to recover the purchase price is not one of the ways of losing the
possessory lien. An unpaid seller does not lose his lien by reason that he has obtained a money
judgement or decree for the price of goods (Art. 1529, last paragraph).
II. Stoppage of goods in transitu

Requisites:
1. Seller must be unpaid
2. Buyer must be insolvent
3. Goods must be in transit
4. Seller must either:
a. actually take possession of the goods sold OR
b. give notice of his claim to the carrier or other person in possession
5. Seller must surrender the negotiable document of title, if any, issued by the carrier or bailee
6. Seller must bear the expenses of delivery of the goods after the exercise of the right
GOODS ARE CONSIDERED IN TRANSITU:

1. after delivery to a carrier or other bailee and before the buyer or his agent takes delivery of them;
and
2. If the goods are rejected by the buyer, and the carrier or other bailee continues in possession of
them
GOODS ARE NO LONGER CONSIDERED IN TRANSITU:

1. after delivery to the buyer or his agent in that behalf;
2. if the buyer or his agent obtains possession of the goods at a point before the destination originally
fixed;
3. if the carrier or the bailee acknowledges to hold the goods on behalf of the buyer; and
4. if the carrier or bailee wrongfully refuses to deliver the goods to the buyer
Effects of the exercise of the right

1. The goods are no longer in transit.
2. The contract of carriage ends; instead the carrier now becomes a mere bailee, and will be liable
as such.
3. The carrier should not deliver anymore to the buyer or the latters agent; otherwise he will
clearly be liable for damages.
4. The carrier must redeliver to, or according to the directions of the seller.
WAYS OF EXERCISING THE RIGHT TO STOP:

1. By taking actual possession of the goods
2. By giving notice of his claim to the carrier or bailee
III. Special Right of Resale

May be exercised only when the unpaid seller has either a right of lien OR has stopped the goods
in transitu AND under ANY of the following conditions:
1. Where the goods are perishable in nature
2. Where the right to resell is expressly reserved in case the buyer should make a default
3. Where the buyer delays in the payment of the price for an unreasonable time
IV. Rescission
Types:
1. Special Right to Rescind Under Art. 1534 If the seller has either the right of lien OR a right
to stop the goods in transitu AND under either of 2 situations:
a. Where the right to rescind on default has been expressly reserved
Page 177 of 193

b. Where the buyer has been in default for an unreasonable time

2. Under Art. 1597 (technical rescission)
V. Action for the price

1. Where the ownership has passed to the buyer AND he wrongfully neglects OR refuses to
pay for the price
2. Where the price is payable on a day certain AND he wrongfully neglects OR refuses to pay
for the price, irrespective of the delivery or transfer of title
3. Where the goods cannot readily be resold for a reasonable price AND the buyer wrongfully
refuses to accept them even before the ownership of the goods has passed, if Article 1596 is
inapplicable.
VI. Action for damages

1. In case of wrongful neglect or refusal by the buyer to accept or pay for the thing sold (Art.
1596 par.1)
2. In an executory contract, where the ownership in the goods has not passed, and the seller
cannot maintain an action to recover the price (Art 1595)
3. If the goods are not yet identified at the time of the contract or subsequently
B. REMEDIES OF THE BUYER FOR BREACH OF CONTRACT
1. Action for specific performance (Art. 1598)

Where the seller has broken the contract to deliver specific or ascertained goods
The judgment or decree may be unconditional, or upon such terms and conditions as to damages,
payment of the price and otherwise as the court may deem just
2.Remedies of buyer for breach of warranty by seller (Art. 1599):

1.Recoupment accept the goods and set up the sellers breach to reduce or extinguish the price
2.Accept the goods and maintain an action for damages for breach of warranty
3.Refuse to accept the goods and maintain an action for damages for breach of warranty
4.Rescind the contract by returning or offering the return of the goods, and recover the price of any
part thereof
NOTE: These are alternative remedies.
When rescission by buyer not allowed:

1. if the buyer accepted the goods knowing of the breach of warranty without protest
2. if he fails to notify the seller within a reasonable time of his election to rescind
3. if he fails to return or offer to return the goods in substantially as good condition as they were in at
the time of the transfer of ownership to him
EXTINGUISHMENT OF SALE
1. Same causes as in all other obligations
2. Conventional Redemption
3. Legal Redemption
CONVENTIONAL REDEMPTION
The right which the vendor reserves to himself, to reacquire the property sold provided he returns
to the vendee:
b. the price of the sale;
c. expenses of the contract;

d. any other legitimate payments made therefore and;
e. the necessary and useful expenses made on the thing sold; and
f. fulfills other stipulations which may have been agreed upon.
A sale with conventional redemption is deemed to be an equitable mortgage in any of the following
cases: (IPERTOD)
1. Unusually Inadequate purchase price;
2. Possession by the vendor remains, as lessee or otherwise;
3. Extension of redemption period after expiration;
4. Retention by the vendee of part of the purchase price;
5. Vendor binds himself to pay the Taxes of the thing sold;
6. Any Other case where the parties really intended that the transaction should secure the payment
of a debt or the performance of any obligation; or
7. When there is Doubt as to whether contract is contract of sale with right of repurchase or an
equitable mortgage.
Equitable Mortgage
One which lacks the proper formalities, form of words, or other requisites prescribed by law for a
mortgage, but shows the intention of the parties to make the property subject of the contract as
security for a debt and contains nothing impossible or contrary to law (Cachola vs. CA
208SCRA496)
When can there be presumption as to Equitable Mortgage?

1) Parties must have entered into a contract denominated as a contract of sale
2) The intention of the parties was to secure an existing debt by way of mortgage
NOTE: In the cases referred to in Arts. 1602 and 1604, the apparent vendor may ask for the
reformation of the instrument.
Article 1602. The contract shall be presumed to be an equitable mortgage, in any of the following
cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument
extending the period of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is
that the transaction shall secure the payment of a debt or the performance of any other
obligation.
Remedy of Reformation: To correct the instrument so as to make it express the true intent of the
parties.
Redemption Period
a. if there is an agreement: period agreed upon cannot exceed 10 years
b. if no agreement as to the period: 4 years from the date of the contract
c. the vendor who fails to repurchase the property within the period agreed upon may, however,
exercise the right to repurchase within 30 days FROM the time final judgment was rendered in a
civil action on the basis that the contract was a true sale with right of repurchase
This refers to cases involving a transaction where one of the parties contests or denies
that the true agreement is one of sale with right to repurchase; not to cases where the
Page 179 of 193

transaction is conclusively a pacto de retro sale. Example: Where a buyer a retro

honestly believed that he entered merely into an Equitable Mortgage, not a pacto de
retro transaction, and because of such belief he had not redeemed within the proper
period.
NOTE: Tender of payment is sufficient to compel redemption, but is not in itself a payment
that relieves the vendor from his liability to pay the redemption price (Paez vs. Magno.)
LEGAL REDEMPTION
The right to be subrogated, upon the same terms and conditions stipulated in the contract, in the
place of one who acquires a thing by (1) purchase or (2) dation in payment, or (3) by any other
transaction whereby ownership is transferred by onerous title.
May be effected against movables or immovables.
It must be exercised within thirty (30) days from the notice in writing by the vendor.\
NOTE: Written notice under Article 1623 is mandatory for the right of redemption to commence
(PSC vs. Sps. Valencia 19 August 2003.)
BASIS OF LEGAL REDEMPTION: Not on any proprietary right, which after the sale of the
property on execution, leaves the judgment debtor and vests in the purchaser, but on a bare statutory
privilege to be exercised only by the persons named in the statute.
Tender of payment is not necessary; offer to redeem is enough.
PRE-EMPTION REDEMPTION
1. arises before sale 1. arises after sale
2. no rescission 2. there can be rescission
because no sale as yet of the original sale
exists
3. the action is 3. action is directed
directed against the against the buyer
prospective seller
Instances of legal redemption:

A. Under the Civil Code (legal redemption):
1. Sale of a co-owner of his share to a stranger (Article 1620)
2. When a credit or other incorporeal right in litigation is sold (Article 1634)
3. Sale of an heir of his hereditary rights to a stranger (Article 1088)
4. Sale of adjacent rural lands not exceeding one hectare (Article 1621)
5. Sale of adjacent small urban lands bought merely for speculation (Article 1622)
B. Under special laws:
1. An equity of redemption in cases of judicial foreclosures
2. A right of redemption in cases of extra-judicial foreclosures
3. Redemption of homesteads
4. Redemption in tax sales
5. Redemption by an agricultural tenant of land sold by the landowner
ASSIGNMENT OF CREDIT
a contract by which the owner of a credit transfers to another his rights and actions against a third
person in consideration of a price certain in money or its equivalent
NOTE: Transfer of rights by assignment takes place by the perfection of the contract of assignment
without the necessity of delivering the document evidencing the credit.
this rule does not apply to negotiable documents and documents of title which are governed
by special laws.
Effects of Assignment:
1. transfers the right to collect the full value of the credit, even if he paid a price less than such
value
2. transfers all the accessory rights
3. debtor can set up against the assignee all the defenses he could have set up against the assignor
Effect of payment by the debtor after assignment of credit

1. Before Notice of the assignment
Payment to the original creditor is valid and debtor shall be released from his obligation
2. After Notice
Payment to the original creditor is not valid as against the assignee
He can be made to pay again by the assignee
Warranties of the assignor of credit:
a. He warrants the existence of the credit
b. He warrants the legality of the credit at the perfection of the contract
NOTE: There is no warranty as to the solvency of the debtor unless it is expressly stipulated OR
unless the insolvency was already existing and of public knowledge at the time of the assignment
NOTE: The seller of an inheritance warrants only the fact of his heirship but not the objects which
make up his inheritance.
Liabilities of the assignor of credit for violation of his warranties

1. Assignor in good faith
Liability is limited only to the price received and to the expenses of the contract, and any
other legitimate payments by reason of the assignment
2. Assignor in bad faith
Liable not only for the payment of the price and all the expenses but also for damages
Legal Redemption in Sale or Credit or other incorporeal right in litigation

Requisites:
1. There must be a sale or assignment of credit
2. There must be a pending litigation at the time of the assignment
3. The debtor must pay the assignee:
a. price paid by him
b. judicial cost incurred by him; AND
c. interest on the price from the date of payment
4. The right must be exercised by the debtor within 30 days from the date the assignee demands
(judicially or extra-judicially) payment from him
SALE OF CREDIT OR OTHER INCORPOREAL RIGHTS IN LITIGATION

GENERAL RULE: Debtor has the right of legal redemption in sale of credit or incorporeal rights in
litigation
EXCEPTIONS:
a. Sale to a co-heir or co-owner
b. Sale to a co-owner
c. Sale to the possessor of property in question
Page 181 of 193

B AR TE R
BARTER
contract whereby one of the parties binds himself to give one thing in consideration of the other's
promise to give another thing (Article 1638)
NOTE: Barter is similar to a sale with the only difference that instead of paying a price in money,
another thing is given in lieu of the purchase price
PERFECTION and CONSUMMATION

Perfected from the moment there is a meeting of minds upon the things promised by each party
in consideration of the other
Consummated from the time of mutual delivery by the contracting parties of the things
promised
NOTES:
Where the giver of the thing bartered is not the lawful owner thereof, the aggrieved party cannot
be compelled to deliver the thing which he has promised and is also entitled to damages.
Where a party is evicted of the thing exchanged, the injured party is given the option, either to
recover the property he has given in exchange with damages or only claim an indemnity for
damages.
As to matters not provided for by the provisions on barter, the provisions on sales will apply
suppletorily
BULK SALES LAW (Act No. 3952)
When Sale or Transfer in Bulk:

Any sale, transfer, mortgage, or assignment:
1. Of a stock of goods, wares, merchandise, provisions, or materials otherwise than in the ordinary
course of trade and the regular prosecution of business; or
2. Of all or substantially all, of the business or trade; or
3. Of all or substantially all, of the fixtures and equipment used in the business of the vendor,
mortgagor, transferor or assignor (section 2)
When sale or transfer in bulk not covered by Bulk Sales Law:

1. If the sale or transfer is in the ordinary course of trade and the regular prosecution of business of
the vendor;
2. If it is made by one who produces and delivers a written waiver of the provisions of the Bulk
Sales Act from his creditors
3. If it is made by an executor, administrator, receiver, assignee in insolvency, or public officer,
acting under judicial process (Section 8); and
4. If it refers to properties exempt from attachment or execution (Rules of Court, Rule 39, Section
12)
Protection Accorded to Creditors by Bulk Sales Law:

1. It requires the vendor, mortgagor, transferor or assignor to deliver to the vendee, mortgagee, or to
his or its agent or representative a sworn written statement of names and addresses of all
creditors to whom said vendor, etc. may have been indebted together with the amount due or to
be due (Section 3)
2. It requires the vendor, mortgagor, transferor or assignor, at least 10 days before the sale, transfer,
mortgage, assignment to make a full detailed inventory showing the quantity and the cost of
price of goods, and to notify every creditor of the price terms and conditions of the sale, etc.
(Section 5)
Effects of False Statements in the Schedule of Creditors:

1. Without knowledge of buyer
If the statement is fair upon its face and the buyer has no knowledge of its incorrectness and
nothing to put him on inquiry about it, he will be protected in its purchase
The remedy of the creditor is not against the goods but to prosecute the seller criminally
2. With knowledge or imputed knowledge of buyer
The vendee accepts it at his peril
The sale is valid only as between the vendor and the vendee but void against the creditors
3. With names of certain creditors without notice are omitted from the list
The sale is void as to such creditors, whether the omission was fraudulent or not,
4. With respect to an innocent purchaser for a value from the original purchaser
An innocent purchaser for value from the original purchaser is protected
However if the circumstances are such as to bind the subsequent purchaser with constructive
notice that the sale to the vendor (original purchaser) was fraudulent, the property will be
liable in his hands to creditors of the original vendor
Effect of violation of law on Transfer:

1. As between the parties
The Bulk Sales Law does not in any way affect the validity of the transfer as between the
intermediate parties thereto
A sale not in compliance with the Bulk Sales Law is valid against all persons other than the
creditors.
2. As against creditors
A purchaser in violation of the law acquires no right in the property purchased as against the
creditors of the seller
His status is that of a trustee or receiver for the benefit of the creditors of the seller; as such,
he is responsible for the disposition of the property
Remedies Available to creditors:

The proper remedy is one against the goods to subject them to the payment of the debt, such as
execution, attachment, garnishment, or by a proceeding in equity
An ordinary action against the purchaser to obtain money judgement will not lie, unless the
purchaser has sold or otherwise disposed of, or dealt with the property, so as to become
personally liable to creditors for value of it.
Acts Punished by Bulk Sales Law:
1. Knowingly or wilfully making or delivering a statement required by the Act which does not
include the names of all the creditors of the vendor, etc. with the correct amount due or to
become due or which contains any false or untrue statement; and
2. Transferring title to any stock of goods, wares, merchandise, provisions or materials sold in bulk
without consideration or for nominal consideration (Section 7)
RETAIL TRADE LIBERALIZATION ACT

(RA 8762)
Retail Trade
Any act occupation or calling of habitually selling direct to the general public merchandise,
commodities or goods for consumption, but the restrictions of this law shall not apply to the
following:
Page 183 of 193

1. Sales by manufacturer, processor, laborer, or worker, to the general public the products
manufactured, processed produced by him if his capital does not exceed P100,000;
2. Sales by a farmer or agriculturalist selling the products of his farm
3. Sales in restaurant operations by a hotel owner or inn-keeper irrespective of the amount of
capital; provided that the restaurant is incidental to the hotel business; and
4. Sales which are limited only to products manufactured, processed or assembled by a
manufacturer through a single outlet, irrespective of capitalization
High-End or Luxury Goods

Goods which are not necessary for life maintenance and whose demand is generated in large part
by the higher income groups
Shall include but not limited to: jewelry, branded or designer clothing and footwear, wearing
apparel, leisure and sporting goods, electronics and other personal effects
NOTE: A natural-born citizen of the Philippines who has lost his citizenship but who resides in the
Philippines shall be granted the same rights as Filipino citizens
Foreign Equity Participation:

Foreign-owned partnerships, associations and corporations formed and organized under the laws
of the Philippines may, upon registration with SEC and DTI, or in case of Foreign-owned single
proprietorship with the DTI, engage or invest in retail trade business, subject to the following
categories:
1. Category A:
Paid-up capital of the equivalent in Philippine Peso of: < $2,500,000 US Dollars
Reserved exclusively for Filipino citizens and corporations wholly owned by citizens
2. Category B:
Minimum paid-up capital of the equivalent in Philippine Peso of $2,500,000 US Dollars,
but <$7,500,000
May be wholly owned by foreigners except for the first two years after the effectivity of this
Act wherein foreign participation shall be limited to not > 60% of total equity.
3. Category C:
Paid-up capital of the equivalent in Philippine Peso of: $7,500,000 US Dollars or more
May be wholly owned by foreigners
NOTE: In no case shall the investments for establishing a store in Categories B and C be
less than the equivalent in Philippine Peso of: US $830,000
4. Category D:
Enterprises specializing in high-end or luxury products with paid-up capital of the
equivalent in Philippine Peso of: $250,000 US Dollars per store
May be wholly owned by foreigners
NOTES:
Foreign investor shall be required to maintain in the Philippines the FULL amount of the
prescribed minimum capital, UNLESS the foreign investor has notified the SEC and the DTI of
its intention to repatriate its capital and cease operations in the Philippines
Failure to maintain the full amount of the prescribed minimum capital prior to notification of the
SEC and the DTI shall subject the foreign investors to penalties or restrictions on any future
trading activities/business in the Philippines
NOTE: Foreign Investors Acquiring Shares of Stock of existing retail stores whether or not publicly
listed whose net worth is in excess of the Peso equivalent of US $2,500,000 may purchase only up to
the maximum of 60% of the equity thereof within the first 2 years, and thereafter, they may acquire
the remaining percentage consistent with the allowable foreign participation as herein provided
NOTE: All retail Trade enterprises under categories B and C in which foreign ownership exceeds
80% of equity shall offer a minimum of 30% of their equity to the public through any stock exchange
in the Philippines within 8 years from the start of the operations
Qualification of Foreign Retailers

1. Minimum of $200,000,000 US Dollars net worth in its parent corporation for Categories B and C
and $50,000,000 net worth in its parent corporation for Categories D
2. 5 retailing branches or franchises in operation anywhere around the world unless such retailer
has at least 1 store capitalized at a minimum of $25,000,000 US Dollars
3. 5-year track record in retailing; and
4. Only nationals from, or juridical entities formed or incorporated in Countries which allow to
engage in retail trade in the Philippines
PD 957
(SUBDIVISION AND CONDOMINIUM BUYERS PROTECTIVE DECREE
Registration of Projects
The registered owner of a parcel of land who wishes to convert the same into a subdivision
project shall submit his subdivision plan to the HOUSING AND LAND-USE REGULATORY
BOARD, which shall act upon and approve the same, upon a finding that the plan complies with
the Subdivision Standards' and Regulations enforceable at the time the plan is submitted. The
same procedure shall be followed in the case of a plan for a condominium project except that, in
addition, said Authority shall act upon and approve the plan with respect to the building or
buildings included in the condominium project in accordance with the National Building Code
(R.A. No. 6541).
The subdivision plan, as so approved, shall then be submitted to the Director of Lands for
approval in accordance with the procedure prescribed in Section 44 of the Land Registration Act
(Act No. 496, as amended by R.A. No. 440): Provided, that it case of complex subdivision plans,
court approval shall no longer be required. The condominium plan as likewise so approved, shall
be submitted to the Register of Deeds of the province or city in which the property lies and the
same shall be acted upon subject to the conditions and in accordance with the procedure
prescribed in Section 4 of the Condominium Act (R.A. No. 4726).
National Housing authority (now Housing and Land Use Regulatory Board) has the exclusive
jurisdiction to regulate the real estate trade and business.
License to sell
Such owner or dealer to whom has been issued a registration certificate shall not, however, be
authorized to sell any subdivision lot or condominium unit in the registered project unless he
shall have first obtained a license to sell the project within two weeks from the registration of
such project.
Exempt transactions
A license to sell and performance bond shall not be required in any of the following transactions:
1. Sale of a subdivision lot resulting from the partition of land among co-owners and co-heirs.
2. Sale or transfer of a subdivision lot by the original purchaser thereof and any subsequent sale of
the same lot.
Page 185 of 193

3. Sale of a subdivision lot or a condominium unit by or for the account of a mortgagee in the
ordinary course of business when necessary to liquidate a bona fide debt.
Grounds for Revocation of registration certificate and license to sell of owners or dealers
1. Is insolvent; or
2. Has violated any of the provisions of this Decree or any applicable rule or regulation of the
Authority, or any undertaking of his/its performance bond; or
3. Has been or is engaged or is about to engage in fraudulent transactions; or
4. Has made any misrepresentation in any prospectus, brochure, circular or other literature about
the subdivision project or condominium project that has been distributed to prospective buyers;
or
5. Is of bad business repute; or
6. Does not conduct his business in accordance with law or sound business principles.
LE AS E
LEASE
consensual, bilateral, onerous, and commutative contract by virtue of which one person binds
himself to grant temporarily the use of the thing or to render some service to another who
undertakes to pay some rent.
Kinds of Leases (From the view point of the subject matter

1. Lease of things
2. Lease of service
3. Lease of work
NOTE: Since lease is consensual and is not imposed by law, only the lessor has the right to fix the
rents. However, the increasing of the rent is not an absolute right on the part of the lessor.
Characteristics or Requisites for Lease of Things

1. Consensual
2. Principal
3. Nominate
4. Purpose is to allow enjoyment or use of a thing (the person to enjoy is the lessee; the person
allowing the enjoyment by another is the lessor
5. Subject matter must be within the commerce of man
6. Purpose to which the thing will be devoted should not be immoral
7. Onerous (there must rent or price certain)
8. Period is Temporary (not perpetual, hence, the longest period is 99 years)
9. Period is either definite or indefinite
If no term is fixed, we should apply Art.1682 (for rural leases) and Art. 1687 (for urban
leases)
If the term is fixed but indefinite, the court will fix the term under the law of obligations
and contracts
10. Lessor need not be the owner
NOTE: A usufructuary may thus lease the premises in favor of a stranger, such lease to end at
the time that the usufruct itself ends
Rent
The compensation either in money, provisions, chattels, or labor, received by the lessor from
the lessee.
NOTES:
When a student boards and lodges in a dormitory, there is no contract of lease. The contract is
not designated specifically in the Civil Code. It is an innominate contract. It is however,
believed that the contract can be denominated as the contract of board and lodging.
There is a contract of lease when the use and enjoyment of a safety deposit box in a bank is given
for a price certain. This is certainly not a contract of deposit.
A lease of personal property with option to buy (at a nominal amount) at the end of the lease can
be considered a sale.
LEASE SALES
1. only use or enjoyment is transferred 1. ownership is transferred
2. transfer is temporary 2. transfer is permanent
3. lessor need not be the owner 3. seller must be the owner at the time the
property is delivered
4. the price of the object, distinguished 4. usually, the selling price is mentioned
from the rent, is usually not mentioned
Lease of Things Lease of Services

1. object of contract is a thing 1. object is some work or service
2. lessor has to deliver the thing leased 2. lessor has to perform some work or
service
3. in case of breach, there can be an action 3. in case of breach, no action for specific
for specific performance performance
Lease of Services Contract for a Piece of Work

(locatio operatum) (locatio operas)
1. the important object is the labor 1. the important object is the work done
performed by the lessor
2. the result is generally not important, 2. the result is generally important; generally,
hence the laborer is entitled to be paid even the price is not payable until the work is
if there is destruction of the work through completed, and said price cannot be lawfully
fortuitous event demanded if the work is destroyed before it is
finished and accepted
Lease of Services Agency

It is based on employment the lessor of It is based on representation agent represents
services does not represent his employer his principal and enters into juridical acts.
nor does he execute juridical acts.
Principal contract Preparatory contract
Page 187 of 193

Rule for Lease of Consumable Goods
GENERAL RULE: Consumable goods cannot be the subject matter of a contract of lease of things.
Why? To use or enjoy hem, they will have to be consumed. This cannot be done by a lease since
ownership over them is not transferred to him by the contract of lease.
EXCEPTIONS:
a. If they are merely exhibited
b. If they are accessory to an industrial establishment
RECORDING OF LEASE OF PERSONAL PROPERTY

GENERAL RULE: Lease of real property is personal right
EXCEPTIONS: Lease partakes of the nature of real right if:

a. Lease of real property is more than 1 year
b. Lease of real property is registered regardless of duration
NOTE: Lease of personal property cannot be registered. To be binding against third persons, the
parties must execute a public instrument.
* Lease may be made orally, but if the lease of Real Property is for more than 1 year, it must be in
writing under the Statue of Frauds.
Persons Disqualified to be Lessees Because Disqualified to Buy
1. A husband and a wife cannot lease to each other their separate properties except:
a. if separation of property was agreed upon
b. if there has been judicial separation of property
Persons referred to in Art. 1491 are disqualified because of fiduciary relationships
SUBLEASE
A separate and distinct contract of lease wherein the original lessee becomes a sublessor to a
sublessee.
Allowed unless expressly prohibited.
The sublessee is subsidiarily liable for any rent due. The lessor has an accion directa against the
sublessee for unpaid rentals and improper use of the object.
SUBLEASE ASSIGNMENT OF LEASE

1. there are two leases and two distinct 1. there is only one juridical relationship, that of the
juridical relationships although lessor and the assignee, who is converted into a
immediately connected and related to lessee
each other
2. the personality of the lessee does not 2. the personality of the lessee disappears
disappear
3.the lessee does not transmit absolutely 3. the lessee transmits absolutely his rights to the
his rights and obligations to the sublessee assignee
4. the sublessee, generally, does not have 4. the assignee has a direct action against the lessor
any direct action against the lessor
RIGHTS OF LESSOR IF SUBLEASE PROHIBITED BUT ENTERED INTO BY LESSEE:

1) Rescission and damages, or
2) Damages only (Contract will be allowed to remain in force)
3) Ejectment
Instances when sublessee is liable to the lessor:

a. All acts which refer to the use and preservation of the thing leased in the manner stipulated
between the lessor and the lessee
b. The sublessee is subsidiarily liable to the lessor for any rent due from the lessee.
NOTE: The sublessee shall not be responsible beyond the amount of rent due from him.
Accion Directa: direct action which the lessor may bring against a sublessee who misuses the
subleased property.
OBLIGATIONS OF THE LESSOR (DnM)

a. Delivery of the object (cannot be waived)
b. Making of necessary repairs
c. Maintenance in peaceful and adequate possession
OBLIGATIONS OF THE LESSEE (R2EN2U)

a. to pay rent
b. to use thing leased as a diligent father of a family, devoting it to the use stipulated
c. to pay expenses for the deed of lease
d. to notify the lessor of usurpation or untoward acts
e. to notify the lessor of need for repairs
f. to return the property leased upon termination of the lease
Effect of Destruction of the Thing Leased:

1. Total destruction by a fortuitous event
Lease is extinguished
2. Partial destruction
a. Proportional reduction of the rent, or
b. Rescission of the lease
When lessee may suspend payment of rent:

1. lessor fails to undertake necessary repairs
2. lessor fails to maintain the lessee in peaceful and adequate enjoyment of the property leased
NOTE: Suspend- for the intervening period, the lessee does not have to pay the rent.
EFFECTIVITY OF THE SUSPENSION:

The right begins:
a) In the case of repairs, from the time he made the demand for said repairs, and the demand went
unheeded.
b) In the case of eviction, from the time the final judgment for eviction becomes effective.
Alternative remedies of Aggrieved party (Lessor/Lessee) in case of Non-fulfillment of duties:

1. Rescission and damages
2. Damages only, allowing the contract to remain in force Specific Performance
NOTE: Damages Recoverable in ejectment cases are the rents or the fair rental value of the
premises. The following cannot be successfully claimed:
1. Profits plaintiff could have earned were it not for the possible entry or unlawful detainer
2. Material injury to the premises
3. Actual, moral, or exemplary damages
Immediate termination of lease under Art. 1660 applies:

1. only to dwelling place or any other building intended for human habitation
2. even if at the time the contract was perfected, the lessee knew of the dangerous condition or
waived the right to rescind on account of this condition
Page 189 of 193

Rules on Alteration of the Form of the Lease

The Lessor can alter provided there is no impairment of the use to which the thing is devoted
under the terms of the lease
Alteration can also be made by the Lessee so long as the value of the property is not substantially
impaired
Rules in case of Urgent Repairs

The lessee is obliged to tolerate the work although it may be very annoying to him and although
during the same time he may be deprived of a part of the premises
1. If repairs last for more than 40 days: Lessee cannot act for reduction of rent or rescission
2. If 40 days or more: lessee can ask for proportionate reduction
NOTE: In either case, rescission may be availed of if the main purpose is to provide a dwelling place
and the property becomes uninhabitable.
Effects if Lessor fails to make Urgent Repairs

1. Lessee may order repairs at the lessors cost
2. Lessee may sue for damages
3. Lessee may suspend the payment of the rent
4. Lessee may ask for rescission, in case of substantial damage to him
TRESPASS IN LEASE:
1. Trespass in fact (perturbacion de mere hecho):
physical enjoyment is reduced
Lessor will not be held liable.
2. Trespass in law (perturbacion de derecho):
A third person claims legal right to enjoy the premises
Lessor will be held liable
NOTE: While the Japanese Occupation was a fortuitous event, the lessor is still not excused from his
obligation to warrant peaceful legal possession. Lease is a contract that calls for prestations both
reciprocal and repetitive; and the obligations of either party are not discharged at any given moment,
but must be fulfilled all throughout the term of the contract. (Villaruel vs. Manila Motor Co.)
Duration of Lease
1. Lease made for a determinate time or fixed Period
Lease will be for the said period and it ends on the day fixed without need of a demand
2. If there is no fixed period

A. For Rural Lands (Article 1680)
it shall be for all time necessary for the gathering of fruits which the whole estate may yield
in 1 year, or which it may yield once
B. For Urban Lands (Article 1687)
a. If rent is paid daily: lease is from day to day
b. If rent is paid weekly: lease is from week to week
c. If rent is paid monthly: lease is from month to month
d. If rent is paid yearly: lease is from year to year
RULES ON EXTENSION OF THE LEASE PERIOD:

1) If a lease contract for a definite term allows lessee to extend the term, there is no necessity for
lessee to notify lessor of his desire to so extend the term, unless the contrary is stipulated.
2) May be extended as stipulation: lessee can extend without lessors consent but lessee must notify
lessor.
3) May be extended for 6 years agreed upon by both parties as stipulation: This must be interpreted
in favor of the lessee. Hence, ordinarily the lessee at the end of the original period may either:
a) leave the premises; or
b) remain in possession
4) In co-ownership, assent of all is needed; otherwise, it is void or ineffective as against non-
consenting co-owners.
5) Where according to the terms of the contract, the lease can be extended only by the written consent
of the parties thereto, no right of extension can rise without such written consent.
Rule if Lessor Objects to the Lessees continued Possession:

Requisites:
1. Contract has expired
2. Lessee continued enjoying the thing
3. Lessor Objected to this enjoyment
If the three requisites are present, the lessee shall be considered a possessor in bad faith
IMPLIED NEW LEASE (Tacita Reconducion)

lease which arises if at the end of the contract the lessee should continue enjoying the thing
leased for 15 days with the acquiescence of the lessor, unless a notice to the contrary had
previously been given by either party.
Requisites:
a. the term of the original contract has expired
b. the lessor has not given the lessee a notice to vacate
c. the lessee continued enjoying the thing leased for at least 15 days with the acquiescence of
the lessor
When there is no implied new lease:

1. When before or after the expiration of the term, there is a notice to vacate given by either
party.
2. When there is no definite fixed period in the original lease contract as in the case of
successive renewals.
Effects:
a. The period of the new lease is not that stated in the original contract but the time in Articles
1682 and 1687.
b. Other terms of the original contract are revived.
NOTE: Terms that are revived are only those which are germane to the enjoyment of possession, but
not those with respect to special agreements
which are by nature foreign to the right of occupancy or enjoyment inherent in a contract of lease
such as an option to purchase the leased premises (Dizon vs. Magsaysay GR No. 23399, May
31,1974)
Perpetual Lease
A lease contract providing that the lessee can stay in the premises for as long as he wants and for
as long as he can pay the rentals and its increases.
Page 191 of 193

This is not permissible; it is a purely potestative condition because it leaves the effectivity and
enjoyment of leasehold rights to the sole and exclusive will of the lessee
NOTE: In Jespajo Realty vs. CA, 27 Sept. 2002, the SC upheld a lease contract, which provides that
the lease contract shall continue for an indefinite period provided that the lessee is up-to-date in the
payment of his monthly rentals for the contract is one with a period subject to a resolutory condition.
PURCHASE OF THE LEASED PROPERTY

GENERAL RULE: Purchaser of thing leased can terminate lease.
EXCEPTIONS:
a. lease is recorded in Registry of Property
b. there is stipulation in the contract of sale that purchaser shall respect the lease
c. purchaser knows the existence of the lease
d. sale is fictitious
e. sale is made with right of repurchase
GROUNDS FOR EJECTMENT UNDER ART. 1673: (ELVU)

1. Expiration of the period agreed upon or the period under Arts. 1682 and 1687;
2. Lack of payment of the price stipulated;
3. Violation of any of the conditions agreed upon in the contract; and
4. Unauthorized use or service by the lessee of the thing leased.
RENTAL REFORM ACT OF 2002

(R.A. No. 9161)
Effectivity: January 1, 2002.
Coverage:
a. All residential units of NCR and other highly urbanized cities, the total monthly rental for each
of which does not exceed P7,500;
b. All residential units in other areas the total monthly rental for each of which does not exceed
P4,000 as of 1/1/02, without prejudice to pre-existing contracts.
Grounds for judicial ejectment: SANORE

1. Assignment of lease or subleasing of residential units including the acceptance of boarders or
bedspacers without written consent of the owner or lessor;
2. Arrears in payment of rent for a total of 3 months;
3. Legitimate needs of the owner or lessor to repossess for his own use or for the use of any
immediate member of his family as a residential unit, provided:
a. owner or immediate member not being owner of any other available residential unit within
the same city or municipality;
b. lease for a definite period has expired;
c. lessor has given lessee formal notice 3 months in advance; and
d. owner or lessor is prohibited from leasing the residential unit or allowing its use by a third
person for at least 1 year.
4. Absolute ownership by the lessee of another dwelling unit in the same city or municipality which
may be lawfully used as his residence provided lessee is with formal notice 3 months in advance;
5. Need of the lessor to make necessary repairs in the leased premises which is the subject of an
existing order of condemnation by appropriate authorities concerned in order to make said
premises safe and habitable; and
6. Expiration of period of the lease contract.
NOTE:
Except when the lease is for a definite period, the provisions of Art. 1673(1) of the Civil Code
(CC), insofar as they refer to residential units, shall be suspended during the effectivity of R.A.
9161, but other provisions of the CC and the Rules of Court on lease contracts insofar as they are
not in conflict with the provisions of R.A. No. 9161 shall apply.
No increase in monthly rental by more than 10% is allowed.
TERMINATION OF THE LEASE

If made for a determinate time, it ceases upon the day fixed without the need of a demand.
1) By the expiration of the period
2) By the total loss of the thing
3) By the resolution of the right of the lessor
4) By the will of the purchaser or transferee of the thing
5) By rescission due to non-performance of the obligation of one of the parties
Special Provisions for Rural Lands

Effect of loss due to fortuitous event:
1. Ordinary fortuitous event no reduction
2. Extraordinary fortuitous event
a. if more than of the fruits were lost, there shall be a reduction, unless there is a stipulation
to the contrary
b. if or less, there shall be no reduction
Lease duration: If not fixed, it shall be for all time necessary for the gathering of fruits which
the whole estate may yield in 1 year, or which it may yield once.
Special Provisions for Urban Lands

Repairs for which urban lessor is liable:
1. special stipulation
2. if none, custom of the place
3. in case of doubt, the repairs are chargeable against him
Lease duration:
1. If there is a fixed period, lease will be for said period.
2. If no fixed period, apply the following rules:
a. If rent is paid daily: day to day
b. If rent is paid weekly: week to week
c. If rent is paid monthly: month to month
d. If rent is paid yearly: year to year
Page 193 of 193

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PERSONS AND FAMILY RELATIONS

Ignorance of the law excuses no one

Acts Contrary To Law

Waiver of rights (Art. 6)

GENERAL RULE: Rights can be waived.

Laws applicable (Art. 15)

4. Laws on forms and solemnities

Rules on Personal Law

LEX NATIONALII LEX REI SITAE LEX LOCI

Doctrine of Processual Presumption

Rule on Prohibitive Laws

EXCEPTION: Art. 26, par. 2 Family Code

NOTE: The elements of an abuse of right under Art. 19 are:

JURIDICAL CAPACITY CAPACITY TO ACT

Cannot be limited or restricted Can be restricted, modified or limited

THEORIES ON CAPACITY TO ACT

THEORY OF GENERAL THEORY OF

GENERAL RULE: Birth determines personality.

When is a Child Considered Born?

Cessation of Civil Personality

CITIZENSHIP AND DOMICILE

Essential requisites: (LC)

Formal requisites: (ALM)

Persons Authorized To Solemnize Marriages: (PMJCCC)

Authorized Venues Of Marriage

Marriages Exempt From License Requirement: (MOLAR)

B. Incestuous marriages, whether the relationship be legitimate or illegitimate (Article 37):

1. between ascendants & descendants of any degree

C. Those contrary to public policy (Article 38): (SCAPS-SAKA)

D. Void subsequent marriages

Essential elements: (MAVFFCCI)

JURISPRUDENTIAL GUIDELINES: (Republic vs. Molina)

JUDICIAL OF DECLARATION OF NULLITY

EFFECTS OF TERMINATION OF SUBSEQUENT MARRIAGE: (ICADI)

DECLARATION OF PRESUMPTIVE DEATH

Effect of Reappearance of Absent Spouse:

Circumstances amounting to Fraud under Article 46: (SPND)

Ground (F2I2NS) Persons Who May Sue Prescriptive Period

Requisites for annulment due to Impotence under Art.45(5) (CUPIN)

Doctrine of Triennial Cohabitation

Requisites for annulment due to Disease under Article 45(6) (ICSIIF)

ADDITIONAL REQUIREMENTS FOR ANNULMENT OR DECLARATION OF NULLITY

RULE ON DECLARATION OF ABSOLUTE NULLITY OF VOID MARRIAGES AND

Grounds for denial of petition:

Effects of filing petition:

Effects of decree of legal separation:

Effects of Reconciliation of the Spouses:

MARITAL RIGHTS AND OBLIGATIONS

Property Relations Between Husband & Wife

Not applicable when:

DONATIONS BY REASON OF MARRIAGE

BASES DONATIONS ORDINARY DONATIONS

Formalities Governed by the rules on ordinary Governed by rules on donations

Rule on Donation Between Spouses During Marriage

Grounds for Revocation (VIRAL-CN)

SYSTEM OF ABSOLUTE COMMUNITY (AC)

Administration of the community property

Rule on Game of Chance

Steps in Liquidation of AC: (IP-DDP)

CONJUGAL PARTNERSHIP OF GAINS (CP)

Conjugal Partnership Property: (LC2 FONT)

Exclusive Property Of Each Spouse: (OGRE)

Rules In Cases Of Improvement Of Exclusive Property