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General Provisions
DEFINITION & TRANSMISSION
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, CC]
Decedent - person whose property is transmitted
through succession, whether or not he left a will. [Art
775, CC]
Testator a decedent who left a will [Art 775, CC]
Inheritance includes:
(a) All the property, rights and obligations of a
person which are not extinguished by his death
[Art 776, CC]
(b) Not only the property and the transmissible rights
and obligations existing at the time of his death,
but also those which have accrued thereto since
the opening of the succession [Art 781, CC]
What are transmitted?
(a) Rights and obligations which are not strictly
personal (intuit personae) [Balane, 2010]
(b) Money debts of the decedent are not transmitted
to the heirs nor paid by them. The estate pays
them. [Balane, 2010]
General Rule: All property rights which have accrued
to the hereditary estate since the opening of
succession are transmitted to the heirs
Exception: Property acquired after the making of a
will shall not pass to the heirs unless it should
expressly appear in the will that such was the
intention of the testator. [Art 793, CC]
SUCCESSION OCCURS AT THE MOMENT OF
DEATH
General Rule: The rights to succession are
transmitted from the moment of the death of the
decedent. [Art 777, CC]
Exception: A person may be presumed dead for the
purpose of opening his succession. In this case,
succession is only of provisional character because
there is always a chance that the absentee may still
be alive. [Arts. 390-391, CC].
SUCCESSION BAR OPERATIONS COMMISSION
KINDS
KINDS OF SUCCESSION
(1) Testamentary that which results from the
designation of an heir, made in a will executed in
the form prescribed by law. [Art. 779, CC]
(2) Legal or Intestate that which takes place by
operation of law in the absence of a valid will.
(3) Mixed that which is effected partly by will and
partly by operation of law. [Art. 780, CC]
(4) Compulsory succession to the legitime and
prevails over all other kinds of succession [Balane,
2010]
KINDS OF SUCCESSORS
(1) Heirs those who are called to the whole or an
aliquot portion of the inheritance either by will or
by operation of law [Art 782, CC]
(2) Devisees persons to whom gifts of real property
are given by virtue of a will
(3) Legatees persons to whom gifts of personal
property are given by virtue of a will
Note: The distinction is significant in case of
preterition and imperfect disinheritance
KINDS OF HEIRS
(1) Compulsory Heirs those who succeed by force of
law to some portion of the inheritance, in an
amount predetermined by law known as the
legitime, of which they cannot be deprived by the
testator, except by a valid disinheritance. They
succeed regardless of a will.
(2) Voluntary or Testamentary Heirs those who are
instituted by the testator in his will, to succeed to
the portion of the inheritance of which the
testator can freely dispose. They succeed by
reason of a will.
(3) Legal or Intestate Heirs those who succeed to
the estate of the decedent who dies without a
valid will, or to the portion of such estate not
disposed of by will, or when certain grounds are
met
Testamentary Succession
WILLS
IN GENERAL
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, CC]
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Kinds of Wills (b) will disinheriting a compulsory heir

(5) Notarial an ordinary or attested will, which must
comply with the requirements of the law [Articles (11) Statutory grant permitted only by law, not a
804-808, CC] constitutional right [Balane (2004)]
(6) Holographic a will entirely written, dated and
signed by the hand of the testator [Art. 810, CC] Rules of Construction and Interpretation [Art. 788-795]
All rules are designed to ascertain and give effect to
Characteristics of Wills the intention of the testator.
(1) Purely personal will-making is non-delegable
(a) making of a will cannot be left in whole or in Reason: testamentary succession is preferred to
part of the discretion of a third person, or intestacy.
accomplished through the instrumentality of (1) Different interpretations, in case of doubt, that
an agent or attorney [Art 784, CC] which would make the will operative [Art 788, CC]
(b) testator may not make a testamentary (2) Words to be taken in their ordinary and
disposition in such manner that another grammatical sense unless there is a clear
person has to determine whether or not it is to intention to use them in another sense [Art 790,
be operative [Art 787, CC] CC]
(3) Technical words are to be taken in their technical
What cannot be What may be entrusted to sense unless there is a contrary intention or when
rd rd
delegated to 3 persons 3 persons testator was unacquainted with such technical
(a) designation of heirs, (a) designation of sense [Art 790, CC]
devisees and person/institution (4) Words must be of an interpretation to give effect to
legatees falling under a class every expression. To make it operative rather than
(b) duration/efficacy of specified by testator inoperative; that which will prevent intestacy [Art
designation (b) manner of 791, CC]
(c) determination of distribution of (5) Invalidity of one of several dispositions does not
portions, when property specified by result in invalidity of others unless the testator
referred to by name testator [Art 786, CC] would not have made such dispositions if the first
[Art 785, CC] invalid disposition had not been made [Art 792,
Note: testator must first CC]
specify the class and the (6) Every devise and legacy shall convey all the interest
amount of property for unless it clearly appears the intention was to
proper delegation convey a less interest [Art 794, CC]
(7) Imperfect description, no person or property
(2) Free and intelligent [Art 839, CC] exactly answers to the description, mistakes,
(3) Solemn and formal - if the form is defective, the omissions [Art 790, CC]
will is void
(4) Revocable and ambulatory will can be revoked Kinds of Ambiguities
at any time before the testators death [Art 828, Patent or Extrinsic Latent or Intrinsic
CC] Ambiguity Ambiguity
(5) Mortis causa - takes effect upon the testators (a) one which appears (a) one which cannot be
death upon the face of the seen from the reading
(6) Individual prohibition against joint wills [Art. instrument of the will but which
818, CC] appears only upon
(7) Executed with animus testandi intent to dispose consideration of
of the property extrinsic
(8) Executed with testamentary capacity circumstances
(9) Unilateral act - does not involve an exchange of
values or depend on simultaneous offer and
acceptance Note: There is no distinction between patent and
(10) Dispositive disposes of property latent ambiguities in so far as the admissibility of
parol or extrinsic evidence to aid testamentary
General Rule: Wills contain disposition of the disposition is concerned.
testators estate mortis causa.
Resolving Ambiguities:
Exceptions: (non-dispositive wills) General Rule: Intrinsic or extrinsic evidence may be
(a) will recognizing an illegitimate child used to ascertain the intention of the testator

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Exception: Oral declarations of the testator as to his FORM

intention must be excluded
Governing Law
TESTAMENTARY CAPACITY AND INTENT Formal Validity Rules
(a) Testamentary capacity must exist at the time of Forms and solemnities of will are governed by the law
the execution of the will of the country in which the will was executed [Art 17,
(b) Supervening incapacity does not invalidate an CC]
effective will nor is the will of an incapable
validated by a supervening of capacity [Art 801, Filipino in a foreign country can make a will according
CC] to:
(1) Forms established by the law of the country in
Requisites - (SAP) which he may be
(a) Testator is of Sound mind at the time of execution (2) Form according to Philippine law [Art 815]
[Art. 798, CC]
(b) Not under 18 years of Age [Art. 797, CC] Alien who is abroad may make the will according to:
(c) Not expressly Prohibited by law to make a will (1) The law of the place where he resides
[Art. 796, CC] (2) Laws observed in his country
(3) According to those which the Civil Code
Age Requirement prescribes [Art 816]
Art 797, CC. Persons of either sex under the age of 18
cannot make a will. (a) Prohibited wills executed by Filipinos in a foreign
country shall not be valid in the Philippines even
though authorized by the laws of the country of
Year shall be understood to be 12 calendar months
execution. [Art 819, CC]
[Sec 31, Book 1, Admin Code]
(b) Joint wills are prohibited even though they are
valid in the foreign country where the Filipino
Soundness of Mind of the Testator
wrote his will
Negatively Stated
(a) Not necessary that the testator be in full
Governing Law as to Place of Execution of Will
possession of reasoning faculties
Place of
(b) Not necessary that the testators mind be wholly
Testator Execution of Governing Law
unbroken, unimpaired, unshattered by disease,
Will
injury or other cause [Art 799, CC]
Philippines Philippine Law (Art. 16,
CC)
Positively Stated: It is sufficient that the testator
(NPC) Outside of (1) Law of the country
(a) Knew the Nature of the estate to be disposed of; the in which it is
Filipino
(b) The Proper objects of his bounty; Philippines executed (Art. 17,
(c) Character of the testamentary act [Art. 799, CC] CC); or
(2) Philippine Law (Art.
General Rule: Soundness of mind is presumed 815, CC)
[Art. 800, CC] Philippines (1) Philippine Law; or
(2) Law of the country
Exception: When the testator, one month or less, of which testator is
before the execution of the will was publicly known a citizen or subject
to be insane (Art. 817, CC)
Outside of (1) Law of the place
the where the will is
Aspect of the Governing Law Philippines executed (Art. 17,
Will Alien CC); or
Law in force at the time the will (2) Law of the place
Formal Validity
was executed [Art. 795, CC] where the testator
Law of decedents nationality at resides; or
Intrinsic Validity the time of his death [Art. 16 and (3) Law of the testators
2263, CC] country; or
(4) Philippine Law (Art.
816, CC)

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physical condition and position with relation to each

Aspects of the Will Governed by the National Law of other at the moment of inscription of each signature.
the Decedent [Jaboneta vs. Gustilo (1906)]
(1) Order of succession;
(2) Amount of successional rights; (3) MARGINAL SIGNATURES
(3) Intrinsic validity of testamentary provisions; and General Rule: Testator or his representative shall
(4) Capacity to succeed write his name, and the witnesses shall sign each
and every page except the last page [Art. 805, CC]
Common Requirements [Art 804, CC]
(1) In writing Exceptions:
(2) In a language or dialect known to the testator (a) When the will consists of only one page
(b) When the will consists of only two pages, the first
Notarial Wills of which contains all dispositions and is signed at
Special Requirements for Notarial Wills. the bottom by the testator and the witnesses, and
(1) SUBSCRIPTION: Subscribed to, at the end [Art. the second page contains only the attestation
805, CC] clause duly signed at the bottom by the
(a) By the testator himself; or witnesses. [Abangan vs. Abangan (1919)]
(b) By the testators name written by a
representative in his presence and under his Matias vs. Salud (1957): the use of thumbprint was
express direction. allowed
(2) ATTESTATION: Attested and subscribed by 3 or Icasiano vs. Icasiano (1964): The inadvertent failure of
more credible witnesses in the presence of the one witness to affix his signature to one page of a
testator and of one another [Art. 805, CC] testament, due to the simultaneous lifting of two
pages in the course of signing, is not per se sufficient
to justify denial of probate.
Attestation Subscription
(4) PAGE NUMBERINGS - Numbered correlatively in
Mental act (act of the Mechanical (act of the letters placed on the upper part of each page.
senses) hand) [Art. 805, CC]
Purpose is to render Purpose of identification (a) i.e., Page One of Five pages
available proof during (b) Mandatory part: pagination by means of a
probate of will, not only conventional system
of the authenticity of the (c) Directory part: pagination in letters on the
will but also of its due upper part of each page [Balane (2010)]
execution
(5) ACKNOWLEDGED before a notary public by the
The attestation clause shall state the following: testator and the witnesses [Art. 806, CC]
(a) Number of pages; (a) Notary public cannot be considered a third
(b) The fact that the testator or his representative witness. He cannot acknowledge before
under his express direction signed the will and himself his having signed the will. To allow
every page in the presence of instrumental such would have the effect of having only two
witnesses attesting witnesses to the will [Cruz v
(c) That the witnesses signed the will and all its Villasor(1973)]
pages in the presence of the testator and of one (b) The certification of acknowledgement need
another. not be signed by the notary in the presence of
the testator and the witnesses. [Javellana v
Cagro v Cagro (1953): The signatures of the witnesses Ledesma 1955)]
must be at the bottom of the attestation clause
Special Rules for Handicapped
Cruz v Villasor (1973): The notary public cannot be Deaf Mute [Art. 807, CC]
counted as an attesting witness (a) Testator must personally read the will; or
(b) Testator shall personally designate two persons
to read the contents and communicate it to him
Test of presence
in some practicable manner.
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

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Blind [Art. 808, CC] Holographic Wills

(a) The will shall be read to the testator twice - By
one of the subscribing witnesses and by the
notary public acknowledging the will.
(b) A testator suffering from glaucoma is considered
as legally blind [Garcia vs. Vasquez (1970)]
Requisites
(1) In writing [Art. 804, CC]
(2) In a language known to the testator [Art. 804, CC]
(3) Entirely written, dated and signed in the hand of
the testator himself [Art. 810, CC]

Substantial Compliance
Art. 809, CC. In the absence of bad faith, forgery, or Advantages Disadvantages
fraud, or undue and improper pressure and
influence, defects and imperfections in the form of (a) Simple and easy to (a) No guarantee as to
attestation or in the language used therein shall not make the capacity of the
render the will invalid if it is proved that the will was (b) Induces foreigners in testator
in fact executed and attested in substantial this jurisdiction to set (b) No protection against
compliance with all the requirements of Article 805. down their last violence, intimidation
wishes or undue influence
Substantial compliance rule applies only in cases (c) Guarantees the (c) May not faithfully
when such defects and imperfections can be absolute secrecy of express the will of the
supplied by an examination of the will itself the testamentary testator due to faulty
dispositions expressions
Examples: (d) Can be easily falsified
(a) Whether all pages are consecutively numbered and concealed
(b) Whether the signatures appear in each and every
page
(c) Whether the subscribing witnesses are three Witnesses Required for Probate [Art. 811]
(d) Whether the will was notarized [Caneda v CA] (a) At least one witness who knows the handwriting
and signature of the testator; explicitly declare
WITNESSES
that it is the testators
Qualifications [Art. 820, CC] (b) If contested at least 3 of such witnesses
(1) Of sound mind (c) In the absence of a competent witness, expert
(2) Aged 18 years or over testimony may be resorted to
(3) Not blind, deaf or dumb
(4) Able to read and write General Rule: The holographic will itself must be
presented for probate [Gan v Yap (1958)]
Disqualifications [Art. 821, CC]
(1) Person not domiciled in the Philippines Exception: If there is a photostatic copy or xerox copy
(2) Those who have been convicted of falsification, of the holographic will, it may be presented for
perjury, or false testimony. probate [Rodelas v Aranza (1982)]

Interested witness [Art. 823, CC] Notarial Will v. Holographic Will

General Rule Exception Notarial Will Holographic Will

Devises or legacies in If there are three other NOTARIAL codicil ONLY Notarial Codicil; or
favor of a spouse, parent competent witnesses, Holographic Codicil; or
or child who also attests the device or legacy shall Additional dispositions
to the will as a witness be valid and the below the signature,
shall be void interested witness shall dated and signed in the
be treated as a mere hand of the testator.
surplusage
Insertion, Cancellation, Erasure or Alteration
(a) Creditors are not incompetent to be witnesses (a) Testator must authenticate by his FULL
[Art. 824, CC] SIGNATURE
(b) Supervening incompetency shall not prevent the (b) Full signature does not necessarily mean the
allowance of the will [Art. 822, CC] testators full name; it rather means his usual and
customary signature. [Balane (2010)]

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Effect of insertion written by another person on the Prohibition is applicable only to joint wills executed by
validity of a holographic will Filipinos.

When made Effect CODICILS

Codicil [Arts. 825-826, CC]
After the execution, Insertion considered not (1) It is a supplement or addition to a will,
without consent of written. Validity cannot (2) made after the execution of a will,
testator be defeated by the (3) and annexed to be taken as a part of the will,
malice or caprice of a (4) by which any disposition made in the original will
third person is explained, added to, or altered.
After execution, with Will is valid, insertion is (5) in order that it may be effective, it shall be
consent void. executed as in the case of a will.
After execution, Insertion becomes part
validated by testators of the will. Entire will INCORPORATION BY REFERENCE
signature becomes void because it Requisites [Art 827, CC]
is not wholly written by (1) The document or paper referred to in the will
the testator. must be in existence at the time of the execution
Contemporaneous to the Will is void because it is of the will.
execution of the will not written entirely by (2) The will must clearly describe and identify the
the testator same, stating among other things the number of
pages thereof.
Joint Wills (3) It must be identified by clear and satisfactory
Art. 818, CC. Two or more persons cannot make a will proof as the document or paper referred to
jointly, or in the same instrument, either for their therein; and
reciprocal benefit or for the benefit of a third person. (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.
Art. 819, CC Wills, prohibited by the preceding article,
executed by Filipinos in a foreign country shall not be REVOCATION
valid in the Philippines, even though authorized by Modes of Revocation [Art. 830, CC]
the laws of the country where they may have been (1) By implication of law; or
executed. (2) By the execution of a will, codicil or other writing
executed as provided in the case of wills; or
Joint Will (3) By burning, tearing, canceling, or obliterating the
(1) A single testamentary instrument, will with the intention of revoking it, by the testator
(2) Which contains the wills of two or more persons, himself, or by some other person in his presence,
(3) Jointly executed by them, and by his express direction.
(4) Either for their reciprocal benefit or for the benefit
of a third person. Note: The act contemplating revocation must be
done at any time before the death of the testator. The
Mutual Wills right of revocation cannot be waived or restricted.
(1) Executed pursuant to an agreement between two (Art. 828, CC)
or more persons,
(2) Jointly executed by them, Law Governing Revocation (Art. 829, CC)
(3) Either for their reciprocal benefit or for the benefit Place of Testators Governing Law
of a third person. Revocation Domicile
Philippines, or Philippine Law
Reciprocal Wills Philippines some other
(1) Testators name each other as beneficiaries in country
their own wills, Philippines Philippine Law
(2) 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 the devises are made in consideration of
each other. Such is prohibited under Art. 819, CC.

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Place of Testators Governing Law contained in a previous one which is void as to its
Revocation Domicile form [Art. 835, CC].
(1) Law of the (1) Tolentino: Reproduction in the codicil is
place where required only when the original will is void as
the will was to it form; in all other cases, reference to the
Foreign Country made; or original will suffices to republish it through the
(2) Law of the codicil.
Outside the place in which (c) If after making a will, the testator makes a second
Philippines the testator will expressly revoking the first, the revocation of
had his the second will does not revive the first will, which
domicile at the can be revived only by another will or codicil.
time of (1) PRINCIPLE OF INSTANTER: Revoking clause
nd
revocation in the 2 will is NOT TESTAMENTARY in
character but operates to revoke the prior will
Doctrine of Dependent Relative Revocation INSTANTER upon the execution of the will
nd
The rule that where the act of destruction is containing it. The revocation of the 2 will
st
connected with the making of another will so as to does not revive the 1 will which has already
fairly raise the inference that the testator meant the become a NULLITY.
revocation of the old to depend upon the efficacy of
the new disposition intended to be substituted, the Republication vs. Revival
revocation will be conditional and dependent upon the
efficacy of the new disposition; and if for any reason, Republication Revival
the new will intended to be made as a substitute is
inoperative, the revocation fails and the original will (a) Takes place by an act (a) Takes place by
remain in full force. [Molo vs. Molo, 1951] of the testator operation of law
(b) Corrects extrinsic (b) Restores a revoked
The failure of the new testamentary disposition upon and intrinsic defects will
whose validity the revocation depends is equivalent
to the non-fulfillment of a suspensive condition and
hence prevents the revocation of the original will.
ALLOWANCE AND DISALLOWANCE OF WILLS
Revocation vs. Nullity Probate Requirement
Probate a Special Proceeding required to establish
Revocation Nullity the validity of a will and in order to pass real or
personal property [Art. 838, CC]
(a) By the act of the (a) Proceeds from law
testator (b) Inherent in the Matters to be proved in probate
(b) Presupposes a valid testament, be it an (1) Whether the instrument which is offered for
act intrinsic or an probate is the last will and testament of the
(c) Takes place during extrinsic defect decedent
the lifetime of the (c) Invoked after the (2) Whether the will has been executed in
testator testators death by accordance with the formalities prescribed by law
(d) Testator cannot his heirs (3) Whether the testator had testamentary capacity
renounce the right to (d) Nullity of a will can at the time of execution of the will
revoke be disregarded by
the heirs through Issues to be resolved in probate proceedings [Art.
voluntary 839]
compliance General Rule: the probate court cannot inquire into
therewith the intrinsic validity of testamentary provisions. Only
the extrinsic validity of such wills may be examined.

REPUBLICATION AND REVIVAL Exceptions: when practical considerations demand

(a) The execution of a codicil referring to a previous
will has the effect of republishing the will as
modified by the codicil [Art. 836, CC].
(b) The testator cannot republish without
reproducing in a subsequent will, the dispositions
the intrinsic validity of the will be resolved
(a) Acain vs Diongson (1987): When the will is
intrinsically void on its face such that to rule on its
formal validity would be a futile exercise

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(b) Valera vs. Inserto (1987): Claimants are all heirs
and they consent either, expressly or impliedly, to
the submission of the question of intrinsic validity
to the court.
(c) Pastor vs. CA (1983): Probate court may pass
upon the title thereto, but such determination is
provisional and not conclusive, and is subject to
the final decision in a separate action to resolve
title.
Revocation v. Disallowance
Revocation Disallowance
Voluntary Act of the Given by Judicial Decree
Testator
With or Without Cause Must always be for a
legal cause
May be partial or total Always total, except
when the ground of
fraud of influence for
example affects only
certain portions of the
will
Effect of Final Decree of Probate, Res Judicata on
Formal Validity
The probate of a will by the probate court having
jurisdiction thereof is usually considered as
conclusive as to its due execution and validity, and is
also conclusive that the testator was of sound and
disposing mind at the time when he executed the
will, and was not acting under duress, menace, fraud,
or undue influence, and that the will is genuine and
not a forgery. [Mercado vs. Santos, 1938]
Grounds for Denying Probate (SUM IFF)
(1) If the Signature of the testator was procured by
fraud;
(2) If it was procured by Undue and improper
pressure and influence, on the part of the
beneficiary or some other person;
(3) If the testator acted by Mistake or did not intend
that the instrument he signed should be his will
at the time affixing his signature thereto;
(4) If the testator was Insane or otherwise mentally
incapable of making a will at the time of its
execution;
(5) If the Formalities required by law have not been
complied with; or
(6) If it was executed through Force or under duress,
or the influence of fear, or threats.
INSTITUTION OF HEIRS
Institution of Heirs an act by virtue of which the
testator designates in his will the person or persons
SUCCESSION BAR OPERATIONS COMMISSION
who are to succeed him in his property and
transmissible rights and obligation [Art 840, CC]
A will shall be VALID even though it (1) should not
contain an institution of an heir or (2) such institution
should not comprise the entire estate or (3) the
person so instituted should not accept the
inheritance or be incapacitated to succeed.
In such cases, the testamentary dispositions made in
accordance with law shall be complied with and the
remainder of the estate shall pass to the legal heirs
[Art. 841, CC].
EXTENT OF GRANT [ART. 842, CC]:
Freedom of disposition depends upon the existence,
kind and number of compulosry heirs.
(1) No compulsory heirs Full power of disposition
(2) One with compulsory heirs cannot disregard the
rights of the latter (i.e. legitime)
EFFECT OF PREDECEASE OF HEIR (ART. 856, CC):
Any heir who dies before the testator or is
incapacitated to succeed or renounces the
inheritance transmits no rights of the testator to his
own heirs. This is without prejudice to the rights of
representation. [Tolentino]
IDENTIFICATION OF HEIRS, MANNER OF INSTITUTION [ART.
843-849; 851-853]
FALSE CAUSE [ART. 850]:
The statement of a false cause for the institution of
an heir shall be considered as not written unless it
appears from the will that the testator would not
have made such institution if he had known the
falsity of such cause.
PRETERITION
The preterition or omission of one, some, or all of the
compulsory heirs in the direct line, whether living at
the time of the execution of the will or born after the
death of the testator, shall annul the institution of
heir; but the devises and legacies shall be valid
insofar as they are not inofficious.
If the omitted compulsory heirs should die before the
testator, the institution shall be effectual, without
prejudice to the right of representation. [Art. 854, CC]
Concept [Art. 854, CC]
(a) There must be a total omission of one, some or all
of the heir/s from the inheritance. [Balane citing
Seangio vs Reyes (2006)]
(b) The omission must be that of a compulsory heir.
(c) The compulsory heir omitted must be of the direct
line.
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(d) The omitted compulsory heir must be living at the
time of the testators death or must at least have
been conceived before the testators death.
COMPULSORY HEIRS IN THE DIRECT LINE
A direct line is that constituted by the series of
degrees among ascendants and descendants
(ascending and descending). [Art 964 par.2]
PRETERITION V. DISPOSITION LESS THAN LEGITIME
BALANE:
(a) If the heir in question is instituted in the will but
the portion given to him by the will is less than his
legitime there is no preterition. [Reyes vs
Barretto-Datu (1967)]
(b) If the heir is given a legacy or devise there is no
preterition. [Aznar vs Duncan (1966)]
(c) If the heir had received a donation inter vivos from
the testator the better view is that there is no
preterition. The donation inter vivos is treated as
an advance on the legitime under Articles 906,
909, 910 and 1062
(d) The remedy, if the value of inheritance, legacy or
devise, or donation inter vivos is only for
completion of his legitime under Articles 906 and
907
(1) Neri vs. Akutin (1941): When there are no
devises and legacies, preterition will result in
the annulment of the will and give rise to
intestate succession.
SUBSTITUTION OF HEIRS
DEFINITION
Substitution - is the appointment of another heir, so
that he may enter into the inheritance in default of
the heir originally instituted. [Art 857, CC]
KINDS
Brief or Compendious [Art. 860, CC]
(a) Brief Two or more persons were designated by
the testator to substitute for only one heir
(b) Compendious One person is designated to take
the place of two or more heirs
Reciprocal
If the heirs instituted in unequal shares should be
reciprocally substituted, the substitute shall acquire
the share of the heir who dies, renounces, or is
incapacitated, unless it clearly appears that the
intention of the testator was otherwise. If there is
more than one substitute, they shall have the same
share in the substitution as the institution.

DISTINGUISHED FROM DISINHERITANCE Example (only 1 substitute): If two heirs are

reciprocally substituted, then if one of them dies
Preterition Disinheritance before the testator dies, renounces, or turns out to be
incapacitated, the other will get his share, regardless
(a) Tacit deprivation of a (a) Express deprivation of of whether or not their shares are equal.
compulsory heir of a compulsory heir of
his legitime his legitime Example (more than 1 substitute): A is instituted to 1/3,
(b) May be voluntary but (b) Always voluntary B to 1/6, and C to . If C dies before the testator,
the presumption of (c) For some legal cause renounces or turns out to be incapacitated, then the
law is that it is (d) If the disinheritance is other two will get his shares in the same proportion
involuntary valid, the compulsory as in the institution. A will get twice as much as B
(c) Law presumes there heir disinheritied is (because his share of 1/3 in the institution is twice the
has been merely totally excluded from size of Bs share of 1/6)
oversight or mistake the inheritance. In
on the part of the case of unlawful Simple Substitution [Art. 859, CC]. The testator may
testator disinheritance, the designate one or more persons to substitute the
(d) Omitted heir gets not compulsory heir is heir/s instituted in case the heirs should:
only his legitime but merely restored to his (1) die before him (predecease),
also his share in the legitime (2) should not wish to accept the inheritance
free portion not (repudiation), or
disposed of by way of (3) should be incapacitated to accept the inheritance
legacies and devises (incapacitated). [Art. 859, CC]

EFFECTS OF PRETERITION [ART. 854, CC]
(a) The institution of the heir is annulled.
(b) Devises and legacies shall remain valid as long as
they are not inofficious.
(c) If the omitted compulsory heir should die before
the testator, the institution shall be effective,
without prejudice to the right of representation.
Fideicommisary Substitution. The testator institutes
an heir with an obligation to preserve and to deliver
to another the property so inherited. The heir
instituted to such condition is called the First Heir or
the Fiduciary Heir; the one to receive the property is
the fideicommissary or the second heir. [Art 863, CC]

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Requisites of a Fideicommisary Substitution [Arts. 863-
865, CC]
(1) A Fiduciary or First Heir instituted is entrusted
with the obligation to preserve and to transmit to a
Fideicommissary Substitute or Second Heir the
whole or part of the inheritance.
(2) The substitution must not go beyond one degree
from the heir originally instituted.
(3) The Fiduciary Heir and the Fideicommissary are
living at the time of the death of the testator.
(4) The fideicommissary substitution must be
expressly made.
(5) The fideicommissary substitution is imposed on
the free portion of the estate and never on the
legitime
Note:
(a) Palacios vs. Ramirez (1982): Degree refers to
degree of relationship.
(b) PCIB vs. Escolin (1974): In the absence of an
obligation on the part of the first heir to preserve
the property for the second heir, there is no
fideicommissary substitution.
Effects of predecease of the first heir/fiduciary or the
second heir/fideicommisary
(a) Legend:
(1) T Testator
(2) FH First Heir / Fiduciary
(3) SH Second Heir / Fideicommissary
Substitute
(b) Situation 1: If the following is the sequence of
death of the three parties: FH SH T, who will
inherit? The legal heirs. There is no
fideicommissary substitution because FH and
SH are not living at the time of the testators
death. (Art 863, CC)
(c) Situation 2: T SH FH, who will inherit? The
SH and his heirs under Art. 866, CC. This is
because the SH passes his rights to his own
heirs when he dies before FH.
(d) Situation 3: FH T SH, who will inherit? No
specific provision in law, but SH inherits because
the T intended him to inherit.
TESTAMENTARY DISPOSITIONS WITH A
CONDITION, A TERM, AND A MODE
3 KINDS OF TESTAMENTARY DISPOSITIONS
(1) Conditional (obliquely defined in Article 1179, par.
1)
(2) Dispositions with a term (obliquely defined in
Article 1193, pars. 1 and 3)
(3) Dispositions with a mode/modal dispositions
(obliquely defined in Article 882)
SUCCESSION BAR OPERATIONS COMMISSION
CONDITIONS
Basis of testators right to impose conditions, terms or
modes: Testamentary freedom
Prohibited conditions: (considered as not imposed)
(1) Any charge, condition or substitution whatsoever
upon the legitimes. [Art. 872]
(2) Impossible and illegal conditions. [Art 873]
(3) Absolute condition not to contract a first or
subsequent marriage unless imposed on the
widow or widower by the deceased spouse, or by
the latters ascendants or descendants. [Art. 874]
(4) Scriptura captatoria or legacy-hunting
dispositions* [Art. 875]
Scriptura captatoria/ Legacy-Hunting Dispositions
(a) Reasons for prohibition
(1) The captatoria converts the testamentary
grants into contractual transactions;
(2) It deprives the heirs of testamentary freedom;
(3) It gives the testator the power to dispose
mortis causa not only of his property but also
of his heirs.
(b) Effect : Entire disposition is void
Potestative, Casual and Mixed Conditions
(a) Potestative Conditions
General Rule: Must be fulfilled as soon as the heir
learns of the testators death
Exception: If the condition was already complied with
at the time the heir learns of the testators death; or
if the condition is of such a nature that it cannot be
fulfilled again.
Constructive Compliance: deemed fulfilled
(b) Casual or mixed
General Rule: May be fulfilled at any time (before or
after testators death), unless testator provides
otherwise.
Exception: If already fulfilled at the time of execution
of will:
(1) if testator unaware of the fact of fulfillment
deemed fulfilled
(2) if testator aware:
(a) can no longer be fulfilled again: deemed
fulfilled
(b) can be fulfilled again: must be fulfilled again.
Constructive Compliance:
(a) if casual not applicable
(b) if mixed applicable only if dependent partly on
the will of a third party not interested.
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Mode [Art. 882, CC]
Definition an obligation imposed upon the heir,
without suspending, as a condition does, the
effectivity of the institution
(a) Must be clearly imposed as an obligation in order
to be considered as one. Mere preferences or
wishes expressed by the testator are not modes.
(b) A mode functions similarly to a resolutory
condition.
Caucin Muciana
DEFINITION: A security to guarantee the return of
the value of property, fruits, and interests, in case of
contravention of condition, term or mode
Instances when it is needed:
(1) Suspensive term [Art. 885]
(2) Negative potestative condition - when the
condition imposed upon the heir is negative, or
consists in not doing or not giving something [Art
879]
(3) Mode [Art 882, par 2]
LEGITIME
DEFINITION [ART. 886]
(a) It is that part of the testators property which he
cannot dispose of,
(b) Because the law has reserved it for his
compulsory heirs.
COMPULSORY HEIRS AND VARIOUS COMBINATIONS
Classes of Compulsory Heirs [Art. 887, CC]
(1) Primary: Those who have precedence over and
exclude other compulsory heirs:
Legitimate Children and Legitimate Descendants
with respect to their Legitimate Parents and
Ascendants
(2) Secondary: Those who succeed only in the absence
of the Primary compulsory heirs:
(a) Legitimate Parents and Legitimate
Ascendants, with respect to their Legitimate
Children and Descendants. (They will inherit
only in default of legitimate children and their
descendants)
(b) Illegitimate Parents with respect to their
Illegitimate Children. (They will inherit only in
default of the illegitimate and legitimate
children and their respective descendants).
Note that other illegitimate ascendants are
not included.
(3) Concurring: Those who succeed together with the
primary or the secondary compulsory heirs:
SUCCESSION BAR OPERATIONS COMMISSION
(a) Widow or Widower / Surviving Spouse
(Legitimate)
(b) Illegitimate Children and Illegitimate
Descendants
If the testator is a If the testator is an
LEGITIMATE CHILD: ILLEGITIMATE CHILD:
(1) LC and descendants (1) LC and descendants
(2) In default of No. 1, LP (2) ILC and descendants
and ascendants
(3) SS (3) In default of Nos. 1-2.
ILP only
(4) IC and descendants (4) SS
Specific Rules on Legitimes
Direct Descending Line
(a) Rule of Preference between lines [Art 978 and
985, CC]
(1) Those in the direct descending line shall
exclude those in the direct ascending and
collateral lines; and
(2) Those in the direct ascending line shall, in
turn, exclude those in the collateral line.
(3) Rule of Proximity [Art 926, CC] The relative
nearest in degree excludes the farther one
(b) Right or representation ad infinitum in case of
predecease, incapacity, or disinheritance [Art 972
and 992, CC]
(1) For decedents who are Legitimate Children,
only the Legitimate Descendants are entitled
to right of representation.
(2) For decedents who are Illegitimate Children,
both the Legitimate and the Illegitimate
Descendants can represent, only with respect
to the decedents illegitimate parents.
(c) If all the Legitimate Children repudiate their
legitime, the next generation of Legitimate
Descendants may succeed in their own right.
Direct Ascending Line
(a) Rule of division between lines
(1) The father and the mother shall inherit
equally if both living. One succeeds to the
entire estate of the child if the other is dead.
[Art. 986, CC]
(2) In default of the mother and the father, the
ascendants nearest in degree will inherit. [Art.
987]
(3) If there is more than one relative of the same
degree but of different lines, one half will go
to the paternal ascendants and the other half
to the maternal ascendants. [Art. 987]
(b) Rule of equal division
(1) The relatives who are in the same degree shall
inherit in equal shares. [Art 987]
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Summary of Legitimes of Compulsory Heirs

Legitimat
Surviving Relatives Legitimate Children Surviving Illegitimate e Parents Illegitimate
[LC] & Descendants Spouse [SS] Children [ILC] [LP] & Parents
Ascendant [ILP]
s
1 LC alone 1/2 of the estate in
equal portions
2 1 LC, SS

3 LC, SS 1/2 in equal portions Same portion as 1

LC
4 LC, ILC in equal portions 1/2 share of 1
LC (for reach
ILC)
5 1 LC, SS, ILC 1/4 (preferred) 1/2 share of 1
LC (for each
child)

N.B. The share

of the ILC may
suffer reduction
pro rata
because spouse
is given
preference
6 2 or more LC, SS, ILC 1/2 in equal portions Same as share of 1/2 share of 1
1 LC LC (for each
child)
7 LP alone 1/2

8 LP, ILC in equal 1/2

portions
9 LP, SS 1/2

1 LP, SS, ILC 1/8 1/2

0
11 ILC alone 1/2 in equal
portions
12 ILC, SS 1/3 1/3 in equal
portions
13 SS alone 1/2

*SS alone where

marriage is in
articulo mortis
and testator dies
within 3 months
from marriage
1/3

But if they have

been living
together as
husband and wife
for more than 5
years 1/2

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Legitimat
Surviving Relatives Legitimate Children Surviving Illegitimate e Parents Illegitimate
[LC] & Descendants Spouse [SS] Children [ILC] [LP] & Parents
Ascendant [ILP]
s
14 ILP alone 1/2

15 ILP, SS 1/4

16 Adopter, ILC, SS 1/3 1/3 1/3

(adopter)

Steps in Determining the Legitime of Compulsory or a brother or sister, is obliged to reserve such
Heirs property as he may have acquired by operation of
(1) Determine the gross value of the estate at the law for the benefit of relatives who are within the
time of the death of the testator. third degree and who belong to the line from which
(2) Determine all debts and charges which are said property came.
chargeable against the estate.
(3) Determine the net value of the estate by Concept of Reserva Troncal [Art. 891, CC]
deducting all the debts and charges from the (1) A descendant (prepositus) inherits or acquires
gross value of the estate. property from an ascendant (origin or mediate
(4) Collate or add the value of all donations inter source) by gratuitous title or from a brother or
vivos to the net value of the estate. sister
(5) Determine the amount of the legitime from the (2) The same property is inherited by another
total thus found. ascendant (reservista) or is otherwise acquired by
(6) Impute the value of all donations inter vivos made him by operation of law from the said descendant
to strangers against the disposable free portion (prepositus)
and restore it to the estate if the donation is (3) The said ascendant (reservista) must reserve the
inofficious. property for the benefit of the relatives of the
(7) Distribute the residue of the estate in accordance deceased descendant within the third civil degree
with the will of the testator. and who belong to the line from which the said
property came (reservatarios).
Remedy of a Compulsory Heir in case of Impairment
of Legitime Parties: [Balane (2010)]
Extent and Nature of Remedy (1) Origin or Mediate Source either an ascendant of
Impairment any degree of ascent or a brother or sister of the
st
Total omission of a Annulment of institution Prepositus; responsible for the 1 transfer
compulsory heir who is a and reduction of legacies (2) Prepositus the first transferee of the reserved
direct descendant or and devises [Art. 854, property
ascendant (preterition) CC] (3) Reservista an ascendant of the Prepositus other
Testamentary Reduction of the than the Origin or Mediate Source; the one
dispositions impairing or disposition insofar as obligated to reserve the property
rd
diminishing the legitime they may be inofficious (4) Reservatarios within the 3 degree of
or excessive [Art. 907, consanguinity from the Prepositus [Cabardo v.
CC] Villanueva (1922)] belonging to the line from
Partial impairment Completion of the which the property came
legitime [Art. 906, CC]
Impairment by Collation reduction of Requisites for Reserva Troncal [Chua vs. CFI(1977)]
inofficious donations donations [Arts. 771 and (1) That the property was acquired by a descendant
911, CC] (Prepositus) from an ascendant or from a brother
or sister (Origin or Mediate Source) by gratuitous
RESERVA TRONCAL title,
Art. 891. The ascendant who inherits from his (2) That the Prepositus died without (legitimate*)
descendant any property which the latter may have issue,
acquired by gratuitous title from another ascendant, (3) That the property is inherited by another
ascendant (Reservista) by operation of law, and

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rd
(4) That there are relatives within the 3 degree
(Reservatarios) belonging to the line from which
said property came.
Note: Only legitimate descendants will prevent the
property from being inherited by the legitimate
ascending line by operation of law [Balane]
3 transmissions involved: [Balane (2010)]
st
(a) 1 transfer by gratuitous title, from a person to
his descent, brother or sister
nd
(b) 2 transfer by operation of law, from the
st
transferee in the 1 transfer to another ascendant.
This creates the reserve.
rd
(c) 3 transfer from the transferee in the second
transfer to the relatives
Juridical Nature of Rights
Nature of the reservistas right: [Balane citing Edroso v
Sablan]
(a) The reservistas right over the reserved property is
one of ownership
(b) The right of ownership is subject to a resolutory
condition, i.e. the existence of reservatarios at the
time
(c) The right of ownership is alienable, but subject to
the same resolutory condition.
(d) The reservistas right of ownership is registrable.
Nature of reservatarios right: [Balane citing Sienes v
Esparcia]
(a) The reservatarios have a right of expectancy over
the property.
(b) The right is subject to a suspensive condition, i.e.
the expectancy ripens into ownership if the
reservatarios survive the reservistas.
(c) The right is alienable but subject to the same
suspensive condition.
(d) The right is registrable.
Reserva Minima v. Reserva Maxima
(1) The prepositus acquired property gratuitously
from an ascendant, a brother or sister
(2) In his will, he institutes as his heir his ascendant
(who is also a compulsory heir) such that the
ascendant receives half of the estate by operation
of law as legitime and the other half by
testamentary disposition
Problem: Will the property acquired gratuitiously by
the prepositus from the source be treated as
acquired by the ascendant-heir by operation of law
(legitime) and therefore reservable or by
testamentary disposition?
SUCCESSION BAR OPERATIONS COMMISSION
Two Views
(1) Reserva Maxima: The entire property will be
considered acquired as legitime and therefore
wholly reservable
(2) Reserva Minima: One half is reservable, the other
half is not subject to reserva troncal [Tolentino, p.
284]
Extinguishment of the Reserva) (LDD-RRP)
(1) Loss of the reservable property
(2) Death of the reservista
(3) Death of all the relatives within the third degree
belonging to the line from which the property
came
(4) Renunciation by the reservatarios
(5) Registration of the reservable property under the
Torrens system as free
(6) Prescription, when the reservista holds the
property adversely against the reservatarios, as
free from reservation
DISINHERITANCE
Definition of Disinheritance [Art. 915, CC]
(1) It is the act by which the testator
(2) For just cause
(3) Deprives a compulsory heir of his right to the
legitime.
Requisites of a Valid Disinheritance
(1) Heir disinherited must be designated by name or
in such a manner as to leave no room for doubt
as to who is intended to be disinherited.
(2) It must be for a cause designated by law.
(3) It must be made in a valid will.
(4) It must be made expressly, stating the cause in
the will itself.
(5) The cause must be certain and true, and must be
proved by the interested heir if the person should
deny it.
(6) It must be unconditional.
(7) It must be total.
Disinheritance for cause
Disinheritance of children and descendants
Article 919. The following shall be sufficient causes
for the disinheritance of children and descendants,
legitimate as well as illegitimate:
(1) When a child or descendant has been found
guilty of an attempt against the life of the
testator, his or her spouse, descendants, or
ascendants;
(2) When a child or descendant has been convicted
of adultery or concubinage with the spouse of the
testator;
(3) When a child or descendant by fraud, violence,
intimidation, or undue influence causes the
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testator to make a will or to change one already
made;
(4) A refusal without justifiable cause to support the
parent or ascendant who disinherits such child or
descendant;
(5) Maltreatment of the testator by word or deed, by
the child or descendant;
(6) When a child or descendant leads a dishonorable
or disgraceful life;
(7) Conviction of a crime which carries with it the
penalty of civil interdiction.
Disinheritance of parents and ascendants
Article 920. The following shall be sufficient causes
for the disinheritance of parents or ascendants,
whether legitimate or illegitimate:
(1) When the parents have abandoned their children
or induced their daughters to live a corrupt or
immoral life, or attempted against their virtue;
(2) When the parent or ascendant has been
convicted of an attempt against the life of the
testator, his or her spouse, descendants, or
ascendants;
(3) When the parent or ascendant has accused the
testator of a crime for which the law prescribes
imprisonment for six years or more, if the
accusation has been found to be false;
(4) When the parent or ascendant has been
convicted of adultery or concubinage with the
spouse of the testator;
(5) When the parent or ascendant by fraud, violence,
intimidation, or undue influence causes the
testator to make a will or to change one already
made;
(6) The loss of parental authority for causes specified
in this Code;
(7) The refusal to support the children or
descendants without justifiable cause;
(8) An attempt by one of the parents against the life
of the other, unless there has been a
reconciliation between them.
Disinheritance of a spouse [Article 921, CC]
Article 921. The following shall be sufficient causes
for disinheriting a spouse:
(1) When the spouse has been convicted of an
attempt against the life of the testator, his or her
descendants, or ascendants;
(2) When the spouse has accused the testator of a
crime for which the law prescribes imprisonment
of six years or more, and the accusation has been
found to be false;
(3) When the spouse by fraud, violence, intimidation,
or undue influence cause the testator to make a
will or to change one already made;
(4) When the spouse has given cause for legal
separation;
(5) When the spouse has given grounds for the loss
of parental authority;
(6) Unjustifiable refusal to support the children or
the other spouse.

Summary of Causes of Disinheritance

[CC 919] [CC 920] [CC 921] [CC 1032]
Grounds for Disinheritance Children & Parents & Spouse Unworthi-
Descendants Ascendants ness
1 Guilty or Convicted of Attempt Against the
Life of the Testator, Spouse, Ascendant or * * * *
Descendant
2 Accused Testator or Decedent of Crime
Punishable by Imprisonment of 6 years or * * * *
more, and Found Groundless or False
3 Causes testator or decedent to Make a Will or
Change one by Fraud, Violence, Intimidation, * * * *
or Undue Influence
4 Unjustified Refusal to Support Testator * * *
5 Convicted of Adultery or Concubinage with
Spouse of Testator or Decedent * * *

6 Maltreatment of testator by Word and Deed *

7 Leading a Dishonorable or Disgraceful Life *
8 Conviction of Crime which carries the penalty *
of Civil Interdiction

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[CC 919] [CC 920] [CC 921] [CC 1032]

Grounds for Disinheritance Children & Parents & Spouse Unworthi-
Descendants Ascendants ness
9 Abandonment of Children or Inducing * *
Children to Live Corrupt and Immoral Life or
Against Attempted Virtue
10 Loss of Parental Authority * *
11 Attempt by One Parent Against the Life of the *
Other UNLESS there is Reconciliation
Between Parents

12 Spouse Has Given Cause for Legal Separation *

13 Failure to Report Violent Death of Decedent *

Within One Month UNLESS Authorities Have
Already Taken Action
14 Force, Violence, Intimidation, or Undue *
Influence to Prevent Another from Making a
Will or Revoking One Already Made or Who
Supplants or Alters the Latters Will
15 Falsifies or Forges Supposed Will of Decedent *

Reconciliation [Art. 922] Disinheritance without cause [Art. 918]

Art. 922. 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.
Rights of descendants of person disinherited [Art.
923]
Art. 923. The children and descendants of the person
disinherited shall take his or her place and shall
preserve the rights of compulsory heirs with respect
to the legitime; but the disinherited parent shall not
have the usufruct or administration of the property
which constitutes the legitime.
Art. 918. Disinheritance without a specification of the
cause, or for a cause the truth of which, if
contradicted, is not proved, or which is not one of
those set forth in this Code, shall annul the
institution of heirs insofar as it may prejudice the
person disinherited; but the devises and legacies and
other testamentary dispositions shall be valid to
such extent as will not impair the legitime.
Ineffective Disinheritance if the disinheritance lacks
one or other of the requisites mentioned in this
article, the heir in question gets his legitime. [Balane
(2010)]

Balane: This is inconsistent with Art. 1033. In

disinheritance, reconciliation is sufficient. It need not Ineffective Disinheritance Preterition
be in writing. In unworthiness, however, it needs to Person disinherited may Person omitted must
be in writing. be any compulsory heir be a compulsory heir in
the direct line
Revocation Only annuls the Annuls the entire
Modes of Revocation. institution in so far as it institution of heirs
(1) Reconciliation [Art 922, CC] prejudices the person
(2) Subsequent institution of the disinherited heir disinherited
(3) Nullity of the will which contains the
disinheritance. Legacies and Devisees

Note: The moment that testator uses one of the acts Legacy Devise
of unworthiness as a cause for disinheritance; he
thereby submits it to the rules on disinheritance. A gift of personal property A gift of real property
Thus, reconciliation renders the disinheritance given in a will given in a will
ineffective. It is bequeathed It is devised

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Persons Charged With the Duty to Give Legacies and

Devises in a Will Status of property given by Effect on the
(1) Compulsory heir, provided, their legitimes are not legacy/devise legacy/devise
impaired (Art. 925, CC) encumbrance or interest of the interest or
(2) Voluntary heir another person (Art. 932, CC) encumbrance
(3) Legatee or devisee can be charged with the duty of Legatee or devisee Ineffective
giving a sub-legacy or sub-devisee but only to the subsequently alienates the
extent of the value of the legacy or devise given thing (Art. 933,CC)
him (Art. 925, CC)
After alienating the thing, the Ineffective
(4) The estate represented by the executor or
legatee or devisee
administrator, if no one is charged with this duty
subsequently reacquires it
to pay or deliver the legacy or devise in the will
gratuitously (Art. 933, CC)
(a) If there is an administration proceeding, it
constitutes a charge upon the estate.
(b) If there is no administration proceeding, it is a
charge upon the heirs.
Status of property given by Effect on the
Validity and Effect of Legacy or Devise
legacy/devise legacy/devise
Legacy or devise of a thing belonging to another [Art.
930, CC] After alienating the thing, the Legatee or
legatee or devisee acquires it devisee can
by onerous title (Art. 933, CC) demand
Status of property given by Effect on the reimbursement
legacy/devise legacy/devise from the heir or
estate
Testator erroneously believed Void
that the property belonged to
him Different Objects of Legacies and Devises (Art. 934-
The thing bequeathed Effective 944, CC)
afterwards becomes his by (1) Legacy of a thing pledged or mortgaged to
whatever title secure a debt [Art 934, CC]
(2) Legacy of credit, or remission or release of a debt
Legacy or devise of thing already belonging to the [Art 935 CC]
legatee or devisee (3) Legacy to the debtor of thing pledged by him [Art
936, CC]
(4) Legacy or devise to a creditor if the testator
Status of property given by Effect on the orders the payment of a debt [Art 939, CC]
legacy/devise legacy/devise (5) Alternative legacies and devises [Art 940, CC]
(6) Legacy of generic personal property or
The thing already belongs to Ineffective indeterminate real property [Art 941, CC]
the legatee or devisee at the
(7) Legacy of education [Art 944, CC]
time of the execution of the will
(8) Legacy of support [Art 944, CC]
(Art. 932, CC)
The thing is subject to an Valid only as to

Objects of Legacy or Devise Effect

Thing pledged or mortgaged
to secure a debt
Credit or remission or release
of a debt
(a) Estate is obliged to pay the debt
(b) Other charges pass to the legatee or devisee
(a) Effective only as regards the credit or debt existing at the time of the testators death
(b) Legacy lapses if the testator later brings action against the debtor
(c) If generic, comprises all credits/debts existing at time of execution of will

Thing pledged by debtor Only the pledge is extinguished; the debt remains
To a creditor Shall not be applied to his credit unless the testator so declares
Order of payment of a debt (a) If testator does not really owe the debt, the disposition is void

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Objects of Legacy or Devise Effect

Alternative legacies and
devises
Legacy of generic personal
property or indeterminate
real property
Legacy of education
Legacy of support
(b) If the order is to pay more that the debt, the excess is not due
(c) This is without prejudice to the payment of natural obligations
(a) The choice is with the heir, or the executor or administrator
(b) If the heir, legatee or devisee dies the right passes to their heirs
(c) Once made, the choice is irrevocable
(a) Legacy is valid even if there are no things of the same kind in the estate
(b) Devise of indeterminate real property valid only if there are immovable property of
the same kind in the estate
(c) The choice belongs to the heir, legatee or devisee or the executor or administrator
(a) Lasts until the legatee is of age or beyond the age of majority in order that he may
finish some professional, vocational or general course provided he pursues his course
diligently
(b) If testator did not fix the amount, it is fixed in accordance with the social standing
and circumstances of the legatee and the value of the estate
(a) Lasts during lifetime of legatee
(b) If the testator used to give the legatee a sum of money for support, give the same
amount unless it is markedly disproportionate to the estate
(c) If testator did not fix the amount, it is fixed in accordance with the social standing
and circumstances of the legatee and the value of the estate

Order of Payment in Case the Estate Is Not Sufficient to Cover All the Legacies and Devises

ART. 911 ART. 950

Order of Preference
LIPO RPSESO
(a) Legitime of compulsory heirs (a) Remuneratory legacy/devise
(b) Donations Inter vivos (b) Preferential legacy/devise
(c) Preferential legacies or devises (c) Legacy for Support
(d) All Other legacies or devises pro rata (d) Legacy for Education
(e) Legacy/devise of Specific, determinate thing which forms
a part of the estate
(f) All Others pro rata
Application
(a) When the reduction is necessary to preserve the (a) When there are no compulsory heirs and the entire estate
legitime of compulsory heirs from impairment whether is distributed by the testator as legacies or devises; or
there are donations inter vivos or not; or (b) When there are compulsory heirs but their legitime has
(b) When, although, the legitime has been preserved by already been provided for by the testator and there are
the testator himself there are donations inter vivos. no donations inter vivos.

NOTE: Art. 911, CC governs when there is a conflict Note: Art. 950, CC governs when the question of reduction is
between compulsory heirs and the devisees and legatees. exclusively among legatees and devisees themselves.

How Legacy or Devise Delivered [Art. 951, CC]
(1) The very thing bequeathed shall be delivered and
not its value
(2) With all its accessions and accessories
(3) In the condition in which it may be upon the death
of the testator
(4) Legacies of money must be paid in cash
Effect of ineffective legacies or devises [Art. 956, CC]
In case of repudiation, revocation or incapacity of the
legatee or devisee, the legacy or devise shall
bemerged with the mass of the hereditary estate,
except in cases of substitution or accretion.
Ground for Revocation of Legacies and Devises [Art.
957, CC] - (TALO)
(1) Testator Transforms the thing such that it does
not retain its original form or denomination

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(2) Testator Alienates the thing by any title or for any
cause. Reacquisition of the thing by the testator
does not make the legacy or devise valid, unless it is
effected by right of repurchase.
(3) Thing is totally Lost during the lifetime or after
the death of the testator
(4) Other causes: nullity of will, non-compliance with
suspensive condition, sale of the thing to pay the
debts of the deceased during the settlement of
his estate.
Legal or Intestate Succession
GENERAL PROVISIONS
Intestacy that which takes place by operation of law
in default of compulsory and testamentary
succession. Not defined in the Civil Code.
INSTANCES WHEN LEGAL OR INTESTATE SUCCESSION
OPERATES: [ART. 960, CC]
(1) If a person dies without a will, or with a void will,
or one which has subsequently lost its validity
(2) When the will does not institute an heir
(3) Upon the expiration of term, or period of
institution of heir [Balane, 426]
(4) Upon fulfillment of a resolutory condition
attached to the institution of heir, rendering the
will ineffective [Balane, 426]
(5) When the will does not dispose of all the property
belonging to the testator. Legal succession shall
take place only with respect to the property which
the testator has not disposed (mixed succession)
(6) If the suspensive condition attached to the
institution of the heir does not happen or is not
fulfilled
(7) If the heir dies before the testator
(8) If the heir repudiates the inheritance, there being
no substitution, and no right of accretion takes
place
(9) When the heir instituted is incapable of
succeeding, except in cases provided in the Civil
Code
(10) Preterition Intestacy may be total or partial
depending on whether or not there are legacies
or devises [Balane, 426]
Note: In all cases where there has been an institution
of heirs, follow the ISRAI order:
(a) If the Institution fails, Substitution occurs.
(b) 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.
SUCCESSION BAR OPERATIONS COMMISSION
(c) The right of Accretion applies to the free portion
when the requisites in Art. 1016 are present.
(d) If there is no substitute, and the right of
Representation or Accretion are not proper, the
rules on Intestate succession shall apply.
THE INTESTATE OR LEGAL HEIRS
(1) Relatives
(a) Legitimate ascendants
(b) Illegitimate parents
(c) Legitimate children
(d) Illegitimate children
(e) Surviving Spouse
(f) Brothers, sisters, nephews and nieces (BSNN)
(g) Other collateral relatives
(2) Surviving spouse
(3) State (through escheat proceedings)
Intestate succession is based on the presumed will of
the decedent. That is, to distribute the estate in
accordance with the love and affection he has for his
family, and in default of these persons, the presumed
desire to promote charitable and humanitarian
activities [Balane].
FUNDAMENTAL PRINCIPLES IN INTESTATE SUCCESSION:
Rule of Preference between Lines
(a) Those in the direct descending line shall exclude
those in the direct ascending and collateral lines;
(b) Those in the direct ascending line shall, in turn,
exclude those in the collateral line.
Rule of Proximity
The relative nearest in degree excludes the farther
one. [Art. 962[1], CC], saving the right of
representation when it properly takes place.
Rule of Equal Division
The relatives who are in the same degree shall
inherit in equal shares. [Arts. 962[2], 987 and 1006,
CC]
Exceptions: [Balane, 427-428]
(a) Rule of preference between Lines
(b) Distinction between legitimate and illegitimate
filiation. The ratio under present law is 2:1. [Art
983, in relation to Article 895 as amended by
Article. 176, FC]
(c) Rule of division by line in the ascending line [Art.
987 [2], CC]
(d) Distinction between full-blood and half-blood
relationship among brothers and sisters, as well
as nephews and nieces. [Art. 1006 and 1008, CC]
(e) Right of representation.
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Rule of Barrier between the legitimate family and the
illegitimate family (the iron-curtain rule)
The illegitimate family cannot inherit by intestate
succession from the legitimate family and vice-versa.
[Art. 992, CC]
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. [Arts. 895 and 983, CC]
Note:
(1) If one of the legitimate ascendants, illegitimate
parents, legitimate children or illegitimate
children survives, the brother, sisters, nephews,
and nieces (BSNN) are excluded.
(2) If one of the legitimate ascendants, illegitimate
parents, legitimate children, illegitimate children
or surviving spouse survives, the other collateral
relatives and the state are excluded.
(3) If any of the heirs concur in legitimes, then they
also concur in intestacy.
RELATIONSHIP
BASIC CONCEPTS IN RELATIONSHIP
The number of generations determines the proximity
of the relationship. Each generation forms one
degree. [Art 963, CC]
A series of degrees forms a line. This line may either
by direct or collateral. [Art. 964, CC]
(a) A direct line is that constituted by the series of
degrees among ascendants and descendants.
(b) The direct line is either ascending (brings a
person with those from whom he descends) and
descending (connecting the head of the family
with those who descend from him). [Art. 965, CC]
(c) 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.
Note: It is important to distinguish between direct
and collateral as the direct has preference over the
collateral.
In a line, as many degrees are counted as there are
generations. [Art. 966, CC]
(a) In the direct line, ascent is made up to the
common ancestor or progenitor.
(b) In the collateral line, ascent is made to the
common ancestor. Then descent to the person
with whom the computation is to be made.
Note: Descending line is preferred over ascending.
SUCCESSION BAR OPERATIONS COMMISSION
Blood relationship is either full or half-blood. [Art.
967, CC]
Note: As among brothers and sisters and nephews
and nieces, there is a 2:1 ratio for full-blood and half-
blood relatives. Direct relatives are preferred. But
this distinction does not apply with respect to other
collateral relatives.
INCAPACITY [ART. 968, CC]
General Rule: If there are several relatives of the
same degree, and one or some of them are unwilling
or incapacitated to succeed, his portion shall accrue
to the others of the same degree.
Exception: When the right of representation should
take place.
Note: This accretion in intestacy takes place in case
of predecease, incapacity, or renunciation among
heirs of the same degree. The relatives must be in
the same relationship because of the Rule of
Preference of Lines.
REPUDIATION [ARTS. 968-969, CC]
(a) There is no right of representation in repudiation.
If the nearest relative/s repudiates the
inheritance, those of the following degree shall
inherit in their own right.
(b) In case of repudiation by all in the same degree,
the right of succession passes on the heirs in
succeeding degrees: descending line first,
ascending line next, and collateral line next.
[Balane]
ADOPTION [ART. 189, FC]
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,
but still remains as an intestate heir of his natural
parents and other blood relatives.
RIGHT OF REPRESENTATION
Representation right created by fiction of law, by
virtue of which the representative is raised to the
place and the degree of the person represented, and
acquires the rights which the latter would have if he
were living or if he could have inherited (Art. 970, CC)
EFFECT OF REPRESENTATION
The representative heir acquires the rights which the
represented would have if he were living or if he
could have inherited.
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WHEN IT OCCURS must be a legal heir of both the person he is

(a) Representation is allowed with respect to
inheritance conferred by law (legitime and
intestate based on Art. 923)
(b) It occurs only in the following instances:
(1) predecease of an heir
(2) incapacity or unworthiness
(3) disinheritance [Art. 923, CC]
(c) There is no representation in testamentary
succession. [Art 856, CC]
(d) There is no representation in repudiation.
A renouncer can represent, but cannot be
represented. Rationale is found in Art. 971 which
states that The representative does not succeed the
person represented but the one whom the person
represented would have succeeded.
representing and the decedent. [Art. 973, CC]
(b) BUT the representative need not be qualified to
succeed the person represented. [Art. 971, CC] In
the same manner, the person represented need
not be qualified to succeed the decedent, as it is
his disqualification which gives rise for
representation to apply.
(c) Implication: Illegitimate children can represent
illegitimate parents in inheritance from
illegitimate grandparents. (Rationale: Iron-curtain
rule under Art. 992, CC)
(d) On the other hand, a legitimate child may
represent either a legitimate or illegitimate
parent in the inheritance of either a legitimate or
illegitimate grandparents. [Arts. 902, 989 and
990, CC]

REPRESENTATION IN THE DIRECT DESCENDING LINE REPRESENTATION IN ADOPTION

Representation takes place ad infinitum in the direct
descending line but never in the direct ascending line.
[Art. 972, CC]
General Rule: Grandchildren inherit from the
grandparents by right of representation, if proper.
Exception: Whenever all the children repudiate, the
grandchildren inherit in their own right because
representation is not proper. [Art. 969, CC]
If the adopting parent should die before the adopted
child, the latter cannot represent the former in the
inheritance of the parents or ascendants of the
adopter. The adopted child is not related to the
deceased in that case, because filiation created by
fiction of law is exclusively between the adopter and
the adopted. [Tolentino, 448-449]
ORDER OF CONCURRENCE IN THE CASE OF AN ADOPTED
CHILD (ART. 190, FC)

REPRESENTATION IN COLLATERAL LINE Survivors Share

(a) In the collateral line, representation takes place
LC, ILC, SS As in the case of ordinary
only in favor of the children of the brothers or
intestate succession
sisters (i.e., nephews and nieces) whether of the
LP/ILP, or legitimate
full or half-blood [Art. 972, CC] and only if they
ascendants
concur with at least one uncle or aunt. In this
Adopter
case, they share in the inheritance per stirpes.
(b) If the children survive alone, they inherit in their SS/ILC
own right and share in equal proportions or per Adopters
capita. [Art. 975, CC] LP or ascendants
(c) Right of representation in the collateral line is Adopter
only possible in INTESTATE succession. It cannot ILC or descendants
take place in testamentary succession. Adopters 1/3
SS 1/3
PER STIRPES ILC 1/3
(a) Inheritance per stirpes means that the Adopter alone Entire estate
representative/s shall receive only what the Collateral blood relatives As in the case of ordinary
person represented would have received, if he alone intestate succession
were living or could inherit. [Art.975, CC]
(b) If there are more than one representative in the
same degree, then it shall be divided equally,
without prejudice to the distinction between
legitimate and illegitimate, if applicable.

THE DOUBLE HEIRSHIP TEST

(a) In determining whether or not representation is
proper, it is necessary that the representative

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ORDER OF INTESTATE SUCCESSION

Decedent is a Legitimate Child Decedent is an Illegitimate Child Decedent is an Adopted Child

1 Legitimate children or Legitimate children or Legitimate children or
descendants (LCD) descendants (LCD) descendants (LCD)
2 Legitimate parents or ascendants Illegitimate children or Illegitimate children or
(LPA) descendants (LPA) descendants (ICD)
3 Illegitimate children or Illegitimate parents (IP) Legitimate or illegitimate parents,
descendants (ICD) or legitimate ascendants, adoptive
parents
4 Surviving spouse (SS) Surviving spouse (SS) Surviving spouse (SS)
5 Brothers and sisters, Illegitimate brothers and sisters, Brothers and sisters, nephews,
nephews, nieces (BS/NN) nephews, nieces (IBS/NN) nieces (BS/NN)

6 Legitimate collateral relatives State State

th
within the 5 degree (C5)
7 State

RULES OF EXCLUSION AND CONCURRENCE IN INTESTATE SHARES

Intestate Heirs Excludes Excluded By Concurs With

LC + LD Ascendants, No one SS + ILC
Collaterals and
State
ILC + D ILP, No one SS, LC, LP
Collaterals and
State
LP + LA Collaterals and LC ILC + SS
State
ILP Collaterals and LC and ILC SS
State
SS Collaterals other than No one LC, ILC, LP, ILP
siblings, nephews and Siblings
nieces, State Nephews
Nieces
Siblings, All other collaterals and LC, ILC, LP, ILP SS
Nephews State
Nieces
th
Other collaterals within 5 Collateral more remote in LC, ILC, LP, ILP and Collaterals in the same
degree degree and SS degree
State
State No one Everyone No one

OUTLINE OF INTESTATE SHARES Legitimate children and surviving spouse

Legitimate children only
(a) Divide entire estate equally among all legitimate
children [Art. 979, CC]
(b) Legitimate children include an adopted child.
Legitimate children and Illegitimate children
Divide entire estate such that each illegitimate child
gets of what a legitimate child gets [Art. 983, CC
and Art. 176, FC]
(a) Divide entire estate equally between the
legitimate children and the surviving spouse, the
latter deemed as one child. The same rule holds
where there is only one child.
(b) Children as used in Art. 996 is interpreted to
include a situation where there is only one child.

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Legitimate children. Surviving spouse, and
Illegitimate children
Divide the entire estate such that the surviving
spouse is deemed one legitimate child and each
illegitimate child getting of what the legitimate
child gets. [Art. 996, CC and Art. 176, FC]
Legitimate parents only
Divide the entire estate equally. [Art. 985, CC]
Legitimate ascendants only (excluding parents)
Divide the entire estate equally but with the
observance of the rule of division by line. [Art. 987,
CC]
Legitimate parents and illegitimate children
Legitimate parents get of the estate, illegitimate
children get the other . [Art. 991, CC]
Legitimate parents and surviving spouse
Legitimate parents get of the estate; The surviving
spouse gets the other . [Art. 997,CC]
Legitimate parents, surviving spouse and illegitimate
children
Legitimate parents get of the estate; surviving
spouse and the illegitimate child each get each,
the latter to share among themselves if more than
one. [Art. 1000, CC]
Illegitimate children only
Divide the entire estate equally. [Art. 988, CC]
Illegitimate children and surviving spouse
Illegitimate children get of the estate; the
surviving spouse gets the other . [Art. 998, CC]
Surviving spouse only
Entire estate goes to the surviving spouse. [Art.
994/995, CC]
Surviving spouse and illegitimate parents
Illegitimate parents get and the spouse gets the
other . [by analogy with Art. 997, CC]
Surviving spouse and legitimate brothers and sisters,
nephews and nieces
Surviving spouse gets of the estate, while the rest
gets the other with the nephews and nieces
inheriting by representation if proper. [Art. 1001, CC]
Surviving spouse and illegitimate brothers and sisters,
nephews and nieces
Surviving spouse gets of the estate while the rest
gets the other with the nephews and nieces
inheriting by representation, if proper; Note that all
SUCCESSION BAR OPERATIONS COMMISSION
the other relatives should be illegitimate because
of the iron-curtain rule. [Art. 994, CC]
Illegitimate parents only
Entire estate goes to the illegitimate parents. [Art
993, CC]
Illegitimate parents and children of any kind (whether
legitimate or illegitimate child)
Illegitimate parents are excluded and do not inherit;
For the rule on the respective shares of the children,
see numbers 1, 2 or 10, whichever is applicable.
Legitimate brothers and sisters only
Divide the entire estate such that full-blood
brothers/sisters gets a share double the amount of a
half-blood brother or sister. [Art. 1004 and 1006, CC]
Legitimate brothers and sisters, nephews and nieces
Divide the entire estate observing the 2 is to 1 ratio
for full and half-blood relationships with respect to
the brothers and sisters, with the nephews and
nieces inheriting by representation, if proper. [Art.
1005 & 1008, CC]
Nephews and nieces only
Divide the entire estate per capita, observing the 2 is
to 1 ratio. [Arts. 975 and 1008, CC]
Other collaterals (Arts. 1009 and 1010)
(a) Divide entire estate per capita.
th
(b) Collateral relatives must be with the 5 degree of
consanguinity.
Note: the nearer relative excludes the more remote
relatives.
State
If there are no other intestate heirs, the State inherits
the entire estate through escheat proceedings. [Art.
1011, CC]
Provisions Common to estate
and Intestate Succession
RIGHT OF ACCRETION
DEFINITION AND REQUISITES [ARTS. 1015-1016]
Definition of Accretion [Art. 1015, CC]
It is 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 renounces or
cannot receive his share or who died before the
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testator is added or incorporated to that of his co- Cause Of Testamentary Succession Intestate
heirs, co-devisees, or co-legatees. Vacancy Legitime Free Portion Succession
Successio n Succession
Requisites [Tolentino p. 497-499]: n
(1) Unity of object and plurality of subjects (two or
more persons are called to the same inheritance Incapacity Represent Accretion Representa
or same portion thereof) -ation Intestate -
(2) Vacancy of share (one of the heirs dies before the Intestate Succession tion
testator, or renounces the inheritance, or is Successio Intestate
incapacitated) n Succession

(a) Accretion happens when there is repudiation, Disinheritan Represent - -

incapacity, or predecease of an heir.
(b) It is the mechanism where the share of an heir is
increased by vacant shares vacated by heirs who
cannot inherit for various reasons. (RATIONALE:
the decedent intended to give the property to
nobody but the co-heirs.)
(c) There can only be accretion if there is an
institution of heirs with respect to specific
properties. [Art 1016, CC]
(d) Among compulsory heirs, there can only be
accretion with respect to the free portion. There
can be no accretion with respect to the legitimes.
[Arts. 1021 and 1018, CC]
(e) The heirs to whom the portion goes by the right
of accretion take it in the same proportion that
they inherit. [Art. 1019, CC]
Exceptions [Balane]:
(1) In testamentary succession, if the testator
provides otherwise
(2) If the obligation is purely personal, and hence
intransmissible
(a) The heirs to whom the inheritance accrues shall
succeed to all the rights and obligations which
the heir who renounced or could not receive it
would have had. [Art. 1020, CC]
(b) In testamentary succession, when the right of
accretion does not take place, the vacant portion
of the instituted heirs, if no substitute has been
designated, shall pass to the legal heirs of the
testator, who shall receive it with the same
charges and obligations. [Art 1022, CC]
(c) Accretion shall also take place among devisees,
legatees and usufructuaries under the same
conditions established for heirs. [Art 1023, CC]
EFFECT OF PREDECEASE, INCAPACITY, DISINHERITANCE OR
REPUDIATION IN TESTAMENTARY AND INTESTATE
SUCCESSION
Cause Of Testamentary Succession Intestate
Vacancy Legitime Free Portion Succession
Predecease Represent Accretion Represent-
-ation Intestate ation
Intestate Successio Intestate
ce -ation
Intestate
Successio
n
Repudiation Intestate Accretion Accretion
Successio
n
CAPACITY TO SUCCEED BY WILL OR INTESTACY
PERSONS INCAPABLE OF SUCEEDING
Requisites for Capacity to Succeed by Will or by
Intestacy [Art. 1024 1025, CC]
(a) The heir, legatee or devisee must be living or in
existence at the moment the succession opens;
(Art 1025) and
(b) He must not be incapacitated or disqualified by
law to succeed. (Art 1024, par.1)
PERSONS INCAPABLE OF SUCCEEDING ARTS. 1027, 739,
1032
Based on Undue Influence or Interest [Art. 1027, CC]
(PIGRAP)
(a) Priest who heard the last confession of the
testator during his last illness, or the minister of
the gospel who extended spiritual aid to him
during the same period;
(b) Individuals, associations and corporations not
permitted by law to inherit;
(c) 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; except if the guardian is his
ascendant, descendant, brother, sister, or spouse;
(d) Relatives of the priest or minister of the gospel
within the fourth degree, the church, order,
chapter, community, organization, or institution
to which such priest or minister may belong;
(e) Attesting witness to the execution of a will, the
spouse, parents, or children, or any one claiming
under such witness, spouse, parents, or children;
(f) Physician, surgeon, nurse, health officer or
druggist who took care of the testator during his
last illness.

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testator revokes the will

or the institution
Based on Morality or Public Policy [Arts. 739 and 1028, Unworthiness vs. Disinheritance
CC] (CAP) Unworthiness renders a Disinheritance is the act
(1) Those made in favor of a person with whom the person incapable of by which a testator, for
testator was guilty of adultery or concubinage at succeeding to the just cause, deprives a
the time of the making of the will. succession, whether compulsory heir of his
(2) Those made in consideration of a crime of which testate or intestate right to the legitime [Art.
both the testator and the beneficiary have been 815, CC]
found guilty.
(3) Those made in favor of a public officer or his Determination of Capacity [Tolentino p. 539]
spouse, descendants and ascendants, by reason
of his public office. General Rule: At the death of the decedent [Art. 1034,
CC]
Based on Acts of Unworthiness (Art. 1032, Cc)
(A3F3P2) Exceptions:
The following are incapable of succeeding by reason (1) Those falling under 2, 3, and 5 of Art. 1032 when
of unworthiness: the final judgment is rendered
(1) Parents who have abandoned their children or (2) Those falling under 4 of Art. 1032 when the
induced their daughters to lead a corrupt or month allowed for the report expired
immoral life, or attempted against their virtue; (3) If the institution is conditional when the
(2) Any person who has been convicted of an condition is complied with
attempt against the life of the testator, his or her
spouse, descendants, or ascendants; ACCEPTANCE AND REPUDIATION OF THE
(3) Any person who has accused the testator of a INHERITANCE
crime for which the law prescribes imprisonment CHARACTERISTICS (VIR) (ARTS. 1041 1042, 1056, CC)
for six years or more, if the accusation has been (1) Voluntary and free [Art 1041, CC]
found groundless; (2) Irrevocable except if there is vitiation of consent
(4) Any heir of full age who, having knowledge of the or an unknown will appears [Art 1056, CC]
violent death of the testator, should fail to report (3) Retroactive [Art 1042, CC]
it to an officer of the law within a month, unless
the authorities have already taken action; this REQUISITES (ART. 1043, CC)
prohibition shall not apply to cases wherein, (1) Certainty of death of the decedent
according to law, there is no obligation to make (2) Certainty of the right to the inheritance
an accusation;
(5) Any person convicted of adultery or concubinage ACCEPTANCE VS. REPUDIATION
with the spouse of the testator;
(6) Any person who by fraud, violence, intimidation, Acceptance Repudiation
or undue influence should cause the testator to
make a will or to change one already made; Involves the confirmation (a) Renders the
(7) Any person who by the same means prevents of transmission of transmission of
another from making a will, or from revoking one successional rights successional rights
already made, or who supplants, conceals, or ineffective
alters the latter's will; (b) Equivalent to an act
(8) Any person who falsifies or forges a supposed will of disposition or
of the decedent. alienation
(c) Publicity
Pardon of Acts of Unworthiness requirement is
necessary for the
Express Implied protection of other
heirs and creditors
Made by the execution of Effected when the
a document or any testator makes a will Forms of Acceptance [Arts. 1049 1050, CC]
writing in which the instituting the unworthy (1) Express Acceptance one made in a public or
decedent condones the heir with knowledge of private document. [Art. 1049 par. 1]
cause of incapacity the cause of incapacity (2) Tacit Acceptance one resulting from acts by
Cannot be revoked Revoked when the which the intention to accept is necessarily

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implied or from acts which one would have no
right to do except in the capacity of an heir.
(3) Implied acceptance - Within thirty days after the
court has issued an order for the distribution of
the estate in accordance with the Rules of Court,
the heirs, devisees and legatees shall signify to
the court having jurisdiction whether they accept
or repudiate the inheritance; if they do not do so
within that time, they are deemed to have
accepted the inheritance. [Art 1057, CC]
Forms of Repudiation [Art. 1051, CC]
(1) in a public instrument acknowledged before a
notary public; or
(2) in an authentic document equivalent of an
indubitable writing or a writing whose
authenticity is admitted or proved; or
(3) by petition presented to the court having
jurisdiction over the testamentary or intestate
proceeding
Heirs in Two Capacities [Art. 1055, CC]
(1) If a person is called to the same inheritance as an
heir by will and by law and he repudiates the
inheritance in his capacity as a testamentary heir,
he will be considered to have also repudiated the
inheritance as a legal heir.
(2) If he repudiates it as a legal heir, without his
being a testamentary heir, he may still accept it in
the latter capacity.
COLLATION
CONCEPT OF COLLATION
(a) To collate is to bring back or to return to the
hereditary mass in fact or by fiction property
which came from the estate of the decedent,
during his lifetime by donation or other
gratuitous title but which the law considers as
an advance from the inheritance. (Art 1061, CC)
(b) It is the act by virtue of which, the compulsory
heir who concurs with other compulsory heirs in
the inheritance bring back to the common
hereditary mass the property which they may
have received from the testator so that a division
may be effected according to law and the will of
the testator.
(c) In reducing inofficious donations, the last to be
donated should be the first to be reduced.
(d) Rationale for collation: If donations inter vivos will
not be collated, then the rule on legitimes shall
be circumvented or disregarded.
OPERATIONS RELATED TO COLLATION
(a) Collation adding to the mass of the hereditary
estate the value of the donation or gratuitous
disposition.
SUCCESSION BAR OPERATIONS COMMISSION
(b) 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). [Balane p 522]
(c) Reduction determining to what extent the
donation will remain and to what extent it is
excessive or inofficious.
(d) Restitution returning or the act of payment of
the excess to the mass of hereditary estate.
PERSONS OBLIGED TO COLLATE
General Rule: Compulsory heirs
Exceptions:
(a) when the testator should have so expressly
provided [Art. 1062, CC]
(b) when the compulsory heir should have
repudiated his inheritance [Art 1062, CC]
Grandchildren who survive with their uncles, aunts,
or first cousins and inherit by right of representation
[Art 1064, CC]
Note: Grandchildren may inherit from their
grandparents in their own right, i.e., as 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
this case, the grandchildren are not obliged to bring
to collation what their parent has received
gratuitously from their grandparent.
Surviving spouse NOT obliged to collate.
WHAT TO COLLATE
(a) Any property or right received by gratuitous title
during the testators lifetime [Art 1061, CC]
(b) All that they may have received from the
decedent during his lifetime. [Art 1061, CC]
(c) Expenses incurred by the parents in giving their
children a professional, vocational or other career
shall not be brought to collation unless the
parents so provide, or unless they impair the
legitime; but when their collation is required, the
sum which the child would have spent if he had
lived in the house and company of his parents
shall be deducted therefrom. [Art 1068, CC]
(d) Any sums paid by a parent in satisfaction of the
debts of his children, election expenses, fines, and
similar expenses shall be brought to collation.
[Art 1069, CC]
Note: Only the value of the thing donated shall be
brought to collation.
PROPERTIES NOT SUBJECT TO COLLATION
Absolutely no collation
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Expenses for support, education (only elementary
and secondary), medical attendance, even in
extraordinary illness, apprenticeship, ordinary
equipment, or customary gifts [Art. 1067, CC]
Generally not imputable to legitime/ cannot be
collected, subject to exceptions
(a) Expenses incurred by parents in giving their
children professional, vocational or other career
unless the parents so provide, or unless they
impair the legitime. [Art. 1067, CC]
(b) Wedding gifts by parents and ascendants,
consisting jewelry, clothing and outfit, except
when they exceed 1/10 of the sum disposable by
will. [Art. 1070, CC]
(c) Neither shall donations to the spouse of the child
be brought to collation; but if they have been
given by the parent to the spouses jointly, the
child shall be obliged to bring to collation one-
half of the thing donated. [Art. 1066, CC]
Note: Parents are not obliged to bring to collation in
the inheritance of their ascendants any property
which may have been donated by the latter to their
children. [Art 1065, CC]
PARTITION AND DISTRIBUTION OF ESTATE
PARTITION
Concept
(a) Separate, Divide, Assign. Partition is the
separation, division and assignment of a thing
held in common among those to whom it may
belong. The thing itself or its value may be
divided. [Art. 1079, CC]
(b) Owned in common. Before partition, the whole
estate of the decedent is owned in common by
the heirs. [Art 1078, CC]
(c) Thing or value may be divided. [Art 1079]
(d) Acts deemed partition. Every act which is intended
to put an end to indivision among heirs and
legatees or devisees is deemed a parition,
although it should purport to be a sale, an
exchange, a compromise, or any other
transaction. [Art 1082, CC]
A void partition may be valid if:
(1) the will was in fact a partition
(2) the beneficiaries of the void will were legal heirs
The titles of acquisition or ownership of each
property shall be delivered to the co-heir to whom
said property has been adjudicated. [Art. 1089 CC]
PARTITION INTER VIVOS
Judicial v. Extrajudicial Partition
SUCCESSION BAR OPERATIONS COMMISSION
(a) Judicial Partition done by Court pursuant to an
Order of Distribution which may or may not be
based on a project of partition.
(b) Extra-judicial partition made by the decedent
himself by an act inter vivos or by will or by a third
person entrusted by the decedent or by the heirs
themselves. [Paras]
PARTITION INTER VIVOS (ASKED IN 85)
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. (Art. 1080, cc)
Who may effect partition
(1) The Decedent, during his lifetime by an act inter
vivos or by will [Art.1080, CC]
(2) The decedents heirs [Art.1083, CC]
(3) A competent court [Art. 1083,CC]
(4) A third person not an heir designated by the
decedent [Art.1081, CC]
Who Can Demand Partition
(1) Compulsory heir
(2) Voluntary heir upon fulfillment of condition if any
[Art 1084, CC]
(3) Legatee or devisee
(4) Any person who has acquired interest in the
estate
When Partition Cannot Be Demanded
(1) When expressly Prohibited by the testator for a
period not exceeding 20 years [Art 1083, CC]
(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 the 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.
Effects of Inclusion of Intruder in Partition [Art 1108,
CC]
(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
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UP COLLEGE OF LAW
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. The partition with respect to the
mistaken heir is void. [Sempio-Dy]
Right of Redemption in Partition
(a) Should any of the heirs sell his hereditary rights
to a stranger before the partition, any or all of the
co-heirs may be subrogated to the rights of the
purchaser by reimbursing him for the price of the
sale, provided they do so within the period of one
month from the time they were notified in writing
of the sale by the vendor [Art. 1088, CC]
(b) Strangers those who are not heirs on the
succession.
EFFECTS OF PARTITION
Effect
A partition legally made confers upon each heir the
exclusive ownership of the property adjudicated to
him [Art 1091, CC]
Warranty
(a) After the partition has been made, the co-heirs
shall be reciprocally bound to warrant the title to,
and the quality of, each property adjudicated
[Art. 1092 CC]
(b) The reciprocal obligation of warranty referred to
in the preceding article shall be proportionate to
the respective hereditary shares of the co-heirs;
(1) But if any one of them should be insolvent, the
other co-heirs shall be liable for his part in the
same proportion, deducting the part
corresponding to the one who should be
indemnified.
(2) Those who pay for the insolvent heir shall
have a right of action against him for
reimbursement, should his financial condition
improve [Art. 1093 CC]
(c) An action to enforce the warranty among the co-
heirs must be brought within ten years from the
date the right of action accrues. [Art. 1094 CC]
(d) If a credit should be assigned as collectible, the
co-heirs shall not be liable for the subsequent
insolvency of the debtor of the estate, but only for
his insolvency at the time the partition is made. [Art
1095, CC]
(e) The warranty of the solvency of the debtor can
only be enforced during the five years following
the partition.
(f) Co-heirs do not warrant bad debts, if so known to,
and accepted by the distributee.
(1) But if such debts are not assigned to a co-heir,
and should be collected, in whole or in part,
the amount collected shall be distributed
SUCCESSION BAR OPERATIONS COMMISSION
proportionately among the heirs. [Art. 1095
CC]
End of Warranty
The obligation of warranty among co-heirs shall
cease in the ff. cases:
(a) The testator himself has made the partition
(1) Unless it appears, or it may be reasonably
presumed, that his intention was otherwise,
but the legitime shall always remain
unimpaired.
(b) When it has been so expressly stipulated in the
agreement of partition
(1) Unless there has been bad faith
(c) When the eviction is due to a cause subsequent to
the partition, or has been caused by the fault of
the distributee of the property. (Art. 1096, CC)
NULLIFICATION OF PARTITION
Causes for Rescission or Annulment
(a) A partition may be rescinded or annulled for the
same causes as contracts. [Art 1097, CC]
(b) A partition, judicial or extra-judicial, may also be
rescinded on account of lesion, when any one of
the co-heirs received things whose value is less by
at least one-fourth, than the share to which he is
entitled, considering the value of the things at the
time they were adjudicated [Art. 1098, CC]
(1) This article applies only to cases of partition
among-coheirs
(2) Lesion is the injury suffered in consequence of
inequality of situation by one party who does
not receive the full equivalent for what she
gives in a sale or any commutative contract
(c) The partition made by the testator cannot be
impugned on the ground of lesion, except when
the legitime of the compulsory heirs is thereby
prejudiced, or when it appears or may be
reasonably be presumed, that the intention of the
testator was otherwise. [Art. 1099, CC]
(d) Preterition of a compulsory heir in the partition
[Art 1104, CC]:
(1) Partition shall not be rescinded unless bad
faith or fraud on the part of other heirs is
proved.
(2) The culpable heirs shall share in the damages
of the prejudiced compulsory heir
proportionately.
(e) A partition which includes a person believed to be
an heir, but who is not, shall be void only with
respect to such person. [Art. 1105 CC]
(a) The action for rescission on account of lesion shall
prescribe after four years from the time the
partition was made. [Art. 1100, CC]
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(b) The heir who is sued shall have the option of 5 years from To enforce warranty of solvency
indemnifying the plaintiff for the loss, or partition of debtor of the estate at the
consenting to a new partition time partition is made
(c) Indemnity may be made: 4 years form Action for rescission of partition
(1) By payment in cash or partition on account of lesion
(2) By the delivery of a thing of the same kind
and quality as that awarded to the plaintiff.
(d) If a new partition is made, it shall affect neither
those who have not been prejudiced nor those
who have not received more than their just share
[Art. 1101, CC]
(e) An heir who has alienated the whole or a
considerable part of the real property adjudicated
to him cannot maintain an action for rescission on
the ground of lesion, but he shall have a right to
be indemnified in cash [Art. 1102, CC]
(f) The omission of one or more objects or securities
of the inheritance shall not cause the rescission of
the partition on the ground of lesion, but the
partition shall be completed by the distribution of
the objects or securities which have been omitted.
[Art. 1103, CC]

Difference of Nullity from Rescission

Nullity is not the same as Rescission:
(1) Nullity - the act is supposed to never have existed
(2) Rescission - the act is valid at the origin though it
afterwards became ineffective

Important Periods in Partition

1 month or less Testator, if publicly known to be
before making a insane, burden of proof is on the
will one claiming validity of the will
20 years Maximum period testator can
prohibit alienation of
dispositions
5 years from To claim property escheated to
delivery to the the State
State
1 month To report knowledge of violent
death of decedent lest he be
considered unworthy
5 years from the Action for declaration of
time disqualified incapacity & for recovery of the
person took inheritance, devise or legacy
possession
30 days from Must signify
issuance of order acceptance/repudiation
of distribution otherwise, deemed accepted
1 month form Right to repurchase hereditary
written notice of rights sold to a stranger by a co-
sale heir
10 years To enforce warranty of
title/quality of property
adjudicated to co-heir from the
time right of action accrues

PAGE 234
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PAGE 235
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Contract of Partnership
DEFINITION
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. [Article 1767]
Article 1767 defines partnership from the viewpoint of
a contract. From the contract arises the partnership
relation. As a form of business organization,
partnership falls between two extremes single
proprietorship and corporation. [De Leon, Comments
and Cases on Partnership, Agency and Trusts (2010),
hereinafter referred to as "De Leon (2010)"]
ELEMENTS
There is a contract of partnership when:
(1) There is a meeting of the minds;
(2) To form a common fund;
(3) With intention that profits and losses will be
divided among the contracting parties.
ESSENTIAL FEATURES
A partnership contract has the following essential
features:
(1) There must be a valid contract.
(2) The parties must have legal capacity.
(3) There must be a mutual contribution of money,
property, or industry to a common fund.
(4) The object must be lawful.
(5) The primary purpose must be to obtain profits
and to divide the same among the parties.
(6) The partnership has a juridical personality
separate from individual partners [Article 1768].
As such, "Any immovable property or an interest
therein may be acquired in the partnership name.
Title so acquired can be conveyed only in the
partnership name." [Article 1774]
EFFECT OF UNLAWFUL OBJECT
If the partnership has an unlawful object or purpose:
(1) The contract is void ab initio. [Article 1409(1)]
(2) Once dissolved by judicial decree:
(a) The profits shall be confiscated by favor of
the State;
(b) The instruments or tools and proceeds of
the crime shall also be forfeited in favor of the
State. [Article 1770]
(c) The contributions of partners shall not be
confiscated unless they are instruments or tools
of the crime. [De Leon (2010)]
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BAR OPERATIONS COMMISSION
Note: A partnership is dissolved by operation of law
(even without judicial decree) when the business
becomes unlawful.
ASSOCIATIONS WITHOUT LEGAL PERSONALITY
Associations and societies with the following
characteristics has no legal personality and is
governed by the provisions of co-ownership:
(1) The articles are kept secret among the members;
and
(2) Any one of the members may contract in his own
name with third persons. [Article 1775]
It may, however, be sued by third persons under the
common name it uses. [Section 15, Rule 3, Rules of
Court]
CHARACTERISTICS
The contract of partnership is:
(1) Consensual, because it is perfected by mere
consent.
(2) Nominate, because it has a specific name.
(3) Bilateral or multilateral, because it is entered into
between two or more persons.
(4) Principal, because its existence does not depend
on another contract.
(5) Onerous, because money, property or industry are
contributed by the parties.
(6) Preparatory, because it is entered into to carry out
a business or specific venture.
(7) Commutative, because the undertaking of each is
considered as equivalent of that of the others.
PARTIES TO THE CONTRACT
General rule: Any person capacitated to contract may
enter into a contract of partnership.
As such, the following persons cannot enter into a
contract of partnership:
(1) Those suffering from civil interdiction;
(2) Minors;
(3) Insane or demented persons;
(4) Deaf-mutes who do not know how to write;
(5) Incompetents who are under guardianship.
Exceptions: The capacity of the following persons to
enter into a contract of partnership, though
capacitated to contract generally, are limited:
(1) Those who are prohibited from giving each other
any donation or advantage cannot enter into a
universal partnership. [Article 1782]
(2) A corporation cannot enter into a partnership in
the absence of express authorization by statute or
charter.
Ratio: Otherwise, as a result of the mutual agency
between partners, a corporation would be bound by
the acts of persons other than its duly appointed or
authorized officers or agents. This is inconsistent
UP COLLEGE OF LAW AGENCY & PARTNERSHIP
with the policy of the law that a corporation should
manage its own affairs.
Also, the arrangement would allow corporate
property to be subject to risks not contemplated by
the stockholders when they originally invested.
[Mendiola v. CA (2006)]
Although a corporation cannot enter into a
partnership contract, it may, however, engage in a
joint venture with others [Auerbach vs. Sanitary
Wares Manufacturing Corp. (1989)].
There is no prohibition against a partnership being a
partner in another partnership. [De Leon (2010)]
OBJECT OF THE CONTRACT
OBJECT OF UNIVERSAL PARTNERSHIP
A universal partnership may refer to:
(1) All present property:
(a) The partners contribute all the property
which belongs to them to a common fund,
with the intention of dividing the same
among themselves, as well as the profits they
may acquire therewith. [Article 1778]
(b) The property contributed includes all those
belonging to the partners at the time of the
constitution of the partnership.
(c) A stipulation for the common enjoyment of
any other profits may also be made.
However, the property which the partners
may acquire subsequently by inheritance,
legacy or donation cannot be included in
such stipulation, except the fruits thereof.
[Article 1779]
(2) All the profits:
(a) It comprises all that the partners may acquire
by their industry or work during the existence
of the partnership.
(b) Only the usufruct over the property of the
partners passes to the partnership. [Article
1780]
When the articles of universal partnership
does not specify its nature (all present
property or all the profits), the partnership
will be considered as one only of all the
profits. [Article 1781]
OBJECT OF PARTICULAR PARTNERSHIP
A particular partnership has for its object determinate
things, their use or fruits, or a specific undertaking, or
the exercise of a profession or vocation. [Article 1783]
FORM OF THE CONTRACT
General rule: The contract may be constituted in any
form. [Article 1771]
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BAR OPERATIONS COMMISSION
Exceptions: (1) Where immovable property or real
rights are contributed:
(a) The contract must appear in a public instrument;
and
(b) Attached to such instrument must be an
inventory, signed by the parties, of the property
contributed. [Articles 1771 and 1773]
(2) Where the capital is at least P3,000, in money or
property:
(a) The contract must appear in a public
instrument; and
(b) It must be recorded in the SEC. Failure to
comply with these requirements, however,
does not affect the liability of the partnership
and the partners to third persons. [Articles
1768 and 1772]
DURATION OF THE CONTRACT
COMMENCEMENT
A partnership begins from the moment of the
execution of the contract, unless it is otherwise
stipulated. [Article 1784]
TERM
As to period, a partnership may either be:
(1) For a fixed term or particular undertaking; or
(2) At will, the formation and dissolution of which
depend on the mutual desire and consent of the
parties. Any one of the partners may, at his sole
pleasure, dictate the dissolution of the
partnership, even in bad faith, subject to liability
for damages. [Ortega v. CA (1995)]
EXTENSION
A partnership term may be extended by:
(1) Express renewal of the agreement; or
(2) Implied renewal, when the requisites concur:
(a) The partnership is for a fixed term or
particular undertaking;
(b) It is continued after the termination of the
fixed term or particular undertaking without
any express agreement.
A continuation of the business by the partners or
such of them as habitually acted therein during the
term, without any settlement or liquidation of the
partnership affairs, is prima facie evidence of a
continuation of the partnership. The effect of such
continuation is that the right and duties of the
partners remain the same as they were at such
termination of the period, but this time, the
partnership is considered to be at will. [Article 1785]
UP COLLEGE OF LAW
RULES TO DETERMINE EXISTENCE
When the intent of the parties is clear, it shall
govern. When it does not clearly appear, the
following rules apply:
(1) Persons who are not partners to each other are
not partners as to third persons.
Exception: A person not a partner may be considered
a partner by estoppel.
(2) Co-ownership or co-possession does not of itself
establish a partnership, even when there is
sharing of profits in the use of the property.
(3) Sharing of gross returns does not of itself
establish a partnership, even when the parties
have joint or common interest in any property
from which the returns are derived.
(4) The receipt by a person of a share in the profits of
a business is prima facie evidence that he is a
partner.
Exceptions: No such inference is drawn if the profits
are received in payment:
(a) As a debt by installments or otherwise;
(b) As wages of an employee of 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;
(e) As the consideration for the sale of a goodwill of a
business or other property by installments or
otherwise. [Article 1769]
RELATIONS CREATED
(1) Among the partners themselves.
(2) Between the partners and the partnership.
(3) Between the partnership and third persons with
whom it contracts.
(4) Between the partners and such third persons.
KINDS OF PARTNERSHIP
AS TO LEGALITY OF EXISTENCE
(1) Partnership de jure is one which has complied with
all the requisites for its lawful establishment.
(2) Partnership de facto is one which failed to so
comply.
AS TO OBJECT
(1) Universal partnership:
(a) Of all present property;
(b) Of profits;
(2) Particular partnership.
AS TO DURATION
(1) For a fixed term or particular undertaking;
(2) At will.
AGENCY & PARTNERSHIP BAR OPERATIONS COMMISSION
AS TO LIABILITY OF PARTNERS
(1) General partnership, consisting of general partners
only, who are liable pro rata for partnership
obligations with all their after exhaustion of
partnership assets;
(2) Limited partnership, includes, aside from general
partner/s, limited partners, who are not
personally liable for partnership obligations.
AS TO PUBLICITY
(1) Secret partnership, where the existence of certain
persons as partners is not made known by the
partners;
(2) Open or notorious partnership, the existence of
which is made known to the public by the
partners.
AS TO PURPOSE
(1) Commercial or trading partnership, for transaction
of business;
(2) Professional or non-trading, for exercise of a
profession.
A profession has been defined as "a group of men
pursuing a learned art as a common calling in the
spirit of public service no less a public service
because it may incidentally be a means of
livelihood." [In the Matter of the Petition for Authority
to Continue Use of Firm name "Sycip, Salazar,
etc."/"Ozaeta, Romulo, etc." (1979)]
A professional partnership is a particular
partnership. [Article 1783]
KINDS OF PARTNERS
(1) Capitalist, whose contribution is money or
property;
(2) Industrial, whose contribution is only his industry;
(3) General, whose liability to third persons extends
to his separate property;
(4) Limited, whose liability to third persons is limited
to his capital contribution;
(5) Managing, designated to manage the affairs or
business of the partnership;
(6) Liquidating, takes charge of the winding up of
partnership affairs;
(7) By estoppel, who is not really a partner but is
liable as such for the protection of innocent third
persons;
(8) Continuing, who continues the business after
dissolution of the partnership by admission of a
new partner, or retirement, death or expulsion of
existing partners.
(9) Surviving, who remains a partner after dissolution
by death of any partner;
(10)Subpartner, who is not a member of the
partnership but contracts with a partner with
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regard to the share of the latter in the DISTINGUISHED FROM OTHER CONTRACTS
partnership; Partnership Joint Venture
(11) Ostensible, who takes active part in the business
of the partnership and is known by the public; Operates with firm name Operates with no firm
(12)Secret, who takes active part in the business, but and legal personality name and legal
is unknown to the third persons as a partner; personality
(13) Silent, who does not take active part in the business, but may be known to be a partner by third persons;
(14)Dormant, who does not take active part in the Generally relates to a Usually limited to a single
business and is not known or held out as a continuing business of transaction
partner; various transactions of a
(15)Original, who has been a partner since the certain king
constitution of the partnership;
(16)Incoming, who is about to be taken as a member Corporations may not Corporations may enter
into an existing partnership; enter into a partnership into joint ventures
(17) Retiring, who is withdrawing from the
partnership. It would seem therefore that under Philippine law, a
joint venture is a form of partnership and should thus
Industrial Partner Capitalist Partner be governed by the laws of partnership. [Auerbach vs.
Sanitary Wares Manufacturing Corp. (1989)]
Form of contribution
Partnership Co-Ownership
Industry Money or property
Generally created by Generally created by law,
Share in profits either express or implied and may exist even
contract without a contract
Just and equitable share According to agreement;
if none, in proportion to Has a separate juridical Has no separate juridical
contribution personality personality

Share in losses Generally, the purpose is The purpose is common

Exempted as to losses as
between partners, but
liable to third persons,
without prejudice to
reimbursement from
capitalist partners
According to agreement; if
none, in proportion to
agreed share in the
profits;
if none, in proportion to
contribution
to obtain profits enjoyment of a thing or
right
Duration has no limitation An agreement to keep a
thing undivided for more
than 10 years is not
allowed

Engaging in business There is mutual agency There is no mutual

between partners representation among co-
Cannot engage in Cannot engage, for his owners
business for himself, own account, in the same
unless the partnership kind of business as that of Death or incapacity of a Death or incapacity of a
expressly permits him to the partnership, unless partner dissolves the co-owner does not
do so; should he do so there is a stipulation to partnership dissolve the co-ownership
without permission, the the contrary; should he do
capitalist partners (as well so, he shall bring to the Partner cannot dispose of Co-owner can dispose of
as industrial partners [De common fund any profits his interest so as to make his share without consent
Leon (2010)]) may (a) accruing to him from his the assignee a partner, of others
exclude him from the firm, transactions and shall without consent of others
or (b) avail themselves of personally bear all the
the benefits obtained in losses [Article 1808]
violation of the Partnership Corporation
prohibition, with right to
damages in either case Has juridical personality separate and distinct from
[Article 1789] its individual members
Can only act through agents

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Partnership Corporation Conjugal

Partnership
Partnership of Gains
Composed of an aggregate of individuals
Has juridical personality Has no juridical
Distributes its profits to those who contributed personality
capital to the business
Commencement date Commencement is on the
Can only be organized where there is a law may be stipulated date of the celebration of
authorizing its organization the marriage, and any
Taxable as a corporation stipulation to the contrary
is void
Created by agreement Created by law (with SEC
approval) Share in profits may be Share in profits is equal
stipulated; otherwise, in
Involves at least 2 persons Except for a corporation proportion to contribution
sole, requires at least 5
incorporators Management shared by Administration belongs to
all partners, unless the spouses jointly, but
Personality commences Personality commences otherwise agreed upon decision of husband
from the moment of from the issuance of prevails in disagreement
execution of the contract certificate of incorporation
Partner can dispose of Spouse cannot dispose of
Can exercise any power Can exercise only powers Interest even without interest during marriage,
authorized by partners granted by law or those consent of others even with consent
incidental to its existence
When management is not Management is vested in
agreed upon, every the board of directors of Partnership Voluntary Association
partner may act for the trustees
partnership Has juridical personality Has no juridical
personality
Partners are generally Stockholders are liable
liable for partnership only to the extent of their Organized for profit Not always organized for
debts shares profit

Partner cannot dispose of Stockholder has the right Capital is contributed Capital is not contributed,
his interest so as to make to transfer his shares although fees are
the assignee a partner, without consent of others collected from members
without consent of others
Partnership is primarily The members are liable
Duration has no limitation The term is 50 years, but liable; the partners are individually for debts
may be extended liable only subsidiarily which they authorized or
ratified
May be dissolved at any May only be dissolved with
time by one or all of the the consent of the state Share in profits may be Share in profits is equal
partners stipulated; otherwise, in
proportion to contribution

Management shared by Administration belongs to

Conjugal all partners, unless the spouses jointly, but
Partnership
Partnership of Gains otherwise agreed upon decision of husband
prevails in disagreement
Created by voluntary Arises in case the spouses,
agreement of 2 or more of opposite sex, agree Partner can dispose of Spouse cannot dispose of
partners of either sex before marriage Interest even without interest during marriage,
consent of others even with consent
Governed by agreement Governed by law

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Rights and obligations
of the partnership
RIGHT TO CONTRIBUTION, IN GENERAL
The mutual contribution to a common fund is the
essence of the contract of partnership [De Leon
(2010)]. As such, the partnership has a right to the
contribution (or partners are obliged to contribute).
The money or property thus contributed, or their use
or fruits, becomes a property of the partnership.
To complement this right of the partnership and as
an incident of its separate and distinct juridical
personality, it is allowed by law to acquire any
immovable property or an interest therein. Title so
acquired can be conveyed only in the partnership
name [Article 1774].
OBLIGATION OF PARTNERS TO THE
PARTNERSHIP
WITH RESPECT TO CONTRIBUTION OF MONEY OR
PROPERTY
With respect to contribution of property, a partner is
obliged to:
(1) To contribute, at the beginning of the partnership
or at the stipulated time, the money, property or
industry which he undertook to contribute;
(2) In case a specific and determinate thing is to be
contributed:
(a) To warrant against eviction in the same
manner as a vendor; and
(b) To deliver to the partnership the fruits of the
property promised to be contributed, from
the time they should have been delivered,
without need of demand [Article 1786];
(3) In case a sum of money is to be contributed, or in
case he took any amount from the partnership
coffers, to indemnify the partnership for:
(a) Interest; and
(b) Damages, from the time he should have
complied with his obligation, or from the time he
converted the amount to his own use, respectively
[Article 1788].
Article 1788 is an exception to the general rule that in
obligations consisting in the payment of a sum of
money, the indemnity for damages consists only in
the payment of interest [Article 2209].
AMOUNT OF CONTRIBUTION
General rule: The partners are obliged to contribute
equal shares to the capital of the partnership.
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Exception: When there is an agreement to the
contrary, the contribution shall follow such
agreement [Article 1790].
DETERMINING VALUE OF CONTRIBUTION IN GOODS
To determine the value when the contribution
consists, in whole or in part, of goods, their appraisal
must be made:
(1) In the manner prescribed in the partnership
contract;
(2) In the absence thereof, by experts chosen by the
partners and according to current prices.
Subsequent changes in the price will be for the
benefit or will be suffered by the partnership [Article
1787].
ADDITIONAL CAPITAL CONTRIBUTION
In case of an imminent loss of the business of the
partnership, any partner who refuses to contribute
an additional share to the capital, except an industrial
partner, to save the venture, shall be obliged to sell
his interest to the other partners, unless there is an
agreement to the contrary [Article 1791].
Requisites:
(1) There is an imminent loss of the business of the
partnership;
(2) The majority of the capitalist partners are of the
opinion that an additional contribution to the
common fund would save the business;
(3) The capitalist partner refuses deliberately (not
because of financial inability) to contribute an
additional share to the capital; and
(4) There is no agreement that even in case of
imminent loss of the business, the partners are not
obliged to contribute.
PROHIBITION AGAINST ENGAGING IN BUSINESS
General rule: A capitalist partner cannot engage for
his own account in any operation which is of the kind
of business in which the partnership is engaged.
Should he do so, he shall bring to the common fund
any profit accruing to him from his transactions,
while personally bearing all the losses.
Exception: The rule does not apply when there is a
stipulation to the contrary [Article 1808].
RISK OF LOSS OF THINGS CONTRIBUTED
In case the contribution consists in the use and fruits
of specific and determinate things, which are not
fungible, the risk of loss shall be borne by the partner
who owns them.
The partnership bears the risk if the things:
(1) Are fungible;
(2) Cannot be kept without deterioration;
UP COLLEGE OF LAW AGENCY & PARTNERSHIP
(3) Were contributed to be sold; or
(4) Were brought and appraised in the inventory.
In the last case, the claim is limited to the
appraised value of the things [Article 1795].
REMEDY IN CASE OF NON-COMPLIANCE
A partner is guilty of estafa if he misappropriates
partnership money or property received by him for a
specific purpose of the partnership [Liwanag v. CA
(1997)].
However, mere failure on the part of an industrial
partner to return to the capitalist partner the capital
brought by him into the partnership is not an act
constituting estafa. The action that may be brought
to recover the money is a civil one [US v. Clarin
(1910)].
OBLIGATION OF PARTNERS TO THE
PARTNERSHIP
WITH RESPECT TO CONTRIBUTION OF INDUSTRY
With respect to contribution of industry, a partner is
also obliged to contribute it at the stipulated time.
PROHIBITION AGAINST ENGAGING IN BUSINESS
General rule: An industrial partner cannot engage in
business for himself. Should he do so, the capitalist
partners, as well as industrial partners [De Leon
(2010)], may either:
(1) Exclude him from the firm; or
(2) Avail themselves of the benefit which he may
have obtained.
Exception: He may engage in business for himself
when the partnership expressly permits him to do so.
[Article 1789]
RIGHT TO APPLY PAYMENT TO PARTNERSHIP
CREDIT
General rule: A partner authorized to manage, who
collects a demandable sum owed to him in his own
name from a person who also owes the partnership a
demandable sum, is obliged to apply the sum
collected to both credits pro rata, even if he issued a
receipt for his own credit only.
Requisites:
(1) There exist at least two debts, one where the
collecting partner is creditor, and the other,
where the partnership is the creditor;
(2) Both debts are demandable; and
(3) The partner who collects is authorized to manage
and actually manages the partnership.
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Exceptions:
(1) In case the receipt was issued for the account of
the partnership credit only, however, the sum
shall be applied to the partnership credit alone.
(2) When the debtor declares, pursuant to Article
1252, at the time of making the payment, to which
debt the sum must be applied, it shall be so
applied [Article 1792].
The law, through this rule, safeguards the interests
of the partnership by preventing the possibility of
their being subordinated by the managing partner to
his own interest, by intentionally failing to collect
partnership credits to collect his own, to the
prejudice of the other partners. This possibility does
not exist in case the partner is not authorized to
manage [De Leon (2010)].
RIGHT TO RETURN OF CREDIT RECEIVED
A partner, who is authorized to manage or not, is
obliged to bring to the partnership capital what he
received when:
(1) He has received, in whole or in part, his share of
the partnership credit;
(2) The other partners have not collected their
shares; and
(3) The partnership debtor has become insolvent.
This obligation exists even when he issued a
receipt for his share only. [Article 1793]
Ratio: In this case, the debt becomes a bad debt. It
would be unfair for the partner who already collected
not to share in the loss of the other partners.
RIGHT TO INDEMNITY FOR DAMAGES
Every partner is responsible to the partnership for
damages suffered by it through his fault.
COMPENSATION OF LIABILITY
General rule: The liability for damages cannot be set-
off or compensated by profits or benefits which the
partner may have earned for the partnership by his
industry.
Ratio: The partner has the obligation to secure the
benefits for the partnership. As such, the
requirement for compensation, that the partner be
both a creditor and a debtor of the partnership at the
same time, is not complied with [Article 1278; De Leon
(2010)].
Exception: The court may equitably lessen the
liability if, through his extraordinary efforts in other
activities of the partnership, unusual profits were
realized [Article 1794].
Note, however, that there is still no compensation.
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SUIT FOR DAMAGES
Before a partner may sue another for alleged
fraudulent management and resultant damages,
liquidation must first be effected to determine the
extent of the damage. Without liquidation of
partnership affairs, a partner cannot claim damages
[Soncuya v. De Luna (1939)].
RESPONSIBILITY OF THE PARTNERSHIP TO
PARTNERS
In the absence of any stipulation to the contrary,
every partner is an agent of the partnership for the
purpose of its business. As such, it is responsible to
every partner:
(1) For amounts, and the corresponding interest
from the time the expenses were made, which he
may have disbursed on behalf of the partnership;
(2) For obligations he may have contracted in good
faith in the interest of the partnership business;
and
(3) For risks in consequence of the management of
the partnership. [Article 1796]
Rights and obligations
of partners inter se
RIGHT TO ASSOCIATE ANOTHER IN SHARE
Every partner may associate another person with him
in his share.
The admission of the associate to the partnership,
however, requires the consent of all the other
partners, even if the partner having an associate is a
managing partner [Article 1804].
SUBPARTNERSHIP
The arrangement refers to a contract of
subpartnership, which is a partnership within a
partnership, distinct and separate from the main
partnership [De Leon (2010)]. The associate is
sometimes referred to as a subpartner.
Since admission of the subpartner as a new partner
in the main partnership amounts to a modification of
the original contract, it requires the unanimous
consent of the partners.
RIGHT TO ACCESS PARTNERSHIP BOOKS
The partnership books shall be kept at the place
agreed upon by the partners.
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Without such agreement, they shall be kept at the
principal place of business of the partnership.
Every partner shall, at any reasonable hour, have
access to and may inspect and copy any of them.
[Article 1805]
BASIS OF RIGHT
Since a partner is a co-owner of partnership
properties, which include the books, and has a right
to participate in the management of its affairs, the
books should not be in the exclusive custody or
control of any one partner [De Leon (2010)].
REASONABLE HOUR
"Any reasonable hour" has been interpreted to mean
reasonable hours on business days throughout the
year, not merely during some arbitrary period of a
few days chosen by the managing partner [Pardo v.
Lumber Co., (1925)].
RIGHT TO A FORMAL ACCOUNT
Any partner shall have the right to a formal account
as to partnership affairs:
(1) If he is wrongfully excluded from the partnership
business or possession of its property by his co-
partners;
(2) If the right exists under the terms of any
agreement;
(3) If, without his consent, a partner has derived
profits from any transaction connected with the
formation, conduct, or liquidation of the
partnership or from any use of partnership
property;
(4) Whenever other circumstances render it just and
reasonable [Article 1809].
ACCRUAL OF RIGHT
General rule: The right to a formal account of
partnership affairs accrues only when the
partnership is dissolved. Ample protection is already
provided.
Exceptions: In special and unusual cases under
Article 1809, formal accounting may be demanded
even before dissolution.
PERSON OBLIGED
The obligation to account rests on the managing or
active partner (or, after dissolution, in the liquidating
or surviving partner).
PRESCRIPTION OF ACTION
The right, on the part of the other partners, to
demand an accounting exists while the partnership
exists. The prescriptive period begins to run only
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upon the dissolution when the final accounting is (b) Dissolution by judicial decree [Article 1831].
done [Fue Leung v. IAC (1989)]. (2) A partner's right in such property is not
assignable, except when all the partners assign
NATURE OF ACTION their rights in the same property.
The action for accounting is an action in personam, (3) The right is not subject to attachment or
regardless of the incidental fact that some of the execution, except on claim against the
assets of the partnership are real property [Emnace v. partnership. Also, in case of such attachment, the
CA (2001)]. partners, or any of them, or the representatives of
a deceased partner, cannot claim any right under
PROPERTY RIGHTS OF PARTNERS the homestead or exemption laws;
IN GENERAL (4) The right is also not subject to legal support
The property rights of a partner are: under Article 291 [Article 1811].
(1) Rights in specific partnership property;
(2) Interest in the partnership; and A partner's right in specific property cannot be
(3) Right to participate in the management [Article separately assigned, since it is impossible to
1810]. determine the extent of his beneficial interest in the
property until after the liquidation of partnership
PARTNERSHIP PROPERTY AND PARTNERSHIP CAPITAL affairs.
Capital Property
It is also not subject to support precisely because it is
With constant value Value varies with market a property of the partnership and not of the
conditions individual partners.

Includes only actually Includes the contributions INTEREST IN THE PARTNERSHIP

contributed and promised and property acquired by A partner's interest in the partnership is his share of
capital the partnership the profits and surplus [Article 1812]. This interest is
subject to support and may be assigned.

OWNERSHIP OF CERTAIN PROPERTY RIGHTS OF ASSIGNEE

(1) The ownership of property used by the partnership Assignment by a partner of his whole interest in the
depends on the intention of the parties, which partnership does not, of itself:
may be drawn from an express agreement or (1) Dissolve the partnership; or
their conduct. (2) Entitle the assignee to:
(a) A partner may allow the property to be used (a) Interfere in the management or
by the partnership without transfer of administration of the partnership business or
ownership, contributing only the use or affairs;
enjoyment thereof. (b) Require information or account of
(b) He may also hold title to partnership property, partnership; or
without acquiring ownership thereof [Article (c) Inspect the partnership books.
1819].
(2) Property acquired by a partner with partnership It merely entitles the assignee to:
funds is presumed to be partnership property. (1) Receive the profits to which the assigning partner
(3) The same presumption also arises when the was entitled;
property is indicated in the partnership books as (2) In case of fraud in management, avail himself of
partnership asset. the usual remedies;
(4) Other factors may be considered to determine (3) In case of dissolution:
ownership of the property. (a) Receive his assignor's interest; and
(b) Require an accounting from the date only of
RIGHTS IN SPECIFIC PROPERTY the last account agreed to by all the partners
The partners are co-owners of specific partnership [Article 1813].
property. As such:
(1) A partner has an equal right with his partners to CHARGING OF PARTNERSHIP INTEREST BY PERSONAL
possess such property for partnership purposes. CREDITOR
For other purposes, the consent of his partners is OF PARTNERS
necessary. If the partner is excluded, he may ask Partnership creditors are preferred over the personal
for: creditors of the partners as regards partnership
(a) Formal accounting [Article 1809]; or property [Article 1827].

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However, on due application by any judgment
creditor of a partner, a competent court may:
(1) Charge the interest of the partner for the
satisfaction of the judgment debt;
(2) Appoint a receiver of the share of the profits and
of any other money due or to fall due to the
partner; and
(3) Make all other orders, directions, accounts and
inquiries, which the debtor partner might have
made, or which the circumstances may require.
The interest charged may be redeemed before
foreclosure or, in case of sale directed by the court,
may be purchased without causing dissolution:
(1) With separate property, by one or more of the
partners; or
(2) With partnership property, by one or more of the
partners, will consent of all, except the debtor
partner.
The partner debtor is not deprived of his right under
exemption laws. [Article 1814]
CHARGING ORDER
A charging order subjects the interest in the
partnership of the debtor partner with the payment
of an unsatisfied amount of a judgment debt against
him, with the least interference with the partnership
business and the rights of the partners. By virtue of
the order, any amount or portion thereof which the
partnership would otherwise pay to the debtor
partner is instead given to the judgment creditor [De
Leon (2010)].
RIGHT TO PROFITS AND OBLIGATION FOR
LOSSES
RULES FOR DISTRIBUTION OF PROFITS AND LOSSES
The distribution of profits and losses shall be in
accordance with the following rules
(1) They shall be distributed in conformity with the
agreement.
(2) If only the share in profits has been stipulated, the
share in the losses shall be in the same
proportion.
(3) In the absence of any stipulation:
(a) The share in the profits of the capitalist
partners shall be in proportion to their
contributions.
(b) The losses shall be borne by the capitalist
partners, also in proportion to the
contributions;
(c) The share of the industrial partners in the
profits is that share as may be just and
equitable. If he also contributed capital, he
will receive a share of the profits in proportion
to his contribution; and
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(d) The industrial partner, who did not contribute
capital, is not liable for losses [Article 1797].
DESIGNATION OF SHARE BY THIRD PERSONS
The designation of the share of each one in the
profits and losses can be delegated to a third person,
in which case, it cannot be impugned:
(a) Unless it is manifestly inequitable;
(b) The partner impugning it has begun to execute
the designation; or
(c) The partner has not impugned it within 3 months
from the time he had knowledge thereof.
The designation cannot be delegated to one of the
partners [Article 1798].
EXCLUSION OF PARTNER FROM SHARE
A stipulation excluding one or more partners from
any share in the profits or losses is void [Article 1799].
With reference to the industrial partner, since the law
itself excludes him from losses, a stipulation
exempting him from the losses is naturally valid
since if the partnership fails to realize profits, he can
no longer withdraw his work or labor. He cannot but
share in the loss.
OBLIGATION 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 or of any partner under legal
disability [Article 1806].
BASIS OF OBLIGATION
This obligation arises from the mutual trust and
confidence among partners. Thus, there must be no
concealment between them in all matters affecting
the partnership [De Leon (2010].
OBLIGATION TO ACCOUNT AND ACT AS TRUSTEE
Every partner must account to the partnership for
any benefit, and hold as a trustee for it any profits
derived by him without the consent of the other
partners from any transaction connected with the
formation, conduct, or liquidation of the partnership
or from any use by him of its property [Article 1807].
BASIS OF OBLIGATION
This obligation also arises from the fiduciary nature
of the partnership relation, and operates to prevent a
partner from making a secret profit out of the
partnership. Note that the obligation extends from
the formation to the liquidation of the partnership.
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Operation of the Partnership
FIRM NAME
Every partnership shall operate under a firm name,
which may or may not include the name of one or
more of the partners.
Those who, not being members of the partnership,
include their names in the firm name, shall be
subject to the liability of a partner [Article 1815].
RIGHT TO CHOOSE FIRM NAME
General rule: The partners may adopt any firm name
desired.
Exceptions:
(1) They cannot use a name that is "identical or
deceptively or confusingly similar to an existing
[partnership] or corporation or to any other name
already protected by law or is patently deceptive,
confusing or contrary to existing laws" [Section 18,
Corporation Code].
(2) Use of names of deceased partner in law firms is
"permissible provided that the firm indicates in all
its communications that said partner is
deceased" [Rule 3.02, Code of Professional
Responsibility].
MANAGEMENT OF THE PARTNERSHIP
Management of the partnership is primarily
governed by the agreement of the partners in the
articles of partnership. It may be managed by:
(1) All the partners; or
(2) A number of partners appointed as managers,
which may be appointed:
(a) In the articles of partnership; or
(b) After constitution of the partnership.
POWERS OF A MANAGING PARTNER
General rule: The partner designated as manager in
the articles may execute all acts of administration
despite opposition by the other partners.
Exception: He cannot do so when he acts in bad faith.
REVOCATION OF POWER OF MANAGING PARTNER
The powers of the managing partner may be
revoked:
(1) If appointed in the articles of partnership, when:
(a) There is just or lawful cause for revocation;
and
(b) The partners representing the controlling
interest revoke such power.
(2) If appointed after the constitution of the
partnership, at any time and for any cause [Article
1800].
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MANAGEMENT BY TWO OR MORE PARTNERS
When there are two or more managing partners
appointed, without specification of their duties or
without a stipulation on how each one will act:
(1) Each one may separately execute all acts of
administration.
(2) If any of them opposes the acts of the others, the
decision of the majority prevails.
(3) In case of a tie, the partners owning the
controlling interest will decide [Article 1801].
Requisites:
(1) Two or more partners have been appointed as
managers;
(2) There is no specification of their respective duties;
and
(3) There is no stipulation that one of them shall not
act without the consent of all the others.
STIPULATION ON UNANIMITY OF MANAGING PARTNERS
In case there is a stipulation that none of the
managing partners shall act without the consent of
others, the concurrence of all is necessary for the
validity of the acts.
The absence or disability of one cannot be alleged,
unless there is imminent danger of grave or
irreparable injury to the partnership. [Article 1802]
MANAGEMENT WHEN MANNER NOT AGREED UPON
When there is no agreement as to the manner of
management, the following rules apply:
(1) All the partners are considered agents (mutual
agency). Whatever any one does alone binds the
partnership, unless there is a timely opposition to
the act, under Article 1801.
(2) Any important alteration in the immovable
property of the partnership, even if useful to the
partnership, requires unanimity. If the alteration
is necessary for the preservation of the property,
however, consent of the others is not required [De
Leon (2010)].
If the refusal is manifestly prejudicial to the
partnership, court intervention may be sought [Article
1803].
INSTANCES OF MUTUAL AGENCY
(1) Partners can dispose of partnership property even
when in partnership name [Article 1819].
(2) An admission or representation made by any
partner concerning partnership affairs is evidence
against the partnership [Article 1820].
(3) Notice to any partner of any matter relating to
partnership affairs is notice to the partnership
[Article 1821].
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(4) Wrongful act or omission of any partner acting for
partnership affairs makes the partnership liable
[Article 1822].
(5) Partnership is bound to make good losses for
wrongful acts or misapplications of partners
[Article 1823].
Obligations of partnership/
partners to third persons
LIABILITY OF PARTNERS FOR PARTNERSHIP
CONTRACTS
The partnership is primarily liable for contracts
entered into in its name and for its account, under its
signature and by a person authorized to act for it.
Upon exhaustion of its assets, all partners are liable
pro rata with all their property.
Any partner may enter into a separate obligation to
perform a partnership contract [Article 1816].
NATURE OF INDIVIDUAL LIABILITY
The pro-rating should be understood to mean
equally or jointly, not proportionally [De Leon (2010),
citing Article 1839(4); note, however, that this
conclusion does not find textual support in Article
1816].
The fact that a partner has left the country and the
payment of his share of the liability cannot be
enforced [Co-Pitco v. Yulo (1907)] or his liability is
condoned by the creditor [Island Sales v. United
Pioneers (1975)] cannot increase the liability of the
other partners.
The liability is subsidiary or secondary. It only arises
upon exhaustion of partnership assets. However,
they may be joined as party defendants in the action
against the partnership, subject to their right to prior
exhaustion of partnership assets [Cia. Maritima v.
Muoz (1907)].
General rule: The partners are liable pro-rata and
subsidiarily, with all their property.
Exceptions:
(1) A third person who transacted with the
partnership can hold the partners solidarily liable
for the whole obligation if the case falls under
Articles 1822 or 1823 [Muasque v. CA (1985)].
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(2) A person admitted as a partner into an existing
partnership is liable for all the obligations of the
partnership arising before his admission, except
that his liability shall be satisfied only out of
partnership property, unless there is a stipulation
to the contrary.
LIABILITY OF INDUSTRIAL PARTNER
An industrial partner, who is not liable for losses, is
not exempt from this liability. However, he can
recover the amount he has paid from the capitalist
partners, unless there is a stipulation to the contrary.
[Cia. Maritima v. Muoz (1907)].
STIPULATION AGAINST INDIVIDUAL LIABILITY
Any stipulation against this liability is void and does
not affect third persons. The stipulation, however, is
valid only as among the partners [Article 1817].
LIABILITY OF PARTNERS FOR PARTNERSHIP
CONTRACTS
ACTS APPARENTLY FOR THE CARRYING ON OF USUAL
BUSINESS
General rule: Every partner is an agent of the
partnership for the purpose of its business and any
act of a partner which is apparently for the carrying
on of the usual business of the partnership binds the
latter, including the execution of any instrument in
the partnership name [1st par., Article 1818].
Exception: The partnership is not bound when:
(1) The partner has in fact no authority to act; AND
(2) The person with whom he deals has knowledge of
such fact.
ACTS NOT APPARENTLY FOR CARRYING ON OF THE USUAL
BUSINESS
General rule: Acts of a partner which is not apparently
for carrying on of the usual business does not bind
the partnership.
Exception: The partnership is bound if the other
partners authorized him to do the act.
ACTS OF STRICT DOMINION
General rule: One or some of the partners have no
authority to do the following acts of strict dominion:
(a) Assign the partnership property in trust for
creditors or on the assignee's promise to pay the
debts of the partnership;
(b) Dispose of the goodwill of the business;
(c) Do any other act which makes it impossible to
carry on the ordinary business of the partnership;
(d) Confess a judgment;
(e) Enter into a compromise concerning a
partnership claim or liability;
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(f) Submit a partnership claim or liability to
arbitration;
(g) Renounce a claim of the partnership.
Exception: They may do so if:
(1) Authorized by all the partners; OR
(2) The other partners have abandoned the business.
ACTS IN CONTRAVENTION OF RESTRICTION
Any act of a partner in contravention of a restriction
on authority does not bind the partnership to
persons having knowledge of the restriction [Article
1818].
CONVEYANCE OF REAL PROPERTY OF
PARTNERSHIP
TITLE IN THE PARTNERSHIP NAME
Any partner may convey the property in the name of
the partnership.
The partnership can recover it, except when:
(1) The act of the partner binds the partnership
under 1st par., Article 1818 (i.e., for the carrying on of
the usual business of the partnership); or
(2) If not so authorized, the property has been
conveyed by the grantee, or a person claiming under
him, to a holder for value and without knowledge
that the partner exceeded his authority.
TITLE IN THE PARTNERSHIP NAME
A partner, authorized to act under 1st par., Article
1818, may convey, in his own name, the equitable
interest of the partnership.
TITLE IN THE NAME OF ONE OR MORE (NOT ALL) OF THE
PARTNERS
AND THE RECORD DOES NOT DISCLOSE THE RIGHT
OF THE PARTNERSHIP
The partners having title may convey title.
The partnership may recover it if the act does not
bind it under 1st par., Article 1818, unless the
purchaser or his assignee is:
(1) A holder for value; AND
(2) Without knowledge that the act exceeded
authority.
TITLE IN THE NAME OF ONE OR MORE OR ALL THE
PARTNERS,
OR IN A THIRD PERSON IN TRUST FOR THE PARTNERSHIP
A partner may convey equitable title in the
partnership name or in his own name, when the act
is authorized under 1st par., Article 1818.
TITLE IN THE NAMES OF ALL THE PARTNERS
The conveyance must be executed by all of them to
pass all their rights in the property [Article 1819].
AGENCY & PARTNERSHIP BAR OPERATIONS COMMISSION
LIABILITY OF PARTNERSHIP FOR ADMISSION BY
PARTNER
An admission or representation by any partner
concerning partnership affairs within the scope of his
authority may be used as evidence against the
partnership [Article 1820].
LIABILITY OF PARTNERSHIP FOR WRONGFUL
ACTS OF PARTNER
The partnership is solidarily liable with the partner
who causes loss or injury, or incurs any penalty
through any wrongful act or omission:
(1) In the ordinary course of the business of the
partnership; or
(2) Not in such ordinary course of business, but with
the authority of his co-partners [Article 1822].
LIABILITY OF THE PARTNERSHIP FOR
MISAPPLICATION OF MONEY
OR PROPERTY RECEIVED
The partnership is liable for losses suffered by a third
person whose money or property was:
(1) Received by a partner, acting within the scope of
his apparent authority, who also misapplied it; or
(2) Received by the partnership, in the course of its
business, but is misapplied by any partner while it
is in the custody of the partnership [Article 1823].
LIABILITY OF OTHER PARTNERS
FOR WRONGFUL ACTS OR MISAPPLICATION
All partners are solidarily liable with the partnership
for its liabilities under Articles 1822 and 1823 [Article
1824].
This is without prejudice to the guilty partner being
liable to the other partners. However, as far as third
persons are concerned, the partnership is
answerable.
LIABILITY IN CASE OF PARTNERSHIP BY
ESTOPPEL
PARTNER BY ESTOPPEL
A person, not a partner, may become a partner by
estoppel, and be liable as a partner, when, by words,
spoken or written, or conduct, he:
(1) Directly represents himself to anyone as a partner
in an existing or non-existing partnership; or
(2) Indirectly represents himself by consenting to
another representing him as such partner. [Article
1825]
LIABILITY OF PARTNER BY ESTOPPEL
A partner by estoppel is liable:
(1) To any person who extended credit to the
partnership, actual or apparent, relying on his
representation; and
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(2) In case the representation was made publicly, to
any person, who extended such credit, whether or
not the communication to said creditor was made
with the knowledge of the partner.
NATURE OF LIABILITY
He is liable in the following manner:
(1) When there is an existing partnership and all the
partners consented to the representation, a
partnership liability results, and the partner by
estoppel is liable as though he were a partner;
(2) When there is an existing partnership and not all
the partners consented, or when there is no
existing partnership and all those represented as
partners consented to the representation, he is
liable jointly and pro rata with those who
consented to the representation;
(3) When there is an existing partnership but none of
the partners consented, or when there is no
existing partnership and not all of those
represented as partners consented to the
representation, he is liable separately.
EFFECTS OF ACTS OF PARTNER BY ESTOPPEL
The acts of a partner by estoppel have the following
effects:
(1) A person, thus representing himself as a partner
of other persons, becomes an agent of the latter,
in the same manner as though he were a partner
in fact, with respect to persons who rely upon the
representation.
(2) When all the members of the existing partnership
consent to the representation, a partnership act
or obligation results.
(3) In all other cases, only a joint act or obligation
results. [Article 1825]
No real partnership is created by estoppel. It is only
with respect to third persons that partnership by
estoppel is recognized.
ESTABLISHING LIABILITY
The basic elements in connection with establishment
of liability as a partner if based on the doctrine of
estoppel must encompass:
(1) Proof by plaintiff that he was individually aware of
the defendant's representations as to his being a
partner or that such representations were made
by others and not denied or refuted by the
defendant;
(2) Reliance on such representations by the plaintiff;
and
(3) Lack of any denial or refutation of the statements
by the defendant; such denial need not precede
plaintiff's acting therein if the denial was
forthcoming promptly upon hearing of the
representations, and if, by prudence and diligence
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BAR OPERATIONS COMMISSION
the plaintiff might have learned of the truth or
untruth of the representations.
Persons who knowingly assume to act as a
corporation without authority to do so are liable as
general partners for all debts, liabilities and
damages incurred. [Section 21, Corporation Code] A
partnership de facto is created.
LIABILITY OF INCOMING PARTNER
A person admitted as a partner is liable as the other
partners for obligations subsequent to his admission.
He is also liable for obligations incurred before his
admission, but will be satisfied only out of the
partnership property, unless otherwise stipulated.
(Article 1826)
Ratio:
(1) The new partner partakes of the benefits of the
partnership property and an already established
business.
(2) He has every means of obtaining full knowledge
of the debts of the partnership and remedies that
amply protect his interest [De Leon (2010)].
However, an incoming partner may fully assume the
obligations of a retiring partner.
NOTICE TO OR KNOWLEDGE OF THE
PARTNERSHIP
The following operate as notice to or knowledge of
the partnership:
(1) Notice to any partner of any matter relating to
partnership affairs;
(2) Knowledge of the partner acting in the particular
matter acquired while a partner;
(3) Knowledge of the partner acting in the particular
matter then present to his mind; and
(4) Knowledge of any other partner who reasonably
could and should have communicated it to the
acting partner.
These do not apply in case of fraud on the
partnership committed by or with the consent of the
partner [Article 1821].
PREFERENCE OF PARTNERSHIP CREDITORS
Partnership creditors are preferred over personal
creditors of the partners with respect to partnership
property.
However, personal creditors may ask the attachment
and public sale of the share of the partner debtor in
the partnership assets. [Article 1827]
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Ratio: The partnership, as a legal entity distinct from
its members, should apply its property to the
payment of its debts in preference to the claim of any
partner or his individual creditors.
Dissolution and winding up
CONCEPTS
Dissolution is the change in the relation of the
partners caused by any partner ceasing to be
associated in the carrying on of the business. It is
different from the winding-up of the business [Article
1828].
Winding up is the actual process of settling the
partnership business or affairs after dissolution. It
involves collection and distribution of partnership
assets, payment of debts, and determination of the
value of the interest of the partners in the
partnership.
Termination is the point in time when all partnership
affairs are completely wound up and finally settled. It
signifies the end of the partnership life.
EFFECT OF DISSOLUTION ON EXISTENCE OF
PARTNERSHIP
Dissolution does not terminate the existence of the
partnership, which continues until the winding up of
partnership affairs is completed. [Article 1829].
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, pending the
winding up of some incidents and obligations of the
partnership, but in such case, the partnership will be
reputed as existing until the juridical relations arising
out of the contract are dissolved [Testate Estate of
Mota v. Serra (1926)].
CAUSES OF DISSOLUTION
WITHOUT VIOLATION OF THE AGREEMENT
Without violation of the partnership agreement
between the partners:
(1) By the termination of the definite term or
particular undertaking specified in the
agreement;
(2) By the express will of any partner, who must act
in good faith, when no definite term or particular
is specified;
(3) By the express will of all the partners who have
not assigned their interests or suffered them to
be charged for their separate debts, either before
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or after the termination of any specified term or
particular undertaking;
(4) By the expulsion of any partner from the business
bona fide in accordance with such a power
conferred by the agreement between the
partners.
If, after the expiration of the definite term or
particular undertaking, the partners continue the
partnership without making a new agreement, the
firm becomes a partnership at will. [Article 1785]
Verily, any one of the partners may, at his sole
pleasure, dictate a dissolution of the partnership at
will. He must, however, act in good faith, not that the
attendance of bad faith can prevent the dissolution
of the partnership but that it can result in a liability
for damages. [Ortega v. CA (1995)]
Bad faith, in the context here used, is no different
from its normal concept of a conscious and
intentional design to do a wrongful act for a
dishonest purpose or moral obliquity. [Ortega v. CA
(1995)]
IN CONTRAVENTION OF THE AGREEMENT
In contravention of the agreement between the
partners, where the circumstances do not permit a
dissolution under any other provision of this article,
by the express will of any partner at any time.
[E]ven if there is a specified term, one partner can
cause its dissolution by expressly withdrawing even
before the expiration of the period, with or without
justifiable cause. Of course, if the cause is not
justified or no cause was given, the withdrawing
partner is liable for damages but in no case can he
be compelled to remain in the firm. With his
withdrawal, the number of members is decreased,
hence, the dissolution. [Rojas v. Maglana (1990)]
BY OPERATION OF LAW
(1) 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;
(2) When a specific thing which a partner had
promised to contribute to the partnership,
perishes before the delivery; in any case by the
loss of the thing, when the partner who
contributed it having reserved the ownership
thereof, has only transferred to the partnership
the use or enjoyment of the same; but the
partnership shall not be dissolved by the loss of
the thing when it occurs after the partnership has
acquired the ownership thereof;
(3) By the death of any partner;
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(4) By the insolvency of any partner or of the
partnership;
(5) By the civil interdiction of any partner;
BY DECREE OF COURT
(1) A partner may apply in court for dissolution when:
(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
tends 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 at a loss;
(f) Other circumstances render a dissolution
equitable.
(2) A person who acquires the interest of a partner
may likewise apply:
(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. [Articles 1830 and 1831]
Judicial determination as to dissolution may be
resorted to when the facts which may cause such
dissolution are open to dispute.
OTHER CAUSES
(1) When a new partner is admitted into an existing
partnership;
(2) When any partner retires;
(3) When the other partners assign their rights to the
sole remaining partner;
(4) When all the partners assign their rights in the
partnership property to third persons. [Article
1840]
The statutory enumeration of the causes of
dissolution is exclusive. [De Leon (2010)]
EFFECT OF DISSOLUTION ON AUTHORITY OF
PARTNERS
Upon dissolution, the authority of the partners to
represent the partnership is confined only to acts
necessary to wind up partnership affairs or to
complete transactions begun but not then finished.
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BAR OPERATIONS COMMISSION
WITH RESPECT TO PARTNERS
The authority of partners to act for the partnership is
terminated, with respect to partners:
(1) When the dissolution is not by the act, insolvency
or death of a partner; or
(2) When the dissolution is by such act, insolvency or
death, when the partner acting for the
partnership has knowledge or notice of the cause.
Otherwise, each co-partner is still liable for his
share in the liability created by the partner acting
for the partnership, as if there was no dissolution.
[Article 1832]
WITH RESPECT TO THIRD PERSONS
With respect to persons not partners:
(1) After dissolution, a partner can bind the
partnership by any act appropriate for winding up
partnership affairs or completing transactions
unfinished at dissolution.
(2) He can also bind it by any transaction which
would bind the partnership as if dissolution had
not taken place, provided the other party to the
transaction:
(a) Had extended credit to the partnership prior
to dissolution and had no knowledge or notice
thereof; or
(b) Had not so extended credit, but had known of
the partnership prior to dissolution, and,
having no knowledge or notice of dissolution,
the fact had not been advertised in a
newspaper of general circulation in the place
(or in each place if more than one) at which
the partnership business was regularly carried
on.
Note the character of notice required. As to persons
who extended credit to the partnership prior to
dissolution, notice must be actual. As to persons who
merely knew of the existence of the partnership,
publication in a newspaper of general circulation in
the place of business of the partnership is sufficient.
LIABILITY OF PARTNERS IN TRANSACTIONS AFTER
DISSOLUTION
General rule: The liability of a partner, in general, is
the same as in ordinary contracts (pro rata and
subsidiary).
Exceptions: In the following cases, however, the
liability shall be satisfied out of the partnership assets
alone:
(1) When the partner had been, prior to the
dissolution, unknown as a partner to the person
with whom the contract is made;
(2) When the partner had been, prior to the
dissolution, so far unknown or inactive in
partnership affairs that the business reputation of
the partnership could not be said to have been in
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any degree due to his connection with it. [Article
1834]
CASES WHERE PARTNERSHIP IS NOT BOUND
Any act of a partner after dissolution in no case binds
the partnership in the following cases:
(1) Where the partnership is dissolved because it is
unlawful to carry on the business, unless the act
is appropriate for winding up partnership affairs;
(2) Where the partner has become insolvent; or
(3) Where the partner has no authority to wind up
partnership affairs, except by a transaction with
one who:
(a) Had extended credit to the partnership prior to
dissolution and had no knowledge or notice of his
want of authority; or
(b) Had not extended credit to the partnership prior
to dissolution, and, having no knowledge or
notice of his want of authority, the fact of his want
of authority has not been advertised.
PARTNERSHIP BY ESTOPPEL AFTER DISSOLUTION
Article 1834 does not affect the liability under Article
1825 of any person who, after dissolution, represents
himself or consents to another representing him as a
partner in a partnership engaged in carrying on
business [Article 1834].
CONTRACTS AFTER DISSOLUTION BY SPECIFIC
CAUSES
General rule: A contract entered into by a partner
acting for the partnership after dissolution by act,
death or insolvency of a partner binds the other
partners.
Exceptions:
(1) The dissolution being by act of any partner, the
partner acting for the partnership had knowledge
of the dissolution; or
(2) The dissolution being by death or insolvency of a
partner, the partner acting for the partnership
had knowledge or notice of the death or
insolvency. [Article 1833]
The general rule assumes that the partner acting for
the partnership has no knowledge or notice of the
specific cause of dissolution.
EFFECT OF DISSOLUTION ON EXISTING LIABILITY
OF PARTNERS
General rule: Dissolution does not of itself discharge
the existing liability of any partner.
Exception: A partner may be so relieved when there is
an agreement to that effect between:
(1) Himself;
(2) The partnership creditor; and
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(3) The person or partnership continuing the
business.
Such agreement may be inferred from the course of
dealing between the creditor having knowledge of
the dissolution and the person or partnership
continuing the business.
In case of dissolution by death, the individual
property of a deceased partner is liable for
obligations of the partnership incurred while he was
a partner, after payment of his separate debts.
[Article 1835]
WINDING UP PARTNERS
WHO MAY WIND UP
The following partners have the right to wind up the
partnership affairs:
(1) Those designated in an agreement;
(2) Those who have not wrongfully dissolved the
partnership; or
(3) The legal representative of the last surviving
partner, who was not insolvent.
However, any partner or his legal representative or
assignee may obtain winding up by the court, upon
cause shown. [Article 1836]
MANNER OF WINDING UP
Thus, winding up of partnership affairs may be done:
(1) Extrajudicially, by the partners themselves; or
(2) Judicially, under the control and direction of the
proper court.
NATURE OF JUDICIAL LIQUIDATION
The action for liquidation of the partnership is
personal. The fact that sale of assets, including real
property, is involved does not change its character,
such sale being merely a necessary incident of the
liquidation of the partnership, which should precede
and/or is part of its process of dissolution.
[Claridades v. Mercader (1966)]
POWERS OF WINDING UP PARTNER
In general, the liquidating partner may perform acts
appropriate for the winding up of partnership affairs.
RIGHTS OF PARTNERS IN CASE OF DISSOLUTION
DISSOLUTION WITHOUT VIOLATION OF THE AGREEMENT
Unless otherwise agreed, when dissolution is caused
in any way, except in contravention of the
partnership agreement, each partner, as against his
co-partners and all partners claiming through them
in respect of their interests in the partnership, may
have the partnership property applied to discharge
the partnership liabilities, and the surplus applied in
cash to the net amount owing to the respective
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partners [referred to as the right under 1st par., Article
1837].
In case of dissolution by bona fide expulsion of a
partner, and the expelled partner is discharged from
all partnership liabilities, either by payment or
agreement to that effect (Article 1835), he shall
receive only the net amount due him from the
partnership.
DISSOLUTION IN CONTRAVENTION OF THE AGREEMENT
Rights of partner who has not caused the dissolution
wrongfully:
(a) To demand the right under 1st par., Article 1837;
(b) To be indemnified for damages for breach of the
agreement against the partner who caused the
dissolution wrongfully;
(c) To continue the business in the same name, by
themselves or jointly with others, during the
agreed term for the partnership and for that
purpose may possess the partnership property
provided they:
(i) Secure the payment by bond approved by the
court; or
(ii) Pay any partner who has caused the
dissolution wrongfully the value of his interest
in the partnership, less any damages
recoverable, and indemnity against all present
or future partnership liabilities.
Rights of partner who has caused the dissolution
wrongfully:
(a) If the business is not continued, all the rights 1st
par., Article 1837, subject to liability for damages;
(b) If the business is continued, the right, as against
his co-partners and all claiming through them, to:
(i) Ascertainment, without considering the value
of the goodwill of the business, and payment to
him in cash the value of his partnership
interest, less any damage, or have the
payment secured by a bond approved by the
court; and
(ii) Be released from all existing liabilities of the
partnership. [Article 1837]
The goodwill of a business may be defined to be the
advantage which it has from its establishment or
from the patronage of its customers, over and above
the mere value of its property and capital. The
goodwill (which includes the firm name) is part of the
partnership assets and may be subject of sale. [De
Leon (2010)]
RIGHTS OF PARTNERS IN CASE OF RESCISSION
A partner, induced by fraud or misrepresentation to
become a partner, may rescind the contract.
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Where a partnership contract is rescinded on such
grounds, the party entitled to rescind, without
prejudice to any other right, is entitled:
(1) After satisfying partnership liabilities to third
persons, to a lien on, or right of retention of, to
the surplus of the partnership property:
(a) For any sum of money paid by him for the
purchase of an interest in the partnership; and
(b) For any capital or advances contributed by
him.
(2) After satisfying partnership liabilities to third
persons, to stand in the place of partnership
creditors for any payments made by him in
respect of the partnership liabilities; and
(3) To be indemnified by the person guilty of the
fraud or making the representation against all
debts and liabilities of the partnership. [Article
1838]
SETTLING OF ACCOUNTS BETWEEN PARTNERS
Subject to any agreement to the contrary, the
following rules shall be observed in settling accounts
between partners after dissolution.
COMPOSITION OF PARTNERSHIP ASSETS
The assets of the partnership are:
(1) The partnership property; and
(2) The contributions of the partners necessary for
the payment of all the liabilities.
In accordance with the subsidiary liability of the
partners, the partnership property shall be applied
first to satisfy any liability of the partnership.
AMOUNT OF CONTRIBUTION FOR LIABILITIES
The rules on distribution of losses [Article 1979] shall
determine the contributions of the partners. As such:
(1) The contribution shall be in conformity with the
agreement.
(2) If only the share in profits has been stipulated, the
contribution shall be in the same proportion.
(3) In the absence of any stipulation, the contribution
shall be in proportion to the capital contribution.
ENFORCEMENT OF CONTRIBUTION
The following persons have the right to enforce the
contributions:
(1) An assignee for the benefit of creditors;
(2) Any person appointed by the court; or
(3) To the extent of the amount which he has paid in
excess of his share of the partnership liability, any
partner or his legal representative.
The individual property of a deceased partner shall
be liable for the contributions.
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ORDER OF APPLICATION OF ASSETS
The partnership liabilities shall rank, in order of
payment, as follows:
(a) Those owing to creditors other than partners;
(b) Those owing to partners other than for capital
and profits;
(c) Those owing to partners in respect of capital;
(d) Those owing to partners in respect of profits.
DOCTRINE OF MARSHALING OF ASSETS
When partnership property and the individual
properties of the partners are in possession of a court
for distribution:
(1) Partnership creditors shall have priority on
partnership property; and
(2) Separate creditors on individual property, saving
the rights of lien of secured creditors.
(3) Anything left from either shall be applied to
satisfy the other.
DISTRIBUTION OF PROPERTY OF INSOLVENT PARTNER
Where a partner has become insolvent or his estate
is insolvent, the claims against his separate property
shall rank in the following order:
(1) Those owing to separate creditors;
(2) Those owing to partnership creditors;
(3) Those owing to partners by way of contribution.
[Article 1839]
RIGHTS OF CREDITORS OF DISSOLVED
PARTNERSHIP
CREDITORS OF DISSOLVED PARTNERSHIP
AS CREDITORS OF NEW PARTNERSHIP
In the following cases, creditors of the dissolved
partnership are also creditors of the person or
partnership continuing the business:
(1) When the business is continued without
liquidation, and the cause of dissolution is:
(a) Admission of a new partner into the existing
partnership;
(b) Retirement or death of any partner, and his
rights to partnership property are assigned to:
(i) Two or more of the partners; or
(ii) One or more of the partners and one or
more third persons.
(c) Retirement of all but one partner, and their
rights to partnership property are assigned to
the remaining partner, who continues the
business, either alone or with others;
(d) Wrongful dissolution by any partner, and the
remaining partners continue the business,
either alone or with others;
(e) Expulsion of a partner, and the remaining
partners continue the business, either alone or
with others.
(2) When the cause of dissolution is the retirement or
death of any partner, and business is continued
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with the consent of the retired partner or the
representative of the deceased partner, without
assignment of their rights to partnership
property.
(3) When the cause of dissolution is the assignment
by all the partners or their representatives of their
rights in partnership property to one or more third
persons who promise to pay the debts and who
continue the business of the partnership.
LIABILITY OF A NEW PARTNER
The liability to the creditors of the dissolved
partnership of a new partner in the partnership
continuing the business shall be satisfied out of the
partnership property alone. However, he may,
through agreement, assume individual liability.
PRIORITY OF CREDITORS OF DISSOLVED PARTNERSHIP
The creditors of dissolved partnership have prior
right to any claim of the retired partner or the
representative of the deceased partner against the
person or partnership continuing the business.
Nothing in this article shall be held to modify any
right of creditors to set aside any assignment on the
ground of fraud.
EFFECT OF CONTINUING USE OF PARTNERSHIP NAME
The use by the person or partnership continuing the
business of the partnership name, or the name of a
deceased partner as part thereof, shall not of itself
make the individual property of the deceased partner
liable for any debts contracted by such person or
partnership. [Article 1840]
RETIRED OR REPRESENTATIVE OF DECEASED
PARTNER
Unless otherwise agreed upon, when any partner
retires or dies, and the business is continued without
any settlement of accounts as between him or his
estate and the person or partnership continuing the
business, he or his legal representative as against
such person or partnership, subject to the prior rights
of creditors of the dissolved partnership:
(1) May have the value of his interest at the date of
dissolution ascertained; and
(2) Shall receive as an ordinary creditor:
(a) An amount equal to the value of his interest in
the dissolved partnership with interest; or
(b) At his option or at the option of his legal
representative, in lieu of interest, the profits
attributable to the use of his right in the property of
the dissolved partnership. [Article 1841]
RIGHT TO AN ACCOUNT
The right to an account of his interest shall accrue to
any partner, or his legal representative, at the date of
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dissolution, in the absence of any agreement to the

contrary, as against: ADVANTAGES OF LIMITED PARTNERSHIP
(1) The winding up partners; (1) For general partners, to secure capital from
(2) The surviving partners; or others while retaining control and supervision for
(3) The person or partnership continuing the the business;
business [Article 1842]. (2) For limited partners, to have a share in the profits
without risk of personal liability.
EXISTENCE OF RIGHT
[T]he right to demand an accounting exists as long GENERAL AND LIMITED PARTNER
as the partnership exists. Prescription begins to run DISTINGUISHED
only upon the dissolution of the partnership when General Partner Limited Partner
the final accounting is done. [Fue Leung v. IAC
(1989)] Extent of liability

NEED FOR LIQUIDATION Personally, but Only to the extent of his

The profits of the business cannot be determined by subsidiarily, liable for capital contributions
taking into account the result of one particular obligations of the
transaction instead of all the transactions had. partnership
Hence, the need for a general liquidation before a
member of a partnership may claim a specific sum as Right to participate in management
his share of the profits. [Sison v. McQuaid (1953)] Unless otherwise agreed No right to participate in
upon, all general partners management
However, no liquidation is necessary when there is have an equal right to
already a settlement or an agreement as to what he manage the partnership
shall receive [De Leon (2010)].
Nature of contribution
Cash, property or industry Cash or property only, not
industry
Limited partnership
Property party in proceedings by or against partnership
DEFINITION
A limited partnership is one formed by two or more Proper party Not proper party, unless:
persons under the provisions of the following article, (1) He is also a general
having as members one or more general partners partner; or
and one or more limited partners. The limited (2) Where the object of
partners as such shall not be bound by the the proceedings is to
obligations of the partnership. [Article 1843] enforce his right against
or liability to the
CHARACTERISTICS partnership
(1) A limited partnership is formed by compliance Name in firm name
with the statutory requirements [Article 1844].
(2) The business is controlled or managed by one or Name may appear in the Name must not appear in
more general partners, who are personally liable firm name the firm name
to creditors [Articles 1848 and 1850].
(3) One or more limited partners contribute to the Prohibition to engage in other business
capital and share in the profits but do not
manage the business and are not personally Prohibited (qualified) Not prohibited
liable for partnership obligations beyond their
capital contributions [Articles 1845, 1848 and Effect of retirement, death, insanity or insolvency
1856].
(4) Obligations or debts are paid out of the Dissolves partnership Does not dissolve; rights
partnership assets and the individual property of transferred to executor or
the general partners. administrator for selling
(5) The limited partners may have their contributions his estate
back subject to conditions prescribed by law Assignability of interest
[Articles 1844 and 1957].

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General Partner Limited Partner A limited partnership is formed if there has been
substantial compliance in good faith with the
Not assignable Assignable requirements.

A partnership cannot become a limited partner. A

general partnership may be changed into a limited
GENERAL AND LIMITED PARTNERSHIP one. A partner in the former general partnership may
DISTINGUISHED become a limited partner in the limited partnership
General Partnership Limited Partnership formed [De Leon (2010)].

Creation PURPOSE OF FILING

The purpose of the requirement of filing the
May be constituted in any Partners must: certificate is to give actual or constructive notice to
form, with exceptions (1) Sign and swear to a potential creditors or persons dealing with the
certificate in compliance partnership to acquaint them with its essential
with Article 1844; and features, including the limited liability of limited
(2) File the certificate for partners.
record in the SEC
NO SUBSTANTIAL COMPLIANCE
Composition When there is failure to substantially comply with the
Only general partners One or more general, and requirements:
one or more limited (1) In relation to third persons, the partnership is
partners general, unless they recognized that the firm as a
limited partnership;
Firm name (2) As between the partners, the partnership remains
limited, since they are bound by their agreement
Must contain the word Must include the word [De Leon (2010)].
"Company" (SEC Memo "Limited" (SEC Memo Circ
Circ No. 14-00), except for No. 14-00) FIRM NAME
professional partnerships The surname of a limited partner shall not appear in
the partnership name unless:
May or may not include Must not include name of (1) It is also the surname of a general partner; or
the name of one or more limited partners, unless: (2) Prior to the time when the limited partner
of the partners (1) It is also the surname became such, the business had been carried on
of a general partner; or under a name in which his surname appeared.
(2) Prior to the time when
the limited partner A limited partner whose surname appears in a
became such, the partnership name contrary to this prohibition is liable
business has been carried as a general partner to partnership creditors who
on under a name in which extend credit without actual knowledge that he is not
his surname appeared. a general partner.
Rules governing dissolution and winding up FALSE STATEMENT IN THE CERTIFICATE
Articles 1828-1842 Articles 1860-1863 If the certificate contains a false statement, one who
suffers loss by reliance thereon may hold liable any
party to the certificate who knew the statement to be
false:
FORMATION OF LIMITED PARTNERSHIP (1) At the time he signed the certificate; or
Two or more persons desiring to form a limited (2) Subsequently, but within a sufficient time before
partnership shall: the statement was relied upon to enable him to
(1) Sign and swear to a certificate stating the items cancel or amend the certificate, or to file a
in Article 1844; and petition for its cancellation or amendment.
(2) File for record the certificate in the Office of the
Securities and Exchange Commission. Requisites:
(1) The partner knew the statement to be false at the
time he signed the certificate, or subsequently,
but having sufficient time to cancel or amend it,

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UP COLLEGE OF LAW AGENCY & PARTNERSHIP
or file a petition for its cancellation or
amendment, and he failed to do so;
(2) The person seeking to enforce liability has relied
upon the false statement in transacting business
with the partnership; and
(3) The person suffered loss as a result of reliance
upon such false statement.
ADMISSION OF ADDITIONAL LIMITED PARTNERS
After the formation of a limited partnership,
additional limited partners may be admitted upon
filing an amendment to the original certificate.
GENERAL AND LIMITED PARTNER AT THE SAME TIME
A person may be a general and a limited partner in
the same partnership at the same time, provided
that this fact shall be stated in the certificate.
A person who is a general, and also at the same time
a limited partner, shall have all the rights and
powers and be subject to all the restrictions of a
general partner; except that, in respect to his
contribution, he shall have the rights against the
other members which he would have had if he were
not also a general partner. [Article 1853]
MANAGEMENT OF LIMITED PARTNERSHIP
A limited partner shall not become liable as a
general partner unless, in addition to the exercise of
his rights and powers as a limited partner, he takes
part in the control of the business [Article 1848].
MANAGEMENT BY GENERAL PARTNERS
Only the general partners have the right to manage
the partnership. The limited partners are not so
entitled.
LIABILITY OF LIMITED PARTNER FOR PARTICIPATING IN
CONTROL
A limited partner is liable as a general partner (i.e.,
subsidiarily liable) for the obligations of the
partnership if he takes part in the control of the
business. The control contemplated is active
participation in the management of the business. It
does not contemplate mere giving of advice to
general partners which may be followed or not.
The abstinence of the limited partner from
participation in the transaction of the business of the
firm is essential to his exemption from personal
liability. [De Leon (2010)].
POWERS OF GENERAL PARTNER
General rule: A general partner shall have the rights
and powers and be subject to all restrictions and
liabilities of a partner in a partnership without
limited partners.
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Thus, a general partner is vested with the entire
control of the business. It is in consideration of his
unlimited personal liability for the obligation of the
partnership that he is granted the general authority
to manage.
Qualification: Written consent or ratification of the
specific act by all the limited partners is necessary to
authorize the general 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 a judgment against the partnership;
(4) Possess partnership property, or assign their
rights in specific property, for other than 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 partnership property
on the death, retirement, insanity, civil
interdiction or insolvency of a general partner,
unless the right so to do is given in the certificate.
[Article 1851]
The acts enumerated are acts of strict dominion.
OBLIGATIONS OF A LIMITED PARTNER
OBLIGATIONS RELATED TO CONTRIBUTION
The contributions of a limited partner may be cash or
property, but not services [Article 1845].
A limited partner is liable for partnership obligations
when he contributes services instead of only money
or property to the partnership [De Leon (2010)].
A limited partner is liable to the partnership:
(1) For the difference between his actual contribution
and that stated in the certificate as having been
made;
(2) For any unpaid contribution which he agreed in
the certificate to make in the future at the time
and on the conditions stated in the certificate. [1st
par., Article 1858]
He holds as trustee for the partnership:
(1) Specific property stated in the certificate as
contributed by him, but which was not
contributed or which has been wrongfully
returned; and
(2) Money or other property wrongfully paid or
conveyed to him on account of his contribution.
[2nd par., Article 1858]
The liabilities under Article 1858 can be waived or
compromised only by the consent of all members.
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Such waiver or compromise, however, shall not affect
the right to enforce said liabilities of a creditor:
(1) Who extended credit, or
(2) Whose claim arose, after the filing or before a
cancellation or amendment of the certificate, to
enforce such liabilities.
Even after a limited partner has rightfully received
the return in whole or in part of his capital
contribution, he is still liable to the partnership for
any sum, not in excess of such return with interest,
necessary to discharge its liabilities to all creditors:
(1) Who extended credit, or
(2) Whose claims arose, before such return. [Article
1858]
A person who has contributed capital to a
partnership, erroneously believing that he has
become a limited partner, but his name appears in
the certificate as a general partner or he is not
designated as a limited partner, is not personally
liable as a general partner by reason of his exercise
of the rights of a limited partner, provided:
(1) On ascertaining the mistake, he promptly
renounces his interest in the profits of the
business or other compensation by way of income
[Article 1852];
(2) He does not participate in the management of
the business [Article 1848]; and
(3) His surname does not appear in the partnership
name [Article 1846].
LIABILITY TO PARTNERSHIP CREDITORS
General rule: A limited partner is not liable as a
general partner. His liability is limited to the extent of
his contributions.
Exceptions: The limited partner is liable as a general
partner when:
(1) His surname appears in the partnership name,
with certain exceptions.
(2) He takes part in the control of the business.
LIABILITY TO SEPARATE CREDITORS
On due application to a court of competent
jurisdiction by any separate creditor of a limited
partner, the court may:
(1) Charge his interest with payment of the
unsatisfied amount of such claim;
(2) Appoint a receiver; and
(3) Make all other orders, directions and inquiries
which the circumstances of the case may require.
The interest so charged may be redeemed with the
separate property of any general partner, but may
not be redeemed with partnership property. [Article
1862]
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Note: In a general partnership, the interest may be
redeemed with partnership property with the
consent of all the partners whose interests are not
charged [Article 1814].
RIGHTS OF A LIMITED PARTNER
RIGHTS OF LIMITED PARTNER, IN GENERAL
A limited partner shall have the same rights as a
general partner to:
(1) Require that the partnership books be kept at the
principal place of business of the partnership;
(2) To inspect and copy any of them at a reasonable
hour;
(3) To demand true and full information of all things
affecting the partnership;
(4) To demand a formal account of partnership
affairs whenever circumstances render it just and
reasonable; and
(5) To ask for dissolution and winding up by decree
of court;
(6) To receive a share of the profits or other
compensation by way of income; and
(7) To receive the return of his contribution provided
the partnership assets are in excess of all its
liabilities.
RIGHT TO TRANSACT BUSINESS WITH PARTNERSHIP
A limited partner may:
(1) Loan money to the partnership;
(2) Transact other business with the partnership; and
(3) Receive a pro rata share of the partnership assets
with general creditors if he is not also a general
partner.
Limitations: A limited partner, with respect to his
transactions with the partnership, cannot:
(1) Receive or hold as collateral security any
partnership property; or
(2) Receive any payment, conveyance, or release
from liability if it will prejudice the right of third
persons.
Violation of the prohibition is considered a fraud on
the creditors of the partnership. [Article 1854]
RIGHT TO SHARE IN PROFITS
A limited partner may receive from the partnership
the share of the profits or the compensation by way
of income stipulated for in the certificate.
This right is subject to the condition that partnership
assets will still be in excess of partnership liabilities
after such payment.
Ratio: Otherwise, he will receive a share to the
prejudice of third-party creditors.
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In determining the partnership liabilities, the
liabilities to the limited partners (for their
contributions) and to general partners (whether for
contributions or not) are not included.
RIGHT TO RETURN OF CONTRIBUTION
A limited partner may have his contributions
withdrawn or reduced when:
(1) All the liabilities of the partnership, except
liabilities to general partners and to limited
partners on account of their contributions, have
been paid or there remains property of the
partnership sufficient to pay them;
(2) The consent of all members is had, unless the
return may be demanded as a matter of right;
and
(3) The certificate is cancelled or so amended as to
set forth the withdrawal or reduction.
The return of his contributions may be demanded, as
a matter of right (even when not all the other
partners consent), the return of his contribution
when (1) and (2) above are complied with:
(1) On the dissolution of the partnership;
(2) Upon the arrival of the date specified in the
certificate for the return; or
(3) After the expiration of a 6-month notice in writing
given by him to the other partners, if no time is
fixed in the certificate for:
(a) the return of the contribution; or
(b) the dissolution of the partnership.
General rule: A limited partner, irrespective of the
nature of his contribution has only the right to
demand and receive cash in return for his
contribution.
Exceptions: He may receive his contribution in a form
other than cash when:
(1) There is a statement in the certificate to the
contrary; or
(2) All the members of the partnership consent.
PREFERENCE OF LIMITED PARTNERS
General rule: The limited partners stand on equal
footing as to their:
(1) Compensation by way of income;
(2) Return of contribution; or
(3) Any other matter.
Exception: By an agreement of all the partners
(general and limited) in the certificate, priority or
preference may be given to some limited partners
over others with respect to the matters enumerated.
[Article 1855]
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RIGHT TO ASSIGN INTEREST
The interest of a limited partner is assignable. The
assignee may become:
(1) A substituted limited partner; or
(2) A mere assignee.
A substituted limited partner is a person admitted to
all the rights of a limited partner who has died or has
assigned his interest in a partnership. He has all the
rights and powers, and is subject to all the
restrictions and liabilities of his assignor, except
those liabilities which:
(1) The assignee was ignorant of; and
(2) Cannot be ascertained from the certificate.
An assignee is only entitled to receive the share of the
profits or other compensation by way of income, or
the return of contribution, to which the assignor
would otherwise be entitled. He has no right:
(1) To require any information or account of the
partnership transactions;
(2) To inspect the partnership books.
An assignee has the right to become a substituted
limited partner if:
(1) All the partners consent thereto;
(2) The assignor, being empowered to do so by the
certificate, gives him that right.
An assignee becomes a substituted limited partner
when the certificate is appropriately amended.
[Article 1859]
RIGHT TO ASK FOR DISSOLUTION
A limited partner may have the partnership dissolved
and its affairs wound up:
(1) When his demand for the return of his
contribution is denied although he has a right to
such return;
(2) When he has such right, but his contribution is
not paid because the partnership property is
insufficient to pay its liabilities. [Article 1857]
CAUSES OF DISSOLUTION OF LIMITED
PARTNERSHIP
A limited partnership is dissolved in much the same
way and causes as an ordinary partnership [De Leon
(2010)].
General rule: The retirement, death, insolvency,
insanity or civil interdiction of a general partner
dissolves the partnership.
Exception: It is not so dissolved when the business is
continued by the remaining general partners:
(1) Under a right to do so stated in the certificate; or
(2) With the consent of all members. [Article 1860]
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On the death of a limited partner, his executor or
administrator shall have:
(1) All the rights of a limited partner for the purpose
of settling his estate; and
(2) The power to constitute an assignee as a
substituted limited partner, if the deceased was
so empowered in the certificate.
The estate of a deceased limited partner shall be
liable for all his liabilities as a limited partner. [Article
1861]
SETTLEMENT OF ACCOUNTS
ORDER OF PAYMENT
In settling accounts after dissolution, the liabilities of
the partnership shall be entitled to payment in the
following order:
(1) Those to creditors, including limited partners
except those on account of their contributions, in
the order of priority as provided by law;
(2) Those to limited partners in respect to their share
of the profits and other compensation by way of
income in their contributions;
(3) Those to limited partners in respect to the capital
of their contributions;
(4) Those to general partners other than for capital
and profits;
(5) Those to general partners in respect to profits;
(6) Those to general partners in respect to capital.
Note: In settling accounts of a general partnership,
those owing to partners in respect to capital enjoy
preference over those in respect to profits.
SHARE IN THE PARTNERSHIP ASSETS
The share of limited partners in respect to their
claims for capital, profits, or for compensation by way
of income, is in proportion of their contribution,
unless:
(1) There is a statement in the certificate as to their
share in the profits; or
(2) There is a subsequent agreement fixing their
share. [Article 1863]
AMENDMENT OR CANCELLATION OF
CERTIFICATE
WHEN CERTIFICATE IS CANCELLED
The certificate shall be cancelled when:
(1) The partnership is dissolved; or
(2) All limited partners cease to be such.
WHEN CERTIFICATE IS AMENDED
A certificate shall be amended when:
(1) There is a change in the name of the partnership
or in the amount or character of the contribution
of any limited partner;
(2) A person is substituted as a limited partner;
AGENCY & PARTNERSHIP BAR OPERATIONS COMMISSION
(3) An additional limited partner is admitted;
(4) A person is admitted as a general partner;
(5) A general partner retires, dies, becomes insolvent
or insane, or is sentenced to civil interdiction and
the business is continued;
(6) There is a change in the character of the business
of the partnership;
(7) There is a false or erroneous statement in the
certificate;
(8) There is a change in the time as stated in the
certificate for the dissolution of the partnership or
for the return of a contribution;
(9) A time is fixed for the dissolution of the
partnership, or the return of a contribution, no
time having been specified in the certificate; or
(10) The members desire to make a change in any
other statement in the certificate in order that it
shall accurately represent the agreement among
them.
REQUIREMENTS FOR AMENDMENT OR CANCELLATION
To amend or cancel a certificate:
(1) The amendment or cancellation must be in
writing;
(2) It must be signed and sworn to by all the
members including the new members, and the
assigning limited partner in case of substitution
or addition of a limited or general partner; and
(3) The writing to amend (with the certificate, as
amended) or to cancel must be filed for record in
the SEC.
From the moment the amended certificate/writing or
a certified copy of a court order granting the petition
for amendment has been filed, such amended
certificate shall thereafter be the certificate of
partnership. [Article 1865]
Contract of agency
DEFINITION
By the contract of agency, a person binds himself to
render some service or to do something in
representation or on behalf of another, with the
consent or authority of the latter [Article 1868].
Agency may refer to both a contract, as defined in
the provision, and the representative relation
created.
As a relation, agency is fiduciary (based on trust and
confidence), which implies a power in an agent to
contract with a third person on behalf of a principal.
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The basis of agency is representation [Victorias
Milling v. CA (2000)].
In an agent-principal relationship, the personality of
the principal is extended through the facility of the
agent. In so doing, the agent, by legal fiction,
becomes the principal, authorized to perform all acts
which the latter would have him do. Such a
relationship can only be effected with the consent of
the principal, which must not, in any way, be
compelled by law or by any court. [Orient Air v. CA
(1991)]
CHARACTERISTICS
The contract of agency is:
(1) Consensual, perfected by mere consent;
(2) Nominate, has its own name;
(3) Preparatory, entered into as a means to enter into
other contracts;
(4) Principal, does not depend on another contract
for existence and validity;
(5) Bilateral, if for compensation, giving rise to
reciprocal rights and obligations, but unilateral, if
gratuitous, creating obligations only for the
agent.
CONSTITUTION OF AGENCY
ESSENTIAL ELEMENTS
(1) There is consent, express or implied, of the parties
to establish the relationship;
(2) The object is the execution of a juridical act in
relation to third persons;
(3) The agent acts as a representative and not for
himself; and
(4) The agent acts within the scope of his authority.
[Rallos v. Felix Go Chan (1978)]
PARTIES
(1) Principal, one whom the agent represents and
from whom he derives his authority; and
(2) Agent, who acts for and represents the principal,
having derivative authority in carrying out the
business of the latter.
Juridical persons such as corporations and
partnerships can be principals and agents [Article
1919(4)].
CAPACITY OF PARTIES
(1) A principal must have legal capacity to enter into
contract in his own right.
(2) An agent must have legal capacity to enter into
the contract of agency, although he may not have
capacity to enter into the particular contract
subject of agency.
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Ratio: One who acts through an agent in law does
the act himself. As such, the capacity to act by an
agent depends in general on the capacity of the
principal to do the act himself as if he were present.
INTENTION OF PARTIES
On the part of the principal, there must be an actual
intention to appoint or an intention naturally
inferable from his words or actions; and on the part of
the agent, there must be an intention to accept the
appointment and act on it. [Victorias Milling v. CA
(2000)]
General rule: In the absence of such intent, there is
generally no agency.
Exceptions:
(1) Agency by estoppel; and
(2) Agency by operation of law.
CONSENT OF PARTIES
An agency is either express or implied. This is true on
the part of the principal as well as on the part of the
agent. It does not require express appointment and
acceptance.
As to the principal, the appointment of an agent may
be express, or implied:
(1) From his acts;
(2) From his silence or lack of action; or
(3) From his failure to repudiate the agency, knowing
that another person is acting on his behalf
without authority.
The appointment may be oral, unless the law
requires a specific form. [Article 1869]
As to the agent, acceptance may also be express, or
implied.
(1) From his acts which carry out the agency;
(2) From his silence or inaction according to the
circumstances [Article 1870];
(3) Both the principal and the agent being present if:
(a) The principal delivers his power of attorney to
the agent; and
(b) The agent receives it without any objection
[Article 1871];
(4) Both the principal and the agent being
absent, when:
(a) The principal transmits his power of attorney
to the agent, who receives it without any
objection; or
(b) When the principal entrusts to him by letter or
telegram a power of attorney with respect to
the business in which he is habitually engaged
as an agent, and he did not reply to the letter
or telegram.
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In other cases between persons who are absent,
acceptance cannot be implied from the silence of the
agent. [Article 1872]
POWER OF ATTORNEY
A power of attorney is 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 of kinds of acts on his
behalf. The written authorization itself is the power
of attorney. It has also been called a "letter of
attorney."
Its primary purpose is not to define the authority of
the agent, but to evidence the authority of the agent
to third parties with whom the agent deals. The
person holding the power of attorney is designated
as an "attorney-in-fact."
FORM OF CONTRACT
General rule: There are no formal requirements
governing the appointment of an agent.
Exceptions:
(1) When the law requires a specific form [2nd par.,
Article 1869];
(2) When a sale of piece of land or any interest
therein is through an agent, in which case the
authority shall be in writing; otherwise the sale is
void [Article 1874];
(3) When the law requires a special power of attorney
[Article 1878].
DESIGNATION BY THE PARTIES
The manner in which the parties designate the
relationship is not controlling. The use of this term
("agent") in one clause of the contract cannot
dominate the real nature of the agreement as
revealed in other clauses, no less than in the caption
["agency agreement"] of the agreement itself.
[Albadejo y Cia v. Phil. Refining (1923)]
ACTS DELEGATED
General rule: What a person may do in person, he
may do through another.
Exceptions:
(1) Personal acts, which the law or public policy
requires to be performed personally (e.g., to vote,
make a will, make statements under oath, or
attend board meetings as director or trustee of a
corporation);
(2) Criminal acts;
(3) Acts not allowed by law to be done by the
principal.
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PRESUMPTION OF EXISTENCE
General rule: It [agency] must exist as a fact. The law
makes no presumption thereof. The person alleging
it has the burden of proof to show, not only the fact
of its existence, but also its nature and extent.
[People v. Yabut (1977)]
Exceptions: A presumption of agency may arise:
(1) Where an agency may arise by operation of law
(e.g., all the partners being considered agents of
the partnership when the manner of
management has not been agreed upon); or
(2) To prevent unjust enrichment. [De Leon (2010)]
COMMUNICATION OF EXISTENCE OF AGENCY
There are two ways of giving notice of agency (that a
person has given a power of attorney to a third
person), with different effects:
(1) If a person specially informs another (e.g., by
letter), the person appointed as agent is
considered such with respect to the person
specially informed;
(2) If a person states by public advertisement, the
person appointed as agent is considered such
with regard to any person.
In either case, the power of the agent continues in
full force until the notice is rescinded in the same
manner in which it was given. [Article 1873]
DUTY OF THIRD PERSON
The person dealing with the agent must act with
ordinary prudence and reasonable diligence.
Obviously, if he knows or has good reason to believe
that the agent is exceeding his authority, he cannot
claim protection. [Keeler Electric v. Rodriguez (1922)]
EFFECT
EXTENSION OF PERSONALITY
It bears stressing that in an agent-principal
relationship, the personality of the principal is
extended through the facility of the agent. In so
doing, the agent, by legal fiction, becomes the
principal, authorized to perform all acts which the
latter would have him do. [Litonjua v. Eternit Corp.
(2006)]
THEORY OF IMPUTED KNOWLEDGE
An important implication of this extension of
personality is the general rule that knowledge of the
agent is imputed to the principal even though the
agent never communicated such knowledge to the
principal.
Requisites:
(1) Actual notice to the agent;
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(2) Notice must pertain to a matter of fact and not of Agency Independent Contractor
law;
(3) The fact must be within the scope of the agent's Control
authority.
An agent acts under the An independent
Thus, it is only logical that the agent is required to control and instruction of contractor is not subject to
notify the principal of all matters that came to his the principal control, except insofar as
attention that are material to the subject matter of the result of the work is
the agency. concerned

Exceptions: Liability for tort

(1) Where the agent's interests are adverse to those Principal is liable for torts Employer is not liable for
of the principal; committed by the agent torts committed by the
(2) Where the agent's duty is not to disclose the with the scope of his independent contractor
information (e.g., he is informed by way of authority
confidential information);
(3) Where the person claiming the benefit of the rule Sub-agents
colludes with the agent to defraud the principal.
Agents of the agent is still Employees of
DISTINGUISHED FROM OTHER CONTRACTS subject to the control of independent contractor
the principal are not subject to control
Agency Partnership
of his employer
Representation
An agent acts only for the A partner acts for the Agency Lease of Service
principal other partners, the
Basis
partnership and himself
Representation Employment
Control
Purpose
An agent's power to bind A partner's power to bind
the principal is subject to his co-partners is not Execution of juridical acts Execution of piece of work
the latter's control subject to their control in relation to third persons or rendition of service
Personal liability Authorized acts
An agent does not A partner is personally Juridical acts (creation, Material acts only
assume personal liability, liable with all his property, modification, extinction of
if he acts within the scope after exhaustion of the relations with third
of his authority partnership properties parties)
Share in profits Discretion
An agent is not entitled to A partner is entitled to a An agent is authorized to Ordinarily, lessor performs
profits, only compensation share in the profits of the exercise discretion only ministerial functions
partnership
Parties
Three parties are involved Two parties are involved
One factor which most clearly distinguishes agency
from other legal concepts is control; one person the
agent agrees to act under the control or direction
of another the principal. Indeed, the very word Agency Lease of Property
"agency" has come to connote control by the
principal. The control factor, more than any other, Control
has caused the courts to put contracts between
principal and agent in a separate category. [Victorias An agent acts under the A lessee is not subject to
Milling v. CA (2000)] control and instruction of the control of the lessor
the principal

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Agency Lease of Property Agency Guardianship

Things involved Person represented
Agency may involve things Lease of property involves An agent represents a A guardian represents an
other than property property only capacitated person incapacitated person
Binding power Source of authority
An agent can bind the Lessee cannot bind the An agent is appointed by A guardian is appointed
principal lessor the principal by the court
Control

Agency to Sell Sale An agent is subject to the A guardian is not subject

control of the principal to the control of the ward
Ownership of goods
Binding power
Principal retains Buyer acquires ownership
ownership An agent can make the A guardian has no power
principal principally liable to impose personal
Payment liability on the ward
An agent delivers the A buyer pays the purchase
proceeds of the sale to the price
principal Agency Trust
Return of goods Title and control of property
Generally, an agent can Generally, a buyer cannot Title passes to the trustee Title retained by principal
return goods unsold return the goods bought
Control
Dealing with the goods
An agent is subject to the A trustee is only subject to
An agent deals with the A buyer, being the owner, control of the principal the stipulated guidance of
goods according to the can deal with the goods as the cestui
instructions of the he pleases
principal Termination
In general, an agency may In general, a trust may be
be revoked at any time terminated only when its
Agency to Buy Sale purpose is fulfilled

Ownership of goods
Ownership is acquired in Ownership is transferred
behalf of the principal to the buyer
Changes in price
Kinds of agency
Generally, any change in A buyer cannot adjust the KINDS OF AGENCY, IN GENERAL
the price is borne by the price already agreed upon AS TO MANNER OF ITS CREATION
principal (1) Express;
(2) Implied.
Payment
AS TO CAUSE OR CONSIDERATION
Price is paid in behalf of Price is paid by the buyer (1) Gratuitous; or
the principal (2) Compensated or onerous.

Agency is presumed to be for a compensation, unless

there is proof to the contrary [Article 1875].

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AS TO EXTENT OF BUSINESS COVERED GENERAL AGENCY

(1) Universal; General agency comprises all the business of the
(2) General; or principal.
(3) Special.
SPECIAL AGENCY
AS TO AUTHORITY CONFERRED Special agency comprises one or more specific
(1) Couched in general terms; or transactions.
(2) Couched in specific terms.
General Agency Special Agency
AS TO ITS NATURE AND EFFECTS
(1) Ostensible or representative, where the agent Scope of authority
acts in the name and representation of the
principal [Article 1868]; All acts connected with Only specific authorized
(2) Simple or commission, where the agent acts in the business or acts or those necessarily
his own name but for the account of the principal. employment in which implied
agent is engaged
AS TO KINDS OF PRINCIPAL
(1) With a disclosed principal, where, at the time the Nature of service authorized
transaction was contracted by the agent, the Involves continuous Usually involves a single
other party thereto has known: service transaction
(a) that the agent is acting for a principal; and
(b) the principal's identity; Extent to which agent may bind principal
(2) Partially disclosed, where the other party knows
or has reason to know that the agent is or may be Acts within the scope of Acts beyond authority
acting for a principal but is unaware of the authority, even in conflict given cannot bind
principal's identity; or with special instructions, principal
(3) Undisclosed, where the party has no notice of the may bind principal
fact that the agent is acting as such for a
principal. Termination of authority
Notice to third persons No notice required, since
KINDS OF AGENCY AS TO MANNER OF CREATION required to terminate third parties are required
EXPRESS AGENCY
apparent authority to inquire as to authority
An express agency is one where the agent has been
actually authorized by the principal, either: Construction of instructions
(a) Orally; or
(b) In writing. [Article 1869] Notice to third persons The instructions, in so far
required as they grant authority,
IMPLIED AGENCY are strictly construed
The creation of implied agency is implied:
(1) As to the appointment of an agent by the KINDS OF AGENCY AS TO AUTHORITY
principal: CONFERRED
(a) From his acts; COUCHED IN GENERAL TERMS
(b) From his silence or lack of action; or An agency couched in general terms is one created in
(c) From his failure to repudiate the agency general terms and is deemed to comprise only acts
knowing that another person is acting on his of administration, even if:
behalf without authority. [Article 1869] (1) The principal should state that he withholds no
(2) As to the acceptance of the agency by the agent: power;
(a) From his acts which carry out the agency; (2) He should state that the agent may execute such
(b) From his silence or inaction according to the acts as he may consider appropriate; or
circumstances (i.e., presence or absence of the (3) Even though the agency should authorize a
parties) [Articles 1870, 1871 and 1872] general and unlimited management [Article 1877].
KINDS OF AGENCY AS TO EXTENT OF BUSINESS COUCHED IN SPECIFIC TERMS
COVERED An agency couched in specific terms authorizes only
UNIVERSAL AGENCY the performance of specific acts [Article 1878].
Universal agency comprises all acts which the Certain specific acts, however, require special powers
principal can lawfully delegate to an agent; of attorney.

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A special power of attorney is 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.
The following acts of strict dominion require special
powers of attorney:
(1) To make such payments as are not usually
considered as acts of administration;
(2) To effect novations which put an end to
obligations already in existence at the 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 for a valuable consideration;
(6) To make gifts, except customary ones for charity
or those made to employees in the business
managed by the agent;
(7) To loan or borrow money, unless the latter 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 a 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. [Article 1878]
Notes:
(1) The requirement of special power of attorney in
Article 1878 refers to the nature of the
authorization, not to its form. Even if a document
is titled as a general power of attorney, the
requirement of a special power of attorney is met
if there is a clear mandate from the principal
specifically authorizing the performance of the
act [Bravo-Guerrero v. Bravo (2005)].
(2) A special power of attorney can be included in the
general power when it is specified therein the act
or transaction for which the special power is
required [Veloso v. CA (1996)].
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(3) A special power to sell excludes the power to
mortgage; and a special power to mortgage does
not include the power to sell [Article 1879].
(4) A special power to compromise does not
authorize submission to arbitration [Article 1880].
(5) The power to "exact the payment" of sums of
money "by legal means" include the power to
institute suits for their recovery [Germann & Co., v.
Donaldson, Sim & Co. (1901)].
(6) A power of attorney to loan and borrow money
and to mortgage the principals property does not
carry with it or imply that that the agent has a
legal right to make the principal liable for the
personal debts of the agent [BPI v. De Coster
(1925)].
(7) Unless the contrary appears, the authority of an
agent must be presumed to include all the
necessary and usual means of carrying the
agency into effect [Macke v. Camps (1907)].
However, although the Civil Code expressly requires a
special power of attorney in order that one may
compromise an interest of another, it is neither
accurate nor correct to conclude that its absence
renders the compromise agreement void. In such a
case, the compromise is merely unenforceable.
[Dugo v. Lopena (1962)]
SPECIAL KINDS OF AGENCY
AGENCY BY ESTOPPEL
Through estoppel, an admission or representation is
rendered conclusive upon the person making it, and
cannot be denied or disproved as against the person
relying thereon [Article 1431].
Ratification Estoppel
Rests on intention Rests on prejudice
Retroacts as if originally Affects only relevant parts
authorized of the transaction
Substance is confirmation Substance is the
of unauthorized acts after principal's inducement for
it has been done third party to act to his
prejudice
For an agency by estoppel to exist, the following must
be established:
(1) The principal manifested a representation of the
agents authority or knowingly allowed the agent
to assume such authority;
(2) The third person, in good faith, relied upon such
representation;
(3) Relying upon such representation, such third
person has changed his position to his detriment.
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An agency by estoppel, which is similar to the doctrine Qualification: The exception only applies if the agent
of apparent authority, requires proof of reliance upon contracts with the properties of the principal within
the representations, and that, in turn, needs proof the scope of his authority [PNB v. Agudelo (1933)].
that the representations predated the action taken in
reliance. [Litonjua v. Eternit Corp. (2006)] AGENCY BY OPERATION OF LAW
An agency may exist by operation of law, such as in
Implied Agency Agency by Estoppel the following cases:
(1) Every partner is an agent of the partnership for
Principal is liable Person who is in bad faith the purpose of its business [Article 1818];
is liable (2) When the principal's actions would reasonably
lead a third person to conclude that an agency
exists, an agency by estoppel is created by
One who clothes another with apparent authority as
operation law [Black's Law Dictionary (9th)];
his agent, and holds him out to the public as such,
(3) In case of certain necessity or emergency, an
cannot be permitted to deny the authority of such
agency by necessity may arise.
person to act as his agent, to the prejudice of
innocent third parties dealing with such person in
IRREVOCABLE AGENCY
good faith.
Article 1927 (on agency coupled with an interest)
mentions three instances where the sole will of the
Note: Article 1911 states that: "Even when the agent
principal cannot terminate (revoke) an agency:
has exceeded his authority, the principal is solidarily
(1) A bilateral contract depends upon it;
liable with the agent if the former allowed the latter
(2) It is the means of fulfilling an obligation already
to act as though he had full powers." In this case,
contracted; or
there is a duly formed agency and estoppel only
(3) A partner is appointed manager of a partnership
applies to the excess of authority. This is an
in the contract of partnership and his removal
application of the doctrine of apparent authority
from the management is unjustifiable.
Under the doctrine of apparent authority, the
Qualifications:
question in every case is whether the principal has, by
(1) Coupled with interest or not, the authority
his voluntary act, placed the agent in such a situation
certainly can be revoked for a just cause, such as
that a person of ordinary prudence, conversant with
when the attorney-in-fact betrays the interest of
business usages and the nature of the particular
the principal, xxx. It is not open to serious doubt
business, is justified in presuming that such agent
that the irrevocability of the power of attorney
has authority to perform the particular act in
may not be used to shield the perpetration of acts
question. [Professional Services v. Agana (2008)]
in bad faith, breach of confidence, or betrayal of
trust, by the agent for that would amount to
In agency by estoppel, there is no agency. The alleged
holding that a power coupled with an interest
agent seemed to have apparent or ostensible
authorizes the agent to commit frauds against
authority, but not real authority to represent another.
the principal. [Coleongco v. Claparols (1964)]
AGENCY WITH UNDISCLOSED PRINCIPAL
(2) A mere statement in the power of attorney that it
General rule: If an agent acts in his own name (the
is coupled with an interest is not enough. In what
principal is undisclosed), the agent is the one directly
does such interest consist must be stated in the
bound in favor of the person with whom he has
power of attorney. [Del Rosario v. Abad (1958)]
contracted, as if the transaction were his own.
(3) An agency couple with an interest cannot affect
Ratio: There is no representation of the principal
third persons. They are obligatory only on the
when the agent acts in his own name. The third
principal who executed the agency. [New Manila
person cannot allege that he was misled by any
Lumber v. Republic (1960)]
representation since he did not know of the existence
of the undisclosed principal.
KINDS OF AGENTS
AS TO NATURE AND EXTENT OF AUTHORITY
Exception: The principal is bound when the contract
According to the nature and extent of their authority,
involves things belonging to him [Article 1883]. In this
agents have been classified into:
case, the contract is considered as one between the
(1) Universal agents are authorized to do all acts for
principal and the third person.
his principal which can lawfully be delegated to
an agent. So far as such a condition is possible,

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such an agent may be said to have universal
authority.
(2) General agents are authorized to do all acts
pertaining to a business of a certain kind or at a
particular place, or all acts pertaining to a
business of a particular class or series. He has
usually authority either expressly conferred in
general terms or in effect made general by the
usages, customs or nature of the business which
he is authorized to transact. An agent, therefore,
who is empowered to transact all the business of
his principal of a particular kind or in a particular
place, would, for this reason, be ordinarily
deemed a general agent.
(3) Special agents are authorized to do some
particular act or to act upon some particular
occasion (i.e., acts usually in accordance with
specific instructions or under limitations
necessarily implied from the nature of the act to
be done). [Siasat v. IAC (1985)]
SPECIAL TYPES OF AGENTS
(1) Attorney-at-law is one whose business is to
represent clients in legal proceedings;
(2) Auctioneer is one whose business is to sell
property for others to the highest bidder at a
public sale;
(3) Broker is one whose business is to act as
intermediary between two other parties such as
insurance broker and real estate broker;
(4) Factor or commission merchant is one whose
business is to receive and sell goods for a
commission, being entrusted with the possession
of the goods involved in the transaction.
(5) Cashier in bank is one whose business is to
represent a banking institution in its financial
transactions; and
(5) Attorney-in-fact is one who is given authority by
his principal to do a particular act not of a legal
character. In its strict legal sense, it means an
agent having a special authority.
Attorneys have authority to bind their clients in any
case by any agreement in relation thereto made in
writing, and in taking appeals, and in all matters of
ordinary judicial procedure. But they cannot, without
special authority, compromise their client's litigation,
or receive anything in discharge of a client's claim
but the full amount in cash. [Section 23, Rule 138,
Rules of Court]
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Powers of the agent
AUTHORITY OF AN AGENT
Authority is the power of the agent to affect the legal
relations of his principal by acts done in accordance
with the principals manifestations of consent.
An agent can make the principal legally responsible
only when he is authorized by the principal to act the
way he did.
KINDS OF AUTHORITY
(1) Actual, when it is actually granted, and it may be
express or implied. It is the authority that the
agent does, in fact, have. It results from what the
principal indicates to the agent;
(2) Express, when it is directly conferred by words;
(3) Implied, when it is incidental to the transaction or
reasonably necessary to accomplish the main
purpose of the agency;
(4) Apparent or ostensible, when it arises by the acts
or conduct of the principal giving rise to an
appearance of authority. It makes the principal
responsible to third persons for certain actions of
the agent that were not really authorized;
(5) General, when it refers to all the business of the
principal;
(6) Special, when it is limited only to one or more
specific transactions; and
(7) By necessity or by operation of law, when it is
demanded by necessity or by virtue of the
existence of an emergency. The agency
terminates when the emergency passes.
SCOPE OF AUTHORITY
General rule: The scope of the authority of the agent
is what appears in the terms of the power of attorney
[Siredy Enterprises v. CA (2002)].
Exceptions: An agent is considered acting within the
scope of his authority when:
(1) He performs acts which are conducive to the
accomplishment of the purpose of the agency
[Article 1881];
(2) He performed the agency in a manner more
advantageous to the principal than that specified
by said principal [Article 1881];
(3) The principal ratifies the act, expressly or tacitly
[Article 1910].
So far as third persons are concerned, an act is
deemed to have been performed within the scope of
the agent's authority if such act is within the terms of
the power of attorney, as written, even if the agent
has in fact exceeded the limits of his authority
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according to an understanding between the principal
and the agent. [Article 1901]
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 of the written power of attorney.
[Siredy Enterprises v. CA (2002)]
POWER TO BIND THE PRINCIPAL
Requisites:
(1) The agent must act within the scope of his
authority; and
(2) The agent must act in behalf of the principal.
Even when the agent acts in his own name, however,
the principal is still bound, when the contract
involves things belonging to the principal [Article
1883] or when the principal ratifies the contract,
expressly or tacitly [Article 1910].
EFFECTS OF ACTS OF AN AGENT
In summary, when the agent acts:
(1) With authority of the principal:
(a) If done in the name of the principal, the
principal is bound to comply with the
obligations contracted [Article 1910] and the
agent is not personally liable to the party with
whom he contracts [Article 1897];
(b) If done in the name of the agent, the agent is
the one directly bound in favor of the person
with whom he has contracted, except when
the contract involves things belonging to the
principal;
(2) Without authority or beyond the authority granted
by the principal:
(a) If done in the name of the principal, it is
unenforceable against him, unless he ratifies
it expressly or tacitly [Article 1910].
(b) If done in the name of the agent, he is
personally liable.
Obligations of the agent
OBLIGATIONS, IN GENERAL
GOOD FAITH AND LOYALTY TO HIS TRUST
The duty of good faith is also called the fiduciary
duty, which imposes upon the agent the obligation of
faithful service. The duty to be loyal to the principal
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demands that the agent look out for the best
interests of the principal as against his own or those
of third parties. [See Article 1889]
Thus, an act of the agent which tends to violate his
fiduciary duty is not only invalid as to the principal,
but is also against public policy.
Presumption: Until proven otherwise, however, the
presumption arises that an agent has performed his
duty in good faith, and the principal, until notice is
received of a breach of relational duties, may rely
upon his agent's faithfulness.
Exception: The presumption does not arise when
there is no relation of trust or confidence between
the parties (e.g., the agent is bound merely as an
instrument/servant, or there is no agency
relationship). [De Leon (2010)]
OBEDIENCE TO PRINCIPAL'S INSTRUCTIONS
General rule: An agent must obey all lawful orders
and instructions of the principal within the scope of
the agency. If he fails to do so, he becomes liable for
any loss the principal incurs even though he can
show that he acted in good faith or exercised
reasonableness. [See Article 1887]
EXERCISE OF REASONABLE CARE
By accepting an employment whose requirements he
knows, without stipulating otherwise, the agent
impliedly undertakes that he possesses a degree of
skill reasonably and ordinarily competent for the
performance of the service, and that in performing
his undertaking, he will exercise reasonable care,
skill and diligence. [De Leon (2010)]
The specific obligations of the parties to each other
are merely specific applications of the general
fiduciary obligation [De Leon (2010)].
OBLIGATION TO CARRY OUT AGENCY
General rule: The agent is:
(1) Bound by his acceptance to carry out the agency;
(2) Liable for damages, which the principal may
suffer, in case of non-performance;
(3) Bound to finish the business already begun on
the death of the principal should delay entail
danger. [Article 1884]
Exception: An agent shall not carry out an agency if
its execution would manifestly result in loss or
damage to the principal [Article 1888].
OBLIGATION IN CASE HE DECLINES AGENCY
In case a person declines an agency, he is bound to
observe the diligence of a good father of a family in
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the custody and preservation of the goods forwarded
to him.
The obligation lasts until the owner, as soon as
practicable:
(1) Appoints an agent; or
(2) Takes charge of the goods. [Article 1886]
The case treated in this provision is different from
withdrawal. In this case, no agency was formed.
Withdrawal presupposes an existing agency.
The obligation of the agent, in case of withdrawal, is
to continue to act as such agent until the principal
has had reasonable opportunity to take the
necessary steps to meet the situation. [Article 1929]
OBLIGATION TO ADVANCE NECESSARY FUNDS
General rule: The agent is not bound to advance the
necessary funds. The principal is obliged to advance
to the agent, should the latter so request, the sums
necessary for the execution of the agency.
Exception: He shall be bound to do so should there
be a stipulation to that effect, subject to the
obligation of the principal to reimburse the agent.
Exception to the exception: He is not bound to do so,
even when there is a stipulation, when the principal is
insolvent. [Article 1886]
Note: Insolvency of the principal is also a ground for
extinguishment.
OBLIGATION TO ACT IN ACCORDANCE WITH
INSTRUCTIONS
In the execution of the agency, the agent shall act in
accordance with the instructions of the principal.
In the absence of such instructions, he shall do all
that a good father of a family would do, as required
by the nature of the business. [Article 1887]
Note: The limits of the agent's authority shall not be
considered exceeded should it have been performed
in a manner more advantageous to the principal
than that specified by him [Article 1882].
Authority Instructions
Sum total of the powers Private rule of guidance to
committed or permitted to the agent
the agent
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Authority Instructions
Relates to the transaction Refers to the manner or
or business with which the mode of agent's action
agent is empowered to act with respect to matters
within the permitted
scope of authority
Binds third parties Does not bind third
parties
OBLIGATION TO PREFER INTEREST OF
PRINCIPAL
General rule: The agent shall be liable for damages if,
there being a conflict between his interest and those
of the principal, he should prefer his own [Article
1889].
Exceptions: The agent is not liable for giving
preference to his own when:
(1) The principal waives the benefit of this rule, with
full knowledge of the facts; or
(2) When the interest of the agent is superior.
An example of the latter is where the agent has
security interest in goods of the principal in his
possession, he may protect his interest even if in
doing so, he disobeys the principal's orders or injures
his interest [De Leon (2010)].
BASIS OF THE RULE
The underlying basis of the rule, which precludes an
agent from engaging in self-dealing, is to shut the
door against temptation and keep the agent's eye
single to the rights and welfare of the principal.
APPLICATION
(1) A specific application of this subordination of
interests is found in Article 1890: If the agent has
been empowered to borrow money, he may
himself be the lender at the current rate of
interest. If he has been authorized to lend money
at interest, he cannot borrow it without the
consent of the principal.
(2) An agent authorized to sell merchandise cannot
bind the principal by selling to himself directly or
indirectly, unless the principal consented or
ratified the purchase.
OBLIGATION TO ACCOUNT AND TO DELIVER
THINGS RECEIVED
Every agent is bound to:
(1) Render an account of his transactions; and
(2) Deliver to the principal whatever he may have
received by virtue of the agency, even though it
may not be owing to the principal.
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WHAT TO DELIVER
What has to be delivered include all money and
property which may have come into his hands or in
that of a sub-agent. This includes gifts from third
parties in connection with the agency.
It is immaterial whether such money or property is
the result of the performance or violation of the
agent's duty, if it be the fruit of the agency.
LIABILITY FOR CONVERSION
If the agent fails to deliver and instead converts or
appropriates for his own use the money or property
belonging to the principal, he is liable for estafa.
EXEMPTING STIPULATION
Every stipulation exempting the agent to render an
account shall be void. [Article 1891]
WHEN OBLIGATION NOT APPLICABLE
(1) If the agent or broker acted only as a middleman
with the task of merely bringing together the
vendor and the vendee [Domingo v. Domingo
(1971)].
(2) If the agent had informed the principal of the gift
or bonus or profit he received from the purchaser
and the principal did not object thereto;
(3) When a right of lien exists in favor of the agent.
RESPONSIBILITY FOR ACTS OF SUBSTITUTE
The agent may appoint a substitute if the principal
has not prohibited him from doing so.
The agent is responsible for the acts of the
substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but:
(a) Without designating the person; and
(b) The person appointed was notoriously
incompetent or insolvent.
All acts of the substitute appointed against the
prohibition of the principal shall be void. [Article
1892]
The principal may bring an action against the
substitute with respect to the obligations which the
latter contracted under the substitution [Article
1893].
SUB-AGENCY
A sub-agent or substitute is a person employed or
appointed by an agent as his agent, to assist him in
the performance of an act for the principal, which the
agent has been empowered to perform.
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The agent is a principal with respect to the sub-
agent.
POWER TO APPOINT
General rule: The agent may appoint a sub-agent.
Ratio: The law allows such substitution for reasons of
convenience and practicality.
Exceptions:
(1) The appointment is prohibited by the principal
[Article 1892];
(2) The work entrusted to the agent requires special
knowledge, skill, or competence, unless
authorized to do so by the principal [De Leon
(2010)].
RELATIONS AMONG THE PARTIES
(1) When the sub-agent has been employed for own
account of the agent, to assist him, the sub-agent
is a stranger to the principal.
(2) When the appointment was authorized by the
principal, a fiduciary relationship is created
between and among the principal, agent, and
sub-agent, such that neither the agent nor the
substitute can be held personally liable so long
as they act within the scope of their authority
[Macias & Co. v. Warner, Barnes & Co. (1922)].
EFFECTS OF SUBSTITUTION
(1) When substitution was prohibited by the principal,
appointment by the agent is an act in excess of
the limits of his authority. All acts of the
substitute are void [Article 1892].
(2) When substitution was authorized, the agent is
only liable when he appointed one who is
notoriously incompetent or insolvent, unless the
person was designated by the principal.
(3) When substitution was not authorized, but also
not prohibited, the appointment is valid, but the
agent is liable for damage caused by the
substitution to the principal.
(4) When substitution was authorized and the sub-
agent was designated by the principal, the agent
is released from any liability for the acts of the
sub-agent.
RESPONSIBILITY OF TWO OR MORE AGENTS
General rule: The responsibility of two or more agents
is not solidary, even though they have been
appointed simultaneously. They are liable jointly.
Exception: They are solidarily liable if solidarity has
been expressly stipulated [Article 1894].
If solidarity has been thus agreed upon, each of the
agents is responsible for:
UP COLLEGE OF LAW AGENCY & PARTNERSHIP
(1) The non-fulfillment of agency, even when the
fellow agents acted beyond the scope of their
authority; and
(2) The fault or negligence of his fellow agents,
except when the fellow agents acted beyond their
authority.
OBLIGATION FOR SUMS APPLIED TO HIS OWN
USE
The agent owes interest:
(1) On the sums applied to his own use from the day
on which he did so; and
(2) On the sums which he still owes after the agency
is extinguished. [Article 1896]
The liability of the agent for interest for sums
converted to his own use is without prejudice to a
criminal action that may be brought against him [De
Leon (2010)].
The sums referred to as still owing to the principal
after extinguishment of the agency are those which
were not misapplied by the agent, but were found to
be owing to the principal after such extinguishment.
OBLIGATIONS TO THIRD PERSONS
LIABILITY OF AGENT FOR OBLIGATIONS CONTRACTED
General rule: The agent who acts as such is not
personally liable to the party with whom he
contracts.
The principal is responsible for such acts done within
the scope of the authority granted to the agent, and
should bear any damage caused to third persons.
[Article 1910]
Exceptions: He is personally liable when:
(1) He acts in his own name [Article 1883];
(2) He expressly binds himself; or
(3) He exceeds the limits of his authority without
giving such party sufficient notice of his powers.
[Article 1897]
Note: If the agent acts in his own name, he is directly
bound in favor of the person with whom he
contracted, as if the transaction were his own, except
when the contract involves things belonging to the
principal.
VOID CONTRACTS
The contract entered into by an agent on behalf of
the principal shall be void when:
(1) The agent contracts in the name of the principal;
(2) He exceeded the scope of his authority;
(3) The principal does not ratify the contract; and
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(4) The party with whom the agent contracted is
aware of the limits of the powers granted by the
principal.
The agent, however, is liable if he undertook to
secure the principal's ratification.
PRESENTATION OF POWER OF ATTORNEY
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. Private or secret
orders and instructions of the principal do not
prejudice third persons who have relied upon the
power of attorney or instructions shown them.
[Article 1902]
So far as third persons are concerned, an act is
deemed to have been performed within the scope of
the agent's authority, if such act is within the terms
of the power of attorney, as written, even if the agent
has in fact exceeded the limits of his authority
according to an understanding between the principal
and the agent. [Article 1900]
RATIFICATION BY PRINCIPAL
A third person, who contracts with the agent
(thereby recognizing the authority of the agent),
cannot later disaffirm his contract based on the fact
that the agent has exceeded his powers, if the
principal has:
(1) Ratified the acts of the agent; or
(2) Signified his willingness to ratify said acts. [Article
1901]
Thus, the third person can be compelled to abide by
the contract in this case.
The ratification has retroactive effect, relating back
to the time of the act or contract ratified and is
equivalent to original authority [Board of Liquidators
v. Kalaw].
A principal may not accept the benefits of a
transaction and repudiate its burdens. Thus, a
principal who seeks to enforce a sale made by the
agent cannot ordinarily allege that the agent
exceeded his authority.
Before ratification, however, the third person may
repudiate the contract.
IGNORANCE OF AGENT
If a duly authorized agent acts in accordance with
the orders of the principal, said principal cannot set
up the ignorance of the agent as to circumstances
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whereof he himself was, or ought to have been, SALE OF GOODS ON CREDIT WITHOUT AUTHORITY
aware. [Article 1899] General rule: The commission agent cannot sell on
credit. Should he do so, the principal may:
Thus, if the principal appoints an agent who is (1) Demand from him payment in cash, in which case
ignorant, the fault is his alone. He is bound by the the commission agent shall be entitled to any
acts of the agent. The agent is not liable to third interest or benefit, which may result from such
persons in this case. sale [Article 1905]; or
(2) Ratify the sale on credit, in which case the
OBLIGATIONS OF COMMISSION AGENT principal will have all the risks and advantages to
FACTOR OR COMMISSION AGENT him [De Leon (2010)].
A factor or commission agent is one whose business
is to receive and sell goods for a commission (also Exception: The commission agent can sell on credit
called factorage) and who is entrusted by the with the express or implied consent of the principal.
principal with the possession of goods to be sold,
and usually selling in his own name. SALE OF GOODS ON CREDIT WITH AUTHORITY
If the commission agent was authorized to sell on
He may act in his own name or in that of the credit and should he so sell on credit, he shall inform
principal. the principal of such sale, with a statement of the
names of the buyers.
An ordinary agent need not have possession of the
goods of the principal, while the commission agent Should he fail to inform the principal, the sale is
must be in possession. [De Leon (2010)] deemed to have been made for cash as far as the
principal is concerned. [Article 1906] As such, as to
Ordinary Agent Commission Agent the buyer, the sale may be on credit, but the principal
may demand the payment in cash from the agent.
Acts for and in behalf of Acts in his own name or
the principal that of his principal Should the commission agent receive a guarantee
commission (del credere commission) on a sale, in
Need not have possession Must have possession of addition to the ordinary commission, he shall:
of the goods the goods (1) Bear the risk of collection; and
(2) Pay the principal the proceeds of the sale on the
terms agreed upon with the purchaser.
Broker Commission Agent In case of a sale on credit, the commission agent is
Has no custody of the Has custody or possession obliged to collect the credits of his principal when
thing to be disposed of, of the things to be sold they become due and demandable.
only acts as intermediary
between seller and buyer General rule: Failing to so collect, the agent shall be
liable for damages
Maintains no relations Maintains relations with
with things to be the thing, the buyer and Exception: He is not liable if he proves that he
sold/bought the seller exercised due diligence for that purpose.

RESPONSIBILITY FOR FRAUD AND NEGLIGENCE

RESPONSIBILITY FOR GOODS RECEIVED
(1) The commission agent shall be responsible for
goods received by him in the terms and
conditions and as described in the consignment,
unless upon receiving them he should make a
written statement of the damage and
deterioration suffered by the same [Article 1903].
(2) 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 [Article 1904].
In the fulfillment of his obligation, the agent is
responsible for:
(1) Fraud; and
(2) Negligence
The circumstance that the agency is or is not
gratuitous will be considered by the courts in fixing
the liability for negligence only.
The liability may be to the principal or to third
persons.

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The principal is solidarily liable if quasi-delict was
committed by the agent while performing his duties
in furtherance of the principal's business.
Obligations of the principal
OBLIGATIONS, IN GENERAL
In addition to his duties specified under the contract
itself, the principal is under obligation to deal fairly
and in good faith with his agent, who owes the same
to his principal.
OBLIGATION TO COMPLY WITH OBLIGATIONS
CONTRACTED
General rule: The principal must comply with all the
obligations which the agent may have contracted
within the scope of his authority. As for any obligation
where in the agent has exceeded his power, the
principal is not bound.
Exceptions: The principal is:
(1) Bound by the obligation entered into by the
agent in excess of his power, when he ratifies it
expressly or tacitly [Article 1910];
(2) Solidarily liable with the agent if the principal
allowed the agent to act as though he had full
powers [Article 1911].
Note: If the agent acts in his own name, but the
contract involves things belonging to the principal,
the contract must be considered as entered into
between the principal and the third person [Sy-Juco
and Viardo v. Sy-Juco (1920)].
RATIFICATION
Ratification is the adoption or affirmance by a person
of a prior act which did not bind him, but which was
done or professed to be done on his account, thus
giving effect to the acts as if originally authorized.
Aside from the intent to ratify, the following
conditions must be fulfilled for ratification to be
effective:
(1) The principal must have the capacity and power
to ratify;
(2) He must have had knowledge or had reason to
know of material or essential facts about the
transaction;
(3) He must ratify the acts entirely;
(4) The act must be capable of ratification; and
(5) The act must be done in behalf of the principal.
[De Leon (2010)]
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The effects of ratification are:
(1) With respect to the agent, it relieves him of
liability. He may thus recover compensation from
the principal.
(2) With respect to the principal, he assumes
responsibility for the unauthorized act as fully as
if the agent had acted under an original authority.
But he is not liable for acts outside the authority
affirmed by his ratification.
(3) With respect to third persons, they are bound by
the ratification and cannot set up the fact that the
agent has exceeded his powers [Article 1901].
SEPARATE CONTRACTS WITH PRINCIPAL AND AGENT
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,
subject to the rules on double sales [Article 1916].
The rules on double sales (Article 1544) provide:
(1) If the same movable property is sold to different
persons, ownership is transferred to whoever first
took possession in good faith.
(2) If it be immovable:
(a) Ownership belongs to the person who in good
faith first recorded it in the Registry of
Property.
(b) If there is no inscription, ownership shall
belong to the person who, in good faith was
first in possession; and in the absence of such,
to the one who presents the oldest title,
provided there is good faith.
The liability for damages suffered by the third person
whose contract must be rejected shall be borne by:
(1) The principal, if the agent acted in good faith; or
(2) The agent, if he acted in bad faith. [Article 1918]
WHEN PRINCIPAL NOT LIABLE, IN SUMMARY
(1) Void or inexistent contracts [Article 1409];
(2) Sale of a piece of land or any interest therein
when the authority of the agent is not in writing
[Article 1874];
(3) Acts of the substitute appointed against the
prohibition of the principal [Article 1892];
(4) Acts done in excess of the scope of the agent's
authority [Articles 1898 and 1910];
(5) When the agent acts in his own name, except
when the contract involves things belonging to the
principal [Article 1883];
(6) Unenforceable contracts [Article 1403].
OBLIGATION FOR COMPENSATION OF AGENT
Agency is presumed to be for a compensation, unless
there is proof to the contrary [Article 1875].
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AMOUNT OF COMPENSATION
The principal must pay the agent the compensation
agreed upon, or the reasonable value of the agent's
services if no compensation was specified.
This obligation presupposes that the agent complied
with his obligation to the principal.
COMPENSATION OF BROKER
A broker is entitled to the usual commissions
whenever he brings to his principal a party who is
able and willing to take the property and enter into a
valid contract upon the terms named by the
principal, although the terms may be arranged and
the matter negotiated and consummated between
the principal and the purchaser directly.
A broker is never entitled to commission for
unsuccessful efforts.
The governing rule is that the agent must prove that
he was the procuring cause of the transaction.
Otherwise, he is not entitled to the stipulated
broker's commission [Inland Realty v. CA (1997)].
Procuring cause refers to a cause originating a series
of events which, without break in their continuity,
result in the accomplishment of the prime objective
of the employment of the broker producing a
purchaser ready, willing and able to buy on the
owner's terms.
Since the brokers only job is to bring together the
parties to a transaction, it follows that if the broker
does not succeed in bringing the mind of the
purchaser and the vendor to an agreement with
reference to the terms of a sale, he is not entitled to
a commission [Rocha v. Prats (1922)].
If the principal breaks off from negotiations with a
buyer brought by the agent in order to deliberately
deal later with the buyer personally, this is evident
bad faith. In such case, justice demands
compensation for the agent. [Infante v. Cunanan
(1953)]
LIABILITY FOR EXPENSES AND DAMAGES
NECESSARY FUNDS
(1) The principal must advance to the agent, should
the latter so request, the sums necessary for the
execution of the agency.
(2) In case the agent already advanced them, the
principal must reimburse him therefor:
(a) Even if the business or undertaking was not
successful;
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(b) Provided that the agent is free from all fault.
[Article 1912]
The reimbursement shall include the interest on the
sums advanced from the day the advances were
made.
WHEN PRINCIPAL NOT LIABLE FOR EXPENSES
The principal is not liable for the expenses incurred
by the agent in the following cases:
(1) If the agent acted in contravention of the
principal's 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 ensue, if the
principal was not aware thereof;
(4) When it was stipulated that:
(a) The expenses would be borne by the agent; or
(b) That the latter would be allowed only a
certain sum. [Article 1918]
DAMAGES
The principal must also indemnify the agent for all
the damages which the execution of the agency may
have caused the latter, without fault or negligence or
his part. [Article 1913]
RIGHT OF RETENTION BY AGENT
The agent may retain in pledge the things which are
the object of the agency until the principal effects:
(1) Reimbursement of necessary funds advanced;
and
(2) Payment of indemnity for damages. [Article 1914]
This is a case of legal pledge. However, the agent is
not entitled to the excess in case the things are sold
to satisfy his claims.
MULTIPLE PRINCIPALS
If there are two or more principals who appointed the
agent for a common transaction or undertaking, they
shall be solidarily liable for all the consequences of
the agency [Article 1915].
Requisites:
(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.
LIABILITY FOR QUASI-DELICT BY AGENT
The principal is solidarily liable to third persons for
torts of an agent committed:
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(1) At the principal's direction; or
(2) In the course and within the scope of the agent's
employment.
Extinguishment of agency
MODES OF EXTINGUISHING AGENCY, IN
GENERAL
Agency is extinguished:
(1) By its revocation;
(2) By the withdrawal of the agent;
(3) By the death, civil interdiction, insanity or
insolvency of the principal or of the agent;
(4) By the dissolution of the firm or corporation which
entrusted or accepted the agency;
(5) By the accomplishment of the object or purpose
of the agency;
(6) By the expiration of the period for which the
agency was constituted. [Article 1919]
The provision enumerates only those which are
peculiar to agency and is, therefore, not exclusive.
Agency may also be extinguished by the modes of
extinguishment of obligations in general.
The modes of extinguishment may be classified into
three:
(1) By agreement (Nos. 5 and 6);
(2) By subsequent acts of the parties:
(a) By the act of both parties or by mutual
consent; or
(b) By the unilateral act of one of them (Nos. 1
and 2)
(3) By operation of law (Nos. 3 and 4)
In the absence of anything to show its termination,
the agency relation will be presumed to have
continued. The burden of proving termination is on
the party asserting it.
REVOCATION BY PRINCIPAL
General rule: The principal may:
(1) Revoke the agency at will; and
(2) Compel the agent to return the document
evidencing the agency.
Qualifications: The right of the principal to terminate
the authority of his agent is absolute and
unrestricted, except that he is liable for damages in
case:
(1) He revokes the agency in bad faith [Danon v.
Brimo (1921)]; or
(2) He revokes the agency before the expiration of
the period stipulated in the agency contract.
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Exception: Agency cannot be revoked if it is coupled
with an interest, such that:
(1) A bilateral contract depends upon it;
(2) It is the means of fulfilling an obligation already
contracted; or
(3) A partner is appointed manager of a partnership
in the contract of partnership and his removal
from the management is unjustifiable.
MULTIPLE PRINCIPALS
When two or more principals have granted a power
of attorney for a common transaction, any one of
them may revoke the same without the consent of
the others. [Article 1925]
MANNER OF REVOCATION
Revocation may be express or implied.
There is express revocation when the principal clearly
and directly makes a cancellation of the authority of
the agent orally or in writing.
There is implied revocation in the following cases:
(1) The appointment of a new agent for the same
business or transaction revokes the previous
agency from the day on which notice thereof was
given to the former agent, without prejudice to
the requirement of notice to third persons [Article
1923].
(2) The agency is revoked if the principal directly
manages the business entrusted to the agent,
dealing directly with third persons [Article 1924].
(3) A general power of attorney is revoked by a
special one granted to another agent, as regards
the special matter involved in the latter [Article
1926].
There is implied revocation only where the new
appointment is incompatible with the previous one.
EFFECT OF REVOCATION IN RELATION TO THIRD PARTIES
If the agency has been entrusted for the purpose of
contracting with specified persons, its revocation
shall not prejudice the latter if they were not given
notice thereof [Article 1921].
If the agent had general powers, revocation of the
agency does not prejudice third persons who acted:
(1) In good faith; and
(2) Without knowledge of the revocation.
Notice of the revocation in a newspaper of general
circulation is a sufficient warning to third persons.
[Article 1922]
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WITHDRAWAL BY AGENT accomplished, the agency continues indefinitely for

The agent may withdraw from the agency by giving as long as the intent to continue is manifested
due notice to the principal. through words or actions of the parties.

LIABILITY FOR DAMAGES DISSOLUTION OF FIRM OR CORPORATION

General rule: If the principal should suffer any The dissolution of a partnership or corporation which
damage by reason of the withdrawal, the agent must entrusted (principal) or accepted (agent) the agency
indemnify him therefor. extinguishes its juridical existence, except for the
purpose of winding up its affairs. It is equivalent to its
Exception: The agent is not liable for damages if he death.
should base his withdrawal upon the impossibility of
continuing the performance of the agency without EXPIRATION OF TERM
grave detriment to himself. [Article 1928] If created for fixed period, expiration of the period
extinguishes agency even if the purpose was not
OBLIGATION TO CONTINUE AGENCY accomplished.
The agent, even if he should withdraw from the
agency for a valid reason, must continue to act until If no time is specified, the courts may fix the period
the principal has had reasonable opportunity to take as under the circumstances have been probably
the necessary steps to meet the situation [Article contemplated by the parties [Article 1197]. Otherwise,
1929]. the agency terminates at the end of a reasonable
period of time. Either party can terminate the
DEATH, CIVIL INTERDICTION, INSANITY OR relationship at will by giving notice to the other. [De
INSOLVENCY Leon (2010)]
DEATH OF PRINCIPAL
General rule: Death extinguishes agency. Period may be implied from terms of agreement,
purpose of agency, and the circumstances of the
Exceptions: parties.
(1) The agency remains in full force and effect even
after the death of the principal, if it has been
constituted:
(a) In the common interest of the principal and
agent; or
(b) In the interest of a third person who has
accepted the stipulation in his favor. [Article
1930]
(2) Anything done by the agent, without knowledge
of the death of the principal or of any other cause
which extinguishes the agency, is valid and shall
be fully effective with respect to third persons
who may have contracted with him in good faith
[Article 1931].
(3) The agent must finish business already begun on
the death of the principal, should delay entail any
danger [Article 1884].

DEATH OF AGENT
If the agent dies, his heirs must:
(1) Notify the principal thereof; and
(2) In the meantime adopt such measures as the
circumstances may demand in the interest of the
latter. [Article 1932]

ACCOMPLISHMENT OF OBJECT OR PURPOSE

Between principal and agent, the fulfillment of the
purpose for which agency was created ipso facto
terminates agency, even though it was expressly
made irrevocable. If the purpose has not been

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Credit Transactions Upon delivery of the object of the contract of loan (in
this case the money received by the debtor when the
MEANING AND SCOPE OF CREDIT checks were encashed) the debtor acquires
TRANSACTIONS ownership of such money or loan proceeds and is
Credit transactions include all transactions involving bound to pay the creditor an equal amount. [Garcia
the purchase or loan of goods, services, or money in v. Thio, G.R. No. 154878]
the present with a promise to pay or deliver in the
future. COMMODATUM V. MUTUUM

TWO TYPES OF CREDIT Commodatum Mutuum

TRANSACTIONS/CONTRACTS OF SECURITY
Ordinarily involves Involves money or other
(1) Secured transactions or contracts of real security
something not consumable thing
supported by a collateral or an encumbrance
consumable* (Art.1936)
of property
(2) Unsecured transactions or contracts of personal Ownership of the thing Ownership is transferred to
security fulfillment by the debtor is supported loaned is retained by the borrower
only by a promise to pay or the personal lender (Art.1933)
commitment of another Essentially gratuitous May be gratuitous or
(Art.1933) onerous, i.e. with stipulated
Examples of credit transactions interest
(1) Bailment contracts Borrower must return Borrower need only pay an
(2) Contracts of guaranty and suretyship the same thing loaned equal amount of the same
(3) Mortgage (Art.1933) kind and quality (Art. 1953)
(4) Antichresis May involve real or Refers only to personal
(5) Concurrence and preference of credits personal property property
(Art.1937)
Loan for use or Loan for consumption
temporary possession
Loan (Art.1935)
Bailor may demand the Lender may not demand its
[A] contract by which one of the parties delivers to return of the thing return before the lapse of
another, either something not consumable so that loaned before the the term agreed upon
the latter may use the same for a certain time and expiration of the term in
return it, in which case the contract is called case of urgent need
commodatum; or money or other consumable thing, (Art.1946)
upon the condition that the same amount of the Bailor suffers the loss of Borrower suffers the loss
same kind and quality shall be paid, in which case the subject matter since even if caused exclusively by
the contract is called a simple loan or mutuum. he is the owner a fortuitous event and he is
[Art.1933] (Art.1942; Art.1174) not, therefore, discharged
from his duty to pay
CHARACTERISTICS OF A LOAN Purely personal in Not purely personal in
(1) Real contract character (Art 1939) character
(a) Delivery is essential for perfection of the
contract of loan. If consumable goods are loaned only for purposes of
(b) An accepted promise to loan, is nevertheless exhibition, or when the intention of the parties is to
binding on the parties, it being a consensual lend consumable goods and to have the very same
contract. goods returned at the end of the period agreed upon,
the loan is a commodatum and not a mutuum.
(2) Unilateral contract [Producers Bank v. CA, Feb. 19, 2003]
(a) creates obligations on only one party, i.e., the
borrower OBLIGATIONS OF BAILOR AND BAILEE
WHO MAY BE A BAILOR IN COMMODATUM?
In a contract of loan, the cause is, as to the borrower, (a) Anyone. The bailor in commodatum need not be
the acquisition of the thing, and as to the lender, the the owner of the thing loaned. [Art.1938]
right to demand its return or its equivalent. [Monte (b) But the bailee himself may not lend nor lease the
de Piedad v. Javier] thing loaned to him to a third person [Art 1939(2)]

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WHAT ARE THE TWO (2) KINDS OF COMMODATUM?
(a) Ordinary commodatum [Art. 1933]
(b) Precarium - bailor may demand the thing loaned
at will [Art. 1947]
OBLIGATIONS OF A BAILOR IN COMMODATUM
(1) To allow the bailee the use of the thing loaned for
the duration of period stipulated or until the
accomplishment of the purpose for which
commodatum was constituted.
Exceptions:
(a) Urgent need of the thing, during which time
he may demand its return or temporary use
(Art.1946)
(b) Precarium (Art.1947)
(i) If duration of the contract has not been
stipulated
(ii) If use or purpose of the thing has not been
stipulated
(iii) If use of thing is merely tolerated by the
bailor
(c) Bailee commits an act of ingratitude specified
in Art. 765 [Art. 1948]:
(1) Commission of offenses against the
person, the honor, or the property of the
bailor, or of his wife or children under his
parental authority
(2) Imputing to the bailor any criminal offense,
or any act involving moral turpitude, even
though he should prove it, unless the crime
or the act has been committed against the
bailee himself, his wife, or children under
his authority
(3) Undue refusal to give the bailor support
when the bailee is legally or morally bound
to do so
(NOTE: Article 765 is applicable, because like
donation, commodatum is essentially gratuitous.
[Art.1933, par.2]
(2) To refund extraordinary expenses for the
preservation of the thing loaned provided bailor is
notified before the expenses were incurred. [Art.
1949]
(a) Exception: Urgent need such that reply to the
notification cannot be awaited without
danger, hence no notice is necessary.
(3) To bear 50% of the extraordinary expenses
arising from actual use of bailee of the thing
loaned [Art. 1949]
(a) Exception: Contrary stipulation
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BAR OPERATIONS COMMISSION
(4) To pay damages to bailee for known hidden flaws
in the thing loaned [Art. 1951]
(NOTE: Bailor has no right of abandonment; he
cannot exempt himself from payment of expenses or
damages to the bailee by abandoning the thing to
the latter. [Art. 1952])
OBLIGATIONS OF A BAILEE IN COMMODATUM
(1) Obligation to pay for the ordinary expenses for
the use and preservation of the thing loaned [Art.
1941]
(2) Obligation to take good care of the thing with the
diligence of a good father of a family [Art. 1163]
(3) Liability for loss, even if loss through fortuitous
event, under certain circumstances [Art. 1942]
(4) Liability for deterioration of thing loaned, except
under certain circumstances [Art. 1943]
(5) Obligation to return the thing upon expiration of
term or upon demand in case of urgent need [Art.
1946]
(6) Solidary obligation where there are 2 or more
bailees to whom a thing was loaned in the same
contract [Art.1945]
General Rule: Bailee is not liable for loss or damage
due to a fortuitous event [Art. 1174], since the bailor
retains ownership of the thing
Exception: Bailee is liable for loss even if due to a
fortuitous event when: [Art. 1942]
(1) He devotes the thing to any purpose different
from that for which it was loaned
(2) He keeps it longer than the period stipulated, or
after the accomplishment of the use for which the
commodatum has been constituted
(3) The thing loaned has been delivered with
appraisal of its value, unless there is stipulation
exempting the bailee from responsibility in case
of a fortuitous event
(4) He lends or leases the thing to a third person who
is a not a member of his household
(5) Being able to save either the thing borrowed or
his own thing, he chose to save the latter.
General Rule [1]: Bailee is liable for deterioration of
thing loaned.
Exception [1]: The deterioration of the thing is due
only to the use thereof and without his fault [Art.
1943]
General Rule [2]: Bailee has no right of retention of
the thing loaned, on the ground that the bailor owes
him something. [Art. 1944]
Exception [2]: Bailee has a right of retention for
damages for known hidden flaws mentioned in Art
UP COLLEGE OF LAW
1951. [Art. 1944]
INTEREST AND SUSPENSION OF USURY LAW
Interest is the compensation allowed by law or fixed
by the parties for the loan or forbearance of money,
goods or credits
KINDS OF INTEREST
(1) Simple interest Paid for the principal at a certain
rate fixed or stipulated by the parties.
(2) Compound Interest that which is imposed upon
interest due and unpaid.
(3) Legal Interest that which the law directs to be
charged in the absence of any agreement as to
the rate between the parties.
(4) Lawful Interest that which the laws allow or do
not prohibit
(5) Unlawful or Usurious Interest paid or stipulated
to be paid beyond the maximum fixed by law.
However, by virtue of CB Circular 905, usury has
become legally inexistent.
WHEN IS COMPOUND INTEREST ALLOWED?
(1) When there is an express written stipulation to
that effect [Art. 1956]
(2) Upon judicial demand. HOWEVER, debtor is not
liable to pay compound interest even after
judicial demand when there is no stipulation for
payment of interest. [Art. 2212]
REQUISITES FOR INTEREST TO BE CHARGEABLE
(1) Must be expressly stipulated [Art 1956]
(2) Agreement must be in writing [Art.1956]
(3) Must be lawful
While it is true that under Article 1956 of the Civil
Code no interest shall be due unless it has been
expressly stipulated in writing, this applies only to
interest for the use of money. It does not
comprehend interest paid as damages. [Integrated
Realty Corporation v. Philippine National Bank, 174
SCRA 295]
EXCEPTIONS TO REQUISITE OF EXPRESS STIPULATION
(1) The debtor in delay is liable to pay legal interest
(6% or 12% per annum) as indemnity for
damages [Art. 2209]
(2) Interest accruing from unpaid interest Interest
demanded shall earn interest from the time it is
judicially demanded [Art. 2212] or where there is
an express stipulation [Art. 1959]
RULES FOR AWARD OF INTEREST IN THE CONCEPT OF
ACTUAL AND COMPENSATORY DAMAGES (Eastern
Shipping Lines v. CA, 234 SCRA 78)
(1) When the obligation breached consists in the
payment of a sum of money, i.e., a loan or
CREDIT TRANSACTIONS BAR OPERATIONS COMMISSION
forbearance of money, the interest due should be
that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn
legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate
of interest shall be 12% per annum to be
computed from default, i.e., from judicial or
extrajudicial demand under and subject to the
provisions of Art.1169.
(2) When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on
the amount of damages awarded may be
imposed at the discretion of the court at the rate
of 6% per annum. No interest, however, shall be
adjudged on unliquidated claims or damages
except when or until the demand can be
established with reasonable certainty.
Accordingly, where the demand is established
with reasonable certainty, the interest shall begin
to run from the time the claim is made judicially
or extrajudicially (Art. 1169) but when such
certainty cannot be so reasonably established at
the time the demand is made, the interest shall
begin to run only from the date the judgment of
the court is made (at which time the
quantification of damages may be deemed to
have been reasonably ascertained). The actual
base for the computation of legal interest shall, in
any case, be on the amount finally adjudged.
(3) When the judgment of the court awarding a sum
of money becomes final and executory, the rate of
legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12%
per annum from such finality until its satisfaction,
this interim period being deemed to be by then
an equivalent to a forbearance of credit.
Forbearance is defined, within the context of usury
law, as a contractual obligation of lender or creditor
to refrain, during given period of time, from requiring
borrower or debtor to repay loan or debt then due
and payable (Bataan Seedling v. Republic, 383 SCRA
590)
THE USURY LAW (Act No.2566) is an act fixing rates
of interests upon loans and declaring the effect of
receiving or taking usurious rates and for other
purposes. (Arevalo v. Dimayuga, 49 Phil 894)
CB Circular No. 905 abolished interest rate ceilings.
With the promulgation of such circular, usury has
become legally inexistent as the parties can now
legally agree on any interest that may be charged on
the loan.
PAGE 281
UP COLLEGE OF LAW CREDIT TRANSACTIONS
ELEMENTS OF USURY
(1) A loan or forbearance of money
(2) An understanding between parties that the loan
shall and may be returned
(3) An unlawful intent to take more than the legal
rate for the use of money or its equivalent
(4) The taking or agreeing to take for the use of the
loan of something in excess of what is allowed by
law.
A usurious loan transaction is not a complete nullity
but defective only with respect to the agreed interest.
(Carpo v. Chua, G.R. Nos. 150773 and 153599)
Deposit
Deposit is constituted from the moment a person
receives a thing belonging to another, with the
obligation of safely keeping it and of returning the
same. If the safekeeping of the thing delivered is not
the principal purpose of the contract, there is no
deposit but some other contract. [Art.1962]
CHARACTERISTICS
(1) Real Contract because it is perfected by the
delivery of the subject matter.
(2) Principal purpose of the contract of deposit is the
safekeeping of the thing delivered.
(3) If gratuitous, it is unilateral because only the
depository has an obligation. If onerous, it is
bilateral.
The principal purpose is safekeeping of the thing
delivered, so that if it is only an accessory or
secondary obligation, deposit is not constituted but
some other contract.
CONTRACT OF DEPOSIT IS GENERALLY
GRATUITOUS [Art. 1965], subject to the following
exceptions:
(1) There is a contrary stipulation
(2) Depository is in the business of storing goods
(3) Property saved from destruction during calamity
without owners knowledge; just compensation
should be given to the depository. [Art. 1996(2)
and Art. 1997, par.2]
ONLY MOVABLE THINGS MAY BE THE OBJECT
OF A DEPOSIT [Art. 1966] if the deposit is either
voluntary [Art. 1968] or necessary [Art. 1996].
HOWEVER, a judicial deposit may cover movable as
well an immovable property, its purpose being to
protect the rights of parties to the suit [Art. 2006].
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BAR OPERATIONS COMMISSION
OBLIGATIONS OF DEPOSITOR
(1) Depositor is obliged to reimburse the depositary
for expenses incurred for preservation if deposit
is gratuitous. [Art. 1992]
(2) Depositor is obliged to pay losses incurred due to
character of thing deposited. [Art. 1993]
General Rule: The depositor shall reimburse the
depositary for any loss arising from the character of
the thing deposited [Art. 1993]
Exceptions
(1) Depositor was not aware of the danger;
(2) Depositor was not expected to know the
dangerous character of the thing;
(3) Depositor notified the depositary of such
dangerous character;
(4) Depositary was aware of the danger without
advice from the depositor.
EXTINGUISHMENT OF DEPOSIT
A DEPOSIT IS EXTINGUISHED:
(1) Upon the loss or deterioration of the thing
deposited;
(2) Upon the death of either the depositor or the
depositary, ONLY in gratuitous deposits;
(3) By other modes provided in the Civil Code, e.g.
novation, merger, etc. [See Art. 1231]
EFFECT OF DEATH OF DEPOSITOR OR
DEPOSITARY [Art. 1995]
(1) Where deposit gratuitous death of either of the
depositor or depositary extinguishes the deposit
(personal in nature). By the word extinguished,
the law really means that the depositary is not
obliged to continue with the contract of deposit.
(2) Where deposit for compensation not
extinguished by the death of either party.
KINDS OF DEPOSIT
(1) Judicial
(2) Extrajudicial
(a) Voluntary
(b) Necessary
VOLUNTARY DEPOSIT
Voluntary Deposit - 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 [Art.
1968]
NECESSARY DEPOSIT
Necessary Deposit - made in compliance with a legal
obligation, or on the occasion of any calamity, or by
travelers in hotels and inns [Arts. 1996-2004] or by
travelers with common carriers [Arts. 1734-1735]
UP COLLEGE OF LAW CREDIT TRANSACTIONS
KINDS OF NECESSARY DEPOSITS
(1) It is made in compliance with a legal obligation,
in which case it is governed by the law
establishing it, and in case of deficiency, the rules
on voluntary deposit e.g. Arts. 538, 586 and 2104
(2) It takes place on the occasion of any calamity,
such as fire, storm, flood, pillage, shipwreck, or
other similar events. There must be a causal
relation between the calamity and the
constitution of the deposit. In this case the
deposit is governed by the rules on voluntary
deposit and Art. 2168
(3) Made by passengers with common carriers. [Art.
1754]
(4) Made by travelers in hotels or inns. [Art. 1998]
DEPOSITS BY TRAVELERS IN HOTELS AND INNS
Before keepers of hotels or inns may be held
responsible as depositaries with regard to the effects
of their guests, the following must concur:
(1) They have been previously informed about the
effects brought by the guests; and
(2) The latter have taken the precautions prescribed
regarding their safekeeping.
EXTENT OF LIABILITY UNDER ART.1998
(1) Those in hotel rooms which come under the
term baggage or articles such as clothing as
are ordinarily used by travelers
(2) Include those lost or damaged in hotel annexes
such as vehicles in the hotels garage.
WHEN HOTEL-KEEPER LIABLE
Regardless of the amount of care exercised:
(1) The loss or injury to personal property is caused
by his servants or employees as well as by
strangers [Art. 2000].
(2) The loss is caused by the act of a thief or robber
done without the use of arms and irresistible
force. [Art. 2001]
WHEN HOTEL-KEEPER NOT LIABLE
(1) The loss or injury is caused by force majeure, like
flood, fire, [Art. 2000] theft or robbery by a
stranger - not the hotel-keepers servant or
employee with the use of firearms or irresistible
force [Art. 2001]
Exception: Hotel-keeper is guilty of fault or
negligence in failing to provide against the loss or
injury from his cause. [Arts. 1170 and 1174]
(2) The loss is due to the acts of the guests, his
family, servants, visitors [Art.2002]
(3) The loss arises from the character of the things
brought into the hotel (Ibid.)
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BAR OPERATIONS COMMISSION
(Note: The hotel-keeper cannot free himself from
responsibility by posting notices to the effect that he
is not liable for the articles brought by the guest.
Such kind of stipulation shall be VOID. [Art. 2003])
Triple-V Food Services v. Filipino Merchants Insurance
Company: Regarding the legal deposit of a vehicle
that was stolen while parked with Saisaki restaurant,
the depositary may not exempt itself from
responsibility for loss or damage of the thing
deposited with it, by exclusionary stipulation. Such
stipulations are void for being contrary to law.
HOTEL-KEEPERS RIGHT TO RETENTION
(1) The hotel-keeper has a right to retain the things
brought into the hotel by the guest, as a security
for credits on account of
(a) lodging, and
(b) supplies usually furnished to hotel guests (Art.
2004)
(2) NOTE: The right of retention recognized in this
article is in the nature of a pledge created by
operation of law.
JUDICIAL DEPOSIT
Judicial Deposit takes place when an attachment or
seizure of property in litigation is ordered [Arts.
2005-2009]
NATURE AND PURPOSE
It is auxiliary to a case pending in court. The purpose
is to maintain the status quo during pendency of the
litigation or to insure the right of the parties to the
property in case of a favorable judgment.
DEPOSITARY OF SEQUESTERED PROPERTY
A person is appointed by the court [Art. 2007] with
the obligations:
(1) To take care of the property with the diligence of
a good father of the family. [Art. 2008]
(2) To continue in his responsibility until the
controversy which give rise thereto is ended
unless the court so orders. [Art. 2007]
APPLICABLE LAW
(1) The law on judicial deposit is remedial or
procedural in nature.
(2) Rules of Court shall govern matters not provided
for in the Civil Code. [Art. 2009]
Guaranty and Suretyship
Guaranty is a contract whereby a person, called the
guarantor, binds himself to the creditor to fulfill the
UP COLLEGE OF LAW CREDIT TRANSACTIONS BAR OPERATIONS COMMISSION

obligation of the principal debtor in case the latter

should fail to do so. [Art. 2047]
While a surety undertakes to pay if the principal does
not pay, the guarantor only binds himself to pay if
the principal cannot pay [See benefit of excussion, Art.
2058].
Suretyship is 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 a third person
(oblige), who is entitled to but one performance, and
as between the two who are bound, the one rather
than the other should perform.
If a person binds himself solidarily with the principal
debtor, the contract is called suretyship and the
guarantor is called a surety.
(a) Presence of cause which supports principal
obligation: Cause of the contract is the same
cause which supports the obligation as to the
principal debtor. The consideration which
supports the obligation as to the principal
debtor is a sufficient consideration to support
the obligation of a guarantor or surety.
(b) Absence of direct consideration or benefit to
guarantor: Guaranty or surety agreement is
regarded valid despite the absence of any
direct consideration received by the guarantor
or surety, such consideration need not pass
directly to the guarantor or surety; a
consideration moving to the principal will
suffice.
(3) A married woman who is a guarantor binds only
her separate property, generally [2049]

GUARANTY DISTINGUISHED FROM SURETYSHIP Exceptions

(a) With her husbands consent, bind the
Guaranty Suretyship community or conjugal partnership property
Guarantors liability Surety assumes liability (b) Without husbands consent, in cases provided
depends upon an as a regular party to the by law, such as when the guaranty has
independent agreement undertaking redounded to the benefit of the family.
to pay the obligation
Guarantors engagement Surety is an original (4) A guaranty need not be undertaken with the
is a collateral promissory knowledge of the debtor [2050]
undertaking (a) Guaranty is unilateral exists for the benefit
of the creditor and not for the benefit of the
Guarantor is subsidiarily Surety is primarily liable
principal debtor
liable i.e. only obliged to i.e. bound to pay if the
(b) Creditor has every right to take all possible
pay if the principal principal does not pay
measures to secure payment of his credit
cannot pay
guaranty can be constituted even against the
Guarantor not bound to Surety ordinarily held to
will of the principal debtor
take notice of default of know every default of his
his principal principal
However, as regards payment made by a third
Guarantor often Surety not discharged person:
discharged by the mere either by the mere (a) Payment without the knowledge or against
indulgence of the indulgence of the the will of the debtor:
creditor and is usually creditor or by want of (i) Guarantor can recover only insofar as the
not liable unless notified notice of default of the payment has been beneficial to the debtor
of the principals default principal [Art. 1236]
(ii) Guarantor cannot compel the creditor to
NATURE AND EXTENT OF GUARANTY subrogate him in his rights [Art. 1237]
NATURE AND EXTENT OF GUARANTY (b) Payment with knowledge or consent of the
(1) A guaranty is generally gratuitous [2048] debtor: Subrogated to all the rights which the
(a) General Rule: Guaranty is gratuitous creditor had against the debtor
(b) Exception: When there is a stipulation to the
contrary (5) The guaranty must be founded on a valid principal
obligation [2052(1)]
(2) On the cause of a guaranty contract
A guarantor or surety is bound by the same Guaranty is an accessory contract: It is an
consideration that makes the contract effective indispensable condition for its existence that
between the principal parties thereto. [Severino v. there must be a principal obligation. Hence, if the
Severino] principal obligation is void, it is also void.

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(6) A guaranty may secure the performance of a
voidable, unenforceable, and natural obligation
[2052(2)]
A guaranty may secure the performance of a:
(a) Voidable contract such contract is binding,
unless it is annulled by a proper court action
(b) Unenforceable contract because such
contract is not void
(c) Natural obligation the creditor may proceed
against the guarantor although he has no
right of action against the principal debtor for
the reason that the latters obligation is not
civilly enforceable. When the debtor himself
offers a guaranty for his natural obligation, he
impliedly recognizes his liability, thereby
transforming the obligation from a natural
into a civil one.
(7) A guaranty may secure a future debt [2053]
Continuing Guaranty or Suretyship:
(a) Under the Civil Code, a guaranty may be given
to secure even future debts, the amount of
which may not be known at the time the
guaranty is executed. This is the basis for
contracts denominated as continuing
guaranty or suretyship. [Dio v. CA]
(b) Future debts, even if the amount is not yet
known, may be guaranteed but there can be
no claim against the guarantor until the
amount of the debt is ascertained or fixed and
demandable
Rationale: A contract of guaranty is subsidiary.
(a) To secure the payment of a loan at maturity
surety binds himself to guarantee the
punctual payment of a loan at maturity and
all other obligations of indebtedness which
may become due or owing to the principal by
the borrower.
(b) To secure payment of any debt to be
subsequently incurred a guaranty shall be
construed as continuing when by the terms
thereof it is evident that the object is to give a
standing credit to the principal debtor to be
used from time to time either indefinitely or
until a certain period, especially if the right to
recall the guaranty is expressly reserved.
(c) To secure existing unliquidated debts refers
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.
(d) The surety agreement itself is valid and
binding even before the principal obligation
intended to be secured thereby is born, just
like obligations which are subject to a
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condition precedent are valid and binding
before the occurrence of the condition
precedent.
A continuing guaranty is one which is not limited to a
single transaction, but which contemplates a future
course of dealing, covering a series of transactions,
generally for an indefinite time or until revoked. It is
prospective in its operation and is generally intended
to provide security with respect to future transactions
within certain limits, and contemplates a succession
of liabilities, for which, as they accrue, the guarantor
becomes liable.
A continuing guaranty is one which covers all
transactions, including those arising in the future,
which are within the description or contemplation of
the contract of guaranty, until the expiration or
termination thereof. A guaranty shall be construed
as continuing when by the terms thereof it is evident
that the object is to give a standing credit to the
principal debtor to be used from time to time either
indefinitely or until a certain period, especially if the
right to recall the guaranty is expressly reserved.
Where the contract of guaranty states that the same
is to secure advances to be made "from time to time"
the guaranty will be construed to be a continuing
one.
(8) A guaranty may secure the performance of a
conditional obligation [2053]
(a) Principal obligation subject to a suspensive
condition the guarantor is liable only after
the fulfillment of the condition.
(b) Principal obligation subject to a resolutory
condition the happening of the condition
extinguishes both the principal obligation and
the guaranty
(9) A guarantors liability cannot exceed the principal
obligation [2054]
General Rule:
Guaranty is a subsidiary and accessory contract
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 the guarantor may bind himself for
less than that of the principal.
Exceptions
(a) Interest, judicial costs, and attorneys fees as
part of damages may be recovered creditors
suing on a suretyship bond may recover from
the surety as part of their damages, interest at
the legal rate, judicial costs, and attorneys
UP COLLEGE OF LAW CREDIT TRANSACTIONS
fees when appropriate, even without
stipulation and even if the surety would
thereby become liable to pay more than the
total amount stipulated in the bond.
Interest runs from:
(1) Filing of the complaint (upon judicial
demand); or
(2) The time demand was made upon the surety
until the principal obligation is fully paid
(upon extra-judicial demand)
Rationale: Surety is made to pay, not by
reason of the contract, but by reason of his
failure to pay when demanded and for having
compelled the creditor to resort to the courts
to obtain payment.
(b) Penalty may be provided a surety may be
held liable for the penalty provided for in a
bond for violation of the condition therein.
Principals liability may exceed guarantors
obligations
The amount specified in a surety bond as the
suretys obligation does not limit the extent of the
damages that may be recovered from the
principal, the latters liability being governed by
the obligations he assumed under his contract
(10) The existence of a guaranty is not presumed
[2055]
Guaranty requires the expression of consent on
the part of the guarantor to be bound. It cannot
be presumed because of the existence of a
contract or principal obligation.
Rationale:
(a) There be assurance that the guarantor had
the true intention to bind himself;
(b) To make certain that on making it, the
guarantor proceeded with consciousness of
what he was doing.
(11) Contract of guaranty is covered by the Statute of
Frauds [See Art. 1403(2)(b)]
Guaranty must not only be expressed but must so
be reduced into writing. Hence, it shall be
unenforceable by action, unless the same or
some note or memorandum thereof be in writing,
and subscribed by the party charged, or by his
agent; evidence, therefore, of the agreement
cannot be received without the writing, or a
secondary evidence of its contents. However, it
need not appear in a public document
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NATURE AND EXTENT OF SURETYSHIP
(1) Liability is contractual and accessory but direct
(2) Liability is limited by the terms of the contract
(3) Liability arises only if principal debtor is held liable
(a) 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;
(b) The creditor may sue, separately or together,
the principal debtor and the surety;
(c) A demand or notice of default is not required
to fix the suretys liability
Exception: Where required by the provisions of
the contract of suretyship
(d) A surety bond is void where there is no
principal debtor because such an undertaking
presupposes that the obligation is to be
enforceable against someone else besides the
surety, and the latter can always claim that it
was never his intention to be the sole person
obligated thereby.
Note: Surety is not entitled to exhaustion
(1) The undertaking is to the creditor, not the debtor
The surety makes no covenant or agreement with
the principal that it will fulfill the obligation
guaranteed for the benefit of the principal. The
suretys undertaking is that the principal shall
fulfill his obligation and that the surety shall be
relieved of liability when the obligation secured is
performed.
Exception: Unless otherwise expressly provided.
(2) Prior demand by the creditor upon principal not
required. Surety is not exonerated by neglect of
creditor to sue principal.
Strictissimi juris rule applicable only to
accommodation surety
Reason: An accommodation surety 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. This rule will apply only after it has been
definitely ascertained that the contract is one of
suretyship or guaranty.
Strictissimi juris rule NOT applicable to compensated
sureties
Reasons:
(1) Compensated corporate sureties are business
associations organized for the purpose of
assuming classified risks in large numbers, for
profit and on an impersonal basis.
(2) They are secured from all possible loss by
UP COLLEGE OF LAW CREDIT TRANSACTIONS
adequate counter-bonds or indemnity
agreements.
Such corporations are in fact insurers and in
determining their rights and liabilities, the rules
peculiar to suretyship do not apply.
The stipulation in the indemnity agreement allowing
the surety to recover even before it paid the creditor
is enforceable. In accordance therewith, the surety
may demand from the indemnitors even before
paying the creditors. [Mercantile Insurance Company
v. Ysmael, 169 SCRA 66]
EFFECT OF GUARANTY
EFFECTS OF GUARANTY BETWEEN THE GUARANTOR AND
THE CREDITOR
(1) The guarantor has the right to benefit from
excussion/ exhaustion [2058]
The guarantor cannot be compelled to pay the
creditor unless the latter has:
(a) Exhausted all of the property of the debtor;
and
(b) Resorted to all the legal remedies against the
debtor.
Exceptions to the benefit of excussion (2059)
(a) As provided in Art. 2059:
(i) If the guarantor has expressly
renounced it.
(ii) If he has bound himself solidarily
with the debtor. Here, the liability
assumed is that of a surety. The
guarantor becomes primarily liable
as a solidary co- debtor. In effect,
he renounces in the contract itself
the benefit of exhaustion.
(iii) In case of insolvency of the debtor
guarantor guarantees the
solvency of the debtor. If the
debtor becomes insolvent, the
liability of the guarantor arises as
the debtor cannot fulfill his
obligation
(iv) When the debtor has absconded,
or cannot be sued within the
Philippines the creditor is not
required to go after a debtor who is
hiding or cannot be sued in our
courts, and to incur the delays and
expenses incident thereto.
Exception: When the debtor has
left a manager or representative
(v) If it may be presumed that an
execution on the property of the
principal debtor would not result in
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the satisfaction of the obligation
If such judicial action including
execution would not satisfy the
obligation, the guarantor can no
longer require the creditor to resort
to all such remedies against the
debtor as the same would be but a
useless formality. It is not
necessary that the debtor be
judicially declared insolvent.
Southern Motors, Inc. v. Barbosa: The right of
guarantorsto demand exhaustion of the property of
the principal debtor, exists only when a pledge or a
mortgage has not been given as special security for
the payment of the principal obligation.
Luzon Steel Corp. v. Sia: The surety in the present
case bound itself "jointly and severally" (in solidum)
with the defendant; and excussion (previous
exhaustion of the property of the debtor) shall not
take place "if he (the guarantor) has bound himself
solidarily with the debtor".
(b) In order that the guarantor may make use of
the benefit of excussion, he must:
(i) Set it up against the creditor upon
the latters demand for payment
from him;
(ii) Point out to the creditor:
(a) Available property of the debtor the
guarantor should facilitate the
realization of the excussion since he is
the most interested in its benefit.
(b) Within the Philippine territory
excussion of property located abroad
would be a lengthy and extremely
difficult proceeding and would not
conform with the purpose of the
guaranty to provide the creditor with the
means of obtaining the fulfillment of the
obligation.
(c) Sufficient to cover the amount of the
debt
(c) If he is a judicial bondsman and sub- surety
(2084)
(d) Where a pledge or mortgage has been given
by him as a special security
(e) If he fails to interpose it as a defense before
judgment is rendered against him.
(2) The creditor has the right to secure a judgment
against the guarantor prior to the excussion
General Rule: An ordinary personal guarantor
(NOT a pledgor or mortgagor), may demand
exhaustion of all the property of the debtor
UP COLLEGE OF LAW CREDIT TRANSACTIONS
before he can be compelled to pay.
Exception: The creditor may, prior thereto, secure
a judgment against the guarantor, who shall be
entitled, however, to a deferment of the execution
of said judgment against him, until after the
properties of the principal debtor shall have been
exhausted, to satisfy the latters obligation.
(3) The creditor has the duty to make prior demand for
payment from the guarantor 2060)
(a) The demand is to be made only after
judgment on the debt
(b) Joining the guarantor in the suit against the
principal debtor is not the demand intended
by law. Actual demand has to be made.
(4) The guarantor has the duty to set up the benefit of
excussion [2060]
As soon as he is required to pay, guarantor must
also point out to the creditor available property
(not in litigation or encumbered) of the debtor
within the Philippines.
(5) The creditor has the duty to resort to all legal
remedies [2058, 2061]
After the guarantor has fulfilled the conditions
required for making use of the benefit of
excussion, it becomes the duty of the creditor to:
(a) Exhaust all the property of the debtor pointed
out by the guarantor;
(b) If he fails to do so, he shall suffer the loss for
the insolvency of the debtor, but only to the
extent of the value of the said property
(6) The creditor has the duty to notify the guarantor in
the action against the debtor [2062]
Notice to the guarantor is mandatory in the
action against the principal debtor. The
guarantor, however, is not duty bound to appear
in the case, and his non- appearance shall not
constitute default, w/ its consequential effects.
Rationale: To give the guarantor the opportunity
to allege and substantiate whatever defenses he
may have against the principal obligation, and
chances to set up such defenses as are afforded
him by law
(7) A compromise shall not prejudice the person not
party to it [2063]
(a) A compromise between creditor and principal
debtor benefits the guarantor but does not
prejudice him.
(b) A compromise between guarantor and the
creditor benefits but does not prejudice the
principal debtor.
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BAR OPERATIONS COMMISSION
(8) Co-guarantors are entitled to the benefit of division
[2065]
The benefit of division applies only when there
are several guarantors and one debtor for a
single debt. Except when solidarity has been
stipulated, a co-guarantor is liable only to the
extent of his share in the obligation as divided
among all the co-guarantors.
EFFECTS OF GUARANTY BETWEEN THE DEBTOR AND THE
GUARANTOR
(1) The guarantor who pays has the right to be
subrogated to the rights of the creditor [2067]
A guarantor who pays the debt is entitled to every
remedy which the creditor has against the
principal debtor, to enforce every security and all
means of payments; to stand in the place of the
creditor not only through the medium of the
contract, but even by means of the securities
entered into w/out the knowledge of the surety;
having the right to have those securities
transferred to him though there was no
stipulation for it, and to avail himself of all
securities against the debtor
The need to enforce the provisions on indemnity
in Article 2066 forms the basis for the
subrogation clause of Article 2067. The
assumption, however, is that the guarantor who is
subrogated to the rights of the creditor, has the
right to be reimbursed for his answering for the
obligation of the debtor. Absent this right of
reimbursement, subrogation will not be proper.
(2) The guarantor has the duty to notify the debtor
before paying the creditor [2068].
Should payment be made without notification,
and supposing the debtor has already made a
prior payment, the debtor would be justified in
setting up the defense that the obligation has
already been extinguished by the time the
guarantor made the payment. The guarantor will
then lose the right of reimbursement and
consequently the right of subrogation.
(3) The guarantor cannot demand reimbursement for
payment made by him before the obligation has
become due [2069].
General Rule: Since a contract of guaranty is only
subsidiary, the guarantor cannot be liable for the
obligation before the period on which the
debtors Liability will accrue. Any payment made
by the guarantor before the obligation is due
cannot be indemnified by the debtor.
UP COLLEGE OF LAW CREDIT TRANSACTIONS
Exception: Prior consent or subsequent
ratification by the debtor
(4) The guarantor may proceed against the debtor
even before payment has been made [2071]
General Rule: Guarantor has no cause of action
against the debtor until after the former has paid
the obligation.
Exceptions (Art. 2071)
(a) When he is sued for the payment;
(b) In case of insolvency of the principal debtor;
(c) When the debtor has bound himself to relieve
him from the guaranty within a specified
period, and this period has expired;
(d) When the debt has become demandable, by
reason of the expiration of the period for
payment;
(e) After the lapse of 10 years, when the principal
obligation has no fixed period for its maturity,
unless it be of such nature that it cannot be
extinguished except within a period longer
than 10 years;
(f) If there are reasonable grounds to fear that
the principal debtor intends to abscond;
(g) If the principal debtor is in imminent danger of
becoming insolvent.
Rationale: To enable the guarantor to take
measures for the protection of his interest in view
of the probability that he would be called upon to
pay the debt. As such, he may, in the alternative,
obtain release from the guaranty; or demand
security that shall protect him from any
proceeding by the creditor, and against the
insolvency of the debtor.
EFFECTS OF GUARANTY AS BETWEEN CO-GUARANTORS
When there are two or more guarantors, one debtor
and one debt:
(a) The one who pays may demand from each of the
others the share proportionally owing to him
(b) If any of the guarantors is insolvent, his share
shall be borne by the others, including the payer,
in the same proportion [Art. 2073]
For purposes of proportionate reimbursement, the
other guarantors may interpose such defenses
against the paying guarantor as are available to the
debtor against the creditor, except those that are
personal to the debtor [Art. 2074]
Requisites for the applicability of Art. 2073:
(1) Payment has been made by one guarantor;
(2) The payment was made because
(a) Of the insolvency of the debtor, or
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BAR OPERATIONS COMMISSION
(b) By judicial demand
(3) The paying guarantor seeks to be indemnified
only to the extent of his proportionate share in
the total obligation.
EXTINGUISHMENT OF GUARANTY
(1) Once the obligation of the debtor is extinguished
in any manner provided in the Civil Code, the
obligation of the guarantor is also extinguished
[2076]. However, there may be instances when,
after the extinguishment of the guarantors
obligation (as in the case of a release from the
guaranty), the obligation of the debtor still
subsists.
(2) Although the guarantor generally has to make
payment in money, any other thing of value, if
accepted by the creditor, is valid payment and
therefore releases the guarantor [dacion en pago]
[2077].
(3) If one guarantor is released without the consent
of the others, the release would benefit the co-
guarantors to the extent of the proportionate
share of the guarantor released [2078].
(4) A guarantor is released if the creditor, without the
guarantors consent, extends the time within
which the debtor may perform his obligation
[2079]. This is to protect the interest of the
guarantor should the debtor be insolvent during
the period of extension and deprive the guarantor
of his right to reimbursement.
(5) The guarantors are released if by some act of the
creditor they cannot be subrogated to the rights,
mortgages and preferences of the latter. [2080]
In order to constitute an extension discharging the
surety, it should appear that the extension was for (1)
a definite period, (2) pursuant to an enforceable
agreement between the principal and the creditor,
and (3) that it was made without the consent of the
surety or with a reservation of rights with respect to
him. (Filipinas Textile Mills v. CA, November 12, 2003)
LEGAL AND JUDICIAL BONDS
Bond an undertaking that is sufficiently secured,
and not cash or currency.
Bondsman a surety offered in virtue of a provision
of law or a judicial order.
QUALIFICATIONS OF PERSONAL BONDSMAN [2082 IN
RELATION TO ART. 2056]
(1) He possesses integrity;
(2) He has capacity to bind himself;
(3) He has sufficient property to answer for the
obligation which he guarantees.
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PLEDGE OR MORTGAGE IN LIEU OF BOND [2083]
(a) Guaranty or suretyship is a personal security.
(b) Pledge or mortgage is a property or real security.
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
be admitted in lieu thereof.
(6) Creditor has the right to retain the thing in his
possession or in that of a third person to whom it
has been delivered, until the debt is paid [2098].
(7) Special Laws apply to pawnshops and
establishments engaged in making loans secured
by pledges. Provisions of the Civil Code shall
apply subsidiarily to them.

BONDSMAN NOT ENTITLED TO EXCUSSION [2084] In case of doubt as to whether a transaction is a

A judicial bondsman and the sub-surety are not
entitled to the benefit of excussion.
(a) Reason: They are not mere guarantors, but
sureties whose liability is primary and solidary.
(b) Effect of negligence of creditor: Mere negligence
on the part of the creditor in collecting from the
debtor will not relieve the surety from liability.
pledge or a dation in payment, the presumption is in
favor of pledge, the latter being the lesser
transmission of rights and interests. (Manila Banking
Corp. v. Teodoro, 169 SCRA 95)
KINDS
(1) Voluntary or conventional Created by agreement
of parties.
(2) Legal Created by operation of law.

Pledge ESSENTIAL REQUIREMENTS

ESSENTIAL REQUISITES COMMON TO PLEDGE AND
MORTGAGE [ART. 2085]
DEFINITION
(1) Constituted to secure the fulfillment of a principal
Pledge is a contract by virtue of which the debtor
obligation.
delivers to the creditor or to a third person a movable
(2) Pledgor or mortgagor must be the absolute
or document evidencing incorporeal rights for the
owner of the thing pledged or mortgaged.
purpose of securing the fulfillment of a principal
(3) The persons constituting the pledge or mortgage
obligation with the understanding that when the
have the free disposal of their property, and in the
obligation is fulfilled, the thing delivered shall be
absence thereof, that they be legally authorized
returned with all its fruits and accessions. [Art.2085
for the purpose.
in relation to 2093]
(4) Cannot exist without a valid obligation.
(5) Debtor retains the ownership of the thing given
PROVISIONS APPLICABLE ONLY TO PLEDGE
as a security.
(1) Transfer of possession to the creditor or to third
(6) When the principal obligation becomes due, the
person by common agreement is essential
thing pledged or mortgaged may be alienated for
[2093].
the payment to the creditor. [Art. 2087]
(a) Actual delivery is important.
(b) Constructive or symbolic delivery of the key to
OBLIGATION OF PLEDGEE
the warehouse is sufficient to show that the
(1) The pledgee cannot deposit the thing pledged
depositary appointed by common consent of
with a 3rd person, unless there is a contrary
the parties was legally placed in possession.
stipulation [2100].
(2) All movables within the commerce of man may
(2) Is responsible for the acts of his agents or
be pledged as long as they are susceptible of
employees with respect to the thing pledged
possession [2094].
[2100].
(3) Incorporeal rights may be pledged. The
(3) Has no right to use the thing or to appropriate its
instruments representing the pledged rights shall
fruits without authority from the owner [2104]
be delivered to the creditor; if negotiable, they
(4) May cause the public sale of the thing pledged if,
must be indorsed [2095].
without fault on his part, there is danger of
(4) Pledge shall take effect against 3rd persons only
destruction, impairment or dimunition in value of
if the following appear in a public instrument:
the thing. The proceeds of the auction shall be a
(a) Description of the thing pledged.
security for the principal obligation [2108].
(b) Date of the pledge [2096].
(5) The thing pledged may be alienated by the
RIGHTS OF PLEDGOR
pledgor or owner only with the consent of the
(1) Takes responsibility for the flaws of the thing
pledgee. Ownership of the thing pledged is
pledged [2101 in relation to Art. 1951].
transmitted to the vendee or transferee as soon
(2) Cannot ask for the return of the thing against the
as the pledgee consents to the alienation, but the
will of the creditor, unless and until he has paid
latter shall continue to have possession [2097].

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UP COLLEGE OF LAW CREDIT TRANSACTIONS
the debt and its interest, with expenses in a
proper case [2105].
Yuliongsiu vs. PNB: There is authority supporting the
proposition that the pledgee can temporarily entrust
the physical possession of the chattels pledged to
the pledgor without invalidating the pledge. In such
a case, the pledgor is regarded as holding the
pledged property merely as trustee for the pledgee.
The type of delivery will depend upon the nature and
the peculiar circumstances of each case.
PNB vs. Atendido: according to law, a pledgee cannot
become the owner of, nor appropriate to himself, the
thing given in pledge. If by the contract of pledge the
pledgor continues to be the owner of the thing
pledged during the pendency of the obligation, it
stands to reason that in case of loss of the property,
the loss should be borne by the pledgor.
(3) Subject to the right of the pledgee under article
2108, pledgor is allowed to substitute the thing
which is in danger of destruction or impairment
without any fault on the part of the pledgee with
another thing of the same kind and quality [2107].
(4) May require that the thing be deposited with a
3rd person, if through the negligence or willful
act of the pledgee the thing is in danger of being
lost or impaired [2106].
PERFECTION ARTS. 2093, 2096
REQUISITES FOR PERFECTION
(1) The thing pledged is placed in the possession of
the creditor or a third person [2093]
(2) For the pledge to take effect as against third
persons, a description of the thing pledged and
the date of the pledge should appear in a public
instrument [2096]
FORECLOSURE ARTS. 2112, 2115
REQUIREMENTS IN SALE OF THE THING PLEDGED BY A
CREDITOR, IF CREDIT IS NOT PAID ON TIME (ART 2112)
(1) Debt is due and unpaid.
(2) Sale must be at a public auction.
(3) Notice to the pledgor and owner, stating the
amount due.
(4) Sale must be made with the intervention of a
notary public.
(5) If at the first auction the thing is not sold, a
second one with the same formalities shall be
held.
(6) If at the second auction, there is no sale either,
the creditor may appropriate the thing pledged
but he shall give an acquittance (release) for his
entire claim.
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BAR OPERATIONS COMMISSION
EFFECT OF THE SALE OF THE THING PLEDGED [Art 2115]
(1) Extinguishes the principal obligation, whether the
proceeds of the sale is more or less than the
amount due.
(2) If the price of sale is more than amount due, the
debtor is not entitled to the excess unless the
contrary is provided.
(3) If the price of sale is less, the creditor is not
entitled to recover the deficiency. A contrary
stipulation is void.
PLEDGE BY OPERATION OF LAW ART. 2121-
2122
LEGAL PLEDGES/PLEDGE BY OPERATION OF LAW [Art.
2121]
(1) Necessary expenses shall be refunded to every
possessor, but only a possessor in good faith may
retain the thing until he has been reimbursed.
(a) Useful expenses shall be refunded only to the
possessor in good faith with the same right of
retention, the person who has defeated him in
the possession having the option of refunding
the amount of the expenses or of paying the
increase in value which the thing may have
acquired and by reason thereof [Art. 546]
(2) He who has executed work upon a movable has a
right to retain it by way of pledge until he is paid.
This is called the mechanics lien. [Art. 1731]
(3) The agent may retain the things which are the
objects of agency until the principal effects the
reimbursement and pays the indemnity. This is
called the agents lien. [Art. 1914]
(4) The laborers wages shall be a lien on the goods
manufactured or the work done. [Art. 1707]
Note:
(1) In legal pledges, the remainder of the price of the
sale shall be delivered to the obligor.
(2) Public auction of legal pledges may only be
executed after demand of the amount for which
the thing is retained. It shall take place within one
month after the demand, otherwise the pledgor
may demand the return of the thing pledged,
provided s/he is able to show that the creditor did
not cause the public sale without justifiable
grounds. [Article 2122]
DISTINGUISHED FROM CHATTEL MORTGAGE
ARTS. 2140, 1484
Chattel Mortgager Pledge
Delivery of Personal Property
Not required Delivery is required for the
validity of the pledge
Registration in the Chattel Mortgage Register
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Chattel Mortgager Pledge property, but ownership of the property is not

parted with. It merely restricts the mortgagors
Necessary for validity of Not necessary; jus disponendi over the property. The mortgagor
the CM against third Public document is may still sell the property, and any stipulation to
persons enough to bind third the contrary is void [Art. 2130]
persons (4) Mortgage extends to the natural accessions, to
the improvements of growing fruits and the rents
Right to Excess of Proceeds of Sale or income NOT YET RECEIVED when the
The excess goes to the The excess goes to the obligation becomes DUE, including indemnity
debtor/ mortgagor pledgee/creditor, unless from insurance, and/or amount received from
otherwise stipulated expropriation for public use [Art. 2127]
(a) Applies only when the accessions and
Right to Recover Deficiency accessories subsequently introduced belongs
Creditor/ mortgagee can Creditor/ mortgagee is to the mortgagor.
recover from the debtor/ not entitled to recover any (b) To exclude them, there must be an express
mortgagor, except if deficiency after the stipulation, or the fruits must be collected
covered by Recto Law property is sold, before the obligation becomes due.
notwithstanding contrary (c) Third persons who introduce improvements
stipulation upon the mortgaged property may remove
them at any time
Note: The provisions of the Civil Code on pledge,
insofar as they are not in conflict with the Chattel The consideration of the accessory contract of real
Mortgage Law shall be applicable to chattel estate mortgage is the same as that of the principal
mortgages [Art. 2141] contract. [Central Bank v. CA, 139 SCRA 46]

Real Mortgage
DEFINITION AND CHARACTERISTICS
Mortgage is a contract whereby the debtor secures to
the creditor the fulfillment of a principal obligation,
immediately making immovable property or real
rights answerable to the principal obligation in case
it is not complied with at the time stipulated.
OBJECTS OF REAL MORTGAGE [Art. 2124]
(1) Immovables
(2) Alienable real rights over immovables.
(a) Future property cannot be an object of
mortgage; however, a stipulation subjecting to
the mortgage improvements which the
mortgagor may subsequently acquire, install
or use in connection with real property already
mortgaged belonging to the mortgagor is
valid.
CHARACTERISTICS
(1) As a general rule, the mortgagor retains
possession of the property. He may deliver said
property to the mortgagee without altering the
nature of the contract of mortgage.
(2) It is not an essential requisite that the principal of
the credit bears interest, or that the interest as
compensation for the use of the principal and the
enjoyment of its fruits be in the form of a certain
percentage thereof.
(3) Mortgage creates an encumbrance over the
KINDS
(1) Voluntary constituted by the will of the owner of
the property on which it is created
(2) Legal required by law to be executed in favor of
certain persons:
(a) Persons in whose favor the law establishes a
mortgage have no other right than to demand
the execution and recording of the document
in which the mortgage is formalized [Article
2125]
(b) The bondsman who is to be offered in virtue of
a provision of law or of a judicial order shall
have the qualifications prescribed in Art 2056
(integrity, capacity to bind himself, and
sufficient property to answer for the
obligation), and in other laws [Article 2082]
(c) If the person bound to give a bond should not
be able to do so, a pledge or mortgage
considered sufficient to recover his obligation
shall be admitted in lieu thereof [Article 2083]
(3) Equitable One which, although lacking the
proper formalities of a mortgage, shows the
intention of the parties to make the property a
security for the debt.
(a) lien created through equitable mortgage
ought not to be defeated by requiring
compliance with formalities necessary to the
validity of a voluntary real estate mortgage.
Ex.: Pacto de retro
(b) provisions governing equitable mortgage:

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Arts. 1365, 1450, 1454, 1602, 1603, 1604 and
1607.
PRINCIPLE OF INDIVISIBILITY OF PLEDGE/MORTGAGE
[ART. 2089 TO 2090]
(a) Dayrit v. CA: A mortgage directly and immediately
subjects the property upon which it is imposed. It
is indivisible even though the debt may be
divided, and such indivisibility is likewise
unaffected by the fact that the debtors are not
solidarity liable.
(b) Central Bank v. CA: Where only a portion of the
loan is released, the mortgage becomes
enforceable only as to the proportionate value of
the loan
Indivisibility applies only as to pledgors/mortgagors
who are themselves debtors in the principal
obligation, and not to accommodation pledgors/
mortgagors
"When several things are pledged or mortgaged,
each thing for a determinate portion of the debt, the
pledges or mortgage, are considered separate from
each other. But when the several things are given to
secure the same debt in its entirety, all of them are
liable for the debt, and the creditor does not have to
divide his action by distributing the debt among the
various things pledged or mortgaged. Even when
only a part of the debt remains unpaid, all the things
are still liable for such balance." [Tolentino]
The question is whether or not the written
instrument in controversy was a mortgage OR a
conditional sale. The correct test, where it can be
applied, is the continued existence of a debt or
liability between the parties. If such exists, the
conveyance may be held to be merely a security for
the debt or an indemnity against the liability. (Reyes
v. Sierra, 93 SCRA 473)
ESSENTIAL REQUISITES
ESSENTIAL REQUISITES COMMON TO PLEDGE AND
MORTGAGE
(1) Constituted to secure the fulfillment of a principal
obligation.
(2) Pledgor or mortgagor must be the absolute
owner of the thing pledged or mortgaged.
(3) The persons constituting the pledge or mortgage
have the free disposal of their property, and in the
absence thereof, that they be legally authorized
for the purpose.
Note: Third persons who are not parties to the
principal obligation may secure the latter by
pledging or mortgaging their own property. [Art.
2085]
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BAR OPERATIONS COMMISSION
(4) Cannot exist without a valid obligation.
(5) Debtor retains the ownership of the thing given
as a security.
(6) When the principal obligation becomes due, the
thing pledged or mortgaged may be alienated for
the payment to the creditor. [Art. 2087]
(7) Must be recorded in the Registry of Property in
order to be validly constituted.
Note: The mortgage would still be binding
between the parties even if the instrument is not
recorded.
FORECLOSURE
FORECLOSURE OF MORTGAGE
It is the remedy available to the mortgagee by which
he subjects the mortgaged property to the
satisfaction of the obligation secured by the
mortgage.
(a) In General: An action for foreclosure of a
mortgage is limited to the amount mentioned in
the mortgage, EXCEPT when the mortgage
contract intends to secure future loans or
advancements
(b) BLANKET mortgage/DRAGNET mortgage that
subsumes all debts of past or future origin
(c) Mortgage may be used as a continuing security
which secures future advancements and is not
discharged by the repayment of the amount in
the mortgage
(d) Alienation or assignment of mortgage credit is
valid even if it is not registered
Acceleration Clause, or the stipulation stating that on
the occasion of the mortgagors default, the whole
sum remaining unpaid automatically becomes due
and demandable, is ALLOWED
KINDS OF FORECLOSURE
(1) Judicial Foreclosure
(2) Extrajudicial Foreclosure
JUDICIAL FORECLOSURE
Rule 68, ROC:
(a) May be availed of by bringing an action in the
proper court which has jurisdiction over the area
wherein the real or personal (in case of chattel
mortgage) property involved or a portion thereof
is situated.
(b) If the court finds the complaint to be well-
founded, it shall order the mortgagor to pay the
amount due with interest and other charges
within a period of not less than 90 days nor more
than 120 days from the entry of judgment. If the
mortgagor fails to pay at the time directed, the
court, upon motion, shall order the property to be
sold to the highest bidder at a public auction.
(c) Upon confirmation of the sale by the court, it
UP COLLEGE OF LAW CREDIT TRANSACTIONS
shall operate to divest the rights of all parties to
the action and to vest their rights to the
purchaser subject to such rights of redemption as
may be allowed by law.
(d) Before the confirmation, the court retains control
of the proceedings
(e) Execution of judgment subject to APPEAL but not
annulment
(f) The foreclosure of the property is completed only
when the sheriffs certificate is executed,
acknowledged and recorded
The Proceeds of the Sale shall be applied to the
Payment of the:
(a) Costs of the sale;
(b) Amount due the mortgagee;
(c) Claims of junior encumbrancers or persons
holding subsequent mortgages in the order of
their priority; and
(d) Balance, if any shall be paid to the mortgagor.
Nature of Judicial Foreclosure Proceedings
(1) Quasi in rem action. Hence, jurisdiction may be
acquired through publication.
(2) Foreclosure is only the result or incident of the
failure to pay debt.
(3) Survives death of mortgagor.
EXTRAJUDICIAL FORECLOSURE [ACT NO. 3135]
(1) Applies to mortgages where the authority to
foreclose is granted to the mortgagee.
(2) Authority is not extinguished by death of
mortgagor or mortgagee. This is an agency
coupled with interest.
(3) Public sale should be made after proper notice to
the public, otherwise it is a jurisdictional defect
which could render the sale voidable.
(4) There is no need to notify the mortgagor, where
there is no contractual stipulation therefor.
Proper notice consists of:
(a) posting notice in three public places and/or
(b) publication in newspaper of general
circulation
Purpose of notice is to obtain the best bid for the
foreclosed property
(5) Surplus proceeds of foreclosure sale belong to
the mortgagor.
(6) Debtor (who must be a NATURAL PERSON) has
the right to redeem the property sold within 1 year
from and after the date of sale.
(a) If the mortgagee is a bank and the debtor is a
juridical person, then there is no right of
redemption. However, it may redeem the
property BEFORE the registration of the TCT
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BAR OPERATIONS COMMISSION
to the buyer, which is similar to the equity of
redemption. The TCT must be registered
within THREE MONTHS after the foreclosure.
(b) The mortgagor can only legally transfer the
right to redeem and the use of the property
during the period of redemption.
(7) Remedy of party aggrieved by foreclosure is a
petition to set aside sale and the cancellation of
writ of possession. However, if the mortgagee is a
bank, the mortgagor is required to post a bond
equal to the value of the mortgagees claim.
(8) Republication of the notice of sale is necessary for
the validity of the postponed extrajudicial sale
(9) In foreclosure of real estate mortgage under Act
3135, the buyer at auction may petition the land
registration court for a writ of possession pending
the one-year period of redemption of the
foreclosed property.
Nature of Power of Foreclosure by Extrajudicial Sale
(1) Conferred for mortgagees protection.
(2) An ancillary stipulation.
(3) A prerogative of the mortgagee.
Note:
(a) Both should be distinguished from execution sale
governed by Rule 39, ROC.
(b) Foreclosure retroacts to the date of registration of
mortgage.
(c) A stipulation of upset price, or the minimum price
at which the property shall be sold to become
operative in the event of a foreclosure sale at
public auction, is null and void.
Right of mortgagee to recover deficiency
(1) Mortgagee is entitled to recover deficiency.
(2) If the deficiency is embodied in a judgment, it is
referred to as deficiency judgment.
(3) Action for recovery of deficiency may be filed even
during redemption period.
(4) Action to recover prescribes after 10 years from
the time the right of action accrues.
Effect of inadequacy of price in foreclosure sale
(1) Where there is right to redeem, inadequacy of
price is immaterial because the judgment debtor
may redeem the property.
(a) Exception: Where the price is so inadequate as
to shock the conscience of the court, taking
into consideration the peculiar circumstances.
(2) Property may be sold for less than its fair market
value, upon the theory that the lesser the price
the easier it is for the owner to redeem.
(3) The value of the mortgaged property has no
bearing on the bid price at the public auction,
provided that the public auction was regularly
and honestly conducted.
UP COLLEGE OF LAW CREDIT TRANSACTIONS
A suit for the recovery of the deficiency after the
foreclosure of a mortgage is in the nature of a
mortgage action because its purpose is precisely to
enforce the mortgage contract. [Caltex v. IAC, 176
SCRA 741]
Waiver of security by creditor
(1) Mortgagee may waive the right to foreclose his
mortgage and maintain a personal action for
recovery of the indebtedness.
(2) Mortgagee cannot have both remedies. This is
because he only has one cause of action, the non-
payment of the mortgage debt.
Redemption
(1) It is a transaction by which the mortgagor
reacquires the property which may have passed
under the mortgage or divests the property of the
lien which the mortgage may have created
(2) Kinds:
(a) Equity of redemption: in judicial foreclosure of
real estate mortgage under the ROC, it is the
right of the mortgagor to redeem the
mortgaged property by paying the secured
debt within the 120 day period from entry of
judgment or after the foreclosure sale, but
before the sale of the mortgaged property or
confirmation of sale
(i) formal offer to redeem preserves the right of
redemption, e.g., by filing an action to
enforce the right to redeem
(b) Right of redemption: in extrajudicial
foreclosure of real estate mortgage, the right
of the mortgagor to redeem the property
within a certain period after it was sold for the
satisfaction of the debt.
(ii) For natural persons one year from the
registration of the TCT
(iii) For juridical persons three months from
the foreclosure
(iv) Formal offer to redeem must be with
tender of redemption price to preserve
right of redemption
Note: There is no right of redemption in pledge and
chattel mortgage.
Medida v. CA: The rule up to now is that the right of a
purchaser at a foreclosure sale is merely inchoate
until after the period of redemption has expired
without the right being exercised. The title to land
sold under mortgage foreclosure remains, in the
mortgagor or his grantee until the expiration of the
redemption period and conveyance by the master's
deed
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BAR OPERATIONS COMMISSION
Antichresis
DEFINITION AND CHARACTERISTICS
Antichresis is a contract whereby the creditor
acquires the right to receive the fruits of an
immovable of the debtor, with the obligation to
apply then to the payment of the interest, if owing,
and thereafter to the principal of the 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 [Art. 2134]
SPECIAL REQUISITES:
(1) It can cover only the fruits of an immovable
property
(2) Delivery of the immovable is necessary for the
creditor to receive the fruits, not to make the
contract binding
(3) Amount of principal and interest must be
specified in writing [Art. 2134]
(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
NOTE: The obligation to pay interest is not 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
OBLIGATIONS OF ANTICHRETIC CREDITOR
(1) To pay taxes and charges on the estate, including
necessary expenses [Art. 2135].
Creditor may avoid said obligation by:
(a) compelling the debtor to reacquire enjoyment
of the property
(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) Action for specific performance
(2) Petition for the sale of the real property as in a
foreclosure of mortgage under Rule 68 of the
UP COLLEGE OF LAW CREDIT TRANSACTIONS
Rules of Court [Art. 2137]
(a) The parties, however, may agree on an
extrajudicial foreclosure in the same manner
as they are allowed in contracts of mortgage
and pledge [Tavera v. El Hogar Filipino, Inc. 68
Phil 712]
(b) 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
DEFINITION AND CHARACTERISTICS
Chattel Mortgage is a conditional sale of personal
property as security for the payment of a debt, or the
performance of some other obligation specified
therein, the condition being that the sale shall be
void upon the seller paying to the purchaser a sum of
money or doing some other act named. If the
condition is performed according to its terms, the
mortgage and sale immediately become void, and
the mortgagee is thereby divested of his title.
[Section 3, Act 1508]
CHARACTERISTICS
(1) It is an accessory contract because it secures
performance of a principal obligation
(2) It is a formal contract because it requires
registration in the Chattel Mortgage Register for
its validity (but only as against third persons)
(3) It is a unilateral contract because it produces only
obligations on the part of the creditor to free the
thing from the encumbrance on fulfillment of the
obligation.
(4) The excess of the proceeds of the sale goes to the
debtor/mortgagor
(5) Creditor/mortgagee can recover deficiency from
the debtor/mortgagor, except if covered by the
Recto Law
REGISTRATION
PERIOD WITHIN WHICH REGISTRATION SHOULD BE MADE
The law is substantially and sufficiently complied
with where the registration is made by the
mortgagee before the mortgagor has complied with
his principal obligation and no right of innocent third
persons is prejudiced.
EFFECT OF REGISTRATION
(1) Creates real rights
(2) Adds nothing to mortgage
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BAR OPERATIONS COMMISSION
REGISTRATION OF ASSIGNMENT OF MORTGAGE NOT
REQUIRED
(a) A chattel mortgage may be alienated or assigned
to a third person
(b) The debtor is protected if he pays his creditor
without actual knowledge that the debt has been
assigned
(c) Affidavit of good faith is required.
AFFIDAVIT OF GOOD FAITH is an 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.
Effect of Absence: Mortgage is vitiated only as against
third persons without notice.
VENUE OF REGISTRATION
(a) If he resides in the Philippines, in the office of the
register of deeds of the province in which the
mortgagor resides at the time of the making of
the chattel mortgage
(b) If he does not reside in the Philippines, in the
province in which the property is situated
(c) If the property is situated in a province different
from that in which the mortgagor resides, the
mortgage shall be recorded in both provinces.
[Sec. 4, Act 1508]
When a corporation is a party to a chattel mortgage,
the affidavit may be made and subscribed by a
director, trustee, cashier, treasurer, or manager
thereof, or by a person authorized to make or receive
such mortgage.
When a partnership is a party, the affidavit may be
made and subscribed by one member thereof.
VALIDITY OF CHATTEL MORTGAGE
Chattel mortgage shall not be valid against any
person except the mortgagor, his executors or
administrators unless:
(1) The possession of the property is delivered to and
retained by the mortgagee or
(2) The mortgage is recorded. (Sec. 4, Act 1508)
FORMAL REQUISITES
(a) It should substantially comply with the form
prescribed by law
(b) It should be signed by the person/s executing the
same in the presence of two witnesses who shall
sign the mortgage as witnesses to the execution
thereof and
UP COLLEGE OF LAW CREDIT TRANSACTIONS
(c) Each mortgagor and mortgagee or, in the
absence of the mortgagee, his agent or attorney,
shall make and subscribe an affidavit in the form
prescribed by law, which affidavit, signed by the
parties to the mortgage and the two witnesses
and the certificate of the oath signed by the
person authorized to administer an oath shall be
appended to such mortgage and recorded
therewith. [Sec. 5, Act 1508]
DESCRIPTION OF PROPERTY
The mortgaged property should be described such
as to enable the parties to the mortgage, or any
other person, after reasonable inquiry and
investigation, to identify the same.
Large cattle as chattel mortgage
The description in the mortgage shall contain the
brands, class, sex, age, knots of radiated hair
commonly known as remolinos or cowlicks, and
other marks of ownership as described and set forth
in the certificate of ownership of said animal/s,
together with the number and place of issue of such
certificates of ownership.
Growing crops as chattel mortgage
The mortgage may contain an agreement stipulating
that the mortgagor binds himself properly to tend,
care for and protect the crop while growing, and
faithfully and without delay to harvest the same, and
that in default of the performance of such duties, the
mortgagee may enter upon the premises, take all the
necessary measures for the protection of said crop,
and retain possession thereof and sell the same, and
from the proceeds of such sale pay all expenses
incurred in caring for, harvesting, and selling the
crop and the amount of the indebtedness or
obligation secured by the mortgage, and the surplus,
if any, shall be paid to the mortgagor or those
entitled to the same.
PROPERTY COVERED BY CM
It is deemed to cover only the property described
therein and not like or substituted property
thereafter acquired by the mortgagor and placed in
the same depository as the property originally
mortgaged, anything in the mortgage to the contrary
notwithstanding. [Sec. 8, Act 1508]
Breaches
Failure of mortgagee to discharge the mortgage
If the mortgagee, assign, administrator, executor, or
either of them,
(1) after performance of the condition before or after
the breach thereof, or
(2) after tender of the performance of the condition,
at or after the time fixed for the performance,
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does not within ten days after being requested
thereto by any person entitled to redeem, discharge
the mortgage in the manner provided by law, the
person entitled to redeem may recover of the person
whose duty it is to discharge the same, twenty pesos
for his neglect and all damages occasioned thereby
in an action in any court having jurisdiction of the
subject-matter thereof. [Sec. 8]
When the condition of the chattel mortgage is
broken, a mortgagor or person holding a subsequent
mortgage, or a subsequent attaching creditor may
redeem the same by paying or delivering to the
mortgagee the amount due on such mortgage and
the reasonable costs and expenses incurred by such
breach of condition before the sale thereof. 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
Foreclosure
The mortgagee, his executor, administrator or assign
may cause the mortgaged property or any part
thereof to be sold at a public auction by a public
officer:
(1) After 30 days from the time of condition broken
(2) At a public place in the municipality where the
mortgagor resides, or where the property is
situated
(3) Provided at least 10 day-notice of the time, place,
and purpose of such sale has been posted at 2 or
more public places in such municipality, and
(4) The mortgagee, his executor, administrator, or
assign shall notify the mortgagor or person
holding under him and the persons holding
subsequent mortgages of the time and place of
sale at least 10 days previous to the sale:
(a) either by notice in writing directed to him or
left at his abode, if within the municipality, or
(b) sent by mail if he does not reside in such
municipality
DISPOSITION OF PROCEEDS
The proceeds of the sale shall be applied to the
payment:
(1) first, to the costs and expenses of mortgage
(2) the residue shall be paid to persons holding
subsequent mortgages in their order
(3) the balance, after paying the mortgages, shall be
paid to the mortgagor or person holding under
him on demand
Quasi-Contracts
A quasi-contract is that juridical relation resulting
UP COLLEGE OF LAW CREDIT TRANSACTIONS
from a lawful, voluntary and unilateral act, and
which has for its purpose the payment of indemnity
to the end that no one shall be unjustly enriched or
benefited at the expense of another [Art. 2142]
NEGOTIORUM GESTIO
(UNAUTHORIZED MANAGEMENT)
This takes place when a person voluntarily takes
charge of anothers abandoned business or property
without the owners authority [Art. 2144].
Reimbursement must be made to the gestor (i.e. one
who carried out the business) for necessary and
useful expenses, as a rule.
THE OBLIGATION DOES NOT ARISE:
(1) When the property or business is not neglected or
abandoned;
(2) If in fact the manager has been tacitly authorized
by the owner.
In the first case, the provisions of Articles 1317, 1403,
No. 1, and 1404 regarding unauthorized contracts
shall govern.
In the second case, the rules on agency in Title X of
this Book shall be applicable. [Art. 2144]
OBLIGATIONS OF A GESTOR
(1) Perform his duties with all the diligence of a good
father of a family
(2) Pay the damages which through his fault and
negligence may be suffered by the owner of the
property/business under his management [Art.
2145]
(3) Be liable for the acts of the persons to whom he
delegated all or some of his duties. This is
without prejudice to the direct obligation of the
delegate to the owner of the business. [Art. 2146]
(4) Be liable for any fortuitous event under the
following conditions:
(a) If he undertakes risky operations which the
owner was not accustomed to embark upon
(b) If he has preferred his own interest to that of
the owner
(c) If he fails to return the property or business
after demand of the owner
(d) If he assumed management in bad faith [Art.
2147]
(e) If he is manifestly unfit to carry on the
management
(f) If by his intervention he prevented a more
competent person from taking up the
management. [Art. 2148]
Note: The gestor shall not be liable for e and f
if the management was assumed to save the
property or business from imminent danger.
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(5) Be personally liable for contracts which he
entered into with third persons, even though he
acted in the name of the owner, and there shall
be no right of action between the owner and third
persons.
The gestor shall not be personally liable for such
contracts, provided:
(a) The owner has expressly or tacitly ratified the
management, or
(b) When the contract refers to things pertaining
to the owner of the business. [Art. 2152]
Note: The responsibility of two or more gestors
shall be solidary, unless the management was
assumed to save the thing or business from
imminent danger.
OBLIGATIONS OF THE OWNER OF THE PROPERTY OR
BUSINESS
Although the management was not expressly
ratified, the owner who enjoys the advantages of the
same shall:
(a) Be liable for the obligations incurred in his
interest
(b) Reimburse the gestor for the necessary and
useful expenses and for the damages the latter
may have suffered in the performance of his
duties
The above obligations shall be incumbent upon the
owner if the management had for its purpose the
prevention of an imminent and manifest loss,
although no benefit may have been derived. [Art.
2150]
If the owner did not derive any benefit and there was
no imminent and manifest danger to the property or
business, the owner would still be liable for the
abovementioned obligations and expenses,
provided:
(a) The gestor has acted in good faith; AND
(b) The property or business is intact, ready to be
returned to the owner. [Art. 2151]
EFFECT OF RATIFICATION
The ratification of the management by the owner of
the business produces the effects of an express
agency, even if the business may not have been
successful. [Art. 2149]
EXTINGUISHMENT OF MANAGEMENT
(1) When the owner repudiates or puts an end
thereto
(2) When the gestor withdraws from the
management, subject to [Art. 2144]
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(3) By the death, civil interdiction, insanity or
insolvency of the owner or the gestor. [Art. 2153]
SOLUTIO INDEBITI (UNDUE PAYMENT)
This takes place when something is received when
there is no right to demand it, and it was unduly
delivered through mistake. The recipient has the
duty to return it [Art. 2154].
This situation covers payment by reason of a mistake
in the construction or application of a doubtful or
difficult question of law [Art. 2155]
WHEN DEBT NOT YET DUE
If the payer was in doubt whether the debt was due,
he may recover if he proves that it was not due. [Art.
2156]
RESPONSIBILITY OF TWO OR MORE PAYEES
When there has been payment of what is not due,
their responsibility is solidary.
WHEN MONEY OR THING DELIVERED IS OWNED BY THIRD
PERSON
The payee cannot demand that the payor prove his
ownership of the thing delivered.
Nevertheless, should he discover that the thing has
been stolen and who its true owner is, he must
advise the latter.
If the owner, in spite of such information, does not
claim it within the period of one month, the payee
shall be relieved of all responsibility by returning the
thing deposited to the payor.
If the payee has reasonable grounds to believe that
the thing has not been lawfully acquired by the
payor, the former may return the same. [Art. 2158]
LIABILITY OF PAYEE
If in bad faith, he shall be liable:
(1) For legal interest if a sum of money is involved, or
(2) For the fruits received or which should have been
received if the thing produces fruits
AND
(3) For any loss or impairment of the thing for any
cause, and
(4) For damages to the person who delivered the
thing, until it is recovered. [Art. 2159]
If in good faith, he shall be liable:
(1) For the impairment or loss of the thing certain
and determinable or its accessories and
accessions insofar as he has thereby been
benefited.
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(2) For the return of the price or assign the action to
collect the sum if he has alienated the same. [Art.
2160]
EXEMPTION FROM THE OBLIGATION TO RESTORE THE
PAYMENT UNDULY MADE
A person who, believing in good faith that the
payment was being made of a legitimate and
subsisting claim,
(1) destroyed the document, or
(2) allowed the action to prescribe, or
(3) gave up the pledges, or
(4) cancelled the guaranties for his right shall be
exempt from the obligation to restore.
The person who paid unduly may proceed only
against the true debtor or the guarantors with regard
to whom the action is still effective. [Art. 2162]
PRESUMPTION OF PAYMENT BY MISTAKE, DEFENSE
The presumption arises if something which had
never been due or had already been paid was
delivered; but he from whom the return is claimed
may prove that the delivery was made out of
liberality or for any other just cause.
OTHER QUASI-CONTRACTS
(1) When, without the knowledge of the person
obliged to give support, it is given by a stranger,
the latter shall have a right to claim the same
from the former, unless it appears that he gave it
out of piety and without intention of being repaid.
[Art. 2164]
(2) When funeral expenses are borne by a third
person, without the knowledge of those relatives
who were obliged to give support to the
deceased, said relatives shall reimburse the third
person, should the latter claim reimbursement.
[Art. 2165]
(3) When the person obliged to support an orphan,
or an insane or other indigent person unjustly
refuses to give support to the latter, any third
person may furnish support to the needy
individual, with right of reimbursement from the
person obliged to give support. The provisions of
this article apply when the father or mother of a
child under eighteen years of age unjustly refuses
to support him. [Art. 2166]
(4) When through an accident or other cause a
person is injured or becomes seriously ill, and he
is treated or helped while he is not in a condition
to give consent to a contract, he shall be liable to
pay for the services of the physician or other
person aiding him, unless the service has been
rendered out of pure generosity. [Art. 2167]
(5) When during a fire, flood, storm, or other
calamity, property is saved from destruction by
UP COLLEGE OF LAW CREDIT TRANSACTIONS
another person without the knowledge of the
owner, the latter is bound to pay the former just
compensation. [Art. 2168]
(6) When the government, upon the failure of any
person to comply with health or safety
regulations concerning property, undertakes to
do the necessary work, even over his objection, he
shall be liable to pay the expenses. [Art. 2169]
(7) When by accident or other fortuitous event,
movables separately pertaining to two or more
persons are commingled or confused, the rules
on co-ownership shall be applicable. [Art. 2170]
(8) The rights and obligations of the finder of lost
personal property shall be governed by Articles
719 and 720. [Art. 2171]
(9) The right of every possessor in good faith to
reimbursement for necessary and useful
expenses is governed by Article 546. [Art. 2172]
(10) When a third person, without the knowledge of
the debtor, pays the debt, the rights of the former
are governed by Articles 1236 and 1237. [Art. 2173]
(11) When in a small community a nationality of the
inhabitants of age decide upon a measure for
protection against lawlessness, fire, flood, storm
or other calamity, any one who objects to the plan
and refuses to contribute to the expenses but is
benefited by the project as executed shall be
liable to pay his share of said expenses. [Art. 2174]
(12) Any person who is constrained to pay the taxes
of another shall be entitled to reimbursement
from the latter. [Art. 2175]
Concurrence and Preference
of Credits
MEANING OF CONCURRENCE AND PREFERENCE
Concurrence of Credit implies possession by two or
more creditors of equal right or privileges over the
same property or all of the property of a debtor.
Preference of Credit is the right held by a creditor to
be preferred in the payment of his claim above
others out of the debtors assets.
PREFERRED CREDITS ON SPECIFIC MOVABLES
[ART. 2241]
With reference to specific movable property of the
debtor, the following claims or liens shall be
preferred:
(1) Duties, taxes and fees due thereon to the State or
any subdivision thereof;
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(2) Claims arising from misappropriation, breach of
trust, or malfeasance by public officials
committed in the performance of their duties, on
the movables, money or securities obtained by
them;
(3) Claims for the unpaid price of movables sold, on
said movables, so long as they are in the
possession of the debtor, up to the value of the
same; and if the movable has been resold by the
debtor and the price is still unpaid, the lien may
be enforced on the price; this right is not lost by
the immobilization of the thing by destination,
provided it has not lost its form, substance and
identity; neither is the right lost by the sale of the
thing together with other property for a lump
sum, when the price thereof can be determined
proportionally;
(4) Credits guaranteed with a pledge so long as the
things pledged are in the hands of the creditor, or
those guaranteed by a chattel mortgage, upon
the things pledged or mortgaged, up to the value
thereof;
(5) Credits for the making, repair, safekeeping or
preservation of personal property, on the
movable thus made, repaired, kept or possessed;
(6) Claims for laborers' wages, on the goods
manufactured or the work done;
(7) For expenses of salvage, upon the goods
salvaged;
(8) Credits between the landlord and the tenant,
arising from the contract of tenancy on shares, on
the share of each in the fruits or harvest;
(9) Credits for transportation, upon the goods
carried, for the price of the contract and
incidental expenses, until their delivery and for
thirty days thereafter;
(10) Credits for lodging and supplies usually
furnished to travelers by hotel keepers, on the
movables belonging to the guest as long as such
movables are in the hotel, but not for money
loaned to the guests;
(11) Credits for seeds and expenses for cultivation and
harvest advanced to the debtor, upon the fruits
harvested;
(12) Credits for rent for one year, upon the personal
property of the lessee existing on the immovable
UP COLLEGE OF LAW CREDIT TRANSACTIONS
leased and on the fruits of the same, but not on
money or instruments of credit;
(13) Claims in favor of the depositor if the depositary
has wrongfully sold the thing deposited, upon the
price of the sale.
In the foregoing cases, if the movables to which the
lien or preference attaches have been wrongfully
taken, the creditor may demand them from any
possessor, within thirty days from the unlawful
seizure.
PREFERRED CREDITS ON SPECIFIC
IMMOVABLES AND REAL RIGHTS [ART. 2242]
With reference to specific immovable property and
real rights of the debtor, the following claims,
mortgages and liens shall be preferred, and shall
constitute an encumbrance on the immovable or real
right:
(1) Taxes due upon the land or building;
(2) For the unpaid price of real property sold, upon
the immovable sold;
(3) Claims of laborers, masons, mechanics and other
workmen, as well as of architects, engineers and
contractors, engaged in the construction,
reconstruction or repair of buildings, canals or
other works, upon said buildings, canals or other
works;
(4) Claims of furnishers of materials used in the
construction, reconstruction, or repair of
buildings, canals or other works, upon said
buildings, canals or other works;
(5) Mortgage credits recorded in the Registry of
Property, upon the real estate mortgaged;
(6) Expenses for the preservation or improvement of
real property when the law authorizes
reimbursement, upon the immovable preserved
or improved;
(7) Credits annotated in the Registry of Property, in
virtue of a judicial order, by attachments or
executions, upon the property affected, and only
as to later credits;
(8) Claims of co-heirs for warranty in the partition of
an immovable among them, upon the real
property thus divided;
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(9) Claims of donors or real property for pecuniary
charges or other conditions imposed upon the
donee, upon the immovable donated;
(10) Credits of insurers, upon the property insured,
for the insurance premium for two years.
PREFERRED CREDITS ON OTHER PROPERTY,
REAL AND PERSONAL [ART. 2244]
With reference to other property, real and personal,
of the debtor, the following claims or credits shall be
preferred in the order named:
i. Proper funeral expenses for the debtor, or
children under his or her parental authority who
have no property of their own, when approved by
the court;
ii. Credits for services rendered the insolvent by
employees, laborers, or household helpers for one
year preceding the commencement of the
proceedings in insolvency;
iii. Expenses during the last illness of the debtor or
of his or her spouse and children under his or her
parental authority, if they have no property of
their own;
iv. Compensation due the laborers or their
dependents under laws providing for indemnity
for damages in cases of labor accident, or illness
resulting from the nature of the employment;
v. Credits and advancements made to the debtor
for support of himself or herself, and family,
during the last year preceding the insolvency;
vi. Support during the insolvency proceedings, and
for three months thereafter;
vii. Fines and civil indemnification arising from a
criminal offense;
viii. Legal expenses, and expenses incurred in the
administration of the insolvent's estate for the
common interest of the creditors, when properly
authorized and approved by the court;
ix. Taxes and assessments due the national
government, other than those mentioned in
Articles 2241, No. 1, and 2242, No. 1;
x. Taxes and assessments due any province, other
than those referred to in Articles 2241, No. 1, and
2242, No. 1;
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xi. Taxes and assessments due any city or
municipality, other than those indicated in Articles
2241, No. 1, and 2242, No. 1;
xii. Damages for death or personal injuries caused by
a quasi-delict;
xiii. Gifts due to public and private institutions of
charity or beneficence;
xiv. Credits which, without special privilege, appear in
(a) a public instrument; or (b) in a final judgment,
if they have been the subject of litigation. These
credits shall have preference among themselves
in the order of priority of the dates of the
instruments and of the judgments, respectively.
EXEMPT PROPERTY
(1) Present property:
(a) Family home. [Arts. 152, 153 and 155, CC]
(b) Right to receive support, as well as money or
property obtained by such support, shall not
be levied upon on attachment or execution.
[Art. 205, CC]
(c) Sec. 13, Rule 39, ROC.
(d) Sec 118, Public Land Act. [CA 141, as
amended]
(2) Future property:
A debtor who obtains a discharge from his debts
on account of insolvency, is not liable for the
unsatisfied claims of his creditors with said
property. [Sec. 68 and 69, Insolvency Law, Act
1956]
(3) Property in custodia legis and of public dominion.
thereof [Art. 2247]
(3) Those credits which enjoy preference in relation
to specific real property or real rights exclude all
others to the extent of the value of the
immovable or real right to which the preference
refers [Art. 2248].
(4) If there are 2 or more credits with respect to the
same specific real property or real rights, they shall
be satisfied pro rata, after the payment of the
taxes and assessment of the taxes and
assessments upon the immovable property or
real right [Art. 2249].
(5) The excess, if any, after the payment of the
credits which enjoy preference with respect to
specific property, real or personal, shall be
added to the free property which the debtor may
have, for the payment of other credits [Art.
2250].
(6) Those credits which do not enjoy any preference
with respect to specific property, and those
which enjoy preference, as to the amount not
paid, shall be satisfied according to the
following rules:
(a) Order established by Art 2244
(b) Common credits referred to in Art 2245 shall
be paid pro rata regardless of dates [Art.
2251].

CLASSIFICATION OF CREDITS
(1) Special preferred credits. [Art. 2241 and 2242, CC]
(a) Considered as mortgages or pledges of real or
personal property or liens within the purview
of legal provisions governing insolvency.
(b) Taxes due to the State shall first be satisfied.
(2) Ordinary preferred credits [Art. 2244] Preferred
in the order given by law.
(3) Common credits [Art. 2245] Credits of any other
kind or class, or by any other right or title not
comprised in Arts. 2241- 2244 shall enjoy no
preference.

ORDER OF PREFERENCE OF CREDITS

(1) Credits which enjoy preference with respect to
specific movables exclude all others to the extent
of the value of the personal property to which the
preference refers [Art. 2246].
(2) If there are 2 or more credits with respect to the
same specific movable property, they shall be
satisfied pro rata, after the payment of duties,
taxes and fees due the State or any subdivision

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PAGE 303
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Torrens System
THE TORRENS SYSTEM:
A system for registration of land under which, upon
landowners application, the court may, after
appropriate proceedings, direct the issuance of a
certificate of title. (Blacks Law Dictionary)
The underlying principle of the Torrens system is
security with facility in dealing with land. This is
made possible by defining the absolute status of a
given property in a certificate of title with a
governmental and universal guaranty. This
certificate of title should better be known as
certificate of title and encumbrances. In the words of
torrens himself the main objects are to simplify,
quicken, and cheapen the transfer of real estate and
to render title safe and indefeasible. (The Philippine
Torrens System by Florencio Ponce 1964)
PURPOSE:
The real purpose of that system is to quiet title to
land; to put a stop forever to any question of the
legality of the title, except claims which were noted
at the time of registration, in the certificate, or which
may arise subsequent thereto. (Legarda v Saleeby,
GR No. 8936)
Avoid possible conflicts of title in and to real property
ADVANTAGES:
(a) Secures title
(b) Protection against fraud
(c) Simplified dealings
(d) Restoration of the estates to its just value, whose
depreciation is cause by some blur, technical
defect
(e) Barred the recurrence of faults in the title (See
Legarda v. Saleeby)
BACKGROUND:
The boldest effort to grapple with the problem of
simplification of title to land was made by Mr.
(afterwards Sir Robert) Torrens, a layman, in South
Australia in 1857. . . . In the Torrens system title by
registration takes the place of "title by deeds" of the
system under the "general" law. A sale of land, for
example, is effected by a registered transfer, upon
which a certificate of title is issued. The certificate is
guaranteed by statute, and, with certain exceptions,
constitutes indefeasible title to the land mentioned
therein. Under the old system the same sale would
be effected by a conveyance, depending for its
validity, apart from intrinsic flaws, on the correctness
of a long series of prior deeds, wills, etc. . . . The
object of the Torrens system, them, is to do away
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with the delay, uncertainty, and expense of the old
conveyancing system.
By "Torrens" system generally are meant those
systems of registration of transactions with interest
in land whose declared object is, under
governmental authority, to establish and certify to
the ownership of an absolute and indefeasible title to
realty, and to simplify its transfer. (Grey-Alba v. Dela
Cruz, GR No. L-524)
CERTIFICATE OF TITLE
ORIGINAL CERTIFICATE OF TITLE OR OCT
It is the first certificate of title issued in the name of a
registered owner by the Register of Deeds covering a
parcel of land which had been registered under the
Torrens System, by virtue of judicial or administrative
proceedings.
TRANSFER CERTIFICATE OF TITLE OR TCT
The subsequent certificate of title pursuant to any
deed of transfer or conveyance to another person.
The Register of Deeds shall make a new certificate of
title and given him an owners duplicate certificate.
The previous certificate (need not be an OCT) shall
be stamped cancelled.
PATENTS
PD 1529, Sec. 103. Certificates of title pursuant to
patents. Whenever public land is by the Government
alienated, granted or conveyed to any person, the
same shall be brought forthwith under the operation
of this Decree.
It shall be the duty of the official issuing the
instrument of alienation, grant, patent or conveyance
in behalf of the Government to cause such
instrument to be filed with the Register of Deeds of
the province or city where the land lies, and to be
there registered like other deeds and conveyance,
whereupon a certificate of title shall be entered as in
other cases of registered land, and an owner's
duplicate issued to the grantee.
The deed, grant, patent or instrument of conveyance
from the Government to the grantee shall not take
effect as a conveyance or bind the land but shall
operate only as a contract between the Government
and the grantee and as evidence of authority to the
Register of Deeds to make registration.
It is the act of registration that shall be the operative
act to affect and convey the land, and in all cases
under this Decree, registration shall be made in the
office of the Register of Deeds of the province or city
where the land lies. The fees for registration shall be
UP COLLEGE OF LAW
paid by the grantee. After due registration and
issuance of the certificate of title, such land shall be
deemed to be registered land to all intents and
purposes under this Decree.
Note:
(a) Patents only involve public lands which are
alienated by the Government, pursuant to the
Public Land Act.
(b) The patent (even if denominated as deed of
conveyance) is not really a conveyance but a
contract between the grantee and the
Government and evidence of authority to the
Register of Deeds to make registration.
(c) The act of registration is the operative act to affect
and convey the land.
General Rule: A Torrens Certificate of Title is valid
and enforceable against the whole world.
A Torrens title, once registered, cannot be defeated,
even by adverse, open and notorious possession. A
registered title under the Torrens system cannot be
defeated by prescription. The title, once registered,
is notice to the whole world. All persons must take
notice. No one can plead ignorance of the
registration. (Egao vs. CA, 1989)
Regalian Doctrine
A western legal concept that was first introduced by
the Spaniards into the country through the laws of
the Indies and the Royal Cedulas. Whereby the
Philippines passed to Spain by virtue of discovery
and conquest. Consequently, all lands became the
exclusive patrimony and dominion of the Spanish
Crown. (Agcaoli)
Enshrined in the Constitution (Art 12, Sec 2 & 3), it
states that all lands of public domain belong to the
state, thus private title to land must be traced to
some grant, express or implied, from the state, i.e.
The Spanish Crown or its successors, the American
Colonial government and thereafter the Philippine
Republic
It does not negate native title to lands held in private
ownership since time immemorial (Cruz vs. Sec. of
Environment and Natural Resources)
It recognized ownership of land by Filipinos
independent of any grant from the Spanish crown on
the basis of possession since time immemorial (cf:
Carino v Insular Government), it is presumed to have
LAND TITLES & DEEDS BAR OPERATIONS COMMISSION
been held prior the Spanish conquest and never to
have been public land.
EFFECTS
All lands of public domain belong to the state, and
that the State is the source of any asserted right to
ownership in land and charged with the conservation
of such patrimony (Republic v IAC, GR No. 71285)
Any applicant for judicial confirmation of an
imperfect title has the burden of proving, by
incontrovertible evidence, that the (a) land applied
for is alienable and disposable public land; and, (b)
the applicant, by himself or through his
predecessors-in-interest had occupied and
possessed the land, in the concept of owner, openly,
continuously, exclusively, and adversely since June
12, 1945, or earlier. (Pelbel Manufacturing Corp. v. CA,
GR No. 141325)
CONCEPT OF NATIVE TITLE, TIME IMMEMORIAL
POSSESSION
A recognized exception to the theory of jura regalia,
the ruling in Carino v Insular Government
institutionalized the recognition of the existence of
native title to land, or ownership of land by Filipinos
by virtue of possession under a claim of ownership
since time immemorial and independent of any grant
from the Spanish Crown (Agcaoli)
Lands under native title are not part of public
domain, lands possessed by an occupant and his
predecessors since time immemorial, such
possession would justify the presumption that the
land had never been part of the public domain or
that it had been private property even before the
Spanish conquest (Republic v CA, GR No. 130174)
Citizenship Doctrine
INDIVIDUALS AND CORPORATIONS
CONSTITUTIONAL REQUIREMENTS AND LIMITATIONS
Only Filipino citizens (Art. XII, Sec. 3, 1987
Constitution)
KRIVENKO DOCTRINE
The capacity to acquire private land is made
dependent upon the capacity to acquire or hold
lands of public domain. Private land may be
transferred or conveyed only to individuals or entities
qualified to acquire lands of public domain (II
Bernas)
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The 1935 Constitution reserved the right xxx for
Filipino citizens or corporations at least sixty percent
of the capital of which was owned by Filipinos.
Aliens, whether individuals or corporations, have
been disqualified from acquiring public lands; hence
they have also been disqualified from acquiring
private lands. (Krivenko v ROD, GR No. L-630: Ong
Ching Po v CA, GR. No. 113427)
Non-Filipinos cannot acquire or hold title to private
lands of public domain, except only by way of legal
succession (Halili v CA, GR No. 113539); BASIS Sec 2,
5 Art XII Constitution
Exceptions:
(a) Aliens by way of hereditary succession
(b) Natural born citizens who have lost their
citizenship- limited to 5,000 sq. m. for urban
land and 3 hectares for rural land (RA No. 7042
as amended by RA No. 8179)
Aliens, although disqualified to acquire lands of
public domain, may lease private land for a
reasonable period provided, that such lease does not
amount to a virtual transfer of ownership. They may
also be given an option to buy property on the
condition that he is granted Philippine citizenship.
(Llantino v Co liong Chong, GR No. 29663)
Private corporations may not hold alienable lands of
the public domain except by lease for a period not
exceeding twenty-five years, renewable for not more
than twenty-five years, and not to exceed one
thousand hectares in area. (1987 Constitution, Art. XII,
Sec. 3)
Private lands may be owned for as long as the
corporation is at least 60% Filipino:
(a) Provided that at the time the corporation
acquired the land, it is under private ownership.
(b) Additional Requirements: (OCEN-PAAL)
(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 provision of
existing laws.
(3) Those who have acquired ownership of private
lands or abandoned river beds by right of
Accession or accretion under the existing laws.
(4) Those who have acquired ownership of land in
any other manner provided for by Law.
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Where the land is Owned in common, all the
co-owners shall file the application jointly.
Where the land has been sold under Pacto de
retro, the vendor a retro may file an
application for the original registration of the
land, provided, however, that should the
period for redemption expire during the
pendency of the registration proceedings and
ownership to the property consolidated in the
vendee a retro, the latter shall be substituted
for the applicant and may continue the
proceedings.
A trustee on behalf of his principal may apply
for original registration of any land held in
trust by him, unless prohibited by the
instrument creating the trust. (PD 1529, Sec.
14)
A corporation sole may acquire and register private
agricultural land (RC Apostolic Administrator of
Davao v LRC GR No. L-8415): A corporation sole,
which consists of one person only, is vested with the
right to purchase and hold real estate and register
the same in trust for the faithful or members of the
religious society or church for which the corporation
was organized
Lands acquired by an American citizen prior the
proclamation of Philippine Independence on July 4,
1946 but after the passage of the 1935 Constitution
may be registered, based on the ordinance
appended to the 1935 Constitution (See: Moss v
Director of Lands, GR No. L-27170)
Land sold to an alien which is now in the hands of a
naturalized citizen can no longer be annulled (De
Castro v Tan, GR No. L-31956). The litigated property
is now in the hands of a naturalized Filipino. It is no
longer owned by a disqualified vendee. The purpose
of the prohibition ceases to be applicable. (Barsobia v
Cuenco, GR No. L-33048)
Original Registration
WHO MAY APPLY
under pd 1529
The following persons may file an application for
registration of title to land:
(1) Those who by themselves or through their
predecessors-in-interest have been in open,
UP COLLEGE OF LAW LAND TITLES & DEEDS
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 provision of
existing laws.
(3) Those who have acquired ownership of private
lands or abandoned river beds by right of
accession or accretion under the existing laws.
(4) Those who have acquired ownership of land in
any other manner provided for by law.
UNDER CA 141
Sec. 12. Any citizen of the Philippines over the age of
eighteen years, or the head of a family, who does not
own more than twenty-four hectares of land in the
Philippines or has not had the benefit of any
gratuitous allotment of more than twenty-four
hectares of land since the occupation of the
Philippines by the United States, may enter a
homestead of not exceeding twenty-four hectares of
agricultural land of the public domain.
UNDER RA 8371
Sec. 11. Recognition of Ancestral Domain Rights. The
rights of ICCs/IPs to their ancestral domains by
virtue of Native Title shall be recognized and
respected. Formal recognition, when solicited by
ICCs/IPs concerned, shall be embodied in a
Certificate of Ancestral Domain Title (CADT), which
shall recognize the title of the concerned ICCs/IPs
over the territories identified and delineated.
Sec. 12. Option to Secure Certificate of Title under
Commonwealth Act 141, as amended, or the Land
Registration Act 496. Individual members of cultural
communities, with respect to individually-owned
ancestral lands who, by themselves or through their
predecessors-in -interest, have been in continuous
possession and occupation of the same in the
concept of owner since time immemorial or for a
period of not less than thirty (30) years immediately
preceding the approval of this Act and uncontested
by the members of the same ICCs/IPs shall have the
option to secure title to their ancestral lands under
the provisions of Commonwealth Act 141, as
amended, or the Land Registration Act 496.
For this purpose, said individually-owned ancestral
lands, which are agricultural in character and
actually used for agricultural, residential, pasture,
and tree farming purposes, including those with a
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slope of eighteen percent (18%) or more, are hereby
classified as alienable and disposable agricultural
lands.
The option granted under this Section shall be
exercised within twenty (20) years from the approval
of this Act.
Sec. 51. Delineation and Recognition of Ancestral
Domains. Self-delineation shall be the guiding
principle in the identification and delineation of
ancestral domains. As such, the ICCs/IPs concerned
shall have a decisive role in all the activities pertinent
thereto. The Sworn Statement of the Elders as to the
Scope of the territories and agreements/pacts made
with neighboring ICCs/IPs, if any, will be essential to
the determination of these traditional territories. The
Government shall take the necessary steps to
identify lands which the ICCs/IPs concerned
traditionally occupy and guarantee effective
protection of their rights of ownership and
possession thereto. Measures shall be taken in
appropriate cases to safeguard the rights of the
ICCs/IPs concerned to land which may no longer be
exclusively occupied by them, but to which they have
traditionally had access for their subsistence and
traditional activities, particularly of ICCs/IPs who are
still nomadic and/or shifting cultivators.
Sec. 52. Delineation Process.- The identification and
delineation of ancestral domains shall be done in
accordance with the following procedures:
(a) Ancestral Domains Delineated Prior to this Act -
The provisions hereunder shall not apply to
ancestral domains/lands already delineated
according to DENR Administrative Order No. 2,
series of 1993, nor to ancestral lands and
domains delineated under any other
community/ancestral domain program prior to
the enactment of his law. ICCs/IPs enactment of
this law shall have the right to apply for the
issuance of a Certificate of Ancestral Domain
Title (CADT) over the area without going
through the process outlined hereunder;
(b) Petition for Delineation - The process of
delineating a specific perimeter may be initiated
by the NCIP with the consent of the ICC/IP
concerned, or through a Petition for Delineation
filed with the NCIP, by a majority of the
members of the ICCs/IPs;
(c) Delineation Paper - The official delineation of
ancestral domain boundaries including census
of all community members therein, shall be
immediately undertaken by the Ancestral
Domains Office upon filing of the application by
the ICCs/IPs concerned. Delineation will be
UP COLLEGE OF LAW LAND TITLES & DEEDS
done in coordination with the community
concerned and shall at all times include genuine
involvement and participation by the members
of the communities concerned;
(d) Proof required - Proof of Ancestral Domain
Claims shall include the testimony of elders or
community under oath, and other documents
directly or indirectly attesting to the possession
or occupation of the area since time immemorial
by such ICCs/IPs in the concept of owners which
shall be any one (1) of the following authentic
documents:
(1) Written accounts of the ICCs/IPs customs
and traditions;
(2) Written accounts of the ICCs/IPs political
structure and institution;
(3) Pictures showing long term occupation such
as those of old improvements, burial
grounds, sacred places and old villages;
(4) Historical accounts, including pacts and
agreements concerning boundaries entered
into by the ICCs/IPs concerned with other
ICCs/IPs;
(5) Survey plans and sketch maps;
(6) Anthropological data;
(7) Genealogical surveys;
(8) Pictures and descriptive histories of
traditional communal forests and hunting
grounds;
(9) Pictures and descriptive histories of
traditional landmarks such as mountains,
rivers, creeks, ridges, hills, terraces and the
like; and
(10) Write-ups of names and places derived from
the native dialect of the community.
(e) Preparation of Maps - On the basis of such
investigation and the findings of fact based
thereon, the Ancestral Domains Office of the
NCIP shall prepare a perimeter map, complete
with technical descriptions, and a description of
the natural features and landmarks embraced
therein;
(f) Report of Investigation and Other Documents - A
complete copy of the preliminary census and a
report of investigation, shall be prepared by the
Ancestral Domains Office of the NCIP;
(g) Notice and Publication - A copy of each
document, including a translation in the native
language of the ICCs/IPs concerned shall be
posted in a prominent place therein for at least
fifteen (15) days. A copy of the document shall
also be posted at the local, provincial and
regional offices of the NCIP, and shall be
published in a newspaper of general circulation
once a week for two (2) consecutive weeks to
allow other claimants to file opposition thereto
within fifteen (15) days from the date of such
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publication: Provided, That in areas where no
such newspaper exists, broadcasting in a radio
station will be a valid substitute: Provided,
further, That mere posting shall be deemed
sufficient if both newspaper and radio station
are not available;
(h) Endorsement to NCIP - Within fifteen (15) days
from publication, and of the inspection process,
the Ancestral Domains Office shall prepare a
report to the NCIP endorsing a favorable action
upon a claim that is deemed to have sufficient
proof. However, if the proof is deemed
insufficient, the Ancestral Domains Office shall
require the submission of additional evidence:
Provided, That the Ancestral Domains Office
shall reject any claim that is deemed patently
false or fraudulent after inspection and
verification: Provided, further, That in case of
rejection, the Ancestral Domains Office shall
give the applicant due notice, copy furnished all
concerned, containing the grounds for denial.
The denial shall be appealable to the NCIP:
Provided, furthermore, That in cases where there
are conflicting claims, the Ancestral Domains
Office shall cause the contending parties to
meet and assist them in coming up with a
preliminary resolution of the conflict, without
prejudice to its full adjudication according to the
selection below.
(i) Turnover of Areas Within Ancestral Domains
Managed by Other Government Agencies - The
Chairperson of the NCIP shall certify that the
area covered is an ancestral domain. The
secretaries of the Department of Agrarian
Reform, Department of Environment and
Natural Resources, Department of the Interior
and Local Government, and Department of
Justice, the Commissioner of the National
Development Corporation, and any other
government agency claiming jurisdiction over
the area shall be notified thereof. Such
notification shall terminate any legal basis for
the jurisdiction previously claimed;
(j) Issuance of CADT - ICCs/IPs whose ancestral
domains have been officially delineated and
determined by the NCIP shall be issued a CADT
in the name of the community concerned,
containing a list of all those identified in the
census; and
(k) Registration of CADTs - The NCIP shall register
issued certificates of ancestral domain titles and
certificates of ancestral lands titles before the
Register of Deeds in the place where the
property is situated.
Sec. 53. Identification, Delineation and Certification of
Ancestral Lands.
UP COLLEGE OF LAW LAND TITLES & DEEDS
(a) The allocation of lands within any ancestral
domain to individual or indigenous corporate
(family or clan) claimants shall be left to the
ICCs/IPs concerned to decide in accordance with
customs and traditions;
(b) Individual and indigenous corporate claimants of
ancestral lands which are not within ancestral
domains, may have their claims officially
established by filing applications for the
identification and delineation of their claims with
the Ancestral Domains Office. An individual or
recognized head of a family or clan may file such
application in his behalf or in behalf of his family
or clan, respectively;
(c) Proofs of such claims shall accompany the
application form which shall include the
testimony under oath of elders of the community
and other documents directly or indirectly
attesting to the possession or occupation of the
areas since time immemorial by the individual or
corporate claimants in the concept of owners
which shall be any of the authentic documents
enumerated under Sec. 52 (d) of this act,
including tax declarations and proofs of payment
of taxes;
(d) The Ancestral Domains Office may require from
each ancestral claimant the submission of such
other documents, Sworn Statements and the like,
which in its opinion, may shed light on the
veracity of the contents of the application/claim;
(e) Upon receipt of the applications for delineation
and recognition of ancestral land claims, the
Ancestral Domains Office shall cause the
publication of the application and a copy of each
document submitted including a translation in
the native language of the ICCs/IPs concerned in
a prominent place therein for at least fifteen (15)
days. A copy of the document shall also be
posted at the local, provincial, and regional
offices of the NCIP and shall be published in a
newspaper of general circulation once a week for
two (2) consecutive weeks to allow other
claimants to file opposition thereto within fifteen
(15) days from the date of such publication:
Provided, That in areas where no such newspaper
exists, broadcasting in a radio station will be a
valid substitute: Provided, further, That mere
posting shall be deemed sufficient if both
newspapers and radio station are not available.
(f) Fifteen (15) days after such publication, the
Ancestral Domains Office shall investigate and
inspect each application, and if found to be
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meritorious, shall cause a parcellary survey of the
area being claimed. The Ancestral Domains office
shall reject any claim that is deemed patently
false or fraudulent after inspection and
verification. In case of rejection, the Ancestral
Domains office shall give the applicant due
notice, copy furnished all concerned, containing
the grounds for denial. The denial shall be
appealable to the NCIP. In case of conflicting
claims among individual or indigenous corporate
claimants, the Ancestral domains Office shall
cause the contending parties to meet and assist
them in coming up with a preliminary resolution
of the conflict, without prejudice to its full
adjudication according to Sec. 62 of this Act. In
all proceedings for the identification or
delineation of the ancestral domains as herein
provided, the Director of Lands shall represent
the interest of the Republic of the Philippines;
and
(g) The Ancestral Domains Office shall prepare and
submit a report on each and every application
surveyed and delineated to the NCIP, which shall,
in turn, evaluate or corporate (family or clan)
claimant over ancestral lands.
Sec. 54. Fraudulent Claims.- The Ancestral Domains
Office may, upon written request from the ICCs/IPs,
review existing claims which have been fraudulently
acquired by any person or community. Any claim
found to be fraudulently acquired by, and issued to,
any person or community may be cancelled by the
NCIP after due notice and hearing of all parties
concerned.
Sec. 55. Communal Rights.- Subject to Section 56
hereof, areas within the ancestral domains, whether
delineated or not, shall be presumed to be
communally held: Provide, That communal rights
under this Act shall not be construed as co-
ownership as provided in Republic Act. No. 386,
otherwise known as the New Civil Code.
REGISTRATION PROCESS AND REQUIREMENTS
(1) Survey
(2) Application
(3) Initial Hearing
(4) Publication
(5) Opposition
(6) Hearing
(7) Judgment
(8) Issuance of Decree
WHAT LANDS ARE REGISTRABLE:
(a) Private Lands
UP COLLEGE OF LAW LAND TITLES & DEEDS
(b) Agricultural Lands
If in the public domain, the land must be classified as
alienable and disposable. It must be classified as such
at the time of filing the application for registration.
(Republic vs. CA and Naguit, 2005)
SURVEY
The survey may be done by a public or private
surveyor. When done by a private surveyor it has to
be approved by the Land Management Bureau. PD
239 withdrew the authority of the Land Registration
Authority to approve original survey plans.
APPLICATION
The application for land registration shall be:
(a) in writing
(b) signed and sworn to by the applicant/duly
authorized person, and if more than one
applicant, it shall be signed and sworn to by and
in behalf of each
It shall contain:
(a) a description of the land
(b) citizenship and civil status of the applicant
(c) if married, the name of the wife or husband
(d) if the marriage has been legally dissolved, when and
how
(e) full names and addresses of all occupants and
those of the adjoining owners, if known
(f) if not known, it shall state the extent of the search
made to find them. (Sec. 15, PD 1529)
Note: It must be accompanied by the original tracing
cloth plan, white or blue copies thereof, the original
and copies of the technical description and geodetic
engineers certification.
Special Cases:
(a) If the land bounded by a road, the applicant must
state in his application if he claims any portion of
the land within the limits of the road, or if he likes
to have the boundaries determined. (Sec. 20, PD
1529)
(b) If the applicant is a non-resident, he shall appoint
an agent or representative who is a Philippine
resident. (Sec. 16, PD 1529)
(c) Intestate Estate of Don Mariano San Pedro vs. CA
(1996): A person claiming ownership of real
property must clearly identify the land claimed by
him.
(d) In re: Application for Land Registration vs. Republic
(2008, Nachura): An applicant in a land
registration case must prove the facts and
circumstances evidencing the alleged ownership
of the land applied for. General statements
which are mere conclusions of law and not
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factual proof of possession are unavailing. The
deeds in its favor only proved possession of its
predecessors-in-interest as early as 1948. (The
law now stands that a mere showing of
possession for 30 years is not sufficient. OCEN
possession must be shown to have stated on June
12, 1945 or earlier.)
INITIAL HEARING
The court shall issue an order setting the date and
hour of the initial hearing within five days from filing
of the application. The initial hearing shall be 45-90
days from the date of the order. (Sec. 23, PD 1529)
PUBLICATION
The public shall be given notice of the initial hearing
of the application for land registration by means of
(1) publication; (2) mailing; and (3) posting. (PD 1529,
Sec. 23)
By publication
The Commissioner of Land Registration shall cause
it to be published: once in the Official Gazette
(sufficient to confer jurisdiction) and once in a
newspaper of general circulation in the Philippines
The notice is addressed to:
(a) all persons appearing to have an interest in the
land the adjoining owners so far as known "to all
whom it may concern"
By mailing
Within 7 days from publication in the OG, the
Commissioner of Land Registration (CLR) shall mail a
copy of the notice to:
(a) Every person named in the notice whose address
is known.
(b) the Secretary of Public Highways, to the
Provincial Governor, and to the Mayor of the
municipality or city, in which the land lies, if the
applicant requests to have the line of a public
way or road determined
(c) Secretary of Agrarian Reform, the Solicitor
General, the Director of Lands, the Director of
Mines and/or the Director of Fisheries and
Aquatic Resources, (as appropriate) 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 or the
proceedings that a tenant-farmer or the national
government may have a claim adverse to that of
the applicant
By posting
CLR shall cause the sheriff or his deputy to post the
notice at least 14 days before the hearing: in a
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conspicuous place on each parcel of land included in Forms of Judgment

the application and in a conspicuous place on the Writ of possession
bulletin board of the municipal building of the Vencilao vs. Vano, (1990): The writ may be issued not
municipality or city in which the land or portion only against the person defeated in the registration
thereof is situated. case but also against any one adversely occupying
the land during the proceedings.
The court may also cause notice to be served to such
other persons and in such manner as it may deem Bernas vs. Nuevo, (1984): The writ does not lie against
proper. a person who entered the land after the issuance of
the decree and who was not a party in the case. He
OPPOSITION can only be proceeded against in a separate action
Who may file? Any person claiming an interest, for ejectment or reinvindicatory action.
whether named in the notice or not
Writ of demolition
When to file? On or before the date of initial hearing, Gawaran vs. IAC, (1988): This writ is a complement of
or within such further time as may be allowed by the the writ of possession.
court.
ISSUANCE OF DECREE
Preparation of the Decree
What shall it contain? It shall state all the objections
(1) Court directs the Land Registration Authority to
and the interest claimed by the party the remedy
issue a decree of registration and certificate of
desired.
Title within 15 days from entry of judgment.
(a) Appeal reckoned from the Solicitor Generals
How shall it be made? It shall be signed and sworn to
receipt of the decision
by him or by some other duly authorized person.
(b) Becomes final 15 days from receipt
(2) Commissioner signs the decree
Note:
(3) Decree is entered and filed with the LRC
(a) If no one appears/files an answer, upon motion,
(4) OCT and owners duplicate certificate are sent to
the court shall order a default to be recorded.
the Register of Deeds where property is situated.
(b) By the description in the notice "To all Whom It
(5) Register of Deeds enters the information in his
May Concern", all the world are made parties
registration book.
defendant and shall be concluded by the default
(6) Register of Deeds sends notice by mail to owner
order.
that his duplicate is ready for delivery upon
(c) Where an appearance has been entered and an
payment of legal fees.
answer filed, a default order shall be entered
against persons who did not appear and answer.
Gomez vs. CA (1988): Court retains jurisdiction over
(d) Director of Lands vs. Agustin, (1921): Absence of
the case until after the expiration of 1 year from the
opposition does not justify outright registration.
issuance of the decree of registration.
HEARING
REMEDIES
Proof of ownership
GROUND FOR REOPENING AND REVIEWING THE DECREE
Municipality of Santiago vs. CA (1983): Tax
OF REGISTRATION: actual fraud
declaration and receipts are not conclusive but have
strong probative value when accompanied by proof
PERIODS:
of actual possession.
Must be reopened not later than 1 year from and
after the date of the entry of such decree.
Republic vs. Tayag (1984): Payment in one lump sum
Upon the expiration of said period of one year, the
to cover all past taxes is irregular and affects the
decree of registration and the certificate of title
validity of the applicants claim of ownership
issued shall become incontrovertible. The only
remedy left is an action for damages.
Spanish titles are no longer admissible.
PROHIBITIONS:
JUDGMENT
(a) Cannot be reopened because of absence,
Judgment becomes final upon expiration of 30 days
minority, or other disability of any person
from receipt of notice of judgment
adversely affected thereby
(b) Cannot be reopened where an innocent
purchaser for value may be prejudiced (includes

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an innocent lessee, mortgagee, or other not among the grounds for forcible entry and
encumbrancer for value.) unlawful detainer, or when possession has been lost
for more than one year and can no longer be
Arguelles vs. Timbancaya (1976): The rule on the maintained under Rule 70 of the Rules of Court.
incontrovertible nature of a certificate of title applies
when what is involved is the validity of the OCT, not The objective of the plaintiffs in accion publiciana is
when it concerns that of the TCT. to recover possession only, not ownership. The
Velascos were able to establish lawful possession of
IMPRESCRIPTIBLE the land when the Padillas occupied the property.
PD 1529, Sec 47. Registered land not subject to The OCT was issued to the original owners who then
prescriptions. No title to registered land in derogation sold the land to Artemio.
of the title of the registered owner shall be acquired
by prescription or adverse possession. From then on, he was in continuous possession of
the land until his death. It was only in 1987, when
the Padillas occupied the property. The argument
Barcelona vs. Barcelona (1956): Prescription is
that the lots are one and the same is a collateral attack
unavailing not only against the registered owner but
on the title over the property which is registered in the
also against his hereditary successors because the
name of Artemio, which cannot be countenanced.
latter merely step into the shoes of the decedent by
operation of law and are merely the continuation of
the personality of their predecessor-in-interest. Remedies of the Aggrieved Party
Motion for New 15 days from notice of judgment
NOT SUBJECT TO COLLATERAL ATTACK Trial
Grounds:
PD 1529, Sec 48. Certificate not subject to collateral
(a) Fraud, accident, mistake,
attack. A certificate of title shall not be subject to
excusable negligence
collateral attack. It cannot be altered, modified, or
(b) Newly discovered evidence
canceled except in a direct proceeding in accordance
(c) Awarded excessive
with law.
damages, or insufficiency of
evidence, or that the
Spouses Padilla vs. Velasco, et. al, G.R. No. 169956 decision is against law
(2009, Nachura) Appeal (d) 15 days from notice
Facts: Velasco et al (respondents) are the heirs of (e) appealable to the CA or to
Artemio who died, leaving a parcel of land. He the SC in the same manner
acquired it by virtue of a deed of sale in his favor. as in ordinary actions
The Padilla sps (petitioners) entered the land as Relief from (f) 60 days after petitioner
trustees by virtue of a deed of sale executed by a Judgment learns of judgment, but not
bank in favor of the Solomon sps. Velascos more than 6 months after
demanded that the Padillas vacate the property. judgment was entered
(g) Grounds: Fraud, accident,
Padillas cut trees, built a house and harvested crops. mistake, excusable
Velascos filed a complaint for accion publiciana negligence
before the RTC. Velascos presented deed of sale in Petition for Requisites: (Walstrom vs. Mapa,
favor of Artemio, while Padillas presented deed of Review 1990)
sale between bank and Solomons. (h) petitioner must have an
estate or interest in the land
The Padillas also argue that the Solomon sps (i) he must show actual fraud
acquired the land in good faith and for value and (j) petition must be filed within
that they argue that Lot 2161 (the one they are one year form the issuance
occupying) and Lot 76-pt (the lot the Solomon of the decree by LRA
spouses bought) are one and the same. (k) property has not yet passed
to an innocent purchaser for
Held: The Velascos have a better right to the land. value.
The instant case is for accion publiciana, or for Grounds:
recovery of the right to possess. (l) extrinsic fraud,
(m)void decision for want of
Accion publiciana is also used to refer to an due process
ejectment suit where the cause of dispossession is (n) lack of jurisdiction

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Calalang vs. Register of Deeds,

1992: Under the Torrens system And is barred from bringing an
of registration, the Torrens still action for recovery of the land.
becomes indefeasible and
incontrovertible one year from the The action has not prescribed. It
issuance of the final decree and is must be instituted within 6 years
generally conclusive evidence of from the time the right to bring
the ownership such action first occurred--> date
of issue of the certificate of title
Iglesia ni Cristo vs. CFI, 1983: This
applies as well to title acquired Against whom filed: against the
through homestead or free Register of Deeds and the
patents National Treasurer if FEMOM is
Action for (o) before issuance of decree, caused by court personnel,
Reconveyance or within/after 1 year from Register of Deeds, his deputy or
entry other employees of the Registry
(p) if based on implied trust, 10
years; If other than those above
(q) if based on expressed trust mentioned: the Register of
and void contract, Deeds, the National Treasurer
imprescriptible and other person or persons, as
(r) if based on fraud, 4 years co-defendants.
from the discovery Annulment of Grounds: extrinsic fraud and lack
(s) not available if the property Judgment of jurisdiction.
has already been
transferred to an innocent Galicia vs. Marquez (2007):
purchaser for value. Ordinary remedies of appeal,
Esconde vs. Barlongay, 1987: It motion for new trial etc should no
does not reopen proceedings but longer be available. If based on
a mere transfer of the land from extrinsic fraud, file 4 within years
registered owner to the rightful from discovery.
owner
Huang vs. CA,1994: It is available If based on lack of jurisdiction,
in case of fraud thereby creating a before it is barred by laches or
constructive trust between parties estoppel
Ching vs. CA, 1990: It can be Reversion Instituted by the government,
Damages availed of when reconveyance is thru Solgen in all cases where
no longer possible as when the lands of public domain are held in
land has been transferred to an violation of the Constitution or
innocent purchaser for value were fraudulently conveyed.
Action for Requisites:
Compensation A person sustains loss or damage Indefeasibility of title,
from the or is deprived by any estate or prescription, laches, and estoppel
1
Assurance Fund interest in land do not bar reversion suits.
Criminal Action Perjury, Forgery, Others involving
On account of bringing of land fraud
under the Torrens system
JUDICIAL CONFIRMATION OF IMPERFECT OR INCOMPLETE
Through (FEMOM) fraud, error, TITLES
mistake, omission, or General Rule
misdescription in the certificate of No title or right to, or equity in, any lands of the
entry in the registration book public domain may be acquired by prescription or by
Without negligence on his part adverse possession or occupancy except as expressly
provided by law. (CA 141, Sec 57) The Public Land
1
Upon registration, there shall be paid to the Register of Deeds Act recognizes the concept of ownership under the
of 1% of the assessed value of the real estate on the basis of the civil law. This ownership is based on adverse
last assessment for taxation purposes, as contribution to the possession and the right of acquisition is governed
Assurance Fund.

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by the Chapter on judicial confirmation of imperfect
or incomplete titles.
This applies only to alienable and disposable
agricultural lands of the public domain. Under Sec. 6
of CA 141, the classification of public lands into
alienable and disposable forest lands, or mineral
lands is the prerogative of the Executive Department.
Bracewell vs. CA, (2000): The rule on confirmation of
imperfect title does not apply unless and until the
land classified as, say, forest land, is released in an
official proclamation to that effect so that if may
form part of the disposable agricultural lands of the
public domain.
Period of filing
RA No. 9176 extended the period to file an
application for judicial confirmation of imperfect or
incomplete title to December 31, 2020. It further
limited the area applied for to 12 hectares.
Requisites
(a) Filipino citizen
(b) He must have, by himself, or thru his
predecessors in - interest, possessed and
occupied an alienable and disposable
agricultural portion of the public domain
(c) Such possession and occupation must have
been OCEN and in the concept of owner since
June 12, 1945
(d) Application filed with proper court
Private corporations
Where at the time the corporation acquired the land,
its predecessor-in-interest had been in possession
and occupation thereof in the manner and for the
period prescribed by law as to entitle him to
registration in his name, then the proscription
against corporation acquiring alienable lands of the
public domain does not apply for the land was no
longer public land but private property. Since the
land is private, the corporation can institute
confirmation proceedings. (Director of Lands vs. IAC
and Acme Plywood and Veneer Co., 1986)
NOTE:
(a) MAXIMUM LAND THAT CAN BE APPLIED FOR:
144 hectares
(b) In case of foreigner, it sufficient that he is already
Filipino citizen at the time of his application.
(c) Corporation which has less than 60% Filipino
ownership cannot apply confirmation of imperfect
title; can only lease
(d) PERSONS COMPETENT TO QUESTION LAND
GRANT: Persons who obtained title from State or
thru persons who obtained title from State.
LAND TITLES & DEEDS BAR OPERATIONS COMMISSION
CADASTRAL REGISTRATION
Unlike other kinds of registration, this is compulsory
as it is initiated by the government.
PD 1529, Sec 35. Cadastral Survey preparatory to filing
of petition.
(a) When in the opinion of the President of the
Philippines public interest so requires that title to
any unregistered lands be settled and
adjudicated, he may to this end direct and order
the Director of Lands to cause to be made a
cadastral survey of the lands involved and the
plans and technical description thereof prepared
in due form.
(b) Thereupon, the Director of Lands shall give notice
to persons claiming any interest in the lands as
well as to the general public, of the day on which
such survey will begin, giving as fully and
accurately as possible the description of the lands
to be surveyed. Such notice shall be punished
once in the Official Gazette, and a copy of the
notice in English or the national language shall
be posted in a conspicuous place on the bulletin
board of the municipal building of the
municipality in which the lands or any portion
thereof is situated. A copy of the notice shall also
be sent to the mayor of such municipality as well
as to the barangay captain and likewise to the
Sangguniang Panlalawigan and the
Sangguniang Bayan concerned.
(c) The Geodetic Engineers or other employees of the
Bureau of Lands in charge of the survey shall give
notice reasonably in advance of the date on which
the survey of any portion of such lands is to begin,
which notice shall be posted in the bulletin board
of the municipal building of the municipality or
barrio in which the lands are situated, and shall
mark the boundaries of the lands by monuments
set up in proper places thereon. It shall be lawful
for such Geodetic Engineers and other employees
to enter upon the lands whenever necessary for
the purposes of such survey or the placing of
monuments.
(d) It shall be the duty of every person claiming an
interest in the lands to be surveyed, or in any
parcel thereof, to communicate with the Geodetic
Engineer upon his request therefor all
information possessed by such person concerning
the boundary lines of any lands to which he
claims title or in which he claims any interest.
(e) Any person who shall willfully obstruct the
making of any survey undertaken by the Bureau of
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Lands or by a licensed Geodetic Engineer duly
authorized to conduct the survey under this Section,
or shall maliciously interfere with the placing of any
monument or remove such monument, or shall
destroy or remove any notice of survey posted on the
land pursuant to law, shall be punished by a fine of
not more than one thousand pesos or by
imprisonment for not more than one year, or both.
PD 1529, Sec 36. Petition for registration. When the
lands have been surveyed or plotted, the Director of
Lands, represented by the Solicitor General, shall
institute original registration proceedings by filing
the necessary petition in the Court of First Instance
of the place where the land is situated against the
holders, claimants, possessors, or occupants of such
lands or any part thereof, stating in substance that
public interest requires that the title to such lands be
settled and adjudicated and praying that such titles
be so settled and adjudicated:
The petition shall contain a description of the lands
and shall be accompanied by a plan thereof, and
may contain such other data as may serve to furnish
full notice to the occupants of the lands and to all
persons who may claim any right or interest therein.
Where the land consists of two or more parcels held
or occupied by different persons, the plan shall
indicate the boundaries or limits of the various
parcels as accurately as possible. The parcels shall
be known as "lots" and shall on the plan filed in the
case be given separate numbers by the Director of
Lands, which numbers shall be known as "cadastral
lot numbers".
The lots situated within each municipality shall, as
far as practicable, be numbered consecutively
beginning with number "one", and only one series of
numbers shall be used for that purpose in each
municipality. However in cities or townsites, a
designation of the landholdings by blocks and lot
numbers may be employed instead of the
designation by cadastral lot numbers.
The cadastral number of a lot shall not be changed
after final decision has been entered decreasing the
registration thereof, except by order of court. Future
subdivisions of any lot shall be designated by a letter
or letters of the alphabet added to the cadastral
number of the lot to which the respective
subdivisions pertain. The letter with which a
subdivision is designated shall be known as its
"cadastral letter": Provided, however, that the
subdivisions of cities or townsites may be designated
by blocks and lot numbers.
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STEPS IN CADASTRAL REGION PROCEEDINGS
(1) Determination of the President that public
interest requires title to unregistered lands be
settled
(2) Director of lands shall make a cadastral survey
(3) Director of Lands gives notice to interested
persons
(4) Publication of notice
(5) A copy of the notice shall also be sent to the
mayor and the sanggunian
(6) Geodetic engineers/ Bureau of Land employees
shall notify (re: survey) by posting at the
municipal building
(7) Interested persons should communicate with
the geodetic engineer if he requests for any
information about the land
(8) Actual survey/ plotting of the land
(9) Director of Lands represented by Solicitor
General shall institute original registration
proceedings
(10) Publication, mailing posting
(11) Hearing
(12) Decision
(13) Issuance of the decree and certificate of title
Note: In voluntary registration proceedings, there is
no res judicata when the applicant fails to prove his
title. In cadastral registration, if the applicant cannot
prove that he is entitled to the land, the land
becomes public land. There is res judicata.
Subsequent Registration
TWO TYPES OF DEALINGS
VOLUNTARY DEALINGS
Deeds, instruments, documents which are the results
of free and voluntary acts of parties thereto.
INVOLUNTARY DEALINGS
Writ, order, or process issued by the court of record
affecting registered land, also other instruments
which are not willful acts of the registered owner,
executed without his knowledge or consent.
NECESSITY AND EFFECTS OF REGISTRATION
PD 1529, Sec 51. Conveyance and other dealings by
registered owner. An owner of registered land may
convey, mortgage, lease, charge or otherwise deal
with the same in accordance with existing laws. He
may use such forms of deeds, mortgages, leases or
other voluntary instruments as are sufficient in law.
But no deed, mortgage, lease, or other voluntary
instrument, except a will purporting to convey or
affect registered land shall take effect as a
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conveyance or bind the land, but shall operate only

as a contract between the parties and as evidence of Voluntary Dealings Involuntary Dealings
authority to the Register of Deeds to make
registration. deed of sale and the
same is entered in the
The act of registration shall be the operative act to day book and at the
convey or affect the land insofar as third persons are same time he
concerned, and in all cases under this Decree, the surrenders or presents
registration shall be made in the office of the the owners duplicate
Register of Deeds for the province or city where the certificate of title
land lies. covering the land sold
and pays the
Note: The deed, mortgage, lease, or other voluntary registration fees.
instrument, except a will shall ONLY operate as: Villasor vs. Camon, Dir. Of Lands vs. Reyes,
(1) A contract between the parties and (1951): It is necessary to (1976): Entry in the day
(2) Evidence of authority to the Register of Deeds to register the deed or book is sufficient notice to
make registration. instrument in the entry all persons of an adverse
book and a claim without the same
(a) The act of registration shall be the operative act to memorandum thereof being annotated at the
convey or affect the land insofar as third persons shall also be made in back of the certificate of
are concerned. the owners duplicate title
(b) A forged deed is an absolute nullity and conveys certificate and its
no title. original
(c) EXCEPTION: If there is good faith, a TCT has Spouses Labayen vs. AFP Mutual Benefit
already been issued to the purchaser, the latter Leonardo Serafica, Association vs. Santiago,
being an innocent purchaser for value according (2008, Nachura): At (2008, Nachura): Entry of
to Sec. 39, PD 1529, then the title is good. the time of the filing of the attachment in the
the petition for books is sufficient notice to
PD 1529, Sec 52. Constructive notice upon registration. cancellation of all persons. Hence, the
Every conveyance, mortgage, lease, lien, attachment, encumbrance, the fact that the deed of sale
order, judgment, instrument or entry affecting lease contract already was already annotated is of
registered land shall, if registered, filed or entered in lost its efficacy. Thus, no moment with regard to
the office of the Register of Deeds for the province or there is no basis to third persons. The
city where the land to which it relates lies, be save its annotation on preference created by the
constructive notice to all persons from the time of defendants title. The levy on attachment is not
such registering, filing or entering. fact that the diminished by the
cancellation of the subsequent registration of
lease contract was the deed of sale.
Voluntary Dealings Involuntary Dealings forged is of no
moment, for there was
Sale, mortgage, lease, Attachment, injunction, no violation of a right.
patent, powers of mandamus, levy on
General Rule:
attorney, trusts execution, notice of lis
pendens (a) Campillo vs. PNB, 1969: A person dealing with
registered property need not go beyond, but only has
Presentation of the Entry in the day book is
to rely on, the title.
owners duplicate sufficient notice to all
(b) He is charged with notice only of such burdens and
certificate of title is persons
claims which are annotated on the title, for
required to notify;
registration is the operative act that binds the
mere entry insufficient
property.
An innocent purchaser Lenin vs. Bass, (1952): Entry
for value of registered thereof in the day book of
WHEN SHOULD A PURCHASER INVESTIGATE?
land becomes the the ROD is sufficient notice
(c) Banks are required to exercise more care and
registered owner the to all persons even if the
prudence in dealing with registered lands for their
moment he presents owners duplicate
business is one affected with public interest. The
and files a duly certificate of title is not
general rule does not apply.
notarized and valid presented to the ROD.

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(d) Leung Yee vs. Strong Machinery, (1918): When party
concerned has actual knowledge of facts and
circumstances that would impel a reasonably
cautious man to make inquiry.
(e) Jamoc vs. CA, (1991): When purchaser is in bad faith;
e.g. he had full knowledge of a previous sale.
(f) Quiniano vs. CA, (1971): When a person buys land from
one whose rights over the land is evidenced only by a
deed of sale and an annotation in the certificate of
title but no TCT.
VOLUNTARY DEALINGS
REGISTRATION OF VOLUNTARY INSTRUMENTS IN GENERAL
PD 1529, Sec 54. Dealings less than ownership, how
registered. No new certificate shall be entered or
issued pursuant to any instrument which does not
divest the ownership or title from the owner or from
the transferee of the registered owners.
All interests in registered land less than ownership
shall be registered by filing with the Register of
Deeds the instrument which creates or transfers or
claims such interests and by a brief memorandum
thereof made by the Register of Deeds upon the
certificate of title, and signed by him.
A similar memorandum shall also be made on the
owner's duplicate. The cancellation or
extinguishment of such interests shall be registered
in the same manner.
PD 1529, Sec 55. Grantee's name, nationality, etc., to
be stated. Every deed or other voluntary instrument
presented for registration shall contain or have
endorsed upon it the full name, nationality,
residence and postal address of the grantee or other
person acquiring or claiming an interest under such
instrument, and every deed shall also state whether
the grantee is married or unmarried, and if married,
the name in full of the husband or wife.
If the grantee is a corporation or association, the
instrument must contain a recital to show that such
corporation or association is legally qualified to
acquire private lands. Any change in the residence or
postal address of such person shall be endorsed by
the Register of Deeds on the original copy of the
corresponding certificate of title, upon receiving a
sworn statement of such change. All names and
addresses shall also be entered on all certificates.
Notices and processed issued in relation to
registered land in pursuance of this Decree may be
served upon any person in interest by mailing the
same to the addresses given, and shall be binding,
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whether such person resides within or without the
Philippines, but the court may, in its discretion,
require further or other notice to be given in any
case, if in its opinion the interest of justice so
requires.
PD 1529, Sec 56. Primary Entry Book; fees; certified
copies. Each Register of Deeds shall keep a primary
entry book in which, upon payment of the entry fee,
he shall enter, in the order of their reception, all
instruments including copies of writs and processes
filed with him relating to registered land.
He shall, as a preliminary process in registration,
note in such book the date, hour and minute of
reception of all instruments, in the order in which
they were received. They shall be regarded as
registered from the time so noted, and the
memorandum of each instrument, when made on
the certificate of title to which it refers, shall bear the
same date:
Provided, that the national government as well as
the provincial and city governments shall be exempt
from the payment of such fees in advance in order to
be entitled to entry and registration.
Every deed or other instrument, whether voluntary or
involuntary, so filed with the Register of Deeds shall
be numbered and indexed and endorsed with a
reference to the proper certificate of title. All records
and papers relative to registered land in the office of
the Register of Deeds shall be open to the public in
the same manner as court records, subject to such
reasonable regulations as the Register of Deeds,
under the direction of the Commissioner of Land
Registration, may prescribe.
All deeds and voluntary instruments shall be
presented with their respective copies and shall be
attested and sealed by the Register of Deeds,
endorsed with the file number, and copies may be
delivered to the person presenting them.
Certified copies of all instruments filed and
registered may also be obtained from the Register of
Deeds upon payment of the prescribed fees.
Process of registration
(1) File instrument creating or transferring interest
and certificate of title with Register of Deeds
together with:
(a) Owners duplicate
(b) Payment of fees & documentary stamp tax
(c) Evidence of full payment of real estate tax
(d) Document of transfer 1 copy additional for
city/provincial assessor
UP COLLEGE OF LAW
(2) Register of Deeds shall make a memorandum on
the certificate of title, signed by him
(3) TCT shall then be issued
Note:
(a) If the grantee is a corporation or association, it
must show that it is qualified to acquire private
lands.
(b) PNB vs. Fernandez (1935): The issuance of a new
transfer certificate without presentation of an
owners duplicate is unwarranted and confers no
right on the purchaser
(c) RA 456 prohibits registration of documents
affecting real property which is delinquent in the
payment of real estate taxes. Further, if evidence
of such payment is not presented with 15 days
from the date of entry of said document in the
primary entry book of the register of deeds the
entry shall be deemed cancelled.
(d) Pay fees and DST (government is exempt)
(e) The instruments are regarded as registered from
the time ROD enters them in his book.
REGISTRATION OF DEEDS OF SALE AND TRANSFERS
If entire property is subject (PD 1529, Sec 57)
(a) Owner executes and registers the deed which
must be sufficient in form.
(b) A new certificate of title is issued and Register of
Deeds prepares and delivers to grantee his
owner's duplicate certificate
(c) Register of Deeds notes upon the OCT and the
duplicate certificate the date of transfer, the
volume and page of the registration book where
the new certificate is registered
(d) The original and the owner's duplicate of the
grantor's certificate shall be stamped "canceled".
(e) The deed of conveyance shall be filed and
indorsed with the number and the place of
registration of the certificate of title of the land
conveyed.
If only a portion of property is subject (PD 1529, Sec
58)
(a) Include a plan which shows all the portions
already subdivided with verified and approved
technical description.
(b) That plan with the certified copy of the technical
descriptions shall be filed with the Register of
Deeds for annotation in the TCT.
(c) Register of Deeds shall issue a TCT and cancel
the grantor's certificate partially OR it may be
canceled totally and a new one issued describing
therein the remaining portion
LAND TITLES & DEEDS BAR OPERATIONS COMMISSION
If there are subsisting encumbrances and annotations
They shall be carried over in the new certificate or
certificates; except when they have been
simultaneously discharged.
MORTGAGES AND LEASES
PD 1529, Sec 60. Mortgage or lease of registered land.
Mortgage and leases shall be registered in the
manner provided in Section 54 of this Decree.
The owner of registered land may mortgage or lease
it by executing the deed in a form sufficient in law.
Such deed of mortgage or lease and all instruments
which assign, extend, discharge or otherwise deal
with the mortgage or lease shall be registered, and
shall take effect upon the title only from time of
registration.
No mortgagee's or lessee's duplicate certificate of
title shall hereafter be issued by the Registers of
Deeds, and those issued prior to the effectivity of this
Decree are hereby deemed canceled and the holders
thereof shall immediately surrender the same to the
Register of Deeds concerned.
PD 1529, Sec 61. Registration. Upon presentation for
registration of the deed of mortgage or lease
together with the owner's duplicate, the Register of
Deeds shall enter upon the original of the certificate
of title and also upon the owner's duplicate
certificate a memorandum thereof, the date and
time of filing and the file number assigned to the
deed, and shall sign the said memorandum.
He shall also note on the deed the date and time of
filing and a reference to the volume and page of the
registration book in which it is registered.
Mortgage and leases shall be registered in the
manner provided for in Section 54.
When a deed of mortgage or lease is presented, ROD
will enter upon the OCT and upon the owners
duplicate a memorandum thereof and shall sign.
POWERS OF ATTORNEY; TRUSTS
PD 1529, Sec 64. Power of attorney. Any person may,
by power of attorney, convey or otherwise deal with
registered land and the same shall be registered
with the Register of Deeds of the province or city
where the land lies. Any instrument revoking such
power of attorney shall be registered in like manner.
PD 1529, Sec 65. Trusts in registered land. If a deed or
other instrument is filed in order to transfer
registered land in trust, or upon any equitable
condition or limitation expressed therein, or to create
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or declare a trust or other equitable interests in such
land without transfer, the particulars of the trust,
condition, limitation or other equitable interest shall
not be entered on the certificate; but only a
memorandum thereof shall be entered by the words
"in trust", or "upon condition", or other apt words,
and by a reference by number to the instrument
authorizing or creating the same.
A similar memorandum shall be made upon the
original instrument creating or declaring the trust or
other equitable interest with a reference by number
to the certificate of title to which it relates and to the
volume and page in the registration book in which it
is registered.
PD 1529, Sec 66. Trust with power of sale, etc., how
expressed. If the instrument creating or declaring a
trust or other equitable interest contains an express
power to sell, mortgage or deal with the land in any
manner, such power shall be stated in the certificate
of title by the words "with power to sell", or "power to
mortgage", or by apt words of description in case of
other powers.
No instrument which transfers, mortgages or in any
way deals with registered land in trust shall be
registered, unless the enabling power thereto is
expressly conferred in the trust instrument, or unless
a final judgment or order of a court of competent
jurisdiction has construed the instrument in favor of
the power, in which case a certified copy of such
judgment or order may be registered.
PD 1529, Sec 68. Implied, trusts, how established.
Whoever claims an interest in registered land by
reason of any implied or constructive trust shall file
for registration with the Register of Deeds a sworn
statement thereof containing a description of the
land, the name of the registered owner and a
reference to the number of the certificate of title.
Such claim shall not affect the title of a purchaser for
value and in good faith before its registration.
(a) Powers of attorney and revocations shall be
registered with the Register of Deeds of the
province or city where the land lies.
(b) To transfer registered land in trust without
transfer, the particulars of the trust shall not be
entered on the certificate. Only a memorandum
shall be entered by the words "in trust", or "upon
condition".
(c) Power must be expressly conferred in the trust
instrument.
(d) If implied or constructive trust, person claiming
such must execute a sworn statement. But such
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claim doesnt affect the title of a purchaser for
value and in good faith before its registration.
INVOLUNTARY DEALINGS
ATTACHMENT
A writ issued at the institution or during progress of
an action commanding the sheriff to attach the
property, rights, credits or effects of the defendant to
satisfy demands of the plaintiff
Kinds
(a) Preliminary
(b) Garnishment
(c) Levy on execution
Registration of attachment/other liens
(a) Copy of writ in order to preserve any lien, right or
attachment upon registered land shall be filed
with the Register of Deeds where the land lies,
containing number of certificate of title of land to
be affected or description of land (PD 1529, Sec
69)
(b) Register of Deeds to index attachment in names
of both plaintiff & defendant or name of person
whom property is held or in whose name stands
in the records
(c) If duplicate of certificate of title is not presented:
(1) Register of Deeds shall within 36 hours send
notice to registered owner by mail stating that
there has been registration & requesting him
to produce duplicate so that memorandum be
made
(2) If owner neglects or refuses Register of
Deeds shall report matter to court.
(3) Court after notice shall enter an order to
owner to surrender certificate at time & place
to be named therein.
(d) Although notice of attachment is not noted in
duplicate, notation in book of entry of Register of
Deeds produces effect of registration already
Effect of registration of attachment
(a) Creates real right
(b) Has priority over execution sale
(c) But between 2 attachments one that is earlier
in registration is preferred
Duty of Register of Deeds
Ministerial but may refuse registration in the
following circumstances:
(1) Title to land is not in the name of defendant
(2) No evidence is submitted to show that he has
present or possible future interest in land
Exception: If petitioner is an heir
UP COLLEGE OF LAW LAND TITLES & DEEDS
EXECUTION AND TAX DELINQUENCY SALES
Execution sale
(a) To enforce a lien of any description on registered
land, any execution or affidavit to enforce such
lien shall be filed with Register of Deeds where
the land lies
(b) Register in the registration book & memorandum
upon proper certificate of title as adverse claim or
as an encumbrance
(c) To determine preferential rights between 2 liens:
priority of registration of attachment
Tax sale
(a) Sale of land for collection of delinquent taxes and
penalties due the Government
(b) In personam (all persons interested shall be
notified so that they are given opportunity to be
heard)
(c) Notice to be given to delinquent tax payer at last
known address
(d) Publication of notice must also be made in
English, Spanish & local dialect & posted in a
public & conspicuous place in place wherein
property is situated & at the main entrance of the
provincial building
(e) Sale cannot affect rights of other lien holders
unless they are given the right to defend their
rights: due process must be strictly observed
(f) Tax lien superior to attachment
(g) No need to register tax lien because it is
automatically registered once the tax accrues
(h) But sale of registered land to foreclose a tax lien
need to be registered.
PD 1529, Sec 74. Enforcement of liens on registered
land. Whenever registered land is solved on
execution, or taken or sold for taxes or for any
assessment or to enforce a lien of any character, or
for any costs and charges incident to such liens, any
execution or copy of execution, any officer's return, or
any deed, demand, certificate, or affidavit, or other
instrument made in the course of the proceedings to
enforce such liens and required by law to be
recorded, shall be filed with the Register of Deeds of
the province or city where the land lies and
registered in the registration book, and a
memorandum made upon the proper certificate of
title in each case as lien or encumbrance.
Procedure of registration of tax sale
(a) Officers return shall be submitted to Register of
Deeds together with duplicate title
(b) Register in the registration book
(c) Memorandum shall be entered in the certificate
as an adverse claim or encumbrance
(d) After the period of redemption has expired & no
redemption (2 years from registration of auction
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sale) is made: cancellation of title & issuance of a
new one
(e) Before cancellation, notice shall be sent to
registered owner: to surrender title & show cause
why it shall not be cancelled
NOTE: Actual knowledge is equivalent to registration.
NOTICE OF LIS PENDENS
PD 1529, Sec. 76. Notice of lis pendens. No action to
recover possession of real estate, or to quiet title
thereto, or to remove clouds upon the title thereof, or
for partition, or other proceedings of any kind in court
directly affecting the title to land or the use or
occupation thereof or the buildings thereon, and no
judgment, and no proceeding to vacate or reverse
any judgment, shall have any effect upon registered
land as against persons other than the parties
thereto, unless a memorandum or notice stating the
institution of such action or proceeding and the court
wherein the same is pending, as well as the date of
the institution thereof, together with a reference to
the number of the certificate of title, and an
adequate description of the land affected and the
registered owner thereof, shall have been filed and
registered.
Purpose
To keep the subject matter within the power of the
court until the entry of final judgment. It therefore
creates merely a contingency & not a lien.
Effect of registration
(a) Impossibility of alienating the property in dispute
during the pendency of the suit may be
alienated but purchaser is subject to final
outcome of pending suit
(b) Register of Deeds is duty bound to carry over
notice of lis pendens on all new titles to be issued
Cancellation of lis pendens (PD 1529, Sec. 77)
(a) Before final judgment court may order
cancellation after showing that notice is only for
the purpose of molesting an adverse party or it is
not necessary to protect the rights of the party
who caused it to be registered
(b) Register of Deeds may also cancel upon verified
petition of the party who caused such registration
(c) Deemed cancelled when certificate of clerk of
court stating manner of disposal of proceeding is
registered
Other parties who need to register
Assignee in involuntary proceeding for insolvency
(a) Duty of the officer serving notice to file a copy of
the notice to the Register of Deeds where the
property of debtor lies
UP COLLEGE OF LAW LAND TITLES & DEEDS
(b) Assignee elected or appointed by court shall be
entitled to entry of new certificate of registered
land upon presentment of copy of assignment
with bankrupts certificate of title (duplicate)
(c) New certificate shall note that it is entered to him
as assignee or trustee in insolvency proceedings
Government in eminent domain
(a) Copy of judgment shall be filed in the Register of
Deeds which states description of property,
certificate number, interest expropriated, nature
of public use
(b) Memorandum shall be made or new certificate of
title shall be issued
ADVERSE CLAIM
Sec. 70. Adverse claim. Whoever claims any part or
interest in registered land adverse to the registered
owner, arising subsequent to the date of the original
registration, may, if no other provision is made in this
Decree for registering the same, make a statement in
writing setting forth fully his alleged right or interest,
and how or under whom acquired, a reference to the
number of the certificate of title of the registered
owner, the name of the registered owner, and a
description of the land in which the right or interest
is claimed.
The statement shall be signed and sworn to, and
shall state the adverse claimant's residence, and a
place at which all notices may be served upon him.
This statement shall be entitled to registration as an
adverse claim on the certificate of title. The adverse
claim shall be effective for a period of thirty days
from the date of registration. After the lapse of said
period, the annotation of adverse claim may be
canceled upon filing of a verified petition therefor by
the party in interest: Provided, however, that after
cancellation, no second adverse claim based on the
same ground shall be registered by the same
claimant.
Before the lapse of thirty days aforesaid, any party in
interest may file a petition in the Court of First
Instance where the land is situated for the
cancellation of the adverse claim, and the court shall
grant a speedy hearing upon the question of the
validity of such adverse claim, and shall render
judgment as may be just and equitable. If the
adverse claim is adjudged to be invalid, the
registration thereof shall be ordered canceled.
If, in any case, the court, after notice and hearing,
shall find that the adverse claim thus registered was
frivolous, it may fine the claimant in an amount not
less than one thousand pesos nor more than five
thousand pesos, in its discretion. Before the lapse of
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thirty days, the claimant may withdraw his adverse
claim by filing with the Register of Deeds a sworn
petition to that effect.
When is a claim adverse?
When a person claims any part or interest in
registered land adverse to the registered owner, after
date of the original registration
Duration of an adverse claim
30 days from the date of registration. After that the
annotation of adverse claim may be cancelled upon
filing of a verified petition by the party in interest.
When cancelled, no second adverse claim based on
the same ground may be registered by the same
claimant.
Requisites
The adverse claimant must give a statement, signed
and sworn before a notary public, of the following in
writing:
(a) his alleged right or interest
(b) how and under whom such alleged right or
interest is acquired
(c) the description of the land in which the right or
interest is claimed and
(d) the number of the certificate of title
(e) his residence or the place to which all notices may
be served upon him.
NOTE: Non-compliance with the above requisites
renders the adverse claim non-registrable and
ineffective.
Non-registrable Properties
NON-REGISTRABLE LANDS
1987 Constitution, Art. XII, Sec. 2
All lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential
energy, fisheries, forests or timber, wildlife, flora and fauna,
and other natural resources are owned by the State. xxx
Civil Code, Art. 420
The following things are property of public dominion:
(1) Those intended for public use, such as roads,
canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores,
roadsteads, and others of similar character;
(2) Those which belong to the State, without being
for public use, and are intended for some public
service or for the development of the national
wealth.
UP COLLEGE OF LAW LAND TITLES & DEEDS
The following lands cannot be registered:
(a) Forest or timberlands
(b) Lands for public use: roads, ports and bridges,
etc.
(c) Lands which are owned by the State for public
service or development of national wealth
Dealings with
Unregistered Lands
PD 1529, Sec 113. Recording of instruments relating to
unregistered lands. No deed, conveyance, mortgage,
lease, or other voluntary instrument affecting land
not registered under the Torrens system shall be
valid, except as between the parties thereto, unless
such instrument shall have been recorded in the
manner herein prescribed in the office of the Register
of Deeds for the province or city where the land lies.
(a) The Register of Deeds for each province or city
shall keep a Primary Entry Book and a
Registration Book. The Primary Entry Book shall
contain, among other particulars, the entry
number, the names of the parties, the nature of
the document, the date, hour and minute it was
presented and received. The recording of the
deed and other instruments relating to
unregistered lands shall be effected by any of
annotation on the space provided therefor in the
Registration Book, after the same shall have been
entered in the Primary Entry Book.
(b) If, on the face of the instrument, it appears that it
is sufficient in law, the Register of Deeds shall
forthwith record the instrument in the manner
provided herein. In case the Register of Deeds
refuses its administration to record, said official
shall advise the party in interest in writing of the
ground or grounds for his refusal, and the latter
may appeal the matter to the Commissioner of
Land Registration in accordance with the
provisions of Section 117 of this Decree. It shall be
understood that any recording made under this
section shall be without prejudice to a third party
with a better right.
(c) After recording on the Record Book, the Register
of Deeds shall endorse among other things, upon
the original of the recorded instruments, the file
number and the date as well as the hour and
minute when the document was received for
recording as shown in the Primary Entry Book,
returning to the registrant or person in interest
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the duplicate of the instrument, with appropriate
annotation, certifying that he has recorded the
instrument after reserving one copy thereof to be
furnished the provincial or city assessor as
required by existing law.
(d) Tax sale, attachment and levy, notice of lis
pendens, adverse claim and other instruments in
the nature of involuntary dealings with respect to
unregistered lands, if made in the form sufficient
in law, shall likewise be admissible to record
under this section.
(e) For the services to be rendered by the Register of
Deeds under this section, he shall collect the
same amount of fees prescribed for similar
services for the registration of deeds or
instruments concerning registered lands.
Key points
(1) The system of registration for unregistered land is
under the Torrens system.
(2) Before: covers voluntary dealings, now includes
involuntary dealings
(3) Effect if prospective; binds 3rd persons after
registration but yields to better rights of 3rd
person prior to registration (limited effect to 3rd
parties) reason: no strict investigation involved
(4) Subsequent dealings also valid if recorded
(5) Register of deeds keeps day book & a register;
index system is also kept
Procedure
(1) Presentment of instrument dealing in
unregistered land
(2) If found in order registered
(3) If found defective registration is refused writing
his reason for refusal
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PAGE 323
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Principles of Torts
ABUSE OF RIGHT
Art. 19. 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.
Generally, the exercise of any right must be in
accordance with the purpose for which it was
established. It must not be excessive or unduly
harsh; there must be no intention to injure another.
There is abuse of right when:
(a) The right is exercised for the only purpose of
prejudicing or injuring another
(b) The objective of the act is illegitimate
(c) There is an absence of good faith
ELEMENTS:
(1) There is a legal right or duty;
(2) Which is exercised in bad faith;
(3) For the sole intent of prejudicing or injuring
another.
Velayo vs. Shell (1959): The standards in NCC 19 are
implemented by NCC 21.
Globe vs. CA (1989): When a right is exercised in a
manner which does not conform with the norms in
NCC 19, and results in damage to another, a legal
wrong is thereby committed.
University of the East vs. Jader (2000): The conscious
indifference of a person to the rights or welfare of the
others who may be affected by his act or omission
can support a claim for damages.
Nikko Hotel Manila Garden vs. Reyes (2005): Article
19, known to contain what is commonly referred to as
the principle of abuse of rights, is not a panacea for
all human hurts and social grievances. The object of
this article is to set certain standards which must be
observed not only in the exercise of ones rights but
also in the performance of ones duties.
ACTS CONTRARY TO LAW
Art. 20. Every person who, contrary to law, willfully or
negligently causes damage to another, shall
indemnify the latter for the same.
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The provision is intended to provide a remedy in
cases where the law declares an act illegal but fails
to provide for a relief to the party injured. (Jarencio)
NCC 20 does not distinguish, and the act may be
done wilfully or negligently.
REQUISITES
(1) The act must be wilful or negligent;
(2) It must be contrary to law;
(3) Damages must be suffered by the injured party.
ACTS CONTRARY TO MORALS
Art. 21. Any person who wilfully causes loss or injury
to another in a manner that is contrary to morals,
good customs or public policy shall compensate the
latter for the damage.
This article is designed to fill in the countless gaps
in the statutes which would otherwise leave victims
of moral wrongs helpless.
ELEMENTS:
(1) Legal action;
(2) Contrary to morals, public policy, good customs;
(3) Intent to injure.
EXAMPLES:
BREACH OF PROMISE TO MARRY, SEDUCTION AND SEXUAL
ASSAULT
Wassmer vs. Velez (1964): Mere breach of promise to
marry is not an actionable wrong. But to formally set
a wedding and go through all the above-described
preparation and publicity, only to walk out of it when
the matrimony is about to be solemnized, is quite
different. This is palpably and unjustifiably contrary
to good customs xxx.
Baksh vs. CA (1993): Where a man's promise to marry
is in fact the proximate cause of the acceptance of
his love by a woman and his representation to fulfill
that promise thereafter becomes the proximate
cause of the giving of herself unto him in a sexual
congress, proof that he had, in reality, no intention of
marrying her and that the promise was only a subtle
scheme or deceptive device to entice or inveigle her
to accept him and to obtain her consent to the
sexual act, could justify the award of damages
pursuant to Article 21 not because of such promise to
marry but because of the fraud and deceit behind it
and the willful injury to her honor and reputation. It
is essential, however, that such injury should have
been committed in a manner contrary to morals,
good customs or public policy.
UP COLLEGE OF LAW TORTS & DAMAGES
Tanjanco v. CA (1966): However, when for one whole
year, the plaintiff, a woman of legal age, maintained
sexual relations with the defendant, with repeated
acts of intercourse, there is here voluntariness. No
case under Article 21 is made.
MALICIOUS PROSECUTION
Malicious prosecution is the institution of any action
or proceeding, either civil or criminal, maliciously and
without probable cause.
ELEMENTS:
(1) The fact of the prosecution and that the
defendant was himself the prosecutor, and that
the action was finally terminated with an
acquittal
(2) The prosecutor acted without probable cause
(3) The prosecutor was impelled by legal malice.
Que vs. IAC (1989): To constitute malicious
prosecution, there must be proof that the
prosecution was prompted by a sinister design to vex
and humiliate a person and that it was initiated
deliberately by the defendant knowing that his
charges were false and groundless. Concededly, the
mere act of submitting a case to the authorities for
prosecution does not make one liable for malicious
prosecution.
PUBLIC HUMILIATION
Grand Union vs. Espino: It is against morals, good
customs and public policy to humiliate, embarrass
and degrade the dignity of a person. Everyone must
respect the dignity, personality, privacy and peace of
mind of his neighbors and other persons (Article 26,
Civil Code).
UNJUSTIFIED DISMISSAL
The right of an employer to dismiss an employee is
not to be confused with the manner in which this
right is to be exercised.
When the manner in which the company exercised its
right to dismiss was abusive, oppressive and
malicious, it is liable for damages.
UNJUST ENRICHMENT
Art. 22. Every person who through an act of
performance by another, or any other means,
acquires or comes into possession of something at
the expense of the latter without just or legal
ground, shall return the same to him.
Art. 23. Even when an act or event causing damage
to anothers property was not due to the fault or
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negligence of the defendant, the latter shall be liable
for indemnity if through the act or event he was
benefited.
Art. 2142. Certain lawful, voluntary and unilateral
acts give rise to the juridical relation of quasi-
contract to the end that no one shall be unjustly
enriched or benefited at the expense of another.
Art. 2143. The provisions for quasi contracts in this
Chapter do not exclude other quasi-contracts which
may come within the purview of the preceding
article.
One person should not be permitted to unjustly
enrich himself at the expense of another, but should
be required to make restitution of, or for property or
benefits received, retained, or appropriated where it
is just and equitable that such restitution be made,
and where much action involves no violation or
frustration of law or opposition to public policy,
either directly or indirectly.
While neither Art. 22 nor Art. 23 expressly provides
for the effects of unjust enrichment, the Chapter on
Quasi-Contracts (Articles 2159-2163), which
complements or supplements and should be so
considered in appropriate cases, does.
Enrichment at the expense of another is not per se
forbidden. It is such enrichment without just or legal
cause that is contemplated here.
Just and legal cause is always presumed, and the
plaintiff has the burden of proving its absence.
The restitution must cover the loss suffered by the
plaintiff but it can never exceed the amount of unjust
enrichment of the defendant if it is less than the loss
of the plaintiff.
Requisites:
(1) That the defendant has been enriched;
(2) That the plaintiff has suffered a loss;
(3) That the enrichment of the defendant is without
just or legal ground; and
(4) That the plaintiff has no other action based on
contract, crime or quasi-delict
LIABILITY WITHOUT FAULT
Art. 23. Even when an act or event causing damage
to anothers party was not due to the fault or
negligence of the defendant, the latter shall be liable
for indemnity if through the act or event he was
benefited.
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BASIS OF LIABILITY
Equity. An involuntary act, because of its character,
cannot generally create an obligation; but when by
such act its author has been enriched, it is only just
that he should indemnify for the damages caused to
the extent of this enrichment.
SCOPE OF LIABILITY
The indemnity does not include unrealized profits of
the injured party, because the defendants
enrichment is the limit of his liability.
Classification of Torts
ACCORDING TO MANNER OF COMMISSION
(1) Negligent Tort consists in the failure to act
according to the standard of diligence required
under the attendant circumstances. It is a
voluntary act or omission which results in injury to
others, without intending to cause the same.
(2) Intentional Tort perpetrated by one who intends
to do that which the law has declared to be
wrong. It is conduct where the actor desires to
cause the consequences of the act, or that he
believes that the consequences are substantially
certain to result therefrom.
Note: Article 2176 where it refers to fault or
negligence covers not only acts not punishable by
law but also acts criminal in character, whether
intentional and voluntary or negligent. (Elcano vs Hill
(1977))
(3) Strict Liability one is liable independent of fault
or negligence. It only requires proof of a certain
set of facts. Liability here is based on the breach
of an absolute duty to make something safe. It
most often applies to ultra-hazardous activities or
in product liability cases. It is also known as
absolute liability or liability without fault.
Strict liability is imposed by articles 1314, 1711, 1712,
1723, 2183, 2187, 2189, 2190, 2191, 2192, 2193.
ACCORDING TO SCOPE
GENERAL
Tort liability is based on any of the three categories:
intentional, negligent, strict liability
SPECIFIC
Includes trespass, assault, battery, negligence,
products liability, and intentional infliction of
emotional distress
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The Tortfeasor
Worcester vs. Ocampo (1958): Tortfeasor refers to all
persons who command, instigate, promote,
encourage, advise, countenance, cooperate in, aid or
abet the commission of a tort, or who approve of it
after it is done, if done for their benefit.
THE DIRECT TORTFEASOR
Art. 2176. Whoever by act or omission causes damage
to another, there being fault or negligence, is obliged
to pay for the damage done.
The tortfeasor may be a natural or juridical person.
PERSONS MADE LIABLE FOR OTHERS
Art. 2180 (1). The obligation imposed by Article 2176
is demandable not only for ones own acts or
omissions, but also for those of persons for whom
one is responsible.
PRINCIPLE OF VICARIOUS LIABILITY; DEFINITION
A person who has not committed the act or omission
which caused damage or injury to another may
nevertheless be held civilly liable to the latter either
directly or subsidiarily under certain circumstances.
This is also known as the doctrine of imputed
negligence.
Art. 2180, par. 8. The responsibility treated of in this
article shall cease when the persons herein
mentioned prove that they observed all the diligence
of a good father of a family to prevent damage.
General Rule: proper defense is the exercise of the
diligence of a good father of a family (bonus
paterfamilias)
Exception: common carriers, and all others subject to
extraordinary diligence.
BASIS OF VICARIOUS LIABILITY
The basis of vicarious liability is NOT respondeat
superior; rather, it is the principle of pater familias.
Respondeat Under American jurisprudence, it
superior means that the negligence of the
servant is conclusively the negligence
of the master.
Bonus pater Under the principle of pater familias,
familias the basis of the masters liability is
the negligence in the supervision of his
subordinates. The master will be
UP COLLEGE OF LAW TORTS & DAMAGES
freed from liability if he can prove that
he had observed all the diligence of a
good father of the family to prevent the
damage.
LIABILITY OF THE ACTUAL TORTFEASOR
The author of the act is not exempted from personal
liability. He may be sued alone or with the person
responsible for him.
2 REQUISITES ACCORDING TO CHIRONI
(1) The duty of supervision
(2) The possibility of making such supervision
effective
PRESUMPTION OF NEGLIGENCE ON PERSONS INDIRECTLY
RESPONSIBLE
Liability arises by virtue of a presumption juris
tantum of negligence on the part of the persons made
responsible under the article, derived from their failure
to exercise due care and vigilance over the acts of the
subordinates to prevent them from causing damage.
The non-performance of certain duties of precaution
and prudence imposed upon the persons who
become responsible by civil bond uniting the actor to
them.
Tamargo v. CA (1992): The basis of this vicarious,
although primary, liability is, as in Article 2176, fault
or negligence, which is presumed from that which
accompanied the causative act or omission. The
presumption is merely prima facie and may therefore
be rebutted.
NATURE OF LIABILITY
The liability of the vicarious obligor is PRIMARY and
DIRECT (solidarily liable with the tortfesor), not
subsidiary. His responsibility is not conditioned upon
the insolvency of or prior recourse against the
negligent tortfeasor.
PERSONS VICARIOUSLY LIABLE (ART. 2180)
WHO ARE LIABLE FOR MINORS?
(a) Parents (the father, and in case of his death or
incapacity, the mother)
(b) Adopters
(c) Court-appointed guardians
(d) Substitute Parental Authorities
(1) Grandparents
(2) Oldest qualified sibling over 21 years old
(3) Childs actual custodian, provided he is
qualified and over 21 years old.
(e) Special Parental Authorities
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(1) School
(2) Administrators
(3) Teachers
(4) Individual, entity, or institution engaged in
child care
PARENTS AND ADOPTERS
BASIS OF LIABILITY
It is based on the presumption of failure on their part
to properly exercise their parental authority for the
good education of their children and exert adequate
vigilance over them.
It is imposed only when children are living with the
parents.
If there is just cause for separation, the responsibility
ceases.
Note: The responsibility of the father and mother is
not simultaneous but alternate.
WHEN RESPONSIBILITY CEASES
When parent is not in the position to exercise
authority and supervision over the child
MEANING OF MINORITY
Par. 2 and 3 of Art. 2180 speak of minors. Minors
here refer to those who are below 21 years of age,
NOT below 18 years. The law reducing the majority
age from 21 to 18 years old did not amend these
pars.
Art. 236, par. 3 of the FC, as amended by RA 6809,
provides:
Nothing in this Code shall be construed to
derogate from the duty or responsibility of
parents and guardians for children and wards
below 21 years of age mentioned in the second
and third paragraphs of 2180 of the Civil Code.
ADOPTED CHILDREN
Judicially adopted children are considered legitimate
children of their adopting parents. Thus, adopters
are civilly liable for their tortious/ criminal acts if the
children live with them and are below 21 years of
age.
ILLEGITIMATE CHILDREN
Responsibility is with the mother whom the law vests
parental authority.
REASON FOR VICARIOUS LIABILITY
Exconde vs. Capuno (1957): The civil liability which the law
imposes upon the father and, in case of his death or
incapacity, the mother, for any damages that may be
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caused by the minor children who live with them, is PARENTAL AUTHORITY OVER FOUNDLINGS, ABANDONED,
obvious. This is a necessary consequence of the NEGLECTED OR ABUSED AND OTHER SIMILARLY SITUATED
parental authority they exercise over them which CHILDREN
imposes upon the parents the 'duty of supporting In case of foundlings, abandoned, neglected or
them, keeping them in their company, educating abused children and other children similarly
them in proportion to their means', while, on the situated, parental authority shall be entrusted in
other hand, gives them the 'right to correct and summary judicial proceedings to heads of children's
punish them in moderation.' homes, orphanages and similar institutions duly
accredited by the proper government agency. (FC
Tamargo vs. CA (1992): The basis of parental Art. 217)
authority for the torts of a minor child is the
GUARDIANS
relationship existing between the parents and the
LIABILITY OF GUARDIANS
minor child living with them and over whom, the law
Guardians are liable for damages caused by the
presumes, the parents exercise supervision and
minors or incapacitated persons who are under their
control. To hold that parental authority had been
authority and live in their company. [Art. 2180, par. 3]
retroactively lodged in the adoptive parents so as to
(a) The liability of guardians with respect to their
burden them with the liability for a tortious act that
wards is governed by the same rule as in the
they could not have foreseen and prevented would
liability of parents with respect to their children
be unfair.
below 21 years and who live with them
(b) Incompetent includes
Parental liability is, in other words, anchored upon
(1) those suffering the penalty of civil interdiction,
parental authority coupled with presumed parental
or
dereliction in the discharge of the duties
(2) prodigals,
accompanying such authority. The parental
(3) deaf and dumb who are unable to read and
dereliction is, of course, only presumed and the
write
presumption can be overturned under Article 2180 of
(4) unsound mind, even though they have lucid
the Civil Code by proof that the parents had
intervals
exercised all the diligence of a good father of a
(5) being of sound mind, but by reason of age,
family to prevent the damage
disease, weak mind, and other similar causes,
cannot take care of themselves or manage
(NOTE: Art 2180, par 2 of the Civil Code which holds
their property [Rule 92, ROC]
the father liable for damages has been modified by
the Family Code and PD 603. Art. 211 of the FC
Liability of minor or insane tortfeasor without a parent
declares joint parental authority of the mother and
or guardian
father over common children. The parent(s)
He shall be answerable with his own property in an
exercising parental authority are liable for the torts
action against him where a guardian ad litem shall
of their children.
be appointed. [Art. 2182]

Libi vs. IAC (1992): The parent's liability under 2180 SCHOOL, TEACHERS AND ADMINISTRATORS
should be primary and not subsidiary. If it were Teachers or heads of establishments of arts and
subsidiary, the parents cannot invoke due diligence trades shall be liable for damages caused by their
as a defense. Such interpretation reconciles 2180 pupils and students or apprentices, so long as they
with 2194 which calls for solidary liability of joint remain in their custody. [Art. 2180, par. 7]
tortfeasors.
Requisite for
REQUISITES FOR LIABILITY TO ATTACH Who are liable For whose Acts Liability to
(1) The child is below 21 years old Attach
(2) The child is under the parental authority of the Teacher-in- Pupils and Pupils and
parents charge (the students students
The child is living in the company of the parents one remain in
designated to teachers
exercise custody
supervision regardless of
over students) the age
Head of Apprentices Custody
establishment regardless of

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Requisite for conducted. Recess by its nature does not include

Who are liable For whose Acts Liability to dismissal.
Attach
of arts and the age Mere fact of being enrolled or being in the premises
trades of a school without more does not constitute
School If the tortfeasor is a Must be attending school or being in the protective and
(generally not student of the below 18 supervisory custody of the school, as concemplated
held liable) school (Art 218 FC) by law.
If the tortfeasor is a
teacher/ employee Ylarde vs. Aquino (1988): The principal of the school
of the school, it is cannot be held liable for the reason that the school
liable as employer he leads is an academic school and not a school of
under 2180 (5) of arts and trades.
CC (St. Francis vs.
CA) OWNERS AND MANAGERS OF
If the tortfeasor is a ESTABLISHMENTS AND ENTERPRISES
stranger, it is liable The owners and managers of an establishment or
for breach of enterprise are likewise responsible for damages
contract. (PSBA vs. caused by their employees in the service of the
CA) branches in which the latter are employed or on the
occasion of their functions. (Art. 2180, par. 4)
Parental Authority of Special Parental Authorities
may only be exercised while under their supervision, For whose Requisites for
instruction, or custody. This attaches to all Who are liable
acts liability to attach
authorized activities, whether inside or outside the Owners and Their The damage was
school, entity, or institution. managers of an employees caused in the
establishment service of the
Palisoc v. Brillantes: Custody means the protective or enterprise branches in which
and supervisory custody that the school, its head and the employees are
teachers exercise over the pupils, for as long as they employed
are in attendance in school, which includes recess -OR-
time. The damage was
caused on the
There is nothing in the law that requires that for such occasion of their
liability to attach, the pupil or student who commits functions
the tortious act must live and board in the school, as
erroneously held by the lower court, and in the dicta Philippine Rabbit vs. Philam Forwarders (1975):
in Mercado (as well as in Exconde) on which it relied, Owners and managers of an establishment or
must now be deemed to have been set aside by this enterprise does not include a manager of a
decision. corporation. (Spanish term directores connotes
employer. But manager of a corporation is not an
Amadora v. CA: As long as it is shown that the employer, but rather merely an employee of the
student is in the school premises pursuant to a owner.)
legitimate student objective, in the exercise of a
legitimate right, or the enjoyment of a legitimate EMPLOYERS (in general)
student privilege, the responsibility of the school Employers shall be liable for the damages caused by
authorities over the student continues. their employees and household helpers acting within
the scope of their assigned tasks, even though the
former are not engaged in any business or industry.
Salvosa v. IAC (1988): A student not at attendance in (Art 2180, par. 5)
the school cannot be in recess thereat. A recess,
as the concept is embraced in the phrase at MEANING OF EMPLOYER:
attendance in the school, contemplates a situation Art. 97 (b) (Labor Code). "Employer" includes any
of temporary adjournment of school activities where person acting directly or indirectly in the interest of
the student still remains within call of his mentor an employer in relation to an employee and shall
and is not permitted to leave the school premises, or include the government and all its branches,
the area within which the school activity is

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subdivisions and instrumentalities, all government-
owned or controlled corporations and institutions, as
well as non-profit private institutions, or
organizations.
Professional Services vs. CA and Agana (2010): This
Court still employs the "control test" to determine
the existence of an employer-employee relationship
between hospital and doctor. Under the "control
test", an employment relationship exists between a
physician and a hospital if the hospital controls both
the means and the details of the process by which
the physician is to accomplish his task.
INDEPENDENT CONTRACTOR
General Rule: Master not generally liable for the fault
or negligence of an independent contractor
performing some work for him
Exception: One who hires an independent contractor,
but controls the latters work is also responsible for
the independent contractors negligence.
The existence of the employer-employee relationship
must first be established before an employer may be
made vicariously liable under Art. 2180, CC.
REQUISITES:
(1) Employee chosen by employer or through
another
(2) Services rendered in accordance with orders
which employer has authority to give
(3) Illicit act of employee was on the occasion or by
reason of the functions entrusted to him
(4) Presumption of negligence
To make the employer liable, it must be established
that the injurious or tortious act was committed at
the time that the employee was performing his
functions.
Filamer vs. IAC (1992): Within the scope of their
assigned task in Art. 2180 includes any act done by
an employee in furtherance of the interests, or for the
account of the employer at the time of the infliction
of the injury or damage.
De Leon Brokerage vs. CA (1962): Employer need not
be riding in the vehicle to become liable for a drivers
negligence. Article 2184 mandating that the owner is
only held solidarily liable if he is riding in the vehicle
at the time of the mishap, only applies to those
owners of vehicles, who do not come within the
ambit of Article 2180 (as owners of an establishment
or enterprise.)
TORTS & DAMAGES BAR OPERATIONS COMMISSION
Basis of liability
Employers negligence in
(1) The selection of their employees (culpa in
eligiendo)
(2) The supervision over their employees (culpa in
vigilando)
Cuison vs. Norton & Harrison (1930): Basis for civil
liability of employers is pater familias.
Presumption of Negligence
The presentation of proof of the negligence of its
employee gives rise to the presumption that the
defendant employer did not exercise the diligence of
a good father of a family in the selection and
supervision of its employees.
Ramos vs. C.O.L. Realty Corp. (2009): For the
employer to avoid the solidary liability for a tort
committed by his employee, an employer must rebut
the presumption by presenting adequate and
convincing proof that in the selection and supervision
of his employee, he or she exercised the care and
diligence of a good father of a family. Employers
must submit concrete proof, including documentary
evidence, that they complied with everything that
was incumbent on them.
Necessity of presumption of negligence
It is difficult for any person injured to prove the
employers negligence as they would be proving
negative facts.
EMPLOYER NEED NOT BE ENGAGED IN BUSINESS OR
INDUSTRY
Castilex Industrial Corp. vs. Vasquez (1999): The
phrase "even though the former are not engaged in
any business or industry" found in the fifth
paragraph should be interpreted to mean that it is
not necessary for the employer to be engaged in any
business or industry to be liable for the negligence of
his employee who is acting within the scope of his
assigned task.
A distinction must be made between the two
provisions to determine what is applicable. Both
provisions apply to employers: the fourth paragraph,
to owners and managers of an establishment or
enterprise; and the fifth paragraph, to employers in
general, whether or not engaged in any business or
industry. The fourth paragraph covers negligent acts
of employees committed either in the service of the
branches or on the occasion of their functions, while
the fifth paragraph encompasses negligent acts of
employees acting within the scope of their assigned
task. The latter is an expansion of the former in both
employer coverage and acts included. Negligent acts
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of employees, whether or not the employer is
engaged in a business or industry, are covered so
long as they were acting within the scope of their
assigned task, even though committed neither in the
service of the branches nor on the occasion of their
functions. For, admittedly, employees oftentimes
wear different hats. They perform functions which
are beyond their office, title or designation but which,
nevertheless, are still within the call of duty.
Under the fifth paragraph of Article 2180, whether or
not engaged in any business or industry, an
employer is liable for the torts committed by
employees within the scope of his assigned tasks.
But it is necessary to establish the employer-
employee relationship; once this is done, the plaintiff
must show, to hold the employer liable, that the
employee was acting within the scope of his
assigned task when the tort complained of was
committed. It is only then that the employer may find
it necessary to interpose the defense of due diligence
in the selection and supervision of the employee.
th th
Distinction between 4 and 5 paragraph of 2180
4th paragraph 5th paragraph
Liable persons Owners and Employers in
managers of an general,
establishment or an whether or not
enterprise engaged in
business or
industry
Covered acts Negligent acts of Negligent acts
employees of employees
committed either in acting within
the service of the the scope of
branches or on the their assigned
occasion of their task
functions
DEFENSE OF DILIGENCE IN SELECTION AND SUPERVISION
Metro Manila Transit vs. CA (1993): Due diligence in
the SUPERVISION of employees includes the
formulation of suitable rules and regulations for the
guidance of employees and the issuance of proper
instructions intended for the protection of the public
and persons with whom the employer has relations
through his or her employees and the imposition of
necessary disciplinary measures upon employees in
case of breach or as may be warranted to ensure
performance of acts as indispensable to the business
of and beneficial to their employee.
Due diligence in the SELECTION of employees
require that the employer carefully examined the
applicant for employment as to his qualifications, his
experience and record of service.
Metro Manila Transit vs. CA (1998): The responsibility
of employers for the negligence of their employees in
the performance of their duties is primary, that is, the
injured party may recover from the employers
directly, regardless of the solvency of their
employees. The rationale for the rule on vicarious
liability of the employer for the torts of the
employees is that this is a required cost of doing
business. They are placed upon the employer
because, having engaged in the enterprise, which
will on the basis of all past experience involve harm
to others through the tort of employees, and sought
to profit by it, it is just that he, rather than the
innocent plaintiff, should bear them; and because he
is better able to absorb them, through prices, rates
or liability or insurance, and so to shift them to
society, to the community at large.
Nature of Employers Liability
The employer is PRIMARILY and SOLIDARILY liable
for the tortious act of the employee. The employer
may recover from the employee, the amount it will
have to pay the offended partys claim.
Such recovery, however, is NOT for the entire
amount. To allow such would be as if to say that the
employer was not negligent.
Philtranco vs. CA (1997): The liability of the registered
owner and driver is solidary, primary and direct.
Criminal Negligence
Fernando v. Franco: The vicarious liability of the
employer for criminal negligence of his employee is
governed by RPC 103. Conviction of the employee
conclusively binds the employer. Defense of due
diligence in the selection and supervision of the
employee is NOT available. The employer cannot
appeal the conviction.
Soliman v. Tuazon (1992): Liability for illegal or
harmful acts committed by security guards attaches
to the employer agency, not to the clients or
customers of such agency.
Registered Owner Rule
(1) The registered owner of the vehicle is primarily
responsible to the public for whatever damage or
injury the vehicle may have caused, even if he had
already sold the same to someone else. The
policy is the easy identification of the owner who
can be held responsible so as not to

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inconvenience or prejudice the third party injured.
(Cadiente v. Macas, 2008)
(2) This rule applies even if the vehicle is leased to
third persons.
Remedy of the registered owner
His liability is subject to his right of recourse against
the transferee or buyer.
THE STATE
The State may not be sued without its consent. (Sec
3, Art XVI, 1987 Constitution)
The State is responsible in like manner when it acts
through a special agent; but not when the damage
has been caused by the official to whom the task
done properly pertains, in which case what is
provided in Article 2176 shall be applicable. (Art
2180, par. 6)
Merritt vs. Government of the Philippine Islands (1960):
A special agent is one who receives a definite and
fixed order or commission, foreign to the exercise of
the duties of his office if he is a special official.
This concept does not apply to any executive agent
who is an employee of the active administration and
who on his own responsibility performs the functions
which are inherent in and naturally pertain to his
office.
The responsibility of the state is limited to that which
it contracts through a special agent, duly
empowered by a definite order or commission to
perform some act or charged with some definite
purpose which gives rise to the claim.
General Rule: The State cannot be sued.
Exceptions:
(1) There is express legislative consent
(2) The State filed the case (because here, it is
deemed to have waived its immunity.)
INSTANCES WHERE THE STATE GIVES ITS CONSENT TO BE
SUED
(1) Art. 2180 (6) is an example of an express
legislative consent. Here, the State assumes a
limited liability for the acts of its special agents.
(2) Art. 2189 provides for state liability for damages
caused by defective condition of public works.
(3) Local Government Code provides for the liability
of local government units for wrongful exercise of
its proprietary (as opposed to its governmental)
functions. The latter is the same as that of a
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private corporation or individual. (Mendoza vs. De
Leon, 1916)
The State agencies or subdivisions, in the pursuance
of proprietary functions, are akin to any other private
corporation. They may be sued for:
(1) Torts committed by them (Art. 2176) or
(2) Torts committed by their employees (art 2180).
As long as it is performing proprietary functions, it
can be held liable for the acts of its employees, both
regular and special.
Notes:
(a) As a governmental entity: Liable only for acts of
its special agents
(b) As a corporate entity: May be held liable just as
any other employer for the acts of its employees
(c) Special Agent: One duly empowered by a definite
order or commission to perform some act or one
charged with some definite purpose which give
rise to the claim; if he is a government employee
or official, he must be acting under a definite and
fixed order or commission, foreign to the exercise
of the duties of his office
JOINT TORTFEASORS
The responsibility of two or more persons who are
liable for quasi-delict is solidary. (Art. 2194)
DEFINITION OF JOINT TORTFEASORS
Filipinas Broadcasting Network vs. AMEC-BCCM
(2005): They are all persons who command,
instigate, promote, encourage, advise, countenance,
cooperate in, aid or abet in the commission of a tort,
or who approve of it after it is done, if done for their
benefit.
APPLICABILITY OF THE PROVISION
The provision applies when there are 2 or more
persons who have participated in the commission of
a single quasi-delict.
The injury must be indivisible.
NATURE OF LIABILITY
Solidary The person injured may sue all of them, or
any number less than all, and they are all together
solidarily liable for the whole damage.
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Acts of Omission and its
Modalities
Human conduct can be described alternatively as
acts or omission. In relation to the existence of a
legal duty, conduct may be described in terms of
action or inaction, or misfeasance or
nonfeasance.
Manresa; liability for personal acts or omission is
founded on that indisputable principle of justice
recognized by all legislators that when a person by
his act or omission causes damage or prejudice to
another, a juridical relation is created by virtue of
which the injured person acquires a right to be
indemnified and the person causing the damage is
charged with the corresponding duty of repairing the
damage. The reason for this is found in the obvious
truth that man should subordinate his acts to the
precepts of prudence and if he fails to observe them
and cause damage to another, he must repair the
damage.
Proximate Cause
CONCEPT OF PROXIMATE CAUSE
In order that civil liability for negligence may arise,
there must be a direct causal connection between
the damage suffered by the plaintiff and the act or
omission of the defendant. In other words, the act or
omission of the defendant must be the proximate
cause of the loss or damage of the plaintiff.
DEFINITION
Bataclan v. Medina:
PROXIMATE CAUSE: that cause, which, in natural and
continuous sequence, unbroken by any efficient
intervening cause, produces the injury, and without
which the result would not have occurred.
PROXIMATE LEGAL CAUSE: that acting first and
producing the injury, either immediately or by setting
other events in motion, all constituting a natural and
continuous chain of events, each having a close
causal connection with its immediate predecessor,
the final event in the chain immediately effecting the
injury as a natural and probable result of the cause
which first acted, under such circumstances that the
person responsible for the first event should, as an
ordinary prudent and intelligent person, have
reasonable ground to expect at the moment of his
act or default that an injury to some person might
probably result therefrom
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Quezon City vs. Dacara (2005): Proximate cause is
determined from the facts of each case, upon a
combined consideration of logic, common sense,
policy or precedent.
DIFFERENTIATED FROM:
REMOTE CAUSE
Manila Electric v. Remonquillo: A prior and remote
cause cannot be made the basis of an action if such
remote cause did nothing more than furnish the
condition or give rise to the occasion by which the
injury was made possible, if there intervened
between such prior or remote cause and the injury a
distinct, successive, unrelated, and efficient cause of
the injury, even though such injury would not have
happened but for such condition or occasion.
Concurrent Cause Several causes producing the
injury, and each is an efficient cause without which
the injury would not have happened. The injury is
attributed to any or all the causes, and recovery may
be had against any or all of those responsible.
Far Eastern Shipping v. CA: Where the concurrent or
successive negligent acts or omissions of two or
more persons, although acting independently, are in
combination the direct and proximate cause of a
single injury to a third person, it is impossible to
determine in what proportion each contributed to
the injury and either of them is responsible for the
whole injury. Where their concurring negligence
resulted in injury or damage to a third party, they
become joint tortfeasors and are solidarily liable for
the resulting damage.
INTERVENING CAUSE
Phoenix Construction v. IAC: If the intervening cause
is one which in ordinary human experience is
reasonably to be anticipated, or one which the
defendant has reason to anticipate under the
particular circumstances. The defendant may be
negligent, among other reasons, because of failure
to guard against it.
There is an intervening cause combining with the
defendants conduct to produce the result, and the
defendants negligence consists in failure to protect
the plaintiff against that very risk.
Foreseeable intervening forces are within the scope
of the original risk, and hence of the defendants
negligence.
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EFFICIENT INTERVENING CAUSE
Teague vs. Fernandez (1973): The test is not in the
number of intervening causes, but in their character
and in the natural and probable connection between
the wrong done and the injurious consequence.
TESTS TO DETERMINE PROXIMATE CAUSE
CAUSE IN FACT: The first step is to determine whether
the defendants conduct, in point of fact, was a factor
in causing plaintiffs damage.
EFFECTIVENESS OF THE CAUSE; BUT FOR RULE: whether
such negligent conduct is a cause without which the
injury would not have taken place (sine qua non rule)
or is the efficient cause which set in motion the chain
of circumstances leading to the injury. (Bataclan v.
Medina)
SUBSTANTIAL FACTOR TEST: If the actors conduct is a
substantial factor in bringing about harm to another,
the fact that the actor neither foresees nor should
have foreseen the harm or the manner in which it
occurred, does not prevent him from being liable.
(Philippine Rabit v. IAC)
FORESEEABILITY TEST: Anticipation of consequence is a
necessary element in determining not only whether a
particular act or omission was negligent, but also
whether the injury complained of was proximately
caused by such act or omission.
NATURAL AND PROBABLE CONSEQUENCE TEST: A natural
consequence of an act is the consequence which
ordinarily follows it. A probable consequence is one
that is more likely to follow than fail to follow its
supposed cause but it need not be one which
necessarily follows such cause.
ORDINARY AND NATURAL OR DIRECT CONSEQUENCE TEST:
If negligence is a cause in fact of the injury, the
liability of the wrongdoer extends to all the injurious
consequences.
HINDSIGHT TEST: A party guilty of negligence or
omission of duty is responsible for all the
consequences which a prudent and experienced
party, fully acquainted with all the circumstances
which in fact exist, whether they could have been
ascertained by reasonable diligence, or not, would
have thought at the time of the negligent act as
reasonably possible to follow, if they had been
suggested to his mind.
ORBIT OF THE RISK TEST: If the foreseeable risk to
plaintiff created a duty which the defendant
breached, liability is imposed for any resulting injury
within the orbit or scope of such injury. It is not the
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unusual nature of the act resulting in injury to
plaintiff that is the test of foreseeability, but whether
the result of the act is within the ambit of the
hazards covered by the duty imposed upon the
defendant.
CAUSE V. CONDITION
Many courts have sought to distinguish between the
active cause of the harm and the existing
conditions upon which that cause operated. If the
defendant has created only a passive, static
condition which made the damage possible, he is
said not to be liable.
Phoenix Construction vs. IAC (1987): The distinction
between cause and condition has already been
almost entirely discredited. Prosser and Keeton: So
far as the fact of causation is concerned, in the sense
of necessary antecedents which could have played
an important part in producing the result, it is quite
impossible to distinguish between active forces and
passive situations, particularly since the latter are the
result of other active forces which have gone before.
(NOTE: active force is the cause while the passive
situation is the condition)
It is not the distinction which is important but the
nature of the risk and the character of the
intervening cause.
LEGAL CAUSE
NATURAL AND PROBABLE CONSEQUENCES
A natural consequence of an act is the consequence
which ordinarily follows it. A probable consequence
is one that is more likely to follow than fail to follow
its supposed cause but it need not be one which
necessarily follows such cause.
FORESEEABILITY
Anticipation of consequence is a necessary element
in determining not only whether a particular act or
omission was negligent, but also whether the injury
complained of was proximately caused by such act or
omission.
Jarencio: Where the particular harm sustained was
reasonably foreseeable at the time of the
defendants misconduct, his act or omission is the
legal cause thereof.
Foreseeability is the fundamental basis of the law of
negligence. To be negligent, the defendant must
have acted or failed to act in such a way that an
ordinary reasonable man would have realized that
certain interests of certain persons were reasonably
subjected to a general but definite class of risks.
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DOCTRINE OF LAST CLEAR CHANCE
Also known as: "doctrine of discovered peril or
doctrine of supervening negligence or
humanitarian doctrine
The negligence of the plaintiff does not preclude a
recovery for the negligence of the defendant where it
appears that the defendant by exercising reasonable
care and prudence, might have avoided injurious
consequences to the plaintiff notwithstanding the
plaintiffs (own) negligence. (Sangco, Torts and
Damages.)
Consolidated Bank v. CA: The doctrine of last clear
chance states that where both parties are negligent
but the negligent act of one is appreciably later than
that of the other, or where it is impossible to
determine whose fault or negligence caused the loss,
the one who had the last clear opportunity to avoid
the loss but failed to do so, is chargeable with the
loss. The antecedent negligence of the plaintiff does
not preclude him from recovering damages caused
by the supervening negligence of the defendant, who
had the last fair chance to prevent the impending
harm by the exercise of due diligence.
Picart v. Smith: If both parties are found to be
negligent; but, their negligence are not
contemporaneous, the person who has the last fair
chance to avoid the impending harm and fails to do
so is chargeable with the consequences, without
reference to the prior negligence of the other party.
ELEMENTS:
(1) Plaintiffs own negligence puts himself in a
dangerous situation;
(2) Defendant saw or discovered, by exercising
reasonable care, the perilous position of plaintiff;
(3) In due time to avoid injuring him
(4) Despite notice and imminent peril, defendant
failed to employ care to avoid injury; and
(5) Injury of plaintiff resulted.
COVERS SUCCESSIVE ACTS OF NEGLIGENCE
Primary negligence of the defendant contributory
negligence of the plaintiff subsequent negligence
of the defendant in failing to avoid the injury to the
plaintiff
INAPPLICABLE TO JOINT TORTFEASORS
However, the doctrine cannot be extended into the
field of joint tortfeasors as a test of whether only one
of them should be held liable to the injured person
by reason of his discovery of the latters peril, and it
cannot be invoked as between defendants
concurrently negligent.
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Note:
(a) If plaintiff is the proximate cause: NO RECOVERY
can be made.
(b) If plaintiff is NOT the proximate cause: Recovery
can be made but such will be mitigated.
(c) If negligence of parties is equal in degree, then
each bears his own loss.)
Pantranco vs. Baesa (1989): Last clear chance applies
only if the person who allegedly had the last
opportunity to avert the accident was aware of the
existence of peril or should, with exercise of due care,
have been aware of it.
Ong vs. Metropolitan (1958): Last clear chance does
not apply where the party charged is required to act
instantaneously, and if the injury cannot be avoided
by the application of all means at hand after the peril
is or should have been discovered.
Bustamante vs. CA (1991): The doctrine of last clear
chance, as enunciated in Anuran v. Buno, applies in a
suit between the owners and drivers of colliding
vehicles. It does not arise where a passenger
demands responsibility from the carrier to enforce its
contractual obligations. It will be inequitable to
exempt the negligent driver of the jeepney and its
owners on the ground that the other driver was
likewise guilty of negligence.
Phoenix vs. IAC (1987): Doctrine of last clear chance
does not seem to have a role to play in a jurisdiction
where the common law concept of contributory
negligence as an absolute bar to recovery by the
plaintiff, has itself been rejected, as it has been in
2179 of CC.
CONTRIBUTORY NEGLIGENCE
Valenzuela v. CA: Conduct on the part of the injured
party, which contributed as a legal cause to the harm
he has suffered, which falls below the standard to
which he is required to conform for his own
protection.
MH Rakes v. Atlantic: Contributory negligence does
not defeat an action if it can be shown that the
defendant might, by the exercise of reasonable care
and prudence, have avoided the consequences of the
injured party's negligence. Petitioners negligence
contributed only to his own injury and not to the
principal occurrence it was merely an element to
the damage caused upon him.
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WHEN IS IT A BAR TO RECOVERY?
Only when the proximate cause is on the part of the
plaintiff. Where the plaintiff contributes to the
principal occurrence, as one of its determining
factors, he cannot recover. Where, in conjunction
with the occurrence, he contributes only to his own
injury, he may recover the amount that the
defendant responsible for the event should pay for
such injury, less a sum deemed a suitable equivalent
for his own imprudence.
Legal Injury
Injury is the illegal invasion of a legal right.
Legal Right A legal claim enforced by sanctions
Legal Duty That which the law requires to be done
to a determinate person
ELEMENTS:
(1) Legal right in favor of a person
(2) Correlative legal duty on the part of another
(3) Wrong in the form of an act or omission or
violation of said legal right and duty with
consequent injury or damage
Custodio vs. CA (1996): To warrant recovery of
damages, there must be both a right of action for a
legal wrong inflicted by the defendant, and damage
resulting to the plaintiff therefrom.
The underlying basis for the award of tort damages is
the premise that an individual was injured in
contemplation of law. The law affords no remedy for
damages resulting from an act which does not
amount to a legal injury or wrong. The act must not
only be hurtful, but wrongful (damnum et injuria).
Amonoy vs. Gutierrez (2001): The exercise of a right
ends when the right disappears, and it disappears
when it is abused, especially to the prejudice of
others. The mask of a right without the spirit of
justice which gives it life, is repugnant to the modern
concept of social law. It cannot be said that a person
exercises a right when he unnecessarily prejudices
another xxx. Over and above the specific precepts of
positive law are the supreme norms of justice; and he
who violates them violates the law. For this reason it
is not permissible to abuse our rights to prejudice
others.
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CLASSES OF INJURY
INJURY TO PERSONS
Art. 19. 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. 20. Every person who, contrary to law, willfully
or negligently causes damage to another shall
indemnify the latter for the same.
Art. 21. 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.
INJURY TO PROPERTY
Art. 23. Even when an act or event causing damage
to anothers property was not due to the fault or
negligence of the defendant, the latter shall be liable
for indemnity if through the act or event he was
benefited.
INJURY TO RELATIONS
Art. 26. Every person shall respect the dignity,
personality, privacy and peace of mind of his
neighbors and other persons. The following and
similar acts, though they may not constitute a
criminal offense, shall produce a cause of action for
damages, prevention and other relief;
(1) Prying into the privacy of anothers residence;
(2) Meddling with or disturbing the private life or
family relations of another;
(3) Intriguing to cause another to be alienated from
his friends;
(4) Vexing or humiliating another on account of his
religious beliefs, lowly station in life, place of
birth, physical defect, or other personal
condition.
Art. 33. In cases of defamation, fraud, and physical
injuries, a civil action for damages, entirely separate
and distinct from the criminal action, may be
brought by the injured party. Such civil action shall
proceed independently of the criminal prosecution,
and shall require only a preponderance of evidence.
Intentional Torts
CONCEPT
Under Article 2176, a person is also held liable for
intentional and malicious acts. The liability is
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founded on the indisputable principle of justice
recognized by all legislations that when a person, by
his act or omission, causes damage or prejudice to
another, a juridical relation is created by virtue of
which the injured person acquires a right to be
indemnified and the person causing the damage is
charged with the corresponding duty of repairing the
damage.
PNB v. CA, 1978: (NCC 21-36) serve as catch all
provisions or dragnet clauses. They cover any
imaginable tort action, because these articles were
intended to expand the concept of torts in out
jurisdiction. It grants adequate legal remedies for the
(otherwise) untold number of moral wrongs, which is
impossible for human foresight to provide in our
statutes.
VIOLATIONS OF A PERSONS SECURITY AND
PHYSICAL INJURIES (NCC 33)
BATTERY (PHYSICAL INJURY)
The actual infliction of any unlawful or unauthorized
violence on the person of another, irrespective of its
degree.
The least touching of another in anger, or in any
manner which amounts to an unlawful setting upon
his person, may subject one to an action for battery.
INTERESTS PROTECTED BY LAW:
(1) Interest of the individual in freedom from bodily
harm or any impairment whatever of the physical
integrity of the body
(2) Interest in freedom from offensive bodily touching
although no actual harm is done.
Carandang vs. Santiago and Valenton (1955):
Defamation and fraud (in Art. 33) are used in their
ordinary sense because there are no specific
provisions in the Revised Penal Code using these
terms as names of offenses defined therein, so that
these two terms defamation and fraud must have
been used not to impart to them any technical
meaning in the laws of the Philippines, but in their
generic sense. With these apparent circumstances in
mind, it is evident that the term physical injuries
could not have been used in its specific sense as a
crime defined in the Revised Penal Code, for it is
difficult to believe that the Code Commission would
have used terms in same articlesome in this
general and others in its technical sense. In other
words, the term physical injuries should be
understood to mean bodily injury, not the crime of
physical injuries, because the terms used with the
latter are general terms.
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ASSAULT (GRAVE THREAT)
An intentional, unlawful offer of physical injury to
another by force unlawfully directed toward the
person of another, under such circumstances as to
create a well-founded fear of imminent peril,
coupled with the apparent present ability to
effectuate the attempt if not prevented.
The wrong is committed when unreasonable fear is
inspired in the plaintiff by threatening gestures,
especially when these are connected with unlawful,
sinister, and wicked conduct on the part of the
defendant.
FALSE IMPRISONMENT (ILLEGAL DETENTION)
Art. 32. Any public officer or employee, or any private
individual, who directly or indirectly obstructs,
defeats, violates or in any manner impedes or
impairs any of the following rights and liberties of
another person shall be liable to the latter for
damages:
(1) Freedom from arbitrary or illegal detention
xxx
INTERFERENCE WITH PERSONAL PROPERTY
TRESPASS TO LAND
Any intentional use of anothers real property,
without authorization and without a privilege by law
to do so, is actionable as a trespass without regard to
harm. (Prosser and Keeton, p. 70)
Elements
An invasion
(1) which interfered with the right of exclusive
possession of the land, and
(2) which was a direct result of some act committed
by the defendant. (Prosser and Keeton, p. 67)
TRESPASS TO CHATTELS
Any direct and immediate intentional interference
with a chattel in the possession of another. (Prosser
and Keeton, p. 85)
CONVERSION
Major interferences with the chattel, or with the
plaintiffs rights in it, which are so serious, and so
important, as to justify the forced judicial sale to the
defendant. (Prosser and Keeton, p. 90)
INTENTIONAL NON-PHYSICAL HARMS
Art. 26. Every person shall respect the dignity,
personality, privacy and peace of mind of his
neighbors and other persons. The following and
similar acts, though they may not constitute a
criminal offense, shall produce a cause of action for
damages, prevention and other relief;
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(1) Prying into the privacy of anothers residence;
(2) Meddling with or disturbing the private life or
family relations of another;
(3) Intriguing to cause another to be alienated from
his friends;
(4) Vexing or humiliating another on account of his
religious beliefs, lowly station in life, place of
birth, physical defect, or other personal
condition.
The principal rights protected under this provision
are the following:
(1) The right to personal dignity
(2) The right to personal security
(3) The right to family relations
(4) The right to social intercourse
(5) The right to privacy
(6) The right to peace of mind
VIOLATION OF PERSONAL DIGNITY
In order to be actionable it is not necessary that the
act constitutes a criminal offense. The remedy
afforded by the law is not only the recovery of
damages. Prevention and other relief is also
available. In other words, injunction and other
appropriate reliefs may also be obtained by the
aggrieved party.
St. Louis Realty Corporation vs. CA (Illustration of a
similar act): The acts and omissions of the firm fall
under Article 26. Persons who know the residence of
Doctor Aramil were confused by the distorted,
lingering impression that he was renting his
residence from Arcadio or that Arcadio had leased it
from him. Either way, his private life was mistakenly
and unnecessarily exposed.
INFLICTION OF EMOTIONAL DISTRESS
MVRS Publications vs. Islamic Da'wah Council (2003):
Article 26 specifically applies to intentional acts
which fall short of being criminal offenses. It itself
expressly refers to tortious conduct which "may not
constitute criminal offenses." The purpose is
precisely to fill a gap or lacuna in the law where a
person who suffers injury because of a wrongful act
not constituting a crime is left without any redress.
Under Article 26, the person responsible for such act
becomes liable for "damages, prevention and other
relief." In short, to preserve peace and harmony in
the family and in the community, Article 26 seeks to
eliminate cases of damnum absque injuria in human
relations.
Consequently, the elements that qualify the same
acts as criminal offenses do not apply in determining
responsibility for tortious conduct under Article 26.
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In intentional infliction of mental distress, the
gravamen of the tort is not the injury to plaintiff's
reputation, but the harm to plaintiff's mental and
emotional state. In libel, the gist of the action is the
injury to plaintiff's reputation. Reputation is the
community's opinion of what a person is. In
intentional infliction of mental distress, the opinion
of the community is immaterial to the existence of
the action although the court can consider it in
awarding damages. What is material is the
disturbance on the mental or emotional state of the
plaintiff who is entitled to peace of mind.
VIOLATION OF PRIVACY
It is the right to be let alone, or to be free from
unwarranted publicity, or to live without
unwarranted interference by the public in matters in
which the public is not necessarily concerned.
Reasonableness of Expectation of Privacy
(The 2-prong test)
(1) Whether by ones conduct, the individual has
exhibited an expectation of privacy
(2) Whether this expectation is one that society
recognizes and accepts as reasonable
Note:
Coverage of Art. 26 is not limited to those
enumerated therein, the enumeration being merely
examples of acts violative of a persons rights to
dignity, personality, privacy and peace of mind. Other
similar acts are also covered within the scope of
the article.
Persons who can invoke privacy
General Rule: The right to privacy may only be
invoked by natural persons. Juridical persons cannot
invoke this because the basis to this right is an injury
to the feelings and sensibilities of the injured party,
and a corporation has none of those
Exception: The right to privacy may be invoked along
with the right against unreasonable searches and
seizures.
General Rule: The right to privacy is purely personal in
nature:
(1) It can be invoked only by the person actually
injured
(2) It is subject to a proper waiver
(3) It ceases upon death
Exception: The privilege may be given to the heirs of
a deceased to protect his memory, but this privilege
exists for the benefit of the living. It enables the
protection of their feelings, and prevents the
UP COLLEGE OF LAW
violation of their own rights regarding the character
and memory of the deceased.
Invasion of Privacy
Types:
(1) Publication of embarrassing private facts The
interest here is the right to be free from
unwarranted publicity, wrongful publicizing of
private affairs and activities, as these are outside
the ambit of legitimate public concern.
Ayer v. Capulong (1988): Public figures enjoy a limited
right to privacy as compared to ordinary individuals.
(2) Intrusion upon plaintiffs private affairs This is
not limited to situations where the wrongdoer
physically trespasses into ones property.
(a) Generally, there is no invasion of privacy
when journalists report something that
occurs in the public realm, except when the
acts of the journalist are to an extent that it
constitutes harassment.
(b) RA 4200: it is illegal for any person not
authorized by both parties to any private
communication to secretly record such
communication.
(c) Limitations to Right to Information v. Right
to Privacy:
(i) Must be of public interest
(ii) Must not be excluded by law
(3) Publicity which puts one in a false light in the
public eye To protect the interest of one in not
being made or forced to appear before the public
in an objectionable false light or position.
Tort of putting in false Defamation
light
The embarrassment of a Concerns the reputational
person being portrayed harm to a person
as something he is not
Statement should be Publication is satisfied
actually made in public even if communicated to
only one specific third
person
(4) Commercial appropriation of likeness of image
It consists of appropriation, for the defendants
benefit or advantage (ex. It was used in the
defendants advertisement), of the plaintiffs name or
likeness (picture or portrait).
TORTS & DAMAGES BAR OPERATIONS COMMISSION
DISTURBANCE OF PEACE OF MIND
The disturbance of the mental and emotional
tranquility of the plaintiff by the defendant is a legal
injury in itself and, therefore, a sufficient cause of
action for damages, injunction, and other relief.
A person, however, cannot be held liable for
damages for the mental or emotional disturbance of
the plaintiff which was due to the latters
susceptibility to such disturbance, where the
defendant had no knowledge of such peculiar
susceptibility. The tendency of the law is to secure an
interest in mental comfort only to the extent of the
ordinary sensibilities of men.
MALICIOUS PROSECUTION
Art. 2219. Moral damages may be recovered in the
following and analogous cases:
xxx
(8) Malicious prosecution
Art. 21. Any person who wilfully causes loss or injury
to another in manner that is contrary to morals, good
customs or public policy shall compensate the latter
for the damage.
Malicious prosecution is the institution of any action
or proceeding either civil or criminal against another,
maliciously and without probable cause.
Elements:
(1) That the defendant was himself the prosecutor
or that he instigated its commencement
(2) That the action was finally terminated with an
acquittal
(3) That in bringing the action, the prosecutor acted
without probable cause
(4) That he was actuated or impelled by legal
malice, that is, by improper and sinister motives.
(Lao v. CA)
Drilon vs. CA (1997): Malicious Prosecution defined:
An action for damages brought by one against whom
a criminal prosecution, civil suit, or other legal
proceeding has been instituted maliciously and
without probable cause, after the termination of such
prosecution, suit or other proceeding in favor of the
defendant herein. The gist of the action is the putting
of legal process in force, regularly, for the mere
purpose of vexation or injury.
Buenaventura vs. Domingo and Ignacio (1958): The
provisions of the Civil Code in taking reference to
malicious prosecutions must necessarily imply that
the person to be held liable to pay moral damages
should have acted deliberately and with knowledge
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that his accusation of the person subject to such
malicious prosecution, was false and groundless.
xxx Proof and motive that the prosecution or
institution of the action was prompted by a sinister
design to vex and humiliate a person and to cast
dishonor and disgrace must be clearly and
preponderantly established to entitle the victims to
damages and other rights granted by law; otherwise,
there would always be a civil action for damages
after every prosecution's failure to prove its cause
resulting in the consequent, acquittal of the accused
therein.
DEFAMATION, FRAUD AND PHYSICAL INJURIES
Art. 33. In case of defamation, fraud, and physical
injuries, a civil action for damages, entirely separate
and distinct from the criminal action, may be
brought by the injured party. Such civil action shall
proceed independently of the criminal prosecution,
and shall require only a preponderance of evidence.
DEFAMATION
Cojuangco vs. CA (1991): Separate civil action may be
consolidated with the criminal action.
MVRS vs. Islamic Da'wah (2003): Defamation is that
which tends to injure reputation or diminish esteem,
respect, good will, or confidence of the plaintiff, or
excite derogatory feelings about him. It must be
personal. (What is definitive is not the level of hurt,
but the effect of the statement on the reputation or
standing of the person.)
Arafiles vs. Philippine Journalists (2004): In actions for
damages for libel, it is axiomatic that the published
work alleged to contain libelous material must be
examined and viewed as a whole.
The article must be construed in its entirety including
the headlines, as they may enlarge, explain, or
restrict or be enlarged, explained or strengthened or
restricted by the context. Whether or not it is
libelous, depends upon the scope, spirit and motive
of the publication taken in its entirety.
A publication claimed to be defamatory must be
read and construed in the sense in which the readers
to whom it is addressed would ordinarily understand
it.
DEFENSES:
(1) Absence of elements
(2) Privilege
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FRAUD OR MISREPRESENTATION (FORMERLY DECEIT)
Salta vs. De Veyra (1982): Independent civil actions
are permitted to be filed separately regardless of the
result of the criminal action.
Samson vs. Daway (2004): Unfair competition under
the Intellectual Property Code and fraud under Art.
33 are independent actions. Art. 33 does not operate
as a prejudicial question to justify the suspension of
the criminal cases at bar.
SEDUCTION
Sangco: Seduction is sexual intercourse with an
unmarried woman of chaste character whose
consent was obtained through abuse of confidence
or through deceit.
Seduction under the RPC (criminal seduction) is
different from seduction under the NCC (civil
seduction, Art. 21)
(a) In criminal seduction, either qualified or simple,
the offended woman must be less than 18 years
of age.
(b) In civil seduction, the offended woman may be
over 18 years of age.
Tanjanco vs. CA (1966): The essential feature is
seduction, that in law is more than mere sexual
intercourse, or a breach of a promise of marriage; it
connotes essentially the idea of deceit, enticement,
superior power or abuse of confidence on the part of
the seducer to which the woman has yielded.
To constitute seduction there must in all cases be
some sufficient promise or inducement and the
woman must yield because of the promise or other
inducement. If she consents merely from carnal lust
and the intercourse is from mutual desire, there is no
seduction.
UNJUST DISMISSAL
The employers right to dismiss his employee differs
from, and should not be confused with the manner in
which the right is exercised. When the manner in
which the company exercised its right to dismiss was
abusive, oppressive or malicious, it is liable for
damages.
Quisaba vs. Sta. Ines-Melale Veneer & Plywood (1974):
Although the acts complained of seemingly appear
to constitute "matters involving employee-employer
relations" as Quisaba's dismissal was the severance
of a pre-existing employee-employer relation, his
complaint is grounded not on his dismissal per se as
in fact he does not ask for reinstatement or
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backwages, but on the manner of his dismissal and
the consequent effects of such dismissal.
The case at bar is intrinsically concerned with a civil
(not a labor) dispute; it has to do with an alleged
violation of Quisaba's rights as a member of society,
and does not involve an existing employee-employer
relation within the meaning of section 2(1) of
Presidential Decree No. 21. The complaint is thus
properly and exclusively cognizable by the regular
courts of justice, not by the National Labor Relations
Commission.
Note:
The foregoing decision thus states that where the
employee does not seek reinstatement or expressly
or impliedly accepts the employers right to
terminate the contract of employment but questions
the manner in which said right was exercised and
predicates thereon his claim for moral and
exemplary damages, the claim is one for tort under
the Civil Code and not one arising from employer-
employee relation under the Labor Code even if he
also demands in the action therefor payment of
termination pay which unquestionably derives from
their prior employer-employee relation.
INTERFERENCE WITH RELATIONS
An interference with the continuance of unimpaired
interests founded upon the relation in which the
plaintiff stands toward one or more third persons.
(Prosser and Keeton, p. 915)
KINDS
(1) Family relations
(2) Social relations
(3) Economic relations
(4) Political relations
FAMILY RELATIONS
The three causes of action enumerated below are
offenses against marital relations.
ALIENATION OF AFFECTION
This is a cause of action in favor of a husband against
one who wrongfully alienates the affection of his
wife, depriving him of his conjugal rights to her
consortium, that is, her society, affection, and
assistance.
Elements:
(1) Wrongful conduct of the defendant: intentional
and malicious enticing of a spouse away from
the other spouse
Note: Where the alienation or separation of the
spouses is caused by the plaintiffs own conduct
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and not by reason of the wrongful conduct of the
defendant, there is no liability on the defendant.
However, if the defendant interferes and by his
wrongful conduct prevents a reconciliation
between the spouses, or destroys the possibility
thereof, the defendant is liable for alienation of
affection.
(2) Loss of affection or consortium
Note: Complete absence of affection between
the spouses is not a defense.
(3) Causal connection between such conduct and
loss
Tenchavez vs. Escao (1965): There is no evidence
that the parents of Vicenta, out of improper motives,
aided and abetted her original suit for annulment, or
her subsequent divorce; she appears to have acted
independently, and being of age, she was entitled to
judge what was best for her and ask that her
decisions be respected. Her parents, in so doing,
certainly cannot be charged with alienation of
affections in the absence of malice or unworthy
motives, which have not been shown, good faith
being always presumed until the contrary is proved.
LIABILITY OF PARENTS, GUARDIANS OR KIN
The law distinguishes between the right of a parent
to interest himself in the marital affairs of his child
and the absence of rights in a stranger to
intermeddle in such affairs. However, such
distinction between the liability of parents and that
of strangers is only in regard to what will justify
interference. A parent is liable for alienation of
affections resulting from his own malicious conduct,
as where he wrongfully entices his son or daughter to
leave his or her spouse, but he is not liable unless he
acts maliciously, without justification and from
unworthy motives. He is not liable where he acts and
advises his child in good faith with respect to his
child's marital relations in the interest of his child as
he sees it, the marriage of his child not terminating
his right and liberty to interest himself in, and be
extremely solicitous for, his child's welfare and
happiness even where his conduct and advice
suggest or result in the separation of the spouses or
the obtaining of a divorce or annulment, or where he
acts under mistake or misinformation, or where his
advice or interference are indiscreet or unfortunate,
although it has been held that the parent is liable for
consequences resulting from recklessness. He may in
good faith take his child into his home and afford
him or her protection and support, so long as he has
not maliciously enticed his child away, or does not
maliciously entice or cause him or her to stay away,
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from his or her spouse. This rule has more frequently
been applied in the case of advice given to a married
daughter, but it is equally applicable in the case of
advice given to a son.
LOSS OF CONSORTIUM
Lilius vs. Manila Railroad Company (1934): The
plaintiff Aleko E. Lilius also seeks to recover the sum
of P2,500 for the loss of what is called Anglo-Saxon
common law "consortium" of his wife, that is, "her
services, society and conjugal companionship", as a
result of personal injuries which she had received
from the accident now under consideration.
In the case of Goitia vs. Campos Rueda, this court,
interpreting the provisions of the Civil Marriage Law
of 1870, in force in these Islands with reference to the
mutual rights and obligations of the spouses,
contained in articles 44-48 thereof, said as follows:
The above quoted provisions of the Law of Civil
Marriage and the Civil Code fix the duties and
obligations of the spouses. The spouses must be
faithful to, assist, and support each other. The
husband must live with and protect his wife. The
wife must obey and live with her husband and
follow him when he changes his domicile or
residence, except when he removes to a foreign
country. . . .
Therefore, under the law and the doctrine of this
court, one of the husband's rights is to count on his
wife's assistance. This assistance comprises the
management of the home and the performance of
household duties, including the care and education
of the children and attention to the husband upon
whom primarily devolves the duty of supporting the
family of which he is the head. When the wife's
mission was circumscribed to the home, it was not
difficult to assume, by virtue of the marriage alone,
that she performed all the said tasks and her
physical incapacity always redounded to the
husband's prejudice inasmuch as it deprived him of
her assistance. However, nowadays when women, in
their desire to be more useful to society and to the
nation, are demanding greater civil rights and are
aspiring to become man's equal in all the activities of
life, commercial and industrial, professional and
political, many of them spending their time outside
the home, engaged in their businesses, industry,
profession and within a short time, in politics, and
entrusting the care of their home to a housekeeper,
and their children, if not to a nursemaid, to public or
private institutions which take charge of young
children while their mothers are at work, marriage
has ceased to create the presumption that a woman
complies with the duties to her husband and
children, which the law imposes upon her, and he
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who seeks to collect indemnity for damages resulting
from deprivation of her domestic services must prove
such services.
Furthermore, inasmuch as a wife's domestic
assistance and conjugal companionship are purely
personal and voluntary acts which neither of the
spouses may be compelled to render, it is necessary
for the party claiming indemnity for the loss of such
services to prove that the person obliged to render
them had done so before he was injured and that he
would be willing to continue rendering them had he
not been prevented from so doing.
CRIMINAL CONVERSATION (ADULTERY)
Interference with the marital relations by committing
adultery with one of the spouses. This is obvious
enough in the case of rape but also applies where
the adulterous spouse consented to or initiated the
intercourse. (Prosser and Keeton, p. 917)
SOCIAL RELATIONS
MEDDLING WITH OR DISTURBING FAMILY RELATIONS
Art. 26. Every person shall respect the dignity,
personality, privacy and peace of mind of his
neighbors and other persons. The following and
similar acts, though they may not constitute a
criminal offense, shall produce a cause of action for
damages, prevention and other relief;
xxx
2) Meddling with or disturbing the private life or
family relations of another;
Developed as an offshoot of the action for enticing
away a servant and depriving the master of the
proprietary interest in [the servants] services until
there has been a gradual shift of emphasis away
from services and toward a recognition of more
intangible elements in the domestic relations, such
as companionship and affection. (Prosser and
Keeton, p. 916)
INTRIGUING TO CAUSE ANOTHER TO BE ALIENATED FROM
HIS FRIENDS
A person who committed affirmative acts intended to
alienate the existing friendship of one with his
friends is liable for damages. A man is a social being
and for being so, he needs friends to socialize with
and to depend upon in case of need. To alienate him
wrongfully or with malice from his friends is to cause
him suffering for which he is entitled to damages.
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ECONOMIC RELATIONS
INTERFERENCE WITH CONTRACTUAL RELATIONS
Art 1314. Any third person who induces another to
violate his contract shall be liable for damages to the
other contracting party.
Gilchrist vs. Cuddy (1915): Everyone has a right to
enjoy the fruits of his enterprise. He has no right to
be protected from competition, but he has the right
to be free from malicious and wanton interference. If
the injury is a result of competition, it is a case of
damnum absque injuria, unless superior right by
contract is interfered with.
Injunction is the proper remedy to prevent wrongful
interference with contracts by strangers, where other
legal remedies are insufficient and the resulting
injury is irreparable.
So Ping Bun vs. CA (1999): Bad faith/Malice is
required to make the defendant liable for DAMAGES
in cases of tortuous interference.
Elements of Interference
(1) Existence of a valid contract;
(2) Knowledge of the third person of the existence
of such contract; and
(3) Interference without legal justification or excuse.
Lagon vs. CA (2005): If there is no bad faith, there is
no tortious interference; Actual knowledge of the
contract is not required so long as there are facts
leading one to investigate.
Proper business interest provides a legal justification
to negate the presence of the third element.
UNFAIR COMPETITION
Art. 28. Unfair competition in agricultural,
commercial or industrial enterprises or in labor
through the use of force, intimidation, deceit,
machination or any other unjust, oppressive or
highhanded method shall give rise to a right of
action by the person who thereby suffers damage.
Free competition in agricultural, commercial or
industrial enterprises and in labor is essential in a
democracy and should be encouraged. Monopolies,
generally speaking, are prejudicial to public interest.
However, the right of free competition is not
unlimited.
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Permissible competition
There is a privilege to interfere with prospects of
advantageous economic relations of others when:
(1) The defendants purpose is justifiable, and
(2) He employs no means which may be regarded as
unfair.
Prohibited competition
In order to qualify as unfair, it must have 2
characteristics:
(1) It must involve an injury to a trade or rival
(2) It must involve acts which are characterized as
contrary to good conscience, or shocking to
judicial sensibilities, or otherwise unlawful
Note:
Jarencio: Unfair competition dealt with in Art. 28 is
different from the unfair competition under Sec. 29
of RA 166. Unfair competition under Sec. 29 of Rep.
Act 166 consists in giving the same general
appearance to the goods manufactured or dealt in or
the services rendered by one person as the goods or
services of another who has already acquired a
public goodwill for such goods or services. Unfair
competition under Art. 28 of the Civil Code refers to
unfair competition in agricultural, commercial or
industrial enterprises or in labor through the use of
force, intimidation, deceit, machination or any other
unjust, oppressive or high- handed method. Unfair
competition under the Civil Code covers a broader
area than Rep. Act 166.
POLITICAL RELATIONS
VIOLATION OF RIGHT TO SUFFRAGE (NCC, ART. 32)
Art 32. Any public officer or employee, or any private
individual, who directly or indirectly obstructs,
defeats, violates or in any manner impedes or
impairs any of the following rights and liberties of
another person shall be liable to the latter for
damages:
(1) Freedom of religion
(2) Freedom of speech
(3) Freedom to write for the press or to maintain a
periodical publication
(4) Freedom from arbitrary or illegal detention
(5) Freedom of suffrage
(6) The right against deprivation of property without
due process of law
(7) The right to just compensation when property is
taken for public use
(8) The right to equal protection of the laws
(9) The right to be secure in ones person, house,
papers and effects against unreasonable
searches and seizures
(10) The liberty of abode and of changing the same
UP COLLEGE OF LAW TORTS & DAMAGES
(11) The right to privacy of communication and
correspondence
(12) The right to become a member of associations
and societies for purposes not contrary to law
(13) The right to take part in a peaceable assembly
and petition the government for redress of
grievances
(14) The right to be free from involuntary servitude in
any form
(15) The right of the accused against excessive bail
(16) The right of the accused to be heard by himself
and counsel, to be informed of the nature and
the cause of the accusation against him, to have
a speedy and public trial, to meet the witnesses
face to face, to have compulsory process to
secure the attendance of witnesses on is behalf;
(17) Freedom form being compelled to be a witness
against ones self, or from being forced to
confess his guilt, or from being induced by a
promise of immunity or reward to make such
confession, except when the person confessing
becomes a State witness.
(18) Freedom from excessive fines, or cruel and
unusual punishment, unless the same is
imposed or inflicted in accordance with a statute
which has not been judicially declared
unconstitutional;
(19) Freedom of access to the courts
In any of the cases referred to in this article, whether
or not the defendants act or omission constitutes a
criminal offense, the aggrieved party has a right to
commence an entirely separate and distinct civil
action for damages, and for other relief. Such civil
action shall proceed independently of any criminal
prosecution (if the latter be instituted) and may be
proved by a preponderance of evidence.
The indemnity shall include moral damages.
Exemplary damages may also be adjudicated.
The responsibility herein set forth is not demandable
from a judge unless his act or omission constitutes a
violation of the Penal code or any other penal
statute.
VIOLATION OF OTHER POLITICAL RIGHTS (FREEDOM OF
SPEECH, PRESS, ASSEMBLY AND PETITION, ETC.)
Jarencio: Article 32 of the Civil Code holds any public
officer, employee or private individual civilly liable for
the violation of civil liberties, political liberties and
other basic rights under the Constitution. The
aggrieved party may recover actual, moral and
exemplary damages and other relief. The civil action
is separate and distinct and shall proceed
independently of a criminal prosecution if one is
instituted. Only a preponderance of evidence is
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required. If the violation of the civil or political rights
constitutes a crime and a criminal action is instituted
the civil action is also deemed instituted with the
criminal action unless the same is reserved.
Cojuangco vs. CA (1999): The purpose of article 32 is
to remind us that basic rights are immutable. Thus,
absence of bad faith or malice is not a defense.
Vinzons-Chato vs. Fortune (2007): A public officer
may be sued under Art. 32 even if his acts were not
so tainted with malice, as long as there is a violation
of a constitutional right. Its precise object is to put an
end to official abuse, done on the plea of good faith.
Negligence
Art. 1173. The fault or negligence of the obligor
consists in the omission of that diligence which is
required by the nature of the obligation and
corresponds with the circumstances of the persons,
of the time and of the place. When negligence shows
bad faith, the provisions of Articles 1171 and 2201,
paragraph 2, shall apply.
If the law or contract does not state the diligence
which is to be observed in the performance, that
which is expected of a good father of a family shall
be required.
ELEMENTS
(1) Legal duty
(2) Breach
(3) Causation
(4) Damages
Layugan vs. IAC (1988): Negligence is the omission to
do something which a reasonable man, guided by
those considerations which ordinarily regulate the
conduct of human affairs, would do, or the doing of
something which a prudent and reasonable man
would not do.
TEST OF NEGLIGENCE
Philippine National Railways vs. Brunty (2006): Did
defendant, in doing the alleged negligent act, use
that reasonable care and caution which an ordinarily
prudent person would have used in the same
situation? If not, the person is guilty of negligence.
The law, in effect, adopts the standard supposed to
be supplied by the imaginary conduct of the discreet
pater familias of the Roman law.
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GOOD FATHER OF A FAMILY (BONUS PATER
FAMILIAS)
A standard man does not mean an ideal or perfect
man, but an ordinary member of the community. He
is usually spoken of as an ordinarily reasonable,
careful, and prudent man.
WHAT CONSTITUTES THE CONDUCT OF A PRUDENT MAN IN
A GIVEN SITUATION?
Picart vs. Smith (1918): Conduct determined in the
light of human experience and in view of the facts
involved in the particular case. Abstract speculations
cannot be of much value here; instead, reasonable
men govern their conduct by the circumstances
which are known before them. They are not
supposed to be omniscient of the future.
STANDARD OF CARE
Picart vs. Smith (1918): Test: Did the defendant in
doing the alleged negligent act use that reasonable
care and caution which an ordinarily prudent man
would have used in the same situation? If not, then he
is negligent. Negligence in a given case is not
determined by reference to the personal judgment of
the actor in the situation before him, but is
determined in the light of human experience and the
facts involved in the particular case.
Conduct is said to be negligent when a prudent man
in the position of the tortfeasor would have foreseen
that an effect harmful to another was sufficiently
probable to warrant his foregoing the conduct or
guarding against its consequences.
Note:
Only the KIND of injury needs to be foreseen, NOT
the actual specific injury.
STANDARD OF CARE REQUIRED OF BANKS
Philippine Bank of Commerce vs. CA (1997): In the
case of banks, however, the degree of diligence
required is more than that of a good father of a
family. Considering the fiduciary nature of their
relationship with their depositors, banks are duty
bound to treat the accounts of their clients with the
highest degree of care.
Simex International (Manila), Inc. v. CA: In every case,
the depositor expects the bank to treat his account
with the utmost fidelity, whether such account
consists only of a few hundred pesos or of millions.
xxx A blunder on the part of the bank, such as the
failure to duly credit him his deposits as soon as they
are made, can cause the depositor not a little
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embarrassment if not financial loss and perhaps
even civil and criminal litigation.
The point is that as a business affected with public
interest and because of the nature of its functions,
the bank is under obligation to treat the accounts of
its depositors with meticulous care, always having in
mind the fiduciary nature of their relationship.
STANDARD OF CARE OF CHILDREN
Taylor vs. Manila Railroad (1910): Children must be
expected to act upon childlike instincts and impulses
and others chargeable with a duty of care and
caution toward them must take precautions
accordingly. If they leave exposed to the observation
of children anything which would be tempting to
them, and which they in their immature judgment
might naturally suppose they were at liberty to play
with, they should expect that liberty to be taken. (But
the child in this case was still negligent because of
his experience).
Jarco v. CA (1999): The rule, therefore, is that a child
under nine years of age must be conclusively
presumed incapable of contributory negligence as a
matter of law. The presumption of lack of
discernment or incapacity for negligence in the case
of a child over nine but under fifteen years of age is a
rebuttable one.
Ylarde vs. Aquino (1988): The degree of care required
to be exercised must vary with the capacity of the
person endangered to care for himself. A minor should
not be held to the same degree of care as an adult,
but his conduct should be judged according to the
average conduct of persons of his age and
experience: that degree of care ordinarily exercised
by children of the same age, capacity, discretion,
knowledge and experience under the same or similar
circumstances.
STANDARD OF CARE OF EXPERTS/PROFESSIONALS
Culion vs. Philippine (1930): When a person holds
himself out as being competent to do things
requiring professional skill, he will be held liable for
negligence if he fails to exhibit the care and skill of
one ordinarily skilled in the particular work which he
attempts to do.
Cruz vs. CA (1997): Whether or not a physician has
committed an "inexcusable lack of precaution" in the
treatment of his patient is to be determined
according to the standard of care observed by other
members of the profession in good standing under
similar circumstances bearing in mind the advanced
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state of the profession at the time of treatment or
the present state of medical science.
IN CASE OF INSANE PERSONS
Art. 2180. Guardians are liable for damages caused
by the minors or incapacitated persons who are
under their authority and live in their company
Art. 2182. If the minor or insane person causing
damage has no parents or guardian, the minor or
insane person shall be answerable with his own
property in an action against him where a guardian
ad litem shall be appointed.
US vs. Baggay (1911): A lunatic or insane person who,
in spite of his irresponsibility on account of the
deplorable condition of his deranged mind, is still
reasonably and justly liable with his property for the
consequences of his acts.
EMERGENCY RULE OR SUDDEN PERIL DOCTRINE
Valenzuela vs. CA (1996): An individual, who suddenly
finds himself in a situation of danger and is required
to act without much time to consider the best means
that may be adopted to avoid the impending danger,
is not guilty of negligence if he fails to undertake
what subsequently and upon reflection may appear
to be a better solution, unless the emergency was
brought by his own negligence.
UNREASONABLE RISK OR HARM
Art 1711. Owners of enterprises and other employers
are obliged to pay compensation for the death of or
injuries to their laborers, workmen, mechanics or
other employees even though the event may have
been purely accidental or entirely due to fortuitous
cause, if the death or personal injury arose out of and
in the course of employment. The employer is also
liable for compensation if the employee contracts
any illness or disease caused by such employment or
as a result of the nature of the employment. If the
mishap was due to the employees own notorious
negligence, or voluntary act, or drunkenness, the
employer shall not be liable for compensation.
When the employees lack of due care contributed to
his death or injury, the compensation shall be
equitably reduced
Art. 1712. If the death or injury is due to the
negligence of a fellow-worker, the latter and the
employer shall be solidarily liable for compensation.
If a fellow-workers intentional or malicious act is the
only cause of the death or injury, the employer shall
not be answerable, unless it should be shown that
the latter did not exercise due diligence in the
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selection or supervision of the plaintiffs fellow-
worker.
Amedo vs. Rio (1954): By jumping into the sea, the
employee failed to exercise even slight care and
diligence and displayed a reckless disregard of the
safety of his person. His death was caused by his
notorious negligence. Notorious negligence has
been held to be tantamount to gross negligence
which is want of even slight care and diligence.
EVIDENCE
QUANTUM OF PROOF IN QUASI-DELICT VS. QUANTUM OF
PROOF IN BREACH OF CONTRACT
Calalas vs. CA: In quasi-delict, the negligence or fault
should be clearly established because it is the basis
of action, whereas in breach of contract, the action
can be prosecuted merely by proving the existence of
a contract and the fact that the obligor, in this case a
common carrier, failed to transport his passenger
safely to his destination.
PRESUMPTION OF NEGLIGENCE
Art. 2184. In motor vehicle mishaps, the owner is
solidarily liable with his driver, if the former, who was
in the vehicle, could have, by the use of due
diligence, prevented the misfortune. It is disputable
presumed that the driver was negligent, if he had
been found guilty of reckless driving or violating
traffic regulations at least twice within the next
preceding two months.
Art. 2185. Unless there is proof to the contrary, it is
presumed that a person driving a motor vehicle has
been negligent if at the time of the mishap, he was
violating any traffic regulation.
Art. 2188. There is prima facie presumption of
negligence if the death or injury results from his
possession of dangerous weapons or substances,
such as firearms and poison, except when the use or
possession thereof is indispensable in his occupation
or business.
Art. 1735. In all cases other than those mentioned in
Nos. 1, 2, 3, 4, and 5 of the preceding article
(calamity, act of public enemy in war, act of owner of
the goods, character of the goods, order of
competent public authority), if the goods are lost
destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted
negligently, unless they prove that they observed
extraordinary diligence as required under Art. 1733.
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PRESUMED NEGLIGENCE OR NEGLIGENCE PER SE
Teague vs. Fernandez (1973): Violation of a statute or
ordinance constitutes negligence as a matter of law
or negligence per se because non-observance of
what the law provides as a suitable precaution is
failure to observe that care which an ordinarily
prudent man would observe.
When the standard of care is fixed by law, failure
conform to such standard is negligence, negligence
per se or negligence in and of itself, in the absence of
a legal excuse.
RES IPSA LOQUITUR
The doctrine of res ipsa loquitur (the thing speaks
for itself) is a rule of evidence (not of substantive
law) peculiar to the law of negligence.
3 conditions for applicability:
F.F. Cruz vs. CA (1988): Res ipsa loquitur is applicable
when:
(1) The thing causing the injury is under the control
of the defendant or his servant;
(2) In the ordinary cause of things, the accident does
not happen if those who have control used proper
care;
(3) In the absence of explanation from the
defendant, a presumption of negligence results.
Layugan vs. IAC 1988): Where the thing which causes
injury is shown to be under the management of the
defendant, and the accident is such as in the
ordinary course of things does not happen if those
who have the management use proper care, it
affords reasonable evidence, in the absence of an
explanation by the defendant, that the accident
arose from want of care.
Ramos vs. CA (1999): The injury itself, taken together
with the circumstances, raises the presumption of
negligence that the defendant must meet with an
explanation.
Elements
(1) The accident is such that it would not have
happened in the ordinary course of events
without the negligence of someone;
(2) The defendant exercises control and
management.
(3) There is no contributory negligence on the part of
the plaintiff.
DM Consunji vs. CA (2001): The res ipsa loquitur
doctrine is based in part upon the theory that the
defendant in charge of the instrumentality which
causes the injury either knows the cause of the
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accident or has the best opportunity of ascertaining
it and that the plaintiff has no such knowledge, and
therefore is compelled to allege negligence in
general terms and to rely upon the proof of the
happening of the accident in order to establish
negligence.
Note: For the res ipsa loquitur doctrine to apply, it
must appear that the injured party had no
knowledge as to the cause of the accident, or that
the party to be charged with negligence has superior
knowledge or opportunity for explanation of the
accident.
DEFENSES
DUE DILIGENCE
Art. 2180. The obligation imposed by Article 2176 is
demandable not only for ones own acts or
omissions, but also for those of persons for whom
one is responsible.
xxx
Par. 8. The responsibility treated of in this article
shall cease when the persons herein mentioned
prove that they observed all the diligence of a good
father of a family to prevent damage.
Ramos vs. PEPSI (1967): The presumption of
negligence on the part of the master or employer,
either in the selection of servant/employee or in the
supervision, when an injury is caused by the
negligence of a servant/employee may be rebutted if
the employer shows to the satisfaction of the court
that in the selection and supervision, he has
exercised the care and diligence of a good father of a
family
Metro Manila vs. CA (1993): The defense of due
diligence is plausible when defendant has presented
enough evidence to overcome the presumption of
negligence. It is not enough that it is alleged.
ACTS OF PUBLIC OFFICERS
Vinzons-Chato vs. Fortune (2008): When what is
involved is a duty owing to the public in general, an
individual cannot have a cause of action against the
public officer although he may have been injured by
the action or inaction of the officer, except when the
individual suffers a particular or special injury.
ACCIDENT OR FORTUITOUS EVENT
Art. 1174. Except in cases expressly specified by the
law, or when it is otherwise declared by stipulation,
or when the nature of the obligation requires the
assumption of risk, no person shall be seen
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responsible for those events which, could not
foreseen, or which, though foreseen, were inevitable.
Elements
Juntilla vs. Fontanar (1985): The elements of caso
fortuito are:
(1) The cause of the unforeseen and unexpected
occurrence, or of the failure of the debtor to
comply with his obligation, must be independent
of the human will;
(2) It must be impossible to foresee the event or if it
can be foreseen, it must be impossible to avoid;
(3) The occurrence must be such as to render it
impossible for the debtor to fulfill his obligation
in a normal manner; and
(4) The obligor must be free from any participation in
the aggravation of the injury resulting to the
creditor.
Hernandez vs. COA (1984): The robbery that
happened to him cannot be said to be the result of
his imprudence and negligence. This was
undoubtedly a fortuitous event covered by the said
provisions, something that could not have been
reasonably foreseen although it could have
happened.
DAMNUM ABSQUE INJURIA
Custodio vs. CA (1996): Right to recover damages
does not arise from the mere fact that the plaintiff
suffered losses. To warrant the recovery of damages,
there must be both a right of action for a legal wrong
inflicted by the defendant, and damage resulting to
the plaintiff therefrom. Wrong without damage, or
damage without wrong, does not constitute a cause
of action, since damages are merely part of the
remedy allowed for the injury caused by a breach or
wrong.
Injury Damage Damages
Illegal Loss, hurt, harm Recompense or
invasion of a resulting from compensation
legal right the injury awarded
Damnum absque injuria. There can be damage
without injury in those instances in which the loss or
harm was not the result of a violation of a legal duty.
In order that the law will give redress for an act
causing damage, that act must be not only hurtful,
but wrongful. There must be damnum et injuria. If,
as may happen in many cases, a person sustains
actual damage, that is, harm or loss to his person or
property, without sustaining any legal injury, that is,
an act or omission which the law does not deem an
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injury, the damage is regarded as damnum absque
injuria.
AUTHORITY OF LAW
Art. 5. Acts executed against the provisions of
mandatory or prohibitory laws shall be void, except
when the law itself authorizes their validity.
Art. 11. (RPC) The following do not incur any criminal
liability:
(5) Any person who acts in the fulfillment of a duty
or in the lawful exercise of a right or office
(8) Any person who acts in obedience to an order
issued by a superior for some lawful purpose
ASSUMPTION OF RISK (VOLENTI NON FIT INJURA)
General rule:
One who voluntarily assumed the risk of injury from a
known danger is debarred from recovery. A plaintiff
who, by his conduct, brought himself within the
operation of the maxim, volenti non fit injuria (that
to which a person assents is not presumed in law an
injury), cannot recover on the basis of the
defendants negligence.
One who knows, appreciates, and deliberately
exposes himself to a danger assumes the risk
thereof.
Where the defense of assumption of risk is based on
this principle, it negates negligence or liability on the
part of the defendant, even though his conduct
would otherwise have constituted actionable
negligence, and without regard to the fact that the
plaintiff may have acted with due care.
The defense bars recovery without regard to whether
the plaintiffs conduct was reasonable, because, in
theory, the plaintiffs acceptance of the risk has
wiped out the defendants duty, and as to the
plaintiff the defendants negligence is not a legal
wrong.
Afialda vs. Hisole (1958): It is the caretaker's business
to try to prevent the animal from causing injury or
damage to anyone, including himself. It was a risk he
voluntarily assumed.
Requisites
(1) That the plaintiff had actual knowledge of the
danger;
(2) That he understood and appreciated the risk from
the danger
(3) That he voluntarily exposed himself to such risk
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Exception:
Ilocos Norte vs. CA (1989): A person is excused from
the force of the rule (volenti non fit injuria), that
when he voluntarily assents to a known danger he
must abide by the consequences, if an emergency is
found to exist or if the life or property of another is in
peril or when he seeks to rescue his endangered
property.
LAST CLEAR CHANCE
The doctrine is also known as:
(1) The doctrine of discovered peril;
(2) The doctrine of supervening negligence;
(3) Humanitarian doctrine
A negligent defendant is liable to a negligent
plaintiff, or even to a plaintiff who has been grossly
negligent in placing himself in peril, if the defendant,
aware of the plaintiffs peril, had in fact a later
opportunity than the plaintiff to avoid the accident.
Picart vs. Smith (1918): The person who has the last
fair chance to avoid the impending harm and fails to
do so is chargeable with the consequences, without
reference to the prior negligence of the other party.
Bustamante vs. CA (1991): Negligence of the plaintiff
does not preclude a recovery for the negligence of
the defendant where it appears that the defendant,
by exercising reasonable care and prudence, might
have avoided injurious consequences to the plaintiff
notwithstanding the plaintiffs negligence.
Consolidated Bank vs. CA (2003): This is a case of
culpa contractual where neither contributory
negligence nor last clear chance will exonerate
defendant from liability. (NOTE: This means that
Last Clear Chance is not a defense in culpa
contractual.)
PRESCRIPTION NCC, ART. 1144, 1146, AND 1150
Art. 1144. The following actions must be brought
within ten years from the time the right of action
accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
Art. 1146. The following actions must be instituted
within four years:
(1) Upon an injury to the rights of the plaintiff;
(2) Upon a quasi-delict;
However, when the action arises from or out of any
act, activity, or conduct of any public officer involving
the exercise of powers or authority arising from
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Martial Law including the arrest, detention and/or
trial of the plaintiff, the same must be brought within
one (1) year.
Art. 1150. The time for prescription for all kinds of
actions, when there is no special provision which
ordains otherwise, shall be counted from the day
they may be brought.
Prescription periods:
(a) years for QD
(b) 1 year for defamation
Kramer vs. CA (1989): It is clear that the prescriptive
period must be counted from the time of the
commission of an act or omission violative of the
right of the plaintiff, which is the time when the
cause of action arises.
Allied Banking vs. CA (1989): Relations Back Doctrine
(footnote 17 of Allied Banking case): That principle of
law by which an act done at one time is considered
by a fiction of law to have been done at some
antecedent period.
WAIVER
Art. 6. Rights may be waived, unless the waiver is
contrary to law, public order, public policy, morals, or
good customs or prejudicial to a third person with a
right recognized by law.
Art. 1171. Responsibility arising from fraud is
demandable in all obligations. Any waiver of an
action for future fraud is void.
DOUBLE RECOVERY NCC ART. 2177
Art. 2177. Responsibility for fault or negligence under
the preceding article is entirely separate and distinct
from the civil liability arising from negligence under
the Penal Code. But the plaintiff cannot recover
damages twice for the same act or omission of the
defendant.
Art. 100 (RPC). Civil liability of a person guilty of
felony. - Every person criminally liable for a felony is
also civilly liable.
Art. 2177 distinguishes 2 kinds of negligence:
(1) Civil and
(2) Criminal.
The same negligence causing damage may produce
liability arising from crime, if the act or omission is
punished by the RPC, or may create an action for
quasi-delict under the NCC.
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ACTIONS AVAILABLE TO VICTIMS OF NEGLIGENCE
(1) An action to enforce the civil liability arising from
culpa criminal under Art. 100 of the RPC
(2) An action for quasi-delict under Art. 2176-2194 of
the NCC.
The only limitation is that the injured party cannot
recover twice for the same act or omission.
EFFECT OF ACQUITTAL OF THE ACCUSED ON HIS CIVIL
LIABILITY
Art. 29. When the accused in a criminal prosecution
is acquitted on the ground that his guilt has not been
proved beyond reasonable doubt, a civil action for
damages for the same act or omission may be
instituted. Such action requires only a
preponderance of evidence. Upon motion of the
defendant, the court may require the plaintiff to file a
bond to answer for damages in case the complaint
should be found to be malicious.
The acquittal of the accused in the criminal case will
not necessarily exonerate him from civil liability.
The judgment of acquittal does not necessarily
extinguish the civil liability of the accused EXCEPT:
(1) When it declares that the facts from which the
civil liability might arise did not exist;
(2) When it declares that the accused is not the
author of the crime;
(3) When the judgment expressly declares that the
liability is only civil in nature;
(4) Where the civil liability is not derived or based on
the criminal act of which the accused was
acquitted;
(5) Where the acquittal is based on reasonable
doubt;
(6) Where the civil action has prescribed.
NO RESERVATION IS REQUIRED IN THE CRIMINAL CASE FOR
THE FILING OF CIVIL ACTION ARISING FROM QUASI-DELICT
Rule 111, Sec. 3, ROC. When civil action may
proceeded independently. In the cases provided
for in Articles 32, 33, 34 and 2176 of the Civil Code of
the Philippines, the independent civil action may be
brought by the offended party. It shall proceed
independently of the criminal action and shall
require only a preponderance of evidence. In no case,
however, may the offended party recover damages
twice for the same act or omission charged in the
criminal action.
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Question
As a result of a collision between a taxicab owned by
A and another taxicab owned by B, X, a passenger of
the first taxicab, was seriously injured. X later filed a
criminal action against both drivers.
(a) Is it necessary for X to reserve his right to institute
a civil action for damages against both taxicab
owners before he can file a civil action for damages
against them? Why?
(b) May both taxicab owners raise the defense of due
diligence in the selection and supervision of their
drivers to be absolved from liability for damages to
X? Reason.
Suggested Answer:
It depends. If the separate civil action is to recover
damages arising from the criminal act, reservation is
necessary. If the civil action against the taxicab
owners is based on culpa contractual or on quasi-
delict, there is no need for reservation.
It depends. If the civil action is based on quasi-delict,
the taxicab owners may raise the defense of
diligence of a good father of a family in the selection
and supervision of the driver; if the action against
them is based on culpa contractual or civil liability
arising from a crime, they cannot raise the defense.
Alternative Answer:
No such reservation is necessary. Under Section 1
Rule 111 of the 2000 Rules on Criminal Procedure,
what is deemed instituted with the criminal action
is only the action to recover civil liability arising from
the crime or ex delicto. All the other civil actions
under Articles 32, 33, 34, 2176 of the New Civil Code
are no longer deemed instituted, and may be filed
separately and prosecuted independently even
without any reservation in the criminal action
(Section 3, Rule 111, 2000 Rules on Criminal
Procedure). The failure to make a reservation of the
criminal action is not a waiver of the right to file a
separate and independent civil action based on
these articles of the New Civil Code (Casupanan vs.
Laroya, G.R. No. 145391, August 26, 2002)
Special Liability in Particular
Cases
In some cases tort law imposes liability on
defendants who are neither negligent nor guilty of
intentional wrongdoing. Known as Strict Liability, or
liability without fault, this branch of torts seeks to
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regulate those activities that are useful and
necessary but that create abnormally dangerous
risks to society.
PRODUCTS LIABILITY
Art. 2187. Manufacturers and processors of
foodstuffs, drinks, toilet articles and similar goods
shall be liable for death or injuries caused by any
noxious or harmful substances used, although no
contractual relation exists between them and the
consumers.
Under the foregoing provision, liability is not made to
depend upon fault or negligence of the
manufacturer or processor. The provision likewise
dispensed with any contractual relation between the
manufacturer and the consumer, thereby clearly
implying that liability is imposed by law as a matter
of PUBLIC POLICY.
Proof of negligence under this provision is not
necessary; as such, traditional contract and warranty
defenses as (1) lack of privity; (2) lack of reliance on a
warranty; (3) lack of notice to the defendant of the
breach of warranty; and (4) disclaimer of implied
warranties are INAPPLICABLE.
REQUISITES OF LIABILITY
(1) Defendant is a manufacturer or possessor of
foodstuff, drinks, toilet articles and similar
goods;
(2) He used noxious or harmful substances in the
manufacture or processing of the foodstuff,
drinks or toilet articles consumed or used by the
plaintiff;
(3) Plaintiffs death or injury was caused by the
product so consumed or used; and
(4) The damages sustained and claimed by the
plaintiff and the amount thereof.
BURDEN OF PROOF
The burden of proof that the product was in a
defective condition at the time it left the hands of the
manufacturer and particular seller is upon the
INJURED PLAINTIFF.
WHO MAY RECOVER
Although the article used the term consumer, such
term includes a user and purchaser of the
injuriously defective food product or toilet article. The
person who may recover NEED NOT BE THE
PURCHASER of the foodstuff or toilet article.
CONSUMER ACT RA 7394, SECS. 92-107 (CH. 1)
Consumer Act Provisions
Article 4. Definition of Terms.
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(n) "Consumer" means a natural person who is a
purchaser, lessee, recipient or prospective purchaser,
lessor or recipient of consumer products, services or
credit.
(as) "Manufacturer" means any person who
manufactures, assembles or processes consumer
products, except that if the goods are manufactured,
assembled or processed for another person who
attaches his own brand name to the consumer
products, the latter shall be deemed the
manufacturer. In case of imported products, the
manufacturer's representatives or, in his absence, the
importer, shall be deemed the manufacturer.
Article 92. Exemptions. If the concerned
department finds that for good or sufficient reasons,
full compliance with the labeling requirements
otherwise applicable under this Act is impracticable
or is not necessary for the adequate protection of
public health and safety, it shall promulgate
regulations exempting such substances from these
requirements to the extent it deems consistent with
the objective of adequately safeguarding public
health and safety, and any hazardous substance
which does not bear a label in accordance with such
regulations shall be deemed mislabeled hazardous
substance.
Article 93. Grounds for Seizure and Condemnation of
Mislabeled Hazardous Substances.
(a) Any mislabeled hazardous substance when
introduced into commerce or while held for sale
shall be liable to be proceeded against and
condemned upon order of the concerned
department in accordance with existing
procedure for seizure and condemnation of
articles in commerce: Provided, That this Article
shall not apply to a hazardous substance
intended for export to any foreign country if:
(1) it is in a package labeled in accordance with
the specifications of the foreign purchaser;
(2) it is labeled in accordance with the laws of
the foreign country;
(3) it is labeled on the outside of the shipping
package to show that it is intended for
export; and
(4) it is so exported,
(b) any hazardous substance condemned under this
Article shall after entry of order of condemnation
be disposed of by destruction or sale as the
concerned department may direct, and the
proceeds thereof, if sold, less the legal cost and
charges, shall be paid into the treasury of the
Philippines; but such hazardous substance shall
not be sold under any order which is contrary to
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the provisions of this Act; Provided, That, after
entry of the order and upon the payment of the
costs of such proceedings and the execution of a
good and sufficient bond conditioned that such
hazardous substance shall not be sold or
disposed of contrary to the provisions of this Act,
the concerned department may direct that such
hazardous substance be delivered to or retained
by the owner thereof for destruction or for
alteration to comply with the provisions of this
Act under the supervision of an officer or
employee duly designated by the concerned
department. The expenses for such supervision
shall be paid by the person obtaining release of
the hazardous substance under bond.
(c) all expenses in connection with the destruction
provided for in paragraphs (a) and (b) of this
Article and all expenses in connection with the
storage and labor with respect to such
hazardous substance shall be paid by the owner
or consignee, and default in such payment shall
constitute a lien against any importation by such
owner or consignee.
Article 94. Labeling Requirements of Cigarettes. All
cigarettes for sale or distribution within the country
shall be contained in a package which shall bear the
following statement or its equivalent in Filipino:
"Warning" Cigarette Smoking is Dangerous to Your
Health". Such statement shall be located in
conspicuous place on every cigarette package and
shall appear in conspicuous and legible type in
contrast by typography, layout or color with other
printed matter on the package. Any advertisement of
cigarette shall contain the name warning as
indicated in the label.
Article 95. Penalties.
(a) Any person who shall violate the provisions of
Title III, Chapter IV of this Act, or its
implementing rules and regulations, except
Articles 81 to 83 of the same Chapter, shall be
subject to a fine of not less than Five hundred
pesos (P500.00) but not more than Twenty
thousand pesos (P20,000.00) or imprisonment
of not less than three (3) months but not more
than two (2) years or both, at the discretion of
the court: Provided, That, if the consumer
product is one which is not a food, cosmetic,
drug, device or hazardous substance, the
penalty shall be a fine of not less than Two
hundred pesos (P200.00) but not more than
Five thousand pesos (P5,000.00) or
imprisonment of not less than one (1) month but
not more than one (1) year or both, at the
discretion of the court.
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(b) Any person who violates the provisions of Article
81 to 83 for the first time shall be subject to a
fine of not less than Two hundred pesos
(P200.00) but not more than Five thousand
pesos (P5,000.00) or by imprisonment of not
less than one (1) month but not more than six (6)
months or both, at the discretion of the court. A
second conviction under this paragraph shall
also carry with it the penalty of revocation of
business permit and license.
Article 96. Implementing Agency. The Department
of Trade and Industry shall enforce the provisions of
this Chapter and its implementing rules and
regulations.
Article 97. Liability for the Defective Products. Any
Filipino or foreign manufacturer, producer, and any
importer, shall be liable for redress, independently of
fault, for damages caused to consumers by defects
resulting from design, manufacture, construction,
assembly and erection, formulas and handling and
making up, presentation or packing of their products,
as well as for the insufficient or inadequate
information on the use and hazards thereof.
A product is defective when it does not offer the
safety rightfully expected of it, taking relevant
circumstances into consideration, including but not
limited to:
(a) presentation of product
(b) use and hazards reasonably expected of it;
(c) the time it was put into circulation.
A product is not considered defective because
another better quality product has been placed in
the market. The manufacturer, builder, producer or
importer shall not be held liable when it evidences:
(a) that it did not place the product on the market;
(b) that although it did place the product on the
market such product has no defect;
(c) that the consumer or a third party is solely at
fault.
Article 98. Liability of Tradesman or Seller. The
tradesman/seller is likewise liable, pursuant to the
preceding article when:
(a) it is not possible to identify the manufacturer,
builder, producer or importer;
(b) the product is supplied, without clear
identification of the manufacturer, producer,
builder or importer;
(c) he does not adequately preserve perishable
goods. The party making payment to the
damaged party may exercise the right to recover
a part of the whole of the payment made
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against the other responsible parties, in
accordance with their part or responsibility in the
cause of the damage effected.
Article 99. Liability for Defective Services. The
service supplier is liable for redress, independently of
fault, for damages caused to consumers by defects
relating to the rendering of the services, as well as
for insufficient or inadequate information on the
fruition and hazards thereof.
The service is defective when it does not provide the
safety the consumer may rightfully expect of it,
taking the relevant circumstances into consideration,
including but not limited to:
(a) the manner in which it is provided;
(b) the result of hazards which may reasonably be
expected of it;
(c) the time when it was provided.
A service is not considered defective because of the
use or introduction of new techniques.
The supplier of the services shall not be held liable
when it is proven:
(a) that there is no defect in the service rendered;
(b) that the consumer or third party is solely at
fault.
Article 100. Liability for Product and Service
Imperfection. The suppliers of durable or
nondurable consumer products are jointly liable for
imperfections in quality that render the products
unfit or inadequate for consumption for which they
are designed or decrease their value, and for those
resulting from inconsistency with the information
provided on the container, packaging, labels or
publicity messages/advertisement, with due regard
to the variations resulting from their nature, the
consumer being able to demand replacement to the
imperfect parts.
If the imperfection is not corrected within thirty (30)
days, the consumer may alternatively demand at his
option:
a) the replacement of the product by another of
the same kind, in a perfect state of use;
b) the immediate reimbursement of the amount
paid, with monetary updating, without prejudice
to any losses and damages;
c) a proportionate price reduction.
The parties may agree to reduce or increase the term
specified in the immediately preceding paragraph;
but such shall not be less than seven (7) nor more
than one hundred and eighty (180) days.
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The consumer may make immediate use of the
alternatives under the second paragraph of this
Article when by virtue of the extent of the
imperfection, the replacement of the imperfect parts
may jeopardize the product quality or characteristics,
thus decreasing its value.
If the consumer opts for the alternative under sub-
paragraph (a) of the second paragraph of this Article,
and replacement of the product is not possible, it
may be replaced by another of a different kind, mark
or model: Provided, That any difference in price may
result thereof shall be supplemented or reimbursed
by the party which caused the damage, without
prejudice to the provisions of the second, third and
fourth paragraphs of this Article.
Article 101. Liability for Product Quantity
Imperfection. Suppliers are jointly liable for
imperfections in the quantity of the product when, in
due regard for variations inherent thereto, their net
content is less than that indicated on the container,
packaging, labeling or advertisement, the consumer
having powers to demand, alternatively, at his own
option:
a) the proportionate price
b) the supplementing of weight or measure
differential;
c) the replacement of the product by another of
the same kind, mark or model, without said
imperfections;
d) the immediate reimbursement of the amount
paid, with monetary updating without prejudice
to losses and damages if any.
The provisions of the fifth paragraph of Article 99
shall apply to this Article.
The immediate supplier shall be liable if the
instrument used for weighing or measuring is not
gauged in accordance with official standards.
Article 102. Liability for Service Quality Imperfection.
The service supplier is liable for any quality
imperfections that render the services improper for
consumption or decrease their value, and for those
resulting from inconsistency with the information
contained in the offer or advertisement, the
consumer being entitled to demand alternatively at
his option:
a) the performance of the services, without any
additional cost and when applicable;
b) the immediate reimbursement of the amount
paid, with monetary updating without prejudice
to losses and damages, if any;
c) a proportionate price reduction.
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Reperformance of services may be entrusted to duly
qualified third parties, at the supplier's risk and cost.
Improper services are those which prove to be
inadequate for purposes reasonably expected of
them and those that fail to meet the provisions of
this Act regulating service rendering.
Article 103. Repair Service Obligation. When
services are provided for the repair of any product,
the supplier shall be considered implicitly bound to
use adequate, new, original replacement parts, or
those that maintain the manufacturer's technical
specifications unless, otherwise authorized, as
regards to the latter by the consumer.
Article 104. Ignorance of Quality Imperfection. The
supplier's ignorance of the quality imperfections due
to inadequacy of the products and services does not
exempt him from any liability.
Article 105. Legal Guarantee of Adequacy. The
legal guarantee of product or service adequacy does
not require an express instrument or contractual
exoneration of the supplier being forbidden.
Article 106. Prohibition in Contractual Stipulation.
The stipulation in a contract of a clause preventing,
exonerating or reducing the obligation to indemnify
for damages effected, as provided for in this and in
the preceding Articles, is hereby prohibited, if there is
more than one person responsible for the cause of
the damage, they shall be jointly liable for the
redress established in the pertinent provisions of this
Act. However, if the damage is caused by a
component or part incorporated in the product or
service, its manufacturer, builder or importer and the
person who incorporated the component or part are
jointly liable.
Article 107. Penalties. Any person who shall violate
any provision of this Chapter or its implementing
rules and regulations with respect to any consumer
product which is not food, cosmetic, or hazardous
substance shall upon conviction, be subject to a fine
of not less than Five thousand pesos (P5,000.00)
and by imprisonment of not more than one (1) year or
both upon the discretion of the court.
In case of juridical persons, the penalty shall be
imposed upon its president, manager or head. If the
offender is an alien, he shall, after payment of fine
and service of sentence, be deported without further
deportation proceedings.
TORTS & DAMAGES BAR OPERATIONS COMMISSION
NUISANCE
Art. 694. A nuisance is any act, omission,
establishment, business, condition of property, or
anything else which:
(1) Injures or endangers the health or safety of
others; or
(2) Annoys or offends the senses; or
(3) Shocks, defies or disregards decency or morality;
or
(4) Obstructs or interferes with the free passage of
any public highway or street, or any body of
water; or
(5) Hinders or impairs the use of property.
Art. 696. Every successive owner or possessor of
property who fails or refuses to abate a nuisance in
that property started by a former owner or possessor
is liable therefor in the same manner as the one who
created it.
Art. 697. The abatement of a nuisance does not
preclude the right of any person injured to recover
damages for its past existence.
Art. 698. Lapse of time cannot legalize any nuisance,
whether public or private.
LIABILITY FOR NEGLIGENCE VS. LIABILITY FOR NUISANCE
Negligence Nuisance
Basis
Liability is based on lack Liability attaches
of proper care and regardless of the skill
diligence exercised to avoid the
injury
Condition of the Act
Act complained of is There is continuing harm
already done which being suffered by the
caused injury to the aggrieved party by the
plaintiff maintenance of the act
or thing which
constitutes the nuisance
Remedy
Action for damages Abatement
NUISANCE PER SE
It is recognized as a nuisance under any and all
circumstances because it constitutes a direct menace
to public health and safety and, for that reason, may
be abated summarily under the undefined law of
necessity.
To become a nuisance per se, the thing must, of
itself, because of its inherent qualities, without
complement, be productive of injury, or, by reason of
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UP COLLEGE OF LAW TORTS & DAMAGES
the matter of its use or exposure, threaten or be
dangerous to life or property.
NUISANCE PER ACCIDENCE
It becomes a nuisance depending upon certain
conditions and circumstances, and its existence
being a question of fact, it cannot be abated without
due hearing thereon in a tribunal authorized to
decide whether such a thing does in law constitute a
nuisance.
PUBLIC NUISANCE
Art. 695. Nuisance is either public or private. A public
nuisance affects a community or neighborhood or
any considerable number of persons, although the
extent of the annoyance, danger or damage upon
individuals may be unequal. A private nuisance is
one that is not included in the foregoing definition.
A public nuisance is the doing of or the failure to do
something that injuriously affects safety, health, or
morals of the public, or works some substantial
annoyance, inconvenience or injury to the public. It
causes hurt, inconvenience, or damage to the public
generally, or such part of the public as necessarily
comes in contact with it in the exercise of a public or
common right.
Art. 699. The remedies against a public nuisance are:
(1) A prosecution under the Penal Code or any local
ordinance: or
(2) A civil action; or
(3) Abatement, without judicial proceedings.
Art. 700. The district health officer shall take care
that one or all of the remedies against a public
nuisance are availed of.
Art. 701. If a civil action is brought by reason of the
maintenance of a public nuisance, such action shall
be commenced by the city or municipal mayor.
Art. 702. The district health officer shall determine
whether or not abatement, without judicial
proceedings, is the best remedy against a public
nuisance.
Art. 703. A private person may file an action on
account of a public nuisance, if it is specially injurious
to himself.
Art. 704. Any private person may abate a public
nuisance which is specially injurious to him by
removing, or if necessary, by destroying the thing
which constitutes the same, without committing a
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breach of the peace, or doing unnecessary injury. But
it is necessary:
(1) That demand be first made upon the owner or
possessor of the property to abate the nuisance;
(2) That such demand has been rejected;
(3) That the abatement be approved by the district
health officer and executed with the assistance
of the local police; and
(4) That the value of the destruction does not
exceed three thousand pesos.
PRIVATE NUISANCE
It is one which violates only private rights and
produces damage to but one or a few persons, and
cannot be said to be public.
Art. 705. The remedies against a private nuisance
are:
(1) A civil action; or
(2) Abatement, without judicial proceedings.
Art. 706. Any person injured by a private nuisance
may abate it by removing, or if necessary, by
destroying the thing which constitutes the nuisance,
without committing a breach of the peace or doing
unnecessary injury. However, it is indispensable that
the procedure for extrajudicial abatement of a public
nuisance by a private person be followed.
Art. 707. A private person or a public official
extrajudicially abating a nuisance shall be liable for
damages:
(1) If he causes unnecessary injury; or
(2) If an alleged nuisance is later declared by the
courts to be not a real nuisance.
ATTRACTIVE NUISANCE
Contributory negligence of a minor does not bar
recovery, where his immaturity and natural curiosity
impelled him to act to his injury; but discretion
shown by the child is the decisive factor.
Del Rosario vs. Manila Electric Co. (1932): It is doubtful
whether contributory negligence can properly be
imputed to the deceased, owing to his immature
years and the natural curiosity which a child would
feel to do something out of the ordinary, and the
mere fact that the deceased ignored the caution of a
companion of the age of 8 years does not, in our
opinion, alter the case.
Hidalgo Enterprises vs. Balandan (1952): 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
UP COLLEGE OF LAW TORTS & DAMAGES
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.
The principle reason for the doctrine is that the
condition or appliance in question although its
danger is apparent to those of age, is so enticing or
alluring to children of tender years as to induce them
to approach, get on or use it, and this attractiveness
is an implied invitation to such children
VIOLATION OF CONSTITUTIONAL RIGHTS
VIOLATION OF CIVIL LIBERTIES
Art 32. Any public officer or employee, or any private
individual, who directly or indirectly obstructs,
defeats, violates or in any manner impedes or
impairs any of the following rights and liberties of
another person shall be liable to the latter for
damages:
(1) Freedom of religion
(2) Freedom of speech
(3) Freedom to write for the press or to maintain a
periodical publication
(4) Freedom from arbitrary or illegal detention
(5) Freedom of suffrage
(6) The right against deprivation of property without
due process of law
(7) The right to just compensation when property is
taken for public use
(8) The right to equal protection of the laws
(9) The right to be secure in ones person, house,
papers and effects against unreasonable
searches and seizures
(10) The liberty of abode and of changing the same
(11) The right to privacy of communication and
correspondence
(12) The right to become a member of associations
and societies for purposes not contrary to law
(13) The right to take part in a peaceable assembly
and petition the government for redress of
grievances
(14) The right to be free from involuntary servitude in
any form
(15) The right of the accused against excessive bail
(16) The right of the accused to be heard by himself
and counsel, to be informed of the nature and
the cause of the accusation against him, to have
a speedy and public trial, to meet the witnesses
face to face, to have compulsory process to
secure the attendance of witnesses on is behalf;
(17) Freedom form being compelled to be a witness
against ones self, or from being forced to
confess his guilt, or from being induced by a
promise of immunity or reward to make such
confession, except when the person confessing
becomes a State witness.
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(18) Freedom from excessive fines, or cruel and
unusual punishment, unless the same is
imposed or inflicted in accordance with a statute
which has not been judicially declared
unconstitutional;
(19) Freedom of access to the courts
In any of the cases referred to in this article, whether
or not the defendants act or omission constitutes a
criminal offense, the aggrieved party has a right to
commence an entirely separate and distinct civil
action for damages, and for other relief. Such civil
action shall proceed independently of any criminal
prosecution (if the latter be instituted) and may be
proved by a preponderance of evidence.
The indemnity shall include moral damages.
Exemplary damages may also be adjudicated.
The responsibility herein set forth is not demandable
from a judge unless his act or omission constitutes a
violation of the Penal code or any other penal
statute.
Aberca, et al. vs. Ver, et al. (1988): It is obvious that
the purpose of the above codal provision (Art. 32) is
to provide a sanction to the deeply cherished rights
and freedoms enshrined in the Constitution. Its
message is clear; no man may seek to violate those
sacred rights with impunity. In times of great
upheaval or of social and political stress, when the
temptation is strongest to yield borrowing the
words of Chief Justice Claudio Teehankee to the
law of force rather than the force of law, it is
necessary to remind ourselves that certain basic
rights and liberties are immutable and cannot be
sacrificed to the transient needs or imperious
demands of the ruling power. The rule of law must
prevail, or else liberty will perish.
VIOLATIONS OF RIGHTS COMMITTED BY PUBLIC OFFICERS
Art. 27. Any person suffering material or moral loss
because a public servant or employee refuses or
neglects, without just cause, to perform his official
duty may file an action for damages and other relief
against the latter, without prejudice to any
disciplinary administrative action that may be taken.
Art. 32, supra.
Dereliction of Duty
Amaro vs. Samanguit: Requisites:
(1) Defendant is a public officer charged with a
performance of a duty in favor of the plaintiff;
(2) He refused or neglected without just cause to
perform the duty;
UP COLLEGE OF LAW
(3) Plaintiff sustained material or moral loss as a
consequence of such non-performance;
(4) The amount of such damages, if material.
Coverage
Applies only to acts of nonfeasance or the
nonperformance of some acts which a person is
obliged or has responsibility to perform.
The duty of the public servant must be ministerial in
character. If the duty is discretionary, he is not liable
unless he acted in a notoriously arbitrary manner.
Defense of Good Faith is not available
The reason of its unavailability is that an officer is
under constant obligation to discharge the duties of
his office, and it is not necessary to show that his
failure to act was due to malice or willfulness.
Art. 34. When a member of a city or municipal police
force refuses or fails to render aid or protection to
any person in case of danger to life or property, such
peace officer shall be primarily liable for damages,
and the city or municipality shall be subsidiarily
responsible therefor. The civil action herein
recognized shall be independent of any criminal
proceedings, and a preponderance of evidence shall
suffice to support such action.
Art. 34 covers a situation where:
(a) There is danger to the life or property of person;
(b) A member of a city or municipal police force who
is present in the scene refused or failed to render
aid or protection to the person; and
(c) Damages are caused wither to the person and/or
property of the victim.
Nature of liability
(1) Of the police officer Primary
(2) City or municipality - Susidiary
The defense of having observed the diligence of a
good father of a family to prevent the damage is not
available to the city/municipality.
PROVINCES, CITIES, AND MUNICIPALITIES
Art. 2189. Provinces, cities and municipalities shall be
liable for damages for the death of, or injuries
suffered by, any person by reason of the defective
condition of roads, streets, bridges, public buildings,
and other public works under their control or
supervision.
Ownership of Roads, etc. is not required
City of Manila vs. Teotico (1968): It is not necessary for
the liability therein established to attach that the
TORTS & DAMAGES BAR OPERATIONS COMMISSION
defective roads or streets belong to the province, city
or municipality. What said article requires is that the
province, city or municipality have either "control or
supervision" over said street or road.
OWNERS OF MOTOR VEHICLES
Art. 2184. In motor vehicle mishaps, the owner is
solidarily liable with his driver, if the former, who was
in the vehicle, could have, by the use of the due
diligence, prevented the misfortune. It is disputably
presumed that a driver was negligent, if he had been
found guilty of reckless driving or violating traffic
regulations at least twice within the next preceding
two months.
If the owner was not in the motor vehicle, the
provisions of article 2180 are applicable.
Art. 2185. Unless there is proof to the contrary, it is
presumed that a person driving a motor vehicle has
been negligent if at the time of the mishap, he was
violating any traffic regulation.
Art. 2186. Every owner of a motor vehicle shall file
with the proper government office a bond executed
by a government-controlled corporation or office, to
answer for damages to third persons. The amount of
the bond and other terms shall be fixed by the
competent public official.
The owner is SOLIDARILY liable with the driver for
motor vehicle mishaps when:
(1) The owner was IN the vehicle at the time, AND
(2) The owner could have, by the use of due
diligence, prevented the misfortune.
Owner of the vehicle
Owner shall mean the actual legal owner of the
motor vehicle, in whose name such vehicle is duly
registered with the LTO.
Registration of motor vehicles is required not
because it is the operative act which transfers
ownership in vehicles, but because it is the means by
which the owner can be identified so that if any
accident occurs, or damage or injury is caused in the
operation of the vehicle, responsibility can be fixed.
As held in Vargas vs. Langcay, the registered
owner/operator of a passenger vehicle is jointly and
severally liable with the driver for damages incurred
by passengers or third persons as a consequence of
injuries or death sustained in the operation of said
vehicles. Regardless of who the actual owner of a
vehicle is, the operator of record continues to be the
operator of the vehicle as regards the public and
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third persons and as such is directly and primarily
responsible for the consequences incident to its
operation, so that in contemplation of law, such
owner/operator of record is the employer of the
driver, the actual operator and employer being
considered merely as his agent.
The registered owner of a motor vehicle is primarily
liable for the damage or injury caused to another,
but he has a right to be indemnified by the real
owner of the amount he was required to pay
(Tamayo vs, Aquino) This rule applies both to private
and to common carriers with respect to their
passengers.
Note:
If the owner was NOT inside the vehicle, Art. 2180
applies.
The presumption is AGAINST the owner of the motor
vehicle. He has the burden of proving due diligence.
Thus, once a driver is proven negligent in causing
damage, the law presumes the vehicle owner equally
negligent and imposes upon the latter the burden of
proving proper selection of employee as a defense.
Summary:
Owner PRESENT in the Owner NOT PRESENT in
Vehicle the Vehicle
Owner is liable if he could Owner may be held
have prevented the liable under Art. 2180,
mishap by the exercise of par. 5.
due diligence.
Caedo vs. Yu Khe Tai (1968): Car owners are not held
to a uniform and inflexible standard of diligence as
are professional drivers. In many cases they refrain
from driving their own cars and instead hire other
persons to drive for them precisely because they are
not trained or endowed with sufficient discernment
to know the rules of traffic or to appreciate the
relative dangers posed by the different situations
that are continually encountered on the road. What
would be a negligent omission under aforesaid
Article on the part of a car owner who is in the prime
of age and knows how to handle a motor vehicle is
not necessarily so on the part, say, of an old and
infirm person who is not similarly equipped.
The law does not require that a person must possess
a certain measure of skill or proficiency either in the
mechanics of driving or in the observance of traffic
rules before he may own a motor vehicle. The test of
his negligence, within the meaning of Article 2184, is
his omission to do that which the evidence of his own
senses tells him he should do in order to avoid the
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accident. And as far as perception is concerned,
absent a minimum level imposed by law, a maneuver
that appears to be fraught with danger to one
passenger may appear to be entirely safe and
commonplace to another. Were the law to require a
uniform standard of perceptiveness, employment of
professional drivers by car owners who, by their very
inadequacies, have real need of drivers' services,
would be effectively proscribed.
Duavit vs. CA (1989): An owner of a vehicle cannot be
held liable for an accident involving the said vehicle if
the same was driven without his consent or
knowledge and by a person not employed by him.
PROPRIETOR OF BUILDING OR STRUCTURE
Art. 2190. The proprietor of a building or structure is
responsible for the damages resulting from its total
or partial collapse, if it should be due to the lack of
necessary repairs.
Art. 2191. Proprietors shall also be responsible for
damages caused:
(1) By the explosion of machinery which has not
been taken care of with due diligence, and the
inflammation of explosive substances which
have not been kept in a safe and adequate
place;
(2) By excessive smoke, which may be harmful to
persons or property;
(3) By the falling of trees situated at or near
highways or lanes, if not caused by force
majeure;
(4) By emanations from tubes, canals, sewers or
deposits of infectious matter, constructed
without precautions suitable to the place.
Art. 2192. If damage referred to in the two preceding
articles should be the result of any defect in the
construction mentioned in article 1723, the third
person suffering damages may proceed only against
the engineer or architect or contractor in accordance
with said article, within the period therein fixed.
Ownership of a building imposes on the proprietor
thereof the duty to maintain it in good condition at
all times to the end that it may not collapse either
totally or partially as to cause damage or injury to
anothers person or property.
This duty obtains whether the building is leased or
held in usufruct.
Considering, however, that the lessee or usufructuary
has direct and immediate control of the building, the
law imposes on him the duty to notify the proprietor
UP COLLEGE OF LAW TORTS & DAMAGES
of such urgent or extra-ordinary repairs AND where
the proprietors failure to make the necessary repairs
was due to the failure of the lessee or usufructuary to
notify him, the proprietor is entitled to
indemnification for damages he may have been
required to pay to the parties.
Gotesco Investment Corp. vs. Chatto (1992): The
owner or proprietor of a place of public amusement
impliedly warrants that the premises, appliances and
amusement devices are safe for the purpose for
which they are designed, the doctrine being subject
to no other exception or qualification than that he
does not contract against unknown defects not
discoverable by ordinary or reasonable means.
HEAD OF FAMILY
Art 2193. The head of a family that lives in a building
or a part thereof, is responsible for damages caused
by things thrown or falling from the same.
Purpose of the law
To relieve the injured party of the difficulty of
determining and proving who threw the thing or
what caused it to fall, or that either was due to the
fault or negligence of any particular individual.
Dingcong vs. Kanaan (1941): Lessee is considered as
the head of the family. It is enough that he lives in
and has control over it.
Strict Liability
POSSESSOR AND USER OF AN ANIMAL
Art. 2183. The possessor of an animal or whoever
may make use of the same is responsible for the
damage which it may cause, although it may escape
or be lost. This responsibility shall cease only in case
the damage should come from force majeure or from
the fault of the person who has suffered damage.
APPLICABILITY OF PROVISION
Since the law makes no distinction, this is applicable
to both wild (in case the wild animal is kept) and
domestic animals. It is enough that defendant is the
possessor, owner, or user of the animal at the time it
caused the damage complained of, to hold him
liable therefor.
BASIS
Vestil vs. IAC (1989): Possession of the animal, not
ownership, is determinative of liability under Art.
2183. The obligation imposed by said article is not
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based on the negligence or on the presumed lack of
vigilance of the possessor or user of the animal
causing damage. It is based on natural equity and on
the principle of social interest that he who possesses
animals for his utility, pleasure, or service, must
answer for any damage which such animal may
cause.
POSSIBLE DEFENSES AGAINST THIS LIABILITY
(1) Force Majeure
(2) Fault of person suffering damage
(3) Act of third persons
SCOPE OF PROVISION
Contention that the defendant could not be
expected to exercise remote control of the animal is
not acceptable. In fact, Art. 2183 holds the possessor
liable even if the animal should escape or be lost
and so be removed from his control.
It is likewise immaterial that the animal was tame
and was merely provoked by the victim. The law does
not speak only of vicious animals but covers even
tame ones as long as they cause injury.
NUISANCE
Sangco: A person who creates or maintains a
nuisance is liable for the resulting injury to others
regardless of the degree of care or skill exercised to
avoid the injury. The creation or maintenance of a
nuisance is a violation of an absolute duty.
Nuisance is a condition and not an act or failure to
act, so that if a wrongful condition exists, the person
responsible for its existence is responsible for the
resulting damages to others.
CLASSES
(1) Nuisance per se; Nuisance per accidence
(2) Public nuisance; private nuisance
Iloilo Ice and Cold Storage Co. vs. Municipal Council
(1913): A nuisance is, according to Blackstone, "Any
thing that worketh hurt, inconvenience, or damages."
They arise from pursuing particular trades or
industries in populous neighborhoods; from acts of
public indecency, keeping disorderly houses, and
houses of ill fame, gambling houses, etc. Nuisances
have been divided into two classes: Nuisances per se,
and nuisances per accidens. To the first belong those
which are unquestionably and under all
circumstances nuisances, such as gambling houses,
houses of ill fame, etc. The number of such
nuisances is necessarily limited, and by far the
greater number of nuisances are such because of
particular facts and circumstances surrounding the
otherwise harmless cause of the nuisance. For this
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reason, it will readily be seen that whether a There can be no doubt that commercial and
particular thing is a nuisance is generally a question industrial activities which are lawful in themselves
of fact, to be determined in the first instance before may become nuisances if they are so offensive to the
the term nuisance can be applied to it. senses that they render the enjoyment of life and
property uncomfortable. It is no defense that skill
Salao and Lucas vs. Santos (1939): Nuisances are of and care have been exercised and the most improved
two kinds: nuisance per se and nuisance per methods and appliances employed to prevent such
accidens. The first is recognized as a nuisance under result.
any and all circumstances because it constitutes a
direct menace to public health or safety and, for that PRODUCTS LIABILITY (SUPRA)
reason, may be abated summarily under the Art 2187. Manufacturers and processors of foodstuffs,
undefined law of necessity. The second is that which drinks, toilet articles and similar goods shall be liable
depends upon certain conditions and circumstances, for death or injuries caused by any noxious or
and its existence being a question of fact, it cannot harmful substances used, although no contractual
be abated without due hearing thereon in a tribunal relation exists between them and the consumers.
authorized to decide whether such a thing does in
law constitute a nuisance. CONSUMER ACT
Consumer Act Provisions (supra)
EASEMENT AGAINST NUISANCE
Art. 682. Every building or piece of land is subject to Coca-Cola v. CA (1993): While it may be true that the
the easement which prohibits the proprietor or pre-existing contract between the parties may, as a
possessor from committing nuisance through noise, general rule, bar the applicability of the law on
jarring, offensive odor, smoke, heat, dust, water, quasi-delict, the liability may itself be deemed to
glare and other causes. arise from quasi-delict if the act which breaks the
contract is also a quasi-delict.
Art. 683. Subject to zoning, health, police and other
laws and regulations, factories and shops may be Summary:
maintained provided the least possible annoyance is Person Strictly For What Defenses or
caused to the neighborhood. Liable Exceptions
Possessor of an For the damage Force majeure
The provisions impose a prohibition upon owners of animal or it may cause Fault of the
buildings of land from committing therein a nuisance whoever makes person who
or using such buildings or lands in a manner as will use of them suffered
constitute a nuisance. It is based on the maxim sic even if the damage
utere tuo ut alienum non laedas (so use your own as animal is lost or
not to injure anothers property). escaped
Owner of Motor Motor vehicle Solidary liability
Velasco vs. Manila Electric Co. (1971): The general rule Vehicle mishaps only if the
is that everyone is bound to bear the habitual or owner was in
customary inconveniences that result from the the vehicle and
proximity of others, and so long as this level is not if he could have
surpassed, he may not complain against them. But if prevented it
the prejudice exceeds the inconveniences that such thru due
proximity habitually brings, the neighbor who causes diligence
such disturbances is held responsible for the If not in vehicle
resulting damage, being guilty of causing nuisance. 2180
Manufacturers Death and Absence on
While no previous adjudications on the specific issue and Processors injuries caused contractual
have been made in the Philippines, our law of of foodstuffs, by any noxious relation NOT a
nuisances is of American origin, and a review of drinks, toilet or harmful defense
authorities clearly indicates the rule to be that the articles and substances used
causing or maintenance of disturbing noise or sound similar goods
may constitute an actionable nuisance. (FDTAS)
Defendant in Death or injury possession or
possession of results from use thereof is
dangerous such possession indispensable in

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Person Strictly For What Defenses or Person Strictly For What Defenses or
Liable Exceptions Liable Exceptions
weapons/ his occupation without
substances or business precautions
such as firearms suitable to the
and poison place
Provinces, Cities The death or Public works Engineer, if damage of
and injuries suffered must be under Architect or building or
Municipalities by any person by their Contractor structure is
reason of the supervisions caused by defect
defective in construction
condition of which happens
roads, streets, within 15 years
bridges, public from
buildings, and construction;
other public action must be
works brought within
Proprietor ofa) Total or partial Responsibility 10 years from
building/ collapse of for collapse collapse
structure building or should be due Head of the Liable for
structure if due to the lack of Family that lives damages
to lack of necessary in a building or caused by
necessary repair repairs any part thereof things thrown or
s falling from the
b) Explosion of same
machinery
which has not
been taken
cared of with
due diligence,
and the
inflammation of
explosive
substances
which have not
been kept in a
safe and
adequate place
c) By excessive
smoke, which
may be harmful
to persons or
property
d) By falling of
trees situated at
or near
highways or
lanes, if not
caused by force
majeure
e) By emanations
from tubes,
canals, sewers
or deposits of
infectious
matter,
constructed

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Damages
DEFINITION
People vs. Ballesteros: Damages may be defined as
the pecuniary compensation, recompense, or
satisfaction for an injury sustained, or as otherwise
expressed, the pecuniary consequences which the
law imposes for the breach of some duty or the
violation of some right.
DAMAGES VS. INJURY
Custodio v. CA (1996): Injury is the illegal invasion of
a legal right. Damage is the loss, hurt, or harm which
results from the injury. Damages are the recompense
or compensation awarded for the damage suffered.
Ocena vs. Icamina: The obligation to repair the
damages exists whether done intentionally or
negligently and whether or not punishable by law.
ELEMENTS FOR RECOVERY OF DAMAGES
(1) Right of action
(2) For a wrong inflicted by the defendant
(3) Damage resulting to the plaintiff
CLASSIFICATION
Art. 2197. Damages may be:
(1) Actual or compensatory;
(2) Moral;
(3) Nominal;
(4) Temperate or moderate;
(5) Liquidated; or
(6) Exemplary or corrective.
ACCORDING TO PURPOSE
(1) For adequate reparation of the injury
a) Compensatory (reparation of pecuniary
losses)
b) Moral (reparation for non-pecuniary losses:
injury to feelings; physical suffering, etc.)
(2) For vindication of the right violated: Nominal
(3) For less than adequate reparation: Moderate
(4) For deterring future violations: Exemplary or
corrective
ACCORDING TO MANNER OF DETERMINATION
(1) Conventional (or liquidated)
(2) Non-conventional, which may either be:
(a) Statutory (fixed by law, as in moratory
interest)
(b) Judicial (determined by the courts)
SPECIAL AND ORDINARY
General damages
Those which are the natural and necessary result of
the wrongful act or omission asserted as the
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DAMAGES BAR OPERATIONS COMMISSION
foundation of liability, and include those which
follow as a conclusion of law from the statement of
the facts of the injury.
Special damages
Damages that arise from the special circumstance of
the case, which, if properly pleaded, may be added to
the general damages which the law presumes or
implies from the mere invasion of the plaintiffs
rights. Special damages are the natural, but NOT the
necessary result of an injury. These are not implied
by law.
Actual and Compensatory
Damages
Compensatory damages are damages in satisfaction
of, or in recompense for, loss or injury sustained. The
phrase actual damages is sometimes used as
synonymous with compensatory damages.
REQUISITES
Asilio, Jr. v. People and Sps. Bombasi (2011): To seek
recovery of actual damages, it is necessary to prove
the actual amount of loss with a reasonable degree
of certainty, premised upon competent proof and on
the best evidence obtainable.
WHEN IS A PERSON ENTITLED?
(1) When there is a pecuniary loss suffered by him;
(2) When he has alleged and prayed for such relief
(Manchester Devt Corp vs. CA);
(3) When he has duly proved it;
(4) When provided by law or by stipulation.
No proof of pecuniary loss is necessary for: moral,
nominal, temperate, liquidated or exemplary damages.
The assessment of such damages is discretionary
upon the court, except liquidated ones. (Art. 2216)
ALLEGED AND PROVED WITH CERTAINTY
Art. 2199. Except as provided by law or by stipulation,
one is entitled to an adequate compensation only for
such pecuniary loss suffered by him as he has duly
proved. Such compensation is referred to as actual
or compensatory damages.
THE DAMAGES MUST BE PROVEN BY
COMPETENT EVIDENCE (ADMISSIBLE OR
PROBATIVE)
Integrated Packaging Corp. vs. CA; Fuentes vs. CA: It
is necessary to prove with a reasonable degree of
certainty, premised upon competent proof and on
UP COLLEGE OF LAW
the best evidence obtainable by the injured party, the
actual amount of loss.
Damages must be proved and cannot be presumed.
It must be established by clear evidence.
Valencia vs. Tantoco (1956): Damages must be
proved with reasonable accuracy, even when not
denied.
DEGREE OF CERTAINTY REQUIRED AS TO: FACT,
CAUSE AND AMOUNT OF DAMAGES
Damages are not rendered uncertain just because
they cannot be calculated with absolute exactness or
because the consequences of the wrong are not
precisely definite in pecuniary amount.
The principle which will disallow recovery of
damages when their existence rests solely on
speculation applies both to the fact and cause of
damages.
(1) The requirement of certainty does not prevent the
drawing of reasonable inferences from the fact
and circumstance in evidence.
(2) Events which occur after the wrong complained
of may serve to render the damage sufficiently
certain.
(3) The damages must be susceptible of
ascertainment in some manner other than by
mere speculation, conjecture or surmise and by
reference to some fairly definite standard, such as
market value, established experience or direct
inference from known circumstances.
Talisay-Silay vs. Associacion: Where, however, it is
reasonably certain that injury consisting of failure to
realize otherwise reasonably expected profits had
been incurred, uncertainty as to the precise amount
of such unrealized profits will not prevent recovery or
the award of damages.
NOT SPECULATIVE
Actual damages to be compensable must be proved
by clear evidence, a court cannot rely on speculation,
conjectures or guesswork as to the fact and amount
of damages, but must depend on actual proof that
damages has been suffered and on evidence of the
actual amount.
COMPONENTS
Actual damage covers the following:
(1) Value of loss; unrealized profit
(2) Attorneys fees and expenses of litigation
(3) Interest
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DAMAGES BAR OPERATIONS COMMISSION
VALUE OF LOSS; UNREALIZED PROFIT
Art. 2200. Indemnification for damages shall
comprehend not only the value of the loss suffered,
but also that of the profits which the obligee failed to
obtain.
In other words, indemnification for damages is not
limited to damnum emergens (actual loss) but
extends to lucrum cessans (a cession of gain or
amount of profit lost).
ATTORNEYS FEES AND EXPENSES OF
LITIGATION
Art. 2208. In the absence of stipulation, attorney's
fees and expenses of litigation, other than judicial
costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has
compelled the plaintiff to litigate with third
persons or to incur expenses to protect his
interest;
(3) In criminal cases of malicious prosecution
against the plaintiff;
(4) In case of a clearly unfounded civil action or
proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident
bad faith in refusing to satisfy the plaintiff's
plainly valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household
helpers, laborers and skilled workers;
(8) In actions for indemnity under workmen's
compensation and employer's liability laws;
(9) In a separate civil action to recover civil liability
arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just
and equitable that attorney's fees and expenses
of litigation should be recovered.
In all cases, the attorney's fees and expenses of
litigation must be reasonable.
General Rule
Attorneys fees and costs of litigation are recoverable
IF stipulated.
Exceptions
If there is no stipulation, they are recoverable only in
the following cases:
(1) By reason of malice or bad faith
(a) When exemplary damages are awarded
(b) In case of a clearly unfounded civil action
(c) Where defendant acted in gross and evident
bad faith
UP COLLEGE OF LAW DAMAGES BAR OPERATIONS COMMISSION

(d) When at least double judicial costs are No interest may be recovered on unliquidated (not
awarded fixed in amount) claims or damages, except when
(2) By reason of plaintiffs indigence in the demand can be established with reasonable
(a) Actions for legal support certainty at the Courts discretion.
(b) Actions for recovery of wages of laborers,
etc. COMPOUNDING OF INTEREST
(c) Actions for workmens compensation Interest due shall earn legal interest from the time it
(3) By reason of crimes in is judicially demanded, although the obligation may
(a) Criminal cases of malicious prosecution be silent on the point.
(b) Separate actions to recover civil liability
arising from crime Note that interest due can earn only at 6%, whether
(4) By reason of equity the rate of interest of the principal is greater than
(a) Where the defendants act compelled 6%.
plaintiff to litigate with third persons
(b) Where the Court deems it just and equitable DETERMINATION OF LEGAL INTEREST
(1) When an obligation, regardless of its source (i.e.,
Note: law, contracts, quasi-contracts, delicts or quasi-
In all cases, attorneys fees and costs of litigation delicts) is breached, the contravenor can be held
must be reasonable. liable for damages.
(2) With regard particularly to an AWARD OF
Even if expressly stipulated, attorneys fees are INTEREST in the concept of actual and
subject to control by the Courts. compensatory damages, the RATE of interest, as
well as the ACCRUAL thereof, is imposed, as
INTEREST follows (Eastern Shipping Lines vs. CA, 1994):
Art. 2209. If the obligation consists in the payment of
a sum of money, and the debtor incurs in delay, the
indemnity for damages, there being no stipulation to Base Rate Accrual
the contrary, shall be the payment of the interest
agreed upon, and in the absence of stipulation, the (a) When the (a) That which to be computed
legal interest, which is six per cent per annum. obligation is may have from default, i.e.,
breached, and it been from JUDICIAL or
consists in the stipulated in EXTRAJUDICIAL
Art. 2210. Interest may, in the discretion of the court, PAYMENT OF A writing. demand under
be allowed upon damages awarded for breach of SUM OF b) In the and subject to the
contract. MONEY, i.e., a absence of provisions of
loan or stipulation, Article 1169 of the
Art. 2211. In crimes and quasi-delicts, interest as a forbearance of the rate of Civil Code.
part of the damages may, in a proper case, be money, the interest shall
adjudicated in the discretion of the court. interest due be 12% per
should be annum (legal
Art. 2212. Interest due shall earn legal interest from interest)
the time it is judicially demanded, although the (b) Furthermore, legal interest from the time it is
obligation may be silent upon this point. the INTEREST JUDICIALLY
DUE shall itself demanded.
earn
Art. 2213. Interest cannot be recovered upon (c) When an at the rate of If claim or
unliquidated claims or damages, except when the obligation, NOT 6% per damages are
demand can be established with reasonable constituting a annum. LIQUIDATED,
certainty. loan or from default, i.e.,
forbearance of from judicial or
INTEREST ACCRUES WHEN: money, is extrajudicial
(1) The obligation consists in the payment of a sum breached, an demand. (Art.
of money interest on the 1169, Civil Code)
(2) Debtor incurs in delay AMOUNT OF
(3) There being no stipulation to the contrary DAMAGES If UNLIQUIDATED,
awarded may from the time the
be imposed at demand can be

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IN CONTRACTS AND QUASI-CONTRACTS

Base Rate Accrual Art. 2201. In contracts and quasi-contracts, the
damages for which the obligor who acted in good
the discretion of established with faith is liable shall be those that are the natural and
the court. reasonable probable consequences of the breach of the
certainty. Hence, obligation, and which the parties have foreseen or
The actual base the interest shall could have reasonably foreseen at the time the
for the begin to run only obligation was constituted.
computation of FROM THE DATE
legal interest THE JUDGMENT In case of fraud, bad faith, malice or wanton attitude,
shall be on the OF THE COURT IS the obligor shall be responsible for all damages
amount finally MADE (at which which may be reasonably attributed to the non-
adjudged. time the performance of the obligation.
quantification of
damages may be
deemed to have Art. 2214. In quasi-delicts, the contributory
been reasonably negligence of the plaintiff shall reduce the damages
ascertained). that he may recover.
(d) When the the rate of from FINALITY
JUDGMENT of legal interest, UNTIL ITS Art. 2215. In contracts, quasi-contracts, and quasi-
the court whether the SATISFACTION, delicts, the court may equitably mitigate the
awarding a sum case falls this period being damages under circumstances other than the case
of money under a,b, or deemed to be an referred to in the preceding article, as in the
becomes final c, above, shall equivalent to a following instances:
and executory, be 12% per forbearance of (1) That the plaintiff himself has contravened the
annum credit. terms of the contract;
(2) That the plaintiff has derived some benefit as a
START OF DELAY result of the contract;
(1) Extrajudicial: demand letter (3) In cases where exemplary damages are to be
(2) Judicial: Filing of complaint awarded, that the defendant acted upon the
(3) Award advice of counsel;
(4) That the loss would have resulted in any event;
EXTENT OR SCOPE OF ACTUAL DAMAGES (5) That since the filing of the action, the defendant
Art. Liability extends Note: has done his best to lessen the plaintiff's loss or
2201 to those: Liability injury.
(1) natural and extends to
probable all damages (a) The obligor IN GOOD FAITH is liable for such
consequences which may damages
of the breach be (1) That are the natural and probable
(2) those that reasonably consequences of the breach of the
have been attributed to obligation; and
Contracts
foreseen the non- (2) That the parties have foreseen (or could
and quasi
(3) those that performance have reasonably foreseen) such damages at
contracts
could have of the the time the obligation was constituted
been obligation in
reasonably case of Natural and probable consequence
foreseen fraud, bad requires:
Provided: obligor faith, malice (1) Causality: That the damage would not
in good faith or wanton have resulted without fault or
attitude negligence of the defendant (but for
(FBM-WA). rule)
Art. Liability extends Note: (2) Adequacy: That the fault of the obligor
2202 Crimes to all damages WON would normally (ordinarily) result in the
and which are the damage is damage suffered by the obligee
quasi- natural and foreseen is
delicts probable irrelevant (b) In case of FRAUD, BAD FAITH, MALICE OR
consequence WANT OF ATTITUDE, the obligor answers for

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UP COLLEGE OF LAW
(1) All damages which may be reasonably
attributed to the non-performance of the
obligation, whether foreseen or not
(2) Exemplary or corrective damages
Note:
Interest may be allowed on damages awarded, in the
discretion of the court.
Daywalt vs. Recoletos et al.: The damages
recoverable upon breach of contract are, primarily,
the ordinary, natural and in a sense the necessary
damages resulting from the breach. Other damages,
known as special damages, are recoverable where it
appears that the particular conditions which made
such damages a probable consequence of the
breach were known to the delinquent party at the
time the contract was made.
IN CRIMES AND QUASI-DELICTS
Art. 2202. In crimes and quasi-delicts, the defendant
shall be liable for all damages which are the natural
and probable consequences of the act or omission
complained of. It is not necessary that such damages
have been foreseen or could have reasonably been
foreseen by the defendant.
Art. 2206. The amount of damages for death caused
by a crime or quasi-delict shall be at least three
thousand pesos, even though there may have been
mitigating circumstances. In addition:
(1) The defendant shall be liable for the loss of the
earning capacity of the deceased, and the
indemnity shall be paid to the heirs of the latter;
such indemnity shall in every case be assessed
and awarded by the court, unless the deceased
on account of permanent physical disability not
caused by the defendant, had no earning
capacity at the time of his death;
(2) If the deceased was obliged to give support
according to the provisions of article 291, the
recipient who is not an heir called to the
decedent's inheritance by the law of testate or
intestate succession, may demand support from
the person causing the death, for a period not
exceeding five years, the exact duration to be
fixed by the court;
(3) The spouse, legitimate and illegitimate
descendants and ascendants of the deceased
may demand moral damages for mental
anguish by reason of the death of the deceased.
Defendant is liable for all damages which are the
natural and probable consequences of the act or
omission complained of; it is not necessary that such
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DAMAGES BAR OPERATIONS COMMISSION
damages were foreseen, or reasonably foreseeable
by the defendant.
Algarra vs. Sandejas: Actual damages for a negligent
act or omission are confined to those which "were
foreseen or might have been foreseen," or those
which were "the natural and probable
consequences" or "the direct and immediate
consequences" of the act or omission.
Note:
Damages are to be increased or decreased (in case of
crimes only) according to aggravating or mitigating
circumstances present.
Interest, as part of damages, may be adjudicated in a
proper case, in the Courts discretion.
Contributory negligence of the plaintiff, in case of
quasi-delicts, shall reduce the damages to which he
may be entitled.
Note:
In crimes, no mitigation for contributory negligence.
Moral Damages
Art. 2217. Moral damages include physical suffering,
mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social
humiliation, and similar injury. Though incapable of
pecuniary computation, moral damages may be
recovered if they are the proximate result of the
defendant's wrongful act for omission.
Art. 2218. In the adjudication of moral damages, the
sentimental value of property, real or personal, may
be considered.
Visayan Sawmill vs. CA: Moral damages are
emphatically not intended to enrich a complainant
at the expense of the defendant. Its award is aimed
at the restoration, within the limits of the possible, of
the spiritual status quo ante, and it must be
proportional to the suffering inflicted.
Bagumbayan Corp. vs. IAC (1984): Mental suffering
means distress or serious pain as distinguished from
annoyance, regret or vexation.
Mental anguish is intense mental suffering.
Generally, damages for mental anguish are limited
to cases in which there has been a personal physical
injury or where the defendant willfully, wantonly,
UP COLLEGE OF LAW
recklessly, or intentionally caused the mental
anguish.
WHEN AWARDED
Awarded when injury consists of: (PBMF-MWSSS)
(a) Physical suffering
(b) Besmirched reputation
(c) Mental anguish
(d) Fright
(e) Moral shock
(f) Wounded feelings
(g) Social humiliation
(h) Serious anxiety
(i) Similar injury
(1) Though incapable of pecuniary computation
(2) If such is the proximate result of defendants act
or omission.
REQUISITES FOR AWARDING MORAL DAMAGES
Villanueva vs. Salvador: Requisites for awarding
moral damages:
(1) there must be an injury, whether physical, mental
or psychological, clearly sustained by the
claimant;
(2) there must be a culpable act or omission factually
established;
(3) the wrongful act or omission of the defendant
must be the proximate cause of the injury
sustained by the claimant; and
(4) the award of damages is predicated on any of the
cases stated in ART. 2219 NCC.
GENERAL PRINCIPLES OF RECOVERY:
(1) Moral damages must somehow be proportional
to the suffering inflicted.
(2) In culpa contractual or breach of contract, moral
damages may be recovered when the defendant
acted in bad faith or was guilty of gross
negligence (amounting to bad faith) or in
wanton disregard of his contractual obligation
and, exceptionally, when the act of breach of
contract itself is constitutive of tort resulting in
physical injuries.
(3) By special rule in Article 1764, in relation to
Article 2206, moral damages may also be
awarded in case the death of a passenger
results from a breach of carriage.
(4) In culpa aquiliana or quasi-delict,
(a) when an act or omission causes physical
injuries, or
(b) where the defendant is guilty of intentional
tort, moral damages may aptly be
recovered. This rule also applies to
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DAMAGES BAR OPERATIONS COMMISSION
contracts when breached by tort.
(5) In culpa criminal, moral damages could be
lawfully due when the accused is found guilty of
physical injuries, lascivious acts, adultery or
concubinage, illegal or arbitrary detention,
illegal arrest, illegal search, or defamation.
(6) Malicious prosecution can also give rise to a
claim for moral damages. The term "analogous
cases," referred to in Article 2219, following the
ejusdem generis rule, must be held similar to
those expressly enumerated by the law.
(7) Although the institution of a clearly unfounded
civil suit can at times be a legal justification for
an award of attorney's fees, such filing, however,
has almost invariably been held not to be a
ground for an award of moral damages.
(Expertravel& Tours vs. CA, 1 to 7)
(8) The burden rests on the person claiming moral
damages to show convincing evidence for good
faith is presumed. In a case involving simple
negligence, moral damages cannot be
recovered. (Villanueva vs. Salvador)
(9) Failure to use the precise legal terms or
"sacramental phrases" of "mental anguish,
fright, serious anxiety, wounded feelings or
moral shock" does not justify the denial of the
claim for damages. It is sufficient that these
exact terms have been pleaded in the complaint
and evidence has been adduced (Miranda-
Ribaya vs. Bautista)
(10) Even if the allegations regarding the amount of
damages in the complaint are not specifically
denied in the answer, such damages are not
deemed admitted. (Raagas, et al. vs. Traya et al).
(11) An appeal in a criminal case opens the whole
case for review and this 'includes the review of
the penalty, indemnity and damages. Even if the
offended party had not appealed from said
award, and the only party who sought a review
of the decision of said court was the accused, the
court can increase damages awarded.
(Sumalpong vs. CA)
(12) It can only be awarded to natural persons.
ABS-CBN vs. CA: The award of moral damages
cannot be granted in favor of a corporation because,
being an artificial person and having existence only
in legal contemplation, it has no feelings, no
emotions, no senses, It cannot, therefore, experience
UP COLLEGE OF LAW
physical suffering and mental anguish, which can be
experienced only by one having a nervous system.
The statement in People vs. Manero and Mambulao
Lumber Co. vs. PNB that a corporation may recover
moral damages if it "has a good reputation that is
debased, resulting in social humiliation" is an obiter
dictum.
NAPOCOR vs. Philipp Brothers: While it is true that
besmirched reputation is included in moral
damages, it cannot cause mental anguish to a
corporation, unlike in the case of a natural person,
for a corporation has no reputation in the sense that
an individual has, and besides, it is inherently
impossible for a corporation to suffer mental
anguish.
Question
Ortillo contracts Fabricato, Inc. to supply and install
tile materials in a building he is donating to his
province. Ortillo pays 50% of the contract price as
per agreement. It is also agreed that the balance
would be payable periodically after every 10%
performance until completed. After performing
about 93% of the contract, for which it has been paid
an additional 40% as per agreement, Fabricato, Inc.
did not complete the project due to its sudden
cessation of operations. Instead, Fabricato, Inc.
demands payment of the last 10% of the contract
despite its non-completion of the project. Ortillo
refuses to pay, invoking the stipulation that payment
of the last amount of 10% shall be upon completion.
Fabricato, Inc. brings suit for the entire 10% plus
damages. Ortillo counters with claims for (a) moral
damages for Fabricato, Inc.s unfounded suit which
has damaged his reputation as a philanthropist and
respected businessman in his community, and (b)
attorneys fees.
(a) Does Ortillo have a legal basis for his claim for
moral damages?
(b) How about his claim for attorneys fees, having
hired a lawyer to defend him?
Suggested Answer:
(a) There is no legal basis to Ortillos claim for
moral damages. It does not fall under the
coverage of Article 2219 of the New Civil Code.
(b) Ortillo is entitled to attorneys fees because
Fabricatos complaint is a case of malicious
prosecution or a clearly unfounded civil action
(Art. 2208 [4] and [11], NCC).
WHEN RECOVERABLE
Art. 2219. Moral damages may be recovered in the
following and analogous cases:
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DAMAGES BAR OPERATIONS COMMISSION
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious
acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in article 309;
(10) Acts and actions referred to in articles 21, 26, 27,
28, 29, 30, 32, 34, and 35.
The parents of the female seduced, abducted, raped,
or abused, referred to in No. 3 of this article, may
also recover moral damages.
The spouse, descendants, ascendants, and brothers
and sisters may bring the action mentioned in No. 9
of this article, in the order named.
Art. 2220. Willful injury to property may be a legal
ground for awarding moral damages if the court
should find that, under the circumstances, such
damages are justly due. The same rule applies to
breaches of contract where the defendant acted
fraudulently or in bad faith.
IN SEDUCTION, ABDUCTION, RAPE AND OTHER LASCIVIOUS
ACTS
People vs. Calongui: Anent the award of damages,
civil indemnity ex delicto is mandatory upon finding
of the fact of rape while moral damages is awarded
upon such finding without need of further proof
because it is assumed that a rape victim has actually
suffered moral injuries entitling the victim to such
award. If without factual and legal bases, no award
of exemplary damages should be allowed.
Note:
Recovery may be had by the offended party and also
by her parents.
IN ACTS REFERRED TO IN ARTS. 21, 26, 27, 28, 29, 32,
34 &35, NCC
Art. 21. Any person who wilfully causes loss or injury
to another in a manner that is contrary to morals,
good customs or public policy shall compensate the
latter for the damage.
Art. 26. Every person shall respect the dignity,
personality, privacy and peace of mind of his
neighbors and other persons. The following and
similar acts, though they may not constitute a
criminal offense, shall produce a cause of action for
damages, prevention and other relief:
UP COLLEGE OF LAW
(1) Prying into the privacy of another's residence:
(2) Meddling with or disturbing the private life or
family relations of another;
(3) Intriguing to cause another to be alienated from
his friends;
(4) Vexing or humiliating another on account of his
religious beliefs, lowly station in life, place of
birth, physical defect, or other personal
condition.
Art. 27. Any person suffering material or moral loss
because a public servant or employee refuses or
neglects, without just cause, to perform his official
duty may file an action for damages and other relief
against he latter, without prejudice to any
disciplinary administrative action that may be taken.
Art. 28. Unfair competition in agricultural,
commercial or industrial enterprises or in labor
through the use of force, intimidation, deceit,
machination or any other unjust, oppressive or
highhanded method shall give rise to a right of
action by the person who thereby suffers damage.
Art. 29. When the accused in a criminal prosecution
is acquitted on the ground that his guilt has not been
proved beyond reasonable doubt, a civil action for
damages for the same act or omission may be
instituted. Such action requires only a
preponderance of evidence. Upon motion of the
defendant, the court may require the plaintiff to file a
bond to answer for damages in case the complaint
should be found to be malicious.
If in a criminal case the judgment of acquittal is
based upon reasonable doubt, the court shall so
declare. In the absence of any declaration to that
effect, it may be inferred from the text of the decision
whether or not the acquittal is due to that ground.
Art. 32. Any public officer or employee, or any private
individual, who directly or indirectly obstructs,
defeats, violates or in any manner impedes or
impairs any of the following rights and liberties of
another person shall be liable to the latter for
damages:
(1) Freedom of religion;
(2) Freedom of speech;
(3) Freedom to write for the press or to maintain a
periodical publication;
(4) Freedom from arbitrary or illegal detention;
(5) Freedom of suffrage;
(6) The right against deprivation of property without
due process of law;
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DAMAGES BAR OPERATIONS COMMISSION
(7) The right to a just compensation when private
property is taken for public use;
(8) The right to the equal protection of the laws;
(9) The right to be secure in one's person, house,
papers, and effects against unreasonable
searches and seizures;
(10) The liberty of abode and of changing the same;
(11) The privacy of communication and
correspondence;
(12) The right to become a member of associations
or societies for purposes not contrary to law;
(13) The right to take part in a peaceable assembly
to petition the government for redress of
grievances;
(14) The right to be free from involuntary servitude in
any form;
(15) The right of the accused against excessive bail;
(16) The right of the accused to be heard by himself
and counsel, to be informed of the nature and
cause of the accusation against him, to have a
speedy and public trial, to meet the witnesses
face to face, and to have compulsory process to
secure the attendance of witness in his behalf;
(17) Freedom from being compelled to be a witness
against one's self, or from being forced to
confess guilt, or from being induced by a
promise of immunity or reward to make such
confession, except when the person confessing
becomes a State witness;
(18) Freedom from excessive fines, or cruel and
unusual punishment, unless the same is
imposed or inflicted in accordance with a statute
which has not been judicially declared
unconstitutional; and
(19) Freedom of access to the courts.
In any of the cases referred to in this article, whether
or not the defendant's act or omission constitutes a
criminal offense, the aggrieved party has a right to
commence an entirely separate and distinct civil
action for damages, and for other relief. Such civil
action shall proceed independently of any criminal
prosecution (if the latter be instituted), and mat be
proved by a preponderance of evidence.
The indemnity shall include moral damages.
Exemplary damages may also be adjudicated.
The responsibility herein set forth is not demandable
from a judge unless his act or omission constitutes a
violation of the Penal Code or other penal statute.
Art. 34. When a member of a city or municipal police
force refuses or fails to render aid or protection to
any person in case of danger to life or property, such
peace officer shall be primarily liable for damages,
and the city or municipality shall be subsidiarily
responsible therefor. The civil action herein
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recognized shall be independent of any criminal
proceedings, and a preponderance of evidence shall
suffice to support such action.
Art. 35. When a person, claiming to be injured by a
criminal offense, charges another with the same, for
which no independent civil action is granted in this
Code or any special law, but the justice of the peace
finds no reasonable grounds to believe that a crime
has been committed, or the prosecuting attorney
refuses or fails to institute criminal proceedings, the
complaint may bring a civil action for damages
against the alleged offender. Such civil action may
be supported by a preponderance of evidence. Upon
the defendant's motion, the court may require the
plaintiff to file a bond to indemnify the defendant in
case the complaint should be found to be malicious.
If during the pendency of the civil action, an
information should be presented by the prosecuting
attorney, the civil action shall be suspended until the
termination of the criminal proceedings.
Please refer to previous discussions on the
provisions.
IN CASES OF MALICIOUS PROSECUTION
Mijares vs. CA: Moral damages cannot be recovered
from a person who has filed a complaint against
another in good faith, or without malice or bad faith.
If damage results from the filing of the complaint, it
is damnum absque injuria.
Castillo vs. Castillo: The adverse result of an action
does not per se make the act wrongful and subject
the actor to the payment of moral damages. The law
could not have meant to impose a penalty on the right
to litigate; such right is so precious that moral
damages may not be charged on those who may
exercise it erroneously.
Nominal Damages
Nominal damages consist in damages awarded, not
for purposes of indemnifying the plaintiff for any loss
suffered, but for the vindication or recognition of a
right violated by the defendant.
REQUISITES AND CHARACTERISTICS
(1) Invasion or violation of any legal or property right.
(2) No proof of loss is required.
(3) The award is to vindicate the right violated.
WHEN AWARDED
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DAMAGES BAR OPERATIONS COMMISSION
Art. 2221. Nominal damages are adjudicated in order
that a right of the plaintiff, which has been violated
or invaded by the defendant, may be vindicated or
recognized, and not for the purpose of indemnifying
the plaintiff for any loss suffered by him.
Art. 2222. The court may award nominal damages in
every obligation arising from any source enumerated
in article 1157, or in every case where any property
right has been invaded.
Art. 2223. The adjudication of nominal damages
shall preclude further contest upon the right
involved and all accessory questions, as between the
parties to the suit, or their respective heirs and
assigns.
General Rule: One does not ask for nominal
damages, and it is in lieu of the actual, moral,
temperate, or liquidated damages.
Nominal damages are incompatible with: actual,
temperate and exemplary damages.
Armovit vs. CA: Nominal damages cannot co-exist
with actual or compensatory damages.
Francisco v. Ferrer: No moral or exemplary damages
was awarded. Nevertheless, when confronted with
their failure to deliver on the wedding day the
wedding cake ordered and paid for, petitioners gave
the lame excuse that delivery was probably delayed
because of the traffic, when in truth, no cake could
be delivered because the order slip got lost. For such
prevarication, petitioners must be held liable for
nominal damages for insensitivity, inadvertence or
inattention to their customer's anxiety and need of
the hour.
Temperate Damages
Art. 2224. Temperate or moderate damages, which
are more than nominal but less than compensatory
damages, may be recovered when the court finds
that some pecuniary loss has been suffered but its
amount cannot, from the nature of the case, be
provided with certainty.
Art. 2225. Temperate damages must be reasonable
under the circumstances.
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These damages are awarded for pecuniary loss, in an
amount that, from the nature of the case, cannot be
proved with certainty.
REQUISITES
(1) Actual existence of pecuniary loss
(2) The nature and circumstances of the loss
prevents proof of the exact amount
(3) They are more than nominal and less than
compensatory.
(4) Causal connection between the loss and the
defendants act or omission.
(5) Amount must be reasonable.
In cases where the resulting injury might be
continuing and possible future complications directly
arising from the injury, while certain to occur are
difficult to predict, temperate damages can and
should be awarded on top of actual or compensatory
damages; in such cases there is no incompatibility
between actual and temperate damages.
Citytrust Bank vs. IAC: Temperate damages are
incompatible with nominal damages hence, cannot
be granted concurrently.
Pleno vs. CA: Temperate damages are included
within the context of compensatory damages (RCPI
vs. CA).
There are cases where from the nature of the case,
definite proof of pecuniary loss cannot be offered,
although the court is convinced that there has been
such loss. For instance, injury to one's commercial
credit or to the goodwill of a business firm is often
hard to show certainty in terms of money. (NOTE: In
this case actual and temperate damages were
awarded. It is postulated that the actual damages is
for the car while the temperate damages is for the lost
actual income not sufficiently proved.)
Liquidated Damages
Art. 2226. Liquidated damages are those agreed
upon by the parties to a contract, to be paid in case
of breach thereof.
Art. 2227. Liquidated damages, whether intended as
an indemnity or a penalty, shall be equitably reduced
if they are iniquitous or unconscionable.
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DAMAGES BAR OPERATIONS COMMISSION
Liquidated damages are those damages agreed
upon by the parties to a contract to be paid in case of
breach thereof.
It differs from a penal clause in that in the latter case
the amount agreed to be paid may bear no relation
to the probable damages resulting from the breach.
Basically, a penalty is ad terrorem, while liquidated
damages are ad reparationem.
REQUISITES AND CHARACTERISTICS
(1) Liquidated damages must be validly stipulated.
(2) There is no need to prove the amount of actual
damages.
(3) Breach of the principal contract must be proved.
RULES GOVERNING BREACH OF CONTRACT
Art. 2228. When the breach of the contract
committed by the defendant is not the one
contemplated by the parties in agreeing upon the
liquidated damages, the law shall determine the
measure of damages, and not the stipulation.
(a) These damages are agreed upon in a contract in
case of breach thereof.
(b) There is no need to prove the amount, only the
fact of the breach.
(c) The amount can be reduced if:
(1) unconscionable as determined by the court
(2) partial or irregular performance.
General Rule: The penalty shall substitute the
indemnity for damages and the payment of the
interests in case or breach.
Exceptions
(1) When there is a stipulation to the contrary.
(2) When the obligor is sued for refusal to pay the
agreed penalty.
(3) When the obligor is guilty of fraud.
Exemplary Or Corrective
Damages
Art. 2229. Exemplary or corrective damages are
imposed, by way of example or correction for the
public good, in addition to the moral, temperate,
liquidated or compensatory damages.
In common law, these damages were termed
punitive.
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PNB vs. CA: However, the award of P1,000,000
exemplary damages is also far too excessive and
should likewise be reduced to an equitable level.
Exemplary damages are imposed not to enrich one
party or impoverish another but to serve as a
deterrent against or as a negative incentive to curb
socially deleterious actions.
WHEN RECOVERABLE
plaintiff must show that he would be entitled to
moral, temperate or compensatory damages were it
not for the stipulation for liquidated damages.
Art. 2235. A stipulation whereby exemplary damages
are renounced in advance shall be null and void.
Requisites to recover exemplary damages and
liquidated damages agreed upon
The plaintiff must show that he/she is entitled to
moral, temperate or compensatory damages:

IN CRIMINAL OFFENSES; NCC ART. 2230

When exemplary
If arising from
damages are granted
Art. 2230. In criminal offenses, exemplary damages the crime was
as a part of the civil liability may be imposed when Art. committed with an
the crime was committed with one or more Crimes
2230 aggravating
aggravating circumstances. Such damages are circumstance/s
separate and distinct from fines and shall be paid to Art. defendant acted with
the offended party. Quasi-delicts
2231 gross negligence
defendant acted in a
Award of exemplary damages is part of the civil wanton, fraudulent,
liability, not of the penalty. Art. Contracts and
reckless, oppressive, or
2232 Quasi- contracts
malevolent manner
Damages are paid to the offended party separately (WFROMM)
from the fines.
General Principles
IN QUASI-DELICTS; NCC ART. 2231 (1) Exemplary damages cannot be awarded alone:
Art. 2231. In quasi-delicts, exemplary damages may they must be awarded IN ADDITION to moral,
be granted if the defendant acted with gross temperate, liquidated or compensatory
negligence. damages.
(2) The purpose of the award is to deter the
IN CONTRACTS AND QUASI-CONTRACTS; NCC ART. 2232 defendant (and others in a similar condition)
Art. 2232. In contracts and quasi-contracts, the court from a repetition of the acts for which exemplary
may award exemplary damages if the defendant damages were awarded; hence, they are not
acted in a wanton, fraudulent, reckless, oppressive, recoverable as a matter of right.
or malevolent manner. (3) The defendant must be guilty of other malice or
else negligence above the ordinary.
(4) Plaintiff is not required to prove the amount of
REQUISITES
exemplary damages.
ARTS. 2233, 2234
a. But plaintiff must show that he is entitled to
Art. 2233. Exemplary damages cannot be recovered moral, temperate, or compensatory
as a matter of right; the court will decide whether or damage; that is, substantial damages, not
not they should be adjudicated. purely nominal ones. This requirement
applies even if the contract stipulates
Art. 2234. While the amount of the exemplary liquidated damages.
damages need not be proved, the plaintiff must b. The amount of exemplary damage need not
show that he is entitled to moral, temperate or be pleaded in the complaint because the
compensatory damages before the court may same cannot be proved. It is merely
consider the question of whether or not exemplary incidental or dependent upon what the
damages should be awarded. In case liquidated court may award as compensatory
damages have been agreed upon, although no proof damages.
of loss is necessary in order that such liquidated
damages may be recovered, nevertheless, before the
court may consider the question of granting
exemplary in addition to the liquidated damages, the

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DAMAGES IN CASE OF DEATH
RE. CRIMES AND QUASI-DELICTS
Art. 2206. The amount of damages for death caused
by a crime or quasi-delict shall be at least three
thousand pesos, even though there may have been
mitigating circumstances. In addition:
(1) The defendant shall be liable for the loss of the
earning capacity of the deceased, and the
indemnity shall be paid to the heirs of the latter;
such indemnity shall in every case be assessed
and awarded by the court, unless the deceased
on account of permanent physical disability not
caused by the defendant, had no earning
capacity at the time of his death;
(2) If the deceased was obliged to give support
according to the provisions of article 291, the
recipient who is not an heir called to the
decedent's inheritance by the law of testate or
intestate succession, may demand support from
the person causing the death, for a period not
exceeding five years, the exact duration to be
fixed by the court;
(3) The spouse, legitimate and illegitimate
descendants and ascendants of the deceased
may demand moral damages for mental
anguish by reason of the death of the deceased.
In death caused by breach of conduct by a common
crime
Heirs of Raymundo Castro vs. Bustos (1969): when
death occurs as a result of a crime, the heirs of the
deceased are entitled to the following items of
damages:
(1) As indemnity for the death of the victim of the
offense P12,000.00, without the need of any
evidence or proof of damages, and even though
there may have been mitigating circumstances
attending the commission of the offense.
(2) As indemnity for loss of earning capacity of the
deceased an amount to be fixed by the Court
according to the circumstances of the deceased
related to his actual income at the time of death
and his probable life expectancy, the said
indemnity to be assessed and awarded by the
court as a matter of duty, unless the deceased
had no earning capacity at said time on account
of permanent disability not caused by the
accused. If the deceased was obliged to give
support, under Art. 291, Civil Code, the recipient
who is not an heir, may demand support from
the accused for not more than five years, the
exact duration to be fixed by the court.
(3) As moral damages for mental anguish, an
amount to be fixed by the court. This may be
recovered even by the illegitimate descendants
and ascendants of the deceased.
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DAMAGES BAR OPERATIONS COMMISSION
(4) As exemplary damages, when the crime is
attended by one or more aggravating
circumstances, an amount to be fixed in the
discretion of the court, the same to be
considered separate from fines.
(5) As attorney's fees and expresses of litigation,
the actual amount thereof, (but only when a
separate civil action to recover civil liability has
been filed or when exemplary damages are
awarded).
(6) Interests in the proper cases.
(7) It must be emphasized that the indemnities for
loss of earning capacity of the deceased and for
moral damages are recoverable separately from
and in addition to the fixed sum of P12,000.00
corresponding to the indemnity for the sole fact
of death, and that these damages may, however,
be respectively increased or lessened according
to the mitigating or aggravating circumstances,
except items 1 and 4 above, for obvious reasons.
Formula for the net earning capacity
People vs. Aringue (1997):
Net earning capacity = Life expectancy * (Gross
annual income Reasonable living expenses)
Where:
Life expectancy = 2/3 * (80 age of victim at the
time of death)
Tan, et al. vs. OMC Carriers, Inc. (2011): As a rule,
documentary evidence should be presented to
substantiate the claim for loss of earning capacity.
By way of exception, damages for loss of earning
capacity may be awarded despite the absence of
documentary evidence when: (1) the deceased is self-
employed and earning less than the minimum wage
under current labor laws, in which case, judicial
notice may be taken of the fact that in the deceased's
line of work, no documentary evidence is available; or
(2) the deceased is employed as a daily wage worker
earning less than the minimum wage under current
labor laws.
Graduation of Damages
DUTY OF THE INJURED PARTY
Art. 2203. The party suffering loss or injury must
exercise the diligence of a good father of a family to
minimize the damages resulting from the act or
omission in question.
Lim and Gunnaban vs. CA (2002): Article 2203 of the
Civil Code exhorts parties suffering from loss or injury
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to exercise the diligence of a good father of a family
to minimize the damages resulting from the act or
omission in question. One who is injured then by the
wrongful or negligent act of another should exercise
reasonable care and diligence to minimize the
resulting damage. Anyway, he can recover from the
wrongdoer money lost in reasonable efforts to
preserve the property injured and for injuries incurred
in attempting to prevent damage to it.
BURDEN OF PROOF
The DEFENDANT has the burden of proof to
establish that the victim, by the exercise of the
diligence of a good father of a family, could have
mitigated the damages. In the absence of such
proof, the amount of damages cannot be reduced.
Note:
The victim is required only to take such steps as an
ordinary prudent man would reasonably adopt for
his own interest.
RULES
IN CRIMES
Art. 2204. In crimes, the damages to be adjudicated
may be respectively increased or lessened according
to the aggravating or mitigating circumstances.
IN QUASI-DELICTS
Art. 2214. In quasi-delicts, the contributory
negligence of the plaintiff shall reduce the damages
that he may recover.
CONTRIBUTORY NEGLIGENCE
Genobiagon vs. CA (1989): The alleged contributory
negligence of the victim, if any, does not exonerate
the accused in criminal cases committed through
reckless imprudence, since one cannot allege the
negligence of another to evade the effects of his own
negligence.
Rakes vs. Atlantic (1907): If so, the disobedience of
the plaintiff in placing himself in danger contributed
in some degree to the injury as a proximate,
although not as its primary cause.
(Supreme Court in this case cited numerous foreign
precedents, mostly leaning towards the doctrine that
contributory negligence on the part of the plaintiff
did not exonerate defendant from liability, but it led
to the reduction of damages awarded to the plantiff.)
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DAMAGES BAR OPERATIONS COMMISSION
Cangco vs. Manila Railroad Co. (1918): In determining
the question of contributory negligence in
performing such act that is to say, whether the
passenger acted prudently or recklessly the age,
sex, and physical condition of the passenger are
circumstances necessarily affecting the safety of the
passenger, and should be considered.
PLAINTIFFS NEGLIGENCE
Manila Electric vs. Remonquillo (1956): Even if Manila
Electric is negligent, in order that it may be held
liable, its negligence must be the proximate and
direct cause of the accident.
Bernardo vs. Legaspi (1914): Both of the parties
contributed to the proximate cause; hence, they
cannot recover from one another.
IN CONTRACTS, QUASI-CONTRACTS AND QUASI-DELICTS
Art. 2215 In contracts, quasi-contracts, and quasi-
delicts, the court may equitably mitigate the
damages under circumstances other than the case
referred to in the preceding article, as in the
following instances:
(1) That the plaintiff himself has contravened the
terms of the contract;
(2) That the plaintiff has derived some benefit as a
result of the contract;
(3) In cases where exemplary damages are to be
awarded, that the defendant acted upon the
advice of counsel;
(4) That the loss would have resulted in any event;
(5) That since the filing of the action, the defendant
has done his best to lessen the plaintiff's loss or
injury.
INSTANCES OF GROUNDS FOR MITIGATION OF DAMAGES
(a) For Contracts:
(1) Violation of terms of the contract by the
plaintiff himself;
(2) Obtention or enjoyment of benefit under the
contract by the plaintiff himself;
(3) Defendant acted upon advice of counsel in
cases where exemplary damages are to be
awarded such as under Articles 2230, 2231,
and 2232;
(4) Defendant has done his best to lessen the
plaintiffs injury or loss.
(b) For Quasi-Contracts:
(1) In cases where exemplary damages are to
be awarded such as in Art. 2232;
(2) Defendant has done his best to lessen the
plaintiffs injury or loss.
(c) For Quasi-Delicts:
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(1) That the loss would have resulted in any
event because of the negligence or omission
of another, and where such negligence or
omission is the immediate and proximate
cause of the damage or injury;
(2) Defendant has done his best to lessen the
plaintiffs injury or loss.
RULE WHEN CONTRACTING PARTIES ARE IN PARI DELICTO
Generally, parties to a void agreement cannot expect
the aid of the law; the courts leave them as they are,
because they are deemed in pari delicto or "in equal
fault." In pari delicto is "a universal doctrine which
holds that no action arises, in equity or at law, from
an illegal contract; no suit can be maintained for its
specific performance, or to recover the property
agreed to be sold or delivered, or the money agreed
to be paid, or damages for its violation; and where
the parties are in pari delicto, no affirmative relief of
any kind will be given to one against the other."
This rule, however, is subject to exceptions that
permit the return of that which may have been given
under a void contract to:
(a) the innocent party (Arts. 1411-1412, Civil Code);
(b) the debtor who pays usurious interest (Art. 1413,
Civil Code);
(c) the party repudiating the void contract before
the illegal purpose is accomplished or before
damage is caused to a third person and if public
interest is subserved by allowing recovery (Art.
1414, Civil Code);
(d) the incapacitated party if the interest of justice
so demands (Art. 1415, Civil Code);
(e) the party for whose protection the prohibition by
law is intended if the agreement is not illegal
per se but merely prohibited and if public policy
would be enhanced by permitting recovery (Art.
1416, Civil Code); and
(f) the party for whose benefit the law has been
intended such as in price ceiling laws (Art. 1417,
Civil Code) and labor laws (Arts. 1418-1419, Civil
Code).
LIQUIDATED DAMAGES
Art. 2227. Liquidated damages, whether intended as
an indemnity or a penalty, shall be equitably reduced
if they are iniquitous or unconscionable.
COMPROMISE
Art. 2031. The courts may mitigate the damages to
be paid by the losing party who has shown a sincere
desire for a compromise.
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DAMAGES BAR OPERATIONS COMMISSION
Miscellaneous Rules
DAMAGES THAT CANNOT CO-EXIST
NOMINAL WITH OTHER DAMAGES
Art. 2223. The adjudication of nominal damages
shall preclude further contest upon the right
involved and all accessory questions, as between the
parties to the suit, or their respective heirs and
assigns.
Vda. De Medina vs. Cresencia (1956): The propriety of
the damages awarded has not been questioned,
Nevertheless, it is patent upon the record that the
award of P10,000 by way of nominal damages is
untenable as a matter of law, since nominal
damages cannot co-exist with compensatory
damages. The purpose of nominal damages is to
vindicate or recognize a right that has been violated,
in order to preclude further contest thereon; and
not for the purpose of indemnifying the Plaintiff for
any loss suffered by him (Articles 2221, 2223, new
Civil Code.) Since the court below has already
awarded compensatory and exemplary damages
that are in themselves a judicial recognition that
Plaintiffs right was violated, the award of nominal
damages is unnecessary and improper. Anyway, ten
thousand pesos cannot, in common sense, be
deemed nominal.
ACTUAL AND LIQUIDATED
Art. 2226. Liquidated damages are those agreed
upon by the parties to a contract, to be paid in case
of breach thereof.
DAMAGES THAT MUST CO-EXIST
EXEMPLARY WITH MORAL, TEMPERATE, LIQUIDATED OR
COMPENSATORY
Francisco vs. GSIS (1963): There is no basis for
awarding exemplary damages either, because this
species of damages is only allowed in addition to
moral, temperate, liquidated, or compensatory
damages, none of which have been allowed in this
case, for reasons herein before discussed.
Scott Consultants & Resource Development Corp. vs.
CA (1995): There was, therefore, no legal basis for the
award of exemplary damages since the private
respondent was not entitled to moral, temperate, or
compensatory damages and there was no
agreement on stipulated damages.
DAMAGES THAT MUST STAND ALONE
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NOMINAL DAMAGES
Art. 2223. The adjudication of nominal damages
shall preclude further contest upon the right
involved and all accessory questions, as between the
parties to the suit, or their respective heirs and
assigns.

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