TortsNdamages Specialcontracts Atty Uribe

TORTS & DAMAGES/Special Contracts
Atty. Uribe (2018)
CONCEPTS Q: What kind of contract if the cause is essentially

gratuitous and essentially onerous?
• The general principles in Obligations and Contracts,
as a rule, are applicable to Special Contracts. A: 1. Essentially gratuitous: Commodatum
• Determine the nature of the contract by looking into its
2. Essentially onerous: Lease
purpose & characteristic.
Q: In a valid sale, would obligations arise?

Q: How will you know the nature of the contract?
A: Look into the definition first stated in the Code, then A: Yes, obligations should arise in a valid sale because
into supplementary provisions that will support such contract is one of the sources of obligations.
concept.
Q: What kind of contract does the law pertain to when it
Example: In an agreement, where one (X) of the parties provides “when one of the parties obligates himself”
oblige himself to deliver a determinate thing to the other A: Consensual contract

party (Y), and likewise Y oblige himself to pay a certain
price in money.
Q: Did the parties automatically entered into a contract of
provides “both parties are obliged”?
sale?
A: Bilateral contract
A: Not necessarily. The purpose of entering such
agreement must be considered first.

provides “one of the parties delivers”?
Q: Why would X oblige himself to deliver such?
A: Real contract, because delivery is required for the
A: In this case:
perfection of such contract.
Purpose: Transfer of ownership
Subject matter: Determinate thing

Q: When the rule says “in reciprocal obligations” would
Q: What kind of contract if the purpose of the contract is that apply to commodatum?
only for safekeeping?
A: No.
A: Deposit
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Atty. Uribe (2018)
Example
Q: In relation to a contract of deposit, is the depositary
provides “in reciprocal obligations”
entitled to reimbursement for expenses incurred in the
A: It would definitely apply to contracts of sale,
sale because a preservation of thing?
contract of sale is a bilateral contract, wherein both
A: It depends. It depends on whether that contract is
parties are obliged, therein, reciprocal obligations would
onerous or gratuitous.
always arise with the valid contract.
If onerous contract: not entitled to reimbursement
If gratuitous contract: entitled to reimbursement
• While one would obligate himself to transfer

ownership, the other party would have to pay. If there is Q: When there is a commutative contract?
no payment, this is not a sale, but a donation,

donation because in A: When there is equivalence in the value of the
donation, there is transfer of ownership but there is no prestation to be performed by the parties.
payment, the cause of the contract is based on pure
liberality.
Q: What are unilateral contracts?
A: Unilateral contracts are those contracts where only one

Q: Is the sale valid when the price of the contract of sale
party is obliged.
is in Chinese Yuan?
Example:
A: Yes. The law only mentioned “money”, it did not
exclusively provided that it only pertains to Philippine • Guaranty (Article 2047)
money or Philippine Peso. • Pledge (Article 2093)
• Perfected commodatum
CHARACTERISTICS
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Q: What are bilateral contracts? and the other did not, the latter shall be considered in
delay even if there is no demand.
A: Bilateral Contracts are contracts where both parties are
reciprocally obligated. Q: What are Principal contracts?
ontracts?
Example: A: Principal contracts are those contracts which can stand

on its own
• Lease - where the lessor is obliged to allow the
use of the thing and the lessee is obliged to pay
rent (Article 1642)
Q: What are Accessory contracts?
contracts
• Sale -where the buyer is obliged to pay the price
and the seller obliged to deliver the thing (Article A: Accessory contracts are those contracts which cannot
1458) stand on its own and are dependent upon other contracts
for its validity. Examples of these are security
arrangements like:
Importance of classification as to the nature of obligation
Guaranty
produced
Suretyship
(whether the obligation is unilateral or bilateral?) Pledge
Chattel Mortgage
fruits in conditional obligations, who would be
As to the fruits:
Real Estate Mortgage
entitled to the fruits before the happening of the
Antichresis
suspensive condition?
Unilateral: the fruits shall pertain to the debtor unless a

contrary intention is clear PERFECTION
Bilateral: the fruits are deemed mutually compensated No one cannot compel anyone to perform any obligation
under Art. 1187 without a perfected contract
As to rescission:
rescission under Art. 1191, is implied in reciprocal 3 contracts under Perfection as recognized by the
obligations, or in this case, bilateral contracts where both Supreme Court
are reciprocally obligated. But if the contract is unilateral,
1. Consensual
logically, the creditor would not rescind, he would either
2. Real
demand performance or seek damages.
3. Formal or Solemn
As to delay:
delay in reciprocal obligations (bilateral contracts), -a form is required for its validity
from the moment one of the parties had already complied (not enforceability)
Example:
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Atty. Uribe (2018)
• Antichresis - agreement as to the principal and A presumption will not arise because a mortgagemay be
interest must be in writing otherwise void. onerous but it is not a form of an alienation, not unlike
sale, barter and dacion en pago that there is an alienation.
Case:
Case A is a debtor of several creditors. He entered into a
contract of sale to sell his only parcel of land.
Q: Is the contract of sale which A entered into, in fraud of The 2 principles applicable to contracts, wherein, there is
his creditors? a controversy or ambiguity present are the following:
MORE REASONABLE QUESTION: 1. Principle of greatest reciprocity of interest

2. Principle of least transmission of rights
Q: With this sale, did a presumption arise that this
contract is in fraud of creditors? Moreover, the law provides that such controversy or
ambiguity pertains only to a secondary matter and such
It depends, under what circumstances A entered into the
ambiguity cannot be resolved by considering the
contract. There will be such presumption if:
intention of the parties and the other rules on the
• at the time A entered into the contract of sale, a interpretation of contracts.
judgment had already been rendered against him
Q: Which principle would apply in relation to a contract of
• without even a judgement yet but there was
sale?
sale
already an order of garnishment issued against A
A: A contract of sale is essentially onerous, thus, the
Presumption of fraud will arise in alienations that are
principle of greatest reciprocity of interest would always
onerous in character, considering a sale is an onerous
apply.
alienation, this provision will apply if the scenarios are
present.
Q: Which principle would apply in relation to a contract of

commodatum?
ommodatum
Case:
Case What if instead of entering a contract of sale, A
(debtor) mortgaged the said parcel of land even there was A: The cause in a contract of commodatum is liberality,
already a judgment against him. thus, the principle of least transmission of rights would
apply.
Q: Will a presumption arise?
A: The Supreme Court ruled:
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(3) When demand would be useless, as when the obligor

has rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the

other does not comply or is not ready to comply in a proper
manner with what is incumbent
incumbent upon him. From the
moment one of the parties fulfills his obligation, delay by
the other begins.
begins. (1100a)”
Case:
Case In a contract of sale and in relation to the last
paragraph of Article 1169. What if the thing or object of A contract of sale would necessary entail a reciprocal
the contract was delivered to the buyer a year ago and up obligation, the rule on the last paragraph of Article 1169
to this day, the buyer had not paid the price. will apply.
Q: If the seller has not asked or demanded for the Note:

Note The last paragraph of Article 1169 is still subject to
payment of the price, does that mean the buyer is already the stipulations of the parties.
in delay?
A: Yes. Conditional obligations
General rule: No demand, no delay. -the obligation to deliver and transfer ownership is
Exception: Last paragraph of Article 1169 subject to a condition.
Kinds of conditional obligations:

obligations
“Art. 1169. Those obliged to deliver or to do something
incur in delay from the time the obligee judicially or 1. Suspensive condition (condition precedent) refers
extrajudicially demands from them the fulfillment of their to a condition wherein the happening of the
obligation. event gives birth to an obligation
• Article 1187, 1188 and 1189
However, the demand by the creditor shall not be
2. Resolutory condition (condition subsequent)
necessary in order that delay may exist:
refers to a condition wherein the happening of
(1) When the obligation or the law expressly so declare; or the event will extinguish the obligation.
(2) When from the nature and the circumstances of the • Article 1190
obligation it appears that the designation of the time

when the thing is to be delivered or the service is to be
In an obligation subject to a suspensive condition, what is
rendered was a controlling motive for the establishment
the effect if there are fruits from the time of the
of the contract; or
constitution of the obligation to the time of fulfillment?
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Atty. Uribe (2018)
Case:
Case Thing to be delivered is a house and lot that was A: SC ruling: Yes, but not the contract of loan itself,
being rented and the condition occurred after the because the contract of loan is a real contract, it requires
payment of rentals. the delivery. The perfected contract in the case at bar is
the perfected consensual contract of loan.
Q: Who is entitled to the rentals (civil fruit), the seller or
(Saura Import & Export Co., Inc. v. DBP GR No. L-24968,
the buyer?
27 April 1972; 44 SCRA 445)
A: Seller would be entitled to the fruits, but the buyer
would not be compelled to pay the interests on the price
Legal basis: “Article 1187. The effects of a conditional

Case:
Case Merly offered to sell her automobile to Violy for
obligation to give, once the condition has been fulfilled,
Php 60, 000, after inspecting the automobile Violy offered
shall retroact to the day of the constitution of the
to buy it for Php 50,000 this offer is accepted by Merly the
obligation. Nevertheless, when the obligation imposes
next day, merly offered to deliver the automobile but
reciprocal prestations upon the parties, the fruits and
violy being short of funds, secured postponement of the
interests during the pendency of the condition shall be
delivery promising to pay the price upon arrival of the
deemed to have been mutually compensated. If the
steamerhelena. The steamer however never arrived
obligation is unilateral, the debtor shall appropriate the
because it was wreck by a typhoon and sunk somewhere
fruits and interests received, unless from the nature and
of the coast of Samar.
circumstances of the obligation it should be inferred that
the intention of the person constituting the same was
different.”
Q: Is there perfected contract in this case? Why?
A: Yes, considering this is a contract of sale, the requisites

• No Retroactivity as to the Fruits. needed in a consensual contract are present which are:
Notice that there is no retroactivity w/ respect to the consent of the parties, object- automobile and price in
fruits. The fruits are deemed to cancel out each other. relation to the cause.
If only one of the thing produces fruits, there is no
There is a perfected contracted from the moment Violy
obligation to deliver the fruits.
offered to buy the automobile and immediately Merly
accepted such counter offer.
Case:
Case A agreed to lend money to B, before the delivery of
the money borrowed by B from A
Q: When Merly offered to Violy the Php 60,000, was there
Q: Whether there was a perfected contract between A a perfected contract?
and B?
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Atty. Uribe (2018)
A: None, because the Php 60, 000 was not accepted, in A month later, a person carrying an authenticated special
fact a counteroffer was made. It was at that time of the power of attorney from the sellers demanded that the
acceptance of the counteroffer that the contract was buyers either immediately pay for the property in full now
perfected. or vacate it and pay damages for having made
improvements on the property without a sale having been
perfected.
Q: Was the contract perfected even though the Violy

promised to pay the price upon the arrival of the
steamerhelena? In other words, a condition did not Q: What are the buyers’ option or legal rights with respect
happen, nonetheless, was the contract perfected? to the expenses they incurred in improving the property
under the circumstances
A: Yes. The condition of Violy “to pay the price upon
arrival of the steamerhelena” is a condition as to the • The answer will depend if the contract of sale was
delivery not a condition for an obligation to arise or as to perfected or not.
its perfection, thus it will not negate the existence of a
A: There was already a perfected sale: Absolute sale (no
perfected contract in this case.
reservation of ownership)
There was already a delivery, thus the buyers already

Case:
Case Mr. and Mrs. X(seller) migrated to the United States acquired ownership, therefore, the owner have the right
of America with all their children because they don’t have to possession of the house and lot. Whatever expenses
the intention of coming back, they offered their house they incurred, it’s because they are already the owners.
and lot for sale to their neighbors, Mr. and Mrs. A (buyer),
Qualification: even if the contract is not perfect
who agreed to buy the property for Php 8,000,000.00.
Since Mr. and Mrs. A needed to obtain a loan from a bank Buyer’s right: Right to retain until they are reimbursed
first and the sellers are in a hurry to migrate, the latter with the expenses Article 448 as builders in good faith,
told the buyers that they could already occupy the house, they can claim ownership as basis of incurring
renovate it as it was already in a state of disrepair and pay improvements
only when their loan is approved and released. While

waiting for the loan approval, the buyers spent Php
Q: Can the buyers be compelled to immediately vacate
1,000,000.00 in repairing the house.
claiming the sale was not perfected?
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Atty. Uribe (2018)
A: There is already a perfected sale, thus, Article 448 (b) Between a conditional sale, on the one hand, and an
would govern. absolute sale, on the other hand.
• 2 kinds of contract of sale
1. Absolute sale
2. Conditional sale
A contract to sell must be distinguished from the 2 kinds

of contract of sale.
A:
KINDS OF SALE:
SALE: NATURE OF THE SUBJECT MATTER
(a) Contract to sell from an absolute sale
1. Real or Personal:
In a contract to sell, in relation to the transfer of
Relevant as to:
ownership, upon delivery of the object of the contract to
a. Application of the statute of frauds; the buyer, the ownership does not pass. While in an
b. Rules on double sale; absolute sale, because there is no condition agreed upon
or imposed by the seller upon delivery the ownership
c. Maceda law which covers only “residential
passes to the buyer.
realty”. E.g., condominium units, land, buildings;
d. Recto law which covers personal property only.

(b) Contract to sell from conditional sale - distinction
2. Thing (corporeal or tangible) or Rights (incorporeal or
goes to the effect of fulfillment of condition/s
intangible)
A contract to sell is a special kind of conditional sale,
Relevant as to mode of delivery.
because it would involve condition/s in relation to the
In Law on Sales, particularly 2nd paragraph of transfer of ownership.
Article 1458
In a contract to sell, the effect of the fulfillment of the
Q: State the basic difference (only in their legal effects) – condition/s does not automatically transfer ownership to
the buyer. The only effect of the fulfillment of the
(a) Between a contract to sell, on the one hand, and a
condition/s is that the buyer can now demand the seller
contract of sale, on the other hand;
sell to him and the seller is now obliged to sell the thing
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to the buyer. While in a conditional sale, upon fulfillment Q: If a sale is a sale on installment, for instance, “the price
of the condition/s, the ownership automatically passes to is payable in 12 monthly installments”, does that mean it
the buyer without the need of a new agreement, this is by is to be considered a conditional sale?
operation of law.
A: Not necessarily, installment payment scheme only
applies to the payment of the price but not to the
condition of the contract.
Q: How would you determine if the agreement entered
into is an absolute sale, conditional sale or a contract to
sell?
A: Check the stipulations
Case:
Case Arthur gave Richard a receipt which states:
“Receipt
Bar exam question
Received from Richard as down payment
Q: Do you agree that a contract to sell is the same as a
for my 1999 Toyota Corolla with plate no. XYZ- conditional contract of sale?
123………………………………………… P50,000.00
A: No. I do not agree because a contract to sell is not the
Balance payable: 12/30/01…………………… P50,000.00 same as a conditional contract of sale, rather it is a kind
of a conditional sale. A contract to sell is a special kind of
(Sgd.) Arturo”
conditional sale, because it would involve condition/s in
Q: Does this receipt evidence a contract to sell? relation to the transfer of ownership.
A: No. It does not show that the circumstance in this case In a contract to sell, the effect of the fulfillment of the
is one of a contract to sell because there is no condition condition/s does not automatically transfer ownership to
imposed or agreed upon in relation to the transfer of the buyer. The only effect of the fulfillment of the
ownership. There is nothing in the receipt that would condition/s is that the buyer can now demand the seller
indicate that the seller reserved ownership. In a contract sell to him and the seller is now obliged to sell the thing
where the seller did not reserve ownership, it is an to the buyer. While in a conditional sale, upon fulfillment
absolute sale. of the condition/s, the ownership automatically passes to
the buyer without the need of a new agreement, this is by
operation of law.
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The action will not prosper because Monica is the owner

and has a right to possess the property. Remedy of Nante
should be “rescission” since there is substantial breach.
2014 Bar exam question The non-payment of the price in a contract of sale would
Nante, a registered owner of a parcel of land in Quezon only entitle the seller to rescind the contract but it does
City, sold the property to Monica under a deed of sale not thereby prevent the transfer of ownership
which reads as follows: particularly so as in this case, where there was already
delivery to the buyer.
"That for and in consideration of the sum of P500,000.00,
value to be paid and delivered to me, and receipt of which
shall be acknowledged by me to the full satisfaction of
Monica, referred to as Vendee, I hereby sell, transfer,
cede, convey, and assign, as by these presents, I do have
sold, transferred, ceded, conveyed and assigned a parcel
of land covered by TCT No. 2468 in favor of the Vendee."
After delivery of the initial payment of P100,000.00,

2017 Bar exam question
Monica immediately took possession of the property.
Alice agreed to sell a parcel of land with an area of 500
Five (5) months after, Monica failed to pay the remaining
square meters registered in her name and covered by TCT
balance of the purchase price. Nante filed an action for
No. 12345 in favor of Bernadette for the amount of
the recovery of possession of the property. Nante alleged
₱900,000.00. Their agreement dated October 15, 2015
that the agreement was one to sell, which was not
reads as follows:
consummated as the full contract price was not paid.
I, Bernadette, agree to buy the lot owned by Alice covered
by TCT No. 12345 for the amount of ₱900,000.00 subject
Q: Is the contention of Nante tenable? Why? to the following schedule of payment:
A: No, the contention of Nante is not tenable. The deed Upon signing of agreement – ₱100,000.00
itself states that for consideration received, he sells,
November 15, 2015 – ₱200,000.00
transfers, and conveys the land to Monica and there was
delivery of the property to the latter. The contract is December 15, 2015 - ₱200,000.00
clearly one of sale as there was no reservation of January 15, 2016 - ₱200,000.00
ownership on the part of the seller Nante. Thus, the
February 15, 2016 - ₱200,000.00
contract is one of an absolute sale. As such, upon delivery,
Monica acquired ownership of the property.
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Title to the property shall be transferred upon full

payment of ₱900,000.00 on or before February 15, 2016.
After making the initial payment of ₱100,000.00 on

CONTRACT OF SALE DISTINGUISHED FROM OTHER
October 15, 2015, and the second instalment of
TRANSACTIONS
₱200,000.00 on November 15, 2015, Bernadette
defaulted despite repeated demands from Alice. Q: Rationale for distinguishing contract of sale from other
transactions, contracts or juridical relationship?
In December 2016, Bernadette offered to pay her balance
but Alice refused and told her that the land was no longer A: To avoid confusion. Contract of sale have similarities
for sale. Due to the refusal, Bernadette caused the with other transactions which may cause confusion as to
annotation of her adverse claim upon TCT No. 12345 on the rights and obligations of the parties.
parties
December 19, 2016. Later on, Bernadette discovered that

Alice had sold the property to Chona on February 5, 2016,
and that TCT No. 12345 had been cancelled and another
one issued (TCT No. 67891) in favor of Chona as the new
owner.
Bernadette sued Alice and Chona for specific

1. Dacion en pago:
pago
performance, annulment of sale and cancellation of TCT
No. 67891. Bernadette insisted that she had entered into Similarities:
a contract of sale with Alice; and that because Alice had In a contract of sale, upon delivery, ownership passes.
engaged in double sale, TCT No. 67891 should be While in dacion en pago, there is always transfer of
cancelled and another title be issued in Bernadette's ownership.
favor.
Delivery in dacion en pago is always required.
Both contract of sale and dacion en pago are governed by

Q: Did Alice and Bernadette enter into a contract of sale the law on sales.
of the lot covered by TCT No. 12345? Explain your answer.
A: Yes, they entered into a contract of sale, but they

Distinctions: Sale is a contract and a source of obligation.
entered into a conditional sale, that is a kind of a contract
While dation in payment is a special form of payment and
of sale.
a mode of extinguishment of an obligation.
The statement “Title to the property shall be transferred
In sale, an obligation arises. While in dation in payment,
upon full payment of ₱900,000.00 on or before February
the obligation is extinguished.
15, 2016” makes it a conditional sale.
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In sale, there is no requirement of a pre-existing In dacion en pago there is an objective novation of the
obligation, in dation in payment, as a special form of obligation where the thing offered as an accepted
payment, there is a need for a pre-existing obligation. If equivalent of the performance of an obligation is
there is no obligation, there is nothing to be extinguished. considered as the object of the contract of sale, while the
debt is considered as the purchase price. In any case,
2016 Bar exam question
common consent is an essential prerequisite, be it sale or
Butch got a loan from Hagibis Corporation (Hagibis) but innovation to have the effect of totally extinguishing the
he defaulted in the payment. A case for collection of a debt or obligation (Filinvest Credit Corporation vs.
sum of money was filed against him. As a defense, Butch Philippine Acetylene Company, Inc. G.R. No. L-50449
claims that there was already an arrangement with January 30, 1982). There being no mention in the facts
Hagibis on the payment of the loan. To implement the that Hagibis has given its consent to accept the SUVs as
same, Butch already surrendered five (5) service utility equivalent payment, the obligation of Butch is not
vehicles (SUVs) to the company for it to sell and the thereby extinguished by mere delivery of the SUVs.
proceeds to be credited to the loan as payment.
Q: Was the obligation of Butch extinguished by reason of

dacion en pago upon the surrender of the SUVs? Decide
and explain.
A: No, the obligation of Butch to Hagibis was not

extinguished by the mere surrender of the SUV's to the
latter, Dation in payment, whereby property is alienated
to the creditor in satisfaction of a debt in money, shall be 2. Contract for a piece of work
governed by the law of sales. (Article 1245) Art. 1467. A contract for the delivery at a certain price of
In dacion en pago, as a special mode of payment, the an article which the vendor in the ordinary course of his
debtor offers another thing to the creditor who accepts it business manufactures or procures for the general
as equivalent of payment of an outstanding debt. The market, whether the same is on hand at the time or not,
undertaking really partakes in one sense of the nature of is a contract of sale, but if the goods are to be
sale, that is, the creditor is really buying the thing or manufactured specially for the customer and upon his
property of the debtor, payment for which is to be special order, and not for the general market, it is a
charged against the debtor's debt. As such, the essential contract for a piece of work. (n)
elements of a contract of sale, namely, consent, object Importance of Distinction: sale is covered by the statute
certain, and cause or consideration must be present. of frauds. On the other hand, contracts for a piece of work
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is covered only if to be performed after more than one amount of the money or its equivalent; otherwise, it is a
year. sale. (1446a)”
Example: customized shoes:
If for more than 1 year – covered by statute of frauds. Q: In an agreement where A obliged himself to give to B a
car worth P800,000, and B obliged himself to give to A, his
If for 6 months – depends on type of contract.
watch and cash P300,000. What contract was entered
into?
Similarities: transfer of ownership; buyer pays the price. A: First, what is the intention? How the parties intended
Subject matter: sale: thing; contract for a piece of work: the contract to be? If the intention is not clear, the value
service. of the car will be irrelevant, it will depend on the value of

the watch. If the value of the watch is greater than
The Massachussetts Rule: if the thing to be delivered by
amount of cash, it will be treated as barter. If the value of
the obligor is manufactured in the ordinary course of
the watch is less than the cash to be given which is,
business, and being offered to the general market, even
P300,000 it will be treated as a sale. Also, if the value of
if not at hand at the time the order is made, it is a contract
the thing and the cash to be given is equal, it will be
of sale;
treated also as a sale.
But, if the thing is to be manufactured only because of the
order of the buyer; not offered to the general market –
contract for a piece of work.
3. Barter
“Art. 1468. If the consideration of the contract consists

partly in money, and partly in another thing, the 4. Contract of agency to sell
transaction shall be characterized by the manifest
“Art. 1466. In construing a contract containing provisions
intention of the parties. If such intention does not clearly
characteristic of both the contract of sale and of the
appear, it shall be considered a barter if the value of the
contract of agency to sell, the essential clauses of the
thing given as a part of the consideration exceeds the
whole instrument shall be considered. (n)”
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What kind of sale? Absolute or conditional? Absolute.

Nothing in the problem would tell us that the seller
Bar exam question
reserved ownership and here there is delivery already.
A granted B the exclusive right to sell his brand of maong Therefore, B was the owner at the time of loss. B has the
pants in Isabela, the price for his merchandise payable 60 obligation to pay for the lost pants.
days from delivery, and promising B a commission of 20%
on all sales. After the delivery of the merchandise to B but
before he could sell any of them, B’s store in Isabela was ANDRES QUIROGA, plaintiff-
plaintiff-appellant, vs. PARSONS
completely burned without his fault, together with all A’s HARDWARE CO., defendant-
defendant-appellee. G.R. No. L-
L-11491
pants. (Quiroga vs. Parsons) August 23, 1918
Q: Must B pay A for his lost pants? Why? Facts: Plaintiff and Defendant entered into a contract
where plaintiff Quiroga gave the exclusive right to sell his
A: Yes. Risk of Loss – who bears the loss? The owner bears
beds to Parsons Harware Co.’s in the Visayan Islands
the loss – res perit domino. Under the facts, who is the
under the following conditions, among others: 1. Quiroga
owner of the loss when the maong pants were burned?
would invoice the beds on the price fixed for sales in
Issue – what is the nature of the transaction or what kind
Manila and shall make an allowance of 25% of the
of contract was entered into?
invoiced prices as commission on the sale; 2. Quiroga
The contract seems like an agency to sell: (1) exclusive would order by the dozen, whether the same or different
right to sell; (2) commission. However, this is a contract of styles; 3. Mr. Quiroga to give notice 15 days before any
sale because there has to be a delivery and price to be alteration in the price which he may plan to make in
paid.
paid respect to his beds; 4. Mr. Parsons binds himself not to
Article 1466: if a contract has characteristics both of sale sell any other kind except the “Quiroga” beds; Of the
and agency, consider essential clauses of the contract: three causes of action alleged by the plaintiff in his
complaint, only two of them constitute the subject matter
(1) A has the obligation to deliver the maong pants;
of this appeal and both substantially amount to the
(2) B has the obligation to pay the price within 60 days averment that the defendant violated the following
from delivery. obligations: not to sell the beds at higher prices than
those of the invoices; to have an open establishment in
Iloilo; itself to conduct the agency; to keep the beds on
The above clauses pertain to sales. “pay the price within public exhibition, and to pay for the advertisement
60 days” – not agency. In agency, the agent has the right expenses for the same; and to order the beds by the
to return the unsold pants and not to pay the price within dozen and in no other manner.
a certain period.
14
Atty. Uribe (2018)
As may be seen, with the exception of the obligation on the thing to sell it, and does not pay its price, but delivers
the part of the defendant to order the beds by the dozen to the principal the price he obtains from the sale of the
and in no other manner, none of the obligations imputed thing to a third person, and if he does not succeed in
to the defendant in the two causes of action are expressly selling it, he returns it. By virtue of the contract between
set forth in the contract. But the plaintiff alleged that the the plaintiff and the defendant, the latter, on receiving
defendant was his agent for the sale of his beds in Iloilo, the beds, was necessarily obliged to pay their price within
and that said obligations are implied in a contract of the term fixed, without any other consideration and
commercial agency. The whole question, therefore, regardless as to whether he had or had not sold the beds.
reduced itself to a determination as to whether the It would be enough to hold, as we do, that the contract by
defendant, by reason of the contract hereinbefore and between the defendant and the plaintiff is one of
transcribed, was a purchaser or an agent of the plaintiff purchase and sale, in order to show that it was not one
for the sale of his beds. made on the basis of a commission on sales, as the
plaintiff claims it was, for these contracts are
Issue: Whether or not the contract is one of agency or one
incompatible with each other. But, besides, examining the
of sales?
clauses of this contract, none of them is found that
Held: Sale. In order to classify a contract, due regard must substantially supports the plaintiff's contention. Not a
be given to its essential clauses. In the contract in single one of these clauses necessarily conveys the idea
question, what was essential, as constituting its cause and of an agency. The words commission on sales used in
subject matter, is that the plaintiff was to furnish the clause (A) of article 1 mean nothing else, as stated in the
defendant with the beds which the latter might order, at contract itself, than a mere discount on the invoice price.
the price stipulated, and that the defendant was to pay The word agency, also used in articles 2 and 3, only
the price in the manner stipulated. The price agreed upon expresses that the defendant was the only one that could
was the one determined by the plaintiff for the sale of sell the plaintiff's beds in the Visayan Islands. With regard
these beds in Manila, with a discount of from 20 to 25 per to the remaining clauses, the least that can be said is that
cent, according to their class. Payment was to be made at they are not incompatible with the contract of purchase
the end of sixty days, or before, at the plaintiff's request, and sale. The plaintiff also endeavored to prove that the
or in cash, if the defendant so preferred, and in these last defendant had returned beds that it could not sell; that,
two cases an additional discount was to be allowed for without previous notice, it forwarded to the defendant
prompt payment. These are precisely the essential the beds that it wanted; and that the defendant received
features of a contract of purchase and sale. There was the its commission for the beds sold by the plaintiff directly to
obligation on the part of the plaintiff to supply the beds, persons in Iloilo. But all this, at the most only shows that,
and, on the part of the defendant, to pay their price. on the part of both of them, there was mutual tolerance
These features exclude the legal conception of an agency in the performance of the contract in disregard of its
or order to sell whereby the mandatory or agent received terms; and it gives no right to have the contract
15
Atty. Uribe (2018)
considered, not as the parties stipulated it, but as they by and between the plaintiff and the defendant was one
performed it. Only the acts of the contracting parties, of purchase and sale, and that the obligations the breach
subsequent to, and in connection with, the execution of of which is alleged as a cause of action are not imposed
the contract, must be considered for the purpose of upon the defendant, either by agreement or by law.
interpreting the contract, when such interpretation is
The judgment appealed from is affirmed, with costs
necessary, but not when, as in the instant case, its
against the appellant. So ordered.
essential agreements are clearly set forth and plainly
show that the contract belongs to a certain kind and not TORTS AND DAMAGES
to another. Furthermore, the return made was of certain Topic Coverage: Topics asked in the Bar Exams:
brass beds, and was not effected in exchange for the price - Persons liable and defences
paid for them, but was for other beds of another kind; and - Damages
- Incurs Liability
for the letter Exhibit L-1, requested the plaintiff's prior
- Requisites
consent with respect to said beds, which shows that it was
Sources in law:
not considered that the defendant had a right, by virtue
- Provisions on Quasi-Delict and Damages
of the contract, to make this return. As regards the
shipment of beds without previous notice, it is insinuated Introduction:
in the record that these brass beds were precisely the Q: Why Quasi-
Quasi-Delict when the course named is Torts and
ones so shipped, and that, for this very reason, the Damages?
plaintiff agreed to their return. And with respect to the A: In a way Quasi-Delict is synonymous to Torts. The
concept is Torts are based on intentional acts, wrongful
so-called commissions, we have said that they merely
acts, and malicious acts; torts are acts. (Dulai v CA)
constituted a discount on the invoice price, and the
Dulai v CA
reason for applying this benefit to the beds sold directly
Facts: The case involves an altercation between a lawyer
by the plaintiff to persons in Iloilo was because, as the
and a guard which resulted to the death of the lawyer. A
defendant obligated itself in the contract to incur the civil action under Quasi-Delict was filed in RTC of Quezon
expenses of advertisement of the plaintiff's beds, such City. In this case not only the guard but also the security
agency; the employer was sued. The agency raised the
sales were to be considered as a result of that defence that the act of the guard is not negligent act
advertisement. In respect to the defendant's obligation to therefor not a source of claim under quasi-delict. The
premise of this argument is that Quasi-delict to be basis
order by the dozen, the only one expressly imposed by
of a claim the act involved should be a negligent act. The
the contract, the effect of its breach would only entitle trial judge held that the security agency is correct to claim
the plaintiff to disregard the orders which the defendant that the act of the guard is not a negligent act which is
why he granted the motion and dismissed the case.
might place under other conditions; but if the plaintiff
Issue: Is quasi-delict only limited to negligent acts.
consents to fill them, he waives his right and cannot
complain for having acted thus at his own free will. For Held: The Supreme Court ruled that quasi-delict as a
source of obligation may not be only based on negligent
the foregoing reasons, we are of opinion that the contract
16
Atty. Uribe (2018)
acts. Even intentional acts, malicious acts, wrongful acts, time liability of the employer under quasi-delict is direct
or even acts punished by law may be the basis of claim and primary liability.
under quasi-delict.
Issue: Is the School liable as well?
Quasi-
Quasi-Delict defined under Civil Code:
Code:
Held: Yes, but not under delict or quasi-delict but under
Fault or negligence, such fault or negligence is called contract. It is because when a student enrols a contract is
quasi-delict. It is not an act or omission nor damage, it is entered into, and one of the obligations of the school is
fault or negligence which is called quasi-delict. The to ensure a peaceful environment conducive to learning.
Supreme Court would tell us that fault can be intentional.
Issue: Is the existence of contract enough to arise liability
Q: If the act is punished by law, can it be the basis of claim automatically?
under quasi-
quasi-delict?
delict?
Held: No. the requirement for fraud, fault, or negligence
A: Yes, but it can be also a basis of claim under delict. At must still be proven. In this case the court found that the
least there is a protection of the law. The double recovery school had gross negligence because there was no officer
rule under 2177, in other words under this rule for the of the school to examine the qualification of the guards.
same act or omission the injured cannot recover twice. They are only relaying on the agency as to who to deploy
in the school.
Example: There was a conviction and an award in a
criminal case for 500 thousand which the injured was able Note: From one act there can be multiple sources of
to claim. In relation to the civil case filed for the same act obligation and liability. You have to know as you read the
the injured also won and was awarded 800 thousand. The facts the cause of action, because there are different
injured can only now claim the excess of 300 thousand. In requisites and defences for each cause of action.
this case the double claim is a partial defence of the
Q: As result of a collision between a taxi cab owned by A
accused. On the other hand if the injured was awarded
and another
another taxi cab owned by B.
B. X, a passenger
passenger of the first
the 800 thousand first and the 500 thousand later the
taxi cab was seriously injured. X later filed criminals acts
2177 is a total defence.
against both drivers.
Note: A single act maybe the basis of a claim not only
If a civil action was filed may both
both taxi cab owners raise the
under one source but possible two or even three
defence of due diligence in the selection and supervision
depending on the circumstances. (Saludaga Case)
damages?
of their drivers to be absolved from liability of damages
Saludaga case
A: It depends on the cause of action. Since it is civil action
Facts: Saludaga is a sophomore law student of Far Eastern it can be breach of contract or filed under quasi-delict.
University. He was shot by a security guard of the school.
If the action arises from contract the only one liable is A,
Issue: What are the possible sources of obligation? because X is not a passenger of the other taxi.
Held: First Delict, in case the guard is convicted the If the action is quasi-delict it is applicable for both A and
liability arise from delict. In fact the security agency can B. Take note even if there is a pre-existing contractual
be subsidiary liable under delict. The second is Quasi- relation between parties a claim under quasi-delict may
Delict, and third contract. prosper.
Issue: Who can be liable under Quasi-Delict? Now if the action is under contract the defence of due
diligence cannot be invoked; while if the action is under
Held: First the school cannot be liable under Quasi-Delict
quasi-delict the defence is available.
because the school is not the employer of the guard or
the guard a student of the school. The ones who are liable Q: What if for criminal case, can the employer of the driver
under quasi-delict are the guard and his employer. This invoke the defence of diligence?
17
Atty. Uribe (2018)
A: Under the Revise Penal Code the answer is no, Bar Question: A passenger
passenger of the bus operated by Times
previously it is because the employer is only subsidiary Transit Company suffered serious physical injuries as a
liable. However it seems the argument is no longer result of vehicular
vehicular accident. An information was filed
applicable under the present laws due to the family code. against the driver of the bus for serious physical injuries
Remember as a result of the act of a minor student the through reckless imprudence. He was however acquitted
one that can be liable are the teachers, administrators, on the merits of the case because according to the
the school, and the parents; but the only ones who can be judgement of acquittal he was not negligent. Subsequently
Subsequently
soldierly liable are the teachers, administrators, and the the passenger instituted an action against the bus
school, while the parents are only subsidiary liable. Under company to recover damages. Would it prosper?
this code all of them may invoke the defence of diligence
A: It may prosper despite the fact the accused was
which is not available in the previous laws.
acquitted and ruled not negligent. This determination of
Note: Always identify what is the source of action. the court in the criminal case is not binding on the court
where the action under quasi-delict was filed. It was
Q: When is the employer primary and subsidiary liable?
liable?
because of the fact of the quantum of evidence required
A: When it is criminal, the cause of action is delict and is different. When the criminal court stated that the
there should be a conviction. There could be no civil accused was not negligent he was thinking of a quantum
liability arising from delict without conviction. In this case of evidence much higher than what is required in a civil
the liability of the employer is subsidiary. action.
In the other two, contract and quasi-delict it is a direct Note: On the requisites in order for a defendant be liable
and primary liability of the employer and the employee. under Quasi-Delict. Despite the provision under Art. 2176
In these two they can be solidary liable. about the requisite on “No pre-existing contractual
relation” the Supreme Court would tell us that even if
In delict they cannot be solidary liable because the there is pre-existing contractual relation a claim under
employer is only subsidiary liable. (Case of Pantranco) quasi-delict may prosper because the same act which
Q: What would be the the effect of the pendency of the breaches the contract may by itself a tortious act.
criminal case in relation to an action under quasi-
quasi-delict However it does not follow automatically that if there is a
base on the same act or omission? Would the pendency of breach its tortious.
the criminal case be a bar to the filing of the civil action of Requisites for quasi-
quasi-delict:
quasi-
quasi-delict or would it at least suspend the action under
quasi-
quasi-delict? - Act or Omission there being fault or negligence
- Damages or Injury
A: No, it will not bar nor suspend. The reason is because
- Casual Connection between the act or omission
the two proceeding is separate and distinct from each
other. Note: Art 2179 – Doctrine of Comparative Negligence
Q: Why are they separate and distinct? which also includes the Doctrine of Contributory
Negligence. Under this provision the parties both being
A: In the aspect of party in interest, in a criminal case the negligent as the premise, if the negligence of the plaintiff
state is the party in interest while in civil case it is the was the direct or proximate cause of the injury sustained
private injured party. However the more important by him, he cannot recover and the action must be
distinction is because of the quantum of evidence dismissed. If the direct or proximate cause of the injury
required differs in the two. sustained by the plaintiff was the defendant’s fault or
negligence, he can recover but the liability of the
Q: What if the accused was acquitted, what would be the
defendant must be mitigated.
effect of the acquittal
acquittal on the claim under quasi-
quasi-delict?
Would the acquittal automatically result in the dismissal of Q: When would an act considered as a negligent act under
the action under quasi-
quasi-delict? quasi-
quasi-delict?
18
Atty. Uribe (2018)
A: The definition in Art. 1173 in oblicon was made The defence raised by the bank was The Doctrine of Last
applicable in quasi-delict by expressed provision. This Clear Chance; claiming that had they exercised the
would involve an omission of the diligence required diligence to open the state of accounts they had
considering the nature of the obligation with corresponds discovered their account was empty.
with the circumstances of the persons, time, and the
Issue: Is the negligence of the bank direct and proximate
place. (Canco v MRR)
cause of the injury?
Canco v MRR
Held: The Supreme Court held that the negligence of the
Facts: Canco alighted from a moving train about to stop. officers of the bank was the direct and proximate cause
The result is that one of his arms went under the train of the injury sustained by the plaintiff.
which was hit by the wheels of the train and had to be
Comment: The speaker concurs for the decision but for a
amputated. The defence of MRR was it was the
reason not fully developed in the ponencia. For him the
negligence of the plaintiff which was the direct and
reason for it being the direct and proximate cause was
proximate cause. Had he waited for the train to make a
because of the degree of diligence required to banks.
full stop before alighting he would not be injured.
Banks are required to exercise the highest level of
Issue: Is the defendant correct to say that the act of diligence.
alighting at moving vehicle of the plaintiff negligence?
Note: Know who are required to exercise a degree of
Held: The majority of the Supreme Court ruled that under diligence higher than a diligence of a good father of a
the circumstances the act of alighting was not negligent family.
in considering as the person, time, and place. In
Singson v BPI
considering that the plaintiff is at his prime enabling him
to jump the Court ruled in favour of the plaintiff and find Facts: Singson have a bank account with BPI. Due to the
that the act is not negligence on his part. fault of the bank the account was freeze which caused his
cheques to bounce. This resulted for his car to be taken
Note: To determine if an act is negligent one must
due to lack of funds.
consider the degree of diligence required. (Philippine
Bank of Commerce v Court of Appeals) Issue: Does Tony have a cause of action?
PBCom v CA Held: Yes, under the circumstances he may claim under
breach of contract as well as under quasi-delict.
Facts: The plaintiff company sued the Philippine Bank of
Commerce claiming that they asked a secretary in their Bar Question: Despite a warning from the police
company to deposit a sum of money into the account of that an attempt to hijack a PAL plane will be made in the
the company in one of the branch of PBCom. This following week, the the airline did not take extra
secretary deposited the amount into the account of her precautions, such as frisking of passengers, for fear of
spouse instead of the account of the company. To make being accused of violating human rights. Two days later, an
it appear like she deposited the money to the account of armed hijacker did attempt to hijack a PAL flight to Cebu.
the company, she fully filled up the original slip while the Although he was subdued by the other passengers,
passengers, he
duplicate was not fully filled up where the account name managed to fire a shot which hit and killed a female
was missing. Despite the missing account name on the passenger. The victim’s parents sued the airline
duplicate the teller accepted the deposit. After the for breach of contract,
contract, and the airline raised
deposit the teller would give the duplicate as proof of the defence of force majeure. Is the airline liable or not?
deposit, it is when the secretary would put the name of
the company in the account name making it as if the Answer: First it is not the obligation of the airline company
company received the amount. The problem is that this to frisk passenger. Now considering the fact that there
did not happen once and continued till they eventually was a warning is it now their obligation to do extra
found out that their account was empty. measures? The answer is still no. By express provisions of
19
Atty. Uribe (2018)
the law this scenario does not require the airline company Note: As a rule the plaintiff has the burden of proving
to exercise extra ordinary diligence because this is an negligence on the part of the defendant. (Spouses Ong v
incident involving both of them are passengers. If only a Metropolitan water district)
passenger would cause injury to another passenger the
common carrier is required only to exercise ordinary Spouses Ong v Metropolitan Water District
diligence under Art. 1763.
Facts: One of the children of the Spouses was drowned in
a pool managed by Metropolitan Water District. The
Bar Question: Jovencio operated a school bus to ferry his
spouses sued the Metropolitan Water District
two sons and five of their schoolmates from their houses
to their school, and back. The parents of the five
schoolmates paid for the service. One morning, Porfirio, Issue: Were there negligence by Metropolitan Water
the driver, took a short cut on the
the way to school because District?
he was running late, and drove across an unmanned
railway crossing. At the time, Porfirio was wearing Held: The action was dismissed because the plaintiff failed
earphones because he loved to hear loud music while to prove the negligence on the part of the defendant.
driving. As he crossed the railway tracks, a speeding PNR
train loudly blared its horn to warn Porfirio, but the latter Note: There are certain circumstances the plaintiff would
did not hear the horn because of the loud music. The train not have the burden where the law would raise a
inevitably rammed into the school bus. The strong impact presumption. These presumptions sometimes conclusive
of the collision between the school bus and the train but most instances are disputable only. Art. 2183-2185
resulted in the instant death of one of the classmates of and 2188 are disputable presumptions, 2187 and 2193
Jovencio's younger son. conclusive.
The parents of the fatality sued Jovencio for damages Art 2187 pertains to products containing noxious
based on culpa contractual alleging that Jovencio was a substances.
common carrier; Porfirio for being negligent; and the PNR
Art 2193 pertains to things thrown from units; the head
for damages based on culpa aquiliana.
of the family occupying the unit is the one conclusively
presumed negligent.
Jovencio denied being a common carrier. He insisted that
he had exercised the diligence of a good father of a family For the disputable, the most common scenario is if the
in supervising Porfirio, claiming that the latter had had no vehicular mishap if the driver at the time of the mishap
history of negligence or recklessness before the fatal
was violating a traffic regulation, he would be presumed
accident.
to be negligent.
(a) Did his operation of the school bus service for a Doctrine of Res ipsa loquitur latin for “The thing speaks for
limited clientele render Jovencio a common itself”.
carrier?
carrier?
Before, the most common is the medical malpractice
A: Yes pertaining to surgical tools left inside the body; but lately
the most common are in the construction projects, for
(b) In accordance with your answer to the preceding those who fell from a height. However it is not enough to
question, state the degree of diligence to be just invoke the doctrine because there are curtain facts to
observed by Jovencio, and the consequences be proven in order for the doctrine to apply.
thereof.
Requisite:
A: Extra-Ordinary Diligence also known as Utmost
- It should be proven that the instrumentality
Diligence
where the incident happened is under the control
of the defendant.
20
Atty. Uribe (2018)
- That the incident in the ordinary business would Parents:

not have happened had the defendant only
Gutierrez v Gutierrez
exercised the diligence required
- The third is there should be no proof adduced by Facts: The driver of the car is a minor. Among sued are the
the defendant to prove that it was not their fault. parents and the other driver.
Issue: Can the suit prosper against the mother?

This one pertains to presumption in relation to employers.
Q: OJ was employed as professional Held: It did not prosper because the father was present
professional driver of MM Transit
during the incident.
Bus owned by Mister BT. In the course of his work OJ hit a
pedestrian who was seriously injured and later died in the Note: The incident happened back when the liability of
hospital as a result of the accident. The victim’s heirs sued the mother subsidiary. However the family code has
the driver and the owner of the bus for damages.
damages. amended how the liability of the mother is viewed; both
parents can be held liable.
Is there a presumption in this case that Mister BT, the
owner had been negligent, if so is the presumption In the case of Libi v Immediate Appellant Court the
absolute or not? Supreme Court has explicitly said that it is about time to
A: The presumption is not absolute presumption. In the re-examine the nature of liability of the parents in relation
last paragraph of Art. 2180 the employers can raise as a to the acts of their minor children. The liability of the
defence that they exercise the diligence required in the parents is now a direct liability not a subsidiary liability.
selection and supervision. In other words for our Q: Who can be held liable when
when a 7yr boy injured his
employers to be liable vicariously is not only because the playmate while playing with his father’s
father’s rifle?
driver was negligent but also themselves were negligent.
Note: If a question is absent of a specific date you can
There will be such a presumption only if there is already a assume that the incident happened during the effectively
determination of negligence on the part of OJ. The of the present laws.
moment there is such a determination of the driver or
employee is negligent automatically the presumption of A: In the family code the parents are held liable.
negligent on the part of the employer arises. Owners: (Art. 2184 in relation to vehicular mishaps)
mishaps)
Q: Who may be held liable? The owner may be held soldierly liable with his negligent
A: The person who himself caused the injury. Take note it driver.
does not matter how old or the mental stability of the one Q: Is the owner automatically liable soldierly because he is
who caused the injury since it is only a civil liability. inside the vehicle?
Vicarious Liability defined: A: No
In Vicarious Liability a person who was not the one who Q: Does the presence of the owner inside the vehicle
caused the injury may be held liable because he is causing damage to a third party affect his liability?
responsible over the person who caused the injury. (Art.
2180) A: Yes, because if he was inside the vehicle and he could
have prevented the mishaps by merely exercising the
Examples: (4 of the most asked in the bar) diligence required but failed to do so he can be held
- Parents or Guardians soldierly liable.
- Owners Note: It must be proven that the owner have the
- Managers opportunity to prevent the mishaps by exercising
- Teachers, Administrators, School diligence required.
21
Atty. Uribe (2018)
Q: Rommel, have an employee of family driver. The owner, Bar Question: After working overtime up to midnight,
Rommel was not on the car during the incident. Is Rommel
Rommel Alberto, an executive of an insurance company drove a
liable for damages to the heirs? company vehicle to a favourite Videoke bar where he had
some drinks and sangsang some songs with friends to
A: Under the last sentence of Art. 2184, if the owner was
“unwind”. At 2:00 a.m., he drove home, but in doing so, he
not inside the vehicle at the time of the incident he may
bumped a tricycle, resulting in the death of its driver. May
be held liable under Art. 2180. Now under Art 2180 he
the insurance company be held liable for the negligent act
may be held liable as the employer of the driver. Take
of Alberto? Why?
note since this is now as employer there are different
requisites and defences. A: No, the employer cannot be held liable because one of
the requisite is lacking which is that the employee must
Q: Would the answer be
be the same if Rommel be inside the
be acting in his assigned task at the time of the incident.
vehicle?
Bar Question: A driver of a bus owned by company Z ran
A: No, if the employer is inside the vehicle Art 2184 would
over a boy who died instantly. A criminal case for reckless
now apply and the question would be if he had the
imprudence resulting in homicide was filed against the
opportunity to prevent the mishaps.
driver. He was convicted and was ordered to pay P2 Million
Employers:
Employers: in actual and moral damages to the parents of the boy who
was an honor student and had a bright future. Without
Martin v Court of Appeals even trying to find out if the driver had assets or means to
Facts: The case involves a post of Meralco. It fell due to a pay the award of damages, the parents of the boy filed a
certain collision from a vehicle driven by a Martin who is civil action against the bus company to make it directly
allegedly an employee of the defendant Martin. The liable for the damages.
theory of Meralco is that the employer of the driver is a) Will their action prosper?
liable.
b) If the parents of the boy
boy do not wish to file a separate
Issue: Is the defendant liable? civil action against. the bus company, can they still make
Held: The Supreme Court dismissed the case because the bus company liable if the driver cannot' pay the award
Meralco was not able to prove the employer employee for damages? If so, what is the nature of the employer's
relationship. liability and how may civil damages be satisfied?
satisfied?
Note: One of the requisites for the employer to be held A: It may prosper, because if the action is under delict
liable is the employer employee relationship. then the conviction of the criminal case with higher
quantum of evidence required was satisfied more so in a
Bar Question: Under the law on quasi-
quasi-delict, aside from the civil case. However if the civil action was under quasi-
persons who caused injury to persons, who else are liable delict the employer may raise the defence of diligence in
under the following circumstances: selection and supervision making the employer not liable.
When a domestic helper, while haggling for a lower price They can still make the bus company subsidiary liable.
with a fish vendor in the course of buying food stuffs for They have to prove first that the driver cannot pay the
her employer’s family, slaps the fish vendor, causing her to awards before they can make the employer held liable.
fall and sustain injuries.
Teachers, Schools, Administrators:
Can the employer be liable?
Q: Can the school itself be held vicariously liable?
A: No, One of the requisite for the employer to be liable
is that the employee must be acting in his assigned task at A: Under Art. 2180 the answer is no, because the one
the time of the incident. liable is the teachers of the school not the school itself.
However in the 80s the Justices of the Supreme Court can
no longer subscribe to the interpretation. Now the
22
Atty. Uribe (2018)
prevailing rule is that under the Family Code the school of the employer is a direct and primary liability that is why
can be held vicariously liable. it is not required that the driver must be sued although it
must be proven that the driver was negligent.
Q: What kind of school can be held liable?
Another defence of the bus company is that he had
A: Now under the family code all kind of institution of
exercised due diligence in selecting and supervision.
learning can be held liable.
However the steps enumerated was not sufficient to be a
Parisoc v Brilyantes defence. Take note that there should be two things that
must be satisfied. First is in selection and next is in
Facts: A student died because one of his classmates supervision.
punched him. The boy fell and his head hit the concrete.
At the time of the incident the student who caused the First in selection, the Supreme Court ruled in one case
damage was of age. The parents of the boy sued the that it is not sufficient for the employer to demand the
teachers, school, and administrators. The teachers raised driver license; they must also inquire on the history of the
the defence that the one who caused the death was of driver.
age.
Second in supervision, there are 3 aspects to be satisfied:
Issue: Are the teachers correct in saying they cannot be
1) Rules promulgated
held liable because the student who caused the death is
2) Monitoring for the rules
of age?
3) Appropriate Penalties imposed.
Held: The Supreme Court ruled in favour of the parents
because even if the cause of death is of age the teachers, Due to these 3 the employer failed to prove it has
school, and administrators can still be held liable. This is exercised due diligence.
in connection to the fact that in the civil code there was Defence of fortuitous
fortuitous event against liability under Quasi-
Quasi-
no qualification as to the age of the student as far as the Delict:
responsibility of the teachers is concerned.
For one to invoke fortuitous event as a defence there
Note: Under the current laws there is no longer any must be no concurring negligence on your part.
debate because it is now clear that for a teacher to be
liable the student must be a minor. Doctrine of Discovered Peril or Doctrine of Last Clear
Chance:
Q: Sumaklay a passenger of a bus owned and operated by
Kanlungan Bus Company suffered serious injury when the The premise of the doctrine is that both parties are
vehicle went out of control and rammed an electric post. negligence of one of the parties was followed by the
Chuper the bus driver was at the time of the accident doing negligence of the other party by an appraisable interval of
a 100km/hr in a school zone and hit the post because he time.
was trying to avoid hitting school children crossing the
Note: The defence of Last Clear Chance can only be raised
street. In the suit for damages against the bus company for
among the parties who are negligent and not against the
driver’s gross negligence Kanlungan interposes
interposes the
party who suffered damage which is not negligent.
defences that all his drivers was under strict injunctions to
observe speed
speed limits in their particular routes and the Damages:
driver should first must have been sued, held liable, and
Focus:
found insolvent, before Kanlungan would be proceeded. Is
the bus company defence tenable? 1) Can the defendant be held liable for actual
damages, nominal, exemplary. (Art 2197)
A: This is a suit for damages not a criminal case. Since it is
not a criminal case the defence is not tenable. The 2) Possible liabilities in case of death as a result of
requirement of the employee to be insolvent is only Quasi-Delictual act. (Art. 2206)
under delict but in contracts and quasi-delict the liability 3) Moral Damages.
23
Atty. Uribe (2018)
Note: If actual damages would be awarded the court

cannot properly award nominal damages.
I. Transfer ownership:
The premise of nominal damages is no peculiarly law but
Q: May a person sell something that does not
there were a violation of rights that is why the plaintiff has
belong to him?
to be indemnified.
For actual damages to be awarded there should be proof A: Yes, even if the seller isn’t the owner, that does
of peculiarly laws. not affect the validity of the contract because the
law does not require the seller to be the absolute
If there is award of actual damages there would be no
owner.
award of temperate or moderate, because although both
of it have the premise of peculiarly laws but in temperate
Q: If the seller isn’t the owner may the buyer
damages the circumstances is such that it is so difficult to
acquire ownership over the thing?
prove the actual damages.
Comment: It is now automatic to the trail courts as per A: Yes, even if the seller is not the owner, he may
order of the Supreme Court, that in cases when someone have the right to sell. If given the authority by; (1)
died due to Quasi-Delictual acts and the heirs cannot Owner; (2) Law; or (3) Courts.
prove any or too little actual damages; the trial courts
awards 25 thousand pesos as temperate damages. Q: Even if the seller doesn’t have the right to sell,
may the buyer actually acquire ownership? May
There are some extra-ordinary situations where there he acquire title better than the seller had?
could be both award for actual and temperate damages.
6 Possible Liabilities
Liabilities under Art. 2206: A: Yes, by way of exceptions; (1) Principle of
estoppel; (2) Because this is a sale by an apparent
1) Indemnity owner to a buyer in good faith and for value; (3)
2) Moral Because the thing is purchased in a merchant
3) Exemplary store in fairs, markets in good faith and for value.
4) Loss of earning capacity
5) Interest Q: ½ of a parcel of land belonging to A and B was
6) Support sold by X to Y, for the amount of 1500, the sale
was executed verbally. One year later, A and B
Moral Damages: sold the entire land to X. Is the sale executed
verbally by X to Y valid and binding?
Just because the plaintiff suffered mental anguish or
serious anxiety does not necessary entitle him to moral
A: Yes, because there was payment already.
damages. There should be a ground which provided by
(doctrine of partial performance)
law why he suffered mental anguish.
Note: Art. 2219 enumerates grounds but not exclusive A: *alternative answer* Estoppel
because there are other ground enshrined in other In art 1434, the seller in the scenario doesn’t have
provisions. the right to sell, he is not the owner, nor does he
have the authority.
Rights and Obligations of the vendor: A: *alternative answer* This is unenforceable, as it

is a sale of an immovable property which is not in
(1) Obligation to transfer Ownership;
writing.
(2) Obligation to deliver;
(3) Obligation to warrant the thing;
24
Atty. Uribe (2018)
Q: Rod, the owner of an FX taxi found in his vehicle A: (1) Yes, Rita can recover the painting, because
an envelope containing TCT No. over a lot she was unlawfully deprived. She has the right to
registered in Ceasar’s Name. Posing as Ceasar, Rod recover. Art. 559, NCC, is applicable.
forged Ceasar’s signature on a deed of sale in
(2) Mario is not entitled. Under the facts he
Rod’s favor. Rod judges (registered) the said
bought it at a gallery auction, and the gallery
document with the registry of deeds, and obtained
auction is not a public sale. It is by invitation.
a new title in his name. After a year, he sold the
Supposing that he bought it from a friend, the
lot to Dawn, a buyer in good faith and for value,
answer is still the same, because it cannot be a
who also registered the lot in his name.
public sale.
(1) Did Rod acquire title to the land?
(2) Discuss the rights of Dawn, if any, over the
property. *In our jurisdiction, transfer of ownership requires
delivery, although, our law allows constructive
delivery.
A: (1) No, he did not acquire title to the land, Q: Even if there is physical delivery, is it possible
because the document is just a forged instrument. na walang transfer of ownership?
In other words, the SC will say, a forged deed
cannot convey a valid title. A: YES, conditional sales.
(2) Dawn acquired absolute ownership. Q: Sale without transfer of ownership?

Because he bought the land from an apparent A: Sale on trial / Sale on satisfaction / sale on
owner and he is a buyer in good faith and for approval - is kind of sale that there is no transfer
value. There is a law which allows the buyer to of ownership upon delivery since it will still
dispose the thing as if he is the true owner. So, undergo trial.
as the court again would say, while a forged
deed cannot convey a valid title it can be the
root of a valid title. 2 concepts related with transfer of ownership
(1) Risk of loss

Mapalo vs Mapalo case: (2) Double Sale
Sale is void, for there is no consent as to the sale of

the land, there is consent as to the donation only. RISK OF LOSS:
Q: Rita owned a valuable painting which was
stolen from her house the theft was duly reported Who bears the loss?
to the authorities. A year after, Rita saw the GR: Res Perit Domino, the loss is due to a
painting hanging in the office of Mario. When fortuitous event.
queried, Mario said that he bought the painting in Even if it is not your fault, you may bear the loss.
a gallery auction. The painting was positively
identified as the one stolen from the house of Q: B sold a second-hand car to E for 150,000. The
Rita. Could Rita recover the painting? If so, would agreement between B and E was that half of
Mario be entitled to reimbursement of the purchase price shall be paid upon delivery of the
amount he paid for the painting? Supposing that car to E and the balance shall be paid in five equal
Mario bought it from a friend, would your answer monthly installments, 15,000 each. The car was
be the same? delivered to E, and E paid the amount of 75,000.
Less than one month thereafter, the car was
25
Atty. Uribe (2018)
stolen from his garage with no fault on his part

and was never recovered. Is E legally bound to pay
DOUBLE SALE Art 1544
the said unpaid balance?
Q: X was the owner of an unregistered parcel of
A: Absolute sale. There is already a delivery, since land in Cabanatuan City. As she was abroad, she
the car was delivered to E before it was stolen. advised her sister Y via overseas call to sell the
Therefore, the buyer already owns the loss, the land and sign a contract of sale on her behalf. Y
buyer bears the loss under the Res Perit Domino thus sold the land to B1, March 31, 2001, and
rule. The buyer can be compelled to pay the executed a deed of absolute sale on behalf of X.
balance. B1, fully paid the purchase price. B2, unaware of
the sale of the land to B1, signified to Y his interest
Q: S is an American resident of Manila about to to buy it but asked Y for her authority from X.
leave on a vacation, sold his car to B for 2000 usd. Without informing X that she had sold the land to
The payment to be made 10 days after delivery to B1, Y the agent, sought X for a written authority to
X, a third-party depositary agreed upon who shall sell. X emailed Y an authority to sell the land. Y
deliver the car to B upon receipt by X of the thereafter sold the land on May 1 to B2 on
purchase price. It was stipulated that ownership is monthly installment basis for 2 years, the first is
retained by S, until delivery of the car to X. Five sought to be paid on end of May, 2001. Who
days after the delivery of the car to X, it was between B1 and B2 has a better right over the
destroyed in a fire which gathered the house of X, land? Explain.
without the fault of either X or B. Is Buyer B still
legally obligated to pay the purchase price?
A: Manner of payment is irrelevant if there is no
A: Clearly this is a conditional sale. In order for the reservation of ownership. There appears to be 2
ownership to pass, the condition must first be contracts of sale, one belonging to B1, and the
fulfilled before the thing is lost. It was after the second belonging to B2. With respect to the
delivery that the thing was destroyed by a fire. In question on who has a better right, it presupposes
other words, at that time of the loss the condition that the contract made is valid. The sale to B1
had already been fulfilled. Therefore, ownership is from the facts is a void sale. Under Art.1874, if the
already passed to the buyer. Therefore, the buyer agent was authorized to sell a parcel of land, his
is already the owner at that time of the loss. That’s authority must be in writing otherwise the sale is
why the buyer shall bear the loss. Res Perit void. B2 has a better right.
Domino.
Ownership is transferred to the first buyer, but
XPN to Res Perit Domino Rule (art 1504):
1504): ultimately that ownership will be transferred to
(1) Stipulation in a contract the second, because the second has a better right.
(2) The seller retains the title only to secure the
fulfillment of the buyer’s obligation
(3) While the goods were still with the seller, the II. Delivery of the Thing
goods were destroyed due to a fortuitous
Modes of Delivery: In sale of rights VS In sale of things
event. If there was delay in the delivery of this
good, whoever was at fault resulting in the
delay will be the one to bear the loss.
In sale of rights:
(1) Formal Delivery
26
Atty. Uribe (2018)
(2) Delivery of titles of ownership to the Ex: Out of 100, only 80 was delivered.
possession of the vendee. Placing of title of
(Q1) Can the buyer be compelled to
ownership.
accept?
(3) By the exercise of the buyer of his rights with
the consent of the vendor. (A) Generally, no. Because partial
performance, as a rule, is non-
performance, subject to the
In sale of things: stipulations.
(1) Actual
(2) Constructive (Q2) What if the buyer accepted?
(A) He cannot be compelled, but he may

Q: If there is physical delivery to the buyer, is accept.
there actual delivery?
(Q3) How much can he be compelled to
A: Not necessarily. The law requires that only pay?
possession on the part of the buyer but also
(A) Depends on whether he had
control.
knowledge of the fact that the seller
would no longer be able to deliver the
balance when he accepted the goods.
Q: If A, sold a parcel of land to B, a registered land.
Instead of taking physical possession, they
If he has the knowledge, then he can
executed another contract, this time a contract of
be compelled to pay at the contract
lease was entered into, with the B as the lessor,
rate.
and the seller remained in possession of the land.
Thereafter, the seller, who is now the lessee sold
If not, the law provides that he can be
the same parcel of land to C, the second buyer.
compelled to pay only the fair value of
Because he was in possession, he was able to
the goods.
deliver the land to C, and C took possession of the
land without knowledge of the prior sale. Both B
and C did not register the respective sale. Who has
a better right over the parcel of land? (Bautista vs
Sioson case) EX: Instead of 1 million, he delivered 1.2 million.
A: The first buyer was considered to be the first to
take possession. Thus, he is declared to have the
better right because this happened when the Q: A buyer ordered 5000 apples from the seller of
buyer leased the land to the seller. Ownership 20 pesos per apple. The seller delivered 6000
passed by way of constitutum possessorium, that’s apples. What are the rights and obligations of the
why if the ownership is acquired by the buyer, the buyer?
lessee will just have physical possession, legal A: (1) He can accept all 6000 apples, and pay the
possession remains with the seller. seller 20 pesos per apple; (2) he can accept all
6000 apples and pay a lesser price for the 1000
excess; (3) or he can keep the 6000 without paying
Q: If the seller would deliver items in a quantity for the 1000 excess, since the seller delivered
more or less than that agreed upon. them anyway; (4) or he can cancel those
transactions since the seller violated the terms.
27
Atty. Uribe (2018)
III. Warrant the thing
Del Prado vs Sps Caballero case:
Sale of a parcel of unregistered land, covered by Two kinds of warranty:

tax declaration. But in the deed of sale it was
(1) Express
clearly stated that the land sold was more or less
(2) Implied
4000 sq m. and the price is 20000. Thereafter, the
buyer had the lands surveyed, preliminary to the
application for the registration. As a result of the
Q: In a sale of a ten-year old car, may the
survey, it shows that the tax declaration covers seller nonetheless be held liable for
more than 14000 sq m. The buyer then applied for breach of warranty?
the registration not just for the 4000 sqm, but the
entire land 14000 sqm. A: Yes, if the seller told the buyer that with
this car you can drive from Manila to Bicol
Petitioners Invoked the lump sum sale rule, if the with only one liter of gasoline.
area turned out to be greater or bigger than that
stated in the contract, the buyer will be entitled to
the entire area, without the need to pay a single Q: In 85, Salvador and the semi-conductor
centavo. company executed a deed of conditional
sale when the former agreed to sell his
2000 sq. m lot in Cainta to the latter for
Held: The SC determined whether it is a lump sum the price of 1 million, payable in 100,000
sale, and concluded that it is a lump sum sale. down, balance 60 days after the squatters
However, the SC did not uphold the lump sum sale in the property have been removed. If the
since this rule is not applicable to the said squatters have not been removed in 6
circumstances. The buyer was allowed to register mos. The 100,000 DP shall be returned by
only 4000, as stated in the contract. the vendor to the vendee. Now, Salvador
filed an ejectment suit against the
squatters but in spite of the decision in his
Place of delivery? favor, the squatters still would not leave in
August 8, Salvador offered to return the
GR: On the stipulation made
100,000 DP to the vendor on the ground
*If none, it is the place fixed by usage of trade. that he is unable to remove the squatters.
The company refused to accept the
*If both stipulation and place fixed by usage of money, and demanded that Salvador
trade is absent, it depends whether the thing or execute a deed of absolute sale of the
good is determinate, or generic. property in its favor at which time it would
If determinate, it is the place where the pay the balance of the price. Incidentally
goods were located at the time of the the value of the land had doubled by that
constitution of the obligation; time. Salvador concerned 100,000 in
court, and filed an action for rescission.
If generic, it is the place of business of the Will the action prosper?
seller, if none, it is the residence of the
seller. A: No, in the first place, the seller here is
not the injured party. He was the one who
failed to evict the squatters.
28
Atty. Uribe (2018)
A: art. 1545. If there is a condition in A: Fortuitous event; under art. 1174, NCC, in
relation to the performance of an its exceptions. The seller is still liable. In fact,
obligation, and the condition was not even if the loss was due to the fault of the
fulfilled as a result of one of the parties. buyer himself, he can still hold the seller liable.
The other party has the following options
(1) he can cancel the sale; (2) For this
party to waive the fulfillment of the Rights and Obligations of the Vendee
condition and proceed with the sale; or (3)
Treat the none happening of the condition ATTY URIBE WANTS YOU TO FOCUS ON THE MACEDA
as a breach of warranty and hold the LAW! (memorize the official name!!)
other party liable for damages.
Q: The seller, delivered the goods to the place of

*In sale of second-hand items, there is no implied business of the buyer, and after unloading the
warranty as to the condition of the thing against goods they immediately left the premises of the
hidden defects. buyer. An hour after the goods were unloaded,
the buyer called the seller to inform him that he is
*There is no warranty against hidden defects on rejecting the goods, and ask the seller to get the
As-is, Where-is Sale. The buyer is practically buying goods on his place, but before the seller could
the thing as it is found and where it is found. obtain the goods / remove the goods from the
buyer’s place, the goods were destroyed. Can the
buyer nonetheless be held liable for the price
Kinds of Implied warranty: despite the loss of the goods?
A warranty inherent in a contract of sale, whether A: Depends if the buyer had a just cause in his
or not mentioned in it are the following; (1) refusal to accept. If none, by law, ownership is
warranty on quality; (2) warranty against hidden deemed to pass to him. Therefore, if you apply Res
defects; (3) warranty against eviction; and (4) Perit Domino rule he will be the one to bear the
warranty in merchantability. loss. He can be compelled to pay the price.
Q: Knowing that the car had a hidden crack in If, however, there is just cause, then ownership
the engine, X, sold it to Y, without informing will not pass to him. He cannot be compelled to
the latter about it. In any event, the deed of pay the price.
sale expressly stipulated that X was not liable
for hidden defects. Does Y have the right to
demand from X a reimbursement of what he Q: The seller delivered the object of the contract a
spent to repair the engine plus damages? year ago. It was only this day, that the buyer paid
the price. If the seller demands for the payment of
A: X acted in bad faith knowing that there is a
interest, would that be a valid demand?
hidden crack in the engine. The waiver is void,
therefore, he is liable. A: (1) if it is stipulated that the buyer is liable for
interest; (2) if the thing sold is fruit bearing; (3)
despite judicial or extrajudicial demand, the buyer
Q: If the thing with hidden defect was lost, or failed to pay, he is already in delay. Therefore, he
is destroyed? Can the seller be held liable, if will be liable for interest.
the loss was due to the fault of the buyer? Or
Fruits of the thing sold:
the loss was due to a fortuitous event?
29
Atty. Uribe (2018)
Before the delivery, but after the perfection, the fruits (I) Installment
which would accrue during this period, who is entitled?
Sale has to be a sale on installment. Also, a sale on
Q: By means of a public instrument, mr. Nagbibili credit. But not all sales on credit are sales on
sold his mango plantation to Abenturero effective installments. It can be sale on credit on a straight
immediately, they agree that the delivery shall be term basis.
effected 6 mos from the execution of the deed of
(B) Buyer
sale. When the said period arrived, abenturero
demanded the delivery in writing but Nagbibili For the protection of the buyer.
dilly-dallied, it was not a month afterwards that
Nagbibili finally gave the land to abenturero. In the Q: Priscilla purchased a condominium unit in
3 weeks before the delivery Nagbibili sold and Makati from the cityland over a price of 10 million
delivered the entire produce of the mango payable 3 million down balance with interest in 60
plantation to Mr. Comersyante for 200,000. equal monthly installments. The executive of this
Comersyante knew nothing about the contract deed in which stipulated that should the vendee
between Nagbibili and Abenturero. Abenturero pay the three successive installments the shares
now seeks to recover from Comersyante. Either shall be deemed rescinded without the necessity
the full value of the mangoes or similar amount of an action. The down payments made by
quality of the mangoes sold. Does Abenturero vendees shall be forfeited in favor of the vendor,
have this right against Comersyante? moving and rental for the use and occupancy and
as…damages. For 46 mos. Priscilla paid the
A: Art 1164, in relation to art 1537, that the installments religiously. But on the 47th and 48th
creditor shall be entitled to the fruits of the thing month, she failed to pay. On the 49th month she
only from the time the obligation to deliver arises. tried to pay, but the vendor refused to receive.
The obligation to deliver arose actually became The following month, the vendor sent her a notice,
due and demandable after 6 mos. Mula doon, saka it was rescinding the deed pursuant to the
lang entitled ang buyer sa mga fruits na iyon. In stipulation demanded that she vacate the
other words, as to these fruits na binenta in the 3 premise. She replied that it cannot be rescinded.
weeks before the delivery, Si Abenturero na ang Can the vendor rescind the contract?
entitled. Therefore, since he is the one entitled
already to these fruits na binenta kay A: No, because under this law (MACEDA), if the
Comersyante, does he have the right against buyer paid for at least 2 years, before default, the
Comersyante? buyer is entitled to a grace period of 1 month for
every year. She was only in default for 60 days, but
Wala din. First reason, from the facts, since, she paid for at least 3 years, she is entitled
Comersyante is a buyer in good faith, but the to 90 days grace period.
second reason is because of the second paragraph
of 1164, that the creditor shall have no real rights
over the thing until the delivery of such thing.
Remedies of the unpaid Seller
Wala naman na-deliver sa kanya, he will have no
real right over these fruits. Art1526, enumerates 4 remedies
(1) Lien on the goods, while the seller is in possession

(possessory lien);
MACEDA LAW:
(2) Right to stop the goods when in transit;
(R) Realty (3) The right to resell; and
(4) The right to rescind
It has to be a sale of a realty. It has to be a
residential realty. Lien on the goods & Right to stop the goods when in transit:
transit:
30
Atty. Uribe (2018)
Q: Can these remedies be invoked by a person who transit? Does that mean he has parted
was not a party to this contract? possession?
A: Yes, the law provides that even an agent to whom A: Not necessarily. Because, nandoon na sa
the bill of lading was indorsed can invoke these rights, common carrier ang goods, does not mean the
or anyone for that matter who is in the possession of seller has parted possession, because, in the bill of
the seller like the assignee, heirs etc. lading, maybe the goods are deliverable to the
seller himself. Or maybe deliverable to the agent
Q: When would a seller be considered unpaid?
of the seller. That’s why his rights are still
EX: if the total contract price is 100,000. And the possessory lien.
buyer already paid 99,000. Can the seller still
invoke any of these remedies?
Q: Does the law require that the buyer be
A: Yes, until the entire price is fully paid, the seller is
insolvent for the seller to invoke any of these
still considered as unpaid seller.
remedies?
A: Yes, but only as to stoppage and transit, as to

Q: Are these the only remedies that the unpaid seller the remaining, it is not required that the buyer be
can invoke? insolvent, but it may be a ground.
A: No, the seller can invoke exact fulfillment, or

specific performance for the buyer to pay the price, or
Q: The buyer alienated the goods to a third person
even an action for damages may prosper.
would the seller lose his possessory lien? Can the
Q: Can a seller still invoke the remedy or any of the third person validly demand that the seller deliver
remedies, if ownership had already pass? the goods to him?
A: Yes, expressly provided. A: As a rule, no. Just because the buyer alienated
the goods that doesn’t result in the seller losing
Q: Can these remedies exist at the same time? his lien, but there are exceptions; (1) because the
Therefore, can the seller invoke not only one, but two seller assented to the alienation; and (2) The
or three remedies? buyer sold these goods to a third person who is a
A: Yes, unlike in the Recto Law, where the remedies buyer in good faith and for value, and the goods
are alternative, the remedies here can never be involved are covered by a negotiable document of
considered as alternative, because having invoked 1, title which was negotiated to the buyer.
you can also invoke the other remedies. Right to resell:
EX: For the seller to be able to invoke the right of Q: 2 notices mentioned in the law to the buyer,
resale, he must still have possessory lien. but are they required for the validity of the sale?
EX: If he properly invoked the right of stoppage in A: No. (1) Notice as to the intention to resell.
transit, he will be reverted back to his possessory
lien. Ex: Kapag hindi ka nag bayad, ibebenta ko itong
mga goods na ito.
XPN: (2) remedies that cannot exist at the same time are;
Possessory lien, and stoppage in transit. Because the (this will find relevance only if the ground relied
requisites are totally opposite. upon by the seller in the exercise of this right is
because the buyer had been in default for an
Q: If the goods are already in transit, does that unreasonable time.)
mean that the seller’s remedy is only stoppage in
31
Atty. Uribe (2018)
(2) Notice as to the Date, time, place of the resale.

(the second notice will find relevance only if there
Q: X sold to Y 100 sacks of rice that Y was to pick up
is deficiency.)
from X’s rice mill on a particular day. Y did not
EX: ang total unpaid price ay 100,000 in the resale, however appear on the agreed date to take delivery of
the net proceeds, baka 30,000 lang. So, may the rice. After one week, X automatically rescinded the
deficiency nang 70,000. sale, without notarial notice to Y. Is the rescission
Q; can the seller recover the deficiency from his valid?
buyer, yung unang buyer.
Options:
A: Yes, if the resale was conducted in good faith.
Art 1191. (A) Yes, automatic rescission allowed, since
Q: What if baliktad, excess naman? Ang unpaid having the character movables and consumables, rice
price na 100,000 ay naku nabenta ng seller for can easily be deteriorated; or (B) Now the buyer is
150,000? Yung 100,000 syempre mapupunta sa entitled to a customary 30 days extension of his
seller, eh yung excess na 50,000? Who shall be obligation to take delivery of the goods.
entitled to that?
Or, No,(C) since there was no express agreement
A: Under the law, the seller. Accdg. To atty. Uribe, regarding automatic rescission; or (D) No, the seller
it is not unjust enrichment, because in the first should first determine that Y was not justified in failing
place, it was the fault of the buyer that the seller to appear.
had the right to resell, so by express provision by
Best answer: A
the law, the seller shall not be responsible to the
buyer for whatever profit he may obtain out of the
resale.
Recto Law:
Q: If the ownership had already passed to the
buyer, and the seller would want to resell the ALSO REMEMBER RECTO LAW!
goods? (ang premise dito ay may possessory lien Similarities to Maceda Law:
ba siya? That is a requirement.) Is he required to
first rescind the sale before he can resell the (1) Both can only be invoked in relation to a contract
goods? (Kalaw vs CA) of sale
(2) The sale must be a sale on installment; and
A: No, he is not required to rescind first before he (3) Both laws were promulgated to protect buyers
can resell, despite the fact that the ownership had
already passed to the buyer. Because, the effect of
the resale by operation of law, is to terminate the *In the Recto Law, the remedies are alternative in
ownership of the buyer. Since the seller still has character.
possession of the goods, when he delivers the
goods to the second buyer, the second buyer * If the seller invoked one of the three remedies of
acquires ownership. this law, even if he isn’t fully paid, he can no longer
invoke the other remedies.
*For the Recto Law to apply, kung ano ang binili, yun
din dapat ang chattel mortgage.
Right to rescind
(1) The buyer had been in default for an unreasonable Remedies:

time;
(2) It was stipulated (1) Exact fulfillment;
32
Atty. Uribe (2018)
(2) Cancellation of the sale; repurchase of property. Until when must A,

(3) Foreclosure of the mortgage which is a chattel exercise his right?
mortgage.
A: 4 years from the date of the contract.
Distinction:
Q: What if the parties agreed that the period for
*In Recto law, personalty dapat ang object ng sale the repurchase is for 25 years? Can the seller a
hindi immovables. EX: Watches, cars. retro still repurchase on the 15th year?
* In Maceda law, a forfeiture clause cannot be given A: No, the law provides for a maximum period
effect if at the time of default, the buyer had already which can be agreed upon by the parties which is
paid for at least two years. In Recto Law, it does not 10 years.
matter. It is always a valid clause, it can always be
Q: July 14, 2004, Pedro executed in favor of Juan a
given effect.
deed of absolute sale over a parcel of land,
covered by TCT no. It appears in the deed of sale
that vendor received from Juan 120,000 as
MODES OF EXTINGUISHMENT
purchase price. However, Pedro retained the
(1) Ordinary modes of extinguishment under the law owners’ duplicate of the said title. Thereafter,
on Obligations. (Ordinary Mode) Juan, as lessor, and Pedro as lessee, executed a
(2) Modes of extinguishment under the law on Sales contract of lease over the property for a period of
(Special Mode) one year, with a monthly rental of 1000. Pedro as
(3) Redemption (Extra Special) lessee, was also obligated to pay the realty taxes
Two kinds: (a) Conventional; (b) Legal on the property during the period of the lease.
Subsequently, Pedro filed a complaint against Juan
REDEMPTION (EXTRA SPECIAL MODE) for the reformation of the deed of absolute sale,
(A) Conventional alleging that the transaction covered by the deed
was an equitable mortgage. In his verified answer
There can only be such right of redemption, if in the complaint, Juan alleged that the property
the parties, or if there was a contract entered was sold to him under the deed of absolute sale
into known as Pacto De Retro Sale (a sale with and interposed counterclaims to recover
the right to repurchase) possession of the property, and to compel Pedro
*Sa conventional, dapat sale ang pinasok nila, to turn over him the owner’s duplicate of title.
sa Legal, there must be an alienation onerous Resolve the case with reasons.
in character* A: atty Uribe would resolve the case in favor of
Pedro, unless, Juan can rebut the presumption
that this is merely an equitable mortgage. In other
* In a true pacto de retro sale, the title and words, there are two reasons in this scenario why
ownership of the property sold are immediately the presumption arose na equitable mortgage lang
vested the vendee a retro, subject only to the siya, (1) that they entered into a contract of lease,
resolutory condition of repurchase by the vendor and therefore, the seller remained in possession;
a retro with in the stipulated period. (2) because as stipulated, the seller obligated
himself also to pay the realty taxes, which is a tax
Q: In January 2, 1980, A and B entered in to a
on the thing. That is another reason why the
contract whereby A sold to B, a parcel of land for
presumption arose. Unless these two are
in consideration 10,000, A reserving to himself the
rebutted, the case should be resolved in favor of
right to repurchase the same. Because they were
Pedro, who is in this deed the seller.
friends no period was agreed upon for the
33
Atty. Uribe (2018)
brothers, to enable the buyer to secure a title to

his name, the deed of sale was made to refer to an
(B) Legal
undivided interest the property of the seller, with
Can be alienation onerous in character. the metes and bounds of the lot being sold as
stated. Bart and Carlos, reacted by signifying their
exercise of the rights of redemption as co-owners.
2 groups that have the right to redemption: Antonio, in his behalf, and in behalf of his buyer,
contends that they are no longer co-owners,
(1) Co-owners although the title covering the property has
(2) The owners of a joining lock remained in their names as such. May Bart and
Carlos still redeem the lot sold by Antonio?
Q: The children inherited a parcel of land. Before A: The brothers bought the land in metes and
the land could be partitioned, one of them Raul, bounds, three separate deeds each referring to a
sold his hereditary rights to Raffy, a stranger to the particular, in metes and bounds.
family, for 5 million. Do Ester and Rufos have a They may exercise the right to redemption but not
remedy for keeping the land within the family as co-owners, but as co-owners of an adjoining lot.
instead of mayroong isang portion na napunta sa
hindi kapamilya? exercised::
Period which the right of redemption may be exercised
*when two or more heirs inherit a specific Q: Betty and Lydia were a co-owner of a parcel of
property, they become co-owners. Kaya before land. Last January 31, 2001 when she paid her real
partition, nag benta ang isa, there will be a right to estate taxes, Betty discovered that Lydia sold her
redemption by the other co-owners. share to Emma last November 10. The following
day, Betty offered to redeem her share, but the
latter replied that Betty’s right to redeem has
A: (a) Yes, they may be subrogated to Raffy’s right already prescribed. Is Emma correct or not?
by reimbursing to him within the required time, A: No, because the 30 days under the law, is from
what he paid Raul (nagbenta). the time notice in writing is given to the
redemptioner. Here, there is no notice given.
That’s why the 30 day period, under the
Q: Antonio, Bart, and Carlos are brothers. They circumstances had not even started to run.
purchased from their parents a specific portion of
a parcel of land as evidenced by 3 separate deeds
of sale, each deed referring to a particular lot in Q: Adelle and Beth are co-owners of a parcel of
metes and bounds. When the deeds were land. Beth sold an undivided share of her property
presented to the registry, the register could not to Sandro, who promptly notified Adelle of the
issue a separate certificate of title due to the sale, and furnished the latter a copy of the deed.
absence of a subdivision plan. The new title had to When Sandro presented the deed for registration,
be issued, therefore, the names of the brothers as the register of deeds also notified Adelle of the
co-owners of the entire property. The situation sale in closing a copy of the deed with the notice.
has not change, up to now, but each of the However, Adelle ignored the notices. A year later,
brothers had been receiving rentals exclusively Sandro filed a petition for the partition. Upon
from the lot actually purchased by him. Antonio receipt of the summons, Adelle immediately
sells his lot to a third person, with notice to his tendered requisite amount for the redemption.
34
Atty. Uribe (2018)
Sandro contends that Adelle had lost her right of so when the term of lease expired. Is Idelfonso bound to
redemption after the expiry of the 30 days from respect the lease contract between Jude and his tenants?
her receipt of the notice of the sale given by him.
A: No. Three scenarios where the buyer will be bound to
May Adelle still exercise her right of redemption?
the terms of contract of lease:
Suggested A: Yes, Adelle may still exercise her
1. If it was stated in the contract of sales
right of redemption because, the 30-day period
2. If the contract is registered
will start to run from the time notice in writing is
given by the vendor. Here, there is no notice given 3. If the buyer had actual knowledge of the
by the vendor. The notice given was only from the existence of contract
vendee, Sandro, and the register of deeds.
Therefore, the 30-day period had not even started
to run. Thr
Three reasons why the owner be held liable by a supplier
even if at the time of demand the owner doesn’t owe the
Alternative A (atty Uribe): the SC held in the case
contractor a single
single amount:
of Durumal vs CA, the law requires for the 30-day
period to start to run, that a copy of the deed of 1. When the owner/employer paid the contractor
sale must have been given to the even before his obligation became due and
redemptioners.(concept of subrogation) A demandable
redemptioner is supposed to be subrogated under 2. The contractor renounced his claim against the
the same terms and conditions, how would they owner
know the actual terms and conditions if they were
3. Bond requirement
not given a copy of the deed of sale?
Does it really matter who gave them a copy? Who

cares? Ang nagbibigay lang naman ay yung Termination of the contract
postman, o empleyado ng nagpapadala. So kung
ikaw ang redemptioner, may nabasa ka na deed of Q: A is the owner of the lot on which he constructed a
sale, eh baka yung prudent na dapat gawin mo ay building with a total cost of Php 10 million. At that
ask your co-owner, binenta mo ba talaga? Para mo amount, B contributed Php 5 million provided that the
ma-exercise kung gusto mo yung right of building as a whole will be leased to him for a period of 10
redemption. years from January 1, 1985 at a rental of Php 100k a year.
To such condition, A agreed. On December 20, 1990, the
Yes, because, here binigyan siya ng notice, in fact, building was totally burned. Soon thereafter, A’s workers
a copy of the deed of sale was given to her, not cleared the debris and started the construction of a new
once, but twice. The period had long expire. building. B then served notice upon A that he would
occupy the building for the unexpired portion of the lease
term explaining that he had spent partly for the
Rights and Obligations of Third Persons construction of the building. A rejected B’s demand. Did
A do right in rejecting his right?
Q: Jude owned a building which he had leased to several
tenants and without informing his tenants Jude sold the A: Yes. The burning of this building or total loss happened
building to Idelfonso. The latter notified all the tenants due to a fortuitous event the contract was extinguished.
that he is the new owner of the building. Idelfono ordered
the tenants to vacate the premises within 30 days from
notice because he had other plans for the building. The
tenants refused to vacate insisting that they will only do
35
Atty. Uribe (2018)
Q: January 1, 1980, Nestor leased the fishpond of Mario

for a period of 3 years on a monthly rental of Php 1,000
Requisites of Tacita Reconduccion:
Reconduccion:
with an option to purchase the same during the period of
1. The period of the lease had already expired the lease for a price of Php 500k. After the expiration of
2. Despite the expiration of the period of the lease, the 3-year period, Mario allowed Nestor to remain in the
the lessee continued to be in peaceful possession leased premises at a same rental rate. However, in June
of property with the acquiescence of the lessor 1983, Nestor tendered the amount of Php 500k to Mario
for 15 days and demanded that the latter execute the deed of
absolute sale of the fishpond in his favor. Mario refused
3. There should be no notice of the termination of
on the ground that Nestor no longer had an option to buy
the contract coming either from the lessor or the
the fishpond. Nestor filed an action for specific
lessee
performance. Will the action prosper?
Q: November 15, 1999, A leased an urban land to B for a A: Yes. Despite the expiration of the period, he remained
period of 10 years with a rental payable annually. in possession of the property. In an implied new lease,
December 5, 2009, B, while still in the possession of the only those terms and conditions that are germane to the
land, paid a rental to A. At the expiration of the lease, contract of lease are deemed renewed.
there being no notice given by either party for the
termination of the lease, did the lessor continued to have
the right to use the thing for a period of another 10 years
which was the period in this contract?
II. Agency
A: No. It will no longer be for the same period (10 years)
as the period expired. It will now be: Q: Joan asked her close friend Iza to buy some groceries
for her in the supermarket. Was there a nominate
• for a period of one year from November 15; or contract entered into between Iza and Joan?
• only with the tolerance of A; or
• for all the time necessary for the gathering A: Yes. A contract of lease of service was entered into.
However, for this contract to be a lease of service there
must be no principal-agent relationship between Joan
and Iza.
Q: The term of a 5-year lease contract between X the
lessor and Y the lessee were rents paid for month to
month came to an end. Still Y continued using the
Characteristics of contract of agency
property with X’s consent. In such a case it is understood
that they impliedly renewed the lease. What is the • Consensual
period? • It is Preparatory contract – entered into not as an
a. From month to month under the same conditions end by itself but only as a means of entering into
as to the rest another contract or other transactions
b. Under the same terms and conditions as before • It is a principal contract – it can stand by itself
c. Under the same terms except the rent which day • Cause – may be gratuitous or onerous
that the court must fix • Representative in character
d. For only a year with a rent raised by 10% pursuant • Fiduciary
rental control law
Distinctions
1. Agency vs Negotorium Gestio

Gestio
a. both of them involves representation.
36
Atty. Uribe (2018)
b. As Manner of creation – agency is by absolute sale of the land to Z. what is the status of the
agreement of parties. Negotirium gestio sale?
is a result of operation of law under
A: Void. Because this contract of sale was entered by an
certain circumstances agent involving a parcel of land and his authority was not
2. Agency vs Trust
Trust in writing. (phone)
a. Both are fudiciary.
b. Agent is supposed to represent the Q: which of the following contract of sale is void:
principal; trustee does not represent the a. Sale of AGM’s car by KRP. AGM’s agent whose
trustor. He acts for himself authority is not reduced into writing -
unenforceable (ART. 1878)
Kinds of Agency
b. Sale of AGM’s piece of land by KRP agm’s agent
• Actual whose authority is not reduced into writing
• Ostensible/apparent c. Sale of AGM’s car by KRP a person stranger to
• Estoppel AGM without AGM’s consent or authority –
unenforceable (Art. 1403)
d. Sale of AGM’s piece of land by KRP a person
As acts of agency in relation to scope of authority of the
stranger to AGM without agms consent or
agent
authority
1. Acts of administration
2. Acts of ownership
3. Acts of strict dominion Q: which of the following contracts is void
Q: A as principal appointed B as his agent granting him a. An oral sale of a parcel of land
general and limited management over A’s properties b. A sale of land by an agent in a public instrument
stating that A withholds no power from B and that the whose authority from the principal is oral
agent may execute such acts as he may consider c. A donation of a wrist watch worth 4005
appropriate. Accordingly, B leased A’s parcel of land in d. A relatively simulated contract
Manila to C for 4 years at Php 60,000 per year payable
annually in advance. Also, B leased another parcel of land
of A in Caloocan to D without fixed term at Php 3,000 per
month payable monthly. All these contracts were
executed while A was confined due to illness in the Makati Q: A property (from the parents) was leased by the
Med. Rule in the validity and binding effect of each of the siblings to Maria for 3 years. 1 year after, Fe claiming to
above contracts upon A, the principal. have authority to represent her siblings (Esperanza and
Caridad), offered to sell the leased property which the
A: B’s authority only pertains to acts of administration.
Maria accepted. The sale was not reduced into writing but
Since B has no SPA when he entered into a contract which
Maria started to make partial payments to Fe which the
is considered as act of ownership clearly makes the
latter received and acknowledged. After giving the full
contract of lease unenforceable as against the principal.
payment, Maria demanded for the execution of deed of
absolute sale which Esperanza and Caridad refused to do.
Worst, Maria learned that the siblings sold the same
Forms
property to Manuel. This compelled Maria to file a
Q: X phoned his brother Y authorizing him to sell X’s parcel complaint for the annulment of the sale with the specific
of land in Pasay. X sent the title to Y by courier service. performance and damages. If you were the judge, how
Acting for his brother Y executed a notarized deed of will you decide the case?
37
Atty. Uribe (2018)
A: Fe claimed that she was representing her siblings. Even Q: A (agent) was authorized to sell a specific car. In the
assuming that Fe has the authority, it appears that there SPA, it was indicated that the car should be sold at price
is no authority in writing. If this is a sale of a parcel of land of Php 300k. The agent sold the car for Php 400k. The
by an agent where the authority is not in writing, this principal did not recognize the sale because of the price
contract of sale is void. Therefore, the only binding sale in mismatch. Would the contract bind the principal?
this case is as to the interest of Fe. The sale was not
A: Yes, because the limits of the authority of the agent
reduced into writing but nonetheless there was already
was not deemed exceeded if the act of the agent is clearly
performance of the obligation so this will be taken out of
more advantageous than that contemplated by the
the operation of statute of frauds.
principal.
Obligations of the Agent

Q: The agent has the authority to hire a lawyer to protect
1. The agent should act within the scope of his the interest of his client. The agent hired and paid a
authority lawyer. Does hiring of lawyer includes the authority to pay
2. The agent should act in representation of the a lawyer?
principal A: Yes. The authority to hire includes the authority to pay.
Scope of Authority of Agents Q: Prime Realty Corporation appointed Nestor as the

exclusive agent in the sale of lots of its newly developed
Q: The agent was authorized to sell properties of the
subdivision. Prime Realty told Nestor that he could not
principal. Thereafter, he was able to sell but the principal
collect or receive payments from the buyers. Nestor was
did not want to recognize the contract claiming that the
able to sell 10 lots to Jesus and to collect down payments
authority of the agent would cover only those property
for the said lots. He did not turn over the collections to
which he already owned at the time of the issuance of the
Prime Realty. Who shall bear the loss for Nestor’s
SPA.
defalcation? Prime realty or Jesus?
A: The SPA was written in Spanish, and one of its words
A: depends on SPA. Jesus should have demanded for the
means “which might belong”. Hence, even the properties
presentation of SPA. If it was so clearly indicated in the
acquired after the issuance of the SPA are covered by
SPA that the agent does not have the authority to collect
authority of the agent.
and receive payments and Jesus did not looked for the
same, Jesus should bear the loss. If the agent acted in
excess or outside of his authority (2 effects:
Q: Linan is the principal while Marcus is the Agent. Based
on the SPA, “he may administer the interest I possess • As to the principal (Art. 1403) as a rule, the
within this municipality of tarlac, purchase, sell, collect contract will be unenforceable against the
and pay, as well as sue, xxx concerning the good principal. EXPN: the principal ratified
administration xxx of the said interest.” The agent sold • When the principal contributed to deceive the
Linan’s land. Did Marcus acted within the scope of his
third person into believing that the agent had full
authority based on the mentioned SPA?
powers (Art. 1911) the principal and agent will be
A: Yes. Each word in the power of Atty should be given held solidarily liable under the principle of
effect. In this case, the SPA included the word “sell”. estoppel.
• If the limitations on the power of the agent could
not have been known by the third person, it will
bind the principal only because (Art. 1900) third
38
Atty. Uribe (2018)
person only have to rely on the power of Atty A: No. the revocation was done in bad faith. However, the
which has written. They are not required to agent had also violated a fiduciary duty under the law
inqure as to the other limitations imposed by the which is to deliver to the principal whatever he had
principal upon his agent not stated in the SPA. received (1k) pursuant to the agency even it is not owing
to the principal. The commission therefore is deemed
forefeited.
Authority of Agent
Q: The general manager PPA issued notice to proceed or Q: X appoints Y as his agent to sell his products in Cebu
notice of award to a company without the authority of the City. Can Y appoint a sub agent and if he does, whet are
board. Did he acted outside of his authority? the effects of such appointment?
A: Yes. He acted outside of his authority. He was like an A: Yes X can appoint a sub agent or a substitute. If he
agent acting without authority from his principal. This will appoints a sub agent or a substitute he will be responsible
will not bind the principal PPA. for the acts of the sub agent or substitute. (suggested
answer by UP). Please note that substitute and sub agent
are different.
Q: CX executed a SPA authorizing DY to secure a loan from
any bank and to mortgage his property covered by the
owner’s certificate of title. In securing a loan from M Obligations of Commission
Commission Agent
bank, DY did not specify that he was acting for CX in the
Q: If the commission agent agreed to sell the products of
transaction with the said bank. Is CX liable for the bank
the principal. If the agent sold the products on installment
loan? Why or Why not?
basis and the higher price without the knowledge of the
A: No. as far as the principal contract of loan is concerned, principal, will the contract bind the principal?
he did not act in representation of his principal, and
A: Yes. A sale in installment basis without authority is not
therefore the effect under the law is that the third person
void nor unenforceable. But, the principal can demand
will have no cause of action against the principal.
that the agent pay him the price as agreed upon less his
Therefore, the bank cannot hold the principal liable.
commission as if it was sold on cash basis.
Q: As an agent, AL was given a guarantee commission in

Other obligations addition to his regular commission after he sold 20 units
of refrigirators to a customer HP hotel. The customer
Q: The principal authorized his agent to sell a parcel of
however failed to pay for the units sold. As principal, DRBI
land. Pursuant to this mandate, the agent, introduced to
demanded from AL a payment for customer’s
the principal a prospective buyer, Oscar. During the
accountability. AL objected on the ground that his job was
period of negotiation, Oscar gave Php 1,000 to the agent
only to sell and not to collect payments from the units
as a gift which the latter did not disclose to the principal.
bought by the customer. Is AL’s objection valid?
Thereafter, the principal and buyer could not agree with
the price. Hence, they came up with a soulution which is A: No. DRBI can collect from him because he is not an
removing the agent so they can avoid paying the ordinary commission agent. under the facts he was given
commissions. As they will not proceed with the sale, the a guarantee commission in addition to his regular
principal revoked the authority of the agent. When the commission. Thus, if he failed to collect, he shall be liable.
agent went to the Registry of Deeds, he discovered the
attached contract of sale in favor of Oscar’s spouse, hence
demanded for his commission. Will the action prosper? Rights and Obligations of the principal
39
Atty. Uribe (2018)
• comply with the contracts entered into by the

agent within the scope of his authority and in
Q: A authorized B in 1950 to sell a parcel of land. A died in
representation of the principal. 1954. In 1956, the children of A sold the land to C. in 1957
• Reimburse expenses incurred by agent in B sold the land to D. C did not register the sale. D was not
fulfillment of his tasks aware of the previous sale registered the sale executed
• If there are two or more principals, their liabilities by B. Who has a better right over the land?
are solidary
A: If B has knowledge of A’s death, this contract will not
bind the deceased’s estate (Art. 1931). Even if B had no
Modes of Extinguishment knowledge, if C acted in bad faith, B’s sale will not also
bind the estate of the deceased principal. Assuming that
• Art. 1990 (6 modes) – MEMORIZE all the requrirements are present, D will have a better
**Note:
Note: The enumeration is not exclusive. right because D was the first one to register the sale and
he is in good faith (Art. 1544).
Q: Richard sold a parcel of land in Cebu to Leo for Php

100M payable in annual installment for 10 years. But title
will remain with Richard until the purchase price was fully
paid. Until Leo will able to pay the price Richard gave him
Q: Mario received from Edgar a pendant with diamonds a power of Atty authorizing him to subdivide the land, sell
valued at Php 5,000 to be sold on commission basis and the individual lots and to deliver the proceeds to Richard
to be returned on demand. In the evening of August 31, to be applied to the purchase price. 5 years later Richard
1987. While he was walking home, two men snatched his revoked the SPA and took over the sale of the subdivision
clutch bag containing the pendant and ran away. lots. Is the revocation valid?
Subsequently, the snatchers were apprehended and
A: No. because the agency is one coupled with interest.
charged. During the pendency of the criminal case, Egdar
The interest pertained are the proceeds of sale that will
brought an action against Mario for the recovery of the
be used to pay the price. There can be no valid revocation
pendant’s value and damages. Mario interposed the
when interest remains.
defense of fortuitous events but Edgar contends that
defense of fortuitous events are untenable because there
was negligence on the part of the agent. That even the
defense is tenable, there must be a prior conviction of
robbery before it can be availed of. Decide the case. Q: Claparols is an owner of a nail factory who badly
needed funds for his business. Loan applications were
A: Prior conviction of robbery is not needed to make the
rejected by the banks. Collonco offered to lend money in
agent’s defense tenable. What is needed is that the agent
a condition that Collonco will be appointed as agent in
must prove the fact by preponderance of evidence.
relation to the nail business. Claparols agreed. During the
Regarding the negligence, it is true that when there is
existence of relationship, Claparols revoked the authority
negligence on part of Edgar, even when there is a
of Collonco. Is the revocation valid?
fortuitious event, he mey still be liable.
A: Yes. If there was a just cause for the revocation, even if
it is coupled with interest, there was a valid revocation. In
Q: Will the death of an agent end an agency? this case, Claparols was able to prove trerrible acts of
Collonco such as sending derogatory letters to banks so
A: Yes. Agency is representative in character.
Claparols may not avail loan applications from them.
Claparols was also able to prove that he motive of
40
Atty. Uribe (2018)
Collonco in entering the contract is that the latter wanted covering three (3) fastfood stores known as "Hungry
to take over the business of Claparols. Toppings" that will be established at Mall Uno, Mall Dos,
and Mall Tres.
The pertinent provisions of the MOA provides:
1. Timothy shall be considered a partner with thirty
Law on Partnership
percent (30%) share in all of the stores to be set up by
Kristopher;
Q. Are partners owners? Are co-owners partners?
2. The proceeds of the business, after deducting
A. The law defines this contract under Art. 1767 where 2
expenses, shall be used to pay the principal amount of
persons bind themselves to contribute money, property
P500,000.00 and the interest therein which is to be
or industry to a common fund with the intention of
computed based on the bank rate, representing the bank
dividing the profits. The Civil Code practically considered
loan secured by Timothy;
the 2 laws into one, the Spanish Civil Code in relation to
civil partnerships and the Code of Commerce in relation
3. The net profits, if any, after deducting the expenses and
to commercial partnerships. Each of the contracting
payments of the principal and interest shall be divided as
parties must bind themselves to contribute property,
follows: seventy percent (70%) for Kristopher and thirty
money or industry.
percent (30%) for Timothy;
Bar: X used his savings from his salary to a little more than
4. Kristopher shall have a free hand in running the
Php 2,000.00 to establish a restaurant. Y gave Php
business without any interference from Timothy, his
4,000.00 to X as “financial assistance” with the
agents, representatives, or assigns , and should such
understanding that Y will be entitled to 22% of the entire
interference happen, Kristopher has the right to buy back
profits. After the last 32 years, Y filed a case demanding
the share of Timothy less the amounts already paid on the
his share in the said profits. X denied that there was a
principal and to dissolve the MOA; and
partnership. Is Y a partner of X in the business?
5. Kristopher shall submit his monthly sales report in
Suggested Answer: Yes. Y is a partner of X in the business
connection with the business to Timothy.
because there is a contribution to a common fund.
(Note: Atty. Uribe does not agree with this instead, the
What is the contractual relationship between Timothy
Alternative Answer below is better)
and Kristopher?
Alternative Answer: No. While as a rule that when a
person receives a share in the profit of the business, it is
Suggested Answer: The contractual relationship between
a prima facie evidence that he is a partner but that is only
Timothy and Kristopher is a contract of partnership as
a prima facie evidence. More importantly, under certain
defined under Article 1767 of the Civil Code, since they
circumstances enumerated under Art. 1769, paragraph 4,
have bound themselves to contribute money, property or
in all those scenarios the law provides that no inferential
industry to a common fund, with the intention of dividing
be made that this people receiving a share from profits
the profits of the partnership between them. With a seed
are partners.
money of P500, 000.00 obtained by Timothy through a
bank loan, they agreed to divide the profits, 70% for
When Y gave X Php 4,000.00, it was not a contribution to
Kristopher and 30% for Timothy.
the common fund but as financial assistance. A financial
assistance can either be a donation or probably a loan. In
However, to be more specific, theirs is a limited
this case, the fact that he receives a share in the profits is
partnership as defined under Article 1843 of the Civil
in payment of a debt in installment.
Code because Timothy does not take part in the control
of the business pursuant to Article 1848, Civil Code.
Nevertheless, Timothy is entitled to monthly sales reports
Bar: Timothy executed a Memorandum of Agreement in connection with the business, a right enshrined in
(MOA) with Kristopher setting up a business venture Article 1851 of the Civil Code.
41
Atty. Uribe (2018)
In a general partnership, the effect of the death of one of

(Note: There is no question that there is an intention to the partner is only dissolution, it does not terminate
divide the profit. The question would be whether there is because it has to undergo a winding up process so the
contribution to a common fund. As further explained by partnership can still sue and be sued and even perform
Atty. Uribe, insofar as Christopher is concerned, his obligations.
contribution, being the managing partner, is service. But
insofar as Timothy is concerned, the relevant paragraph Atty. Uribe: The interpretation of the question, “Can Kyla
is: the proceeds of the business after deducting the demand that Y deliver the portrait she had paid for
expenses shall be used to pay the principal amount of Php because she was dealing the with business establishment
500,000.00 and the interest therein which to be and not with the artist personally?,” is whether it is a fact
computed based on the bank rate representing the bank or just a claim of Kyla.
loan secured by Timothy. Apparently, Timothy borrowed
from the bank Php 500,000.00 which became the starting Note: The question being vague, it can be interpreted
capital of the business. As stipulated, the capital should either way:
be paid by the partnership. The act of borrowing for a. If Kyla’s claim as a matter of fact that she was dealing
capital is a sufficient contribution to the common fund. with the establishment, the death of the partner did not
Thus, they are partners.) terminate it but merely dissolved, and thus the obligation
can still perform during the winding up period. This would
be a valid demand.
Notes on Characteristics of Partnership b. If Kyla really wanted the portrait to be made by the
partner artist, that makes the obligation a purely personal
Distinguish agency with partnership. obligation. Thus, with the death of his partner who is the
Partnership, unlike agency, ordinarily has mutual agency. artist, the obligation was extinguished.
In a Contract of Agency, the agent represents the
principal but in Partnership, the partner represents the
other partners and the partnership subject only to the Notes on Distinction
stipulations.
Distinguish corporation with partnership.
One of the most important characteristics is the fact that In partnership, there is no statutorily provided term limit.
a juridical personality is created separate and distinct Unlike in corporation where there is a limit of 50 years
from the contracting parties. The Philippine Law has subject to extension.
adopted the Entity Theory under the Civil Law System.
Often, this business organization is distinguished from In general partnership, the death of the partner will
corporation. One distinction is the liability – partners can dissolve the partnership.
be held subsidiarily liable whereas stockholders cannot be
held liable in corporate obligations. (Piercing the veil Distinguish co-ownership with partnership.
theory). Co-ownership does not create a juridical personality
separate and distinct created not only by agreement but
Bar: X and Y are partners in a shop offering portrait also by operation of law. Also, profits will be divided
painting. Y provided the capital and the marketing while X depending on their interests.
was the portrait artist. They accepted the P50,000.00
payment of Kyla to do her portrait but X passed away
without being able to do it. Can Kyla demand that Y Q: In this jurisdiction, is a joint venture (Joint venture is a
deliver the portrait she had paid for because she was group of corporations contributing sources for a specific
dealing the with business establishment and not with the project and sharing the profits therefrom) considered a
artist personally? Why or why not? partnership?
Suggested Answer/s: Example: MRT is a joint venture between 7 companies.
42
Atty. Uribe (2018)
A: Yes. Because of the word “considered.” The Supreme

Court ruled in so many cases that a joint venture may be Note: An oral partnership is valid. There is no debate if
considered a species of partnership. Another is that a there is no immovable property contributed. Under Art.
joint venture may be likened to a partnership. 1772, every contract of partnership where money or
property is contributed which is Php 3,000.00 or more
shall be in a public instrument and must be registered
In the Essential Elements of Partnership, as to the consent with SEC.
of the contracting parties:
XPN: Partnership will be valid as long as there are
Q: Are there persons prohibited from entering in to this no immovable properties contributed.
contract? .
Basis: par. 2, Art. 1772 “Failure to comply with the
A: Under the law of partnership, those who are prohibited requirements of the preceding paragraph shall
from giving to each other by means of donation under the not affect the liability of the partnership and the
law of donation are also prohibited from entering into a members thereof to third persons.” This will be
universal partnership. Example: Those who are guilty of without prejudice to the liability of the
concubinage or adultery. contracting parties and the partnership.
Q: Can a husband and wife form a limited partnership to Q: What if one of the contracting parties promise to
engage in real estate business, with the wife being a deliver an immovable property?
limited partner?
A: There must be an inventory of the immovable property
A: Yes. They can form a limited partnership because a signed by the contracting parties, otherwise, the
limited partnership is a particular partnership. The law partnership agreement will be void.
does not prohibit. What the law prohibits is universal
partnership between spouses. (CIR u. Suter, etal. 27 SCRA Q: What if there is an inventory but the partnership
152) agreement is not in writing?
There are two kinds of universal partnership: A: Even if it is in writing, it is not in a public instrument.
1. Universal partnership of present property Under Arts. 1771 and 1173, the law requires that this
- Each of the contracting parties must agreement shall be in a public instrument if there is an
contribute all which belong to them at the immovable property contributed, otherwise, the
time they enter into a contract partnership agreement shall be void.
2. Universal partnership of profits
- Shall comprise all which the partners will
acquire by their industry Classes of Partnership
Note: In a limited partnership, one of the parties cannot 1. According to their Contribution
contribute his industry that is why a limited partner is a. Universal
always a capitalist, he can only contribute money or b. Particular
property.
2. According to their Rights and Obligations
Q: Can two corporations organize a general partnership a. General
under the Civil Code of the Philippines? Can a corporation b. Limited
organize a general partnership with a natural person?
3. As to the duration of the partnership
No. Because of ruling of the SC in Tuazon v. Bolaños, the
SC ruled that while a corporation may enter into a joint Q: If the Articles of Partnership did not fix a period for the
venture agreement (JVA) with other parties, it cannot partnership, does that mean that the partnership is a
validly enter into a contract of partnership. partnership at will?
43
Atty. Uribe (2018)
GR: A limited partnership cannot be held liable up

A: No. In this jurisdiction, there is another partnership to his personal property for partnership
called partnership for a particular undertaking. obligation:
XPN:
Dissolution of Partnership / Class of Partnership a. If the limited partner actively participates in the
Bar: A, B and C formed a partnership for the purpose of management even if he does not have the right.
contracting with the Government in the construction of If he participates, he will be treated as if a general
one of its bridges. On June 30, 1992, after completion of partner but he does not become a general
the project, the bridge was turned over by the partners to partner. He can be held liable up to his personal
the Government. On August 30, 1992, D, a supplier of property.
materials used in the project sued A for collection of the
indebtedness to him. A moved to dismiss the complaint b. If his surname appears in the firm name. As a
against him on the ground that it was the ABC partnership limited partner, his surname should not appear in
that is liable for the debt. D replied that ABC partnership the firm name.
was dissolved upon completion of the project for which
purpose the partnership was formed. Will you dismiss the XPN: He cannot be held liable even if his
complaint against A If you were the Judge? surname appears in the firm name, if his
surname is the same with the surname of
Suggested Answer: As a judge, I would not dismiss the another partner or if his surname has
case against A but I will have the partnership impleaded long been in the firm name even before
as one of the defendants because a partner may be held he enter into the partnership.
subsidiarily liable in case the assets of the partnership
were not sufficient to answer for the claims of the c. When a partner is both a general and limited
creditors. partner in one partnership at the same time. The
law provides for their rights and obligation, if a
Note: As to the class of partnership, it is a partnership for person is both a general and a limited partner, he
a particular undertaking. Once the purpose was will have all the rights of a general partner, hence,
accomplished, the partnership will be dissolved. he can be held liable up to his personal property.
However, he cannot sue the other partners. Said In case of dissolution, he will have preference as
materials were purchased for the project, hence, it is the to the assets, which he would not have if he be a
partnership’s liability. limited partner.
d. If there is failure to comply with the formalities

Classes of Partners prescribed then a limited partnership can be held
liable up to his personal property. In general
Q: Can a partner be both a capitalist and industrial? partnership, there are no formalities required
unlike in limited partnership where there has to
A: Yes, if the partner contributed both money and service. be a certificate signed by all the contracting
parties and must be sworn to and must contain
According to their Rights and Obligations certain facts prescribed by law and the names of
1. General – has the right to participate in the those who are limited partners.
management of the business, however, he can be
held liable up to his personal property. Effect in failure to comply with the formalities
Limited – has no right to participate in the prescribed by law: among the partners, there is a
management under the law but his liability is only valid limited partnership. As to third persons, like
up to the capital contribution. He cannot be held partnership creditors, all of them will be treated
liable up to his personal property for partnership as if general partners. Thus, he can be held liable
obligations. up to his personal property. However, he has an
available remedy, since the limited partnership is
44
Atty. Uribe (2018)
valid among them, he can seek reimbursement If he is a managing partner, will he be entitled to the
among the other partners. entire Php 60,000.00? Yes. Another requirement for the
rule to apply is that both debts must be due and
demandable.
Obligations of a Partner
If he is a managing partner and both debts are due and
Joe and Rudy formed a partnership to operate a demandable, is it possible that Z is entitled to the entire
car repair shop in Quezon City. Joe provided the Php 60,000.00 despite Art. 1792? Yes. Even if both debts
capital while Rudy contributed his labor and are due and demandable, and the debt to Z is more
industry. On one side of their shop, Joe opened onerous and the debtor invoked his right to apply to the
and operated a coffee shop, while on the other more onerous debt, he may be entitled to the entire
side, Rudy put up a car accessories store. May amount. Debts must also be on the same nature and
they engage in such separate businesses? Why? burden.
[Note: Determine first what kind of partner they If Z issued a receipt in the name of the partnership, the
are in reference to their contribution] entire amount will go to the partnership.
Suggested Answer: Joe, being the capitalist In summary, the four requisites for the proportional rule
partner, may engage in the restaurant business to apply are:
because what the law prohibits is being engaged 1. He must be the managing partner
in the same business as that of the partnership. 2. Both debts are due and demandable
[Note: the operative phrase why prohibited is 3. Both debts have the same nature and burden
because it will be in competition with the 4. He issued a receipt in his name.
business] On the other hand, Rudy, being the
industrial partner, may not engage in any other
business unless their partnership expressly Three Major Property Rights
permits him to do so because the law provides 1. A partner’s rights in specific partnership property
that an industrial partner because an industrial - Q: If a partnership has a property, what are
partner has to devote his full time to the business the rights of the partners with regards to that
of the partnership. specific property?
A: Under Article 1811, a partner is co-owner
2. Managing Partner – Under Art. 1792, different with his partners of specific partnership
scenarios may occur: property.
- Only partnership creditors may validly levy
Example: X is indebted to both partnership around Php upon the property.
200,000.00 and Z, another partner, around P 100,000.00. 2. A partner’s interest in the partnership
Thereafter, X paid Z Php 60,000.00. Is Z entitled to the - A partner’s share in the profit and surplus.
entire Php 60,000.00? Or is Z entitled to give the entire - Bar: In 2005, L, M, N, 0 and P formed a
Php 60,000.00 to the partnership or in half Php 30,000 partnership. L, M and N were capitalist
each or in proportion Php 40,000 and Php 20,000.00? partners who contributed P500,000 each,
while 0, a limited partner, contributed Php
The law provides that under certain circumstances, there 1,000,000. P joined as an industrial partner,
are requisites, if all the requisites are present the Php contributing only his services. The Articles of
60,000.00 should be applied proportionally (Php Partnership, registered with the Securities
40,000.00 – 20,000.00). Z may also be entitled to the and Exchange Commission, designated L and
entire Php 60,000.00 if he is not the managing partner 0 as managing partners; L was liable only to
because the rule requiring proportional application the extent of his capital contribution; and P
requires that the payee is the managing partner because was not liable for losses. In 2006, the
a conflict of interest may arise. partnership earned a net profit of P800,000.
In the same year, P engaged in a different
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Atty. Uribe (2018)
business with the consent of all the partners. Suggested Answer: Under the law, Justine
However, in 2007, the partnership incurred a does not have the right to participate
net loss of Php 500,000.00. In 2008, the whether or not they allow her to participate.
partners dissolved the partnership. The Justine cannot interfere or participate in the
proceeds of the sale of partnership assets management or administration of the
were insufficient to settle its obligation. After partnership business or affairs. She may,
liquidation, the partnership had an unpaid however, receive the net profits to which Una
liability of Php 300,000. would have otherwise been entitled. Under
the law, the assignee shall be entitled to
Assuming that the just and equitable share of whatever profit the assigning partner is
the industrial partner, P, in the profit in 2006 entitled has he not assigned his interest. In
amounted to P1 00,000, how much is the this case, Php 120,000.00.
share of O, a limited partner, in the P800,000
net profit? Bar: W, X, Y and Z organized a general
partnership with W and X as industrial
Suggested Answer: The share of O is Php partners and Y and Z as capitalist partners. Y
280,000.00. First, deduct the share of P from contributed P50,000.00 and Z contributed
the profits. P800,000 less P100,000 is P20,000.00 to the common fund. By a
P700,000. Next, get the share of O by unanimous vote of the partners, W and X
following the proportion that the shares of L, were appointed managing partners, without
M, N, O is 1:1:1:2, respectively. The quotient any specification of their respective powers
will serve as their share. and duties.
- Bar: Dielle, Karlo and Una are general A applied for the position of Secretary and B
partners in a merchandising firm. Having applied for the position of Accountant of the
contributed equal amounts to the capital, partnership.
they also agree on equal distribution of
whatever net profit is realized per fiscal The hiring of A was decided upon by W and X,
period. After two years of operation, but was opposed by Y and Z.
however, Una conveys her whole interest in
the partnership to Justine, without the The hiring of B was decided upon by W and Z,
knowledge and consent of Dielle and Karlo. but was opposed by X and Y.
a. Is the partnership dissolved? Who of the applicants should be hired by the

partnership? Explain and give your reasons.
Suggested Answer: No. The law provides that
with the assignment of a partner’s interest, Suggested Answer: The hiring of A prevails
the partnership is not dissolved. The assignee because it is an act of administration which
does not automatically become a partner can be performed by the duly appointed
without the consent of the other partners, no managing partners, W and X.
one will become a partner in this partnership.
B cannot be hired, because in case of a tie in
b. What are the rights of Justine, if any, the decision of the managing partners, the
should she desire to participate in the deadlock must be decided by the partners
management of the partnership and in the owning the controlling interest. In this case,
distribution of a net profit of P360,000.00 the opposition of X and Y prevails because Y
which was realized after her purchase of owns the controlling Interest. Y has more
Una's interest? than 60%. (Art. 1801, NCC)
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Atty. Uribe (2018)
[Note that industrial partners don’t have any [Note: an industrial partner has no share in the
controlling interest] losses.]
- Bar: In 2005, L, M, N, 0 and P formed a

3. A partner’s right to participate in the partnership. L, M and N were capitalist
management of the business. partners who contributed P500,000 each,
- Each of the general partners has the right to while 0, a limited partner, contributed Php
participate and each one of them may bind 1,000,000. P joined as an industrial partner,
the partnership for each act of contributing only his services. The Articles of
administration. Partnership, registered with the Securities
and Exchange Commission, designated L and
0 as managing partners; L was liable only to
Rules as far as losses are concerned the extent of his capital contribution; and P
was not liable for losses. In 2006, the
Applicable only when the assets of the partnership are no partnership earned a net profit of P800,000.
longer sufficient to cover the debts. The liability of the In the same year, P engaged in a different
partners as to their personal property is only as subsidiary business with the consent of all the partners.
liability. However, in 2007, the partnership incurred a
net loss of Php 500,000.00. In 2008, the
The losses will be shared in the partners in the following partners dissolved the partnership. The
manner: proceeds of the sale of partnership assets
1. If there is an agreement as to losses. There are were insufficient to settle its obligation. After
two scenarios: liquidation, the partnership had an unpaid
a. In the agreement, all partners have a liability of Php 300,000.
share in the losses; or
[Note: There is no inherent illegality in an How much is the share of O, a limited
industrial partner having a share in the partner, in the net loss of Php 500,000.00?
losses]
b. In the agreement, a partner or some Suggested Answer: Based on the facts, L and
partners were excluded from the sharing O were the managing partners. Evidently, O
of the losses. actively participated in the management,
[Note: The validity in this stipulation therefore one of the exceptions is applicable.
depends on the kind of partner the one When a limited partner actively participate in
who was excluded. Under the Civil Code, the management, he may be held liable up to
if the one excluded is a capitalist partner, his personal property, he may be treated as a
that is 100% Void. However, if an general partner. The proportion between L,
industrial partner was excluded from M, N and O is 1:1:1:2. The share of O is Php
sharing of the losses, Art. 1816 applies. 200,000.00.
As far as third parties are concern, the Q: Could Z, the managing partner, be held liable for the
stipulation is void but among the debts of the partnership not satisfied with the assets of
partners, the stipulation is valid.] the partnership?
2. If there is no agreement as to losses or the
agreement as to losses is void, follow the A: Yes, as far as the creditors of the partners are
stipulation as to the profits. concerned, the stipulation is void. Thus, Z can be held
3. No agreement as to losses and/or that the liable as to his personal properties.
stipulation is void; and there is no agreement as
to profits and/or the stipulation is also void. How
are the losses shared in proportion to their capital Dissolution of Partnership
contribution?
47
Atty. Uribe (2018)
• There will be dissolution if there is a change in the acquisition of Pauline's interest, Philip simultaneously
relations of the partners such that a partner ceases to petitioned for the dissolution of the partnership.
be associated in the carrying on of the business of the
partnership. Hence, if two partners marry each other, Is the dissolution done by Patricia and Priscilla without the
there will be no dissolution. consent of Pauline or Philip valid? Explain.
• Will the death of a partner terminate the
Suggested Answer: Yes, the dissolution done by Patricia
partnership? No. The death does not terminate. At
and Priscilla without the consent of Pauline is valid. This is
best, the death of the partner will only dissolve.
expressly provided in Article 1830 as one of the grounds
• Will the death of a partner dissolve the partnership?
It depends on the kind of partnership. for the dissolution of partnership. By the express will of
o If it is a general partnership, the partnership all the partners who have not assigned their interest or
will be dissolved. suffered them to be charged for the separate debts, the
o But if it is a limited partnership, it’s important dissolution is valid.
to determine who among the general partner
or the limited partner died.
If the general partner in a limited Does Philip have any right to petition for the dissolution
partner died, the surviving partner/s of the partnership before the expiration of its specified
unanimously decide continue with term? Explain.
the business of the partnership then
the partnership is not deemed Suggested Answer: No, Philip has no right to petition for
dissolved. the dissolution of partnership. Despite the fact that the
If the limited partner died, on its partner assigned his or her interest to Philip, that doesn’t
face, the partnership is not dissolved. make Philip a partner. Thus, he doesn’t have the
A limited partner supposedly has no personality to file the dissolution of partnership.
participation in the management of
the business. An executor is vested
with the authority to appoint a • Any of the partners can cause dissolution by his
limited partner, hence, all the unilateral act withdrawal from the partnership as
executor has to do is appoint another long as he acted in good faith, he cannot be held
as a limited partner, there will be no liable to whatever damage it may cause to the
dissolution. other partners.
• Expulsion of a partner bona fide would be
[Note: If the general partner in a general without violation will result in the dissolution of
partnership died without having been known partnership because one of them will no longer
by the other party, to which the latter be associated in the carrying on of the business.
entered into a contract in good faith, then • In contravention, even if it is dissolved, he will be
the contract will be binding to the held liable for damages.
partnership.] • Supervening illegality, which is common in law
firms, in the event a partner is elected in the
Bar: Pauline, Patricia and Priscilla formed a business Congress. Will the subsequent election result in
partnership for the purpose of engaging in neon the dissolution of a partnership? No. The firm
advertising for a term of five (5) years. Pauline name need not be changed. At best, elected
subsequently assigned to Philip her interest in the lawyers can indicate “on leave” with their name.
partnership. When Patricia and Priscilla learned of the Note that the Constitution does not prohibit
assignment, they decided to dissolve the partnership them from the private practice of their
before the expiration of its term as they had an profession, what’s prohibited is their personal
unproductive business relationship with Philip in the past. appearance before the tribunals which include
signing of pleadings. There is also supervening
On the other hand, unaware of the move of Patricia and
illegality if a partner becomes a judge or a justice,
Priscilla but sensing their negative reaction to his
the subsequent appointment will result in the
48
Atty. Uribe (2018)
dissolution of the partnership by operation of

law. In judiciary, it is always voluntary because Kinds of Trust
Trust
there is application. 1. Express
• Insanity and incapacity of a partner can only be a - No express trust over an immovable may be
ground for the dissolution if such insanity or proved by parole evidence. Express trust over
incapacity: movables, oral testimony is allowed.
o is more or less permanent in character 2. Implied
o affects the performance of the obligation
[Note: not every misconduct is a ground Prescription
for dissolution as long as they don’t cause
grave damage to the partnership] Bar: On January 1, 1980, Redentor and Remedios entered
into an agreement by virtue of which the former was to
• If a limited partner becomes a limited partner in register a parcel of land in the name of Remedios under
another partnership, is that a ground for the explicit covenant to reconvey the land to Remigio, son
dissolution? No. In both partnership, the limited of Redentor, upon the son’s graduation from college. In
partner has no participation in the management, 1991, the land was registered in the name of Remedios.
hence, no conflict of interest.
• In case of dissolution, how are the assets Redentor died a year later or in 1982. In March 1983,
distributed? Remegio graduated from college. In February 1992,
Q: X, Y and Z are partners. X contributed Php Remegio accidentally found a copy of the document
10,000.00, Y contributed Php 5,000.00 and Z constituting Remedios as the trustee of the land. In May
contributed his services only. After payment of 1994, Remigio filed a case against Remedios for the
partnership debts, what remains of the reconveyance of the land to him. Remedios, in her
partnership assets is Php 6,000.00 only. In the answer, averred that the action already prescribed.
absence of the terms of the contrary, the share of
Z will be equal to? How should the matter be decided?
A: The share of Z will be equal to nothing. Because Suggested Answer: The case will have to be decided in
in dissolution, the assets in terms of the contrary, favor of Remegio. Clearly, the case involves an express
the first to be paid are the partnership creditors trust and as long as there is no repudiation, the trustee
who are not partners, second are creditors who will continue to hold the property in trust forever. In the
are also partners and third are partners in case, there is no repudiation. At any given time the
relation to their capital contribution. In other beneficiary can recover the land from the trustee.
words, an industrial partner will only have a share
in the assets if there are net profits. In this case, Q: Joaquin Reyes bought from Julio Cruz a residential lot
the remaining Php 6,000.00 is not sufficient to of 300 sq, m, in Quezon City for which Joaquin paid Julio
return the capital of X and Y. the amount of Php 300,000.00. When the deed was about
to be prepared Joaquin told Julio that it be drawn in the
name of Joaquina Roxas, his acknowledged natural child.
Trust Thus, the deed was prepared and executed by Julio.
Joaquina then built a house on the lot where she, her
• Can be made by agreement and/or operation of husband and children resided. Upon Joaquin’s death, his
law legitimate children sought to recover possession and
• The trustee does not represent the trustor nor ownership of the lot, claiming that Joaquina Roxas was
the beneficiary because in trust he acquires but a trustee of their father.
ownership over the property (naked title). The
beneficial ownership is with the beneficiary or Will the action against Joaquina Roxas prosper?
the trustor if he is the beneficiary.
Suggested Answer: No, the action against Joaquina will
• The trustor doesn’t have much control over his
not prosper.
trustee unless otherwise stipulated.
49
Atty. Uribe (2018)
the latter may use the same for a certain time and return
When a person purchases a property but instead of it. Delivery is important in commodatum, otherwise,
having the property registered under his name, registered there is no commodatum.
it under the name of another, it would raise a
presumption of that person being a trustee. By express In Simple loan or Mutuum, if money or consumable thing
provision of the law, no trust is implied if this person by the condition is borrowed that same amount or same
whose name under the property was registered is a child quality shall be paid.
whether legitimate or illegitimate who purchased the
property. Q: What is the purpose of commodatum?
A: The purpose of commodatum is the use of the thing.
In this case, Joaquina is the acknowledged natural child of
Joaquin and therefore the said provision was applicable. Q: Distinguish commodatum from mutuum.
The law provides that it will be presumed to be a gift to [Note: To distinguish, go into the mature, purpose,
the child -- a donation. characteristic, subject matter or object.]
Example, in commodatum, you can borrow a house or a
There are two kinds of implied trust: rice field but not in mutuum because it must be movables.
1. Resulting trust (Arts. 1448-1454)
2. Constructive trust (Arts. 1455 and 1456) Q: What are the two kinds of deposit?
A: The two kinds of deposits are Conventional and
Judicial.
Credit Transactions Q: Distinguish usufruct and commodatum.

In Usufruct, it pertains to the right to enjoy the fruits. In
Q: Are all credit transactions bailments? commodatum, it refers to the right to use the fruits if at
A: No, not all credit transactions are bailments. Some all because ordinarily in commodatum, the bailee doesn’t
credit transactions like commodatum are bailments. have the right to the fruits unless it was stipulated.
Commodatum is a classic credit transaction. A deposit is
a form of bailment. Rights and Obligations of the parties
Q: What distinguishes them? Why are some not Q: What are the rights and obligations of the parties in
bailments? commodatum?
A: In bailment, it involves the delivery of a thing as agreed A: There are three:
upon by the parties which the thing must be returned or - Can a bailor in commodatum validly demand the
accounted for. In fact the word “bailment” comes from return of the thing at will or at any time? Yes, if
the root word “bailer” which means to deliver. In some the commodatum is a special kind called
credit transactions, delivery is not required for the precarium. In precarium, the bailor can demand
perfection of the contract. In fact that contract may be for the return of the thing borrowed at will or at
extinguished even without anything being delivered. any time. A commodatum will only be considered
- In a mortgage, nothing is delivered. The a precarium if there was no period agreed upon
mortgagor remains in possession of the thing which the bailee can use. However, if there is a
mortgaged. period agreed upon which the bailee can use,
before the expiration of that period the bailor
cannot validly demand for the return.
Q: As to credit transactions, what are principal contracts?
A: Loans and deposits are principal contracts. All other XPN to the general rule that the bailor cannot
contractss in credit transactions are accessory contracts. validly demand for the return of the thing before
the expiration of the period:
Q: What are the kinds of loans as to the definition? a. When there is an urgent need on the part
A: Commodatum - By the contract of loan, one party of the bailor. The contract however will
delivers to another something that is not consumable so not be extinguished, it will be merely
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suspended until the urgent need of the first, stipulation; second, the obligation requires
bailor is over. an assumption of risk but because the law so
b. When the bailee commits an act of provides. In other words, there are so many
unworthiness. Acts of unworthiness can provisions in law where there would be
be found in Law of Donations. responsibility of one of the parties like that of the
debtor even if the loss was due to a fortuitous
Q: Is the expense due to a fortuitous event subject to event so in commodatum, Article 1942 is the
reimbursement? governing provision.
A: Yes. However, the issue is whether the reimbursement
is 100% or 50%. If the thing is not being used when it [Note: Article 1942 is important – most favorite
suffered damages due to a fortuitous event, the in credit transactions]
reimbursement is 100%. If being used, the
reimbursement is only 50%. iii. During the bar exam month, Jose lent the car to
his girlfriend, Jolie, who parked the car at the Mall
Bar: Cruz lent Jose his car until Jose finished his Bar exams. of Asia’s open parking lot, with the ignition key
Soon after, Cruz delivered the car, Jose brought it to inside the car. Car thieves broke into and took the
Mitsubishi Cubao for maintenance check up and incurred car. Is Jose liable to Cruz for the loss of the car
costs of Php 8,000.00. Seeing the car’s peeling and faded due to Jolie’s negligence?
paint, Jose also had the car repainted for Php 10,000.00.
Answer the two questions below based on these common A: Yes. Jose is liable to Cruz. Since Jose lent the
facts. car to another without the consent of Cruz. Jose
must bear the consequent loss of the car.
i. After the bar exams, Cruz asked for the return of
his car. Jose said he would return it as soon as Bar: A, upon request, loaned his passenger jeepney to B
Cruz has reimbursed him for the car maintenance to enable the latter to bring his sick wife from Paniqui,
and repainting costs of Php 18,000.00 Is Jose’s Tarlac to the Philippine General Hospital in Manila for
refusal justified? treatment. On the way back to Paniqui, after leaving his
wife at the hospital, people stopped the passenger
[Note: Check if Jose has the right to retain before jeepney. B stopped for them and allowed them to ride on
he is reimbursed right of retention – Jose has board accepting payment from them just as in the case of
no right of retention because in commodatum an ordinary passenger jeepneys plying the route. As B was
even if the bailee is entitled to reimbursement he crossing Bamban, there was a thrust of lahar from Mt.
has no right of retention except when the bailee Pinatubo. The jeep that was loaned to him was wrecked.
suffered damages due to the flaw of the thing
borrowed to which the bailor is aware of] Q1: What do you call the contract that was entered into
by A and B with respect to the passenger jeepney that was
A: No. Jose’s refusal is not justified. The expenses loaned by A to B to transport the latter’s sick wife to
he incurred are useful for the preservation of the Manila?
thig loaned. It is Jose’s obligation to shoulder
these useful expenses. A: A better or more accurate answer is the contract of
commodatum. There is a delivery of a thing for the use of
ii. What if the thing which is still with the bailee the thing of another.
within the period agreed upon was lost or
destroyed due to a fortuitous event, can the Q2: Is B obliged to pay for the use of the passenger
bailee be held liable? jeepney?
A: No. In commodatum, there is no obligation to pay and
A. Under Art. 1174, no person shall be there was no stipulation that B is required to pay rental.
responsible for those events which could not be Commodatum is essentially gratuitous.
foreseen, or which though foreseen, were
inevitable. However, there are three exceptions: Q3. Is B liable in the loss of the jeepney?
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A: Yes. Because the bailee used the property not agreed to pay only on the 8th month. However, there was no
upon by the parties. demand from Julia. As a rule, demand is required for delay
to set in. No demand, no delay, therefore, the debtor is
Bar: A borrowed B’s truck during a fire which broke out in not liable for interest. Thus, the creditor is not entitled to
A’s garage. He had time to save only one vehicle and he the interest paid. The creditor must return it under the
saved his car instead of the truck. Is he liable for the loss principle of solutio indebiti.
of B’s truck?
Why? Note: The legal interest now is set at 6% per annum. In
the Macalinao case, a 3% per month interest is already
A: Yes because there is a conflict of interest. Instead of excessive.
saving the truck which he borrowed, he saved his own car.
By express provision of the law, if he chooses to save his Bar: Siga-an granted a loan to Villanueva in the amount
thing instead of the thing which he borrowed when he of P 540, 000.00. Such agreement was not reduced to
had the opportunity to save one of the two things, he can writing. Siga-an demanded interest which was paid by
be held liable for the loss of the thing. But you consider Villanueva in cash and checks. The total amount
the phraseology of the question, he had the time to save Villanueva paid accumulated to P 1, 200, 000.00. Upon
only one vehicle. advice of her lawyer, Villanueva demanded for the return
of the excess amount of P 660, 000.00 which was ignored
by Siga-an.
Rights and obligations of the parties in relation to Mutuum
Q: Is the payment of interest valid? Is solutio indebiti
Q: When will be the debtor liable to interest? Or when will applicable?
the creditor be liable to interest?
A: No. Because it was not reduced in writing. The Civil
A: Two kinds of interest: i. Interest in relation to money – Code provides that solutio indebiti is applicable. When
from the time of perfection meaning from the time of the the creditor receives payment by way of interest when he
delivery of the money to the borrower to the time the is not entitled to such interest, he has the obligation to
obligation would become due and demandable return such amount under the principle of solutio
compensatory interest – compensation for the use of the indebiti. [Payment as if made by mistake]
money and for the debtor to be liable there must be an
express stipulation in writing; ii. By way of damages Bar: Josef owns a piece of land in Pampanga. The National
earned from delay. Housing Authority (NHA) sought to expropriate the
property for its socialized housing project. The trial court
fixed the just compensation for the property at P50
Bar: Sara borrowed Php 50,000.00 from Julia and orally million. The NHA immediately deposited the same at the
promised to pay it within six months. When Sara tried to authorized depository bank and filed a motion for the
pay her debt on the 8th month, Julia demanded payment issuance of a writ of possession with the trial court.
of interest of 12% per annum because of Sara’s delay in Unfortunately, there was delay in the resolution of the
payment. Sara paid her debt and the interest claimed by motion. Meanwhile, the amount deposited earned
Julia. After rethinking, Sara demanded back from Julia the interest.
amount she has paid as interest. Julia claims she has no
obligation to return the interest paid by Sara because it When Josef sought the release of the amount deposited,
was a natural obligation which Sara voluntarily performed NHA argued that Josef should only be entitled to P50
and can no longer recover. Do you agree? Explain. million.
A: No. This is not a natural obligation but that of solutio Who owns the interest earned?
indebiti. A quasi-contractual obligation arose under the
circumstances. The interest in this case is not the A: The SC ruled that it is the owner of the land. From the
compensatory interest since it was orally promised. In this time the money is deposited, the owner of the land is
case, Sara promised to pay within six months but was able
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Atty. Uribe (2018)
already in a way the owner of the money, thus, he is Otherwise, prohibit the depositary from comingling
entitled to interests. the grains with others.
Q: What is the purpose of deposit? Important article in commodatum: Art. 1942; in deposit:
A: In deposit, a thing is delivered for safekeeping. But Art. 1979.
from the formulation, a deposit exists from the moment
the person receives the thing. As a contract, the deposit Q: Ana rented a safety deposit box at the Alto Bank, paid
is a real contract. The depositary may have the right to the rental fee, and was given the key. Ana put her jewelry
use the thing. and her gold coins in the box. Days after, three armed
men gained entry into the Alto Bank opening its vault and
Q: What are the kinds of extrajudicial deposit? several safety deposit boxes including Ana’s and emptied
A: In extrajudicial deposit, there are two kinds: voluntary them of their contents. Could Ana hold Alto Bank liable
and necessary. It is only for the voluntary deposit which is for the loss of the contents of her safety deposit box?
a contract. A necessary deposit is not a contract.
A: Ordinarily if the loss of the thing deposited is due to a
Bar: Due to the continuous heavy rainfall, the major fortuitous event, it will be the depositor (if he is the
streets in Manila became flooded. This compelled Cris to owner) who will bear the loss. The reason for this is that
check-in at Square One Hotel. As soon as Cris got off from in deposit the ownership does not pass to the depositary
his Toyota Altis, the Hotel’s parking attendant got the key because the thing will be delivered only for safekeeping.
of his car and gave him a valet parking customer’s claim However, there are instances when the depositary cannot
stub. The attendant parked his car at the basement of the validly invoke fortuitous event because probably there
hotel. Early in the morning, Cris was informed by the hotel was concurring negligence on his part.
manager that his car was carnapped.
Yes, she can hold Alto Bank liable if she can prove that
Q1: What contract, if any, was perfected between Cris there was concurring negligence on the part of the Alto
and the Hotel when Cris surrendered the key of his car to Bank.
the Hotel’s parking attendant?
A: This is a contract of deposit. Q: Is savings deposit a deposit?
A: No. In relation to a savings deposit, a savings deposit is
Q2: What is the liability, if any, of the Hotel for the loss of not a deposit but a simple loan. To be an irregular deposit,
Cris’ car? they must be deposits. The SC ruled that these savings
A: The hotel can be held liable for the loss not only for the deposits are in the nature of irregular deposits because
value but also for damages because if it cannot prove that banks can use the money deposited in them.
there was no fault on its part when the car was stolen
while in the basement of the hotel. Since the car is in the Q: When would a deposit be considered as an irregular
basement of the hotel, it is the burden of the hotel to deposit?
prove that there is no negligence on their part. A: When the depositary has the right to use. Even if he has
the right to use the principal purpose would remain to still
be safekeeping. The use may be necessary for its
preservation.
Note: a depositor is not required to be the owner of the
thing because there is no transfer of ownership. As a Q: Who enjoys the right of retention?
matter of fact, the depositary could not even demand A: The depositary may retain the thing in pledge until the
that the depositor prove his ownership. full payment of what may be due him by reason of the
deposit. (Art. 1994). An example is pledge.
• A thing usually deposited is non-fungible. This rule,
however, does not apply to the deposit of grains Accessory Contracts
because under the law in such deposits, unless
otherwise stated the depositary has the right to Q: What are the classifications of an accessory contract?
comingle the grains with the grains of another.
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A: Personal Guarantees do not involve a specific property benefit of excussion twice. Before a sub-guarantor can be
that is subjected to the claim of the creditor. It will only held liable, the properties of the debtor must first be
involve a personal commitment that in case the debtor exhausted.
defaults, the latter shall pay. Under personal guarantees
it involves guarantee proper and suretyship. Q: Who are co-guarantors?
Real Guarantees will involve specific properties such as A: If there are 2 or more guarantors in relation to one
pledge, chattel mortgage, real estate mortgage and obligation.
antichresis.
Q: Is oral guaranty valid and binding?
[Note: In a guaranty, a guarantor binds himself to the A: No. One of the contracts covered by the Statute of
creditor to fulfill the obligation in case the latter fails to Frauds is the contract of guaranty (special contract in case
do so. But if a person binds himself solidarily to the the debtor defaults). If not in writing, the contract is
principal debtor, in such case the relationship shall be unenforceable.
called a suretyship.]
Q: Does the surety has no right of excussion?
Q: What are the three rules or principles in relation to A: Yes. It’s because he has bound himself solidary. When
guaranty? a guarantor binds himself solidarily with a principal
A: Subrogation, Benefit of Excussion and Benefit of debtor, he then becomes a surety. (Art. 2059, NCC)
Division
Q: Distinguish guarantor from surety.
Q. Distinguish surety from co-debtor. A: A guarantor will be liable if the debtor cannot or is
A. In terms of their liability, in surety it is only accessory unable to pay. The guarantor is the ensurer of the
undertaking though secondary only – it is important that solvency only. On the other hand, a surety will be held
the principal debtor defaults before he can be held liable; liable when the debtor does not pay. The surety is called
on the other hand, a solidary co-debtor, the moment the the ensurer of the debt itself.
obligation becomes due, he can be held directly liable at
any time. A surety has no share in the obligation while a Bar: In the province, farmer couple borrowed money
solidary co-debtor has his share in the debt. Another from the local merchant. To guaranty payment, they left
distinction is with payment, when a surety pays, as a rule, the Torrens title of their land with the merchant for him
he will be subrogated to the rights of the creditor; a to hold until they pay the loan. Is there a contract of
solidary co-debtor will not be subrogated to the rights of pledge, contract of mortgage, contract of antichresis, or
the creditor, his only right is to demand reimbursement none of the above?
from his co-debtors with respect to their shares.
Q1: May this be a contract of antichresis?
Q: Who are the necessary parties in a contract of A: No. It is not a contract of antichresis is because there is
guaranty? nothing in the facts which would tell you that the creditor
A: The necessary parties are the guarantor and creditor was given the right to the fruits. However, he would have
only. The debtor is not a necessary party. There can be a the obligation to apply the fruits to the interest if owing.
valid contract of guaranty even if the contract is without If there is an excess, the excess should be applied to the
the knowledge of the principal debtor or even against his principal. Antichresis is a unique mode of accessory
will. contract because by itself, the entire obligation may be
extinguished.
Q: Who is a sub-guarantor?
A: If there is a guarantor, there is a sub-guarantor. A sub- Q2: May this be a pledge?
guarantor is the guarantor of the guarantor. A: No. Apparently, the subject matter of the contract is a
parcel of land. In contract of pledge, the subject matter
Q: Who can invoke the benefit of excussion? pertains to movables. But it may be argued that this is a
A: In contracts of guaranty, the guarantor, as a rule, can contract of pledge but what was pledged was not the land
invoke the benefits of excussion or the right of excussion but the certificate of title.
or the right of exhaustion. A sub-guarantor can invoke the
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Atty. Uribe (2018)
Q3: May this be a mortgage? the place where the goods are located would result
A: Yes. Since this is a parcel of land, it appears that this already in a perfected pledge.
would be a real estate mortgage. It is claimed that it
cannot be because the agreement is not in writing or it is In Yuliongsiu v. PNB, it would be an unreasonable
not in fact in a public instrument nor was it registered. I requirement for Yuliongiu to be required to physically
cannot agree really with this position. I think the best deliver the three ships to PNB.
answer to this question is this is a contract of real estate
mortgage because the law actually does not require a Q: What are the two kinds of pledge?
particular form as far as the real estate mortgage is A: The two kinds of pledge are Pledge by operation of law
concerned. By express provision of the law, even if this or legal pledge and voluntary pledge.
contract is not registered, it may still be a valid and
binding contract between the parties. The limitation only Q: When would there be a legal pledge? Under what
provided by law, as far as real estate mortgage is circumstances?
concerned, as interpreted by the Supreme Court, is that A: There would be a legal pledge if a creditor is in the
the mortgagee creditor cannot foreclose the mortgage if possession of a movable property owned by principal
it is not in a public instrument. Registration is not even debtor and he would have the right to retain such
required in order for the creditor to be able to foreclose. movable property to secure fulfillment of the obligation
But it will not ordinarily bind third persons if not of this debtor and if the debtor wouldn’t pay, the creditor
registered. But even if the mortgage is not in a public would have the right to sell that thing to satisfy his claim.
instrument, for example it is in a private instrument, while
there can be no valid foreclosure because the instrument Basically, Article 2121 enumerates 3 scenarios where
is still in a private instrument, at least the creditor here there would be legal guarantees but the enumeration is
would have a right under Article 1357. The remedy is to not exclusive because even under1914 in agency, if the
require that the contract to be in the form prescribed by agent for example incurred expenses for accomplishment
law. of the purpose of agency, and a property to be delivered
to the principal was received by this agent, he would have
Q: Distinguish a contract of chattel mortgage from a the right to retain this property in pledge to secure the
contract of pledge. fulfillment of the obligation of the principal to him as far
A: In a way, there’s a need to distinguish these two as reimbursement of the expenses is concerned. But the
because both involve movables. Obviously, chattel other scenarios mentioned in 2121 would be found in
mortgage is not a real contract, pledge is a real contract. Articles 546, 1731, 1994.
Article 1731 pertains to a contract for a piece of work
Q: What kind of delivery is required for pledge to be where, for example a car was delivered to a car repair
perfected? shop for repair. After the repair works were made and the
A: The SC ruled that ordinarily it must be an actual bill was presented to the owner of the car, the owner
delivery. In exceptional circumstances where it will be an failed to pay, then the car repair shop would have the
unreasonable requirement for the pledger to deliver to right to retain the car in pledge. Thereafter, if this owner
the pledgee, constructive delivery may suffice. fails to pay after a certain period, normally he would be
given 30 days within which to pay, then the car repair
In Bangko Filipino Espanol v. Peterson, shop would have the right to sell the car to satisfy his
The goods pledged were voluminous goods found in a claim.
warehouse. What the pledgor did was to deliver the keys Article 1994 pertains to the right of depositary to retain
to the warehouse to the pledgee. the things deposited by depositor.
Q: Upon the delivery of the keys to the pledgee, was there
already a perfected pledge? Q: Is an affidavit of good faith a requirement in chattel
A: The SC said yes. De Leon and others would call this mortgage?
symbolic delivery because it would have been an A: No. An affidavit of good faith is not required for the
unreasonable requirement for the thing to be physically chattel mortgage to be valid. Essentially, an affidavit of
delivered to the pledgee. So the delivery of the keys to good faith is only necessary to bind third persons.
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Atty. Uribe (2018)
A: The answer is yes, the chattel mortgage law would

MARCOS V. BAUTISTA treat certain immovables merely as personalty. These
A borrowed money from B. To secure the fulfillment of would include large cattles and growing crops. Large
her obligation to B, A mortgaged a parcel of land. But at cattles and growing crops ordinarily would be considered
the time the mortgage is constituted, A was not yet the as immovables but the chattel mortgage law merely
owner of the land because that was still the subject of a considered them as personalty for purposes of the chattel
pending application under the homestead law. But before mortgage. Thus, it would be a valid and binding chattel
the obligation of A to B became due and demandable, mortgage if the things mortgaged are large cattle or
that land was awarded to her. So A was already the owner growing crops.
at the time when the obligation became due. And
definitely, when she failed to pay and B filed an action for Bar: Vinny constructed a building on a parcel of land he
the foreclosure of the mortgage, A was already the leased from Andrea. He chattel mortgaged the land to
owner. Nonetheless, A questioned the validity of the Felicia. When he couldn’t pay Felicia, Felicia initiated
foreclosure. foreclosure proceeding. Vinny claimed that the building
Q: Was the foreclosure valid? he had constructed on the leased land cannot be validly
A: The SC ruled that the foreclosure was not valid because foreclosed because the building was by law an
the mortgagor was not yet the owner at the time of the immovable. Is Vinny correct?
constitution of the mortgage. The pledgor or mortgagor
must be the owner not only at the time when the A: No. Vinny is not correct. A building cannot be
obligation became due, not only at the time of foreclosed, what is being foreclosed is the mortgage on
foreclosure or the sale of the thing, but also at the time of the building. [Note: Harmonize the facts] If the mortgagor
the constitution of the mortgagor. Otherwise, the pledge would be the one to question the validity of the contract
or mortgage would be void. because the subject matter is an immovable, he would
not be allowed to do so under the principle of estoppel.
Note: In relation to subject matter, one other The foreclosure may proceed.
requirement and essential requisite for a pledge or
mortgage to be valid is that the pledgor or mortgagor Bar: To secure the payment to B of a loan, A, the owner
must have free disposal of the thing pledged or of the lot, executed a chattel mortgage on the building he
mortgaged. A person may be the absolute owner but he erected thereon as well as on some newly bought
may not have free disposal for one reason or another. The machinery stored therein. Thereafter, a judgment was
best reason why he will not have free disposal is because rendered against A in favor of C who had the building and
there is order of the court for him to retain the thing, by the machinery levied upon to satisfy the judgment.
way of attachment or by way of garnishment. If there is a
mortgage over the thing, that is a void pledge or Q: Is the chattel mortgage binding on C?
mortgage. The other reason could be that the pledgor or A: As to C, a third person, the mortgage on the building is
mortgagor is suffering civil interdiction. As such, he is void. It will never bind C because under the Civil Code a
prohibited from disposing the property which would be building is an immovable property.
effective inter vivos. Also, when a person is under
receivership like a partnership or a corporation, he does Q: Does it matter if the obligation involved, if there are 2
not have free disposal of the thing to be pledged. or more debtor, does it matter if the obligation is only a
joint obligation if they are not solidarily liable?
Q: While the law requires that the thing to be mortgaged A: No. The indivisibility principle will not be affected by
be a movable property, may a chattel mortgage over a the fact that the obligation is not a solidary obligation.
property ordinarily considered as an immovable property This was the ruling of the SC in DAYRIT v. CA where 4
be a valid and binding chattel mortgage? persons obtained certain goods from the creditor. To
A: The answer is yes, if there is a law which treats such secure fulfillment of the obligation, only one of them
immovable property merely as personalty for purposes of executed the real estate mortgage over his parcels of
chattel mortgage. land. When the obligation of these 4 became due, the
creditor demanded payment but no one was able to pay
Q: And is there such a law? until Dayrit offered to pay only his share claiming that the
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Atty. Uribe (2018)
obligation is a joint obligation. But after paying his share, Q: Suppose in the preceding question, the agreement
he demanded that the mortgage over his parcels of land between X and Y was that if X failed to pay the mortgage
be cancelled. The SC ruled that the obligation was a joint debt on time, the debts shall be paid by the land
obligation because the obligation does not fall under any mortgaged by X to Y, would your answer be the same as
of the 3 circumstances under Article 1207 where the in the preceding question?
obligation would be considered solidary. A: No. That stipulation now does not constitute Pactum
Commisorium because upon default, the mortgagee does
But being a joint obligation, does it give Dayrit the right to not automatically acquire ownership here. As stated, the
have the mortgage cancel after paying his share? The SC debts shall be paid with the land. Ownership does not
ruled no because of the indivisibility principle. Before the automatically pass upon default, rather the mortgagee,
real estate mortgage can be cancelled, the entire upon default, will only have the right to demand that the
indebtedness must be fully paid. land be delivered to him as payment. This would be a valid
-most favorite in the bar exam- dacion en pago in case the principal debtor defaults.
Hence, the right of the creditor is to demand the delivery
PACTUM
PACTUM COMMISORIUM: of the thing upon default.
Bar: To secure a loan obtained from a rural bank, Purita Q: Upon default of the principal debtor the thing
assigned her leasehold right over a stall in a public market mortgaged is deemed sold to the mortgagee. Does this
in favor of the bank. The deed of assignment provides that constitute pactum commisorium?
in case of default in the payment of the loan, the bank A: No. If deemed sold upon default, the creditor will not
shall have the right to sell the leasehold right over the stall be the owner. His right upon default is to demand the
as her attorney-in-fact and to apply the proceeds to the mortgagor to execute the deed of sale. Even if there is an
payment of the loan. execution of the deed of sale, there would not be a
transfer of ownership until the delivery of the thing.
Q: Assuming the assignment to be a mortgage, does the
provision giving the bank the power to sell Purita’s right As to the right to recover deficiency:
constitute pactum commisorium or not? Why?
A: No. For a stipulation to constitute pactum Q: If there is a deficiency, should the creditor have the
commisorium, it should provide for the automatic right to recover the deficiency?
appropriation of the property by the creditor upon A: Yes. Because that is the fair rule.
default. The ownership of the property pledged or
mortgaged upon default would automatically belong to Q: Who is entitled to the excess?
the creditor. This would be a void stipulation because the A: The excess should go to the owner of the property
remedy is to foreclose the mortgage and to sell at a public because, he will lose the thing except in pledge.
auction.
Q: In pledge, in case of deficiency, can the pledgee
Bar: X borrowed money from Y and gave a piece of land recover the deficiency from the principal debtor?
as security by way of mortgage. It was expressly agreed A: No. If there is a stipulation in the contract of pledge
between the parties in the mortgage contract that upon where it is provided that in case of deficiency, the pledgee
non-payment of the debt on time, the mortgaged land can recover deficiency from the principal debtor, that
would already belong to Y. stipulation is void. Therefore, the pledgee cannot recover
Q: If X defaulted in paying, would Y now become the any deficiency.
owner of the land?
A: No. Despite the stipulation, the mortgaged land would Q: In pledge, if there is an excess, who would be entitled
still not be owned by Y because this stipulation to the excess?
constitutes pactum commisorium which is a void A: The excess will go to the pledgee. The only plausible
stipulation. explanation is because this is a form of balancing.
[Note: it is only the stipulation that is void, not the
contract, hence, the remedy is to foreclose the mortgage]
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Q: What if there is a stipulation to the effect that if there A: I would decide this conflict in favor of the mortgagee.
is an excess, the excess goes to the pledgor, may the First, as to the claim of the mortgagor that the offspring
pledgor be now entitled to the excess? was not included in the pledge, under the law offsprings
A: Yes. Note that in deficiency it is void but in excess, it is are covered by the pledge unless otherwise stipulated by
valid. the parties. There appears to be no stipulation which
would exclude the offspring from the pledge, thus, under
Note: In chattel mortgage, real estate mortgage and the law, it is covered by the pledge. Second, as to the
antichresis, if there is deficiency, there is a right to excess, the claim of the pledgor that he is entitled to the
recover. If there’s an excess, the excess goes to the excess is not tenable because under the law on pledge, it
mortgagor. is the pledgee who is entitled to the excess unless
otherwise stipulated by the parties. There being no
Note: EXCEPT in chattel mortgage, if there is a deficiency, stipulation to that effect, under the facts, the pledgee is
there may not be a right to recover if this is covered by the one entitled to the excess.
the Recto Law.
RIGHT OF REDEMPTION/EQUITY OF REDEMPTION TO A
Bar: Mr. Matunod lent Mr. Maganaka 100000. as security MORTGAGOR
of the payment of said amount, Maganaka delivered to
Matunod 2 rings in pledge. When Maganaka failed to pay, Q: Are the right of redemption and equity of redemption
Matunod foreclosed and had the ring sold at the auction. the same?
The proceeds of the sale after deducting expenses A: No. The right of redemption is the right after the sale.
amounted to only 70000. Equity of redemption is the right to redeem can be
invoked before the sale is conducted.
Q1: May Matunod demand the deficiency from
Maganaka? Note: There is a period of 1 year redemption. That period
A: No. In pledge, if there is a deficiency the pledgee is not
will not start to run until the sale or the deed of sale is
entitled to the deficiency.
registered.
Q2: Assume that the proceeds, after deducting expenses,
amounted to 150000. Would Matunod have been
entitled to the excess?
A: Yes unless there is a stipulation giving the excess to the
pledgor. Since in the facts there are no stipulations,
Matunod is entitled to the excess. Thus, the pledgee goes
to the excess.
Q: A diamond ring and female cow were pledged to

secure a loan amounting to 100000. The pledge appeared
in a public instrument. A month later, the cow gave birth.
When the amount of the loan was not paid upon its
maturity date, the pledgee cause to be sold at the public
auction the ring, the cow, and the cow’s offspring. And
the amount of 150000 was realized. The pledgor, upon
learning of the sale, demanded from the pledgee the
excess in the price over and above the amount of the
principal obligation claiming that he is entitled to the
excess and claiming that the offspring was not included in
the pledge. The pledgee refused to comply with the
demand. How would you resolve this conflict? Give your
reasons.
58

TortsNdamages Specialcontracts Atty Uribe

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TORTS & DAMAGES/Special Contracts

Atty. Uribe (2018)

CONCEPTS Q: What kind of contract if the cause is essentially

Q: In a valid sale, would obligations arise?

Q: What kind of contract does the law pertain to when it

oblige himself to deliver a determinate thing to the other A: Consensual contract

Q: What kind of contract does the law pertain to when it

Subject matter: Determinate thing

If gratuitous contract: entitled to reimbursement

• While one would obligate himself to transfer

no payment, this is not a sale, but a donation,

A: Unilateral contracts are those contracts where only one

Example: A: Principal contracts are those contracts which can stand

Unilateral: the fruits shall pertain to the debtor unless a

MORE REASONABLE QUESTION: 1. Principle of greatest reciprocity of interest

Q: Which principle would apply in relation to a contract of

A: The Supreme Court ruled:

(3) When demand would be useless, as when the obligor

In reciprocal obligations, neither party incurs in delay if the

Q: If the seller has not asked or demanded for the Note:

A: Yes. Conditional obligations

Kinds of conditional obligations:

obligation it appears that the designation of the time

Legal basis: “Article 1187. The effects of a conditional

A: Yes, considering this is a contract of sale, the requisites

Q: Was the contract perfected even though the Violy

There was already a delivery, thus the buyers already

renovate it as it was already in a state of disrepair and pay improvements

only when their loan is approved and released. While

• 2 kinds of contract of sale

A contract to sell must be distinguished from the 2 kinds

d. Recto law which covers personal property only.

A: Check the stipulations

The action will not prosper because Monica is the owner

After delivery of the initial payment of P100,000.00,

Title to the property shall be transferred upon full

After making the initial payment of ₱100,000.00 on

December 19, 2016. Later on, Bernadette discovered that

Bernadette sued Alice and Chona for specific

Both contract of sale and dacion en pago are governed by

A: Yes, they entered into a contract of sale, but they

Q: Was the obligation of Butch extinguished by reason of

A: No, the obligation of Butch to Hagibis was not

Example: customized shoes:

service. of the car will be irrelevant, it will depend on the value of

“Art. 1468. If the consideration of the contract consists

What kind of sale? Absolute or conditional? Absolute.

- That the incident in the ordinary business would Parents:

Issue: Can the suit prosper against the mother?

Note: If actual damages would be awarded the court

Rights and Obligations of the vendor: A: *alternative answer* This is unenforceable, as it

(2) Dawn acquired absolute ownership. Q: Sale without transfer of ownership?

(1) Risk of loss

Sale is void, for there is no consent as to the sale of

stolen from his garage with no fault on his part

(1) Formal Delivery

(A) He cannot be compelled, but he may

III. Warrant the thing

Del Prado vs Sps Caballero case:

Sale of a parcel of unregistered land, covered by Two kinds of warranty:

Q: The seller, delivered the goods to the place of

(1) Lien on the goods, while the seller is in possession

A: Yes, but only as to stoppage and transit, as to

Rights and Obligations of the vendor: A: alternative answer This is unenforceable, as it