2021 UST Pre Week The Law Pertaining To Private Personal and Commercial

University
of Santo Tomas
Faculty of Civil Law

The Law Pertaining

to Private Personal
and Commercial
Relations
PRE-WEEK NOTES 2020/21 BAR EXAMINATIONS

CIVIL LAW & COMMERCIAL LAW

ACADEMICS COMMITTEE

SECRETARY GENERAL: Maria Frances Faye R. Gutierrez
EXECUTIVE COMMITTEE: John Edward F. Fronda, Angel Isah M.
Romero, Kirby Anne C. Renia, Karen Abbie C. Aspiras, Jose Christian
Anthony I. Pinzon
University of Santo Tomas

CIVIL LAW
PRE-WEEK NOTES

CIVIL LAW COMMITTEE

COMMITTEE HEAD: Mary Jo S. Reyes

MEMBERS: Floree Faye F. Pinzon, Cara Angela Flores, Angela
Alfonso, Jose Christian Anthony Pinzon

Atty. James Carlo King Hizon
Atty. Kenneth James Carlo Hizon
Atty. Joshua Barrieta
ADVISERS
Civil Law
2. Prodigality;
PERSONS AND FAMILY RELATIONS 3. Age;
4. Imbecility;
5. Deaf-Mute;
Effectivity of laws 6. Family Relations;
7. Alienage;
Laws shall take effect after fifteen days following the 8. Trusteeship;
completion of their publication either in the Official 9. Penalty;
Gazette, or in a newspaper of general circulation in the 10. Insolvency; and
Philippines, unless it is otherwise provided. [(New Civil 11. Absence.
Code (NCC), Art. 2, as amended by EO 200)]
The enumeration in Articles 38 and 39 is not exclusive.
“Unless it is otherwise provided” provision on There are others spread throughout the code (e.g., a
effectivity of law lawyer cannot buy property in litigation). [NCC, Art. 1491
(5)]
This clause refers to the date of effectivity and not to the
requirement of publication itself. The requirement of BIRTH
publication may not be omitted in any event. This clause
does not mean that the legislature may make the law Determination of personality
effective immediately upon approval, or on any other date
without its previous publication. The Civil Code provides that birth determines personality,
but the conceived child shall be considered born for all
KINDS OF PERSONS purposes that are favorable to it, provided it is born later
with the conditions specified in Art. 41. (NCC, Art. 40)
1. Natural – Human beings and have physical existence.
2. Juridical – Artificial persons and product of legal This provision has been superseded by Art. 5 of P.D. No.
fiction. 603 (The Child and Youth Welfare Code), which declares
that the civil personality of the child shall commence from
Juridical capacity vs. Capacity to act the time of his conception, for all purposes favorable to
him, subject to the requirements of Art. 41.
BASIS JURIDICAL CAPACITY
CAPACITY TO ACT Acquisition of personality through birth
Fitness to be the Power to do acts
Definition subject of legal with legal effect. (Art. GR: Actual/Permanent Personality – Personality begins
relations. (Art. 37) 37) at birth, not at conception.
Inherent (co-exists Through the
Acquisition with the fulfillment of specific XPN: Presumptive/Temporary – The law considers the
natural person). legal activities. conceived child as born (Conceptus pro nato habetur)
Only Through death and
Loss through death. other causes. The provisional personality of a conceived child (conceptus
Can exist without Cannot exist w/o pro nato habetur) under Article 40, expressly limits such
In relation capacity to juridical capacity. provisional personality by imposing the condition that the
to the other act. child should be subsequently born alive: "Provided it be
born later with the condition specified in the following
None. Art. 38 (restriction)
article." (Geluz v. CA, G.R. No. L- 16439, 20 July 1961)
Limitation Art. 39 (modification/
limitation), among
“Born later in accordance with law” (1995, 1999, 2008
others.
BAR)
Restrictions on capacity to act: (M-I-D-I-P-C) (Art. 38, NCC)
A fetus with an intra-uterine life of:
1. Minority - State of a person who is under the age of
1. Less than 7 months – Must survive for at least 24
legal majority which is eighteen years of age;
hours after its complete delivery from the maternal
2. Insanity – State of a person whose mental faculties are
womb.
diseased;
2. At least 7 months – If born alive it shall be
3. Deaf-mute – Lacking sense of hearing and the inability
considered born even if it dies within 24 hours after
to speak;
complete delivery
4. Imbecility – State of a person who while advanced in
age has the mental capacity comparable to that of a
Provisional personality of a conceived child
child between two and seven years of age;
5. Prodigality – A spendthrift or squanderer;
6. Civil Interdiction – An accessory penalty imposed upon A conceived child, although as yet unborn, has a limited
an accused who is sentenced to a principal penalty not and provisional personality. Its personality is provisional
because it depends upon the child being born alive later
lower than reclusion temporal.
under certain conditions.
Circumstances that modify or limit capacity to act (FC,
Rights of the conceived child
Art. 39)
1. Insanity;
UNIVERSITY OF SANTO TOMAS 2 PRE–WEEK NOTES

2021 GOLDEN NOTES 2021 & 2022
Civil Law
Since a conceived child has a provisional personality even Absence of the additional requirement of parental
while inside the mother’s womb, it is entitled to the advice
following rights: (S-A-D)
It does not make the marriage void or voidable, it only
a. Right to Support affects the release of the marriage license to be postponed
b. To be Acknowledged until (3) three months from the complete publication of
c. To receive Donations. (Rabuya, 2009) the application. (FC, Art. 15)

THE FAMILY CODE FORMAL REQUISITES OF A VALID MARRIAGE (C-A-L)
(1996, 2009 BAR)
Marriage
1. Marriage Ceremony;
A special contract of permanent union between a man and 2. Authority of the solemnizing officer;
a woman entered into in accordance with law for the 3. Valid marriage License, except in a marriage of
establishment of conjugal and family life. It is the exceptional character. (FC, Art. 3)
foundation of the family and an inviolable social institution
whose nature, consequences, and incidents are governed EFFECT OF ABSENCE OF REQUISITES
by law and not subject to stipulation, except that marriage
settlements may fix the property relations during the Effect in the status of marriage (1995, 1996, 1999,
marriage within the limits provided by the Family Code. 2008 Bar)
(Family Code, Art. 1)
Status of Marriage in case of:
Under the Constitution, “marriage, as an inviolable social
institution, is the foundation of the family and shall be 1. Absence of any of the essential requisites - Void ab
protected by the State.” (1987 Constitution, Art. XV, Sec. 2) initio. (FC, Art. 4)
2. Absence of any of the formal requisites – Void ab
ESSENTIAL REQUISITES OF A VALID MARRIAGE initio. (FC, Art. 4)
(1996, 2009 BAR)
XPNs: Valid even in the absence of formal requisite:
1. Legal capacity of the contracting parties who must be
a male and a female; a. Marriages exempt from license requirement
2. Consent freely given in the presence of the b. Either or both parties believed in good faith
solemnizing officer. (FC, Art. 2) that the solemnizing officer had the proper
authority [FC, Art. 35 (2)].
Legal capacity of the parties to marry
3. Defect in any of the essential requisites – Voidable.
1. Age – at least 18 years of age (FC, Art. 4)
4. Irregularity in any of the formal requisites - Valid, but
The attainment of the required minimum age for the party responsible for such irregularity shall be
marriage should be reckoned, not on the date of filing civilly, criminally or administratively liable. (FC, Art. 4)
of the application for issuance of a marriage license,
but on the date of the marriage. Pursuant to Article 6 1. MARRIAGE CEREMONY
of the Family Code, parties may contract marriage on
the date of the solemnization of the marriage, i.e., That which takes place with the:
when they appear personally before the solemnizing
officer and declare in the presence of not less than 1. Personal appearance of the contracting parties
two witnesses of legal age that they take each other before the solemnizing officer;
as husband and wife. (Rabuya, 2009)
NOTE: There is no marriage ceremony if what transpired
2. Sex – between a male and a female was a mere private act of signing a marriage contract by
the contracting parties, without the presence of the
Before the contracting parties can be considered solemnizing officer. (Morigo v. People, G.R. No. 145226,
legally capacitated to contract marriage, it is February 6, 2004)
indispensable that they must be of opposite sex.
2. Their personal declaration that they shall take each
3. Lack of legal impediment to marry – FC, Art. 37-38 other as husband and wife; and
3. In the presence of not less than 2 witnesses of legal
Other requirements needed for the validity of such age.
marriage depending upon the age of the contracting
party No particular form of ceremony or religious rite for
solemnization of the marriage is required by law. (FC, Art.
AGE ADDITIONAL REQUIREMENTS 6)
Parental consent and Marriage 2. SOLEMNIZING AUTHORITY

18 to 21 years old
counseling
22 to 25 years old Parental advice and Marriage Persons authorized to solemnize marriage (1994
counseling 1995, 1999 BAR)

2021 GOLDEN NOTES 2021 & 2022
Civil Law
The following are the persons authorized to solemnize person legally authorized to administer oaths, that the
marriage depending upon the circumstances: marriage was performed in articulo mortis and that he
took the necessary steps to ascertain the ages and
1. Under ordinary circumstances (FC, Art. 7): relationship of the contracting parties and the absence of a
legal impediment to the marriage. (FC, Art. 29)
a. Incumbent judiciary member –
Effect of solemnizing officer’s failure to execute an
Provided, it is within the court’s jurisdiction affidavit
NOTE: Where a judge solemnized a marriage outside his It will have no effect as to the validity of the marriage. The
court’s jurisdiction, this is a mere irregularity in the formal marriage will still be valid.
requisite, which while it may not affect the validity of the
marriage, may subject the officiating official to Authorized venues of marriage
administrative liability. (Rabuya, 2009)
GR: Must be solemnized publicly within the jurisdiction of
b. Priest, rabbi, imam or minister of any the authority of the solemnizing officer:
church/religious sector
1. Chambers of the judge or in open court;
i. duly authorized by his church or religious 2. Church, chapel or temple; or,
sect and registered with the civil registrar 3. Office of the consul-general, consul or vice-consul. (FC,
general, acting within the limits of the Art. 8)
written authority granted him by his
church or religious sect XPNs:
ii. Provided at least one of the parties
belongs to such church or religious sect. 1. Marriage at the point of death;
c. Consul general, consul or vice-consul 2. Marriage in remote places;
3. Marriage at a house or place designated by both of the
i. Provided both parties are Filipinos and parties with the written request to the solemnizing
marriage takes place abroad in the country officer to that effect. (FC, Art. 8)
where the consul holds office. (FC, Art. 10)
NOTE: This provision is only directory, not mandatory.
d. Mayors (LGC, Arts. 444 and 445) – including The requirement that the marriage be solemnized in a
“Acting Mayor” particular venue or a public place is not an essential
requisite for the validity of the marriage.
NOTE: From the time of the effectivity of the Family
Code (August 3, 1988) up to the time of the effectivity Exception to the rule requiring authority of the
of the Local Government Code (January 1, 1992), solemnizing officer
mayors do not have the authority to solemnize
marriage. The exception to the rule requiring authority of the
solemnizing officer is when a marriage is contracted with
2. Marriages in articulo mortis: either or both parties believing in good faith that the
solemnizing officer had the authority to do so. [FC, Art. 35
a. Ship captain or airplane chief – (2)]
Provided the marriage is performed: 3. MARRIAGE LICENSE
i. During voyage, even during stopovers Validity of marriage license

ii. Between passengers or crew members. (FC,
Art. 31) The license shall be valid in any part of the Philippines for
a period of 120 days from the date of issue, and shall be
Such authority may be exercised not only while the ship is deemed automatically cancelled at the expiration of said
at sea or the plane is in flight but also during stopovers at period if the contracting parties have not made use of it.
ports of call. (Rabuya, 2018) (FC, Art. 20)
b. Military commander of a unit who is a Status of marriages celebrated during the suspension
commissioned officer – provided the marriage is of the issuance of marriage license
performed (FC, Art. 32):
The status of the marriage if the parties get married within
i. In absence of chaplain; the said 3-month period depends:
ii. Within zone of military operation;
iii. Between members of the armed forces or 1. If the parties did not obtain a marriage license – the
civilians. marriage shall be void for lack of marriage license.
Duty of the solemnizing officer in a marriage in 2. If the parties were able to obtain a marriage license
articulo mortis – the marriage shall be valid without prejudice to the
actions that may be taken against the guilty party.
The solemnizing officer in a marriage in articulo mortis
after solemnizing such marriage shall state in an affidavit Marriage license vs. Marriage certificate
executed before the local civil registrar or any other

2021 GOLDEN NOTES 2021 & 2022
Civil Law
4. Parties must execute an Affidavit that they are living

BASIS MARRIAGE MARRIAGE together as husband and wife for 5 years and that they
LICENSE CERTIFICATE do not have any impediment to marry.

Authorization by Best evidence of 5. Solemnizing officer must execute a Sworn statement
Nature the state to the existence of the that he had ascertained the qualifications of the
celebrate marriage. parties and found no legal impediment to their
marriage. marriage. (Manzano v. Sanchez, A.M. No. MTJ-00-
Requisite of Formal requisite Neither essential 1329, March 8, 2001)
Marriage of marriage. nor formal
requisite of EFFECT OF MARRIAGE CELEBRATED ABROAD AND
marriage. FOREIGN DIVORCE
EXCEPTIONS TO MARRIAGE LICENSE REQUIREMENT Rules governing the validity of marriage (2002, 2004,
2006, 2009, 2010 BAR)
Marriages exempt from the license requirement
(MARCO) 1. As to its extrinsic validity – Lex loci celebrationis
1. Marriages among Muslims or members of ethnic NOTE: Locus regit actum (the act is governed by the
cultural communities – Provided they are solemnized law of the place where it is done) - is adhered to here
in accordance with their customs, rites or practices in the Philippines as regards the extrinsic validity of
(FC, Art. 33); marriage.
2. Marriages in Articulo mortis
a. In case either or both of the contracting parties 2. As to its intrinsic validity – Personal law
are at the point of death (FC, Art. 27);
b. Solemnized by a ship captain or airplane pilot (FC, NOTE: Personal law may either be the national law or
Art. 31); and the law of the place where the person is domiciled.
c. Within zones of military operation. (FC, Art. 32)
3. Marriages in Remote places. (FC, Art. 28) Marriages between Filipinos solemnized abroad in
accordance with the law in force in said country
Remote Place - no means of transportation to enable the
party to personally appear before the local civil registrar. GR: Marriages between Filipinos solemnized outside the
(Rabuya, 2018) Philippines in accordance with the law of the foreign
country where it is celebrated, if valid there, shall be valid
4. Marriages between parties Cohabiting for at least 5 here as such.
years and without legal impediment to marry each
other (FC, Art. 34); XPNs: It shall be void, even if it is valid in the foreign
5. Marriages solemnized Outside the Philippines where country where the marriage was celebrated, if any of the
no marriage license is required by the country where following circumstances are present:
it was solemnized.
1. Lack of legal capacity even with parental consent
Requisites for the 5-year cohabitation as an exception (e.g. party is below 18);
to the marriage license requirement (2002, 2008 BAR) 2. Incestuous;
3. Contracted through Mistake of one party as to the
The requisites are: identity of the other;
4. Contracted following the annulment or declaration
1. Living together as husband and wife at least 5 years of nullity of a previous marriage but Before
before the marriage. partition, etc.;
5. Bigamous or polygamous except as provided in Art.
The 5-year period must be characterized by: 41 FC on terminable bigamous marriages;
6. Void due to Psychological incapacity;
a. Exclusivity – the partners must live together 7. Void for reasons of Public policy.
exclusively, with no other partners, during the
whole 5-year period. Requirements to prove a foreign marriage
b. Continuity – such cohabitation was unbroken.
1. The existence of the pertinent provision of the foreign
NOTE: The period is counted from the date of marriage law.
celebration of marriage. It should be the years 2. The celebration or performance of the marriage in
immediately before the day of the marriage. accordance of said law.
2. No legal impediment to marry each other During the Requirements for the application of par. 2 of Art. 26 of
period of cohabitation. the Family Code
NOTE: The five-year period of cohabitation must have 1. It must be a case of mixed marriage (one party is
been a period of legal union had it not been for the Filipino and the other is an alien);
absence of marriage. 2. The divorce must be obtained by the alien spouse and
not by the Filipino spouse; and
3. Fact of absence of legal impediment must be present at
the time of the marriage.

2021 GOLDEN NOTES 2021 & 2022
Civil Law
NOTE: Whether the Filipino spouse initiated the foreign A: NO. It had been ruled in Republic vs. Manalo that foreign
divorce proceeding or not, a favorable decree dissolving divorce decrees obtained to nullify marriages between a
the marriage bond and capacitating his or her alien spouse Filipino and an alien citizen may already be recognized in
to remarry will have the same result: the Filipino spouse this jurisdiction, regardless of who between the spouses
will effectively be without a husband or wife. initiated the divorce; provided, of course, that the party
petitioning for the recognition of such foreign divorce
Divorces obtained abroad by Filipino citizens may now be decree – presumably the Filipino citizen – must prove the
validly recognized in the Philippines but only in cases of divorce as a fact and demonstrate its conformity to the
mixed marriages involving a Filipino and a Foreigner. foreign law allowing it. A plain reading of the RTC ruling
(Republic of the Philippines V. Marelyn Tanedo Manalo, G.R. shows that the denial of Luzviminda's petition to have her
No. 221029, April 24, 2018) foreign divorce decree recognized in this jurisdiction was
anchored on the sole ground that she admittedly initiated
3. The divorce obtained by the alien spouse must the divorce proceedings which she, as a Filipino citizen,
capacitate him or her to remarry. (Rabuya, 2018) was not allowed to do.
Q: If a foreigner who was divorced seeks to obtain a In light of the doctrine laid down in Manalo, such ground
marriage license in the Philippines, what should he relied upon by the RTC had been rendered nugatory.
do? However, the Court cannot just order the grant of
Luzviminda's petition for recognition of the foreign
A: The applicant for marriage license has to prove his legal divorce decree, as Luzviminda has yet to prove the fact of
capacity. If the marriage was dissolved by reason of her. "Divorce by Agreement" obtained in Nagoya City,
divorce, he has to file a sworn statement as to how the Japan and its conformity with prevailing Japanese laws on
marriage was dissolved (FC, Art. 11) and furnish the local divorce. Notably, the RTC did not rule on such issues. Since
civil registrar with the judgment (FC, Art. 13) and must these are questions which require an examination of
register the same with the local civil registrar to bind third various factual matters, a remand to the court a quo is
persons. (FC, Art. 52) warranted. (Morisono v. Morisono, G.R. No. 226013, July 2,
2018)
NOTE: Without the divorce decree and foreign law as part
of the evidence, the Court cannot rule on the issue of VOID MARRIAGES
whether petitioner has the personality to file the petition
for declaration of nullity of marriage. After all, petitioner Marriages that are void ab initio (1993, 2004, 2005,
may have the personality to file the petition, but the 2006 BAR)
divorce decree obtained was a limited divorce or a mensa
et thoro or the foreign law may restrict remarriage even 1. Solemnized without License, except those marriages
after the divorce decree becomes absolute. (Garcia v. Recio, that are exempt from the license requirement;
G.R. No. 138322, October 2, 2002) 2. Absence of any of the essential or formal requisites of
marriage;
Q: Luzviminda was married to Ryoji Morisono in 3. Solemnized by any person not legally Authorized to
Quezon City on December 8, 2009. Thereafter, they perform marriages unless such marriages were
lived together in Japan for 1 year and 3 months but contracted with either or both parties believing in
were not blessed with a child. During their married good faith that the solemnizing officer had the legal
life, they would quarrel mainly due to Ryoji’s authority to do so;
philandering ways, in addition to the fact that he was 4. Contracted through Mistake of one of the contracting
much older than Luzviminda. As such, the two of them parties as to the identity of the other;
submitted a “Divorce by Agreement” before the City 5. Bigamous or polygamous marriages not falling under
Hall of Mizuho-ku in Nagoya, Japan, which was Article 41 of the Family Code or those allowed under
approved and duly recorded. In view of this, special laws such as the Muslim Code;
Luzviminda filed a petition for recognition of foreign 6. Marriages contracted by any party below 18 years of
divorce decree obtained by her and Ryoji before the age even with the consent of parents or guardians;
RTC so that she could cancel the surname of her 7. Marriages contracted by any party, who at the time of
husband and be able to marry again. the celebration of the marriage, was Psychologically
incapacitated, even if such incapacity becomes
The RTC denied Luzviminda’s petition, holding that manifest only after its solemnization (FC, Art. 36);
while a divorce decree held that while a divorce 8. Incestuous Marriages (FC, Art. 37);
obtained abroad by an alien spouse may be recognized 9. Marriages declared void because they are contrary to
in the Philippines – provided that such decree is valid Public policy (FC, Art. 38);
according to the national law of the alien – the same 10. Subsequent marriages which are void under Art. 53;
does not find application when it was the Filipino 11. Marriages in jest; and
spouse, i.e., petitioner, who procured the same.
Invoking the nationality principle provided under NOTE: “Marriages in jest is a pretended one, legal in
Article 15 of the Civil Code, in relation to Article 26 (2) form but entered as a joke, with no real intentions of
of the Family Code, the RTC opined that since entering into the actual marriage status, and with a
petitioner is a Filipino citizen whose national laws do clear understanding that the parties would not be
not allow divorce, the foreign divorce decree she bound. (Republic of the Philippines v. Albios, G.R. No.
herself obtained in Japan is not binding in the 198780, October 16, 2013)
Philippines. Did the RTC correctly deny Luzviminda’s
petition for recognition of divorce decree she 12. Common-law marriages.
procured?

2021 GOLDEN NOTES 2021 & 2022
Civil Law
Q: In case of a change in sex, can the person who has husband and wife, as well as Arts. 220, 221 and 225 of
undergone said change be allowed to marry another of the same Code in regard to parents and their children.
the same sex as he/she originally had? (2014 BAR) Such non-complied marital obligation(s) must also be
stated in the petition, proven by evidence and included
A: It depends upon the cause for the change in sex. in the text of the decision;
7. Interpretations given by the National Appellate
1. If the change is artificial – No, he/she cannot. Matrimonial Tribunal of the Catholic Church in the
Philippines, while not controlling or decisive, should
The sex or gender at the time of birth shall be taken into be given great respect by our courts;
account. He is still, in the eyes of the law, a man although 8. The trial court must order the prosecuting attorney or
because of the artificial intervention, he now has the fiscal and the Solicitor General to appear as counsel for
physiological characteristics of a woman. (Silverio v. the state.
Republic, G.R. No. 174689, October 22, 2007)
Q: Was the Molina doctrine abandoned by the recent
2. If the change is natural – He/she can. Ex. ruling in the abovementioned case of Kalaw vs.
Hermaphrodite, Congenital Adrenal Hyperplasia Fernandez (G.R. No. 166357, January 14, 2015)?
PSYCHOLOGICAL INCAPACITY A: NO. The Court in this case merely recognized the
unintended consequences of strictly applying the
Requisites of Psychological Incapacity (1996, 1997, standards set in Molina. The resiliency with which the
2002, 2006 BAR) concept (of psychological incapacity) should be applied
and the case-to-case basis by which the provision should
a. Juridical antecedence– Must be rooted in the history be interpreted, as so intended by its framers, had,
of the party antedating the marriage, although overt somehow, been rendered ineffectual by the imposition of a
manifestations may arise only after such marriage. set of strict standards in Molina. In hindsight, it may have
been inappropriate for the Court to impose a rigid set of
b. Gravity – grave enough to bring about the disability of rules, as the one in Molina, in resolving all cases of
the party to assume the essential marital obligations. psychological incapacity. The unintended consequences of
Molina have taken its toll on people who have to live with
c. Permanence or Incurability – must be incurable or, if deviant behavior, moral insanity and sociopathic
curable, the cure should be beyond the means of the personality anomaly, which, like termites, consume little
parties involved. by little the very foundation of their families, our basic
social institutions. Far from what was intended by the
Proof of Psychological Incapacity Court, Molina has become a straight-jacket, forcing all sizes
to fit into and be bound by it.
The root cause of psychological incapacity must be:
In the abovementioned case, the Supreme Court is not
a. Medically or clinically identified; suggesting the abandonment of Molina. It simply declares
b. Alleged in the complaint; that there is a need to emphasize other perspectives as
c. Sufficiently proven by experts; and well which should govern the disposition of petitions for
d. Clearly explained in the decision. declaration of nullity under Article 36.
NOTE: Expert evidence may be given by qualified Incestuous Marriages

psychiatrists and clinical psychologists.
1. Between ascendants and descendants of any degree;
Guidelines set by the Court to aid it in its disposition of 2. Between brothers and sisters, whether of the full or
cases involving psychological incapacity half-blood. (FC, Art. 37)
In the landmark case of Republic of the Philippines v. NOTE: Regardless of whether the relationship between the
Court of Appeals and Molina, the Supreme Court parties is legitimate or illegitimate.
enumerated the following guidelines in invoking and
proving psychological incapacity under Article 36 of the Void marriages by reason of public policy (1999, 2007,
Family Code: 2008 Bar)
1. Burden of proof to show the nullity of the marriage Marriages between:

belongs to the plaintiff;
2. The root cause of the psychological incapacity must 1. Collateral blood relatives (legitimate or Illegitimate)
be: (a) medically or clinically identified, (b) alleged in up to the 4th civil degree;
the complaint, (c) sufficiently proven by experts and 2. Step-parents & step-children;
(d) clearly explained in the decision; 3. Parents-in-law & children-in-law;
3. The incapacity must be proven to be existing at “the
time of the celebration” of the marriage; NOTE: The prohibition under Nos. 2 and 3 applies
4. Such incapacity must also be shown to be medically or even after the termination of the marriage, which is
clinically permanent or incurable; the very source of the relationship by affinity,
5. Such illness must be grave enough to bring about the regardless of the cause of such termination.
disability of the party to assume the essential
obligations of marriage; Affinity is a relationship gained by marriage and a
6. The essential marital obligations must be those fictive kinship created by law. Also, it is aligned with
embraced by Arts. 68 up to 71 of the FC as regards the the spirit of Art. 332 of the RPC. It holds for all intents

2021 GOLDEN NOTES 2021 & 2022
Civil Law
and purposes favorable to the strengthening of the years (ordinary absence) or 2 consecutive years
bond of the family. (Intestate Estate of Carungcong vs. (extra-ordinary absence);
People, G.R. No. 181409, February 11, 2010) 3. The present spouse has a well-founded belief that the
absent spouse is already Dead;
4. Adopting parent & the adopted child;
5. Surviving spouse of the adopting parent & the adopted NOTE: The Court in Cantor pointed out the term “well-
child; founded belief” has no exact definition under the law.
6. Surviving spouse of the adopted child & the adopter; In fact, the Court notes that such belief depends on the
7. Adopted child & legitimate child of the adopter; circumstances of each particular case, as such must
8. Adopted children of the same adopter; result from diligent efforts to locate the absent spouse.
9. Parties where one, with the intention to marry the Such diligence entails an active effort on the part of the
other, killed the latter’s spouse or his/her spouse. (FC, present spouse to locate the missing one. The mere
Art. 38) absence of a spouse, devoid of any attempt by the
present spouse to locate the former, will not suffice.
NOTE: The list is EXCLUSIVE. If not falling within this (Republic v. Catubag, G.R. No. 210580, April 18, 2018)
enumeration, the marriage shall be valid. Such as
marriages between: 4. There is judicial declaration of presumptive death in a
summary proceeding in accordance with Article 253 of
1. Adopted and Illegitimate child of the adopter; the Family Code.
2. Step-brother and step-sister;
3. Brother-in-law and sister-in-law; NOTE: If both spouses of subsequent marriage acted
4. Parties who have been guilty of adultery or in bad faith, such marriage is void ab initio.
concubinage.
Requisites for issuance of judicial declaration of
SUBSEQUENT MARRIAGE presumptive death
Q: If a person contracts a subsequent marriage during 1. That the absent spouse has been missing for four
the subsistence of a prior marriage, what is the status consecutive years, or two consecutive years if the
of the subsequent marriage? (1992, 2005, 2008 BAR) disappearance occurred where there is a danger of
death under the circumstances laid down in Article
A: GR: Void for being bigamous or polygamous, even if 391 of the New Civil Code;
celebrated abroad and valid there as such. 2. That the present spouse wishes to remarry;
3. That the present spouse has a well-founded belief that
XPN: Valid if it is a terminable bigamous marriage. the absentee is dead; and
4. That the present spouse files a summary proceeding
If the first marriage is void and a party to that first for the declaration of presumptive death of the
marriage subsequently remarries without obtaining a absentee. (Republic of the Philippines v. Nolasco, G.R.
judicial declaration of nullity of the first marriage, the No. 94053, March 17, 1993)
subsequent marriage is likewise void. It is void not
because it is bigamous but because it failed to comply with The requirement for a judgment of the presumptive death
the requirements under Article 40 in relation to Articles 52 of the absent spouse is for the benefit of the spouse
and 53 of the Family Code. (Valdes v. RTC, G.R. No. 122749, present because she could be charged and convicted of
July 31, 1996) bigamy if the defense of good faith based on mere
testimony is found incredible. (Eduardo Manuel v. People,
Q: May a person contract a valid subsequent marriage G.R. No. 165842, November 29, 2005)
before a first marriage is declared void ab initio by a
competent court? NOTE: A mere filing of an affidavit of reappearance would
not suffice for the purpose of terminating the subsequent
A: NO. A judicial declaration of nullity is required before a marriage and also of nullifying the effects of the
valid subsequent marriage can be contracted; or else, what declaration of presumptive death and the subsequent
transpires is a bigamous marriage, reprehensible and marriage. Celerina does not admit to having been absent.
immoral. (FC, Art. 40; In re: Salvador v. Serafico, A.M. 2008- She also seeks not merely the termination of the
20-SC, March 15, 2010) subsequent marriage but also the nullification of its effects.
A subsequent marriage contracted in bad faith, even if it
NOTE: Before one can contract a second marriage on the was contracted after a court declaration of presumptive
ground of nullity of the first marriage, there must first be a death, lacks the requirement of a well-founded belief that
final judgment declaring the first marriage void. (FC, Art. the spouse is already dead; the first marriage will not be
40) If a party fails to secure a judicial declaration of nullity considered as validly terminated. Hence, Celerina’s choice
of the first marriage, he or she runs the risk of being to file an action for annulment of judgment is the proper
charged with bigamy as the marital bond or vinculum in remedy as annulment of judgment is the remedy when the
the first nuptial subsists. (Mercado v. Tan, G.R. No. 137110, RTC’s judgment, order, or resolution has become final, and
August 1, 2000; Te v. CA, G.R. No. 126746, November 29, the remedies of new trial, appeal, petition for relief (or
2000) other appropriate remedies) are no longer available
through no fault of the petitioner. (Celerina J. Santos v.
Requisites for validity of subsequent marriage under Ricardo T. Santos, G.R. No. 187061, October 8, 2014)
Art. 41 under the Family Code (B-A-D)
Effect if both parties in the subsequent marriage under
1. Before the celebration of the subsequent marriage: Article 41 acted in bad faith
2. The Absent spouse had been absent for 4 consecutive

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1. The subsequent marriage is void ab initio. ii. Due to the non-compliance with the
2. All donations propter nuptias made by one in favour of requirements set forth under Article 52 of the
the other are revoked by operation of law. Family Code
3. All testamentary dispositions made by one in favour of b. Legitimate if the children were conceived or born
the other are revoked by operation of law. before the judgment of annulment or absolute
4. The parties shall be liable for the crime of bigamy. nullity of the marriage under Article 36 has
(Rabuya, 2009) become final and executory. (FC, Art. 54, 1st
sentence)
Termination of Subsequent Bigamous Marriage c. Legitimate if the children were conceived or born
of the subsequent marriage under Article 53. (FC,
The recording of the affidavit of reappearance of the Art. 54, 2nd sentence)
absent spouse in the civil registry of the residence of the
parties to the subsequent marriage shall automatically 2. Property Relations
terminate the terminable bigamous marriage (subsequent
marriage) unless there is a judgment annulling the GR: Either Article 147 or 148 (Co-Ownership) of the
previous marriage or declaring it void ab initio. (FC, Art. Family Code will apply.
42)
XPN: If the subsequent marriage is void for non-
In Art. 42, no judicial proceeding to annul a subsequent compliance with Article 40 of the Family Code, the
marriage contracted under Art. 41 is necessary. Also, the property relations of the void subsequent marriage are
termination of the subsequent marriage by affidavit governed either by absolute community or the conjugal
provided for in Art. 42 does not preclude the filing of an partnership of gains, as the case may be, unless the parties
action in court to prove the reappearance of the absentee agree to a complete separation of property in a marriage
and obtain a declaration of dissolution or termination of settlement before marriage. (Diño vs. Diño, G.R. 178044,
the subsequent marriage. (SSS v. Jarque Vda. De Bailon, G.R. January 29, 2011)
No. 165545, March 24, 2006
Q: Is the declaration of nullity of marriage applied
Q: What is the effect if the parties to the subsequent prospectively?
marriage obtain knowledge that the spouse absent has
reappeared? A: NO. It retroacts to the date of the celebration of the
marriage. It is as if the marriage did not happen at all.
A: NONE. If the absentee reappears, but no step is taken to (Niñal v. Bayadog, G.R. No. 133778, March 14, 2000)
terminate the subsequent marriage, either by affidavit or
by court action, such absentee's mere reappearance, even Q: Is a decree of nullity of the first marriage required
if made known to the spouses in the subsequent marriage, before a subsequent marriage can be entered into
will not terminate such marriage. (SSS v. Jarque Vda. De validly?
Bailon, G.R. No. 165545, March 24, 2006)
A: GR: Under the Art. 40 of the FC, the absolute nullity of a
Q: When are non-bigamous subsequent marriages previous marriage may be invoked for purposes of
void? remarriage on the basis solely of a final judgment
declaring such previous marriage void.
A: The subsequent marriage of a person whose prior
marriage has been annulled but contracted said XPNs:
subsequent marriage without compliance with Art. 52 of
the FC, shall be VOID. 1. If parties merely signed the marriage contract, i.e.
without the presence of the solemnizing officer.
Before he contracts a subsequent marriage, he must first
comply with the requirement provided for in Art. 52, viz: NOTE: The mere private act of signing a marriage contract
bears no semblance to a valid marriage and, thus, needs no
The recording in the civil registries and registries of judicial declaration of nullity of marriage. (Morigo vs.
properties of the following: People, G.R. 145226, February 06, 2004)
1. Judgment of annulment; 2. If one of the parties was a victim of identity theft. Here,
2. Partition; the victim discovered that she was already married to
3. Distribution of properties; and, a Korean national upon receipt of her NSO’s
4. Delivery of presumptive legitimes. CENOMAR. The SC affirmed the trial court’s order for
correction of entry under Rule 108 of ROC without
EFFECTS OF DECLARATION OF NULLITY OF MARRIAGE need of declaration of nullity of the marriage since
there is no marriage to be declared void in the first
1. Status of the Children (1990, 2010 BAR) place. (Republic vs Olaybar, G.R. 189538, February 10,
2014)
GR: Children conceived and born outside a valid marriage
or inside a void marriage are illegitimate. 3. Proxy marriages conducted in the Philippines.
XPNs: 4. Same sex marriage celebrated abroad involving

Filipino citizens by reason of public policy. Same sex
a. Legitimate if the marriage is void: marriage contracted by a Filipino citizen is not
i. On the ground of psychological incapacity of recognized as a valid marriage in the Philippines
either or both parties; pursuant Article 1 of FC and Article 15 of the NCC.

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NOTE: The marriage between the deceased Teodorico and other are revoked by operation of law.
respondent Marietta was solemnized on 08 May
1958. The law in force at that time was the Civil Code, not NOTE: The parties are not disqualified to institute each
the Family Code, which took effect only on 03 August 1988. other as voluntary heir in their respective wills to be
Article 256 of the Family Code itself limited its retroactive executed after the judicial declaration of nullity
governance only to cases where it thereby would not
prejudice or impair vested or acquired rights in 6. Parental Authority and Custody of Children
accordance with the Civil Code or other laws. (Armas v.
Calisterio, G.R. No. 136467, April 6, 2000) GR: Since the children are considered as illegitimate, the
parental authority and the custody of the children will be
XPN to XPN: In ruling Jarillo and Montañez, Supreme Court exercised by their mother. The illegitimate father, even if
applied Art. 40 retroactively, though the second marriage he admits paternity, will only have visitation rights.
took place after the effectivity of the FC, holding that said
provision is a rule of procedure. The retroactive XPN: If the marriage is declared void by reason of
application of procedural laws is not violative of any right psychological incapacity of either or both of the parties,
of a person who may feel that he is adversely affected. The the parental authority and the custody will be exercised by
reason is that as a general rule, no vested right may attach the parent designated by the court. If a child is below
to, nor arise from, procedural laws. (Jarillo v. People, G.R. seven years old, the law presumes the mother is the best
No. 164435, September 29, 2009) (Montañez v. Cipriano, custodian unless the court decides otherwise for
G.R. No. 181089, October 22, 2012) compelling reasons. (FC, Art. 213)
3. Donations Propter Nuptias Effects of Decree of Annulment
GR: Donations propter nuptias are revocable at the 1. Termination of the marital bond, as if it had never
instance of the donor. been entered into, but the effects thereof are not
totally wiped out;
XPNs: 2. Children conceived or born before the judgment of
annulment has become final and executory are
a. If the donation propter nuptias is embodied in a considered legitimate;
marriage settlement, the donation is void under 3. Absolute community property regime or the conjugal
Article 86 par. 1 of the Family Code; partnership property regime is terminated or
b. If the subsequent marriage is judicially declared void dissolved and the same shall be liquidated in
by reason of Article 40 of the Family Code, the accordance with the provisions of Arts. 102 and 129;
donation remains valid; 4. The innocent spouse may revoke the designation of
the other spouse who acted in bad faith as beneficiary
XPN to the XPN: If the donee spouse contracted the in the insurance policy even if the designation is
marriage in bad faith, all donations are revoked by irrevocable;
operation by law. 5. The spouse who contracted the marriage in bad faith
shall be disqualified to inherit from the innocent
4. Designation as Beneficiary in Insurance Policy spouse by testate and intestate succession;
6. Donation propter nuptias.
If the subsequent marriage is judicially declared void by
reason of Article 40 of the Family Code, the innocent GR: It shall remain valid.
spouse may revoke such designation if the beneficiary
spouse acted in bad faith, even if such designation be XPN: If the donee spouse acted in bad faith, the donor may
stipulated as irrevocable. However, if the marriage was not revoke the donation.
judicially declared void and the designation in the
insurance policy is irrevocable, the insured cannot change Liquidation of Property if either spouse contracted the
such designation. marriage in bad faith
5. Right to inherit His or her share of the net profits of the community
property or conjugal partnership property shall be
a. Intestate Succession: The parties cannot inherit forfeited in favor of the common children or if there be
from each other by way of intestate succession none, the children of the guilty spouse by previous
since they are no longer considered as spouses; marriage or in default thereof, the innocent spouse.
b. Testate Succession:
The final judgment of nullity or annulment shall
GR: Any testamentary provision by one in favor of the provide the following:
other shall remain valid.
1. Liquidation, partition, and distribution of the
XPNs: properties of the spouses;
1. If the subsequent marriage is rendered void by non- 2. Custody and support of the common children; and
compliance with Article 40 of the Family Code, the 3. Delivery of their presumptive legitimes.
spouse who contracted the subsequent marriage in
bad faith is disqualified to inherit from the innocent NOTE: Where there was a failure to record in the civil
spouse. registry and registry of property the judgment of
2. If the marriage is void by reason of the bad faith of annulment or absolute nullity of the marriage, the
both parties under Article 41 of the Family Code, all partition and distribution of the property of the spouses,
testamentary dispositions made by one in favor of the

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and the delivery of the children’s presumptive legitimes, it the insane; or
shall not affect third persons. (FC, Art. 52) Insane spouse
during a lucid
VOIDABLE MARRIAGES interval or after
regaining sanity
A voidable marriage is considered valid and produces all
its civil effects until it is set aside by final judgment of a At any time
competent court in an action for annulment. (Rabuya, before the death
2018) Simply, a voidable marriage is valid until it is of either party.
annulled. (Paras, 2016)
During a lucid
Art. 45 v. 46 of the FC on STD as ground for annulment interval or after
regaining sanity.
ARTICLE 45 ARTICLE 46
Affliction Concealment
Consent of Injured party: Injured party
Ground for Annulment
either party Through free
The fact of being afflicted The act of concealing was obtained cohabitation with Within 5 years
because it constitutes fraud by fraud full knowledge of after the
the facts discovery of
Concealment
constituting the fraud.
Not necessarily Necessary fraud.
Nature of the Disease
Must be serious and Does not have to be serious Vices of consent Injured party: Injured party
incurable and incurable such as force, Through free
intimidation or cohabitation after Within 5 years
Voidable marriages and its ratification undue the vices have from the time
influence ceased or the force,
GROUND disappeared. intimidation or
(1999, 2003, RATIFICATION WHO MAY FILE undue influence
2006, 2007, AND WHEN TO disappeared or
2009 BAR) FILE ceased.

Only the potent
Contracting party
By the Impotence May not be ratified spouse can file
Marriage of a who failed to obtain
contracting (impotencia but action may be the action, and
party 18 years parental consent:
party whose copulandi) and barred by he or she must
of age or over Through free
parent did not afflicted with prescription only, not have been
but below 21 cohabitation after
give consent. STD found to be which is 5 years aware of the
solemnized attaining the age of
serious and after the marriage. other’s
without the 21. Within 5 years appears to be impotency at
consent of the after attaining incurable the time of the
parents, NOTE: The parents
the age of 21. marriage.
guardian or cannot ratify the

person having marriage. The effect
Within 5 years
substitute of prescription on
Parent, after the
parental their part is that
guardian, or celebration of
authority over they are barred
person having marriage.
the party, in from contesting it
legal charge of
that order but the marriage is
the contracting LEGAL SEPARATION
not yet cleansed of
party.
its defect. Legal separation is a legal remedy available to parties in a
At any time valid but failed marriage for the purpose of obtaining a
before such decree from the court entitling him or her certain reliefs
party has such as the right to live separately from each other
reached the age (without affecting the marital bond that exists between
of 21. them), the dissolution and liquidation of their absolute
community or conjugal partnership property regime and
Insane spouse: GR: Sane spouse the custody of their minor children.
Through free who had no
Either party cohabitation after knowledge of GROUNDS FOR LEGAL SEPARATION (FC, ART. 55)
was of coming to reason. the other’s (1997, 2002, 2003, 2006, 2007 BAR)
unsound mind insanity
1. Repeated physical violence or grossly abusive conduct
XPN: Any against petitioner, common child, child of petitioner;
relative,
guardian or NOTE: Respondent’s child is not included
person having
legal charge of 2. Attempt to corrupt or induce petitioner, common

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child, child of petitioner to engage in prostitution, or differences. In other words, it is for possible reconciliation.
connivance in such corruption or inducement; (FC, Art. 58)
3. Attempt by respondent against the life of petitioner;
4. Final judgment sentencing respondent to There is no cooling-off period if the grounds alleged are
imprisonment of more than 6 years, even if pardoned; those under R.A. 9262. (Anti-Violence against Women and
Children Act) The court can immediately hear the case.
NOTE: The final judgment must be promulgated
during the marriage. Filing of petition for legal separation
5. Drug addiction or habitual alcoholism of respondent;

Who may file Husband or wife
NOTE: It must exist after celebration of marriage

6. Physical violence or moral pressure to compel When to file Within 5 years from the time of the
petitioner to change religious or political affiliation; occurrence of the cause
7. Bigamous marriage subsequently contracted by
respondent in the Philippines or abroad;
8. Sexual infidelity or perversion; Family Court of the province or city
Where to file where the petitioner or the
NOTE: Sexual perversion includes all unusual or respondent has been residing for at
abnormal sexual practices which may be offensive to least 6 months prior to the date of
the feelings or sense of decency of either the husband filing or in case of a non- resident,
or wife. where he may be found in the
Philippines, at the election of the
9. Lesbianism or homosexuality of respondent; and petitioner.

NOTE: It must exist after celebration of marriage
Effects of Legal Separation
10. Abandonment of petitioner by respondent without
justifiable cause for more than 1 year. 1. Spouses entitled to live separately but the marriage
bond is not severed;
Grounds for denial of petition for legal separation 2. ACP/CPG shall be dissolved and liquidated. The share
(2006 BAR) of the offending spouse in the net profits shall be
forfeited in favor of:
1. Condonation of the act complained of; a. Common children,
2. Consent to the commission of the offense/act; b. In default of the common children, children of the
3. Connivance in the commission of the act; guilty spouse by a previous marriage,
4. Collusion in the procurement of decree of LS; c. In default of common children and the children of
5. Mutual Guilt; the guilty spouse, innocent spouse;
6. Prescription: 5 yrs from occurrence of cause; 3. Custody of minor children is awarded to the innocent
7. Death of either party during the pendency of the case spouse (subject to FC, Art. 213);
(Lapuz-Sy v. Eufemio, G.R. No. L-31429, January 31, 4. Offending spouse is disqualified to inherit from
1972); innocent spouse by intestate succession;
8. Reconciliation of the spouses during the pendency of 5. Provisions in the will of innocent spouse which favors
the case. (FC, Art. 56) offending spouse shall be revoked by operation of law;
6. Innocent spouse may revoke donations he/she made in
Prescriptive period for filing a petition for legal favor of offending spouse; and
separation
NOTE: Prescriptive period: 5 years from finality of
An action for legal separation shall be filed within five decree of legal separation
years from the time of the occurrence of the cause. (FC, Art.
57) 7. Innocent spouse may revoke designation of offending
spouse as beneficiary in any insurance policy, even
Cooling-off period when stipulated as irrevocable.
An action for legal separation shall be in no case tried

before 6 months has elapsed since the filing of the
petition, to enable the contending spouses to settle

Declaration of Nullity of Marriage vs. Annulment vs. Legal Separation

BASIS DECLARATION OF NULLITY OF MARRIAGE ANNULMENT LEGAL SEPARATION

Marriage
Dissolved Dissolved No effect; marriage bond remains
bond
GR: Illegitimate
Legitimate
Status of

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Civil Law
children XPN: Children conceived or born of marriages

before declaration of nullity under Arts. 36 and 53
of the FC considered legitimate
GR: Governed either by Article 147 or Article 148
ACP/CPG shall be dissolved & liquidated. [FC,
of the Family Code FC. Thus, property regime shall
Art.43(2)]
be liquidated pursuant to the ordinary rules on co-

ownership.
1. Share of spouse, who contracted the subsequent

marriage in bad faith, in the net profits of the
XPN: Marriages declared void under Article 40
community property or conjugal partnership, shall
which shall be liquidated in accordance with
be forfeited in favor of the common children; or
Property Article 43 par. 2 which property relations could

relations either be governed by absolute community or
2. If there are none, the children of the guilty
conjugal gains unless the parties agree to complete
spouse by a previous marriage; or
separation of property in a marriage settlement

prior marriage. (Valdes v. RTC, G.R. No. 122749. July
3. In default of children, the innocent spouse.
31, 1996)
GR: Donations propter nuptias are revocable at the
instance of the donor.

XPN:
i. If the donation propter nuptias is
embodied in a marriage settlement, the donation
is void under Article 86 par. 1 of the FC. GR: Shall remain valid. [FC, Art.43(3)]

ii. If the subsequent marriage is judicially XPN:
declared void by reason of Art. 40 of the FC, the 1. If donee contracted the marriage in bad
donation remains valid. faith, such donations made to said donee shall be
Donations revoked by operation of law.
propter XPN to the XPN:
nuptias 1. If the donee spouse contracted the 2. If both spouses to the marriage acted in
marriage in bad faith, all donations are revoked bad faith, all donations propter nuptias shall be
by operation by law. revoked by operation of law.
2. When both parties to a subsequent
marriage contracted in bad faith under Article 44
of the FC, all donations propter nuptias are
revoked by operation by law.

If the subsequent marriage is judicially declared by
If one spouse acted in bad faith, innocent spouse may
void by reason of Article 40 of the FC, the innocent
revoke his designation as beneficiary in the
spouse may revoke such designation if the
Insurance insurance policy even if such designation be
beneficiary spouse acted in bad faith, even if such
stipulated as irrevocable. [FC, Art.43 (4)]
designation be stipulated as irrevocable.
Intestate Succession:
The parties cannot inherit from each other by way
of intestate succession since they are no longer
considered as spouses.

Testate Succession:
GR: Any testamentary provision by one in favor of
the other shall remain valid.

XPN:
1. If the subsequent marriage is rendered void by
non- compliance with Article 40 of the Family
If one spouse contracted the marriage in bad faith,
Code FC, the spouse who contracted the
he shall be disqualified to inherit from innocent
subsequent marriage in bad faith is
Succession spouse by testate and intestate succession. [FC, Art.
disqualified to inherit from the innocent
43(5)]
spouse.

2. If the marriage is void by reason of the bad
faith of both parties under Article 41 of the
Family Code FC, all testamentary dispositions
made by one in favor of the other are revoked
by operation of law.

NOTE: The parties are not disqualified to institute
each other as voluntary heir in their respective
wills to be executed after the judicial declaration of
nullity.

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Civil Law
PROPERTY RELATIONS OF THE SPOUSES consideration of a future marriage because such

donations are rendered void when marriage did not
Requisites of a valid Marriage Settlement (FC, Art. 77) take place and, thus, there is nothing to revoke.
(W-S-E-R) b. If the marriage is judicially declared void by reason
of non-compliance with Article 40 of the FC and the
1. In Writing; done spouse contracted the marriage in bad faith.
2. Signed by the parties; The donation is deemed revoked by operation of
3. Executed before the celebration of marriage; law.
4. Registration (to bind 3rd persons) c. If both parties acted in bad faith, all donations by
reason of marriage and testamentary dispositions
Property regime governing the property relations of made by one in favor of the other are revoked by
spouses in the absence of marriage settlement or operation of law. (Article 44, FC)
when regime agreed upon is void (1992, 1995, 2005
Bar) 2. Marriage takes place without the required consent of
parents or guardians.
GR: Absolute Community Property. (FC, Art. 75)
NOTE: If the donor knew of the absence of consent of the
XPNs: parents before the marriage, he may not revoke the
donation because the parent can still give their consent
1. For marriages contracted prior to the effectivity of the any time before the marriage ceremony takes palace. (Sta.
FC on August 3, 1988, conjugal partnership of gains Maria, 2017)
shall govern the property relations and Art. 116 of the
NCC will apply. The provisions of the FC shall have no 3. Marriage is annulled and donee acted in bad faith.
retroactive effect because it shall impair vested rights.
2. Subsequent marriage contracted within one year from 4. Upon legal separation, the donee being the guilty spouse.
the death of the deceased spouse without liquidation
of the community property or conjugal partnership of NOTE: Prescription is 5 years from the judicial
gains, either judicially or extra-judicially, as required declaration of legal separation (a decree is necessary for
under Arts.103 and 130 of the FC. In such case, a the donor to revoke the donation).
mandatory regime of complete separation of property
shall govern the subsequent marriage. (Rabuya, 2009) 5. If with a resolutory condition which was complied with.
Requisites for Donation Propter Nuptias 6. Donee has committed an act of ingratitude as specified
by the provisions of the Civil Code on donations in general.
1. Made before celebration of marriage;
2. Made in consideration of the marriage; and Different property regimes which may be adopted by
3. Made in favor of one or both of the future spouses. future spouses
Rule regarding DPN made between spouses 1. Absolute Community of Property (ACP)
2. Conjugal Partnership of Gains (CPG);
GR: Future spouses cannot donate to each other more than 3. Absolute Separation of Property (ASOP);
1/5 of their present property and any excess from which 4. A combination of the above regimes;
shall be considered void. 5. Any other regime within limits provided by the FC.

XPN: If they are governed by ACP, then each spouse can
donate to each other in their marriage settlements present
property without limit, provided there is sufficient
property left for their support and the legitimes are not
impaired.

shall be entitled to the excess. (FC, Art. 85)

Donations that may be revoked by the donor (FC, Art.
86)

A donation by reason of marriage may be revoked by the
donor in the following cases:

1. GR: Marriage is not celebrated or is judicially declared
void ab initio.

Effect: Donations stipulated in marriage settlement which
are made not in consideration of the future marriage
remains valid. Thus, can be revoked by the donor.

XPNs:

a. Donations made in the marriage settlements in

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Civil Law
ABSOLUTE COMMUNITY CONJUGAL PARTNERSHIP COMPLETE SEPARATION

OF PROPERTY OF GAINS OF PROPERTY
(ACP) (CPG) (CSOP)
When applicable
When spouses: 1. When the future spouses adopt 1. When future spouses adopt it in a
it in a marriage settlement. marriage settlement;
1. Adopt it in a marriage settlement;
2. If the marriage is celebrated 2. ACP or CPG is dissolved;
under the New Civil Code or
2. Do not choose any economic prior the effectivity of the 3. Prior marriage is dissolved due to
system property regime and the Family Code and they have not death of one spouse and surviving
marriage took place during the adopted any economic system spouse failed to comply with the
effectivity of the Family Code (on property regime. requirements under Art. 103 (judicial
August 3, 1988 or after); or settlement proceeding of the estate
of deceased spouse);
3. Adopted a different property
regime and the same is void. 4. By judicial order. Judicial separation
of property may either be voluntary
or for sufficient cause.
Composition
All the properties owned by the Each spouse retains his/her
spouses at the time of marriage property before the marriage and
become community property. only the fruits and income of such
properties become part of the
conjugal properties during the
marriage.
Effect of Separation In Fact
The separation in fact shall not affect the regime of ACP, but:
1. The spouse who leaves the conjugal home or refuses to live therein,
without just cause, shall not have the right to be supported;
2. When consent of one spouse to any transaction of the other is required by
law, judicial authorization shall be obtained in a summary proceeding.
3. In case of insufficiency of community or conjugal partnership property,
separate property of both spouses shall be solidarily liable for the support
of the family. Spouse present shall, upon proper petition in a summary
proceeding, be given judicial authority to administer or encumber any
specific separate property of the other spouse and use the fruits or
proceeds thereof to satisfy the latter’s share. (FC, Arts. 100 & 127)
Effect of Dissolution
Upon dissolution and liquidation of Upon dissolution of the
the community property, what is partnership, the separate
divided equally between the spouses properties of the spouses are
or their heirs is the net remainder of returned and only the net profits of
the properties of the the partnership are divided equally
ACP. between the spouses of their heirs.

Property Regime of unions without marriage
BASIS ART.147 ART.148

(1997, 2000, 2006, 2009, 2010 BAR) (1992, 1998, 2000, 2006, 2009 BAR)

Applicability 1. Parties without legal impediment to marry; With legal impediment caused by:

2. Void marriage on the ground of psychological incapacity. 1. Adulterous relationships
2. Bigamous/polygamous marriages
3. Incestuous void marriages under
Art.37
4. Void marriages by reason of public
policy. (FC, Art. 38)

As to requisites 1. The man and the woman must be capacitated to marry 1. The man and the woman must be
each other; incapacitated to marry each other,
or they do not live exclusively with
2. live exclusively with each other as husband and wife; and each other as husband and wife;
and
3. their union is without the benefit of marriage or their 2. Their union is without the benefit
marriage is void. (Mercado Fehr v. Fehr, G.R. No. 152716, of marriage or their marriage is

2021 GOLDEN NOTES 2021 & 2022
CIVIL Law
October 23, 2003 Salas, Jr. v. Aguila, G.R. No. 202370, void. (FC, Art. 148)
September 23, 2013)
Separately owned by the parties. If
Salaries & wages Owned in equal shares any is married, his/her salary pertains
to the CPG of the legitimate marriage.

Property Belongs to party upon proof of acquisition through exclusive Belongs to such party.
exclusively funds.
acquired
Property acquired
by Governed by rules of co-ownership. Owned in common in proportion to
both through their their respective contributions.
work or industry

Property acquired while living together presumed obtained No presumption of joint acquisition.
Presumption by their joint efforts, work or industry and owned by them
in equal shares. Actual joint contribution of money,
property or industry shall be owned by
If one party did not participate in acquisition: presumed to them in common proportion.
have contributed through care and maintenance of family
and household. (Buenaventura v. CA, G.R. No. 127358, March However, their contributions are
31, 2005) presumed equal, in the absence of
proof to the contrary.

When only one of the parties to a void marriage is in good If one of the parties is validly married
Forfeiture faith, the share of the party in bad faith in the co-ownership to another, his/her share in the co-
shall be forfeited in favor of: ownership shall accrue to the ACP or
CPG existing in the marriage.
1. their common children
If the party who acted in BF is not
2. in case of default of/or waiver by any or all of the validly married to another or if both
common children or their descendants, each vacant share parties are in BF, such share be
shall belong to the respective surviving descendants forfeited in a manner provided in the
last par. of Art. 147
3. In the absence of descendants, such shares shall belong to
the innocent party.

Proof of actual Not necessary Necessary
contribution

ABSOLUTE COMMUNITY OF PROPERTY
Composition of CPG (1995, 1998, 2004, 2005, 2008
A property regime wherein the spouses are considered co- Bar) (FC, Art. 117)
owners of all property brought into the marriage, as well
as those acquired during the marriage, which are not 1. Those acquired by onerous title during the marriage
otherwise excluded from the community either by the with conjugal funds;
provisions of the Family Code or by the marriage
settlement. (Rabuya, 2009) Requisites:
a. Acquisition is made during the marriage,
Q: An individual, while single, purchases a house and b. Thru onerous title,
lot in 1990 and borrows money in 1992 to repair it. In c. At the expense of common fund;
1995, such individual is married while the debt is still
being paid. After the marriage, is the debt still the 2. Livestock in excess of what was brought to the
responsibility of such individual? (2007 BAR) marriage;
3. Those acquired by chance such as winnings from
A: NO. Ante-nuptial debts of either spouse shall be gambling or betting;
considered as the liability of the absolute community of 4. Those obtained from labor, industry, work or
property insofar as they have redounded to the benefit of profession of either or both spouses;
the family. There is no presumption that the obligations 5. Fruits of conjugal property due or received during the
incurred by one of the spouses during the marriage are marriage and net fruits of separate property;
charged against their community of property. Before any
obligation may be chargeable against the community of NOTE: Net fruits refer to the remainder of the fruits
property, it must first be established that such obligation is after deducting the amount necessary to cover the
among the charges against the same. (Wong, et al, v. IAC, expenses of administration of said exclusive property.
G.R. No. 70082, August 19, 1991)
6. Share of either spouse in hidden treasure; and
7. Those acquired through occupation such as hunting or
CONJUGAL PARTNERSHIP PROPERTY
fishing. (FC, Art. 117)


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CIVIL Law
Q: Suppose a property was acquired by one spouse a spouse are merely descriptive of the civil status of the
while they were living separately, is this property registered owner, which do not prove co-ownership.
conjugal or not? Without proof of actual contribution from either or both
spouses, there can be no co-ownership under Article 148
A: It is presumed to be conjugal. All property acquired of the Family Code. (Go-Bangayan v. Bangayan, Jr., G.R. No.
during the marriage regardless of whether the spouses are 201061, July 3, 2013)
living together or not, are presumed to be conjugal
property. (Flores v. Escudero, G.R. No. L-5302, March 11, Family Home
1953)
It is the dwelling house where the husband and wife and
COMPLETE SEPARATION OF PROPERTY (CSOP) their family reside, and the land on which it is situated. It is
constituted jointly by the husband and the wife or by an
If during the liquidation of the CP, the conjugal partnership unmarried head of a family. (FC, Art. 152)
assets are less than the conjugal partnership liabilities, the
surviving spouse and the children shall not be entitled to Constitution of Family Home (FH)
support.
The FH is deemed constituted on a house and lot from the
Q: Romeo and Juliet lived together as husband and time it is occupied as a family residence. (FC Art. 153)
wife without the benefit of marriage. During their
cohabitation, they acquired a house. When they broke The heirs cannot partition the same unless the court finds
up, they executed an agreement where he agreed to compelling reasons therefor. This rule shall apply
leave the house provided Juliet will pay his entire regardless of whoever owns the property or constituted
share in their properties. She failed to do so but she the FH. (FC, Art 159)
also ignored his demand for her to vacate. Romeo sued
her for ejectment which the court granted. Was the Q: On March 30, 2000, Mariano died intestate and was
court correct in granting the same? survived by his wife, Leonora and children, Danilo and
Carlito. One of the properties he left was a piece of
A: NO. Under Art.147 of the Family Code, the property is land in Alabang where he built his residential house.
co- owned by the parties. In the absence of proof to the After his burial, Leonora and Mariano’s children extra-
contrary, any property acquired by common-law spouses judicially settled his estate. Thereafter, Leonora and
during their cohabitation is presumed to have been Danilo advised Carlito of their intention to partition
obtained thru their joint efforts and is owned by them in the property. Carlito opposed invoking Art. 159 of the
equal shares. Their property relationship in such a case is Family Code. Carlito alleged that since his minor child
essentially governed by the rules on co-ownership. Thus, Lucas still resides in the premises, the family home
Romeo cannot seek the ejectment of Juliet therefrom. As a continues until the minor beneficiary becomes of age.
co- owner, she is as much entitled to enjoy its possession Is the contention of Carlito tenable? (2014 BAR)
and ownership as him. (Abing v. CA, G.R. No. 146294, July
31, 2006) A: NO. To qualify as beneficiary of the FH, the person must
be among those mentioned under Art. 154 of the Family
Q: Benjamin is married to Azucena. While Azucena is Code, he/she must be actually living in the FH and must be
out of country, Benjamin developed a romantic dependent for legal support upon the head of the family.
relationship with Sally, but her father was against this. (Patricio v. Darion, G.R. No. 170829, November 20, 2006)
In order to appease her father, Sally convinced While Lucas satisfies the first and second requisites, he
Benjamin to sign a purported marriage contract. cannot, however, directly claim legal support from his
Eventually, their relationship ended a few years later. grandmother, Leonora because the person primarily
Benjamin asked the court for the partition of the obliged to give him support is his father Carlito. Thus, the
properties he acquired with Sally in accordance with partition may be successfully claimed by Leonora and
Article 148 of the FC, for his appointment as Danilo.
administrator of the properties during the pendency
of the case. Among the 44 properties which were the Occupancy of the FH either by the owner thereof or by
subject of the partition, 7 were enumerated by “any of its beneficiaries” must be actual. That which is
Benjamin while Sally named 37 properties in her “actual” is something real, or actually existing, as opposed
answer. Is Benjamin’s contention correct? to something merely possible, or to something which is
presumptive and constructive. Actual occupancy, however,
A: YES. The property relations of Benjamin and Sally is need not be by the owner of the house. Rather, the
governed by Article 148 of the Family Code. They property may be occupied by the “beneficiaries”
cohabitated without the benefit of marriage. Thus, only the enumerated by Art. 154 of the Family Code. (Manacop v.
properties acquired by them through their actual joint CA, G.R. No. 97898, August 11, 1997)
contribution of money, property, or industry shall be
owned by them in common in proportion to their NOTE: This enumeration may include the in-laws where
respective contributions. Thus, the 37 properties being the FH is constituted jointly by the husband and wife. But
claimed by Sally is excluded as part of her conjugal the law definitely excludes maids and overseers.
properties with Benjamin because Sally was not legally
married to Benjamin. As regards the seven remaining
properties, only one of them is registered in the names of
the parties as spouses. The other four were registered in
the name of either one of them with the description
“married to” and the last two were named to Sally as an
individual. The words “married to” preceding the name of

2021 GOLDEN NOTES 2021 & 2022
CIVIL Law
4. Analogy – Classified by express provision of law or
PROPERTY those which are not actually tangible properties but
are rights and interests over existing immovable
properties.
All things which are or may be the object of appropriation
considered as either real or personal property. (NCC, Art. PERSONAL OR MOVABLE PROPERTY
414) (1995 BAR)

It is an object or a right which is appropriated or Movable properties (SOFTSS)
susceptible of appropriation by man, with capacity to 1. Movables Susceptible of appropriation which are not
satisfy human wants and needs. (Pineda, 1999) included in Art. 415;

NOTE: Property does not only cover material things 2. Real property which by any Special provision of law
because it mentions of rights which could either be considers as personality;
classified as real or personal right. e.g. Growing crops under the Chattel
Mortgage Law
A human person is not a property, nor even his body while
he is still alive. But under certain conditions allowed by 3. Forces of nature which are brought under the control
law, he may donate part of his body like blood or organ. of science;
e.g. Electricity generated by electric
Q: Are the rights under the Bill of Rights considered as powers, solar light for batteries power.
property?
4. In general, all things which can be Transported from
A: NO. They are not susceptible of appropriation. place to place without impairment of the real property
to which they are fixed (NCC, Art. 416);
Requisites for a thing to be considered as property 5. Obligations and actions which have for their object
(USA) movables or demandable sums; and
6. Shares of stock of agricultural, commercial and
1. Utility –It can serve as a means to satisfy human needs; industrial entities, although they have real estate.
2. Substantivity/Individuality – It has a separate and (NCC, Art. 417)
autonomous existence and not simply a part of a
whole. Tests to determine whether a property is a movable
3. Appropriability - Susceptibility to property (MES)
ownership/possession, even if not yet actually
appropriated. 1. Test of Exclusion – Everything not included in Art. 415
of NCC; e.g. ships or vessels or interest in a business.
Properties NOT susceptible of appropriation 2. By reason of a Special law – Immovable by nature but
movable for the purpose of the special law; e.g.
1. Common things (res communes) – Growing crops for purposes of the Chattel Mortgage
XPN: Those that may be appropriated under certain Law.
conditions in a limited way. 3. Test of Mobility – If the property is capable of being
e.g. electricity, oxygen, distilled water carried from place to place without injuring the real
property to which it may in the meantime be attached.
2. Not susceptible due to physical impossibility
e.g. sun, moon, and other heavenly bodies Private ownership of land prohibited to Aliens
(KRIVENKO DOCTRINE)
3. Not susceptible due to legal impossibility
e.g. human body while the person is alive GR: Aliens have no right to acquire any public or private
agricultural, commercial or residential lands in the
CLASSIFICATION OF PROPERTY BY MOBILITY Philippines.

REAL OR IMMOVABLE PROPERTY The same rule is applicable to a foreign corporation even if
(1995, 1997, 2007 BAR) it is a religious and non-stock corporation. A foreign-
owned corporation cannot be the transferee of a land in
Categories of immovable property: the Philippines even temporarily. (Pineda, 2009)

Real properties are categorized by: (NIDA) XPN: Aliens may only acquire such lands by hereditary
succession. (Krivenko v. Registry of Deeds, G.R. No. L-630,
1. Nature – Those which by their essence and nature are November 15, 1947)
immovable or cannot be moved from one place to
another; Effect of a subsequent sale by the disqualified alien
2. Incorporation – Those which are attached to an vendee to a qualified Filipino citizen
immovable in a fixed manner and considered as an
integral part thereof, irrespective of its ownership; If land is invalidly transferred to an alien who
3. Destination – Things placed in buildings or on lands by subsequently becomes a citizen or transfers it to a citizen,
the owner of the immovable or his agent in such a the flaw in the original transaction is considered cured and
manner that it reveals the intention to attach them the title of the transferee is rendered valid.
permanently thereto; and
Thus, the subsequent transfer of the property to qualified

2021 GOLDEN NOTES 2021 & 2022
CIVIL Law
Filipinos may no longer be impugned on the basis of from the unlawful witholding of possession of the realty.
invalidity of the initial transfer. The objective of the (Gabriel Jr. v. Crisologo, G.R. No. 204626, June 9, 2014)
constitutional provision to keep our lands in Filipino
hands has been achieved. (Lee v. Republic of the Philippines, It is an ordinary civil proceeding to recover the better right
G.R. No. 12819, October 3, 2001) of possession, except in cases of forcible entry and
unlawful detainer. What is involved here is not possession
NOTE: The constitutional proscription on alien ownership de facto but possession de jure.
of lands of the public or private domain was intended to
protect lands from falling in the hands of non-Filipinos. Accion reinvindicatoria
(Lee v. Republic of the Philippines, G.R. No. 12819, October 3, It is an action to recover real property based on
2001) ownership. Here, the object is the recovery of the
dominion over the property as owner.
Regalian Doctrine: All lands not otherwise appearing to
be clearly within private ownership are presumed to be NOTE: Where the facts averred in the complaint reveals
owned by the state. (Pineda, 2009) that the action is neither one of forcible entry nor unlawful
detainer but essentially involves a boundary dispute, the
Reversion - An action where the ultimate relief sought is same must be resolved in an accion reinvindicatoria.
to revert the land back to the government under the (Sarmiento v. CA, G.R. No. 116192, November 16, 1995)
Regalian Doctrine. (Pineda, 2009)
Requisites of accion reivindicatoria
OWNERSHIP
1. Identity of property; and
Ownership is the juridical relation of a person over a thing 2. Plaintiff’s title to the property.
by virtue of which said person has the exclusive power or
authority to receive all the benefits and advantages arising Q: Spouses Magtanggol managed and operated a
from said thing, save those restricted by law or the gasoline station on a 1,000 sq.m. lot which they leased
recognized rights of others. from Francisco Bigla-awa. The contract was for a
period of three years. When the contract expired,
Attributes of ownership Francisco asked the spouses to peacefully vacate the
premises. The spouses ignored the demand and
1. Right to enjoy (jus utendi) (NCC, Art. 428); continued with the operation of the gasoline station.
2. Right to the fruits (jus fruendi); One month after, Francisco, with the aid of a group of
3. Right to abuse (jus abutendi); armed men, caused the closure of the gasoline station
4. Right to dispose (jus dispodendi) (NCC Art. 428); by constructing fences around it. Was the act of
5. Right to recover (jus vindicandi) (NCC. Art. 428); Francisco and his men lawful? Why? (2014 BAR)
6. Right to accessories (jus accessiones);
7. Right to possess (jus possidendi); A: NO, the act was not lawful. Even if the lessee’s right to
8. Right to exclude (NCC, Art. 429); and occupy the premises has expired, the lessor cannot
9. Right to enclose (NCC, Art. 430). physically oust the lessee from the leased premises if the
latter refuses to vacate. The lessor must go through the
RECOVERY OF POSSESSION OF proper channels by filing an appropriate case for unlawful
MOVABLE PROPERTY detainer or recovery of possession. Every possessor has a
right to be respected in his possession (NCC, Art. 539) and
Replevin in no case can possession be acquired through force or
intimidation as long as there is a possessor who objects
It is the remedy when the complaint prays for the recovery thereto (NCC, Art. 536). The act of Francisco is an abuse of
of the possession of personal property. rights because even if he has the right to recover
possession of his property, he must act with justice and
NOTE: A property validly deposited in custodia legis give the lessees their day in court and observe honesty and
cannot be subject of a replevin suit. (Calub v. CA, G.R. No. good faith.
115634, April 27, 2000)
REAL v. PERSONAL RIGHTS
RECOVERY OF POSSESSION
OF IMMOVABLE PROPERTY Subjects
a. One definite active a. An active
Accion interdictal subject (e.g. subject (creditor); and
owner) b. A definite
It is a summary action to recover physical or material b. One indefinite passive subject
possession only and it must be brought within one year passive subject (debtor).
from the time the cause of action arises. It may be: which is the whole
world
1. Forcible Entry; or Right of pursuit is
2. Unlawful detainer. therefore available. Real
right follows its object
Accion publiciana in the
hands of any possessor.
It refers to an ejectment suit filed within 10 years after the
expiration of one year from accrual of cause of action or Enforceability

2021 GOLDEN NOTES 2021 & 2022
CIVIL Law
Enforceable against the Enforceable only against Requisites of the Principle of Self-Help (RODA)
whole world. the original debtor or
his transferee charged 1. Reasonable force used
with notice of the 2. Such force is used by the owner or lawful possessor
personal rights 3. There is no delay
Limit 4. Actual or threatened physical invasion or usurpation
Limited by No such limitation. of the property.
usefulness, value or
productivity of the DOCTRINE OF STATE OF NECESSITY
thing.
Extinguishment The owner of a thing has no right to prohibit the
Extinguished by loss or Not so interference of another with the same, if the interference is
destruction of the thing extinguished. Claim for necessary to avert an imminent danger and the threatened
damages may still damage, compared to the damage arising to the owner
be pursued-in from the interference, is much greater. The owner may
case of demand from the person benefited indemnity for the
loss or destruction of damage to him. (NCC, Art. 432)
the thing.
This principle authorized the destruction of property
LIMITATIONS ON THE RIGHT OF OWNERSHIP which is lesser in value to avert the danger poised to
another property of greater value.
Those imposed by the: (SLOG-C²-SO)
Requisites of Doctrine of State of Necessity
1. State in the exercise of:
a. Power of taxation; 1. Interference necessary to avert an imminent danger
b. Police power; and and the threatened damage to the actor or a third
c. Power of eminent domain person;
2. Damage to another is much greater than the damage to
2. Law; the property.
a. Legal easements (i.e., easements of waters and of
right of way) and HIDDEN TREASURE
b. The requirement of legitime in succession;
Treasure is understood, for legal purposes, as any hidden
3. Owner himself; and unknown deposit of money, jewelry, or other precious
a. Voluntary easement objects, the lawful ownership of which does not appear.
b. Mortgage (NCC, Art. 439) (1997, 2008, 2014 BAR)
c. Pledge
d. Lease; “Other precious objects”

4. Grantor of the property on the grantee, either by: Under the ejusdem generis rule, the phrase should be
a. Contract understood as being similar to money or jewelry.
b. Donation or
c. Will; Rule regarding discovery of hidden treasure (NCC, Art.
438 in relation to Art. 718)
5. Those arising from Conflicts of private rights - Those
which take place in accession continua; GR: If the finder is the owner of the land, building, or other
property where it is found, the entire hidden treasure
6. Constitution - On the prohibition against the belongs to him.
acquisition of private lands by aliens;
XPN: If the finder is not the owner or is a stranger
7. Acts in state of necessity – The law permits injury or (includes the lessee or usufructuary), he is entitled to ½
destruction of things owned by another provided this thereof. (NCC, Art. 566)
is necessary to avert a greater danger (with right to
indemnity v. principle of unjust enrichment); and If the finder is married

8. True owner must resort to judicial process – When If the finder is married, he or she gets one half of the
thing is in possession of another; law creates a treasure or its value. His or her spouse is entitled to share
disputable presumption of ownership to those in one-half of that share, it being a conjugal property. (NCC,
actual possession. (2008 BAR) Art. 117, par. 4, FC)

PRINCIPLE OF SELF-HELP Requisites in order that the finder be entitled to any
share in the hidden treasure (ACTA)
This principle authorizes an owner or lawful possessor of a
property to use reasonable force to prevent or repel an 1. Discovery was made on the property of Another, or of
actual or threatened unlawful physical invasion or the State or any of its political subdivisions;
usurpation of property. (NCC, Art. 429) There must be no 2. Made by Chance; and
delay in the pursuit, otherwise, his recourse will be to go to 3. He is not a Trespasser or Agent of the landowner.
the court for the recovery of property. (NCC, Art. 438, par. 2)


2021 GOLDEN NOTES 2021 & 2022
CIVIL Law
NOTE: If the things found be of interest to science or the To the owner belongs the:
arts, the State may acquire them at their just price, which
shall be divided in conformity with the rule stated. (NCC, 1. Natural fruits - The spontaneous products of the soil,
Art. 438) and the young and other products of animals;
2. Industrial fruits - Are those produced by lands of any
“By chance” kind through cultivation or labor;
3. Civil fruits - The rents of buildings, the price of leases of
The finder had no intention to search for the treasure. lands and other property and the amount of perpetual
There is no agreement between the owner of the property or life annuities or other similar income. (NCC, Art.
and the finder for the search of the treasure. 441-442)

Yamashita treasure Obligation of the owner who receives the fruit from a
third person
The State is entitled to 75% share and the finder to 25%.
(PD 7056-A) He who receives the fruits has the obligation to pay the
expenses made by a third person in their production,
Q: O, owner of Lot A, learning that Japanese soldiers gathering and preservation. (NCC, Art. 443) (2009 BAR)
may have buried gold and other treasures at the
adjoining vacant Lot B, belonging to Spouses X and Y, Ownership of fruits
excavated in Lot B where she succeeded in unearthing
gold and precious stones. How will the treasures found GR: Fruits belong to the owner. (NCC, Art. 441)
by O to be divided – (1) 100% to O as finder, (2) 50%
to O and 50% to X and Y, (3) 50% to O and 50% to the XPNS: If the thing is: (PULPA)
State (4) none of the above? (2010 BAR) 1. In possession of a Possessor in good faith (NCC, Art
546) (1992, 1996, 2000 BAR); before the possession
A: NONE OF THE ABOVE. The finding of the treasure was is legally interrupted;
not by chance because O knew that the treasure was in Lot 2. Subject to a Usufruct (NCC, Art. 566);
B. While a trespasser is also not entitled to any share and 3. Lease of rural land;
there is no indication in the problem whether or not O was 4. Pledged [NCC, Art. 1680 and Art. 2102(7)]; pledge is
a trespasser, O is not entitled to share because the finding entitled to the fruits but has the obligation to
was not by chance. compensate or set-off what he receives with those
which are owing to him; or
ACCESSION 5. In possession of an Antichretic creditor. (NCC, Art.
2132)
The right pertaining to the owner of a thing over
everything which is produced thereby, or which is ACCESSION CONTINUA
incorporated or attached thereto, either naturally or
artificially. (NCC, Art. 440) It is the right pertaining to the owner of a thing over
everything incorporated or attached thereto either
Right of accession naturally or artificially; by external forces.

It is that right of ownership of which an owner of a thing 1. Immovable Property
has over the products of said thing (accession discreta), as a. Accession industrial (Art. 445-455)
well as to all things inseparably attached or incorporated i. Building;
thereto whether naturally or artificially (accession ii. Planting; and
continua). (Pineda, 2009) iii. Sowing.

Accession is NOT a mode of acquiring ownership b. Accession natural
i. Alluvium (Art. 457);
It is not one of the modes enumerated under Art. 712 ii. Avulsion (Art. 459);
(different modes of acquiring ownership). It is, therefore, iii. Change of course of rivers (Art. 461-462); and
safe to conclude that accession is not a mode of acquiring iv. Formation of islands. (Art. 464- 465)
ownership.
2. Movable property
Reason: Accession presupposes a previously existing a. Adjunction or Conjunction;
ownership by the owner over the principal. b. Mixture; and
Fundamentally, accession is a right implicitly included in c. Specification.
ownership, without which it will have no basis or
existence. (Paras, 2008) Basic principles in accession continua (BADONG-E)

NOTE: In general, the right to accession is automatic (ipso 1. He who is in Bad faith is liable for damages.
jure), requiring no prior act on the part of the owner or 2. Accessory follows the principal;
principal. 3. Union or incorporation must generally be effected in
such a manner that to separate the principal from the
ACCESSION DISCRETA accessory would result in substantial Damage to either
or diminish its value;
The right of accession with respect to what is produced by 4. To the Owner of the thing belongs the extension or
the property. increases to such thing;
5. Bad faith of one party Neutralizes the bad faith of the

2021 GOLDEN NOTES 2021 & 2022
CIVIL Law
other so that they shall be considered in good faith; ALLUVIUM AVULSION
6. He who is in Good faith may be held responsible but Gradual and Sudden or abrupt
not penalized; and imperceptible. process.
7. No one shall unjustly Enrich himself at the expense of Soil cannot be identified. Identifiable and
another. verifiable.
Belongs to the owner of Belongs to the owner
FOR IMMOVABLES the property to from whose property
which it is attached. it was detached.
ACCESSION INDUSTRIAL Merely an attachment. Detachment followed by
attachment.
Three kinds of industrial endeavors (BPS)
CO-OWNERSHIP
1. Building - Erecting a structure or construction of any
kind, with roof for residential, office, social, There is co-ownership whenever the ownership of an
commercial or other purposes; undivided thing or right belongs to different persons. (NCC,
2. Planting – Setting into the soil or land seeds or Art. 484) It is the right of common dominion which two or
seedlings of trees such as mangoes, coconuts, etc; more persons have in a spiritual (or ideal) part of the thing
3. Sowing – The act of scattering or spreading of which is not physically divided.
germinated seeds indiscriminately or evenly through
hand or mechanical device. CHARACTERISTICS OF CO-OWNERSHIP IN GENERAL

Q: Bartolome constructed a chapel on the land of Eric. 1. Plurality of subjects or owners;
What are Bartolome’s rights if he were: (1) possessor 2. There is no mutual representation by the co-owners;
of the land in good faith, or (2) in bad faith? (1996 3. It exists for the common enjoyment of the co-owners;
BAR) 4. There is a single object which is not materially
divided;
A: (1) A chapel is a useful improvement, Bartolome may 5. It has no distinct legal personality; and
remove the chapel if it can be removed without damage to 6. It is governed first of all by the contract of the parties;
the land, unless Eric chooses to acquire the chapel. In the otherwise, by special legal provisions, and in default of
latter case, Bartolome has the right of reimbursement of such provisions, by the provisions of Title III of the
the value of the chapel with right of retention until he is New Civil Code on co-ownership.
reimbursed. (NCC, Arts. 448, 546 & 547)
RIGHTS OF CO-OWNERS
(2) Bartolome loses whatever he built, without any right to
indemnify. (NCC, Art. 449) General rights of each co-owner as to the thing owned
in common (USA-COPE-P)
ACCESSION NATURAL
1. To Use the thing according to the purpose intended
Alluvium or alluvion (2001, 2003, 2008, 2009 BAR) provided that:
a. It is without prejudice to the interest of the co-
It is the gradual deposit of sediment by natural action of a ownership; and
current of fresh water (not sea water), the original identity b. Without preventing the use of other co-owners.
of the deposit being lost. Where it is by sea water, it (NCC, Art. 486)
belongs to the State. (Government of Philippine Islands v.
Cabangis, G.R. No. L-28379, March 27, 1929) NOTE: The purpose of the co-ownership may be
changed by an agreement, express or implied.
NOTE: Art. 457 of NCC states “To the owners of the lands
adjoining the banks of the rivers belongs the accretion 2. To Share in the benefits in proportion to his interest,
which they gradually receive from the effects of the provided the charges are borne in the same
current of the waters. proportion (NCC, Art. 485);

Avulsion NOTE: A contrary stipulation is void. Hence, benefits
cannot be stipulated upon by the co-owners.
It is the deposit of known (identifiable) portion of land
detached from the property of another which is attached 3. Each co-owner may bring an Action for ejectment
to the property of another as a result of the effect of the (NCC, Art. 487);
current of a river, creek or torrent. (2001 BAR)
NOTE: Action for ejectment covers; forcible entry,
Whenever the current of a river, creek, or torrent unlawful detainer, accion publiciana, quieting of title,
segregates from an estate on its banks a known portion of accion reivindicatoria, and replevin.
land and transfers it to another estate, the owner of the
land to which the segregated portion belonged retains the 4. To Compel other co-owners to contribute to expenses
ownership of it, provided that he removes the same within for preservation of the thing (NCC, Art. 488) and to the
2 years. (NCC, Art. 459) (2001 BAR) taxes;
5. To Oppose to any act of alteration (NCC, Art. 491) even
Alluvium vs. Avulsion (2001 BAR) if beneficial to the co-owners;
6. To Protect against acts of majority which are
prejudicial to the minority (NCC, Art. 492, par. 3);
7. To Exercise legal redemption;

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CIVIL Law
8. To ask for Partition (NCC, Art. 494); Acts of administration v. Acts of alteration
9. Right to exempt himself from obligation of paying
necessary expenses and taxes by renouncing his share
in the pro-indiviso interest; but cannot be made if ACTS OF ACTS OF
prejudicial to co-ownership (NCC, Art.488); ADMINISTRATION ALTERATION
10. Right to make repairs for preservation of things can be Refers to the enjoyment, Acts, by virtue of which, a
made at will of one co-owner; receive reimbursement exploitation, alteration co-owner, in opposition to
therefrom; notice of necessity of such repairs must be of the thing which do the expressed or tacit
given to co- owners, if practicable (NCC, Art.489); not affect its substance, agreement of all the co-
11. Right to full ownership of his part and fruits. (NCC, Art. form, or purpose. owners, and in violation of
493); their will, changes the
12. Right to alienate, assign or mortgage own part; except thing from the state in
personal rights like right to use and habitation (NCC, which the others believe it
Art.493); would remain, or
13. Right of pre-emption; withdraws it from the use
14. Right to be adjudicated thing (subject to right of others to which they believe it is
to be indemnified); and intended.
15. Right to share in proceeds of sale of thing if thing is Transitory in character. Permanent
indivisible and they cannot agree that it be allotted to
one of them. (NCC, Art.498)
Does not affect the Affects or relates to the
Rights of a co-owner to third parties substance or form. substance or essence of
the thing.
1. Assignees or creditors of the co-owners may take part In relation to the right Require the consent of all
in the division of the thing owned in common and of a co-owner, they co-owners.
object to it being effected without their concurrence, require the consent of
but they cannot impugn any partition already the majority who
executed; and represents the
controlling interest.
XPN: If there has been fraud or it was made Can be exercised by the Must be exercised by the
notwithstanding their formal opposition presented to co-owners co-owners themselves.
prevent it, without prejudice to the right of the debtor through other persons.
or assignor to maintain its validity. (NCC, Art. 497)

2. Non-intervenors – Retain rights of mortgage and Right to demand partition
servitude and other real rights and personal rights
belonging to them before partition was made. GR: Every co-owner has the right to demand partition.
(NCC, Art. 494) (2000, 2002, 2008 BAR)

Co-owner’s right to use the property owned in XPNs: (EASI-PAUL)
common 1. When partition would render the thing Unserviceable;
2. When the thing is essentially Indivisible;
Each co-owner may use the thing owned in common, 3. When partition is prohibited by Law by reason of
provided he does so in accordance with the purpose for their origin or juridical nature - e.g. party walls and
which it is intended and in such a way as not to injure the fences;
interest of the co- ownership or prevent the other co- 4. When the co-owners Agree to keep the property
owners from using it according to their rights. undivided for a period of time but not more than 10
years;
NOTE: If one co-owner alone occupies the entire house 5. When partition is Prohibited by the transferor
without opposition from the other co- owners, and there is (donor/testator) but not more than 20 years (NCC,
no lease agreement, the other co-owners cannot demand Art. 1083);
the payment of rent. 6. When a co-owner possessed the property as an
Exclusive owner for a period sufficient to acquire it
Rules on determination of the purpose of the property through prescription (acquisitive prescription);
NOTE: 10 years ordinary prescription, 30 years
1. Purpose stipulated in the agreement, express or extra-ordinary partition.
implied; 7. When co-owners may agree that it be Allotted to one
2. In default thereof, its purpose ordinarily adapted of them reimbursing the others; and
based on its nature; or 8. If they cannot agree, they may Sell the thing and
3. In default thereof, the use for which it was formerly distribute the proceeds.
intended.
NOTE: The right to ask for partition CANNOT be waived
Alteration (2008 BAR) or renounced permanently. Such waiver or renunciation
is void.
It is a change which is more or less permanent, which
changes the use of the thing and which prejudices the
condition of the thing or its enjoyment by the others. Q: May prescription run against a co-owner? (2000,
(Paras, 2008) 2002, 2008 BAR)

GR: As long as the co-owner expressly or impliedly

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CIVIL Law
recognizes the co-ownership, prescription cannot run in 2. Inseparable from the estate to which it is attached –
favor of or against him. cannot be alienated independently of the estate (NCC,
Art. 617) (2001, 2010 BAR);
Reason: Possession of a co-owner is like that of a trustee 3. Cannot consist in the doing of an act unless the act is
and shall not be regarded as adverse to the other co- accessory in relation to a real easement;
owners but in fact is beneficial to all of them. Acts 4. Involves two (2) neighboring Estates: the dominant
considered adverse to strangers may not be considered estate to which the right belongs and the servient
adverse insofar as co-owners are concerned. (Salvador v. estate upon which an obligation rests;
CA, G.R. No. 109910, April 5, 1995) 5. A Limitation on the servient owner’s rights of
ownership;
XPN: Co-owner's possession may be deemed adverse to 6. Indivisible – not affected by the division of the estate
the cestui que trust or the other co- owners provided the between two or more persons (NCC, Art. 618);
following elements must concur:
7. It is enjoyed over Another immovable never on one’s

own property; and
1. That he has performed unequivocal acts of
repudiation amounting to an ouster of the cestui que 8. A Real right but will affect third persons only when
trust or the other co- owners; registered.
2. That such positive acts of repudiation have been
CLASSIFICATIONS OF EASEMENT
made known to the cestui que trust or the other co-
owners; and
3. That the evidence thereon must be clear and 1. As to recipient of the benefit
convincing. (Salvador v. CA, G.R. No. 109910, April 5, a. Real (or predial) – The easement is in favor of
another immovable (NCC, Art. 613); and
1995)

NOTE: Prescription begins to run from the time of NOTE: It requires two distinct immovables belonging to
repudiation. Example of acts of repudiation: filing of an different owners to which it relates.
action to:
1. Quiet title; or b. Personal – The easement is in favor of a
2. Recovery of ownership. community, or of one or more persons to whom
the encumbered estate does not belong e.g.

easement of right of way for passage of livestock.
XPN to XPN: Constructive trusts can prescribe. Express
(NCC, Art. 614)
trust cannot prescribe as long as the relationship between
trustor and trustee is recognized. (Paras, 2008)
NOTE: In personal servitude the person in whose favor
TERMINATION/ EXTINGUISHMENT OF CO-OWNERSHIP the easement is constituted need not to be the owner of
any estate and does not require a dominant estate because
Extinguishment of Co-ownership (CALSTEP) the person in whose favor the easement is constituted
need not to be the property owner.
1. Confusion or merger of the rights in one co-owner;
2. Acquisitive prescription in favor of a third person or a 2. As to the manner of exercise
co-owner who repudiates; a. Continuous – Their use may or may not be
3. Loss or destruction of thing co-owned; incessant, without the intervention of any act of
man. E.g. Easement of drainage (NCC, Art. 615);
4. Sale of thing co-owned;
and
5. Termination of period agreed upon;

6. Expropriation; or
7. Judicial or extra-judicial Partition. NOTE: For acquisitive prescription, the
easement of aqueduct and easement of light and
view are considered continuous.
EASEMENT OR SERVITUDE

b. Discontinuous – Used at intervals and depend
It is an encumbrance imposed upon an immovable for the upon the acts of man. E.g. Easement of right of
benefit of: way

1. Another immovable belonging to a different owner; or 3. As to whether their existence is indicated
2. For the benefit of a community or one or more persons a. Apparent – Made known and continually kept in
to whom the encumbered estate does not belong by view by external signs that reveal the use and
virtue of which the owner is obliged to abstain from enjoyment of the same (NCC, Art. 615); and
doing or to permit a certain thing to be done on his
estate. (NCC, Articles 613 and 614) NOTE: By way of exception the easement of aqueduct is
always apparent, whether or not it can be seen. (NCC, Art.
There can be no easement over another easement for the 646)
reason that an easement may be constituted only on a
corporeal immovable property. An easement, although it is b. Non-apparent – They show no external indication
real right over an immovable, is not a corporeal right. of their existence. (NCC, Art. 615)
(1995 BAR)
4. As to the right given
CHARACTERISTICS OF EASEMENT (NICE LIAR) a. Right to partially use the servient estate;
b. Right to get specific materials or objects from the
1. A right limited by the Needs of the dominant owner servient estate;
or estate, without possession; c. Right to participate in ownership; and

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d. Right to impede or prevent the neighboring declares the existence of an easement created by the
estate from performing a specific act of parties. (La Vista Association, Inc. v. CA, G.R. No. 95252,
ownership. (Paras, 2008) September 5, 1997)
5. As to source
a. Legal – Those created by law for public use or NOTE: If the owner of the servient estate refuses to
private interests; execute the deed of recognition, the court may, in its
b. Voluntary - constituted by will or agreement of judgment, declare the existence of the easement.
the parties or by testator; and
NOTE: Lie any other contract, a voluntary 5. By Apparent sign established by the owner of the two
easement (of right-of-way) could be extinguished adjoining estates
only by mutual agreement or by renunciation of the
owner of the dominant estate. (La Vista Association v. XPN: unless at the time the ownership of the two
CA, G.R. No. 95252, September 5, 1997) estates is divided:
a. There are contrary stipulations; or
c. Mixed – Created partly by agreement and partly b. The sign is removed before the execution of
by law. the deed. (NCC, Art. 624)

6. As to the duty of the servient owner: RIGHTS AND OBLIGATION OF THE OWNERS OF THE
a. Positive – Imposes upon the owner of the DOMINANT AND SERVIENT
servient estate the obligation of allowing
something to be done or doing it himself; and The owner of the dominant estate may make, at his own
expense, on the servient state any works necessary for the
e.g. Right of way – imposes the duty to allow the use and preservation of the servitude, but without altering
use of said way. it or rendering it more burdensome.
b. Negative – Prohibits the owner of the servient
estate from doing something which he could Rights of the dominant owner (MARE)
lawfully do if the easement did not exist. e.g.
Easement of light and view – where the owner is
1. Make on the servient estate all works necessary for
prohibited from obstructing the passage of light.
the use and preservation of the servitude (NCC, Art.

627);
MODES OF ACQUIRING EASEMENT
2. Ask for mandatory injunction to prevent impairment

of his right (Resolme v. Lazo, G.R. No. L-8654, March
1. By Title – the following easements may be acquired
30, 1914);
only by title:
3. Renounce the easement if he desires to be exempt
a. Continuous non-apparent easements; from contributing necessary expenses (NCC, Art. 628);
b. Discontinuous apparent easements; and and
c. Discontinuous non-apparent easements. (NCC, 4. Exercise all rights necessary for the use of the
Art. 622) (2005 BAR) easement. (NCC, Art. 625)

NOTE: Title means: It does not necessarily mean Obligations of the dominant owner (CANECO)
document. It means a juridical act or law sufficient to
create the encumbrance. 1. He cannot Exercise the easement in any other manner
than that previously established (NCC, Art. 626);
E.g. law, donation, testamentary succession, contract. 2. He cannot Alter the easement or render it more
burdensome [NCC, Art. 627(1)];
a. Intestate succession does not create an easement, for no 3. He shall Notify the servient owner of works necessary
act is involved. Hence, instead of creating an easement, it for the use and preservation of the servitude [NCC, Art.
transmits merely an easement already existing. 627(2)];
4. He must Choose the most convenient time and manner
b. Prescription is a mode of acquisition, and is generally of making the necessary works as to cause the least
and ordinarily a title, but is not considered as such under inconvenience to the servient owner;
Art. 620 which expressly makes it DISTINCT from title. 5. If there are several dominant estates he must
Contribute to the necessary expenses in proportion to
2. By Prescription of 10 years (2009 BAR) the benefits derived from the works [NCC, Art. 628(1)];
and
NOTE: Prescription runs irrespective of good faith or bad 6. He can may make, at his Own expense, on the servient
faith of the possessor and whether or not he has just title. estate, any works necessary for the use of servitude,
The only requirement is adverse possession. Only provided it will not alter or make it more burdensome.
continuous and apparent easements can be acquired by [NCC, Art.627(1)]
prescription. (NCC, Art. 620)
Servient owner
3. By deed of Recognition
4. By Final judgment The owner of the immovable whose property is subject to
easement for the benefit of the dominant owner.
NO JUDICIAL EASEMENTS. Resultantly, when the court
says that an easement exists, it is not creating one. For, Rights of the servient owner (RMC)
even an injunction cannot be used to create one as there is
no such thing as a judicial easement. The court merely 1. Retain the ownership of the portion of the estate on

2021 GOLDEN NOTES 2021 & 2022
CIVIL Law
which easement is imposed; used; and, with respect to continuous easements from
2. Make use of the easement unless there is an agreement the day on which an act contrary to the same took
to the contrary [NCC, Art. 628(2)]; and place;
3. Change the place or manner of the use of the easement, 3. When either or both of the estates fall into such
provided it be equally convenient. [NCC, Art. 629(2)] condition that the easement Cannot be used; but it
shall revive if the subsequent condition of the estates
Obligations or limitations imposed on the servient or either of them should again permit its use, unless
owner (IC) when the use becomes possible, sufficient time for
prescription has elapsed, in accordance with the
1. He cannot Impair the use of the easement. provisions of the preceding number;
4. By the Expiration of the term or the fulfillment of the
XPN: (1) When the easement has become very condition, if the easement is temporary or conditional;
inconvenient to the said servient owner; and (2) If it 5. By the Renunciation of the owner of the dominant
prevents him from making any important works, estate; and
repairs, or improvements thereon. 6. By the Redemption agreed upon between the owners
of the dominant and servient estates. (NCC, Art. 631)
2. He must Contribute to the necessary expenses in case
he uses the easement, unless otherwise agreed upon. Q: Mr. Bong owns several properties in Pasig City. He
[NCC, Art. 628(2)] decided to build a condominium named Flores de
Manila in one of his lots. To fund the project, he
EASEMENT OF RIGHT OF WAY obtained a loan from the National Bank (NB) secured
(1996, 2005, 2010 BAR) by a real estate mortgage over the adjoining property
which he also owned.
Easement of right of way is the right granted to a person
or class of persons to pass over the land of another by During construction, he built three pumps on the
using a particular pathway therein, to reach the former’s mortgaged property to supply water to the
estates, which have no adequate outlet to a public condominium. After one year, the project was
completed and the condominium was turned over to
highway subject, however to payment of indemnity to the
the buyers. However, Mr. Bong failed to pay his loan
owner of the land burdened by the right. (Pineda, 2009)
obligation to NB. Thus, NB foreclosed the mortgaged
property where the pumps were installed. During the
Requisites for easement on right of way (POON-D)
sale on public auction of the mortgaged property, Mr.
(1996, 2005, 2010 BAR)
Simon won in the bidding. When Mr. Simon attempted
to take possession of the property, the condominium
1. The easement must be established at the point least
owners, who in the meantime constituted themselves
Prejudicial to the servient estate (NCC, Art. 649);
into Flores de Manila Inc. (FMI), claimed that they
2. Claimant must be an Owner of enclosed
have earlier filed a case for the declaration of the
3. There must be no adequate Outlet to a public highway
existence of an easement before the Regional Trial
[NCC, Art. 649, (1)];
Court (RTC) of Pasig City and prayed that the
4. The right of way must be absolutely Necessary not
easement be annotated in the title of the property
mere convenience;
foreclosed by NB. FMI further claimed that when Mr.
5. The isolation must not be Due to the claimant’s own
Bong installed the pumps in his adjoining property, a
act (NCC, Art. 649); and
voluntary easement was constituted in favor of FMI.
6. There must be payment of proper Indemnity.
Will the action prosper? (2014 BAR)
Adequate outlet
A: NO, the action will not prosper. The essence of a
mortgage is that it immediately subjects the property
The convenience of the dominant estate has never been
upon which it is imposed, and whoever the possessor may
the gauge for the grant of compulsory right of way. To be
be, to the fulfillment of the obligation for whose security it
sure, the true standard for the grant of the legal right is
was constituted. There was no voluntary easement in this
"adequacy." Hence, when there is already an existing
case because at the time the water pumps were
adequate outlet from the dominant estate to a public
constructed, the subject lot where the water pumps were
highway, as in this case, even when the said outlet, for one
constructed and the condominium belong to the same
reason or another, be inconvenient, the need to open up
person. No one can have an easement over his own
another servitude is entirely unjustified. (Dichoso v.
property. Even of the assumption that an easement was
Marcos, G.R. No. 180282, April 11, 2011; Alicia B. Reyes v.
created in favor of FMI that alone will not defeat the right
Spouses Francisco S. Valentin and Anatalia Ramos, G.R. No.
of the mortgagee to enforce the security if the debtor
194488, February 11, 2015, as penned by J. Leonen)
defaults. (Bogo- Medellin v. CA, G.R. No. 124699, July 31,
2003)
MODES OF EXTINGUISHMENT OF EASEMENT
NUISANCE
Easements are extinguished (MEN CRR) (2001, 2010
BAR)
A nuisance is any act, omission, establishment, business,
1. By Merger in the same person of the ownership of the condition of property, or anything else which:
dominant and servient estates;
2. By Non-user for 10 years; with respect to 1. Injures or endangers the health or safety of others;
discontinuous easements, this period shall be 2. Annoys or offends the senses;
computed from the day on which they ceased to be 3. Shocks, defies or disregards decency or morality;

2021 GOLDEN NOTES 2021 & 2022
CIVIL Law
4. Obstructs or interferes with the free passage of any a breach of the peace or doing unnecessary injury.
public highway or street, or any body of water; or
5. Hinders or impairs the use of property. (NCC, Art. 694) However, it is indispensable that the procedure for extra-
(2005, 2006 BAR) judicial abatement of a public nuisance by a private
person be followed. (NCC, Art. 706)
Nuisance per se vs. Nuisance per accidens
Every successive owner or possessor of property who
PER SE PER ACCIDENS fails or refuses to abate a nuisance in that property
As a matter of law. As a matter of fact. started by a former owner or possessor is liable therefor
in the same manner as the one who created it. (NCC, Art.
696)
Need only be Depends upon its location and

proved in any surroundings, the manner of its
Extra-judicial abatement (2002 BAR)
locality. conduct or other circumstances.

May be May be abated only with
Requisites of extra-judicial abatement (BAR VID)
summarily reasonable notice to the person
1. The nuisance must be especially Injurious to the
abated under alleged to be maintaining or
person affected;
the law of doing such nuisance.
2. No Breach of peace or unnecessary injury must be
necessity.
committed;

3. Demand must first be made upon the owner or
NOTE: The abatement of a nuisance without judicial
possessor of the property to abate the nuisance;
proceedings is possible only if it is a nuisance per se. A gas
4. Demand is Rejected;
station is not a nuisance per se or one affecting the
5. Abatement is Approved by the district health officer
immediate safety of persons or property. Hence, it cannot
and executed with the assistance of the local police;
be closed down or transferred summarily to another
and
location. (Parayno v. Jovellanos, G.R. No. 148408, July 14, 6. Value of the destruction does not exceed P3,000
2006)
NOTE: Abatement is the exercise of police power which
ATTRACTIVE NUISANCE
includes the right to destroy property regarded as a public

health or safety, and there is no obligation to give
One who maintains on his premises dangerous
compensation.
instrumentalities or appliances of a character likely to

attract children in play, and who fails to exercise ordinary
An extra-judicial abatement can only be applied for if what
care to prevent children from playing therewith or
is abated is a nuisance per se and not nuisance per accidens.
resorting thereto, is liable to a child of tender years who is
injured thereby, even if the child is technically a trespasser
Liability for damages in case of extrajudicial abatement
in the premises. (Jarco Marketing Corp. v. CA, G.R. No.
of nuisance
129792, December 21, 1999)

The private person or a public official extrajudicially
Basis for liability abating a nuisance is liable for damages to the owner other
thing abated, if he causes unnecessary injury or if an alleged
The attractiveness is an invitation to children. nuisance is later declared by courts to be not a real
Safeguards to prevent danger must therefore be set
nuisance. (NCC, Art. 707)
up.

NOTE: The right to question the existence of a nuisance
PUBLIC NUISANCE AND PRIVATE NUISANCE does not prescribe; it is imprescriptible.

Remedies against public nuisances
Modes of acquiring Ownership

1. Prosecution under the RPC or any local ordinance; 1. Occupation
2. Civil action; or
3. Abatement, summarily and without judicial Occupation is the acquisition of ownership by seizing
proceeding. (NCC, Art. 699) corporeal thing that have no owner, made with the
intention of acquiring them, and accomplished
NOTE: A private person may file for a civil action against a according to legal rules. (Paras, 2008) (1997, 2007
public nuisance if the latter is injurious to him. Thus, BAR)
insofar as he is concerned, the nuisance becomes a private
nuisance which affects him in a special way, different 2. Donation
from that sustained by the public in general.
Donation is an act of pure liberality whereby a person
Remedies against private nuisances disposes gratuitously of a thing or right in favor of
another who accepts it. (NCC, Art. 725)
1. Civil action; or
2. Abatement, summarily and without judicial 3. Prescription
proceedings. (NCC, Art. 705)
It is the means of acquiring ownership and other real
NOTE: Any person injured by a private nuisance may rights or losing rights or action to enforce such rights
abate it by removing, or if necessary, by destroying the through lapse of time in the manner and under the
thing which constitutes the nuisance, without committing conditions laid down by law.

2021 GOLDEN NOTES 2021 & 2022
CIVIL Law
NOTE: The applicability of prescription is a question of A: The following are the characteristics of a legal
fact. It is evidentiary and has to be established by clear obligation:
and convincing evidence.
1. Does not need the consent of the obligor;
2. Must be expressly set forth in the law creating it and
OBLIGATIONS not merely presumed; and
3. In order that the law may be a source of obligation, it
should be the creator of the obligation itself. (NCC,
An obligation is a juridical necessity to give, to do, or not to Art. 1158)
do. (Art. 1156)
Obligation Ex Contractu
ELEMENTS OF AN OBLIGATION
Q: What are the requisites of a contractual obligation?

1. Juridical tie or vinculum juris or efficient cause; A: The following are the requisites of a contractual
2. Active subject [creditor (CR) or obligee]; obligation:
3. Passive subject [debtor (DR) or obligor]; and 1. It must contain all the essential requisites of a contract
4. Object or prestation. (NCC, Art. 1318); and

2. It must not be contrary to law, morals, good
Q: Distinguish briefly but clearly between: Civil customs, public order, and public policy. (NCC, Art.
obligation and natural obligation. (2015, 2004, 1989 1306)
BAR)
Q: What rules govern the obligations arising from
A: Civil obligation is a juridical necessity to give, to do and
contracts?
not to do. It gives the creditor the legal right to compel by
an action in court the performance of such obligation. A: GR: These obligations arising from contracts shall be
governed primarily by the stipulations, clauses, terms and
A natural obligation is based on equity and natural law. conditions of the parties’ agreements.
There is no legal right to compel performance thereof
but if the debtor voluntarily pays it, he cannot recover
XPN: Contracts with prestations that are unconscionable
what was paid.
or unreasonable. (Pineda, 2009)

NOTE: Civil obligation can be enforced in court Q: What is the principle of autonomy of will?
while natural obligation cannot.
A: It is that principle which states that obligations arising
SOURCES OF OBLIGATIONS from contracts have the force of law between the
contracting parties and should be complied with in good
Q: What are the sources of obligations? faith. (NCC, Art. 1159)

A: The sources of obligations are the following: Q: Can damages suffered by a party during the period
(1) Law; of negotiations can be recovered, if the contract is not
(2) Contracts; finally perfected?
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and A: YES. This is a case of a “pre-contractual obligation”. The
(5) Quasi-delicts. (Art. 1157, NCC) offer, however, must be clear and definite, thus leading the
offeree in good faith to incur expenses in the expectation of
Q: What are “obligations without an agreement”? Give entering into the contract; and the withdrawal of the offer
five examples of situations giving rise to this type of must be without any legitimate cause.
obligation. (2007 BAR)
Obligation Ex Quasi - Contractu
A: “Obligations without an agreement” are obligations that
do not arise from contract such as those arising from: Q: What is a quasi-contract?
(1) delicts;
(2) quasi-delicts; A: A quasi-contract is a juridical relation which arises
(3) solution indebiti; from certain lawful, voluntary, and unilateral acts, to the
(4) negotiorum gestio; and end that no one may be unjustly enriched or benefited at
(5) all other obligations arising from law. the expense of another. (NCC, Art. 2142)

Obligation Ex Lege The act giving rise to quasi-contract must be lawful,
thereby distinguishing it from crime, in which the act or
Obligations derived from law are NOT presumed. omission is unlawful; it must be voluntary, thus
Only those expressly determined in the Code or in special differentiating it from quasi delict, which is based on fault
laws are demandable and shall be regulated by the or negligence or mere lack of foresight; and it must be
precepts of the law which establishes them and as to what unilateral, to distinguish it from contract in which there
has not been foreseen by the provisions of Book IV of NCC. are two parties who come to an agreement.
(Art. 1158)
Q: What are the characteristics of a quasi-contract?
Q: What are the characteristics of a legal obligation? (LUV)


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CIVIL Law
A: A: A quasi-delict is a separate legal institution under the
1. It must be lawful Civil Code entirely apart and independent from a delict or
2. It must be voluntary crime. Whoever by act or omission causes damage to
3. It must be unilateral. (Pineda, 2000) another, there being fault or negligence, is obliged to pay
for the damage done. Such fault or negligence, if there is
Q: What does the concept of presumptive consent no pre-existing contractual relation is called a quasi-
mean? delict.

A: It means that since a quasi-contract is a unilateral Q: What are the elements of a quasi-delict? (DANC)
contract created by the sole act(s) of the gestor, there is no
express consent given by the other party. The consent A:
needed in a contract is provided by law through 1. Negligent or wrongful act or omission;
presumption. (Pineda, 2000) 2. Damage or injury caused to another;
3. Causal relation between such negligence or fault
Obligations Ex Delicto and damage; and
4. No pre-existing contractual relationship between
Q: What is a delict? the parties. (NCC, Art. 2176)

A: A delict is an act or omission punishable under the law. Breaches of obligations

Art. 10 of the RPC provides that “every person criminally Q: Great Harvest hired Tan to transport 430 bags of
liable for a felony is also civilly liable,” except for crimes of soya beans from Tacoma to Selecta Feeds. At Selecta
treason, rebellion, espionage, contempt, and others Feeds, however, the shipment was rejected. The truck
wherein no civil liability arises on the part of the offender and its shipment never reached Great Harvest's
either because there are no damages to be compensated warehouse. Great Harvest asked Tan about the missing
or there is no private person injured by the crime. (Reyes, delivery but to no avail. Is Anita Tan liable for the lost
2008) bags of soya beans?

Q: What is the extent of civil liability arising from A: YES, Annie Tan should be liable. Common carriers are
crimes? (IRR) mandated to internalize or shoulder the costs under the
contracts of carriage. This is so because a contract of
A: carriage is structured so that passengers or shippers
1. Restitution surrender total control over their persons or goods to
2. Reparation for damage caused common carriers, fully trusting that the latter will safely
3. Indemnity for consequential damages (Art. 104, RPC) and timely deliver them to their destination. Here, the
petitioner is a common carrier obligated to exercise
Q: What amount of proof or evidence is required in extraordinary diligence over the goods entrusted to her.
order to recover on civil liability arising from a Her responsibility began from the time she received the
crime? soya beans from the respondent's broker and would only
cease after she has delivered them to the consignee or any
A: IT DEPENDS. If the claim is made in a criminal case, person with the right to receive them. (Annie Tan v. Great
then the proof of the facts giving rise to the liability must Harvest Enterprises, Inc., G.R. No. 220400, March 20, 2019, as
be beyond reasonable doubt; this degree of proof is penned By J. Leonen)
necessary for the conviction of the accused, and unless
there is a judgment of conviction, there can be no Q: Eliza is a condo unit owner and delivered a check to
pronouncement of civil liability in the criminal case. But if Sison, who will be paying in behalf of Eliza, however,
the claim for indemnity is made in a civil case, a mere Sison did not receive the package. Later, it was found
preponderance of evidence is necessary. out that the check was delivered to Sison’s neighbor,
but there was no signed receipt. Hence, Eliza sent a
Q: What is the effect of the acquittal of the accused in demand letter to FedEx, the delivery courier, for
a criminal case to his civil liability arising from said payment of damages since the check was supposed to
crime of which he is charged? be used to pay the balance for the condo unit, which
was foreclosed since it was unpaid. FedEx refused, and
A: When the accused in a criminal prosecution is acquitted thus Eliza filed a complaint for damages with the
on the Ground that his guilt has not been proven beyond Regional Trial Court. Is FedEx liable?
reasonable doubt, a civil action for damages for the same
act or omission may be instituted. Such action requires A: YES. The Civil Code mandates common carriers to
only preponderance of evidence. (NCC, Art. 29) observe extraordinary diligence in caring for the goods
they are transporting. Common carriers must ascertain the
But where the judgment of acquittal contained a identity of the recipient. Failing to deliver shipment to the
declaration that no negligence can be attributed to the designated recipient amounts to a failure to deliver. The
accused and that the fact from which the civil action might shipment shall then be considered lost, and liability for
arise did not exist, such acquittal in the criminal action this loss ensues. FedEx is unable to prove that it exercised
carried with it extinction of civil responsibility arising extraordinary diligence in ensuring delivery of the package
therefrom. (Castillo v. CA, 176 SCRA 591) to its designated consignee. It claimed to have made a
delivery but it even admits that it was not to the
Obligations Ex Quasi- Delicto designated consignee. (Federal Express Corporation v.
Luwalhati R. Antonino and Eliza Bettina Ricasa Antonino,
Q: What is a quasi-delict? G.R. No. 199455, June 27, 2018, as penned by J. Leonen)

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NATURE AND EFFECTS OF OBLIGATIONS has rendered it beyond his power to perform. [Art.
1169 (2), NCC]
Q: In obligations to give, what are the different rights
which are available to the creditor? Q: What are the effects of mora solvendi?

A: We must distinguish between the rights which are A: The following are its effects:
available to the creditor when the obligation is 1. Debtor may be liable for damages (NCC, Art. 1155) or
determinate and those which are available to him when interests;
the obligation is indeterminate or generic. 2. When the obligation has for its object a determinate
If the obligation is determinate in the sense that the thing, the debtor may bear the risk of loss of the thing
object thereof is particularly designated or physically even if the loss is due to fortuitous event; and
segregated from all others of the same class, the rights of 3. Rescission or resolution.
the creditor are:
Mora Accipiendi
1. To compel specific performance (NCC, Art. 1165, par.
1) Q: What are the requisites of mora accipiendi? (CPR)
2. To recover damages in case of breach of the obligation
(NCC, Art. 1170) A: The following are its requisites:
1. Offer of performance by a capacitated debtor; 2. Offer
If the obligation is indeterminate or generic, the rights must be to comply with the prestation as it should be
of the creditor are: performed; and
2. Refusal of the creditor without just cause. (Pantaleon
1. To ask for performance of the obligation (NCC, Art. v. American Express International, Inc., G.R. No. 174269,
1246) May 8, 2009)
2. To ask that the obligation be complied with at the
expense of the debtor (NCC, Art. 1165, par. 2) Q: What are the effects of mora accipiendi?
3. To recover damages in case of breach of the obligation
(NCC, Art. 1170) A: The following are its effects:
1. Responsibility of debtor is limited to fraud and
1. Delay (Mora) gross negligence;
2. Debtor is exempted from risk of loss of thing;
Q: What are the requisites of delay (mora)? creditor bears risk of loss;
3. Expenses by debtor for preservation of thing after
A: delay is chargeable to creditor;
1. Obligation must be due, demandable, and liquidated; 4. If the obligation bears interest, debtor does not have
2. Debtor fails to perform his positive obligation on to pay it from time of delay;
the date agreed upon; 5. Creditor liable for damages;
3. A judicial or extra-judicial demand made by 6. Debtor may relieve himself of obligation by
the creditor upon the debtor to fulfill, perform or consigning the thing.
comply with his obligation; and
4. Failure of the debtor to comply with such demand Compensatio Morae

2. Mora Solvendi Q: What are the rules on Compensatio Morae?

Q: What are the requisites of mora solvendi? (PDF-MJ) A: The following are the rules on compensatio morae:

A: The following are its requisites: UNILATERAL RECIPROCAL

1. Obligation pertains to the debtor; OBLIGATIONS OBLIGATIONS
2. Obligation is determinate, due and demandable, Default or delay Delay by the other
and liquidated; begins from party begins from the
3. Obligation has not been performed on its maturity extrajudicial moment one of the
date or judicial parties fulfills his
4. There is judicial or extrajudicial demand by the demand – mere obligation.
Time of
creditor; ; and expiration of the
Delay
5. Failure of the debtor to comply with such period fixed is
demand. (Pineda, 2009) not enough
in order that
Q: When shall demand by the creditor be not debtor
necessary in order that delay may exist? may incur delay.
a. The When different dates
A: In the following instances: obligation or for the performance of
1. When the obligation or the law expressly so declares; the law obligation is fixed by
or expressly so the parties.
2. When from the nature and the circumstances of dictates;
XPNs:
the obligation it appears that the designation of time b. Time is of
when the thing is to be delivered or the service is to the essence;
be rendered was a controlling motive for the c. Demand
establishment of the contract; or would be
3. When demand would be useless, as when the obligor useless, as

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CIVIL Law
UNILATERAL RECIPROCAL Remedy Annulment Contract remains

OBLIGATIONS OBLIGATIONS with damages. valid. Remedy is
debtor has claim for damages
rendered it only.
beyond his
power to
perform; or Q: Wenifredo Salvaña was driving the bus owned
d. Debtor has by Bachelor Express, Inc./Ceres Liner, Inc. along the
acknowledg national highway when he overtook a PUJ jeepney
ed that he is while negotiating a blind curve in a descending road
in default. causing him to intrude into the opposite lane and
bump the 10- wheeler Hino dump truck of petitioner
Fraud Cresencio Baño running uphill from the opposite
direction. The collision resulted in damage to both
Fraud is the deliberate and intentional evasion of the vehicles, the subsequent death of the truck driver,
faithful performance of the obligation. Amancio Asumbrado, and serious physical injuries to
bus driver Salvaña.
Any waiver of an action for future fraud is void. (NCC,
1171) A complaint for quasi-delict was filed against Salvaña
for negligently driving the bus causing it to collide
NOTE: If fraud was already committed by the debtor, the with the dump truck. Respondents denied liability,
creditor may forgive him by disregarding claiming that prior to the collision the bus was
such fraud. (1966 BAR) running out of control because of a problem in the
steering wheel system which could not have been
Q: What are the kinds of fraud under the Civil Code? avoided despite their maintenance efforts. Instead,
they claimed that Asumbrado had the last
A: The following are the kinds of fraud under the Civil clear chance to avoid the collision had he not driven
Code: the dump truck at a very fast speed. Was Salvaña
grossly negligent?
FRAUD IN THE FRAUD IN THE
BASIS A: YES. When bus driver Salvaña overtook the jeepney in
PERFORMANCE PERFECTION
It occurs after It occurs before front of him, he was rounding a blind curve along a
the valid execution or simultaneous descending road. Considering the road condition and that
of the contract. It with the creation there was only one lane on each side of the center line for
Time of the movement of traffic in opposite directions, it would
is employed in or perfection of
occurrence have been more prudent for him to confine his bus to its
the performance of the obligation;
a pre- proper place. Having thus encroached on the opposite
existing obligation; lane in the process of overtaking the jeepney, without
Consent is free and Consent is vitiated ascertaining that it was clear of oncoming traffic that
not vitiated; by serious deception resulted in the collision with the approaching dump truck
Consent driven by deceased Asumbrado, Salvaña was
or
misrepresentation; grossly negligent in driving his bus. He was remiss in his
It is not a Ground for It is a Ground for duty to determine that the road was clear and not to
Effect annulment of the annulment of the proceed if he could not do so in safety. (Cresencio Baño v.
Contract; contract; Bachelor Express, GR No. 191703, March 12, 2012)
Action for damages Action for
Remedy only. annulment with Q: What are the remedies of the defrauded party?
damages.
A: The creditor may avail of the following remedies:

1. Specific performance (NCC, Art. 1233); or
Q: What are the different classes of fraud in the
perfection? 2. Resolution of the contract (NCC, Art. 1191); and
3. Damages, in either case.

A: They are the following:
Q: What are the subsidiary remedies?

Basis Dolo Causante Dolo Incidente 1. Accion subrogatoria - case against the debtor’s debtor
2. Accion Pauliana - creditor will impugn the acts of
Nature It is the efficient It is not the debtor that is in fraud of creditors
cause to the giving of efficient cause for the 3. Accion directa - direct action against third persons
consent to the giving of consent to 4. On generic obligation- the obligation is not
contract; the extinguished
contract;
Fortuitous Event (2002,2008 BAR)
Effect It renders the contract It does not affect
voidable; the validity of the An occurrence or happening which could not be foreseen,
contract; or even if foreseen, is inevitable. (NCC, Art. 1174)
Requisites: (CODE)

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CIVIL Law
1. Cause of breach is independent of the will of the property, repulsive to the common sense of man.
debtor; (Spouses Castro v. Tan, G.R. No. 168940, 24 November
2. The Event is unforeseeable or unavoidable; 2009)
3. Occurrence renders it absolutely impossible for the
debtor to fulfill his obligation in a normal manner - KINDS OF OBLIGATIONS
impossibility must be absolute not partial, otherwise
not force majeure; and
PURE AND CONDITIONAL OBLIGATIONS
4. Debtor is free from any participation in the
aggravation of the injury to the creditor.
Q: What is a pure obligation?
NOTE: The fortuitous event must not only be the
proximate cause, but it must also be the only and sole A: An obligation whose performance does not depend
cause. Contributory negligence of the debtor renders him upon a future or uncertain event, or upon a past event or
liable despite the fortuitous event. (Pineda, 2000) If the upon a past event unknown to the parties, demandable at
negligence was the proximate cause, the obligation is not once. (NCC, Art. 1179)
extinguished. It is converted into a monetary obligation for
damages. Q: What is a conditional obligation?

Q: Is there a liability for loss due to fortuitous event? A: An obligation subject to a condition and the effectivity
of which is subordinated to the fulfillment or non-
A: GR: There is no liability for loss in case of fortuitous fulfillment of a future and uncertain event, or upon a past
event. event unknown to the parties. (Pineda, 2009)

XPNs: (LaNS-PC-BaG) Q: What is a potestative condition? (1997, 2000,
1. Law 2003 BAR)
2. Nature of the obligation requires the assumption of
risk A: A condition which depends upon the will of one of
3. Stipulation by parties the contracting parties. (NCC, Art. 1182)
4. The debtor is guilty of dolo, malice or bad faith,
has promised the same thing to two or more persons Q: What are the effects of fulfillment of the
who does not have the same interest (NCC, Art. 1165) suspensive condition? (1999 BAR)
5. The debtor contributed to the loss (Tan v. Inchausti &
Co., G.R. No. L-6472, March 7, 1912) A: The following are its effects in:
6. The possessor is in bad faith (NCC, Art. 552)
7. The obligor is guilty of fraud, negligence or delay or if 1. Real obligations
he contravened the tenor of the obligation (Juan
Nakpil v. United Construction Co., Inc. v. CA, G.R. No. L- GR: Retroacts to the day of the constitution of
47851, April 15, 1988) the obligation.

Q: What are the effects of fortuitous events? XPNs: There is no retroactive effect with respect to
the fruits and interest:
1. On determinate obligation – The obligation is a. In reciprocal obligations, the fruits and
extinguished interests shall be deemed to have been mutually
2. On generic obligation – The obligation is not compensated;
extinguished b. In unilateral obligations, the debtor
appropriates the fruits and interest received
Liability to Pay Interest before the fulfillment of the condition unless
from the nature and circumstances of the
Q: What are the requisites so a creditor may compel obligation it should be inferred that the intention
the payment of interest in an obligation arising of the person constituting the same was
from contracts? different. (NCC, Art. 1187)

A: 2. Personal obligations - the court determines
1. There is an agreement that the interest shall be earned the retroactive effect of the condition fulfilled. (NCC,
2. The agreement that interest shall be due shall Art. 1187)
be expressly stipulated in writing; and
3. The rate of interest must not be usurious or excessive Q: What are the effects of fulfillment of resolutory
or unconscionable. condition?

Q: What are the kinds of Interest? A: The following are its effects in:

A: 1. Real obligations:
1. Monetary Interest- compensation for the use of money a. The parties shall return to each other what
2. Compensatory Interest- interest as damages they have received (mutual restitution).
b. Obligation is extinguished.
The imposition of an unconscionable rate of interest c. In case of loss, deterioration or improvement of
on a money debt, even if knowingly and voluntarily the thing, Art. 1189, with respect to the debtor,
assumed, is immoral and unjust. It is tantamount to a shall be applied to the party who is bound to
repugnant spoliation and an iniquitous deprivation of return. (NCC, Art. 1190)

2021 GOLDEN NOTES 2021 & 2022
CIVIL Law
2. Personal obligations – the courts shall determine, in
obligation obligation but (suspensive) or
each case, the retroactive effect of the condition that
only in its the cessation of
has been complied with (NCC, Art. 1187; Art. 1190).
demandability. one
already existing
OBLIGATION WITH A PERIOD OR A TERM (resolutory).
Obligations with a Period If fulfillment is Valid. But the Annulled

dependent upon court is
Q: What are the rules in an obligation with a period or the sole will of empowered to fix
a term? the debtor the duration of
the period.
A: GR: Whenever in an obligation a period is designated, it
is presumed to have been established for the benefit of Retroactivity No retroactivity. The moment the
both the creditor and the debtor. condition is
fulfilled, the
XPN: When it appears from the tenor of the period or effects will
other circumstances that it was established for the benefit retroact on the
of one of the parties. (NCC, Art. 1196) day of the
constitution of
What are the effects of the term/period? the obligation.

1. When it is for the benefit of the creditor – Creditor may
Obligation with a period or a term
demand the performance of the obligation at anytime
but the debtor cannot compel him to accept payment
Obligations for whose fulfillment a day certain has been
before the period expires (e.g. “on demand”)
fixed, shall be demandable only when that day comes.
2. When it is for the benefit of the debtor – Debtor may
(NCC, Art. 1193)
oppose any premature demand on the part of the
creditor for performance of the obligation, or if he so
Instances where the court may fix the period (1991,
desires, he may renounce the benefit of the period by
1997, 2003 Bar)
performing his obligation in advance (Manresa).

1. If the obligation does not fix a period, but from its
Q: In what instances may the court fix the period for
nature and circumstances it can be inferred that a
the parties? (1991, 1997, 2003 BAR)
period was intended by the parties;

2. If the duration of the period depends upon the will of
A: In the following instances:
the debtor (1997, 2003 Bar);
1. If the obligation does not fix a period, but from its
3. In case of reciprocal obligations, when there is a just
nature and circumstances it can be inferred that a
cause for fixing the period; or
period was intended by the parties.
4. If the debtor binds himself when his means permit him
2. If the duration of the period depends upon the will of
to do so.
the debtor. (1997, 2003 BAR)
3. In case of reciprocal obligations, when there is a just
NOTE: Once fixed by the courts, the period cannot be
cause for fixing the period.
changed by the parties. (NCC, Art. 1197)
4. If the debtor binds himself when his means permit
him to do so.
ALTERNATIVE OR FACULTATIVE
NOTE: Once fixed by the courts, the period cannot be
changed by the parties. (NCC, Art. 1197) Facultative obligations v. Alternative obligations

Period v. Condition BASIS FACULTATIVE ALTERNATIVE
OBLIGATIONS OBLIGATIONS
BASIS PERIOD CONDITION
Number of Only one object is Several objects are
As to time Refers to the May refer to prestation due. due.
future. past
event unknown
to the parties. Manner of May be complied May be complied
compliance with by with by fulfilling any
As to fulfillment It will happen at May or may not substitution of one of those alternately
an exact date or at happen. that is due. due.
an indefinite time
but is definite to
arrive. Right to Choice pertains GR: Choice pertain to
choose only to debtor. debtor.
Characteristic Futurity and Futurity and XPN: Expressly
certainty. uncertainty. granted to creditor
or third person.
The effect of its No effect upon the May give rise to
happening to the existence of the an obligation

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CIVIL Law
Effect of Fortuitous loss Fortuitous loss of all All are Debtor Creditor shall have a
fortuitous extinguishes the prestations will lost released Debtor is right to be indemnified
loss obligation. extinguish the released from the for damages based on
obligation. obligation. the value of the last
thing which
disappeared or last
Effect of Culpable loss Culpable loss of any service which became
culpable obliges the debtor object due will give impossible.
loss to deliver a rise to liability to the
substitute debtor.
prestation without Some but Debtor shall deliver Debtor shall deliver
liability to the not all that which he shall that which he shall
debtor. are lost choose from among choose from among
the remainder. the remainder without
Liability of When substitution The creditor shall damages.
the debtor has been made have the right of
and indemnity for Only one Deliver that which remains.
communicated to damages when, remains
the creditor, the through the fault of
Choice Belongs to Creditor
obligor is liable for the debtor only, all
the loss of the things which are
thing on account alternatively the All are Debtor is released Creditor may claim the
of delay, object of the lost from the obligation price or value of any of
negligence, or obligation have been them with indemnity
fraud. lost, or the for damages
compliance of the

obligation has JOINT AND SOLIDARY OBLIGATIONS

become impossible.
Void If the principal If one prestation is Consequences of a joint obligation

prestation obligation is void, void, the others that
the creditor are free from any The following are its consequences:
cannot compel vices of consent 1. Each debtor is liable only for a proportionate part of
delivery of the preserve the validity the entire debt
substitute. of the obligation. 2. Each creditor, if there are several, is entitled only to
a proportionate part of the credit
Impossibility If there is If some prestations 3. The demand made by one creditor upon one
of impossibility to are impossible to debtor, produces effects of default only as between
prestation perform or to perform or to deliver them
deliver the except for one - this 4. Interruption of prescription caused by the demand
principal thing or one must be made by one creditor upon one debtor, will NOT
prestation, the delivered. benefit the co creditors or the co-debtors
obligation is 5. Insolvency of a debtor will not increase the liability of
extinguished, even If all prestations are his co-debtor
if the substitute impossible to 6. Vices of each obligation emanating from a
obligation is valid. perform, the particular debtor or creditor will not affect the others
obligation is 7. In indivisible or joint obligation, the defense of res
extinguished. judicata of one does not extend to the others.

Loss of Loss of the When the choice is Rules in solidary obligations (1998, 2003 BAR)
substitute substitute before given to the creditor,
the substitution is the loss of the The rules are the following:
made through the alternative through 1. Anyone of the solidary creditors may collect or
fault of the debtor the fault of the demand payment of the whole obligation; there is
doesn’t make him debtor renders him mutual agency among solidary debtors. (NCC, Arts.
liable. liable for damages. 1214, 1215)
2. Any of the solidary debtor may be required to pay
the whole obligation; there is mutual guaranty
Effects of loss of objects in alternative obligations among solidary debtors. (NCC, Arts. 1216, 1217, 1222)
3. Each one of solidary creditors may do whatever

DUE TO DUE TO DEBTOR’S maybe useful to the others, but not anything
FORTUITOUS FAULT prejudicial to them (NCC, Art. 1212); however, any
EVENT novation, compensation, confusion or remission of
debt made by any solidary creditors or with any of the
solidary debtors shall extinguish the obligation
Choice Belongs to Debtor
without prejudice to that solidary creditor’s liability
for the shares of other solidary creditors. (NCC. Art.
1215; Art. 1219)

2021 GOLDEN NOTES 2021 & 2022
CIVIL Law
NOTE: Solidarity is never presumed. There is solidary 10. Prescription (Art. 1231)
liability only when:
NOTE: The enumeration stated under Art. 1231 is not
1. The obligation expressly so states; exclusive and there are still other modes of extinguishing
2. The law expressly provided for solidarity; of obligation. (Jurado, 2010)
3. The nature of the obligation requires solidarity
(Art. 1207); and PAYMENT OR PERFORMANCE
4. A solidary responsibility is imposed by a final
judgment upon several defendants. (Tolentino, 2002) Q: What is meant by payment?

Divisible and Indivisible Obligations A: Payment is the fulfilment of the prestation due,
a fulfilment that extinguishes the obligation by
Q: What is the test of divisibility of the obligation? the realization of the purposes for which it is
constituted. (Jurado, 2010) (1998, 2009 BAR)
A: The test is: whether or not the prestation is susceptible
of partial performance, in the sense of the possibility of Payment may consist not only in the delivery of
realizing the purpose which the obligation seeks to obtain. money but also the giving of a thing (other than money),
If a thing could be divided into parts and as divided, its the doing of an act, or not doing of an act. (NCC, Art. 1232)
value is impaired disproportionately, that thing is
indivisible. (Pineda, 2009) Q: What are the requisites of a valid payment? (P3AD)

What are the effects of illegality of a part of a contract? A: The following are its requisites:
1. Capacity of the person who pays
1. Divisible contract – illegal part is void 2. Capacity of the person to whom payment is made
and unenforceable. Legal part is valid and enforceable. 3. Propriety of the time, place, and manner of payment
(NCC, Art. 1420) 4. Acceptance of the payment by the creditor
2. Indivisible contract – entire contract is indivisible and 5. Delivery of the full amount or the full performance of
unenforceable. the prestation

OBLIGATIONS WITH A PENAL CLAUSE Q: Who may effect payment and compel the creditor to
accept the payment?
GR: The creditor cannot demand the fulfillment of
the obligation and the satisfaction of the penalty at the A: The following persons:
same time. (NCC, Art. 1227) 1. Debtor himself
2. His heirs and assigns
XPNs: 3. His agents and representatives
1. When the right has been clearly granted to him; 4. Third persons who have a material interest in
2. If the creditor has decided to require the fulfillment of the fulfilment of the obligation
the obligation, the performance thereof should
become impossible without his fault, the penalty may Q: What is the rule in case payment is made by third
be enforced. (NCC, Art. 1227) persons?

NOTE: The enforcement of a penalty is not an alternative A: GR: The creditor is not bound to accept payment
obligation which can be chosen by the debtor. or performance by a third person.

A contract of lease may provide for a forfeiture clause a XPNs:
provision that allows the lessor to forfeit in its 1. When made by a third person who has interest in the
favor advance rentals and deposits of the lessee deserts fulfillment of the obligation
or vacates the premises. 2. Contrary stipulation (NCC, Art. 1236)

EXTINGUISHMENT OF OBLIGATIONS SPECIAL FORMS OF PAYMENT

Q: What are the Principal modes of extinguishment of Dation in Payment
obligations? (PaLoCo3N)
Alienation by the debtor of a particular property in favor of
A: They are the following: his creditor, with the latter’s consent, for the satisfaction of
1. Payment or performance the former’s money obligation to the latter, with the effect
2. Loss of the thing due of extinguishing the said money obligation.
3. Condonation or remission of debt
4. Confusion or merger Application of Payment
5. Compensation
6. Novation (Art. 1231) Designation of the particular debt being paid by the debtor
who has two or more debts or obligations of the same kind
Other Modes (PARF) in favor of the same creditor to whom the payment is
made.
7. Annulment
8. Rescission Requisites:
9. Fulfillment of a resolutory condition 1. There must be only one debtor and only one creditor;

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necessarily judicial; it is not allowed in venues other than
2. There must be two or more debts of the same kind;
the courts. (PNB v. Chan, GR No. 206037, 13 March 2017)
3. All debts must be due; and
4. The amount paid by the debtor must not be sufficient
to cover all of the debts LOSS OF THE THING DUE
Q: When is a thing considered lost? (DOPE)

Payment by Cession

Debtor cedes his property to his creditors so the latter may A: A thing is considered lost if:
sell the same and the proceeds realized applied to the 1. It Disappears in such a way that its existence is
debts of the debtor. unknown;
2. It goes Out of commerce;
3. It Perishes; or
Requisites:
1. Plurality of Debts; 4. Its Existence is unknown or if known, it cannot be
2. Partial or relative insolvency of the debtor; and recovered
3. Acceptance of the cession by the creditors
Q: What are the requisites in order for the loss of the
Tender of Payment thing due will result in the extinguishment of the
obligation (DWB)
Voluntary act of the debtor whereby he offers to the
creditor for acceptance the immediate performance of the A:
former’s obligation to the latter. 1. The thing which is lost must be determinate;
2. The thing is lost without any fault of the debtor.
NOTE: This is a general requisite before consignation
takes place. NOTE If the thing lost is through the fault of the
debtor, the obligation is not extinguished and it is
Consignation simply converted into an obligation to indemnify the
creditor for damages
Act of depositing the object of the obligation with the court
or competent authority after the creditor has unjustifiably 3. The thing is lost before the debtor has incurred in
refused to accept the same or is not in a position to accept delay.
it due to certain reasons or circumstances.
Q: What are the effects of loss of the thing/object of
Requisites: the obligation?
1. There is a debt due;
2. That the consignation has been made either because A: If the obligation is a:
the creditor to whom the tender of payment was made
refused to accept the payment without just cause or 1. Determinate obligation to give:
because any of the causes stated by the law for
effective consignation without previous tender of GR: The obligation is extinguished when the object of
payment exists; the obligation is lost or destroyed. (NCC, Art. 1262)
3. That previous notice of the consignation had been
given to the persons interested in the fulfillment of the XPNs: (LAS-CD-PCG)
obligation; a. Law provides otherwise (NCC, Art. 1262)
4. That the thing or amount due had been placed at the b. Nature of the obligation requires the Assumption
disposal of judicial authority; and of risk (Ibid)
5. That after consignation had been made, the persons c. Stipulation to the contrary (Ibid)
interested in the fulfillment of the obligation had been d. Debtor Contributed to the loss (Ibid)
notified. e. Loss the of the thing occurs after the debtor
incurred in Delay (Ibid)
f. When debtor Promised to deliver the same thing
Q: Chan, owner of a three story commercial building, to two or more persons who do not have the same
entered into a lease contract with Philippine interest (Art. 1165)
National Bank for five years. Upon expiration of the g. When the debt of a certain and determinate thing
lease, PNB continued to lease the property on a proceeds from a Criminal offense (NCC, Art. 1268)
monthly basis.. Chan executed a Deed of Assignment h. When the obligation is Generic (NCC, Art. 1263)
over the rental payments in favor of PNB. However,
PNB failed to pay its monthly rentals and it also 2. Generic obligation to give:
explained that it received a demand letter from a
certain Chua who claimed to be the new owner of the GR: The obligation is not extinguished because
leased property and requested that the rentals be a generic thing never perishes (genus nun guam perit).
paid directly to him. PNB thus deposited the rentals in (NCC, Art. 1263)
a separate non-drawing savings account for
the benefit of the rightful party. Is there a XPNs:
proper consignation made by PNB?
a. In case of generic obligations whose object is a
A: NO. PNB's deposit of the subject monthly rentals in a particular class or group with specific
non-drawing savings account is not the consignation or determinate qualities (delimited
contemplated by law, precisely because it does not place generic obligation)
the same at the disposal of the court. Consignation is b. In case the generic thing has already

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been segregated or set aside, in which case, it 2. Must take place in the persons of a principal creditor
has become specific. and a principal debtor (Art. 1276); and
3. Merger is definite and complete.
3. An obligation to do – the obligation is
extinguished when the prestation becomes legally or Q: What is the effect of confusion or merger of rights?
physically impossible without the fault of the obligor.
(NCC, Art. 1266) A: The obligation is extinguished from the time the
characters of creditor and debtor are merged in the same
Q: What are the effects of partial loss? person. (NCC, Art. 1275)

A: Q: What is the effect of confusion or merger in one
1. Due to the fault or negligence of the debtor – Creditor debtor or creditor in a joint obligation?
has the right to demand the rescission of the
obligation or to demand specific performance, plus A: GR: Joint obligation is not extinguished since confusion
damages, in either case. is not definite and complete with regard to the entire
obligation. A part of the obligation still remains
2. Due to fortuitous event: outstanding.
a. Substantial loss – obligation is extinguished.
b. Unsubstantial loss – the creditor shall deliver XPN: Obligation is extinguished with respect only to the
the thing promised in its impaired condition. (Art. share corresponding to the DR or CR concerned. In effect,
1264) there is only partial extinguishment of the entire
obligation. (NCC, Art. 1277; Pineda, 2000)
Q: What are the effects when the thing is lost in the
possession of the debtor? Q: What is the effect of confusion or merger in one
debtor or creditor in a solidary obligation?
A: GR: It is presumed that loss is due to debtor’s fault.
A: If a solidary debtor had paid the entire obligation,
XPN: Presumption shall not apply in case loss is due the obligation is totally extinguished without prejudice to
to earthquake, flood, storm or other natural calamity (Art. the rights of the solidary debtor who paid, to proceed
1262) against his solidary co- debtors for the latter’s individual
contribution or liability. (Pineda, 2000)
XPN to the XPN: Debtor still liable even if loss is due
to fortuitous event when: Q: When is confusion or merger of rights revoked?
1. Debtor incurred in delay; or
2. Debtor promised to deliver the thing to two or A: If the act which created the confusion is revoked for
more persons with different interests [NCC, some causes such as rescission of contracts, or nullity of
Art. 1165 (3)] the will or contract, the confusion or merger is also
revoked. The subject obligation is revived in the same
CONDONATION condition as it was before the confusion.

Q: What are the requisites of condonation? NOTE: During such interregnum, the running of the period
of prescription of the obligation is suspended. (Pineda,
A: For condonation to take place, the following requisites 2000)
must concur:
COMPENSATION
1. Renunciation of the debt is purely gratuitous;
2. Acceptance by the debtor; Q: What are the requisites of compensation (1998,
3. Must not be inofficious; 2002, 2008, 2009 BAR)
4. Formalities provided by law on donations must be
complied with if condonation is express; and A: They are the following:
5. An existing demandable debt. 1. Each one of the obligors must be bound principally,
and that he be at the same time a principal creditor of
Q: What is the effect of the remission of the principal the other except guarantor who may set up
debt with respect to the accessory obligation and vice compensation as regards what the creditor may owe
versa? the principal (NCC, Art. 1279, 1280);
2. Both debts consist in sum of money, or if the
A: The renunciation of the principal debt shall extinguish things due are consumable, they be of the same kind
the accessory but the waiver of the latter shall leave the and also of the same quality if the latter has
former in force. (NCC, Art. 1273) been stated;
3. Both debts are due;
Confusion or Merger of Rights 4. Both debts are liquidated and demandable; and
5. Neither debt must be retained in a
Q: What are the requisites of confusion or merger controversy commenced by third person and
of rights? communicated in due time to the debtor (neither debt
is garnished). (NCC, Art. 1279)
When all the requisites mentioned in Art. 1279 of the Civil
1. Merger in the same person of the characters of both a Code are present, compensation takes effect by operation
creditor and debtor (Art. 1275); of law, and extinguishes both debts to the concurrent

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amount, even though the creditors and debtors are not 1. Explicit declaration – if it be so declared in unequivocal
aware of the compensation. (NCC, Art. 1290) terms; or
2. Material incompatibility – that the old and the
Q: In light of a new business venture, Mr. A entered new obligations be on every point incompatible
into a lease contract with Mr. B involving one of the with each other. (Art. 1292)
latter's warehouses. One day, Mr. B, who was then
encountering financial difficulties, approached Mr. A Distinctions between Expromission and Delegacion
and sought for a loan, which Mr. A readily granted to
him. In order to secure the loan obligation, Mr. B
DELEGACION EXPROMISSION
mortgaged the leased warehouse in favor of Mr. A. In
addition, Mr. B executed a promissory note in favor of
A, wherein prior demand was waived by him. When Person who Old debtor Third person
Mr. B defaulted on his loan obligation, Mr. A simply initiated the
stopped paying rentals due to Mr. B on the ground that substitution
legal compensation had already set in up to the
concurrent amount. Furthermore, since there was still Consent of the It may be express or implied from his
a balance due on the promissory note, Mr. A foreclosed creditor acts but not from his mere acceptance of
the real estate mortgage over Mr. B's property, payment by a third party.
without any prior demand furnished to Mr. B.
Consent of the With the consent With or without the
Aggrieved, Mr. B opposed the foreclosure due to the old debtor of the old debtor knowledge of the
lack of prior demand, contending that the waiver of (since he initiated debtor or
prior demand was stipulated in the promissory note the substitution). against the will of
and not in the mortgage instrument. Mr. B likewise the old debtor.
argued that when Mr. A invoked legal compensation
between the unpaid rentals and the loan arrearages, it Consent of Consent is needed Consent is
amounted to a novation that resulted in the third person but it need not be needed.
extinguishment of the loan contract between them. As given
such, the real estate mortgage, being a mere accessory simultaneously.
contract to the principal loan, was necessarily
extinguished. May Mr. A validly claim legal Rights of the With the debtor’s With the debtor’s
compensation? (2019 BAR) new debtor consent – right of consent – right of
reimbursement reimbursement and
A: YES, Mr. A may validly claim legal compensation. The and subrogation. subrogation.
Civil Code provides that when all the requisites mentioned Without the consent
in Article 1279 are present, compensation takes effect by of the old debtor or
operation of law, and extinguishes both debts to the against his will –
concurrent amount, even though the creditors and debtors right to beneficial
are not aware of the compensation. (Article 1290, Civil reimbursement.
Code). All requisites obtain in this case.
Insolvency or Shall not revive With the debtor’s
For compensation to be proper, it is necessary: (1) That nonfulfillment the action of the consent - If the old
each one of the obligors be bound principally, and that he of the latter against the debtor gave his
be at the same time a principal creditor of the other; (2) obligation of original obligor. consent and the new
That both debts consist in a sum of money, or if the things the new debtor could not
due are consumable, they be of the same kind, and also of debtor Original debtor fulfill the obligation,
the same quality if the latter has been stated; (3) That the shall be held the old debtor
two debts be due; (4) That they be liquidated and liable: should be liable for
demandable; (5) That over neither of them there be any the payment of his
retention or controversy, commenced by third persons and 1. Insolvency original
communicated in due time to the debtor. was already obligation.
existing and
NOVATION of Without the
public knowl consent of the old
edge, debtor or against
Q: What are the requisites of novation?
or known to his will – the new

the debtor. debtor’s
1. Valid old obligation; insolvency or non-
2. Intent to extinguish or to modify the old obligation Insolvency of the fulfillment of the
3. Capacity and consent of all the parties to the new debtor was obligation shall not
new obligation (except in case of expromission already existing give rise to any
and known to liability on the part
where the old debtor does not participate);
the original of the original
4. Substantial difference of the old and new obligation –
debtor at the time debtor.
on every point incompatible with each other (implied
novation) of the
5. Valid new obligation delegation of the
debt to the new
Novation is never presumed, it must be proven as debtor.
a fact either by:

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can be demanded by the third person if duly accepted
Intention of Released from the obligation with the
by him before it could be revoked;
substitution consent of the creditor.

Requisites of stipulation pour atrui:

a. Stipulation in favor of a third person;
CONTRACTS b. Stipulation is just part and not the whole
obligations of the contract;
c. Contracting parties must have clearly and
Q: What are the essential requisites of a deliberately conferred a favor upon a third
contract? (2005 BAR) person;
d. Favor or benefit conferred is not just an
A: They are the following: incidental benefit or interest;
1. Consent; e. Third person must have communicated his
2. Object or subject matter; and acceptance; and
3. Cause or consideration. f. Neither of the contracting parties bears the
legal representation or authorization of the
Q: What are the characteristics of a contract? third person. (Young v. Court of Appeals, G.R.
(AMORP) No. 79518, January 13, 1989)

A: The following are its characteristics: NOTE: The fairest test to determine whether the
interest of third person in a contract is a
1. Autonomy (Art. 1306); (1996, 2004 BAR) stipulation pour autrui or merely an incidental
2. Mutuality (Art. 1308); (2001, 2004, 2008 BAR) interest, is to rely upon the intention of the parties
3. Obligatoriness (Art. 1356); as disclosed by their contract. In applying this test,
4. Relativity (Art. 1311); (1991, 1996, 2002 BAR) it matters not whether the stipulation is in the
5. Perfection by mere consent (Art.1315) nature of a gift or whether there is an obligation
owing from the promise to the third person.
Q: What are the stages of a contract? (CPC): (Rabuya, 2017)

1. Conception or Generation; 3. Third persons coming into possession of the object of
2. Perfection or Birth; the contract creating real rights subject to the
3. Consummation or Fulfillment. provisions of Mortgage Law and the Land Registration
Law (NCC, Art. 1312);
RELATIVITY OF CONTRACTS
(1991, 1996, 2002 BAR) 4. Contracts entered into in fraud of creditors; (NCC, Art.
1313);
Principle of relativity or Principle of limited effectivity
of contracts (2011 BAR) 5. When a third person induces a party to violate the
contract. (NCC, Art. 1314) (1991, 1998 BAR)
GR: Contracts take effect only between the parties or their
assigns and heirs. NOTE: This tort or wrongful conduct is known as
“interference with contractual relations.”
Res inter alios acta aliis neque nocit prodest (a thing done
between others does not harm or benefit others) – a Requisites:
contract can only obligate the parties who entered into it,
or their successors who assumed their personalities, and a. Existence of a valid contract;
that, concomitantly, a contract can neither favor nor b. Third person has knowledge of such contract;
prejudice third persons. (Vitug, 2006) c. Third person interferes without legal justification
or excuse. (De Leon, 2010)
NOTE: With respect to the heir, he shall not be liable
beyond the value of the property he received from the It is based on quasi-delict and their liability is solidary.
decedent. (NCC, Art. 1311)
Thus, the unwarranted interference by a stranger in the
XPNs: contractual relations of a contracting party justifies a claim
for damages against the former. It is based on tort or
1. Rights and obligations that are not transmissible by quasi-delict and their liability is solidary. (NCC, Art. 2194)
their nature, or by the stipulation or by provisions of
law (NCC, Art. 1311); NOTE: A third person can be held liable for tort
interference even if he does not know the identity of one of
NOTE : Determine whether a contract terminates the contracting parties. The interference with lawful
upon the death of one of the parties contracts by strangers thereto gives rise to an action for
damage in favor of the injured person. The law does not
2. Stipulation pour autrui (stipulation in favor of a third require that the responsible person shall have known the
person) – benefits clearly and deliberately conferred identity of the injured person. (Rabuya, 2017)
by parties to a contract upon third persons (NCC, Art.
1311) and which stipulation is merely part of a Consent (2005 BAR)
contract entered into by the parties, neither of whom
acted as agents of the third person and which favor Q: What are the requisites of a valid consent?

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A: For consent to be valid, the following requisites Q: Gilbert averred that sometime in 1999, he, through
should be present: an undated contract of lease, leased a portion of a 541
square meter property situated in Poblacion,
1. Legal capacity of the contracting parties; Nabunturan, Compostela Valley Province, registered
2. Manifestation of the conformity of the in his name, to Robert, which the latter intended to
contracting parties; use as a lottery outlet. Gilbert claimed that Robert and
3. Parties’ conformity must be intelligent, spontaneous Gil failed to pay their rental arrears to him and
and free from all vices of consent; and refused to vacate the subject property, despite
4. Said Conformity must be real and not simulated repeated demands, thus, he filed an
or fictitious. ejectment complaint. In their defense, Robert and Gil
posited that the aforementioned lease contract was
Q: Who are the persons incapacitated to give consent? simulated and, hence, not binding on the parties as
there was no demand to pay the rentals on the part of
1. Deaf-mutes who do not know how to read and the complainants and that such contract was only
write (illiterates) executed as a requirement to be able to put up
2. Insane or demented persons, unless the contract a lottery stall. Is the contract involved absolutely
was entered into during a lucid interval simulated?
3. Minors (Art. 1327) EXCEPT:
a. Contracts for necessaries (NCC, Art. 1489) A: YES. Simulation of a contract may be absolute or
b. Contracts by guardians or legal relative. The former takes place when the parties do not
representatives and the court having jurisdiction intend to be bound at all; the latter, when the parties
had approved the same conceal their true agreement. The fact of executing the
c. When there is active misrepresentation on the contract to comply with the requirement to put up a
part of the minor (minor is estopped) lottery stall makes the contract absolutely simulated
d. Contracts of deposit with the Postal Savings as there was no intention between the parties to enter
Bank provided that the minor is over 7 years of into the contract of lease. (Robert and Nenita De Leon vs.
age Gilbert and Analyn Dela Llana, G.R. No. 21227, February 11,
e. Upon reaching age of majority – they ratify 2015)
the same
Q: Sps. Tanchuling and Cantela executed the subject
Q: What are the vices of consent? deed covering two (2) parcels of land. On the face of
the subject deed, the sum of F400,000.00 appears as
1. Mistake the consideration for Cantela's purported purchase.
2. Intimidation After the subject deed's execution, Vicente delivered
3. Violence the owner's copies of the TCTs to Cantela, although it
4. Undue influence is undisputed that none of the parties are in actual
5. Fraud physical possession of the properties. When
Sps. Tanchuling tried to recover the TCTs from
Simulation of contract Cantela, the latter refused, prompting them to file on a
Complaint for Annulment of Deed of Sale and Delivery
It is the declaration of a fictitious will, deliberately made of the [Owner's] Duplicate Copy of the [TCTs] with
by agreement of the parties, in order to produce, for the Preliminary Prohibitory and Mandatory Injunction
purposes of deception, the appearance of a juridical act before the RTC.
which does not exist or is different from that which was
executed. (Tolentino, 2002) They alleged that the subject deed was absolutely
simulated, hence, null and void, given that: there was
The simulation is absolute when there is colourable no actual consideration paid by Cantela to them; and
contract but it has no substance as the contracting parties the subject deed was executed to merely show to their
do not intend to be bound by the contract at all, as when a neighbors that they are the true owners of
debtor simulates the sale of his properties to a friend in the properties. However, Cantela insisted that the sale
order to prevent their possible attachment by creditors. of the properties to him was valid as he bought the
same for the price of P400,000.00. He further averred
It is relative when the contracting parties state a false that the undated deed was surreptitiously inserted by
cause in the contract to conceal their true agreement, as Sps. Tanchuling in the copies of the subject deed
when a person conceals a donation by simulating a sale of presented to him for signing. Is the subject deed
the property to the beneficiary for a fictitious simulated?
consideration. (Jurado, 2010)
A: YES. In this case, the subject deed was absolutely
NOTE: The primary consideration in determining the true simulated. The parties never intended to be bound by any
nature of a contract is the intention of the parties. sale agreement. Instead, the subject deed was executed
merely as a front to show the public that Sps. Tanchuling
If the parties state a false cause in the contract to conceal were the owners of the properties in order to deter the
their real agreement, the contract is only relatively group of John Mercado from illegally selling the same.
simulated and the parties are still bound by their real Moreover, there was actually no exchange of
agreement. Hence, where the essential requisites of a money between the parties. (Renee B. Tangchuling vs.
contract are present and the simulation refers only to the Sotero C. Cantela, G.R. No. 209284, November 20, 2015)
content or terms of the contract, the agreement is
absolutely binding and enforceable between the parties
and their successors in interest.

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CIVIL Law
Q: Distinguish consensual from real contracts and 2. Partnership where real property contributed
name at least four (4) kinds of real contracts under
the present law. (1998 BAR) a. There must be a public instrument regarding
the partnership;
A: Consensual contracts are those which are perfected by b. The inventory of the realty must be made, signed
mere consent. (NCC, Art. 1315) Real contracts are those by the parties and attached to the public
which are perfected by the delivery of the object of the instrument (NCC, Art. 1773)
obligation. (NCC, Art. 1316)
3. Antichresis - the amount of the principal and
Examples of real contracts are deposit, pledge, interest must be in writing. (NCC, Art. 2134)
commodatum and simple loan (mutuum).
4. Agency to sell real property or an interest therein -
Q: What are the requisites of an object? (DELiCT) authority of the agent must be in writing. (NCC, Art.
1874)
A:
1. Determinate as to its kind (even if not 5. Stipulation to charge interest - interest must
determinate, provided it is possible to determine the be stipulated in writing. (NCC, Art. 1956)
same without the need of a new contract);
2. Existing or has the potentiality to exist subsequent to 6. Stipulation limiting common carrier's duty
the contract; of extraordinary diligence to ordinary diligence:
3. Must be Licit;
4. Within the Commerce of man; and a. must be in writing, signed by shipper or owner
5. Transmissible. b. supported by valuable consideration other than
the service rendered by the common carrier
Q: What are the requisites of a cause? (LET) c. reasonable, just and not contrary to public policy.
(NCC, Art. 1744)
A:
1. It must be Existing; 7. Chattel mortgage - personal property must be
2. Be True; and recorded in the Chattel Mortgage Register. (NCC, Art.
3. Be Lawful. 2140)

NOTE: Every contract is presumed to have a cause; and Contracts which must appear in a public document:
such cause is lawful.
1. Donation of real properties (NCC, Art. 719);
Q: What is the rule on formality of contracts? 2. Partnership where immovable property or real rights
are contributed to the common fund (NCC, Arts. 1171
A: GR: Form is not required in consensual contracts. &1773);
(NCC, Art. 1356) 3. Acts and contracts which have for their object the
creation, transmission, modification or
XPNs: When the law requires a contract be in writing for extinguishment of real rights over immovable
its: property; sale of real property or of an interest
1. Validity (formal contracts); or therein is governed by Arts. 1403, No. 2, and 1405
2. Enforceability (under Statute of Frauds). [NCC, Art. 1358 (1)];
3. For the convenience of the parties 4. The cession, repudiation or renunciation of
hereditary rights or of those of the conjugal
NOTE: The parties may compel each other to reduce partnership of gains [Art. 1358 (2)];
the verbal agreement into writing. (NCC, Art. 1357) (2006 5. The power to administer property or any other
BAR) power which has for its object an act appearing or
which should appear in a public document or should
Formalities required in specific contracts prejudice a third person [Art. 1358 (3)];
6. The cession of actions or rights proceeding from an
1. Donations act appearing in a public document. [Art. 1358 (4)]

a. Personal property- if value exceeds 5,000, Q: What is reformation of instruments and what are
the donation and acceptance must both be its requisites?
written. (NCC, Art. 748)
b. Real property: A: It is a remedy to conform to the real intention of the
i. Donation must be in a public instrument, parties due to mistake, fraud, inequitable conduct,
specifying therein the property donated accident. (NCC, Art.1359)
and value of charges which the donee must
satisfy. The following are its requisites:
ii. Acceptance must be written, either in the
same deed of donation or in a separate 1. Meeting of the minds to the contract
instrument.
iii. If acceptance is in a separate instrument, NOTE: When there is no meeting of the minds, the
the donor shall be notified thereof in proper remedy is annulment and not reformation.
authentic form, and this step shall be noted in (Pineda, 2000)
both instruments. (NCC, Art. 749)
2. Real intention is not expressed in the instrument

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3. By reason of: Mistake, Accident, Relative simulation, which there has been no meeting of the minds because the
Fraud, or Inequitable conduct. consent is vitiated. (Jurado, 2010)
4. Clear and convincing proof of those abovementioned.
Q: What is the prescriptive period in reformation of
The fundamental distinction between reformation of an instruments?
instrument and annulment of a contract is that the first
presupposes a perfectly valid contract in which there has A: 10 years from the date of the execution of the
been a valid meeting of the minds of the contracting instrument.
parties while the second is based on a defective contract in

RECISSIBLE, VOIDABLE, UNENFORCEABLE, VOID, AND INEXISTENT CONTRACTS
Q: What are the kinds of defective contracts? Differentiate each other.

RESCISSIBLE VIOADABLE UNENFORCEABLE VOID/INEXISTENT
BASIS
(2004 BAR) (2004 BAR)
Economic damage or Incapacity of one of Entered without Illegality (void) or
lesion to either one of parties to give authority or in excess absence of any of
the parties or to 3rd consent or vitiated thereof; essential requisites of a
persons declaration by consent non-compliance with contract (inexistent)
Origin of the defect
law Statute of Frauds
(2009 BAR); incapacity
of both parties to give
consent
Suffered by either one As to the other Not necessary Not necessary
Necessity of
of parties or 3rd parson contracting party –
Damage/Prejudice
not necessary
Curable by Curable Curable Not Curable Not Curable
Prescription
Valid and legally Valid and legally Inoperative until A void or inexistent
enforceable until enforceable until ratified; not enforceable contract has no force and
judicially rescinded judicially annulled in court without proper effect from the very
ratification beginning.

This rule applies to
Legal Effect contracts that are
declared void by Positive
provision of law. (Tomas
Tan Jr. v. Tomas Hosana,
G.R. No. 190846, February
3, 2016)
Rescission or Annulment Only Declaration of nullity of
Remedy rescissory of personal contract
action contract defense
Must be a direct action Direct action needed Indirect attack allowed Can be attacked directly
Nature of Action or indirectly
GR: Contracting Party Contracting Patty Contracting Party 3rd persons cannot file
Who can file the UNLESS their interests
action XPN: are directly affected.
Defrauded Creditorrs
Susceptibility of Susceptible but not of Susceptible Susceptible Not Susceptible
ratification ratification proper
Action for rescission Action for Action for recovery; Action for declaration of
prescribes in 4 years annulment specific performance or nullity or putting of
Susceptibility of prescribes after 4 damages prescribes in defense of nullity does
prescription years 10 years (if based on a not prescribe
written contract) or 6
years if unwritten

2021 GOLDEN NOTES 2021 & 2022
Civil Law
VOIDABLE CONTRACTS drunkennes
Ways or Prescriptio s or during a
Grounds Modes of n for hypnotic
Non- Action of spell. (NCC,
Kinds
validating Annulment Art. 1328)
a Voidable
Contract Q: What is the doctrine of estoppel and to whom is
Legal consent Four years it applied?
presupposes from the
incapacity time A: The doctrine of estoppel is an admission or
A person may guardianshi representation rendered conclusive upon the person
be considered p p of the making it and cannot be denied or disproved as against
incapacitated minor and the person relying thereon. (Art. 1431, NCC)
because of: other The doctrine of estoppel is applied only to those who
incapacitate were parties to the contract and their privies or
1. minoriy d ceases successors-in- interest. (Mactan Cebu International Airport
Voidable 2. insanity Authority v. Heirs of Ga Vina Jordan, G.R. No. 173140,
due to 3. imbecilty or (1) By January 11, 2016)
incapacit 4. the state of prescriptio
y being deaf mute n of the SPECIAL CONTRACTS
who cannot action for
LOAN
write annulment

(Art.1391)
It is a contract where one of the parties delivers to another,
NOTE: if BOTH
either something not consumable so that the latter may
parties are (2) By
use the same for a certain time and return it, in which case
incapacitated, ratification
is called a commodatum; or money or other consumable
the contract is or
UNENFORCEAB confirmatio things, upon the condition that the same amount of the
LE n (Art. same kind and quality shall be paid, in which case the
contract is simply called a loan or mutuum. (NCC, Art.
Consent may be 1392- Four Years
1396) 1933) (1993, 2004, 2005 Bar)
vitiated by: from the

discovery
(3) By loss Kinds of loan
1. Mistake
of the thing

1. Commodatum – where the bailor (lender) delivers to
2. Intimidation which is
the object the bailee (borrower) a non-consumable thing so that
Four Years
of the the latter may use it for a given time and return the
3. Violence from the
identical thing;
contract time of
through the 2. Mutuum or Simple Loan – where the lender delivers to
4. Undue intimidatio
fraud or the borrower money or other consumable thing upon
Influence n, violence
fault of the the condition that the latter shall pay same amount of
or undue
person who the same kind and quality.
influence
is entitled
stops
to institute Commodatum is a loan of use (because there is a transfer
5. Fraud Four years
the action of the use of the thing borrowed) while mutuum is a loan
from the
for the of consumption (because there is a transfer of the
Requisites: discovery
annulment ownership of the thing, which is generally received for
Voidable a. It was
consumption).
because employed by a (Art.1401)
of contracting
Cause or Consideration in a contract of loan
Vitiated party upon the
Consent other
1. As to the borrower, the acquisition of the thing; and

2. As to the lender, the right to demand its return or its
b. it was induced
equivalent.
the other party

to enter into the
Object of a contract of loan
contract

1. Commodatum – The object is generally not consumable;
c. it was serious;
and
and
2. Mutuum – The object is consumable.

d. It resulted in
Commodatum v. Mutuum (1996, 2004 BAR)
damages and
injury to the
BASIS COMMODATUM MUTUUM
party seeking
annulment Money or
Non-consumable and
Object consumable
Non- fungible.
6. Contract thing.
agreed to in Gratuitous, otherwise it May or may not
Cause
a state of is a lease. be gratuitous.

2021 GOLDEN NOTES 2021 & 2022
Civil Law
Use or temporary 3. It must be gratuitous.
possession of the
thing loaned. Purpose: It must be the temporary use of the thing loaned.
If the bailee is not entitled to the use of the property, the
GR: Not its fruit contract may be a deposit. (NCC, Art. 1962)
because the bailor
remains the owner. Subject matter of the contract of commodatum
Purpose Consumption
XPNs: 1. Non-consumable;
Use of the fruits is 2. Consumable – only if the purpose is merely
stipulated; enjoyment of for exhibition;
the fruits is stipulated; 3. Movable; or
or enjoyment of the 4. Immovable. (NCC, Arts. 1936 & 1937)
fruits is incidental to its
use. NOTE: In Producers Bank of the Philippines vs. CA, the
Real or personal loan involving money was classified as commodatum
property. instead of mutuum because the lender agreed to deposit
Generally non- his money in the savings account of the borrower
Subject consumable things but Only personal especially for the purpose of making it appear that the
Matter may cover consumables property. latter had sufficient capitalization for incorporation, with
if the purpose of the the promise that the amount shall not be removed and
contract is for shall be returned within a specific period. (Rabuya, 2017)
exhibition.
Ownership Passes to the Kinds of commodatum
Retained by the bailor.
of the thing debtor.
Equal amount 1. Ordinary commodatum – The bailor cannot just
Thing to be of the same demand the return of the thing at will, but only after
Exact thing loaned the period agreed upon by the parties.
returned kind and
quality. 2. Precarium – One whereby the bailor may demand the
Who bears thing loaned at will:
Bailor Debtor a. If the duration of the contract had not been
risk of loss
In case of urgent need stipulated;
even before the Only after the b. If the use to which the thing loaned should be
When to devoted had not been stipulated; or
expiration of term (the expiration of
return c. If the use of the thing is merely by tolerance of the
contract is in the the term.
meantime suspended). owner. (NCC, Art. 1947)
Contract of
Contract Contract of use NOTE: An essential feature of commodatum is that it is
consumption
gratuitous, while another feature is that the use of the
Delivery essential to perfection of loan thing belonging to another is for a certain period.

Delivery is necessary in view of the purpose of the contract If the use of the thing is merely tolerated by the bailor, he
which is to transfer either the use or ownership of the can demand the return of the thing at will, in which case
thing loaned. the contractual relation is called precarium, which is a kind
of commodatum. (Pajuyo v. Court of Appeals, GR No.
146364, June 3, 2004)
An accepted promise to deliver something by way of
commodatum or simple loan is binding upon the parties, but
the commodatum or simple loan itself shall not be perfected Consequence of purely personal character of
until the delivery of the object of the contract. (NCC, Art. commodatum (2006, 2007 BAR)
1934)
1. As to death of a party
Perfection of contract of loan
GR: Commodatum is purely personal in character
hence death of either bailor or bailee extinguishes the
An accepted promise to deliver something by way of
contract. (NCC, Art. 1939)
mutuum or simple loan is binding upon the parties, but the

mutuum or simple loan itself shall not be perfected until
XPN: By stipulation, the commodatum is transmitted
the delivery of the object of the contract. (NCC, Art. 1934)
to the heirs of either or both parties.

COMMODATUM
2. As to Lease of the thing subject of commodatum

It is a contract where one of the parties (bailor) delivers to
GR: The bailee can neither lend nor lease the object of
another (bailee) something not consumable so that the
the contract to a third person. (NCC, Art. 1939)
latter may use the same for a certain time and thereafter

return the identical thing.
XPN: Members of the bailee's household may make

use of the thing loaned because members of the
Elements of commodatum
bailee's household are not considered as third

persons.
1. There must be a bailor and bailee;

2. The bailee acquires the use of the thing; and

2021 GOLDEN NOTES 2021 & 2022
Civil Law
NOTE: Household members are those permanently Its object is money or fungible and consumable things.
living or residing within the same residence including
the household helpers. Governing rules on payment of loan

XPN to the XPN: Contrary stipulation; or when the If the object of loan is:
nature of the thing forbids such use.
1. Money – Governed by Articles 1249 and 1250. (NCC)
3. As to right of retention
GR: Payment shall be made in the currency stipulated.
GR: The bailee cannot exercise the right of retention
against the bailor. (NCC, Art. 1944) XPN: If not, that currency which is legal tender in the
Philippines.
XPN: However, he can exercise the right of retention
on the account of damages suffered by the bailee In case of extraordinary inflation – payment shall be
because of flaws that the bailor knew of but did not made at the value of the currency at the time of the
disclose to the bailee. (NCC, Art. 1944; Art. 1951) creation of the obligation, unless there is an agreement
to the contrary. (NCC, Art. 1250) Loan of money can be
Parties to a commodatum payable in kind if there is an agreement between the
parties.
1. Bailor/Comodatario/Commodans – The giver/ lender
– the party who delivers the possession or custody of 2. Consumable or fungible thing – Debtor or borrower
the thing bailed; and shall pay another thing of the same kind, quality and
2. Bailee/Comodante/Commodatarius – The recipient/ quantity even if it should change in value. If cannot be
borrower; the party who receives the possession or done, the value of the thing at the time of its perfection
custody of the thing thus delivered. (delivery) shall be the basis of the payment of the loan.
(NCC, Art. 1955)
NOTE: The bailor need not be the owner of the thing since
the contract of commodatum does not transfer ownership. Q: Can estafa be committed by a person who refuses to
(Pineda, 2006, NCC, Art. 1938) pay his debt or denies its existence?

MUTUUM A: NO, because the debtor in mutuum becomes the owner
of the thing delivered to him. If he consumed or disposed
It is a contract whereby one of the parties called the of the thing, the act which is an act of ownership is not
“lender” delivers to another called the “borrower”, money misappropriation. Hence, there is no basis for a criminal
or other consumable thing subject to the condition that the prosecution. (See Flores, Jr. vs. Enrile, G.R. No. L-38440, July
same amount of the same kind and quantity shall be paid. 20, 1982)
(NCC, Art. 1933)
MORTGAGE
It involves the return of the equivalent only and not the
identical thing because the borrower acquires ownership Indivisibility of mortgage
thereof. A loan of money, however, may be payable in kind.
(De Leon, 2013) GR: A mortgage is indivisible.

Characteristics of a contract of mutuum NOTE: The mortgage is indivisible even if the obligation of
the debtor is joint and not solidary. Generally, the
1. Borrower acquires ownership of the thing (NCC, Art divisibility of the principal obligation is not affected by the
1953); indivisibility of the pledge or mortgage. (NCC, Art. 2089)
2. If the thing loaned is money, payment must be made in
the currency stipulated, and if it is not possible to XPNs:
deliver such currency, then in the currency which is
legal tender in the Philippines. (NCC, Art. 1249) 1. Where each one of several things guarantees
determinate portion of the credit (NCC, Art. 2089);
NOTE: In case of extraordinary deflation or inflation, the 2. Where only a portion of the loan was released; or
basis of payment shall be the value of the currency at the 3. Where there was failure of consideration.
time of the creation of the obligation (NCC, 1250); and
Limited liability of a third person as a mortgagor
3. If fungible thing other than money was loaned, the
borrower is obliged to pay the lender another thing of GR: A third person who pledged and mortgaged his
the same kind, quality and quantity even if it should property is not liable for any deficiency.
change in value. (NCC, Art. 1955[2])
XPN: If the third party pledgor or mortgagor expressly
Consideration in a simple loan agreed to be bound solidarily with the principal debtor.

1. As to the borrower – The acquisition of money or any Property acquirable in the future cannot be mortgaged
other fungible thing; and
2. As to the lender – the right to demand the return of the Where the mortgagor mortgaged a property and under the
money or any other fungible thing or its equivalent. contract, he agreed to mortgage additional properties
which he may acquire in the future, there was no valid
Object of mutuum mortgage as to the latter because he was not yet the owner

2021 GOLDEN NOTES 2021 & 2022
Civil Law
of the properties at the time of the mortgage. (Dilag v. The following requisites are essential to the contract of a
Heirs of Ressurrecion, G.R. No. 48941, May 6, 1946) real estate mortgage:
Mortgage constituted to secure future advances 1. That it be constituted to secure the fulfillment of a
principal obligation;
Mortgage constituted to secure future advances is valid. It 2. That the mortgagor be the absolute owner of the thing
is a continuing security and not discharged by repayment mortgaged;
of the amount named in the mortgage, until the full 3. That the person constituting the mortgage have the
amount of the advances is paid. However, a chattel free disposal of their property, and in the absence
mortgage can only cover obligations existing at the time thereof, that they be legally authorized for the
the mortgage is constituted and not to obligations purpose;
subsequent to the execution of the mortgage. 4. It must appear in a public instrument (NCC, Art. 2125);
and
Mortgage constituted to secure future advances 5. Recording in the Registry of Property is necessary to
bind third persons.
Mortgage constituted to secure future advances is valid. It
is a continuing security and not discharged by repayment NOTE: A recorded Real Estate Mortgage is a right in rem, a
of the amount named in the mortgage, until the full lien on the property whoever its owner maybe. (Rabuya,
amount of the advances is paid. However, a chattel 2017)
mortgage can only cover obligations existing at the time
the mortgage is constituted and not to obligations Registration operates as a notice of the mortgage to others,
subsequent to the execution of the mortgage. but neither adds to its validity nor converts an invalid
mortgage into a valid one between the parties. The person
PACTUM COMMISSORIUM in whose favor the law establishes a mortgage has the
(1999, 2001, 2004, 2009 BAR) right to demand the execution and the recording of the
document in which the mortgage is formalized. [NCC, Art.
Pactum commissorium is a stipulation whereby the thing 2152(2)]
pledged or mortgaged or subject of antichresis shall
automatically become the property of the creditor in the Mortgage as a real and inseparable right
event of non-payment of the debt within the term fixed.
Such stipulation is null and void. (NCC, Art. 2085) Mortgage is a real and inseparable right. The mortgage
directly and immediately subjects the property upon
Elements of pactum commissorium which it is imposed, whoever the possessor may be, to the
fulfillment of the obligation for whose security it was
1. There is a pledge, mortgage or antichresis of a constituted. (NCC, Art. 2126)
property by way of security; and
2. There is an express stipulation for the automatic Effect of registration as to better right of third parties
appropriation by the creditor of the property in case of
nonpayment. A registered mortgage right over property previously sold
is inferior to the buyer’s unregistered right.
NOTE: What are prohibited are those stipulations
executed or made simultaneously with the original Reason: If the original owner had sold the thing, then he no
contract, and not those subsequently entered into. longer had ownership and free disposal of it so as to be
able to mortgage it. (State Investment House, Inc. v. CA, G.R.
Q: X borrowed money from Y and gave a piece of land No. 115548, March 5, 1996)
as security by way of mortgage. It was expressly
agreed between the parties in the mortgage contract Foreclosure
that upon nonpayment of the debt on time by X, the
mortgaged land would already belong to Y. If X Foreclosure is a remedy available to the mortgagee by
defaulted in paying, would Y now become the owner of which he subjects the mortgaged property to the
the mortgaged land? Why? satisfaction of the obligation. It is a proceeding to
terminate the rights of the mortgagor of the property.
A: NO, Y would not become the owner of the land. The
stipulation is in the nature of Pactum commissorium which Judicial foreclosure v. Extrajudicial foreclosure (1999
is prohibited by law. The property should be sold at public BAR)
auction and the proceeds thereof applied to the
indebtedness. Any excess shall be given to the mortgagor. BASIS JUDICIAL EXTRAJUDICIAL
FORECLOSURE FORECLOSURE
REAM MORTGAGE
Court With court Without court
Intervention intervention intervention
Real estate mortgage (REM) is a contract whereby the
Right of Decisions not
debtor secures to the creditor the fulfillment of the
Appeal Decisions are appealable;
principal obligation, specially subjecting to such security
appealable immediately
immovable property or real rights over immovable
executory
property in case the principal obligation is not fulfilled at
Cutting off of Order of the Foreclosure does
the time stipulated. (12 Manresa 467)
rights court cuts off all not cut off the
rights of the rights of all
Requisites for a valid constitution of a real mortgage
parties parties involved
(1991, 1994, 1996, 1999, 2001 BAR)

2021 GOLDEN NOTES 2021 & 2022
Civil Law
impleaded Interest
Right of GR: No right of
Redemption redemption It is the compensation to be paid by the borrower for the
XPN: If use of the money lent to him by the lender. It is paid either
There is right of
mortgagee is a as compensation for the use of money (monetary interest)
redemption or as damages (compensatory interest). (Andreas vs. Bank
bank, quasi-
bank, or trust of the Philippine Islands, G.R. No. 23836, September 9, 1925;
entity Asian Terminals, Inc., vs. Padoson Stainless Steel
Equity of There is equity No equity of Corporation, G.R. No. 211876, June 25, 2018)
Redemption of redemption redemption
Classes of interest
Redemption of mortgage
1. Simple/Monetary – The interest which is paid for the
Redemption is a transaction by which the mortgagor use or forbearance of the money, at a certain rate
reacquires or buys back the property which may have stipulated in writing by the parties (NCC, Art. 2209;
passed under the mortgage or divests the property of the Odiamar vs. Valencia, G.R. No. 213582, September 12,
lien which the mortgage may have created. 2018);
2. Compound – The interest which is imposed upon
Summary of Redemption Period accrued interest, that is, the interest due and unpaid
(NCC, Arts. 1959 and 2212);
1. Extrajudicial (Act No. 3135) 3. Legal – That interest which the law directs to be paid
in the absence of any agreement as to the rate (NCC,
a. Natural Person- one (1) year from registration of Art. 2209); and
the certificate of sale with the Registry of Deeds. 4. Compensatory – The interest paid by virtue of
damages for delay or failure to pay principal loan on
NOTE: The statutory period of redemption is only which interest is demanded. (Odiamar vs. Valencia, G.R.
directory and can be extended by agreement of No. 213582, September 12, 2018)
the parties provided:
Rules on interest
i. The agreement to extend is voluntary; and
ii. The debtor commits to pay the redemption GR: No interest shall be due unless it is stipulated in
price on a fixed date. (Gojudo v. Traders Royal writing. (NCC, Art. 1956) (2004 BAR)
Bank, G.R. No. 151098, March 21, 2006)
XPN:
b. Juridical Person – same rule as natural person.
1. In case of interest on damages or indemnity for
c. Juridical Person (mortgagor) and Bank damages, it need not be in writing (NCC, Art. 2209); or
(mortgagee) – three (3) months after foreclosure 2. Interest accruing from unpaid interest. (NCC, Art.
or before registration of certificate of foreclosure 2212)
whichever is earlier. (RA 8791, Sec. 47)
NOTE: Art. 1956 applies only to interest for the use of
NOTE: By an amendment by the General Banking Law of money and not to interest imposed as items of damages.
2000, juridical mortgagors like partnerships and
corporations are barred from the right of redemption of Stipulation of a particular interest rate
mortgaged property sold pursuant to an extrajudicial
foreclosure, after the registration of the certificate of If a particular rate of interest has been expressly stipulated
foreclosure with the applicable Register of Deeds. by the parties, that interest, not the legal rate of interest
shall be applied. (Casa Filipina Development Corporation v.
For purposes of reckoning the one-year redemption period Deputy Executive Secretary, G.R. No. 96494, May 28, 1992)
in case of individual mortgagors, or the three-month
reckoning period for juridical persons/mortgagors the Governing rule on usurious transactions
same shall be reckoned from the date of confirmation of
the auction sale which is the date when the certificate of CB Circular No. 905 has expressly removed the interest
title is issued. (BIR RMC No. 15-2008, August 15, 2008) ceilings prescribed by Usury Law; thus, the said law has
become legally non-existent.
2. Judicial – within the period of 90-120 days from the
NOTE: It did not repeal or amend the usury law but merely
date of the service of the order of foreclosure or even
suspended its effectivity. (Security Bank and Trust
thereafter but before the order of the confirmation of
Company v. RTC of Makati, G.R. No. 113926, October 23,
the sale. (Rules of Court, Secs. 2 &3, Rule 28)
1996)

NOTE: Allowing redemption after the lapse of the
There is certainly nothing in said circular which grants
statutory period, when the buyer at the foreclosure sale
lenders carte blanche authority to raise interest rates to
does not object but even consents to the redemption, will
levels which will either enslave their borrowers or lead to
uphold the policy of the law which is to aid rather than
a hemorrhaging of their assets. Stipulations authorizing
defeat the right of redemption. (Ramirez v. CA, G.R. No.
iniquitous or unconscionable interests are contrary to
98147, March 5, 1993)
morals, if not against the law. (Rey vs. Anson, G.R. No.
211206, November 7, 2018)
INTEREST AND THE SUSPENSION

OF USURY LAW

2021 GOLDEN NOTES 2021 & 2022
Civil Law
When Usury Law does not apply 1. Damage to the plaintiff;

1. A contract for the lease of property is not a loan; NOTE: It is the loss, hurt or harm which results from
hence, the rental paid is not governed by the Usury injury. It differs from damages which term refers to the
Law (Tolentino v. Gonzales, 50 Phil. 5, G.R. No. 26085, recompense or compensation awarded for the damage
August 12, 1927); or suffered. (So Ping Bun v. CA, G.R. No. 120554, September 21,
2. The increase of the price of a thing sold on credit over 1999; Ferro Chemicals, Inc. vs. Garcia, G.R. No. 168134,
its cash sale price is not interest within the purview of October 5, 2016)
the Usury Law, if the sale is made in good faith and not
as a mere pretext to cover a usurious loan. (Manila 2. Negligence, by act or omission, of which defendant, or
Trading v. Tamaraw, G.R. No. L-22995, February 28, some person for whose acts, must respond, was guilty;
1925) and

3. Connection of cause and effect between such

negligence and damage. (Dra. Leila A. Llano v. Rebecca
TORTS
Biong, G.R. No. 182356, December 4, 2013)

NOTE: Based on this provision of law, the requisites of
Tort
quasi-delict are the following:

It is a civil wrong wherein one person’s conduct causes a
a. there must be an act or omission;
compensable injury to the person, property or recognized
b. such act or omission causes damage to
interest of another, in violation of a duty imposed by law.
another;

c. such act or omission is caused by fault or
Tortious Act
negligence; and

d. there is no pre-existing contractual relation
It is a wrongful act. It is the commission or omission of an
between the parties. (Chan, Jr. v. Iglesia Ni
act by one, without right, whereby another receives, some
Cristo, Inc., G.R. No. 160283, October 14, 2005)
direct or indirect injury, in person, property, or reputation.
(De Leon, 2012)
NOTE: In civil cases, a party who alleges a fact has the

burden of proving it by preponderance of evidence or
GR: An action for damages can only be maintained by the
greater weight of credible evidence.
person directly injured, not by one alleging the collateral
injury.
Elements of Abuse of Rights:

XPN: There are instances where injury to one may operate
1. The existence of a legal right or duty;
as an injury to another, e.g. a lone parent cannot sue for the
2. Which is exercise in bad faith; and
injury suffered by his child, but may maintain an action in
3. For the sole intent of prejudicing or injuring another.
his own right for any damages suffered as a result of the
(Far East Bank and Trust Co. v. Pacilan, G.R. No. 157314,
injury.
July 29, 2005)

Remedies for Torts (CPR):
Elements of Unjust Enrichment (Accion In Rem Verso):

1. Compensatory – actions for sum of money for the
1. The defendant has been enriched;
damage suffered.
2. The plaintiff has suffered a loss;
2. Preventive – prayer for injunction, a writ of
3. The enrichment of the defendant is without just or
preliminary injunction, and a temporary restraining
legal ground; and
order, enjoining the defendant from continuing the
4. The plaintiff has NO other action based on a contract,
doing of the tortious conduct.
quasi-contract, crime, quasi-delict, or any other
3. Restitution – to return gains that the defendant
provision of law.
wrongfully obtained by tort.

Elements The injury to the plaintiff, however, need NOT be the cause
of the enrichment of the defendant. It is enough that there
1. A legal Right in favor of a person be some relation between them, that the enrichment of the
2. A correlative legal Obligation on the part of the defendant would not have been produced had it not been
defendant to respect such right. for the fact from which the injury to the plaintiff is derived.
3. A Wrong, an act or omission in violation of such right (Almario v. Philippine Airlines, G.R. No. 170928, September
with consequent injury. 11, 2007)

Unjust Enrichment does NOT apply if the plaintiff
Quasi-delict
assumed the risk and was not diligent in obtaining the

consent of giving notice
Whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre- The principle of unjust enrichment cannot be validly
existing contractual relation between the parties, is quasi- invoked by a party who, through his own act or omission,
delict or culpa aquilana. (Art. 2176, NCC) took the risk of being denied payment for additional costs
by not giving the other party prior notice of such costs
Elements of Quasi-Delict (1993, 1997, 2006, 2007, and/or by not securing their written consent thereto, as
2010 BAR)

2021 GOLDEN NOTES 2021 & 2022
Civil Law
required by law and their contract. (Uy v. Public Estates Intentional torts are independent civil liabilities not
Authority, G.R. Nos. 147925-26, June 8, 2000) arising from an act or omission complained of as a felony.
Intentional torts are found under Articles 32 and 34 of the
Liability without fault NCC. (See Safeguard Security Agency, Inc. v. Tangco, G.R. No.
165732, December 14, 2006, 540 PHIL 86-111)
Even when an act or event causing damage to another’s
property was not due to the fault or negligence of the Negligence
defendant, the latter shall be liable for indemnity if
through the act or event he was benefited. (Art. 23, NCC) Negligence is the omission of that degree of diligence
which is required by the nature of the obligation and
Acts Contrary to Law corresponding to the circumstances of the persons, time
and place. (NCC, Art. 1173)
Every person who, contrary to law, willfully or negligently An actionable negligence may be culpa contractual, culpa
causes damage to another, shall indemnify the latter for aquiliana, or criminal negligence. Thus, an action for
the same. (NCC, Art. 20) damages for negligent act of the defendant may be based
on contract, quasi-delict, or delict. The bases for liability
“Contrary to law” means that the act violated are are separate and distinct from each other even if only one
provisions of both the Civil and Penal Codes. act is involved. (Aquino, 2017)

Elements of Acts Against Good Morals (Contra Bonus Motive NOT Material
Mores):
Motive is not material on negligence cases. The defendant
1. There is a legal act; may still be held liable even if the act was meant to be a
2. Which is contrary to morals, good customs, public practical joke. (Aquino, 2017)
order or public policy; and
3. It is done with the intent to injure. (Mendoza v. Sps. Culpa Aquiliana v. Culpa Contractual
Gomez, G.R. No. 160110, June 18, 2014)
Culpa Aquiliana Culpa Contractual
NOTE: Art. 20 pertains to damages arising from a violation The foundation of liability The liability is founded on
of law, while Art. 21 refers to acts contrary to morals. is independent of a a contract.
contract.
Distinctions between Art. 20 and Art. 21 Negligence is merely
Negligence is direct,
incidental to the
Article 20 Article 21 substantive, and
performance of the
independent
The act is illegal, and a law The act is legal, however, contractual obligation.
was violated, the act offended public The defense of “good The defense of “good father
morals, good customs and father of a family” is a of a family” is not a
public policy. complete and proper complete defense in the
The act was done willfully The act was done willfully. defense insofar as selection of employees.
or may have been parents, guardians,
committed negligently. employers are concerned.
The intent of the offender The intent of the offender There is no presumption There is presumption of
is immaterial in is immaterial. of negligence. negligence as long as it can
determining liability. The party injured must be proved that there is a
prove the negligence of breach of contract.
Breach of Promise of Marriage may be actionable the defendant.
under Art. 21 in certain circumstances
Test of negligence
Mere breach of promise to marry is not an actionable
wrong. To formally set a wedding and go through all the The test is would a prudent man, in the position of the
numerous preparation and publicity, only to walk out of it tortfeasor, foresee harm to the person injured as a
when the matrimony is about to be solemnized, is quite reasonable consequence of the course about to be
different. This is palpably and unjustifiably contrary to pursued? If so, the law imposes a duty on the actor to take
good customs for which defendant must be held precaution against its mischievous results, and failure to
answerable in damages in accordance with Article 21 do so constitutes negligence. (Picart v. Smith, G.R. No. L-
aforesaid. (Wassmer v. Velez, 12 SCRA 648, 1964) 12219, March 15, 1918; Romulo Abrogar and Erlinda
Abrogar v. Cosmos Bottling Company and Intergames Inc.,
NOTE: Breach of promise to marry where there had been G.R. No. 164749, March 15, 2017)
carnal knowledge, moral damages may be recovered if
there be criminal or moral seduction, but not if the NOTE: The determination of negligence is a question of
intercourse was due to mutual lust. (Paras, 2018) foresight on the part of the actor. (Phil. Hawk Corp. v.
Vivian Tan Lee, G.R. No. 166869, February 16, 2010)
CLASSIFICATION OF TORTS
When is negligence excused

ACCORDING TO MANNER OF COMMISSION
GR: Negligence is excused when events that transpired

were unforeseen or, which though foreseen, were
Intentional Torts
inevitable. (NCC, Art. 1174)


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Civil Law
XPNs: G.R. No. L-12219, March 15, 1918; Al del Cruz v. Capt. Renato
1. In cases specified by law; Octaviano and Wilma Octaviano, G.R. No. 219649, July 26,
2. When declared by stipulation; or 2017)
3. When the nature of the obligation requires the
assumption of risk. The law requires a man to possess ordinary capacity to
avoid harming his neighbors unless a clear and manifest
Burden of proof incapacity is shown; but it does not generally hold him
liable for unintentional injury unless, possessing such
GR: Plaintiff alleging damage due to negligent acts in his capacity, he might ought to have foreseen the danger.
complaint has the burden of proving such negligence. (Corliss v. Manila Railroad Co., G.R. No. L-21291, March 28,
1969; Al del Cruz v. Capt. Renato Octaviano and Wilma
XPN: When the rules or the law provide for cases when Octaviano, G.R. No. 219649, July 26, 2017)
negligence is presumed.
Application of standard of diligence to children
Disputable presumptions of negligence
GR: The action of a child will not necessarily be judged
1. Motor vehicle mishaps – a driver is presumed according to the standard of an adult.
negligent if he:
XPN: If the minor is mature enough to understand and
a. Was found guilty of reckless driving or violating appreciate the nature and consequences of his actions. In
traffic regulations at least twice within the preceding such a case, he shall be considered to have been negligent.
two months (NCC, Art. 2184); or
b. Was violating any traffic regulation at the time of NOTE: The age of absolute irresponsibility is 15 years old
the mishap. (NCC, Art. 2185) and below. (Juvenile Justice and Welfare Act of 2006, RA
9344)
2. Possession of dangerous weapons or substances,
results in death or injury, except when the possession or Nevertheless, absence of negligence does not absolutely
use thereof is indispensable in his occupation or business. excuse the child from liability, as his properties, if any, can
(NCC, Art. 2188) be held subsidiarily liable. Nor will such absence of
negligence excuse the child’s parent from vicarious
3. Common carriers are presumed to have been at liability.
fault or acted negligently in cases of death or injuries to
passengers. Unless they prove that they observed “Diligence before the fact”
extraordinary diligence. (NCC, Art. 1733 & 1755)
The conduct that should be examined in negligence cases
Intoxication not negligence per se is prior conduct or conduct prior to the injury that resulted
or, in proper cases, the aggravation thereof.
Mere intoxication is not negligence per se nor establishes
want of ordinary care. But it may be one of the DEFENSES OF NEGLIGENCE
circumstances to be considered to prove negligence.
(Wright v. MERALCO, G.R. No. L-7760, October 1, 1914) 1. Plaintiff’s negligence is the proximate cause of
injury
Doctrine of Comparative Negligence
When the plaintiff's own negligence was the immediate
The negligence of both the plaintiff and the defendant are and proximate cause of his injury, he cannot recover
compared for the purpose of reaching an equitable damages. But if his negligence was only contributory, the
apportionment of their respective liabilities for the immediate and proximate cause of the injury being the
damages caused and suffered by the plaintiff. (Pineda, defendant's lack of due care, the plaintiff may recover
2009) damages, but the courts shall mitigate the damages to be
awarded. (Art. 2179, NCC)
The relative degree of negligence of the parties is
considered in determining whether, and to what degree, Test in determining whose negligence was the
either should be responsible for his negligence proximate cause of injury
(apportionment of damages).
Distinction must be made between the accident and the
Good father of a family or reasonably prudent man injury, between the event itself, without which there could
have been no accident, and those acts of the victim not
The general standard of test is Bonus Pater Familias or that entering into it, independent of it, but contributing to his
of a good father of a family. If the law or contract does not own proper hurt. (Fernando v. Court of Appeals, 208 SCRA
state the diligence which is to be observed in the 714, 1992)
performance, that which is expected of a good father of a
family shall be required. [NCC, Art. 1173 (2)] 2. Contributory negligence

Concept of a good father of the family (pater familias) Contributory negligence has been defined as a conduct
on the part of the injured party, contributing as a legal
He is not and is not supposed to be omniscient of the cause to the harm he has suffered, which falls below
future; rather, he is one who takes precautions against any the standard to which he is required to conform for his
harm when there is something before him to suggest or own protection. (Estacion v. Bernardo, G.R. No. 144723,
warn him of the danger or to foresee it. (Picart v. Smith, February 27, 2006)

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Civil Law
Contributory negligence of the party injured will not defeat The following actions must be instituted within four
the action if it be shown that the defendant might, by the years:
exercise of reasonable care and prudence, have avoided
the consequences of the injured party's negligence. (Rakes (1) Upon an injury to the rights of the plaintiff;
v. The Atlantic, Gulf and Pacific Company, 7 PHIL. 359, 1907) (2) Upon a quasi-delict;

3. Assumption of risk However, when the action arises from or out of any
act, activity, or conduct of any public officer involving
A person who, knowing that he is exposed to a the exercise of powers or authority arising from
dangerous condition, voluntarily assumes the risk of Martial Law including the arrest, detention and/or
such dangerous condition may not recover from the trial of the plaintiff, the same must be brought within
defendant who maintained such dangerous conditions. one (1) year. (As amended by PD No. 1755, Dec. 24,
(Aquino, 2017) 1980) (Art. 1146, NCC)

Elements: NOTE: In actions of damages, there may also be other
prescriptive periods established by law. Art. 1146 does not
1. The plaintiff must know that the risk is present; always apply, such as in this case where the law on sales
2. He must further understand its nature; and sets a prescriptive period of only 6 months for violation of
3. His choice to incur is free and voluntary implied warranties against hidden faults or defects. (De
Guzman v. Toyota Cubao, Inc., G.R. No. 141480, November
Assumption of Risk is inapplicable if the Emergency 29, 2006)
rule applies
6. Fortuitous Event
For it has been held that a person is excused from the force
of the rule, that when he voluntarily assents to a known Elements of Fortuitous Events or Force Majeure
danger he must abide by the consequences, if an
emergency is found to exist or if the life or property of 1. The cause of the unforeseen and unexpected
another is in peril or when he seeks to rescue his occurrence, or of the failure of the debtor to comply
endangered property. (Ilocos Norte Electric Company v. with his obligation, must be independent of the human
Court of Appeals, 179 SCRA 5, 1989) will
2. It must be impossible to foresee the event which
4. Doctrine of Last Clear Chance constitutes the 'caso fortuito', or if it can be foreseen, it
must be impossible to avoid
The person who has the last fair chance to avoid 3. The occurrence must be such as to render it
impending harm and fails to do so is chargeable with impossible for the debtor to fulfill his obligation in a
the consequences, without reference to the prior normal manner; and
negligence of the other party. (Picart v. Smith, G.R. No. 4. 4. The obligor must be free from any participation in
L-12219, March 15, 1918) the aggravation of the injury resulting to the creditor.

Elements Inapplicability of “Force Majeure” or Fortuitous Events
in case of Negligence
1. Both the plaintiff and defendant were negligent;
2. The plaintiff’s negligence was not the proximate cause; Where loss of cargo results from the failure of the officers
3. Plaintiff’s negligence was antecedent to the of a vessel to inspect their ship frequently so as to discover
subsequent negligence of the defendant; and the existence of cracked parts, that loss cannot be
4. The defendant had the opportunity to observe the attributed to force majeure, but to the negligence of those
circumstance and avoid the damage done to the officials. (Edgar Cokaliong Shipping Lines v. UCPB General
plaintiff. Insurance Company, G.R. No. 146018, June 25, 2003)

Inapplicability of Last clear chance in breach of 7. Waiver
contract cases
While liability for future ordinary negligence may be
The principle of last clear chance is inapplicable in the waived liability for gross negligence (negligence with bad
instant case, as it only applies in a suit between the owners faith, see Art. 1173) cannot be waived. This is because
and drivers of two colliding vehicles. It does not arise gross negligence amounts to fraud and bad faith which
where a passenger demands responsibility from the cannot be waived under Art. 1171. (Sabena Belgian World
carrier to enforce its contractual obligations, for it would Airlines v. Court of Appeals, G.R. No. 104685, March 14,
be inequitable to exempt the negligent driver and its 1996)
owner on the ground that the other driver was likewise
guilty of negligence. (Tiu v. Arriesgado, 437 SCRA 426, 8. Emergency Rule
2004)
Under this rule, one who suddenly finds himself in a place
NOTE: The doctrine does not apply where the party of danger, and is required to act without time to consider
charged is required to act instantaneously, and the injury the best means that may be adopted to avoid the
cannot be avoided by the application of all means at hand impending danger, is not guilty of negligence, if he fails to
after the peril is or should have been discovered. adopt what subsequently and upon reflection may appear
(Achevara v. Ramos, G.R. No. 175172, September 29, 2009) to have been a better method, unless the danger in which
he finds himself is brought about by his own negligence.
5. Prescription

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Civil Law
(Delsan Transport Lines, Inc., v. C&A Construction, Inc., G.R. engaged in any business or industry. [Ibid. (5)] (2005
No. 156034, October 1, 2003) BAR)

9. Damnum Absque Injuria Vicarious Liability of Owners and Managers of the
Establishment under Article 2180(5) (1991, 2001
There is a material distinction between damages and BAR)
injury. Injury is the illegal invasion of a legal right; damage
is the loss, hurt or harm which results from the injury; and GR: It is required that the employee must be performing
damages are the recompense or compensation awarded his assigned task at the time that the injury is caused.
for the damage suffered.
XPN: However, it is not necessary that the task performed
NOTE: There can be damage without injury in those by the employee is his regular job or that which was
instances in which the loss or harm was not the results of a expressly given to him by the employer. It is enough that
violation of a legal duty. the task is indispensable to the business or beneficial to
the employer. (Filamer Christian Institute v. IAC, G.R. No.
In order that the plaintiff may maintain an action for the 75112, August 7, 1992)
injuries of which he complaints, he must establish that
such injuries resulted from a breach of duty which the NOTE: It is not required that the employer is engaged in
defendant owed to the plaintiff a concurrence of injury to some kind of industry or work. (Castilex Industrial
the plaintiff and legal responsibility by the person causing Corporation v. Vasquez, G.R. No. 132266 December 21, 1999)
it. (BPI Express Card Corporation v. Court Of Appeals, G.R.
No. 120639, September 25, 1998) If there is deviation from the scope of employment, the
employer is not liable no matter how short in time is the
ACCORDING TO SCOPE deviation.

1. Human Relations Tort When a criminal case is filed against the offender, before
2. Strict Liability Tort the employer’s subsidiary liability is exacted, there must
3. Independent Civil Actions be proof that:

Independent Civil Actions may be filed independently 1. They are indeed the employer of the convicted
of the criminal action, even if there was no reservation employee;
made by the injured party. 2. The former are engaged in some kind of industry;
3. The crime was committed by the employees in the
discharge of their duties; and
THE TORTFEASOR
4. That the execution against the latter has not been
satisfied due to insolvency. (Philippine Rabbit Bus
Whoever by act or omission causes damage to another, Lines, Inc. v. People, G.R. No. 147703, April 14, 2004)
there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre- 2. Employers
existing contractual relation between the parties, is called
quasi-delict and is governed by the provisions of this Requisites before an employer may be held liable
Chapter. (Art. 2175, NCC) under Article 2180 (4) for the act of its employees

Natural Persons liable for quasi-delict 1. The employee was chosen by the employer personally
or through another;
Every person legally responsible is liable for a tort 2. The service is to be rendered in accordance with
committed by him provided it is the proximate cause of an orders which the employer has the authority to give all
injury to another. (De Leon, 2012) times; and
3. That the illicit act of the employee was on the occasion
Juridical Persons or by reason of the functions entrusted to him. (Jayme
v. Apostol, G.R. No. 163609, November 27, 2008)
Pursuant to vicarious liability, a corporation may be held
directly and primary liable for tortious acts of its officers Presumption on the negligence of the employer
or employees. (NCC, Art. 2180)
The negligence of the employee is presumed to be the
PERSONS MADE RESPONSIBLE FOR OTHERS negligence of the employer because the employer is
supposed to exercise supervision over the work of the
1. Owners and managers of establishments and employees. This liability of the employer is primary and
enterprises direct. (Standard Vacuum Oil Co. vs. Tan and Court of
Appeals, G.R. No. L-13048. February 27, 1960)
The owners and managers of an establishment or
enterprise are likewise responsible for damages caused by Once the employee’s fault is established, the employer can
their employees in the service of the branches in which the then be made liable on the basis of the presumption that
latter are employed or on the occasion of their functions. the employer failed to exercise diligentissimi patris familias
[NCC, Art. 2180(4)] (diligence of a good father of a family) in the selection and
supervision of its employees. (LRTA v. Navidad, G.R. No.
Employers shall be liable for the damages caused by their 145804, February 6, 2003)
employees and household helpers acting within the scope
of their assigned tasks, even though the former are not

2021 GOLDEN NOTES 2021 & 2022
Civil Law
Owners/Managers Employers (Par 5, Art. NEW CIVIL CODE REVISED PENAL CODE
(Par 4, Art. 2180, NCC) 2180, NCC) even without suing the
Requires engagement in The employers need not be employee.
business on the part of the engaged in business or Diligence of a good father
employers as the law industry. Diligence of a good father
of a family is not a defense.
speaks of “establishment of a family is a defense.

or enterprise.” Petitioner must prove that
Covers negligent acts of Covers negligent acts of Employer is liable even if the employer is engaged in
employees committed employees acting within not engaged in business. business.
either in the service of the the scope of their assigned
branches or in the tasks. Proof of negligence is by Proof beyond reasonable
occasion of their mere preponderance of doubt is required.
functions. evidence.

Remedies of the injured party in pursuing the civil 3. Parents
liability of the employer for the acts of his employees
Basis of vicarious liability of the parents (2005 BAR);
1. If he chooses to file a civil action for damages based on “Principal of Parental Liability”
quasi-delict under Article 2180 of the New Civil Code
and succeeds in proving the negligence of the This liability is made natural as a logical consequence of
employee, the liability of the employer is primary, the duties and responsibilities of parents exercising
direct and solidary. It is not conditioned on the parental authority which includes controlling, disciplining
insolvency of the employee. (Metro Manila Transit and instructing their children. In this jurisdiction the
Corp. v. CA, G.R. No. 118069, November 16, 1998) parent’s liability is vested by law which assumes that when
a minor or unemancipated child living with their parent,
2. If he chooses to file a criminal case against the offender commits a tortious act, the parents are presumed negligent
and was found guilty beyond reasonable doubt, the in the performance of their duty to supervise the children
civil liability of the employer is subsidiary. The under their custody. (Tamargo v. CA, G.R. No. 85044, June 3,
employer cannot use as a defense the exercise of the 1992)
diligence of a good father of a family.
Requisites of vicarious liability of the parents (21-CL)
NOTE: Once there is a conviction for a felony, final in
character, the employer under Article 103 of the RPC, is 1. The child is below 21 years of age;
subsidiary liable, if it be shown that the commission 2. The child Committed a tortious act to the damage and
thereof was in the discharge of the duties of the employee. prejudice of another person; and
A previous dismissal of an action based on culpa aquiliana 3. The child Lives in the company of the parent
could not be a bar to the enforcement of the subsidiary concerned whether single or married. (Pineda, 2009)
liability required by Art. 103 of the RPC. (Jocson, et al. v.
Glorioso, G.R. No. L-22686, January 30, 1968) NOTE: Under Article 221 of the Family Code, there is no
more alternative qualification as to the civil liability of
Defenses available to an employer parents. The liability of both father and mother is now
primary and not subsidiary. (Libi vs. IAC, G.R. No. 70890,
1. Exercise of due diligence in the selection and September 18, 1992) Otherwise stated, their responsibility
supervision of its employees (except in criminal is now simultaneous, and no longer alternative. (Rabuya,
action); and 2017)

NOTE: In the selection of prospective employees, Liability of parents involving either crimes or quasi-
employers are required to examine them as their delicts of their minor children; Primary NOT
qualifications, experience, and service records. On the Subsidiary
other hand, with respect to the supervision of
employees, employers should formulate standard Primary and Solidary Liability:
operating procedures, monitor their implementation,
and impose disciplinary measures for breaches (a) Under Article 2180 of the NCC
thereof. To establish these factors in a trial involving
the issue of vicarious liability, employees must submit The civil liability of parents for quasi-delicts of their minor
concrete proof, including documentary evidence. children, as contemplated in Article 2180 of the Civil Code,
(Metro Manila Transit v. CA, G.R. No. 141089, August 1, is primary and not subsidiary. In fact, if we apply Article
2002) 2194 of the said Code, which provides for solidary liability
of joint tortfeasors, the persons responsible for the act or
2. The act or omission was made outside working hours omission, in this case, the minor and the father, and in case
and in violation of company’s rules and regulations. of his death or incapacity, the mother, are solidarily liable.
Accordingly, such parental liability is primary and not
Employer’s Liability under Art. 2180, NCC v. subsidiary, hence the last paragraph of Article 2180
Employer’s Liability under Art. 100, RPC provides that “the responsibility treated in this article shall
cease when the persons herein mentioned proved that
NEW CIVIL CODE REVISED PENAL CODE they observed all the diligence of a good father of a family
Liability is direct, primary, Liability is subsidiary. to prevent damages. (Libi vs. IAC, G.R. No. 70890, September
and solidary - the 18, 1992)
employer may be sued

2021 GOLDEN NOTES 2021 & 2022
Civil Law
(b) Under Article 101 of the RPC 4. Guardians

The parents are, and should be, held primarily liable for Guardians are liable for damages caused by the minors or
the civil liability arising from criminal offenses committed incapacitated persons who are under their authority and
by their minor children under their legal authority or live in their company (NCC, Art. 2180). If the minor or
control, or who live in their company, unless it is proven insane person causing damage has no parents or guardian,
that the former acted with the diligence of a good father of the minor or insane person shall be answerable with his
a family to prevent such damages. The primary liability is own property in an action against him where a guardian ad
premised on the provisions of Article 101 of the Revised litem shall be appointed. (NCC, Art. 2182)
Penal Code with respect to damages ex delicto caused by
their children 9 years of age or under, or over 9 but under NOTE: The rules on vicarious liability of parents are
15 years of age, who acted without discernment. With applicable to vicarious liability of guardians.
regard to their children over 9 but under 15 years of age,
who acted with discernment, or 15 years of age or over but 5. State
under 21 years of age, such primary liability shall be
imposed pursuant to Article 2180 of the Civil Code. (Libi vs. Aspects of liability of the State
IAC, G.R. No. 70890, September 18, 1992)
1. Public/Governmental – Where the State is liable only
NOTE: Parents and other persons exercising parental for the tortious acts of its special agents. The State has
authority shall be civilly liable for the injuries and damages voluntarily assumed liability for acts done through
caused by the acts or omissions of their unemancipated special agents. (Pineda, 2009)
children living in their company and under their parental 2. Private/Non-governmental – When the State is
authority subject to the appropriate defenses provided by engaged in private business or enterprise, it becomes
law. (FC, Art. 221) liable as an ordinary employer. (NIA v. Fontanilla, G.R.
No. 61045, December 1, 1989)
Vicarious liability of other persons exercising parental
authority NOTE: The State is only liable for the negligent acts of its
officers, agents and employees when they are acting as
In default of the parents or a judicially appointed guardian, special agents.
parental authority shall be exercised by the following
persons in the order indicated: Where the government commissions a private individual
for a special governmental task, it is acting through a
1. Surviving grandparents; special agent within the meaning of the provision. (Largo,
2. Oldest sibling, over 21 years old, unless unfit or 2007)
unqualified; or
3. Child’s actual custodian, over 21 years old, unless unfit Liability of Provinces, Cities and Municipalities
or disqualified. (FC, Art. 216)
As for local government units, “provinces, cities and
Adopted Children municipalities shall be liable for damages for the death of,
or injuries suffered by, any person by reason of the
Judicially adopted children are considered legitimate defective condition of roads, streets, bridges, public
children of their adopting parents. (RA. 8552, Sec. 17) buildings, and other public works under their control or
supervision.” (NCC, Art. 2189)
Thus, adopters are civilly liable for the tortious/criminal
acts of their minor children who live with them. Lack of knowledge not a defense

NOTE: Parental authority may not be given retroactive The LGU cannot be relieved of liability based on its
effect so as to make the adopting parents the indispensable purported lack of knowledge of the excavation and the
parties in a damage case filed against their adopted child, condition of the road when the accident occurred. Its
for acts committed by the latter, when actual custody was obligation to maintain the safe condition of the road within
yet lodged with the biological parents. (Tamargo v. CA, G.R. its territory is a continuing one which is not suspended
No. 85044, June 3, 1992) while a street is being repaired. (Municipality of San Juan v.
CA, G.R. No. 121920, 9 Aug 2005)
Reversion of parental authority to biological parents
6. Teachers and heads of establishments and trades
If the adopter dies while the adopted child is still a minor,
parental authority should be deemed to have reverted in Teachers or directors of arts and trades are liable for any
favor of the biological parents. (Bartolome v. SSS, G.R. No. damages caused by their pupils or apprentices while they
192531, November 12, 2014) are under their custody.

Illegitimate Child In the case of Ylarde v. Aquino, G.R. L-33722, July 29, 1988,
the teacher Edgardo Aquino, after bringing his pupils to an
As for an illegitimate child, if he is acknowledged by the excavation site dug by them, left them all by themselves,
father and lives with the latter, the father shall be and one of the pupils fell into the pit. The teacher acted
responsible. However, if he is not recognized by the with fault and gross negligence because a teacher who
putative father but is under the custody and supervision of stands in loco parentis to his pupils would have made sure
the mother, it is the latter who is the one vicariously liable. that the children are protected from all harm in his
(Pineda, 2009) company.


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Civil Law
Application of vicarious liability under Art. 2180 of the b. as an institution exercising special parental
NCC not limited to schools of arts and trade authority over minor children under Art. 219 of
the FC;
The application of Article 2180 of the New Civil Code is not c. for breach of contract; or
limited to schools of arts and trades. There is really no
substantial distinction between the academic and the non- NOTE: When a student enrolls, a contract is entered
academic schools insofar as torts committed by their into between him and the school. Under this contract,
students are concerned. The same vigilance is expected the school is supposed to ensure that adequate steps
from the teacher over the students under his control and are taken to provide an atmosphere conducive to
supervision, whatever the nature of the school where he is study and ensure the safety of the student while inside
teaching. There is no reason why different degrees of its premises. (Saludaga v. FEU, G.R. No. 179337, April
vigilance should be exercised by the school authorities on 30, 2008) Thus, any quasi-delict committed by the
the basis only of the nature of their respective schools. school’s employee against the student is also
(Amadora v. CA, G.R. No. L-47745, April 15, 1988) actionable under breach of contractual obligations.

NOTE: Although Art. 2180 is applicable to all schools, the 3. Subsidiary liability for felonies committed by their
distinction between an academic school and an servants, pupils, workmen, apprentices, or employees
establishment of arts and trades is still essential to in the discharge of their duties, under Art. 103 of the
distinguish the liability of the teacher from that of the RPC.
head of the establishment.
Joint Tortfeasors
Liability of the teacher as distinguished from the head
of the establishment Two or more persons who act together in committing a
wrong, or contribute to its commission, or assist or
GR: Where the school is academic rather than technical or participate therein actively and with common intent, so
vocational in nature, responsibility for the tort committed that injury results to a third person from the joint
by the student will attach to the teacher in charge of such wrongful act of the wrongdoers. (De Leon, 2012)
student.
Test for Joint Tortfeasors
XPN: In the case of establishments of arts and trades, it is
the head thereof, and only he, who shall be held liable as 1. Whether the plaintiff has a single cause of action
an exception to the general rule. against such tortfeasors; or
2. Whether he has only several causes of action against
Age of student immaterial each of them.

Even if the student has already reached the age of majority, Liability of Joint Tortfeasors
the liability can be imputed to the teacher-in-charge.
Under Article 2180, age does not matter. Unlike the parent The responsibility of two or more persons who are liable
who will be liable only if the child is still a minor, the for quasi-delict is solidary. (NCC, Art. 2194) Each are liable
teacher is held answerable by the law for the act of the as principals, to the same extent and in the same manner
student regardless of the age of the student liable. as if they had performed the wrongful act themselves.
(Amadora v. CA, G.R. No. L-47745, April 15, 1988) (Ruks Konsult and Construction v. Adworld Sign and
Advertising Corp., G.R. No. 204866, January 21, 2015)
Limitation to the liability of teachers and heads of
Schools PROXIMATE CAUSE

Teachers and Heads of schools are only liable if the Proximate cause is that cause, which, in natural and
students remain in schools. If they are no longer in such continuous sequence, unbroken by any efficient
premises, their responsibility shall attach no more. Their intervening cause, produces the injury, and without which
parents become responsible for them. (Pineda, 2009) the result would not have occurred. (Ramos v. C.O.L. Realty,
G.R. No. 184905, August 28, 2009)
Defenses available
NOTE: Proximate cause is not necessarily the immediate
Their responsibility will cease when they prove that they cause; it’s not necessarily the nearest time, distance or
observed all the diligence of a good father of a family to space. (People v. Elizalde, 59 Off. Gaz. 1241)
prevent damage. (NCC, Art. 2180) As for the employer, if he
shows to the satisfaction of the court that in the selection The doctrine of proximate cause is applicable only in
and in the supervision of his employees he has exercised actions for quasi-delict, not in actions involving breach of
the care and diligence of a good father of a family, the contract.
presumption is overcome and he is relieved from
liability. (Layugan v. IAC, G.R. No. L-49542, September 12, Principle of concurrent causes
1980)
Where the concurrent or successive negligent acts or
Liability of the school omissions of two or more persons, although acting
independently, are in combination with the direct and
1. Vicarious liability as an employer under Art. 2180 of proximate cause of a single injury to a third person, and it
the NCC; is impossible to determine what proportion each
2. Direct liability: contributed to the injury, either of them is responsible for
a. for quasi-delicts under Art. 2176 of the NCC; the whole injury, even though his act alone might not have

2021 GOLDEN NOTES 2021 & 2022
Civil Law
caused the entire injury. (Sabido v. Custodio, G.R. No. L- Resort to the doctrine may be allowed only when:
21512, August 31, 1966)
1. The accident is of such character as to warrant an
EFFICEINT INTERVENING CAUSE inference that it would not have happened except for
the defendant’s negligence;
An efficient intervening cause is one which destroys the 2. The accident must have been caused by an agency or
causal connection between the negligent act and the injury instrumentality within the exclusive management or
and thereby negatives liability. (Morril v. Morril, 60 ALR control of the person charged with the negligence
102, 104 NJL 557) complained of; and
3. The accident must not have been due to any voluntary
NOTE: There is no efficient intervening cause if the force action or contribution on the part of the person
created by the negligent act or omission have either: injured. (Josefa v. MERALCO, G.R. No. 182705, July 18,
2014)
1. Remained active itself; or
2. Created another force which remained active until it Thus, it is not applicable when an unexplained accident
directly caused the result; or may be attributable to one of several causes, for some of
3. Created a new active risk of being acted upon by the which the defendant could not be responsible. (FGU
active force that caused the result. (57 Am. Jur. 2d 507) Insurance Corp. v. G. P. Sarmiento Trucking Co., G.R. No.
141910, August 6, 2002)

DOCTRINE OF LAST CLEAR CHANCE
DAMNUM ABSQUE INJURIA

Where both parties are negligent but the negligent act of (DAMAGE WITHOUT PREJUDICE)
one succeeds that of the other by an appreciable interval of
time, the one who has the last reasonable opportunity to Damnum absque injuria – The proper exercise of a lawful
avoid the impending harm and fails to do so, is chargeable right cannot constitute a legal wrong for which an action
with the consequences, without reference to the prior will lie, although the act may result in damage to another,
negligence of the other party. (Picart v. Smith, G.R. No. L- for no legal right has been invaded. One may use any
12219, March 15, 1918; Greenstar Express, Inc. v. Universal lawful means to accomplish a lawful purpose and though
Robina Corporation, G.R. No. 205090, October 17, 2016) the means adopted may cause damage to another, no cause
of action arises in the latter’s favor. Any injury or damage
Requisites: occasioned thereby is damnum absque injuria. The courts
can give no redress for hardship to an individual resulting
1. Plaintiff is placed in danger by his own negligent acts from action reasonably calculated to achieve a lawful end
and he is unable to get out from such situation by any by lawful means. (The Orchard Golf & Country Club, Inc., et
means; al. v. Yu and Yuhico, G.R. No. 191033, January 11, 2016)
2. Defendant knows that the plaintiff is in danger and
knows or should have known that the plaintiff was NOTE: When the conjunction of damage and wrong is
unable to extricate himself therefrom; and wanting there is no damnum absque injuria. (Lagon v. CA,
3. Defendant had the last clear chance or opportunity to G.R. No. 119107, March 18, 2005)
avoid the accident through the exercise of ordinary
care but failed to do so, and the accident occurred as a The principle does not apply when the exercise of this
proximate result of such failure. (Pineda, 2009) right is suspended or extinguished pursuant to a court
order. (Amonoy v. Gutierrez, 651 SCRA 731, 2001)
NOTE: There is a different rule in case of collision of
vessels. The doctrine of last clear chance in tort is not Prohibition against Double Recovery (2003, 2006
applicable to collisions of vessels as sea under the Code of BAR)
Commerce, and the case is deemed as if the collision is
imputable to both vessels; thus, each one of the vessels Responsibility for fault or negligence under quasi-delict is
shall suffer her own damage, and both shall be solidarily entirely separate and distinct from the civil liability arising
liable for the damages occasioned to their cargoes. (Arts. from negligence under the Penal Code. But the plaintiff
827 & 828, Code of Commerce; C.B. Williams v. Teodoro cannot recover damages twice for the same act or
Yangco, G.R. No. L-8325, March 10, 1914; Gargonio de omission of the defendant. (NCC, Art. 2177)
Sarasola v. Yu Biao Sontua, G.R. No. 22630. January 31,
1925) LEGAL INJURY

RES IPSA LOQUITUR In order that the law will give redress for an act causing
damage, that act must not only be hurtful, but also
Literally, res ipsa loquitur means "the thing speaks for wrongful. There must be damnum et injuria. (Sps. Cristino
itself." It is the rule that the fact of the occurrence of an v. Court of Appeals, G.R. No. 116100, February 9, 1996)
injury, taken with the surrounding circumstances, may
permit an inference or raise a presumption of negligence, Right
or make out a plaintiff’s prima facie case, and present a
question of fact for defendant to meet with an explanation. A right is a legally enforceable claim of one person against
(Professional Services Inc. v. Agana, G.R. No. 126297, another, that the other shall do a given act, or shall not do a
January 31, 2007) given act. (Pineda, 2011)

Requisites for the application of the doctrine Injury vs. Damage vs. Damages


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Civil Law
Injury The illegal invasion of a legal right. Manufacturers or Processors
The loss, hurt, or harm which results from
Damage
the injury. Under Article 2187 of the NCC, manufacturers and
The recompense or compensation awarded processors of foodstuffs, drinks, toilet articles, and similar
Damages goods shall be liable for death or injuries caused by any
for the damage suffered.
noxious or harmful substances used, although no
contractual relation exists between them and the
VIOLATION OF RIGHT OR LEGAL INJURY consumers.

Consumer’s Act (R.A. No. 7394)
Elements of Cause of Action
Section 97 of R.A. No. 7394 provides that any Filipino or
1. A right in favor of the plaintiff by whatever means and
foreign manufacturer, producer, and any importer, shall be
under whatever law it arises or is created;
liable for redress, independently of fault, for damages
2. An obligation on the part of the named defendant to
caused to consumers by defects resulting from design,
respect or not to violate such right; and
manufacture, construction, assembly and erection,
3. An act or omission on the part of such defendant
formulas and handling and making up, presentation or
violative of the right of the plaintiff or constituting a
packing of their products, as well as for the insufficient or
breach of the obligation to the plaintiff.
inadequate information on the use and hazards thereof.
(See Sections 92 – 107 of R.A. No. 7394)
Tort arising from Breach of Contract

Noise as Nuisance
A quasi-delict can be the cause for breaching a contract
that might thereby permit the application of principles
There can be no fixed standard as to what kind of noise
applicable to tort even when there is a pre-existing
constitutes a nuisance. In the absence of evidence that the
contract between the plaintiff and the defendant.
complainant and his family are supersensitive to

distracting noises, it is to be assumed that they are persons
Where, without a pre-existing contract between two
of ordinary and normal sensibilities. (Velasco v. Manila
parties, an act or omission can nonetheless amount to an
Electric Co., G.R. No. L-18390, August 6, 1971, 148-B PHIL
actionable tort by itself, the fact that the parties are
204-221)
contractually bound is no bar to the application of quasi-
delict provisions to the case.
Attractive Nuisance Doctrine

This rule can govern only where the act or omission
One who maintains on his premises dangerous
complained of would constitute an actionable tort
independently of the contract. (Far East Bank and Trust instrumentalities or appliances of a character likely to
Company v. CA, G.R. No. 108164, February 23, 1995; Orient attract children in play, and who fails to exercise ordinary
Freight International, Inc. v. Keihin-Everett Forwarding care to prevent children from playing therewith or
Company, Inc., G.R. No. 191937, August 9, 2017) resorting thereto, is liable to a child of tender years who is
injured thereby, even if the child is technically a trespasser
NOTE: The act that breaks the contract may be also a tort. in the premises.
(Air France v. Carrascoso, G.R. No. L-21438, September 28,
1966; Orient Freight International, Inc. v. Keihin-Everett The principal reason for the doctrine is that the condition
Forwarding Company, Inc., G.R. No. 191937, August 9, 2017) or appliance in question although its danger is apparent to
those of age, is so enticing or alluring to children of tender
years as to induce them to approach, get on or use it, and
CLASSES OF INJURY this attractiveness is an implied invitation to such children.
1. Legal injury (Hidalgo Enterprises, Inc. v. Balandan, G.R. No. L-3422, June
2. Damnum absque injuria 13, 1952, 91 PHIL 488-492; Jarco Marketing Corp. v. Court of
Appeals, G.R. No. 129792, December 21, 1999, 378 PHIL 991-
There can be damage without injury in those instances 1008)
in which the loss or harm was not the result of a
violation of a legal duty. In such cases, the Example: Swimming pool with “attractive floats or
consequences must be borne by the injured person paraphernalia.”
alone, the law affords no remedy for damages
resulting from an act which does not amount to a legal However, it should be noted that the attractive nuisance
injury or wrong. These situations are often doctrine, generally, is not applicable to bodies of water,
called damnum absque injuria. artificial as well as natural, in the absence of some unusual
condition or artificial feature other than the mere water
The underlying basis for the award of tort damages is and its location. (Hidalgo Enterprises, Inc. v. Balandan, G.R.
the premise that an individual was injured in No. L-3422, [June 13, 1952], 91 PHIL 488-492)
contemplation of law. Thus, there must first be a
breach of some duty and the imposition of liability for Abatement of Nuisances per se
that breach before damages may be awarded; and the
breach of such duty should be the proximate cause of The general welfare clause authorizes the abatement of
the injury. (Equitable Banking Corp. v. Calderon, G.R. nuisances without judicial proceedings. This tenet applies
No. 156168, December 14, 2004, 487 PHIL 499-511) to a nuisance per se, or one which affects the immediate
safety of persons and property and may be summarily
SPECIAL LIABILITY IN PARTICULAR ACTIVITIES abated under the undefined law of necessity. (Monteverde


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Civil Law
v. Generoso, 52 Phil. 123, 1982; Estate of Francisco v. Court infectious matter, constructed without precautions
of Appeals, G.R. No. 95279, July 25, 1991, 276 PHIL 649-656) suitable to the place. (NCC, Art. 2191) (2002 BAR)

Abatement of Nuisance per accidens Rules on liability for collapse of a building (NCC, Art.
1723)
If it be a nuisance per accidens, or by its nature, it cannot
be said to be injurious to rights of property, health, or 1. The collapse of the building must be within 15 years
comfort of the community, it may then be so proven in a from the completion of the structure.
hearing conducted for that purpose. A nuisance per
accidens is not per se a nuisance warranting its summary NOTE: The collapse is by reason of a defect in the
abatement without judicial intervention. (Estate of engineer or architect’s plans and specifications, or due
Francisco v. Court of Appeals, G.R. No. 95279, July 25, 1991, to the defects in the ground.
276 PHIL 649-656)
2. The prescriptive period is 10 years following the
Note: While the Sangguniang Bayan may provide for the collapse.
abatement of a nuisance (Local Government Code, Sec. 149 3. The liability applies to collapse or ruin, not to minor
[ee]), it cannot declare a particular thing as a nuisance per defects.
se and order its condemnation. The nuisance can only be 4. Even if payment has been made, an action is still
so adjudged by judicial determination. possible.

Municipal councils do not have the power to find as a fact NOTE: Acceptance of the building, after completion,
that a particular thing is a nuisance when such thing is not does not imply waiver of any of the cause of action by
a nuisance per se; nor can they authorize the extra judicial reason of any defect.
condemnation and destruction of that as a nuisance which,
in its nature, situation or use is not such. These things 5. If the engineer or architect supervises the
must be determined in the ordinary courts of law. (Iloilo construction, he shall be solidarily liable with the
Cold Storage v. Municipal Council, 24 Phil. 47, 1913; Estate contractor.
of Francisco v. Court of Appeals, G.R. No. 95279, July 25,
1991, 276 PHIL 649-656) NOTE: The contractor is likewise responsible for the
damages if the edifice falls, within the same period, on
Liability of the owner of a vehicle in case of an accident account of defects in the construction or the use of
(1996, 1998, 2002, 2009 BAR) materials of inferior quality furnished by him, or due
to any violation of the terms of the contract.
In motor vehicle mishaps, the owner is solidarily liable
with his driver, if the former, who was in the vehicle, could When a building collapses during an earthquake
have, by the use of the due diligence, prevented the
misfortune. It is disputably presumed that a driver was GR: No one can be held liable in view of the fortuitous
negligent, if he had been found guilty or reckless driving or event if the proximate cause of the collapse of the building
violating traffic regulations at least twice within the next is an earthquake.
preceding two months. (NCC, Art. 2184)
XPN: If the proximate cause is the defective designing or
Car owner not present in the vehicle construction, or directly attributable to the use of inferior
or unsafe material, it is clear that liability exists. (NCC, Art.
If the car owner is not present in the vehicle and the driver 1723; Juan F. Nakpil & Sons v. CA, G.R. No. L-47851, October
was negligent, the injured party may still sue the said 3, 1986)
owner under Article 2180 par. (5) of the New Civil Code
for imputed liability. Head of family

NOTE: Employers shall be liable for the damages caused The head of family that lives in a building or part thereof, is
by their employees and household helpers acting within responsible for damages caused by things thrown or
the scope of their assigned tasks, even though the former falling from the same. (Art. 2193, NCC)
are not engaged in any business or industry. (NCC, Article
2180 par. 5) NOTE: A lessee is considered as the head of a family. It is
enough that he lives in and has control over it. (Dingcong v.
If no knowledge of owner of vehicle not liable Kanaan, G.R. No. L-47033, 1941)

An owner of a vehicle cannot be held liable for an accident Possessor and User of an Animal
involving the said vehicle if the same was driven without
his consent or knowledge, and by a person not employed Under Article 2183 of the NCC, the possessor of an animal
by him. (Duavit v. CA, G.R. No. 82318, May 18, 1989) or whoever may make use of the same is responsible for
the damage which it may cause, although it may escape or
Liability of proprietors of buildings be lost. This responsibility shall cease only in case the
damage should come from force majeure or from the fault
1. The proprietor of a building or structure is responsible of the person who has suffered damage.
for the damages resulting from its total or partial
collapse, if it should be due to the lack of necessary In the case of Afialda v. Hisole, the animal was in the
repairs. (NCC, Art. 2190) (1990, 2007 BAR) custody and under the control of the caretaker, who was
2. They shall also be responsible for damages caused by paid for his work as such. Obviously, the Court ruled that it
emanations from tubes, canals, sewers or deposits of was the caretaker's business to try to prevent the animal

2021 GOLDEN NOTES 2021 & 2022
Civil Law
from causing injury or damage to anyone, including the driver. The conviction of the driver is a condition
himself. And being injured by the animal under those sine qua non for the subsidiary liability of the
circumstances, was one of the risks of the occupation employer to attach. Proof must be shown that the
which he had voluntarily assumed and for which he must driver is insolvent. (RPC, Art. 103)
take the consequences. (Afialda v. Hisole, G.R. No. L-2075,
November 29, 1949, 85 PHIL 67-70) Q: A 15-year-old high school student stabs his
classmate who is his rival for a girl, while they were
Q: After working overtime up to midnight, Alberto, an going out of the classroom after their last class. Who
executive of an insurance company drove a company may be held liable? (2005 BAR)
vehicle to a favorite Videoke bar where he had some
drinks and sang some songs with friends to "unwind." A: Under Article 218 of the Family Code, the school, its
At 2:00 a.m., he drove home, but in doing so, he administrators and teachers, or the individual, entity or
bumped a tricycle, resulting in the death of its driver. institution engaged in child care shall have special parental
May the insurance company be held liable for the authority and responsibility over the minor child while
negligent act of Alberto? Why? (2001 BAR) under their supervision, instruction or custody. Authority
and responsibility shall apply to all authorized activities
A: NO. The insurance company is not liable because when whether inside or outside the premises of the school,
the accident occurred, Alberto was not acting within the entity or institution.
assigned tasks of his employment.

It is true that under Art. 2180(5), employers are liable for DAMAGES
damages caused by their employees who were acting
within the scope of their assigned tasks. However, the
mere fact that Alberto was using a service vehicle of the Damages v. Injury
employer at the time of the injurious accident does not
necessarily mean that he was operating the vehicle within Injury is the illegal invasion of a legal right; damage is the
the scope of his employment. In Castilex Industrial loss, hurt, or harm which results from the injury; damages
Corporation v. Vasquez, G.R. No. 132266, December 21, are the compensation awarded for the damage suffered.
1999, the Supreme Court held that notwithstanding the There can be damage without injury in those instances in
fact that the employee did some overtime work for the which the loss or harm was not the result of a violation of a
company, the former was, nevertheless, engaged in his legal duty. Example: damnum absque injuria. (Sps. Custodio
own affairs or carrying out a personal purpose when he v. CA, G.R. No. 116100, February 9, 1996; Carbonell v.
went to a restaurant at 2:00 a.m. after coming out from Metropolitan Bank and Trust Company, G.R. No. 178467,
work. The time of the accident (also 2:00 a.m.) was outside April 26, 2017)
normal working hours.
Damages can only be paid with money
Q: A driver of a bus owned by company Z ran over a
boy who died instantly. A criminal case for reckless Damages can only be paid with money and not “palay”
imprudence resulting in homicide was filed against the because “palay” is not a legal tender
driver. He was convicted and was ordered to pay P2 currency in the Philippines. (Vda. Simeon Borlado v. CA, G.R.
Million in actual and moral damages to the parents of No. 114118, August 28, 2001)
the boy who was an honor student and had a bright
future. Without even trying to find out if the driver had NOTE: In actions for damages, the courts should award an
assets or means to pay the award of damages, the amount to the winning party and not its equivalent in
parents of the boy filed a civil action against the bus property. (Ibid.)
company to make it directly liable for the damages.

KINDS OF DAMAGES (MENTAL)
1. Will their action prosper?
2. If the parents of the boy do not wish to file a
separate civil action against the bus company, can 1. Moral
they still make the bus company liable if the driver 2. Exemplary or corrective
cannot pay the award for damages? If so, what is 3. Nominal
the nature of the employer's liability and how may 4. Temperate or moderate
civil damages be satisfied? (2015 BAR) 5. Actual or compensatory
6. Liquidated
A:
1. YES, their action will prosper. The liability of the WHEN DAMAGES MAY BE RECOVERED
employer in this case may be based on quasi-delict
and is included within the coverage of independent Actual and Compensatory Damages
civil actions. It is not necessary to enforce the civil
liability based on culpa aquiliana that the driver or Actual damages are such compensation or damages for an
employee be proven to be insolvent since the liability injury that will put the injured party in the position in
of the employer for the quasi-delict committed by which he had been before he was injured. They pertain to
their employees is direct and primary subject to the such injuries or losses that are actually sustained and
defense of due diligence on their part. (NCC, Art. 2176; susceptible of measurement. (Filipinas (Pre-Fab Bldg.)
NCC, Art. 2180 Systems, Inc. v. MRT Development Corp., G.R. Nos. 167829-
30, November 13, 2007)
2. YES, the parents of the boy can enforce the subsidiary
liability of the employer in the criminal case against

2021 GOLDEN NOTES 2021 & 2022
Civil Law
NOTE: To recover damages, the amount of loss must not awarded actual damages amounting to
only be capable of proof but must actually be proven. (but P90,717,632.06.
must be pleaded and proven in Court) (1991, 1996, 2004 a) Is Wyeth entitled to actual damages?
BAR) b) Is SKI entitled to temperate damages?

Article 2199 of the Civil Code expressly mandates that A:
“except as provided by law or by stipulation, one is entitled a) NO. Actual damages are provided for under Article 2199
to an adequate compensation only for such pecuniary loss of the Civil Code: “Article 2199. Except as provided by law
suffered by him as he duly proved.” or by stipulation, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him
It must be proven with a reasonable degree of certainty, as he has duly proved. Such compensation is referred to as
premised upon competent proof or the best evidence actual or compensatory damages.”
obtainable. (Metro Rail Transit Dev’t. Corp. v. Gammon
Phils., Inc., G.R. No. 200401, Jan. 17, 2018) Further, "[e]xcept as provided by law or by stipulation, [a
claimant] is entitled to an adequate compensation only for
NOTE: Kinds of Actual or compensatory damages pecuniary loss" duly proven. Thus, actual damages must be
proven with a reasonable degree of certainty, premised
1. Damnum Emergens/Dano Emergente (actual damages) upon competent proof or the best evidence obtainable"
– all the natural and probable consequence of the act like official receipts and invoices, as explained in Metro
or omission complained of, classified as one for the Rail Transit Development Corp. v. Gammon Philippines.
loss of what a person already possesses.
Actual damages constitute compensation for sustained
2. Lucrum Cessans/Lucro Cesante (compensatory measurable losses. It must be proven with a reasonable
damages) – for failure to receive, as benefit, that which degree of certainty, premised upon competent proof or the
would have pertained to him (expected profits). best evidence obtainable. It is never presumed or based on
(Filipinas Synthetic v. De Los Santos, G.R. No. 152033, personal knowledge of the court.
March 16, 2011)
b) YES. Article 2224 of the Civil Code provides for
NOTE: Both actual and compensatory damages can be temperate damages, as follows: “Art. 2224. Temperate or
granted at the same time to the plaintiff as provided under moderate damages, which are more than nominal but less
Article 2200. In other words, there are two components to than compensatory damages, may be recovered when the
actual damages. (RCPI v. CA, G.R. No. L-55194, February 26, court finds that some pecuniary loss has been suffered but
1981) its amount cannot, from the nature of the case, be proved
with certainty.”
Q: Petitioner Wyeth Philippines, Inc. (Wyeth) is the
project owner of the "Dryer 3 and Wet Process In concluding that respondent SKI's claims for the value of
Superstructure Works.” In 2007, Wyeth invited rebars, formworks, safety harness equipment, and costs of
bidders to submit proposals for its project. the repair were validly proven, the Arbitral Tribunal
Respondent SKI Construction Group, Inc. (SKI) thoroughly examined and considered the evidence
submitted its qualified proposal to undertake the presented by the parties. Thus, its evaluation of the
project for P242,800,000.00, and was later on evidence and findings of fact must be upheld. (Wyeth
awarded the bid. Subsequently, the Project Manager Philippines Inc. v. CIAC, et. al., G.R. No. 220045-48, June 22,
directed the cessation of all construction activities. 2020, as penned by J. Leonen)
until further notice give SKI ample time to address
internal issues regarding its workforce. . Wyeth wrote Q: MV Lorcon Luzon, a commercial vessel owned by
letter to Mapfre, claiming on the bonds. Mapfre later Lorenzo Shipping, hit and rammed National Power
confirmed that Wyeth will not be barred from Corporation’s Power Barge 104. NPC submitted pieces
pursuing its claims against the bonds. However, of evidence to the court as basis for actual damages it
Mapfre refused to pay the amount under the payments has suffered. However, Lorenzo Shipping pointed out
bond. The parties failed to reach a settlement, that these pieces of evidence fall short of the standard
however, the parties eventually agreed to resolve the required for proving pecuniary loss, which shall be the
dispute through arbitration before the Construction basis for awarding actual damages. The CA awarded
Industry Arbitration Commission (Commission). temperate damages to NPC in lieu of actual damages as
the amount of damages was not proven by NPC. Is
After the conduct of hearings, Arbitral Tribunal held Lorenzo Shipping liable for actual damages?
that while Wyeth suffered pecuniary loss, the evidence
it submitted were not clear and convincing as to A: NO. Article 2199 of the Civil Code spells out the basic
establish actual damages. Hence, the Tribunal applied requirement that compensation by way of actual damages
Article 2224 of the Civil Codes and the parties' is awarded only to the extent that pecuniary loss is proven.
agreement on liquidated damages as measure for NPC failed to establish the precise amount of pecuniary
temperate damages. It awarded Wyeth temperate loss it suffered. Nevertheless, it remains that Power Barge
damages amounting to P24,280,000.00. Upon appeal, 104 sustained damage — which may be reckoned
the Court of Appeals held that that while SKI is entitled financially — as a result of the MV Lorcon Luzon's
to the value of rebars, formworks, and costs of repair, ramming into it. National Power Corporation suffered
the amount cannot be established with certainty, thus, pecuniary loss, albeit its precise extent or amount had not
the Court of Appeals only awarded SKI temperate been established. Accordingly, the Court of Appeals'
damages. It also held that the Arbitral Tribunal erred conclusion that National Power Corporation is entitled to
in awarding temperate damages to Wyeth, and instead temperate damages should be sustained. (Lorenzo Shipping

2021 GOLDEN NOTES 2021 & 2022
Civil Law
Corporation v. National Power Corporation, G.R. No. 181683, 6. Illegal search;
October 07, 2015, as penned by J. Leonen) 7. Libel, slander or any other form of defamation;
8. Malicious prosecution;
Attorney’s Fees: Ordinary vs. Extraordinary 9. Acts mentioned in Article 309; and
10. Actions referred to in Articles 21, 26, 27, 28, 29, 30, 32,
ORDINARY EXTRAORDINARY 34, and 35 (NCC, Art. 2219).
Nature
The reasonable An indemnity for damages Exemplary
compensation paid to a ordered by the court to be
lawyer for the legal services paid by the losing to the Exemplary damages or corrective damages are imposed,
rendered to a client who prevailing party in by way of example or correction for the public good, in
has engaged him. litigation. addition to the moral, temperate, liquidated or
Basis compensatory damages. (NCC, Art. 2229) (2003, 2005,
The fact of employment of In cases authorized by law. 2009 BAR)
the lawyer by the client.
To whom payable Cases where exemplary damages may be imposed as
Lawyer Client accessory damages

Recovery of attorney’s fees as actual damages (1991, GR: Exemplary damages cannot be recovered as a matter
1994, 2002 BAR) of right. (NCC, Art. 2233)

GR: Attorney’s fees cannot be recovered as actual XPN: They can be imposed in the following cases:
damages. 1. Criminal offense – when the crime was committed with
XPNs: (SWISS- MUD- ERC) one or more aggravating circumstances (NCC, Art.
1. Stipulation between parties; 2230);
2. Recovery of Wages of household helpers, laborers and 2. Quasi-delicts – when the defendant acted with gross
skilled workers; negligence (NCC, Art. 2231);
3. Actions for Indemnity under workmen's compensation 3. Contracts and Quasi-contracts – when defendant acted
and employer liability laws; in wanton, fraudulent, reckless, oppressive, or
4. Legal Support actions; malevolent manner. (NCC, Art. 2232)
5. Separate civil action to recover civil liability arising
from crime; Nominal
6. Malicious prosecution;
7. Clearly Unfounded civil action or proceeding against The court may award nominal damages in every obligation
plaintiff; arising from any source enumerated in Article 1157, or in
8. When Double judicial costs are awarded; every case where any property right has been invaded.
9. When Exemplary damages are awarded; (NCC, Art. 2222)
10. Defendant acted in gross & evident bad faith in
Refusing to satisfy plaintiff's just & demandable claim; The adjudication of nominal damages shall preclude
and further contest upon the right involved and all accessory
11. When defendant's act or omission Compelled plaintiff questions, as between the parties to the suit, or their
to litigate with third persons or incur expenses to respective heirs and assigns. (NCC, Article 2223)
protect his interest.
NOTE: Nominal damages cannot co-exist with
NOTE: It was held that, in respect of attorney’s fees, where compensatory damages. Nominal damages are
a claim therefore arises out of the filing of the complaint, adjudged in order that a right of the plaintiff, which
they too should be considered as in the nature of a has been violated or invaded by the defendant, may be
compulsory counterclaim. They should be pleaded or vindicated or recognized, and not for the purpose of
prayed for in the answer to the complaint in order to be indemnifying the plaintiff for any loss suffered by him.
recoverable, otherwise, they would be barred. (Tiu Po v. (LRTA v. Navidad, G.R. No. 145804, February 6, 2003)
Bautista, G.R. No. L-55514, March 17, 1981; Lafarge Cement
Philippines, Inc., et. al. v. Continental Cement Corporation, et. Temperate
al., G.R. No. 155173, November 23, 2004)
Temperate damages are those damages, which are more
Furthermore, moral damages and attorney’s fees cannot be than nominal but less than compensatory, and may be
consolidated for they are different in nature and each must recovered when the court finds that some pecuniary loss
be separately determined. (Philippine Veterans Bank v. has been suffered but its amount cannot be proved with
NLRC, G.R. No. 130439, October 26, 1999) Attorney’s fees certainty. (NCC, Art. 2224)
are recoverable only in the concept of actual not moral
damages. (Pedro Mirasol v. Hon. Rafael dela Cruz and Rationale behind the temperate or moderate damages
Dominador Mendoza, G.R. No. L-32552, July 31, 1978) (1994 BAR)

Moral The rationale behind temperate damages is precisely that
from the nature of the case, definite proof of pecuniary loss
1. A criminal offense resulting in physical injuries; cannot be offered. When the court is convinced that there
2. Quasi-delicts causing physical injuries; has been such loss, the judge is empowered to calculate
3. Seduction, abduction, rape, or other lascivious acts; moderate damages, rather than let the complainant suffer
4. Adultery or concubinage; without redress from the defendant’s wrongful act. (GSIS v.
5. Illegal or arbitrary detention or arrest;

2021 GOLDEN NOTES 2021 & 2022
Civil Law
Spouses Labung-Deang, G.R. No. 135644, September 17, 2. If the deceased was obliged to give support according
2001) to the provisions of Article 291, the recipient who is
not an heir called to the decedent's inheritance by the
Elements of Temperate Damages law of testate or intestate succession, may demand
support from the person causing the death, for a
1. Some pecuniary loss; period not exceeding five years, the exact duration to
2. Loss is incapable of pecuniary estimation; and be fixed by the court;
3. The damages awarded are reasonable. 3. The spouse, legitimate and illegitimate descendants
and ascendants of the deceased may demand moral
Q: Nanito Evangelista filed a complaint for damages damages for mental anguish by reason of the death of
against Andolong over the latter's failure to give the the deceased. (NCC, Art. 2206)
former's share in the net profits derived from their
business. However, this was evidenced solely by the Rules in graduation of damages in torts cases
documentary exhibits which disclosed the gross
monthly revenue and not the actual profit earned. Generally, the degree of care required is graduated
During the course of the proceedings, Andolong was according to the danger a person or property attendant
declared in default. Consequently, it was no longer upon the activity which the actor pursues or the
possible for Evangelista to prove the actual profit instrumentality he uses. The greater the danger the
earned since such documents were in possession of greater the degree of care required. (Keppel Cebu Shipyard
Andolong. Can Evangelista recover damages if the net v. Pioneer Insurance, G.R. Nos. 180880-81, September 25,
profits can no longer be ascertained? 2009).

A: YES. Evangelista can recover damages although the Rules in graduation of damages in crimes
exact amount of the net profits remained unproven. This
comes in the form of temperate or moderate damages. In crimes, the damages to be adjudicated may be
Temperate damages may be recovered when the court respectively increased or lessened according to the
finds that some pecuniary loss has been suffered but its aggravating or mitigating circumstances. (NCC, Art. 2204)
amount cannot, from the nature of the case, be provided
with certainty. Consequently, in computing the amount of Reduction of damages in quasi-delict cases
temperate or moderate damages, it is usually left to the
discretion of the courts, but the amount must be In quasi-delict, the contributory negligence of the plaintiff
reasonable, bearing in mind that temperate damages shall reduce the damages he may recover. (NCC, Art. 2214)
should be more than nominal but less than compensatory.
(Nanito Evangelista V. Spouses Nero Andolong Iii and Reduction of damages in contracts, quasi-contracts
Erlinda Andolong et al., G.R. No. 221770, November 16, and quasi-delicts
2016)
The court can equitably mitigate the damages in contracts,
Liquidated damages quasi-contracts and quasi-delicts in the following instances
other than in Art. 2214:
Liquidated damages are fixed damages previously agreed
by the parties to the contract and payable to the innocent 1. That the plaintiff himself has contravened the terms of
party in case of breach by the other. (Pineda, 2009) the contract;
2. That the plaintiff has derived some benefit as a result
Damages that can be recovered in case of death (MEA- of the contract;
I3) 3. In cases where exemplary damages are to be awarded,
that the defendant acted upon the advice of counsel;
1. Moral damages 4. That the loss would have resulted in any event; and
2. Exemplary damages 5. That since the filing of the action, the defendant has
3. Attorney's fees and expenses for litigation done his best to lessen the plaintiff’s loss or injury.
4. Indemnity for death (NCC, Art. 2215)
5. Indemnity for loss of earning capacity
6. Interest in proper cases Liquidated damages, whether intended as an indemnity or
a penalty, shall be equitably reduced if they are iniquitous
Rules when crimes and quasi-delict has caused death or unconscionable. (NCC, Art. 2227)

The amount of damages for death caused by a crime or NOTE: There may be a compromise upon the civil liability
quasi-delict shall be at least P75,000, even though there arising from an offense; but such compromise shall not
may have been mitigating circumstances. In addition: extinguish the public action for the imposition of the legal
penalty. (NCC, Art. 2034)
1. The defendant shall be liable for the loss of the earning
capacity of the deceased, and the indemnity shall be Rules in compromise
paid to the heirs of the latter; such indemnity shall in
every case be assessed and awarded by the court, The courts may mitigate the damages to be paid by the
unless the deceased on account of permanent physical losing party who has shown a sincere desire for a
disability not caused by the defendant, had no earning compromise. (Art. 2031, NCC)
capacity at the time of his death;


2021 GOLDEN NOTES 2021 & 2022

University of Santo Tomas


COMMERCIAL LAW
PRE-WEEK NOTES 2021 & 2022

COMMERCIAL LAW COMMITTEE

COMMITTEE HEAD: Allen Freidrick B. Orodio

MEMBERS: Michael Dale R. Aparejado, Ronnel L. Belga, Jesusa Jenla L. Ras

Judge Maria Ella Cecilia D. Escalante
Atty. Marian Joanne K. Co-Pua
Atty. Amado E. Tayag
ADVISERS
Commercial Law
subject to the provision of Chapter I of the Insurance Code.

INSURANCE LAW (IC, Sec. 3)

Void stipulations in an insurance contract
Contract of insurance
The following are void stipulations in an insurance
It is an agreement whereby one undertakes for a contract which provides:
consideration to indemnify another against loss, damage
or liability arising from an unknown or contingent event. 1. For the payment of loss whether the person insured
[IC, Sec.2(a)] has or has no interest in the property insured; or
2. That the policy shall be received as proof of such
Thus, it must have all the essential elements of a valid interest; and
contract as enumerated in Art. 1318 of the New Civil Code: 3. Every policy executed by way of gaming or wagering.
(Sm-CoMe) (IC, Sec. 25)

1. Subject matter in which the insured has an insurable ELEMENTS OF AN INSURANCE CONTRACT
interest;
2. Consideration, which is the premium paid by the SPEAR:
insured, for the insurer’s promise to indemnify the 1. Scheme to distribute losses
former upon the happening of the event or peril 2. Payment of premium
insured against; and 3. Existence of insurable interest
3. Meeting of the minds of the parties. 4. Assumption of Risk
5. Risk of loss
Insurance as a Uberrimae Fides contract (1993 BAR)
CLASSES OF INSURANCE CONTRACTS
The contract of insurance is one of perfect good faith

(uberrimae fidei) not for the insured alone, but equally so
1. Marine;
for the insurer; in fact, it is more so for the latter, since its
2. Fire;
dominant bargaining position carries with it stricter
3. Casualty;
responsibility. (Qua Chee Gan v. Law Union and Rock
4. Suretyship;
Insurance, Co. Ltd., G.R. No. L-4611, December 17, 1955)
5. Life;

6. Microinsurance;
Insurance as contracts of adhesion (Fine Print Rule)
7. Compulsory motor vehicle liability insurance; and

8. Compulsory insurance coverage for agency-hired
While generally stipulations in a contract come about after
workers.
deliberate drafting by the parties thereto, there are certain

contracts in which almost all the provisions of which have
MARINE INSURANCE
been drafted only by one party, usually a corporation. Such

contracts are called contracts of adhesion because the only
Marine Insurance includes:
participation of the other party is the signing of his

signature or his 'adhesion' thereto. Insurance contracts fall
1. Loss of or damage to:
into this category. (Sweet Lines, Inc. vs. Teves, G.R. No. L-
a. Vessels, cargo, freightage, profits, and all kinds of
37750, May 19, 1978) An illustration of a contract of
property and interests therein, in connection with
adhesion is when the insurer used “fine print” letters in
any and all risks or perils of navigation;
conditions stated in a contract of insurance. (Ibid)
b. Person or property appertaining to a marine,

inland marine, transit or transportation insurance;
Persons who may by insured (2000 BAR)
c. Precious stones, jewels, jewelry, precious metals,
whether in the course of transportation or
Anyone except a public enemy may be insured. (IC, Sec. 7) otherwise; and
d. Instrumentalities of transportation and
A public enemy is a nation at war with the Philippines and communication, excluding buildings, aids to
every citizen or subject of such nation. It does not include navigation and transportation, and appurtenant
mobs, thieves or robbers. (Bouvier’s Law Dictionary) facilities for the control of waterways. [IC, Sec. 101
(a)]
Subject matter of a contract of insurance
2. Marine protection and indemnity insurance against
Anything having an appreciable pecuniary value, which is legal liability of the insured for loss, damage, or
subject to loss or deterioration, or of which one may be expense incident to ownership, operation, chartering,
deprived so that his pecuniary interest is or may be maintenance, use, repair, or construction of any
prejudiced. vessel, craft or instrumentality in use of ocean or
inland waterways, including liability of the insured for
Event or peril insured against personal injury, illness or death or for loss of or
damage to the property of another person. [IC, Sec.
It is any contingent or unknown event, whether part of 101 (b)]
future, which may damnify a person having an insurable
interest, or create a liability against him may be insured,

2021 GOLDEN NOTES 2021 & 2022
Commercial Law
FIRE INSURANCE COMPULSORY MOTOR VEHICLE LIABILITY INURANCE

Fire insurance shall include insurance against loss by: “Own damage” coverage
1. Fire, lightning, windstorm, tornado or earthquake;
and It simply meant that the insurer had assumed to reimburse
2. Other allied risks, when such risks are covered by the costs for repairing the damage to the insured vehicle,
extension to fire insurance policies or under separate as opposed to damage to third party vehicle/property. The
policies. (IC, Sec. 169) phrase “own damage” does not mean damage to the
insured car caused by the assured itself, instead, of third
CASUALTY INSURANCE parties. (Pan Malayan Insurance Corporation v. Court of
Appeals, supra)
It is an insurance covering loss or liability arising from
accident or mishap, excluding certain types of loss which No fault indemnity clause (1994 BAR)
by law or custom are considered as falling exclusively
within the scope of other types of insurance such as fire or It is a clause where the insurer is required to pay a third
marine. (IC, Sec. 176) party injured or killed in an accident without the
necessity of proving fault or negligence on the part of
Coverage of casualty insurance (P3-Emo-BuHO) the insured. There is a stipulated maximum amount to be
recovered.
1. Personal accident insurance
2. Public utility insurance It is a clause that gives the victim (injured person or heirs
3. Plate glass insurance of the deceased) an option to file a claim for death or injury
4. Employer's liability and workmen’s insurance without the necessity of proving fault or negligence of any
5. Motor vehicle liability insurance kind to guarantee compensation or indemnity to injured
6. Burglary and theft insurance persons in motor vehicle accidents.
7. Health insurance
8. Other substantially similar kinds of insurance. (Perez, Authorized driver clause
2006)
It indemnifies the insured owner against loss or damage to
LIFE INSURANCE the car but limits the use of the insured vehicle to:

It is insurance on human lives and insurance appertaining 1. The insured himself; or
thereto or connected therewith. (IC, Sec. 181) It includes
every contract or pledge for the payment of endowments The insured need not prove that he has a driver’s
or annuities. It may be made payable on the death of the license at the time of accident if he was the driver.
person, or on his surviving a specified period, or otherwise (Sundiang Sr. & Aquino, 2014)
contingently on the continuance or cessation of life. (IC,
Sec. 182) 2. Any person who drives on his order or with his
permission; provided, that the person driving is
Kinds of life insurance policies (GO LITE) permitted to drive the motor vehicle in accordance
with the law, and is not disqualified. (Villacorta v.
1. Group Life Insurance Commissioner, G.R. No. 54171, October 28,
2. Ordinary life, general life or old-line policy 1980)
3. Limited payment
4. Industrial life Theft clause
5. Term insurance
6. Endowment It is that which includes theft as among the risks insured
against. Where a car is unlawfully and wrongfully taken
Contract of life annuity without the knowledge and consent of the owner, such
taking constitutes “theft” and it is the theft clause, not the
It is a contract to pay the insured, or a named person or authorized driver clause which should apply. (Perla
persons, a sum or sums periodically during life or certain Compania de Seguros, Inc. v. CA, supra)
period. (Perez, 2006)
There is theft if the vehicle is taken with intent to gain
Liability of the insurer in case of suicide without the consent of the insured-owner. Thus, there is
theft even if:
The insurer shall be liable in case of suicide by the insured
if: (FISh) 1. The vehicle is returned;
1. The suicide is committed after the policy has been in 2. The vehicle was stolen by the driver of the insured
force for a period of 2 years from the date of its issue (Alpha Insurance and Surety Company v. Castor, G.R.
or of its last reinstatement. 198174, September 2, 2013);
2. The suicide is committed within a shorter period as 3. The vehicle was taken to the owner of a repair shop
provided in the policy. for the purpose of repair and in order to attach
3. The suicide is committed in the state of insanity accessories. (Paramount Insurance v. Spouses
regardless of the date of commission. (IC, Sec. 183) Remondeulaz, G.R. No. 173773, November 28, 2012)
(Sundiang Sr. & Aquino, 2014)
NOTE: Any stipulation extending the 2-year period is null
and void. INSURABLE INTEREST


2021 GOLDEN NOTES 2021 & 2022
Commercial Law
An insurable interest is that interest which a person is
deemed to have in the subject matter insured, where he 2. A change of interest in one or
has a relation or connection with or concern in it, such that more several distinct things,
the person will derive pecuniary benefit or advantage from separately insured by one policy,
the preservation of the subject matter insured and will does not avoid the insurance as to
suffer pecuniary loss or damage from its destruction, the others. (IC, Sec. 22)
termination, or injury by the happening of the event
insured against. 3. A change on interest, by will or
succession, on the death of the
NOTE: The existence of insurable interest is a matter of insured, does not avoid an
public policy and is not susceptible to the principle of insurance; and his interest in the
estoppel. The existence of an insurable interest gives a insurance passes to the person
person the legal right to insure the subject matter of the taking his interest in the thing
policy of insurance. (Violeta R. Lalican vs. The Insular Life insured. (IC, Sec. 23)
Assurance Co. Ltd., G.R. No. 183526, August 25, 2009)
4. A transfer of interest by one of
Mere hope or expectancy is not insurable several partners, joint owners, or
owners in common, who are
A mere contingent or expectant interest in anything, not jointly insured, to the others,
founded on an actual right to the thing, nor upon any valid does not avoid an insurance even
contract for it, is not insurable. (IC, Sec. 16) though it has been agreed that
the insurance shall cease upon an
When does a person have insurable interest? alienation of the thing insured.
(IC, Sec. 24)
GR: A person is deemed to have an insurable interest in
the subject matter insured when a person has a relation or 5. Every stipulation in a policy of
connection with or concern in the subject matter, such that insurance for the payment of loss
he will derive pecuniary benefit or advantage from its whether the person insured has
preservation and will suffer pecuniary loss from its or has not any interest in the
destruction or injury by the happening of the event property insured, or that the
insured against. policy shall be received as proof
of such interest, and every policy
However, in some cases, expectation of benefit from the executed by way of gaming or
continued life of that person need not necessarily be of wagering, is void. (IC, Sec. 25)
pecuniary nature to have an insurable interest in the life of As to the beneficiary interest
a person. (De Leon, 2010) GR: The beneficiary The beneficiary must have
need not have insurable interest over the thing
Insurable interest in life insurance vs. Insurable insurable interest insured.
interest in property insurance (2002 BAR) over the life of the
insured if the NOTE: Insurable interest is an
LIFE PROPERTY insured himself indispensable requirement.
As to extent secured the policy.
GR: Every person Limited to the actual value of the
has an unlimited property. XPN: However, if
insurable interest in the life insurance
his own life. was obtained by the
beneficiary, the
XPN: Where life latter must have
insurance is taken insurable interest
out by a creditor on over the life of the
the life of the debtor, insured.
insurable interest is
limited to the Change of beneficiary
amount of debt.
When must insurable interest exist GR: The insured shall have the right to change the
Must exist at the GR: Must exist twice, i.e, both at beneficiary he designated in the policy.
time the policy the time the policy takes effect
takes effect and and the time of loss, but need not XPN: If the insured expressly waived this right in the said
need not exist exist in the period in between. policy.
thereafter. (IC, Sec. (IC, Sec. 19)
19) Notwithstanding the foregoing, in the event the insured
XPN: IC, Secs. 21-24; 25, 57. does not change the beneficiary during his lifetime, the
designation shall be deemed irrevocable. (IC, Sec. 11)
1. A change in interest in a thing
insured, after the occurrence of NOTE: Under Sec. 64 of the Family Code, the innocent
an injury which results in a loss, spouse is allowed to revoke the designation of the other
does not affect the right of the spouse as irrevocable beneficiary after legal separation.
insured to indemnity for the loss.
(IC, Sec. 21) Effect of Irrevocable Designation of a Beneficiary:

2021 GOLDEN NOTES 2021 & 2022
Commercial Law
1. The insured cannot assign the policy if the designation disqualified. In the absence of other beneficiaries, the
of the beneficiary is irrevocable. The irrevocable proceeds shall be paid in accordance with the policy
beneficiary has a vested right. (2005 BAR; Sundiang Sr. contract. If the policy contract is silent, the proceeds shall
& Aquino, 2014) be paid to the estate of the insured. (IC, Sec. 12)
2. The beneficiary designated in a life insurance contract
cannot be changed without the consent of the XPNs: (IUD)
beneficiary. (Gercio v. Sun Life Assurance of Canada, 48 1. Insanity of the beneficiary at the time he killed the
Phil. 53, 28 September 1925) insured;
3. A new beneficiary cannot be added to the irrevocably 2. The insured’s death was unintentionally caused (e.g.,
designated beneficiary for this would in effect reduce thru accident);
the latter’s vested rights. (Go v. Redfern, 72 Phil. 71, 25 3. The beneficiary acted in self-defense.
April 1941)
4. The irrevocably designated beneficiary may obtain a IN PROPERTY
policy loan to the extent stated in the schedule of
values attached to the policy. (Gercio v. Sun Life Every interest in property, whether real or personal, or
Assurance of Canada, 48 Phl. 53, 28 September 1925) any relation thereto, or liability in respect thereof, of such
5. The insured cannot take the cash surrender value nature that contemplated peril might directly damnify the
assign or even borrow on said policy without the insured, is insurable interest. (IC, Sec. 13)
consent of the beneficiary.
Insurable interest in property may consist of the
IN LIFE/HEALTH following (1991 BAR): (ExInEx)

Two general classes of life policies 1. An existing interest – The existing interest in the
property may be legal or equitable title.
1. Insurance upon one’s life – are those taken out by the 2. An inchoate interest founded on an existing interest.
insured upon his own life for the benefit of: (HET) 3. An expectancy coupled with an existing interest in
a. Himself; that out of which the expectancy arises. (IC, Sec. 14)
b. His estate, in case it matures only at his death; or
c. Third person who may be designated as Measure of insurable interest in property (2000 BAR)
beneficiary.
Under Sec. 17, the measure of insurable interest in
2. Insurance upon life of another – are those taken out by property is the extent to which the insured might be
the insured upon the life of another. Where a person damnified by loss or injury thereof. Insurable interest in
names himself beneficiary in a policy he takes on the property does not necessarily imply a property interest in,
life of another, he must have insurable interest in the or lien upon, or possession of, the subject matter of the
life of the latter. This class includes the following: insurance, and neither title nor a beneficial interest is
(SELD) requisite to the existence thereof. It is sufficient that the
a. His spouse and of his children; insured is so situated with reference to the property that
b. Any person on whom he depends wholly or in he would be liable to loss should it be injured or destroyed
part for education or support, or in whom he has by the peril against which it is insured. Anyone has an
a pecuniary interest; insurable interest in property who derives a benefit from
c. Of any person under a legal obligation to him for its existence or would suffer loss from its destruction.
the payment or services, of which death or illness (Gaisano Cagayan, Inc. v. Insurance Company of North
might delay or prevent the performance; America, G.R. No. 147839, June 8, 2006)
d. Of any person upon whose life any estate or
interest vested in him depends. (IC, Sec. 10) Double Insurance

Persons prohibited from being designated as Double insurance exists where the same person is insured
beneficiaries (1998 BAR) by several insurers separately, in respect to the same
subject and interest. (IC, Sec. 95)
Under the Article 739 in relation to Art. 2012 of the New
Civil Code, the following are prohibited designation of Requisites of double insurance (STRIP)
beneficiaries:
1. Subject matter is the same
1. Those made between persons who were guilty of 2. Two or more insurers insuring separately
adultery or concubinage at the time of donation. 3. Risk or peril insured against is the same
2. Those made between persons found guilty of the same 4. Interest insured is the same
criminal offense, in consideration thereof. 5. Person insured is the same
3. Those made to a public officer or his wife, descendants
or ascendants by reason of his office. There is no double insurance even though two policies
were both issued over the same subject matter and both
Beneficiary willfully brought about the death of the covered the same peril insured against if the two policies
insured (2008 BAR) were issued to two different entities which have separate
and distinct insurable interest over the said subject matter.
GR: The interest of a beneficiary in a life insurance policy (Malayan Insurance Co. vs. Philippine First Insurance Co.,
shall be forfeited when the beneficiary is the principal, G.R. No. 184300, July 11, 2012)
accomplice, or accessory in willfully bringing about the
death of the insured. In such a case, the share forfeited Double insurance is not prohibited by law
shall pass on to the other beneficiaries, unless otherwise

2021 GOLDEN NOTES 2021 & 2022
Commercial Law
It is not contrary to law and hence, in case of double 1. Mortgagor – The mortgagor of property, as owner, has
insurance, the insurers may still be made liable up to the an insurable interest to the extent of its value even
extent of the value of the thing insured but not to exceed though the mortgage debt equals such value.
the amount of the policies issued. 2. Mortgagee - The mortgagee as such has an insurable
interest in the mortgaged property to the extent of the
A provision in the policy that prohibits double insurance is debt secured; such interest continues until the
valid. However, in the absence of such prohibition, double mortgage debt is extinguished. (Sundiang Sr. & Aquino,
insurance is allowed. (Perez, 2006) 2014)

Nature of the liability of the several insurers in double “Cash and carry” rule (2003 BAR)
insurance (2005 BAR)
GR: No policy or contract of insurance issued by an
In double insurance, the insurers are considered as co- insurance company is valid and binding unless and until
insurers. Each one is bound to contribute ratably to the the premium thereof has been paid. Any agreement to the
loss in proportion to the amount for which he is liable contrary is void.
under his contract. This is known as the “principle of
contribution” or “contribution clause”. [IC, Sec. 96(e)] XPN: (ICE GAP)

Over insurance A policy is valid and binding even when there is a non-
payment of premium:
There is over insurance whenever the insured obtains a 1. When there is an agreement allowing the insured to
policy in an amount exceeding the value of his insurable pay the premium in installments and partial payment
interest. (Perez, 2006) has been made at the time of loss. (Makati Tuscany
Condominium Corp. v. CA, G.R. No. 95546, Nov. 6, 1992)
Double Insurance vs. Over Insurance 2. When there is an agreement to grant the insured credit
extension for the payment of the premium and loss
DOUBLE INSURANCE OVER INSURANCE occurs before the expiration of the credit term. (2007
There may be no over When the amount of the BAR; NCC, Art. 1306; UCPB General Insurance v.
insurance as when the sum insurance is beyond the Masagana Telemart, G.R. No. 137172, Apr. 4, 2001)
total of the amounts of the value of the insured’s 3. When estoppel bars the insurer to invoke non-
policies issued does not insurable interest. recovery on the policy.
exceed the insurable 4. In case of life or industrial life policy whenever the
interest of the insured. grace period provision applies, or whenever under the
There are two or more There may be only one broker and agency agreements with duly licensed
insurers insuring the same insurer, with whom the intermediaries, a ninety (90)-day credit extension is
subject matter. insured takes insurance given. No credit extension to a duly licensed
beyond the value of his intermediary should exceed ninety (90) days from
insurable interest. date of issuance of the policy. (IC, Sec. 77)
5. When there is acknowledgment in a policy of a receipt
Additional or other insurance clause (2008 BAR) of premium, which the law declares to be conclusive
evidence of payment, even if there is stipulation
A clause in the policy that provides that the policy shall be therein that it shall not be binding until the premium
void if the insured procures additional insurance without is actually paid. This is without prejudice however to
the consent of the insurer. (Pioneer Insurance and Surety right of insurer to collect corresponding premium. (IC,
Corp vs. Yap, G.R. No. L-36232, December 19, 1974) Sec. 79)
6. When the public interest so requires, as determined by
The insurer may insert an “other insurance clause” to the Insurance Commissioner.
prevent the danger that the insured will over insure his
property and thus avert the possibility of perpetration of Non-payment of premiums by reason of the
fraud. It is lawful and specifically allowed under Sec. 75 of circumstances or conduct of the insurer
the Insurance Code which provides that “a policy may
declare that a violation or a specified provision thereof GR: Non-payment of premiums does not merely suspend
shall avoid it, otherwise the breach of an immaterial but put an end to an insurance contract since the time of
provision does not avoid it.” the payment is peculiarly of the essence of the contract.
(De Leon, 2010)
Insurable interest of mortgagor and mortgagee in case
of a mortgaged property are NOT the same (1999, XPN: (IWW)
2010 BAR) 1. The insurer has become insolvent and has suspended
business, or has refused without justification a valid
Each has an insurable interest in the property mortgaged tender of premiums. (Gonzales v. Asia Life Ins. Co., G.R.
and this interest is separate and distinct from the other. No. L-5188, Oct. 29, 1952)
Therefore, insurance taken by one in his name only and in 2. Failure to pay was due to the wrongful conduct of the
his favor alone does not inure to the benefit of the other. insurer.
The same is not open to objection that there is double 3. The insurer has waived his right to demand payment.
insurance. (RCBC vs. CA, 289 G.R. Nos. 128833-34, 128866,
April 20, 1998; IC, Sec. 8) Devices used to prevent the forfeiture of a life
insurance after the payment of the first premium (C-
Extent of insurable interest of mortgagor and PAGER)
mortgagee (1999 BAR)

2021 GOLDEN NOTES 2021 & 2022
Commercial Law
1. Cash surrender value Concealment is a neglect to communicate that which a
2. Paid up insurance party knows and ought to communicate. (IC, Sec. 26)
3. Automatic Loan Clause
4. Grace period Requisites: (NeD-NoW-NomMa)
5. Extended insurance
6. Reinstatement 1. A party knows a fact which he neglects to
communicate or disclose to the other party;
REINSTATEMENT OF LAPSED POLICY OF LIFE 2. Such party concealing is duty bound to disclose such
INSURANCE fact to the other;
3. Such party concealing makes no warranty as to the
Purpose of the reinstatement provision fact concealed;
4. The other party has no means of ascertaining the fact
The purpose of the provision is to clarify the requirements concealed; and
for restoring a policy to premium-paying status after it has 5. The fact must be material.
been permitted to lapse.
Test of materiality (2000 BAR)
The law requires that the policy owner be permitted to
reinstate the policy, subject to the violations specified, any It is determined not by the event, but solely by the
time within three (3) years from the date of default of probable and reasonable influence of the facts upon the
premium payment. A longer period, being more favorable party to whom the communication is due, in forming his
to the insured, may be used. estimate of the disadvantages of the proposed contract, or
in making his inquiries. (IC, Sec. 31)
Reinstatement is not an absolute right of the insured, but
discretionary on the part of the insurer, which has the Misrepresentation
right to deny reinstatement if it were not satisfied as to the
insurability of the insured, and if the latter did not pay all It occurs when the facts fail to correspond with its
overdue premiums and other indebtedness to the insurer. assertions or stipulations. Misrepresentation is an
(McGuire vs. Manufacturer’s Life Ins. Co., G.R. No. L-3581, affirmative defense. To avoid liability, the insurer has the
September 21, 1950) duty to establish such a defense by satisfactory and
convincing evidence. (IC, Sec. 44; Ng Gan Zee v. Asian
Crusader Life Assn. Corp., G.R. No. L- 30685, May 30, 1983)
RESCISSION OF INSURANCE CONTRACTS
Effects of misrepresentation
Instances wherein a contract of insurance may be
rescinded (1991, 1994, 1996 – 1998 BAR) 1. It renders the insurance contract voidable at the
option of the insurer, although the policy is not
1. Concealment thereby rendered void ab initio. The injured party is
2. Misrepresentation/omission entitled to rescind from the time when the
3. Breach of warranties representation becomes false.
2. When the insurer accepted the payment of premium
Instances wherein a contract of insurance may be with the knowledge of the ground for rescission, there
cancelled by the insurer is waiver of right of rescission.
(NCDP – Discovery of FraME WOR)
Application of concealment and misrepresentation in
1. Nonpayment of premium case of loss or death
2. Conviction of a crime arising out of acts increasing the
hazard insured against GR: If the concealment or misrepresentation is discovered
3. A determination by the Commissioner that the before loss or death, the insurer can cancel the policy. If
continuation of the policy would violate or would the discovery is after loss or death, the insurer can refuse
place the insurer in violation of the Insurance Code to pay.
4. Physical changes in the property insured which result
in the property becoming uninsurable XPN: The incontestability clause under paragraph 2 of
5. Discovery of fraud or material misrepresentation Section 48.
6. Discovery of other insurance coverage that makes the
total insurance in excess of the value of the property Incontestability clause (1991,1994,1996,1998 BAR)
insured
7. Discovery of willful or omissions or reckless acts After the policy of life insurance made payable on the
increasing the hazard insured against. (IC, Sec 64) death of the insured shall have been in force during the
lifetime of the insured for a period of two (2) years from
No policy of insurance other than life shall be canceled by the date of its issue or its last reinstatement, the insurer
the insurer except upon prior notice thereof to the insured, cannot prove that the policy is void ab initio (construed as
and no notice of cancellation shall be effective unless it is voidable) or is rescindible by reason of the fraudulent
based on the occurrence, after the effective date of the concealment or misrepresentation of the insured or his
policy, of one or more of the abovementioned instances. agent. (Sundiang Sr. & Aquino, 2014, citing IC, Sec. 48;
(Sec. 64, Ibid) Florendo v. Philam Plans, G.R. No. 186983, February 22,
2012)
Concealment
The “Incontestability Clause” under Section 48 of the
Insurance Code regulates both the actions of the insurers

2021 GOLDEN NOTES 2021 & 2022
Commercial Law
and prospective takers of life insurance. It gives insurers 1. Not attempting in good faith to effectuate prompt, fair
enough time to inquire whether the policy was obtained by and equitable settlement of claims submitted in which
fraud, concealment, or misrepresentation; on the other liability has become reasonably clear.
hand, it forewarns scheming individuals that their 2. Knowingly misrepresenting to claimant’s pertinent
attempts at insurance fraud would be timely uncovered – facts or policy provisions relating to coverage at issue;
thus deterring them from venturing into such nefarious 3. Failing to acknowledge with reasonable promptness
enterprise. (Manila Bankers Life Insurance Corporation vs. pertinent communications with respect to claims
Cresencia-Aban, G.R. No. 175666, July 29, 2013) arising under its policies;
4. Failing to adopt and implement reasonable standards
NOTE: The period of two years may be shortened but it for the prompt investigation of claims arising under its
cannot be extended by stipulation. policies;
5. Compelling policyholders to institute suits to recover
CLAIMS SETTLEMENT AND SUBROGATION amounts due under its policies by offering without
justifiable reason substantially less than the amounts
Effect of failure to give notice of loss ultimately recovered in suits brought by them.

OTHER TYPES OF PRESCRIPTION OF ACTIONS
FIRE INSURANCE
INSURANCE
Rules on the prescriptive period for filing an insurance
Failure to give notice Failure to give notice will
claim
defeats the right of the not exonerate the insurer

insured to recover. unless there is a
1. The parties to a contract of insurance may validly
stipulation in the policy
agree that an action on the policy should be brought
requiring the insured to do
within a limited period of time, provided such period is
so.
not less than 1 year from the time the cause of action

accrues. If the period agreed upon is less than 1 year
The law does not require any form in which the notice of
from the time the cause of action accrues, such
loss must be given. In absence of any stipulation in the
agreement is void. (IC, Sec. 63, 1996 BAR)
policy, notice may be given orally or in writing. (de Leon, de

Leon Jr., 2017)
a. The stipulated prescriptive period shall begin to

run from the date of the insurer’s rejection of the
GUIDELINES ON CLAIMS SETTLEMENT claim filed by the insured or beneficiary and not
from the time of loss.
Claim Settlement b. In case the claim was denied by the insurer but
the insured filed a petition for reconsideration, the
Claim settlement is the indemnification of that suffered by prescriptive period should be counted from the
the insured. The claimant may be the: date the claim was denied at the first instance and
not from the denial of the reconsideration. To rule
1. Insured; otherwise would give the insured a scheme or
2. Reinsured, the insurer who is entitled to subrogation; devise to waste time until any evidence which may
or be considered against him is destroyed. (1996
3. A third party who has a claim against the insured. BAR; Sun Life Office, Ltd. vs. CA, supra)

Claims settlement in life insurance 2. If there is no stipulation or the stipulation is void, the
insured may bring the action within 10 years in case
1. The proceeds shall be paid immediately upon the the contract is written.
maturity of the policy if there is such a maturity date. 3. In a comprehensive motor vehicle liability insurance
2. If the policy matures by the death of the insured, (CMVLI), the written notice of claim must be filed
within sixty (60) days after presentation of the claim within 6 months from the date of the accident;
and filing of the proof of the death of the insured. otherwise, the claim is deemed waived even if the
(Sundiang Sr. & Aquino, 2014; IC, Section 248) same is brought within 1 year from its rejection. (Vda.
De Gabriel vs. CA, GR No. 103883, Nov 14, 1996)
Claims settlement in property insurance 4. The suit for damages, either with the proper court or
with the Insurance Commissioner, should be filed
1. Proceeds shall be paid within thirty (30) days after within 1 year from the date of the denial of the claim
proof of loss is received by the insurer and by the insurer, otherwise, claimant’s right of action
ascertainment of the loss or damage is made either by shall prescribe. (IC, Sec. 397)
agreement or by arbitration.
2. If no ascertainment is made within sixty (60) days NOTE: Notwithstanding the fact that the case was filed
after receipt of proof of loss, it shall be paid within beyond the one-year prescriptive period provided for
ninety (90) days after such receipt. (Sundiang Sr. & under COGSA, the suit will not be dismissed if the delay
Aquino, 2014; IC, Sec. 249) was not due to the claimant’s fault. The insurer therefore
should bear the loss with interest on account of such delay.
UNFAIR CLAIMS SETTLEMENT; SANCTIONS (New World International Development Phils. Inc. vs. NYK-
FILJAPAN Shipping Corp., G.R. No. 171468, August 24, 2011,
Unfair settlement practices (GMAIL) in Divina, 2014)

The following constitutes unfair settlement practices:


2021 GOLDEN NOTES 2021 & 2022
Commercial Law
6. As to their legal right to corporate existence:

THE REVISED CORPORATION CODE a. De jure - existing both in fact and in law.
b. De facto - existing in fact but not in law.

Corporation 7. As to whether they are open to the public or not:
a. Close - limited to selected persons or members
A corporation is an artificial being created by operation of of the family (Sec. 95-104, RCC).
law, having the right of succession and the powers, b. Open – open to any person who may wish to
attributes, and properties expressly authorized by law or become a stockholder or member thereto.
incident to its existence. (Sec. 2, RCC)
8. As to their relation to another corporation:
CLASSES OF CORPORATION a. Parent or Holding - related to another
corporation that it has the power either,

directly or indirectly to, elect the majority of the
The following are the classes of corporation:
director of such other corporation.

1. As to whether their membership is represented by b. Subsidiary - so related to another corporation
that the majority of its directors can be elected
shares of stock or not:
either, directly or indirectly, by such other
a. Stock – one which has:
corporation
i. Capital stock divided into shares; and

ii. Are authorized to distribute to the holders of
9. As to whether they are corporations in a true
such shares dividends or allotments of the
sense or only in a limited sense:
surplus profits on the basis of the shares held.
a. True - exists by statutory authority
(Sec. 3, RCC)
b. Quasi - exist without formal legislative grant:

i. Corporation by prescription - has exercised
b. Non-Stock – is one which does not issue shares
corporate powers for an indefinite period
and is - created not for profit but for public good
without interference on the part of the
and welfare and where no part of its income is
sovereign power and which by fiction of law, is
distributable as dividends to its members,
given the status of a corporation;
trustees, or officers (Sec. 86, RCC)
ii. Corporation by estoppel - in reality is not a

corporation, either de jure or de facto, because
2. As to the number of persons who compose them:
it is so defectively formed, but is considered a
a. One Person Corporation
corporation in relation to those only who, by
Corporation consisting of a single stockholder:
reason of theirs acts or admissions, are
Provided, That only a natural person, trust, or estate
precluded from asserting that it is not a
may form a One Person Corporation. (Sec. 116, RCC)
corporation. (Sec. 20, RCC)

b. Corporation Aggregate
10. As to whether they are for public (government)
Corporation consisting of more than one member or
or private purpose: (2001, 2004 BAR)
corporator. The RCC requires that these corporations
a. Public - formed or organized for the
must be formed jointly with others. (Sec. 10, RCC)
government of a portion of the State (like cities

c. Corporation Sole and municipalities) for the purpose of serving
the general good and welfare. (Aquino, 2014)
Religious corporation which consists of one member
b. Private - one formed for some private purpose,
which is the head of the religious sect or corporator
benefit or end. It may either be a stock or non-
only and his successor. (Sec. 108, RCC)
stock. (Aquino, 2014)

3. As to whether they are for religious purpose or
not: DOCTRINE OF SEPARATE JURIDICAL PERSONALITY
a. Ecclesiastical Corporation - one organized for
religious purpose. The doctrine of corporate juridical personality states that a
b. Lay Corporation - one organized for a purpose corporation is a juridical entity with legal personality
other than for religion. separate and distinct from those acting for and in its behalf
and, in general, from the people comprising it. (Francisco v.
4. As to whether they are for charitable purpose or Mallen Jr. G.R. No. 173169, September 22, 2010)
not:
a. Eleemosynary - one established for charitable A corporation may be held liable for torts
purposes.
b. Civil - one established for business or profit. The corporation is liable for every tort which it expressly
directs or authorizes. (PNB v. CA, G.R. No. L-27155, May 18,
5. As to state or country under or by whose laws 1978)
they have been created:
a. Domestic - incorporated and organized under A corporation is civilly liable in the same manner as
the laws of the Philippines. natural persons for torts, because generally speaking, the
b. Foreign - formed, organized, or existing under rules governing the liability of a principal or master for a
any laws other than those of the Philippines and tort committed by an agent or servant are the same,
whose laws allow Filipino citizens and whether the servant or agent is a natural or artificial
corporations to do business in its own country person. (Ibid)
or state. (Sec. 140, RCC)
Liability of a corporation in cases of crimes

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Commercial Law
GR: Since a corporation is a mere creation of legal fiction, it obligations of the stockholders. (Umali v CA, G.R. No.
cannot be held liable for crimes committed by its officers; 89561, September 13, 1990)
in such case the responsible officers would be criminally
liable. (People v. Tan Boon Kong, G.R. No. L-35262, March Three-pronged test to determine the application of the
15, 1930) alter ego/ instrumentality theory:

XPN: If the penalty of the crime is only fine or forfeiture of 1. Control, not mere majority or complete stock control,
license or franchise. (Ching v Secretary of Justice, supra) but complete domination, not only of finances but of
policy and business practice in respect to the
DOCTRINE OF PIERCING THE CORPORATE VEIL transaction attacked so that the corporate entity as to
this transaction had at the time no separate mind, will
The doctrine of piercing the corporate veil is the doctrine or existence of its own (Instrumentality or Control
that allows the State to disregard, for certain justifiable test);
reasons, the notion that a corporation has a personality 2. Such control must have been used by the defendant to
separate and distinct from the persons composing it. commit fraud or wrong, to perpetuate the violation of
a statutory or other positive legal duty, or dishonest
Where it appears that business enterprises are owned, and unjust act in contravention of plaintiff’s legal right
conducted and controlled by the same parties, law and (Fraud test); and
equity will disregard the legal fiction that these 3. 3. The aforesaid control and breach of duty must have
corporations are distinct entities and shall treat them as proximately caused the injury or unjust loss
one. This is in order to protect the rights of third persons. complained of (Harm test).
(Vicmar Development Corporation v. Elarcos, et al., G.R. No.
202215, December 09, 2015, Del Castillo, J.) NUMBER AND QUALIFICATIONS OF INCORPORATORS

In order to justify the piercing of the corporate veil, Number and the qualifications of incorporators in a
allegation or proof of fraud or other public policy stock corporation
considerations is needed. (Hacienda Luisita Incorporated
vs. Presidential Agrarian Reform Council, G.R. No. 171101, 1. GR: As amended by RA No. 11232 (or the Revised
November 22, 2011) Corporation Code), any person, partnership,
association or corporation, singly or jointly with
NOTE: This is an exception to the Doctrine of Separate others.
Corporate Entity.
XPN: Under the Rural Banks Act of 1992, incorporated
Grounds for application of the doctrine cooperatives are allowed to be incorporators of rural
banks.
It applies upon the following circumstances: (FACO)
1. If the fiction is used to perpetrate fraud (Fraud Test) 2. GR: Incorporators must not be more than 15
2. If the complete control of one corporate entity to XPNS:
another which perpetuated the wrong is the 1. Educational institutions
proximate cause of the injury (Control Test) 2. Close corporations
3. If a certain corporation is only an adjunct or an
extension of the personality of the corporation (Alter 3. An incorporator must be of Legal age
ego or Instrumentality Test) 4. Each must own or subscribe to at least one (1) share
4. If the fiction is pierced to make the stockholders liable of the capital stock. (Sec.10, RCC)
for the obligation of the corporation (Objective Test)
Q: Must all incorporators and directors be residents of
The following are the tests in determining the the Philippines? (2006 BAR)
applicability of the doctrine of piercing the corporate
veil (ECAO) A: NO. The Revised Corporation Code has removed the
residency requirement of the majority of incorporators
1. When the corporation is used to defeat public and directors under the old law.
convenience as when the corporate fiction is used as a
vehicle for the evasion of an existing obligation (Equity Capital stock requirements
Cases)
2. In fraud cases or when the corporate entity is used to GR: Stock corporations shall not be required to have a
justify a wrong, protect fraud, or defend a crime minimum authorized capital stock. (Sec. 12, RCC)
(Control Test)
3. In Alter ego cases, where a corporation is merely a XPN: As provided by special law
farce since it is a mere alter ego or business conduit of
a person, or where the corporation is so organized and Paid-up capital
controlled and its affairs are so conducted as to make
it merely an instrumentality, agency, conduit or Paid-up capital forms part of the authorized capital stock
adjunct of another corporation. (Sarona vs. NLRC, of the corporation, subscribed and then actually paid for.
Royale Security Agency, et al., G.R. No. 185280, January The assets transferred and the loans extended to a
18, 2012) corporation should not be considered in computing the
4. The Objective test where the end result in piercing the paid-up capital of the corporation. (MISCI-NACUSIP Local
veil of corporate fiction is to make the stockholders Chapter v. NWPC, G.R. No. 125198, March 3, 1997)
liable for debts and obligations of the Corporation not
to make the Corporation liable for the debts and Term of corporate existence

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Commercial Law
GR: As amended by RA No. 11232, corporations now have there shall always be a class or series of shares which have
a perpetual existence. complete voting rights. (Sec. 6)

XPN: Unless its Articles of Incorporation provides XPN: These redeemable and preferred shares, when such
otherwise. (Sec. 11, RCC) voting rights are denied, shall nevertheless be entitled to
vote on the following fundamental matters: (AASIIMID)
Also, the Code mandates that corporations with certificates
of incorporation issued prior to the effectivity of this Code 1. Amendment of the Articles of Incorporation;
and which continue to exist, shall likewise have perpetual 2. Adoption and amendment of by-laws;
existence, unless the corporation, upon a vote of its 3. Sale, lease, exchange, other disposition of all or
stockholders representing a majority of its outstanding substantially all of the corporate property;
capital stock, notifies the Commission that it elects to 4. Incurring, creating or increasing bonded
retain its specific corporate term. indebtedness;
5. Increase or decrease of capital stock;
Under the RCC, if a corporation wishes to change its 6. Merger and consolidation;
corporate term, it may amend its AOI at least 3 years prior 7. Investment of corporate funds in another corporation
to the expiration of its term. Previously, such change or business; and
should be made at least 5 years prior to the expiration. 8. Dissolution of the corporation.

If the term has already expired, the corporation may apply Founder’s Shares
for a revival of their corporate existence, which option was
not present in the old code. Upon approval by the Shares classified as such in the articles of incorporation
Commission, it will then issue a certificate of revival of and which may be given special preference in voting rights
corporate existence, giving it perpetual existence, unless its and dividend payments.
application for revival provides otherwise.
NOTE: Where the exclusive right to vote and be voted for
XPN: No revival is allowed for companies under the in the election of directors is granted, it must be for a
supervision of other government agencies, such as banks, limited period not to exceed five (5) years from the date of
insurance and trust companies. incorporation: Provided, That such exclusive right shall
not be allowed if its exercise will violate Commonwealth
XPN to XPN: Revival is accompanied by a favorable Act No. 108, otherwise known as the “Anti-Dummy Law”;
recommendation of the appropriate government agency. Republic Act No. 7042, otherwise known as the “Foreign
Investments Act of 1991”; and other pertinent laws.
Extension must also comply with procedural requirements
for amendment of AOI. Redeemable Shares

Common vs. Preferred shares These are shares which may be purchased by the
corporation from the holders of such shares upon the
COMMON PREFERRED expiration of a fixed period, regardless of the existence of
Stock which Stock which entitles unrestricted retained earnings in the books of the
entitles the owner the holder to some corporation, and upon such other terms and conditions
to an equal pro preference, wither stated in the articles of incorporation and the certificate of
Definition stock representing the shares, subject to rules and
rata division of in the dividends, or
profits. in distribution of regulations issued by the Commission. (Sec. 8, RCC)
assets, or both.
Depends if it is a Treasury Shares
Stated par value.
Value par or no-par value
(Sec. 6) Shares that have been earlier issued as fully paid and have
share.
Usually vested May be deprived of thereafter been acquired by the corporation by purchase,
Voting with the exclusive voting rights. (Sec. donation, and redemption or through some lawful means.
rights right to vote. 6) (Sec. 9, RCC)

No advantage, NOTE: Treasury shares are not retired shares. They do not
Has the first crack
priority or revert to the unissued shares of the corporation but are
Preference oat
preference over regarded as property acquired by the corporation which
upon dividends/profits/
any other may be reissued or resold at a price to be fixed by the
Liquidation distribution of
stockholder in the Board of Directors. (SEC Rules Governing Redeemable and
assets.
same class. Treasury Shares, CCP No. 1-1982)

SCOPE OF VOTING RIGHTS SUBJECT TO Nature of a subscription contract
CLASSIFICATION
A subscription contract is indivisible. Consequently, where
Only preferred and redeemable shares may be deprived of stocks were subscribed and part of the subscription
the right to vote (Sec. 6), except as otherwise provided in contract price was not paid, the whole subscription shall
the Revised Corporation Code. be considered delinquent and not only the shares which
correspond to the amount not paid.
GR: Non-voting shares are not entitled to vote. The law
only authorizes the denial of voting rights in the case of NOTE: This is called the Doctrine of Individuality
redeemable shares and preferred shares, provided that (Indivisibility) of Subscription. A subscription is one

2021 GOLDEN NOTES 2021 & 2022
Commercial Law
entire and indivisible whole contract. It cannot be divided 11. Other matters as are not inconsistent with law and
into portions. (Sec. 63, RCC) which the incorporators may deem necessary and
convenient. (Sec. 13, RCC)
Subscription and purchase of stock
NOTE: An arbitration agreement may be provided in
The CC, under sec. 60, now Sec. 59 of the RCC, in defining the articles of incorporation pursuant to Section 181
subscription, abolished the distinction between of the RCC.
subscription and purchase of shares from an existing
corporation by making all such acquisitions a subscription NON-AMENDABLE ITEMS
notwithstanding that the parties denominate it as a
purchase or sale or some other contract. Non-amendable items in the AOI

ARTICLES OF INCORPORATION Those matters referring to accomplished facts, except to
correct mistakes, such as:
Articles of Incorporation 1. Names of incorporators;
2. Names of original subscribers to the capital stock
The Articles of Incorporation (AOI) is one that defines the of the corporation and their subscribed and paid
charter of the corporation and the contractual up capital;
relationships between the State and the corporation, the 3. Names of the original directors;
stockholders and the State, and between the corporation 4. Treasurer elected by the original subscribers;
and its stockholders. (Government of the Philippine Islands 5. Members who contributed to the initial capital of
v. Manila Railroad Co., G.R. No. L-30646, January 30, 1929) the non-stock corporation; or
6. Witnesses to and acknowledgment with AOI.
Three-fold nature of AOI
COMMENCEMENT OF CORPORATE EXISTENCE
An AOI, which stands as the corporate charter, is a contract
of three-fold nature because it is a contract between: Doctrine of corporate entity

1. The State and the corporation; GR: A corporation comes into existence upon the issuance
2. The corporation and the stockholders; and of the certificate of incorporation by the SEC under its
3. The stockholders inter se. official seal. Then and only then will it acquire a juridical
personality. (Sec. 18, RCC)
CONTENTS
XPN: In case of a corporation sole, the corporation sole
All corporations organized under the Code shall file with commences existence upon the filing of the articles of
the SEC an AOI in any of the official languages duly signed incorporation.
and acknowledged or authenticated, in such form and
manner as may be allowed by the Commission, containing ADOPTION OF BY-LAWS
substantially the following matters, except as otherwise
prescribed by the Code or by special law: (NaP- By-laws are rules and regulations or private laws
PlaTINum-ASONO) enacted by the corporation to regulate, govern and control
its own actions, affairs and concerns and of its
1. NAme of corporation; stockholders or members and directors and officers in
2. Purpose/s, indicating the primary and secondary relation thereto and among themselves in their relation to
purposes (Purpose Clause); it. (Valley Golf & Country Club, Inc. vs. Vda. De Caram, GR
3. PLAce of principal office; 158805, April 16, 2009)
4. Term of existence; if the corporation has not elected
perpetual existence; By-laws are relatively permanent and continuing rules of
5. Names, nationalities and residences of Incorporators; action adopted by the corporation for its for its own
6. NUMber of directors, which shall not more than fifteen government and that of individuals composing of it and
(15) or the number of trustees which may be more those having the direction, management, and control of its
than fifteen (15); affairs, in whole or in part, in the management and
Note: Under the Revised Corporation Code, the control of its affairs and activities. (China Banking
number of directors shall not be more than fifteen (15) Corporation v. CA, G.R. No. 117604, March 26, 1997)
while the number of trustees which may be more than
fifteen (15) and the term of existence is generally REQUISITES OF VALID BY-LAWS (2000, 2001 BAR)
perpetual;
The following are the requisites for the validity of by-laws:
7. Names, nationalities, and residences of the persons (CoMorO-RAG)
who shall Act as directors or trustees until the first
regular ones are elected and qualified; 1. Must be consistent with the COrporation Code, other
8. If a Stock corporation, the amount of its authorized pertinent laws and regulations;
capital stock, number of shares and in case the shares 2. Must not be contrary to MORals and public policy;
are par value shares, the par value of each share; 3. Must not impair Obligations and contracts or property
9. Names, nationalities, number of shares, and the rights of stockholders;
amounts subscribed and paid by each of the Original 4. Must be Reasonable;
subscribers 5. Must be consistent with the charter or AOI; and
10. If Non-stock, the amount of capital, the names,
residences, and amount paid by each contributor,

2021 GOLDEN NOTES 2021 & 2022
Commercial Law
NOTE: In case of conflict between the by-laws and the 4. Copy of the amended AOI shall be submitted to the
AOI, the AOI prevails because the by- laws are SEC for its approval;
intended merely to supplement the former. 5. In case of Special Corporation, a favorable
recommendation of appropriate government agency
6. Must be of General application and not directed (Sec. 36, RCC)
against a particular individual. 6. The extension must be done during the lifetime of the
corporation not earlier than 3 years prior to the expiry
AMENDMENT OR REVISION date unless exempted. (Sec. 15, RCC)

Ways of amending, repealing or adopting new by-laws: POWER TO INCREASE OR DECREASE CAPITAL STOCK
OR INCUR, CREATE, INCREASE BONDED
1. Amendment may be made by stockholders together with INDEBTEDNESS
the Board – by majority vote of directors and owners
of at least a majority of the outstanding capital Procedural requirements in increasing or decreasing
stock/members; or capital stock
2. By the board only after due delegation by the Majority vote of the BOD;
stockholders owning 2/3 of the outstanding capital 1. Ratification by stockholders representing 2/3 of the
stock/members. Provided, that such power delegated outstanding capital stock;
to the board shall be considered as revoked whenever 2. Written notice of the proposed increase or diminution
stockholders owning at least majority of the of the capital stock and of the time and place of the
outstanding capital stock or members, shall vote at a stockholder’s meeting at which the proposed increase
regular or special meeting. (Sec. 47, RCC) or diminution of the capital stock must be addressed
to each stockholder at his place of residence as shown
EFFECTS OF NON-USE OF CORPORATE CHARTER on the books of the corporation and deposited to the
addressee in the post office with postage prepaid, or
If a corporation does not formally organize and commence served personally or through electronic means
its business within five (5) years from the date of its recognized in the corporation’s bylaws and/or the
incorporation, its certificate of incorporation shall be Commission’s rules as a valid mode for service of
deemed revoked as of the day following the end of the five- notices;
year period. 3. A certificate in duplicate must be signed by a majority
vote of the directors of the corporation and
If a corporation has commenced its business but countersigned by the chairman(chairperson) and the
subsequently becomes inoperative for a period of at least secretary of the stockholder’s meeting, setting forth:
five (5) consecutive years, the Commission may, after due a. That the foregoing requirements have been
notice and hearing, place the corporation under delinquent complied with;
status. b. The amount of increase or diminution of the
capital stock;
A delinquent corporation shall have a period of two (2) c. If an increase of the capital stock, the amount of
years to resume operations and comply with all capital stock or number of shares of no par stock
requirements that the Commission shall prescribe. Upon actually subscribed, the names, nationalities and
compliance by the corporation, the Commission shall issue residences of the persons subscribing, the
an order lifting the delinquent status. Failure to comply amount of capital stock or number of no par stock
with the requirements and resume operations within the subscribed by each, and the amount paid by each
period given by the Commission shall cause the revocation on his subscription in cash or property, or the
of the corporation’s certificate of incorporation. (Sec. 21, amount of capital stock or number of shares of no
RCC) par stock allotted to each stockholder if such
increase is for the purpose of making effective
CORPORATE POWERS stock dividend authorized (and the amount paid
by each on the subscription in cash or property,
or the amount of capital stock or number of
POWER TO EXTEND OR SHORTEN CORPORATE TERM
shares of no-par stock allotted to each
stockholder if such increase is for the purpose of
Procedural requirements in extending/ shortening making effective stock dividend therefor
corporate term authorized);
d. The amount of stock represented at the meeting;
1. Majority vote of the BOD or BOT and
2. Ratification by 2/3 of the SH representing outstanding e. The vote authorizing the increase or diminution
capital stock or by at least 2/3 of the members in case of the capital stock, or the incurring, creating or
of non-stock corporation. increasing of any bonded indebtedness.
3. Written notice of the proposed action and of the time
and place of the meeting shall be addressed to each NOTE: The increase or decrease in the capital stock or the
stockholder or member at his place of residence as incurring, creating or increasing bonded indebtedness
shown on the books of the corporation and deposited shall require prior approval of the SEC.
to the addressee in the post office with postage
prepaid, or served personally or when allowed in the Bonded indebtedness
bylaws or done with the consent of the stockholder,
sent electronically in accordance with the rules and It is a long-term indebtedness secured by real or personal
regulations of the Commission on the use of electronic property (corporate assets).
data messages.

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Commercial Law
NOTE: The requirements for the power to incur, create or in its books. (Sec. 103 par. 1[d], RCC)
increase bonded indebtedness is also the same with the
power to increase or decrease capital stock. NOTE: Where a corporation reacquires its own shares,
it does not thereby become a subscriber thereof.
Registration of the bonds issued by the corporation
Rule in order that a corporation may acquire its own
Bonds issued by a corporation shall be registered with the shares
SEC which shall have the authority to determine the
sufficiency of the terms thereof. (Sec. 37, RCC) GR: The corporation may only acquire its own stocks in
the presence of unrestricted retained earnings (URE).
Stockholders’ approval is not required for all
borrowings of the corporation
XPNs: (RDC)
Not all borrowings of the corporation need stockholders’
approval. Only bonded indebtedness requires such 1. Redeemable shares may be acquired even without
approval. surplus profit for as long as it will not result to the
insolvency of the Corporation
POWER TO DENY PRE-EMPTIVE RIGHTS 2. In cases that the corporation conveys its stocks in
payment of a Debt
Pre-emptive right 3. In a Close corporation, a stockholder may demand the
payment of the fair value of shares regardless of
It is the preferential right of shareholders to subscribe to existence of retained earnings for as long as it will not
all issues or disposition of shares of any class in proportion result to the insolvency of the corporation.
to their present shareholdings. (Sec. 38, RCC)
Unrestricted retained earnings (URE)
NOTE: The stockholder must exercise his pre- emptive
right within the time fixed in the resolution authorizing the It represents the surplus profits of the corporation. It is
increase of capital stock. determined by subtracting the liabilities (L), the Capital
Stock (CS) and the Restricted Retained Earnings (RRE)
POWER TO SELL OR DISPOSE CORPORATE ASSETS from the assets (A) of the corporation (URE = A – (L + CS+
RRE)).
Substantially all of corporate assets
Unrestricted Retained Earnings shall include accumulated
There is a sale, lease, exchange, mortgage, pledge, and any profits and gains realized out of the normal and
other disposition (SLEMPO) of substantially all of continuous operations of the company after deducting
corporate asset if in the SLEMPOD thereof, the corporation therefrom distributions of stockholders and transfers to
would be rendered: capital stock or other accounts. It does NOT include:

1. Incapable of continuing the business; or 1. Funds appropriated by its BOD for corporate
2. Incapable of accomplishing the purpose for which expansion projects or programs;
it was incorporated. (Sec. 39, RCC) 2. Funds covered by a restriction for dividend
declaration under a loan agreement; and
NOTE: This is subject to the provisions of Republic Act No. 3. Funds required to be retained under special
10667, otherwise known as the “Philippine Competition circumstances obtaining in the corporation such as
Act.” when there is a need for a special reserve for probable
circumstances.
POWER TO ACQUIRE OWN SHARES
POWER TO INVEST CORPORATE FUNDS IN ANOTHER
Instances when a corporation may acquire its own CORPORATION OR BUSINESS
shares (1991, 1992, 2005 BAR)
GR: The corporation is not allowed to engage in a business
1. To eliminate fractional shares arising out of stock different from those enumerated in its AOI.
dividends (Sec. 40, RCC)
2. To collect or compromise an indebtedness to the XPN: The purpose will be amended to include the desired
corporation, arising out of unpaid subscription, in a business activity among its secondary purpose.
delinquency sale and to purchase delinquent shares
sold during said sale (Ibid.) POWER TO DECLARE DIVIDENDS
3. To pay dissenting or withdrawing stockholders (in the
exercise of the stockholder’s appraisal right) (Ibid.) Requirements for the declaration of dividends
4. To acquire treasury shares (Sec. 9, RCC)
5. To acquire Redeemable shares regardless of existence 1. Existence of URE’s.
of retained earnings (Sec. 8, RCC) 2. Resolution of the board.
6. To effect a decrease of capital stock (Sec. 37, RCC)
7. In close corporations, when there is a deadlock in the NOTE: In case stock dividend is to be declared, an
management of the business, the SEC may order the additional requirement of:
purchase at their fair value of the shares of any
stockholder by a corporation regardless of the 1. A vote representing 2/3 of outstanding capital.
availability of unrestricted retained earnings (URE’s) (Sec. 42, RCC)

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Commercial Law
2. A corporation must have also a sufficient number of certificate or certificates and the number of shares
authorized unissued shares for distribution to transferred. (Sec. 62, RCC)
stockholders.
No certificate of stock shall be issued to a subscriber until
POWER TO ENTER INTO MANAGEMENT CONTRACT the full amount of the subscription together with interest
and expenses (in case of delinquent shares), if any is due,
Management Contract is any contract whereby a has been paid. (Sec. 63, RCC)
corporation undertakes to manage or operate all or
substantially all of the business of another corporation, DOCTRINE OF EQUALITY OF SHARES
whether such contracts are called service contracts,
operating agreements or otherwise. (Sec. 43, RCC) Where the articles of incorporation do not provide for any
distinction of the shares of stock, all shares issued by the
NOTE: Sec. 43 refers only to a management contract with corporation are presumed to be equal and enjoy the same
another corporation. Hence, it does not apply to rights and privileges and are also subject to the same
management contracts entered into by a corporation with liabilities. (Sec. 6, RCC).
natural persons. Corollary to this, management contract
with a natural person need not comply with the requisites
TRUST FUND DOCTRINE
of Sec. 43.

The subscribed capital stock of the corporation is a trust
APPLICABILITY OF ULTRA VIRES ACT fund for the payment of debts of the corporation which the
creditors have the right to look up to satisfy their credits,
No corporation shall possess or exercise any corporate and which the corporation may not dissipate. The
powers except those conferred by this Code or by its creditors may sue the stockholders directly for the latter’s
articles of incorporation and except such as are necessary unpaid subscription.
or incidental to the exercise of the powers so conferred.
(Sec. 44, RCC) Exceptions to the trust fund doctrine

An ultra vires act refers to an act outside or beyond The Code allows distribution of corporate capital only in
express, implied and incidental corporate powers. The instances of:
concept also includes those acts that may ostensibly be
within such powers but are, by general or special laws, 1. Amendment of the AOI to reduce authorized capital
either proscribed or declared illegal. (Rural Bank of Milaor stock;
v. Ocefemia, G.R. No. 137686, February 8, 2000) 2. Purchase of redeemable shares by the corporation
regardless of existence of unrestricted retained
It is one committed outside the object for which a earnings; or
corporation is created as defined by the law of its 3. Dissolution and eventual liquidation of the
organization and therefore beyond the power conferred corporation.
upon it by law. (Atrium Management Corporation vs. CA,
G.R. No. 109491, February 28, 2001)
HOW EXERCISED BY THE SHAREHOLDERS

Unlike illegal acts which contemplate the doing of an act
that is contrary to law, morals, or public policy or public The shareholders participate in controlling the affairs of
duty, and are void, ultra vires acts are not illegal but not the corporation by exercising their right to vote. They can
merely within the scope of the articles of incorporation elect the directors who will actually govern the
and the by-laws. They are merely voidable and may corporation and they can also vote on important matters
become binding and enforceable when ratified by the that are still reserved to them by the Corporation Code.
stockholders. (Maria Clara Pirovana, et al. v. the De La (Aquino, 2006)
Rama Steamship Co., G.R. No. L-5377, December 29, 1954)
HOW EXERCISED BY THE BOARD OF DIRECTORS
Types of UVA
The Board of Directors is primarily responsible for the
1. Acts done beyond the powers of the corporation governance of the corporation. Their primary duty is to set
(through BOD); the policies for the accomplishment of the corporate
2. Ultra vires acts by corporate officers; and objectives. (Revised Code of Corporate Governance, Art. 3)
3. Acts or contracts which are per se illegal as being
contrary to law They elect the officers who carry out the policies that they
have established.
DOCTRINE OF INDIVIDUALITY /
INDIVISIBILITY OF SUBSCRIPTION The general rule is that a corporation, through its Board of
Directors, should act in a manner and within the

formalities, if any, prescribed by its charter or by the
Shares of stock so issued are personal property and may
general law. Directors must act as a body in a meeting
be transferred by delivery of the certificate or certificates
called for the pursuant to the law or the corporation’s by
indorsed by the owner or his attorney- in-fact or any other
laws, otherwise, any action taken therein may be
person legally authorized to make the transfer. No
questioned by any objecting director or shareholder; but
transfer, however, shall be valid, except as between the
an action of the Board of Directors during a meeting, which
parties, until the transfer is recorded in the books of the
was illegal for lack of notice, may be ratified expressly, by
corporation showing the names of the parties to the
the action of directors in a subsequent legal meeting, or
transaction, the date of the transfer, the number of the
impliedly, by the corporation’s subsequent course of

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Commercial Law
conduct. (Lopez Realty, Inc., v. Fontecha, et al., GR No. entitled to dividends pro rata based on the total number of
76801, August 11, 1995) shares that they own and not on the amount paid for the
shares. (SEC Opinion, October 10, 1992 and July 16, 1996)
RIGHTS OF A STOCKHOLDER
GR: Stock corporations are prohibited from retaining
1. Management Right surplus profits in excess of 100% of their paid-in capital
a. To attend and vote in person or by proxy at a stock
stockholders’ meetings (Sec. 49, 57, RCC)
b. To elect and remove directors (Sec. 23, 27, RCC) XPNs:
c. To approve certain corporate (Sec. 57, RCC) 1. When justified by definite corporate expansion
d. To adopt and amend or repeal the by-laws of projects or programs approved by the board of
adopt new by-laws (Sec. 45, 47, RCC) directors; or
e. To compel the calling of the meetings (Sec. 49, 2. When the corporation is prohibited under any
RCC) loan agreement with any financial institution or
f. To enter into a voting trust agreement (Sec. 58, creditor, whether local or foreign, from declaring
RCC)and dividends without its/his consent, and such
g. To have the corporation voluntarily dissolved consent has not yet been secured; or
(Sec. 117, 118, RCC) 3. When it can be clearly shown that such retention
is necessary under special circumstances
2. Proprietary rights obtaining in the corporation, such as when there is
a. To transfer stock in the corporate book (Sec. 62, need for special reserve for probable
RCC) contingencies (Sec. 42, RCC)
b. To receive dividends when declared (Sec. 42,
RCC) APPRAISAL RIGHT
c. To the issuance of certificate of stock or other
evidence of stock ownership (Sec. 63, RCC) It refers to the right of the stockholder to demand payment
d. To participate in the distribution of corporate of the fair value of his shares, after dissenting from a
assets upon dissolution (Sec. 117, 118, RCC) and proposed corporate action involving a fundamental change
e. To pre-emption in the issue of shares (Sec. 38, in the charter or articles of incorporation in the cases
RCC) provided by law. (De Leon, 2010)

3. Remedial rights Requisites: (GWAFU)
a. To inspect corporate books (Sec. 73, RCC)
b. To recover stock unlawfully sold for delinquent 1. Any Ground for appraisal must be present.
payment of subscription (Sec. 68, RCC) 2. A written demand on the corporation must be
c. To be furnished with most recent financial made within 30 days after the date when the vote
statements or reports of the corporation’s was taken.
operation (Sec. 73, 74, RCC) 3. The dissenting stockholders attend the meeting of
d. To bring suits (derivative suit, individual suit, the stockholders and voted against the proposed
and representative suit); and action.
e. To demand payment in the exercise of appraisal 4. The price of the Fair Market Value of the shares on
right (Sec. 40, 81, RCC) the day before the date of voting.

NOTE: In case of disagreement, the value will be
CASES WHEN STOCKHOLDER’S ACTION IS REQUIRED
determined by appraisal of 3 disinterested persons.
(Sec. 81, RCC)
Under Section 6 of the Corporation Code, each share of
stock is entitled to vote, unless otherwise provided in the 5. The corporation has sufficient unrestricted
articles of incorporation or declared delinquent under retained earnings to pay. (Turner vs. Lorenzo G.R.
Section 67 of the Corporation Code. (Tan v. Sycip, G.R. No. No. 157479, November 24, 2010)
153468, August 17, 2006)

PRE-EMPTIVE RIGHT
PROPRIETARY RIGHTS
It is the preferential right of shareholders to subscribe to
The following are the proprietary rights of the all issues or disposition of shares of any class in proportion
stockholders: to their respective shareholdings. (Sec. 38, RCC)
1. Right to Dividends;
2. Right of Appraisal; REMEDIAL RIGHTS
3. Right to Inspect;
4. Pre-emptive Right; Actions that the stockholders or members can bring
5. Right to Vote; and
6. Right of First Refusal. 1. Derivative suit – one brought by one or more
stockholders or members in the name and on behalf of the
RIGHT TO DIVIDENDS corporation to redress wrongs committed against it or to
protect or vindicate corporate rights, whenever the
Right to dividend of a stockholder officials of the corporation refuse to sue or are the ones to
be sued or hold control of the corporation.
It is the right of the stockholder to demand payment of
dividends after the board’s declaration. Stockholders are

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Commercial Law
2. Individual suit – an action brought by a stockholder misconduct similar to those enumerated in
against the corporation for direct violation of his paragraphs (a) and (b) above (Sec. 26, RCC)
contractual rights as such individual stockholder, such as
the right to vote and be voted for, the right to share in the 2. He must be of legal age; and
declared dividends, the right to inspect corporate books 3. Other qualifications as may be prescribed in special
and records, and others. laws or regulations or in the by-laws of the
corporation.
3. Representative suit – one brought by a person in his own
behalf and on behalf of all similarly situated. INDEPENDENT DIRECTORS

BOARD OF DIRECTORS AND TRUSTEES An independent director is a person who apart from
shareholdings and fees received from the corporation, is
DOCTRINE OF CENTRALIZED MANAGEMENT independent of management and free from any business or
other relationship which could or could reasonably be
GR: The Doctrine of Centralized Management states that perceived to materially interfere with the exercise of
all corporate powers are exercised by the BOD or BOT. independent judgment in carrying out the responsibilities
(Sec. 22, RCC) as a director. (Sec 22, RCC)

Board is the body which: (ExCoCo) Requirement of independent directors
1. Exercises all powers provided for under the
Corporation Code; At least two (2) independent directors are required in the
2. Conducts all Business of the corporation; and following companies:
3. Controls and holds all the properties of the
corporation. (Sec. 22, RCC) 1. Any corporation with a class of equity securities listed
for trading on an Exchange (Publicly traded companies);
XPN: The doctrine is not applicable to the following 2. Banks; and
instances: 3. Corporations with secondary franchise.
1. In case of delegation to the Executive Committee
duly authorized in the by-laws; NOTE: The Board should have at least two (2)
2. Authorization pursuant to a contracted manager independent directors, or such number as to constitute at
which may be an individual, a partnership, or least one-third of the members of the Board, whichever is
another corporation; and higher.
3. In case of close corporations, the stockholders
may manage the business of the corporation The board of the following corporations vested with public
instead of a board of directors, if the articles of interest shall have independent directors constituting at
incorporation so provide. least twenty percent (20%) of the board: (Co-BO)

TENURE, QUALIFICATIONS AND DISQUALIFICATIONS 1. Corporations whose: (Re-Li-Ass)
OF DIRECTORS OR TRUSTEES
a. Securities are registered with the Commission;

b. Corporations listed with an exchange;
Term of office of BOD/BOT
c. Corporations with:

Directors shall be elected for a term of one (1) year from
i. assets of at least 50 Million Pesos;
among the holders of stocks registered in the corporation’s
ii. having 200 or more shareholders;
books, while trustees shall be elected for a term not
iii. each shareholder holding at least 100 shares of
exceeding three (3) years from among the members of the
a class of its equity shares

2. (B-PIN-PEF): Banks, quasi-banks, preneed, insurance
If no election is held, the directors and officers will
and trust companies, nonstock savings and loan
continue to occupy position even after the lapse of 1 year
associations, pawnshops, corporations engaged in money
under a hold-over capacity until their successors are
service business and other financial intermediaries; and
elected and qualified.
3. Other corporations engaged in business vested with

public interest similar to the above, as may be determined
Common qualifications of a director and trustee
by the Commission, after taking into account relevant

factors which are germane to the objective and purpose of
1. He must not have been, within five (5) years prior to
requiring the election of independent director
the election or appointment as such:
Factors to consider by the Commission in determining a
a. Convicted by final judgment: (ICS)
coporation engaged in business with public interest:
i. of an offense punishable by
(ExTyPO)
imprisonment for a period exceeding 6

years;
1. Extent of minority ownership;
ii. violation of the Corporation Code; or
2. Type of financial products or securities issued or
iii. violation of RA 8799 (SRC)
offered to investors;
b. Found administratively liable for any offense
3. Public interest involved in the nature of business
involving fraudulent acts; and
operations; and
c. By a foreign court or equivalent foreign
4. Other analogous factors (Sec. 22, RCC)
regulatory authority for acts, violations or

Power to remove directors or trustees

2021 GOLDEN NOTES 2021 & 2022
Commercial Law
The power to remove belongs to the stockholders to withhold information from the stockholder, the duty to
representing at least 2/3 of the outstanding capital stock disclose arises, and concealment is fraud.
or if non stock corporation, by a vote of at least 2/3 of the
members entitled to vote. (Sec. 27, RCC) INSIDE INFORMATION

GR: Removal may be with or without cause. Any material non-public information about the issuer of
the securities (corporation) or the security obtained by
XPN: If the director was elected by the minority, there being an insider, which includes: (ID-ReGoL)
must be cause for removal because the minority may not
be deprived of the right to representation to which they 1. The Issuer;
may be entitled under Sec. 23 of the Code. (Sec. 27, RCC) 2. A Director or officer (or any person performing
similar functions) of, or a person controlling the
NOTE: The right of representation referred to is the right issuer;
to cumulative voting for one candidate under Sec. 23 of the 3. A person whose Relationship or former relationship to
Code. the issuer gives or gave him access to material
information about the issuer or the security that is not
DISLOYALTY generally available to the public;
4. A Government employee, director, or officer of an
GR: The director must account for and refund to the office exchange, clearing agency and/or self- regulatory
all such profits, which such director, by virtue of such organization who has access to material information
office: about an issuer or a security that is not generally
available to the public; or
1. Acquires a business opportunity which should 5. A person who Learns such information by a
belong to the corporation; communication from any forgoing insiders (Sec. 3.8,
2. Thereby obtaining profits to the prejudice of such SRC)
Contracts between corporations with interlocking
XPN: Unless the act has been ratified by a vote of the directors
stockholders owning or representing at least two- thirds
(2/3) of the outstanding capital stock. (Ibid.) A contract between two or more corporations having
interlocking directors shall not be invalidated on that
NOTE: This rule shall be applicable, notwithstanding the ground alone. Provided that:
fact that the director risked one’s own funds in the
venture. (Ibid.) 1. Contract is not fraudulent;
2. Contract is fair and reasonable under the
BUSINESS JUDGMENT RULE circumstances; and
3. If the interest of the interlocking director in one
Questions of policy or management are left solely to the corporation or corporations is merely nominal (not
honest decision of officers and directors of a corporation exceeding 20% of the outstanding capital stock), he
and the courts are without authority to substitute their shall be subject to the provisions of Sec. 32 insofar as
judgment for the judgment of the board of directors; the the latter corporation or corporations are concerned.
board is the business manager of the corporation and so (Sec. 32, RCC);
long as it acts in good faith, its orders are not reviewable
by the courts or the SEC. (Montelibano v. Bacolod-Murica NOTE: Stockholdings exceeding 20% of the
Milling Co., G.R. No. L-15092, May 18, 1962; Phil. Stock outstanding capital stock shall be considered
Exchange, Inc. v. Ca, G.R. No. 125469, October 27, 1997) substantial for purposes of interlocking directors.

GR: Contracts intra vires entered into by the board of Liability of directors for watered stocks
directors are binding upon the corporation beyond the
interference of courts. The courts are barred from Any director or officer of a corporation shall be solidarily
intruding into business judgments of corporations, when liable with stockholder concerned to the corporation and
the same are made in good faith. (Ong v Tiu, G.R. No. its creditors for difference
144476. April 8, 2003)
There is a violation of the trust fund doctrine when
XPNs: Courts can inquire unto contracts which are: stocks of the corporation are issued less than the par
1. Unconscionable and oppressive as to amount to value
wanton destruction to the rights of the minority
(Ong v Tiu, ibid); or GR: The trust fund doctrine is violated where stocks are
2. When there is bad faith or gross negligence by the issued by the corporation for a consideration which is less
directors. (Republic Communications Inc v CA, G.R. than its par value.
No. 135074, January 29, 1999)
XPN: Trust fund doctrine is not violated in case treasury
shares are reacquired and subsequently re-issued for a
SPECIAL FACT DOCTRINE lesser consideration by the corporation. The only
limitation for the reissuance of treasury shares is that their
The special fact doctrine is an exception to the majority price must be reasonable.
rule doctrine. It states that where special circumstances or
facts are present which make it inequitable for the director

2021 GOLDEN NOTES 2021 & 2022
Commercial Law
OTHER CORPORATIONS whenever necessary or proper, be used in furtherance of

the purpose or purposes for which it was organized. (Sec.
CLOSE CORPORATION 86, RCC)

Characteristics of a close corporation Purposes for which a non-stock corporation may be
organized
A close corporation is one whose AOI provides that:
Non-stock corporations may be formed or organized for:
1. All of the corporation’s issued stock of all classes, (CREP-CFLSS-CS)
exclusive of treasury shares, shall be held of record by
not more than a specified number of persons, not 1. Charitable,
exceeding 20; 2. Religious,
2. All of the issued stock of all classes shall be subject to 3. Educational,
one or more specified restrictions on transfer 4. Professional,
permitted by the provisions on close corporations; and 5. Cultural,
3. The corporation shall not list in any stock exchange or 6. Fraternal,
make any public offering of any of its stock of any 7. Literary,
class. 8. Scientific,
4. Notwithstanding the foregoing, a corporation shall be 9. Social,
deemed NOT a close corporation when at least 2/3 of 10. Civic service, or
its voting stock or voting rights is owned or controlled 11. Similar purposes, like trade, industry, agriculture and
by another corporation which is not a close like chambers, or any combination thereof. (Sec. 87,
corporation within the meaning of this Code. RCC)

NOTE: Stockholders of close corporations are personally NOTE: A non-stock corporation organized to promote
liable for corporate torts unless the corporation has educational objectives may not be an educational
obtained adequate liability insurance. (Sec. 99[e], RCC) corporation as contemplated in Sec. 105 and 106 of the
RCC.
Validity of restrictions on transfer of shares
Treatment of profits
Restrictions on the right to transfer shares must appear in:
Mere intangible or pecuniary benefit to the members does
1. The articles of incorporation; not change the nature of the corporation. The fact that a
2. In the by-laws; and non-stock corporation earns a profit does not make it a
3. In the certificate of stock; profit-making corporation where such profit or income is
used for purposes set forth in its articles of incorporation
Otherwise, the same shall not be binding on any purchaser and is not distributed to its incorporators, members or
in good faith. (Sec. 97, RCC) officers.

NOTE: Said restrictions shall not be more onerous than Order of distribution of assets on dissolution of non-
granting the existing stockholders or the corporation the stock corporations
option to purchase the shares of the transferring
stockholder with such reasonable terms, conditions or 1. All liabilities and obligations of the corporation shall
period stated. If upon the expiration of said period, the be paid, satisfied and discharged, or adequate
existing stockholders or the corporation fails to exercise provision shall be made therefor;
the option to purchase, the transferring stockholder may
sell their shares to any third person. (Ibid.) 2. Assets held by the corporation upon a condition
requiring return, transfer or conveyance and which
Deadlocks condition occurs by reason of the dissolution, shall be
returned, transferred or conveyed in accordance with
Notwithstanding any contrary provision in the close such requirements;
corporation’s articles of incorporation, bylaws, or
stockholders’ agreement, if the directors or stockholders 3. Assets received and held by the corporation subject to
are so divided on the management of the corporation’s limitations permitting their use only for charitable,
business and affairs that the votes required for a corporate religious, benevolent, educational or similar purposes,
action cannot be obtained, with the consequence that the but not held upon a condition requiring return,
business and affairs of the corporation can no longer be transfer or conveyance by reason of the dissolution,
conducted to the advantage of the stockholders generally, shall be transferred or conveyed to one or more
the Commission, upon written petition by any stockholder, corporations, societies or organizations engaged in
shall have the power to arbitrate the dispute. (Sec. 103, activities in the Philippines substantially similar to
RCC) those of the dissolving corporation according to a plan
of distribution adopted.
NON-STOCK CORPORATION
4. Assets other than those mentioned, if any, shall be
Definition distributed to the members in accordance with the
provisions of the articles of incorporation or the
It is one where no part of its income is distributable as bylaws, to the extent that the articles of incorporation
dividends to its members, trustees or officers. Any profit or the bylaws determine the distributive rights of
which it may obtain as an incident to its operations shall members, or any class or classes of members, or

2021 GOLDEN NOTES 2021 & 2022
Commercial Law
provide for distribution. NOTE: Religious corporations shall be governed by
Chapter II of the RCC and by the general provisions on
5. In the absence of provision in the AOI or by- laws, non-stock corporations insofar as applicable.
distribution may be made in accordance to a plan of
distribution adopted by the board of trustees by Corporation sole
majority vote and by at least 2/3 of the members. (Sec.
94, RCC) For the purpose of administering and managing, as trustee,
the affairs, property and temporalities of any religious
The assets of a non-stock corporation undergoing the denomination, sect or church, a corporation sole may be
process of dissolution for reasons other than those set formed by the chief archbishop, bishop, priest, minister,
forth in Section 139 of this Code shall be applied and rabbi, or other presiding elder of such religious
distributed to such enumeration (Sec. 93, RCC) denomination, sect, or church. (Sec. 108, RCC)

EDUCATIONAL CORPORATION Organization of a corporation sole

Incorporation A corporation sole is organized by the mere filing of the
verified articles of incorporation by the head of any
Educational corporations shall be governed by special laws religious denomination, sect or church with the SEC
and by the general provisions of the Revised Corporation without the need of an issuance of a certificate of
Code. (Sec. 105, RCC) incorporation. Once filed, a separate juridical character is
acquired which is separate and distinct from his natural
Board of trustees character.

Trustees of educational institutions organized as nonstock NOTE: A corporation sole is not required to file by- laws. It
corporations shall not be less than five (5) nor more than is governed by the rules, regulations and discipline of its
fifteen (15). (Sec. 106, RCC) religious denomination, sect or church.

NOTE: The number of trustees shall be in multiples of five Nationality of a corporation sole
(5).
A corporation sole does not have any nationality but for
Term of office purposes of applying nationalization laws, nationality is
determined not by the nationality of its presiding elder but
Unless otherwise provided in the articles of incorporation by the nationality of its members, constituting the sect in
or by-laws, the board of trustees of incorporated schools, the Philippines. Thus, the Roman Catholic Church can
colleges, or other institutions of learning shall, as soon as acquire lands in the Philippines even if it is headed by the
organized, so classify themselves that the term of office of Pope. (Roman Catholic Apostolic Church v. Land
one-fifth (1/5) of their number shall expire every year. Registration Commission, G.R. No. L-8451, December 20,
(Ibid.) 1957)

Filling of vacancies A corporation sole is not governed by by-laws

Vacancies occurring before the expiration of term – the A corporation sole is not governed by by-laws. It is instead
trustees elected shall hold office only for the unexpired governed by Rules, Regulations and Discipline of its
period. (Ibid.) religious denomination which already contain the
provisions embodied in the by-laws of ordinary
Vacancies caused by expiration of term – the trustees corporations.
elected shall hold office for five (5) years. (Ibid.)
Q: Father X, an American priest who came from New
Quorum York, registered the Diocese of Bacolod of the Roman
Catholic Church which was incorporated as a
A majority of the trustees shall constitute a quorum for the corporation sole. There were years when the head of
transaction of business. The powers and authority of the Diocese was a Filipino, but there were more years
trustees shall be defined in the bylaws. (Ibid.) when the heads were foreigners. Today, the head is an
American again. Y donated a piece of land located in
NOTE: For institutions organized as stock corporations, Bacolod City for use as a school. Which statement is
the number and term of directors shall be governed by the most accurate? (2012 BAR)
provisions on stock corporations.
A: “Any corporation sole may purchase and hold real
RELIGIOUS CORPORATION estate and personal property for its church, charitable,
benevolent or educational purposes, and may receive
Classes of Religious Corporations bequests or gifts for such purposes”. (Sec. 111, RCC)

Religious corporations may be incorporated by one or Being a mere administrator of the temporalities or
more persons. Such corporations may be classified into: properties titled in his name, the constitutional provisions
requiring 60% (or 100%) Filipino ownership are not
1. Corporation sole; and applicable to the corporation sole. The ownership thereof
2. Religious societies. (Sec. 107, RCC) devolves upon the church or congregation acquiring the
same. To own the property, compliance with the
constitutionally required 60% (or 100%) Filipino capital is

2021 GOLDEN NOTES 2021 & 2022
Commercial Law
determined by the nationality of the constituents of the 6. The names, nationalities, and residence addresses of
diocese (church or congregation), and not the nationality the trustees, not less than five (5) nor more than
of the actual incumbent of the parish (the Corporation Sole fifteen (15), elected by the religious society or
or the head of the church or congregation). (De Leon, 2010, religious order, or the diocese, synod, or district
citing SEC Opinions, Nov. 6, 1990 and Sept. 21, 1993) organization to serve for the first year or such other
period as may be prescribed by the laws of the
Procedure for dissolution of a corporation sole religious society or religious order, or of the diocese,
synod, or district organization. (Sec. 114, RCC)
In case of a corporation sole, by submitting to the SEC for
approval, a verified declaration of dissolution which will ONE PERSON CORPORATION
set forth the following:
A corporation with a single stockholder: Provided, That
1. The name of the corporation; only a natural person, trust, or an estate may form a One
2. The reason for dissolution and winding up; Person Corporation. (Sec. 116, RCC)
3. The authorization for the dissolution of the
corporation by the particular religious denomination, Single stockholder as Director, President
sect or church; and
4. The names and addresses of the persons who are to The single stockholder shall be the sole director and
supervise the winding up of the affairs of the president of the One Person Corporation. (Sec 121, RCC)
corporation.
Treasurer, Corporate Secretary, and Other Officers
Upon approval of such declaration of dissolution by the
Securities and Exchange Commission, the corporation shall Within fifteen (15) days from the issuance of its certificate
cease to carry on its operations except for the purpose of of incorporation, the One Person Corporation shall appoint
winding up its affairs. (Sec. 113, RCC) a treasurer, corporate secretary, and other officers as it
may deem necessary, and notify the Commission thereof
Religious Societies within five (5) days from appointment. (Sec. 122, RCC)

Unless forbidden by competent authority, the Constitution, The single stockholder may not be appointed as corporate
pertinent rules, regulations, or discipline of the religious secretary. A single stockholder who is likewise the self-
denomination, sect, or church of which it is a part, any appointed treasurer of the corporation shall give a bond to
religious society, religious order, diocese, synod, or district the Commission in such a sum as may be required. The
organization of any religious denomination, sect, or bond shall be renewed every two (2) years or as often as
church, may, upon written consent and/or by an may be required.
affirmative vote at a meeting called for the purpose of at
least two-thirds (2/3) of its membership, incorporate for Provided, That, the said stockholder/treasurer shall
the administration of its temporalities or for the undertake in writing to faithfully administer the One
management of its affairs, properties, and estate by filing Person Corporation’s funds to be received as treasurer,
with the Commission, articles of incorporation verified by and to disburse and invest the same according to the
the affidavit of the presiding elder, secretary, or clerk or articles of incorporation as approved by the Commission.
other member of such religious society or religious order, The bond shall be renewed every two (2) years or as often
or diocese, synod, or district organization of the religious as may be required. (Ibid)
denomination, sect, or church, setting forth the following:
Nominee and Alternate Nominee
1. That the religious society or religious order, or
diocese, synod, or district organization is a religious The single stockholder shall designate a nominee and an
organization of a religious denomination, sect or alternate nominee who shall, in the event of the single
church; stockholder’s death or incapacity, take the place of the
single stockholder as director and shall manage the
2. That at least two-thirds (2/3) of its membership has corporation’s affairs.
given written consent or has voted to incorporate, at
a duly convened meeting of the body; The articles of incorporation shall state the names,
residence addresses and contact details of the nominee
3. That the incorporation of the religious society or and alternate nominee, as well as the extent and
religious order, diocese, synod, or district limitations of their authority in managing the affairs of the
organization is not forbidden by competent One Person Corporation.
authority or by the Constitution, rules, regulations or
discipline of the religious denomination, sect, or The written consent of the nominee and alternate nominee
church of which it forms part; shall be attached to the application for incorporation. Such
consent may be withdrawn in writing any time before the
4. That the religious society or religious order, diocese, death or incapacity of the single stockholder. (Sec. 124,
synod, or district organization desires to incorporate RCC)
for the administration of its affairs, properties and
estate; Liability of Single Shareholder

5. The place within the Philippines where the principal A sole shareholder claiming limited liability has the burden
office of the corporation is to be established and of affirmatively showing that the corporation was
located; and adequately financed.


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Commercial Law
Where the single stockholder cannot prove that the Q: When is a foreign corporation deemed to be “doing
property of the One Person Corporation is independent of business in the Philippines?” (1998, 2016 BAR)
the stockholder’s personal property, the stockholder shall
be jointly and severally liable for the debts and other A: Under the Foreign Investment Act (R.A. No. 7402), a
liabilities of the One Person Corporation. foreign corporation is “deemed doing business in the
Philippines” if it is continuing the body or substance of the
The principles of piercing the corporate veil applies with business or enterprise for which it was organized. It is the
equal force to One Person Corporations as with other intention of an entity to continue the body of its business
corporations. (Sec. 130, RCC) in the country. The grant and extension of 90-day credit
terms of a foreign corporation to a domestic corporation
Conversion from an Ordinary Corporation to a One for every purchase shows an intention to continue
Person Corporation transacting with the latter.

When a single stockholder acquires all the stocks of an Necessity of a license to do business
ordinary stock corporation, the latter may apply for
conversion into a One Person Corporation, subject to the The purpose of the law in requiring that a foreign
submission of such documents as the Commission may corporation doing business in the Philippines be licensed
require. If the application for conversion is approved, the to do so is to subject such corporation to the jurisdiction of
Commission shall issue certificate of filing of amended the courts. The object is not to prevent foreign corporation
articles of incorporation reflecting the conversion. from performing single acts but to prevent it from
acquiring a domicile for the purpose of business without
The One Person Corporation converted from an ordinary taking steps necessary to render it amenable to suits in
stock corporation shall succeed the latter and be legally local courts. (Marshall-Wells Co. vs. Elser & Co, G. R. No.
responsible for all the latter’s outstanding liabilities as of 22015, September 1, 1924)
the date of conversion. (Sec. 131, RCC)
Further, the following are considered objectives of the
Conversion from a One Person Corporation to an statutory provisions prescribing regulation of foreign
Ordinary Stock Corporation corporations:

A One Person Corporation may be converted into an 1. To place the foreign corporations under the
ordinary stock corporation after due notice to the jurisdiction of the court;
Commission of such fact and of the circumstances leading 2. To place them in the same footing as domestic
to the conversion, and after compliance with all other corporation; and
requirements for stock corporations under this Code and 3. To protect the public in dealing with the said
applicable rules. Such notice shall be filed with the corporation.
Commission within sixty (60) days from the occurrence of
the circumstances leading to the conversion into an Resident agent
ordinary stock corporation. If all requirements have been
complied with, the Commission shall issue an amended 1. An individual, who must be of good moral character
certificate of incorporation reflecting the conversion. (Sec. and of sound financial standing, residing in the
132, RCC) Philippines; or
2. A domestic corporation lawfully transacting business
In case of death of the single stockholder, the nominee or in the Philippines. (Sec 144, RCC)
alternate nominee shall transfer the shares to the duly
designated legal heir or estate within seven (7) days from Provided, further, That in case of a domestic corporation
receipt of either an affidavit of heirship or self- who will act as a resident agent, it must likewise be of
adjudication executed by a sole heir, or any other legal sound financial standing and must show proof that it is in
document declaring the legal heirs of the single good standing as certified by the Commission. (Sec. 144,
stockholder and notify the Commission of the transfer. RCC)
Within sixty (60) days from the transfer of the shares, the
legal heirs shall notify the Commission of their decision to Personality to sue
either wind up and dissolve the One Person Corporation or
convert it into an ordinary stock corporation. (Ibid.) GR: Only foreign corporations that have been issued a
license to operate a business in the Philippines have the
The ordinary stock corporation converted from a One personality to sue. (Sec. 150, RCC)
Person Corporation shall succeed the latter and be legally
responsible for all the latter’s outstanding liabilities as of No foreign corporation transacting business in the
the date of conversion. (Ibid.) Philippines without a license, or its successors or assigns,
shall be permitted to maintain or intervene in any action,
FOREIGN CORPORATION suit or proceeding in any court or administrative agency of
the Philippines; but such corporation may be sued or
A foreign corporation is done, formed, organized or proceeded against before Philippine courts or
existing under any laws other than those of the Philippines administrative tribunals on any valid cause of action
and whose laws allow Filipino citizens and corporations to recognized under Philippine laws. (Sec. 150, RCC)
do business in its own country or State. (Sec. 140, RCC)
XPN: Under the rule on estoppel, a party is estopped to
Doctrine of “Doing Business” in the Philippines challenge the personality of a foreign corporation to sue,
even if it has no license, after having acknowledged the
same by entering to a contract with it.

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Commercial Law
One who has dealt with a corporation of foreign origin as a preliminary attachment against Llorente, who was a
corporate entity is estopped to deny its corporate patron of its Star City casino. SCPL alleged in its
existence. complaint that it is not doing business in the
Philippines and that it is suing upon a singular or
A foreign corporation, which was granted a license to isolated transaction. Llorente argues that in order for
transact business in the Philippines, is suable before the isolated transaction rule to apply, the alleged
local courts or administrative agencies delict or wrongful act must have occurred in the
Philippines. Can SCPL sue before Philippine courts
It is suable since any foreign corporation lawfully doing under the isolated transaction rule?
business in the Philippines shall be bound by all laws, rules
and regulations applicable to domestic corporations of the A: YES. The issue on whether a foreign corporation which
same class, save and except: does not have license to engage in business in the
Philippines can seek redress in Philippine courts depends
1. Such only as provided for the creation, formation, on whether it is doing business or it merely entered into
organization or dissolution of the corporations or an isolated transaction. A foreign corporation that is not
2. Those which fix the relations, liabilities, doing business in the Philippines must disclose such fact if
responsibilities, or duties of stockholders, members or it desires to sue in Philippine courts under the "isolated
officers of corporations to each other or to the transaction rule" because without such disclosure, the
corporation. (Sec. 146, RCC) court may choose to deny it the right to sue. In this case,
SCPL has the necessary legal capacity to sue before
NOTE: Matters relating to the organization or internal Philippine courts since it disclosed such fact in the
affairs of the corporation are governed by the laws of the complaint. (Quintin Llorente vs. Star City PTY Limited, G.R.
home or incorporating State unless they offend any public No. 212050, January 15, 2020)
policy of the Philippines.
MERGER AND CONSOLIDATION
A foreign corporation doing business in the
Philippines without license may be sued in the country BASIS MERGER CONSOLIDATION
One where a One where a new
While an unlicensed foreign corporation doing business in corporation corporation is
the country cannot maintain any action, said corporation absorbs another created and
can be sued in the country, under the doctrine of quasi- corporation and consolidating
estoppel by acceptance of benefits. It shall not be allowed Definition remains in corporations are
to invoke its lack of license to impugn the jurisdiction of existence while extinguished. (Sec.
the courts. (Marubeni Nedeland BV vs. Tensuan, G.R. No. others are 75, RCC)
61950, September 28, 1990; SEC Opinion, Jan. 10, 1995) dissolved. (Sec.
75, RCC)
Instances when an unlicensed foreign corporation be All of the All consolidated
allowed to sue Consequent constituent corporations are
dissolution of corporations dissolved without
1. Isolated transactions. a corporation involved are exception
2. A license subsequently granted enables the foreign or dissolved except
corporation to sue on contracts executed before the corporations one
grant of the license.
3. In an action for infringement of patent or other Consequent No new A new corporation
intellectual property rights, provided that the country creation of a corporation is emerges
of the foreign corporation is a party to the Paris new created
Convention. corporation
4. If the foreign corporation is co-plaintiff with a The surviving All assets, liabilities,
domestic corporation and the domestic corporation is corporation and capital stock of
the one who instituted the suit in the Philippines; -or Acquisition of acquires all the all consolidated
5. By reason of the doctrine of estoppel. Assets, assets, liabilities, corporations are
Liabilities, and capital stock transferred to the
Isolated transaction Capital Stock of all constituent new corporation
corporations
The Court has not construed the term “isolated
transaction” to literally mean “one” or a mere single act.
The phrase “isolated transaction” has a definite and fixed
meaning, i.e., a transaction or series of transaction set INTRA-CORPORATE CONTROVERSIES
apart from the common business of a foreign enterprise in
the sense that there is no intention to engage in
progressive pursuit of the purpose and object of the To determine whether a case involves an intra-corporate
business organization. (Lorenzo Shipping Corp., vs. Chubb controversy, and is to be heard and decided by the
and Sons, G.R. No. 147724, June 8, 2004) branches of the RTC specifically designated by the Court to
try and decide such cases, two elements must concur:
Q: Star City Pty Limited (SCPL) is an Australian
Corporation which operates the Star City Casino in 1. The status or relationship of the parties (Relationship
Sydney, New South Wales, Australia. It filed through its Test); and
attorney-in-fact in the Philippines, a complaint for
collection of sum of money with prayer for

2021 GOLDEN NOTES 2021 & 2022
Commercial Law
2. The nature of the question that is the subject of their No. 902-A had already been transferred to designated
controversy (Nature of the Controversy Regional Trial Courts. This case is an intra-corporate
Test). (Reyes v. Zenith Insurance Co., G.R. No. 165744, dispute, over which the Regional Trial Court has
August 11, 2008) jurisdiction. It involves a dispute between the corporation,
SBGCCI, and its shareholders, Villareal and Filart. This case
Relationship Test also involves corporate rights and obligations. Villareal
and Filart's right to a refund of the value of their shares
Initially, the main consideration in determining whether a was based on SBGCCI and UIGDC's alleged failure to abide
dispute constitutes an intra-corporate controversy was by their representations in their prospectus. Specifically,
limited to a consideration of the intra-corporate Villareal and Filart alleged in their letter-complaint that
relationship existing between or among the parties. The the world-class golf course that was promised to them
types of relationships, as declared in the case of Union when they purchased shares did not materialize. It
Glass & Container Corp. v. SEC, were as follows: involves the determination of a shareholder's rights under
the Corporation Code or other intra-corporate rules when
1. Between the corporation, partnership, or association the corporation or association fails to fulfill its obligations.
and the public; (SEC v. Subic Bay Golf and Country Club, G.R. No. 179047,
2. Between the corporation, partnership, or association March 11, 2015, J. Leonen)
and its stockholders, partners, members, or officers;
3. Between the corporation, partnership, or association Q: Santos, claiming to be a stockholder and co-owner
and the State as far as its franchise, permit or license of Belo’s share in Belo Medical Group, Inc. since such
to operate is concerned; and were acquired when they are cohabitating as husband
4. Among the stockholders, partners, or associates and wife, demanded for inspection of the corporation’s
themselves. (Ibid.) book. However, Belo claims that it is her who paid for
the shares and that there’s conflict of interest with
respect to the demand of Santos for inspection since
Nature of the Controversy Test the latter owned 90% of The Obagi Skin Health Inc.
Under the nature of the controversy test, the incidents of Belo Medical Group filed a complaint for interpleader
that relationship must also be considered for the purpose claiming the complaint was filed to protect its interest
of ascertaining whether the controversy itself is intra- and to compel Belo and Santos to litigate their
corporate. The controversy must not only be rooted in the conflicting claims of ownerhip. Belo argued that the
existence of an intra-corporate relationship, but must as proceedings should not have been classified as intra-
well pertain to the enforcement of the parties’ correlative corporate because it ceased to be that and becomes a
rights and obligations under the Corporation Code and the full-blown civil law question of competing rights of
internal and intra-corporate regulatory rules of the ownership. Santos filed for the dismissal of the case
corporation. If the relationship and its incidents are merely claiming that there’s no cause of action and it is merely
incidental to the controversy or if there will still be conflict an afterthought for BMG to escape criminal liability for
even if the relationship does not exist, then no intra- not allowing him to inspect the records. RTC dismissed
corporate controversy exists. (Ibid.) the case. Is the dispute intra-corporate?
A. YES. The conflict is clearly intra-corporate as it involves
NOTE: Based on Section 8, Rule 1 of the Interim Rules of two (2) shareholders although the ownership of stocks of
Procedure for Intra-Corporate Controversies, in cases one stockholder is questioned. Unless Santos is adjudged
involving an intra-corporate dispute, a motion to dismiss is as a stranger to the corporation because he holds his
a prohibited pleading. (Aldersgate College v. Gauuan, G.R. shares only in trust for Belo, then both he and Belo, based
No. 192951, Nov 14, 2012) on official records, are stockholders of the corporation.
Applying the nature of the controversy test, this is still an
Q: Subic Bay Golf and Country Club, Inc. (SBGCCI) and intra--corporate dispute. The controversy shifts from a
Universal International Group Development mere question of ownership over movable property to the
Corporation (UIGDC) entered into a Development exercise of a registered stockholder's proprietary right to
Agreement. UIGDC agreed to "finance, construct and inspect corporate books. The circumstances of the case
develop the golf course, for and in consideration of the and the aims of the parties must not be taken in isolation
payment by SBGCCI of its 1,530 (SBGCCI) shares of from one another. The totality of the controversy must be
stock." Upon SBGCCI's application, SBGCCI was issued a taken into account to improve upon the existing tests.
Certificate of Permit to Offer Securities for Sale to the (Belo Medical Group v. Santos, G.R. No. 185894, August 30,
Public of its 1,530 no par value proprietary shares. 2017, J. Leonen)
SBGCCI would use the proceeds of the sale of securities
to pay UIGDC for the development of the golf course. In
the letter addressed to the Director of Securities and Q: Jaka Investments bought 3 lots in Urdaneta Village
Exchange Commission's Corporation Finance from Urdaneta Village Association, subject to uniform
Department, complainants Regina Filart and Margarita restrictions annotated on the transfer certificates of
Villareal informed the Securities and Exchange title covering the lots. On March 15, 2007, the
Commission that they had been asking UIGDC for the Association's Board of Governors held a meeting,
refund of their payment for their SBGCCI shares where it approved the extension of the Association's
because they failed to deliver the promised amenities. corporate life after its expiration on August 13, 2008
Is the issue of refund should be litigated in the and the term of the Deed Restrictions from June 1,
Regional Trial Court? 2008, both for another 25 years. The extensions were
approved by the members of the Association. Jaka
A: YES. Jurisdiction over intra-corporate disputes and all Investments filed before the Regional Trial Court a
other cases enumerated in Section 5 of Presidential Decree Petition for the cancellation of restrictions annotated
in the Transfer Certificate of Titles of the lots bought.

2021 GOLDEN NOTES 2021 & 2022
Commercial Law
The Association opposed the petition and claimed that homeowners' associations. Later on, the above-mentioned
it was an intra-corporate dispute on the validity of the powers and responsibilities, which had been vested in the
uniform restrictions' term extension. It argued that HIGC with respect to homeowners' associations, were
the HLURB, not the trial court, had exclusive and transferred to the HLURB pursuant to Republic Act No.
original jurisdiction over the case. Is the contention of 8763, entitled "Home Guaranty Corporation Act of 2000."
the Association correct? (JAKA Investments Corporation v. Urdaneta Village
Association Inc., G.R. Nos. 204187 and 206606, April 1,
A: YES. In Maria Luisa Park Association, Inc. v. Almendras, 2019, J. Leonen)
the Court held that originally, administrative supervision
over homeowners' associations was vested by law with the
Securities and Exchange Commission (SEC). However, INTELLECTUAL PROPERTY CODE
pursuant to Executive Order No. 535, the HIGC assumed
the regulatory and adjudicative functions of the SEC over
PATENT VS. TRADEMARK VS. COPYRIGHT

PATENT TRADEMARK COPYRIGHT

Definition The right granted to an Any visible sign capable of Literary and artistic works
inventor by a State, or by a distinguishing the goods which are original intellectual
regional office acting for (trademark) or services (service creations in the literary and
several States, which allows mark) of an enterprise and shall artistic domain protected from
the inventor to exclude include a stamped or marked the moment of their creation.
anyone else from container of goods. (RA 8293, Sec. (Pearl and Dean (Phil) Inc. v.
commercially exploiting his 121.1) Shoemart Inc., G.R. No. 148222,
invention for a limited period. August 15, 2003)
(Understanding Industrial
Property, WIPO, p.5)
Registered Technical solution of a Any visible sign capable of Literary and artistic works.
intellectual rights problem in any field of human distinguishing the goods
activity which is new (novel (trademark) or services (service
invention) and industrially mark) of an enterprise must be
applicable. registered).

Need not be a. scientific theories a. generic terms for goods or a. method
registered b. contrary to public order services b. idea
or morality b. characteristics of goods like c. procedure
c. aesthetic creations quality or quantity d. principle
d. methods for treatment of c. customary sign in everyday e. operation
human body language f. system
e. plant varieties d. color itself
The format of television game
show is not subject to a
copyright. (Joaquin v. Drilon, 302
SCRA 225, January 28, 1999)
Term of 20 years from filing date of 10 years and renewable upon It depends on the type of work.
protection application (RA 8293, Sec. 54) expiration. (RA 8293, Secs. 145-
146)
Limitations on 1. In general A person may NOT: 1. Performance of a work, once
the use of right it has been lawfully made
a. GR: If put on the market 1. Use a name if the word is accessible to the public, if
in the Philippines by the generic (Lyceum of the done privately and free of
owner of the product, or Philippines v. CA, G.R. No. charge or for a charitable or
with his express consent. 101897, March 5, 1993). religious institution or
society.
XPN: Drugs and 2. Use any name indicating a
medicines - introduced in
geographical location. (Ang Si 2. The Making of quotations
the Philippines or Heng vs. Wellington Department
anywhere else in the world from a published work if they
Store G.R. No. L-4531, January are compatible with fair use
by the patent owner, or by 10, 1953)
any party authorized to and only to the extent
justified for the purpose.
use the invention (Sec. 3. Use any name or designation
72.1, as amended by R.A.
contrary to public order or 3. Communication to the public
9502) morals by mass media of articles on
b. Where the act is done current political, social,
privately and on a non- 4. Use a name if it is liable to economic, scientific or
commercial scale or for a deceive trade circles or the religious topic, lectures,
non-commercial purpose. public as to the nature of the addresses and other works of

2021 GOLDEN NOTES 2021 & 2022
Commercial Law
(IPC, Sec. 72.2) enterprise identified by that the same nature

name (IPC, Sec. 165.1).
c. Exclusively for 4. As Part of reports of current
experimental use of the 5. Subsequently use a trade name events (e.g. music played or
invention for scientific likely to mislead the public as a tunes on the occasion of a
purposes or educational third party (IPC, Sec. 165.2 [b]). sporting event and such
purposes (experimental tunes were picked up during
use provision). (IPC, Sec. 6. Copy or simulate the name of a new coverage of the event).
72.3) any domestic product (for
d. Bolar Provision - In the imported products). 5. For Teaching purposes,
case of drugs and provided that the source and
medicines, where the act 7. Copy or simulate a mark of the name of the author, if
includes testing, using, registered in accordance with appearing in the work, are
making or selling the the provisions of IPC (for mentioned.
invention including any imported products).
data related thereto, 6. Recording made in
solely for purposes 8. Use mark or trade name Educational institutions of a
reasonably related to the calculated to induce the public work included in a broadcast
development and to believe that the article is for the use of such
submission of information manufactured in the educational institutions,
and issuance of approvals Philippines, or that it is provided that such recording
by government regulatory manufactured in any foreign must be deleted within a
agencies required under country or locality other than reasonable period after they
any law of the Philippines the country or locality where it were first broadcast.
or of another country that is in fact manufactured.
regulates the 7. The making of Ephemeral
manufacture, NOTE: Items 4, 5 and 6 only recordings by a broadcasting
construction, use or sale applies to imported products and organization by means of its
of any product. (IPC, Sec. those imported articles shall not own facilities and for use in
72.4) be admitted to entry at any its own broadcast.
customhouse of the Philippines
e. Where the act consists of (IPC, Sec. 166). 8. The Use made of a work by or
the preparation for under the direction or control
individual cases, in a of the government, by the
pharmacy or by a medical National Library or by
professional, of a medicine educational, scientific or
in accordance with a professional institutions
medical prescription. (IPC, where such use is in the
Sec. 72.5) public interest and is
compatible with fair use.
f. Where the invention is
used in any ship, vessel, 9. The Public performance of a
aircraft, or land vehicle of work, in a place where no
any other country admission fee is charged.
entering the territory of
the Philippines 10. Public Display of the original
temporarily or or a copy of the work not
accidentally. (IPC, Sec. made by means of a film,
72.5) slide, television image or
otherwise on screen or by
2. Prior user– Person other
than the applicant, who in means of any other device or
good faith, started using the process (e.g. Public display
invention in the Philippines, using posters mounted on
or undertaken serious walls and display boards.
preparations to use the
same, before the filing date 11. Any use made of a work for
or priority date of the the purpose of any Judicial
application shall have the proceedings or for the giving
right to continue the use of professional advice by a
thereof, but this right shall legal practitioner.
only be transferred or
assigned further with his
enterprise or business. (IPC,
Sec. 73)
3. Use by Government– A
government agency or third
person authorized by the
government may exploit

2021 GOLDEN NOTES 2021 & 2022
Commercial Law
invention even without

agreement of a patent
owner where:
a. Public interest, as
determined by the
appropriate agency of the
government, so requires;
or
b. A judicial or
administrative body has
determined that the
manner of exploitation by
owner of patent is anti-
competitive. (IPC, Sec. 74)
Reverse reciprocity of
foreign law– Any condition,
restriction, limitation,
diminution, requirement,
penalty or any similar burden
imposed by the law of a
foreign country on a
Philippine national seeking
protection of intellectual
property rights in that
country, shall reciprocally be
enforceable upon nationals of
said country, within
Philippine jurisdiction. (IPC,
Sec. 231)
Prescriptive 4 years from time of 4 years from the time the cause of 4 years from the time the cause
period for filing commission of infringement action arose. of action arose. (IPC, Sec. 226)
of an action for (IPC, Sec.79)
damages due to
infringement

Tests or elements 1. Literal infringement Test – 1. That it is duly registered in the A person infringes a right
which will Resort must be had, in the Intellectual Property Office protected under this Act when
establish the first instance, to words of one:
presence of the claim. If the accused 2. The validity of the mark
infringement matter clearly falls within a. Directly commits an
the claim, infringement is 3. The plaintiff’s ownership of the infringement;
committed. mark
b. Benefits from the infringing
Minor modifications are 4. The use of the mark or its activity of another person
sufficient to put the item colorable imitation by the who commits an
beyond literal infringement. alleged infringer results in infringement if the person
(Godines v. CA, G.R. No. L- “likelihood of confusion” benefiting has been given
97343, Sept. 13, 1993) (McDonald’s Corp v. L.C. Big notice of the infringing
Mak Burger, Inc., G.R. No. activity and has the right and
2. Doctrine of Equivalents – ability to control the
There is infringement 143993, Aug 18, 2004)
activities of the other person;
where a device appropriates
a prior invention by 5. Used without the consent of
the owner (Prosource c. With knowledge of infringing
incorporating its innovative activity, induces, causes or
concept and, although with International Inc.v. Horphag
Research Management SA G.R. materially contributes to the
some modification and infringing conduct of another
change, performs No. 180073, November 25,
2009) (IPC, as amended by R.A. No.
substantially the same 10372, Sec. 216).
function in substantially the

same way to achieve
substantially the same
result.(Godines v. CA, G.R. No.
L-97343, Sept. 13, 1993)
Economic interest test – when
the process-discoverer’s
economic interest are

2021 GOLDEN NOTES 2021 & 2022
Commercial Law
compromised, i.e., when

others can import the
products that result from the
process, such an act is said to
be prohibited.
Remedies against 1. Civil action for infringement 1. Civil – i.e. preliminary 1. Injunction
infringers – (IPC, Sec 76.3). injunction with damages
2. Damages, including legal
2. Criminal action for 2. Criminal — remedies available costs and other expenses, as
infringement shall also include the seizure, he may have incurred due to
forfeiture and destruction of the infringement as well as
3. Administrative remedy the infringing goods and of any the profits the infringer may
materials and implements the have made due to such
4. Destruction of infringing predominant use of which has infringement
material(IPC, Sec.76.5). been in the commission of the 3. Impounding during the
offense. pendency of the action sales
invoices and other
3. Administrative documents evidencing sales

4. Destruction without any
compensation all infringing
copies
5. Moral and Exemplary
damages (IPC, Sec. 216.1); or
Seizure and impounding of any
article, which may serve as
evidence in the court
proceedings. (IPC, Sec. 216.2)

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Rights of copyright owners (1995 BAR) natural person. Hence, even if he has licensed or assigned
his economic rights, he continues to enjoy the above-
1. Economic rights – The right to carry out, authorize or mentioned moral rights. (Amador, 2007)
prevent the following acts (ReCa FReP2O):
Term of moral rights
a. Reproduction of the work or substantial portion
thereof The rights of an author shall last during the lifetime of the
b. Carry-out derivative work (dramatization, author and IN PERPETUITY after his death while the rights
translation, adaptation, abridgement, under sections 193.2, 193.3 and 193.4 shall be
arrangement or other transformation of the work) coterminous with the economic rights, the moral rights
c. First distribution of the original and each copy of shall not be assignable or subject to license. The person or
the work by sale or other forms of transfer of persons to be charged with the posthumous enforcement
ownership of these rights shall be named in a written instrument
d. Rental right which shall be filed with the National Library. In default of
e. Public display such person or persons, such enforcement shall devolve
f. Public performance upon either the author’s heirs, and in default of the heirs,
g. Other communications to the public. the Director of the National Library. (IPC, Sec. 198)

Note: Assignment of rights must be in writing to be Exceptions to moral rights
valid.
1. Absent any special contract at the time creator
2. Moral rights – For reasons of professionalism and licenses/permits another to use his work, the
propriety, the author has the right : following are deemed not to contravene creator’s
moral rights, provided they are done in accordance
a. To require that the authorship of the works be with reasonable customary standards or requisites of
attributed to him (attribution right) the medium:
b. To make any alterations of his work prior to, or to
withhold it from publication a. Editing
c. To preserve integrity of work, object to any b. Arranging
distortion, mutilation or other modification which c. Adaptation
would be prejudicial to his honor or reputation; d. Dramatization
and e. Mechanical and electric reproduction
d. To restrain the use of his name with respect to any
work not of his own creation or in a distorted 2. Complete destruction of work unconditionally
version of his work. (IPC, Sec.193) transferred by creators. (IPC, Sec. 197)

3. Droit de suite or “art proceeds right” is the artist’s Waiver of moral rights
resale right, which requires that a percentage of the
resale price of an artistic work is paid to the author. GR: Moral rights can be waived in writing, expressly so
The right is exercisable even after the author’s death, stating such waiver.
provided the work is still in copyright. (David
Bainbridge, Intellectual Property, 3rd Ed., p. 220 1996, XPN: Even in writing, waiver is not valid if:
also cited in Copyright Law of the Philippines by D.
Funa) 1. Use the name of the author, title of his work, or his
reputation with respect to any version/adaptation of
In every sale or lease of an original work of painting or his work, which because of alterations, substantially
sculpture or of the original manuscript of a writer or tend to injure literary/artistic reputation of another
composer, subsequent to the first disposition thereof author
by the author, the author or his heirs shall have an 2. Use name of author in a work that he did not create
inalienable right to participate in the gross proceeds of
the sale or lease to the extent of five percent (5%). (Sec. DOCTRINE OF FAIR USE
200, IPC)
“Fair use” permits a secondary use that “serves the
Rights which are not covered under a Droit de suite copyright objective of stimulating productive thought and
public instruction without excessively diminishing the
1. Prints incentives for creativity”.
2. Etchings
3. Engravings The fair use of a copyrighted work for criticism, comment,
4. Works of applied art news reporting, teaching including limited number of
5. Similar works wherein the author primarily derives copies for classroom use, scholarship, research, and
gain from the proceeds of reproductions. (IPC, Sec. similar purposes is not an infringement of copyright.
201)
Decompilation may be considered fair use
MORAL RIGHTS
Decompilation, which is the reproduction of the code and
Nature of moral rights translation of the forms of the computer program to
achieve the inter-operability of an independently created
These are personal rights independent from the economic computer program with other programs, may also
rights. Being a personal right, it can only be given to a constitute fair use under the criteria established Sec. 185,

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to the extent that such decompilation is done for the information and to any natural and juridical person
purpose of obtaining the information necessary to achieve involved in personal information processing including
such interoperability. (Sec. 185, IPC) those personal information controllers and processors
who, although not found or established in the Philippines,
Factors that should be considered in order to use equipment that are located in the Philippines, or those
determine fair use who maintain an office, branch or agency in the Philippines
subject to the immediately succeeding paragraph:
1. Purpose and character of the use, including whether Provided, That the requirements of Section 5 are complied
such use is of a commercial nature or is for non-profit with.
educational purpose;
2. Nature of the copyrighted work; Requisites: (ProNE-Act)
3. Amount and substantiality of the portion used in
relation to the copyrighted work as a whole; and 1. It must involve any processing of personal
4. Effect of the use upon the potential market for or value information
of the copyrighted work. 2. By either natural or juridical persons
3. Whether or not found in the Philippines that uses
NOTE: The fact that a work is unpublished shall not by equipment or maintains an office, branch or agency in
itself bar a finding of fair use if such finding is made upon the Philippines.
consideration of all the above factors (IPC, Sec. 182.2). If 4. Either acting as a controller or processor
you copy to the extent that you reduce the marketability of
the book, it is no longer fair use. This Act does not apply to the following:

Copyright Infringement 1. Information about any individual who is or was an
officer or employee of a government institution that
A person infringes a right protected under this Act when relates to the position or functions of the individual,
one: including:
1. Directly commits an infringement;
2. Benefits from the infringing activity of another person a. The fact that the individual is or was an officer or
who commits an infringement if the person benefiting employee of the government institution;
has been given notice of the infringing activity and has b. The title, business address and office telephone
the right and ability to control the activities of the number of the individual;
other person; c. The classification, salary range and
3. With knowledge of infringing activity, induces, causes responsibilities of the position held by the
or materially contributes to the infringing conduct of individual; and
another. (IPC,Sec. 216, as amended by R.A. No. 10372) d. The name of the individual on a document
prepared by the individual in the course of
Q: Diana and Piolo are famous personalities in employment with the government;
showbusiness who kept their love affair secret. They
use a special instant messaging service which allows 2. Information about an individual who is or was
them to see one another’s typing on their own screen performing service under contract for a government
as each letter key is pressed. When Greg, the controller institution that relates to the services performed,
of the service facility, found out their identities, he including the terms of the contract, and the name of
kept a copy of all the messages Diana and Piolo sent the individual given in the course of the performance
each other and published them. Is Greg liable for of those services;
copyright infringement? Reason briefly. (2007 BAR) 3. Information relating to any discretionary benefit of a
financial nature such as the granting of a license or
A: YES. The messages which Diana and Pablo sent each permit given by the government to an individual,
other fall under the category of letters as provided in Sec. including the name of the individual and the exact
172.1.d which provides that literary and artistic works, nature of the benefit;
hereinafter referred to as “works,” are original intellectual 4. Personal information processed for journalistic,
creations in the literary and artistic domain protected artistic, literary or research purposes;
from the moment of their creation and shall include in 5. Information necessary in order to carry out the
particular, among others, letters. Infringement of such functions of public authority which includes the
consist in the doing by any person, without the consent of processing of personal data for the performance by
the owner of the copyright, of anything the sole right to do the independent, central monetary authority and law
which is conferred by statute on the owner of the enforcement and regulatory agencies of their
copyright . Reproduction and first public distribution of constitutionally and statutorily mandated functions.
the work are economic rights of the authors of the work. Nothing in this Act shall be construed as to have
Such cannot be done by the person not the author of the amended or repealed Republic Act No. 1405,
work. In this instance, Greg is not the owner of the otherwise known as the Secrecy of Bank Deposits Act;
messages. He merely copied it without the consent of the Republic Act No. 6426, otherwise known as the
authors thereof and subsequently published the same in Foreign Currency Deposit Act; and Republic Act No.
violation of the latter’s economic rights. 9510, otherwise known as the Credit Information
System Act (CISA);
6. Information necessary for banks and other financial
DATA PRIVACY ACT institutions under the jurisdiction of the independent,
central monetary authority or Bangko Sentral ng
Pilipinas to comply with Republic Act No. 9510, and
This Act applies to the processing of all types of personal Republic Act No. 9160, as amended, otherwise known

2021 GOLDEN NOTES 2021 & 2022
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as the Anti-Money Laundering Act and other as provided by law; and
applicable laws; and 6. Kept in a form which permits identification of data
7. Personal information originally collected from subjects for no longer than is necessary for the
residents of foreign jurisdictions in accordance with purposes for which the data were collected and
the laws of those foreign jurisdictions, including any processed: Provided, That personal information
applicable data privacy laws, which is being collected for other purposes may lie processed for
processed in the Philippines. (Sec. 4, RA 10173) historical, statistical or scientific purposes, and in
cases laid down in law may be stored for longer
EXTRATERRITORIAL APPLICATION periods: Provided, further, That adequate safeguards
are guaranteed by said laws authorizing their
This Act applies to an act done or practice engaged in and processing. (Sec. 11, RA 10173)
outside of the Philippines by an entity if:
NOTE: The personal information controller must ensure
1. The act, practice or processing relates to personal implementation of personal information processing
information about a Philippine citizen or a resident; principles set out herein.
2. The entity has a link with the Philippines, and the
entity is processing personal information in the Principles of Transparency, Legitimate Purpose and
Philippines or even if the processing is outside the Proportionality
Philippines as long as it is about Philippine citizens or
residents such as, but not limited to, the following: The processing of personal data shall be allowed subject to
adherence to the principles of transparency, legitimate
a. A contract is entered in the Philippines; purpose, and proportionality.
b. A juridical entity unincorporated in the
Philippines but has central management and 1. Transparency. The data subject must be aware of the
control in the country; and nature, purpose, and extent of the processing of his or
c. An entity that has a branch, agency, office or her personal data, including the risks and safeguards
subsidiary in the Philippines and the parent or involved, the identity of personal information
affiliate of the Philippine entity has access to controller, his or her rights as a data subject, and how
personal information; and these can be exercised. Any information and
communication relating to the processing of personal
3. The entity has other links in the Philippines such as, data should be easy to access and understand, using
but not limited to: clear and plain language.
2. Legitimate purpose. The processing of information
a. The entity carries on business in the Philippines; shall be compatible with a declared and specified
and purpose which must not be contrary to law, morals,
b. The personal information was collected or held by or public policy.
an entity in the Philippines. (Sec. 6, RA 10173) 3. Proportionality. The processing of information shall
be adequate, relevant, suitable, necessary, and not
excessive in relation to a declared and specified
PROCESSING OF PERSONAL INFORMATION purpose. Personal data shall be processed only if the
APPLICATION purpose of the processing could not reasonably be
fulfilled by other means. (Sec. 18, IRR of RA 10173)
General Data Privacy Principles
Sensitive Personal Information and Privileged
The processing of personal information shall be allowed, Information
subject to compliance with the requirements of this Act
and other laws allowing disclosure of information to the The processing of sensitive personal information and
public and adherence to the principles of transparency, privileged information shall be prohibited, except in the
legitimate purpose and proportionality. following cases:

Personal information must be: 1. The data subject has given his or her consent, specific
to the purpose prior to the processing, or in the case
1. Collected for specified and legitimate purposes of privileged information, all parties to the exchange
determined and declared before, or as soon as have given their consent prior to processing;
reasonably practicable after collection, and later 2. The processing of the same is provided for by existing
processed in a way compatible with such declared, laws and regulations: Provided, That such regulatory
specified and legitimate purposes only; enactments guarantee the protection of the sensitive
2. Processed fairly and lawfully; personal information and the privileged information:
3. Accurate, relevant and, where necessary for purposes Provided, further, That the consent of the data
for which it is to be used the processing of personal subjects are not required by law or regulation
information, kept up to date; inaccurate or permitting the processing of the sensitive personal
incomplete data must be rectified, supplemented, information or the privileged information;
destroyed or their further processing restricted; 3. The processing is necessary to protect the life and
4. Adequate and not excessive in relation to the health of the data subject or another person, and the
purposes for which they are collected and processed; data subject is not legally or physically able to express
5. Retained only for as long as necessary for the his or her consent prior to the processing;
fulfillment of the purposes for which the data was 4. The processing is necessary to achieve the lawful and
obtained or for the establishment, exercise or defense noncommercial objectives of public organizations and
of legal claims, or for legitimate business purposes, or their associations: Provided, That such processing is

2021 GOLDEN NOTES 2021 & 2022
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only confined and related to the bona fide members of 5. The processing is necessary for purposes of medical
these organizations or their associations: Provided, treatment, is carried out by a medical practitioner or
further, That the sensitive personal information are a medical treatment institution, and an adequate level
not transferred to third parties: Provided, finally, That of protection of personal information is ensured; or
consent of the data subject was obtained prior to
processing; 6. The processing concerns such personal information
as is necessary for the protection of lawful rights and
interests of natural or legal persons in court
proceedings, or the establishment, exercise or
defense of legal claims, or when provided to
government or public authority. (Sec. 13, RA 10173)

PERSONAL vs. SENSITIVE INFORMATION
PERSONAL INFORMATION SENSITIVE PERSONAL INFORMATION

Any information whether recorded in a material form Any information:
or not from which the identity of an individual is 1. About an individual’s race, ethnic origin, marital
apparent or can be reasonably and directly status, age, color, and religious, philosophical or
ascertained by the entity holding the information or political affiliations.
when put together with other information would 2. About an individual’s health, education, genetic or
directly and certainly identify an individual. [Sec. 3(g), sexual life of a person, or to any proceeding for any
RA 10173] offense committed or alleged to have been committed
by such person, the disposal of such proceedings, or
It must be: the sentence of any court in such proceedings;
1. Collected for specified and legitimate purposes 3. Issued by government agencies peculiar to an
determined and declared before, or as soon as individual which includes, but not limited to, social
reasonably practicable after collection, and later security numbers, previous or current health records,
processed in a way compatible with such licenses or its denials, suspension or revocation, and
declared, specified and legitimate purposes only; tax returns; and
4. Specifically established by an executive order or an
2. Processed fairly and lawfully; act of Congress to be kept classified. [Sec. 3(l), RA
10173]
3. Accurate, relevant and, where necessary for
purposes for which it is to be used the GR: The processing of sensitive personal information and
processing of personal information, kept up to privileged information shall be prohibited,
date; inaccurate or incomplete data must be
rectified, supplemented, destroyed or their XPNs:
further processing restricted; 1. The data subject has given his or her consent, specific
4. Adequate and not excessive in relation to the to the purpose prior to the processing, or in the case
purposes for which they are collected and of privileged information, all parties to the exchange
processed; have given their consent prior to processing;

5. Retained only for as long as necessary for the 2. The processing of the same is provided for by
fulfillment of the purposes for which the data existing laws and regulations: Provided, That such
was obtained or for the establishment, exercise regulatory enactments guarantee the protection of
or defense of legal claims, or for legitimate the sensitive personal information and the privileged
business purposes, or as provided by law; and information: Provided, further, That the consent of
the data subjects are not required by law or
6. Kept in a form which permits identification of regulation permitting the processing of the sensitive
data subjects for no longer than is necessary for personal information or the privileged information;
the purposes for which the data were collected
and processed: Provided, That personal 3. The processing is necessary to protect the life and
information collected for other purposes may lie health of the data subject or another person, and the
processed for historical, statistical or scientific data subject is not legally or physically able to
purposes, and in cases laid down in law may be express his or her consent prior to the processing;
stored for longer periods: Provided, further, That
adequate safeguards are guaranteed by said laws 4. The processing is necessary to achieve the lawful and
authorizing their processing. (Sec. 11, RA 10173) noncommercial objectives of public organizations
and their associations: Provided, That such
processing is only confined and related to the bona
fide members of these organizations or their
associations: Provided, further, That the sensitive
personal information are not transferred to third
parties: Provided, finally, That consent of the data
subject was obtained prior to processing;

5. The processing is necessary for purposes of medical
treatment, is carried out by a medical practitioner or

2021 GOLDEN NOTES 2021 & 2022
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a medical treatment institution, and an adequate
level of protection of personal information is
ensured; or

6. The processing concerns such personal information
as is necessary for the protection of lawful rights and
interests of natural or legal persons in court
proceedings, or the establishment, exercise or
defense of legal claims, or when provided to
government or public authority (Sec. 13, RA 10173)

Subcontract of Personal Information e. Methods utilized for automated access, if the same
is allowed by the data subject, and the extent to
A personal information controller may subcontract the which such access is authorized;
processing of personal information: Provided, That the f. The identity and contact details of the personal
personal information controller shall be responsible for information controller or its representative;
ensuring that proper safeguards are in place to ensure the g. The period for which the information will be
confidentiality of the personal information processed, stored; and
prevent its use for unauthorized purposes, and generally, h. The existence of their rights, i.e., to access,
comply with the requirements of this Act and other laws correction, as well as the right to lodge a
for processing of personal information. The personal complaint before the Commission.
information processor shall comply with all the i. Any information supplied or declaration made to
requirements of this Act and other applicable laws. (Sec. the data subject on these matters shall not be
14, RA 10173) amended without prior notification of data
subject: Provided, That the notification under
Extension of Privileged Communication subsection (b) shall not apply should the personal
information be needed pursuant to a subpoena or
Personal information controllers may invoke the principle when the collection and processing are for
of privileged communication over privileged information obvious purposes, including when it is necessary
that they lawfully control or process. Subject to existing for the performance of or in relation to a contract
laws and regulations, any evidence gathered on privileged or service or when necessary or desirable in the
information is inadmissible. (Sec. 15, RA 10173) context of an employer-employee relationship,
between the collector and the data subject, or
RIGHTS OF DATA SUBJECT when the information is being collected and
processed as a result of legal obligation;
Summary (I-BAR-OP-C-Dean)
3. Access - Reasonable access to, upon demand, the
1. Informed; following:
2. Block;
3. Access; a. Contents of his or her personal information that
4. Rectify; were processed;
5. Object; b. Sources from which personal information were
6. Portability; obtained;
7. Complaint; c. Names and addresses of recipients of the personal
8. Damages information;
d. Manner by which such data were processed;
The data subject is entitled to: e. Reasons for the disclosure of the personal
information to recipients;
1. Information - Be informed whether personal f. Information on automated processes where the
information pertaining to him or her shall be, are data will or likely to be made as the sole basis for
being or have been processed; any decision significantly affecting or will affect
the data subject;
2. Be Furnished the information indicated hereunder g. Date when his or her personal information
before the entry of his or her personal information concerning the data subject were last accessed
into the processing system of the personal and modified; and
information controller, or at the next practical h. The designation, or name or identity and address
opportunity: of the personal information controller;

a. Description of the personal information to be 4. Rectification - Dispute the inaccuracy or error in the
entered into the system; personal information and have the personal
b. Purposes for which they are being or are to be information controller correct it immediately and
processed; accordingly, unless the request is vexatious or
c. Scope and method of the personal information otherwise unreasonable. If the personal information
processing; have been corrected, the personal information
d. The recipients or classes of recipients to whom controller shall ensure the accessibility of both the
they are or may be disclosed; new and the retracted information and the
simultaneous receipt of the new and the retracted
information by recipients thereof: Provided, That the

2021 GOLDEN NOTES 2021 & 2022
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third parties who have previously received such foreseeable vulnerabilities in its computer
processed personal information shall be informed of networks, and for taking preventive, corrective
its inaccuracy and its rectification upon reasonable and mitigating action against security incidents
request of the data subject; that can lead to a security breach; and
d. Regular monitoring for security breaches and a
5. Erasure/Blocking/Objection - Suspend, withdraw process for taking preventive, corrective and
or order the blocking, removal or destruction of his or mitigating action against security incidents that
her personal information from the personal can lead to a security breach.
information controller’s filing system upon discovery
and substantial proof that the personal information 4. The personal information controller must further
are incomplete, outdated, false, unlawfully obtained, ensure that third parties processing personal
used for unauthorized purposes or are no longer information on its behalf shall implement the security
necessary for the purposes for which they were measures required by this provision.
collected. In this case, the personal information 5. The employees, agents or representatives of a
controller may notify third parties who have personal information controller who are involved in
previously received such processed personal the processing of personal information shall operate
information; and and hold personal information under strict
confidentiality if the personal information are not
6. Indemnification - Be indemnified for any damages intended for public disclosure. This obligation shall
sustained due to such inaccurate, incomplete, continue even after leaving the public service,
outdated, false, unlawfully obtained or unauthorized transfer to another position or upon termination of
use of personal information. (Sec. 16, RA 10173) employment or contractual relations.
6. The personal information controller shall promptly
Non-Applicability notify the Commission and affected data subjects
when sensitive personal information or other
The immediately preceding sections are not applicable if information that may, under the circumstances, be
the processed personal information are used only for the used to enable identity fraud are reasonably believed
needs of scientific and statistical research and, on the basis to have been acquired by an unauthorized person,
of such, no activities are carried out and no decisions are and the personal information controller or the
taken regarding the data subject: Provided, That the Commission believes that such unauthorized
personal information shall be held under strict acquisition is likely to give rise to a real risk of serious
confidentiality and shall be used only for the declared harm to any affected data subject. The notification
purpose. Likewise, the immediately preceding sections are shall at least describe the nature of the breach, the
not applicable to processing of personal information sensitive personal information possibly involved, and
gathered for the purpose of investigations in relation to the measures taken by the entity to address the
any criminal, administrative or tax liabilities of a data breach. Notification may be delayed only to the extent
subject. (Sec. 19, RA 10173) necessary to determine the scope of the breach, to
prevent further disclosures, or to restore reasonable
integrity to the information and communications
DUTIES AND RESPONSIBILITIES OF PERSONAL
system.
INFORMATION CONTROLLER

a. In evaluating if notification is unwarranted, the
1. The personal information controller must implement Commission may take into account compliance by
reasonable and appropriate organizational, physical the personal information controller with this
and technical measures intended for the protection of section and existence of good faith in the
personal information against any accidental or acquisition of personal information.
unlawful destruction, alteration and disclosure, as b. The Commission may exempt a personal
well as against any other unlawful processing. information controller from notification where, in
2. The personal information controller shall implement its reasonable judgment, such notification would
reasonable and appropriate measures to protect not be in the public interest or in the interests of
personal information against natural dangers such as the affected data subjects.
accidental loss or destruction, and human dangers c. The Commission may authorize postponement of
such as unlawful access, fraudulent misuse, unlawful notification where it may hinder the progress of a
destruction, alteration and contamination. criminal investigation related to a serious breach.
3. The determination of the appropriate level of security
under this section must take into account the nature Q: Pedro Delos Santos, a Filipino took a test for HIV,
of the personal information to be protected, the risks knowing that it is free and no ID was required of him,
represented by the processing, the size of the and out of fear, he filled up the application form with
organization and complexity of its operations, current incorrect information. He purports to be Juan De Vega
data privacy best practices and the cost of security who is 25 years old. Is such health information
implementation. Subject to guidelines as the sensitive personal information?
Commission may issue from time to time, the
measures implemented must include: A: NO. Health information such as medical diagnosis or
a. Safeguards to protect its computer network prognosis by itself is not sensitive personal information
against accidental, unlawful or unauthorized unless there is a Patient ID or name of the patient together
usage or interference with or hindering of their with the health information that can be used to trace back
functioning or availability; to an individual.
b. A security policy with respect to the processing of
personal information;
c. A process for identifying and accessing reasonably

2021 GOLDEN NOTES 2021 & 2022
civil law
Q: Atty. X faces suspension from the practice of law for
his ‘Facebook posts maligning and insulting’ the
complainant, a famous beauty doctor who counted
local movie stars as clients. His defense was that his
Facebook page had restricted access to ‘Friends Only.’
Is his argument tenable?

A: NO. The Court did not accept the lawyer’s argument that
the statements were private since he had restricted access
to the page to ‘Friends Only,’ further observing that ‘even if
the Court were to accept the allegation that his posts were
limited to or viewable by his ‘Friends’ only, there is no
assurance that the same will be safeguarded as within the
confines of privacy.’ It noted the social media platform’s
goal of allowing ‘the world to be more open and connected
in every conceivable way,’ the implied message being that
a person who shares information on social media should
not be surprised or aggrieved if such information is
spread. (Belo-Henares v. Guevarra, AC No. 11394, December
1, 2016)

Q: Nenita and Julienne were graduating high school
students at St. Theresa’s College (STC), Cebu City.
While changing into their swimsuits for a beach party
they were about to attend, Julia and Julienne, along
with several others, took digital pictures of themselves
clad only in their undergarments. These pictures were
then uploaded by Angela on her Facebook profile.

Back at the school, Escudero, a computer teacher at
STC’s high school department, learned from her
students that some seniors at STC posted pictures
online, depicting themselves from the waist up,
dressed only in brassieres. Escudero reported the
matter and, through one of her student’s Facebook
page, showed the photos to Tigol, STC’s Discipline-in-
Charge, for appropriate action. Were unlawful means
used by STC in gathering information about the photo?

A: NO. Even assuming that the photos in issue are visible
only to the sanctioned students’ Facebook friends,
respondent STC can hardly be taken to task for the
perceived privacy invasion since it was the minors’
Facebook friends who showed the pictures to Tigol.
Respondents were mere recipients of what were posted.
They did not resort to any unlawful means of gathering the
information as it was voluntarily given to them by persons
who had legitimate access to the said posts. Clearly, the
fault, if any, lies with the friends of the minors. Curiously
enough, however, neither the minors nor their parents
imputed any violation of privacy against the students who
showed the images to Escudero. (Vivares v. St. Theresa’s
College, G.R. No. 202666, September 29, 2014)


2021 GOLDEN NOTES 2021 & 2022

2021 UST Pre Week The Law Pertaining To Private Personal and Commercial

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The Law Pertaining

UNIVERSITY OF SANTO TOMAS 2 PRE–WEEK NOTES

Parental consent and Marriage 2. SOLEMNIZING AUTHORITY

UNIVERSITY OF SANTO TOMAS 3 PRE–WEEK NOTES

Provided the marriage is performed: 3. MARRIAGE LICENSE

i. During voyage, even during stopovers Validity of marriage license

UNIVERSITY OF SANTO TOMAS 4 PRE–WEEK NOTES

4. Parties must execute an Affidavit that they are living

UNIVERSITY OF SANTO TOMAS 5 PRE–WEEK NOTES

UNIVERSITY OF SANTO TOMAS 6 PRE–WEEK NOTES

NOTE: Expert evidence may be given by qualified Incestuous Marriages

1. Burden of proof to show the nullity of the marriage Marriages between:

UNIVERSITY OF SANTO TOMAS 7 PRE–WEEK NOTES

UNIVERSITY OF SANTO TOMAS 8 PRE–WEEK NOTES

XPNs: 4. Same sex marriage celebrated abroad involving

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3. Donations Propter Nuptias Effects of Decree of Annulment

UNIVERSITY OF SANTO TOMAS 10 PRE–WEEK NOTES

UNIVERSITY OF SANTO TOMAS 11 PRE–WEEK NOTES

5. Drug addiction or habitual alcoholism of respondent;

An action for legal separation shall be in no case tried

Declaration of Nullity of Marriage vs. Annulment vs. Legal Separation

UNIVERSITY OF SANTO TOMAS 12 PRE–WEEK NOTES

children XPN: Children conceived or born of marriages

UNIVERSITY OF SANTO TOMAS 13 PRE–WEEK NOTES

PROPERTY RELATIONS OF THE SPOUSES consideration of a future marriage because such

UNIVERSITY OF SANTO TOMAS 14 PRE–WEEK NOTES

ABSOLUTE COMMUNITY CONJUGAL PARTNERSHIP COMPLETE SEPARATION

BASIS ART.147 ART.148

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UNIVERSITY OF SANTO TOMAS 32 PRE–WEEK NOTES

Obligations with a Period If fulfillment is Valid. But the Annulled

UNIVERSITY OF SANTO TOMAS 33 PRE–WEEK NOTES

obligation has JOINT AND SOLIDARY OBLIGATIONS

Void If the principal If one prestation is Consequences of a joint obligation

UNIVERSITY OF SANTO TOMAS 34 PRE–WEEK NOTES

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Q: When is a thing considered lost? (DOPE)

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Requisites of stipulation pour atrui:

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UNIVERSITY OF SANTO TOMAS 41 PRE–WEEK NOTES

RECISSIBLE, VOIDABLE, UNENFORCEABLE, VOID, AND INEXISTENT CONTRACTS