AUSL The Law Pertaining To Private Personal and Commercial Relations

EXECUTIVE COUNCIL
JAYSON FRANCISCO JULIAN PAOLO FABROS LOUIE JOHN BAYON

Chairperson Operations Head Auditor
REA MAY HERMOSURA MA. ISIS DANIELLE VOLANTE CRISTOBAL RABINO

Vice Chairperson for Academics Secretary Creative Director
MIKYLA CORDERO TIMOTHY JAMES PACSON ARRIANE SANGALANG

Vice Chairperson for Administration Treasurer Volunteer Core Head
CIVIL LAW COMMISSION

JOVAN KEFF ALVARO MA. RUTH CUSTODIO
Commissioner Subject Head - Property LYCELLE MAE BALOING
GERON BUENO
KEVIN ALBERT ABOY ANTONIETTE PULUTAN CHRISTINE JOY DAVID
Deputy Commissioner Subject Head - Land Titles and Deeds LEIRA MARIE GUEVARRA FILIO
JOBELUZ IGDANES
JANINE NICOLE ORCENA JANE EUNICE GADIN YASSER MAMBUAY
Subject Head - Persons and Family Subject Head - Sales PETER JANSSEN MANALO
Relations GERMINIANO DALISAY MANIO
HANNA AYON ANNA HYACINTH NICERIO
JONAINA SUWALAWAN-HADJINOOR Subject Head - Torts and Damages TIMOTHY JAMES PACSON
Subject Head - Succession VERONICA PANGILINAN
ELLAINEMOR SAN PASCUAL ELLAINEMOR SAN PASCUAL
LANIE GRACE LIM Subject Head - Conflicts MARION PATRICIA RODRIGUEZ
Subject Head - Obligations and Contracts AIRA JANILLE TIMOTEO
JAN TRISTAN RAMOS RAEZEL LOUISE VELAYO
LOUIE AERON CORDOVA Subject Head - Agency and Trusts Members
Subject Head Credit Transactions
COMMERCIAL LAW COMMISSION

MARY ANGELA FABON DAEWIN PAMITTAN JOHN HENRY ALMANZOR
Commissioner Corporation Law Subject Head JIMBOY ARANAS
APRIL JOY BATALLA
AILE CARISSA ABCEDE MIKE FERDINAND SANTOS RAMILYN BERTOLANO
Insurance and Pre-Need Laws Subject Law on Securities Subject Head JOSEPH ERIC POCHOLO BRIONES
Head ED THADEUS CAMMAYO
CAMILLE BIANCA PINTO REENA MAE CAÑAMAQUE
LORILLE LEONES Banking Laws Subject Head BIANCA CHIA CASTRO
Transportation Law Subject Head
JOJEE ROSE DELA CUEVA
LOIS RENEE TUBON WILLIAM CYDRICK ESTRADA
CLARIZ MINGOA Intellectual Property Law Subject Head
KENKEN LAGUTAN
Law on Partnerships Subject Head
MARIELLE ERIKA LITUANAS
MAC VINCENT JAVIER
FLEMARIE MAGNE MEDIDA
Special Commercial Laws Subject Head
IMARI JOIE RAVANILLA
RR RICAFORT
RENZO NIÑO ROSALES
JIZZA SOFIA CRISTINE TENDENILLA
FAITH CLAIRE TOLENTINO
GERALDINE YU
Members
CENTER FOR LEGAL EDUCATION AND RESEARCH
ATTY. RODERICK M. VILLOSTAS
Director
ATTY. ANTONY PARREÑO

ATTY. LESTER NAZARENE OPLE
ATTY. RICKSON M. BUENVIAJE
Research Fellows
BRANDO DE TORRES
MARICAR ASUNCION
JAYSON GALAPON
Research Staff
PHILIPPINE COPYRIGHT
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ALL RIGHTS RESERVED © 2021

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A. CIVIL LAW
I. LEGAL PERSONALITY, CAPACITY TO ACT
1. When is a child considered born for civil purposes?
As a general rule, the fetus is considered born if it is alive at the time it is completely delivered
from the mother‟s womb.However, if the fetus had an intrauterine life of less than seven (7)
months, it is not deemed born if it dies within 24 hours after its complete delivery from the
maternal womb. (Art. 41, Civil Code)
2. Distinguish juridical capacity from capacity to act?
Basis Juridical Capacity Capacity to Act

(Art. 37, Civil Code) (Art. 37, Civil Code)
Definition Fitness to be subject Power to do acts with legal effect.
of legal relations.
Acquisition Inherent Through fulfillment of specific legal activities.
Extinguishment Only through death Through death and other causes.
In relation to the Can exist without Cannot exist without juridical capacity.
other capacity to act.
Limitation None Minority, insanity or imbecility, state of being deaf-
mute, prodigality, and civil interdiction (restriction)
Age, insanity, imbecility, state of being deaf-mute,

penalty, prodigality, family relations, alienage,
absence, insolvency, and trusteeship, among
others. (modification/limitation) (Art. 38-39, Civil
Code)
II. MARITAL RELATIONSHIPS
3. What is the status of the following marriages:
(a) A marriage between a step-brother and a step-sister?
Yes, the marriage is valid. However, if it was celebrated during the effectivity of the Civil, said
marriage is expressly prohibited, therefore, void. (Art. 80, Civil Code)
(b) A marriage between a half-brother and a half-sister?
Void. Marriages between brothers and sisters, whether of the full or half blood, are
incestuous and void from the beginning, whether relationship between the parties be
legitimate or illegitimate. (Art. 35, Family Code)
(c) A marriage which took place five (5) months after the issuance of a marriage
license.
Void for absence of an essential requisite. A marriage license shall be valid in any part of the
Philippines for a period of 120 days from the date of issue and shall be deemed
Center for Legal Education And Research |1

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automaticallycancelled at the expiration of the said period if the contracting parties have not
made use of it. (Art. 20, Family Code)
(d) A marriage contracted by an 18-year-old illegitimate child who obtained the

parental consent only of her putative father.
Voidable. Since illegitimate children are under the exclusive parental authority of their
mother, it is the consent of the mother that is required. (Art. 176, Family Code)
(e) A second marriage celebrated on August 3, 1984, contracted by a person whose

first husband had been missing for four (4) consecutive years, without securing a
judicial declaration of presumptive death.
Valid. The requirement of securing a judicial declaration of presumptive death for purposes of
remarriage applies only to marriages celebrated during the effectivity of the Family Code.
(Armas vs. Calisterio, G.R. No. 136467, April 6, 2000)
(f) A marriage where one party was afflicted with a sexually transmissible disease
found to be serious and appears to be incurable during the marriage.
Valid. For affliction with a sexually transmissible disease to render a marriage voidable, it
must either be (a) existing at the time of the marriage; or (b) concealed and existing at the
time of the marriage amounting to fraud in obtaining consent.(Arts. 45 and 46, Family Code)
(g) A marriage which took place with the presence of only three (3) persons:the
contracting parties and the solemnizing officer.
Valid. The absence of at least two (2) witnesses of legal age is a mere irregularity that shall
not affect the validity of the marriage, but the party or parties responsible for the irregularity
shall be civilly, criminally and administratively liable.(Arts. 3 and 4, Family Code)
4. What are the rules on sex determination vis-a-vis (a) sex reassignment and (b)
persons who are biologically intersex?
Sex reassignment. The sex of a person is determined at birth, visually done by the birth attendant
(the physician or midwife) by examining the genitals of the infant. (Silverio vs. Republic, G.R. No.
174689, October 22, 2007)
Intersex.Where the person is biologically or naturally intersex (or diagnosed with Congenital
Adrenal Hyperplasia), the determining factor in his gender classification would be what the
individual, having reached the age of majority, with good reason thinks of his/her sex. (Republic
vs. Cagandahan, G.R. No. 166676, September 12, 2008)
5. What are the instances when marriage license may be dispensed with?
The requirement of marriage license may be dispensed with in the following instances:
(1) Marriage in articulo mortis (at the point of death) even if the ailing party subsequently
survives;
(2) If the residence of either party is so located that there is no means of transportation to
enable such party to personally appear before the local civil registrar;
(3) Marriage among Muslims or among members of the ethnic cultural communities, provided
they are solemnized in accordance with their customs, rites or practices;
(4) Marriage of a man and a woman who have lived together and exclusively with each other as
husband and wife for a continuous and unbroken period of at least five years before the
marriage. (Arts. 27, 28, 33, and 34, Family Code, Ninal vs. Bayadog, G.R. No. 133778 dated March 14,
2000)
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(5) Marriages celebrated abroad and in accordance with the laws of the place of celebration
which do not require a valid marriage license (Arts. 26 and 35, Family Code
6. AAA married BBB in 2012. When they separated in fact, AAA married CCC, her
childhood sweetheart. In 2018, when BBB found out about the second marriage of
her husband filed a complaint for the declaration of nullity of marriage between AAA
and CCC for being bigamous. CCCcontends that only the husband or the can file a
petition for declaration of nullity of marriage pursuant to AM No. 02-11-10-SC. Is she
correct?
No. The aggrieved spouse in the prior marriage has personality to file the petition of absolute
nullity of a subsequent marriage on the ground of bigamy. AM No. 02-11-10-SC does not
preclude a spouse of a subsisting marriage to question the validity of a subsequent marriage.
(Juliano-Llave vs. Republic, G.R. No. 169766, March 30, 2011)
7. Will a person who contracted another marriage be liable for bigamy, if the first one is
contracted only through signing a marriage contract, and without a marriage
ceremony?
No, as the first marriage is not a marriage at all. The mere private act of signing a marriage
contract bears no semblance to a valid marriage and thus, needs no judicial declaration of nullity.
Such act alone, without more, cannot be deemed to constitute an ostensibly valid marriage for
which a person might be held liable for bigamy. (Morigo vs. People, G.R. No. 145226, February 06,
2004)
8. What are the exceptions to the rule that all marriages solemnized outside the
Philippines, in accordance with the laws in force in the country where they were
solemnized, and valid there as such, shall also be valid in the Philippines?
(1) Marriages contracted by any party below 18 years of age even with the consent of parents or
guardians (Art. 35 [1], Family Code);
(2) Bigamous or polygamous marriages not failing under Art. 41, which provides that where
before the celebration of a subsequent marriage, the prior spouse had been absent for four
consecutive years (or two years in case of disappearance where there is danger of death)
and the spouse present has a well-founded belief that the absent spouse was already dead
(Art. 35 [4], Family Code);
(3) Marriages contracted through mistake of one contracting party as to the identity of the other
(Art. 35 [5], Family Code);
(4) Subsequent marriages that are void under Art. 53, i.e., when there is non-compliance with
the requirement of recording in the appropriate civil registry and registries of property the
judgment of annulment or of absolute nullity of the marriage, the partition and distribution of
the properties of the spouses and the delivery of the children‟s presumptive legitimes, and
where either of the former spouses marry again (Art. 35 [6], Family Code);
(5) A marriage contracted by any party who, at the time of the celebration, was psychologically
incapacitated to comply with the essential marital obligations of marriage, even if such
incapacity becomes manifest only after its solemnization (Art. 36, Family Code);
(6) Incestuous marriages (Art. 37, Family Code); or
(7) Void marriages by reasons of public policy. (Art. 38, Family Code)
9. Can consul-generals, consuls, or vice-consuls solemnize a marriage abroad between a

Filipino and an Alien?
No, consul-generals, consults, or vice-consuls cannot solemnize mixed marriages. Only marriages
between Filipino citizens abroad may be solemnized by a consul-general, consul or vice-consul of
the Republic of the Philippines. (Art. 10, Family Code)

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10. May a divorce decree obtained abroad by a Filipino married to a foreigner be

recognized as valid in the Philippines pursuant to Par. 2, Art. 26 of the Family Code?
Yes, Par. 2, Art. 26 of the Family Code still applies even if it is the Filipino spouse who obtained a
divorce decree, thus, it will still capacitate him or her to remarry. The purpose of Par. 2 of Article
26 is to avoid the absurd situation where the Filipino spouse remains married to the alien spouse
who, after a foreign divorce decree that is effective in the country where it was rendered, is no
longer married to the Filipino spouse. (Republic vs. Manalo, G.R. No. 221029, April 24, 2018)
11. AAA, a Filipino, and BBB, a Japanese national, were married on April 20, 2001, and
lived together for nine (9) years in Japan. Eventually, both parties obtained a divorce
decree in Japan. AAA secured a Divorce Certificate issued by the Consul of the
Japanese Consulate in the Philippines and had it authenticated by an authentication
officer of the Department of Foreign Affairs. AAA then tried to have the Divorce
Certificate registered with the Civil Registry of Manila but was refused by the City
Registrar since there was no court recognizing it. Is there a need for AAA to prove
said divorce in Philippine courts?
Yes. Judicial recognition of a foreign divorce requires that the national law of the foreign spouse
and the divorce decree be pleaded and proved as a fact before the Regional Trial Court. The
Filipino spouse may be granted the capacity to remarry once the courts find that the foreign
divorce was validly obtained by the foreign spouse according to his or her national law, and that
the foreign spouse‟s national law considers the dissolution of the marital relationship to be
absolute. (Racho vs. Tanaka, G.R. No. 199515, June 25, 2018)
12. Discuss the difference between bigamous marriage under Art. 40 and Art. 35 (4) of
the Family Code?
Distinction Art. 40 Art. 35 (4)

As to status of Prior marriage is itself void but a party Prior marriage is perfectly valid, or
prior marriage thereto did not secure a judicial at least voidable, and a party
declaration of nullity of the prior thereto contracts another
marriage before contracting a marriage prior to its termination.
subsequent marriage.
As to property Property regime in a marriage following a Property regime in a marriage
relations void marriage. following a bigamous marriage
under Art. 35(4) is governed by
Art. 148.
As to effect to The subsequent marriage is also void The subsequent marriage is void
the second because of failure to comply with the for being bigamous.
marriage requisites.
13. When is declaration of nullity of marriage on the ground of psychological incapacity

warranted?1
To warrant the declaration of nullity of marriage, the psychological incapacity must be

characterized by:
(1) Gravity, i.e., it must be grave and serious such that the party would be incapable of carrying
out the ordinary duties required in a marriage;
(2) Juridical antecedence i.e., it must be rooted in the history of the party antedating the
marriage, although the overt manifestations may emerge only after the marriage; and
(3) Incurability i.e., it must be incurable, or even if it were otherwise, the cure would be beyond
the means of the party involved. (Santos vs. CA, G.R. No. 112019, January 4, 1995)

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14. AAA sought for a judicial decree of presumptive death of her husband,BBB, which
allowed her to validly marry her childhood sweetheart, CCC. Later, BBB appeared.
What is the effect of BBB’s re-appearance to AAA’s subsequent marriage?
It will have no effect on the validity of the subsequent marriage, unless the missing spouse files
an Affidavit of Reappearance. The second marriage shall automatically be terminated by
recording the missing spouse‟s affidavit of reappearance.(Arts. 41 and 42, Family Code)
15. While they were sweethearts, Teresa already noticed that Rodolfo was an introvert
and was prone to jealousy. She observed that Rodolfo appeared to have no ambition
in life and felt insecure of his siblings, who excelled in their studies and careers.
Teresa and Rodolfo still got married and had two children. Rodolfo’s attitude
worsened in that he treated Teresa as a sex slave and he once poked a gun at his own
15-year-old cousin who was staying at their house because he suspected his cousin of
being Teresa’s lover. Teresa then filed a petition for declaration of nullity of marriage.
During trial, Dr. Lopez was presented as witness. Dr. Lopez stated that Rodolfo’s
psychological disorder probably started during his late childhood years and developed
in his early adolescent years. Dr. Lopez explained that Rodolfo’s psychological
incapacity to perform his marital obligations was likely caused by growing up with a
pathogenic parental model. May the marriage of Teresa and Rodolfo be declared null
and void on the ground of psychological incapacity? 2
Yes. Psychological incapacity is a mental illness that leads to an inability to comply with or
comprehend essential marital obligations. Here, Rodolfo‟s paranoid personality disorder made him
distrustful and prone to extreme jealousy and acts of depravity, incapacitating him to fully
comprehend and assume the essential obligations of marriage. (Tani-De La Fuente vs. De La Fuente,
G.R. No. 188400, March 08, 2017, J Leonen)3
1
Nota Bene: In the case of Tan-Andal v. Andal, G.R. No. 196359, penned by Justice Leonen, the Supreme
Court held that psychological incapacity is not a medical but a legal concept. It need not be a mental or
personality disorder. It need not be a permanent and incurable condition. Therefore, the testimony of
psychologist or psychiatrist is not mandatory in all cases. The totality of the evidence must show clear and
convincing evidence to cause the declaration of nullity of marriage. However, note that this decision was
promulgated only last May 11, 2021, hence, is not covered by the 2022 Bar Examinations.
2
Id.
16. May a person unilaterally declare his marriage void?
No. A person cannot unilaterally declare his marriage void. The law provides that a judicial
declaration of nullity is indispensable for the purposes of remarriage. (De Guzman vs. People, G.R.
No. 224742, August 07, 2019, J Leonen)
17. Alice discovered that Norberto was previously married to a certain Gina, as evidenced
by a marriage contract registered with the National Statistics Office. Alice
subsequently filed a criminal Complaint for bigamy against Norberto. On the other
hand, Norberto alleged that before finalizing their marriage plans, Norberto revealed
to Alice that he had a” fake marriage” with his college girlfriend, Gina. Despite the
revelation, Alice and Norberto were still married. Is Alice’s and Norberto’s marriage
bigamous?
Yes. Persons intending to contract a second marriage must first secure a judicial declaration of
nullity of their first marriage. If they proceed with the second marriage without the judicial

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declaration, they are guilty of bigamy regardless of evidence of the nullity of the first marriage.
(Vitangcol vs. People, G.R. No. 207406, January 13, 2016, J Leonen)
18. What are the actions for annulment of voidable marriages?
Persons Who
Grounds PrescriptionPeriod Ratification
May File
(Art. 45, FC) (Art. 47, FC) (Art. 45, FC)
(Art. 47, FC)
Parent/ legal
guardian having Any time before such party has
Absence of Free cohabitation after
charge of the reached the age of 21
Parental attaining the age of
minor.
Consent 21.
Parties to the Within 5 years after attaining
marriage. the age of 21.
Sane spouse who
has no knowledge
of the insanity. Any time before the death of
Relative guardian either party. Free cohabitation after
Unsound mind or persons having the insane spouse
legal charge of the regains sanity.
insane.
During lucid interval or after
Insane spouse
regaining sanity.
Free cohabitation with
Within 5 years after the full knowledge of the
Fraud
discovery of fraud. facts constituting the
fraud.
Free cohabitation after
Force, Injured party Within 5 years from the time the disappearance of
intimidation, or force, intimidation, or undue force, intimidation /
undue influence influence disappeared or ceased. undue influence,
respectively.
No ratification since
Within 5 years after the
Impotency the defect is
marriage.
permanent.
19. When can cohabitation for at least five (5) years be a substitute to the marriage
license requirement?
(1) The man and woman must have been living as husband and wife for at least five (5) years
before the marriage;
(2) The parties must have no legal impediment to marry each other;
(3) The fact of absence of legal impediment between the parties must be present at the time of
marriage;
(4) The parties must execute an affidavit stating that they have lived together for at least five (5)
years (and are without legal impediment to marry each other); and
(5) The solemnizing officer must execute a sworn statement that he had ascertained the
qualifications of the parties and that he had found no legal impediment to their marriage
(Borja-Manzano vs. Sanchez, A.M. No. MTJ–00–1329, March 08, 2001).
20. AAA was declared presumptively dead after her husband, BBB, filed a petition for
declaration of absence or presumptive death for the purpose of remarriage despite
knowing fully well that AAA is still alive. AAA filed a petition for annulment of
judgment on the grounds of extrinsic fraud and lack of jurisdiction. The trial court

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dismissed AAA’s petition for annulment of judgment for being a wrong remedy.
According to the court, the proper remedy was to file a sworn statement before the
civil registry, declaring her reappearance in accordance with Art. 42 of the Family
Code. Is the court correct?
No. The provision on reappearance in the Family Code as a remedy to effect the termination of
the subsequent marriage does not preclude the spouse who was declared presumptively dead
from availing other remedies existing in law. A subsequent marriage may also be terminated by
filing an action in court to prove the reappearance of the absentee and obtain a declaration of
dissolution or termination of the subsequent marriage. (Santos vs. Santos, G.R. No. 187061, October
08, 2014, J Leonen)
III. PROPERTY (CONCEPT OF PROPERTY, OWNERSHIP, CO-OWNERSHIP, RIGHT OF

ACCESSION, EASEMENT, NUISANCE)
21. To what does “property” extend to.
Property refers to things which are or may be the object of appropriation.Property is not confined
to things which are already possessed or appropriated by man but also extends to those
susceptible to appropriation (Art. 44, Civil Code, Rabuya, Civil Law Reviewer, Vol. 1, p. 311) .
22. What is ownership and what are the rights included therein?
An independent right of exclusive enjoyment and control of the thing for the purpose of deriving
therefrom all advantages required by the reasonable needs of the owner and the promotion of
the general welfare but subject to the restrictions imposed by law and the right of others. Its
rights are the following:
a) Right to enjoy
b) Right to dispose(jus disponendi)
c) Right to vindicate (jus vindicandi)
d) Right to exclude
e) Right to demand indemnity for damages suffered due to lawful interference by a third person
to avert an imminent danger;
f) Right to just compensation in eminent domain cases;
g) Right to construct any works or make any plantations and excavations on the surface or
subsurface of the land;
h) Right to hidden treasure found in the owner„s property; and
i) Right to accessions.(Rabuya, Civil Law Reviewer Vol. 1, 2017, pp. 350-351)
23. What are the characteristics of co-ownership?
The following are the characteristics of co-ownership:

a. There are two or more co-owners (Art. 484, Civil Code);
b. There is a single object which is not materially or physically divided and over which his ideal
share of the whole, each of the co-owner exercises ownership, together with the other co-
owners;
c. There is no mutual representation by the co-owners;
d. It exists for the common enjoyment of the co-owners;
e. It has no distinct legal personality;
f. It is governed first of all by the contract of the parties; otherwise, by special legal provisions,
and in default of such provisions, by the provisions of Title III on Co-ownership.

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24. AAA and BBB are co-owners of a house and lot, the Certificate of Title of which is
registered solely in the name of AAA without annotation of the co-ownership. AAA
then secured a loan secured by a mortgage on the property. Is the mortgage valid?
The mortgage is valid as to the aliquot portion owned by the mortgagor. Under Article 493 of the
Civil Code, a co-owner can alienate only his pro indiviso share in the co-owned property, and not
the share of his co-owners. (Alano v. Planter‟s Development Bank, G.R. No. 171628, June 13, 2011)
25. In industrial succession, what are the rights, liabilities and remedies available to a
landowner, builder, planter, sower, and owner of the materials?
Landowner (LO); Builder, Planter, Sower (BPS); Owner of the Materials (OM)
BUILDING, PLANTING, OR SOWINGON ONE’S OWN LAND WITH MATERIALS
BELONGING TO ANOTHER
If both the LO and If both the LO and If LO acted in bad If LO acted in good
the OM acted in the OM acted in faith and OM acted faith and OM acted
good faith bad faith in good faith in bad faith
(1) LO may The bad faith of one (1) LO is liable for OM loses his
appropriate what neutralizes the bad damages. materials without any
he has built, faith of the other. (2) OM may: right whatsoever and
planted or sown, Hence, they must be a. Demand the is liable to the LO for
but must pay the treated as if both of value of his damages. (Arts. 447,
value of the them acted in good materials plus 449, and 455, Civil
materials; OR faith. damages; OR Code)
(2) LO may return b. Demand the
the materials to return of the
the OM, if it can materials,
be made without even if injury
damage to the is caused to
materials. the land, plus
damages.
BUILDING, PLANTING, OR SOWING

WITH ONE’S OWN MATERIALS ON THE LAND BELONGING TO ANOTHER
If both the LO and If both the LO and If the LO acted in If the LO acted in
the BPS-OM acted the BPS-OM acted good faith and the bad faith and the
in good faith in bad faith BPS-OM acted in BPS-OM acted in
bad faith good faith
(1) LO may The bad faith of one (1) LO may (1) BPS-OM may:
appropriate as his neutralizes the bad appropriate as his a. Demand the
own the works, faith of the other. own the works, value of his
sowing, or Hence, they must be sowing, or materials plus
planting, but must treated as if both of planting, without damages; OR
pay the BPS-OM them acted in good need of paying b. Demand the
the necessary and faith. indemnity, plus return of the
useful expenses, damages; OR materials,
and in proper (2) LO may demand even if injury
cases, expenses the demolition of is caused to
for pure luxury; whatever has the land, plus
OR been built, damages.
(2) LO may oblige the planted, or sown (Arts. 448-
BP to pay the even if injury is 454, Civil
price of the land, caused to the Code)
if the value of the land, plus
land is not damages; OR
considerably more (3) LO may compel

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than that of the the BP to pay the

building or trees; price of the land,
and the S, the even if the land is
proper rent. considerably more
than that of the
(3) LO is entitled to building or trees,
remove the works, plus damages.
sowing, or
planting when, (4) BPS-OM is entitled
after having to reimbursement
chosen to sell his of necessary
land, the BPS-OM expenses for the
fails to pay for the preservation of
same; the land.
(4) Pending
reimbursement,
the BPS-OM has
the right of
retention.
BUILDING, PLANTING, OR SOWING

ON THE LAND OF ANOTHER WITH MATERIALS BELONGING TO A THIRD PERSON
OM acted in good faith OM acted in bad faith
(1) OM must be paid the value of the (1) OM loses his materials without any right
materials; whatsoever and is liable for damages;
(2) BPS is primarily liable to make such (2) LO can claim what has been built, planted,
payment to the OM (with damages if BPS or sown on his land without any obligation
acted in bad faith); to indemnify the OM;
(3) If BPS pays, he becomes the OM and the (3) BPS who acted in good faith may claim
case would be the same as that of from the LO a reasonable compensation
building, planting, or sowing with one‟s for his labor;
own materials on the land of another (4) BPS who acted in bad faith is not entitled
(refer to the table above); to anything, he is instead liable for
(4) LO is subsidiarily for the payment of the damages. (Arts. 447-454, Civil Code)
value of the materials. It will attach only
when: the BPS is insolvent; and the LO
chooses to appropriate the building,
planting, or sowing. However, if the LO
pays for the value of the materials, he
becomes the OM, who may: demand
damages from the BPS; or pay the BPS a
reasonable compensation if the latter acted
in good faith.
26. What are the requisites of accretion as a mode of acquiring property?
Accretion as a mode of acquiring property under Article 457 of the Civil Code requires the
concurrence of the following requisites:
(1) The deposition of soil or sediment be gradual and imperceptible;
(2) It be resulted of the action of the waters of the river; and
(3) The land where accretion takes place is adjacent to the banks of rivers.
(New Regent Sources, Inc. vs. Tanjuatco Jr., G.R. No. 168800, April 16, 2009)
27. Rody is the riparian owner of a parcel of land adjacent to the Pasig River. Unknown to
Rody who migrated as an OFW to New Zealand, an accretion developed in 1980 by

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force of nature, which Dany immediately took actual possession and control as owner,
but only registered it in his name in 1991. Later, a second accretion developed in
1992 adjacent to the first accretion registered in Dany’s name, which Dany
immediately took actual possession and control by building a rest house, but
neglected to register it in his name. Thus, his driver, Pepe, registered the second
accretion in his name in 1995. Upon Rody’s return to Manila in 2015, he discovered
what transpired while he was overseas and a legal battle ensued.
(a) Rody filed an action for Reconveyance and Cancellation of Title against Dany and
Pepe on the ground that he is the riparian owner. In his defense, Dany claimed
that the action for reconveyance has prescribed. Will Rody’s action prosper?
No. The action for reconveyance has prescribed by virtue of Dany‟s registration of the Title in
1991. Alluvial property automatically belongs to the owner of the estate to which it may have
been added, but the owner of the adjoining property must register the same under the
Torrens System;otherwise, the alluvial property may be subject to acquisition by prescription
by third persons. (Heirs of Narvasa vs. Imbornal, G.R. No. 182908, August 8, 2014)
(b) Dany also filed a similar action against Pepe, on the ground that he is the riparian
owner of the First Accretion. In his defense, Pepe claimed that Dany’s action has
prescribed as 20 years have lapsed since he registered the Second Accretion in his
name. Decide.
The case filed by Dany against Pepe will prosper because Dany was able to take actual
possession and control of the Second Accretion. There is no prescription when, in an action
for reconveyance, the claimant is in actual possession of the property because this, in effect,
is an action for quieting of title. And, an action for quieting of title is imprescriptible.(PNB vs.
Jumamoy, G.R. No. 169901, August 3, 2011)
(c) Suppose Rody returned in 2000 and initiated a case in the same year. With Dany
raising the defense that the action has prescribed as he has been in actual
possession and control in the concept of an owner over the First Accretion since
1980, how would you then decide?
If Rody had returned in 2000, I will decide in his favor. An action for reconveyance of a
parcel of land based on implied constructive trust prescribes in 10 years, the point of
reference being the date of the deed or the date of the issuance of the certificate of title of
the property. (Villanueva-Mijares vs. Court of Appeals, G.R. No. 108921, April 12, 2000)
28. What are the rights of the dominant estate owner?
1. To use the easement and exercise all rights necessary for it [Art. 625, Civil Code].
2. The owner of the dominant estate is granted the right to use the principal easement, and all
accessory servitudes.
3. To make, at his own expense, on the servient estate, any works necessary for the use and
preservation of the servitude, but without altering it or rendering it more burdensome. [ Art.
627(1), Civil Code]
4. In a right of way, to ask for change in width of easement sufficient for the needs of the
dominant estate. [Art. 651, Civil Code]
5. The needs of the dominant property ultimately determine the width of the passage. And
these needs may vary from time to time. [Encarnacion vs. CA, G.R. No. 77628, March 11, 1991 ]
6. To renounce totally the easement, if he desires to be exempt from contributing to the
expenses. [Art. 628, Civil Code]

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29. What are the rights of the servient estate owner?
1. To retain the ownership of the portion of the estate on which the easement is established
[Art. 630, Civil Code]
2. To use the easement, provided he shall also be obliged to pay the expenses necessary for the
preservation and use of the servitude. [Art. 628(2), Civil Code] (Exception to paying
expenses: There is an agreement to the contrary. )
3. To change the place or manner of the use of the easement, provided it be equally convenient
[Art. 629(2), Civil Code]. In case the easement becomes very inconvenient for the servient
estate owner,or if it prevents him from making any important works, repairs, or
improvements, the easement MAY BE CHANGED, provided:
1. He offers another place/manner equally convenient.
2. Does not cause injury to the dominant estate owner.
3. Does not cause injury to those who have a right to use the easement, if any.
30. What are the requisites of a legal or compulsory right of way?
Legal easement of right of way is an easement which has been imposed by law and not by the
parties and it has “for its object either public use or the interest of private persons.” To be
entitled to a legal easement of right of way, the following requisites must concur:
(1) The dominant estate is surrounded by other immovable and has no adequate outlet to a
public highway;
(2) Payment of proper indemnity;
(3) The isolation was not due to acts of the proprietor of the dominant estate; and
(4) The right of way claimed is at the point least prejudicial to the servient estate, and insofar as
consistent with this rule, where the distance of the dominant estate to a public highway may
be the shortest. (Woodridge School, Inc. vs. ARB Construction Co., Inc., G.R. No. 157 285, February
16, 2007)
31. What is a nuisance?
Nuisance is any omission, establishment, business or condition of property or anything else

which:
a) Injures or endangers safety of others;
b) Annoys or offends the senses;
c) Shocks, defies or disregards the decency or morality;
d) Obstructs or interferes with the free passage to any public highway or street or any body of
water, or
e) Hindersorimpairs the use of the property (Art. 694, Civil Code)
IV. OBLIGATIONS
32. Distinguish Culpa Contractual, Culpa Aquiliana, and Culpa Criminal from each other.
Culpa Contractual Culpa Aquiliana Culpa Criminal

CHARACTER OF NEGLIGENCE
Negligence is merely Negligence is independent, Negligence is independent,
incidental to the performance direct, and substantive. direct, and substantive.
of an obligation already
existing because of a
contract.
RELATIONSHIP OF PARTIES
The contractual relation is There may or may not be a There is no pre-existing
pre-existing. pre-existing contractual contractual relation.

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relation.
SOURCE OF OBLIGATION
Contract. Quasi-delict. Law.
PROOF REQUIRED
Proof by preponderance of Proof by preponderance of Proof beyond reasonable
evidence. evidence. doubt.
DEFENSE OF A GOOD FATHER OF A FAMILY

IN THE SELECTION AND SUPERVISION OF EMPLOYEES
Not a proper or complete A proper or complete defense. Not a proper defense. The
defense, though it may employer becomes
mitigate damages. subsidiarily liable if its
employee becomes
insolvent.
(Jurado, Comments and Jurisprudence on Obligations and Contracts [2010]; Rabuya, supra.)
33. What are the remedies available to the creditors in case of breach of specific and
generic obligations?
SPECIFIC OBLIGATION GENERIC OBLIGATION

Specific performance. Specific performance.
Rescission (Art. 1380, Civil Code) Ask that the obligation be complied with at
the debtor„s expense.
Resolution (Art. 1191, Civil Code) Resolution or specific performance, with
damages in either case (Art. 1191, Civil Code)
Damages, in both cases (Art. 1170, Civil Code)
34. Effect of Breach of Both Parties:
The liability of the first infractor shall be equitably tempered by the courts; If it cannot be
determined which of the parties first violated the contract, the same shall be deemed
extinguished, and each shall bear his own damages. (Art. 1192, Civil Code).
35. George Pay was the creditor of Palanca, to whom the latter executed a promissory
note dated January 30, 1952 in favor of the former, promising to pay him the amount
of P26,900 upon the receipt of Palanca of his share of a certain estate or upon
demand. On August 26, 1967 or more than 15 years after, Pay filed a petition for the
payment of the promissory note. Can Pay still claim payment for the note?
No, George Pay cannot anymore claim payment on the note. A promissory note payable “on
demand” is immediately due and demandable; action thereon prescribes within ten years
consistent with the provisions under the Civil Code and Sec. 43, Act No. 90. The obligation being
due and demandable, it would appear that the filing of the suit after fifteen years was much too
late. (Pay vs. Vda. De Palanca, G.R. No. L-29900 June 28, 1974)
36. What are the rights of the parties before the fulfillment of the condition?
1. The Creditor bring the appropriate actions for the preservation of his right such as:
a) Action for prohibition/restraining the alienation of the thing pending the happening of the
suspensive condition;
b) Petition for the annotation of the creditor‟s right with the proper registry;
c) Action to demand security if the debtor has become insolvent;
d) Action to set aside alienations made by the debtor in fraud of creditors; or

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e) Action against adverse possessors to interrupt the running of the prescriptive period.
2. The Debtor recover what, during the same time, he has paid by mistake in case of a
suspensive condition. (Art. 1188, Civil Code)
37. On July 1963, Chaves delivered to Gonzales a typewriter for the latter to repair.
However, after the lapse of sometime and despite repeated demands from Chaves,
Gonzales failed to repair the typewriter. As such, Chaves demanded the return of the
typewriter. When the same was returned, the typewriter was in shambles. Chaves
then brought the typewriter to Freixas Business Machines who fixed the typewriter.
The job cost Chaves a total of P89.85, P31.10 of which was for the spare parts.
Chaves now is claiming the said amount from Gonzales. Gonzales however, denies
liability on the grounds that their contract is one for the repair of the typewriter,
which does not have a period. Hence, Gonzales argues that the proper action from
Chaves would have been to go to the courts to ask them to fix the period, instead of
having the typewriter returned to him. Can Gonzales be held liable?
Yes, Gonzales can be held liable. Where Gonzales virtually admitted non-performance by
returning the typewriter he was obliged to repair in a non-working condition, with essential parts,
missing, he cannot invoke Article 1137 of the Civil Code. The time for compliance having
evidently expired, and there being a breach of contract by non-performance, it was academic for
the Chaves to have first petitioned the court to fix a period for the performance of the contract
before filing his complaint in this case. The fixing of a period would thus be a mere formality and
would serve no purpose than to delay. Further, under Article 1167 of the Civil Code, a person
who is obliged to do something and fails to do it shall be liable for the cost of executing the
obligation in a proper manner. (Chaves vs. Gonzales, G.R. No. 27454 April 30, 1970)
38. A promissory note which states that “debtors individually and jointly” agree to pay
the amount due within a period of 6 months. Is there a joint or solidary liability on
the part of the debtor?
There is solidary liability. The term “individually” has the same meaning as “collectively”,
“separately”, “distinctively”, respectively or “severally”.(Ronquillo vs. Court of Appeals, G.R. No. L-
55138 September 28, 1984)
39. AAA, a bus driver under Philtranco, was found guilty beyond reasonable doubt of
reckless imprudence resulting to multiple homicide, multiple physical injuries and
damage to property after he caused the death of multiple people after hitting jeepney
while driving a Philtranco Bus. The trial court likewise found Philtranco, being
Calang’s employer, to be jointly and severally liable with Calang. Is the finding of the
Trial Court correct?
No, the finding of the Trial Court was not correct. If the source of cause of action is based on
delict, only the employee can be held liable and the nature of the liability of the employer is only
subsidiary. (Calang vs. People, G.R. No. 190696 August 3, 2010)
40. What is the nature of Novation?
Novation extinguishes an obligation between two parties when there is a substitution of objects
or debtors or when there is subrogation of the creditor. It occurs only when the new contract
declares so “in unequivocal terms” or that “the old and the new obligations be on every point
incompatible with each other.” The consent of the creditor must also be secured for the novation
to be valid: Novationmust be expressly consented to. (Arco Pulp and Paper Co., Inc. vs. Lim, G.R. No.
206806, June 25, 2014)

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41. What is subrogation, and its two forms?
It is the transfer of all the rights of the creditor to a third person, who substitutes him in all his
rights. It‟s two forms are the following:
1. Conventional – It takes place by the agreement of and requires the consent of the original
parties (the debtor and original creditor) and of the third person (the new creditor) ( Art.
1301, Civil Code);
2. Legal – It takes place by operation of law and is not to be presumed outside of the following
cases:
a. When a creditor pays another creditor who is preferred, even if the payment is without
the debtor„s knowledge;
b. When a third person interested in the fulfillment of the obligation pays the obligation,
even if such payment is without the knowledge of the debtor without prejudice to the
effects of confusion as to the latter„s share;
c. When a third person, not interested in the obligation, pays the obligation but only if such
payment is with the consent of the debtor, whether express or implied (Arts. 1300 and
1302, Civil Code).
42. Distinguish Subrogation from Assignment
DISTINCTION SUBROGATION ASSIGNMENT

Consent Debtor‟s consent is necessary. Debtor‟s consent is not required
Nature Extinguishes an obligation and Refers to the same right which
gives rise to a new one passes from one person to
another.
Effect of nullity of old Nullity of an old obligation may be The nullity of an obligation is not
obligation cured by subrogation, such that remedied by the assignment of
the new obligation will be the creditor„s right to another.
perfectly valid.
(Ledonio vs. Capitol Development Corp., G.R. No. 149040, July 4, 2007)
43. Does a manifestation of a desire to answer for the debt of another amount to
novation by substitution of the debtor so as to release the original debtor from his
obligation?
No. To constitute novation by substitution of debtor, the former debtor must be expressly
released from the obligation and the third person or new debtor must assume the former‟s place
in the contractual relations. Moreover, the fact that the creditor accepts payments from a third
person, who has assumed the obligation, will result merely in the addition of debtors and not
novation. At its core, novation is never presumed, and the animus novandi, whether totally or
partially, must appear by express agreement of the parties, or by their acts that are too clear and
unequivocal to be mistaken. (Odiamar vs. Valencia, G.R. No. 213582, June 28, 2016)
44. May a debtor be held liable for a prescribed debt that he acknowledged?
Yes. When a debt is already barred by prescription, it cannot be enforced by the creditor. But a
new contract recognizing and assuming the prescribed debt would be valid and enforceable.
Thus, wherea party acknowledges the correctness of a debt and promises to pay it after the same
has prescribed and with full knowledge of the prescription he thereby waives the benefit of
prescription. (DBP vs. Adil, G.R. No. L-48889, May 11, 1988)

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V. CONTRACTS (IN GENERAL, LOANS AND MORTGAGES, INTEREST)
45. Whatare the requisites for mistake of fact to result in vitiation consent?
1. The error must be substantial regarding:

a. The object of the contract (error in re):
i. When the thing constitutes the object of the contract is confused with another thing
(Mistake as to Identity of the thing – error in corpore)
ii. Mistake as to the substance of the thing (error in substantia)
iii. Mistake regarding the quantity of the thing (error in quantitate); if mistake refers
only to accidental or secondary qualities, the contract is not rendered voidable ( error
in qualitate)
b. The conditions which principally moved or induced one of the parties
c. Identity or qualifications (error in personae), but only if such was the principal cause of
the contract.
d. The error must be excusable (not caused by negligence).
2. The error must be a mistake of fact, and not of law. (Jurado, Comments and Jurisprudence
on Obligations and Contracts, 2010 ed., pp. 430-432)
3. A simple mistake of account, however, shall only give rise to its correction. (Art. 1331, Civil
Code)
4. An error so patent and obvious that nobody could have made it, or one which could have
been avoided by ordinary prudence, cannot be invoked by the one who made it in order to
annul his contract. (Alcasidvs. CA, G.R. No. 104751, October 7, 1994)
46. What is the effect of fraud by third persons on the validity of a contract?
Misrepresentation by a third person does not vitiate consent, unless such misrepresentation has
created substantial mistake and the same is mutual. (Art. 1342, Civil Code) Misrepresentation
made in good faith is not fraudulent but may constitute error (Art. 1343, Civil Code)
47. Discuss the rules on the validity or enforceability of electronic documents.
Electronic documents shall have the legal effect, validity or enforceability as any other document
or legal writing (Sec. 7, R.A. 8792, Electronic Commerce Act).
If the law requires that a document be in writing, that requirement is met by an electronic
document if the said electronic document maintains its integrity and reliability and can be
authenticated so as to be usable for subsequent reference, in that -
1. The electronic document has remained complete and unaltered, apart from the addition of
any endorsement and any authorized change, or any change which arises in the normal
course of communication, storage and display; and
2. The electronic document is reliable in the light of the purpose for which it was generated and
in the light of all relevant circumstances (Sec. 7[a], RA 8792).
If the law requires it to be in the original form, the requirement is met by an electronic document
if:
1. There exists a reliable assurance as to the integrity of the document from the time when it
was first generated in its final form; and
2. That document is capable of being displayed to the person to whom it is to be presented and
no provision of the law shall apply to vary any and all requirements of existing laws on
formalities required in the execution of documents for their validity Sec. 7[b], RA 8792).

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48. What are real contracts?
Under Art. 1316 of the Civil Code, real contracts are contracts that are not perfected until the
delivery of the object of the obligation, as opposed to consensual contracts that are perfected by
mere meeting of the minds. Specifically, these are deposit, commodatum, and mutuum.
(1) Deposit. A deposit is constituted from the moment a person receives a thing belonging to
another, with the obligation of safely keeping it and of returning the same. If the safekeeping
of the thing delivered is not the principal purpose of the contract, there is no deposit but
some other contract. (Art. 1962, Civil Code)
(2) Commodatum. By the contract of commodatum, one of the parties delivers to another,
either something not consumable so that the latter may use the same for a certain time
and return it. (Art. 1933, Civil Code)
(3) Mutuum. By the contract of mutuum, one of the parties delivers to another, either money
or other consumable thing, upon the condition that the same amount of the same kind
and quality shall be paid. (Art. 1933, Civil Code)
Note: Contract of pledge in the Civil Code was already repealed by virtue of Personal Property
Security Act which is also referred to Security Agreement involving personal property as a
collateral.
49. Distinguish from each other an option contract and a right of first refusal.
Option Contract Right of First Refusal

NATURE
A grant, for a fixed period and under specified A grant of a first priority to another in the
conditions, of the power to decide, whether or event the grantor decides to enter into a
not to enter into a principal contract. contract (usually an offer to sell, but not the
sale itself).
CONSIDERATION
To be binding, the promise must be supported Need not be supported by a consideration
by a consideration distinct from the price. distinct from the price.
TERMS
The option granted to the offeree is for a fixed While the object might be made determinate,
period and at a determined price. the exercise of the right of first refusal would
be dependent not only on the owner‟s
eventual intention to enter into a binding
juridical relation with another but also on
terms, including the price, that are yet to be
firmed up. (Carceller vs. CA, G.R. No. 124791,
February 10, 1999; PUP vs. Golden Horizon Realty,
G.R. No. 183612, March 15, 2010; Tuazon vs. Del
Rosario-Suarez, G.R. No. 168325, December 8,
2010)
50. Distinguish defective contracts.
Rescissible Voidable Unenforceable Void or Inexistent

DEFINITION
Those validly agreed Those which possess Those that cannot be Those which, because
upon because all the all the essential enforced in court or of certain defects,
essential dements requisites of a valid sued upon by reason generally produce no
exist and, therefore contract but one of of defects provided by effect at all.
legally effective, but the parties is legally law until and unless
in the cases incapable of giving they are ratified

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established by law, consent, or consent is according to law.
the remedy of vitiated by mistake,
rescission is granted violence, intimidation,
in the interest of undue influence, or
equity. fraud.
DEFECTS
Injury or damage Vitiation of consent or Entered into in excess VOID: All requisites
either to one of the legal incapacity of or without any prescribed by law for
contracting parties or one of the contracting authority, non- contracts are present,
to third persons. parties. compliance with the but because, object,
Statute of Frauds, or or purpose is contrary
incapacity of both to law, morals, good
contracting parties. customs, public order
or public policy, or
contracts prohibited
by law or declared by
law to be void.
INEXISTENT: Lacking
absolutely either in
fact or in law one or
some of the elements
of a valid contract.
GROUNDS
(1) Those which are (1) Those where one (1) Those entered (1) Those whose
entered into by of the parties is into in the name cause, object or
guardians incapable of of another person purpose is
whenever the giving consent to by one who has contrary to law,
wards whom a contract; been given no morals, good
they represent (2) Those where the authority or legal customs, public
suffer lesion by consent is vitiated representation, or order or public
more than ¼ of by mistake, who has acted policy;
the value of the violence, beyond his (2) Those which are
things which are intimidation, powers; absolutely
the object undue influence (2) Those that do not simulated or
thereof; or fraud. comply with the fictitious;
(2) Those agreed Statute of Frauds; (3) Those whose
upon in (3) Those where both cause or object
representation of parties are did not exist at
absentees, if the incapable of the time of the
latter suffer the giving consent to transaction;
lesion stated in a contract. (4) Those whose
the preceding object is outside
number; the commerce of
(3) Those men;
undertaken in (5) Those which
fraud of creditors contemplate an
when the latter impossible
cannot in any service;
other manner (6) Those where the
collect the claims intention of the
due them; parties relative to
(4) Those which the principal
refer to things object of the
under litigation if contract cannot

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they have been be ascertained;
entered into by (7) Those expressly
the defendant prohibited or
without the declared void by
knowledge and law.
approval of the
litigants or of
competent
judicial authority;
(5) All other
contracts
specially
declared by law
to be subject to
rescission.
NECESSITY OF DAMAGE
Necessary. Not necessary. Not necessary. Not necessary.
WHO MAY ASSAIL
One of the One of the Any of the contracting One of the
contracting parties or contracting parties parties, including contracting parties or
third person injured (but not the guilty heirs, assigns, or third person whose
or defrauded, one) or third persons successors-in-interest. interest is directly
including heirs, whose rights are affected, including
assigns, or prejudiced with heirs, assigns, or
successors-in-interest. respect to one of the successors-in-interest.
contracting parties,
including heirs,
assigns, or
successors-in-
interest.
HOW ASSAILED
Direct action only. Directly and Collaterally (by way of Directly or collaterally.
collaterally (by way of defense to an action
defense to an action under the contract)
under the contract).
VALIDITY
Valid until rescinded. Valid until annulled. Valid if the elements Void from the
of a contract are beginning.
complete, but still
unenforceable unless
ratified.
PRESCRIPTIVE PERIOD
Four (4) years. Four (4) years. N/A. Imprescriptible.
51. DifferentiateCommodatumfrom Mutuum.
COMMODATUM MUTUUM or SIMPLE LOAN
As to the object delivery of something not delivery of money or other

consumable so that the bailee may consumable thing, upon the condition
use the same for a certain time and that the same amount of the same
return it kind and quality shall be paid

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COMMODATUM MUTUUM or SIMPLE LOAN
As to the movable or immovable thing, which is money or other consumable thing

subject matter ordinarily non-consumable
As to nature essentially gratuitous may be gratuitous or with a

stipulation to pay interest
As to transfer bailor retains the ownership of the ownership passes to the borrower
of ownership thing loaned
(Spouses Abellavs.Romeo , G.R. No. 195166, July 08, 2015, Leonen, J.)
52. AAAlentBBB his car until he finished his Bar exams. Soon after AAA delivered the car,
BBB brought it to Mitsubishi Cubao for maintenance check-up and incurred costs of
P8,000. Seeing the car’s peeling and faded paint, BBB also had the car repainted for
P10,000. After the bar exams, AAA asked for the return of his car. BBB said he would
return it as soon as AAA has reimbursed him for the car maintenance and repainting
costs of P 18,000. Is BBB’s refusal to return the car justified?
No. Under Article 1944, the bailee cannot retain the thing loaned on the ground that the bailor
owes him something, even though it may be by reason of expenses. However, the bailee has the
right of retention for damages which he may suffer if the bailor who, knowing the flaws of the
thing loaned, does not advise the bailee of the same (Art. 1951, Civil Code).
53. What is a real estate mortgage?
It is an accessory contract by virtue of which real property is conveyed by way of security and a
lien is created over a specific real property or properties with the condition that if the obligation
secured is not paid, the mortgage may be foreclosed and the property sold to answer for the
mortgage credit. (Aquino, Essentials of Credit Transactions and Banking Laws, 2015, p. 308)
54. What may be the object of a contract of real estate mortgage?
Only the following may be the object of a contract of real estate mortgage:
1. Immovable; and
2. Alienable real rights in accordance with the laws, imposed upon immovables. (Art. 2124, Civil
Code)
55. What is the status of the stipulation in a mortgage contract forbidding the owner
from alienating the mortgaged property?
A stipulation forbidding the owner from alienating the immovable mortgaged shall be void. ( Art.
2130, Civil Code)
56. Enumerate the essential requisites of a contract of real estate mortgage.
The following are the essential requisites to a contract of real estate mortgage:
a. That the mortgage be constituted to Secure the fulfillment of a principal obligation;

b. That the mortgagor be the absolute Owner of the thing mortgaged;
c. That the persons constituting the mortgage have the free Disposal of their property and in
the absence thereof, that they may be legally authorized for the purpose. (Art. 2085, Civil
Code)

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57. What are the types of interest?
MONETARY COMPENSATORY
The compensation fixed by the parties for the The compensation imposed by law or by the
use or forbearance of money. courts as a penalty or indemnity for damages.
(Odiamar vs. Valencia, supra.)
58. Provide the rule on the imposition of interest rate in case there is a stipulation of
interest payment.
If the rate of interest is stipulated, such stipulated interest shall apply and not the legal interest,
provided the stipulated interest is not excessive and unconscionable. The stipulated interest shall
be applied until full payment of the obligation because that is the law between the parties. The
legal interest only applies in the absence of stipulated interest. (Lara‟s Gifts v Midtown, G.R. No.
225433, August 28, 2019)
59. May interest be imposed even in the absence of stipulation in a contract?
Yes. Interest may be imposed even in the absence of stipulation in the contract. Interest may, in
the discretion of the court, be allowed upon damages awarded for breach of contract. (Estores vs.
Sps. Supangan, G.R. No. 175139, April 18, 2012)
60. Is a proviso in loans with banks that interest rate would be made “to depend on the
prevailing market value” valid?
Yes. Such provision does not signify an automatic increase in interest. It simply means that the
bank may adjust the interest according to the prevailing market rate. This may result to either an
increase or a decrease in interest. (Lotto Restaurant, Corp. vs. BPI Family Savings Bank, Inc., G.R. No.
177260, March 30, 2011)
VI. TORTS, QUASI DELICTS
61. How should the Registered-Owner Rule and the rule on Employer’s Vicarious Liability
under Article 2180 of the Civil Code be harmonized in cases where both rules apply?
In cases where both the registered-owner rule and Article 2180 apply, the plaintiff may first prove
the employer‟s ownership of the vehicle involved in a mishap by presenting the vehicle‟s
registration in evidence. Thereafter, a disputable presumption that the requirements for an
employer‟s liability under Article 2180 of the Civil Code have been satisfied will arise. The burden
of evidence then shifts to the defendant to show that no liability under Article 2180 has ensued.
(Caravan Travel and Tours International, Inc. vs. Abejar, G.R. No. 170631, February 10, 2016)
62. On September 8, 2011, a vehicle collision between a truck and a passenger van
happened, resulting in the death of all the passengers in the van. An action for
damages based on quasi-delict was filed against the driver, AAA, as well as the
operator and registered owner of the truck, BBB. BBB interposed that it is not the
actual owner of the truck and contended that there is no cause of action against him
because on September 7, 2011, he sold the truck to CCC. CCC being the alleged owner
at the time of the collision, BBB filed a Third Party Complaint against CCC. Is the
contention of BBB tenable?
No. Zenaida as the operator on record of the truck is liable to the heirs of the victims of the
mishap. Zenaida cannot point fingers at the alleged real owner to exculpate itself from vicarious
liability under Art. 2180 of the Civil Code, which states that the obligation imposed by Art. 2176 is

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demandable not only for one‟s own acts or omissions, but also for those of persons for whom one
is responsible. Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the former are
not engaged in any business or industry. (Orix Metro Leasing and Finance Corporation vs. Mangalinao,
G.R. No. 174089, January 25, 2012)
63. What is the liability of Joint Tortfeasors?
The responsibility of two or more persons who are liable for quasi-delict is solidary. Each are
liable as principals and in the same manner as if they had performed the wrongful act themselves
(RuksKonsult and Construction vs. Adworld Sign Corp., G.R. No. 204856, January 1, 2015).
64. What is the nature of the responsibility of an employer for the negligence of his
employees?
The responsibility of an employer for the negligence of his employees in the performance of
hisduties is primary, that is, the injured party may recover from the employer directly, regardless
of the solvency of his employees. However, the employer-employee relationship cannot be
presumed but must be sufficiently proven by the plaintiff. The plaintiff must also show that the
employee was acting within the scope of his assigned task when the tort complained of was
committed (Reyes vs. Doctolero, G.R. No. 185579, August 2, 2017).
65. Karmelle and her friend Janine were having a conversation when Janine’s friend,
Finela, approached her to ask if she could have Finela’s check cleared and encashed
for a service fee of 2.5%.
The check is under the account of another person and drawn by a certain John
against Bank of America Alhambra Branch in USA, payable to cash. Because Janine
does not have a dollar account in which to deposit the check, she asked Karmelle if
she could accommodate Finela’s request since she has a dollar savings account.
Karmelle agreed. She deposited the check and was informed of the 15-day clearing
period. Five days later, the proceeds of the subject check had been temporarily
credited to PNB’s account.
After informing Karmelle that the check had already been cleared and that the
amount had been credited to her account, she personally withdrew the proceeds and
gave them to Finela.PNB learned about the bouncing of the check when it received a
debit advice and a letter from Philadelphia National Bank demanding the return of the
money. Karmelle contacted Finela to get the money back but the latter told her that
all the money had already been given to several people. Later on, PNB demanded the
payment of the amount withdrawn by Karmelle, while the latter, as her main defense,
claimed that the proximate cause of PNB’s injury was its own negligence of paying
the amount without waiting for the 15-day clearing period.
Is the act of PNB, in releasing the proceeds of the check prior to the lapse of the 15-
day clearing period the proximate cause of the loss?
Yes. The payment of the amounts of checks without previously clearing them with the drawee
bank, especially so where the drawee bank is a foreign bank and the amounts involved were
large, is contrary to normal or ordinary banking practice. Clearly, PNB‟s disregard of its preventive
and protective measure against the possibility of being victimized by bad checks had brought
upon itself the injury of losing a significant amount of money. PNB miserably failed to do its duty
of exercising extraordinary diligence and reasonable business prudence. The disregard of its own
banking policy amounts to gross negligence, which the law defines as “negligence characterized
by the want of even slight care, acting or omitting to act in a situation where there is duty to act,

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not inadvertently but willfully and intentionally with a conscious indifference to consequences in
so far as other persons may be affected.” (Philippine National Bank vs. Spouses Cheah, G.R. No.
170865, April 25, 2002)
Is Karmelle guilty of contributory negligence?
Yes. Karmelle is guilty of contributory negligence and is bound to share the loss with the bank.
Karmelle failed to observe caution in giving her full trust in accommodating a complete stranger
and this led her to be swindled. The fact that the check was cleared after only eight banking days
from the time it was deposited or contrary to what Janine told Karmelle that clearing takes 15
days should have already put Karmelle on guard. (Philippine National Bank vs. Spouses Cheah, G.R.
No. 170865, April 25, 2002)
66. What is the doctrine of last clear chance? When is it applied?
The doctrine of last clear chance provides that where both parties are negligent but the negligent
act of one is appreciably later in point of time than that of the other, or where it is impossible to
determine whose fault or negligence brought about the occurrence of the incident, the one who
had the last clear opportunity to avoid the impending harm but failed to do so, is chargeable with
the consequences arising therefrom. Stated differently, the rule is that the antecedent negligence
of a person does not preclude recovery of damages caused by the supervening negligence of the
latter, who had the last fair chance to prevent the impending harm by the exercise of due
diligence. (Philippine National Railways vs. Vizcara, G.R. No. 190022, February 15, 2012)
67. Two (2) vehicles, a van and a tricycle, figured in an accident along SumulongHighway,
Antipolo City. The Mitsubishi L-300 van was owned and registered under Imperial's
name, and was driven by Laraga. The tricycle was driven by Mercado. On board the
tricycle were the Bayaban Spouses, who sustained injuries. The Bayaban Spouses
demanded compensation from Imperial, Laraga, and Mercado for the hospital bills
and loss of income that they sustained while undergoing therapy and post-medical
treatment. When their demand was unheeded, the Bayaban Spouses filed a Complaint
for damages before the Regional Trial Court. Imperial denied liability, contending
that the van was under the custody of one Pascua.Is the burden of proof shifted to
Imperial to prove that his employee Laraga, acting within the scope of his task?
Yes. Article 2176 defines "quasi-delict" as the fault or negligence that causes damage to another,
there being no pre-existing contractual relations between the parties. On the other hand, Article
2180 enumerates persons who are vicariously liable for the fault or negligence of persons over
whom they exercise control, whether absolute or limited. Specifically, for employers, they are
deemed liable or morally responsible for the fault or negligence of their employees but only if the
employees are acting within the scope of their assigned tasks. An act is deemed an assigned task
if it is "done by an employee, in furtherance of the interests of the employer or for the account of
the employer at the time of the infliction of the injury or damage. Applying the foregoing, this
Court finds that respondents have discharged the burden of proof necessary to hold Imperial
vicariously liable under Article 2180 of the Civil Code. With respondents having discharged their
burden of proof, the disputable presumption that petitioner Imperial was negligent in the
selection and supervision of Laraga arises. (Imperial vs. Heirs of Neil Bayaban and Marylou Bayaban,
G.R. No. 197626, October 3, 2018)
68. What is the doctrine of res ipsa loquitur? When is it applied?
Res ipsa loquitur literally means “the thing or the transaction speaks for itself.” It is a maxim for
the rule that the fact of the occurrence of an injury, taken with the surrounding circumstances,
may permit an inference or raise a presumption of negligence, or make out a plaintiff's prima
facie case, and present a question of fact for defendant to meet with an explanation. For the
doctrine to apply, the following requirements must be shown to exist, namely:

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(1) The accident is of a kind that ordinarily does not occur in the absence of someone‟s
negligence;
(2) It is caused by an instrumentality within the exclusive control of the defendant or
defendants; and
(3) The possibility of contributing conduct that would make the plaintiff responsible is eliminated.
(Tan vs. Jam Transit, Inc., G.R. No. 183198, November 25, 2009)
69. How do the actions based on contractual negligence and actions based on quasi-delict
differ from one another?
It differs in terms of conditions, defenses, and proof. They generally cannot co-exist. Once a
breach of contract is proved, the defendant is presumed negligent and must prove not being at
fault. In a quasi-delict, however, the complaining party has the burden of proving the other
party's negligence.(Orient freight international, Inc vs. Keihin-Everett Forwarding Co., Inc., G.R. No.
191937, August 9, 2017)
VII. DAMAGES
70. What is the difference between damage, injury, and damages?
Damage Injury Damages

Is the loss, hurt or harm Is the legal invasion of the legal The compensation awarded for
which results from the right. the damage suffered.
injury.
(Far East Bank and Trust Company vs. Pacilan, Jr., G.R. No. 157314, July 29, 2005)
71. What are the kinds of actual or compensatory damages?
Damnum Emergens/DanoEmergente Lucrum Cessans/LucroCesante

(actual damages) (compensatory damages)
All the natural and probable consequences of For failure to receive, as benefit, that which
the act or omission complained of, classified as would have pertained to him (expected
one for the loss of what a person already profits).
possesses.
(Filipinas Synthetic vs. De Los Santos, G.R. No. 152033, March 16, 2011 )
72. How can Loss or Impairment of Earning Capacity be compensated?
To be compensated for loss of earning capacity, it is not necessary that the victim be gainfully
employed at the time of injury or death. Actual damages are awarded not for the loss of earnings
but for the loss of capacity to earn money. (People vs. Sanchez, G.R. No. 121039-45, October 18, 2001)
73. A commercial vessel owned by Lorenzo Shipping hit and rammed NAPOCOR’s Power
Barge 104. NAPOCOR submitted pieces of evidence to the court as basis for actual
damages it has suffered. However, Lorenzo Shipping pointed out that the evidence
falls short of proving pecuniary loss, which shall be the basis for awarding actual
damages. The court awarded temperate damages in lieu of actual damages to
NAPOCOR as the amount of damages was not proven. May Lorenzo Shipping liable for
actual damages?
No. Article 2219 of the Civil Code spells out the basic requirement that compensation by way of
actual damages is awarded only to the extent that pecuniary loss is proven. NAPOCOR failed to
establish the precise amount of pecuniary loss it suffered. Nevertheless, it remains that the Power
Barge 104 sustained damage, and NAPOCOR suffered pecuniary loss, albeit its precise extent or

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amount had not been established. (Lorenzo Shipping Corporation vs. National Power Corporation, G.R.
No. 181683, October 7, 2015)
74. An article written by RaffyTulfo, and was published in AbanteTonite, reported that a
certain Michael C. Guy, who was being investigated for tax fraud, went to former
Department of Finance Secretary Juanita Amatong’s house to ask for help. Claiming
that the article had tainted his reputation, Guy filed a Complaint-Affidavit against
Tulfo and the following representatives of AbanteTonite’s Publisher.
The court convicted Tulfo and Macasaet, et al. of the crime of libel and ordered them
to pay Guy: P5,000,000 as actual damages, and P5,000,000 as moral damages. The
court, in its ruling, did not award actual damages as it was not proven during trial.
a. Is Guy entitled to actual damages?
No. Actual damages cannot be presumed and courts, in making an award, must point out
specific facts which could afford basis for measuring whatever compensatory or actual
damages are borne. An award of actual damages is dependent upon competent proof of the
damages suffered and the actual amount thereof. The award must be based on the evidence
presented, not on the personal knowledge of the court; and certainly not on flimsy, remote,
speculative and unsubstantial proof.
b. Is Guy entitled to exemplary damages?
Yes. Exemplary damages may be awarded even in the absence of aggravating circumstances.
It may be awarded where the circumstances of the case show the highly reprehensible or
outrageous conduct of the offender.
c. May the court order the reduction of moral damages?
Yes. Art. 2219 of the Civil Code specifically states that moral damages may be recovered in
cases of libel, slander, or defamation. The amount of moral damages that the courts may
award depends upon the set of circumstances for each case. There is no fixed standard to
determine the amount of moral damages to be given. Courts are given the discretion to fix
the amount to be awarded in favor of the injured party, so long as there is sufficient basis for
awarding such amount. (Michael C. Guy vs. RaffyTulfo, G.R. No. 213023, April 10, 2019)
75. When is nominal damages awarded?
Nominal damages may be awarded to a plaintiff whose right has been violated or invaded by the
defendant, for the purpose of vindicating or recognizing that right and not for indemnifying the
plaintiff for any loss suffered by him. Its award is thus not for the purpose of indemnification for a
loss but for the recognition and vindication of a right (Libcap vs. Baquial, G.R. No. 192011, June 30,
2014)
76. Can temperate and actual damages be awarded at the same time?
No. Temperate and Actual damages are mutually exclusive in that both may not be awarded at
the same time (People vs. Gutierrez, G.R. No. 188602, February 4, 2010 )
77. Are there exceptions to the rule that temperate and actual damages are mutually
exclusive?
Yes. Temperate and actual damages may both be awarded:

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1. In cases where the resulting injury might be continuing and possible future complications
directly arising from the injury, while certain occur are difficult to predict (Ramos vs. CA, G.R.
No. 124354, April 11, 2002)
2. In cases of additional damages to cover estimated future cost of proper care where it would
not be equitable for the victim to constantly come to court and invoke their aid in seeking
adjustments to the compensatory damages previously awarded (Ramos vs. CA G.R. No. 124354,
April 11, 2002)
78. When may Attorney’s Fees be awarded?
Attorney‟s fees may be awarded when a party is compelled to litigate or incur expenses to protect
its interest, or when the court deems it just and equitable. (Durban Apartments Corp. vs. Pioneer
Insurance and Surety Corp., G.R. No. 179419, January 12, 2011)
79. What are the instances when Attorney’s fees may not be recovered?
1. When it is shown that the judgment creditor did not come to court with clean hands; and
2. When there is no evidence of fraud and bad faith on the part of the tortfeasor.
3. When damages may be recovered. (Tac-anDanao vs. CA, G.R. No. 62251, July 29, 1985 )
80. Suppose that the only surviving heir of a certain person whose death was caused by a
crime or quasi-delict is a brother or sister, can such brother or sister recover moral
damages for mental anguish by reason of death of the deceased?
No. Art. 2206 of the Civil Code is explicit, stating that only “the spouse, legitimate and illegitimate
descendants and ascendants of the deceased may demand moral damages for mental anguish by
reason of the death of the deceased.” Brothers and sisters are not included. (Receiver for North
Negros Sugar Co. vs. Ibañez, G.R. No. L-22183, August 30, 1968)
81. How can damages be reduced in quasi-delicts cases?
In quasi-delict, the contributory negligence of the plaintiff shall reduce the damages hemay
recover. (Art. 2214, Civil Code)
82. Rodolfo, Monalisa, Johanna and Abellana arrived at the municipal wharf of Jetafe,
Bohol. They boarded a cargo truck which would transfer them from the wharf to
Poblacion, Jetafe. While the passengers were getting on the truck, Simolde called
Caballes, the official truck driver. Caballes approached Simolde but left the engine
running. While Simolde and Caballes were talking, Aparra, chief diesel mechanic,
started driving the truck. Upon seeing the truck move, Caballes rushed to the truck
and sat beside Aparra. However, instead of taking control of the vehicle, Caballes
allowed Aparra to drive. Shortly thereafter, Aparra lost control of the truck and they
fell off the wharf. Consequently, Rodolfo and Monalisa died while Johanna and
Abellana were injured. Vivian, the widow of Rodolfo and the mother of Johanna, filed
a complaint.
A) Whether or not quasi-delict was committed?
Yes. The requisites for quasi-delict are: (1) damages to the plaintiff; (2) negligence, by act or
omission of which defendant, or some person for whose acts he must respond, was guilty;
and (3) the connection of cause and effect between such negligence and the damages. The
said requisites are all present.Caballes was grossly negligent in allowing Aparra to drive the
truck despite being an inexperienced driver.

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B) Whether or not loss of earning capacity should be awarded to Vivian, wife of

Rodolfo?
Yes. Art. 2206 of the Civil Code provides that the amount of damages for death caused by a
crime of quasi-delict shall be at least Three Thousand Pesos (Php 3,000.00), even though
there may have been mitigating circumstances. In addition, the defendant shall be liable,
among others, for the loss of earning capacity of the deceased, and the indemnity shall in
every case be assessed and awarded by the court, unless the deceased on account of
permanent physical disability not caused by the defendant, had no earning capacity at the
time of his death. The indemnity for the deceased‟s lost of earning capacity is meant to
compensate the heirs for the income they would have received had the decedent continued
to live. (Vivian Torreon and FelominaAbellanavs.GenerosoAparra, Jr., Felix Caballes, and
Carmelo Simolde, G.R. No. 188493, December 13, 2017)
B. COMMERCIAL LAW
I. CORPORATIONS
(KINDS OF CORPORATIONS, INCLUDING CORPORATIONS SOLE;

COMPOSITION OF / MEMBERSHIP IN THE BOARD OF DIRECTORS, POWERS, DUTIES AND
PREROGATIVES OF BOARDS OF DIRECTORS AND STOCKHOLDERS; AND
ARTICLES OF INCORPORATION AND BY LAWS)
1. What are the classes of corporation?
The classes of corporation are as follows:
As to whether the membership is represented by shares of stock or not.

Stock – one which has (1) capital stock divided Non-stock – one which is not a stock
into shares, and is (2) authorized to distribute to corporation; one where no part of its
the holders of such shares dividends or income is distributable as dividends to its
allotments or the surplus profits on the basis of members, trustees, or officers.
the shares held.
(Sec. 3 and 87 of the Revised Corporation Code)
As to purpose.
Public -Formed or organized for the government or a Private - Formed by private
portion of the State or any of its political subdivisions for persons alone or with the
the general good and welfare; governed by special laws. State; governed by the law on
Their subsidiaries are entirely different or independent from Private Corporations. They may
that of the other. They are not immune from suit unless be stock or non-stock
provided by the law of their creation. corporations.
(Aquino, Philippine Corporation Law Compendium, p. 114, 2018)
As to number of persons who compose the corporation.

Corporation Aggregate Corporation Sole - A religious One Person Corporation -
- Composed of a corporation which consists of one A corporation with a
number of individuals person or individual and who is made single stockholder:
vested with corporate as body corporate and politics in order Provided, That only a
powers. to give them some legal capacity and natural person, trust, or
advantage which as natural persons, an estate may form a
they cannot have. It may be formed by One Person Corporation.
the chief archbishop, bishop, priest,
minister, rabbi or other presiding elder

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of religious denominations, sects or

churches.
(Ladia, The Corporation Code of the Philippines, 2015, p. 16)
As to their legal right to corporate existence.

De Jure De Facto Corporation - Corporation by Corporation by
Corporation - Exists by virtue of an Estoppel - When a Prescription –A
Juridical entity irregularity or a defect group of persons Corporation that was
created or in the organization or assumes to act as a not formally organized
organized in constitution or from corporation knowing it as such, but has been
strict or some omission to to be without duly recognized by
substantial comply with the authority to do so, immemorial usage as a
compliance conditions precedent and enters into a corporation, with rights
with the by which corporations transaction with a and duties
statutory de jure are created; third person on the maintainable at law.
requirements organized with a strength of such
of incorporation colorable compliance appearance. It
and whose with the requirements cannot be permitted
rights to exist of a valid law. Its to deny its existence
as such cannot existence cannot be in an action under
be successfully inquired collaterally, said transaction.
attacked even such inquiry may be
by the State in made by the Solicitor
a quo warranto General in a quo
proceeding. warranto proceeding.
It has the following

requisites: (a) valid law
under which the
corporation is
organized; (b) bona
fide attempt on good
faith to incorporate; (c)
an assumption of
corporate powers; and
(d) good faith in
claiming to be and
doing business as a
corporation.
(Sundiang& Aquino, Reviewer on Commercial Law, 2017, p. 185, and Section 19 and 20, Revised
Corporation Code)
As to their relation to another corporation.

Parent or Holding Corporation - Subsidiary Affiliated Corporation – A
Corporation that controls Corporation – A corporation which are subject to
another as a subsidiary by the corporation under the common control of the mother
power to elect management. It control of another holding company and operated as
is one that holds stocks in other corporation which is part of a system. They are
companies for purposes of the holding company. sometimes called “sister”
control rather than for mere company.
investment.

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As to the state under which law they have been created.

Domestic Corporation – Organized or Foreign Corporation – Formed or organized or
created under or by a virtue of Philippine existing under any laws other than the
laws, either by legislative act or under Philippines and whose laws allow Filipino citizens
the provisions of the General Corporation and corporations to do business in its own
Law. country.
As to whether they are open to the public or not.

Close Corporation - One which is limited to selected persons or Open corporation –
members of a family or other closely-knit group. It is a corporation Formed to openly
whose Articles of Incorporation provides that: (a) All the accept outsiders or
corporation‟s issued stock of all classes, exclusive of treasury shares, stockholders or
shall be held on record by not more than a specified number of investors.
persons, not exceeding 20; (b) All the issued stock of all classes shall
be subject to one or more specified restrictions on transfer; and (c)
The corporation shall not list in any stock exchange or make any
public offering of its stocks of any class.
(Sec. 95, Revised Corporation Code)
2. When does the juridical personality of a corporation sole commence?
From and after filing with the Securities and Exchange Commission of the articles of
incorporation, verified by affidavit or affirmation, and accompanied by the copy of the
commission, certificate of election or letter of appointment duly certified to be correct by any
notary public, the chief archbishop, bishop, priest, minister, rabbi, or presiding officer shall
become a corporation sole. All temporalities, estate, and properties of the religious
denomination, sect or church or managed by such chief archbishop, bishop, priest, minister,
rabbi, or presiding officer shall be personally held in trust as a corporation sole for the use,
purpose, exclusive benefit and on behalf of the religious denomination, sect or church. (Sec.
110, Revised Corporation Code)
3. What are the property rights of a corporation sole?
A corporation sole may:

a. Purchase and hold real estate and personal property for its church, charitable,
benevolent, or educational purposes;
b. Receive bequests or gifts for the same purposes; and
c. Sell or mortgage real property held by it by obtaining and order for that purpose from the
Regional Trial Court of the province where the property is situated upon proof that the
notice of the application for leave to sell or mortgage has been made through publication
or as directed by the Court, and that it is in the interest of the corporation that leave to
sell or mortgage be granted.
Where the rules, regulations, and discipline of the religious denomination, sect or church,
religious society, or order concerned represented by such corporation sole regulate the
method of acquiring, holding, selling, and mortgaging real estate and personal property, such
rules, regulations, and discipline shall govern and the intervention of the courts shall not be
necessary.
4. Should a corporation sole be treated as an ordinary private corporation for the

purpose of the application of the constitutional prohibition against land
acquisition in the Philippines by foreigners?
No. A corporation sole does not have any nationality but for purposes of applying
nationalization laws, nationality is determined not by the nationality of its presiding elder, but

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by the nationality of its members, constituting the sect in the Philippines. Thus, the Roman
Catholic Church can acquire lands in the Philippines even if it is headed by the Pope . (Roman
Catholic Apostolic Church vs. Land Registration Commission, G.R. No. L-8451, December 20, 1957)
5. What is a One Person Corporation? Who may or may not incorporate as such?
A One Person Corporation is a corporation with a single stockholder. Only a natural person,
trust, or an estate may form a One Person Corporation.The following may not incorporate as
a One Person Corporation:
a. Banks and quasi-banks, pre-need, trust, insurance, public and publicly-listed companies,
and non-chartered government-owned and -controlled corporations;
b. A natural person who is licensed to exercise a profession may not organize as a One
Person Corporation for the purpose of exercising such profession except as otherwise
provided under special laws. (Sec. 116, Revised Corporation Code)
6. Who are estopped from denying the existence of a corporation by estoppel?
The doctrine of corporation by estoppel may apply to the alleged corporation and to a third
party. All persons who assume to act as a corporation knowing it to be without authority to
do so shall be liable as general partners for all debts, liabilities and damages incurred or
arising as a result thereof. When any such ostensible corporation is sued on any transaction
entered by it as a corporation or on any tort committed by it as such, it shall not be allowed
to use its lack of corporate personality as a defense. Moreover, a third party who, knowing an
association to be unincorporated, nonetheless treated it as a corporation and received
benefits from it, may be barred from denying its corporate existence in a suit brought against
the alleged corporation. (International Express vs. CA, G.R. No. 119002, October 19, 2000).
7. What is the composition of the Board of Directors or Trustees? What are the
qualifications and the term of a member of the Board?
Corporation Composition of Qualification of Term

Board Director/Trustee
Stock Not more than Director must be a One (1) year; shall hold
Corporation fifteen (15) holder of at least one office until the
directors. For (1) share of stock successor is elected and
corporations vested registered in the qualified.
with public interest, books.
there must be an
independent
director,
constituting at least
20% of the Board.
Non-stock May or may not be Trustee must be a Not exceeding three (3)
Corporation more than fifteen member of the years; shall hold office
(15) trustees. For corporation. until the successor is
corporations vested elected and qualified.
with public interest,
there must be an
independent
director,
constituting at least
20% of the Board.
Close Stockholders shall Director must be a If without Board, the
Corporation be deemed holder of at least one term shall be that
directors when the (1) share of stock stipulated in the articles
articles of registered in the of

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Corporation Composition of Qualification of Term

Board Director/Trustee
incorporation books incorporation.Otherwise,
provide that the provision on stock
business of the corporations applies.
corporation shall be
managed by the
stockholders rather
than by a board.
Otherwise,
provision on stock
corporations
applies.
Educational Not more than Organized as stock One (1) year; shall hold
Corporation fifteen (15) corporation: Director office until the
Organized as directors must be a holder of successor is elected and
Stock at least one (1) share qualified
Corporation of stock registered in
the books. Members
of the Board must be
all Filipino citizens.
Educational Trustees shall not Organized as non- Not exceeding three (3)
Corporation be less than five (5) stock corporation: years; shall hold office
Organized as nor more than Trustee must be a until the successor is
Non-stock fifteen (15); member of the elected and qualified.
Corporation Provided, that the corporation. Members
number of trustees of the Board must be
shall be in multiples all Filipino citizens.
of five (5).
One-Person Single stockholder. May only be a natural While director is living
Corporation person, trust, or an and capacitated, with
estate. nominee and alternate
nominee in case of
death or incapacity.
8. What are the disqualifications from being a director, trustee, or officer?
A person shall be disqualified from being a director, trustee, or officer of any corporation if,
within five (5) years prior to the election or appointment as such, the person was:
a. Convicted by final judgment:

i. Of an offense punishable by imprisonment for a period exceeding six (6) years;
ii. For violating the Revised Corporation Code; and
iii. For violating the Securities Regulation Code;
b. Found administratively liable for any offense involving fraudulent acts; and
c. Found liable by a foreign court or equivalent foreign regulatory authority for acts,
violations, or misconduct similar to (a) and (b). (Sec. 26, Revised Corporation Code)
9. What is cumulative voting?
Cumulative voting is the manner of voting in which the stockholder, or a member when so
provided by the by-laws of a nonstock corporation, is entitled to give a candidate as many
votes as the number of directors or trustees to be elected multiplied by the number of his
shares or to distribute them among the candidates as he may see fit. (Secs 23 and 88,
Revised Corporation Code)

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10. How may a director or trustee be removed from office?
The director or trustee may be removed either by the stockholders or members themselves or
by the Securities and Exchange Commission (SEC).
The stockholders or members may remove a director or trustee through a meeting for that
purpose. Notice must be given and such notice must contain the intention to remove a
director or trustee. During the meeting, the removal must be approved by at least 2/3 of the
outstanding capital stock or the members entitled to vote. The SEC, on the other hand may
remove an officer, after due notice and hearing, if such director or trustee was elected
despite being disqualified or has become disqualified after being in office. (Sec. 27, Revised
Corporation Code)
11. Summarize the voting requirements in the exercise of a corporation of its

corporate powers.
POWERS OF BOARD OF DIRECTORS OUTSTANDING CAPITAL

CORPORATION STOCK (OR MEMBERS FOR
NONSTOCK CORP)
Sec. 15 – Amendment of At least majority of the board. Vote or written assent of at
articles of incorporation least 2/3 of the outstanding
capital stock or members.
Sec. 23 – Election of - At least majority of the
directors outstanding capital stock or
members.
Sec. 24 – Appointment of At least majority of the board. -
corporate officers
Removal of corporate At least majority of the board. -
officers
Sec. 27 – Removal of - At least 2/3 of the outstanding
directors/trustees capital stock or members
Sec. 28 – Filling vacancy If the ground is not expiration If the ground is:
in the board of the term, removal, increase a. Expiration of term, removal,
in number of board seats and increase in number of
the remaining directors directors; or
constitute a quorum – at least b. Not expiration, removal,
majority of the remaining increase in number of board
directors/trustees seats but the remaining
directors do not constitute a
quorum
– at least majority of the
outstanding capital stock or
members.
Sec. 29 – Payment of Directors/trustees - without At least majority of the
compensation of directors participation. outstanding capital stock or
members.
Sec. 34 – Appointment of Majority of the quorum. -
the members of the
executive committee
Sec. 34 – Creation of Majority of the quorum. -
special committees
Sec. 36 – At least majority of the board. At least 2/3 of the outstanding
Extension/shortening of capital stock or members.
the term
Sec. 37 – Incurring, At least majority of the board. At least 2/3 of the outstanding

ARELLANO UNIVERSITY
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NONSTOCK CORP)
creating or increasing capital stock.
bonded indebtedness;
Increasing or decreasing
capital stock
Incurring debt in the Majority of the quorum. -
ordinary course of
business
Sec. 39 – Sale or other In the ordinary course of -
disposition of assets business – majority of the
quorum.
All or substantially all of At least 2/3 of the outstanding
corporate assets – At least capital stock or members.
majority of the board.
Sec. 41 – Investing funds Majority of the quorum. -
for its primary purpose
Sec. 41 – Investing funds Majority of the quorum. -
for incidental purpose for
which corporation is
created
Invest the funds for a At least majority of the board. At least 2/3 of the outstanding
secondary purpose or in capital stock or members
another business
Sec. 42 – Declaration of Majority of the quorum. -
cash dividends
Sec. 42 – Declaration of Majority of the quorum. At least 2/3 of the outstanding
stock dividends capital stock.
Sec. 43 – Entering into a Majority of the quorum for At least majority of the
management contract both managed and managing outstanding capital stock or
corporation. members of each managed and
managing corporation.
In case of corporations with

interlocking directors/trustees
or stockholders/members – at
least 2/3 of the outstanding
capital stock or members from
the managed corporation
Sec. 45 – Adoption of by- - Majority of the outstanding
laws capital stock or members.
Sec. 47 – Amendment of At least majority of the board. At least majority of the
by-laws outstanding capital stock or
members;
If authority to amend will be

delegated by stockholders to
the board - at least 2/3 of the
outstanding capital stock or
members
Revocation of the delegation

made to the board – At least
majority of the outstanding

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NONSTOCK CORP)
capital stock or members
Sec. 61 – Fixing the Majority of the quorum At least majority of the
issued value of no par pursuant to authority outstanding capital stock.
value shares (if not fixed conferred by the AOI or the
in the AOI) by-laws.
Sec. 76 – Merger or At least majority of the board. At least 2/3 of the outstanding
consolidation capital stock or members.
Sec. 102 – Amendment of At least majority of the board. At least 2/3 of the outstanding
AOI of a close corporation capital stock, with or without
voting rights or of such greater
proportion of shares as
provided in the AOI.
Sec. 134 – Voluntary At least majority of the board. At least majority of the
dissolution where no outstanding capital stock or
creditors are affected members.
Sec. 135 – Voluntary At least majority of the board. At least 2/3 of the outstanding
dissolution where capital stock or members.
creditors are affected
(Divina, Divina on Commercial Law Volume I, 2021, pp. 483-486)
12. On what matters can holders of nonvoting shares be entitled to vote?
Holders of nonvoting shares shall be entitled to vote on the following matters:

a. Amendment of the articles of incorporation;
b. Adoption and amendment of by-laws;
c. Sale, lease, exchange, mortgage, pledge, or other disposition of all or substantially all of
the corporate property;
d. Incurring, creating, or increasing bonded indebtedness;
e. Increase or decrease of authorized capital stock;
f. Merger or consolidation of the corporation with another corporation/s;
g. Investment of corporate funds in another corporation or business for any purpose other
than its primary purpose; and
h. Dissolution of the corporation. (Sec. 6, Revised Corporation Code)
13. Distinguish Proxy Voting from Voting Trust.
PROXY VOTING TRUST AGREEMENT

Form Proxies shall be in writing, signed A voting trust agreement must be in
by the stockholder or member and writing and notarized, and shall
filed before the scheduled specify the terms and conditions
meeting with the corporate thereof. A certified copy of such
secretary. Unless required by the agreement shall be filed with the
by-laws, proxies need not be corporation and with the Securities
notarized nor is it required to be and Exchange Commission; otherwise,
filed with the SEC. said agreement is ineffective and
unenforceable.
Ownership or Legal title to the shares remains A trustee is vested legal title to the
title of shares with the beneficial owner. shares and the beneficial owner of the
shares ceased to be stockholder of
record of the corporation.
Rights (1) A proxy votes merely as an (1) A trustee votes as owner of the
Concerned agent shares

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PROXY VOTING TRUST AGREEMENT

(2) A proxy must vote in person (2) A Trustee may vote in person or
(3) No right to inspect is granted, by proxy
unless separately authorized for (3) Right to inspect is granted. All
that purpose. rights of a stockholder may be
(4) A proxy cannot be voted and exercised by trustees except
cannot qualify as director of a proprietary rights.
corporation unless he is a (4) A trustee is qualified to be elected
stockholder in his own right. as director or trustee.
Duration Unless otherwise provided in the Duration may exceed five (5) years, in
proxy, it shall be valid only for the case a voting trust is specifically
meeting for which it is intended. required as a condition in a loan
No proxy shall be valid and agreement but shall automatically
effective for a period longer than expire upon full payment of the loan.
five (5) years at any one time.
Revocability Revocable anytime unless coupled Irrevocable.
with an interest.
14. What are the contents of the articles of incorporation?
The contents are as follows:

a. The name of the corporation;
b. The specific purpose/s for which the corporation is being formed;
c. The place where the principal office of the corporation is to be located, which must
be within the Philippines;
d. The term for which the corporation is to exist, if the corporation has not elected
perpetual existence;
e. The names, nationalities, and residence addresses of the incorporators;
f. The number of directors/trustees;
g. If a stock corporation:
i. The amount of its authorized capital stock;
ii. The number of shares into which it is divided;
iii. The par value of each;
iv. Names, nationalities, and residence addresses of the original subscribers;
v. Statement that some or all the shares are without par value, if applicable;
h. If a non-stock corporation:
i. The amount of its capital;
ii. The names, nationalities, and residence addresses of the contributors; and
iii. The amount contributed by each;
i. An arbitration agreement may be provided. (Sec. 13, Revised Corporation Code)
15. When shall the amendments in the articles of incorporation take effect?
The amendments shall take effect:

a. Upon their approval by the Securities and Exchange Commission (SEC); or
b. From the date of filing with the SEC if not acted upon within six (6) months from date of
filing for a cause not attributable to the corporation. (Sec. 15, Revised Corporation Code)
16. What are the contents of the bylaws?
The contents of the bylaws are as follows:

a. The time, place and manner of calling and conducting regular or special meetings of
the directors or trustees;
b. The time and manner of calling and conducting regular or special meetings and mode
of notifying the stockholders or members thereof;

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c. The required quorum in meetings of stockholders or members and the manner of

voting therein;
d. The form for proxies of stockholders and members and the manner of voting them;
e. The time for holding the annual election of directors or trustees and the mode or
manner of giving notice thereof;
f. The manner of election or appointment and the term office of all officers other than
directors or trustees; and
g. Such other matters as may be necessary for the proper or convenient transaction of
its corporate affairs or for the promotion of good governance and anti-graft and
corruption measures.
h. An arbitration agreement may also be provided. (Sec. 46, Revised Corporation Code)
17. When shall the bylaws be effective?
The bylaws shall be effective only upon the issuance by the Securities and Exchange
Commission of a certification that the bylaws are in accordance with the Revised Corporation
Code. (Sec. 47, Revised Corporation Code)
18. Discuss the concept of Business Judgment Rule.
Under the Business Judgment Rule, questions of policy or of management are left solely to
the honest decision of officers and directors of a corporation, and the court is without
authority to substitute its judgment of the board of directors; the board is the business
manager of the corporation, and so long as it acts in good faith its orders are not reviewable
by the courts. (Montelibano vs. Bacolod-Murcia Milling Co., Inc., G.R. No. L-15092, May 18, 1962)
19. What is the Doctrine of Centralized Management?
The corporate powers of all corporations shall be exercised by the board of directors. Just as
a natural person may authorize another to do certain acts in his behalf, so may the board of
directors of a corporation validly delegate some of its functions to individual officers or agents
appointed by it. Thus, contracts or acts of a corporation must be made either by the board of
directors or by a corporate agent duly authorized by the board. Absent such valid
delegation/authorization, the rule is that the declarations of an individual director relating to
the affairs of the corporation, but not in the course of, or connected with the performance of
authorized duties of such director, are held not binding on the corporation. (Manila Metal
Container Corporation vs. PNB, G.R. No. 166862, December 20, 2006)
20. Explain the Corporate Entity Theory.
As a legal entity, a corporation has a personality distinct and separate from its individual
stockholders or members, and is not affected by the personal rights, obligations and
transactions of the latter. The property of the corporation is its property and not that of the
stockholders, as owners. On the other hand, the corporation is not liable for the debts,
obligations or liabilities of its stockholders (Cruz vs. Dalisay, A.M. No. R-181-P, July 31, 1987).
21. Distinguish Ultra Vires Acts from Illegal Acts.
Ultra Vires Acts Illegal Acts

An act done by a corporation outside of the An act which is contrary to law, morals, or
express and implied powers vested in it by its public policy or public duty, and are, like
charter and by law. Said acts are not illegal similar transactions between public order, or
and void ab initio, but are not merely within contravene some rules of individuals, void.
the scope of the articles of incorporation are They cannot serve as basis of a court action,
merely voidable and may become binding nor acquire validity by performance,
and enforceable when ratified by the ratification, or estoppel.

ARELLANO UNIVERSITY
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stockholders.
(Bernas vs. Cinco, G.R. Nos. 163356-57, July 01, 2015)
22. What is the Doctrine of Piercing the Corporate Veil?
Under this doctrine, the legal fiction that a corporation is an entity with a juridical personality
separate and distinct from its members or stockholders may be disregarded and the
corporation will be considered as a mere association of persons, such that liability will attach
directly to the officers and the stockholders. It is an equitable doctrine developed to address
situation where the separate corporate personality of a corporation is abused or used for
wrongful purposes (Dutch Movers, Inc. vs. Lequin, G.R. No. 210032, April 25, 2017).
23. Differentiate the Doctrine of Outside Reverse Piercing and Insider Reverse
Piercing the Corporate Veil?
In a traditional veil-piercing action, a court disregards the existence of the corporate entity so
a claimant can reach the assets of a corporate insider. In a reverse piercing action, however,
the plaintiff seeks to reach the assets of a corporation to satisfy claims against a corporate
insider.” “Reverse piercing flows in the opposite direction (of traditional corporate veil-
piercing) and makes the corporation liable for the debt of the shareholders.” It has two (2)
types: outsider reverse piercing and insider reverse piercing.
Outsider reverse piercing occurs when a party with a claim against an individual or
corporation attempts to be repaid with assets of a corporation owned or substantially
controlled by the defendant. In contrast, in insider reverse piercing, the controlling members
will attempt to ignore the corporate fiction in order to take advantage of a benefit available to
the corporation, such as an interest in a lawsuit or protection of personal assets. (International
Academy of Management and Economics (IAME) vs. Litton and Company, Inc., G.R. No. 191525,
December 13, 2017)
24. What are the grounds for application of the “traditional” Doctrine of Piercing the
Corporate Veil?
The Doctrine of Piercing the Corporate Veil applies upon the following circumstances:
a. If the fiction is used to perpetuate fraud (Fraud Test);

b. The complete control of one corporate entity to another which perpetuated the
wrong is the proximate cause of the injury (Control Test);
c. If a certain corporation is only an adjunct or an extension of the personality of the
corporation (Alter Ego or Instrumentality Test); and
d. If the fiction is pierced to make the stockholders liable for the obligation of the
corporation (Objective Test). (Philippine National Bank vs Ritratto Group, Inc., G.R. No.
142616, July 31, 2001)
25. A owns 90% of the share of the capital stock in XYZ Corporation. On one occasion,
XYZ Corporation, represented by A as President and General Manager, executed a
contract to sell a subdivision lot in favor of B. However, XYZ failed to develop the
subdivision. Thus, B filed an action for rescission and damages against XYZ
Corporation and A. Will the action prosper? Explain.
The action will prosper against the Corporation but not against the President and General
Manager. Stockholders have separate and distinct personality from the corporation. Mere
ownership by a single stockholder, or by another corporation, of all or nearly all of the capital
stock of a corporation is not itself a suffering ground for disregarding the separate corporate
personality. (Secosa vs. Heirs of Erwin Suarez Francisco, G.R. No. 160039, June 29, 2004)

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26. What is pre-emptive right? When is not available?
It is the right of a stockholder to subscribe to all issues or disposition of shares of any class,
in proportion to their respective shareholdings. It is not available:
a. When it is denied by the articles of incorporation or an amendment thereto;
b. To shares issued in compliance with laws requiring stock offerings or minimum stock
ownership by the public; and
c. To shares issued in good faith with the approval of the stockholders representing 2/3 of
the outstanding capital stock in exchange for propertyneeded for corporate purposes
(property-for-share exchange) or in payment of a debt (debt to equity conversion). (Sec.
38, Revised Corporation Code)
27. What is appraisal right? When can it be exercised?
It refers to the right of the stockholder to dissent and demand payment of the fair value of
his shares, after dissenting from a proposed corporate action involving a fundamental change
in the charter or articles of incorporation in the instance provided for under the Code. It can
be exercised in any of the following cases:
a. In case an amendment to the articles of incorporation has the effect of changing or
restricting the rights of any stockholder or class of shares, or of authorizing preferences
in any respect superior to those of outstanding shares of any class, or of extending or
shortening the term of corporate existence;
b. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or
substantially all of the corporate property and assets as provided in the Code;
c. In case of merger or consolidation;
d. In case of investment of corporate funds for any purpose other than its primary purpose
of the corporation; (Sec. 80, Revised Corporation Code)
e. When a stockholder of a close corporation compels said corporation, for any reason, to
purchase shares at fair value, which shall not be less than the par or issued value, when
the corporation has sufficient assets in its books to cover its debts and liabilities exclusive
of capital stock. (Sec. 104, Revised Corporation Code)
Note:In items a to d, the corporation must have unrestricted retained earnings (URE).URE
are undistributed earnings of the corporation which have not been allocated for any
managerial, contractual, or legal purposes and which are free for distribution to the
stockholders as dividends
28. What are the remedial rights available to stockholders and members, in case of a
wrongful or fraudulent acts of a director, officer or agent?
The remedial rights available to stockholders and members are (1) individual suit; (2)
representative or class suit; and (3) derivative suit.
An individual suit involves direct injury to the rights of stockholders and members, such as
denial of his right to inspect corporate books and records or preemptive rights. A
representative or class suit is one in which one or more members of a class sue for
themselves as a class or for all to whom the right was denied, either as an individual action
or a derivative suit. A derivative suit is an action based on injury to the corporation – to
enforce a corporate right – wherein the corporation itself is joined as a necessary party, and
recovery is in favor of and for the corporation. It is a suit granted to any stockholder to
institute a case to remedy a wrong done directly to the corporation and indirectly to
stockholders.

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29. How is the appropriate remedy by stockholders for wrongful or fraudulent

corporate actions determined?
The determination of the appropriate remedy by stockholders against their corporation hinges
on the object of the wrong done. When the object is a specific stockholder or a definite class
of stockholders, an individual suit or class/representative suit must be resorted to. When the
object of the wrong done is the corporation itself or “the whole body of its stock and property
without any severance or distribution among individual holders,” it is a derivative suit that a
stockholder must resort to. (Florete, Jr. vs. Florete, Sr., G.R. Nos. 174909 and 177275, January 20,
2016)
30. What is the effect of delinquency of stock?
A delinquent stock shall not be entitled to be voted for, to vote, or to be represented at any
stockholder‟s meeting. The holder of a delinquent stock shall not be entitled to any of the
rights of a stockholder exceptthe right to dividends, until and unless payment is made by the
holder of such delinquent stock, with accrued interest, costs and expenses of advertisement,
if any. (Sec. 70, Revised Corporation Code)
31. A bought from B 2,200 shares of stocks of XYZ Corp evidenced by a notarized deed
of sale of shares of stocks. B endorsed and delivered the certificate of stocks to A
and requested XYZ Corp to record the sale in its stock and transfer books and to
issue new certificate of stocks in favor of A. The corporate secretary denied the
recording of the sale stating that under an existing stockholder’s resolution that
existing stockholders have the right of first refusal in the event shares of other
stockholders are offered for sale. A opposed the refusal and claimed that the
restriction does not appear in the articles of incorporation, the by-laws and the
certificate of stock. He filed an action for mandamus to compel the Corporation to
record the sale. Can A compel the recording of the transfer of stocks in the stock
and transfer book of the corporation?
Yes. The registration of a transfer of shares of stock is a ministerial duty on the part of the
corporation. Aggrieved parties may then resort to the remedy of mandamus to compel
corporations that wrongfully or unjustifiably refuse to record the transfer or to issue new
certificates of stock. This remedy is available even upon the instance of a bona fide
transferee who is able to establish a clear legal right to the registration of the transfer. The
right of a transferee/assignee to have stocks transferred to his name is an inherent right
flowing from his ownership of the stocks. (Andaya vs. Rural Bank of Cabadbaran, G.R. No. 188769,
August 3, 2016)
32. Can the court award moral damages to a corporation?
General Rule: No. A corporation, being an artificial person and having existence only in
legal contemplation cannot recover moral damages as it cannot suffer physical suffering and
mental anguish (Prime White Cement vs. IAC, G.R. No. L-68555, March 19, 1993).
Exception: A corporation with good reputation, if besmirched, is allowed to recover moral

damages upon proof of existence of factual basis of damage (actual injury) and its causal
relations (Crystal vs. BPI, G.R. No. 172428, November 28, 2008).
33. Distinguish Treasury shares from Redeemable shares.
TREASURY SHARES REDEEMABLE SHARES

As to definition Shares which have been issued Shares which grant the
and fully paid for, but corporation the right to purchase
subsequently reacquired by the or reacquire the shares at the

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issuing corporation through option of the corporation or

purchase, redemption, donation, holder, based on the face or
or some other lawful means. issued value plus a specified
premium.
As to the necessity May only be acquired if the May be acquired regardless of
of Unrestricted corporation has URE to cover the existence of URE in the books
Retained Earnings. the shares to be purchased or of the corporation.
acquired.
As to voting rights They shall have voting rights May be deprived of voting rights,
since these shares are not part unless otherwise provided in the
of the outstanding capital stock Code.
of the corporation before
reissuance.
34. When can a stock corporation acquire its own shares?
A stock corporation can acquire its own shares for a legitimate corporate purpose, including:
a. To eliminate fractional shares arising out of stock dividends;

b. To collect or compromise an indebtedness to the corporation, arising out of unpaid
subscription, in a delinquency sale, and to purchase delinquent shares sold during said
sale; and
c. To pay dissenting or withdrawing stockholders entitled to such payment. (Sec. 40,
Revised Corporation Code)
35. Can the board be compelled to declare dividends every year?
General Rule: No. The declaration of dividends is a business judgment lodged in the
governing board.
Exceptions:
a. In cases when the articles of incorporation provide that such declaration is required every
year; or
b. When the corporation has unrestricted retained earnings which exceed 100% of its paid-
in capital stock every year.
Exception to the exception in (b):

i. When such retention is justified by definite corporate expansion projects or programs
approved by the board of directors; or
ii. When the corporation is prohibited under any loan agreement with any financial
institution or creditor, whether local or foreign, from declaring dividends without their
consent, and such consent has not yet been secured; or
iii. When it can be clearly shown that such retention is necessary under special
circumstances obtaining in the corporation. (Sec. 42, Revised Corporation Code)
36. Discuss the Trust Fund Doctrine.
Under Trust Fund Doctrine, the capital stock, property, and other assets of a corporation are
regarded as equity in trust for the payment of corporate creditors, who are preferred in the
distribution of corporate assets. It also provides that subscriptions to the capital stock of a
corporation constitute a fund to which creditors have a right to look up to for satisfaction of
their claims. There can be no distribution of assets among the stockholders without first
paying corporate debts. Thus, any disposition of corporate funds and assets to the prejudice
of creditors is null and void. (Turner vs. Lorenzo Shipping Corporation, G.R. No. 157479,
November 24, 2010)

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37. When is the “Grandfather Rule” applied in determining the nationality of a

corporation?
Whenthere is doubt, in the 60-40 Filipino equity ownership in the corporation, the
"Grandfather Rule" applies. The Grandfather Rule was originally conceived to look into the
citizenship of the individuals who ultimately own and control the shares of stock of a
corporation for purposes of determining compliance with the constitutional requirement of
Filipino ownership. (Narra Nickel Mining and Development Corp. vs. Redmont Consolidated Mines
Corporation, G.R. No. 195580, January 28, 2015)
38. The following is the composition of Sana Oil Company, a public utility company:
Outstanding Kind of Stock Number of shares owned by

Stock Filipinos
100 Common Shares 60
100 Class A Preferred Shares (with right to 60
elect directors)
100 Class B Preferred Shares (without right to 50
elect directors)
Is the company compliant with the 60-40 requirement under the Constitution?
No. In cases of public utility corporations, mere legal title is not enough to meet the required
Filipino equity, which means that it is not sufficient that a share is registered in the name of a
Filipino citizen or national. He should also have full beneficial ownership of the share. To
determine if a corporation is a “Philippine National,” the Voting Control Test and the
Beneficial Ownership Test must be applied.
Under the Voting Control Test, there should be at least 60% voting shares owned by
Filipinos. For Sana Oil Company, there should at least be a total of 120 of common shares
and Class A preferred shares (in any combination) owned and controlled by Filipinos for it to
be compliant with the 60% of the voting rights in favor of Filipinos requirement. Here, it has
60 common shares and 60 Class A preferred shares (with right to elect directors). Thus, Sana
Oil Company passed the Voting Control Test.
However, under the Beneficial Ownership Test, at least 60% of all the outstanding capital
stock should be owned by Filipinos. For Sana Oil Company, there should be at least a total of
180 shares of all the outstanding capital stock owned and controlled by Filipinos (provided
that among those 180 shares a total of 120 of the common shares and Class A preferred
shares (in any combination) are owned and controlled by Filipinos). Here, there are only 170
shares owned by Filipinos out of all the outstanding capital stock. (Roy III vs. Herbosa, G.R.
No. 207246, November 22, 2016)
39. When can an unlicensed foreign corporation be considered as doing business in

the Philippines?
Under the Continuity Test, doing business implies a continuity of commercial dealings and
arrangements, and contemplates to some extent the performance of acts or works or the
exercise of some functions normally incident to and in progressive prosecution of, the
purpose and object of its organization.
Under the Substance Test, a foreign corporation is doing business in the country if it is
continuing the body or substance of the enterprise of the business for which it was organized.
(Agilent Technologies Singapore (Pte.) Ltd. vs. Integrated Silicon Technology Philippines Corporation,
G.R. No. 154618, April 14, 2004, citing Mentholatum vs. Mangaliman)

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40. State the rules regarding the right of a foreign corporation to bring suit in
Philippine courts.
The principles regarding the right of a foreign corporation to bring suit in Philippine courts
may thus be condensed in four statements:
a. If a foreign corporation does business in the Philippines without a license, it cannot sue
before the Philippine courts;
b. If a foreign corporation is not doing business in the Philippines, it needs no license to sue
before Philippine courts on an isolated transaction or on a cause of action entirely
independent of any business transaction;
c. If a foreign corporation does business in the Philippines without a license, a Philippine
citizen or entity which has contracted with said corporation may be estopped from
challenging the foreign corporation‟s corporate personality in a suit brought before
Philippine courts; and
d. If a foreign corporation does business in the Philippines with the required license, it can
sue before Philippine courts on any transaction. (Agilent Technologies Singapore (PTE),
Ltd. vs. Integrated Silicon Technology Phil. Corp., G.R. No. 154618, April 14, 2004)
II. INTRA-CORPORATE DISPUTE (CONCEPT)
41. What is an intra-corporate dispute?
It is one which arises between a stockholder and the corporation or among the stockholders
involving internal affairs of the corporation. (San Jose vs. Ozamiz, G.R. No. 190590, July 12, 2017)
42. What are the tests in determining whether or not a case involves an intra-
corporate dispute?
The two tests are the relationship test and the nature of the controversy test.
Under the relationship test, there is an intra-corporate controversy when the conflict is:
a. Between the corporation, partnership, or association and the public;

b. Between the corporation, partnership, or association and the State insofar as its
franchise, permit, or license to operate is concerned;
c. Between the corporation, partnership, or association and its stockholders, partners,
members, or officers; and
d. Among the stockholders, partners, or associates themselves.
Under the nature of the controversy test, an intra-corporate controversy arises when the
controversy is not only rooted in the existence of an intra-corporate relationship, but also in
the enforcement of the parties‟ correlative rights and obligations under the Corporation Code
and the internal and intra-corporate regulatory rules of the corporation. (San Jose vs. Ozamiz,
G.R. No. 190590, July 12, 2017)
43. Who has jurisdiction over intra-corporate disputes?
The Regional Trial Court (RTC), as a Special Commercial Court, has jurisdiction over intra-
corporate disputes (Securities Regulation Code). However, despite the transfer of jurisdiction
over intra-corporate disputes to the RTC, the Securities and Exchange Commission (SEC) is
not entirely divested of its powers over them. The SEC could act upon those that are merely
administrative and regulatory in character (Roman Jr. vs. SEC, G.R. No. 196329, June 1,
2016).

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SCHOOL OF LAW
III. INTELLECTUAL PROPERTY

(COPYRIGHT, INCLUDING FAIR USE PRINCIPLE AND MORAL RIGHTS)
44. What are the kinds of intellectual property rights?
Under Sec. 4 of Republic Act No. 8293 or the Intellectual Property Code, the term “intellectual
property rights” consists of:
a. Copyright and Related Rights, referring to the literary and artistic works which are
original intellectual creations in the literary and artistic domain protected from the
moment of their creation;
b. Trademarks and Service Marks, referring to any visible sign capable of distinguishing
the goods (trademark) or services (service mark) of an enterprise and shall include a
stamped or marked container of goods;
c. Geographic Indications, pertaining to indications which identify a good as originating
from a given territory, a region or locality where a given quality, reputation or other
characteristic of the good is essentially attributable to its geographic indication (Art. 22,
TRIPS Agreement);
d. Industrial Designs, or any composition of line or colors or any three-dimensional form,
whether or not associated with lines or colors; provided that such composition or form
gives a special appearance to and can serve as a pattern for an industrial product or
handicraft (Sec. 112, IPC);
e. Patents, defined as any technical solution of a problem with any field of human activity
which is new, involves an inventive step and is industrially applicable (Sec. 21,
Intellectual Property Code);
f. Layout-Designs (Topographies) of Integrated Circuits, pertaining to the three-
dimensional disposition, however expressed, of the elements, at least one of which is an
active element and of some or all of the interconnections of an integrated circuit, or such
a three-dimensional disposition prepared for an integrated circuit intended for
manufacture (Sec. 112.3,Intellectual Property Code); and
g. Protection of Undisclosed Information, meaning protection of information lawfully
held from being disclosed to, acquired by, or used by others without their consent in a
manner contrary to honest commercial practices so long as such information: i) is secret
in the sense that it is not, as a body or in the precise configuration and assembly of its
components, generally known among or readily accessible to persons within the circles
that normally deal with the kind of information in question; ii) has commercial value
because it is a secret; and iii) has been subject to reasonable steps under the
circumstances, by the person lawfully in control of the information, to keep it secret.)
(Art. 39, TRIPS Agreement)
45. Distinguish trademark, patent and copyright from one another.
TRADEMARK PATENT COPYRIGHT

Definition Any visible sign capable Exclusive right Right granted to the
of distinguishing the granted to an author or originator of
goods (trademark) or inventor over an certain literary or
services (service mark) invention or a utility artistic productions,
of an enterprise and model or industrial whereby he or she is
shall include a stamped design to sell, use, invested, for a specific
or marked container of and make the same period, with the sole
goods. for commerce and and exclusive privilege
industry. of multiplying copies
Tradename – name or of the same and
designation identifying publishing and selling

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or distinguishing an them.
enterprise.
Scope Attaches to goods or Covers any technical Confined to literary
services of an solution of a problem and artistic work, and
enterprise and stamped in any field of human scientific and scholarly
or marked containers activity which is new, works which are
involves an inventive original intellectual
step, and is creations in the
industrially applicable literary and artistic
domain
Term of Certificate of 20 years from filing Generally, during the
protection registration remains in of the application for life of the author and
force for 10 years, the grant of patent. for 50 years after his
provided the registrant death (also applicable
shall file a declaration to posthumous
of actual use and works), subject to the
evidence to that effect, provisions of Sec
or shall show valid 213.2 to 213.5 of the
reasons based on the Intellectual Property
existence of obstacles Code, as amended.
to such use, within one
(1) year from the fifth
anniversary of the date
of the registration of
the mark. Otherwise,
the mark shall be
removed from the
Register.
Commencement Requires registration Requires registration Protected from the
of protection of before the Code can before the Code can moment of creation.
right protect them against protect them against
third person third person
competitors. competitors.
Exception:
Trade name – acquired
by use; protected, even
prior to or without
registration, against
any unlawful act
committed by third
parties.
Remedies First act of trademark First act of patent First act of copyright
against infringement gives rise infringement does not infringement gives rise
infringement to criminal liability. give rise to criminal to criminal liability.
liability. Infringer can
only be held
criminally liable if he
repeats the
commission of the
same infringing acts
after finality of the
court judgment
against him in a civil
action for

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SCHOOL OF LAW

infringement.
46. A has been using the name and mark "Lavandera Ko" in his laundry business since
1994. He has a certificate of copyright over said name and mark. Over the years,
his business expanded with numerous franchise outlets in the Philippines. A then
formed a corporation to handle the said business. He called it Laundromatic
Corporation (Laundromatic) and it was incorporated in 1997, while "Lavandera
Ko" was registered as a business name in 1998 with the Department of Trade and
Industry (DTI).
Later on, A discovered that his brother, B, was able to register the name and mark
"Lavandera Ko" with the Intellectual Property Office (IPO) in 2010, the
registration of which was filed in 1995. He also discovered that B had been selling
A’s franchises. Thus, A filed a petition for injunction, unfair competition,
infringement of copyright, cancellation of trademark and name before the RTC.
The RTC dismissed the action, finding that neither party was the originator of the
subject mark. The judge ruled that the mark was created by a certain C in 1942 in
his musical composition "Lavandera Ko.” Is the RTC correct?
No. “Lavandera Ko,” the mark in question in this case is being used as a trade name or
specifically, a service name since the business in which it pertains involves the rendering of
laundry services. As such, the basic contention of the parties is who between them has the
better right to use “Lavandera Ko” as a service name, given that the law guarantees the
protection of trade names and business names prior to or even without registration, against
any unlawful act committed by third parties. A cause of action arises when the subsequent
use of any third party of such trade name or business name would likely mislead the public as
such act is considered unlawful. (Fernando Juan v. Roberto Juan, G.R. No. 221372, August 23,
2017)
47. X and Y are famous personalities in show business who kept their affair secret.
They use a special instant messaging service which allows them to see one
another’s typing on their own screen as each letter key is pressed. When A, the
controller of the service facility, found out their identities, he kept a copy of all the
messages X and Y sent each other and published them. Is A liable for copyright
infringement? Why or why not?
Yes. Under the law, text messages are not expressly enumerated as among the copyrightable
works. However, these messages are akin to letters or may at least fall under “other literary,
artistic, scientific, and scholarly works.” They are therefore protected from the moment of
creation. (Sec. 172.1, Intellectual Property Code, as amended)
48. What are the requirements of to be entitled to a copyright?
To be entitled to copyright, the thing being copyrighted must be original, created by the
author through his own skill, labor and judgment, without directly copying or evasively
imitating the work of another. (Sambar vs. Levi Strauss, G.R. No. 132604, March 6, 2002)
49. What is the scope of protection for derivative works?
Derivative works shall be protected as new works. However, such new work shall not affect
the force of any subsisting copyright upon the original works employed or any part thereof,
or be construed to imply any right to such use of the original works, or to secure or extend
copyright in such original works. (Sec. 173.2, Intellectual Property Code, as amended)

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50. What original works are not protected by copyright?
No protection shall extend, under this law, to the following:
a. Any idea, procedure, system, method or operation, concept, principle, discovery or mere
data as such, even if they are expressed, explained, illustrated or embodied in a work;
b. News of the day and other miscellaneous facts having the character of mere items of
press information;
c. Any official text of a legislative, administrative or legal nature, as well as any official
translation thereof;
d. Any work of the Government of the Philippines (prior approval of the government agency
or office wherein the work is created is necessary for exploitation of such work for
profit); and
e. Statutes, rules and regulations, and speeches, lectures, sermons, addresses, and
dissertations, pronounced, read, or rendered in courts of justice, before administrative
agencies, in deliberative assemblies and in meetings of public character. (Secs 174,
176.1, and 176.2, Intellectual Property Code, as amended)
51. What are the rules on copyright ownership?
The rules on ownership under the Intellectual Property Code, as amended, are as follows:
TYPE OF WORK OWNER

Only one Copyright shall belong to the author of the work. (Sec. 178.1)
creator
Joint General Rule: The co-authors shall be the original owners of the
ownership copyright and in the absence of agreement, their rights shall be governed
by the rules on co-ownership.
Exception: If, however, a work consists of parts that can be used

separately and the author of each part can be identified, the author of
each part shall be the original owner of the copyright in the part that he
has created. (Sec. 178.2)
Created in the The copyright shall belong to:
course of (a) The employee, if the creation of the object of copyright is not a part of
employment his regular duties even if the employee uses the time, facilities and
materials of the employer.
(b) The employer, if the work is the result of the performance of his
regularly-assigned duties, unless there is an agreement, express or
implied, to the contrary. (Sec. 178.3)
Commissioned General Rule: The person who so commissioned the work shall have
work ownership of the work, but the copyright thereto shall remain with the
creator.
Exception: There is a written stipulation to the contrary. (Sec. 178.5)

Letters Person/s to whom they are addressed and delivered. (Sec. 178.6)
Anonymous or General Rule: The publishers shall be deemed to represent the authors
pseudonymous of articles and other writings published without the names of the authors
works or under pseudonyms.
Exception: The contrary appears, or the pseudonyms or adopted name

leaves no doubt as to the author's identity, or if the author of the
anonymous works discloses his identity. (Sec. 179)

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SCHOOL OF LAW
52. What is the doctrine of fair use?
Under this doctrine, the fair use of a copyrighted work for criticism, comment, news
reporting, teaching including limited number of copies for classroom use, scholarship,
research, and similar purposes is not an infringement of copyright. (Sec. 185, Intellectual
Property Code, as amended)
53. What are the factors to be considered in determining fair use?
The four factors in determining fair use are the following:
a. The purpose and character of the use, including whether such use is of a commercial
nature or is for non-profit educational purposes;
b. The nature of the copyrighted work;
c. The amount and substantiality of the portion used in relation to the copyrighted work as
a whole; and
d. The effect of the use upon the potential market for or value of the copyrighted work.
(Sec. 185, Intellectual Property Code, as amended)
54. How is copyright infringement committed?
Copyright infringement is committed when a person:
a. Directly commits an infringement;

b. Benefits from the infringing activity of another person who commits an infringement if
the person benefiting has been given notice of the infringing activity and has the right
and ability to control the activities of the other person;
c. With knowledge of infringing activity, induces, causes or materially contributes to the
infringing conduct of another. Sec. 216, Intellectual Property Code, as amended)
55. Atty. X was the author of Law for Dummies. While Atty. X was researching for
books to assist him in updating his own book, he chanced upon the book of Y
entitled Surviving Law School. He discovered further that the book of Y was
strikingly similar to the contents, scheme of presentation, illustrations and
illustrative examples of Law for Dummies. Atty. X sued Y and the latter’s publisher
for infringement and/or unfair competition with damages. Y, in his defense,
alleged that his book was not a copy of any existing valid copyrighted book and
that the similarities may be due to the authors' exercise of the "right to fair use of
copyrighted materials, as guides. Is Y’s argument tenable?
No. Y‟s act of lifting from the book of Atty. X‟s substantial portions of discussions and
examples, and his failure to acknowledge the same in his book is an infringement of Atty. X‟s
copyrights. Substantial reproduction of a book does not necessarily require that the entire
copyrighted work, or even a large portion of it, be copied. If so much is taken that the value
of the original work is substantially diminished, there is an infringement of copyright and to
an injurious extent, the work is appropriated. (Habana vs. Robles, G.R. No. 131522, July 19,
1999)
56. X was charged with copyright infringement. In her defense she argues that
copyright infringement is malum in se, in that copying alone is not what is being
prohibited, but its injurious effect which consists in the lifting from the copyright
owners’ film or materials, that were the result of the latter’s creativity, work and
productions and without authority, reproduced, sold and circulated for commercial
use to the detriment of the latter. Is X’s argument tenable?

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No. In its current form, the Intellectual Property Code is malum prohibitum and prescribes a
strict liability for copyright infringement. Good faith, lack of knowledge of the copyright, or
lack of intent to infringe is not a defense against copyright infringement. (ABS CBN vs. Gozon
G.R. No. 195956 March 11, 2015)
57. What are the moral rights of a copyright holder?
The author of a work shall, independently of the economic rights or the grant of an
assignment or license with respect to such rights, have the following moral rights:
a. Right of attribution: To require that the authorship of the works be attributed to him,
in particular, the right that his name, as far as practicable, be indicated in a prominent
way on the copies, and in connection with the public use of his work;
b. To make any alterations of his work prior to, or to withhold it from publication;
c. Right of integrity: To object to any distortion, mutilation, or other modification of, or
other derogatory action in relation, his work which would be prejudicial to his honor or
reputation; and
d. Right against false attribution: To restrain the use of his name with respect to any
work not of his own creation or in a distorted version of his work. (Sec. 193, Intellectual
58. May an author be compelled to perform his contract to create a work or to publish
his work already in existence?
No. An author cannot be compelled to perform his contract to create a work or for publication
of his work already in existence. However, he may be held liable for damages for breach of
such contract. (Sec. 194, Intellectual Property Code, as amended)
59. What is the term of moral rights?
All moral rights shall be coterminous with the economic rights of the author or creator of the
work except the right of attribution, which is in perpetuity. (Sec. 198.1, Intellectual Property
Code, as amended)
60. What are technology transfer arrangements?
These refer to contracts or agreements involving the transfer of systematic knowledge for the
manufacture of a product, the application of a process, or rendering of a service including
management contracts; and the transfer, assignment or licensing of all forms of intellectual
property rights, including licensing of computer software except computer software
developed for mass market. (Sec. 4.2, Intellectual Property Code, as amended)
It is in the nature of a licensing contract, where the licensor is the Intellectual property rights
owner, and the licensee is the second party who was granted authority to commercially
exploit the same intellectual property right.
61. What are the prohibited stipulations in technology transfer agreements?
The following stipulations are prohibited in technology transfer agreements:
a. Those which impose upon the licensee the obligation to acquire from a specific source
capital goods, intermediate products, raw materials, and other technologies, or of
permanently employing personnel indicated by the licensor;
b. Those pursuant to which the licensor reserves the right to fix the sale or resale prices of
the products manufactured on the basis of the license;
c. Those that contain restrictions regarding the volume and structure of production;

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SCHOOL OF LAW
d. Those that prohibit the use of competitive technologies in a non-exclusive technology

transfer agreement;
e. Those that establish a full or partial purchase option in favor of the licensor;
f. Those that obligate the licensee to transfer for free to the licensor the inventions or
improvements that may be obtained through the use of the licensed technology;
g. Those that require payment of royalties to the owners of patents for patents which are
not used;
h. Those that prohibit the licensee to export the licensed product unless justified for the
protection of the legitimate interest of the licensor such as exports to countries where
exclusive licenses to manufacture and/or distribute the licensed product(s) have already
been granted;
i. Those which restrict the use of the technology supplied after the expiration of the
technology transfer arrangement, except in cases of early termination of the technology
transfer arrangement due to reason(s) attributable to the licensee;
j. Those which require payments for patents and other industrial property rights after their
expiration, termination arrangement;
k. Those which require that the technology recipient shall not contest the validity of any of
the patents of the technology supplier;
l. Those which restrict the research and development activities of the licensee designed to
absorb and adapt the transferred technology to local conditions or to initiate research and
development programs in connection with new products, processes or equipment;
m. Those which prevent the licensee from adapting the imported technology to local
conditions, or introducing innovation to it, as long as it does not impair the quality
standards prescribed by the licensor;
n. Those which exempt the licensor for liability for non-fulfilment of his responsibilities
under the technology transfer arrangement and/or liability arising from third party suits
brought about by the use of the licensed product or the licensed technology; and
o. Other clauses with equivalent effects. (Sec. 87, Intellectual Property Code, as amended)
62. What contractual stipulations are required in all technology transfer agreements?
The following stipulations are required in all technology transfer arrangements:

a. That the laws of the Philippines shall govern the interpretation of the same and in the
event of litigation, the venue shall be the proper court in the place where the licensee
has its principal office;
b. Continued access to improvements in techniques and processes related to the technology
shall be made available during the period of the technology transfer arrangement;
c. In the event the technology transfer arrangement shall provide for arbitration, the
Procedure of Arbitration of the Arbitration Law of the Philippines or the Arbitration Rules
of the United Nations Commission on International Trade Law (UNCITRAL) or the Rules
of Conciliation and Arbitration of the International Chamber of Commerce (ICC) shall
apply and the venue of arbitration shall be the Philippines or any neutral country; and
d. The Philippine taxes on all payments relating to the technology transfer arrangement
shall be borne by the licensor. (Sec. 88, Intellectual Property Code, as amended)
63. What are the requisites for the patentability of an invention?
The requisites for the patentability of an invention under Sec. 21 of the Intellectual Property
Code are:
a. Novelty or newness - The invention shall not form part of a prior art (Sec. 23,
Intellectual Property Code, as amended);
b. An inventive step – This is satisfied if having regard to prior art, it is not obvious to a
person skilled in the art at the time of the filing date or priority date of the application
claiming the invention (Sec. 26.1, Intellectual Property Code, as amended); and
c. Industrial applicability – The invention should be capable of being produced and used
in any industry (Sec. 27, Intellectual Property Code, as amended).

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64. What is the first-to-file rule?
The first-to-file rule states that:

a. If two (2) or more persons have made the invention separately and independently of
each other, the right to the patent shall belong to the person who filed an application for
such invention;
b. Where two or more applications are filed for the same invention, patent will issue to the
applicant who has the earliest filing date or, the earliest priority date; and
d. If two or more applications for the same invention have the same filing date or priority
date, the patent will be issued jointly to all applicants. (Sec. 29, Intellectual Property
Code, as amended).
65. Who owns the patent to an invention created pursuant to a commission but not
under an employer-employee relationship?
General Rule: The one who commissioned the work shall own the patent.
Exception: There is a contrary stipulation. (Sec. 30.1, Intellectual Property Code, as
amended).
66. Who owns the patent to an invention created by an employee?
In case the employee made the invention in the course of his employment contract, the
patent shall belong to:
a. The employee, if the inventive activity is not a part of his regular duties even if the
employee uses the time, facilities and materials of the employer;
b. The employer, if the invention is the result of the performance of his regularly-assigned
duties, unless there is an agreement, express or implied, to the contrary. (Sec. 30.1,
Intellectual Property Code, as amended).
67. What is the Doctrine of Right of Priority?
It provides that a patent filed by any person who has previously applied for the same
invention in another country which by treaty, convention, or law affords similar privileges to
Filipino citizens, shall be considered as filed as of the date of filing the foreign application,
subject to the following requirements:
a. That the local application expressly claims priority;

b. It is filed within twelve (12) months from the date the earliest foreign application was
filed; and
c. Certified copy of the foreign application together with an English translation is filed
within six (6) months from the date of filing in the Philippines. (Sec. 30.1, Intellectual
Property Code, as amended).
68. What are the remedies of the true and actual inventor deprived of the patent
without his consent or through fraud?
If he is declared by final court order or decision to be the true and actual inventor, the court
shall order for his substitution as patentee, or at the option of the true inventor, cancel the
patent, and award actual and other damages in his favor if warranted by the circumstances.
69. X invented a device which, through the use of noise, can recharge a cellphone
battery. He applied for and was granted a patent on his device, effective within
the Philippines. As it turns out, a year before the grant of X’s patent, Y, also an
inventor, invented a similar device which he used in his cellphone business in

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Manila. X files an injunctive suit against Y to stop him from using the device on
the ground of patent infringement. Will the suit prosper?
No. Y is a prior user in good faith. Under Sec. 73.1 of the Intellectual Property Code, as
amended, any user, who, in good faith was using the invention or has undertaken serious
preparations to use the invention in his enterprise or business, before the filing date or
priority date of the application on which a patent is granted, shall have the right to continue
the use thereof as envisaged in such preparations within the territory where the patent
produces its effect.
70. What are the limitations on the use of invention by the government?
The limitations on the use of invention by the government are:
a. The scope and duration of the use shall be limited to the purpose for which it was
authorized (Sec. 74.2(d), Intellectual Property Code, as amended);
b. Such use shall be non-exclusive (Sec. 74.2(e), Intellectual Property Code, as amended);
c. The right holder shall be Notified as soon as reasonably practicable (Sec. 74.2(b),
Intellectual Property Code, as amended); and
d. The right holder shall be paid adequate remuneration in the circumstances of each case,
taking into account the economic value of the authorization (Sec. 74.2(f), Intellectual
Property Code, as amended);
71. What are the two tests in patent infringement? How are these tests used?
The two tests in Patent Infringement are literal infringement and the doctrine of equivalents.
In using literal infringement as a test, resort must be had, in the first instance, to the
words of the claim. To determine whether the particular item falls within the literal meaning
of the patent claims, the court must juxtapose the claims of the patent and the accused
product within the overall context of the claims and specifications, to determine whether
there is exact identity of all material elements.
Under the doctrine of equivalents, an infringement occurs when a device appropriates a

prior invention by incorporating its innovative concept and, albeit with some modification and
change, performs substantially the same function in substantially the same way to achieve
substantially the same result. (Godines vs. CA, G.R. No. 97343, September 13, 1993)
72. What is voluntary licensing?
Voluntary licensing is the grant by the patent owner to a third person of the right to exploit a
patented invention. It is used to encourage the transfer and dissemination of technology and
to prevent or control practices that may have an adverse effect on competition and trade.
73. What are the rights of a licensor in voluntary licensing?
In the absence of any provision to the contrary in the technology transfer arrangement, the
grant of a license shall not prevent the licensor from granting further licenses to third person
nor from exploiting the subject matter of the technology transfer arrangement himself. (Sec.
89, Intellectual Property Code, as amended)
74. What is compulsory licensing?
Compulsory Licensing is the grant of the Director of Legal Affairs of a license to exploit a
patented invention, even without the agreement of the patent owner, in favor of any person

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who has shown his capability to exploit the invention. (Sec. 93, Intellectual Property Code, as
amended)
75. X invented and patented a miracle medicine for the cure of COVID-19. Being the
sole manufacturer, X sold the medicine at an exorbitant price. Because of the
current high prevalence of COVID-19 nationwide, the Department of Health (DOH)
asked X for a license to produce and sell the medicine to the public at a
substantially lower price. X refused, citing the huge costs and expenses incurred
for research and development. Assuming you are the legal consultant of DOH, how
will you resolve the matter?
DOH may file a petition for compulsory license with the Director of Legal Affairs of the
Intellectual Property Office to exploit the patented medicine even without the agreement of X
on the ground of public interest, in particular, health. (Sec. 93.2, Intellectual Property Code,
as amended). Once granted, the DOH may then produce and sell the medicines for a cheaper
price subject to payment of reasonable royalties to X.
76. How is trademark acquired?
It shall be acquired through registration made validly in accordance with the provisions of the
law (Sec. 152.1, Intellectual Property Code, as amended).
Note: The Supreme Court has abandoned its previous rulings that registration does not
confer ownership of the trademark and that the first user in good faith defeats the right of
the first filer in good faith. It held that trademarks are acquired solely through registration.
(Zuneca Pharmaceutical vs. Natrapharm, Inc., G.R. No. 211850, September 8, 2020)
77. How is the ownership of trade name acquired?
Trade name is acquired by use. Notwithstanding any laws or regulations providing for any
obligation to register trade names, such names shall be protected, even prior to or without
registration, against any unlawful act committed by third parties (Sec. 165.2(a), Intellectual
Property Code, as amended). In particular, any subsequent use of the trade name by a third
party, whether as a trade name or a mark or collective mark, or any such use of a similar
trade name or mark, likely to mislead the public, shall be deemed unlawful (Sec. 165.2(b),
Intellectual Property Code, as amended).
78. Fredco filed a Petition for Cancellation of Registration No. 12345 before the
Bureau of Legal Affairs of the Intellectual Property Office (IPO) against Harvard
University, a corporation organized and existing under the laws of Massachusetts,
USA. Fredco alleged that Registration No. 12345 was issued to Harvard University
for the mark “Harvard Veritas Shield Symbol” for decals, bags, serving trays
sweatshirts, t-shirts, hats and flying discs. Fredco alleged that the mark “Harvard”
for t-shirts, polo shirts, sandos, briefs, jackets, and slacks was first used in the
Philippines by New York Garments, Fredco’ predecessor-in-interest. Harvard
University argued that it is the lawful owner of the name and mark “Harvard” in
numerous countries worldwide, including Philippines. Fredco made use of the
mark “Harvard” for jeans coupled with a claim that it originated in Cambridge.
Was Fredco’s registration of such mark valid?
No. The law prohibits the registration of a mark “which may disparage or falsely suggest a
connection with persons, living or dead, institutions, beliefs.” Fredco‟s use of the mark
“Harvard,” coupled with its claimed origin in Cambridge, Massachusetts, obviously suggests a
false connection with Harvard University. On this ground, Fredco‟s registration of the mark
“Harvard” should have been disallowed. (Fredco Manufacturing Corporation vs. President and
Fellows of Harvard College, G.R. No. 185917, June 1, 2011)

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79. Distinguish between Dominancy Test and Holistic Test.

The Dominancy Test focuses on the similarity of the dominant features of the competing
trademarks that might cause confusion, mistake, and deception in the mind of the ordinary
purchaser, and gives more consideration to the aural and visual impressions created by the
marks on the buyers of goods, giving little weight to factors like prices, quality, sales outlets,
and market segments.
In contrast, the Holistic or Totality Test considers the entirety of the marks as applied to
the products, including the labels and packaging, and focuses not only on the predominant
words but also on the other features appearing on both labels to determine whether one is
confusingly similar to the other as to mislead the ordinary purchaser. (Great White Shark
Enterprises, Inc. vs. Caralde, G.R. No. 192294, November 21, 2012)
80. What is the idem sonansrule in trademark?
Under this rule, two names are said to be “idem sonans” if the attentive ear finds difficulty in
distinguishing them when pronounced. (Martin vs. State, 541 S.W. 2d 605) A mark with a
different spelling but is similar in sound with a registered trademark when read may be ruled
as being confusingly similar with the said registered mark. (Divina, Divina on Commercial Law
Volume II, 2021, p. 267)
81. What is the rule on the registrability of well-known marks?
If the well-known mark is registered in the Philippines, any mark identical with,
confusingly similar to, or constitutes a translation of such well-known mark, cannot be used
for identical goods or services or be registered in the Philippines with respect to goods or
services which are not similar to those with respect to which registration is applied for:
provided, that use of the mark would indicate a connection between the goods or services
and the owner of the registered mark, and that the interests of the owner of the registered
mark are likely to be damaged by such use.
If the well-known mark is not registered in the Philippines, the scope of protection
only extends to marks used for identical goods or services. (Sec. 123.1(e), Intellectual
82. Is it necessary that a foreign well-known mark be registered in the Philippines

before said well-known mark may be protected in the Philippines?
No. The fact that a foreign well-known mark is neither registered nor used in the Philippines
is of no moment. The scope of protection initially afforded by Art. 6(b) of the Paris
Convention has been expanded in the 1999 Joint Recommendation Concerning Provisions on
the Protection of Well-Known Marks, wherein the World Intellectual Property Organization
(WIPO) General Assembly and the Paris Union agreed to a non-binding recommendation that
a well-known mark should be protected in a country even if the mark is neither registered nor
used in that country. (Sehwani Inc. and/or Benita„s Frites Inc. vs. In-N-Out Burger, Inc. G.R. No.
171053, October 15, 2007)
83. What are the elements of trademark infringement?
The elements of trademark infringement are the following:
a. The trademark being infringed is registered in the Intellectual Property Office;

b. The trademark is reproduced, counterfeited, copied, or colorably imitated by the
infringer;

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c. The infringing mark is used in connection with the sale, offering for sale, or advertising
of any goods, business or services; or the infringing mark is applied to labels, signs,
prints, packages, wrappers, receptacles or advertisements intended to be used upon or
in connection with such goods, business or services;
d. The use or application of the infringing mark is likely to cause confusion or mistake or to
deceive purchasers or others as to the goods or services themselves or as to the source
or origin of such goods or services or the identity of such business; and
e. The use or application of the infringing mark is without the consent of the trademark
owner or the assignee thereof. (Diaz vs. People of the Philippines, G.R. No. 180677, February
18, 2013)
84. What are the remedies of the owner of the registered trademark if his rights to
the trademark are infringed?
The remedies of the owner of the registered trademark if his rights to the trademark are
infringed are:
a. Filing a civil action for trademark infringement to recover damages from the infringer.
The measure of damages shall either be the reasonable profit which the owner would
have made had the infringer not infringe the owner‟s rights, or the profit which the
infringer actually made out of the infringement, or such reasonable percentage to be
determined by the court if the mentioned measures cannot be reasonably ascertained;
b. Recovery of attorney‟s fees and the costs of suit;
c. Application with the court for the issuance of an order to impound during the pendency
of the civil action;
d. Application for injunction;
e. Application with the court for the issuance of an order to destroy infringing materials and
goods;
f. Filing of a criminal action for trademark infringement. (Secs. 156, 157, and 170,
Intellectual Property Code, as amended)
85. Is notice required in order to recover damages for infringement?
Yes. In any suit for infringement, the owner of the registered mark shall not be entitled to
recover profits or damages unless the acts have been committed with knowledge that such
imitation is likely to cause confusion, or to cause mistake, or to deceive. Such knowledge is
presumed if the registrant gives notice that his mark is registered by displaying with the mark
the words “Registered Mark” or the letter R within a circle or if the defendant had otherwise
actual notice of the registration. (Sec. 180, Intellectual Property Code, as amended)
86. What are the acts constituting unfair competition?
Any person shall be guilty of unfair competition who shall:
a. Employ deception, or any other means contrary to good faith by which he shall pass off the
goods manufactured by him or in which he deals, or his business, or services for those of the
one having established such goodwill; or
b. Commit any acts calculated to produce said result. (Sec. 168.2, Intellectual Property Code, as
amended)

ARELLANO UNIVERSITY
SCHOOL OF LAW
IV. INSURANCE (WHAT CAN BE INSURED, CLAIMS FOR LIFE INSURANCE)
87. What may be insured against?
Any contingent or unknown event, whether past or future, which may damnify a person
having an insurable interest, or create a liability against him, may be insured against. (Sec. 3,
Insurance Code)
88. What is the test to determine if a contract is an insurance contract or not?
The test depends on the nature of the promise, the act required to be performed, and the
exact nature of the agreement in the light of the occurrence, contingency, or circumstances
under which the performance becomes requisite. An insurance contract is a contract of
indemnity wherein one undertakes for a consideration to indemnify another against loss,
damage, or liability arising from an unknown or contingent event (White Gold Marine Services,
Inc. vs. Pioneer Insurance and Surety Corp., G.R. No. 154514, July 28, 2005 ).
89. What are the elements of an insurance contract?
The elements of an insurance contract are (a) payment of premium, (b) assumption of risk by
the insurer, (c) risk of loss to the insured, (d) insurable interest, and (e) scheme to distribute
losses (Gulf Resorts, Inc. v. Philippine Charter Insurance Corporation, G.R. No. 156167, May 16, 2005).
90. Discuss how claims for life insurance are settled.
The proceeds of a life insurance policy shall be paid immediately upon maturity of the policy,
unless such proceeds are made payable in installments or as an annuity, in which case the
installments, or annuities shall be paid as they become due.
In the case of a policy maturing by the death of the insured, the proceeds thereof shall be
paid within sixty (60) days after presentation of the claim and filing of the proof of death of
the insured.
Note: The proceeds of the policy maturing by the death of the insured payable to the
beneficiary shall include the discounted value of all premiums paid in advance of their due
dates, but are not due and payable at maturity.(Sec. 248, Insurance Code)
91. In marine insurance, when the cargo was lost due to the ship being unseaworthy,
may the shipper, who has no knowledge of the unseaworthiness of the ship, be
entitled to the proceeds of the insurance policy?
No. The fact that the unseaworthiness of the ship was unknown to the insured is immaterial
in ordinary marine insurance and may not be used by him as a defense in order to recover on
the marine insurance policy. The cargo owner is required to look for a common carrier that
keeps its vessels seaworthy. In the absence of stipulation that insurer answers for perils of
the ship, insurance cannot be recovered on losses from perils of the ship ( Roque vs. IAC,
G.R. No. L-66935, November 11, 1985).
92. Differentiate perils of the sea and perils of the ship.
PERILS OF THE PERILS OF THE SHIP

SEA

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PERILS OF THE PERILS OF THE SHIP

SEA
Cause of Loss Fortuitous accidents a. Natural and inevitable action of the sea;
or casualties of the b. Ordinary wear and tear of the ship; or
seas. c. Negligent failure of the ship‟s owner to provide
the vessel with proper equipment to convey the
cargo under ordinary conditions.
Compensability Generally Not compensable unless the insurance policy is an
compensable. “All Risk Marine Insurance Policy.”
(Aquino, Essentials of Insurance Law, 2018, p. 311)
93. What is Compulsory Motor Vehicle Liability Insurance (CMVLI)?
It is an insurance policy that directly insures against liability. The insurer‟s liability accrues
immediately upon the occurrence of the injury upon which liability depends, and does not
depend on the recovery of judgment by the injured party against the insured. It is a contract
of insurance against passenger and third-party liability for death or bodily injuries and
damage to property arising from motor vehicle accidents (Sec. 386(f), Insurance Code).
94. What is an insurable interest?
An insurable interest is that interest which a person is deemed to have in the subject matter
insured, where he has a relation or connection with or concern in it, such that the person will
derive pecuniary benefit or advantage from the preservation of the subject matter insured
and will suffer pecuniary loss or damage from its destruction, termination, or injury by the
happening of the event insured against. (Lalican vs. The Insular Life, G.R. No. 183526, August 25,
2009)
95. Discuss the insurable interest of a mortgagor and a mortgagee with respect to a
mortgaged property.
The insurable interests of the mortgagor and mortgagee are separate and distinct. The
mortgagor, as owner of the property, has insurable interest over the property to the extent of
its value. The mortgagee has insurable interest to the extent of the debt secured and such
interest continues until the mortgage debt is extinguished (RCBC vs. CA, G.R. No. 128833, April 20,
1998).
96. Differentiate insurable interest in life insurance and insurable interest in property
insurance.
LIFE INSURANCE PROPERTY INSURANCE

Extent Unlimited, except if secured Limited to the value of the
by the creditor. property.
Time when the insurable At the time of the perfection At the time of perfection of the
interest must exist of the insurance contract. contract and at the time of the
loss.
Need for legal basis Expectation of benefit need Expectation of benefit must have
not have legal basis or need legal basis.
not be based on legally
enforceable obligation.
Beneficiary’s interest Insurable interest is not Beneficiary must have insurable
necessary if the insured took interest.
out the policy on his own life

ARELLANO UNIVERSITY
SCHOOL OF LAW
LIFE INSURANCE PROPERTY INSURANCE

and designated another.
Beneficiary must have

insurable interest if one took
out an insurance on the life
of another.
97. Differentiate double insurance and over-insurance.
DOUBLE INSURANCE OVER INSURANCE

Value of Policy/ies The subject, although insured A property is insured for an
by several insurers, is not amount in excess of its value.
necessarily insured for an
amount in excess of its value.
Number of Insurers There are always several There may be one or several
insurers. insurer/s involved.
Applicability in Life and There can be double There can be no over-

Property Insurance insurance in both life and insurance in life insurance.
property insurance.
98. Differentiate double insurance and reinsurance.
DOUBLE INSURANCE REINSURANCE

Capacity of the Insurer The insurer remains in such The insurer becomes an
capacity only. insured (reinsured) in the
reinsurance policy.
Number of Insured There is only one insured. There are two separate
insured.
Subject Matter The subject matter is the The subject matter is the
property insured. liability of the insured.
Interest Insured The same interest is insured. It involves separate interests.
Perils Insured Against Same peril is insured against Different perils are insured
in separate policies. against in separate policies.
99. A is the proud owner of a newly-built house worth Php 5,000,000.00. As a

protection against any possible loss or damage to his house, A applied for a fire
insurance thereon with B Company on October 11, 2019 and paid the premium in
cash. It took the company a week to approve A’s application. On October 18,
2019, B Company mailed the approved policy to A which the latter received five
(5) days later. However, A’s house had been razed by fire which transpired a day
before his receipt of the approved policy. A filed a written claim with B Company
under the insurance policy. Decide A’s claim with reasons.
A‟s claim should be denied. What governs insurance contract is the cognition theory
whereby the insurance contract is perfected only from the time the applicant came to know of
the acceptance of the offer by the insurer. In this case, the loss occurred a day prior to A‟s

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knowledge of the acceptance by B Company of his application. There being no perfected

insurance contract, A is not entitled to recover from B Company. (Great Pacific Life Assurance
Corporation vs. CA, G.R. No. L-31845, April 30, 1979)
100. What is the effect of non-payment of the first premium?
The obligation of the insurer will not become valid and binding if the first premiumhas not
been paid. Notwithstanding any agreement to the contrary, no policy or contract of insurance
issued by an insurance company is valid and binding unless and until the premium thereof
has been paid (Sec. 77, Insurance Code).
101. When is an insurance contract binding even if premium is unpaid?
The exceptions to the rule that the insurance contract is not valid and binding unless the
premiums have paid are:
a. When the grace period applies in case of life and industrial life policy;
b. When there is an acknowledgment in the policy or receipt that the premium has been
paid;
c. When there is an agreement that the premium shall be payable on installment;
d. When there is a credit extention; and
e. When the equitable doctrine of estoppel applies (UCPB General Insurance Co., Inc. vs.
MasaganaTelemart, Inc., G.R. No. 137172, April 4, 2001).
102. Does the right of the insured to reinstatement of a life insurance give him or her
an absolute right to reinstatement?
No. The insurer has the right to deny the reinstatement if the following circumstances are
present: (1) the insurer is not satisfied as to the insurability of the insured; and (2) if the
insured does not pay the overdue premiums and all other indebtedness to the insurance
company (Andres vs. The Crown Life Insurance Company, G.R. No. L-10874, January 28, 1958).
103. When is the return of premium warranted?
The return of premium is warranted in the following cases:

a. When the thing was not exposed to the peril insured against ( Sec. 80(a), Insurance
Code);
b. “Time policy” when the policy is surrendered before the expiration of the stipulated (Sec.
80(b), Insurance Code);
c. When the contract is voidable and subsequently annulled under the provisions of the Civil
Code (Sec. 82, Insurance Code);
d. When the contract is annulled on account of the fraud or misrepresentation of the insurer
or of his agent or on account of facts, or the existence of which the insured was ignorant
of without his fault (Sec. 82, Insurance Code);
e. When by any default of the insured other than actual fraud, the insurer never incurred
liability under the policy (Sec. 82, Insurance Code); and
f. When there is over-insurance by several insurers (Sec. 83, Insurance Code).
104. What is the test of materiality in concealment and in representation?
Materiality is to be determined not by the event, but solely by the probable and reasonable
influence of the facts upon the party to whom the communication is due, in forming his
estimate of the disadvantages of the proposed contract, or in making his inquiries ( Secs. 31
and 46, Insurance Code).

ARELLANO UNIVERSITY
SCHOOL OF LAW
105. X applied for life insurance with Metropolitan Life Insurance Company. The
application contained the question, “Have you ever had any ailment or disease of
the stomach or intestines, liver, kidney or genitourinary organ?” X, a laundry
woman who has no medical knowledge answered “No.” The application was
approved and premium was paid. Six months later, X died from stomach cancer.
The post-mortem examination of X shows that she had the cancer at the time she
applied for a policy. Can the beneficiary of X collect on the policy? Explain.
No, the beneficiary of X cannot collect on the policy. The matter concealed was material.
Hence, the insurer has a valid defense against the beneficiary. The defense is available even
if X was not aware of her fatal illness because Sec. 27 of the Insurance Code gives the right
to the insurer to avoid the policy whether the concealment is intentional or unintentional.
106. On June 18, 1997, A applied for and was granted a housing loan by XYZ Bank. This
loan was secured by a promissory note, a real estate mortgage over the lot, and a
mortgage redemption insurance taken on the life of A with XYZ Bank as
beneficiary. A died. A year after his death, XYZ Bank filed with Secured Life a
death claim under A’s name pursuant to the Group Mortgage Redemption
Insurance. Secured Life denied the claim after determining that A was not eligible
for coverage as he was supposedly more than 60 years old at the time of his loan’s
approval. Relying on A’s Health Statement Form where he wrote “1942” as his
birth year, Secured Life rescinded the Group Mortgage Redemption Insurance
obtained by XYZ Bank on A’s life. Is A guilty of fraudulent misrepresentation as to
warrant the rescission of the Group Mortgage Redemption Insurance obtained by
XYZ Bank on A’s life?
No. Proof of fraudulent intent in cases of rescission of an insurance contract due to false
representations is indispensable. When an abundance of available documentary evidence can
be referenced to demonstrate a design to defraud, presenting a singular document with an
erroneous entry does not qualify as clear and convincing proof of fraudulent intent. Fraud is
not to be presumed, for "otherwise, courts would be indulging in speculations and surmises."
(Insular Life vs. Heirs of Alvarez, G.R. No. 207526, October 3, 2018 )
107. May the insurer rescind the contract of insurance on the ground of fraud,
concealment, or misrepresentation where the insured dies before the expiration of
the two-year contestability period?
No. The death of the insured within the two-year period will render the right of the insurer to
rescind the policy nugatory. As such, the incontestability period will now set in and the
insurer is bound to make good its obligation under the policy, regardless of the presence or
lack of concealment or misrepresentation. (Sun Life vs. Sibya, G.R. No. 211212, June 8, 2016)
108. What is the effect of misrepresentation?
The injured party is entitled to rescind the contract from the time when the representation
becomes false if a representation is false in a material point, whether affirmative or
promissory (Sec. 45, Insurance Code).
109. Who can exercise the rights of the minor under a life insurance policy where he is
an insured or beneficiary?
The following can exercise the rights of the minor under a life insurance policy where he is an
insured or beneficiary with an interest not exceeding Php 500,000.00:
a. Father;
b. Mother, but only in the absence or incapacity of the father;

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c. In the absence of the father or the mother, the following may exercise the right without
need of court appointment:
i. The grandparent,
ii. The eldest brother or sister at least eighteen (18) years of age, or
iii. Any relative who has actual custody of the minor insured or beneficiary. (Sec. 182,
Insurance Code, as amended by R.A. No. 10607)
110. When is the insurer in a life insurance contract liable in case of suicide by the
insured?
The insurer in a life insurance contract shall be liable in case of suicide only when it is
committed after the policy has been in force for a period of two (2) years from the date of its
issue or of its last reinstatement. However, by way of exception, the insurer is liable in case
of suicide even before the two-year period when:
a. A shorter period is provided for in the policy; or
b. The suicide was committed in the state of insanity. (Sec. 183, Insurance Code)
111. On May 3, 2017, a life insurance policy was issued by the insurer to W payable
upon her death. She designated her husband H as her beneficiary. In the
application form for the life insurance policy, there was a question whether W had
ever consulted a psychiatrist to which she answered “Never” although the truth
was that she had undergone psychiatric counseling for depression. On May 10,
2019, W deliberately jumped off a building and died. H filed a claim on the policy.
The insurer denied the claim on the ground that W committed suicide and that W
was guilty of fraudulent misrepresentation. Is the insurer’s refusal to pay the
proceeds of the policy justified?
No. Under Sec. 183 of the Insurance Code, the insurer in life insurance contract shall be liable
in case of suicide only when it is committed after the policy has been in force for a period of
two (2) years from the date of its issue or of its last reinstatement, unless the policy provides
a shorter period. Also, under Sec. 48 of the same Code, after a life insurance policy made
payable on the death of the insured shall have been in force during the lifetime of the insured
for a period of two (2) years from the date of its issue or of its last reinstatement, the insurer
cannot prove that the policy is void ab initio or is rescindable by reason of fraudulent
concealment or misrepresentation of the insured or his agent.
112. X, the insured in a life insurance policy with an accidental death benefit clause
which excluded an “injury intentionally inflicted by a third party,” was stabbed
multiple times by a band of robbers, which resulted to the death of X. The
beneficiaries of X filed a claim under the policy. The insurance company paid for
the basic amount of the policy but refused to pay the additional sum under the
accidental death benefit clause. The beneficiaries filed a suit to recover. Is the
insurance company liable to pay the additional sum under the accidental death
benefit clause?
No. Where a provision of the policy excludes intentional injury, it is the intention of the
person inflicting the injury that is controlling. If the injuries suffered by the insured clearly
resulted from the intentional act of a third person, the insurer is relieved from liability as
stipulated. (Biagtan vs. The Insular Life Assurance Company, Ltd., G.R. No. L-25579, March
29, 1972)
113. What are the defenses that may be invoked by the insured or his beneficiaries
against revocation of the insurance contract by the insured?
The defenses that may be invoked by the insured or his beneficiaries against revocation of
the insurance contract are:

ARELLANO UNIVERSITY
SCHOOL OF LAW
a. Guaranteed Insurability Clause (Secs. 48, 183, and 243(b), Insurance Code)
b. Failure to invoke before commencement of the action (Sec. 48, Insurance Code;
Philamcare Health Systems, Inc. vs. CA, G.R. No. 125678, March 18, 2002)
c. Waiver (Sec. 33, Insurance Code)
d. Estoppel (Art. 1431, Civil Code)
114. Discuss the rules on loss in insurance.
Loss for which insurer is liable Loss for which insurer is not liable
a. Proximate cause of the loss was a peril insured a. Loss where the peril insured
against. against was a remote cause.
b. The thing insured is damaged because it was b. Peril insured against is the
being rescued from the peril insured against; immediate cause, but the
c. Loss caused by efforts to rescue the thing proximate cause is an excepted
insured from peril insured against. peril.
d. Peril insured against is the immediate cause, if c. Loss caused by the willful act of
the proximate cause is not an excepted peril; the insured; and
and d. Loss due to connivance of the
e. Loss through negligence of insured. insured.
(Sections 86-89, Insurance Code)
115. When are the defects in the notice or proof of loss waived?
All defects in a notice of loss, or in preliminary proof thereof, which the insured might
remedy, and which the insurer omits to specify to him, without unnecessary delay, as
grounds of objection, are waived (Sec. 92, Insurance Code).
116. When is the delay in the presentation to an insurer of notice or proof of loss
waived?
The delay is waived if caused by any act of the insurer, or if the insurer omits to take
objection promptly and specifically upon that ground (Sec. 93, Insurance Code).
117. An insurance company issued a marine insurance policy covering a shipment by

sea from Mindoro to Batangas of 1,000 pieces of Mindoro garden stones against
“Total Loss Only.” The stones were loaded in two lighters, the first with 600 pieces
and the second with 400 pieces. Because of rough seas, damage was caused to
the second lighter resulting in the loss of 325 out of the 400 pieces. The owner of
the shipment filed claims against the insurance company on the ground of
constructive total loss inasmuch as more than ¾ of the value of the stones had
been lost in one of the lighters. Is the insurance company liable under its policy?
Why?
No, the insurance company is not liable because there was no total loss. The liability of the
insurer under the policy is for “Total Loss Only.” In this case, the insurance was over the
1,000 pieces of garden stones and only 325 were lost. There is no constructive total loss even
if the loss constitutes 2/3 of the stones shipped in the second lighter. Although they were
shipped on separate lighters, the two shipments totaling 1,000 pieces of garden stones were
under a single and indivisible coverage (Oriental Assurance vs. Court of Appeals and Panama
Saw Mill, G.R. No. 94052, August 9, 1991).

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118. What is the rule as to the refusal by an insurance company to pay or settle claims
arising from its policies?
Under Sec. 247(a) of the Insurance Code, no insurance company doing business in the
Philippines shall refuse, without just case, to pay or settle claims arising under coverages
provided by its policies.
119. What are considered as unfair claims settlement practices?
Any of the following acts by an insurance company, if committed without just cause and
performed with such frequency as to indicate a general business practice, shall constitute
unfair claim settlement practices:
a. Knowingly misrepresenting to claimants pertinent facts or policy provisions relating to

coverage at issue;
b. Failing to acknowledge with reasonable promptness pertinent communications with
respect to claims arising under its policies;
c. Failing to adopt and implement reasonable standards for the prompt investigation of
claims arising under its policies;
d. Not attempting in good faith to effectuate prompt, fair and equitable settlement of
claims submitted in which liability has become reasonably clear; or
e. Compelling policyholders to institute suits to recover amounts due under its policies by
offering without justifiable reason substantially less than the amounts ultimately
recovered in suits brought by them (Sec. 247, Insurance Code).
120. What are the sanctions prescribed by law for unfair claims settlement practices?
If it is found, after notice and an opportunity to be heard, that an insurance company has
committed unfair claims settlement practice/s, each instance of non-compliance may be
treated as a separate violation and shall be considered sufficient cause for the suspension or
revocation of the company‟s certificate of authority (Sec. 247©, Insurance Code).
121. What is the prescriptive period for the filing of a complaint for the recovery of the
proceeds of the insurance?
The Insurance Code does not provide for a prescriptive period, except for the one-year period
provided for in the case of Compulsory Third Party Liability Insurance under Sec. 397 of the
Insurance Code.However, the parties may stipulate a prescriptive period in the policy subject
to the limitation under Sec. 63 of the Insurance Code, declaring void a stipulation limiting the
time for commencing an action thereunder to a period of less than one (1) year from the
time when the cause of action accrues.
If no prescriptive period is provided for in the policy, the prescriptive period is ten (10) years
from the rejection of the claim by the insurer. This is consistent with Art. 1144 of the Civil
Code which provides that the prescriptive period for written contracts is ten (10) years.
122. When is the insurer subrogated to the rights of the insured?
The right of subrogation accrues upon payment by the insurance company of the insurance
claim. The payment by the insurer to the insured operates as an equitable assignment to the
insurer of all the remedies which the insured may have against the third party whose
negligence or wrongful act caused the loss (Keihin-Everett Forwarding Co., Inc. vs. Tokio Marine
Malayan Insurance Co., Inc. and Sunfreight Forwarders & Customs Brokerage, G.R. No. 212107,
January 28, 2019).

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SCHOOL OF LAW
123. What are the limitations to the right of subrogation of the insurer?
If the claim of the insured against a third party is limited, the right of subrogation of the
insurer is likewise limited. As subrogee, the insurer steps into the shoes of the insured and
may exercise only those rights that the insured may have against the wrongdoer who caused
the damage (Aboitiz Shipping Corp. vs. Insurance Company of North America, G.R. No. 168402,
August 6, 2008).
124. What is the prescriptive period in cases where the insurer is subrogated to the
rights of the insured against the wrongdoer based on a quasi-delict?
The current rule is that the prescriptive period is four (4) years from the time the tort is
committed against the insured by the wrongdoer. Following the principles of subrogation, the
insurer only steps into the shoes of the insured and therefore, for purposes of prescription,
inherits only the remaining period within which the insured may file an action against the
wrongdoer. The prescriptive period of the action that the insured may file against the
wrongdoer begins at the time that the tort was committed and the loss/injury occurred
against the insured (Vicente Henson Jr. vs. UCPB General Insurance, Co., G.R. No. 223134, August
14, 2019).
125. What are the requirements for the formation of insurance corporations?
The requirements for the formation of insurance corporations are:
a. The corporation must possess the capital and assets required of an insurance
corporation doing the same kind of business in the Philippines and invested in the same
manner;
b. The Insurance Commissioner had granted a certificate to the effect that the insurer has
complied with the provisions of the Insurance Code;
c. It must have obtained a certificate of authority to transact business from the Insurance
Commissioner; and
d. It must have paid the fees prescribed and filed the necessary documents to the
Insurance Commissioner (Secs. 192 and 193, Insurance Code).
V. REPUBLIC ACT NO. 10173 (DATA PRIVACY ACT OF 2012)
126. What is the state policy of the Data Privacy Act?
It is the policy of the State to protect the fundamental human right of privacy, of
communication while ensuring free flow of information to promote innovation and growth.
The State recognizes the vital role of information and communications technology in nation-
building and its inherent obligation to ensure that personal information in information and
communications systems in the government and in the private sector are secured and
protected. (Sec. 2, Data Privacy Act)
127. What is the scope of the Data Privacy Act?
It applies to the processing of all types of personal information and to any natural and
juridical person involved in personal information processing including those personal
information controllers and processors who, although not found or established in the
Philippines, use equipment that are located in the Philippines, or those who maintain an
office, branch or agency in the Philippines subject to the immediately succeeding
paragraph: Provided, That the requirements of Sec. 5 (Protection Afforded to Journalists
and Their Sources) are complied with. (Sec. 4, Data Privacy Act)

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128. What is theextraterritorial application of the Data Privacy Act?
It applies to an act done or practice engaged in and outside of the Philippines by an entity if:
a. The act, practice or processing relates to personal information about a Philippine citizen
or a resident;
b. The entity has a link with the Philippines, and the entity is processing personal
information in the Philippines or even if the processing is outside the Philippines as long
as it is about Philippine citizens or residents such as, but not limited to, the following:
i. A contract is entered in the Philippines;
ii. A juridical entity unincorporated in the Philippines but has central management
and control in the country; and
iii. An entity that has a branch, agency, office or subsidiary in the Philippines and the
parent or affiliate of the Philippine entity has access to personal information; and
c. The entity has other links in the Philippines such as, but not limited to:
i. The entity carries on business in the Philippines; and
ii. The personal information was collected or held by an entity in the Philippines.
(Sec. 6, Data Privacy Act)
129. Who is a data subject?
A data subject is an individual whose personal information is processed (Sec. 3(c), Data
Privacy Act).
130. What is personalinformation?
It refers to any information, whether recorded in a material form or not, from which the
identity of an individual is apparent or can be reasonably and directly ascertained by the
entity holding the information, or when put together with other information would directly
and certainly identify an individual (Sec. 3(g), Data Privacy Act).
131. What is “sensitive personal information”?
The term “sensitive personal information” refers to personal information:
d. About an individual‟s race, ethnic origin, marital status, age, color, and religious,
philosophical or political affiliations;
e. About an individual‟s health, education, genetic or sexual life of a person, or to any
proceeding for any offense committed or alleged to have been committed by such
person, the disposal of such proceedings, or the sentence of any court in such
proceedings;
f. Issued by government agencies peculiar to an individual which includes, but not limited
to, social security numbers, previous or current health records, licenses or its denials,
suspension or revocation, and tax returns; and
g. Specifically established by an executive order or an act of Congress to be kept classified .
(Sec. 1(l), Data Privacy Act)
132. What are the main differences between personal information (PI) and sensitive
personal information (SPI)?
PERSONAL INFORMATION SENSITIVE PERSONAL

INFORMATION
Processing Processing of PI is allowed if not Processing of SPI is prohibited unless
otherwise prohibited by law, and at least one ground for lawful
when at least one ground for lawful processing exists.
processing exists.
Penalty There are penalties for unlawful acts Penalties for unlawful acts involving

ARELLANO UNIVERSITY
SCHOOL OF LAW
involving PI. SPI are more severe.

(Divina, Divina on Commercial Law Volume II, 2021, p. 509)
133. Differentiate outsourcing or subcontracting and data sharing.
OUTSOURCING/ DATA SHARING

SUBCONTRACTING
Parties The parties have to be at least one All parties to a data sharing
personal information controller and agreement are considered personal
one personal information processor. information controllers.
Objective A personal information processor Each party has its own purpose for
has no other reason for processing processing the personal data
the personal data other than that as involved.
instructed by the personal
information controller.
134. What are the general data privacy principles that govern the processing of
personal information?
The processing of personal data shall be allowed subject to adherence to the principles of
transparency, legitimate purpose, and proportionality.
a. Transparency. The data subject must be aware of the nature, purpose, and extent of
the processing of his or her personal data, including the risks and safeguards involved,
the identity of personal information controller, his or her rights as a data subject, and
how these can be exercised. Any information and communication relating to the
processing of personal data should be easy to access and understand, using clear and
plain language.
b. Legitimate purpose. The processing of information shall be compatible with a declared
and specified purpose which must not be contrary to law, morals, or public policy.
c. Proportionality. The processing of information shall be adequate, relevant, suitable,
necessary, and not excessive in relation to a declared and specified purpose. Personal
data shall be processed only if the purpose of the processing could not reasonably be
fulfilled by other means. (Sec. 18, Rule IV, IRR of the Data Privacy Act)
135. What are the rights of a data subject?
The rights of a data subject are as follows:
a. Right to be informed;
b. Right to object;
c. Right to access;
d. Right to rectification;
e. Right to erasure or blocking;
f. Right to damages;
g. Right to file a complaint;
h. Right to data portability; and
i. Transmissibility of rights. (Sec. 34, Rule VIII, IRR of Data Privacy Act)
136. What are the limitations to the rights of a data subject?
The rights of a data subject shall not be applicable if the processed personal data are used
only for the needs of scientific and statistical research and, on the basis of such, no
activities are carried out and no decisions are taken regarding the data subject: Provided,
that the personal data shall be held under strict confidentiality and shall be used only for the
declared purpose.

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PRE-WEEK NOTES
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The rights are also not applicable to the processing of personal data gathered for the purpose
of investigations in relation to any criminal, administrative, or tax liabilities of a
data subject.
Any limitation on the rights of the data subject shall only be to the minimum extent necessary
to achieve the purpose of said research or investigation. (Sec. 37, Data Privacy Act)
- HAIL TO THE CHIEFS -

AUSL The Law Pertaining To Private Personal and Commercial Relations

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AUSL The Law Pertaining To Private Personal and Commercial Relations

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EXECUTIVE COUNCIL

JAYSON FRANCISCO JULIAN PAOLO FABROS LOUIE JOHN BAYON

REA MAY HERMOSURA MA. ISIS DANIELLE VOLANTE CRISTOBAL RABINO

MIKYLA CORDERO TIMOTHY JAMES PACSON ARRIANE SANGALANG

CIVIL LAW COMMISSION

COMMERCIAL LAW COMMISSION

ATTY. ANTONY PARREÑO

ALL RIGHTS RESERVED © 2021

I. LEGAL PERSONALITY, CAPACITY TO ACT

1. When is a child considered born for civil purposes?

2. Distinguish juridical capacity from capacity to act?

Basis Juridical Capacity Capacity to Act

Age, insanity, imbecility, state of being deaf-mute,

II. MARITAL RELATIONSHIPS

3. What is the status of the following marriages:

(a) A marriage between a step-brother and a step-sister?

(b) A marriage between a half-brother and a half-sister?

Center for Legal Education And Research |1

(d) A marriage contracted by an 18-year-old illegitimate child who obtained the

(e) A second marriage celebrated on August 3, 1984, contracted by a person whose

Bar Operations Commissions |2

9. Can consul-generals, consuls, or vice-consuls solemnize a marriage abroad between a

Center for Legal Education And Research |3

10. May a divorce decree obtained abroad by a Filipino married to a foreigner be

Distinction Art. 40 Art. 35 (4)

13. When is declaration of nullity of marriage on the ground of psychological incapacity

To warrant the declaration of nullity of marriage, the psychological incapacity must be

Bar Operations Commissions |4

16. May a person unilaterally declare his marriage void?

Center for Legal Education And Research |5

18. What are the actions for annulment of voidable marriages?

Bar Operations Commissions |6

III. PROPERTY (CONCEPT OF PROPERTY, OWNERSHIP, CO-OWNERSHIP, RIGHT OF

21. To what does “property” extend to.

23. What are the characteristics of co-ownership?

The following are the characteristics of co-ownership:

Center for Legal Education And Research |7

BUILDING, PLANTING, OR SOWING

Bar Operations Commissions |8

than that of the the BP to pay the

BUILDING, PLANTING, OR SOWING

26. What are the requisites of accretion as a mode of acquiring property?

Center for Legal Education And Research |9

28. What are the rights of the dominant estate owner?

Bar Operations Commissions |10

29. What are the rights of the servient estate owner?

30. What are the requisites of a legal or compulsory right of way?

31. What is a nuisance?

Nuisance is any omission, establishment, business or condition of property or anything else

Culpa Contractual Culpa Aquiliana Culpa Criminal

Center for Legal Education And Research |11

DEFENSE OF A GOOD FATHER OF A FAMILY

SPECIFIC OBLIGATION GENERIC OBLIGATION

34. Effect of Breach of Both Parties:

Bar Operations Commissions |12

40. What is the nature of Novation?

Center for Legal Education And Research |13

41. What is subrogation, and its two forms?

42. Distinguish Subrogation from Assignment

DISTINCTION SUBROGATION ASSIGNMENT

Bar Operations Commissions |14

V. CONTRACTS (IN GENERAL, LOANS AND MORTGAGES, INTEREST)

1. The error must be substantial regarding: