We humbly ask for peace

in our hearts, our bodies, our minds, and our souls,

as we wait patiently and confidently.

Not once did you leave us despite our failures and sins.
We recognize and accept the death of your Son, Jesus on the
cross, as a symbol of your unconditional love for us. We thank
you for the assurance of eternal life upon acceptance of Jesus as
our Savior.

Father, we humbly come before you as one family to ask that for
your Divine providence we implore the help of the Holy Spirit to
work in the hearts of those who are preparing for the 2021 Bar
Examination, especially members of our Bedan family.
 SAN BEDA UNIVERSITY
College of Law

The RGCT – Bar Operations Center is a recognized organization of the San Beda
University College of Law dedicated to assisting our Bedan brothers and sisters in their pre and post-
preparations in taking the Philippine Bar Examinations administered by the Supreme Court. The Bar
Operations Group formerly known as the Centralized Bar Operations was renamed as the RGCT –
Bar Operations Center in honor of our beloved Mother of Lions, Atty. Risel G. Castillo-Taleon for her
life dedication in teaching and for caring and taking the Organization under her wings. Working on
continuing her legacy, the RGCT – Bar Operations Center continues to innovate and improve its
services for our Bedan Brethren amidst the COVID-19 pandemic.
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ALL RIGHTS RESERVED

I. PERSONS AND FAMILY RELATIONS ...................................................................................... 02
A. Legal Personality and Capacity to Act .................................................................................. 02
B. Marital Relationships ............................................................................................................. 02

II. PROPERTY ................................................................................................................................. 07

A. Concept of Property .............................................................................................................. 07
B. Ownership ............................................................................................................................. 08
C. Co-ownership ........................................................................................................................ 08
D. Right of Accession ................................................................................................................ 08
E. Easements ............................................................................................................................ 09
F. Nuisance ............................................................................................................................... 10

III. OBLIGATIONS AND CONTRACTS ........................................................................................... 11

A. Obligations ............................................................................................................................ 11
B. Contracts ............................................................................................................................... 12
C. Loans..................................................................................................................................... 15
D. Mortgages ............................................................................................................................. 16
E. Interest .................................................................................................................................. 16

IV. TORTS, QUASI DELICTS ........................................................................................................... 17

V. DAMAGES .................................................................................................................................. 23

I. INSURANCE LAW ...................................................................................................................... 26

A. What can be Insured ............................................................................................................. 26
B. Claims for Life Insurance ...................................................................................................... 26

II. CORPORATIONS ....................................................................................................................... 28

A. Kinds of Corporations............................................................................................................ 28
B. Composition of / Membership in Board of Directors ............................................................. 31
C. Powers, Duties, and Prerogatives of Board of Directors and Stockholders ......................... 32
D. Articles of Incorporation and By-Laws .................................................................................. 38

III. INTRA-CORPORATE DISPUTE ................................................................................................. 39

A. Concept of Intra-Corporate Dispute ...................................................................................... 39
IV. INTELLECTUAL PROPERTY ..................................................................................................... 41
A. Copyrights ............................................................................................................................. 41

V. DATA PRIVACY ACT OF 2012 (REPUBLIC ACT NO. 10173) ................................................. 45

A. Scope of the Act .................................................................................................................... 45
B. Processing of Personal Information ...................................................................................... 46
C. Rights of the Data Subject .................................................................................................... 47
(1) Distinguish juridical capacity from capacity to act.

The distinctions are the following:

JURIDICAL CAPACITY vs. CAPACITY TO ACT

JURIDICAL CAPACITY CAPACITY TO ACT
As to Definition It is the aptitude to be the subject of It is the power to give life to juridical acts or to
rights and obligations. execute acts with legal effects
As to Acquisition Inherent in every natural person, Not inherent, it is acquired through the
therefore it is not acquired fulfillment of specific legal activities
As to Loss It is lost only through death (in It may be lost through death and other means
natural person) or circumstances
As to Limitation It cannot be limited or restricted It may be limited or restricted.

Articles 38 – Restriction on Capacity to Act Ex.

Minority, insanity or imbecility, state of being
deft mute, prodigality and civil interdiction

Article 39 of the Civil Code- Circumstances

which modify or limit Capacity to Act
Ex. Age, insanity, imbecility, the state of being
deft-mute, penalty, prodigality, family relations,
alienage, absence, insolvency and trusteeship.
In Relation Can exist without capacity to act Exists always with juridical capacity
to the Other

(2) R donated P1 Million to the unborn child of his pregnant girlfriend, which she accepted. After six (6)
months of pregnancy, the fetus was born and baptized as X. However, X died 20 hours after birth. R
sought to recover the P 1 Million. Is R entitled to recover?

Yes, R is entitled to recover the P 1 Million. The Civil personality of a child commences from the time of
conception for all purposes favorable to it provided it be born later with the conditions specified in Article 41 CC.
Here, while the donation is favorable to the fetus, the child did not acquire legal personality / juridical capacity to
become a donee because it had an intra-uterine life of less than 7 months and it died within 24 hours after its
complete delivery from the maternal womb. Hence, the donation cannot take effect and the amount donated
must be returned to avoid unjust enrichment.

(3) Legal capacity to contract marriage

FOR FOREIGNERS FOR FILIPINOS SAME SEX MARRIAGE

Governed by their national law. To be capacitated to contract Same sex marriage is not
marriage, the parties must be: recognized as valid here in the
They must submit a certificate of legal 1. A male and a female; Philippines, even if the marriage
capacity to contract marriage issued 2. At least 18 years of age UNLESS is solemnized abroad and valid
 FOR FOREIGNERS
by their respective diplomatic or
consular officials (FAMILY CODE,
Article 21)
FOR FILIPINOS SAME SEX MARRIAGE
covered by the Sharia Personal there as such.
Law; and
3. Must not be suffering from any Effect of Sex Reassignment
legal impediment mentioned in Surgery:
Article 37 (Incestuous) and 38
(Contrary to Public Policy) of the In Silverio vs Republic, it was
Family Code held that in this jurisdiction there
is no law recognizing sec
INCESTUOUS MARRIAGES, reassignment and its effects.
WHETHER THE RELATIONSHIP IS The sex of a Filipino is
LEGITIMATE OR ILLEGITIMATE, determined at birrh, visually
BETWEEN: (AB) done by the birth attendant (the
a. Ascendants & Descendants of any physician or midwife) by
degree; and examining the genitals of the
b. Brothers & Sisters whether full or infant. (Civil Register Law, Act
half-blood No. 3753) HOWEVER, the
(FAMILY CODE, Art. 37). ruling in Silverio will not apply if
a person who underwent sex
THOSE CONTRARY TO PUBLIC reassignment surgery is a
POLICY CONTRACTED BETWEEN: foreigner and his national law
(COS-PAAS2A-K) allows him to have a change of
a. Collateral blood relatives whether sex
legitimate or illegitimate up to the
4th civil degree;
b. Step-parents & step children;
c. Parents-in-law & children-in-law;
d. Adopting parent & adopted child;
e. Adopted child & a legitimate child
of the adopter;
f. Surviving spouse of the adopting
parent & the adopted child;
g. Surviving spouse of the adopted
child & adopter;
h. Adopted children of the same
adopter; and
i. Parties wherein one, with the
intention to marry the other, Killed
the latter’s spouse, or his/her
spouse (FAMILY CODE, Art. 38).

The following can now marry each

other: (LSG-CAC)
a. Brother–in–Law and sister–in–law;
b. Stepbrother and stepsister;
c. Guardian and ward;
d. Parties who have been Convicted
of adultery or concubinage; and
e. Adopted and illegitimate child,
parents and relatives by
consanguinity or affinity of the
adopter (SEMPIO-DIY, supra at
45).

(4) Essential and Formal Requisites of Marriage, Exceptions to the License Requirement, Void and Voidable
Marriages

ESSENTIAL AND FORMAL EXCEPTIONS TO THE LICENSE VOID MARRIAGES

REQUISITES OF MARRIAGE REQUIREMENT: (ARMZ-5)
Essential Requisites of 1. Marriage in Articulo mortis Void Marriages due to Absence of
Marriage: (LC) between passengers or crew any of the Essential or Formal
1. Legal capacity of the members may be solemnized by Requisites (FAMILY CODE, ART.
 ESSENTIAL AND FORMAL
REQUISITES OF MARRIAGE
contracting parties, who must
be a male and a female; and
a. Eighteen (18) years old or
above; and
b. Not under any impediment
mentioned in Arts. 37 and 38 2. In Remote places – residence of
(FAMILY CODE, Art. 5).
2. Consent freely given in the
presence of a solemnizing
officer (FAMILY CODE, Art. 2).
Note: Consent is different from 3. Among Muslims or members of
motive. A freely given consent
requires that the contracting parties
willingly and deliberately enter into
the marriage. Motives, such as
acquiring foreign citizenship 4. Marriage in articulo mortis
(Republic v. Albios, G.R. No.
198780, October 16, 2013) or out of
reverence for the other spouse's
parents (Republic v. Romero II,
G.R. Nos. 209180 & 209253,
February 24, 2016), are immaterial
for the determination of the validity
of marriage.
Formal Requisites of Marriage:
(ALM)
a. Authority of the solemnizing
officer;
b. Valid Marriage License; and
c. Marriage ceremony where the
contracting parties appear
before the solemnizing officer,
with their personal declaration
that they take each other as
husband and wife in the
presence of not less than 2
witnesses of legal age (FAMILY
CODE, Art. 3).
EXCEPTIONS TO THE LICENSE
REQUIREMENT: (ARMZ-5)
a ship captain or by an airplane
pilot not only while the ship is at
sea or the plane is in flight, but
also during stopovers at ports of
call (FAMILY CODE, Art. 31);
either party is so located that
there is no means of
transportation to enable them to
personally appear before the
LCR (FAMILY CODE Art. 28);
ethnic cultural communities
solemnized in accordance with
their customs, rites, or practices
(FAMILY CODE, Art. 33);
between persons within the Zone
of military operation, whether
members of the armed forces or
civilians may be solemnized by a
military commander of a unit,
who is a commissioned officer
(FAMILY CODE, Art. 32);
5. Marriage between a man and a
woman who have lived together
as husband and wife for at least
five (5) years and without legal
impediment to marry each other
(FAMILY CODE, Art. 34).
Requisites: (5-NPAS)
i. The man and woman must
have been living as husband
and wife for at least 5 years
before the marriage;
ii. The parties must have No
legal impediment to marry
each other;
iii. The fact of absence of legal
impediment between the
parties must be Present at
the time of marriage;
iv. The parties must execute an
Affidavit before any person
authorized by law to
administer oaths stating that
they have lived together for at
least 5 years (and are without
legal impediment to marry
each other); and
v. 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 v.
Sanchez, A.M. No. MTJ–00–
1329, March 8, 2001).
NOTE: The falsity of an affidavit of
VOID MARRIAGES
35): (18-ALBI-53)
1. Those contracted by any party
below eighteen (18) years of age
even with the consent of parents
or guardians;
2. Those solemnized by any
person not legally Authorized to
perform marriages unless such
marriages were contracted with
either or both parties believing in
good faith that the solemnizing
officer had the legal authority to
do so;
3. Those solemnized without
License, except those covered
by the preceding Chapter;
4. Those Bigamous or polygamous
marriages not failing under
Article 41;
5. Those contracted through
mistake of one contracting party
as to the Identity of the other;
and
6. Those subsequent marriages
that are void under Article 53
(FAMILY CODE, Art. 35).
Void Subsequent Marriages
1. Without judicial declaration of
nullity of previous void marriage
(FAMILY CODE, Art. 40)
2. Without judicial declaration of
presumptive death of absent
spouse (FAMILY CODE, Art. 41)
3. Where the absent spouse was
presumed dead, and both the
present spouse and would–be
spouse were in bad faith in
contracting marriage (FAMILY
CODE, Art. 44); and
4. Failure to comply with Art. 52
requiring the partition and
distribution of properties and
delivery of children’s
presumptive legitimes which
should be recorded in the
appropriate civil registry and
registry of property after
obtaining judgment for
declaration of nullity or
annulment (FAMILY CODE, Art.
53).
 ESSENTIAL AND FORMAL EXCEPTIONS TO THE LICENSE VOID MARRIAGES
REQUISITES OF MARRIAGE REQUIREMENT: (ARMZ-5)
marital cohabitation, where the
parties have in truth fallen short of
the minimum five-year requirement,
effectively renders the marriage void
ab initio for lack of a marriage
license (Republic v. Dayot, G.R. No.
175581, March 28, 2008).

VOIDABLE MARRIAGES
Grounds
Persons Who May Sue Prescriptive Period Ratification
(AUFFIS)

Parent/ legal guardian

Anytime before the parties reach
Absence of having charge of the Free cohabitation after
21
Parental Consent parties reaching age of 21
Parties to the marriage Within 5 years after reaching 21
Sane spouse who has no Anytime before the death of either
knowledge of the insanity party
Relative guardian or
Anytime before the death of either Free cohabitation after
Unsound mind persons having legal
party insane regains sanity
charge of the insane
During lucid interval or after
Insane spouse
regaining sanity
Free cohabitation even
Within 5 years from the discovery with full knowledge of
Fraudulent means Injured party
of fraud facts constituting the
fraud
Free cohabitation after
Within 5 years from the time the
Force, intimidation, disappearance of force,
Injured party force, intimidation, or undue
or undue influence intimidation/undue
influence ceased
influence, respectively
Within 5 years after the No ratification since
Impotency Injured party
celebration of the marriage defect is permanent
Within 5 years after the No ratification since
STD Injured party
celebration of the marriage defect is permanent

(5) What are the rights and obligations of the spouses

The rights and obligations between husband and wife are:

ESSENTIAL MARITAL OBLIGATIONS (FAMILY CODE, Art. 68):

1. Live together which includes consortium (cohabitation) and copulation (sexual intercourse);
2. Observe mutual love, respect, fidelity; and
3. Render mutual help and support.

NOTE: Where the wife abandons the conjugal abode with a justifiable cause, i.e. the husband
demanded that she perform lascivious acts, the husband's obligation to support her does not terminate
(Camara v. Campos Rueda, G.R. 11263, November 2, 1916). But if such abandonment is without
justifiable cause, the husband's obligation to support ceases (Arroyo v. De Arroyo, G.R. No. 17014,
August 11, 1921).

4. Fix the family domicile (FAMILY CODE, Art. 69);

5. Jointly support the family (FAMILY CODE, Art. 70);
6. Manage the household (FAMILY CODE, Art. 71);
7. Not to neglect duties, or commit acts which tend to bring danger, dishonor, or injury to the family
(FAMILY CODE, Art. 72);
 8. Either spouse may practice any legitimate profession/business, even without the consent of the other
(FAMILY CODE, Art. 73). The other spouse may object only on valid, serious and moral grounds.

OTHER OBLIGATIONS OF SPOUSES INCLUDE:

1. Exercise the duties and enjoy the rights of parents (FAMILY CODE, Art. 209);
2. Answer for civil liability arising from injuries caused by children below 21 (CIVIL CODE, Art. 2180,
par. 2 and RA 6809);
3. Exercise parental authority over children’s property (FAMILY CODE, Art. 225).

(6) A, a Filipina, married B who is a Japanese citizen. The relationship turned sour, prompting A to file a
petition for divorce in Japan which was eventually granted. A then filed a petition in the court of the
Philippines seeking to have the divorce decree recognized here. The trial court denied her petition,
holding that while a divorce obtained abroad by an alien spouse may be recognized in the Philippines –
provided that such decree is valid according to the national law of the alien – the same does not find
application when it was the Filipino spouse, who procured the same. Invoking the nationality principle
provided under Art. 15 of the Civil Code, in relation to Art. 26 (2) of the Family Code, the RTC opined that
since A is a Filipino citizen whose national laws do not allow divorce, the foreign divorce decree she
herself obtained in Japan is not binding in the Philippines. Decide.

Under Article 26 of the Family Code, where a marriage between a Filipino citizen and a foreigner is validly
celebrated and a divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to
remarry, the Filipino spouse shall have capacity to remarry under Philippine law. Recent jurisprudence holds that
a foreign divorce may be recognized in this jurisdiction as long as it is validly obtained, regardless of who
between the spouses initiated the divorce proceedings. The question in this case, therefore, is not who
initiated the proceedings but rather if the divorce obtained by petitioner and respondent was valid. Once a divorce
decree is issued, the divorce becomes "validly obtained" and capacitates the foreign spouse to marry. The same
status should be given to the Filipino spouse. It would be inherently unjust for a Filipino woman to be prohibited
by her own national laws from something that a foreign law may allow. Parenthetically, the prohibition on Filipinos
from participating in divorce proceedings will not be protecting our own nationals (Republic vs. Manalo G.R. No.
221029, April 24, 2018; reiterated in Racho v. Tanaka G.R. No. 199515, June 25, 2018, J. (Leonen Case) where
the SC further held that the divorce obtained abroad in Article 26 FC need not be by a judicial decree but may
also be a divorce by agreement as evidenced by a Certificate of Acceptance of the Report of Divorce.

(7) Ricardo filed a petition for declaration of absence or presumptive death of Celerina for the purpose of
remarriage in the RTC, which was granted. Ricardo claimed that it was almost 12 years from the date of
his RTC petition since Celerina left and he believed that she had passed away. Celerina, who was left by
Ricardo in their conjugal dwelling filed a petition for annulment of judgment in the CA but was dismissed
because the CA said that the proper remedy was to file a sworn statement before the civil registry
declaring her reappearance in accordance with Article 42 of the Family Code. Celerina argued that filing
an affidavit of reappearance under Article 42 of the Family Code is appropriate only when the spouse
was actually absent and the spouse seeking the declaration of presumptive death has a well-founded
belief of the spouse's death. Thus, it would be inappropriate to file an affidavit of reappearance if she did
not disappear in the first place. Is the contention of Celerina correct?

Yes. The filing of an affidavit of reappearance is an admission on the part of the first spouse that his or
her marriage to the present spouse was terminated when he or she was declared presumptively dead. A close
reading of the entire Article 42 reveals that the termination of the subsequent marriage by reappearance is
subject to several conditions: (1) the non-existence of a judgment annulling the previous marriage or declaring it
void ab initio; (2) recording in the civil registry of the residence of the parties to the subsequent marriage of the
sworn statement of fact and circumstances of reappearance; (3) due notice to the spouses of the subsequent
marriage of the fact of reappearance; and (4) the fact of reappearance must either be undisputed or judicially
determined. The existence of these conditions means that reappearance does not always immediately cause the
subsequent marriage's termination. Reappearance of the absent or presumptively dead spouse will cause the
termination of the subsequent marriage only when all the conditions enumerated in the Family Code are present.
Therefore, for the purpose of not only terminating the subsequent marriage but also of nullifying the
effects of the declaration of presumptive death and the subsequent marriage, mere filing of an affidavit
of reappearance would not suffice. Celerina's choice to file an action for annulment of judgment will,
therefore, lie. (Santos v. Santos, G.R. Number 187061, October 8, 2014, J. Leonen Case).

(8) On September 5, 1983, then 16-year old Luisito, married his teacher, then 22-year old Nora in a civil
ceremony. The couple lived together until 2007 when Luisito stopped going home to their conjugal
dwelling. When confronted by Nora, Luisito admitted to his affair with Rowena. Nora likewise learned
that Luisito and Rowena entered into a marriage on July 31, 1995 where their Marriage Certificate
indicated Luisito’s civil status as single. Nora charged Luisito and Rowena with Bigamy. In his defense,
Luisito insisted that he could not be held criminally liable for Bigamy because both his marriages were
 null and void. He claimed that his marriage with Nora in 1983 is null and void for lack of a valid marriage
license while his marriage with Rowena is null and void for lack of a marriage ceremony. Meanwhile, the
RTC declared Luisito’s marriage to Rowena void from the beginning and on June 29, 2016. May a void
ab initio marriage be raised as a valid defense in the prosecution for bigamy even without a judicial
declaration of absolute nullity?

Yes. When the prior marriage was contracted prior to the effectivity of the Family Code while the
subsequent marriage was contracted during the effectivity of the said law, the Court recognizes the retroactive
application of Article 40 of the Family Code but only for the purpose of remarriage, as the parties are not permitted
to judge for themselves the nullity of their marriage. However, in a criminal prosecution for bigamy, the parties
may still raise the defense of a void ab initio marriage even without obtaining a judicial declaration of absolute
nullity if the first marriage was celebrated before the effectivity of the Family Code. This is more in line with the
rule that procedural rules are only given retroactive effect insofar as they do not prejudice or impair vested or
acquired rights. In this case, Luisito’s marriage with Nora was celebrated when the Civil Code was in effect while
his subsequent marriage with Rowena was contracted during the effectivity of the Family Code. Hence, Luisito
is required to obtain a judicial decree of absolute nullity of his prior void ab initio marriage but only for purposes
of remarriage. As regards the bigamy case, however, Luisito may raise the defense of a void ab initio marriage
even without obtaining a judicial declaration of absolute nullity.

With regard to the second marriage, the existing rule is that, a judicial declaration of nullity of the second
marriage is not a valid defense in bigamy nor a prejudicial question to a criminal action for bigamy. After a careful
consideration, the Court is constrained to abandon its earlier rulings. Consequently, judicial declaration of
absolute nullity of the first and/or second marriages presented by the accused in the prosecution for
bigamy is a valid defense, irrespective of the time within which they were secured. The aforesaid
conclusion is anchored on and justified by the retroactive effects of a void ab initio marriage, the legislative intent
of Article 40 of the Family Code, and the fundamental rules of construction governing penal laws. Applying the
foregoing, Luisito may validly raise the defense of a void ab initio marriage in the Bigamy case against
him. More importantly, during the pendency of this case, a judicial declaration of absolute nullity of
Luisito’s marriage with Rowena due to the absence of a valid marriage license was issued and attained
finality. This connotes that Luisito and Rowena were never married in the eyes of the law (Pulido v. People,
G.R. No. 220149, July 27, 2021).

NOTE: Prejudicial question. Elements: 1.) The previously instituted civil action involves an issue similar or
intimately related to the issue raised in the subsequent criminal action; and 2.) The resolution of such issue
determines whether or not the criminal action may proceed. (RULES OF COURT, RULE 111, Sec. 7).

(9) Bert and Joe, both male and single, lived together as common law spouses and agreed to raise a son of
Bert's living brother as their child without legally adopting him. Bert worked while Joe took care of their
home and the boy. In their 20 years of cohabitation they were able to acquire real estate assets registered
in their names as co-owners. Unfortunately, Bert died of cardiac arrest, leaving no will. Bert was survived
by his biological siblings, Joe, and the boy. Can Art. 147 on co-ownership apply to Bert and Joe, whereby
all properties they acquired will be presumed to have been acquired by their joint industry and shall be
owned by them in equal shares? (2015 Bar)

No, Art. 147 will not apply. Art. 147 provides that when a man and a woman who are capacitated to marry
each other, live exclusively with each other as husband and wife without the benefit of marriage or under a void
marriage, their wages and salaries shall be owned by them in equal shares and the property acquired by both of
them through their work or industry shall be governed by the rules on co-ownership. Here, Art. 147 cannot apply
to Bert and Joe since they are both male thus incapacitated to marry each other pursuant to Arts. 1 and 2 of the
Family Code providing for the rule that a valid marriage must be between a male and a female. N.B. Article 147
and 148 will not apply to same sex partners.

(10) How are lands of the public domain converted into patrimonial property?

For a land of the public domain to be converted into patrimonial property, there must be an express
declaration in the form of a law enacted by Congress or, in cases where the President is duly authorized by law,
a Presidential Proclamation that the public dominion property is no longer intended for public service or the
development of the national wealth or that the property has been converted into patrimonial property ( (Heirs of
Delfin v. National Housing Authority, G.R. No. 193618, November 28, 2016, J. Leonen Case).
(11) L Towers is a condominium building located in Makati. L Towers consists of 7 floors with a unit on the
roof deck and two levels above the roof deck, which are called concession 2 and concession 3. M is the
owner of concession 3. M decided to build another unit on top of concession 3, known as concession 4,
and commenced building thereon. L Towers sent notice to M that M’s construction of concession 4 was
illegal, but M refused to stop construction. Hence, L Towers filed a complaint against M with the RTC.
The RTC held that L Towers must exercise its option to appropriate the additional structure constructed
by M or, should L Towers not choose to appropriate said structure, the parties shall agree on the terms
of lease, applying Art. 448 of the Civil Code. Was the RTC correct in applying Art. 448?

No, the RTC is not correct. Art. 448 on builders in good faith does not apply where there is a contractual
relation between the parties. The land in this case belongs to a condominium corporation, wherein the builder,
as a unit owner, is considered a stockholder or member in accordance with Sec. 10 of the Condominium Act.
The builder is in a co-ownership with other unit owners as members or stockholders of the condominium
corporation, whose legal relationship is governed by a special law, the Condominium Act. Between a general
law and a special law, the special law prevails.

Here, the provisions of the Civil Code, a general law, should give way to the Condominium Act, a special
law. Thus, Arts. 448 and 546 of the Civil Code on builders in good faith are therefore inapplicable in cases
covered by the Condominium Act where the owner of the land and the builder are already bound by specific
legislation on the subject property (the Condominium Act), and by contract (the Master Deed and the By-Laws
of the condominium corporation). Concession 4 should be demolished at the expense of M for having been
illegally constructed in violation of the Master Deed (Leviste Management System, Inc. v. Legaspi Towers
200, G.R. No. 199353, April 04, 2018).

(12) A and B are co-owners of a parcel of land and of the residential house located thereon. For taxation
purposes, however, the house was declared solely in the name of A. Being the alleged owner of said
house, A demanded B to vacate the same but to no avail. Thus, A instituted an action for ejectment
against B. Will the case prosper?

The case will not prosper. In a co-ownership, the undivided thing or right belong to different persons, with
each of them holding the property pro indiviso and exercising his rights over the whole property. Each co-owner
may use and enjoy the property with no other limitation than that he shall not injure the interests of his co-owners.
In the given facts, A does not have a cause of action to eject B since, as a co-owner, the latter is also entitled to
possess and enjoy the subject property. If, at all, the remedy of A is to file an action for partition (Anzures v.
Spouses Ventanilla, G.R. No. 222297, July 9, 2018).

(13) Y co-owns a certain parcel of land with his other co-heirs. From said parcel of land, he offered to sell a
definite portion of the property to C. C accepted the offer but represented that he could only pay the
purchase price in full in some future time. Y agreed. Later on, Y wrote C a letter, informing that he is
formally rescinding their agreement. Aggrieved, C filed a case for specific performance against Y praying
that a formal deed of sale be executed in his favor and that the title to the property be transferred in his
name. Decide the case.

The case will not prosper. The contract of sale is null ab initio. In cases where the seller in a contract of
sale merely co-owns the object of the contract, he or she cannot sell a definite portion of the thing without the
consent from his or her co-owners; he or she could only sell his or her undivided interest in the co-owned property.
In the given facts, the object of the sale is a definite portion of a co-owned parcel of land. At the time of the sale
between C and Y, the property was still held in common. Thus, there being no showing that the respondent was
authorized by his co-owners to sell the subject definite portion of land, he cannot sell the same (Cabrera v. Ysaac,
G.R. No. 166790, J. Leonen Case).

(14) Spouses P are the registered owners of a certain parcel of land. M, in turn, on the basis of representation
made by D, a complete stranger, that he is the owner of said property, rented the same from him and
thereon, constructed a house. Upon discovery that M built a house on said lot, Spouses P made repeated
demands for him to vacate. M, however, refused to comply. Aggrieved, Spouses P filed a complaint for
recovery of possession against M. In their Answer with Compulsory Counterclaim, M alleged that they
 are builders in good faith since they truly believed that the lot belonged to D. Is M considered a builder
in good faith?

M is not a builder in good faith. A builder in good faith is a builder who was not aware of a defect or flaw
in his or her title when he or she introduced improvements on a lot that turns out to be owned by another. In the
given facts, M claims that he believed D when he claimed that the lot belonged to her. Yet, as also stated in the
facts, D was a complete stranger to him. The lack of blood relation should have been enough to put him on guard
and convince him not to rely on her claim of ownership. If M had looked into the ownership of the lot, he would
have easily discovered that it was titled to Spouses P (Padilla v. Malicsi, G.R. No. 201354, September 21, 2016,
J. Leonen Case)

(15) E and P borrowed P100,000 from T. As security for the loan, E and P mortgaged their land to T. However,
P died in 1989. In 1990, T found out about P’s death when she went on vacation in the Philippines. Later,
E was unable to pay the loan and thus agreed to sell the land to T for P150,000. The parties executed a
deed of sale and release of mortgage in 1992, on which deed appears the signatures of E, P, and T,
whereby the land was sold to T. T constructed a 3-storey building worth P2,000,000 on the land. E refused
to acknowledge the sale, claiming that P’s signature was forged. Hence, T demanded from E P150,000,
the consideration for the land sold, and P2,000,000, for construction cost of the building. What are the
rights of T and E?

T is a builder in bad faith. When the deed of sale was executed in 1992, which contained a signature
purportedly of P, she was already aware of P’s death. Despite such awareness of the defect in their title to the
land, T still constructed the building thereon.

E is a landowner in bad faith. E knew of the defect in the execution of the deed of sale from the start but
still acquiesced to the construction of the 3-storey building.

Art. 453 of the Civil Code provides that where both the landowner and the builder, planter, or sower acted
in bad faith, they shall be treated as if both of them were in good faith. Where both the landowner and builder
are in good faith, the landowner is given two options under Art. 448: (a) he may appropriate the improvements
for himself after reimbursing the buyer (the builder in good faith) the necessary and useful expenses under Arts.
546 and 548 of the Civil Code; or (b) he may sell the land to the buyer, unless its value is considerably more than
that of the improvements, in which case, the buyer shall pay reasonable rent.

Here, under the first option, E may appropriate the building after payment of the indemnity provided in
Arts. 546 and 548. T would have a right of retention over the building and the land until E completes the
reimbursement. Under the second option, E may sell the land to T at a price equivalent to the current market
value thereof. But if the value of the land is considerably more than the value of the building, T cannot be
compelled to purchase the land but can only be obliged to pay E reasonable rent (Delos Santos v. Abejon, G.R.
No. 215820, March 20, 2017).

(16) M is the registered owner of 2 contiguous parcels of land in Taguig. He initially constructed a bungalow-
type house on the property. He further added a second floor to the structure, and even extended his two-
storey house up to the edge of his property. In 1994, Spouses J constructed their house/sari-sari store
on the vacant barrio road immediately adjoining the rear perimeter wall of M’s house. Such construction
deprived M of the light and ventilation he previously enjoyed, and of the ingress and egress to the
municipal road through the rear door of his house. Despite repeated demands and notices the Spouses
refuse to remove the structure they constructed. M filed a complaint against Spouses J, praying for the
removal of Spouses J’s structure and the enforcement of his easement of light and view. Decide.

I will grant the first prayer. Art. 694 of the Civil Code provides that a nuisance is any act, omission,
establishment, business, condition of property, or anything else which, among others, “obstructs or interferes
with the free passage of any public highway or street, or any body of water. Here, a barrio road is designated for
the use of the general public who are entitled to unobstructed passage thereon. Permanent obstructions on these
roads, such as Spouses J’s house, are injurious to public welfare. The occupation and use of private individuals
of public places devoted to public use constitute public and private nuisances and nuisance per se. Thus, the
house may be abated.

On the other hand, I will deny the second prayer. An easement of light and view is a negative easement if
the window is on the wall of the dominant estate i.e. that which prohibits the owner of the servient estate from
doing something which he could lawfully do if the easement did not exist (CIVIL CODE, Art. 616). The period of
prescription for acquisition of a negative easement of light and view shall be counted from the time of formal
prohibition upon the proprietor of the adjoining land or tenement (CIVIL CODE, Art. 668). Here, there was no
 formal prohibition by M upon Spouses J. Thus, the period for acquisitive prescription did not begin to run. M does
not have an easement of light and view (Alolino v. Flores, G.R. No. 198774, April 4, 2016).

(17) A is the owner of a parcel of land which was being surrounded by the property of Spouses R. Following
an ocular inspection, it was discovered that a public road fronted A’s property. To reach the same,
however, she needs to traverse other properties and a four-meter-wide irrigation canal. It was likewise
discovered that the owners of the neighboring properties have already constructed their own bridges to
cross said irrigation canal. Claiming that the property of Spouses R is the only adequate and most
convenient outlet from her property to the highway, A filed a complaint for easement of right of way
against Spouses R. Spouses R, on the other hand, argued that the proposed easement would traverse
their fixed improvements. Decide the case.

A has no right to an easement of right of way. Art. 649 and 650 of the Civil Code provide the requisites of
an easement of right of way -- (1) an immovable is surrounded by other immovables belonging to other persons;
(2) it is without adequate outlet to a public highway; (3) payment of proper indemnity by the owner of the
surrounded immovable; (4) the isolation of the immovable is not due to its owner’s acts; and (5) the proposed
easement of right of way is established 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. In
the given facts, there is an adequate outlet from A’s property to the public highway -- through the irrigation canal.
Although said outlet may be longer and more inconvenient to A, because she will have to construct a bridge over
the irrigation canal, such inconvenience will not justify the imposition of an easement of right of way. Verily, the
convenience of the owner of the dominant estate is not the gauge in determining whether to impose an
easement right of way, especially if the owner’s needs may be satisfied without imposing the easement
(Reyes v. Spouses Ramos, G.R. No. 194488, February 11, 2015, J. Leonen Case)

(18) What are the modes of extinguishing easements?

Easements are extinguished: (MPCE RenRed)

1. By Merger in the same person of the ownership of the dominant and servient estates;
2. By non-use for 10 years; with respect to discontinuous easements, this Period shall be computed from
the day on which they ceased to be used; and, with respect to continuous easements, from the day
on which an act contrary to the same took place;
3. When either or both of the estates fall into such Condition that the easement cannot be used; but it
shall revive if the subsequent condition of the estates or either of them should again permit its use,
unless when the use becomes possible, sufficient time for prescription has elapsed, in accordance
with the provisions of the preceding number;
4. By the Expiration of the term or the fulfillment of the condition, if the easement is temporary or
conditional;
5. By the Renunciation of the owner of the dominant estate; and
6. By the Redemption agreed upon between the owners of the dominant and servient estates (CIVIL
CODE, Art. 631).

(19) X is a resident of NG Subdivision. His house is located alongside CF Avenue and adjacent to MK Park,
an open space/playground area owned and operated by NG Association (NGA). He also has a personal
access door, which he built through a wall separating his house from the park. This access door, when
unlocked, opens directly into the park. NGA started constructing a kiosk occupying the side of the park
adjacent to the residence of X. Part of the design was a public restroom intended to serve the needs of
park guests and members of NGA. Said restroom was constructed alongside the concrete wall
separating the house of X from the park. X sought the demolition of the kiosk on the ground that it is a
nuisance per se considering the fact that for a period spanning 33 years, he had an open, continuous,
immediate, and unhampered access to the subdivision park through his side door, which also served as
an exit door in case of any eventuality; that having such access to the park was one of the considerations
why he purchased the lot. Is the restroom constructed by NGA a nuisance per accidens?

No, the restroom is not a nuisance per accidens. A nuisance per accidens is one which depends upon
certain conditions and circumstances, and its existence being a question of fact, it cannot be abated without due
hearing. There is nothing in the facts which discloses that X had introduced any evidence, to prove that the
restroom annoyed his senses, that foul odor emanated from it, or that it posed sanitary issues detrimental to his
family's health. Thus, the restroom is not considered a nuisance per accidens (NGA vs. Morales, GR No. 222821,
August 9, 2017)
(20) On August 16, 2000, Iloilo Jar Corporation, as lessor, and respondent Comglasco Corporation/Aguila
Glass, as lessee, entered into a lease contract for a period of three (3) years or until August 15, 2003 over
a portion of a warehouse building. On December 1, 2001, Comglasco requested for the pre-termination
of the lease effective on the same date. Iloilo Jar, however, rejected the request on the ground that the
pre-termination of the lease contract was not stipulated therein. Comglasco, raised an affirmative
defense, arguing that by virtue of Article 1267 of the Civil Code (Article 1267), it was released from its
obligation from the lease contract. It explained that the consideration thereof had become so difficult
due to the global and regional economic crisis that had plagued the economy. Is Comglasco’s act of
treating the lease contract terminated due to the economic circumstances then prevalent correct?

No. Article 1267 applies only to obligations to do and not to obligations to give. An obligation "to do"
includes all kinds of work or service; while an obligation "to give" is a prestation which consists in the delivery of
a movable or an immovable thing in order to create a real right, or for the use of the recipient, or for its simple
possession, or in order to return it to its owner. The obligation to pay rentals or deliver the thing in a contract of
lease falls within the prestation "to give". Considering that Comglasco's obligation of paying rent is not an
obligation to do, it could not rightfully invoke Article 1267 of the Civil Code. Even so, its position is still without
merit as financial struggles due to an economic crisis is not enough reason for the courts to grant reprieve from
contractual obligations (Iloilo Jar Corporation v. Comglasco Corporation, G.R. No. 219509, January 18, 2017).

(21) ABC Co. obtained several loans from X Bank. ABC Co. suffered economic reverses, failed to settle their
obligations, and offered the sale of ABC Co.’s remaining assets consisting of machineries. X Bank
refused and instead advised them to sell the same and apply the proceeds of the sale to their outstanding
obligations. ABC Co. tried to sell their assets but since there were no takers, the assets were reduced to
scrap metal and sold to Y Co. under a Memorandum of Agreement (MOA). However, Y Co. failed to pay.
In this regard, ABC Co. claims that Y Co.’s failure to pay the value of scrap must be considered as force
majeure in the sense that they have, beyond their control, lost the funds they expected to have received
from Y Co. which they would, in turn, use to pay their own loan obligations to X Bank and that since the
latter was a party to the MOA, their obligations must therefore be deemed extinguished. However, upon
the court's examination of the MOA, it was found that X Bank was not a party thereto. Decide.

ABC Co.’s contention that its obligation is already extinguished on account of Y Co.’s failure to comply
with its own obligation is untenable. To constitute a fortuitous event, the following elements must concur: (a) the
cause of the unforeseen and unexpected occurrence or of the failure of the debtor to comply with obligations
must be independent of human will; (b) it must be impossible to foresee the event that constitutes the caso
fortuito or, if it can be foreseen, it must be impossible to avoid; (c) the occurrence must be such as to render it
impossible for the debtor to fulfill obligations in a normal manner; and, (d) the obligor must be free from any
participation in the aggravation of the injury or loss.

While it may be argued that Y Co.’s breach of the MOA was unforeseen by ABC Co., the same is clearly
not "impossible" to foresee or even an event which is "independent of human will." Neither has it been shown
that said occurrence rendered it impossible for ABC Co. to pay their loan obligations to X Bank and thus, negates
the former's force majeure theory altogether. In any case, the performance or breach of the MOA bears no
relation to the performance or breach of the subject loan transactions, they being separate and distinct sources
of obligation. Hence, ABC Co.’s contention is erroneous (Metro Concast Steel Corporation v. Allied Bank, G.R.
No. 177921, December 4, 2013).

(22) D, owner of a business supplying scrap papers, cartons, and other raw materials, delivered scrap papers
to APP Company. D and APP agreed that APP would either pay D the value of the raw materials or deliver
to him their finished products of equivalent value. D alleged that he received a post-dated check from
APP but when he deposited the check, it was dishonored for being drawn against a closed account. On
the same day, APP and a certain E executed a memorandum of agreement (MOA) where APP bound
themselves to deliver the finished product to E and his company MCC. Did the MOA extinguish APP’s
obligation to D through novation or did the obligation remain to be alternative?

There was no novation. Novation must be stated in clear and unequivocal terms to extinguish an
obligation. For there to be novation, the following requisites must concur: (1) there must be a previous valid
obligation; (2) the parties concerned must agree to a new contract; (3) the old contract must be extinguished;
and (4) there must be a valid new contract. The test of incompatibility is whether the two obligations can stand
together, each one with its own independent existence. Moreover, consent of the creditor must also be secured
 for the novation to be valid. In the case at bar, D was not a privy to the agreement between APP and E. Thus,
D’s conformity to the contract need not be secured.

The obligation between D and APP remained to be an alternative obligation. In an alternative obligation,
there is more than one object, and the fulfillment of one is sufficient, determined by the choice of the debtor who
generally has the right of election. The right of election is extinguished when the party who may exercise that
option categorically and unequivocally makes his or her choice known. In this case, the contract provides that
APP, after receiving the raw materials from D, would either pay him the price of the raw materials or, in the
alternative, deliver to him the finished products of equivalent value. When APP tendered a check to respondent
in partial payment for the scrap papers, they exercised their option to pay the price. D’s receipt of the check and
his subsequent act of depositing it constituted his notice of APP’s option to pay. This choice was also shown by
the terms of the MOA, which was executed on the same day. The MOA declared that the delivery of APP’s
finished products would be to a third person, thereby extinguishing the option to deliver the finished products of
equivalent value to D (Arco Pulp and Paper Co., Inc. v. Lim, G.R. No. 206806, June 25, 2014, J. Leonen Case).

(23) Sps. C purchased a parcel of land from Kalikasan Homes, owned/developed by AFPMBAI, to be paid
from the proceeds of the PAG-IBIG loan extended to the former by the Rural Bank. AFPMBAI executed a
Deed of Absolute Sale and caused the transfer of the land title to Sps. C’s names but the PAG-IBIG loan
facility did not push through. Meanwhile, AFPMBAI made several demands against the Sps. C to pay the
price. The Sps. C are confused as to whom between the Rural Bank through PDIC or AFPMBAI tender of
payment should be made. Thus, they filed a complaint for consignation of loan payment before the RTC.
Does the complaint filed by the Sps. C against AFPMBAI make out a case for consignation?

Yes. Under Art. 1256 of the Civil Code, the debtor shall be released from responsibility by the consignation
of the thing or sum due, without need of prior tender of payment, when the creditor is absent or unknown, or
when he is incapacitated to receive the payment at the time it is due, or when two or more persons claim the
same right to collect, or when the title to the obligation has been lost. The allegations in the complaint present a
situation where the creditor is unknown, or that two or more entities appear to possess the same right to collect
from petitioners. Sps. C are ready to pay the loan in full; however, under the circumstances, they do not know
which of the two should receive full payment of the purchase price, or to whom tender of payment must validly
be made thus making out a case for consignation (Spouses Cacayorin v. Armed Forces and Police Mutual Benefit
Association, Inc., G.R. No. 171298, April 15, 2013).

(24) ST and TI entered into a Marketing agreement whereby the latter agreed to act as ST’s exclusive
marketing agent by selling advertising spots to business enterprises on behalf of ST. According to ST,
TI breached their agreement by failing to disclose the names of the entities to which TI sold advertising
spots. ST filed a complaint against TI for Accounting and Damages. ST and TI entered into a compromise
agreement to which they agreed, among others, that a violation of the compromise agreement would
make either party who violates such liable for P2M per violation. According to ST, TI violated the
compromise agreement by failing to pay its monetary obligations under the agreement. TI, on the other
hand, argued that ST violated the agreement by failing to withdraw the complaint-in-intervention. Both
parties argued that the other party is liable for P2M liquidated damages. Is there compensation in this
case?

Yes, there is compensation in this case. Under Article 1279 of the New Civil Code, in order that
compensation may be proper, it is necessary that: (1) each one of the obligors be bound principally, and that he
be at the same time a principal creditor of the other; (2) that both debts consist in a sum of money, or if the things
due are consumable, they be of the same kind, and also of the same quality if the later has been stated; (3) That
the two debts be due; (4) That they be liquidated and demandable; and (5) that over neither of them there be
any retention or controversy, commenced by third persons and communicated in due time to the debtor. Article
1281 of the same code further provides that compensation may be total or partial. When the two debts are of the
same amount, there is total compensation. In this case, considering that the parties are equally liable to each
other in the amount of P2M, the amounts are set off by operation of law. (Team Image v. Solar Team, G.R. No.
191658, September 13, 2017, J. Leonen Case)

(25) G Inc. received from MRT an invitation to bid for the complete concrete works of the Podium. G Inc.
submitted their bid and won the bid. MRT issued a Letter of Award and Notice to Proceed to G Inc. which
was signed and accepted by the latter. However, due to restructuring of the project, G Inc. was unable
to proceed with the project as it was suspended. A second notice was given to G Inc. based on the
redesigned plan which was accepted and signed by G Inc. A third notice was again issued but was not
accepted by G Inc. A fourth notice was again issued which was qualifiedly accepted by G Inc. MRT treated
the qualified acceptance as a new offer and rejected the same. MRT manifested its intent to award the
project to another company. G Inc. acknowledged MRT’s intent and notified MRT of its claims for
 reimbursement for costs, losses, and charges, and damages it had incurred due to the suspension
orders and the consequences of its award to another. G Inc. filed a notice of claim before the
Construction Industry Arbitration Commission which awarded to the former monetary claims amounting
to P53M. MRT argued that G Inc. is not entitled to said monetary award as the contract was not perfected.
Is MRT correct that there was no perfection of the contract?

No, MRT is not correct. There was a perfected contract. There are 3 stages in a contract: (1) negotiation
which refers to the time the parties agree on its terms and conditions; (2) perfection which occurs when there is
a meeting of the minds of the parties such that there is a concurrence of offer and acceptance, and all essential
elements of the contract are present; and (3) consummation which covers the period when the parties perform
their obligations in the contract until it is finished or extinguished. To determine when the contract was perfected,
the acceptance of the offer must be unqualified, unconditional, and made known to the offeror. Here, there is a
perfected contract between MRT and G Inc. MRT has already awarded the contract to G Inc., and G Inc.’s
acceptance of the award was communicated to MRT before MRT rescinded the contract. Thus, there is already
mutual consent on the object of the contract and its consideration, and an absolute acceptance of the offer.
(Metro Rail Transit Development Corporation v. Gammon Philippines, Inc., G.R. No. 200401, January 17, 2018,
J. Leonen Case)

(26) BPI issued a pre-approved credit card to R. The cards were used by R and his wife by regularly charging
goods and services on them. R regularly settled their accounts with BPI at first but started to be
delinquent with their payment, thus, their outstanding balance ballooned to P200,000. BPI sent demand
letters but to no avail. BPI then commenced a complaint for collection of sum of money. R, however,
argued that their liability is only P20,000 and that R did not consent to the Terms and conditions on their
use of the issued credit cards, specifically those regarding the interest. BPI, on the other hand, argued
that R bound himself to its Terms and Conditions in the credit card packet’s delivery receipt. Further,
their constant use of the card could be considered a consent. Is there consent in this case?

None. There is no consent in this case. When a credit card provider issues a credit card to a pre-approved
client, the usual screening process is dispensed with and the credit card is issued outright. As such, when issuing
a pre-screened or pre-approved credit card, the credit card provider must prove that its client read and consented
to the terms and conditions governing the credit card. Failure to prove consent means that the client cannot be
bound by the provisions of the terms and conditions, despite admitted use of the credit card. This is true even if
the client did not deny availing of the credit card by charging purchases on it. Thus, the credit card client may
only be charged with legal interest. The client should not be condemned to pay the interests and charges provided
in the Terms and Conditions on the mere claim of the credit card provider without any proof of the former’s
conformity and acceptance of the stipulations contained therein. (Yulo v. BPI, G.R. No. 217044, January 16,
2019, J. Leonen Case)

(27) The property of the Y was declared condemned for public use to expand the Lahug International Airport.
On appeal, there was a compromise to stop Y from pursuing with the appeal, but with an oral assurance
that if the purpose would not be pursued, the property would be resold to him. The public use was not
pursued, hence, there was a demand for the resale of the property, especially so that it has been
converted to a commercial area, but X contended that it is not bound by the oral assurance that it would
be resold, using the Statute of Frauds as defense, Is the defense proper?

No. The Statute of Frauds operates only with respect to executory contracts, and does not apply to
contracts which have been completely or partially performed. The reason is that, in executory contracts there is
a wide field of fraud because unless they be in writing there is no palpable evidence of the intention of the
contracting parties. However, if the contract has been totally or partially performed, the exclusion of parol
evidence would promote fraud or bad faith, for it would enable the defendant to keep the benefits already
delivered to him from the transaction in litigation, and, at the same time evade the obligation, responsibilities or
liabilities assumed or contracted by him thereby. The oral compromise settlement having been partially
performed, the statute of frauds cannot apply. By reason of such assurance made in their favor, Y relied on the
same by not pursuing their appeal before the Court of Appeals (Mactan-Cebu International Airport et al v. Lozada,
Sr., et al, G.R. No. 1776625, February 25, 2010).

(28) Comparative Table of Contract and Remedies Available Against Defective Contract

COMPARATIVE TABLE OF CONTRACT

RESCISSIBLE VOIDABLE UNENFORCEABLE INEXISTENT VOID
As to defect
Defect is caused by Defect is caused by Defect is caused by lack of Defect is caused Defect is caused
injury/ damage either vice of consent required form, authority, or by the absence of by illegality or
 RESCISSIBLE VOIDABLE UNENFORCEABLE INEXISTENT VOID
to one of the parties capacity of both parties, at least one of the invalidity of any
or to a third person not cured by prescription essential one of its
requisites. essential
elements, or the
contract itself
As to status of contract
Valid and Valid and Cannot be enforced by a Do not, as a general rule, produce
enforceable until enforceable until proper action in court any legal effect
rescinded by a annulled by a
competent court competent court
As to remedy
Rescission Annulment; Ratification Declaration of Absolute Nullity or
Ratification Inexistence
As to prescription of defense or action
Action for rescission Defense or Action for Corresponding action for Defense or Action for the declaration
prescribes in 4 years annulment recovery, if there was total of nullity or inexistence do not
prescribes in 4 years or partial performance of prescribe
the unenforceable
contract under nos. 1 or 3
of Article 1403, may
prescribe
As to real party in interest
Contracting parties Contracting parties Contracting parties Contracting parties and a third person
and a third person whose interest is directly affected
who is prejudiced or
damaged by the
contract
As to susceptibility of ratification
Need not be ratified Can be ratified Can be ratified Cannot be ratified
As to how contracts may be assailed
Assailed directly or Assailed directly only May be assailed only by a Assailed directly or collaterally
collaterally contracting party

REMEDIES AVAILABLE AGAINST DEFECTIVE CONTRACTS

Party who may Institute Period to Bring an Action
Defective Contract
an Action for Rescission/Annulment
Rescissible Contracts
1. Contracts entered into by guardians whenever By ward Within four years from gaining
the wards whom they represent suffer lesion capacity
by more than ¼ of the value of the things
which are objects thereof;
2. Contracts agreed upon in representation of By absentee Within four years from
absentees, if the latter suffers lesion by more knowledge of domicile or
than ¼ of the value of the things which are knowledge of fraudulent
subject thereof; contract
3. Contracts undertaken in fraud of creditors By creditor Within four years from
when the latter cannot in any manner collect knowledge of fraudulent act
the claims due them;
4. Payments made in a state of insolvency for By creditor
Within four years from
obligations whose fulfillment the debtor could
knowledge of fraudulent
not be compelled at the time they were
contract
effected
 Party who may Institute Period to Bring an Action
Defective Contract
an Action for Rescission/Annulment
5. Contracts which refer to the things under By party litigant
Within four years from
litigation if they have been entered into by the
knowledge of fraudulent
defendant without the knowledge and
contract
approval of the litigants and the court
Voidable Contracts
1. Contracts where one of the parties is incapable By party who is Within four years from gaining
of giving consent to the contract incapacitated or regaining capacity to act
2. Contracts where the consent is vitiated by By party whose consent Within four years from
mistake, violence, intimidation, undue was vitiated cessation of force, intimidation
influence or fraud or undue influence; within four
years from discovery of fraud
or mistake
Unenforceable Contracts
1. Contract entered into in the name of another Person in whose name the At any time whenever one
person without authority or in excess of contract is entered into party attempts to enforce the
authority contract against another
through court action
2. Contract entered into which does not comply By party against whom the
with the Statutes of Fraud contract is being enforced
3. Contract where both contracting parties do not By parents or guardians of
possess the required legal capacity both parties, or both
parties after regaining
capacity to act
Void or Inexistent Contracts
1. Contract whose cause, object or purpose is By innocent party; Imprescriptible
contrary to law, good customs, morals, public By 3rd persons whose
order or public policy interests are directly
affected
2. One or some of essential requisites of valid By any of the contracting
contract is lacking in fact or in law: parties;
a. Absolutely simulated By 3rd persons whose
b. Cause or object did not exist interests are directly
c. Object is outside the commerce of man affected
d. Contemplate an impossible service
e. Intention of parties relative to the principal
object of contract cannot be ascertained
3. Contracts expressly prohibited by law By the party in whose
protection the prohibition
of the law is designed;
By 3rd party whose
interests are directly
affected

(29) Distinguish commodatum from mutuum/simple loan. (2017 Bar)

1. As to what must be returned: In mutuum, the debtor shall return to the creditor an equivalent amount
of the subject matter, while in commodatum, the same thing that was delivered should be returned;
2. As to cause: Mutuum may be gratuitous or onerous, while commodatum is gratuitous;
3. As to transmission of ownership: The borrower in mutuum acquires ownership, while in
commodatum, one does not acquire ownership (CIVIL CODE, Art. 1933).
4. As to object: Mutuum refers to personal property, while commodatum may refer to real and personal
property (CIVIL CODE, Arts. 1937 and 1953).
(30) F granted a loan to G in the amount of P 540,000.00. Such agreement was not reduced to writing. G
demanded interest which was paid by F in cash and checks. The total amount F paid accumulated to P
1,200,000.00. Upon advice of her lawyer, F demanded for the return of the excess amount of P 660,000.00
which was ignored by G. Is the payment of interest valid? Explain. (2012 Bar)

No, the payment of interest is not valid. Art. 1956 of the Civil Code explicitly provides that “no interest shall
be due unless it has been expressly stipulated in writing.” Here, the agreement of the loan between F and G and
the obligation to pay interest was not deduced in writing, thus G cannot demand interest payment from F.

(31) Spouses Florante Vitug and Narcisa Vitug obtained a loan from Evangeline. A mortgage contract was
executed to secure the loan, with the amount secured by their property which the spouses claim was
constituted as a family home before its mortgage. Sps. Vitug failed to pay their loan. Evangeline then
filed a Complaint for Foreclosure of Property which was granted by the lower court. Are Sps. Vitug
correct in arguing that the property should be exempt from execution because it was constituted as a
family home before its mortgage?

No, Sps. Vitug’s contention is incorrect. Even though petitioner’s property has been constituted as a family
home, it is not exempt from execution. Article 155, paragraph 3 of the Family Code explicitly provides that the
family home shall be exempt from execution, forced sale or attachment, except for nonpayment of taxes; for
debts incurred prior to the constitution of family home; debts secured by mortgages on the premises before or
after such constitution; and for debts due to laborers, mechanics, architects, builders, materialmen, and others
who have rendered service or furnished material for the construction of the building. Sps. Vitug voluntarily used
the property constituting their family home as security for the loan obtained from Evangeline. Such use falls under
the exemptions provided for under Article 155 of the Family Code (Vitug v. Abuda, G.R. No. 2012264, January
11, 2016).

(32) Summarize the guidelines on the imposition of interest

To summarize, the guidelines on the imposition of interest as provided in Eastern Shipping Lines Inc. v.
Court of Appeals and Nacar v. Gallery Frames are further modified in the case of Lara's Gift and Decors, Inc. v.
Midtown Industrial Sales, Inc. (G.R. No. 225433, August 28, 2019) for clarity and uniformity, as follows:
1. When an obligation, regardless of its source, (i.e., law, contracts, quasi-contracts, delicts or quasi-
delicts) is breached, the contravenor can be held liable for damages and the provisions under Title
XVIII on Damages of the Civil Code govern in determining the measure of recoverable damages;
2. With regard to an award of interest in the concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as follows:
a. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, goods, credits or judgments, the interest due shall be that which is
stipulated by the parties in writing PROVIDED it is not excessive and unconscionable, which,
IN THE ABSENCE OF A STIPULATED RECKONING DATE, shall be computed from default, i.e.,
from extrajudicial or judicial demand in accordance with Article 1169 of the Civil Code, UNTIL
FULL PAYMENT, without compounding any interest UNLESS compounded interest is expressly
stipulated by the parties, by law or regulation.
b. In the absence of stipulated interest, the rate of interest on the principal amount shall be the
prevailing legal interest prescribed by the Bangko Sentral ng Pilipinas, which shall be
computed from default (i.e., judicial or extrajudicial demand) in accordance with Art. 1169 of the
Civil Code UNTIL FULL PAYMENT, without compounding any interest UNLESS compounded
interest is expressly stipulated by law or regulation.
c. For breached obligations not constituting a loan or forbearance of money, goods, credits
or judgments, an interest on amount of damages awarded may be imposed at the discretion
of the court at the prevailing legal interest prescribed by the Bangko Sentral ng Pilipinas,
pursuant to Articles 2210 and 2011 of the Civil Code. No interest shall be adjudged on
unliquidated claims or damages, except when or until the demand can be established with
reasonable certainty.
i. Where demand is established with reasonable certainty, the prevailing legal interest shall
begin to run from time claim is made judicially or extrajudicially UNTIL FULL PAYMENT;
ii. When certainty cannot be reasonably established at the time demand is made, interest shall
begin to run only from date judgment of the trial court is made (at which time quantification of
damages may be deemed to have been reasonably ascertained) UNTIL FULL PAYMENT.
The actual base for the computation of the interest shall, in any case, be on the principal
 amount finally adjudged, without compounding any interest unless compounded interest is
expressly stipulated by law or regulation.
d. Whether the case falls on forbearance or non-forbearance of money, interest due on the principal
amount accruing as of judicial demand shall SEPARATELY earn legal interest at the prevailing
rate prescribed by the Bangko Sentral ng Pilipinas, from the time of judicial demand UNTIL FULL
PAYMENT.

(33) Distinguish Culpa Aquiliana, Culpa Contractual, and Culpa Criminal.

CULPA AQUILIANA CULPA CONTRACTUAL CULPA CRIMINAL

As to Nature of Negligence
Direct, substantive, and Negligence is merely incidental to the Direct, substantive, and
independent. performance of an existing obligation. independent.
As to Quantum of Proof Required
Preponderance of evidence Preponderance of evidence (RULES Proof beyond reasonable
(RULES OF COURT, Rule 133, OF COURT, Rule 133, Section 1). doubt (Barredo v. Garcia, G.R.
Section 1). No. L-48006, July 8, 1942).
As to Defense of “Good Father of a Family”
A complete and proper defense Not a complete and proper defense in Not a proper defense.
insofar as parents, guardians, and the selection and supervision of
employers are concerned (Cangco employees but can mitigate liability for
v. Manila Railroad Co., G.R. No. L- damages (Cangco v. Manila Railroad
12191, October 14, 1918). Co., supra).
As to Presumption of Negligence
As a rule, the injured party must
Presumption of negligence Innocence of the accused is
prove the negligence of the immediately attaches by a failure of a presumed until the contrary is
defendant (Cangco v. Manila covenant or its tenor (FGU Insurance proven.
Railroad Co., supra). Corp. v. G.P. Sarmiento Trucking
Corp., G.R. No. 141910, August 6,
Exceptions under Articles 2184, 2002).
2185 and 2188

Article 2184 - It is disputably

presumed that a driver was
negligent, if he had been found
guilty of reckless driving or violating
traffic regulations at least twice
within the next preceding two
months

Article 2185 - Unless there is a

proof to the contrary, it is presumed
that a person driving a motor
vehicle has been negligent if at the
time of the mishap, he was violating
any traffic regulations

Article 2188 - There is a prima facie

presumption on the part of the
defendant if the death or injury
results from the possession of
dangerous weapons or substances,
such as firearms and poisons
EXCEPT when the possession or
use thereof is indispensable in his
occupation or business.
(34) Discuss the distinction among Articles 19, 20, 21 and 2176 of the Civil Code.

ARTICLE 19 Article 19 is the general rule which governs the conduct of human relations. By itself, it is not
the basis of an actionable tort. Article 19 describes the degree of care required so that an
actionable tort may arise when it is alleged together with Article 20 or Article 21.

ARTICLE 20 Article 20 concerns violations of existing law as basis for an injury. It allows recovery should
the act have been willful or negligent. Willful may refer to the intention to do the act and the
desire to achieve the outcome which is considered by the plaintiff in tort action as injurious.
Negligence may refer to a situation where the act was consciously done but without intending
the result which the plaintiff considers as injurious.

ARTICLE 21 Article 21 concerns injuries that may be caused by acts which are not necessarily
proscribed by law. This article requires that the act be willful, that is, that there was an
intention to do the act and a desire to achieve the outcome.
ARTICLE 2176 Article 2176 covers situations where an injury happens through an act or omission of the
defendant. When it involves a positive act, the intention to commit the outcome is irrelevant.
The act itself must not be a breach of an existing law or a pre-existing contractual
obligation. What will be considered is whether there is "fault or negligence" attending the
commission of the act which necessarily leads to the outcome considered as injurious by the
plaintiff.
(See J. Leonen’s Concurring Opinion in Alano v. Magud-Logmao, G.R. No. 175540, April 7, 2014)

(35) Y was in Diamond Hotel when he bumped into a friend who was then on her way to a wedding reception
being held in said hotel. Y alleged that he was then invited by his friend to join her at the wedding
reception and carried the basket full of fruits which she was bringing to the affair. At the reception, X,
the wedding coordinator of the hotel noticed him and asked him, allegedly in a loud voice, to leave as he
was not in the guest list. He retorted that he had been invited to the affair by his friend, who however
denied doing so. Deeply embarrassed by the incident, Y then sued the hotel for damages under Articles
19 and 21 of the Civil Code. When asked, Y noted that when X approached him to leave the part, they
were very close that they nearly kissed each other. Does X acted abusively in asking Y to leave the party
thereby becoming liable under Articles 19 and 21 of the Civil Code? Explain.

No. The principle on abuse of right under Article 19 of the Civil Code has the following elements: (1) There
is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another.
As applied to herein case, Y has not shown that X was driven by animosity against him. Considering the
closeness of X to Y when the request for the latter to leave the party was made such that they nearly kissed each
other, the request was meant to be heard by him only and there could have been no intention on her part to
cause embarrassment to him. Without proof of any ill-motive on her part, Y’s act cannot amount to abusive
conduct.

(36) When the Trucking Service Agreement (TSA) between KE and M expired on December 31, 2001, KE
executed an In-House Brokerage Service Agreement for M’s PEZA export operations and KE continued
to retain the services of Orient, which sub-contracted its work to ST Brokerage Corporation. M called
KE’s Sales Manager about a column in a tabloid which narrated that there was a stolen truck filled with
a shipment of video monitors and CCTV systems owned by M in Caloocan. When contacted by KE about
this news, Orient stated that the tabloid report was not true. They claimed that the incident simply
involved the breakdown and towing of the truck, which was driven by D, with truck helper, R. KE directed
Orient to investigate. At the same time, KE independently investigated the incident. When confronted
with KE’s findings, Orient admitted that its previous report was erroneous and that pilferage was proven.
M terminated the agreement with KE and cited loss of confidence due to the fact of nondisclosure of this
incident's relevant facts which "amounted to fraud and signified an utter disregard of the rule of law." Is
negligence in the performance of an obligation which already existed a proper basis of an action based
on quasi-delict under Article 2176 of the Civil Code?

No, Actions based on contractual negligence and actions based on quasi-delicts differ 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. In situations where the contractual relation is
indispensable to hold a party liable, there must be a finding that the act or omission complained of was done in
bad faith and in violation of Article 21 of the Civil Code to give rise to an action based on tort.
 The doctrine "the act that breaks the contract may also be a tort," on which the lower courts relied, is
inapplicable here. Orient’s negligence, arising as it does from its performance of its obligation to KE, is dependent
on this obligation. Neither do the facts show that Art. 21 of the Civil Code applies, there being no finding that
Orient’s act was a conscious one to cause harm, or be of such a degree as to approximate fraud or bad faith. To
be sure, there was inaction on the part of the Orient which caused damage to KE, but there is nothing to show
that Orient intended to conceal the truth or to avoid liability. When the facts became apparent to Orient, the latter
readily apologized to KE and M for its mistake. Consequently, Arts. 1170, 1172, and 1173 of the Civil Code on
negligence in the performance of an obligation should apply and not Art. 2176 (Orient Freight International, Inc.,
v. Keihin-Everett Forwarding Co., Inc., G.R. No. 191937, August 9, 2017, J. Leonen Case).

NOTE: Test to determine if there is concurrence of contract and quasi-delict. - If a contracting party's act
that breaches the contract would have given rise to an extra-contractual liability had there been no contract, the
contract would be deemed breached by a tort, and the party may be held liable under Article 2176 and its related
provisions. (Orient Freight International, Inc. v. Keihin-Everett Forwarding Co., Inc., August 9, 2017)

(37) Distinguish the persons who are vicariously liable and the defenses that they may raise in order for them
not to be made liable for the negligent acts of another.

PERSONS PERSONS FOR WHOSE NATURE OF DEFENSES

VICARIOUSLY ACTS LIABILITY IS LIABILITY
LIABLE IMPUTED
Parents Acts of their children up to 21 Direct and Primary 1. The child is not living in
(Art. 2180, NCC, and years of who live in their their company.
Arts. 221 and 236 Family company (2005 Bar)
Code) 2. Exercise of diligence of a
good father of a family to
Note: Article 221 of the prevent damage.
Family code removes the
alternative qualification
between father and
mother.
Guardians Minors or incapacitated Direct and Primary Exercise of diligence of a
(Art. 2180, NCC) persons who are under their good father of a family to
authority and live in their prevent damage.
company
School, Administrators, A child who is: Direct, Principally and 1. The activity is not an
Teachers, and Individual, i. a Minor; Solidary Liable (2012 authorized activity;
Entity or Institution ii. under their supervision, Bar).
Engaged in Child Care instruction or custody; 2. The child is not under their
(Art. 218, Family Code) iii. over which they exercise Note: The parents, supervision, instruction, or
special parental authority
guardians, or persons custody;
(2005 Bar) exercising substitute
parental authority are 3. Exercise of due diligence.
Note: The responsibility subsidiary liable.
applies to authorized
activities inside or outside
the school.
Teachers or Heads of Pupils, students, or Direct, Primary, and 1. The student is not in their
Establishment of Arts and apprentices so long as they Solidary custody;
Trade remain in custody – if they
(Art. 2180, NCC) are no longer minors. 2. Exercise of due diligence.

Note: Schools and (For minor children, apply

Administrators are NOT Arts. 218 and 219 of the
liable. Family Code)
Employers Employees and household Direct, Primary, and 1. The employee is not
(Art. 2180, NCC) helpers – in the service or, on Solidary with performing his functions or
occasion of their functions or employee (1997 Bar) is acting beyond the scope
Note: It is NOT the scope of their task. (2005 of his function;
necessary that they are Bar)
engaged in any business 2. Exercise of due diligence
or industry in the selection or
 PERSONS PERSONS FOR WHOSE NATURE OF DEFENSES
VICARIOUSLY ACTS LIABILITY IS LIABILITY
LIABLE IMPUTED
supervision of the
employee (1992, 1997,
and 2003 Bar)
The State Special Agents Direct and Primary The persons who directly
(Art. 2180, NCC) - one who receives a fixed caused the loss is not a
order, foreign to the exercise special agent – the official
of the duties of the official was performing the task that
properly pertains to him.
A Head of Department of Subordinates that he has Direct and Primary He did not give a written
Government or Superior authorized by written order order.
Public Officer. the specific act or
(Sec. 38, Revised misconduct.
Administrative Code of
1987)

(38) B, an employee of CTTI, while driving a van owned by CTTI, saw an incoming vehicle. In order to avoid
collision with the said incoming vehicle, B swerved to another direction thereby hitting R, an 18-year-old
girl. R was rushed to the hospital but later died. E, R’s paternal aunt, is now suing CTTI and B for the
death of R. E is arguing that, based on Art. 2180 in relation to Art. 2176 of the Civil Code and as CTTI is
the registered owner of the van which hit R, CTTI is vicariously liable with B. CTTI denies liability arguing
that it exercised due diligence in the selection and supervision of B, and that they cannot be made liable
as B was dropped as a party in the case already.

During the trial, E was able to present a copy of the Certificate of Registration of the said van of CTTI
and other documents which attested to CTTI’s ownership of the said van. It was also found out during
trial that CTTI was unable to prove that B was not acting within the scope of his assigned tasks at the
time of the accident, and that CTTI failed to exercise the requisite diligence in selecting and supervising
B. Is CTTI liable for the death of R?

Yes, CTTI is liable for R’s death. In cases where both Art. 2180 of the Civil Code and the registered-
owner rule apply, the plaintiff must establish that the employer is the registered owner of the vehicle in question.
Once ownership of the vehicle is established, there now arises a disputable presumption that the requirements
of Art. 2180, that an employer-employee relationship exists between the person made sought to be made
vicariously liable and the negligent employee, liability for quasi-delict of the employee, and performance by the
employee of the task assigned by the employer or the latter’s authorized representative or employee when
damage or injury was inflicted through or negligence was committed, are present. As a consequence, the burden
of proof shifts to the defendant to show that no liability under Art. 2180 is present.

Herein, E was able to establish that CTTI is the registered owner of the van which hit R when E presented
the van’s Certificate of Registration and other pertinent documents. As such, it is now CTTI’s responsibility to
prove that it has exercised due diligence in the selection and supervision of B. However, as found by the trial
court, CTTI has failed to discharge this burden of proof. Therefore, CTTI, being the registered-owner of the van
being driven by B which hit R, is liable for the death of R (Caravan Travel and Tours International, Inc. v. Abejar,
G.R. No. 170631, February 10, 2016, J. Leonen Case).

NOTE: In cases when the registered-owner rule does not coincide with Art. 2180 of the Civil Code
(as when the registered owner and the employer are not the same person), the registered owner cannot
use the defenses available under Article 2180 of the Civil Code - that the employee acts beyond the scope of his
assigned task or that it exercised the due diligence of a good father of a family to prevent damage - because the
motor vehicle registration law, to a certain extent, modified Art. 2180 of the Civil Code by making these defenses
unavailable to the registered owner of the motor vehicle. (Filcar Transport Services v. Espinas, 688 Phil. 430,
2012).

(39) In the preceding question, E is R’s the paternal aunt and the person who raised the victim since she was
nine (9) years old. Can the aunt file an action for quasi-delict even if R, the victim, has already reached
the age of majority at the time of here death?

Yes. It bears emphasis, at the outset, that E took custody of R when she was a child, assumed the role of
Reyes' parents, and thus, exercised substitute parental authority over her pursuant to Article 216 of the Family
Code. As R's custodian, E exercised the full extent of the statutorily recognized rights and duties of a parent.
 E’s right to proceed against CTTI, therefore, is based on two grounds.

First, E suffered actual personal loss. With her affinity for R, it stands to reason that when R died, E
suffered the same anguish that a natural parent would have felt upon the loss of one's child. It is for this injury —
as authentic and personal as that of a natural parent — that E seeks to be indemnified.

Second, E is capacitated to do what R’s actual parents would have been capacitated to do. Inasmuch as
persons exercising substitute parental authority have the full range of competencies of a child's actual parents,
nothing prevents persons exercising substitute parental authority from similarly possessing the right to be
indemnified for their ward's death.

While R was already emancipated upon her death, for having reached the age of majority, the termination
of E’s parental authority is not an insurmountable legal bar that precludes the filing of her complaint. More so,
when case law is clear that Article 2176 is broad enough to accommodate even plaintiffs who are not relatives
of the deceased, viz:

“It is particularly noticeable that Article 1902 [now Article 2176] stresses the passive subject
of the obligation to pay damages caused by his fault or negligence. The article does not limit or
specify the active subjects, much less the relation that must exist between the victim of the culpa
aquiliana and the person who may recover damages, thus warranting the inference that, in principle,
anybody who suffers any damage from culpa aquiliana, whether a relative or not of the victim,
may recover damages from the person responsible therefor.” (Caravan Travel and Tours
International, Inc. v. Abejar, G.R. No. 170631, February 10, 2016, J. Leonen Case).

NOTE: Anent the issue on the award of moral damages, the Supreme Court likewise explained in Caravan
Travel and Tours International, Inc. v. Abejar, G.R. No. 170631, February 10, 2016 that:

“For deaths caused by quasi-delict, the recovery of moral damages is limited to the spouse,
legitimate and illegitimate descendants, and ascendants of the deceased.

Persons exercising substitute parental authority are to be considered ascendants for the
purpose of awarding moral damages. Persons exercising substitute parental authority are intended
to stand in place of a child's parents in order to ensure the well-being and welfare of a child.134 Like
natural parents, persons exercising substitute parental authority are required to, among others, keep
their wards in their company, provide for their upbringing,136 show them love and affection, give
them advice and counsel, and provide them with companionship and understanding. For their part,
wards shall always observe respect and obedience towards the person exercising parental
authority The law forges a relationship between the ward and the person exercising substitute
parental authority such that the death or injury of one results in the damage or prejudice of the other.

Moral damages are awarded to compensate the claimant for his or her actual injury, and not
to penalize the wrongdoer. Moral damages enable the injured party to alleviate the moral suffering
resulting from the defendant's actions. It aims to restore — to the extent possible — "the spiritual
status quo ante[.]"

Given the policy underlying Articles 216 and 220 of the Family Code as well as the purposes
for awarding moral damages, a person exercising substitute parental authority is rightly considered
an ascendant of the deceased, within the meaning of Article 2206(3) of the Civil Code. Hence,
respondent is entitled to moral damages.”

(40) In January 2016, L Pawnshop installed a signage in front of its shop. V Electric Co. has a post near the
pawnshop. However, the drainage and road widening project of the government affected V Electric Co.’s
posts and they had to be relocated. The relocation was on October 6, 2017 and was already completed
by the end of November, 2017. The post in front of the pawnshop was installed in such a manner that its
wires constantly touched L Pawnshop’s signage, leading to the failure of the insulation thereby causing
a short circuit which eventually led to the breaking and burning of the wire. It was this burning wire that
fell on the Mr. A' residence's roof and burned down their house and store, as well as Mr. M's adjacent
shop.

Mr. A and Mr. M then sued V Electric Co. for damages. In its defense, V Electric Co. claimed that it is not
liable since the negligence being imputed against it is not the proximate cause of the damage. Is V
Electric Co. correct?
 No. Proximate cause is defined as "that cause which, in natural and continuous sequence, unbroken by
any efficient intervening cause, produces the injury and without which the result would not have occurred."

V Electric Co.’s negligence was the proximate cause of the damage suffered by Mr. A and Mr. M. It is
settled that the confluence of proximity, abrasion, and short-circuiting led to the fire. The first of these-proximity
arose because of V Electric Co.’s relocation of posts and wires. Installed in such a manner that its wires
constantly touched L Pawnshop’s signage, this "led to the failure of the insulation thereby causing a short circuit
which eventually led to the breaking and burning of the wire." It was this burning wire that fell on the Mr. A’s
residence's roof and burned down their house and store, as well as Mr. M’s adjacent shop (Visayan Electric
Company, Inc. v. Alfeche, G.R. No. 209910, April 7, 2014, J. Leonen Case).

(41) BPI Bank discovered discrepancies in its inter-bank reconciliation statements, causing them to file a
letter-complaint before the Central Bank of the Philippines (CBP) requesting them to conduct
investigation regarding the said discrepancies. PI Bank also sought the help of NBI. The NBI concluded
that the discrepancies were brought about by an organized criminal syndicate scheme known as
“pilferage scheme” perpetrated by some personnel of the CBP Clearing House. It was found out that V,
CBP’s Bookkeeper, with the assistance of E, a janitor-messenger, intercepted and pilfered PI Bank
checks and tampered the clearing envelopes. They would also reduce the amounts on the clearing
manifest and the PI Bank clearing statement and Central Bank manifest to conceal the bank fraud done.
PI Bank filed an action against CBP to recover the discrepancies and to hold the CBP, as employer, liable
for the damage caused by its employees, V and E.

No, the Central Bank of the Philippines (CBP), as employer cannot be made liable for the damage caused
by its employees, V and E. Under, Art. 2180, par. 6, the test of liability depends on whether or not the employees,
acting in behalf of CBP, were performing governmental or proprietary functions. The State in the performance of
its governmental functions is liable only for the tortuous acts of its special agents. On the other hand, the State
becomes liable as an ordinary employer when performing its proprietary functions.

CBP's establishment of clearing house facilities for its member banks to which V and E were assigned as
Bookkeeper and Janitor-Messenger, respectively, is a governmental function. As such, the State or CBP in this
case, is liable only for the torts committed by its employee when the latter acts as a special agent but not when
the said employee or official performs his or her functions that naturally pertain to his or her office. V and E are
not considered as special agents of CBP during their commission of the fraudulent acts against PI Bank as they
were regular employees performing tasks pertaining to their offices, namely, bookkeeping and janitorial-
messenger. CBP cannot be held liable for any damage caused to PI Bank by reason of Valentino and Estacio's
unlawful acts (Bank of the Philippine Islands v. Central Bank of the Philippines, G.R. No. 197593, October 12,
2020).

(42) A is an 11-year-old patient suffering from bone cancer. A and her parents went to T, a physician, to seek
medical treatment. T amputated A’s right leg in order to remove the tumor. In order to prevent recurrence
of the tumor, T referred A to L, an oncologist, for further treatment. L advised A’s parents to let A undergo
chemotherapy. L explained to A’s parents that the chemotherapy will help prevent recurrence and the
possible side effects of the procedure, and further explained that this procedure will give no assurance
that it will treat A’s cancers. Chemotherapy sessions later on ensued, however with little success and
with A developing further complications. Weeks after the chemotherapy session, A’s condition did not
improve. A eventually died of septicemia. Aggrieved with A’s death, A’s parents filed a suit holding L
liable for the death of A. Can L be held liable for the death of A?

No, L cannot be held liable for the death of A. Under the Disclosure Rule, the physician is not expected to
give the patient a short medical education, it only requires him to give reasonable explanation which includes
generally informing the patient in non-technical terms as to what is at stake, the alternative therapies available,
the goals expected to be achieved, and the risks that may ensue from the particular treatment or no treatment.
When L informed A’s parents of the side effects of the chemotherapy, there was already a reasonable expectation
on the part of L, as a physician, that A’s parents understood very well that the severity of these side effects will
not be the same for all patients undergoing the procedure. By the nature of the disease itself, each patient’s
reaction to the chemical agents even with the laboratory tests cannot be precisely determined by a physician (Li
v. Spouses Soliman, G.R. No. 165279, June 07, 2011).

Note: The four essential elements a plaintiff must prove in a malpractice action based upon the doctrine
of informed consent are: (1) the physician had a duty to disclose material risks; (2) he failed to disclose or
inadequately disclosed those risks; (3) as a direct and proximate result of the failure to disclose, the patient
consented to treatment she otherwise would not have consented to; and (4) plaintiff was injured by the proposed
treatment."
(43) What are the different kinds of damages? (MENTAL)

1. Actual Damages. Actual or compensatory damages are those awarded in satisfaction of, or in
recompense for, loss or injury sustained. They simply make good or replace the loss caused by the
wrong (Lim vs. Sps. Mendoza, G.R. No. 160110, June 18, 2014).

2. Moral Damages. Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though
incapable of pecuniary computation, moral damages may be recovered if they are the proximate result
of the defendant's wrongful act or omission (Art. 2217, CIVIL CODE).

3. Nominal Damages. Nominal damages are adjudicated in order that a right of the plaintiff, which has
been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose
of indemnifying the plaintiff for any loss suffered by him (Art. 2221, CIVIL CODE).

4. Temperate or Moderate Damages. Temperate or moderate damages, which are more than nominal
but less than compensatory damages, may be recovered when the court finds that some pecuniary
loss has been suffered but its amount can not, from the nature of the case, be provided with certainty
(Art. 2224, CIVIL CODE).

5. Note: The Supreme Court already debunked the notion that temperate damages are appropriate only
in those cases in which pecuniary loss cannot, "by its nature." Jurisprudence applying Article 2224 is
clear that temperate damages may be awarded even in instances where pecuniary loss could
theoretically have been proved with certainty (Lorenzo Shipping Corp. v. National Power Corp., G.R.
Nos. 181683 & 184568, October 7, 2015).

6. Liquidated Damages. Liquidated damages are those agreed upon by the parties to a contract, to be
paid in case of breach thereof (Art. 2226, CIVIL CODE).

7. Exemplary or Corrective Damages. Exemplary or corrective damages are imposed, by way of

example or correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages (Art. 2229, CIVIL CODE).

DAMAGES THAT REASON

CANNOT CO-EXIST
Nominal Damages Nominal damages are recoverable where a legal right is technically violated and must
and be vindicated against an invasion that has produced no actual present loss of any kind
Actual Damages or where there has been a breach of contract and no substantial injury or actual
damages whatsoever have been or can be shown but actual damages must be proved
with a reasonable degree of certainty.
Nominal Damages In nominal damages, it is recoverable where a legal right is technically violated and
and must be vindicated against an invasion that has produced no actual present loss of
Moral Damages any kind or where there has been a breach of contract and no substantial injury have
been or can be shown but in moral damages, it must be shown that plaintiff suffered
mental anguish, serious anxiety, wounded feelings, moral shock and other similar
injuries.
Nominal Damages In nominal damages, it is recoverable where a legal right is technically violated and
and must be vindicated against an invasion that has produced no actual present loss of
Temperate Damages any kind but in temperate damages, it may be recovered when the court finds that
some pecuniary loss has been suffered.
Temperate Damages Temperate damages may be recovered when the court finds that some pecuniary loss
and Actual Damages has been suffered but its amount cannot, from the nature of the case, be proved with
certainty while actual damages must be proved with a reasonable degree of certainty.

(44) A passenger bus owned by Philippine Rabbit Bus Lines, Inc. (PRBLI) had a collision with another vehicle
along the national highway in Pangasinan. E was a passenger of the said bus, and due to the accident,
his right arm was amputated. E sued PRBLI and its driver S for damages. E claimed for moral damages
purely on the fact that E lost his right arm, arguing that while in a strict sense, E incurred actual damages
through the amputation of his right arm, such loss may rightly be considered as falling under moral
damages. This is because a right arm is beyond the commerce of man and loss thereof necessarily
 brings physical suffering, mental anguish, besmirched reputation, social humiliation and similar injury
to a person. Is E’s contention correct?

No, E’s contention is incorrect. Since breach of contract is not one of the items enumerated under Art.
2219 of the Civil Code, moral damages, as a general rule, are not recoverable in actions for damages predicated
on breach of contract like in this case. As an exception to Art. 2219, such damages are recoverable in an action
for breach of contract: (1) in cases in which the mishap results in the death of a passenger; and (2) in cases in
which the carrier is guilty of fraud or bad faith. In this case, E did not die in the mishap but merely suffered an
injury. Further, the fraud or bad faith that must be convincingly proved by E should be one which was committed
by PRBLI in breaching its contract of carriage with E. Unfortunately, there was no persuasive proof of such fraud
or bad faith here (Estrada v. Philippine Rabbit Bus Lines, Inc., G.R. No. 203902, July 19, 2017).

(45) From 1989 to 1999, NL leased the front space of the ground floor of a two-storey building owned by H.
Eventually, NL gave up its initial lease and leased the other front portion of the ground floor and the
whole second floor of the said building, and made renovations with the building piping’s assembly. CPL
moved into the ground floor that NL once occupied. On May 9, 2006, a water leak occurred and damaged
CPL’s equipment, causing injury of over P2,000,000. Said equipment were insured with UGIC, hence CPL
filed a claim with UGIC. On November 2, 2006, the parties settled for the amount of over P1,300,000,
resulting to UGIC’s subrogation of CPL’s rights over all claims and demands arising from the water leak.
On May 20, 2010, UGIC demanded from NL for the payment of the said claim, but to no avail, causing
UGIC to file a complaint for damages against NL.

Meanwhile, H transferred the building’s ownership to CHI, causing UGIC, on October 6, 2010, to file an
Amended Complaint to implead CHI as a party-defendant in the said case. On April 21, 2014, UGIC then
filed another Amended Complaint to instead implead H, instead of CHI, as party-defendant, considering
that H was then the owner of the building when the water leak occurred. Has UGIC’s claim for damages
has already prescribed?

No, UGIC’s claim for damages has not yet prescribed. Considering that the prevailing rule applicable to
this case is the ruling in Vector Shipping Corp v. American Home Assurance Company (G.R. No. 159213, July
03, 2013) as UGIC’s claim for damages was filed during the applicability of Vector, UGIC has ten (10) years
within which to file the said action for damages.

The water leak damage incident, which gave rise to CPL’s cause of action against NL and H happened
on May 9, 2006. This incident can be classified as a quasi-delict, giving CPL, under the Vector ruling, until May
9, 2016 to file a complaint for damages. Considering further that UGIC’s Amended Complaint impleading H was
filed on April 21, 2014, and that the same is within ten years from the time UGIC indemnified CPL, i.e., November
2, 2006, UGIC’s claim for damages cannot be said to have prescribed under Vector (Henson, Jr. v. UCPB
General Insurance Co., Inc., G.R. No. 223134, August 14, 2019).

UT IN OMNIBUS GLORIFICETUR DEUS!

THIS IS THE INTELLECTUAL PROPERTY OF THE

SAN BEDA UNIVERSITY COLLEGE OF LAW RGCT BAR OPERATIONS CENTER

THE UNAUTHORIZED COPYING, REPRODUCTION, MODIFICATION OR

DISTRIBUTION OF ANY OF THE CONTENTS OF THIS MATERIAL
IS STRICTLY PROHIBITED.
(1) Under the Insurance Code, what event can or may be insured?

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 (INSURANCE CODE, Sec. 3).

Hence, under Section 3 of the Insurance Code, the risk must be:
a. A contingent or unknown event, whether past or future; and
b. It must damnify the insured or create a liability against him.

As a rule, only future events may be covered by an insurance contract because of the requirement that it
be “contingent or unknown.” A past event that may be insured against is peculiar to Marine Insurance in case
the loss of the vessel in the past could not have been known by ordinary means of communication.

However, no insurance can be taken for or against the drawing of any lottery, or for or against any chance
or ticket in a lottery drawing a prize (INSURANCE CODE, Sec. 4).

(2) Carlo and Bianca met in Phuket, Thailand. Immediately, they fell in love with each other and got married
soon after. They have been cohabiting blissfully as husband and wife, but they did not have any
offspring. As the years passed by, Carlo decided to take out an insurance on Bianca’s life for P1M with
him (Carlo) as sole beneficiary, given that he did not have a steady source of income and he always
depended on Bianca both emotionally and financially. During the term of the insurance, Bianca died of
what appeared to be a mysterious cause so that Carlo immediately requested for an autopsy to be
conducted. It was established that Bianca died of testicular cancer. It seems that Bianca was a
transsexual all along—a fact unknown to Carlo. Can Carlo claim the insurance benefit?

Yes, Carlo can claim the insurance benefit. Although Carlo’s insurable interest as the “husband” in a void
marriage is questionable, the law expressly provides that every person has an insurable interest in the life and
health of any person on whom he depends wholly or in part for support (INSURANCE CODE, Sec. 10). Moreover,
insurable interest in the life of the person only needs to exist at the time the policy takes effect and need not exist
at the time of the loss (INSURANCE CODE, Sec. 19). Thus, the subsequent knowledge of Carlo, upon the death
of Bianca, that the latter is a transsexual, and thus was not his wife, did not destroy the insurable interest he had
on the life of Bianca when he took out the policy.

(3) What claims can there be against the insurer in life insurance?

Unless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of
indemnity under a policy of insurance upon life or health is the sum fixed in the policy (INSURANCE CODE, Sec.
186). Hence, when the creditor insures the life of his debtor, the amount of insurance is limited by the value of
the obligation due.

The insurer in a life insurance contract shall be liable in case of suicide: (a) When it is committed after the
policy has been in force for a period of 2 years from the date of its issue or of its last reinstatement, unless the
policy provides a shorter period; and (b) When it is committed in the state of insanity regardless of the date of
commission (INSURANCE CODE, Sec. 183).

Refusal or failure to pay the claim within the time prescribed by the Insurance Code will entitle the
beneficiary to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the
ceiling prescribed by the Monetary Board, unless such failure or refusal to pay is based on the ground that the
claim is fraudulent (INSURANCE CODE, Sec. 248).
 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
(INSURANCE CODE, Sec. 248).

(4) Within what period should claims in life insurance be settled?

In policies maturing upon the expiration of the term set forth therein: 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 policies maturing at the death of the insured occurring prior to the expiration of the term
stipulated: 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 (INSURANCE CODE, Sec. 248).

(5) When shall the interest of a beneficiary in a life insurance policy be forfeited?

The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal,
accomplice, or accessory in willfully bringing about the death of the insured (INSURANCE CODE, Sec. 12).

(6) Who shall receive such life insurance proceeds?

The share forfeited shall pass on to the other beneficiaries, unless otherwise disqualified. In the absence
of other beneficiaries, the proceeds shall be paid in accordance with the policy contract. If the policy contract is
silent, the proceeds shall be paid to the estate of the insured (INSURANCE CODE, Sec. 12).

(7) On June 21, 2018, Kate took out a life insurance policy on her life in the amount of Php 10 million and
named her husband and her daughter as joint irrevocable beneficiaries. Before the policy was issued
and the premiums were paid, Kate underwent a medical checkup with a physician accredited by the
insurer, and the only notable observation was that she was suffering from high blood pressure. Kate was
previously diagnosed by a private physician of having breast cancer which she did not disclose to the
insurer in her application, nor to the insurer's accredited physician because by then, she was told that
she was already cancer-free after undergoing surgery which removed both her breasts. She was later
diagnosed with psychotic tendency that graduated into extreme despondency. She was found dead
hanging in her closet on October 20, 2019. The police authorities declared it to be a case of suicide as
they found a suicide note written by Kate stating that she needed to stop the voices in her head who kept
telling her she was ugly. The policy did not include suicide as an excepted risk.

(a) Can the insurer raise the issue of failure to disclose that Kate previously had cancer as a cause
for denying the claim of her husband and daughter?
(b) Are the beneficiaries entitled to receive the proceeds of the life insurance notwithstanding the fact
that the cause of death was suicide within the 2-year contestability period?

(a) No. In life insurance, the insurer cannot raise the issue of Kate’s failure to disclose that she had cancer as
a cause for denying the claim because the insurer is already estopped from contesting the validity of the
policy. The incontestability clause under Section 48 of the Insurance Code provides that the insurer will
lose its right to rescind the policy on the ground of concealment or material misrepresentation (a) if the
insured dies within two years and the policy is in force; or (b) if the policy is continuously in force for at
least 2 years from its issuance.

The insurer is given two years from the effectivity of the life insurance, and while the insurer is alive, to
discover or prove that the policy is void due to concealment or misrepresentation. There is a view to the
effect that when the insured dies within said period, the insurer must make good of the policy even if it
was obtained by fraud, concealment, or misrepresentation (Manila Bankers Life Insurance Corporation v.
Aban, G.R. No. 175666, July 29, 2013). Thus, under this view, upon the death of Kate, the insurer lost its
right to rescind the policy (Sun Life of Canada v. Ma. Daisy Sibya, G.R. No. 211212, June 8, 2016).
However, the opposite view that is also supported by jurisprudence is that the insurer can still deny the
claim if the insured dies within the 2-year period (Emilio Tan, et al. v. The Court of Appeals, G.R. No.
48049, June 29, 1989).

(b) Yes. In cases of suicide, the insurer is liable if committed in a state of insanity regardless of the date of
the commission unless suicide is an excepted peril (INSURANCE CODE, Sec. 183). Here, Kate committed
suicide in a state of insanity and suicide is not an excepted peril. Thus, the claim must be paid.
(8) Moon Life issued an Insurance Policy to Boy covering the life of her mother Anne, the insured, with a
face value of P500,000.00. The insurance policy was issued on December 1, 2003. On April 27, 2005, Anne
passed away. Moon Life later discovered several medical conditions which pre-dated the application of
the policy including the fact that the insured consulted with the UST Hospital and the AIM Imaging
Medical Services which diagnosed her to be suffering from stable angina, atherosclerosis, and lateral
wall ischemia. However, it is noted in her application for insurance that Anne, the insured, answered in
the affirmative that she had sought advice with a doctor for “high blood pressure, chest pain/discomfort,
heart murmur, stroke, circulatory or heart disorder.” She also disclosed her general check-up in Makati
Medical Center in 2003 which showed normal results except for a slight increase in her cholesterol.

(a) Can Moon Life rescind the contract based on concealment?

(b) Assuming there is a two-year incontestability clause in the contract of insurance, is Moon Life
barred from rescinding the contract based on concealment?

(a) Yes. Section 27 of the Insurance Code provides that a concealment, whether intentional or unintentional,
entitles the injured party to rescind a contract of insurance. Concealment is a neglect to communicate that
which a party knows and ought to communicate. In the case at hand, it is undisputed that prior to the
approval of the insured's insurance policy and during the stage of her application, she did not disclose the
fact that she consulted with the UST Hospital and the AIM Imaging Medical Services which diagnosed her
to be suffering from stable angina, atherosclerosis, and lateral wall ischemia. Such fact is material to the
contract in view of its effect on the insurer in forming its estimate of whether to deny or approve the
application as well as in prescribing the amount of premium thereon. The fact that the insured gave
affirmative answers in the application form does not relieve her from the obligation to disclose the
diagnoses of the UST Hospital and AIM. If she was able to provide information about her check-up in
Makati Medical Center, then there is no reason why she was unable to disclose her consultations with the
UST Hospital and the AIM (Alvarez II v. Sun Life of Canada [Philippines], Inc., G.R. No. 206674,
September 29, 2014).

(b) No. Moon Life is not barred from rescinding the contract on the ground of concealment in light of the two-
year incontestability clause in the contract of insurance, which is in accordance with Section 48 of the
Insurance Code. The insured herein died on April 27, 2005, while the insurance policy was issued on
December 1, 2003. Hence, since the incontestability period of two years had not yet set in, Moon Life was
not barred from rescinding the contract on the ground of concealment or misrepresentation, receipt of
premium payments from petitioner, notwithstanding (Alvarez II v. Sun Life of Canada [Philippines], Inc.,
G.R. No. 206674, September 29, 2014).

(9) What are the kinds of corporations?

As to the existence of stocks:

1. Stock Corporation: A corporation which has capital stock divided into shares and is authorized to
distribute to holders of such shares, dividends, or allotments of the surplus profits on the basis of the
shares held (REVISED CORPORATION CODE, Sec. 3).
2. Non-Stock Corporation: One where no part of its income is distributable as dividends to its members,
trustees, or officers (REVISED CORPORATION CODE, Sec. 86).

As to the manner of creation:

1. Corporation Created by Special Law: A corporation directly created by Congress through a special
law. Such corporation must be a government-owned or controlled corporation (CONST. Art. XII, Sec.
16).
2. Corporation Created Under a General Law: A corporation created under the Revised Corporation
Code of the Philippines, the Corporation Code of the Philippines or the Old Corporation Law.
3. Corporations by Prescription: A corporation that was not formally organized as such but has been
duly recognized by immemorial usage as a corporation, with rights and duties enforceable under the
law.

As legal right to corporate existence:

1. De jure Corporation: A corporation created in strict or substantial compliance with the mandatory
requirements for incorporation, and the right of which to exist as a corporation cannot be successfully
 attacked or questioned by any party (including the State) even in a direct proceeding for that purpose
by the State.
2. De facto Corporation: An association of persons existing under a valid law under which it may be
incorporated after having attempted in good faith to incorporate, and assuming corporate powers
(Seventh Day Adventist Conference Church of Southern Philippines, Inc. v. Northeastern Mindanao
Mission of Seventh Day Adventists, Inc., G.R. No. 150416, July 21, 2006).

As to nationality / place of incorporation:

1. Domestic Corporation: A corporation formed, organized or existing under Philippine laws (R.A. No.
7042, Foreign Investments Act of 1991, Sec. 3).
2. Foreign Corporation: A corporation formed, organized or existing under laws other than those of the
Philippines and whose laws allow Filipino citizens and corporations to do business in its own country
or state (REVISED CORPORATION CODE, Sec. 140).

As to relationship of management and control:

1. Holding or Parent Corporation: A corporation that has control over another corporation directly or
indirectly through one or more intermediaries. It is the corporation that owns all or substantially all or
the controlling shares in the subsidiary
2. Subsidiary Corporation: A corporation more than 50% of the voting stock of which is owned or
controlled directly or indirectly through one or more intermediaries by another corporation, which
thereby becomes its parent corporation (A.M. No. 00-8-10-SC, Rules of Procedure on Corporate
Rehabilitation).
3. Affiliate: A corporation that, directly or indirectly, through one or more intermediaries, is controlled by,
or is under the common control, of a parent corporation (A.M. No. 00-8-10-SC, Rules of Procedure on
Corporate Rehabilitation).

As to number of corporators:
1. Corporation Aggregate: A corporation consisting of more than one person or member. It has been
defined as an artificial body of men, composed of diverse individuals, the ligaments of which body, the
franchises and liberties bestowed upon it, bind and unite all into one, and consists the whole frame
and essence of the corporation.
2. Corporation Sole: A corporation consisting of only one person or member, for the purpose of
administering and managing, as trustee, the affairs, property and temporalities of any religious
denomination, sect or church, a corporation sole may be formed by the chief archbishop, bishop,
priest, minister, rabbi or other presiding elder of such religious denomination, sect or church
(REVISED CORPORATION CODE, Sec. 108).
3. One Person Corporation: A corporation with a single stockholder, who may be a natural person,
trust, or an estate (REVISED CORPORATION CODE, Sec. 116).

As to functions:
1. Public Corporation: A corporation organized for the government of a portion of State for the purpose
of serving general good and welfare.
2. Private Corporation: A Corporation formed for some private purpose, benefit, aim or end.

Other kinds of corporations:

1. Close Corporation: One whose AOI provides that:
a. All the corporation’s issued stock of all classes, exclusive of treasury shares, shall be held of
record by not more than a specified number of persons, not exceeding 20;
b. All the issued stock of all classes shall be subject to one (1) or more specified restrictions on
transfer permitted by Title XII; and
c. The corporation shall not list in any stock exchange or make any public offering of any of its stock
of any class (REVISED CORPORATION CODE, Sec. 95).
2. Ecclesiastical Corporation: Corporations composing entirely of spiritual persons and are
established for the furtherance of religion and for perpetuating the rights of a church.
3. Lay Corporation: All corporations other than ecclesiastical.
4. Eleemosynary Corporation or Charitable Corporation: A corporation created not for private gain
or profit but for charitable purposes for the administration of charitable trust.
5. Educational Corporation: A stock or non-stock corporation organized to provide facilities for teaching
or instruction.

(10) “XY” is a mobile application development company with an original authorized capital of P10 Million. It
employs 3 teams of 5 engineers and designers who develop mobile applications for third party clients.
Neither the articles of incorporation nor the by-laws of XY provide for any rule on the distribution of
dividends although there is a provision that after its dissolution, the assets shall be given to a scientific
research institution. Is “XY” a stock corporation? Give reasons for your answer.
 No, “XY” is a non-stock corporation. For a corporation to be a stock corporation, two requisites must
concur. First, it must have capital stock divided into shares; second, it must be authorized by its charter, its
articles of incorporation, to distribute dividends or allotments of the surplus profits on the basis of the shares held
(REVISED CORPORATION CODE, Sec. 3). Even if a corporation’s capital stock is divided into shares, if it is not
authorized to distribute dividends, surplus allotments, or profits to stockholders, it cannot be properly classified
as a stock corporation (Republic v. City of Paranaque, G.R. No. 191109, July 18, 2012). In such cases, Section
3 of the Revised Corporation Code provides that “all other corporations are non-stock corporations.” Thus, a
corporation organized under the Revised Corporation Code is deemed to be a non-stock corporation if it cannot
be classified as a stock corporation. It follows that “XY” must be classified as a non-stock corporation.

(11) What are the essential requirements for there to be de facto corporation?

It is essential to the existence of a de facto corporation that there be:

a. A valid law under which a corporation is organized;
b. A bona fide attempt in good faith to incorporate; and
c. Actual use or exercise in good faith of corporate powers conferred upon it by law (Seventh Day
Adventist Conference Church of Southern Philippines, Inc. v. Northeastern Mindanao Mission of
Seventh Day Adventist Inc., G.R. No. 150416, July 21, 2006).

(12) What is required to be filed with the Securities and Exchange Commission in order to become a
corporation sole?

In order to become a corporation sole, the chief archbishop, bishop, priest, minister, rabbi, or presiding
elder of any religious denomination, sect or church must file with the Securities and Exchange Commission
articles of incorporation setting forth the following:
a. That the applicant chief archbishop, bishop, priest, minister, rabbi, or presiding elder represents the
religious denomination, sect or church which desires to become a corporation sole;
b. That the rules, regulations and discipline of the religious denomination, sect or church are consistent
with becoming a corporation sole and do not forbid it;
c. That such chief archbishop, bishop, priest, minister, rabbi or presiding elder is charged with the
administration of the temporalities and the management of the affairs, estate and properties of the
religious denomination, sect or church within the territorial jurisdiction, so described succinctly in the
articles of incorporation;
d. The manner by which any vacancy occurring in the office of chief archbishop, bishop, priest, rabbi or
presiding elder is required to be filled, according to the rules, regulations or discipline of the religious
denomination, sect or church; and
e. The place where the principal office of the corporation sole is to be established and located, which
place must be within the territory of the Philippines.

The articles of incorporation may include any other provisions not contrary to law for the regulation of the
affairs of the corporation (REVISED CORPORATION CODE, Sec. 109).

(13) May a corporation sole acquire and alienate its properties?

Yes. A corporation sole may purchase and hold real estate and personal property for its church, charitable,
benevolent, or educational purposes, and may receive bequests or gifts for such purposes. Such corporation
may sell or mortgage real property held by it by obtaining an 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 (REVISED CORPORATION CODE, Sec. 111).

(14) Assume that you are the BSP and the GSIS Family Bank President sought your opinion as to whether
GSIS Family Bank should be considered as a government-owned and controlled corporation or
government bank under R.A. No. 10149 or the GOCC Governance Act of 2011. Taking into consideration
that Government Service Insurance System (GSIS) owns 99.55% of the outstanding capital stock of GSIS
Family Bank, will you consider the latter as a government-owned and controlled corporation?

Yes, GSIS Family Bank shall be considered as a government-owned and controlled corporation. A
government-owned or controlled corporation is: (1) established by original charter or through the general
corporation law; (2) vested with functions relating to public need whether governmental or proprietary in nature;
and (3) directly owned by the government or by its instrumentality, or where the government owns a majority of
the outstanding capital stock. Possessing all three (3) attributes is necessary to be classified as a government-
owned or controlled corporation. There is no doubt that GSIS Family Bank is a government-owned or controlled
 corporation since 99.55% of its outstanding capital stock is owned and controlled by the GSIS (GSIS Family
Bank Employees Union v. Villanueva, G.R. No. 210773, January 23, 2019, Leonen Case).

(15) Under the Revised Corporation Code, what is the maximum number of directors required for a board of
directors and what is the term of a director?

Under Section 13 of the Revised Corporation Code, the number of directors shall not be more than fifteen
(15). The number of directors cannot exceed 15 even after the incorporation.

Directors shall be elected for a term of one (1) year from among the holders of stocks registered in the
corporation's book. Each director shall hold office until the successor is elected and qualified. A director who
ceases to own at least one (1) share of stock or a trustee who ceases to be a member of the corporation shall
cease to be such (REVISED CORPORATION CODE, Sec. 22).

(16) What are the qualifications needed to be considered a director?

The following are the qualifications prescribe by the law:

a. He must own at least one share of the capital stock of the corporation in his own name (REVISED
CORPORATION CODE, Sec. 22);
b. He must not be disqualified under the Revised Corporation Code or any applicable special law or
rules (REVISED CORPORATION CODE, Sec. 26);
c. He must be of legal age; and
d. He must possess other qualifications as may be prescribed in special laws or regulations or in the
by-laws of the corporation.

(17) How are directors or members of a board of directors elected?

At all elections of directors or trustees, there must be present, either in person or through a representative
authorized to act by written proxy, the owners of majority of the outstanding capital stock, or if there be no capital
stock, a majority of the members entitled to vote. When so authorized in the bylaws or by a majority of the board
of directors, the stockholders or members may also vote through remote communication or in absentia: Provided,
That the right to vote through such modes may be exercised in corporations vested with public interest,
notwithstanding the absence of a provision in the bylaws of such corporations (REVISED CORPORATION
CODE, Sec. 23).

A stockholder or member who participates through remote communication or in absentia, shall be deemed
present for purposes of quorum. The election must be by ballot if requested by any voting stockholder or member
(REVISED CORPORATION CODE, Sec. 23).

(18) In stock corporations, how may directors be voted for?

The stockholder may adopt any of the following means:

1. Straight voting – vote such number of shares for as many persons as there are directors to be
elected; or
2. Cumulative voting for one candidate – cumulates his shares and give one candidate as many votes
as the number of directors to be elected multiplied by the number of his shares; or
3. Cumulative voting by distribution – distribute his shares among as many candidates as he shall
see fit (REVISED CORPORATION CODE, Sec. 23).

(19) Define and explain independent director.

An independent director is a person who apart from shareholdings and fees received from any business
or other relationship which could or could reasonably be perceived to materially interfere with the exercise of
independent judgment in carrying out the responsibilities as a director (REVISED CORPORATION CODE, Sec.
22).

The board of the following corporations vested with public interest shall have independent directors
constituting at least twenty percent (20%) of such board:
a. Corporations covered by Section 17.2 of Republic Act No. 8799, otherwise known as “The Securities
Regulation Code”, namely those whose securities are registered with the Commission, corporations
listed with an exchange or with assets of at least Fifty million pesos (P50,000,000.00) and having two
hundred (200) or more holders of shares, each holding at least one hundred (100) shares of a class
of its equity shares;
 b. Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged in money service business, pre-
need, trust and insurance companies, and other financial intermediaries; and
c. Other corporations engaged in business vested with public interest similar to the above, as may be
determined by the SEC, after taking into account relevant factors which are germane to the objective
and purpose of requiring the election of an independent director, such as the extent of minority
ownership, type of financial products or securities issued or offered to investors, public interest
involved in the nature of business operations, and other analogous factors (REVISED
CORPORATION CODE, Sec. 22).

(20) How are the vacancies in the board of directors filled?

Any vacancy occurring in the board of directors other than by removal or by expiration of term may be
filled by the vote of at least a majority of the remaining directors or trustees, if still constituting a quorum.

When the vacancy prevents the remaining directors from constituting a quorum and emergency action is
required to prevent grave, substantial, and irreparable loss or damage to the corporation, the vacancy may be
temporarily filled from among the officers of the corporation by unanimous vote of the remaining directors or
trustees (REVISED CORPORATION CODE, Sec. 28).

(21) How are vacancies filled on the grounds of removal or term expiration or when the remaining members
of the board do not constitute a quorum?

In such cases, vacancies must be filled by the stockholders or members in a regular or special meeting
called for that purpose. Any directorship to be filled by reason of an increase in the number of directors shall be
filled only by an election at a regular or at a special meeting of stockholders or members duly called for the
purpose (REVISED CORPORATION CODE, Sec. 28).

(22) How should a corporation exercise its corporate powers?

Section 22 of the Revised Corporation Code is clear that “unless otherwise provided in the Code, the
board of directors or trustees shall exercise the corporate powers, conduct all business, and control all properties
of the corporation.”

This is called the Doctrine of Centralized Management. Stockholders are too numerous, scattered, and
unfamiliar with the business of a corporation to conduct its business directly. Thus, the plan of corporate
organization is for the stockholders to choose the directors who shall control and supervise the conduct of
corporate business (Filipinas Port v. Go, G.R. No. 161886, March 16, 2007).

(23) Explain the Business Judgment Rule.

Questions of policy and management are left solely to the honest decision of officers and directors of a
corporation and the courts are without authority to substitute their judgment to the 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 or the SEC. The directors are therefore also not liable to the stockholders in
performing such acts (Philippine Stock Exchange, Inc. v. Court of Appeals, G.R. No. 125469, October 27, 1997).

(24) Is the exercise of corporate powers exclusive to the Board of Directors?

No. Although a corporation exercises its corporate powers through its board of directors, this power may
be validly delegated to its officers, committees, or agencies. The authority of the board of directors to delegate
its corporate powers may either be: (1) actual; or (2) apparent.

Actual authority may be express or implied. Express actual authority refers to the corporate powers
expressly delegated by the board of directors. Implied actual authority, on the other hand, can be measured by
his or her prior acts which have been ratified by the corporation or whose benefits have been accepted by the
corporation.

Apparent authority is ascertained through: (1) the general manner by which the corporation holds out an
officer or agent as having power to act or, in other words, the apparent authority with which it clothes him to act
in general, or (2) the acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof,
 whether within or without the scope of his ordinary powers (Terp Construction Corporation v. Banco Filipino
Savings and Mortgage Bank, G.R. No. 221771, September 18, 2019, Leonen Case).

(25) T Construction planned to develop a housing project, to finance this, T Construction, B Corporation, and
Planters Bank agreed to raise funds through the issuance of bonds worth P400 million called the
Margarita Bonds. B Construction, as guarantor, would pay investors the value of the bond at maturity
plus 8.5% interest per year. Banco Filipino purchased the Margarita Bonds and asked for additional
interest other than the 8.5% per annum based on the letters written by T Construction Senior Vice
President Escalona. When the Margarita Bonds matured, the funds in the asset pool were insufficient to
pay the bond holders. Banco Filipino, however, sent T Construction a demand letter dated January 31,
2001, alleging that it was entitled to a 15.5% interest on its investment and that as of July 1, 2001, it was
entitled to a 7% percent remaining unpaid interest of P 18,104,431.33. T Construction refused to pay the
demanded interest. Banco Filipino alleged that it was induced into buying the Margarita Bonds after T
Construction, through its senior vice president's letters, committed to pay 15.5% interest on a P50 million
bond that Banco Filipino held for a client and 16.5% interest on a P50 million bond it held for another
client. It also alleged that T Construction paid the additional interest twice during the Margarita Bonds'
holding period. Is T Construction liable to Banco Filipino to pay the demanded interest?

Yes. Escalona had apparent authority to transact on behalf of T Construction. The rule is of course settled
that although an officer or agent acts without, or in excess of, his actual authority if he acts within the scope of
an apparent authority with which the corporation has clothed him by holding him out or permitting him to appear
as having such authority, the corporation is bound thereby in favor of a person who deals with him in good faith
in reliance on such apparent authority, as where an officer is allowed to exercise a particular authority with
respect to the business, or a particular branch of its continuously and publicly, for a considerable time. Here,
Banco Filipino relied on Escalona's apparent authority to promise interest payments over and above the
guaranteed 8.5%, considering that Escalona was T Construction's then senior vice president. His apparent
authority was further demonstrated by T Construction paying Banco Filipino what Escalona promised during the
Margarita Bonds' term (Terp Construction Corporation v. Banco Filipino Savings and Mortgage Bank, G.R. No.
221771, September 18, 2019, Leonen Case).

(26) Ms. Mateo, the President of Stanley Corporation (Stanley), obtained a loan before the Lestine Financing
(Lestine) and secured by a real estate mortgage of Stanley’s property. Ms. Mateo presented a board
resolution empowering her to borrow money from Lestine and to use Stanley’s property to secure the
loan. However, Stanley failed to pay its loan. Lestine initiated extrajudicial foreclosure proceedings. Only
then Stanley learned about the transactions of Ms. Mateo. She was immediately removed as president.
Stanley filed a Complaint for Annulment of Real Estate Mortgage contending that it never gave Ms. Mateo
the authority to obtain the loan and it should not be liable for such. Is Stanley correct?

No. When a corporation intentionally or negligently clothes its agent with apparent authority to act in its
behalf, it is estopped from denying its agent's apparent authority as to innocent third parties who dealt with this
agent in good faith (Calubad v. Ricarcen Development Corp, G.R. No. 202364, August 30, 2017, Leonen Case).
Stanley cannot deny the authority it vested upon Ms. Mateo to obtain the loan and use of its property to secure
such loan. This is evident on the board resolution to such effect, absent any proof negating the validity of the
resolution.

(27) In what instances are the board of directors or trustees personally or solidarily liable?

Directors, trustees, or officers may be held personally or solidarily liable in the following instances:
(SAWGAV)
1. By virtue of a Specific provision of law;
2. Agreement or stipulation in a contract to hold himself personally liable with the corporation (Crisologo
vs. People, G.R. No. 199481; December 3, 2012);
3. Consent to the issuance of Watered stocks, or, having knowledge thereof, fails to file objections with
the corporate secretary (REVISED CORPORATION CODE, Sec. 64);
4. Those found guilty of Gross negligence or bad faith in directing the affairs of the corporation (REVISED
CORPORATION CODE, Sec. 30);
5. Acquire any personal or pecuniary interest in conflict with their duty (REVISED CORPORATION
CODE, Sec. 30); and
6. Willfully and knowingly Vote for and assent to patently unlawful acts of the corporation (REVISED
CORPORATION CODE, Sec. 30).
(28) What is the effect of acts of disloyalty of a director?

The director, trustee, or officer who commits act of disloyalty when he attempts to acquire or acquires any
interest adverse to the corporation in respect of any matter which has been reposed in him in confidence, and
upon which, equity imposes a disability upon himself to deal in his own behalf shall be liable as a trustee for the
corporation and must account for the profits which otherwise would have accrued to the corporation (REVISED
CORPORATION CODE, Sec. 30).

A disloyal director who, by virtue of such office, acquires a business opportunity which should belong to
the corporation, thereby obtaining profits to the prejudice of such corporation must account for and refund to the
corporation all profits obtained to the prejudice of the latter, unless the act has been ratified by a vote of the
stockholders owning or representing at 2/3 of the outstanding capital stock (REVISED CORPORATION CODE,
Sec. 33).

(29) A, B, and C are shareholders of XYZ Company. A has an unpaid subscription of P100,000. B’s shares are
fully paid up, while C owns only nominal but fully paid-up shares and is a director and officer. XYZ
Company became insolvent, and it is established that the insolvency resulted from fraudulent practices
within the company. If you were the counsel for a creditor of XYZ Company, will you advice legal action
directly against A, B, and C?

My advice would be different for each of the three shareholders.

I would advise the creditor to file a claim against A for the latter’s unpaid subscription in the amount of
P100,000 before the insolvency court under the Trust Fund Doctrine (Halley v. Printwell, G.R. No. 157549, May
30, 2011). My action cannot be direct against A as it is still a clam against the corporation except that it is in the
form of seeking to compel the corporation to collect unpaid subscriptions for purposes of liquidating its assets.

I would advise the creditor to file an action for damages against C in his personal capacity as director and
officer because the corporation’s insolvency was the result of fraudulent practices within the company. Under
Section 30 of the Revised Corporation Code, directors are liable jointly and severally for damages sustained by
the corporation, stockholders, or other persons resulting from gross negligence or bad faith in directing the affairs
of the corporation.

However, my client does not have any cause of action against B because B has already fully paid for his
subscription. Since the stockholder is not an officer, his liability as stockholder is only up to the extent of his
subscription which has been paid. This is also called the limited liability feature of the corporate vehicle (Pioneer
Insurance Surety Corp. v. Morning Star Travel & Tours, Inc., G.R. No. 198436, July 8, 2015, Leonen Case).

(30) X subscribed and paid for P10,000.00 worth of shares of stock of Rainbow Mines Equipment, Inc. (RMEI)
as an incorporator and original subscriber. He was employed as a Chief of the Engineering Section in
charge of overseeing the maintenance and improvement of RMEI’s equipment. As such, he designed
certain modifications in RMEI’s equipment which it would rent out to third persons. However, due to
some technical error in his designs, the third persons who leased the equipment suffered damages
which were brought against RMEI. The Board accused X of infidelity and breach of trust and confiscated
his shares claiming that he was solidarily liable for the damages charged against RMEI. Is the action of
the Board legal?

No, such action of the Board is not legal. For an officer to be made liable under Section 30 of the Revised
Corporation Code, he must have:
a. Voted or assented to a patently unlawful act of the corporation;
b. Be guilty of gross negligence or bad faith in directing the affairs of the corporation; or
c. Acquired any personal or pecuniary interest in conflict with his duty.

Nowhere does it appear that there was gross negligence on the part of X in the performance of his duties.
Mere technical error will not make the officer liable. In any case, even if there was gross negligence, the
corporation cannot take the law in its own hands and confiscate the shares of X without due process. The
corporation must file the appropriate action before the RTC since the claim against X is the subject matter of an
intra-corporate dispute.

(31) Pedro and his two daughters own a total of 70% of the subscribed capital stock of a close family
corporation which owns an office building. Tomas and Juan, the respective husbands of Pedro’s
daughters own the rest of the shares. Tomas, the corporate secretary, also owns majority shares in a
security agency, a janitorial company, and a catering business. By Tomas’ suggestion and referral, the
office building company engaged the service companies to render their services at reasonable fees.
 Assuming that Tomas was not present in any of the board meetings that approved the service contracts,
are the service contracts valid?

Yes, the service contracts are valid. Under Section 32 of the Revised Corporation Code, the mere fact that
a contract is executed between corporations with interlocking directors will not make said contracts invalid except
when:
1. There is a clear case of fraud; or
2. The contract is not fair and reasonable under the circumstances (REVISED CORPORATION CODE,
Sec. 32, par. 1)

However, where the interest of the interlocking directors in one corporation is substantial while his interest
in the other is nominal—that is, less than 20% of the outstanding capital stock—the contract shall be subject to
the provisions of Section 31 of the Revised Corporation Code with respect to the corporation where the
interlocking director has nominal holding. Thus, unless the following conditions are present, the said contract is
voidable, at the option of such corporation, unless all the following conditions are present:
a. The presence of the interlocking director in the board meeting approving the contract was not
necessary to constitute a quorum;
b. His vote was not necessary to approve the contract;
c. The contract is fair and reasonable under the circumstances;
d. In case of corporations vested with public interest, material contracts are approved by at least two-
thirds (2/3) of the entire membership of the board, with at least a majority of the independent directors
voting to approve the material contract; and
e. In case of an officer, the contract has been previously authorized by the board of directors (REVISED
CORPORATION CODE, Sec. 31).

According to the facts, Tomas owns a nominal interest of 15% in the office building company and is a
majority shareholder in the service companies. However, his presence in the board meetings that approved the
service contracts did not seem to be necessary to constitute their quorums. Nor was his vote necessary to
approve the contracts. Thus, ratification by the stockholders of the office building company is not required to
validate the contracts. Furthermore, there is no allegation of fraud and the contracts seem to be fair and
reasonable under the circumstances. Therefore, the contracts are valid.

(32) Enumerate the powers of corporation exercise by the board of directors.

General Powers and Capacity (SEx-SA-BISeP-DReN)

1. To Sue and be sued in its corporate name;
2. To have perpetual Existence unless the certificate of incorporation provides otherwise;
3. To adopt and use a corporate Seal;
4. To amend its Articles of incorporation in accordance with the provisions of this Code;
5. To adopt Bylaws, not contrary to law, morals or public policy, and to amend or repeal the same in
accordance with this Code;
6. In case of stock corporations, to Issue or sell stocks to subscribers and to sell treasury stocks in
accordance with the provisions of this Code; and to admit members to the corporation if it be a
nonstock corporation;
7. To purchase, receive, take or grant, hold, convey, Sell, lease, pledge, mortgage, and otherwise deal
with such real and personal property, including securities and bonds of other corporations, as the
transaction of the lawful business of the corporation may reasonably and necessarily require, subject
to the limitations prescribed by law and the Constitution;
8. To enter into a Partnership, joint venture, merger, consolidation, or any other commercial agreement
with natural and juridical persons;
9. To make reasonable Donations, including those for the public welfare or for hospital, charitable,
cultural, scientific, civic, or similar purposes: Provided, that no foreign corporation shall give donations
in aid of any political party or candidate or for purposes of partisan political activity;
10. To establish pension, Retirement, and other plans for the benefit of its directors, trustees, officers, and
employees; and
11. To exercise such other powers as may be essential or Necessary to carry out its purpose or purposes
as stated in the articles of incorporation (REVISED CORPORATION CODE, Sec. 35).

Specific Powers (DID-SAC-MER)

1. Power to declare Dividends out of unrestricted retained earnings (REVISED CORPORATION CODE,
Sec. 42);
2. Power to Increase or Decrease Capital Stock / Power to Incur, Create or Increase Bonded
Indebtedness (REVISED CORPORATION CODE, Sec. 37);
3. Power to Deny Pre-Emptive Right (REVISED CORPORATION CODE, Sec. 38);
 4. Sell, dispose, lease, encumber all or substantially all of corporate assets (REVISED CORPORATION
CODE, Sec. 39);
5. Power to Acquire own shares (REVISED CORPORATION CODE, Sec. 40);
6. Invest Corporate funds in another corporation or business or for any other purpose other than the
primary purpose (REVISED CORPORATION CODE, Sec. 41);
7. Power to enter into Management contract (REVISED CORPORATION CODE, Sec. 43);
8. Extension/Shortening of Corporate Term (REVISED CORPORATION CODE, Sec. 36); and
9. To Revive its corporate existence (REVISED CORPORATION CODE, Sec 11).

(33) When is there an ultra vires act on the part of (a) the corporation; (b) the board of directors/trustees; and
(c) the corporate officers?

(a) There is an ultra vires corporate act when the act is not within the scope of the primary or secondary
objects or purposes for which a corporation is created as defined by the law of its organization or is thus
beyond the powers conferred upon it by law (University of Mindanao, Inc. v. Bangko Sentral ng Pilipinas,
G.R. No. 194964-65, January 11, 2016, Leonen Case).

(b) There is an ultra vires act of directors/trustees when the Board engages in an activity or enters into a
contract without the act being ratified by the stockholders where ratification is required by the Revised
Corporation Code. This is the import of the opening clause of Section 22 of the Revised Corporation Code
which states that “unless otherwise provided in this Code, the board of directors or trustees shall exercise
the corporate powers, conduct all business, and control all properties of the corporation.” The Board has
broad powers to pursue all business judgements except when the Revised Corporation Code requires that
a corporate act be first ratified by the stockholders or members.

(c) A corporate officer acts ultra vires when he enters into a contract on behalf of the corporation without
having been so expressly or impliedly authorized by the Board of directors, even when the act or contract
falls within the corporation’s express, implied, or incidental powers (Yao Ka Sin Trading v. Court of
Appeals, G.R. No. L-53820, June 15, 1992).

(34) Should the corporation be bound by all the contracts entered into by its officer?

No. Corporations are artificial entities granted legal personalities upon their creation by their incorporators
in accordance with law. It is up to the third persons dealing with corporations to determine the corporation’s
competence as expressly defined by the law and their articles of incorporation. Corporate acts that are outside
those express definitions under the law or articles of incorporation or those "committed outside the object for
which a corporation is created" are ultra vires. Moreover, contracts entered into by persons without authority from
the corporation shall generally be considered ultra vires and unenforceable against the corporation (University
of Mindanao, Inc. v. Bangko Sentral ng Pilipinas, G.R. No. 194964-65, January 11, 2016, Leonen Case).

(35) Enumerate the rights of a Shareholder as to control and management the corporation.

The following are the rights of a shareholder as to control and management the corporation: (AVEMECA)
1. To Adopt/amend/repeal the by-laws or adopt new by-laws (REVISED CORPORATION CODE, Secs.
45 & 47);
2. To have the corporation Voluntarily dissolved (REVISED CORPORATION CODE, Secs. 134 & 135);
3. To Elect & remove directors (REVISED CORPORATION CODE, Secs. 23 & 27);
4. To attend and vote in person/proxy at stockholder’s Meetings (REVISED CORPORATION CODE,
Secs. 49 & 57);
5. To Enter into a voting trust agreement (REVISED CORPORATION CODE, Sec. 58);
6. To Compel the calling of meetings (REVISED CORPORATION CODE, Sec. 49); and
7. To Approve certain corporate acts.

(36) Enumerate the Proprietary Rights of a Shareholder.

The following are the proprietary rights of a shareholder: (Pre-TRIP)

1. To Pre-emption in the issue of shares (REVISED CORPORATION CODE, Sec. 38);
2. To Transfer of stocks in the corporate book (REVISED CORPORATION CODE, Sec. 62);
3. To Receive dividends when declared (REVISED CORPORATION CODE, Sec. 42);
4. To demand the Issuance of a certificate of stock or other evidence of stock ownership (REVISED
CORPORATION CODE, Sec. 62); and
5. To Participate in distribution of corporate assets upon dissolution (REVISED CORPORATION CODE,
Secs. 134-135).
(37) Enumerate the Remedial Rights of a Shareholder.

The following are the remedial rights of a shareholder: (ReBIRD)

1. To be furnished recent financial statements/ Reports of the corporation’s operations (REVISED
CORPORATION CODE, Sec. 74);
2. To Bring suits;
3. To Inspect corporate books (REVISED CORPORATION CODE, Sec. 73);
4. To Recover stock unlawfully sold for delinquency (REVISED CORPORATION CODE, Sec. 68); and
5. To Demand payment in the exercise of appraisal right (REVISED CORPORATION CODE, Secs. 40
& 80).

(38) Y owns one (1) share of the stock of TID Corporation since its first issue of shares 3 years prior. She
wrote to TID Corporation requesting to inspect its books and records. TID Corporation denied the request
for inspection as she only held one share and thus a negligible interest in the corporation and demanded
that she show proof that she had a bona fide purpose. Did TID validly deny Y’s request to inspect its
books and records?

No, the denial was invalid. The following are the only limitations on the right to inspect corporate books:
1. The right must be exercised during reasonable hours on business days;
2. The person demanding the right has not improperly used any information obtained through any
previous examination of the books and records of the corporation;
3. The demand is made in good faith or for a legitimate purpose; and
4. The person demanding is not a competitor, director, officer, controlling stockholder or otherwise
represents the interests of a competitor (REVISED CORPORATION CODE, Sec. 73).

The Revised Corporation Code does not require any minimum amount of stockholding for the exercise of
the right to inspect corporate books. The right of the shareholder to inspect the books and records is not subject
to the condition of a showing of any particular dispute or of proving any mismanagement or other occasion
rendering an examination proper. Where the right is to be denied, the burden of proof is upon the corporation to
show that the purpose of the shareholder is improper (Terlay Investment and Development Corporation v. Yulo,
G.R. No. 160924, August 5, 2015).

(39) Summary of cases when there is concurrence of the board of directors and stockholders.

BOARD APPROVAL
(Majority of Members STOCKHOLDERS’
SEC. CORPORATE POWER/ACT
present and voting APPROVAL
constituting a quorum)

ARTICLES OF INCORPORATION
2/3 of Outstanding Capital
15 Amendment of the Articles of Incorporation Yes
Stock (OCS)
36 Extending or shortening the Corporate Term Yes 2/3 of OCS
37 Increase or decrease Capital Stock Yes 2/3 of OCS
Determination of issue price of no-par value Yes, if authorized by the Majority of OCS, if board
61
shares AOI or bylaws not authorized by AOI
Approval or amendment of plan of merger or
76 Yes 2/3 of OCS
consolidation
BY-LAWS
Amendment/Repeal of by-laws or Adoption of
47 Yes Majority of OCS
new by-laws
OTHER CORPORATE POWERS/ACTS
37 Create, increase, or incur bonded indebtedness Yes 2/3 of OCS
Sale, lease, exchange, mortgage, pledge or
39 other disposition of all or substantially all of the Yes 2/3 of OCS
corporate property
 BOARD APPROVAL
(Majority of Members STOCKHOLDERS’
SEC. CORPORATE POWER/ACT
present and voting APPROVAL
constituting a quorum)

41 Investment of Corporate funds germane to the

Yes 2/3 of OCS
secondary purpose of the corporation
42 Issuance of Stock Dividends Yes 2/3 of OCS
MANAGEMENT CONTRACTS
Management Contracts in general Yes Majority of OCS
Management Contracts where:
1. 1/3 of OCS in managing corporation is
owned or controlled by the same interest in
both corporations; or
43 2. Majority of both Boards are same persons; 2/3 of OCS of the
Yes
or managed corporation
3. Corporation undertakes to manage or
operate all or substantially all of the business
of another corporation regardless of
nomenclature
DISSOLUTION AND WINDING-UP
Voluntary dissolution where no creditors are
134 Yes Majority of OCS
affected
Voluntary dissolution where creditors are
135 Yes 2/3 of OCS
affected

(40) What are the differences between Articles of Incorporation and By-laws?

ARTICLES OF INCORPORATION BY-LAWS

As to Definition
Charter of the corporation and the contractual Rules and regulations or private laws enacted by the
relationships between the State and the corporation, corporation to regulate, govern, and control its own
the stockholders and the State, and between the actions, affairs and concerns, and of its stockholders or
corporation and its stockholders (Lanuza v. Court of members and directors and officers in relation thereto
Appeals, G.R. No. 131394, March 28, 2005). and among themselves in their relation to the
corporation. These may not be essential to corporate
birth but certainly, these are required by law for an
orderly governance and management of corporations
(Loyola Grand Villas Homeowners Association, Inc. v.
Court of Appeals, G.R. No. 117188, August 7, 1997).
As to Effect on Corporate Existence
Condition precedent in the acquisition of corporate Not essential to corporate existence. Its absence merely
existence. furnishes a ground for the revocation of the franchise.
As to Purpose

Constitutes the charter or fundamental law of the Rules and regulations adopted by the corporation for its
corporation. governance.
As to Time of Execution
Executed before incorporation May be executed before incorporation or after
incorporation (REVISED CORPORATION CODE, Sec.
45).
 ARTICLES OF INCORPORATION BY-LAWS
As to Amendment
Amended by May by amended by a majority of the Board and at least
1. Majority of the Board; and majority of outstanding capital stock or majority of
2. Written Assent of stockholders representing 2/3 members.
of outstanding capital stock or 2/3 of members
(REVISED CORPORATION CODE, Sec. 15). When duly delegated, may be amended by a majority
vote of the Board (REVISED CORPORATION CODE,
Sec. 47).
As to Delegation of Power to Amend
Cannot be delegated Can be delegated to the Board by a vote of 2/3 of the
outstanding capital stock or 2/3 of members in a meeting
called for such purpose (REVISED CORPORATION
CODE, Sec. 47).

The delegation may be revoked by a vote of the majority

of the outstanding capital stock or majority of members
in a meeting called for such purpose.

(41) Explain intra-corporate dispute.

Broadly speaking, an intra-corporate dispute is one that arises from intra-corporate relations; relationships
between or among stockholders; or the relationships between the stockholders and the corporation (Gulfo v.
Ancheta, G.R. No. 175301, August 15, 2012). But to be considered as an intra-corporate dispute, the case: (a)
must arise out of intra-corporate or partnership relations, and (b) the nature of the question subject of the
controversy must be such that it is intrinsically connected with the regulation of the corporation or the enforcement
of the parties’ rights and obligations under the [Revised] Corporation Code and the internal regulatory rules of
the corporation. So long as these two criteria are satisfied, the dispute is intra-corporate and the RTC, acting as
a special commercial court, has jurisdiction over it (Aguirre II v. FQB+7, Inc., G. R. No. 170770, January 9, 2013).

(42) B was the Executive Vice President/Chief Executive Officer of NSIT Incorporated. After several years of
service, B was placed in preventive suspension due to some questionable transactions. She was then
prevented from reassuming her position. B filed a complaint before the Labor Arbiter contending that
she was illegally dismissed. NSIT Inc., on the other hand, prayed that the complaint be dismissed for
lack of jurisdiction of the LA as the case involves an intra-corporate dispute. What are the tests to
determine whether a case is an intra-corporate controversy? Is the matter of B’s dismissal an intra-
corporate dispute?

Yes. To determine whether a case is an intra-corporate controversy, a two-tiered test must be employed:
(a) the relationship test, and (b) the nature of the controversy test. Under the relationship test, a dispute is
considered an intra-corporate controversy when, among others, it is one between the corporation and its
stockholders, partners, members, or officers. Moreover, under the nature of the controversy test, the
disagreement must not only be rooted in the existence of an intra-corporate relationship but must as well pertain
to the enforcement of the parties' correlative rights and obligations under the [Revised] Corporation Code and
the internal and intra-corporate regulatory rules of the corporation.

Incidents and issues that are adjuncts of a dismissed officer’s corporate office make a controversy an
intra-corporate controversy (Norma D. Cacho and North Star International Travel, Inc. v. Virginia D. Balagtas,
G.R. No. 202974, February 7, 2018; Belo Medical Group, Inc. v. Santos, G.R. No. 185894, August 30, 2017,
Leonen Case). A corporate officer's dismissal is always a corporate act, or an intra-corporate controversy which
arises between a stockholder and a corporation, and the nature is not altered by the reason or wisdom with which
the Board of Directors may have in taking such action. The issue of the alleged termination involving a corporate
officer, not a mere employee, is not a simple labor problem but a matter that comes within the area of corporate
affairs and management and is a corporate controversy in contemplation of the [Revised] Corporation Code
(Wesleyan University-Philippines v. Maglaya, Sr., G.R. No. 212774, January 23, 2017).
(43) BMG received a request from AB for inspection of corporate records. AB claims that he was a registered
shareholder and co-owner of CB’s shares. The request for corporate records arose when AB was not
notified of the annual meetings and AB’s concern over the corporate operations arose from the alleged
death of a client in BMG premises. CB wrote BMG to object to the inspection by AB of corporate records
claiming that AB held the shares in his name merely in trust for CB. Based on BMG’s Articles of
Incorporation and General information Sheet, both AB and CB are shareholders of BMG. BMG filed a
complaint for interpleader in RTC to compel AB and CB to interplead and litigate their conflicting claims
of ownership which ultimately seeks to determine the true owner of the shares of stock and also to
prevent AB from inspecting the corporate books or records based on bad faith. Is the dispute between
AB and CB who claim to be the real owners of the same shares of stock an intra-corporate dispute?

Yes. Applying the relationship test, both AB and CD are named shareholders in BMG's Articles of
Incorporation and General Information Sheet. The conflict is clearly intra-corporate as it involves two (2)
shareholders although the ownership of stocks of one stockholder is questioned. Unless AB is adjudged as a
stranger to the corporation because he holds his shares only in trust for CD, then both AB and CD, based on
official records, are stockholders of the corporation. Applying the nature of the controversy test, this is still an
intra-corporate dispute. The Complaint for interpleader seeks a determination of the true owner of the shares of
stock registered in AB's name. Even if AB is declared the true owner of the shares of stock upon completion of
the interpleader case, BMG still seeks his disqualification from inspecting the corporate books based on bad
faith. Therefore, the controversy shifts from a mere question of ownership over movable property to the exercise
of a registered stockholder's proprietary right to inspect corporate books (Belo Medical Group, Inc. v. Santos,
G.R. No. 185894, August 30, 2017, Leonen Case).

(44) PH Corporation was owned by PCS Corporation which is subject of a standing sequestration order
issued by the PCGG. OD, a stockholder of PH Corporation, requested for a copy of all the minutes of the
meetings of the board of directors and executive committee of PH Corporation. Despite several follow-
ups made by OD, nothing happened. Hence, OD filed a complaint for inspection of books with the RTC.
The officers of PH Corporations prayed that the complaint be dismissed for lack of jurisdiction of the
RTC as special commercial court since PH Corporation is under sequestration and thus any issue must
be resolved by the PCGG. The RTC however denied the prayer for dismissal.

(a) Was the RTC correct?

(b) Assuming that the RTC issued an order, directing PH Corporation to furnish OD a copy of the
minutes of the meetings as requested, may PH Corporation refuse to comply with the order on the
ground that the decision has been appealed?

(a) Yes. Cases involving intra-corporate disputes are within the original and exclusive jurisdiction of the
Regional Trial Courts. The mere fact that a corporation's shares of stocks are owned by a sequestered
corporation does not, by itself, automatically categorize the matter as one involving sequestered assets,
or matters incidental to or related to transactions involving sequestered corporations and/or their assets
(San Jose v. Ozamiz, G.R. No. 190590, July 12, 2017).

(b) No. In intra-corporate controversies, all orders of the trial court are immediately executory as provided for
by Section 4 of the Interim Rules of Procedure Governing Intra-Corporate Controversies, as amended. It
is not for the parties to decide whether they should or should not comply with a court order. There was no
injunction to stop the implementation of the trial court’s orders (Oca v. Custodio, G.R. No. 199825, July
26, 2017, Leonen Case). PH Corporation cannot refuse to comply with the order of the RTC in absence
of any injunction pertaining thereto.

(45) Stockholders Kiko and Kikay ask for the refund of the shares they bought from A Corporation on the
ground that said Corporation failed to deliver the promised amenities to be built on the premises. The
Corporation Finance Department (CFD) conducted an ocular inspection of the project and found out that
they failed to comply substantially with their commitment to complete the project and ordered the refund
of Kiko and Kikay’s share. The SEC affirmed the CFD’s decision stating that the latter conducted such
inspection to determine if A Corporation violated SEC’s rules and regulations. The Court of Appeals
found that the case involved an intra corporate controversy, thus must be within the jurisdiction of the
RTC. Did the SEC act in excess of its jurisdiction when it ordered the refund of the shares?

No. This case is an intra-corporate dispute, over which the RTC has jurisdiction. It involves a dispute
between the corporation, A Corporation, and its stockholders, Kiko and Kikay. This also involves corporate rights
and obligations. It involves the determination of a stockholder's rights under the Revised Corporation Code or
other intra-corporate rules when the corporation or association fails to fulfill its obligations. However, even though
the complaint filed before SEC contains allegations that are intra-corporate in nature, it does not necessarily oust
the SEC of its regulatory and administrative jurisdiction to determine and act if there were administrative
violations committed. The SEC may investigate activities of corporations under its jurisdiction to ensure
 compliance with the law. However, its regulatory power does not include the authority to order the refund of the
purchase price of Kiko’s and Kikay’s shares in A Corporation (Securities and Exchange Commission v. Subic
Bay Golf and Country Club, Inc., G.R. No. 179047, March 11, 2015, Leonen Case).

(46) Define and explain Copyright.

Copyright is the right over literary and artistic works which are original intellectual creations in the literary
and artistic domain protected from the moment of creation (Kho v. Court of Appeals, G.R. No. 115758, March
19, 2002).

In copyright, works are protected by the sole fact of their creation, irrespective of their mode or form of
expression, as well as their content, quality or purpose (IPC, Sec. 172.2).

(47) What are the requisites for the creation of a copyrightable work?

1. Originality – It does not mean novelty or ingenuity, neither uniqueness nor creativity. It simply means
that the work "owes its origin to the author.”
2. Expression – To be "fixed", a work must be embodied in a medium sufficiently permanent or stable
to permit it to be perceived, reproduced, or otherwise communicated for a period of more than
transitory duration.

(48) X is a maker and manufacturer of a utility model, Leaf Spring Eye Bushing, for which he holds certificates
of copyright registration. X’s request to the NBI to apprehend and prosecute illegal manufacturers of his
work led to the issuance of search warrants against Y, alleged to be reproducing and distributing said
models in violation of the IP Code. Y moved to quash the warrants on the ground that X’s work is not
artistic in nature and is a proper subject of a patent, not copyright. X insists that the IP Code protects an
intellectual creation from the moment of its creation regardless of its nature or purpose. X argues that
the copyright certificates over the model are prima facie evidence of its validity. Is X’s model an artistic
work subject to copyright protection? Explain.

No. While works of applied art, original intellectual, literary and artistic works are copyrightable, useful
articles and works of industrial design are not. As gleaned from the specifications appended to the application
for a copyright certificate filed by X, the said Leaf Spring Eye Bushing are merely utility models. These are not
merely portrayals of the appearance of the article or to convey information. They are not intellectual creations in
the literary and artistic domain, or works of applied art. They are certainly not ornamental designs or one having
decorative quality or value. The designs for the bushing are not works of art. They are, as X admitted, utility
models which are the subject of patents (Ching v. Salinas, G.R. No.161295, June 29, 2005).

(49) Hubert is a social media influencer whose primary mode of livelihood is the creation of “vlogs” regarding
the unique local cuisine he encounters in his travels. During one of his trips, a strong undersea
earthquake struck which caused a tsunami to hit the beach where Hubert was staying. He quickly took
out his “GoPro” and began filming the tsunami making comments. He then uploaded the video on
Instagram. One of his followers, Jenny, works for a local news network. As the video was a “close up of
what was happening on the ground”, the news network aired Hubert’s video using Jenny’s access. Thus,
Hubert filed a complaint for copyright infringement against Jenny and the news network. The news
network however argued that under the IP Code, “news of the date and other miscellaneous facts having
the character of mere items of press information” was not copyrightable subject matter. Will the defense
of the news network lie?

No. It has been settled by the Supreme Court that while the “news of the day itself” is not copyrightable
subject matter, a unique “expression” of the news event is distinct from the “idea” of the event. Thus, while no
one can claim copyright to the mere statement of the happening of the tsunami, Hubert’s unique way of capturing
the event and his accompanying commentaries on the experience are copyrightable subject matter. Hence the
video is copyrightable (ABS-CBN Corp. v. Gozon, G.R. No. 195956, March 11, 2015, Leonen Case).
(50) What are the rights conferred to a copyright owner?

1. Copyright or Economic right

It shall consist of the exclusive right to carry out, authorize or prevent the following acts:
a. Reproduction of the work or substantial portion of the work;
b. Dramatization, translation, adaptation, abridgment, arrangement or other transformation of the
work;
c. The first public distribution of the original and each copy of the work by sale or other forms of
transfer of ownership;
d. Rental of the original or a copy of an audiovisual or cinematographic work, a work embodied in a
sound recording, a computer program, a compilation of data and other materials or a musical work
in graphic form, irrespective of the ownership of the original or the copy which is the subject of the
rental;
e. Public display of the original or a copy of the work;
f. Public performance of the work; and
g. Other communication to the public of the work (IPC, Sec. 177).

2. Moral rights
The author of a work shall, independently of the economic rights in Section 177 or the grant of an
assignment or license with respect to such right, have the right:
a. 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 (IPC, Sec. 193.1);
b. To make any alterations of his work prior to, or to withhold it from publication (IPC, Sec. 193.2);
c. To object to any distortion, mutilation or other modification of, or other derogatory action in relation
to, his work which would be prejudicial to his honor or reputation (IPC, Sec. 193.3); and
d. 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 (IPC, Sec. 193.4).

3. Right to participate in the gross proceeds of the sale or lease of the original work or Droit de
suite (IPC, Sec. 200).

(51) What is the term of Moral Rights conferred to a copyright owner?

The rights of an author under Section 193.1. shall last during the lifetime of the author and in perpetuity
after his death while the rights under Sections 193.2. 193.3. and 193.4. shall be coterminous with the economic
rights, the moral rights shall not be assignable or subject to license (IPC, Sec. 198.1).

(52) May an author waive his moral rights?

Yes. An author may waive his rights by a written instrument, but no such waiver shall be valid where its
effects is to permit another:
a. To use the name of the author, or the title of his work, or otherwise to make use of his reputation with
respect to any version or adaptation of his work which, because of alterations therein, would
substantially tend to injure the literary or artistic reputation of another author; or
b. To use the name of the author with respect to a work he did not create (IPC, Sec. 195).

(53) Discuss the rules on the ownership of copyright.

The rules on authorship are the following:

CREATOR TO WHOM IT BELONGS
Single Creator Author of the work (IPC, Sec. 178.1).
If work consists of unidentifiable parts: co-authors jointly as co-owners, unless
there is agreement to the contrary (IPC, Sec. 178.2).
Joint Creator
If work consists of identifiable parts: author of each part owns the part that he
has created (IPC, Sec. 178.2).
 CREATOR TO WHOM IT BELONGS
If the creation is part of his regular duties: employer, unless there is agreement
to the contrary (IPC, Sec. 178.3).
Employee’s Creation
If it is not part of his regular duties: employee, even if he uses the time, facilities,
and materials of employer (IPC, Sec. 178.3).
Work itself: person commissioning (IPC, Sec. 178.4).
Commissioned Work Copyright: creator, unless there is a written stipulation to the contrary (IPC,
Sec. 178.4).
For exhibition purposes: producer (IPC, Sec. 178.5).
Cinematographic Works For all other purposes: producer, author of the scenario, composer, film
director, author of the work (IPC, Sec. 178.5).
Publishers are deemed representatives of the author, unless:
Anonymous and 1. The contrary appears; or
pseudonymous works 2. Pseudonyms or adopted name leaves no doubt as to the author’s
identity; or author discloses his identity. (IPC, Sec. 179).
Contributor is deemed to have waived his right, unless he expressly reserves
Collective Works
it (IPC, Sec. 196).
Writer.
Letters
However, the court may authorize their publication or dissemination if the public
good or the interest of justice so requires (CIVIL CODE, Art. 723).

(54) BR and CT are noted artists whose paintings are highly prized by collectors. Dr. DL commissioned them
to paint a mural at the main lobby of his new hospital for children. Both agreed to collaborate on the
project for a total fee of two million pesos to be equally divided between them. It was also agreed that
Dr. DL had to provide all the materials for the painting and pay for the wages of technicians and laborers
needed for the work on the project.

Assume that the project is completed and both BR and CT are fully paid the amount of P2M as artists'
fee by DL. Under the law on intellectual property, who will own the mural? Who will own the copyright in
the mural? Why? Explain.

In case of commissioned work, the creator, in the absence of a written stipulation to the contrary, owns
the copyright, but the work itself belongs to the person who commissioned its creation (IPC, Sec. 178.4).
Accordingly, the mural belongs to DL. However, BR and CT own the copyright, since there is no written stipulation
to the contrary among the parties.

(55) What are the limitations on copyright?

Copyright may not be invoked to restrain the following acts with respect to a work covered by a copyright:
1. General Limitations;
a. Recitation or Performance of a work, once made accessible to the public, that is either:
i. Privately done and free of charge; or
ii. Strictly for a charitable or religious institution (IPC, Sec. 184 (a));
b. Making of Quotations from a published work:
i. Compatible with fair use;
ii. Extent is justified by the purpose; and
iii. Source and name of the author, appearing on work, must be mentioned (IPC, Sec. 184 (b));
c. Reproduction or Communication to the public by mass media of articles on current political, social,
economic, scientific or religious topic, lectures, addresses and other works, delivered in public:
i. For information purposes;
ii. Not expressly reserved; and
iii. Source is clearly indicated (IPC, Sec. 184 (c));
d. Reproduction and Communication to the public of literary, scientific or artistic works as part of
reports of current events by means of photography, cinematography or broadcasting to the extent
necessary for the purpose (IPC, Sec. 184 (d));
 e. Inclusion of a work in a publication, broadcast or other communication to the public, sound
recording or film if made by way of illustration for teaching purposes compatible with fair use and
the source and the name of the author appearing on work, must be mentioned (IPC, Sec. 184
(e));
f. Recording made in schools, universities, or educational institutions of a work included in a
broadcast for the use of schools, universities or educational institutions. Such recording must be
deleted within a reasonable period; such recording may not be made from audio-visual works
which are part of the general cinema, repertoire of feature films except of brief excerpts of the
work (IPC, Sec. 184 (f));
g. Making of ephemeral recordings:
i. By a broadcasting organization;
ii. By means of its work or facilities; and
iii. For use in its own broadcast (IPC, Sec. 184 (g));
h. Use made of a work by or under the direction or control of the government for public interest
compatible with fair use (IPC, Sec. 184 (h));
i. Public performance or the communication to the public of a work in a place where no admission
fee is charged by a club on institution for charitable or educational purpose only and the aim is
not profit-making (IPC, Sec. 184 (i));
j. Public display of the original or a copy of the work not made by means of a film, slide, television,
image or otherwise on screen or by means of any other device or process either the work has
been published, sold, given away, or transferred to another person by the author or his successor
in title (IPC, Sec. 184 (j));
k. Use made of a work for the purpose of any judicial proceedings or for the giving of professional
advice by a legal practitioner (IPC, Sec. 184 (k)).
l. Reproduction or distribution of Published articles or materials in a specialized format exclusively
for the use of the blind, visually- and reading-impaired persons:
i. Made on a nonprofit basis; and
ii. Shall indicate the copyright owner and the original date of publication (IPC, Sec. 184 (l)).
2. Fair use (IPC, Sec. 185);
3. Private reproduction of published work in a single copy by a natural person for research and private
study (IPC, Sec. 187);
4. In the case of a work of architecture, the right to control the reconstruction or rehabilitation in the same
style as the original of the building (IPC, Sec. 186);
5. Reprographic reproduction in a single copy by non-profit libraries, under certain circumstances (PC,
Sec. 188);
6. Reproduction, under certain circumstances, of a computer program in one back-up copy by the lawful
owner of the program (IPC, Sec. 189); and
7. Importation for personal purposes under certain conditions (IPC, Sec. 190).

(56) Can a judge be held liable for quoting a portion of a published work in his decision without permission
of the author of said book or any citation?

No. Unlike academic institutions which value original scholarship, such that the citation of sources
becomes part of the basic standards of scholarship, courts do not write to produce original scholarship. The
judicial system is based on the doctrine of stare decisis which encourages the citation of historical legal data,
precedents, and related studies in their decisions. Court decisions are not written to earn merit, accolade, or
prize as an original work of art or scholarship. Deciding disputes is a service rendered for the public good. The
interest of society in judicial decision is not that they are originally crafted but that they are fair and correct in the
context of the particular dispute involved. Thus, judges are exempt from a charge of plagiarism as they are free
to use whatever sources they deem appropriate to resolve the matter before them. This rule should apply to
practicing lawyers as well when they cite legal sources for their pleadings or in rendering advice to clients (In the
Matter of the Charges of Plagiarism, etc., against Associate Justice Mariano C. Del Castillo, A.M. No. 10-7-17-
SC, February 8, 2011).

(57) A chapter of book was photocopied by a professor and was given to his students for class discussion.
Can the professor be made liable for copyright infringement?

No. Under the Doctrine of Fair Use, a person has the privilege to use the copyrighted material in a
reasonable manner without the consent of the copyright owner. Fair use of a copyrighted work for criticism,
comment, news reporting, teaching, including multiple copies for classroom use, scholarship, research, and
similar purposes is not an infringement of copyright (ABS-CBN Corp. v. Gozon, et al., G.R. No. 195956, March
11, 2015, Leonen Case).
(58) What are the factors to be considered in determining whether use is fair or not?

The following should be considered:

1. The purpose and character of the use, including whether such use is of a commercial nature or is for
non-profit educational purposes;
2. The nature of the copyrighted work;
3. The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
4. The effect of the use upon the potential market for or value of the copyrighted work (IPC, Sec. 185.2).

(59) Is it necessary that a whole or large portion of the work shall have been copied in order for it to constitute
as infringement?

No. If so much is taken that the value of the original work is substantially diminished, or the labors of the
original author are substantially and to an injurious extent appropriated by another, that is sufficient in point of
law to constitute an infringement (Habana v. Robles, G.R. No. 131522, July 19, 1999).

(60) A shop photocopies a book almost in its entirety in preparation for the opening of the schoolyear as the
book is a popular book that many students usually photocopy. A student goes to buy one of the copies
“pre-made”. Is there copyright infringement in this case?

No, copyright infringement is the exercise of the sole rights of a copyright owner, conferred by the statute
unto him, by another person without the consent of the copyright owner (Columbia Pictures, Inc. v. Court of
Appeals, G.R. No. 110318, August 28, 1996). The rights, however, are subject to limitations.

The photocopying by the students of the book is a private reproduction of a published work in a single
copy for research and private study (IPC, Sec. 187). The shop owner merely anticipated that several students
would be requesting such reproduction and so pre-made them to increase his shop’s business efficiency. The
shop owner is not shown to have sold the pre-made photocopies to persons other than students who sought
such reproductions for such specific purposes. Thus, there is a valid limitation to copyright which precludes a
finding of infringement.

(61) What and who are governed the Data Privacy Act?

In summary, the Data Privacy Act (DPA) governs:

1. All acts of processing of all types of personal data;
2. All persons involved in such processing including those not found within the Philippines under certain
conditions (DPA, Sec. 4).

It must also be noted that publishers, editors, or duly accredited reporters of any newspaper, magazine,
or periodical of general circulation are protected from being compelled to reveal the source of any news report
or information appearing in said publication which was related in confidence to such publisher, editor, or reporter.
(Sec. 5 of DPA in relation to R.A. No. 53)

(62) ABC Inc. is a business outsourcing operation which processes financial data collected from residents
of foreign countries for the purpose of encoding the same in locally established databases. Reggie is a
technician who monitors the database in Manila. In order to make extra money, he randomly extracts
data from about 10,000 individuals and sells the data to a person who offered to pay P100 per dataset.
Thus, he was paid P1M for his troubles. When the data breach was discovered, Reggie was prosecuted
under Section 29 of the DPA. In his defense, Reggie points out that under Section 4 of the DPA, the law
does not apply to information originally collected from residents of foreign jurisdictions. Is he correct?

No. As clarified in the Implementing Rules and Regulations of the DPA, what is excepted from the
application of the DPA are the acts of processing performed in foreign jurisdictions under the data privacy laws
of such jurisdictions. In other words, the same information may be governed by two separate data privacy laws
because data privacy statutes apply to acts of processing and not to the data. Thus, acts of processing performed
in the Philippine jurisdiction which are penalized under the DPA may be prosecuted (IRR to the DPA, Sec. 5(f)).
(63) Thomas is a Ph.D. researcher completing his research for new book in economics. He interviewed
hundreds of sex workers as part of his research in the industry. He then published his book which named
the persons he interviewed. Thus, he was charged of violating Section 32 of the DPA. In his defense, he
cites Section 4 of the DPA which states that information processed for research purposes are not
covered by the act. Is he correct?

No. As clarified in the Implementing Rules and Regulations of the DPA, the exception only applies to
personal information processed for research purpose intended for a public benefit and does not exempt the
information controller from applicable laws, regulations, or ethical standards (IRR to the DPA, Sec. 5(c)).
Moreover, even in the special excepting cases under Section 4 of the DPA, the basic rights of data subjects must
still be upheld (IRR to the DPA, Sec. 6). Hence, Thomas may be prosecuted under the DPA.

(64) Differentiate Personal Information from Sensitive Personal Information.

PERSONAL INFORMATION SENSITIVE PERSONAL INFORMATION

Personal information 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
(DPA, Sec. 3(g)).
Criteria for Lawful Processing Despite Lack of Consent Common to Both
Under Section 12 of the DPA, the
processing of personal information shall be
lawful even without the consent of the data
subject when it is necessary or related to
any of the following purposes:
1. To protect vitally important interests,
including life and health;
2. To comply with national emergency;
3. To comply with the requirements of
public order and safety;
4. To fulfill the functions of public authority
(ex. processing by AMLC);
5. To comply with a legal obligation of the
information controller (ex. AMLA
reportorial requirements);
6. Preparatory to or in fulfillment of a
contract with the data subject;
7. To serve legitimate interests of the
information controller or a 3rd party
unless said interests are overridden by
the fundamental rights and freedoms of
the data subject.
Definition
A subset of personal information which, by their nature and utility,
are sensitive, classified, confidential, and very harmful if misused
such as:
1. Information about an individual’s race, ethnic origin, marital
status, age, color, and religious, philosophical or political
affiliations;
2. Information about an individual’s health, education, genetic or
sexual life of a person;
3. Information regarding—
a. any proceeding for any offense committed or alleged to
have been committed by such person;
b. the disposal of such proceedings; or
c. the sentence of any court in such proceedings;
4. Information 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,
5. Information specifically established by an executive order or
an act of Congress to be kept classified (DPA, Sec. 3(l))
Under Section 13 of the DPA, the processing of personal
information shall be lawful even without the consent of the data
subject when it is necessary or related to any of the following
purposes:
1. To protect the life and health of the data subject or a third
person, and the absence of consent is due to the physical or
legal inability of the data subject to give such consent;
2. To achieve the purposes of medical treatment by a medical
practitioner or institution which ensured adequate protection
of the sensitive or privileged information
3. To perform information processing provided or required by
existing law, rule, or regulation, provided that such law, rule,
or regulation—
a. guarantees the protection of the sensitive personal or
privileged information;
b. does not expressly require that the consent of the data
subject be first obtained;
4. To be provided to government or public authority for
legitimate public purposes or processes
5. To protect lawful rights and interests of any person in court
proceedings;
6. To establish, exercise, or defend legitimate rights and claims;
7. To achieve the lawful and non-commercial objectives of
public organizations and their associations provided that—
 PERSONAL INFORMATION SENSITIVE PERSONAL INFORMATION
a. The processing is confined to data of the bona fide
members of said organization or associations;
b. The information is not disclosed or transferred to third
parties.

(65) Who are the parties involved in personal data processing?

Personal Data processing usually involves 2 parties:

1. Data Subject: the person whose personal information is processed by another.
2. Personal Information Controller (PIC): the individual or entity who controls the processing of
personal information except when the processing of such information is for personal or household
affairs.

If the PIC outsources the processing of data within its control, the individual or entity who actually
processes the data in behalf of and under the control and direction of the PIC is called the Personal Information
Processor. The PIP only exists when the processor is a distinct person or entity from the PIC. There is no such
relationship when the information is controlled by an employer which is processed by his employee. In this case,
there is no PIP as the employer and the employee are deemed to be the PIC collectively.

(66) What are the limits to retaining personal information?

Retention of personal information, in terms of purpose, shall only be allowed when:

1. Retention is necessary for the purposes of data collection;
2. Retention is necessary for the establishment, exercise, or defense of legal claims;
3. Retained for legitimate business purpose;
4. Retention is required or provided by law (DPA, Sec. 11, par. 2.e.)

Retention of personal information shall, in relation to amount and time, be lawful when:
1. Only such amounts as are necessary to achieve the purpose of the collection;
2. Only in the amount and length of time as is necessary to serve the purposes of historical, statistical,
or scientific purpose;
3. Only for such period as is necessary by its purposes and no longer than that prescribed by law (DPA,
Sec. 11, par. 2.f.).

(67) What are the rights of a data subject under the DPA?

Under Section 16 and 18 of the DPA, as well as its implementing rules, the rights of the data subject may
be summarized as follows:
1. Right to be Informed
a. Of the fact of processing
b. Of the details of the processing.
2. Right to access the information processed.
3. Right to object to, or demand the termination of, processing.
4. Right to rectify, or demand the rectification of, any error.
5. Right to erase, or demand the erasure/deletion, of the processed data.
6. Right to damages for breach of data privacy.
7. Right to data portability if data is processed —
a. By electronic means; and
b. In a structured and commonly used format.

(68) In the Municipality of Sta. Clara, the municipal government passed an ordinance whereby the
municipality promised itself to give residents who have reached the age of 100, a cash gift of
P100,000.000 provided that they had been a resident of the municipality for at least 10 continuous years.
Thus, via an internal administrative order by the mayor, the barangay chairmen were asked to prepare
registries of their residents. Elma, a secretary in one of the barangays, filed a petition for injunction
arguing that the personal information of herself and her co-residents was being collected without their
knowledge and consent. Will you grant the petition?

No. I will deny the petition. The right to be informed and notified of the processing of personal information
is not absolute. Notification of the data subject is not necessary when (a) the personal information is needed
pursuant to a subpoena, (b) when it is being collected or processed pursuant to some other legal obligation, or
 (c) when the processing is for obvious purposes (DPA, Sec. 16). In this case, the second and third limitations on
the right to be informed are present as the collection is pursuant to the municipal mayor’s legal obligation to
implement the ordinance and it is obvious that the ordinance can only be reasonably carried out if the census is
made.

(69) Enumerate at least 5 grounds to suspend/withdraw consent to processing or demand the destruction of
data already being processed.

Under Section 16(e) of the DPA, a data subject may suspend/withdraw his/her consent to the processing
of his/her personal information, or demand the destruction of the same when the information is:
1. Incomplete
2. Outdated
3. False
4. Unlawfully obtained
5. Unlawfully processed
6. Used for unauthorized or illegal purposes
7. Processed in a manner not germane to the purpose of its collection/retention
8. Processed or used in a manner prejudicial to the other rights, interests, and freedoms of the data
subject

UT IN OMNIBUS GLORIFICETUR DEUS!

THIS IS THE INTELLECTUAL PROPERTY OF THE

SAN BEDA UNIVERSITY COLLEGE OF LAW RGCT BAR OPERATIONS CENTER

THE UNAUTHORIZED COPYING, REPRODUCTION, MODIFICATION OR

DISTRIBUTION OF ANY OF THE CONTENTS OF THIS MATERIAL
IS STRICTLY PROHIBITED.