CIVIL LAW

1. PERSONS their personality begins as soon as they have

(a) Natural Persons
Birth determines personality; but the conceived
child shall be considered born for all purposes
that are favorable to it, provided it be born later
with the conditions specified in the following
article. (ART. 40, CIVIL CODE)
(i) Commencement Of Civil Personality
For civil purposes, the foetus is considered born
if it is alive at the time it is completely delivered
from the mother's womb.
However, if the foetus had an intrauterine life of
less than seven months, it is not deemed born if
it dies within twenty-four hours after its complete
delivery from the maternal womb. (ART. 41,
CIVIL CODE)
GELUZ V. CA
(G.R. No. L-16439, July 20, 1961)
Even if a cause of action did accrue on behalf of
the unborn child, the same was extinguished by
its pre-natal death, since no transmission to
anyone can take place from one that lacked
juridical personality.
(ii) Extinguishment Of Civil Personality
Civil personality is extinguished by death.
The effect of death upon the rights and
obligations of the deceased is determined by
law, by contract and by will. (ART. 42, CIVIL
CODE)
been constituted according to law;
3) Corporations, partnerships and associations
for private interest or purpose to which the law
grants a juridical personality, separate and
distinct from that of each shareholder, partner or
member. (ART. 44, CIVIL CODE)
(c) Capacity to Act
Capacity to act, which is the power to do acts
with legal effect, is acquired and may be lost.
(ART. 37, CIVIL CODE)
(i) Restrictions on the capacity to act
Minority, insanity or imbecility, the state of being
a deaf-mute, prodigality and civil interdiction are
mere restrictions on capacity to act, and do not
exempt the incapacitated person from certain
obligations, as when the latter arise from his
acts or from property relations, such as
easements. (ART. 38, CIVIL CODE)
Juridical Capacity Capacity to Act
Fitness of a person to Power to do acts with
be the subject of legal legal effect
relations
Passive Active
Aptitude for the Aptitude to exercise
holding and rights
enjoyment of rights
Inherent in natural Must be acquired
persons

(b) Juridical Persons Lost upon death Lost through death

and other causes
(i) Kinds of juridical persons
Can exist without Must exist with
The following are juridical persons: capacity to act juridical capacity
1. The State and its political subdivisions; Cannot be limited or May be restricted or
2. Other corporations, institutions and entities restricted limited
for public interest or purpose, created by law;
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A conceived child has a provisional personality
for all purposes favorable to it:
1. It is entitled to support [QUIMIGING V.
ICAO, GR. NO. L-26795 (1970)]
2. It may inherit or succeed [ART. 1025, CC]
3. It may receive donations [ART. 742, CC]
Note: However that such is only “provisional” or
conditional, since it should be born alive later
before the rights can be claimed. For civil
purposes, the fetus is considered born if it is
alive at the time it is completely delivered from
the mother’s womb. However, if the fetus had an
intrauterine life of less than seven months, it is
not deemed born if it dies within twenty-four
hours after its complete delivery from the
maternal womb. [ART. 41, NCC]
(ii) Civil Personality Extinguished
Civil personality is extinguished by death; the
effect of death upon the rights and obligations of
the deceased is determined by law, by contract
and by will. [ART. 42, NCC]
Note: Only natural or physical death. The law
does not recognize “civil death,” (i.e. death due
to conviction or a religious profession).
[TOLENTINO]
II. MARITAL RELATIONSHIPS
(a) Marriage
Marriage is a special contract of permanent
union between a man and a woman entered into
in accordance with law for the establishment of
conjugal and family life. It is the foundation of the
family and an inviolable social institution whose
nature, consequences, and incidents are
governed by law and not subject to stipulation,
except that marriage settlements may ix the
property relations during the marriage within the
limits provided by this Code. (ART. 1, FAMILY
CODE)
(b) Evidence of Marriage
The best documentary evidence of a marriage
is the marriage contract. However, the failure to
present it is not, however, proof that no marriage
took place, as other evidence may be presented
to prove marriage (BALOGBOG V. CA, G.R NO.
83598, MARCH 7, 1997).
(c) Status of Marriage:
(i) Valid
Essential Requisites of Valid Marriage:
1. Legal capacity of the contracting parties
who must be a male and a female;
2. Consent freely given in the presence of
the solemnizing officer (FC, ART. 2).
Absence of the additional requirement of
parental advice
It does not make the marriage void or voidable,
it only affects the release of the marriage license
to be postponed until (3) three months from the
complete publication of the application (FC,
ART. 15).
Formal Requisites of Valid Marriage
1. Marriage Ceremony
2. Authority of the solemnizing officer
3. Valid marriage License, except in a
marriage of exceptional character (FC, ART. 3).
Effect Of Absence Of Requisites
Status of Marriage in case of:
1. Absence of any of the essential requisites -
Void ab initio (FC, ART. 4).
2. Absence of any of the formal requisites – Void
ab initio (FC, ART.4).
Exceptions:
Valid even in the absence of formal requisite:
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a. Marriages exempt from license
requirement
b. Either or both parties believed in good
faith that the solemnizing officer had the proper
authority [FC, ART. 35 (2)].
3. Defect in any of the essential requisites –
Voidable (FC, ART. 4).
4. Irregularity in any of the formal requisites-
Valid, but the party responsible for such
irregularity shall be civilly, criminally or
administratively liable (FC, ART. 4).
Marriage Ceremony
Requisites:
1. Personal appearance of the contracting
parties before the solemnizing officer;
Note: There is no marriage ceremony if what
transpired was a mere private act of signing a
marriage contract by the contracting parties,
without the presence of the solemnizing officer
(MORIGO V. PEOPLE, G.R. NO. 145226,
FEBRUARY 6, 2004).
2. Their personal declaration that they shall take
each other as husband and wife; and
3. In the presence of not less than 2 witnesses
of legal age.
No particular form of ceremony or religious rite
for solemnization of the marriage is required by
law (FC, ART. 6).
The declaration of consent need not be vocally
expressed. It can be shown by other
manifestations or signs of approval and
consent. It is the agreement itself, and not the
form in which it is couched, which constitutes the
contract (STA. MARIA, 2010).
Common-law marriages are not recognized in
the Philippines
A common-law marriage, otherwise referred to
as a live-in relationship, is one where the man
and the woman just live together as husband
and wife without getting married (PARAS,
2016).
This form of marriage is not recognized in the
Philippines.
If performed abroad – Whether it is allowed or
not depends upon the law of the place where the
marriage was celebrated (lex loci celebrationis).
As to marriages between Filipinos - all
marriages solemnized outside the Philippines,
in accordance with the laws enforced in said
country where they are solemnized, and valid
there as such, shall also be valid here in the
country, except those prohibited under Art.
35(1),(2),(4), (5), (6), 36, 37 and 38 (FC,ART.
26).
Persons authorized to solemnize marriage
(1994 1995, 1999 BAR)
The following are the persons authorized to
solemnize marriage depending upon the
circumstances:
Under ordinary circumstances (FC, ART. 7):
a. Incumbent judiciary member – Provided, It
is within the court’s jurisdiction.
b. Priest , rabbi, imam or minister of any
church/religious sect duly authorized - by his
church or religious sect and registered with the
civil registrar general, acting within the limits of
the written authority granted him by his church
or religious sect –
Provided at least one of the parties belongs to
such church or religious sect.
c. Consul general, consul or vice-consul -
Provided both parties are Filipinos and marriage
takes place abroad in the country where the
consul holds office (FC, ART. 10).
d. Mayors (LGC, ARTS. 444 AND 445) –
including “Acting Mayor”
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Marriages in articulo mortis:
a. Ship captain or airplane chief – provided
the marriage is performed:
1. During voyage, even during stopovers
2. Between passengers or crew members
(FC, ART. 31).
Such authority may be exercised not only while
the ship is at sea or the plane is in flight but also
during stop-overs at ports of call (Rabuya,
2018).
b. Military commander of a unit who is a
commissioned officer – provided the marriage
is performed (FC,ART.32):
1. In absence of chaplain;
2. Within zone of military operation;
3. Between members of the armed forces or
civilians.
Marriage License
A marriage license is required in order to notify
the public that two persons are about to be
united in matrimony and that anyone who is
aware or has knowledge of any impediment to
the union of the two shall make it known to the
local civil registrar.
The requirement and issuance of marriage
license is the State’s demonstration of its
involvement and participation in every marriage
(RABUYA, 2018).
What is required is the marriage license, not the
marriage certificate. The latter is not an
essential or formal requisite; thus an oral
solemnization is valid. In fact, a marriage may
be proved by oral evidence (PARAS, 2016).
(ii) Void
Marriages that are void ab initio
1. Solemnized without License, except
those marriages that are exempt from the
license requirement;
2. Absence of any of the essential or formal
requisites of marriage;
3. 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;
4. Contracted through Mistake of one of the
contracting parties as to the identity of the other;
5. Bigamous or polygamous marriages not
falling under Article 41 of the Family Code or
those allowed under special laws such as the
Muslim Code;
6. Marriages contracted by any party below
18 years of age even with the consent of parents
or guardians;
7. Marriages contracted by any party, who
at the time of the celebration of the marriage,
was Psychologically incapacitated, even if such
incapacity becomes manifest only after its
solemnization (FC, ART. 36);
8. Incestuous Marriages (FC, ART. 37);
9. Marriages declared void because they
are contrary to Public policy (FC, ART. 38);
10. Subsequent marriages which are void under
Art.53;
11. Marriages in jest;
“Marriages in jest is a pretended one, legal in
form but entered as a joke, with no real
intentions of entering into the actual marriage
status, and with a clear understanding that the
parties would not be bound (REPUBLIC OF
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THE PHILIPPINES V. ALBIOS, G.R. NO.
198780, OCTOBER 16, 2013); and
12. Common-law marriages.
Things to be considered in invoking and
proving psychological incapacity:
1. The burden of proof in proving psychological
incapacity is on the plaintiff. The quantum of
proof required in nullity cases is clear and
convincing evidence.
2. Psychological incapacity is neither a mental
incapacity nor a personality disorder that must
be proven through expert testimony. There must
be proof, however, of the durable or enduring
aspects of a person’s personality, called
“personality structure,” which manifests itself
through clear acts of dysfunctionality that
undermines the family
3. Incurable, not in the medical, but in the legal
sense; incurable as to the partner.
4. As to gravity, it must be shown that the
incapacity is caused by a genuinely serious
psychic cause.
5. Juridical antecedence.
6. Marital obligations refer to ARTICLES 68-71,
220, 221 AND 225, FC.
7. The decisions of the National Appellate
Matrimonial
Tribunal of the Catholic Church of the
Philippines has a persuasive effect on nullity
cases pending before secular courts. [TAN-
ANDAL V. ANDAL, GR. 196359 (2021)].
(iii) Voidable
A voidable marriage is considered valid and
produces all its civil effects until it is set aside by
final judgment of a competent court in an action
for annulment (RABUYA, 2018). Simply, a
voidable marriage is valid until it is annulled
(PARAS, 2016).
Determination of the unsoundness of mind as a
ground for annulment
It is essential that the mental incapacity must
relate specifically to the contract of marriage and
the test is whether the party at the time of the
marriage was capable of understanding the
nature and consequences of the marriage
(RABUYA, 2018).
(d) Fraud as a ground for annulment
Fraud, as distinguished from fraud as a ground
for annulment of contracts, refers to the non-
disclosure or concealment of some facts
deemed material to the marital relations
(RABUYA, 2009).
(i) Legal Separation
1. Reconciliation, stop or abate the proceedings
and even rescind a decree of legal separation
already granted (LAPUZ V. EUFEMIO, G.R.
NO. L-31429, JANUARY 31, 1972).
Repeated physical violence or grossly abusive
conduct against petitioner, common child, child
of petitioner;
Note: Respondent’s child is not included
2. Attempt to corrupt or induce petitioner,
common child, child of petitioner to engage in
prostitution, or connivance in such corruption or
inducement;
3. Attempt by respondent against the life of
petitioner;
4. Final judgment sentencing respondent to
imprisonment of more than 6 years, even if
pardoned;
5. Drug addiction or habitual alcoholism of
respondent;
Note: It must exist after celebration of marriage
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 6. Physical violence or moral pressure to
compel petitioner to change religious or political
affiliation;
7. Bigamous marriage subsequently
contracted by respondent in the Philippines or
abroad;
8. Sexual infidelity or perversion;
9. Lesbianism or homosexuality of
respondent; and
Note: It must exist after celebration of marriage
10. Abandonment of petitioner by respondent
without justifiable cause for more than 1 year.
(e) Cooling-Off Period
An action for legal separation shall be in no case
tried before 6 months has elapsed since the
filing of the petition, to enable the contending
spouses to settle differences. In other words, it
is for possible reconciliation (FC, ART. 58).
(f) Reconciliation Efforts
An action for legal separation shall be in no case
tried before 6 months has elapsed since the
filing of the petition, to enable the contending
spouses to settle differences. In other words, it
is for possible reconciliation (FC, ART. 58).
(g) Rights and obligations of the spouses
1. Essential marital obligations (FC, ART. 68):
a. Live together which includes consortium
(cohabitation) and copulation (sexual
intercourse),
b. Observe mutual love, respect, fidelity, and
Render mutual help and support
c. Fix the family domicile (FC, ART. 69);
Note: In case of disagreement the Court shall
decide.
3. Jointly support the family (FC, ART. 70);
a. expenses shall be paid from the community
property;
b. In the absence thereof from the income or
fruits of their separate properties,
c. In the absence or insufficiency thereof from
their separate properties
4. Manage the household (FC, ART. 71);
5. Not to neglect duties, or commit acts which
tend to bring danger, dishonor, or injury to family
(FC, ART. 72);
6. Either spouse may practice any legitimate
profession/business even without the consent of
the other.
(h) Marriage Settlement
The property relations shall be governed by the
ff. in the stated order:
1. Property relation agreed and embodied in the
marriage settlement;
2. Provisions of the FC; and
3. Local custom (FC, ART. 74).
Commencement of Property Regime
A property regime commences at the precise
moment of the celebration of marriage (i.e.
Actual time the marriage is celebrated on a
certain date).
Any stipulation, express or implied, for the
commencement of the community regime at any
other time shall be void (FC, ART. 88).
Requisites of a valid Marriage Settlement (FC,
ART. 77)
1. In Writing;
2. Signed by the parties;
3. Executed before the celebration of marriage;
4. Registration (to bind 3rd persons)
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The provisions in the marriage settlement must
be in accordance with law, morals or public
policy; otherwise such agreement is void
(PARAS, 2008).
(i) Absolute Community Property Regime
The ACP between spouses shall commence at
the precise moment that the marriage is
celebrated. Any stipulation, express or implied,
for the commencement of the community
regime at any other time shall be void (FC, ART.
88).
Note: The same rule applies to CPG (FC, ART.
107).
Absence of specific provisions in the Family
Code regarding the property regime of the
spouses:
The provisions on co-ownership shall apply to
the ACP between the spouses in all matters not
especially provided for by the Family code (FC,
ART. 90)
No waiver or rights, interests, shares and effects
of the ACP can be made except upon judicial
separation of property (FC, ART. 89).
(ii) Conjugal Partnership of Gains
It is that formed by a husband and wife whereby
they place in a common fund the proceeds,
products, fruits and income of their separate
properties, and those acquired by either or both
spouses through their efforts or by chance, the
same to be divided between them equally (as a
general rule) upon the dissolution of marriage or
partnership (FC, ART. 106).
(i) Family Home
The family home is deemed constituted on a
house and lot from the time it is occupied as a
family residence. From the time of its
constitution and so long as any of its
beneficiaries actually reside therein, the family
home continues to be such and is exempt from
execution, forced sale or attachment except as
hereinafter provided and to the extent of the
value allowed by law (FC, ART. 153).
(j) Rights of Legitimate And Illegitimate
Children
Legitimate children have the right to:
1. bear the surname of the father and the mother
in conformity with the provisions of CC on
surnames;
2. receive support from their parents,
ascendants, and in proper cases, their brothers
and sisters, in conformity with the provisions of
this Code on Support;
3. be entitled to the legitimate and other
successional rights granted to them by the CC
[ART. 174, FC].
4. receive support from ascendants or
descendants of the same line [ART. 195, FC];
5. inherit ab intestato from legitimate parents
and ascendants [ART. 887, CC].
Illegitimate children have the right to:
1. use the surname and be under the parental
authority of their mother;
2. be entitled to support in conformity with the
FC;
3. be entitled to the legitime which shall consist
of ½ the legitime of a legitimate child [ART. 176,
FC];
4. receive support from only up to grandparent
and grandchildren [ART. 195, FC].
(k) Effects of adoption:
1. Parental Authority - severance of legal ties
between the biological parents and the adoptee,
which shall be vested in the adopters, except if
the biological parent is the spouse of the adopter
2. Legitimacy - adoptee shall be considered as
a legitimate child of the adopter(s) for all intents
and purposes [SEC. 17, RA 8552] and;
3. Succession - in legal or intestate succession,
the adoptee and the adopter(s) shall have
reciprocal rights of succession without
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distinction from legitimate filiation. However, if
there is a will, the rules on testamentary
succession shall be followed [SEC. 18, RA
8552].
4. Surname - an adopted child shall bear the
surname of the adopter [ART. 365, CC].
Grounds for rescission of adoption:
1. Repeated physical and verbal maltreatment
by adopters despite having undergone
counseling
2. Attempt on life of adoptee
3. Sexual assault or violence
4. Abandonment or failure to comply with
parental obligations
Note: Adoption shall not be subject to rescission
by the adopters. However, the adopters may
disinherit the adoptee for causes provided under
ART. 919 OF THE CIVIL CODE. [SEC. 19, RA
8552]
Parental Authority
As a general rule, it is jointly exercised by the
father and the mother of a child [ART. 211(1),
FC].
The exceptions are:
1. In case of disagreement, the father’s decision
prevails [ART. 211(2), FC]. Exception to the
exception: If there is judicial order to the
contrary.
2. In case of absence or death of either parent,
the parent present or alive [ART. 212, FC].
3. In case of separation of the parents, the
parent designated by the court [ART. 213, FC].
Special Parental Authority
Special parental authorized is exercised:
1. While the child is under their supervision,
instruction, or custody
2. During all authorized activities, whether inside
or outside the premises of the school, entity, or
institution [ART. 218, FC]
Rules in the use of username of a child:
1. Legitimate and legitimated children shall
principally use the surname of the father. [ART.
364, CC; ARTICLE 174 (1), FC].
2. An adopted child shall bear the surname of
the adopter. [ART. 365, CC; ART. 189 (1), FC].
3. A natural child acknowledged by both parents
shall principally use the surname of the father.
[ART. 366, CC]
4. Illegitimate children shall use the surnames of
their mother. [Art. 176, FC].
A married woman may use:
a. Her maiden first name and surname and add
her husband’s surname, or;
b. Her maiden first name and her husband’s
surname, or;
c. Her husband’s full name, but prefixing a word
indicating that she is his wife, such as “Mrs.”
[ART. 370, CC]
(l) Declaration of Absence
The following may ask for the declaration of
absence.
1. The spouse present;
2. The heirs instituted in a will, who may present
an authentic copy of the same;
3. The relatives who may succeed by the law of
intestacy;
4. Those who may have, over the property of the
absentee, some right subordinated to the
condition of his death. [ART. 385, CC]
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(m) Clerical or Typographical Error
It refers to a mistake committed in the
performance of clerical work in writing, copying,
transcribing or typing an entry in the civil register
that is harmless and innocuous, such as
misspelled name or misspelled place of birth or
the like, which is visible to the eyes or obvious
to the understanding, and can be corrected or
changed only by reference to other existing
record or records. [SEC. 2, RA 9048]
III. PROPERTY (concept of property,
ownership, co-ownership, right of
accession, easement, nuisance)
(a) Property
Contracting parties may validly stipulate that a
real property be considered as personal. After
agreeing to such stipulation, they are
consequently estopped from claiming
otherwise. [SERG’S PRODUCTS, INC. V. PCI
LEASING AND FINANCE, INC., G.R. NO.
137705 (2000)]
(b) Ownership
Ownership is the independent and general right
of a person to control a thing particularly in his
possession, enjoyment, disposition, and
recovery, subject to no restrictions except those
imposed by the state or private persons, without
prejudice to the provisions of the law.
(i) Principle of Self-Help
This principle authorizes an owner or lawful
possessor of a property to use reasonable force
to prevent or repel an actual or threatened
unlawful physical invasion or usurpation of
property (NCC, ART. 429). There must be no
delay in the pursuit, otherwise, his recourse will
be to go to the court for the recovery of property.
(ii) Remedies to Recover Possession
Of Personal Property
a. Replevin — An action or provisional remedy
where the complainant prays for the recovery of
the possession of personal property.
b. Forcible Entry and Unlawful Detainer. —
Accion interdictal comprises two distinct causes
of action, namely, forcible entry and unlawful
detainer.
In forcible entry, one is deprived of physical
possession of real property by means of force,
intimidation, strategy, threats, or stealth
whereas in unlawful detainer, one illegally
withholds possession after the expiration or
termination of his right to hold possession under
any contract, express or implied
c. Accion Publiciana. — is the plenary action
to recover the right of possession when
dispossession has lasted for more than one
year. It is an ordinary civil proceeding to
determine the better right of possession of realty
independently of title.
d. Accion Reivindicatoria. — It is an action to
recover real property based on ownership.
Here, the object is the recovery of the dominion
over the property as owner.
Note: ART. 435. No person shall be deprived of
his property except by competent authority and
for public use and always upon payment of just
compensation Should this requirement be not
first complied with, the courts shall protect and,
in a proper case, restore the owner in his
possession.
(iii) Hidden Treasure Discovery Rule
General Rule: If the finder is the owner of the
land, building, or other property where it is
found, the entire hidden treasure belongs to
him.
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Exception: If the finder is not the owner or is a
stranger (includes the lessee or usufructuary, he
is entitled to ½ thereof (NCC, ART. 566).
(c) Co-Ownership
ART 484. There is co-ownership whenever the
ownership of an undivided thing or right belongs
to different persons. Exists whenever an
undivided thing or right belongs to different
persons.
(i) Alienation of Property Co-Owned
When a co-owner sells the whole property as
his, the sale will affect only his own share but
not those of the other co-owners’ who did not
consent to the sale. A sale of the entire property
by one co-owner without the consent of the
other co-owners is not null and void but affects
only his undivided share and the transferee gets
only what would correspond to his grantor in the
partition of the thing owned in common
(PAULMITAN V. CA, G.R. NO. 51584,
NOVEMBER 25, 1992)
(ii) Effect of Renunciation
Since renunciation is intended as payment for
expenses already made, it is in the nature of
dacion en pago - there is a change in the object
of the obligation (i.e. from sum of money to
interest in the co-ownership). Consequently, the
consent of the other co-owner who made the
advances is necessary (TOLENTINO, 2013).
(iii) Acts of Alteration
It is a change which is more or less permanent,
which changes the use of the thing and which
prejudices the condition of the thing or its
enjoyment by the others (PARAS, 2008).
Alteration includes the act by virtue of which a
co-owner changes the thing from the state in
which the others believe it should remain. It is
not limited to material charges.
Note: In this jurisdiction, the legal provisions on
co-ownership do not grant to any of the owners
of a property held in common a pre-emptive right
to purchase the pro-indiviso shares of his co-
owners.
(iv) Right to Contribution For Expenses
Expenses which the co-owners can be
compelled to contribute Only necessary
expenses. Useful expenses and those for pure
luxury are not included.
(v) Sale by A Co-Owner
A sale of the entire property by one co-owner
without the consent of the other co-owners is
valid. However, it will only affect the interest or
share in the undivided property of the co-owner
who sold the same. The remedy is an action for
partition under Rule 69 of the Revised Rules of
Court, the division of the common property
(ACABAL V. ACABAL, G.R. NO. 148376,
MARCH 31, 2005)
(d) Right of Accession
It is that right of ownership of which an owner of
a thing has over the products of said thing
(accession discreta), as well as to all things
inseparably attached or incorporated thereto
whether naturally or artificially (accession
continua) (PINEDA, 2009).
Note: Accession is NOT a mode of acquiring
ownership.
ART 448. The owner of the land on which
anything has been built, sown or planted in good
faith, shall have the right
a) to appropriate as his own the works, sowing
or planting, after payment of the indemnity
provided for in articles 546 and 548, or
b) to oblige the one who built or planted to pay
the price of the land, and the one who sowed the
proper rent.
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However, the builder or planter cannot be
obliged to buy the land if its value is
considerably more than that of the building or
trees.
In such case, he shall pay reasonable rent, if the
owner of the land does not choose to
appropriate the building or trees after proper
indemnity. The parties shall agree upon the
terms of the lease and in case of disagreement,
the court shall fix the terms thereof.
(e) Quieting of Title
Requisites that must be fulfilled in quieting of
titles?
1. Plaintiff or complainant has a legal or an
equitable title to or interest in the real property
subject of the action; and [ART. 477, CC]
2. The deed, claim, encumbrance or proceeding
claimed to be casting a cloud on his title must be
shown to be in fact invalid or inoperative despite
its prima facie appearance of validity or legal
efficacy. [SPS. CHUA V SPS. LO, G.R. NO.
196743 (2019)]
When the plaintiff is NOT in possession of the
real property, the action to quiet title may
prescribe depending upon the right of action
filed by the plaintiff:
1. 10 years - if plaintiff is a possessor with a real
right, i.e. accion publiciana, or if action is for
reconveyance on the basis of a constructive
trust under Art. 1456, CC.
2. 30 years - if plaintiff is the owner of real
property.
(i) Usufruct
Usufruct is a temporary real right which gives a
right to enjoy the property as well as its fruits of
another with the obligation of preserving its form
and substance, unless the title constituting it or
the law otherwise provides. [ART. 562, CC]
Usufruct may be constituted on the whole or a
part of the fruits of a thing, in favor of one or
more persons, simultaneously or successively,
and in every case from or to a certain day, purely
or conditionally. [ART. 564, CC]
(f) Easements
A servient estate may be the object of usufruct
but an easement cannot be the object of
usufruct because it has no existence
independent of the immovable. [DE LEON, p.
488]
Note: easements cannot be mortgaged
separately. Servitudes are merely accessories
to the tenements of which they form part.
Although they are possessed of a separate
juridical existence, as mere accessories, they
cannot, however, be alienated from the
tenement, or mortgaged separately. [SOLID
MANILA CORP. V. BIO HONG TRADING CO.,
INC., G.R. NO. 90596 (1991)]
(g) Nuisance
Criminal prosecution is instituted only for “public
nuisance” and not for a private nuisance. The
action is brought in the name of the “People of
the Philippines” since public nuisances are
considered as offenses against the State. [DE
LEON, p. 573] The remedies against a private
nuisance are: (1) a civil action; or (2) abatement,
without judicial proceedings. [ART. 705, CC]
Modes of Acquiring Ownership
A donation cannot be forced: it cannot arise from
compulsion, be borne by a requirement, or
otherwise be impelled by a mandate imposed
upon the donor by forces that are external to him
or her. [NAPOCOR v. Delta P, Inc., G.R. No.
221709 (2019)]
4. OBLIGATIONS
(a) Obligation
Obligation is a juridical necessity to give, to do,
or not to do. (ART. 1156)
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(i) Elements of an Obligation
The following are the elements of an obligation:
1. Juridical tie or vinculum juris or efficient
cause - the efficient cause by virtue of which the
debtor becomes bound to perform the
prestation. (PINEDA, 2000)
2. Active subject [creditor (CR) or obligee] -
The person demanding the performance of the
obligation. It is he in whose favor the obligation
is constituted, established, or created.
3. Passive subject [debtor (DR) or obligor] -
The person bound to perform the prestation to
give, to do, or not to do.
4. Object or prestation - The subject matter of
the obligation which has a corresponding
economic value or susceptible of pecuniary
substitution in case of noncompliance.
Note: In order to be valid, the object or
prestation must be:
1. Licit or lawful;
2. Possible, physically, & judicially;
3. Determinate or determinable; and
4. Pecuniary value or possible equivalent in
money.
(b) Breaches of Obligations
(i) Degree of diligence required:
1. That agreed upon;
2. In the absence of such, that which is required
by the law;
General Rule: In the absence of the foregoing,
diligence of a good father of a family
Exceptions:
a. Common carriers requiring extraordinary
diligence (NCC, ARTS. 1998-2002);
b. Banks require the highest degree of diligence,
being imbued with public interest.
(ii) Liability for loss due to fortuitous event
General Rule: There is no liability for loss in
case of fortuitous event.
Exceptions:
1. Law;
2. Nature of the obligation requires the
assumption of risk;
3. Stipulation;
4. The debtor is guilty of dolo, malice or bad
faith, has Promised the same thing to two or
more persons who does not have the same
interest (NCC, Art. 1165);
5. The debtor Contributed to the loss
6. The possessor is in Bad faith (NCC, Art. 552);
or
7. The obligor is Guilty of fraud, negligence or
delay or if he contravene the tenor of the
obligation (Juan Nakpil v. United Construction
Co., Inc. v. CA, G.R. No. L-47851, April 15,
1988).
(c) Kinds of Civil Obligations
(i) Pure obligation- An obligation whose
performance does not depend upon a future or
uncertain event, or upon a past event or upon a
past event unknown to the parties, demandable
at once. (NCC, ART. 1179)
Note: Other obligations which are demandable
at once are: (1.) Obligations with a resolutory
condition; and (2.) Obligations with a resolutory
term or period [NCC, ARTS. 1179 (2) AND 1193
(2)].
(ii) Conditional obligation- An obligation
subject to a condition and the effectivity of which
is subordinated to the fulfillment or non-
fulfillment of a future and uncertain event, or
upon a past event unknown to the parties.
Types of Condition:
1. Suspensive condition- A condition the
fulfillment of which will give rise to the
acquisition of a right. While the condition has not
- 12 -
arrived yet, in the meantime, the rights and
obligations of the parties are suspended.
2. Resolutory condition- A condition where the
rights already acquired are lost upon fulfillment
of the condition.
(d) Obligations with A Period
Obligation with a period or a term is Obligations
for whose fulfillment a day certain has been
fixed, shall be demandable only when that day
comes.
Action to Fix Duration of Period
1. Separate action for that express purpose
— The only action that can be maintained is to
ask the court first to determine the
term within which the obligor must comply with
his obligation for the reason that fulfillment of the
obligation itself cannot be demanded until after
the court has fixed the period for its
compliance and such has arrived.
2. Where separate action would be a mere
formality — Action brought for that express
purpose separate from action to enforce
payment; but may not be adhered to when a
prior and separate action would be a mere
formality and would serve no other purpose than
to delay.
(iii) Alternative obligation
It is an obligation where the debtor is
alternatively bound by different prestations but
the complete performance of one is sufficient to
extinguish the obligation.
(iv) Facultative Obligation
It is an obligation where the debtor, who has a
reserved right to choose another prestation or
thing, is bound to perform one of the
severalprestations due or to deliver a thing as a
substitute for the principal.
(v) Conjunctive Obligation
An obligation where the debtor has to perform
several prestations; it is extinguished only by the
performance of all of them.
(vi) Reciprocal Obligations
are those which arise from the same cause,
wherein each party is a debtor and a creditor of
the other, such that performance of one is
conditioned upon the simultaneous fulfillment of
the other from the moment one of the parties
fulfills his obligation, delay by the other party
begins (ASJ CORPORATION V.
EVANGELISTA, G.R. NO. 158086, FEBRUARY
14, 2008).
Note: In rescission of reciprocal obligations, the
power to rescind obligations is implied, in case
one of the obligors should not comply with what
is incumbent upon him. The injured party may
choose between the fulfillment and the
rescission of the obligation, with the payment of
damages. In either case. He may also seek
rescission, even after he has chosen fulfillment,
if the latter should become impossible. The court
shall decree the rescission claimed, unless
there be just cause authorizing the fixing of a
period.
Where both parties guilty of breach
1. First infractor known — Under this
provision, the second infractor is not liable for
damages at all. Art 1192 does not really
exculpate the second infractor from liability, as
the second infractor is actually punished for his
breach by mitigating the damages to be
awarded to him from the previous breach of the
other party.
2. First infractor cannot be determined —
Contract shall be deemed extinguished and
both bear the damages sustained.
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(vii) Joint Obligations
One where the whole obligation is to be paid or
fulfilled proportionately by the different debtors
and/or is to be demanded proportionately by the
different creditors. (Art 1208)
When there is no expressed provision in the
contract, joint obligation is presumed.
The Effects - Art 1207, 1208
1. Demand by one creditor upon one debtor,
produces the effects of default only with respect
to the creditor who demanded and the debtor on
whom the demand was made, but not with
respect to the others.
2. The interruption of prescription by the judicial
demand of one creditor upon a debtor, does not
benefit the other creditors nor interrupt the
prescription as to the other debtors. On the
same principle, a partial payment or
acknowledgment made by one of several joint
debtors does not stop the running of the statute
of limitations as to the others.
3. In the joint divisible obligation, the defense of
res judicata is not extended from one debtor to
another.
(viii) Solidary Obligations
One where each of the debtors is bound to
render, and/or each one of the creditors has a
right to demand entire compliance with the
prestation (Art 1207).
The Effects - ART 1216.
1. The creditor may proceed against any one of
the solidary debtors or some or all of them
simultaneously. The demand made against one
of them shall not be an obstacle to those which
may subsequently be directed against the
others, so long as the debt has not been fully
collected.
Effects of Partial Performance
Debtor who fails to fully perform the work agreed
upon, but abandons the same after performing
a part, cannot recover on quantum meruit for the
work already finished, because in indivisible
obligations, partial performance is equivalent to
non-performance. Exceptions: a) where the
obligation has been substantially performed in
good faith, the debtor may recover as if there
had been complete performance, minus the
damages suffered by the creditor (Art 1234);
and b) when the creditor accepts performance,
knowing its incompleteness, and without
protest, the obligation is deemed fully performed
(Art 1235).
(e) Extinguishment of Obligations
(i) Payment or performance- is the fulfillment
of the obligation by the realization of the
purposes for which it was constituted.
Note: Payment may consist not only in the
delivery of money but also the giving of a thing
(other than money), the doing of an act, or not
doing of an act. (NCC, ART. 1232)
How payment is made
A debt shall not be understood to have been
paid unless the thing or service in which the
obligation consists has been completely
delivered or rendered, as the case may be. (Art
1233)
General Rule: Partial Payment NOT allowed;
(Art 1248)
Exception: Unless there is an express
stipulation to that effect. When the debt is in part
liquidated and in part unliquidated, the creditor
may demand and the debtor may effect the
payment of the former without waiting for the
liquidation of the latter. (Art 1248 par. 2)
Dation in Payment (dacion en pago)- The
delivery and transmission of ownership of a
- 14 -
thing by the debtor to the creditor as an
accepted equivalent of the performance of the
obligation. The property given may consist not
only of a thing but also of a real right. (Tolentino,
2002)
Payment by Cession- is the abandonment of
the universality of the property of the debtor for
the benefit of his creditors in order that such
property may be applied to the payment of the
credits.
Consignation- Act of depositing the object of
the obligation with the court or competent
authority after the creditor has unjustifiably
refused to accept the same or is not in a position
to accept it due to certain reasons or
circumstances.
Tender of payment is the act of offering the
creditor what is due him together with a demand
that the creditor accepts the same. If the creditor
to whom tender of payment has been made
refuses without just cause to accept it, the
debtor shall be released from responsibility by
the consignation of the thing or sum due.
Note: When a tender of payment is made in
such a form that the creditor could have
immediately realized payment if he had
accepted the tender, followed by a prompt
attempt of the debtor to deposit the means of
payment in court by way of consignation, the
accrual of interest on the obligation will be
suspended from the date of such tender. But
when the tender of payment is not accompanied
by the means of payment, and the debtor did not
take any immediate step to make a
consignation, then interest is not suspended
from the time of such tender.
(ii) Loss of the thing due
(iii) Condonation or remission of debt- An act
of liberality by virtue of which the creditor,
without receiving any price or equivalent,
renounces the enforcement of the obligation, as
a result of which it is extinguished in its entirety
or in that part or aspect of the same to which the
condonation or remission refers.
(iv) Confusion or Merger- There is a confusion
when there is a meeting in one person of the
qualities of a creditor and debtor of the same
obligation.
(v) Compensation- It is a mode of extinguishing
obligations that take place when two persons, in
their own right, are creditors and debtors of each
other
(vi) Novation- It is the substitution or change of
an obligation by another, resulting in its
extinguishment or modification, either by
changing the object or principal conditions, or by
substituting another in the place of the debtor or
by subrogating a third person to the rights of the
creditor.
(vii) Subrogation
Is the extinctive subjective novation by change
of creditor is the transfer to a third person of all
the rights pertaining to the creditor.
ART 1301. Conventional subrogation of a third
person requires the consent of the original
parties and of the third person.
ART 1302. It is presumed that there is legal
subrogation:
1) When a creditor pays another creditor who is
preferred, even without the debtor's knowledge;
2) When a third person, not interested in the
obligation, pays with the express or tacit
approval of the debtor;
3) When, even without the knowledge of the
debtor, a person interested in the fulfillment of
the obligation pays, without prejudice to the
effects of confusion as to the latter's share.
Note: The enumeration is not exclusive.
- 15 -
5. CONTRACTS (in general, loans and
mortgages, interest)
(a) Contract is a meeting of the minds between
two or more parties, whereby one party binds
himself with respect to the other, or where both
parties bind themselves reciprocally, in favor of
one another, to fulfill a prestation to give, to do
or not to do. (PINEDA, 2009)
(METRO RAIL TRANSIT V. GAMMON
PHILIPPINES)
To determine when the contract was perfected,
the acceptance of the offer must be unqualified,
unconditional, and made known to the offeror.
Before knowing of the acceptance, the offeror
may withdraw the offer. Moreover, if the offeror
imposes the manner of acceptance to be done
by the offeree, the offeree must accept it in that
manner for the contract to be binding. If the
offeree accepts the offer in a different manner, it
is not effective, but constitutes a counter-offer,
which the offeror may accept or reject.
In bidding contracts, this Court has ruled that the
award of the contract to the bidder is an
acceptance of the bidder's offer. Its effect is to
perfect a contract between the bidder and the
contractor upon notice of the award to the
bidder. Thus, the award of a contract to a bidder
perfects the contract. Failure to sign the physical
contract does not affect the contract's existence.
(i) Characteristics of a Contract
1. Freedom to Stipulate or Autonomy or
Liberality — The contracting parties may
establish such stipulations, clauses, terms and
conditions as they may deem convenient,
provided they are not contrary to law, morals,
good customs, public order, or public policy.
(ART 1306)
2. Mutuality — The contract must bind both
contracting parties; its validity or compliance
cannot be left to the will of one of them. (ART
1308)
3. Relativity — Contracts take effect only
between the parties, their assigns and heirs,
except in case where the rights and obligations
arising from the contract are not transmissible
by their nature, or by stipulation or by provision
of law. (ART 1311)
Note: The exceptions on Relativity of Contracts
are as follows:
1. Where the rights and obligations arising from
the contract are not transmissible by their
nature, or by stipulation or by provision of law;
2. Stipulation pour autrui — if a contract should
contain some stipulation in favor of a third
person;
3. Tortious interference — Where a third person
induces another to violate his contract, he shall
be liable for damages to the other contracting
party; (ART 1314)
4. Where third persons may be adversely
affected by a contract where they did not
participate;
5. Accion directa — Where the law authorizes
the creditor to sue on a contract entered into by
his debtor
(FLORENTINO VS. ENCARNACION)
A stipulation pour autrui is a stipulation in favor
of a third person.
The requisites are:
1. There must be a stipulation in favor of a third
person.
2. The stipulation must be a PART, not the
whole of the contract.
3. The contracting parties must have clearly and
deliberately conferred a favor upon a third
person, not a mere incidental benefit or interest.
4. The third person must have communicated
his acceptance to the obligor before its
revocation.
5. Neither of the contracting parties bears the
legal representation or authorization of the third
party.
- 16 -
4. Consensuality — Contracts are perfected by stipulation therein is ambiguous. Absent any
mere consent xxx (ART 1315) ambiguity, the provision on its face will be read
as it is written and treated as the binding law of
5. Obligatory Force — xxx Parties are bound the parties to the contract.
not only to the fulfillment of what has been
expressly stipulated but also to all the (v) Defective Contracts
consequences which, according to their nature,
may be in keeping with good faith, usage and Rescissible Voidable
law. (ART 1315)
Valid until rescinded Valid until annulled
(ii) Essential Requisites of a Contract
Reason: Reason:
1. Consent;
2. Object or subject matter; and Extrinsic, consisting Intrinsic, as in vitiated
3. Cause or consideration (NCC, ART 1318). of economic damage consent
(See CATHAY PACIFIC V. VASQUEZ, 2003) or lesion

Non-ratifiable Ratifiable
(iii) Reformation of Instruments

It is a remedy to conform to the real intention of Unenforceable Void/ Inexistent

the parties due to mistake, fraud, inequitable
conduct, accident (NCC, ART. 1359). Has no effect for now No effect at all

Reason: Reason:
Reformation is a remedy in quity by means of
which a written instrument is made or construed
Lack of authority; Various, see Art 1409
so as to express or confirm the real intention of
Failure to comply with
the parties when some error or mistake is
Statute of Frauds;
committed. (PINEDA, 2009)
Both parties lack
consent
(iv) Interpretation of Contracts
Ratifiable Non-ratifiable
The "interpretation" of a contract is the
determination of the meaning attached to the
words written or spoken which make the Note: Resolution is a principal action based on
contract. a breach by a party under Article 1191, while
rescission under Article 1383 is a subsidiary
(CENTURY PROPERTIES, INC. V. BABIANO, action limited to cases of rescission for lesion
ET AL 2016) under Article 1381. (SPS POON V. PRIME
SAVINGS BANK 2016)
The rule is that where the language of a contract
is plain and unambiguous, its meaning should (vi) Ratification
be determined without reference to extrinsic
facts or aids. The intention of the parties must It is the act or means by virtue of which, efficacy
be gathered from that language, and from that is given to a contract which suffers from a vice
language alone. of curable nullity (MANRESA).

Thus, in the interpretation of contracts, the Court Note: Ratification extinguishes the action to
must first determine whether a provision or annul a voidable contract (NCC, ART. 1392).
- 17 -
Requisites of ratification:
1. The contract involved must be voidable;
2. Person ratifying must know the reason for the
voidability;
3. The cause for the voidability must
immediately cease after the ratification; and
4. Ratification must be express or through an act
implying a waiver of the action to annul;
(vii) Reitaration
General Rule: They produce no legal effect
whatsoever in accordance with the principle
quod nullum est nullum producit effectum
(JURADO, 2011).
Exception: In case of pari delicto since it will
refuse legal remedy to either party to an illegal
agreement and leaves them to where they were.
Hence, if a void contract is already executed,
neither of the parties can recover from each
other. NOTE: A party has a right to unilaterally
cancel and treat as avoided a void contract.
However, an action to declare its inexistence is
necessary to allow restitution of what has been
given under it (FUENTES V. ROCA, 618 SCRA
702, [2010]).
(b) Loans
Loan is a contract where one of the parties
delivers to another, either something not
consumable so that the latter may use the same
for a certain time and return it, in which case is
called a commodatum; or money or other
consumable things, upon the condition that the
same amount of the same kind and quality shall
be paid, in which case the contract is simply
called a loan or mutuum (NCC, ART. 1933)
(i) Kinds of loan
1. Commodatum – where the bailor (lender)
delivers to the bailee (borrower) a non
consumable thing so that the latter may use it
for a given time and return the same thing (i.e.
identical thing); and
2. Mutuum or Simple Loan – where the lender
delivers to the borrower money or other
consumable thing upon the condition that the
latter shall pay the same amount of the same
kind and quality. Commodatum is a loan of use
(because there is a transfer of the use of the
thing borrowed) while mutuum is a loan of
consumption (because there is a transfer of the
ownership of the thing, which is generally
received for consumption).
(PRODUCERS BANK V. CA.) Thus, if
consumable goods are loaned only for purposes
of exhibition, or when the intention of the parties
is to lend consumable goods and to have the
very same goods returned at the end of the
period agreed upon, the loan is a commodatum
and not a mutuum.
(ii) Obligations of the Bailee (Arts 1941-1945)
1. To pay for the ordinary expenses for the use
and preservation of the thing loaned.
2. Liable for the loss of the thing, even if it
should be through a fortuitous event:
a) If he devotes the thing to any purpose
different from that for which it has been loaned;
b) If he keeps it longer than the period
stipulated, or after the accomplishment of the
use for which the commodatum has been
constituted;
c) If the thing loaned has been delivered with
appraisal of its value, unless there is a
stipulation exempting the bailee from
responsibility in case of a fortuitous event;
d) If he lends or leases the thing to a third
person, who is not a member of his household;
e) If, being able to save either the thing
borrowed or his own thing, he chose to save the
latter.
(iii) Obligations of the Bailor (ARTS 1946 -
1952)
1. To pay extraordinary expenses of
preservation.
2. To answer for damages to the borrower The
bailor who:
- 18 -
a) knowing the flaws of the thing loaned, security for subjecting to
b) does not advise the bailee of the same, shall the such security,
be liable to the latter for the damages which he performance immovable
may suffer by reason thereof. of an property or
obligation. real rights
Note: The bailor cannot evade liability by over
abandonment of the thing. immovable
property, in
(iv) Termination case the
principal
1. Expiration of time or use stipulated obligation is
2. Claim of the lender- lender has urgent need not paid or
of the thing loaned, in which case, he may complied with
demand its: at the time
a. Return, or stipulated
b. Temporary use- commodatum is suspended.
Object Personal Immovable
3. Destruction of the thing property property or
4. Death of parties real rights
5. Ingratitude of the borrower: Exception: A over
a. If the bailee should commit some offenses real property immovable
against the person, honor or property of the may be a property
bailor or of his wife or children under his parental subject of
authority. chattel
b. If the bailee imputes any criminal offense, or mortgage as
any act involving moral turpitude, even though long as the
he should prove it, unless the crime or the act parties to the
has been committed against the bailee himself, contract
his wife or children under his authority; and agree and no
c. If the bailee unduly reuses the bailor support innocent third
when the bailee is legally or morally bound to do party will be
so. prejudiced
thereby.
(c) Mortgage (MAKATI
LEASING
Chattel Real Estate AND
Mortgage Mortgage FINANCE
CORPORATI
Definition is a contract is a contract ON V
by virtue of whereby the WEAVER
which a debtor TEXTILE
personal secures to the MILLS, INC.,
property is creditor the G.R. NO
recorded in fulfillment of a L58469, MAY
the Chattel principal 17, 1983)
Mortgage obligation,
Register as a specially

- 19 -
(i) Rights of a mortgagor
To alienate the mortgaged property but the
mortgage shall remain attached to the property
(NCC, ART. 2130).
(ii) Rights of a Mortgagee
To claim from a third person in possession of the
mortgaged property the payment of the part of
the credit secured by the property which said
third person possesses (NCC, ART. 2129).
(iii) Right to Possession
The mortgagee has no right or claim to the
possession of the property. Such possession is
only a security for the payment of the sum
borrowed. The debtor merely subjects the
property to a lien but the ownership thereof is
not parted. (DE LEON, 2013)
(iv) Foreclosure of Real Estate Mortgage
Mortgage-creditor has a single cause of action
against the mortgage-debtor, which is to recover
the debt, but he has the option to either:
1. File a personal action for collection of sum of
money; or
2. Institute a real action to foreclose on the
mortgaged property.
Note: The remedies are alternative, not
cumulative.
(v) Foreclosure is a remedy available to the
mortgagee by which he subjects the mortgaged
property to the satisfaction of the obligation.
Note: If he chooses foreclosure of mortgage, he
enforces his lien by the sale on foreclosure of
the mortgage property. The proceeds of the sale
will be applied to the satisfaction of the debt.
With this remedy, he has a prior lien on the
property. In case of deficiency, the mortgagee
has the right to claim for deficiency resulting
from the price obtained in the sale of real
property at public auction and the outstanding
obligation at the time of the foreclosure
proceedings (RABUYA, 2017).
Kinds of Foreclosure
1. Judicial – Governed by Rule 68, Rules of
Court;
2. Extrajudicial – The mortgagee is given a
SPA to sell the mortgaged property (ACT NO.
3135).
(vi) Redemption of Mortgage
Redemption is a transaction by which the
mortgagor reacquires or buys back the property
which may have passed under the mortgage or
divests the property of the lien which the
mortgage may have created.
(d) Interest
Interest on loan Interest payable in kind In the
determination of the interest, if it is payable in
kind, its value shall be appraised at the current
price of the products or goods at the time and
place of payment.
Note: On compounding of interest, the interest
due and unpaid shall not earn interest.
However, the contracting parties may by
stipulation capitalize the interest due and
unpaid, which as added principal, shall earn
new interest. Under Article 1959 of the Civil
Code, unless there is a stipulation to the
contrary, interest due should not further earn
interest.
6. TORTS, QUASI-DELICTS
(a) Torts or Quasi-delict
The following are the elements of a quasi-delict
under Article 2176, NCC:
1. Act or omission committed through fault or
negligence
- 20 -
2. Damage or injury is caused by such act or
omission
3. Does not arise under a preexisting
contractual obligation
4. There is a connection of cause and effect
between such negligence and damage
[PNR v. Brunty, G.R. No. 169891 (2006);
Andamo v. IAC, G.R. No. 74761 (1990)]
(i) Negligence
When negligence shows bad faith, responsibility
arising from fraud is demandable in all
obligations (NCC, Art. 1171). Furthermore, in
case of fraud, bad faith, malice or wanton
attitude, the obligor shall be responsible for all
damages which may be reasonably attributed to
the nonperformance of the obligation (NCC, Art.
2201).
(ii) When is negligence excused
General Rule: Negligence is excused when
events that transpired were unforeseen or,
which though foreseen, were inevitable (NCC,
Art. 1174).
Exceptions:
1. In cases specified by law;
2. When declared by stipulation; or
3. When the nature of the obligation requires the
assumption of risk.
Note: A person or juridical entity is made liable
solidarily with a tortfeasor simply by reason of
his relationship with the latter.
(iii) Degree of Care Required
If the law or contract does not state the diligence
which is to be observed in the performance, that
which is expected of a good father of a family
shall be required [Article 1173(2)].
(iv) Unjust Enrichment
One person should not be permitted to unjustly
enrich himself at the expense of another. The
former is required to make restitution of
whatever they have received.
(v) Acts Contra Bonus Mores
are acts that cause injury through an act or
omission contrary to morals, good customs, or
public policy. Article 21, NCC, the basis of such
acts, provides a legal remedy for such moral
wrongs that are not covered by existing statutes.
Examples are breach of promise to marry and
moral seduction, malicious prosecution, public
humiliation, oppressive dismissal, and public
humiliation.
(vi) The Tortfeasor
The direct tortfeasor is one who is made liable
for a tort committed through his own acts. The
tortfeasor may be a natural or juridical person
(vii) Doctrine of Vicarious Liability
is the obligation to pay for the injury suffered due
to a quasi- delict is also demandable from those
persons who are responsible for the person who
committed such act. The liability which arises is
primary and direct, and the vicariously liable
person is solidarily liable with the direct
tortfeasor. This doctrine gives rise to a
presumption of negligence on the part of such
persons, and is rebuttable by a showing of the
person’s exercise of the diligence of a good
father of a family.
(viii) Proximate Cause
is the 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. [BATACLAN
V. MEDINA, G.R. NO. 10126 (1957)].
- 21 -
When Efficient Intervening Cause is not
applicable
There is no efficient intervening cause if the
force created by the negligent act or omission
have either:
1. Remained active itself;
2. Created another force which remained active
until it directly caused the result; or
3. Created a new active risk of being acted upon
by the active force that caused the result
(ix) Doctrine of Last Clear Chance
Where both parties are negligent but the
negligent act of one is appreciably later in point
of time than that of the other, or where it is
impossible to determine whose fault or
negligence brought about the occurrence of the
incident, the one who had the last clear
opportunity to avoid the impending harm but
failed to do so, is chargeable with the
consequences arising therefrom.
(x) Doctrine of Common Knowledge
In cases where res ipsa loquitur is applicable,
the court is permitted to find a physician
negligent upon proper proof of injury to the
patient, without the aid of expert testimony,
where the court from its fund of common
knowledge can determine the proper standard
of care. (Borromeo v. Family Care Hospital
2016)
(xi) Doctrine of Informed Consent
There are four essential elements a plaintiff
must prove in a malpractice action based upon
the doctrine of informed consent:
1. 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.
(xii) Damnum Absque Injuria
A person who only exercises his legal rights
does no injury. If damages result from such
exercise of legal rights, the consequences must
be borne by the injured person alone.
Note: The principle does not apply when the
exercise of this right is suspended or
extinguished pursuant to a court order (Amonoy
v. Gutierrez, 651 SCRA 731, 2001).
(i) Prohibition against Double Recovery
Responsibility for fault or negligence under
quasi-delict is entirely separate and distinct from
the civil liability arising from negligence under
the Penal Code. But the plaintiff cannot recover
damages twice for the same act or omission of
the defendant (NCC, Art. 2177).
7. DAMAGES
(a) Damages is the pecuniary compensation,
recompense, or satisfaction for an injury
sustained, or as otherwise expressed, the
pecuniary consequences which the law imposes
for the breach of some duty or violation of some
rights.
Note: There is a material distinction between
damages and injury. Injury is the illegal invasion
of a legal right; damage is the loss, hurt or harm
which results from the injury; and damages are
the recompense or compensation awarded for
the damage suffered.
(i) Kinds of Damages
1. Moral- applies both to natural and juridical
persons. Moral damages are generally not
awarded in favor of a juridical person, unless it
enjoys a good reputation that was debased by
- 22 -
the offending party resulting in social humiliation
(ABSCBN v. CA, 301 SCRA 589). A corporation
can be an offended party in an action for
defamation, and can recover moral damages
pursuant to ARTICLE 2219(7) OF THE NCC.
2. Exemplary or corrective
3. Nominal
4. Temperate or moderate
5. Actual or compensatory
Kinds of Actual or compensatory damages:
1. Damnun Emergens/Dano Emergente
(actual damages) – all the natural and probable
consequence of the act or omission complained
of, classified as one for the loss of what a person
already possesses
2. Lucrum Cessans/Lucro Cesante
(compensatory damages) – for failure to
receive, as benefit, that which would have
pertained to him (expected profits) (FILIPINAS
SYNTHETIC V. DE LOS SANTOS, G.R. NO.
152033, MARCH 16, 2011).
6. Liquidated
Note: Damages may be recovered:
1. For loss or impairment of earning capacity in
cases of temporary or permanent personal
injury;
2. For injury to the plaintiff's business standing
or commercial credit.
(ii) Rules On Graduation Of Damages
In crimes, the damages to be adjudicated may
be respectively increased or lessened according
to the aggravating or mitigating circumstances
(NCC, ART. 2204).
Reduction of damages in quasi-delict cases, the
contributory negligence of the plaintiff shall
reduce the damages he may recover (NCC,
ART. 2214).
Reduction of damages in contracts, quasi-
contracts and quasi-delicts. The court can
equitably mitigate the damages in contracts,
quasi-contracts and quasi-delicts in the
following instances other than in ART. 2214:
1. That the plaintiff himself has contravened the
terms of the contract;
2. That the plaintiff has derived some benefit as
a result of the contract;
3. In cases where exemplary damages are to be
awarded, that the defendant acted upon the
advice of counsel;
4. That the loss would have resulted in any
event; and
5. That since the filing of the action, the
defendant has done his best to lessen the
plaintiff’s loss or injury (NCC, ART. 2215).
Note: Liquidated damages, whether intended
as an indemnity or a penalty, shall be equitably
reduced if they are iniquitous or unconscionable
(ART. 2227)
- 23 -
 COMMERCIAL LAW
1. CORPORATIONS
A. CLASSIFICATIONS OF CORPORATIONS:
o As to the existence of stocks:
(a) Stock Corporations
A corporation which has a 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)
Note: REPUBLIC V. CITY OF PARANAQUE
(G.R. No. 191109, July 18, 2012)
Although a corporation has a capital stock
divided into shares, if it is not authorized to
distribute dividends and allotment of surplus and
profit to its stockholders, it may not be classified
as a stock corporation because it lacks the
second requisite.
(b) Non-Stock Corporations
It is one where no part of its income is
distributable as dividends to its members,
trustees, or officers. Provided, that any profit
which a non-stock corporation may obtain
incidental to its operations shall, whenever
necessary or proper, be used for the furtherance
of the purpose or purposes for which the
corporation was organized, subject to the
provisions of Title XI
(REVISED CORPORATION CODE, Sec. 86)
i. Non-Applicability of the Nationalization
Laws to Non-stock Corporations:
A foreigner may become a member or officer of
a non-stock corporation, save for the position of
the Secretary, such prohibition of foreign
citizens becoming officers does not apply to
activities of a non-stock corporation which do
not fall within the coverage of a nationalized
industry or area of business reserved by law
exclusively to Filipino citizens. (SEC OPINION
NO. 12, Nov. 21, 2002)
ii. Voting Rights of Members:
Under the bylaws, membership in the
corporation shall, among others, be terminated
by the death of the member.
iii. Delinquency of Membership Dues:
[Sec. 66] of RCC refers specifically to unpaid
subscriptions to capital stock, the sale of which
is governed by [Section 67] of RCC, and utterly
inapplicable to non-stock corporations. In such
recovery claims, Article 1140 of the Civil Code
governs and provides that an action to recover
movables shall prescribe in 8 years.
(CALATAGAN GOLF CLUB, INC., v.
CLEMENTE, 2016)
Note: AGDAO LANDLESS RESIDENTS ASSN.
v. MARAMION, 2016
Termination of a member must be based on the
AOI and/or bylaws. Otherwise, such termination
is void and such individual remains to be a
member.
o As to Functions:
(a) Public Corporations
The State and its political subdivisions. (CIVIL
CODE, Art. 44(1)) It is created for the purpose
of governing the state (governmental purpose)
and created either by General Law or Special
Law.
(b) Private Corporations
Corporations for private interest or purpose to
which the law (the Revised Corporation Code)
grants a juridical personality separate and
distinct from that of each shareholder.
(CIVIL CODE, Art. 44(3))
(c) Quasi-Public Corporations
Corporations, institutions, and entities created
by law for public interest and purpose.
- 24 -
(CIVIL CODE, Art. 44(2))
(d) Government Owned and Controlled
Corporations
Corporations organized as stock or non-stock
corporations, vested with functions relating to
public needs whether governmental or
proprietary in nature, and owned by the
government directly or through its
instrumentalities either wholly or to the extent of
at least 51% of its capital stock.
(REVISED ADMINISTRATIVE CODE, Sec.
2(13)))
Note: Not all GOCCs are quasi-public
corporations. GOCCs organized under the
Corporation Code, and thus, without original
charters, are private corporations
NATIONAL COAL CO v. CIR
(G.R. No. L-22619, Dec. 2, 1924)
The government, as a member of a corporation
organized under the Corporation Code, merely
acts as a corporator and does not exercise any
sovereignty. The mere fact that the government
happens to be the majority stockholder of a
corporation does not make it a public
corporation.
o As to the Manner of Creation
(a) 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.
(b) Corporation created under GENERAL
LAW
A corporation created under the Revised
Corporation Code of the Philippines, the
Corporation Code of the Philippines and the Old
Corporation Law.
(c) Corporation created 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.
o As to the Legal Right to Corporate
Existence
(a) 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 attached
or questioned by any party (including the State)
even in a direct proceeding for that purpose by
the State.
(b) De Facto Corporation
A de facto corporation is a company which has
colorable compliance in good faith to the legal
requirements set by the Revised Penal Code
and the SEC.
Requisites:
(1) A valid law under which the corporation is
organized
(2) A bona fide attempt in good faith to
incorporate; and
(3) An assumption of corporate powers
MISSIONARY SISTERS OF OUR LADY OF
FATIMA v. ALZONA (2018)
The filing of AOI and the issuance of the
certificate of incorporation are essential for the
existence of a de facto corporation. In fine, it is
the act of registration with SEC through the
issuance of the Certificate of Incorporation that
marks the beginning of an entity’s corporate
existence. Thus, a donation made in favor of the
corporation after which the filing of its
incorporation papers with the SEC, but before
the issuance of the SEC Certificate of
Incorporation requires the application, not of the
de facto corporation doctrine, but rather of the
corporation by estoppel doctrine under [Sec. 20]
o As to Nationality or Place of Incorporation
(a) Domestic Corporation
A corporation formed, organized or existing
under Philippine laws.
25
(b) Foreign Corporation
A corporation formed, organized or existing
under laws other than those of the Philippines
and whose laws allow Filipino citizens and
corporation to do business in its own country or
state.
o As to Relationship of Management and
Control
(a) 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.
(b) Subsidiary Corporation
A corporation more than 50% of the voting stock
of which is owned and controlled directly or
indirectly through one or more intermediaries by
another corporation, which thereby becomes a
parent corporation.; or
(c) 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.
o As to Number of Corporators
(a) 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 of the whole
frame and essence of the corporation.
(b) 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)
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 SEC its AOI
setting forth the following:
(a) That the applicant chief archbishop,
bishop, priest, minister, rabbi, or
presiding elder represents the religious
denomination, sect, or church who
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, minister,
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 AOI may include any other provision not
contrary to law for the regulation of the affairs of
the corporation (Sec. 109, RCC).
The articles of incorporation must be verified, by
affidavit or affirmation of the chief archbishop,
bishop, priest, minister, rabbi, or presiding elder,
as the case may be, and accompanied by a
26
copy of the commission, certificate of election or
letter of appointment of such chief archbishop,
bishop, priest, minister, rabbi, or presiding elder,
duly certified to be correct by any notary public.
From and after filing with the SEC of the said
AOI, verified by affidavit or affirmation, and
accompanied by the documents mentioned in
the preceding paragraph, such chief
archbishop, bishop, priest, minister, rabbi, or
presiding elder shall become a corporation sole
and all temporalities, estate and properties of
the religious denomination, sect or church
theretofore administered or managed as such
chief archbishop, bishop, priest, minister, rabbi,
or presiding elder shall be personally held in
trust as a corporation sole, for the use, purpose,
exclusive benefit and on behalf of the religious
denomination, sect, or church, including
hospitals, schools, colleges, orphan asylums,
parsonages, and cemeteries thereof (Sec. 110,
RCC).
Filling of vacancies:
The successors in office of any chief
archbishop, bishop, priest, minister, rabbi, or
presiding elder in a corporation sole shall
become the corporation sole on their accession
to office and shall be permitted to transact
business as such upon filing a copy of their
commission, certificate of election, or letters of
appointment, duly certified by any notary public
with the SEC.
During any vacancy in the office of chief
archbishop, bishop, priest, minister, rabbi, or
presiding elder of any religious denomination,
sect or church incorporated as a corporation
sole, the person or persons authorized by the
rules, regulations or discipline of the religious
denomination, sect, or church represented by
the corporation sole to administer the
temporalities and manage the affairs, estate,
and properties of the corporation sole shall
exercise all the powers and authority of the
corporation sole during such vacancy
(Sec. 112, RCC).
Dissolution: A corporation sole may be
dissolved and its affairs settled voluntarily by
submitting to the SEC a verified declaration of
dissolution, setting forth:
(a) The name of the corporation;
(b) The reason for dissolution and winding
up;
(c) The authorization for the dissolution of
the corporation by the particular religious
denomination, sect or church;
(d) The names and addresses of the
persons who are to supervise the winding
up of the affairs of the corporation.
Upon approval of such declaration of dissolution
by the SEC, the corporation shall cease to carry
on its operations except for the purpose of
winding up its affairs (Sec. 113, RCC).
(c) One Person Corporation
A corporation with a single stockholder, who
may be a natural person, a trust, or an estate
(Sec. 116, RCC). No other person / entity,
outside those mentioned in Section 116 of the
RCC, may form an OPC. An OPC is a stock
corporation. Submission of By-Laws is not
required for an OPC (Sec. 119, RCC)
o As to existence of Delectus Personae
Feature
(a) Open Corporation
One which is open to any person who may wish
to become a stockholder or member thereto.
(b) Close Corporation
A close corporation is one whose AOI provides
that:
(1) All the corporation’s issued stock of all
classes, exclusive of treasury shares, shall be
held of record by nor more than a specified
number of persons, not exceeding 20;
(2) All the issued stock of all classes shall be
subject to one or more specified restrictions on
transfer permitted by this Title; and
(3) The corporation shall not list any stock
exchange or make any public offering of its
stocks of any class. Notwithstanding the
27
foregoing, a corporation shall not be deemed a
close corporation when at least 2/3 of its voting
stock or voting rights is owned or controlled by
another corporation which is not a close
corporation within the meaning of this Code.
(REVISED CORPORATION CODE, Sec. 95)
o Special Types of Corporations under the
Revised Corporation Code of the
Philippines
(a) Close Corporation
(b) Special Corporations
i. Educational Corporations
It is a stock or non-stock corporation organized
to provide facilities for teaching or instruction. It
shall be governed by special laws and the
general provision of the RCC.
(REVISED CORPORATION CODE, Sec. 105)
ii. Religious Corporations
It is a corporation composed entirely of spiritual
persons and which is organized for the
furtherance of perpetuating religion or for
perpetuating the rights of the church or for the
administration of church or religious work or
property.
It may be classified into corporation sole and
religious societies.
o Other Special Classes of Corporations
(a) Ecclesiastical Corporation
Corporations composing entirely of spiritual
persons and are established for the furtherance
of religion and for perpetuating the rights of a
church.
(b) Lay Corporations
All corporations other than ecclesiastical.
(c) Eleemosynary Corporation or Charitable
Corporation
A corporation created not for private gain or
profit but for charitable purposes for the
administration of charitable trust.
B. COMPOSITION OF / MEMBERSHIP IN
BOARD OF DIRECTORS:
Number of Directors/Trustees:
Directors must NOT be more than fifteen (15)
(REVISED CORPORATION CODE, Sec. 10)
The number of Trustees shall be fixed in the AOI
or by laws which may or may not be more than
fifteen (15)
(REVISED CORPORATION CODE, Sec. 91)
Term of the Board:
A Director holds office for 1 year while a
Trustee holds office for a term not exceeding
3 years, or until the replacement
Director/Trustee is elected.
(REVISED CORPORATION CODE, Sec. 22)
While there appears to be no maximum limit (on
the number of trustees in order to give more
representation to the Board of Trustees of
nationwide membership associations) the
number should not exceed the number of
members of the corporation.
(SEC Opinion dated August 21, 1997)
General Authority and Duty of the Board
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.
(REVISED CORPORATION CODE, Sec. 22,
par. 1)
Minimum Qualifications of Directors or
Trustees:
(1) For a director, legal ownership of at least one
share of the capital stock of the corporation in
his own name;
(2) Directors and Trustees must be natural
person of legal age possessed of full legal
capacity; and
(3) He must possess other qualifications as may
be prescribed in the by-laws of the corporation
(REVISED CORPORATION CODE, Sec. 46)
28
Disqualifications of Directors, Trustees, and
Officers:
A person shall be disqualified from being a
director, trustee, or officer of any corporation if,
within 5 years prior to the election or
appointment as such, the person was:
(1) Convicted by final judgment:
i. Of an offense punishable by
imprisonment for more than 6 years;
ii. For violating of the RCC; and
iii. For violating of the SRC’
(2) Found to be administratively liable or any
offense involving fraudulent acts; and
(3) By a foreign court or equivalent foreign
authority for acts, violations, misconducts
similar to (1) and (2)
(REVISED CORPORATION CODE, Sec. 26)
Note: The enumeration of grounds for
disqualifications is not exclusive. The by-laws
may validly provide that a stockholder is
ineligible to be a director if he is also a director
in a corporation whose business is in
competition with that of other corporation.
Designated Name:
HORNILLA v. SALUNAT (2003)
Whatever may be the term used in the company
charter, the “Board of Directors” is the body
which: (1) exercises all powers provided for
under the [RCC]; (2) conducts all business of the
corporation; and (3) controls and holds all
properties of the corporation. Its members have
been characterized as clothed with a fiduciary
character. Hence, the corporation’s general
counsel cannot represent the members of the
board who have been sued by the stockholders
in a derivative suit, for clearly the Board is
separate and distinct from the corporate entity
itself.
Non-stock and other special corporations, may
through their AOI or their bylaws, designate their
Governing Board by any name other than as
“Board of Trustees”
(REVISED CORPORATION CODE, Sec. 174)
Independent Director
An independent director is a person who, apart
from shareholdings and fees received from the
corporation, is independent of management and
free 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. Independent
directors are required to constitute at least 20%
of the Board’s membership in corporations
vested with public interest.
(REVISED CORPORATION CODE, Sec. 174)
Election of Directors/Trustees:
VALLE VERDE COUNTRY CLUB, INC. v.
AFRICA (2009)
The underlying policy of the Corporation Code
is that the business and affairs of a corporation
must be governed by a Board of Directors
whose members have stood for election, and
who have been elected by the stockholders, on
an annual basis. Only in that way can the
director’s continued accountability to the
shareholders, and the legitimacy of their
decisions that bind the corporation’s
stockholders, be assured. The shareholder vote
is critical to the theory that legitimizes the
exercise of power by the directors or officers
over properties that they do not own.
Cumulative voting in stock corporations, a
stockholder is entitled to vote as many as the
number of his shares and apportion them in any
way he likes.
Straight voting in non-stock corporations, a
member is generally entitled to 1 vote; unless,
the AOI or the bylaws allow that a member is
entitled to vote as many as the number of seats
in the Board of Trustees to be filled provided that
no candidate shall be voted more than once by
a member.
(REVISED PENAL CODE, Sec. 23)
RICAFORT v. DICDICAN (2016)
All election contests over directors and trustees
fall within the original and exclusive jurisdiction
29
of the RTC Special Commercial Courts and no
longer with the SEC. 181 Under Secs. 1-3 of
Rule 6 of the Interim Rules of Procedure for
Intra-Corporate Controversies, an election
contest should be dismissed when filed beyond
the 15-day prescriptive period allowed for an
election protest.
Vacancies in the Board:
If the reason for the vacancy is Removal,
Expiration of term, or Increase in the number
of seats (REI), the stockholders will fill the
vacancy. For all other reasons, the Board will fill
the vacancy if there is it still has quorum. If the
Board does not have a quorum, the
stockholders will fill the vacancy.
A director or trustee elected to fill a vacancy
shall be referred to as replacement director or
trustee and shall serve only for the unexpired
term of the predecessor in office.
(REVISED CORPORATION CODE, Sec. 28)
Emergency Board:
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.
The action by the designated director or trustee
shall be limited to the emergency action
necessary, and the term shall cease within a
reasonable time from the termination of the
emergency or upon election of the
replacement director or trustee, whichever
comes earlier. The corporation must notify the
SEC within 3 days from the creation of the
emergency board, stating therein the reason for
its creation.
(REVISED CORPORATION CODE, Sec. 22)
C. POWERS, DUTIES AND PREROGATIVES
OF BOARD OF DIRECTORS AND
STOCKHOLDERS
• EXPRESS POWERS OF THE
CORPORATION
Every corporation incorporated under this Code
has the power and capacity:
(a) To sue and be sued in its corporate
name;
(b) To have perpetual existence unless the
certificate of incorporation provides
otherwise;
(c) To adopt and use a corporate seal;
(d) To amend its AOI in accordance with the
provisions of this Code;
(e) To adopt bylaws, not contrary to law,
morals or public policy, and to amend or
repeal the same in accordance with this
Code;
(f) 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 non-
stock corporation;
(g) To purchase, receive, take or grant, hold,
convey, sell, lease, pledge, mortgage,
and otherwise deal with such real and
personal property, subject to the
limitations prescribed by law and the
Constitution;
(h) To enter into a partnership, joint venture,
merger, consolidation, or any other
commercial agreement with natural and
juridical persons;
(i) 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;
30
 (j) To establish pension, retirement, and
other plans for the benefit of its directors,
trustees, officers, and employees; and
(k) To exercise such other powers as may be
essential or necessary to carry out its
purpose or purposes as stated in the AOI.
(REVISED CORPORATION CODE, Sec. 35)
Doctrine of Necessary Implication:
Reference must be made to a corporation’s AOI
and unless the power to carry a particular
business is either expressly or impliedly
conferred thereby, it does not exist.
• POWER TO EXTEND OR SHORTEN
CORPORATE TERM
Corporate term may be extended or shortened
upon compliance with the following (NARS):
1. Written Notice of the proposed action and
the time and place of meeting served to
each stockholder or member either by
mail or personal service;
2. Approval by a majority vote of the board
of directors/trustees;
3. Ratification by the stockholders
representing at least 2/3 of the
outstanding capital stock or 2/3 of the
members in case of non-stock
corporations; and
4. A copy of the amended AOI Submitted to
the SEC for approval (Sec. 36, RCC).
Despite the Board resolution approving the
increase in capital stock and the receipt of
payment on the future issues of the shares from
the increased capital stock, such funds do not
constitute part of the capital stock of the
corporation until approval of the increase by
SEC.
• POWER TO INCREASE OR
DECREASE CAPITAL STOCK, OR
INCUR, CREATE, OR INCREASE
BONDED INDEBTEDNESS
The requirements for the increase or decrease
of authorized capital stock or incur, create, or
increase bonded indebtedness are as follows:
(NARS-CPF25)
1. Prior written Notice of the proposed
increase or decrease of the capital stock
indicating the time and place of meeting
addressed to each stockholder which
must be made either by mail or personal
service;
2. Approval by the majority vote of the
Board of directors;
3. Ratification by the Stockholders holding
or representing at least 2/3 of the
outstanding capital stock at a meeting
duly called for that purpose;
4. Submission to the SEC for approval;
5. A Certificate in duplicate signed by a
majority of the directors of the
corporation, countersigned by the
chairman and the secretary of the
stockholders meeting;
6. In case of decrease in capital stock, the
same must not Prejudice the right of the
creditors;
7. Filing of the certificate with the SEC; and,
8. In case of increase in capital stock, 25%
of such increased capital must be
subscribed and that at least 25% of the
amount subscribed must be paid either in
cash or property.
(REVISED CORPORATION CODE, Sec. 37)
Bonded indebtedness is a secured
indebtedness or those secured by real or
personal property that is covered by certificates.
• POWER TO SELL OR DISPOSE OF
CORPORATE ASSETS
The requirements are as follows (NARC):
1. Prior written Notice of the proposed
action indicating the time and place of
meeting addressed to each stockholder
or member which must be made either by
mail or personal service;
2. Approval by the majority vote of the board
of directors;
31
 3. Ratification by the stockholders holding
or representing at least 2/3 of the
outstanding capital stock at a meeting
duly called for that purpose; and,
4. The sale of the assets shall not be
Contrary to the provisions of existing
laws on illegal combinations and
monopolies and Bulk Sales Law.
(REVISED CORPORATION CODE, Sec. 39)
Instances when ratification of stockholders
is not required:
1. If it is necessary in the usual and regular
course of business;
2. If the proceeds of the sale or other disposition
of such property and assets be appropriated for
the conduct of the remaining business; or
3. If the transaction does not cover all or
substantially all of the assets.
(REVISED CORPORATION CODE, Sec. 39)
Under the Nell Doctrine, the transfer of all the
assets of a corporation to another shall not
render the latter liable to the liabilities of the
transferor, except:
1. Where the purchaser expressly or
impliedly agrees to assume such debts;
2. Where the transaction amounts to a
consolidation or merger of corporations;
3. Where the purchasing corporation is
merely a continuation of the selling
corporation; and
4. Where the transaction is entered into
fraudulently in order to escape liability for
such debts.
• POWER TO INVEST CORPORATE
FUNDS IN ANOTHER CORPORATION
OR BUSINESS
The following are the requirements for
investment (NAR):
1. Prior written Notice of the proposed
investment and the time and place of
the meeting shall be made,
addressed to each stockholder or
member by mail or by personal
service;
2. Approval by the majority of the board
of directors or trustees;
3. Ratification by the stockholders
representing at least 2/3 of the
outstanding capital stock or 2/3 of the
members in case of non-stock
corporation at a meeting duly called
for the purpose (Sec. 39, RCC).
A corporation is not allowed to engage in a
business distinct from those enumerated in the
AOI without amending the purpose clause of
said article. However, if the investment by the
corporation is reasonably necessary to
accomplish its primary purpose as stated in AOI,
there is no need for stockholdersǁ approval.
(REVISED CORPORATION CODE, Sec. 39)
• POWER TO ACQUIRE OWN SHARES
A corporation can acquire its own shares
provided that:
1. The capital is not impaired;
2. A legitimate and proper corporate
purpose or objective is advanced;
3. The corporate affairs warrant it;
4. The transaction is designed and carried
out in good faith;
5. There is intended and there results no
undue advantage to a favored
stockholder at the expense of the
remainder;
6. The creditors are not prejudiced; and
7. The corporation acts in good faith and
without prejudice to the rights of creditors
and stockholders.
• POWER TO DECLARE DIVIDENDS
Dividends are corporate profits allocated,
lawfully declared and ordered by the directors to
be paid to the stockholders on demand or at a
fixed time.
The requirements to declare dividends are as
follows (URC):
1. Unrestricted retained earnings;
2. Resolution of the board; and
32
 3. If stock dividends are declared, there
must be resolution of the board with
concurrence of 2/3 of outstanding Capital
(Sec. 42, RCC).
The following are the corporate acts which
requires the existence of unrestricted retained
earnings: (ADA)
1. Power to Acquire own shares (Sec. 40,
RCC);
2. Power to Declare dividends (Sec 42,
RCC); and
3. Payment of stocks to dissenting
stockholder in exercise of his Appraisal
right (Sec. 80, RCC).
• POWER TO ENTER INTO
MANAGEMENT CONTRACTS
Management contract is a contract whereby a
corporation undertakes to manage or operate all
or substantially all of the business of another
corporation, whether such contracts are called
service contracts, operating agreements or
otherwise (Sec. 43, RCC).
A corporation cannot enter into a management
contract with a natural person.
estoppel, while the latter is void and cannot be
validated.”
Types of Ultra Vires Act (BAI)
1. Acts done Beyond the powers of the
corporation as provided in the law or its
AOI;
2. Acts or contracts entered into in behalf of
a corporation by persons who have no
corporate Authority; and
3. Acts or contracts, which are per se Illegal
as being contrary to law.
The effects of an ultra vires act in executed and
executory contracts are:
1. Executed contract – courts will not set
aside or interfere with such contracts;
2. Executory contracts – no enforcement
even at the suit of either party
(unenforceable);
3. Partly executed and partly executory –
principle prohibiting unjust enrichment at
the expense of another shall apply; and
4. Executory contracts apparently
authorized but ultra vires – the
principle of estoppel shall apply.

A management contract must not be longer than

5 years for any 1 term except those contracts
which relate to the exploration, development,
exploitation or utilization of natural resources
that may be entered into for such periods as
may be provided by pertinent laws or
regulations (Sec. 43, RCC)

• ULTRA VIRES DOCTRINE

An ultra vires act is one committed outside the

object for which a corporation is created as
defined by the law of its organization and
therefore beyond the power conferred upon it by
law.

The term “ultra vires“ is “distinguished from an

illegal act for the former is merely voidable which
may be enforced by performance, ratification, or
33
34
D. ARTICLES OF INCORPORATION AND BY-
LAWS
I. ARTICLES OF INCORPORATION
The AOI is in the nature of a contract between
the corporation and the State and defines the
charter of the corporation and the contractual
relationships between the State and the
corporation, the stockholders and the State, and
between the corporation and its stockholders.
The AOI must be filed with the SEC for the
issuance of the Certificate of Incorporation. The
AOI and its amendments can be filed
electronically. [Sec. 13, RCC]
Corporate Existence starts from the moment
the SEC issues the certificate of incorporation
under its seal provided that the submitted
documents and information are fully compliant
with the requirements of the RCC and other laws
(Sec. 18, RCC).
Articles of Incorporation must contain:
(a) Corporate Name
Under the RCC, incorporators undertake to
change the name of the corporation immediately
upon receipt of notice from SEC that another
corporation, partnership or person has acquired
a prior right to its use, that the name has been
declared not distinguishable from a name
already registered or reserved for the use of
another corporation, or that it is contrary to law,
public morals, good customs or public policy.
[Sec. 14(11)] See also SEC Memorandum
Circular No. 13, s. 2019
A corporation may change its name by the
amendment of its AOI, but the same is not
effective until approved by the SEC.
In accordance with SEC Memo Circular No. 6,
s. 2015, a dissolved corporation’s name shall
not be allowed to be used within 3-years after
approval of dissolution by the SEC, unless
allowed by the last stockholders representing at
least majority of the outstanding capital stock
(b) Purpose Clause;
A corporation can only have one (1) primary
purpose. However, it can have several
secondary purposes.
(c) Principal Office;
• It must be within the Philippines
• Must contain specific address of their
principal office, which shall include, if
feasible, the street number, street name,
barangay, city or municipality, and if
applicable, the name of the building,
number of the building, and name or
number of the room or unit
• Important in determining venue in an
action by or against the corp., or on
determining the province where a chattel
mortgage of shares should be
(d) Corporate Term, if the corporation has not
elected perpetual existence;
A corporation shall now have perpetual
existence unless its AOI provides otherwise.
[Sec. 11]
(e) Incorporators; and
(f) Trustees/Directors;
• Names, nationalities & residences of the
incorporators;
• Names, nationalities & residences of the
directors or trustees who will act as such
until the first regular directors or trustees
are elected;
• Treasurer who has been chosen by the
pre-incorporation subscribers/members
to receive on behalf of the corporation, all
subscriptions /contributions paid by them
See SEC Memorandum Circular No. 26,
s. 2019
(g) For stock corporations:
1. The authorized capital stock,
2. Number of shares into which it is divided,
35
 3. The par value of each share,
4. Names, nationalities, and residence
addresses of the original subscribers,
5. Amount subscribed and paid by each on
the subscription, and
6. A statement that some or all of the shares
are without par value, if applicable
(h) For nonstock corporations:
1. Amount of its capital,
2. The names, nationalities, and
3. Residence addresses of the contributors,
and
4. Amount contributed by each
(i) Other matters
• Classes of shares into which the shares
of stock have been divided; preferences
of & restrictions on any such class; and
any denial or restriction of the pre-
emptive right of stockholders should also
be expressly stated in said articles.
• If the corporation is engaged in a wholly
or partially nationalized business or
activity, the AOI must contain a
prohibition against a transfer of stock
which would reduce the Filipino
ownership of its stock to less than the
required minimum.
• Transfer restrictions
[REVISED CORPORATION CODE Sec. 13]
The grounds for DISAPPROVAL OF THE AOI
are the following:
1. AOI or any amendment is not compliant
with the form prescribed by the RCC;
2. Purpose of the corporation is patently
unconstitutional, illegal, immoral, or
contrary to government rules and
regulations;
3. The certification concerning the amount
of capital stock subscribed and/or paid is
false; and
4. The required percentage of Filipino
ownership is not met (Sec. 16, RCC).
The SEC shall give the corporators reasonable
time to modify the objectionable portions of their
AOI.
Amendment of the AOI should have the vote
of at least majority of the Board and at least
2/3 of the shareholders. The proposed
amendments shall take effect upon their
approval or from the date of filing if not acted
upon by the SEC within 6 months for a cause
not attributable to the corporation.
(Sec. 15, RCC).
Stock corporation may be converted to non-
stock corporation by amendment of the AOI.
Conversion may be made by mere amendment
of the purpose clause in the AOI, among others.
In effect, the shares subscriptions constitute as
the capital contributions of the shareholders,
and they are converted into members who
divest themselves of any right to receive
dividends of any profits of the corporation.
(SEC Opinion, July 19, 1999)
A non-stock corporation cannot be converted
into a stock corporation by a mere amendment
of the AOI. It is fundamental that the non -stock
corporation be dissolved first under any of the
methods specified in the Corporation Code.
(SEC Opinion, February 24, 2003)
II. CORPORATE BY-LAWS
Bylaws are the self -imposed rules resulting
from the agreement between the [corporation]
and its members to conduct the corporate
business in a particular way.
Bylaws constitute a binding contract as between
the [corporation] and its members, and as
among the members themselves. They are self-
imposed private laws binding on all members,
directors, and officers of the [corporation]. The
prevailing rule is that the provisions of the
AOI and the bylaws must be strictly
complied with and applied to the letter.
36
The power to adopt bylaws is an inherent power
on the part of those forming a corporation or any
other form of association.
Section 45 of the RCC removed the One-
Month-from-Incorporation Period to Adopt
Bylaws. However, failure to Adopt and Maintain
the Bylaws now specifically criminally
punishable and subject to SECǁs Contempt
Power (Sec. 161, RCC).
Contents of Bylaws:
A private corporation may provide the following
in its bylaws:
(a) The time, place and manner of calling
and conducting regular or special
meetings of the directors or trustees;
(b) The time and manner of calling and
conducting regular or special meetings
and mode of notifying the stockholders or
members thereof;
(c) The required quorum in meetings of
stockholders or members and the
manner of voting therein;
(d) The modes by which a stockholder,
member, director, or trustee may attend
meetings and cast their votes;
(e) The form for proxies of stockholders and
members and the manner of voting them;
a) f) The directors’ or trustees’
qualifications, duties and responsibilities,
the guidelines for setting the
compensation of directors or trustees
and officers, and the maximum number
of other board representations that an
independent director or trustee may have
which shall, in no case, be more than the
number prescribed by the SEC;
(f) The time for holding the annual election
of directors of trustees and the mode or
manner of giving notice thereof;
(g) The manner of election or appointment
and the term of office of all officers other
than directors or trustees;
(h) The penalties for violation of the bylaws;
(i) In the case of stock corporations, the
manner of issuing stock certificates; and
(j) Such other matters as may be necessary
for the proper or convenient transaction
of its corporate affairs for the promotion
of good governance and anti-graft and
corruption measures.
An arbitration agreement may be provided in
the bylaws (Sec. 46, RCC).
Adoption of Corporate Bylaws, required
votes:
1. If it is adopted prior to incorporation – The
by-laws must be signed and approved by all the
incorporators and filed with the SEC together
with the AOI.
2. If it is adopted and filed after incorporation
– The affirmative vote of the stockholders
representing at least a majority of the
outstanding capital stock, or of at least a
majority of the members shall be necessary.
The by-laws shall be signed by the stockholders
or members voting for them (Sec. 45, RCC).
Amendment of Corporate By-laws requires the
majority vote of the board of
directors/trustees and majority vote of the
outstanding capital stock or membership
(Sec. 47, RCC).
The power to adopt, amend, or repeal the
bylaws may be delegated to the Board by 2/3
vote of the shareholders. The same power
may be revoked by a majority vote of the
shareholders (Sec. 47, RCC).
2. INTRA-CORPORATE DISPUTE
(concept)
An intra-corporate controversy is one which
arises between a stockholder and the
corporation or among the stockholders involving
internal affairs of the corporation.
ANGCAO VS. OZAMIZ, 2017:
Two tests in determining whether a case
involves an intra-corporate dispute:
37
1. Relationship Test
The main consideration in determining whether
a dispute constitutes an intra- corporate
controversy was limited to a consideration of the
intra-corporate relationship (also known as the
Relationship Test) existing between or among
parties.
a) Between the corporation, partnership, or
association and the public;
b) Between the corporation, partnership, or
association and its stockholders,
partners, members or officers;
c) Between the corporation, partnership, or
association and the State as far as its
franchise, permit or license to operate is
concerned; and
d) Among the stockholder, partners, or
associates themselves.
2. The Nature of Controversy Test
Under the nature of the controversy test, the
incidents of that relationship must also be
considered for the purpose of ascertaining
whether the controversy itself is intra-corporate.
The controversy must not only be rooted in the
existence of an intra-corporate relationship, but
must pertain to the enforcement of the parties’
correlative rights and obligations under the
Corporation Code and the internal and intra-
corporate regulatory rules of the
corporation. If the relationship and its incidents
are merely incidental to the controversy or if
there will still be conflict even if the relationship
does not exist, then no intra- corporate
controversy exists.
Jurisdiction over intra-corporate disputes has
been transferred to regular courts, from the
Securities and Exchange Commission (SEC),
pursuant to Section 5.2 of the Securities
Regulation Code (Republic Act No. 8799).
3. INTELLECTUAL PROPERTY
A. 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.
Principle Of Automatic Protection
Copyright is vested from the very moment of
creation irrespective of their mode or form of
expression, as well as of their content, quality
and purpose. [Sec. 171.1-172.2, RA 8293]
The enjoyment and exercise of copyright,
including moral rights, shall not be the subject of
any formality; such enjoyment and such
exercise shall be independent of the existence
of protection in the country of origin of the work.
[Article 5(2), Berne Convention for the
Protection of Literary and Artistic Works]
I. COPYRIGHTABLE WORKS
1. Original Works
Literary and artistic works, hereinafter referred
to as "works", are original intellectual creations
in the literary and artistic domain protected from
the moment of their creation and shall include in
particular:
a) Books, pamphlets, articles and other
writings;
b) Periodicals and newspapers;
c) Lectures, sermons, addresses,
dissertations prepared for oral delivery,
whether or not reduced in writing or other
material form;
a) Letters;
b) Dramatic or dramatico-musical
compositions; choreographic works or
entertainment in dumb shows;
c) Musical compositions, with or without
words;
d) Works of drawing, painting, architecture,
38
 sculpture, engraving, lithography or other
works of art; models or designs for works
of art;
e) Original ornamental designs or models
for articles of manufacture, whether or
not registrable as an industrial design,
and other works of applied art;
f) Illustrations, maps, plans, sketches,
charts and three-dimensional works
relative to geography, topography,
architecture or science;
g) Drawings or plastic works of a scientific
or technical character;
h) Photographic works including works
produced by a process analogous to
photography; lantern slides;
i) Audiovisual works and cinematographic
works and works produced by a process
analogous to cinematography or any
process for making audio-visual
recordings;
j) Pictorial illustrations and advertisements;
k) Computer programs; and
l) Other literary, scholarly, scientific and
artistic works
[Sec. 172.1, RA 8293]
When a work is considered original:
1. The work is an independent creation of
the author; and
2. It must not be copied from the work of
another.
A person must be the original creator of the work
to be entitled to a copyright. He must have
created it by his own skill, labor and judgment
without directly copying or evasively imitating
the work of another. [Ching Kian Chuan vs. CA,
G.R. No. 130360 (2001)]
2. Derivative Works
The following derivative works shall also be
protected by copyright: Dramatizations,
translations, adaptations, abridgments,
arrangements, and other alterations of literary or
artistic works; and Collections of literary,
scholarly or artistic works, and compilations of
data and other materials which are original by
reason of the selection or coordination or
arrangement of their contents. [Sec. 173.1, RA
8293]
Derivative works are protected as new
works, provided they shall not:
(1) Affect the force of any subsisting copyright
upon the original works employed or any part
thereof; or
(2) Be construed to imply any right to such use
of the original works, or to secure or extend
copyright in such original works.
[Sec. 173.2, RA 8293]
Useful Article
A “useful article” is defined as an article “having
intrinsic utilitarian function that is not merely to
portray the appearance of the article or to
convey information” is excluded from copyright
eligibility. The only instance when a useful
article may be the subject of copyright protection
is when it incorporates a design element that is
physically or conceptually separable from the
underlying product. [OLAÑO V. LIM ENG CO,
G.R. NO. 195835 (2016)]
USEFUL ARTICLE DOCTRINE
Works whose sole purpose is utilitarian, and
have no separate artistic value are non-
copyrightable works.
In contrast, a work of applied art, which has
utilitarian functions, but has an identifiable
artistic work or creation incorporated thereto,
can be the subject of a copyright to the extent
that the design features:
Can be identified separately from, and
Are capable of existing independently of the
utilitarian aspects of the article.
Denicola Test: Conceptual Separability
(Aesthetics v. Functionality)
1. The work cannot be copyrighted if its
design elements reflect a merger of
aesthetic and functional considerations,
and the artistic aspects of the work
39
 cannot be conceptually separable from
the utilitarian aspects.
2. Conceptual separability exists where
design elements can be identified as
reflecting the designer's artistic
judgment, exercised independently of
functional influences
3. The relevant question should be whether
the design of a useful article, however
intertwined with the article’s utilitarian
aspects, causes an ordinary reasonable
observer to perceive an aesthetic
concept not related to the article’s use.
[BrandirInt’l v. Cascade Pacific, 834 F.
2nd 1142 (2nd Cir.) (1987)]
B. FAIR USE PRINCIPLE AND MORAL
RIGHTS
I. Fair Use Principle
Fair use of a Copyrighted Work
(IPC, Sec. 185):
Fair use is defined as a privilege in other than
the owner of a copyright to use the copyrighted
material in a reasonable manner without his
consent, notwithstanding the monopoly granted
to the owner by the copyright.
Scope of Fair Use
The fair use of a copyrighted work for criticism,
comment, news reporting, teaching including
limited number of copies for classroom use,
scholarship, research, and similar purposes is
not an infringement of copyright
(IPC, Sec.185.1).
Decompilation or the reproduction of the code
and translation of the forms of a computer
program to achieve the interoperability of an
independently created computer program with
other programs may also constitute fair use
done for the purpose of obtaining the
information necessary to achieve such
interoperability (IPC,Sec. 185.1).
Factors to be considered in determining
whether use is fair or not: (PANE)
a. Purpose and the character of the use;
b. Amount and substantiality of the portions
used;
c. Nature of the copyrighted work; and
d. Effect of the use upon the potential
market of the copyrighted work
(IPC, Sec. 185.1)
The fact that the work is unpublished shall not
itself bar a finding of fair use (IPC, 185.2).
HABANA V. ROBLES
(G.R. No. 131522, July 19, 1999)
Quotations from a published work if they are
compatible with fair use and only to the extent
justified by the purpose, including quotations
from newspaper articles, and periodicals in the
form of press summaries, are allowed provided
that the source and the name of the author, if
appearing on the work, are mentioned.
II. MORAL RIGHTS
MORAL RIGHTS: (PAIN)
1. Right of Paternity - To require that the
authorship of the works be attributed to him, in
a prominent way on the copies, and with the
public use of the work (IPC, Sec. 193.1);
2. To make any Alterations of his work prior to,
or to withhold it from publication (IPC, Sec.
193.2);
3. Right of Integrity - 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
4. 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).
These rights are distinct from economic rights
and remain with the author even after he has
transferred or assigned to another "other rights
of copyright"
40
Moral rights allow the author to take certain
actions to preserve the personal link between
himself and the work (Id. at 9).
Term / Duration of Moral Rights
Lifetime of the author and in perpetuity after his
death for the moral rights under Sec. 193.1 (i.e.
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). The rights under
Secs. 193.2, 193.3, 193.4, shall be coterminous
with the economic rights.
Moral rights shall not be assignable or subject to
license (IPC, Sec. 198).
Waiver of Moral Rights
GENERAL RULE: Moral rights may be waived
by a written instrument.
EXCEPTION: Where its effects is to permit
another:
1. 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.
(PC, Sec.195.1); or
2. To use the name of the author with
respect to a work he did not create (IPC,
Sec. 195.2).
NOTE: When an author contributes to a
collective work, his right to have his contribution
attributed to him is deemed waived unless he
expressly reserves it (IPC, Sec. 196).
4. INSURANCE
I. WHAT CAN BE INSURED
Insurance is an agreement whereby one [the
insurer] undertakes, for a consideration [the
premium], to indemnify another [the insured]
against loss, damage, or liability arising from an
unknown or contingent event [the risk].
GULF RESORTS, INC. v. PHILIPPINE
CHARTER INSURANCE CORPORATION
(G.R. No. 156167, May 16, 2005)
An insurance contract exists where the following
elements concur:
1. The insured has insurable interest;
2. The insurable interest is subject to a risk of
loss by the happening of the designated peril;
3. The insurer’s Promise is in consideration of
the payment of a premium;
4. The insurer Assumes the risk; and
5. Such assumption of risk is part of Risk-
distribution scheme
WHAT MAY BE INSURED
Any contingent or unknown event, whether past
or future, which may:
(a) Damnify a person having an
insurable interest, or
(b) Create a liability against him,
may be insured against, subject to the
provisions of this chapter. [Sec. 3 of the
Insurance Code]
Thus, insurance may be taken upon any
property, life, health or one’s liability in which the
insured has insurance interest.
(VILLANUEVA-CASTRO, Commercial Law
Recap Book One (2020), p. 88).
A person is deemed to have insurable interest in
the subject matter of insurance where he has a
relation or connection with or concern in it that
he will derive pecuniary benefit or advantage
from its preservation and will suffer pecuniary
loss or damage from its destruction, termination,
41
or injury by the happening of the event insured
against.
Basis of insurable interest in life and health
insurance:
Every person has an insurable interest in the life
and health:
1. Of himself;
2. Of any person on whom he depends
wholly or in part for education or support;
3. Of any person under a legal obligation
to him for the payment of money, or
respecting property or services, of which
death or illness might delay or prevent
the performance; and
4. Of any person upon whose life any
estate or interest vested in him depends
(Sec. 11, IC).
Basis of Insurable Interest in Property
Insurance
An insurable interest in property may consist in:
1. An existing interest;
2. An inchoate interest founded on an
existing interest; or
3. An expectancy, coupled with an
existing interest in that out of which the
expectancy arises (Sec. 13, IC).
As to a mortgaged property, the mortgagor
and the mortgagee have each an independent
insurable interest therein and both interests may
be covered by one policy, or each may take out
a separate policy covering his interest, either at
the same or at separate times.
● Mortgagor’s insurable interest: covers
the full value of the mortgaged property.
● Mortgagee’s insurable interest: to the
extent of the debt
(GEAGONIA V. CA, G.R. NO. 114427,
February 6, 1995).
`Distinctions between insurable interest in
life and in property:
(a) As to measure
Insurable Interest in Life:
General Rule:
Insurable interest in life is beyond pecuniary
estimation.
Exception:
A life insurance obtained by a creditor on the life
of the debtor, as the measure here is the amount
of debt owed to the creditor.
Insurable Interest in Property:
The measure of an insurable interest in property
is the extent to which the insured might be
damnified by loss or injury thereof (Sec. 17, IC).
(b) As to time when insurable interest must
exist
Insurable Interest in Life:
General Rule:
It is enough that the insurable interest exists at
the time the policy takes effect and need not
exist at the time of the loss.
Exception:
Creditor taking insurance on the life of debtor,
as the former must have insurable interest at the
time the policy took effect and at the time of loss.
Insurable Interest in Property:
The insurable interest must exist when the
insurance takes effect and when the loss occurs
but it need not exist in the meantime.
(c) As to beneficiary
Insurable Interest in Life:
If the subject matter of insurance is the life of the
insured, he can designate anyone as
beneficiary though the latter has no insurable
interest in his (insured) life.
42
However, one cannot lawfully procure insurance
for his own benefit on the life of another in
whose life he has no insurable interest.
Insurable Interest in Property:
The beneficiary must also have insurable
interest in the property insured when the
insurance takes effect and when the loss
occurs.
CLASSES OF INSURANCE CONTRACT:
1. Life Insurance
- It is the insurance on human lives and
insurance pertaining thereto or connected
therewith, which may be made payable on the
death of the person, or on his surviving a
specific period, or otherwise contingently on the
continuance or cessation of life
NOTE: It includes every contract or undertaking
for the payment of lump sums under a
retirement program where the insurer manages
or acts as a trustee for such program, or every
contract or pledge for the payment of
endowments or annuities.
All other classes of insurance are considered as
“non-life” insurances.
2. Property Insurance
a. Fire Insurance
A contract by which the insurer for a
consideration agrees to indemnify the insured
against loss of, or damage to, property by hostile
fire, including loss by lightning, windstorm,
tornado or earthquake and other allied risks,
when such risks are covered by extension to fire
insurance policies or under separate policies.
(INSURANCE CODE, Sec. 169)
b. Marine Insurance
An insurance against risks connected with
navigation, to which a ship, cargo, freightage,
profits, or other insurable interest in movable
property, may be exposed during a certain
voyage or a fixed period of time. (INSURANCE
CODE, Sec. 101).
c. Suretyship
- An agreement whereby a party called the
surety, guarantees the performance by another
called the principal or obligor of an obligation or
undertaking in favor of a third party called the
oblige (INSURANCE CODE, Sec. 177).
NOTE: The property insured is credit or
standing.
3. Casualty Insurance
- Insurance covering loss or liability arising from
accident r mishap, excluding those falling under
other types of insurance such as fire or marine
(INSURANCE CODE, Sec. 176).
4. Compulsory Insurance
a. Compulsory Motor Vehicle Liability
Insurance (CMVLI)
A special type of casualty insurance against
passenger and third-party liability for death or
bodily injuries and damage to property arising
from motor vehicle accidents
(INSURANCE CODE, Sec. 386(7)).
b. Compulsory Insurance Coverage for
Agency-Hired Workers
Each migrant worker deployed by a
recruitment/manning agency shall be covered
by a compulsory insurance policy which shall be
secured at no cost to the said worker. Such
insurance policy shall be effective for the
duration of the migrant worker's employment
(R.A. No. 8042, otherwise known as "Migrant
Workers and Overseas Filipinos Act of 1995," as
amended by R.A. No. 10022, Sec. 37-A)
5. Microinsurance
An activity providing specific insurance,
insurance-like and other similar products and
services that meet the needs of the low-income
sector for risk protection and relief against
distress, misfortune, and other contingent
events
43
(Insurance Memorandum Circular No. 001-10,
January 29, 2010).
6. Reinsurance
It is a transaction whereby the reinsurer, in turn,
passes to another insurer a portion of the risk
reinsured.
It is presumed to be a contract of indemnity
against liability, and not merely against damage.
In reinsurance, the insurer agrees to indemnify
the insurer, not against actual payment made
but against liabilities incurred.
II. CLAIMS FOR LIFE INSURANCE
Liability of Insurer if Insured Commits
Suicide
The insurer in a life insurance contract shall be
liable in case of suicide only when it is
committed after the policy has been in force for
a period of two years from the date of its issue
or of its last reinstatement, unless the policy
provides a shorter period: Provided, however,
That suicide committed in the state of insanity
shall be compensable regardless of the date of
commission (Sec. 183, IC).
Forfeiture of Beneficiary’s Interest
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
(Sec. 12, IC).
The share forfeited shall pass on to:
1. The other beneficiaries, unless otherwise
disqualified;
2. In the absence of other beneficiaries, the
proceeds shall
be paid in accordance with the policy contract;
and
3. If the policy contract is silent, the proceeds
shall be paid
to the estate of the insured. (Sec. 12, IC)
Incontestability Clause
The incontestability clause provides that after a
policy of life insurance made payable on the
death of the insured shall have insured for a
period of two (2) years from the date of its issue
or of its last reinstatement, the insurer cannot
prove that the policy is void ab initio or is
rescindable by reason of the fraudulent
concealment or misrepresentation of the
insured or his agent (Sec. 48, IC).
First view: The incontestability clause applies if
the following requisites are present:
(1) The policy must be a Life Insurance
policy;
(2) The policy is in force for 2 years from
issue or last reinstatement
(MANILA BANKERS LIFE INSURANCE
CORP. V. ABAN, July 29, 2013).
Second view: The death of the insured within
the two-year period will render the right of the
insurer to rescind nugatory
(SUN LIFE V. SIBYA, June 8, 2016).
Assignment of Life Insurance Policy
A policy of life insurance upon life or health may
pass by transfer, will or succession to any
person, whether he has an insurable interest or
not, and such person may recover upon it
whatever the insured might have recovered
(Sec. 184, IC).
Notice to an insurer of a transfer or bequest
thereof is not necessary to preserve the validity
of a policy of insurance upon life or health,
unless thereby expressly required (Sec. 185,
IC).
5. REPUBLIC ACT NO. 10173
(DATA PRIVACY ACT OF 2012)
1. DEFINITIONS AND SCOPE
Personal information – Any information
whether recorded in a material form or not:
• From which the identity of an individual is
44
 apparent or can be reasonably and
directly ascertained by the entity holding
the information; or
• When put together with other information
would directly and certainly identify an
individual. [Sec. 3(g)]
Scope
The Data Privacy Act of 2012 applies to:
a. The processing of ALL types of personal
information; and
b. Any natural and juridical person involved in
personal information processing including:
i. Those personal information controllers
and processors who use equipment that
are located in the Philippines, although
not found or established in the
Philippines; or
ii. Those who maintain an office, branch
or agency in the Philippines subject to the
immediately succeeding paragraph:
Provided, That the requirements of
Section 5 are complied with. [Sec. 4]
Nothing in this Act shall be construed as to have
amended or repealed the provisions of Republic
Act No. 53, which affords the publishers, editors
or duly accredited reporters of any newspaper,
magazine or periodical of general circulation
protection from being compelled to reveal the
source of any news report or information
appearing in said publication which was related
in any confidence to such publisher, editor, or
reporter. [Sec. 5]
This Act does NOT apply to the following [Sec.
4]:
a. Information about any individual who is or was
an officer or employee of a government
institution that relates to the position or functions
of the individual, including:
1. The fact that the individual is or was an
officer or employee of the government
institution;
2. The title, business address and office
telephone number of the individual;
3. The classification, salary range and
responsibilities of the position held by the
individual; and
4. The name of the individual on a
document prepared by the individual in
the course of employment with the
government.
b. Information about an individual who is or was
performing service under contract for a
government institution that relates to the
services performed.
This includes: The terms of the contract,
and the name of the individual given in
the course of the performance of those
services;
c. Information relating to any discretionary
benefit of a financial nature.
Such as the granting of a license or
permit given by the government to an
individual, including the name of the
individual and the exact nature of the
benefit;
d. Personal information processed for
journalistic, artistic, literary or research
purposes;
e. Information necessary in order to carry out the
functions of public authority.
This includes: the processing of personal
data for the performance by the
independent, central monetary authority
and law enforcement and regulatory
agencies of their constitutionally and
statutorily mandated functions.
f. Information necessary for banks and other
financial institutions under the jurisdiction of
the independent, central monetary authority or
BSP to comply with the Credit Information
System Act (RA 9510) and Anti-Money
Laundering Act (RA 9160) and other applicable
laws.
45
g. Personal information originally collected from
residents of foreign jurisdictions in
accordance with the laws of those foreign
jurisdictions, including any applicable data
privacy laws, which is being processed in the
Philippines.
2. EXTRATERRITORIAL APPLICATION
This Act applies to an act done or practice
engaged in and outside of the Philippines by an
entity if:
a. The act, practice or processing relates to
personal information about a Philippine citizen
or a resident;
b. The entity has a link with the Philippines,
and the entity is processing personal
information in the Philippines or even if the
processing is outside the Philippines as long as
it is about Philippine citizens or residents such
as, but not limited to, the following:
1. A contract is entered in the Philippines;
2. A juridical entity unincorporated in the
Philippines but has central management
and control in the country; and
3. An entity that has a branch, agency,
office or subsidiary in the Philippines and
the parent or affiliate of the Philippine
entity has access to personal
information; and
c. The entity has other links in the Philippines
such as, but not limited to:
1. The entity carries on business in the
Philippines; and
2. The personal information was
collected or held by an entity in the
Philippines.
(Sec. 6)
3. PROCESSING OF INFORMATION
a. General Principles
Processing
Any operation or any set of operations
performed upon personal information including,
but not limited to, the collection, recording,
organization, storage, updating or modification,
retrieval, consultation, use, consolidation,
blocking, erasure or destruction of data. [Sec.
3(j)]
The processing of personal information shall
be allowed, subject to:
a. Compliance with the requirements of this
Act and other laws allowing disclosure of
information to the public; and
b. Adherence to the principles of transparency,
legitimate purpose and proportionality. [Sec. 11]
Personal information must be:
a. Collected for specified and legitimate
purposes determined and declared, and later
processed in a way compatible with such
declared, specified and legitimate purposes
only;
• When purposes are determined and
declared: before, or as soon as
reasonably practicable after collection.
b. Processed fairly and lawfully;
c. Accurate, relevant and, where necessary for
purposes for which it is to be used the
processing of personal information, kept up to
date.
• Inaccurate or incomplete data must be
rectified, supplemented, destroyed or
their further processing restricted;
d. Adequate and not excessive in relation to the
purposes for which they are collected and
processed;
e. Retained only for as long as necessary for the
fulfillment of the purposes for which the data
was obtained or for the establishment, exercise
or defense of legal claims, or for legitimate
business purposes, or as provided by law; and
f. Kept in a form which permits identification of
data subjects for no longer than is necessary for
the purposes for which the data were collected
and processed.
46
 • Provided, That personal information
collected for other purposes may lie
processed for historical, statistical or
scientific purposes, and in cases laid
down in law may be stored for longer
periods.
• Provided, further, That adequate
safeguards are guaranteed by said laws
authorizing their processing. [Sec. 11]
b. Sensitive information and Privileged
information
Sensitive personal information – Personal
information:
(1) About an individual’s race, ethnic origin,
marital status, age, color, and religious,
philosophical or political affiliations;
(2) About an individual’s health, education,
genetic or sexual life of a person, or to
any proceeding for any offense
committed or alleged to have been
committed by such person, the disposal
of such proceedings, or the sentence of
any court in such proceedings;
(3) 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
(4) Specifically established by an executive
order or an act of Congress to be kept
classified. [Sec. 3(l)]
Privileged information – Any and all forms of
data which under the Rules of Court and other
pertinent laws constitute privileged
communication. [Sec. 3(k)]
General Rule: The processing of sensitive
personal information and privileged information
shall be prohibited.
However, it shall be permitted if –
a. Not otherwise prohibited by law; and
b. When at least one of the following conditions
exists:
1. The data subject has given his or her
consent;
2. The processing is necessary and is
related to the fulfillment of a contract
with the data subject or in order to
take steps at the request of the data
subject prior to entering into a
contract;
3. The processing is necessary for
compliance with a legal obligation to
which the personal information
controller is subject;
4. The processing is necessary to
protect vitally important interests of
the data subject, including life and
health;
5. The processing is necessary in order
to respond to national emergency, to
comply with the requirements of
public order and safety, or to fulfill
functions of public authority which
necessarily includes the processing
of personal data for the fulfillment of
its mandate; or
6. The processing is necessary for the
purposes of the legitimate interests
pursued by the personal information
controller or by a third party or parties
to whom the data is disclosed.
Except: Where such interests are overridden by
fundamental rights and freedoms of the data
subject which require protection under the
Philippine Constitution. [Sec. 12]
c. Subcontracting
Personal information controller
Refers to a person or organization who controls
the collection, holding, processing or use of
personal information.
Including:
• A person or organization who instructs
another person or organization to collect,
hold, process, use, transfer or disclose
personal information on his or her behalf.
47
Excluding:
• A person or organization who performs
such functions as instructed by another
person or organization; and
• An individual who collects, holds,
processes or uses personal information
in connection with the individual’s
personal, family or household affairs.
[Sec. 3(h)]
Subcontracting
A personal information controller may
subcontract the processing of personal
information, provided, that the personal
information controller shall be responsible for
ensuring that proper safeguards are in place:
(1) To ensure the confidentiality of the personal
information processed;
(2) To prevent the use of the processed
personal information for unauthorized purposes;
and
(3) To comply with the requirements of this Act
and other laws for processing of personal
information. [Sec.14]
Privileged Communication
Personal information controllers may invoke the
principle of privileged communication over
privileged information that they lawfully control
or process.
Subject to existing laws and regulations, any
evidence gathered on privileged information is
inadmissible. [Sec.15]
4. RIGHTS OF THE DATA SUBJECT;
EXCEPTIONS/NON-APPLICABILITY
Data subject
An individual whose personal information is
processed. [Sec. 3(c)]
The data subject is entitled to:
a. Be informed
As to whether personal information pertaining to
him/her shall be, are being, or have been
processed;
b. Be furnished
With the following before the entry of his or her
personal information into the processing system
of the personal information controller, or at the
next practical opportunity:
1. Description of the personal information to
be entered into the system;
2. Purposes for which they are being or are
to be processed;
3. Scope and method of the personal
information processing;
4. The recipients or classes of recipients to
whom they are or may be disclosed;
5. Methods utilized for automated access, if
the same is allowed by the data subject,
and the extent to which such access is
authorized;
6. The identity and contact details of the
personal information controller or its
representative;
7. The period for which the information will
be stored; and
8. The existence of their rights, i.e., to
access, correction, as well as the right to
lodge a complaint before the
Commission.
General Rule: Any information supplied/
declaration made to the data subject on these
matters shall not be amended without prior
notification.
Exception: notification under (b) shall not apply
if the personal information is needed pursuant to
a subpoena or when the collection and
processing are for obvious purposes (e.g., when
it is necessary for the performance of or in
relation to a contract or service or when
necessary or desirable in the context of an
employer- employee relationship, between the
collector and the data subject) or when the
information is being collected and processed as
a result of legal obligation.
c. Reasonable access to the following, upon
demand:
1. Contents of his or her personal
information that were processed;
48
 2. Sources from which personal information
were obtained;
3. Names and addresses of recipients of
the personal information;
4. Manner by which such data were
processed;
5. Reasons for the disclosure of the
personal information to recipients;
6. Information on automated processes
where the data will or likely to be made
as the sole basis for any decision
significantly affecting or will affect the
data subject;
7. Date when his or her personal
information concerning the data subject
were last accessed and modified; and
8. The designation, or name or identity and
address of the personal information
controller;
d. Dispute the inaccuracy or error in the
personal information and have the personal
information controller correct it immediately and
accordingly.
Unless: the request is vexatious or
otherwise unreasonable.
Note: If the personal information have
been corrected, the personal information
controller shall ensure the accessibility of
both the new and the retracted
information and the simultaneous receipt
of the new and the retracted information
by recipients thereof.
Provided, That the third parties who have
previously received such processed
personal information shall he informed of
its inaccuracy and its rectification upon
reasonable request of the data subject.
e. Suspend, withdraw or order the blocking,
removal or destruction of his or her personal
information from the personal information
controller’s filing system
This is upon discovery and substantial proof that
the personal information are incomplete,
outdated, false, unlawfully obtained, used for
unauthorized purposes or are no longer
necessary for the purposes for which they were
collected. In this case, the personal information
controller may notify third parties who have
previously received such processed personal
information.
f. Be indemnified
For any damages sustained due to such
inaccurate, incomplete, outdated, false,
unlawfully obtained or unauthorized use of
personal information. [Sec. 16]
g. Transmissibility of Rights of the Data
Subject
The lawful heirs and assigns of the data subject
may invoke the rights of the data subject for
which he or she is an heir or assignee.
When they may invoke: (1) At any time after the
death of the data subject OR (2) when the data
subject is incapacitated or incapable of
exercising the above-enumerated rights. [Sec.
17]
h. Right to Data Portability
Where personal information is processed by
electronic means and in a structured and
commonly used format:
The data subject shall have the right to obtain
from the personal information controller a copy
of data undergoing processing in an electronic
or structured format, which is commonly used
and allows for further use by the data subject.
[Sec. 18]
Exception: These rights are not applicable if the
processed personal information are used/
gathered only:
a. For the needs of scientific and statistical
research and, on the basis of such, no activities
are carried out and no decisions are taken
regarding the data subject.
In such case, however, the personal
information shall be held under strict
confidentiality and shall be used only for
the declared purpose.
49
b. For the purpose of investigations in relation to
any criminal, administrative or tax liabilities of a
data subject. [Sec. 19]
Non-Applicability
The immediately preceding sections are not
applicable if:
(i) The processed personal information are used
only for the needs of scientific and statistical
research; and
(ii) On the basis of such, no activities are carried
out and no decisions are taken regarding the
data subject
Provided, That the personal information shall:
a. Be held under strict confidentiality
b. Be used only for the declared purpose.
Likewise, the immediately preceding sections
are not applicable to processing of personal
information gathered for the purpose of
investigations in relation to any criminal,
administrative or tax liabilities of a data subject.
[Sec. 19]
5. DUTIES AND RESPONSIBILITIES OF
PERSONAL INFORMATION CONTROLLER
(1) The personal information controller must
implement reasonable and appropriate
organizational, physical and technical measures
intended for the protection of personal
information against any accidental or unlawful
destruction, alteration and disclosure, as well as
against any other unlawful processing.
(2) The personal information controller shall
implement reasonable and appropriate
measures to protect personal information
against natural dangers such as accidental loss
or destruction, and human dangers such as
unlawful access, fraudulent misuse, unlawful
destruction, alteration and contamination.
(3) The personal information controller must
further ensure that third parties processing
personal information on its behalf shall
implement the security measures required by
this provision.
The determination of the appropriate levelof
security under this section must take into
account the nature of the personal information
to be protected, the risks represented by the
processing, the size of the organization and
complexity of its operations, current data privacy
best practices and the cost of security
implementation.
Subject to guidelines as the Commission may
issue from time to time, the measures
implemented must include:
• Safeguards to protect its computer
network against accidental, unlawful or
unauthorized usage or interference with
or hindering of their functioning or
availability;
• A security policy with respect to the
processing of personal information;
• A process for identifying and accessing
reasonably foreseeable vulnerabilities in
its computer networks, and for taking
preventive, corrective and mitigating
action against security incidents that can
lead to a security breach; and
• Regular monitoring for security breaches
and a process for taking preventive,
corrective and mitigating action against
security incidents that can lead to a
security breach.
(4) The personal information controller shall
promptly notify the Commission and affected
data subjects when sensitive personal
information or other information that may, under
the circumstances, be used to enable identity
fraud are reasonably believed to have been
acquired by an unauthorized person, and the
personal information controller or the
Commission believes that such unauthorized
acquisition is likely to give rise to a real risk of
serious harm to any affected data subject.
50
The employees, agents or representatives of a
personal information controller who are involved
in the processing of personal information shall
operate and hold personal information under
strict confidentiality if the personal information
are not intended for public disclosure. This
obligation shall continue even after leaving the
public service, transfer to another position or
upon termination of employment or contractual
relations. [Sec. 20]

51