EXECUTIVE COUNCIL

REA MAY G. HERMOSURA

Chairperson

JANINE NICOLE C. ORCENA TRISHA ALEXIS R. MAINGAT JAYNIE P. PAJARILLAGA

Vice Chairperson for Academics Secretary Creative Director

SHASHLEY R. BERNARDEZ LANIE GRACE S. LIM IRISH ANA A. SALINAS

Vice Chairperson for Administration Treasurer Volunteer Core Head

CRISTOBAL N. RABINO GRACE PEREZ-SONIDO TIMOTHY JAMES D. PACSON

Operations Head Auditor Ways and Means Officer

CIVIL LAW I & II (AND PRACTICAL EXERCISES) COMMISSION

Patricia Marie C. Alonzo Louie Aeron R. Cordova Gee Marie G. Galang

Commissioner Subject Head – Credit Transactions I and II Justinianne Joyce O. Guevarra
Ibli Bernadette L. Inductivo
Charity Magtibay Precious Claire F. Formarejo Gee Maurene G. Manguera
Deputy Commissioner 1 Subject Head – Torts and Damages Ethel Joi M. Mendoza
Anna Hyacinth E. Nicerio
Lorille J. Leones Joshua L. Custodio John Robert M. Ortega
Subject Head – Preliminary Title, and
Subject Head – Property Elaine L. Pajaron
Persons and Family Relations
Karen Joy T. Pamittan
Timothy James D. Pacson Sherrie Mieko M. Obmerga Maria Elena T. Pineda
Subject Head – Succession Subject Head – Land Titles and Deeds Kevin M. Quioge
Roi Earl J. Red
Albert John A. Ranoco Gille R. Abajar Ma. Crizena M. Remo
Subject Head – Obligations and Contracts Lycelle Mae A. Balaoing April Anne G. Roma
Ma. Bernadette A. Castillo Globertina U. Sarangay
Maureen N. Ramos Adrian Paulo M. Catalan Romalyn E. Servañez
Subject Head – Sales Loren Marciana B. Diwa Lalaine Michael A. Sombilon
Johnver X A. Espineda Members
Bianca Chia R. Castro Jane Eunice S. Gadin
Subject Head – Lease, Partnership, Agency Members

LEGAL ETHICS AND PRACTICAL EXERCISES COMMISSION

Donald Adrian M. Castillo Michael Renz Alambra

Commissioner Alyssa M. Aquino
Araceli Marie M. De Guzman
Nikka Mae B. Morales Gladys C. de Vera
Deputy Commissioner John Angelo M. Gabrillo
Shiela May Noceda
Ma. Dhelltria G. Garner Jona B. Pranes
Subject Head – Legal Ethics, Suspension, John Louie Pariñas
Disbarment and Discipline of Lawyers (Rule Joy Marie Sevilleno
139; Rule 139-B)
Lourdes Tuozo
Gina B. Quintal
Mikyla Janiene V. Cordero Members
Subject Head – Practical Exercises (Civil
Law and Criminal Law)
 CENTER FOR LEGAL EDUCATION AND RESEARCH
ATTY. RODERICK M. VILLOSTAS
Director

ATTY. ANTONY J. PARREÑO

ATTY. LESTER NAZARENE V. OPLE
ATTY. RICKSON M. BUENVIAJE
Research Fellows

BRANDO F. DE TORRES
MARICAR S. ASUNCION
Research Staff

PHILIPPINE COPYRIGHT

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ALL RIGHTS RESERVED © 2022

 TABLE OF CONTENTS

PART I

I. PRELIMINARY TITLE
A. Effect and application of laws ……………………………………………….. 1
B. Human Relations …………………………………………………………….. 9

II. PERSONS AND FAMILY RELATIONS

A. Persons ………………………………………………………………………. 11
B. Marriage ……………………………………………………………………... 22
C. Legal Separation …………………………………………………………….. 41
D. Rights and obligations between husband and wife ………………………….. 45
E. Property relations between husband and wife ……………………………….. 48
F. Family home ………………………………………………………………… 64
G. Paternity and filiation ………………………………………………………... 66
H. Adoption …………………………………………………………………….. 73
I. Support ………………………………………………………………………. 77
J. Parental authority ……………………………………………………………. 80
K. Emancipation ……………………………………………………………....... 83
L. Retroactivity of the Family Code ……………………………………………. 83

III. SUCCESSION

A. General provisions …………………………………………………………... 83

B. Testamentary succession …………………………………………………….. 86
C. Legal and intestate succession ……………………………………………….. 127
D. Provisions common to testate and intestate succession ……………………… 133

IV. OBLIGATIONS AND CONTRACTS

A. Obligations …………………………………………………………………... 140

B. Contracts …………………………………………………………………….. 144
B. Natural obligations …………………………………………………………... 263
C. Estoppel ……………………………………………………………………... 264
D. Trusts ………………………………………………………………………... 267
E. Quasi-Contracts ……………………………………………………………... 225

V. SALES

A. Nature and form ……………………………………………………………... 227

B. Capacity to buy or sell ………………………………………………………. 230
C. Effects of the contract when the thing sold has been lost …………………… 233
 D. Obligations of vendor ………………………………………………………... 234
E. Obligations of vendee ……………………………………………………….. 237
F. Breach of contract …………………………………………………………… 238
G. Extinguishment ……………………………………………………………… 244
H. Assignment of credits ………………………………………………………... 247

VI. LEASE

A. General provisions …………………………………………………………... 249

B. Rights and obligations of the lessor ………………………………………….. 251
C. Rights and obligations of the lessee …………………………………………. 252

VII. PARTNERSHIP

A. General provisions …………………………………………………………... 254

B. Obligations of the partners …………………………………………………... 264
C. Dissolution and winding up ………………………………………………….. 273
D. Limited partnership ………………………………………………………….. 277

VIII. AGENCY

A. Nature, form, and kinds ……………………………………………………… 281

B. Obligations of the agent ……………………………………………………... 285
C. Obligations of the principal ………………………………………………….. 289
D. Modes of extinguishment ……………………………………………………. 291

IX. CREDIT TRANSACTIONS

A. Loan …………………………………………………………………………. 293

B. Deposit ………………………………………………………………………. 303
C. Guaranty and Suretyship ……………………………………………………. 309
D. Quasi-Contracts ……………………………………………………………...

X. TORTS AND DAMAGES

A. Torts …………………………………………………………………………. 324

B. Proximate cause ……………………………………………………………... 330
C. Negligence …………………………………………………………………... 330
D. Damages …………………………………………………………………….. 332
 PART II

I. PROPERTY

A. Classification of property ……………………………………………………. 342

B. Ownership …………………………………………………………………… 348
C. Co-ownership ………………………………………………………………... 361
D. Possession …………………………………………………………………… 368
E. Usufruct ……………………………………….…………………………….. 372
F. Easements …………………………………………………………………… 376
G. Nuisance …………………………………………………………………….. 386
H. Modes of acquiring ownership ……………………………………………… 390
I. Quieting of Title ……………………………………………………………... 401
J. Actions to Recover Property ………………………………………………… 402

II. CREDIT TRANSACTIONS

A. Antichresis …………………………………………………………………... 403

B. Pledge ……………………………………………………………………….. 405
C. Real Estate Mortgage ………………………………………………………... 421
D. Chattel Mortgage ……………………………………………………………. 428

III. LAND TITLES AND DEEDS

A. Torrens System; general principles ………………………………………….. 428

B. Regalian Doctrine …………………………………………………………… 432
C. Original Registration ………………………………………………………… 433
D. Certificate of title ……………………………………………………………. 436
E. Subsequent registration ……………………………………………………… 437
F. Non-registrable properties …………………………………………………... 444
G. Dealings with unregistered land ……………………………………………... 446
H. Assurance Fund ……………………………………………………………… 448
I. Cadastral System of Registration (Act No. 2259, as amended) ……………… 449
J. Registration through Administrative Proceedings (C.A. 141, as amended) … 451
K. Reconstitution of Titles ……………………………………………………… 453

IV. PRACTICAL EXERCISES

A. Demand and authorization letters ……………………………………………. 455

B. Simple contracts ……………………………………………………………... 458
C. Complaints …………………………………………………………………... 462
 PART I
I. PRELIMINARY TITLE
A. EFFECT AND APPLICATION OF LAWS
The New Civil Code (NCC) took effect on August
30, 1950.
When Laws Take Effect (Art. 2, NCC)
Three possible scenarios:
1. If the law is silent as to its date of
effectivity. It takes effect after fifteen
(15) days following the completion of its
publication in the Official Gazette or in a
newspaper of general circulation (Art. 2, as
amended by E.O. No. 200).
2. If the law provides for its own date of
effectivity. It takes effect on such date,
provided there is publication. Publication is
indispensable (Tañada vs. Tuvera, G.R. No.
L-63915, April 24, 1985).
3. If the law provides that it shall take
effect immediately upon its approval. It
takes effect immediately after its publication.
There is nothing in E.O. No. 200 that
prevents a law from taking effect on a date
other than – even before – the 15-day period
after its publication. Where a law provides
for its own date of effectivity, such date
prevails over that prescribed by E.O. No. 200
(La Bugal-B’laan Tribal Association, Inc. vs.
Ramos, G.R. No. 127882, January 27, 2004).
 "Unless it is otherwise provided" refers to
the date of effectivity and not to the
requirement of publication itself, which cannot
in any event be omitted. This clause does not
mean that the legislature may make the law
effective immediately upon approval, or on
any other date, without its previous
publication (Tañada vs. Tuvera, G.R. No. L-
63915, April 24, 1985).
Publication
Publication is indispensable in every case, but the
legislature may in its discretion provide that the
usual fifteen-day period shall be shortened or
extended (Tañada v. Tuvera, G.R. No. L-63915,
April 24, 1985).
 Complete publication is required.
Otherwise, it is considered as no publication
at all (Tañada v. Tuvera, G.R. No. L-63915,
April 24, 1985).
Where to publish
1. Official Gazette (Art. 2, NCC); or
2. Newspaper of general circulation (E.O.
No. 200)
 To be a newspaper of general
circulation, it is enough that it is
published for the dissemination of
local news and general information,
that it has a bona fide subscription list
of paying subscribers, and that it is
published at regular intervals (Fortune
Motors Phils. Inc. vs. Metropolitan
Bank and Trust Company, G.R. No.
115068, November 28, 1996).
 Administrative Issuances:
Publication with the Office of the
National Administration Register
(ONAR) is also required for its
effectivity (Sec. 3, Chapter 2, Book
VII, Administrative Code of 1987).
 Strict compliance with the
requirements of publication cannot be
annulled by a mere allegation that
parties were notified of the existence
of the implementing rules concerned
(Republic vs. Filipinas Shell, G.R. No.
173918, April 8, 2008).
When Publication is Required
1. Presidential Decrees;
2. Administrative Rules and Regulations, if their
purpose is to enforce or implement existing
laws pursuant to a valid delegation;
3. Laws or statutes, including local and private
laws;
4. Executive Orders;
5. City Charter;
6. Circulars issued by the Monetary Board
where purpose is not merely to interpret but
to fill in the details of the Central Bank Act;
and
1
7. Circulars and Regulations prescribing penalty When some facts Occurs when a person
for its violation. (Rabuya, The Law on Persons which really exist are having full knowledge of
and Family Relations, 2017 Ed, p. 9-10) unknown or some the facts come to an
fact is supposed to erroneous conclusion as
 Before the public is bound by its contents, exist which really to its legal effects
especially its penal provisions, a law, does not exist.
regulation or circular must first be published Good faith is an Not excusable, even if in
and the people must be officially and excuse good faith
specifically informed of said contents and its
penalties (People vs. Que Po Lay, G.R. No. L- b. As to Foreign Laws
6791, March 29, 1954).
There is no conclusive presumption of knowledge
When Publication is NOT Required of foreign laws.

1. Interpretative regulations and those merely Doctrine of processual presumption

internal in nature regulating only the
personnel of the administrative agency and
not the public; and
2. Letters of instructions issued by
administrative superiors concerning the rules
or guidelines to be followed by their
subordinates in the performance of their
duties. (De Jesus vs. COA, G.R. No. 109023,
August 12, 1998).
 Administrative rules and regulations must be
published if their purpose is to enforce or
implement existing laws pursuant to a valid
delegation.
Ignorance of the Law (Art. 3, NCC)
Ignorance of the law excuses no one from
compliance therewith.
Presumption of Knowledge of Laws
a. As to Domestic Laws
GR: Everyone is conclusively presumed to know
the law but only as to internal or domestic laws.
It is also known as the Doctrine of Presumed-
Identity approach. If the foreign law is not
properly pleaded and proved, it is presumed to
be the same with the local or domestic laws.
 The possessor’s mistake in the application or
interpretation of a difficult or doubtful
provision of law may be the basis of good
faith. This pertains to excusable error arising
from complex legal principles and from the
interpretation of conflicting or doubtful
doctrines. (Art. 526, NCC)
 Payment by reason of mistake in the
construction or application of a doubtful or
difficult question of law may give rise to an
obligation to return what has been unduly
received (Art. 2155, in relation to Art. 2154
NCC).
Retroactivity of Laws (Art. 4, NCC)
GR:
Laws shall have no retroactive effect.

XPN: Ignorantia facti excusat. Ignorance or XPNs:

mistake in point of fact is a sufficient excuse (U.S.
vs. Ah Chong, G.R. No. L-5272, March 19, 1910). a. Curative statutes;
b. Remedial statutes;
MISTAKE OF FACT MISTAKE OF LAW c. Expressly provided by the law;
Want of knowledge Want of knowledge or d. Laws creating new substantive rights;
of some facts acquaintance with the e. Emergency laws;
constituting or laws of the land insofar as f. Tax laws when expressly declared so;
relating to the they apply to the act, g. Interpretative statutes; and
subject matter in relation, duty, or matter h. Penal laws favorable to the accused who is
hand. under consideration. not a recidivist or a habitual delinquent

2
 (Rabuya, The Law on Persons and Family
Relations, 2006 Ed, p. 13).
XPNs to retroactivity of laws when the
expressly provides:
1. The retroactivity of the penal law will make
it an ex post facto law; and
2. When the retroactivity of the law will result
in the impairment of obligation of contracts
(Rabuya, The Law on Persons and Family
Relations, 2006 Ed, p. 13).
Mandatory or Prohibitory Laws (Art. 5,
NCC)
GR: Acts executed against mandatory or
prohibitory laws are void.
XPNs:
1. When the law itself authorizes its validity
although generally, it would have been void;
2. When the law authorizes it, recognizes legal
effect;
3. When the law only makes the act voidable
and not void; or
4. When the law makes the act valid but
punishes the violator (Rabuya, supra, p. 17-
18).
Waiver of Rights (Art. 6, NCC)
Rights may be waived, unless the waiver is
contrary to law, public order, public policy,
morals, or good customs, or prejudicial to a third
person with a right recognized by law.
Waiver – the intentional or voluntary
relinquishment of a known right, or such conduct
as warrants an inference of the relinquishment of
such right. (Christenson vs. Carleton, 69 Vt. 91)
Thus, a waiver may be express or implied (Black’s
Law Dictionary, pp. 1827-1828)
GR: Rights may be waived.
XPNs:
1. When waiver is contrary to law, public
morals, public policy and good customs;
2. When waiver is prejudicial to a third person
in a right recognized by law;
3. Waiver of inchoate rights (e.g., future
inheritance);
4. When it is a natural right (e.g., right to
support); or
5. When there is a particular formality required
by law. (Art. 6, NCC)
Note: Art. 6 deals with the waiver of rights, not
the waiver of obligations or duties. Waiver of
obligations or duties would be possible only if the
person being possessed of certain rights, and
resultant obligations or duties waives the said
rights; or if the law itself authorizes such waiver
[e.g., if a person who has a right renounces the
same, in a sense, he is exempting himself from
the obligations that may have ensued from the
exercise of the right.]
What is a right?
It is the power or privilege given to one person
and as a rule demandable of another (Black’s Law
Dictionary, p. 1158), as the right to recover a
debt justly due. In still another sense, a right
denotes an interest or title in an object or
property. (Black’s Law Dictionary, p. 1558).
Generally, rights involve two subjects: the active
subject (the person entitled) and the passive
subject (the person obliged to suffer the
enforcement of the right).
Kinds of Right
1. Real rights (jus in re, jus in rem) – enforceable
against the whole world (absolute rights);
2. Personal rights (jus in personam, jus ad rem)
– enforceable against a particular individual
(relative rights) (Rabuya, The Law on Persons
and Family Relations, 2017 Ed, p. 20)
Requisites for a Valid Waiver
1. The person waiving must be capacitated to
make the waiver. (Hence, a waiver by a
minor or by an insane person is voidable.)
2. The waiver must be made clearly, but not
necessarily expressed.
3. The person waiving must actually have the
right which he is renouncing; otherwise, he
will not be renouncing anything. (Rabuya,
The Law on Persons and Family Relations,
2017 Ed, p. 21)
4. In certain instances, the waiver, as in the
express remission of a debt owed in favour
3
 of the waiver, must comply with the
formalities of a donation. (Art. 1270, NCC)
5. The waiver must not be contrary to law,
morals, public policy (the aim of the State in
promoting the social welfare of the people),
public order (or public safety) or good
customs (those which exist in a particular
place). (Sanico vs. Colipano, 841 SCRA 141)
6. The waiver must not prejudice others with a
right recognized by law. (Art. 6, NCC)
Rights that CANNOT be Renounced
a. Natural rights such as the right to life
Therefore, if a person requests another to kill
him, the killer would still be criminally liable. (Art.
253, Revised Penal Code) As a matter of fact,
even if a person is not the killer himself, if a
person assists another in the latter’s suicide, the
helper is penalized by the penalty of prision
mayor. (Ibid.) The right to be supported (present
or future support) cannot be renounced, for
support is vital to the life of the recipient (De Asis
vs. CA, G.R. No. 127578, February 17, 1999)
b. Alleged rights which really do not yet
exist
Future inheritance cannot be renounced since no
right is vested till the death of the decedent.
(Art.1347, NCC)
c. Those the renunciation of which would
infringe upon public policy
 A waiver of the legal right to repurchase a
homestead that had been sold if the waiver
is made in advance. This is so, otherwise the
benevolent intent of the State to give the
homesteader all chances to preserve for
himself and his family the land that the State
has rewarded him which would be rendered
useless. (Barcelon vs. Arambulo, et al., C.A.,
G.R. No. L-48610, March 31, 1987)
 A tenant is not allowed to waive his right to
the exemption provided by the Rice Tenancy
Act from lien and attachment of 25% of his
share in the land products because such a
waiver would be equivalent to a waiver of
the tenant’s right to live. Thus, a sheriff’s
levy on said properties, and the subsequent
sale thereof, should be considered unlawful.
4
(Maniego vs. Castelo, G.R. No. L-9855, April
29, 1957)
 A stipulation requiring the recipient of a
scholarship grant to waive (before receiving
said award) his right to transfer to another
school, unless he refunds the equivalent of
his scholarship in cash, is null and void. The
school concerned obviously understands
scholarship awards as a business scheme
designed to increase the business potential
of an educational institutions. Thus,
conceived it is not only inconsistent with
sound policy, but also with good morals. (Cui
vs. Arellano University, G.R. No. L-15127,
May 30, 1961)
d. When the waiver is prejudicial to a
third person with a right recognized by
law
 While an heir may renounce present
inheritance (i.e., inheritance that has
already accrued by virtue of the decedent’s
death), still if the waiver will prejudice
existing creditors, the latter can accept the
inheritance in the name of the heir, but
only to the extent sufficient to cover the
amount of their credits. (Art. 1052, NCC)
Rights that MAY BE Renounced
1. Support in arrears – for evidently this is no
longer needed for subsistence. (Art. 301,
NCC)
2. The right to object to testimony of a wife on
information obtained because of her
domestic relations with her husband, is
waived when a husband accused of killing
his son, does not only deny his guilt, but also
points to the wife as the killer. (People v.
Francisco, G.R. No. L-568, July 16, 1947). In
a prosecution for rape against his own child,
a husband cannot object to the testimony
given by his wife against him, for in effect
this may be considered an offense
committed by a husband against his wife.
3. The right of the accused to be aided by
counsel may also be waived, provided, the
judge informs said accused of his right. (U.S.
vs. Escalante, G.R. No. 12442, August 10,
1917)
4. The venue of actions (the place where the
action should be brought may be waived,
but not the court’s jurisdiction. (Central
 Azucarera vs. De Leon and Fernando, G.R.
No. L-58287, August 19, 1982)
5. An individual who accepts the office of an
executor or administrator may waive
compensation therefor. (Sison vs. Teodoro,
L-9721, March 29, 1957)
Repeal of Laws (Art. 7, NCC)
Manner of repealing a law:
1. Express repeal – When the statute’s
repealing clause specifically designates the
law to be repealed.
 When a law which expressly repeals a
prior law is itself repealed, the law first
repealed shall not be revived unless
expressly so provided.
2. Implied repeal – The provision of the
subsequent law is incompatible with the
previous law.
Requisites:
a. Both laws cover the same subject; and
b. The latter is repugnant to the earlier law.
 When a law which repeals a prior law, not
expressly but by implication, is itself
repealed, the repeal of the repealing law
revives the prior law, unless the language of
the repealing statute provides otherwise
(U.S. vs. Soliman, G.R. No. L-11555, January
6, 1917).
Repeal of a repealing law
Express No revival of prior law
Implied Revival of prior law
Rules for general and special laws
In case of conflict between a general law and a
special law:
1. If the general law was enacted prior to the
special law, the latter is considered the XPN
to the general law. The general law remains
a good law and there is no repeal.
2. If general law was enacted after the special
law, the special law remains, unless:
a. There is an express declaration to the
contrary;
b. There is a clear, necessary and
irreconcilable conflict; or
c. Subsequent general law covers the whole
subject and is clearly intended to replace
the special law on the matter (Rabuya,
The Law on Persons and Family
Relations, 2006 Ed, p. 24).
Principle of Constitutional Supremacy
When the courts declare a law to be inconsistent
with the Constitution, the former shall be void
and the latter shall govern. The Constitution is the
supreme law of the land. (Art. 7, NCC)
Doctrine of Operative Fact
It recognizes the existence of the law or executive
act prior to the determination of its
unconstitutionality as an operative fact that
produced consequences that cannot always be
erased, ignored or disregarded. In short, it
nullifies the void law or executive act but sustains
its effects (Yap vs. Thenamaris Ship’s
Management, G.R. No. 179532, May 30, 2011).
Effect of Doubt in Interpretation or
Application of Laws
1. In case of doubt, it must be presumed that
the lawmaking body intended right and
justice to prevail (Art. 10, NCC).
2. If the law is clear, it is the duty of the judge
to apply the law even if the application of the
law may seem to be harsh.(Rabuya, The Law
on Persons and Family Relations, 2017 Ed, p.
36).
3. Resort to equity – It is applied only in the
absence of, and never against, statutory law
or judicial rules of procedure (Rabuya, supra,
Ed, p. 12).
Judicial Decisions (Art. 8, NCC)
Effect of Judicial Decisions:
1. Form part of the legal system;
2. Retroactively applied
XPN: Prospective application when a
doctrine of the Supreme Court overruled and
a different view is adopted. (People vs.
5
 Jabinal, G.R. No. L-30061 February 27,
1974); and
3. Doctrine of Stare Decisis
Conflict of Laws
Conflict of Laws, also called Private
International Law, is that part of the municipal
laws of a state which directs its courts and
administrative agencies, when confronted with a
legal problem involving a foreign element,
whether or not they should apply a foreign law or
foreign laws (Paras, Philippine Conflict of Laws,
1996, p. 2).
Elements of Conflict of Laws:
a. Legal problem or case involving a foreign
element; and
Foreign element – refers to the factual
situation cutting across territorial lines,
affected by diverse laws of two or more
states. The presence of foreign elements in
a case determines the existence of a conflict
of laws. Where there is no foreign element,
no conflict of laws exists (Agpalo, Conflict of
Laws, 2004, p. 12).
b. Determination of whether the law or
judgments of other state/s will govern, and if
so, the extent of its recognition/application in
the forum (Coquia & Aguiling-Pangalangan,
Conflict of Laws: Cases Materials and
Comments, 2000, p. 57).
Rules or Principles Governing Conflict of
Laws:
1. Territoriality of penal laws;
2. Nationality Principle
3. Lex Rei Sitae
4. Lex Loci Celebrationis
5. Other Rules or Principles Governing Conflict of
Laws.
1. Territoriality of penal laws
GR: Penal laws and those of public security and
safety shall be obligatory upon all who live or
sojourn in the Philippines (Art. 14, NCC).
XPNs:
a. Treaty stipulations; except:
6
1. When the offense is committed by a
foreign sovereign while in Philippine
territory;
2. When the offense is committed by
diplomatic representatives;
3. When the offense is committed in a
public or armed vessel of a foreign
country.
b. Laws of preferential application; and
c. Principles of public international law (Rabuya,
The Law on Persons and Family Relations,
2006 Ed, p. 35).
2. Nationality Principle (Status Laws)
Laws relating to the following are binding upon
citizens of the Philippines, even though living
abroad (Art. 15, NCC):
a. Family rights and duties;
b. Status;
c. Condition; and
d. Legal capacity of persons.
Note: In case of stateless individuals, the
following shall be applicable:
 The personal law shall be the domicile of the
stateless person; or,
 Secondarily the place of temporary residence
(Paras, Conflict of Laws, 1996 Ed, p. 110)
Application of rule to absolute divorce
GR: Philippine law does not recognize absolute
divorce between Filipino citizens (Garcia vs.
Recio, G.R. No. 138322, October 2, 2001).
XPN: Principle of Reciprocity
Where a marriage between a Filipino citizen and
a foreigner is validly celebrated and a divorce is
thereafter validly obtained abroad by the alien
spouse capacitating him or her to remarry, the
Filipino spouse shall likewise have capacity to
remarry under Philippine law (Corpuz vs. Sto.
Tomas, G.R. No. 186571, August 11, 2010; Art.
26, FC).
Reckoning point in Determining Citizenship
in a Recognized Divorce in the Philippines
The reckoning point is the citizenship at the time
a valid divorce is obtained, and not the citizenship
at the time of marriage (Republic v. Orbecido III,
G.R. No. 154380, October 5, 2005).
3. Lex Rei Sitae (Immovable Property
laws)
GR: Real property as well as personal property is
subject to the law of the country where it is
situated (Art. 16 [1], NCC). This comprises all
aspects including formalities (Orayon Savings
Bank vs. Suzuki, G.R. No. 205487, November 12,
2014).
XPNs: National law of the decedent whose
succession is under consideration will govern with
respect to the following aspects of succession,
whether testate or intestate:
a. Order of succession;
b. Amount of successional rights;
c. Intrinsic validity of testamentary provisions;
and
d. Legal capacity to succeed (Art. 16, NCC).
4. Lex Loci Celebrationis (Laws on Forms
and Solemnities)
GR: The forms and solemnities of contracts, wills,
and other public instruments shall be governed
by the laws of the country in which they are
executed (Art. 17, NCC).
When a Filipino is in a foreign country, he is
authorized to make a will in any of the forms
established by the law of such country in which
he may be (Art. 815, NCC).
XPNs:
a. Marriages involving Filipinos
solemnized abroad when such
marriages are void in the Philippines,
such as:
1. Marriages contracted by minors, even
with the consent of parents or guardian
(Art. 35 [1], FC);
2. Bigamous or polygamous marriages not
falling under Art. 41, FC (Art. 35 [4], FC);
3. Marriages contracted through mistake of
identity of the other contracting party
(Art. 35 [5], FC);
4. Non-compliance of recording
requirements with appropriate civil
registry and registries of properties
concerning the judgment of annulment
or of absolute nullity of marriage, the
partition and distribution of properties of
spouses, and the delivery of the
presumptive legitimes of children (Art. 35
[6], FC);
5. Void marriages by reason of
psychological incapacity of a party to
comply with the essential marital
obligations of marriage (Art. 36, FC);
6. Incestuous marriages (Art. 37, FC); and
7. Void marriages for reasons of public
policy (Art. 38, FC).
b. Rule of Extra-territoriality - When the
acts referred to are executed before the
diplomatic or consular officials of the Republic
of the Philippines in a foreign country, the
solemnities established by Philippine laws
shall be observed in their execution (Art. 17
[2], NCC).
c. Rule on Prohibitive Laws - Prohibitive
laws concerning persons, their acts or
property, and those which have for their
object public order, public policy or good
customs shall not be rendered ineffective by
laws or judgments promulgated, or by
determinations or conventions agreed upon
in a foreign country (Art. 17[3], NCC).
 Under the rule of lex loci celebrationis, a
contract executed in a foreign country is
considered valid as long as it is valid in
accordance with the law of the place where
it was celebrated. However, if such contract
is prohibited under Philippine laws like those
provided under Art. 26 par. [1] of E.O. 207,
then such contract is not valid.
5. Other Principles or Doctrines on Conflict
of Laws
a. Jurisdiction
Principle of Forum Non Conveniens - This
refers to the court’s discretionary power to
decline the exercise of its jurisdiction where
7
another court may more conveniently hear a
case. Accordingly, under this doctrine, a court, in
conflict of laws cases, may refuse impositions on
its jurisdiction where it is not the most convenient
or available forum and the parties are not
precluded from seeking redress elsewhere (Bank
of America vs. CA, G.R. No. 120135, March 31,
2003).
b. Personal Law
Different Theories on Personal Law:
i. Nationality Theory or Personal
Theory (Lex Nationalii) – the status
and capacity of a person is determined
by the law of his nationality or national
law. This theory is followed in the
Philippines.
ii. Domiciliary Theory or Territorial
Theory (Lex Domicilii) – the status
and capacity of a person is determined
by the law of his domicile.
iii. Situs or Eclectic Theory – the
particular place or situs of an event or
transaction is generally the controlling
law (Paras, Conflict of Laws, 1996, p.
102).
c. Doctrine of Renvoi
Renvoi - literally means “to refer back”. Renvoi
takes place when the conflicts rule of the forum
makes a reference to a foreign law, but the
foreign law is found to contain a conflict rule that
returns or refers the matter back to the law of the
forum (Remission) (Paras, Conflict of Laws, 1996,
p. 211).
Double Renvoi – occurs when the local court, in
adopting the foreign court theory, discovers that
the foreign court accepts the renvoi (Paras,
supra, p. 214).
Transmission Theory – provides that when the
conflicts rule of the forum makes a reference to a
foreign law, but the foreign law is found to
contain a conflict rule that refers it to a third
country, the law of the third country shall
apply. It is the process of applying the law of a
foreign state (third state) thru the law of a second
foreign state (Paras, Conflict of Laws, 1996, p.
215)
8
d. Doctrine of Lex Fori (Law of the
Forum)
It applies whenever the content of the otherwise
applicable foreign law is excluded from
application in a given case for the reason that it
falls under one of the XPNs to the applications of
foreign law (Saudi Arabian Airlines vs. Court of
Appeals, G.R. No. 122191, October 8, 1998).
e. Doctrine of Processual Presumption
(Presumed-Identity Approach)
When a foreign law is not pleaded or, even if
pleaded, is not proved, the presumption is that
the foreign law is the same as ours. In our
jurisdiction, courts do not take judicial notice of
foreign laws (Philippine National Construction
Corporation vs. Asiavest, G.R. No. 172301,
August 19, 2015).
f. Torts
GR: Lex Loci Delicti Commissi or law of the place
where the tort was committed will govern. Under
this, the court applies the substantive laws of the
state where the last event necessary to make an
actor liable for the alleged wrong takes place
(Shaw vs. LDC Enterprises, 863 N.E. 2d 424,
March 30, 2007).
XPNs: When the place of the tort is an
insignificant contact, the factors that must be
evaluated are:
1. The place where the conduct causing the
injury occurred;
2. The residence or place of business of the
parties; and
3. The place where the relationship is centered
(Melton vs. Stephens, 13 N.E. 3d 533, July
22, 2014).
Kilberg Doctrine – Where a wrongful death
occurred in A state and the action for damages is
brought in B state, B is not bound by A’s laws on
any limitation of liability arising from the death
where the set limitations on damages are
procedural. The law of the forum (B) should be
applied (Kilberg vs. Northeast Airlines, Inc., 9
N.Y. 2d 34, 211 N.Y.S. 2d, 133, 172 N.E. 2d 526).

B. HUMAN RELATIONS
PRINCIPLE OF ABUSE OF RIGHTS
Every person must, in the exercise of his rights
and in the performance of his duties, act with
justice, give everyone his due, and observe
honesty and good faith (Art. 19, NCC).
Elements of abuse of rights
a. There is a legal right or duty;
b. It is exercised in bad faith; and
c. For the sole intent of prejudicing or injuring
another (Albenson Enterprises Corp. vs. CA,
G.R. No. 88694, January 11, 1993).
DAMNUM ABSQUE INJURIA (DAMAGE
WITHOUT INJURY)
A person who only exercises his legal rights does
no injury.
GR: In the exercise of one’s right, there is no
actionable injury, and no one can be held liable
for damages (Amonoy vs. Gutierrez, G.R. No.
140420, February 15, 2001).
XPNs:
1. Abuse of rights; and
2. When the exercise of a right is suspended
or extinguished pursuant to a court order
(Amonoy vs. Gutierrez, G.R. No.
140420, February 15, 2001).
DOCTRINE OF VOLENTI NON FIT INJURIA
(To which a person assents is not esteemed
in law as injury)
It refers to self–inflicted injury or to the consent
to the injury which precludes recovery of
damages by one who has knowingly or voluntarily
exposed himself to danger, even if he is not
negligent in doing so (Nikko Hotel Manila Garden
vs. Roberto Reyes, G.R. No. 154259, February 28,
2005).
WILLFUL AND NEGLIGENT ACTS
Anyone who, contrary to law, willfully or
negligently causes damage to another, shall
indemnify the latter for damages (Art. 20, NCC).
ACTS CONTRA BONOS MORES (Acts
contrary to good morals)
Any person who willfully causes loss or injury to
another in a manner that is contrary to morals,
good customs or public policy shall compensate
the latter for the damage (Art. 21, NCC).
Elements of Acts Contra Bonus Mores:
1. An act which is legal;
2. But the act is contrary to morals, good
customs, public order, or public policy; and
3. It is done with intent to injure (Rabuya, The
Law on Persons and Family Relations, 2006,
p. 55).
 Articles 19, 20, and 21 are related to each
other. Under these articles, an act which
causes an injury to another may be made the
basis for an award for damages (Rabuya,
supra, p. 55).
 While under Articles 19 and 21, the act must
be done intentionally, Article 20 does not
distinguish the act, and may either be willful
or negligent. However, the act must be
contrary to law (Albenson Enterprise
Corporation vs. Court of Appeals, supra.).
BREACH OF PROMISE TO MARRY.
Breach of promise to marry per se is not an
actionable wrong. To be actionable, there must
be some act independent of the cause of the
breach, such as:
a. Fraud or deceit (Gashem Shookat Baksh vs.
CA, 1993, G.R. No. 97336, February 19,
1993);
b. Forcible abduction and rape (Buñag, Jr. v.CA,
G.R. No. 101749, July 10, 1992);
c. Actual expenses are actually incurred in
preparation for the wedding and the
necessary incidents thereof (Wassmer vs.
Velez, G.R. No. L-20089, December 26,
1964).
 Mere breach of promise to marry is not an
actionable wrong. But to formally set a
wedding and go through all the above-
described preparation and publicity, only to
walk out of it when the matrimony is about
to be solemnized, is quite different. This is
9
 palpably and unjustifiably contrary to good
customs for which defendant must be held
answerable in damages in accordance with
Article 21. (Wassmer vs. Velez, G.R. No. L-
20089, December 26, 1964)
PRINCIPLE OF UNJUST ENRICHMENT
It exists when a person unjustly retains a benefit
to the loss of another, or when a person retains
money or property of another against the
fundamental principles of justice, equity or good
conscience. (Rabuya, The Law on Persons and
Family Relations, 2017 Ed, p. 80).
ACCION IN REM VERSO
It is an action for unjust enrichment. If a person
acquires or comes into possession of something
at the expense of another without just or legal
ground has the obligation to return the same (Art.
22, NCC).
Requisites:
1. Defendant has been enriched;
2. Plaintiff suffered a loss;
3. Enrichment of defendant is without just or
legal ground; and
4. Plaintiff has no other action based on
contract, quasi contract, crime, or quasi-
delict (LBP vs. Ong, G.R. No. 190755,
November 24, 2010).
 This is applicable only if someone acquires or
comes into possession of something (by
delivery or acquisition).
ACCION IN REM VERSO vis-à-vis SOLUTIO
INDEBITI.
ACCION IN REM SOLUTIO INDEBITI
VERSO
1.Plaintiff has suffered a loss
2.Defendant has been enriched
3.Enrichment is without just or legal ground
4.Defendant has the obligation to return what
was unduly delivered or paid to him
5.Objective is to prevent unjust enrichment
Distinctions:
Source of Obligation
Source of obligation is Source of obligation is
quasi-contract law
10
Reason for delivery or payment
The delivery or The delivery or
payment is not by payment is by reason
reason of mistake of of mistake of fact or
fact or mistake in the mistake in the
application of a application of a
doubtful or difficult doubtful or difficult
provision of law provision of law
Applicability of Penal Laws
Delict as Source of Civil Liability
Delict or crime is one of the sources of obligation.
The GR is that every person criminally liable is
also civilly liable (Art. 100, RPC).
Effect of Acquittal of the Accused
GR: The extinction of the penal action does not
carry with it extinction of the civil action (Sec. 2
[4], Rule 111, ROC).
XPN: When there is a finding in a judgement in
the criminal action that the act or omission from
which the civil liability arises did not exist (Ibid.).
Acquittal based on Reasonable Doubt
The judgement of acquittal extinguishes the
liability of the accused for damages only when it
includes a declaration that the facts from which
the civil liability might arise did not exist (Rabuya,
The Law on Persons and Family Relations, 2006,
p. 82).
Independent Civil Action, (Art. 29, NCC)
Art. 29 automatically reserves for the private
offended party the right to institute an
independent civil action for damages based on
the same act or omission and prove it by
preponderance of evidence despite the fact that
the accused was not held to be criminally liable
and that the injured party previously opted to
recover his damages ex delicto under Art. 100 of
the ROC (Rabuya, The Law on Persons and
Family Relations, 2006, p. 86).
Rule of Implied Institution
GR: When a criminal action is instituted, the civil
action for the recovery of civil action for the
recovery of civil action arising from the offense
charged shall be instituted with the criminal
action (Sec. 1, Rule 111, ROC).
XPNs:
1. The offended party waives the civil action
2. Reserves the right to institute it separately;
and
3. The civil action was instituted prior to the
criminal action (Ibid.).
When Civil Action is Reserved:
a. The reservation of the right to institute
separately the civil action shall be made prior
to the prosecution’s presentation of evidence
and under circumstances affording the
offended party a reasonable opportunity to
make such reservation (Sec. 1, Rule 111,
ROC).
b. The separate civil action cannot be instituted
until final judgement of the criminal action
has been entered (Ibid.).
When Civil Action is Instituted Prior to
Criminal Action
The civil action shall be suspended in whatever
stage it may be found before judgement on the
merits. Such suspension shall last until final
judgement is rendered on the criminal action.
(Sec. 2, Rule 111, ROC).
Independent Civil Action
Independent civil action proceeds independently
of the criminal action and shall require only a
preponderance of evidence. In no case, however,
may the offended party recover damages twice
for the same act or omission charged in the
criminal action (Sec. 3, Rule 111, ROC).
This is allowed for cases provided in Art. 32, 33,
34 and 2176 of the New Civil Code, in which case,
preponderance of evidence shall suffice:
1. Civil Damages for Violation of Constitutional
Liberties (Art. 32, NCC);
2. In cases of defamation, fraud, and physical
injuries (Art. 33, NCC);
3. When a member of a city or municipal police
force refuses or fails to render aid or
protection to any person in case of danger to
life or property (Art. 34, NCC);
4. In cases of quasi-delict (Art. 2176, NCC).
Prejudicial Questions (ART. 36, NCC)
Prejudicial questions, which must be decided
before any criminal prosecution may be instituted
or may proceed, shall be governed by the Rules
of Court which the Supreme Court shall
promulgate and which shall not be in conflict with
the provisions of this Code (Art. 36, NCC).
Elements of Prejudicial Question:
1. The previously instituted civil action involves
an issue similarly or intimately related to the
issue raised in the subsequent criminal
action;
2. The resolution of such issue determines
whether or not the criminal action may
proceed (Sec. 7, Rule 111, ROC).
Note: It is the issue in the civil action that is
prejudicial to the continuation of the criminal
action and not vice versa (Rabuya, Persons and
Family Relations, 2006 Ed, p. 98).
II. PERSONS AND FAMILY RELATIONS
A. PERSONS
1. CIVIL PERSONALITY
Capacity is synonymous with personality (I
Caguioa, Civil Code, 1967 Ed., p. 74). Juridical
capacity is the fitness to be the subject of legal
relations, while capacity to act is the power to do
acts with legal effect (Art. 37, NCC). The union of
both juridical capacity and capacity to act
constitutes full civil capacity (2 Sanchez Roman,
112-114).
The external manifestation of either juridical
capacity or capacity to act. It is the aptitude of
being the subject of rights and obligations ( 2
Sanchez Roman 114-147).
A person is any being, natural or artificial,
capable of possessing legal rights and obligations
(2 Sanchez Roman 110).
11
KINDS OF PERSONS
A. Natural Persons are those human beings
created by God through the intervention of the
parents; and
B. Juridical persons are those created by law
(2 Sanchez Roman 112-114).
NATURAL PERSONS
COMMENCEMENT OF PERSONALITY
GR: Birth determines personality in case of
natural persons (Art. 40, NCC).
XPN: The civil personality of the child shall
commence from the time of his conception for all
purposes favorable to him, subject to the
requirements of Art. 41, NCC (Art. 5, P.D. No.
603).
 A conceived child, although as yet unborn, is
given by law, a provisional personality of
its own for all purposes favorable to it (Art.
40, NCC).
When is a child considered born?
GR: The fetus is considered born if it is alive at
the time it is completely delivered from the
mother's womb or often the cutting of the
umbilical cord (Art. 41, NCC). This holds true
even if the same died after a few hours.
 Complete delivery means the cutting
of the umbilical cord. So, if after the
cutting of the umbilical cord the child is
alive, even only for a few hours, it is
considered a person. (I Caguioa, Civil
Code, 1967 Ed., p. 82)
XPN: If the fetus had an intrauterine life of less
than 7 months and dies within 24 hours after
its complete delivery from the mother’s womb is
not deemed born (Art. 41, NCC).
 There is no dispute that the child was dead
when separated from the mother’s womb,
therefore it lacked juridical personality, and
no action for damages can be constituted.
Parents, however, may recover moral
damages on account of distress and anguish
to the loss of the fetus and the
disappointment of their parental
12
expectations (Geluz vs. CA, G.R. No. L-
16439, July 20, 1961).
 While the Civil Code expressly provides that
civil personality may be extinguished by
death, it does not explicitly state that only
those who have acquired juridical
personality could die — one need not
acquire civil personality first before he/she
could die (Continental Steel Manufacturing
Corporation vs. Montaño, G.R. No. 182836,
October 13, 2009).
EXTINGUISHMENT OF 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, NCC).
Other legal effects of death:
1. The right to support ends (Falcon vs. Arca,
G.R. No. L-18135, July 31, 1963);
2. A marriage, whether voidable or valid, also
ends, however, the relationship by affinity
survives (Intestate Estate of Manolita
Gonzales Vda. De Carungcong vs. People,
G.R. No. 181409, February 11, 2010);
3. Tenure of public office ends (Abeja vs.
Tañada, G.R. No. 112283, August 30, 1994) ;
4. If a person dies after he has authorized
another to sell the former's property, the sale
after such death is not valid, if made by the
agent with knowledge of the principal’s
death. This is true even if the buyer is in good
faith (Rallos vs. Felix Go Chan and Sons
Realty Corporation, G.R. No. L-24332,
January 3, 1978).
5. The moment a person dies, juridical capacity
is extinguished. Therefore, he could not be
validly served with summons nor convicted
(Dumlao vs. Quality Plastic Products, Inc.,
G.R. No. L-27956, April 30, 1976);
6. Death extinguishes criminal liability but not
civil liability, therefore, the case shall
continue in order to determine the civil
liability of the accused (People vs. Tirol, G.R.
No. L-30538, January 31, 1981).
 In the case of Geluz vs. Court of Appeals
(G.R. No. L-16439, July 20, 1961), the
husband of the wife who had an abortion
filed a claim for damages against the
physician who performed the abortion
arguing that he does not consent thereto.
Here, there is no dispute that the child was
dead when separated from the mother’s
womb, therefore it lacked juridical
personality. Hence, no right of action for
pecuniary damages could derivatively
accrue to the parent of the unborn fetus
since an action for such damages an account
of personal injury or death pertains primarily
to the one injured.
 In the case of Continental Steel
Manufacturing Corporation vs.
Montaño (G.R. No. 182836, October
13, 2009), on the other hand, the
father of the unborn child filed a claim
for paternity leave, bereavement leave
and death benefits as provided under
the collective bargaining agreement
between the employer and the
employees. However, the employer
denied the claim for bereavement
leave and other death benefits arguing
that only one with civil personality
could die and hence, the unborn child
never died because it never acquired
juridical personality. Here, the
Supreme Court granted said benefits
holding that, although the fetus was
dead from the moment of delivery, the
Civil Code does not explicitly state that
only those who have acquired juridical
personality could die. Death has been
defined as cessation of life, and life is
not synonymous with civil personality.
One need not acquire civil personality
first before he/she could die. Even a
child inside the womb already has life.
If the unborn already has life, then the
cessation thereof even prior to the
child being delivered qualifies death.
Moreover, the rights to bereavement
leave and death other benefits in this
case pertain directly to the parents of
the unborn child upon the latter’s
death.
 Estate of a deceased is a person that
may continue the personality of the
deceased even after death for the
purpose of settling debts (Limjuco vs.
Estate of Pedro Fragrante, G.R. No. L-
770, April 27, 1948).
 The moment a person dies, juridical capacity
is extinguished. Therefore, he could not be
validly served with summons nor convicted
(Dumlao vs. Quality Plastic Products, Inc.,
G.R. No. L-27956, April 30, 1976).
 Death extinguishes criminal liability but not
civil liability, therefore, the case shall
continue in order to determine the civil
liability of the accused (People vs. Tirol, G.R.
No. L-30538, January 31, 1981).
PRESUMPTION OF SURVIVORSHIP
If there is a doubt, as between two or more
persons who are called to succeed each other, as
to which of them died first, the following shall be
observed:
a. Whoever alleges the death of one prior to the
other, shall prove the same;
b. In the absence of proof, it is presumed that
they died at the same time and there shall be
no transmission of rights from one to the
other (Art. 43, NCC).
ELEMENTS. In order for Article 43 of the New
Civil Code to apply, two requisites must be
satisfied:
1. The question of survivorship involves persons
who are called to succeed each other.
2. The issue involves successional rights.
If one of both requisites is absent, it is the rule
on survivorship under the Rules of Court that
shall govern and not Article 43 of the New Civil
Code. The survivorship is determined from the
probabilities resulting from the probabilities
resulting from the strength and age of the sexes
(Rabuya, The Law on Persons and Family
Relations, 2017 Ed., p. 156).
JURIDICAL PERSONS
Classification of Juridical Persons
JURIDICAL COMMENCEMENT
PERSONS OF PERSONALITY
State and its political
subdivisions
Public corporations, Their personality
institutions and begins as soon as
13
 entities for public they have been XPNs:
interest or purpose, constituted according
created by law to law. 1. For the grant of rights in the Constitution to
Upon issuance of the operation of public utilities, and for the
Certificate of acquisition of land and other natural
Incorporation by the resources, a corporation, even if incorporated
Corporation Security and here, cannot acquire said rights, unless 60%
Exchange of its capital is owned by the Philippines.
Commission (SEC) (Sec. 11, Art. XII, 1987 Constitution)
(Sec. 18, par. 3, RCC) 2. During war, we may pierce the veil of
General partnership Upon the execution of corporate identity and go to the very
where no immovable the contract (Art. nationality of the controlling stockholders
property contributed 1784, NCC) regardless of where the incorporation had
Upon the execution of been made (Davis Winship vs. Philippine
the contract (Ibid.) Trust Co., G.R. No. L-3869, January 31,
which is a public 1952).
General Partnership
instrument with
where immovable  The Roman Catholic Church is a corporation
inventory of
property contributed by prescription, with acknowledged juridical
immovable property
contributed attached personality (Barlin vs. Ramirez, G.R. No. L-
therewith 2832, November 24, 1906).
Upon submission of a
signed and notarized  Foreign corporations not doing business in
Articles of Partnership the Philippines and not licensed in the
Limited Partnership Philippines may sue in the Philippines
duly filed for record
with the SEC (Art. (Converse Rubber Corp. vs. Universal
1844, NCC) Rubber Products, Inc., G.R. No. L-27906,
January 8, 1987).
 Private corporations are regulated by laws of
general application on the subject (Art. 45, Juridical Capacity is the fitness to be the
NCC). subject of legal relations; inherent in every
natural person and is lost only through death (Art.
 Partnerships and associations for private 37, NCC).
interest or purpose are governed by the
provisions of the Civil Code concerning CAPACITY TO ACT
partnerships (Art. 45, NCC).
Capacity to act is the power to do acts with
RIGHTS OF JURIDICAL PERSONS (Art. 46, legal effect; it is acquired and may be lost (Art.
NCC) 37, NCC).

1. To acquire and possess property of all kinds, Juridical Capacity vs. Capacity to Act
except those prohibited under the law;
2. To incur obligations; and JURIDICAL
CAPACITY TO ACT
3. To bring civil or criminal actions CAPACITY
Fitness to be the
Power to do acts with
NATIONALITY OF JURIDICAL PERSONS subject of legal
legal effects.
relations.
GR: The nationality of a corporation is Passive Active
determined by the place of issuance of its Inherent in every Merely acquired; Not
incorporation (SEC-OGC Opinion No. 16-15, natural person. inherent
Re: Nationality of Non-stock Corporation). Lost through death
Lost only through
and may be restricted
death.
by other causes

14
 Can exist without Cannot exist without
capacity to act. juridical capacity
Cannot be limited or Can be restricted
restricted. modified or limited.
Restrictions on capacity to act (Article 38,
NCC)
1. Minority (below 18 years old). A minor
needs parental consent before he can enter
into an ordinary contract, but a contract he
entered without parental consent is merely
voidable (Art. 1327, NCC) and will arise to
certain obligations from him (Cruz vs. Court
of Appeals, G.R. No. L-40880, October 13,
1979).
 R.A. No. 6809 (1989) is an act
lowering the age of majority from
twenty-one (21) to eighteen (18) years
old. Under R.A. 9344, the age of
criminal exemption was increased from
9 to 15 years old. A child less than 15
years old is exempted from criminal
liability for it is conclusively presumed
that he acted without discernment while
a child above 15 years old but below 18
years old is presumed to have acted
with discernment (Cruz vs. Court of
Appeals, G.R. No. L-40880, October 13,
1979).
 Estoppel is the preclusion of minors to
annul a contract because of
misrepresentation of their age.
However, if the minor is guilty of ONLY
PASSIVE or CONSTRUCTIVE
misrepresentation and not active, he
can be allowed to annul the contract
upon attaining the age of majority
(Rabuya, The Law on Persons and
Family Relations, 2006, p. 108).
2. Insanity (condition of one whose mental
faculties are diseased) or imbecility (a
condition of a person whose advanced in age
has the mental capacity comparable to that
of a child between two to seven years of age)
(Rabuya, The Law on Persons and Family
Relations, 2006, p. 116).
 Insanity in one thing does not mean
insanity in another as in the case of
monomania or partial insanity (Standard
Oil Company of New York vs. Arenas,
G.R. No. L-5921, July 25, 1911).
 An insane person under guardianship
who entered a contract is presumed to
be insane and the contract is voidable,
(Francisco vs. Herrera, G.R. No. 139982,
November 21, 2002) but may be
rebutted by substantial evidence that
the same acted within his lucid interval,
thus such contract is valid (Dumaguin
vs. Reynolds, G.R. No. L-3572,
September 30, 1952).
3. The state of being deaf-mute does not
disqualify the ability to give consent.
Contracts entered into by deaf-mute are
valid. However, a deaf-mute who does not
know how to write is declared incapable of
giving consent therefore rendering the
contract voidable (Rabuya, The Law on
Persons and Family Relations, 2006, p. 117).
4. Prodigality is the state of squandering
money or property with a morbid desire to
prejudice the heirs of a person.
5. Civil interdiction is the deprivation by the
court of a person’s right:
a. To have parental or marital authority;
b. To be the guardian of the person and
property of a ward;
c. To dispose of his property by an act inter
vivos (he cannot donate, for this is an act
inter vivos; but he can make a will, for
this is a disposition mortis causa); and
d. To manage his own property. (Art. 34,
RPC)
▪ The penalty of civil interdiction is given to a
criminal punished by imprisonment of 12
years and 1 day or more (Art. 41, RPC).
▪ These restrictions do not exempt the
incapacitated person from certain obligations
when the latter arise from his acts or from
property relations such as easements (Art.
38, NCC).
MODIFICATIONS OR LIMITATIONS ON
CAPACITY TO ACT (Art. 39, NCC)
1. Those enumerated under Art. 38, NCC;
2. Family relations – as to marriage and
support:
15

a. Incestuous and void marriages (Art. 37,
FC);
b. Donations/grants of gratuitous
advantage between spouses during the
marriage shall be void, except moderate
gifts during family occasions (Art. 87,
FC);
c. Descendants cannot be compelled to
testify in a criminal case, against his
parents and grandparents unless: crime
was against the descendant or by one
parent against the other (Art. 215, FC);
d. Spouses cannot sell property to each
other, except: Absolute separation is
agreed upon in the marriage settlements
(Art. 1490, NCC); and
e. Judicial separation of property (Art.
1490, NCC)
3. Aliens/Foreigners – limitations as to:
a. Acquisition of private or public
agricultural land;
b. Practice medicine (Sec. 226, RAC);
c. Vote or be voted upon; and
d. Engagement in coast shipping (Sec.
1172, RAC)
4. Absence;
5. Insolvency; and
6. Trusteeship.
 The consequences of these
circumstances are governed in this
Code, other codes, the Rules of Court,
and in special laws (Art. 39, NCC).
Equality in Capacity to Act (Women in
Development and Nation Building Act)
Women of legal age, regardless of civil status,
shall have the capacity to act and enter into
contracts which shall in every respect be equal to
that of men under similar circumstances.
In all contractual situations where married men
have the capacity to act, married women shall
have equal rights.
1. Women shall have the capacity to borrow and
obtain loans and execute security and credit
arrangement under the same conditions as
men;
16
2. Women shall have equal access to all
government and private sector programs
granting agricultural credit, loans and non-
material resources and shall enjoy equal
treatment in agrarian reform and land
resettlement programs;
3. Women shall have equal rights to act as
incorporators and enter into insurance
contracts; and
4. Married women shall have rights equal to
those of married men in applying for passport,
secure visas and other travel documents,
without need to secure the consent of their
spouses.
In all other similar contractual relations, women
shall enjoy equal rights and shall have the
capacity to act which shall in every respect be
equal to those of men under similar
circumstances (Sec. 5, R.A. No. 7192).
Domicile of Juridical Persons
GR: The domicile of juridical persons shall be
understood to be the place where their legal
representation is established or where they
exercise their principal functions (Art. 51, NCC).
XPN: When the law creating or recognizing them,
or any other provision has fixed its domicile (Art.
51, NCC).
2. USE OF SURNAMES
CIVIL CODE PROVISIONS (Arts. 364-380,
NCC)
GR: No person shall use different names and
surnames (Art. 380, NCC). The given name may
be freely selected by the parents for the child, but
the surname to which the child is entitled is fixed
by law. (Rabuya, The Law on Persons and Family
Relations, 2017 Ed., p. 1028)
XPN: The employment of pen names or stage
names is permitted, provided it is done in good
faith and there is no injury to third persons (Art.
379, NCC).
Change of First Name
Governing Law: RA 9048 now governs the
change of first name. It vests the power and
authority to entertain petitions for change of first
name to municipal civil registrar or consul general
concerned. Under the law, jurisdiction over
applications for first name is primarily lodged with
said administrative officers (Rabuya, Civil Law
Reviewer Vol. 1, 2017, p. 298).
Grounds for Change of First Name (Sec. 4,
R.A. No. 9048):
1. The petitioner finds that the first name or
nickname to be ridiculous, tainted with
dishonor or extremely difficult to pronounce;
2. The new first name or nickname has been
habitually and continuously used by the
petitioner and he has been publicly known by
that first name or nickname in the community;
and,
3. The change will avoid confusion.
Change of Name other than the First Name
Governing Law: Rule 103 is now limited to
change of name other than the first name which
may include therefore change of surname or
possibly, the middle name (Rabuya, Civil Law
Reviewer Vol. 1, 2017, p. 300).
Grounds for Change of Name other than the
First Name
1. When the name is ridiculous, dishonorable or
extremely difficult to pronounce;
2. When the change results as a legal
consequence, as in legitimation;
3. When the change will avoid confusion;
4. When one has continuously used and known
since childhood by a Filipino name, and was
unaware of his alien parentage;
5. A sincere desire to adopt a Filipino name to
erase signs of former alienage, all in good
faith and without prejudicing anybody;
6. When the surname causes embarrassment
and there is no showing that the desired
change of name was for a fraudulent purpose
or that the change of name would prejudice
public interest (In re: Petition for Change of
Name and/or Correction of Entry in the Civil
Registry of Julian Lin Carulasan Wang).
 Before a person can legally change his given
name, he must present proper or reasonable
cause or any compelling reason justifying
such change. In addition, he must show that
he will be prejudiced by the use of his true
and official name. Under the Civil Register
Law, a birth certificate is a historical record
of the facts as they existed at the time of
birth. Thus, the sex of a person is
determined at birth, visually done by the
birth attendant (the physician or midwife) by
examining the genitals of the infant.
Considering that there is no law legally
recognizing sex reassignment, the
determination of a person’s sex made at the
time of his or her birth, if not attended by
error, is immutable (Silverio vs. Republic,
G.R. No. 174689, Oct. 22, 2007).
Surnames of Children
1. Legitimate and legitimated children shall
principally use the surname of the father (Art.
364, NCC).
However, the word “principally” in the provision
is not equivalent to “exclusively” such that there
is no legal obstacle for her to choose to use the
surname of her mother to which she is entitled
(Alfon vs. Republic, G.R. No. L-51201, May 29,
1980).
A legitimate child cannot be allowed to change his
surname by dropping the surname of the
legitimate father and replacing it with the
surname of the stepfather because confusion
indeed might arise in the child’s paternity
(Republic vs. Court of Appeals, G.R. No. 88202,
December 4, 1998).
2. An adopted child shall bear the surname of
the adopter (Art. 365, NCC).
The use of the surname of the adopter refers to
the adopter’s own surname and not her surname
acquired by virtue of marriage (Valdes-Johnson
vs. Republic, G.R. No. L-18284, April 30, 1963).
Pursuant to the present law on adoption which
make it mandatory upon the spouses to jointly
adopt, the above rule is applicable only in the
following situations:
a. if the wife adopts her own illegitimate child
with the consent of the husband;
b. if the spouses are legally separated and only
the wife filed the adoption; and
c. if the adoption was made by the woman prior
to her marriage. (Rabuya, The Law on
Persons and Family Relations, 2017 Ed., Pg.
1037-1038)
17
3. Illegitimate children referred to in Art. 287
shall bear the surname of the mother.
4. Children conceived before the decree
annulling a voidable marriage shall principally
use the surname of the father (Art. 369,
NCC).
A middle name has practical or legal significance
as it serves to identify the maternal pedigree or
filiation of a person and distinguishes him from
others who may have the same given name and
surname as he has. Art. 364 of the Civil Code
states that legitimate and legitimated children
shall principally use the surname of their father.
Art. 174 of the Family Code gives legitimate
children the right to bear the surnames of the
father and mother, while illegitimate children,
under Art. 176, as amended by R.A. 9255, shall
use the surname of their mother, unless their
father recognizes their filiation, in which case,
they may bear the father's surname. In the case
of these children, their registration in the civil
registry requires that their middle names be
indicated therein, apart of course from their given
names and surnames (In re: Petition for Change
of Name and/or Correction of Entry in the Civil
Registry of Julian Lin Carulasan Wang, G.R. No.
159966, March 30, 2005).
5. Art. 176 gives illegitimate children the right to
decide if they want to use the surname of their
father or not. It is not the father or the mother
who is granted by law the right to dictate the
surname of their illegitimate children (Art. 176
as amended by R.A. No. 9255; Grande vs.
Antonio, G.R. No. 206248, October 18, 2014).
Rules governing the use of surname by a
Married Woman
1. 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, NCC).
 The wife may still opt to use her
maiden name because the above is
only permissive and not mandatory.
The use of “may” in Article 370 of the
NCC indicates that the use of the
18
husband’s surname by the wife is
permissive rather than obligatory (In
re: Josephine P. Uy-Timosa, Bar
Matter No. 1625, July 18, 2006).
2. In case of annulment of marriage:
a. If the wife is the guilty party, she shall
resume her maiden name and surname;
b. If she is the innocent spouse, she may
resume her maiden name and surname.
However, she may choose to continue
employing her former husband’s
surname, unless the court decrees
otherwise; or she or the former husband
is married again to another person (Art.
371, NCC).
c. When legal separation has been granted,
the wife shall continue using her name
and surname employed before the legal
separation (Art. 372, NCC).
 Once a married woman opted to
adopt her husband's surname in her
passport, she may not revert to the
use of her maiden name, except in
the cases enumerated in Sec. 5 (d)
of RA 8239. These instances are: (1)
death of husband, (2) divorce, (3)
annulment, or (4) nullity of
marriage. Since the petitioner's
marriage to her husband subsists,
she may not resume her maiden
name in the replacement passport.
Otherwise stated, a married
woman's reversion to the use of her
maiden name must be based only
on the severance of the marriage
(Remo vs. DFA, G.R. No. 160202,
March 5, 2010).
3. A widow may use the deceased husband’s
surname as though he were still living, in
accordance with Art. 370 (Art. 373, NCC).
Rules in case of identity of names or
surnames
1. The younger person shall be obliged to use
additional name or surname (Art. 374, NCC);
2. In case of ascendants and descendants:
b. The word “Junior” can only be used to a
son;
c. Grandsons and other male descendants
shall either: (i) add a middle name or the
 mother’s surname, or (ii) add the roman
numerals II, III and so on (Art. 375,
NCC).
Usurpation of Names
1. Usurpation of a name and surname may be
the subject of an action for damages and
other relief (Art. 377, NCC).
2. The unauthorized or unlawful use of another
person's surname gives a right of action to
the latter. (Art. 378, NCC).
3. Pen names and stage names cannot be
usurped. (Art. 379, NCC).
CHANGE OF NAME
No person can change his name or surname
without judicial authority (Art. 376, New Civil
Code). In a petition for change of name "the only
name that may be changed is the true or official
name recorded in the civil register". (Pabellar vs.
Republic, G.R. No. L-27298, March 4, 1976)
As a Privilege. A change of name is a privilege,
not a matter of right conferred on the petitioner.
Thus, before a person can be authorized to
change his name, he must show proper and
reasonable cause or any convincing reason which
may justify such change. (Republic vs.
Hernandez, G.R. No. 117209, February 9, 1996)
3. ENTRIES IN THE CIVIL REGISTRY AND
CLERICAL ERROR LAW (R.A. 9048, As
amended)
CIVIL REGISTRAR (Title XVI, Articles 407-413)
Civil Register – refers to the various registry
books and related certificates and documents
kept in the archives of the local civil registry
offices, PH Consulates, and of the Office of the
Civil Registrar General.
Acts, events and judicial decrees concerning the
civil status of persons shall be recorded in the civil
register (Art. 407, NCC). This includes:
1. Birth
2. Marriages
3. Deaths
4. Legal Separations
5. Judgments of Annulment of marriage
6. Judgment declaring marriages void from the
beginning
7. Adoptions
8. Legitimations
9. Acknowledgments of natural children
10. Naturalizations
11. Election, loss or recovery of citizenship
12. Civil interdiction
13. Judicial determination of filiation
14. Voluntary emancipation of a minor
15. Change of name
Duty of the Clerk of Court
To ascertain whether the decree has been
registered, and if this has not been done, to send
a copy of said decree to the civil registry of the
city or municipality where the court is functioning
(Art. 409, NCC).
Books of the Civil Register and Related
Documents
 Considered Public Documents
 Prima Facie evidence of the facts contained
therein
GR: No entry in the civil register shall be changed
and corrected, without a judicial order (Art. 412,
NCC).
XPN: Clerical or Typographical Errors subject to
administrative proceedings
Clerical or Typographical Error – refers to a
mistake committed in the performance of clerical
work in writing, copying, transcribing or typing
and entry in the civil register that is harmless and
innocuous, such as misspelled name or
misspelled place of birth, mistake in the entry of
the day and month in the date of birth or the sex
of the person 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[3], R.A. No.
9048, as amended by R.A. No. 10172).
XPN to XPN:
1. Change of Nationality
2. Age
3. Status (Sec. 2[3], R.A. No. 9048, as amended
by R.A. No. 10172)
19
Petition Seeking Substantial Correction of
an Entry in Civil Register
A petition seeking a substantial correction of an
entry in a civil register must implead as parties to
the proceedings not only the local civil register,
but also all persons who have or claim any
interest which would be affected by the
correction (Sec. 3, Rule 108, ROC).
 Substantial changes are changes which may
affect the civil status from legitimate to
illegitimate, sex, or citizenship of a person.
(Republic vs. Valencia, G.R. No. L-32181
March 5, 1986)
System of Registering Civil Registry
documents under Children’s Emergency
Relief and Protection Act
The PSA is mandated to ensure that vital
information pertaining to the personal
circumstances of a child are adequately protected
and available at all times. For this purpose, the
PSA is tasked to:
1. Develop a system of restoration and
reconstruction of civil registry documents that
have been destroyed or declared lost or
missing during a disaster or calamity;
2. Submit a report on the number of restored or
reconstructed documents to appropriate
government agencies for effective monitoring
and reporting and to ensure the continued
access of the affected children to social
services and facilitate the reunification of
separated children with their families; and,
3. Develop a system for registration of children
born during a national or local disaster (Sec.
7, R.A. No. 10821).
4. ABSENCE
a. CIVIL CODE PROVISIONS
STAGES OF ABSENCE
1. PROVISIONAL ABSENCE
Appointment. When a person disappears from
his domicile, his whereabouts being unknown,
and without leaving an agent to administer his
property, the judge, at the instance of an
interested party, a relative, or a friend, may
20
appoint a person to represent him in all that may
be necessary (Art. 381, NCC).
This same rule shall be observed when under
similar circumstances the power conferred by the
absentee has expired (Ibid.).
DUTY OF JUDGE. The judge shall take the
necessary measures to safeguard the rights and
interest of the absentee and shall specify the
powers, obligations and remuneration of his
representative, regulating them, according to the
circumstances, by the rules concerning guardians
(Art. 382, NCC).
PREFERENCE IN APPOINTMENT. In the
appointment of a representative:
1. The spouse present shall be preferred when
there is no legal separation; or
2. If the absentee left no spouse, or if the
spouse present is a minor, any competent
person may be appointed by the court. (Art.
383, NCC);
2. DECLARATION OF ABSENCE
a. Without administrator – Two years have
elapsed without any news about the
absentee or since the receipt of the last
news;
b. With administrator – Five years have
elapsed (Art. 384, NCC).
Who 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; and
4. Those who may have over the property of the
absentee some right subordinated to the
condition of his death (Art. 385, NCC).
PUBLICATION. The judicial declaration of
absence shall not take effect until six months
after its publication in a newspaper of general
circulation (Art. 386, NCC).
3. ADMINISTRATION OF THE ABSENTEE’S
PROPERTY.
The wife who is appointed as an administrator of
the husband’s property cannot alienate or
encumber the husband’s property, or that of the
conjugal partnership, without judicial authority
(Art. 388, NCC).
TERMINATION OF ADMINISTRATION
1. When the absentee appears personally or by
means of an agent;
2. When the death of the absentee is proved,
and his testate or intestate heirs appear;
3. When a third person appears, showing by a
proper document that he has acquired the
absentee’s property by purchase or other
title.
In these cases, the administrator shall cease in
the performance of his office, and the property
shall be at the disposal of those who may have a
right thereto (Art. 389, NCC).
4. PRESUMPTION OF DEATH
Ordinary Presumption
GR: A person shall be presumed dead for all
purposes after absence for a period of 7 years.
XPN: Succession
1. In succession, 10 years is required for
presumption of death.
2. If an absentee disappeared after age 75, 5
years shall be sufficient (Art. 390, NCC).
Extraordinary Presumption (for all
purposes including opening of succession)
GR: The following shall be presumed dead after
four years:
a. A person on board a vessel lost during a sea
voyage, or an airplane which is missing, since
the loss of the vessel or airplane;
b. A person in the armed forces who has taken
part in war, and has been missing;
c. A person who has been in danger of death
under other circumstances and his existence
has not been known (Art. 391, NCC).
XPN: If for purposes of remarriage, it shall be
two years.
If the absentee appears, or without appearing his
existence is proved, he shall recover his property
in the condition in which it may be found, and the
price of any property that may have been
alienated or the property acquired therewith; but
he cannot claim either fruits or rents (Art. 392,
NCC).
b. PRESUMPTIVE DEATH OF ABSENT
SPOUSE UNDER THE FAMILY CODE (ART.
41, FC)
Requisites for the Declaration of Presumptive
Death:
a. Prior spouse had been absent for four
consecutive years, or two years where
there is danger of death under Art. 391,
New Civil Code at the time of disappearance;
b. Spouse present has a well-founded belief that
the absent spouse is already dead; and
c. The present spouse must institute a summary
proceeding for the declaration of
presumptive death of the absentee.
 To avoid being charged and convicted of
bigamy, the above-mentioned requisites must
concur, and the present spouse must secure a
judicial declaration of presumptive death
before contracting a subsequent marriage.
Presumptive Death Art. 390 and 391 of the
Civil Code
1. Articles 390 and 391 of the Civil Code merely
express rules of evidence that only allow a
court or a tribunal to presume that a person is
dead upon the establishment of certain facts.
2. Since Articles 390 and 391 of the Civil Code
merely express rules of evidence, an action
brought exclusively to declare a person
presumptively dead under either of the said
articles actually presents no actual
controversy that a court could decide. In such
action, there would be no actual rights to be
enforced, no wrong to be remedied nor any
status to be established.
3. A judicial pronouncement declaring a person
presumptively dead under Article 390 or
Article 391 of the Civil Code, in an action
exclusively based thereon, would never really
21
 become "final" as the same only confirms the Marriage v. Ordinary Contracts
existence of a prima facie or disputable
presumption. The function of a court to render Marriage is a contract sui generis, differing in
decisions that is supposed to be final and notable respects from ordinary contracts.
binding between litigants is thereby (Rabuya, The Law on Persons and Family
compromised. Relations, 2006, p. 136)
4. Moreover, a court action to declare a person
presumptively dead under Articles 390 and MARRIAGE ORDINARY
391 of the Civil Code would be unnecessary. CONTRACT
The presumption in the said articles is already Both a contract and a Merely a contract.
established by law (Tadeo-Matias vs. Republic, social institution.
G.R. No. 230751, April 25, 2018). Generally, nature and Stipulations are
consequences as well generally fixed by
B. MARRIAGE (Family Code) as incidents are fixed the parties unless it
by law – not by the is against law, public
A marriage is a special contract of permanent parties (XPN: marriage policy, public order,
union between a man and a woman entered into settlement). morals or good
in accordance with law for the establishment of Stipulations are of no customs.
conjugal and family life. It is the foundation of the value.
family and an inviolable social institution whose
Marrying age is 18 The age of ordinary
nature, consequences, and incidents are
years old and above contract is the age of
governed by law and not subject to stipulation,
and does not have majority (18 years
except that marriage settlements may fix the
legal impediments old)
property relations during the marriage within the
mentioned in Articles
limits provided by the Code (Art. 1, FC).
37 and 38, FC (Art. 5,
FC)
Concepts of Marriage
Can be dissolved only Can be ended by
by death or annulment, mutual agreement
1. It is a special contract of permanent union
not by mutual and by other legal
between a man and a woman;
agreement. causes like
2. It is the foundation of the family; and
expiration of the
3. It is an inviolable social institution (Ibid).
term of contract or
fulfillment of the
 Persons dwelling together in apparent
purpose to which the
matrimony are presumed, in the absence of
contract was entered
counter-presumption or evidence special to
into.
the case, to be in fact married. The reason
Only a man and a Gender of either
is that such is the common order of society,
woman can enter into party is not
and if the parties were not what they thus
marriage. important.
hold themselves out as being, they would be
Only 2 persons of May be entered into
living in the constant violation of decency
opposite sex may enter by as many persons.
and of law. There is a presumption in favor
into contract.
of marriage. (Adong vs. Cheong See Gee, 43
Phil. 43, 1956) Breach of the Breach of contract
obligation imposed by gives rise to an
 Presumption in favor of a valid marriage law doesn’t give rise to action for damages.
(Balogbog vs. CA, G.R. No. 83598, March 7, damages – there may
only be penal or civil
1997)
sanctions.
 Under the Constitution, marriage, as an
inviolable social institution, is the foundation
of the family and shall be protected by the
state (Sec. 2, Art. XV of the 1987
Constitution).

22
1. REQUISITES OF MARRIAGE
a. Essential Requisites (Art. 2, FC)
1) Legal capacity
▪ Parties must be a male and a female;
▪ 18 years old and above (at the time of
the marriage); and
▪ Not subject to any legal impediments in
Arts. 37 and 38 of Family Code (Art. 5,
FC).
2) Consent of the contracting parties
▪ Free and voluntary (not obtained through
mistake, fraud, force, intimidation or
undue influence). If it is vitiated with
error, fraud, intimidation, etc., it is mere
voidable (valid until annulled). However,
if there is absolutely no consent at all, as
it was intended to be a jest, the marriage
is VOID.
▪ Must be manifested in the presence of
solemnizing officer; and
▪ Parties must have the necessary consent
of parents if contracted marriage at the
age of 18 years old but below 21 years
old (Art. 14, FC).
b. Formal Requisites
1) Authority of Solemnizing Officer;
2) Valid marriage license (not a marriage
certificate); and
3) Marriage ceremony- which takes place
with the:
▪ Personal appearance of the solemnizing
officer;
▪ Their personal declaration that they take
each other as husband and wife; and
▪ In the presence of not less than two
witnesses of legal age (Art. 3, FC).
GR: In the absence of any of the formal or
essential requisites, the marriage is void.
XPN: Marriages which are exempted from
obtaining a marriage license (Arts. 27-34, FC) and
in case either or both parties believed in good
faith that the solemnizing officer had the proper
authority, shall be valid.
▪ If there is a defect in the essential
marriage requisites the marriage is
voidable.
▪ If there is any irregularity in the formal
requisite, the marriage is valid but the
party responsible shall be civilly,
criminally and administratively liable.
 The issuance of a marriage license
despite neither the parties are residents
of the city or municipality which issued
the same is a mere irregularity and does
not affect the validity of the marriage
(Alcantara vs. Alcantara, G.R. No.
167746, August 28, 2007).
 Although a marriage contract is
considered primary evidence of
marriage, its absence is not always a
proof that no marriage took place
(Balogbog vs. Court of Appeals, G.R.
No. 83598, March 7, 1997).
 Once the presumption of marriage
arises, other evidence may be
presented in support necessary/direct
to establish the marriage but at least
enough to strengthen the presumption
of marriage. Every intention of law
leans towards legitimizing marriage
(Delgado vda De dela Rosa vs.
Marciana vda de Damian, G.R. No.
155733, January 26, 2006).
Some of the irregularities in the formal
requisites include:
1. Presence of only one witness;
2. Lack of legal age of witness;
3. Failure to comply with the procedural
requirements under Art. 12, FC;
4. Non-observance of 3-month period under
Art. 15; and
5. Failure to comply with the requirements of
notice under Art. 17, FC.
a. Authority of Solemnizing Officer
GR: Those solemnized by any person not legally
authorized to perform marriages are void. (Art.
35, par. 2, FC)
23
XPN: The marriage was contracted with either or
both parties believing in good faith that the
solemnizing officer had the legal authority to do
so. If a person seeks to impugn the validity of a
marriage on the ground that the person who
solemnized it was not really authorized, such lack
of authority must be proved by the person
petitioning (De Cardenas vs. Cardenas, et al.,
G.R. No. L-8218, Dec. 15, 1955).
Persons Authorized to Solemnize
Marriages: (Art. 7-8, 10, FC)
a. Any incumbent member of the judiciary
within the court’s jurisdiction
A marriage solemnized by a judge outside the
court’s jurisdiction will not affect the validity of
the marriage but may subject the officiating
official to administrative liability. (Beso vs.
Daguman, A.M. No. 99-1211 January 28, 2000).
The defect is a mere irregularity in a formal
requisite (Navarro vs. Domagtoy, A.M. No. MTJ-
96-1088, July 19, 1996).
Members of the Judiciary:
1. Metropolitan/Municipal Trial Courts (MTC)
and Regional Trial Courts (RTC) Judges –
within their territorial Jurisdiction.
2. Court of Appeals, Court of Tax Appeals,
Sandiganbayan, and Supreme Court Justices
– Anywhere in the Philippines.
b. Priests, rabbis, ministers of any church
Requisites to Perform Marriage:
1. Must be duly authorized by his or her church
or religious sect in writing,
2. Must act within the limits of the written
authority granted to him or her by the church
or religious sect;
3. His written authority must be registered with
the civil registrar general; and
4. At least one of the contracting parties
belongs to the solemnizing officer’s church or
religious sect (Art. 7 [2], FC).
24
c. Ship captains or airplane chiefs or pilot
Requisites to Perform Marriage:
1. The marriage must be in articulo mortis (at
least one of the parties is at the point of
death)
Effect of recovery from illness of dying
person – Marriage is still valid (Art.27, FC);
2. The marriage must be between passengers
or crew members; and
3. Generally, the plane must be in flight or the
ship must be at sea or during stopovers at
the port of call (Art. 31, FC).
d. Military commanders of a unit;
Requisites to Perform Marriage:
1. He or she must be a commissioned officer, or
an officer in the armed forces holding rank by
virtue of a commission from the president
(his rank should start from a second
lieutenant, ensign and above);
2. Assigned chaplain must be absent at the time
of the marriage;
3. The marriage must be one in articulo mortis;
and
4. The contracting parties, whether members of
the armed forces or civilians, must be within
the zone of military operation (Art. 32, FC).
e. Consul generals, consuls or vice consuls
Marriages between Filipino citizens abroad may
be solemnized by them. When performed abroad,
or specifically in his place of assignment, the
solemnities established by Philippine laws shall be
observed in their execution (Art. 17, NCC).
f. Duly elected mayors of cities and
municipalities pursuant to the Local
Government Code.
The mayor of a city or municipality, within their
exclusive jurisdiction, is empowered to solemnize
a marriage (Sec. 444[b](1)(xviii), Local
Government Code).
 When the mayor is temporarily
incapacitated to perform his duties for
physical or legal reasons such as, but not
limited to, leave of absence, travel abroad,
 any suspension from office, the vice mayor
or the highest ranking Sangguniang Bayan
member shall automatically exercise the
powers and perform the duties of the local
chief executive (Sec. 46, LGC).
 They were not included under the Family
Code but their authority was restored by the
Local Government Code, which took effect
on 1 January 1992. Thus, if a marriage was
celebrated by a mayor after the effectivity of
the Family Code on 3 August 1988 but prior
to the effectivity of the Local Government
Code on 1 January 1992, such marriage is
void ab initio (Rabuya, The Law on Persons
and Family Relations, 2006, p. 167).
Duty of the Solemnizing officer:
The solemnizing officer shall state under oath
that he ascertained the qualifications of the
contracting parties and found no legal
impediment to the marriage (Art. 34, FC).
Public Solemnization – based on the premise
that the state takes an active interest in marriage .
It may be done in the:
1. Chambers of the judge or in open court;
2. Church;
3. Chapel or temple; or
4. Office of the consul-general, consul or vice-
consul (Estrada vs. Escritor, AM No. P-02-
1651, June 22, 2006).
XPNS to the Public Solemnization:
1. At the point of death (articulo mortis);
2. In a remote place; or
3. When both of the parties requested in
writing, solemnization in some other place. It
must be stated in the sworn statement
(Navarro vs. Judge Dumagtoy, AM No. MTJ-
96-1088, July 19, 1996).
b. Valid Marriage License (Articles 3[2], 9,
11,20, and 26, FC).
1. Marriage License must include the
following data
a. Full name of the contracting parties;
b. Place of birth;
c. Age and date of birth;
d. Civil status;
e. If previously married, how, when and
where the previous marriage was dissolved
or annulled;
f. Present residence or citizenship;
g. Degree of relationship of the contracting
parties;
h. Full name, residence and citizenship of the
father;
i. Full name, residence and citizenship of the
mother; and
j. Full name, residence and citizenship of the
guardian or person having charge, in case
the contracting party has neither father nor
mother and is under the age of 20 years
old (Art. 11, FC).
2. Validity: Valid in any part of the Philippines
for a period of one hundred twenty (120)
days from date of issue. It is deemed
automatically cancelled at the expiration of
the said period (Art. 20, FC).
1. Place of Issuance:
a. If within the Philippines – in the local civil
registrar of the city or municipality where
either contracting party habitually
resides.
b. If outside the Philippines – in the office
of the consular officials.
Under this rule, when a marriage between
Filipino citizens is performed abroad, the
Filipino consular official shall discharge the
duties of the LCR and of the solemnizing
official (Art. 10, FC).
Certificate of Compliance (RH LAW)
No marriage license shall be issued by the Local
Civil Registrar unless the applicants present a
Certificate of Compliance issued for free by the
local Family Planning Office certifying that they
had duly received adequate instructions and
information on responsible parenthood, family
planning, breastfeeding and infant nutrition (Sec.
15, The Responsible Parenthood and
Reproductive Health Act of 2012).
25
Special Requirements for Application of
Marriage License
a. Person previously married: (Art 13, FC)
1. Death certificate of deceased spouse;
and in case the death certificate cannot
be secured, the party shall make an
affidavit setting forth this circumstance
and his/her actual civil status and name
and date of death of the deceased
spouse.
2. Judicial decree of annulment or
declaration of nullity of previous
marriage.
 Petition for cancellation of entries in
the marriage contract filed with the
NSO, specifically the entries in the
wife portion thereof on ground that
the identity of the petitioner is stolen
is allowed (Republic vs. Olaybar G.R.
No. 189538, February 10, 2014).
b. Persons between 18 and 21 years old:
(Art 14, FC)
1. Parental consent of parents, guardian or
person exercising substitute parental
authority; and
2. Certificate of marriage counseling (Art
16, FC).
Lack of Parental Consent – The marriage is
voidable (Art. 45[1], FC)
c. Persons between 21 and 25 years old:
(Art 15, FC)
1. Parental advice of parents or guardian;
and
2. Certificate of marriage counseling issued
by:
a. Priest, imam or minister authorized to
solemnize marriage; or
b. Marriage counselor accredited by
proper government agency.
Lack of Parental Advice or Marriage Counseling
– There is no effect on the validity of
marriage. However, the issuance of the
marriage license will be suspended for a period of
26
three months from the completion of the 10-
day publication of the application for marriage
license (Art. 15 and 16, FC).
Marriage Performed During the 3-Month Period
Without a License – The marriage shall be void
(Art. 17, FC)
Marriage License Obtained During the 3-Month
Prohibition – The marriage will be valid subject
to civil and criminal liabilities on the part of
the erring party or parties. The issuing offices
shall be subjected to administrative sanctions
(Art. 17, FC).
d. Foreigners
When either or both parties are foreign nationals:
Certificate of legal capacity to contract marriage,
issued by a diplomatic or consular official, shall
be submitted before a marriage license can be
obtained (Art. 21, FC).
e. Stateless Persons or Refugees from
other Countries:
a. Affidavit stating circumstances showing
capacity to contract marriage; and
b. Marriage license issued only after the
completion of the 10-day publication of
application. (Art. 21, FC)
2. EXEMPTION FROM LICENSE
REQUIREMENT (Arts. 27, 28, 31 to 34, FC)
a. In Articulo mortis (Art 27, 31 & 32)
1. Either or both of the contracting parties
are at the point of death.
2. Marriage shall remain valid even if the
ailing party subsequently survives.
 A witness should sign the dying
party’s signature if the latter be
physically unable to do so (Cruz vs.
Catandes, CA., 39 O.G. No. 18, p.
324).
b. In Remote Places (Art 28 & 29)
The residence of either party is located where
there is no means of transportation to enable
 such party to appear personally before the
local civil registrar.
 There is no prescribed minimum or
maximum distance, unlike that in the
Civil Code.
Duty of the Solemnizing officer in items “a”
(articulo mortis) and “b” (in remote
places):
1. State in an affidavit executed before the local
civil registrar or any other person legally
authorized to administer oaths that the
marriage was performed in (i) articulo
mortis, or that (ii) the residence of either
party, specifying the barrio or barangay, is so
located that there is no means of
transportation to enable such party to appear
personally before the local civil registrar;
2. The officer took the necessary steps to
ascertain the ages and relationship of the
contracting parties and the absence of legal
impediment to the marriage; (Art. 29, FC)
and
3. Send the affidavit stated above and the
marriage contract to the local civil registrar
of the municipality where it was performed
within the period of thirty days after the
performance of the marriage (Art. 30, FC).
Purpose of Affidavit:
For the purpose of proving the basis for
exemption from the marriage license. Even if
there is failure on the part of the solemnizing
officer to execute the necessary affidavit, such
irregularity will not invalidate the marriage, since
the affidavit is not required of the parties (Soriano
vs. Felix, G.R. No. L-9005, June 20, 1958).
c. Cohabitation for at least 5 years (Art 34,
FC)
Requisites:
1. The parties must have been living together
as husband and wife for at least 5 years
immediately before the marriage (Niñal vs.
Bayadog, G.R. No. 133778, March 14, 2000);
2. The parties must have no legal impediment
to marry each other;
3. The fact of absence of legal impediment
between the parties must be present at the
time of marriage; and
4. The parties must execute an affidavit stating
that they have lived together for at least five
years and are without legal impediment to
marry each other (Orja-Manzano vs.
Sanchez, A.M. No. MTJ-00-1329, March 8,
2008).
 The falsity of an affidavit of marital
cohabitation, where the parties have in
truth fallen short of the minimum five-
year requirement, effectively renders
the marriage void ab initio for lack of a
marriage license. It is the actual period
of cohabitation that is essential to the
validity of the affidavit of cohabitation
(Republic vs. Dayot, G.R. No. 175581,
March 28, 2008).
 The falsity of an affidavit of cohabitation
CANNOT be used as a defense in the
crime of bigamy, for it will be the height
of absurdity for the Court to allow the
accused to use her illegal act to escape
criminal conviction (Santiago vs. People,
G.R. No. 200233, July 15, 2015).
 The five-year period should be a period
of cohabitation characterized by
exclusivity, meaning, no third party was
involved at any time within the five
years and it should be in the nature of a
perfect union that is valid under the law
but rendered imperfect only by the
absence of the marriage contract. (Niñal
vs. Bayadog, G.R. No. 133778, March
14, 2000.)
d. Solemnized outside the Philippines
where no marriage license is required
by the country where it is solemnized.
If the marriage was celebrated before the
diplomatic or consular officials of the Republic
of the Philippines in a foreign country,
marriage license is still required (Art. 17, FC).
e. Marriages among Muslims or among
members of the ethnic cultural
communities, provided they are
solemnized in accordance with their
customs, rites or practices (Art. 33, FC).
27
C. Marriage Ceremony
No prescribed form or religious rite for the
solemnization of marriage is required (Art. 6, FC).
Minimum requirements prescribed by law:
1. Appearance of contracting parties personally
before the solemnizing officer (Art. 3, FC);
2. Personal declaration that they take each
other as husband and wife (Art. 3, FC);
3. Presence of at least two witnesses of legal
age; (Art. 3, FC)
4. The declaration shall be contained in the
marriage certificate; and (Art. 6, FC)
5. Marriage certificate shall be signed by the
contracting parties and their witnesses and
attested by the solemnizing officer (Art. 6,
FC).
In cases of Articulo Mortis, when the party is at
the point of death and cannot sign the Marriage
Certificate, it is sufficient that one of the
witnesses write the name of the party, which will
be attested by the solemnizing officer (Art. 6, FC).
Civil Weddings during the Modified
Enhanced Community Quarantine
Civil weddings may be solemnized provided that:
1. The parties and guests shall not exceed 5;
2. Observance of health hygiene protocols and
other public medical standards (wearing of
face masks and face shields, subjecting
everyone to no contact thermal scanning,
and observance of social distancing.
This rule is applicable during the declaration of
the MECQ in the National Capital Region, Cebu
City and Laguna (Admin. Circular No. 39 s. 2020).
Validity of Marriage by Proxy (one where the
other party is merely represented by a delegate
or friend):
1. Not valid if celebrated in the Philippines since
the presence of the contracting parties is
required (Art. 6, FC).
2. Valid if celebrated abroad and valid there as
such (Art. 26, FC).
3. The marriage by proxy is deemed celebrated
at the place where the delegate or the proxy
appears.
28
Proofs of Marriage
Primary Evidence – The marriage contract or
certificate of marriage (Villanueva vs. CA, G.R.
No. 84464, June 21, 1991).
Marriage Certificate (Article 22, FC)
 A marriage certificate is not an essential or
formal requisite of marriage and without
which, the marriage remains valid. It is
merely a proof of marriage (Madridejo vs.
De Leon, G.R. No. 32473, October 6, 1993).
 The best documentary evidence of a
marriage is the marriage contract or the
marriage certificate (Villanueva vs. CA, G.R.
No. 84464, June 21, 1991).
 There is a legal presumption that a man and
woman deporting themselves as husband
and wife have entered into a lawful contract
of marriage (Sec. 5 [bb], Rule 131 of the
Rules of Court), but may however be
rebutted by evidence showing that the
marriage did not actually take place
(Fernandez vs. Puatdu, G.R. No. L-10071,
October 31, 1957).
Secondary Evidence – If primary evidence is
not available.
a. Testimonies of witness to matrimony.
b. Couple’s public and open cohabitation as
husband and wife after the alleged wedlock.
c. Birth / baptismal certificates of children born
during such union.
d. Mention of such nuptials in subsequent
documents (Trinidad vs. CA, supra).
3. MARRIAGES SOLEMNIZED ABROAD AND
FOREIGN DIVORCE
GR: Marriages solemnized outside the Philippines
in accordance with the law of a foreign country
shall be valid in the Philippines . (Lex loci
celebrationis)
XPNs: The following foreign marriages are
considered void:
1. Marriages contracted by any party below
eighteen (18) years of age even with the
consent of parents or guardians (Art. 35 [1],
FC)
2. Bigamous or Polygamous Marriages not Lex Nationalii – Laws Lex loci celebrationis
falling under Art. 41 of the FC (Art. 35 [4], relating to family rights – if valid where
FC) and duties, or to the celebrated, then
status, condition and valid everywhere;
Art. 41, FC – in case the first spouse was legal capacity of forms of contracting
judicially declared dead and the surviving persons are binding marriage are to be
spouse re-marry. upon Philippine citizens regulated by the law
even though living where it is
3. Mistake in Identity (Art. 35 [5], FC) abroad (Art. 15, NCC) celebrated. (Art. 16,
4. Subsequent marriage celebrated without the NCC)
court’s annulment or decree of nullity of prior Foreign marriages void Foreign marriages
marriage, partition of property and delivery under Philippine law may be void under
of presumptive legitime of children in due to lack of an Philippine law due to
previous marriage being first registered (Art essential requisite, absence of a formal
35 [6], FC) even if valid under requisite under
5. Psychological incapacity (Art. 36, FC) foreign laws, will not be foreign laws.
6. Incestuous marriages (Art. 37, FC) recognized.
7. Marriages void by reasons of public policy
(Art. 38, FC) FOREIGN DIVORCE

Marriage celebrated without license and Marriage Effect of Foreign Divorce

by proxy are valid in the Philippines if valid where
celebrated, as they are not among the XPNs and
will not contravene any public policy.
 Paragraph 2 of Article 26 of the Family Code
(E.O. No. 209, as amended by E.O. No.
227), should be interpreted to allow a
Filipino citizen, who has been divorced by a
spouse who had acquired foreign citizenship
and remarried, also to remarry. The
reckoning point is not the citizenship of the
parties at the time of the celebration of the
marriage, but their citizenship at the time a
valid divorce is obtained abroad by the alien
spouse capacitating the latter to remarry
(Republic vs. Orbecido III, G.R. No. 154380,
October 5, 2005).
 With respect to same sex marriage
celebrated abroad involving citizens of the
Philippines, the same shall not be
recognized as valid here in the Philippines
even if such kind of marriage is valid in the
place of celebration (Rabuya, The Law on
Persons and Family Relations, 2006, p. 206)
. conformity to the foreign law allowing it.
As to Essential and Formal requisites of
Marriages celebrated abroad:
Essential Requisites Formal Requisites
Inherent in the parties, Requirements
carried everywhere independent of the
parties
GR: Divorce contemplates the dissolution of the
lawful union for cause arising after the marriage.
Absolute divorce is not recognized in the
Philippines (Tolentino, Civil Code of the
Philippines, Vol. 1, 2004 ed).
XPN: Where a marriage between a Filipino citizen
and a foreigner is validly celebrated and a divorce
is thereafter validly obtained abroad by the alien
spouse capacitating him or her to remarry, the
Filipino spouse shall have capacity to remarry
under Philippine law (Art. 26 [2], FC).
Requisites:
a. There is a valid marriage that has been
celebrated between a Filipino citizen and a
foreigner; and
b. A valid divorce is obtained abroad
capacitating the alien spouse and the Filipino
spouse to re-marry (Art. 26[2], NCC).
 The party pleading it must prove the
divorce as a fact and demonstrate its
It must be shown that the divorce
decree allows the former spouse to
remarry as specifically required in Art.
26 of the Family Code (Republic vs.
Orbecido III, G.R. No. 154380, October
5, 2005).

29
  Courts do not take judicial notice of
foreign laws and foreign judgments;
thus, our laws require that the divorce
decree and the national law of the
foreign spouse must be pleaded and
proved like any other fact before trial
courts (Racho vs. Tanaka, G.R. No.
199515, June 25, 2018).
 The purpose of Paragraph 2 of Article 26
of the Civil Code is to avoid the absurd
situation where the Filipino spouse
remains married to the alien spouse
who, after a foreign divorce decree that
is effective in the country where it was
rendered, is no longer married to the
Filipino spouse. Whether the Filipino
spouse initiated the foreign divorce
proceeding or not, a favorable decree
dissolving the marriage bond and
capacitating his or her alien spouse to
remarry will have the same result: the
Filipino spouse will effectively be
without a husband or wife. A Filipino
who initiated a foreign divorce
proceeding is in the same place and in
like circumstance as a Filipino who is at
the receiving end of an alien-initiated
proceeding (Republic vs. Manalo, G.R.
No. 221029, April 24, 2018).
Requirements to prove foreign marriage
1. The existence of the pertinent provision of
the foreign marriage law; and
2. The celebration and performance of the
marriage in accordance with the said law.
(Fujiki vs. Marinay G.R. No. 196049, June 26,
2013; Corpuz vs. Sto. Tomas, G.R. No.
186571, 11 August 2010; Garcia vs. Recio,
G.R. No. 138322 - October 2, 2001; Adong
vs. Cheong Seng Gee Adong vs. Cheong Seng
Gee, G.R. No. 18081, March 3, 1922)
4. VOID AND VOIDABLE MARRIAGES
Void Marriages - Those which are inexistent
from the very beginning. It is ipso facto void
without need of any judicial declaration of nullity
unless for purposes of remarriage. A judicial
declaration of its nullity is required before a
subsequent marriage can be contracted,
otherwise, the subsequent marriage is also void
and may be subjected to bigamy.
30
🕮 A void marriage can be questioned even after
the death of either party (Niñal vs. Bayadog,
G.R. No. 133778, March 14, 2000).
🕮 The clause “on the basis solely of a final
judgment declaring such marriage void” (Art.
40, FC) denotes that such final judgment
declaring the previous marriage void need
not be obtained only for purposes of
remarriage (Domingo vs. CA, G.R. No.
104818, Sept. 17, 1993).
The following are void marriages:
a. The absence of any of the essential or
formal requisites (Art. 35, FC)
1. Those contracted by any party below
eighteen years of age even with the
consent of parents or guardians (Art. 35
[1], FC);
2. Those solemnized by any person not
legally authorized to perform
marriages;
XPN: 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 (Art. 35 [2], FC);
3. Those solemnized without license,
except those covered in Chapter 2 of the
FC (Art. 35 [3], FC);
4. Those bigamous or polygamous
marriages not failing under Article 41
(Art. 35 [4], FC);
Art. 41 – In case the first spouse was judicially
declared dead and the surviving spouse remarry.
Technically a bigamous marriage but the judicial
declaration of presumptive death allows the other
spouse to remarry.
5. Those contracted through mistake of
one of the contracting parties as to
the identity of the other (Art. 35 [5], FC);
Not applicable to mistake of circumstances.
 The mistake in identity refers to the actual
physical identity of the other contracting
party (Rabuya, The Law on Persons and
Family Relations, 2006, p. 213)
6. Those subsequent marriages under
Article 53 (Art. 35 [6], FC);
In case one of the spouses, who intend to re-
marry, failed to register the judgment of
annulment or declaration of absolute nullity of the
marriage, the partition and distribution of the
properties of the spouses, and the delivery of the
children’s legitimes, the subsequent marriage
shall be void (Art. 53, FC).
Other void marriages:
1. Marriages in a play, drama, or movie;
2. Marriages between two boys or two girls;
3. Marriages in jest;
4. Common law marriages;
5. Marriages between persons of the same sex,
even if celebrated abroad;
6. Marriages where parties merely signed a
marriage contract; and
7. Marriages where the parties did not
personally appear before the solemnizing
authority. (Paras, Persons and Family
Relations Vol. 1 p. 441)
a. Annulment under Article 36, FC
A marriage contracted by any party, who, at the
time of the celebration, was psychologically
incapacitated to comply with the essential marital
obligations of marriage, shall likewise be void
even if such incapacity becomes manifest only
after its solemnization (Art. 36, FC).
Psychological incapacity involves a senseless and
protracted refusal to comply with the essential
marital obligations by one or both of the spouses
although he and/or she is physically capable of
performing such obligation (Chi Ming Tsoi vs. CA,
G.R. No. 119190, January 16, 1997). Marital
obligations are provided for in Art. 68 of the FC
which provides “the husband and wife are obliged
to live together, observe mutual love, respect and
fidelity, and render mutual help and support.”
Psychological Incapacity as a Legal
Concept
Psychological incapacity is neither a mental
incapacity nor a personality disorder that must be
proven through expert opinion. “Mental” is not
synonymous with “psychological”. The use of
“mental” would give the wrong impression of
psychological incapacity being a mere vice of
consent.
Psychological incapacity must consist in a lack of
understanding of the essential obligations of
marriage, making the marriage void ab initio. The
“Totality of Evidence” presented is enough to
sustain a finding of psychological incapacity.
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. (Tan Andal vs. Andal, G.R.
196359, May 11, 2021)
Molina Guidelines as amended by Tan-
Andal vs. Andal Case
1. The burden of proof to show the nullity of the
marriage belongs to the plaintiff. Any doubt
should be resolved in favor of the existence and
continuation of the marriage and against its
dissolution and nullity. This is rooted in the fact
that both our Constitution and our laws cherish
the validity of marriage and unity of the family.
Thus, our Constitution devotes an entire Article
on the Family, recognizing it "as the foundation
of the nation." It decrees marriage as legally
"inviolable," thereby protecting it from dissolution
at the whim of the parties. Both the family and
marriage are to be "protected" by the state.
The Family Code echoes this constitutional edict
on marriage and the family and emphasizes their
permanence, inviolability and solidarity.
 The Molina guideline is silent as to the
quantum of proof required in nullity cases.
In the case of Tan-Andal vs. Andal, the
Supreme Court held that the case must be
proven with clear and convincing
evidence. This requires more than
preponderant of evidence but less than
proof beyond reasonable doubt.
2. The root cause of the psychological incapacity
must be: (a) medically or clinically identified, (b)
alleged in the complaint, (c) sufficiently proven
by experts and (d) clearly explained in the
decision.
 This second Molina guideline was
categorically abandoned by the Supreme
Court in the case of Tan-Andal vs. Andal.
Psychological incapacity is neither a mental
incapacity nor a personality disorder that
31
 must be proven through expert opinion.
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.
The spouse’s personality structure must
make it impossible for him or her to
understand and more important, to comply
with his or her essential marital obligations.
Proof of these aspects need not be given by
an expert. Ordinary witnesses who have
been present in the life of the spouses
before the latter contracted marriage may
testify that the behaviors are indicative of a
true and serious incapacity to assume the
essential marital obligations. (Tan Andal vs.
Andal, supra.)
3. Juridical Antecedence. The incapacity must
be proven to be existing at "the time of the
celebration" of the marriage. The evidence must
show that the illness was existing when the
parties exchanged their "I do's." The
manifestation of the illness need not be
perceivable at such time, but the illness itself
must have attached at such moment, or prior
thereto.
 The party is still required to prove juridical
antecedence because it is an explicit
requirement of the law and this distinguishes
psychological incapacity from divorce.
Divorce severs a marital tie for causes, that
may have developed after the marriage
celebration (Tan Andal vs. Andal, supra.).
4. Incurability. Such incapacity must also be
shown to be medically or clinically permanent or
incurable. Such incurability may be absolute or
even relative only in regard to the other spouse,
not necessarily absolutely against everyone of the
same sex. Furthermore, such incapacity must be
relevant to the assumption of marriage
obligations, not necessarily to those not related
to marriage, like the exercise of a profession or
employment in a job. Hence, a pediatrician may
be effective in diagnosing illnesses of children and
prescribing medicine to cure them but may not
be psychologically capacitated to procreate, bear
and raise his/her own children as an essential
obligation of marriage.
 The psychological incapacity is incurable but
in a legal sense. It is incurable in such a
32
way that the parties' personality structures
are so incompatible and antagonistic that it
would result to the inevitable and
irreparable breakdown of marriage. It
should not be defined as incurable in the
medical sense or has poor long-term
prognosis. Otherwise, if it is medically
incurable, then the law should not allow the
parties to remarry again because eventually,
it will also result to another void marriage. It
is relative and specific between the parties
(Tan Andal vs. Andal, supra.).
5. Gravity. Such illness must be grave enough
to bring about the disability of the party to
assume the essential obligations of marriage.
Thus, "mild characterological peculiarities, mood
changes, occasional emotional outbursts" cannot
be accepted as root causes. The illness must be
shown as downright incapacity or inability, not a
refusal, neglect or difficulty, much less ill will. In
other words, there is a natal or supervening
disabling factor in the person, an adverse integral
element in the personality structure that
effectively incapacitates the person from really
accepting and thereby complying with the
obligations essential to marriage.
 The gravity of the condition is also retained
but not in the sense that it is a serious or
dangerous illness, but to exclude mild
characterological peculiarities, mood
changes, occasional emotional outburst. It
must be caused by a genuinely serious
psychic cause and not just a mere refusal,
neglect or difficulty, or much less ill will.
(Tan Andal vs. Andal, supra.).
6. The essential marital obligations must be those
embraced by Articles 68 up to 71 of the Family
Code as regards the husband and wife as well as
Articles 220, 221 and 225 of the same Code in
regard to parents and their children. Such non-
complied marital obligation(s) must also be
stated in the petition, proven by evidence and
included in the text of the decision.
7. Interpretations given by the National Appellate
Matrimonial Tribunal of the Catholic Church in the
Philippines, while not controlling or decisive,
should be given great respect by our courts.
(Azcueta vs. Republic, G.R. No. 180668, May 26,
2009).
 Mere showing of “irreconcilable differences”
and “conflicting personalities” in no wise
constitutes psychological incapacity. It is
enough to prove that the parties failed to
meet their responsibilities and duties as
married persons. It is essential that it must
be shown to be incapable of doing so, due
to some psychological, not physical illness
(Republic vs. CA, G.R. No. 108763, February
13, 1997).
 Mere abandonment and lack of desire to
communicate cannot qualify as the spouse
as psychologically incapacitated (Santos vs.
CA, G.R. No. 112019, January 4, 1995).
 The senseless and protracted refusal of one
of the contracting parties of sexual
intercourse for the procreation of children is
equivalent to psychological incapacity (Chi
Ming Tsoi vs. CA, G.R. No. 119190, January
16, 1997).
 If a psychological disorder can be proven by
independent means, no reason exists why
such independent proof cannot be admitted
and given credit. Insensitivity, sexual
infidelity, emotional immaturity, and
irresponsibility do not by themselves
warrant a finding of psychological incapacity
under Art. 36 of the FC (Agraviador vs.
Amparo-Agraviador, G.R. No. 170729,
December 8, 2010).
b. Incestuous Marriage (Art. 37, FC):
Marriages are void even if celebrated abroad
between these parties, whether their
relationship is legitimate or illegitimate:
1. Between ascendants and descendants of
any degree; and
2. Between brothers and sisters, whether of
full or half-blood.
c. Void Marriages by Reason of Public
Policy (Art. 38, FC):
1. Between collateral blood relatives
whether legitimate or illegitimate, up to
the fourth civil degree;
2. Between stepparents and stepchildren.
The prohibition still applies even after the
termination of the marriage, which is the
very source of affinity, regardless of the
cause of such termination. On the other
hand, marriage between stepbrothers
and stepsisters are no longer prohibited
(Rabuya, Civil Law Reviewer Vol. 1, 2017,
p. 92).
3. Between parents-in-law and children-in-
law;
The prohibition still applies even after the
termination of the marriage, which is the
very source of affinity, regardless of the
cause of such termination (Rabuya, Civil
Law Reviewer Vol. 1, 2017, p. 92).
4. Between the adopting parent and the
adopted child;
5. Between the surviving spouse of the
adopting parent and the adopted child;
6. Between the surviving spouse of the
adopted child and the adopter;
7. Between an adopted child and a
legitimate child of the adopter;
8. Between adopted children of the same
adopter; and
9. Between parties where one, with the
intention to marry the other, killed that
other person's spouse, or his or her own
spouse.
The marriage is void even if the surviving spouse
does not conspire in killing his/her spouse. The
primary intention must be to marry the surviving
spouse. No conviction is required (Rabuya, Civil
Law Reviewer Vol. 1, 2017, p. 94).
The following can now marry each other:
1. Brother-in-Law and sister-in-Law;
2. Stepbrother and stepsister;
3. Guardian and ward;
4. Parties who have been convicted of
adultery and concubinage; and
5. Adopted and illegitimate child, parents and
relatives by consanguinity and affinity of
the adopter; and
6. Collateral relatives by the half blood.
33
d. Subsequent Marriages that are Void
Void Marriages under Article 40, FC
Under Art. 40, when a party failed to secure a
judicial declaration of nullity of the prior marriage
before contracting a subsequent marriage, the
subsequent marriage is also void and is liable for
the crime of bigamy.
Judicial declaration of nullity of a void marriage is
necessary only when a marriage, although void,
had taken place, otherwise, Article 40 will not
apply. In the case of Morigo vs. People, no
marriage ceremony was performed by a duly
authorized solemnizing officer, hence since no
marriage took place, Art. 40 will not apply, nor
the parties be held liable for bigamy (Morigo vs.
People, 422 G.R. No. 145226, February 6, 2004).
GR: A marriage contracted by any person during
the subsistence of a previous valid marriage shall
be null and void (Art. 41, FC).
XPN: Unless the requisites for the Declaration of
Presumptive Death concur (Please see discussion
under “Absence”) and the present spouse
secured a judicial declaration of presumptive
death before contracting a subsequent marriage.
It is not necessary for the absent spouse to be
declared an absentee, and that the only purpose
of the declaration of absence is for the proper
administration of the estate of the absentee
(Jones vs. Hortinguela, G.R. No. L-43701, March
6, 1937).
BIGAMOUS MARRIAGE
General rule: A marriage contracted by any
person during the subsistence of a previous valid
marriage shall be null and void (Art. 41, FC).
Exception: Unless the requisites for the
Declaration of Presumptive Death concur (Please
see discussion under “Absence”) and the present
spouse secured a judicial declaration of
presumptive death before contracting a
subsequent marriage.
It is not necessary for the absent spouse to be
declared an absentee, and that the only purpose
of the declaration of absence is for the proper
administration of the estate of the absentee
(Jones vs. Hortinguela, G.R. No. L-43701, March
6, 1937).
34
Issuance of a marriage license to a widow
No marriage license shall be issued to a widow till
after 300 days following the death of the
husband, unless in the meantime she has given
birth to a child (Art. 84, NCC).
Effect of Reappearance
GR: The subsequent marriage is automatically
terminated and without need of a judicial
proceeding, by recording the Affidavit of
Reappearance in the civil registry
XPN: Unless the previous marriage has been
annulled or declared void ab initio (Art. 42 [1],
FC).
Failure to Execute and Record the Affidavit
of Reappearance
Mere reappearance of the absentee spouse,
EVEN IF made known to the present spouse, will
NOT terminate the subsequent marriage IF no
step is taken to terminate the subsequent
marriage, either by recording the affidavit or by
court action. Since the second marriage has been
contracted because of a presumption that the
former spouse is dead, such presumption
continues in spite of the spouses’ physical
reappearance, and by fiction of law, he or she
must still be regarded as legally an absentee until
the subsequent marriage is terminated as
provided by law (SSS vs. Jarque Vda de Bailon,
G.R. No. 165545, March 24, 2006).
Both Spouses to the Subsequent Marriage
is in Bad Faith (Art. 44, FC)
Requisites:
1. Prior spouse had been absent for four
consecutive years, or two years where there
is danger of death under Art. 391, New Civil
Code at the time of disappearance;
2. The present spouse has obtained a judicial
declaration of presumptive death; and
3. Both the present spouse and the second
spouse acted in bad faith, meaning, they
knew at the time of subsequent marriage, the
absentee spouse is still alive (Rabuya, The
Law on Persons and Family Relations, 2006,
p. 292).
Effects: 2. Marriages
celebrated during
1. The subsequent marriage is void ab initio the effectivity of
(Art. 41, FC); the Civil Code (De
2. All donations by reason of marriage and Dios Carlos vs.
testamentary dispositions made by one in Sandoval, G.R. No.
favor of the other are revoked by operation 179922, December
of law (Art. 43 [3], FC); 16, 2008).
3. Testamentary dispositions made by one in Prescriptive Period
favor of the other are revoked by operation No prescriptive period GR: Within 5 years
of law (Art. 43 [5], FC); and from discovery of the
4. Parties are liable for the crime of bigamy ground.
(Rabuya, The Law on Persons and Family
Relations, 2006, p. 293). XPN:
1. Lifetime of spouse
Failure to comply with Art. 52 of the FC in cases of
(Art. 53, FC) insanity;
2. Before the party
The judgment of annulment or of absolute nullity reaches 21 in
of the marriage, the partition and distribution of cases where
the properties of the spouses and the delivery of parents or
the children's presumptive legitimes shall be guardians may file
recorded in the appropriate civil registry and annulment.
registries of property; otherwise, the same shall Judicial Declaration
not affect third persons. GR: Not necessary Necessary

▪ The action or defense for the declaration of XPN: In case of

absolute nullity of marriage shall not remarriage
prescribe (Art. 39, FC).
5. Voidable Marriages
Distinction between a void and voidable
marriage Voidable marriage is considered valid and
produces all its civil effects, until it is set aside by
VOID MARRIAGE VOIDABLE final judgment of a competent court in an action
MARRIAGE for annulment (Suntay vs. Cojuangco-Suntay,
Status of marriage G.R. No. 183053, October 10, 2012).
Void ab initio Valid until annulled
Petition filed GR: Defects of a voidable marriage can be
Declaration of Nullity Annulment of ratified by free cohabitation or prescription.
of Marriage Marriage
Who may file XPNs: The following defects are not subject to
GR: Solely by the GR: Offended Spouse ratification: (i) impotency which appears to be
husband or wife. incurable; and (ii) STD that is found to be serious
XPNs: and incurable. These defects, however, may be
XPNs: Any real party subjected to prescription (Niñal vs. Bayadog, G.R.
in interest, only in the 1. Parents or No. 133778, March 14, 2000).
following cases: guardians in cases
of insanity; or The marriage shall be annulled for the
1. Nullity of marriage 2. Parents or following reasons: (NUFFIS)
cases commenced guardians before
before the the party reaches 1. Non-age (below 18)
effectivity of A.M. 21 years old on the 2. Unsoundness of mind
No. 02-11-10- ground of Lack of 3. Fraud (as defined in Art. 46, FC)
March 15, 2003. Parental Authority. 4. Force, intimidation, or undue influence

35
5. Impotence 1. Absence of parental consent (required
6. STD
Effect of Termination of Subsequent
Marriage (Art. 43, FC)
Good Faith Bad Faith
Children of the subsequent marriage conceived
prior to its termination shall be considered
legitimate.
The absolute If either spouse is in
community of bad faith, his or her
property or the share of the net 2. Unsoundness of mind
conjugal partnership, profits of the
as the case may be, community property
shall be dissolved and or conjugal
liquidated. partnership property
shall be forfeited in
favor of the common
children or, if there
are none, the children
of the guilty spouse
by a previous
marriage or in default
of children, the
innocent spouse.
Donations by reason If the donee
of marriage shall contracted the
remain valid. marriage in bad faith,
such donations made
to said donee are
revoked by operation
of law.
The innocent spouse
may revoke the
designation of the
other spouse who
acted in bad faith as
beneficiary in any
insurance policy, even
if such designation be
stipulated as
irrevocable.
The spouse who
contracted the
subsequent marriage
in bad faith shall be
disqualified to inherit
from the innocent 3. Fraud: Non-disclosure or concealment of
spouse by testate and
intestate succession.
Grounds, Art. 45, FC (must exist at the time
of marriage):
36
when party is at least 18 but below 21 years
of age under Art. 14, FC);
▪ Father, mother, surviving parent or
guardian, or persons having legal charge
of the party must give consent. However,
if the child is illegitimate, consent of the
mother is required since it is under the
latter’s parental authority.
▪ The sane spouse can file an action for
annulment ONLY if he/she has no
knowledge of the other spouse’s insanity
at the time of marriage, otherwise, only
the insane or the latter’s relatives may
file an action for annulment.
▪ The marriage may be ratified by the
insane party, after coming to reason,
freely cohabited with the other party (Art.
45[2], FC).
▪ The true test is whether the party
concerned could intelligently consent;
that is, he knew what contract he is
entering into (Hoadley vs. Hoadley, 244
N.Y. 424).
▪ Intoxication, Somnambulism at the time
of the wedding, and drug addiction which
results in lack of capacity to give consent
is equivalent to unsoundness of mind
(McKnee vs. McKnee, 49 Nev. 90; See
also 15 Sanches Roman 528).
▪ A person is presumed to be of sound
mind at any particular time and the
condition is presumed to continue to
exist, in the absence of proof to the
contrary (Mendezona vs. Osamiz, G.R.
No. 143370, February 6,2002; See also
29 Am Jur 2d Evidence § 295; Norwood
v. Norwood, 207 Ga 148, 60 SE2d 449).
certain circumstances when materiality can
affect the essence of marriage (Rabuya, The
Law on Persons and Family Relations, 2006,
p. 303).
Circumstances Constituting Fraud in
Marriage (Art. 46, FC)
a. Non-disclosure of a previous conviction by
final judgment of the other party of a crime
involving moral turpitude.
Moral turpitude is any act done contrary to
justice, honesty, principle or good morals; or an
act of baseness, vileness or depravity in private
and social duties which a man owes to his
fellowmen or to society in general, contrary to the
accepted and customary rule of right and duty
between man and man (Rabuya, The Law on
Persons and Family Relations, 2006, p. 304).
No other misrepresentation as to character,
health, rank, fortune or chastity shall constitute
such fraud as will give grounds for an action for
the annulment of marriage (Art. 46 [2], FC)
Non-disclosure of a husband’s pre-marital
relationship with another woman is not one of the
enumerated circumstances that would constitute
a ground for fraud (Anaya vs. Palaroan, G.R. No.
L-27930, November 26, 1970).
b. Concealment by the wife of the fact that at
the time of the marriage, she was pregnant
by a man other than her husband (Rabuya,
The Law on Persons and Family Relations,
2006, p. 305).
If the woman did not expressly inform the
man of her pregnancy, but such physical
condition was readily apparent to the man
(seven months pregnant), he cannot claim
lack of knowledge of such pregnancy
(Buccat vs. Buccat, G.R. No. 47101, April 25,
1941).
Even if the wife is pregnant with another
man at the time of celebration of the
marriage, the marriage cannot be annulled
because the husband knew of such fact. In
the case, the present condition of the
woman was already evident at the time of
marriage (Buccat vs. Buccat, supra.).
c. Concealment of sexually transmissible
disease (STD), regardless of its nature,
existing at the time of the marriage.
d. Drug addiction:
Requisites for Annulment due to Drug
Addiction:
1. Existing at the time of the celebration of the
marriage;
2. Continuous;
3. Appears to be incurable;
4. Unknown to the other spouse at the time of
marriage; and
5. The case is filed within 5 years from
discovery.
Note: The enumeration in Art. 46, FC is
exclusive.
4. Consent was obtained by force,
intimidation or undue influence;
Force – must be one as to prevent the party from
acting as a free agent. His free will is destroyed
by fear or compulsion.
Intimidation – one of the contracting parties is
compelled, by a reasonable and well-grounded
fear of an imminent and grave evil upon the
person or property or upon those of his
spouse/descendant/ascendant to give consent.
Undue influence – a person takes improper
advantage of his power over the will of another,
depriving him of a reasonable freedom of choice.
Requisites for Duress:
1. It must be the determining cause of the
contract;
2. It is unjust or unlawful;
3. It is serious or grave; and
4. It must produce a reasonable and well-
grounded fear from the fact that the person
who employed it has the necessary means to
inflict the threatened injury.
▪ A threat to enforce one’s claim through
competent authority, if the claim is just
or legal, does not vitiate consent (Art.
1335, NCC)
5. Impotence or impotentia copulandi
It must be a continuing and incurable physical
incapacity of consummating the marriage from
the time of marriage up to the time of filing a
petition for annulment. This refers to the physical
inability to perform the act of sexual intercourse.
37
The action must be brought by the potent Relative Impotence as Ground for
spouse, and such spouse must be unaware of the Annulment
other’s impotency (Keezer on Marriage and
Divorce, 1946 Ed.,478). When a man may not be able to have penile
erection with his wife but can have it with another
 If both parties are impotent, the marriage woman (Tompkins vs. Tompkins, supra.).
cannot be annulled because no one is
aggrieved (Sarao vs. Guevara [CA], 40 O.G. Refusal to be examined by the husband or
[1st Sup] 263) wife

 The test is not the capacity to reproduce, but
the capacity to copulate (Menciano vs. San
Jose, G.R. No. L-1967, May 28, 1951).
 The advance age of a person did not mean
that sexual intercourse is no longer possible
(People vs. Ablog, G.R. No. 125005, June 28,
1999).
Doctrine of Triennial Cohabitation
Refusal on the part of the man to submit himself
to physical examination raises the presumption of
impotence (Keezer on Marriage and Divorce,
1946 Ed., pp. 480-481). However, refusal by the
wife does not raise such presumption because of
the natural modesty of our native girls. (Jimenez
vs. Cañizares, G.R. No. L-12790, August 31,
1960)
6. Sexually transmitted disease, if
incurable

If the wife still remains a virgin after living Requisites:

together with her husband for three years, the
presumption is that the husband is impotent, and
he will have to overcome this presumption
(Tompkins vs. Tompkins, 92 N.J. Eq. 113, 11 Atl.
599).
1. It must have existed at the time of the
celebration of the marriage
2. It is serious and appears to be incurable
3. Unknown to both parties at the time of the
marriage (Rabuya, The Law on Persons and
Family Relations, 2006, p. 311).

STD: ART. 45 vs. ART. 46

ARTICLE 45
(Sexually Transmitted Disease)
Ground for annulment
Does not have to be concealed
Must be serious and incurable
The STD itself is the ground for annulment
ARTICLE 46
(Sexually Transmitted Disease)
The STD is a type of fraud which is a ground for
annulment
Must be concealed
Need not be serious nor incurable
It is the concealment that gives rise to the annulment

Prescription of Action for Annulment (Art. 47, FC)

GROUND PERSON WHO MAY PRESCRIPTION CONVALIDATION OR

FILE
Absence of By the spouse whose
parental consent parent or guardian did
(required when the not give his or her
party is at least 18 but consent;
below 21 under Art. By the parent or guardian
14, FC) who did not give consent
Unsoundness of By the sane spouse who
mind; had no knowledge of the
other’s insanity;
RATIFICATION
Within 5 years from Free cohabitation after
attaining the age of 21; reaching 21
At any time before the
minor has reached the
age of 21
At any time before the Free cohabitation after
death of either spouse insane regains sanity

38
 Any relative or guardian
or person having legal
charge of the insane
By the insane spouse During lucid interval or
after regaining sanity
Fraud By the injured party Within 5 years after the Free cohabitation after
discovery of fraud knowledge of fraud.
Force, intimidation By the injured party Within 5 years from the Free cohabitation after
or undue influence; time the force, cause has disappeared.
intimidation or undue
influence disappeared
or ceased
Impotence By the injured party Within 5 years after Cannot be ratified, but
marriage action prescribes.
Sexually By the injured party Within 5 years after Cannot be ratified, but
transmitted marriage action prescribes.
disease

Pendency of Action 1. Children conceived or born before the

judgment of annulment or absolute nullity of
In the absence of adequate provisions: the marriage under Article 36 has become
final and executory shall be considered
A written agreement between the spouses, the legitimate (Art. 54, FC).
Court shall provide for: 2. Children conceived or born of the subsequent
marriage under Article 53 shall likewise be
a. Support of the spouses; legitimate (Art. 54; Art. 53, FC).
b. Custody and support of the common
children; and Other Effects:
c. Appropriate visitation rights of the other
parent (Art. 49, FC). 1. The absolute community of property or the
conjugal partnership, as the case may be,
Paramount Considerations of the court are: shall be dissolved and liquidated.
a. Moral and material welfare of the children; 2. If either spouse contracted said marriage in
and bad faith, his or her share of the net profits
b. Children’s choice of the parent with whom of the community property or conjugal
they wish to remain. partnership property shall be forfeited in
favor of the common children or, if there are
EFFECTS OF FINAL JUDGMENT OF none, the children of the guilty spouse by a
NULLITY/ANNULMENT OF MARRIAGE previous marriage or in default of children,
the innocent spouse.
Status of Children Born under Void 3. Donations by reason of marriage shall remain
Marriages valid, except that if the donee contracted the
marriage in bad faith, such donations made
GR: Children conceived and born outside a valid to said donee may be revoked by the donor.
marriage are illegitimate. Hence, children born of 4. The innocent spouse may revoke the
void marriages are considered illegitimate (Art. designation of the other spouse who acted in
50, FC). bad faith as beneficiary in any insurance
policy, even if such designation be stipulated
XPNs: as irrevocable (Art. 43 [4], FC).
5. The spouse who contracted the subsequent
marriage in bad faith shall be disqualified to

39
6. inherit from the innocent spouse by testate
and intestate succession (Art. 43. [5]).
7. The marriage that is void ab initio is
considered as having never to have taken
place. As such, the judicial declaration of the
nullity of the marriage retroacts to the date
of the celebration of the marriage (Morigo vs.
People, 422 G.R. No. 145226, February 6,
2004).
8. In case of annulment of marriage, and the
wife is the guilty party, she shall resume her
maiden name and surname. If she is the
innocent spouse, she may resume her
maiden name and surname. However, she
may choose to continue employing her
former husband's surname, unless:
a. The court decrees otherwise, or
b. She or the former husband is married
again to another person (Art. 371, NCC).
The final judgment in such cases shall
provide for the following:
1. Liquidation – all creditors of the spouses, the
absolute community of property, or the
conjugal partnership shall be notified;
2. Partition (conjugal dwelling and the lot on
which it is situated, shall be adjudicated with
the provision of Articles 102 and 109);
3. Distribution of the properties of the spouses
4. Custody and support of the common children
5. Delivery of presumptive legitimes, unless
such matters had been adjudicated in
previous judicial proceedings.
XPN: Unless such matter has been adjudicated
in previous proceedings (Art. 50, FC).
Effect of partition provided for in the
judicial decree in the annulment or nullity
of marriage
Delivery shall not prejudice successional rights of
children accruing upon the death of either or both
parents. The value already received under the
decree of annulment is considered as an advance
on the legitime (Art. 51, FC).
Value of partition of presumptive legitimes
In said partition, the value of the presumptive
legitimes of all common children are computed as
of the date of the final judgment of the trial court,
and shall be delivered in:
40
1. Cash;
2. Property; or
3. Sound securities.
4. This is unless the parties, by mutual
agreement judicially approved, had already
provided for such matters (Art. 51, FC).
Effect of partition provided for in the
judicial decree in the annulment or nullity
of marriage
Delivery shall not prejudice successional rights of
children accruing upon the death of either or both
parents. The value already received under the
decree of annulment is considered as an advance
on the legitime (Art. 51, FC).
Effect of Non-Registration
Either of the former spouses may marry again
after compliance with the requirements of
registering the (i) judgment of annulment or
absolute nullity of marriage, (ii) the partition and
distribution of properties, and (iii) delivery of the
children’s presumptive legitimes, in the
appropriate civil registry or registries of property,
otherwise, the subsequent marriage shall be null
and void (Arts. 52 and 53, FC).
NOTES:
▪ A.M. No. 02-11-10, which took effect on
March 15, 2003, provides that the court will
only issue a decree of absolute nullity or
decree of annulment after compliance with
Article 50 and 51 of the Family Code (Sec. 19
[1]).
▪ It is clear from Article 50 of the Family Code
that Section 19(1) of the Rule applies only to
marriages which are declared void ab initio or
annulled by final judgment under Articles
40 and 45 of the Family Code. In short,
Article 50 of the Family Code does not apply
to marriages which are declared void ab
initio under Article 36 of the Family Code,
which should be declared void without
waiting for the liquidation of the properties of
the parties (Diño vs. Diño, G.R. No. 178044,
January 19, 2011).
▪ Thus, the requirement of a decree of absolute
nullity or a decree of annulment is only
required for cases covered under Article 40
and Article 45 of the Family Code (Id.).
Distinction between Annulment and Legal Between Filipinos – will not be recognized here
Separation even if allowed in the foreign country, and even
if the ground be either adultery on the part of the
ANNULMENT LEGAL wife or concubinage on the part of the husband;
SEPARATION
The marriage was There was no defect Between foreigners – recognized as valid by
defective at the very in the marriage at the the personal law of the parties involved, that is,
beginning beginning if valid according to the national law or the law of
The cause for The cause for legal their domicile depending upon the theory
annulment must separation arises after adopted by their countries (Recto vs. Harden,
already be existing at the marriage G.R. No. L-6897, November 29, 1956).
the time of marriage celebration
There are seven There are 10 grounds Between a Filipino and a foreigner – if
grounds for for legal separation obtained by either the foreigner or the Filipino
annulment and valid according to his personal law or the
Annulment dissolves The marriage Filipino, it is valid for both the foreigner and
the marriage bond; remains; the parties Filipino (Republic vs. Manalo, G.R. No. 221029,
the parties are free to are not allowed to April 24, 2018).
marry again remarry
From PIL, the grounds From PIL, the grounds Legal Separation v. Separation of Property
are generally given in are those given by
the lex loci national law Legal Separation of
celebrationis Separation Property
Must be done 1. If one prior to
C. LEGAL SEPARATION through the court marriage – may be
done through the
Legal separation is merely the separation of Note: An marriage settlement.
spouses from bed and board (Art. 65, FC). While extrajudicial 2. If done during the
it permits the partial suspension of marital agreement to existence of the
relations, the marriage bond still exists as the separate is VOID marriage- must be
marital bonds are not severed as in the case of (Art. 221, NCC) done through the
annulment or petition for nullity. courts
Always involves May exist with or
Two kinds of Divorces: separation of without legal separation
property
1. Absolute Divorce (divorce a vincula May be May be considered, in a
matrimonii) – marriage is dissolved; considered, in a sense, as one of the
2. Relative Divorce or legal separation sense, as a cause effects of legal
(divorce a mensa et thoro) – marriage is of separation of separation (Art. 63 FC)
not dissolved; here, the parties are merely property
separated from bed and board (Garcia-Recio The spouses are The spouses are not
vs. Recio, G.R. No. 138322, October, 2, necessarily necessarily separated
2001). separated

If the action for Absolute Divorce is brought
here in the Philippines:
1. Between Filipinos – will not prosper
2. Between foreigners – will not prosper
3. Between a Filipino and a foreigner – will not
prosper
If the action is brought in a foreign country:
1. Grounds: (Art. 55, FC)
a. Repeated physical violence or grossly abusive
conduct directed against the petitioner, a
common child, or a child of the petitioner;
1) If the physical violence is directed against
the wife, a common child or a child of the
wife, the same is also punishable under
R.A. 9262, otherwise known as the “Anti-

41
 Violence Against Women and Their
Children Act of 2004”
2) Violence need not be physical; it is
submitted that psychological and sexual
violence and repeated verbal abuse may
qualify as grossly abusive conduct
(Rabuya, The Law on Persons and Family
Relations, 2006, p. 352).
3) “Psychological violence" refers to
acts or omissions causing or likely to
cause mental or emotional suffering of
the victim such as but not limited to
intimidation, harassment, stalking,
damage to property, public ridicule or
humiliation, repeated verbal abuse and
mental infidelity. It includes causing or
allowing the victim to witness the
physical, sexual or psychological abuse of
a member of the family to which the
victim belongs, or to witness
pornography in any form or to witness
abusive injury to pets or to unlawful or
unwanted deprivation of the right to
custody and/or visitation of common
children (Sec. 3 [c], R.A. No. 9262).
b. Physical violence or moral pressure to compel
the petitioner to change religious or political
affiliation;
Moral pressure must be directed against the
petitioner-spouse. If the same is directed on a
common child or child of the petitioner-spouse to
compel the said child to change religious or
political affiliation, there is no ground for legal
separation (Rabuya, The Law on Persons and
Family Relations, 2006, p.351)
3. Attempt of respondent to corrupt or induce
the petitioner, a common child, or a child of
the petitioner, to engage in prostitution, or
connivance in such corruption or inducement;
It pertains to a common child or the petitioner’s
child, and not the respondent’s child.
4. Final judgment sentencing the respondent
to imprisonment of more than six years, even
if pardoned;
Conviction must occur after the celebration of the
marriage. If respondent is convicted in a final
judgment prior thereto, it is a ground for
annulment if the crime involves moral turpitude
42
and the fact of conviction is not disclosed to the
other party (Rabuya, The Law on Persons and
Family Relations, 2006, p. 353).
5. Drug addiction or habitual alcoholism of the
respondent;
Requisites:
a. There should be no condonation or
consent to the drug addiction;
b. The action must be filed within 5 years
from the occurrence of the cause;
c. Drug addiction arises during the marriage
and not at the time of marriage.
If such is present at the time of marriage and was
concealed from the other party, it shall constitute
as a ground for annulment (Art.46 [4], FC).
6. Lesbianism or Homosexuality of the
respondent;
7. Contracting by the respondent of a
subsequent bigamous marriage, whether in
the Philippines or abroad;
The subsequent marriage is void ab initio but it
does not affect the validity of the prior marriage.
Hence, the remedy of the aggrieved party in the
prior marriage is legal separation (Rabuya, The
Law on Persons and Family Relations, 2006, 354).
8. Sexual infidelity or perversion;
Sexual infidelity need not be in the form of
adultery or concubinage (Rabuya, The Law on
Persons and Family Relations, 2004, p. 355).
Sexual perversion includes all unusual or
abnormal sexual practices which may be
offensive to the feelings or sense of decency of
either the husband or the wife (Tolentino,
Persons and Family Relations, 1990, p. 323).
9. Attempt by the respondent against the life of
the petitioner; or
There must be an “intent to kill” and must not be
justified or excused, as in the case of legitimate
self-defense.
10. Abandonment of petitioner without justifiable
cause for more than one year.
These grounds for legal separation are
exclusive.
Proof needed
Mere preponderance of evidence, will suffice to
prove the existence of any of the grounds,
although in Final Judgment sentencing the
respondent to imprisonment of more than 6
years, even if pardoned, previous conviction is
essential, in view of the necessity of “Final
Judgment.” (Paras, Civil Code of the Philippines
Annotated Vol. 1, 2008, p. 543).
2. Defenses for Denying Legal Separation
(Art. 56, FC)
a. Aggrieved party has condoned the offense
or act complained of;
Condonation – conditional forgiveness or
remission, by a husband or wife, of a matrimonial
offense which the other has committed (Rabuya,
The Law on Persons and Family Relations, 2006,
p. 357).
 The act of giving money to an erring wife
and the fact that no action was taken
against her before the courts of justice are
sufficient to establish forgiveness amounting
to condonation. At any rate, pardon or
condonation does not require sexual
intercourse and it may be express or implied
(Almacen vs. Baltazar, G.R. No. L-10028,
May 23, 1958).
 Forgiveness may be expressed or implied.
Sleeping together after full knowledge of the
offense is condonation (Bugayong vs. Ginez,
G.R. No. L-10033. December 28, 1956)
 It comes after, not before the offense
(Ocampo vs. Florenciano, G.R. No. L-13554,
February 23, 1960).
 Each sexual intercourse of the wife outside
marriage is a separate act of adultery.
Therefore, condoning one act does not
necessarily imply condonation of the others
(People vs. Zapata, G.R. No. L-3047, May
16, 1951).
b. Aggrieved party has consented to the
commission of the offense or act complained
of. (Note: There is consent when either of the
spouses agreed to or did not object, despite
full knowledge, to the act, giving rise to a
ground for legal separation, before such act
was in fact committed. It may be express or
implied and done prior to the offense)
 The failure of the husband to look
actively for his adulterous wife after she
left the conjugal home does not
constitute condonation or consent of the
wife’s adulterous acts. It was not his duty
to search for her to bring her home. Hers
was the obligation to return. (Ocampo vs.
Florenciano, G.R. No. L-13554, February
23, 1960)
 An agreement between the parties that
they will not object to the other’s act of
sexual infidelity, adultery or concubinage
has been declared as void, but, though
void, is nevertheless an expression of
their clear consent to the commission of
the sexual infidelity. (People vs.
Schneckenburger, G.R. No. L-48183,
November 10, 1941)
c. Connivance between the parties in the
commission of the offense or act constituting
the ground for legal separation;
Connivance - Implies agreement (express or
implied) by both spouses to the ground for legal
separation. It is an act of the mind before the
offense was committed and involves criminality
on the part of the individual who connives
(Rabuya, The Law on Persons and Family
Relations, 2006, p. 359).
d. Mutual guilt - Both parties have given
ground for legal separation;
Recrimination or Equal Guilt ( In Pari
Delicto)
Both parties being in pari delicto, there is no
offended spouse who deserves to bring the action
(Benedicto vs. Dela Rama, G.R. No. 1056,
December 8, 1903).
e. Collusion between the parties to obtain
decree of legal separation;
Collusion - The agreement between husband
and wife for one of them to commit or to be
represented in court as having committed a
matrimonial offense, or to suppress evidence of
valid defenses, for the purpose of enabling the
43
other to obtain legal separation (Rabuya, The
Law on Persons and Family Relations, 2006. p.
359).
f. Action is barred by prescription;
An action for legal separation shall be filed within
five years from the time of the occurrence of the
cause (Art. 57, FC).
g. Reconciliation (Please see further
discussion under 7. Reconciliation)
3. Procedure
Cooling-Off Period:
GR: An action for legal separation shall in no case
be tried before six months has elapsed since the
filing of the petition (Art. 58, FC).
XPN: There is no cooling-off period if the ground
alleged pertains to those under R.A. No. 9262
(Anti-Violence Against Women and Children) are.
Confession of Judgment or Stipulation of
Facts
No decree of legal separation shall be based upon
a stipulation of facts or a confession of judgment.
In any case, the Court shall order the prosecuting
attorney or fiscal assigned to it to take steps to
prevent collusion between the parties and to take
care that the evidence is not fabricated or
suppressed (Art. 60, FC).
4. Effects of Filing the Petition for Legal
Separation (Art. 61, FC)
a. Spouses are entitled to live separately, but
the marital bond is not severed;
b. No right to have sexual intercourse with the
other spouse;
c. In the absence of an agreement between the
parties, the court shall designate the
husband, the wife or a third person, to
manage the absolute community or conjugal
partnership property.
5. Effects of Pendency of the action for
Legal Separation (Art. 62, FC)
44
The Court shall provide for:
1. Support of spouses
2. Custody of children
3. Visitation rights of the other spouse
During the pendency of the action for legal
separation, the provisions of Article 49 of the
FC, wherein the Court shall provide for the
support of the spouses and the custody and
support of the common children. (Art. 62, FC;
Araneta vs. Concepcion, G.R. No. L-9667, July
31, 1956). However, if the support is found to
be onerous, the husband can file a motion to
modify or reduce the same (Gaudionco vs.
Hon. Peñaranda, G.R. No. L-72984, November
27, 1987).
6. Effects of the Decree of Legal
Separation
a. Spouses are entitled to live separately
(Art. 63, FC). A third person may manage
the property regime. The designation of
this person may be done by the court;
b. Marriage bond shall not be severed;
c. Dissolution and liquidation of the
property regime (Art. 63, FC) which shall
be automatic upon issuance of the
decree of legal separation; (Laperal vs.
Republic, G.R. No. L-18008, October 30,
1962)
d. The offending spouse shall have no right
to the net profits and such will be
forfeited according to Art. 43(2), FC;
(Macadangdang vs. CA, G.R. No. L-
49542, September 12, 1980)
e. Custody of the minor children shall be
awarded to the innocent spouse, subject
to the provisions of Art. 213, FC (Tonog
vs. Daguimol, G.R. No. 122906, February
7, 2002).
Sec. 29 of R.A. 9262 prohibits the awarding of
custody of minor children to the perpetrator of a
woman who is suffering from battered woman
syndrome.
f. Disqualification of the offending spouse
to inherit from the innocent spouse by
intestate succession. The provisions in
favor of the offending spouse made in
the will of the innocent spouse shall be
revoked by operation of law; (Art. 63 FC)
 g. Innocent spouse may revoke the
donations (within five years from the
time the decree of legal separation has
become final) made by him in favor of the
offending spouse. However, alienations,
liens and encumbrances registered in
good faith before the recording of the
complaint for revocation in the registries
of property shall be respected; (Art. 64,
FC)
h. Innocent spouse may revoke the
designation of the offending spouse as
the beneficiary in any insurance policy,
even if the designation is irrevocable (Art.
64, FC).
i. Pursuant to Art. 198, FC, obligation for
mutual support ceases but guilty spouse
may be ordered to give support to the
innocent one; and
j. Wife continues to use her name and
surname before the legal separation.
7. Reconciliation of the spouses during
the pendency of the action.
No legal separation may be decreed unless the
Court has taken steps toward the reconciliation of
the spouses and is fully satisfied, despite such
efforts, that reconciliation is highly improbable
(Art. 59, FC).
If the spouses should reconcile, a corresponding
joint manifestation under oath duly signed by
them shall be filed with the court in the same
proceeding for legal separation (Art. 65, FC).
Effects of Reconciliation
1. On their personal relations – resumption of
cohabitation and marital relations;
2. On proceedings for the decree of legal
separation:
a. The legal separation proceedings, if still
pending, shall thereby be terminated at
whatever stage; and
b. The final decree of legal separation shall
be set aside, but the separation of
property and any forfeiture of the share
of the guilty spouse already effected
shall subsist, unless the spouses agree
to revive their former property regime.
(Art. 66, FC)
c. The court's order containing the
foregoing shall be recorded in the
proper civil registries.
Without the decree of reconciliation, even if they
reconcile the effects of the final decree of legal
separation will remain (Rabuya, Civil Law
Reviewer Vol 1, 2017, p. 133).
Agreement to revive former property
regime upon reconciliation (Art. 67, FC)
The agreement to revive former property regime
shall be executed under oath and shall specify:
a. The properties to be contributed anew to the
restored regime;
b. Those to be retained as separated properties
of each spouse; and
c. The names of all their known creditors, their
addresses and the amounts owing to each.
The agreement of revival and the motion for its
approval shall be filed with the court in the same
proceeding for legal separation, with copies of
both furnished to the creditors named therein.
After due hearing, the court shall, in its order,
take measure to protect the interest of creditors
and such order shall be recorded in the proper
registries of properties.
The recording of the ordering in the registries of
property shall not prejudice any creditor not listed
or not notified, unless the debtor-spouse has
sufficient separate properties to satisfy the
creditor's claim.
8. Effect of Death of one of the parties
An action for legal separation which involves
nothing more than bed and board separation of
the spouses is purely personal. Being personal, it
follows that the death of one party to the action
causes the death of the action itself (Lapuz-Sy vs.
Eufemio, G.R. No. 30977, January 31, 1972).
D. RIGHTS AND OBLIGATIONS BETWEEN
HUSBAND AND WIFE
Essential Obligations (Art. 68, FC)
45
GR: Performance of essential marital obligations
under Art. 68 cannot be compelled by court
because it will be a violation of personal liberty.
XPN: Giving support (Arroyo vs. Arroyo, G.R. No.
L-17014, Aug. 11, 1921)
a. Cohabitation or the obligation to live
together
GR: The right to live together also includes the
right to demand sexual intimacy from the other
spouse (Rabuya, The Law on Persons and Family
Relations, 2006, p. 389).
XPNs: The court may exempt one spouse from
living with the other, if:
1. Other spouse will live abroad; and
2. There are valid and compelling reasons
such as:
 Husband’s illicit relationship with others;
(Dadivas vs. Villanueva, G.R. No. L-
29959, December 3, 1929)
 Moderic and barbaric demands of the
husband to have sexual intercourse;
(Goita vs. Campos-Rueda, G.R. No.
11263, November 2, 1916)
 Gross insults from the husband; (Talana
v. Willis [CA], 35 O.G. 1369)
 Maltreatment of the husband; (Arroyo vs.
Vasquez de Arroyo, G.R. No. L-17014,
August 11, 1921)
 Virtually driving off the wife away from
the family home and threaten with
violence if she returns; (Garcia vs.
Santiago, G.R. No. L-28904, December
29, 1928)
 Gambling of the husband, refusal to
support the family, and insulting of the
wife; (Panuncio vs. Sula [CA], 34 O.G.
1291)
 If the husband lives as a vagabond
having no fixed home (1 Manresa 329).
b. Observe mutual love, respect and
fidelity
46
Marriage is definitely not for children but for two
consenting adults who view the relationship with
love, respect, sacrifice and a continuing
commitment to compromise, conscious of its
value as a sublime institution. (Chi Ming Tsoi vs.
CA, G.R. No. 119190, January 16, 1997).
c. Render mutual help and support
The spouses are jointly responsible for the
support of the family. The expenses for such
support and other conjugal obligations shall be
paid from the community property and, in the
absence thereof, from the income or fruits of their
separate properties. In case of insufficiency or
absence of said income or fruits, such obligations
shall be satisfied from the separate properties
(Art. 70, FC).
Mutual help includes the right to defend the life
and honor of the other spouse (Art. 11, NCC).
d. Fix family domicile
The husband and wife shall fix the family
domicile. In case of disagreement, the court shall
decide (Art 69, FC).
 In the event that one spouse refuses to live
with the other in the family dwelling, the
court is powerless to enforce the provisions
of Article 69 of the Family Code; even such
refusal is not justifiable (Illusorio vs. Bilder,
G.R. No. 139789, May 12, 2000).
e. Joint responsibility for support of the
family and other conjugal obligations
The expenses for such support and other
conjugal obligations shall be paid from the
community property and, in the absence thereof,
from the income or fruits of their separate
properties. In case of insufficiency or absence of
said income or fruits, such obligations shall be
satisfied from their separate properties (Art. 70,
FC).
f. Management of the household
The management of the household shall be the
right and the duty of both spouses. The expenses
for such management shall be paid in accordance
with the provisions of Article 70 (Art. 71, FC).
Expenses for Support, Other Conjugal
Obligations and Management of Household
are Chargeable to the following order:
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 (Art. 70, FC).
Effect of Neglect of Duty
When (i) one of the spouses neglects his or her
duties to the conjugal union, or (ii) commits acts
which tend to bring danger, dishonor or injury to
the other or to the family, the aggrieved party
may apply to the court for relief (Art. 72, FC).
Some of the reliefs available under the law are:
(i) cutting the wife’s support if she refuses to
cohabit with the husband without justifiable
cause; (ii) filing for legal separation if there are
grounds to support such; (iii) injunction to stop
further disposition of property aside from seeking
sole administration of the conjugal or community
property; (iv) criminal prosecution for adultery or
concubinage; and (v) protection orders.
Exercise of Profession
Either spouse may exercise any legitimate
profession, occupation, business or activity
without the consent of the other. The latter may
object only on valid, serious, and moral grounds
(Art. 73, FC).
In case of disagreement, the court shall decide
whether or not:
1. The objection is proper, and
2. Benefit has occurred to the family prior to the
objection or thereafter.
▪ If the benefit accrued prior to the
objection, the resulting obligation shall
be enforced against the community
property.
▪ If the benefit accrued after the
objection, such obligation shall be
enforced against the separate property of
the spouse who has not obtained
consent.
If the wife engages in business:
a. All properties will be liable if the husband
consented;
b. The community and the separate property of
the wife shall be liable if the husband does
not give his consent, unless it pertains to the
community property. (Paras, Civil Code Vol. 1
Persons and Family Relations, 2008 p. 516)
Magna Carta for Women (R.A. 9710)
The Magna Carta of Women is comprehensive
women’s human rights law that seeks to eliminate
discrimination against women by recognizing,
protecting, fulfilling and promoting the rights of
Filipino women, especially those in marginalized
sector.
Equal Rights in All Matters Relating to
Marriage and Family Relations (Sec. 19, R.A.
No. 9710)
The State shall take all appropriate measures to
eliminate discrimination against women in all
matters relating to marriage and family relations
and shall ensure:
1. The same rights to enter into and leave
marriages or common law relationships
referred to under the Family Code without
prejudice to personal or religious beliefs;
2. The same rights to choose freely a spouse
and to enter into marriage only with their free
and full consent. The betrothal and the
marriage of a child shall have no legal effect;
3. The joint decision on the number and spacing
of their children and to have access to the
information, education and means to enable
them to exercise these rights;
4. The same personal rights between spouses
or common law spouses including the right to
choose freely a profession and an
occupation;
5. The same rights for both spouses or common
law spouses in respect of the ownership,
acquisition, management, administration,
enjoyment, and disposition of property;
6. The same rights to properties and resources,
whether titled or not, and inheritance,
whether formal or customary; and
7. Women shall have equal rights with men to
acquire change or retain their nationality.
47
▪ Neither marriage to an alien nor change of
nationality by the husband during marriage
shall automatically change the nationality of
the wife, render her stateless or force upon
her the nationality of the husband (Sec 19,
R.A. No. 9710)
▪ Various statutes of other countries
concerning dual citizenship that may be
enjoyed equally by women and men shall
likewise be considered (Sec 19, R.A. No.
9710).
▪ Customary laws shall be respected provided
that they shall not discriminate against
women (Sec 19, R.A. No. 9710).
E. PROPERTY RELATIONS BETWEEN
HUSBAND AND WIFE
1. GENERAL PROVISIONS
The property relationship between husband and
wife shall be governed in the following order:
1. By marriage settlements executed before the
marriage;
2. By the provisions of the Civil Code; and
3. By the local custom. (Art. 74, FC)
Marriage settlements
It is a contract entered into by the future spouses
fixing the matrimonial property regime that
should govern during the existence of the
marriage (Paras, Civil Code of the Philippines
Annotated, Persons and Family Relations Vol. 1,
2008 p. 515).
The future spouses may, in the marriage
settlement, agree upon any of the following:
1. Regime of absolute community;
2. Conjugal partnership of gains;
3. Complete separation of property; or
4. Any other regime (Art. 75, FC).
In the absence of a marriage settlement, or when
the regime agreed upon is void, the system of
absolute community of property as established in
this Code shall govern (Art.75, FC).
48
Requisites of a Valid Marriage Settlement
1. In writing; (Art. 77, FC)
An agreement in consideration of marriage
must be in writing; otherwise, it shall be
unenforceable. (Art. 1403[2C], NCC).
2. Signed by the parties; (Art. 77, FC)
3. Must not contain provision contrary to law,
good morals, good customs, public order,
and public policy or against the dignity of
either spouse. It must not be prejudicial to
third person; (Art. 77, FC)
4. Executed before the celebration of the
marriage; (Art. 76, FC)
5. Fixing the terms and conditions of their
property relation;
6. Registration (to bind third persons) (Art. 77,
FC); and
7. Additional signatories:
a. A minor who according to law may
contract marriage may also execute his
or her marriage settlements, but they
shall be valid only if the persons
designated in Article 14 [parents] to give
consent to the marriage are made parties
to the agreement. (Art. 78, FC).
b. If the party executing the settlement is
under civil interdiction or any other
disability, the guardian appointed by the
court must be made a party to the
settlement (Art. 79, FC).
Effect of marriage settlement if marriage
does not take place
GR: Everything stipulated in the settlements or
contracts in consideration of a future marriage,
including donations between the prospective
spouses made therein, shall be rendered void if
the marriage does not take place (Art. 81, FC).
XPN: Stipulations that do not depend upon the
celebration of the marriages shall be valid (Art.
81, FC).
Applicable law for marriage settlements
GR: In the absence of a contrary stipulation in a
marriage settlement, the property relations of the
spouses shall be governed by Philippine laws,
regardless of the place of the celebration of the
marriage and their residence (Art. 80, FC).
XPNs:
a. Both spouses are aliens;
b. With respect to the extrinsic validity of
contracts affecting property:
1) Not situated in the Philippines and
executed in the country where the
property is located; and
2) Situated in a foreign country whose laws
require different formalities for its
extrinsic validity (Art. 80, FC).
 Prior to the effectivity of the Family
Code, in the absence of a marriage
settlement or when the same is void:
Conjugal Partnership of Gains
will govern (Rabuya, The Law on
Persons and Family Relations, 2006,
p. 421).
 If there is no marriage settlement,
the property regime shall be the
Absolute Community of
Property. (Sta. Maria, Persons and
Family Relations, 2019, p. 443)
 Under the Family Code, in the
absence of a marriage settlement or
when the regime agreed upon is
void: System of Absolute
Community of Property will
govern (Art. 75, FC).
2. DONATIONS BY REASON OF MARRIAGE
(Donation Propter Nuptias)
Requisites of Donation Propter Nuptias (Art.
82, FC):
1. It is made before the celebration of marriage.
2. It must be made in consideration of the
marriage.
3. It must be made in favor of one or both of
the future spouses.
Otherwise, the GRs on donation shall govern.
Form Required by Law: These donations are
governed by the rules on ordinary donations
established in Title III of Book III of the Civil
Code, insofar as they are not modified by the
following articles (Art. 83, FC).
Limitation on Donations by Reason of
Marriage
If the regime agreed upon is other than absolute
community, they cannot donate to each other in
their marriage settlements more than one-fifth of
their present property. Any excess shall be
considered void (Art. 84, FC).
The donation may comprehend all the present
property of the donor, or part thereof, provided
he reserves, in full ownership or in usufruct,
sufficient means for the support of himself, and
all relatives who, at the time of the acceptance of
the donation, are by law entitled to be supported
by the donor. Without such reservation, the
donation shall be reduced on petition of any
person affected (Art. 750, NCC).
No person may give or receive, by way of
donation, more than he may give or receive by
will. The donation shall be inofficious in all that it
may exceed this limitation (Art. 752, NCC).
Donation propter nuptias of encumbered
property
Donations by reason of marriage of property
subject to encumbrances shall be valid. In case
of foreclosure of the encumbrance and the
property is sold for:
1. Less than the total amount of the obligation
secured, the donee shall not be liable for the
deficiency.
2. More than the total amount of said obligation,
the donee shall be entitled to the excess (Art.
85, FC).
Donation by reason of marriage may be
revoked in the following cases
1. If the marriage is not celebrated or judicially
declared void ab initio except donations made
in the marriage settlements, which is
governed by Art. 81, FC;
a. If marriage is not celebrated
Prescriptive Period: Five years from date
of supposed solemnization of marriage (Art.
1149, NCC).
b. If marriage is judicially void, it depends:
49
  If subsequent marriage is void pursuant
to Art. 40, FC in relation to Arts. 52 and
53, FC because it was contracted by a
spouse before the prior marriage is
judicially declared void. If donee-spouse
contracted subsequent void marriage in
bad faith.
Prescriptive Period: Revoked by operation of
law
 Judicially declared void on other grounds.
Prescriptive Period: Five years from finality of
judicial declaration of nullity (if action to recover
the property)
2. When the marriage takes place without the
consent of the parents or guardian, as
required by law;
Prescriptive Period: Five years from the time
the donor came to know that the required
parental consent was not obtained
3. When the marriage is annulled, and the
donee acted in bad faith;
Prescriptive Periods:
(a) Five years from finality of decree Upon legal
separation, the donee being guilty spouse;
(b) Five years from the time the decree of legal
separation becomes final
4. If it is with a resolutory condition and the
condition is complied with;
Prescriptive Period: Five years from happening
of condition
5. When the donee has committed an act of
ingratitude as specified by the provision of
the Civil Code on donations in general (Art.
86, FC).
50
Prescriptive Period: One year from donor’s
knowledge of that fact
Rule on Donations between Spouses during
Marriage
GR: Every donation or grant of gratuitous
advantage, direct or indirect, between the
spouses during the marriage shall be void (Art.
87, FC).
Reason:
1. To prevent the weaker spouse from being
influenced by the stronger spouse;
2. To protect creditors;
3. To prevent an indirect modification of the
marriage settlement during marriage (Art.
76).
XPNs:
1. Moderate gifts given on occasion of family
rejoicing; or
2. Donations mortis causa.
 Donation between common-law spouses
is void (Art. 87, FC).
Void donations by the Spouses
1. Those made between persons who were
guilty of adultery or concubinage at the time
of the donation;
▪ In this case, the action for declaration of
nullity may be brought by the spouse of the
donor or donee; and the guilt of the donor
and donee may be proved by
preponderance of evidence in the same
action (Art. 739, NCC, last par.).
2. Those made between persons found guilty of
the same criminal offense, in consideration
thereof; and
3. Those made to a public officer or his wife,
descendants and ascendants, by reason of
his office (Art. 739, NCC).
MARRIAGE SETTLEMENT, DONATION
PROPTER NUPTIAS AND ORDINARY
DONATIONS

NATURE MARRIAGE DONATION PROPTER ORDINARY

SETTLEMENT NUPTIAS DONATION
Definition Contract entered into by Act of liberality made An act of liberality
a man and a woman who before marriage in favor whereby a person
intend to get married, of one or both of the gratuitously disposes of
fixing the property future spouses. a thing or a right in
regime that will govern favor of another, who
their present and future accepts it.
property during
marriage.
Scope and Should not prejudice 3rd May include future Cannot comprehend
Restrictions persons property future property

Will be void if marriage If regime is not absolute Cannot be made by

does not take place community property minors
spouses cannot donate
Cannot stipulate that more than 1/5 of their May comprehend all
donation between them present property. property of donor
during marriage will be provided donor must
valid. No indirect donations reserve sufficient
means to support
Must not prejudice himself.
legitimes
Must not prejudice
legitimes
Effectivity Start of marriage. When it is made
Who executes Future spouse Any person in favor of Between any person
one or both of the future
If party is 18-21 years spouses
old, the parent whose
consent is needed must
be a party thereto

For persons suffering

from civil interdiction or
other disability, the
guardian must be a party
thereto.
When to execute Before the celebration of Before the celebration of Anytime
the marriage the marriage
Form of Execution In writing, otherwise, Same formalities as that Movables – oral or
unenforceable. required in ordinary written.
donations, otherwise,
void Immovable – public
document.
Revocation Judicial separation of Marriage is not Donor, after the
property, voluntarily or celebrated or judicially donation should have
for cause. declared void ab initio. legitimate, illegitimate,
legitimated children,

51
 NATURE MARRIAGE DONATION PROPTER ORDINARY
SETTLEMENT NUPTIAS DONATION
Marriage takes place even though they are
without the needed posthumous.
consent.
Child of donor, whom
Marriage is annulled, the latter believed
donee acted in bad faith. dead, turns out to be
alive.
In case of legal
separation and donee is Donor subsequently
guilty spouse. adopts a minor child.

Resolutory condition is Acts of ingratitude by

not complied with. donee.

Donee committed an act Failure to comply with

of ingratitutde. condition attached to
donation.

Heirs of any person Those who have right

Who may question whose rights are to legitimate and their
validity prejudiced. heirs.

commencement of the community regime at any

KINDS OF PROPERTY REGIME other time shall be void (Art. 88, FC).

3. ABSOLUTE COMMUNITY OF PROPERTY Rules on Co-ownership applies suppletorily

(ACP)
General Provision
A marriage settlement where spouses are
considered co-owners of ALL property brought
into the marriage which are not otherwise
excluded from the community property either by
the provisions of the Family Code or by the
marriage settlement.
Applies when:
The provisions on co-ownership shall apply to the
absolute community of property between the
spouses in all matters not provided by the
Chapter on ACP (Art. 90 FC).
What constitutes community property
GR: Community property shall consist of all
property owned by the spouses at the time of
the marriage or acquired thereafter (Art. 91,
FC).

1) Agreed upon in the marriage settlement; XPNs:

2) In default of a marriage settlement; and
3) When marriage settlement is void (Art.75,
FC).
Commencement
The absolute community of property between
spouses shall commence at the precise
moment that the marriage is celebrated.
Any stipulation, express or implied, for the
1. Property acquired during the marriage by
gratuitous title by either spouse, its fruits and
income, unless it is expressly otherwise
provided by the donor, testator or grantor.
2. For personal and exclusive use, except
jewelry.

52
3. Acquired before the marriage by either
spouse who has legitimate descendants by
a former marriage including the fruits and
income (Art. 92, FC).
4. Those excluded from the absolute
community as in the marriage settlement
(Art. 91, FC).
The above mentioned shall be excluded from the
absolute community property.
Presumption: Property acquired during the
marriage is presumed to belong to the
community, unless proven that is one of those
excluded therefrom (Art. 93, FC).
Liability of the Absolute Community of
Property
1. The support of the spouses, common
children, and legitimate children of either
spouse;
2. Illegitimate children shall be governed by
the provisions of the Code on Support;
3. All debts and obligations contracted during
marriage;
4. Debts and obligations contracted by either
spouse without the consent of the other;
5. All taxes, liens, charges and expenses,
including major or minor repairs;
6. All taxes and expenses for mere
preservation made during marriage;
7. Expenses of either spouse to commence or
complete a professional or vocational
course;
8. Antenuptial debt;
9. The value of what is donated or promised by
both spouse;
10. Advances of the debtor-spouse upon
liquidation of the community; and
11. Expenses of litigation between the spouses
unless the suit is found to be groundless.
When the community property is insufficient to
cover the foregoing liabilities, except par. 9, the
spouses shall be solidarily liable for the unpaid
balance with their separate properties. (Art. 94,
FC)
Administration of Absolute Community of
Property
The administration and enjoyment of the
community property shall belong to both
spouses jointly. In case of disagreement, the
husband’s decision shall prevail. (Art. 96, FC)
Either spouse may dispose by will of his or her
interest in the community property. (Art. 97, FC)
Neither spouse may donate any community
property without the consent of the other,
unless moderate donations. (Art. 98, FC)
Dissolution of Absolute Community
Regime
1. Upon the death of either spouse;
2. Decree of legal separation;
3. Marriage is annulled or declared void;
4. Judicial separation of property during the
marriage under Article 134 to 138. (Art. 99,
FC)
A spouse is deemed to have abandoned the
other when he or she has left the conjugal
dwelling without any intention of returning. The
spouse who has left the conjugal dwelling for a
period of three months or has failed within the
same period to give any information as to his or
her whereabouts shall be prima facie presumed
to have no intention of returning to conjugal
dwelling. (Art. 101, par. 3, FC)
Procedure on Liquidation of the Absolute
Community Assets and Liabilities
1. An inventory of all the ACP properties and
exclusive properties of each spouse;
2. Payment of debts and obligations of the
absolute community;
In case of insufficiency of said assets, the
spouses shall be solidarily liable for the unpaid
balance with their separate properties taking
into consideration the charges and obligations
upon the ACP (Art. 94, FC).
3. Delivery of exclusive properties to spouses -
whatever remains of the exclusive
properties of the spouses shall thereafter be
delivered to each of them.
4. Net remainder = Net assets of ACP
GR: The net remainder of the properties of the
absolute community which shall be divided
equally between husband and wife.
53
XPN: Effect of Failure to Liquidate

a. Unless a different proportion or division was Should the surviving spouse contract a
agreed upon in the marriage settlements or; subsequent marriage without compliance with
b. There has been a voluntary waiver of such the foregoing requirements, a mandatory
share provided in this Code or; regime of complete separation of property shall
c. The share of the guilty spouse is forfeited. govern the property relations of the subsequent
marriage (Art. 103, FC).
For purpose of computing the net profits subject
to forfeiture in accordance with Articles 43, No. Liquidation of ACP of Two Marriages by
2 (one of the spouses contracted subsequent the Same Person
marriage in bad faith, his share shall be forfeited
in favor of the common children, if none, the Whenever the liquidation of the community
children of the guilty spouse by a previous properties of two or more marriages contracted
marriage or in default of children, the innocent by the same person before the effectivity of this
spouse) and 63, No. 2 (the offending spouse in Code is carried out simultaneously, the
case of legal separation shall have no right to respective capital, fruits and income of each
any share of the net profits earned by the ACP) community shall be determined upon such proof
the said profits shall be the increase in value as may be considered according to the rules of
between the market value of the community evidence. In case of doubt as to which
property at the time of the celebration of the community the existing properties belong, the
marriage and the market value at the time of its same shall be divided between the different
dissolution (Art. 102, FC). communities in proportion to the capital and
duration of each (Art. 104, FC).
5. Delivery of presumptive legitimes of the
common children. ABSOLUTE CONJUGAL
COMMUNITY OF PARTNERSHIP OF
6. Adjudication of conjugal dwelling and lot. PROPERTY GAINS
All the properties Each spouse retains
a. In accordance with agreement of the owned by the his/her property
parties, if any; spouses at the time before the marriage
b. if no agreement, it shall be adjudicated of marriage become and only the fruits
to the spouse with whom the majority of community property and income of such
the common children choose to remain; properties become
part of the conjugal
Effect of Termination of ACP due to death properties during the
of one of the Spouses marriage.

Upon the termination of the marriage by death, Upon dissolution and Upon dissolution of
the community property shall be liquidated liquidation of the the partnership, the
within one year from death of the deceased community property separate properties
spouse in the same proceeding for the what is divided of the spouses are
settlement of the estate of the deceased equally between the returned and only the
(Art.103, FC). If no judicial settlement spouses or their heirs net profits of the
proceeding is instituted, the surviving spouse is the net remainder partnership are
shall liquidate the community property either of the properties of divided equally
judicially or extra-judicially within one year from the absolute between the spouses,
the death of the deceased spouse. If upon the community property. and their heirs.
lapse of the one-year period, no liquidation is
made, any disposition or encumbrance involving
the community property of the terminated
marriage shall be void (Art. 103, FC).

54
4. CONJUGAL PARTNERSHIP OF GAINS
(CPG)
It is a partnership established through the
marriage of a man and a woman, who as
partners, place in a common fund:
a. The proceeds, the products, fruits and
income from their separate properties;
b. Those acquired by either or both of them
through their efforts;
c. Those acquired by them by chance;
The dissolution of the marriage or of the
partnership, the net gains or profits obtained by
either or both spouses shall be divided equally
between them, unless otherwise agreed in the
marriage settlements. (Art. 106, FC).
Presumption of CPG - All property acquired
during the marriage, whether the acquisition
appears to have been made, contracted or
registered in the name of one or both spouses,
is presumed to be conjugal unless the contrary
is proved (Art. 116, FC).
Conjugal Partnership of Gains Will Govern:
In case the future spouses agree in the marriage
settlements that the regime of conjugal
partnership gains shall govern their property
relations during marriage (Art. 105, FC).
Commencement of CPG
CPG shall commence at the precise moment that
the marriage is celebrated (Art 107, FC in
relation to Art. 88, FC).
Rules that govern the CPG
The rules on the contract of partnership in all
that is not in conflict with what is expressly
determined in the FC or by the spouses in their
marriage settlements (Art. 108, FC).
What constitutes CPG -Those acquired by the
spouses:
1. Onerous title during marriage at the
expense of common fund;
2. Labor, work, profession or industry of either
or both spouses;
3. Fruits, natural, industrial or civil, due or
received during marriage from common
property, as well as net fruits from exclusive
property of each spouse;
4. Share of either spouse in hidden treasure as
finder or owner of property where treasure
is found;
5. Through occupation;
6. Livestock existing upon dissolution of
conjugal partnership of gains in excess of
number of each kind brought to the
marriage by either spouse; and
7. Those acquired by chance (Art. 117, FC).
But losses from a game of chance shall be
borne exclusively by the loser-spouse.
Exclusive property of each spouse (Arts.
109-115)
1. Those brought to the marriage as his or her
own;
2. That which each acquires during the
marriage by gratuitous title;
3. That which is acquired by right of
redemption, by barter or by exchange with
property belonging to only one of the
spouses; and That which is purchased with
exclusive money of the wife or of the
husband (Art. 109, FC).
4. The amount of principal which may be
collected during the marriage in partial
payments or by installments on the amount
of credit belonging to one of the spouses.
XPN: Interests falling due during the marriage
on the principal shall belong to the conjugal
partnership (Art. 119, FC).
The spouses retain the ownership, possession,
administration and enjoyment of their exclusive
properties (Art. 110, FC).
Rule on transfer of exclusive property
under CPG
1. Either spouse may, during the marriage,
transfer the administration of his or her
exclusive property to the other by means of
a public instrument, which shall be recorded
in the registry of property of the place the
property is located (Art. 110, FC).
2. A spouse, may mortgage, encumber,
alienate or otherwise dispose of his or her
exclusive property, without the consent of
55
 the other spouse, and appear alone in court
to litigate with regard to the same (Art. 111,
FC).
3. The alienation of any exclusive property of a
spouse administered by the other
automatically terminates the administration
over such property and the proceeds of the
alienation shall be turned over to the owner-
spouse (Art. 112, FC).
 The settled rule is that the sale or
encumbrance of a conjugal property
requires the consent of both the
husband and the wife (Guiang vs. CA,
G.R. No. 127172, June 26, 1998). The
absence of the consent of one render
the entire sale or encumbrance null and
void, including the portion of the
conjugal property pertaining to the
husband who contracted the sale.
Neither would the conjugal partnership
be liable for the loan on the ground that
it redounded to the benefit of the family.
The sweeping conclusion that the loan
was obtained by the husband in order to
finance the construction of housing
units, without however adducing
adequate proof, does not persuade
(Homeowners Savings & Loan Bank vs.
Dailo, G.R. No. 153802, March 11,
2005).
Rules on donation of exclusive property
1. Property donated or left by will to the
spouses, jointly and with designation of
determinate shares, shall pertain to the
donee-spouses as his or her own exclusive
property, and in the absence of designation,
share and share alike, without prejudice to
the right of accretion when proper (Art. 113,
FC).
2. If the donations are onerous, the amount of
the charges shall be borne by the exclusive
property of the donee spouse, whenever
they have been advanced by the conjugal
partnership of gains (Art. 114., FC).
3. Retirement benefits, pensions, annuities,
gratuities, usufructs and similar benefits
shall be governed by the rules on gratuitous
or onerous acquisitions as may be proper in
each case (Art. 115, FC).
56
Ownership of property bought through
instalment
Property bought on installments paid partly from
exclusive funds of the spouses and partly from
conjugal funds:
1. If full ownership vested before marriage –
it shall belong to the buyer spouse;
2. If full ownership vested during marriage –
it shall belong to the conjugal partnership
▪ In either case, any amount advanced by
the partnership or by either or both
spouses shall be reimbursed by the
owner or owners upon liquidation of the
partnership (Art. 118, FC).
Rule on Ownership of Improvements (Art.
120, FC)
When will apply:
1. If there is an improvement made on the
separate property whether for utility or
adornment;
2. At the expense of the partnership or through
the acts or efforts of either or both spouses;
and
3. Improvement is made during the marriage.
▪ Reverse Accession:
When the cost of the improvement made by
the conjugal partnership and any resulting
increase in value are more than the value
of the property at the time of the
improvement, the entire property of one of
the spouses shall belong to the conjugal
partnership. Subject to reimbursement of
the value of the property of the owner-
spouse at the time of the improvement.
▪ Accession
When the cost of the improvement made by
the conjugal partnership and any resulting
increase in value are less than the value of
the property at the time of the
improvement, the entire property remains
the exclusive property of the spouse.
 CONJUGAL 2. The benefits received by a spouse from the
CO-OWNERSHIP
PARTNERSHIP CPG during the marriage are returned to the
Arises only because of May arise by an CPG;
marriage contract. ordinary contract. 3. Reimbursement for the use of exclusive
Conjugal owners are Co-owners may be two funds/exclusive property, ownership of
always only two or more which has been vested in the CPG;
Profits are generally 50- Profits are proportional 4. Payment of debts and obligations of the
50 unless a contrary to respective interests. conjugal partnership; (Art. 129)
stipulation is in a
marriage settlement. ▪ In case of insufficiency of said assets,
Death of either husband Death of one does not the spouses shall be solidarily liable for
or wife dissolves the dissolve the co- the unpaid balance with their separate
conjugal partnership ownership. properties, taking into consideration the
Generally, the husband Generally, all co- charges and obligations upon the ACP
is the administrator. owners administer (Art. 121, FC)
Encouraged by law to Co-ownership
provide for better family discouraged by law 5. Delivery of exclusive properties to spouses;
solidarity 6. Payment of loss or deterioration of movables
Created by operation of Created by will or used for the benefit of the family, belonging
law upon celebration of consent of the parties to either spouse, even due to fortuitous
marriage. event
It is the law that governs The will of the partners 7. Net remainder = Net profits of CPG
shall govern
GR: The net remainder of the properties of the
Does not possess any It possesses a legal
conjugal partnership shall be divided equally
legal personality distinct personality
between husband and wife.
from that of the
spouses.
XPN:
Begins precisely on the Begins from the
a. Unless a different proportion or division was
date of the celebration moment of the
agreed upon in the marriage settlements or;
of the marriage – no execution of the
b. There has been a voluntary waiver of such
contrary stipulation is contract but a contrary
share provided in this Code or;
allowed stipulation is allowed
c. The share of the guilty spouse is forfeited.
Not formed particularly Formed for profit
for profit
8. Delivery of presumptive legitimes of the
Profits are divided Profits are divided
common children;
according to previous
9. Adjudication of conjugal dwelling and lot:
agreement; if there is
no previous
a. In accordance with agreement of the
agreement, in
parties, if any;
proportion to the
b. If no agreement, it shall be adjudicated
amount contributed
to the spouse with whom the majority
Administration and Management is of the common children choose to
enjoyment of the conferred upon the remain;
conjugal partnership partners so appointed
property belong to by the others; Presumption: Children below the age of seven
both spouses jointly years are deemed to have chosen the mother,
unless the court has decided otherwise.
Liquidation of the Conjugal Partnership
Assets and Liabilities In case there is no majority among children, the
court shall decide the matter taking into
1. An inventory of all the CPG properties and consideration the best interests of the children
exclusive properties of each spouse; (Art. 129, FC).

57
Effect of Termination of CPG due to death
of one of the Spouses
Upon the termination of the marriage by death,
the community property shall be liquidated
within one year from death of the deceased
spouse in the same proceeding for the
settlement of the estate of the deceased (Art.
130, FC).
▪ If no judicial settlement proceeding is
instituted, the surviving spouse shall
liquidate the community property either
judicially or extra-judicially within one year
from the death of the deceased spouse. If
upon the lapse of the one-year period, no
liquidation is made, any disposition or
encumbrance involving the community
property of the terminated marriage shall be
void (Id.).
Effect of Failure to Liquidate
Should the surviving spouse contract a
subsequent marriage without compliance with
the foregoing requirements, a mandatory
regime of complete separation of property shall
govern the property relations of the subsequent
marriage (Art. 130, FC).
Liquidation of CPG of Two Marriages by
the Same Person
Whenever the liquidation of the community
properties of two or more marriages contracted
by the same person before the effectivity of this
Code is carried out simultaneously, the
respective capital, fruits and income of each
community
shall be determined upon such proof as may be
considered according to the rules of evidence. In
case of doubt as to which community the
existing properties belong, the same shall be
divided between the different communities in
proportion to the capital and duration of each
(Art. 131, FC).
Provisions Common to ACP and CPG
Prohibition on the waiver of rights,
interest, shares and effects (Art. 89, FC for
ACP; Art. 107, FC for CPG)
58
GR: No waiver of rights, interests, shares and
effects of the absolute community of property
during the marriage can be made.
XPN: In case of judicial separation of property
(Art. 89, FC).
When the waiver takes place upon a judicial
separation of property, or after the marriage has
been dissolved or annulled, the same shall
appear in a public instrument and shall be
recorded in the office of the local civil registrar
where the marriage contract was recorded as
well as in the proper registry of property (Arts.
89 and 77, FC).
Remedy of Creditors in case of waiver of
debtor-spouse
The creditors of the spouse who made such
waiver may petition the court to rescind the
waiver to the extent of the amount sufficient to
cover the amount of their credits (Art. 89 [2],
FC).
Charges upon and obligations of absolute
community property and conjugal
property
The absolute community of property shall be
liable for (Art. 94, FC for ACP; Art. 121, FC for
CPG): (DELTS)
1) Debts
a. All debts and obligations contracted
during the marriage by:
i. The designated administrator-
spouse for the benefit of the
community; or
ii. By both spouses; or
iii. By one spouse with the consent of
the other.
b. Debts and obligations contracted by
either spouse without the consent of
the other to the extent that the
family may have been benefited.
c. Ante-nuptial debts of either spouse
insofar as they have redounded to the
benefit of the family.
d. Ante-nuptial debts of either spouse
other than those falling under item “c”
stated above, such as:
 i. The support of illegitimate children
of either spouse; and
ii. Liabilities incurred by either spouse
by reason of a crime or a quasi-
delict.
Here, the ACP becomes automatically liable in
case of absence or insufficiency of the exclusive
property of the debtor-spouse, the payment of
which shall be considered as advances to be
deducted from the share of the debtor-spouse
upon liquidation of the community. This is not
applicable to CPG, as the CPG does not become
automatically liable for its payment even if the
debtor-spouse has no or has insufficient
exclusive property.
2) Education and Self-Improvement:
a. Expenses to enable either spouse to
commence or compete a professional,
vocational, or other activity for self-
improvement.
The value of what is donated or promised by
both spouses in favor of their common
legitimate children for the exclusive purpose
of commencing or completing a professional
or vocational course or other activity for
self-improvement.
3) Expenses of litigation between the spouses
unless the suit is found to be groundless.
4) Taxes
a. All taxes, liens, charges and expenses,
including major or minor repairs, upon
the community property.
b. All taxes and expenses for mere
preservation made during marriage
upon the separate property of either
spouse used by the family.
In ACP, item “4.b” must pertain to the property
used by the family before said obligation can be
charged against the ACP, which is not a
requirement in CPG. (Rabuya, The Law on
Persons and Family Relations, 2006, p. 435)
5) Support- The support of the spouses, their
common children, and legitimate children of
either spouse.
The support of illegitimate children shall be
governed by the provisions of Family Code on
Support.
In case ACP/CPG is insufficient to cover
the foregoing liabilities
The spouses shall be solidarily liable for the
unpaid balance with their separate properties.
(Art. 94, par [2], FC for ACP; Art. 121, par [2],
FC for CPG)
GR: The payment of personal debts
contracted by the husband or the wife before or
during the marriage shall NOT be charged to the
conjugal partnership.
XPNs:
1. They redounded to the benefit of the family;
2. Fines and indemnities imposed upon them;
and
3. Support of illegitimate children of either
spouse.
Here, it is enforced against the partnership asset
if the spouse who is bound should have no
exclusive property or insufficient. (Art. 122, FC)
Ownership, administration, enjoyment
and disposition of the community property
Joint Administration -The administration and
enjoyment of the community property shall
belong to both spouses jointly (Art. 96, FC for
ACP; Art. 124, FC for CPG).
In case of disagreement, the husband’s decision
shall prevail, subject to recourse to the court by
the wife for proper remedy, which must be
availed of within five years from the date of the
contract implementing such decision.
Sole Administration – One spouse may
assume sole power of administration when:
a. Other spouse is incapacitated;
b. Other spouse is unable to participate in the
administration of the common properties;
c. During the pendency of a legal separation
case; or
d. If one spouse abandons the other or fails to
comply with his/her obligations to the
family.
59
Limitation to Sole Administration:
a. No power to dispose community/conjugal
partnership property; and
b. No power to encumber community/conjugal
partnership property.
XPNs:
a. With authority of the court; or
b. With written consent of the other spouse
In the absence of such authority or consent, the
disposition or encumbrance shall be void.
Continuing offer
The transaction, however, shall be construed as
a continuing offer on the part of the consenting
spouse and the third person, and may be
perfected as a binding contract upon the
acceptance by the other spouse or authorization
by the court before the offer is withdrawn by
either or both offerors.
Rules on Donation and Disposition of
Interest in the Community Property:
1. Either spouse may dispose by will of his or
her interest in the community property (Art.
97, FC).
2. Neither spouse may donate any community
property without the consent of the other
(Art. 98, FC).
XPN: Moderate donations for:
(i) Charity; or
(ii) Occasions of family rejoicing; or
(iii) Family distress (Art. 98, FC for ACP; Art.
125, FC for CPG)
Dissolution of Community Regime
Grounds for Termination of ACP (Art. 99, FC
for ACP; Art. 126, FC for CPG)
1. Death of either spouse;
2. Decree of legal separation;
3. Marriage is annulled or declared void;
4. Death of either spouse;
5. Judicial separation of property on the
ground of:
a. Civil interdiction;
60
b. Declared absentee;
c. Loss of parental authority;
d. Abandonment and failure to comply
with the obligations to the family;
e. Abuse of power of administration;
f. At the time of the petition, spouses are
separated in fact for at least 1 year and
the possibility for reconciliation is highly
improbable (Art. 135, FC).
Separation de Facto
The separation in fact between husband and
wife shall not affect the regime of absolute
community/conjugal partnership.
Effects of Separation de Facto:
1. The spouse who leaves the conjugal home
or refuses to live therein, without just cause,
shall not have the right to be supported;
2. When the consent of one spouse to any
transaction of the other is required by law,
judicial authorization shall be obtained in a
summary proceeding; and
3. In the absence of sufficient community
property, the separate property of both
spouses shall be solidarily liable for the
support of the family. The spouse present
shall, upon proper petition in a summary
proceeding, be given judicial authority to
administer or encumber any specific
separate property of the other spouse and
use the fruits or proceeds thereof to satisfy
the latter’s share (Art. 100, FC for ACP; Art.
127, FC for CPG).
What constitutes abandonment?
A spouse is deemed to have abandoned the
other when he or she has left the conjugal
dwelling without intention of returning
(Rabuya, The Law on Persons and Family
Relations, 2006, p. 446).
Presumption of abandonment: If the spouse
who left the conjugal dwelling for a period of
three months or has failed within the same
period to give any information as to his or her
whereabouts shall be prima facie presumed to
have no intention of returning to the conjugal
dwelling. (Art. 101, FC for ACP; Art. 128, FC for
CPG)
Remedy of the aggrieved spouse in case of
abandonment of the other spouse
If a spouse without just cause abandons the
other or fails to comply with his or her
obligations (may pertain to marital, parental or
property relations) to the family, the aggrieved
spouse may petition the court for:
1. Receivership;
2. Judicial separation of property or;
3. Authority to be the sole administrator of the
absolute community (Art. 101, FC for ACP;
Art. 128, FC for CPG)
5. SEPARATION OF PROPERTY AND
ADMINISTRATION OF COMMON
PROPERTY BY ONE SPOUSE DURING THE
MARRIAGE (Arts. 134-142, FC)
In the absence of an express declaration in the
marriage settlements, the separation of property
between spouses during the marriage shall not
take place EXCEPT by judicial order.
Such judicial separation of property may either
be voluntary or for sufficient cause. (Art. 134,
FC).
ANY will be sufficient cause for judicial
separation of property.
1. Civil interdiction of petitioner’s spouse;
2. Petitioner’s spouse has been declared an
absentee;
3. Petitioner’s spouse loss of parental authority
with court decree;
4. Petitioner’s spouse abandoned the former;
5. Abused of power by the petitioner’s spouse;
and
Spouses have been separated in fact for at least
one year and reconciliation is highly improbable.
Nos. 1, 2, and 3, the final judgment against the
guilty or absent spouse shall be enough basis
for the grant of the decree of judicial separation
of property. (Art. 135, FC)
Effects of Judicial Separation of Property
1. The absolute community or the judicial
partnership of gains shall be liquidated in
conformity with this Code. (Art. 137, FC)
2. After the dissolution of the absolute
community or the conjugal partnership,
complete separation of property shall apply.
(Art. 138, FC)
3. The decree of final judgment will be recorded
in the proper local civil registries and registries
of property. (Art. 139, FC)
Revival of property regime:
The spouses, may, in the same proceedings
where separation of property was decreed, file a
motion in court for a decree reviving the
property regime that existed between them
before the separation of property in any of the
following instances:
1. When the civil interdiction terminates;
2. When the absentee spouse reappears;
3. When the court, being satisfied that the
spouse granted the power of administration
in the marriage settlements will not again
abuse that power, authorizes the
resumption of said administration;
4. When the spouse who has left the conjugal
home without a decree of legal separation
resumes common life with the other;
5. When parental authority is judicially
restored to the spouse previously deprived
thereof;
6. When the spouses who have separated in
fact for at least one year, reconcile and
resume common life; or
7. When after voluntary dissolution of the
absolute community of property or conjugal
partnership has been judicially decreed
upon the joint petition of the spouses, they
agree to the revival of the former property
regime. No voluntary separation of property
may thereafter be granted (Art.141, FC).
Transfer of administration of exclusive
property between the spouses:
By agreement by means of a public instrument,
recorded in the registry of property of the place
where the property is located.
1. The administration of all classes of exclusive
property of either spouse may be
transferred by the court to the other spouse:
61
 a. When one spouse becomes the
guardian of the other.
b. When one spouse is judicially declared
an absentee;
c. When one spouse is sentenced to a
penalty which carries with it civil
interdiction; or
d. When one spouse becomes a fugitive
from justice or is in hiding as an accused
in a criminal case (Art. 142, FC).
If the other spouse is not qualified by reason of
incompetence, conflict of interest, or any other
just cause, the court shall appoint a suitable
person to be the administrator (Id.).
2. All fruits, natural, industrial or civil, due or
received during the marriage from his or her
separate property. (Art. 145, FC)
Rights of Each Spouse
1. Own his or her property;
2. Dispose of it;
3. Possess;
4. Administer; and
5. Enjoy his or her separate estate; and
6. For nos. 1 to 5, no need consent of the other
spouse. (Art. 145, FC)
Rule on Expenses:

 Automatic termination of administration in
case the administrator-spouse alienates any
exclusive property of the other. The
proceeds shall be turned over to the owner-
spouse (Art 112, FC).
6. REGIME OF SEPARATION OF PROPERTY
(Arts. 143-146, FC)
Both spouses shall bear the same in proportion
to their income or, in case of insufficiency and
default thereof, to the current market value of
their separate properties.
They shall, however, be held solidarily liable to
the creditors in connection with such family
expenses (Art. 146, FC).

Separation is agreed upon in the marriage 7. PROPERTY REGIME OF UNIONS

settlements WITHOUT MARRIAGE (Arts. 147-148, FC)

The spouses may provide for separation with GR: In case of void marriages, regardless of the
respect to: cause thereof, or those living together as
husband and wife without the benefit of
1. Their present properties; or marriage, the property relations of the parties
2. Their future properties; or during the period of cohabitation is Art. 147 or
3. Their both properties. (Art.144, FC). 148 of the FC, as the case may be (Rabuya, The
Law on Persons and Family Relations, 2006, p.
GR: In the regime of Complete Separation of 507).
Property, each spouse shall own, dispose of,
possess, administer, and enjoy his or her own ART. 147 ART. 148
separate property, whether acquired prior to the Applicability
marriage or during the marriage, without the 1. No legal Presence of legal
need of the consent of the other (Art. 145, FC). impediment to impediment:
marry but living as
 If the spouses agree on a partial separation, husband and wife; 1. Adulterous
or separation only with respect either to relationships
their present or future property, the 2. Void marriage on 2. Bigamous/pol
property not agreed upon as separate shall the ground of ygamous
pertain to the absolute community following psychological marriages
the provisions of Articles 75 and 144 of the incapacity. 3. Incestuous
FC. void
marriages
What properties are included? under Art 37
4. Void
1. All earnings by each spouse from his or her marriages by
profession, business or industry; and

62
 reason of When only one is in If one of the parties is
public policy GF, share of party in validly married to
(Art. 38) BF in the co‐ another, his/her share
ownership be in the co‐ownership
forfeited in favor of: shall accrue to the
1. their common ACP or CPG existing in
Salaries & wages children; the marriage.
Owned in equal Separately owned by 2. in default of /
shares the parties. If any waiver by any/all If the party who acted
party is married, common children, in BF is not validly
his/her salary pertains or by their married to another or
to the ACP or CPG of descendants, to if both parties are in
the legitimate the surviving BF, such share be
marriage. descendants; forfeited in manner
Property exclusively acquired 3. in their absence, provided in last
Belongs to party Belongs to such party to the innocent paragraph of Art. 147
upon proof of party
acquisition through Proof of actual contribution
exclusive funds Not necessary Necessary
Acquired by both through their work or
industry This property regime applies when the
Governed by rules of Owned in common in following requisites concur (Art 147, FC)
co‐ownership proportion to their
respective 1. A man and a woman who are capacitated to
contributions marry each other;
Presumption 2. Live exclusively with each other as husband
Property acquired No presumption of and wife; and without the benefit of
while living together joint acquisition. marriage or under a void marriage.
presumed to have
been obtained by their Actual joint Examples:
joint efforts, work or contribution of
industry and owned money, property or 1. Marriages declared void by reason of
by them in equal industry shall be psychological incapacity (Art. 36, FC);
shares. owned by them in 2. Marriages celebrated without a valid
common proportion. marriage license [(Art. 35[3], FC).
If one party did not However, their
participate in contributions are Shares of parties in property
acquisition: presumed equal, in
presumed to have the absence of proof 1. Wages and salaries are owned in equal
contributed through to the contrary . shares.
care and maintenance
of family and  Wages and salaries will be divided
household equally between them, even if only one
(Buenaventura vs. party earned the wages and the other
Buenaventura, G.R. did not contribute thereto. (Art. 147, FC)
No. 127358, Mar. 31,
2005) 2. De Facto Co-Ownership – With respect to
Forfeiture property acquired by both through work and
industry, rules on co-ownership shall apply.

 Property acquired by both spouses

through their work and industry shall be
governed by the rules of equal co-

63
 ownership when the marriage was
declared null pursuant to Art. 36 of the
Family Code. A party who did not
participate in the acquisition of the
property shall still be considered as
having contributed thereto jointly if said
party’s “efforts consisted in the care and
maintenance of the family household.”
(Valdes vs. RTC, G.R. No. 122749, July
31, 1996)
3. Care and maintenance of the family and
household are deemed to be joint and equal.
4. Parties cannot encumber or dispose by acts
inter vivos their share in the property
acquired during their cohabitation and
owned in common, without the consent of
the other, until after termination of
cohabitation.
5. In cases of void marriages, if only one party
is in good faith, the share of the spouse who
is in bad faith shall be forfeited
a. In favor of their common children
b. In case of default or waiver by any or all
of the common children or their
descendants, each vacant share shall
belong to the respective surviving
descendants.
c. In the absence of such descendants,
such share belongs to the innocent
party.
Unions Governed by Article 148, FC:
1. Bigamous marriages;
2. Adulterous relationship;
3. Relationships in a state of concubinage;
4. Relationships where both man and woman
are married to other persons; or
5. Multiple alliances of the same married man.
 Wages and salaries earned by each
party belong to him/her exclusively.
 Only properties acquired by the parties
through their “actual joint contribution”
of money, property or industry shall be
owned in common in proportion to their
respective contributions.
 In the absence of proof to the contrary,
contributions and the share of the
parties to the properties acquired during
the cohabitation are presumed to be
equal.
64
If one party is validly married to another:
1. His/her share in the co-owned properties
will accrue to the absolute community
property/conjugal partnership of gains of
his/her existing valid marriage.
2. If the party who acted in bad faith is not
validly married to another, his/her share
shall be forfeited in the same manner as that
provided in Art 147, FC.
3. The same rules on forfeiture shall apply if
both parties are in bad faith
F. FAMILY HOME
The family home, constituted jointly by the
husband and the wife or by an unmarried head
of a family, is the dwelling house where they and
their family reside, and the land on which it is
situated (Arts. 152, FC).
After the effectivity of the Family Code, a family
home is deemed constituted upon actual
occupation of the family. There is no need to
constitute it judicially or extra-judicially (Rabuya,
The Law on Persons and Family Relations, 2006,
p. 518).
Constitution of family home: The family
home is deemed constituted on a house and lot
from the time it is occupied as a family residence
(Arts. 153, FC).
Limitations:
1. Each family can only have one family home.
After a family house is constituted, no other
family home can be established without first
dissolving the existing one.
2. The family home can be constituted only on
the dwelling place, and therefore, in the
locality where the family has its domicile.
3. The value of the family home exempt from
seizure of creditors cannot exceed the limits
fixed by law
4. It must be part of the properties of the
ACP/CPG, or of the exclusive properties of
either spouse with the latter's consent. It
may also be constituted by an unmarried
head of a family on his or her own property
(Arts. 156, FC).
  The property that is the subject of a
conditional sale on installments where
ownership is reserved by the vendor
only to guarantee payment of the
purchase price may be constituted as a
family home (Paras, Civil Code of the
Philippine Annotated, Persons and
Family Relations, 2008, p. 647).
5. It may be sold, alienated, donated, assigned
or encumbered by the owner or owners
thereof with the written consent of the
person constituting the same, the latter's
spouse, and a majority of the beneficiaries
of legal age. In case of conflict, the court
shall decide (Art. 158, FC).
GR: From the time of its constitution and so long
as any of its beneficiaries actually resides
therein, the family home continues to be such
and is exempt from execution, forced sale or
attachment (Art. 153, FC).
XPNs:
1. Non-payment of taxes;
2. Debts incurred prior to the constitution of
family home;
3. Debts secured by mortgages on the
premises before or after its constitution; and
4. Debts due to laborers, mechanics,
architects, builders, materialmen and others
who have rendered service or furnished
material for the construction of the building
(Art. 155, FC).
 The Family Home is protected only up to
the extent of the following amounts:
a. P300,000.00, in urban areas; and
b. P200,000.00, in rural areas (Art.
157, FC).
 As a rule, the family home is exempt
from execution, forced sale or
attachment. However, Article 155(3) of
the Family Code explicitly allows the
forced sale of a family home "for debts
secured by mortgages on the premises
before or after such constitution." While
it is true that the family home is
constituted on a house and lot from the
time it is occupied as a family residence
and is exempt from execution or forced
sale under Article 153 of the Family
Code, such claim for exemption should
be set up and proved to the Sheriff
before the sale of the property at public
auction. Failure to do so would estop the
party from later claiming the exemption.
(Spouses Charlie Fortaleza and Ofelia
Fortaleza vs. Spouses Raul Lapitan and
Rona Lapitan, G.R. No. 178288, August
15, 2012)
Duration of Protection: The right to
exemption is effective from the time of the
constitution of the family home and lasts so long
as its beneficiaries actually reside therein.
(Art.153, FC)
Requisites for judgment creditor to avail
the rights under sale on execution of
family home:
1. He must be a judgment creditor;
2. His claim is not among those excepted under
Article 155; and
3. He has reasonable ground to believe that
the family home is worth more than the
maximum amount of P200,000 (for rural
areas) or P300,000 (for urban areas) (Art.
160, FC).
Effect of death of the person constituting
the family home
If there are beneficiaries who survive and living
in the family home, it will continue to be such for
10 years, unless at the expiration of 10 years,
there is still a minor beneficiary, in which case it
will remain a family home until that beneficiary
becomes of age (Rabuya, Civil Law Reviewer Vol
1, 2017, p. 199).
Beneficiaries of the Family Home:
1. Husband and wife, or unmarried person who
is the head of the family; and
2. The following relatives of such persons
whether legitimate or illegitimate:
a. Their parents;
b. Their ascendants and descendants; and
c. Their brothers and sisters,
Provided they comply with the following:
1. They live in the family home; and
65
 2. They are dependent for legal support
upon the head of the family (Art. 154,
FC).
 Beneficiaries include the in-laws. But the law
definitely excludes maids and overseers
(Patricio vs. Dario III, G.R. No. 170829,
November 20, 2006).
G. PATERNITY AND FILIATION
Paternity - The civil status of the father with
regard to the child.
Filiation - The civil status of the child with
regard to his father either by nature or adoption.
1. LEGITIMATE CHILDREN
Legitimate – conceived or born during a valid
marriage or within a lawful wedlock (Art. 164,
FC)
Children who are born outside of wedlock
but are considered LEGITIMATE:
a. Children of void marriages on the ground of
psychological incapacity (Art. 36, FC);
b. Children born in a subsequent void marriage
due to non-compliance of the registration
requirements (Art. 53, FC); and
c. Born of a voidable marriage before the
decree of annulment (Art. 54, FC).
Children by artificial insemination: A child
conceived by artificial insemination (AI) is
considered legitimate (Art. 164, FC).
Requisites:
1) Artificial Insemination (AI) is made on the
wife, not on another woman;
2) AI on the wife is done with sperm of the
husband or that of a donor, or a
combination of the husband and the donor;
3) AI has been authorized or ratified by the
husband and wife in a written instrument;
4) Executed and signed by them before the
birth of the child; and
5) The written instrument is recorded in civil
registry together with the birth
certificate of the child (Art. 164, FC).
66
Rights of Legitimate Children
1. To bear the surnames of the father and the
mother, in conformity with the provisions of
the Civil Code on Surnames;
2. To receive support from their parents, their
ascendants, and in proper cases, their
brothers and sisters, in conformity with the
provisions of this Code on Support; and
3. To be entitled to the legitimate and other
successional rights granted to them by the
Civil Code (Art. 174, FC).
Presumption of legitimacy
The child conceived or born during a valid
marriage is presumed to be legitimate. (Art.
164, FC)
2. PROOF OF FILIATION
a. Primary
1) Record of birth appearing in civil register
or a final judgment; or
2) Admission of legitimate filiations in a
public document or a private
handwritten instrument signed by the
parent concerned (Art. 172, FC).
b. Secondary
1) Open and continuous possession of the
status of a legitimate child; or
2) Any other means allowed by the Rules
of Court and Special laws (Art. 172, FC).
 The due recognition of an illegitimate
child in a record of birth, a will, a
statement before a court of record, or in
any authentic writing is, in itself, a
consummated act of acknowledgment
of the child, and no further court action
is required. (Potenciano vs. Reynoso,
G.R. No. 140707, April 22, 2003). In
fact, any authentic writing is treated not
just a ground for compulsory
recognition; it is in itself a voluntary
recognition that does not require a
separate action for judicial approval
(Eceta vs. Eceta, G.R. No. 157037, May
20, 2004).
 A birth certificate to be considered as
validating proof of paternity and as an
instrument of recognition must be
signed by the father and mother jointly,
 or the mother alone if the father refuses
(Reyes v. CA, G.R. No. L-39537, March
19, 1985).
 Alfredo Aguilar’s SSS Form E-1 (Exhibit
“G”) satisfies the requirement for proof
of filiation and relationship to the Aguilar
spouses under Article 172 of the Family
Code; by itself, said document
constitutes an “admission of legitimate
filiation in a public document or a
private handwritten instrument and
signed by the parent concerned”
(Aguilar vs. Siasat, G.R. No. 200169,
January 28, 2015
 The Court adopted adopt the following
rules respecting the requirement of
affixing the signature of the
acknowledging parent in any private
handwritten instrument wherein an
admission of filiation of a legitimate or
illegitimate child is made:
1) Where the private handwritten
instrument is the lone piece of
evidence submitted to prove
filiation, there should be strict
compliance with the requirement
that the same must be signed by the
acknowledging parent; and
2) Where the private handwritten
instrument is accompanied by other
relevant and competent evidence, it
suffices that the claim of filiation
therein be shown to have been
made and handwritten by the
acknowledging parent as it is merely
corroborative of such other
evidence (Dela Cruz vs. Gracia, G.R.
No. 177728, July 31, 2009).
3. ILLEGITIMATE CHILDREN (Art. 176, FC
as amended by R.A. No. 9255)
Illegitimate – conceived and born outside a
valid marriage, except those children born
during void marriages under Articles 36 and 53,
FC.
Illegitimate children may use the surname of
their father if their filiation has been expressly
recognized by the father, either through:
1. Record of birth in civil register;
2. Father’s admission in public document;
3. Father’s admission in private handwritten
document.
The father, under R.A. No. 9255, Sec. 1, has the
right to file an action to prove non-filiation
during his lifetime.
▪ All illegitimate child should use the surname
of the mother if the requisites of R.A. No.
9255 are not complied with (Rule 8.1,
Revised IRR of R.A. No. 9255).
How to prove filiation of Illegitimate Child
Illegitimate children may establish their
illegitimate filiation in the same way and on the
same evidence as legitimate children. Except if
proof of illegitimate filiation is any of the
following: a) open and continuous
possession of the status of an illegitimate
child; or b) any other means allowed by the
Rules of Court and special laws. In case of these
two instances, the action must be brought
during the lifetime of the putative father.
(Art. 175, FC)
Prescription Period for Claiming Filiation
of illegitimate Child - The action must be
brought by the child during his or her lifetime
and shall be transmitted to the heirs should the
child:
1. Dies during minority;
2. Dies during state of insanity; or
3. Dies after the commencement of the action.
The heirs shall have 5 years within which to
institute the action (Art. 173 in relation to
Art. 175, FC).
Rights of illegitimate Children:
1. To bear the surname of the mother
regardless of whether or not the father
admits paternity;
2. To have an option to use his/her father’s
surname if: his/her filiation is expressly
recognized by the father though the record
of birth; or when admission of paternity is
written by the father in a public or private
instrument;
3. To receive support from the mother and the
exclusive or separate property of the father;
and
67
4. To be entitled to the legitime (1/2 of each
legitimate child) and other successional
rights granted to them by the Civil Code
(Art. 172, FC).
Impugning the legitimacy of a child (Art.
171, FC)
GR: Only the husband can impugn the
legitimacy of a child.
XPN: The heirs of the husband may impugn the
child’s filiation in the following cases:
1. If the husband dies before the expiration of
period for filing his action;
2. If the husband dies after filing without
desisting therefrom; or
3. If the child was born after the death of the
husband (Art. 171, FC)
RATIONALE: Legitimacy can be impugned only
by direct action brought for that purpose, by the
proper parties and within the period allowed by
law. It is strictly a personal right of the husband
(Rabuya, Civil Law Reviewer I, 2017, p. 203).
 Legitimacy cannot be attacked collaterally
(Sayson vs. CA, G.R. No. 89224-25, January
23, 1992).
Grounds for impugning the legitimacy of a
child (Art. 166, FC)
1. Physical impossibility for the husband to
have sexual intercourse with his wife within
the first 120 days of the 300 days
immediately preceding the birth of the
child due to:
a. Physical incapacity of the husband
(Impotent);
 It is only impotency which the law
considers as sufficient ground to
impugn the child’s legitimacy, and
not sterility. (Macadangdang vs. CA,
G.R. No. L-49542, September 12,
1980)
b. The spouses are living separately in
such a way that sexual intercourse was
not possible;
 Where the husband and wife
continued to live together in the
68
same province after their alleged
separation, the Court did not
discount the possibility of physical
access to each other considering
their proximity to each other
(Concepcion vs. CA, G.R. No.
123450, August 31, 2005).
c. Serious illness of the husband which
absolutely prevented intercourse.
2. Biological or scientific proof that the child
could not have been that of the husband;
Estoppel applicable
In artificial insemination by sperm of another
man, the husband is expressly prohibited from
assailing the child’s legitimacy if he authorized
or ratified such artificial insemination in the
manner required by law (Art. 166[2], FC).
Blood testing
1. conclusive on non-paternity
2. inconclusive on paternity (Jao vs. CA, G.R.
No. L-49162, July 28, 1987)
DNA testing may now be used to establish
paternity or non- paternity (Tijing vs. CA, G.R.
No. 125901, March 8, 2001)
 The death of the claimed father does not
ipso facto negate the application of DNA
testing for as long as there exists
appropriate biological samples of his DNA
(Estate of Rogelio Ong vs. Diaz, G.R. No.
171713, December 17, 2007).
 There must be first a show cause hearing
wherein the applicant must first present
sufficient evidence to establish a prima facie
case or a reasonable possibility of paternity
or good cause for the holding of the test.
(Lucas vs. Lucas, G.R. No. 190710, June 6,
2011)
3. Written authorization or ratification for
artificial insemination was obtained through
mistake, fraud, violence, intimidation or
undue influence (Art. 166, FC).
Prescriptive period for impugning
legitimacy
May be brought within 1, 2, or 3 years from the
knowledge of the birth, or the knowledge of
registration of birth.
1. Within 1 year - if husband or any heirs
reside in the same city or municipality
where the child was born or his birth was
recorded.
2. Within 2 years - if the husband or all heirs
live in the Philippines but do not reside in
the same city or municipality where the
child's birth took place or was recorded
3. Within 3 years - if the husband or all heirs
live outside the Philippines when the child's
birth took place or was recorded in the
Philippines (Art. 170, FC)
Applicability of the periods
Applicable only if the action is to impugn
legitimacy, the child was the undisputed
offspring of the mother but the husband denies
paternity.
Effect of expiration of period
The action to impugn legitimacy of a child would
no longer be legally feasible and the status
conferred by the presumption is fixed and
unassailable.
If the birth of the child has been concealed or
was unknown to the husband, the above periods
shall be counted:
prove that the child is born by such
parents. If the blood type of the child is
not the possible blood of the mother and
of the alleged father after it had been
cross-matched, then the child cannot
possibly be that of the alleged father.
(Jao vs. Court of Appeals, G.R. No. L-
49162, July 28, 1987).
Rule of the status of children born after
300 days following termination of
marriage
Requisites:
1. First marriage was terminated;
2. Mother contracted a subsequent marriage
within 300 days after termination;
3. A child is born within 300 days after the
termination of previous marriage.
Rules as to Whom the Child Belongs:
1. To the first marriage – if the child is born
BEFORE 180 days after the celebration of
the 2nd marriage, and within 300 days after
the termination of the 1st marriage.
2. To the second marriage – If the child was
born AFTER 180 days following the
celebration of the 2nd marriage even if
born within 300 days after the termination
of the 1st marriage.
Action to Impugn Legitimacy v. Action to
Claim Legitimacy

1. From the discovery or knowledge of the ACTION TO IMPUGN ACTION TO CLAIM

birth of the child, or LEGITIMACY LEGITIMACY
Remedy
2. From the discovery or knowledge of the Action to impugn Action to claim
fact of registration of said birth, legitimacy or legitimacy
whichever is earlier (Art. 170, FC). illegitimacy (compulsory
recognition)
 The period shall be counted from the Real party in interest
knowledge of the child’s birth or its
Genral Rule: Genral Rule: Child
recording in the civil register.
Husband
XPN: Heirs of the child,
 There is a universal scientific agreement XPN: Heirs, in cases in cases where:
that the blood grouping tests are
where:
conclusive as to non-paternity, that is, 2. Child died in state of
the fact that the blood type of the child
1. Husband died before insanity
is a possible product of the mother and
the expiration of the
the alleged father does not conclusively

69
 period for bringing 3. Child died during Rules of Court." (Charles Gotardo vs. Divina
the action; minority Buling, G.R. No. 165166, August 15, 2012)
2. Husband died after
filing the complaint, Note: Must be filed 4. LEGITIMATED CHILDREN
without having within 5 years. (Art.
desisted; 173, FC) Legitimated – originally illegitimate but later
3. Child was born after considered legitimated by legal fiction because
the death of of the subsequent marriage of the parents who
husband. (Art. 171, at the time of the child’s conception had no legal
FC) impediment to marry each other or even if
Prescription disqualified, the reason for disqualification is
1 year – husband GR: During the lifetime simply below 18 (As amended by RA No. 9858)
reside in the same of the child
municipality or city Effects of legitimation:
where birth took place XPN: Lifetime of the
2 years – husband putative father. 1. Confers on the child the rights of legitimate
reside NOT in the In cases where the children (Art. 179, FC);
same municipality or action is for the 2. Retroacts to the time of the child’s birth.
city recognition of (Art. 180, FC)
3 years – husband is illegitimate child by
living abroad (Art. 170, “open and continuous How legitimation takes place:
FC) possession” of the status
and other means 1. At the time of conception of the child,
allowed by the Rules of his/her parents were not disqualified by any
Court and special laws. impediment to marry each other;
(Art. 175, FC) 2. The child is conceived and born outside of
wedlock;
 One can prove filiation, either legitimate or 3. After the birth of the child, his/her parents
illegitimate, through the record of birth subsequently got married; and
appearing in the civil register or a final 4. Such marriage is not void ab initio. (Art. 178
judgment, an admission of filiation in a and 177, FC).
public document or a private handwritten
instrument and signed by the parent Effect of death before legitimation
concerned, or the open and continuous
possession of the status of a legitimate or The legitimation of children who died before the
illegitimate child, or any other means celebration of marriage of his/her parents shall
allowed by the Rules of Court and special benefit his/her descendants (Art. 181, FC).
laws. We have held that such other proof of
one's filiation may be a "baptismal Who may impugn?
certificate, a judicial admission, a family
bible in which [his] name has been entered, Legitimation may be impugned only by those
common reputation respecting [his] who are prejudiced in their rights as a result of
pedigree, admission by silence, the the legitimation, within 5 years from the time of
[testimonies] of witnesses, and other kinds death of either of the parents of the child.
of proof [admissible] under Rule 130 of the (Art.182, FC).

70
 LEGITIMATE (L) ILLEGITIMATE (IL) LEGITIMATED (LD)

L IL LD
Define
Conceived or born during a Conceived and born outside a Originally illegitimate but later
valid marriage. valid marriage or outside lawful considered legitimate by legal
wedlock fiction by subsequent marriage of
Children conceived as a result parent who, at the time of
of artificial insemination on conception had no legal
the wife. impediment to marry each or even
if disqualified the reason for
Children born to void disqualification is simply 18.
marriages under Arts. 36 and
53.
Rights
Bear surname of father Use of surname of the mother Bear surname of father;
(or father under R.A. 9225)
Receive support from parents Receive support from parents,
ascendants, brothers and Support ascendants, brothers and sisters;
sisters
Legitimate (half of the legitime Entitled to legitime and other
Entitled to legitimate and of legitimate children) (Art. 176, successional rights under the Civil
other succession all rights FC) Code (Art. 179 In relation to Art.
under the Civil Code. (Art. 174, FC)
174, FC)
To Establish Status
May be brought by a child In the same way and on the Acknowledgement not needed:
during his or her lifetime and same evidence as a legitimate marriage of parents enough
should be transmitted to the child.
heirs if the child dies during
minority or in a state of Same period, except if action is
insanity. based of Art. 172. Par. 2, it must
be filed within the lifetime of the
Heirs shall have 5 years within alleged parent
which to institute the action.
(Art. 175, FC)
Proof of Filiation
Primary: Certificate of Adoption
Record of birth appearing in the civil register or a final judgement.

Admission of legitimate filiation in a public document or private

handwritten instrument and signed by parent concerned (Art.
172, FC)

Secondary:
Open and continuous possession of the status of a legitimate
child.

Any other means allowed by the Rules of Court and special laws
(Art. 172, FC)

Grounds for Impugning

71
Physical impossibility of husband to have sexual intercourse with Subsequent marriage of parents is
his wife within first 120 days of the 300 days immediately void
preceding birth
Child not really a child of the
Biological and scientific reasons parents.

For children conceived through artificial insemination, written At the time of child’s conception,
authorization obtained thru fraud, mistake, violence, intimidation parents are disqualified to marry
or undue influence. (Art. 176, FC) each other by reason other than
their age.
Who may Impugn
Husband Those who are prejudiced in their
Heirs may impugn only in the ff. cases: rights. (Art. 182, FC)
1. Husband dies before expiration of the period for bringing
action
2. Husband dies after filing without desisting therefrom
3. Child was born after death of husband (Art. 171, FC)
Periods for Filing
1 year if husband/heirs reside in the city or municipality where Within 5 years from time their cause
the child was born or birth was recorded. accrues. (Art. 182, FC)

2 years if husband/heirs do not reside in the same city or

municipality, but a resident of the Philippines

3 years if husband is residing abroad and the child is born or birth

recorded in the Philippines. (Art. 170, FC)

72
H. ADOPTION
1. DOMESTIC ADOPTION ACT (DAA) OF
1998 (R.A. No. 8552)
Adoption
A juridical act and a proceeding in rem which
creates between two persons a relationship
similar to that which results from legitimate
paternity and filiation (Lazatin vs. Campos,
G.R. No. L-43955-56, July 30, 1979).
The tampering of the civil registry making it
appear in the birth records that a certain child
was born to a person who is not the biological
mother, causing such child to lose his true
identity and status is simulation of birth, which
does not produce the legal effects of adoption
(Sec. 3[j], R.A. No. 8552).
A. WHO MAY ADOPT
Filipino Citizen
1. Of legal age;
2. With full civil capacity and legal rights;
3. With good moral character;
4. Has not been convicted of any crime
involving moral turpitude;
5. Emotionally and psychological capable of
caring for children;
6. In a position to support and care for his/her
children in keeping with the means of the
family; and
7. At least 16 years older than the adoptee,
but may be waived if:
a. Adopter is the biological parent of the
adoptee; or
b. Adopter is the spouse of the adoptee’s
parent (Sec. 7 [a], R.A. No. 8552).
Aliens
1. Same qualifications for Filipino citizens;
and
2. His/her country has diplomatic relations
with the Republic of the Philippines;
3. His government allows adoptee to enter
his/her country as his/her adopted child;
4. Has been certified by his/her diplomatic or
consular office or any appropriate
government agency that he/she has the
legal capacity to adopt in his/her country;
and
5. Has been living in the Philippines for at
least 3 continuous years prior to the filing
of application for adoption and maintains
such residence until the adoption decree is
entered (Sec. 7 [b])
The requirements on residency and
certification of the aliens may be waived if:
1. A former Filipino citizen seeks to adopt a
relative within 4th degree of
consanguinity or affinity;
2. Seeks to adopt the legitimate child of
his/her spouse; or
3. One who is married to a Filipino citizen
and seeks to adopt jointly with his/her
spouse a relative within 4th degree of
consanguinity or affinity of the Filipino
spouse (Ibid.).
Joint adoption by spouses
GR: The husband and the wife shall jointly
adopt (Sec. 7).
XPNs:
1. One spouse seeks to adopt the legitimate
son/daughter of the other;
2. One spouse seeks to adopt his/her own
illegitimate son/daughter, provided, that
the other spouse has given his/her
consent,
3. If the spouses are legally separated from
each other (Sec. 7).
 The husband and the wife shall jointly
adopt. In one case, the birth
certificates of two (2) children were
simulated by Spouses Lim to make it
appear that they were their children.
One of the spouses died and the
surviving spouse remarried. The
surviving spouse proceeded to adopt
the two children by availing of the
amnesty given under R.A. No. 8552,
without jointly adopting with her new
spouse. The court held that the
surviving spouse or the petitioner,
having remarried at the time the
73
 petitions for adoption were filed, must
jointly adopt. Since the petitions for
adoption were filed only by petitioner
herself, without joining her husband,
Olario, the trial court was correct in
denying the petitions for adoption on
this ground. Neither does petitioner
fall under any of the three XPNs
enumerated in Section 7. First, the
children to be adopted are not the
legitimate children of petitioner or of
her husband Olario. Second, the
children are not the illegitimate
children of petitioner. And third,
petitioner and Olario are not legally
separated from each other (In Re:
Michelle Lim and In Re: Michael Jude
Lim, G.R. Nos. 168992-93, May 21,
2009.)
B. WHO MAY BE ADOPTED
A child is legally available for adoption, if:
1. Person below 18 years of age who has
been administratively or judicially declared
available for adoption;
2. Legitimate son/daughter of one of the
spouse by other spouse;
3. Illegitimate son/daughter by a qualified
adopter to improve his or her status to that
of legitimacy;
4. Any person of legal age, if prior to the
adoption said person has been consistently
considered by the adopter(s) as his/her
own child since minority;
5. Child whose adoption has been rescinded;
or
6. Child whose biological/adoptive parent(s)
has died (Sec. 8, R.A. No. 8552).
 Provided, no proceedings shall be
initiated within 6 months from the time
of death of said parents (Id.).
 Merely permitting the child to remain
for a time undisturbed in the care of
others is not the same as
abandonment. To dispense with the
requirement of consent, the
abandonment must be shown to have
existed at the time of adoption
74
(Landingin vs. Republic, G.R. No.
164948, June 27, 2006).
C. RIGHTS OF AN ADOPTED CHILD
The adopted shall be considered for all intents
and purposes the legitimate child of the
adopter and shall be entitled to all the rights
accorded to legitimate children (Sec. 17, R.A.
No. 8552), to wit:
1. The right to use the surnames of the
father and the mother;
2. The right to receive support from their
parents, their ascendants, and in proper
cases, their brothers and sisters, in
conformity with the provisions of the
Family Code of the Philippines on support;
and
3. To be entitled to the legitimate and other
successional rights granted to them by the
Civil Code. (Art. 174, FC)
Effects of Domestic Adoption:
1. On Parental Authority: All legal ties
between the biological parents and the
adoptee shall be severed and the same
shall be vested in the adopters, except,
when the biological parent is the spouse of
the adopter (Sec. 16, R.A. No. 8552).
2. On Legitimacy: Adoptee shall be
considered a legitimate child of the adopter
for all intents and purposes and is entitled
to all rights and obligations provided by law
to a legitimate child (Sec. 17, R.A. No.
8552);
3. On Succession: In legal and intestate
succession, the adoptee and adopters shall
have reciprocal rights of succession
without distinction from legal filiation. The
adoptee and his/her biological parents can
likewise inherit based on testamentary
succession (Sec. 18, DAA) and intestate
succession (In re In the Matter of Adoption
of Stephanie Naty Astorga Garcia, G.R. No.
148311, March 31, 2005).
4. Issuance of new birth certificate in which
the adoptee will have a new name and use
the surname of the adopter.
D. INSTANCES AND EFFECTS OF
RESCISSION
Instances when adoption may be
rescinded
1. Repeated physical and verbal
maltreatment by the adopter(s) despite
having undergone counseling:
2. Attempt on the life of the adoptee;
3. Sexual assault or violence; or
4. Abandonment or failure to comply with
parental obligations (Sec. 19, R.A. No.
8552).
The ADOPTEE is given the sole right to rescind
the adoption. (Sec. 19, DAA) Adoption shall not
be subject to rescission by the adopter.
However, adopter(s) may disinherit the
adoptee for causes provided in Article 919 of
the Civil Code.
Effects of Rescission of Adoption:
1. The parental authority of the adoptee’s
biological parent (s), if known, or the legal
custody of the DSWD shall be restored if
the adoptee is still a minor or
incapacitated;
2. The reciprocal rights and obligations of the
adopter(s) and the adoptee to each other
shall be extinguished;
3. The court shall order the civil registrar to
cancel the amended certificate of birth of
the adoptee and restore his/her original
birth certificate; and
4. Succession rights shall revert to its status
prior to adoption, but only as of the date of
judgment of judicial rescission. Vested
rights acquired prior to judicial rescission
shall be respected (Sec. 20, R.A. No.
8552).
2. INTER-COUNTRY ADOPTION ACT OF
1995 (R.A. NO. 8043)
Inter-Country Adoption
The socio-legal process of adopting a Filipino
child by a foreigner or a Filipino citizen
permanently residing abroad where the
petition is filed, the supervised trial custody is
undertaken, and the decree of adoption is
issued outside the Philippines (Sec. 3, RA. No.
8043).
The child must first be placed under adoption
in the Philippines before he is placed for inter-
country adoption.
a. WHEN ALLOWED
Inter-country adoption is allowed ONLY as a
LAST RESORT. The Inter-Country Adoption
Board is mandated to ensure that all
possibilities for adoption of the child under the
FC have been exhausted and that inter-country
adoption is in the best interest of the child (Sec.
7, R.A. No. 8043).
b. WHO MAY ADOPT (Sec. 9, R.A. No.
8043)
Any alien or Filipino citizen permanently
residing abroad may file an application for
inter-country adoption of a Filipino child if
he/she is:
1. At least 27 years of age at the time of the
application;
2. At least 16 years older than the child to be
adopted, unless:
1. The adopter is the parent by nature of
the child to be adopted; or
2. The spouse of such parent;
3. If married, his/her spouse must jointly file
for the adoption;
4. Has the capacity to act and assume all
rights and responsibilities of parental
authority under his national laws;
5. Has undergone the appropriate counseling
from an accredited counselor in his/her
country;
6. Has not been convicted of a crime involving
moral turpitude;
7. Is eligible to adopt under his/her national
law;
8. Is in a position to provide the proper care
and support and to give the necessary
moral values and example to all his
children, including the child to be adopted;
9. Agrees to uphold the basic rights of the
child as embodied under Philippine laws,
the U.N. Convention on the Rights of a
Child, and to abide by the rules and
75
 regulations issued to implement the Inter-
Country Adoption Act;
10. Comes from a country with whom the
Philippines has diplomatic relations and
whose government maintains a similarly
authorized and accredited agency and that
adoption is allowed under his/her national
laws; and
11. Possesses all the qualifications and none of
the disqualifications under the Inter-
Country Adoption Act and other applicable
Philippine laws.
c. WHO MAY BE ADOPTED
Only a “legally-free child” (a child who is below
15 years of age and has been voluntarily or
involuntarily committed to the DSWD of the
Philippines, in accordance with the Child and
Youth Welfare Code) may be adopted (Sec. 8,
R.A. No. 8043).
No child shall be matched to a foreign adoptive
family unless it is satisfactorily shown that the
child cannot be adopted locally (Sec. 11, R.A.
No. 8043).
R.A. NO. 11222 (An Act Allowing
Rectification of Simulated Birth Records)
Certification Declaring a Child Legally
Available for Adoption (CDCLAA) refers to
a document issued by the Secretary of DSWD
or the Secretary’s duly authorized
representative as provided for by RA No. 9523,
otherwise known as "An Act Requiring
Certification of the DSWD to Declare a ‘Child
Legally Available for Adoption’ as a Prerequisite
for Adoption Proceedings (Sec. 3[a], R.A. No.
11222).
Simulation of birth record refers to the
tampering of the civil registry to make it appear
in the record of birth that a child was born to a
person who is not such child’s biological
mother, causing the loss of the true identity
and status of such child(Sec. 3[f], R.A. No.
11222).
Qualifications of Adopters
1. Must be Filipino citizens;
2. Be of legal age;
76
3. Possess full civil capacity and legal rights;
4. Be of good moral character;
5. Have not been convicted of any crime
involving moral turpitude;
6. Be emotionally and psychologically
capable of caring for children; and
7. Be in a position to support and care for
the child in keeping with the means of the
family.
In case of adoption by a married couple, where
one of the adopters is a foreign national
married to a Filipino, the foreign national must
have been residing in the Philippines for at
least three (3) continuous years prior to the
filing of the petition for adoption and
application for rectification of simulated birth
record (Sec. 7, R.A. No. 11222).
Required Written Consent:
1. The adoptee, if ten (10) years of age or
over;
2. The legitimate and adopted daughters and
sons, ten (10) years of age or over, of the
adopter and adoptee, if any;
3. The illegitimate daughters and sons, ten
(10) years of age or over, of the adopter if
living with said adopter and the latter’s
spouse, if any; and
4. The spouse, if any, of the adoptee (Sec. 8,
R.A. No. 11222).
The petition for adoption with an application for
rectification of simulated birth record shall be
in the form of an affidavit and shall be
subscribed and sworn to by the petitioner or
petitioners before any person authorized by
law to administer affirmations and oaths (Sec.
9, R.A. No. 11222).
Adoption Process
The petition shall be filed with the Office of the
Social Welfare and Development Officer
(SWDO) of the city or municipality where the
child resides. The SWDO shall have seven (7)
days to examine the petition and its supporting
documents and determine whether the same is
sufficient in form and substance. If the SWDO
finds that the petition is insufficient in form or
substance, the SWDO shall return the same to
the petitioner with a written explanation of its
insufficiency. If the SWDO finds the petition
sufficient in form and substance, the SWDO
shall forward the petition and the supporting
documents within three (3) days to the
Regional Director.
The Regional Director shall review the petition,
establish the identity of the child, and prepare
the recommendation on the petition not later
than thirty (30) days from receipt thereof. The
Regional Director may require the petitioner to
submit additional information or evidence to
support the petition. The failure of the
petitioner to comply with such request shall not
preclude the Regional Director from acting on
the petition based on
the evidence on hand.
The Regional Director shall transmit to the
Secretary the recommendation on the petition
together with a copy of the petition and
supporting documents.
The Secretary shall act and decide on the
petition within thirty (30) days from receipt of
the recommendation of the Regional Director
(Sec. 10, R.A. No. 11222).
Effects of Administrative Adoption
1. Adoptee shall be considered the legitimate
daughter or son of the adopter for all
intents and purposes and as such is
entitled to all the rights and obligations
(Sec 15, R.A. No. 11222).
2. Except where a biological parent is the
spouse of the adopter, all legal ties
between the biological parents and the
adoptee shall be severed and the same
shall then be vested in the adopter (Sec.
16, R.A. No. 11222).
3. The adopter and the adoptee shall have
reciprocal rights of succession without
distinction from legitimate filiation.
However, if the adoptee and her or his
biological parents left a will, the law on
testamentary succession shall govern. (Sec
17, R.A. No. 11222)
Grounds for Rescission
1. Repeated physical or verbal maltreatment
by the adopter;
2. Attempt on the life of the adoptee;
3. Sexual assault or violence;
4. Abandonment and failure to comply with
parental obligations; or
5. Other acts that are detrimental to the
psychological and emotional development
of the adoptee.
Adoption, being in the best interest of the child,
shall not be subject to rescission by the
adopter. However, the adopter may disinherit
the adoptee for causes provided in Article 919
of the Civil Code (Sec. 18, R.A. No. 11222).
Effects of Rescission
If granted, parental authority of the adoptee’s
biological parents, if known, shall be restored if
the adoptee is still a minor or incapacitated.
The reciprocal rights and obligations of the
adopter and the adoptee to each other shall be
extinguished (Sec. 20, R.A. No. 11222).
I. SUPPORT
What it comprises
It comprises everything indispensable in
keeping with the financial capacity of the
family:
1. Food or sustenance;
2. Dwelling or shelter;
3. Clothing;
4. Medical attendance;
5. Education;
6. Transportation (Art. 194, FC)
Characteristics of the Right to Support:
1. Not subject to levy upon attachment or
execution (Art. 205, FC)
2. Cannot be renounced nor transmitted to a
3rd person (De Asis vs. CA, G.R. No.
127578, February 15, 1998)
3. Cannot be subject of compromise (Art.
2035, CC).
4. Cannot be extinguished by setting up
compensation against creditor who has a
claim for support due by gratuitous title
(Art.287[2], FC).
77
2. Who are obliged to support each other
(Art. 195-197, 199-200, 206-208, FC)
1. Spouses – he/she must be the legitimate
spouse.
2. Legitimate ascendants and descendants;
A husband may validly refuse to support a child
who is a fruit of an adulterous relationship.
(Sanchez vs. Zulueta, G.R. No. L-45616, May
16, 1939).
3. Parents and their children (whether or
illegitimate) and the latter’s children
(whether legitimate or illegitimate);
The persons obliged to support each other are
limited to the grandparents and the
grandchildren only and vice versa.
If at a hearing for support pendente lite, the
status of the child is at issue, the alleged child
can get support in the meantime while the case
is pending from the alleged parent if his status
as such has been proven provisionally
(Mangulabnan vs. IAC, G.R. No. 71994, May
31, 1990).
4. Legitimate brothers and sisters (whether
full or half-blood); (Art. 195, FC)
5. Brothers and sisters not legitimately
related (whether full or half-blood).
XPN: When the need for support of the
brother/sister, being of age, is due to cause
imputable to the claimant’s fault of negligence.
(Art. 196, FC)
 Since filiation is beyond question, support
follows as a matter of obligation; a parent
is obliged to support his child, whether
legitimate or illegitimate. Support consists
of everything indispensable for
sustenance, dwelling, clothing, medical
attendance, education and transportation,
in keeping with the financial capacity of the
family. Thus, the amount of support is
variable and, for this reason, no final
judgment on the amount of support is
made as the amount shall be in proportion
to the resources or means of the giver and
the necessities of the recipient. It may be
reduced or increased proportionately
78
according to the reduction or increase of
the necessities of the recipient and the
resources or means of the person obliged
to support (Charles Gotardo vs. Divina
Buling, G.R. No. 165166, August 15, 2012).
3. Source of Support
The support of the spouses, their common
children, and legitimate children of either
spouse is chargeable to the absolute
community of property or the conjugal
partnership of gains.
If the community property or the conjugal
partnership is insufficient to cover this liability,
the spouses shall be solidarily for the unpaid
balance with their separate properties (Arts. 94
and 121, FC).
4. Order of Liability for Support
When two or more persons are obliged to give
support, the following order should be
followed:
a. The spouse;
b. The descendants in the nearest degree;
c. The ascendants in the nearest degree; and
d. The brothers and sisters (Art. 199, FC).
When the obligation to give support falls upon
two or more persons, the payment of the same
shall be divided between them in proportion to
the resources of each. In case of urgent need
and by special circumstances, the judge may
order only one of them to furnish the support
provisionally, without prejudice to his right to
claim from the other obligors the share due
from them (Art. 200, FC).
Insufficiency of means to give support:
When two or more recipients at the same time
claim support from one and the same person
legally obliged to give it, should the latter not
have sufficient means to satisfy all claims, the
order established in Art. 199, FC shall be
followed, unless the concurrent obligees
should be the spouse and a child subject to
parental authority, in which case the child shall
be preferred (Art. 200, FC).
5. Amount of Support
The amount of support shall be in proportion
to the:
1. Resources or means of the giver; and
2. The necessities of the recipient (Art. 201,
FC).
In the same vein, support shall be reduced or
increased proportionately, according to the (a)
reduction or (b) increase of the necessities of
the recipient and the resources or means of the
person obliged to furnish the same (Art. 202,
FC).
When demandable
From the time the person who has a right to
receive the same needs it for maintenance, but
it shall not be paid except from the date of
judicial or extrajudicial demand.
Payment shall be made within the first five days
of each corresponding month or when the
recipient dies, his heirs shall not be obliged to
return what he has received in advance (Art.
203, FC).
Options
The person obliged to give support shall have
the option to fulfill the obligation either by:
1. paying the allowance fixed; or
2. by receiving and maintaining in the family
dwelling the person who has a right to
receive support (Art. 204, FC).
This cannot be availed of in case there is a
moral or legal obstacle thereto (Art. 204, FC).
Payment by Third Person
If payment by a stranger or third person,
he/she is entitled to full reimbursement even if
made without the knowledge of the person
obliged to give support, unless the stranger
does not want to be reimbursed (Art. 206, FC).
A third person may provide support to the
needy if the person obliged to give support
refuses or fails to give support when urgently
needed. The
stranger has a right of reimbursement (Art.
207, FC).
6. Manner and time of Payment
From the time the person who has a right to
receive the same needs it for maintenance, but
it shall not be paid except from the date of
judicial or extrajudicial demand.
Payment shall be made within the first five days
of each corresponding month or when the
recipient dies, his heirs shall not be obliged to
return what he has received in advance (Art.
203, FC).
Options
The person obliged to give support shall have
the option to fulfill the obligation either by:
1. paying the allowance fixed; or
2. by receiving and maintaining in the family
dwelling the person who has a right to
receive support.
This cannot be availed of in case there is a
moral or legal obstacle thereto (Art. 204, FC).
7. Renunciation and Termination
After the final judgment granting petition for
annulment or petition for declaration of nullity
of marriage, the obligation of mutual support
between spouses ceases(Art. 198, FC).
In legal separation, even if the marriage bond
is not severed, obligation of mutual support
ceases upon finality of a decree of legal
separation, although the court may, in its
discretion, order the guilty spouse to support
the innocent one (Art. 198, FC).
8. Support Pendente Lite Between
Spouses
During pendency of action for annulment or
declaration of absolute nullity of marriage, the
court shall provide for support of the spouses
and their common children in the absence of a
written agreement between spouses (Art. 49,
79
FC). The same rule shall apply during pendency
of an action for legal separation (Art. 62, FC).
J. PARENTAL AUTHORITY (Patria
Potestas)
General Provisions
A mass of rights and obligations which parents
have in relation to the person and property of
their children until their majority age or
emancipation, and even after this under certain
circumstances (JJ. Makasiar, Dissenting
Opinion, Luna vs. IAC, G.R. No. L-68374, June
18, 1985).
What Constitutes Parental Authority
Pursuant to the natural right and duty of
parents over the person and property of their
unemancipated children, parental authority
and responsibility shall include:
1. Taking care of their children;
2. Rearing them for civic consciousness and
efficiency; and
3. Development of their moral, mental and
physical character and well-being (Art.
209, FC).
Substitute and Special Parental Authority
Substitute parental authority - exercised in
case of death, absence or unsuitability of the
parents (Art. 214, FC). It is exercised in the
order indicated:
a. Surviving grandparent;
b. Oldest brother/sister over 21 years of age
unless unfit/disqualified;
c. Child’s actual custodian who is over 21
years of age, unless unfit or disqualified
(Art. 216, FC); and
d. In case of foundlings, abandoned,
neglected or abused children, they shall be
entrusted in summary judicial proceedings
to heads of children’s homes, orphanages
and other similar institutions duly
accredited by the proper government
agency (Art. 217, FC).
e. A foster parent in accordance with the
Foster Care Act of 2012.
80
Foster Care Act of 2012 (R.A. No. 10165)
Foster Parents shall have the rights, duties, and
liabilities of persons exercising substitute
parental authority, as may be provided under
the Family Code over the children under foster
care (Sec. 6).
Who may be a Foster Parent:
A Foster Parent refers to a person, duly
licensed with the DSWD, to provide foster care
(Sec. 3[i], R.A. No. 10165).
Qualifications of a Foster Parent
1. Must be of legal age
2. Must be at least 16 years older than the child
unless the foster parent is a relative;
3. Must have genuine interest, capacity and
commitment in parenting and is able to provide
a familial atmosphere for the child;
4. Must have a healthy and harmonious
relationship with each family member;
5. Must be of good moral character;
6. Must be physically and mentally capable and
emotionally mature;
7. Must have sufficient resources to be able to
provide for the family’s needs;
8. Must be willing to further hone or be trained
on knowledge, attitudes, and skills in caring for
a child; and,
9. Must not already have the maximum number
of children (Sec. 5 R.A. No. 10165).
Aliens qualified to become foster parents
provided that:
1. He or she must be legally documented;
2. Possess all the qualifications as stated
above;
3. Have resided in the Philippines for at least
12 continuous months at the time of the
application;
4. Undertake to maintain such residence until
the termination of placement by the DSWD
or expiration of the Foster Family Care
License (Rule 6, IRR of R.A. No. 10165).
Who may be a foster child:
The following children may be placed under
Foster Care:
1. A child who is abandoned, surrendered,
neglected, dependent or orphaned;
2. A child who is a victim of sexual, physical,
or any other form of abuse of exploitation;
3. A child with special needs;
4. A child whose family members are
temporarily or permanently unable or
willing to provide the child with adequate
care;
5. A child awaiting adoptive placement md
who would have to be prepared for family
life;
6. A child who needs long-term care and close
family ties but who cannot be placed for
domestic adoption;
7. A child whose adoption has been
disrupted;
8. A child who is under socially difficult
circumstances (e.g. street child, child in
armed conflict, victim of child labor or
trafficking);
9. A child who committed a minor offense but
has been released on recognizance, or who
is in custody supervision or whose case has
been dismissed;
10. A child who is in need of special protection
as assessed by a Social Worker, an Agency
or the DSWD (Sec. 4, R.A. No. 10165).
Limitation of Foster Parent’s Substitute
Parental Authority
Foster parents shall only have the rights of a
persons of a person with special parental
authority to discipline the foster children,
insofar as it prohibits the infliction of
corporal punishment upon the child.
The infliction of corporal punishment upon the
child shall be ground for revocation of the
Foster Family Care License and termination of
Foster Placement Authority (Rule 8, IRR of R.A.
No. 10165).
Special Parental authority
It is granted by law to the following persons in
view of their special relation to children
under supervision, instruction, or custody
(Rabuya, The Law on Persons and Family
Relations, 2006, p. 690).
1. School;
2. School Administrator and teachers; or
3. Individual, entity or institution engaged in
childcare.
Their authority and responsibility shall apply to
all authorized activities whether inside or
outside the premises of the school, entity or
institution (Art. 218, FC).
Extent of liability of those exercising
special parental authority
GR: They shall be principally and solidarily
liable for damages caused by the acts or
omissions of the unemancipated minor.
The parents, judicial guardians or the persons
exercising substitute parental authority over
said minor shall be subsidiarily liable.
XPN: If it is proved that they exercised the
proper diligence required under the particular
circumstances (Art. 219, FC).
Effect of parental authority upon the
persons of the children
Rights and duties of persons exercising
parental authority:
1. To keep them in their company, to support,
educate and instruct them by right precept
and good example, and to provide for their
upbringing in keeping with their means;
2. To give them love and affection, advice
and counsel, companionship and
understanding;
3. To provide them with moral and spiritual
guidance, inculcate in them honesty,
integrity, self-discipline, self-reliance,
industry and thrift, stimulate their interest
in civic affairs, and inspire in them
compliance with the duties of citizenship;
4. To furnish them with good and wholesome
educational materials, supervise their
activities, recreation and association with
others, protect them from bad company,
and prevent them from acquiring habits
81
 detrimental to their health, studies and
morals;
5. To represent them in all matters affecting
their interests;
6. To demand from them respect and
obedience;
7. To impose discipline on them as may be
required under the circumstances; and
8. To perform such other duties as are
imposed by law upon parents and
guardians (Art. 220, FC).
Principle of Parental Liability
Parents and other persons exercising parental
authority shall be civilly liable for the injuries
and damages caused by the acts or omissions
of their unemancipated children living in their
company and under their parental authority
subject to the appropriate defenses provided
by law (Art. 221, FC).
 The principle of parental liability is a
species of vicarious liability, or the doctrine
of “imputed negligence”, where a person is
not only liable for torts committed by
himself, but also for torts committed by
others with whom he has a certain
relationship and for whom he is responsible
(Tamargo vs. CA, G.R. No. 85044, June 3,
1992).
Effect of parental authority upon the
property of the children
Legal guardianship:
The father and the mother shall jointly exercise
legal guardianship over the property of the
unemancipated common child without the
necessity of a court appointment.
In case of disagreement, the father’s decision
shall prevail, unless there is a judicial order to
the contrary (Art. 225, FC).
Income of the child:
The property of the unemancipated child
earned or acquired with his work or industry or
by onerous or gratuitous title shall belong to
the child in ownership. The child’s property
shall be devoted exclusively to the latter’s
82
support and education, unless the title or
transfer provides otherwise.
Right of the parents over the fruits and income
of the child’s property shall be limited to (a)
primarily to the child’s support and (b)
secondarily to the collective daily needs of the
family (Art. 226, FC).
6. Suspension or Termination of Parental
Authority
Permanent Termination:
1. Upon the death of the parents;
2. Upon the death of the child; or
3. Upon emancipation of the child (Art. 228,
FC).
4. If the person exercising parental authority
has subjected the child or allowed him to
be subjected to sexual abuse, such person
shall be permanently deprived by the court
of such authority (Art. 232, FC).
Temporary termination:
1. Adoption of child;
2. Appointment of general guardian;
3. Judicial declaration of abandonment of the
child;
4. Final judgment divesting the party
concerned of parental authority; or
5. Judicial declaration of absence or
incapacity or person exercising parental
authority (Art. 229, FC).
Grounds for Judicial Suspension of
Parental authority:
1. Conviction of crime which carries with it the
penalty of civil interdiction;
 Parental authority is automatically
reinstated upon service of the penalty
or upon pardon/amnesty (Art. 230, FC)
2. Treating the child with excessive harshness
or cruelty;
3. Gives the child corrupting orders, counsel
for example;
4. Compels the child to beg; or
5. Subjects the child or allows him/her to be
subjected to acts of lasciviousness (Art.
231, FC).
Parental Responsibility of Solo Parents
(Solo Parents RA 8972)
Parental Responsibility of solo parents with
respect to their minor children shall refer to the
rights and duties of the parents as defined in
Article 220 of the FC (Sec.3 [c], R.A. No. 8972).
3. In contracting marriage, parental advice is
still necessary if a party is at least 21 but
below 25 (Art. 15, FC).
4. The parents or guardians are still liable for
the quasi-delict committed by a person
who is at least 18 but below 21, if the
latter is living in the company of the
former (Art. 236, FC; in relation to Art.
2180, NCC).
L. RETROACTIVITY OF THE FAMILY CODE

(Please see enumeration of Art. 220 under 4. This code shall have retroactive effect insofar
Effect of Parental Authority upon the Persons as it does not prejudice or impair vested or
of Children) acquired rights in accordance with the civil
code or other laws (Art. 256, FC).
K. EMANCIPATION
III. SUCCESSION
It is the means by which a child is freed from
parental authority and custody of, and from the A. GENERAL PROVISIONS
obligation to render services to, the parent or
persons exercising parental authority. Succession is a mode of acquisition by virtue
of which the property, rights and obligations to
1. Cause of Emancipation the extent of the value of the inheritance of a
person are transmitted through his death to
How Emancipation Takes Place: By another or others either by his will or by
attainment of the age of majority. Under operation of law. (Art. 774, NCC)
present laws, majority commences at the age
of 18 years (Art. 234, as amended by R.A. Elements of Succession:
6809, FC).
1. Causal element, which is the death of the
2. Effects of Emancipation decedent;
2. Objective element, which is the
1. Termination of parental authority over the inheritance;
person and property of the child; and 3. Subjective element, or the decedent and
2. The child then becomes qualified and those who are called to succeed him, either
responsible for all acts of civil life (Art. by the decedent’s express will or by
236, FC). provision of law;
4. Acceptance of the inheritance by the
XPNs: person called to the succession. (Rabuya,
Pre-bar Reviewer in Civil Law, 2021, p.
1. In contracting marriage, parental consent 241)
is still necessary if a party is at least 18 but
below 21 (Art. 14, FC). Without parental Succession Inheritance
consent, marriage is voidable (Art. 45 (1), Refers to the legal Consists of the
FC). mode by which the property and
2. If such party will enter into a marriage inheritance is transmissible rights
settlement, the person who is required to transmitted to the and obligations
give his consent to the marriage is also persons entitled to it existing at the time of
required to be a party to the marriage surviving the his death. (Art. 776,
settlement is not valid (Art. 78, FC). decedent. (Art. 774, NCC)
NCC)

83
Subject of Succession: DECEDENT/
TESTATOR and HEIRS/SUCCESSORS
Decedent - A person whose property is
transmitted through succession, whether or
not he left a will. If he left a will, he is also
called the testator. (Art. 775, NCC)
Heirs - Those who are called upon to succeed
by universal title on the whole or to an aliquot
portion thereof, either by will or by operation
of law. (Art. 782, par. 1, NCC)
Object of Succession: INHERITANCE
1. The inheritance includes all the property,
rights and obligations of a person which
are not extinguished by death. (Art. 776,
NCC)
2. Those which have accrued thereto since
the opening of the succession. (Art. 781,
NCC)
Transmission of Successional Rights
The rights to the succession are transmitted
from the moment of the death of the decedent.
(Art. 777, NCC)
Conditions for Transmission
1. That indeed there has been death (either
actual or presumed);
2. That the rights or properties are indeed
transmissible or descendible; and
3. That the transferee is still alive (no
predecease), willing (no repudiation) and is
capacitated to inherit. (Paras, Civil Code of
the Philippines Annotated Wills and
Succession, 2016, p. 12-13)
The decedent’s right to succeed is what is
transmitted and not the right to the
inheritance. (Paras, Civil Code of the
Philippines Annotated Wills and Succession,
2016, p. 13)
Rules on Transmissibility of Rights and
Obligations
1. Purely personal rights are extinguished by
death; hence, they are not transmissible to
the heirs.
84
2. Patrimonial rights are generally
transmissible to the heirs, unless otherwise
provided by law or by the will of the
testator.
3. Rights and obligations arising from
contracts are generally transmissible to the
heirs unless they are not transmissible by
reason of their nature, by express
agreement of the parties, or by express
provision of law. (Rabuya, Pre-bar
Reviewer in Civil Law, 2021, p. 243)
Death Contemplated
a. Actual or Natural Death
Death has been defined as the cessation of life.
Life is not synonymous with civil personality.
One need not acquire civil personality first
before he/she could die. (Continental Steel
Manufacturing Corp. vs. Montano, G.R. No.
182836, October 13, 2009)
If there is doubt, between two or more persons
who are called to succeed each other, as to
which of them died first, the person alleging
the death of one prior to the other shall prove
the same. In the absence of proof, it is
presumed that they died at the same time and
there shall be no transmission of rights from
one to the other. (Art. 43, NCC)
b. Presumptive death for purposes of
succession
Presumptive death may be ordinary or
extraordinary.
In case of presumptive death for purposes of
opening the succession, a judicial declaration is
not required and courts are without authority
to issue the same. (Tadeo-Matias vs. Republic,
G.R. No. 230751, April 25, 2018).
i. Ordinary Absence
If a person has been absent, it being unknown
whether or not he still lives, he shall be
presumed dead for purposes of opening his
succession after an absence of ten (10) years.
If he disappeared after the age of 75 years, an will of the testator, to succeed to the
absence of five (5) years shall be sufficient. inheritance or the portion thereof of which
(Art. 390, par. 2, NCC) the testator can freely dispose.

ii. Extraordinary or Qualified Absence Devisee- Person to whom gifts of real

property are given by virtue of a will. (Art.
The following shall be presumed dead for all 782, NCC)
purposes, including the division of the estate
among the heirs: Legatee - Person to whom gifts of personal
property are given by virtue of a will. (Art.
1. A person on board a vessel lost during a 782, NCC)
sea voyage, or an airplane which is
missing, who has not been heard of for iii. Legal or intestate heirs - Those who
four (4) years since the loss of the vessel succeed to the estate of the decedent who
or airplane; dies without a valid will, or to the portion
2. A person in the armed forces who has of such estate not disposed of by will.
taken part in war, and has been missing for (Tolentino, Civil Code of the Philippines
four (4) years; Vol. III, succession, p. 27)
3. A person who has been in danger of death
under other circumstances and his Distinctions between heirs and legatees
existence has not been known for four or devisees
years. (Art. 391, NCC)
Legatees or
Heirs
Reckoning point of death - On the very day of Devisees
the occurrence of the event from which death Amount of inheritance
is presumed; and if such date cannot be fixed, Inherit an Are always given a
the court shall determine. (Rabuya, Civil Law indeterminate or determinate thing
Reviewer Vol. I, 2021, p. 854) aliquot portion by or a fixed amount.
the decedent’s
Kinds of Succession hereditary estate.
Extent of successional right
1. Testamentary – that which results from Succeed to the Only succeed to the
the designation of an heir, made in a will remainder of the determinate thing
executed in the form prescribed by law. properties after all or quantity which
(Art. 779, NCC) the debts and all the is mentioned in the
2. Legal or Intestate – that which takes legacies and devices legacy or devise
place by operation of law in the absence of have been paid or
a valid will. (Art. 960, NCC) given
3. Mixed – that which is effected partly by When exists
will and partly by operation of law. (Art. Both in Only in
780, NCC) testamentary and testamentary
intestate succession
Kinds of Successors succession

i. Compulsory heirs - Those who succeed Instances where the distinctions

by operation of law to some portion of the
inheritance known as “legitime,” in an
amount predetermined by law, of which
they cannot be deprived by the testator,
except by a valid disinheritance.
ii. Voluntary or testamentary heirs -
Those who are instituted by the express
between heirs and devisees/legatees are
important:
1. Preterition - The effect is to annul
entirely the institution of heirs, but legacies
and devises shall be valid insofar as they
are not inofficious. (Art. 854, NCC)

85
2. Defective/Imperfect Disinheritance -
The effect is to annul the institution of heirs
to the extent that the legitime of the
disinherited heir is prejudiced, but legacies
and devises shall be valid insofar as they
are not inofficious. (Art. 918, NCC)
3. After – acquired properties - As a rule,
they are not included among the properties
disposed of unless it should expressly
appear in the will itself that such was the
testator’s intention (Art. 793, NCC). This
rule is applicable only to legacies and
devises and not to the institution of heirs.
(Jurado, Comments & Jurisprudence in
Succession, 2009 Ed, p. 28)
B. TESTAMENTARY SUCCESSION
1. WILLS
Will – An act whereby a person is permitted,
with the formalities prescribed by law, to
control to a certain degree the disposition of his
estate, to take effect after his death. (Art. 783,
NCC)
Characteristics of Wills
a. It is a statutory right – A person is only
“permitted” with the formalities prescribed
by law, to dispose of his estate effectively
upon his death through a will. (Rabuya,
Civil Law Reviewer Vol. I, 2017, p. 724
citing Art. 783, NCC)
The making of a will should be considered
subordinate to both the law and public policy.
(Paras, Civil Code of the Philippines Annotated
Wills and Succession, 2016, p. 44)
b. It is a strictly personal act – It cannot
be left in whole or in part to the discretion
of a third person, or accomplished through
the instrumentality of an agent or attorney.
(Art. 784, NCC)
Acts which the testator cannot entrust to
third persons:
1. The duration or efficacy of designation of
heirs, devisees or legatees. (Art. 785, NCC)
86
2. The determination of portions which they
are to take, when referred to by name.
(Art. 785, NCC)
3. Determination of whether or not a
testamentary disposition is to be operative.
(Art. 787, NCC)
The testator may only entrust to a third
person:
1. The distribution of specific property or
sums of money that he may leave in
general to specified classes or causes, (Art.
786, NCC) provided that the testator has
already determined the property or
amount of money to be given.
2. The designation of persons, institutions or
establishments to which such property or
sums of money are to be given or applied,
(Art. 786, NCC) provided that the testator
has already determined the class or cause
to be benefited. (Rabuya, Civil Law
Reviewer 1, 2017 Ed, p. 727)
c. It is a unilateral and individual act –
It takes effect upon the death of the
testator even if the testamentary
dispositions become inoperative by reason
of renunciation (Art. 832, NCC); and two or
more persons cannot make a will jointly or
in the same instrument, either for their
reciprocal benefit or for the benefit of a
third person. (Art. 818, NCC)
d. It is a free and voluntary act – It must
have been executed freely, knowingly, and
voluntarily, otherwise it will be disallowed.
(Paras, Civil Code of the Philippines
Annotated Wills and Succession, 2016, p.
44)
e. It is a formal or a solemn act – It must
be executed in accordance with the
formalities prescribed by law. (Art. 783,
NCC)
f. It is a disposition of property - Testator
must have animus testandi – intent to
transfer title via a testamentary
disposition, to take effect upon testator’s
death. (Art. 783, NCC)
g. It is a disposition mortis causa - It will
take effect upon death. (Art. 777, NCC)
h. It is ambulatory and revocable - a will
may be revoked by the testator at any time
before his death. (Art. 828, NCC).
i. The testator must have testamentary
capacity.
Testamentary Capacity
Governing Law: The capacity of a person to
make a will shall be governed by his national
law. (Art. 15, NCC)
When must exist: Testamentary Capacity
must exist at the time of the execution of the
will. (Jurado, Comments and Jurisprudence on
Succession, 2009 ed. p. 40)
Only natural persons are qualified to make a
will.
GR: All natural persons are qualified to make a
will.
XPNs:
1. He is expressly prohibited by law- All
persons who are not expressly prohibited
by law may make a will. (Art. 796, NCC)
2. He is below 18 years of age at the
time of its execution- Persons of either
sex under eighteen years of age cannot
make a will. (Art. 797, NCC)
3. He is of unsound mind at the time of
execution - In order to make a will it is
essential that the testator be of sound
mind at the time of its execution. (Art. 798,
NCC).
Test of Soundness of Mind:
To be considered as of sound mind, the
testator must have the ability to know:
a. The nature of the estate to be
disposed of (Art. 799, NCC) – the testator
must have a fairly accurate knowledge of
what he owns. (Rabuya, Civil Law Review
Vol. I, 2021, p. 872)
b. The proper objects of his bounty (Art.
799, NCC) – the testator should know
under ordinary circumstances, his relatives
in the most proximate degrees. (Rabuya,
Civil Law Review Vol. I, 2021, p. 872)
c. The character of the testamentary act
(Art. 799, NCC) - the testator must be
aware that the instrument he is executing
is an act mortis causa which will dispose of
his property upon his death. (Rabuya,
supra, at 872).
GR: The law presumes that the testator is of
sound mind. (Art. 800, NCC)
XPNs:
a. One month or less before the execution of
the will, the testator was publicly known to
be insane; and
b. He was under guardianship at the time of
making his will. (Art. 800, NCC)
Supervening incapacity does not invalidate an
effective will, nor is the will of an incapacitated
validated by supervening of capacity. (Art. 801,
NCC)
There is no presumption of incapacity merely
because of advanced years. (Tolentino, Civil
Code of the Philippines Vol. III, succession, p.
53) It is senile dementia and not senility that
produces testamentary incapacity. (Jurado,
Comments and Jurisprudence on Succession,
2009 ed. p .46)
Insane Delusions
Not every insane delusion will render one
incapable of making a will. A testator may have
delusions regarding matters which do not
affect or concern his testamentary act and
which have no influence upon the disposition
which he makes of his estate. In such a case,
if the testator is otherwise mentally qualified,
the existence of such delusions would not
invalidate his will. (Tolentino, Civil Code of the
Philippines Vol. III, Succession p. 55)
87
Deaf, Dumb, and Blind
Neither blindness, nor deafness and dumbness,
nor all of them combined, will alone
incapacitate a person to perform a
testamentary act. If a person afflicted has
testamentary capacity and can communicate
his desires, no reason exists for rejecting his
will. (Tolentino, Civil Code of the Philippines
Vol. III, Succession, p. 56)
Other circumstances such as family relations,
civil interdiction, prodigality, insolvency,
alienage, and other similar nature, which
ordinarily modify or limit capacity to act do not
affect or restrict testamentary capacity.
(Jurado, Comments and Jurisprudence on
Succession, 2009 ed. p.39)
Rules in Interpretation of Wills
Rule Favoring Testacy
The intent or will of the testator, expressed in
the form and within the limits prescribed by
law, must be recognized as the supreme law in
succession. All rules of construction are
designed to ascertain and give effect to that
intention.
It is only when the intention of the testator is
contrary to law, morals, or public policy that it
cannot be given effect. (Rabuya, Civil Law
Review, Vol. I, 2021, p. 863)
If a testamentary disposition admits of
different interpretations, in case of doubt, that
interpretation by which the disposition is to be
operative shall be preferred. (Art. 788, NCC)
Parole Evidence Rule with respect to
interpretation of wills
When there is an imperfect description, or
when no person or property exactly answers
the description, mistakes and omissions must
be corrected, if the error appears from the
context of the will or from extrinsic evidence,
excluding the oral declarations of the testator
as to his intention; and when an uncertainty
arises upon the face of the will, as to the
application of any of its provisions, the
testator's intention is to be ascertained from
88
the words of the will, taking into consideration
the circumstances under which it was made,
excluding such oral declarations. (Art. 789,
NCC)
Kinds of Ambiguities
1. Patent or Extrinsic ambiguity - one
which appears upon the face of the
instrument. (e.g., When the testator gives
a legacy to “some of the six children of my
brother Juan.) (Rabuya, Civil Law Review
Vol. I, 2021, pp. 865-866)
2. Latent or Intrinsic ambiguity - one
which cannot be seen from a mere perusal
or reading of the will, but which appears
only upon consideration of extrinsic
circumstances. (e.g., When the testator
gives a legacy to “my cousin Pedro” and it
turns out that he has two or more cousins
named Pedro.) (Rabuya, Civil Law Review
Vol. I, 2021, p. 866)
There is no distinction between patent and
latent ambiguities in so far as the admissibility
of parole or extrinsic evidence to aid
testamentary disposition is concerned.
(Tolentino, Civil Code of the Philippines Vol. III,
Succession, p. 36)
How to cure ambiguities:
1. By determining the intention of the testator
through examining the words of the will;
2. By resorting to parol or extrinsic evidence
(oral declarations not allowed since
contrary to the dead man’s statute rule).
(Rabuya, Civil Law Review, Vol. I, 2021, p
866)
Interpretation of words
1. Non-technical words
GR: The words of a will are to be taken in their
ordinary and grammatical sense.
XPN: When a clear intention to use them in
another sense can be gathered, and that other
can be ascertained. (Art. 790, NCC)
2. Technical words
GR: They are to be taken in their technical After-acquired property
sense.
GR: Properties acquired during the interval
XPNs: (a) When the context clearly indicates a between the execution of the will and the death
contrary intention, or (b) when it satisfactorily of the testator are not included among the
appears that the will was drawn solely by the properties disposed of. (Art. 793, NCC)
testator, and that he was unacquainted with
such technical sense. (Art. 790, NCC) XPN: Unless it should expressly appear in the
will itself that such was the intention of the
Interpretation as a whole testator, such as when the will covers or speaks
of the “whole estate” or the entire inheritance.”
The words of a will are to receive an (Rabuya, Civil Law Review, Vol. I, 2021, pp
interpretation which will give to every 868-869, citing Art. 793, NCC)
expression some effect, rather than one which
Extent of interest covered
will render any of the expressions inoperative;
and of two modes of interpreting a will, that is
GR: Every devise or legacy shall cover all the
to be preferred which will prevent intestacy.
interest which the testator could devise or
(Art. 791, NCC)
bequeath in the property disposed of.
The will of the testator is the first and principal
XPN: When it clearly appears from the will that
law in the matter of testaments. When his
he intended to convey a less interest. (Art. 794,
intention is clearly and precisely expressed, any
NCC).
interpretation must be in accord with the plain
and literal meaning of his words, except when
Law Governing Forms of the Will
it may clearly appear that his intention was
different from that literally expressed. The
1. As to the time of execution
testator’s intention is to be ascertained from
the words of the will, taking into consideration
Extrinsic validity
the circumstances under which it was made.
Inasmuch as the testator was not survived by
The validity of a will as to its form depends
any nephew who became a priest, the
upon the observance of the law in force at the
unavoidable conclusion is that the bequest in
time it is made. (Art. 795, NCC)
question was ineffectual or inoperative.
Therefore, the administration of the rice lands
Effect of statutory changes
by the parish priest of Victoria, as envisaged in
the will, was likewise inoperative. (Parish Priest
a. After the testator’s death
of Roman Catholic Church of Victoria, Tarlac vs.
Rigor, G.R. No. L-22036, April 30, 1979)
Successional rights arising from the will are
vested in the person called to the inheritance.
Separability of invalid provisions
These vested rights are protected under the
due process clause of the constitution. (Jurado,
GR: The invalidity of one of several dispositions
Comments and Jurisprudence on Succession,
contained in a will does not result in the
2009 ed. p. 37)
invalidity of the other dispositions.
b. Before the testator’s death
XPN: Unless it is to be presumed that the
testator would not have made such other
GR: Any statutory change enacted after the
dispositions if the first invalid disposition had
execution of the will but before the death of
not been made. (Art. 792, NCC)
the testator cannot have any retroactive effect
upon the formal validity of the will.

89
XPN: When a retroactive effect is expressly
declared by the statue itself or is necessarily
implied from the language used therein.
(Jurado, Comments and Jurisprudence on
Succession, 2009 ed. p. 38)
Intrinsic validity
1. Successional rights are governed by the
law in force at the TIME OF THE
DECEDENT’S DEATH (Art. 2263, NCC);
2. Laws that must be observed in relation to
intrinsic validity under Philippine Law:
a. National law of the decedent; law of his
country or nationality; regardless of the
place of execution and the place of death
(Art. 16 [2], NCC);
b. RENVOI DOCTRINE: referring back to
the forum of the problem.
Where the conflict rules under the
decedent’s national law refers the matter
to the law of the domicile.
A holographic will is subject to no other
form, and may be made in or out of the
Philippines. (Art. 810, NCC)
2. As to the place of execution
The forms and solemnities of contracts, wills,
and other public instruments shall be governed
by the laws of the country in which they are
executed. (Art. 17, NCC)
Extrinsic Validity - A will produces effect in
the Philippines if made by either a Filipino
Testator or an Alien within the formalities
prescribed by:
a. Filipino Testator (Art. 815 and Art. 17,
NCC)
1) Philippine Law
2) The law of the country where it is
executed
b. Alien Testator
90
1) Executed abroad (Art. 17 and 816,
NCC)
a) The law of the place where it is
executed
b) The law of the place which he
resides
c) The law according to the formalities
observed in his country
d) Philippine Law
2) Executed in the Philippines (Art. 817,
NCC)
a) Philippine Law
b) The law of the country of which he
is a citizen or subject
Aspects of a Will Governed by the
National Law of the Decedent
1. Order of succession;
2. Amount of successional rights;
3. Intrinsic validity of testamentary
dispositions; and
4. Capacity of the heir to succeed from
decedent. (Art. 16 (2), NCC)
Prohibition on Joint Wills
Two or more persons cannot make a will
jointly, or in the same instrument, either for
their reciprocal benefit or for the benefit of a
third person. (Art. 818, NCC) This provision
extends to all Filipinos even if they are in a
foreign country that allows joint wills. (Art. 819,
NCC)
Formalities of Wills
Forms and solemnities of will are governed by
the law of the country in which the will was
executed. (Art 17, NCC)
Kinds of Wills
1. Notarial/Attested or Ordinary will –
Executed in accordance with the
formalities prescribed in Arts. 804 to 808 of
the Civil Code.
2. Holographic will – A will which must be
entirely written, dated and signed by the
 hand of the testator HIMSELF, without the 3) The person requested by the testator signs
necessity of any witness. (Art. 810, NCC) the testator’s name, not his; and
4) The fact that the testator caused some
Common Formalities of Wills other person to write his name in his
presence and by his express direction and
1. Must be in writing; also in the presence of the instrumental
2. Written and executed in a language or witnesses is stated in the attestation clause
dialect known to the testator. (Art. 804, (Rabuya, Civil Law Review Vol. I, 2021, pp
NCC) 884-885).

Notarial/Attested or Ordinary Will End of the will – It refers to the point where
the last testamentary disposition ends or at its
Special Formalities (Art. 805, NCC) logical end.

1. Subscription - It must be subscribed at When signature is followed by dispositive

the end thereof by the testator himself or
by the testator’s name written by some
other person in his presence and express
direction.
Two modes by which the testator can
subscribe a notarial will:
a. Subscription by testator himself
A thumbprint is considered a sufficient
signature. (De Gala vs. Gonzales, G.R. No. L-
30289, March 26, 1929)
provisions, the whole will cannot be probated
because it must be considered as the whole (III
Tolentino, Civil Code of the Philippines, 70,
1992 Ed, cited by Rabuya in Civil Law Reviewer
I, 2021 Ed. p. 889).
Purpose of the Requirement - To prevent
fraud or interpolation between the
testamentary dispositions and the signature.
An instrument in the form of a will cannot be
probated, if it is not signed at the end
(Tolentino, Civil Code of the Philippines, Vol.
III, 1992, p 70).

A cross written across the testator’s name is
not sufficient signature unless it is shown that
it is the testator’s habitual signature or one of
the ways by which he signs his name. (Matias
vs. Salud, G.R. No. L-10751, June 23, 1958).
2. Attestation and Subscription by at least
3 witnesses - Attested and subscribed by 3
or more qualified or competent witnesses in
the presence of the testator and of one
another.

The mere sign of the cross cannot be likened Distinction between Attestation and
to a thumb mark as the cross does not have Subscription
the trustworthiness of a thumbmark (Garcia vs.
Lacuesta, G.R. No. L-4067, November 29, Attestation Subscription
1951). As to the act itself
Act of senses (mental) Act of the hand
b. Subscription by the testator’s name (mechanical)
written by some other person in his As to what constitutes
presence, and by his express direction Consists in witnessing It is the signing of
the testator’s the witnesses’
Requisites: execution of the will in names upon the
order to see and take same paper for the
1) The testator’s name is written by some note mentally that purpose of
other person in his presence and by his those things are done identification of
express direction; which the statute such paper as the
2) Such person signed the will and every page requires for the will which was
thereof in the presence of the instrumental execution of a will and
witnesses;

91
 that the signature of executed by the
the testator exists as a testator
fact.
(Rabuya, Civil Law Review Vol. I, 2021, p 891)
Attestation is the act of the senses, while
subscription is the act of the hand. Hence, if
the will consisted of two pages, both signed by
the witnesses on the left-hand margin thereof,
but without signing the attestation clause at its
bottom, the will is void because an unsigned
attestation clause results in an unattested will.
The signatures on the left-hand margin cannot
be deemed compliance with the signature on
the attestation clause since the signatures that
do appear on the page were directed towards
a wholly different avowal (Azuela vs. Court of
Appeals, G.R. No. 122880, April 26, 2006).
Meaning of “in the presence of the
testator and of one another”:
The true test of signing in each other’s
presence is not whether they actually saw each
other sign, but whether they might have
seen each other sign had they chosen to
do so, considering their mental and physical
condition and position in relation to each other
at the moment of inscription of each signature.
Hence, if a witness could see everything that
took place by merely casting his eyes in the
proper direction and without any physical
obstruction to prevent his doing so, the
requirement of the statute is satisfied (Nera vs.
Rimando, G.R. No. L-5971, February 27, 1911).
As long as the witness was in such a position
which in relation to the third witness that he
could see everything which took place by
merely casting his eyes in the proper
direction, and without physical
obstruction to prevent doing so, it shall be
considered as signed in his presence (Jobaneta
vs. Villasor, G.R. No. 1641, January 19, 1906
cited in Rabuya Civil Law Reviewer I, 2021 Ed.
p. 895).
Number of witnesses
Art. 805 of the NOC mandatorily requires that
the will be attested and subscribed by three or
more credible witnesses.
92
A notarial will is required by law to be
subscribed at the end thereof by the testator
himself. In addition, it should be attested and
subscribed by three or more credible witnesses
in the presence of the testator and of one
another. If attested by only two witnesses, the
will must be considered void. (Lee vs.
Tambago, A.C. No. 5281, February 12, 2008).
If the third witness is the notary public himself
before whom the will was supposed to have
been acknowledged, the requirements of
Articles 805 and 806 of the Civil Code are not
satisfied (Rabuya, supra, p. 894).
3. Marginal Signatures - Signatures of the
testator or the person requested by him to
write his name and his witnesses on the
left margin of each and every page, except
the last.
Three requirements (for testator or the
person requested by him to write his
name):
a. The testator or the person requested by
him to write his name must sign on every
page, except the last (MANDATORY)
b. Such signature be on the left margin
(DIRECTORY)
c. The signing must be done in the presence
of the witnesses (MANDATORY) (Rabuya,
supra, p. 896).
Three requirements (for testator or the
person requested by him to write his
name):
a. The witnesses must sign on every page
(MANDATORY)
b. Such signature be on the left margin
(DIRECTORY)
c. The signing must be done in the presence
of the testator and of one another
(MANDATORY) (Rabuya, supra, p. 899).
4. Pages numbered correlatively in letters
placed on the upper part of each page.
Purpose of the requirement: The paging of
wills is to guard against fraud, and to afford
means of preventing the substitution or of
defecting the loss of any of its pages.
The omission to put a page number on the first
sheet is supplied by other forms of
identification more trustworthy than the
conventional numerical words or characters.
The unnumbered page is clearly identified as
the first page by the internal sense of its
contents considered in relation to the contents
of the second page. By their meaning and
coherence, the first and second lines on the
second page are undeniably a continuation of
the last sentence of the testament, before the
attestation clause, which starts at the bottom
of the preceding page. Furthermore, the
unnumbered page contains the caption
"TESTAMENTO," the invocation of the
Almighty, and a recital that the testator was in
full use of his testamentary faculty, — all of
which, in the logical order of sequence,
precede the direction for the disposition of the
marker's property (Lopez vs. Liboro, G.R. No.
L-1787, August 27, 1948).
If the paging should be placed on the lower
part, the testament is not void for this sole
reason (Rabuya, supra, p. 902 citing Unson vs.
Abella, G.R. No. 17847, June 12, 1922).
It is not necessary that the pages of the will be
numbered correlatively in letters such as “one,”
“two,” “three,” etc. The requirement of the law
is sufficiently complied with if the folios were
paged with the letters “A,” “B,” “C,” etc. or in
Arabic numerals or in any form of identification.
(Rabuya, supra, p 902-903 citing Aldaba vs.
Roque, G.R. No. L-17304, May 22, 1922, and
Unson vs. Abella, G.R. No. 17857, June 12,
1922).
5. Must contain an attestation clause
An attestation clause refers to that part of an
ordinary will whereby the attesting witnesses
certify that the instrument has been executed
before them and to the manner of the
execution of the same.(Rabuya, supra, p. 903)
Contents of an attestation clause
a. Number of pages used upon which the
will is written;
b. The fact that testator signed the will
and every page thereof, or caused some
other person to write his name, under his
express direction and in his presence, in
the presence of the instrumental
witnesses;
c. The fact that the witnesses witnessed
and signed the will and all the pages
thereof in the presence of the testator and
of one another.
If the attestation clause is the only evidence of
the fact required to be stated therein, the
omission to state such fact in the attestation
clause is fatal (Caneda vs. CA, G.R. No.
103554, May 28, 1993). For example, if the
attestation clause failed to state that the
testator signed the will in the presence of the
witnesses.
But if the omitted statement may be proven by
the mere examination of the will, such omission
does not invalidate the will (Caneda vs. CA,
supra.). For example, the fact that all the pages
were signed by the testator and all the
witnesses.
6. Acknowledged before a notary public by
the testator and all the witnesses.
An acknowledgment is the act of one who has
executed a deed in going before some
competent officer or court and declaring it to
be his act or deed.(Rabuya, supra, p. 914)
This requirement does not apply to holographic
wills because the latter are not required to be
witnessed. (Art. 810, NCC)
An attestation clause and an acknowledgment
cannot be merged in one statement as the law
contemplates these as two distinct acts that
serve different purposes. (Echavez vs. Dozen
Construction and Development Corp., G.R. No.
192916, October 11, 2010)
An acknowledgment taken outside the
territorial limits of the notary public’s
jurisdiction is void because outside of the place
of his commission, a notary public is bereft of
power to perform any notarial act. Hence, the
will becomes void because of absence of
acknowledgment (Guerrero vs. Bihis, G.R. No.
212045, July 22, 2015).
93
A will which does not contain an
acknowledgment, but a mere jurat, is fatally
defective, as the express requirement of the
law is that the will be acknowledged, and not
merely subscribed and sworn to (Azuela vs. CA,
G.R. No. 122880, April 12, 2006).
The notary public before whom the will was
acknowledged cannot be considered as the
third instrumental witness since he cannot
acknowledge before himself the will (Cruz vs.
Villasor, G.R. No. L-32213, November 26,
1973).
Timing of acknowledgment – The NCC
does not require that the signing of the
testator, witnesses and notary should be
accomplished in one single act. Thus, the
conflict between the dates appearing on the
notarial will does not invalidate the document,
because the law does not even require that a
notarial will be executed and acknowledged on
the same occasion (Ortega vs. Valmonte, G.R.
No. 157451, December 16, 2005).
Special Requirements in XPNal Cases:
A. Deaf or Deaf-Mute Testator
1. He must personally read the will, if able
to do so; or
2. He shall designate two persons to read
and communicate to him, the contents
thereof (Art. 807, NCC)
B. Blind Testator
The will shall be read to him twice; once by one
of the subscribing witnesses, and again by the
notary public before whom the will is
acknowledged.(Art. 808, NCC)
Art. 808 applies also to those who are
incapable of reading their wills, either because
of poor or defective eyesight or because of
illiteracy.
Rule Qualified:
The will was held to be valid where, instead of
a Notary Public and an instrumental witness, it
was the lawyer who drafted the will who read
the same aloud to the testator once, not twice
94
as the law requires, in the presence of the
testator, his three instrumental witnesses and
the notary public. Prior and subsequent thereto
the testator affirmed upon being asked that the
contents read corresponded with his
instructions. Only then did the signing and
acknowledgment take place (Alvarado vs.
Gaviola, Jr., G.R. No. 74695, September 14,
1993.
Holographic Wills
Special formalities:
1. Entirely written by the hand of the
testator;
2. Dated by the hand of the testator; and
3. Signed by the hand of the testator himself
(Art. 810, NCC).
Absent the above requirements, the will is
void.
No Witness Required – During the execution
of the holographic will, no witnesses are
necessary and required. (Rabuya, supra, p.
923)
Probate of a Holographic Will
In the probate of a holographic will, it shall be
necessary that at least one witness who
knows the handwriting and signature of the
testator explicitly declares that the will and the
signature are in the handwriting of the testator.
If the will is contested, at least three of such
witnesses shall be required. In the absence of
any competent witness and if the court deems
it necessary expert testimony may be resorted
(Art. 811, NCC).
In an earlier case (Azaola vs. Singson, G.R. No.
L-14003, August 5, 1960), it was held that even
if the genuineness of the holographic will is
contested, the requirement of three witnesses
is not compulsory. In a later case (Codoy vs.
Calugay, G.R. No. 123486, August 12, 1999),
however, the Court ruled that the requirement
is mandatory.
Rules in case of insertion, cancellation,
erasure or alterations made by testator:
1. He must authenticate the same with his
full signature (Art. 814, NCC).
2. If not authenticated with his full
signature, it is considered as not made,
but the will is not invalidated as a whole,
but at most only with respect to the
particular words erased, corrected or
interlined (Kalaw vs. Relova, G.R. No. L-
40207, September 28, 1984).
Effect of insertion by another person on
the validity of a holographic will:
1. Made after the execution of the will
but without the consent of the
testator: such insertion is considered as
not written because the validity of the will
cannot be defeated by the malice or
caprice of a third person.
2. Made after the execution of the will
but with the consent of the testator:
the will remains valid but the insertion is
void.
3. Made after the execution of the will
but validated by the testator by his
signature thereon, then the insertion
becomes part of the will, and the entire will
becomes void.
4. Made contemporaneous to the
execution of the will, then the will is
void because it is not written entirely by the
testator (III Tolentino, Civil Code, 1979, p.
115).
Witnesses to Will
Who are qualified to be a witness (Arts.
820, 821, NCC)
1. At least 18 years of age;
2. Of sound mind;
3. Not blind, deaf or dumb;
4. Able to read and write;
5. Domiciled in the Philippines, and
6. Has not been convicted of falsification of a
document, perjury or false testimony
The requirement that witnesses must be
domiciled in the Philippines applies only if a
Filipino citizen executes his will in the
Philippines. (Rabuya, Civil Law Review, Vol. I,
2021, p. 874)
The competency of the witnesses is determined
at the time of the attestation of the will. (Art.
822, NCC)
If a person is made a beneficiary in the will, or
his spouse, parent or child:
a) The disposition is void as far only as
concerns synch person, or spouse, or
parent or child of such person, or any one
claiming under such person or spouse, or
parent, or child, if there are no other three
qualified witnesses, but the will is still
valid.
b) The witness is not disqualified; only his
entitlement to the inheritance, legacy or
devise is affected – it becomes void (Art.
823, NCC).
Doctrine of Substantial Compliance
In the absence of bad faith, forgery or fraud,
or undue and improper pressure and influence,
defects and imperfections in the form of
attestation or in the language used therein
shall not render the will invalid if it is proved
that the will was in fact executed and attested
in substantial compliance with all the
requirements of Article 805. (Art. 809, NCC;
RE: Petition for Probate of the Will of Consuelo
Santiago Garcia vs Natividad Garcia Santos,
G.R. No. 204793, June 08, 2020)
Codicils and Incorporation by Reference
Codicil – is a supplement or addition to a will
made after the execution of a will and annexed
to be taken as a part thereof by which any
disposition made in the original will is
explained, added to or altered (Art. 825, NCC).
If the later instrument makes dispositions
independent of those in the original will,
without explaining or modifying such original
will, then it is a new will, not a codicil. (Rabuya,
Civil Law Review, Vol. I, 2021, p. 928)
95
Forms Required for Codicil: Difference between Codicil and
Subsequent Will
It shall be executed as in the case of a will in
order to be effective (Art. 826, NCC). Codicil Subsequent Will
As to whether it forms part of the
If the will to which a codicil refers is a original will
holographic will, the law does not require that Forms part of the New or separate
the codicil be also in the form of a holographic original will
will. (Rabuya, Civil Law Reviewer I, 2021 Ed., As to how it is related to the original will
p. 928 citing Balane, Jottings and Supplements the Makes dispositions
Jurisprudence in Succession, 1998 Ed. p. 140). original will, without reference to
explaining, adding to, and independent of
Incorporation by reference or altering any of its the original will
dispositions
An XPN to the rule that if an instrument is not As to how it is construed together will
executed with all the formalities of a will it the original will
cannot be admitted to probate. (Tolentino, Civil A will and a codicil, A prior will and a
Code of the Philippines Vol. III, Succession being regarded as a subsequent will,
p.127) single instrument, are being two separate
to be construed wills, may be
Requisites for the validity of together construed
incorporation by reference of documents independently of each
or paper to notarial will: other.
As to how it is executed
1. Document or paper referred to must be in To be effective, it It must be executed
existence at the time of the execution of must be executed as in the formalities
the will; in the case of a will prescribed for
2. Will must clearly describe and identify the (Art. 826). holographic or
same stating, among other things, the notarial wills.
number of pages thereof;
3. It must be identified by clear and
satisfactory proof as the document or
Revocation of Wills and Testamentary
paper referred therein; and Dispositions
4. It must be signed by the testator and the
witnesses on each and every page, except Revocation is an act of the mind, terminating
in case of voluminous books of account or
the potential capacity of the will to operate at
inventories. (Art. 827, NCC)
the death of the testator, manifested by some
outward and visible act or sign, symbolic
Holographic wills cannot incorporate
thereof. (Tolentino, Civil Code of the
documents by reference since one of the Philippines Vol. III, Succession p. 129)
requirements for its validity is the signature of
the testator and the witness, which the latter is Rules on revocability of wills
not required in a holographic will. (Balane,
Jottings and Jurisprudence in Civil Law, p. 183, 1. A will may be revoked at will by the testator
2016) at any time before his death;
2. Any waiver or restriction of the right to
revoke the will is void, but it shall not
affect the validity of the will. (Art. 828,
NCC)

96
Laws Governing Validity of Revocation:
(Art. 829, NCC)
1. If done outside the Philippines:
a. By a person not domiciled in the
Philippines, valid if –
1) In accordance with the law of the
place where the will was made (lex
loci celebrationis); or
2) In accordance with the law of the
place in which he is domiciled at
the time of revocation (lex loci
domicilii).
B. By a person domiciled in the
Philippines, the revocation must be
done in accordance with Philippine law
(lex loci domicilii).
2. If done in the Philippines: in accordance
with Philippine laws, whether the testator
be domiciled in the Philippines or not.
Modes of revoking wills: (Art. 830, NCC)
1. By implication of law;
2. By some will, codicil, or other writing
executed as provided in case of wills; and
3. By physical destruction (burning, tearing,
cancelling, or obliterating the will with the
intention of revoking it (animus
revocandi) by the testator himself, or by
some other person in his presence, and by
his express direction).
Instances of revocation by implication of
law:
1. If the subsequent marriage in Art. 41 of the
Family Code is terminated by the recording
of the affidavit of reappearance, the
spouse who contracted the marriage in bad
faith is disqualified to inherit from the
other, whether the succession is
testamentary or intestate. (Art. 43[F], FC)
2. If both spouses in the subsequent marriage
referred to in Art. 41 of the FC are in bad
faith, the marriage is void, and any
testamentary disposition by one in favor of
the other is revoked by operation of law.
(Art. 44, FC)
3. In case of annulment of marriage, the
spouse who contracted the marriage in bad
faith is disqualified to inherit from the
other, whether the succession is
testamentary or intestate. (Art. 50, FC)
4. Upon the issuance of the decree of legal
separation, provisions in favor of the
offending spouse shall be revoked by
operation of law. (Art. 63[4], FC)
5. In case of preterition of a compulsory heirs
in the direct line, the institution of heirs
shall be annulled but without affecting the
legacies and devises which are not
inofficious. (Art. 854)
6. When the heir, legatee or devisee commits
any act of unworthiness which by express
provision of law will incapacitate him to
succeed. (Art. 1032)
7. When in the testator’s will there is a legacy
of credit against a third a person or of a
remission of a debt of the legatee, and
subsequently, after the execution of the
will, the testator brings an action against
the debtor for the payment of his debt. In
such a case, the legacy is revoked by
operation of law. (Arts. 935 & 936)
8. When the testator transforms the thing
bequeathed in such a manner that it does
not retain either the form or denomination
it had, or when he alienates by any title or
for any cause the thing bequeathed or any
part thereof, or when the thing
bequeathed is totally lost during the
testator’s lifetime or after his death without
the heir’s fault. In such cases, the legacy is
revoked by operation of law. (Art. 957,
NCC) (Rabuya, Civil Law Reviewer, Vol. III,
2021, p 931-932)
Revocation by subsequent instrument
May be made either expressly or impliedly.
1. Express Revocation
Revocation is express when the subsequent
instrument contains a revocatory clause
expressly revoking the will or a part thereof.
97
(Rabuya, Civil Law Reviewer, Vol. III, 2021, p
932)
In order that a former will may be revoked by
a subsequent will, it is necessary that the latter
will should be valid and executed with the
formalities required for the making of wills.
(Tolentino, Civil Code of the Philippines Vol. III,
Succession p. 131)
If the subsequent will containing a clause
revoking previous will is disallowed by the
probate court on the ground that it was not
executed in accordance with the formalities
prescribed by law, the revocatory clause will
not produce any effect whatsoever. (Jurado,
Comments and Jurisprudence on Succession,
2009 ed. p. 121)
The revocation takes effect if the subsequent
instrument is valid as to formalities even if the
will shall thereafter become inoperative.
(Rabuya, Civil Law Reviewer, Vol. III, 2021, p
933)
A revocation of a will based on a false cause or
an illegal cause is null and void. (Art. 833, NCC)
Doctrine of Dependent Relative
Revocation
If the testator revokes his will with the present
intention of making a new one immediately and
substitute, and the new will is not made, or if
made, fails to take effect for any reason
whatsoever, it will be presumed that the
testator prefers the old will to intestacy;
consequently, the old will can still be admitted
to probate (Molo vs. Molo, G.R. L-02538,
September 21, 1951).
XPN:
A revocation made in a subsequent will shall
take effect, even if the new will should become
inoperative by reason of:
a. Incapacity of the heirs, devisees or
legatees designated therein;
b. Renunciation or repudiation (Art. 832,
NCC)
98
2. Implied Revocation
Revocation is implied when the subsequent
instrument contains no revocatory clause but
the provisions are totally incompatible with the
previous will (Rabuya, Civil Law Reviewer, Vol.
III, 2021, p 933-934)
Subsequent wills which do not revoke the
previous ones in an express manner, annul only
such dispositions in the prior wills as are
inconsistent with or contrary to those
contained in the latter wills (Art. 831, NCC).
Parol evidence is competent to show which was
in fact last executed, whether they are dated
or not. But if they are of the same date, or not
dated, and there is nothing to show which was
the last, all fail for uncertainty (III Tolentino,
Civil Code, 1992 ed., 131-132).
3. Revocation by Physical Destruction
Requisites:
1. Testator must, at the time of performing it,
be in possession of his faculties and
capable of making wills (Tolentino, Civil
Code of the Philippines Vol. III, Succession
p. 132);
2. The destruction must be with intent to
revoke or coupled with animus revocandi
(Tolentino, Civil Code of the Philippines
Vol. III, succession p.132);
3. Intention to revoke must be accompanied
by overt physical act of burning, tearing,
obliterating or cancelling the will (Testate
Estate of Adriana Maloto vs. Court of
Appeals, G. R. no. L-76464. February 29,
1988).
4. The overt act must be made by the testator
or by another person in his presence and
under his express direction (Testate Estate
of Adriana Maloto vs. Court of Appeals,
supra.).
5. There must be a completion at least of the
subjective phase of the overt act (Paras,
Civil Code III, Succession, 2008, p. 139).
Who may do the physical destruction?
1. The testator himself; or
2. Another person, acting under the express
direction of the testator and the physical
 destruction is done in the presence of the
testator. (Testate Estate of Adriana Maloto
vs. Court of Appeals, supra.).
Burning: It is necessary that some part
thereof be scorched or burned, that the paper
itself on which the will is written be partially
burned or scorched (Tolentino, Civil Code of
the Philippines Vol. III, succession p. 135).
Tearing: It is enough that the paper is torn; it
does not need to be torn off entirely; it may
still be together and all legible, but will be
considered revoked (Tolentino, Civil Code of
the Philippines Vol. III, succession p. 135).
Cancelling: A will is well canceled by drawing
lines over it that do not cross each other. It has
held that an endorsement on the back of the
will, “Cancelled and is null and void,” signed by
the testator, is sufficient cancellation
(Tolentino, Civil Code of the Philippines Vol. III,
succession p. 135-136).
Obliteration: Obliteration is effected by
erasing or scraping off any word or disposition
which the testator tends to revoke (Jurado,
Comments and Jurisprudence on Succession,
2009 ed., p. 127).
Revocation effected by burning or tearing is
always total as opposed to revocation through
cancelling and obliterating which may be either
total or partial. It is total if directed against an
essential part of the will and partial if it is
directed against a nonessential part of the will
(Jurado, Comments and Jurisprudence on
Succession, 2009 ed. p. 127-126).
Presumption of revocation:
Where a will which cannot be found is shown
to have been in the possession of the testator,
when last seen, the presumption is, in the
absence of other competent evidence, that the
same was cancelled or destroyed. The same
presumption arises where it is shown that the
testator had ready access to the will and it
cannot be found after his death. It will not be
presumed that such will has been destroyed by
any other person without the knowledge or
authority of the testator (Gago vs. Mamuyac G.
R. No. 26317. January 29, 1927).
In case of unauthorized destruction:
2. In case of notarial will, parol evidence is
competent to prove the contents or
provisions of the will.
3. In case of holographic will, if there is no
copy left, the will may not be probated
even if the loss or destruction was
unauthorized (Gan vs. Yap, 104 Phil. 509).
But if there is a photostatic or Xerox copy
left, then the will may still be probated
(Rodelas vs. Aranza, G.R. No. L-58509,
December 7, 1982).
Recognition of an Illegitimate Child
The recognition of an illegitimate child does not
lose its legal effect, even though the will where
it was made should be revoked (Art. 834, NCC).
Republication and Revival Of Wills
Republication – the re-execution or re-
establishment, by a positive act of the testator,
of the force of a will which has been lost either
because the will is void or it has been
previously revoked (Rabuya, Pre-Bar Reviewer
Civil Law , 2021, p. 269).
Two ways of republishing wills:
1. Express- By reproducing the contents of
the will to be republished in a subsequent
will.
2. Implied- By execution of a codicil which
simply referred to the previous will to be
republished (without reproducing its
contents).
If the previous will is void as to form, it can
only be republished by reproducing the
provisions thereof in a subsequent will
(Rabuya, Civil Law Review, Vol. I, 2021, p.
938citing Art. 835, NCC).
Revival – the process or renewing or
restoring, by operation of law, the operative
force of a will which has been lost because the
will has been previously revoked by implication
of law or by a subsequent instrument (Rabuya,
Pre-Bar Reviewer Civil Law , 2021, p. 269).
99
 Republication Revival
When takes place
Takes place by an Takes place by
act of the testator operation of law
Purpose
Corrects extrinsic Restores a revoked
and intrinsic defects will.
Revival in relation to Revocation
Express - If after making a will, the testator
makes a second will expressly revoking the
first, the revocation of the second does not
revive the first will, which can be revived only
by another will or codicil (Art. 837, NCC).
Implied - Where there is merely inconsistency
between two wills, but no revoking clause, it
has been held in common law that upon the
destruction or revocation of the second will the
first is automatically revived, regardless of the
intention of the testator, provided the first will
has been preserved, undestroyed and
cancelled (Tolentino, Civil Code of the
Philippines Vol. III, succession p. 145).
The issuance of a decree of legal separation
revokes the provisions made in the will of the
innocent spouse in favor of the offending
spouse. However, if a decree of reconciliation
is later issued, the same provisions are
automatically revived (Rabuya, Pre-Bar
Reviewer Civil Law , 2021, p. 268).
The execution of a codicil referring to a
previous will has the effect of republishing the
will as modified by the codicil. (Art. 836, NCC)
Allowance and Disallowance of Wills
Probate - the probate of a will is a special
proceeding for establishing the validity of a will
(Jurado, Comments and Jurisprudence on
Succession, 2009 ed. p.134).
No will shall pass either real or personal
property unless it is proved and allowed in
accordance with the Rules of Court (Art. 838,
NCC).
100
To probate a will means to prove before some
officer or tribunal the following:
1. Identity of the will;
2. Compliance with the formalities for its
execution;
3. Due execution of the will; and
4. Testamentary capacity of the testator
(Rabuya, Pre-Bar Reviewer Civil Law ,
2021, p. 270).
Kinds of probate proceedings:
1. Ante Mortem – Probate during the
lifetime of the testator.
2. Post Mortem – Probate after the
testator’s death. (Rabuya, Civil Law
Reviewer Vol. I, 2021, p. 947)
Even after the ante mortem probate, the will
may still be revoked by the testator. (Rabuya,
Civil Law Reviewer Vol. I, 2021, p. 947)
Probate is mandatory, thus:
1. Prescription and estoppel is not applicable.
2. There can be no valid partition among the
heirs until after the will has been probated.
3. The heirs may not disregard the provisions
of the will unless those are contrary to law.
Neither may they do away with its
presentation to the court for probate
(Rabuya, Pre-Bar Reviewer Civil Law, 2021,
p. 270).
4. Heirs cannot enter into a compromise
agreement different from the terms of the
will.
Who may institute the probate
proceedings
1. The testator himself during his lifetime;
2. Any executor, devisee, or legatee named in
a will, or any other person interested in the
estate, may at any time after the death of
the testator, petition the court, having
jurisdiction to have the will allowed,
whether the same be in his possession or
not, or is lost or destroyed (Rule 76, Sec.
1, Rules of Court).
Issues to be resolved in probate
proceedings
GR: Probate proceedings are limited to pass
only upon the extrinsic validity of the will
sought to be probated. (Rabuya, Civil Law
Review, Vol. I, 2021, p. 942 citing Reyes vs.
CA, G.R. No. 12099, October 30, 1997)
XPNs: Issues affecting the intrinsic validity
were allowed to be passed upon –
1. When the parties agree that the intrinsic
validity be first determined (Reyes vs. CA,
supra.);
2. When the defect of the will is apparent on
its face or when the testamentary
provisions are of doubtful legality and the
probate of the will become a useless
ceremony if it is intrinsically invalid
(Nepomuceno vs. CA, G.R. No. L-62952,
October 9, 1985);
3. When practical considerations demand that
the intrinsic validity of the will be passed
upon even before it is probated (Morales
vs. Olondriz, G.R. No. 198994, February 3,
2016);
4. When the instrument presented for
probate is denominated as a donation
mortis causa the issues of whether said
instrument is a donation mortis causa or in
fact a donation inter vivos, may be passed
by the probate court (Del Rosario vs.
Ferrer, G.R. No. 187056, September 20,
2010).
Witnesses to Probate
Probate of Notarial wills
1. If the will is uncontested - court may
grant allowance thereof, on the testimony
of one of the subscribing witnesses only, if
such witness testifies that the will was
executed as required by the law. (Rule 76,
Sec. 5, ROC)
2. If contested - all the subscribing
witnesses and the notary public who are in
the Philippines, and not insane, must be
produced and examined, and the death
absence, or insanity or any of them must
be satisfactorily shown to the court. In case
of death of the subscribing witnesses, the
court may admit the testimony of other
witnesses to prove the sanity of the
testator, and the due execution of the will.
(Rule 76, Sec. 11, ROC)
Probate of Holographic wills
1. If the will is uncontested - it shall be
necessary that at least one witness who
knows the handwriting and signature of
the testator explicitly declare that the will
and the signature are in the handwriting of
the testator. (Rule 76, Sec. 5, ROC)
2. If the will is contested - at least three
witnesses who know the handwriting of the
decedent shall be required. In the absence
of any such witnesses, or the court deems
it necessary, expert testimony may be
resorted to. (Rule 76, Sec. 11, ROC)
The witnesses so presented do not need to
have seen the execution of the holographic will.
They may be mistaken in their opinion of the
handwriting, or they may deliberately lie in
affirming it is in the testator’s hand. However,
the opposition may present other witnesses
who also know the testator’s handwriting, or
some expert witnesses, who after comparing
the will with other writings or letters of the
deceased have come to the conclusion that
such will has not been written by the hand of
the deceased (Gan vs. Yap, No. L-12190.
August 30, 1958).
Where the testator himself petitions for the
probate of his holographic will and no contest
is filed, the fact that he affirms that the
holographic will and the signature are in his
own handwriting, shall be sufficient evidence of
the genuineness and due execution thereof. If
the holographic will is contested, the burden of
disproving the genuineness and due execution
thereof shall be on the contestant. The testator
to rebut the evidence for the contestant. (Rule
76, Sec. 12, ROC)
The will shall be proved as a lost or
destroyed will if:
1. The execution and validity of the will be
established;
101
2. The will is in existence at the time of the
death of the testator, or is shown to have
been fraudulently or accidentally destroyed
in the lifetime of the testator without his
knowledge; and
3. Its provisions are clearly and distinctly
proved by at least 2 credible witnesses.
(Rule 76, Sec. 6, ROC)
A photostatic or Xerox copy of a lost or
destroyed will is admissible; comparison can be
made with standard writings of the testators
(Tolentino, Civil Code of the Philippines Vol. III,
Succession p. 153).
Effect of probate of Wills
Probate proceedings are in rem and
mandatory. If allowed, it becomes conclusive
as to its due execution and extrinsic validity.
The matters of due execution of the will and
the capacity of the testator acquires the
character of res judicata and cannot again be
brought into question. (Rabuya, Pre-Bar
Reviewer Civil Law , 2021, p. 272)
This includes the following conclusions:
a. The testator was of sound mind when he
executed the will;
b. Testator was not acting under duress or
fraud; his consent was not vitiated;
c. The will was executed in accordance with
the formalities required by law;
d. The will is genuine and not forged.
(Mercado vs. Santos, G.R. No. 45629,
September 22, 1938)
Questions regarding the intrinsic validity of
the will may still be raised.
Subject to appeal but once final, it becomes
conclusive (Rabuya, Civil Law Reviewer Vol. 1,
2017, p. 817-819).
Joint wills are considered to have a defect in
form (non-compliance with formalities).
However, if allowed and probated and becomes
final, it can pass properties. (De la Cerna vs.
De la Cerna G.R. No. L-28838, August 31,
1976)
102
Grounds for the disallowance of wills:
1. Formalities required by law have not been
complied with;
2. Testator was insane or mentally incapable
of making a will, at the time of its
execution;
3. Will was executed through force or under
duress, or the influence of fear, or threats;
4. It was procured by undue and improper
pressure and influence, on the part of the
beneficiary or of some other person;
5. Signature of the testator was procured by
fraud;
6. Testator acted by mistake or did not intend
that the instrument he signed should be his
last will at the time of affixing his signature
thereto (Art. 839, NCC); and
7. Testator was below 18 years of age at the
time of the execution of the will. (Art. 797,
NCC)
The enumeration is exclusive. They either
make the will void or valid. There is no such
thing as a voidable will.
Violence or intimidation
Serious or irresistible force is employed and
there is intimidation.
Fraud
If by misrepresentation and deception, the
testator is led into making a will different from
what he would have made but for the
misrepresentation and deception (Jurado,
Comments and Jurisprudence on Succession,
2009, p. 157).
Mistake
Generally known as a mistake in execution
(Jurado, Comments and Jurisprudence on
Succession, 2009 p. 158).
Undue pressure and influence
To be sufficient to avoid a will, the influence
exerted must be of a kind that so overpowers
and subjugates the mind of the testator as to
destroy his free agency and make him express
the will of another rather than his own; that the
exercise of improper pressure and undue Difference between Revocation and
influence must be supported by substantial Disallowance
evidence that it was actually exercised; that the
burden is on the person challenging that will to Revocation Disallowance
show that such influence was exerted at the What Constitutes
time of its execution; that mere general or Voluntary act of the Express deprivation
reasonable influence is not sufficient to testator of a compulsory heir
invalidate a will; nor is moderate and of his legitime
reasonable solicitation and entreaty addressed Cause
to the testator. or omission of relatives, not With or without Must always be for a
forced heirs, evidence of undue influence cause legal cause
(Pascual vs. De la Cruz, G.R. No. L-24819., May Totality
30, 1969). May be partial or GR: Always total
total
Allegations of fraud and undue influence are XPN: When the
mutually repugnant and exclude each other; ground of fraud or
their joining as grounds for opposing probate undue influence, for
shows absence of definite evidence against the example, affects only
validity of the will (Icasiano vs. Icasiano G.R. certain portions of
No. L-18979, June 30, 1964). the will
(Paras, Civil Code III, Succession, p. 194)
Effect of Disallowance
2. INSTITUTION OF HEIRS
If any of the above grounds for disallowance is
proved, the will shall be set aside as void It is an act by virtue of which a testator
(Rabuya, Civil Law Reviewer Vol. I, 2021, p designates in his will the person or persons
948). who will succeed him in his property and
transmissible rights and obligation. (Art. 840,
Probate of Wills of Foreigners NCC)
A will executed abroad by a foreigner may be Effect of Lack of Institution
probated and given legal effect in our
jurisdiction. (Art. 816, NCC; Rabuya, Pre-Bar Rule: A will shall still be valid even though it
Reviewer Civil Law , 2021, p. 273) should not contain an institution of heir or even
if the institution does not comprise the entire
Ratification estate, and even though the person so
instituted should not accept the inheritance or
When a will is void because of non-compliance should be incapacitated to succeed. (Art. 841
with the formalities prescribed by law, [1], NCC).
ratification is not possible The testator’s proper
course of action is republication. 1. In case of no institution of heir:

When the will is executed through violence,
intimidation, undue influence, fraud or mistake,
ratification is possible since we cannot exactly
say that the will is void or inexistent. (Jurado,
Comments and Jurisprudence on Succession,
2009 ed., p. 158-159)
Effect: If there is no institution of heir (which
includes the designation of devisees and
legatees), the estate shall pass to the legal
heirs by intestate succession. (Art. 841 [2],
NCC)
2. In case the institution should not
comprise the entire estate:

103
 Effect: If the institution does not comprise the
entire estate, the remainder of the estate shall
pass to the legal heir. (Art. 841 [2], NCC).
3. In case of repudiation or incapacity:
Effect: In such a case, the testamentary
dispositions made in accordance with law shall
be complied with and the remainder of the
estate shall pass to the legal heirs (Art. 841 [2],
NCC) .
Extent of Freedom of Disposition
1. No Compulsory Heirs – The testator may
dispose by will of all his assets or any part of
it in favor of any person having the capacity
to succeed. (Art. 842 [1], NCC)
2. With Compulsory Heirs – The testator can
only dispose of the remaining portion of the
estate after satisfying the legitime of all
compulsory heirs. (Art. 842 [2], NCC)
(Rabuya, Civil Law Reviewer Vol. I, 2021, p
950)
How Designation is mad
GR: The heir must be designated by his name
and surname (Art. 843, NCC).
Qualification: Even when the name is omitted
but the testator has designated the heir in such
a manner that there can be no doubt as to who
has been instituted, the institution is valid (Art.
843 [2], NCC).
1. If two or more persons have same names:
a. Testator must indicate some
circumstance by which the instituted
heir may be known. (Art. 843, NCC)
b. If no such circumstance has been
provided, ambiguity may be resolved
by extrinsic evidence or evidence
aliunde (other than the oral declaration
of the testator as to his intention) (Art.
789, NCC).
c. An error in the name, surname or
circumstances of the heir shall not
vitiate the institution when it is possible
to know the certainty of the person
instituted. (Art. 844 [1], NCC)
104
d. If there is similarity of circumstance
and the ambiguity cannot be resolved
through the use of other proof and the
person instituted cannot still be
identified, none of them shall be an
heir (Art. 844 [2], NCC).
2. Disposition in favor of unknown person is
void, except:
a. If the identity becomes certain by
some event or circumstance provided
in the will; or
b. The disposition is in favor of a definite
class or group of persons. (Art. 845,
NCC)
It is important that the event or circumstance
should appear in the will itself; it cannot be
shown by extrinsic evidence, either oral or
documentary. (Rabuya, Civil Law Reviewer I,
2017 Ed. p. 825 citing III Tolentino, Civil Code
of the Philippines, 176 1992 Ed)
In order to be capacitated, the heir, devisee or
legatee is required to be living at the time of
the death of the testator. (Art. 1025, NCC)
Designation of Shares
If the heirs are instituted without designation
of shares, they shall inherit in equal parts (Art.
846, NCC).
It should be understood as referring to heirs
who are of the same class or juridical condition,
and to the portion of the inheritance of which
the testator can freely dispose. (Tolentino, Civil
Code of the Philippines Vol. III, succession p.
178)
The legitime must first be satisfied before the
instituted heirs without designation shall inherit
in equal shares.
Individual and Collective Institution
If some are individually designated and others
collectively, those collectively designated are
considered as individually instituted unless it
clearly appears that the intention of the
testator was otherwise. (Art. 847, NCC)
E.g. “I designate as my heirs A and B and the
children of C.” - The children of C shall be
considered as individually instituted unless the
testator clearly intended otherwise.
Institution of Brothers and Sisters
If instituted heirs are brothers and sisters,
some of full blood and some of half-blood, the
inheritance shall be distributed equally unless a
different intention appears. (Art. 848, NCC)
In intestate succession, brothers and sisters
of the full blood shall be entitled to a share
double that of the brothers and sisters of the
half-blood. (Art. 1006, NCC)
Instituting a Person and the Latter’s
Children
When the testator calls to the succession a
person and his children, they are all deemed to
have been instituted simultaneously and not
successively, unless the contrary intention
appears. (Art. 849, NCC)
If the testator institutes “A” and his five
children as his heirs with respect to the
disposable free portion of the inheritance, it is
clear that such disposable portion shall be
divided equally among “A” and the five
children. (Jurado, Comments and
Jurisprudence on Succession, 2009 ed. p. 169)
Statement of False Cause
GR: The institution is still valid and the
statement of a false cause is considered not
written.
XPN: When it appears from the will that the
testator would not have made such institution
if he had known the falsity of such cause. (Art.
850, NCC)
As a consequence, the institution shall be
annulled.
Requisites for the Annulment of
Institution by Reason of False Cause:
1. The cause is stated in the will;
2. It is shown to be false; and
3. It appears on the will that the testator
would not have made the institution if he
had known the falsity of the cause. (Art.
850, NCC)
Institution in Aliquot Parts (Not the
Entire Inheritance)
Institution of Only One Heir
If the testator has instituted only one heir, and
the institution is limited to an aliquot part of the
inheritance, legal succession takes place with
respect to the remainder of the estate. (Art.
851, NCC)
Illustration: The estator in his will wrote: “I
hereby institute my child, “A” as my heir who
will inherit 3/4 of my estate.” – Here, intestate
succession takes place to the remaining ¼ of
the estate.
Institution of Several Heirs
The same rule applies, if the testator has
instituted several heirs each being limited to an
aliquot part, and all the parts do not cover the
whole inheritance. (Art. 851, NCC)
Illustration: The testator in his will wrote: “I
hereby institute my children “A,” “B” and “C” as
my heirs who will inherit 1/4, 1/8, and 1/8,
respectively, of my estate.” – Here, intestate
succession takes place to the remaining 1/2 of
the estate.
However, if it was the intention of the testator
that the instituted heirs should become sole
heirs to the whole estate, or the whole free
portion, as the case may be, and each of them
has been instituted to an aliquot part of the
inheritance and their aliquot parts together do
not cover the whole inheritance, or the whole
free portion, each shall be increased
proportionally (Art. 852, NCC).
If each of the instituted heirs has been given
an aliquot part of the inheritance, and the parts
together exceed the whole inheritance, or the
whole free portion as the case may be, each
part shall be reduced proportionally (Art.
853, NCC).
105
Prior determination of heirship
The Supreme Court has already abandoned the
rule laid down in Ypon, Yaptinchay, Portugal,
Reyes, Heirs of Gabatan vs. Court of Appeals,
and other similar cases, which requires a prior
determination of heirship in a separate special
proceeding as a prerequisite before one can file
an ordinary civil action to enforce ownership
rights acquired by virtue of succession.
In an En Banc decision penned by Justice
Caguioa, the rule now provides that ”unless
there is a pending special proceeding for
the settlement of the decedent's estate
or for the determination of heirship, the
compulsory or intestate heirs may
commence an ordinary civil action to
declare the nullity of a deed or
instrument, and for recovery of property,
or any other action in the enforcement of
their ownership rights acquired by virtue
of succession, without the necessity of a
prior and separate judicial declaration of
their status as such.” This rule is more
consistent with the clear dictates of Article 777
of the Civil Code that the rights of succession
are immediately vested at the precise moment
of the decedent’s death. From that point, the
heirs are legally deemed to have acquired
ownership of their share in the inheritance and
not at the time of declaration of heirs, or
partition, or distribution. (Treyes vs. Larlar,
G.R. No. 232579, September 08, 2020)
Preterition
It is the complete and total omission of a
compulsory heir from the testator’s inheritance
without the heir’s express disinheritance.
(Morales vs. Olondriz, G.R. No. 198994,
February 3, 2016)
The preterition or omission of one, some, or all
of the compulsory heirs in the direct line,
whether living at the time of the execution of
the will or born after the death of the testator,
shall annul the institution of heir; but the
devises and legacies shall be valid insofar as
they are not inofficious. If the omitted
compulsory heirs should die before the
testator, the institution shall be effectual,
106
without prejudice to the right of
representation. (Art. 854, NCC)
Requisites:
a. The heir omitted must be a compulsory
heir in the direct line, whether ascending
or descending. (Rabuya, Pre-Bar Reviewer
Civil Law , 2021, p. 288)
Even if the surviving spouse is a compulsory
heir, there is no preterition even if she is
omitted from the inheritance, for she is not in
the direct line. Preterition applies also to
legally adopted child. Under Article 39 of P.D.
No. 603, known as the Child and Youth Welfare
Code, adoption gives to the adopted person the
same rights and duties as if he were a
legitimate child of the adopter and makes the
adopted person a legal heir of the adopter.
(Acain vs. Intermediate Appellate Court, G.R.
No. L-72706, October 27, 1987)
All persons who are compulsory heirs are
included within its scope, including
illegitimate children and illegitimate
father or mother. (Tolentino, Civil Code of
the Philippines Vol. III, Succession p. 189)
b. The omission must be complete and total
in character in such a way that the omitted
heir does not and has not received
anything at all from the testator by any title
whatsoever. (Jurado, Comments and
Jurisprudence on Succession, 2009 ed.
p.174)
There is total omission, when the testator does
not disinherit the heir, but leaves him nothing
of the hereditary estate, whether or not he is
mentioned in the will. (Tolentino, Civil Code of
the Philippines Vol. III, Succession, p.188).
He must have received nothing by way of:
1. testamentary succession
2. legacy or devise
3. donation inter vivos; and
4. intestacy.
If the heir was given a share, even if very small
or minimal, there is no preterition. All he has to
do is ask for the completion of his share (Reyes
vs. Barreto-Datu,, G.R. No. L-17818, January as well as wife W as sole heirs. He also left a
25, 1967). legacy of 100K to his beloved friend, F.

c. The compulsory heir omitted should 1. Is there preterition?

survive the testator. (Jurado, Comments
and Jurisprudence on Succession, 2009 ed. Answer: Yes, child C, a compulsory heir in the
p.174) direct line was omitted.

d. The omission of a compulsory heir in the 2. Distribute the estate.

will must be by mistake, inadvertence, or
through an oversight, and not intentional, Answer: The institution of A, B and W will be
otherwise it will be a case of invalid annulled. Their shares will be computed based
disinheritance. (Rabuya, Pre-Bar Reviewer on their legitimes and the free portion shall be
Civil Law , 2021, p. 289) divided equally among A, B, C and W. Legacy
to F will be satisfied, if it is not inofficious and
Example: Testator with an estate of 10M was from the free portion, if any. Hence:
survived by his legitimate children, A, B and C, Step 1: Satisfy respective legitimes
and wife, W. During his lifetime, he gave a Amount of
Heir Legitime
donation to B worth 2M. Legitime
A 1/2 1,666,666.67
If Testator institutes B, C and W as his sole B (Hence, 5M divided 1,666,666.67
heirs, is there preterition? C by 3) 1,666,666.67
W Same as 1 child 1,666,666.67
Answer: Yes, A was omitted. “A” being a child Total 6,666,666.67
is a compulsory heir in the direct line. Step 2: Satisfy legacy from free portion
F Total of legitime is 100,000.00
What if B was omitted?
less than 10M,
hence, legacy can
Answer: No. B received a donation of 2M from
be satisfied
the testator, hence, omission was not complete
Total 100,000.00
and total in character.
Step 3: Distribute the remaining free
portion among the heirs
What if wife W was omitted?
Amount of
Heir Free Portion
Voluntary Share
Answer: No. Wife W, though a compulsory
heir, is not a compulsory heir in the direct line. A 10 M less legitime 808,333.33
B and legacy 808,333.33
Effects of Preterition: C (6,666,666.67 + 808,333.33
W 100,000.00) = 808,333.33
1. It annuls entirely the institution of heirs.
3,233,333.24
2. Legacies and devises shall remain valid Divide Free Portion
insofar as they are not inofficious. (Art.
Equally by 4
854, NCC) If it impairs the legitime, they Step 4: Get total share
are merely reduced. A 2,475,000.00
3. If a will does not institute any devisee or Legitime plus
legatees, the preterition will result in total B Voluntary Share 2,475,000.00
intestacy. (Rabuya, Pre-Bar Reviewer Civil (Hence,
Law , 2021, p. 288 citing Morales vs. C 1,666,666.67 + 2,475,000.00
Olondriz) 808,333.33)
W 2,475,000.00
Example: Testator with an estate of 10M was F Legacy 100,000.00
survived by his legitimate children, A, B and C, Total 10,000,000.00
and wife, W. He instituted his children A and B

107
In defective disinheritance, there is no Right of Representation in Testamentary
annulment of the institution of heirs but the Succession
disinherited heir shall only be entitled to the
restoration of anything to which he is entitled When Allowed: Representation is allowed
by operation of law. with respect to the legitime, in case of a
compulsory heir in the descending line (Art.
Preterition vs. Disinheritance 972, NCC) when such heir dies before the
testator (predecease) or is incapacitated to
Preterition Disinheritance succeed or validly disinherited.
What Constitutes
Omission in the Deprivation of a Not Allowed: In case of heirs who repudiated
testator’s will of any compulsory heir of their share (Art. 977, NCC).
of the compulsory his legitime through a
heirs in the direct testamentary A voluntary heir cannot likewise be
line disposition represented.
Voluntariness
Presumed to be Always voluntary From whom the representative inherits:
involuntary In case of representation, the representative
Effect inherits not from the person represented but
Results to the Results to the from the one whom the person represented
annulment of the annulment of the would have succeeded (Art. 971, NCC).
institution of heirs in institution of heirs but
toto but devises and only insofar as it may 3. SUBSTITUTION OF HEIRS
legacies remain valid prejudice the person
insofar as they are disinherited It is the designation by the testator of a person
not in officious or persons to take the place of the heir or heirs
(Rabuya, Civil Law Reviewer Vol. I, 2021, p first instituted. (Tolentino, Civil Code of the
990-991) Philippines Vol. III, p.201)

The share of a child or descendant omitted in Substitution is the appointment of another

a will must first be taken from the part of the
estate not disposed of by the will, if any; if that
is not sufficient, so much as may be necessary
must be taken proportionally from the shares
of other compulsory heirs. (Art. 855, NCC)
heir so that he may enter into the inheritance
in default of the heir originally instituted (Art.
857, NCC).
Effects of Substitution

Effect of Predecease, Incapacity and
Repudiation
A voluntary heir who dies before the testator
transmits nothing to his heirs. (Art. 856, NCC)
GR: The substitute is subject to the same
charges and conditions imposed upon the
instituted heir. (Art. 862, NCC)
XPNs:

A compulsory heir who dies before the
testator, a person incapacitated to succeed,
and one who renounces the inheritance, shall
transmit no right to his own heirs except in
cases expressly provided for in this Code. (Art.
856, NCC)
1. When the testator expressly provided in
the will the contrary; or
2. When the charges or conditions are
personally applicable only to the heir
instituted. (Art. 862, NCC)
Kinds of Substitution

1. Simple — When a testator designates one

or more persons to substitute the heir or
heirs instituted in case such heir or heirs
should die before him, or should not wish,

108
 or should be incapacitated to accept the
inheritance. (Art. 859, par.1, NCC)
Grounds for Substitution
GR: If the simple substitution is without a
statement of the cases to which it refers, the
same shall comprise incapacity, predeceases or
renunciation.
XPN: If the testator provides that substitution
shall take place only in case of only one (e.g.,
predecease), it cannot take place by reason of
repudiation or incapacity.
Variations of Simple Substitution
a. Brief – when two or more persons are
designated to substitute for one heir. (Art.
860, NCC)
b. Compendious – when there is only one
person designated to substitute for two or
more heirs. (Art. 860, NCC)
If the substitutes named for any or all of
several heirs instituted, substitution will
take place even if only one renounces the
inheritance, but only with respect to the
share of such instituted heir. (Tolentino,
Civil Code of the Philippines Vol. III,
Succession, p. 207)
c. Reciprocal – when two or more persons
are reciprocally substitutes for each other.
(Art. 861, NCC)
Extinguishment of Simple Substitution
a. When the substitute predeceases the
testator;
b. When the substitute is incapacitated;
c. When the substitute renounces the
inheritance;
d. When the institution of heirs is annulled;
e. When the institution or substitution is
revoked by the testator; and
f. When a will is void or disallowed or
revoked. (Paras, Civil Code of the
Philippines Annotated Wills and
Succession, 2016, p.233-234)
2. Fideicommissary – when the testator
leaves his property to one person with the
express charge that it be transmitted to
another or others. (Art. 863, NCC)
Requisites: (Art. 863-865, NCC)
i. A first heir called primarily to the
enjoyment of the estate (called
fiduciary);
Recognized as an instituted heir, and is
entitled to the enjoyment of property but
he cannot alienate it. (Tolentino, Civil Code
of the Philippines Vol. III, Succession, p.
210-211)
ii. A second heir to whom the property is
transmitted by the first heir (called
the fideicommissary).
Persons conceived are considered living,
provided they are subsequently born with
the requisites for civil personality.
(Tolentino, Civil Code of the Philippines
Vol. III, Succession, p. 213)
The second heir shall acquire a right to the
succession from the time of the testator’s
death, even though he should die before
the fiduciary. The right to second heirs
shall pass to his heirs. (Art. 866, NCC)
iii. An obligation clearly imposed upon
the first heir to preserve and transmit
the whole or part of the estate; and
In the absence of an obligation on the part
of the first heir to preserve the property for
the second heir, there is no
fideicommissary substitution (PCIB vs.
Escolin. G.R. Nos. L-27860 and L-27896,
March 29, 1974).
Limitations upon Fideicommissary
Substitution
1. The substitution must not go beyond one
degree from the heir originally instituted.
One degree means one generation. (Art.
863, NCC)
109
It follows that the fideicommissary can only be
either a parent or child of the first heir.
(Rabuya, Civil Law Reviewer, Vol. I, 2021 Ed.
p. 996 citing Ramirez vs. Vda. de Ramirez, G.R.
No. L-27952, February 15, 1982)
2. Both the fiduciary and fideicommissary
must be living at the time of death of the
testator. (Art. 863, NCC)
3. Substitution must not burden the legitime.
(Art. 864, NCC)
4. Substitution must be expressly made. (Art.
865, NCC)
Effects of Valid Fideicommissary
Substitution
1. The right of the first heir with respect to
the property is similar to that of a
usufructuary. He is obliged to preserve and
transmit the inherited property to the
second heir.
2. The time of transmission depends upon the
intention of the testator. If not provided
for, it is understood to be at the time of
death of the first heir.
3. The fideicommissary heir does not succeed
the fiduciary for he acquires directly from
the testator upon the latter’s death.
A provision whereby the testator leaves to a
person the whole or part of the inheritance,
and to another the usufruct shall be valid. If he
gives the usufruct to various persons, not
simultaneously, but successively the provisions
of Art. 863 shall apply. (Art. 869, NCC)
Void Fideicommissary Substitution
1. Fideicommissary substitution not made in
an express manner;
2. Provisions which contain a perpetual
probation to alienate, and even a
temporary one beyond the time limit fixed
in Art. 863;
4. Those which impose upon the heir the
charge of paying to various persons
successively beyond the limits prescribed
in Art. 863, e.g., a certain income or
pension;
110
5. Those which leave to a person the whole
or part of the hereditary property in order
that he may apply or invest the same
according to secret instructions
communicated to him by the testator. (Art.
867, NCC)
6. The dispositions of the testator declaring
all part of the estate inalienable for more
than 20 years are void. (Art. 870, NCC)
Effect of Void Fideicommissary
Substitution
If the foregoing prohibitions are violated, the
fideicommissary substitution is considered as
not written but the validity of the
institution of the first heir is not affected.
Hence, the first heir acquires the inheritance
without the obligation of transmitting the same
to the second heir. (Art. 868, NCC)
4. CONDITIONAL TESTAMENTARY
DISPOSITIONS AND THOSE WITH A
TERM
Conditional Testamentary Disposition –
When the acquisition or extinguishment of
successional rights is made to depend upon the
happening or non-happening of a future and
uncertain event. (Rabuya, Civil Law Reviewer,
Vol. I, 2021, p. 1001)
Testamentary Disposition with a Term -
When the demandability or extinguishment of
successional rights is made to depend upon the
arrival of a day certain or upon the happening
of a future but certain event.
The institution of an heir may be made
conditionally, or for a certain purpose or cause.
(Art. 871, NCC)
Conditions imposed by the testator upon the
heirs shall be governed by the rules established
for conditional obligations in all matters not
provided for by this Section. (Art. 884, NCC)
GR: Testator is free to impose any condition,
mode or term on testamentary dispositions.
XPN: The testator cannot impose upon the Kinds of Conditions
legitime any burden, encumbrance, charge,
term, condition or substitution of any kind With regard to the cause upon which
whatsoever. Should he do so, the same is their fulfillment depends:
considered as not imposed (Art. 872, NCC).
Potestative Casual Mixed
XPN to the XPN: The testator can forbid the As to definition
partition of the inheritance, including the One which One that It depends
legitime, for not more than 20 years. (Art. depends does not jointly upon
1083, NCC) exclusively depend upon the will of
upon the will of the will of the heir,
Impossible Conditions the heir, the heir, devisee, or
devisee, or devisee, or legatee and
Impossible conditions and those contrary to legatee, and legatee, but upon chance
law or good customs in testamentary must be upon the and/or the
dispositions shall be considered as not imposed performed by chance will of a third
and shall not affect the validity of the him personally. and/or upon person.
disposition. (Art. 873, NCC) (Tolentino, Civil the will of a (Tolentino,
Code of the third person. Civil Code of
Condition Not to Marry Philippines Vol. (Tolentino, the
III, succession, Civil Code of Philippines
GR: An absolute prohibition not to contract a p. 234) the Vol. III,
first or subsequent marriage is not a valid Philippines succession,
condition and shall be considered as not Vol. III, p. 234)
written. (Art. 874, NCC) succession,
p. 234)
However, if the prohibition is not absolute and
is relative as to persons, time, or place, such As to fulfillment
condition is valid and must be complied with, It must be It shall be sufficient that it
unless the testator practically renders it fulfilled by him happens or be fulfilled at
impossible for the heir to marry at all. (Rabuya, as soon as he any time before or after the
Civil Law Reviewer I, 2021 Ed. p. 1006) learns of the death of the testator, unless
testator’s he has provided otherwise.
XPN: If the prohibition is imposed on the death.
widow or widower of the deceased spouse or Should it have existed or
the latter’s ascendants or descendants. This rule shall should it have been fulfilled
However, this condition may not be validly not apply when at the time the will was
imposed upon the legitime of the widow or the condition, executed and the testator
widower. (Rabuya, Civil Law Reviewer I, 2021 already was unaware thereof, it shall
Ed. p. 1006) complied with, be deemed complied with.
cannot be
Disposition Captatoria fulfilled again If he had knowledge thereof,
(Art. 876). the condition shall be
It is one which imposes as condition that the considered fulfilled only
heir shall make some provision in his will in when it is of such nature
favor of the testator or of any other person. that it can no longer exist or
(Art. 875, NCC) be complied with again (Art.
877).
Such disposition is void, without affecting the
other provisions of the will.

111
Negative Potestative Condition substitute (if one is provided), or to a
co-heir (if accretion is proper) or to
It refers to a potestative condition which the legal heirs. (Rabuya, supra, at
consists in not doing or not giving something. 1003)

The heir shall comply by giving a security that If the heir be instituted under a
he will not do or give that which has been suspensive term or condition, the estate
prohibited by the testator, and that in case of shall be placed under administration
contravention he will return whatever he may until the condition is fulfilled, or until it
have received, together with its fruits and becomes certain that it cannot be
interest. (Art. 879, NCC) fulfilled, or until arrival of the term. (Art.
880, NCC)
Caucion Muciana
The law governing administration is the
Such security or bond is known as “caucion Rules of Court (Art. 881, NCC).
muciana” which will answer for his violation
in case he cannot return what he may have b. Resolutory Condition - Successional
received (Rabuya, Civil Law Reviewer Vol. 1, rights are acquired immediately upon the
2021, p. 1005). death of the testator but subject to
extinction upon the happening of the
With regard to their effects condition. (Art. 1181 in relation to Art. 884,
NCC)
a. Suspensive Condition - Successional
rights are transmitted only upon the If the condition is fulfilled, the instituted
happening of the condition, although the heir loses his right over the inheritance and
effects thereof retroact to the moment of the same shall be passed on to the
the death of the testator. Hence – substitute (if one is provided), or to the co-
heir with a right of accretion, or to the legal
1. Capacity of the heir, devisee or heirs. (Rabuya, Civil Law Reviewer Vol. 1,
legatee to succeed must exist not 2021, p. 1004)
only at the time of the testator’s death,
but also at the time of the happening of Condition v. Term
the condition. (Art. 1034, NCC)
Condition Term
2. Effect of death of conditional heir, As to definition
devisee or legatee before the A condition is an A term is sure to
happening of the condition: his uncertain event which happen or to arrive,
capacity to succeed terminates and thus may or may not even if the exact
renders the testamentary disposition happen. (Tolentino, date of such
inoperative and without effect. (Rabuya, Civil Code of the happening or arrival
Civil Law Reviewer Vol. 1, 2021, p. 1003) Philippines Vol. III, may be uncertain.
succession, p. 236) (Tolentino, Civil
3. After the death of the testator but Code of the
prior to the happening of the Philippines Vol. III,
condition: succession, p. 236)
When rights are acquired
a. The inheritance or property involved The acquisition of the The right is already
shall be placed under right of the heir transmitted to the
administration until the condition is depends upon the heir upon the death
fulfilled. happening of the of the testator.
b. If it becomes certain that the condition, such that if (Tolentino, Civil
condition will not be fulfilled, the the condition does not Code of the
same must be delivered to the

112
 happen, the heir does Philippines Vol. III,
not succeed. succession, p.236)
(Tolentino, Civil Code of
the Philippines Vol. III,
succession, p. 236)
The designation of the day or time when the
effects of the institution of an heir shall
commence or cease shall be valid.
In both cases, the legal heir shall be considered
as called to succession until the arrival of the
period or its expiration. But in the first case
(commence) he shall not enter into possession
of the property until after having given
sufficient security, with the intervention of the
instituted heir. (Art. 885, NCC).
Suspensive Term - The inheritance can be
delivered to the heir upon the arrival of the
term. (Tolentino, Civil Code of the Philippines
Vol. III, Succession, p. 236)
A disposition with a suspensive term does not
prevent the instituted heir from acquiring his
rights and transmitting them to his heirs even
before the arrival of the term. (Art. 878, NCC)
If the legal heirs cannot file the required bond
or security, then the inheritance or property
shall be placed under administration. (Jurado,
Comments and Jurisprudence on Succession,
2009 ed., p. 231).
Resolutory Term - The inheritance is
delivered immediately to the instituted heir,
who holds it until the arrival of the period.
(Tolentino, Civil Code of the Philippines Vol. III,
succession, p. 236)
As a consequence, the inheritance devise or
legacy shall pass to the legal heirs of the
testator (Jurado, Comments and Jurisprudence
on Succession, 2009 ed., p.232). In such
situation, the instituted heir, devise or legacy is
not required to give a security or bond.
Modal Institution
It is the institution of an heir made for a certain
purpose or cause. (Arts. 881 and 882, NCC)
While a condition suspends, but does not
obligate, a mode obligates, but does not
suspend.
In case of doubt, the institution, devise or
legacy must be considered as modal. (Jurado,
Comments and Jurisprudence on Succession,
2009 ed., p. 229)
1. In a modal institution, the testator states:
(1) the object of the institution, or (2) the
purpose or application of the property left
by the testator, or (3) the charge imposed
by him upon the heir.
2. As a rule, an obligation imposed upon an
heir is not considered a condition unless it
clearly appears that such was the intention
of the testator.
3. Effect of mode: The instituted heir can
claim immediately the delivery of the
inheritance subject to the giving of security
or bond for the compliance of his
obligation. In case of failure to comply with
the obligation, the instituted heir shall be
compelled to return whatever he may have
received by virtue of the institution,
together with their fruits and interests.
(Rabuya, Civil Law Reviewer Vol. 1, 2021,
p. 1009)
Constructive Compliance
When without the fault of the heir, an
institution referred to in the preceding article
cannot take effect in the exact manner stated
by the testator, it shall be complied with in a
manner most analogous to and in conformity
with his wishes.
If the person interested in the condition should
prevent its fulfillment, without the fault of the
heir, the condition shall be determined to have
been complied with. (Art. 883, NCC)
Both paragraphs are applicable whether the
institution of heirs, devise or legacy is modal or
conditional in character. (Jurado, Comments
and Jurisprudence on Succession, 2009 ed., p.
229)
113
Doctrine of Constructive Compliance to him may demand the same be fully satisfied.
does not apply to casual conditions (Art. 906, NCC)

In case of casual conditions, since their Testamentary dispositions that impair or

performance does not depend on the will of the diminish the legitime of the compulsory heirs
heir, devisee or legatee, there must always be shall be reduced on petition of the same,
fulfillment as a fact or actual compliance. insofar as they may be inofficious or excessive.
(Tolentino, Civil Code of the Philippines Vol. III, (Art. 907, NCC)
Succession, p. 235)
Compulsory heirs - those for whom the law
5. LEGITIME has reserved a portion of the testator’s estate
which is known as the legitime. (Art. 887, NCC)
It is that part of the testator’s property which
he cannot dispose of because the law has Kinds of Compulsory Heirs
reserved it for certain heirs, who are therefore
called compulsory heirs. (Art. 886, NCC) Legitimate Illegitimate
Testator Testator
GR: The testator cannot deprive his Legitimate children Legitimate children
compulsory heirs of their legitime. Neither can and descendants and descendants
he impose upon the same burden, In default of the Illegitimate children
encumbrance, condition, or substitution of any foregoing, legitimate and descendants
kind whatsoever. (Art. 904, NCC) parents and
ascendants
XPNs: Surviving spouse In default of the
foregoing,
1. Valid and effective disinheritance (Art. 915, illegitimate parents
NCC); only
2. The testator may forbid the partition of the Illegitimate children Surviving spouse
inheritance including the legitime for not
more than 20 years (Art. 1083, NCC); Legitimate Illegitimate
3. Reserva Troncal (Art. 891, NCC); and Testator Testator
4. Family Home. 1. Primary Compulsory Heirs: Those
who have precedence and exclude other
Every renunciation or compromise as compulsory heirs.
regards a future legitime between the a. Legitimate a. Legitimate
person owning it and his compulsory children and children and
heirs is void. (Art. 905, NCC) descendants - descendants
an adopted child
Rationale: The heir does not acquire any right or legitimated
over the same until the death of the testator. child falls in this
(Tolentino, Civil Code of the Philippines Vol. III, category
Succession, p. 323) 2. Secondary Compulsory Heirs: Those
who succeed only in the absence of the
The compulsory heir may claim the same upon
primary compulsory heirs.
death of the decedent, but they must bring to
a. Legitimate a. Illegitimate
collation or whatever they may have received
parents and parents only -
by virtue of the renunciation or compromise.
ascendants - excluded by
excluded by legitimate and
Incomplete Legitime
legitimate illegitimate
children and children and
Any compulsory heir to whom the testator has
descendants descendants
left by any title less than the legitime belonging

114
 3. Concurring Compulsory Heirs: Those takes place. (Jurado, Comments and
who succeed together with the primary Jurisprudence on Succession, 2009 ed., p. 243)
or the secondary compulsory heirs
a. Surviving a. Surviving 2. Illegitimate
spouse – the spouse – the
innocent spouse innocent spouse The basis for the computation of the legitime
in case of legal in case of legal of illegitimate children is the legitime of each
separation separation legitimate child. Each illegitimate child is
remains to be a remains to be a entitled to ½ of the legitime of a legitimate
compulsory heir compulsory heir child.
of the other of the other
spouse spouse Limitations
b. Illegitimate b. Illegitimate
children children - note a. Their filiation must be proved.
that they become b. Shares are taken from the free portion.
primary heirs in c. If there is a surviving spouse concurring
default of with legitimate and illegitimate children,
legitimate the legitime of the surviving spouse
children and must first be satisfied before the
descendants legitimes of the illegitimate children.
thereby d. In case the total amount of the legitimes of
excluding all illegitimate children exceeds what
illegitimate remains of the free portion after deducting
parents the legitime of the surviving spouse, they
(Rabuya, Civil Law Reviewer Vol. 1, 2021, pp. are subject to reduction. (Tolentino, Civil
952-966) Code of the Philippines Vol. III, Succession,
p. 312)
Children and Descendants (Art. 888, NCC):
Parents and Ascendants
1. Legitimate
Their legitime is ½ of hereditary estate of their
This class includes legitimate children or children and descendants. (Art. 889, NCC)
descendants proper, legitimated children or
descendants, and adopted children. (Jurado, In case of an in illegitimate parent
Comments and Jurisprudence on Succession,
2009 ed., p. 236) The illegitimate parents of the deceased are
compulsory heirs only when the latter does not
Their legitime is ½ of hereditary estate of the have legitimate or illegitimate children or
decedent, which is to be distributed equally descendants. (Tolentino, Civil Code of the
among the children. Philippines Vol. III, Succession, p. 321)

The decedent may freely dispose of the
remaining half, subject to the rights of
illegitimate children and the surviving spouse.
In case of different degrees of the decedent’s
descendants, the proximity rule should apply.
In every inheritance, the relative nearest in
degree excludes the more distant ones, saving
the right of representation when it properly
The presence of a surviving spouse of the
deceased, however, does not exclude
illegitimate parents as a compulsory heir.
(Tolentino, Civil Code of the Philippines Vol. III,
Succession, p. 321). The legitime is ¼ for the
illegitimate parent and ¼ for the surviving
spouse
In case of an Adopting Parents
The adoption shall give the adopter and
adoptee reciprocal rights and obligations

115
arising from the relationship of parent and
child, including but not limited to: xxx ii. the
rights of the adopter and adoptee to be legal
and compulsory heirs of each other. (Sec. 33,
Art. VI, Rules and Regulations to Implement
Domestic Adoption Act of 1998)
Shares in Legitime (Art. 890, NCC)
If both mother and father survive, they divide
the legitime equally; but if only one of them
survives, he gets the entire legitime.
(Tolentino, Civil Code of the Philippines Vol. III,
Succession, p. 266)
Surviving Spouse
The condition of being a surviving spouse
requires that there should have been a valid
marriage between the deceased and the
survivor (Tolentino, Civil Code of the
Philippines Vol. III, Succession, p. 257).
The marriage must be subsisting at the time of
the death of one party, in order that the
survivor can be called a widow or widower and
thus be entitled to a legitime (Tolentino, Civil
Code of the Philippines Vol. III, Succession, p.
259).
Art. 900
GR: If the only survivor is the spouse, the
legitime is ½ of hereditary estate of the
decedent.
XPN: If marriage is in articulo mortis, and the
testator died within 3 months from marriage,
the legitime is 1/3.
XPN to the XPN: When they have been living
as husband and wife for more than 5 years.
Legitime is ½.
Effect of Legal Separation
1. The widow or widower will be entitled to
succeed only when he or she is the
innocent spouse.
2. If death should occur during the pendency
of the legal separation proceedings, the
result of the suit should be awaited.
3. To exclude from legitime the guilty spouse.
116
4. If after such reconciliation, one of the
spouses should die, the survivor gets his or
her legitime, regardless of whether he or
she is the guilty party (Tolentino, Civil Code
of the Philippines Vol. III, Succession, pp.
259-260).
Steps in determining the legitime of
compulsory heirs
1. Determination of the gross value of the
estate at the time of the death of the
testator (Art. 908, NCC);
2. Determination of all debts and charges
which are chargeable against the estate
(Art. 908, NCC);
3. Determination of the net value of the
estate by deducting all the debts and
charges from the gross value of the estate
(Art. 908, NCC);
4. Collation - addition of the value of all
donations inter vivos to the net value of the
estate (Art. 908, NCC);
5. Determination of the amount of the
legitime from the total thus found (Art.
908, NCC);
6. Imputation of the value of all donations
inter vivos made to compulsory heirs
against their legitime and of the value of all
donations inter vivos made to strangers
against the disposable free portion and
restoration to the hereditary estate if the
donation is inofficious (Art. 909, NCC);
7. Distribution of the residue of the estate in
accordance with the will of the testator.
Rules on Donation
1. Donations given to children shall be
charged to their legitime. (Art. 909, NCC)
2. Donations made to strangers shall be
charged to the free portion. (Art. 909,
NCC)
3. Donations which an illegitimate child may
have received during the lifetime of his
father or mother, shall be charged to his
legitime. (Art. 910, NCC)
Donations are subject to reduction in cases
where they are inofficious or if they exceed the
disposable portion.
Summary of the Amount of Legitime
LEGEND:
LC Legitimate Children, including adopted
and legitimated children
LPA Legitimate Parents/Ascendants;
IC Illegitimate Children;
IP Illegitimate Parents;
SS Surviving Spouse
CH Compulsory Heirs
FP Free Portion
SURVIVOR LEGITIME
1. When compulsory heir/s of the same
kind survive alone
1 LC ½ of the hereditary estate of
the father and mother
(Art. 888, NCC)
2 or more ½ of the hereditary estate of
LCs the father and mother to be
divided equally
(Art. 888, NCC)
LPA ½ of the hereditary estate of
their children and descendants
to be divided equally (Art. 889,
NCC)
IP ½ of the hereditary estate
Parents of illegitimate children
are compulsory heirs of the
latter only in the case, when
such child leaves neither LC,
nor a SS, nor IC
(Art. 903, NCC)
SS ½ of hereditary estate
⅓ if marriage was solemnized
in articulo mortis and the
testator died within 3 months
from the time of the marriage
½ if the surviving spouse and
the testator have been living as
husband and wife for more
than 5 years
(Art. 900, NCC)
IC ½ of hereditary estate divided
equally among the IC
2. When Primary concurs with
compulsory heirs
1LC; LC - ½ of the hereditary
SS estate of the father and
mother (Art. 888, NCC)
SS - ¼ of the hereditary
estate to be taken from the
FP (Art. 892, NCC)
In case of legal separation,
the SS may inherit if it was
the deceased who had
given cause for the same.
(Art. 892, NCC)
2 or more LC - ½ of the hereditary
LC; estate divided in equal
SS portions (Art. 888, NCC);
SS - share of that equal to
a child to be taken from the
FP (Art. 892, NCC)
LC; LC - ½, in equal portions
IC (Art. 888, NCC);
IC - ½ share of each LC (Art.
176, FC)
1 LC; LC - ½ of the hereditary
SS; estate of the father and
IC mother (Art. 888, NCC)
SS - ¼ of the hereditary
estate to be taken from the
FP (Art. 892, NCC)
IC - ½ share of each LC (Art.
176, FC)
The legitime of the
concurring CH are from the
free portion.
The share of the SS has
preference over that of the
IC, whose share may suffer
reduction pro rata in case
of insufficiency. (Art. 895,
NCC)
117
2 or more LC - ½ of the hereditary
LC; estate divided in equal
IC; portions (Art. 888, NCC);
SS
IC - ½ share of each LC (Art.
176, FC)
SS - share of that equal to
a child to be taken from the
FP (Arts. 892, 897, NCC)
3. When secondary concurs with
concurring compulsory heirs
LPA; LPA - ½ of the hereditary
IC estate of their children and
descendants to be divided
equally (Art. 890, NCC)
IC - ¼ of the hereditary
estate to be taken from the
FP (Art. 896, NCC)
LPA; LPA - ½ of the hereditary
SS estate of their children and
descendants to be divided
equally (Art. 889, NCC)
⅓ of the hereditary estate
(Art. 894, NCC)
Sample Problem: Testator with an estate of
1.0M was survived by his 2 LC, 4 ILC, spouse,
5 siblings and father. (1) Who are the
compulsory heirs? (2) What is the legitime of
each?
Answer:
1. 2 LC, 4 ILC and spouse
Siblings are not one of the compulsory heirs
while the testator’s father being a secondary
heir is excluded by the primary heirs.
2. Legitime of:
2 LC (½): 1.0M x ½ = 500K
500 / 2 = 250K for each LC
Spouse (same as 1 LC): 250K
4 ILC (1/2 of 1 LC share): 250K / 2 = 125K

SS - ¼ of the hereditary Note that 125k multiplied to 4 is 500K, hence,

estate (Art. 893, NCC)
LPA LPA - ½ of the hereditary
SS estate of their children and
IC descendants to be divided
equally (Art. 889, NCC)
SS ⅛ of the hereditary
estate from the FP (Art. 899,
NCC)
the remaining amount of the estate is not
sufficient. In such case, the 4 ILC will suffer a
pro rata reduction, hence -
1.0 M – (500K + 250K) = 250K
250K / 4 = 62.5K for each ILC
Reserva Troncal or Reserva Lineal

IC - ¼ of the estate from the

FP (Art. 899, NCC)
IP; IP - ¼ of the hereditary
SS estate

SS - ¼ of the hereditary
estate

(Art. 903, NCC)

GF=grandfather, F=father, M=Mother
4. Concurrence among concurring
compulsory heirs
SS; SS - ⅓ of the hereditary
IC estate

118
The reservation by virtue of which an
ascendant (called reservista) who inherits by
operation of law from his descendant (called
propositus) any property which the latter may
have acquired by gratuitous title from another
ascendant, or a brother or sister, is obliged to
reserve such property (called reserve) for the
benefit of relatives (called reservatarios) who
are within the third degree and who belong to
the same line from which said property came
(Art. 891, NCC).
Purpose:
1. To reserve certain property in favor of
certain relatives. (Tolentino, Civil Code of
the Philippines Vol. III, Succession, p. 270)
2. To prevent persons who are strangers to
the family from acquiring by some chance
or accident, property which would have
remained with said family.
Persons Involved in Reserval Troncal
(1) The ascendant or brother or sister from
whom the property was received by the
descendant by lucrative or gratuitous title;
(2) The descendant or prepositus who
received the property;
(3) The reservor (reservista) or the other
descendant who obtained the property
from the prepositus by operation of law;
and
(4) The reservee (reservatario) who is within
the third degree from the prepositus and
who belongs to the line from which the
property came and for whom the property
should be reserved by the reservor.
Qualifications of a Reservatario:
a. Within 3rd degree of consanguinity
from the descendant-prepositus;
b. Belong to the same blood line from
which the property came; and
c. Should be related by blood not only from
the prepositus but also from the person
from whom the property originally came.
d. Able to survive the reservista (Rabuya,
Civil Law Reviewer Vol.1, 2017, p. 890-
892).
The reservatarios inherit from the descendant-
propositus and not from the reservista. This is
a case of delayed succession.
Among the reservatarios, the rules on intestate
succession should be applied (Rabuya, supra,
p. 892).
Three lines of Transmission in Reserva
Troncal:
1. Origin ⟹⟹⟹⟹⟹ Prepositus
(gratuitous title)
2. Prepositus⟹⟹⟹ Reservista
(succession by operation of law)
3. Reservista⟹⟹⟹ Reservatario
(intestate succession)
Requisites of Reserva Troncal
1. Property previously acquired by gratuitous
title (e.g., donation or succession) by the
descendant (propositus) from another
ascendant or from a brother or sister
(origin);
2. Descendant-prepositus should have died
without any legitimate issue;
3. Property should have been acquired by
operation of law (intestate or compulsory
succession) by an ascendant (reservista)
from the descendant-prepositus; and
4. There are living relatives within the third
degree counted from the descendant-
prepositus and belonging to the same line
from where the property originally came
(reservatarios).
(Art. 891; Chua vs. CFI of Negros Occidental,
Branch V, G.R. No. L-29901, August 31, 1977).
119
In order that the reserve will exist, all the
foregoing persons should be legitimately
related.
Relatives who are within the third degree
that is capable to be a reservatorio
1st Father or Mother
degree
2nd a. Grandparents of the line from
degree which the property came.
b. Full blood brothers or sisters
c. Half blood brothers or sisters
from which the property came.
3rd a. Great-grandparents
degree b. Uncles by consanguinity (full
or half blood brothers or sisters
of the father or mother)
c. Nephews and nieces (children
of full or half blood brothers or
sisters of the descendant)
Preference among Reservees
While all relatives within the third degree, as a
group are called to succeed as reserves, as
among themselves the rules of intestacy will
apply, particularly Articles 1001, 1004, 1005
and 1009 in this case. (Tolentino, Civil Code of
the Philippines Vol. III, Succession, p. 280)
Effects of Reserva Troncal:
1. The reserve creates two resolutory
conditions: (a) death of the reservista; and
(b) survival, at time of the reservista’s
death, by reservatario. Hence, the
reservista has the legal title and dominion
to the reservable property but subject to
the happening of the resolutory
conditions.
2. During the lifetime of the reservista, the
reservatario merely has contingent or
inchoate rights or a mere expectancy; the
reservista is the owner of the property
subject to a resolutory condition.
3. If the resolutory conditions are fulfilled,
then the property should be conveyed to
the reservatarios. (Rabuya, supra, p. 895-
898)
120
Rights of the Reservista
1. Reservista’s right over the property is that
of ownership.
2. It is subject to a resolutory condition which
are (1) the death of the ascendant obliged
to reserve (reservista); and (2) that the
reservatarios survive the reservista’s
death.
3. Since the reservista has the legal title and
dominion over the reservable property, he
can dispose of the same by way of acts
inter vivos but subject to the same
resolutory condition. The buyer’s
ownership is subject to the same
resolutory condition.
4. While the reservista cannot make a
disposition mortis causa as long as the
reservatario survived the reservista, it
does not mean that the reservista may not
dispose of the reserva by way of mortis
causa. If there shall be reservatario at the
time of the reservista’s death, the reserva
shall form part of his estate. (Rabuya, Civil
Law Reviewer Vol.1, 2021, p. 1121-1122)
Obligations of Reservista
1. To annotate in the Registry of Deeds the
reservable character of the immovable;
2. To make an inventory of all the reservable
property;
3. To constitute a mortgage or give security
to guaranty, upon his death, the delivery to
the reservatarios the personal property, the
value of properties, movable or immovable,
that has been alienated, and the
reimbursement of deteriorations
occasioned by his fault or negligence
(Tolentino, Civil Code of the Philippines Vol.
III, Succession, p. 292);
 ▪ Reservista has a period of 90 days from
the time the reserve arises, in which to
register the reservable character of the
property; if he does not voluntary
cause the registration, reservatarios
may judicially demand that he be
compelled to make it (Tolentino, Civil
Code of the Philippines Vol. III,
succession, p.292).
4. To appraise the value of all reservable
movable property.
Rights of the Reservatarios
1. Their right over the property during the life
of the reservista is a mere expectancy.
2. The expectancy is subject to a suspensive
condition which is that the reservatarios are
alive at the death of the reservista.
3. The right of expectancy can be alienated
but it will be subject to the same
suspensive condition.
4. The right of expectancy is registrable. It
must be annotated at the back of the title
to protect the reservatarios from innocent
purchasers for value.
 The reservista cannot execute a will
disposing the reservable property because
it does not belong to him as his estate. The
property belongs to the reservatarios, if
they are existing upon the reservista’s
death (Cano v. Director of Lands, G.R. No.
L-10701, January 16, 1959).
 The reservista may dispose of the
reservable property by acts inter vivos.
This is logical because it acquires the
ownership of the reservable property upon
the death of the descendant-prepositus,
subject to the resolutory condition that
there must exist at the time of his death
relatives of the descendant who are within
the third degree and who belong to the line
from which the property came. He can,
therefore, alienate or encumber the
property if he so desires but he will only
alienate or encumber what he has and
nothing more (Lungsod vs. Ortega, G.R.
No. 14904, September 19, 1921).
Property subject to reserve
The property which has been acquired by the
descendant gratuitously should pass to the
ascendant reservista by operation of law in
order to be reservable.
GR: The reservista cannot substitute them with
others.
XPN: In case of loss by fault of the reservista,
or alienation of the property, or if the things
are fungible, it is inevitable that substitution
with other property or the payment of a sum of
money should be allowed. (Tolentino, Civil
Code of the Philippines Vol. III, Succession, p.
283)
6. DISINHERITANCE (Art. 915, NCC)
It is a testamentary disposition by which a
compulsory heir is deprived of, or excluded
from, the inheritance to which he has a right.
Disinheritance is not automatic. There must be
evidence presented to substantiate the
disinheritance and must be for a valid and
sound cause.
Requisites for a valid disinheritance
1. Effected through a valid will (Art. 916,
NCC);
2. Legal cause must be specified in the will
itself (Art. 916, NCC);
3. For causes provided by law (Art. 918,
NCC);
4. Cause must be true and proven to be true
if challenged by the person disinherited
(Art. 918, NCC);
5. Disinherited heir must be designated in a
manner that there is no doubt as to his
identity;
121
6. Unconditional (refers to suspensive
condition) and total. (Rabuya, Civil Law
Reviewer Vol. I, 2021, p 1028).
Implications of disinheritance
1. Only compulsory heirs can be disinherited,
for they alone are entitled to the legitime.
2. Since compulsory heirs may be disinherited
only for lawful cause, it is clear that the
courts may properly inquire into the validity
of the disinheritance.
Imperfect/Invalid Disinheritance
Express attempt of the testator to deprive a
compulsory heir of his legitime without
complying with the requisites / formalities
prescribed by law. (Rabuya, Civil Law Reviewer
Vol. 1, 2017, p. 903).
Effect: Partial annulment of the institution of
heirs in so far as it may prejudice the legitime
of the person disinherited. Devisees and
legacies remain valid provided it does not affect
legitime. (Rabuya, supra).

3. Disinheritance excludes the heirs not only Imperfect Disinheritance vs. Preterition
from the legitime but also from the free
portion. IMPERFECT
PRETERITION
DISINHERITANCE
Effects of a valid disinheritance: Persons Excluded
Person disinherited Person omitted
1. Deprivation of the disinherited compulsory must be any must be a
heir from any participation in the compulsory heir. compulsory heir in
inheritance. the direct line.
Manner of Deprivation
2. Children and descendants of the person Attempt to deprive The attempt to
disinherited can take his or her place and the heir of legitime is deprive the heir of
preserve the rights of compulsory heirs always express. legitime is always
with respect to the legitime. In other implied.
words, a disinherited heir may still be Intent to Deprive
represented. Attempt to deprive Attempt may or
the heir of his may not be
3. A disinherited parent shall not have the legitime is always intentional.
usufruct or administration of the property intentional.
which constitutes the legitime. Effect
Partial annulment of Total annulment of
institution of heirs. the institution of
heirs.
(Rabuya, Civil Law Reviewer Vol. 1, 2017, p .
902)

122
 Grounds for Disinheritance
CHILDREN AND
DESCENDANTS
1.Leads a dishonorable life;
2.Accused the testator of a crime
for which the law prescribes
imprisonment for 6 years or
more, if accusation has been
found to be groundless:
Accusation includes:
a. Filing an information
against the testator
b. Acting as a witness against
the testator
3.Convicted of
adultery/concubinage with the
spouse of the testator;
4.Conviction of a crime which
carries with it the penalty of
civil interdiction;
5.By fraud, violence,
intimidation, or undue
influence causes the testator to
make a will or to change one
already made
6.Conviction by final judgment of
an attempt against the life of
the testator, his/her spouse,
ascendant/descendant;
7.Refusal without justifiable
cause to support the parent or
ascendant; and
8.Maltreatment of the testator by
word or deed. (Art. 919, NCC)
PARENTS OR
ASCENDANTS
1.Abandonment of their
children or inducing their
daughters to live a
corrupt or immoral life, or
attempting against their
virtue;
2.Conviction by final
judgment of an attempt
against the life of the
testator, his/her spouse,
3.Accusing the testator of a
crime for which the law
prescribes imprisonment
for 6 years or more and
accusation has been
found to be false;
4.Conviction of adultery
/concubinage with the
spouse of the testator;
5.By fraud, violence, or
intimidation or undue
influence, causes the
testator to make a will or
to change one already
made;
6.Loss of parental
authority;
7.Refusal without justifiable
cause to support the
children/descendants;
and
8.Attempt by one of the
parents against the life of
the other, unless there
has been reconciliation
between them. (Art. 920,
NCC)
SPOUSE
1.Conviction by final
judgment of an attempt
against the life of the
testator, his/her
descendants/ascendants.
2.Accusing the testator of a
crime for which the law
prescribes the
imprisonment for 6 years
or more and accusation
has been found to be
false;
3.By fraud, violence, or
intimidation or undue
influence, causes the
testator to make a will or
to change one already
made;
4.Has given cause for legal
separation;
5.Has given ground for loss
of parental authority; and
6.Unjustifiable refusal to
support the children or the
other spouse. (Art. 921,
NCC)
123
Causes of Revocation of Disinheritance:
Reconciliation (Art. 922, NCC)
The subsequent institution of the disinherited
heir, inasmuch as this will impliedly revoked the
disinheritance clause in the earlier will.
The nullity of the will containing the
disinheritance, such as when it is denied probate.
Effects of Reconciliation
A subsequent reconciliation between the offender
and the offended person deprives the latter of the
right to disinherit and renders ineffectual any
disinheritance that may have been made.
If there is no will, it deprives the offended person
of right to disinherit the offending person.
If already disinherited, disinheritance already
made is rendered ineffectual.
There is no required form. It may be express or
tacit (Rabuya, Civil Law Reviewer Vol. 1, p. 906-907).
If the ground is unworthiness: Under Art.
1033, these causes of unworthiness shall be
without effect if the testator had knowledge
thereof at the time he made his will, or if having
known of them subsequently, he should condone
them in writing.
parent shall not have the usufruct or
administration of the property which constitutes
the legitime (Art. 923, NCC).
7. LEGACIES AND DEVISES
A legacy is a gift of personal property given by
virtue of a will, while a devise is a gift of real
property given by virtue of a will (Jurado,
Comments & Jurisprudence on Succession, p. 926).
A legacy is “bequeathed”’ while a devise is
“devised”.
All things and rights which are within the
commerce of man may be bequeathed or devised
(Art. 924, NCC).
In a devise or legacy, a person succeeds by
universal title, to specific property.
An heir is a person who succeeds by universal
title, to an aliquot portion of the estate.
Persons Charged with legacies and Devises
GR: Legacies are and devises are a charge or a
burden upon the estate itself and are to be paid
by the executor or administrator, unless the
testator expressly burdens a particular heir,
legatee, devisee with their payment.

If disinheritance is made, reconciliation renders Limitations:

the disinheritance ineffective.
Persons Charged Extent of Liability
If there is express disinheritance, the heir will Any compulsory heir Shall not be liable for
continue to be incapacitated to succeed even to the charge beyond the
his legitime, unless he is pardoned in writing or amount of the free
the testator makes a new will re-instituting him portion given to them.
or reiterating the provisions of the former will (Art. 925, NCC)
wherein the heir is instituted (Tolentino, Civil Code Any voluntary heir His liability will extend
of the Philippines Vol. III, succession, p.372). only to the entire
share received by him.
(Rabuya, Civil Law
Representation in Disinheritance
Reviewer Vol. I, 2021,
p 1010-1011)
The children and descendants of the person Any legatee or devisee May be liable for the
disinherited shall take his or her place and shall charge only to the
preserve the rights of compulsory heirs with extent of the value of
respect to the legitime; but the disinherited the legacy or the

124
 devise received by Legacy of credit and remission
them. (Art. 925, NCC) (Art. 935, NCC)
No one is charged All shall be liable in the
same proportion as Legacy of Credit Remission of Debt
they inherit. (Art. 926, What is covered
NCC) This applies only Effective only as regards that part of the credit
in the absence of or debt existing at the time of the death of the
administration testator
proceedings for the What constitutes
settlement of the The legacy shall comprise all interests on the
decedent’s estate. credit or debt which may be due the testator at
the time of his death.
If two or more heirs take possession of the How Executed
estate, they shall be solidary liable for the loss or The estate shall By giving the legatee
destruction of a thing devised or bequeathed, comply with the legacy an acquittance, should
even though only one of them should have been by assigning to the he request one.
negligent. (Art. 927, NCC) legatee
all rights of action it
Liability in Case of Loss or Destruction may have against the
debtor.
In case the thing devised or bequeathed be lost
or destroyed through the fault or negligence of The legacy of credit or remission shall lapse if the
an heir, the latter shall be liable. testator, after having made it, should bring an
If two or more heirs take possession of the action against the debtor for the payment of his
estate, they shall be solidarily liable for the loss debt, even if such payment should not have been
or destruction of a thing devised or bequeathed, effected at the time of his death. (Art. 936, NCC)
even though only one of them should have been
negligent. (Art. 927, Art. NCC) A generic legacy of release or remission of debts
comprises those existing at the time of the
Liability for Eviction execution of the will, but not subsequent ones.
(Art. 937, NCC)
If the legacy or devise is:
Legacy in Favor of Creditor
1. Indeterminate or generic - the heir is
charged with payment or delivery of the legacy or GR: A legacy or devise made to a credit shall not
devise shall be liable in case of eviction (Art. 928, be applied to his credit.
NCC).
XPN: Unless the testator so expressly declares.
2. Determinate or specific - the heir who is In this case, the creditor shall have the right to
charged cannot be held liable in case of eviction. collect the excess, if any, of the credit or of the
(Jurado, Comments & Jurisprudence on legacy or devise. (Art. 938, NCC)
Succession, p. 346-347)
If the testator orders the payment of what he
believes he owes but does not in fact owe, the
disposition shall be considered as not written.

If the testator orders the payment of a specified

debt more than the amount thereof, the excess is
not due, unless a contrary intention appears. (Art.
939, NCC)

125
Alternative Legacies or Devises
(If there are several,
The legacy is alternative when the testator reduce or annul the
bequeathed one of two or more things that he more recent).
designates. Application
When the reduction When there are no
In such a case, the choice is presumed to be left is necessary to compulsory heirs and
to the heir upon whom the obligation to give the preserve the legitime the entire estate is
legacy or devise may be imposed, or the executor of compulsory heirs distributed by the
or administrator of the estate if no particular heir from impairment testator as legacies or
is so obliged. whether there is devises; or
donation inter vivos
Once the choice is made, it is irrevocable. (Art. or not; or When there are
940, NCC) compulsory heirs but
When although, the their legitime has
Generic Legacy or Devise legitime has been already been provided
preserved by the for by the testator and
A legacy of generic personal property shall be testator himself there are no donations
valid even if there be no things of the same kind there are donation inter vivos.
in the estate. inter vivos.

A devise of indeterminate real property shall be Grounds for revocation of legacies and
valid only if there be immovable property of its devises
kind in the estate.
1. Testator transforms the thing bequeathed in
The right of choice belongs to the executor or such a manner that it does not retain either
administrator who shall comply with the legacy by the form or the denomination it had (Art.
the delivery of a thing which is neither of inferior 957[1], NCC).
nor of superior quality. (Art. 941, NCC)
2. Testator by any title or for any cause alienates
Rule of Preference Among Legacies and the thing bequeathed, or any part thereof, it
Devises being understood that in the latter case the
legacy or devise shall be without effect only
ART. 911 ART. 950 with respect to the part alienated Art. 957[2],
(Applies in case of (Applies when NCC).
concurrence of question of preference
legitime, donation is exclusively among Except: when the thing should again belong to
inter vivos and legatees and devisees) the testator after alienation Art. 957[2], NCC).
devises and
legacies) 3. Thing bequeathed is totally lost during the
Order of Preference lifetime of the testator, or after his death
Reduce first devises 1. Remuneratory L/D without the heirs fault.
and legacies pro 2. Preferential L/D
rata, (except if the 3. L for support 4. Other causes: Nullity of the will, non-
testator directed that 4. L for education compliance with suspensive conditions
a certain legacy or 5. L/D of a specific affecting the bequests, sale of the thing to
devise be preferred). determinate thing pay debts of the deaths during the settlement
which forms a part of of his estates Art. 957[3], NCC).
the estate.
If not yet sufficient All others pro rata.
to satisfy the
legitimes, reduce or
annul donation inter
vivos.

126
C. LEGAL AND INTESTATE SUCCESSION
That mode of transmission mortis causa which is
effected by operation of law in the absence or in
default of a will. (Rabuya, Civil Law Reviewer Vol.1,
2017, 923)
Legal or intestate succession is that which is
effected by operation of law in default of a will. It
is legal because it takes place by operation of law;
it is intestate because it takes place in the
absence or in default of a last will of the
decedent. (Jurado, Comments and Jurisprudence on
Succession, 2009 ed., p. 377)
1. GENERAL PROVISIONS; RELATIONSHIP
AND RIGHT OF REPRESENTATION
When Legal Succession Takes Place
1. When a person dies:
a. Without a will
b. With a void will
c. With a will that subsequently lost its
efficacy. (Art. 960 [1], NCC)
2. When the will does not institute an heir (or
when the institution of heir is void) or when
the will does not dispose of all the property
belonging to the testator. (Art. 960 [2], NCC)
3. When a voluntary heir repudiates the
inheritance and there being no substitution
and no right of accretion takes place. (Art.
960 (3), NCC)
4. When a compulsory heir repudiates the
inheritance, legal succession shall also take
place with respect to the legitime because he
cannot be represented thereto. (Rabuya, Civil
Law Reviewer Vol. 1, 2021, p. 1075)
5. When a voluntary heir dies before the testator
or when he is incapable of succeeding and
there being no substitution and no right of
accretion or representation takes place. (Art.
960 (3)(4), NCC)
6. When a compulsory heir is incapable of
succeeding, legal succession shall also take
place with respect to his legitime when
representation does not take place. (Rabuya,
Civil Law Reviewer Vol. 1, 2021, p. 1075)
7. When there is preterition. (Art. 854, NCC)
8. When the suspensive condition attached to
the institution of heir does not happen or is
not fulfilled. (Art. 960 (3), NCC)
9. When the resolutory condition attached to the
institution of heir happens and there being no
substitution and no right of accretion takes
place. (Rabuya, supra)
10. When the resolutory term attached to the
institution of the heir arrives and there being
no substitution and no right of accretion takes
place. (Rabuya, supra)
11. When a testamentary disposition is
impossible of compliance or is ineffective.
(Rabuya, Civil Law Reviewer Vol. I, 2021, p 1075-
1076)
Rule of Proximity
Proximity Rule
The relatives nearest in degree to the decedent
shall exclude the more distant ones, saving the
right of representation when it properly takes
place (Art. 962[1], NCC).
Hence, the order of preference between lines is
first observed, and within each line, the rule of
proximity applies (Rabuya, supra, at 1079).
Rule of Equal Division
GR: Relatives of the same degree shall inherit in
equal shares. (Art. 962[2], NCC)
The children of the deceased shall always inherit
from him in their own right, dividing the
inheritance in equal shares. (Art. 980, NCC)
Should the only survivors be brothers and sisters
of the full blood, they shall inherit in equal shares.
(Art. 1004, NCC)
In case brothers and sisters of the half-blood,
some on the father’s and some on the mother’s
side, are the only survivors, all shall inherit in
equal shares without distinction as to the origin
of the property. (Art. 1007, NCC)
Except:
a. Ascending Line - There is first division
between lines and within each line there is
further division per capita. (Art. 987, NCC)
Maternal line 1/2
Paternal line 1/2
127
b. Collateral Line - Full Blood will receive
double of that of what is received by half-
blood. (Art. 1006, NCC)
Half blood x a. Their capacity to succeed must be
Full blood 2x
a. When there is a right of representation.
b. Between legitimate and illegitimate children.
 If decedent is ascendant, Full Blood/Half
Blood relationship is immaterial.
(Rabuya, Civil Law Reviewer Vol. I, 2021, p 1079)
Rules in relationship (Arts. 963 to 969,
NCC)
1. Number of generations determines proximity
2. Each generation forms a degree.
3. A series of degrees forms a line.
4. A line may be direct or collateral.
Direct line is that constituted by the series of
degrees among ascendants and descendants
(ascending and descending). (Art. 964 [1], NCC)
Collateral line is that constituted by the series
of degrees among persons who are not
ascendants or descendants, but who come from
a common ancestor (Art. 964[2], NCC)
Right of Representation
It is the right created by fiction of law by virtue
of which the representative is raised to the place
and the degree of the person represented, and
acquires the rights which the latter would have if
he were living or if he could have inherited (Art.
970, NCC).
Representation takes place only in case of
predecease, incapacity, and disinheritance.
It does not take place in case of repudiation or
renunciation.
Representation takes place only with respect to
inheritance conferred by law. (legal succession
and compulsory succession) (Tolentino, Civil Code
of the Philippines Vil. III, 1992, p 447). Hence, a
voluntary heir may not be represented.
128
The representative inherits not from the person
represented but from the one whom the latter
would have succeeded (Art. 971, NCC). Hence -
determined in relation to the decedent and
not the person represented.
b. An adopted child, who is not related by blood
to the adopter, may not represent the
adopter because the adopter is not related to
the deceased.
In partial intestacy, legacies and devises are
charged to the free portion proportionately
against the heirs, who are given more than their
legitimes, but in no case, shall the legitimes be
impaired. (Rabuya, Civil Law Reviewer Vol. 1, 2017,
p. 935)
Nephews and nieces inherit either by
representation or in their own right. (Art. 1005,
NCC)
1) They inherit by right of representation when
they concur with aunts and uncles, who
divide per capita, while nephews and nieces
divide per stirpes. (Calisterio vs. Calisterio, G.R.
No. 136467 April 6, 2000)
2) They inherit in their own right when they do
not concur with aunts and uncles. In this
case, they divide per capita or equally. (Art.
975, NCC)
There is also reserva troncal in legal succession,
since it is succession by operation of law.
A person who repudiates or renounces his share
can represent, but he cannot be represented.
(Art. 976-977, NCC)
Representation in the Direct Descending
Line
The right of representation takes place in the
direct descending line, but never in the ascending
line (Art. 972, NCC).
The right of representation in the direct line takes
place in the following cases:
1. When children concur with grandchildren, the
latter being the children of other children who
died before the decedent or who are
incapable of succeeding the decedent.
2. When all children are dead or are incapable
of succeeding the decedent and
grandchildren concur with great-
grandchildren, the latter being the children of
other children who died before the decedent
or are incapable of succeeding the decedent.
3. When all children are dead or are incapable
of succeeding the decedent leaving children
or descendants of the same degree.
Representation in Collateral Line
Representation in the collateral line is true only in
legal succession, because collateral relatives are
not compulsory heirs.
1. Right can be exercised by the nephews or
nieces of the decedent if they will concur with
at least one brother or sister of the decedent.
2. If they (nephews and nieces) are the only
survivors, they shall inherit in their own right
and not by right of representation.
3. Right of representation is possible only in
intestate succession. (Jurado, Comments and
Jurisprudence on Succession, 2009 ed. pp. 392-
393)
Representation of an Illegitimate Child
An illegitimate child can represent their parents,
if the latter are also of illegitimate filiation to the
decedent-ascendant. But if the parent of the
illegitimate child is legitimately filiated to the
decedent-ascendant, an illegitimate child may not
represent his parent by virtue of the iron barrier
curtain rule. (Art. 992, NCC)
Consequences:
1. The son who repudiates the inheritance from
his father does not lose the right to represent
the latter in the inheritance from the
grandfather.
2. Great grandson may be called to the
inheritance even if grandfather should die
before the great grandson has been
conceived.
3. Son who cannot inherit from his father on the
ground of unworthiness can still inherit from
his grandfather by representing the latter,
provided he himself is not unworthy with
regard to the said grandfather.
4. Since the person representing virtually
succeeds to the inheritance, he must be
possessed of all the qualities necessary for
the right to inherit.
5. He succeeds not only to the rights but also
the obligations which are transmissible.
6. An adopted child does not have the right of
representation. The relationship created by
the adoption is between only the adopting
parents and the adopted child and does not
extend to the blood relatives of either party.
(Sayson vs. CA, G.R. Nos. 89224-25, 1992)
Situations and cases when right of
representation takes place
Testamentary Succession
1. When a compulsory heir in the direct
descending line has predeceased the
predecessor, and is survived by his children
or descendants. (Art. 856[2], NCC)
2. When a compulsory heir in the direct
descending line is excluded from the
inheritance due to incapacity or unworthiness
and he has children or descendants. (Art.
1035, NCC)
3. When a compulsory heir in the direct
descending line is disinherited and who has
children or descendants. (Representation
covers only the legitime). (Art. 923, NCC)
4. A devisee or legatee who died after the death
of the testator may be represented by his
heirs. (Art. 954, NCC)
Intestate Succession
1. When a legal heir in the direct descending line
had predeceased the descendant and is
survived by his children or descendants. (Arts.
981 and 982, NCC)
2. When a legal heir in the direct descending line
is excluded from the inheritance by reason of
incapacity or unworthiness. (This is also
129
 applied in testamentary succession) (Art.
1035, NCC)
3. When brothers or sisters (when there is no
exclusion) had predeceased the decedent and
they had children or descendants. (Arts. 981
and 975, NCC)
4. When the illegitimate children represent their
illegitimate parents who already died in the
estate of their grandparents. (Art. 989, NCC)
5. When nephews and nieces inherit together
with their uncles and aunts, in representation
of their predeceased parents who are
brothers/sisters of their said uncles or aunts.
(Art. 1005, NCC)
The right of representation can only represent a
person immediately higher in degree.
Representation does not take place with respect
to rights or inheritance voluntarily given by will,
but rather, to right or inheritance conferred by
law.
The adoptee has the right to represent the
adopting parent in the inheritance of the latter’s
parents or ascendants. (Pineda, Succession and
Prescription, 2001 ed., pp. 376-378)
Division Per Stirpes
Representatives shall not inherit more than what
the person they represent would inherit, if he
were living or could inherit. (Art. 974, NCC)
The representatives will divide among themselves
only the share pertaining to the parent whom
they represent. (per stirpes division).
Per Capita Division Per Stirpes Division
Succession is by head Succession is by group
or by number of and the group will not
persons who succeed – inherit more than the
which finds application shares of the person
when the heirs are of represented. The heirs
the same degree. They within the group will
inherit equally. inherit equally. (Art.
974, NCC)
130
Rule in Case of Repudiation and Incapacity
a. Incapacity
GR: in case of incapacity, the share which is
rendered vacant shall pass to co-heirs (within the
same degree) if the right of representation is not
obtained. (Art. 968, NCC)
XPN: If the incapacitated heir has descendant/s
on his own, his share which is rendered vacant
shall pass to such descendant/s by right of
representation. (Art. 892, NCC)
E.g., X is survived by three children, A, B and C.
C is incapacitated to inherit.
Share of C will accrue to A and B B (by right of
accretion), who will share equally but if C has a
son, C’s share will go to his son by way of right
of representation.
b. Repudiation
i. If not all of the heirs within the same degree
repudiate, but only some of them, the shares
of those who did not accept shall accrue to
the co-heirs within the same degree. (Art.
968, NCC) This is a case of accretion.
ii. If all of the heirs within the same degree
repudiate their inheritance, those of the next
degree shall inherit in their own right. (Art.
969, NCC)
Rule of Double Share for full blood
collaterals
When full and half-blood brothers or sisters,
nephews or nieces survive, the full blood shall
take a portion in the inheritance double that of
the half-blood (Arts. 895, 983, NCC).
Half blood x
Full blood 2x
2. ORDER OF INTESTATE SUCCESSION
Intestate or Legal Heirs
In general, the legal heirs are the legitimate and
illegitimate relatives of the deceased, the
surviving spouse and the State. (Art. 961, NCC).
Regular Order of Intestate Succession The legitimate and adopted children inherit in
(Decedent is legitimate person): their own right and their descendants inherit in
by right of representation. (Art. 979, NCC)
a. Legitimate children or descendants (LCD) (Art.
979, NCC); The surviving spouse and the illegitimate children
b. In default of LCD, Legitimate parents and of the deceased are not excluded by the direct
ascendants (LPA) (Art. 986, NCC); descending line. (Arts. 983, 996, 999, NCC)
c. Illegitimate children and descendants (ILC)
(Arts. 988, 990 and 992, NCC);
d. Surviving spouse (SS) (Art. 995, NCC); LC ILC SS LA ILA B/S State
e. Brothers and sisters (B/S), nephews, nieces /Ni
(Ne/Ni)(Art. 995, NCC); /Ne
f. Other collateral relatives within 5th degree
(Art. 1011, NCC); ✔ ✔ ✔ x x x x
g. The State (Art. 1011, NCC).

 One who is merely related by affinity to
the decedent does not inherit from the
latter and cannot become a co-owner of
the decedent’s property. (Ining v. Vega,
G.R. No. 174727, G.R. No. 174727, August
12, 2013)
 A surviving spouse is not an intestate heir
of his or her parent-in-law. (Rosales vs.
Rosales, G.R. No. L-40789, February 27,
1987)
Irregular Order of Intestate Succession
(Decedent is an illegitimate person):
a. Legitimate children and descendants (Art.
979, NCC);
b. Illegitimate children and descendants (Arts.
988, 989, 990, NCC);
c. Illegitimate parents (Art. 993, NCC);
d. Surviving spouse (Art. 994, NCC);
e. Illegitimate brothers and sisters, nephews and
nieces (Art. 994, NCC); and
f. The State (Art. 1011, NCC).
In default of legitimate or adopted children and
descendants, his parents and ascendants shall
inherit from him, to the exclusion of the collateral
relatives. (Art. 985, NCC)
The surviving spouse and the illegitimate children
are not excluded by the legitimate parents and
ascendants of the deceased. (Arts. 991, 997,
1000, NCC)
L ILC SS L IL B/S/Ni Sta
C A A /Ne te
A ✔ ✔ ✔ x x x
In the absence of legitimate descendants and
ascendants, the presence of illegitimate children
shall result in the exclusion of all collateral
relatives. (Art. 1003, NCC)
The illegitimate children do not exclude the
surviving spouse. (Art. 998, NCC)

Rules on legal or intestate succession L IL SS L IL B/S/Ni Sta

C C A A /Ne te
Rule of Preference Between Lines,
Concurrence and Exclusion X ✔ ✔ A x x x

Those in the direct descending line shall

exclude those in the direct ascending and
collateral lines, and those in the direct ascending
line shall, in turn, exclude those in the collateral
line. (Arts. 978, 985, 988, 995, 1003 and 1011,
NCC).
The surviving spouse is not excluded by the
descendants, ascendants and illegitimate children
but the surviving spouse excludes the other
collateral relatives of the deceased (Art. 1003,
NCC) the brothers, sisters, nephews and nieces
of the deceased (Art. 1001, NCC).

131
 Other GR: An illegitimate child has no right to inherit ab
S L IL B/S/Ni Sta
Collateral intestato from the legitimate children and
S A A /Ne te
Relatives relatives of his father or mother; nor shall such
children or relatives inherit in the same manner
✔ x x ✔ x x from the illegitimate child

As mentioned above, the other collateral
relatives can only succeed ab intestato in the
absence of descendants, ascendants, illegitimate
children, surviving spouse, brothers, sisters,
nephews, nieces (Art. 1009, NCC).
Except: When the parent is also illegitimate (Art.
902, NCC).
 Iron Curtain Rule applies only in intestate
succession (succession by operation of law).

The right to inherit ab intestato shall not extend TABLE OF INTESTATE SUCCESSION
beyond the fifth degree of relationship in the (FAMILY CODE)
collateral line (Art. 1010, NCC).
SURVIVOR INTESTATE SHARE
They exclude the State from the succession (Art. Any class alone Entire estate
1009, NCC). LCD Entire estate,
LPA Excluded
Other 1 LCD 1/2
Collat SS 1/4
L IL S L IL B/S/Ni Sta
eral 2 or more LCD Consider SS as 1 LCD
C C S A A /Ne te
Relati SS then divide estate by
ves total number.
x x x x x x ✔ x LPA 1/2
SS 1/2
LPA 1/2
The State shall inherit the whole estate in default SS 1/4
of the descendants, ascendants, illegitimate ILC 1/4
children, surviving spouse, and collateral relatives Any kind of children Entire Estate Excluded
within the fifth degree of relationship (Art. 1010, of
NCC). ILC
ILP
Other ILP 1/2
Collat SS 1/2
L IL S L IL B/S/Ni Sta
eral Note: only ILP is The law is silent. Apply
C C S A A /Ne te
Relati considered legal concurrence theory.
ves heir. Other
x x x x x x x ✔ ascendants of
deceased ILC, not
 The foregoing rules, presupposes that the legal heirs.
descendant is a legitimate child. SS 1/2
BS/NN 1/2
In case the decedent is an illegitimate child, Other collateral
the illegitimate parents are excluded by the relatives will inherit
children and descendants whether legitimate or only in the absence
illegitimate. (Art. 993, NCC); (Rabuya, Civil Law of B/S and N/N.
Reviewer Vol. I, 2021, p 1113) 1LC First satisfy legitimes.
SS Estate would be
Rule of Barrier Between the Legitimate IC insufficient. Reduction
Family and Illegitimate (Iron Curtain Rule) must be according to
(Art. 992, NCC) the rules of legitimes.
The legitime of LCD
and SS shall always be

132
 first satisfied in
preference to the ICD.
LC = 2x
SS = (same as LC) 2x
IC = x
D. PROVISIONS COMMON TO TESTATE
AND INTESTATE SUCCESSION
1. RIGHT OF ACCRETION
A right by virtue of which, when two or more
persons are called to the same inheritance,
devise, or legacy, the part assigned to the one
who renounces or cannot receive his share, or
who died before the testator, is added or
incorporated to that of his co-heirs, co-devisees,
or co-legatees. (Art 1015, NCC)
It is common to both testamentary and intestate
succession.
Accretion in Testamentary Succession
Basis: Presumed will of decedent.
Causes: In testamentary succession, accretion
takes place in the following cases -
(1) Renunciation or repudiation of inheritance;
(2) incapacity; or
(3) predecease. (Rabuya, Civil Law Reviewer Vol. 1,
2021, p. 1057)
Elements:
a. Two or more persons are called to same
inheritance, or to same portion thereof,
jointly or pro indiviso; and
b. There is vacancy in the inheritance as a result
of predecease, incapacity or repudiation.
(Art. 1016, NCC)
Accretion takes place only with respect to the free
portion. There is no accretion with respect to the
legitime.
Accretion in Intestate Succession
In intestate succession, repudiation will always
give rise to accretion. In case of predecease and
incapacity, if representation does not take place,
other co-heirs inherit in their own right and not
by right of accretion. (Art. 1018, NCC)
Substitution, Representation, Accretion
and Succeeding in One’s Own Right
TESTAMENTARY SUCCESSION
LEGITIME
In case of predecease, incapacity or
disinheritance (PID):
1) If representation is proper,
representative gets the vacant share,
(representation takes place in case of PID);
2) If representation is not available,
a. Co-heirs of the same degree (in their
own right);
b. (In default) – Other secondary
and/or compulsory heirs
Note: there is no accretion with respect to
the legitime (Jurado, Comments and Cases in
Wills and Succession, 2009, p. 470).
In case of repudiation:
1) Co-heirs of the same degree (in their own
right).
2) In default thereof: Other secondary and/or
compulsory heirs.
Note: there is no accretion with respect to
the legitime. No substitution may be imposed
upon the legitime.
FREE PORTION
In case of predecease, incapacity or
repudiation:
1) Vacant share goes to substitute, if
substitution is provided for by the testator.
2) If no substitution is provided: Co-heirs by
right of accretion, if requisites are present
and testator has not provided to the
contrary.
3) If substitution and accretion are not
available: Legal heirs.
Note: Representation does not take place
with respect to the free portion. A voluntary
heir may not be represented.
LEGAL OR INTESTATE SUCCESSION
In case of repudiation
1) Co-heirs by right of accretion. In legal
succession, the share of the one who
repudiated always accrue to his co heirs.
133
2) In default thereof c.
a. Heirs of the next degree (in their own Repudiati X X
right); on
b. Heirs in the next order of intestacy.

Note: Representation does not take place in 2. CAPACITY TO SUCCEED BY WILL OR

case of repudiation. INTESTACY

In case of predecease and incapacity: Requisites in order that a person may be

1. The vacant share goes to the
representative, if representation is proper.
2. If representation is not available
a. heirs of the next degree, who inherit in
their own right;
b. heirs in the next order of intestacy.
capacitated to succeed
1. Heir, legatee or devisee must be living or in
existence at the moment the succession
opens, except in case of representation. (Art.
1025, NCC)

Summary: 2. Heir, legatee or devisee must not be

incapacitated by law to succeed.
Substitutio Representatio Accreti
n n on
Kinds of Incapacity:
Testamentary Succession
1.
A. Absolute
Legitim
e
a. Those not living or not in existence at the
a.
time of the death of the decedent. (Arts.
Predece X X
1025 (2), 1026, 1029, 1030, NCC)
ase
b. Those that cannot be identified. (Art.
b.
845, NCC)
Incapaci X X
c. Individuals, associations, or corporations
ty
not permitted by law inherit. (Art. 1027
c.
par.6, NCC)
Disinheri X X
tance
B. Relative
d.
Repudiat X X X a. Based on the possibility of undue
ion influence or interest. (Art. 1027 pars. 1-
2. Free 5, NCC)
Portion b. Based on morality or public policy. (Art.
a. 1028, NCC)
Predece X c. Based on acts of unworthiness. (Art.
ase 1032, NCC)
b. d. By operation of law. (Jurado, Comments
Incapaci X and Cases in Wills and Succession, 2009, p.
ty 483)
c.
Repudiat X Relative Incapacity
ion
Intestate Succession I. Incapacity or Disqualification by Reason
a. of Undue Influence
Predece X X
ase Fundamental Characteristics
b.
Incapaci X X a. These incapacities or disqualification are
ty based either on possibility of undue influence
or of interest.

134
b. They are not only in testamentary succession;
and
c. They are not only relative in character but
they are also partial in the sense that if the
incapacitated or disqualified heir is a
compulsory heir, only the free portion given
to him is affected, but not his legitime.
(Jurado, supra, p. 483)
1. Priest/Minister – who heard the confession or
gave spiritual aid to the testator during his
last illness. The illness referred to must be the
one in which the testator dies. (Art. 1027[1],
NCC)
Requisites:
a. The will must be made during the last illness
of the testator;
b. The spiritual ministration must have been
extended during the last illness;
c. The will was executed during or after the
spiritual ministration. (Jurado, supra, p.
484).
2. Relatives of such priest or minister of the
gospel within the fourth degree, the church,
order, chapter, community, organization, or
institution to which such priest or minister
may belong. (Art. 1027[2], NCC)
3. Guardian with respect to testamentary
dispositions given by a ward in his favor,
before the final accounts of the guardianship
have been approved, even if the testator
should sign after the approval thereof. (Art.
1027[3], NCC)
XPN: Disqualification does not apply when the
guardian is an
a. Ascendant
b. Descendant
c. Brother
d. Sister
e. Spouse
4. Attesting witness to the execution of a will,
the spouse, parents, or children, or any one
claiming under such witness, any one
claiming under such witness, spouse, parents,
or children. (Art. 1027[4], NCC)
XPN: When there are 3 other witnesses to the
execution of the will (Art. 823, NCC);
5. Physician, surgeon, nurse, health officer or
druggist who took care of the testator during
his last illness. (Art. 1027[5], NCC)
Requisites:
a. The will was made during the last illness.
b. The sick person must have been taken cared
of during the last illness.
c. Medical attendance was made.
d. The will was executed during or after he was
being cared of. (Jurado, supra, p. 486)
XPN: Does not apply if the one who took care of
the testator is
a. spouse
b. ascendant
c. descendant. (Juardo, supra, p. 486)
6. Individuals, associations, corporations not
permitted by law to inherit.(Art. 1027[6],
NCC)
II. Incapacity Based on Morality or Public
Policy (Art. 1028 in relation to Art. 739, NCC)
The capacity based on this Article is not only
relative but also partial in a sense that if the heir
disqualified is also a compulsory heir, the
incapacity shall apply only to the free portion
given to him, but NOT THE LEGITIME.
1. Those made in favor of a person with whom
the testator was guilty of adultery or
concubinage at the time of the making of the
will;
2. Those made in consideration of a crime of
which both the testator and the beneficiary
have been found guilty;
3. Those made in favor of a public officer or his
spouse, descendants and ascendants, by
reason of his public office.
II. Incapacity Due to Unworthiness
Fundamental Characteristics:
1. They are based on offenses committed by the
disqualified person against the decedent
which render him unworthy to succeed;
2. They are applicable not only in testamentary
succession, but also in intestate succession;
135
3. Although they are relative in character, they
are also total in a sense that if the heir
disqualified is a compulsory heir, incapacity
shall apply not only to the free portion, but
ALSO TO THE LEGITIME. (Jurado, Comments
and Cases in Wills and Succession, 2009, p. 491).
The following are incapable of succeeding
by reason of unworthiness:
1. Parents who have abandoned their children or
induced their daughters to lead a corrupt or
immoral life, attempted against their virtue;
2. Person convicted of an attempt against the
life of the testator, his, or her spouse,
descendants, or ascendants;
3. Person who has accused the testator of a
crime for which the law prescribes
imprisonment for six years or more, if the
accusation has been found groundless;
4. Person convicted of adultery or concubinage
with the spouse of the testator;
 The spouse is not rendered unworthy to
inherit from the decedent, but only the
person with whom the spouse is guilty
with. (Jurado, supra).
5. Heir of full age who, having knowledge of the
violent death of the testator, should fail to
report it to an officer of the law within a
month, unless the authorities have already
taken action; this probation shall not apply to
cases wherein, according to law, there is no
obligation to make an accusation;
 This provision shall not apply to cases
wherein, according to law, there is no
obligation to make an accusation, e.g.
Deaths occasioned by crime (violent
deaths) are prosecuted de oficio or at the
instance of the government. (Jurado,
supra)
6. Person who by fraud, violence, intimidation,
or undue influence should cause the testator
to make a will or to change one already made;
7. Person who by the same means prevents
another from making a will, or from revoking
one already made, or who supplants,
conceals, or alters the latter’s will;
8. Person who falsifies or forges a supposed will
of the decedent. (Art. 1032, NCC)
136
The causes of unworthiness shall be without
effect if the testator had knowledge thereof at the
time he made the will, or if, having known of
them subsequently, he should condone them in
writing. (Art. 1033, NCC)
The moment the testator uses one of the causes
for unworthiness as a ground for disinheritance,
he thereby submits it to the rules on
disinheritance. Thus, reconciliation renders the
disinheritance ineffective. (Rabuya, Civil Law
Reviewer Vol. 1, 2021, p. 1033)
There are grounds for disinheritance which are
also causes of incapacity to succeed by reason of
unworthiness. Among them are the abandonment
of children, and the attempt to take the life of the
testator, etc. (Art. 1032, NCC)
If the cause of unworthiness was made a ground
for disinheritance and there is reconciliation, Art.
922 will govern, (the offended person is deprived
of his right to disinherit) and NOT Art. 1033. In
other words, the mere fact of reconciliation
extinguishes the unworthiness and NO written
document is needed for a condonation. (Rabuya,
supra).
Reason: A person is rendered unworthy to
succeed only because the law presumes this to
be the will of the testator. This presumed intent
certainly cannot prevail over the express will of a
person shown by his act of reconciliation. If the
cause for unworthiness was NOT made the
ground for disinheritance, or there has been no
disinheritance at all, Art. 1033 will apply. Art.
1033 says: “The causes of unworthiness shall be
without effect if the testator had knowledge
thereof at the time he made the will, or if having
known of them subsequently, he should condone
them in writing.”
Instances when the spouse cannot inherit:
1. If the spouse will actively participate by
securing the decree of legal separation;
2. By disinheriting him/her. (Art. 921, NCC)
PARDON may be express or implied
- may be express or implied
- only the decedent himself can erase the
effects of acts of unworthiness. (Rabuya,
supra)
 EXPRESS IMPLIED
How done
Testator has
knowledge of the act
Decedent condones
of the unworthiness,
the acts of
executes a will
unworthiness in
instituting the person
writing
who has committed
the offence as an heir
When Available
Available to both Available only in
testamentary and testamentary
intestate succession succession
Revocability
Can be revoked when
the testator revokes
Cannot be revoked
the will or the
institution
2. It is retroactive (Art. 1042, NCC); and,
3. Once made, it is irrevocable (Art. 1043, NCC).
XPN to the Irrevocability
1. When it was made through any of the causes
that vitiate consent.
2. When an unknown will appears, provided that
such will substantially change the rights of a
person who has repudiated or accepted.
(Art.1056, NCC)
Who May Effect Acceptance of Repudiation
If the heir, devisee or legatee is capacitated to
act and has the free disposal of his property, he
may personally accept or repudiate the
inheritance.

II. By Operation of Law Any inheritance left to minor or incapacitated

1. In case of legal separation, incapacity of the
guilty spouse to inherit from the innocent
spouse.
2. Incapacity of adopter to inherit from adopted
child.
3. Incapacity of illegitimate children & legitimate
relatives of decedent to inherit from each
other.
persons may be accepted by their parents or
guardians. Parents or guardians may repudiate
the inheritance left to their wards. (Art. 1044,
NCC)
The right to accept an inheritance left to the poor
shall belong to the persons designated by the
testator to determine the beneficiaries and
distribute the property. (Art. 1044, NCC)

3. ACCEPTANCE AND REPUDIATION OF Should there be several heirs called to the

INHERITANCE
Acceptance – an act by virtue of which an heir,
legatee or devisee manifests his desire, in
accordance with the formalities prescribed by
law, to succeed to the inheritance, legacy or
devise. (Jurado, Comments and Cases in Wills and
Succession, 2009, p. 501)
Repudiation – an act by virtue of which an heir,
legatee or devisee manifests his desire, in
accordance with the formalities prescribed by law
not to succeed to the inheritance, legacy or
devise. (Jurado, supra, p. 501)
If the heir should die without having accepted or
repudiated the inheritance, his right shall be
transmitted to his heirs. (Art. 1053)
Principal Characteristic of Acceptance or
Repudiation:
1. It is voluntary and free (Art. 1041, NCC);
inheritance, some of them may accept and the
others may repudiate. (Art. 1054, NCC)
Manner of Acceptance (Art. 1049, NCC)
1. Express Acceptance – one made in a public or
private document.
2. Tacit Acceptance – one resulting from acts by
which the intention to accept is necessarily
implied or which one would have no right to
do except in the capacity of an heir. (Jurado,
Comments and Cases in Wills and Succession,
2009, p. 506)
When is inheritance deemed accepted
(1) If the heirs sells, donates or assigns his right
to a stranger, or to his co-heirs, or to any of
them;
(2) If the heir renounces the same, even though
gratuitously, for the benefit of one or more of
his co-heirs;

137
(3) If he renounces it for a price in favor of all his
co-heirs indiscriminately; but if this
renunciation should be gratuitous, and the
co-heirs in whose favor it is made are those
upon whom the portion renounced should
devolve by virtue of accretion, the inheritance
shall not be deemed accepted. (Art. 1050,
NCC)
How Repudiation is made:
1. Public instrument;
2. Authentic instrument;
3. Petition presented to the court having
jurisdiction over the testamentary or intestate
proceedings. (Art. 1051, NCC)
Collation
Every compulsory heir, who succeeds with other
compulsory heirs must bring into the mass of the
estate any property or right which he may receive
from the decedent, during the lifetime of the
latter, by way of donation, or any other gratuitous
title, in order that it may be computed in the
determination of the legitime of each heir, and in
the account of partition. (Art. 1061, NCC)
An act of returning or restoring to the common
mass of the estate, either actually or fictitiously,
any property which a person may have received
from the decedent during the latter’s lifetime, but
which is understood for legal purposes as an
advance from inheritance. (Jurado, Comments and
Cases in Wills and Succession, 2009, p. 511)
When is Collation not Available
Collation shall not take place among compulsory
heirs if the donor should have so expressly
provided, or if the donee should repudiate the
inheritance, unless the donation should be
reduced as inofficious. (Art. 1062, NCC)
Operations related to collation:
1. Collation - adding to the mass of the
hereditary estate the value of the donation or
gratuitous disposition.
2. Imputing or Charging - crediting the donation
as an advance on the legitime (if the donee is
a compulsory heir) or on the free portion (if
the donee is a stranger).
138
3. Reduction – determining to what extent the
donation will remain and to what extent it is
excessive or inofficious.
4. Restitution – return or payment of the excess
to the mass of hereditary estate.
What to Collate:
1. Any property or right received by gratuitous
title during the testator’s lifetime. (Art. 1061,
NCC)
2. In cases of grandchildren:
a. All that their parents would have brought to
collation if alive.
b. All that they may have received from the
decedent during his lifetime. (Art. 1064, NCC)
3. Any sums paid by a parent in satisfaction of
the debts of his children, election expenses,
fines and similar expenses. (Art. 1069, NCC)
Properties not subject to collation
1. Absolutely no collation
Expenses for support, education (elementary
and secondary only), medical attendance, even
in extraordinary illness, apprenticeship, ordinary
equipment, or customary gifts (Art. 1067).
2. Generally, not imputable to legitime:
a. Expenses incurred by parents in giving their
children professional, vocational or other
career unless the parents so provide or
unless they impair the legitime (Art. 1068.,
NCC).
b. Wedding gifts by parents and ascendants
consisting of jewelry, clothing, and outfit
except when they exceed 1/10 of the sum
disposable by will (Art. 1070., NCC).
4. PARTITION AND DISTRIBUTION OF THE
ESTATE
Partition
It is the separation, division and assignment of a
thing held in common among those to whom it
may belong. The thing itself may be divided, or
its value. (Art. 1079, NCC)
A partition may be rescinded or annulled for the
same causes as contracts (Art. 1097, NCC).
There is co-ownership on the property between
or among heirs before partition. (Art. 1078, NCC).
Persons to demand partition:
1. Decedent himself during his lifetime by an act
inter vivos or by will (Art. 1080, NCC);
2. Third person designated by the decedent
(Art. 1081, NCC);
3. The heirs themselves (Sec. 1, Rule 74, ROC);
or
4. Competent court. (Rule 69, ROC)
When partition cannot be demanded:
1. Expressly prohibited by the testator for a
period not exceeding 20 years (Art. 1084,
NCC);
2. Co-heirs agreed that the estate shall not be
divided for a period which shall exceed 10
years, renewable for another 10 years (Art.
494, NCC);
3. Partition is prohibited by law (Art. 494, NCC);
or
4. Partition of the estate would render it
unserviceable for the use for which it is
intended (Art. 494, NCC).
5. When the property owned in common by co-
heirs is a family home and the testator has
not ordered its dissolution (Art. 238, NCC).
Four ways in which the estate of the
decedent may be partitioned:
1. By extrajudicial settlement (Sec. 1, Rule 74,
ROC).
2. By ordinary action for partition (Rule 69,
ROC);
3. By judicial summary settlement; or
4. By administration proceeding
Ways of Partition by the Decedent
1. By an Act of Inter Vivos
2. By a Will
Partition Inter Vivos
It is one that merely allocates specific items or
pieces of property on the basis of the pro indiviso
shares fixed by law or given under the will to heirs
or successors. (Art. 1080)
It may be oral or written and need not be in the
form of a will, provided that partition does not
prejudice the legitime of the compulsory heirs.
(Rabuya, Civil Law Reviewer Vol. 1, 2017, p. 1002).
Partition by Will
It must be effected by a will duly executed in
accordance with the formalities prescribed by
law. (Art. 783, NCC) Before it can have any force,
it must be first probated. (Art. 838, NCC)
Partition by a Third Person
A person may, by an act inter vivos or mortis
causa, instruct the mere power to make the
partition after his death to any person who is not
one of the co-heirs (Art. 1081, NCC).
Effects of Inclusion of Intruder in Partition:
1. Between a true heir and several mistaken
heirs:
a. Partition is VOID.
b. The declaration of nullity shall result in
the delivery of everything that had been
adjudicated to the true heir;
2. Between several true heirs and a mistaken
heir – transmission to mistaken heir is VOID.
3. Through error or mistake, share of true heir
is allotted to mistaken heir:
a. Partition shall not be rescinded unless
there is bad faith or fraud on the part of
the other persons interested, but the
latter shall be proportionately obliged to
pay the true heir of his share.
b. The partition with respect to the
mistaken heir is void (Jurado, Comments
and Cases in Wills and Succession, 2009, p.
105).
A void will may be a valid partition:
a. If the will was in fact a partition; and
b. If the beneficiaries in the void will were legal
heirs.
Rescission of Partition due to Lesion (Art.
1098)
139
GR: If the partition was effected by the decedent
himself, either by an act inter vivos or by will, it
cannot be impugned on the ground of lesion
XPNs:
a. When the legitime of the compulsory heir is
prejudiced;
b. When it appears or may reasonably be
presumed that the intention of the testator
was otherwise
Prescriptive period due to lesion: 4 years from the
date of judicial partition (Art. 1100)
Partition with Preterition (Art. 1104)
GR: It cannot be rescinded
XPN: It is proved that there was bad faith or
fraud on the part of the other persons interested.
IV. OBLIGATIONS AND CONTRACTS
A. OBLIGATIONS (Arts. 1156 to 1304,
NCC)
1. GENERAL PROVISIONS
Definition
An obligation is a juridical necessity to give, to
do, or not to do (Art. 1156, NCC).
It is also defined as a juridical relation whereby a
person (creditor) may demand from another
(debtor) the observance of a determinative
conduct (the giving, doing, or not doing), and in
case of breach, may demand satisfaction from the
assets of the latter (Makati Stock Exchange Inc.
vs. Campos, G.R. No. 138814, 16 April 2009,
Cited in Rabuya, Civil Law Reviewer Volume II,
2017 Ed., p. 3).
The term juridical necessity in Article 1156 of the
Civil Code implies the existence of legal sanctions
that may be imposed upon the obligor (debtor) in
case of breach of the obligation. Stated
otherwise, the obligee (creditor) may seek
appropriate reliefs from the courts in case of such
breach (Rabuya, Obligations & Contracts, 2019 Ed., p.
5 ).
The juridical tie between two or more persons, by
virtue of which one of them, the creditor or
140
obligee, has the right to demand of the other, the
debtor or obligor, a definite prestation (Tolentino,
Civil Code of the Philippines Volume 4, 1991 ed., p.55).
GR: The law does not require any form in
obligations arising from contracts for their validity
or binding force. (Art. 1356, NCC)
XPNs:
1) When the form is essential to the validity of
the contract as required by law (Art. 1346,
NCC);
2) When the contract is unenforceable unless it
is in a certain form, such as those under the
Statute of Frauds as formulated in Art. 1403.
Elements of an Obligation
1. Active subject (obligee or creditor); -The
person demanding the performance of the
obligation. It is he in whose favor the obligation
is constituted, established or created. (Paras, Civil
Code of the Philippines Annotated Vol IV, 2008, p. 77)
2. Passive subject (obligor or debtor);- The one
bound to perform the prestation to give, to do, or
not to do. (Paras, Civil Code of the Philippines
Annotated Vol IV, 2008, p. 77)
3. Object - the prestation or the particular
conduct required to be observed by the debtor
(to give, to do or not to do);
Requisites for a valid Object:
1) must be lawful/licit
2) must be possible, physically and juridically
3) must be determinate or at least determinable
according to pre-established elements
4) must be within the commerce of men
4. Juridical tie (vinculum juris) - the efficient
cause between the two subjects by reason of
which the debtor is bound in favor of the creditor
to perform the prestation. (Paras, Civil Code of the
Philippines Annotated Vol IV, 2008, p. 77)
DifferentKinds of Object or Prestations
“to give” - prestation consists in the delivery of
a movable or an immovable thing in order to
create a real right, or for the use of the recipient,
or for possession, or to return to its owner (e.g.
obligation to deliver the thing in a contract of
sale, deposit, lease, antichresis, pledge and
donation)
“to do” - includes all kinds of work or
services. (e.g., contract of employment or
professional services)
“not to do” - consists in abstaining from some
act. (e.g., duty not to create a nuisance).
(Tolentino, Civil Code of the Philippines Volume 4, 1991
ed., p.57-58)
Real – if the prestation involved is that of giving
or the obligation to give.
Personal – if the prestation involved is that of
doing or not doing, i.e., obligation to do or not to
do (Paras, Civil Code of the Philippines Annotated Vol
IV, 2008, p. 79).
Absence of any of the first three makes the object
void.
Classification of Obligations
Primary Classification under the NCC:
1. Pure and Conditional Obligation (Arts. 1179 -
1192)
2. With a Period (Arts. 1193 - 1198)
3. Alternative and Facultative (Arts. 1199 - 1206)
4. Joint and Solidary (Arts. 1207 - 1222)
5. Divisible and Indivisible (Arts. 1223 - 1225)
6. With a penal clause (Arts. 1226 - 1230)
Other Classifications:
1. As to judicial enforceability:
a. Civil– Those that are based on positive
law and give a right of action to compel their
performance (Art. 1423, NCC);
b. Natural– Those that are based on equity
and natural law and which do not grant a
right of action to enforce their performance,
but after voluntary fulfillment by the obligor,
they authorize the retention of what has been
delivered or rendered by reason thereof (Art.
1423, NCC);
c. Moral – obligations arising from the moral
law or law of the church and not from positive
law; therefore, not enforceable in court. It is
the obligation of a person in relation to his
God or Church; the sanction is limited to
conscience or morality, and not through
legality (Paras, Civil Code of the Philippines
Annotated Vol IV, 2008, p. 79).
d. Mixed Obligation – obligations that are
in accordance with both natural and positive
law (Paras, supra, p. 77).
2. As to the subject matter:
a. Real obligation – obligations to give or
to deliver. (See Articles 1163-1166, & 1169,
NCC for the nature and effects of real
obligations);
b. Personal obligation – obligations to do
or not to do. (See Articles 1167 & 1169, NCC
for the nature and effects of positive personal
obligations; and, Art. 1168, NCC for negative
personal obligations)
3. As to the number of persons bound to
perform:
a. Unilateral obligation – an obligation
where only one of the parties is bound to
fulfill a prestation;
b. Bilateral obligation – an obligation
where both parties are bound to perform a
part in the obligation.
c. Reciprocal – Obligations that depend
upon the performance of both subjects. (See
Art. 1169, last par., NCC for the effects of
delay in reciprocal obligations; and, Art 1191,
NCC for the rules regarding their rescission);
and,
d. Non-Reciprocal– Obligations where
performance by one is not dependent upon
the performance of the other (Paras, Civil
Code of the Philippines Annotated Vol IV,
2008, p. 80).
4. As to the capability of fulfillment:
a. Possible obligation – an obligation that
is capable of accomplishment or fulfillment in
nature or in law;
141
 b. Impossible obligation – an obligation
that is not capable of accomplishment or
fulfillment in nature or in law. (Art. 1183,
NCC)
5. As to susceptibility of partial fulfillment:
a. Divisible obligation - when the
obligation is susceptible of partial
performance;
b. Indivisible obligation – when the
obligation is not susceptible of partial
performance (Paras, Civil Code of the Philippines
Annotated Vol IV, 2008, p. 189).
6. As to their dependence upon one
another:
a. Principal obligation – refers to the main
obligation created by the parties;
b. Accessory obligation – refers to the
secondary obligation created to guarantee
the fulfillment of the principal
obligation.(Rabuya, Pre-bar Reviewer in Civil
Law, 2021 Ed., p. 181).
7. As to the existence of a burden or
condition:
a. Pure obligation – an obligation whose
performance does not depend upon a
condition or a term and is demandable at
once. (Art. 1179, NCC)
b. Conditional obligation – an obligation
which is subject to a condition. The condition
is suspensive if the happening of which shall
give rise to the acquisition of a right; the
condition is resolutory if it shall result to the
extinguishment or loss of rights already
acquired. (Art. 1181, NCC)
Condition, defined: It is an uncertain event
which wields an influence on a legal relation.
It is also defined as every future and
uncertain event upon which an obligation or
provision or provision is made to depend. The
essential thing about condition is uncertainty.
Thus, although the death of the person may
be in the future and there is uncertainty as to
the dates of its arrival, the certainty of its
happening makes it a term and not a
142
condition (Rabuya, Civil Law Reviewer Volume II,
2017 Ed., p. 48-49).
c. Obligation with a term – an obligation
that is subject to the fulfillment of an event
that is certain to happen, although the date
may not be known as of the moment. The
term may be suspensive (from a day certain),
if the obligation becomes demandable only
after the expiration of the term. On the other
hand, a term is resolutory (to a day certain)
if the obligation terminates upon the
expiration of the term (Art. 1193, NCC).
When the debtor binds himself to pay when
his means permit him to do so, the obligation
shall be deemed to be one with a term ( Art.
1180, NCC). In such instance, the courts shall
fix the duration thereof (Art. 1197, NCC). The
obligation therein is NOT VOID under Art.
1182 since what is dependent upon the sole
will of the debtor is only the TIME of
payment, not the payment itself nor a
condition precedent or antecedent thereto.
As opposed to a condition, a term only affects
the demandability of an obligation but not its
very existence.
8. As to the nature of performance:
a. Positive obligation – when a debtor is
obliged to give or do something in favor of
a creditor (Art. 1157, NCC).
b. Negative obligation – when an obligor is
forbidden from doing something (Art.
1157, NCC).
9. As to the nature of creation of the
obligation:
a. Legal obligation – obligations imposed by
law (Art. 1158, NCC);
b. Conventional obligation – obligations
established by the agreement of the parties
like contracts (Paras, Civil Code of the
Philippines Annotated Vol IV, 2008, p. 189).
10. As to the character of responsibility or
liability (when there is a concurrence of two
or more creditors or two or more debtors in
one and the same obligation)
a. Joint obligation – an obligation wherein
each debtor shall be liable only for a part of
 the whole liability and to each creditor
belongs only a part of the correlative rights,
the credits/debts of which are distinct from
one another (8 Manresa 194; Art. 1208,
NCC);
b. Solidary obligation (joint and several
obligation) – an obligation wherein each
one of the creditors has a right to demand
entire compliance with the prestation, or that
each one of the debtors is bound to render
entire compliance as demanded (Art. 1207,
NCC) without prejudice to his right to collect
from his co-debtors their shares in the
obligation. (Art. 1217, par.2, NCC).
There is solidary liability only when it is expressly
stated, or when the law or the nature of the
obligation requires solidarity (Art, 1207, NCC; See
Articles 1211-1222, NCC for the effects of solidary
obligations).
11. As to the grant of right to choose one
prestation out of several, or to
substitute the first one:
a. Alternative obligation – an obligation
wherein the obligor may choose to
completely perform one out of the several
prestations (Art. 1199, NCC)
b. Facultative obligation – an obligation
wherein only one prestation has been
agreed upon, but the obligor may render
another in substitution (Art. 1206, NCC).
12. As to the imposition of penalty:
a. Simple obligation – an obligation
wherein no penalty is imposed for the
violation of its terms (Art. 1226, NCC);
b. Obligation with penalty – an obligation
that imposes a penalty for violation of its
terms (Art. 1226, NCC).
13. From the viewpoint of the object
a. Determinate / specific - Particularly
designated or physically segregated from
all others of the same class;
b. Generic – Designated merely by its class
or genus;
c. Limited generic – Generic objects
confined to a particular class or
source e.g., An obligation to deliver one
of my horses) (Paras, Civil Code of the
Philippines Annotated Vol IV, 2008, p. 440).
3. Sources of Obligations (Arts. 1156 –
1157, NCC)
1. Law;
2. Contracts;
3. Quasi-contracts;
4. Acts or Omissions punished by Law
5. Quasi-delict. (Art. 1157. NCC)
This enumeration is exclusive. No obligation
exists if its source is not one of those enumerated
in Art. 1157 of the NCC. (Sagrada vs. NACOCO , G.R.
No. L-3756, June 30, 1952).
Time of perfection
GR:
1. Law – From the time designated by the law
creating or regulating them;
2. Contracts –From the time of the perfection of
the contract. e.g., meeting of the minds.
XPNs:
a. When the parties made stipulation on the right
of the creditor to the fruits of the thing (Art.
1164, NCC);
b. When the obligation is subject to a suspensive
condition, it arises upon fulfillment of the
condition (Art. 1181, NCC);
c. When the obligation is with a period, there is
already an existing obligation but demandable
only when the period expires or becomes due.
(Art. 1185, NCC)
3. Quasi Contracts, delicts, quasi-delict – From
the time designated by the law creating or
regulating them.
a. Law
Law – Obligations derived from law are not to
be presumed but must be expressly provided for
by law (Art. 1158, NCC). (e.g., obligation to give
legal support under the provisions of the Family
Code)
NOTE: If there is conflict between the NCC and
a special law, the latter prevails unless the
contrary has been expressly stipulated in the NCC
(NCC, Art. 18; Paras, Civil Code of the Philippines
Annotated Vol IV, 2008, p. 86).
143
Determining whether an obligation arises from
law or from some other source
1. Arises from law if it establishes obligation;
2. Arises from the act itself if the law merely
recognizes the existence of an obligation
generated by an act (Manresa).
Examples:
a. According to Art. 2014 of the NCC, a loser in a
game of chance may recover his loss from the
winner, with legal interest from the time he
paid the amount lost (Leung Ben vs. O’Brien,
G.R. No. L13602, April 6, 1918);
b. The obligation of the spouses to support each
other (Art. 195, FC);
c. The obligation of the employers;(Sec. 12, R.A.
No. 4119;
d. The obligations of the owners of the dominant
and servient estates in legal easements and
others; Arts. 627-630, NCC)
e. The obligation to pay taxes. (Sec. 23, NIRC)
B. Contracts
Contract - A Contract is a meeting of minds
between two persons whereby one binds himself,
with respect to the other, to give something or to
render some service. (Art. 1305, NCC)
Requisites of a contractual obligation
1. It must contain all the essential requisites of a
contract (Art. 1318, NCC); and
2. It must not be contrary to law, morals, good
customs, public order, and public policy (Art.
1306, NCC).
Rules governing the obligations arising
from contracts
GR: Obligations arising from contracts shall be
governed primarily by the stipulations, clauses,
terms and conditions of the parties’ agreements.
XPN: Contracts with prestations that are
unconscionable or unreasonable (Bachrach vs.
Golingco, G.R. No. L-13660, November 13, 1918).
Binding force of contractual obligations
GR: Neither party may unilaterally evade his
obligation in the contract.
144
XPNs: Unilateral evasion is allowed when the:
1. Contract authorizes such evasion; or
2. Other party assents thereto.
d. Quasi-Contract
Quasi-contracts are those juridical relations
arising from lawful, voluntary and unilateral
acts, by virtue of which the parties become bound
to each other, based on the principle that no one
shall be unjustly enriched or benefited at the
expense of another (Art. 2142, NCC)
Characteristics of a quasi-contract
1. It must be Lawful;
2. It must be Unilateral; and
3. It must be Voluntary (Paras, Civil Code of the
Philippines Annotated Vol IV, 2008, p. 94).
Contract v Quasi-Contract
CONTRACT QUASI-CONTRACT
With consent Unilateral act. There is
whether express no consent given
or implied. whether express or
implied.
The 2 Principal Kinds of Quasi-Contracts:
1. Negotiorum Gestio (unauthorized
management); - arises when a person voluntarily
takes charge of the management of the business
or property of another without any power from
the latter. (Art. 2144, NCC).
2. Solutio indebiti (unjust enrichment)–takes
place when a person receives something from
another without any right to demand for it, and
the thing was unduly delivered to him through
mistake. (Art. 2154, NCC).
d. Delict
- Acts or Omissions punished by Law
GR: Every person liable for felony is also civilly
liable. (Art. 100, RPC)
XPNs: Crimes of treason, rebellion, illegal
possession of firearms and gambling. But a
person who is not criminally liable may still be
civilly liable. (Jurado, Obligations and Contracts,
2010, pg. 11)
Implied institution of the civil action in a
criminal case
GR: When a criminal action is instituted, the civil
action for the recovery of the civil liability arising
from the offense charged shall be deemed
instituted with the criminal action (Sec. 1, Rule 111,
Rules of Court).
XPNs: When the offended party:
1. Expressly waives the civil action;
2. Reserves the right to institute it separately;
and
3. Institutes the civil action prior to the criminal
action (Ibid.).
Civil liability includes the following:
1. Restitution
2. Reparation of the damage caused
3.Indemnification for consequential damages
(Art. 104, RPC)
Acquittal in criminal case
GR: The acquittal of the accused in a criminal
case on the ground of reasonable doubt does not
preclude the filing of a subsequent civil action and
only preponderance of evidence is required to
prove the latter.
XPNs: When the acquittal is on the basis that:
1. The accused did not commit the crime
charged; or
2. There is a declaration in the decision of
acquittal that no negligence can be attributed
to the accused and that the fact from which
the civil action might arise did not exist (NCC,
Art. 29).
Basis of civil liability Ex Delicto:
Criminal liability shall give rise to civil liability only
if the same felonious act or omission results in
damage or injury to another and is the direct and
proximate cause thereof (Romero Y Dominguez vs.
People, G.R. 167546, July 17, 2009). In other words,
there must be a PRIVATE offended party. Hence,
in rebellion, treason or illegal possession of
firearms, there is no civil liability ex delicto.
e. Quasi-Delict
Whoever by act or omission causes damage to
another, there being fault or negligence, is
obliged to pay for the damage done. Such fault
or negligence, if there is no pre-existing
contractual relation between the parties, is called
a quasi-delict (Art. 2176, NCC).
NOTE: A single act or omission may give rise to
two or more causes of action. Thus, an act or
omission may give rise to an action based on
delict, quasi‐delict or contract.
Elements of a quasi-delict
1. Negligent or wrongful act or omission;
2. Damage or injury caused to another;
3. Causal relation between such negligence or
fault and damage; and
4. No pre-existing contractual relationship
between the parties (Art. 2176, NCC).
Instances when Art. 2176 is inapplicable
1. When there was a pre‐existing contractual
relation because the breach of contract is the
source of the obligation (Robles vs. Yap Wing,
41 SCRA 267, G.R. No. L-20442, October 4, 1971);
NOTE: However, if the act that breaches the
contract is tortuous, the pre‐existing contractual
relation will not bar the recovery of damages
(Singson vs. BPI, G.R. No. L-24837, June 27, 1968);
2. When the fault or negligence is punished by
law as a crime, Art. 100 of RPC shall be
applicable;
3. If the action for quasi‐delict is instituted after
4 years, it is deemed prescribed (Art. 1146,
NCC)
4. When the injury suffered by a person is the
result of a fortuitous event without human
intervention (Art. 1174, NCC);
5. If there is no damage or injury caused to
another (Walter A. Smith & Co. vs. Cadwallader
Gibson Lumber Company, G.R. No. L-32640,
December 29, 1930).
145
Requisites for recovery: Batangas
Transportation, G.R.
1. Damages suffered by the plaintiff; L-4920, June 29,
1953)
2. Fault or negligence of the defendant, or some Guilt must be proved Guilt may be proved
other person for whose acts he must respond; beyond reasonable by preponderance of
and doubt. evidence.
Criminal liability is not The civil liability can
3. The connection of cause and effect between subject to a be compromised.
the fault or negligence of the defendant and compromise.
the damage incurred by the plaintiff (Indophil
Textile vs. Engr. Adviento, G.R. 171212, August 4, Pre-existing contractual obligation, not bar
2014). to recovery under Quasi-Delict:
TEST OF NEGLIGENCE: Would a prudent man, In fine, a liability for tort may arise even under a
in the position of the person on whom negligence contract, where tort is that which breaches the
is attributed, foresee harm to the person injured contract (Loadmasters Custom Services vs. Glodel
as a reasonable consequence of the course about Brokerage, G.R. 179446, January 10, 2011). Stated
to be pursued (Picart vs. Smith, G.R. No. L-12219, differently, when an act which constitutes a
March 15, 1918.
breach of contract would have itself constituted
the source of a quasi-delictual liability had no
Scope of Quasi-Delict:
contract existed between the parties, the contract
can be said to have been breached by tort,
Culpa aquiliana (fault or negligence) covers not
thereby allowing the rules on tort to apply (LRTA
only acts “not punishable by law” but also acts
vs. Navidad, G.R. No. 145804, February 6, 2003).
criminal in character, whether intentional and
voluntary or negligent (Safeguard Security Agency 2. NATURE AND EFFECT
vs. Tangco, et. al., G.R. 165732, December 14, 2006).
Hence, the same negligent act causing damages
A. Real Obligation (Obligation To Give)
may produce two kinds of civil liability: (1) civil
liability arising from a crime under Article 100 of
An obligation to give may either involve a
the RPC, or (2) an action for quasi-delict or culpa
determinate or generic thing.
extra-contractual under Article 2176 of the Civil
Code (Cerezo vs. Tuazon, G.R. 141538, March 23,
It is determinate/specific when the object is
2004).
particularly designated or physically segregated
from all others of the same class (Art. 1460[1],
Prohibition against double recovery:
NCC).
The plaintiff cannot recover damages twice for
It is indeterminate/generic when the object is
the same act or omission of the defendant (Art.
designated merely by its class or genus.
2177, NCC).
It is delimited generic when confined to a
particular class e.g. An obligation to deliver one
Delict v Quasi-Delict
of my horses.
DELICT QUASI - DELICT
Obligation to give a determinate or specific
Affects public Affects private
thing
interest; concern only;
Criminal act is Damage done is
Accessory obligations in determinate
punishable under the repaired by means of
obligation
Penal Code; indemnification under
the Civil Code;
1. Obligation to deliver the thing agreed upon.
Punishable only if Punishes all acts in (Art. 1165, NCC)
there is a penal law which any kind of
covering the crime fault or negligence
committed. (Diana vs. intervenes. (Ibid.)

146
2. Obligation to take care of the thing with the
proper diligence of a good father of a family,
unless the law or the stipulation of parties
requires another standard of care (Art. 1163,
NCC).
GR: The diligence required is that of a good
father of a family.
XPNs:
a. If the law requires another standard of care
b. If the parties stipulate another standard of
care
3. Obligation to deliver the fruits from the
time the obligation to deliver (the principal
thing) arises (Art. 1164, NCC); and
The creditor acquires a right to demand for the
delivery of the fruits of the determinate thing due
from the time the obligation to deliver the
determinate thing arises (Art. 1164, NCC).
4. Obligation to deliver all accessions and
accessories of the thing, even though they
may not have been mentioned (Art. 1166,
NCC).
Accessions - signifies all those things which are
produced by the thing which is the object of the
obligation as well as all of those which are
naturally or artificially attached thereto.
Kinds of Accessions:
Accession with respect to what is produced by a
property/ accession discreta – FRUITS may be
natural, industrial, or civil.
Accession with respect to an immovable property/
accession industrial – whatever is built, planted
or sown on the land of another and the
improvements or repairs made thereon (Art. 445,
NCC).
Accession natural - alluvion, avulsion,
abandoned river beds, and islands formed in non-
navigable or non-floatable rivers.
Accession with respect to movable property -
adjunction or conjunction, confusion or
commixtion, and specification.
Accessories - signifies all of those things which
have for their object the embellishment, use or
preservation of another thing which is more
important and to which they are not incorporated
or attached.
5. To be liable for damages in case of breach of
obligation by reason of delay, fraud,
negligence or contravention of the tenor
thereof (Art. 1170, NCC).
XPN: The debtor is not liable in case the
determinate thing was lost due to a fortuitous
event (Art. 1174, NCC). Liability extends only to
a breach which is voluntary in character, and not
to one which is involuntary. However, this does
not apply in case of loss of a generic thing.
B. Obligation to give indeterminate or
generic thing
A thing is indeterminate if it is designated merely
by its class or genus without any particular
designation or segregation from all others of the
same class (Gaisano Cagayan, Inc. vs. Insurance Co.,
of North America, G. R. No. 147839, June 8, 2006).
Accessory obligations in generic obligation
1. To deliver a thing which is neither of superior
or inferior quality (Art. 1246, NCC).
2. To be liable for damages in case of breach of
the obligation by reason of delay, fraud,
negligence, or contravention of the tenor
thereof (Art. 1170, NCC).
3. In case the generic thing is lost due to a
fortuitous event, the obligation is not
extinguished based on the precept that the
genus of a thing can never perish (genus
nunquam peruit) (Paras, Civil Code of the
Philippines Annotated Vol IV, 2008, p. 437).
Remedies of the creditors:
SPECIFIC GENERIC
OBLIGATION OBLIGATION
Specific Specific performance
performance (delivery of anything
belonging to the same
species)
147
 Rescission (action to Ask that the obligation
rescind under Art. be complied with at the
1380, NCC) debtor’s expense
Resolution (action Resolution or specific
for cancellation performance, with
under Art. 1191, damages in either case
NCC) (Art. 1191, NCC)
Damages, in both cases (Art. 1170, NCC)
Note: May be exclusive or in addition to the
above‐mentioned remedies (Pineda,
Obligations and Contracts, 2000 ed, p. 37)
B. Personal Obligation (Obligation To Do Or
Not To Do)
Two kinds:
1. Positive obligation (Obligations to do)
Considered breached if:
(a) the debtor fails to do the obligation; or
Remedies of the creditor in case of breach:
i. To have the obligation performed or executed
at the expense of the debtor (Art. 1157[2],
NCC).
Note: This does not apply if the prestation
consists of an act where the personal or special
qualification of the debtor is the principal motive
for the establishment. In such cases, the creditor
has no other remedy but demand for damages
(Jurado, Comments and Jurisprudence on Obligations
and Contracts, 2010, p.52-53).
ii. To recover damages by reason of the breach
of obligation (Art. 1170, NCC).
(b) Even in case of performance but the
same is done either in a poor manner
or in contravention of the tenor of the
obligation.
Remedies of the creditor:
i. To have the obligation performed or executed
at the expense of the debtor (Art. 1157,
NCC);
ii. To ask that what has been poorly done be
undone (Art. 1157, NCC); and,
148
iii. To recover damages because of breach of the
obligation (Art. 1170, NCC).
2. Negative obligation - if the prestation
consists of not doing (e.g., negative
easements, See Art. 616, NCC; particularly,
easements of light and view, See Arts. 667-673,
NCC).
Remedies in case of breach of negative
obligation:
i. To have it undone at the expense of the
debtor. (Art. 1168, NCC); and,
ii. To ask for damages (Art. 1170, NCC).
C. Transmissibility of Obligations
Subject to the laws, all rights acquired in virtue
of an obligation are transmissible, if there has
been no stipulation to the contrary (Art. 1178,
NCC).
GR: Rights are transmissible which can be
alienated and transferred to third persons.
XPNs:
1. When they are intransmissible by their very
nature, such as in the case of a personal
right;
2. When there is a stipulation of the parties that
they are not transmissible;
3. When they are not transmissible by operation
of law ((Paras, Civil Code of the Philippines
Annotated Vol IV, 2008, p. 183).
D. Performance of Obligations
Payment means not only the delivery of money
but also the performance, in any manner of an
obligation (Art. 1232, NCC).
Obligations To Give:
It shall be understood to have been paid when
the debtor has completely delivered the thing
which he obligated himself to deliver.
Obligations To Do:
It shall be understood to have been performed
when the debtor has completely rendered the
service which he has obligated himself to render.
Obligations Not to Do:
It shall be understood to have been complied with
when the debtor has completely refrained from
doing that which he had obligated himself to to
do (Jurado, Obligations & Contracts, 2010 Ed., p.
232).
(This topic shall be further discussed in Payment
or Performance as a mode of extinguishment of
an obligation)
E. Breaches of Obligations
Forms of breach of obligations:
1. Voluntary breach - Those causes which
arise from the will of the parties. Debtor is
liable for damages if he is guilty of:
1. Default (mora)
2. Fraud (dolo)
3. Negligence (culpa)
4. Breach through contravention of the
tenor thereof
2. Involuntary breach – debtor is unable to
perform the obligation due to a fortuitous
event, thus not liable for damages. (Rabuya,
Pre-bar Reviewer Civil Law, 2021 Ed., p. 346).
Voluntary Breach of Obligations:
1. Delay/Default (Mora)
Three Kinds of Default:
1. Mora Solvendi – There is delay on the part
of the debtor.
(a) Mora solvendi ex re – refers to obligation
to give;
(b) Mora solvendi ex persona – refers to
obligation to do (Paras, Civil Code of the
Philippines Annotated Vol. IV, 2008, p. 125).
Requisites in order to consider debtor in
default:
1. The obligation is demandable and already
liquidated;
2. The debtor delays performance; and,
3. The creditor requires the performance
judicially or extrajudicially (Aerospace Chemical
Industries, Inc. vs. CA, G.R. No. 108129 cited by
Jurado, 2010).
Default in Positive Obligations (to give or to
do)
GR: The debtor is in delay or in default only if
there has been a DEMAND made by the creditor,
either judicial or extrajudicial in cases of positive
obligations to give or to do (Art. 1169, NCC).
XPNs: Demand is no longer necessary in order
to place the debtor in delay or in default:
1. The law expressly declares that demand is not
necessary;
2. The stipulation of the parties expressly states
that demand is not necessary;
Under the first and second XPN, it is not
enough that the law or the obligation fixes a
period for the performance of the latter, if it
does not expressly add that, upon the
expiration thereof, delay shall commence.
Hence, mere expiration of the period fixed by
the parties will not cause delay (Palmares vs.
CA, G.R. No. 126490, 31 March 1998).
3. The time is the controlling motive for the
establishment of the contract.
In determining whether time is of the essence of
the contract, the ultimate criterion is the actual or
apparent intention of the parties and before time
may be so regarded by the court, there must be
a sufficient manifestation, either in the contract
itself or the surrounding circumstances of that
intention (Lorenzo Shipping Corp. vs. BJ Marthel
International, Inc., G.R. 145483, November 19,
2004).
4. Demand would be useless, as when the
debtor has rendered the obligation beyond
his power to perform (Art. 1169, NCC).
Default in Negative Obligations (not to do)
Default is not possible in negative obligations due
to their special nature (Paras, Civil Code of the
Philippines Annotated Vol. IV, 2008, p. 125).
Effect of delay/default:
1. Debtor is liable for damages (Art. 1170,
NCC);
149
2. Debtor is liable for a fortuitous event until he
has affected the delivery (Art. 1165 last par.,
NCC).
2. Mora Accipiendi – There is delay on the
part of the creditor;
The improper refusal of the lessor (creditor) to
accept the rents tendered by the lessee places
said lessor in default (mora) and he must
shoulder the subsequent accidental loss of the
premises leased. The mora accipiendi of said
lessor is not cured by the lessee’s failure to make
consignation of the rejected payments, but the
lessee remains obligated to pay the amounts he
had tendered but did not deposit in court (Vda. de
Villaruel, et al. vs. Manila Motor Co. & Colonizers ,
L-10394, Dec. 3, 1958).
(The effects of mora accipiendi are discussed
under consignation)
determined by the rules given in the first
paragraph of Art. 1169, NCC, that is, the other
party would incur in delay only from the moment
the other party demands fulfillment of the
former's obligation. Thus, even in reciprocal
obligations, if the period for the fulfillment of the
obligation is fixed, demand upon the obligee is
still necessary before the obligor can be
considered in default and before a cause of action
for rescission will accrue (Solar Harvest Inc. vs.
Davao Corrugated Carton Corp. G.R. No. 176868, 26
July 2010).
When delay occurs
In reciprocal obligations, neither party incurs in
delay if the other does not comply or is not ready
to comply in a proper manner with what is
incumbent upon him. From the moment one of
the parties fulfills his obligation, delay by the
other begins (Art. 1169, last par., NCC).

3. Compensatio Morae – Delay of both ● Rescission of reciprocal obligations in Art.

parties existing in reciprocal obligations when
neither of them has performed the prestation
required.
Concept of Reciprocal Obligations:
● These are obligations arising from the SAME
CAUSE, and in which each party is a debtor
and a creditor of the other, such that the
obligation of one is dependent upon the
obligation of the other. They are to be
performed SIMULTANEOUSLY such that the
performance of one is conditioned upon the
simultaneous fulfillment of the other (DBP vs.
Guariña G.R. 160758, January 15, 2014).
1191, NCC is different from rescission of
contracts in Art. 1383, NCC. The former is
based on resolution due to a breach of faith
by one party while the latter involves a
subsidiary action due to lesion (Ong vs. CA,
G.R. 97347, July 6, 1999).
Effect of non-compliance of both parties in
reciprocal obligations
If neither party complies with his prestation, the
default of one compensates for the default of
the other.
Art. 1191 v. 1380 (Recission)

If a reciprocal obligation has a condition, the Rescission / Rescission (Art.

fruits and interests during the pendency of the Resolution (Art. 1380, NCC)
condition shall be deemed to have been mutually 1191, NCC)
compensated (Art. 1187[1], NCC). Based on non- Based on lesion or
performance or non- fraud upon creditors.
Requirement of Demand fulfillment of
obligation
In reciprocal obligations, as in a contract of sale, Action is instituted Action is instituted by
the GR is that the fulfillment of the parties’ only by the injured either party or by a
respective obligations should be simultaneous. party third person.
Hence, no demand is generally necessary Nonperformance by Nonperformance by
because, once a party fulfills his obligation and the other party is the other party is
the other party does not fulfill his, the latter important immaterial.
automatically incurs in delay. But when different
dates for performance of the obligations are
fixed, the default for each obligation must be

150
B. Fraud in the performance of obligation
Fraud is the deliberate and intentional evasion of
the normal fulfillment of obligations. There is
malice or bad faith (Art. 1170, NCC).
In order that fraud may vitiate consent, it must
be the causal (dolo causante), not merely the
incidental (dolo incidente), inducement to the
making of the contract (Tanke vs. DBP, G.R. No.
171428, November 11, 2013).

Responsibility arising from fraud is demandable in C. Negligence in the performance of

all obligations. Any waiver of an action for future obligation
fraud is void (Art. 1171, NCC).
Negligence or Culpa defined: It is the
Kinds of Fraud (Dolo): omission of that diligence which is required by the
nature of the obligation and corresponds with the
1. Incidental Fraud (Dolo Incidente) – circumstances of the persons of the time and
Fraud is merely incidental to the performance place (Art. 1173, NCC). It is the failure to observe
of an already existing obligation. It renders for the protection of the interests of another
the debtor liable for damages. person that degree of care, precaution and
vigilance, which the circumstances justly
2. Causal Fraud (Dolo Causante) – Fraud is demand, by reason of which such other person
the very reason for the existence of the suffers injury (ANECO vs. Balen, G.R. No. 173146, 25
obligation. It is the fraud employed by one November 2009, cited in Rabuya, Civil Law Reviewer,
party to induce the other to enter into a Volume II, 2017 Ed., p. 42)
contract with him. This is a ground to annul
the contract Fraud is the deliberate and Kinds of Negligence (Culpa):
intentional evasion of the normal fulfillment of
obligations. There is malice or bad faith (Paras, 1. Culpa Contractual – Negligence is merely
Civil Code of the Philippines Annotated Vol. IV, incidental to the performance of an already
2008, p. 642). existing obligation. The source of obligation
is contract and the occurrence of negligence
INCIDENTAL CAUSAL during the performance of the obligation only
v. renders the debtor liable for damages.
FRAUD FRAUD
During the At the time
performance of of the birth 2. Culpa Extra-Contractual or Culpa
an existing When of the Aquiliana - Negligence is the very source of
obligation present obligation the obligation. Without the negligence, there
is no juridical tie between the parties (Jurado,
Evading the Securing the Comments and Jurisprudence on Obligations and
normal consent of Contracts, 2010, p. 65).
fulfillment of an the other
obligation Purpose party to GR: The diligence required is that of a good
enter in to father of a family.
contract
Breach or non- Voidable XPNs:
fulfillment of contract
the obligation since 1. If the law requires another standard of care
Result (e.g., in case of common carries, the
consent is
vitiated diligence required is extraordinary diligence)
Recover Annulment of 2. If the parties stipulate another standard of
damages from the contract care
Remedy
the debtor with
of the In case of fraud, bad faith, malice or wanton
damages
innocent attitude, the obligor shall be responsible for all
party damages which may be reasonably attributed to
the non-performance of the obligation (Art. 2201,
(De Leon, Obligations and Contracts, 2010, p. 52-53)
NCC).

151
 CULPA CULPA Legal excuse for breach of obligation:
CONTRACTUAL AQUILIANA fortuitous event

Character of merely an substantive A fortuitous event has been defined as one which
negligence incident in the and could not be foreseen, or which though foreseen,
of performance independent is inevitable (Art. 1174, NCC; The Philippine American
defendant of an General Insurance, Co., Inc. vs. MGG Marine Services,
obligation Inc. G.R. No. 135645, March 8, 2002). A fortuitous
event under Article 1174 may either be an “act of
Relationshi there is always there may or God”, or natural occurrences such as riots, strikes
p of the a pre-existing may not be or wars (Philippine Communication Satellite Corp., vs.
parties contractual a pre- Globe Telecom, Inc., G.R. No. 147324, May 25, 2004).
relation existing
contractual GR: The debtor is not liable for non-performance
relation of the obligation due to fortuitous event (Art.
1174, NCC). The obligation is extinguished.
Source of breach or defendant’s
obligation nonfulfillment negligent act Requisites: To exempt the obligor from liability
of the contract or omission for a breach of an obligation by reason of a
itself fortuitous event, the following requisites must
concur:
Proof existence of negligence
required for the contract of the 1. Cause of the breach of the obligation must be
recovery and of its defendant independent of the will of the debtor;
breach/ non- must be 2. Event must be either unforeseeable or
fulfillment proved unavoidable;
is sufficient 3. Event must be such as to render it impossible
prima facie to for the debtor to fulfill his obligation in a
warrant normal manner, and
recovery 4. Debtor must be free from any participation
in, or aggravation of the injury to the creditor.
Availability not available available as (Mondragon Leisure and Resorts Corp., vs. CA G.
of due as a defense a defense R. No. 154188, June 15, 2005)
diligence as
a defense XPNs: In the following cases, the debtor remains
liable for non-performance of the obligation due
to fortuitous event:
D. Contravention of tenor of obligation
1. In cases expressly specified by law;
It includes all cases of defective performance and
even cases of non-performance attributable to
If the obligor delays, or has promised to
the debtor even though there is no bad faith,
deliver the same thing to two or more
malice or negligence (Art. 1167, NCC).
persons who do not have the same interest,
he shall be responsible for fortuitous event
Effect: It renders the debtor liable for damages
until he has effected the delivery (Art. 1165,
(Art. 1170, NCC). last par., NCC)

Under Art. 1170, NCC, the phrase “in any manner
contravene the tenor” of the obligation includes
any illicit act which impairs the strict and faithful
fulfillment of the obligation, or every kind of
defective performance.
2. When the stipulation of the parties provides
to that effect (Art. 1174, NCC);
3. When the nature of the obligation requires
the assumption of risk (Art. 1174, NCC);

If the robbery takes place without any concurrent

fault or negligence on the part of the debtor, it

152
may exempt the debtor from liability (Hernandez
vs. Chairman, COA, G.R. 71871, November 6, 1989).
But the robbery is not considered fortuitous event
if it takes place with the concurrent fault or
negligence of the debtor. Hence, when the
robbery took place in a pawnshop which is under
the control of the petitioners, the latter are not
exempt from liability because they failed to
exercise the required degree of diligence. (Sicam
vs. Jorge, G.R. 159617, August 8, 2007)
4. When the object of the obligation is lost and
the loss is due partly to the fault of the
debtor.
5. When the loss occurs after the debtor is
considered in delay (Art. 1165, NCC)
6. When the debtor promised to deliver the
same thing to two or more persons who do
not have the same interest (Art. 1165, NCC);
7. When the obligation to deliver arises from a
criminal offense (Art. 1268, NCC); and,
8. When the obligation is generic (Art. 1263,
NCC).
Effects of fortuitous event:
1. On determinate obligation – the obligation is
extinguished
2. On generic obligation – the obligation is not
extinguished (genus nun quam peruit – genus
never perishes) (Art. 1263, NCC)
Act of God v Act of Man
ACT OF GOD ACT OF MAN
Fortuitous event Force majeure
Event which is Event caused by the
absolutely legitimate or illegitimate
independent of acts of persons other
human than the obligor
intervention
e.g., Earthquakes, e.g., Armed invasion,
storms, floods, robbery, war
epidemics
NOTE: they both refer to causes independent of
the will of the obligor
Q: Kristina brought her diamond ring for
cleaning to a jewelry shop which failed to
fulfill its promise to return such a ring
on February 1, 1999. Kristina went back
to the shop on February 6, 1999 but she
was informed that the ring was stolen by a
thief the night before. Kristina filed an
action for damages against the jewelry
shop which put up the defense of force
majeure. Will the action prosper or not?
(2000 Bar)
A: YES. The action will prosper. Since the
defendant was already in default for not having
delivered the ring when delivery was demanded
by the plaintiff at due date, the defendant is liable
for the loss of the thing and even when the loss
was due to force majeure.
The defendant who is obliged to deliver incurred
delay from the time the plaintiff extrajudicially
demands the fulfillment of the obligation (Art.
1169, NCC). The defendant shall be held liable for
the loss of the thing even if it was due to a
fortuitous event. (Art. 1262, NCC)
Q: AB Corp entered into a contract with XY
Corp for the construction of the research
and laboratory facilities of the XY Corp. XY
Corp paid 50% of the 10M contract price.
On the other hand, AB agreed to complete
the work in 18months. After 17 months,
work was only 45% completed as AB Corp
experienced work slippage due to labor
unrest.
(a) Can the labor unrest be considered a
fortuitous event?
(b) Can XY Corp. unilaterally and
immediately cancel the contract?
(c) Must AB Corp. return the 50% down
payment? (2008 Bar)
A:
a.) NO, Labor unrest is not a fortuitous event
that will excuse AB Corp. from complying with its
obligation of constructing the research and
laboratory facilities of XY Corp. The labor unrest,
which may even be attributed in large part to AB
Corp. itself, is not the direct cause of non-
compliance by AB Corp. It is independent of its
obligation. It is similar to the failure of a DBP
153
borrower to pay her loan just because her 6. Remedies Available To The Creditor In
plantation suffered losses due to the cadang- Case of Breach
cadang disease. It does not excuse compliance
with the obligation (DBP v. Vda. De Moll, G.R. No. L- 1. Specific Performance
25802, January 31, 1972). AB Corp. could have
anticipated the labor unrest which was caused by When positive personal obligation
delays in paying the laborer’s wages. The (obligation to do) is considered breached
company could have hired additional laborers to (Art. 1170, NCC).
make up for the work slowdown.
It may be breached in two ways:
b.) YES. XY Corp. may unilaterally cancel the
obligation but this is subject to the risk that the a. There is no performance at all; or
cancellation of the reciprocal obligation being b. There is performance but the same is either
challenged in court and if AB Corp. succeeds, poor or in contravention of the tenor of the
then XY Corp. will be declared in default and be obligation.
liable for damages.
Remedies in cases of breach of:
c.) NO, under the principle of quantum meruit,
AB Corp. had the right to retain payment Positive Personal Negative Personal
corresponding to his percentage of Obligation Obligation
accomplishment less the amount of damages
suffered by XY Corp. because of the delay or
If there is failure to do If it is still possible,
default.
what has been the remedy is to
Q: Jacinto Tanguilig constructed a windmill promised, the demand that what
system for Vicente Herce, Jr. for P60,000 obligation may be has been done be
with a one-year guaranty. Herce made a executed by another undone at the
downpayment of P30,000 and an person at the cost of expense of the
installment payment of PI5,000, leaving a the debtor. Same rule debtor (Art. 1168,
shall be observed if NCC).
balance of Pi5,000. He refused to pay the
balance because the windmill system the obligor does it
in contravention of the If undoing is no
collapsed after a strong wind hit the place.
tenor of the longer possible,
Is Tanguilig exempt from liability due to
obligation. (Art. 1167, either physically or
fortuitous event?
NCC); OR legally, the remedy is
A: No. In order for a party to claim exemption simply
from liability due to fortuitous event, one The creditor may indemnification
requisite is that the event must be either demand that what has for damages (Art.
unforeseeable or unavoidable. A strong wind in been poorly done be 1170, NCC).
this case cannot be fortuitous, unforeseeable, or undone at the
unavoidable. On the contrary, a strong wind expense of the debtor
should be present in places where windmills are (Art. 1167, par. 2).
constructed, otherwise the windmills will not turn.
Given the newly-constructed windmill system, the 2. Rescission
same would not have collapsed had there been
no inherent defect in it which could only be Cancellation of the contract or reciprocal
attributable to Tanguilig. When the windmill obligation in case of breach on the part of one,
failed to function properly, it became incumbent which breach is violative of the reciprocity
upon Tanguilig to repair it in accordance with his between the parties. This is properly called
guaranty and bear the expenses therefor (Jurado, resolution (Art. 1191, NCC).
Civil Law Reviewer, 2009, p. 717 citing Tanguilig vs. CA
and Herce, G.R. No. 117190, January 2, 1997). 3. Damages, in any Event

The injured party may choose between the

fulfillment and the rescission of the obligation,

154
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 (Art. 1191[2], NCC).
The court shall decree the rescission claimed
unless there be just cause authorizing the fixing
of a period (Art. 1191 [3], NCC).
This is understood to be without prejudice to the
rights of third persons who have acquired the
thing, in accordance with Articles 1385 and 1388
and the Mortgage Law.
4. Subsidiary Remedies of Creditors
1. Accion Subrogatoria
GR: The law expressly grants to the creditor the
right to exercise all of the rights and bring all of
the actions which the debtor may have against
third persons (Jurado, Comments and Jurisprudence
on Obligations and Contracts, 2010 ed., p. 104).
XPN: Purely personal rights in the sense that
they are inherent in the person of the debtor.
Requisites:
1. Debtor to whom the right of action properly
pertains must be indebted to the creditor;
2. Creditor must be prejudiced by the inaction
or failure of the debtor to proceed against the
third person;
3. Creditor must have pursued or exhausted
all the properties of the debtor, which are not
exempted for execution.
b. Accion Pauliana
It refers to the right available to the creditor for
the rescission of any act of the debtor which is in
fraud and to the prejudice of his rights as a
creditor. By its very nature, it is subsidiary in
character (Art. 1383, NCC).
Requisites:
1. There must be a credit prior to alienation;
2. Debtor has made a subsequent contract
conveying a patrimonial benefit to a third
person;
3. The creditor has no other legal remedy to
satisfy his claim;
4. The act being impugned is fraudulent; and
5. The third person who received the property
conveyed, if by onerous title, has been an
accomplice in the fraud (Siguan vs. Lim, G.R.
134685, November 19, 1999).
c. Accion Directa
The right of a person to go directly against
another who is not a privy to the contract (Arts.
1652, 1608, 1729 and 1893, NCC).
NOTE:
1. Subsidiary liability of sublessee for the rent
(Art. 1652, NCC);
2. Right of sellers a retro to redeem property from
persons other than the buyer a retro (Art. 1608,
NCC);
3. Subsidiary liability of owners to laborers and
material men (Art. 1729, NCC); and
4. The principal may sue the substitute of the
agent with respect to the obligations which
the substitute has contracted under the
substitution (Art. 1893, NCC).
3. KINDS
Classification As to the existence of a
burden or condition.
1. Pure Obligation
It is an obligation whose performance does not
depend upon a future or uncertain event, or upon
a past event unknown to the parties. Pure
obligations are demandable at once (Art. 1179 [1],
NCC).
Effect: Its effectiveness or extinguishment does
not depend upon the fulfillment or non-fulfillment
of a condition or upon the expiration of a term or
period and characterized by the quality of its
being IMMEDIATELY DEMANDABLE (Art. 1179,
NCC).
Past Event Unknown to the Parties – A
“future knowledge of a past event” will determine
whether or not an obligation will rise. An
obligation which depends on such event is an
obligation with a term since a past event is a
certain event, and such event only affects the
demandability of the obligation (e.g., an
obligation to give monetary assistance after a
survey of the aftermath of a calamity has been
155
conducted; the amount thereof depends on the Kinds of Condition:
number of casualties thus surveyed) (Art. 1179 [1],
NCC). 1. Suspensive & Resolutory (Art. 1181,
NCC)
2. Conditional Obligation
a. Suspensive Condition (“Condition
It refers to one where the acquisition of rights, as Precedent or antecedent”) – A future
well as the extinguishment or loss of those and uncertain event, the fulfillment of
already acquired, shall depend upon the which gives rise to the obligation or
happening of the event which constitutes the acquisition of rights.
condition (Art. 1181, NCC).
Principle of Retroactivity in Suspensive
3. Obligation with a term Conditions: Once the condition is fulfilled, its
effects must logically retroact to the moment
That kind of obligation which is subject to the when the essential elements, which gave birth to
happening of the event which will surely happen, the obligation, have taken place. (day of the
although the date may not be known as of the constitution of the obligation). The condition
moment. which is imposed is only accidental, not an
essential element of the obligation. This is applied
Conditional Obligation v. with a period only to consensual contracts. No application to
real contracts which can only be perfected by
CONDITIONAL OBLIGATION WITH delivery (Art.1187 [1], NCC).
OBLIGATION A TERM/PERIOD
A Condition is any Any future but b. Resolutory Condition (“Condition
future and certain event Subsequent”) – A future and uncertain
uncertain event (Jurado, Comments and event, the happening of which
which wields an Jurisprudence on extinguishes obligations or rights already
influence on a legal Obligations and acquired.
relationship (Jurado, Contracts, 2010 ed., p.
146).
Comments and SUSPENSIVE RESOLUTORY
Jurisprudence on CONDITION CONDITION
Obligations and During the pendency During the
Contracts, 2010 ed., p.
of the condition: pendency of the
108).
condition:
The obligation and
rights do not exist yet The obligation is
Affects the very Affects ONLY the
and the nature of the immediately
existence of the demandability of the
interest of the expectant demandable as if it
obligation (Ibid). obligation (Ibid).
creditor is but a mere were a pure
If the fulfillment of If it is the designation
hope or expectancy. obligation (Art. 1179
the condition is left to of the period which is
[1], NCC);
the sole will of the left to the exclusive
Unlike other hopes or
debtor, the obligation will of the debtor, the
expectancies, however, If the obligation is
is void (Art. 1182, NCC) obligation remains already performed,
it is protected by law.
valid (Art. 1197, NCC)
the previous debtor
The obligation and becomes an
rights do not exist yet expectant creditor
WHEN HIS MEANS PERMIT HIM TO DO SO- entitled to bring the
and the nature of the
the obligation shall be considered to be one with appropriate action
interest of the expectant
a term, and not one with a condition dependent to protect his hope
creditor is but a mere
upon the sole will of the debtor which is void (Art. or expectancy.
hope or expectancy.
1180, NCC).
Unlike other hopes or
expectancies, however,
it is protected by law.

156
 1. The obligation 1. Rights
In case of payment by and rights come into already acquired,
the DEBTOR by existence. as well as the
REASON OF MISTAKE: obligations, are
He has the right to 0. If the obligation extinguished (Art.
recover the undue is to give, the effects of 1181, NCC). If the
payment based on the the happening of the previous obligation
PRINCIPLE OF condition shall retroact is that of giving
SOLUTIO INDEBITI. to the day of the which has already
The reason is that – the constitution of the been performed,
payment is not due obligation. But when the the parties shall
since the obligation has obligation imposes return to each
not yet come into reciprocal obligations, other what they
existence yet the fruits and interest have received (Art.
(Art. 1188 [2], NCC). during the pendency of 1190, par.1, NCC),
the condition shall be including fruits and
RECOVERY shall be deemed mutually interest.
made prior to the compensated (Art. 1187,
fulfillment of the par.1, NCC). Note: Restitution
suspensive condition. is ABSOLUTE such
Once the suspensive The rule of retroactivity that everything
condition is fulfilled, of the effects of that was received
effect of such conditional obligation to would have to be
conditional obligation give, once the condition restored.
shall retroact to the day has been fulfilled, is
of its constitution, thus, without prejudice to the
effectively barring any existence of the
action from recovery preferred right of a third
based on SOLUTIO person in good faith.
INDEBITI.
In obligations to do and
If the intention is to not to do, the court shall
simply to make the determine, in each case,
delivery even prior to the retroactive effect of
the fulfillment of the the condition that has
condition but upon the been complied with
expectation that the (Art.1187, par.2, NCC).
condition would
happen, it is just that
the debtor be allowed to Effect of loss of specific thing due during
recover what he has the pendency of condition
paid if it will become
clear that the event will 1. Loss of the thing due
not take place anymore.
While there may be no If the thing is lost without the fault of the debtor
mistake, the right of the (and later on the condition is fulfilled), the
payor to recover is obligation is extinguished (Art. 1189, par.1, NCC);
based upon the
principle of ACCIO.N IN XPNS:
REM VERSO (Article 22,
NCC). a. When by law, the obligor is liable even for
Effects upon the Effects upon the fortuitous event;
fulfillment of the fulfillment of the b. When by stipulation, the obligor is liable even
condition: condition: for fortuitous event; or

157
 c. When the nature of the obligation requires the
assumption of risks (Art. 1174, NCC).
if the thing is lost through the fault of the debtor
(and later on the condition is fulfilled), the
obligation is converted into indemnification for
damages (Art. 1189, par.2, NCC);
2. In case of deterioration of the thing due
If the thing deteriorates without the fault of the
debtor (and later on the condition is fulfilled), the
impairment is borne by the creditor (Art. 1189,
par.3, NCC);
If it deteriorates due to the fault of the debtor
(and later on the condition is fulfilled), the
creditor may choose between rescission and
fulfillment, with damages in either case (Art. 1189,
par.4, NCC);
3. In case of improvement of the thing due
If the thing is improved by nature (and later on
the condition is fulfilled), the improvement inures
to the benefit of the creditor (Art. 1189, par.5,
NCC);
If the thing is improved at the expense of the
debtor (and later on the condition is fulfilled), the
debtor shall have no other right over the
improvements than that granted to the
usufructuary (Art. 1189, par.6, NCC).
USUFRUCT gives a right to enjoy the property of
another with the obligation of preserving its form
and substance, unless the title constituting it or
the law otherwise provides (Art. 562, NCC).
A usufructuary is NOT ENTITLED TO
REIMBURSEMENT of expenses he incurred in
connection with the improvements that he may
have introduced on the property. However, he
has the RIGHT TO REMOVE the improvement if
it will not cause injury to the property. In addition,
he may also SET OFF HIS LIABILITY FOR
DAMAGES caused to the property with the value
of said improvements (Art. 579, NCC)
2. Potestative, Casual & Mixed Condition
Potestative (“Facultative”)– The fulfillment
of the condition is left to the exclusive will of one
of the parties.
158
● When the fulfillment of the condition depends
upon the sole will of the debtor, the
conditional obligation shall be void (Art.
1182, NCC). It must be noted that Art. 1182
is applicable only to suspensive condition.
● NOTE: What is contemplated in the provision
is a condition that is POTESTATIVE to the
debtor and, at the same time SUSPENSIVE.
● In other words, a condition at once
FACULTATIVE and RESOLUTORY may be
valid though the condition is made to depend
upon the will of the debtor.
● Where the so-called potestative condition is
imposed not on the birth of the obligation but
on its fulfillment, only the condition is avoided
leaving unaffected the obligation itself (De
Leon, Obligations and Contracts, 2010, p. 117).
OSMENA vs. RAMA
The Court held that if that statement found in her
acknowledgement of the indebtedness should be
regarded as a condition, it was a condition
dependent upon the exclusive will of the debtor
and is therefore VOID.
ONLY the potestative condition was held void
because it referred merely to the fulfillment of an
already existing indebtedness (Osmena vs. Rama,
G.R. No. 4437, September 9, 1909).
TRILLANA vs. QUEZON COLLEGE
Where the potestative condition was imposed on
the birth of the obligation and not on its
fulfillment, the Court declared the OBLIGATION
VOID pursuant to Article 1182 of NCC because
the condition is dependent upon the debtor’s sole
will (Trillana vs. Quezon College, G.R. No. L-5003,
June 27, 1953).
Casual – The fulfillment of the condition is left to
the will of a third party or chance.
Mixed – The fulfillment of the condition is left
partially to the will of either of the parties and
partly to the will of a third person or by chance.
If the condition is casual or mixed, the obligation
remains valid.
Doctrine of Constructive Fulfillment Effect upon the Obligation:
If impossible condition is imposed ---
When the condition is partly dependent upon
chance, the will of a third party or upon the will 1. Ordinary Obligation: obligation itself
of the debtor, the conditional obligation is valid. becomes void (Art. 1183, NCC);
In this scenario, if the debtor voluntarily prevents 2. Simple or Remuneratory Donation: the
the fulfillment of the condition partly dependent donation remains valid because the
upon him, the condition is deemed fulfilled (Art. condition is considered not imposed (Art. 727,
1186, NCC) . NCC);
3. Onerous Donation: the donation becomes
Requisites: void because an onerous donation is
governed by the law on obligations and
1. The condition is SUSPENSIVE; contract (Art. 733, in rel. to Art. 1183, NCC); and
2. The obligor actually prevents the fulfillment of 4. Testamentary Disposition: the disposition
the condition; and, remains valid because the impossible
3. He acts voluntarily. condition is considered not imposed, even if
the testator provides otherwise (Art. 873,
● There must be INTENT on the part of NCC).
the obligor to prevent the fulfillment of 5. Negative Condition: the obligation is valid
the condition. but the condition shall be considered as not
agreed upon (Art. 1183, NCC).
● MERE INTENTION of the debtor to
prevent the happening of the condition is ● The obligation is VOID if it depends
INSUFFICIENT (Rabuya, Obligations and upon an impossible condition. But if the
Contracts, 2019 ed, p. 103). OBLIGATION is DIVISIBLE, that part
thereof which is not affected by the
Constructive Fulfillment Of A Mixed impossible or unlawful condition shall be
Conditional Obligation VALID (Art. 1183, NCC).
● When the condition was not fulfilled but the Positive & Negative Condition
obligor (debtor) did all his power to comply
with the obligation, the condition should be POSITIVE NEGATIVE
deemed satisfied. CONDITION CONDITION
A certain event A certain event must
3. Possible & Impossible Conditions
must happen at a not happen at a
determinate time. determinate time.
a. Possible Condition – when it is capable
Effects: Effects:
of realization not only according to its nature,
The obligation is
but also according to law, good customs and
considered In negative condition,
public policy.
extinguished if: the obligation becomes
The period expires effective if:
b. Impossible Condition – refers to
without the The period expires;
conditions which are:
condition Even before the
happening; or expiration of the
Physical Impossibility
It is certain that the period, when it is
event will not certain that the
1. Physically impossible because they are
take place, event cannot
incompatible or contrary to law and nature;
even before happen;
said period If no period is fixed,
Juridical Impossibility
expires (Art. the intention of the
1184, NCC). parties,
1. Contrary to good customs or public policy; or
considering the
2. Prohibited by law.
nature of the
obligation, shall

159
 determine the evident that the event which serves as a condition
period. (Art. 1185, can no longer occur.
NCC).
Obligation with a Term/Period

Effect of Breach of Both Parties:
The liability of the first infractor shall be equitably
tempered by the courts;
If it cannot be determined which of the parties
first violated the contract, the same shall be
deemed extinguished, and each shall bear his
own damages. (Art. 1192, NCC).
The above rules are deemed just. The first one is
fair to both parties because the second infractor
also derived or thought he would derive some
advantage by his own act or neglect. The second
rule is likewise just, because it is presumed that
both at about the same time tried to reap some
benefit.
Examples:
Positive Condition
Obligations with a period are, therefore, those
whose consequences are subjected in one way or
another to the expiration of said term.
Period – A term or period consists in a space of
time which has an influence on obligations as a
result of a judicial act, and either suspends their
demandableness, or produces their
extinguishment (Manresa, Commentaries on the Civil
Code, Vol. 8, p. 153).
Suspensive and Resolutory Terms:
Suspensive (ex die) – The obligation becomes
demandable only upon the arrival of a day certain
(Art. 1193 [1], NCC).
Resolutory (in diem) – The obligation is
immediately effective and demandable but will be
extinguished when the period arrives (Art. 1193
[2], NCC).

If A says: “I am giving B my collection of law A Day Certain – Understood to be that which

books but if my son, C, becomes a lawyer when must necessarily come, although it may not be
he turns 25, those law books will have to be given known when (Art. 1193 [3], NCC).
back to C.”
PERIOD / TERM CONDITION
RIGHT OF B will become absolute from the A future and certain A future and
moment C reaches 25 and has not graduated time or event which uncertain event;
from law school, although he may eventually pass must necessarily
the bar examinations and become a lawyer come;
afterwards.
Always refers to the May, under the law,
If C is still in his 2 year in the College of Law
nd future; refer even to the
when he turns 24, it is definite that the event will past;
not take place. Merely fixes the time Causes an obligation
or efficaciousness of to arise or to cease.
Negative Condition an obligation. (8 Manresa 153,
154).
If A says: “I promise to give B a Rolex watch if
she does not marry C before she turns 25.” Benefit of Period
This obligation shall become effective from the
moment B reaches the age of 25 and remains a GR: If period is designated, it is presumed for the
bachelorette, although she may marry C benefit of both the creditor and debtor (Art. 1196,
afterwards. NCC). Hence, the creditor cannot demand for
early performance and neither may the debtor
The obligation shall also become effective if B compel the creditor to accept an early
marries another when she turns 24 for it is performance.

160
NOTE: This Article applies only where the parties
to a contract themselves have fixed a period, and Specific Thing Both the thing and its
not to a case where the parties have authorized fruits may no longer
the Court to fix a reasonable term (Orit vs. If the obligation is to be recovered because
Balrodgan Co., Ltd., L-12277, Dec. 29, 1959). give a specific thing the creditor is already
and what has been entitled to both.
Effect of Suspensive Term or Period delivered is
something that NOTE: The obligation
The obligation becomes demandable only when produces fruits, both to give specific things,
the day certain arrives. The term or period does the thing and the the creditor acquires a
not, however, affect the existence of the fruits actually right over the fruits
obligation nor its effectivity. What is suspended received by the from the time the
by the term is only the demandability of the creditor, may be obligation was
obligation (Art. 1193 [1], NCC). recovered, provided constituted even if not
that the action for yet demandable
If delivery or payment has been made prior to the recovery is made prior unless the contrary
arrival of the day certain, the debtor is authorized to maturity of the otherwise agreed.
to recover what has been delivered prematurely, obligation.
together with fruits and interest but only if the
debtor made the delivery or payment unaware of Instances Where Fruits and Interests May
the period or believing that the obligation has No Longer Be Recovered Notwithstanding
become due and demandable (Art. 1195, NCC). Premature Payment:

As to the extent of what may be recovered: 1. When the obligation is reciprocal and both
sides advanced payment;
PRIOR TO AFTER THE 2. When the obligation is a loan and what has
ARRIVAL OF THE ARRIVAL OF THE been paid was merely interest;
DAY CERTAIN DAY CERTAIN 3. When the period is exclusively for the benefit
of the creditor because by accepting the
In addition to the Obligation to pay the advance payment, the creditor has waived
recovery of the sum sum of money is the benefit of the period (Rabuya, Obligations
paid the debtor is also already due and and Contracts, 2019 ed., p. 134).
entitled to recover demandable, only the
interest over that sum interest accruing from XPN: Unless from the tenor of the obligation or
at the legal rate the date of payment other circumstances it appears that the period
provided that the up to the date of has been established in favor of the creditor or
action for recovery is maturity of the the debtor alone (Art. 1196, NCC).
made prior to the obligation may be
maturity of the recovered (Rabuya, Effect if for the benefit of creditor alone: He
obligation. Obligations and cannot be compelled by the debtor to accept an
Contracts, 2019 ed, p. early performance but he can compel the debtor
133). to perform even prior to the arrival of the period.

Generic Thing Effect for the benefit of debtor alone: He

cannot be compelled by the creditor to perform
If the obligation is to The obligation to give prior to the arrival of the period but he can
give a generic thing the generic thing is compel the creditor to accept an early
and what has been already due and performance.
delivered is demandable, only the
something that fruits actually received
produces fruits, both by the creditor from
the thing and fruits the date of delivery up
actually received by to the date of maturity
the creditor may be of the obligation may
recovered. be recovered.

161
Instances where the debtor loses right to
make use of period (in which case, the period
becomes for the benefit of creditor alone):
a. Debtor becomes INSOLVENT, unless he gives
guaranty or security;
b. Debtor FAILS TO FURNISH the promised
security or guaranty;
c. Debtor, by his act, IMPAIRS the guaranty or
security, unless he gives a new security or
guaranty;
d. When guaranty or security DISAPPEARS thru
FORTUITOUS EVENT;
e. Debtor VIOLATES ANY UNDERTAKING in
consideration of which the creditor agreed
period; or
f. Debtor ATTEMPTS to ABSCOND (Art. 1198, NCC)
When May Court Fix the Period:
a. No period is fixed but same is intended based
from the nature of obligation and the
circumstances (Art. 1197 [1], NCC);
b. If the duration of period depends upon the will
of the debtor; (Art. 1197[2], NCC)
c. If debtor binds himself to pay when his means
permit him to do so (Art. 1180, NCC).
GR: the court must first fix the period before an
action for the enforcement of the obligation can
be maintained. However, when such separate
action would be a mere formality and would serve
no purpose than to delay, such technicality need
not be adhered to (Tiglao vs. Manila Railroad Co., 52
O.G. 179).
XPNS: (Rabuya, Obligations and Contracts, 2019 ed.,
p. 141-142)
1. When no period was intended by the parties.
2. When the obligation is payable on demand
because it is a pure obligation and not one
with a period. There must be a demand in
order for the obligation to become due. In the
absence of such demand, it follows that the
obligation is not yet due, and this obligation
may not be subject to compensation for lack
of requisite under the law.
3. When the performance of the obligation was
fixed “within a reasonable time” because a
period was already fixed, a “reasonable time”;
and all that the court should do is to determine
if that reasonable time had already passed or
not when suit was filed.
4. Where the law itself provides for the period.
162
 Once the period has been fixed by the court
it becomes part of the contract, and it cannot
be subsequently changed or extended by the
court without the consent of both parties
(Barretto vs. City of Manila, G.R. No. 4372, March
27, 1908).
 When the obligation is payable on demand,
the obligation is without a term and, hence,
the court cannot fix the period (People’s Bank
& Trust Co. vs. Odom, G.R. No. L-43670,
February 25, 1937).
 When what is left to the will of the debtor is
only the duration of the period, the
obligation is valid and said provision
authorizes the courts to fix the period (Art,
1197 (2), NCC).
Classification As to the grant of right to
choose one prestation out of several, or to
substitute the first one.
Alternative and Facultative Obligations
Kinds of obligations in case of plurality of
objects:
1. Conjunctive – One where there are several
prestations and all of them are due;
2. Distributive – One where one of two or more
prestations are due. It may either be:
a. Alternative – several prestations are due
but the performance of one is sufficient to
extinguish the obligation; or
b. Facultative – only one prestation is due,
but the debtor has reserved the right to
substitute it with another (De Leon,
Obligations and Contracts, 2010, p. 209).
Facultative Obligation
The choice to substitute another prestation lies
only with the debtor (Art. 1206, par. 1, NCC).
Substitution becomes effective only from the time
it has been communicated to the creditor (De
Leon, Obligations and Contracts, 2010, p. 209).
Effect of loss of substitute:
If the thing intended as a substitute is lost even
due to the fault of the debtor, the latter is not
liable because obligation simply ceases to be a
facultative one.
But if the loss of the substitute due to the fault of
the debtor occurs after the substitution has been
made, the obligation is converted into
indemnification for damages (Art. 1206, 2nd par.,
NCC).
If the principal obligation becomes impossible by
fault or negligence of the creditor, the debtor
cannot be compelled to perform the substitute
(no more substitute, obligation becomes simple).
Thus, obligation is extinguished.
Alternative Obligation
The right of choice belongs to the debtor, unless
it has been expressly granted to the creditor. The
right of choice may, in fact, be granted to a third
person by express agreement of the parties
(notification to both the debtor and creditor by
the 3rd person of his choice) because said
agreement is not prohibited by law nor contrary
to morals, good customs, public order, or public
policy (Art. 1200, 1st par., NCC).
Limitations on exercise of right: The
following prestation cannot be chosen:
1. Those which are impossible;
2. Those which are unlawful; or
3. Those which could not have been the object
of the obligation (Art. 1200, 2nd par., NCC).
Choice becomes effective only from the time that
it has been communicated to the other party (Art.
1201, NCC). After that, the obligation is converted
into a simple obligation of performing the chosen
prestation.
Two Principal Theories As To When The
Election Becomes Effective:
Cognition Theory
The election or notice has no effect until it comes
to the knowledge of the other party. (Note: this is
adopted in the Philippines)
In alternative obligation, the election becomes
effective from the moment the choice is made
known to the other party. In other words, what is
required is MERE NOTICE to the other party and
not his consent (Art. 1201, NCC).
Effect of Choice:
The right of election is extinguished when the
party who may exercise that option categorically
and unequivocally makes his or her own choice.
The choice becomes IRREVOCABLE and BINDING
upon he who made it and HE WILL NOT
THEREAFTER BE PERMITTED TO RENOUNCE his
choice and take an alternative which was first
open to him.
The debtor has no other recourse except to
perform the chosen prestation.
The obligation ceases to be alternative and is
converted into a PURE or SIMPLE ONE (Art. 1205,
NCC).
If right of choice belongs to debtor:
Prior To Election
1. And only one of the several prestations is
practicable, the obligation becomes simple
(Art. 1202, NCC);
2. And thru the creditor’s act, the debtor cannot
make a choice in accordance with the terms
of the obligation, the debtor may either
rescind the contract with damages (Art. 1203,
NCC) or choose to perform that which
remains.
3. And all the prestations were lost due to the
debtor’s fault, the creditor is entitled to
recover the value of the last thing which
disappeared, or that of the service which last
became impossible (Art. 1204, NCC).
4. If all prestations were lost by reason of
fortuitous event, the obligation is
extinguished and the debtor is not liable for
damages (Arts. 1262 and 1264, NCC).
If right of choice belongs to creditor:
1. If one of the prestations is lost due to debtor’s
fault, the creditor may either choose from the
remaining (without being entitled to
damages) or the price of that which has
disappeared (with the right to recover
damages) (Art. 1205[2], NCC);
2. If all the prestations were lost due to debtor’s
fault, the creditor may choose the price of any
163
 of them, with indemnity for damages (Art.
1205[3]. NCC).
3. If only one prestation is lost by fortuitous
event, the creditor can still exercise the right
of choice, hence, the obligation remains as
alternative if there are several prestations left
(Art. 1205[1], NCC). If only one prestation is
left, obligation ceases to be an alternative
one.
After Election
1. If what was lost was the chosen prestation
which, for all intents and purposes, is the only
prestation which is due and demandable
under the circumstances, the obligation is
considered extinguished if it was lost without
the fault of the debtor and before he has
incurred in delay (Art. 1262, par 1, NCC). If
the same was lost by reason of the debtor’s
fault, his obligation is converted to
indemnification for damages.
2. If what was lost was not the chosen
prestation, the same does not affect the
obligation because said prestation is not what
is due (Rabuya, Obligations and Contracts,
2019 ed., pps. 152-153).
Requirement of Communication of choice -
If the choice belongs to the creditor, he has to
communicate his choice to the debtor.
There is no required form. It may be ORAL, IN
WRITING, TACITLY, OR OTHER UNEQUIVOCAL
MEANS.
Classification As to the character of
responsibility or liability.
Joint and Solidary Obligations
Joint Obligation- An obligation in which each
debtor is liable only for a proportionate part of
the debt, and the creditor is entitled to demand
only a proportionate part of the credit form each
debtor (Rabuya, Civil Law Reviewer Volume II, 2017
Ed., p. 78. Cited in Dy-Dumalasa vs. Fernandez, et al.,
G.R. No. 178760, 23 July 2009).
It is defined as an obligation where there is a
concurrence of several creditors, or of several
debtors, or of several creditors and debtors, by
virtue of which each of the creditors has a right
to demand, and each of the debtors is bound to
render, compliance with his proportionate part of
164
the prestation which constitutes the object of the
obligation (Rabuya, Obligations and Contracts, 2019
ed., p. 157).
Presumption of Joint Obligation
Presumption: Obligation is presumed joint if
there is a concurrence of several creditors, of
several debtors, or of several creditors and
debtors in one and the same obligation (Art. 1207,
NCC).
XPNs:
1. When the obligation expressly states that
there is solidarity
2. When the law requires solidarity i.e. quasi-
delicts
3. When the nature of the obligation requires
solidarity
4. When the nature or condition is imposed
upon heirs or legatees, and the testament
expressly makes the charge or condition in
solidum
5. When the solidary responsibility is imputed
by a final judgment upon several defendants
Presumption of Equal Division
Presumption: Credit or debit shall be presumed
to be divided into as many equal shares as there
are creditors or debtors (Art. 1208, NCC).
Joint creditor cannot act in representation of the
others, nor can a joint debtor be compelled to
answer for the liability of others (Jurado, Comments
and Jurisprudence in Obligations and Contracts, 2010,
p. 181 – 182).
Division of shares:
1. The co-creditors or co-debtors may regulate
their rights or liabilities in their internal
relations with each other;
2. In the absence of clear agreement, the law
PRESUMES that the credit or debt is divided
into as many equal shares as there are
creditors or debtors (Art. 1208, NCC).
Effect of Joint Divisible Obligation: Each
creditor can demand only for the payment of his
proportionate share of the credit, while each
debtor can be held liable only for the payment of
his proportionate share of the debt.
Distinct character of each share: In joint
obligation, the share pertaining to each creditor
or debtor is distinct from the share pertaining to
the others (Art. 1208, NCC). As a consequence –
1. As to demand: Demand made by one
creditor upon one debtor produces the
effects of default only with respect to the
creditor who made the demand and the
debtor upon whom the demand has been
made, without affecting the others.
2. As to interruption of prescription: The
interruption of prescription by the judicial
demand of one creditor upon one debtor
does not insure to the benefit of the other
creditors nor interrupt the running of the
prescriptive period as to other debtors.
3. As to personal defenses: The vices of each
obligation arising from the personal defect of
a particular debtor or creditor do not affect
the obligation or rights of the others.
4. As to Insolvency: The insolvency of one
debtor does not increase the liability of his
co-debtors.
Joint Indivisible Obligation
Indivisibility of an obligation does not necessarily
give rise to solidarity nor does solidarity of itself
imply indivisibility (Art. 1210, NCC).
INDIVISIBILITY SOLIDARITY
Refers to the Refers to the legal tie
prestation, which is or vinculum juris
not capable of partial defining the extent
performance of liability of the
parties
Effect to Joint Creditors
Each cannot demand Each may demand
more than his share the full prestation
Effect to Joint Debtors
Each is only liable for Each has the duty
his respective share to comply with
entire prestation
Reason: Indivisibility and solidarity refers to two
distinct concepts. Solidarity refers to the vinculum
that binds the parties and, therefore, principally
to the subjects of the obligation. Indivisibility
refers to the prestation or the object of the
obligation. (Arts. 1210, 1223 NCC)
Test of Divisibility: Whether an obligation is
divisible or not depends on whether the
obligation is susceptible of partial fulfillment,
according to the purpose of the said
obligation.(Rabuya, Pre-Bar Reviewer in Civil Law,
2021 Ed., p. 368)
Concept of Joint Indivisible Obligation: It
exists when the prestation is indivisible or
incapable of partial performance and yet, there is
plurality of subjects who are not bound solidarily.
Legal Effects:
1. Since the obligation is joint, on the side of the
debtors, each is liable only for a portion of
the debt; on the side of the creditors, each is
entitled only to a portion of the credit.
2. Since the obligation is joint, if one of the
debtors should be insolvent, the others shall
not be liable for his share (Art. 1209, NCC)
3. But since the prestation is at the same time
indivisible, compliance is possible only if all
joint debtors shall act TOGETHER; therefore,
the obligation can be enforced only by
proceeding against all the debtors (Art. 1209,
NCC).
Effect of Breach:
1. If a creditor chooses specific performance, all
debtors must be sued because the obligation
can be performed only by the concurrence of
all debtors (Art. 1209, NCC).
2. It also gives rise to indemnity for damages
from the time anyone of the debtors does not
comply with his undertaking; in which case,
the debtors who may have been ready to
fulfill their promises shall not contribute to
the indemnity beyond the corresponding
portion of the price of the thing or of the
value of the service in which the obligation
consist (Art. 1224, NCC). Only the debtor
who was responsible for the breach shall be
liable to pay damages.
Solidary Obligation – an obligation where
there is a concurrence of several creditors, or of
several debtors, or of several debtors, or of
several creditors and debtors in one and the same
165
obligation wherein each one of the creditors has
a right to demand entire compliance with the
prestation, or that each one of the debtors is
bound to render entire compliance as demanded
(Art. 1207, NCC).
Solidarity exists when:
1. The obligation expressly declares;
2. The law expressly requires solidarity; or
3. The nature of obligation requires solidarity
(Art. 1207, NCC).
These are the only instances when the obligation
is solidary.
Terms indicating solidarity:
1. Jointly and severally;
2. Juntos o separadamente;
3. In solidum;
4. Individually and collectively
The term "individually" has the same meaning as
"collectively", "separately", "distinctively",
respectively or "severally". An agreement to be
"individually liable" undoubtedly creates a several
obligation, and a "several obligation is one by
which one individual binds himself to perform the
whole obligation (Ronquillo vs. CA, GR L-55138,
September 28, 1984).
“I” Promise to Pay: Where an instrument
containing the words “I promise to pay” is signed
by two or more persons, they are deemed to be
jointly and severally liable thereon (Sec. 17 (g),
Negotiable Instruments Law). Hence, when the
instrument contains the words “We promise to
pay” and followed by separate signatures of the
makers, the obligation is merely joint.
Kinds of Solidarity:
1. Active – existing on the side of the creditors;
2. Passive – existing on the side of the debtors;
or
3. Mixed – existing on both sides.
Active Solidarity
Distinguishing characteristic: There is an
existence of mutual representation or mutual
agency among the solidary creditors with powers
to exercise the rights of other in the same manner
166
as their rights (De Leon, Obligations and Contracts,
2010, p. 218).
Effect of Demand: The debtor may pay anyone
of the solidary creditors, but if any demand,
either judicial or extrajudicial, is made by one of
the solidary creditors, payment should be made
only to him (Art. 1214, NCC). If the payment is
made to the other creditors, that is a case of
payment made to a wrong person.
In case of mixed solidarity:
1. The creditor can validly refuse payment
coming from debtors who were not recipient
of the demand (the latter are considered third
person); and
2. The debtor who received the demand is
obliged to make payment only to the creditor
who made the demand.
In case of mixed solidarity, the prohibition in
Article 1214 does not extend to other debtors
upon whom no demand has been made, so each
of the debtor can make a valid payment to a
creditor who did not make the demand (Jurado,
Comments and Cases on Obligations and Contracts,
2010, p. 197).
Effect of condition: Solidarity may exist
although the creditors and debtors may not be
bound in the same manner and by the same
periods and condition (Art. 1211, NCC).
Only one is indispensable party: Where the
obligation of the parties is solidary, either of the
parties is indispensable, and the other is not even
a necessary because complete relief is available
from either (Justice Jose Feria, Civil Procedure, 1969
Ed., p. 153 cited in Cerezo vs. Tuazon, G.R. 141538,
March 23, 2004).
Effect of Judgment:
1. If favorable, this inures to the benefit of the
co-creditors pursuant (Article 1212, NCC);
2. If adverse:
1. It cannot be set up against the others if the
same is founded on a cause personal to the
plaintiff-creditor;
2. But if the judgment is founded on a cause
not personal to the plaintiff-creditor, the
same can be set up against the co-creditors
because once an action is filed by a solidary
 creditor, he represents all the others and
payment can be made only to him.
Effect of beneficial act: Each one of the
solidary creditors may do whatever may be useful
to the others (Art. 1212, NCC). Hence, each
solidary creditor may interrupt the running of the
prescriptive period, constitute the debtor in
default, or bring the suit so that the obligation
may produce interest.
Effect of prejudicial acts:
1. As far as the debtors are concerned, the acts
are valid because of the principle of mutual
representation which exists among the
creditors (Art. 1215, NCC).
2. However, as far as the co-creditors are
concerned, this prejudicial act does not
prejudice the rights of the other creditors to
recover their respective shares in the credit
from the creditor who effected such
prejudicial acts (Art. 1212, NCC).
Effect of assignment of rights:
Rule: A solidary creditor cannot assign his rights
without the consent of the others (Art. 1213,
NCC); but the assignment of rights to a co-
creditor even without the consent of the other
creditors is not prohibited.
Effect of violation of prohibition: The
assignment is not valid. Hence, the assignee does
not become a co-creditor. If payment is made to
the assignee, such payment is made to a wrong
person. (Rabuya, Pre-Bar Reviewer in Civil Law, 2021
Ed., p. 365)
Effect of condoning the solidary obligation:
1. If remission covers the entire obligation, the
obligation is totally extinguished (Art. 1215,
NCC).
2. If remission is for the benefit of one of the
debtors covering the latter’s entire share:
1. As far as the creditors are concerned, he
is completely released;
2. But as far as the debtors are concerned,
he remains a debtor in case of insolvency
of one of the remaining debtors (Rabuya,
Pre-Bar Reviewer in Civil Law, 2021 Ed., p.
366).
3. If remission is for the benefit of one of the
debtors covering only part of the latter’s
share, his character as a solidary debtor is not
affected, both insofar as the creditors and
debtors are concerned. (Rabuya, Pre-Bar
Reviewer in Civil Law, 2021 Ed., p. 366).
Effects of Novation:
1. Novation effected by substituting another
person in place of the debtor – solidary
debtor who effected the novation is liable for
the acts of the new debtor in case there is a
deficiency in performance or in case damages
are incurred by other solidary creditors as a
result of the substitution; (Rabuya, Pre-Bar
Reviewer in Civil Law, 2021 Ed., p. 392)
2. Novation by subrogating a third person in the
rights of the solidary creditor – obligation of
the debtor remains the same; (Rabuya, Pre-Bar
Reviewer in Civil Law, 2021 Ed., p. 393)
3. Novation by subrogating a third person in the
rights of the solidary creditor – the creditor is
responsible for such novation is liable to the
other creditors for the share which
corresponds to them in the obligation.
(Rabuya, Pre-Bar Reviewer in Civil Law, 2021 Ed.,
p. 393)
Effect of payment to a creditor: If one of the
solidary creditors was able to collect the entire
amount or debt of the solidary debtors, the
obligation is totally extinguished, although there
arises a consequent obligation on his part to
render an account to his co-creditors (Art. 1215
[2], NCC).
Passive Solidarity
Each solidary debtor, insofar as the creditor or
creditors are concerned, is the debtor of the
entire amount; however, with respect to his co-
debtors, he is a debtor only to the extent of his
share in the obligation.
● Solidary obligation cannot lightly be inferred.
There is a solidary liability only when the
obligation expressly so states, when the law
so provides or when the nature of the
obligation so requires. In the dispositive
portion of the labor arbiter, the word
"solidary" does not appear (INIMACO vs. NLRC,
G.R. No. 101723, May 11, 2000).
167
Distinguished from Suretyship:
1. A surety (fiador in solidum) answers for the
debt, default or miscarriage of another while
a solidary debtor is liable not only for the
payment of the debt of another, but also for
the payment of a debtor which is his own
property.
2. Hence, in reimbursement, the surety is
entitled to recover the entire amount that he
paid while a solidary debtor can only demand
reimbursement of the shares pertaining to
the others (Escano vs. Ortigas, Jr., G. R. No.
151953, June 29, 2007).
3. Extension of time granted by the creditor to
one of the solidary debtors for the payment
of the obligation without the knowledge or
consent of the other solidary debtors would
not have the effect of releasing the latter
from their obligation, but in suretyship such
extension would release the surety from the
obligation.
Passive Solidarity v. Surety
PASSIVE SURETY
SOLIDARITY
Solidary Debtors Solidary Guaranty
Distinctions
Solidary debtor is liable Liable only as to
for the entire obligation his own obligation
Extent of Liability
Primary Subsidiary
Effects of Extension of time granted by
creditor
Solidary obligation is not Surety is released
extinguished from the obligation
Characteristic of passive solidarity:
Existence of a mutual guaranty among the
solidary debtors. Hence:
1. Each is liable for the entire obligation and the
creditor has the right to choose whom to be
called upon to perform the obligation (Art.
1218, NCC).
2. Payment made by one of the solidary debtors
extinguishes the obligation (Art. 1217, NCC).
168
Effect of Demand upon a Debtor
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 (Art.
1216, NCC).
Effects of judgment:
1. If adverse to the defendant solidary debtor
and the latter turns out to be insolvent, other
debtors can still be sued until the debt is fully
paid (Art. 1216, NCC). The judgment against
the defendant-debtor cannot, however, be
enforced against the others; a new action
must be filed against the latter.
2. If favorable to defendant-debtor:
a. And judgment is based on a defense
personal to defendant, the others can
avail of it as partial defense pertaining
only to share of the defendant-debtor;
b. If the judgment is based on the
inexistence of the obligation, its
unenforceability or some other cause
inherent in the vinculum juris, judgment
inures to the benefit of the other debtors
who can avail of it as a total defense.
In case of remission:
1. If what was remitted was the entire
obligation in favor of one of the solidary
debtors, the entire obligation is extinguished
(Art. 1215, NCC), but the solidary debtor who
obtained such remission is not entitled to
reimbursement (Art. 1220, NCC);
2. If what was remitted was only the whole
portion pertaining to the solidary debtor who
obtained such remission, he is considered
completely released in so far as the creditors
are concerned but he is still bound to his co-
debtors in case of insolvency of one of the
remaining debtors;
3. If what was remitted was only a portion of
the share pertaining to the solidary debtor
who obtained such remission, his character
as a solidary debtor is not affected and
continues to be so, both with respect to the
creditors and the other solidary debtors.
Effects of loss or impossibility of
performance:
1. Without the fault of the debtors – obligation
shall be extinguished;
2. If one of the debtors is at fault – all shall be
responsible to the creditor for the price and
damages without prejudice to their own
action against the guilty or negligent debtor;
3. In case of a fortuitous event and one of the
debtors is in delay – all shall be responsible
to the creditor for the price and damages
without prejudice to their own action against
the guilty or negligent debtor (Art. 1221, NCC).
Defenses available to solidary debtors:
1. Defenses derived from the nature of the
obligation such as payment, prescription,
minority of all debtors. These defenses
constitute as a total or complete defense;
2. Defenses personal to the defendant-debtor,
which may either be:
a. Insanity or minority, which operates as a
complete defense of the defendant-debtor
from liability.
b. Special terms or conditions, which operate
only as a partial defense applicable only to
his portion.
3. Defenses personal to others: It operates only
as a partial defense pertaining to the share of
the debtors to whom it is available.
Obligations with a Penal Clause
One which an accessory undertaking is attached
for the purpose of insuring its performance by
virtue of which the obligor is bound to pay a
stipulated indemnity or perform a stipulated
prestation in case of breach.
GR: In obligations with a penal clause, the
penalty shall substitute the indemnity for
damages and the payment of interests in case of
noncompliance (Art. 1226 [1], NCC).
XPNs:
1. When there is a stipulation to the contrary;
2. Obligor refuses to pay the penalty; or
3. Guilty of fraud in the fulfillment of the
obligation.
Penal Clause has been defined as an accessory
obligation which the parties attach to a principal
obligation for the purpose of insuring the
performance thereof by imposing on the debtor a
special prestation (generally consisting in the
payment of a sum of money) in case the
obligation is not fulfilled or is irregularly or
inadequately fulfilled (Rabuya, Obligations and
Contracts, 2019 ed., p. 212).
Functions:
1. Provide for liquidated damages, and
2. To strengthen the coercive force of the
obligation by the threat of greater
responsibility in the event of breach (Rabuya,
Obligations and Contracts, 2019 ed., p. 212).
Penalty, when demandable: Upon breach or
non-fulfillment of the principal obligation, the
penalty stipulated becomes demandable,
provided that it is not contrary to law, morals,
customs, public order or public policy (Art. 1226
[2], NCC).
Hence, the penalty cannot be demanded when
the non-fulfillment of the obligation is not
imputable to the fault or negligence of the debtor
but to a fortuitous event or due to the fault of the
creditor. But the burden of proof lies with the
debtor. In order to avoid payment of penalty, he
must be able to prove that the non-performance
of the obligation is not due to his fault (Rabuya,
Obligations and Contracts, 2019 ed., p. 213).
Penalty v. Liquidated Damages
The Court declared that there was no difference
between a penalty and liquidated damages, so far
as legal results are concerned (Lambert vs. Fox, GR
No. L-7991, January 29, 1914).
The Court lamented that “there is no justification
for the Civil Code to make an apparent distinction
between penalty and liquidated damages
because the settled rule is that there is no
difference between penalty and liquidated
damages insofar as legal results are concerned
and that either may be recovered without the
necessity of proving actual damages and both
may be reduced when proper.” (Pamintuan vs. CA,
GR No. L-26339, December 14, 1979)
169
Penalty distinguished from Condition Alternative v. With a Penal clause:

PENALTY CONDITION ALTERNATIVE WITH PENAL

Constitutes an Does not constitute an CLAUSE
obligation, obligation Two or more There is only one
although obligations are due but principal obligation
accessory the performance of one and in the case of
May be Can never be demanded to extinguishes the non-performance
demanded in be fulfilled, but whether it obligation of such will enforce
case of non- happens or not, only the the penal clause
fulfillment obligation which it affects In case of impossibility The impossibility of
may be demanded of one of the principal obligation
(Rabuya, Obligations and Contracts, 2019 ed., p. 215) obligations, the others extinguishes the
still subsist. Hence, the penal clause.
Limitation on the right of debtor: The debtor obligation is not
cannot exempt himself from the performance of extinguished.
the obligation by paying the penalty, save in the Debtor can choose Debtor cannot
case where this right has been expressly reserved which prestation to choose to pay
for him (Art. 1227, NCC). fulfill penalty to avoid
performance of the
Limitation on the right of the creditor: obligation, unless
Neither can the creditor demand the fulfillment of expressed.
the obligation and the satisfaction of the penalty
at the same time, unless this right has been Facultative v. With a Penal clause:
clearly granted him. However, if after the creditor
has decided to require the fulfillment of the FACULTATIVE WITH PENAL
obligation, the performance thereof should CLAUSE
become impossible without his fault, the penalty Debtor can make a Debtor cannot make
may be enforced (Art. 1227, NCC). substitution such substitution
unless expressly
Proof of actual damages: Proof of actual agreed by the parties
damages suffered by the creditor is not necessary Creditor cannot Such right to demand
in order that the penalty may be demanded (Art. demand both both may be given
1228, NCC). prestations
When penalty may be reduced
Guaranty v. With a Penal clause:
1. The judge shall equitably reduce the penalty
when the principal obligation has been partly GUARANTY WITH PENAL
or irregularly complied with by the debtor; CLAUSE
It is a contract by It is an obligation to
2. Even if there has been no performance, the which virtue, a 3rd pay the penalty in
penalty may also be reduced by the courts if person (guarantor) case of non-
it is iniquitous or unconscionable (Art. 1229, obliged himself to performance of the
NCC).
fulfill the obligation in obligation and is
lieu of the debtor’s different from the
Effect of nullity of penal clause
non-performance principal obligation.
Both are intended to insure performance of
The nullity of the penal clause does not carry with
the principal obligation
it that of the principal obligation.
Both are considered as an accessory and
subsidiary obligation
The nullity of the principal obligation carries with
it that of the penal clause (Art. 1230, NCC).

170
4. EXTINGUISHMENT
Modes of extinguishment of an obligation.
(Art. 1231, NCC)
1. Payment or performance
2. Loss of the thing due
3. Condonation or remission of debt
4. Confusion or merger
5. Compensation
6. Novation
7. Annulment
8. Rescission
9. Fulfillment of a resolutory condition
10. Prescription
Other modes of extinguishing an
Obligation:
1. Renunciation or waiver by the the obligee or
creditor;
2. Compromise;
3. Expiration of the resolutory term or period;
4. Death of one of the contracting parties in
purely personal obligations;
5. The will of one of the contracting parties in
certain contracts; and,
6. Agreement of both contracting parties or what
is sometimes known as mutual assent or
dissent (Jurado, Comments and Jurisprudence on
Obligations and Contracts, 2010 ed., p. 230).
1. Payment or Performance
Concept: Payment means not only the delivery
of money but includes the performance, in any
other manner, of an obligation (Art. 1232, NCC).
Burden of Proof: One who pleads payment has
the burden of proving it. Even where the plaintiff
must allege non-payment, the GR is that the
burden rests on the defendant to prove payment,
rather than on the plaintiff to prove non-
payment. However, where the debtor introduces
some evidence of payment, the burden of going
forward with the evidence – as distinct from the
general burden of proof – shift to the creditor,
who is then under a duty of producing some
evidence to show non-payment (Jimenez vs. NLRC,
G.R. No. 116960, April 2, 1996; Royal Cargo Corp. vs.
DFS Sports Unlimited, Inc., G.R. No. 158621,
December 10, 2008).
Requisites for Valid Payment:
1. It must be complete and regular (Art. 1233,
NCC);
2. It must be tendered by the proper party
(Arts. 1237-1238, NCC);
3. It must be made to the proper party (Art.
1240, NCC);
4. The payor and payee must be capacitated
(Arts. 1240-1241, NCC);
5. There must be identity, in that the very thing
or service due must be delivered or released
(Arts. 1244 and 1246, NCC);
6. It must be tendered in the proper place. (Art.
1240, NCC);
Payment must be complete and regular
GR: An obligation is not considered paid unless
there is complete and regular performance (Art.
1233 & 1235, NCC).
XPNs:
a. Substantial Performance in Good Faith:
when the obligation has been substantially
performed in good faith (Art. 1234, NCC); and
b. Waiver / Estoppel: when the creditor
accepts performance, knowing its incompleteness
and irregularity (Art. 1235, NCC).
Partial Payments
GR: The creditor cannot be compelled to accept
partial payment, unless there is an express
stipulation to that effect.
However, the law does not prohibit the creditor
from accepting partial payments (Art. 1248,
NCC).
The mere receipt of a partial payment is not, as
a rule, equivalent to the required acceptance of
performance as would extinguish the whole
obligation. To imply that creditors accept partial
payment as complete performance of their
obligation, their acceptance must be made under
circumstances that indicate their intention to
consider the performance complete and to
renounce their claim arising from the defect.
(Rabuya, Obligations and Contracts, 2019 ed., p.
277)
171
Cited case: Selegna Mngt. And Devt. Corp vs.
UCPB, supra
XPNS:
1. When there is an express stipulation to that
effect.
2. Where the obligation is partly liquidated and
partly unliquidated, in which case, the creditor
may demand, and the debtor may effect the
payment of the former without waiting for the
liquidation of the latter;
3. Where different prestations are subject to
different conditions or terms.
In order that the obligation may be considered
extinguished by payment, it is necessary that the
creditor acknowledges such full payment or proof
of full payment is shown to the satisfaction of the
court (Rabuya, Obligations and Contracts, 2019 ed., p.
226)
Requisites of Substantial Performance in
Good Faith
1. The obligor has made substantial performance,
which is determinable by the unique
circumstances of each case.
2. The obligor is in good faith (Art. 1234, NCC);
Note: Even if the performance of the obligation
is already substantial but the obligation is not
fully complied with because of the debtor’s fault,
the debtor may not invoke the principle of
substantial performance (Rabuya, Obligations and
Contracts, 2019 ed., p. 231).
Effect of Substantial Performance in Good
Faith:
The debtor is completely released from the
obligation despite his failure to completely
perform the obligation and he may recover as
though there had been a strict and complete
fulfillment.
Thus, the creditor cannot require the
performance of the remainder as condition sine
qua non to his liability (Rabuya, Obligations and
Contracts, 2019 ed., p. 231-232).
Waiver / Estoppel
When the obligee accepts the performance,
knowing its incompleteness or irregularity, and
without expressing any protest or objection, the
172
obligation is deemed fully complied with (Art.
1235, NCC).
Payment must be made by the proper party
Proper Party: The following can compel the
creditor to accept the payment if the other
requisites of valid payment are present:
a. The debtor, his heirs, assignees, or duly
authorized representative; or
b. The person authorized by stipulation to make
payment;
c. Third person who has an interest in the
fulfillment of the obligation, such as a surety
or a guarantor.
If the creditor refuses to accept payment made
by any of these (3) persons, such refusal is
without just cause and entitles the debtor to
resort to consignation.
In obligations to do, however, where the
qualification and circumstances of the person of
the debtor have been taken into account in
establishing the obligation (referred to as intuiti
personae), the creditor is not bound to accept
payment or performance by a third person even
when the latter has an interest in the fulfillment
of the obligation (Rabuya, Obligations and Contracts,
2019 ed., p. 234).
Rule of payment coming from third person:
GR: The creditor cannot be compelled to accept
payment coming from a third person.
XPNs:
a. If third person has interest in the fulfillment of
the obligation;
Interest referred to must be a pecuniary or
material interest in the fulfillment of the
obligation and not merely social or friendly
interest (Rabuya, Obligations and Contracts, 2019 ed.,
p. 236).
These third persons include:
1. Guarantor & Surety - they both guarantee the
fulfillment of the debtor’s obligation.
2. Accommodation mortgagors and third-party
pledgors - they are liable to pay the obligation
in case the debtor defaults in the payment of
 the obligation, although their liability extends
only up to the value of their properties.
3. Persons who are subsidiarily liable to pay the
obligation (e.g., an employer who is
subsidiarily liable to pay the civil liability of his
employee arising from delict) (Rabuya,
Obligations and Contracts, 2019 ed., p. 236).
b. Unless there is a stipulation to the contrary (Art.
1236 [1], NCC).
Effect of payment by a third person
WITH/WITHOUT
KNOWLEDGE OF EFFECT
THE DEBTOR
With knowledge Obligation is
and consent of extinguished.
the debtor
Third person who pays
the obligation may
recover from the
debtor; and
He is subrogated to all
the rights of the
creditor.
Without Obligation is
knowledge of the extinguished but third
debtor person may recover
only insofar as the
payment has been
beneficial to the said
debtor.
Third person is not
subrogated to the
rights of the creditor
(Art. 1237, NCC).
Payment without Payment is deemed
intention of being donation (Art. 1238,
reimbursed NCC).
However, donation
necessitates consent of
the debtor as in the
case of the donee in
ordinary donations
(Art. 734, NCC).
Subrogation v. Reimbursement
SUBROGATION REIMBURSEMENT
Debt is extinguished The new creditor has
in one sense, but a different rights,
new creditor, with imposing that there
exactly the same has indeed been an
rights as the old one, extinguishment of the
appears on the obligation;
scene.
More than a personal Only a personal action
action of recovery. to recover the amount.
(8 Manresa 269).
Subrogation is defined as the transfer of all the
rights of the creditor to a third person, who
thereby acquires all his rights against the debtor
or against third persons. (Rabuya, Pre-bar Reviewer
in Civil Law, 2021 Ed., p. 393)
Payor Must Be Capacitated
GR: If the payor is not capacitated to make the
payment, the payment is not valid. In obligations
to give, payment made by one who does not have
the free disposal of the thing due and capacity to
alienate it shall not be valid (Art. 1239, NCC).
The creditor can therefore refuse to accept the
payment made by a person who is not the owner
of the thing delivered. Should the paying debtor
be incapacitated to alienate, the obligation would
be VOIDABLE, but only at the instance of the
debtor who is incapacitated and the same may
not be interposed by the creditor.
XPN: Voluntary payment of a sum of money or
delivery of a fungible thing made by a minor
between 18 and 21 years of age without the
consent of his parent or guardian. In said case,
the creditor who has spent or consumed the thing
in good faith cannot be compelled to return what
he has received for the law considers it as a
Natural Obligation (Art. 1239, NCC in relation to
Art. 234 and 236, FC as amended by RA 6809).
Payment should be made to the PROPER
PARTY:
1. The person in whose favor the obligation has
been constituted (original creditor);
2. Successor-in-interest of the original creditor;
173
3. Person authorized to receive it, whether such
authorization comes from the creditor,
agreement or provision of law (Art. 1240,
NCC).
Effect of payment made to wrong person
GR: Payment made by the debtor to the wrong
party does not extinguish the obligation as to the
creditor who is without fault or negligence, even
if the debtor acted in utmost good faith and by
mistake as to the person of the creditor, or
through error induced by fraud of a third person
(BPI v. CA, G.R. No. 104612, May 10, 1994).
XPN: Payment made to a wrong person will be
considered valid and shall extinguish the debtor’s
obligation in the following instances:
1. If the payment has redounded to the
creditor’s benefit (Art. 1241 [2], NCC);
Ordinarily, it is the burden of the debtor to prove
that his payment made to a wrong person has in
fact redounded to the benefit of the creditor. But
in the following instances, such benefit is
presumed and need not be proved:
a. If after payment, the third person acquires
the creditor’s rights;
b. If the creditor ratifies the payment to the
third person;
c. If by the creditor’s conduct, the debtor has
been led to believe that the third person had
authority to receive the payment (Art. 1241[2],
NCC).
The burden of proving the payment made to a
wrong person has, in fact, redounded to the
creditor’s benefit is incumbent upon the debtor
for two reasons:
1. He was the one who committed the mistake
of paying a wrong party; and
2. He has the burden of proving that his
obligation had already been extinguished
(Rabuya, Obligations and Contracts, 2019 ed., p.
251).
2. If made in good faith to a possessor of
the credit (Art. 1242, NCC);
a. Possession of the credit is different from
possession of the document evidencing the
credit.
174
Example: If A obtains possession of a
promissory note payable to C and, without
negotiation or assignment, the former obtains
payment from the maker, such payment is not
valid because A is merely a possessor of the
document of the credit himself.
b. The possessor of the credit referred to in
Article 1242 must be a wrong person who is
not entitled to the payment but since the
debtor acted in good faith, he is already
released from the obligation.
Examples:
i. If the promissory note is payable to bearer, the
possessor thereof is a possessor of the credit
itself and if the same is presented to the debtor
for payment and the latter pays in good faith, the
debtor is already released from the obligation
even if the possessor is not actually entitled to
the payment because the instrument was never
assigned nor negotiated to him.
ii. But if the instrument was negotiated or
assigned in favor of the possessor, the payment
is valid not pursuant to Article 1242 but pursuant
to the GR in Article 1240. In this case, the
possessor is a proper party because he is a
successor – in-interest of the original creditor.
3. If the debtor pays the creditor prior to
acquiring knowledge of the latter’s
assignment of his credit (Payment in Good
Faith to Assignor of Credit) (Art. 1626, NCC).
Assignment of Credit
An agreement by virtue of which the owner of a
credit (known as the assignor), by a legal cause-
such as sale, dation in payment or exchange or
donation, and without need of the debtor’s
consent, transfers that credit and its accessory
rights to another (known as the assignee), who
acquires the power to enforce it, to the same
extent as the assignor could have enforced it
against the debtor.
Note: The duty to pay does not depend on the
consent of the debtor. Otherwise, all creditors
would be prevented from assigning their credits
because of the possibility of the debtor’s refusal
to give consent. (Rabuya, Obligations and Contracts,
2019 ed., p. 254).
Recipient of payment must be capacitated
GR: Payment made to a person who is
incapacitated to administer his property is invalid
and does not extinguish the obligation.
XPNs:
(1) If such incapacitated person has kept the
thing delivered; or
(2) insofar as the payment has been beneficial to
the incapacitated person (Art. 1241 [1], NCC).
Payment after judicial order of retention
Rule: If the debtor pays the creditor after he has
been judicially ordered to retain the debt, it shall
not be a valid payment (Art. 1243, NCC).
“After the latter has been judicially
ordered” refers to the date of receipt of the
notice of such judicial order and not on the date
of issuance.
Thus, the payment made by the debtor to his
creditor after the issuance of the judicial order
but prior to notice of its issuance is valid because
the debtor, at the time of payment, is not yet
bound by the order issued by the court (Rabuya,
Obligations and Contracts, 2019 ed., p. 255).
Identity of Prestation
What should payment consist of:
1. In specific or determinate obligations,
what should be delivered is the thing due.
(Art. 1244 [1], NCC);
2. In generic or determinate obligations,
the thing to be delivered must be in
accordance with the quality and
circumstances stated in the agreement. If the
quality and circumstances have not been
stated, the creditor cannot demand a thing
of superior quality and neither may the
debtor deliver a thing of inferior quality (Art.
1246, NCC);
3. In obligations to do or not to do, there
shall be no substitution of another act or
forbearance against the will of the creditor
(Art. 1244 [2], NCC);
4. In obligations to pay debts in money,
the payment shall be made in the currency
stipulated, and if it is not possible to deliver
such currency, then in the currency which is
the legal tender in the Philippines. (Art. 1249
[1], NCC).
Rules in Payment in Sum of Money:
1. The payment shall be made in the currently
stipulated
The parties may agree that the obligation or
transaction shall be settled in a currency other
than Philippine currency at the time of payment
(R.A. No. 8183, expressly repealing Sec. 2, RA 529).
Note: If it is not possible to deliver the currency
stipulated or in the absence of such stipulation,
the payment must be in the currency which is
legal tender in the Philippines.
Concept of Legal Tender: Such kind of
currency which in a given jurisdiction can be used
for the payment of debts, whether public or
private, and which cannot be refused by the
creditor.
Legal Tender
In the Philippines, all notes and coins issued by
the Bangko Sentral ng Pilipinas and
guaranteed by the Republic of the Philippines are
considered legal tender for all debts, both public
and private (Sec. 52, R.A. No. 7653).
With respect to coins, it is considered legal
tender:
1. Only up the maximum amount of P1,000.00,
for coins having denominations of 1, 5 and 10
pesos; or
2. Only up to the maximum amount of P100.00,
for coins having denominations of 1 centavo,
5 centavo, 10 centavo and 25 centavo (BSP
Circular No. 537, Series of 2006, issued on July 18,
2006).
Tender of payment in checks: Checks are not
legal tender (PAL vs. CA, G.R. No. L-49188, January
30, 1990). Hence, the creditor may not be
compelled to accept payment in the form of a
check. This dictum does not, however, prevent a
creditor from accepting a check as payment. In
other words, the creditor has the option and
175
discretion of refusing or accepting it (FEBTC vs.
Diaz Realty, Inc., G.R. No. 138588, August 23, 2001).
Payment Using Check
GR: A negotiable instrument or document is not
a legal tender; however, it may constitute as a
valid payment if:
XPNs:
1. It had been encashed in case of checks; or
2. In case of a document, when it had been
impaired through the fault of the creditor (Art.
1249, NCC).
Sufficiency of tender of checks: The tender
of check may be considered sufficient depending
on the purpose, as follows:
1. If what is involved is the payment of an
obligation, the Civil Code provisions on
payment of obligations, particularly Article
1249 thereof, are applicable (Philippine
Airlines, Inc. vs. CA, G.R. No. L-49188, January 30,
1990);
However, when the case does not involve the
payment of an obligation but the exercise of a
right, i.e., the right of redemption, the Civil Code
provisions on payment of obligations do not
apply. What applies is the settled rule that a mere
tender of a check is sufficient to compel
redemption (Biana vs. Gimenez, G.R. No. 132768,
September 9, 2005). A check may be used for the
exercise of the right of redemption, the same
being a right and not an obligation (Fortunado vs.
CA, G.R. No. 78556, April 25, 1991).
Effect of Extraordinary Inflation or
Deflation: In case an extraordinary inflation or
deflation of the currency stipulated should
supervene, the value of the currency at the time
of the establishment of the obligation (and not
the value at the time of payment) shall be the
basis of payment, unless there is an agreement
to the contrary (Art. 1250, NCC).
Extraordinary Inflation
Exists when there is a decrease or increase in the
purchasing power of the Philippine currency
which is unusual or beyond the common
fluctuation in the value of said currency, and such
increase or decrease could not have been
176
reasonably foreseen or was manifestly beyond
the contemplation of the parties at the time of the
establishment of the obligation (Citibank, N.A. vs.
Sabeniano, G.R. No. 156132, February 6, 2007).
Requisites of Extraordinary Inflation:
1. That there was an official declaration of
extraordinary inflation or deflation from the
Bangko Sentral ng Pilipinas (BSP);
2. That the obligation was contractual in nature;
3. That the parties expressly agreed to consider
the effects of the extraordinary inflation or
deflation. (Rabuya, Pre-bar Reviewer in Civil Law,
2021 Ed., p. 375)
Note: Absent an official pronouncement or
declaration by competent authorities of the
existence of extraordinary inflation during a given
period, the effects of extraordinary inflation are
not to be applied (Telengtan Brothers & Sons, Inc.
vs. United States Lines, Inc. G.R. No. 132284, February
25, 2006).
Place of Payment
Rule: The tender of payment must be made in
the proper place; otherwise, the creditor may not
be compelled to accept the payment.
Proper Place of Payment:
GR: Payment shall be made at the domicile of the
debtor (Art. 1251 [3],. NCC). This rule applies even
if the debtor changes his domicile in bad faith,
except that the additional expenses shall be
borne by the debtor (Art. 1251 [3], NCC).
XPNs: The foregoing rule does not apply—
1. If there is another place of payment
designated in the obligation (Art. 1251[1],
NCC); or
2. In case of determinate obligations, the place
of payment is wherever the thing might be at
the moment the obligation was constituted
(Art. 1251[2], NCC).
1. Dacion en Pago or Dation in payment
(Art. 1245)
Concept: It is the alienation of property to the
creditor in satisfaction of a debt in money (Fort
Bonifacio Development Corp. vs. Yllas Lending Corp.,
G.R. No. 158997, October 6, 2008).
● It requires delivery and transmission of
ownership of a thing owned by the debtor to
the creditor as an accepted equivalent of the
performance of the obligation. There is no
dation in payment when there is no transfer
of ownership in the creditor’s favor, as when
the possession of the thing is merely given to
the creditor by way of security (Ibid).
In a true dacion en pago, the assignment of the
property extinguished the monetary debt. Where
the alienation of the properties was by way of
security, and not by way of satisfying the debt,
there is no dacion en pago (Ong vs. Roban Lending
Corp., G.R. No. 172592, July 9, 2008).
Dation in payment, a form of Novation
Although in the modern concept what actually
takes place in dacion en pago is an objective
novation of the obligation where the thing offered
as an accepted equivalent of the performance of
an obligation is considered as the object of the
contract of sale while the debt is considered as
the purchase price (Filinvest Credit Corp . vs. Phil.
Acetylene Co., Inc., G. R. No. L-50449, Jan. 30, 1982),
the Civil Code classifies dacion en pago as a
special form of payment. Hence, in dacion en
pago, the obligation is extinguished by way of
payment and not by novation. But what is
considered as dacion en pago under the Code is
the alienation of a property in favor of the creditor
in satisfaction of a debt in money. Hence, if what
is offered as payment in lieu of money is not a
property but service, for example, it is not dacion
en pago but a case of objective novation.
Requisites of Dacion En Pago
1. There must be the performance of the
prestation in lieu of payment (animus
solvendi) which may consist in the delivery of
a corporeal thing or a real right or a credit
against the third person;
2. There must be some difference between the
prestation due and that which is given in
substitution (aliud pro alio); and
3. There must be an agreement between the
creditor and debtor that the obligation is
immediately extinguished by reason of the
performance of a prestation different from
that due (Lo v. KJS Eco-Formwork System Phil.,
Inc., G. R. No. 149420, Oct. 8, 2003).
Governed by law on sales: Dacion en pago is
governed by the law on sales (Art. 1245, NCC).
The undertaking really partakes in one sense of
the nature of sale, that is, the creditor is really
buying the thing or property of the debtor,
payment for which is to be charged against the
debtor’s debt. As such, the essential elements of
a contract of sale, namely, consent, object
certain, and cause or consideration must be
present (Filinvest Credit Corp. vs. Phil . Acetylene
Co., Inc., supra; Lo vs. KJS Eco-Formwork System Phil.,
Inc., supra.).
Effect of Dacion En Pago: The dation in
payment extinguishes the obligation to the extent
of the value of the thing delivered, either as
agreed upon by the parties or as may be proved,
unless the parties by agreement, express or
implied, or by their silence, consider the thing as
equivalent to the obligation, in which case the
obligation is totally extinguished (Lopez vs. CA,
G.R. No. L-26549, July 31, 1970). In other words, a
dation in payment does not necessarily mean
total extinguishment of the obligation. The
obligation is totally extinguished only when the
parties, by agreement, express or implied, or by
their silence, consider the thing as equivalent to
the obligation. (Caltex Phils., Inc. vs. IAC, G. R. No.
72703, Nov. 13, 1992)
As Distinguished from Cession
Payment by cession contemplates of a situation
where the debtor is indebted to several creditors
but he is under a state of insolvency, or that the
debtor is generally unable to pay his liabilities as
they fall due in the ordinary course of business or
has liabilities that are greater than his assets. In
cession, the debtor abandons all his properties or
assets to his creditors so that the latter may sell
the same and apply the proceeds to the
satisfaction of their credits (Rabuya, Obligations and
Contracts, 2019 ed., p. 272).
Payment by Cession as distinguished from
Dacion En Pago
DACION EN PAGO PAYMENT BY
CESSION
Number of creditors is Requires
immaterial plurality of
creditors
Involves specific property Involves the
or properties of the debtor universality or
the whole of the
177
 property of the Proper Place of Payment
debtor
The debtor is not under a Debtor is under 1. If the place of payment is designated in the
state of financial difficulties a state of obligation, the payment shall be made in
because if the debtor is insolvency said place (Art. 1251, NCC);
insolvent, he is generally
prohibited from resorting to 2. In the absence of stipulation and the
dacion en pago obligation is to deliver a determinate thing,
Involves the delivery and The creditors do the payment shall be made in the place
transmission of ownership not acquire where the thing might be at the time of the
of a thing as an accepted ownership over constitution of the obligation (Ibid).
equivalent of the the properties of
performance of the the debtor 3. In any other case (or in the absence of
obligation because the stipulation and the obligation is other than
transfer of the delivery of a determinate thing), the
possession to place of payment shall be the DOMICILE OF
them is only for THE DEBTOR (Ibid).
the purpose of
the sale of 2. Application of payment (Art. 1252-1254,
properties NCC):
Extinguishes the obligation Releases the
to the extent of the value of debtor from Concept: It is the designation of the debt which
the thing delivered, either responsibility is being paid by a debtor who has several
as agreed upon by the only up to the obligations of the same kind in favor of the
parties or as may be extent of the net creditor to whom payment is made when the
proved, unless the parties proceeds of the amount is not sufficient to cover all indebtedness.
by agreement, express or sale
implied, or by their silence, Requisites of application of payment:
consider the thing as
equivalent to the 1. There should be one debtor and one creditor;
obligation, in which case, 2. There should be several debts between them
the obligation is totally of the same kind;
extinguished. 3. The payment is not sufficient to cover all
(Rabuya, Obligations and Contracts, 2019 ed., p. 272) indebtedness; and
4. The debts are all due, except when (a) the
Extrajudicial Expenses, Who Shall Bear: parties so stipulate or (b) the application is
made by the party with the benefit of the
The parties may freely stipulate as to who shall term (Art. 1252, NCC).
bear said expenses. In the absence of stipulation,
said expenses shall be for the account of the Who has right to apply:
debtor (Rabuya, Obligations and Contracts, 2019 ed.,
p. 274). GR: Initially, it is the debtor who has the right to
choose the debt to which his payment is to be
The latter rule is fair because it is the debtor applied. Such right must be exercised at the time
who has the burden of extinguishing the of payment and not afterwards. Should the
obligation. debtor fail to exercise such right at the time of
payment, the same is extinguished. Thereafter,
Judicial Expenses shall be governed by Rules the creditor acquires the right to propose an
of Court. application of payment which proposal does not
bind the debtor unless he accepts the same (Art.
1252 [1], NCC).

178
XPNs: One in default Debt in default
while the others
1. If the debtor accepts from the creditor a are not
receipt in which an application of the payment is All other things Older obligation
made, the former cannot complain of the same, being the same
unless there is a cause for invalidating the Liquidated v. Non Liquidated
contract. (Art. 1252 [2], NCC; Art. 1330, NCC.); - liquidated

2. If both the debtor and the creditor did not
choose the debt to which the payment is to be
applied first, the debt which is most onerous to
the debtor, among those due (Art. 1254 [1] NCC).
If the debts due are of the same nature and
burden, the payment shall be applied to all of
them proportionately (Art. 1254 [2] NCC).
Application of payment to interest first: But
if the debt produces interest, the debtor cannot
apply his payment to the capital first prior to
paying the interest because the law requires its
application to interest first (Art. 1253, NCC).
GR: Payment shall first be applied to the interest
and not to the principal shall govern if two facts
exist:
1. The debt produces interest (e.g. the payment
of interest is expressly stipulated).
2. The principal remains unpaid.
XPN: When the creditor waives payment of the
interest despite the presence of (1) and (2).
Debts are of the same burden: If the debts
due are of the same nature and burden, the
payment shall be applied to all of them
proportionately (Art. 1254 [2], NCC).
3. Payment by Cession (Art. 1255)
Concept: Cession or assignment consists in the
abandonment of the totality of the property of the
debtor in favor of the creditors in order that the
same may be applied for the satisfaction of their
credits (8 Manresa 321).
Requisites:
1. There must be two or more debts;
2. There must be two or more creditors;
3. There must be one debtor who is insolvent;
4. The debtor must abandon his properties in
favor of the creditors; and
5. The creditors must accept the abandonment
in their favor (Jurado, Comments and
Jurisprudence on Obligations and Contracts, 2010,
p. 275).

Legal application of payment Dation in Payment v. Payment by Cession

Debts which are not of same burden DATION IN PAYMENT BY

PAYMENT CESSION
When debts due are not of the same burden, the There may only be Plurality of creditors
rule is that the debt which is most onerous to the one creditor
debtor shall be deemed to have been satisfied Debtor not Debtor is in a state of
(Art. 1254, NCC). necessarily partial or relative
insolvent insolvency
Preference of Credits What is delivered is What is ceded is the
a specific thing to universality of the
TYPES OF DEBTS MORE ONEROUS be considered as debtor’s property
Principal v. Debt covering that of the equivalent of
Surety the principal the performance of
Interest Bearing Interest bearing debts the obligation
v. Non-interest Ownership is Only the possession
bearing transferred to the and administration are
Secured v. Non– A secured debt is more creditor transferred to the
secured onerous than another creditors.
which has no security
(Traders Insurance vs. Dy May totally Assignment only
Eng Giok G.R. No. L09073, extinguish the extinguishes the credits
November 17, 1958)

179
 obligation and to the extent of the Catholic Bishop of Malolos, Inc. v. IAC, G.R. No. 72110,
release the debtor amount realized from Novemver 16, 1990). In obligations to pay in
the properties assigned, money, tender of payment involves a positive act
unless otherwise agreed and unconditional act by the obligor of offering
upon. legal tender currency as payment to the obligee
for the former’s obligation and demanding that
(Jurado, Comments and Jurisprudence on Obligations the latter accept the same (Cebu International
and Contracts, 2010, p. 275-276) Finance Corp. vs. CA, G.R. No. 123031, October 12,
1999).
4. Tender of Payment and Consignation
(Art. 1256-1257) Consignation

Effect of Non-Acceptance of Payment Consignation is the act of depositing the thing

due with the court or judicial authorities
The creditor’s unjust refusal to accept payment whenever the creditor cannot accept or refuses
does not produce the effect of payment that will to accept payment, and it generally requires a
extinguish the debtor’s obligation. prior tender of payment.

To have the effect of payment and the Is the remedy for an unjust refusal to accept
consequent extinguishment of the obligation to payment (Rabuya, Obligations and Contracts, 2019
pay, the law requires the companion acts of ed., p. 292).
tender of payment and consignation. Tender of
payment must be followed by a valid consignation The rationale for consignation is to avoid the
in order to produce the effect of payment and performance of an obligation becoming more
extinguish an obligation. Hence, where the onerous to the debtor by reason of causes not
creditor unjustly refuses to accept the payment, imputable to him. If the debtor fails to consign
the debtor must comply with (2) conditions: (a) the amounts due, his obligation necessarily
tender of payment; and (b) consignation of the becomes more onerous as he becomes liable for
sum due (Rabuya, Obligations and Contracts, 2019 interest on the amounts he failed to pay (Jurado,
ed., p. 286). Comments and Jurisprudence on Obligations and
Contracts, 2010, p. 277).
Tender of Payment, Not Sufficient: Tender of
payment even if valid, does not by itself produce Consignation v. Tender of Payment:
legal payment, unless it is completed by
consignation. The effect of a valid tender of TENDER OF
CONSIGNATION
payment is merely to exempt the debtor from PAYMENT
payment of interest and/or damages. (PNB vs. Deposit of the Manifestation of the
Relativo, G. R. No. L-5298, Oct. 29, 1952). Well object of the debtor to the creditor of
settled is the rule that tender of payment must be obligation in a his decision to comply
accompanied by consignation in order that the competent court in immediately with his
effects of payment may be produced. (State accordance with obligation.
Investment House, Inc. vs. Court of Appeals, G. R. No. the rules prescribed
90676, June 19, 1991; Pasricha vs. Don Luis Dison by law, after refusal
Realty, Inc., G. R. No. 136409, March 14, 2008). or inability of the
creditor to accept
Concept of “Tender of Payment” the tender of
payment.
Tender of payment is the definitive act of offering Judicial in character Extra-judicial in
the creditor what is due him or her, together with character
the demand that the creditor accept the same Principal act Preparatory act
(Cinco v. CA, G. R. No. 151903, Oct. 9, 2009). (Jurado, Comments and Jurisprudence on Obligations
and Contracts, 2010, p. 277-278).
Tender of payment presupposes not only that the
obligor is able, ready, and willing, but more so, in
the act of performing his obligation (Roman

180
Requisites of Effectivity of Consignation:
In order that consignation may be effective, the
debtor must show that:
1. There was a debt due;
2. The consignation of the obligation had been
made because the creditor to whom tender
of payment was made refused to accept it, or
because she was absent or incapacitated, or
because several persons claimed to be
entitled to receive the amount due or
because the title to the obligation had been
lost (Art. 1258, NCC);
When Consignation Alone is Sufficient:
Consignation generally requires a prior tender of
payment. But in the following instances,
consignation alone shall produce the effect of
payment:
a. When creditor is ABSENT;
b. When creditor is UKNOWN;
c. When creditor DOES NOT APPEAR at place of
payment;
d. When creditor is INCAPACITATED TO
RECEIVE payment at the time it is due;
e. When without just cause, creditor REFUSES
TO GIVE RECEIPT;
f. When TWO OR MORE PERSONS claim the
same right to collect, and
g. When TITLE OF THE OBLIGATION has been
LOST (Art. 1256, NCC).
Notice Requirement
Previous notice of the consignation had been
given to the person interested in the performance
of the obligation (prior to consignation). The
purpose of the notice is in order to give the
creditor an opportunity to reconsider his
unjustified refusal and to accept payment thereby
avoiding consignation and the subsequent
litigation. This previous notice is essential to the
validity of the consignation and its lack invalidates
the same. Sending to the creditor a tender of
payment and notice of consignation may be done
in the same act. (Soco vs. Hon. Militante, G.R. L-
58961, June 28, 1983)
When Notice Should Be Made
1. The amount due was placed at the disposal
of the court; and
2. After the consignation had been made, the
person interested was notified of the action.
(after consignation). The reason for the
notification to the persons interested in the
fulfillment of the obligation after consignation
had been made, which is separate and
distinct from the notification which is made
prior to the consignation is to enable the
creditor to withdraw the goods or money
deposited (B. E. San Diego, Inc. vs. Alzul, G. R.
No. 169501, June 8, 2007; Banco Filipino Savings
and Mortgage Bank vs. Diaz, G. R. No. 153134,
June 27, 2006; Pabugais vs. Sahijwani, G.R. No.
156846, February 23, 2004).
Note: The notices mentioned above are required
to be given not only to the creditor but to ALL
persons interested in the obligation (mandatory).
Failure to prove any of these requirements is
enough ground to render a consignation
ineffective (void) (Allandale Sportsline, Inc., vs. The
Good Development Corp., G.R. No. 164521, December
18, 2008; Insular Life Assurance Company, Ltd. vs.
Toyota Bel-Air, Inc., G.R. No. 137884, March 28,
2008).
Expenses of Consignation - The expenses of
consignation, when properly made, shall be
charged against the creditor (Art. 1259, NCC).
Effects of Consignation
Before Acceptance of the Creditor: Before
the creditor has accepted the consignation, or
before a judicial declaration that the consignation
has been properly made, the debtor may
withdraw the thing or the sum deposited,
allowing the obligation to remain in force (Art.
1260, NCC).
After the Acceptance of the Creditor:
1. Once the consignation has been duly made,
the debtor may ask the judge to order the
cancellation of the obligation (Art. 1260, NCC);
2. If the creditor accepts the thing or amount
deposited without contesting the validity or
efficacy of the consignation, obligation is
deemed extinguished (Jurado, Comments and
181
 Jurisprudence on Obligations and Contracts, 2010
ed., p. 287);
3. If the creditor contests the validity or efficacy
of the consignation, the result is litigation
(Supra).
Retroactive Effect of Consignation
The consignation has a retroactive effect and the
payment is deemed to have been made at the
time of the deposit of the thing in court or when
it was placed at the disposal of the judicial
authority (Rabuya, Obligations and Contracts, 2019
ed., p. 305).
Contract of Lease with option to buy
Consignation requires the existence of a debt.
Hence, it does not apply to a case of a lessee with
option to buy since the lessee was not indebted
to the lessor for the purchase price. Here, the
lessee is merely exercising a right of option and
had no obligation to pay said price until execution
of the deed of sale (Vda. De Quirino vs. Palarca,
G.R. No. L28269, August 15, 1969).
Right of Redemption
While consignation of the tendered price is not
always necessary because legal redemption is not
made to discharge a pre-existing debt, a valid
tender is indispensable, for the reasons already
stated. Of course, consignation of the price would
remove all controversy as to the redemptioner's
ability to pay at the proper time. (Conejero vs. CA,
G.R. No. L-21812, April 29, 1966) November 26,
1986). In cases which involve the performance
of an obligation and not merely the exercise of a
privilege or right, the payment may be effected
not by mere tender alone but by both tender and
consignation. The rule is different in cases which
involve an exercise of a right or privilege, such as
an option contract, legal redemption or sale with
right to repurchase, wherein tender of payment
would be sufficient to preserve the right or
privilege (Adelfa Properties, Inc. vs. CA, G.R. No.
111238, Jjune 25, 1995).
The essential requisites of a valid consignation
must be complied with fully and strictly in
accordance with the law. (Arts 1256-1261, NCC).
Substantial compliance is not enough (Soco vs.
Militante, G.R. No. L-58961, June28, 1983).
182
2. Loss of the Thing Due
In Real Obligation
Concept of loss in real obligations: It is
understood that the thing is lost when:
1. It perishes;
2. It goes out of commerce; or
3. It disappears in such a way that its existence
is unknown or it cannot be recovered (Art.
1189, NCC)
Not Applicable to Generic Obligation: Only a
specific obligation can be extinguished by way of
loss of the thing due. In a generic obligation, the
loss or destruction of anything of the same kind
does not extinguish the obligation (Art. 1263,
NCC). This rule is based on the principle that the
genus of a thing can never perish. Genus
nunquam perit (Gaisano Cagayan, Inc. vs. Insurance
Co. of North America, G. R. No. 147839, June 8, 2006).
An obligation to pay money is generic; therefore,
it is not excused by fortuitous loss of any specific
property of the debtor(Gaisano Cagayan, Inc. vs.
Insurance Co. of North America, supra)
GR: A determinate obligation is extinguished if
the determinate thing is lost without the fault of
the debtor and before he has incurred in delay
(Art. 1262 [1], NCC).
Effect of Loss in Determinate Obligations to
Give: Before the loss of the determinate thing
may result in the extinguishment of the
obligation, it is necessary that the following
requisites must concur:
1. The thing loss must be determinate;
2. Thing is loss without the fault of the debtor;
3. Thing is loss before the debtor has already
incurred in delay (Art. 1262, NCC).
Effect of Loss Due to Fortuitous Event
GR: If the determinate thing is loss due to a
fortuitous event, the debtor is not liable.
XPNs:
1. When by law, the debtor is liable even for
fortuitous event;
2. When by stipulation, the debtor is liable even
for fortuitous event, or
3. When the nature of the obligation requires
the assumption of risk (Art. 1262[2], NCC).
Disputable presumption of fault on the part
of debtor: If the thing is lost while in the
possession of the debtor, he is presumed to be at
fault, unless there is proof to the contrary. This
presumption does not apply if the thing is lost on
occasions of earthquake, flood, storm or other
natural calamity (Art. 1265, NCC).
In Positive Personal Obligation
Concept of loss in positive personal
obligation: An obligation to do is considered
lost, therefore extinguished, if:
1. The prestation becomes either legally or
physically impossible without the fault of the
debtor (Art. 1266, NCC); or
2. The service has become so difficult as to be
manifestly beyond the contemplation of the
parties (Art. 1267, NCC).
● The obligation to pay rentals or deliver
the thing in a contract of lease falls within
the prestation “to give” hence, it is not
covered within the scope of Article 1266
(PCC vs. CA, G.R. No. 116896, May 5, 1997).
● Article 1267, which enunciates the
doctrine of unforeseen events, is not an
absolute application of the principle of
rebus sic stantibus, which would
endanger the security of contractual
relations. The parties to the contract
must be presumed to have assumed the
risks of unfavorable developments. It is
therefore only in absolutely XPNal
changes of circumstances that equity
demands assistance for the debtor
(Ibid.).
Remedy of creditor if thing is lost through
fault of third person:
If the determinate thing is lost through the fault
of a third person, the obligation is extinguished
since it was lost without the fault of the debtor
(Art. 1262, NCC). The creditor acquires, however,
all the rights of action which the debtor may have
against third persons by reason of the loss (Art.
1269, NCC).
3. Condonation or Remission
Concept: It is an act of liberality by which the
obligee, who receives no price or equivalent
thereof, renounces the enforcement of the
obligation, which is extinguished in its entirety or
in part or aspect of the same to which the
remission refers (8 Manresa 365).
Requisites for Valid Condonation:
1. It must be gratuitous (Art. 1270 [1], NCC);
2. The obligation must be demandable at the
time of the condonation;
3. The condonation must be accepted by the
debtor (Art. 1270 [1], NCC);
4. It must not amount to an inofficious donation
(Art. 1270 [2], NCC); and
5. If the condonation is made expressly, it must
comply with the formalities of donation.
It is an essential characteristic of remission that
it be gratuitous, that there is no equivalent
received for the benefit given; once such
equivalent exists, the nature of the act changes.
It may become dation in payment when the
creditor receives a thing different from that
stipulated; or novation, when the object or
principal conditions of the obligation should be
changed; or compromise, when the matter
renounced is in litigation or dispute and in
exchange of some concession which the creditor
receives. (Dizon vs. CA. G. R. No. 140944, April 30,
2008; citing IV Tolentino, Civil Code, 1991 ed., p. 353).
Formalities of Condonation: Implied
condonation has no special form. But if the
condonation is done expressly, it must conform
with the following formalities, otherwise, the
condonation is not valid—
1. If the obligation condoned involves a real
property, the condonation and its acceptance
must be made in a public instrument (Art. 749,
in rel. to Art. 1270, NCC);
2. If the obligation condoned involves a
personal property, the condonation and its
acceptance must be in writing if the value of
the personal property exceeds five thousand
pesos (Art. 748, in rel. to Art. 1270, NCC).
Disputable presumptions of condonation:
1. If the private document evidencing a credit is
found in the possession of the debtor, it gives
rise to a presumption that the creditor
183
 voluntarily delivered it to the debtor, unless
the contrary is proved (Art. 1272, NCC). The
voluntary delivery of such document by the
creditor to the debtor, in turn, gives rise to a
presumption that the debt is being condoned
(Art. 1271, NCC);
2. The accessory obligation of pledge is presumed
condoned when the thing pledged, after its
delivery to the creditor, is found in the
possession of the debtor, or of a third person
who owns the thing (Art. 1274, NCC).
Note: If the thing pledged is returned
(voluntarily) by the pledgee to the pledgor or
owner, the pledge is extinguished and any
stipulation to the contrary shall be void (Art. 2110,
NCC).
4. Confusion or Merger
Concept: It exists when the characters of the
creditor and debtor are merged in the same
person.
Illustration: A executes a promissory note
payable to the order of B. B uses it to pay C. Then
C uses it to pay A.
Requisites of Merger:
1. It must take place in the person of the
principal creditor and principal debtor (Art.
1276, NCC).
If the merger involves a creditor and a
guarantor, the obligation is not
extinguished. However, when the merger
takes place in the person of the guarantor,
the accessory obligation is extinguished by
the principal obligation continues (Art. 1276,
NCC).
2. It must be complete and definite, because if
not complete, the obligation still subsists (2
Castan, 60.)
Effects of Merger in Joint and Solidary
Obligations:
1. Joint Obligation- merger does not extinguish
a joint obligation except as regards the share
corresponding to the creditor or debtor in
whom the two characters concur (Art. 1277,
NCC)
184
2. Solidary Obligation- merger has the effect of
extinguishing the obligation (Art. 1215, NCC).
5. Compensation
Concept: It is the offsetting of two obligations
which are reciprocally extinguished to their
concurrent amount between persons who, in
their own right, are creditors and debtors of each
other (Jurado, Comments and Jurisprudence on
Obligations and Contracts, 2010, p. 309)
Kinds of Compensation:
1. Legal – It takes place ipso jure when all the
requisites of law are present (Mavest [USA],
Inc. vs. Sampaguita Garment Corp., G. R. No.
127454, Sep. 21, 2005);
2. Conventional or Voluntary – It occurs
when the parties agree to the mutual
extinguishment of their credits or to
compensate their mutual obligations even in
the absence of some of the legal requisites
(Mavest [USA], Inc. vs. Sampaguita Garment
Corp., G. R. No. 127454, Sep. 21, 2005);
3. Judicial – It takes place by order of the court
or by judicial decree (Jurado, Comments and
Jurisprudence on Obligations and Contracts, 2010,
p. 311.)
Minimum Requirement of Compensation:
There must be the confluence of the characters
of mutual debtors and creditors. Without this, the
contracting parties cannot stipulate (in
conventional compensation) to the compensation
of their obligations, for the legal tie that binds
contracting parties to their obligations would be
absent. At least one party would be binding
himself under an authority he does not possess.
(CKH Industrial and Development Corp. vs. CA, G.R.
No. 111890, May 7, 1997). But while compensation,
be it legal or conventional, requires the
confluence in the parties of the characters of
mutual debtors and creditors, their rights as such
creditors, or their obligations as such debtors,
need not spring from one and the same contract
or transaction (Mavest [USA], Inc. vs. Sampaguita
Garment Corp., supra.).
Requisites of Legal Compensation - In order
that legal compensation may be proper, the
following requisites must be present –
1. The parties must be creditors and debtors of
each other in their own right (Art. 1278, NCC);
2. They must be bound principally (Art. 1279 [1],
NCC);
However, the law permits a guarantor to set up
compensation as regards what the creditor may
owe his principal debtor (Art. 1280, NCC). Thus,
such guarantor may set up credits which
personally belong to him and also credits which
belong to his principal, the former under the GR.
3. Both debts consist in a sum of money, or if the
things due are consumable, they be of the same
kind, and also of the same quality if the latter has
been stated (Art. 1279[2], NCC);
4. The two debts are due, liquidated and
demandable (Art. 1279 [3] and [4], NCC); and
5. Over neither of them there be any retention
or controversy, commenced in due time to the
debtor (Art. 1279 [5], NCC).
● Article 1279 requires, among others, that in
order that legal compensation shall take
place, “the two debts be due” and “they be
liquidated and demandable.” Compensation
is not proper where the claim of the person
asserting the set-off against the other is
neither clear nor liquidated; compensation
cannot extend to unliquidated, disputed claim
existing from breach of contract. (Silahis
Marketing Corp. vs. IAC, G.R. No. L-74027, Dec.
7, 1989)
Effects of legal compensation: When all the
foregoing requisites are present, compensation
takes effect by operation of law, and extinguishes
both debts to the concurrent amount, even
though the creditors and debtors are not aware
of the compensation (Art. 1290, NCC).
● Legal compensation operates even against
the will of the interested parties and even
without the consent of them (BPI vs. CA, 255
SCRA 571). Since this compensation takes
place ipso jure, its effects arise on the very
day on which all its requisites concur. When
used as a defense, it retroacts to the date
when its requisites are fulfilled. (BPI v. CA,
supra.; Trinidad vs. Acapulco, G. R. No. 147477,
June 27, 2006).
Prohibited compensation - Compensation is
prohibited in the following instances:
1. When one of the debts arises from a contract
of deposit/depositum or from the obligations
of a depositary (Art. 1287, NCC);
● The relationship between a bank and its
depositor is that of creditor and debtor. For
this reason, a bank has the right to set-off
the deposits in its hands for the payment
of a depositor’s indebtedness (Equitable PCI
Bank vs. Ng Sheung Ngor, G.R. No. 171545,
December 19, 2007).
2. When one of the debts arises from the
obligations of a bailee in commodatum (Art.
1287, NCC);
3. Over a claim for support due by gratuitous
title (Art. 1287, NCC);
4. If one of the debts consists in civil liability
arising from a penal offense (Art. 1288, NCC);
5. Over claims of the Government for taxes.
● Taxes cannot be subject to compensation
for the simple reason that the
government and the taxpayer are not the
creditors and debtors of each other.
There is a material distinction between a
tax and debt. Debts are due to the
Government in its corporate capacity,
while taxes are due to the Government in
its sovereign capacity. We find no cogent
reason to deviate from the
aforementioned distinction. (Philex Mining
Corp. vs. Commissioner of Internal Revenue,
G. R. No. 125704, August 28, 1998; Caltex
Philippines, Inc. vs. Commission on Audit,
G.R. No. 92585, May 8, 1992)
Effect of assignment upon legal
compensation:
1. An assignment made after compensation has
legally taken place can produce no effect as
against the debtor, and the only recourse of
the assignee is an action for damages based
on fraud or eviction against the creditor-
assignor (8 Manresa 413-414);
Illustration: A is indebted to B for P500 and
B is indebted to A for P300. Upon concurrence
of all requisites, both debts become extinguished
up to the concurrent amount of P300, so that A
remains liable to B only for the balance of P300.
185
But suppose A assigned his credit of P300 against
B in favor of X, after compensation had taken
place by operation of law, X would have acquired
no credit enforceable against B, because of the
extinguishment of said credit by compensation.
2. If the debtor consents to the assignment, he
cannot set up against the assignee compensation
which would have pertained to him against the
creditor-assignor, unless the debtor notifies the
assignor that he reserves his right to the
compensation (Art. 1285 [1], NCC);
Illustration: In the above example, if X
consents that B assign the former’s indebtedness
to him for P300, A cannot set up any defense of
compensation. He has to pay B or his assignee X
P500, unless in consenting to said assignment, A
expressly reserved his right to the compensation.
3. If the creditor communicated the assignment
to the debtor but the debtor did not consent
thereto, the debtor may set up the compensation
of debts previous to the assignment of the
creditor but not of subsequent ones (Art. 1285 [2],
NCC);
Illustration: In the above example, if B assigns
his credit of P500 against A in favor of X,
communicating the same to A but without
obtaining his consent, A may set up as against X
his credit of P300 against B only and if said credit
has become due and has given rise to
compensation as against B’s credit of P500 before
the assignment.
4. If the assignment is made without the
knowledge of the debtor, such debtor may set
against the assignee not only the compensation
of all credits prior to the assignment, but also of
later ones (even after the assignment) until he
had knowledge of the assignment (Art. 1285 [3],
NCC).
Illustration: Suppose B’s credit against A
matures on January 1 while A’s credit against B
matures on January 30. A, on January 15,
assigned his credit of P300 against B in favor of
assignee X, and, B does not know of said
assignment until February 1. Although the
compensation has taken place 15 days after the
assignment, B may still set up against the
assignee X compensation which pertains to him
against the assignor A in as much as said
186
compensation occurred prior to February 1, when
debtor B had knowledge of the assignment.
6. Novation (Arts. 1291-1304, NCC)
Concept: it is the extinguishment of obligation
by the substitution or change of the obligation by
a subsequent one which extinguishes or modifies
the first, either by changing the object or principal
conditions, or by substituting another in place of
the debtor, or by subrogating a third person in
the rights of the creditor. Unlike other modes of
extinction of obligations, it is a juridical act with a
dual function, namely, it extinguishes an
obligation and creates a new one in lieu of the old
(Rabuya, Civil Law Reviewer Volume II, 2017 Ed. p.
158-159).
Kinds of Novation:
1. As to its effect:
Extinctive – An old obligation is terminated by
the creation of a new obligation that takes the
place of the former (Quinto vs. People, G.R. No.
126712, April 14,1999). For example, if what is
changed is any of the principal conditions of the
obligation or terms and conditions, which are
considered to be the essence of the obligation
itself, the novation, is extinctive (Aquinley vs.
Tibong, G.R. No. 166704, Dec. 20, 2006; Swagman
Hotels and Travel, Inc. vs. CA, G. R. No. 161135, April
8, 2005). It has twin effects: first, it extinguishes
the existing obligation and, second, it creates a
new one in its stead.
Q: The co-owners of a property entered into
a Deed of Partial Partition and
subsequently entered into a Memorandum
of Agreement that they shall share alike
and receive equal shares in the proceeds of
the sale of the property subject of the
partition. They, however, still respected the
partition. Was there novation of the Deed
of Partition with the execution of the MOA?
A: No. There is no novation because there was
no inconsistency between the two contracts, as
they can stand together. Novation, in order to
extinguish an obligation, should have the
following requisites:
i. There is a previous valid obligation;
ii. The parties concerned agree to a new contract;
iii. The old contract is extinguished; and
iv. There is a new valid contract.
In order for there to be implied novation, the old
and the new obligations be on every point
incompatible with each other (Jurado, Civil Law
Reviewer, 2009, p. 797 citing Uraca vs. CA, G.R. No.
115158, September 5, 1997).
Q: Suppose that in a second and a new
contract, the debtor acknowledges or
ratifies the new contract, is there novation?
Reason.
A: No. There is no novation. It is clear that the
first contract and the second contract can stand
together, and consequently, there can be no
incompatibility between them (Jurado, Civil Law
Reviewer, 2009, p. 797 citing Millar vs. CA G.R. No. L-
29981, April 30, 1971).
Modificatory– The old obligation subsists to the
extent it remains compatible with the amendatory
agreement (Quinto vs. People, G.R. No. 126712, April
14, 1999). For example, novation is merely
modificatory where the change brought about by
any subsequent agreement is merely incidental to
the main obligation (e.g. a change in interest
rates or an extension of time to pay). In this
instance, the new agreement will not have the
effect of extinguishing the first but will merely
supplement it or supplant some but not all of its
provisions. (Aquintey vs. Tibong, Dec. 2006;
Swagman Hotels and Travel, Inc. v. CA, G. R. No.
161135, April 8, 2005).
2. As to its essence:
Real or Objective – Novation is effected by
changing the object, cause or any of the principal
conditions of the obligation (Rio Grande Oli Co. vs.
Coleman [CA], 39 O. G 986);
Personal or Subjective – Novation is effected
by substituting the person of the debtor or by
subrogating a third person in the rights of the
creditor (Rio Grande Oli Co. vs. Coleman [CA], supra.).
May either be expromision or delegacion.
3. As to its form:
Express – The contracting parties
incontrovertibly disclose that their object in
executing the new contract is to extinguish the
old one (Sueno vs. Land Bank of the Phil, G.R. No.
G.R. No. 174711, Sep. 17, 2008);
Novation is never presumed, and the animus
novandi, whether totally or partially, must appear
by express agreement of the parties, or by their
acts that are too clear and unmistakable (Sueno
vs. Land Bank of the Phil., supra.). In order to
extinguish or discharge an obligation by novation
the intent of the parties to do so (animus
novandi) must be either expressed or else clearly
apparent from the incompatibility “on all points”
of the old and the new obligations (La Tondena,
Inc. v. Alto Surety & Insurance Co., Inc. G.R. No. L-
10132, July 18, 1957).
Implied – There is no express novation but there
is irreconcilable incompatibility between the old
and the new obligations (Sueno vs. Land Bank of
the Phil;, supra.) or that the new obligations is on
every point incompatible with the old one (Ajax
Marketing & Development Corp. vs. CA, G. R. No.
118585, Sep. 14, 1995).
In order that an obligation may be impliedly
extinguished by another which substitutes the
same, it is imperative that the old and the new
obligations must be incompatible with each other
(Art. 1292, NCC).
Objective Novation – change of the object
of the obligation, requisites of valid
novation:
1. Previous valid obligation;
The novation is void if the original obligation was
void. This rule admits of two XPNs: (1) when the
annulment may be claimed only by the debtor; or
(2) when ratification validates acts which are
voidable (Art. 1298, NCC).
2. Agreement of all parties to the new
obligation;
3. Extinguishment of old obligation; and
4. Validity of the new obligation (Tiu Siuco vs.
Habana, G.R. No. 21106, February 21, 1924).
If the new obligation is void, the original one shall
subsist, unless the parties intended that the
former relation should be extinguished in any
event (Art. 1297, NCC).
Novation of conditional obligation: If the
original obligation was subject of a suspensive or
resolutory condition, the new obligation shall be
under the same condition, unless it is otherwise
stipulated (Art. 1299, NCC).
187
Two forms of novation by substitution of
debtor
1. Expromission– substitution of debtors is
effected with the consent of the creditor at
the instance of the new debtor without the
knowledge or against the will of the old
debtor;
2. Delegacion – The debtor offers and the
creditor accepts a third person who consents
to the substitution so that the intervention
and the consent of these three persons are
necessary and they are respectively known as
delegante, delegatario and delegado (Testate
Estate of Mota vs. Serra, G.R. No. L-22825,
February 14, 1925).
For Novation by substitution of debtor to
exist, the old debtor must be released from
the obligation
In novation effected by way of substituting the
person of the debtor, it is essential that the old
debtor be released from the obligation, and the
third person or new debtor takes his place in the
new relation. If the old debtor is not released, no
novation occurs and the third person who has
assumed the obligation of the debtor becomes
merely a co-debtor or surety or a co-surety
(Cochingyan, Jr. vs. R & B Surety and Insurance Co.,
Inc., G.R. No. L-47369, June 30, 1987, Lopez v. CA,
114 SCRA 67).
Thus, the mere circumstance of the creditor
accepting payments from a third person who
acquiesced to assume the obligation of the debtor
when there is clearly no agreement to release the
debtor from his responsibility does not constitute
novation – at most, it only creates a juridical
relation of co-debtorship or suretyship on the part
of the third person to the contractual obligation
of the debtor, and the creditor can still enforce
the obligation against the debtor (Reyes vs. CA,
G.R. No. 120817, November 4, 1996; Magdalena
Estates, Inc. v. Rodriguez , G. R. No. L-18411,
December 17, 1966).
Creditor’s Consent Essential:
1. Whether the substitution is thru expromission
or delegacion, the creditor’s consent is
always necessary (Garcia vs. Khu Yek Chiong,
G.R. No. 45154, March 31, 1938). The reason for
the requirement of the creditor’s consent to
188
such substitution is obvious. Substitution of
one debtor for another may delay or prevent
the fulfillment or performance of the
obligation by reason of the temporary
inability or insolvency of the new debtor (Rio
Grande Oil Co. vs. Coleman, [CA], 39 O.G. 1410);
2. It is not necessary that the creditor should
give his consent simultaneously with the
execution of the new contract. He may do so
afterwards. (Testate Estate of Mota vs. Serra, 47
Phil. 464);
3. Creditor’s consent may be implied (Asia
Banking Corporation vs. Elser, 54 Phil. 994). It is
true that it need not be given simultaneously
with those of the debtor and the third party
who assumes the debtor’s obligation, nor is it
necessary that it be given by the creditor in
any particular or specific form, but it must be
given by the creditor in one way or another
(Rio Grande Oil Co. vs. Coleman, supra);
4. But the creditor’s acceptance of payments by
a third party for the benefit of a debtor whose
accounts the third party has assumed,
without further facts does not constitute a
novation (Pacific Commercial Co. vs. Sotto, 34
Phil. 237).
Effect of substitution without the consent
of the debtor
If the substitution is without the knowledge or
against the will of the debtor, the new debtor's
insolvency or non-fulfillment of the obligations
shall not give rise to any liability on the part of
the original debtor (Art. 1294, NCC).
Effect of insolvency of new debtor
The insolvency of the new debtor, who has been
proposed by the original debtor and accepted by
the creditor, shall not revive the action of the
latter against the original obligor, except when
said insolvency was already existing and of public
knowledge, or known to the debtor, when the
delegated his debt (Art. 1295, NCC).
Effect of Objective Novation and Novation
by Substitution of Debtor:
1. Generally, the extinction of the old obligation
carries with it the extinction of the accessory
obligations which are subordinate to and
dependent upon the principal obligation thus
extinguished;
2. However, accessory obligations subsist In an assignment of credit, the consent of the
insofar as they may benefit third persons who debtor is not necessary in order that the
have not given their consent to the novation assignment may fully produce the legal effects.
(Art. 1296, NCC). What the law requires in an assignment of credit
is not the consent of the debtor, but merely notice
Subrogation to him as the assignment takes effect only from
the time he has knowledge thereof. A creditor
Concept: It is the transfer of all the rights of the may, therefore, validly assign his credit and its
creditor to a third person, who substitutes him in accessories without the debtor’s consent. On the
all his rights (Jurado, Comments and Jurisprudence other hand, conventional subrogation requires an
on Obligations and Contracts, 2010, p349). agreement among the parties concerned – the
original creditor, the debtor, and the new
Two forms of subrogation creditor. It is a new contractual relation based on
the mutual agreement among all the necessary
1. Conventional – It takes place by the parties (Ledonio vs. Capitol Development Corp., G.R.
agreement of and requires the consent of the No. 149040, July 4, 2007).
original parties (the debtor and original
creditor) and of the third person (the new If the approval of the debtor to the subrogation
creditor) (Art. 1301, NCC); of a third person in place of the creditor is
2. Legal – It takes place by operation of law expressly required, the intention of the parties is
and is not to be presumed outside of the that the transaction is one of conventional
following cases: subrogation and not just an assignment of credit
a. When a creditor pays another creditor (Licaros vs. Gatmaitan, G.R. No. 142838, August 9,
who is preferred, even if the payment is 2001).
without the debtor’s knowledge;
b. When a third person interested in the Effect of Subrogation: It transfers the credit,
fulfillment of the obligation pays the together with the rights annexed thereto (the
obligation, even if such payment is right to the exercise of other accessory rights,
without the knowledge of the debtor such as the right to the mortgage or pledge),
without prejudice to the effects of whether those rights be against the debtor or
confusion as to the latter’s share; against third persons. (Art. 1303, NCC) This is
c. When a third person, not interested in true for legal subrogation. But in conventional
the obligation, pays the obligation but subrogation, the effects thereof may be modified
only if such payment is with the consent by the express agreement of the parties.
of the debtor, whether express or implied
(Arts. 1300 and 1302, NCC). Reimbursement v. Subrogation: In case of
reimbursement, the person paying for another
Subrogation v. Assignment has only a personal action to recover what he has
paid without the rights, powers and guaranties
SUBROGATION ASSIGNMENT attached to the original obligation. In
The debtor’s consent is Not required subrogation, the person who pays for another
necessary acquires not only the right to be reimbursed for
Extinguishes an Refers to the same what he has paid but also the other rights
obligation and gives rise right which passes attached to the obligation originally contracted by
to a new one from one person to the debtor.(Jurado, Obligations and Contracts, 2010
Ed., p. 237)
another.
Nullity of an old The nullity of an
Effect of partial subrogation: In case of
obligation may be cured obligation is not
partial payment, the creditor, to whom partial
by subrogation, such remedied by the
payment has been made, may exercise his right
that the new obligation assignment of the
for the remainder and he shall be preferred in his
will be perfectly valid. creditor’s right to
(Ledonio vs. Capitol place to the person who has been subrogated in
another.
Development Corp., G.R. virtue of the partial payment of the same credit.
No. 149040, July 4, 2007) (Art. 1304, NCC)

189
B. CONTRACTS (Arts. 1305 to 1422, NCC)
1. GENERAL PROVISIONS
Definition
A contract is a meeting of minds between two
persons whereby one binds himself, with respect
to the other, to give something or to render some
service (Art. 1305, NCC).
Difference between Obligation and
Contract
OBLIGATION CONTRACT
Juridical necessity Source of obligation
May exist without Cannot exist without
contract obligation
Elements of Contracts
1. Essential elements without which there can
be no contract. (3 Castan, 7th Ed., pp. 322-324)
1. Common (communes) those which are
present in all contracts, such as consent,
object certain and cause.
2. Special (especiales) those which present
only in certain contracts, such as delivery
in real contracts, or form in solemn ones.
3. Extraordinary(especialissimos) those
which are peculiar to a specific contract
(i.e., price in sales)
2. Natural elements are those derived from
the nature of the contract and ordinarily
accompany the same. They are presumed
by law, although they can be excluded by the
contracting parties if they so desire. (3 Castan,
7th Ed., p. 324)
(a) Right to resolve (Art. 1191, NCC)
(b) Warranties in sales contracts, implied
3. Accidental elements are those which exist
only when the parties expressly provide
for them for the purpose of limiting or
modifying the normal effects of the contract.
(i.e., condition, terms or modes) (3 Castan, 7th Ed.,
p. 324)
Stages of a Contract
Negotiation- it begins from the time the
prospective contracting parties manifest their
190
interest in the contract and ends at the moment
of agreement of the parties;
Perfection (or birth) — Here, the parties have at
long last came to a definite agreement, the
elements of definite subject matter and valid
cause have been accepted by mutual consent
(Paras, Civil Code of the Philippines, Annotated Vol. IV,
2008, p. 540).
Consequences of Perfection
a. The parties are bound to the fulfillment of what
has been EXPRESSLY STIPULATED (Art. 1315,
NCC), and compliance thereof must be in
GOOD FAITH (Art. 1159, NCC).
b. The parties are ALSO bound to all the
CONSEQUENCES which, according to their
nature, may be in keeping with GOOD FAITH,
USAGE, and LAW.
Consummation (or death or termination) —
Here the terms of the contract are performed,
and the contract may be said to have been fully
executed.
Characteristics of a Contract
Obligatory force
Obligations arising from contracts have the force
of law between the contracting parties and should
be complied with in good faith. (Art. 1159, NCC)
From the moment the contract is perfected, the
parties are bound not only to the fulfilment of
what has been expressly stipulated but also to all
consequences which, according to their nature,
may be in keeping with good faith. Also, the
stipulations of the contract being the law between
the parties, courts have no alternative but to
enforce there as they were agreed upon and
written (Pangilinan vs. CA, G.R. No. 83588, September
29, 1997).
Autonomy of Contracts
The contracting parties are accorded with
liberality and freedom to establish stipulations,
clauses, terms and conditions as they may deem
appropriate, provided the same are not contrary
to law, morals, good customs, public order or
public policy (See Art. 1306, NCC).
The right to enter into lawful contracts constitutes
one of the liberties of the people of the state. If
that right be struck down, or arbitrarily interfered
with, there is substantial impairment of the liberty
of the people under the constitution (Rabuya, Civil
Law Reviewer Volume II, 2017 ed, p. 180, citing People
vs. Pomar, G.R. No. L-22008, November 3, 1924).
Mutuality of Contracts
Contracts must bind the contracting parties, its
validity or compliance cannot be left to the will
of one of them (see Art. 1308, NCC) However,
the performance of a contract can be left to the
determination of third persons. The
determination of the performance by a third
person shall be obligatory upon both contracting
parties from the moment it is made known to
them. (Art. 1310, NCC)
Relativity of Contracts
Contracts can only bind the parties who entered
into it, including their heirs and assigns, and it
cannot prejudice a third person, even if he is
aware of such contract and has acted with the
knowledge thereof. (See Art. 1311, NCC)
Principle of relativity of contracts
GR: A contract is binding not only between
parties but extends to the heirs, successors in
interest, and assignees of the parties, provided
that the contract involves transmissible rights by
their nature, or by stipulation or by provision of
law. (Ibid)
XPNs:
Stipulation pour autrui (stipulation in favor of
a third person) – benefits deliberately conferred
by parties to a contract upon third persons. (Ibid)
Requisites of Stipulation pour autrui:
1. Stipulation in favor of a third person.
2. The stipulation must be part, not whole of the
contract;
3. Contracting parties must have clearly and
deliberately conferred a favor upon third
person;
4. Favor or benefit is not just an incidental benefit
or interest.
5. Third person must have communicated his
acceptance; and
6. Neither of the contracting parties bears the
legal representation of the third person (Young vs.
Court of Appeals, G.R. No. 79518, January 13, 1989).
Tort Interference - When a third person
induces a party to violate the contract (Art. 1314,
NCC).
Requisites to hold a third person not party
to a contract liable:
a. Existence of a valid contract
b. Third person has knowledge of such contract
c. Third person interferes without justification
Third persons coming into possession of the
object of the contract creating real rights. (Art.
1312, NCC)
Contracts entered into fraud of creditors. (Art.
1313, NCC)
Classification of Contracts (Jurado, Comments
and Jurisprudence on Obligations and Contracts, 2010
ed., p. 359-361)
a) According to their relation to other
contracts
i) Preparatory – those which have for their
object the establishment of a condition in
law which is necessary as a preliminary
step towards the celebration of another
subsequent contract.
ii) Principal – those which can subsist
independently from other contracts and
whose purpose can be fulfilled by
themselves.
iii) Accessory – those which can exist only as
a consequence of, or in relation with,
another prior contract.
b) According to perfection
i) Consensual – those which are perfected
by the mere agreement of the parties.
GR: No particular form is required in
order to make the contract binding and
effective between the parties thereto.
191
 XPNs:
a. When the law requires a contract to be in
some form in order that it may be valid;
or
b. When the law requires a contract to be in
some form in order that it may be
enforceable, or that a contract be proved
in a certain way. (Art. 1356, NCC)
ii) Real – those which require not only the
consent of the parties for their perfection,
but also the delivery of the object by one
party to the other.
The real contracts referred to in Art 1316
are:
(1) Deposit
(2) Pledge
(3) Commodatum, a loan where the
identical object must be returned.
c) According to Form
i) Common or Informal – those which
require no particular form.
ii) Special or Formal – those which require
some particular form.
d) According to their purpose
i) Transfer of ownership – e.g., sale
ii) Conveyance of use – e.g., commodatum
iii) Rendition of service – e.g., agency
e) According to their subject matter
i) Things – e.g., sale, deposit, pledge
ii) Services – e.g., agency, lease of services
f) According to the nature of the vinculum
which they produce
i) Unilateral – those which give rise to an
obligation for only one of the parties.
ii) Bilateral – those which give rise to
reciprocal obligations for both parties.
g) According to their cause
i) Onerous – those in which each of the
parties aspire to procure for himself a
192
benefit through the giving of an
equivalent or compensation.
ii) Gratuitous – those in which one of the
parties proposes to give to the other a
benefit without any equivalent or
compensation.
iii) Remuneratory - one where a party gives
something to another because of some
service or benefit given or rendered by
the latter to the former, where such
service or benefit was not due as a legal
obligation. The consideration of one is
greater than the other’s.
h) According to the risks involved
i) Commutative – those where each of the
parties acquire an equivalent of his
prestation and such equivalent is
pecuniarily appreciable and already
determined from the moment of the
celebration of the contract.
ii) Aleatory – those where each of the
parties has to his account the acquisition
of an equivalent of his prestation, but
such equivalent, although pecuniarily
appreciable, is not yet determined at the
moment of the celebration of the
contract, since it depends upon the
happening of an uncertain event, thus
charging the parties with the risk of loss
or gain.
i) According to the names or norms
regulating them
i) Nominate – those which have their own
individuality and are regulated by special
provisions of law.
ii) Innominate – those which lack
individuality and are not regulated by
special provisions of law. These are
governed by the stipulation of the
parties, the principles of Obligations of
Contracts, Rules governing the most
analogous nominate contracts, and the
Customs of the place (Art. 1307, NCC)
Kinds of innominate contracts:
1. Do ut des - I give that you give
2. Do ut facias - I give that you do
3. Facio ut des - I do that you give
4. Facio ut facias - I do that you do
2. ESSENTIAL REQUISITES
There is no contract unless the following
requisites concur:
1. Consent of the contracting parties;
2. Object certain which is the subject matter of
the contract; and
3. Cause of the obligation which is established.
(Art. 1318, NCC)
a. Consent (Art. 1319, NCC)
It is the meeting of the minds between the parties
on the subject matter and the cause of the
contract, even if neither one has been delivered.
Consent is manifested by the meeting of the offer
and acceptance upon the thing and the cause
which are to constitute the contract (Art. 1319
[1], NCC) Thus, an offer that is not accepted does
not give rise to consent, and the contract does
not come into existence. (Gamboa v. Gonzales, G.R.
No. L-5810, November 23, 1910)
Requisites of Consent:
1. There must be two or more parties.
One person may represent two or more parties,
unless there are contradictory or prejudicial
interests involved (Art. 1490, NCC; Garchitorena vs.
Sotelo, G.R. No. L-47868, November 13, 1942)
2. The parties must be capable or capacitated
(hence, if one party is insane, the contract is
merely voidable).
3. There must be no vitiation of consent.
Example: There must be no fraud or intimidation,
otherwise the contract is voidable).
4. There must be no conflict between what was
expressly declared and what was really
intended. Otherwise, the remedy may be
reformation, as when the parties really
intended to be bound, or else the contract is
VOID, as when the contract is fictitious or
absolutely simulated.
5. The intent must be declared properly (that is,
whatever legal formalities are required must
be complied with).
Consent may either be expressed or implied
(Clarin vs. Rulona, G.R. No. L-30786, February 20,
1984)
Note: Acceptance of the offer may either be
express or implied. (Art. 1320, NCC)
Meeting of the Minds
1. An offer that must be CERTAIN;
2. An acceptance that must be UNQUALIFIED
and ABSOLUTE.
If the acceptance is qualified, e.g., by a condition,
this merely constitutes a COUNTER-OFFER.
Offer
An offer is a proposal to enter into a contract. It
must be one which is intended of itself to create
legal relations on acceptance, and must be
capable of creating a definite obligation and not
a mere expression of desire or hope. A mere
statement of willingness to enter into
negotiations or a mere inquiry as to whether a
person could make specified articles is not an
offer (Jurado, Comments and Jurisprudence on
Obligations and Contracts, 2010, p. 400).
Distinguished from invitations to make an
offer:
If a proposal is nothing more than an invitation to
the person to whom it is made to make an offer
to the proposer, it is not such an offer that gives
birth to a contract upon acceptance. Thus:
1. Unless it appears otherwise, business
advertisements of things for sale are not
definite offers, but mere invitations to make
an offer. (Art. 1325, NCC)
2. Advertisements for bidders are simply
invitations to make proposals, and the
advertiser is not bound to accept the highest
or lowest bidder, unless the contrary
appears. (Art. 1326, NCC) Accordingly, the
terms and conditions of the bidding
disseminated by the proponent constitute the
“advertisement” to bid on the project. The bid
proposals or quotations submitted by the
prospective suppliers are the offers. And, the
193
 reply of the proponent, the acceptance or
rejection of the offers. (Jardine Davies, Inc. vs.
CA, G.R. No. 128066, June 19, 2000)
Requisites of an effective offer:
1. The terms of the offer must be reasonably
certain or definite (Art. 1319, NCC) and there
is an offer in the context of Article 1319 of
the Civil Code only if the contract can come
into existence by the mere acceptance of the
offer without any further act on the part of
the offeror (Paredes vs. CA, G.R. No. 112115,
March 9, 2001);
2. The offeror must have a serious intention to
become bound by his offer; and
3. The offer must be communicated by the
offeror to the offeree, resulting in the
offeree’s knowledge of the offer.
Termination of offer:
1. Thru the action of the offeree by rejecting the
offer; or
2. Thru the action of the offeror by rejecting the
offer; or
3. Thru operation of law by supervening
illegality of the proposed contract, by lapse of
time, by destruction of the subject matter of
the offer, or by death, civil interdiction,
insanity or insolvency of the offeror or offeree
(Paras, Civil Code of the Philippines, Annotated
Vol. IV, 2008, p. 613-614).
 An offer, the acceptance of an offer and
such other elements required under
existing laws for the formation of
contracts may be expressed in,
demonstrated and proved by means of
electronic data messages or electronic
documents.
 No contract shall be denied validity or
enforceability on the sole ground that it
is in the form of an electronic data
message or electronic document, or that
any or all of the elements required under
existing laws for the formation of
contracts is expressed, demonstrated
and proved by means of electronic data
messages or electronic documents (Sec.
16[1], Electronic Commerce Act).
194
Revocation of offer: The offer may be revoked
at any time prior to the perfection of the contract
(Laudico vs. Arias, G.R. No. 16530, March 31, 1922).
However, if the offer is encapsulated in an option
contract (as when the option is supported by a
consideration distinct from the price), the offer
may not be withdrawn by the offeror within the
period agreed upon without incurring liability for
damages.
Definition of option contract: It is a
preparatory contract in which one party grants to
the other, for a fixed period and under specified
conditions, the power to decide, whether or not
to enter into a principal contract. It binds the
party who has given the option, not to enter into
the principal contract with any other person
during the period designated, and, within that
period, to enter into such contract with the one
to whom the option was granted, if the latter
should decide to use the option. (Carceller vs. Arias,
G.R. No. 124791, February 10, 1999)
Effects of Option Contract:
1. If supported by a consideration distinct and
separate from the price, in which case, there
is a perfected contract of option, and it would
be a breach of that contract to withdraw the
offer during the agreed period. (Arts. 1324 and
1479, NCC).
2. If the period is not itself founded upon or
supported by a consideration, the offeror is
still free and has the right to withdraw the
offer before its acceptance, or, if an
acceptance has been made, before the
offeror’s coming to know of such fact, by
communicating that withdrawal to the
offeree. (Art. 1324, NCC; Atkins, Kroll & Co. vs.
Chua, G.R. No. L-9871, January 31, 1958, Rural
Bank of Parañaque, Inc. vs. Remolado, G.R. No.
62051, March 18, 1985; Sanchez vs. Rigos, G.R.
No. L-25494, June 14, 1972) Nonetheless,
pending notice of its withdrawal, the
accepted promise partakes of the nature of
an offer which, if accepted, results in a
perfected contract. (Sanchez vs. Rigos, supra)
Consideration in option contracts:
● The consideration need not be monetary but
could consist of other things or undertakings.
However, if the consideration is not monetary,
these must be things or undertakings of value,
in view of the onerous nature of the option
 contract. Furthermore, when a consideration
for an option contract is not monetary, said
consideration must be clearly specified as such
in the option contract or clause (Bible Baptist
Church vs. CA, G.R. No. 126454, November 26,
2004; Eulogio v. Apes, G.R. No. 113638, April 15,
2005)
OPTION MONEY EARNEST MONEY
Money given as a Part of the purchase
distinct consideration price
in an option contract
Applies to a sale not Given only where
yet perfected there is already a
sale
The would-be buyer When earnest
gives the option money is given, the
money, he is not buyer is bound to
required to buy pay the balance
(Adelfa Properties, Inc. vs. CA, G.R. No. 111238,
January 25, 1995)
Rejection and counter-offer: By rejecting the
offer, the offeree thereby terminates the offer
and his subsequent attempt to accept the
previous offer will not result in its reinstatement.
A “counter –offer” is the rejection of the original
offer and the simultaneous making of a new offer
ABS-CBN Broadcasting Corp vs. Court of Appeals, G.R.
No. 128690, January 21, 1999).
Lapse of time: The offeror may fix the time of
acceptance which must be complied with. (Art.
1321, NCC) Thus, an offer terminates
automatically when the period of time specified in
the offer has lapsed.
Death, insanity, civil interdiction or
insolvency: The offer becomes ineffective upon
the death, civil interdiction, insanity, or
insolvency of either the offeror or the offeree
before acceptance is conveyed. (Art. 1323, NCC)
The contract is not yet perfected at any time
before acceptance is conveyed; hence, the
disappearance of either party or his loss of
capacity, before perfection prevents the
contractual tie from being formed (Villanueva vs.
CA, G.R. No. 99357, January 27, 1992).
Contract of Adhesion - one party has already
a prepared form of a contract, containing the
stipulations he desires, and he simply asks the
other party to agree to them if he wants to enter
into the contract (Paras, Civil Code of the Philippines,
Annotated Vol. IV, 2008, p. 641).
Acceptance
Acceptance must be absolute: To be effective
an acceptance must be absolute. (Art. 1319 [1],
NCC) Only an absolute or unqualified acceptance
of a definite offer manifests the consent
necessary to perfect a contract. (Weldon
Construction Corp. vs. CA, G.R. No. L-35721, October
12, 1987)
Effect of qualified acceptance: A qualified
acceptance, or one that involves a new proposal,
constitutes a counter-offer (Art. 1319 [1], NCC)
and is a rejection of the original offer.
“Mirror-Image Rule”
The acceptance must be identical in all respects
with that of the offer so as to produce consent or
meeting of the minds. (Limketkai Sons Milling, Inc.
vs. CA, G.R. No. 118509, March 29, 1996; ABS-CBN
Broadcasting Corp. vs. CA, G.R. No. 128690, January
21, 1999) Consequently, when something is
desired which is not exactly what is proposed in
the offer, such acceptance is not sufficient to
generate consent because any modification or
variation from the terms of the offer annuls the
offer (ABS-CBN Broadcasting Corp. vs. CA, supra.).
Manner and form of acceptance:
1. The offeror has a right to prescribe in his
offer the time, place and manner of
acceptance, all of which must be complied
with (Art. 1321, NCC).
2. The acceptance may be expressed or implied
(Art. 1320, NCC).
3. If an offer is made through an agent, it is
deemed accepted from the moment
acceptance is communicated to said agent
(Art. 1322, NCC).
4. Presumed (by law) as when there is failure to
repudiate hereditary rights within the period
fixed by law (Art. 1057, NCC); or when there
is SILENCE in certain specific cases as would
tend to mislead the other party, and thus
place the silent person in estoppel (Arts.
1670, 1870, 1871, 1872 and 1873, NCC).
Acceptance thru Letter or Telegram or
Expedition Theory:
Acceptance made by letter or telegram does not
bind the offeror except from the time it came to
his knowledge. The contract in such a case is
195
presumed to have been entered into in the place
where the offer was made (Jurado, Comments and
Jurisprudence on Obligations and Contracts, 2010, p.
400).
Cognition theory – A contract is perfected only
from the time an acceptance of an offer is made
known to the offeror.
● The Civil Code adopts the Cognition theory.
The second paragraph of Article 1319 of the
Civil Code provides that acceptance made by
letter or telegram does not bind the offeror
except from the time it came to his knowledge.
● As Differentiated to Manifestation Theory in
which provides that the Offeree merely
manifests his acceptance.
Withdrawal of Acceptance:
For a contract to arise, the acceptance must be
made known to the offeror. Accordingly, the
acceptance can be withdrawn or revoked before
it is made known to the offeror (Jardine Davies,
Inc., vs. CA, G.R. No. 128066, June 19, 2000).
Capacity of Contracting Parties
Importance of Legal Capacity:
There is no effective consent in law without the
capacity to give such consent. In other words,
legal consent presupposes capacity (Delos Reyes
vs. CA, G.R. No. 129103, September 9, 1999).
Persons Incapable of Giving Consent:
1. Unemancipated minors.
Under the regime of the Family Code, there are
no longer unemancipated minors.
2. Insane or demented persons;
Contracts entered into during a lucid interval are
valid. Contracts agreed into in a state of
drunkenness or during a hypnotic spell are
voidable. (Art. 1328, NCC)
Only insanity, which prevents a person from
knowing the character of the act that he is
performing as well as its legal effects, will be a
ground for annulment. (I Caguioa, 1967 ed., p.
79-80) Thus, monomania, which is insanity on a
certain point does not necessarily annul a
196
contract except when the contract refers to that
point where the person concerned is insane.
3. Deaf-mutes who do not know how to write
If they know how to write (and consequently
know how to read), it is submitted that the
contract is valid, for then they are capable of
understanding, and therefore capacitated to give
consent.
4. Persons suffering from civil interdiction (Art.
34, RPC);
5. Incompetents under guardianship (Rule 92-
97, ROC); and
6. Other persons specially disqualified. (Art.
1329, NCC)
Old age or other physical infirmities: A
person is not incapacitated to contract merely
because of advanced years or by reason of
physical infirmities, only when such age or
infirmities impair his mental faculties to
such extent as to prevent him from
properly, intelligently, and fairly protecting
his property rights, is he considered
incapacitated. (Loyola vs. Court of Appeals, G.R.
No. 115734, May 17, 1982)
Contracts by Illiterates:
Burden of Proof
GR: Whoever alleges fraud or mistake in any
transaction must substantiate his allegation.
XPN: Where a party to a contract is illiterate, or
cannot read nor understand the language in
which the contract is written, the burden is on the
party interested in enforcing the contract to
prove that the terms thereof were fully explained
to the former in a language understood by him.
(Art. 1332, NCC; Cayabyab vs. IAC, G.R. No. 75120,
April 28, 1994)
Status of contract where parties are
incapacitated: If only one of the contracting
parties is incapacitated to give his consent, the
contract is voidable. (Art. 1390 [1], NCC) If both
parties are incapacitated to give their consent,
the contract is unenforceable. (Art. 1403 [3],
NCC)
Vitiation of Consent: A contract where consent
is procured thru mistake, violence, intimidation,
undue influence or fraud is voidable. (Art. 1330,
NCC)
Mistake and fraud affect the INTELLECT (which is
the faculty in the mind of man, the proper object
of which is the TRUTH. They thus affect
COGNITION). Cognition must be intelligent.
Violence, intimidation, and undue influence affect
the WILL (which is the faculty in the mind of man,
the proper object of which is the GOOD. They
thus affect VOLITION). Volition must be free.
Mistake and fraud result in defects of the
intellect; the others result in defects of the will
(Paras, Civil Code of the Philippines, Annotated Vol. IV,
2008, p. 627).
Mistake (Art. 1331, NCC)
Wrong conception and lack of knowledge with
respect to a thing. (Jurado, Comments and
Jurisprudence on Obligations and Contracts, 2010 ed.,
p. 429)
Mistake of Law: As a GR, mistake of law does
not make a contract voidable because ignorance
of the law does not excuse any one from its
compliance. (Art. 3, NCC; Luna, et al. vs. Linatoc, G.R.
No. L-48403, August 28, 1942) Thus, ordinarily, it is
only a mistake of fact which will vitiate consent
rendering the contract voidable. There is,
however, an XPN to this rule. According to Article
1334 of the Civil Code “mutual error as to the
legal effect of an agreement when the real
purpose of the parties is frustrated, may vitiate
consent.”
Mistake of Fact: One or both of the contracting
parties believe that a fact exists when in reality it
does not. (Supra.)
Requisites for Mistake of fact which to
Vitiate Consent:
1. The error must be substantial regarding:
a. The object of the contract (error in re):
● When the thing constitutes the
object of the contract is confused
with another thing (Mistake as to
Identity of the thing – error in
corpore)
● Mistake as to the substance of the
thing (error in substantia)
● Mistake regarding the quantity of the
thing (error in quantitate); if mistake
refers only to accidental or secondary
qualities, the contract is not rendered
voidable (error in qualitate)
b. The conditions which principally moved
or induced one of the parties
c. Identity or qualifications (error in
personae), but only if such was the
principal cause of the contract.
d. The error must be excusable (not
caused by negligence).
2. The error must be a mistake of fact, and not
of law. (Jurado, Comments and Jurisprudence on
Obligations and Contracts, 2010 ed., pp. 430-432)
3. A simple mistake of account, however, shall
only give rise to its correction. (Art. 1331,
NCC)
4. An error so patent and obvious that nobody
could have made it, or one which could have
been avoided by ordinary prudence, cannot
be invoked by the one who made it in order
to annul his contract. (Alcasid vs. CA, G.R. No.
104751, October 7, 1994)
Violence and Intimidation (Art. 1335, NCC)
There is Violence when in order to wrest consent,
serious or irresistible force is employed.
There is Intimidation when one of the contracting
parties is compelled by a reasonable and well-
grounded fear of an imminent and grave evil
upon his person or property, or upon the person
or property of his spouse, descendants or
ascendants, to give his consent
Requisites of Violence:
1. Force employed to wrest consent must be
serious and irresistible;
2. It must be the determining cause for the
party upon whom it is employed in entering
into the contract. (Jurado, Comments and
Jurisprudence on Obligations and Contracts, 2010
ed., p. 436)
197
Requisites of Intimidation:
1. Reasonable and well-grounded fear of an
imminent and grave evil upon his person,
property, or upon the person or property of
his spouse, descendants, or ascendants
(Supra);
2. It must have been the reason why the
contract was entered into
The threat must be of an unjust act, an actionable
wrong. (Therefore, a threat to enforce one’s claim
through competent authority, if the claim is just
or legal, does not vitiate consent). (Art. 1335, last
par., NCC)
A threat to prosecute is not considered as
intimidation. (P. Agustinos vs. Del Rey, G.R. No.
32813, November 5, 1930; Sotto v. Mariano, [C.A.] 36
O.G. 1056)
But, of course, an agreement not to prosecute on
account of a crime is against public policy. (Arroyo
vs. Berwin, G.R. No. 10551, March 3, 1917 and Hibberd
v. Rhode, G.R. No. 8418, December 9, 1915)
Violence or Intimidation Caused by Third
Person
Even if a third person exercised the violence or
intimidation, the contract may be annulled. This
is because the consent is still vitiated. (De Asis vs.
Buenviaje, [C.A.] 45 O.G. 317)
Undue Influence (Art. 1337, NCC)
When a person takes improper advantage of his
power over the will of another, depriving the
latter of a reasonable freedom of choice
Requisites for Undue Influence
1. Improper advantage;
2. Power over the will of another (reflected for
example in a superior bargaining power)
(Martinez vs. Hongkong and Shanghai Bank, G.R.
No. L-5496, February 19, 1910);
3. Deprivation of the latter’s will of a reasonable
freedom of choice (The influence exerted
must be of a kind that overpowers the mind
as to destroy the party’s free agency). (Coso
vs. Fernandez Deza, G.R. No. L-16763, December
22, 1921)
198
Undue Influence Caused by Third Person
Undue influence exercised by a third party vitiates
consent, just like in the case of violence and
intimidation (Memorandum to the Joint Congressional
Committee on Codification, Mar. 8, 1951)
Fraud
Use of insidious words or machinations employed
by one of the contracting parties in order to
induce the other to enter into a contract, without
them, he would not have agreed to. (Jurado,
Comments and Jurisprudence on Obligations and
Contracts, 2010 ed., p. 444)
Kinds of Fraud
1. Fraud in the PERFECTION of the contract
(Supra):
a. Dolo causante (or causal fraud):
Here, were it not for the fraud, the other
party would not have consented. (This is
the fraud referred to in Art. 1338, NCC)
Effect: The contract is VOIDABLE.
b. Dolo incidente (or incidental fraud):
Here, even without the fraud the parties
would have agreed just the same, hence
the fraud was only incidental in causing
consent. Very likely though, different
terms would have been agreed upon.
Effect: The contract is valid, but there
can be an action for damages (Woodhouse
vs. Halili, G.R. No. L-4811, July 31, 1953).
2. Fraud in the PERFORMANCE of the obligation.
(Art. 1170, NCC)
Requisites for Fraud: (Art. 1338, NCC)
a. The fraud must have been serious;
b. The insidious words or machinations must
have induced the other party to enter into the
contract
c. The fraud should have been employed by one
of the contracting parties or by third persons.
(Jurado, Comments and Jurisprudence on
Obligations and Contracts, 2010 ed., p. 445)
The parties must not be in pari delicto (mutual
guilt), otherwise, neither party may ask for
annulment. The contract would, therefore, be
considered valid (Valdez vs. Sibal, G.R. No. L-26278,
August 4, 1927)
Fraud by Third Persons (Art. 1342, NCC)
Misrepresentation by a third person does not
vitiate consent, unless such
misrepresentation has created substantial
mistake and the same is mutual.
● Misrepresentation made in good faith is not
fraudulent but may constitute error (Art. 1343,
NCC)
Simulation of a Contract
It is the act of intentionally deceiving others by
producing the appearance of a contract that
really does not exist (absolute simulation) or
which is different from the true agreement
(relative simulation). (Art. 1345-1346, NCC)
Kinds of Simulated Contracts
1. Absolutely simulated (simulados) fictitious
contracts:
Here, the parties do not intend to be bound.
Effect: The contract is VOID.
2. Relatively simulated (disimulados) disguised
contracts:
Here, the parties conceal their true agreement.
Effect: The parties are bound to the real or true
agreement except —
a. If the contract should prejudice a third person;
or
b. If the purpose is contrary to law, morals, good
customs, public order, or public policy.
B. Object (Art. 1347, NCC)
Object of contract: Things which are not
outside the commerce of men or rights or
services which are not intransmissible can be the
object of contracts. (Art. 1347 [2], NCC)
GR: All things or services may be the object of
contracts.
XPNs:
1. Things outside the commerce of men;
2. Intransmissible rights;
3. Future inheritance, except in cases expressly
authorized by law;
4. Services which are contrary to law, morals,
good customs, public order or public policy;
5. Impossible things or services; and
6. Objects which are not possible of
determination as to their kind.
Requisites for object of contracts:
1. The thing must be within the commerce of
men; or the right must not be intransmissible
(Art. 1347 [1], NCC); It should be susceptible
of appropriation and transmissible from one
person to another;
2. The thing or services must not be impossible
(Art. 1348, NCC); in other words, it should
exist at the moment of the celebration of the
contract, or, at least, it can exist
subsequently or in the future.
3. It must be licit, in other words, it should not
be contrary to law, morals, good customs,
public order or public policy or it must be
capable of coming into existence; and
4. It must be determinate, or at least, possible
of determination, as to its kind. (Art. 1349,
NCC; 3 Castan 7th Ed., pp. 342-343; 8 Manresa,
5th Ed., Bk. 2, pp. 431-432)
C. Cause (Art. 1350, NCC)
Concept
Cause is the essential reason which moves the
contracting parties to enter into it. The cause is
the immediate, direct and proximate reason
which justifies the creation of an obligation
through the will of the contracting parties. (Uy vs.
CA, G.R. No. 120465, Sept. 9, 1999)
Requisites for Cause:
1. Cause must be lawful or not contrary to law,
morals, good customs, public order or public
policy. (Art. 1352, NCC) A contract whose
cause is contrary to law, morals, good
customs, public order or public is void. (Art.
1409 [1], NCC)
2. Cause must be true, otherwise the contract is
without cause and produces no effect
199
 whatever. The statement of a false cause in
Illegality or Legality Legality or illegality of
contracts shall render them void, if it should
of the cause will the motives will not
not be proved that they were founded upon
affect the existence affect the existence of
another cause which is true and lawful. (Art.
or validity of the the contract
1353, NCC)
contract
Presumption in favor of existence of cause:
Although the cause is not stated in the contract, NOTE:
it is presumed that it exists and is lawful, unless
the debtor proves the contrary. (Art. 1354, NCC) There are times, however, when the boundary
line between motive and cause disappears
Effect of inadequacy of cause: Unless altogether. The motive may be regarded as causa
specified by law, lesion or inadequacy of cause when the contract is conditioned upon the
shall not invalidate a contract, unless there has attainment of the motive of either contracting
been fraud, mistake or undue influence (Art. party. In other words, motive becomes causa
1355, NCC). when it predetermines the purpose of the
contract (Jurado, Comments and Jurisprudence on
Causes In: Obligations and Contracts, 2010 ed., p. 466).

Onerous Remuneratory Pure B. Forms of Contracts

Contract Contracts Beneficenc
s e/ Statutory Basis: (Art. 1356, NCC)
Gratuitous
The The service or Mere Contracts shall be obligatory, in whatever form
undertakin benefit which is liberality of they may have been entered into, provided all the
g or the remunerated the essential requisites for their validity are present.
promise of benefactor However, when the law requires that a contract
the thing be in some form in order that it may be valid or
or service enforceable or that a contract be proved in a
by the certain way, that requirement is absolute and
other indispensable.
party
Rules in the form of contract:

▪ Contracts shall be obligatory, in whatever

Accessory Contracts
cause of the accessory contract is identical with
that of the principal contract
form they may have been entered into,
provided all essential requisites for their
validity are present.
GR: Form is not required in consensual contracts.

XPNs: When the law requires a contract be in

Cause Motive certain form:

Direct or most Indirect or remote a. TO BE VALID (This is true in formal or solemn

proximate reason of reason contracts)
a contract b. TO BE ENFORCEABLE (This is true for the
agreements enumerated under the Statute of
Objective or Juridical The Psychological or Frauds, but of course this requirement may
reason of a contract purely personal be waived by acceptance of benefits (partial)
reasons or by failure to object to the presentation of
oral (parol) evidence. (Art. 1403, NCC)
Cause is always the Motives differ for
same contracting parties

200
c. FOR CONVENIENCE (This is true for the
contracts enumerated for example under Art.
1358, NCC)
The parties may compel each other to reduce the
verbal agreement into writing (Art. 1357, NCC).
Electronic Commerce Act
Electronic documents shall have the legal effect,
validity or enforceability as any other document
or legal writing (Sec. 7, R.A. No. 8792).
If the law requires that a document be in
writing and the requirement therein is in the
form of an obligation or whether the law simply
provides consequences for the document not
being presented or retained in its original from:
Such requirement is met by an electronic
document maintains its integrity and can be
authenticated so as to be usable for subsequent
reference.
1. The electronic document has remained
complete and unaltered, apart from the
addition of any endorsement and any
authorized change, or any change which
arises in the normal course of communication,
storage and display; and
2. The electronic document is reliable in the light
of the purpose for which it was generated and
in the light of all relevant circumstances (Sec.
7[a], RA No. 8792).
If the law requires it to be in the original
form, the requirement is met by an electronic
document if:
1. There exists a reliable assurance as to the
integrity of the document from the time when
it was first generated in its final form; and
2. That document is capable of being displayed
to the person to whom it is to be presented
and no provision of the law shall apply to vary
any and all requirements of existing laws on
formalities required in the execution of
documents for their validity Sec. 7[b], R.A. No.
8792).
Examples of formal contracts
If the form is not complied with, Art. 1357 of the
Civil Code cannot be availed of.
“Art. 1357. If the law requires a document or
other special form, as in the acts and contracts
enumerated in the following article, the
contracting parties may compel each other to
observe that form, once the contract has been
perfected. This right may be exercised
simultaneously with the action upon the
contract.”
1. Donations of real property (these require a
public instrument) (Art. 749, NCC).
2. Donations of personal property (these require
a written contract or document if the donation
exceeds P500) (Art. 748, NCC).
3. Stipulation to pay interest on loans, interest
for the USE of the money (said stipulation
must be in writing) (Art. 1956).
4. Transfer of large cattle (this requires the
transfer of certificate of registration) (Sec.
523, Rev. Adm. Code).
5. Sale of land through an agent (the authority
of the agent must be in writing; otherwise, the
sale is null and void) (Art. 1874, NCC).
6. Contracts of antichresis (here the principal
loan, and the interest of any, must be
specified in writing; otherwise, the contract of
antichresis is void) (Art. 2134, NCC).
Right to compel each other to execute
required form
If the law requires a document or other special
form, as in the acts and contracts enumerated in
Article 1358 of the Civil Code, the contracting
parties may compel each other to observe that
form. (Art.1357, NCC) But before the remedy
granted under Article 1357 can be availed, it is
necessary that the contract must have already
been perfected (Art.1357, NCC) and that the
same must have already been valid and
enforceable as to formalities. (Art.1356,
NCC)
Contracts which must appear in a public
document to be valid are as follows:
1. Donations of immovable property. (Art. 749,
NCC)
201
2. Partnerships where immovable property or
real rights are contributed to the common
fund. (Art. 1771 and 1773, NCC)
Contracts which require form for
convenience
Necessity of Public Document in Article
1358, NCC
The provision of Article 1358 of the Civil Code on
the necessity of a public document is only for
convenience, not for validity or enforceability.
(Dalion vs. CA, G.R. No. 78903, February 28, 1990)
In other words, even if the contracts are required
to appear in a public document pursuant to the
provisions of Article 1358, they nevertheless
remain valid and enforceable as between the
parties thereto:
1. Acts and contracts which have for their object
the creation, transmission, modification or
extinguishment or real rights over immovable
property; sales of real property or of an
interest therein are governed by Articles
1403, No. 2, and 1405.
2. The cession, repudiation or renunciation of
hereditary rights or of those of the conjugal
partnership of gains.
3. The power to administer property, or any
other power which has for its object an act
appearing or which should appear in a public
document, or should prejudice a third person.
4. The cession of actions or rights proceeding
from an act appearing in a public document.
(Art. 1358, NCC)
Contracts, which require form for
enforceability
Statute of frauds: (Art. 1403, par. 2 NCC)
This law provides that the following agreement
shall be unenforceable by action, unless the
same, or some note or memorandum thereof, be
in writing, and subscribed by the party charged,
or by his agent;
1. Agreement that by its terms is not to be
performed within a year from the
making thereof;
The test to determine whether an oral contract is
enforceable under the one-year rule of the
202
Statute of Frauds is whether, under its own term,
performance is possible within a year from the
making thereof. If so, the contract is outside of
the Statute of Frauds and need not be in writing
to be enforceable.
The broad view is that the Statute of Frauds
applies only to agreements not to be performed
on either side within a year from the making
thereof. Agreements to be fully performed on one
side within a year are taken out of the operation
of the statute. (National Bank vs. Philippine Vegetable
Oil Co., G.R. No. L-25400, January 14, 1927)
2. Special promise to answer for the debt,
default or miscarriage of another;
Whether an oral promise to pay the debt of
another is enforceable under the Statute of
Frauds depends on whether such promise is an
original one or collateral promise. The Statute
applies only to a collateral promise, one
which is made by a third party to answer
for the debt or obligation of a primary party
to a contract if that party does not perform.
If the promise is an original or an independent
one, that is, if the promissory becomes primarily
liable for the payment of the debt, the promise is
not within the Statute (Jurado, Comments and
Jurisprudence on Obligations and Contracts, 2010 ed.,
p. 546).
3. Agreement made in consideration of
marriage, other than a mutual promise
to marry;
A marriage settlement is an agreement made in
consideration of marriage covered by the Statute
of Frauds. Hence, it must be in writing (Art. 77,
FC) in order to be enforceable. On the other
hand, while donation propter nuptias are likewise
made in consideration of the marriage, the same
is no longer covered by the Statute because the
requirement of form in donation propter nuptias
is for validity. (Art. 83, FC; in relation to Arts. 748-
749, NCC)
4. Agreement for the sale of goods,
chattels or things in action, at a price
not less than P500.00;
5. Agreement for the leasing for a longer
period than one year, or for the sale of
real property or of an interest therein;
Not all agreements “affecting land” must be put
in writing to attain enforceability (Hernandez vs.
CA, supra). Under the Statute, such formality is
only required of contracts involving leases for
longer than one year, or for the sale of real
property or of an interest therein. (Art. 1403
[2][e], NCC)
6. A representation as to the credit of a
third person.
The note or memorandum, in fact, need not be
contained in a single document; nor, when
contained in two or more papers, need each
paper to be sufficient as to contents and
signature to satisfy the statute. (Berg vs.
Magdalena Estate, Inc., G.R. No. L-3784, October 17,
1952)
Two or more writings properly connected may be
considered together; matters missing or
uncertain in one may be supplied or rendered
certain by another, and their sufficiency will
depend on whether, taken together, they meet
the requirement of the statute as to contents and
the requirements of the statute as to signature.
(Ibid.)
That the exchange of written correspondences
between the parties may constitute sufficient
writing to evidence the agreement for purposes
of complying with the Statute of Frauds. (City of
Cebu vs. Heirs of Rubi, G.R. No. 128579, April 29,
1999)
Fundamental principles governing Statute
of Frauds:
1. The statute simply provides the method by
which the contracts enumerated therein may
be proved, but does not declare them invalid
because they are not reduced to writing.
(Swedish Match, Ab vs. CA, G.R. No. 128120,
October 20, 2004)
2. The statute applies only to executory
contracts and not to contracts which are
either partially or totally performed. (Averia vs.
Averia, G.R. No. 141877, August 13, 2004)
If the rule were otherwise, the Statute of Frauds
could be used to perpetuate fraud, which is
contrary to its avowed purpose of preventing
fraud (Carbonell vs. Poncio, G.R. No. L-11231, May 12,
1958).
3. Stated otherwise, the defense is applicable
only if the action is either for specific
performance of the oral contract or for
recovery of damages arising from a violation
thereof. (Asia Productions Co., Inc. vs. Paño, G.R.
No. 510518, January 27, 1992; citing Facturan vs.
Sabanal, G.R. No. L-2090, September 27, 1948
and Eusebio v. Sociedad Agricola de Balarin, G.R.
No. 21519, March 31, 1966)
4. The defense of the Statute of Frauds is
personal to the contracting parties and may
not be raised by strangers to the contract.
(Art. 1408, NCC; Ayson vs. CA, G.R. No.
223254, December 1, 2016)
5. The defense of the Statute of Frauds may be
waived either by: (a) failing to object to the
presentation of oral evidence to prove the
contract, or (b) accepting benefits therefrom.
(Art. 1405, NCC)
6. The Statute of Frauds refers to specific kinds
of transactions and cannot apply to any other
transaction that is not enumerated in Article
1403, paragraph 2, of the Civil Code. (Cruz vs.
J.M. Tuason & Co., Inc., G.R. No. L-23749, April
29, 1977; Western Mindanao Lumber Co., Inc. vs.
Medalle, G.R. No. L-23213, October 28, 1977;
Rosencor Development Corp. vs. Inquing, G. R.
No. 140479, March 8, 2011)
An oral partition of real property is enforceable
since partition is not a conveyance of property but
simply a segregation and designation of the part
of the property, which belongs to the co-owners.
(Vda. De Espina vs. Abaya, G.R. No. 45142, April 26,
1991)
A right of first refusal need not be written to be
enforceable and may be proven by oral evidence
since it is not by any means a perfected contract
of sale of real property. (Rosencor Development
Corp. vs. Inquing, supra) An oral agreement
creating an easement of right-of-way is also
enforceable since it is not a sale of real property
or of an interest therein. (Western Mindanao
Lumber Co., Inc. vs. Medalle, G.R. No. L-23213,
October 28, 1977)
Statute of Frauds is not applicable when writing
does not express the true intent of the parties,
and one of such parties offers to prove by parol
evidence the true agreement (Cuyugan vs. Santos,
G.R. No. L-10265, March 3, 1916).
203
Contracts that MUST be registered for
VALIDITY:
● Chattel mortgages (Art. 2140, NCC)
● Sale or transfer of large cattle (Cattle
Registration Act)
3. REFORMATION OF INSTRUMENTS
Definition – It is a remedy to conform to the
real intention of the parties due to mistake, fraud,
inequitable conduct, accident. (Art. 1359, NCC)
It is remedy in equity, whereby a written
instrument is made or construed so as to express
or conform to the real intention of the parties,
where some error or mistake has been
committed. (Rabuya, Pre-Bar Reviewer in Civil Law,
2021 ed., p.417, citing Huibonhoa vs. CA, G.R. No.
95897, December 14, 1999)
Requisites in Reformation of Instruments
(B.F. Corporation vs. Form-Eze Systems, Inc., G.R. No.
192948, December 7, 2016)
1. Meeting of the minds to the contract
2. The true intention is not expressed in the
instrument
3. It was not expressed by reason of (MAFI)
1. Mistake
2. Accident
3. Fraud
4. Inequitable conduct
NOTE: If the mistake is mutual, in order for the
instrument be reformed, the following requisites
must be present: (FC³)
1. Mistake should be a fact;
2. Such mistake must be proved by clear and
convincing evidence; and
3. The mistake should be common to both
parties to the instrument (Rabuya, Pre-Bar
Reviewer in Civil Law, 2021 ed., p.417)
The facts upon which relief by way of reformation
of the instrument is sought are put in issue by the
pleadings.
There must be a clear and convincing proof of the
mistake, accident, fraud, or inequitable conduct
(MAFI)
204
Cases where Reformation is Allowed:
1. When a mutual mistake of the parties causes
the failure of the instrument to disclose the
agreement (Art. 1361, NCC)
2. When one party was mistaken and the other
acted fraudulently or inequitably in such a
way that the instrument does not show their
true intention, the former may ask for the
reformation of the instrument. (Art. 1362,
NCC)
3. When one party was mistaken and the other
knew or believed that the instrument did not
state their real agreement, but concealed
that fact from the former. (Art. 1363, NCC)
4. When through ignorance, lack of skill,
negligence, or bad faith on the part of the
person drafting the instrument, does not
express the true intention of the parties. (Art.
1364, NCC)
5. If the parties agree upon the mortgage or
pledge of real or personal property, but the
instrument states that the property is sold
absolutely or with right of purchase. (Art.
1365, NCC)
Reformation and Annulment of Contracts
Reformation Annulment of Contract
of Instrument
There is a There is a defective
Perfectly valid contract by reason of
contract. mistake, fraud, inequitable
conduct, or accident.
(Jurado, Comments and Jurisprudence on Obligations
and Contracts, 2010 ed., p. 488)
Cases where reformation IS NOT allowed
1. Simple, unconditional donations inter vivos;
2. Wills;
3. When the agreement is void;
4. When an action to enforce the instrument is
filed (estoppel).
5. If by mistake, fraud, inequitable conduct, or
accident has prevented a meeting of the
minds of the parties— instead, the remedy is
annulment of the contract and not
reformation; (Article 1359b)
6. When the contract is unenforceable due to
failure to comply with the Statute of Frauds.
 (Rabuya, Obligations and Contracts, 2019 ed.,
p.547)
Prescriptive Period for Reformation of
Instruments
1. 10 years from the date of execution of the
instrument. (Pineda, Obligations and
Contracts, 2000 ed., p. 483)
2. It may be ordered at the instance of:
a. If the mistake is mutual – either
party or his successors in interest;
otherwise;
b. Upon petition of the injured party; or
c. His heirs or assigns. (Art. 1368, NCC)
3. In reformation of contracts, what is reformed
is not the contract itself, but the instrument
embodying the contract.
4. It follows that whether the contract is
disadvantageous or not is irrelevant to
reformation and therefore, cannot be an
element in the determination of the period for
prescription of the action to reform. (Pineda,
Obligations and Contracts, 2000 ed., p. 469)
Who may Demand Reformation (Article
1367, 1368, and 1369)
1. If mistake is mutual-either party;
2. If mistake is not mutual-injured party, his heirs
and assigns;
4. INTERPRETATION OF CONTRACTS
Definition – Interpretation of a contract is the
determination of the meaning of the words used
by the parties in their contract (De Leon and De
Leon Jr., Comments and Cases: Obligations and
Contracts, 2010 ed., p. 661)
Application – If the terms of a contract are clear
and leave no doubt upon the intention of the
contracting parties, the literal meaning of its
stipulations shall control.
If the words appear contrary to the evident
intention of the parties, the latter shall prevail
over the former. (Art. 1370, NCC)
Applicable rules on determining the
intention of parties:
1. When the terms of the contract are clear, and
leave no doubt as to the intention of the
parties, the courts have no authority to alter
the contract by construction or make a new
contract for the parties. (Benguet Corp., vs.
Cabildo G.R. No. 151402 citing Bautista v. C.A.,
379 Phil. 386, 399, 2000)
2. In order to judge the intention of the
contracting parties, their contemporaneous
and subsequent acts shall be principally
considered. (Art. 1371, NCC, and TSPIC Corp. vs.
TSPIC Employees Union (FFW), G.R. No. 163419,
February 13, 2008)
3. A contract is what the law defines it to be,
considering its essential elements, and not
what is called by the contracting parties. (De
Leon and De Leon, Comments and Cases:
Obligations and Contracts, 2010 ed., p. 678., citing
Schmid and Oberly, Inc. vs. RJL Martinez Fishing
Corp., G.R. No. 75198, October 18, 1988 and
Filinvest Credit Corp. vs. Court of Appeals, G.R.
No. 82508, September 29, 1989)
4. However general the terms of a contract may
be, they shall not be understood to
comprehend things that are distinct and
cases that are different from those which the
parties intend to agree.(Art. 1372, NCC.)
5. If some stipulation of any contract should
admit of several meanings, it shall be
understood as bearing that import which is
most adequate to render it effectual. (Art.
1373, NCC,)
6. The various stipulations of a contract shall be
interpreted together, attributing to the
doubtful ones that sense which may result
from all of them taken jointly. (Art. 1374, NCC,
Section 12, Rule 130, and Hanjin Heavy Industries
and Construction Co., Ltd. v. Dynamic Planners
and Construction Corp., G.R. Nos. 169408 &
170144, April 30, 2008)
7. Words which may have different
significations shall be understood in that
which is most in keeping with the nature and
object of the contract. (Art. 1375, NCC, and
TSPIC Corp. v. TSPIC Employees Union (FFW),
Supra.)
8. The usage or custom of the place shall be
borne in mind in the interpretation of the
ambiguities of a contract, and shall fill the
omission of stipulations which are ordinarily
established. (Art. 1376, NCC)
9. The interpretation of obscure words or
stipulations in a contract shall not favor the
205
 party who caused the obscurity. (Art. 1377,
NCC, Fortune Medicare, Inc. vs. Amorin, G.R. No.
195872, March 12, 2014, and Horrigan v. Troika
Commercial, Inc., G.R. No. 148411, November 29,
2005)
10. If the doubts refer to incidental
circumstances of a gratuitous contract (see
Art. 1350, NCC), such interpretation shall be
made which would result in the least
transmission of rights and interests. (De Leon
and De Leon Jr., Comments and Cases:
Obligations and Contracts, 2010 ed., p. 699)
11. If the contract in question is onerous (see Art.
1350), such interpretation should be made
which would result in favor of the greatest
reciprocity of interests. (De Leon and De Leon
Jr., Comments and Cases: Obligations and
Contracts, 2010 ed., p 699 citing Rodriguez vs.
Belgica, G.R. No. 10801, February 28, 1961)
12. If the doubt refers to the principal object of
the contract and such doubt cannot be
resolved, thereby leaving the intention of the
parties unknown, the contract shall be null
and void (Art. 1378, NCC)
13. The Rules of Court on the interpretation of
documents contained in Rule 130, Sec. 10-19
are applicable for interpretation of contracts.
(De Leon and De Leon Jr., Comments and Cases:
Obligations and Contracts, 2010 ed., p. 702)
Revised Rules on Evidence, Rule 130 –
Rules of Admissibility
Interpretation of Documents
1. Interpretation of a writing according to its
legal meaning. — The language of a writing
is to be interpreted according to the legal
meaning it bears in the place of its execution,
unless the parties intended otherwise (Sec 11,
2019 Amendments to the ROC).
2. Instrument construed so as to give effect to
all provisions. — In the construction of an
instrument, where there are several
provisions or particulars, such a construction
is, if possible, to be adopted as will give effect
to all (Sec 12, 2019 Amendments to the ROC).
3. Interpretation according to intention; general
and particular provisions. — In the
construction of an instrument, the intention
of the parties is to be pursued; and when a
general and a particular provision are
inconsistent, the latter is paramount to the
former. So a particular intent will control a
206
general one that is inconsistent with it (Sec 13,
2019 Amendments to the ROC).
4. Interpretation according to circumstances. —
For the proper construction of an instrument,
the circumstances under which it was made,
including the situation of the subject thereof
and of the parties to it, may be shown, so that
the judge may be placed in the position of
those who language he is to interpret (Sec 14,
2019 Amendments to the ROC).
5. Peculiar signification of terms. — The terms of
a writing are presumed to have been used in
their primary and general acceptation, but
evidence is admissible to show that they have
a local, technical, or otherwise peculiar
signification, and were so used and
understood in the particular instance, in
which case the agreement must be construed
accordingly (Sec 15, 2019 Amendments to the
ROC).
6. Written words control printed. — When an
instrument consists partly of written words
and partly of a printed form, and the two are
inconsistent, the former controls the latter
(Sec 16, 2019 Amendments to the ROC).
7. Experts and interpreters to be used in
explaining certain writings. — When the
characters in which an instrument is written
are difficult to be deciphered, or the language
is not understood by the court, the evidence
of persons skilled in deciphering the
characters, or who understand the language,
is admissible to declare the characters or the
meaning of the language (Sec 17, 2019
Amendments to the ROC).
8. Of Two constructions, which preferred. —
When the terms of an agreement have been
intended in a different sense by the different
parties to it, that sense is to prevail against
either party in which he supposed the other
understood it, and when different
constructions of a provision are otherwise
equally proper, that is to be taken which is
the most favorable to the party in whose
favor the provision was made (Sec 18, 2019
Amendments to the ROC).
9. Construction in favor of natural right. — When
an instrument is equally susceptible of two
interpretations, one in favor of natural right
 and the other against it, the former is to be
adopted (Sec 19, 2019 Amendments to the ROC).
10. Interpretation according to usage. — An
instrument may be construed according to
usage, in order to determine its true character
(Sec 20, 2019 Amendments to the ROC).
Essential Features of Defective Contracts
(Jurado, Comments and Jurisprudence on
Obligations and Contracts, 2010, p. 501-502).
1. As to defect:
a. In rescissible contracts, there is damage or
injury either to one of the contracting
parties or to third persons;
b. In voidable contracts, there is vitiation of
consent or legal incapacity of one of the
contracting parties;
c. In unenforceable contracts, the contract is
entered into in excess or without any
authority, or does not comply with the
Statute of Frauds, or both contracting
parties are legally incapacitated;
d. In void or inexistent contracts, one or some
of the essential requisites of a valid
contract are lacking either in fact or in law.
2. As to effect:
a. The first are considered valid and
enforceable until they are rescinded by a
competent court;
b. The second are considered valid and
enforceable until they are annulled by a
competent court;
c. The third cannot be enforced by a proper
action in court;
d. The fourth do not, as a GR, produce any
legal effect.
3. As to prescriptibility of action or defense:
a. In the first, the action for rescission may
prescribe;
b. In the second, the action for annulment or
the defense of annullability may prescribe;
c. In the third, the corresponding action for
recovery, if there was total or partial
performance of the unenforceable contract
under No. 1 or No. 3 of Art. 1403, may
prescribe.
d. In the fourth, the action for declaration of
nullity or inexistence or the defense of
nullity or inexistence does not prescribe
4. As to susceptibility of ratification:
a. The first are not susceptible of ratification;
b. The second are susceptible of ratification;
c. The third are susceptible of ratification;
d. The fourth are not susceptible of
ratification
5. As to who may assail contracts:
a. The first maybe assailed not only by a
contracting party but even by a third
person who is prejudiced or damaged by
the contract;
b. The second may be assailed only by a
contracting party;
c. The third may be assailed only by a
contracting party;
d. The fourth may be assailed not only by a
contracting party but even by a third
person whose interest is directly affected.
6. As to how contracts may be assailed:
a. The first may be assailed directly only, and
not collaterally;
b. The second may be assailed directly or
collaterally;
c. The third may be assailed directly or
collaterally;
d. The fourth may be assailed directly or
collaterally (Jurado, Comments and
Jurisprudence on Obligations and Contracts,
2010 ed., p. 501-502)
5. RESCISSIBLE CONTRACTS
They are the least infirm or defective. It contains
all essential requisites of a valid contract, but by
reason of injury or damage (lesion) to one of the
parties or third persons, such as creditors, the
contract may be rescinded. Thus, the defect is
external. Until such contracts are rescinded in an
appropriate proceeding, they remain valid and
binding upon the parties thereto;(Rabuya,
Obligations and Contracts, 2019 ed., p.558)
Rescission is a remedy granted by law to the
contracting parties and even to third persons, to
secure the reparation of damages caused to them
by a contract, even if this should be valid, by
restoration of things to their condition at the
moment prior to the celebration of contract. It
implies a contract, which even if eventually valid,
produces lesion or a pecuniary damage to
someone. (Rabuya, Civil Law Reviewer Volume II,
2017 ed., p. 250) Thus its purpose is to make
ineffective a contract validly entered into and,
207
therefore, obligatory under normal conditions.
(Ada vs. Baylon, G.R. No. 182435, August 13, 2012)
The Civil Code uses rescission in two different
contexts: (1) rescission on account of breach of
contract under Article 1191; and (2) rescission by
reason of lesion or economic prejudice under
Article 1381. (Rabuya, Obligations and Contracts,
2019 ed., p.559)
Nature of Rescissible Contracts under
Article 1381
Contracts which are rescissible are valid contracts
having all essential requisites of a contract, and
therefore obligatory under normal conditions, but
by reason of injury or damage, may be rescinded.
(Ada vs. Baylon, Supra.)
Contracts Declared Rescissible Under
Articles 1381 and 1382, NCC:
1. Contracts entered into by guardians on behalf
of the ward and contract entered into by legal
representatives on behalf of the absentee, if
the ward or the absentee suffers lesion by
more than ¼ of the value of the things which
are the object of the contract. (Art. 1381 [1]
and [2], NCC) But if the court approved the
contract, the same is not rescissible (Art.
1386, NCC);
2. Contracts undertaken in fraud of creditors
(Art. 1381 [3], NCC);
3. Contracts, which refer to things under
litigation if they have been entered into by the
defendant without the knowledge and
approval of the litigants or of competent
judicial authority (Art. 1381 [4], NCC);
4. All other contracts specially declared by law
to be subject to rescission (Art. 1381 [5],
NCC); and
5. Payments made in a state of insolvency for
obligations to whose fulfilment the debtor
could not be compelled at the time they were
effected. (Art. 1382, NCC).
Rescission under Art. 1381 and Rescission
By Mutual Consent
Article 1295 (now Art. 1385) refers to contracts
that are rescissible in accordance with law in the
cases expressly fixed thereby, but it does not
refer to contracts that are rescinded by mutual
consent and for the mutual convenience of the
contracting parties. The rescission in question
208
was not originated by any of the causes specified
in Articles 1291 and 1292 (now Arts. 1381 and
1382), nor is it any relief for the purposes sought
by these articles. It is simply another contract for
the dissolution of a previous one, and its effects,
in relation to the contract so dissolved, should be
determined by the agreement made by the
parties, or by the application of other legal
provisions, but not by Article 1295 (now Art.
1385), which is not applicable. (Aquino vs. Tanedo,
G.R. No. 12457, January 22, 1919)
Requisites for Rescission of Contracts
entered into on behalf of Wards and
Absentees under Art. 1381 Nos. 1 and 2:
1. The contract must have been entered into by
a guardian in behalf of his ward or by a legal
representative in behalf of an absentee (Art.
1381 Nos. 1 and 2 NCC);
2. The ward or absentee must have suffered
lesion of more than one-fourth of the value
of the property which is the object of the
contract (Art. 1381 Nos. 1 and 2 NCC);
3. The contract must have been entered into
without judicial approval (Art. 1386, NCC);
4. There must be no other legal means for
obtaining reparation for the lesion (Art. 1383,
NCC);
1. The person bringing the action must be
able to return whatever he may be
obliged to restore (Art. 1385 par. 1, NCC);
and
2. The object of the contract must not be
legally in the possession of a third person
who did not act in bad faith. (Art. 1385,
par. 2, NCC)
NOTE: If the object of the contract is legally in
the possession of a third person who did not act
in bad faith, the remedy available to the person
suffering the lesion is indemnification for
damages and not rescission. (Art. 1385, par. 3,
NCC; Jurado, Comments and Jurisprudence on
Obligations and Contracts, 2010 ed., p. 507)
Requisites for Rescission of Contracts in
Fraud of Creditors under Art. 1381 No. 3
(accion pauliana)
There must be a credit existing prior to the
celebration of the contract;
1. There must be a fraud, or at least, the intent
to commit fraud, or at least, the intent to
 commit fraud to the prejudice of the creditor
seeking the rescission;
2. The creditor cannot in any other legal manner
collect his credit; and
3. The object of the contract must not be legally
in the possession of a third person who did
not act in bad faith.
NOTE: If the object of the contract is legally in
the possession of a third person who did not act
in bad faith, the remedy available to the creditor
is to proceed against the person causing the loss
for damages. (Jurado, Comments and Jurisprudence
on Obligations and Contracts, 2010 ed., p. 508)
The GR is that rescission requires the existence
of creditors at the time of the alleged fraudulent
alienation, and this must be proved as one of the
bases of the judicial pronouncement setting aside
the contract. Without any prior existing debt,
there can neither be injury nor fraud. While it is
necessary that the credit of the plaintiff in the
accion pauliana must exist prior to the fraudulent
alienation, the date of the judgment enforcing it
is immaterial. Even if the judgment be
subsequent to the alienation, it is merely
declaratory, with retroactive effect to the date
when the credit was constituted (Siguan vs. Lim,
G.R. No. 134685 November 19, 1999).
Presumptions of Fraud
The law presumes that there is fraud of creditors
in the following cases:
1. Alienation of property by gratuitous title if the
debtor has not reserved sufficient property to
pay all of his debts contracted before such
alienations. (Art. 1387 par. 1 NCC)
2. Alienation of property by onerous title if made
by a debtor against whom some judgment
has been rendered in any instance or some
writ of attachment has been issued. The
decision or attachment need not refer to the
property alienated and need not have been
obtained by the party seeking the rescission.
(Art. 1387 par. 2, NCC)
Badges of Fraud
The following circumstances have been
denominated by the courts as badges of fraud.
1. The fact that the cause or consideration of
the conveyance is inadequate.
2. A transfer made by a debtor after a suit has
been begun and while it is pending against
him.
3. A sale on credit by an insolvent debtor.
4. Evidence of large indebtedness or complete
insolvency.
5. The transfer of all or nearly all of his property
by a debtor, especially when he is insolvent
or greatly embarrassed financially.
6. The fact that the transfer is made between
father and son, when there are present
others of the above circumstances.
7. The failure of the vendee to take exclusive
possession of a.ll the property (Oria vs.
Mcmicking, G.R. No. L-7003, January 18, 1912)
Acquisition by Third Party
If in Good Faith - if the property is acquired by
a purchaser in good faith and for value, the
acquisition as far as the law is concerned is not
fraudulent. The right of such purchaser over the
property is legally superior to that of any other
person even as against the creditor who is
prejudiced by the conveyance. Consequently, the
contract or conveyance is not rescissible (Honrado
vs. Marcayda,. 49 Off. Gaz. 1492, C.A.)
If in Bad Faith - if the property is acquired by
one who is not a purchaser in good faith and for
value, it is clear that the contract or conveyance
is rescissible and shall indemnify the latter for
damages suffered by them on account of the
alienation, whenever, due to any cause, it should
be impossible for him to return them. (Art. 1388,
NCC)
Requisites for Rescission of Contracts by
Insolvent under Art. 1382
1. That it must have been made in a state of
insolvency, and
2. That the obligation must have been one which
the debtor could not be compelled to pay at
the time such payment was effected. (Jurado,
Comments and Jurisprudence on Obligations and
Contracts, 2010 ed., p. 509)
209
Requisites of Rescission (as subsidiary
remedy)
The following are the requisites in order that the
remedy of rescission may be availed of:
1. The contract must be validly agreed upon (Art.
1380; see Onglengco vs. Ozaeta and Hernandez,
G.R. No. L-46685, January 20, 1940);
2. There must be lesion or pecuniary prejudice
or damage to one of the parties or to a third
person (Art. 1381, NCC);
3. The rescission must be based upon a case
especially provided by law (Arts. 1380, 1381,
1382, NCC);
4. There must be no other legal remedy to obtain
reparation for the damage (Art. 1383, NCC);
5. The party asking for rescission must be able
to return what he is obliged to restore by
reason of the contract (Art. 1385 par. 1, NCC);
6. The object of the contract must not legally be
in the possession of third persons who did not
act in bad faith (Ibid., par. 2, NCC); and
7. The period for filing the action for rescission
must not have been prescribed. (Art. 1389,
NCC)
Prescriptive Period
GR: The action for rescission must be filed within
four (4) years from accrual of the right of action.
(Art 1389, NCC)
XPNs:
1. For persons under guardianship the period
shall begin from the termination of incapacity;
and
2. For absentees, from the time the domicile is
known. (Art. 1389, NCC)
Laches bars an action for rescission or annulment
of a contract. (Art. 1391 NCC)
Extent of Rescission
The entire contract need not be set aside if the
damage can be repaired or covered by partial
rescission. The rescission shall be only to the
extent of the creditor’s unsatisfied credit. (Art.
1384, NCC)
Effect of Rescission
1. Obligation of mutual restitution
2. Abrogation of contract
210
3. Obligation of third person to restore (Art.
1358, NCC)
6. VOIDABLE CONTRACTS
They are also valid until annulled unless there has
been a ratification. In a voidable contract, the
defect is caused by vice of consent.
Voidable or annullable contracts are those which
possess all the essential requisites of a valid
contract but one of the parties is legally incapable
of giving consent, or consent is vitiated by
mistake, violence, intimidation undue influence,
or fraud. (Art. 1390, NCC)
It is valid and binding and produces all its civil
effects, until it is set aside by final judgement of
a competent court in an action for annulment.
(Art. 1390, last par., NCC; Suntay vs. Cojuangco-
Suntay, G.R. No. 183053, October 10, 2012)
Nature and Characteristics
1. It is valid and binding and produces all its civil
effects, until it is set aside by final judgment
of a competent court.
2. However, it is defective because the consent
of one of the parties was vitiated by want of
capacity, error, violence, intimidation, undue
influence, or deceit. Hence, may be annulled
by an action in court
3. It may be rendered perfectly valid by
ratification, which can be express or implied,
such as by accepting and retaining the
benefits of a contract.
4. The action for annulment is subject to the
statute of limitations. In other words, the
action for annulment may prescribe after the
lapse of four years.
5. A voidable contract can be assailed only in a
direct proceeding for that purpose and not
collaterally. (Niñal vs. Bayadog, G.R. No.
133778, March 14, 2000)
Two kinds of voidable contracts:
1. Those where one of the parties is incapable of
giving consent to a contract: and;
2. Those where the consent is vitiated by
mistake, violence, intimidation, undue
influence or fraud. (Art. 1390, NCC; Fule vs.
CA, G.R. No. L-40502, November 29, 1976)
But where both parties are incapable of giving XPN: A person who is not a party obliged
consent, the contract is not merely voidable but principally or subsidiarily under a contract, may
enforceable. (Art. 1403 [3], NCC) exercise an action for annulment of the contract
if (a) he is prejudiced in his rights with respect to
Differences between action for annulment one of the contracting parties; and (b) he can
and action for rescission show detriment which would positively result to
him from the contract in which he has no
ANNULMENT RESCISSION intervention. (Teves vs. People’s Homesite &
Based on vitiation of Based on lesion to one Housing Corp., G.R. No. L-21498, June 27, 1968)
consent (Art. 1390, of the parties or a third
NCC) person (Art. 1381, Prescriptive Period– Action for annulment
NCC) must be brought within four (4) years. (Art. 1391,
May be brought only May also be brought by NCC) This period shall begin:
by a party to the a third person who
contract suffered damage by 1. In case of minority and incapacity, from the
(Arts. 1390 & 1397, reason of the contract time the guardianship ceases;
NCC) (Art. 1381, NCC) 2. In case of mistake or fraud, from the time of
Principal action (Art. Merely subsidiary (Art. its discovery;
1390, NCC) 1383, NCC) 3. In case of intimidation, violence, or undue
Presupposes that the The contract was influence, from the time the defect ceases.
contract is legally validly entered into
defective (Art. 1390, (Art 1380, NCC) Effects of ratification
NCC)
Seeks imposition of Remedy allowed by Ratification cleanses the contract from all its
sanction by law on law on ground of defects from the moment it was constituted. (Art.
the guilty party for equity (Art. 1383, 1396, NCC) The contract thus becomes valid.
reason of public NCC) (Art. 1390) Hence, the action to annul is
interest (Ibid.) extinguished (Art. 1392; Tan Ah Chan vs.
Allowed even if the Barred by Gonzalez, G.R. No. 28595, October 11, 1928)
plaintiff has been indemnification (Arts.
indemnified (Art. 1383, 1384, NCC) How ratification can be effected:
1390, NCC)
1. It can be effected either expressly or
Annulment under Article 1390 and rescission impliedly. An implied ratification is deemed
under Article 1191 are inconsistent remedies. A made when the party entitled to ask for
party pursuing the remedy of rescission impliedly annulment, (1) with the knowledge of the
admits the validity of the subject contract. If he reason which makes the contract voidable, (2)
demands annulment, he forfeits his right to seek and such reason having ceased, (3) should
rescission. (De Leon & De Leon, Comments and execute any act evincing an intent to abide by
Cases On Obligations and Contracts, 2014 ed., p. the contract and implying an intention to
820) waive his right to annul the same (Art. 1393,
NCC).
Who may institute action for annulment? 2. If the defect consists in the incapacity of one
of the parties, the ratification may be effected
GR: In order for a party to have the necessary by the guardian of the incapacitated person
standing to institute action for annulment, the (Art. 1394, NCC).
following requisites must be satisfied: 3. It does not require the conformity of the
1. He must be a party obliged principally or contracting party who has no right to bring the
subsidiary in the contract; and action for annulment (Art. 1395, NCC).
2. He is not the person sui juris or the party
responsible for the vice or defect (Art. 1397, Requisites for Ratification:
NCC)
1. The contract must be voidable and annullable;

211
2. Ratification is made with knowledge of the
reason which makes the contract voidable
(Art. 1393 NCC);
3. At the time it is made, the reason which makes
the contract voidable has already ceased (Art.
1393, NCC);
4. It is effected by the party who has the right to
bring the action for annulment. (Art. 1395,
NCC)
Effects of Annulment Decree:
GR: The effect of a juridical decree annulling
voidable contract is to restore to the contracting
parties their original condition before the
contract, and hence, they are required to make
mutual restitution of the subject matter, with its
fruits, and the price with its interest. In
obligations to render service, the value thereof
shall be the basis for damages. (Art. 1398, NCC)
XPN: When the defect of the contract consists in
the incapacity of one of the parties, the
incapacitated person IS NOT obliged to make
restitution EXCEPT INSOFAR as he has been
benefited by the thing or price received by him.
(Art. 1399, NCC)
As long as one of the contracting parties does not
restore what in virtue of the decree of annulment
he is bound to return, the other cannot be
compelled to comply with what is incumbent
upon him. (Art. 1402, NCC)
Effect of loss of object of contract:
If lost by Defendant:
1. Through his fault, he is obliged to return the
fruits received, the value of the thing at the
time of loss, with interest from the same date
(Art. 1400, NCC);
2. If the loss is without fault on the part of the
defendant, but by fortuitous event, the action
for annulment is extinguished by loss of the
thing only when such loss is due to the fault
or fraud of the person entitled to ask for
annulment. The defendant is free from
liability. (Tolentino, Civil Code of the
Philippines Volume 4, 1991 ed.,p. 613-614)
212
If lost by party who has right to annul
(plaintiff):
1. Through his fault or fraud, the action for
annulment is extinguished (Art. 1404, NCC),
even if at the time of the loss, the plaintiff was
still minor or was insane. (Report of the Code
Commission March 8, 1951)
2. Through fortuitous event and without his
fault, the action for annulment is not
extinguished. Hence, if the plaintiff offers the
value of the thing at the time of the loss
(without need of paying interest thereon), the
defendant can be obliged to make restitution.
(Tolentino, Civil Code of the Philippines Volume 4,
1991 ed., p. 613-614)
The action for annulment is extinguished only
when the loss of the object of the contract is due
to the fault or fraud of the plaintiff (or the party
entitled to ask for annulment. (Art. 1401, NCC)
7. UNENFORCEABLE CONTRACTS
They cannot be sued upon or enforced unless
they are ratified. As regards the degree of
defectiveness, voidable contracts are further
away from absolute nullity than unenforceable
contracts. In other words, an unenforceable
contract occupies an intermediate ground
between a voidable and a void contract.
Nature and Characteristics:
1. They cannot be sued upon or enforced unless
they are ratified (Art. 1403, NCC), as
distinguished rescissible and annullable
contracts which produce legal effects unless
they are set aside by a competent court.
2. Although valid, are unenforceable unless they
are ratified. The defect of the contract can be
cured by ratification.
3. They cannot be assailed by third persons. (Art.
1408, NCC) In other words, the defense of
unenforceability of contracts is personal only
to the parties to the contract.
Three kinds of unenforceable contracts:
1. Those entered into in the name of another
without the latter’s authority or legal
representation, or beyond the agent’s power;
2. Those that do not comply with the Statute of
Frauds; and
3. Those where both parties are incapable of
giving consent to a contract. (Art. 1403, NCC)
Without or Excess of Authority:
1. If the agent contracts without authority:
a. And the contract involves the sale of a
parcel of land or any interest therein
belonging to the principal, the sale is void
(Art. 1874, NCC);
b. And the principal does not ratify the
contract, the contract is void as to the
alleged principal but the agent is personally
liable to the party with whom he
contracted;
c. The third person with whom the agent
contracted may revoke the contract prior
to its ratification by the principal. (Art.
1317, NCC)
2. If the agent exceeds his authority and the
principal does not ratify the contract:
a. The principal is not bound (Art. 1910,
NCC) except when he allows the agent to
act as though the latter had full powers,
he becomes solidarily liable with the
agent. (Art. 1911 NCC)
b. The agent is personally liable to the party
with whom he contracts if he did not give
such party sufficient notice of his powers.
(Art. 1897, NCC)
3. If the agent exceeds his authority and the
principal ratifies the contract or has signified
his willingness to ratify the agent’s acts, a
third person cannot set up the fact that the
agent has exceeded his powers. (Art. 1901,
NCC)
Statute of Frauds
Form required: Only formality required is that
the contract or agreement must be in writing and
subscribed by the party charged or by his agent
(Art. 1403[2], NCC).
Contracts under Statute of Frauds (Art.
1403 No. 2)
(a) An agreement that by its terms is not to be
performed within a year from the making
thereof;
It is well-settled that this refers only to
agreements which by their terms are not to be
performed on either side within a year from the
execution thereof. Hence, those which are to be
fully performed on one side within a year are
taken out of the operation of the statute. (Phil.
National Bank vs. Phil. Vegetable Oil Co., G.R. No.
L-25400, January 14, 1927)
(b) A special promise to answer for the debt,
default, or miscarriage of another;
The true test as to whether a promise is within
the statute has been said to lie in the answer to
the question whether the promise is an original
or a collateral one. If the promise is an original or
an independent one, that is, if the promisor
becomes thereby primarily liable for the payment
of the debt, the promise is not within the statute.
But, on the other hand, if the promise is collateral
to the agreement of another and the promisor
becomes merely a surety, the promise must be in
writing. Just what is the character of a promise
as original (Reiss vs. Memije, G.R. No. L-5447,
March 1, 1910)
(c) An agreement made in consideration of
marriage, other than a mutual promise to
marry;
(d) An agreement for the sale of goods, chattels
or things in action, at a price not less than five
hundred pesos, unless the buyer accept and
receive part of such goods and chattels, or
the evidences, or some of them, of such
things in action or pay at the time some part
of the purchase money; but when a sale is
made by auction and entry is made by the
auctioneer in his sales book, at the time of the
sale, of the amount and kind of property sold,
terms of sale, price, names of the purchasers
and person on whose account the sale is
made, it is a sufficient memorandum;
(e) An agreement for the leasing for a longer
period than one year, or for the sale of real
property or of an interest therein;
Obviously, an agreement creating an easement
of right-of way is not one of those contracts
213
covered by the statute of frauds since it is not a
sale of real property or of an interest therein.
(Western Mindanao Co. vs. Medalle, G.R. No. L-23213,
October 28, 1977)
(f) A representation as to the credit of a third
person.
When a contract is enforceable under the Statute
of Frauds, and a public document is necessary for
its registration in the Registry of Deeds, the
parties may avail themselves of the right under
Article 1357. (Art. 1406 NCC)
Performance of Contract
Rule: Statute of Frauds is applicable only to
those contracts which are executory and not to
those which have been consummated either
totally or partially. (Arroyo vs. Azur, G.R. No. L-
18682, June 30, 1965)
Rationale: The Statute of Frauds was enacted
for the purpose of preventing frauds. Hence, it
should not be made the instrument to further
them. (Phil. National Bank vs. Phil. Vegetable Oil Co.,
G.R. No. L-25400, January 14, 1927)
Ratification of unenforceable contracts:
1. For contracts infringing the Statute of Frauds,
they are ratified either by:
a. Failure to object to the presentation of
oral evidence to prove the contract; or
b. Acceptance of the benefits under the
contract (Art. 1405, NCC);
2. For contracts which are unenforceable by
reason of incapacity of both parties:
a. The ratification may be made by the
parents or guardian of the incapacitated;
b. If the contract is ratified by the parent or
guardian of one of the contracting
parties, the contract becomes voidable
because such ratification shall give the
contract the same effect as if only one of
them were incapacitated (Art. 1407,
NCC.);
If the ratification is made by the parents or
guardians of both the contracting parties, the
contract is considered validated from the
inception. (Art. 1407, NCC)
214
Express Trust Concerning Real Property
It will be observed that while the Statue of Frauds
makes no mention of it, still under Art. 1443 of
the Civil Code, “no express trusts concerning
immovable or any interest therein may be proved
by parol (oral) evidence.” Hence, we can safely
conclude that the Statute of Frauds also applies
to express conventional trusts (Paras, Civil Code of
the Philippines Annotated, 2008, p 806).
Rule on Authority of the Agent to Sell Land
or Any Interest Therein
Under Art. 1874 of the NCC, “when a sale of a
piece of land or any interest therein is through an
agent, the authority of the latter shall be in
writing; otherwise, the sale shall be void. Thus,
the law provides sale is not merely unenforceable
but void (Paras, Civil Code of the Philippines
Annotated, 2008, p 811).
8. VOID OR INEXISTENT CONTRACTS –
They are absolutely null and void. They have no
legal effect at all and cannot be ratified.
These contracts are absolute nullity and produce
no effect, as if it had never been executed or
entered into:
a. Those whose cause, object or purpose is
contrary to law, morals, good customs, public
order or public policy (Art. 1409 [1], NCC.);
Cause is the essential reason which moves the
parties to enter into [a contract]. [It] should be
distinguished from motive, which is the particular
reason of a contracting party which does not
affect the other party (Uy vs. CA, G.R. No. 120465,
Sept. 9, 1999).
For example, in a contract of sale of a piece of
land, such as in this case, the cause of the vendor
entering into the contract is to obtain the price,
and for the vendee, NHA it is the acquisition of
the land. The motive of the NHA, on the other
hand, is to use said lands for housing (Id.).
GR: It is illegality or immorality of the cause
which renders the contract void and, ordinarily, a
party’s motives for entering into the contract do
not affect the contract. (Uy vs. CA, G.R. No.
120465, Sept. 9, 1999)
 XPN: When the motive predetermines the Void Contracts vs. Inexistent Contracts
purpose of the contract, the motive may be
regarded as the cause (Liguez vs. CA, G.R. No. VOID INEXISTENT
11240, Dec. 18, 1957). When they blend to that CONTRACTS CONTRACTS
degree, and the motive is unlawful, then the Those which Refer to agreements which
contract entered into null and void. (Olegario vs. because of lack one or some or all of
CA, G.R. No. 104892, November 14, 1994) certain defects, the elements (i.e.,
generally consent, object, and
b. Those which are absolutely simulated or produce no cause) or do not comply
fictitious (Art. 1409 [2], NCC); effect at all. with the formalities which
c. Those whose cause or object did not exist at are essential for the
the time of the transaction (Art. 1409 [3], existence of a contract.
NCC.); If nullity Absolutely cannot produce
d. Those whose object is outside the commerce proceeds from any legal effect.
of men (Art. 1409 [4], NCC); illegality, it will
e. Those which contemplate of an impossible produce barring
service (Art. 1409 [5], NCC.); effect
May prescribe Imprescriptible
At the time of delivery or consummation stage of according to
sale, it is required that the seller be the owner of Statute of
the thing sold; otherwise, he will not be able to Limitations
comply with his obligation to transfer ownership
to the buyer. It is at the consummation stage
where the principle of nemodat qud non habet Although not barred by prescription, the right to
applies. (Cavite Development Bank vs. Lim, G.R. No. have a contract declared void ab initio may be
131679, February 1,2000) barred by laches. (MWSS vs. CA, G.R. Nos. 126000
& 128520, October 7, 1988)
When the sellers can no longer deliver the object
of the sale to the buyers, as the buyers Characteristics of void or inexistent
themselves have already acquired title and contracts:
delivery thereof from the rightful owner, the
contract of sale is not valid. Thus, such contract 1. The contract produces no effect whatsoever
may be deemed to be inoperative and may thus either against or in favour of anyone following
fall, by analogy, under item No. 5 of Article 1409 the principle quod nullum est nullum producit
of the Civil Code. (Nool vs. CA, G.R. No. 116635, effectum.
July 24, 1997)
2. Void or inexistent contracts cannot be ratified.
f. Those where the intention of the parties (Ouano vs. CA, G.R. No. L-40203, August 21,
relative to the principal object of the contract 1990) It cannot give rise to a valid contract.
cannot be ascertained (Art. 1409[6], NCC) ; (Art. 1422, NCC) The defect of a void or
g. Those expressly prohibited or declared void by inexistent contract is permanent. (Teja
law (Art. 1409 [7], NCC.) Marketing vs. IAC, G.R. No. L-65510, March 9,
1987) Mere lapse of time cannot produce its
The principle of in pari delicto cannot be invoked efficacy. (Fomilda vs. Branch 164 RTC IVth Judicial
with respect to inexistent contracts. (Modina vs. Region, Pasig, G.R. No. 72306, January 24, 1989)
CA, 109355, October 29, 1999) It can only be Hence, it cannot be validated either by time or
invoked in relation to void contracts. Hence, the ratification. (Palmera vs. Civil Service
latter may eventually produce legal effects while Commission, G.R. No. 110168, August 4,
the former cannot produce any effect 1994)
whatsoever.
3. Void contract cannot be novated.

4. The right to set up the defense of inexistence

or absolute nullity cannot be waived. (Fomilda

215
 v. Branch 164 RTC IV Judicial Region, Pasig, G.R.
No. 72306, January 24, 1989)
5. The inexistence or absolute nullity of a
contract cannot be invoked by a person whose
interests are not directly affected. (Art. 1421,
NCC; Chavez vs. PCGG, G.R. No. 130716,
December 9, 1998)
Necessity of action to declare contract
inexistent or void:
If purely executory- If the void or inexistent
contract is still fully executory, there is no need
for such an action. (Razon vs. Phils. Ports Authority,
G.R. No. 75197, June 22, 1987) But if any party
should bring an action to enforce it, the other
party can simply set up the nullity of the contract
or its non-existence as defense.
If already executed- If the void or inexistent
contract had already been executed, an action to
declare non-existence of the contract or its nullity
can be maintained for the purpose of recovering
what has been given by virtue of that contract.
(Rongavilla vs. CA, G.R. No. 83974, August 14, 1998)
The reason for this rule is that nobody can take
the law into his own hands.
1. Pactum Commissorium (Arts. 2088,
2130, NCC)
A stipulation whereby the thing pledged or
mortgage or under antichresis shall
automatically become the property of the
creditor in the event of non-payment of the
debt within the term fixed. This is forbidden
by law and any stipulation to this effect is
declared null and void (Art. 2088, NCC).
However, only the prohibited stipulation is
void and shall not affect the validity of the
principal obligation.
Requisites of Pactum Commissorium:
a. A pledge, mortgage, or antichresis of property
by way of security for the payment of the
principal obligation;
b. A stipulation for an automatic appropriation by
the creditor of the property in the event of
non-payment of the obligation within the
stipulated period.
216
2. Pactum De Non Alienando (Art. 2130,
NCC)
A stipulation forbidding the owner from alienating
the immovable mortgage shall be void for being
contrary to public policy inasmuch as the
transmission of property should not be unduly
impeded.
3. Pactum Leonina (Art. 1799, NCC)
In a contract of partnership, none of the partners
can be excluded from participation in the profits
and losses.
Principle of In Pari Delicto (Art. 1411 and
1412, NCC)
GR:
Art. 1411. When the nullity proceeds from the
illegality of the cause or object of the contract,
and the act constitutes a criminal offense, both
parties being in pari delicto, they shall have no
action against each other, and both shall be
prosecuted. Moreover, the provisions of the Penal
Code relative to the disposal of effects or
instruments of a crime shall be applicable to the
things or the price of the contract.
This rule shall be applicable when only one of the
parties is guilty; but the innocent one may claim
what he has given, and shall not be bound to
comply with his promise.
Art. 1412. If the act in which the unlawful or
forbidden cause consists does not constitute a
criminal offense, the following rules shall be
observed:
(1) When the fault is on the part of both
contracting parties, neither may recover what
he has given by virtue of the contract, or
demand the performance of the other's
undertaking;
(2) When only one of the contracting parties is
at fault, he cannot recover what he has given
by reason of the contract, or ask for the
fulfillment of what has been promised him.
The other, who is not at fault, may demand
the return of what he has given without any
obligation to comply with his promise.
The rule is expressed in the maxims: “Ex dolo
malo non oritur actio’’ and “In pari delicto potior
est conditio defendantis.’’ The law will not aid
either party to an illegal agreement; it leaves
them where they are. Of course, this presupposes
that the fault of one party is more or less equal
or equivalent to the fault of the other party.
(Bough vs. Cantiveros, G.R. No. 13300,
September 29, 1919)
XPNs:
(1) Payment of usurious interest. In such case,
the law allows the debtor to recover the
interest paid in excess of that allowed by the
usury laws, with interest thereon from the
date of payment. (Art. 1413, NCC)
(2) Payment of money or delivery of property for
an illegal purpose, where the party who paid
or delivered repudiates the contract before
the purpose has been accomplished, or
before any damage has been caused to a
third person. In such case, the courts may
allow such party to recover what he has paid
or delivered, if the public interest will thus be
sub served. (Art. 1414 NCC)
(3) Payment of money or delivery of property by
an incapacitated person. In such case, the
courts may allow such person to recover
what he has paid or delivered, if the interest
of justice so demands. (Art. 1415, NCC)
(4) Agreement or contract which is not illegal
per se but is merely prohibited by law, and
the prohibition is designed for the protection
of the plaintiff. In such case, such plaintiff, if
public policy is thereby enhanced, may
recover what he has paid or delivered. (Art.
1416, NCC)
(5) Payment of any amount in excess of the
maximum price of any article or commodity
fixed by law. In such case, the buyer may
recover the excess. (Art. 1417, NCC)
(6) Contract whereby a laborer undertakes to
work longer than the maximum number of
hours fixed by law. In such case, the laborer
may demand for overtime pay. (Art. 1418,
NCC)
(7) Contract whereby a laborer accepts a wage
lower than the minimum wage fixed by law.
In such case, the laborer may demand for
the deficiency. (Art. 1419, NCC)
Divisible Contracts (Art. 1420, NCC)
Article 1420 of the New Civil Code provides in this
regard: "In case of a divisible contract, if the
illegal terms can be separated from the legal
ones, the latter may be enforced." In simple loan
with stipulation of usurious interest, the
prestation of the debtor to pay the principal debt,
which is the cause of the contract (Article 1350,
NCC), is not illegal. The illegality lies only as to
the prestation to pay the stipulated interest;
hence, being separable, the latter only should be
deemed void, since it is the only one that is illegal
(Angel Jose vs. Chelda, G.R. No. L-25704, April 24,
1968).
Where the contract is divisible (or severable) that
is, the consideration is made up of several parts,
and the illegal ones can be separated from the
legal portions, without doing violence to the
intention of the parties, the latter may be
enforced. This rule, however, is subject to the
contrary intention of the parties (De Leon,
Obligations and Contracts, 2010, p. 818).
Divisible Contract v. Divisible Obligation
It must be noted that a divisible contract is
different from a divisible obligation. Divisible
contract refers to the divisibility of the cause
while divisible obligation refers to the capability
of partial fulfillment (De Leon, Obligations and
Contracts, 2010, p. 820).
Example: S paid P1,000.00 as annual
subscription to a weekly magazine to be delivered
every week. The contract is indivisible but the
obligation is divisible.
If the agreement is that the publisher will deliver
the magazine every week and S will pay P25.00
upon such delivery, the contract is divisible. The
obligations of the parties are likewise divisible (De
Leon, Obligations and Contracts, 2010, p. 820).
RESCISSION under Art. 1381 vs. from
rescission or RESOLUTION of reciprocal
obligation under Art. 1191
ART. 1381 ART. 1991
As to nature of remedy
Rescission is a Rescission is a principal
subsidiary remedy remedy
217
 As to basis In Heirs of Quirong vs. DBP (GR 173441, December
The ground is lesion The ground is breach of 3, 2009), the Court distinguished Resolution from
or economic faith by the defendant Rescission:
prejudice that violates the
reciprocity between the “The remedy of "rescission" is not confined to the
parties rescissible contracts enumerated under Article
As to who may be considered “injured 1381. Article 1191 of the Civil Code gives the
party” injured party in reciprocal obligations, such as
The action may be The action can be what contracts are about, the option to choose
availed of even by a availed of only by a between fulfillment and "rescission." Arturo M.
third party (as in the party to a contract. Tolentino, a well-known authority in civil law, is
case of accion quick to note, however, that the equivalent of
pauliana) Article 1191 in the old code actually uses the term
As to applicability to kinds of obligations "resolution" rather than the present
"rescission." The calibrated meanings of these
Rescission applies to Rescission applies terms are distinct.
all kinds of exclusively to reciprocal
obligations obligations "Rescission" is a subsidiary action based on injury
As to prescriptive period to the plaintiff’s economic interests as described
4 years from accrualEither 10 years (for in Articles 1380 and 1381. "Resolution," the
of right of action written contracts) or 6 action referred to in Article 1191, on the other
years (for oral hand, is based on the defendant’s breach of faith,
contracts) a violation of the reciprocity between the parties.
As to discretionary power of court As an action based on the binding force of a
written contract, therefore, rescission (resolution)
If the ground is The court has under Article 1191 prescribes in 10 years. Ten
proved, the court discretionary power not years is the period of prescription of actions
has no discretion to grant rescission if based on a written contract under Article 1144.”
but to order there is just cause for
rescission the fixing period.

(De Leon, Obligations and Contracts, 2010, p. 713 to

714)
SUMMARY OF DEFECTIVE CONTRACTS:
RESCISSIBLE VOIDABLE UNENFORCEABLE VOID/
CONTRACTS CONTRACTS CONTRACTS INEXISTENT
DEFECT Economic Vitiation of Without or in excess Illegality (void) or
damage to a Consent of authority, or absence or
party or to a does not comply with absolute lack of any
third party; Statute of Frauds of essential
declaration by or incapacity of requisite of a
law both parties contract
(inexistent)
LEGAL EFFECT Valid and legally Valid and Inoperative until None
enforceable until legally ratified; Cannot be
judicially enforceable enforced by court
rescinded until judicially action without proper
annulled ratification
REMEDY Rescission or Annulment of Only personal Declaration of
rescissory action contract defense nullity of contract
GROUNDS Arts. 1381-1382, Art. 1390, NCC Art. 1403, NCC Art. 1409, NCC
NCC

218
 Necessary Not necessary Not necessary Not necessary
NECESSITY OF
DAMAGE
Susceptible but May be May be susceptible Not Susceptible
SUSCEPTIBILITY not of susceptible
OF ratification
RATIFICATION proper
Prescriptible – Prescriptible - Action for recovery; Imprescriptible
Action for Action for specific performance
rescission annulment or damages
PRESCRIPTION prescribes after prescribes prescribes (10 years
4 years after 4 years if based on a written
contract; 6 years if
unwritten)
CURABILITY BY Curable Curable Not Curable Not curable
PRESCRIPTION
Assailable by a Assailable only Assailable only by a Assailable by a
ASSAILABILITY party or by a by a party to party to the contract party or by a third
BY THIRD third party who the contract party who suffered
PERSONS suffered damage
damage

B. NATURAL OBLIGATIONS (Arts. 1423 to Voluntary Fulfilment

1430, NCC)
Distinguished from Civil Obligations:
1. Civil obligations give a right of action to
compel their performance.
2. Natural obligations, not being based on
positive law but on equity and natural law, do
not grant a right of action to enforce their
performance, but after voluntary fulfilment by
the obligor, they authorize the retention of
what has been delivered or rendered by
reason thereof (Art. 1423, NCC).
Distinguished from Moral Obligations
1. Natural Obligations – There is a juridical tie
between the parties which is not enforceable
by court action. Its performance produces
legal effects which the courts recognize and
protect.
Voluntary fulfilment means that the debtor
complied with the same even if he knew that he
could not have been legally forced to do so. Thus,
payment through a coercive process of the writ
of execution issued at the instance and insistence
of the prevailing party is NOT considered
voluntary and the provisions of the law on natural
obligations cannot be applied thereto (Manila
Surety & Fidelity Co. vs. Lim, G.R. No.L-9343,
December 29, 1959).
No Juridical Tie in Moral Obligations
While there is a juridical tie in natural obligations,
there is none in moral obligations. Thus, giving
legal assistance to one’s employee (accused of a
crime) is merely a moral obligation, and the
employee cannot recover attorney’s fee from the
employer (Dela Cruz vs. Northern Theatrical
Enterprises, Inc. et. al., G.R. No. L-7089, August 31,
1954).

2. Moral Obligations – there is no juridical tie Extinctive Prescription

whatsoever. Its voluntary fulfillment does not
produce any legal effect which the courts
recognize and protects (Jurado, Comments and
Jurisprudence on Obligations and Contracts, 2010,
p. 635-636).
When a right to sue upon a civil obligation has
lapsed by extinctive prescription, the obligor who
voluntarily performs the contract cannot recover
what he has delivered or the value of the service
he has rendered (Art. 1424, NCC).

219
Effect of Extinctive Prescription: By virtue of
which, a right or property has been lost.
Payment by Third Person
When without the knowledge or against the will
of the debtor, a third person pays a debt which
the obligor is not legally bound to pay because
the action thereon has prescribed, but the debtor
voluntarily reimburses the third person, the
obligor cannot recover what he has paid (Art.
1425, NCC).
If payment is made with the consent of the
debtor, a civil obligation arises.
Contracts by Minors
When a minor who has entered into a contract
without the consent of the parent or guardian,
after the annulment of the contract voluntarily
returns the whole thing or price received,
notwithstanding the fact that he has not been
benefited thereby, there is no right to demand
the thing or price thus returned (Art. 1426, NCC).
Contracts by minors; when there has been
annulment:
This applies to minors when the contract was
without parental consent.
Here after annulment, there was a voluntary
return
● When a minor who has entered into contract
without the consent of the parent or guardian,
pays a sum of money or delivers a fungible
thing in the fulfilment of the obligation, there
shall be no right to recover the same from the
obligee who has spent or consumed it in good
faith (Art. 1427, NCC).
Performance after an Action to Enforce a
Civil Obligation has failed
When, after an action to enforce a civil obligation
has failed the defendant voluntarily performs the
obligation, he cannot demand the return of what
he has delivered or the payment of the value of
the service he has rendered (Art. 1428, NCC).
220
Rule in case of Payment of Debts Beyond
Value of the Decedent’s Estate
When a testate or intestate heir voluntarily pays
a debt of the decedent exceeding the value of the
property which he received by will or by law of
intestacy from the estate of the deceased, the
payment is valid and cannot be rescinded by the
payer (Art. 1429, NCC).
Heirs inherit only to the extent of the value of the
inheritance.
Payment of Legacies despite the fact that
the Will is Void
When a will is declared void because it has not
been executed in accordance with the formalities
required by law, but one of the intestate heirs,
after the settlement of the debts of the deceased,
pays a legacy in compliance with a clause in the
defective will, the payment is effective and
irrevocable (Art. 1430, NCC).
● If the will is void, the legacy would also be
void and the deceased is considered to have
died without a will.
C. ESTOPPEL (Arts. 1431 to 1439, NCC)
The Rule on Estoppel
Through estoppel an admission or representation
is rendered conclusive upon the person making it,
and it cannot be denied or disproved as against
the person relying thereon (Art. 1431, NCC)
Kinds of Estoppel
There are generally three (3) kinds of estoppel:
1. Estoppel in pais (or by conduct) – A
person is considered in estoppel if by his
conducts, representations or admissions or
silence when he ought to speak out, whether
intentionally or through culpable negligence,
causes another to believe certain facts to exist
and such other rightfully relies and acts on such
belief, as a consequence of which he shall be
prejudiced if the former is permitted to deny the
existence of such facts;
a. Estoppel by Silence - type of estoppel in
pais which arises when a party, who has a
 right and opportunity to speak or act as well
as a duty to do so under the circumstances,
intentionally or through culpable negligence,
induces another to believe certain facts to
exist and such other relies and acts on such
belief, as a consequence of which he would
be prejudiced if the former is permitted to
deny the existence of such facts (Jurado;
Obligations and Contracts; 2010 ed. p.640)
b. Estoppel by. acceptance of Benefits -
type of estoppel in pais which arises when a
party by accepting benefits derived from a
certain act or transaction, intentionally or
through culpable negligence, induces
another to believe certain facts to exist and
such other relies and acts on such belief, as
a consequence of which he would be
prejudiced if the former is permitted to deny
the existence of such facts (Jurado;
Obligations and Contracts; 2010 ed. p. 640).
2. Estoppel by deed or by record (Technical
Estoppel) - Occurs when a party to a deed and
his privies are precluded from denying any
material fact stated in the said deed as against
the other party and his privies;
a. Estoppel by Deed - type of technical
estoppel by virtue of which a party to a deed
and his privies are precluded from asserting
as against the other party and his privies any
right or title in derogation of the deed, or
from denying any material fact asserted
therein (Jurado, Obligations and Contracts,
2010 ed., p. 640).
b. Estoppel by Record - technical estoppel
by virtue of which a party and his privies are
precluded from denying the truth of matters
set forth in a record whether judicial or
legislative (Jurado, Obligations and
Contracts, 2010 ed., p. 640).
c. Estoppel by Judgement- estoppel by virtue
of which the party to a case is precluded from
denying the facts adjudicated by a court of
competent jurisdiction (Jurado, Obligations
and Contracts, 2010 ed., p. 641).
d. Estoppel by Judgement v Res Judicata -
Estoppel by judgment bars the parties from
raising any question that might have been
put in issue and decided in the previous
litigation, whereas res judicata makes a
judgment conclusive between the same
parties as to the matter directly adjudged
(Phil. National Bank vs. Barretto, G.R. No. L-8831,
May 28, 1958).
3. Estoppel by laches - laches is failure or
neglect, for an unreasonable and unexplained
length of time, to do that which, by exercising
due diligence, could or should have been done
earlier; it is negligence or omission to assert a
right within a reasonable time, warranting a
presumption that the party entitled thereto
either has abandoned it or declined to assert it.
However, courts will not be bound by strictures
of the statute of limitations or laches when
manifest wrong or injuries would result
thereby” (Cristobal vs. Melchor, G.R. No. L-
43203, July 29, 1977).
a. Laches; definition- It is a failure or
neglect, for an unreasonable and
unexplained length of time, to which, by
exercising due diligence, one could or should
have done earlier; it is negligence or
omission to assert a right within reasonable
time, warranting a presumption that the
party entitled to assert it either has
abandoned it or declined to assert it (Tijam
vs. Sibonghanoy, G.R. No. L-21450, April 15,
1968).
b. Elements of Estoppel by laches:
i.Conduct on the part of the defendant or of
one under whom he claims, giving rise to
the situation of which complaint is made;
ii.Delay in asserting the complainant’s right,
the complainant having had knowledge or
notice of the defendant’s conduct and
having been afforded an opportunity to sue
iii.Lack of knowledge or notice on the part of
the defendant that the complaint would
assert the right on which he bases his suit
iv.Injury or prejudice to the defendant in the
even relief is accorded to the complainant,
or the suit is not held to be barred
221
Laches and Prescription Distinguished misleading conduct what one himself
or language of one intended to do
Prescription Laches person and reliance regardless of the
Concerned Not concerned merely with thereon by another attitude assumed by
with the fact of lapse of time ; deals with the who is misled the other party
delay effect of unreasonable delay thereby to his
Question or Principally a question of the prejudice;
matter of time inequity or unfairness of Frequently carries Never carry an
permitting a stale right or the implication of implication of fraud
claim to be enforced or fraud
asserted, this inequity being (De Leon and De Leon Jr. Comments and Cases:
founded on some change in Obligations and Contracts, 2014 ed., pp. 945-946)
the condition or the relation
of parties
Statutory Not statutory 2. Distinguished from ratification
Applies at law Applies in equity
Based on a Not based on a fixed time Equitable Estoppel Ratification
fixed time Substance is the inducement The substance
(De Leon and De Leon, Comments and Cases: to another to act to his is confirmation
Obligations and Contracts, 2014 ed., p.957) prejudice after conduct
A party is bound A party is
Estoppel as applied notwithstanding that there bound because
1. Estoppel against a vendor who subsequently was no such intention he intended to
acquires title (Art. 1434, NCC) because the other party will be
2. Estoppel against agent who sells for another be prejudiced and defrauded
(Art. 1435, NCC) by his conduct unless the
3. Estoppel against tenant or bailee (Art. 1436, law treats him as legally
NCC) bound
4. Estoppel against the owner of immovable Applied if the other party Does not rest
(Art. 1437, NCC). would be unjustly prejudiced upon prejudice
5. Estoppel by acceptance of benefits (Art. (28 Am. Jur. 2d. 635-636)
1438, NCC) (De Leon and De Leon Jr., Comments and Cases:
Obligations and Contracts, 2014 ed., pp. 946-947)
Estoppel distinguished from other concepts

1. Distinguished from waiver Equitable Estoppel Ratification

Substance is the inducement The substance
Equitable Waiver to another to act to his is confirmation
Estoppel prejudice after conduct
May arise even Voluntary and A party is bound A party is
though there was intentional notwithstanding that there bound
no intention on the abandonment or was no such intention because he
part of the party relinquishment of a because the other party will intended to be
estopped to known right be prejudiced and defrauded
relinquish or by his conduct unless the law
change any existing treats him as legally bound
right Applied if the other party Does not rest
Prejudice to other Does not necessarily would be unjustly prejudiced upon
party is one of the imply that the party (28 Am. Jur. 2d. 635-636) prejudice
essential elements asserting it has been (Id.)
misled to his prejudice
Involves conduct of Involves the conduct of
both parties, since it only one of the parties,
is based upon that is, it depends upon

222
D. TRUSTS
A trust is the legal relationship between one
person having an equitable ownership of property
and another person owning the legal title to such
property, the equitable ownership of the former
entitling him to the performance of certain duties
and the exercise of certain powers by the latter
(Estate of Cabacungan vs. Laigo, G.R. No. 175073,
August 15, 2011).
A trust is a juridical relationship that exist
between one person having the equitable title or
beneficial enjoyment of property, real or
personal, and another having the legal title
thereto (Inocencia Deluao vs. Nicanor Casteel, G.R. No.
L-21906, December 24, 1968). The person who
establishes the trust is the trustor (or grantor);
one in whom confidence is reposed as regards
property for the benefit of another person is
known as the trustee (fiduciary), and the person
for whose benefit the trust has been created is
referred to as the beneficiary (cestui que trust).
The Civil Code has adopted the principles of the
general law of trusts, insofar as they are not in
conflict with its provisions, the Code of
Commerce, the Rules of Court, and Special Laws.
What distinguishes a trust from other relations is
the separation of the legal title and equitable
ownership of the property. In a trust relation,
legal title is vested in the fiduciary while equitable
ownership is vested in a cestui que trust.
A trust, terminates upon the death of the trustee,
particularly where the trust is personal to him, in
the sense that the trustor intended no other
person to administer it (De Leon, Comments and
Cases on Partnership, Agency, and Agency, 2010,
p.621)
CHARACTERISTICS OF A TRUST
1. It is a relationship;
2. It is a relationship of fiduciary character;
3. It is a relationship with respect to property,
not one involving merely personal duties;
4. It involves the existence of equitable duties
imposed upon the holder of the title to the
property to deal with it for the benefit of
another; and
5. It arises as a result of a manifestation of
intention to create the relationship.
KINDS OF TRUST:
1. Express Trust - Express or direct trusts are
created by the direct and positive acts of the
parties, by some writing or deed, or will, or
by oral declaration in words evincing an
intention to create a trust.
2. Implied Trust - also called "trusts by
operation of law," "indirect trusts" and
"involuntary trusts" – arise by legal
implication based on the presumed intention
of the parties or on equitable principles
independent of the particular intention of the
parties. They are those which, without being
expressed, are deducible from the nature of
the transaction as matters of intent or,
independently of the particular intention of
the parties, as being inferred from the
transaction by operation of law basically by
reason of equity.
Express Trust and Implied Trust
Distinguished
Express Trust Implied Trust
As to Creation
Created by the By operation of law
intention of the parties
As to Proof of Trust
An express trust over An implied trust over
an immovable property an immovable property
or any interest therein or any interest therein
cannot be proved by may be proved by oral
parol evidence. evidence
As to Repudiation of Trust
An express repudiation In constructive trusts,
made known to the even if there is no
beneficiary is repudiation, laches
necessary in order that may bar an action to
laches or acquisitive enforce an implied
prescription may bar an trust.
action to enforce an
express trust.
(Jurado, Comments and Jurisprudence on Obligations
and Contracts, 2010, p. 659)
EXPRESS TRUST
Express trust are those which are created by the
direct and positive acts of the parties, by some
writing or dead, or by will, or by words evincing
an intention to establish a trust. No particular
words are required for the creation of an express
223
trust (Art. 1444, NCC). No express trust
concerning an immovable or any interest therein
may be proved by parole evidence.
No trust shall fail because the trustee appointed
declines the designation, unless the contrary
should appear in the instrument constituting trust
(Art. 1445, NCC). Acceptance by the beneficiary
is necessary. Nevertheless, if the trust imposes
no onerous condition upon the beneficiary, his
acceptance shall be presumed unless there is
proof to the contrary (Art. 1446, NCC). This
acceptance by the beneficiary is not subject to
the law on donation.
Neither laches nor prescription is a bar to enforce
an express trust. Either laches or prescription,
however, may constitute a bar to enforce an
implied trust. Thus, an action to recover an
immovable under a constructive trust prescribes
in 10 years counted from the date the Transfer
Certificate of Title was issued in the name of the
repudiating possessor (Paz Villagonzalo vs.
Intermediate Appellate Court, G.R. No. 71110,
November 22, 1988).
Elements of Express Trust:
1. A trustor or settlor who executes the
instrument creating the trust;
2. A trustee, who is the person expressly
designated to carry out the trust;
3. The trust res, consisting of duly identified and
definite real properties; and
4. The cestui que trust, or beneficiaries whose
identity must be clear (De Leon, Comments and
Cases on Partnership, Agency, and Trusts, 2010,
p. 627).
Termination of Express Trust
1. Expiration of period fixed;
2. Accomplishment of purpose;
3. Mutual Agreement of beneficiaries;
4. Exercise of power to terminate De Leon,
Comments and Cases on Partnership, Agency,
and Trusts, 2010, p. 630).
Kinds of Express Trust
1. Charitable Trust – one designed for the
benefit of a segment of the public or of the
public in general. It is one created for
charitable, educational, social, religious, or
scientific purposes, or for the general benefit
224
of humanity. A private trust is not for the good
of the public in general or society as a whole;
2. Accumulation Trust – one that will
accumulate income to be reinvested by the
trustee in the trust for the period of the time
specified;
3. Spendthrift trust – one established when
the beneficiary need to be protected,
because of his inexperience or immaturity
from his imprudent spending habits or simply
because the beneficiary is Spendthrift.
Income will be paid to the beneficiary only
when actually necessary. Under some
circumstances, the trustee will pay directly
the creditor for obligations of the beneficiary;
and
4. Sprinkling trust – one that gives the trustee
the right to determine the income
beneficiaries who should receive income each
year and the amount thereof. Income that is
not distributed an any given year is added to
the corpus, as in an accumulation trust. It is a
discretionary trust if it gives the trustee the
discretion to pay or not to pay the income or
principal (De Leon, Comments and Cases on
Partnership, Agency, and Trusts, 2010, p. 635).
When trustee may sue or be sued alone.
In order that a trustee may sue or be sued alone,
it is essential that his trust be express, that is, a
trust created by the direct and positive acts of the
parties, by some writing, deed, or will or by
proceedings in court (Phil. Airlines, Inc. vs. Heald
Lumber Co., G.R. No. L-11497, August 16, 1957).
Acceptance, declination, or renunciation by
the trustee (Art. 1445, NCC)
Acceptance
In the case of an express trust, acceptance of
trust by a trustee is necessary to charge him with
the office of the trustee and the administration of
the trust and to vest the legal title in him.
However, his acceptance of the trust is not
necessary to its existence and validity, since if he
declines the trust, the courts will appoint a
trustee to fill the office that he declines (54 Am.
Jur. 107; see Sec. 3, Rule 98, Rules of Court).
Declination
One designated or appointed as trustee may
decline the responsibility and thereby be free
from any legal or equitable duty or liability in the
matter. Unless a contrary intention appears in the
instrument constituting the trust (Art. 1145),
declination or refusal or disqualification of a
trustee does not operate to defeat or void the
trust; nor does it operate to vest legal as well as
equitable title in the beneficiary (54 Am. Jur.
108).
Renunciation
Renunciation of a trust after its acceptance can
only be by resignation or retirement with court
approval or at least, with agreement of
beneficiaries and on satisfaction of all legal
liabilities growing out of the acceptance of the
trust. A contract to renounce, for a pecuniary
consideration, the right to act as a trustee has
generally been recognized to be against public
policy (Ibid). When a person administering
property in the character of trustee inconsistently
assumes to be holding on his own right, this
operates as renunciation of the trust and the
beneficiaries in the property are entitled to
maintain an action to declare their right and
remove the unfaithful trustee (Martinez vs. Grano,
G.R. No. 16709, August 8, 1921).
IMPLIED TRUST
Implied trusts are those which, without being
express, are deductible from the nature of the
transaction as matters of intent or, independently
of the particular intention of the parties, as being
super-induced on the transaction by operation of
law basically by reason of equity. These species
of implied trust are ordinarily subdivided into
resulting and constructive trust De Leon,
Comments and Cases on Partnership, Agency, and
Trusts, 2010, p. 638).
Kinds of Implied Trust
1. Resulting Trust - A resulting trust is one that
arises by implication of law and presumed always
to have been contemplated by the parties, the
intention as to which can be found in the nature
of their transaction although not expressed in a
deed or instrument of conveyance. Resulting
trust are based on the equitable doctrine that it
is the more valuable consideration than the legal
title that determines the equitable interest in
property. Implied trusts of this nature are
describable as “intention-enforcing trusts.”
(Estate of Cabacungan vs. Laigo, G.R. No.
175073, August 15, 2011)
2. Constructive Trust - On the other hand, a
constructive trust, is a trust not created by any
word or phrase, either expressly or impliedly,
evincing a direct intention to create a trust, but
one that arises in order to satisfy the demands of
justice. It does not come about by agreement or
intention but in main by operation of law
construed against one who, by fraud, duress, or
abuse of confidence, obtains or holds the legal
right to property which he ought not, in equity
and good conscience, to hold. This kind of trust
is aptly characterized as “fraud-rectifying trust,”
imposed by equity to satisfy the demands of
justice and to defeat or prevent the wrongful act
of one of the parties. (Ibid)
Articles 1448 to 1456 of the Civil Code enumerate
cases of implied trust, but the list according to
Article 1447 is not exclusive of others which may
be established by the general law on trusts so
long as the limitations laid down in Article 1442
are observed.
E. QUASI-CONTRACTS
Quasi-Contract - Quasi-contracts are those
juridical relations arising from lawful, voluntary
and unilateral acts, by virtue of which the
parties become bound to each other, based on
the principle that no one shall be unjustly
enriched or benefited at the expense of another
(Art. 2142, NCC)
Characteristics of a quasi-contract
1. It must be Lawful;
2. It must be Unilateral; and
3. It must be Voluntary (Art. 2142, NCC)
The 2 Principal Kinds:
1. Negotiorum Gestio (unauthorized
management); - arises when a person
voluntarily takes charge of the management
of the business or property of another
without any power from the latter (Art. 2144,
NCC).
225
2. Solutio indebiti (unjust enrichment)–takes
place when a person receives something
from another without any right to demand for
it, and the thing was unduly delivered to him
through mistake (Art. 2154, NCC).
Negotiorum Gestio
A juridical relation which arises whenever a
person voluntarily takes charge of the agency or
management of the business or property of
another without any power or authority from the
latter (Art. 2144, NCC).
Requisites:
1. An “officious manager” or “gestor” voluntarily
assumes the management or agency of the
business or property of another;
2. Property or business must be neglected or
abandoned; otherwise, what results is a case
of unenforceable contract and not
negotiorum gestio.
3. No authorization from the owner, whether
express or implied, otherwise what results is
a contract of agency and not negotiorum
gestio; and
NB: A contract is unenforceable if entered into
the name of another by one who has been given
no authority or legal representation, or who has
acted beyond his powers (Art. 1403 [1], NCC);
Assumption of agency or management must be
done in good faith.
Obligations Created:
a. On the part of the officious manager:
1. He is obliged to continue with the
management or agency until the
termination of the affair and its incidents,
unless he requires the owner to substitute
for him if the latter is in a position to do so
(Art. 2144, NCC).
2. He is personally liable to third persons with
whom he contracted with unless:
a. the owner has ratified the management;
or
b. the contract refers to things pertaining
to the owner (Art. 2152, NCC).
226
b. On the part of the owner:
1. If he enjoys the advantages of the
unauthorized management, he shall be
liable to the officious manager:
(a) for obligations incurred in his interest;
(b) for reimbursement of necessary and
useful expenses incurred by the latter;
(c) for reimbursement of damages which
the latter may have suffered in the
performance of his duties.
2. If he did not derive benefit but the
management had for its purpose the
prevention of imminent and manifest loss,
the owner shall also be liable for the
foregoing obligations.
3. If he did not derive benefit and although
there has been no imminent and manifest
danger, he shall still be liable for the
foregoing obligations provided that:
(a) the officious manager has acted in
good faith; and
(b) the property or business is intact, ready
to be returned to the owner (Arts. 2150
& 2151, NCC).
Solutio Indebiti
If something is received when there is no right to
demand it and it was unduly delivered through
mistake, the obligation to return it arises (Art.
2154, NCC).
Requisites:
1. Payment is made when there exist no
binding relation between the payor, who has
no duty to pay, and the person who received
the payment;
2. Payment is made through mistake and not
through liberality or some other cause.
(Commissioner of Internal Revenue v. MERALCO,
G.R. 181459, June 9, 2014).
Compared to accion in rem verso: Accion in
rem verso is an action for recovery for what has
been paid or delivered without just cause or legal
ground. It is an auxiliary action available only
when there is no other remedy based on contract,
quasi contract, crime or quasi delict (Rabuya, Civil
Law Reviewer I, 2017, p. 24-25). In solution indebiti,
mistake is an essential element while in accion in
rem verso, it is not necessary that there should
be mistake in the payment (I Tolentino, Civil Code
of the Phil., 1992, p. 76).
Q: “C”, a Filipino resident of the US sent to
his father “D” in Manila $500.00 through
“X” Bank which had a branch in Manila. Due
to mistake of the employees of the Bank,
“D” was paid $5,000.00. Upon delivery of
the mistake, the Bank demanded from “D”
the return of the $4,500.00. “D” refused
and the Bank sued him. Is the Bank entitled
to recover from “D”? (Bar 1980)
A: Yes. The Bank is entitled to recover the
$4,500.00 from D. This is an example of a quasi-
contract of solution indebiti which arises
whenever a person unduly delivers a thing
through the mistake to another who has no right
to demand it (Jurado, Civil Law Reviewer, 2009, p.
1151).
V. SALES
Sales Defined
By the contract of sale, one of the contracting
parties obligates himself to transfer the
ownership and to deliver a determinate thing, and
the other to pay therefore a price certain in
money or its equivalent (Art. 1458, NCC).
 The contract of sale is not a mode for
acquisition or transmission of ownership; it
only creates title (San Lorenzo Development
Corp. vs. CA, G. R. No. 124242, Jan. 21, 2005)
Characteristics of a Contract of Sale
a. Nominate – it has been given a particular
name by law (Art. 1458, NCC).
b. Principal – it can stand on its own, and does
not depend on another contract for its
validity.
c. Bilateral – it creates reciprocal obligations –
the seller obligates himself to transfer the
ownership of and deliver a determinate thing,
and the buyer obligates himself to pay
therefore a price certain in money or its
equivalent. Reciprocal obligations are those
which arise from the same cause and in
which party is a debtor and a creditor of each
other, such that the obligation of one is
dependent upon the obligation of the other.
(Carrascoso, Jr. vs. CA, G.R. No. 123672,
December 17, 2005)
d. Consensual – It is perfected by mere
consent of the parties. The essence of
consent is the agreement of the parties on
the terms of the contract, the acceptance by
one and the offer made by the other (Vda.
De Ape vs. CA, G.R. No. 133638, April 15,
2005; Torcuator vs. Bernabe, G.R. No.
134219, June 8, 2005).
 The essence of consent is the agreement
of the parties on the terms of the
contract, the acceptance by one of the
offer made by the other. It is the
concurrence of the minds of the parties
on the object and the cause, which
constitutes the contract. The area of
agreement must extend to all points that
the parties deem material or there is no
consent at all (Leonardo vs. Court of
Appeals, G.R. No. 125485, June 15, 2006).
e. Onerous and Commutative – A contract of
sale is normally commutative and onerous:
not only does each one of the parties assume
a correlative obligation (the seller to deliver
and transfer ownership of the thing sold and
the buyer to pay the price), but each party
anticipates performance by the other from
the very start (Gaite vs. Fonacier, G.R. No. L-
11827, July 31, 1961).
In a sale the obligation of one party can be
lawfully subordinated to an uncertain event,
so that the other understands that he
assumes the risk of receiving nothing for
what he gives [as in the case of a sale of
hopes or expectations, emptio spei, which
makes the contract ALEATORY and not
commutative (Art. 2010, NCC). But this XPN
is not the usual course of business; hence,
the contingent character of the obligation
must clearly appear. (Gaite vs. Fonacier,
supra.)
A. NATURE AND FORM
Being a consensual contract, the contract of sale
is perfected at the moment there is a meeting of
minds upon the thing which is the object of the
contract and upon the price (Art. 1475, NCC).
227

The form of a contract refers to the manner in
which it is executed or manifested.
GR: Contract of sale may be entered into in any
form provided all the essential requisites for its
validity are present (Art. 1356, NCC). It may be
in writing; it may be oral; it may be partly in
writing and partly oral. It may even be inferred
from the conduct of the parties (Art. 1483, NCC).
XPNs:
a. Where form is required in order that a
contract may be enforceable.
Under the Statute of Frauds, the following
contracts must be in writing; otherwise, they shall
be unenforceable by action:
1) Sale of personal property at a price not less
than P500.00;
2) Sale of real property or an interest therein
regardless of the price involved; and
3) Sale of property not to be performed within a
year from the date thereof regardless of the
nature of the property and the price involved
(Art. 1403[2], a, d, e], NCC).
b. Where the “applicable statute” requires that
the contract of sale be in a certain form for
its validity (Art. 1356, NCC);
1) Sale of large cattle (Art. 1581, NCC).
2) Sale of a piece of land or interest therein
through agent is required to be in writing,
otherwise the sale thereof by the agent
would be void (Art. 1874, NCC).
3) Sale of land by non-Muslim hill tribe
cultural minorities of the Philippines is void
if not approved by National Commission of
Indigenous Peoples (R.A. No. 8371).
c. Where form is required only for the
convenience of the parties (De Leon,
Comments and Cases on Sales and Lease, 2005,
p. 115).
STATUTE OF FRAUDS: Note that if a particular
form is required under the statute of frauds and
the same is not followed, the sale is valid, but it
is unenforceable even as to the parties to the
contract of sale.
228
Kinds of Contact of Sales as to Presence or
Absence of Conditions (1997, 2001 Bar)
a. Absolute Sale - where the sale is not
subject to any condition whatsoever and
where title passes to the buyer upon delivery
of the thing sold.
b. Conditional Sale - where the sale
contemplates a contingency, and in general,
where the contract is subject to certain
conditions.
If the condition is imposed on an obligation
of a party (e.g., ejection by the vendor of
squatters within a certain period before
delivery of property) not upon the perfection
of the contract itself, which is not complied
with, the other party may either refuse to
proceed or waive said condition (De Leon,
Comments and Cases on Sales and Lease, 2005,
p. 16).
1. ESSENTIAL REQUISITES– ART. 1505,
NCC
a. Consent or meeting of the minds to
transfer ownership in exchange for the
price
 Being a consensual contract, the
contract of sale is perfected at the
moment there is a “meeting of the
minds” upon the thing which is the
object of the contract and upon the
price (Art. 1475, NCC).
 There may be a sale against the will
of the owner in case of expropriation
and the three different kinds of sale
under the law – ordinary execution
sale, judicial foreclosure sale, and
extra-judicial foreclosure sale (Paras,
Civil Code of the Philippines Annotated,
2008, p. 12).
Requisites:
a. Capacity,
b. Offer and acceptance, and
c. No vitiation of consent
b. Determinate or determinable subject
matter – which refers to the determinate thing
which is the object of the contract.
(See further discussion under Subject Matter) Container vs. PNB, G.R. No. 166862, December 20,
2006)
c. Price certain in money or its equivalent.
Earnest Money
It is not enough for the parties to agree on the
price of the property, but they must also agree Earnest money, called “arras,” is something of
on the manner of payment of the price of the value to show that the buyer was really in
property to give rise to a binding and earnest, and given to the seller to bind the
enforceable contract of sale or contract to sell. bargain. (See 14 Words and Phrases, p. 23). It is
This is because the agreement as to the manner part of the purchase price, hence, is a proof of
of payment goes into the price, such that a the perfection of the contract (Art. 1482, NCC).
disagreement on the manner of payment is
tantamount to a failure to agree on the price Earnest Money distinguished from Option
(Boston Bank of the Phil. vs. CA, G.R. No. 158149, Money
February 9, 2006, Mernelego vs. Banco Filipino
Savings and Mortgage Bank, G.R. No. 161524, Earnest Money Option Money
January 27, 2006). As to Money Given
Forms part of Money given as a
 In expropriation and foreclosure proceedings, purchase price distinct consideration
there can be a valid sale but not by the for an option contract
meeting of the minds since the other party is As to Perfection
compelled to enter into a contract. Given only where Applies to a
there is already a sale sale not yet perfected
NOTE: The absence of any essential elements Obligation of the buyer
negates the existence of a perfected contract of Buyer is bound to pay Buyer is not required
sale (Dizon vs. CA, G.R.122544, June 28, 1999) even the balance to buy but may
when earnest money or down payment has been even forfeit it
paid (Manila Metal Container Corp. vs. PNB, G.R. No. depending on the
166862, December 20, 2006) terms of the option

2. PERFECTION 3. CONTRACT OF SALE V. CONTRACT TO

SELL
GR: Being a consensual contract, the contract of
sale is perfected at the moment there is a Contract of Sale Contract to Sell
meeting of minds upon the thing which is the As to transfer of ownership
object of the contract and upon the price. (Art. Ownership is Ownership is
1475, NCC) transferred to the transferred upon full
buyer upon delivery payment of the
XPN: When the sale is subject to a Suspensive of the object to him. purchase price.
Condition (People’s Homesite vs. CA, G.R. No. L-
61623, December 26, 1984).
Note: Vendor has lost Note: Prior to full
and cannot recover payment, ownership
Requirements:
ownership until and is retained by the
unless the contract is seller.
1. When parties are face to face – when there
resolved or rescinded
is absolute acceptance of an offer.
As to numbers of contracts
2. When thru correspondence/telegram –
There is only one There are two
when the offeror receives or had knowledge of
contract executed contracts:
the acceptance.
between the seller 1.The contract to sell.
and the buyer. (Preparatory to sale)
NOTE: Qualified acceptance is a mere counter-
2. The deed of
offeror which needs to be absolutely accepted to
absolute sale. (The
give rise to perfected contract of sale (Manila Metal
principal contract is

229
 executed after full  In a conditional contract of sale, however,
payment of the upon the fulfillment of the suspensive
purchase price.) condition, the sale becomes absolute and this
As to payment as a condition will definitely affect the seller’s title thereto.
Non-payment of the Full payment of the In fact, if there had been a previous delivery
price is a resolutory price is a positive of the subject property, the seller’s ownership
condition. Vendor suspensive or title to the property is automatically
loses ownership over condition. transferred to the buyer such that, the seller
the property and will no longer have any title to transfer to any
cannot recover it until Note: Failure to fully third person. Applying Article 1544 of the Civil
and unless the pay the price is not a Code, a second buyer of the property who
contract is resolved or breach but an event may have had actual or constructive
rescinded. that prevents the knowledge of such defect in the seller’s title,
obligation of the or at least was charged with the obligation to
vendor to convey title discover such defect, cannot be a registrant
from becoming in good faith. Second buyer cannot defeat the
effective (Uy & Sons, first buyer’s title. In case a title is issued to
Inc. v Valbueco Inc., the second buyer, the first buyer may seek
G.R. No.o. 179594, reconveyance of the property subject of the
September 11, 2013). sale (Ibid.).
The non-payment of
the purchase price B. CAPACITY TO BUY OR SELL
renders the contract
to sell without force GR: All persons, whether natural or juridical, who
and effect (Tumibay can bind themselves, have legal capacity to buy
v. Lopez, GR No. and sell (Art. 1489, par. 1, NCC).
171692, June 3,
2013). XPN:
As to remedies available
1. Specific 1. Resolution Those incapacitated to enter into contracts
Performance 2. Damages
2. Rescission 1. Absolute incapacity - cannot bind themselves
3. Damages in any case
(De Leon, Comments and Cases on Sales and Lease,
2005, p. 22) 2. Relative incapacity - exists only with
reference to certain persons or a certain class
Importance of Distinctions Between of property
Contract to Sell and Conditional Contract of
Sale: 3. Specific incapacity/Special disqualifications

In a contract to sell, there being no previous sale Absolute Incapacity (Arts. 1327, 1397,
of the property, a third person buying such 1399, NCC):
property despite the fulfillment of the suspensive
condition such as the full payment of the 1. Persons who cannot give consent to a
purchase price, cannot be deemed a buyer in bad contract:
faith and the prospective buyer cannot seek the a. Minors
relief of reconveyance of the property. There is b. Insane persons
no double sale in such cases. Title to the property c. Deaf-mutes who do not know how to write
will transfer to the buyer after registration
because there is no defect in the owner-seller’s 2. Civil Interdictees
title per se, but the latter may be sued for a. Judicially-declared Incompetents
damages by the intending buyer (United Muslim b. Prodigals
and Christian Urban Poor Association, Inc. vs. Bryc-V c. Imbeciles
Development Corp., G.R. No. 179653, July 31, 2009). d. Absence & presumption of death

230
 e. Persons not of unsound mind but by
reason of age, disease, weak mind, and
other similar causes, cannot take care of
themselves and manage their property
without outside aid
 Contracts entered into during intervals by
insane or demented persons are generally
valid (Art. 1328, NCC); whereas, those
entered into in a state of drunkenness, or
during hypnotic spell, are merely voidable
(Art.1328, NCC). Contracts entered into by
such legally incapacitated persons are not
void, but merely voidable, subject to
annulment or ratification (Art. 1393, NCC).
 Capacitated person CANNOT file an action for
annulment using incapacity of the
incapacitated party as the basis.
He is disqualified from alleging the incapacity of
the person whom he contracts (Art. 1397, NCC).
Obligation to make restitution in a defective
contract, where such defect consists in the
incapacity of a party.
GR: The incapacitated person is not obliged to
make any restitution.
XPN: Insofar as he has been benefited by the
thing or price received by him (Art. 1399, NCC).
Sale to a Minor
Rule: The contract is voidable. But where
necessaries are sold and delivered to a minor or
other person without capacity to act, the
incapacitated person must pay a reasonable price
therefor (Art. 1489 [2], NCC).
Necessaries cover everything indispensable for
sustenance, dwelling, clothing, medical
attendance, education, and transportation (Art.
194, FC).
Relative Incapacity:
a. Married Persons
GR: Sale between husband and wife is void (Art.
1490, NCC; Camia De Reyes vs. Reyes de Ilano, G.R.
No. L-42092, October 28, 1936).
The prohibition applies –
a. To sales in legal redemption, compromise
and renunciations (Art. 1492, NCC); and
b. To common-law spouses (Calimlim-Canullas vs.
Fortun, G.R. No. L-57499, June 22, 1984).
Rationale: The reason behind the prohibition is
to protect third persons who may have contracted
with a spouse, believing in the existence of
certain properties, and who could easily be
defrauded by removing such property by transfer
to the other spouse (Perez vs. Perez-Senerpida, G.R.
No. 233365, March 24, 2021).
XPNs:
a. Separation of property in marriage settlement,
OR
b. Judicial separation of property. (Art. 1490,
NCC)
Who may question validity of sale:
a. The heirs of the spouses who have been
prejudiced, prior creditors and the State
when it comes to the payment of the proper
taxes due on the transactions (Medina vs. CIR,
G.R. No. L-15113, January 28, 1961).
b. However, the spouses, since they are parties
to an illegal act, cannot avail themselves of the
illegality of the sale on the ground of in pari
delicto and creditors who became such only
after the prohibited sale (Medina vs. CIR, supra).
Between Common Law Spouses
In Calimlim-Canullas vs. Fortun, the Court
decided that sale between common law spouses
is null and void because Art. 1490 prohibits
sales between spouses to prevent the exercise of
undue influence by one spouse over the other, as
well as to protect the institution of marriage. The
prohibition applies to a couple living as husband
and wife without the benefit of marriage,
otherwise, the condition of those incurred guilt
would turn out to be better than those in legal
union (Calimlim-Canullas vs. Fortun, et. al., G.R. No.
L-57499, June 22, 1984).
But when the registered property has been
conveyed subsequently to a third-party buyer in
good faith and for value, then reconveyance is no
longer available to common-law spouse-seller,
since under the Torrens system every buyer has
231
a right to rely upon the title of his immediate
seller (Cruz vs. CA, G.R. No. 120122, Nov. 6, 1997).
b. Alienage (Art. 39, NCC)
GR: Aliens, whether individuals or corporations,
have been disqualified from acquiring lands of the
public domain (Matthews vs. Taylor, G.R. No.
164584, June 22, 2009).
XPNs:
1. Acquisition is through hereditary succession
(Section 7, Article XII, 1987 Constitution)
2. A natural-born citizen of the Philippines who
has lost his Philippine citizenship (Section 8,
Article XII, 1987 Constitution)
3. Americans who may have acquired tile to
private lands during the effectiveness of the
Parity Agreement (Section 11, Article XVII,
1973 Constitution).
c. Trusteeship
Special Disqualifications (Arts. 1491-1492,
NCC)
1. Agents
GR: An agent or administrator cannot acquire by
purchase, even at public or judicial auction, either
in person or thru the mediation of another, the
property whose administration or sale may have
been entrusted to them.
XPN: Principal gives consent.
2. Guardian
GR: Sale of property belonging to the ward in
favor of the guardian is void (Art. 149[1], NCC;
Philippine Trust Co. vs. Roldan, G.R. No. L-8477,
May 31, 1956). But after the inhibition has
ceased, a new contract may be executed which
will be valid from the time of the execution of the
new contract (Rubias vs. Batiller, G.R. No. L-35702,
May 29, 1973).
Rationale: Guardianship is a trust of the highest
order, and the trustee cannot be allowed to have
any inducement or neglect his ward’s interest (Phil
Trust Co vs. Roldan, G.R. No. L-8477, May 31, 1956).
232
3. Executors and Administrators
GR: The sale in favor of the executor or
administrator of property under his
administration is void (Art. 1491[3], NCC).
Qualifications:
(a) Prohibition applies to sale of specific property
under administration. But after the inhibition
has ceased (or after the termination of the
administration), a new contract may be
executed which will be valid from the time of
the execution of the new contract (Rubias vs.
Batiller, G.R. No. L-35702, May 29, 1973).
(b) Prohibition does not apply to acquisition of
hereditary rights because these hereditary
rights are not part of the property under his
administration (Naval vs. Enriquez, G.R. No.
1318, April 12, 1904).
4. Public Officers and Employees
Public officers and employees cannot acquire the
property of the State or of any political
subdivision, or any GOCC, or institution, the
administration of which has been entrusted to
them; including judges and government experts,
who, in any manner whatsoever takes part in the
sale. (Art. 1491[4], NCC) Such contract is void.
(Maharlika Broadcasting Corp. vs. Tagle, G.R. No. L-
65594, July 9, 1986)
5. Lawyers
Cannot acquire or purchase property or rights in
litigation in which they take part by virtue of their
profession.
Rationale: Lawyers may have undue influence
over clients; greed may get the better of the
sentiments of loyalty and disinterestedness
(Valencia vs. Cabanting, A.C. No. 1302, 1391, 1543,
April 26, 1991).
Prohibition is definite and permanent and cannot
be cured by ratification (Rubias vs. Batiller, G.R. No.
L-35702, May 29, 1973).
XPNs: An assignment to a lawyer by his client of
an interest in the property does not violate Art.
1491, where:
a. A judgment has been rendered and has
become final; and
b. In case of contingency fee arrangements:
the interest of the lawyer may be annotated
as an adverse claim on the property awarded
to his client (Director of Lands vs. Ababa, G.R.
No. L-26096, February 27, 1979).
6. Justices, Judges, prosecuting
attorneys, clerks and other officers and
employees connected with the
administration of justice
Cannot acquire or purchase property or rights in
litigation or levied upon on execution before the
court within which jurisdiction or territory they
exercise their respective functions.
Rationale: To prevent fraud and to surround
their profession with prestige.
Prohibition applies only on sales or assignment
during the pendency of litigation involving the
property (Macariola vs. Asuncion, A.M. No. 133-J, May
31, 1982).
Applicability of Prohibition
a. Even if the sale is at a public or judicial
auction, either in person or through the
mediation of another (Art. 1491, NCC).
b. To sales in legal redemption compromises
and renunciations (Art. 1492, NCC).
c. Only during the period of litigation. Hence, in
a case where the judge acquired the property
after the decision had long become final,
there is said to be no violation (Macariola vs.
Asuncion, A.M. No. 133-J, May 31, 1982).
When prohibition does not apply:
a. It does not apply to the sale of a parcel of
land acquired by a client to satisfy a
judgment in his favor to his attorney, as long
as the property was not the subject of the
litigation (Daroy vs. Abecia, A.C. No. 3046,
October 26, 1998).
b. It does not apply to a contingent fee based
on the value of the property involved in
litigation because the transfer or assignment
of the property in litigation takes effect only
after the finality of a favorable judgment.
(Recto vs. Harden, G.R. No. L-6897, November 29,
1956; Vda. De Laig vs. CA, G.R. No. L-26882; April
5, 1978; Director of Lands vs. Ababa, G.R. No. L-
26096, February 27, 1979)
C. EFFECTS OF THE CONTRACT WHEN THE
THING SOLD HAS BEEN LOST
The thing is lost when it perishes or goes out of
commerce or disappears in such a way that its
existence is unknown or it cannot be recovered
(Art. 1189, NCC).
a. If occurs prior to perfection, the seller bears
the loss, being the owner of the thing (res
perit domino).
b. If loss occurs at the time of perfection:
● If subject matter has been “entirely” lost,
contract shall be without any effect (Art.
1493, NCC).
● If the subject matter has been lost in part
only, the buyer may choose between:
withdrawing from the contract; or
demanding the remaining part, paying its
price in proportion to the total sum
agreed upon (Id).
c. If loss occurs after perfection but before
delivery (Villanueva, Law on Sales, 2009, p.
348):
● If lost without fault of the vendor,
obligation is extinguished.
● If lost through the fault of the vendor, he
is obliged to pay damages.
● If the thing deteriorates without fault of
the vendor, impairment is borne by
vendee.
● If it deteriorates through fault of the
vendor, vendee may choose between
rescission of obligation and its fulfillment,
with indemnity for damages in either
case.
● If loss without seller’s fault: Two views:
First view: Seller is released from his obligation to
deliver but buyer’s obligation to pay subsists
(Paras, Vol. V, 1990 ed., p. 58; Padilla, Civil Code,
1972, Ed., p. 840-841). Hence, the buyer bears the
risk of loss.
Second view: Counter-prestation is also
extinguished (IV Tolentino, Civil Code, 1991 ed.,
337). Hence, risk of loss is borne by the seller and
buyer need not pay the price.
233
 View of Tolentino is more just and equitable
and in conformity with the principle of res
perit domino. At any rate, the Supreme Court
had the occasion to hold that after perfection
but before delivery, the risk of loss is borne
by the seller under the rule of res perit
domino (Union Motors vs. CA, G.R. No. 117187,
July 20, 2001; Chrysler Philippines vs. CA, G.R. No.
L-55684, December 19, 1984).
d. If loss and deterioration occur after delivery:
GR: When ownership over goods has been
transferred to the buyer, goods are buyer’s risk
(Art. 1504, NCC).
XPNs:
(a) When delivery is made to buyer in pursuance
of contract and ownership is retained by
seller merely to secure performance of
buyer’s obligations, goods are still at buyer’s
risk from time of such delivery (Art. 1504,
NCC).
(b) Where actual delivery is delayed thru fault of
either buyer or seller, goods are at risk of
party in fault (Art. 1504, NCC).
Loss in case of specific goods
In the case of sale of specific goods, and without
the knowledge of the seller, the goods have
perished in part or wholly or in a material part so
deteriorated in quality as to be substantially
changed in character, the buyer may at his
option: treat sale as avoided; or treat sale as valid
in all of the existing goods or in so much thereof
as have not deteriorated, and as binding the
buyer to pay the agreed price for the goods in
which the ownership will pass, if the sale was
divisible (Art. 1494, NCC).
D. OBLIGATIONS OF THE VENDOR
General Obligations of the Vendor:
1. Transfer the ownership
2. Deliver the thing sold (Arts. 1458 and 1495)
3. Deliver the fruits and accessories (Arts. 1164,
1166, and 1537);
4. Make Warranties (Arts. 1545 - 1581) - can be
waived or modified; warranty is not an
essential element of the contract of sale;
5. Take care of the thing, pending delivery, with
diligence of a good father of a family unless
234
law or parties stipulate another standard (Art.
1163);
6. Pay for the expenses for the execution and
registration of the sale, unless there is
stipulation to the contrary
7. Accord the buyer the right to examine the
goods (Art. 1584);
8. Enter into contract with the carrier on behalf
of the buyer as may be reasonable under the
circumstances (Art. 1523);
9. Notify the buyer regarding necessity to insure
goods if it is usual to insure them
OBLIGATION OF THE SELLER TO TRANSFER
OWNERSHIP
Not required at the time of the perfection of the
contract, but required only at the time of
delivery (Art. 1459, NCC). Hence, a perfected
contract of sale cannot be challenged on the
ground of the seller’s non-ownership of the thing
sold at the time of the perfection of the contract
of sale (Quijada vs. CA, G.R. No. 126444, December
4, 1998; Cavite Development Bank vs. Sps. Lim G.R.
No. 131679, February 1, 2000).
Place of Delivery
The following are the rules shall be observed in
determining the place of delivery of goods sold:
1. Where there is an agreement, express or
implied, the place of delivery is that agreed
upon;
2. In the absence an agreement, the place is
that determined by usage of trade;
3. Where there is no agreement and there is
also no prevalent usage, the place of delivery
is the seller’s place of business;
4. In any other case, the place of delivery is the
seller’s residence; and
5. In case of specific goods, which to the
knowledge of the parties at the time the
contract was made were in some other place,
that place is the place of delivery, in the
absence of any agreement or usage of trade
to the contrary (Art. 1521, NCC).
 Where the goods at the time of sale are
in the possession of a third person, the
seller has not fulfilled his obligation to
deliver to the buyer unless and until such
third person acknowledges to the buyer
that he holds the goods on the buyer’s
behalf (Art. 1521, NCC).
When Thing is Deemed Delivered
The thing sold shall be understood as delivered,
when it is placed in the control and possession of
the vendee (Art. 1497, NCC).
Delivery – the absolute giving up of the control
and custody of the property on the part of the
vendor, and the assumption of the same by the
vendee (Equatorial Realty Dev. vs. Mayfair Theatre,
G.R. No. 106063, November 21, 1996).
Types of Delivery:
Delivery may be effected in any of the following
ways or modes:
1. by actual or real delivery (Art. 1497, NCC)
2. by constructive or legal delivery (Arts.
1498-1501, NCC); or
3. by delivery in any other manner signifying an
agreement that the possession is transferred
to the vendee. (De Leon, Comments and Cases
on Sales and Lease, 2005, p. 166).
Actual Delivery
Thing sold is placed under the control and
possession of the vendee (Art. 1497, NCC) or his
agent (Alliance Tobacco Corp., Inc. vs. Phil. Virginia
Tobacco Administration, G.R. No. L-66944, November
13, 1989).
Constructive Delivery; Concepts; Types
Constructive delivery is a general term
comprehending all those acts which, although not
conferring physical possession of the thing, have
been held by construction of law equivalent to
acts of real delivery (Banawa vs. Mirano, G.R. No. L-
24750, May 16, 1980).
Constructive delivery may be effected in any of
the following ways or modes:
1. by the execution of a public instrument
(Art. 1498, par. 1., NCC);
2. by symbolical tradition or traditio
symbolica (ibid., par. 2);
3. by traditio longa manu (Art. 1499, NCC);
4. by traditio brevi manu (Ibid.);
5. by traditio constitutum possessorium
(Art. 1500, NCC); or
6. by quasi-delivery or quasi-traditio (Art.
1501, NCC).
1. Execution of Public Instruments
When the sale of movable or immovables is made
through a public instrument, the execution
thereof shall be equivalent to the delivery of the
thing which is the object of the contract, if from
the deed the contrary does not appear or cannot
clearly be inferred (Art. 1498, NCC).
Sale of thing not subject to control of
vendor:
Delivery by the execution of a public instrument
is equivalent to actual delivery only where the
thing is subject to the control of the vendor and
there is no impediment that may prevent the
passing of the property from the hands of the
vendor into those of the vendee. The thing sold
must be placed in his control in order that it can
be said that delivery has been effected (Addison
vs. Felix Tioco, G.R. No. L-12342, August 3, 1918).
Execution of Special Power of Attorney to
Agent; Not a Delivery
A special power of attorney authorizing the
agents to execute a deed of sale over the
property can by no means be interpreted as
delivery or conveyance of ownership over said
property (Torcuator vs. Bernabe, G.R. No. 134219,
June 8, 2005).
2. Symbolical Tradition or Traditio
Symbolica
As to movable property, its delivery may also be
made by the delivery of the keys of the place or
depository where it is stored or kept (Art. 1498,
NCC).
3. Traditio Longa Manu
This mode of delivery takes place by the mere
consent or agreement of the contracting parties
as when the vendor merely points to the thing
sold which shall thereafter be at the control and
disposal of the vendee (De Leon, Obligations and
Contracts, 2005, p. 181).
4. Traditio Brevi Manu
This mode of legal delivery happens when the
vendee has already the possession of the thing
sold by virtue of another title as when the lessor
235
sells the thing leased to the lessee. Instead of
turning over the thing to the vendor so that the
latter may, in turn, deliver it, all these are
considered done by action of law (De Leon,
Obligations and Contracts, 2005, p. 181).
5. Constitutum Possessorium
This mode of constructive delivery takes effect
when at the time of the perfection of the sale, the
seller held possession of the subject matter in the
concept of owner, and pursuant to the contract,
the seller continues to hold physical possession
thereof no longer in the concept of an owner, but
as a lessee or any other form of possession other
than in the concept of owner and pursuant to
sale, he would now hold possession in the
concept of an owner (Villanueva, Law on Sales,
2009, p. 230).
6. Quasi-traditio
Used to indicate the transfer of rights or
incorporeal things through the exercise of the
rights by the grantee with the acquiescence of the
grantor. (Rabuya, Civil Review I, 2021 Ed., p. 746)
Delivery of Incorporeal Thing
Delivery of incorporeal thing is effected:
1. by the execution of a public instrument (Art.
1498, NCC); or
2. when that mode of delivery is not applicable,
by the placing of the titles of ownership in the
possession of the vendee (Art. 1501, NCC);
or
3. by allowing the vendee to use his rights as
new owner with the consent of the vendor
(Art. 1501, NCC).
Double Sale
There is double sale when same property is sold
by the same vendor to different vendees (Art.
1544, NCC)
Requisites of Double Sales
1. The two (or more) sales transactions must
constitute valid sales;
2. The two (or more) sales transactions must
pertain to exactly the same subject matter;
3. The two (or more) buyers at odds over the
rightful ownership of the subject matter must
each represent conflicting interests; and
236
4. The two (or more) buyers at odds over the
rightful ownership of the subject matter must
each have bought from the very same
seller (Cheng vs. Genato, G.R. No. 129760,
December 29, 1998).
Rules in Case of Double Sales
The conflicting rights of said vendees in case of
double sales shall be resolved in accordance with
the following rules:
1. When subject matter is movable - the
ownership shall be acquired by the vendee
who first takes possession in good faith
(Art. 1544, NCC; Villa Rey Transit, Inc. vs. Ferrer,
G.R. No. L-23893, October 29, 1968).
2. When subject matter is immovable
a. Registration in good faith: The
vendee who first registers the sale in
good faith in the Registry of Property has
a preferred right over another who has
not registered his title even if the latter is
in actual possession of the immovable
property.
b. Possession in good faith: In the
absence of registration, the vendee who
first takes possession in good faith; and
c. Oldest title in good faith: In the
absence of both registration and
possession, the vendee who presents the
oldest title in good faith. (Art. 1544, NCC)
 Art. 1544 does not apply to land
application under the Torrens
System.
Concept of Purchaser in Good Faith
He is deemed a possessor in good faith who is
not aware that there exists in his title or mode of
acquisition any flaw which invalidates it (Art. 526,
NCC).
When a piece of land is in the actual possession
of persons other than the seller, the buyer must
be wary and should investigate the rights of those
in possession. Without making such inquiry, one
cannot claim that he is a buyer in good faith
(Rosaroso vs. Doria, G.R. No. 194846 June 19, 2013).
Effect if seller is not the owner at the time
of delivery:
If the seller is not the owner, the sale is null and
void (nemo dat quod non habet). The seller is
liable for damages for breach of his obligation to
transmit ownership to the buyer (Rabuya, Pre-bar
Reviewer in Civil Law, 2021 Ed., p. 446-447).
Sale by a Person Having a Voidable Title
GR: In a sale by the non-owner, the buyer
acquires no better title to the goods than the
seller had (he merely steps into the shoes of the
seller).
XPNs: (True Owner Cannot Recover):
1. Owner is estopped or precluded by his
conduct (Art. 1505, NCC);
2. Sale made by the registered or apparent
owner in accordance with registration laws
(Art. 1505, NCC);
3. Sales sanctioned by judicial or statutory
authority (Art. 1505, NCC);
4. Purchases in a merchants store, fairs or
markets; the thing must be on display to
make it part of the goods for sale to bar
recovery by the true owner (Art. 1505, NCC);
5. When a person who is not the owner sells and
delivers a thing, and subsequently acquires
title thereto (Art. 1434, NCC);
6. When the seller has a voidable title which has
not been avoided at the time of the sale (Art.
1506, NCC)
7. Sale by co-owner of whole property or a
definite portion thereof;
8. Special rights of unpaid seller (Arts. 1526-
1533, NCC).
 When a non-owner who sells and delivers
a thing subsequently acquires title
thereto, the title passes by operation of
law to the buyer (Art. 1434, NCC).
E. OBLIGATIONS OF THE VENDEE
General Obligations of Vendee:
1. Payment of price;
2. Accepting the delivery of thing sold; and
3. Bear the expenses for the execution and
registration of the sale and putting the goods
in a deliverable state, if such is the stipulation
(Art. 1488, NCC).
OBLIGATION TO PAY PRICE:
1. As to time and place: Must pay at the time
and place stipulated in the contract. If no
stipulation, at the time and place of the delivery
of the thing sold (Art. 1582, NCC).
1. Liability for interest: For the period
between delivery and payment of price, in the
following cases-
a. If stipulated
b. If thing sold and delivered produced
fruits and income; or
c. If buyer is in default, from time of judicial
or extrajudicial demand for payment of
price (Art. 1589, NCC).
OBLIGATION TO ACCEPT DELIVERY:
1. Time and place: The vendee is bound to
accept delivery at the time and place
stipulated in the contract. If not stipulated, at
time and place of the delivery of thing sold
(Art. 1582, NCC).
2. Rule in delivery of goods by installment.
Buyer cannot be compelled to accept delivery
of goods by installment, unless otherwise
agreed upon (Art. 1583, NCC).
Rule on right of buyer to examine
GR: If not previously examined by buyer and no
stipulation to contrary, delivery is not deemed
accepted unless buyer has reasonable
opportunity to examine the delivered goods (Art.
1584 [1], NCC). Buyer has, upon request and
unless there is contrary agreement, the right to
examine the goods when seller tenders delivery
of the same (Art. 1584 [2], NCC).
XPN:
C.O.D – When the terms indicate that goods shall
not be delivered by the carrier to the buyer until
he has paid the price. The buyer is not entitled to
examine the goods before the payment of the
price (Art. 1584, NCC).
Delivery by installments
The buyer of goods is not bound to accept
delivery thereof by installments, unless otherwise
is agreed upon (Art. 1583, NCC).
237
Seller’s Warranty
In the absence of express or implied agreement
of the parties, acceptance of the goods by the
buyer shall not discharge the seller from liability
in damages or other legal remedy for breach of
any promise or warranty in the contract of sale
(Art. 1586, NCC).
Refusal to Accept
Unless otherwise agreed, where goods are
delivered to the buyer, and he refuses to accept
them, having the right to do so, he is not bound
to return them to the seller, but it is sufficient if
he notifies the seller that he refuses to accept
them (Art. 1587, NCC). However, when the
buyer's refusal to accept the goods is without just
cause, the title thereto passes to him from the
moment they are placed at his disposal (Art.
1588, NCC).
Circumstances indicating acceptance of
goods:
1. Express acceptance
- When buyer intimates to the seller that he
has accepted them;
2. Implied acceptance
- When goods have been delivered to buyer
and he does any act in relation to them
which is inconsistent with the ownership of
the seller; or
- When, after the lapse of a reasonable time,
buyer retains the goods without intimating
to seller that he has rejected them (Art.
1585, NCC).
Effect of acceptance on seller’s breach:
1. Seller remains liable for damages or other
legal remedy for breach of any promise or
warranty in the contract of sale, in the
absence of agreement to the contrary.
2. But the buyer must give notice to the seller
of such breach within a reasonable time after
the buyer knows, or ought to know of such
breach; otherwise, the seller is not liable (Art.
1586, NCC).
238
Other Obligations of the Buyer
1. Duty of buyer to take care of goods without
obligation to return (Art. 1587, NCC);
2. To be liable for a depositary if he voluntarily
constitutes himself as such (Art. 1587, NCC);
and
3. Pay interest for the period between the
delivery of the thing and the payment of the
price in the following circumstances:
a. Should it have been so stipulated;
b. Should the thing sold and delivered
produce fruits or income;
c. Should he be in default, from the time of
judicial or extrajudicial demand for the
payment of the price (Art. 1589, NCC).
F. BREACH OF CONTRACT
1. REMEDIES
a. Remedies of the Seller
1. Action for payment of the price (Art.
1595);
2. Action for damages for non-acceptance
of the goods (Art. 1596);
3. Action for rescission (Art. 1597).
b. Remedies of the Buyer
1. Action for specific performance (Art.
1598);
2. Action for rescission or damages for
breach of warranty (Art. 1599).
c. Remedies of the Seller for Breach of
Contract in Case of Movables
1. Ordinary Remedies
Movables in General – Action to rescind the
sale (Art. 1593)
Sale of Goods:
1. Action for specific performance - when
ownership has been transferred to the
buyer (Art. 1595, NCC).
2. Treat the goods as the buyer’s and may
maintain an action for the price - When the
ownership in the goods has not passed, if
they cannot readily be resold for a
reasonable price, the seller may offer to
 deliver the goods to the buyer, and, if the
buyer refuses to receive them, may notify
the buyer that the goods are thereafter
held by the seller as bailee for the buyer
(Art. 1595, NCC).
When buyer wrongfully neglects / refuses
to accept goods:
The seller may maintain an action against him for
damages for non-acceptance in accordance with
the following:
a. The seller of the goods who has not been
paid or to whom the price has not been
tendered.
b. The seller of the goods, in case a bill of
exchange or other negotiable instrument has
been received as conditional payment, AND
the condition on which it was received has
been broken by reason of the dishonor of the
instrument, insolvency of the buyer or
otherwise (Villanueva, Law on Sales, 2009, p.
363).
3. Special Right of resale;
Remedies of Unpaid Seller:
1. Possessory lien over the goods;
● Right of lien is not affected by any sale, or
other disposition of the goods which the
buyer may have made, unless the seller
assented thereto. If a negotiable document
of title has been issued for goods, no
seller’s lien shall defeat the right of any
purchaser for value and in good faith to
whom such document has been
negotiated, whether such negotiation be
prior or subsequent to the notification to
the carrier, or other bailee who issued such
document, of the seller’s claim to a lien
(Art. 1535, NCC).
● It is exercisable only in the following
instances:
4. Special Right to rescind the sale;
a. Where the goods have been sold
without any stipulation as to credit;
b. Where the goods have been sold on
credit, but the term of credit has
expired;
c. Where the buyer becomes insolvent
(Art. 1527, NCC).
2. Right of stoppage in transit after he has
parted with the possession of the goods and
the buyer becomes insolvent;
● The unpaid seller may resume possession
of the goods at any time while they are in
transit, and he will then become entitled to
the same rights in regard to the goods as
he would have had if he had never parted
with the possession (Villanueva, Law on
Sales, 2009, p. 371).
● If a negotiable document of title has been
issued for goods, no seller’s right to
stoppage in transitu shall defeat the right
of any purchaser for value and in good
faith to whom such document has been
negotiated, whether such negotiation be
prior or subsequent to the notification to
the carrier, or other bailee who issued such
document, of the seller’s claim to a lien
(Art. 1535, NCC).
● Unpaid seller may exercise special right of
resell under the following circumstances:
a. The goods are of perishable nature;
b. Where the seller has been expressly
reserved in case the buyer should
make default; or
c. Where the buyer has been in default
in the payment of the price for an
unreasonable time (Art. 1533, NCC).
● Unpaid seller, without need of first
rescinding the contract judicially, is entitled
to resell the same, and if he is obliged to
sell it for less than the contract price, the
buyer is liable for the difference (Katigbak
vs. Court of Appeals, G.R. No. L-16480, January
31, 1962).
● Notwithstanding that the ownership in the
goods may have passed to the buyer, the
unpaid seller has a special right to
extrajudicially rescind the sale.
239
 ● Unpaid seller may exercise special right to
rescind the sale under the following
circumstances:
a. The seller has expressly reserved the
right to do so in case the buyer should
make default; or
b. The buyer has been in default in the
payment of the price for an
unreasonable time.
5. Action for the price;
Effect of Failure to Pay:
Failure of the vendee to pay the price after the
execution of the contract does not make the sale
null and void for lack of consideration but results
at most in default on the part of the vendee, for
which the vendor may exercise his legal remedies
(Balatbat vs. CA, G.R. No. 109410, August 28, 1996).
Failure to pay the consideration results in a right
to demand the fulfillment or cancellation of the
obligation under an existing valid contract
(Buenaventura vs. CA, G.R. No. 126376, November 20,
2003)
When Vendee Liable to Pay Interest:
1. If it has been so stipulated;
2. If the thing sold and delivered produce fruits
or income; or
3. If the buyer be in default, from the time of
judicial or extrajudicial demand for the
payment of price (Art. 1589, NCC).
6. Action for damages
2. SALE OF PERSONAL/MOVABLES
PROPERTY THRU INSTALLMENT (AS
AMENDED BY RECTO LAW, ACT NO. 4122)
Remedies of Vendor: In a contract of sale of
personal property the price of which is payable in
installments, the vendor may exercise any of the
following remedies:
a. Exact fulfillment of the obligation, should the
vendee fail to pay at least one installment;
b. Cancel the sale, should the vendee’s failure
to pay cover two or more installments;
c. Foreclose the chattel mortgage on the thing
sold, if one has been constituted, should the
vendee’s failure to pay cover two or more
installments (Art. 1484, NCC).
240
Foregoing remedies are alternative and not
cumulative. If the creditor chooses one remedy,
he cannot avail himself of the other two (Delta
Motors Sales Corp. vs. Niu Kim Duan, G.R. No. 61043,
September 2, 1992; Elisco Tool Manufacturing Corp.
vs. CA, G.R. No. 109966, May 31, 1999).
What constitute “sale on installment”
1. The price must be payable in several
installments (Levy Hermanos, Inc. vs. Gervacio,
G.R. No. L-46306, October 27, 1939).
2. The Recto law does not apply to a sale where
there is an initial payment and the balance is
payable in the future. This is not a sale on
installment (Id.).
A. Specific Performance
GR: The GR is that when the seller has chosen
specific performance, he can no longer seek for
rescission nor foreclosure of the chattel mortgage
constituted on the thing sold. The seller is
deemed to have chosen specific performance,
thereby foreclosing resort to the other two
remedies, when he files an action in court for
recovery.
XPN: Even if the seller had chosen specific
performance, but if the same becomes
impossible, the seller may still choose rescission
(Art. 1191, NCC).
 In Chieng vs. Sps. Santos (G.R. No. 169647,
Aug. 31, 2007), involving a real estate
mortgage obligation, the Supreme Court held
that the filing of the criminal cases for
violation of B.P. Blg. 22 where the civil action
for recovery of the amount of the checks is
impliedly instituted (Sec. 1[b] of Rule 111 of
the 2000 Rules on Criminal Procedure), the
remedy of collection suit is deemed to have
been availed, thus barring the complainant
from subsequently resorting to an action for
foreclosure.
B. Rescission/Cancellation of Sale
When remedy is deemed chosen:
The rule is that the seller is deemed to have
chosen the remedy of rescission, and can no
longer avail of the other two remedies, when he
has clearly indicated to end the contract, such as:
(1) when he sends a notice of rescission; or (2)
takes possession of the subject matter of the
sale; or (3) when he files an action for rescission.
Forfeiture of installment or rentals paid:
GR: As a rule, rescission obliges the parties to
make mutual restitution (Art. 1385, NCC). Hence,
the payments must be returned.
XPN: A stipulation that the installments or rents
paid shall not be returned to the vendee or lessee
shall be valid insofar as the same may not be
unconscionable under the circumstances (Art.
1486, NCC).
Effects of rescission:
It abrogates the contract from the very
beginning, subject to the provisions of Article
1486 allowing the vendor to retain installments
payments if there is such stipulation and the
same is not unconscionable under the
circumstances.
 As a consequence, the seller is barred from
exacting payment from the buyer the balance
of the price (Nonato vs. IAC, G.R. No. L-67181,
November 22, 1985; Delta Motor Sales Corp. vs.
Niu Kim Duan, supra.). The same is not
consistent with the remedy of rescission.
C. Foreclosure of Chattel Mortgage:
When remedy is deemed chosen:
GR: Where the mortgagee elects a remedy of
foreclosure, the law requires the actual
foreclosure of the mortgaged chattel. Thus, in
Manila Motor Co. vs. Fernandez (G.R. No. L-8377,
August 28, 1956), the Court held that it is the actual
sale of the mortgaged chattel in accordance with
Sec. 14 of Act No. 1508 that would bar the
creditor (who chooses to foreclose) from
recovering any unpaid balance (Pacific Commercial
Co. vs. De la Rama, G.R. No. 47771, June 17, 1941).
And it is deemed that there has been foreclosure
of the mortgage when all the proceedings of the
foreclosure, including the sale of the property at
public auction, have been accomplished
(Macondray & Co., Inc. vs. Tan, G.R. No. 45105,
November 26, 1938).
XPN: Although no actual foreclosure as
contemplated under the law has taken place but
since the vehicle is already in the possession of
the creditor and it has persistently and
consistently avowed that it elects the remedy of
foreclosure, the creditor can be directed to
foreclosure the said vehicle without more (Magna
Financial Services Group, Inc. vs. Colarina, G.R.
No. 158635, December 9, 2005).
Effect of foreclosure of mortgage:
GR: In case of foreclosure, the creditor-
mortgagee shall have no further action against
the purchaser to recover “any unpaid balance of
the price.” Any agreement to the contrary shall
be void. This is known as the Recto Law (Art.
148[3], NCC). Notwithstanding the language of
the law, current jurisprudence upholds the full
barring effect in recovery to include damages,
interests and attorney’s fees (and not only the
balance of the purchase price).
XPN: However, where the mortgagor plainly
refuses to deliver the chattel subject of the
mortgage upon his failure to pay two or more
installments, or if he conceals the chattel to place
it beyond the reach of the mortgagee, the
creditor-mortgagee is allowed to recover the
expenses properly incurred in effecting seizure of
the chattel and reasonable attorney’s fees in
prosecuting the action for replevin (Filipinas
Investment & Finance Corp., vs. Ridad, G.R. No. L-
27645, November 28, 1969).
The seller can no longer proceed to foreclose on
the real estate mortgage because if the guarantor
should be compelled to pay the balance of the
purchase price, the guarantor will in turn be
entitled to recover what he has paid from the
debtor vendee; so ultimately, it will be the buyer
who will be made to bear the payment of the
balance of the price, despite the earlier
foreclosure of the chattel mortgage given by him
(Cruz v. Filipinas Investment & Finance Corp., G.R. No.
L-27645, November 28, 1969).
Applicability of Recto Law: The Recto law
applies also to contracts purporting to be leases
of personal property with option to buy, when the
lessor has deprived the lessee of the possession
or enjoyment of the thing (Art. 1485, NCC).
 This law covers contracts of sale of personal
property by installments (Act No. 4122). It is
also applied to contracts purporting to be
leases of personal property with option to
buy, when the lessor has deprived the lessee
241
 of the possession or enjoyment of the thing.
(PCI Leasing and Finance Inc. vs. Giraffe‐ X
Creative Imaging, Inc., G.R. No. 142618, July 12,
2007).
 In choosing, through replevin, to deprive the
lessee-buyer of possession of the leased
equipment, the lessor-seller waived its right
to bring an action to recover unpaid rentals
on the said leased items. The condition that
the lessor has deprived the lessee of
possession or enjoyment of the thing for the
purpose of applying Article 1485 was fulfilled
upon filing of the lessor-seller of the
complaint for a sum of money with prayer for
replevin to recover possession of the office
equipment. By virtue of writ of seizure issued
by the court, the lessor-seller has effectively
deprived lessee-buyer of their use, a situation
which, by force of Recto Law, in turn
precludes the former from maintaining an
action for recovery of “accrued rentals” or the
recovery of the balance of the purchase price
plus interest (PCI Leasing and Finance, Inc.
vs. Giraffe-X Creative Imaging, Inc., supra).
SALE OF IMMOVABLE PROPERTY THRU
INSTALLMENT (MACEDA LAW, R.A. 6552)
Applies to sale or financing of real estate on
installment payments, including residential
condominium apartments. The MACEDA law
applies to sale of real estate on installments,
whether the contract be one of contract to sell
(Villanueva, Sales, 2009 Ed., p. 432; Rillo vs. CA, G.R.
No. 125347, June 19, 1997).
Requisites:
1. Transactions or contracts involving the sale
OR financing of real estate on installment
payments, including residential condominium
apartments; and
2. Buyer defaults in payment of succeeding
installments.
Not Applicable:
1. Sale of industrial lots
2. Sale of commercial buildings
3. Sale of urban land covered by Urban Land
Reform and agricultural land under Agrarian
Reform Law
4. Sale of lands payable in straight terms
242
Rights of the Buyer
If Buyer Has Paid At Least 2 Years of
Installments:
1. The buyer must pay, without additional
interest, the unpaid installments due within
the total grace period earned by him. There
shall be one (1) month grace period for every
one (1) year of installment payments made.
This right shall be exercised by the buyer
ONLY once in every 5 years of the life of the
contract AND its extensions.
 Actual cancellation can only take place
after 30 days from receipt by the buyer of
the notice of cancellation OR demand for
rescission by a notarial act AND upon full
payment of the cash surrender value to
the buyer t of the cash surrender value to
the buyer (Olympia Housing vs. Panasiatic,
G.R. No. 140468 January 16, 2003).
 The seller shall refund to the buyer the
cash surrender value of the payments on
the property equivalent to 50% of the
total payments made. After five (5) years
of installments, there shall be an
additional 5% every year but not to
exceed 90% of the total payments made.
2. The buyer shall have the right to sell his
rights or assign the same to another person
OR to reinstate the contract by updating the
account during the grace period and before
actual cancellation of the contract.
3. The buyer shall have the right to pay in
advance any installment or the full unpaid
balance of the purchase price any time
without interest and to have such full
payment of the purchase price annotated in
the certificate of title covering the property.
If Buyer Has Paid Less Than Two Years Of
Installments:
1. Buyer is entitled to pay unpaid installments
within a grace period of NOT less than 60
days from the date the installments became
due. Within the grace period, buyer also has
the right to assign his rights.
2. After the grace period, seller may cancel the
contract AFTER 30 days from receipt of the
buyer of notice of cancellation or demand for
rescission by a notarial act.
3. Here, there is no cash surrender value.
Maceda Law, MANDATORY: Any stipulation of
the parties contrary to the foregoing rules shall
be null and void (Sec. 7, R.A. No. 6552).
Sale of Immovable Property In General
Anticipatory breach (No Actual Breach):
Seller may sue for rescission of sale of immovable
property even in the absence of actual breach by
buyer, if the following conditions are present:
1. Seller has already delivered the immovable
property but the buyer has not yet paid the
price; and
2. Seller has reasonable grounds to fear the loss
of the immovable property and its price (Art.
1591, NCC).
Where there was actual breach (buyer
failed to pay agreed price within agreed
period):
1. Buyer may still pay after the expiration of the
period as long as no demand for rescission of
the contract has been made upon him either
judicially or by a notarial act. After the
demand, the court may not grant the buyer a
new term (Art. 1592, NCC).
2. The foregoing rule applies even if the
contract provides for its automatic rescission
upon failure of the buyer to pay the price at
the time agreed upon (Art. 1592, NCC).
3. An offer to pay prior to the demand for
rescission is sufficient to defeat the seller’s
right under Article 1592 of the Civil Code (Art.
1592, NCC).
4. Under the provisions of Article 1592, the
demand for rescission must either be
judicial or by notarial act. A letter
informing the buyer of the automatic
rescission of an agreement does not amount
to a demand for rescission if it is not
notarized (Laforteza vs. Machuca, G.R. No.
137552, June 16, 2000);
5. The foregoing rules (or Article 1592) does not
apply in the following:
a. Cases covered by R.A. No. 6552 (or
Maceda Law)
b. Contracts to sell – Article 1592 of the
NCC, requiring demand by suit or by
notarial act in case the vendor of realty
wants to rescind does not apply to a
contract to sell but only to contract of
sale (Pangilinan vs. CA, G.R. No. 83588,
September 29, 1997);
c. Sale on installment of real estate where
parties have laid down the procedure to
be followed in the event vendee failed to
fulfill his obligation (Torralba vs. Delos
Angeles, G.R. No. L-27592, February 14,
1980).
Remedies of Buyer
Action for Specific Performance (Art. 1598,
NCC):
1. When a seller has broken a contract to
deliver specific or ascertained goods, the
buyer may ask for specific performance,
without giving seller the option to retain the
goods on payment of damages.
2. Judgment may be unconditional, or upon
such terms and conditions as to damages,
payment of the price and otherwise, as the
court may deem just (Art. 1598, NCC).
In case of breach of warranty by seller:
Buyer may, at his election –
1. Accept or keep goods and set up against the
seller, the breach of warranty by way of
recoupment in diminution or extinction of
price;
2. Accept or keep goods and maintain an action
against seller for damages for breach of
warranty;
3. Refuse to accept goods, and maintain an
action against seller for damages for breach
of warranty; or
4. Rescind contract of sale and refuse to receive
goods or if goods have already been
received, return them or offer to return them
to seller and recover the price or any part
thereof, which has been paid (Art. 1599,
NCC).
243
Remedy of Rescission by Buyer (Art. 1599,
NCC):
1. Not entitled to rescind:
a. If he knew of breach of warranty when
he accepted the goods without protest;
b. If he fails to notify the seller within a
reasonable time of the election to
rescind;
c. If he fails to return or offer to return the
goods to the seller in substantially as
good condition as they were in at the
time the ownership was transmitted to
the buyer.
2. If entitled to rescind and elected to do so
(Art. 1599, NCC):
a. He shall cease to be liable for the price
upon returning or offering to return the
goods.
b. If price or any part thereof has already
been paid, seller shall be liable to repay
so much thereof as has been paid,
concurrently with the return of the
goods, or immediately after an offer to
return of the goods, or immediately after
an offer to return the goods in exchange
for repayment of the price.
c. If the seller refuses to accept an offer of
buyer to return the goods, the buyer is
deemed to hold the goods as bailee for
seller, but subject to a lien to secure
payment of any portion of the price,
which he has been paid, and with
remedies for the enforcement of such
lien.
Right to Suspend Payment:
1. In sales not involving subdivision or
condominium projects:
a. Grounds for suspension of payment:
1) The vendee is disturbed in the possession
or ownership of the thing acquired; or
2) Vendee has reasonable grounds to fear
such disturbance, by a vindicatory action
or for a foreclosure of mortgage (Art.
1590 NCC).
 But a mere act of trespass does not
authorize the suspension of the
payment of the price (Art. 1590,
NCC).
244
b. Remedies of buyer: He may suspend
payment of the price until the vendor has
caused the disturbance or danger to cease.
But this remedy of suspension may not be
availed of if the seller gives security for the
return of the price or it has been stipulated
that, notwithstanding any such contingency,
the vendee shall be bound to make the
payment (Art. 1590, NCC).
2. In sales involving subdivision or
condominium projects:
a. Ground for suspension of payment: Failure of
the owner or developer to develop the
subdivision or condominium project
according to the approved plans and within
the time limit for complying the same (Sec.
23, PD 957).
b. Alternative remedies of the buyer:
1) The buyer may suspend payment and wait
for further development; or (2) he may
demand reimbursement of the total amount
paid (Sec. 23, P.D. No. 957).
2) In case of the first option, the
owner/developer may not forfeit the
installment payments made by the buyer
(Sec. 23, PD 957). He may not also be ousted
from the subdivision (Relucio vs. Brillante-
Garfin, G.R. No. 76518, July 13, 1990).
3) In case of the second option, the notice of
informing the developer of the intention not
to remit further payments on account of non-
development of the subdivision, and the
demand for refund, can be made at the same
time (Casa Filipina Realty Corp. vs. Office of the
Pres., G.R. No. 99346, February 7, 1995).
G. EXTINGUISHMENT
1. IN GENERAL
The same grounds by which obligations in
general are extinguished, also apply to the
extinguishment of the obligations arising from
contracts of sale. They include payment of the
price or performance, loss of the subject matter,
condonation or remission, confusion or merger of
the rights of creditor and debtor, compensation,
novation, annulment, rescission, fulfillment of a
resolutory condition, and prescription.
Payment or performance only extinguishes the
obligations to which they pertain to in a contract
of sale, but not necessarily the contract itself,
since the relationship between buyer and seller
remains after performance or payment, such as
the continuing enforceability of the warranties of
the seller. (Villanueva, Law on Sales, 2009 Ed., p.
515)
2. PACTO DE RETRO SALE
The essence is that title and ownership of the
property sold is immediately vested in the vendee
a retro, subject to the restrictive condition of
repurchase by the vendor a retro within the
period provided in Article 1606 of the New Civil
Code, to wit: the failure of the vendee a retro to
repurchase the property vests upon the latter by
operation of law the absolute title and ownership
over the property sold (Misterio vs. Cebu State
College of Science and Technology, G.R. No. 152199,
June 23, 2005).
Causes of Extinguishment: (Arts. 1600,
1231, NCC)
1. Same causes as all other obligations;
2. By various causes of extinguishment in Title
VI (Sales) such as:
a. Cancellation of sale of personal property
payable in installments (Art. 1484, NCC).
b. Resale of goods by the unpaid seller (Art.
1532, NCC).
c. Rescission of the sale by the unpaid
seller. (Art. 1534)
d. Rescission by the buyer in case of partial
eviction (Art. 1556).
e. Rescission by the buyer in case of breach
of warranty against hidden defects (Art.
1567).
f. Rescission by the buyer of sale of animals
with redhibitory defects (Art. 1580);
3. By redemption, whether conventional or legal.
a. Conventional Redemption
That which takes place when vendor reserves the
right to repurchase the thing sold with the
obligation to reimburse to the vendee the price of
the sale, the expenses of the contract, other
legitimate payments made by reason of the sale,
as well as necessary and useful expenses made
on the thing sold (Arts. 1601 and 1616, NCC).
 The GR in redemption is that it is not
sufficient that a person offering to redeem
manifests his desire to do so. The statement
of intention must be accompanied by an
actual and simultaneous tender of payment
for the full amount of the repurchase price
(BPI Family Savings Bank, Inc. vs. Veloso, G.R. No.
141974, August 9, 2004).
Period of Conventional Redemption:
1. When no period is fixed:
If the right of redemption was agreed upon
but there was no stipulation as to the period
within which the right shall be exercised, the
period of redemption shall be four years from
the date of the contract (Art. 1606, NCC).
2. When a period is fixed by the parties:
a. If the period does not exceed ten years-
such as when the right to repurchase
shall be exercised within five years, then
the period shall be five years from the
date of the contract.
If the period exceeds ten years, then the
period shall be ten years from the date of
the contract, the stipulation as to the
excess being null and void (Montiero vs.
Salgado, G.R. Nos. 7287, 7288, March 29,
1914).
b. When the period agreed upon is
indefinite, such as when the repurchase
may be made “at any time”, the
repurchase may be exercised within ten
years from the date of the contract.
c. In case there was a civil action between
the parties the vendor may still exercise
the right to repurchase within thirty days
from the time final judgment was
rendered in a civil action on that basis
that the contract was a true sale with a
right to repurchase (Art. 1606, NCC).
Effect of failure to exercise right of
repurchase
Ownership is consolidated in the vendee.
However, in case of real property, a judicial order,
after the vendee has been duly heard, is required
for the purpose of recording the consolidation in
the Registry of Property (Art. 1607, NCC).
245
Against whom right to repurchase available
a. The vendee a retro (original vendee)
If the vendee should leave several heirs, the
action for redemption cannot be brought
against each of them except for his own
share, whether the thing be undivided, or it
has been partitioned among them.
But if the inheritance has been divided, and
the thing sold has been awarded to one of
the heirs, the action for redemption may be
instituted against him for the whole (Art.
1615, NCC).
b. Every possessor whose right is derived from
the vendee a retro, even if no mention is
made in the second contract of the right to
repurchase, provided the right has been
recorded in the Register of Deeds, or even if
the right is not registered, but the possessor
has knowledge of the existence of the right.
(Art. 1608, Mortgage Law, Land Registration Law)
2. When the vendor remains in possession as
lessee or otherwise;
3. When the period for the exercise of the right
to repurchase is extended;
4. When the purchaser retains for himself a part
of the purchase price;
5. When the vendor binds himself to pay the
taxes on the thing sold;
6. When the real intention of the parties is that
the transaction shall secure they payment of
a debt or the transaction shall secure the
payment of a debt or the performance of any
other obligation (De Leon, Comments and Cases
on Sales and Lease, 2005, p. 389).
 The presumption of equitable mortgage
created in Article 1602 of the CC is not
conclusive – It may be rebutted by
competent and satisfactory proof of the
contrary (Santiago vs. Dizon, G.R. No.
172771, January 31, 2008).
Remedy: The apparent vendor may ask for the
reformation of the instrument (Art. 1605, NCC).

3. EQUITABLE MORTGAGE (Arts. 1602- Distinguished from Option to Buy

1604, NCC)
OPTION TO
RIGHT TO REDEEM
One which, although lacking in some formality, or PURCHASE
form, or words, or other requisites demanded by Not a separate contract Generally, it is
a statute, nevertheless reveals the intention of but merely part of a principal contract
the parties to charge real property as security for main contract of sale
a debt, and contains nothing impossible or Does not need its To be valid, it must
contrary to law (Dorado Vda. De Delfin vs. Dellota, separate consideration have a
G.R No. 143697, January 28, 2008; Deheza-Inamarga in order to be valid and consideration
vs. Alano, G.R. No. 171321, December 18, 2008). effective separate and
distinct from
Essential Elements: purchase price
Cannot exceed 10 years May be beyond 10
1. That the parties entered into a contract years
denominated as a contract of sale; and There must be a tender of May be exercised by
2. That their intention was to secure an existing payment of the amount notice of its exercise
debt by way of mortgage (Bacungan vs. CA, required by law, including to the offeror
G.R. No. 170282, December 18, 2008). consignment thereof if
tender of payment cannot
Contracts presumed to be an equitable be made effectively on the
buyer.
mortgage:
(De Leon, Comments and Cases on Sales and Lease,
2005, p. 382).
A contract of sale with a right to repurchase and
other contracts purporting to be an absolute sale,
shall be presumed to be an equitable mortgage,
in any of the following cases:
1. When the price of a sale with a right to
repurchase is unusually inadequate;

246
Exercise of the Right to Redeem
Obligations of Vendor A Retro When He
Exercises Right to Repurchase (Art. 1616,
NCC):
1. Return to vendee price of sale;
2. Pay expenses of the contract and other
legitimate payments made by reason of sale;
and
3. Pay all necessary and useful expenses made
on the thing sold.
b. Legal Redemption
The right to be subrogated upon the same terms
and conditions stipulated in the contract, in the
place of one who acquires a thing by purchase or
dation in payment, or by any other transaction
whereby ownership is transmitted by onerous
title (Art. 1619, NCC). Thus, this right is not
available if the transfer of ownership is by
gratuitous title.
Instances of legal redemption under civil
code:
1. Redemption by other co-owners or any one
or some of them. If a co-owner sells his
undivided share to a third person. If two or
more co-owners desire to exercise the right,
they may only do so in proportion to the
share they may respectively have in the thing
owned in common (Art. 1620, NCC).
2. Redemption by other co-heirs, or by any one
of them. If a co-heir sells his hereditary right
to a stranger (Art. 1088, NCC).
3. Redemption by owner of adjoining land:
a. In case of rural – If the owner alienates
it to a third person, the area of which
does not exceed one hectare. If two or
more adjoining owners desire to exercise
the right at the same time, the owner of
the smaller area shall be preferred; and
should both lands have the same area,
the one who first requested the
redemption (Art. 1621, NCC).
b. In case of urban land – If owner of urban
land, which is so small and so situated
that a major portion thereof cannot be
used for any practical purpose within a
reasonable time and which said owner
had bought merely for speculation, resell
it to a third person. If resale has not yet
been perfected, an owner of adjoining
land shall have a right of pre-emption; in
other words, his right to buy the property
is preferred to that of third persons. If
two or more adjoining owners desire to
exercise the right of pre-emption or
redemption as the case may be, the
owner whose intended use of the land
appears best justified shall be preferred
(Art. 1622, NCC).
4. Redemption by a debtor: if a credit or other
incorporated right in litigation be sold by the
creditor to a third person (Art. 1634, NCC).
Period of Redemption/Pre-emption: The
right of legal redemption shall not be exercised
except within 30 days from the notice in writing
by the prospective seller, or seller, as the case
may be. The deed of sale shall not be recorded in
the Registry of Property unless accompanied by
an affidavit of the seller that he has given written
notice thereof to all possible redemptioners (Art.
1623, NCC).
Redemption v. Pre-emption:
Redemption Pre-emption
Effected after the sale Effected prior to sale
Directed against third Directed against the
persons who bought prospective vendor
the property who is about to resell
the property
May be exercised only
where there is
prospective resale of
a small piece of urban
land bought by the
prospective vendor
merely for speculation
H. ASSIGNMENT OF CREDITS
DEFINITION
An assignment of credit has been defined as the
process of transferring the right of the assignor
to the assignee who would then have the right to
proceed against the debtor. The assignment may
be done gratuitously or onerously, in which case,
the assignment has an effect similar to that of a
247
sale (Abelardo B. Licaros vs. Antonio P. Gatmaitan,
G.R. No. 142838, August 9, 2001).
Perfection
An assignment of creditors and other incorporeal
rights shall be perfected in accordance with the
provisions of Article 1475 (Art. 1624, NCC).
 Art. 1475. The contract of sale is perfected at
the moment there is a meeting of minds upon
the thing which is the object of the contract,
and upon the price. From that moment, the
parties may reciprocally demand
performance, subject to the provisions of the
law governing the form of contracts.
Effects:
1. An assignment of a credit, right or action shall
produce no effect as against a third person,
unless it appears in a public instrument, or the
instrument is recorded in the Registry of
Property in case the assignment involves real
property. (Art. 1625, NCC)
2. The debtor who, before having knowledge of
the assignment, pays his creditor shall be
released from the obligation (Art. 1626, NCC).
3. The assignment of a credit includes all the
accessory rights, such as a guaranty,
mortgage, pledge or preference. (Art. 1627,
NCC).
4. The vendor in good faith shall be responsible
for the existence and legality of the credit at
the time of the sale, unless it should have
been sold as doubtful; but not for the solvency
of the debtor, unless it has been so expressly
stipulated or unless the insolvency was prior
to the sale and of common knowledge. Even
in these cases he shall only be liable for the
price received and for the expenses specified
in No. 1 of Article 1616. The vendor in bad
faith shall always be answerable for the
payment of all expenses, and for damages
(Art. 1628, NCC).
5. In case the assignor in good faith should have
made himself responsible for the solvency of
the debtor, and the contracting parties should
not have agreed upon the duration of the
liability, it shall last for one year only, from the
time of the assignment if the period had
already expired.(Art. 1629, NCC). If the credit
should be payable within a term or period
which has not yet expired, the liability shall
cease one year after the maturity (Ibid)
248
6. One who sells an inheritance without
enumerating the things of which it is
composed, shall only be answerable for his
character as an heir (Art. 1630, NCC).
7. One who sells for a lump sum the whole of
certain rights, rents, or products, shall comply
by answering for the legitimacy of the whole
in general; but he shall not be obliged to
warrant each of the various parts of which it
may be composed, except in the case of
eviction from the whole or the part of greater
value (Art. 1631, NCC).
Obligation of the Vendor:
Should the vendor have profited by some of the
fruits or received anything from the inheritance
sold, he shall pay the vendee thereof, if the
contrary has not been stipulated (Art. 1632,
NCC).
Obligation of the Vendee:
Art. 1633. The vendee shall, on his part,
reimburse the vendor for all that the latter may
have paid for the debts of and charges on the
estate and satisfy the credits he may have against
the same, unless there is an agreement to the
contrary (Art. 1633, NCC).
Extinguishment:
When a credit or other incorporeal right in
litigation is sold, the debtor shall have a right to
extinguish it by reimbursing the assignee for the
price the latter paid therefor, the judicial costs
incurred by him, and the interest on the price
from the day on which the same was paid.
A credit or other incorporeal right shall be
considered in litigation from the time the
complaint concerning the same is answered.
The debtor may exercise his right within thirty
days from the date the assignee demands
payment from him (Art. 1634, NCC).
XPNS - From the provisions of the preceding
article shall be excepted the assignments or sales
made:
1. To a co-heir or co-owner of the right
assigned;
2. To a creditor in payment of his credit;
3. To the possessor of a tenement or piece of
land which is subject to the right in litigation
assigned. (Art. 1635, NCC)
VI. LEASE
A. GENERAL PROVISIONS
Two Kinds of Contract of Lease
1. Contract of Lease (proper) – it is a lease of
things, or when the subject matter is a thing;
2. Contract for Piece of Work – it is a lease of
service, or when the subject matter is a
service. (Art. 1642, NCC)
Contract of Lease of Things
It is a contract involving the grant of temporary
use or enjoyment of a property to another in
consideration of the payment of a price certain in
money or its equivalent (called rent). (Art. 1643,
NCC)
"Rent" may be defined as the compensation
either in money, provisions, chattels, or labor,
received by the owner of the soil from the
occupant thereof. It is defined as the return or
compensation for the possession of some
corporeal inheritance and is a profit issuing out of
lands or tenements, in return for their use. It is
that which is to be paid for the use of land,
whether in money, labor or other thing agreed
upon. (Tolentino and Manio vs. Gonzales SyChiam,
G.R. No. 26085, August 12, 1927)
Subject-matter
It can either be real or personal property.
GR: As to personal property, consumable goods
cannot be the subject matter of a contract of
lease.
XPN: When they are merely to be exhibited or
when they are accessory to an industrial
establishment. (Art. 1645, NCC)
Characteristic of Lease of things:
1. Consensual Contract
2. Onerous (essentially onerous)
3. Bilateral
4. Nominate
5. Principal
6. Cumulative
A contract of lease is a consensual, bilateral,
onerous and commutative contract by which the
owner temporarily grants the use of his property
(Chua Tee Dee vs. Court of Appeals, G.R. No. 135721,
May 27, 2004) or rendering of some service to
another who undertakes to pay the rent.
Being a consensual contract, it is perfected at the
moment there is a meeting of the minds on the
thing and the cause and consideration, which are
to constitute the contract. (Bugatti vs. Court of
Appeals, G.R. No. 138113, October 17, 2000; citing
Vitug, Compendium of Civil Law and Jurisprudence,
1993 edition, 653-654)
GR: Without the agreement of both parties, no
contract of lease can be said to have been
created or established. Nobody can force an
owner to lease out his property if he is not willing.
(Pagurayan vs. Reyes, G. R. No. 15477, July 23, 2008)
XPN: In industrial accession where both the
landowner and the builder may not be compelled
to buy the land because the value of the building
or of trees, the builder can be required to pay
reasonable rent. (Art. 448, NCC)
Essential Requisites of Contract of Lease
1) Consent
As in all contracts, consent is an essential
requisite in a contract of lease.
But take note that the people who are prohibited
from entering in a contract of sale under Arts.
1490 and 1491 cannot also enter into a contract
of lease. (Art. 1646, NCC)
Disqualified under Art. 1490, NCC
The husband and the wife cannot sell property to
each other, except:
a) When a separation of property was agreed
upon in the marriage settlements; or
b) When there has been a judicial separation of
property under article 191.
249
Disqualified under Art. 1491, NCC
The following persons cannot acquire by
purchase, even at a public or judicial auction,
either in person or through the mediation of
another:
a) The guardian, (as to) the property of the
person or persons who may be under his
guardianship;
b) Agents, (as to) the property whose
administration or sale may have been
entrusted to them, unless the consent of the
principal has been given;
c) Executors and administrators, (as to) the
property of the estate under administration;
d) Public officers and employees, (as to) the
property of the State or of any subdivision
thereof, or of any government-owned or
controlled corporation, or institution, the
administration of which has been entrusted
to them; this provision shall apply to judges
and government experts who, in any manner
whatsoever, take part in the sale;
e) Justices, judges, prosecuting attorneys,
clerks of superior and inferior courts, and
other officers and employees connected with
the administration of justice, (as to) the
property and rights in litigation or levied upon
an execution before the court within whose
jurisdiction or territory they exercise their
respective functions; this prohibition includes
the act of acquiring by assignment and shall
apply to lawyers, with respect to the property
and rights which may be the object of any
litigation in which they may take part by
virtue of their profession;
f) Any others specially disqualified by law.
If the lease is to be recorded in the Registry of
Property, the following cannot constitute the
same without proper authority; (a) the husband,
with respect to the paraphernal property of the
wife; (b) the father or guardian as to the property
of the minor or ward; (c) and the manager,
without special power. (Art. 1647, NCC).
2) Object
The object of the lease must be within the
commerce of man, otherwise, it is void. (De Leon,
Comments and Cases on Sales and Lease, 2005, p.
562)
250
3) Cause
Cause of the lease contract according to
subject matter:
Lease of thing – the consideration for the lessor
is the payment of rental
Lease of work or service - it is the
compensation to be paid by the other party
Lease of right – it is the payment of royalties
which is the cause and consideration of the one
leasing the right to another (De Leon, Comments
and Cases on Sales and Lease, 2005, p. 707)
Formalities required:
1. A contract of lease is not required to be in
any form in order to be valid.
2. But for the purpose of enforceability, the
Statute of Frauds requires that the contract
be in writing or be in some note or
memorandum signed by the party charged, if
“the agreement for the leasing is for a longer
period than one year. (Art. 1403[2][e], NCC)
3. The requirement of the Statute of Frauds is
also necessary in case of agreement to renew
the lease. In (Fernandez v. CA, G.R. No.
80231, October 18, 1988), where it was
alleged that the respondent had assured the
petitioner over a telephone conversation that
the former would willingly renew the lease for
another ten years upon expiration of the
original, the Court held that such alleged
verbal assurance of renewal of a lease is
inadmissible to qualify the terms of the
written lease agreement under the parole
evidence rule and unenforceable under the
Statute of Frauds.
4. In lease of real property, the recording with
the Registry of Deeds of the lease contract is
only for the purpose of binding third persons
(Art. 1648, NCC).
Lessor need not be owner
The lessor need not be the owner of the property
leased (Ballesteros vs. Abion, G.R. No. 143361,
February 9, 2006), because lease does not involve
transfer of ownership.
However, the lessor must have a right (e. g.
usufructuary or lessee) or at least an authority
(e.g., as an agent of the owner, usufructuary, or
lessee), otherwise, the contract is legally
inexistent for lack of an object certain. Under
Articles. 1318 and 1409(3) of the CC, contracts
the cause or object of which did not exist at the
time of the transaction are inexistent and void ab
initio (Ballesteros vs. Abion, supra.).
The lessee may sublet the thing leased, in whole
or in part, without prejudice to his responsibility
for the performance of the contract toward the
lessor. (Art. 1650, NCC).
Lease of Rural and Urban Lands
Lease of Rural Lands v. Lease of Urban
Lands
RURAL LANDS URBAN LANDS
Scope
Product producing Non-product
lands producing lands
Purpose
Regardless of site, if Lands leased
the principal purpose principally for
is to obtain products purposes of residence
from the soil, the are called urban
lease is of rural lands. lands.
(De Leon, Comments and Cases on Sales and Lease,
2005, p. 590)
Rule on Assignment of Lease or sublease:
Sublease - A separate and distinct contract of
lease wherein the original lessee becomes a
sublessor to a sublessee.
GR: Lessee cannot assign without the consent of
the lessor. (Art. 1649, NCC)
XPN: Unless expressly prohibited. (Art. 1650,
NCC)
The assignment constitutes a novation by
substituting the person of the debtor-lessee;
hence, creditor-lessor’s consent is necessary.
Effects of sublease
1. The sublease is without prejudice to the
responsibility of the lessee for the
performance of the contract toward the
lessor (Art. 1650, NCC);
2. Sublessee is bound to the lessor for all acts
which refer to the use and preservation of the
thing leased in the manner stipulated
between lessor and the lessee (Art. 1650,
NCC);
3. Sublessee is subsidiarily liable to lessor for
any rent due from the lessee. However,
sublessee shall not be responsible beyond the
amount of rent due from him, in accordance
with the terms of the sublease, at the time of
the extrajudicial demand by the lessor (Art.
1652, NCC);
4. Payments of rent in advance by sublessee
shall be deemed not to have been made, so
far as the lessor’s claim is concerned, unless
said payments were effected in virtue of
custom of the place (Art. 1652, NCC).
B. RIGHTS AND OBLIGATIONS OF THE
LESSOR
Obligations of Lessor:
1. Delivery of object of contract in such a
condition as to render it fit for the use
intended;
2. Making of necessary repairs in order to keep
leased premises suitable for the use to which
it has been devoted, unless there is a
stipulation to the contrary;
3. Maintaining the lessee in the peaceful and
adequate enjoyment of the lease for the
entire duration of the contract (Art. 1654,
NCC); and
4. If the lessee makes, in good faith, useful
improvements which are suitable to the use
for which the lease is intended, without
altering the form or substance of the property
leased, the lessor upon the termination of the
lease shall pay the lessee one-half (½) of the
value of the improvements at that time.
Should the lessor refuse to reimburse said
amount, the lessee may remove the
improvements, even though the principal
thing may suffer damage thereby. He shall
not, however, cause any more impairment
upon the property leased than is necessary.
(Art. 1678, NCC).
251
Remedies of Lessor
In case lessor should not comply with the
foregoing obligations, lessee may:
1. Rescind the contract with damages; or
2. Recover damages only, allowing the contract
to remain in force (Art. 1659, NCC);
3. Hold the sublessee liable for all acts which
refer to the use and preservation of the
things leased (Art. 1651, NCC);
4. Hold the sublessee subsidiarily liable for any
rent due from the lessee (Art. 1652, NCC);
Effect of destruction of thing leased by
fortuitous event
a) Total Destruction- the lease is extinguished
b) Partial Destruction- the lessee may choose
between a proportional reduction of the rent
and a rescission of the lease. (Art. 1655,
NCC)
Rule on Alteration of Form
Lessor cannot alter the form of the thing leased
in such a way as to impair the use to which the
thing is devoted under terms of the lease. (Art.
1661, NCC)
Rule in case of urgent repairs:
1. If repairs are urgent and cannot be deferred
until the termination of the lease, the lessee
is obliged to tolerate it although it may be
annoying to him and he may be deprived of
a part of the property for which the lessee
has been deprived.
2. If repairs last more than 40 days, rent shall
be reduced in proportion to the time and the
part of the property for which to the time and
the part of the property for which the lessee
has been deprived.
3. If by reason of the repairs, the portion, which
the lessee and his family need for their
dwelling, becomes uninhabitable, lessee may
rescind the contract if the main purpose of
the lease is to provide a dwelling place for the
lessee.
4. If lessor fails to make urgent repairs, the
lessee, in order to avoid an imminent danger,
may order the repairs at the lessor’s cost.
(Art. 1663, last par., NCC)
252
C. RIGHTS AND OBLIGATIONS OF THE
LESSEE
Obligations of Lessee:
1. Pay the price of the lease according to terms
stipulated;
2. Use the thing leased as a diligent father of a
family, devoting it to the use stipulated; and
in the absence of stipulation, to that which
may be inferred from nature of thing leased,
according to custom of place;
3. Pay expenses for the deed of lease (Art.
1657, NCC);
4. Lessee is obliged to inform the lessor, within
shortest possible time, of every usurpation or
untoward act which any third person may
have committed or may be openly preparing
to carry out upon the thing leased, failure to
do so shall render the lessee liable for
damages which, through his negligence, may
be suffered by the proprietor (Art. 1663,
NCC).
5. Lessee is obliged to advise the owner, with
the same urgency, of need of all necessary
repairs included in No. 2 of Article 1654.
Failure to do so shall render the lessee liable
for damages, which, through his negligence,
may be suffered by the proprietor (Art. 1663,
NCC).
6. Lessee is responsible for deterioration or loss
of thing leased.
a. XPN: He is not liable if he proves that it
took place without his fault.
b. Presumption of fault does not apply:
When destruction is due to earthquake,
flood storm, or other natural calamity
(Art. 1667, NCC).
7. Lessee is also liable for any deterioration
caused by members of his household and by
guests and visitors (Art. 1668, NCC).
8. Lessee is obliged to return thing leased, upon
termination of the leased, in the same
condition as when he received it, except what
has been lost or impaired;
a) By lapse of the time;
b) By ordinary wear and tear,
c) By reason of an inevitable cause (Art.
1665, NCC).
Introduction of useful improvements:
1. Lessee may introduce useful improvements
on the leased premises provided he does not
 alter the form and substance of the property
leased (Art. 1678, NCC).
2. But he has no right of retention and
reimbursement, which rightfully belongs to a
builder in good faith; otherwise, such a
situation would allow the lessee to easily
“improve” the lessor out of its property
(SulosaNayon, Inc. vs. Nayong Pilipino
Foundation, G.R. No. 170923, January 20, 2009).
3. In this situation, the lessor has the option of
paying one-half of the value of the
improvements which the lessee made in good
faith, which are suitable for the use for which
the lease is intended, and which have not
altered the form and substance of the land
(Art. 1678, NCC).
4. Should the lessor refuse to reimburse said
amount, the lessee may remove the
improvement, even though the principal
thing may suffer damage thereby. He shall
not, however, cause any more impairment
upon the property leased than what is
necessary (Art. 1678, NCC).
 A lessee, in order to be entitled to one-
half the value of the improvements
introduced by him in the leased premises,
or to remove them should the lessor
refuse to reimburse the half value
thereof, must show that the same were
introduced in good faith; are useful;
suitable to the use for which the lease is
intended without altering the form and
substance of the premises (Imperial
Insurance, Inc. vs. Simon, G.R. No.
83545, August 11, 1989).
Introduction of Ornamental Objects:
1. Lessee may introduce ornamental objects on
the leased premises provided he does not
alter the form and substance of the property
leased (Art. 1678, NCC).
2. He is not entitled to any reimbursement with
regard to ornamental expenses.
3. But may remove the ornamental objects,
provided no damage is caused to the
principal thing, and the lessor does not
choose to retain them by paying their value
at the time the lease is extinguished (Art.
1678, NCC).
Duration and termination of lease
Duration:
1. Period may either be definite or indefinite.
2. But the period cannot be more than 99 years
(Art. 1643, NCC). If the period is more than
99 years, the lease is considered terminated
after the end of 99 years. After that, it will be
a lease for an indefinite term (Commentaries
and Jurisprudence on the Civil Code of the
Philippines, Volume V Tolentino, 1992 ed., 209).
Lease for fixed or definite period:
1. It ceases upon the day fixed, without need of
demand (Art. 1669, NCC).
2. Implied new lease (tácita reconducción) –If
at the end of the contract the lessee should
continue enjoying the thing leased for 15
days with the acquiescence of the lessor, and
unless a notice to the contrary by either party
has previously been given, it is understood
that there is an implied new lease, not for the
period of the original contract, but for the
time established in Articles 1682 and 1687 of
the NCC. The other terms of the original
contract shall be revived (Art. 1670, NCC).
3. If the lessee continues enjoying the thing
after the expiration of the contract, over the
lessor’s objection, the lessee shall be subject
to the responsibilities of a possessor in bad
faith (Art. 1671, NCC).
A notice to vacate constitutes an express act on
the part of the lessor that he no longer consents
to the continued occupation by the lessee of the
property (Josefa vs. San Buenaventura, G.R. No.
163495, May 8, 2009).
Lease for not fixed or indefinite period
If leased property is rural lands:
1. Shall be for all the time necessary for the
gathering of the fruits which the whole
estate leased may yield in one year; or
2. Which it may yield once, although two or
more years have to elapse for the purpose
(Art. 1682, NCC).
If leased property is urban lands:
1. Shall be year to year, if the rent agreed
upon is annual;
253
2. Shall be from month to month, if it is
monthly;
- However, courts may fix a longer term
for the lease after the lessee has
occupied the premises for over one year.
3. Shall be from week to week, if the rent is
weekly;
- However, courts may likewise determine
a longer period after the lessee has been
in possession for over six months.
4. Shall be from day to day, if the rent is to be
paid daily
- However, courts may also fix a longer
period after the lessee has stayed in the
place for over one month (Art. 1687,
NCC).
VII. PARTNERSHIPS
A. GENERAL PROVISIONS
Definition
A partnership is a contract of two or more persons
who bind themselves to contribute money,
property or industry to a common fund, with the
intention of dividing the profits among
themselves. Two or more persons may also form
a partnership for the exercise of a profession (Art.
1767, NCC).
Elements of Partnership
1. Two or more persons bind themselves to
contribute money, property, or industry to a
common fund
Money - must be in legal tender. Checks, drafts,
promissory notes and other mercantile
documents are not money. There is no
contribution until they have been cashed.
(Art.1249, NCC)
Property - may be real, personal, corporeal, or
incorporeal property.
Industry-means the active cooperation, the work
of the party associated, which may be either
personal manual efforts or intellectual and for
which he receives a share in the profits of the
business, not as salary.
254
2. They intend to divide profits among
themselves (Heirs of Tan Eng Kee vs. CA, 341
SCRA 740)
Essential Requisites of a Partnership
1. There must be a valid contract (De Leon,
Partnership, Agency, and Trust, 2019, p. 13) ;
2. The parties must have legal capacity to enter
into the contract (De Leon, Partnership,
Agency, and Trust, 2019, p. 15);
3. There must be mutual contribution of money,
property or industry to a common fund
(Art.1767, NCC);
4. There must be a lawful object. (Art.1770,
NCC); and
5. The purpose or primary purpose must be to
obtain profits and divide the same among the
parties (Art 1767, NCC).
Characteristics:
1. Consensual – it is perfected by mere consent,
upon the express or implied agreement of
two or more persons.
2. Principal – it does not depend upon any other
contract for its validity or existence.
3. Bilateral or multilateral – it is entered into by
two or more persons whose rights and
obligations are reciprocal.
4. Nominate – it has a special name or
designation given to it by law. (Art. 1767,
NCC)
5. Preparatory – it is a means by which other
contracts will be entered into as a partnership
pursues its business.
6. Onerous – the partners contribute money,
property, or industry to a common fund. (Art.
1767, NCC)
7. Commutative – the undertaking of each of
the partners is considered as the equivalent
of that of the others. (De Leon & De Leon, Jr.,
Comments and Cases on Partnership, Agency and
Trusts, 2019, p.12)
Separate personality:
Partnership has a juridical personality separate
and distinct from the partners (Art. 1768, NCC)
EVEN IF:
1. It does not appear in a public instrument and
its capital is P3,000.00 or more, in money or
property (Art. 1772; Art. 1768, NCC).
2. It is not recorded in the Office of the
Securities and Exchange Commission (SEC)
(Art. 1772; Art. 1768, NCC).
The fact that there is no record in the SEC of a
public instrument embodying the partnership did
not cause the nullification of the partnership.
(Tocao vs. CA, G.R. No. 127405, October 4, 2000)
Failure to register the contract of partnership
does not affect the liability of the partnership and
of the partners to third persons. Neither does
such failure to register affect the partnership’s
juridical personality. (Angeles vs. Sec. of Justice,
G.R. No. 142612, July 29, 2005)
However, associations or societies whose articles
are kept secret among the members, and wherein
any one of the members may contract in his own
name with third persons, shall have no juridical
personality and shall be governed by the
provisions relating to co-ownership. (Art. 1775,
NCC)
Rules to Determine Existence of
Partnership
a. Requirement of Consent:
GR: Persons who are not partners as to each
other are not partners as to third persons. (Art.
1769[1], NCC)
XPN: When a person represents himself or
consents to another representing him to anyone,
as a partner in an existing partnership or with one
or more persons not actual partners, he is liable
to persons who, in good faith, has relied on such
representation and given credit to the actual or
apparent partnership. (Partnership by estoppel).
(Art. 1825, NCC)
Persons not in partnership with each other:
1. Partnership by Estoppel (Art. 1825, NCC);
and
2. Persons living together without the benefit of
marriage
When a man and a woman who are
capacitated to marry each other, live
exclusively with each other as husband and
wife without the benefit of marriage or under
a void marriage, their wages and salaries
shall be owned by them in equal shares and
the property acquired by both of them
through their work or industry shall be
governed by the rules on co-ownership. (Art.
147, FC)
b. Co-ownership or Co-possession:
1. Co-ownership or co-possession does not
in itself establish a partnership, whether
such co-owners or co-possessors do or
do not share any profits made by the use
of the property (Art. 1769[2], NCC).
2. There must be a clear intent to form a
partnership.
XPN: The co-ownership of inherited properties is
automatically converted into an unregistered
partnership the moment said common properties
and/or the income derived therefrom are used as
a common fund with intent to produce profits for
the heirs in proportion to their respective shares
in the inheritance as determined in a project
partition (Ona vs. CIR, G.R. L-19342, May 25, 1972).
c. Sharing of Gross Returns:
1. The sharing of gross returns does not of
itself establish a partnership, whether or
not the persons sharing them have a joint
or common right or interest in any
property from which the returns are
derived (Art. 1769[3], NCC).
2. There must be a clear intent to form a
partnership, the existence of a juridical
personality different from the individual
partners, and the freedom of each party
to transfer or assign the whole property.
(Pascual vs. CIR, G.R. No. 78133, October 18,
1988.
d. Sharing of Profits:
GR: Receipt by a person of a share of the profits
of a business is prima facie evidence that he is a
partner in the business (Art. 1769[4], NCC).
XPN: No such inference shall be drawn if profits
were received in payment as:
a. Debt by installments or otherwise
b. Wages of an employee
c. Rent to a landlord
d. Annuity to a widow or representative of a
deceased partner
e. Interest on a loan
255
f. Consideration for the sale of goodwill of a
business or other property by installments or
otherwise (Art. 1769[4], NCC).
Object or Purpose of a Partnership
A partnership must have a lawful object or
purpose and must be established for the common
benefit or interest of the partners (Art. 1770,
NCC).
Effects when Object or Purpose of
Partnership is Unlawful
1. Contract of partnership is void (Art. 1409[1],
NCC).
2. Effects upon partners inter se:
The partners have no right to enforce claims
which depend upon the validity of contract (Arbes
vs. Polistico, G.R. No. 31057, September 7, 1929).
Hence, upon the dissolution of the partnership by
judicial decree, profits shall be confiscated in
favor of the State (Art. 1770, NCC) and shall not
enrich the partners. But partners may recover
their contributions from the manager or
administrator because such a claim does not
depend upon the validity of the contract (Arbes vs.
Polistico, supra).
3. Effects upon third persons:
a. If the third person acted in good faith, he
may recover indemnity from the partner
who dealt with him.
b. If a third person acted in bad faith, he
cannot recover. (De Leon, Partnership,
Agency, and Trust, 2019, p. 58)
Effects of Partial Illegality of Object or
Purpose
a. Where a part of the business of a
partnership is legal and a part illegal, an
account of that which is legal may be had.
b. Where, without the knowledge or
participation of the partners, the firm's
profits in a lawful business have been
increased by wrongful acts, the innocent
partners are not precluded as against the
guilty partners from recovering their share of
the profits. (De Leon, Partnership, Agency, and
Trust, 2019, p. 62)
256
Form of Partnership Contract
GR: Being consensual in nature, a partnership
may be constituted in any form. (Arts. 1356 and
1771, NCC; Tocao vs. CA, G.R. No. 127405, October 4,
2000)
XPN: Where immovable property or real rights
are contributed to the partnership, a public
instrument shall be necessary. Moreover,
whenever immovable property is contributed
thereto, an inventory of said property, signed by
the parties, and attached to the public
instrument, is indispensable to the validity of the
partnership. If this requirement is not complied
with, the partnership is void. (Arts. 1771 and
1773, NCC)
Registration of a Partnership
Every contract of partnership having a capital of
three thousand pesos or more, in money or
property, shall appear in a public instrument,
which must be recorded with SEC (Art. 1772 (1),
NCC).
Failure to comply with the requirements of the
preceding paragraph shall not affect the liability
of the partnership and the members thereof to
third persons (Art. 1772 [2], NCC).
Rules on Partnership Name
Partnership has the right to adopt any name it
may choose. It may or may include the name of
one or more partners. (Art. 1815 (1), NCC)
The use of the name of a deceased partner in the
partnership is not allowed. (In re: Petition for
Authority to Continue Use of the Firm Name
“Sycip”, July 30, 1979)
The word “limited” as required by law, shall be
put in the name of limited partnership. (Art.1844
(1a), NCC)
The law prohibits the inclusion of a name of a
person who is not a partner, such inclusion shall
be subject to the liability of a partner. (Art. 1815
(2), NCC)
Classifications of Partnership
1. As to object:
Universal partnership – may refer to all the
present property or to all the profits. (Art. 1777,
NCC).
1. Universal partnership of all present property
– is that in which the partners contribute all
the property, which actually belongs to them
to a common fund, with the intention of
dividing the same among themselves, as
well as the profits, which they may acquire
therewith. (Art. 1778, NCC).
2. Universal partnership of profits – comprises
all that the partner may acquire by their
industry or work during the existence of the
partnership. (Art. 1780, NCC).
In universal partnership (whether of all present
property or all profits), persons who are
prohibited from giving each other any donation or
advantage cannot enter into such kind of
partnership. (Art. 1782, NCC)
Hence, the following CANNOT become partners in
a universal partnership:
1. The spouses during their marriage (Art. 87,
FC);
2. Those cohabiting as husband and wife (Art.
87, FC); and
3. Those who cannot donate to each other
under Article 739 of the NCC:
a. Those made between persons who were
guilty of adultery or concubinage at the
time of donation;
b. Those made between persons found
guilty of the same criminal offense, in
consideration thereof; and
c. Those made to a public officer or his wife,
descendants and ascendants, by reason
of his office.
Note: While spouses cannot enter into a
universal partnership, they can enter into a
particular partnership or be members thereof.
(Paras, Civil Code of the Philippines Annotated, 2008,
p. 619)
Particular partnership – one which has for its
object determinate things, their use and fruits, or
a specific undertaking, or the exercise of a
profession or vocation. (Art. 1783, NCC).
2. As to liability of partners:
General partnership – one where all the
partners are general partners and they are liable
even with respect to their individual properties,
pro rata, after the assets of the partnership have
been exhausted). (Paras, Civil Code of the Philippines
Annotated, 2013, p.612)
Limited partnership – one where at least one
partner is a general partner, and the rest are
limited partners. (Paras, Civil Code of the Philippines
Annotated, 2013, p.612). The general partners are
liable to the extent of their separate property,
while the limited partners are liable only to the
extent of their investment in the partnership.
3. As to duration (Partnership Term):
Partnership at will – one in which no time is
specified and is not formed for a particular
undertaking or venture and which may be
terminated at any time by mutual agreement of
the partners or by the will of any of the partners;
or one for a fixed term or particular undertaking
which is continued by the partners after the
expiration of such term or completion of the
particular undertaking without any express
agreement. (De Leon & De Leon, Jr., Comments and
Cases on Partnership, Agency and Trusts, 2014, p.72)
Note: Verily, any one of the partners may, at his
sole pleasure, dictate the dissolution of the
partnership at will. He must however, act in good
faith, not that the attendance of bad faith can
prevent the dissolution of the partnership but that
it can result in a liability in damages. (Ortega vs.
CA, G.R No. 10924, July 3, 1995)
Partnership with a fixed period – one where
the term for which the partnership is to exist is
fixed or agreed upon or one formed for a
particular undertaking, and upon the expiration of
the term or completion of the particular
undertaking, the partnership is dissolved, unless
continued by the partners. (Ibid)
Partnership for a particular undertaking –
one which is organized for a certain undertaking,
which when attained, will cause the termination
of the partnership, (Art. 1785, NCC) such as a
partnership formed to construct 20 residential
houses.
257
4. As to legality of existence: 7. As to purpose:

De jure partnership – one which has complied
with all the legal requirements for its
establishment.
Where the capital of the partnership amounts to
P3,000.00 or more, the following requirements
must be met:
1. The contract must appear in a public
instrument; and
2. It must be recorded or registered with the
SEC. (Art. 1772, NCC)
Commercial or trading – one formed for the
transactions or business. Trading partnership,
generally is one which buys and sells but it need
not be its sole purpose because it may also be
one of its incidence (Marsh, Merwin & Lemmon vs
Wheeler, 77 Conn.449)
Professional or non-trading - is one formed
for the exercise of a profession (Art.1767, NCC)
GENERAL vs. LIMITED PARTNERSHIP

Where an immovable property, regardless of its GENERAL LIMITED

value, is contributed, the following requirements
must be complied with: As to Liability
1. The contract must be in a public instrument; Liability is limited
Personally liable for
(Art. 1771, NCC) and only to his capital
partnership obligations
2. An inventory of the property contributed contributions
must be made, signed by the parties, and As to management participation
attached to the public instrument. (Art. 1773, When manner of
NCC) management not agreed
upon, all general
No participation in
De facto partnership – one which has failed to partners have equal
the management
comply with all the legal requirements for its rights in the
establishment. (De Leon & De Leon, Jr., Comments management of the
and Cases on Partnership, Agency and Trusts, 2014, business
p.72) As to contribution
Contributes cash or
5. As to representation to others: Contributes cash,
property only, not
property, or industry
industry
Ordinary or real partnership – one which
actually exists among the partners and also as to As to proper party to a proceeding
third persons. Not proper party to
a proceeding
Ostensible or partnership by estoppel – one by/against the
which in reality is not a partnership, but is partnership (except
considered as one with respect to those who, by when the issue in
Proper party of a the case is his
reason of their conduct or admission are
proceeding by/against interest/ subject of
precluded from denying its existence. (Art. 1825,
the partnership suit) (De Leon & De
NCC)
Leon, Jr., Comments
and Cases on
6. As to publicity:
Partnership, Agency
and Trusts, 2014,
Secret partnership – one wherein the existence p.322)
of certain persons as partners is not made known As to assignability
to the public by any of the partners.
Interest not assignable
Interest is freely
without the consent of
Notorious or open partnership – one whose assignable
the partners
existence is made known to the public by the
members of the firm. (De Leon & De Leon, Jr., As to name of partnership
Comments and Cases on Partnership, Agency and
Trusts, 2014, p.73)

258
 Name must not transactions but he shall personally bear the
appear in the firm losses. (Art. 1818, par 2, NCC). But this is not a
name ground to exclude him.

Except: In the absence of any agreement as to the

(1) If it is also the distribution of the profits and losses in the same
surname of a proportion to what he may have contributed, (Art.
general partner, or 1797, NCC) and any stipulation to the contrary
Name may appear in the
(2) Prior to the time shall be void. (Art. 1799, NCC)
firm name
when the limited
partner became In case of imminent loss of the business of the
such, the business partnership and there is a need for additional
had been carried capital contribution to save the venture, the
on under a name in capitalist partner can be compelled to make such
which his surname additional contribution.Any partner who refuses
appeared. (Art. to contribute shall be obliged to sell his interest
1846, NCC) to the other partners, except if there is an
As to prohibition in business agreement to the contrary. (Art. 1791, NCC).
engagement
Prohibition against 2. Industrial Partner – contributes only his
engaging in a business industry or service. Such industry may be physical
or intellectual. (Art. 1767, NCC);
(Qualification: An
industrial partner cannot Effects of Being an Industrial Partner
engage in business for
himself, unless the An industrial partner cannot engage in any kind
partnership expressly of business for himself, unless the partnership
permits him to do so, expressly permits him to do so. If he does, the
No prohibition
and if he should do so, capitalist partner may exclude him from
against engaging in
the capitalist partners partnership or avail himself of the benefits which
a business
may either exclude him he may have obtained in violation of the
from the firm or avail prohibition, with a right to damages in either
themselves of the case. (Art. 1789, NCC).
benefits which he may
have obtained in As to distribution of the profits and losses, an
violation of this industrial partner shall not be liable for losses
provision, with a right to (Art. 1797, NCC).
damages in either case.)
(Article 1789, NCC) In case of imminent loss of the business of the
partnership and there is a need for additional
Kinds of partners capital contribution to save the venture, the
capitalist partner can be compelled to make such
As to Nature of Contribution: additional contribution.

1. Capitalist Partner - contributes either money or
property to the common fund.
Effects of Being a Capitalist Partner
A capitalist partner cannot engage for his own
account in any operation or business which is of
the same nature as that of partnership unless
there is stipulation to the contrary. (Art. 1818, par
1, NCC). If he does, he shall bring to the common
funds any profit accruing to him from his
3. Capitalist – Industrial Partner – one who
contributes not only money or property but also
his services to the partnership. (Art. 1797, NCC)
As to Nature of Liability:
1. General Partner
- one where all the partners are unlimitedly
liable.
- All partners shall be liable pro rata beyond
the partnership assets for all the contracts

259
 which may have been entered into in its
name, under its signature, and by a person
authorized to act for the partnership. (Art.
1816, NCC)
- Partners can be held solidary liable with the
partnership specifically in the following
instances:
● where, by any wrongful act or omission
of any partner acting in the ordinary
course of business of the partnership or
with the authority of his co-partners, loss
or injury is caused to any person, not
being partner in partnership or any
penalty is incurred, the partnership is
liable therefor to the same extent as the
partner so acting or omitting to act;
● where one partner acting within the
scope of his apparent authority receives
money or property of third person and
mis applies it; and
● where the partnership in the course of its
business receives money and property of
a third person, and the money or
property so received is misapplied by any
partner while it is in custody of the
partnership consistently with the rules on
the nature of civil liability in delicts and
quasi-delicts (Lim Tong Lim vs. Philippine
Fishing Gear Industries, Inc., G.R. No.
136448, November 3, 1999).
2. Limited partner – where there is one or more
general partners who is/are unlimitedly liable and
one or more limited partners (Art. 1843, NCC) .
The latter is liable for partnership debts only to
the extent of their stipulated contributions under
the articles of partnership.
Liability of a Limited Partner
A limited partner does not become liable as a
general partner to third persons. However, he
becomes liable as general partner if in addition to
the exercise of his rights and powers as a limited
partner, he takes part in the control of the
business (Art. 1848, NCC).
He has no right to participate in the management
of the firm’s business: otherwise, he becomes
liable as general partner.
When the surname of a limited partner appears
in a partnership name he becomes liable as a
general partner to partnership creditors who
extend credit to the partnership without actual
260
knowledge that he is not a general partner.
Unless it is also the surname of a general partner
or prior to the time when a limited partner
became such, the business had been carried on
under the name in which his surname appeared
(Art. 1846, NCC).
The partnership creditors enjoy preference
compared to the limited and general partners in
terms of payment from the partnership property.
A limited partner may also loan money to and
transact other business with the partnership and
unless he is also general partner, receive on
account of resulting claims against the
partnership with general creditors, a pro rata
share of assets (Art. 1854, NCC).
3. General-limited partner – one who has all the
rights and powers and is subject to all the
restrictions of a general partner, except that, in
respect to his contribution, he shall have the
rights against the other members, which he
would have had, if he were not also a general
partner. (Art. 1853, NCC)
As to Management:
1. Managing partner – one who has been
entrusted with the management of partnership
(Art. 1800 and 1801, NCC)
2. Silent partner – does not take any active part
in the business although he may be known to be
a partner. (De Leon and De Leon, Jr., Comments and
Cases on Partnership, Agency and Trusts, 2014, p.75)
3. Secret partner – takes active part in the
business but is not known to be a partner by
outside parties. (Ibid)
4. Liquidating partner – takes charge of the
winding up of partnership affairs upon
dissolution. (Art. 1834, NCC)
As to Exposure to Public Perception:
1. Ostensible partner – one who takes active part
and is known to the public as a partner in the
business (Art. 1834[2], NCC), whether or not in
reality he is such. If in fact he is not a partner, he
is subject to liability by the doctrine of estoppel
(Art. 1825, NCC).
2. Nominal partner – is held out to the world as a CAPITALIST vs. INDUSTRIAL PARTNER
partner but he has no real interest in the firm. He
then becomes a partner by estoppel. CAPITALIST INDUSTRIAL
PARTNER PARTNER
3. Dormant partner – one who does not take an As to Contribution
active part in the business and is not known or Contributes money Contributes industry or
held out as partner (Art. 1834[2], NCC). and property. (Art. personal service. (Art.
1767, NCC) 1789, NCC)
4. Silent partner – one who does not take any As to Prohibition to Engage in Other
active part in the business although he may be Business
known to be a partner. Cannot engage in any
business for himself
5. Secret partner – one who does not take an
(Reason: all his
active part in the business although he may be Cannot generally
industry is supposed to
known to be partner (Art. 1834, NCC). engage in the same
be contributed to the
or similar enterprise
firm). (Art. 1789, NCC)
6. Partner by estoppel – although not an actual as that of his firm
partner, he has made himself liable as such by (the test is the
XPN: The industrial
holding himself out as a partner or allows another possibility of unfair
partner can engage in
to hold him out as a partner. (Art. 1825, NCC). competition). (Art.
business for himself,
1808, NCC)
unless the partnership
As to Actual Membership:
expressly permits him
to do so.
1. Actual or real partner – is really a partner by
As to Profits
agreement among the parties.
According to the
2. Partner by estoppel – is not a real or actual agreement among The industrial partner
partner but he becomes liable as a partner the partners; if none, receives a just and
because he holds himself out as a partner or pro-rata to his equitable share. (Art.
allows another to hold him out as a partner. (Art. contribution. (Art. 1797, NCC)
1825, NCC) 1797, NCC)
As to Losses
As to Timing of Membership: First, the stipulation
Exempted as to losses
as to losses;
as between partners;
1. Original partner – one who is a member of a
but is liable against
partnership at the time of its organization. If none, the
third person without
agreement as to
prejudice to
2. Incoming partner – one who becomes a profits; and if none,
reimbursement from
member of an existing partnership. (De Leon and pro rata to his
the capital partners.
De Leon, Jr., Comments and Cases on Partnership, contribution. (Art.
Agency and Trusts, 2014, p.75) (Art. 1797, NCC)
1797, NCC)

As to Continuation of Business Affairs After Partnership by Estoppel

Dissolution:
1. Continuing partner – one who continues the
partnership business after the dissolution of the
partnership due to admission of a new partner, or
retirement, death, or expulsion of one or more
partners. (Art. 1840, NCC)
2. Discontinuing partner – one who does not
participate in the partnership business after its
dissolution. (Art 1840 & 1841, NCC)
It exists when a non-partner, by words spoken or
written or by conduct, represents himself, or
consents to another representing or with one or
more persons who are not actual partners . (Art.
1825, NCC)
In order for estoppel to apply, it is necessary that
the third person must have knowledge of the
representation and in good faith, acted in reliance
upon the same. (De Leon and De Leon, Jr.,

261
Comments and Cases on Partnership, Agency and
Trusts, 2014, p.30)
When Estoppel Not Applicable
When although there is misrepresentation, the
third party is not deceived, the doctrine of
estoppel does not apply. (Paras, Civil Code of the
Philippines Annotated, 2013, p.693)
LIABILITY OF A PARTNER BY ESTOPPEL
Personal Representation
A partner by estoppel is liable to any such
persons:
1. To whom such representation has been
made; and
2. Who has, on the faith of such representation,
given credit to the actual or apparent
partnership. (par. 1, Art. 1825, NCC)
Public Representation
If he has made such representation or consented
to its being made in a public manner, whether the
representation has or has not been (personally)
made or communicated to such persons so giving
credit by or with his knowledge:
1. When partnership liability results, he is liable
as though he were an actual member of the
partnership.
2. When no partnership liability results, he is
liable pro rata with the other persons, if any,
so consenting to the contract or
representation. 3. When there are no such
other persons, he is separately liable. (par. 1,
Art. 1825, NCC)
Liability of Incoming Partner for
Obligations Arising Prior to His Admission
He is liable as though he had been a partner when
such obligations were incurred. But his
obligations shall be satisfied only out of
partnership property unless there is a stipulation
to the contrary (Art. 1826, NCC).
Partnership vs. Joint Venture
Joint Venture: An association or persons or
companies jointly undertaking some commercial
enterprise; generally, contribute assets and share
262
risks. It requires a community of interest in the
performance of the subject matter, a right to
direct and govern the policy in connection
therewith, and a duty which may be altered to
share both in profits and losses. (Kilosbayan vs.
Guingona, G.R. No. 113375, May 5, 1994)
Requisites of a Joint Venture:
1. A community of interest in the performance
of the subject matter.
2. A right to direct and govern the policy in
connection therewith; duty to share profits
and losses. (Kilosbayan vs. Guingona, supra)
The main distinction in common law
jurisdiction is that Partnership contemplates a
general business with some degree of continuity
while Joint Venture is formed for the execution of
a single transaction, and is thus of a temporary
nature. (Aurbach vs Sanitary Wares Manufacturing
Corporation, supra)
Professional Partnership
Two or more persons may also form a partnership
for the exercise of a profession (Art. 1767, NCC).
The law does not allow the practice of a
profession as a corporate entity. Personal
qualifications for such practice cannot be
possessed by a corporation. (De Leon and De Leon,
Jr., Comments and Cases on Partnership, Agency and
Trusts, 2014, p.10)
XPN: A corporation may be registered or licensed
for the practice of architecture provided that
certain conditions are met, one of which is:
registered and licensed architects shall compose
at least seventy-five percent (75%) of the
owners, shareholders, members, incorporators,
directors, executive officers, as the case may be.
(Sec. 37, RA 9266)
Who shall bear the risk of things
contributed to the partnership
a. Specific and determinate things which are not
fungible where only the use and fruits may
be for the common benefit – the risk of loss
is borne by the partner who owns them. (Art.
1795[1], NCC)
b. Specific and determinate things the
ownership of which is transferred to the
partnership – the risk of loss is for the
account of the partnership.
c. Fungible things or things which cannot be
kept without deteriorating even if they were
contributed only for the use of the
partnership – the risk of loss is borne by the
partnership for evidently the ownership was
being transferred since use is impossible
without the things being consumed or
impaired.
d. Things contributed to be sold – the
partnership bears risk of loss for there cannot
be any doubt that the partnership was
intended to be the owner; otherwise, the
partnership could not effect the sale.
Things brought and appraised in the
inventory – the partnership bears the risk of
loss because the intention of the parties was
to contribute to the partnership the price of
the things contributed with an appraisal in
the inventory (De Leon & De Leon, Jr.,
Comments and Cases on Partnership, Agency and
Trusts, 2014, p.108)
Rules as to Management of the Partnership
When there is No Agreement as to Manner
of Management:
a. All the partners shall be considered agents
and whatever any one of them may do alone
shall bind the partnership (Art. 1803[1],
NCC).
b. But if any of them should oppose the acts of
the others, the decision of the majority shall
prevail, and in case of a tie, the matter shall
be decided by the parties owning the
controlling interest (Art. 1803, in relation to
Art. 1801, NCC).
c. In case of important alteration in the
immovable property of the partnership,
unanimous consent is required even if the
same is useful to partnership (Art. 1803 [2],
NCC).
When Manner of Management Has Been
Agreed Upon:
When a managing partner has been appointed:
The managing partner may execute all acts of
administration despite the opposition of his
partners unless he acts in bad faith. (Art. 1800,
NCC)
GR: Power is irrevocable without just or lawful
cause (Art. 1800, NCC)
XPNs:
1. To remove him for JUST CAUSE, vote of
partners having controlling interest is
necessary (Art. 1800, NCC);
2. To remove him WITHOUT JUST CAUSE,
unanimous vote is necessary, including his
own vote. (5 Paras, Civil Code of the
Philippines, 2016, p. 645)
When a partner has been appointed manager
after the partnership has been constituted:
Scope of authority:
He/she may execute all acts of administration but
in case of opposition by the other partners, the
partners owning the controlling interest may
resort to voting for his removal as manager. (Tai
Tong Chuache vs. Insurance Commission, G.R. No.
L055397, February 29, 1988)
Revocation of his/her appointment
He/she may be removed with or without just
cause by the vote of the partners owning the
controlling interest. (Art. 1800, NCC)
This is because such a partner is only an agent
whose authority may be revoked at any time by
his principal, which is the partnership. (Art. 1920,
NCC)
When two or more partners have been appointed
as managers:
When there is specification of their respective
duties one shall not act without the consent of
the others.
● Each one may separately execute all acts of
administration (Art. 1801, NCC)
● If there any opposition:
○ The decision of the majority of the
managing partners shall prevail (per
head)
○ In case of tie, the decision of the
managing partner/s owning the
controlling interest shall prevail. (Art.
1801, NCC)
When the manner of management has not been
agreed upon:
- All the partners shall be considered agents
of the partnership
263
- Whatever any one of them may do alone
shall bind the partnership
- In case of opposition of the other partners:
a. The decision of the majority shall prevail
b. In case of a tie, the decision of the
partners owning the controlling interest
shall prevail.
- None of the partners may, without the
consent of the others, make any important
alteration in the immovable property even if
it may be useful to the partnership (Arts.
1801, 1803, NCC)
Where stipulation requires unanimous consent
Unanimous consent of all the managing partners
shall be necessary for the validity of the acts, and
the absence or disability of any one of them
cannot be alleged, except when there is imminent
danger of grave or irreparable injury to the
partnership (Art. 1802, NCC).
Where there is opposition by a managing partner,
imminent danger of grave or irreparable injury to
the partnership is not applicable when one of the
managers is not absent or disabled, and in the
exercise of his right to oppose, objects to the
proposed act. (De Leon and De Leon, Jr., Comments
and Cases on Partnership, Agency and Trusts, 2014,
p.148)
B. OBLIGATIONS OF THE PARTNERS
Rights and Obligations of the Partnership:
1. Refund the amounts disbursed by partner in
behalf of the partnership plus corresponding
interest from the time the expenses are
made, not from the date of demand (e.g.,
loans and advances made by a partner to the
partnership aside from capital contribution);
2. Answer for the obligations the partner may
have contracted in good faith in the interest
of the partnership business;
3. Answer for risks in consequence of its
management. (Art. 1796, NCC; De Leon & De
Leon, Jr., Comments and Cases on Partnership,
Agency and Trusts, 2014, p.110)
Rights of Partners
1. Property Rights
a. Rights in specific partnership property
264
b. Interest in the partnership (share in the
profits and surplus).
c. Right to participate in the management
(Art. 1810, NCC).
- This right to participate in the
management is not given to the limited
partner. (Art. 1848, NCC)
2. Right to associate with another person in his
share. (Art. 1804, NCC)
3. Right to reimbursement for amounts advanced
to the partnership and to indemnification for risks
in consequence of management. (Art. 1796, NCC)
4. Right of access and inspection partnership
books. (Art. 1805, NCC)
5. Right to demand a formal account of
partnership affairs (Art. 1809, NCC).
6. Right to have the partnership dissolved under
certain conditions (Arts. 1830-1831, NCC).
Distribution of Profits and Losses
Distribution is Primarily Determined by
Agreement of the Partners:
The losses and profits shall be distributed in
conformity with the agreement. (Art. 1797[1],
NCC)
• However, none of them can be excluded from
participation in the profits and losses. A
stipulation, which excludes one or more
partners from any share in the profits or
losses, is void. (Art. 1799, NCC)
In the Absence of Agreement:
As to Profits:
The profits shall be divided in proportion to their
respective contribution, except that in the case of
the industrial partner he shall receive such share
as may be just and equitable under the
circumstances (Art. 1797[2], NCC).
As to Losses:
The partners share in the losses according to their
agreement.
If there is NO AGREEMENT as to the share of each
partner in the losses, but there is an agreement
as to the share in the profits, the loss shall be
borne in the same proportion as that in which
they share in the profits. (Art. 1797[1], NCC)
The purely industrial partner shall not be liable for
the losses. (Art. 1797[2], NCC)
If Designation Entrusted to Third Persons:
The partners may agree to entrust to a third
person the designation of the share of each one
in the profits and losses.
Such designation may be impugned only when it
is manifestly inequitable.
A partner cannot impugn the decision of a third
person if:
a. He has begun to execute said decision; or
b. He has not impugned the same within a
period of three months from the time he had
knowledge thereof (not from the time of
making). (Art. 1798 [1], NCC)
Designation by One Partner, Prohibited
The designation of losses and profits cannot be
entrusted to one of the partners (Art. 1798[2],
NCC).
Right to Enter Into Sub-Partnership
Property
A partner may associate another person with him
in his share without the consent of the other
partners (Art. 1804, NCC). The contract between
them is called a sub-partnership.
The sub-partners are partners inter se. However,
the sub-partner does not become a member of
the original partnership in the absence of the
mutual assent of all the other partners, even if
the partner having an associate should be a
manager (Art. 1804, NCC).
He does not acquire the rights of the partner nor
is he liable for its debts.
Rights in Specific Partnership Property
(Art. 1811, NCC):
Nature of Right – A partner is co-owner with
his partners of specific partnership property.
● Contemplates tangible property;
● The specific partnership property belongs to
the partnership. The partners have no actual
interest in it until after dissolution. (De Leon &
De Leon, Jr., Comments and Cases on Partnership,
Agency and Trusts, 2014, p.153)
The right over a specific partnership property is
not subject to attachment or execution except if
it is based on a claim against the partnership
itself.
The rules on “co-ownership in partnership” are
detailed in the subsequent paragraphs.
Note: This right to participate in the
management is not given to the limited partner .
(Art. 1848, NCC)
Right to possess – Has an equal right to
possess specific partnership property for
partnership purposes. He has no right to possess
such property for any other purpose without the
express or implied consent of the other partners.
(De Leon & De Leon, Jr., Comments and Cases on
Partnership, Agency and Trusts, 2014, p.152)
Right not assignable – a partner cannot
separately assign his right to specific partnership
property but all of them can assign their rights in
the same property. (De Leon & De Leon, Jr.,
Comments and Cases on Partnership, Agency and
Trusts, 2014, p.153)
Reasons:
 Assignment would in effect allow a stranger
to become a partner without the consent of
all other partners;
 It prevents interference by outsiders in
partnership affairs;
 It protects the right of other partners and
partnership creditors to have partnership
assets applied to firm debts;
 It is impossible to measure or value a
partner’s beneficial interest in a particular
partnership asset. (De Leon & De Leon, Jr.,
Comments and Cases on Partnership, Agency and
Trusts, 2014, p.155)
265
Right is NOT SUBJECT to Attachment or
Execution, except on a claim against the
partnership.
If there is partnership debt, the specific property
can be attached. [Art. 1811(3), NCC]
Right is NOT SUBJECT to Legal Support
under Art. 195 of the Family Code.
Reason: The property belongs to the partnership
and not to the partners. His interest in the
partnership, however, is subject to legal support.
Partner’s Interest in the Partnership:
A partner’s interest in the partnership is his share
of the profits and surplus. (Art. 1812, NCC)
Profit – the excess of returns over expenditure
in a transaction or series of transactions. (De Leon
& De Leon, Jr., Comments and Cases on Partnership,
Agency and Trusts, 2014, p.159)
Surplus – refers to the assets of the partnership
after debts and liabilities are paid and settled and
the rights of the partners among themselves are
adjusted. (Ibid.)
Only a partner’s share in interest and not the
whole profit of the partnership can be assigned,
be attached, and be subjected to legal support
(Arts. 1813 and 1814, NCC).
Procedure for Enforcement of Claim
Against Partner’s Interest:
1. Charging Order: Any judgment creditor of
a partner may apply in court for a charging
order. In said order, the court may charge the
interest of the debtor partner with payment
of the unsatisfied amount of such judgment
debt with interest thereon (Art. 1814[1],
NCC).
This remedy is without prejudice to the preferred
rights of partnership creditors under Article 1827.
It means that the claims of partnership creditors
must be satisfied first before the separate
creditors of the partners can be paid out of the
interest charged (Art.1839[8], NCC).
266
2. Redemption of Interest Charged.
Redemption – the extinguishment of the charge
on or attachment of the partner’s interest in the
profits.
How is Redemption Made
1. The “interest charged” may be redeemed or
bought at any time BEFORE foreclosure.
2. AFTER the foreclosure, it may still be bought
with separate property (by any one or more
of the partners) OR with partnership property
(with consent of all the other partners). (De
Leon & De Leon, Jr., Comments and Cases on
Partnership, Agency and Trusts, 2014, p.162)
Preferred Rights of Partnership Creditors
The creditors of the partnership shall be preferred
to those of each partner as regards the
partnership property (Art. 1827, NCC).
Assignment of Partner’s Whole Interest in
the Partnership (Art. 1813, NCC)
Right to Convey – Since a partner’s interest in
the partnership is his personal property, he has
the right to convey such property.
Such conveyance does not of itself dissolve the
partnership. However, the non-assigning
partners may dissolve the partnership if they so
desire.
The purchaser of a partner’s interest may secure
from the court a decree of dissolution in two
instances:
● After the termination of the specified term or
particular undertaking; or
● In case of partnership at will, when the
interest was assigned or when the charging
order was issued. (Art. 1830, NCC)
Rights of Assignee
a. To receive in accordance with his contract the
profits to which the assigning partner would
otherwise be entitled.
b. In case of fraud in the management of the
partnership, the assignee may avail himself
of the usual remedies.
c. In case of dissolution of partnership, the
assignee is entitled to receive his assignor’s
interest and may require an account from the
 date only of the last account agreed to by all
the partners. (Art. 1813, NCC)
The assignee does not become a partner without
the concurrence of all of the other partners.
Hence, during the continuance of the partnership,
he does not acquire the right:
a. To interfere in the management or
administration of the partnership business or
affairs;
b. To require any information or account of
partnership transactions; or
c. To inspect the partnership books.
Obligations of Partners in General
A. Obligation to Contribute to Capital
Proportion of Capital Due from Partners
In the absence of contrary stipulation, partners
shall contribute equal shares to the capital of
partnership (Art. 1790, NCC);
An industrial partner cannot be required to
contribute capital without stipulation to that
effect.
Debtor of Partnership
Every partner is a debtor of the partnership for
whatever he may have promised to contribute
thereto (Art. 1786, [1], NCC).
Contributions
Contribution of Property:
a. To deliver to the partnership at the time it
was constituted or on the date stipulated the
property he has promised to contribute.
b. To take care of the property before its
delivery to the partnership with the diligence
of a good father of a family as a rule. (Art.
1163, NCC)
c. To be liable for damages in case of default.
d. The partner shall also be liable for the fruits
of the specific and determinate things, which
he may have promised to contribute from the
time they should have been delivered,
without the need of any demand (Art.
1786[2], NCC).
e. He shall also be bound for warranty in case
of eviction with regard to specific and
determinate things, which he may have
contributed to the partnership (Art. 1786[2],
NCC).
Contribution of Money
A partner who has undertaken to contribute a
sum of money and fails to do so becomes a
debtor for the interest and damages from the
time he should have complied with his obligation
(Art. 1788, NCC).
Note: Partner’s failure to pay to the partnership
the whole amount which he bound himself to pay,
he became indebted to it for the remainder, with
interest and any damages occasioned thereby,
ipso jure without the need of demand (Sancho v
Lizarraga, G.R. No. L-33580, February 6, 1931).
Contribution of Additional Capital to Save Venture
In case of imminent loss of the business of the
partnership, the partners can be compelled to
contribute an additional share to the capital to
save the venture.
XPN: Industrial partners (Art. 1791, NCC).
Effect of Refusal to Contribute
The partner who refuses to contribute shall be
obliged to sell his interest to the other partners,
except if there is an agreement to the contrary
(Art. 1791, NCC).
B. Obligation to Observe Good Faith
Private Use of Partnership Money - If a partner
uses partnership money for his own use, he is
liable to pay interest and damages to the
partnership from the time he converted said
amount to his own use. (Art. 1788[2], NCC).
Individual Transactions in Connection with
Partnership Affairs or Involving Use of Firm
Property:
a. Partner must account to the partnership for
any benefit, and hold as trustee for it any
profit derived by him without the consent of
the other partners from any transaction
connected with the formation, conduct, or
267
 liquidation of the partnership or from any use
by him of its property. (Art. 1807, NCC).
b. He is holding any such profit only as a trustee
for the partnership (Art. 1807, NCC).
Engagement in Individual Business:
By an Industrial Partner:
Prohibition: Prohibited from engaging in any
kind of business, unless expressly permitted by
all partners (Art. 1789, NCC).
Effect of Violation: The capitalist partner may
either:
1. Exclude the industrial partner from the firm;
or
2. Avail themselves of the benefits, which he
may have obtained in violation of the
prohibition, with a right to damages in either
case. (Art. 1789, NCC)
By a Capitalist Partner
Prohibition: Prohibited from engaging in
business of the same nature as that of
partnership, unless there is a stipulation to the
contrary (Art. 1808, [1], NCC).
Effect of Violation: He is required to bring to
the common funds any profits accruing to him
from his transactions, and shall personally bear
all the losses (Art. 1808[2], NCC)
Equal Knowledge of Partnership Affairs:
a. Right to Examine Partnership Books: Every
partner shall at any reasonable hour have
access to and may inspect and copy the
partnership books. (Art. 1805, NCC)
b. Matters Affecting Partnership: Partners shall
render ON DEMAND true and full information
of all things affecting the partnership to any
partner or the legal representative of any
deceased partner or of any partner under
legal disability. (Art. 1806, NCC)
Obligations of Partners among Themselves
1. Obligation with Respect to Contribution
of Property
a. To contribute what was promised;
268
b. To answer for eviction in case the
partnership is deprived of determinate
property contributed;
c. To answer to the partnership for the
fruits of the specific property, , from the
time they should have been contributed
to the time of actual delivery (Art. 1786,
NCC);
d. To preserve the property with the
diligence of a good father of a family
pending delivery to the partnership (Art.
1163, NCC); and
e. To indemnify the partners for any
damages caused to it by the retention of
the same or by delay in its contribution.
(Art. 1788, NCC)
2. Obligation With Respect to Contribution
of Money and Money Converted to Personal
Use
a. To contribute on the date due the amount he
has undertaken to contribute to the
partnership;
b. To reimburse any amount he may have taken
from the partnership coffers and converted to
his own personal use;
c. To pay interest if he fails to pay his
contribution on time or in case he takes any
amount from the common fund and converts
to his own personal use; and
d. To indemnify the partnership for the
damages caused to it by the delay in the
contribution or the conversion of any sum for
his personal benefit. (Art. 1788, NCC)
3. Obligation Not to Engage in Other
Business for Himself
Industrial partner – cannot engage in any
business for himself unless the partnership
expressly permits him to do so; and if he should
do so, the capitalist partners may either exclude
him from the firm or avail themselves of the
benefits which he may have obtained in the firm
or avail themselves of the benefits which he may
have obtained in violation of this provision, with
a right to damages in either case. (Art. 1789,
NCC)
 The prohibition is absolute and applies
whether the industrial partner is to engage in
the same business in which the partnership is
 engaged or in any kind of business. (De Leon
& De Leon, Jr. Comments and Cases on
Partnership, Agency and Trusts, 2014, p.100,
citing Evangelista & Co. vs. Abad Santos, G.R.
No. L-31684 June 28, 1973)
Capitalist partner – the prohibition extends only
to any operation which is of the same kind of
business in which the partnership is engaged
unless there is stipulation to the contrary (Art.
1808, NCC).
3. Obligation to Contribute Additional
Capital (Art. 1791, NCC)
GR: A capitalist partner is not bound to contribute
to the partnership more than what he agreed to
contribute.
XPN: In case of imminent loss of the business,
and there is no agreement to the contrary, he is
under obligation to contribute an additional share
to save the venture.
If he refuses to contribute, he shall be obliged to
sell his interest in the partnership to the other
partners.
Requisites before capitalist partners may
be obliged to sell his interest to the others:
1. Imminent loss of the business of the
partnership;
2. Majority of the capitalist partners are of the
opinion that an additional contribution to the
common fund would save the business;
3. Capitalist partner refuses deliberately to
contribute (not due to financial inability to do
so);
4. There is no agreement to the contrary. (De
Leon & De Leon, Jr., Comments and Cases on
Partnership, Agency, and Trusts, 2014, p.102)
5. Obligation of Managing Partners who
Collect Debt (Art. 1792, NCC)
Where a person is separately indebted to the
partnership and to the managing partner at the
same time, any sum collected by the managing
partner shall be applied to the two credits in
proportion to their amount, even though receipt
has been given for the latter’s own account only,
except where he received it entirely for the
account of the partnership credit only.
Requisites:
1. The existence of two debts (one where the
collecting partner is a creditor, the other,
where the partnership is creditor);
2. Both debts are demandable;
3. The partner who collects is authorized to
manage and actually manages the
partnership (De Leon & De Leon, Jr., Comments
and Cases on Partnership, Agency, and Trusts,
2014, p.103)
6. Obligation of Partner Who Receives
Shares in Partnership Credit
A partner who receives in whole or in part his
share in the partnership credit, when the others
have not collected theirs, shall be obliged, if the
debtor should thereafter become insolvent, to
bring to the partnership capital what he received
even though he may have given receipt for his
share only. (Art. 1793, NCC)
Requisites:
1. A partner has received, in whole or in part,
his share of the partnership credit;
2. The other partners have not collected their
shares;
3. The partnership debtor has become
insolvent. (De Leon & De Leon, Jr., Comments
and Cases on Partnership, Agency, and Trusts,
2014, p.105)
Art. 1792 In comparison with Art. 1793
(Where a Partner Receives His Share of a
Partnership)
Art. 1792 Art. 1793
Two debts One debt only
Applies only to Applies to any
managing partner
partner
7. Obligation of Partner for Damages to
Partnership (Art. 1794, NCC)
Every partner is responsible to the partnership for
damages suffered by it through his fault. He
cannot compensate them with the profits and
benefits which he may have earned for the
partnership by his industry.
However, the court may equitably lessen his
responsibility if thru the partner’s
EXTRAORDINARY efforts in other activities of the
269
partnership, UNUSUAL PROFITS have been
realized.
8. Duty to Render Information (Art. 1806,
NCC)
Partners shall render on demand true and full
information of all things affecting the partnership
to any partner or the legal representative of any
deceased partner of any partner under legal
disability.
9. Obligation to Account for Any Benefit and
Hold as Trustee Unauthorized Personal
Profits (Art. 1807, NCC)
Every partner must account to the partnership for
any benefit, and hold as trustee for it any profits
derived by him without the consent of the other
partners from any transaction connected with the
formation, conduct, liquidation of the partnership
or from any use by him of a property.
Obligations of Partnership/ Partners to
Third Persons
Use of partnership name
1. Requirement of firm name: Every partnership
is required to operate under a firm name (Art.
1815, NCC).
2. Name to be adopted: It can adopt any name,
which may or may not include the name of
one or more of the partners (Art.1815, NCC).
In case of limited partnership, it is required that
the word “Ltd.” be included in the name of the
partnership (Art. 1844[1], NCC).
3. Use of Name of Non-Partner. Article 1825 of
the Civil Code prohibits a third person from
including his name in the firm name under
pain of assuming the liability of a partner (In
re: Petition for Authority to Continue Use of
the Firm Name “Sycip,” July 30, 1979).
Those who, not being members of the
partnership, include their names in the firm name
shall be subject to the liability of a partner (Art.
1815[2], NCC).
270
Liability for contractual obligations:
Nature and Extent of liability:
a. Pro-rata – The Liability of the partnership
shall be equally divided among the partners,
including industrial ones.
b. Subsidiary – Each partner shall be liable with
his separate property after all the assets of
the partnership have been extinguished.
(Art. 1816, NCC)
Stipulation against liability
Any stipulation against the foregoing liability is:
● Void, in so far as third persons are
concerned;
● Valid, as among the partners (Art. 1817,
NCC).
Separate obligation by a partner – If a
partner undertakes in his individual capacity and
on his individual credit to perform a partnership
contract, he becomes primarily (not secondarily)
liable for the same (Art. 1816, NCC).
For Consenting to Acts of a Partner by
Estoppel:
When all partners consented, partnership liability
results; hence, all partners shall be liable pro rata
(not solidarity) with all their property and after all
the partnership assets have been exhausted (Art.
1816, NCC).
When not all consented, those who consented
shall be liable merely as joint debtors, pro rata.
(Id)
As to the partner by estoppel:
(1) when all partners consented, he is also liable
as though he were an actual member of the
partnership;
(2) when not all consented, he is liable pro rata
with the other partners so consenting. (Art. 1825,
NCC)
Binding the Partnership
Right of Representation
GR: Every partner is an agent of the partnership
and his act binds the partnership if it is for
apparently carrying on in the usual way the
business of the partnership.
XPNs:
1. The partner so acting has in fact no authority
to act for the partnership in the particular
matter; and
2. The person with whom he is dealing has
knowledge of the fact he has no such
authority (Art. 1818, NCC).
Partnership is NOT BOUND by act of a
partner if:
a. Act is not apparently for the carrying on of
business of the partnership in the usual way,
unless authorized by other partners. (Art.
1818[2], NCC)
b. Although the act is for apparently carrying on
in the usual way the business of the
partnership, the partner so acting has no
authority to act in the particular matter and
the person with whom he dealt with had
knowledge of such fact. (Art. 1818[1], NCC)
c. Act is in contravention of a restriction on
authority and the person he dealt with had
knowledge of the restriction. (Art. 1818, last
par., NCC)
Effect of admission and representation by a
partner - It binds the partnership when:
1. It concerns partnership affairs; and
2. It is within the scope of his authority (Art.
1820, NCC).
When act is Not Apparently for Carrying on
Partnership Business
GR: The act does not bind the partnership.
XPN: The act binds the partnership when such
partner has been authorized by the other
partners with respect to the particular matter.
Acts requiring Concurrence of All Partners
(Art. 1818, NCC)
1. Assigning of partnership property in trust for
creditors or on assignee’s promise to pay
debts of the partnership;
2. Disposition of goodwill of a partnership;
3. Doing any other act which would make it
impossible to carry on the ordinary business
of a partnership;
4. Confession of a judgement;
5. Entering into a compromise concerning a
partnership claim or liability;
6. Submitting a partnership claim or liability to
arbitration; and
7. Renouncing a partnership claim.
Admission Made by A Partner
Made before Dissolution: It binds the partnership
when: (a) it concerns partnership affairs and (b)
it is within the scope of his authority. (Art. 1820,
NCC)
Made after Dissolution: It binds the partnership
only if it is necessary for the winding up of
partnership affairs. (Art. 1834, NCC)
Notice to Partner
GR: It operates as notice to the partnership
when: (a) it is notice to any partner relating to
partnership affairs; (b) upon knowledge of the
partner acting in the particular matter, acquired
while a partner or then present to his mind; or
upon knowledge of any other partner who
reasonably could and should have communicated
it to the acting partner. (Art. 1821, NCC)
XPN: It does not operate as notice to the
partnership when the same is a case of fraud on
the partnership, committed by or with the
consent of that partner. (Id)
Liability arising from partner’s tort or
breach of trust
Instances giving rise to liability:
1. Where a partner, by any wrongful act or
omission and acting in the ordinary course of
the business of the partnership or with the
authority of his co-partners, causes loss or
injury to a non-partner (Art. 1822, NCC).
2. Where a partner acting within the scope of
his apparent authority receives money or
271
 property of a third person and misapplies it
(Art. 1823[1], NCC).
3. Where the partnership in the course of its
business receives money or property of a
third person and the money or property so
received is misapplied by any partner while it
is in the custody of the partnership (Art.
1823[2], NCC)
Who shall be liable:
1. The partnership is liable to the same extent as
the partner so acting or omitting to act (Arts.
1822 and 1823, NCC).
2. But all the partners are liable solidarily with
the partnership for everything chargeable to
the partnership in the abovementioned
instances (Art. 1824, NCC).
3. In such representation, the transaction would
be considered as their joint act or obligation.
4. The partner by estoppel is liable pro rata with
the other persons so consenting to the
contract or representation, if any (Art. 1825,
NCC).
Liability of incoming partner for obligations
arising prior to his admission:
1. He is liable even though he had not been a
partner when such obligations were incurred.
2. But his obligations shall be satisfied only out
of partnership property.
3. His own property shall not be liable, unless
there is a stipulation to the contrary. (Art.
1826, NCC)
Liability For Acts of Conversion or
Misappropriation:
The partnership is liable for an act of conversion
or misappropriation committed by a partner in
the following cases:
1. Where the partner who received and
misapplied the money or property of a third
person acted within the scope of his apparent
authority; or
2. Where the money or property of a third
person was received by the partnership in the
course of its business and it was misapplied
by any partner while it was in the custody of
the partnership. (Art. 1823, NCC)
272
Conveyance of Real Property
Where title is in partnership’s name: Can be
conveyed only in the partnership name (Art.
1774, NCC).
Effect of conveyance by a single partner:
1. If conveyance is in the usual course of
business, the same is within the scope of the
partner’s apparent authority, therefore
binding upon the principal.
2. If conveyed in partnership name but not
authorized, the partnership may recover the
property unless the same has been conveyed
by the grantee to a holder for value without
knowledge that the partner has exceeded his
authority. (Art. 1819[1], NCC)
3. If conveyed in his own name and the act is
one within the authority of the partner the
conveyance passes the equitable interest of
the partnership. (Art. 1819[2], NCC)
Where title is in name of one or more but not all
the partners and the record does not disclose the
right of the partnership and the conveyance is
executed without authority in the name of the
partner or partners in whose name the title
stands:
● The partners in whose name the title stands
may convey title to such property.
● But the partnership may recover such
property if the partners act does not bind the
partnership under the provisions of Article
1818, unless the purchaser or his assignee, is
a holder for value, without knowledge. (Art.
1819[3], NCC)
Where title is in name of one or more or all
partners, or in a third person in trust for the
partnership:
A conveyance executed by a partner in the
partnership name, or in his own name, passes the
equitable interest of the partnership, provided the
act is one within the authority of the partner
under the provisions of the first paragraph of
Article 1818. (Art. 1819[3], NCC)
Where title in names of all partners:
A conveyance executed by all the partners passes
all their rights in such property. (Art. 1819[5],
NCC)
Principle of Delectus Personae
A rule inherent in every partnership wherein no
one can become a member of the partnership
without the consent of all of the partners.
This does not hold true, however, to a limited
partner who is referred to as a mere contributor
under Art. 1866 of the NCC. He is practically a
stranger in the limited partnership whose liability
is limited to his interest in the firm without any
right and power to participate in the management
and control of the business. (De Leon & De Leon,
Jr., Comments and Cases on Partnership, Agency, and
Trusts, 2014, p. 319)
C. DISSOLUTION AND WINDING UP
Dissolution is the change in the relation of the
partners caused by any partner ceasing to be
associated in carrying on of the business
(Art.1828, NCC).
Winding up is the process of settling the
partnership business or affairs after dissolution.
Termination is the point when all partnership
affairs are wound up or completed and is the end
of the partnership life. It takes place after both
dissolution and winding up have occurred.
Causes of Dissolution:
The parties may agree to expand the grounds
provided under Article 1830 but NOT to DELIMIT
them. The causes are enumerated as follows:
1. Extrajudicial Dissolution – by act of the
parties WITHOUT violation of their
agreement
a. By the termination of the definite term or
particular undertaking specified in the
agreement;
b. By the express will of any partner, who
must act in good faith, when no definite
term or particular undertaking is
specified;
c. By the express will of all the partners who
have not assigned their interests or
suffered them to be charged for their
separate debts, either before or after the
termination of any specified term or
particular undertaking;
d. By the expulsion of any partner from the
business bona fide in accordance with
such a power conferred by the
agreement between the partners.
Note: In the absence of an express
agreement, there is no right to expel any
member, except in the case of an
industrial partner who engages in
business for himself without express
permission the partnership. (Art. 1789,
NCC; Rabuya, Pre-bar Reviewer in Civil Law,
2021, p. 494).
2. Extrajudicial Dissolution – by act of the
parties WITH violation of their agreement.
Among partners, mutual agency arises and
the doctrine of delectus personae allows
them to have the power, although not
necessarily the right, to dissolve the
partnership. However, an unjustified
dissolution by the partner can subject him to
a possible action for damages. (Ortega v. CA,
G.R. No. 109248, July 3, 1995).
3. Dissolution by Operation of Law
a. By any event which makes it unlawful for
the business of the partnership to be
carried on or for the members to carry it
on in partnership [Art. 1830(3), NCC);
b. When a specific thing, which a partner
had promised to contribute to the
partnership, perishes before the delivery;
in any case by the loss of the thing, when
the partner who contributed it having
reserved the ownership thereof, has only
transferred to the partnership the use or
enjoyment of the same; but the
partnership shall not be dissolved by the
loss of the thing when it occurs after the
partnership has acquired the ownership
thereof [Art. 1830(4), NCC);
c. By the death of any partner [Art.
1830(5), NCC);;
d. By the insolvency of any partner or of the
partnership [Art. 1830(6), NCC);
e. By the civil interdiction of any partner
[Art. 1830(7), NCC).
4. Judicial Dissolution
When so decreed by the court, the presiding
judge may place the partnership under
receivership and direct an accounting to be
made towards winding up the partnership affairs.
(Art. 1831, NCC)
273
Grounds for Dissolution by Decree of Court
A. On Application Bv or For a Partner:
In the following instances:
(1) a partner has been declared insane in any
judicial proceeding or is shown to be of
unsound mind;
(2) a partner becomes in any other way
incapable of performing his part of the
partnership contract;
(3) a partner has been guilty of such conduct as
tends to affect prejudicially the carrying on
of the business;
(4) a partner willfully or persistently commits a
breach of the partnership agreement, or
otherwise so conducts himself in matters
relating to the partnership business that it is
not reasonably practicable to carry on the '
business in partnership with him;
(5) the business of the partnership can only be
carried on at a loss; or
(6) other circumstances that may render a
dissolution equitable. (Art. 1831, par. 1,
NCC).
B. At Instance of Purchaser of Partner’s
Interest:
In the following cases:
(1) after the termination of the specified term or
particular undertaking; or
(2) at any time if the partnership was a
partnership at will when the interest was
assigned or when the charging order was
issued. (Art. 1831, par. 2, NCC).
Effects of Dissolution
Effect On Existence of Partnership:
1. Partnership not terminated – dissolution does
not automatically result in the termination of
the legal personality of the partnership, or
the cessation of his business, nor the
relations of the partners among themselves
who remain as co-partners until the
partnership is terminated. (Art. 1829, NCC)
2. Partnership continues for a limited purpose –
for the purpose of making good all
outstanding engagements, of taking and
settling accounts, and collecting all the
property, means and assets of the
partnership existing at the time of its
274
dissolution for the benefit of all interested.
(De Leon & De Leon, Jr., Comments and Cases on
Partnership, Agency and Trusts, 2014, p.215)
3. Transaction of new business prohibited – the
partnership remains viable only for the
purpose of winding up its affairs. (De Leon &
De Leon, Jr., Comments and Cases on Partnership,
Agency and Trusts, 2014, p.216)
Effect on Existing Liability of Any Partner
GR: The dissolution of the partnership does not
of itself discharge the existing liability of any
partner.
XPN: A partner is discharged from any existing
liability upon dissolution by an agreement to that
effect between himself, the partnership creditor,
and the person or partnership continuing the
business. (Art. 1835, NCC)
Effect on Authority to Act for Partnership as
Between Partners
Dissolution terminates all authority of any partner
to act for the partnership, except with respect to
the following:
1. Acts are necessary to wind up partnership
affairs.
2. Acts to complete transactions begun before
dissolution (Art. 1832, NCC)
3. If the dissolution is caused by the act, death,
or insolvency of a partner, each partner is
liable to his co-partners for his share of any
liability created by any partner acting for the
partnership in relation to “new businesses” as
if the partnership had not been dissolved,
unless the dissolution being by act of any
partner, the partner acting for the
partnership (who makes new contracts or
obligations) had knowledge of the
dissolution; or the dissolution being by the
death or insolvency of partner, the partner
acting for the partnership (who makes new
contracts or obligations) had knowledge or
notice of the death or insolvency. (Art. 1833,
NCC)
Effect on Authority to Act for Partnership as When Partnership Not Liable for Any Act of
to Third Persons Partner After Dissolution

A partner can bind the partnership with respect (1) Where partnership is dissolved because it is
to third persons: unlawful to carry on the business, unless the
(1) by any act appropriate for winding up act is appropriate for winding up partnership
partnership affairs or completing affairs;
transactions unfinished at dissolution;(Art. (2) Where the partner has become insolvent; or
1834, NCC) (3) Where the partner has no authority to wind
(2) by any transaction which would bind the
up partnership affairs;
partnership if dissolution had not taken place
provided that the other party to the
Except by a transaction with a third person who:
transaction (third person):
1. had extended credit to a partnership prior to
(a) had extended credit to the partnership
dissolution and had no knowledge or notice
prior to dissolution and had no
of his want of authority; or
knowledge or notice of the dissolution; or
2. had not extended credit to the partnership
(b) though he had not so extended credit,
prior to dissolution, and, having no
had nevertheless known of the
knowledge or notice of his want of authority,
partnership prior to dissolution, and,
the fact of his want of authority has not been
having no knowledge or notice of
advertised in a newspaper of general
dissolution, the fact of dissolution had not
circulation in the place (or in each place if
been advertised in a newspaper of
more than one) at which the partnership
general circulation in the place (or in each
business was regularly carried on.(Art. 1834,
place if more than one) at which the
NCC)
partnership business was regularly
carried on. (Art. 1834, NCC)
In the above cases, the act of the partner binds
the partnership. If the assets of the partnership
Order of Payment of Partnership Liabilities
are not sufficient to pay the liabilities, the
1. Those owing to creditors other than partners; partners can be held liable to the extent of their
2. Those owing to partners other than for separate properties. (Art. 1839, NCC)
capital and profits;
3. Those owing to partners in respect of capital Right of Partners upon Dissolution
4. Those owing to partners in respect of profits.
1. If dissolution is WITHOUT violation of
(Art. 1839(2), NCC)
partnership agreement:
a. To have partnership property applied to
When does the four (4) years prescription
discharge the liabilities of the
period of the right of a partner to demand
partnership;
an accounting of the partnership business
b. To have surplus applied to pay in cash
start to run?
the net amount owing to respective
partners.
The partnership, although dissolved, continues to
exist and its legal personality is retained, at which 2. If dissolution is due to expulsion of a partner,
time it completes the winding up of its affairs, rights of expelled partner:
including the partitioning and distribution of the a. To be discharged from all partnership
net partnership assets to the partners. For as liability;
long as the partnership exists, any of the partners b. To receive in cash only the net amount
may demand an accounting of the partnership due him from the partnership.
business. Prescription of the said right starts to
run only upon the dissolution of the partnership 3. If dissolution is due to violation of partnership
and when the final accounting is done. (Emnace agreement
vs. Court of Appeals, G.R. No. 126334, November 23,
2001)

275
Partner who has not caused dissolution
wrongfully (Innocent partner):
a. To have partnership property applied for
payment of its liabilities
b. To receive in cash his share in the surplus
c. To demand damages from the guilty partner
for breach of the agreement
d. To continue the business under the same
name
e. To possess the partnership property should
they decide to continue the business
Rights of a partner who has wrongfully
caused the dissolution (Guilty Partner):
1. If the business is NOT continued –
a. To have partnership property applied to
discharge partnership liabilities
b. To receive his share of the surplus less
damages owing to the innocent partner
2. If the business is continued –
a. To have the value of his interest less
damages and
b. To be released from all existing and
future liabilities of the partnership (Art.
1837, NCC)
Right of a retiring partner or the estate of
the deceased partner when business is
continued without settling the accounts
In case the business of the partnership is
continued after its dissolution, those who remain
in the partnership are referred to as the
“continuing partners,” whereas, those who cease
to be part of the partnership are referred to as
“retiring partners. (Art. 1837, NCC)
Unless otherwise agreed, retiring partner
or his legal representative shall receive as
an ordinary creditor:
An amount equal to the value of his interest in
the dissolved partnership with interest, or, at his
option or at the option of his legal representative,
in lieu of interest, the profits attributable to the
use of his right in the property of the dissolved
partnership; (Art. 1841, NCC)
The creditors of the dissolved partnership as
against the separate creditors, or the
representative of the retired or deceased partner,
276
shall have priority on any claim arising under this
article. (Art. 1841, NCC)
Rescission on the ground of fraud or
misrepresentation of one of the parties
thereto, renders the party entitled to
rescind, without prejudice to any other
right, entitled to: (Art. 1838, NCC)
1. Right of lien or retention
2. Right of subrogation
3. Right of indemnification
Although the law uses “rescind” the proper
technical term should be “annulled”
Rules in settling accounts between
partners after dissolution (Art. 1839, NCC)
Assets of partnership for payment of
liabilities:
1. The partnership property;
2. The contributions of the partners necessary
for the payment of all the liabilities.
Partnership property insufficient to pay all
liabilities
1. Contributions of the partners shall be in
accordance with their:
a. Agreement as to sharing of losses (Art.
1797, NCC);
b. If there is no agreement as to losses,
according to their agreement as to
sharing of profits (Ibid);
c. If there is no agreement as to sharing of
both profit and losses, then in
accordance with their capital contribution
(Ibid).
2. If any partner does not pay his share in the
loss, the remaining partner shall have to pay.
However, the latter or his legal
representative who paid in excess of his
share in the liability shall have the right to
enforce the rule specified in the preceding
paragraph;
3. In case one of the partners died, his
individual property shall be liable for his share
of the loss.
Priority in Partnership Property and
Individual Property
When partnership property and the individual
properties of the partners are in possession of the
court for distribution, partnership creditors shall
have priority on partnership property and
separate creditors on individual property, saving
the rights of lien or secured creditors. [Art.
1839(8), NCC)
Where a partner has become insolvent or
his estate is insolvent, the claims against his
separate property shall rank in the following
order:
1. Those owing to separate creditors;
2. Those owing to partnership creditors;
3. Those owing to partners by way of
contribution.
Insolvency here of the partner or his estate does
not necessarily mean that there is no more
money or property; it is enough that the assets
are less than the liabilities. (Paras, Civil Code of the
Philippines Annotated, 2013, p. 713)
Liquidation of dissolved partnership
Concept: This involves the sale of the assets of
the partnership, the payment of its liabilities, and
the distribution of the remaining cash or other
property to the partners. (De Leon & De Leon, Jr.,
Comments and Cases on Partnership, Agency and
Trusts, 2014, p.259)
Powers of Liquidating Partner
1. Make new contracts but for liquidation
purposes only
2. Raise money to partnership debt
3. Incur obligations to complete existing
contracts or preserve partnership assets
4. Incur expenses necessary in the conduct of
litigation (De Leon & De Leon, Jr., Comments and
Cases on Partnership, Agency and Trusts, 2014, p.
260-261)
Winding Up Partners
The following partners have the right to wind up
the partnership affairs:
1. Those designated in an agreement;
2. Those who have not wrongfully dissolved the
partnership; or
3. The legal representative of the last surviving
partner, who was not insolvent.
Any partner or his legal representative or
assignee may obtain winding up by the court,
upon cause shown (Art. 1836, NCC)
Manner of Winding Up
1. Extrajudicial, by the partners themselves (Art.
1830, NCC); or
2. Judicial, under the control and direction of the
proper court (Art. 1831, NCC).
Who has the right or duty to wind up or
liquidate partnership affairs?
▪ If it is judicial, the right or duty to wind up
or liquidate partnership affairs devolves upon
the partner or legal representative or
assignee designated by the court (NCC, Art.
1836), whereas if it is extrajudicial, the
right or duty devolves upon the managing
partner.
▪ But where there is no managing partner, or
even where there is, he dies, then the right
or duty devolves upon the partners who have
not wrongfully dissolved the partnership or
the legal representative of the last surviving
partner, not insolvent. (Art. 1836, NCC)
D. LIMITED PARTNERSHIP
A limited partnership is a partnership which has
one or more general partners and one or more
limited partners. The limited partners as such
shall not be bound by the obligations of the
partnership (Art. 1843, NCC), except up to the
extent of their contribution.
Limited partnership is not created by mere
voluntary agreement.
A limited partner as such cannot be held liable for
partnership obligations (Art. 1843, NCC).
However, if his surname appears in the
partnership or firm name or if he participates in
the management or control of the business, he
can be held liable (Arts. 1846 & 1848, NCC).
277
Essential Requirements for Formation of
Limited Partnership
1. A certificate or articles of limited partnership
which states the matters enumerated in
Article 1844, which must be signed and
sworn;
2. Such certificate must be filed for record in the
Office of the Securities and Exchange
Commission. (De Leon, Comments and Cases on
Partnership, Agency and Trusts, 2010, p. 283)
It is only the property of the partnership that can
be pursued by the creditors.
Execution of the Prescribed Certificate
A prime requisite to the formation of a limited
partnership, under Article 1844, is the execution
of the prescribed certificate. This document, as a
rule, must contain the matters enumerated in
said article. Thus, a limited partnership cannot be
constituted orally.
The statements required in the certificate must
be true at the time the certificate and other
required papers are filed with the SEC.
A strict compliance with the legal requirements is
not necessary. It is sufficient that there is
substantial compliance in good faith.
The firm becomes a general partnership only as
to its relation to third persons. It is, in form, still
a limited partnership subject to all the rules
applicable to a limited partnership. (De Leon & De
Leon, Jr., Comments and Cases on Partnership, Agency
and Trusts, 2014, p.285)
In the following cases, a certificate shall be
amended (Art. 1864, NCC):
1. There is a change in the name of the
partnership or in the amount or character of
the contribution of any limited partner;
2. A person is substituted as a limited partner;
3. An additional limited partner is admitted;
4. A person is admitted as a general partner;
5. A general partner retires, dies, becomes
insolvent or insane, or is sentenced to civil
interdiction and the business is continued
under Article 1860;
6. There is a change in the character of the
business of the partnership;
7. There is a false or erroneous statement in
the certificate;
278
8. There is a change in the time as stated in
the certificate for the dissolution of the
partnership or for the return of a
contribution;
9. A time is fixed for the dissolution of the
partnership, or the return of a contribution,
no time having been specified in the
certificate; or
10. The members desire to make a change in
any other statement in the certificate in
order that it shall accurately represent the
agreement among them.
The certificate must be signed and sworn to by
all the members, and an amendment substituting
a limited partner or adding a limited or general
partner shall be signed also by the member to be
substituted or added, and when a limited partner
is to be substituted, the assigning limited partner
shall also sign the amendment. (Art. 1865, NCC)
The cancellation or amendment must be recorded
in the SEC (De Leon, Partnership, Agency, and Trust,
supra. p. 219).
Specific Rights of Limited Partners:
1. To have partnership books kept at principal
place of business;
2. To inspect and copy at a reasonable hour
partnership books or any of them.
3. To demand true and full information of all
things affecting the partnership;
4. To demand formal account of partnership
affairs whenever circumstances render it just
and reasonable;
5. To ask for dissolution and winding up by
decree of court;
6. To receive a share of profits or other
compensation by way of income;
7. To receive return of his contribution provided
the partnership assets are in excess of all its
liabilities. (Art. 1851, NCC)
A person may be general and limited at the
same time provided it is stated in the certificate.
He shall have all the powers, rights, and
restrictions of a general partner; but with respect
to his capital contribution, his right against the
other members of the firm would be that of a
limited partner (Art. 1853, NCC).
GR: A limited partner may also loan money to
and transact other business with the firm.

XPNs: Except that he cannot: 1. Receive or hold
as collateral any partnership property; or 2.
Receive from a general partner or from the firm
any payment, conveyance, release if at that time
assets of the firm are not sufficient to discharge
liabilities to outside creditors. Any violation would
be fraud on such creditors (Art. 1854, NCC).
Obligations of a Limited Partner
1. Not to allow the inclusion of his surname in
the partnership name. (Art. 1846, NCC)
XPNs:
a. If it is also the surname of a general partner.
b. The business had been carried on under a
name in which his surname appeared prior to
his admission as a limited partner.
2. To be liable as a general partner if he takes
part in the control of the business;
3. To be liable to the partnership for the
following:
a. For the difference between his actual
contribution and that stated in the
certificate.
b. For any unpaid contribution which he
agreed in the certificate to make in the
future at the time and on the conditions
stated in the certificate. (Art. 1858, NCC)
4. To hold as trustee for the partnership the
following:
a. Specific property stated in the certificate
as contributed by him, but which was not
contributed.
b. Specific property, which has been
wrongfully returned to him.
c. Money or property wrongfully paid or
conveyed to him on account of his
contribution. (Art. 1858, NCC)
5. To be liable to the partnership after he has
rightfully received the return of his capital
contribution, for any sum not in excess of such
return with interest, which is necessary to
discharge its liabilities to all creditors which
extended credit or whose claims arose before
such return. (Art. 1858, NCC)
6. Not to receive or hold as collateral security any
partnership property on account of his claims
for loan granted to or other business
transaction with the partnership. (Art. 1854
NCC)
7. Not to receive from a general partner or the
partnership on account of such claims any
payment, conveyance, or release from liability,
if at the time the assets of the partnership are
not sufficient to discharge partnership
liabilities to persons not claiming as general or
limited partnership. (Art. 1854, NCC)
Liability for Unpaid Contribution:
1. For the difference between his contribution
as actually made and that stated in the
certificate as having been made;
2. For any unpaid contribution, which he has,
agree in the certificate to make in the future
at the time and conditions stated in the
certificate. (Art. 1858, NCC)
Liability as Trustee:
1. Specific property stated in the certificate to
be contributed by him, but which was not
contributed or which has been wrongfully
returned; and
2. Money or other property wrongfully paid or
conveyed to him on account of his
contribution. (Ibid)
Liability to Partnership Creditors
GR: A limited partner is not liable as a general
partner. His liability is limited to the extent of his
contributions. (Art. 1843, NCC)
XPNs: The limited partner is liable as a general
partner when:
1. His surname appears in the partnership
name, with certain XPNs. (par. 2, Art. 1846,
NCC)
2. He takes part in the control of the business.
(Art. 1848, NCC)
3. The certificate contains a false statement of
which he knows and which was relied upon,
resulting in loss. (Art. 1847, NCC)
In cases (1) and (2), the limited partner is entitled
to reimbursement by the general partner/s.
279
Ratio: The general partner/s may not have been
aware of such false statements.
Liability to Separate Creditors
On due application to a court of competent
jurisdiction by any separate creditor of a limited
partner, the court may:
1. Charge his interest with payment of the
unsatisfied amount of such claim;
2. Appoint a receiver; and
3. Make all other orders, directions and inquiries
which the circumstances of the case may
require. The interest so charged may be
redeemed with the separate property of any
general partner, but may not be redeemed
with partnership property. (Art. 1862, NCC)
Note: In a general partnership, the interest may
be redeemed with partnership property with the
consent of all the partners whose interests are
not charged. (Art. 1814, NCC)
Waiver of Liabilities of Limited Partner:
These liabilities can be waived or compromised
only by consent of all the members.
Assignment of a Limited Partner’s Interest
(Art. 1859, NCC)
A limited partner’s interest is assignable.
Substituted limited partner – is a person
admitted to all the rights of a limited partner
who has died or has assigned his interest in a
partnership. (Art. 1859, NCC)
Rights and Powers, Restrictions and
Liabilities of Substituted Limited Partner
GR: He has all the rights and powers and is
subject to all the restrictions and liabilities as
assignor (Art. 1859, NCC).
XPN: Those liabilities, which he was ignorant at
the time he became a limited partner and which
could not be ascertained from the certificate (Art.
1859, NCC).
280
Right to Transact Business with the
Partnership
A limited partner may:
1. Loan money to the partnership;
2. Transact other business with the partnership;
and
3. Receive a pro rata share of the partnership
assets with general creditors if he is not also
a general partner. (Art. 1854 [1], NCC)
Limitations: A limited partner, with respect
to his transactions with the partnership,
cannot:
1. Receive or hold as collateral security any
partnership property; or
2. Receive any payment, conveyance, or release
from liability if it will prejudice the right of
third persons. (Art. 1854 [1], NCC)
Violation of the prohibition is considered a fraud
on the creditors of the partnership. (Art. 1854 [2],
NCC)
Right to Share in Profits
A limited partner may receive from the
partnership the share of the profits or the
compensation by way of income stipulated for in
the certificate. (Arts. 1851 and 1856, NCC)
This right is subject to the condition that
partnership assets will still be in excess of
partnership liabilities after such payment. (Art.
1856, NCC) The partnership liabilities being
referred to exclude the liabilities to the limited
and general partners.
Rationale: Otherwise, he will receive a share to
the prejudice of third-party creditors.
Right to Return of Contribution
A limited partner may have his contributions
withdrawn or reduced when:
1. All the liabilities of the partnership, except
liabilities to general partners and to limited
partners on account of their contributions,
have been paid or there remains property of
the partnership sufficient to pay them;
2. The consent of all members is had, unless the
return may be demanded as a matter of
right; and
3. The certificate is cancelled or so amended as
to set forth the withdrawal or reduction.
(Arts. 1851 and 1857, NCC)
Note: Once withdrawal has been approved by
the SEC and registered, the partnership may no
longer recover the limited partner’s contributions.
The return of his contributions may be
demanded, as a matter of right
1. On the dissolution of the partnership;
2. Upon the arrival of the date specified in the
certificate for the return; or
3. After the expiration of a 6-month notice in
writing given by him to the other partners, if
no time is fixed in the certificate for:
a. The return of the contribution; or
b. The dissolution of the partnership (Art.
1857, NCC)
GR: A limited partner, irrespective of the nature
of his contribution, has only the right to demand
and receive cash in return for his contribution.
XPNs: He may receive his contribution in a form
other than cash when:
1. There is a statement in the certificate to the
contrary; or
2. All the members of the partnership consent.
(Art. 1857, NCC)
Right to Assign Interest
The interest of a limited partner is
assignable.
The assignee may become:
1. A substituted limited partner; or
Substituted limited partner - admitted and
has all the rights of a limited partner who has died
or has assigned his interest in a partnership.
He has all the rights and powers, and is subject
to all the restrictions and liabilities of his assignor,
except those liabilities which:
a. The assignee was ignorant of; and
b. Cannot be ascertained from the certificate.
(Art. 1859 [4], NCC)
2. A mere assignee.
Assignee - only entitled to receive the share of
the profits or other compensation by way of
income, or the return of contribution, to which
the assignor would otherwise be entitled.
He has no right:
a. To require any information or account of the
partnership transactions;
b. To inspect the partnership books. (Art. 1859
[3], NCC)
Right to Ask for Dissolution if:
1. He rightfully but unsuccessfully demands the
return of his contribution; or
2. He has a right to contribute but his
contribution is not paid because the
partnership property is insufficient to pay its
liabilities. (Art. 1857, NCC)
VIII. AGENCY
A. NATURE, FORM AND KINDS
Concept
It is a contract whereby a person (agent) binds
himself to render some service or to do
something in representation or on behalf of
another (principal), with the consent or authority
of the latter. (Art. 1868, NCC)
Elements of a Contract of Agency
In the case of Tuazon vs. Ramos (G.R. No.
156262 July 14, 2005), the Court had the
occasion to set forth the elements of agency,
thus:
1. The parties’ consent, express or implied, to
establish the relationship;
2. The object, which is the execution of a
juridical act in relation to a third person;
3. The representation, by which the one who
acts as an agent does so, not for oneself, but
as a representative;
4. The limitation that the agent acts within the
scope of his or her authority
Parties to a Contract of Agency
1. Principal – The person represented by the
agent and from whom the latter derives his
authority; he is the party primarily and originally
concerned in the contract of agency:
281
 a. May be a natural or juridical person; and
b. Must be capacitated to enter into a
contract. (De Leon, Comments and Cases on
Partnership, Agency and Trusts, 2019, 338)
2. Agent – He who acts for and represents the
principal and from whom he derives his authority.
(De Leon, Comments and Cases on Partnership,
Agency and Trusts, 2010, p. 328)
GR: Anyone can be an agent. His capacity is
usually immaterial. It is the capacity of the
principal that is controlling since the contract is
really entered into by the principal. In the case of
the agent, since he assumes no personal liability,
he does not have to possess full capacity to act
for himself insofar as third persons are
concerned.
XPN: However, some mental capacity is
necessary as an agent, and, therefore, persons
who are absolutely incapacitated, such as insane
persons, cannot be agents (2 C.J.S. 1041) as they
are completely incapable of understanding the
task to be performed. Principals should appoint
agents who are able to make sound decisions in
carrying out the agency (De Leon, Comments and
Cases on Partnership, Agency, and Trusts, 201, p.
333).
Theory of Imputed Knowledge
The knowledge of the agent is imputed to the
principal even though the agent never
communicated such knowledge to the principal
(see Art. 1821). Thus, it is only logical that the
agent is required to notify the principal of all
matters that came to his attention that are
material to the subject matter of the agency (De
Leon, Comments and Cases on Partnership, Agency,
and Trusts, 2010, p. 344).
XPNs to the Rule
1. Where the agent’s interests are adverse to
those of the principal;
2. Where the agent’s duty is not to disclose the
information, as where he is informed by way
of confidential information; and
3. Where the person claiming the benefit of the
rule colluded with the agent to defraud the
principal (Teller, op. cit., p.150).
Characteristics of Contract of Agency
282
1. Principal – It can stand by itself.
2. Preparatory – It is a means by which other
contracts may be entered into.
3. Bilateral – The parties are bound reciprocally
to each other.
4. Onerous – It is presumed to be for a
compensation, unless there is proof to the
contrary. (Art. 1875, NCC)
5. Consensual – It is perfected by mere consent.
6. Nominate – It has a name given to it by law.
(Art. 1868, NCC)
7. Commutative – The parties give and receive
almost equivalent values; hence, there is real
fulfillment. (De Leon, Comments and Cases on
Partnership, Agency, and Trusts, 2010, p. 325)
Object or Subject Matter
GR: The object of every contract of agency is the
execution of a juridical act in relation to a third
person. (Rallos vs. Felix Go Chan & Sons Realy Corp.,
81 SCRA 251, 1978)
XPNs:
a) Peculiarly personal acts may not be
delegated;
b) Illegal or unlawful acts may not be delegated.
Forms of Agency
GR: Agency may be written or oral, unless the
law requires a specific form. (Art. 1869, NCC)
XPNs:
1. When a sale of a piece of land or any interest
therein is through an agent, the authority of
the latter shall be in writing; otherwise, the
sale shall be void. (Art. 1874, NCC)
2. When required to make the contract effective
against third persons. (De Leon, Comments and
Cases on Partnership, Agency, and Trusts, 2019,
p. 381)
3. When required for the purpose of proving
existence of the contract. (De Leon, Comments
and Cases on Partnership, Agency, and Trusts,
2019, p. 381)
Kind and Classification of Agency
A. According to form (Art. 1869, NCC)
EXPRESS AGENCY – One where the agent has
been actually authorized by the principal, either
orally or in writing.
1. Oral Agreement – An oral agency is valid
unless the law requires a specific form. (Art.
1869, NCC)
2. Written Agreement:
a. Those that require a specific power of
attorney, such as those enumerated
under Art. 1878. The act performed is not
enforced against the principal, if the
power of attorney is not special.
b. When the sale of a piece of land or an
interest therein (such as easement and
usufruct) is made through an agent, the
authority of the agent must be in writing
otherwise the sale is void. (Art. 1874,
NCC)
Implied Agency – One, which is implied from:
1. Acts of the principal;
2. Silence of the principal;
3. Lack of action of the principal; or
4. Failure of the principal to repudiate the
agency knowing that another person is acting
in his behalf without authority. (Art. 1869,
NCC)
As indicated in Article 1869, the principal must
know “that the person is acting on his behalf
without authority” for an agency to be implied.
(De Leon, Comments and Cases on Partnership,
Agency and Trusts, 2010, p. 373)
Acceptance by the agent may also be express, or
implied from his acts which carry out the agency,
or from his silence or inaction according to the
circumstances. (Art. 1870, NCC)
As to Persons Who are Present
 The acceptance of agency may be implied if
the principal delivers his power of attorney
to the agent and the agent receives it
without any objection. (Art. 1870, NCC)
As to Persons Who are Absent
 GR: The acceptance of the agent cannot be
implied from his silence.
 XPNs:
1. When the principal transmits his power of
attorney to the agent, who receives it without
any objection;
2. When the principal entrusts to him by letter
or telegram a power of attorney with respect
to the business in which he is habitually
engaged as an agent, and he did not reply to
the letter or telegram (Art. 1871, NCC).
B. According to extent (Art. 1876, NCC)
General Agency – One that comprises all the
business of the principal.
Special Agency – One that comprises one or
more specific transactions (De Leon, Comments and
Cases on Partnership, Agency, and Trusts, 2010, p.
403).
C. According to authority conferred
Agency Couched In General Terms (General
Power of Attorney) - This comprises only acts
of administration. This is true even if the principal
should state:
a. That he withholds no power; or
b. That the agent may execute acts as he may
consider appropriate; or
c. Even though the agency should authorize a
general and unlimited management. (Art.
1877, NCC)
A general agency must not be confused with one
couched in general terms which is a special
agency when it involves only one or more specific
transactions (De Leon, Comments and Cases on
Partnership, Agency and Trusts, 2010, p. 403)
Effect: The authority conferred in general terms
is confined to acts of administration. They are
those that do not involve acts of dominion, such
as alienations, except where they are incidental
to the authority to administer.
283
Agency Couched in Specific Terms – A Agency is generally not presumed
special power of attorney is required for the
performance of the following specific acts: The relation between principal and agent must
exist as a fact. However, a presumption of agency
a. To make such payments as are not usually may arise in cases where an agency may arise by
considered as acts of administration; operation of law or to prevent unjust enrichment.
b. To effect novation which put an end to (De Leon, Comments and Cases on Partnership,
obligations already in existence at the time Agency and Trusts, 2010, p. 375)
the agency was constituted;
c. To compromise, to submit questions to GENERAL V. SPECIAL AGENCY
arbitration, to renounce the right to appeal
from a judgment, to waive objections to the GENERAL AGENT SPECIAL AGENT
venue of an action or to abandon a Scope of Authority
prescription already acquired; Usually authorized to Authorized to do only
d. To waive any obligation gratuitously; do all acts connected one or more specific
e. To enter into any contract by which the with the business in acts in pursuance of
ownership of an immovable is transmitted or which he is engaged particular instructions
acquired either gratuitously or for a valuable or with restrictions
consideration; necessarily implied
f. To make gifts, except customary ones for
from the act to be
charity or those made to employees in the
done
business managed by the agent;
g. To loan or borrow money, unless the latter Continuity
act be urgent and indispensable for the Conducts a series of Usually involves a
preservation of the things which are under transactions involving single transaction or a
administration; a continuity of service series of transactions
h. To lease any real property to another person not involving
for more than one year; continuity of service
i. To bind the principal to render some service
without compensation; Extent to which agent may bind
j. To bind the principal in a contract of principal
partnership;
Binds his principal by Cannot bind his
k. To obligate the principal as a guarantor or
an act within the principal in a manner
surety;
scope of his authority beyond or outside the
l. To create or convey real rights over
immovable property; although it may be specific acts which he
m. To accept or repudiate an inheritance; contrary to his special is authorized to
n. To ratify or recognize obligations contracted instructions perform
before the agency; and Termination of authority
o. Any other act of strict dominion. (Art. 1878, Apparent authority Termination effective
NCC) does not terminate by as to third party
mere revocation of unless agency was for
Powers not included: authority without purpose of
notice to third parties contracting with that
1. Special power to sell excludes the power to third party
mortgage; and a special power to mortgage
Construction of instructions of principal
does not include the power to sell. (Art. 1879,
Statement of principal Authority of the agent
NCC)
2. Special power to compromise does not with respect to the must be strictly
authorize submission to arbitration (Art. agent’s authority construed
1880, NCC) would ordinarily be
regarded as advisory
only

284
D. Other Kinds of Agency AGENCY BY
IMPLIED AGENCY
ESTOPPEL
1. Doctrine of Agency by Necessity Between the principal and the agent
In an implied agency, In an agency by
By virtue of the existence of an emergency, the the agent is a true estoppel (caused for
authority of an agent is correspondingly enlarged
agent, with rights and instance by estoppel
in order to cope with the exigencies or the
duties of an agent. on the part of the
necessities of the moment. The five conditions
agent), the “agent” is
laid down for authority of agency by necessity
are: not a true agent;
hence he has no
1. The real existence of an emergency; rights as such.
2. Inability of the agent to communicate with As to third persons
the principal; In an implied agency, If the estoppel is
3. Exercise of the additional authority for the the principal is always caused by the
principal’s own protection; liable. principal, he is liable,
4. The adoption of fairly reasonable means, but only if the third
premises duly considered;
person acted on the
5. The ceasing of the authority the moment the
misrepresentation.
emergency no longer demands the same.
(Paras, Civil Code of the Philippines Annotated, In an implied agency, If the estoppel is
2008, p. 785) the agent is never caused by the agent,
personally liable. it is only the agent
2. Agency By Estoppel who is liable, never
the alleged principal.
There is agency by estoppel where a person, by
words or conduct, represents or permits it to be 3. Agency by Operation of Law
represented that another person is his agent. In
such a case, he is stopped to deny the agency as The heirs’ duty to continue the agency after the
against third persons who have dealt, on the faith death of the agent arises from what may be
of such representation, with the person so held termed as an agency by operation of law or a
out as agent, even if no agency existed in fact. presumed or tacit agency. (11 Manresa 588;
Arts. 1884, par. 2, 1885, 1929, and 1931) Of
Elements: course, the heirs can continue the agency only
temporarily for, as we have seen, the essence of
For an agency by estoppel to exist, the following the contract is personal confidence. The principal
must be established: has a right to an agent of his choice. There is
nothing to suggest that he would or should
(1) the principal manifested a representation of expect the authority to pass to the agent’s heirs
the agent’s authority or knowingly allowed or personal representatives. (De Leon, 2010, supra,
the agent to assume such authority; p.618)
(2) the third person, in good faith, relied upon
such representation; B. OBLIGATIONS OF THE AGENT
(3) relying upon such representation, such third
person has changed his position to his To bind principal (Arts. 1897-1902)
detriment.
Requisites in order to bind principal by
An agency by estoppel, which is similar to the agent’s acts:
doctrine of apparent authority, requires proof of
reliance upon the representations, and that, in a) Agent must act within the scope of his
turn, needs proof that the representations authority (Art. 1881, NCC); and
predated the action taken in reliance. (Lintonjua b) Agent must act in the name of the principal.
vs. Eternit Corporation, G.R. No. 144805, June 8, 2006)

285
Effect of Acting Beyond Scope of Authority:
GR: Principal is not bound. A contract entered
into by an agent who has acted beyond his
powers is unenforceable, unless it is ratified by
the principal (Art. 1317 and 1403[1], NCC).
XPNs:
Principal is liable in the following situations even
if the agent acted beyond the scope of his
authority –
1. When the principal ratifies the agent’s act,
either expressly or impliedly (Art. 1910,
NCC).
2. Principal is solidarily liable if he allowed the
agent to act as though the latter had full
powers (Art. 1911, NCC).
3. If the limitations to the agent’s authority is
known only between the agent and principal
and not to third persons (Art. 1900, NCC).
4. Where the principal placed in the hands of
the agent instruments signed by him in blank.
Effect of agent acting in his own name:
1. Principal has no right of action against the
third person with whom the agent has
contracted (Art. 1883, NCC).
2. Third person has no right of action against
the principal (Id).
3. Agent is the one directly bound in favor of
contracted as if the transaction were his own,
except when the contract involves things
belonging to the principal (Art. 1883[2],
NCC).
Acts, which may be delegated to an agent
(subject matter of agency):
GR: What he may do in person, he may do
through another (Qui facit per alium facit per se).
XPNs:
1. Peculiarly personal acts; and
2. Illegal acts
Delegation of Authority (Sub-Agent):
When permissible: Agent may appoint a
substitute if the principal has not prohibited him
from doing so (Art. 1892, NCC).
286
Effect as between principal and third
person:
If substitution is not prohibited: The acts of the
substitute will produce the same effect between
the principal and third persons as if they were
those of the agent himself.
If substitution is prohibited: All acts of the
substitute appointed against the prohibition of
the principal shall be void (Art. 1892, last par.,
NCC).
Effects as between principal and agent:
If agent is not empowered to appoint a substitute
but not prohibited: Agent shall be responsible for
the acts of the substitute (Art. 1892[1], NCC).
If agent is empowered:
a) But principal did not designate a particular
person: Agent is responsible for the acts of
the substitute if the substitute was
notoriously incompetent or insolvent (Art.
1892, NCC).
b) But principal designated a particular person:
Substitution is the act of the principal himself
rather than of the agent. Consequently, the
agent is totally and absolutely exempt from
responsibility for the acts of the sub-agent.
c) If agent is prohibited from appointing
substitute: The agent acts beyond the scope
of his authority and shall be held liable for
whatever damage that may result.
Effect as between principal and substitute:
Both substitute and agent are directly and
personally liable to the principal for the acts of
substitute if
a) Agent appoints a substitute although not
empowered to do so; or
b) Even if empowered, agent selects a
substitute who is notoriously incompetent or
insolvent. (Art. 1893, NCC)
Duties and Liabilities of Agent to Principal
a. If Agency was declined – In case a person
declines an agency:
a) Such person is bound to observe the
diligence of a good father of a family in
 the custody and preservation of the
goods forwarded to him by the owner
until the latter should appoint an agent
or take charge of the goods (Art. 1885,
NCC).
b) The owner, as soon as practicable, must
either appoint an agent or take charge of
the goods (Art. 1885, NCC).
b. If Agency Was Accepted
1. Obligation to act within the scope of
authority
The agent must act within the scope of his
authority. He may do such acts as may be
conducive to the accomplishment of the purpose
of the agency (Art. 1881, NCC).
Other acts performed by an agent which are
deemed to be within the scope of his authority:
a. Acts performed in a manner more
advantageous to the principal than that
specified by him (Art. 1882, NCC).
b. So far as third persons are concerned, if such
performed act is within the terms of the
power of attorney, as written, even if the
agent has in fact exceeded the limits of his
authority according to an understanding
between the principal and the agent (Art.
1900, NCC).
2. Obligation to carry out agency
What constitutes “carrying out” – It means
to perform whatever acts may be necessary to
bring the business to conclusion.
The agent, even if he should withdraw from the
agency for a valid reason, must continue to act
until the principal has had reasonable opportunity
to take the necessary steps to meet the situation
(Art. 1929, NCC).
Effect of principal’s death
Though death of the principal extinguishes the
agency (Art. 1919[3], NCC) agent is obligated to
finish the business already begun on the death of
the principal, should delay entail any danger (Art.
1884[2], NCC).
Liability for damages in case of non-
performance
Agent is liable for damages which, through his
non-performance, the principal may suffer (Art.
1884[1], NCC). But if, after non-performance, the
principal confers a second mandate for the same
purpose, this will bar an action for damages as it
constitutes a tacit assent to the conduct of the
agent under the first agency.
Cases when an agent is not bound to carry
out the agency – If its execution would
manifestly result in loss or damage to the
principal (Art. 1888, NCC).
3. Obligation to advance necessary funds
GR: Agent is not bound to advance the necessary
funds to carry out the agency.
XPN: Unless there is stipulation to that effect.
XPN to XPN: Even if there is a stipulation that
the agent should advance the necessary funds,
he is not obliged to do so if the principal is
insolvent (Art. 1886, NCC).
4. Obligation to obey instructions
In the execution of the agency, the agent shall
act in accordance with the instructions of the
principal (Art. 1887, NCC).
In default of instructions: Agent shall do all
that a good father of a family would do, as
required by the nature of the business (Art. 1887,
NCC).
5. Obligation to observe good faith and
loyalty
An agent is a fiduciary with respect to the matters
within the scope of his agency.
If, there is a conflict between his interests and
those of the principal, he should prefer his own;
he shall be liable for damages (Art. 1889, NCC).
If the agent has been empowered to borrow
money, he may himself be the lender at the
current rate of interest (Art. 1890, NCC).
287
If he has been authorized to lend money at
interest, he cannot borrow it without the consent
of the principal (Art. 1890, NCC).
Prohibition against buying property of
principal: An agent cannot, without his
principal’s consent purchase, whether directly or
indirectly, and even at public or judicial sale,
property, which he is authorized to sell or
administer (Art. 1491, NCC).
6. Duty to render account
Every agent is bound:
a) To render an account of his transactions; and
b) To deliver to the principal whatever he may
have received by virtue of the agency, even
though it may not be owing to the principal
(Art. 1891, NCC).
7. Obligation to pay interest
a) On sums he has applied to his own use
from the day on which he did so; and
b) On those which he still owes after the
extinguishment of the agency (Art. 1896,
NCC).
8. Obligation to observe diligence
Diligence required is bonus pater familias. The
agent is responsible not only for fraud, but also
for negligence (Art. 1909, NCC).
The negligence of the agent shall be judged with
more or less rigor by the courts, according to
whether the agency was or was not for
compensation (Art. 1909, NCC).
Commission Agent
It is one engaged in the purchase and sale for a
principal of personal property, which for this
purpose, has to:
1. Care and custody of goods:
The commission agent shall be responsible for
the goods received by him in the terms and
conditions and as described in the consignment,
unless upon receiving them he should make a
written statement of the damage and
288
deterioration suffered by the same (Art. 1903,
NCC).
If the commission agent handles goods of the
same kind and mark belonging to different
owners, he has the obligation to distinguish them
by countermarks, and to designate the
merchandise respectively belonging to each
principal (Art. 1904, NCC).
2. Care of cash
He is not the insurer of the safety of the money.
But he must observe diligence of a good father of
a family.
3. Sell on credit:
Duty not to sell on credit: A commission agent
cannot, without the express or implied consent of
the principal, sell on credit (Art. 1905, NCC).
Effect of sale on credit:
If not authorized: The principal may demand from
him payment in cash, but the commission agent
shall be entitled to any interest or benefit, which
may result from such sale (Art. 1905, NCC).
If authorized: Should the commission agent, with
authority of the principal, sell on credit, he shall
so inform the principal, with a statement of the
names of the buyers. Should he fail to do so, the
sale shall be deemed to have been made for cash
insofar as the principal is concerned (Art. 1906,
NCC).
4. Collect credits:
Effect of failure to collect credits when due and
demandable:
a) Commission agent becomes liable to principal
for damages.
b) Unless: he proves that he exercises due
diligence for that purpose (Art. 1908, NCC).
Del Credre Agent - A commission agent who
receives on sale a guaranty commission, in
addition to the ordinary commission. The
guaranty commission is given in return for the
risk of collecting the credit.
Effects:
a) He guarantees the risk of collection and he
shall pay the principal the proceeds of the
sale on the same terms agreed upon with the
purchaser, if the latter is not able to pay (Art.
1907, NCC).
b) Either the principal or the del credere agent
may sue the purchaser and the suit of one
will bar the subsequent suit of the other.
“Doctrine of Procuring Cause” – If the agent
is the procuring cause of the sale – that the
measures employed by him and the efforts he
exerted resulted in the sale – he is entitled to the
payment of the commission (Ramos vs. CA, G.R. No.
25463, April 4, 1975).
In case of two or more Agents (Joint
Agents): The responsibility of two or more
agents, even though they have been appointed
simultaneously is merely joint and not solidary,
unless solidarity has been expressly stipulated
(Art. 1894, NCC).
IRREVOCABLE AGENCY
The agency is not revocable at will if —
1. If a bilateral contract depends upon it.
2. If the agency is a means of fulfilling an
obligation already contracted
3. If a partner is appointed manager of
partnership in the contract of partnership and
his removal from the management is
unjustifiable (Art. 1927, NCC).
C. OBLIGATIONS OF THE PRINCIPAL
1. Obligation to pay compensation
GR: Agency is presumed to be for compensation
(Art. 1875, NCC).
XPN: Unless there is proof to the contrary (Art.
1875, NCC).
2. Obligation to advance funds
Principal is obliged to advance funds necessary
for the execution of the agency upon the request
of the agent (Art. 1912, NCC).
When an agent is obliged to advance funds
If there is a stipulation to that effect. But,
notwithstanding such stipulation, he cannot be
obliged to do so if the principal is insolvent (Art.
1886, NCC).
Right of agent who made such advances
a) He is entitled to be reimbursed, even if the
business or undertaking was not successful,
provided the agent was free from all fault
(Art. 1912[2], NCC).
b) Such reimbursement shall include interest
on the sums advanced, from the day on
which the advance was made (Art. 1912[3]
NCC).
Instances where principal is not liable for
expenses incurred by agent:
a) If the agent acted in contravention of
principal’s instructions, unless the latter
should wish to avail himself of the benefits
derived from the contract.
b) When expenses were due to the fault of the
agent.
c) When agent incurred them with knowledge
that an unfavorable result would ensue, if the
principal was not aware thereof.
d) When it was stipulated that the expenses
would be borne by the agent, or that the
latter would be allowed only a certain sum
(Art. 1918, NCC).
3. Obligation to indemnify agent for
damages
Requisites:
a) Agent suffers damage as a result of the
execution of agency; and
b) The agent is free from fault or negligence
(Art. 1913, NCC).
Agent’s Lien
1. Agent may retain in pledge the things which
are the object of the agency until the
principal effects the reimbursement and pays
the advances made by the agent; and
2. The damages suffered by the agent in
executing the agency (Art. 1914, The
289
 enforcement of the lien is the same as that
required in foreclosing a pledge.
If there be several principals (joint
principals): If there are several principals who
have appointed the agent for a common
transaction or undertaking, they shall be solidarily
liable to the agent for all the consequences of the
agency (Art. 1915, NCC).
Rights and liabilities between principal and
third person
For contracts contracted by agent as such
(in behalf of principal) and contract is
within scope of agent’s authority:
1. The cause of action of third person is against
the principal, unless the agent expressly
binds himself.
2. Agent is not personally liable to third person
with whom he contracts, unless he expressly
binds himself (Art. 1897, NCC)..
3. Principal is bound. He must comply with the
obligations which the agent may have
contracted (Art. 1910, NCC)
When agent deemed to have acted within
scope of his authority as to third persons
1. If authority is in writing-
a. Act is deemed to have been performed within
the scope of the agent’s authority if the same
is within the terms of the power of attorney
as written, even if the agent has in fact
exceeded the limits of his authority according
to an understanding between the principal
and the agent (Art. 1900, NCC).
b. Private or secret orders and instructions of
the principal do not prejudice third persons
who have relied upon the written power of
attorney or instructions shown them (Art.
1902, NCC).
c. For this purpose, a third person with whom
the agent wishes to contract on behalf of the
principal may require the presentation of the
power of attorney or the instructions as
regards the agency (Art. 1902, NCC).
2. If authority is not in writing – rule is that
every person dealing with an assumed agent
is put upon inquiry and must discover upon
his peril, if he would hold the principal liable,
290
not only upon the fact of the agency but the
nature and extent of the authority of the
agent.
3. And contract is beyond the scope of
agent’s authority:
a. Principal is not bound except when he ratifies
it expressly or tacitly (Art. 1910[2], NCC). The
contract is unenforceable (Art. 1317 and
1403[1], NCC).
b. XPNs: Principal is bound notwithstanding the
fact that agent exceeded his authority—
▪ If the limits of the agent’s authority is
known only to the principal and agent
and the party with whom the agent
contacted is not aware of the limits of the
powers granted by the principal (Art.
1898 and 1900, NCC).
▪ If the principal allowed the agent to act
as though the latter had full powers, in
which case, the principal is solidarily
liable with the agent (Art. 1911, NCC).
Agent is personally liable to the person he
contracted with if—
1) He exceeds his authority, without giving such
party sufficient notice of his powers (Art.
1897, NCC).
2) He exceeds his authority and he undertook to
secure the principal’s ratification (Art. 1898,
NCC).
For Contracts Executed by Agent in His
Own Name:
1. Principal has no right of action against the
person with whom the agent has contracted,
except when the contract involves things
belonging to principal (Art. 1883, NCC).
2. Such third person likewise has no cause of
action against the principal, except when the
contract involves things belonging to
principal (Art. 1883, NCC).
3. Agent is the one directly bound to the person
whom he contracted with, except when the
contract involves things belonging to
principal (Art. 1883, NCC).
4. The XPN does not apply when the agent
acted beyond the scope of his authority.
5. If the principal ratifies the contract and has
signified his willingness to ratify the agents
acts, the same becomes enforceable between
the parties and the third person with whom
the agent contracted with cannot set up the
fact the agent exceed his powers (Art. 1901,
NCC).
Double sale by principal and agent
Situation: Two persons contract with regard to
the same thing, one of them with the agent and
the other with the principal, and the two contracts
are incompatible with each other.
Whose contract is preferred: That of prior
date shall be preferred, without prejudice to the
provisions of Article 1544 on double sale (Art.
1916, NCC).
Who is liable to the person whose contract
is rejected:
1. If the principal has agent acted in good faith,
the principal is liable. The agent is not liable
2. If the agent has acted in bad faith, only the
agent is liable for damages. The principal is
not liable (Art. 1917, NCC).
When is Principal Liable for Delict/Quasi-
delict Committed by Agent:
1. Person sought to be held must stand in
relation of principal to the one committing the
act; and
2. Act of the agent must have been done within
the scope of his authority ( De Leon, Comments
and Cases on Partnership, Agency, and Trusts,
2010, p. 518).
D. MODES OF EXTINGUISHMENT
1. Revocation by principal;
2. Withdrawal of the agent;
3. Death, civil interdiction, insanity or insolvency
of the principal or of the agent;
4. Dissolution of the firm or corporation which
entrusted or accepted the agency;
5. Accomplishment of the object or purpose of
the agency;
6. Expiration of the period for which the agency
was constituted (Art. 1919, NCC).
Note: The list is not exclusive.
1. Revocation of agency by principal
Revocable at will: The principal may revoke the
agency at will, and compel the agent to return the
document evidencing the agency (Art. 1920,
NCC). When two or more principals have granted
a power of attorney for a common transaction,
any one of them may revoke the same without
the consent of the others (Art. 1925, NCC).
Manner of revocation: Either express or
implied (Art. 1920, NCC). There is implied
revocation in the following—
1. When a new agent is appointed for the same
business or transaction (Art. 1923, NCC).
2. When the principal directly manages the
business entrusted to the agent, dealing
directly with third persons (Art. 1924, NCC).
3. When a special power of attorney is granted
to another, it revokes the general power of
attorney as regards the special matter
involved in the general power (Art. 1926,
NCC).
Necessity and sufficiency of notice of
revocation:
Between principal and third person –
If agent had general powers:
Notice of revocation in a newspaper of general
circulation is a sufficient warning to third persons
(Art. 1922, NCC).
Without such notice, revocation does not
prejudice third persons who acted in good faith
and without knowledge of the revocation (Art.
1922, NCC).
If Agency is for contracting with specified
persons:
The specified persons who contracted with the
agent shall not be prejudiced if notice of
revocation is not given. (Art. 1922, NCC).
Between principal and agent – Agent must be
notified.
291
2. Withdrawal by Agent
Manner: By giving due notice to the principal
(Art. 1928, NCC).
Liabilities of agent incident to withdrawal:
▪ If the principal suffers damage by reason of
withdrawal, agent is liable for damages
unless he based his withdrawal upon the
impossibility of continuing the performance
of the agency without grave detriment to
himself (Art. 1928, NCC).
▪ If the withdrawal is for valid reason, agent
must continue to act until principal has had
reasonable opportunity to take necessary
steps to meet the situation (Art. 1929, NCC).
3. Death of Principal
GR: Death of principal results in the
extinguishment of agency (Art. 1919[3], NCC).
XPNs:
1. It agency has been constituted in the
common interest of both principal and agent.
2. If agency has been constituted in the interest
of a third person who has accepted the
stipulation in his favor (Art. 1930, NCC).
Obligation of agent upon extinguishment of
agency by reason of death of principal: He
must finish the business already begun on the
death of the principal, should delay entail any
danger (Art. 1884[2], NCC).
Acts done by agent prior to notice of death
of principal or of any other cause which
extinguished agency: Considered valid and
fully effective with respect to third persons who
may have contracted with the agent in good faith
(Art. 1931, NCC).
4. Civil Interdiction, insanity, and
insolvency
Person with these qualities cannot give valid
consent to a contract (Arts. 1327 and 1329, NCC).
Civil interdiction shall deprive the offender during
the time of his sentence of the rights of parental
authority, or guardianship, either as to the person
or property of any ward, of marital authority, of
the right to manage his property and of the right
292
to dispose of such property by any act or any
conveyance inter vivos. (Art. 34, RPC)
5. Dissolution of a Firm or Corporation
Dissolution of a firm or corporation which
entrusted (as principal) or accepted (as agent)
the agency, extinguishes its juridical existence as
far as the right to go on doing ordinary business
is concerned, except for the purpose of winding
up its affairs.
6. Accomplishment of object or purpose
Termination of agency ipso facto
At least as between the parties, principal and
agent, the fulfillment of the purpose for which the
agency is created ipso facto terminates the
agency, even though expressed to be irrevocable.
Continued existence of authority illogical
When the object or purpose of the agency is
accomplished and nothing else remains to be
done, there would be no sense in continuing the
relationship beyond that point.
7. Expiration of term
Term specified
Where an agency, by the terms of the original
agreement, is created for a fixed period or is to
end at a certain time, the expiration of such
period or the arrival of that time, obviously results
in the termination of the relationship, even
though the purpose for which the agency was
created has not been accomplished. (De Leon,
Comments and Cases on Partnership, Agency and
Trusts, 2010, p. 578-579)
Term not specified
If no time is specified, it terminates at the end of
a reasonable period of time. (Ibid, p. 579)
Period implied
The period may be implied from the terms of the
agreement, the purpose of the agency, and the
circumstances of the parties. (Ibid)
IX. CREDIT TRANSACTIONS Two Kinds of Loan

A. LOAN 1. Contract of Commodatum – this is a

A contract wherein 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, or money or other consumable
thing, upon the condition that the same amount
of the same kind and quality shall be paid. (Art.
1933, NCC)
Parties:
contract of loan by one to another of non-
consumable property to be temporarily used by
the latter and returned in specie. (Art. 1933, NCC)
2. Contract of Mutuum – this is a contract of
loan by one of money or other consumable things
to another for consumption, this other becoming
the owner of the things subject to an obligation
to repay the same amount of the same quality as
he had received. (Art. 1933, NCC)

1. Lender/bailor - person who delivers money

COMMODATUM MUTUUM
or goods, consumable or non-consumable, to
another As to the type
2. Borrower/bailee - receives something not
consumable so that he may use the same for Loan of use (Art. 1935, Loan of
a certain time with the obligation to return NCC) consumption
the same, or something consumable (or
money) so that he may consume it with the As to purpose
obligation to pay the same amount of the
same kind and quality. The purpose is the use The purpose is for
of the thing loaned. the borrower to
Characteristics consume what was
NOTE: Use of the borrowed.
1. Real Contract – delivery of the thing loaned fruits is not included,
is necessary for the perfection of the unless expressly
contract. provided for in the
contract. (Arts. 1935
An accepted promise to make a future loan and 1940, NCC)
is a consensual contract, and therefore
binding upon the parties but it is only after As to object
delivery, will the real contract of loan arise.
(Art. 1934, NCC) Movable and Movable
Immovable (Art. 1937,
The mere issuance of the checks did not NCC) The object is money
result in the perfection of the contract of or other fungible
loan. For the Civil Code provides that the GR: The object of the things.
delivery of bills of exchange and mercantile contract non-fungible
documents such as checks shall produce the or non-consumable.
effect of payment only when they have been
cashed. It is only after the checks have XPN: The object may
produced the effect of payment that the be consumable,
contract of loan may be deemed perfected. provided that the
(Naguiat vs. Court of Appeals, G.R. No. purpose is not for
118375, October 3, 2003) consumption but for
exhibition. (Art. 1936,
2. Unilateral Contract - once the subject NCC)
matter has been delivered, it creates
obligations on the part of only one of the As to consideration
parties (i.e., borrower). (De Leon, Comments
and Cases on Credit Transactions, 2010, p. 6) Essentially gratuitous May be gratuitous or

293
 onerous. the thing, the lender must wait for the
NOTE: If onerous or must wait for the expiration of the
compensation is paid, (Example: if interest expiration of the period agreed upon
then the contract may is payable) period agreed upon or for the payment of
be Lease. (Art. 1935, the accomplishment of the loan.
NCC) the use for which the
commodatum has
As to ownership of the thing been constituted. (Art.
1946, NCC)
Bailor/Lender retains Bailee/borrower
ownership of the thing becomes the owner XPNs:
delivered. (Art. 1933, of the thing
NCC) delivered. (1) In case of Urgent
Need;
The bailor/lender need The lender must be (2) In Precarium;
not be the owner of the owner or at least (3) In case of acts of
the thing loaned. (Art. capable of ingratitude by the
1938, NCC) transferring bailee.
ownership.
(Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 515;
Paras, Comments and Cases on Credit Transactions)
As to duty of borrower

There is an obligation The bailee or the Both contracts shall not be perfected until the
to return the very borrower becomes delivery of the object of the contract. (Art. 1934,
same thing loaned. the owner; hence, NCC)
there is no
obligation to return A thing is consumable when it cannot be used in
the very same thing a manner appropriate to its nature without being
loaned, but only to consumed. (NCC, Art. 418)
pay its equivalent in
kind, quality and On the other hand, a non-consumable thing is a
quantity movable thing which can be used in a manner
appropriate to its nature without it being
As to the effect of the death of the consumed. (Ibid.)
lender
1. COMMODATUM
Death of the lender or Death of the lender
the borrower does not extinguish Commodatum – an essentially gratuitous
extinguishes the loan. It is not contract where the bailor (lender) delivers to the
commodatum because purely personal. bailee (borrower) a non-consumable thing so that
it is purely personal in the latter may use the same for a certain time
character. (Art. and return after using it, without compensation.
1939[1], NCC) (Art. 1933, NCC)

As to who bears the loss
Generally, the bailor The bailee-borrower
bears the loss of the bears the loss of the
thing due to fortuitous thing delivered. Res
event. Perit Domino.
An essential feature of the commodatum that the
use of the thing belonging to another shall for a
certain period. (Mina vs. Pascual, G.R. No. L-8321,
October 14, 1913)
Parties to a commodatum

As to when it is extinguished 1. Bailor/Comodatario/Commodans – The

giver/ lender; the party who delivers the
GR: For the return of The lender-bailor possession or custody of the thing bailed; and

294
2. Bailee/Comodante/Commodatarius – may make use of the thing loaned
The recipient/ borrower; the party who
receives the possession or custody of the thing
thus delivered.
Kinds of a contract of commodatum
1. Ordinary Commodatum – use by the
borrower of the thing is for a certain period
of time.
2. Precarium - one whereby the bailor may
demand the thing loaned at will. (Art. 1947,
NCC)
Object of a contract of commodatum:
GR: Non-consumable, so that the bailee may use
the same for a certain time and return it. (Art.
1933, NCC)
XPN: Consumable goods may be the subject of
commodatum if the purpose of the contract is not
the consumption of the object, as when it is
merely for exhibition. (Article 1936, NCC)
If consumable goods are loaned only for ad
ostentationem or 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. The rule is that the intention of the
parties thereto shall be accorded primordial
consideration in determining the actual character
of a contract. (Producers Bank of the Philippines vs.
Court of Appeals, G.R. No. 115324, February 19, 2003)
Commodatum is purely personal in
character.
(a) As to the death of a party
GR: The death of either the bailor or the bailee
extinguishes the contract.
XPN: By stipulation, the contract is transmitted
to the heirs of either or both parties.
(b) As to the lease of the object
GR: The bailee can neither lend nor lease the
object of the contract to a third person.
XPN: The members of the bailee's household
XPN to the XPN: There is a stipulation to the
contrary, or unless the nature of the thing forbids
such use. (Art. 1939, NCC)
(c) As to the bailee’s right to fruits
GR: The bailee in commodatum acquires only the
use of the thing loaned but not its fruits. (Art.
1935, NCC)
XPN: A stipulation that the bailee may make use
of the fruits of the thing loaned is valid. (Art.
1940, NCC)
(d) As to bailee’s right of retention
GR: The bailee has no right to retain the thing
loaned as security for claims he has against the
bailor even for extraordinary expenses. (Art.
1944, NCC)
XPN: The bailor shall be liable for the damages
suffered by the bailee by reason of flaws of the
thing loaned, which were known to the bailor but
not disclosed to the bailee. The bailor cannot
exempt himself from liability by abandoning the
thing. (Arts. 1951-1952, NCC)
No Transfer of Ownership
The bailor retains the ownership of the thing
loaned. Hence, the bailor in commodatum need
not be the owner of the thing loaned. (Art. 1938,
NCC)
The real right that is transferred is merely
possession and not ownership; hence, all that is
necessary for the bailor is to have: (1) the right
to possess and use the thing; and (2) the right to
transfer such right to use and possess.
Hence, a usufructuary or a lessee in a contract of
lease can be a bailor in commodatum with
respect to the object of usufruct or lease. The
usufructuary or a lessee can allow another to use
the thing temporarily. However, this right is
subject to the restrictions imposed under the
contract between the owner, on one hand, and
the lessee or usufructuary, on the other hand.
While it is not required that the bailor has the
right to dispose of the thing itself in an absolute
295
 manner, the bailor must have the right to convey
the use of the thing. Hence, the bailor cannot
constitute a commodatum if (the use of the thing
is personal to him only or if his right is subject) to
a contractual prohibition to convey any right.
(Aquino, Essentials of Credit Transactions and
Insolvency Law (2021), p. 24-26)
Obligations of the Bailee (Borrower)
Principal Obligations
1. Take care of the thing with diligence of a good
father of a family. (Arts. 1163, 1169, 1170 and
1173, NCC)
If a person is obliged to return a determinate
thing, he must exercise the diligence of a
good father of a family in taking care of the
thing. The bailee is liable for breach of this
duty; hence, the bailee is liable for any loss
due to his negligence.
2. Use the thing loaned only for the purpose for
which it was loaned and not for any other
purpose. (Art. 1935, 1939(2), 1942[1], NCC)
3. Return the thing upon expiration of terms or
upon accomplishment of purpose. (Art. 1933,
NCC)
Other obligations
1. To pay for the ordinary expenses for the use
and preservation of the thing loaned. (Art.
1941, NCC)
2. To be liable for the loss of the thing, even if
it should be through a fortuitous event, in the
following cases:
a. When the bailee devoted the thing for
any purpose different from that for which
it has been loaned (Art. 1942[1], NCC);
Reason: Bailee acts in bad faith
b. When he keeps it longer than the period
stipulated, or after the accomplishment
of its use (Art. 1942[2], NCC);
Reason: Delay (Art. 1165, 1169, and
1170, NCC)
c. When the thing loaned has been
delivered with appraisal of its value,
296
unless there is a stipulation exempting
the bailee from responsibility in case of
fortuitous event (Art. 1942[3], NCC);
Reason: The law presumes that the
parties intended that the borrower shall
be liable for the loss of the thing even if
due to a fortuitous event for otherwise
they would not have appraised the thing
(Republic vs. Bagtas, GR. No. L-17474
October 25, 1962)
d. When he lends or leases it to third
persons who are not members of his
household (Art. 1942[4], NCC);
Reason: Commodatum is purely
personal (Art. 1939, NCC)
e. When, being able to save either of the
thing borrowed or his own things, he
chose to save the latter (Art. 1942[5],
NCC).
Reason: Bailee’s ingratitude
3. Liability for the deterioration due to the use
of the thing:
GR: Bailee is not liable for the deterioration
of the thing loaned due only to the use
thereof and without his fault (Art. 1943,
NCC). This refers only to the normal use of
the thing loaned.
XPNs:
a. If expressly stipulated;
b. If guilty of fault or negligence (Art. 1170,
NCC);
c. If he devoted the thing to any purpose
different from that for which it has been
loaned (Art.1942[1], NCC); or
d. If he uses the thing beyond the period
stipulated (Art. 1942[2], NCC).
4. Unless there’s stipulation to the contrary, to
be equally liable with the bailor for the
extraordinary expenses arising from the
actual use of the thing by the bailee, even
though the latter acted without fault, (Art.
1949 [2], NCC).
5. If in making use of the thing, the bailee
incurred expenses other than ordinary and
extraordinary expenses, he shoulders such
liability and is NOT entitled to reimbursement.
(Art. 1950, NCC)
Obligations of the Bailor
1. To respect the duration of the loan because
the bailor is bound by the terms of the
contract of commodatum which is for a
certain time. (Art. 1946, NCC)
GR: Allow the bailee the use of the thing loaned
for the duration of the period stipulated or until
the accomplishment of the purpose for which the
commodatum has been constituted. (Art. 1946,
NCC)
XPNs:
(a) In case of urgent need in which case the
bailor may demand its return or temporary
use, in which the contract of commodatum
shall be suspended while the thing is in the
possession of the bailor. (Art. 1946, NCC)
Reason: Commodatum is essentially
gratuitous.
(b) When the contractual relation is a precarium,
or one whereby the bailor may demand the
thing loaned at will.
It exists in the following cases:
a. The duration of the contract is not
stipulated; or
b. The purpose of the contract is not
stipulated; or
c. The use of the thing is merely tolerated
by the owner (Art. 1947, NCC).
(c) The bailor may demand immediate return of
the thing if the bailee commits any act of
ingratitude as specified in Art. 765 (Art. 1948,
NCC):
a. If the bailee should commit some
offenses against the person, honor or
property of the bailor, or of his wife,
children under his parental authority;
b. If the bailee imputes to the bailor any
criminal offense, or any act involving
moral turpitude, even though he should
prove it, unless the crime or the act has
been committed against the bailee
himself, his wife or children under his
authority;
c. If the bailee unduly refuses the bailor
support when the bailee is legally or
morally bound to give support; and
d. If the loan is for illegal or immoral use.
Reason: The contract is void
(Art.1409[1] and [7], NCC). (Tolentino,
Civil Code of the Philippines Vol. 5, 1992 ed.,
p.448)
2. To refund to the bailee the extraordinary
expenses for the preservation of the thing
loaned.
GR: The bailee shall bring the same to the
knowledge of the bailor before incurring
them
XPN: When the expenses are so urgent that
the reply to the notification cannot be
awaited without danger. (Art. 1949 [1], NCC)
3. Unless there’s stipulation to the contrary, to
be equally liable with the bailee for
extraordinary expenses, even without his
own fault, arising from the actual use of the
thing by such bailee. (Art. 1949 [2], NCC).
4. To be liable to the bailee for damages for
hidden flaws known to him which he did not
disclose to the bailee. (Art. 1951, NCC).
Requisites (FHANS):
a. Existence of flaw or defect in the thing
loaned;
b. The flaw or defect is hidden;
c. The bailor is aware thereof;
d. The bailee is not aware thereof; and
e. The bailee suffers damages by reason of
said flaw or defect.
If the above requisites concur, the bailee has
the right of retention for damages. (Art. 1944
NCC)
Multiple bailees in commodatum
In a contract of deposit, when there are two or
more bailees to whom a thing is loaned in the
same contract, such relationship will be deemed
solidary (Art. 1945, NCC).
This is an XPN by express provision of law to the
GR that the concurrence of 2 or more parties in
the same obligation gives rise only to a joint
obligation (Arts. 1207, 1208, NCC)
Their liability is solidary in order to protect the
bailor’s rights over the thing loaned. The law
presumes that the bailor takes into account the
personal integrity and responsibility of all the
bailees, therefore, he could not have constituted
297
commodatum if there was only one bailee.(De
Leon, Comments and Cases on Credit Transactions, 1. Expiration of the term agreed upon;
2010, p. 21) 2. Accomplishment of the stipulated
purpose or use of the thing;
Expenses in a contract of commodatum 3. Return of the thing with the consent of
the bailor;
ORDINARY EXTRAORDINARY 4. Return of the thing in case the
agreement is precarium (Art. 1947,
NCC),
For the use For the use For the 5. Return of the thing for acts of ingratitude
and/or of the thing preservation of (Art. 1948, NCC); and
preservation the thing 6. Death of a party. (Arts. 133 and 1178,
of the thing NCC)

Regular Non-routine/regular expenses, 2. Mutuum or Simple Loan

expense including those that cannot be
foreseen at the institution of Mutuum – A contract whereby the lender
the contract delivers to another, either gratuitously or with a
stipulation to pay interest, money or other
Borne by the GR: Borne Borne by the consumable thing with the understanding that
bailee (Art. equally by bailor the same amount of the same kind and quality
1941, NCC) the bailor shall be paid. The ownership of the thing loaned
and the GR: The bailee in this type of contract passes on to the borrower.
bailee shall bring the (Art. 1933, NCC)
same to the
XPN: In knowledge of Nature of a contract of mutuum
case there the bailor
is before incurring 1. The purpose of the contract is consumption;
stipulation them 2. The subject-matter is either money or
to the consumable property;
contrary. XPN: When the 3. Ownership passes to the borrower;
Art. 1949 expenses are so 4. It is a real contract;
[1], NCC) urgent that the 5. It may be gratuitous or with stipulation to pay
reply to the interest; and
notification 6. It is a unilateral contract. (Rabuya, Pre-bar
cannot be Reviewer in Civil Law, 2021, p. 516-517)
awaited without
danger (Art. Object of a contract of loan
1949 [1], NCC).
Fungible things
Abandonment
The contract of mutuum requires the receipt of
money or other fungible things. Fungible things
The bailor cannot exempt himself from the
are those properties that can be replaced by
payment of expenses or damages by abandoning
another property of the same kind, quantity and
the thing to the bailee. (Art. 1952, NCC)
quality. One unit of the property is equivalent to
or is deemed to be the equivalent of and
Reason: The expenses or damages may exceed
replaceable with another unit of the same kind,
the value of the thing loaned.
quantity and quality. The fungibility of property is
a question of intent of the parties. (Tolentino,
Extinguishment of Commodatum
Commentaries and Jurisprudence on the Civil Code of
the Philippines, Vol. 5, 1992 Ed., p. 442,)
The provisions of the New Civil Code on
commodatum include the following non-exclusive
grounds for extinguishing the contract:

298
Fungible thing is one where the parties have
agreed to allow the substitution of the thing given
or delivered with an equivalent thing. On the
other hand, a non-fungible thing is one where
the parties have the intention of having the same
identical thing returned after the intended use. (3
Manresa 58)
GR: Non-fungible things are irreplaceable. They
must be returned to the lender after the purpose
of the loan had been accomplished.
XPN: Non-fungible things may be replaced by
agreement of the parties. In such case, the
contract is barter and not a loan.
A person who receives a loan of money or any
other fungible thing acquires the ownership
thereof, and is bound to pay to the creditor an
equal amount of the same kind and quantity. (Art.
1953, NCC)
A contract whereby one person transfers the
ownership of non-fungible things to another with
the obligation on the part of the latter to give
things of the same kind, quantity and quality shall
be considered a barter. (Art. 1954, NCC)
1. Pay the creditor an equal amount of the same
Perfection of a contract of mutuum
2. Pay interest, if stipulated in writing (Art. 1956,
Mere issuance of checks to the debtor does not
perfect the contract of loan. It is only after the
checks have been cashed by the debtor that
the contract may be deemed perfected. (Art.
1249, NCC)
Forms of Payment
1. If the thing loaned is money, payment must
be made in the currency stipulated, otherwise
that which in legal tender in the Philippines.
(Arts. 1955 [1] and 1249, NCC) In case of
extraordinary inflation or deflation, payment
shall be in the value of the currency at the
time of the creation of the obligation. (Art.
1250, NCC) A loan of money may be payable
in kind. (Art. 1958, NCC)
2. If the thing loaned is other than money,
payment shall be of another thing of the
same kind, quality and quantity. In case it is
impossible to do so, the borrower shall pay
its value at the time of the perfection of the
loan. (Art. 1955 [2], NCC)
Legal Tender
Legal Tender Power - All notes and coins
issued by the Bangko Sentral ng Pilipinas
shall be fully guaranteed by the Government of
the Republic of the Philippines and shall be [the
only] legal tender in the Philippines for all debts,
both public and private. (Section 52 of Republic Act
No. 7653 a.k.a. The New Central Bank Act)
BSP Circular No. 537, Series of 2006
Maximum
Type of Coins amount
One (1) Peso, Five Ten One Thousand
(10) Pesos (5) Pesos and (1,000) Pesos
Ten (10) Pesos
One (1) Centavo, Five (5) One Hundred
Centavos, Ten (10) (100) Pesos
Centavos, and Twenty-Five
(25) Centavos
Obligations of a borrower:
kind and quality (Art. 1953, NCC)
NCC)
The destruction of the thing loaned does not
extinguish one’s obligation to pay because his
obligation is not to return the thing loaned but to
pay a generic thing (De Leon, Comments and
Cases on Credit Transactions, 2016, p. 62).
Securing Loans through an Agent
Par. 7. Article 1878 of the New Civil Code
expressly requires a special power of authority
before an agent can obtain a loan or borrow
money on behalf of the principal. However, a
written special power of attorney is not required
under Article 1878. The Court explained in the
case of Home Insurance Company vs. United
States Lines Company that: "Article 1878 does
not state that the authority be in writing. As long
as the mandate is express, such authority may be
either oral or written.” (AQUINO, Essentials of Credit
Transactions and Insolvency Law (2021), p. 46)
Interest - It is the compensation to be paid by
the borrower for the use of the money lent to him
by the lender. It is paid either as compensation
299
 for the use of money (monetary interest) or as
damages (compensatory interest). (Andreas vs.
Bank of the Philippine Islands, G.R. No. 23836,
September 9, 1925; Asian Terminals, Inc., vs. Padoson
Stainless Steel Corporation, G.R. No. 211876, June 25,
2018)
Kinds of Interest on Simple Loans
1. Simple interest – that which is paid for the
principal at a certain rate fixed or stipulated by
the parties
2. Compound interest – that which is imposed
interest due and unpaid. The accrued interest
is added to the principal sum and the whole is
treated as a new principal upon which the
interest for the next period is calculated.
3. Legal interest – the rate of interest fixed by
law or regulation that will be followed where
there is a written agreement that interest will
be paid or when the law or rule provides for
payment of interest, but the rate is not
stipulated. (AQUINO, Essentials of Credit
Transactions and Insolvency Law, 2021, p. 56)
Rate of Legal Interest: The legal rate of
interest is now 6% per annum even for
loans/forbearance of money, goods, or credit
under BSP Circular No. 799, Series of 2013
dated June 21, 2013 that took effect on July
1, 2013. (Nacar vs. Gallery Frames, Inc., G.R. No.
189871, August 13, 2013; Sps. Andal v. PNB, G.R.
No. 19420, November 27, 2013)
4. Lawful interest – that which the laws allow
or do not prohibit.
5. Unlawful or usurious interest – paid or
stipulated to be paid beyond the maximum
fixed by law. (De Leon, Comments on Credit
Transactions, 2016 Ed p. 67-69)
6. Monetary or conventional interest -
compensation set by the parties for use or
forbearance of money.
The payment of regular interest constitutes
the price or cost of the use of money and thus,
until the principal sum due is returned to the
creditor, regular interest continues to accrue
since the debtor continues to use such
principal amount. It has been held that for a
debtor to continue in possession of the
300
principal of the loan and to continue to use the
same after maturity of the loan without
payment of the monetary interest, would
constitute unjust enrichment on the part of the
debtor at the expense of the creditor. (Frias vs.
San Diego-Sison, G.R. No. 155223, April 4, 2007)
7. Compensatory/Penalty/Indemnity
interest - interest that may be imposed by
law or by courts as penalty for damages (Hun
Hyung Park vs. Eung Won Choi, G.R. No.
220826, March 27, 2019); this refers to
damages paid arising from delay in paying a
fixed sum of money or delay in assessing and
paying damages. (Sps. Abella vs. Sps. Abella,
G.R. No. 195166, July 9, 2015)
If a particular rate of interest has been expressly
stipulated by the parties, that interest, not the
legal rate of interest shall be applied. (Casa Filipina
Development Corporation vs. Deputy Executive
Secretary, G.R. No. 96494, May 28, 1992)
Formula for Interest Computation
TOTAL AMOUNT DUE = [principal - partial
payments made] + [interest + interest on
interest], where:
Interest = remaining balance x 6% per annum
x number of years from due date (Date when
demand was made) until full satisfaction/
payment
Interest on interest = interest computed as of
the filing of the complaint x 6% x number of
years until full satisfaction/payment.
(PCI Leasing and Finance, Inc. vs. Trojan Industries
Inc., et al., G.R. No. 176381, December 15, 2010)
GR: No interest shall be due on the loan.
XPN: Unless it has been expressly stipulated in
writing. (Art. 1956, NCC)
Requisites for Recovery of Interest:
1. The payment of interest must be expressly
stipulated. (Art. 1956, NCC)
XPNs:
a. Indemnity for damages. (Art. 2209, NCC)
Interest as indemnity for damages is
 payable only in case of default or non-
performance of the contract. As they are
distinct claims, they may be demanded
separately. (Sentinel Insurance Co. Inc. vs.
Court of Appeals, G.R. No. L-52482, February
23, 1990)
b. Interest accruing from unpaid interest.
(Art 2212, NCC)
2. The interest must be lawful and
unconscionable (not against morals and public
policy).
3. The stipulation must be in writing.
Payment of unstipulated interest
1. Where unstipulated interest is paid by
mistake, the debtor may recover, this would
be a case of solutio indebiti or undue payment.
2. Where the unstipulated interest is paid
voluntarily because the debtor feels morally
obliged to do so, there can be no recovery as
in the case of natural obligations. (Art. 1960,
NCC)
Recovery of Compound Interest
GR: Accrued/Unpaid interest shall not earn
interest.
XPNs:
1. When judicially demanded as provided in Art.
2212, interest due shall earn legal interest
from the time it is judicially demanded
although the obligation may be silent upon
this point.
2. When there is an express stipulation made by
the parties that the interest due and unpaid
shall be added to the principal obligation and
the resulting total amount shall earn interest.
(Art. 1959, NCC)
Guidelines for the application of proper
interest rates
1. Stipulated rate shall apply
2. When an obligation is breached, the
contravener may be held liable for damages.
3. When the obligation breached consists of
forbearance of money, in the absence of
stipulation, the rate shall be the legal rate
computed from default. The interest due shall
itself earn legal interest from the time it is
judicially demanded.
4. If the obligation does not consist of
forbearance of money, the rate of interest
shall be 6% per annum.
In Nacar vs. Gallery Frames, G.R. No. 189871,
August 13, 2013, the Supreme Court modified the
guidelines laid down in the case of Eastern
Shipping Lines to embody BSP Circular No. 799 s.
of 2013:
1. Obligation regardless of source is breached –
the contravenor shall be liable for damages
under Title XVIII on Damages of the NCC;
2. Award of interest in the concept of actual or
compensatory damages the rate of interest
shall be as follows:
a. When the obligation breached consists of
payment of sum of money, the interest
due shall be that which may have been
stipulated in writing. Furthermore, the
interest due shall itself earn legal interest
from the time it is judicially demanded.
In the absence of stipulation, the rate of
interest shall be 6% per annum to be
computed from default.
b. When an obligation, not consisting of a
loan or forbearance of money, is
breached, an interest on the amount of
damages may be imposed at the
discretion of the court at the rate of 6%
per annum.
No interest shall be adjudged on
unliquidated claims or damages, except
when or until the demand can be
established with reasonable certainty.
3. When the judgment of the court awarding the
sum of money becomes final and executory,
the rate of legal interest shall be 6% per
annum from finality until satisfaction.
When the agreed rate is iniquitous and
unconscionable, the courts may reduce the same
as reason and equity demand. (Imperial vs.
Jaucian, G.R. No. 149004, April 14, 2004)
The right to interest arises by reason of the
contract (stipulation in writing) or by reason of
delay or failure to pay principal on which interest
is demanded (Baretto vs. Santa Marina, G.R. No.
11908, Feb. 4, 1918).
301
If the obligation consists of the payment of a sum
of money, and the debtor incurs delay, the
indemnity for damages shall be the payment of
legal interest (Philrock, Inc. vs. Construction Industry
Arbitration Commission, G.R. Nos. 132848‐49, June 25,
2001)
Payment of monetary interest is allowed only if:
1. There was an express stipulation for the
payment of interest; and
2. The agreement for the payment of interest
was reduced in writing.
The concurrence of the two conditions is required
for the payment of monetary interest. Thus,
collection of interest without any stipulation
therefor in writing is prohibited by law (Siga‐an vs.
Villanueva, G.R. No. 173227, Jan. 20, 2009).
Escalation Clause
§ X305.2 Escalation clause; when
allowable. Parties to an agreement pertaining to
a loan or forbearance of money, goods or credits
may stipulate that the rate of interest agreed
upon may be increased in the event that the
applicable maximum rate of interest is increased
by the Monetary Board: Provided, That such
stipulation shall be valid only if there is also a
stipulation in the agreement that the rate of
interest agreed upon shall be reduced in the
event that the applicable maximum rate of
interest is reduced by law or by the Monetary
Board: Provided, further, That the adjustment in
the rate of interest agreed upon shall take effect
on or after the effectivity of the increase or
decrease in the maximum rate of interest
Escalation clauses are not basically wrong or
legally objectionable so long as they are not
solely potestative but based on reasonable and
valid grounds.(Sps. Almeda vs. Court of Appeals, G.R.
No. 113412, April 17, 1996)
Escalation clauses are valid stipulations in
commercial contracts to maintain fiscal stability
and to retain the value of money in long term
contracts. (Polotan, Sr. vs. Hon. Court of Appeals,
G.R. No. 119379, September 25, 1998)
In loan agreements, it cannot be denied that the
rate of interest is a principal condition, if not the
most important component. Thus, any
modification thereof must be mutually agreed
upon; otherwise, it has no binding effect.
302
Moreover, the Court cannot consider a stipulation
granting a party the option to prepay the loan if
said party is not agreeable to the arbitrary
interest rates imposed. (Silos vs. Philippine National
Bank, G.R. No. 181045, July 2, 2014)
If the escalation clause is annulled, the principal
amount of the loan is subject to the original or
stipulated rate of interest, and upon maturity, the
amount due shall be subject to legal interest at
the rate of 6% per annum in accordance with BSP
Monetary Board Circular No. 799. (New
Sampaguita Builders vs. Philippine National Bank, G.R.
No. 148753, July 30, 2004)
The interests paid by borrowers should be applied
first to the payment of the stipulated or legal and
unpaid interest, as the case may be, and later, to
the capital or principal. (Hodges vs. Salas, G.R. No.
L-42958 October 21, 1936)
The lender should refund the excess amount of
interest that it has illegally imposed upon
borrowers; the amount to be refunded refers to
that paid by borrowers when they had no
obligation to do so. (Philippine Savings Bank vs.
Castillo, G.R. No. 193178, May 30, 2011)
Finance charge refers to interest, fees, service
charges, discounts and such other charges
incident to the extension of credit (R.A. No. 3765,
otherwise known as "Truth in Lending Act. Sec. 3).
Under Section 4(6), "finance charge" represents
the amount to be paid by the debtor incident to
the extension of credit such as interest or
discounts, collection fees, credit investigation
fees, attorney’s fees, and other service charges.
The total finance charge represents the
difference between (1) the aggregate
consideration (down payment plus installments)
on the part of the debtor, and (2) the sum of the
cash price and non-finance charges. (Silos vs.
Philippine National Bank, G.R. No, 181045, July 2,
2014)
Suspension of the Usury Law
Circular No. 905 of the Central Bank, adopted on
December 22, 1982, has expressly removed the
interest ceilings prescribed by the Usury Law. and
that the Usury Law is now "legally inexistent". In
Security Bank and Trust Company vs. Regional
Trial Court of Makati, Branch 61 the Court held
that CB Circular No. 905 "did not repeal nor in
anyway amend the Usury Law but simply
suspended the latter's effectivity." (Medel vs. Court
of Appeals, G.R. No. 131622, November 27, 1998)
Unconscionable Interest Rates
Parties are free to enter into agreements and
stipulations as to the terms and conditions of their
contract, but such freedom is not absolute. Thus,
the stipulation as to interest may be considered
void if it is unconscionable. Only the interest is
void; the principal obligation is not affected by
the invalidity of the stipulation as to interest.
(Limso vs. Philippine National Bank, G.R. Nos. 158622,
169441, 172958, 173194, 196958, 197120, 205463,
January 27, 2016)
As case law instructs, the imposition of an
unconscionable rate of interest on a money debt,
even if knowingly and voluntarily assumed, is
immoral and unjust. It is tantamount to a
repugnant spoliation and an iniquitous
deprivation of property, repulsive to the common
sense of man. It has no support in law, in
principles of justice, or in the human conscience
nor is there any reason whatsoever which may
justify such imposition as righteous and as one
that may be sustained within the sphere of public
or private morals. (Sps. Albos vs. Spouses Embisan,
et al, G.R. No. 210831, November 26, 2014)
It is also worth stressing that interest rates
whenever unconscionable may still be declared
illegal. There is certainly nothing in said circular
which grants lenders carte blanche authority to
raise interest rates to levels which will either
enslave their borrowers or lead to a
hemorrhaging of their assets. (Castro vs. Tan, G.R.
No. 168940, November 24, 2009)
It is clear from the contract of loan between
petitioners-spouses and respondent bank that
petitioners, as borrowers, agreed to the payment
of interest on their loan obligation. That the rate
of interest was subsequently declared illegal and
unconscionable does not entitle petitioners-
spouses to stop payment of interest.1âwphi1 It
should be emphasized that only the rate of
interest was declared void. The stipulation
requiring petitioners-spouses to pay interest on
their loan remains valid and binding. They are,
therefore, liable to pay interest from the time
they defaulted in payment until their loan is fully
paid. (Sps. Andal vs. Philippine National Bank, G.R. No.
19420, November 27, 2013)
Penalties and Surcharges
The parties may likewise provide for liability to
pay surcharges and penalties in case of breach.
However, the stipulation regarding penalties and
surcharges must not also be unconscionable. A
stipulation providing for unconscionable or
excessive penalty is void for being contrary to
morals, good customs, public order, or public
policy. The Court has held "that the surcharge or
penalty stipulated in a loan agreement in case of
default partakes of the nature of liquidated
damages under Article 2226 of the Civil Code, and
is separate and distinct from interest payment.
Also referred to as a penalty clause, it is expressly
recognized by law. It is an accessory undertaking
to assume greater liability on the part of an
obligor in case of breach of an obligation."
(Metropolitan Bank & Trust Company vs. Chuy Lu Tan,
G.R. No. 202176, August 1, 2016)
B. DEPOSIT
It is a contract constituted from the moment a
person receives a thing belonging to another with
the obligation of safely keeping it and returning
the same. If the safekeeping of the thing
delivered is not the principal purpose of the
contract, there is no deposit but some other
contract (Art. 1962, NCC)
Principal Purpose
Safekeeping. If the safekeeping is not the
principal purpose it may be either: (a)
commodatum; (b) lease; or (c) agency.
Characteristics of deposit:
1. Real Contract - contract is perfected by the
delivery of the subject matter. Where there
has been no delivery, there is merely an
agreement to deposit, which however is
binding and enforceable upon the parties.
2. Unilateral – when gratuitous because only
the depositary has an obligation.
3. Bilateral – If with compensation because it
gives rise to obligations on the part of both
the depositary and depositor.
4. Voluntary as a GR.
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5. Principal – Its existence is not dependent on Extra-judicial deposit does not include
another contract. incorporeal/intangible property such as right and
actions for it follow the person of the owner.
6. Gratuitous as a GR. (De Leon, Comments and
Cases on Credit Transactions, 2016, p. 144) GR: A contract of deposit is gratuitous (Art. 1965,
NCC).
Subject Matter of Deposit
XPNs:
1. Only MOVABLE/PERSONAL property may
be the object of EXTRAJUDICIAL deposit, 1. When there is a contrary stipulation;
whether voluntary or necessary. The 2. The depositary is engaged in the business of
provisions do not embrace incorporeal or storing goods; and
intangible property, like rights and actions. 3. Property is saved from destruction without
the knowledge of the owner.
2. JUDICIAL deposit may cover MOVABLE as
well as IMMOVABLE property, its purpose 1. Voluntary Deposit
being to protect the rights of the parties to
a suit. It is a deposit wherein the delivery is made by the
will of the depositor. A deposit may also be made
Kinds of Deposit: by two or more persons each of whom believes
himself entitled to the thing deposited with a third
A. Judicial (sequestration) – when an person, who shall deliver it in a proper case to the
attachment or seizure of property in one to whom it belongs. (Art. 1968, NCC)
litigation is ordered. (Art. 2005, NCC)
RULES ON THE CAPACITY OF
B. Extra-judicial DEPOSITARY AND DEPOSITOR
Depositary Depositary
1. Voluntary – delivery is made by the (capacitated) (incapacitated)
will of the depositor or by 2 or more Depositor Depositor
persons each of whom believes himself (incapacitated) (capacitated)
entitled to the thing deposited. (Arts. (Art. 1970) (Art. 1971)
1968-1995, NCC) Depositary is Depositary does not
subject to ALL the incur obligations of a
2. Necessary – made in compliance with obligations of a depositary
(1) a legal obligation; or (2) on occasion depositary whether
of any calamity; or (3) by travelers in or not the depositor
hotels and inns; or (4) by travelers with is capacitated.
common carriers. (Arts. 1996-2004, Depositary must Depositary, however is
NCC) return the property liable to:
either to:
The prevailing rule is that the relation between a 1. Return the thing
bank renting out safety-deposit boxes and its 1. The legal deposited while still in
customer with respect to the contents of the box representative of his possession; and
is that of a bailor and bailee, the bailment being the incapacitated;
for hire and manual benefit. (CA Agro-Industrial 2. The depositor 2. Pay the depositor
Dev. Corp. vs. C.A., Mar. 3, 1993, G.R. No. 90027) himself if he should the amount by which
acquire capacity he may have benefited
Another difference between a voluntary deposit himself with the thing
and necessary deposit is that in the former, the or its price subject to
depositor is free to choose the depositary, in the the right of any third
latter, there is lack of free choice in the depositor. person who acquired
(De Leon, Comments and Cases on Credit
the thing in good faith.
Transactions, 2016, p. 158)

304
General Obligations of Depositary
1. To keep the thing safely (Art. 1972, NCC)
Depositary is liable if the loss occurs through
his fault or negligence even if the thing is
insured. The loss of the thing while in his
possession ordinarily raises the presumption
of fault on his part.
The required degree of care is greater when:
a. Stipulated;
b. It is the depositary who voluntarily offered
to keep the thing;
c. The deposit is compensated; or
d. The deposit produces benefit to the
depositary. (Tolentino, Civil Code of the
Philippines Vol. 5, 1992 ed., p. 460)
2. To not use the thing without express
permission of the depositor. (Art. 1977, NCC)
3. To return the thing. (Art. 1972, NCC)
Persons to whom the thing deposited must
be returned
a. Depositor, to his heirs and successors, or the
person who may have been designated in
the contract (Art. 1972, NCC).
b. When the depositor is incapacitated, the
guardian or administrator of the person who
made the deposit or the latter himself should
acquire capacity. (Art. 1970, NCC)
c. Legal representative of the depositor should
the latter subsequently lose his capacity
during the deposit. (Art. 1986, NCC)
Time of return
GR: Upon demand even though a specified
period of time for such return may have been
fixed.
XPNs:
a. When the thing is judicially attached while in
the depositary’s possession;
b. Should he have been notified of the
opposition of a 3rd person to the return or
removal of the thing deposited in such
instance, the depositary must immediately
inform the depositor of the attachment or
opposition (Art. 1988, NCC); or
c. If the deposit is gratuitous, the depositary
may return the thing deposited
notwithstanding that a period has been fixed
for the deposit if justifiable reasons exist for
its return. If the depositor refuses to receive
it, the depositary may secure its consignation
from the court (Art. 1989, NCC).
If the deposit is for a valuable consideration,
period must be followed even if the depositary
suffers inconvenience as a consequence.
(Art.1989, NCC)
What to return
a. The thing deposited with all its product,
accessories, and accessions of the thing
deposited. (Art. 1983, NCC)
b. If by force majeure or government order,
the depositary loses the thing, and receives
money or another thing in its place, he shall
deliver the sum or other thing to the
depositor. (Art. 1990, NCC)
Where to return
a. Place agreed upon by the parties, or
b. If there is no place agreed upon, at the place
where the thing deposited may be, even if it
should not be the same place where the
deposit was made provided there was no
malice on the part of depositary. (Art. 1987)
Note: The depositary cannot deposit the thing
with a third person, unless authorized by express
stipulation. (Art. 1973, NCC)
Reason: Deposit is founded on trust and
confidence.
Under Art. 1973, the depositary is liable for
the loss under the following:
a. He transfers the deposit with a 3rd person
without authority, although there is no
negligence on his part and the third person;
b. He deposits the thing with a 3rd person who
is manifestly careless and unfit, although
305
 authorized, even in the absence of
negligence; or
c. The thing is lost through the negligence of his
employees whether the latter are manifestly
careless or not.
Changing the way of deposit
To change the way of the deposit if under the
circumstances, the depositary may reasonably
presume that the depositor would consent to the
change if he knew of the facts of the situation,
provided, that the former notifies the depositor
thereof and wait for his decision, unless delay
would cause danger. (Art. 1974, NCC)
Obligation to collect interest
If the thing deposited should earn interest, the
depositary shall be bound to:
a. To collect interest and the capital itself as it
falls due; and
b. To take steps to preserve its value and rights
with regards to it. (Art. 1975, NCC)
A contract for the rent of safety deposit boxes is
a special kind of deposit; hence, it is not to be
strictly governed by the provisions on deposit.
The relation between the bank and its customer
is that of a bailor and bailee, the bailment being
for hire and mutual benefit. (CA Agro vs. CA, G.R.
No. 90027, March 3, 1993).
It cannot be characterized as an ordinary contract
of lease because full and absolute control of the
safety deposit boxes was not given to the joint
renters. (CA Agro vs. CA, G.R. No. 90027, March 3,
1993)
Commingle things deposited
The depositary may not commingle things
deposited if so stipulated. (Art. 1976, NCC)
Depositary can only commingle if the articles are
of the same kind and quality. In case of
commingling, each depositor shall be entitled to
each portion of the entire mass as the amount
deposited by him bears to the whole.
306
Use of the Thing Deposited
GR: Deposit is not for use of the thing. Use by
the depositary would make him liable for
damages.
XPNs:
a. When the preservation of the thing deposited
requires its use;
b. When authorized by the depositor (the
authorization shall not be presumed and its
existence must be proved). (Art. 1977, NCC)
Effect if permission to use is given:
If the thing deposited is non-consumable, the
contract is a commodatum, unless safekeeping is
still the principal purpose. (Art. 1978, NCC)
If the thing deposited consists of consumable
things, the contract is converted into a simple
loan or mutuum unless safekeeping is still the
principal purpose in which case it is called an
irregular deposit (example: bank deposit) (De
Leon, Comments and Cases on Credit Transactions,
2016, p. 180)
Liability for loss through fortuitous event
The depositary is liable for the loss of the thing
through fortuitous event:
a. If stipulated;
b. If he uses the thing without the
depositor’s permission;
c. If he delays its return;
d. If he allows others to use it. (Art. 1979, NCC).
Obligation when the thing deposited is
delivered closed and sealed
When the thing deposited is delivered closed and
sealed, the depositary must:
a. Return the thing deposited in the same
condition;
b. Pay for damages should the seam or lock be
broken through his fault, which is presumed
unless proven otherwise;
c. Keep the secret of the deposit when the seal
or lock is broken with or without his fault.
(Art. 1981, NCC):
The depositary is authorized to open the thing
deposited which is closed and sealed when:
a. There is presumed authority; or
b. There is necessity to do so. (Art. 1982, NCC)
The depositary shall pay interest on sums
converted to personal use if the deposit consists
of money. (Art. 1983, NCC)
Fixed, savings, and current deposits of moneys in
banks and similar institutions shall be governed
by the provisions concerning simple loans. (Art.
1980, NCC)
A bank can compensate or set-off the deposit in
its hands for the payment of any indebtedness to
it on the part of the depositor. In true deposit,
such compensation or set-off is NOT allowed.
The depositary has the obligation to advise the
true owner that a deposit has been made should
he discover that the thing deposited was stolen
from the owner (Art. 1984, NCC)
If the owner despite such information does not
claim it within the period of one (1) month, the
depositary shall be relieved from all responsibility
by returning the same to the depositor. (De Leon,
Comments and Cases on Credit Transactions.
2016, p. 198).
Rules when there are two or more
depositors
1. If the thing deposited is divisible and
depositors are not solidary. Each depositor
can demand only his proportionate share
thereto.
2. If obligation is solidary or if the thing is not
divisible. (Art. 1985, NCC)
Rules on active solidarity shall apply, i.e., each
one of the solidary depositors may do whatever
may be useful to the others but not anything
which may be prejudicial to the latter, (Art. 1212,
NCC) and the depositary may return the thing to
anyone of the solidary depositors unless a
demand, judicial or extrajudicial, for its return has
been made by one of them in which case, delivery
should be made to him (Art. 1214, NCC).
3. If there is a stipulation that the thing should
be returned to one of the depositors, the
depositary is bound to return it only to the
person designated although the latter has not
made any demand for its return.
The depositary may retain the thing in pledge
until payment of what may be due him by reason
of the deposit. (Art. 1994, NCC)
The depositor’s heir who in good faith may have
sold the thing which he did not know was
deposited shall only be bound to return the price
he may have received or to assign his right of
action against the buyer in case the price has not
been paid him. (Art. 1991, NCC)
General Obligations of the Depositor:
1. To pay expenses for preservation
(contemplates ordinary and extraordinary &
necessary expenses);
2. If the deposit is gratuitous, the depositor is
obliged to reimburse the depositary for
expenses incurred for the preservation of the
thing deposited (Art. 1992);
3. If the deposit is for valuable consideration,
expenses for preservation are borne by the
depositary due to the character of the thing
deposited.
GR: The depositor shall reimburse the depositary
for any loss arising from the character of the thing
deposited. (Art. 1993, NCC)
XPNs:
a. At the time of the deposit, the depositor was
not aware of the dangerous character of the
thing;
b. When the depositor was not expected to
know the dangerous character of the thing;
c. When the depositor notified the depositary of
the same; or
d. The depositary was aware of it without advice
from the depositor. (Art. 1993, NCC)
Extinguishment of voluntary deposit
Same as the modes of extinguishment of
obligations in Art. 1231 of the New Civil Code:
a. Novation
b. Compensation
307
c. Merger This also applies to deposits made to common
d. Remission carriers. (Art. 1754, NCC)
e. Payment
f. Loss The liability extends to vehicles, animals and
g. Prescription articles, which have been introduced or placed in
h. Rescission the annexes of the hotel. (Art. 1999, NCC)
i. Fulfillment of resolutory condition
j. Annulment Liability shall EXCLUDE losses, which proceed
from force majeure. The act of a thief or robber
A voluntary deposit is extinguished: is not deemed force majeure unless done with the
use of arms or irresistible force. (Arts. 2000-2001,
1. Upon the loss or destruction of the thing NCC)
deposited;
2. In case of gratuitous deposit, upon the death The hotelkeeper cannot free himself from
of either the depositor or the depositary (Art. responsibility by posting notices to the effect that
1995, NCC); or he is not liable for the loss of articles brought by
3. Other causes, such as return of the thing, the guest. Any stipulation to such effect shall be
novation, merger, expiration of the term, void. (Art. 2003, NCC)
fulfillment of the resolutory condition, etc.
(Art. 1231, NCC) Notice is necessary only for suing civil liability but
not criminal liability. (Art. 2003, NCC)
A deposit for compensation is not extinguished by
the death of either party because, unlike a 3. Judicial Deposit or Sequestration
gratuitous deposit, an onerous deposit is not
personal in nature. (De Leon, Comments and Cases Judicial Deposit or sequestration takes place
on Credit Transactions, 2010 ed., p. 145) when an attachment or seizure of property in
litigation is ordered. (Art. 2005, NCC)
2. Necessary Deposits:
JUDICIAL EXTRA-JUDICIAL
A deposit is necessary: Creation
By order of the court. By the will of the
1. When it is made in compliance with a legal parties or by
obligation. contract.
2. When it takes place on the occasion of any Purpose
calamity, such as fire, storm, flood, pillage, For security or to For custody and
shipwreck or other similar events. (Art. 1996, insure the right of a safekeeping
NCC) party to a property or
3. When made by travelers in hotels and inns or to recover in case of
by travelers with common carrier. (Art. 1998, favorable judgment
NCC) Subject Matter
Movables or Movables only.
Deposit by travelers in hotels and inns immovable, but
generally immovable
The keepers of hotels or inns shall be responsible
Cause
as depositaries for the deposit of effects made by
Always onerous Maybe onerous or
travelers, provided that:
gratuitous
When must the thing be returned
1. Notice was given to them or to their
Upon order of the Upon demand of the
employees of the effects brought by the
court or when litigation depositor
guest; and
is ended.
2. The guest takes the precautions, which said
hotel-keepers or their substitutes advised,
relative to the care and vigilance of their
effects. (Art. 1998, NCC)

308
 C. GUARANTY and SURETYSHIP
Guaranty
By guaranty, a person, called the guarantor,
binds himself to the creditor to fulfill the
obligation of the principal debtor in case the latter
should fail to do so. (Art. 2047, NCC)
Characteristics of Guaranty
1. Gratuitous. A guaranty is gratuitous, unless
there is a stipulation to the contrary; (Article
2048, NCC)
2. Accessory. Guaranty secures the payment of
a principal obligation; hence, it cannot exist
without a principal obligation;
3. Subsidiary. The guarantor will pay only if the
principal debtor cannot pay and has no
properties to answer for the obligation;
4. Conditional. Certain conditions (i.e., the
requirement of exhaustion) must be complied
with before the guarantor can be made liable;
5. Unilateral. The obligation is only on the part
of the guarantor in favor of the creditor. The
debtor need not even give his consent;
6. Express. A guaranty is not presumed; it must
be express and cannot extend to more than
what is stipulated therein; (Article 2055, NCC)
7. Covered by Statutes of Fraud. Guaranty
which is a collateral contract, is a promise to
answer for a debt, hence, it must be in writing.
(Ewan, MacKendrick, Goode on Commercial
Law, 2010 Ed., p.880, hereinafter referred to
as Goode, p. 880)
8. Prospective. A contract of guaranty or
suretyship is only prospective, and not
retroactive in operation unless a contrary
intent is clearly shown. Consequently, the
guarantor or surety is entitled to assume that
the notice provided by the surety bond did not,
and was not intended to include any defaults
incurred prior to his acceptance. (Pastoral vs.
Mutual Security Insurance Corp., G.R. No. L-
20469, August 31, 1965)
Classifications of Guaranty:
1. In the broad sense:
a. Personal – the guaranty is the credit given
by the person who guarantees the
fulfillment of the principal obligation.
b. Real – the guaranty is the property,
movable or immovable.
2. As to its Origin:
a. Conventional – agreed upon by the
parties
b. Legal – one imposed by virtue of a
provision of a law.
c. Judicial – one which is required by a court
to guarantee the eventual right of one of
the parties in a case.
3. As to consideration:
a. Gratuitous – the guarantor does not
receive any price or remuneration for
acting as such.
b. Onerous – the guarantor receives valuable
consideration.
4. As to the Person Guaranteed:
a. Single or simple – one constituted solely
to guarantee or secure performance by the
debtor of the principal obligation.
b. Double or sub-guaranty – one
constituted to secure the fulfillment by the
guarantor of a prior guaranty (as opposed
to where there is a co-guarantor, meaning,
two or more persons will be guarantors for
the same principal obligation).
5. As to Scope and Extent:
a. Definite – the guaranty is limited to the
principal obligation only, or to a specific
portion thereof.
b. Indefinite or simple – one which not
only includes the principal obligation but
also all its accessories including judicial
costs.
6. As to whether it covers future debts:
a. Continuing – one where it is given as
security for future debts, the amount of
which is not yet known;
b. Not continuing – one where the contract
does not stipulate that the security covers
future debts. (Art. 2053, NCC)
A guaranty may be conventional, legal or judicial,
gratuitous, or by onerous title.
It may also be constituted, not only in favor of
309
 the principal debtor, but also in favor of the other
guarantor, with the latter’s consent, or without
his knowledge, or even his objection. (Art. 2051,
NCC)
An unconditional guaranty is still subject to
the condition that the principal debtor should
default in his obligation first before resort to the
guarantor could be had. A conditional
guaranty, on the other hand, is one which
depends upon some extraneous event, beyond
the mere default of the principal, and generally
upon notice of the principal's default and
reasonable diligence in exhausting proper
remedies against the principal. (Philippine Export
and Foreign Loan Guarantee Corp. vs. V.P. Eusebio
Construction Corp., et al., G.R. No. 140047, July 13,
2004.)
Parties to a Guaranty
1. Principal-obligor - the person whose
obligation is secured by the guarantor
2. Obligee - the person in whose favor the
guarantee is made; he will be paid or
reimbursed if the principal fails to performs his
obligation and the proper procedure is
complied with.
3. Guarantor - agrees to enter into a contract
to accommodate the obligor either
gratuitously or for consideration.
The obligor cannot claim that he is only a mere
guarantor of his own obligation. One cannot be
both the primary debtor and the guarantor of his
own debt. This is inconsistent with the very
purpose of a guarantee that is for the creditor to
proceed against a third person if the debtor
defaults in his obligation. Certainly, to accept
such an argument would make a mockery of
commercial transactions. (Velasquez vs. Solidbank
Corp., G.R. No. 157309, March 28, 2008)
Similarly, it was held in one case that it is absurd
to accept the submission of the petitioner that he
signed as surety as a representative of a
corporation if the latter corporation is also the
principal debtor. The principle behind suretyship
will be negated if the allegation will be accepted
because the borrower cannot at the same time be
a guarantor/surety to assure the fulfillment of its
own loan application. The Court therefore
concluded that the petitioner signed in his
personal capacity as surety of the corporation’s
loan. (Madrigal vs. DOJ, G.R. No. 168903, June 18,
310
2014)
Qualifications of Guarantors
If the debtor is obligated to furnish a guarantor
or surety, he must present one with the following
characteristics:
1. The guarantor must possess integrity;
2. He must have capacity to bind himself;
3. He must have sufficient property to answer
for the obligation which he guarantees;
4. He shall be subject to the jurisdiction of the
court of the place where this obligation is to
be complied with. (Art. 2056, NCC)
Replacement of the Guarantor
GR: If the guarantor should be convicted in the
first instance of a crime involving dishonesty
(even while appeal is pending) or should become
insolvent, the creditor may demand another who
has all the qualifications required in Article 2056.
XPN: The creditor has required and stipulated
that a specified person should be the guarantor.
This means that the creditor should bear the risk
that the guarantor is not qualified if he himself
chose the guarantor. (Art. 2057, NCC)
Consent
Guaranty may be entered into even against the
will or without the consent of the debtor.
A married woman may guarantee an obligation
without the husband's consent, but shall not
thereby bind the conjugal partnership, except
in cases provided by law. (Art. 2049, NCC)
Thus, only the separate properties of the spouses
are bound by the guarantee. It shall also be noted
that, under the Absolute Community of Property
regime under the present Family Code, the
spouses shall have joint administration of the
community properties. The rule is that the
obligations of one spouse shall not be chargeable
to the absolute community properties unless the
same redounded to the benefit of the family.
(AQUINO, Essentials of Credit Transactions and
Insolvency Law (2021), p. 235)
If the money or services are given to other person
or entity and the husband acted only as a surety
or guarantor, the transaction cannot by itself be
deemed an obligation for the benefit of the
conjugal partnership. It is for the benefit of the
principal debtor and not for the surety or his
family. No presumption is raised that, when a
husband. enters into a contract of surety or
accommodation agreement, it is for the benefit of
the conjugal partnership. To hold the conjugal
partnership liable for an obligation pertaining to
the husband alone defeats the objective of the
Civil Code to protect the solidarity and well-being
of the family as a unit. (Security Bank vs. Mar Tierra
Co., G.R. No. 143382, November 29, 2006)
If a guaranty is entered into without the
knowledge or consent, or against the will of the
principal debtor, the provisions of Articles 1236
and 1237 shall apply. (Art. 2050, NCC) Thus, the
payment made by the guarantor shall be
considered payment by a third person.
A. Debtor did not consent
Effects:
1) There is limited right of reimbursement.
- the guarantor can recover only insofar as
the payment has been beneficial to the
debtor
- the same defenses which could have been
set up against the creditor can be set up
against the paying guarantor.
- the debtor who was the contractor of the
project had valid defenses against the
obligee. (Philippine Export and Foreign Loan
Guarantee Corp. vs. V.P. Eusebio Construction,
Inc., et al., G.R. No. 140047, July 13, 2004)
- XPN: The agreement between the creditor
and the debtor may stipulate that payment
may be secured from a third person who
will act as a guarantor. It may also be
stipulated that the guarantor may be
secured even without prior notice to the
debtor. (Article 1236, NCC)
2) The guarantor has no right of
subrogation.
- Whoever pays on behalf of the debtor
without the knowledge or against the will
of the latter, cannot compel the creditor
to subrogate him in his rights, such as
those arising from a mortgage, guaranty,
or penalty. (Art. 1237, NCC)
B. Acceptance by the creditor
Where there is merely an offer of, or proposition
for, a guaranty, or merely a conditional guaranty
in the sense that it requires action by the creditor
before the obligation becomes fixed, it does not
become a binding obligation until it is accepted
and, unless there is a waiver of notice, until notice
of such acceptance is given to, or acquired by,
the guarantor, or until he has notice or
knowledge that the creditor has performed the
conditions. and intends to act upon the guaranty.
(Philippine National Bank vs. Garcia, G.R. No. 23175,
March 18, 1925)
The acceptance need not necessarily be express
or in writing but may be indicated by acts
amounting to acceptance. (National Bank vs.
Escueta, G.R. No. L-26118, December 31, 1926.)
Where, upon the other hand, the transaction is
not merely an offer of guaranty but amounts to a
direct or unconditional promise of guaranty,
unless notice of acceptance is made a condition
of the guaranty, all that is necessary to make the
promise binding is that the promisee should act
upon it, and notice of acceptance is not
necessary, the reason being that the contract of
guaranty is unilateral. (Visayan Surety and
Insurance Corporation vs. Laperal, G. R. No.
46515, June 14, 1940)
Consideration
A guaranty is gratuitous, unless there is a
stipulation to the contrary. The cause of the
contract is the same cause, which supports the
obligation as to the principal debtor. (Art. 2048,
NCC)
The peculiar nature of a guaranty or surety
agreement is that it is regarded as valid despite
the absence of any direct consideration received
by the guarantor or surety either from the
principal debtor or from the creditor; a
consideration moving to the principal alone will
suffice. (Garcia vs. CA, G.R. No. 80201, November 20,
1990)
It is never necessary that the guarantor or surety
should receive any part or benefit, if such there
be, accruing to the principal. (Willex Plastic
Industries Corp. vs. CA, G.R. No. 103066, April 25,
1996)
311
With respect to the creditor, the consideration in
guaranty is the same consideration in the
principal contract. "The consideration which
supports the obligation as to the principal debtor
is a sufficient consideration to support the
obligation of the sureties." (C.C. Pyle vs. Johnson,
G.R. No. L-3755, November 23, 1907.)
The true consideration of the contract may be the
detriment suffered by the plaintiffs in the former
action in dismissing that proceeding, and it is
immaterial that no benefit may have accrued
either to the principal or his guarantor. (Severino
vs. Severino, G.R. No. 34642, September 24, 1931)
Interpretation
The interpretation of a gratuitous guaranty or
surety arrangement is liberal in favor of the
gratuitous surety or guarantor, except for
compensated sureties which are offered by surety
companies, organized for the purpose of
conducting an indemnity business at established
rates of compensation. (Aquino, Essentials of Credit
Transactions and Insolvency Law, 2021, p. 235)
Obligations Secured by Guaranty
1. Valid obligations; (Art. 2052, NCC)
2. Voidable obligations, unless it is annulled by
proper action in court; (Art. 2052, NCC)
3. Unenforceable obligations; (Article 2052,
NCC)
4. Natural obligations -When the debtor himself
offers a guaranty for his liability, thereby
transforming the obligation from a natural
into a civil one; (Art. 2052, NCC) and
5. Conditional obligations – In the case of
suspensive condition, it’s happening gives
rise to the principal obligation and hence, it
also gives rise to the accessory obligation.
(Art. 2053, NCC)
A valid principal obligation is necessary in a
contract of guaranty since guaranty is an
accessory contract; it is an indispensable
condition for its existence that there must be a
principal obligation. Hence, if the principal
obligation is void, it is also void. (Sps. Rigor vs.
Consolidated Orix Leasing and Finance Corporation,
G.R. No. 136423, August 20, 2002)
There can be a guaranty for:
1. Present debts; and
2. Future debts, even if the amount is not yet
312
known. (Art. 2053, NCC)
There can be no claim against the
guarantor until the debt is liquidated
(Article 2053, NCC)
Liquidated debt – a debt for the price of goods to
be delivered in the future is liquidated when it is
for a price fixed by the contract and the seller
offers to deliver said goods within the period
stipulated and according to the terms of the
contract. (Smith, Bell & Co. vs. Phil. National Bank,
G.R. No. 16482, February 1, 1992)
Continuing Guaranty
By executing a continuing guaranty or suretyship
agreement, the principal debtor places himself in
a position to enter into the projected series of
transactions with its creditor; with such
suretyship or guaranty agreement, there would
be no need to execute separate contracts or bond
(in surety) for each financing or credit
accommodation extended to the principal
debtors. (Atok Finance Corporation vs. Court of
Appeals, G.R. No. 80078, May 18, 1993; Fortune
Motors (Phils) Corp. vs. The Hon. Court of Appeals,
G.R. No. 112191, February 7, 1997; See also Lim vs.
Security Bank Corporation, G.R. No. 188539, March 12,
2014; Saludo, Jr. vs. Security Bank Corporation, G.R.
No. 184041, October 13, 2010)
A continuing guaranty is one which is not limited
to a single transaction, but which contemplates a
future course of dealing, covering a series of
transactions, generally for an indefinite time or
until revoked. It is prospective in its operation
and is generally intended to provide security with
respect to future transactions within certain
limits, and contemplates a succession of
liabilities, for which, as they accrue, the guarantor
becomes liable. Otherwise stated, a continuing
guaranty is one which covers all transactions,
including those arising in the future, which are
within the description or contemplation of the
contract of guaranty, until the expiration or
termination thereof. A guaranty shall be
construed as continuing when by the terms
thereof it is evident that the object is to give a
standing credit to the principal debtor to be used
from time to time either indefinitely or until a
certain period, especially if the right to recall the
guaranty is expressly reserved. Hence, where the
contract of guaranty states that the same is to
secure advances to be made "from time to time"
the guaranty will be construed to be a continuing
one. (Dino vs. Hon. Court of Appeals, G.R. No. 89775,
November 26, 1992)
The continuing nature of the obligation of the
guarantor or surety must be expressly provided
for. (Willex Plastic Industries Corp. vs. Hon. Court of
Appeals, G.R. No. 103066, April 25, 1996)
Of course, a surety is not bound under any
particular principal obligation until that principal
obligation is born. But there is no theoretical or
doctrinal difficulty inherent in saying that the
suretyship agreement itself is valid and binding
even before the principal obligation intended to
be secured thereby is born, any more that there
would be in saying that obligations which are
subject to a condition precedent are valid and
binding before the occurrence of the condition
precedent. (Atok Finance Corporation vs. Court of
Appeals, G.R. No. 80078, May 18, 1993)
Debts to be Guaranteed
If it be simple or indefinite, it shall compromise
not only the principal obligation, but also all its
accessories, including the judicial costs, provided
with respect to the latter, that the guarantor shall
only be liable for those costs incurred after he has
been judicially required to pay. (Art. 2055, NCC)
Accessories under Article 2055 include damages,
interest and charges, and judicial costs incurred
after the principal debtor is judicially required to
pay." Attorney's fees may also be imposed
whenever appropriate. (Dino vs. Hon. Court of
Appeals, G.R. No. 89775, November 26, 1992)
Unless a specific period is fixed in the contract or
the bond, the obligation of the surety subsists so
long as the principal obligation subsists.
Amount of the debt guaranteed
A guarantor or surety may bind himself for less,
but not for more than the principal debtor, both
as regards the amount and the onerous nature of
the conditions. Should he have bound himself for
more, his obligations shall be reduced to the
limits of that of the debtor. (Eastern Assurance and
Surety Corp. vs. Con-Field Construction and
Development Corp., G.R. No. 159731, April 22, 2008)
Similarly, the interest that the surety is obligated
to pay may be less than the interest that is being
charged by the creditor. (Philippine National Bank
vs. Escueta, G.R. No. L-26118, December 31, 1926)
Compensatory interest
If a surety upon demand fails to pay, he can be
held liable for interest, even if in thus paying, the
liability becomes more than that in the principal
obligation. The increased liability is not because
of the contract but because of the default and the
necessity of judicial collection. It should be noted,
however, that the interest runs from the time the
complaint is filed, not from the time the debt
becomes due and demandable. (Philippine National
Bank vs. Luzon Surety Co., Inc., G.R. No. L-29587,
November 28, 1975)
Benefit of Excussion
The guarantor cannot be compelled to pay the
creditor unless:
1. the creditor has exhausted all the property of
the principal debtor, and
2. the creditor has resorted to all of the legal
remedies against debtor. (Art. 2058, NCC)
It is axiomatic that the liability of the guarantor is
only subsidiary. All the properties of the principal
debtor must first be exhausted before his own is
levied upon. Thus, the creditor may hold the
guarantor liable only after judgment has been
obtained against the principal debtor and the
latter is unable to pay, for obviously the
exhaustion of the principal’s property – the
benefit of which the guarantor claims – cannot
even begin to take place before judgment has
been obtained. (Baylon vs. CA, G.R. No. 109941,
August 17, 1999)
It should be clarified that excussion is not a
condition sine qua non for the institution of an
action against a guarantor. (Prudential Bank vs.
Intermediate Appellate Court, et. al., G.R. No. 74886,
December 8, 1992.)
Although an ordinary personal guarantor not a
mortgagor or pledgor may demand the
aforementioned exhaustion, the creditor may,
prior thereto, secure a judgment against said
guarantor, who shall be entitled, however, to a
deferment of the execution of said judgment
against him until after the properties of the
principal debtor shall have been exhausted to
satisfy the obligation involved in the case.
(Southern Motors, Inc. vs. Barbosa, G.R. No. L-9306.
313
May 25, 1956)
When excussion is not required.
1. If the guarantor has expressly renounced it;
2. If he has bound himself solidarily with the
debtor;
3. In case of insolvency of the debtor;
4. When the guarantor has absconded, or
cannot be sued within the Philippines unless
he has left a manager or representative;
5. If it may be presumed that an execution on
the property of the principal debtor would
not result in the satisfaction of the
obligation;
6. If the guarantor did not set it up against the
creditor upon the latter's demand for
payment from him; and
7. If the guarantor did not point out the
creditor available property of the debtor
within Philippine territory, sufficient to cover
the amount of the debt. (Arts. 2059 and
2060, NCC)
Waiver of excussion
The guarantor is not entitled to the benefit of
excussion where the guarantor clearly waived this
right and remedy by making the payment of an
obligation that was yet to be shown to be
rightfully due the creditor and demandable of the
principal debtor. (Philippine Export and Foreign Loan
Guarantee Corp. vs. V.P. Eusebio Construction Corp.,
et al., G.R. No. 140047, July 13, 2004)
Special Security
It is accepted that guarantors have no right to
exhaustion of the properties of the principal
debtor, under Article 2058 of the New Civil Code,
where a pledge or mortgage has been given as a
special security. (Philippine American General
Insurance Company, Inc. vs. Ramos, G.R. No. L-20978,
February 28, 1966)
Filing of case and notice
1. The creditor must file a case against the
debtor alone;
2. In said case, the creditor must ask the court
to notify the guarantor so that he may be
given a chance to interpose defenses
granted to him by law;
3. A judgment in favor of the creditor must be
obtained; and
314
4. Execution of the judgment. (Arts. 2060 and
2061, NCC)
Duties of the Guarantor in Excussion
1. the guarantor must set up the benefit of
excussion against the creditor upon the
latter's demand for payment from him; and
2. the guarantor must point out to the creditor
available property of the debtor within
Philippine territory, sufficient to cover the
amount of the debt.
Failure to comply with these requirements
forecloses his right to set up the defense of
excussion. (Bitanga vs. Pyramid Construction
Engineering Corporation, G.R. No. 173526, August 28,
2008)
A guarantor who desires to avail himself of the
benefit of excussion must demand it in limine, on
the institution of proceedings against him. He
must, moreover, point out to the creditor
property of the principal debtor, not encumbered,
subject to seizure and must furnish a sufficient
sum to have the excussion carried into effect. A
plea which does not meet these requirements
must be disregarded. The property pointed out
by the sureties is not sufficient to pay the
indebtedness; it is not salable; it is so
encumbered that third parties have full
possession under claim of ownership without
leaving to the absconding guardian a fractional or
reversionary interest without determining first
whether the claim of one or more of the
occupants is well founded. The guarantor is not
entitled to the benefit of excussion if in all these
respects the guarantor has failed to meet the
requirements of the Civil Code. (Arroyo vs.
Jungsay, G.R. No. L-10168, July 22, 1916)
Right to Protection
A compromise between the creditor and the
principal debtor benefits the guarantor but does
not prejudice him. That which is entered into
between the guarantor and the creditor benefits
but does not prejudice the principal debtor. (Art.
2063, NCC)
Right to Indemnification
The guarantor who pays for a debtor must be
indemnified by the latter. (Art. 2066, NCC)
If a guaranty is entered into without the
knowledge or consent, or against the will of the
principal debtor, the provisions of Article 1236
and 1237 shall apply. (Art. 2050, NCC)
Whoever pays for another may demand from the
debtor what he has paid, except that if he paid
without the knowledge or against the will of the
debtor, he can recover only insofar as the
payment has been beneficial to the debtor. (Art.
1236, NCC)
Right to Subrogation
The guarantor who pays is subrogated by virtue
to all the rights which the creditor had against the
debtor. (Art. 2067, NCC)
Whoever pays on behalf of the debtor without the
knowledge or against the will of the latter, cannot
compel the creditor to subrogate him in his rights,
such as those arising from a mortgage, guaranty,
or penalty. (Art. 1237, NCC)
Rights of Co-Guarantors
Should there be several guarantors of only one
debtor and for the same debt, the obligation to
answer for the same is divided among all. The
creditor cannot claim from the guarantors except
the shares which they are respectively bound to
pay, unless solidarity has been expressly
stipulated. (Art. 2065, NCC)
Effects of Guaranty between the Guarantor
and the Creditor:
1. Benefit of Excussion or Exhaustion (Art.
2058, NCC)
a. The creditor may hold the guarantor liable
only after judgment has been obtained
against the principal debtor and the latter
is unable to pay. (Aglibot vs. Santia, G.R. No.
185945, December 05, 2012); and
b. Point out the available property (not in
litigation or encumbered) of the debtor
within the Philippines, sufficient to cover
the amount of the debt. (Art. 2060, NCC)
There is nothing procedurally objectionable in
impleading the guarantor under the rule on
permissive joinder of parties. "This is the equity
rule relating to multifariousness. It is based on
trial convenience and is designed to permit the
joinder of plaintiffs or defendants whenever there
is a common question of law or fact. It will save
the parties unnecessary work, trouble and
expense. (Prudential Bank vs. Intermediate Appellate
Court, G.R. No. 74886, December 8, 1992)
It is useless to speak of a guarantor when no
debtor has been held liable for the obligation that
was allegedly secured by such guarantee. The
creditor must first obtain a judgment against the
principal debtor before assuming to run after the
alleged guarantor. (Baylon vs. Court of Appeals, G.R.
No. 109941, August 17, 1999)
Effect of failure of the creditor to exhaust
and resort to all legal remedies
The creditor shall suffer the loss but only to the
extent of the said property, for the insolvency of
the debtor resulting from such negligence. (Art.
2061, NCC)
Not applicable to a contract of suretyship (Arts.
2047[2]2 and 2059[2] NCC)
When guarantor not entitled to the benefit
of excussion (Art. 2059, NCC)
1. Renunciation has been expressly made by the
guarantor;
2. It would be useless because execution on the
property of the principal debtor would not
after all result in the satisfaction of the
obligation; (Not necessary that the debtor be
judicially declared insolvent or bankrupt)
3. When guarantor has bound himself solidarily
with the principal debtor;
4. Insolvency of the debtor; (Must be actual;
proven by unsatisfied writ of execution)
5. When the debtor has absconded or cannot be
sued within the Philippines, unless he has left
a manager or representative;
6. If he is a judicial bondsman or sub-surety;
7. If he fails to interpose it as a defense before
judgment is rendered against him;
8. If the guarantor does not set up the benefit
against the creditor upon the latter’s demand
for payment from him;
a. Demand can be made only after
judgment on the debt
b. Demand must be actual; joining the
guarantor in the suit against the principal
debtor is not the demand intended by law
9. Where the pledge or mortgage has been given
315
 by him as special security.
Procedure When Creditor Sues:
The guarantor cannot be sued with the principal,
much less alone, except in Article 2059.
1. The guarantor is still given the benefit of
exhaustion even if judgment should be
rendered against him and the principal debtor.
His voluntary appearance does not constitute
a renunciation of his right to excussion. The
guarantor may appear so that he may, if he so
desire, set up such defenses as are granted
him by law. (Art. 2062, NCC)
Guarantor cannot set up the defenses if he does
not appear and it may no longer be possible for
him to question the validity of the judgment.
2. A guarantor is entitled to be heard before
execution can be issued against him where he
is not a party in the case involving his principal
(procedural due process). (Ang Tibay vs. CIR,
G.R. No. L-46496, February 27, 1940)
Benefit of Division
Should there be several guarantors of only one
debtor and for the same debt, the obligation to
answer for the same is divided among all. (Art.
2065 [1], NCC) Thus, the obligation shall be joint
among the creditors.
The benefit of division against the co-guarantors
ceases in the same cases and for the same
reasons as the benefit of excussion against the
principal ceases. (Art. 2065 [2], NCC)
Effect if the division is solidary
The guaranty agreement may stipulate that the
obligation of the co-guarantors is solidary. This
relates to the agreement between the guarantors
on one hand and the creditor on the other.
However, solidarity of the obligation of the
guarantors may also be limited to the liability
between themselves. (Art. 2065 [1], NCC; Tupas IV
& Tupas vs. Court of Appeals, G.R. No. 145578,
November 18, 2005)
Solidary Guaranty Clause
This is a provision that makes the guarantors
solidarily liable. This does not make the
316
guarantors solidarily liable with the debtor.
The clause "we jointly and severally agree and
undertake" refers to the undertaking of the two
(2) parties who are to sign it or to the liability
existing between themselves. It does not refer to
the undertaking between either one or both of
them on the one hand and the petitioner on the
other with respect to the liability described under
the trust receipt. Elsewise stated, their liability is
not divisible as between them, i.e., it can be
enforced to its full extent against any one of
them. (Prudential Bank vs. Intermediate Appellate
Court, December 8, 1992.)
Rights of the Guarantor after Payment of
the Principal’s Obligation:
1. Reimbursement
(Art. 2067) The guarantor who pays is subrogated
by virtue thereof to all the rights which the creditor
had against the debtor which comprises of:
a. Total amount of the debt
b. Interest (legal) from the time payment was
made known to the debtor.
c. Expenses incurred by the guarantor after
having notified the debtor that payment had
been demanded of him
d. Damages, if they are due (Art. 2066, NCC)
XPNs to guarantor’s right to
reimbursement:
1. Where the guaranty is constituted without
the knowledge or against the will of the
principal debtor, the guarantor can recover
only insofar as the payment had been
beneficial to the debtor. (Art. 1236, NCC)
2. Payment by a 3rd person who does not
intend to be reimbursed by the debtor is
deemed to be a donation, which, however,
requires the debtor’s consent. But the
payment is in any case valid as to the creditor
who has accepted it. (Art. 1238, NCC)
3. Waiver of the right to demand
reimbursement.
4. In case there is double payment if the
conditions under Article 2071 are present
Double Payment
GR: The creditor, and not the debtor shall be
 liable to the guarantor for reimbursement if the
debtor already paid so long as the following
requisites concur:
1. The guarantor has paid without notifying the
debtor;
2. The debtor is not aware of the payment; and
3. The debtor repeats the payment. (Art. 2070,
NCC)
XPN (debtor is liable):
1. The guaranty is gratuitous;
2. The guarantor was prevented by a fortuitous
event from advising the debtor of the
payment; and
3. The creditor becomes insolvent. (Ibid)
2. Subrogation
Subrogation transfers to the person subrogated,
the credit with all the rights thereto appertaining
either against the debtor or against 3rd persons,
be they guarantors or possessors of mortgages,
subject to the stipulation in conventional
subrogation.
The guarantor who pays is subrogated by virtue
thereof to all the rights, which the creditor had
against the debtor. If the guarantor has
compromised with the creditor, he cannot demand
of the debtor more than what he has really paid.
(Art. 2067, NCC)
This right of subrogation is necessary to enable the
guarantor to enforce the indemnity given in Art.
2066. It arises by operation of law upon payment
by the guarantor. It is not necessary that the
creditor cede to the guarantor the former’s rights
against the debtor. It is not a contractual right.
The right of guarantor who has paid a debt to
subrogation does not stand upon contract but
upon the principles of natural justice. The
guarantor is subrogated by virtue of the payment
to the right of the creditor, not those of the debtor.
If the guarantor paid a smaller amount by virtue
of a compromise, he cannot demand more than he
actually paid. Guarantor cannot exercise the right
of redemption of his principal. (Umutia & Co. vs.
Moreno et al., G.R. No. 8147, Oct. 26, 1914)
Effect of Compromise
If the guarantor has compromised with the
creditor, he cannot demand of the debtor more
than what he has really paid. (Art. 2067, NCC)
Effect if Principal Obligation is Solidary
It has been opined that if the guaranty is in favor
of all or any of the solidary debtors, there is
subrogation in the rights of the creditor against
all the solidary debtors if the guarantor paid the
total obligation. The guarantor may claim
reimbursement from any one of the solidary
debtors. However, if the liability of the debtors is
solidary and the guaranty is in favor only of one
of the solidary debtors, the guarantor who paid
the total obligation may claim reimbursement
from the solidary debtor in whose behalf he paid
the principal obligation. He may also claim
reimbursement from the other solidary debtors
but only up to the extent of the share of each
debtor. With respect to the other solidary
debtors, he has the same right of reimbursement
as the debtor in whose behalf he paid. (AQUINO,
Essentials of Credit Transactions and Insolvency Law
(2021), p. 258)
Effect of payment by guarantor
1. Without notice to debtor – The debtor may
interpose against the guarantor those
defenses which he could have set up against
the creditor at the time the payment was
made, e.g., the debtor can set up against the
guarantor the defense of previous
extinguishment of the obligation by
payment. (Art. 2068, NCC)
2. Before maturity – The guarantor is not
entitled to reimbursement unless the
payment was made with the consent or has
been ratified by the debtor (Ratification may
be express or implied). (Art. 2069, NCC)
Notice to the debtor:
GR: Before the guarantor pay the creditor, he
must first notify the debtor, otherwise the latter
may set up defenses he could have set up against
the creditor (Art. 2068, NCC). If he fails to give
such notice and the debtor repeats payment, the
guarantor can only collect from the creditor and
guarantor has no cause of action against the
debtor for the return of the amount paid by
guarantor even if the creditor should become
insolvent. (Art. 2070, NCC)
XPNs: The guarantor can still claim
reimbursement from the debtor in spite of lack of
317
notice if the following conditions are present: Remedies of Guarantor (Alternative
1. Guarantor was prevented by fortuitous event remedies)
to advise the debtor of the payment;
2. The creditor becomes insolvent; and 1. Obtain release from the guaranty (can only
3. The guaranty is gratuitous. (Article 2070, be exercised against the principal debtor);
NCC) 2. Demand a security that shall protect him
from any proceedings by the creditor, and
When Guarantor May Proceed Against against the danger of insolvency of the
Principal Debtor Even Before Payment debtor. (Art. 2071, NCC)

GR: Guarantor has no cause of action against

ART. 2066 ART. 2071
debtor until after the former has paid the
obligation. Provides for the Provides for the
enforcement of the guarantor’s
XPNs: The guarantor, even before having paid, rights of the protection before he
may proceed against the principal debtor: guarantor/surety has paid but after
1. When he is sued for the payment; against the debtor after he has become
2. In case of insolvency of the principal debtor; he has paid the debt liable
3. When the debtor has bound himself to
relieve him from the guaranty within a Gives a right of action Protective remedy
specified period, and this period has expired; after payment before payment
4. When the debt has become demandable, by
reason of the expiration of the period for Substantive right Preliminary remedy
payment;
5. After the lapse of ten years, when the
Guarantor of 3rd person at request of
principal obligation has no fixed period for its
another may demand payment from:
maturity, unless it be of such nature that it
cannot be extinguished except within a
1. Person who requested him to be a
period longer than ten years;
guarantor;
6. If there are reasonable grounds to fear that
2. Debtor (Art. 2072, NCC)
the principal debtor intends to abscond;
7. If the principal debtor is in imminent danger
Right to contribution of co-guarantor who
of becoming solvent. (Art. 2071, NCC)
pays
In all cases, the action of the guarantor is to
When there are two or more guarantors of the
obtain release from the guaranty, or to demand
same debtor and for the same debt, the one
a security that shall protect him from any
among them who has paid may demand of each
proceedings by the creditor and from the danger
of the others the share which proportionally
of insolvency of the debtor. (Art. 2071, NCC) Art.
owing from him. (Art. 2073, NCC)
2071 is applicable and available to the surety.
(Manila Surety & Fidelity Co., Inc. vs. Batu Construction
& Co., G.R. No. L-9353, May 21, 1957) Restrictions

Effect of Failure to Pay the Guarantor
The guarantor is not entitled to the release from
liability even if the debtor failed to pay the
consideration for acting as a guarantor. The
liability to the creditor who has accepted the
guaranty remains subject to his right of
reimbursement and payment of the consideration
agreed upon with the debtor. (Aquino, Essentials of
Credit Transactions and Insolvency Law, 2021, p. 260)
It is required that the payment made to the
creditor by the guarantor who is seeking for the
reimbursement from his co-guarantor(s) the
share which is proportionately owing him, must
have been made:
a. in virtue of a judicial demand or
b. because the principal debtor is insolvent.
(Sadaya vs. Sevilla, G.R. No. L-17845, April 27,
1967)

318
 Effect of insolvency of any co-guarantor:
If any of the guarantors should be insolvent, his
share shall be borne by the others, including the
paying guarantor, in the same proportion. (Article
2073, NCC)
Defenses
The co-guarantors may set up against the one
who paid, the same defenses which would have
pertained to the principal debtor against the
creditor, and which are not purely personal to the
debtor. (Art. 2074, NCC)
Liability of sub-guarantor in case of
insolvency of guarantor
A sub-guarantor is liable to the co-guarantors in
the same manner as the guarantor whom he
guaranteed. (Art. 2075, NCC)
Extinguishment of Guaranty
1. Extinguished at the same time as the
obligation of the debtor (Art. 2076, NCC);
2. If the creditor voluntarily accepts immovable
or other property in payment of the debt, even
if he should afterwards lose the same through
eviction (Art. 2077, NCC);
3. Release by the creditor in favor of one of the
guarantors, without the consent of the others,
benefits all to the extent of the share of the
guarantor to whom it has been granted (Art.
2078, NCC);
4. Whenever by some act of the creditor, the
guarantors even though they are solidarily
liable cannot be subrogated to the rights,
mortgages and preferences of the former (Art.
2080, NCC);
5. For the same causes as all other obligations
under Art. 1231;
6. Extension granted to the debtor by the
creditor without the consent of the guarantor.
However, the mere failure on the part of the
creditor to demand payment after the debt
has become due does not of itself constitute
any extension of time referred to herein. (Art.
2079, NCC)
The guarantor may also set up against the creditor
all the defenses which pertain to the principal
debtor and are inherent in the debt; but not those
that are purely personal to the debtor. (Art. 2081,
NCC)
XPNs:
1. Creditor did not collect from 3rd persons
2. Obligations payable in installments
3. Waiver by guarantor
4. Extension granted by creditor on bond
5. Extension granted to first tier obligors cannot
prejudice second tier parties
Legal and Judicial Bonds
Bonds
The obligation of a surety often appears in the
form of a bond. The surety business of insurance
companies usually takes the forms of issuance of
bonds.
Kinds of Bonds:
1. Fidelity Bond is a bond that answers for the
loss of an employer who is the obligee, for the
dishonesty of the employee. (Act No. 2711)
2. Surety Bond may be further classified into
the following: (1) Contract Bonds which
include (a) Bid Bond, (b) Performance Bond,
(c) Payment Bond, and (d) Maintenance Bond;
(2) Legal Bonds; and (3) Judicial Bonds;
3. Contract Bonds. As the term implies, this
bond guarantees the performance of
contractual obligations.
a. Bid Bond – has for its purpose the
assurance of the owner of the project, the
good faith of the bidder and that the bidder
will enter into a contract with the project
owner should his proposal be accepted.
b. Performance Bond - is designed to
afford the project owner security that the
bidder (the contractor) will faithfully
comply with the requirements of the
contract awarded to the contractor and
make good damages sustained by the
project owner in case of the contractor’s
failure to so perform. (Trade and Investment
Development Corporation of the Phils vs.
Roblett Industrial and Construction
Corporation, et al., No. 139290, November 11,
2005)
319
 c. Payment Bond – secures the payment of
bills for the labor and materials used in
building a project.
d. Maintenance Bond – answers for breach
of warranties in a building project; the
principal agrees to correct poor
workmanship and to replace defective
materials.
4. Legal Bonds. are bonds that are submitted
“in virtue of a provision of law.” (Article 2082,
NCC) This includes “License and Permit
Bonds” which are bonds imposed by law to
guarantee that the persons concerned will
comply with the provisions of the license or
permit issued to him.
5. Judicial Bonds. are bonds that are issued in
virtue of judicial orders and/or pursuant to the
Rules of Court. Examples are:
a. Replevin Bond – is a bond posted by the
petitioner to repossess a personal
property. The purpose of this bond is to
answer for any and all expenses that the
opposing party may suffer if the petitioner
is not entitled to the remedy of
repossession. (Rule 60, Rules of Court)
b. Supersedeas Bond – is a bond posted by
the losing party as a requirement for
perfecting an appeal. The purposes of the
bond are to stay the execution of the
judgment pending appeal and to answer
for any and all damages that the opposing
party may suffer if it will sustain the inferior
court’s decision.
c. Administrator’s Bond – a pre-condition
for the issuance of the letter of
administration. It is a security for the
satisfaction of any judgment. The property
subject of the attachment is a real or
immovable property. (Rule 81, Rules of
Court)
d. Attachment Bond – it guarantees the
payment of all costs which may be
adjudged to the adverse party and all
damages which he may sustain by reason
of attachment if the court finds that the
principal is not entitled to the remedy of
attachment. (Rule 57, Rules of Court).
320
e. Heir’s Bond – It answers for the payment of
any claim by an heir who has been deprived
of his lawful participation in the estate and/ or
any creditor who has a claim against the
estate which has not been paid. (Rule 74,
Rules of Court)
f. Injunction Bond - shall finally adjudge that
the plaintiff was not entitled to such
provisional remedy. A preliminary injunction
bond is an order by the court at any stage of
an action prior to final judgment, requiring a
person to refrain from doing a particular act.
It shall answer for all the damages which the
party enjoined by order of injunction is
directed, in such amount the court may fix.
(Rule 58 of the Rules of Court).
The rules on the issuance of the Certificates of
Accreditation and Authority for corporate
surety bonds are embodied in Circular No. 04-
970-SC entitled Guidelines on Corporate
Surety Bond issued by the Supreme Court on
August 6, 2004.
Classification of the Insurance
Commission:
In the Rules and Regulations Governing the
Issuance of Bonds in the Philippines issued by the
Insurance Commission, bonds are classified into:
(1) Judicial Civil Bonds; (2) Judicial Criminal
Bonds; (3) Firearms Bonds; (4) Internal Revenue
Bonds; (5) Customs Bonds; (6) Guaranty Bonds;
(7) Fidelity Bonds; (8) Promissory Notes; and (9)
Immigration Bonds (Aquino, Essentials of Credit
Transactions and Insolvency Law, 2021, p. 300;
Insurance Memorandum Circular No. 1-7, March 1,
1977).
Qualifications of a Personal Bondsman:
The bondsman who is to be offered in virtue of a
provision of law or of a judicial order shall have
the qualifications required of a guarantor under
Article 2056 and in special laws. (Art. 2082, NCC)
1. He possesses integrity;
2. He has capacity to bind himself; and
3. He has sufficient property to answer for the
obligation, which he guarantees. (Art. 2056,
NCC)
Pledge or Mortgage in lieu of Bond:
If the person bound to give a bond should not be
able to do so, a pledge or mortgage considered
sufficient to cover his obligation shall be admitted
in lieu thereof. (Art. 2083, NCC)
Benefit of Excussion Not Available to
Judicial Bondsman and Sub-surety:
A judicial bondsman cannot demand the
exhaustion of the property of the principal debtor.
A sub-surety in the same case, cannot demand
the exhaustion of the property of the debtor or
the surety. (Art. 2084, NCC)
Surety
A contract of surety is an agreement where a
party called the surety guarantees the
performance by another party called the principal
or obligor of an obligation or undertaking in favor
of a third party called the obligee. Specifically,
suretyship is a contractual relation resulting from
an agreement whereby one person, the surety,
engages to be answerable for the debt, default or
miscarriage of another, known as the principal.
(Visayan Surety & Insurance Corp. vs. Court of
Appeals, G.R. No. 127261, September 7, 2001)
The Court expounds that a surety’s liability is joint
and several, limited to the amount of the bond,
and determined strictly by the terms of contract
of suretyship in relation to the principal contract
between the obligor and the obligee. It bears
stressing, however, that although the contract of
suretyship is secondary to the principal contract,
the surety’s liability to the obligee is nevertheless
direct, primary and absolute. (The Manila Insurance
Company, Inc. vs. Sps. Amurao, G.R. No. 179628,
January 16, 2013)
Suretyship is deemed to be an insurance contract
only if made by a surety who or which, as such,
is doing an insurance business, i.e., making or
proposing to make, as surety, any contract of
suretyship as a vocation and not merely incidental
to any other legitimate business or activity of the
surety. (De Leon, The Insurance Code of the
Philippines, 2010, p. 42)
Characteristics
1. It is an accessory contract because its
validity depends upon the existence of a
principal obligation guaranteed by it. It
cannot exist without a valid obligation (Art.
2052, NCC). It is indispensable that there
must be a principal contract, thus, if the
principal obligation is void, it also voids.
2. It is subsidiary and conditional because it
takes effect only when the principal fails in
his obligation subject to certain limitations.
(Government vs. Tizon, G.R. No. L-22108, August
30, 1967)
Parties to a contract of suretyship:
1. Principal – is the person whose obligation is
secured by the bond or suretyship. He is the
person who agrees to perform certain acts –
the person who fulfills certain obligations.
(Aquino, Essentials of Credit Transactions
and Banking Laws, 2015, p.235)
2. Surety – is the party who answers for the
debt, default or obligations of the principal.
The liability of surety or sureties shall be joint
and several with the obligor and shall be
limited to the amount fixed in the agreement.
(Ibid.)
3. Obligee – the oblige is the person in whose
favor the bond is issued or the undertaking
of the surety is made. He will be paid or
reimbursed if the principal fails to perform his
obligation. In relation to the obligation of the
principal and the surety, the obligee is the
creditor or the active subject. (Ibid)
Nature of liability of surety
1. Solidary;
2. Limited to the amount of the bond; and
3. Determined strictly by the terms of the contract
of suretyship in relation to the principal
contract between the obligor and the obligee
(Sec. 176, Insurance Code of the Philippines [ICP]).
A surety is merely a collateral contract.
Obligations Secured
A continuing guaranty or suretyship covers all
transactions, including those arising in the future,
which are within the description or contemplation
of the contract of guaranty until the expiration or
termination thereof.
321
A guaranty may be given to secure even future
In standby credit, the In the surety
debts; the amount of which may not be known at beneficiary avoids the contract setting,
the time the guaranty is executed. This is the
burden of litigation there is no duty to
basis for contracts denominated as continuing and receives his indemnify the
guaranty or suretyship. It covers all transactions,
money promptly upon beneficiary until
including those arising in the future, which are
presentation of the the beneficiary
within the description or contemplation of the required documents. establishes the
contract of guaranty, until the expiration or
It may be that the face of the
termination thereof. (Diño vs. CA, G.R. No. 89775, applicant has, obligor’s
November 26, 1992)
performed his performance. The
obligation and that beneficiary may
Surety Distinguished from Standby Letter
the beneficiary’s have to establish
of Credit
presentation of those the fact in
documents is not litigation.
STANDBY LETTER SURETYSHIP rightful.
OF CREDIT

As to the effect of nonperformance of As to who holds the money

the obligation
During litigation to During the
determine whether litigation, the
The beneficiary Upon obligor’s the applicant has in surety holds the
reasonably expects default, the surety fact breached the money and the
that he will receive undertakes to obligation to perform, beneficiary bears
cash in the event of complete the the beneficiary, not most of the cost of
nonperformance. The obligor’s the applicant, holds delay in
Standby letter of performance, the money. performance.
credit has this which often
opposite effect of the involves costs of
surety contract: it determining Parties that use a standby credit and courts
reverses the financial whether the construing such a credit should understand this
burden of parties obligor defaulted allocation of burdens. There is a tendency in
during litigation. (a matter over some quarters to overlook this distinction
which surety and between surety contracts and standby credit and
the beneficiary to reallocate burdens by permitting the obligor or
often litigate) plus the issuer to litigate the performance question
the cost of before payment to the beneficiary. (Transfield
performance. Philippines, Inc. vs. Luzon Hydro Corporation, et al.,
G.R. No. 146717, November 22, 2004, citing J. Dolan,
As to litigation requirement The Law on Letters of Credit, Revised Ed. 2000)

Surety Distinguished from Guaranty

GUARANTY SURETYSHIP

As to existence of liability

Liability depends Surety assumes

upon an independent liability as regular
agreement to pay the party to the
obligation if the undertaking.
primary debtor fails
to do so.

322
 As to collateral Has the right to have Not entitled to the
all the property of the benefit of
Collateral Original promisor debtor and legal exhaustion of the
undertaking remedies against the debtor’s assets
debtor first
As to order of liability exhausted before he
can be compelled to
Guarantor is Surety primarily
pay the creditor.
secondarily liable. liable.

Guaranty and surety are nearly related for there

As to what is protected is a promise to answer for the debt or default of
another. Surety is usually bound with his principal
Insurer of the Insurer of the debt.
by the same instrument executed at the same
insolvency of debtor.
time and on the same consideration. The
guarantor’s own separate undertaking is often
As to availment of the benefit of supported by a consideration separate from that
excussion supporting the contract of the principal; the
original contract of his principal is not his
Guarantor can avail Surety cannot avail contract. (Phil. Export & Foreign Loan Guarantee
of benefit of of such benefit. Corp. vs. V.P. Usebio Construction, Inc., G.R. No.
excussion and 140047, July 13, 2004)
division in case the
creditor proceeds Surety distinguished from Solidary
against him. Obligations

As to when liable to pay SOLIDARY SURETYSHIP

OBLIGATIONS
Guarantor binds Surety undertakes
himself to pay if the to pay if the
principal CANNOT principal does not As to who is liable
PAY. pay.
Solidarity signifies The surety alone
As to notice requirement that the creditor can answers for the
compel any one of entirety of the
Not bound to take Held to know every
the joint and several principal debt.
notice of the non- default of his
debtors to answer
performance of his principal
the entirety of the
principal
principal debt
As to when discharged
As to additional liability
Often discharged by Not discharged by
Solidary co-debtor Surety, outside of the
the mere indulgence mere indulgence of
has no other rights liability, assumes to
of the creditor or the creditor or want
than those pay the debt before
want of notice of of notice of default.
bestowed upon him the property of the
default
in Section 4, principal debtor has
Chapter 3, Title I, been exhausted,
As to the right to the property/assets Book IV of the Civil retains all the other
of the debtor Code. rights, actions and
benefits which
pertain to him.

As to reimbursement

323
 4. Proximate Causation (Garcia vs. Salvador,
In the case of joint In contrast, even as
G.R. No. 168512, March 20, 2007)
and several debtors, the surety is solidarily
the solidary debtor bound with the
Classification of Torts
who effected the principal debtor to
payment to the the creditor, the
A. According to manner of commission
creditor may claim surety who does pay
from his co-debtors the creditor has the
1. Negligent torts – voluntary acts or omissions
only the share which right to recover the
which results in injury to others, without
corresponds to full amount paid, and
intending to cause the same.
each, with the not just any
interest for the proportional share,
2. Intentional torts – The actor desires to
payment already from the principal
cause the consequences of his act or believes
made. debtor or debtors.
the consequences are substantially certain to
result therefrom.
Solidary debtor will Right to full
not be able to reimbursement falls
3. Strict liability – A person whose actions
recover from the co- within the other
caused harm to another may be held
debtors the full rights, actions and
responsible for that harm simply because he
amount already paid benefits which
had acted. In other words, he is liable
to the creditor, pertain to the surety
although without fault (De Leon, Comments and
because the right to by reason of the Cases on Torts and Damages, 2004, p 50).
recovery extends subsidiary obligation
only to the assumed by the B. According to scope
proportional share surety.
of the other co- As a general legal classification, tort encompasses
debtors, and not as a number of different civil causes of action
to the particular providing a private remedy, almost always in the
proportional share form of money damages, for an injury to a person
of the solidary caused by the tortuous conduct of another Each
debtor who already tort is separately named and defined Although
paid. some rules or principles are common to various
(Escaño vs. Ortigas, Jr., G.R. No. 151953, June 29, forts or group of torts, there is no universal
2007) formula for tort liability. (Aquino, Torts and
Damages, 2002, p 1).
XIII. TORTS
Quasi-Delict or Culpa Aquiliana
A. TORTS
Whoever by act or omission causes damage to
An unlawful violation of private right, not created another, there being fault or negligence, is
by contract and which gives rise to action for obliged to pay for the damage done. Such fault
damages. (Aquino, Torts and Damages, 2019, p. or negligence, if there is no pre-existing
1) contractual relation between the parties, is called
a quasi-delict and is governed by the provisions
“Tort” consists in the violaton of a right given or of this Chapter. (Art. 2176, NCC)
the omission of a duty imposed by law. Simply
stated, tort is a breach of legal duty. (Naguiat vs. The concept of quasi-delict in Art. 2176 is broad;
NLRC, G.R. No. 116123, March 13, 1997) it includes not only injuries to persons but also
damage to property. (Cinco vs. Canonoy, GR No.
1. ELEMENTS L-33171, May 31, 1979)

1. Duty Elements of Quasi-Delict

2. Breach (1) an act or omission;
3. Injury

324
(2) the presence of fault or negligence in the August 26, No. L-48006,
performance or non-performance of the act; 2002). July 8, 1942).
(3) injury;
(4) a causal connection between the negligent
act and the injury; and
(5) no pre-existing contractual relation. (St.
Martin Polyclinic, Inc. vs. LWU Construction
As to the Existence of Pre-Existing
Corporation, GR No. 217426, Dec. 4, 2017) Contractual Obligation
No pre-
2. CULPA AQUILIANA v. CULPA existing
CONTRACTUAL v. CULPA CRIMINAL obligation
(except the
Culpa Culpa Culpa duty to be There is pre-
Aquiliana Contractual Criminal careful in all existing
human obligation (a
As to the Basis of Liability
actuations contract, None.
Obligation
(Huang vs. either express
arises from
Philippine or implied)
the breach of Existence of
Fault or Hoteliers, Inc. (Ibid.)
the contract a law
negligence GR No.
because of clearly
resulting in 180440,
defendant’s punishing
damage or December 5,
failure to the act
injury to 2012).
exercise due (Nullum
another (Art. As to the Employer’s Defense of
care in its crimen sine
2176, NCC). Exercising the Diligence of “Good Father
performance lege).
of a Family” in the Selection and
(Art. 1173,
Supervision of his Employees
NCC).
As a GR, a
As to the Nature of Negligence complete
Negligence is proper
merely defense.
incident to the However,
Direct,
performance even if the
substantive
of an employer can
and
obligation prove the
independent Direct,
already diligence in
(Huang vs. substantive
existing the selection
Philippine and
because of a and
Hoteliers, Inc. independen Not a
contract supervision
GR No. t proper
(Huang vs. (the latter Not a
180440, defense
Philippine aspect has not complete and
December 5, (Albano,
Hoteliers Inc., been proper
2012). Torts and
GR No. established defense.
180440, Dec. Damages,
herein) of the
5, 2012). supra at 7).
employee, still
As to the Proof Needed if he ratifies
Preponderanc the wrongful
Preponderanc
e of evidence acts or take
e of evidence
(Rule 133, Proof no step to
(Rule 133,
Section 1, beyond avert further
Section 1,
Rules of reasonable damage, the
Rules of
Court; doubt employer
Court;
Casupanan vs. (Ibid.). would still be
Barredo vs.
Laroya, GR liable.
Garcia, GR
No. 145391, (Spouses

325
Fontanilla vs. Governed by
Hon. Article 2176; Governed
Governed by
Maliaman, GR Articles 1172- by Article
Arts. 1170-
No. L-55963, 1174 are also 365 of the
1174 of the
December 1, applicable Revised
Civil Code.
1989). (Art. 2178, Penal Code.
As to the Presumption of Negligence NCC).
The
presumption 3. VICARIOUS LIABILITY
of negligence
in culpa It is also known as the doctrine of imputed
contractual negligence.
immediately
attaches by a A person is not only liable for one’s own quasi-
failure of the delictual acts, but also for those persons for
covenant or whom one is responsible for. (Art. 2180, NCC)
its tenor (FGU
Insurance Liability of Parents and Other Persons
Corporation Exercising Parental Authority
vs. G.P.
No Sarmiento The basis of liability of parents for the acts or
presumption Trucking omissions of their minor children is the parental
of negligence. Corporation, authority that they exercise over them. Their
Injured party GR No. liability is a necessary consequence of such
The authority which includes instructing, controlling
must prove 141910, Aug.
innocence and disciplining of the child. (Tamargo vs. CA, G.R.
the negligence 6, 2002)
of the No. 85044, June 3, 1992)
of the
accused is
defendant In culpa
presumed a. If Child is Minor
(Cangco vs. contractual,
until the
Manila the plaintiff
contrary is Parents and other persons exercising parental
Railroad only needs to
proven. authority shall be civilly liable for the injuries and
Company, GR establish the
damages caused by the acts or omissions of their
No. L-12191, existence of
unemancipated children living in their company
October 14, the contract
and under their parental authority. (Art. 221, FC)
1918). and the
obligor’s
b. If at Least 18 but Below 21
failure to to
perform his
The vicarious liability of the parents or guardians
obligation
exercising parental authority shall continue to be
(Torres-
applicable provided the following conditions are
Madrid
satisfied:
Brokerage,
i. the age of the child is at least 18 but below
Inc. vs. FEB
21;
Mitsui Marine
ii. the child is living in their company. (Art.
Insurance Co.
2180, NCC)
Inc., GR No.
194121, July
c. In the Absence of Both Parents or Guardian
11, 2016).
As to the Nature of the Right Violated
The parental authority shall be exercised by the
Private Right Private Right Public Right following persons:
As to the Governing Law
a) The surviving grandparents;

326
b) The oldest brother or sister, over twenty-one
years of age, unless unfit or disqualified; and
c) The child’s actual custodian, over twenty-one
years of age, unless unfit or disqualified.
(Arts. 214 and 216, FC)
Hence, they are civilly liable only in such cases
where both parents are dead, absent or
otherwise incapacitated to perform their duty.
Liability of Employers
Owners and managers of an establishment or
enterprise are responsible for damages caused by
their employees in the service of the branches in
which the latter are employed or on the occasion
of their functions. Employers shall be liable for
the damages caused by their employees and
household helpers acting within the scope of their
assigned tasks, even though the former are not
engaged in any business or industry. (Art. 2180,
NCC)
When the employee causes damage due to his
own negligence while performing his own duties,
there arises the juris tantum presumption that the
employer is negligent. (Reyes vs. Doctrolero, G.R.
No. 185597, August 2, 2017)
Requisites for Employer’s Presumed Liability
1. Existence of an employer-employee
relationship; and
2. That the employee caused the injury while he
acted within the scope of his or her assigned
tasks. (Caravan Travel and Tours International,
Inc. vs. Abejar, 783 SCRA 368 (2016).
The burden of proving that the employee was
acting within the scope of his assigned task is
incumbent upon the plaintiff and not the
employer. (Rabuya, Pre-bar Reviewer in Civil Law,
2021, p. 575)
Employer’s Defense
To avoid liability for a quasi-delict committed by
his employee, an employer must overcome the
presumption by presenting convincing proof that
he exercised the care and diligence of a good
father of a family in the selection and supervision
of his employee. (Aquino, Torts and Damages, 2005,
p.701-702)
Nature of the Liability
The liability of the employer for the negligent
conduct of the subordinate is direct and
primary.(Aquino, Torts and Damages, 2005, p.
688)
Registered Owner Rule
It is well settled that in case of motor vehicle
mishaps, the registered owner of the motor
vehicle is considered as the employer of the
tortfeasor-driver, and is made primarily liable for
the tort committed by the latter under Article
2176, in relation with Article 2180, of the Civil
Code. (Filcar Transport Services vs. Jose A. Espinas,
G.R. No. 174156, June 20, 2012)
The main aim of motor vehicle registration is to
identify the owner so that if any accident
happens, or that any damage or injury is caused
by the vehicle on the public highways,
responsibility therefor can be fixed on a definite
individual, the registered owner. Instances are
numerous where vehicles running on public
highways caused accidents or injuries to
pedestrians or other vehicles without positive
identification of the owner or drivers, or with very
scant means of identification. It is to forestall
these circumstances, so inconvenient or
prejudicial to the public, that the motor vehicle
registration is primarily ordained, in the interest
of the determination of persons responsible for
damages or injuries caused on public highways.
(Erezo, et al. vs. Jepte, G.R. No. L-9605, September
30, 1957)
 The defense of due diligence in the selection
and supervision of the employee is not
available if the defendant is sued under the
Revised Penal Code.
 One who hires an independent contractor but
controls the latter’s works is responsible also
for the latter’s negligence. (Cuison vs. Norton
and Harrison Co., G.R. No. L-32774, October 14,
1930)
Liability of Schools, Administrators and
Teachers
Teachers or heads of establishments of arts and
trades shall be liable for damages caused by their
pupils and students or apprentices, so long as
they remain in their custody. (Art. 2180, NCC)
327
This is applicable to all schools, academic as well
as non-academic.
The school, its administrators and teachers, or
the individual, entity or institution engaged in
child are shall have special parental authority and
responsibility over the minor child while under
their supervision, instruction or custody.
Authority and responsibility shall apply to all
authorized activities whether inside or outside the
premises of the school, entity or institution. (Art.
218, FC)
When student is considered under custody
The student is in the custody of the school
authorities as long as he is under the control and
influence of the school and within its premises,
whether the semester or school year has not yet
begun or has already ended. (Amadora vs. CA, G.R.
No. L-47745, April 15, 1988)
Enrollment Contract Rule
Institutions of learning have the “built-in”
obligation of providing a conducive atmosphere
for learning, an atmosphere where there are no
constant threats to life and limb, and one where
peace and order are maintained (PSBA vs. CA, G.R.
No. 84698, February 4, 1992).
Liability of Schools
GR: Schools are not liable as party defendants.
XPNs:
1. Schools are expressly made liable. (Art. 218,
FC)
2. School’s liability as an employer. (St. Francis
High School vs. CA, G.R. No. 82465, February
25, 1991)
3. School has liability based on contract (PSBA
case); thus:
a. If the culprit is a teacher, sue school as
employer (St. Francis High School vs. CA,
G.R. No. 82465, February 25, 1991)
b. If culprit is a stranger, sue school based
on contract (PSBA vs. CA, G.R. No.
84698, February 4, 1992).
c. If culprit is a student apply Art. 2180.
328
Liability of the State
The liability of the State has two aspects:
(1) Its public or governmental aspect where it is
liable for the tortious acts of special agents
only;
(2) Its private or business aspect where it
becomes liable as an ordinary employer.
The State is responsible in like manner when it
acts through a special agent; but not when the
damage has been caused by the official to whom
the task done properly pertains, in which case
what is provided in article 2176 shall be
applicable. (Art. 2180, NCC)
Test of Liability
1. If Discharging Government Functions
GR: If the injury is caused in the course of the
performance of a governmental function or duty,
the principle of non-suability of the State applies.
Hence, the State is not liable. (DOH vs. Phil Pharma,
G.R. No. 182358, February 20, 2013)
XPN: The State is liable only for torts caused by
its special agents, specially commissioned to
carry out the acts complained of outside of such
agent’s regular duties. (E. Merritt vs. Government of
the Philippine Islands, G.R. No. L-11154, March 21,
1916)
XPN to XPN: The State is not liable for the
damage caused by public officials who are in the
performance of their usual governmental
functions. The said public official may be held
liable for the commission of quasi-delict. (Art.
2180, NCC)
2. If Discharging Private or Proprietary Functions
If the State or the LGUs engages in private or
proprietary functions, it becomes liable as an
ordinary employer.
▪ Provinces, Cities and Municipalities are liable
for damages for the death or injuries suffered
by any person, by reason of the defective
condition of roads, streets, bridges, public
buildings, and other public works under their
control and supervision.
 Under Article 2189 of the Civil Code, it is not
necessary for the liability therein established
to attach that the defective roads or
streets belong to the province, city or
municipality from which responsibility is
exacted. What said article requires is that the
province, city or municipality have either
"control or supervision" over said street or
road (City of Manila vs. Teotico G.R. No. L-23052
Jan. 29, 1968).
Joint tortfeasors
Joint tortfeasors are two or more persons who act
together in committing a wrong, or contribute to
its commission, or assist or participate therein
actively and with common intent, so that injury
results to a third person from the joint wrongful
act of the wrongdoers. (De Leon, Comments and
Cases on Torts and Damages, 2004, p 17).
Liability of Joint Tortfeasor
Joint tortfeasors are solidarily liable for the
resulting damage of a wrongful act, (Art. 2194,
NCC)
Joint tort-feasors are each liable as principals, to
the same extent and in the same manner as if
they had performed the wrongful act themselves.
It is likewise not an excuse for any of the joint
tort-feasors that individual participation in the
tort was insignificant as compared to that of the
other. (Malvar vs. Kraft Foods, G.R. No. 183952,
September 9, 2013)
4. RES IPSA LOQUITUR
Res ipsa loquitur is a Latin phrase which literally
means “the thing or the transaction speaks for
itself.” It holds a defendant liable where the thing
which caused the injury complained of is shown
to be under the latter’s management and the
accident is such that, in the ordinary course of
things, cannot be expected to happen if those
who have its management or control use proper
care. (Rabuya, Pre-bar Reviewer in Civil Law, 2021, p.
570)
Elements of Res ipsa loquitur
1. The accident is of a kind which ordinarily does
not occur in the absence of someone's
negligence;
2. It is caused by an instrumentality within the
exclusive control of the defendant or
defendants; and
3. The possibility of contributing conduct which
would make the plaintiff responsible is
eliminated. (Ramos vs. CA, G.R. No. 124354,
December 29, 1999)
5. LAST CLEAR CHANCE
The negligence of the plaintiff does not preclude
a recovery for the negligence of the defendant
where it appears that the defendant, by
exercising reasonable care and prudence, might
have avoided injurious consequences to the
plaintiff notwithstanding the plaintiff’s
negligence.
Even though a person’s own acts may have
placed him in a position of peril, and an injury
results, the injured person is entitled to recovery.
(Rabuya, Pre-bar Reviewer in Civil Law, 2021, p. 569)
Elements of Last Clear Chance
1. The plaintiff placed themselves in the
situation of danger because of their own
negligence, became unable to escape from
such position by the use of ordinary care,
either because it became physically
impossible for him to do so or because he
was totally unaware of the danger;
2. The defendant knew that the plaintiff was in
a position of danger and further knew, or in
the exercise of ordinary care, should have
known, that the plaintiff was unable to
escape therefrom; and
3. That thereafter, the defendant had the last
clear chance to avoid the accident by the
exercise of ordinary care but failed to
exercise such last clear chance, and the
accident occurred as a proximate result of
such failure. (De Leon, Comments and Cases on
Torts and Damages, 2004, p. 250)
When inapplicable
This doctrine of last chance has no application to
a case where a person is to act instantaneously,
and if the injury cannot be avoided by using all
means available after the peril is or should have
been discovered (Ibid).
329
It applies in a suit between the owners and
drivers of colliding vehicles. It does not arise
where a passenger demands responsibility from
the carrier to enforce its contractual obligations.
For it would be inequitable to exempt the
negligent driver and its owners on the ground
that the other driver was likewise guilty of
negligence (Philippine Rabbit Bus Lines, Inc. vs.
Intermediate Appellate Court, et al. G.R. Nos. 66102-
04, August 30, 1990).
6. DAMNUM ABSQUE INJURIA
Under this principle, the proper exercise of a
lawful right cannot constitute a legal wrong for
which an action will lie although the act may
result in damage to another, for no legal right has
been evaded (Custodio vs. CA, G.R. No. 116100,
February 9, 1996).
Cosmos Bottling Company, Inc., G.R. No. 164749,
March 15, 2017)
The proximate cause is that “which in natural and
continuous sequence, unbroken by any efficient
intervening cause, produces the injury and
without which the result would not have
occurred.” (38 Am. Jur. 695; Fernando vs. Court of
Appeals, G.R. No. 92087, May 8, 1992)
This doctrine is applicable only in actions for
quasi-delict, not in actions involving breach of
contract.
Efficient intervening cause
An efficient intervening cause is one that destroys
the causal connection between the negligent act
and injury and thereby negatives liability. (Morril
v. Morril, 60 ALR 102, 104 NJL 557)

Damnum Et Damnum Absque C. NEGLIGENCE

Injuria Injuria
Negligence is the omission to do something which
As to invasion of legal right a reasonable man, guided by those
considerations which ordinarily regulate the
Legal Injury or the Actual damage sustained
conduct of human affairs, would do, or the doing
illegal invasion of a by a person (harm or loss
of something which a prudent and reasonable
legal right. to his person or property)
man would not do. (Layugan vs. IAC G.R. NO. 73998,
that is not considered by November 14, 1998).
law as an injury (i.e.,
legal injury). The fault or negligence of the obligor consists in
the omission of that diligence which is required
As to resulting legal injury
by the nature of the obligation and corresponds
with the circumstances of the persons, of the time
Damage resulting Damage does not result
and of the place. (Art. 1173, NCC)
in legal injury. in a legal injury since the
loss or harm was not the
The defendant is not guilty of negligence if in
result of a violation of a
doing the alleged negligent act, he used that
legal duty or right.
reasonable care and caution which an ordinary
As to who borne the consequences prudent person would have used in the same
situation. (Picart vs. Smith, G.R. No. L-12219 March
Consequences Consequences must be 15, 1918)
must be borne by borne by the injured
the one who person alone. Standard of diligence provided for under
caused the the NCC
damage.
Bonus Pater Familias or that of a good father of
a family. (Art. 1163, NCC)
B. PROXIMATE CAUSE
The law requires a man to possess ordinary
In order for liability from negligence to arise, capacity to avoid harming his neighbors unless a
there must be not only proof of damage and clear and manifest incapacity is shown; but it
negligence, but also proof that the damage was does not generally hold him liable for
the consequence of the negligence. (Abrogard vs. unintentional injury unless, possessing such

330
capacity, he might ought to have foreseen the
danger. (Corliss vs. Manila Railroad Co., G.R. No. L-
21291, March 28, 1969).
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 (Art. 1173 [2], NCC).
Degrees of negligence
1. Simple Negligence - Want of slight of care
and diligence only. (LBC Air Cargo vs. CA, G.R.
No. 101683 February 23, 1995)
2. Ordinary Negligence - results when an
individual fails to do something a reasonably
careful person would do or does something a
reasonably careful person would not do in
that type of situation. Aquino, Torts and
Damages, 2005, p. 129-130)
3. Gross Negligence - heedless and palpable
violation of the legal obligation to others'
rights.(Ibid)
1. STANDARD OF CARE
One who suddenly finds himself in a place of
danger, and is required to act without time to
consider the best means that may be adopted to
avoid the impending danger, is not guilty of
negligence, if he fails to adopt what subsequently
and upon reflection may appear to have been a
better method, unless the danger in which he
finds himself is brought about by his own
negligence. (DELSAN transport lines., vs. C & A
construction, inc., G. R. No. 156034 - October 1, 2003)
Diligence required of motorists
While the duty of using reasonable care falls alike
on a motorist and a bicyclist, due to the inherent
differences in the two vehicles, more care is
required from the motorist to fully discharge the
duty than from the bicyclist. Simply stated, the
physical advantages that the motor vehicle has
over the bicycle make it more dangerous to the
bicyclist than vice versa. (Heirs of Completo vs.
Albayda, G.R.172200, July 6, 2010)
Diligence required of gun store owners
A higher degree of care is required of someone
who has in his possession or under his control an
instrumentality extremely dangerous in
character, such as dangerous weapons or
substances. (Pacis vs. Morales, G.R. No. 169467,
February 25, 2010)
Diligence required of children
The standard of conduct to which a child must
conform for his own protection is that degree of
care ordinarily exercised by children of the same
age, capacity, discretion, knowledge and
experience under the same or similar
circumstances. (Ylarde vs. Aquino, G.R. No. L-33722
July 29, 1988)
Diligence required of pharmacists
The highest practicable degree of prudence,
thoughtfulness, and vigilance, and most exact
and reliable safeguards consistent with the
reasonable conduct of the business, in order that
human life may not be constantly be exposed to
the danger flowing from the substitution of
deadly poisons for harmless medicine. In other
words, the care required must be commensurate
with the danger involved, and the skill employed
must correspond with the superior knowledge of
the business which the law demands. (US vs.
Pineda, G.R. No. L-12858, January 22, 1918)
Diligence required of physicians
A physician’s duty to his patient relates to his
exercise of the degree of care, skill and diligence
which physicians in the same general
neighborhood, and in the same general line of
practice, ordinarily possess and exercise in like
cases. (Dela Torre vs. Imbuido, G.R. No. 192973
September 29, 2014)
Unreasonable risk of harm
An act may be negligent if it is done without the
competence that a reasonable person in the
position of the actor would recognize as
necessary to prevent it from creating an
unreasonable risk of harm to another. Those who
undertake any work calling for special skills are
required not only to exercise reasonable care in
what they do but also possess a standard
minimum of special knowledge and ability.
Every man who offers his services to another, and
is employed, assumes to exercise in the
employment such skills he possesses, with a
331
reasonable degree of diligence. In all these
employments where peculiar skills is requisite, if
one offers his services he is understood as
holding himself out to the public as possessing
the degree of skill commonly possessed by others
in the same employment, and if his pretensions
are unfounded, he commits a species of fraud on
every man who employs him in reliance on his
public profession. (De Leon, Comments and Cases on
Torts and Damages, 2004, p. 192)
2. PRESUMPTIONS
In motor vehicle mishaps
Unless there is proof to the contrary, it is
presumed that a person driving a motor vehicle
has been negligent if at the time of the mishap,
he was violating any traffic regulation. (Art. 2185,
NCC)
There is no presumption of negligence if there
was no causal connection between the traffic
violation and the injury. (Tison vs. Sps Pomasin,
G.R.173180, 2012)
Possession of dangerous weapons or
substance
There is a prima facie presumption of negligence
on the part of the defendant if the death or injury
results from his possession of dangerous
weapons or substances, such as firearms and
poison, except when the possession or use
thereof is indispensable in his occupation or
business. (Art. 2188, NCC)
Common carriers
There is a presumption of negligence when there
is a breach of contract (Art. 1733, NCC).
Contributory negligence of plaintiff
Contributory negligence is conduct on the part of
plaintiff which falls below the standard of conduct
to which he should conform for his own
protection and cooperates with the negligence of
defendant in bringing about the plaintiff’s harm.
The plaintiff may recover damages but the courts
shall mitigate the damages to be awarded. (Art.
2179, NCC)
Note: What is applicable in our jurisdiction is the
“modified’’ form of comparative negligence. This
332
is evident from the language of Article 2179.
When negligence of the plaintiff is the sole cause
or the proximate cause of his injury, he cannot
recover, but if his negligence only contributes
remotely or otherwise but not proximately, to his
injury, he is deemed partly responsible and his
recovery shall be diminished in proportion to the
amount of fault attributable to him ( De Leon,
Comments and Cases on Torts and Damages, 2004, p.
239-240).
D. DAMAGES
1. GENERAL PROVISIONS
Damages – A sum of money which the law
awards or imposes as pecuniary compensation,
recompense or satisfaction for an injury done or
a wrong sustained as a consequence of the
breach of some duty or violation of some right.
(PNB vs. RBL Enterprise, G. R. No. 149569, May 28,
2004)
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.
(People vs. Ballesteros G.R. No. 120921, January 29,
1998)
Damage – is the detriment, injury or loss which
is occasioned by reason of fault of another in the
property or person. (De Leon, Comments and Cases
on Torts and Damages, 2004, p. 628)
Injury v. Damage
Injury is the illegal invasion of a legal right.
Damage is the loss, hurt, or harm which results
from the injury. Damages is the recompense or
compensation awarded for the damage suffered.
(Custodio vs. CA, G.R. No. 116100, February 9, 1996).
Classification of Damages
A. Under Art. 2197 of the New Civil Code:
1. Moral
2. Exemplary or corrective
3. Nominal
4. Temperate or moderate
5. Actual or compensatory
6. Liquidated
B. According to purpose
1. Compensatory
2. Punitive
C. According to manner of determining the
amount of indemnity
1. Conventional
It is conventional if stipulated by the parties to a
contract.
2. Non-Conventional
It is non-conventional if it is not agreed upon or
predetermined.
Special and ordinary
Ordinary damages are those which necessarily
and by implication of law result from the act or
omission complained of.
Special damages are those which result directly
but not necessarily or by implication of law, from
the act or omission complained of and exist only
because of special circumstances.
The first may be awarded without the second,
while the second, when proper, are added to the
first. (De Leon, Comments and Cases on Torts and
Damages, 2004, p. 561)
2. KINDS OF DAMAGES
a. Actual and Compensatory Damages
Actual or compensatory damages are those
awarded in satisfaction of, or in recompense for,
loss or injury sustained. They proceed from a
sense of natural justice and are designed to repair
the wrong that has been done, to compensate for
the injury inflicted and not to impose a penalty.
In actions based on torts or quasi-delicts, actual
damages include all the natural and probable
consequences of the act or omission complained
of. (Art. 2199, NCC).
Two kinds of actual or compensatory
damages:
1. One is the loss of what a person already
possesses (daño emergente),
2. Failure to receive as a benefit that would have
pertained to him (lucro cesante).
The purpose of the law in awarding actual
damages is to repair the wrong that has been
done, to compensate for the injury inflicted, and
not to impose a penalty. (Algarra vs. Sandejas, G.R.
No. 8385, March 24, 1914)
Except as provided by law or by stipulation, one
is entitled to an adequate compensation only for
such pecuniary loss suffered by him as he has
duly proved. Such compensation is referred to as
actual or compensatory damages.
In the absence of competent proof on the actual
damage suffered, a party is entitled to nominal
damages, which, as the law says, is adjudicated
in order that a right of the plaintiff, which has
been violated or invaded by defendant, may be
vindicated and recognized, and not for the
purpose of indemnifying the plaintiff for any loss
suffered. (PNOC Shipping and Transport Corporation
vs. CA, G.R. No. 107518, October 8, 1998)
Manner of Determination
To justify an award for actual damages, there
must be competent proof of the actual amount of
loss. Credence can be given only to claims duly
supported by receipts. (ComSavings Bank vs.
Spouses Danilo, G.R. No. 170942, August 28, 2013)
Claimants must produce competent proof or the
best evidence obtainable such as receipts to
justify an award therefore. Actual or
compensatory damages cannot be presumed but
must be proved with reasonable certainty. (People
vs. Ereño, G.R. No. 124706, February 22, 2000)
Requisites to award actual damages:
1. The loss is alleged and proved
2. The loss is not speculative. (General
Enterprises, Inc. vs. Lianga Bay Logging, Co., Inc.,
G.R. No. L-18487, August 31, 1964)
Component elements of actual
damages/actual damages may be
recovered
1. For loss or impairment of earning capacity in
case of temporary or permanent physical
injury. (Art. 2205, NCC)
333
2. For injury to the plaintiff’s business standing
or commercial credit (Art. 2205, NCC)
3. For attorney’s fees and expenses of litigation
4. Interest
5. For value of the loss suffered (Art. 2200,
NCC)
6. Unrealized profits (Art. 2200, NCC)
7. Indemnity for Death and loss of earning
capacity of the deceased (Art. 2206 NCC)
8. Support for Compulsory Heirs
When victim is unknown
The fact that the victim remains unknown and no
heirs have come forward, does not warrant the
elimination of civil indemnity. (People vs. Guzman,
G.R. No. 8385, April 25, 1994).
Proving the loss
GR: Loss must be proved before one can be
entitled to damages.
XPNs: Loss need not be proved in the following
cases:
1. Liquidated damages previously agreed upon
(Art. 2226, NCC) Liquidated damages take
the place of actual damages except when
additional damages are incurred.
2. Forfeiture of bonds in favor of the
government for the purpose of promoting
public interest or policy (Far Eastern Surety and
Insurance Co. vs. CA, No. L-12019, October 16,
1958).
3. Loss is presumed (Manzanares vs. Moreta,
G.R. No. 12306, October 22, 1918).
4. When the penalty clause is agreed upon in
the contract between the parties (Art. 1226,
NCC).
Civil liability ex delicto v. Actual or
compensatory damages distinguished
Civil Indemnity Ex Delicto can be awarded
without need of further proof than the fact of
commission of the felony while Actual or
Compensatory Damages to be recoverable must
additionally be established with reasonable
degree of certainty (People vs. Dianos, G.R. No.
119311, October 07, 1998).
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How to ascertain amount of actual and
compensatory damage (Evidence of Actual
Damage)
The amount of the damages should be
determined with reasonable certainty. It cannot
be simply based on the mere allegation of a
witness without any tangible claim, such as
receipts or other documentary proofs to support
such claim (Consolidated Industrial Gases, Inc. vs.
Alabang Medical Center, Inc., G.R. No. 181983,
November 13, 2013).
 Rule applies to civil and criminal cases
(People vs. Abaño y Cañares, G.R. No.
188323, February 21, 2011)
GR: Documentary evidence should be presented
to substantiate the claim for damages for loss of
earning capacity.
XPN: Damages for loss of earning capacity may
be awarded despite the absence of documentary
evidence when:
1. The deceased is self-employed and earning
less than the minimum wage under current
labor laws, in which case, judicial notice may
be taken of the fact that in the deceased's
line of work no documentary evidence is
available; or
2. The deceased is employed as a daily wage
worker earning less than the minimum wage
under current labor laws (Philippine Hawk
Corporation vs. Vivian Tan Lee, G.R. 166869, Feb.
16, 2010).
If amount admitted by a party
Even if there are no receipts and yet the amount
claimed is admitted by a party, it should be
granted (People vs. Abolidor, G.R. No. 133380,
February 13, 2004).
Determination of amount of damages
recoverable
Much is left to the discretion of the court
considering the moral and material damages
involved. There can be no exact or uniform rule
for measuring the value of a human life.
The life expectancy of the deceased or of the
beneficiary, whichever is shorter, is an important
factor. Other factors that are usually considered
are:
1. Pecuniary loss to plaintiff or beneficiary;
2. Loss of support;
3. Loss of service;
4. Loss of society;
5. Mental suffering of beneficiaries; and
6. Medical and funeral expenses.
 The formula that has gained acceptance
over time has limited recovery to net
earning capacity. The premise is
obviously that net earning capacity is the
person’s capacity to acquire money, less
the necessary expense for his own living
(Philtranco Service Enterprises vs. Felix Paras
and Inland Trailways Inc., G.R. No. 161909,
April 25, 2012).
Computation of Unearned Income
Formula:
Net Earning Capacity (x) = Life Expectancy X
(Gross Annual Income LESS Living Expenses)
Legend:
Net Earning Capacity = Life Expectancy x (Gross
Annual Income – Living Expenses)
Life Expectancy = 2/3 x (80 – Age of the
Deceased)
Living Expenses = 50% of gross annual income.
Basis of Life Expectancy
Life expectancy should not be based on the
retirement age of government employees, which
is pegged at 65. In calculating the life expectancy
of an individual for the purpose of determining
loss of earning capacity under Art. 2206 (1) of the
NCC, it is assumed that the deceased would have
earned income even after retirement from a
particular job (Smith Bell Dodwell Shipping Agency
Corp. vs. Borja, G.R. No. 143008, June 10, 2002).
Heirs cannot claim as damages the full
amount of earnings of the deceased
Said damages consist, not of the full amount of
his earnings, but of the support they received or
would have received from him had he not died in
consequence of the negligence of the bus' agent.
Stated otherwise, the amount recoverable is not
loss of the entire earning, but rather the loss of
that portion of the earnings which the beneficiary
would have received. In other words, only net
earnings, not gross earning, are to be considered.
In fixing the amount of that support, the
"necessary expenses of his own living" should be
deducted from his earnings. Earning capacity, as
an element of damages to one's estate for his
death by wrongful act, is necessarily his net
earning capacity or his capacity to acquire money,
less the necessary expense for his own living.
(Villa Rey Transit, Inc. vs. CA, et al., G.R. No. L-25499,
Feb. 18, 1970)
Medical Expenses are in the nature of
actual damage
Medical expenses are in the nature of actual
damages which should be duly proved and the
award for actual damages cannot be made on the
basis of the doctor’s prescription alone. (People vs.
Enguito, G.R. No. 128812, Feb 28, 2000)
Adjustment fees do not constitute actual
damages
Adjustment fees and expense of drivers in the
recovery of cargo lost at sea done voluntarily,
though unsuccessfully, does not constitute actual
damages. (Schmitz Transport & Brokerage Corp. vs.
Transport Venture, Inc., G.R. No. 150255, April 22,
2005)
Attorney’s Fees and Expenses of Litigation
In the absence of stipulation, attorney’s fees and
expenses of litigation, other than judicial costs,
cannot be recovered, except:
1. When exemplary damages are awarded;
2. When the defendant’s act or omission has
compelled the plaintiff to litigate with third
persons or to incur expenses to protect his
interest;
3. In criminal cases of malicious prosecution
against the plaintiff;
4. In case of a clearly unfounded civil action or
proceeding against the plaintiff;
5. Where the defendant acted in gross and
evident bad faith in refusing to satisfy the
plaintiff’s plainly valid, just and demandable
claim;
6. In actions for legal support;’
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7. In actions for the recovery of wages of
household helpers, laborers and skilled
workers;
8. In actions for indemnity under workmen’s
compensation and employer’s liability laws;
9. In a separate civil action to recover civil
liability arising from a crime;
10. When at least double judicial costs are
awarded;
11. In any other case where the court deems it
just and equitable that attorney’s fees and
expenses fees is proper if the parties stipulate
it.
The law allows a party to recover attorney’s fees
under a written agreement. Article 2208 of the
Civil Code provides that an award of attorney’s
fees is proper if the parties stipulate it.
Article 2208 allows attorney’s fees to be awarded
by a court when its claimant is compelled to
litigate with third persons or to incur expenses to
protect his interest by reason of an unjustified act
or omission of the party from whom it is sought.
The matter cannot and should not be left to
speculation and conjecture (Spouses Hernandez, et
al. vs. Dolor, et al, G.R. No. 160286, July 30, 2004).
Two concepts of Attorney’s fees
1. Ordinary – reasonable compensation paid to
a lawyer by this client for the legal services
he has rendered to the latter.
Basis: The fact of employment of the lawyer
by the client
To whom payable: Lawyer
2. Extraordinary – indemnity for damages
ordered by the court to be paid by the losing
party in litigation to the prevailing party. They
are actual damages due to the plaintiff. (Art.
2208, NCC)
Basis: Any cases authorized by law
To whom payable: Client
Payable not only to the lawyer but to the
client, unless they have agreed that the
award shall pertain to the lawyer as
additional compensation or as part thereof
(Benedicto vs. Villaflores, G.R. No. 185020,
October 6, 2010).
336
 In all cases, the attorney’s fees and
expenses of litigation must be
reasonable.
Interest
The code Commission included provisions in the
Civil Code allowing interest on damages because
they believed that “such interest is in fact a part
of the loss suffered” (Arts. 2209-2213)
Interest may be recovered from:
1. Obligation consisting in payment of a sum of
money, and debtor incurs delay (Art. 2209,
NCC).
2. Breach of contract, in the discretion of the
court (Art. 2210, NCC)
3. Crimes and quasi-delicts, at the discretion of
the court (Art.2211, NCC)
4. When obligation is judicially demanded (Art.
2212, NCC)
5. Unliquidated claims or damages in which the
demand when established with reasonable
certainty (Art. 2213, NCC)
Interest on Damages:
1. Six percent (6%) per annum if the obligation
consists in the payment of a sum of money,
and the debtor incurs in delay and there
being no stipulation to the contrary. (Art.
2209, NCC)
2. Interest due shall earn legal interest (6% per
annum) from the time it is judicially
demanded, not from default, even if the
obligation is silent on the matter. (Art. 2212,
NCC)
3. Interest cannot be recovered upon
unliquidated claims or damages, except when
the demand can be established with
reasonable certainty. (Art. 2213, NCC)
4. In quasi-delicts, the contributory negligence
of the plaintiff shall reduce the damages that
he may recover. (Art. 2214, NCC)
When obligation is breached and it consists in
payment of a sum of money (ie. Loan or
forbearance of money), the interest due should
be that which may have been stipulated in
writing. (Art. 1956, NCC) Furthermore, the
interest due shall itself earn legal interest from
the time it is judicially demanded. (Art. 2212,
NCC) In the absence of stipulation, the interest
shall be computed from default, i.e., from judicial
or extrajudicial demand.
When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on
the amount of damages awarded may be
imposed at the discretion of the court (Art. 2210,
NCC) at the rate of 6% per annum (Art. 2209,
NCC). No interest, however, shall be adjudged on
unliquidated claims or damages except when or
until the demand can be established with
reasonable certainty.(Art 2216, NCC)
Accordingly, where the demand is established
with reasonable certainty, the interest shall begin
to run from the time the claim is made judicially
or extrajudicially (Art. 1169, Civil Code) but when
such certainty cannot be so reasonably
established at the time the demand is made, the
interest shall begin to run only from the date the
judgment of the court is made (at which time the
quantification of damages may be deemed to
have been reasonably ascertained). The actual
base for the computation of legal interest shall, in
any case, be on the amount finally adjudged.
Extent or Scope of Actual Damages
To enable an injured party to recover actual or
compensatory damages, he is required to prove
the actual amount of loss with reasonable degree
of certainty premised upon competent proof and
on the best evidence available. The burden of
proof is on the party who would be defeated if no
evidence would be presented on either side. He
must establish his case by a preponderance of
evidence which means that the evidence, as a
whole, adduced by one side is superior to that of
the other. In other words, damages cannot be
presumed and courts, in making an award must
point out specific facts that could afford a basis
for measuring whatever compensatory or actual
damages are borne (PNOC Shipping and Transport
Corporation vs. CA, G. R. No. 107518, October 8,
1998).
Extent in Contracts and Quasi-Contracts
In contracts and quasi-contracts, the damages
for which the obligor who acted in good faith is
liable shall be those that are the natural and
probable consequences of the breach of the
obligation, and which the parties have foreseen
or could have reasonably foreseen at the time the
obligation was constituted. (Art. 2201, NCC)
In contracts and quasi-contracts and 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 non-
performance of the obligation. (Art. 2202, NCC)
Extent in crimes and quasi-delicts:
In crimes and quasi-delicts, the defendant shall
be liable for all damages, which are the natural
and probable consequences of the act or
omission complained of. It is not necessary that
such damages have been foreseen or could have
reasonably been foreseen by the defendant (Art.
2202, NCC).
Restitutio in Integrum
The basic principle for the measure of damages
in integrum. The amount to be awarded to the
plaintiff should be that sum of money which will
put the party who has been injured or who has
suffered in the same position as he would have
been in if he had not sustained the wrong for
which he is now getting his compensation or
reparation. Consequently, the damages are
measured on plaintiff’s loss and not on
defendant’s gain. By way of XPN, damages are
measured by the benefit that has accrued to the
defendant in certain cases. (Aquino, Torts and
Damages, 2005, p. 850-851)
Damage to Property
Where goods were destroyed by the wrongful act
of the defendant, the plaintiff is entitled to their
value at the time of destruction. Normally, the
award is the sum of money which plaintiff would
have to pay in the market for identical or
essentially similar good, plus in proper cases,
damages for the loss of use during the period
before replacement. In cases of profit-earning
chattels, what has to be assessed is the value of
the chattel to its owner as a going concern at the
time and place of the loss.
 With respect to real property, the measure of
damage for a permanent injury is ordinarily
the difference between the reasonable
market value of the property immediately
before and after the injury.
 In case of total loss, the value of the real
property at the time and place of the loss
must also be assessed and such assessed
337
 value is the measure of the damage due to
the plaintiff.
 Where the plaintiff was merely deprived of
his possession, said plaintiff is entitled to the
value or use of the premises. Thus the rental
value should be assessed against the plaintiff
for tress-pass or illegal occupation of house
(Aquino, Torts and Damages, 2004, p. 853-854).
Damages in crimes and quasi-delicts
causing death
The amount of damages for death caused by a
crime or quasi-delict shall be at least three
thousand pesos, even though there may have
been mitigating circumstances. In addition:
a. The defendant shall be liable for the loss of
the earning capacity of the deceased, and the
indemnity shall be paid to the heirs of the
latter; such indemnity shall in every case be
assessed and awarded by the court, unless
the deceased on account of permanent
physical disability not caused by the
defendant, had no earning capacity at the
time of his death;
b. If the deceased was obliged to give support
according to the provisions of article 291, the
recipient who is not an heir called to the
decedent’s inheritance by the law of testate
or intestate succession, may demand support
from the person causing the death, for a
period not exceeding five years, the exact
duration to be fixed by the court;
c. The spouse, legitimate and illegitimate
descendants and ascendants of the deceased
may demand moral damages for mental
anguish by reason of the death of the
deceased. (Art. 2206, NCC)
 If the plaintiff is asking for damages for
his own injury or for the death of his
relative, said plaintiff is entitled to the
amount of medical expenses as well as
other reasonable expenses that he
incurred to treat his or his relative’s
injuries. Courts may also award monthly
payments to that person who was injured
to answer for his future medical
expenses.
 In proper cases, the award of damages
may likewise include the amount spent
338
for the plastic surgery of the plaintiff or
any procedure to restore the part of the
body that was affected.
🕮 In case of death, the plaintiff is entitled
to the amount that he spent during the
wake and funeral of the deceased.
However, it has been ruled that expenses
after burial are not compensable.
Damages in Rape
Civil indemnity, which is actually in the nature of
actual or compensatory damages, is mandatory
upon the finding of the fact of rape. The case law
also requires automatic award of moral damages
to a rape victim without need of proof because
from the nature of the crime, it can be assumed
that she has suffered moral injuries entitling her
to such award. Such award is separate and
distinct from civil indemnity (People vs. Astrologo,
G.R. No. 169873, June 8, 2007).
 The commission of an offense has a two (2)-
pronged effect, one (1) on the public as it
breaches the social order, and the other upon
the private victim as it causes personal
sufferings—each effect is respectively
addressed by the prescription of heavier
punishment for the accused and by an award
of additional damages to the victim.
 Although it is essential to observe the
requirements imposed by Secs. 8 and 9 of
Rule 110 of the Revised Rules of Criminal
Procedure, as amended, the requirements
should affect only the criminal liability of the
accused, which is the State’s concern, and
should not affect the civil liability of the
accused, which is for the benefit of the
injured party.
 Where the special qualifying circumstances of
age and relationship, although not alleged in
the information, are nonetheless established
during the trial, the award of civil indemnity
and moral damages in a conviction for simple
rape should equal the award of civil
indemnity and moral damages in convictions
for qualified rape (People vs. Bartolini, G.R. No.
179498, August 3, 2010).
b. Moral Damages
Designed to compensate the claimants for actual
injury and is not meant to enrich the complainant
at the expense of the defendant.
Moral damages include (FMP-BMW-SSS):
1. Physical suffering
2. Mental anguish
3. Fright
4. Serious anxiety
5. Besmirched reputation
6. Wounded feelings
7. Moral shock
8. Social humiliation
9. Similar injury (Art. 2217, NCC)
Though incapable of pecuniary computation,
moral damages may be recovered if they are the
proximate result of the defendant’s wrongful act
for omission. (Art. 2217, NCC)
 Moral damages apply both to natural and
juridical persons. It is only when a juridical
person has good reputation that is debased,
resulting in social humiliation, that moral
damages may be awarded. (San Fernando
Regala Trading, Inc. vs. Cargil Philippines, Inc.,
G.R. No. 178008, October 9, 2013)
When recoverable:
1. In a criminal offense resulting in physical
injuries
2. In quasi-delicts causing physical injuries;
3. In cases of seduction, abduction, rape, or
other lascivious acts;
4. In cases of adultery or concubinage;
5. In illegal or arbitrary detention or arrest;
6. In illegal search;
7. In libel, slander or any other form of
defamation;
8. In malicious prosecution;
9. In acts mentioned in Article 309 of NCC;
10. In acts and actions referred to in articles 21.
26, 27, 28, 29,30, 32, 34, and 35
11. In breaches of contract where the defendant
acted fraudulently or in bad faith (Arts. 2219-
2220, NCC).
 The parents of the female seduced,
abducted, raped, or abused may also
recover moral damages (Art. 2219, NCC).
 The spouse, descendants, ascendants, and
brothers and sisters may bring the action
mentioned in Article 309 CC, in the order
named.
Requisites:
1. There must be an injury, whether physical,
mental or psychological, clearly sustained by
the claimant;
2. There must be a culpable act or omission
factually established
3. The wrongful act or omission of the
defendant is the proximate cause of the
injury sustained by the claimant
4. The award of damages is predicated on any
of the cases stated in Article 2219 of the NCC
(Francisco vs. Ferrer, Jr. G.R. No. 142029,
February 28, 2001).
Article 309, NCC. Any person who shows
disrespect to the dead, or wrongfully interferes
with a funeral shall be liable to the family of the
deceased for damages, material and moral.
Corporations and other artificial beings are not
entitled to recover moral damages.
GR: A juridical person is generally not entitled to
moral damages because, unlike a natural person,
it cannot experience physical suffering or such
sentiments as wounded feelings, serious anxiety,
mental anguish or moral shock (Filipinas
Broadcasting vs. Ago Medical, G.R.No. 141994,
January 17, 2005).
XPN: Unless the corporation enjoyed good
reputation that the offender debased and
besmirched.
 An appeal in a criminal case opens the whole
case for review and this 'includes the review
of the penalty, indemnity and damages. Even
if the offended party had not appealed from
said award, and the only party who sought a
review of the decision of said court was the
accused, the court can increase damages
awarded (Sumalpong vs. CA, G.R. No. 123404,
1997).
c. Nominal Damages
Nominal damages are adjudicated in order that a
right of the plaintiff, which has been violated or
invaded by the defendant, may be vindicated or
339
recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by
him. (Art. 2221, NCC)
When awarded: The court may award nominal
damages in every obligation arising from any
source enumerated in Article 1157, or in every
case where any property right has been invaded
(Art. 2222, NCC). Award of nominal damages is
in lieu of actual, moral, temperate or liquidated
damages.
Purpose of nominal damages
In order that a right of the plaintiff which has
been violated or invaded by the defendant may
be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any loss
suffered by him (Art. 2221, NCC).
 Nominal damages cannot co-exist with
compensatory damages. Nominal damages
are adjusted in order that a right of the
plaintiff, which has been violated or invaded
by the defendant, may be vindicated or
recognized, and not for the purpose of
indemnifying the plaintiff for any loss
suffered by him (LRTA vs. Navidad, G.R. No.
145804, February 6, 2003).
Elements:
1. There exists a right of plaintiff;
2. The resulting damage must not be capable of
pecuniary estimation;
3. There is a violation of such right; and
4. The purpose of the award is not to indemnify
but to vindicate or recognize right violated.
 The adjudication of nominal damages
shall preclude further contest upon the
right involved and all accessory
questions. (Art. 2223, NCC)
 No proof of pecuniary loss is likewise
necessary in order that moral, nominal,
temperate, liquidated or exemplary
damages may be adjudicated, and it is
quite enough that proof of damage or
injury is adduced (People of the Philippines
v. Dianos G.R. No. 119311 October 7, 1998).
d. Temperate or Moderate Damages
These are damages, which are more than
nominal but less than compensatory, and may be
340
recovered when the court finds that some
pecuniary loss has been suffered, but its amount
cannot be proved with certainty (Art. 2224, NCC).
These are damages the amount of which is left to
the sound discretion of the court (Pineda, Torts and
Damages, 2004, p. 224).
e. Liquidated Damages
Liquidated damages are those agreed upon by
the parties to a contract, to be paid in case of
breach thereof (Art. 2226, NCC). It cannot co-
exist with actual damages (Art. 2226, NCC)
Liquidated damages, whether intended as an
indemnity or a penalty, shall be equitably reduced
if they are iniquitous or unconscionable. (Art
2227, NCC)
It is necessary that there be a contract the
violation of which gives rise to the liquidated
damages stipulated upon (Pineda, Torts and
Damages, 2004, p. 232).
Rules governing in case of breach of
contract:
Interest recoverable for damages in a breach of
contract is left to the discretion of the court. It is
computed not from the date of filing of the
complaint but from the date the judgment of the
trial court is rendered (De Leon, Torts and Damages,
2010, p. 669).
f. Exemplary or Corrective Damages
Imposed by way of example of correction for
public good in addition to the moral, temperate,
liquidated or compensatory damages. (Art. 2229,
NCC)
Exemplary damages are required by public policy,
for wanton acts must be suppressed. They are
mere additions to actual, moral, temperate and
liquidated damages which may or may not be
granted at all depending upon the necessity of
setting an example for the public good as a form
of deterrent to the repetition of the same act by
any one (Pineda, Torts and Damages, 2004, p. 234).
When Damages May be Recovered
Actual Damages may be recovered when the
aggrieved party’s property, business, trade,
profession, or occupation suffered pecuniary loss.
There must be competent proof of actual amount
of loss to justify actual damages. Credence can
be given only to claims which are duly supported
by receipts. (People vs. Guillermo, G.R. No. 113787.
January 28, 1999)
Moral damages can be awarded if the cases file
fall within article 2219 and article 2220 of the civil
code. It must be established that the act or
omission of the defendant is the proximate cause
of the damage or injury suffered by the plaintiff
(Pineda, Torts and Damages, 2004). It is not
enough that injuries have arisen; it is essential
that they have sprung from a wrongful act,
omission, fraud, malice, or bad faith which was
the proximate cause thereof (Guita vs. CA, G.R. No.
L-60409, November 11, 1985).
Nominal damages for the vindication of a right
violated cannot be awarded together with
compensatory damages. Where the court has
already awarded compensatory and exemplary
damages, that is already a juridical recognition
that plaintiff’s right was violated. The award of
actual, moral, temperate or moderate damages
precludes damages. Nominal Damages may be
awarded together attorney’s fees (Pineda, Torts
and Damages, 2004, p. 225).
Temperate damages may be recovered when the
court finds that some pecuniary loss has been
suffered but the loss is incapable of pecuniary
estimation and that such award is reasonable
(Arts. 2224-2225, NCC).
a. Exemplary Damages may be recovered in
criminal offenses (Art. 2230, NCC); In quasi-
delicts (Art. 2231, NCC) or ; In contracts and
quasi-contracts (Art. 2232, NCC)
It is for the court to decide whether or not
they should be adjudicated. (Art. 2233, NCC)
Claimant must prove that he is entitled to
moral, temperate or compensatory damages
even if liquidated damages have been agreed
on in order that exemplary damages may be
awarded. (Art. 2234, NCC)
3. IN CASE OF DEATH
1. Moral damages
2. Exemplary damages
3. Attorney's fees and expenses for litigation
4. Indemnity for death
5. Indemnity for loss of earning capacity
6. Interest in proper cases. (People vs. Tolentino,
G.R. No. 176385, February 26, 2008).
The law requires payment of P3,000.00 to the
heirs of the deceased. The fixed amount of three
thousand pesos is in addition to any damage that
may have resulted because of the act or omission
of the defendant including medical expenses and
loss of earning capacity. It should be noted,
however that the SC had repeatedly increased the
amount of indemnity from three thousand pesos
in order to reflect the current value of currency
and prevailing inflation. The current amount of
fixed damages as increased by the Court is P75,
000.00 (People vs. Buyagan, G.R. No. 187733,
February 8, 2012).
Death indemnity was granted by the court in the
amount of P50,000 for the death of the
passengers. (Sulpicio Lines, Inc. vs. Curso, et al., G.R.
No. 157009, March 17, 2010)
 The plaintiff is entitled to the amount that he
spent during the wake and funeral of the
deceased. However, it has been ruled that
expenses after the burial are not
compensable Sulpicio Lines, Inc. vs. Curso, et al.,
G.R. No. 157009, March 17, 2010).
PART II
I. PROPERTY
Property defined
Property refers to things which are or may be the
object of appropriation (Art. 414, NCC).
Distinction between things and property
Things are broader in scope than property. All
kinds of property are things but not all things are
property.
Things refer to all objects that exist including
those which could not be appropriated by man.
Property refers to objects already possessed by
man or are in their possession.
Things involve only corporeal objects. Property
may refer to intangible matters (Pineda, 2009).
341
Requisites for a thing to be considered as 3. Res Alicujus – things that belong to someone.
property (USA) (Paras, Civil Code of the Philippines Annotated,
2008, p. 2)
1. Utility - It can serve as a means to satisfy
human needs; Categories of real property
2. Substantivity/Individuality - It has a separate
and autonomous existence and not simply a 1. By nature - Those which by their essence and
part of a whole; and nature are immovable or cannot be moved
3. Appropriability - Susceptibility to from one place to another;
ownership/possession, even if not yet 2. By incorporation - Those which are attached
actually appropriated (Rabuya, Pre-bar to an immovable in a fixed manner and
Reviewer in Civil Law, 2021, p. 403). considered as an integral part thereof;
3. By destination - Things placed in buildings or
A. CLASSIFICATION OF PROPERTY on lands by the owner of the immovable or
his agent in such a manner that it reveals the
1. As to nature: intention to attach them permanently
a. Immovable or Real Property thereto; and
b. Movable or Personal Property 4. By analogy - Classified by express provision
2. As to character of ownership: of law or those which are not actually
a. Public Dominion tangible properties but are rights and
b. Private Ownership interests over existing immovable properties
3. As to essential form: (Rabuya, Civil Review I, 2021, p. 406-407).
a. Incorporeal
b. Corporeal Immovable property
4. As to existence:
a. Present 1. Land, buildings, roads and
b. Future constructions of all kinds adhered to
5. As to designation: the soil.
a. Specific
b. Generic Lands and roads are always immovable (Art. 415,
6. As to susceptibility of substitution: NCC; Punzalan vs. Vda. Lacsamana, G.R. No. L-55729,
March 28, 1983).
a. Fungible
b. Non-Fungible
A building is classified as an immovable by
7. As to aptitude for repeated use:
incorporation (Art. 415, NCC). It is classified
a. Consumable
immovable property by reason of its adherence
b. Non-Consumable
to the soil in which it is built (Biscerra vs. Teneza
8. As to susceptibility to division:
a. Divisible
G.R. No. L-16218, Nov. 19, 1962). Thus, a
building which is merely superimposed on the soil
b. Indivisible
is not considered as real property (Evangelista vs.
9. As to existence in time:
Alto Surety & Insurance Co., Inc., G.R. No. L-11139,
a. Present April 23, 1958)..
b. Future
10. As to dependence: A building treated separately from the land on
a. Principal which it stood is immovable property and the
b. Accessory mere fact that the parties to a contract seem to
11. As to alienability: have dealt with it separate and apart from the
a. Within the commerce of man land on which it stood in no wise changed its
b. Outside the commerce of man character as immovable property (Punzalan, Jr. vs.
Vda. de Lacsamana, 37 Phil 644, 1918).
Classification of things
Even if the parties may treat as personal property
1. Res Nullus – things that belong to no one; that which under the law is a real property, that
2. Res Communes – things that is enjoyed by agreement does not in any way alter the
everyone; and character of the property as an immovable or real

342
property, except by estoppel. When the parties
so agreed that the building (or house) is a
personal property and a proper subject of the
contract of chattel mortgage, they are estopped
from denying the existence of the chattel
mortgage which, as between them, must be
upheld (Navarro vs. Pineda, G.R. No. L-18456,
November 30, 1963).
Register of Deed may not refuse the registration
of a chattel mortgage on the pretext that the
subject matter thereof is not a personal property.
The Court clarifies that the duties of the register
of deeds in respect to the registration of chattel
mortgages are of purely ministerial in character
(The Standard Oil Co. of New York vs. Jaramillo, G.R.
No. L-20329, March 16,1923).
2. Trees, plants and growing fruits, while
they are attached to the land or form an
integral of an immovable.
While they are attached to the land, they are
considered immovable property (Art. 415, NCC).
Trees and Plants
They are immovable by reason of their
incorporation to the soil or because they form an
integral part of the immovable. Thus, if they are
cut or uprooted for the purpose of making
firewood or timber, they become movable
property unless timber constitutes natural
product of the tenements (Rabuya, Property, 2008,
p. 26).
Growing Fruits
In some instances while they are still attached to
the soil, growing fruits may exceptionally be
treated as personal property pursuant to the
provision of Article 416(2) of NCC.
3. Everything attached to an immovable in
a fixed manner, in such a way that it
cannot be separated there from without
breaking the material or deterioration
of the object.
These properties are immovable by incorporation.
Their attachment to an immovable must be in a
fixed manner and in such a way that they cannot
be separated therefrom without breaking the
material or deterioration of the object (Art. 415
[3], NCC).
The fact that the machineries are heavy, bolted
or cemented on the real property, does not make
them ipso facto immovable. Their intent has to be
looked into. If the parties treat the machinery as
chattels, they are bound by their agreement
under the principle of estoppel notwithstanding
the fact that the machinery may have been
attached to an immovable in a fixed manner and
may not be separated therefrom without breaking
the material or deterioration of the object to
which it is attached (Tsai vs. CA, 366 SCRA 324,
October 2, 2001).
Submarine or undersea communication cables
are akin to electric transmission lines may qualify
as “machinery” subject to real property tax under
the Local Government Code. Both electric lines
and communication cables, in the strictest sense,
are not directly adhered to the soil but pass
through posts, relays or landing stations, but both
may be classified under the term “machinery” as
real property under Article 415(5) absent any
showing from Capwire of any express grant of an
exemption for its lines and cable from real
property taxation (Capitol Wireless v. Provincial
Treasurer of Batangas, G.R. No. 10110, May 30, 2016).
The oil storage tanks constitute real property,
while they are not embodied in the land, they
may nevertheless be considered as
improvements in the land, enhancing its utility
and rendering it useful to the oil industry. It is
undeniable that the two tanks have been installed
with some degree of permanence as receptacles
for the considerable quantities of oil needed by
Meralco for its operations (Manila Electric Co. v.
Central Board of Assessment Appeals, G.R. No. L-
47943, May 31, 1982).
4. Statues, reliefs, paintings or other
objects for use or ornamentation placed
in buildings or on lands by the owner of
the immovable in such a manner that it
reveals the intention to attach them
permanently to the tenements.
Requisites:
a. They must be placed in building or on lands
by the owner of the immovable or by his
agent; and
b. The attachment must be intended to be
permanent.
343
Distinguished from paragraph 3 Application of the Doctrine of Estoppel

Art. 415 [3] Art. 415 [4] Machines are proper subject of a writ of replevin,
although they are essential and principal
Cannot be separated Can be separated elements of industry because the parties have
from immovable from immovable treated the same as personal property (Serg’s
without breaking or without breaking or Product Inc. vs. PCI Leasing and Finance, Inc., G.R.
deterioration. deterioration. No. 137705, August 22, 2000).

Must be essential and principal elements of

Need not be placed Must be placed by the
industry
by the owner. owner or his agent.

Real property by Real property by
incorporation. incorporation and
destination.
(Rabuya, Civil Law Reviewer Vol. 1, 2017, p. 319)
5. Machinery, receptacles, instruments or
implements intended by the owner of
the tenement for an industry or works
which may be carried on in a building or
on a piece of land, and which tend
directly to meet the needs of the said
industry or works.
Requisites to be considered immovable
a. The machinery must be placed by the owner
of the tenement;
b. An industry or works must be carried on the
tenement;
c. The machinery must be intended for such
industry or works; and
d. The machinery must tend directly to meet the
needs of such industry and work. (Rabuya,
Civil Review I, 2021, p. 411-412_
GR: The machinery, receptacles instruments or
implements be placed in the land or tenement by
the leases. Thereof remains personal because
they are not placed by the owner of the
tenement.
XPN: Machinery becomes immobilized only
when placed in a plant by the owner of the
property or plant, but not when so placed by the
tenant usufructuary, or any person having
temporary right, unless such person acted as the
agent of the owner (Davao Sawmill Co. vs. Castillo,
G.R. No. L-40411, August 7, 1935).
It is necessary that they must be essential and
principal elements of industry or works without
which such industry or works would be unable to
function or carry on the industrial purpose for
which it was established. (Rabuya, Property, 2008,
p.46)
Industry or work must be carried in a
building or on a piece of land
Court held that the steel towers do not fall under
paragraph 5 of Article 415 for they are not
machineries, receptacles, instruments or
implements, and even if they were, the Court
declared that “they are not intended for industry
or works on the land” since the Manila Electric
Company “is not engaged in an industry or works
on the land in which the steel supports or towers
are constructed.” (Mindanao Bus vs. City Treasurer,
G.R. No. L-17870, September 29, 1962)
6. Animal houses, pigeons, beehives, fish
ponds or breeding places of similar
nature, in case their owner has placed
them or preserves them with the
intention to have them permanently
attached to the land, and forming a
permanent part of it; the animals in
these places are included.
They are immovable by destination, however,
such structures may still qualify as real property
under Art. 415(1) being constructed as attached
to the soil (permanent in character).
The fish in fishponds will be considered as
personal property for purposes of theft under the
Revised Penal Code. (Rabuya, Property, 2008 p. 41)

344
7. Fertilizers actually used on a piece of
land
They are immovable by destination (Rabuya, Civil
Law Reviewer Vol. 1, 2017, p. 315).
8. Mines, quarries, and slag dumps, while
the matter thereof forms part of the
bed, and waters either running or
stagnant.
They are considered immovable property that is,
the matters thereof remains unreserved from
the soil. Once separated, they are considered as
personal property. Waters which are immovable,
such as sea, river, lake must not be confused with
water itself which plainly movable property
(Rabuya, Property, 2008, p.42).
9. Docks and structures which, though
floating, are intended by their nature
and object to remain at a fixed place on
a river, lake or coast.
They are considered real property and structure
of which, though floating, are intended by their
nature and object to remain at a fixed place on a
river, lake, or coast.
Note: Power barges moored off the coast of
Balayan, Batangas are real properties under Art.
415 (9) of NCC (Fels Energy Inc. vs. The Province of
Batangas, GR. No. 168557, February 16, 2007,).
Movable Property (Art. 416, NCC)
Definition of movable property
The Civil Code does not likewise define the term
“personal” or “movable” property. As in the case
of “real” or “immovable” property, the Code
simply enumerates in Articles 416 and 417
thereof what are to be considered as “personal”
property.
Movable properties in the Code
1. Those movables susceptible of
appropriation which are not included in
Art. 415;
2. Real property which by any special
provision of the law is considered as
personal property;
Certain things may partake of the nature of real
and personal property at the same time.
This is expressly recognized in no. 2 of Article 416
of the NCC, which states that the real property
which by provision of law is considered as
personal is deemed to be movable or personal
property. Thus, under the Chattel Mortgage Law
(Sec. 7, Act No. 1508), growing crops may be the
object of a contract of chattel mortgage.
Similarly, growing crops may also be considered
as personality for the purpose of a contract of
sale(Art. 1462, NCC).
3. Forces of nature which are brought
under control by science;
The forces of nature in their original state are not,
ordinarily, subject to appropriation because of the
degree of difficulty in appropriating them.
However, paragraph (3) of Art. 416 clarifies that
if these forces of nature are bought under the
control of man through the help of science,
thereby becoming appropriate, they are now
considered as property and classified as personal
property hence, gas and electricity are considered
personal property under this provision (US vs.
Tambunting, G.R. No. L-16513, January 18,
1921).
4. In general, all things which can be
transferred from place to place without
impairment of the real property to
which they are fixed.
The following are also considered personal
property:
a. Obligation and action which have for their
object movables or demandable sums; and
b. Shares of stock of agriculture, commercial
and industrial entities, although they may
have real estate. (Art. 417, NCC)
Tests of “Movable” Character
Test by exclusion – Whether the property was
not enumerated in Art. 415., under the principle
expressio unius est exclusio alterius. (Art. 416
[1], NCC).
Test by description – Whether the property can
be transported or carried from place to place (Art.
416 [4], NCC); whether such change of location
345
can be made without injuring the immovable to Classification of Lands of the Public
which the object may be attached; unless Domain: (Art. XIV, Sec. 10, 1987 Constitution)
expressly included in Art. 415; whether real
property is considered by any special provision of 1. Agricultural
law as personalty. (Art. 416 [2], NCC). 2. Forest or timber
3. Mineral lands
Note: Test by Exclusion is superior. 4. National parks

Classification of Movable Property (Art. Regalian Doctrine or jura regalia declares that
418, NCC) all property is presumed to be a State property in
the absence of any showing to the contrary
(Chavez vs. Public Estates Authority, G.R. No. 133250,
CONSUMABLE NON-CONSUMABLE July 9, 2000).

The following things are property of public

Movables which Any other kind of
dominion (Art. 420, NCC):
cannot be used in a movable property.
manner appropriate
1. Those intended for public use, such as roads,
to their nature
canals, rivers, torrents, ports and bridges
without their being
constructed by the State, banks, shores,
consumed.
roadsteads, and others of similar character;
2. Those which belong to the State, without
FUNGIBLE NON-FUNGIBLE being for public use, and are intended for
some public service or for the development
Capable of Incapable of of the national wealth.
substitution of same substitution; Identical
kind and quantity thing must be given or Characteristics:
returned
1. Outside the commerce of man
(Rabuya, Civil Law Reviewer I, 2017, p. 326)
When certain public streets in Caloocan City were
Public Dominion and Private Ownership converted into flea markets and leased to
several vendors, the Supreme Court held that
Property is either of public dominion or of private such leases were null and void since a public
ownership (Art. 419, NCC). street is property for public use hence outside the
commerce of man. Being outside the commerce
Public Dominion is one not owned by the state of man, it may not be the subject of lease or other
but pertains to the state, which, as territorial contract (Dacanay vs. Asistio, G.R. No. 93654, May 6,
sovereign, exercises certain juridical prerogatives 1992).
over such property (3 Manresa 66-69).
2. Cannot be leased, donated, sold, or be the
In order to be property of public dominion an object of any contract, except insofar as they
intention to devote it to public use is sufficient may be the object of repairs or improvements
and it is not necessary that it must actually be and other incidental things of similar things
used as such (Manila Lodge vs. CA, G.R. No. L-41001,
September 30, 1976). Adverse possession which may be the basis of a
grant of title in confirmation of imperfect title
Kinds of Public Dominion (Arts. 420 & 424, cases applies only to alienable lands of the public
NCC) domain. In this case, since the subject property
is part of the reservation for provincial park
1. For public use purposes and, thus, part of the forest zone, it is
2. For public service not registrable and its possession, no matter how
3. For the development of national wealth. lengthy, cannot convert it into private property
(Palomo vs. CA, G.R. No. 95608, January 21, 1997).

346
3. Cannot be acquired by prescription;
4. Cannot be registered under the Land
Registration Law and be the subject of a
Torrens title;
5. Cannot be levied upon by execution, nor
attachment;
Any encumbrance, levy on execution or auction
sale of any property of public dominion is void for
being contrary to public policy. Essential public
services will stop if properties of public dominion
are subject to encumbrances, foreclosures and
auction sale (Manila International Airport vs. CA, G.R.
No. 155650 July 20, 2006).
6. They can be used by everybody
7. Inalienable but when no longer needed for
public use or service, may be declared
patrimonial property (Art. 422, NCC).
8. Cannot be burdened by voluntary easement
When a right of way was claimed on a lot owned
by the government and on which stairways were
built for the use of the people as a passageway,
it is a property of public dominion devoted to
public use and cannot be burdened by a voluntary
easement or right of way in favor of Villarico
(Villarico vs. Sarmiento, G.R. No. 136438
November 11, 2004).
Patrimonial Property of the State
It refers to all other property of the State, which
is not of the character stated in Art. 420. It is
considered as property of the State in a private
sense. It is said that over this kind of property the
State has the same rights and has the same
power of disposition as private individuals,
subject to existing rules and regulations (II
Caguioa, Civil Code of the Philippines, 1996, p. 36)
It is the property owned by the State in its private
or proprietary capacity which may be acquired by
private individuals or corporations through
prescription. It may be an object of ordinary
contract (Pineda, Law on Property, 2009, p. 32-33).
Save in cases of hereditary succession, no private
lands shall be transferred or conveyed except to
individuals, corporations, or associations qualified
to acquire or hold lands of the public domain.
(Art. XII Secs. 7, 1987 Constitution)
Property of public dominion, when no longer
intended for public use or for public service, shall
form part of the patrimonial property of the State
(Art. 422, NCC). This provision is not self-
executing. There must be a formal declaration by
the executive or possible legislative department
of the government that the property of the State
is no longer needed for public use or for public
service before the same can be classified as
patrimonial or private property of the state;
otherwise, the property continues to be property
of public dominion notwithstanding the fact that
it is not actually devoted for such use or service
(Manila Lodge No. 761 vs. CA, G.R. No. L-41001,
September 30, 1976). If no such declaration has
been made, the lot forms part of public domain
(Faustino Ignacio vs. Dir. of Lands, G.R. No. L-12958,
May 30, 1960).
Art. XII Secs. 7 and 8 of the 1987 Constitution
explicitly prohibits non-Filipinos from acquiring or
holding title to private lands or to lands of public
domain. (Ancheta vs. Guersey-Dalaygon, G.R. No.
139868, June 8, 2006)
Property of Local Government Units
1. Property for public use – consists of the
provincial roads, city streets, municipal
streets, squares, fountains, public waters,
promenades, and public works for public
service paid for by said provinces, cities or
municipalities (Art. 424[1], NCC).
Manifestly owned by the city/municipal
corporation in its public and governmental
capacity and are therefore public property over
which Congress has absolute control. Such
property is held in trust for the State for the
benefit of its inhabitants, whether it be for
governmental or proprietary purposes (Rabuco vs.
Villegas, G.R. No. L-24661, February 28, 1974).
2. Patrimonial Property – All other property
possessed by LGUs without prejudice to
provisions of special laws (Rabuya, Civil Law
Reviewer Vol. 1, 2017, p.349).
a. Owned a municipal corporation in its
private or proprietary capacity which it
could not be deprived of without due
process and without payment of just
compensation. Such property is acquired
with its own funds in its private or
corporate capacity. (Rabuco vs. Villegas,
G.R. No. L-24661, February 28, 1974)
347
 b. In the absence of proof that the land
claimed by a municipal corporation was
acquired with its private funds, the
presumption is that such land was given
to it by the State in trust upon the
creation of the municipality (Sangguniang
Panlalawigan of Bataan vs. Garcia, G.R. No.
174964, October 5, 2016).
Property of private ownership besides the
patrimonial property of the State, provinces,
cities, and municipalities, consists of all properties
belonging to private persons, either individually
or collectively (Art. 425, NCC).
B. OWNERSHIP
1. GENERAL PROVISIONS
An independent right of exclusive enjoyment and
control of the thing for the purpose of deriving
therefrom all advantages required by the
reasonable needs of the owner and the
promotion of the general welfare but subject to
the restrictions imposed by law and the right of
others (Rabuya, Civil Law Reviewer Vol. 1, 2017,
p. 350-351, citing Outline of Civil Law by Reyes
and Puno Vol. II)
Attributes of Ownership (Bundle of Rights)
The Civil Code does not define ownership.
Instead, the Code simply enumerates the rights
which are included therein, to wit:
1. Right to enjoy (Art. 428, 1st par., NCC)
a. Jus utendi (right to use);
b. Jus fruendi (right to enjoy the fruits);
c. Jus abutendi (right to consume the thing
by its use); and
d. Jus possidendi (right to possess)
2. Right to dispose (jus disponendi) (Ibid)
a. Alienate
b. Encumber
c. Transform
d. Destroy
3. Right to vindicate (jus vindicandi) or the
right to recover the property from any holder
or possessor. (Art. 428, 2nd par., NCC)
4. Right to exclude (Art. 429, NCC)
348
a. Right to exclude any person from
enjoyment and disposal of the property;
b. Right to enclose or fence the land or
tenement;
c. May use such force to repel or prevent
usurpation of property.
5. Right to demand indemnity for
damages suffered due to lawful interference
by a third person to avert an imminent
danger; (Art. 432, NCC)
6. Right to just compensation in eminent
domain cases; (Art. 435, NCC)
7. Right to construct any works or make any
plantations and excavations on the surface or
subsurface of the land; (Art. 437, NCC)
8. Right to hidden treasure found in the
owner’s property; (Art. 438, NCC) and
9. Right to accessions. (Arts. 440-475, NCC)
Ownership is a Real Right
A real right or jus in re, has been defined as the
power belonging to a person over a specific thing
without a definite passive subject against whom
such right may be personally enforced. A right in
rem, therefore, is one which imposes an
obligation on persons generally, i.e., either on all
the world or on all the world except certain
determinate persons. Rabuya, Property, 2008, p.
105-106)
A real right creates a direct relation between the
specific thing and its holder in such a way that it
permits the holder to exclude others from the
enjoyment of the thing. Correspondingly, it
creates an obligation on the part of third persons
not to interfere in such enjoyment. These
elements are clearly present in ownership. Hence,
the owner of a thing has the right to exclude any
person from its enjoyment and disposal save for
the XPN mentioned in Article 432 for acts done in
the state of necessity. (Ibid)
Objects of Ownership
The relationship that exists between ownership
and property is that the latter is the object of the
former. In accordance with Article 427 of the
Code, the subject matter of ownership may either
be things or rights. (Rabuya, Property, 2008, p. 106)
Presumption of Ownership
Possession is viewed by the Civil Code as
presumed ownership. Actual possession under
claim of ownership raises a disputable
presumption of ownership. The true owner must
resort to judicial process for the recovery of the
property(Art. 433, NCC).
The presumption, however, is merely disputable
and may be overthrown by proof to the contrary.
(Rabuya, Property, 2008, p. 137)
Attributes of Ownership
1. Right to Enjoy
The essence of ownership is the right of the
owner to freely enjoy either the property itself or
the benefits derived therefrom, which enjoyment
may consist:
a. Simply of its possession (jus possidendi);
b. Its consumption (jus abutendi) - which
properly meant the use that extinguishes,
that consumes, by acts of the owner, things
which are consumable;
c. Its use (jus utendi) - To use a thing consists
in employing it for the purpose for which it is
fit, without destroying it, and which
employment can therefore be repeated;
d. Enjoyments of its products or fruits (jus
fruendi); or,
e. The enjoyment of anything attached or
incorporated to it, either naturally or
artificially (the right of accession). (Rabuya,
Property, 2008, p. 107-108)
2. Right to Dispose
Jus disponendi or the power of the owner to
dispose of his property includes the power:
a. To alienate - the right of the owner to
transmit either by onerous or gratuitous title
his right to another by any act inter vivos or
mortis causa. Such right is exclusively vested
upon the owner based upon the principle that
“no one can give what he does not have.”
b. To limit or to encumber - the power of the
owner to deprive himself of several of the
rights included in ownership and transfer
them to another;
c. To transform - the power to change the
nature of the thing, or its form or destination
d. To destroy - the power to destroy is the
power to render useless or to abandon or
annihilate the thing; and,
e. To merge. (Rabuya, Property, 2008, p. 108-
109)
3. Right to Vindicate
The owner has also a right of action against the
holder and possessor of the thing in order to
recover it. (Art. 428, 3rd par., NCC)
Every possessor has a right to be respected in his
possession; and should he be disturbed therein,
he shall be protected in or restored to said
possession by the means established by the laws
and the Rules of Court. (Art. 539, NCC)
4. Right to Possession
Possession, as an incident of ownership or a right
included in ownership, must be distinguished
from possession, as a right independent and
apart from ownership. Possession as an incident
of ownership refers to jus possidendi or the right
to possession. On the other hand, a right
independent and apart from ownership refers to
jus possessionis or the right of possession.
(Rabuya, Property, 2008, p. 109)
5. Right to Exclude
The owner is entitled to the exclusive possession
of his property. For this purpose, he may exclude
any person from the enjoyment and disposal
thereof by force if necessary and he may also
enclose or fence his property by any means. In
the event, however, that the possessor is
unlawfully deprived of possession, he is required
to resort to the proper legal processes for the
purpose of obtaining recovery of possession. This
principle is embodied in Article 433 of the New
Civil Code which directs the true owner to resort
to judicial process for the recovery of the
property, to wit:
“Article 433. Actual possession under claim of
ownership raises disputable presumption of
ownership. The true owner must resort to judicial
process for the recovery of the property. (n)”
349
and Article 536 of the same Code which states:
“Art. 536. In no case may possession be acquired
through force or intimidation as long as there is a
possessor who objects thereto. He who believes
that he has an action or a right to deprive another
of the holding of a thing, must invoke the aid of
the competent court, if the holder should refuse
to deliver the thing. (441a)” (Rabuya, Property,
2008, p. 109-110)
a. Doctrine of Self-help
The owner or lawful possessor of a thing has the
right to exclude any person from the enjoyment
and disposal thereof. For this purpose, he may
use such force as may be reasonably necessary
to repel or prevent an actual or threatened
unlawful physical invasion or usurpation of his
property.” The employment of such reasonable
force in defense of his property is what is known
in juridical science as the doctrine of self-help.
The doctrine of self-help is available not only to
owners of the property but also to any of its
“lawful possessor.” (Art. 429, NCC).
The actual invasion of property may consist of:
i. A mere disturbance of possession; or
ii. A real dispossession.
From the words of Art. 429, the doctrine of self-
help can only be exercised at the time of actual
(referring to the word “repel”) or threatened
(referring to the word “prevent”) dispossession,
and not when possession has already been lost.
In the latter case, the owner must resort to
judicial process for the recovery of property as
required in Article 536 of the Civil Code. In other
words, the doctrine of self-help cannot be
invoked for the purpose of recovering property.
(Rabuya, Property, 2008, p. 115-116)
Note: If the property is immovable, there should
be no delay in the use of force to recover it; a
delay even if excusable, such as when due to the
ignorance of the dispossession, will bar the right
to the use of force. (3-1 Enneccerus, Kipp & Wolff,
92-93)
Q: A, the registered owner of a parcel of land,
authorized petitioner ABC Construction Co.
(Company) to develop their property into a
residential subdivision. Finding that part of the
property was occupied by respondent X and
twenty other persons, the petitioner Company
350
advised the occupants to vacate the premises but
the latter refused. Nevertheless, the petitioner
proceeded with the development of the subject
property which included the portions occupied
and cultivated by herein respondents. In so
doing, the petitioner forcibly removed and
destroyed the barbed wire fence enclosing
private respondents’ farm holdings. Petitioner
likewise bulldozed the rice, corn, fruit bearing
trees and other crops of private respondents.
Private respondents, thereafter, sued the
petitioner for ejectment (forcible entry). The
lower courts rationalized the petitioner’s drastic
action of bulldozing and destroying the crops of
private respondents on the basis of the doctrine
of self-help enunciated in Article 429 of the New
Civil. Are the contentions of the lower courts
correct?
A: No. The doctrine of self-help can only be
exercised at the time of actual or threatened
dispossession which is absent in the case at bar.
When possession has already been lost, the
owner must resort to judicial process for the
recovery of property. (German Management &
Services, Inc. vs. CA, 177 SCRA 495 (1989))
b. Defense of Property as
Justifying Circumstance
Defense of property is deemed included in self-
defense under the provisions of Article 11,
paragraph 1 (justifying circumstances in defense
of person or rights), of the Revised Penal Code
(RPC) which requires unlawful aggression against
the person of the owner or lawful possessor of
the property.
Defense of property without any aggression
against the person of the owner is authorized.
Thus, even if the aggression was directed not on
the person of the accused-appellant but only on
his property, the Court nonetheless considered
such unlawful aggression for the purpose of
crediting him with the special mitigating
circumstance of incomplete self-defense (Art.
429, NCC).
For defense of property to be appreciated as a
justifying circumstance, it is necessary that the
means employed to prevent or repel the
aggression must be reasonable. Note that under
the doctrine of self-help in Article 429 of the Civil
Code, what is authorized is the use of force “as
may be reasonably necessary” for the purpose of
repelling or preventing any actual or threatened
unlawful physical invasion or usurpation of one’s
property. In determining the reasonableness of
the means employed, the absence of an attack
against the person of the owner or lawful
possessor of the property must be considered
since defense of property is not of such
importance as the right to life and limb. (Rabuya,
Property, 2008, p. 117-119)
Q: A’s house was situated on a land awarded to
B’s company by virtue of a sales patent. The
validity of the award was, however, questioned
before the court by a group of settlers including
A. While the case was still pending, a group of
men headed by B, the landowner, and his son,
were fencing the land of the A. At that time, A
was taking his rest but when he heard that the
walls of his house were being chiseled, he arose
and there he saw the fencing going on. If the
fencing would go on, A would be prevented from
getting into his house and the bodega of his rice
mill. So A addressed the group, “Pare, if possible
you stop destroying my house and if possible we
will talk it over what is good.” B, however,
answered: “No, gademit, proceed, go ahead.” A
apparently lost his equilibrium and he got his gun
and shot dead B and the latter’s companion, X. A
now questions his criminal conviction claiming
exemption from criminal liability as he acted
merely in defense of his person and of his rights.
Decide.
A: A, should be credited with the special
mitigating circumstance of incomplete defense of
property even if such defense is not coupled with
an attack upon the person of the accused. There
was an actual physical invasion of A’s property
which he had the right to resist, pursuant to Art.
429 of the Civil Code. The unlawful physical
invasion of A’s property is considered as unlawful
aggression. However, when A fired his shotgun
from his window, killing his two victims, his
resistance was disproportionate to the attack.
Hence, he must be credited only with special
mitigating circumstance of incomplete defense of
property. (People vs. Narvaez 121 SCRA 389 (1983))
6. Right to Enclose or Fence
Every owner may enclose or fence his land or
tenements by means of walls, ditches, live or
dead hedges, or by any other means without
detriment to servitudes constituted thereon (Art.
438, NCC).
However, it is required that the right to enclose
or fence must be legitimately exercised and must
not be attended with bad faith.
The same must not work to detriment the
servitudes constituted therein. (Rabuya, Property,
2008, p. 120)
7. Right to Sub-surface and Airspace
The owner of a parcel of land is the owner of its
surface and of everything under it, and he can
construct thereon any works or make any
plantations and excavations which he may deem
proper, without detriment to servitudes and
subject to special laws and ordinances. He cannot
complain of the reasonable requirements of aerial
navigation (Art. 437, NCC).
The owner of piece of land has rights not only to
its surface but also to everything underneath and
the airspace above it up to a reasonable height.
However, this is subject to certain limitations:
a. That it cannot work detriment to servitudes;
b. That it is subject to special laws and
ordinances;
c. That it is subject to reasonable requirements
of aerial navigation;
d. Rights of third person (Art. 431, NCC); and.
e. Principles on human relations and the
prevention of injury to the rights of third
persons. (Art. 19 and 431, NCC)
Rights Over Land Are Indivisible.
The rights over the land are indivisible and that
the land itself cannot be half agricultural and half
mineral. The classification must be categorical;
the land must be either completely mineral or
completely agricultural.
Extent of Rights Over The Sub-Surface. The
landowners’ right extends to such height or depth
where it is possible for them to obtain some
benefit or enjoyment, and it is extinguished
beyond such limit as there would be no more
interest protected by law. (Rabuya, Property, 2008,
p. 142-147)
Extent of Landowner’s Right to AirspaceThe
landowner owns at least as much of the space
351
above the ground as he can occupy or use in
connection with the land. To this extent his title
to the air is paramount. No other person can
acquire any title or exclusive right to any space
above him. Any unauthorized physical entry into
that space is to be considered a trespass, if done
by a private person, or a case of “taking” of
private property, if done under governmental
authority. (Rabuya, Property, 2008, p. 158)
8. Right to Hidden Treasure
Hidden treasure belongs to the owner of the land,
building, or other property on which it is found.
Nevertheless, when the discovery is made on the
property of another, or of the State or any of its
subdivisions, and by chance, one-half thereof
shall be allowed to the finder. If the finder is a
trespasser, he shall not be entitled to any share
of the treasure.
If the things found be of interest to science or the
arts, the State may acquire them at their just
price, which shall be divided in conformity with
the rule stated (Art. 438, NCC).
Rule on Hidden Treasure:
a. Finder is the owner of the property where the
treasure is found, is all his (Art. 438, NCC);
b. Finder is a trespasser; it shall belong solely to
the owner of the property where the treasure
is found (Ibid);
c. Finder is a third person who is not a
trespasser and the finding of the treasure is
by chance, the finder is entitled to ½ of the
treasure while the other half goes to the
owner of the property (Ibid).
Requisites to be considered as “hidden
treasure”:
a. The deposit of money, jewelry or other
precious objects must be hidden or unknown;
and,
b. The lawful ownership of which must not
appear. (Paras, Civil Code of the Philippines
Annotated, 2008, p. 199)
Meaning of Treasure
By treasure is understood, for legal purposes, any
hidden and unknown deposit of money, jewelry,
352
or other precious objects, the lawful ownership of
which does not appear (Art. 439, NCC).
Under the ejusdem generis rule, the term “other
precious objects” should be understood as being
similar to money or jewelry. Hence, the concept
does not include natural wealth, i.e., minerals and
petroleum.
The Regalian doctrine reserves to the State all
natural wealth that may be found in the bowels
of the earth even if the land where the discovery
is made be private. As such, the right of the
owner of the land with respect to the sub-surface
or subsoil is subject to the application of the
Regalian doctrine. (Rabuya, Property, 2008, p.
148-149).
Treasure Hunting
A treasure hunter requires a permit from the state
for the discovery/recovery of hidden treasures,
shipwreck/sunken vessels, etc. (R.A. 8492, the
National Museum Act of 1998)
The net proceeds of the treasure hunting shall be
distributed, as follows:
a. For treasure hunting within public lands –
75% to the Government and 25% to the
permit holder;
b. For treasure hunting in private lands – 30%
to the Government and 70% to be shared by
the permit holder and the landowner; and
c. For shipwreck/sunken vessel recovery – 50%
to the Government and 50% to the permit
holder (Rabuya, Civil Law Reviewer Vo 1,2017, p.
365-366).
Limitations on Ownership
The exercise of rights arising from ownership is
always subject to the restrictions imposed by law,
the exercise of the inherent powers of the State
and the rights of others. Aside from the foregoing
restrictions, the owner himself may impose
limitations upon his own right (Rabuya, Property,
2008, p. 122-135).
a. General Limitations Pursuant to the
Exercise of the Inherent Powers of the
State
i. Police Power. In the State’s exercise of
its police power, the owner does not
recover from the government for injury
sustained in consequence thereof (Art.
436, NCC).
ii. Power of Eminent Domain. The
exercise of the power of eminent domain
is constrained by two constitutional
provisions:
(1) That private property shall not be
taken for public use without just
compensation; and
(2) That no person shall be deprived of
his/her life, liberty, or property
without due process of law (Art. 435,
NCC).
b. Specific Limitations Imposed By
Law.
i. Legal easements which can be
enforced by law and, therefore, may
be established even against the will
of the owner of the servient estate.
ii. During a period of acute public want
or emergency, thoughtless
extravagance in expenses for
pleasure or display may be stopped
by order of the courts at the
instance of any government or
private charitable institution.
iii. Lands acquired under free patent or
homestead cannot be subject to
encumbrance or alienation within
five years from the issuance of the
patent. (Rabuya, Property, 2008, p.
126-127)
c. Inherent Limitations Arising From
Conflicts with Other Similar Rights
i. The owner of a thing cannot make
use thereof in such manner as to
injure the rights of a third person
(Art. 431, NCC).
ii. The owner of a thing has no right to
prohibit the interference of another
with the same, if the interference is
necessary to avert an imminent
danger and the threatened damage,
compared to the damage arising to
the owner from the interference, is
much greater. The owner may
demand from the person benefited
indemnity for the damage to him
(Art. 432, NCC).
When the owner acts in the legitimate exercise of
his right, that is, when he acts with prudence and
in good faith, he does no actionable injury and
cannot be held liable for damages. The damage
resulting from the legitimate exercise of a
person’s right is a loss without injury — damnum
absque injuria.
If the right is exercise in bad faith, however, and
for the sole intent of prejudicing or injuring
another, there is liability under the principle of
abuse of right.
State of Necessity
The interference by a third person with another’s
property is justified and cannot be prevented by
the latter if such interference is necessary to
avert an imminent danger and the threatened
damage, compared to the damage arising to the
owner from the interference, is much greater.
(Art. 432, NCC)
Requisites of State of Necessity:
a. There must be a situation of grave peril, an
actual or imminent danger, either upon the
person of the actor or a third person or their
property;
b. The interference is necessary to avert such
danger;
c. The threatened damaged, compared to the
damage arising to the owner from the
interference, is much greater; and,
d. The state of necessity must not be brought
about by the intentional provocation of the
party invoking the same. (Rabuya, Property,
2008, p. 132)
Since “state of necessity” is a justifying
circumstance, the accused does not commit a
crime in legal contemplation; hence, is not
criminally and civilly liable. Civil liability is borne
by the person/persons benefited by the act of the
accused.
353
d. Limitations Imposed By the Owner
Himself
The owner of the property may impose
restrictions or limitations on ownership in two
situations:
i. At the time that he transmits the property to
another person; or
ii. At the time that he continues to be the owner
of the property. (Rabuya, Property, 2008, p.
134)
Prohibition to Alienate. Prohibitions to alienate
imposed by the will of the transmitting owner are
generally valid except when they are forbidden by
law or contrary to public policy. A prohibition to
alienate should not exceed at most a period of
twenty years whether the transmission of
ownership is done gratuitously or onerously,
otherwise there would be subversion of public
policy, which naturally frowns on unwarranted
restrictions on the right of ownership.
A perpetual prohibition against alienation is,
however, void for being contrary to public policy.
Any such prohibition, indefinite and stated as to
time, so much so that it shall continue to be
applicable even beyond the lifetime of the original
parties to the contract, is, without doubt, a nullity.
(Rabuya, Property, 2008, p. 135)
2. RULES ON ACCESSION
Accession defined
It is the right by virtue of which the owner of a
thing becomes the owner of everything which is
produced thereby, or which is incorporated or
attached thereto, either naturally or artificially.
(Art. 440, NCC)
Rule on Accession of Immovables or
Accession Discreta
GR: To the owner belongs the natural, industrial,
and civil fruits (Art. 441, NCC).
XPNs:
1. Lease of rural lands: Lessee is entitled to
the natural and industrial fruits of the thing
leased. Civil fruits in the form of rent are
given to the lessor (Arts. 1654 and 1676[2],
NCC).
354
2. Usufruct: The usufructuary gets the fruits.
(3 Manresa 179-180)
3. Antichresis: The creditor acquires the right
to receive the fruits of an immovable of his
debtor, with the obligation to apply them to
the payment of interest, if owing, and
thereafter to the principal of his credit (Art.
2123, NCC).
4. Possession in good faith: A possessor in
good faith is entitled to the fruits received by
him before his possession is legally
interrupted (Art. 544, NCC).
5. Fruits naturally falling: If it falls upon
adjacent land, it belongs to the owner of said
land and not to the owner of the tree (Art.
681, NCC).
Kinds of Fruits
1. Natural fruits
Spontaneous products of the soil and the young
and other products of animals. (Art. 442(1), NCC)
Only such as are manifest or born are considered
as natural or industrial fruits. With respect to
animals, it is sufficient that they are in the womb
of the mother, although unborn. (Art. 444, NCC)
Offspring of Animals
GR: Partus Sequitur Ventrem - The owner of the
female animal owns the offspring which it
produced (US vs. Caballero, G.R. No. 8608,
September 26, 1913).
XPN: If there is a contrary custom or stipulation
(U.S. vs. Caballero, G.R. No. 8608, September 26,
1931).
Offspring is already considered as a natural fruit
even during the time that it is inside the womb of
its mother so long as the latter’s pregnancy is
already manifest or evident. It is necessary that
there must be no human labor which has
intervened in its generation. If human labor
intervenes in the production of the fruit, the same
is classified as an industrial fruit.
2. Industrial fruits
Produced by lands of any kind through cultivation
or labor (Art. 442[2], NCC).
Requirements:
a. Produced by the land; and
b. Produced through cultivation or labor.
3. Civil fruits
The rents of buildings, the price of leases of lands
and other property and the amount of perpetual
or life annuities or other similar income. Income
or revenues derived from the property itself (Art.
442[3], NCC).
Article 443 does not apply to a situation where
the fruits are still pending. In a situation where
the fruits are still pending (or ungathered) at the
time the owner recovers possession from a
possessor in bad faith, it is the provisions of
Article 449 of the Civil Code that will apply
(Rabuya, Civil Law Reviewer Vol. 1, 2017, p. 371-372).
Accession Continua
The right pertaining to the owner of a thing, over
everything that is incorporated or attached
thereto, either naturally or artificially by external
forces. (Rabuya, Property, 2008, p. 169)
Basic principles of accession continua:
1. Accessory follows the principal.
2. To the owner of a thing belongs the
extension or increase of such thing, subject
to certain XPNs.
Gathered Fruits (Art. 544, 545, NCC)
PLANTER
Planter in Good Keeps fruits until possession is
Faith legally interrupted.
Planter in Bad Faith Reimbursed for expenses for
production, gathering and
preservation
3. Union or incorporation must generally be
effected in such a manner that to
separate the principal from the accessory
would result in substantial injury to
either.
4. He who is in good faith may be held
responsible but not penalized.
5. He who is in bad faith may be penalized
6. No one should unjustly enrich himself at
the expertise of another (Rabuya, Civil
Law Reviewer Vol. 1, 2017, p. 372-372).
Principle: Accession exists only if separation is
not feasible. Otherwise, separation may be
demanded.
With respect to Real Property
Accession Industrial
Principles:
1. The accessory does not lead but follows the
principal.
2. The accessory follows the nature of that to
which it relates.
3. What is built upon the land goes with it, or
the land is the principal, and whatever is built
on it becomes the accessory.
Obligation to third person who pay for the
expenses
He who receives the fruits has the obligation to
pay the expenses made by a third person in their
production, gathering, and preservation. (Art.
443, NCC)
LANDOWNER
No necessity to reimburse the planter of
expenses since he retains the fruits
Gets fruits, pays planter expenses
355
Standing Crops

PLANTER LANDOWNER
Planter in Good Reimbursed for expenses for Owns fruits provided he pays planter
Faith production, gathering and expenses for production, gathering and
preservation preservation (force co-ownership)
Planter in Bad Loses everything. No right to Owns fruits
Faith reimbursement

A. RIGHTS OF A BUILDER/PLANTER/SOWER IN GOOD FAITH

RIGHTS AND OBLIGATIONS AMONG THE LANDOWNER, BUILDER, PLANTER AND SOWER,
AND THE OWNER OF THE MATERIALS IN CASE OF ACCESSION WITH RESPECT TO
IMMOVABLE PROPERTY
GOOD FAITH
LANDOWNER BUILDER, PLANTER, OWNER OF THE MATERIALS
SOWER
Acquire improvements and Right of retention for necessary Collect value of materials primarily from
pay to Builder, Planter, and useful expense. Builder, Planter or Sower; subsidiarily
Sower, indemnity; or Sell liable from landowner if Builder, Planter
the land to Builder or Pay the value of materials to or Sower is insolvent.
Planter except if the value owner of materials
of the land is considerably Materials can be removed if without
more. injury. (Arts. 447 and 455, NCC)

Rent to Sower (Arts. 448,

546 and 455, NCC)

Subsidiarily liable to owner

of materials
GOOD FAITH BAD FAITH
Acquire improvements and Right of retention for necessary Lose them without right to indemnity
pay indemnity to Builder, and useful expenses. (Art. 449, NCC)
Planter or Sower; or sell to
Builder, Planter or Sower if Keep building, planting or
the value of the land is sowing without indemnity to
considerable more (forced owner of materials and collect
lease) damages (Arts. 449 and 546,
NCC)
GOOD FAITH BAD FAITH
Acquire improvement Recover necessary expenses Recover value from Builder, Planter,
without paying indemnity for preservation. Sower as if they acted in good faith.
and collect damages or
demolition or restoration, Lose improvements without If Builder, Planter or Sower acquire
and collect damages or sell right to indemnity from Land improvements, materials can be
to Builder, Planter or rent to Owner (Art. 452, NCC) unless removed but only if without injury (Art.
Sower, and collect damages the Land Owner sells the land. 447, NCC)
BAD FAITH
Same as though they acted in good faith (Art. 453, NCC)
BAD FAITH GOOD FAITH

356
 Acquire improvements after Remove improvements in any Remove materials if without injury
paying indemnity and event.
damages to Builder, Planter Collect value of materials, primarily
or Sower. Be indemnified for damages. from Builder, Planter or Sower

Subsidiarily liable to owner Subsidiarily liable from Land Owner

of materials (Arts. 447, 454
and 455, NCC)

BAD FAITH GOOD FAITH

Acquire improvements after
indemnity to Builder,
Planter, Sower or sell to
Builder and Planter except if
the property is considerably
more
Right of retention for necessary
expenses.
Pay the value of the materials
to owner of materials and pay
him damages. (Arts. 447 and
546, NCC)
Collect value of materials primarily from
Builder, Planter and Sower, subsidiarily
liable with the Land Owner
Collect damages
If Builder, Planter, Sower acquires
improvements remove materials in any
event (Art. 447 and 455, NCC)

GOOD FAITH BAD FAITH GOOD FAITH

Acquire without paying Recover necessary expenses. Collect value of materials and damages
indemnity and collect (Art. 443 and 452, CC) from Builder, Planter or Sower and
damages or sell to Builder, subsidiarily from Land Owner.
Planter or Sower and collect
damages or demolish or Remove materials in any event if
restore and collect Builder, Planter or Sower acquires
damages. improvements.

Pay necessary expenses to

Builder, Planter or Sower.

BAD FAITH GOOD FAITH BAD FAITH

Acquire improvements and
pay indemnity and damages
to Builder, Planter or Sower.
(Arts. 447 and 454, NCC)
Indemnity for damages No indemnity
Remove improvements in any Lose materials. (Art. 449, NCC)
event. (Arts. 447 and 454,
NCC)

Concept of Good Faith:
Builder, Planter or Sower – There is good faith
if he has no knowledge of any flaw or defect in
his title or mode of acquisition which invalidates
it, while there is bad faith if he is aware of such
defect (Art. 526, NCC).
Landowner, Owner of the Materials –
consists in the ignorance of the acts of the
builder, planter or sower or if he was aware, there
was opposition on his part, while bad faith is
knowledge of such acts without opposition on his
part (Jurado, Civil Law Reviewer, 2009, p.336).
When both landowner and builder (who is also
the owner of the materials), all acted in good
faith, the right to choose between appropriating
the improvement or selling the land on which the
improvement of the builder, planter or sower
stands, is given to the only right given to the
builder in good faith is the right to reimbursement

357
for the improvements; the builder, cannot compel
the owner of the land to sell such land to the
former (Art. 448, NCC).
The landowner cannot refuse to exercise either
option and compel instead the owner of the
building or improvement to remove it from the
land. The remedy of remotion is available only if
and when the owner of the land chooses to
compel the builder to buy the land at a
reasonable price but the latter fails to pay such
price (Technogas Philippines Manufacturing Corp.
vs. CA, G.R. No. 108894, February 10, 1997).
Accession Natural
To the owners of lands adjoining the banks of
rivers belongs the accretion which they gradually
receive from the effects of the current of the
waters. (Art 457, NCC)
Alluvium
Increment which lands abutting rivers gradually
receive as a result of the current of the waters. It
is the gradual deposit of sediment by the natural
action of a current of fresh water (not sea water),
the original identity of the deposit being lost. Soil
is gradually deposited on banks adjoining the
river (Rabuya, Property, 2008, p. 234).
Requisites:
1. Deposit of soil or sediment is gradual and
imperceptible
2. As a result of the action of the currents of the
waters of the river
3. Land where the accretion takes place is
adjacent to the banks of the rivers (Rabuya,
Property, 2008, p. 235).
Deemed to Exist: When the deposit of the
sediment has reached a level higher than the
highest level of the water during the year
Effects:
1. Land automatically owned by the riparian
owner.
2. BUT does not automatically become
registered property (Rabuya, Property, 2008, p.
234).
358
Rationale:
1. To offset the owner’s loss from possible
erosion due to the current of the river
2. Compensate for the subjection of the land to
encumbrances and legal easements (Rabuya,
Property, 2008, p. 235).
Accretion operates ipso jure. However, the
additional area is not covered by a Torrens title
and the riparian owner must register the
additional area (Meneses vs. CA, G.R. No. 82220, July
14, 1995).
Since the accretion was formed by the dumping
of boulders, soil, sawdust and other filing
materials, it cannot be claimed that the
accumulation of such was gradual and
imperceptible. The deposit was not also due to
the effect of water current. The article excludes
all deposits caused by human intervention.
Alluvium must be the exclusive work of nature.
The accretion in this case is man-made, since it
was formed as a result of sawdust dumped into
the dried-up creek along the banks of rivers,
hence, part of the public domain (Vda. De Nazareno
vs. CA, G.R. No. 98048, June 26, 1996).
Registration under the Torrens System does not
protect the riparian owner against diminution of
the area of his land through gradual changes in
the course of adjoining stream (Payatas vs. Tuazon
G.R. No. L-30067, March 23, 1929).
Avulsion
Process whereby the current of a river, creek, and
torrent segregates from an estate on its bank a
known portion of land and transfers it to another
estate. A portion of land is segregated from one
estate by the forceful current of a river, creek or
torrent and transferred to another (Rabuya,
Property, 2008, p. 243).
Requisites:
1. Segregation and transfer of land is sudden
and abrupt
2. Caused by the current of the water
3. Portion of land transported must beknown
and identifiable; or
4. Can also apply to sudden transfer by other
forces of nature such as land transferred
from a mountain slope because of an
earthquake.
The owner must remove the transported portion
within two years to retain ownership. (Art. 459,
NCC) In avulsion, it is essential that the detached
portion be known or identifiable. Therefore, mere
placing on top will not make the article
inapplicable as long as the identification is
possible. But if because of some force, (e.g.,
continuous rain) the two have so mixed with each
other that identification cannot take place, the
article should not apply (II Tolentino, 135). In this
case, the principles of commixtion or confusion
should apply.
Effect: The ownership of the detached property
is retained by the owner subject to removal within
2 years from the detachment (Art. 459, NCC).
Alluvium vs. Avulsion
ALLUVIUM AVULSION
The deposit of the soil Sudden or abrupt;
here is gradual and may be seen.
imprescriptible
Soil cannot be Soil is identifiable or
identified verifiable
Belongs to owner of Belongs to the owner
the property to which from whose property
it is attached. it was detached.
Merely an attachment Detachment followed
by attachment.
Trees uprooted and carried away by the current
of the waters belong to the owner of the land
upon which they may be cast if the owners do not
claim them within 6 months. If the trees form part
of the soil which was removed by action of
waters, the rule on avulsion will apply. Thus, the
action will prescribe in 2 years.
Change of Rivers’ Course
If there is a natural change in the course of the
waters of the river, the abandoned riverbeds shall
ipso facto belong to the owners whose lands are
occupied by the new course in proportion to the
area lost(Art. 469, NCC).
Island
When the current of a river divides itself into
branches, leaving a piece of land. The island
formed remains to be the property of the owner
of the land where such island has been formed
and the portion of the land separated from his
estate by the current (Art. 463, NCC).
An island is formed on a sea, lake or navigable or
floatable river through whatever cause. The
island formed is owned by the State (Art. 464,
NCC).
Islands formed through successive accumulation
of alluvial deposits in non-navigable and non-
floatable rivers (Art. 465, NCC).
Rules of Ownership:
1. It shall belong to the owner of the margins or
banks nearest to the island;
2. If the island is in the middle of the river, the
same shall be owned by the owners of both
margins, in which case it shall be divided
longitudinally in halves; or
3. If the island be more distant from one margin
than from the other, the owner of the nearer
margin shall be the sole owner thereof (Art.
465, NCC).
Requisites:
1. Change in the natural course of the waters of
the river;
2. Such change causes the abandonment of the
river beds. (Rabuya, Property, 2008, 235)
Natural Bed: ground covered by its waters
during ordinary floods. Such change is sudden or
abrupt. (Ibid, p. 61)
Results:
1. Owners whose lands are occupied by the new
course automatically become owners of the
old bed, in proportion to the area they lost
(Art. 461, NCC);
2. Owners of the lands adjoining the old bed are
given the right to acquire the same by paying
the value of the land Not exceeding the
value of the land invaded by the new bed (the
old property of the owner) (Ibid);
3. The new bed opened by the river on a private
estate shall become of public dominion. (Art.
462, NCC)
359
Islands’ Formation
They belong to the State if:
1. Formed on the SEAS within the jurisdiction of
the Philippines
2. Formed on LAKES
3. Formed on NAVIGABLE or FLOATABLE
RIVERS capable of affording a channel or
passage for ships and vessels
4. Must be sufficient not only to float bancas
and light boats, but also bigger watercraft
5. Deep enough to allow unobstructed
movements of ships and vessels (Art. 464,
NCC)
They belong to the owners of the nearest
margins or banks if:
1. Formed through successive accumulation of
alluvial deposits
2. On NON-NAVIGABLE and NON- FLOATABLE
RIVERS
3. If island is in the middle: divided
longitudinally in half (Art. 464, NCC)
Adjunction
Process by virtue of which two movable things
belonging to different owners are united in such
a way that they form a single object and each of
the things united preserves its own nature.
(Rabuya, Property, 2008, p. 255)
Requisites:
1. Two things must belong to different owners;
2. Form a single object;
3. Inseparable or their separation would impair
their nature. (Ibid)
Kinds:
1. Inclusion or engraftment
2. Soldadura or soldering
a. Ferrumination – if both accessory and
principal are of the same metal
b. Plumbatura – if they are of different
metals
3. Escitura or writing
4. Pintura or painting
5. Tejido or weaving (Ibid)
360
Test to Determine Principal
1. The “rule of importance and purpose” – to
which the other (accessory) has been united
as an ornament or for its perfection.
2. Of greater value, if they are of unequal values
3. Of greater volume, if they are of an equal
value
4. That of greater merits taking into
consideration all the pertinent legal
provisions applicable as well as the
comparative merits, utility and volume of
their respective things. (Ibid, p. 258-259(
Rules in Adjudication by either owner
GR: Accessory follows the principal.
XPN: If the accessory is much more precious
than the principal, the owner of the accessory
may demand the separation even if the principal
suffer some injury. (Art. 469, NCC)
Adjudication in bad faith by the owner of the
principal; Option of the owner of the accessory:
1. To recover the value plus damages; or
2. To demand separation plus damages.
Adjudication in bad faith by the owner of the
accessory:
1. He losses the accessory; or
2. He is liable for damages
When separation of things allowed:
1. Separation is without injury (Art. 469, 1st
par., NCC); or
2. Accessory is more precious than the principal
(Art. 469, 2nd par., NCC); or
3. Owner of the principal acted in bad faith (Art.
470, NCC).
Commixtion
Combination or union of materials where the
respective identities of the component elements
are lost.
Kinds:
Commixtion – mixture of solid
Confusion – mixture of liquids
Rules: more) but form
is changed.
1. Mixture by will of the owners. In the absence Accessory Co- Accessory
of stipulations, each owner acquires a right or follows the ownership follows the
interest in the mixture in proportion to the principal results principal
value of his material as in co-ownership. Things joined Things The new object
2. Mixture caused by an owner is proportional to retain their mixed or retains or
the value of the part which belonged to him. nature confused preserves the
The share of each owner is proportional to the may either nature of the
value of the part which belonged to him. retain or original object.
3. Mixture is caused by an owner in bad faith: lose their
4. He loses his material in favor of the other’s respective
material; and natures
5. He is liable for damages
C. CO-OWNERSHIP
Mixture made with the knowledge and without
the objection of the other owner. Their respective Co-ownership defined
rights shall be determined as though both acted
in good faith. The form of ownership when the ownership of an
undivided thing or right belongs to different
Specification persons (Art. 484, NCC).

Giving of a new form to another’s material
through application of labor (labor is the
principal). (Rabuya, Pre-bar Reviewer in Civil Law,
2021, p. 183)
Rules:
Manifestation of the private right of ownership,
which instead of being exercised by the owner in
an exclusive manner over the things subject to it,
is exercised by two or more owners and the
undivided thing or right to which it refers is one
and the same (Rabuya, Property, 2008, p. 272).

1. Owner of the principal (worker) in good faith Requisites of co-ownership

2. A worker/maker acquires the new thing;
3. Must indemnify the owner of the material. 1. Plurality of subjects - Ownership of an
undivided thing or right belongs to different
XPN: If the material is more precious/valuable persons;
than the new thing, the owner of the material 2. Unity of object - There is a single object
may choose: which is not materially divided, and which is
the element which binds the subjects; and
1. To appropriate the new thing to himself, but 3. Recognition of ideal share - There must be
he pays for the work; or recognition of ideal shares, which determines
2. To demand indemnity for the material. the rights and obligations of the co-owners.
3. Owner of the principal (worker) in bad faith: Rabuya, Property, 2008, p. 272-273)
the owner of the material has the choice:
4. To acquire the new thing without indemnity; Dual Nature of Ownership in Co-
or Ownership:
5. To demand indemnity for the material plus
damages. 1. Ownership over the ideal share
6. Owner of the material in bad faith
7. He loses the material; and Each co-owner shall have the full ownership of his
8. He is liable for damages. (Ibid) part and of the fruits and benefits pertaining
thereto and he may therefore alienate, assign or
ADJUNCTION MIXTURE SPECIFICATION mortgage it, and even substitute another person
Involves at Involves May involve only in its enjoyment, except when personal rights are
least two at least one thing (or involved (Art. 493, NCC).
things. two things

361
2. Joint Ownership over the whole of them happens to goes to other joint-
be a minor tenant.
Each co-owner may use the thing owned in Prescription runs Prescription does not
common, provided he does so in accordance with against all co-owners, run against all joint-
the purpose for which it is intended and in such a even if one of them tenants if one of them
way as not to injure the interest of the co- happens to be a is a minor or is under
ownership or prevent the other co-owners from minor. legal disability.
using it according to their rights (Art. 486, NCC).
ORDINARY
Characteristics of co-ownership CO-OWNERSHIP
PARTNERSHIP
Created by law, Created by contract
1. There are two or more co-owners (Art. 484, contract, succession, (express or implied).
NCC); fortuitous event or
2. There is a single object which is not occupancy
materially or physically divided and over For common To obtain profits.
which his ideal share of the whole, each of enjoyment of the
the co-owner exercises ownership, together thing or right owned
with the other co-owners; in common.
3. There is no mutual representation by the co- No juridical Has a juridical
owners; personality personality.
4. It exists for the common enjoyment of the Share is proportionate Shares or profits may
co-owners; to the respective be subject to
5. It has no distinct legal personality; and interests of the co- stipulation.
6. It is governed first of all by the contract of owners.
the parties; otherwise, by special legal Co-owner may A partner cannot
provisions, and in default of such provisions, dispose of his share dispose of his share
by the provisions of Title III on Co- without the consent and substitute the
ownership. of the others – except buyer/assignee in his
when personal rights place without the
Sources of Co-ownership are involved. consent of the others.
Agreement to keep Law fixes no limit
1. Law;
the thing undivided
2. Contracts; for a period of more
3. Succession;
than 10 years is void.
4. Testamentary disposition or donation inter
Generally, there is no Generally, there is a
vivos;
mutual mutual
5. Fortuitous event or by chance (commixtion,
representation. XPN: representation,
confusion, hidden treasure); and
When a co-owner files unless otherwise
6. Occupation or occupancy (two persons claim
a case for ejectment, stipulated.
ownership.
the rest are
represented.
Co-ownership distinguished from other
Death or incapacity of Death dissolved the
concepts
a co-owner does not partnership
dissolve the co-
JOINT
CO-OWNERSHIP ownership. The
OWNERSHIP
deceased will be
Each co-owner owns Each joint-tenant
represented by his
only his ideal share in cannot dispose of his
estate or heirs in the
the whole property own share without the
co-ownership.
consent of all the
others.
CO-OWNERSHIP EASEMENT
In case of death, the In case of death, the
There is in each co- Precisely a limitation
share of co-owners share of joint-tenant
owner a right of on the right of
remains, even if one
dominion over the dominion.

362
 whole property and is ordinarily adapted according to its nature and
over his undivided that is for dwelling purposes. (Ibid, p. 289)
share.
The right of ownership The right of Bringing action of ejectment
rests solely on each dominion is favor of
and every co-owner one or more persons Any one of the co-owners may bring an action in
over a single object. and over two or ejection (Art. 487, NCC).
more different
things. A co-owner may thus bring an ejectment action
without joining the other co-owners, the suit
CONJUGAL being deemed instituted for the benefit of all
CO-OWNERSHIP (Sering vs. Plazo, G.R. No. L-49731, September 29,
PARTNERSHIP
1988).
May arise by an Arises only because of
ordinary contract. the marriage contract.
Any co-owner may file an action under Article 487
Sex of the co- One must be a male, the
not only against a third person, but also against
owners is other a female.
another co-owner who takes exclusive possession
immaterial
and asserts exclusive ownership of the property
Co-owners may be Conjugal owners are
(De Guia vs. CA, G.R. No. 120864, October 8, 2003).
two or more. always two.
Profits are Profits are generally 50- Right to demand contribution from co-
proportional to 50 unless a contrary owners
respective stipulation is in a
interests. marriage settlement. The law grants each co-owner the right to
Death of one does Death of either husband demand contribution from the other co-owners
not dissolve the or wife dissolves the for any and all expenses he incurred for the
co-ownership. conjugal partnership. purpose of preserving the thing or right owned in
Generally, all co- Generally, the husband common, even if the repairs for preservation
owners administer. is the administrator. were made without the consent of the other co-
Co-ownership is Encourage by law to owners. (Rabuya, Property, 2008, p. 296)
discouraged by provide for better family
law. solidarity. When notice of repairs is required

Limitation on use of co-owned property Giving of notice to repair property held in

Although each co-owner is the owner of the
whole thing prior to partition and may make use
of the entire thing, such use is, however, subject
to the following limitations:
1. Such use must be in accordance with the
purpose for which the thing is intended;
2. Such use must be without prejudice to the
rights of the other co-owners; and
3. Such use must not be in a manner as to
prevent the other co-owners from using the
thing according to their own right. (Rabuya,
Property, 2008, p. 284)
Determining the intended purpose
common, is required only if the same is
“practicable” given the circumstances by which
the repair is to be undertaken. Hence, if the
repairs are urgent and any delay will be
detrimental to the interest of the co-ownership,
prior notification is no longer necessary and a co-
owner may already undertake such repairs
without need of giving prior notice to the other
co-owners (Art. 489, NCC).
The Condominium Act (R.A. No. 4726)
defines “condominium” as:
An interest in real property consists of a separate
interest in a unit in a:

To determine the purpose for which the property 1. Residential;

held in common is intended, the agreement, 2. Industrial or Commercial building or in an
express or implied, of the parties will first govern. industrial estate; and
In default of such an agreement, it is understood 3. An undivided interest in common, directly
that the thing is intended for that use for which it and indirectly, in the land, or the appurtenant

363
 interest of their respective units in the
common areas (Sec. 2)
Concept of Common Areas, amendment
A “common area” refers to the entire project
excepting all units separately granted or held or
reserved (Sec. 3[d])
Under Sec. 4, of R.A. No. 4726, “common areas”
may be added to or become separate areas by
amending the master deed.
Amendment of the master deed shall be done by
registration of an instrument which is: Executed
by the registered owner or owners of the
property; and consented to by all registered
holders of any lien or encumbrance on the land
or building or portion thereof.
The term “registered owner” shall include the
registered owners of condominiums in the project
(Sec. 4)
The enabling or master deed may be amended or
revoked upon registration of an instrument
executed by a simple majority of the registered
owners of the property; Provided, that in a
condominium project exclusively for either
residential or commercial use, simple majority
shall be on a per unit of ownership basis and that
in the case of mixed use, simple majority shall be
on a floor area of ownership basis: Provided,
further, that prior notifications to all registered
owners are done: and Provided, finally, that any
amendment or revocation, already decided by a
simple majority of all registered owners shall be
submitted to the Housing and Land Use
Regulatory Board and the city/municipal engineer
for approval before it can be registered. Until
registration of a revocation, the provisions of this
Act shall continue to apply to such property
(Ibid.)
Articles of Incorporation and By-laws of the
condominium corporation
Whenever the common areas of the
condominium are owned by a condominium
corporation, the articles of incorporation and by-
laws of the said corporation shall:
Not contain any provision contrary to or
inconsistent with the provisions of the
364
Condominium Act, the enabling or master deed,
or the declaration of restrictions of the project
(Sec. 10).
Limit the corporate purpose to:
1. The holding of the common areas, either in
ownership or any other interest in real
property recognized by law; and
2. To the management of the project, and to
such other purposes as may be necessary,
incidental or convenient to the
accomplishment of said purposes (Sec. 10).
Rights of condominium unit owner:
1. Absolute ownership of his unit;
2. Co-ownership of land and common areas;
3. Exclusive easement of the space of his unit;
4. Non-exclusive easement to common areas
for ingress or egress;
5. Right to sell, lease, or mortgage his unit;
6. Right to repair, paint, decorate the interior
surface of his unit; and
7. Right to participate and vote in condominium
corporation meetings (Sec. 6).
Obligations of a condominium unit owner:
1. Pay the realty on his unit;
2. Pay the insurance on his unit; and
3. Pay the shared monthly dues for
maintenance of common
areas/amenities/garbage disposal comply
with use restrictions.
Realty Installment Buyer Act (R.A. No.
6552)
In case where less than two years of installments
were paid, the seller shall give the buyer a grace
period of not less than sixty days from the date
the installment became due.
If the buyer fails to pay the installments due at
the expiration of the grace period, the seller may
cancel the contract after thirty days from receipt
by the buyer of the notice of cancellation or the
demand for rescission of the contract by a
notarial act (Sec. 4).
Under Sec. 3 and 4, the buyer shall have the right
to sell his rights or assign the same to another
person or to reinstate the contract by updating
the account during the grace period and before
actual cancellation of the contract.
The deed of sale or assignment shall be done by
notarial act (Sec. 5).
The buyer shall have the right to pay in advance
any installment or the full unpaid balance of the
purchase price any time without interest and to
have such full payment of the purchase price
annotated in the certificate of title covering the
property (Sec. 6).
Any stipulation in any contract hereafter entered
into contrary to the provisions of Sec.s 3, 4, 5 and
6, shall be null and void (Sec. 4).
Right to Refund Under RA No. 6552 and
P.D. 957
R.A. No. 6552 – Right to refund applies as a
requisite for cancellation of contract due to
delinquency when the buyer has paid at least two
years. Refund is 50% of total payments;
additional 5% per year after 5th year.
Presidential Decree 957 – Right to refund
applies when the developer fails to complete the
development within the required period. Refund
is 100% of total payments less penalty interest.
Grounds for dissolution of the
condominium:
1. That three years after damage or destruction
to the project in which the corporation owns
or holds the common areas, which damage
or destruction renders a material part thereof
unfit for its use prior thereto, the project has
not been rebuilt or repaired substantially to
its state prior to its damage or destruction;
or
2. That damage or destruction to the project
has rendered one-half or more of the units
therein untenantable and that more than
thirty percent of the members of the
corporation, if non-stock, or the shareholders
representing more than thirty percent of the
capital stock entitled to vote, if a stock
corporation, are opposed to the repair or
reconstruction of the project, or
3. That the project has been in existence in
excess of fifty years, that it is obsolete and
uneconomical, and that more than fifty
percent of the members of the corporation, if
non-stock, or the stockholders representing
more than fifty percent of the capital stock
entitled to vote, if a stock corporation, are
opposed to the repair or restoration or
remodeling or modernizing of the project; or
4. That the project or a material part thereof
has been condemned or expropriated and
that the project is no longer viable, or that
the members holding in aggregate more than
seventy percent interest in the corporation, if
non-stock, or the stockholders representing
more than seventy percent of the capital
stock entitled to vote, if a stock corporation,
are opposed to the continuation of the
condominium regime after expropriation or
condemnation of a material portion thereof;
or
5. That the conditions for such dissolution set
forth in the declaration of restrictions of the
project in which the corporation owns or
holds the common areas, have been met
(Secs. 8 and 13).
Rights of each co-owner as to the thing
owned in common:
1. To use the thing owned in common (Art. 486,
NCC)
Limitations:
. Use according to the purpose for which it was
intended;
a. Interest of the co-ownership must not be
prejudiced;
b. Other co-owners must not be prevented
from using it according to their own
rights (Art. 486, NCC)
2. To share in the benefits and charges in
proportion to the interest of each. Any
stipulation to the contrary is void (Art. 485,
NCC);
If the source of the co-ownership is a contract,
the share of the co-owner in the thing itself may
depend on their agreement and, in default
thereof, it is presumed to be equal in the absence
of proof to the contrary (Rabuya, Property, 2008, p.
282).
365
3. To bring an action for ejectment
A co-owner may bring an ejectment action
without joining the other co-owners, the suit
being deemed instituted for the benefit of all. (3
Manresa, 6th ed., 424)
A co-owner may file an ejectment suit against a
co-owner who takes exclusive possession of the
property, but it will only be for the purpose of
obtaining recognition of the co-ownership
(Rabuya, Property, 2008, p. 292).
4. To the benefits of prescription – Prescription
by one co-owner benefits all; and
5. To compel the others to share in the
expenses of preservation even if incurred
without prior notice (Right to contributions
for expenses).
A co-owner may exempt himself from the duty to
reimburse by RENOUNCING (abandoning for the
benefit of the others) so much of his undivided
share as may be equivalent to his share of the
expenses and taxes. However, the renouncing
cannot be done if the co-ownership will be
prejudiced (Rabuya, Property, 2008, p.297-298).
Reimbursement covers only necessary expenses,
like those for the preservation of a house in a
ruinous condition (Trinidad vs. Ricafort, et al.,
G.R. No. 3240, February 8, 1907) and not for
useful improvements, even if the value of the
property is thereby increased, the purpose of co-
ownership not being for profit.
6. To oppose alterations made without the
consent of all, even if beneficial (Art. 491,
NCC).
Alteration
The act by virtue of which a co-owner, in
opposition to the express agreement, if there is
any, or, in default thereof, to the tacit agreement
of all the co-owners, and violating their will,
changes the thing from that state in which the
others believe it should remain or withdraws it
from the use to which they wish it to be intended
(Manresa, 6th Ed).
366
Consent of alteration
Act of alteration must be authorized by all the co-
owners, whether such authorization be given
prior to or after the commission of the act.
If the alteration is made without the consent of
all the co-owners, the act is illegal and invalid.
Other co-owners can compel the erring co- owner
to undo what has been done, at the latter’s
expense.
7. To make repairs for the preservation may be
made at the WILL OF ONE of the co-owners,
but he must, if practicable, first notify his co-
owners of the necessity for such repairs.
Expenses to improve or embellish are decided
by MAJORITY.
Acts of administration
An act of administration refers to the
improvement or embellishment of the thing
owned in common for the purpose of better
enjoyment.
8. To protest against seriously prejudicial
decisions of the majority.
Legal redemption: to be exercised within 30 days
from written notice of sale of an undivided share
of another co-owner to a stranger (Right To
Redemption Of Co-Owners Share) (Arts. 1620
and 1623, NCC)
9. To defend the co-ownership’s interest in
court.
10. To demand partition at any time (Right To
Partition) (Art. 494, NCC).
Partition defined
The division between 2 or more persons of real
or personal property which they own in common
so that each may enjoy and possess his sole
estate to the exclusion of and without
interference from the others (Art. 1079, NCC).
Co-owner cannot immediately specify
portion as his own
A co-owner cannot point to specific portion of the
property owned in common as his own because
his share therein remains intangible (Vda de Ape
vs. CA, supra, 207).
Effects of partition
Co-ownership is terminated.
a. It shall not prejudice the rights of the third
persons who shall retain the right to
mortgage, servitude or any other real rights
belonging to them before the division was
made.
b. Personal rights pertaining to third persons
against the ownership shall also remain in
force.
c. Mutual accounting shall be rendered by the
co-owners to each other with regard to
benefits and expenses and each co-owner
shall pay for the damages by reason of his
negligence or fraud.
d. Every co-owner shall be liable for defects of
title and quality of the portion assigned to
each of the other co-owner (Rabuya, Property,
2008, p. 347).
No more co-ownership when portion to
property is already determined
There is no co-ownership when the different
portions owned by different people are already
concretely determined and separately
identifiable, even if not yet technically
described. (Sps. Si vs. CA, G.R. No. 122047
October 12, 2000)
Prior to partition, co-owners hold ideal
shares
Prior to the partition, all that the co-owner has is
an ideal or abstract quota or proportionate share
in the entire land or thing (City of Mandaluyong
vs. Aguilar, supra, p.499).
Where the transferees of an undivided portion of
the land allowed a co-owner of the property to
occupy a definite portion thereof, the possessor
is in a better condition or right than said
transferees. (Potior est condition possidentis).
Such undisturbed possession, according to the
Court, had the effect of a partial partition of the
co-owned property which entitles the possessor
to the definite portion which he occupies (Vda de
Cabrera vs. CA, G.R. No. 108547, February 3, 1997).
Right to Partition (Art. 494, NCC)
GR:
No co-owner shall be obliged to remain in the co-
ownership” and, thus, “each co-owner may
demand at any time the partition of the thing
owned in common, insofar as his share is
concerned.
XPNs:
. An agreement to keep the thing undivided for
a certain period NOT exceeding 10 years is
valid.
a. Term may be extended by a new agreement
b. Donor or testator may prohibit partition,
period NOT to exceed 20 years
c. No partition if prohibited by law
Right does not prescribe
As long as the co-ownership is recognized, an
action to compel partition will not prescribe and
may be filed at any time against the actual
possessor by any of the other co-owners.
Except when, a co-owner or co-heir, however,
holds the property in exclusive adverse
possession as owner, asserting sole and exclusive
dominion for the required period, he can acquire
sole title to it as against the co-heirs or co-
owners. (Pangan vs. CA, G.R. No. L-39299
October 18, 1988)
When partition is not available
. When there is an agreement among the
owners to keep the thing undivided. This
should not exceed 10 years.
a. When the donor or testator prohibits
partition for a period which shall not
exceed twenty (20) years.
b. When the law prohibits partition such as
when the origin or juridical nature of co-
ownership prevents partition
i. Spouses, who are governed by a
regime of absolute community,
367
 cannot agree to partition the
community property without a
judicial order (Art. 134, FC)
ii. The heirs cannot partition the family
home upon the death of the person
or persons who constituted the same
unless the court finds compelling
reasons therefore (Art. 159, FC).
c. When partition would render the thing
unserviceable for the use for which it is
intended.
Termination of Co-ownership
1. Loss or destruction of the thing;
2. Merger of all the interest in one co-owner;
3. By the partition, judicial or extrajudicial, of
the respective undivided shares of co-owner;
and
4. Judicial or extrajudicial partition (2103
Manresa, 6th ed., 486; 2 Castan, 8th ed., 318)
D. POSSESSION
Possession defined
The holding of a thing or the enjoyment of a right,
either by material occupation or by the fact of
subjecting the thing or right to the action of our
will (Art. 523, NCC).
Requisites of possession
1. Holding/control or material detention or
enjoyment of a thing or right;
2. Animus possidendi or intent to possess the
thing or right; and
3. Possession must be by virtue of one’s own
right (Rabuya, Property, 2008, p. 378).
Possession vs. Occupation (Bar 1997,
2000)
Occupation can take place only with respect to
property without an owner while possession can
refer to all kinds of property, whether with owner
or without an owner. Occupation itself, when
proper, confers ownership but possession does
not by itself give rise to ownership (Suggested
Answers, UPLC & PALS).
368
Forms/degrees of possession:
1. Possession without any title whatsoever (e.g.
possession of a thief);
2. Possession with juridical title (e.g. lessee,
pledge, depositary);
3. Possession with just title (e.g. a buyer in
good faith, where the property was delivered
to him by one pretending to be the owner);
4. Possession with a title in fee simple, i.e.
possession that springs from ownership
(Rabuya, Property, 2008, p. 381).
1. KINDS OF POSSESSION (Art. 524-526,
NCC)
1. Possession in one’s own name and
possession in the name of another
(Art. 524, NCC).
Actual possession of land consists in the
manifestation of acts of dominion over it of
such a nature as those a party would
naturally exercise over his own property. It
is not necessary that the owner of a parcel
of land should himself occupy the property
as someone in his name may perform the
act. In other words, the owner of real estate
has possession, either when he himself is
physically in occupation of the property, or
when another person who recognizes his
rights as owner is in such occupancy. This
declaration is conformably with Art. 524 of
the Civil Code providing that possession may
be exercised in one’s own name or in the
name of another. An example of actual
possession of real property by an owner
through another is a lease agreement
whereby the lessor transfers merely the
temporary use and enjoyment of the thing
leased (Reyes v. Court of Appeals G.R. No.
127608, September 30, 1999).
“The circumstance that after the sale, the
Manalilis resided in Manila and Pangasinan is of
no moment. As it is, possession may be exercised
in one’s own name or in that of another. It is not
necessary that the owner or holder of the thing
exercise personally the rights of possession.
Rights of possession may be exercised through
agents.” (Santos v. Manalili 475 SCRA 679 (2005))
It is more logical to view “possession in another’s
name” in Article 524 as referring only to the
possession by a person without any right of his
own and one which is strictly of an agent or
merely an instrument in the exercise of such
possession, e.g., possession by a caretaker. On
the other hand, possession in one’s own name
embraces all kinds of possession anchored on a
juridical title or right, e.g., possession by the
owner himself, possession by a lessee or a mere
usufructuary. If both the fact of possession and
the right to such possession are found in the
same person, such possession is said to be
exercised in one’s own name. If, on the other
hand, the right to the possession is in one person
while the fact of possession is in another person
and the latter merely acts in representation of the
former, the latter’s possession is said to be
exercised in another’s name. In this case, the
actual possessor (the agent) is not considered in
law as legal possessor because the possession is
not by virtue of his own right. (Rabuya, Property,
2008, p. 386)
2. Possession in the Concept of Owner or
Holder
A possessor in the concept of an owner may be
the owner himself or one who claims to be so.
The concept of owner, refers to the opinion or
belief of the neighbors and the rest of the world
and not that of the possessor. Consequently,
even if the possessor is aware that that there is a
flaw in his title resulting in its invalidation (in
which case he becomes a possessor in bad faith),
so long as he claims ownership of the property
and does not acknowledge in another a superior
right, he is nonetheless considered a possessor in
the concept of owner. (Rabuya, Property, 2008, p.
388-389)
One who possesses as a mere holder
acknowledges in another a superior right which
he believes to be ownership, whether his belief
be right or wrong. In the case of possessors in
the concept of holder who are as such by virtue
of a juridical title or right, e.g., lessee,
usufructuary, etc., they are considered as
possessors in the concept of holder with respect
to the thing itself, but considered as possessors
in the concept of owner with respect to their
right. (Rabuya, Property, 2008, p. 389)
3. Possession in good faith and possession
in bad faith
He is deemed a possessor in good faith who is
not aware that there exists in his title or mode of
acquisition any fl aw which invalidates it. He is
deemed a possessor in bad faith who possesses
in any case contrary to the foregoing. Mistake
upon a doubtful or difficult question of law may
be the basis of good faith. (Art. 526, NCC)
Good faith is always presumed, and upon him
who alleges bad faith on the part of a possessor
rests the burden of proof. (Art. 527, NCC)
Possession acquired in good faith does not lose
this character except in the case and from the
moment facts exist which show that the
possessor is not unaware that he possesses the
thing improperly or wrongfully. (Art. 528, NCC)
It is presumed that possession continues to be
enjoyed in the same character in which it was
acquired, until the contrary is proved. (Art. 529,
NCC)
Requisites for possession in good faith (Art.
526, NCC):
a. the possessor has a title or mode of
acquisition;
b. There is a flaw or defect in said title or mode
which invalidates it; and,
c. The possessor is unaware of the flaw or
defect, or believes that the thing belongs to
him.
One whose interest is merely that of a holder,
such as a mere tenant, agent or usufructuary, is
not qualified to become a possessor builder in
good faith. A lessee cannot be said to be a
possessor-builder in good faith as he has no
pretension to be owner. Being a mere lessee, he
knows that his occupation of the premises will
continue only for the life of the lease. Hence, he
cannot claim that he is unaware of any flaw in his
title or that he is under the belief that he is the
owner of the subject premises. (Rabuya, Property,
2008, p. 396)
Q: In a petition for reconstitution of a lost or
destroyed TCT, where the petitioner-owner
states that she is in possession but somebody
else is residing in the property, is the petition
defective?
A: No. In the case of Republic vs. Alonte, (G.R.
No. 162787, June 13, 2008), the SC held that the
fact that Alona, Ludy’s attorney-in-fact, testified
that it is she and her family who are residing on
369
the subject lot, does not negate the statement in
the petition for reconstitution that it is Ludy who
is in possession of the lot. After all, Art. 524 of
the NCC provides that possession may be
exercised on one’s own name or in that of
another. Obviously, Alona was exercising
possession over the land in the name of Ludy.
(Jurado, Civil Law Reviewer, 2009, p. 389).
Mistake of Law
According to Manresa, gross and inexcusable
ignorance of the law may not be the basis of good
faith, but excusable error arising from complex
legal principles and from the interpretation of
conflicting or doubtful doctrines may be such
basis. (Rabuya, Property, 2008, p. 398)
When a person accepted the mortgage of the
improvements and proceeded on the well-
grounded belief that he was not violating the
prohibition regarding the alienation of the land, in
taking possession and in consenting to receive its
fruits, he did not know that the possession and
enjoyment of the fruits are attributes of the
contract of antichresis and that the latter, as a
lien, was prohibited by Section 116 of Act No.
2874, he is deemed a possessor in good faith
(Kasilag vs. Rodriguez, G.R. No. 46623, December 7,
1939).
2. ACQUISITION OF POSSESSION
Acquisition of Possession/Ways of
acquiring possession:
1. By the material occupation of a thing or
exercise of a right.
2. By the subjection of the thing or right to our
will.
3. By proper acts and legal formalities
established for acquiring such right of
possession (Art. 531, NCC).
Constitutum possessorium – exists when a
person who possessed property as an owner,
now possesses it in some other capacity.
Traditio brevi manu – exist when a person who
possessed property not as an owner, now
possesses it as owner.
Traditio symbolica – delivery of a mere symbol
or objects which represent the thing to be
delivered (e.g. key of a warehouse).
370
Traditio longa manu – delivery by consent or
mere pointing (Paras, Civil Code Annotated, 16th
Edition, 2008, p. 476 – 477).
Constructive possession
The actual possession of part of the property is
deemed to extend to the whole because
possession in the eyes of the law does not mean
that a man has to have his feet on every square
meter of ground before it can be said that he is
in possession (Gonzalez vs. CA, G.R. No. 145914,
June 20, 2001).
Requisites of Constructive Possession:
1. The alleged possessor must be in actual
possession of a portion or part of the
property;
2. He is claiming ownership of the whole area;
3. The remainder of the area must not be in the
adverse possession of another person; and
4. The area claimed must be reasonable
(Rabuya, Property, 2008, p. 406).
Transfer of Possession through Succession
If possession of property is effected by way of
succession, whether testate or intestate, such
possession is deemed transmitted to the heir
without interruption from the moment of the
death of the decedent but only if the heir accepts
the inheritance. This rule will apply even if such
heir is not in actual physical possession of the
property. If the heir, on the other hand, validly
renounces the inheritance he will be deemed
never to have possessed the same even if he is
in actual physical possession of the property (Art.
533, NCC).
Instances When Possession is not
Acquired:
1. Through the use of Force or
Intimidation as long as there is a
possessor who objects thereto.
If such illegal manner of ejectment is employed,
the party who proves prior possession can
recover possession even from the owners
themselves (Heirs of Pedro Laurora,vs. Sterling
Technopark III, G.R. No. 146815, April 9, 2003).
2. Acts Merely Tolerated Right of Right of
reimbursement and reimbursement only
The rule is that acts which are merely tolerated retention of the thing.
do not affect possession. Possession, to Pending Fruits
constitute the foundation of a prescriptive right, Liable with the No right to the
must be a possession under claim of title (en legitimate possessor pending fruits.
concepto de dueño), or to use the common law for expenses of
equivalent of the term, it must be adverse. cultivation and shall
share in the net
Acts of a possessory character performed by one harvest in proportion
who holds by mere tolerance by the owner are to the time of
clearly not en concepto de dueño, and such possession.
possessory acts, no matter how long so Useful Expenses
continued, do not start the running of the period Reimbursed to None
of prescription. (Rabuya, Property, 2008, p. 416-417) possessor (owner’s
option).
Acts merely tolerated are those which by reason Initial cost;
of neighborliness or familiarity, the owner of Plus value may be
property allows his neighbor or another person to removed if no
do on the property; they are generally those reimbursement, and
particular services or benefits which one’s no damage is caused
property can give to another without material to the principal by the
injury or prejudice to the owner, who permits removal.
them out of friendship or courtesy (Sarona vs. Deterioration or Loss
Villegas, G.R. No. L-22984, March 27, 1968). No liability unless due Always
to his fault or
3. Clandestine and Unknown Acts
negligence.
Ornamental expenses
It will not interrupt the running of the period of
Not entitled to a Not entitled to a
acquisitive prescription in favor of the legal
refund. refund
possessor nor it will affect his right to receive the
Right of removal, Right of removal,
fruits.
unless owner retains unless owner retains
possession of possession of
On the part of the actual possessor, his
ornaments, hence ornaments, refund
possession acquired through clandestine acts not
refund on the actual shall be LIMITED to
known to the legal possessor will not ripen into
amount expended. the value at the time
ownership through prescription because one of
of possession of
the requirements thereof — that the possession
owner.
be “public” in character — will not be present
(Rabuya, Property, 2008, p. 419). Taxes and charges
On capital – charged On capital – charged
3. EFFECTS OF POSSESSION (Art. 544-548, to owner; to owner;
NCC) On fruits – charged to On fruits – charged
owner; to owner;
Possessor in Good Possessor in Bad Charges – prorated Charges – pro-rated.
Faith Faith
Entitled to the fruits Reimburse the fruits Possession in good faith (4 years) or bad faith (8
received or which years) cannot benefit possessor in cases where
legitimate possessor Art. 559 are applicable (Pajunar vs. CA, G.R. No.
77266, July 19, 1989).
would have
received.
Q: Anthony bought a piece of untitled agricultural
Necessary Expenses
land from Bert, Bert, in turn, acquired the
property by forging Carlo’s signature in a deed of
sale over the property. Carlo had been in

371
possession of the property for 8 years, declared
it for tax purposes, and religiously paid all taxes
due on the property. Anthony is not aware of the
defect in Bert’s title, but has been in actual
physical possession off the property from the
time he bought it from Bert, who had never been
in possession. Anthony has since then been in
possession of the property for one year.
a. If Carlo is able to legally recover his property,
can he require Anthony to account for all the
fruits he has harvested from the property while in
possession?
b. If there are standing crops on the property
when Carlo recovers possession, can Carlo
appropriate them? (Bar 2008)
A: Since Anthony is a possessor in good faith,
Anthony cannot be made to account for the fruits
he gathered before he was served with summons.
A possessor in good faith is entitled to the fruits
received before the possession was legally
interrupted by the service of summons. (Art. 544,
NCC) After Anthony was served with summons,
he became a possessor in bad faith and a builder,
planter, sower in bad faith. He can also be made
to account for the fruits but he may deduct
expenses for production gathering and
preservation of the fruits (Art. 1443, NCC)
b. The value of the standing crops must be
prorated depending upon the period of
possession and the period of growing and
producing the fruits. Anthony is entitled to a part
of the net harvest and a part of the expenses of
cultivation in proportion to his period of
possession. Carlo may appropriate the respective
parts subject to prorating the respective periods
of possession. However, Carlo may allow Anthony
to gather these growing fruits as an indemnity for
the expenses of cultivation. If Anthony refuses to
accept this concession, he shall lose the right to
indemnity under Art. 443 (Art. 545, par. 3, NCC).
E. USUFRUCT
1. IN GENERAL
Usufruct gives the right to enjoy the property of
another with the obligation of preserving its form
and substance, unless the title constituting it or
the law otherwise provides (Art. 562, NCC).
372
Usufruct, in essence, is nothing else but simply
allowing one to enjoy another’s property. It is
also defined as the right to enjoy the property of
another temporarily, including both the jus utendi
and the jus fruendi, with the owner retaining the
jus disponendi or the power to alienate the same
(Moralidad vs. Sps. Pernes, G.R. No. 152809, Aug. 3,
2006).
GR: Usufructuary is bound to preserve the form
and substance of the thing in usufruct.
XPN: Abnormal usufruct whereby the law or the
will of the parties may allow the modification of
the substance of the thing.
Characteristics of Usufruct
1. It is real right (whether registered or not in
the Registry of Property) of use and
enjoyment;
2. It is temporary in duration;
3. Transmissible;
4. May be constituted on real or personal
property, consumable or non-consumable,
tangible or intangible, the ownership of which
is vested in another.
5. To derive all advantages from the thing due
to normal exploitation (Rabuya, Property, 2008,
p. 467).
How Constituted
1. By law;
2. By will of private persons in act inter vivos;
3. By the will of private persons expressed in a
last will and testament;
4. By prescription (Rabuya, Property, 2008, p. 470-
471).
Caucion Juratoria
A sworn duty to take good care of the property of
another and to return the same at the end of the
usufruct (Rabuya, Property, 2008, p. 488).
If the usufructuary who has not given security
claims, by virtue of a promise under oath, the
delivery of the furniture necessary for his use,
and that he and his family be allowed to live in a
house included in the usufruct, the court may
grant this petition, after due consideration of the
facts of the case (Art. 587, NCC).
Abnormal Usufruct
Classifications of Usufruct
The usufructuary does not have the obligation of
preserving the form and the substance of the a. Total and Partial
property which is the object of the usufruct
(Rabuya, Property, 2008, p. 472). Usufruct may be constituted on the whole (total)
or part of a thing (partial).
Distinction between usufruct and lease
b. Simple and Multiple
USUFRUCT LEASE
As Nature of right It may be constituted in favor of one person
Always a real right. Generally, a (simple) or it may be constituted in favor of two
personal right; or more persons (multiple).
becomes a real
right only when c. Pure, with a condition or with a period
registered
As Constitution It may be constituted from or to a certain day
Constituted by law, by the Constituted by (with a period), purely or conditionally.
will of private persons contract.
expressed in acts inter d. Proper (normal) and improper
vivos or in a last will or (abnormal)
testament, and by
prescription. It is proper or normal when it is improper or
As Person constituting it abnormal when it is constituted over a
The owner. Need not be the consumable thing. (Rabuya, Property, 2008, p. 471)
owner
As Extent 2. RIGHTS AND OBLIGATIONS OF THE
Includes the right to use Limited to use USUFRUCTUARY
and to enjoy the fruits only.
(jus utendi and jus Rights of Usufructuary
fruendi) of the thing.
As Duration 1. Rights to civil, natural, and industrial
There is no limitation to There is a fruits of property (Art. 566, NCC)
the duration of a limitation to the
usufructuary right. duration of a Civil fruits are deemed to accrue daily and belong
lease right. to the usufructuary in proportion to the time the
usufruct may last (Art. 569, NCC).
As Repair
Both stock dividends and cash dividends are
There is no limitation to Lessee is not
considered civil fruits.
the duration of a generally under
usufructuary right. obligation to
Fruits pending at the beginning of the usufruct
undertake
belong to the usufructuary.
repairs.
As Taxes
No necessity of refunding the owner for expenses
Usufructuary is Lessee is not
incurred (for the owner gave the usufruct
responsible for taxes on generally under
evidently without any thought of being
the fruits obligation to pay
reimbursed for the pending fruits or because the
taxes.
value of said fruits must have already been taken
into consideration in fixing the terms and
Usufruct is a right of superior degree to that
conditions of the usufruct, if for instance, the
which arises from a lease. It is a real right and
usufruct came about because of contract) (Art.
includes all the jus utendi and jus fruendi
567 [3], NCC). BUT without prejudice to the right
(Eleizegui vs. The Manila Lawn Tennis Club, G.R. No.
967, May 19, 1903). of 3rd persons (thus, if the fruits had been planted

373
by a possessor in good faith, the pending crop
expenses and charges shall be prorated between
said possessor and the usufructuary) (Art. 567
[4], NCC).
Fruits pending at the termination of the usufruct
belong to the owner (par. 2, Art. 567, NCC). BUT
the owner must reimburse the usufructuary for
ordinary cultivation expenses and for seeds and
similar expenses from the proceeds of the fruits.
(Hence, the excess of expenses over the
proceeds need not be reimbursed).
2. Rights to hidden treasure as a stranger
(Art. 566, NCC)
If he is the actual finder, he gets half; if not, he
gets nothing because he is not the owner.
3. Right to transfer usufructuary (Art. 572,
574, NCC)
Gratuitous or onerous (Art. 572, NCC); but is co-
terminus with the term of usufruct; fruits
proportionate at duration of usufruct; but can’t do
acts of ownership such as alienation or
conveyance except when property is (Art. 574,
NCC):
a. Consumable
b. Intended for sale
c. Appraised when delivered; If not appraised
and consumable, return same quality
(mutuum)
4. Right to exempt from execution and can be
sold at public auction by the owner
5. Naked owner still has the rights but without
prejudice to the usufructuary; may still
exercise rights of ownership (Art. 581, NCC)
6. Right to necessary expenses from cultivation
at end of usufruct (par. 3, Art. 567, NCC)
7. Right to enjoy accessions and servitudes in
its favor and all benefits inherent therein (Art.
571, NCC)
8. Right to make use of dead trunks of fruit
bearing trees and shrubs or those uprooted
or cut by accident but obliged to plant a new
one (Art. 575, NCC)
9. Right to usufructuary of woodland (Art. 577,
NCC)
10. Right to leave dead, uprooted trees at the
disposal of owner with right to demand that
owner should clear and remove them (Art.
576, NCC)
374
11. Right to oblige owner to give authority and
furnish him proofs if usufruct is extended to
recover real property (Art. 578, NCC)
12. Right to introduce useful and luxurious
expenses but with no obligation of
reimbursement on the part of owner (Art.
579, NCC)
13. Right to set-off improvements against
damages he made against property (Art. 580,
NCC)
14. Right to administer when property is co-
owned (Art. 582, NCC)
15. Right to demand the increase in value of
property if owner did not spend for
extraordinary repairs when urgent and
necessary for preservation of a thing.
As a rule, the lease executed by the usufructuary
should terminate at the end of the usufruct or
earlier, except in the case of leases of rural lands,
because in said case, if the usufruct ends earlier
than the lease, it continues for the remainder of
the agricultural year.
It is not the naked owner, but the usufructuary
that has the right to choose the tenant. (Art. 572,
NCC)
Obligations of the Usufructuary
Before the usufruct begins
1. To make an inventory of the property;
2. To give security/bond (Art. 583, NCC).
XPNs:
a. When the usufruct is reserved by the donor;
and
b. In case of legal usufruct of the parents over
the property of their minor children
XPNs:
(i) When parents contract a second marriage;
(ii) When the market value of property/annual
income of the child exceeds P50,000.
The usufructuary may be excused from the
obligation of making an inventory or of giving
security when:
1. No one will be injured thereby;
2. The enjoyment of the property is to be
acquired through caucion juratoria
Effects of Failure to Post Bond
1. Owner shall have the following options:
a. Receivership of realty, sale of
movables, deposit of securities, or
investment of money; or
b. Retention of the property as
administrator
2. The net product shall be delivered to the
usufructuary.
3. Usufructuary cannot collect credits due or
make investments of the capital without the
consent of the owner or of the court until the
bond is given (Rabuya, Property, 2008, p. 487).
Obligations during the Usufruct
1. To take care of the property (Art. 589, NCC)
2. To replace with the young thereof animals
that die or are lost in certain cases when the
usufruct is constituted on flock or herd of
livestock (Art. 591, NCC)
3. To make ordinary repairs (Art. 592[1], NCC)
4. To notify the owner of urgent extraordinary
repairs (Art. 593, NCC)
5. To permit works and improvements by the
naked owner not prejudicial to the usufruct
(Art. 595, NCC)
6. To pay annual taxes and charges on the fruits
(Art. 595, NCC)
7. To pay interest on taxes on capital paid by
the naked owner (Art 597, NCC)
8. To pay debts when the usufruct is constituted
on the whole of a patrimony (Art 598, NCC)
9. To secure the naked owner’s or court’s
approval to collect credits in certain case (Art.
599, NCC)
10. To notify the owner of any prejudicial act
committed by third persons (Art 601, NCC)
11. To pay for court expenses and costs
regarding usufruct (Art 602, NCC)
12. To indemnify the owner for any deterioration
they may have suffered by reason of his
fraud/negligence (Art. 573, NCC)
13. If usufruct includes fruit-bearing trees &
shrubs, to replace them with new plants. (Art.
574, NCC)
At the Termination of the Usufruct
1. To return the thing in usufruct to the naked
owner unless there is a right of retention (Art.
602, NCC)
2. To pay legal interest for the time that the
usufruct lasts, on the amount spent by the
owner for extraordinary repairs (Art. 594,
NCC) and the proper interest on the sums
paid as taxes by the owner (Art. 597, NCC)
3. To indemnity the naked owner for any losses
due to his negligence or of his transferees.
4. If usufruct includes things which cannot be
used without being consumed, (obligation is)
to pay their appraised value at the
termination of the usufruct, if they were
appraised; or (if not appraised) to return the
same quality/quantity, or pay their current
price at the time the usufruct ceases (Art.
574, NCC)
3. EXTINGUISHMENT
1. Death of the usufructuary, unless
contrary intention appears;
2. Expiration of the period or fulfillment of
the resolutory condition;
3. Merger of the usufruct and ownership in
the same person; (Art. 603, NCC)
4. Renunciation of the usufructuary;
5. Total loss of the thing;
6. Termination of the right of the person
constituting the usufruct;
7. Prescription. (Art. 603, NCC)
8. Other causes for extinguishment of
usufruct
a. Annulment
b. Rescission
c. Mutual withdrawal
d. Legal causes ending usufruct, as
when attainment of the age of
majority extinguishes parental
usufruct
Bad use does not extinguish the usufruct, unless
the ABUSE OR MISUSE should cause considerable
injury to the owner (Art. 610, NCC).
Q: On 1 January 1980, Minerva, the owner of a
building granted Petronila a usufruct over the
property until 01 June 1998 when Manuel, a son
of Petronila, would have reached his 30th
birthday. Manuel, however, died on 1 June 1990
when he was only 26 years old. Minerva notified
Petronila that the usufruct had been extinguished
by the death of Manuel and demanded that the
latter vacate the premises and deliver the same
to the former.
375
Petronila refused to vacate the place on the
ground that the usufruct in her favor would expire
only on 1 June 1998 when Manuel would have
reached his 30th birthday and that the death of
Manuel before his 30th birthday did not
extinguish the usufruct.
Whose contention should be accepted? (Bar 1997)
A: Petronila's contention is correct. Under Article
606 of the Civil Code, a usufruct granted for the
time that may elapse before a third person
reaches a certain age shall subsist for the number
of years specified even if the third person should
die unless there is an express stipulation in the
contract that states otherwise. In the case at bar,
there is no express stipulation that the
consideration for the usufruct is the existence of
Petronila's son. Thus, the GR and not the XPN
should apply in this case.
F. EASEMENTS
Easement defined
It is a real right, constituted on the corporeal
immovable property of another, by virtue of
which the owner has to refrain from doing, or
must allow someone to do, something on his
property, for the benefit of another thing or
person (Bogo-Medellin Milling Co., Inc. vs. CA, G.R.
No. 124699, July 31, 2003).
It is an encumbrance imposed upon an
immovable for the benefit of another immovable
belonging to a different owner (Art. 613, NCC).
May also be established for the benefit of a
community, or of one or more persons to whom
the encumbered estate does not belong (Art. 614,
NCC).
An easement is a limitation on the owner’s right
to use his or her property for the benefit of
another (Reyes vs. Sps. Valentin & Ramos, G.R. No.
194488, February 11, 2015).
Difference of easement and servitude
“Easement” refers to the right enjoyed by one
over another’s property, or jura in re aliena while
“servitude” refers to the burden imposed upon
the other (Rabuya, Property, 2008, p. 502).
376
Nature and characteristics of easement
1. The right consists of a limited use and
enjoyment of the thing without possession
and gives rise to an action in rem in favor of
the owner of the tenement of the easement
and against any possessor of the servient
estate (Caguioa, Civil Code of the Phil., 1966).
2. Easement is a real right which falls over the
property itself. The easement is inseparable
from the estate which it actively or passively
belongs (Art. 617, NCC).
3. It cannot be alienated or mortgaged
separately from the estate to which it forms
part (Solid Manila Corp vs. Bio Hong Trading Co.,
G.R. No. 90596, April 8, 1991).
4. It is a necessary consequence of the principle
of inseparability of the easement or servitude
from the estate to which it relates (Rabuya,
Civil Law Reviewer Vol. 1, 2017, p. 532)
5. Indivisible
Even if the servient and dominant estates are
divided between two or more persons, the
easement or the servitude continues to attach to
the estates originally affected (Solid Manila Corp. v.
Bio Hong Trading, G.R. No. 90596, April 8, 1991).
6. Intransmissible
The easement is inseparable from the estate to
which it actively or passively belongs. It cannot,
therefore, be alienated or mortgaged separately
from the estate to which it forms part (Solid Manila
Corp. v. Bio Hong Trading, supra.).
7. Enjoyed over another immovable, never on
one’s own property
Parties to an Easement: (Art. 613, NCC)
1. Dominant Estate - Immovable in favor of
which an easement is established.
2. Servient Estate - That which is subject to
easement.
Classification of Easement c. Non-apparent easements - those
which show no external indication of their
1. As to recipient of Benefit: existence (Art. 615, NCC).
d. Positive Easement - imposes upon the
. Real (or Praedial) – When it is in favor owner of the servient estate the
of another immovable obligation of allowing something to be
a. Personal - when it is in favor of a done on his property (servitutes in
community, or of one or more persons to patendo) (Art. 616, NCC).
whom the encumbered estate does not e. Negative easement - prohibits the
belong. owner of the servient estate from doing
something which he could lawfully do if
2. As to Source: the easement did not exist (servitutes in
non faciendo) (Art. 616, NCC).
. Legal – if established by law either for
public use or for the interest of private No such a thing as judicial easement
persons.
a. Voluntary - if established by the will of When the court says that an easement exists, it
the owners. is not creating one. Court merely declares the
existence of an easement created by the parties
Examples of Legal Easement: (La Vista Association v CA, G.R. No. 95252, September
5, 1997).
. Easement relating to waters (Arts. 637-648,
NCC); Easement v. Lease:
a. Easement of right of way (Arts. 649-657,
NCC); EASEMENT LEASE
b. Easement of party wall (Arts. 658-666, NCC); Always a real Real right only when it is
c. Easement of light and view (Arts. 667-673, right. registered, or when its
NCC); subject matter is real
d. Easement of drainage of buildings (Arts. 674- property and the
676, NCC); duration exceeds one
e. Easement of distances (Arts. 677-681, NCC); year.
f. Easement of nuisance (Arts. 682-683, NCC); A right limited to A right limited to use and
and use without possession without
g. Easement of lateral and subjacent support ownership or ownership.
(Arts. 684-687, NCC). (Cited in Rabuya, Property, possession.
2008 p. 509)
Can refer only to May involve either real or
immovable. personal property.
(**For more details, see DISCUSSION ON LEGAL
Imposed only on
AND VOLUNTARY EASEMENT at the end of this
real property.
section)
Limited to Included all the uses and
particular or the fruits of the property.
3. As to its exercise:
specific use of the
servient estate.
. Continuous easements - those the use
A non-possessory Involves a right of
of which is or may be incessant, without
right over an possession in an
the intervention of any act of man (Art.
615, NCC). immovable. immovable or
a. Discontinuous easements - those immovable.
which are used at intervals and depend Not extinguished Extinguished by
upon the acts of man (Art. 615, NCC). by the death of stipulation of the parties,
b. Apparent easements - those which are the dominant or by law.
made known and are continually kept in owner.
view by external signs that reveal the use
and enjoyment of the same (Art. 615,
NCC).

377
Easement v. Usufruct: Commencement of easement

EASEMENT USUFRUCT Depends on whether the easement is positive or

Limited to a specific Includes all use of the negative.
use of the property property, including jus
fruendi Positive Servitude – The 10 year period is counted
Only on immovable Real or personal from the day when the owner of dominant estate
property property begins to exercise it (Art. 621, NCC).
Not extinguished by the
extinguished by th death of the Negative Servitude – counted from the formal
e death of the usufructuary, unless a prohibition to the servitude owner to any opposed
owner of the contrary intention to the servitude. There must be a notarized
dominant estate. appears document (Art. 621, NCC).
Involves two Contemplates only one
neighboring estates property 1. By deed of recognition
Does not include the Includes the right of
right of possession possession in the 2. By apparent sign established by the
property owner of two adjoining estates
Cannot be alienated May be alienated se
independently of the parately from the Requisites:
estate property to which it
attaches a. That there exist an apparent sign of
servitude between two estates;
1. MODES OF ACQUIRING EASEMENTS b. That at the time of the establishment of
such sign, the ownership of the two
A. By title - All kinds of easements whether estates resides in one person;
continuous or discontinuous, apparent or c. That the sign of the easement be
non-apparent positive or negative, may established by the owner of both estates
be acquired by title (Art. 620 and 622, because the article will not apply when
NCC). the easement is established by a person
different from the owner;
By title as a mode of acquiring servitude, refers d. That the ownership over the two estates
to the “juridical act: which gives birth to the is later on divided, either by alienation or
servitude, such as the law, donations, contracts partition; and
and wills. Hence, the act may either be inter vivos e. That at the time of division of ownership,
or mortis causa, may be onerous or gratuitous (4 nothing is stated in the document of
Manresa, 5th Ed, 552). alienation or partition contrary to the
easement nor is the sign of the easement
Title - means a juridical act or law sufficient to removed before the execution of the
create the encumbrance. document (Art. 624, NCC).

Intestate succession does not create an Acknowledgment of an easement in one

easement because no act is involved. There is
only transmission of easement already existing.
B. By prescription (Ten years [10])
Only continuous and apparent easement may be
acquired by prescription (Art. 620, NCC).
Prescription runs irrespective of good faith or bad
faith of the possessor and whether or not he has
just title. Only requirement is adverse possession.
who owns property
An acknowledgment of the easement is an
admission that the property belongs to another
(BOMEDCO vs. Heirs of Valdez, G.R. No. 124699, July
31, 2003).
Effect of Zoning Ordinance
Such prohibition is similar to other conditions
imposed by sellers of subdivision lots upon
purchasers thereof, in and around Manila. It is in
reality an easement, which every owner of real

378
estate may validly impose under Art. 594 of the
Civil Code or under Art. 688 of the Civil Code,
which provides that “the owner of a piece of land
may establish thereon the easements which he
may deem suitable, provided he does not
contravene the law, public policy or public order”.
“The validity of building restrictions
limiting buildings to residences, restrictions as
to the character or location of buildings or
structures to be erected on the land has been
sustained. (14 Am, Jur. 617)
2. RIGHTS AND OBLIGATIONS OF THE
OWNERS OF THE DOMINANT AND
SERVIENT ESTATES
Rights of the dominant owner
a. Make on the servient estate all the works
necessary for the use and preservation of the
servitude (Art. 627, NCC);
b. Ask for a mandatory injunction to prevent
impairment of his use of the easement (Art.
625, NCC);
c. Renounce the easement if he desires to
exempt himself from contribution to
necessary expenses (Art. 628, NCC); and
d. To exercise all the rights necessary for the
use of the easement (Art. 625, NCC).
Obligations of the dominant owner
a. Cannot alter the easement or
render it more burdensome (Art. 627,
NCC)
b. Notify the servient owner of works necessary
for the use and preservation of the servitude
(Art. 627, NCC)
c. Choose the most convenient time
and manner in making the necessary
works as to cause the least inconvenience to
the servient owner (Art. 627, NCC)
d. Contribute to the necessary expenses if there
are several dominant estates (Art. 628, NCC)
e. Cannot use the easement except for the
benefit of the immovable originally
contemplated.
f. Exercise the easement in any other manner
than that previously established (Art. 626,
NCC).
Rights of the servient owner
A servient owner is the owner of the immovable,
whose property is subject to easement for the
benefit of the dominant owner.
a. To retain ownership and possession of the
servient estate (Art. 630, NCC);
b. To make use of the easement, unless there is
agreement to the contrary (Art. 630, NCC);
and
c. To change the place or manner of the
easement, provided it be equally convenient
(Art. 629, NCC).
Obligations of the servient owner
Cannot impair the use of the easement
XPN:
i. The same should become very inconvenient
to the owner of the servient estate; or
ii. Should prevent him from making any
important works, repairs or improvements
thereon.
Requisites for the servient owner to be allowed to
impair easement
i. He offers another place or manner equally
convenient;
ii. No injury is caused thereby to the owner of
the dominant estate or to those who may
have a right to the use of the easement; and
iii. Contribute to the necessary expenses in case
he uses the easement, unless there is an
agreement to the contrary (Art. 629, NCC)
3. MODES OF EXTINGUISHMENT (Art. 631,
NCC)
1. Redemption agreed upon between the
parties
2. Expiration of the term
3. Merger of ownership of the dominant and
servient estate
Where the merger is temporary or under
resolutory condition, there is at most a
suspension, but not an extinguishment of the
servitude.
379
4. Annulment or Rescission of title constituting
the easement
5. Permanent Impossibility to use the
easement.
Impossibility of use only suspends the servitude
until such time when it can be used again.
6. Non-user for 10 years
a. Discontinuous: counted from the day
they ceased to be used
b. Continuous: Counted from the day an act
adverse to the exercise takes place.
7. Renunciation – renunciation by the dominant
owner must be specific, clear and express
(Fuentes v. Rivera, 40 O.G. [Sup. 12]).
8. Termination of the right of the grantor.
9. Abandonment of the servient estate
10. Eminent Domain
11. Fulfillment of the resolutory condition
4. LEGAL V. VOLUNTARY EASEMENTS
A. Legal Easement
Those imposed by law having for their object
either public use of the interest of private
persons. They shall be governed by the special
laws and regulations relating thereto, and in the
absence thereof, by the Civil Code. (Rabuya,
Property, 2008, p. 509)
Public Legal Easement
Public legal easement is for public or communal
use.
Private legal easement
Private legal easement for the interest of private
persons or for private use. It shall be governed
by:
1. Agreement of the parties provided they are
neither prohibited by law nor prejudicial to
third persons
2. In default, general or local laws and
ordinances for the general welfare
3. In default, Title VII of Articles 613-687 of the
NCC.
380
5. KINDS OF LEGAL EASEMENT
a. RELATING TO WATERS
The following are the easements relating to
waters:
Easement of drainage of waters (Art. 637,
NCC; Art. 50, Water Code) (Bar, 1995)
An easement exists when, based on the physical
condition of two estates, waters descend
naturally and without the intervention of man
from a higher estate (the dominant estate) to a
lower estate (the servient estate). (Rabuya,
Property, 2008 p. 538)
Character: Continuous
Obligations of the Servient Estate (Art. 637,
NCC):
1. To receive the waters which naturally and
without the intervention of man flow from the
higher estates, as well as the stones or earth
which they carry with them; and
2. He may not construct works, such as dikes,
walls or hedges, which will block or impede
the flow of waters, unless he provides an
alternative method of drainage.
Obligations of the Dominant Estate:
1. He may not construct works which will
increase the burden or increase the natural
flow.
2. To select the routes and methods of drainage
that will cause the minimum damage to the
lower lands if he shall resort to artificial
means of draining waters from higher to the
lower estate.
3. To pay just compensation to the lower estate
(Rabuya, Property, 2008 p. 538).
Q: Lauro owns an agricultural land planted mostly
with fruit trees. Hernando owns an adjacent land
devoted to his piggery business, which is two (2)
meters higher in elevation. Although Hernando
has constructed a waste disposal lagoon for his
piggery, it is inadequate to contain the waste
water containing pig manure, and it often
overflows and inundates Lauro’s plantation. This
has increased the acidity of the soil in the
plantation, causing the trees to wither and die.
Lauro sues for damages caused to his plantation.
Hernando invokes his right to the benefit of a
natural easement in favor of his higher estate,
which imposes upon the lower estate of Lauro the
obligation to receive the waters descending from
the higher estate. Is Hernando correct? (Bar,
2002)
A: Hernando is wrong. Article 637 of the New Civil
Code provides that the owner of the higher estate
cannot make works which will increase the
burden on the servient estate. (Remman
Enterprises, Inc. vs. CA, G.R. No. 125018, April 6,
2000).
Easement for public use (Art. 638, NCC; Art.
51, Water Code)
The banks or rivers and streams and the shores
of the seas and lakes throughout their entire
length and within a zone of three (3) meters in
urban areas, twenty (20) meters in agricultural
areas and forty (40) meters in forest areas, along
their margins, are subject to the easement of
public use in the interest of recreation,
navigation, floatage, fishing and salvage.
However, no person shall be allowed to stay in
this zone longer than what is necessary for
recreation, navigation, floatage, fishing or
salvage or to build structures of any kind.
Easement for drawing waters or easement
for watering animals (Arts. 640-641, NCC)
This is really a combined easement for drawing
of water and right of way
Requisites:
1. Must be imposed for reasons of public use
2. Must be in favor of a town or village
3. Indemnity must be paid.
Easement of abutment of dam (Art. 639,
NCC)
Requisites:
1. For the purpose of diverting or taking waters
from a river or brook, or for the use of any
other continuous or discontinuous stream
2. The person who is to construct it is not the
owner of the banks or of the land on which
must support it
3. Payment of the proper indemnity to the
owner of the affected estates.
Easement of aqueduct (Arts. 642-646,
NCC)
The right arising from a forced easement by
virtue of which the owner of an estate who
desires to avail himself of water for the use of
said estate may make such waters pass through
the intermediate estate with the obligation of
indemnifying the owner of the same and also the
owner of the estate to which the water may filter
or flow.
Character: apparent and continuous
Requisites:
1. Dominant owner must prove that he has the
capacity to dispose of the water
2. That the water is sufficient for the intended
use
3. That the course is most convenient, and least
onerous to the 3rd person
4. Payment of indemnity
b. RIGHT OF WAY (Arts. 649-657, NCC)
The right granted to the owner of an estate which
is surrounded by other estates belonging to other
persons and without adequate outlet to a public
highway to demand that he be allowed a
passageway throughout such neighboring estates
after payment of proper indemnity.
Requisites:
1. Claimant must be an owner of enclosed
immovable or one with real right (Art. 649
[1], NCC).
2. There must be no adequate outlet to a public
highway (Art. 649 [1], NCC).
3. Property must be surrounded by estates of
others (Art. 649 [1], NCC).
4. Isolation must not be due to the claimant’s
own act(Art. 649 [4], NCC).
5. Easement must be established at the point
least prejudicial to the servient estate (Art.
650, NCC).
6. Payment of proper indemnity (Art. 649 [1],
NCC).
381
NOT compulsory if the isolation of the immovable
is due to the proprietor’s own acts (Art. 649 [4],
NCC).
Right of way is granted without indemnity if land
was acquired by and is surrounded by the other
estates of the vendor, exchanger or co-owner
through: Sale, exchange or partition (Art. 652,
NCC).
Extinguishment
1. When the dominant estate is joined to
another estate (such as when the dominant
owner bought and adjacent estate) which is
abutting a public road, the access being
adequate and convenient (Art. 655, 1st par.,
NCC)
2. When a new road is opened, giving access to
the isolated estate. (Art. 655, 2nd par., NCC)
BOTH cases must substantially meet the needs of
the dominant estate. Otherwise, the easement
may not be extinguished.
The extinction is not automatic (not ipso facto).
If extinguished, must return the amount received
as indemnity to the dominant owner without any
interest.
Q: Don was the owner of an agricultural land with
no access to a public road. He had been passing
through the land of Ernie with the latter’s
acquiescence for over 20 years.
Subsequently, Don subdivided his property
into 20 residential lots and sold them to
different persons. Ernie blocked the pathway and
refused to let the buyers pass through his land.
a) Did Don acquire an easement of right
of way? Explain.
b) Could Ernie close the pathway and refuse to
let the buyers pass? Give reasons.
c) What are the rights of the lot buyers, if any?
Explain. (Bar 2005)
A: (a) No, Don did not acquire an easement of
right of way. An easement of right of way is
discontinuous in nature — it is exercised only if a
man passes over somebody’s land. Under Article
622 of the Civil Code, discontinuous easements,
382
whether apparent or not, may only be acquired
by virtue of a title. The Supreme Court, in
Abellana, Sr. vs. Court of Appeals (G.R. No.
97039, April 24, 1992), ruled that an easement of
right of way being discontinuous in nature is not
acquirable by prescription.
Further, possession of the easement by Don is
only permissive, tolerated or with the
acquiescence of Ernie. It is settled in the case of
Cuaycong vs. Benedicto (G.R. No. 9989, March
13, 1918) that a permissive use of a road over
the land of another, no matter how long
continued, will not create an easement of way by
prescription.
(b) Yes, Ernie could close the pathway on his
land. Don has
not acquired an easement of right of way
either by agreement or by judicial grant. Neither
did the buyers. He has the right to exclude any
person from the enjoyment and disposal of the
land. This is an attribute of ownership that Ernie
enjoys.
(c) Prior to the grant of an easement, the
buyers of the dominant estate have no other
right than to compel grant of easement of right
of way.
Since the properties of the buyers are surrounded
by other immovables and has no adequate outlet
to a public highway
and the isolation is not due to their acts, b
uyers may demand an easement of a right of
way provided proper indemnity is paid and the
right of way demanded is the shortest and least
prejudicial to Ernie (Villanueva vs. Velasco, G.R. No.
130845, November 27,2000).
Q: Who has the burden of proof to show
entitlement to an easement of right of way?
A: The burden of proving the requisites lies on
the owner of the dominant estate. (Cristobal, et.al.,
vs. CA, G.R. No. 125339 June 22, 1998)
Q: The coconut farm of Federico is surrounded
by the lands of Romulo. Federico seeks a right of
way through a portion of the land of Romulo to
bring his coconut products to the market. He has
chosen a point where he will pass through a
housing project of Romulo. The latter wants him
to pass another way which is one kilometer
longer. Who should prevail? (Bar, 2000)
A: Romulo will prevail. Under Article 650 of the Owner may free Partial renunciation is
New Civil Code, the easement of right of way shall himself from allowed
be established at the point least prejudicial to the contributing to the
servient estate and where the distance from the cost of repairs and
dominant estate to a public highway is the construction of a
shortest. In case of conflict, the criterion of least party wall by
prejudice prevails over the criterion of shortest renouncing all his
distance. Since the route chosen by Federico will rights thereto
prejudice the housing project of Romulo, Romulo
has the right to demand that Federico pass
another way even though it will be longer.
(Quimen vs. CA, G.R. No. 112331 May 29, 1996) Presumptions of existence (juris tantum):

Q: Which determines the width of the Easement 1. In adjoining walls of buildings, up to common
of Right of Way? elevation
2. In dividing walls of gardens and yards
A: Article 651 of the New Civil Code provides that (urban)
the width of the easement of right of way shall 3. In dividing fences, walls and live hedges of
be that which is sufficient for the needs of the rural tenements
dominant estate, and may accordingly be 4. In ditches or drains between tenements (Art.
changed from time to time. This is taken to mean 659, NCC)
that under the law, it is the needs of the dominant
property which ultimately determine the width of Rebuttal of presumption:
the passage and these needs may vary from time
to time. (Encarnacion vs. CA, G.R. No. 77628, March 1. There is title to the contrary;
1991) 2. There is exterior sign to the contrary; and
3. There is proof to the contrary (Arts. 660 &
Easement of party wall (Arts. 658-
661, NCC).
666,NCC)
Rights of part owners:
A common wall which separates two (2) estates
built by common agreement at the dividing line
1. To make use of the wall in proportion to their
such that it occupies a portion of both estates on
respective interests, resting buildings;
equal parts.
2. On it or inserting beams up to one-half of the
wall’s thickness; and
Party Wall Co-ownership
3. To increase the height of the wall at his
Shares of parties Shares of the co-
expense upon payment of proper indemnity
cannot be owners can be divided
to acquire half interest in any increase of
physically and separated
thickness or height, paying a proportionate
segregated but physically but before
share in the cost of the work and of the land
they can be such division, a co-
covered by the increase (Art. 644, NCC).
physically owner cannot point to
identified any definite portion of
Obligations of each part-owners:
the property as
belonging to him
1. To contribute proportionately to the repair
No limitation as to None of the co-owners
and maintenance unless he renounces his
use of the party may use the
part-ownership (Art. 662, NCC)
wall for exclusive community property
2. If one part owner raises the height of the
benefit of a party for his exclusive
wall, he must: bear the cost of maintenance
benefit
of the additions, bear the increased expenses
of preservation, bear the cost of construction,
give additional land, if necessary, to thicken
the wall (Art. 664, NCC)

383
c. LIGHT AND VIEW (Arts. 667-673, NCC)
No part-owner may, without the consent of the
others, open through the party wall any window
or aperture of any kind (NCC, Art. 667).
Easement of Light (jus luminum) – The
easement consists of in prohibiting or restraining
the adjacent owner from doing anything which
may tend to cut off or interrupt the light; in short,
it is limited to the obligation of not impeding the
light. (Rabuya, Property, 2008, p. 522)
Requisites:
1. Opening must not be greater than 30
centimeters square, made on the ceiling or
on the wall; and
2. There must be an iron grating;
3. There must be a wire screen; and
4. Opening must be at the height of the ceiling
joists or immediately under the ceiling
Easement of View (jus prospectus) – The right
to make openings or windows, to enjoy the view
through the estate of another and the power to
prevent all constructions or work which would
obstruct such view or make the same difficult. It
necessarily includes easement of light (Rabuya,
Civil Law Reviewer Volume I, 2021, p. 701)
The abutting owner may:
1. Close the openings if the wall becomes a
party wall, unless there is a contrary
stipulation (Art. 669 [1], NCC)
2. Block the light by constructing a building or
wall, unless an easement of light has been
acquired (Art. 669 [3], NCC)
3. Ask for the reduction of the opening to the
proper size
Restriction as to Views:
Direct views: The distance of at least 2 meters
between the wall and the boundary must be
observed (Art. 670 [1], NCC).
Oblique views: (walls perpendicular or at an
angle to the boundary line) must not be less than
60 cm between the boundary line to the nearest
edge of the window (Art. 670 [2], NCC).
384
Easement of drainage of buildings (Arts.
674-676, NCC)
The owner of a building shall be obliged to
construct its roof or covering in such manner that
the rain water shall fall on his own land or on a
street or public place, and not on the land of his
neighbor, even though the adjacent land may
belong to two or more persons, one of whom is
the owner of the roof. Even if it should fall on his
own land, the owner shall be obliged to collect
the water in such a way as not to cause damage
to the adjacent land or tenement (Art. 674, NCC).
The right to divert or empty the rain waters from
one’s own roof or shed to the neighbor’s estate
either drop by drop or through conduits (Rabuya,
Property, 2008 p. 560).
Requisites:
1. There must be no adequate outlet to the rain
water because the yard or court of a house is
surrounded by other houses;
2. The outlet to the water must be at the point
where egress is easiest, and establishing a
conduit for drainage; and
3. There must be payment of proper indemnity
(Art. 676, NCC).
Ownership of Rainwaters:
Pursuant to the provisions of the Water Code of
the Philippines, rain waters falling on private
lands shall belong to the State. However, any
person who captures or collects water by means
of cisterns, tanks or pools shall have exclusive
control over such water and he shall also have
the right to dispose of the same (Rabuya, Property,
2008 p. 560).
Easement of distances (Arts. 677-681,
NCC)
Article 679 of the New Civil Code prohibits the
planting of trees near a tenement or piece of
land belonging to another person, unless the
distance requirement is observed, to wit:
1. The distance authorized by local ordinances
or customs of the place, if any; or
2. In default of the foregoing, at a distance of
at least two (2) meters from the dividing line
of the estate in case of tall trees and at a
 distance of at least 50 centimeters in case of
shrubs or small trees. (Rabuya, Property, 2008
p. 562)
Right to cut branches and Roots
If the branches of any tree should extend over a
neighboring estate, tenement, garden or yard,
the owner of the latter does not have the right to
take the matter into his own hand by cutting off
the branches extending on his property. Instead,
he may demand that the protruding branches be
cut-off by its owner. If his demand is not acted
upon, he has to go to court to seek authority for
the cutting of the protruding branches. (Art. 680,
NCC)
With respect to the roots of a neighboring tree
which penetrated into the land of another, the
owner of the latter may himself cut off the roots
found within his property. The reason for the
difference is that with respect to the roots, the
same belong to the owner of the land where it is
found by reason of incorporation. This right of the
adjacent owner does not prescribe unless he has
been, by a formal act, prohibited by the owner of
the tree from cutting off the roots of the tree, in
which case, the ten-year prescriptive period for
the establishment of a negative easement will
commence to run (Rabuya, Property, 2008 p.
563).
Fruits falling to adjacent land (Art. 681,
NCC):
Fruits which are naturally falling upon adjacent
land belong to the owner of the said land to
discourage the act of allowing branches to
protrude over another’s land.
However, in the case of fruits naturally falling on
a public property, the owner of the tree retains
ownership.
Easement of nuisance (Arts. 682-683, NCC)
Every building or piece of land is subject to the
easement which prohibits the proprietor or
possessor from committing nuisance through
noise, jarring, offensive odor, smoke, heat, dust,
water, glare and other causes.
Easement of lateral and subjacent support
(Arts. 684-687, NCC)
The law prohibits any excavation upon one’s land
if the same will deprive any adjacent land or
building of sufficient lateral or subjacent support.
The law prohibits any stipulation or testamentary
provision allowing such kind of excavation. Any
such stipulation or testamentary provision is
expressly declared to be void.
Lateral - when the supported and the supporting
lands are divided by a vertical plane.
Subjacent - when the supported land is above
and the supporting land is beneath it (Rabuya,
Civil Law Reviewer Vol. 1, 2017, p. 578 citing
Restatement of the Law of Torts, Vol. IV, p. 184).
B. Voluntary Easement
Every owner of a tenement or a piece of land may
establish thereon the easements which he may
deem suitable, and in the manner and form which
he may deem best (Art. 688, NCC).
Except: If it contravenes laws, public policy or
public order (Art. 688, NCC).
The consent of all the co-owners are required on
an undivided tenement, or piece of land (Art. 691,
NCC).
Right of Way Act (R.A. 10752)
The government can acquire private real property
for national government infrastructure projects
and its public service facilities, engineering works
and service contracts, including those undertaken
by government-owned and -controlled
corporations (Sec. 4).
This can be effected by:
1. Donation;
2. Negotiated sale;
3. Expropriation; and,
4. Other modes of acquisition authorized by
existing laws (Sec. 4).
Negotiated Sale
1. The implementing agency shall offer to the
property owner concerned the current
385
 market value of the land, the replacement and the just compensation adjudged by the
cost of the structures and improvements and court has to be paid by the agency (Sec. 6).
the current market value of the crops and
trees therein;
2. The property owner shall be given 30 days to
decide whether or not to accept the offer;
and
3. (a) If the landowner accepts the offer: 50%
of the agreed price of the land 70% of the
price of the structure, improvements, corps
and trees shall be paid upon execution of the
Deed of Sale;
(b) If the owner refuses the offer within the 30-
day period:

The agency shall institute expropriation

proceedings which may be instituted by any
government or private legal counsel which may
be deputized for that purpose (Sec. 5).
Figure. Illustration of the various easements of the
Expropriation Proceedings
Code.
__________________________________________
Upon filing of the complaint and the owner is
G. NUISANCE
notified of the action, the agency shall
immediately deposit with the court in favor of the
Nuisance Defined
owner the amounts equivalent to the sum of:
A nuisance is any act, omission, establishment,
1. 100% of the value of the land based on the
business, condition of property, or anything else
current relevant zonal valuation of the BIR
which:
issued not more than 3 years prior to the
1. Injures or endangers the health or safety of
filing of the complaint;
others; or
2. Replacement cost at current market value of
2. Annoys or offends the senses; or
the improvements and structures as
3. Shocks, defies, or disregards decency or
determined by the agency, a government
morality; or
financial institution with experience with
4. Obstructs or interferes with the free passage
property appraisal and an independent
of any public highway or street, or any body
property appraisal accredited by the BSP;
of water; or
3. Current market value of the crops and trees
5. Hinders or impairs the use of property (Art.
as determined by a government financial
694, NCC).
institution or an independent property
appraiser.
Based on case law, however, the term "nuisance"
4. Once payment is made, the court is required
is deemed to be "so comprehensive that it has
to immediately issue an order to the agency
been applied to almost all ways which have
to take possession of the land and start the
interfered with the rights of the citizens, either in
implementation of the project.
person, property, the enjoyment of his property,
5. If the writ is not issued within 7 days from
or his comfort." (Rana vs. Wong, Sps. Ong, and Sps.
the deposit, the counsel may file a motion for Uy, G.R. No. 192861, June 30, 2014)
the issuance of the writ.
6. The court is obliged to determine the just Nuisance v. Negligence
compensation to be paid to the owner within
60 days form the date of the filing of the
Nuisance Negligence
expropriation case.
Liability for the Liability is based on a
7. Once the court’s decision becomes final: the
resulting injury to want of proper care
difference between the deposited payment
others regardless of

386
 the degree of care or Municipality of Aklan, G.R. No. 211356, September 29,
skill exercised to avoid 2014).
such injury.
Principles ordinarily Principles ordinarily Traditional Test for determining existence
apply where the cause apply where the of Nuisance per se
of action is for harm cause of action is for
caused by continuing harm resulting from Whether the nuisance has become dangerous at
or recurrent acts one act which created all times and under all circumstances to life,
which cause an unreasonable risk health or property (Suddeth vs. Knight, 280 S.C.
discomfort or of injury. 545).
annoyance to plaintiff
in the use of his Examples:
property.
1. Houses of prostitution and gambling houses
are nuisance per se regardless of their
Classification
location or surroundings (Iloilo Ice and Cold
1. As to nature:
Storage Co. vs. Municipal Council of Iloilo,
G.R. No. L-7012, March 26, 1913)
2. Mad dog on the loose, which may be killed on
a. Per se – wrong is established by proof of
sight because of the immediate danger it
the mere act
poses to the safety and lives of the
b. Per accidens – considered nuisance by
people (Rabuya, Civil Law Reviewer Vol. 1,
reason of circumstances, location, and
surroundings
2021, p. 727)
3. Pornographic materials (Ibid)
4. Contaminated meat and narcotic drugs which
2. As to injurious effect:
are inherently pernicious (Ibid)
5. A filthy restaurant which may be summarily
a. Public – affects the community or a
padlocked in the interest of public health
considerable number of persons
b. Private – affects only a person or a small
(Cruz vs. Pandacan Hiker’s Club, Inc. G.R. N.
number of persons
118213, January 11, 2016).
c. Mixed – one which is both public and
Remedies
private in its effects: public because it
injures many persons or all the
1. Private Nuisance
community, and private in that it also
a. Civil action for damages
produces special injuries to private
b. Action for injunction/Abatement if
rights. (Rabuya, Property, 2008, p. 571)
nuisance per accidens
c. Extrajudicial abatement if nuisance per
Nuisance per se
se
A nuisance per se is recognized as a nuisance
2. Public Nuisance
under any and all circumstances because it
a. A prosecution under the Revised Penal
constitutes a direct menace to public health or
Code or any local ordinance/Criminal
safety.
prosecution
b. Civil action for damages
When it affects the immediate safety of persons
c. Action for injunction/Abatement if
and property, which may be summarily abated
nuisance per accidens
under the law of necessity (Cruz vs. Pandacan
Hiker’s Club, Inc. G.R. N. 118213, January 11, 2016). d. Extrajudicial abatement if nuisance per
se
It is considered as nuisance under any and all
circumstances, because it constitutes a direct Nuisance per accidens
menace to public health or safety, and, for that
reason, may be abated summarily under the It depends on certain conditions and
undefined law of necessity (Aquino vs. circumstances, and its existence being a question
of fact, cannot be abated without due hearing

387
thereon in a tribunal authorized to decide
whether such thing does in law constitute a
nuisance (Cruz vs. Pandacan Hiker’s Club, Inc. G.R. N.
118213, January 11, 2016).
It may only be proven in a hearing conducted for
that purpose and may not be summarily abated
without judicial proceeding.
Liabilities
A private person or a public official extrajudicially
abating a nuisance shall be liable for damages:
1. If he causes unnecessary injury; or
2. If an alleged nuisance is later declared by the
courts to be not a real nuisance (Art. 707,
NCC).
Every successive owner or possessor of property
who fails or refuses to abate a nuisance in that
property started by a former owner or possessor
is liable therefor in the same manner as the one
who created it (Art. 696, NCC).
No Prescription
The abatement of a nuisance does not preclude
the right of any person injured to recover
damages for its past existence (Art. 697, NCC).
Lapse of time cannot legalize any nuisance,
whether public or private (Art. 698, NCC).
Criminal Prosecution
A public nuisance may be subject of a criminal
prosecution under the RPC or local ordinance.
For example, the conduct of an illegal gambling
is a form of public nuisance which shall subject
any person who shall knowingly permit the
commission of the same in any inhabited or
uninhabited place or any building, vessel, or other
means of transportation controlled by him (Art.
195[2], RPC; Rabuya, Civil Law Reviewer Vol. 1, 2017,
p. 595)
Judgment with Abatement
Whether a nuisance is a private or public one, it
may be abated without the necessity of judicial
proceedings or only upon due hearing thereon.
388
For Nuisance Per Accidens
Judicial intervention is necessary to abate the
nuisance.
A nuisance per accidens cannot be abated
without due hearing thereon in a tribunal
authorized to decide whether such a thing does
in law constitute a nuisance. And the local
government unit concerned does not have the
power to summarily abate a nuisance per
accidens in the guise of exercising its police
power through an ordinance. If it does, such
ordinance is null and void because it violates the
guarantee of due process under the Constitution
(Iloilo Ice and Cold Storage Co. vs. Municipal Council
of Iloilo, G.R. No. L-7012, March 26, 1913).
Extrajudicial Abatement
Abatement of nuisance without judicial
proceedings is possible only if it is a nuisance per
se (Salao vs. Santos, G.R. No. L-45519, April 26,
1939).
How is abatement done
1. By removing; or
2. By destroying the thing that constitutes the
nuisance (Art. 704, NCC).
Requisites of summary abatement of public
or private nuisance by private individual
(Art. 704, 706, NCC)
1. It must be specially injurious to him;
2. No breach of the peace or unnecessary injury
must be committed;
3. Demand must be first made upon the owner
or possessor of the property to abate the
nuisance;
4. Prior demand has been rejected;
5. Approval by district health officer and
assistance of local police; and
6. Value of destruction does not exceed
P3,000.00.
Q: A drug lord and his family reside in a small
bungalow where they sell shabu and other
prohibited drugs. When the police found the
illegal trade, they immediately demolished the
house because according to them, it was a
nuisance per se that should be abated. Can this
demolition be sustained? Explain. (Bar 2006)
A: No, the demolition cannot be sustained. The
house cannot be considered as nuisance per se.
To be considered per se, the act, occupation, or
structure must be a nuisance at all times and
under any circumstances, regardless of location
or surrounding (Jurado, Civil Law Reviewer, 2009, p.
438 – 439).
Since the demolished house was not a nuisance
during the times that it was not being used for
selling drugs, it cannot be considered as nuisance
per se. Moreover, in the abatement of a nuisance,
whether judicially or extra-judicially, the
abatement should not inflict unnecessary damage
or injury. In this case, what may be considered
as nuisance per se is not the structure of the
house but the use of the house for the selling of
shabu. However, the demolition of the house is
not necessary to abate the sale of shabu in that
community. To demolish the house is an
unnecessary damage and injury.
Special Injury to Individual
A private nuisance affects only an individual or
a limited number of individuals. As distinguished
from a public nuisance, a private nuisance
includes any wrongful act which destroys or
deteriorates the property of an individual or of a
few persons or interferes with their lawful use or
enjoyment thereof, or any act which unlawfully
hinders them in the enjoyment of a common or
public right and causes them a special injury
different from that sustained by the general
public. Therefore, although the ground of
distinction between public and private nuisances
is still the injury to the community at large or, on
the other hand, to a single individual, it is evident
that the same thing or act may constitute a public
nuisance and at the same time a private nuisance
(Rabuya, Property, 2008, p. 571).
Right of a Private Individual to Abate a
Public Nuisance
A private person may abate a public nuisance
which is specifically injurious to him, by removing
or if necessary, by destroying the thing which
constitutes the same, without committing a
breach of the peace, or doing unnecessary injury
(Art. 704, NCC).
Right to Damages
GR: For Public Nuisance, no action for damages
may be maintained by a private individual (Art.
703, NCC).
XPN: When it is specifically injurious to himself
(Art. 703, NCC).
Private Nuisance: A claim for damages may be
maintained by any person injured by a private
nuisance (Ibid.)
In the action for damages, not only the person
who caused the nuisance but every successive
owner or possessor of the property shall be liable
for damages in the same manner as the one who
created the nuisance (Art. 696, NCC).
Who may abate
1. City and/or the Municipal Health Officer (Art.
700, NCC)
2. City and/or Municipal Engineer, in cases of
illegal construction
3. Private person, subject to requisites of
summary abatement of public or private
nuisance by private individual (Art. 704 and
706, NCC)
Doctrine of Attractive Nuisance
A person who maintains on his premises
dangerous instrumentalities or appliances of a
character which is attractive to children in play
and who fails to exercise ordinary care to prevent
children from playing therewith or resorting
thereto, is liable to a child of tender years who is
injured thereby, even if the child is technically a
trespasser (Jarco Marketing vs. CA, G.R. No. 129792,
December 21, 1999).
Generally, Attractive Nuisance Doctrine is not
applicable to bodies of water, artificial as well as
natural, in the absence of some unusual condition
or artificial feature other than the mere water and
its location (Hidalgo Enterprises Inc. vs. Balandon,
G.R. No. L-3422, June 13, 1952).
From a review of the record of this case, it is very
clear that private respondent Aquino acted with
fault and gross negligence when he: (1) failed to
avail himself of services of adult manual laborers
and instead utilized his pupils aged ten to eleven
389
to make an excavation near the one-ton concrete
stone which he knew to be a very hazardous task;
(2) required the children to remain inside the pit
even after they had finished digging, knowing
that the huge block was lying nearby and could
be easily pushed or kicked aside by any pupil who
by chance may go to the perilous area; (3)
ordered them to level the soil around the
excavation when it was so apparent that the huge
stone was at the brink of falling; (4) went to a
place where he would not be able to check on the
children’s safety; and (5) left the children close to
the excavation, an obviously attractive nuisance
(Ylarde vs. Aquino, G.R. No. L-33722, July 29, 1988).
a public nuisance because there is a tendency
to annoy the public. (Velasco v. Manila Electric
Co., G.R. No. L-18390, August 6, 1971).
5. It will become a nuisance if it substantially
impairs the comfort and enjoyment of the
adjacent occupants. The annoyance and the
smell must be substantial as to interfere
sensibly with the use and enjoyment by
persons of ordinary sensibilities. It is a public
nuisance because of its injury to the public.
(Suggested Answer, UPLC & PALS).
H. MODES OF ACQUIRING OWNERSHIP

Q: State with reason whether each of the Original Modes – result in the independent
following is a nuisance, and if so, give its creation of a new right of ownership, when in
classification, whether public or private: effect, therefore is independent of the
1. A squatter’s hut ownership of the third person (Rabuya,
2. A swimming pool Property, 2008, 594)
3. A house of prostitution
4. A noisy or dangerous Derivative Modes – those which produce the
5. Uncollected garbage (Bar 2005) acquisition of property based on a right previously
held by another person and, therefore, subject to
A: the same characteristics, powers, burdens, etc,
1. If constructed on public streets or riverbeds, as when held by the previous owner, e.g.
it is a public nuisance because it obstructs the tradition (Rabuya, supra).
free use by the public of said places. (City of
Manila vs. Garcia, G.R. No. L-26053, February 21, Mode vs. Cause
1967). MODE CAUSE
Original Modes
If constructed on private land, it is a private Occupation Condition of being
nuisance because it hinders or impairs the without known owner
use of the property by the owner. Work which includes Creation, discovery or
intellectual creation invention
2. This is not a nuisance in the absence o Derivative Modes
f any unusual condition or artificial feature Law Existence of required
other than the mere water. In Hidalgo conditions
Enterprises vs. Balandan (G.R. No. L-3422, Tradition Contract of the
June 13, 1952), the Supreme Court ruled that parties
a swimming pool is but a duplication of Donation Contract of the
nature — thus, could not be considered as a parties
nuisance. Prescription Possession in the
concept of the owner
3. Irrespective of its location and how Succession Death
its business is conducted, it is a nuisance
since it defies, shocks and disregards Mode v. Title
decency and morality. It is a public nuisance
because of its injury to the public. (Rabuya, Mode Title
Civil Law Reviewer Vol. I, 2021, p. 727)
Directly and Serves merely to
immediately produces a give the occasion for
4. If the noise injuriously affects the health and
real right its acquisition or
comfort of ordinary people in the vicinity to
existence
an unreasonable extent, it is a nuisance. It is
Cause Means

390
 Proximate cause Remote cause As to Requires the The property
Essence of the right Means whereby that ownership object be may be
which is to be created “essence” is of the thing without an owned by
or transmitted transmitted by another owner somebody
As to intent There must be May be had
to acquire intent to in the
acquire concept of a
1. OCCUPATION ownership mere holder
As to May not take May exist
Definition possession place without without
some form of occupation
Occupation is a mode of acquiring ownership by possession
the seizure or apprehension of things corporeal As to Short duration Generally,
which have no owner with the intention acquiring period longer
them and according to the rules laid down by law As to Cannot lead to May lead to
(3 Sanchez Roman, 209). leading to another mode another
another of acquisition mode -
Requisites: mode of prescription
acquisition
1. Thing must be res nullius – a thing which
never had an owner or has no owner at the Appropriation of Piece of Land
time of occupation;
2. Must be appropriable by nature or one that The ownership of a piece of land cannot be
can be seized or apprehended; acquired by occupation (Art. 714, NCC).
3. Must be brought into the actual possession or
control of the one professing to acquire it; Animals as Object of Appropriation
4. Person must acquire it with the intention of
acquiring ownership. (Rabuya, Civil Law Things appropriable by nature which are without
Reviewer, 2017, p. 627) an owner, such as animals that are the object of
hunting and fishing, hidden treasure and
Possession v Occupation (Bar 1997, 2000) abandoned movables, are acquired by occupation
(Art.713, NCC).
Occupation can take place only with respect to
property without an owner while possession can The right to hunt and to fish is regulated by
refer to all kinds of property, whether with owner special laws (Art.715, NCC).
or without an owner. Occupation itself, when
proper, confers ownership but possession does The owner of a swarm of bees shall have a right
not by itself give rise to ownership (Suggested to pursue them to another’s land, indemnifying
Answers, UPLC & PALS). the possessor of the latter for the damage. If the
owner has not pursued the swarm, or ceases to
Occupation Possession do so within two consecutive days, the possessor
As to Mode of Merely raises of the land may occupy or retain the same. The
acquisition acquiring the owner of domesticated animals may also claim
of ownership presumption them within twenty days to be counted from their
ownership of ownership occupation by another person. This period having
when expired, they shall pertain to him who has caught
exercised in and kept them (Art.716, NCC).
the concept
of owner Pigeons and fish which from their respective
As to Involves only Any kind of breeding places pass to another pertaining to a
property corporeal property different owner shall belong to the latter,
involved personal provided they have not been enticed by some
property article of fraud (Art.717, NCC).

391
Whoever finds a movable, which is not treasure,
must return it to its previous possessor. If the
latter is unknown, the finder shall immediately
deposit it with the mayor of the city or
municipality where the finding has taken place
(Art.719, NCC).
The finding shall be publicly announced by the
mayor for two consecutive weeks in the way he
deems best.
If the movable cannot be kept without
deterioration, or without expenses which
considerably diminish its value, it shall be sold at
public auction eight days after the publication.
Six months from the publication having elapsed
without the owner having appeared, the thing
found, or its value, shall be awarded to the finder.
The finder and the owner shall be obliged, as the
case may be, to reimburse the expenses. (Art.
720, NCC)
If the owner should appear in time, he shall be
obliged to pay, as a reward to the finder, one-
tenth of the sum or of the price of the thing found
(Ibid).
Animals as Object of Appropriation
Wild beasts, birds, fishes, and in fact all animals
which are still in their natural state of freedom
become the property of the captor by virtue of
occupation. This rule applies even though the
capture be made on another’s land, without
prejudice, however, to the liability of the captor
for any damage resulting from his trespass.
1. Limitations. The rule on acquisition of
ownership by virtue of occupation stated in
Article 713 of the New Civil Code does not
apply to animals which are classified as rare,
threatened or endangered species. (Rabuya,
Property, 2008 p. 616-617)
2. Domestic Animals. The foregoing rule does
not apply to domestic or tame animals, or
those which are born and reared under the
control and care of man as they are
considered as movable property. Hence, they
are subject to the same rules governing the
acquisition of ownership over other
movables. If they are lost, their owner, as a
rule, can recover them from the present
392
possessor without need of indemnifying the
latter subject to the qualifications stated
under Art. 719. The ownership thereof may
not be acquired by occupation unless these
animals are abandoned by their owner.
(Rabuya, Property, 2008 p. 618-619)
3. Abandoned v. Lost or Mislaid
Properties. In the case of abandoned
property, it is necessary that the spes
recuperandi (hope of recovery or recapture)
is gone and the animus revertendi (intent to
recover) is given up. In the case of lost and
mislaid (or misplaced) property, however, the
spes recuperandi and the animus revertendi
are still alive. Hence, its ownership is not lost
yet by its owner. So long as the property is
not under the control of another person, the
present owner does not lose both the
ownership and possession of the same.
However, if the misplaced property is already
in the control of another person, its
possession is already deemed lost. This is the
difference between mislaid (misplaced
property) and lost property. But in the case
of a lost property, note that it is only the
possession which is considered lost by the
owner, not his ownership thereof. The lost
property is not, therefore, considered a res
nullius but a res alicujus. Hence, its
ownership may not be acquired by the finder
through occupation. (Rabuya, Property, 2008 p.
619-620)
2. DONATION
Definition
An act of liberality whereby a person disposes
gratuitously of a thing or right in favor of another,
who accepts it (Art. 725, NCC).
Limitations on Donation of Property
1. Future property cannot be donated (Art. 751,
NCC);
2. Present property that can be donated;
a. If the donor has forced heirs: he cannot
give or receive by donation more than
what he can give or receive by will.
b. If the donor has no forced heirs:
donation may include all present
property provided he reserves in full
ownership or in usufruct (Art. 750, NCC)
3. The amount necessary to support him and
those relatives entitled to support him. (Ibid)
4. Property sufficient to pay the donor’s debt
contracted prior to the donation (Art. 758,
NCC)
5. Donation should not prejudice creditors (Art.
759, NCC);
6. Donee must reserve sufficient means for his
support and for his relatives which are
entitled to be supported by him. (Art. 750,
NCC)
a. NATURE
Essential Elements of Donation
1. The essential reduction of the patrimony of
the donor;
2. The increase in the patrimony of the done;
and
3. The intent to do an act of liberality or animus
donandi (Heirs of Florencio vs. Heirs of De Leon,
G.R. No. 149570, March 12, 2004).
Kinds of Donation:
1. Donation Inter Vivos - Those which take
effect independently of the donor’s death
(Rabuya, Property 2008, p. 634).
When the donor intends that the donation shall
take effect during the lifetime of the donor,
though the property shall not be delivered until
after the donor’s death, this shall be a donation
inter vivos. The fruits of the property from the
time of the acceptance of the donation shall
pertain to the donee, unless the donor provides
otherwise.
Requisites:
a. Must follow the formalities of donations;
b. Takes effect during the lifetime of the donor;
c. Cannot be revoked except for grounds
provided by the law;
d. In case of impairment of the legitime,
donations inter vivos are preferred to
donations mortis causa.
e. The right of disposition is completely
transferred to the donee;
f. Acceptance by donee must be during lifetime
of donor.
2. Donation By Reason Of Marriage -
(Donation Propter Nuptias) Those made in
consideration of the marriage in favor of one
or both of the prospective spouses and
executed before the marriage (Art. 86, FC).
3. Donation Mortis Causa – those which take
effect upon the death of the donor (Rabuya,
Property 2008, p. 634).
4. Onerous Donation – imposes the donee a
reciprocal obligation or a donation made for
a valuable consideration, the cost of which is
equal to or more than the thing donated
(Republic vs. Silim, G.R. No. 140487, April 2,
2001).
5. Simple/Modal/Conditional
a. Simple – the underlying cause is plain
gratuity or liberality (Lagazo vs. CA, G.R.
No. 112796, March 5, 1998)
b. Remuneratory or Compensatory –
made for the donee’s past services,
which services do not amount to a
demandable debt (Art. 726, NCC).
c. Modal – is one which imposes on one a
prestation imposed on the donee may
either be a burden or charge inferior in
value to the property donated or service
to be performed in the future (Art. 726,
NCC).
Formalities Required
How donation of movable/personal
property is made and accepted
1. With simultaneous delivery
a. If value is more than P5,000.00,
donation and acceptance must be in
writing (Art. 748 [3], NCC).
b. If value is P5,000.00 or less:
i. Can be made orally – but requires
simultaneous delivery of the thing.
Acceptance may be oral or written.
ii. Can be made in writing – acceptance
may be oral or written (Art. 748,
NCC).
2. Without simultaneous delivery - The donation
and acceptance must be in public or private
instrument(Art. 748, NCC).
393
How donation of immovable/real property
is made and accepted
1. In public instrument
2. Acceptance in same instrument in another
public instrument, notified to donor in
authentic form, and annotated in both deeds.
Otherwise, donation is void.
3. Acceptance should be made during the
lifetime of the donor; otherwise, donation
shall not take effect (Art. 748, NCC).
Perfection
The donation is perfected from the moment the
donor knows of the acceptance by the done (Art.
734, NCC).
Acceptance must be made during the lifetime of
the donor and of the done (Art. 746, NCC).
In case of donation mortis causa, acceptance is
made only after the donor’s death because they
partake of a will and thus governed by the rules
on succession (Art. 728, NCC).
b. PERSONS WHO MAY GIVE OR RECEIVE A
DONATION
1. Qualifications of a DONOR
Must have the capacity to contract and to dispose
of his property (Art. 735, NCC).
Rules:
a. Every donation between spouses during the
marriage shall be void except moderate gifts
on the occasion of family rejoicing. The
prohibition also applies to person living
together as husband and wife without a valid
marriage (Art. 87, FC).
b. Every corporation has the power and capacity
to make reasonable donations, including
those for public welfare or for hospital,
charitable, cultural, etc. However, it cannot
give donations in aid of any political party or
candidate or for purposes of partisan political
activity.
c. Guardian and trustee cannot alienate
property entrusted to them. (Art. 736, NCC).
However, this is not absolute as this only
applies to simple donation and not to
394
donations which are onerous and beneficial
to the beneficiary.
d. Trustees, who have repudiated the trust and
have acquired the properties by prescription,
are allowed to donate said properties.
e. Donor’s capacity is determined as of the time
of the perfection of the donation (Art. 737,
NCC).
2. Qualifications of a DONEE
All persons who are not disqualified by law may
accept donations (Art. 738, NCC).
Rules:
a. Donations made to incapacitated persons
such as minors and those incapacitated to
contract, the acceptance can be made by the
parents or legal representatives (Art. 741,
NCC)
b. With regard to conceived and unborn
children, the acceptance can be made by
them if they were already born (Art. 742,
NCC)
c. Special disqualifications (Art. 739 and 740,
NCC):
i. Those made between persons who were
guilty of adultery or concubinage at the
time of the donation;
ii. Those made between persons found
guilty of the same criminal offense, in
consideration thereof;
iii. Those made to a public officer or his wife,
descendant and ascendants, by reason of
his office; and
iv. Donations by reason of unworthiness of
the donee under Art.740, in relation to
Arts. 1032 and 1027, except for
paragraph 4 of Art. 1027.
d. The donee must accept the donation
personally, or through an authorized person
with a special power for the purpose, or with
a general and sufficient power, otherwise the
donations are void. (Art. 745, NCC)
c. EFFECTS AND LIMITATIONS OF
DONATION
1. In general
a. Donee may demand the delivery of
the thing donated
b. Donee is subrogated to the rights of
the donor in the property (Art. 754,
NCC).
c. In donations propter nuptias, the
donor must release the property from
encumbrances, except servitudes
(Art. 85, FC)
d. Donor’s warranty exists if:
i. Expressed
ii. Donation is propter nuptias
iii. Donation is onerous
iv. Donor is in bad faith (Art. 754,
NCC)
e. When the donation is made to several
donees jointly, they are entitled to
equal portions, without accretion,
unless the contrary is stipulated (Art.
753, NCC).
2. Double Donations
Donations of the same thing to two or more
persons shall be governed by the provisions
concerning the sale of the same thing to two or
more different persons (Art. 744, NCC).
Rule: Priority in time, priority in right (Prior est in
tempore, potio res tiure)
a. If MOVABLE – one who first took possession
in good faith
b. If IMMOVABLE – one who recorded in
registry or property in good faith
i. No inscription, one who first took
possession in good faith
ii. In absence thereof, one who can present
the oldest title (Art. 1544, NCC)
Excessive/Inofficious donations
1. The donor at the time of donation either had
no children or thought he had no more (Art.
760 and 761, NCC).
2. The donor had at least one child already at
the time he made the donation (Arts. 771-
772, NCC).
The donation shall be revoked or reduced insofar
as it exceeds the portion that may be freely
disposed of by will, taking into account the whole
estate of the donor at the time of the birth,
appearance or adoption of a child (Art. 761)
The action for revocation or reduction shall
prescribe after four years from the birth of the
first child, or from his legitimation, recognition, or
adoption, or form the time information was
received regarding the existence of the child
believed to be dead. (Art. 763, NCC)
Scope of amount
The donation may comprehend all the present
property of the donor, or part thereof, provided
he reserves, in full ownership or in usufruct,
sufficient means for the support of himself, and
of all relatives who, at the time of the acceptance
of the donation, are by law entitled to be
supported by the donor. Without such
reservation, the donation shall be reduced in
petition of any person affected (Art. 750, NCC).
Donations cannot comprehend future property
(Art. 751, NCC).
By future property is understood anything which
the donor cannot dispose of at the time of the
donation (Art. 751, NCC).
The provisions of Article 750 notwithstanding, no
person may give or receive, by way of donation,
more than he may give or receive by will (Art.
752, NCC).
In fraud of creditors
There being no stipulation regarding the payment
of debts, the donee shall be responsible therefore
only when the donation has been made in fraud
of creditors. The donation is always presumed to
be in fraud of creditors, when at the time thereof
the donor did not reserve sufficient property to
pay his debts prior to the donation (Art. 759,
NCC).
Void donations, donations Prohibited by
Law:
1. By persons guilty of adultery or concubinage
at the time of donation (Art. 739, [1], NCC).
395
2. Between persons found guilty of same
criminal offense, in consideration thereof
(Art. 739, [2], NCC);
3. To a public officer or his or her spouse;
descendants or ascendants, by reason of his
or her office (Art. 739, [3], NCC);
4. To a priest who heard confession of donor
during latter’s illness or minister of gospel
who extended spiritual aid to him during the
same period (Art. 1027, [1], NCC).
5. To relatives of such priest or minister within
the 4th degree, the church, order, etc., to
which such priest or minister may belong
(Art. 1027, [2], NCC);
6. By ward to the guardian before approval of
final accounts (Art. 1027, [3], NCC);
7. To attesting witness of the execution of a
donation, if there is any, or to the spouse,
parents, or children, or anyone claiming
under them (Art. 1027, [4], NCC);
8. To physician, surgeon, nurse, health officer
or druggist who took care of the donor during
last illness (Art. 1027, [5], NCC);
9. By individuals, associations and corporations
not permitted by law to make donations (Art.
1027, [6], NCC); and
10. By spouses to each other during marriage, or
to persons of whom the other spouse is a
presumptive heir (Art. 87, FC).
d. REVOCATION AND REDUCTION
GR: Once the donation is accepted, it is
irrevocable (Gestopa vs. CA, G.R. No. 111904,
October 5, 2000).
XPNs:
1. Birth, Adoption or Reappearance (Art.
760, NCC)
Every person having no children or descendants,
legitimate or illegitimate, may be revoked or
reduced in the following scenarios:
a. if the donor, after the donation, should have
legitimate or legitimated or illegitimate
children, even though they be posthumous;
b. if the child of the donor, who the latter
believed to be dead when he made the
donation, should turn out to be living; o
c. if the donor subsequently adopt a minor child
(Art. 760, NCC).
396
2. Inofficious donations (Art. 771, NCC)
Action must be brought within five (5) years after
the death of the donor.
The action is transmitted to the donor’s heirs as
the donation shall be reduced as regards the
excess at the time of the donor’s death.
The donation takes effect during the lifetime of
the donor subject to reduction only upon his
death with regard to the excess.
The donee appropriates the fruits as owner of the
property (Art 771, NCC).
3. Made in fraud of creditors (Art. 1381
[3], NCC)
The action for rescission must be brought within
four years from the perfection of the donation, or
at the latest from the time the creditor had
knowledge of the donation.
The right is transmissible to the heirs of the
creditor or the latter’s successor-in-interest.
The property affected shall be returned by the
donee for the benefit of the creditor subject to
the rights of innocent third persons.
The fruits of the property affected shall also be
returned. In case the donee acted in bad faith
and it should be impossible for him to return the
property affected due to any cause, he shall
indemnify the donor’s creditor for damages
suffered by the latter.
Effects
Upon revocation or reduction of the donation
based on Article 760, the following effects are
produced:
1. The property affected shall be returned, or if
it cannot be returned, as its value;
2. If the property is mortgaged, the donor may
redeem the mortgage, by paying the amount
guaranteed, with a right to recover his
payment from the donee. When the property
cannot be returned, it shall be estimated at
what it was worth at the time of the donation.
 3. The donee shall return the fruits of
property affected only from the filing of
the complaint.
Prescription
The prescriptive period of an action for revocation
or reduction of the donation under Article 760 is
four (4) years reckoned from the birth of the first
child, or from his legitimation, recognition or
adoption, or from the judicial declaration of
filiation, or from the time information was
received regarding the existence of the child
believed to be dead. If, however, the child dies
prior to the filing of the action, it is believed that
the action can no longer be brought (Art. 763 [1],
NCC).
This action is not subject to waiver or
renunciation and is transmitted, upon the death
of the donor, to his legitimate or illegitimate
children and descendants (Art. 763 [2], NCC).
Acts of Ingratitude (Art. 765, NCC)
1. If the donee should commit some offense
against the person, honor or property of the
donor, or of his wife or children under his
parental authority.
2. If the donee imputes to the donor any
criminal offense, or any act involving moral
turpitude even though he should prove it,
unless the crime or act has been committed
against the donee himself, his wife, or
children under his authority.
3. Unduly refuses to support the donor when
the donee is legally or morally bound to do
so.
The maximum period of inalienability, when
imposed by will is 20 years (Art. 870, NCC),
unless a fideicommissary substitution has been
established, in which case, the inalienability will
last during the lifetime of the first heir. (Art. 863,
NCC)
By analogy, the same maximum period of 20
years should apply to inalienability imposed by
the donor on the donee, because this is also a
gratuitous disposition; but the period may be
longer when the donor provides for reversion
under Article 757.
3. PRESCRIPTION
a. GENERAL PROVISIONS
Definition
One acquires ownership and other real rights
through the lapse of time in the manner and
under the conditions laid down by law. In the
same way, rights and actions are lost by
prescription (Art. 1106, NCC).
Types of prescription
1. Acquisitive Prescription
A mode of acquiring ownership and other real
rights or losing rights or actions to enforce such
rights through the lapse of time, in the manner
laid down by law (Rabuya, Civil Law Reviewer Vol.
1, 2017, p. 614).
a. Ordinary Acquisitive Prescription
Requires possession of things in good faith and
with just title for the time fixed by law (Art. 1117,
NCC).
Requisites:
i. Possession in good faith;
In its positive aspect, the good faith of the
possessor consists in the reasonable belief that
the person from whom he received the thing was
the owner thereof, and could transmit his
ownership. In its negative aspect, it consists in
the ignorance of the possessor of any flaw which
would invalidate his title or mode of acquisition
(Art. 1127 and 1128, 526, NCC).
ii. Just title;
There is just title when the adverse claimant
came into possession of the property through one
of the modes recognized by law for the
acquisition of ownership or other real rights, but
the grantor was not the owner or could not
transmit any right and that the title is true and
valid (Arts. 1129 and 1130, NCC).
iii. Within the time fixed by law (4 years for
movables and 10 years for immovables);
iv. In the concept of an owner;
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 v. It must be public, peaceful and Immovables
uninterrupted;
Ownership and other real rights over immovable
vi. Capacity to acquire by prescription; and, property are acquired by ordinary prescription
through possession of ten years (Art. 1134,
vii. Object must be susceptible of NCC).
prescription
Ownership and other real rights over immovables
also prescribe through uninterrupted adverse
b. Extraordinary Acquisitive Prescription
possession thereof for thirty years, without
need of title or of good faith (Art. 1137, NCC).
Acquisition of ownership and other real rights
without need of title or of good faith or any other
Rules for the computation of time
condition (Art. 1137, NCC).
necessary for prescription:
Requisites:
1. The present possessor may complete the
period necessary for prescription by tacking
i. Within the time fixed by law (8 years for
his possession to that of his grantor or
movables, 30 years for immovable)
predecessor in interest.
ii. Capacity to acquire by prescription
2. It is presumed that the present possessor
iii. Object must be susceptible of prescription
who was also the possessor at a previous
iv. In the concept of an owner
time, has continued to be in possession
v. It must be public, peaceful and
during the intervening time, unless there is
uninterrupted.
proof to the contrary.
3. The first day shall be excluded and the last
Acquisitive Prescription is based on the assertion
day included. (Art. 1138, NCC)
of a usurper of an adverse right for such a long
period of time, uncontested by the true owner of
Acquisitive v. Extinctive Prescription
the right, as to give rise to the presumption that
the latter has given up such right in favour of the
Acquisitive Extinctive
former (Tolentino, Civil Code of the Philippines, Vol.
IV, p. 2). Prescription Prescription
Requires positive Requires inaction of
b. PRESCRIPTION OF OWNERSHIP AND action of the possessor the owner out of
OTHER REAL RIGHTS who is not the owner possession or
neglect of one with a
Period of Prescription: right to bring his
action
Movables (Art. 1132, NCC): Applicable to Applicable to all
ownership and other kinds of rights,
The ownership of movables prescribes through real rights whether real or
uninterrupted possession of four years in good personal
faith. (Ordinary) Results in the Merely results in the
acquisition of loss of a real or
The ownership of personal property also ownership or other real personal right, or
prescribes through uninterrupted possession for rights in a person as bars the cause action
eight years, without need of any other well as the loss of said to enforce said right
condition. (Extraordinary) ownership or real rights
in another
As to the right to recover personal property lost Can be proven under Should be
or illegally deprived of or those acquired in public the general issue affirmatively pleaded
sale, fair, market or from merchant stores, without its being and proved to bar
Articles 559 and 1505 of the Civil Code shall affirmatively pleaded the action or claim of
apply. the adverse party

398
 pleaded as an
2. Extinctive Prescription affirmative allegation

It is the loss or extinguishment of property rights

c. PRESCRIPTION OF ACTIONS
or actions through the possession by another of
a thing for the period provided by law or through
failure to bring the necessary action to enforce PRESCRIPTIVE
ACTIONS
one’s right within the period fixed by law (Art. PERIOD
1106 and 1339, NCC). Imprescriptible To declare an inexistent or
void contract
a. Characteristics:
To quiet title
i. One does not look to the act of the
possessor but the neglect of the owner; To demand a right of way
ii. Requires inaction of the owner or neglect
To bring an action for
of one with a right to bring his action;
abatement of public
iii. Applies to all kinds of rights, whether real
nuisance
or personal;
iv. Produces the extinction of rights or bars To enforce a trust
a right of action;
Probate of a will
v. Results in the loss of a real or personal
right, or bars the cause of action to To recover possession of a
enforce said right; registered land under the
vi. Should be affirmatively pleaded and land registration act by the
proved to bar the action or claim of the registered owner
adverse party.
30 years Real actions over
immovables (but not
b. Requisites:
foreclosure) without
i. Capacity to acquire by prescription
prejudice to the acquisition
ii. The thing is capable of acquisition by
of ownership or real rights
prescription
by acquisitive prescription
iii. Possession of the thing under certain
(Art. 1141)
conditions
iv. Lapse of time as provided for by law. 10 years Actions upon a written
contract
Laches distinguished from Prescription
Actions upon an obligation
created by law
LACHES PRESCRIPTION
Concerned with the Concerned with the Actions upon a judgment
effect of delay fact of delay from the time judgment
becomes final
Question of inequity A question or matter of
of permitting a claim time Actions among co-heirs to
to be enforced, this enforce warranty against
inequity being eviction in partition
founded on some Mortgage action
subsequent change
in the condition or 8 years Action to recover movables
the relation of the without prejudice to
parties acquisition of title for a
shorter period or to the
Equity; Not statutory Statutory possessor’s title under Art.
Need not specifically Cannot be availed of 559, 1505 and 1133
pleaded unless it is specifically 6 years Actions upon an oral
(verbal) contract

399
 Actions upon a quasi- Action to impugn
contract legitimacy of a child if the
husband or his heirs reside
5 years Action for annulment of
abroad.
marriages (except on the
ground of insanity) and for
legal separation counted Prescription, when applicable
from the occurrence of the
cause a. By offender
Actions against the co-
Movables possessed through a crime can never
heirs for warranty of
be acquired through prescription by the offender.
solvency the debtor in
(Art. 1133, NCC)
credits assigned in
partition
b. Registered lands
Action for the declaration
of the incapacity of an heir An action to recover a registered land by the
(devisee or legatee) to owner (Sec. 47, P.D. No. 1529); and
succeed
Right to petition for the issuance for the issuance
All other actions whose
of a Writ of Possession filed by the applicant for
period are not fixed by law,
registered land (Sec. 44, Act No. 496).
counted from the time the
right of action accrues
b. Actions to demand right of way
4 years Action to revoke donations The easement of right of way may not be
due to non-compliance of acquired through prescription (Ronquillo vs.
conditions Roco, G.R. No. L-10619, February 28, 1958).
Action to rescind partition
c. To abate a nuisance
of deceased’s estate on
account of lesion
The abatement of a nuisance does not preclude
Action to claim rescission the right of any person injured to recover
of contracts damages for its past existence. (Art. 697, NCC)
Annulment of contracts for
Lapse of time cannot legalize any nuisance,
vice of consent
whether public or private. (Art. 698, NCC)
Actions upon a Quasi-
delict d. Action to quiet title if plaintiff is in
possession
Action to revoke or reduce
donations based on birth,
If the plaintiff is in possession of property - action
appearance or adoption of
does not prescribe (Sapto vs. Fabiana, G.R. No.
a child
L-11285, May 16, 1958).
Actions upon an injury to
the rights of the plaintiff e. Void contracts (Art. 1410, NCC)
(not arising from contract)
f. Action to demand partition as
3 years Actions under the eight -
distinguished from laches
hour labor law
Actions to recover losses in No prescription shall run in favor of a co-owner
gambling or co-heir against his co-owners or co-heirs so
long as he expressly or impliedly recognizes the
Money claims as a
co-ownership (Art. 494, NCC).
consequence of employer-
employee relationship

400
g. Property of public dominion (Heirs of Mario
Malabanan vs. Republic, G.R. No. 179987,
September 3, 2013).
Interruption of Prescription of actions
1. It is filed in court;
2. There is a written extrajudicial demand by
the creditor; and
3. Written acknowledgement of the debt by the
debtor (Art. 1155, NCC).
I. QUIETING OF TITLE
An action to remove a cloud from the title of real
estate. Persons having legal as well as equitable
title to or interest in a real property may bring
such action. "Title" does not necessarily denote a
certificate of title issued in favor of the person
filing the suit (Maestrado vs. CA, G.R. No. 133345,
March 9, 2000).
What is cloud on title?
Is a semblance of title, either legal or equitable,
or a claim or a right in real property, appearing in
some legal form but which is, in fact, invalid or
unfounded, or which would be inequitable to
enforce. (Ibid, p. 265)
Requisites of a cloud on title
1. There is a Price, Record, Instrument, Claim,
or Encumbrance (P.R.I.C.E.) which is
apparently effective or valid;(Art. 476, NCC)
2. Such is in fact invalid, ineffective, voidable or
unenforceable, or has been extinguished or
terminated, or has been barred by extinctive
prescription (Art 478, NCC);
3. Such may be prejudicial to said title. (Art.
476, NCC)
Requisites:

A suit against a particular person or persons in 1. Plaintiff must have a legal or equitable title
respect to the res and the judgment will apply to, or interest in real property which is the
only to the property in dispute. subject matter of the action;
2. There must be a cloud on such title to the
Nature of action to quiet title real property or interest therein;
3. The deed, claim, encumbrance or proceeding
The action to quiet title is characterized as claimed to be casting cloud on the title must
proceeding quasi in rem. Technically, it is neither be shown to be in fact invalid or inoperative
in rem nor in personam. In an action quasi in rem, despite prima facie appearance of validity or
an individual is named as defendant. However, legal efficacy (Rabuya, Property, Property, 2008,
unlike suits in rem, a quasi in rem judgment is p. 264)
conclusive only between the parties (Spouses
Portic vs. Cristobal, G.R. No. 156171, April 22, 2005). Distinctions between quieting of title and
removing/preventing cloud
An action for quieting of title is imprescriptible
until the claimant is ousted of his ACTION TO QUIET ACTION TO
possession. TITLE REMOVE CLOUD
To put an end to To procure the
Suits to quiet title are characterized as troublesome, cancellation, release
proceedings quasi in rem. In an action quasi in vexatious litigation of an instrument,
rem, an individual is named as defendant. with respect to the encumbrance, or
However, unlike suits in rem, a quasi in rem property concerned. claim in the plaintiffs
judgment is conclusive only between the parties. title or enjoyment of
(San Pedro vs. Ong, G.R. No. 177598, October 17,
the property.
2008)
Plaintiff asserts own Plaintiff declares his
A remedy or proceeding which has for its purpose claim and declares own claim and title,
an adjudication that a claim of title to realty or an that the claim of the and at the same time
interest thereon, adverse to the plaintiff, is invalid defendant is indicates the source
or inoperative, or otherwise defective and hence, unfounded and calls and nature of the
the plaintiff and those claiming under him may on the defendant to defendant’s claim,
forever be free of any hostile claim. (Rabuya, justify his claim on pointing out its
Property, 2008, p. 263) the property that the defects and prays for

401
 same may be the declaration of its
determined by the invalidity.
court.
Remedial action Preventive action to
involving a present prevent a future cloud
adverse claim on the title
In an action to quiet title, the suit does not
prescribe if the plaintiff is in possession of the
property. However, if the property is in the
possession of the defendant, then the action has
prescribed. The action would not be one to quiet
title, but one to recover real property (Galler vs.
Hussain, 20 G.R. No. L-20954, May 24, 1967).
Prescription / non-prescription of action
1. If the plaintiff is in possession of property -
action does not prescribe (Sapto vs. Fabiana,
G.R. No. L-11285, May 16, 1958)
2. If the plaintiff is not in possession of property
action may prescribe in:
a. Immovables
i. 10 years (ordinary good faith and
with just title) (Art. 1134, NCC)
ii. 30 years (extraordinary
uninterrupted adverse possession)
(Art. 1137, NCC)
b. Movables:
i. 4 years – in good faith (Art. 1132, 1st
par., NCC)
ii. 8 years – in bad faith (Art. 1132, 2nd
par., NCC)
When action to quiet title does not apply:
1. To questions involving interpretation of
contract or document (Paras, Civil Code of the
Philippines Annotated, Vol. 2, Property, 2008, p.
310) ;
2. To mere written or oral assertions of claim
except:
a. If made in legal proceeding;
b. If it is being asserted that the instrument
or reentry in plaintiff’s favor is not what
it purports to be;
c. To boundary disputes;
d. To deeds by strangers to the title unless
purporting to convey the property of the
plaintiff;
e. To instruments invalid on their face;
f. Where the validity of the instrument
involved pure questions of law; and
402
g. If the action has prescribed and the
plaintiff is not in possession of the
property. (Ibid)
J. ACTIONS TO RECOVER PROPERTY
Real Property
1. ACCION INTERDICTAL – Summary action
to recover physical possession, and not
juridical possession nor ownership (Rabuya,
Civil Law Reviewer Vol. I, 2017, p. 354).
Accion interdictal comprises two distinct
causes of action, namely, forcible entry
(detentacion) and unlawful detainer. (Rule
70, Rules of Court)
a. Forcible Entry – Action for recovery of
material/physical possession was
deprived thereof by force, intimidation,
strategy, threat or stealth. (Sec. 1, Rule
70, Rules of Court)
b. Unlawful Detainer – Possession by a
landlord, vendor, vendee or other person
of any land or building is being unlawfully
withheld after the expiration or
termination of the right to hold
possession, by virtue of any
contract. (Ibid)
Jurisdiction - MTC
Prescription - Both actions must be brought
within one year from the date of actual entry on
the land, in case of forcible entry, and from the
date of last demand, in case of unlawful detainer.
The issue in said cases is the right to physical
possession. (Paras, Civil Code of the Philippines
Annotated, Vol. 2, Property, 2008, p. 96)
2. ACCION PUBLICIANA – an ordinary
proceeding to determine the better right of
possession of realty independently of title
(Urieta Vda. De Aguilar vs. Alfaro, G.R. No.
164402, July 5, 2010).
Jurisdiction - RTC 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. In other words, if at
the time of the filing of the complaint, more
 than one year has lapsed since defendant
unlawfully withheld possession from plaintiff,
the action will not be for illegal detainer, but
an accion publiciana. (Rabuya, Pre-bar
Reviewer in Civil Law, 2021, p. 627)
Prescription - 10 years (Art. 555 [4], NCC)
3. ACCION REINVINDICATORIA – an action
for recovery of possession of the real poperty
as element of ownership (Ocampo vs. Heirs
of Dionision, G.R. No. 191101, October 4,
2014).
Jurisdiction - RTC
Prescriptive period: 10 years (ordinary
prescription) – requires good faith and just title;
or 30 years (extraordinary prescription) – does
not require good faith and just title (see Arts.
1134 and 1137, NCC).
To successfully maintain an action to recover the
ownership of a real property, the person who
claims a better right to it must prove two (2)
things:
a. Identity of the land claimed; and
b. His title thereto (Art. 434, NCC).
Personal Property
Replevin - recovery of personal property. (Rule
60, Rules of Court)
Requisites for Recovery of Property:
1. Proof of Right
2. Identity
3. Reliance on strength of own evidence, not
weakness of defendant’s claim. (Ibid)
II. CREDIT TRANSACTIONS
A. ANTICHRESIS
Antichresis is a contract whereby the creditor
acquires the right to receive the fruits of an
immovable of the debtor, with the obligation to
apply them to the payment of interest, if owing,
and thereafter to the principal of his credit. (Art.
2132, NCC)
Elements of Antichresis
1. The existence of the principal obligation to be
secured;
2. The property involved must be an
immovable;
3. The person who will constitute the antichresis
must be the absolute owner of the
immovable;
4. The person who will constitute the antichresis
must have free disposal of the property;
5. The parties agree that the creditor acquires
the right to receive the fruits of an immovable
of his debtor;
6. The creditor has the obligation to apply the
fruits of the immovable to the payment of the
interest, if owing, and thereafter to the
principal of his credit; and
7. The amount of the principal and of the
interest shall be specified in writing;
otherwise, the contract of antichresis shall be
void. (Arts. 2132 and 2134, NCC; Aniceto Bangis
vs. Heirs of Serafin and Salud Adolfo, G.R. No.
190875, June 13, 2012; AQUINO, Essentials of
Credit Transactions and Insolvency Law (2021), p.
379)
Characteristics of Antichresis
1. Accessory – it secures the performance of a
principal obligation
2. Formal – it must be in a specified form to be
valid
3. Involves only immovable properties.
4. Real right
5. Creditor has the right to receive the fruits of
the immovable
6. It can guarantee all kinds of valid obligations
(Arts. 2091 & 2139, NCC)
7. Indivisible in nature. (Art. 2090, NCC)
The last paragraph of Article 2085, and Articles
2089 to 2091 are applicable to this contract. (Art.
2139, NCC) Antichresis is also indivisible and the
rules that apply to mortgage and pledge
regarding indivisibility applies to antichresis.
It is not essential that the loan should earn
interest in order that it can be guaranteed with a
contract of antichresis. Antichresis is susceptible
403
of guaranteeing all kinds of obligations, pure or
conditional. (Javier vs. Valliser, G.R. No. 2648-R, April
29, 1950; Sta. Rosa vs. Noble, 35 O.G. 27241)
Requisites of Antichresis
Antichresis involves an express agreement
between parties whereby:
a. the creditor will have possession of the
debtor's real property given as security;
b. such creditor will apply the fruits of the said
property to the interest owed by the debtor,
if any, then to the principal amount;
c. the creditor retains enjoyment of such
property until the debtor has totally paid
what he owes; and
d. should the obligation be duly paid, then the
contract is automatically extinguished
proceeding from the accessory character of
the agreement. (Reyes vs. Heirs of Benjamin
Malance, G.R. No. 219071, August 24, 2016)
A stipulation authorizing the antichretic creditor
to appropriate the property upon non-payment of
the debt within the period agreed upon is void.
(Art. 2088, NCC)
Amount to be paid
The actual market value of the fruits at the time
of the application thereof to the interest and
principal shall be the measure of such application.
(Art. 2133, NCC)
Since the creditor with a lien took a lien on the
real property with the consent of the debtor, such
creditor held the real property as an antichretic
creditor with the right to collect the credit with
interest from the fruits, returning to the
antichretic debtor the balance, if any, after
deducting the expenses. The fact that the debtor
consented and asked the bank to take charge of
managing said property does not entitle the latter
to appropriate to itself the fruits thereof unless
the former has expressly waived his right thereto.
(Enriquez vs. Philippine National Bank, G.R. No. 33584.
December 15, 1930)
Interest
The contracting parties may stipulate that the
interest upon the debt be compensated with the
404
fruits of the property which is the object of the
antichresis, provided that if the value of the fruits
should exceed the amount of interest allowed by
the laws against usury, the excess shall be
applied to the principal. (Art. 2138, NCC) In fact,
the fruits shall first be applied to the interest
rather than the principal.
Parties to a contract of Antichresis
1. Antichretic creditor – one who receives
the fruits on the immovable property of the
debtor.
2. Antichretic debtor – one who pays his
debt through the application of the fruits of
his immovable property.
Rights of the Antichretic Creditor
1. Right to fruits and income of the thing (Art.
2132, NCC);
2. Retain the thing until debt is paid (Art. 2136,
NCC);
The property delivered stands as security for the
payment of the obligation of the debtor in
antichresis. Hence, the debtor cannot demand its
return until indebtedness is satisfied and the
property is redeemed. (Macapinlac vs. Gutierrez
Repide, G.R. No. 18574, September 20, 1992)
3. Have the thing sold upon non-payment at
maturity (Art. 2137, NCC); in this case, the
Rules of Court on the rules on foreclosure of
mortgages shall apply; and
4. Preference to the proceeds of the sale of the
thing; (Art. 2132, NCC).
Obligations of an antichretic creditor
1. Pay the taxes and charges assessable
against the property like real estate taxes
and others. (Art. 2135, NCC)
2. The creditor has to pay the taxes even if the
fruits be insufficient.
If he does not pay taxes, he is, by law, required
to pay indemnity for damages to the debtor.
(Pando vs. Gimenez, G.R. No. 31816, February 15,
1930) Creditor may avoid such obligation by
compelling the debtor to reacquire enjoyment of
the property, unless there is a stipulation to the
contrary. [Art. 2136(2), NCC]
3. Bear the necessary expenses for the
preservation and repair of the property. (Art.
2135, NCC)
4. Apply the fruits received for payment of the
outstanding interests, if any, of the sums
spent for purposes of those stated under Art.
2135, NCC, and thereafter of the principal.
(Art. 2132, NCC)
5. To render an account of the fruits to the
debtor. (Diaz vs. De Mendezona, G.R. No. L-
24824, January 30, 1926)
In order to exempt himself from the obligations
imposed upon him by Article 2135 of the NCC, the
creditor may always compel the debtor to enter
again upon the enjoyment of the property, except
when there is a stipulation to the contrary. (Art.
2136, NCC)
Delivery of the Immovable Property.
The property involved is an immovable property
that is delivered to the antichretic creditor as a
security. There is no transfer of ownership to the
creditor. The debtor cannot reacquire the
enjoyment of the immovable until full payment of
his obligation. (Aquino, Essentials of Credit
Transactions and Insolvency Law, 2021, , p. 390)
Return of the property
The antichretic debtor can only demand the
return of the property after having fully paid his
obligations to the creditor. It is not fair for the
debtor to regain the possession of the property
when his debt has not been fully paid. Until there
is full payment of the obligation, the property
shall stand as security therefor. (Macapinlac vs.
Gutierrez Repide, G.R. No. 18574, September 20,
1922)
Remedies of the Antichretic Creditor
The creditor in antichresis does not acquire title
to the property by the failure of payment of the
debt within the period agreed upon. Every
stipulation to the contrary shall be void (Article
2137, NCC). However, the antichretic creditor
may avail of the following remedies:
1. File an action for specific performance; or
2. File a petition for the public sale of the
property. (Barretto vs. Barretto, G.R. No. 11933,
December 1, 1917)
3. Parties may agree on an extrajudicial
foreclosure in the same manner as they are
allowed in contracts of mortgage. (Tavera vs.
El Hogar Filipino, Inc., G.R. No. L-45963, October
12, 1939)
The debtor cannot recover the possession and
enjoyment of the immovable property without
first paying the creditor all that he owes. (Article
2136, NCC; Diaz vs. De Mendezona, G.R. No. L- 24824,
January 30, 1926)
Availability of acquisitive prescription to
the antichretic creditor
The creditor in an antichresis and his successors-
in-interest cannot ordinarily acquire by
prescription the land given to him, hence, any
agreement to the contrary is void. (Valencia vs.
Valencia, G.R. No. 16256, September 28, 1921)
Possession of the property is not in the concept
of an owner but that of a mere holder during the
existence of the contract. (Ramirez vs. CA, G.R. No.
L-38185, September 24, 1986)
B. PLEDGE
PERSONAL PROPERTY SECURITIES ACT
(PPSA) (Republic Act [RA] No. 11057
approved on August 17, 2018)
It is the policy of the State to promote economic
activity by increasing access to least cost credit,
particularly for micro, small, and medium
enterprise (MSMEs), by establishing a unified and
modern legal framework for securing obligations
with personal property. (Sec. 2 of R.A. No. 11057)
Effect on the laws governing Pledge and
Chattel Mortgage
1. PPSA repealed the provisions of the civil code
on Pledge (Art. 2085 – 2123), Chattel
Mortgage (Art. 2140- 2141) and Sec. 1-16 of
the Chattel Mortgage law (Act. No. 1508).
(Sec. 9.01 of PPSA IRR.)
2. No more Pledge and Chattel Mortgage, under
the PSSA, contracts creating a security
405
 interest over a movable property are referred
to simple as “security agreement”. (Rabuya,
Pre-Bar Reviewer in Civil Law, 2021 Ed, 553)
Requisites
The following are the requisites of a security
agreement:
1. The debtor must have an existing obligation
to the creditor;
2. There is intent by the parties, including the
grantor, to create a security interest to secure
performance of the principal obligation;
3. The agreement to create a security interest
must be in writing;
4. The parties must sign the security
agreement;
5. The security agreement must identify the
secured obligation; and
6. The security agreement must identify the
property that will serve as the collateral.
(Aquino, Essentials of credit transactions and
insolvency law, 2021 Ed, 438-439).
Parties of a security agreement:
1. Grantor
2. Secured Creditor
Definitions and Scope (Sec. 3 of R.A. No. 11057;
IRR of R.A. No. 11057)
Commodity contract – a commodity futures
contract, an option on a commodity futures
contract, a commodity option, or another contract
if the contract of option is:
1. Traded on or subject to the rules of a board
of trade that has been designated as a
contract market for such a contract; or
2. Traded on a foreign commodity board of
trade, exchange, or market, and is carried
on the books of a commodity intermediary
for a commodity customer.
Competing claimant – a creditor of a grantor
or other person with rights in an encumbered
asset that may be in competition with the rights
of a secured creditor in the same encumbered
asset.
Consumer goods – Goods that are used or
acquired for use primarily for personal, family or
household purposes.
406
Control agreement – an agreement in writing
between the grantor and secured creditor which
perfects the security interests over intangible
asset.
1. With respect to securities, means an
agreement in writing among the issuer or the
intermediary, the grantor and the secured
creditor, according to which the issuer or the
intermediary agrees to follow instructions
from the secured creditor with respect to the
security, without further consent from the
grantor.
2. With respect to rights to deposit account,
means an agreement in writing among the
deposit-taking institution, the grantor and the
secured creditor with respect to the payment
of funds credited to the deposit account
without further consent from the grantor.
3. With respect to commodity contracts, means
an agreement in writing among the grantor,
secured creditor, and intermediary, according
to which the commodity intermediary will
apply any value distributed on account of the
commodity contract as directed by the
secured creditor without further consent by
the commodity customer or grantor.
Default – the failure of a debtor to pay or
otherwise perform a secured obligation, and any
other event that constitutes default under the
terms of an agreement between the grantor and
the secured creditor.
Deposit account – consists of deposits in
deposit-taking institutions.
Deposit-taking institutions
1. a bank as defined under R.A. No. 8791,
otherwise known as the “General Banking
Law”;
2. a non-stock savings and loan association as
defined under R.A. No. 8367, or the “Revised
Non-Stock Savings and Loan Association Act
of 1997”; or
3. a cooperative as defined under R.A. No.
9520 otherwise known as “Philippine
Cooperative Code”.
Equipment – means a tangible asset other than
inventory or consumer goods, or livestock, that is
primarily used or intended to be used by the 1. A bank;
grantor in the operation of its business. 2. Trust entity;
3. Depositary;
Finance lease – “finance leasing” of movable 4. Broker; or
properties as defined in Section 3(d) of RA No. 5. Central security depositary.
5980, as amended by R.A. No. 8556, or the
“Financing Company Act of 1998”. Intermediated securities – means securities
credited to a securities account and rights in
Fixtures – property attached to an immovable or securities resulting from the credit of securities to
a movable. a securities account.

Future property – means any movable property Inventory – means tangible assets held by the
which does not exist or which the grantor does grantor for sale or lease in the ordinary course of
not have rights in or the power to encumber at the grantor’s business, including raw materials
the time the security agreement is concluded. and work in process.

Grantor – Investment property – means any property

right arising from an investment. The term shall
1. The person who grants a security interest in include but will not be limited to property in
collateral to secure its own obligation or that securities and commodity contracts.
of another person;
2. A buyer or the transferee of a collateral that Lien – a qualified right or proprietary interest,
acquires its right subject to a security which may be exercised over the property of
interest; another.
3. A transferor in an outright transfer of an
accounts receivable; or Non-intermediated securities - securities
4. A lessee of goods. other than securities credited to a securities
account and rights in securities resulting from the
Intangible asset – means any movable credit of securities to a securities account.
property other than a tangible asset including,
but not limited to: Or simply, securities other than Intermediated
Securities. (Sec. 1.05 (t), IRR of R.A. No. 11057)
1. investment property;
2. deposit accounts; Notice – a statement of information that is
3. commodity contracts; and registered in the Registry relating to a security
4. receivables. interest or lien. The term includes an initial notice,
amendment notice, and termination notice.
Intellectual property – shall refer to
“intellectual property rights” defined in Section Operating lease – an agreement by which the
4.1 of R.A. No. 8293 or the “Intellectual Property owner temporarily grants the use of his property
Code of the Philippines”. It shall include: to another who undertakes to pay rent therefor.

1. Copyrights; Perfection – any act authorized by the PPSA and

2. Trademarks; these Rules that makes a security interest binding
3. Service marks; as against third parties.
4. Patents;
5. Industrial design; and Possession – the holding of a thing or
6. Trade secrets. enjoyment of a right.
Priority – the right of a person in an encumbered
Intermediary – a person that in the ordinary asset in preference to the right of a competing
course of business or activity maintains an claimant.
account for such securities or assets, for another
person, and is acting in that capacity, including, Proceeds – any property received upon sale,
but not limited to: lease or other disposition of collateral, or

407
whatever is collected on or distributed with
respect to collateral, claims arising out of the loss
or damage to the collateral, as well as a right to
insurance payment or other compensation for
loss or damage of the collateral.
Product – a tangible asset which results when a
tangible asset is so physically associated or united
with one or more other tangible asset of a
different kind, or when one or more tangibles
assets are so manufactured, assembled or
processed, that they have lost their separate
identities.
Purchase money security interest – a
security interest in goods taken by the seller to
secure the price or by a person who gives value
to enable the grantor to acquire the goods to the
extent that the credit is used for that purpose.
Receivable – means a right to payment of a
monetary obligation, excluding:
1. a right to payment evidenced by a
negotiable instrument;
2. a right to payment of funds credited to a
bank account; and
3. a right to payment under a non-
intermediated security.
Recognized market – an organized market in
which large volumes of similar assets are bought
and sold between many different sellers and
buyers, and accordingly one in which prices are
set by the market and not negotiated between
individual sellers and buyers.
Registration – the process of filing a notice as
defined under these Rules with the Registry.
Registry – the centralized and nationwide
electronic registry established in the Land
Registration Authority (LRA) where notice of a
security interest and a lien in personal property
may be registered.
Secured creditor – a person that has a security
interest. For purposes of registration and
priority only, it includes a buyer of an account
receivable and a lessor of goods under an
operating lease for not less than one (1) year.
Securities account – an account maintained by
an intermediary to which securities may be
credited or debited.
408
Security – shares, participation or interests in a
corporation or in a commercial enterprise or
profit-making venture and evidenced by a
certificate, contract, instruments, whether
written or electronic in character. It includes but
is not limited to:
1. Shares of stocks, bonds, debentures, notes
as evidenced of indebtedness, asset-backed
securities;
2. Investment contracts, certificates of interest
or participation in a profit-sharing
agreement, certificates of deposit for a
future subscription;
3. Fractional undivided interest in oil, gas or
other mineral rights;
4. Derivatives like options and warrants;
5. Certificates of assignments, certificates of
participation, trust certificates, voting trust
certificates or similar instruments;
6. Proprietary or nonproprietary membership
certificates in corporations; and
7. Other instruments as may in the future be
determined by the SEC.
Security interest – a property right in collateral
that secures payment or other performance of an
obligation, regardless of whether the parties have
denominated it as a security interest, and
regardless of the type of asset, the status of the
grantor or secured creditor, or the nature of the
secured obligation; including the right of a buyer
of accounts receivable and a lessor under an
operating lease for not less than one (1) year.
Tangible asset – means any tangible asset.
XPNs:
1. Rule 3.07 – Security interest over intangible
assets commingled in a mass;
2. Rule 3.08 – Security interest in certain
accounts receivables;
3. Rule 4.09 – Disposition of perfected security
interest before default; and
4. Rule 6.05 – Priority of purchase money
security interest
Under the XPNs, this term includes money,
negotiable instruments, negotiable documents
and certificated non-intermediated securities but
only if the mere possession of such instruments
results in the ownership of the underlying rights
or property embodied by them, in accordance
with the laws governing such instruments.
Writing – for the purpose of the PPSA and its
Rules, includes electronic records.
Scope
GR: The PPSA shall apply to all transactions of
any form that secure an obligation with movable
collateral. (Sec. 4, R.A. No. 11057)
A security interest may be created over all forms
of tangible or intangible asset or personal
property as defined by the Civil Code, including,
but not limited to:
1. Right arising from a contract, including but
not limited to:
a. Securities
b. Commodity contracts
c. Lease of goods including financial leases
and operating leases for a period of not
less than one (1) year
2. Equipment;
3. Inventory;
4. Deposit accounts;
5. Negotiable instruments;
6. Negotiable documents of title;
7. Consumer goods;
8. Intellectual property;
9. Livestock;
10. Fixture, accessions, and commingled goods;
or
11. Future property or after-acquired assets.
Note: A security interest can only be created on
the asset over which the grantor has a legal right.
(Sec. 2.03, IRR of R.A. No. 11057)
XPNs:
1. Interests in aircrafts subject to RA No.
9497, or the "Civil Aviation Authority Act of
2008"; and
2. Interests in ships subject to Presidential
Decree (PD) No. 1521, or the "Ship
Mortgage Decree of 1978". (Sec. 4, RA 11057)
Asset-Specific Rules:
Future Property
1. A security agreement may provide for the
creation of a security interest in future
property of after-acquired assets, but the
security interest in that property is created
only when the grantor acquires rights in it or
the power to encumber it.
2. A security agreement may provide that a
security interest in a tangible asset that is
transformed into a product extends to the
product. A security interest extends to a
product is limited to the value of the
encumbered asset immediately before it
became part of the product.
3. A security agreement may provide that a
security interest in tangible asset extends to
its replacement. A security interest extends
to a replacement is limited to the value of
the encumbered asset immediately before it
was replaced. (Sec. 3.05, IRR of R.A. No.
11057)
Rights to proceeds and comingled funds
1. A security interest in personal property shall
extend to its identifiable or traceable
proceeds.
2. Where proceeds in the form of funds
credited to a deposit account or money are
commingled with other funds or money:
a. The security interest shall extend to the
commingled money or funds,
notwithstanding that the proceeds have
ceased to be identifiable to the extent they
remain traceable;
b. The security interest in the commingled
funds or money shall be limited to the
amount of the proceeds immediately
before they were commingled; and
c. If at any time after the commingling, the
balance credited to the deposit account or
the amount of the commingled money is
less than the amount of the proceeds
immediately before they were
commingled, the security interest against
the commingled funds or money shall be
limited to the lowest amount of the
commingled funds or money between the
time when the proceeds were commingled
and the time the security interest in the
409
 proceeds is claimed. (Sec. 3.06, IRR of R.A. Effect of perfection
No. 11057)
A security interest becomes effective against third
Tangible Assets Comingled in a Mass parties. (Sec. 11 (b), R.A. 11057)

1. A security interest in a tangible asset that is Means of perfection of the following

commingled in a mass extends to the mass. security interests:
2. A security interest that extends to a mass is
limited to the same proportion of the mass 1. A security interest in tangible asset may
as the quantity of the encumbered asset be perfected by:
bore to the quantity of the entire mass
immediately after the commingling. (Sec. a. Registration of a notice with the Registry;
3.07, IRR of R.A. No. 11057) or
Accounts Receivables
b. Possession, whether actual or
constructive, of the tangible asset either
1. A security interest in an account receivable
by the secured creditor or a depositary
shall be effective notwithstanding any
acting for the secured creditor. Provided,
agreement between the grantor and the
that the debtor or the grantor cannot
account debtor or any secured creditor
possess the collateral on behalf of the
limiting in any way the grantor’s right to
secured creditor for purposes of
create a security interest; Provided: Nothing
perfecting and maintaining the security
in this section affects the right of a buyer to
interest over such collateral.
create a security interest over the account
receivable.
If a security interest in a tangible asset is effective
Provided, further: that any release of
against third parties, a security interest in a mass
information is subject to agreements on
to which a security interest extends is effective
confidentiality.
against third parties without any further act. (Sec.
2. Nothing in this section shall affect any
4.02, IRR of R.A. No. 11057)
obligation or liability of the grantor for
breach of the agreement in subsection (a).
2. Security interest in intangible asset may
3. Any stipulation limiting the grantor’s right to
be perfected by:
create security interest shall be void.
4. This section applies only to accounts
a. Registration of a notice with the Registry;
receivable arising from:
or
a. A contract for supply or lease of goods or
b. Conclusion of control agreement. (Sec.
services other than financial services; 4.03, IRR of R.A. No. 11057)
b. A construction contract or contract for
the sale or lease of real property; and 3. Security interest in intermediated
c. A contract for the sale, lease or license of securities or deposit accounts may be
intellectual property. (Sec. 3.08, IRR of R.A. perfected by:
No. 11057)
a. Registration of a notice with the Registry;
Perfection of Security Interests
b. Creation of a security interest in favor of
the deposit-taking institution or the
A security interest shall be perfected when it has
intermediary; or
been created and the secured creditor has taken
c. Conclusion of a control agreement. (Sec.
one of the actions in accordance with the 4.04, IRR of R.A. No. 11057)
following means:
Notes:
1. Registration of a notice with the Registry;
2. Possession of the collateral by the secured  Nothing in the Rules shall require a deposit-
creditor; and taking institution or an intermediary under
3. Control of investment property and deposit subsection (b) to enter into a control
account. (Secs. 11 (a) and 12, R.A. No. 11057) agreement, even if the grantor so requests.

410
 A deposit-taking institution or an
intermediary that has entered into such an
agreement shall not be required to confirm
the existence of the agreement to another
person unless requested to do so by the
grantor. (Sec. 4.04, IRR of R.A. No. 11057)
4. Security interest in electronic securities
non-intermediated securities may be
perfected by:
a. Registration of a notice with the Registry;
b. Execution of a control agreement
between the grantor and secured
creditor; or
c. Control, through notation of a security
interest in the books maintained by or on
behalf of the issuer for the purpose of
recording the name of the holder of the
securities. (Sec. 4.05, IRR of R.A. No. 11057)
5. Security interest in investment
property that is electronic (i.e. a
scripless or uncertificated) security
held by an intermediary may be perfected
by:
a. Registration of a notice with the Registry;
or
b. Execution of a control agreement among
the intermediary, the grantor and
secured creditor. (Sec. 4.06, IRR of R.A. No.
11057)
Notes:
 A security that is not registered remains valid
between the parties. (Sec. 4.06 (a), IRR of R.A.
No. 11057)
 For purposes of determining the time of
perfection of the security interest, the control
agreement shall:
 Be executed under oath; and
 Include the date and time of its
execution. (Sec. 4.06, IRR of R.A. No.
11057)
Parties to, Form and Contents of a Control
Agreement (Sec. 4.07, IRR of R.A. No. 11057)
1. With respect to intermediated securities,
a control agreement shall:
a. Be executed in writing by the issuer or the
intermediary, the grantor and secured
creditor; and
b. Stipulate that the issuer or the
intermediary agrees to follow instructions
from the secured creditor with respect to
the security, without further consent from
the grantor.
2. With respect to rights to deposit account,
a control agreement shall:
a. Be executed in writing among the deposit-
taking institution, the grantor and the
secured creditor; and
b. Stipulate that the deposit-taking institution
agrees to follow instructions from the
secured creditor with respect to the
payment of funds credited to the deposit
account without further consent from the
grantor.
3. With respect to commodity contracts, a
control agreement shall:
a. Be executed in writing among the grantor,
secured creditor, and intermediary; and
b. Stipulate that the commodity intermediary
will apply any value distributed on account
of the commodity contract as directed by
the secured creditor without further
consent by the commodity customer or
grantor.
Continuity of Perfected Security Interest
A security interest shall remain perfected despite
a change in the means for achieving perfection:
Provided, that there was no time when the
security interest was not perfected. (Sec. 15, RA
No. 11057 and Sec. 4.08, IRR of R.A. No. 11057)
A security interest shall continue in collateral
notwithstanding sale, lease, license, exchange, or
other disposition of the collateral, except:
1. Agreed upon by the parties or; (Sec. 9, R.A.
No. 11057)
2. Any party who obtains, in the ordinary
course of business, any movable property
containing a security interest shall take the
same free of such security interest provided
he was in good faith. No such good faith
shall exist if the security interest in the
movable property was registered prior to his
411
 obtaining the property. (Sec. 21, R.A. No.
11057)
Rules on Disposition of Perfected Security
Interest Before Default
1. As to Transferee, XPNs
Any party who obtains, in the ordinary course
of business, any movable property containing
a security interest shall take the same free of
such security interest provided he was in
good faith. No such good faith shall exist if
the security interest in the movable property
was registered prior to his obtaining the
property. (Sec. 4.09[a]), IRR of RA 11057)
2. As to Perfection in Proceeds
a. Before default, upon disposition of the
collateral, a security interest shall extend
to proceeds of the collateral without
further act and be continuously
perfected, if the proceeds are in the form
of money, accounts receivable,
negotiable instruments or deposit
accounts (MAND).
b. Before default, upon disposition of the
collateral, if the proceeds are in a form
different from MAND, the security
interest in such proceeds must be
perfected by one of the means applicable
to the relevant type of collateral within
fifteen (15) days after the grantor
receives such proceeds; otherwise, the
security interest in such proceeds shall
not be effective against third parties.
(Sec. 14, R.A. No. 11057 and Sec. 4.09[b]),
IRR of R.A. No. 11057)
Fixtures, Accessions, and Commingled
Goods
A perfected security interest in a movable
property which has become a fixture, or has
undergone accession or commingling shall
continue provided the movable property involved
can still be reasonably traced. In determining
ownership over fixtures, accessions and
commingled goods, the provisions of Book II of
RA No. 386 or the “Civil Code of the Philippines”
shall apply. (Sec. 4.10, IRR of R.A. No. 11057)
412
Registration
Establishment Registry
The LRA shall:
1. Establish and administer the centralized,
nationwide Registry, which shall contain,
among others, the following information:
a. Initial notice of security interest and lien
in personal property;
b. Amendment notice providing new
information or continuing the period of
effectiveness of an initial notice; and
c. Termination notice.
2. Provide electronic means for registration and
searching of notices.
3. Issue the necessary guidelines on the use
and management of the Registry. (Sec. 5.01,
SIRR of R.A. No. 11057)
Registry Duties:
1. For each registered notice, the Registry shall:
a. Assign a unique registration number;
b. Create a record that bears the number
assigned to the initial notice and the date
and time of registration; and
c. Maintain the record for public inspection.
2. The Registry shall index notices by the
identification number of the grantor and, for
notices containing a serial number of a motor
vehicle, by serial number.
3. The Registry shall provide a copy of the
electronic record of the notice, including the
registration number and the date and time of
registration to the person who submitted it.
4. The Registry shall maintain the capability to
retrieve a record by the identification number
of the grantor, and by serial number of a
motor vehicle.
5. The Registry shall maintain records of lapsed
notices for a period of ten (10) years after the
lapse.
6. The duties of the Registry shall be merely
administrative in nature. By registering a
notice or refusing to register a notice, the
Registry does not determine the sufficiency,
correctness, authenticity, or validity of any
information contained in the notice. (Sec. 35,
R.A. No. 11057 and its Sec. 5.04, IRR of R.A. No.
11057)
Registration of Notice
When sufficient:
1. An initial notice shall not be rejected if it:
a. Identifies the grantor by an indication
number;
b. Identifies the secured creditor or an agent
of the secured creditor by name;
c. Provides an address for the grantor and
secured creditor or its agent;
d. Describes the collateral; and
e. The prescribed fee has been tendered, or
an agreement has been made for payment
of fees by other means. (Sec. 28, R.A. No.
11057 and Sec. 5.05 (a), IRR of R.A. No.
11057)
● Natural person shall be identified
through the name appearing in any of
the grantor’s government issued
identification.
● Juridical person shall be identified
through its name in the most recently
registered articles of incorporation, or
in an agreement constituting the legal
person. (Sec. 5.05 (a), IRR of R.A. No.
11057)
● A notice that does not provide the
identification number of the
grantor shall be seriously
misleading. (Sec. 31 of R.A. No. 11057)
● If the Registry rejects to register a
notice, it shall promptly communicate
to the person who submitted the notice
the facts and reasons for its rejection
within three (days) from the rejection.
(Sec. 5.05 (b), IRR of R.A. No. 11057)
● Description of the collateral in a notice
shall be entered in English. (Sec. 5.05
(f), IRR of R.A. No. 11057)
2. Each grantor must authorize the registration
of an initial notice by signing a security
agreement or otherwise in writing. (Sec.
5.05[c]), IRR of R.A. No. 11057)
● A notice may be registered before a
security agreement is concluded.
● Once a security agreement is concluded,
the date of registration of the notice shall
be reckoned from the date the notice was
registered. (IRR of R.A. No. 11057, Sec.
5.05[d])
3. A notice of lien may be registered by a lien
holder without the consent of the person
against whom the lien is sought to be
enforced. (IRR of R.A. No. 11057, Sec. 5.05[e])
4. Registration of a single notice may relate to a
security interests created by the grantor
under one (1) or more than one security
agreement. (Sec. 29, R.A. No. 11057 and Sec.
5.06, IRR of R.A. No. 11057)
Effectiveness of Notice
1. A notice shall be effective at the time it is
discoverable on the records of the Registry.
2. A notice shall be effective for the duration of
the term indicated in the notice unless a
continuation notice is registered before the
term lapses.
Note: The copy of the electronic record of
the notice provided to the person who
submitted it indicating the date and time of
effectivity shall be conclusive. (Sec. 5.07, IRR
of R.A. No. 11057)
3. A notice substantially complying with the
requirements shall be effective unless it is
seriously misleading.
Note: Seriously misleading notices include
notices which do not provide the
identification number of the grantor. (Ibid.)
4. A notice that may not be retrieved in a
search of the Registry against the correct
identifier of the grantor shall be ineffective
with respect to that grantor. (Ibid.)
Notes:
 The registration of a notice shall neither
expand nor diminish the security interest
beyond the terms of the security agreement,
except as otherwise provided by the PPSA or
these Rules.
 Any error or misrepresentation in the notice
with respect to the description of the security
interest shall not affect any rights beyond
those granted in the original security
agreement. (Ibid.)
413
Continuation of effectiveness of a notice
The period of effectiveness of a notice may be
continued by registering an amendment notice
that identifies the initial notice by its registration
number. (Sec. 33[a]), R.A. No. 11057)
Limitation
Continuation of notice may be registered only
within six (6) months before the expiration of the
effective period of the notice. (Sec. 33[b]), R.A. No.
11057)
Termination of effectiveness of a notice:
May be made by registering a termination notice
that:
1. Identifies the initial notice by its registration
number; and
2. Identifies each secured creditor who
authorizes the registration of the termination
notice.
A termination notice terminates effectiveness as
to each authorizing secured creditor. (Sec. 34, R.A.
No. 11057)
Amendment of Notice
1. Notice may be amended by the registration
of an amendment notice that:
a. Identifies the initial notice by its
registration number; and
b. Provides new information. (Sec. 32[a]),
R.A. No. 11057)
2. An amendment notice that adds collateral
that is not proceeds must be authorized by
the grantor in writing.
3. An amendment notice that adds a grantor
must be authorized by the added grantor in
writing.
4. Amendment notice shall be effective only to
each secured creditor who authorizes it.
5. An amendment notice that adds collateral or
a grantor shall be effective as to the added
collateral or grantor from the date of its
registration.
414
If the secured creditor assigns a perfected
security interest, an amendment notice may be
registered to reflect the assignment. (Sec. 5.08,
IRR of R.A. No. 11057)
Cases when the grantor may give a written
demand to the secured creditor for the
amendment or termination of effectiveness
of a notice:
i. All the obligations under the security
agreement to which the registration relates
have been performed and there is no
commitment to make future advances;
ii. The secured creditor has agreed to release
part of the collateral described in the notice;
iii. The collateral described in the notice includes
an item or kind of property that is not a
collateral under a security agreement between
the secured creditor and the grantor;
iv. No security agreement exists between the
parties; or
v. The security interest is extinguished in
accordance with PPSA and its IRR. (Sec. 39, RA
11057)
A secured creditor shall not charge any fee for
compliance with a demand received under
Section 39. (Sec. 43, R.A. No. 11057)
Within fifteen (15) working days upon receipt of
the demand submitted under Section 39 of RA
No. 11057, the secured creditor must register an
amendment or termination of notice as follows:
Termination (a), (d) or (e)
Amendment (c)
(Sec. 40, RA 11057)
If the secured creditor fails to comply with the
demand within fifteen (15) working days after its
receipt, the person giving the demand under
Section 39 may ask the proper court to issue an
order terminating or amending the notice as
appropriate. (Sec. 41, R.A. No. 11057)
Compulsory Amendment or Termination of
a Notice by Court Order
The court may, on application by the grantor,
issue an order that the notice be amended or
terminated in accordance with the demand,
which order shall be conclusive and binding on
the LRA.
Note: The secured creditor who disagrees with
the order of the court may appeal the order.
The court may make any other order it deems
proper for the purpose of giving effect to an order
under (a).
The LRA shall amend or terminate a notice in
accordance with a court order made under (a) as
soon as reasonably practicable after receiving the
order.
When Registration and Search Constitutes
Interference with Privacy of Individual
A person who submitted a notice for registration
or carried out a search of the Registry with a
frivolous, malicious or criminal purpose or intent
shall be subject to civil and criminal penalties
according to the relevant laws. (Sec. 44, R.A. No.
11057)
Priority of Security Interests
Time of perfection
GR: The priority of security interests and liens on
the same collateral shall be determined
according to the time of registration of a
notice or perfection by other means, without
regard to the order of creation of the security
interests and liens, or to the mode of perfection.
(Sec. 6.01, IRR of R.A. No. 11057)
XPNs:
Tangible Assets; Intangible Assets
1. Priority for investment property and deposit
accounts. The following rules shall govern
when applicable:
a. A security interest in a deposit
account with respect to which the
secured creditor is the deposit-taking
institution or the intermediary shall have
the priority over the competing security
interest perfected by any method.
2. Priority for tangible assets embodied in
b. A security interest in a deposit
account or investment property that
is perfected by control agreement
shall have priority over competing
security interest except a security
interest of the deposit-taking institution
or the intermediary.
c. The order of priority among competing
security interests in a deposit account or
investment property that were perfected
by the conclusion of control agreements
shall be determined on the basis of the
time of the conclusion of the control
agreements.
d. Any rights to set-off that the deposit-
taking institution may have against a
grantor’s right to payment of funds
credited to a deposit account shall have
priority over a security interest in the
deposit account.
e. A security interest in electronic non-
intermediated securities perfected by a
notation of the security interests in the
books maintained for that purpose by or
on behalf of the issuer shall have priority
over a security interest in the same
securities perfected by any other
method.
f. A security interest in electronic securities
not held with an intermediary perfected
by the conclusion of a control agreement
shall have priority over a security interest
in the same securities perfected by
registration of a notice in the Registry.
g. A security interest in electronic securities
held with an intermediary and perfected
through a control agreement shall have
priority over a security interest in the
same securities perfected by any other
method.
h. The order of priority among competing
security interests in electronic securities
held with an intermediary perfected by
the conclusion of control agreements is
determined on the basis of the time
conclusion of the control agreements.
(Sec. 6.02, IRR of R.A. No. 11057)
instruments. The following rules shall govern
when applicable:
a. A security interest in a security certificate
perfected by the secured creditor’s
415
 possession of the certificate shall have
priority over a competing security interest
perfected by registration of a notice in the
Registry.
b. A security in an instrument or negotiable
document that is perfected by possession
of the instrument or the negotiable
document shall have priority over a
security interest in the instrument or
negotiable document that is perfected by
registration of a notice in the Registry.
c. A perfected security interest in livestock
securing an obligation incurred to enable
the grantor to obtain food or medicine for
the livestock shall have priority over any
other security interest in the livestock,
except for a perfected purchase money
security interest in the livestock, if the
secured creditor providing credit for food
or medicine gives written notification to the
holder of the conflicting perfected security
interest in the same livestock before the
grantor receives possession of the food or
medicine. (Rule 6.03, IRR of R.A. No. 11057)
3. A person who provides services or materials
with respect to the goods, in the ordinary
course of business, and retains possession of
the goods shall have priority over a perfected
security interest in the goods until payment
thereof. (Sec. 6.04[a]), IRR of R.A. No. 11057)
4. Subject to the applicable insolvency law, a
security interest perfected prior to the
commencement of insolvency proceedings in
respect of the grantor shall remain perfected
and retain the priority it had before the
commencement of the insolvency
proceedings. (Sec. 6.04[b]), IRR of R.A. No.
11057)
Note: During the insolvency proceedings, the
perfected security interest shall constitute a lien
over the collateral. (Ibid.)
5. Purchase money security interest
a. A purchase money security interest in
equipment and its proceeds shall gave
priority over a conflicting security interest,
if a notice relating to the purchase money
security interest is registered within three
416
(3) business days after the grantor
receives possession of the equipment.
b. A purchase money security interest in
consumer goods that is perfected by
registration notice not later than three (3)
business days after the grantor obtains
possession of the consumer goods shall
have priority over a conflicting security
interest.
c. A purchase money security interest in
inventory, intellectual property or livestock
(IIL) shall have priority over conflicting
perfected security interest in the same IIL
if:
i. A purchase money security interest is
perfected when the grantor receives
possession of the inventory or livestock,
or acquires rights to intellectual property;
and
ii. Before the grantor receives possession of
the inventory or livestock, or acquires
rights to intellectual property, the
purchase money secured creditor gives
written notification to the holder of the
conflicting perfected security interest
may in the same types of IIL. The
notification sent to the holder of the
conflicting security interest may cover
multiple transactions between the
purchase money secured creditor and the
grantor without the need to identify each
transaction.
d. Purchase money security interest in
equipment or consumer goods perfected
timely in accordance with subsection (a)
and (b), shall have priority over the rights
of a buyer, lessee, or lien holder which
arise between delivery of the equipment
or consumer goods to the grantor and the
time the notice is registered. (Sec. 6.05,
IRR of R.A. No. 11057)
Enforcement of Security Interests
Secured Creditor’s Rights
1. Right of Redemption
GR: Any person who is entitled to receive a
notification of disposition is entitled to redeem
the collateral by paying or otherwise performing
the secured obligation in full, including the
reasonable cost of enforcement.
XPN:
The right of redemption may be exercised,
unless:
a. The person entitled to redeem has not, after
the default, waived in writing the right to
redeem;
b. The collateral is sold or otherwise disposed
of, acquired or collected by the secured
creditor or until the conclusion of an
agreement by the secured creditor for that
purpose; and
c. The secured creditor has retained the
collateral. (Sec. 45, R.A. No. 11057)
2. Right of Higher-Ranking Secured
Creditor to Take Over Enforcement
Even if another secured creditor or a lien holder
has commenced enforcement, a secured creditor
whose security-interest has priority over that of
the enforcing secured creditor or lien holder shall
be entitled to take over the enforcement process.
1. May be invoked:
a. At any time before the collateral is sold or
otherwise disposed of, or retained by the
secured creditor; or
b. Until the conclusion of an agreement by
the secured creditor for that purpose.
The right of the higher-ranking secured creditor
to take over the enforcement process shall
include the right to enforce the rights by any
method available to a secured creditor under the
PPSA. (Sec. 46, R.A. No. 11057)
3. Expedited Repossession of Collateral
a. Extrajudicial
Requisites:
i. The security agreement so stipulates;
ii.Possession can be taken without breach of
the peace. (Sec. 7.02, IRR of R.A. No. 11057)
Breach of the peace shall include:
i. Entering the private residence of the grantor
without permission;
ii. Resorting to physical violence or
intimidation; or
iii. Being accompanied by a law enforcement
officer when taking possession or
confronting the grantor. (Ibid)
Where the collateral is a fixture, the secured
creditor may remove the fixture from the real
property to which it is affixed without judicial
process, if he has priority over all owners and
mortgagees. The secured creditor shall exercise
due care in removing the fixture. (Ibid)
b. Judicial - if, upon default, the secured creditor
cannot take possession of collateral without
breach of the peace.
Procedures:
i. The secured creditor shall be entitled to an
expedited hearing upon application for an
order granting the secured creditor
possession of the collateral. Such application
shall include a statement by the secured
creditor, under oath, verifying the:
• Existence of the security agreement
attached to the application; and
• Identifying at least one event of default by
the debtor under the security agreement.
(Sec. 7.03 [a], IRR of R.A. No. 11057)
ii. The secured creditor shall provide a copy of
the application, including all supporting
documents and evidence for the order
granting the secured creditor possession of
the collateral to the following:
• Debtor;
• Grantor; and
417
 • Real estate mortgagee, if the collateral is
a fixture (Sec. 7.03 [b], IRR of R.A. No.
11057)
iii. The secured creditor is entitled to an order
granting possession of the collateral upon
the court finding that a default has occurred
under the security agreement and that the
secured creditor has a right to take
possession of the collateral. The court may
direct the grantor to take such action as the
court deems necessary and appropriate so
that the secured creditor may take
possession of the collateral. (Sec. 7.03 [c], IRR
of R.A. No. 11057)
4. Recovery by the secured creditor without
judicial process upon default in the
following cases
a. Instruct the account debtor to make
payment to the secured creditor, and apply
such payment to the satisfaction of the
obligation secured by the security interest
after deducting the secured creditor’s
reasonable collection expenses. On request
of the account debtor, the secured creditor
shall provide evidence of its security interest
to the account debtor when it delivers the
instruction to the account debtor;
b. In a negotiable document that is perfected
by possession, proceed as to the negotiable
document or goods covered by the
negotiable document;
c. In a deposit account maintained by the
secured creditor, apply the balance of the
deposit account to the obligation secured by
the deposit account; and
d. In other cases of security interest in a
deposit account perfected by control,
instruct the deposit-taking institution to pay
the balance of the deposit account to the
secured creditor’s account. (Sec. 48, R.A. No.
11057)
5. Right to Dispose of Collateral
Requirements:
a. Default (Sec. 49[a]), R.A. No. 11057);
b. The secured creditor act in a commercially
reasonable manner (Sec. 50[a]), R.A. No.
11057);
418
c. Not later than ten (10) days before the
disposition, notice of disposition by the
secured creditor to the following:
i. The grantor;
ii. Any other secured creditor or lien holder
who, five (5) days before the date
notification is sent to the grantor, held a
security interest or lien in the collateral
that was perfected by registration; and
iii. Any other person from whom the secured
creditor received notification of a claim of
an interest in the collateral if the
notification was received before the
secured creditor gave notification of the
proposed disposition to the grantor.
The grantor may waive the right to be notified. It
is sufficient if it:
i. identifies the grantor and the secured
creditor;
ii. describes the collateral;
iii. states the method of intended disposition;
iv. states the time and place of a public
disposition or the time after which other
disposition is to be made.
The requirement to send a notification under this
section shall not apply if the collateral is:
i. Perishable or threatens to decline speedily in
value; or
ii. of a type customarily sold on a recognized
market. (Sec. 51, R.A. No. 11057)
Procedures:
a. After default, a secured creditor may sell or
otherwise dispose of the collateral, publicly
or privately, in its present condition or
following any commercially reasonable
preparation or processing.
In disposing of collateral, the secured creditor
shall act in a commercially reasonable manner.
A disposition is commercially reasonable if the
secured creditor disposes of the collateral in
conformity with commercial practices among
dealers in that type of property.
A disposition is not commercially unreasonable
merely because a better price could have been
obtained by disposition at a different time or by a
different method from the time and method
selected by the secured creditor.
If a method of disposition of collateral has been
approved in any legal proceeding, it is
conclusively commercially reasonable.
b. The secured creditor may buy the collateral
at any public disposition, or at a private
disposition but only if the collateral is of a
kind that is customarily sold on a
recognized market or the subject of widely
distributed standard price quotations. (Secs.
49 and 50, RA 11057)
Order of Application of Proceeds of
Sale
a. The reasonable expenses of taking, holding,
preparing for disposition, and disposing of
the collateral, including reasonable
attorneys’ fees and legal expenses incurred
by the secured creditor.
It shall include all expenses incurred by the
secured creditor in the preservation and care of
the collateral in his possession with diligence of
a good father of a family. (Sec. 7.11[c]), IRR of
R.A. No. 11057)
b. The satisfaction of the obligation secured
by the security interest of the enforcing
secured creditor.
c. The satisfaction of obligations secured by
any subordinate security interest or lien in
the collateral if a written demand and proof
of the interest are received before
distribution of the proceeds is completed.
(Sec. 52, R.A. No. 11057)
Obligation of the secured creditor:
a. Account to the grantor for any surplus, and,
unless otherwise agreed, the debtor is
liable for deficiency.
b. In case of loss or deterioration in value of
the collateral due to his failure to preserve
and care, he shall be liable to the grantor
for the value of the loss or deterioration.
(Sec. 7.11[c] and [e], of R.A. No. 11057)
Retention of Collateral by Secured Creditor
Kinds of retention of collateral:
a. Full;
b. Partial
Requisites:
a. Default;
b. Proposal by the secured creditor to the
debtor and grantor to take all or part of the
collateral in total or partial satisfaction of
the secured obligation;
c. Such proposal shall be sent to:
i. The debtor and the grantor;
ii. Any other secured creditor or lien holder
who, five (5) days before the proposal is
sent to the debtor and the grantor,
perfected its security interest or lien by
registration; and
iii. Any other person with an interest in the
collateral who has given a written
notification to the secured creditor before
the proposal is sent to the debtor and the
grantor. (Sec. 54[a], R.A. No. 11057)
The secured creditor may retain the collateral in
the case of:
a. A proposal for the acquisition of the
collateral in full satisfaction of the secured
obligation, unless the secured creditor
receives an objection in writing from any
person entitled to receive such a proposal
within twenty (20) days after the proposal
is sent to that person; or
b. A proposal for the acquisition of the
collateral in partial satisfaction of the
secured obligation, only if the secured
creditor receives the affirmative consent of
each addressee of the proposal in writing
within twenty (20) days after the proposal
is sent to that person. (Sec. 54[b], R.A. No.
11057)
419
Rights of the Buyers and Other Third Prior Interests and the Transitional Period
Parties
Prior interests
Compliant Mode of Rights of
with the enforcement the buyers Priority interest means a security interest
law* and other created or provided for by an agreement or
third other transaction that was made or entered into
parties before the effectivity of the PPSA and that had
Yes Sale The buyer not been terminated before the effectivity of the
shall acquire said Act.
the grantor’s
right in the 1. It excludes a security interest that is
asset free of renewed or extended by a security
the rights of agreement or other transaction made or
any secured entered into on or after the effectivity of the
creditor or Act. (Sec. 55[c]), R.A. No. 11057)
lien holder. 2. Its creation shall be determined by prior
Lease or The lessee or laws.
licensing licensee shall 3. It remains effective between the parties
be entitled to notwithstanding its creation did not comply
the benefit of with the creation requirements of PPSA.
the lease or (Sec. 56, R.A. No. 11057)
license 4. A prior interest that was perfected under
during its prior law continues to be perfected under
term. the PPSA until the earlier of:
No Sale, lease or The buyer,
licensing lessee or a. The time the prior interest would cease
licensee of to be perfected under prior law; and
the collateral b. The expiration of the transitional period.
shall acquire (Sec. 57[a]), R.A. No. 11057)
the rights or
benefits Note: If the perfection requirements of the
described in PPSA are satisfied before the perfection of
the two (2) a prior interest ceases, the prior interest
preceding continues to be perfected under the PPSA from
scenarios in the time when it was perfected under the prior
this table. law. (Sec. 57[b], R.A. No. 11057)

Provided, If a prior interest referred herein was perfected

that it had no by the registration of a notice under prior law,
knowledge of the time of registration under the prior law shall
a violation of be the time to be used for purposes of applying
this Chapter* the priority rules of the PPSA. (Sec. 57[e]), R.A.
No. 11057)
that
materially
5. If the perfection requirements of the PPSA
prejudiced
are not satisfied before the perfection
the rights of
of a prior interest ceases, the prior
the grantor
interest is perfected only from the time it is
or another
perfected under the PPSA. (Sec. 57[c]), R.A.
person.
No. 11057)
*Chapter 6, R.A. No. 11057 6. A written agreement between a grantor and
a secured creditor creating a prior interest
is sufficient to constitute authorization by
the grantor of the registration of a notice

420
 covering assets described in that
agreement under the PPSA. (Sec. 57[d]),
R.A. No. 11057)
7. Priority of Prior Interests as against the
rights of a competing claimant is
determined by the prior law if:
a. The security interest and the rights of all
competing claimant arose before the
effectivity of the PPSA; and
b. The priority status of these rights has
not changed since the effectivity of the
PPSA. For this purpose, the priority
status of a prior interest has changed
only if:
i. It was perfected when the PPSA
took effect, but ceased to be
perfected; or
ii. It was not perfected under prior
law when the PPSA took effect,
and was only perfected under the
PPSA. (Sec. 58, R.A. No. 11057)
Enforcement of Prior Interest
1. If any step or action has been taken to
enforce a prior interest before the
effectivity of the PPSA, enforcement may
continue under prior law or may proceed
under the PPSA.
2. Subject to (1), prior law shall apply to a
matter that is the subject of proceedings
before a court before the effectivity of the
PPSA. (Sec. 59, R.A. No. 11057)
Transitional Period
It is the period from the date of effectivity of the
PPSA until the date when the Registry has been
established and operational. (Sec. 55 (d) of R.A.
No. 11057)
C. REAL ESTATE MORTGAGE
Definition
Real estate mortgage is an accessory contract by
virtue of which real property is conveyed by way
of security and a lien is created over a specific
real property or properties with the condition
that if the obligation secured is not paid, the
mortgage may be foreclosed and the property
sold to answer for the mortgage credit. (Aquino,
Essentials of Credit Transaction and Banking Laws,
2015, p.308)
Essential Requisites:
1. Constituted to secure the fulfillment of a
principal obligation; (Art. 2085, NCC)
2. The mortgagor or antichretic debtor must
be the absolute owner of the thing pledged
or mortgaged; (Ibid.)
3. The mortgagor or antichretic debtor have
the free disposal of their property, or are
legally authorized for the purpose;
4. When the principal obligation becomes due,
the subject matter of the pledge, mortgage
or antichresis may be alienated for the
payment to the creditor. (Art. 2087, NCC)
5. It can cover only immovable property and
alienable real rights imposed upon
immovables
An essential requisite of a contract of mortgage
is that the mortgagor be the absolute owner of
the thing mortgaged. The effect of a mortgage by
a co-owner shall be limited to the portion that
may be allotted to that person upon the
termination of the co-ownership. (Ocampo, et al.,
vs. Ocampo, et al., G.R. No. 150707, April 14, 2004)
A mortgage cannot exist without a principal
obligation. Hence, principal obligation may be
valid and binding even if the mortgage is not valid
and binding; the mortgage is not binding if the
principal obligation is not valid and binding.
The consideration of the principal obligation is the
consideration for the mortgage. (Filipinas Marble
Corporation vs. Intermediate Appellate Court, G.R. No.
L-68010, May 30, 1986)
Real right is the power belonging to a person over
a specific thing without a definite passive subject
against whom such right may be exercised. It is
enforceable against the whole world. Mortgage
fall under the classification of real right that is a
real right of security. (Aquino Essentials of Credit
Transactions and Banking Laws, 2015, p. 246)
Registration in the registry of property is not
necessary for the validity of the contract.
However, it is necessary for the purpose of
binding third persons. Consequently, whether
registered or not, the contract is binding upon the
parties. (Jurado, Civil law reviewer, 2019, p. 1212)
421
Order of foreclosure cannot be refused on the
ground that the mortgage was not registered
provided no innocent third parties are involved.
Parties:
1. Mortgagor - the person who conveys the
real property by way of mortgage to secure
an obligation
2. Mortgagee - the creditor whose credit is
secured by the mortgage. (Ibid.)
Characteristics:
1. It creates a real right of security;
2. It is an accessory contract;
3. It is a real security contract;
4. It is unilateral in the sense that only the
mortgagor’s signature is necessary to
constitute it; and
5. It is subsidiary because the thing pledged
will answer for the principal obligation only
upon default of the principal debtor. (Ibid.)
In the accessory contract of real mortgage, in
which immovable property or real rights thereto
are used as security for the fulfillment of the
principal loan obligation, the bid price may be
lower than the property’s fair market value. The
loan value itself is only 70 per cent of the
appraised value. A low bid price will make it
easier for the owner to effect redemption by
subsequently reacquiring the property or by
selling the right to redeem and thus recover
alleged losses. No personal notice is even
required, because an extrajudicial foreclosure is
an action in rem, requiring only notice by
publication and posting, in order to bind parties
interested in the foreclosed property. (New
Sampaguita Builders Construction Inc. et al., Phil.
Nat’l Bank, G.R. No. 148753, July 30, 2004)
Obligations Secured by Real Estate
Mortgage
1. Valid obligations;
2. Voidable obligations;
3. Unenforceable obligations;
4. Natural obligations; and
6. Conditional obligations. (Aquino Essentials of
Credit Transaction and Banking Laws, 2015, p.
248)
422
Mortgage constituted to secure future
advances
Mortgage constituted to secure future advances
is valid. It is a continuing security and not
discharged by repayment of the amount named
in the mortgage, until the full amount of the
advances is paid. (Aquino Essentials of Credit
Transaction and Banking Laws, 2015, p. 311)
Nature
The mortgage constitutes an encumbrance on
the real property. The right of the mortgagee is
a right in rem. The registered mortgage follows
the property even if there is a change of
ownership. (Ibid.)
Security Interest
Only security interest is acquired, thus, the right
to possession and jus disponendi are not
included unless otherwise stipulated. The
mortgagor is also not personally liable to pay the
obligation because the right of the mortgagee is
only limited to a lien on the mortgaged property.
(Ibid.)
After-Incurred or Future Obligations
After-incurred or future obligations may be
covered by real estate mortgage if the same is
expressly provided for. The Deed of Real Estate
Mortgage may expressly state that it may secure
future advancements. In the absence of
stipulation, the GR is that the amount secured
by a mortgage is limited to the amount expressly
mentioned in the mortgage. (Quintanilla vs. CA,
G.R. No. 101747, September 24, 1997)
Blanket Mortgage or Dragnet Clause
A clause, which implies an understanding that
subsequent loans need not be secured by other
securities, as to loans, will be secured by the first
mortgage.
A blanket mortgage clause, also known as
dragnet clause is one, which is specifically
phrased to subsume all debts of past or future
origins. Such clauses are carefully scrutinized and
strictly construed. Mortgages of this character
enable the parties to provide continuous dealings,
the nature or extent of which may not be known
or anticipated at the time, and they avoid the
expense and inconvenience of executing a new
security on each new transaction. (Prudential Bank
vs. Alviar, G.R. No. 150197, July 28, 2005)
It is a continuing security. A mortgage with a
dragnet clause makes available future loans
without the need of executing another set of
security document. (Aquino Essentials of Credit
Transaction and Banking Laws, 2015, p. 311)
Object of Real Estate Mortgage
Only the following property may be the object of
a contract of mortgage:
1. Immovable; and
2. Alienable real rights in accordance with the
laws, imposed upon immovables.
Movables treated as real properties
There are instances when certain movables are
treated as real properties by estoppel. The parties
may be estopped although innocent third parties
are not affected. The parties are bound, through
estoppel, if they treat a movable as immovable.
Nevertheless, only the parties are estopped
(People’s Bank & Trust Company and Atlantic Gulf
& Pacific Company vs. Dahican Lumber, G.R. No.
L-17500, May 16, 1967).
Future property cannot be an object of a contract
of mortgage (Art. 2085[2], NCC). However, a
stipulation subjecting to the mortgage lien,
properties (improvements) which the mortgagor
may subsequently acquire, install, or use in
connection with real property already mortgaged
belonging to the mortgagor is valid (People’s Bank
and Trust Co. vs. Dahican Lumber Co., G.R. No. L-
17500, May 16, 1967)
Extent of Mortgage
Absent any express stipulation to the contrary,
the mortgage includes the natural accessions,
improvements, growing fruits and income of the
property not yet received when the obligation
becomes due and to the amount of the indemnity
granted or owing to the proprietor from the
insurers of the property mortgaged, or in virtue
of expropriation for public use. (Art. 2127, NCC)
When not applicable
The Court explained that Article 2127 is
predicated on the presumption that the
ownership of accessions and accessories also
belongs to the mortgagor as the owner of the
principal. After all, it is an indispensable requisite
of valid real estate mortgage that the mortgagor
be the absolute owner of the encumbered
property, thus, all improvements subsequently
introduced or owned by the mortgagor on the
encumbered property, thus, all improvements are
to be considered so incorporated only if so owned
by the mortgagor is a rule that can hardly be
debated since a contract of security, whether,
real or personal, needs as an indispensable
element thereof the ownership by the pledgor or
mortgagor of the property pledged or mortgaged.
(Castro, Jr. vs. CA, G.R. No. 97401, December 6, 1995)
Corollary, any evidence sufficiently overthrowing
the presumption that the mortgagor owns the
mortgaged property precludes the application of
Article 2127. Otherwise stated, the provision is
irrelevant and inapplicable to mortgages and their
resultant foreclosures if the mortgagor is later on
found or declared to be not the true owner of the
property. (PNB vs. Sps. Maranon, G.R. No. 189316,
June 1, 2013)
After-acquired property
One of the basic requirements of mortgage is that
the mortgagor must be the owner of the thing
mortgaged. Thus, a mortgage of property not
owned by the mortgagor is without any effect.
Nevertheless, Article 2092 of the NCC sanctions a
promise to mortgage in the future. Hence, one
may promise to mortgage property that he or she
does not own subject to his acquisition before
constituting the mortgage.
In addition, Article 2127 contemplates after-
acquired properties like fruits and income.
Accessions and improvements are not separate
properties but are part of the properties originally
mortgaged.
After-acquired properties may also be included by
stipulation; the parties may stipulate that after-
acquired properties are automatically included in
the mortgage. It should be noted that the
stipulation usually involves contracts where there
is a main object of the contract, like land owned
by the mortgagor which will be first mortgaged
423
and the properties that are subject to stipulation
are properties other than the property originally
mortgaged. Thus, the parties may stipulate that
all buildings, machineries and equipment
attached to the mortgaged property shall be
subject to the mortgage. (Aquino Essentials of
Credit Transaction and Banking Laws, 2015, p.321)
Right to Alienate Mortgage Credit
The mortgage credit may be alienated or
assigned to a third person, in whole or in part,
with the formalities required by law. (Art. 2128,
NCC)
The mortgagee acquires real right when property
is mortgaged. The mortgage right is real property
in itself under par. 10 of Article of 415 of the NCC
because it is an encumbrance over an immovable.
Hence, the mortgagee is an owner of an
intangible property that is the mortgage credit. As
an owner, he has the right to dispose the
mortgage credit.
Transfer of mortgage credit is an assignment of a
right contemplated under Article 1625 of the NCC.
Hence, the assignment must be registered in
order to affect third persons. However,
registration is not enough because it is also
required that the debtor is notified. “The transfer
of the mortgage credit does not affect the debtor
unless he is notified of it.” (5 Tolentino 562)
Accommodation mortgage
Third persons who are not parties to the principal
obligation may secure the latter by mortgaging
their own property (Art. 2085, NCC)
A mere accommodation mortgagor is not entitled
to the proceeds of the loan, nor is required to be
furnished with the loan documents or notice of
the borrower’s default, or of extrajudicial
proceedings, unless stipulated in the subject
deed. (De Leon, Comments and cases on credit
transactions, 2021, p.413)
Payment by third person
The creditor may claim form a third person in
possession of the mortgaged property, the
payment of the part of the credit secured by the
property, the payment of the part of the credit
secured by the property which said third person
424
possesses, in the terms and with the formalities
which the law establishes. (Art. 2129, NCC)
Normally, a third person cannot be made to pay
the obligation. However, Article 2129 allows
recovery from a third person who is in possession
of the mortgaged property up to the extent of the
value of the property.
However, if the third person buys the mortgaged
property with notice that it was mortgaged, the
buyer only undertook either to pay or else allow
the land to be sold if the mortgage creditor could
not or did not obtain payment from the principal
debtor when the debt matured. The obligation to
discharge the mortgage indebtedness remained
on the shoulders of the original debtors. The
reason is plain: the mortgage is merely an
encumbrance on the property, entitling the
mortgagee to have the property foreclosed, i.e.,
sold, in case the principal obligor does not pay
the mortgage debt, and apply the proceeds of the
sale to the satisfaction of his credit. The
encumbrance would make the purchaser,
eventually liable to discharge the mortgage by
paying or settling with mortgage creditor, should
the original mortgagors fail to satisfy the debt.
(Rodriguez vs. Reyes, G.R. L-22958 January 30, 1971;
Art. 2129, NCC)
Right to Alienate Collateral
To alienate the mortgaged property, the
mortgage shall remain attached to the property.
1. A stipulation forbidding the owner from
alienating the immovable mortgage shall be
void. (Art. 2130, NCC)
The mortgagor remains to be the owner of
the property despite the mortgage. Hence,
the mortgagor has the right to dispose the
property. The mortgage contract cannot
stipulate that mortgagor is prohibited from
transferring the mortgaged property. “Such
a prohibition would be contrary to the public
good, inasmuch as the transmission of
property should not be unduly impeded.
(Report of the Code Commission, p. 158)
2. In a sale with assumption of mortgage, the
alienation needs the consent of the
mortgagee.
Foreclosure Not appealable
Decisions are
because it is
appealable
It is the remedy available to the mortgagee by immediately executor
which he subjects the mortgaged property to the As to right of redemption
satisfaction of the obligation to secure that for Order of the courts
which the mortgage was given. (De Leon, There is a right of
cuts off all rights of the
Comments and Cases on Credit Transactions, 2010, p. redemption
parties impleaded.
398) As to period when to redeem
Period to exercise
Validity and Effect: equity of redemption Period to redeem
starts from the finality starts from the date of
1. When the principal obligation is not paid of the judgment until registration of the
when due, the mortgagee has the right to the order of certificate of sale.
foreclose the mortgage and to have the confirmation
property seized and sold, and to apply the
As to requirement of SPA
proceeds thereof to the payment of principal
No need for a special Special power of
obligation;
power of attorney in attorney in favor of
2. The power to foreclose resides on the
the contract of mortgagee is needed
mortgagee;
mortgage in the contract.
3. In case of deficiency, the debtor is required
As to governing laws
to pay the same even after foreclosure; and
Governed by Rule 68
4. The rule governing public notice of
of the Rules of Court Governed by Act. 3135
foreclosure must be strictly complied with
(ROC).
and slight deviations will invalidate the sale
or render it voidable. (De Leon, Comments and
Cases on Credit Transactions, 2016, p. 495) Redemption is the transaction by which the
mortgagor reacquires or buys back the property
Prescriptive Period which may have passed under the mortgage, or
divests the property of the lien which the
A mortgage action prescribes after 10 years from mortgage may have created. (De Leon, Comments
the time the right of action accrues; the right of and Cases on Credit Transactions, 2010, p. 426)
action accrues when the mortgagor defaults in
the payment of his obligation to the mortgagee. The sale by a mortgagor to a third party of the
(Rabuya, Pre-Bar reviewer on Civil Law, 2021, p. 550) mortgaged property during the period for
redemption transfers only to said third person the
Kinds of Foreclosure: right to redeem the property and the right to
possess, use and enjoy the same during said
Judicial – Ordinary action for foreclosure under period. (De Leon, Comments and Cases on Credit
Rule 68 of the Rules of Court Transactions, 2010, p. 432)

Extrajudicial – when the mortgagee is given a Where the sale with assumption of mortgage was
special power of attorney to sell the mortgaged not registered and made without the consent of
property by public auction, under Act. No. 3135, the mortgagee, the buyer, thereof, was not
as amended. validly substituted as debtor and, hence, had no
right to redeem. (Bonnevie vs. CA G.R. No. L-4910,
October 24, 1983)
JUDICIAL EXTRAJUDICIAL
FORECLOSURE FORECLOSURE
Kinds of Redemption:
As to court intervention
1. Equity of Redemption is the right of the
There is court defendant mortgagor to extinguish and
No court intervention retain ownership of the property by paying
intervention
As to appeal the amount fixed in the decision of the court
within ninety (90) days to one hundred
twenty (120) days after entry of judgment or

425
 even after the sale but prior to its
confirmation.
2. Right of Redemption, on the other hand,
is the right granted to the debtor-
mortgagor, his successor in interest or any
judicial creditor of said debtor-mortgagor or
any person having a lien in the property
subsequent to its mortgagor deed of trust
under which the property is sold to redeem
the property within one (1) year from
registration of the sheriff’s certificate of sale.
A foreclosure sale retroacts to the date of
registration of the mortgage and that a person
who takes a mortgage on good faith and for
valuable consideration, the record showing clear
title to the mortgagor will be protected against
equitable claims on the title in favor of 3rd
persons, of which he had no actual or
constructive notice. (St. Dominic Corp. vs. IAC, G.R.
No. 70623, June 30, 1987)
Mere inadequacy of the price obtained at the
sheriff’s sale will not be sufficient to set aside the
sale unless “the price is so inadequate as to shock
the conscience of the court” taking into
consideration the peculiar circumstances
attendant thereto. (Sulit vs. CA, G.R. No. 119247,
Feb. 17, 1997)
Should there remain a balance due to the
mortgagee after applying the proceeds of the
sale; the mortgagee is entitled to recover the
deficiency (Rule 68, ROC). This rule does not
apply to extrajudicial foreclosure of real estate
mortgage.
The action to recover a deficiency after
foreclosure prescribed after 10 years from the
time the right of action accrues. (Arts. 1142 and
1144, NCC)
Period of Redemption:
1. Extra-Judicial (Act. No. 3135)
Natural Person – One year from registration of
certificate of sale with the Registry of Deeds
Juridical Person- same as a natural person.
Juridical person (mortgagor) and bank
(mortgagee) – Three months after foreclosure or
before registration of certificate of foreclosure
426
whichever is earlier (Sec. 47, General Banking
Law)
2. Judicial – before confirmation of the sale by
the court except when the mortgagee is a
banking institution, redemption will then be one
year from the registration of sale (Sec. 25, P.D. No.
694) (De Leon Comment and Cases on Credit
Transactions, 2006, p. 418)
Nature of Judicial Foreclosure proceedings:
1. Quasi in rem action.
2. Foreclosure is only the result or incident of
the failure to pay debt.
3. Survives the death of the mortgagor.
Right of the mortgagee to recover
deficiency (for judicial foreclosure only):
1. Mortgagee is entitled to recover deficiency.
2. If the deficiency is embodied in a judgment,
it is referred to as deficiency judgment.
3. Action for recovery of deficiency may be filed
even during redemption period.
4. Action to recover prescribed after 10 years
from the time the right of action accrues. (De
Leon Comment and Cases on Credit Transactions,
2010, p. 413)
Extrajudicial foreclosure of real property
Extrajudicial foreclosure must be STIPULATED
in the contract.
The law covers only real estate mortgages. It is
intended merely to regulate the extrajudicial sale
of property mortgaged. (Act No. 3135)
The authority to sell is not extinguished by the
death of the mortgagor (or mortgagee) as it is an
essential and inseparable part of a bilateral
agreement (Perez vs. PNB, G.R. No. L- 21813, July
30, 1966)
Nature of the power of foreclosure by
extrajudicial sale:
1. Conferred for mortgagee’s protection.
2. An ancillary stipulation
3. A prerogative of the mortgagee.
Effects of inadequacy of price in foreclosure
sale:
1. Where there is right to redeem, inadequacy
of price is immaterial because the judgment
debtor may redeem the property. (PNB vs.
CA, G.R. No. 121739, June 14, 1999
2. XPN: Where the price is so inadequate as to
shock the conscience of the court, taking
into consideration the peculiar
circumstances. (United Coconut Planters Bank
vs. CA, G.R. No. 155912, August 17, 2007)
3. Property may be sold for less than its fair
market value, upon the theory that the
lesser the price, the easier it is for the owner
to redeem. (Sps. Rabat vs. PNB, G.R. No.
158755, June 18, 2012)
4. The value of the mortgaged property has no
bearing on the bid price at the public
auction, provided that the public auction was
regularly and honestly conducted.
Waiver of security by creditor:
1. Mortgagee may waive right to foreclose his
mortgage and maintain a personal action for
recovery of the indebtedness.
2. Mortgagee cannot have both remedies.
The mortgagor and mortgagee have no right to
waive the posting and publication requirements
under Act. No. 3135. Notices are given to secure
bidders and prevent a sacrifice of the property.
Clearly, the statutory requirements of posting and
publication are mandated, not for the
mortgagor’s benefit, but for the public or 3rd
persons. Failure to comply with the statutory
requirements as to publication of notice of
auction sale constitutes a jurisdictional defect
which invalidates the sale. Lack of republication
of notice of foreclosure sale made subsequently
after the original date renders such sale void.
(PNB vs. Nepomuceno Productions, Inc. G.R. No.
139479, Dec. 27, 2002)
Sec. 3 of Act. 3135 does not require personal or
any particular notice on the mortgagor much less
on his successors-interest where there is no
contractual stipulation thereof. Hence, unless
required in the mortgage contract, the lack of
such notice is not a ground to set aside a
foreclosure sale.
Mortgages given to secure future advancements
are valid and legal contracts; that the amounts
named as consideration in said contract do not
limit the amount for which the mortgage may
stand as security, if from the four corners of the
instrument the intent to secure future and other
indebtedness can be gathered. A mortgage given
to secure advancement is a continuing security
and is not discharged by repayment of the
amount named in the mortgage, until the full
amount of the advancements is paid. (Mojica vs.
CA, G.R. No. 94247, September 11, 1991)
The creditor may claim from the third person in
possession of the property payment of the credit
up to the extent secured by the property which
the third party possesses, in terms and with the
formalities which the law establishes. (Art. 2129,
NCC)
A foreclosure sale is not complete until it is
confirmed and before such confirmation, the
court retains control of the proceedings by
exercising sound discretion in regard to it either
granting or withholding confirmation as the rights
and interests of the parties and the ends of justice
may require. (Rural Bank of Oroquieta vs. CA, No.
53466, November 10, 1980)
If there be a balance due to the mortgagee after
applying the proceeds of the sale, the mortgagee
is entitled to recover the deficiency. (DBP vs.
Mirang, G.R. No. L‐29130, Aug. 8, 1975)
The purchaser at the foreclosure sale merely
acquired an inchoate right to the property which
could ripen into ownership only upon the lapse of
the redemption period without his credit having
been discharged, it is illogical to hold that during
that same period of twelve months the mortgagor
was "divested" of his ownership, since the absurd
result would be that the land will consequently be
without an owner although it remains registered
in the name of the mortgagor. Such mortgage
does not involve a transfer, cession or
conveyance of the property but only constitutes
a lien thereon. (Medida vs. CA, G.R. No. 98334, May
8, 1992)
427
D. CHATTEL MORTGAGE
[Please see previous discussion under B.
Pledge]
III. LAND TITLES AND DEEDS
Land Title
Evidence of the right of the owner or the extent
of his interest and by means of which he can
maintain control, and as a rule, assert his right to
exclusive possession and enjoyment of the
property. (Evangelista, et.al., vs. Santiago, G.R. No.
157447. April 29, 2005)
Deed
A written instrument executed in accordance with
law, wherein a person grants or conveys to
another certain land, tenements or
hereditaments. (Pena, Registration of Land Titles and
Deeds, 2008, p. 4)
Land Registration
A judicial or administrative proceeding whereby a
persons’ claim over a particular land is
determined and confirmed or recognized so that
such land and the ownership thereof may be
recorded in a public registry (Agcaoili, O., Property
Registration Decree and Related Laws, 2011).
In its strictest acceptation, it is the entry made in
the property registry, which records solemnly and
permanently the right of ownership and other real
rights. (Cheng vs. Genato, G.R. No. 129760,
December 29, 1998)
Land laws
1. Public Land Act (C.A. No. 141, as amended)
2. Land Registration Act (Act No. 496)
3. Cadastral Act (Act no. 2259, as amended)
4. Property Registration Decree (P.D 1529, as
amended)
5. Indigenous Peoples Right Act or IPRA of
1997 (R.A. No. 8371)
Purpose of Registration:
1. Binds the land/third person (Aznar Brothers
Realty vs. CA and Anying, et. al., G.R. No.
128102, March 7, 2000)
428
2. Incontestability of Title (Estrellado vs.
Martinez, G.R. No. L-23847, Nov. 18, 1925)
3. Notice to the World (In Rem under sec. 2, P.D.
1529) (Gatioan vs. Gafud, G.R. No. L-21953,
March 28, 1969)
4. To Transfer Ownership (Reyes vs. Noblejas,
G.R. No. L-23691, Nov. 25, 1967)
XPN: When the party concerned has actual
knowledge of facts and circumstances that should
impel a reasonably cautious man to make such
further inquiry. (Crisostomo vs. Court of Appeals, GR
No. 91383, May 31, 1991)
Notes:
 Registration does not vest title.
 It is not a mode of acquiring ownership.
 It is merely evidence of such title over a
particular property
 Registration does not give the registrant a
better right than what the registrant had
prior to the registration (Agcaoili, O., Property
Registration Decree and Related Laws, 2006, p.
62).
A. TORRENS SYSTEM; GENERAL
PRINCIPLES
Torrens system (Founded by Richard
Robert Torrens)
A system for registration of land under which,
upon the landowner’s application, the court may,
after appropriate proceedings, direct the issuance
of a certificate of title. (Aquino, Land Registration
and Related Proceedings, 2007, p.1 citing Black’s
Dictionary)
The Torrens System is not a means of acquiring
titles to lands; it is merely a system of registration
of titles to lands. Registration of a piece of land
under the Torrens System does not create or vest
title, because it is not a mode of acquiring
ownership. A certificate of title is merely evidence
of ownership or title over the particular property
described therein. It cannot be used to protect a
usurper from the true owner; nor can it be used
as a shield for the commission of fraud; neither
does it permit one to enrich himself at the
expense of others. (Lorzano vs. Tabayag, Jr.,G.R.
No. 189647, February 6, 2012)
The Torrens system does not create or vest title.
It only conforms and records title already existing
and vested. It cannot be a shield for the
commission of fraud. It does not protect a
usurper from true owner. It does not permit one
to enrich himself at the expense of another.
(Purisima vs. Purisima, G.R. No. 200484, November 18,
2020)
It was later amended and superseded by P.D.
1529, which took effect on June 11, 1978,
otherwise known as the Property Registration
Decree. (PD. 1529)
Nature of the Torrens System
1. It is judicial in character.
2. The proceeding is in rem.
3. As to the matter of initiating the proceeding,
it is voluntary in character.
4. It is administrative and compulsory under
Section 103 of P.D. No. 1529
5. It is conclusive against the whole world
including the government
6. The title issued is indefeasible and it cannot
be lost by prescription. (Pena, Registration of
Land Titles and Deeds, 2008, p. 48-49)
Purposes of the Torrens system
1. To quiet title to land; to put a stop forever
to any question of the legality of the title,
except claims which were noted, at the time
of registration, in the certificate, or which
may arise subsequent thereto (Legarda and
Prieto vs. Saleeby., G.R. No. L-8936 October 2,
1915).
2. To provide security of ownership, avoid
possible conflicts of title in and to real
property (Sps. Peralta vs. Heirs of Abalon, G.R.
No. 183448, June 30, 2014)
3. To facilitate transactions relative to land
giving the public the right to rely upon the
face of the transfer Certificate of Title (TCT)
and to dispense with the need of inquiring
further, except when fraud is attendant.
(Republic vs. Umali, G.R. No. 80687, April 10,
1989)
4. To guarantee the integrity of land titles and
to protect their indefeasibility once the claim
of ownership is established and recognized.
(Agcaoili, O., Property Registration Decree and
Related Laws, 2006, p. 8)
Advantages of the Torrens System
1. It relieves the land of unknown liens or
claims against it;
2. It substituted security for insecurity;
3. It reduced the cost of conveyances from
pounds to shillings and the time occupied
from months to days;
4. It exchanged brevity and clearness for
obscurity and verbiage;
5. It simplified ordinary dealings on land that
one may transact his own conveyancing;
6. It affords protection against fraud;
7. It restored just value on estates, held under
good holding titles, but depreciated, in
consequence of some blur or technical
defect in title, and barred the reoccurrence
of such similar faults;
8. No encumbrance, lien, or adverse claim can
affect the land unless registered in the
Registry book and annotated on the owner’s
duplicate certificate
9. An assurance fund is provided for to answer
for damages which may be incurred by
anyone deprived of his property through
fraud or the operation of the Property
Registration Decree. (Pena, Registration of
Land Titles and Deeds, 2008, p. 45-46)
Torrens Title
Certificate of ownership issued by the land
Register of Deeds, naming and declaring the
owner of the real property described therein, free
from all liens and encumbrances except such as
may be expressly noted thereon or otherwise
reserved by law. (Pena, Registration of Land Titles
and Deeds, 2008, p. 190)
Effect: It can be conclusive against the whole
world, including the government, and to a holder
thereof in good faith it is guaranteed to be
indefeasible, unassailable, and imprescriptible.
GR: Title once registered cannot be impugned,
altered, changed, modified, enlarged and cannot
defeated by prescription.
XPN: Subject to the right of a third person on
principle of equity.
Registration of lands under the Torrens System,
by itself, cannot convert public lands into private
lands. (Chavez vs. PEA, G.R. No. 133250, May 6,
2003)
429
Nature of Torrens Title
1. Judicial, not merely administrative
2. Proceeding in rem (enforceable against the
whole world)
3. Cannot be collaterally attacked
4. The issue of validity of a Torrens title,
whether fraudulently issued or not may be
posed only in an action brought to impugn
or annul it.
5. Indefeasible
6. Conclusive evidence of ownership (Pena,
Registration of Land Titles and Deeds, 2008, p.
190-192)
Probative Value
Torrens Title may be received evidence in all
courts of the Philippines and shall be conclusive
as to all matters contained therein principally the
identity of the owner of the covered land thereby
and identity of the land. (Pena, Registration of Land
Titles and Deeds, 2008, p. 217)
Certificate of Title
It is mere evidence of ownership. It is not the title
to the land itself, but a copy of the decree of
registration. It is not a source of right. It merely
confirms or records a title already existing, and
the mere possession thereof does not make one
the true owner of the property.
1. It cannot be defeated by adverse, open and
notorious possession neither can it be
defeated by prescription.
2. It cannot be collaterally attacked.
3. The Certificate of Title is indefeasible and
imprescriptible and all claims to the parcel of
land are quieted upon issuance of the said
certificate
4. A person dealing with registered land may
safely rely upon the correctness of the
Certificate of Title (CoT) issued thereof and
the law will in no way oblige him to go
beyond the CoT to determine the condition
of the property (Dela Cruz vs. Dela Cruz, G. R.
No. 146222, January 15, 2004).
Types of Torrens Certificate of Title:
1. Original Certificate of Title -The first title
issued in the name of the registered owner
by the Register of Deeds covering a parcel
430
of land which had been registered by virtue
of a judicial or administrative proceeding.
2. Transfer Certificate of Title - the title
issued by the ROD in favor of the transferee
to whom the ownership of the already
registered land had been transferred by
virtue of a sale or other modes of
conveyance. (Sec. 43, P.D. 1529)
GR: A title once registered cannot be impugned,
altered, changed, modified, enlarged, or
diminished. It shall not be subject to collateral
attack.
XPN: Direct proceeding permitted by law, usually
for the protection of innocent third persons.
Note: A certificate of title shall not be subject to
collateral attack. It cannot be altered, modified,
or cancelled except in a direct proceeding in
accordance with law. (Sec. 48, P.D. 1529)
Effects of Registration under the Torrens
System (Three Guiding Principles)
A. The Mirror Principle
A purchaser is not required to explore beyond
what the record in the registry indicates on its
face, in quest for any hidden defect or inchoate
right which may subsequently defeat his right
thereto (Viray vs. CA, G.R. No. 92481 November
9, 1990)
Two Components of “Mirror Principle”
1. Certainty to the Identity of the Land- the
identity or metes and bounds of the land is
accomplished through a survey; survey is a
requirement before a land can be registered.
Under CA 141 Sec. 8, only the following lands can
be surveyed:
a. Declared open to disposition or concession
b. Delimited and Classified
c. Not reserved for public or quasi-public use
d. Not appropriated by the government
e. Not private property
2. Certainty as to the Ownership of the Land -
the identity of the landowners is ensured
during original registration proceedings,
cadastral registration proceedings, or
 through application for a public land grant;
the personal circumstances of applicants are
secured during the proceedings. (Pena,
Registration of Land Titles and Deeds, 2008, p.
265-266)
XPNs to the Applicability of the Mirror
Principle
1) Purchaser acted in bad faith
2) When the purchaser or mortgagee is a
Financing institution
3) Banks, as their business is one affected with
public interest
4) Where a person buys land not from the
registered owner but from one whose right
to the land has been merely Annotated on
the Certificate of Title
5) Purchaser of land where the certificate of
title contains a notice of Lis pendens
6) Sufficiently strong indications to impel closer
inquiry into the location, boundaries, and
condition of the lot
7) Purchaser with full knowledge of flaws and
defects in the title.
B. The Curtain Principle (or Indefeasibility
of Titles)
The principle means that the current certificate of
title contains all the information about the title
and it is not necessary for an interested person
such as a potential purchase to worry about any
past dealings with the property. (Sps. Cusi vs.
Domingo, G.R. No. 195825, February 27, 2013)
GR: A historical search to verify that the title is
good is unnecessary.
XPNs: (1) When the party concerned has actual
knowledge of facts and circumstances that should
impel a reasonably cautious man to make further
inquiry; (2) Fraud
C. The Insurance or Guarantee Principle
The principle means that an insurance fund is in
place to compensate anyone who suffers as a
result of a mistake being made concerning the
validity or accuracy of a title.
The idea behind the Torrens System is that the
registry must guarantee the accuracy of every
title to the land. If a result of human error, there
is a mistake about the title to a piece of land and
someone suffers a loss as a result they will be
compensated by the fund.
XPNs to the 3 principles of the Torrens
System
a) Statutory liens and restrictions
b) Liens, claims, or rights which, under the law,
are not required to appear of record in the
Registry of Deeds
c) Unpaid real estate taxes levied and assessed
within 2 years
d) Public highways/canals or private way if the
title does not state that the boundaries of
such highway have been determined
e) Disposition pursuant to the Agrarian Reform
Law
f) Registered lands which are subject to
burdens and incident as may arise by
operation of law
g) Rights incidental to marital relation
h) Landlord and tenant relationship
i) Change the laws of descent
j) Restriction on Patents
k) Deferred Indefeasibility
l) Reconveyance
m) Reversion
n) Caveat Emptor
Deferred Indefeasibility
In Decree – the case cannot be reopened except
if such decree was obtained by actual fraud,
action should be filed within 1 year after the
issuance of decree. (Sec. 32, P.D. 1529)
Constitutional Limitations
Art. XII, Sec. 3 of the 1987 Constitution classified
lands of the public domain into the following:
1. Agricultural – Those public lands acquired
from Spain which are not timber or mineral
lands. (Mapa vs. Insular Government, G.R. No.
L-3793, February 19, 1908)
2. Forest or timber – P.D. No. 705 Sec. 3
defines the following:
Forest lands – include the public forest, the
permanent forest or forest reserves, and forest
reservations
431
Public forest – mass of lands of the public domain
which has not been the subject of the present
system of classification for the determination of
which lands are needed for forest purposes and
which are not
Permanent forest or forest reserves – those lands
of the public domain which have been the subject
of the present system of classification and
determined to be needed for forest purposes
Note: Under P.D. No. 705, lands, which are 18%
in slope, are not suitable to become alienable and
disposable. As such, lands, which are already
classified as alienable and disposable, revert to
forestlands if they are 18% in slope.
3. Mineral lands – Any area where mineral
resources are found (R.A. No. 7923, Mining Act
of 1995)
4. National Parks – A forest reservation
essentially for national wilderness character
which has been withdrawn from settlement,
occupancy or form of exploitation (RA No.
7586, National Integrated Protected Areas
System Act)
B. REGALIAN DOCTRINE (Jura Regalia)
Constitutional Basis
All lands of the public domain, waters, minerals,
coal, petroleum, and other mineral oils, all forces
of potential energy, fisheries, forests or timber,
wildlife, flora and fauna, and other natural
resources are owned by the State. With the XPN
of agricultural lands, all other natural resources
shall not be alienated. The exploration,
development, and utilization of natural resources
shall be under the full control and supervision of
the State. (Sec. 2, Par. (1), Article XII of the 1987
Constitution)
Concept
All lands not otherwise appearing to be clearly
within private ownership are presumed to belong
to the State. No public land can be acquired by
private persons without any grant, express or
implies, from the Government. It is indispensable,
therefore, that there is a showing of a title from
the State. Occupation of public land in the
concept of owner, no matter how long, cannot
ripen into ownership and be registered as title.
432
(Republic vs. Santos III, G.R. No. 160453, November
12, 2012)
Regalian Doctrine reserves to the State all
minerals that may be found in public and even
private land devoted to agricultural, industrial,
commercial, residential or (for) any purpose other
than mining. Thus, if a person is the owner of
agricultural land in which minerals are
discovered, his ownership of such land does not
give him the right to extract or utilize the said
minerals without the permission of the State to
which such minerals belong. (Republic vs. CA and
Dela Rosa, G.R. No. No. L-43938, April 15, 1988)
There is a presumption that all lands of the Public
Domain belong to the State, and the burden of
proof to overcome the presumption of ownership
of lands of the public domain is on the person
applying for registration. (San Pedro, V., Essentials
in Land Registration, 2020, p. 23-24)
Proving an Alienable and Disposable (A&D)
Land
To prove that the subject property is alienable
and disposable land of the public domain,
applicant must:
1. Present a Community Environment and
Natural Resources Office (CENRO)
Certificate;
2. Prove that the DENR Secretary had approved
the land classification and released the land
of the public domain as alienable and
disposable; AND
3. That the land subject of the application for
registration falls within the approved area per
verification through survey by PENRO or
CENRO. In addition, the applicant for land
registration must present a copy of the
original classification approved by the DENR
Secretary and certified as a true copy by the
legal custodian of the official records.
(Republic vs. T.A.N Properties, G.R. No. 154953,
June 26, 2008)
XPN to the Regalian Doctrine
1. The Regalian Doctrine does not negate
native title to lands held in private ownership
since time immemorial. (Cruz vs. Secretary of
Environment and Natural Resources, G.R. No.
135385, December 6, 2000)
 Native title refers to ICCs/IPs' preconquest
rights to lands and domains held under a
claim of private ownership as far back as
memory reaches. These lands are deemed
never to have been public lands and are
indisputably presumed to have been held
that way since before the Spanish Conquest.
(Sec. 3 [l], R.A. No. 8371)
Time immemorial possession for native title
refers to a period when as far back as
memory can go, certain ICCs/IPs are known
to have occupied, possessed in the concept
of owner, and utilized a defined territory
devolved to them, by operation of customary
law or inherited from their ancestors, in
accordance with their customs and
traditions. (Sec. 3 [p], R.A. No. 8371)
2. The Indigenous Peoples’ Rights Act of 1997
or the IPRA Law categorically declares
ancestral lands and domains held by native
title as never to have been public land –
domains and lands held under native title
are, therefore, indisputably presumed to
have never been public lands and are
private.
C. ORIGINAL REGISTRATION
It takes place when the title to land is made of
public record for the first time in the name of its
lawful owner. It refers to the registration
procedure from the filing of the application to
issuance of the original certificate of title based
on the decree of registration, patent, award, or
grant. (Sec. 14, P.D. 1529)
Nature of Original Registration
Judicial proceedings for the registration of lands
throughout the Philippines shall be in rem and
shall be used based on the Torrens System.
Proceeding is brought before the Courts of First
Instance to determine title or ownership of land
on the basis of an application or answer
opposition by a claimant in a cadastral
registration. (Sec. 2, P.D No. 1529)
The Torrens System provides for mechanism to
realize the purpose of obtaining the original
registration of title to land. The person asserting
title, referred to as applicant, has to initiate and
apply before the proper court. Thereafter, a
hearing is conducted to determine whether or not
the applicant has title to the property and if he
does have, a decree of confirmation and
registration is entered to bind the land and quiet
the title. It is incumbent upon the Administrator
of land Registration Authority to issue the
corresponding decree in the prescribed form of
“Original Certificate of Title.” (Executive Order No.
292, Administrative Code of 1987)
1. ORDINARY REGISTRATION (Under Act
496, as amended by P.D. No. 1529)
Nature of the Proceeding (In Rem)
Land registration or judicial titling is an action in
rem or property (subject matter of registration)
and seeks judgment with respect to as against
the whole world. (Sec. 2, P.D. No. 1529)
Jurisdiction
1) The Regional Trial Courts are generally
vested with exclusive original jurisdiction
over judicial titling. (B.P. 129 as amended by
R.A. No.7691, otherwise known as the “Judiciary
Reorganization Act of 1980”)
2) The RTC has jurisdiction where the assessed
value of the property involved exceeds
Php300,000.00 or, for civil actions in Metro
Manila, where such value exceeds Php
400,000.00.
Note: On July 30, 2021, the President signed into
law Republic Act No. 11576 to amend BP 129,
particularly adjusting threshold values for civil
cases – MeTC/MTCs should heard for actions
involving title to, or possession of real property,
or any interest therein, with Assessed value of the
real property involved up to P400,000.
Register of Deeds (RD)
Constitutes a public repository of records of
instruments affecting registered or unregistered
lands and chattel mortgages in the province or
city wherein such office is situated. (Sec. 10, P.D.
1529)
RD’s duty to register is purely ministerial - The
Register of Deeds is entirely precluded by Sec. 10
of P.D. No. 1529 (formerly Sec. 4, R.A. 1151)
from exercising his personal judgment and
433
discretion when confronted with the problem of
whether to register a deed or instrument on the
ground that it is invalid. The determination of
whether a document is valid or not is a function
that belongs properly to a court of competent
jurisdiction. (Aquino, Land Registration and Related
Proceedings, p.11, 2007)
When RD may deny registration:
1) Where there are more than one copy of the
owner’s duplicate certificate of title and not
all such copies are presented to the Register
of Deeds.
2) Where the voluntary instrument bears on its
face an infirmity. Thus, if the conjugal
character of the property subject of a deed
of donation by the husband “is assumed”
and 2/3 portion of the property was donated
by the husband alone, then such donation
clearly exceeds the 1/2 share that pertains
to him.
3) Where the validity of the instrument sought
to be registered is an issue in a pending suit.
The registration may be suspended to await
the final outcome of the case and the rights
of the interested parties could be protected
in the meantime by filing the proper notice
of lis pendens. (Aquino, Land Registration and
Related Proceedings,2007, p.11-12)
a. WHO MAY APPLY
Section 14 of P.D. No. 1529 provides that the
following persons may file in the proper court, an
application for registration of title to land:
1) Those who by themselves or through their
predecessors-in-interest have been in Open,
continuous, exclusive and notorious
possession and occupation of alienable and
disposable lands of the public domain under
a bona fide claim of ownership since June
12, 1945, or earlier (Sec. 14[1], P.D. 1529);
Requisites for Registration under Section
14(1):
(a) The land applied for is alienable and
disposable lands of the public domain;
(b) That the applicant, by themselves or through
their predecessors-in-interest have been in
open, continuous, exclusive, and notorious
possession and occupation;
434
(c) That such possession and occupation is under
a bona fide claim of ownership since June 12,
1945.
2) Those who have acquired ownership of
private lands by Prescription under the
provision of existing laws [Sec. 14(2), P.D.
1529];
Requisites for Registration under Section
14(2):
(a) The land is an alienable and disposable, and
patrimonial property of the public domain;
(b) The applicant and its predecessors-in-interest
have been in possession of the land for at
least 10 years, in good faith and with just
title, or for at least 30 years, regardless of
good faith or just title; and
(c) The land had already been converter or
declared as patrimonial property of the State
at the beginning of the said 10-year or 30-
year period of possession.
3) Those who have acquired ownership of
private lands or abandoned riverbeds by
right of Accession or accretion under the
existing laws (Art. 457, NCC);
Essential Requisites to Acquire Property by
Accretion under Article 457, NCC:
(a) That the accumulation of soil or sediment be
gradual and imperceptible
(b) That it be the result of the action of the water
of the rivers; and
(c) That the land where the accretion takes place
is adjacent to the bank of the river.
Notes:
 Riparian owner acquires automatic ownership
of the abandoned bed without need of formal
act of acquisition.
 For accretion or alluvion to form part of
registered land of riparian owner, the gradual
alluvial deposits must be due to the effects of
the river’s current. Deposits made by human
intervention are excluded.
4) Those who have acquired ownership of land
in any other manner provided for by Law.
Note: If the applicant is not a resident of the
Philippines, he shall file with his application an
instrument in due form appointing an agent or
representative residing in the Philippines, giving
his full name and postal address, and shall therein
agree that the service of any legal process in the
proceedings under or growing out of the
application made upon his agent or
representative shall be of the same legal effect as
if made upon the applicant within the Philippines.
If the agent or representative dies, or leaves the
Philippines, the applicant shall forthwith make
another appointment for the substitute, and, if he
fails to do so the court may dismiss the
application. (Sec. 16, P.D. 1529)
b. DECREE OF REGISTRATION
It is a document prepared in the prescribed form
by the LRA Administrator, signed by him in the
name of court, embodying the final disposition of
the land by the court and such other data found
in the record, including the name and other
personal circumstances of the applicant, the
technical description of the property, liens and
encumbrances affecting it, and such other
matters as determined by the court in its
judgment.
It is issued by Administrator of Land Registration
who signs the decree of registration and attests
the date and hour or its issuance. (Sec. 31, P.D.
1529)
The decree becomes final after one (1) year from
the date of its entry. (Sec. 32, P.D. No. 1529)
GR: The law does not limit the period within
which the court may order the issuance of a
decree of registration.
XPN: Decree of Registration cannot be issued
pending appeal.
Effect of decree of registration
1) It binds the land, quiets title, subject only to
such XPNs or liens as may be provided by
law.
2) It is conclusive upon all persons including
the national government and all branches
thereof. Such conclusiveness does not cease
to exist when the title is transferred to a
successor. (Sec. 31, P.D. 1529)
Contents of decree of registration
Every decree of registration issued shall bear the
following:
a) The date, hour and minute of its entry, and
shall be signed.
b) State whether the owner is married or
unmarried, and if married, the name of the
husband or wife. However, that if the land
adjudicated by the court is conjugal
property, the decree shall be issued in the
name of both spouses.
c) If the owner is under disability, it shall state
the nature of disability, and if a minor, his
age.
d) Description of the land as finally determined
by the court; and
e) Set forth the estate of the owner, and also,
in such manner as to show their relative
priorities, all particular estates, mortgages,
easements, liens, attachments, and other
encumbrances, including rights of tenant-
farmers, if any, to which the land or owner's
estate is subject, as well as any other
matters properly to be determined in
pursuance of this Decree. (Sec. 31, P.D. No.
1529)
c. REVIEW OF DECREE OF REGISTRATION;
INNOCENT PURCHASER FOR VALUE
GR: The decree of registration shall not be
reopened or revised by reason of absence,
minority, or other disability of any person
adversely affected thereby, nor by any
proceeding in any court for reversing judgments.
XPN: Courts may reopen proceedings already
closed by final decision or decree when
application for review is filed not later than one
year from and after the date of the entry of such
decree of registration by the party aggrieved or
deprived of land or of any estate or interest
therein by such adjudication or confirmation of
title obtained by actual fraud.
Requisites:
1. The petitioner must have an estate or interest
in the land;
2. He must show actual or extrinsic fraud in the
procurement of the decree of registration;
435
3. The petition must be filed within one year
from the issuance of the decree by the Land
Registration Authority;
4. The property has not yet passed to an
innocent purchaser for value. (Sec. 38, Act No.
496)
XPN to XPN: In no case shall such petition be
entertained by the court where an innocent
purchaser for value has acquired the land or an
interest therein, whose rights may be prejudiced.
(Sec. 32, P.D. 1529)
Innocent purchaser for value
One who buys property of another, without notice
that some other person has a right to, or interest
in, such property, and pays a full and fair price
for the same, at the time such purchase, or
before he has notice of the claim or interest of
some other person in the property. (Yap vs.
Republic, G.R. No. 199810, March 15, 2017)
Whenever the phrase "innocent purchaser for
value" or an equivalent phrase occurs in this
Decree, it shall be deemed to include an innocent
lessee, mortgagee, or other encumbrancer for
value. (Lozada vs. Bracewell, G.R. No. 179155
April 2, 2014)
Effect of Failure to File
Upon the expiration of said period of one year,
the decree of registration and the certificate of
title issued shall become incontrovertible. Any
person aggrieved by such decree of registration
in any case may pursue his remedy by action for
damages against the applicant or any other
persons responsible for the fraud (Sec. 32, P.D.
No. 1529).
D. CERTIFICATE OF TITLE
It is the true copy of the decree of registration or
the transcription thereof and, similar to the
decree, shall also be signed by LRA Administrator.
(Sec. 39, P.D. No. 1529)
It is an absolute and indefeasible evidence of
ownership of the property in favor of the person
whose name appears therein.
It takes effect upon date of entry thereof, and the
land covered thereby becomes a registered land
on that date. (Sec. 40, P.D. No. 1529)
436
Transfer Certificate of Title
It is the subsequent certificate of title that may
be issued by the Register of Deeds pursuant to
any voluntary or involuntary instrument relating
to the same land. (Sec. 43, P.D. No. 1529)
Attributes and Limitation
a. Free from Liens and Encumbrances
GR: Existing claims and liens against the land
prior to the issuance of the certificate of title are
cut off by such certificate, and it binds the whole
world, including the government.
XPNs:
1. Those noted on the Certificate;
2. Liens, claims or rights arising or existing
under the laws and Constitution of the
Philippines which are not by law required to
appear of record in the Registry of Deeds in
order to be valid against subsequent
purchasers or encumbrancers of record.;
3. Unpaid real estate taxes levied and assessed
within two years immediately preceding the
acquisition of any right over the land by an
innocent purchaser for value, without
prejudice to the right of the government to
collect taxes payable before that period from
the delinquent taxpayer alone;
4. Any public highway or private way
established or recognized by law, or any
government irrigation canal or lateral
thereof, if the certificate of title does not
state that the boundaries of such highway or
irrigation canal or lateral thereof have been
determined; and
5. Any disposition of the property or limitation
on the use thereof by virtue of, or pursuant
to, Presidential Decree No. 27 or any other
law or regulations on agrarian reform. (Sec.
44, P.D. No. 1529)
b. Incontrovertible and Indefeasible
GR: Upon the expiration of one year from and
after the entry of the decree of registration and
the certificate of title, the said decree and
certificate shall become incontrovertible and
indefeasible. (Sec. 32, P.D. No. 1529)
XPNs:
1. If previous valid title of the dame land exists;
2. When the land covered is not capable of
registration;
3. When the acquisition of certificate is
attended by Fraud.
c. Registered Land not Subject to
Prescription
No title to registered land in derogation of the title
of the registered owner shall be acquired by
prescription or adverse possession (Sec. 47, P.D.
No. 1529).
d. Certificate of Title not subject to
collateral attack
A certificate of title shall not be subject to
collateral attack. It cannot be altered, modified,
or canceled except in a direct proceeding in
accordance with law. (Sec. 48, P.D. No. 1529)
e. Includes Improvements on Land
GR: Torrens Certificate of title covers the lands
described therein, together with all the buildings
and improvements existing thereon.
XPNs:
1. An express Reservation shall have been
annotated on the certificate;
2. Public thoroughfares as were already in
existence at the time title was acquired;
3. Navigate streams within the registered
property unless the boundaries or such
stream had been expressly delimited in the
registration plan. (Pena, N., Registration of Land
Titles and Deeds, 2008)
Persons entitled to Duplicate Certificate of
Titles
a. Registered owners; and
b. Each co-owner. (Sec. 41, P.D. No. 1529)
General incidents of registered land
Registered land shall be subject to such burdens
and incidents as may arise by operation of law. It
is not relieved from the following:
a) Any rights incident to the relation of husband
and wife, landlord and tenant,
b) Liability to attachment or levy on execution,
or
c) Liability to any lien of any description
established by law on the land and the
buildings thereon, or on the interest of the
owner in such land or buildings,
d) Any rights or liability arising from change of
the laws of descent,
e) The rights of partition between co-owners,
f) The right to take the same by eminent
domain,
g) Liability to be recovered by an assignee in
insolvency or trustee in bankcruptcy under
the laws relative to preferences,
h) Any rights or liability created by law and
applicable to unregistered land. (Article 46,
P.D. No. 1529)
Splitting, or Consolidation of Titles
Splitting of Titles – owners of two or more
parcels of land described in a certificate of title,
may petition to cancel the certificate and issue in
lieu thereof several new certificates each
covering one or such number of parcels as the
owner may desire.
Consolidation of Titles – a registered owner of
several distinct parcels of land in separate
certificates may, if he desires, cause all his
certificate be cancelled and in lieu thereof have a
single certificate for the whole land. (Sec. 49, P.D.
1529)
E. SUBSEQUENT REGISTRATION
It refers to any transaction affecting an originally
registered land and which, if in order, is
registered in the Office of the Registry of Deeds
concerned. (Sec. 51, P.D. 1529)
General Principles
The mere execution of deed of sale, mortgages,
leases or other voluntary documents serves only
as:
1. A contract between the parties, and
2. As evidence of authority to the Register of
Deeds to register such documents.
437
They do not, in themselves, affect a conveyance
or encumbrance on the land. The XPN to this rule
is if the instrument is a WILL.
 The act of registration serves as constructive
notice to the whole world of such voluntary
or involuntary conveyances, instruments,
writs or court processes. (Sec. 51, P.D. No.
1529)
It is settled in this jurisdiction that a sale of real
estate, whether made as a result of a private
transaction or of a foreclosure or execution sale,
becomes legally effective against third persons
only from the date of its registration. (Campillo v.
CA, G.R. No. L-564483, May 29, 1984)
1. VOLUNTARY DEALINGS; GENERAL
PROVISIONS
It refers to deeds, instruments or documents,
which are the results of the free and voluntary
acts of the parties thereto.
Kinds of voluntary dealings
1. Sales, conveyances or transfer of ownership
over the titled property;
2. Real property mortgages;
3. Lease;
4. Pacto de retro sale;
5. Extra-judicial settlement;
6. Free patent/homestead;
7. Powers of attorney; and
8. Trusts. (Aquino, Land Registration and Related
Proceedings, 2007, p. 184)
Effects of Registration
An innocent purchaser for value of registered
land becomes the registered owner the moment
he presents and files a duly notarized and valid
deed of sale, and the same day is entered in the
book and at the same time he surrenders or
presents the owner’s duplicate certificate of title
covering the land sold.
Presentment of Certificate of Title is required to
record the deed in the registry and to make
memorandum on title.
For entry to be considered as registration,
payment of fees mandatory.
438
For the entry to be considered to have the effect
of registration there is still a need to comply with
all that is required for entry and registration,
including the payment of the prescribed fees.
(Durawood vs. Bona, G.R. No. 179884, January 25,
2012)
Conveyances and other Dealings by
Registered Owner
Sale of Registered Land
The GR is that one who buys from a person who
is not the registered owner is not a purchaser in
good faith. But in deciding the question of good
faith, the legal environment of each case must be
considered.
Purchaser in good faith is one who buys property
of another without notice that some other person
has a right to, or interest in such property and
prays in full and fair price for the same, at the
time of such purchase, and before he has notice
of the claim or interest of some other person in
the property. (Inquimboy vs. Cruz, G.R. No. L-13953,
July 26, 1960)
Encumbrances
It is a principal feature of the Torrens System of
registration that all encumbrances on the land or
special estates therein shall be shown or at least
intimated upon the certificate of title so that a
person dealing with the owner of the land need
not go behind the certificate and inquire into
transactions the existence of which is not there
intimated. (Bass vs. Dela Rama, G.R. No. L-47662,
September 30, 1942)
The Supreme Court (Director of Lands vs. Abad,
G.R. No. L-36992, March 7, 1933) held that the
entry of an instrument in the entry book of the
register of deeds produces no legal effect unless
a memorandum of such instrument is noted on
the certificate of title.
Double Sale
In cases of double sale, the property belongs to
the purchaser who first registers the transaction
in his name in the registry of property.
Banks, their business being impressed with public
interest, are expected to exercise more care and
prudence than private individuals in their
dealings, even those involving registered lands.
The bank is a mortgagee in bad faith, for merely
relying on the certificates of title and for its failure
to ascertain the status of the mortgaged
properties. (Consolidated Rural Bank, Inc. vs. CA G.
R. No. 132161, January 17, 2005)
The provision on double sale, Article 1544 of the
Civil Code is not applicable in a case of multiple
sales by a single vendor. More specifically, it
covers a situation where a single vendor sold one
and the same immovable property to two or more
buyers.
It is necessary that the conveyance must have
been made by a party who has an existing right
in the thing and the power to dispose of it. It
cannot be invoked where the two different
contracts of sale are made by two different
persons, one of them being the owner of the
property sold.
Even if the sale was made by the same person, if
the second sale was made when such person was
no longer the owner of the property, because it
had been acquired by the first purchaser in full
dominion, the second purchaser cannot acquire
any right. (Consolidated Rural Bank, Inc. vs. CA G. R.
No. 132161, January 17, 2005)
Rules of Preference (Article 1544, NCC) in
cases of Double Sale of an Immovable
a. The first registrant in good faith;
b. Should there be no entry, the first in
possession in good faith; and
c. In the absence thereof, the buyer who
presents the oldest title in good faith.
Prior registration of the subject property does not
by itself confer ownership or a better right over
the property.
Article 1544 requires that before the second
buyer can obtain priority over the first, he must
show that he acted in good faith throughout (i.e.,
in ignorance of the first sale and of the first
buyer’s rights) from the time of acquisition until
the title is transferred to him by registration or
failing registration, by delivery of possession.
While certificates of title are indefeasible,
unassailable and binding against the whole world,
they merely confirm or record title already
existing and vested. They cannot be used to
protect a usurper from the true owner, nor can
they be used for the perpetration of fraud;
neither do they permit one to enrich him at the
expense of other.
Double Title
GR: Prior title prevails.
A land registration court has no jurisdiction to
order the registration of the land already decreed
in the name of another in an earlier land
registration case. (Heirs of Gonzaga vs. CA, G.R. No.
130841, February 26, 2008)
It applies to subsequent owners who derives his
title from the earlier title. (Sales Enterprise, Inc. vs.
IAC, G.R. No. L-67451, September 28, 1987)
XPN: When there is infirmity in the prior title.
(Azarcon vs. Vallarta, G.R. No. L-43679, October 28,
1980)
Two apparently valid titles, which one held valid:
The principle that the earlier title prevails over a
subsequent one applies when there are two
apparently valid titles over a single property. The
existence of the earlier valid title renders the
subsequent title void because a single property
cannot be registered twice. (Oliveros vs. SMC, G.R.
No. 173531, February 1, 2012)
Effect of Failure to register
In the absence of an express stipulation to the
contrary, the payment of the purchase price of
the goods is not a condition precedent to the
transfer of title to buyer, but title passes by the
delivery of the goods. (Suburban Development
Corporation vs. Auditor General, G.R.No. L-19455, April
18, 1975)
As between the parties to a contract of sale,
registration is not necessary to make it valid and
effective, for actual notice is equivalent to
registration.
Sec. 50 of the Land Registration Act provides
that, even without the act of registration, a deed
purporting to convey or affect registered land
shall operate as a contract between the parties.
The registration is intended to protect the buyer
against claims of third persons arising from
subsequent alienations by the vendor and is
439
certainly not necessary to give effect to the deed
of sale, as between the parties to the contract.
Ministerial Duty to Register
Upon presentation of a deed of conveyance of a
registered land, together with the grantor’s
duplicate certificate, the register of deeds shall:
a. Make out in the registration book a new
certificate of title;
b. Prepare and deliver to the grantee an owner’s
duplicate certificate of title;
c. Note upon the original and duplicate
certificates the date of transfer, the volume
and page of the registration book where the
new certificate is registered, and a reference
by number to the last prior certificate;
d. Require the surrender of the grantor’s
duplicate certificate for purposes of
cancellation;
e. Cancel likewise the original certificate and
f. File and indorse in the manner required the
deed of conveyance presented for
registration. (Sec. 57, Act. No. 496)
The duties enjoined upon the register of deeds by
Sec. 57 of the Land Registration Act are clearly
ministerial and mandatory in character not only
as is indicated by the auxiliary “shall” but by the
nature of such functions required to be performed
by him. (In re Consulta filed by Attorney Vicente J.
Francisco on behalf of Domingo Cabantog, G.R. No. L-
45192, April 10, 1939)
Registration of Forged Deeds
Although forged documents are generally null
and void, they can legally be the root of a valid
title when an innocent purchaser for value
intervenes. However, this does not apply where
the owner still holds a valid and existing
Certificate of Title covering the same property.
Where the mortgage is admittedly a forgery and
the registered owner was not shown to have been
negligent or in connivance with the forger, the
mortgage cannot be enforced against the
owner.(Pena, Registration of Land Titles and Deeds,
2008, p. 760)
“As between two innocent persons, one of whom
must suffer the consequences of the breach of
trust, the one who made it possible by his act of
confidence must bear the loss.” This is the
440
principle of equity applied when the fraud was
made possible by the owner’s act in entrusting
the certificate of title to another. (De Lara vs.
Ayroso, G.R. No. L-6122, May 31, 1954)
Other Important Voluntary Dealings
Mortgages and leases
Sec. 60, P.D. No. 1529 requires deeds of
mortgage or lease and all instruments which
assign, extend, discharge or otherwise deal with
the mortgage or lease to be registered, with the
mortgage or lease to be registered, and such
deeds shall take effect upon the title only upon
registration. Unless recorded, such deeds are not
binding on third persons even though they are
binding between the parties.
DISCHARGE: Sec. 62, P.D. No. 1529 allows the
discharge or cancellation of a mortgage or lease
on registered land by means of an instrument
executed by the mortgagee or lessee in a form
sufficient in law, which shall be filed with the
Register of Deeds who shall make the appropriate
memorandum upon the certificate of title.
Mortgage is discharged only upon full payment of
all indebtedness. It is well settled that where
annotation at the back of the title about a 1st
mortgage states that “mortgage secured the
payment of a certain sum of money plus interest
plus other obligations arising thereunder,” there
is no need for any (further) notation of later loans
on the title. (Mojica vs. CA, G.R. No. 94247,
September 11, 1991)
Discharge is done by:
a. Creditor executing a public instrument
canceling or releasing the mortgage; and
b. After foreclosure, by an order of the court
and submission of a final certificate of sale
which cancels old title. (Sec. 62, P.D. No.
1529)
2. INVOLUNTARY DEALINGS
It refers to an attachment, or a copy of any writ,
order or process issued by a court of record,
intended to create or preserve any lien, status,
right, or attachment upon registered land. It shall
be filed and registered in the Registry of Deeds
for the province or city in which the land lies, and,
in addition to the particulars required in such
papers for registration, shall contain a reference
to the number of the certificate of title to be
affected and the registered owner or owners
thereof, and also if the attachment, order,
process or lien is not claimed on all the land in
any certificate of title a description sufficiently
accurate for identification of the land or interest
intended to be affected. A restraining order,
injunction or mandamus issued by the court shall
be entered and registered on the certificate of
title affected, free of charge. (Sec. 69, P.D. No.
1529)
Kinds of Involuntary Dealings
1. Attachment (Sec. 69, P.D. 1529)
2. Mandamus (Sec. 73, P.D. 1529)
3. Sale on execution of judgment or sales for
taxes (Sec. 74, P.D. 1529)
4. Adverse claims (Sec. 70, P.D. 1529)
5. Notice of lis pendens (Sec. 76, P.D. 1529)
6. Expropriation (Sec. 85, P.D. 1529)
7. Forfeiture (Sec. 75, P.D. 1529)
8. Auction sale on foreclosure of mortgage (Sec.
74, P.D. 1529)
Effect of Registration
Entry thereof in the day book of the Register of
Deeds is sufficient notice to all persons even if the
owner’s duplicate certificate of title is not
presented to the Register of Deeds. (Sec. 31, P.D.
1529)
Presentment of Certificate of Title is not required,
annotation in entry book is sufficient.
a. ADVERSE CLAIM
It is a notice to third persons that someone is
claiming an interest on the property or has a
better right than the registered owner thereof,
and that any transaction regarding the disputed
land is subject to the outcome of the dispute.
A notice of a claim adverse to the registered
owner, the validity of which is yet to be
established in court at some future date and is no
better than a notice of lis pendens already
pending in court. (Acap vs. CA, G.R. No. 118114,
December 7, 1995)
Whoever claims any part or interest in registered
land adverse to the registered owner, arising
subsequent to the date of the original
registration, may, if no other provision is made in
this Decree for registering the same, make a
statement in writing setting forth fully his alleged
right or interest, and how or under whom
acquired, a reference to the number of the
certificate of title of the registered owner, the
name of the registered owner, and a description
of the land in which the right or interest is
claimed. (Sec. 70, P.D. No. 1529)
Period of effectivity: 30 days from the date of
registration; lapse of the 30-day period does not
result in the automatic cancellation of the adverse
claim (a petition for cancellation must first be
filed). (Sec. 70 P.D. 1529)
Formal Requisites of an Adverse Claim for
Purposes of Registration
1. Adverse claimant must state the following in
writing:
a. His allege right or interest
b. How and under whom such alleged
right or interest is acquired
c. The description of the land in which the
right or interest is claimed
d. The certificate of the title number;
2. Such statement must be signed and sworn
to before a Notary public; and
3. Claimant shall state his Residence or place
to which all notices may be served upon him.
(Sec. 70, P.D. No. 1529)
Cancellation
Before lapse of 30 days
a. By party in interest: by filing a petition in the
proper RTC for cancellation
b. By claimant: by filing a sworn petition
withdrawing his adverse claim.
After lapse of 30 days
a. By party in interest: by filing a verified
petition for cancellation;
b. No 2nd adverse claim based on the same
ground may thereafter be registered by the
same claimant.
After cancellation, no adverse claim shall be
registered by the same claimant.
441
Cancellation of the adverse claim is still necessary
to render it ineffective; otherwise, the inscription
will remain annotated and shall continue as a lien
upon the property. (Sajonas vs. CA, G.R. No.
128563, March 25, 2004)
The register of Deeds cannot unilaterally cancel
the adverse claim. There must be a court hearing
for the purpose. (Diaz-Dutante vs. Ong. G.R. No.
130352, November 9, 1998)
Purpose of Adverse Claim
To apprise third persons that there is a
controversy over the ownership of the land and
to preserve and protect the right of the adverse
claimant during the pendency of the controversy.
Such is registered by filing a sworn statement
with the RD of the province where the property is
located, setting forth the basis of the claimed
right together with other data pertinent thereto.
Annotation is a measure designed to protect the
interest of a person over a piece of real property
where the registration of such interest or right is
not otherwise provided for by Act 496, now PD
1529. It serves as a warning to third parties
dealing with the said property that someone is
claiming an interest on the same or a better right
than the registered on the same or a better right
than the registered owner, and that any
transaction regarding the disputed land is subject
to the outcome of the disputed land is subject to
the outcome of the dispute.
Subsequent sale of the property covered by a
certificate of title cannot prevail over an adverse
claim, duly sworn to and annotated on the
certificate of title previous to the sale. (Sajonas vs.
CA, G.R. No. 102377, July 5, 1996)
Requisites for Valid Adverse Claim
1. The claimant’s right or interest in registered
land must be adverse to the registered
owner;
2. Such right or interest must have arisen
subsequent to the date of original
registration; and
3. No other provision is made in the Decree for
the registration of such right or claim. (Sec.
70, P.D. No. 1529; Arrazola vs. Bernas, G.R. No.
L-29740, November 10, 1978)
442
b. NOTICE OF LIS PENDENS
It literally means a pending suit. The doctrine of
lis pendens refers to the jurisdiction, power or
control, which a court acquires over property
involved in a suit, pending the continuance of an
action, and until final judgment.
A notice of lis pendens is proper in actions:
1. To recover possession of real estate;
2. To quiet title thereto;
3. To remove clouds upon the title thereof;
4. For partition; and
5. Any other proceeding of any kind in court
directly affecting the title to the land or the
use or occupation thereof or the building
thereon. (Sec. 76, P.D. No. 1529, Sec. 14, Rule
13, Rules of Court)
Notice of lis pendens is inapplicable in actions:
1. Proceedings for the recovery of money
judgments
2. Preliminary Attachments
3. Proceedings on the probate of wills
4. Administration of the estate of deceased
persons
5. Levies on execution
6. Foreclosure
Purposes of lis pendens
1. To protect the rights of the party causing the
registration of the lis pendens, and
2. To advise 3rd persons who purchase or
contract on the subject property that they do
so at the peril and subject to the result of the
pending litigation. (Agcaoili, Property
Registration Decree and Related Laws: Land Titles
and Deeds, 2006, p. 548)
Notice of lis pendens
This is an announcement to the whole world that
a particular real property is in litigation. The
inscription serves as a warning that one who
acquires an interest over litigated property does
so at his own risk, or that he gambles on the
result of the litigation of the property. (Marasigan
vs. IAC, G.R. No. L-69303, July 23, 1987)
The doctrine of lis pendens is founded upon
reason of public policy and necessity, the purpose
of which is to keep the subject matter of the
litigation within the power of the Court until the
judgment or decree shall have been entered;
otherwise, by successive alienations pending the
litigation, its judgment or decree shall be
rendered abortive and impossible of execution.
(Laroza, et al. vs. D Guia, G.R. L-45252, Jan. 31, 1985)
No action to recover possession of real estate, or
to quiet title thereto, or to remove clouds upon
the title thereof, or for partition, or other
proceedings of any kind of court directly affecting
the title to land or the use or occupation thereof
or the buildings thereon, and no judgment, and
no proceeding to vacate or reverse any judgment,
shall have any effect upon registered land as
against persons other than the parties thereto,
unless a memorandum or notice stating the
institution of such action or proceeding and the
court wherein the same is pending, as well as
the date of the institution thereof, together with
a reference to the number of the certificate of
title, and an adequate description of the land
affected and the registered owner thereof. Shall
have been filed and registered. (Sec. 76, P.D. No.
1529, Property Registration Decree)
Effects of Lis Pendens
1. Keeps the subject matter of the litigation
within the power of the court until the entry
of final judgment so as to prevent the defeat
of the latter by successive alienations.
2. Binds the purchaser of the land subject of the
litigation to the judgment or decree that will
be promulgated thereon whether such a
purchaser is a bona fide purchaser or not.
3. Does not create a non-existent right or lien.
(Carrasco vs. CA, G.R. No. 123672, Dec. 14, 2005)
Cancellation of Lis Pendens
GR: Notice of Lis Pendens cannot be cancelled
while the action is pending. (Agcaoli, Supra.)
XPNs:
1. When it is shown that the notice is for the
purpose of molesting the adverse party
2. Where the evidence so far presented by the
plaintiff does not bear out the main
allegations of the complaints
3. When it is shown that it is not necessary to
protect the right of the party who caused the
registration thereof
4. Where the continuances of the trial are
unnecessarily delaying the determination
of the case to the prejudice of the
defendant
5. Upon verified petition of the party who
caused the registration thereof
6. It is deemed cancelled after final judgment
in favor of the defendant, or other
disposition of the action such as to
terminate all rights of the plaintiff to
property involved. (Noblejas, 2007, p. 438-
439)
A notice of lis pendens may be cancelled:
1. Upon order of the court, or
2. Upon action by the register of Deeds, upon
verified petition of the party who caused the
registration thereof (Sec. 77, P.D. No. 1529).
Before final judgment
May be done upon proper showing that the notice
is for the purpose of molesting the adverse party,
or that it is not necessary to protect the rights of
the party who caused it to be recorded. (Sec. 77,
P.D. No. 1529)
A mere incident to a court action and may
therefore be ordered by the court having
jurisdiction of it at any given time (certificate of
finality issued by the court will not suffice; should
be done with judicial authority. (Agcaoili, Property
Registration Decree and Related Laws: Land Titles and
Deeds, 2006, p. 556)
After final judgment
Deemed cancelled upon the registration of a
certificate of the Clerk of Court in which the action
or proceeding was pending stating the manner of
disposal thereof.
Under the Rules of Court, a notice of lis pendens
may be cancelled on two grounds:
1. If the annotation was for the purpose of
molesting the title of the adverse party; or
2. When the annotation is not necessary to
protect the title of the party who caused it to
be recorded. (Sec. 19, Rule 13, Revised Rules of
Court)
In case of subsequent sales or transfers, the
Registry of Deeds is duty bound to carry over the
443
notice of lis pendens on all titles to be issued.
Otherwise, if he cancels any notice of lis pendens
in violation of his duty, he may be held civilly and
even criminally liable for any prejudice caused to
innocent third persons. (Marasigan vs. IAC, G.R. No.
L-69303, July 23, 1987)
Notice of Insolvency
Whenever proceeding in bankruptcy or
insolvency, or analogous proceedings, are
instituted against a debtor who owns registered
land, it shall be the duty of the officer serving the
notice of the institution of such proceedings on
the debtor to file a copy thereof with the office of
the Register of Deeds of the province or city
where the land of the debtor lies. The assignee
or trustee appointed by the court in such
proceedings shall be entitled to the entry of anew
certificate of the registered land of the debtor or
bankrupt, upon presenting and filing a certified
copy of the assignment in insolvency or order or
adjudication in bankruptcy with the insolvent’s or
bankrupt’s duplicate certificate of title; but the
new certificate shall state that it is entered to him
as assignee in insolvency or trustee in bankruptcy
or other proceedings, as the case may be. (Sec.
83, P.D. No. 1529)
Under the Insolvency law, creditors holding
security shall vote for the election of an assignee.
But if they fail to elect an assignee, or if vacancy
occurs, the court shall appoint an assignee and
fix the amount of his bond. (Sec. 30 and 31, Act.
No. 1956)
E. NON-REGISTRABLE PROPERTIES
These are properties of public dominion which,
under existing legislation, are not the subject of
private ownership and are reserved for public
purposes.
Constitutional Basis
All lands of the public domain, waters, minerals,
coal, petroleum, and other mineral oils, all forces
of potential energy, fisheries, forests or timber,
wildlife, flora and fauna, and other natural
resources are owned by the State. With the XPN
of agricultural lands, all other natural resources
shall not be alienated. (Art. XII, Sec. 2, 1987
Constitution).
444
Property of public dominion
1. Those intended for public use, such as roads,
canals, rivers, torrent, ports and bridges
constructed by the State, banks, shores,
roadsteads, and others of similar character;
2. Those which belong to the State, without
being for public use, and are intended for
some public service or for the development
of the national wealth.” (Art. 420, NCC)
3. Non-registrable lands - These are properties
of public dominion which, under existing
legislation, are not the subject of private
ownership and are reserved for public
purposes.
NOTE: The properties of public dominion are not
susceptible to acquisitive prescription and only
properties of the State that are no longer
earmarked for public use, otherwise known as
patrimonial, may be acquired by prescription.
In Heirs of Mario Malabanan vs. Republic, the
Supreme Court, in observance of the foregoing,
clarified the import of Sec. 14(2) and made the
following declarations:
a. The prescriptive period for purposes of
acquiring an imperfect title over a property of
the State shall commence to run from the
date an official declaration is issued that such
property is no longer intended for public
service or the development of national
wealth; and
b. Prescription will not run as against the State
even if the property has been previously
classified as alienable and disposable as it is
that official declaration that converts the
property to patrimonial. (Republic of the
Philippines vs. Metro Index Realty and
Development Corporation, G.R. No. 198585, July
2, 2012)
Reason behind their non-registrability
Property of the public domain is beyond the
commerce of man and not susceptible of private
appropriation and acquisitive prescription.
Occupation thereof in the concept of owner no
matter how long cannot ripen into ownership and
be registered as a title. (Valiao vs. Republic, G.R.
No. 170757, November 28, 2011)
Kinds of Non-Registrable Lands
1. Property of public domain or those intended
for public use, public service or development
of the national wealth;
2. Forest or timber lands;
3. Water sheds;
4. Mangrove swamps;
5. Mineral lands;
6. National parks and plazas;
7. Military or naval reservations;
8. Foreshore lands;
9. Reclaimed lands;
10. Submerged areas;
11. River banks;
12. Lakes, rivers, creeks and lagoons;
13. Reservations for public and semi-public
purposes;
14. Protected areas;
15. Resources within ancestral domains; and
16. Others of similar character. (Agcaoili, Property
Registration Decree and Related Laws: Land Titles
and Deeds, 2006)
Q: In 1913, Gov. Gen. Forbes reserved a parcel
of land for provincial park purposes. Sometime
thereafter, the court ordered said land to be
registered in Ignacio & Carmen Palomo’s name.
What is the effect of the act of Gov. Gen Forbes
in reserving the land for provincial park purposes?
A: As part of the reservation for provincial park
purposes, they form part of the forest zone. It is
elementary in the law governing natural
resources that forest land cannot be owned by
private persons. It is not registrable and
possession thereof, no matter how lengthy,
cannot convert it into private property, unless
such lands are reclassified and considered
disposable and alienable. (Sps. Palomo, et. al. vs.
CA, et. al., G.R. No. 95608, January 21, 1997)
Q: Does land classified as forest loses its
classification because it has been stripped of it
forest cover?
A: NO. A forested area classified as forest land
of the public domain does not lose such
classification simply because loggers or settlers
may have stripped it of its forest cover. Parcels of
land classified as forest land may actually be
covered with grass or planted with crops by
kaingin cultivators or other farmers. Forest lands
do not have to be on mountains or in out of the-
way places. The classification of land is
descriptive of its legal nature or status and does
not have to be descriptive of what the land
actually looks like. (Heirs of Jose Amunategui vs.
Director of Forestry, G.R. No. L-27873, November 9,
1983)
Foreshore land
A strip of land that lies between the high and low
water marks and is alternately wet and dry
according to the flow of tide. It is that part of the
land adjacent to the sea, which is alternately
covered by the ordinary flow of tides. Foreshore
lands are inalienable unless reclaimed by the
government and classified as agricultural lands of
the public domain. (Chavez vs. Public Estates
Authority, G.R. No. 133250, November 11, 2003)
NOTE: Seashore, foreshore land, and/or portions
of the territorial waters and beaches, cannot be
registered. Even alluvial formation along the
seashore is part of the public domain and,
therefore, not open to acquisition by adverse
possession by private persons unless
subsequently declared as no longer needed for
public use. (Id.)
Mangrove swamps
These are mud flats, alternately washed and
exposed by the tide, in which grows various
kindred plants which will not live except when
watered by the sea, extending their roots deep
into the mud and casting their seeds, which also
germinate there. These constitute the mangrove
flats of the tropics, which exist naturally, but
which are also, to some extent, cultivated by man
for the sake of the combustible wood of the
mangrove and like trees as well as for the useful
nipa palm propagated thereon. (Montano vs.
Insular Government, G.R. No. L-3714, January 26,
1909)
Mineral lands
Mineral land means any land where mineral
resources are found. Mineral resources, on the
other hand, mean any concentration of
mineral/rocks with potential economic value.
(Sec. 4(aj) and (an), DENR Administrative Order No.
95-936, as amended)
445
NOTE: Possession of mineral land, no matter
how long, does not confer possessory rights.
(Atok-Big Wedge Mining Co. vs. Court of Appeals, GR
No. 88883, Jan. 18, 1991)
Watershed
It is a land area drained by a stream or fixed body
of water and its tributaries having a common
outlet for surface runoff.
Watershed reservation
It is a forest land reservation established to
protect or improve the conditions of the water
yield thereof or reduce sedimentation. (Sec.
3(l,m,n) , P.D. 1559, as amended)
F. DEALINGS WITH UNREGISTERED LAND
Legal Basis
No deed, conveyance, mortgage, lease, or other
voluntary instrument affecting land not registered
under the Torrens system shall be valid, except
as between the parties thereto, unless such
instrument shall have been recorded in the
manner herein prescribed in the office of the
Register of Deeds for the province or city where
the land lies.
(a) The Register of Deeds for each province or
city shall keep a Primary Entry Book and a
Registration Book. The Primary Entry Book shall
contain, among other particulars, the entry
number, the names of the parties, the nature of
the document, the date, hour and minute it was
presented and received. The recording of the
deed and other instruments relating to
unregistered lands shall be effected by any of
annotation on the space provided therefor in the
Registration Book, after the same shall have been
entered in the Primary Entry Book.
(b) If, on the face of the instrument, it appears
that it is sufficient in law, the Register of Deeds
shall forthwith record the instrument in the
manner provided herein. In case the Register of
Deeds refuses its administration to record, said
official shall advise the party in interest in writing
of the ground or grounds for his refusal, and the
latter may appeal the matter to the Commissioner
of Land Registration in accordance with the
provisions of Section 117 of this Decree. It shall
be understood that any recording made under
446
this section shall be without prejudice to a third
party with a better right.
(c) After recording on the Record Book, the
Register of Deeds shall endorse among other
things, upon the original of the recorded
instruments, the file number and the date as well
as the hour and minute when the document was
received for recording as shown in the Primary
Entry Book, returning to the registrant or person
in interest the duplicate of the instrument, with
appropriate annotation, certifying that he has
recorded the instrument after reserving one copy
thereof to be furnished the provincial or city
assessor as required by existing law.
(d) Tax sale, attachment and levy, notice of lis
pendens, adverse claim and other instruments in
the nature of involuntary dealings with respect to
unregistered lands, if made in the form sufficient
in law, shall likewise be admissible to record
under this section.
(e) For the services to be rendered by the
Register of Deeds under this section, he shall
collect the same amount of fees prescribed for
similar services for the registration of deeds or
instruments concerning registered lands. (Sec.
113, P.D. 1529)
Untitled Lands
These are private lands that are not registered in
the Register of Deeds and not covered by the
Torrens System.
It refers to bare ownership of land or ownership
that has not been adjudicated either judicially or
administratively and registered as Torrens title
under P.D. 1529. (Noblejas, Registration of Land
Titles and Deeds, 2007)
Registration of instruments dealing with
unregistered land
The system of registration under the Spanish
Mortgage Law, by express provision of Sec. 2 of
the Property Registration Decree, has been
discontinued and all lands registered under said
system which are not yet covered by Torrens
titles shall be considered unregistered lands.
However, all instruments affecting lands
originally registered under the Spanish Mortgage
Law may be recorded under Sec. 113 of the
decree until the land shall have been brought
under the operation of the Torrens system. The
books of registration of the Revised
Administrative Code, as amended by Act No.
3344, shall continue to be in force, provided that
unregistered lands shall henceforth be registered
under Sec. 113. (Agcaoili, Property Registration
Decree and Related Laws: Land Titles and Deeds,
2006, p. 805)
Where registered land has been the subject of a
transaction and this was recorded under Act No.
3344, such recording does not bind third persons
since registration thereunder refers to properties
not registered under the Land Registration Act,
and, hence, not effective for purposes of Art.
1544 of the Civil Code on double sales.
Registration of instruments, in order to affect and
bind the land, must be done in the proper
registry. (Soriano vs. Magali, G.R. No. L-15133, July
31, 1953)
Recording by ministerial officers
The opening paragraph of Sec. 113 declares in
substance that no instrument or deed affecting
rights to real property not registered under the
Torrens system (Land Registration Act, now
Property Registration Decree) shall be valid,
except as between the parties thereto, until such
instrument or deed shall have been registered in
the manner prescribed therein. This provision
cannot be interpreted to include conveyances
made by ministerial officers, such as sheriff’s
deeds. It contemplates only such instruments as
may be created by agreement of the parties.
(Williams vs. Suner, G.R. No. 25795, November 6,
1926)
The fact that the vendee a retro of unregistered
land did not object to the auction sale thereof
does not safeguard the purchaser at auction even
if the sheriff’s deed be registered in the Registry
of Deeds since the provisions of Act No. 3344 do
not apply to judicial sales. (Laxamana vs. Carlos,
G.R. No. 25797, December 13, 1932)
The rule that the Register of Deeds must record
a sheriff’s certificate of sale or sheriff's deed,
upon demand made by the purchaser and tender
of the necessary fee, is applicable not only to the
situation where a single sale has been made by
the sheriff but also to the situation where there is
a succession of sales made at the instance of
various creditors. The fact that a similar
certificate of sale in favor of the first creditor has
already been registered is no obstacle to the
recording of the others. (Pua Hermanos vs. Register
of Deeds, G.R. No. 274349, September 10, 1927)
Recording shall be without prejudice to a third
party with "better right" It has been held that the
inscription of a mortgage of unregistered land did
not materially improve the petitioners' situation,
for such inscription is without prejudice to third
parties with a better right. (Rivera vs. Moran, G.R.
No. 24568, March 2, 1926)
Better Right
It refers to a right which must have been acquired
by a third party independently of the unregistered
deed such as title by prescription, and that has
no reference to rights acquired under the
unregistered deed itself.
The mere registration of a sale in one's favor does
not give him any right over the land if the vendor
was not anymore, the owner of the land having
previously sold the same to somebody else even
if the earlier sale was unrecorded. (Sabitsana vs.
Muertegui, G.R. No. 181359, August 5, 2013; Relate to
Art. 1608 of the Civil Code)
Recording by Register of Deeds ministerial
The Register of Deeds does not exercise a judicial
or quasi-judicial power in the registration of
sheriff’s deeds or certificates of sale. His duty with
respect to the notation or recording of these
instruments, so far at least as relates to
unregistered property, is ministerial only; and the
registration of such instruments adds nothing to
their intrinsic effect. (Agcaoili, Property Registration
Decree and Related Laws: Land Titles and Deeds,
2006, p. 807)
NOTE: Registration in such cases is required
merely as a means of notification of the
purchasers' rights to the public. If the Register of
Deeds refuses to register the instrument, he shall
advise the party in interest in writing of the
grounds for his refusal, and the latter may elevate
the matter to the Administrator, Land
Registration Authority, en consulta pursuant to
Sec. 117 of the Property Registration Decree.
(Agcaoili, Property Registration Decree and Related
Laws: Land Titles and Deeds, 2006, p. 807)
447
No deed, conveyance, mortgage, lease, or other
voluntary instrument affecting land not registered
under the Torrens system shall be valid, except
as between the parties thereto, unless such
instrument shall have been recorded in the
manner prescribed in the office of the Register of
Deeds for the province or city where the land lies.
 Tax sale, attachment and levy, notice of lis
pendens, adverse claim and other
instruments in the nature of involuntary
dealings with respect to unregistered lands,
if made in the form sufficient in law, shall
likewise be admissible to record. (Sec. 113,
P.D. 1529)
Procedure for Registration of Instruments
Dealing with Unregistered Land
The Register of Deeds shall then record the
instrument. However, in case the Register of
Deeds refuses its administration to record, said
official shall advise the party in interest in writing
of the ground or grounds for his refusal.
It may be appealed to the Commissioner of Land
Registration in accordance with Sec. 117.
Register of Deeds shall endorse among other
things, the file number and the date all well as
the hour and minute when the document was
received for recording as shown in the Primary
Entry Book, returning to the registrant or person
in interest the duplicate of the instrument, with
proper annotation, certifying that he has
recorded the instrument after reserving one copy
thereof to be furnished the provincial or city
assessor. (ibid)
Register of Deeds shall collect the same amount
of fees prescribed for similar services for the
registration of deeds or instrument concerning
registered lands.
G. ASSURANCE FUND
It is created for the purpose of paying any
damages which may result from an improper or
illegal registration. All the people of the Philippine
Archipelago may be taxed for the purpose of
paying these damages if the "assurance fund" is
not sufficient. (Loewenstein vs. Page, G.R. No. L-
5599, March 22, 1910)
448
Purpose
The Assurance Fund is intended to relieve
innocent persons from the harshness of the
doctrine that a certificate is conclusive evidence
of an indefeasible title to land. (De Guzman Jr., vs.
National Treasurer, G.R. No. 143281, August 3, 2000)
Act No. 496 provides for an Assurance Fund to
pay for the loss or damage sustained by any
person who, without negligence on his part, is
wrongfully deprived of any land or interest
therein on account of the bringing of the same
under the Act or registration of any persons as
owner of the land. (Agcaoili, 2015)
1. ACTION OF COMPENSATION FROM
FUNDS
Requisites for recovery
1. A person sustains loss or damage, or is
deprived of land of any estate or interest in
land;
2. In consequence of the bringing of the land
under the operation of the Torrens system of
arising after original registration of land,
3. Through fraud or in consequence of any
error, omission, mistake or misdescription in
any certificate of title or in any entry or
memorandum in the registration book,
4. Without negligence on his part
5. Is barred or otherwise precluded under the
provision of any law from bringing an action
for the recovery of such land or the estate or
interest therein. (Sec. 95, P.D. No. 1529)
When available
The right of the innocent purchaser for value
must be respected and protected, even if the
seller obtained his title through fraud. The
remedy of the person prejudiced is to bring an
action for damages against those who caused or
employed the fraud, and if the latter are
insolvent, an action against the Treasurer of the
Philippines may be filed for recovery of damages
against the Assurance Fund.
Condition sine qua non of a person who brings
action for damages against Assurance Fund
1. He must be the registered owner, and
 2. As the holders of transfer certificates of
title, that they be innocent purchasers in
good faith and for value.
Moreover, there must be a showing that there is
no negligence on the part of the party sustaining
the loss or damage or deprivation of any land or
interest therein. (La Urbana vs. Bernardo, G.R. No.
41915, January 8, 1936)
Limitation on the amount to be recovered
The plaintiff cannot recover as compensation
more than the fair market of the land at the time
he suffered the loss, damage, or deprivation
thereof.
b. LIMITATION OF ACTION
Any action for compensation against the
Assurance Fund by reason of any loss, damage or
deprivation of land or any interest therein shall be
instituted within a period of six years from the
time the right to bring such action first occurred.
(Sec. 102, P.D. No. 1529)
NOTES:
 The right of action herein provided shall
survive to the legal representative of the
person sustaining loss or damage, unless
barred in his lifetime.
 If at the time such right of action first accrued
the person entitled to bring such action was
a minor or insane or imprisoned, or otherwise
under legal disability, such person or anyone
claiming from, by or under him may bring the
proper action at any time within two years
after such disability has been removed,
notwithstanding the expiration of the original
period of six years first above provided.
H. CADASTRAL SYSTEM OF REGISTRATION
(Act No. 2259, as amended)
Nature
All the private lands in the town are registered in
one single collective proceeding. This avoids
piecemeal or individual registration of lands.
(Agcaoili, Property Registration Decree and Related
Laws: Land Titles and Deeds, 2006, p. 370)
An involuntary proceeding in rem, initiated by the
filing of petition for registration by the
government to adjudicate titles for all the land
within a stated area, whether or not the people
living within desire to have titles issued. Here, all
claimants are compelled to litigate against one
another regarding their respective claims of
ownership. (Agcaoli, supra., p. 390)
It is a compulsory registration initiated by the
government, to adjudicate ownership of land.
Involuntary on the part of the claimants but they
are compelled to substantiate their claim on
interest through an answer. (Agcaoli, supra., p.
390)
Purpose
a) To serve the public interest by requiring that
the titles to any unregistered lands be settled
and adjudicated. (Sec. 35 [a], P.D. No. 1529)
b) To settle all dispute over the land; and
c) To remove all clouds over land titles, as far
as practicable, in a community. (Agcaoli,
supra., p. 390)
Period of Filing: Extended up to December 31,
2020 (Sec. 2, R.A. No. 9176)
Limitation to Area Applied for: Maximum of
twelve (12) hectares (Sec. 3, R.A. No. 6940)
Cadastral Registration Proceedings
(Sections 35-38 of P.D. No. 1529)
1. Cadastral Survey preparatory to filing of the
petition
(a) When in the opinion of the President of
the Philippines public interest so requires
that title to any unregistered lands be
settled and adjudicated, he may to this
end direct and order the Director of
Lands to cause to be made a cadastral
survey of the lands involved and the
plans and technical description thereof
prepared in due form.
(b) The Director of Lands shall give notice to
persons claiming any interest in the lands
as well as to the general public, of the
day on which such survey will begin,
giving as fully and accurately as possible
449
 the description of the lands to be
surveyed.
(c) The Geodetic Engineers or other
employees of the Bureau of Lands in
charge of the survey shall give notice
reasonably in advance of the date on
which the survey of any portion of such
lands is to begin, which notice shall be
posted in the bulletin board of the
municipal building of the municipality or
barrio in which the lands are situated,
and shall mark the boundaries of the
lands by monuments set up in proper
places thereon.
(d) It shall be the duty of every person
claiming an interest in the lands to be
surveyed, or in any parcel thereof, to
communicate with the Geodetic Engineer
upon his request therefor all information
possessed by such person concerning the
boundary lines of any lands to which he
claims title or in which he claims any
interest.
(e) Any person who shall willfully obstruct the
making of any survey undertaken by the
Bureau of Lands or by a licensed
Geodetic Engineer duly authorized to
conduct the survey under this Section, or
shall maliciously interfere with the
placing of any monument or remove such
monument, or shall destroy or remove
any notice of survey posted on the land
pursuant to law, shall be punished by a
fine of not more than one thousand
pesos or by imprisonment for not more
than one year, or both.
2. Petition for Registration
(a) When the lands have been surveyed or
plotted, the Director of Lands, represented by
the Solicitor General, shall institute original
registration proceedings by filing the
necessary petition in the Court of First
Instance of the place where the land is
situated against the holders, claimants,
possessors, or occupants of such lands or any
part thereof, stating in substance that public
interest requires that the title to such lands
be settled and adjudicated and praying that
such titles be so settled and adjudicated:
450
Contents of the Petition
The petition shall contain a description of the
lands and shall be accompanied by a plan
thereof, and may contain such other data as
may serve to furnish full notice to the
occupants of the lands and to all persons who
may claim any right or interest therein.
(b) Where the land consists of two or more
parcels held or occupied by different persons,
the plan shall indicate the boundaries or
limits of the various parcels as accurately as
possible.
(c) The cadastral number of a lot shall not be
changed after final decision has been entered
decreasing the registration thereof, except by
order of court. Future subdivisions of any lot
shall be designated by a letter or letters of
the alphabet added to the cadastral number
of the lot to which the respective subdivisions
pertain.
3. Answer to petition in cadastral proceedings
Any claimant in cadastral proceedings, whether
named in the notice or not, shall appear before
the court by himself or by some other authorized
person in his behalf, and shall file an answer on
or before the date of initial hearing or within such
further time as may be allowed by the court.
Contents of the Answer
(a) The age of the claimant;
(b) The cadastral number of the lot or lots
claimed, as appearing on the plan filed in the
case by the Director of Lands, or the block
and lot numbers, as the case may be;
(c) The name of the barrio and municipality in
which the lots are situated;
(d) The names and addresses of the owners of
the adjoining lots so far as known to the
claimant;
(e) If the claimant is in possession of the lots
claimed and can show no express grant of the
land by the government to him or to his
predecessors-in-interest, the answer shall
state the length of time he has held such
possession and the manner in which it has
been acquired, and shall also state the length
of time, as far as known, during which the
predecessors, if any, held possession;
 (f) If the claimant is not in possession or
occupation of the land, the answer shall
fully set forth the interest claimed by him
and the time and manner of his
acquisition;
(g) if the lots have been assessed for
taxation, their last assessed value; and
(h) The encumbrances, if any, affecting the
lots and the names of adverse claimants,
as far as known.
4. Hearing and Judgment
The trial of the case may occur at any convenient
place within the province in which the lands are
situated and shall be conducted, and orders for
default and confessions entered, in the same
manner as in ordinary land registration
proceedings and shall be governed by the same
rules.
All conflicting interests shall be adjudicated by the
court and decrees awarded in favor of the
persons entitled to the lands or to parts thereof
and such decrees shall be the basis for issuance
of original certificates of title in favor of said
persons and shall have the same effect as
certificates of title granted on application for
registration of land under ordinary land
registration proceedings.
I. REGISTRATION THROUGH
ADMINISTRATIVE PROCEEDINGS (C.A.
141, as amended)
Public lands suitable for agricultural purposes can
be disposed of only as follows, and not otherwise:
1. For Homestead Settlement
Who may apply?
Any citizen of the Philippines over the age of 18
years, or the head of a family, who does not own
more than twelve (12) hectares of land in the
Philippines or has not had the benefit of any
gratuitous allotment of more than twelve (12)
hectares of land since the occupation of the
Philippines by the United States, may enter a
homestead of not exceeding twenty-four
hectares of agricultural land of the public domain.
2. By Sale
Who may apply?
Any citizen of lawful age of the Philippines, and
any such citizen who is a head of a family. They
may purchase any tract of public agricultural land
disposable under this Act, not to exceed twelve
(12) hectares.
3. By lease
Who may apply?
(a) Any citizen of lawful age of the Philippines
(b) Any corporation or association of which at
least sixty per centum (60%) of the capital
stock or of any interest in said capital stock
belongs wholly to citizens of the Philippines,
and which is organized and constituted under
the laws of the Philippines.
They may lease any tract of agricultural
public land available for not exceeding a total
of one thousand (1,000) hectares, for
corporations and five hundred hectares, for
individuals.
No member, stockholder, of officer,
representative, attorney, agent, employee or
bondholder of any corporation or association
holding or controlling agricultural public land
shall apply, directly or indirectly, for
agricultural public land shall apply, directly or
indirectly, for agricultural public land except
under the homestead and free patent
provisions of this act. Provided, That no lease
shall be permitted to interfere with any prior
claim by settlement or occupation, until the
consent of the occupant or settler is first had,
or until such claim shall be legally
extinguished, and no person, corporation, or
association shall be permitted to lease lands
hereunder which are not reasonably
necessary to carry on his business in case of
an individual, or the business for which it was
lawfully created and which it may lawfully
pursue in the Philippines, if an association or
corporation.
451
4. By Confirmation of Imperfect or
Incomplete Titles
By Judicial Legalization
Who may apply?
(a) Those who, prior to the transfer of
sovereignty from Spain to the United States,
have applied for the purchase, composition
or other form of grant of lands of the public
domain under the laws and royal decrees
then in force and have instituted and
prosecuted the proceedings in connection
therewith, but have with or without default
upon their part, or for any other cause, not
received title therefore, if such applicants or
grantees and their heirs have occupied and
cultivated said lands continuously since the
filing of their applications.
(b) Those who, by themselves or through their
predecessors in interest, have been in open,
continuous, exclusive, and notorious
possession and occupation of agricultural
lands of the public domain, under a bona fide
claim of acquisition or ownership, for at least
thirty (30) years immediately preceding the
filing of the application for confirmation of
title except when prevented by war or force
majeure. These shall be conclusively
presumed to have performed all the
conditions essential to a Government grand
and shall be entitled to a certificate of title.
(c) Members of the national cultural minorities
who by themselves or through their
predecessors-in-interest have been in open,
continuous, exclusive and notorious public
domain suitable to agriculture, whether
disposable or not, under a bona fide claim of
ownership for at least thirty (30) years shall
be entitled to the rights granted in sub-Sec.
(b) hereof.
5. By Administrative Legalization (Free
Patent)
(a) Any natural-born citizen of the Philippines
who is not the owner of more than twelve
(12) hectares and who since July 4, 1926 or
prior thereto, has continuously occupied and
cultivated, either by himself or through his
predecessors-in-interest, a tract or tracts of
agricultural public lands subject to
disposition, or who shall have paid the real
estate tax thereon while the same has not
been occupied by any person shall be entitled
452
to have a free patent issued to him for such
tract or tracts of such land not to exceed
twelve (12) hectares.
(b) A member of the national cultural minorities
who has continuously occupied and
cultivated, either by himself or through his
predecessors-in-interest, a tract or tracts of
land, whether disposable or not since July 4,
1955. Provided, that at the time he files his
free patent application he is not the owner of
any real property secured or disposable
under this provision of the Public Land Law.
6. Socialized Housing (R.A. No. 7292)
Socialized housing refers to housing programs
and projects covering houses and lots or home
lots only undertaken by the Government or the
private sector for the underprivileged and
homeless citizens which shall include sites and
services development, long-term financing,
liberalized terms on interest payments, and such
other benefits.
Eligibility Criteria for Socialized Housing:
1. Must be a Filipino citizen;
2. Must be an underprivileged citizen;
3. Must not own any real property;
4. Must not be a professional squatter. (Sec. 16.
R.A. No. 7292)
Right to Adequate Housing under Magna
Carta of the Poor (R.A. No. 1129)
The Right to Adequate Housing is the right to
have a decent, affordable, safe and culturally
appropriate place to live in with dignity, security
of tenure in accordance with the "Urban
Development and Housing Act of 1992", in peace,
with access to basic services, facilities, and
livelihood. (Sec. 4[d], R.A. No. 11291)
It shall be the duty of the Housing and Urban
Development Coordinating Council and other
implementing agencies to ensure:
1. That it shall prioritize the implementation of
socialized housing program with identified
appropriate subsidies;
2. To immediately construct and provide
housing facilities for families living in
identified hazardous/danger zones, and in
 areas affected by disasters/calamities where
the housing needs of the poor are urgent;
3. Create an enabling environment that will
assist the poor gain access to security of
tenure with the least financial burden; and
4. Provide a system consisting of simple
requirements and procedures, and
expeditious processing and approval
especially for community-based socialized
housing/people’s proposals. (Sec. 4[d], R.A.
No. 11291)
J. RECONSTITUTION OF TITLES
It is the restoration of the instrument or title
allegedly lost or destroyed in its original form and
condition. Its only purpose is to have the title
reproduced, after observing the procedure
prescribed by law, in the same form they were
when the loss or destruction occurred. The
process involves diligent circumspect evaluation
of the authenticity and relevance of all the
evidence presented for fear of the chilling
consequences of mistakenly issuing a
reconstituted title when in fact the original is not
truly lost or destroyed. (Dela Paz vs. Republic, G.R.
No. 195726, November 20, 2017)
Requisites for the issuance of an order for
reconstitution
(a) that the certificate of title had been lost or
destroyed;
(b) that the documents presented by petitioner
are sufficient and proper to warrant
reconstitution of the lost or destroyed
certificate of title;
(c) that the petitioner is the registered owner of
the property or had an interest therein;
(d) that the certificate of title was in force at the
time it was lost or destroyed; and
(e) that the description, area and boundaries of
the property are substantially the same as
those contained in the lost or destroyed
certificate of title. (Republic vs. Catarroja, G.R.
No. 171774, February 12, 2010)
Jurisdictional requirements in petitions
Notice of Hearing, thereof shall be:
a) Published twice in successive issues of the
Official Gazette;
b) Posted on the main entrance of the provincial
building and of the municipal building of the
municipality or city, where the land is
situated; and
c) Sent by registered mail to every person
named in said notice. (Sec. 13 of R.A. 26)
NOTE: Publication is a jurisdictional requirement
and noncompliance therewith is fatal to the
petition for reconstitution of title.
Kinds of Reconstitution
A. Judicial
It partakes of the nature of a land registration
proceeding in rem. The registered owners,
assigns, or any person having an interest in the
property may file petition for that purpose with
RTC where property is located.
Sources for Judicial Reconstitution of Title
The petition for judicial reconstitution must also
be supported by any of the following:
A. For Original Certificate of Transfer (OCT)
a. The owner's duplicate of the certificate of
title;
b. The co-owners’, mortgagee's, or lessee's
duplicate of the certificate of title;
c. A certified copy of the certificate of title,
previously issued by the register of deeds or
by a legal custodian thereof;
d. An authenticated copy of the decree of
registration or patent, as the case may be,
pursuant to which the original certificate of
title was issued;
e. A document, on file in the registry of deeds,
by which the property, the description of
which is given in said document, is
mortgaged, leased or encumbered, or an
authenticated copy of said document
showing that its original had been registered;
and
f. Any other document which, in the judgment
of the court, is sufficient and proper basis for
reconstituting the lost or destroyed certificate
of title. (Sec. 2, R.A. 26)
B. For Transfer Certificate of Title (TCT):
a. The owner's duplicate of the certificate of
title;
453
b. The co-owners’, mortgagee's, or lessee's Sources for Administrative Reconstitution
duplicate of the certificate of title; of Title
c. A certified copy of the certificate of title,
previously issued by the register of deeds or a. Owner’s duplicate certificate of title; and if
by a legal custodian thereof; absent
d. The deed of transfer or other document, on
file in the registry of deeds, containing the b. Co-owners’, mortgagee’s, or lessee’s
description of the property, or an duplicate of said certificate
authenticated copy thereof, showing that its
original had been registered, and pursuant to Retroactive application
which the lost or destroyed transfer
certificate of title was issued; The law provides for retroactive application
e. A document, on file in the registry of deeds, thereof to cases fifteen (15) years immediately
by which the property, the description of preceding 1989. (Sec. 14, R.A. No. 6732)
which is given in said document, is
mortgaged, leased or encumbered, or an
authenticated copy of said document
showing that its original had been registered;
and
f. Any other document which, in the judgment
of the court, is sufficient and proper basis for
reconstituting the lost or destroyed certificate
of title. (Sec. 3, R.A. 26)

B. Administrative

It may be availed of only in case of:

1. Substantial loss or destruction of land titles

due to fire, flood or other force majeure as
determined by the Administrator of the Land
Registration Authority;

2. The number of certificates of titles lost or

damaged should be at least ten percent
(10%) of the total number in the possession
of the Office of the Register of Deeds;

3. In no case shall the number of certificates of

titles lost or damaged be less than five
hundred (500);

4. Petitioner must have the duplicate copy of

the certificate of title. (Sec. 1, R.A. No. 6732,
amending Sec. 110 of P.D. No. 1529)

454
 III. PRACTICAL EXERCISES

A. DEMAND AND AUTHORIZATION LETTERS

Sample form: DEMAND LETTER

(Date)

(Addressee)
(Address)

FINAL DEMAND TO PAY

Dear, Mr./Ms. ___________

We write on behalf of our client, (Name of Client)., the matter of your non-payment of your obligation.

Records disclose that you have an outstanding obligation with our client in the amount of Php (amount of
obligation) inclusive of interest and surcharges. Despite repeated demands, you failed and continuously
failed to pay the aforesaid amount.

Accordingly, final demand is hereby made upon you to settle the amount of Php (amount of obligation)
within (no. of days) from receipt of this letter. Otherwise, we will be constrained to file the necessary legal
action against you to protect the interest of our client.

We trust that you will give this matter your prompt and preferential attention to avoid the expense and
inconvenience of litigation.

Respectfully,

ATTY. (Name of Counsel)

Counsel of Mr./Ms. (Name of person making the demand)

455
Sample Form: LETTER OF AUTHORIZATION

(Date)

(Addressee)
(Address)

AUTHORIZATION

Dear, Mr./Ms. ___________

I, (Name of authorizing person), hereby authorize (Name of authorized person), my (Relationship), to act
on my behalf in all necessary transactions concerning (State personal circumstance/matters, as applicable) .
A copy of my (Indicate type of Identification) ID is with her/him for your reference. Thank you.

(Name of Authorizing Person)

or

(Date)

To Whom It May Concern:

I, (Name), give full authorization to (Name of Representative) receive, sign, and transact any
communication with any representative of (Name or Type of courier) in connection with (State personal
circumstance/matters, as applicable) .

Thank you very much.

Sincerely,

(Signature over Complete Name)

456
Sample Form: SPECIAL POWER OF ATTORNEY

REPUBLIC OF THE PHILIPPINES )

CITY OF (Name of City / Municipality ) S.S

SPECIAL POWER OF ATTORNEY

THIS SPECIAL POWER OF ATTORNEY IS ENTERED BETWEEN:

(Name of Principal), the Principal,

And

(Name of Agent), the Agent.

(State personal circumstances: Name, Age, Address, Citizenship ), do hereby appoint, (Name of Attorney-
in-fact and state personal circumstances) to be my true and lawful attorney-in-fact, to do and perform the
following acts:

1. (Enumerate the powers to be given to Attorney-in-fact)

HEREBY GIVING AND GRANTING unto my said attorney-in-fact full power and authority to do and perform
any and every act and thing whatsoever requisite, necessary to be done in and about the premises as fully
to all intents and purpose as I might or could lawfully do if personally present and hereby ratifying and
confirming all that my said attorney-in-fact shall lawfully do and cause to be done under by virtue of these
presents.

(Place) and (Date)

CONFORME:

(Name of Principal) (Name of Attorney-in-fact)

Principal Attorney-in-fact

SIGNED IN THE PRESENCE OF:

(Name of Witness) (Name of Witness)

[ACKNOWLEDGMENT]

457
B. SIMPLE CONTRACTS

Sample Form: CONTRACT OF LEASE

CONTRACT OF LEASE

THIS CONTRACT OF LEASE IS ENTERED INTO BETWEEN:

(State personal circumstances: Name, Age, Address, Citizenship ), and hereinafter referred to as the
LESSOR;

And

(State personal circumstances: Name, Age, Address, Citizenship), and hereinafter referred to as the
LESSEE;

WITNESSETH THAT:

The LESSOR sub-leases a (State kind the property being leased), in favor of the LESSEE, for (State purpose
of lease), within (Period of lease), commencing on (Date), for and in consideration of the monthly rental in
the amount of (Amount in words and in figures) Philippine Currency;

(State other circumstances pertaining to the lease: Date of payment, Amount of payment, Place and Time
of payment, and Tender of Payment);

(Place) and (Date)

(Name of Lessor) (Name of Lessee)

Lessor Lessee

SIGNED IN THE PRESENCE OF:

(Name of Witness) (Name of Witness)

Witness Witness

[ACKNOWLEDGMENT]

458
Sample Form: DEED OF ABSOLUTE SALE

DEED OF ABSOLUTE SALE

THIS DEED OF ABSOLUTE SALE IS MADE AND EXECUTED BY:

(State personal circumstances: Name, Age, Address, Citizenship ), herein represented by their
Attorney in fact,(Name of Attorney-in-fact and state personal circumstances), respectively, are hereinafter
referred to collectively as SELLER;

And

(State personal circumstances: Name, Age, Address, Citizenship) and herein represented by (State
personal circumstances of representative: Name, Age, Address, Citizenship ), hereinafter referred as the
BUYER;

WITNESSETH THAT:

WHEREAS, SELLER is the absolute and registered owner in fee simple of a parcel of land with TCT
No. ______, registered under the name of (Name) , for the Registry of Deeds of (Place) , containing a total
area of ( Description of the parcel of land) , more or less;

WHEREAS, SELLER offered to sell said lot and the BUYER is willing to buy and has accepted the
offer;

NOW therefore, for and in consideration of the foregoing premises, the parties hereby agree and
the stipulate the following:

1. In consideration of the payment by the BUYER of the amount of (Amount in PHP) Philippine
currency, receipt of which is hereby acknowledged by the SELLER, and SELLER hereby SELLS, CEDES,
TRANSFERS and CONVEYS by way of absolute sale the above-mentioned improvement unto the BUYER,
their heirs, assigns and successors-in-interest free from all liens and encumbrances.

(State here the stipulation made by the parties)

(Date), (Place).

(Name of Seller) (Name of Seller’s Spouse)

Seller Marital Consent (if necessary)

(Name of Buyer)
Buyer

SIGNED IN THE PRESENCE OF:

(Name of Witness) (Name of Witness)

Witness Witness
[ACKNOWLEDGMENT]

459
Sample Form: DEED OF SALE OF PERSONAL PROPERTY

DEED OF SALE OF PERSONAL PROPERTY

KNOW ALL MEN BY THESE PRESENTS:

I, (State personal circumstances: Name, Age, Address, Citizenship), hereinafter known as

VENDOR;
And

(State personal circumstances: Name, Age, Address, Citizenship), hereinafter known as VENDEE;

WITNESSETH THAT:

1. The VENDOR is the absolute owner of (State description of the property owned)

2. That for and in consideration of the sum of (Amount of consideration), receipt of which I hereby
acknowledge, I hereby SELL, TRANSFER and CONVEY to the VENDEE, his heirs, assigns and
transferees, the aforesaid described automobile vehicle, free from all liens and encumbrances;

3. That the VENDEE undertakes to pay all taxes, registration and transfer fees.

(Date), (Place).

(Name of Vendor) (Name of Vendee)

Vendor Vendee

SIGNED IN THE PRESENCE OF:

(Name of Witness) (Name of Witness)

Witness Witness

[ACKNOWLEDGMENT]

460
Sample Form: ACKNOWLEDGEMENT

REPUBLIC OF THE PHILIPPINES )

CITY OF(Name of City / Municipality ) S.S.

BEFORE ME, this ____ day of ____, _____ in the City of _________, personally appeared:

Name Competent Evidence of Identity Place and Date of Issue

_______________ ___________________ ___________________
_______________ ___________________ ___________________

known to me to be the same persons who executed the foregoing instrument, and acknowledged that
the same are their free act and deed.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal on the (Date
and Place).

NOTARY PUBLIC
Commission Expires on _______
Commission No.___: (Place) (Date)
Roll No. ____;
IBP No. ____;
PTR No. ____;
MCLE No.____.
(Office Address)
(Contact Details)

Doc. No. _____:

Page No. _____;
Book No. _____;
Series of _____.

461
C. CIVIL COMPLAINT

Sample Form: COMPLAINT

REPUBLIC OF THE PHILIPPINES

_____________ JUDICIAL REGION
_________TRIAL COURT
_________ CITY, BRANCH _______

(Name of Plaintiff)
Plaintiff, CIVIL CASE NO. _____

FOR: _______________
-versus-

(Name of Defendant)
Defendant,
x-------------------------------------------x

COMPLAINT

Plaintiff, through counsel, states that,

1. (State personal circumstances of Plaintiff: Name, Age, Address, Citizenship );

2. (State personal circumstances of Defendant: Name, Age, Address, Citizenship );
3. (Details of the allegation).

PRAYER

Plaintiff respectfully prays that:

1. (State reliefs prayed for).

Other equitable reliefs as the court sees fit are likewise prayed for.
(Place), (Date)

(signed)
Atty. (Name of Counsel)
Roll No.: _____;
IBP No.:_____;
PTR No.: _____;
MCLE No.: _____;
Telephone No.:____;
Email Address:____.

462
REPUBLIC OF THE PHILIPPINES)
CITY OF (Name of City / Municipality ) S.S

VERIFICATION AND CERTIFICATION AGAINST FORUM SHOPPING

I, (State personal circumstances: Name, Age, Address, Citizenship of Plaintiff ) respectfully states
that:

1. I am the plaintiff in the above-entitled case;

2. I have caused the preparation of the foregoing complaint and read the pleading;
3. The allegations in the pleading are true and correct based on his personal knowledge, or based on
authentic documents;
4. The pleading is not filed to harass, cause unnecessary delay, or needlessly increase the cost of
litigation;
5. The factual allegations therein have evidentiary support or, if specifically so identified, will likewise
have evidentiary support after a reasonable opportunity for discovery;
6. I have not commenced any action or filed any claim involving the same issue in any court, tribunal,
or quasi-judicial agency and, to the best of my knowledge, no such other action or claim is pending
therein;
7. If there is such other pending action or claim, a complete statement of the present status thereof;
and
8. If I should thereafter learn that the same or similar action or claim has been filed or is pending, I
shall report that fact within five (5) calendar days therefrom to the court wherein aforesaid
complaint or initiatory pleading has been filed.

IN WITNESS WHEREOF, I hereunto affix my signature this (Date and Place where signed).

(signed)
(Name of Affiant)
Affiant

[JURAT]

463
Sample Form: CERTIFICATE OF NON-FORUM SHOPPING

REPUBLIC OF THE PHILIPPINES)

CITY OF (Name of City / Municipality ) S.S.

CERTIFICATION OF NON-FORUM SHOPPING

I, I, (State personal circumstances: Name, Age, Address, Citizenship of Affiant ), after having been sworn
in accordance with law, depose and state that:

1. I am the petitioner (Respondent/Plaintiff/Defendant) in the above-entitled case and have

caused the preparation of the foregoing petition (complaint/pleading);

2. I have not commenced any action or filed any claim involving the same issues in any court,
tribunal or quasi-judicial agency and , to the best of my knowledge, no such other action or claim
is pending therein;

3. If there is such other pending action or claim, I will furnish this Honorable Court with a
complete statement of the present status thereof; and

4. If I should thereafter learn that the same or similar action or claim has been filed or is
pending, I shall report that fact within five (5) days therefrom to this Honorable Court wherein
my aforesaid petition (complaint/pleading) has been filed.

IN WITNESS WHEREOF, I hereunto affix my signature this (Date and Place where signed).

(signed)
(Name of Affiant)
Affiant

[JURAT]

464
Sample Form: JURAT

JURAT

SWORN and SUBSCRIBED to before me this (Date) in (Place), with the affiant, (Name of Plaintiff),
presenting his (Type of Identification) with (I.D. Number) issued on (Date of Issuance at (Place / Office
where I.D. was issued) as proof of his identity.

(signed)
NOTARY PUBLIC
Commission Expires on (place)(date)
Commission No. ____:
Roll No.: ____;
IBP No.: ____;
PTR No.: ____;
MCLE No.: ___.
(Office Address)
(Contact Details)

Doc. No. _____;

Page No. _____;
Book No. _____;
Series of _____.

HAIL TO THE CHIEFS!!!

465