uribe notes

MOTO-Q NOTESMorales, Occiano, Tongcua, Occiano, Quitain

Atty. Crisostomo Uribe Notes in Civil Law Review 2

I. OBLIGATIONS 20% Midterm30% quizzes and recitations50% finals

Digest – Sales; starting with Sanchez v. Rigos

- 2 quizzes in oblicon- Certification that the digest is

complete and is in your own handwriting - from 2 classmates

- - cases penned by justice Azcuna - 2 quizzes

OBLICON – TolentinoSales – BavieraPartnership – Bautista

Common Law – general and ordinary law of a country/ community; unwritten law founded on memorial usage and natural justice and reason.

Passive solidarity – not always one debtor; may/ may have 2 or more debtors/creditors.

When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void – this is true only in resolutory conditions.

Alternative conditions – simple when choice has already been communicated! If not communicated there is no consent.

Facultative conditions – is the choice always with the creditor?

Obligations:

Art. 1156. An obligation is a juridical necessity to give, to do or not to do. (n)

- it is a civil obligation because of the phrase juridical necessity.

Q: Does a creditor have a right under natural obligations?A: Yes

Q: Suppose a promissory note was made:

1/2/93

I promise to pay B P1M

AIs it civil or natural?A: It may be civil or natural. Civil-within 10 years prescriptive period; natural-beyond ten years.

Q: If it was made beyond the prescriptive period, may it be considered a civil obligation?A: Yes. If prescriptive period was interrupted or if no written demand was made. Only if demanded within the prescriptive period may it be due and demandable.

Q: Is consent one of the essential elements of obligations?A: NO. It is true only with contracts.

Essential elements of obligation:

1. Active Subject – creditor/obligeeQ: Is any kind of person subject to obligation?A: Yes. Not only Natural persons but also juridical entities/persons.

2. Prestation – to give, to do, or not to do.

Q: Is it a thing?A: No. It is the particular conduct of the debtor.

3 Juridical tie – vinculum juris- that which binds the parties.

Q: When can there be a tie? What creates a tie?A: when there is an existence of the source of obligation.

Sources of Obligation:

Art. 1157. Obligations arise from:

(1) Law;

(2) Contracts;

BOGS QUITAIN; TERE MORALES; PAULETTE TONGCUA; TINO OCCIANO; BUDS OCCIANO 1



(3) Quasi-contracts;

(4) Acts or omissions punished by law; and

(5) Quasi-delicts. (1089a)

QUASI CONTRACTS:

Kinds:

1.Nominate:

a.) solutio indebitib.) Negotiorum gestio

2. Innominate – Articles 2164-2175

SECTION 3. - Other Quasi-Contracts Art. 2164. When, without the knowledge of the person obliged to give support, it is given by a stranger, the latter shall have a right to claim the same from the former, unless it appears that he gave it out of piety and without intention of being repaid. (1894a)

Art. 2165. When funeral expenses are borne by a third person, without the knowledge of those relatives who were obliged to give support to the deceased, said relatives shall reimburse the third person, should the latter claim reimbursement. (1894a)

Art. 2166. When the person obliged to support an orphan, or an insane or other indigent person unjustly refuses to give support to the latter, any third person may furnish support to the needy individual, with right of reimbursement from the person obliged to give support. The provisions of this article apply when the father or mother of a child under eighteen years of age unjustly refuses to support him.

Art. 2167. When through an accident or other cause a person is injured or becomes seriously ill, and he is treated or helped while he is not in a condition to give consent to a contract, he shall be liable to pay for the services of the physician or other person aiding him,

unless the service has been rendered out of pure generosity.

Art. 2168. When during a fire, flood, storm, or other calamity, property is saved from destruction by another person without the knowledge of the owner, the latter is bound to pay the former just compensation.

Art. 2169. When the government, upon the failure of any person to comply with health or safety regulations concerning property, undertakes to do the necessary work, even over his objection, he shall be liable to pay the expenses.

Art. 2170. When by accident or other fortuitous event, movables separately pertaining to two or more persons are commingled or confused, the rules on co-ownership shall be applicable.

Art. 2171. The rights and obligations of the finder of lost personal property shall be governed by Articles 719 and 720.

Art. 2172. The right of every possessor in good faith to reimbursement for necessary and useful expenses is governed by Article 546.

Art. 2173. When a third person, without the knowledge of the debtor, pays the debt, the rights of the former are governed by Articles 1236 and 1237.

Art. 2174. When in a small community a nationality of the inhabitants of age decide upon a measure for protection against lawlessness, fire, flood, storm or other calamity, any one who objects to the plan and refuses to contribute to the expenses but is benefited by the project as executed shall be liable to pay his share of said expenses.

Art. 2175. Any person who is constrained to pay the taxes of another shall be entitled to reimbursement from the latter.




certain lawful, unilateral act must concur. For negotiorum gestio- there must be abandonment.

BAR EXAM QUESTION:

A bought a pack of cigar worth P225.00. He paid P375.00. What relationship was created?

A: Quasi contract; solutio indebiti

Q: A had a fishpond. Lawless events forced to go to Manila and then Europe. B, who has in the business of buying and selling fish, realized that it was harvest time, harvested the fish and sold them to X. B borrowed money from Y in order to buy the fingerlings.

a. What Juridical relationship was created between A and B?

A: Negotiorum gestio

b. What juridical relationship was created by A with respect to B and X?

A: to remit the sale of fish sold to X

c. A with respect to B and Y?

A: A must pay the loan to B because it was for the benefit of A.

d. If A ratified the acts of B, what will happen?

A: A shall be indebted to B

Q: Is innominate quasi contract exclusive?

A: No. Acts or omissions punishable by law.-> crimes and delicts.

felony is limited only to the RPC.

Requisites for it to arise:

There must be a conviction. Proof beyond reasonable doubt.

Q: Is there a crime where there is no civil liability?

A: Justifying Circumstances.

QUASI DELICT:

Quasi-delict = culpa aquiliana

- it is not culpa extra contractual or torts.

Culpa extra contractual includes:

1. contractual2. Extra contractual – includes

other sources under 1157.

Pineda would say that torts is not quasi-delict because torts include malicious and negligent acts.

Atty. Uribe does not agree with him. Torts is the same as quasi delict.

Art. 2177. Responsibility for fault or negligence under the preceding article is entirely separate and distinct from the civil liability arising from negligence under the Penal Code. But the plaintiff cannot recover damages twice for the same act or omission of the defendant. (n)

Cangco v. Manila Railroad (18 Phil 768)

Q: What were the defendant's defenses?

A: plaintiff was negligent; defendant exercised due diligence in selecting its employees. (not a good defense. It is raised only in quasi delict.MRR’s liability was based on contract of carriage.)

Q: Was it the negligence of Cangco?




A: No. the proximate cause was the bulk of watermelon. It was dimly lighted. There is negligence considering the person, time and place.

Gutierrez v. Gutierrez (56 Phil 177)

- there were 5 defendants. 3 were held liable. The mother and child were not held liable.

Q: A obliged himself the following to B: a. to give a refrigerator, model 123; b. an 18 inch TV set; c. fix piano of B. A failed to perform any. What are the remedies?

A: Determine first the nature of the thing to be delivered whether determinate or indeterminate:

a. determinate/specific(ref)- specific performance plus damages.

b. Generic (TV) – to have another person perform at the expense of the debtor.

c. Service (to do) – damages;involuntary servitude.

Generic – depends on the purpose and circumstances.

July 7, 2007 (7/7/07)

Compliance of Obligation; specific obligation of the debtor; different kinds of obligation – joint solidary.

July 10 and 28 -make up class

Compliance – determine the kind of obligation; determine the purpose.

BAR EXAM QUESTION:

There was an obligation on the part of A to deliver mangoes on july 1, 2006, 6

months after agreement with B. One month before delivery, A sold to the fruit to X. Can B recover the fruits from X?

A: No. B has no real rights over the fruits since it was not delivered to him.

KINDS OF OBLIGATIONS AS TO PERFECTION AND EXTINGUISHMENT:

Q: promissory note:

1/2/93

I promise to pay B P1M

AWhat kind of obligation?

A: Pure Obligation even if suspensive or postestative condition, the debtor may be compelled if there is a pre existing condition.Impossible Conditions:

If with a term – shall annul conditionIf without a term – it is voidIf negative impossible – valid condition

Art. 1187. The effects of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation. Nevertheless, when the obligation imposes reciprocal prestations upon the parties, the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. If the obligation is unilateral, the debtor shall appropriate the fruits and interests received, unless from the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the same was different.

Reciprocal – saleUnilateral – donation

Q: A obliged himself to B to deliver a thing on September 2005, after they agreed in January 2003. A however




delivered it to in April of 2003. Who has a better right? What about C?A: B has a better right. C will have a better right if he acted in good faith.* with regard to improvements, if voluntarily made by the debtor, no other right than usufructuary.

BAR EXAM QUESTION:

Q: A borrowed P1M from B payable at the end of the year; A delivered a car as stipulated, B may use the car. On August 1, A offered to pay P1M, can B be compelled to accept P1M?

A: It depends on whose benefit the term was constituted. If for the benefit of both parties, there may be no compulsion. If for the benefit of the debtor, creditor may be compelled to accept.

Instances for the benefit of the debtor:1. on or before2. Not later than3. within ___ mos.

Q: A borrowed from B P1M, payable at the end of the year. August 1, creditor demanded a mortgage constituted on the house of A. No mortgage was delivered. On Aug.16, can creditor demand? When?

A: When he loses the right to make use of the period. If debtor has promised, in this case the debtor did not promise anything.

Q: If insolvent, will he lose his right?

A: No, if he furnishes a guaranty which is acceptable to the creditor.

Q: How will he be insolvent?

A: by giving one or more of his property.

Q: What if he has no assets?

A: third person may guarantee.

Art. 1198. The debtor shall lose every right to make use of the period:

(1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the debt;

(2) When he does not furnish to the creditor the guaranties or securities which he has promised;

(3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through a fortuitous event they disappear, unless he immediately gives new ones equally satisfactory;

(4) When the debtor violates any undertaking, in consideration of which the creditor agreed to the period;

(5) When the debtor attempts to abscond. (1129a)

Lim v. People (133 SCRA 333)

-> merely an agent; 1197 is not applicable. Period “as soon as sold”

Millares v. Hernando (151 SCRA 484)

-> 1197 is not applicable.

Art. 1197. If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was intended, the courts may fix the duration thereof.

The courts shall also fix the duration of the period when it depends upon the will of the debtor.

In every case, the courts shall determine such period as may under




the circumstances have been probably contemplated by the parties. Once fixed by the courts, the period cannot be changed by them. (1128a)

AS TO PLURALITY OF PRESTATION:

SECTION 3. - Alternative Obligations Art. 1199. A person alternatively bound by different prestations shall completely perform one of them.

The creditor cannot be compelled to receive part of one and part of the other undertaking. (1131)

Art. 1200. The right of choice belongs to the debtor, unless it has been expressly granted to the creditor.

The debtor shall have no right to choose those prestations which are impossible, unlawful or which could not have been the object of the obligation. (1132)

Art. 1201. The choice shall produce no effect except from the time it has been communicated. (1133)

Art. 1202. The debtor shall lose the right of choice when among the prestations whereby he is alternatively bound, only one is practicable. (1134)

Art. 1203. If through the creditor's acts the debtor cannot make a choice according to the terms of the obligation, the latter may rescind the contract with damages. (n)

Art. 1204. The creditor shall have a right to indemnity for damages when, through the fault of the debtor, all the things which are alternatively the object of the obligation have been lost, or the compliance of the obligation has become impossible.

The indemnity shall be fixed taking as a basis the value of the last thing which disappeared, or that of the service which last became impossible.

Damages other than the value of the last thing or service may also be awarded. (1135a)

Art. 1205. When the choice has been expressly given to the creditor, the obligation shall cease to be alternative from the day when the selection has been communicated to the debtor.

Until then the responsibility of the debtor shall be governed by the following rules:

(1) If one of the things is lost through a fortuitous event, he shall perform the obligation by delivering that which the creditor should choose from among the remainder, or that which remains if only one subsists;

(2) If the loss of one of the things occurs through the fault of the debtor, the creditor may claim any of those subsisting, or the price of that which, through the fault of the former, has disappeared, with a right to damages;

(3) If all the things are lost through the fault of the debtor, the choice by the creditor shall fall upon the price of any one of them, also with indemnity for damages.

The same rules shall be applied to obligations to do or not to do in case one, some or all of the prestations should become impossible. (1136a)

Art. 1206. When only one prestation has been agreed upon, but the obligor may render another in substitution, the obligation is called facultative.

The loss or deterioration of the thing intended as a substitute, through the negligence of the obligor, does not render him liable. But once the substitution has been made, the obligor is liable for the loss of the substitute on account of his delay,




negligence or fraud. (n)

a.) alternativeb.) facultativec.) conjunctive – 2 or more

prestations which shall be complied with.

Example:

I promise to __,__,and ___ (conjunctive)

I promise to __,__,or ___ (alternative)

In conjunctive and facultative, no choice is made.

In alternative, choice is with debtor unless:

Art. 1205. When the choice has been expressly given to the creditor, the obligation shall cease to be alternative from the day when the selection has been communicated to the debtor.

* choice must be communicated. (relevant if one of the prestation was lost)

1. if fault of debtor after communication – debtor is liable.

2. if loss happened before communication due to fortuitous event – debtor may still choose from the remaining.

IF FAULT WAS DUE TO ONE OF THE PARTIES; MAKE A DISTINCTION, WHO HAS AT FAULT AND WHO HAS THE CHOICE:

1. Choice of debtor; fault of creditor.

- debtor may choose from those remaining or debtor may opt to rescind the obligation.

2. Choice of creditor; fault of debtor.

- creditor may opt to choose from those remaining or that value of which was lost plus damages.

Example:

Choice of debtor, first prestations were lost due to his fault, only one is left and yet was lost through fortuitous event.

- debtor can’t be held liable.

In alternative, if all prestations were lost due to the fault of the debtor?

depends on who has the right to choose:

1. if debtor: value of last prestation plus damages.

2. if creditor’s choice: anything of those lost plus damages.

In Facultative: involves 2 or more prestations but only one is due.

- if one is lost, depends if there was a communication.

Tolentino: if debtor destroys the substitute, it doesn’t matter.

Q: What if debtor refuses to make a choice?

A: Creditor file an action in the alternative.

Final exams/ midterms (might be asked)

In July 1, 2003, A and B entered into an agreement. When it fell due, B failed to fulfill and was in delay. (Sir said that he is not in delay, because there was no demand.)

Q: When can debtor make a choice of the substitution?

A: He can make a choice even before it becomes due and demandable.




Facultative vs. Penal clause (there should be non-compliance.)

AS TO THE RIGHTS AND OBLIGATION OF MULTIPLE PARTIES:

SECTION 4. - Joint and Solidary Obligations

Art. 1207. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestation. There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity. (1137a)

Art. 1208. If from the law, or the nature or the wording of the obligations to which the preceding article refers the contrary does not appear, the credit or debt shall be presumed to be divided into as many shares as there are creditors or debtors, the credits or debts being considered distinct from one another, subject to the Rules of Court governing the multiplicity of suits. (1138a)

Art. 1209. If the division is impossible, the right of the creditors may be prejudiced only by their collective acts, and the debt can be enforced only by proceeding against all the debtors. If one of the latter should be insolvent, the others shall not be liable for his share. (1139)

Art. 1210. The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of itself imply indivisibility. (n)

Art. 1211. Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions. (1140)

Art. 1212. Each one of the solidary creditors may do whatever may be

useful to the others, but not anything which may be prejudicial to the latter. (1141a)

Art. 1213. A solidary creditor cannot assign his rights without the consent of the others. (n)

Art. 1214. The debtor may pay any one of the solidary creditors; but if any demand, judicial or extrajudicial, has been made by one of them, payment should be made to him. (1142a)

Art. 1215. Novation, compensation, confusion or remission of the debt, made by any of the solidary creditors or with any of the solidary debtors, shall extinguish the obligation, without prejudice to the provisions of Article 1219.

The creditor who may have executed any of these acts, as well as he who collects the debt, shall be liable to the others for the share in the obligation corresponding to them. (1143)

Art. 1216. 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. (1144a)

Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept.

He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made. If the payment is made before the debt is due, no interest for the intervening period may be demanded.

When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying the obligation, such share shall




be borne by all his co-debtors, in proportion to the debt of each. (1145a)

Art. 1218. Payment by a solidary debtor shall not entitle him to reimbursement from his co-debtors if such payment is made after the obligation has prescribed or become illegal. (n)

Art. 1219. The remission made by the creditor of the share which affects one of the solidary debtors does not release the latter from his responsibility towards the co-debtors, in case the debt had been totally paid by anyone of them before the remission was effected. (1146a)

Art. 1220. The remission of the whole obligation, obtained by one of the solidary debtors, does not entitle him to reimbursement from his co-debtors. (n)

Art. 1221. If the thing has been lost or if the prestation has become impossible without the fault of the solidary debtors, the obligation shall be extinguished.

If there was fault on the part of any one of them, all shall be responsible to the creditor, for the price and the payment of damages and interest, without prejudice to their action against the guilty or negligent debtor.

If through a fortuitous event, the thing is lost or the performance has become impossible after one of the solidary debtors has incurred in delay through the judicial or extrajudicial demand upon him by the creditor, the provisions of the preceding paragraph shall apply. (1147a)

Art. 1222. A solidary debtor may, in actions filed by the creditor, avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him, or pertain to his own share. With respect to those which personally belong to the others, he may avail himself thereof only as

regards that part of the debt for which the latter are responsible. (1148a)

1. Joint obligation2. Solidary obligation

In the exams if A, B and C are debtors and X and Y are creditors, and it speaks of solidarity, presume solidarity on both sides.

BAR EXAM QUESTION:

Q: A and B obliged themselves to deliver 1thousand pesos worth of specific sacks of rice to X and Y. What is the type of obligation?

A: It is a joint obligation unless there is a stipulation; the law requires it; the nature of the obligation requires it.

Q: B delivered entire 1 thousand pesos to X, can Y compel B to deliver?

A: Yes. Because the obligation is joint.

Solidary:

1. Joint and several.2. jointly and severally.

Ronquillo v. CA (132 SCRA 274)

“individually and jointly, respectively, collectively and distinctively.”

In promissory note: I promise to pay A and B (solidary).

We promise to pay. (solidary)

If simple “We” – joint

Solidary liability examples:

LAW

Solution indebiti, crimes, negotiorum gestio. In agency read b.solidary on




the on the outline, 1823-1824-> tortuous act of one of the parties.

Art. 1823. The partnership is bound to make good the loss:

(1) Where one partner acting within the scope of his apparent authority receives money or property of a third person and misapplies it; and

(2) 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. (n)

Art. 1824. All partners are liable solidarily with the partnership for everything chargeable to the partnership under Articles 1822 and 1823. (n)

NATURE OF THE OBLIGATION WHICH REQUIRES SOLIDARITY:

Example:

1. Liability arising from human relations. (torts-2194)

Art. 2194. The responsibility of two or more persons who are liable for quasi-delict is solidary.

2. Decisions of the Supreme Court which became final.

Liwanag v. WCC

Computations:

Joint obligations

P120

A X

B

C Y

-> X may demand P60

If X demands from A, A is to pay only P20.

Mixed Solidarity

X may demand 120 from any of them.

What if there was an agreement? A = ½; B = ¼; C =1/4; X = ¾ ; Y = ¼

A: If joint- X with respect to A can demand 45;

Q: If mixed:

A: X= 90; Y = 30; X may demand P22.50 from A.

Passive solidarity:

No agreement – debtors are solidarily bound. X may demand 60 from A.

If there is an agreement: X may demand from A- 45, B and C- 22.50.

Active Solidarity:

Creditor solidarily bound. X can demand from A = 40; if Y receives 40, he should give 20 to X.

If there is an agreement: X may demand 45 from A and Y may demand 15 from A.

In a joint obligation if A paid the whole 120, he cannot claim reimbursement from B and C unless he proves that they have been benefited. There was payment to the wrong party.

Solidary:

Q: A demanded payment from X, can Y still collect?




A: No. the payment of one debtor extinguishes the obligation.

Q: In joint, C became insolvent, how much can X demand from A?

A: Still P20. Insolvency shall not increase the debt of joint debtors.

Q: if X remitted entire obligation in favor of A, can Y still collect from B and C?

A: Yes.

Q: If solidary, C became insolvent, how much can X demand?

A: 120. The share of 1 solidary debtor shall be shouldered by other solidary debtors.

Q: If A was compelled to pay X, how much can A recover?

A: From B=P60

REMISSION IN SOLIDARY:

Q: X condones share of A and demanded payment from B. How much can B pay?

A: P80

Q: If after condonation C was already insolvent, how much can B recover from A?

A: Having paid 80, B shall recover 20, even if remitted, it does not exempt if one is insolvent.

EFFECT OF DISMISSAL OF ACTION

Q: X and Y filed a case against A, however it was dismissed. Y filed a case again. Will his action prosper?

A: it depends if joint or solidary.

Q: If joint: If reason is prescription, Y still files, may it prosper?

A: Yes. The debts are separate and distinct in joint. Action shall not inure to X.

Q: If the ground is subject to different conditions?

A: Yes. The debts are separate and distinct in joint. Action shall not inure to X.

Q: If ground is minority. May it prosper?

A: No, it is an absolute defense.

Q: If dismissed because contract is void, will it prosper?

A: No.

Q: if solidary?

A: No. The demand of one creditor inures to the benefit of other creditors.

BAR EXAMINATION QUESTION:

Q: Four medical students rented an apartment. They agreed for the payment of utilities. Before the lease contract ended, 3 of the 4 went back to their country. They have unpaid telephone bills worth 100k, can the one left pay only P25?

A: Yes. It is presumed to be a joint obligation as provided in Article 1207.

Art. 1207. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestation. There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity. (1137a)




DISJUNCTIVE

1. A will pay P120 either to X or Y2. A or B will pay X

Q: If X demands payment, A paid Y, can X still demand payment from A? Who has the right to choose?

A: Depends on the agreement.

Q: What if there is no agreement?

A: Tolentino- should be treated like solidary. Payment should be made to the solidary creditor who demanded first.

* Sir does not agree! Rules on alternative obligation should govern because under the law solidarity is not presumed hence disjunctive is not one of it.

NEXT MEETING TUESDAY!

July 24, 2007

BAR EXAM QUESTION:

Q: Corporation promised to deliver furniture set to A. they agreed that in case of non compliance, a penalty of 100 thousand pesos must be paid. The corporation delivered furniture set which is different, instead of Narra. Buyer is asking for 300 thousand pesos as damages and 100 thousand for the penalty. Is this claim tenable?

A: UP Law Center: It is not tenable. The penalty is the substitute for damages.

Alternative answer: Yes, he may claim for damages because there was fraud committed.

PENAL CLAUSE – provides for greater liability.

Robes-Francisco v. CFI 86 SCRA 59

The supreme court ruled that the 4% stipulation is not a penal clause. Even

without such stipulation, corporation is still liable to pay 6% based on Article 2209.

Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum. (1108)

Bachrach v. Espiritu 52 PHIL 346

Facts: There was a sale of 2 trucks with interest of 12% for the unpaid portion and a penalty of 25%.

Held: Parties expressly stipulated the payment of interest hence liable, the penalty was reduced to 10% because there was partial performance; usurious.

* no need to present proof of damages as long as there is breach of the obligation.

Q: May the aggrieved party be able to compel the other party to pay penalty plus performance?

A: The general rule is they may not, however if it is clearly granted, they may.

Illustration: A construction of a building which has a penalty of 10 thousand pesos per day if not completed on the agreed day, plus performance was agreed upon.

Q: Debtor offered his car instead of paying the penalty. May a debtor compel creditor to accept penalty instead of car.

A: General rule: No; Exception: Unless expressly reserved.

Q: If the principal is void, will it follow that the accessory is void?




A: General Rule: Yes

Exception: if the basis is the nullity of the obligation there can be a penalty.

Example:Foreigners who contracted Filipinos usually penalty is provided in case contract is declared void. In this case the nullity of the principal does not affect the penalty.

BREACH OF OBLIGATION:

Q: Who can be held liable?

A: Those who are enumerated in Article 1170; hence, anyone.

Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages. (1101)

FRAUD:

1. Fraud in contract – art. 1338

Art. 1338. There is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. (1269)

2. Causal fraud – dolo causante in contracts; voidable.

3. Incidental fraud – dolo incidente

Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages. (1101)

- if obligation is monetary in character for example, P1M, it is interest by way of damages.

Compensatory damages – expressly stipulated in writing.

Q: Is article 1170 by way of dolo?

A: No. Better term is bad faith or malice. The phrase “in any manner” covers not only fraud but also negligence and delay.

WAIVER of future fraud is void:

- consider the dated when waiver was made, and date when the fraudulent act happened.

NEGLIGENCE (memorize)

Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the provisions of Articles 1171 and 2201, paragraph 2, shall apply.

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. (1104a)

- depends on the circumstances, time and place.

- Degree of diligence: that of a good father of a family unless the law or the stipulations provide otherwise.

Q: May a waiver of future negligence be considered void.

A: Yes. Gross negligence is equivalent to fraud.

Telefast v. Castro 158 SCRA 445

The negligence in this case was considered gross in character.

DELAY:




“Mora”; non-fulfillment with respect to time.

- no delay in obligation not to do. (obviously!)

Effects of delay:

1. If determinate thing to deliver, there was a fortuitous event – the obligor is still liable.

BAR EXAM QUESTION:

Q: A and B entered into a lease agreement over certain machineries. B was to open a car repair shop. On February 15, they agreed that the machineries will be leased for one month. On March 15, the lessor demanded return of the machineries. Because the truck of B had a problem, the machineries were not returned. Is B liable?

A: No, B is not liable. There were only 28 days. An agreement of 1 month is 30 days.

*As a rule there has to be a demand.

*Demand need not be in writing; It is different from demand to interrupt the prescriptive period.

Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delay may exist:

(1) When the obligation or the law expressly so declare; or

(2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the

establishment of the contract; or

(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.

In 1169 – no demand is needed.

1. by law – eg. Payment of tax, agency.

2. Stipulation3. When period is the controlling

motive. Ex. Wedding.4. Demand would be useless due

to the of the debtor.

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. (1100a)

Reciprocal obligations:

- arise from the same transaction.

Example: Contract of sale.

1169 – should apply only if both are already due and demandable upon establishment or at the same time.

Agcaoili v. GSIS 165 SCRA 1

- if both in delay, no right of recission.

Art. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable. (1105a)

- it is the happening of a fortuitous event. It applies to any kind of obligation.




In obligation to give, Article 1262 applies:

Art. 1262. An obligation which consists in the delivery of a determinate thing shall be extinguished if it should be lost or destroyed without the fault of the debtor, and before he has incurred in delay.

When by law or stipulation, the obligor is liable even for fortuitous events, the loss of the thing does not extinguish the obligation, and he shall be responsible for damages. The same rule applies when the nature of the obligation requires the assumption of risk. (1182a)

In Article 1165, even if obligation became impossible due to Fortuitous event, debtor is still liable.

Art. 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by Article 1170, may compel the debtor to make the delivery.

If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor.

If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the same interest, he shall be responsible for any fortuitous event until he has effected the delivery. (1096)

- promise to deliver to two or more persons, the debtor is still liable. In Napocor v. CA (161 SCRA 344), to be excused there should be no concurring negligence.

BAR EXAM QUESTION:

Q: A ring was delivered to a jewelry shop for cleaning. After a week, the ring was not yet cleaned. Thereafter,

the ring was lost due to robbery. Is the jewelry shop liable?

A: Yes. Before the fortuitous event, the jewelry shop was already in delay.

REMEDIES FOR BREACH:

A. Extra judicial – principal remedy, expressly granted by law. - 1191. It can be invoked aside from other remedy. Art.1381 is only a subsidiary remedy.

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

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. (1124)

Art. 1381. The following contracts are rescissible:

(1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof;

(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number;




(3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them;

(4) Those 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;

(5) All other contracts specially declared by law to be subject to rescission. (1291a)

If court declared the act as rescissory, it will retroact from the time notice was given to the other party.

Q: Why is there a need to file a rescission with the courts when it can be extrajudicial?

A: Because a party cannot take the law in his own hands especially if there is recovery needed.

UP v. de los Angeles (35 SCRA 102)

- there can be unilateral decision provided it is agreed upon.

BAR EXAMINATION QUESTION

Q: A sold a parcel of land to B for P1M, B paid 100 thousand as down payment. Vendor will be liable for eviction of squatters, balance to be paid 30 days after eviction, if squatters are still there for 6 months buyer should return the money. During the 6th month period, the price of the land was doubled. Seller offered to return the 100 thousand pesos. Buyer refused and offered to pay the balance and asked seller to sign. Seller filed an action for rescission. Is the action proper?

A: No. The seller was not the aggrieved party. Rescission as a remedy maybe invoked only by the aggrieved party.

UFC v. CA (33 SCRA 1)

1. Only those who have complied with their obligation or at least ready to comply.

2. Violation must be substantial/fundamental in character.

There was no showing that Mafran had exhausted all the remedies available.

SC: rescission is under 1191 not 1381.

Q: If obligation becomes impossible, what is the remedy?

A: Rescission. If already rescinded, he can no longer demand for the fulfillment.

Magdalena Estate v. Myrick (71 Phil 344)

Myrick was able to recover because there was no stipulation as to forfeiture.

Other extrajudicial remedies:

Rights of unpaid seller:

Art. 1526. Subject to the provisions of this Title, notwithstanding that the ownership in the goods may have passed to the buyer, the unpaid seller of goods, as such, has:

(1) A lien on the goods or right to retain them for the price while he is in possession of them;

(2) In case of the insolvency of the buyer, a right of stopping the goods in transitu after he has parted with the possession of them;

(3) A right of resale as limited by this Title;

(4) A right to rescind the sale as likewise limited by this Title.




Where the ownership in the goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies a right of withholding delivery similar to and coextensive with his rights of lien and stoppage in transitu where the ownership has passed to the buyer. (n)

B. Judicial Remedies:

a.) Principal remedies – specific performance

Q: In obligation to do, is substitute performance allowed?

A: It depends. If personal qualification was stipulated.

If no specific performance, it amounts to involuntary servitude.

Q: If obligation was to do and obligation was poorly done.

A: Art. 1167. If a person obliged to do something fails to do it, the same shall be executed at his cost.

This same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore, it may be decreed that what has been poorly done be undone. (1098)

b.) Subsidiary remedies

1. accion pauliana – to be discussed in rescissible contracts.

2. accion subrogatoria – creditor may be subrogated to the right of the debtor as to 3rd persons.

- pertains to obligation to give; monetary obligation. It does not pertain to purely personal right. Example: acts of agency.

Q: What is the extent of liability?

A: 2236, applies to present and future property.

Art. 2236. The debtor is liable with all his property, present and future, for the fulfillment of his obligations, subject to the exemptions provided by law. (1911a)

- If a person is judicially declared to be insolvent, when he inherits, the future property is exempt.

Family Home: May be a subject for tax nonpayment, creditors for construction, claim of laborers and mortgagee. (Rules of Court rule 39, sec.13)

MODES OF EXTINGUISHMENT – Article 1231

Art. 1231. Obligations are extinguished:

(1) By payment or performance:

(2) By the loss of the thing due:

(3) By the condonation or remission of the debt;

(4) By the confusion or merger of the rights of creditor and debtor;

(5) By compensation;

(6) By novation.

Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, and prescription, are governed elsewhere in this Code. (1156a)

- It presupposes that there is an existing valid obligation.

Recission – principal remedy is under article 1191.




Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

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. (1124)

Extinctive prescription – conversion of civil to natural.

Q: Are thes modes exclusive?

A: No! In Saura v. DBP, there was a mutual dissent. This also considered as a mode. The Supreme Court said that there was a perfected consensual contract of loan. (mutuum)

Q: Aside from it, what are the other modes?

A: Death - To the extent of personal obligation to do. It does not extinguish property rights. Eg. Agency – death of an agent; Partnership – death of a partner.

Q: Fulfillment of resolutory condition in 1231 pertains to?

A: Happening of a resolutory condition.

- will of one of the parties in contracts as a general rule does not extinguish obligation.

- Exception: contracts involving trust and confidence. Partnership without prejudice to

the possible liability of partner causing dissolution.

Q: Is happening of a fortuitous event a mode of extinguishment?

A: Fortuitous events are not modes of extinguishment. Only results to loss of the thing due.

- Insolvency per se is not a mode of extinguishment, there must be a judicial declaration.

Q: What about renunciation by the creditor?

A: Not necessarily. If it is gratuitous, it would fall under condonation/remission. If for a consideration, it falls under novation.

Q: Compromise?

A: It may. But it would fall under one of those mentioned by law; common result reduction of obligation which falls under condonation; if it would fall under a totally new obligation, it is novation.

1. PAYMENT

- synonymous with performance.- May apply to all kinds of

obligation.

Rules:

a.) As to person who pays.b.) As to whom payment is made.c.) Prestation in obligation.d.) Date, time and place.

a.) person who pays.

- Should be called payor, not only debtor, because third persons may pay.

- Not every person under the NCC can compel a person to pay except those who have an interest and those who by virtue of stipulation.




Eg. A is indebted to B. X is a 3rd person.

Q: Who are those who have interest?

A: Joint debtors have interest in the fulfillment of the entire obligation, those who are subsidiary liable. (guarantors, mortgagors, pledgors.)

Q: If a third person pays, if he has interest, what happens?

A: Subrogation.

- If X is a guarantor, Y is a mortgagor who secured debt, Y pays, he shall be subrogated to the rights of B and can exercise right of a creditor.

- if X pays B, obligation of A to B is extinguished but accessory obligations are not extinguished. It subsists that is why X can still foreclose the mortgage.

Q: A is indebted to B. X pays 100 thousand to B for A’s debt. Does A have a right to recover from A and can he have a right of foreclosure?

A: It depends. If A consented, he has the right.

Q: If before X pays, A partially paid 20 thousand, X paid entire 100 thousand, how much can Y ask for reimbursement?

A: Only 80 thousand, that which redounded to the benefit of A.

Q: If X pays without the knowledge of A, can he compel A to pay?

A: No. He is not subrogated to the rights of B, hence he cannot foreclose the mortgage.

“consented” – means debtor failed to object at a reasonable time.

Q: X had agreement with B without knowledge of A, can he recover the payment made?

A: As long as payment was without knowledge, third person shall not be subrogated to the rights of the creditor. (1236-1237)

Art. 1236. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.

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. (1158a)

Art. 1237. 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. (1159a)

Q: X paid B without any intention of being reimbursed. What if X demanded the return after one week?

A: Indirect Donation. As far as payment, it is valid and binding.

- Payor must have the capacity to alienate the thing or has free disposal.

b.) as to the person to whom payment is made.

- called payee; normally the creditor.

CASE: Arañas v. Tutaan

- creditor does not have to be a party. A creditor may be any person who has the right to compel the performance.

Eg. A is indebted to B. But the real payment should be given to Y; even if A pays B, Y can still compel A to pay.

- there is also payment to a person authorize to receive




payment; the law may provide. Eg. Payment to a sheriff, executors and administrators.

Q: May payment to a wrong person extinguish obligation?

A: Gen. rule: No! Except: 1. if payment redounded to the benefit of B. Otherwise, obligation is not extinguished.

Q: Who has the burden to prove?

A: No need to prove if: 1. it was ratified by the creditor; 2. principle of estoppel; 3. if the person to whom payment made acquired rights of creditor after the payment.

Q: Are there any more exceptions?

A: Yes. If payment was made in good faith to a person in possession of the credit, not a mere possession of the instrument.

Q: X (in possession of PN) demanded payment from A when the promissory note became due and demandable, A paid x in good faith.

A: Obligation is extinguished.

Q: A is indebted to B. However, B dies and is survived by Y. Even if A paid Y, can it be invalidated?

A: Yes. If the payment was not made in good faith, such as when there is a pending action to declare Y incapacitated.

Q: A is indebted to B. B assigned the credit to X. May it extinguish the assignment?

A: Yes.

c.)Prestation in obligation

- identity of the obligation; consider the purpose.

General Rule: A partial performance is non-compliance.

Except:

1. The parties expressly stipulate. - Subject to different terms – integrity of the prestation. Rescission is not a remedy if there is substantial performance.

Case: JM Tuason v. Javier

A obligated himself to deliver 100 sacks to B for 1000 pesos. He only delivered 95.

Q: How much can he recover?

A: Amount or value delivered, less damages.

As to kind of obligation:

Q: A is obliged to B. He paid Japanese yen. Is it valid?

A: Yes. RA 8183. Payment may be made in any currency as long as stipulated. Before: RA 529-payment not in Philippine currency is prohibited.

Q: Can creditor be compelled to accept check?

A: No. As stated in New pacific timber v. Señeris. Creditor may refuse to accept check.

Before: If Manager or Cashier’s check, it is deemed as cash.

Q: If partly check and partly cash?

A: Creditor may refuse. Except if stipulated. In Article 1249, it is extinguished if encashed.

Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the




currency which is legal tender in the Philippines.

The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.

In the meantime, the action derived from the original obligation shall be held in the abeyance. (1170)

Q: If check is stale, will the obligation be extinguished?

A: No.

Q: When is payment thru check extinguish obligation?

A: When it is encashed or through fault of the debtor when it had been impaired.

Q: B owes A 1M in 1968. A claimed that in 1968, the value of 1M is only 500k compared to the present because of devaluation, hence he claimed 2M base on Art.1250.

Art. 1250. 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 shall be the basis of payment, unless there is an agreement to the contrary. (n)

Is his contention correct?

A: No. As decided in the Philippine Pipe Foundry case, the supreme court said “as far as Philippine experience is concerned, there has never been an extraordinary inflation as experienced by Germany in 1920-1923. Art.1250 may only be invoked if the source is a contract. In Velasco v. Meralco, Article 1250 may not be invoked because the source is a quasi delict.”

d.)date, time, place

Determinate – place where obligation was constituted.

Generic – domicile of the debtor.

SPECIAL FORMS OF PAYMENT

1. Payment by Cession and decion en pago.

Art. 1255. The debtor may cede or assign his property to his creditors in payment of his debts. This cession, unless there is stipulation to the contrary, shall only release the debtor from responsibility for the net proceeds of the thing assigned. The agreements which, on the effect of the cession, are made between the debtor and his creditors shall be governed by special laws. (1175a)

conventional assignment

requires consent of both parties.

CASE: Filinvest v. Philippine Acetylene

- no dation en pago, the delivery of the case was not consented to.

- Filinvest was only an agent; there was no transfer of ownership.

Dacion en pago CessionAs to transfer of ownership:

The delivery results to the transfer of ownership, same is true with application of payment.

No transfer of ownership, creditor only given the power to sell.




As to effect of payment:

General rule: Extinguished only as to the extent of value delivered.

Exception: unless stipulated upon that anything delivered shall extend the entire obligation.General Rule: governed by law on sales only if the pre- existing obligation is in money.

Art. 1245. Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law of sales. (n)

General Rule: Extinguish only as to the extent of the proceeds of the sale of creditor.

Exception: Unless there is an express agreement.

Q: If A is to deliver a carabao, but instead gave a refrigerator. Is it dacion en pago on sale?

A: No. It is novation. The pre-existing obligation is not in money.

CASE: Citizens Surety v. CA

- no dation en pago if at the time of the transaction there is no obligation.

- All transactions were executed within one day. The indemnity agreement that they will be liable upon default on payment

of surety bond, hence no obligation yet on that day.

- SC: Dation en pago may pertain to delivery of rights/things.

2. Application of payments:

Problem: X is the creditor. A owes him, 100k, 50k, 20k and 10k.

Rules:

1. debtor ha the right to designate to which payment is to be applied.

a.) no partial payment.

b.) to that which is due and demandable, except if payment was made for the benefit of the debtor.

c.) If the debt is interest bearing.

2.) if debtor fails to designate, the creditor may designate.

3.) if both failed to designate:

Note: provision for application of payment is not applicable here.

3. that which is most onerous.4. Proportionate application

(provided, it is of the same nature and burden) – if the debts are of different amounts.

Q: How do we determine what is the most onerous?

A: There is no hard and fast rule. We must consider factors and circumstances.

3. Payment by cession:

1255: voluntary assignment requires consent of the creditor.

Art. 1255. The debtor may cede or assign his property to his creditors in payment of his debts. This cession, unless there is stipulation to the contrary, shall only release the debtor




from responsibility for the net proceeds of the thing assigned. The agreements which, on the effect of the cession, are made between the debtor and his creditors shall be governed by special laws. (1175a)

Q: How will the proceeds of the sale be applied?

A: 1. based on stipulation. 2. without agreement; rules in concurrence and preference of credits shall be applied.

- debtor must deliver his property to creditor.

- Resorted to by debtor who is experiencing financial difficulty.

4. Tender of payment and consignation:

- tender of payment alone shall never extinguish the obligation.

- Actual offering of the amount or thing.

1256 – the only one scenario when tender of payment should be made, when creditor refuses to accept without just cause.

Art. 1256. If the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due.

Consignation alone shall produce the same effect in the following cases:

(1) When the creditor is absent or unknown, or does not appear at the place of payment;

(2) When he is incapacitated to receive the payment at the time it is due;

(3) When, without just cause, he refuses to give a receipt;

(4) When two or more persons claim the same right to collect;

(5) When the title of the obligation has been lost. (1176a)

CASE: Soco v. Militante:

Q: When may Tender of payment be made judicial?

A: No. Tender of payment by its nature is extra judicial.

Illustration:

Q: There was a sale with right to repurchase. Seller a retro refuses to accept money, an action was filed. Plaintiff said that he is not obliged because there is no tender of payment required. Is his contention correct?

A: Yes. No tender of payment is required. No consignation is required in sale with right to repurchase.

Q: Is notice required by consignation?

A: Yes.

Q: 2nd notice after consignation is required?

A: Yes. Required but it does not need to come from the debtor, it is in the form of summons.

Soco v. militante – 2 notices per amount due.

Q: When will obligation be extinguished?

A: When creditor accepted, even if debtor refuses, may extinguish after consignation, it retroacts from the time of delivery.

Q: The obligation was due in January, 1998. There was a tender of payment in January 1, 2000 but was refused. In January 2, 2004, there was




consignation. In January 2, 2007 there was a court ruling. Is the debtor liable to pay interest?

A: Yes. If from January 1998 he was already in delay, up to consignation if court ruled to be valid. If the consignation was ruled by the court to be invalid, the interest must be from January 1998 till court ruled.

According to Sir: however, mora accipiendi.-delay of the creditor to accept. Debtor may release himself from the obligation by the consignation of the thing.

Q: Can debtor withdraw the consignated money?

A: Yes. If the withdrawal is made before acceptance of creditor and before court ruled on the consignation.

- if creditor accepted and court ruled, no withdrawal. If no ruling yet, it may be withdrawn if creditor accepted.

- Revival without consent of accessory – creditor is released.

LOSS

When not valid?

- when it goes out of commerce.- Prohibited by law.- Impossibility of performance.

Q: To deliver shabu? Is the obligation extinguished?

A: No. This is not a valid obligation therefore no extinguishment.

Q: If the thing is lost, who has the burden to prove?

A: depends on who is in possession of the thing at the time of the loss. However, this rule is not absolute

when the loss occurred during the happening of a calamity, like typhoon.

Read: Art 1265 and Art 1262.

Art. 1265. Whenever the thing is lost in the possession of the debtor, it shall be presumed that the loss was due to his fault, unless there is proof to the contrary, and without prejudice to the provisions of article 1165. This presumption does not apply in case of earthquake, flood, storm, or other natural calamity. (1183a)

Art. 1262. An obligation which consists in the delivery of a determinate thing shall be extinguished if it should be lost or destroyed without the fault of the debtor, and before he has incurred in delay.

When by law or stipulation, the obligor is liable even for fortuitous events, the loss of the thing does not extinguish the obligation, and he shall be responsible for damages. The same rule applies when the nature of the obligation requires the assumption of risk. (1182a)

Q: In an agreement between A and B for construction of house, proceeds shall be equally distributed from the sale. B didn’t give his share in the house because of the high price of materials. A filed an action. May court grant the action?

A: No. Because the event of increase of price is foreseen. 1267 is not applicable.

CASE: Occeña v. Jacobsen

- court can’t change agreement of the parties.

1267 – only difficulty not impossibility.

Art. 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the




parties, the obligor may also be released therefrom, in whole or in part. (n)

1264 – depends on the intention of the parties.

Art. 1264. The courts shall determine whether, under the circumstances, the partial loss of the object of the obligation is so important as to extinguish the obligation. (n)

CONDONATION OR REMISSION

“donation of a credit”

1272 – refers to “private document only” . If public document, it needs many copies.

Art. 1270. Condonation or remission is essentially gratuitous, and requires the acceptance by the obligor. It may be made expressly or impliedly.

One and the other kind shall be subject to the rules which govern inofficious donations. Express condonation shall, furthermore, comply with the forms of donation. (1187)

Art. 1271. The delivery of a private document evidencing a credit, made voluntarily by the creditor to the debtor, implies the renunciation of the action which the former had against the latter.

If in order to nullify this waiver it should be claimed to be inofficious, the debtor and his heirs may uphold it by proving that the delivery of the document was made in virtue of payment of the debt. (1188)

Art. 1272. Whenever the private document in which the debt appears is found in the possession of the debtor, it shall be presumed that the creditor delivered it voluntarily, unless the contrary is proved. (1189)

Q: X owes A 1M, he lends the same amount to A. Is there condonation?

A: Maybe, if payment of interest is remitted.

Q: If employment of interest is found in debtor X? Is it condonation?

A: No.

Q: If employment of interest is found in debtor’s possession, is there necessarily condonation?

A: No, may be through other modes, like payment.

Q: A is the creditor of 100k to B. X, a third party, pledged his car to B. May the pledged car be used as condonation?

A: Determine first the status of X. Whether he is the owner or for what the pledge is for.

Then state the accessory v. principal. Not X. Because A and B are the parties in the principal obligation; there is only a presumption of X on part of the accessory obligation of the pledge.

CONFUSION OR MERGER OF RIGHTS

Art. 1275. The obligation is extinguished from the time the characters of creditor and debtor are merged in the same person. (1192a)

Q: May it be made through agreement of parties?

A: May be. It depends upon the intention. Ex. Merger of rights of a corporation.

Q: By operation of law, can there be confusion?

A: By succession, creditor died, debtor is son or daughter.

Q: debtor died, creditor is an heir, can confusion take place?




A: there can be, when there is acceptance.

Q: A is indebted to B. The debt is secured by a mortgage by M on B. Can there be a confusion of B and M?

A: No.

Q: If there is an agreement?

A: No. It will be subrogation. If B assigned his rights to M, but still obligation is not extinguished.

Q: Will confusion result in total extinguishment?

A: No. In cases of joint obligations, in 1277.

Art. 1277. Confusion does not extinguish a joint obligation except as regards the share corresponding to the creditor or debtor in whom the two characters concur. (1194)

COMPENSATION

Q: If 2 or ore persons are debtors and creditors, will there be compensation?

A: No, the requirements must be complied with. – Art. 1279

Art. 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor. (1196)

Q: In compensation, is it a reciprocal obligation?

A: Not necessarily.

Q: When is it a reciprocal obligation?

A: Reciprocal obligations arise from a single transaction; contract of sale.

Q: What about legal compensation? Will it take place in reciprocal obligations?

A: Not necessarily. In reciprocal obligations, there can be none.

Q: In partial compensation, is debt totally extinguished?

A: No. Extinguished as to at least one debt.

Q: In compensation, how many debts are involved?

A: 2 or more debts.

Q: Which debts will be extinguished?

A: Less onerous amount.

Q: A owes B the following, 50k, 100k, 75k, 225k, 100k. B owes A 100k. How many of the debts will be totally extinguished?

A: 2 debts of A and debt of B.

Q: A paid 100k to B. A has the following debts to B; 50k, 25k, 10k. How many debts are extinguished?




A: 3 debts are extinguished. Partial compensation because there is still a balance.

Q: How many kinds of compensation are there?

A: 4: legal, conventional, facultative, judicial.

Q: In some books, there are three; facultative is removed, why?

A: It is a modification only of conventional.

Q: What are the other names of compensation?

A: set off or counterclaim.

Q: Not really the same because?

A: Set-off and counterclaim must be invoked in courts of law.

Q: What distinguishes legal from conventional?

A: As to requirements, not the same. In legal, all requirements should be present, in conventional, not necessary that all requirements are present. i.e. different amounts or objects; one debt is not yet due.

Q: Give an example of facultative.

A: Support. Invoked by the one who claims for support.

Q: A opened a checking account with a bank, he borrowed money with the same bank. A failed to pay, Bank invoked compensation. A said that his checking account is depositum. Is his claim tenable?

A: No. In a checking account, the bank is the creditor, A is a debtor governed by mutuum, hence compensation can’t take place.

Q: When is there a deposit?

A: If the delivery is only for safe keeping.

Q: Other kind of facultative.

A: In case of commodatum, bailor can invoke. In a civil case/penal, invoke by injured party.

CASE: PNB v. Acero

PNB invoked: No legal compensation, the credit line was used, lawyer of PNB claimed that credit line was shown to Acero.

- you don’t prove a fact by showing it to the other party.

Q: A is indebted to B with G as guarantor. Can G invoke compensation?

A: No. they are not debtors and creditors to each other. The law requires that they are principally bound.

CASE: Sycip V. CA

SC: debtors and creditors should be debtors and creditors in their own rights.

CASE: Francia v. IAC

SC: There is no compensation when Francia paid real property tax to the LG of Pasay. The national government was the one who expropriated.

- compensation takes place if debt became due at the same time.

Q: Monetary debts must arise from contracts?

A: Not necessarily. Eg. Attorneys fees

Q: Are all monetary debts subject to compensation?

A: No. Custom duties. (Francia v. IAC)




CASE: International Corp. Bank v. IAC

Facts: Villanueva applied a loan from ICB for 50M. Only 1M was delivered by the bank. The loan was secured by a mortgage, which is 110 M asset. Villanueva deposited 1M to ICB. He invoked compensation.

SC: Since there was a question on the foreclosure sale, there was no legal compensation.

CASE: Solinap v. del Rosario

Facts: The lessee did not pay rentals. He invoked that the lessor had made advancements.

SC: No legal compensation because alleged debt were being questioned in the estate proceedings.

- no legal compensation if debts arise from depositum, commodatum, civil liability arising from crime.

Q: A is the creditor of B worth 100k secured by a mortgage. B gave 50k. If there is a partial compensation, will the mortgage be extinguished?

A: Not necessarily. It depends which debt is most onerous.

Q: If there is total compensation, will the mortgage be extinguished?

A: Yes. Mortgage will be extinguished.

Q: B is indebted to A for 100k which is interest bearing. B gave 50 k to A. Will there be payment of interest even after payment of compensation?

A: Depends. If there is total compensation, no interest will be paid. If partial, depends on whose debt is bigger.

Q: Will partial compensation be extinguished by prescription?

A: Yes. Partial compensation does not toll the running of the period.

ASSIGNMENT OF THE CREDIT

Q: On January 1, 2002, A owes B 100k. B assigned the credit to C on June 1, 2002. Can C demand payment from A?

A: Determine when the assignment was made; if made after both obligation was due and demandable, there will already be compensation.

Q: What if A paid B 50k in May 1, 2002? How much can C claim?

A: 50k. He must ask B for the other 50k.

Q: In the same case, the debt is demandable on May 1, 2002. The credit was assigned to on March 1, 2002. May D validly demand it on the same date?

A: No. The obligation is not yet due.

Q: A owes B 100k due and demandable on May 1, 2003. B assigned it to X on April 1, 2003. A made the following payments to B: 20k-March 1, 2003; 30K-June 1, 2003; 40k-decemeber 1, 2003. On May 1, 2003, how much may X validly demand?

A: It depends: If A had knowledge of assignment of X and he consented with reservation, X may claim 90k, if he consented without reservation, 100k. If it was without knowledge of A, X may claim 10k.

NOVATION

I. Subjective/PersonalII. Objective/RealIII. Mixed

Art. 1291. Obligations may be modified by:




(1) Changing their object or principal conditions;

(2) Substituting the person of the debtor;

(3) Subrogating a third person in the rights of the creditor. (1203.)

I. Subjective:

A. Active – third person is subrogated in the rights of the creditor.

B. Passive – substitution of the person of the debtor.

* other classifications:

1. express or implied.

2. extinctive.

3. modificatory.

Eg. Prescription

Q: In ACTIVE SUBJECTIVE, operative word is subrogated. When does this happen?

A: 1. by agreement (express);

2. art. 1302 – legal subrogation.

a. Third Party pays creditor without consent of debtor.

b. TP who has an interest pays creditor with or without consent of debtor.

c. Creditor of debtor pays creditor of the same debtor.

Art. 1302. It is presumed that there is legal subrogation:

(1) When a creditor pays another creditor who is preferred, even without the debtor's knowledge;

(2) When a third person, not interested in the obligation, pays with the express or tacit approval of the debtor;

(3) When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latter's share. (1210a)

Q: In PASSIVE SUBJECTIVE, operative word is substitution. When does this happen?

A: 1. Expromission – substitution was made without knowledge or against will of original debtor.

2. delegacion – substitution was made with knowledge of debtor.

Q: A is indebted to B. A mortgaged to B his property worth 100k. B is indebted to C, 100k also. If A does not pay, can C foreclose the mortgage?

A: No. He was not subrogated.

DELEGACION – there is already subrogation, therefore, C may foreclose the mortgage.

if there is already novation through delegacion, no consent of original debtor is void.

If payment consented to by A, no novation, subrogation. (1236-1237)

Art. 1236. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.




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. (1158a)

Art. 1237. 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. (1159a)

Effect of Insolvency of new debtor:

- If C becomes insolvent after substitution, A is no longer liable.

- If C was already insolvent at the time of substitution, A can’t be held liable if no knowledge except if he acted in Bad Faith or such insolvency is of public knowledge.

II. Objective

A. Change in object – no problem, eg. Money to celphone (art.1245)

Art. 1245. Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law of sales. (n)

B. Change in principal obligation:

a. expressb. implied

* if 2 obligations can’t stand together, there is novation, there is incompatibility.

* there was novation in FOA and the Villar case.

There was a lease contract entered into for 5 years. Another contract was entered into for 10 years. The

contention is that the 2nd agreement is void, therefore novation is void.

CASE: Ronquillo v. CA

Facts: The obligation was due in 1952, In 1967, debtor acknowledge debt and promised to pay. Since it is now transformed to a natural obligation, will the action for novation prosper?

SC: Even natural obligations may be subject of novation.

Q: X is the creditor of A, B and C for 10M. After 3 months, C paid 10M to X without the knowledge of A and B. After 6 months A and B paid 7M to X. May A and B recover the 7M from X?

A: if voluntarily given, the creditor can retain.

According to sir: It is actually a payment by mistake therefore solution indebiti.

In natural obligations, payor knows he can’t be compelled to pay but nonetheless pays.

II. CONTRACTS

- while all contracts are agreements, not all agreements are contracts.

Prohibited:

- Auto contracts – a person contracts himself.

- article 1491.

Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another:




(1) The guardian, the property of the person or persons who may be under his guardianship;

(2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given;

(3) Executors and administrators, the property of the estate under administration;

(4) Public officers and employees, 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 intrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale;

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, 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.

(6) Any others specially disqualified by law. (1459a)

ELEMENTS OF A CONTRACT:

Natural – implied warranties.

Essential – Consent, Object, Consideration

Accidental – payment of interest. (compensatory)

CHARACTERISTICS:

1. Autonomy – freedom of contract/liberty of contract.

Art. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. (1255a)

Void waiver:

Example:

a. for agent to waive accounting.

b. pactum commisorium

c. partnership, exclusive partner from sharing profits – pactum aliena

mortgage – pactum aliendro

d. Public policy:

CASE: Cui v. Arellano

- scholarship in law school must not be contrary to public policy.

CASE: Saura v. Sandico

- Escalation clause – ex. Construction contracts. Creditor has right to demand a higher compensation upon the happening of a contingency. Ex. Contract of loan (interest).

- Acceleration clause – stipulation whereby in an obligation to pay on installment, balance shall




automatically become due and demandable when debtor fails to pay.

Q: Will an escalation clause be valid when there is no descalation clause?

A: It is relevant only in contracts of loan; only effect of circular issued by the Central Bank provided the escalation clause only happens once a year.

2. Consensuality:

Art. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. (1255a)

CASE: Republic v. PLDT

- to compel PLDT to enter into inter- connection agreements is actually expropriation.

Validity of contracts of adhesion:

CASE: Ong Yu v. CA

- plaintiff bought ticket from PAL, eventually he lost his baggage. In the ticket it contained a waiver of a right.

SC: waiver of a right in a contract of adhesion are not considered gladly by the Supreme Court.

3. Mutuality: goes to validity and compliance.

Art. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. (1256a)

termination by mere notice – valid.

4.Obligatory:

Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. (1258)

Q: When is a contract obligatory?

A: Upon perfection of the contract.

Q: When is a contract perfected?

A: It depends if it is consensual (concurrence between the offer and acceptance), real (like deposit, pledge, commodatum requires delivery), formal/solemn (requires compliance with certain formalities prescribed by law).

5. Relativity:

Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent.

If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. (1257a)

General rule: Contracts take effect only between parties, their assigns and heirs.

Exceptions:

1. creation of real rights




Q: A mortgaged his land to B and eventually A sold it to C. Can C be bound by the mortgage?

A: Yes.

2. Interference by a third party.

Art. 1314. Any third person who induces another to violate his contract shall be liable for damages to the other contracting party. (n)

Requisites:

- existence of a valid contract- knowledge of contract by third

persons- interference by third persons

without legal justification or excuse.

Q: A has a contract with GMA. Subsequently, A entered a contract with ABS-CBN. A was in bad faith. May ABS CBN be liable?

A: No. To be liable there must be malice impugned. Third Party liability does not impugn liability of debtor who violated.

3. Contracts in fraud of creditors:

Q: A is the debtor of B. A sold his property to C. May B rescind the contract between A and C?

A: Yes.

4. Stipulation pour atrui – stipulation in favor of third persons. It is not the main agreement.

CASE: Kaufman v. PNB

CASE: Florentino v. Encarnacion

- acceptance may be implied.

CASE: Bonifacio bros. v. Mira

- enforcement of insurance.

CLASSIFICATION OF CONTRACTS:

A: Degree of Dependence1) principal (agency, partnership)2) accessory (Real Estate

Mortgage, Chattel Morgtage, Pledge, Antichresis)

example: crop loan scenario

B. As to Perfection 1) Real (Pledge, Commodatum,

Mutuum. Deposit) 2) Formal (antichresis; donation)C. PurposeD. As to cause 1) onerous 2) pure beneficience

a) gratuitousb) lucrative

»liberality id the consideration3) remuneratory

» seller (payment); buyer (deliver)

E. Risk of Fulfillment 1) Aleatory » sale of hope – emptio spei » risk of fulfillment » insurance »life annuity 2) commutativeF. Name and Designation 1) Nominate 2) innominateG. As to subject matter 1) Things 2) Right 3) Services

PAQIII/Oct2007

III. SALES

- there must be an agreement to transfer ownership.

Q: A sold goods to B for purpose of resale, Y bought goods from X for personal consumption. What law shall govern this contract?




A: NCC and Code of Commerce, A-B commercial saleY-X civil sale

»now no distinction, NCC governs

Characteristics:1. principal2. bilateral-imposes obligations on two parties3. nominate4. onerous- always! otherwise donation5. commutative- emptio spei

Subject matter:» things and rights, service is not included

As to object:

a. movableb. immoxable

Concepts involve:a) Recto Law- personal prop by

installmentb) Maceda- immovablec) double saled) Statute of Frauds

Q: As to WON tangible/intangible?

A: corporeal (things); incorporeal(rights) Q: relevant as to what concept?

A: delivery

Q: As to validity?

A: void, unenforceable, rescissible, voidable

Q: 1458 2nd par: provides for?

A: absolute/conditional sale:» In an absolute sale there is an automatic transfer of ownership while in conditional sale, there is a reservation of ownership.

Art. 1458. 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 therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional. (1445a)

Q: Conditional sale vs. contract to sell

A: In conditional sale, ownership depends on the happening of condition and it take place by operation of law. In contract to sell, ownership passes after full payment passes. There is no automatic transfer, buyer have right to ask execute final deed.

Q: A delivered receipt to B “as partial payment to my car”, received by D, balance payable at the end of the month, signed by A.

Is this contract pertaining to a contract to sell?

A: NO, there is already transfer of ownership, there was no reservation as to ownership.

dacion en pago vs. contract of sale»dacion en pago is a mode of extinguishing obli, it is a pecial form of payment; while contract of sale is a source of obli.

Q: Kobe & companion B is to buy shoes, B’shoes to be delivered, upon payment, Kobe ordered a particular shoe.

A: Kobe- contract of piece of workB- contract of sale

»contract for a piece of work under (Aticle1467) is also called Massachusetts Rule

Art. 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work. (n)




Q: A to deliver his car to B, B to give A his watch plus money, 100k. What law should govern?

A: 1st. depends on manifest intention of parties.Barter = value of thing given as a part of consideration > money/its equivalent; if value of watch >100k

Sale- if same valueQ: A granted B exclusive right (right to sell within a specific area) to sell maong pants to Isabela, before B could sell, his store was burned, can B be compelled to pay?

A: contract of sale bec. There is a stipulation. B is a distributor/dealer 99.99% » Quiroga vs. Parsons- “will supply the bed and pay price within a certain period”. No obli to remit the price, no stipulation.

ELEMENTS OF SALE:1. C onsent2. P rice- consideration as to

whom? The seller.Buyer- acquisition of ownership over the thing.

3. Object

»Contracts which are void: Absolutely simulated contract (parties voluntarily entered)ex. To defraud creditors, wife hide property from husband, buyer go abroad.

relatively simulated- why? To reduce tax liability, circumvent law on legitime

SPECIFIC PERSONS PROHIBITED TO ENTER INTO SALEGuardian- absoluteAgent- administration/sale

Q: A inherited property from father to transfer property; executor to pay 700k, status?

A: valid; Assignment of rights which A can validly sell, not part of the estate under Y’s administration.

Q: a sued B for recovery of a parcel of land, hired lawyer, one year after

filing, entered into a contract of sale with B involving the land.

A: not valid. object of sale is subject to litigation-actually depends. WON the case is still pending.

Q: 1491 status of contracts

A:GR: voidableExcept: agents- subject to ratificationPar.1,2,3 voidable- can be ratified»private interests is involved.

4,5,6 void1,2,3 can be ratified because after lapse of incapacity, another contract maybe entered into Rubias VS. MateriaWolfgang vs. Martinez





(4) Public officers and employees, 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 intrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale;

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees




connected with the administration of justice, 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.


Q: If both parties are capacitated to give consent, contract of sale valid?

A: not necessarily because consent of one might had been vitiated.

Q: A person sold a thing to another in representation of another person without authority, status?

A: unenforceable

Q: can it be valid?

A: Yes, in case of statutory power to sell 1505; officious manager, executor notary public (where pledgor can go to NP to have the thing sold).

Art. 1505. Subject to the provisions of this Title, where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell.

Nothing in this Title, however, shall affect:

(1) The provisions of any factors' act, recording laws, or any other provision of law

enabling the apparent owner of goods to dispose of them as if he were the true owner thereof;

(2) The validity of any contract of sale under statutory power of sale or under the order of a court of competent jurisdiction;

(3) Purchases made in a merchant's store, or in fairs, or markets, in accordance with the Code of Commerce and special laws. (n)

Q: contract of sale involving alien.

A: depends; if private agricultural, if he is seller, valid. If he is the buyer, GR: NO. XPN: former natural born citizen.

Q: All matters could be a valid subject matter of sale.

A: every matter that can be a subject matter of contracts in general can be subject matter of sale (service, things, and rights). Service CAN NOT BE A SUBJECT MATTER OF SALE

Q: For rights to be a valid subject matter. of sale, what are the requirements?»for rights- conclusively presumed to be valid

A: must be transmissible

Q: Sale of the right, known as?

A: assignment of rights

Q: if deed of assignment

A: sale? Not necessarily, if gratuitous- donation, maybe dation in payment, or a security arrangement.

Q: rights arising from contracts

A: rights and obligations arising from contracts are transmissible XPN: NATURE, STIP, LAW (right in specific partnership property)




Q: As to things to be valid subject matter?

A: determinate, capable of being determinateexample: buying a car in the casa outside commerce of man, corpseQ: Agreement between A&B, A sell palay that will be harvested this November.Q: Status of sale

A: sale is valid.

Q: if no palay is harvested, A is liable

A: GR: Yes, liable, if he was at FAULT, except if reason was a FE

Q: sale of a sweepstakes ticket status?

A: depends, if winning ticket not void

Q: A sold B land with right of repurchase within one year, 3rd month sold to C. what if on the 6th month, A offered to repurchase land status of sale

A: Sale maybe valid. 1465 »1. things (ownership over the thing) subject to a resolutory condition may be the object of the contract of sale. 2. validity of contract requires Consent, Price, Object, the fact that it is present, sale is valid

Art. 1465. Things subject to a resolutory condition may be the object of the contract of sale. (n)

Q: Who will have a better right?

A: GR: A EXCEPT: C was a buyer in GF, no knowledge of right of repurchase and right to repurchase WAS NOT ANNOTATED

Q: when is a sale of right perfected?

A: upon meeting of the minds, consensual contract

Q: does it bind 3rd person?

A: No, unless in writing (public instrument)

Q: if in public instrument, binding already?

A: only requirement in real property

Q: deed of sale, no price mentioned, valid?

A: sale maybe valid.

Q: agreement A-B specific car, price is 500k yen.

A: valid, if so stipulated, 1458 “in money”

Art. 1458. 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 therefor a price certain in money or its equivalent.

Q: if not in money, valid?

A: “its equivalent”

Q: can seller compel of lapad?

A: stipulated, RA8183 (currency stipulated) repealed RA 529 (only in philippine currency)

Q: why RA 529-because of dollar reserves problem

A: at that time, RA 8183, our dollar reserves improved

Q: sell specific car, amount of two academic load, 2 semesters status, valid?

A: No! Gross inadequacy of price=lesion -does not invalidate contract of sale -guardian ,more than ¼ of value, contract of absentee

Q: A & B-price fixed by 3rd person

A: void if 3rd person refuse/unwilling to fix the price




Q: one peso as value of car

A: maybe donation/vitiation of consent

Q: parties to option agreement

A: promisor, promissee; offeror;offeree optioner,optionee »earnest money depends if perfected as to object,priceSOF-goes only to enforceability not validity of sale! 1487=1356

Art. 1487. The expenses for the execution and registration of the sale shall be borne by the vendor, unless there is a stipulation to the contrary. (1455a)

Art. 1356. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. However, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable. In such cases, the right of the parties stated in the following article cannot be exercised. (1278a)

Q: sale of ballpen 2k worth,valid? Enforceable?

A: value ‡ worth ‡ price, if sold to<400 1358- not a requirement for the validity of contract - only goes to the enforceability

Art. 1358. The following must appear in a public document:

(1) Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property; sales of real property or of an interest therein a

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.

All other contracts where the amount involved exceeds five hundred pesos must appear in writing, even a private one. But sales of goods, chattels or things in action are governed by Articles, 1403, No. 2 and 1405. (1280a)

OPTION

founded upon a consideration-no withdrawal allowed

if option contract perfected, optionee nay file for damages in case of breach

option money- separated & distinct from the price

Q: May a person sell something he does not own?

A: As to validity, Yes! Sale will always be valid even if not owned; ownership of the thing has nothing to do with validity

Q: What do you call a sale where a person may sell something he does not own?

A: Statutory Power to sell- 1505

Q: When should the seller has the right to sell?

A: At the time ownership is to pass




If seller has no right to sell, buyer acquires no better right

SCENARIOS WHEN SELLER HAS NO RIGHT TO SELL BUT OWNERSHIP IS TRANSFERRED TO THE BUYER

1) ESTOPPELa) equitable estoppel/estoppel

in pais -led 3rd person to believe…b) estoppel by deed-technical estoppel -Art.1434

Q: Who is estopped?

A: the owner,that the seller has no authority to sell

c) estoppel by record-also technical estoppel

-estafa,owner testified that he is not the owner to free the accused (said authorized even not)

2)MERCHANT STORE + GF * unlawful & stolen-with reimbursement- Art.559 * not unlawful- no recovery-Art.1505

Art. 1505. Subject to the provisions of this Title, where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell.

Nothing in this Title, however, shall affect:

(1) The provisions of any factors' act, recording laws, or any other provision of law enabling the apparent owner of goods to dispose of them as if he were the true owner thereof;

(2) The validity of any contract of sale under statutory power of sale or under the order of a court of competent jurisdiction;

(3) Purchases made in a merchant's store, or in fairs, or markets, in accordance with the Code of Commerce and special laws. (n)

2) SALE BY AN APPARENT OWNER + GF

a) recording laws-land registration decree –(now involves forgery)

b) factor acts(old term for agency) sale made by agents

c) any other law- ex.goods covered by NDT incase of bearer document when negotiated

Q: If bought from merchant store, is it possible to recover?

A: Yes, if buyer is in BF

Q: In GF,can owner recover?

A: Yes +reimbursement

CASE:SunBros.vs.Velasco(refrigerator) *Buyer cannot recover if thing was not lost/stolen

Q: lady owned a painting w/c was stolen from her, owner of house bought from gallery auction, can she recover?

A: Yes even w/o reimbursement public sale ‡ gallery auction

Q: lady owned a necklace w/c was stolen can the lady recover?A: Yes, Art. 559

Q: If delivery of certificate of ownership there is transfer of ownership-ex: TCT, OCT




A: Quasi-tradition-what is delivered is a right -1501

Art. 559. The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the same.

If the possessor of a movable lost or which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor. (464a)

Art. 1501. With respect to incorporeal property, the provisions of the first paragraph of article 1498 shall govern. In any other case wherein said provisions are not applicable, the placing of the titles of ownership in the possession of the vendee or the use by the vendee of his rights, with the vendor's consent, shall be understood as a delivery. (1464)

Q: Public instrument, signed by notary, ownership passes?

A: No,because contrary intention may appear

CASE:MAPALO VS. MAPALO

Q: If at the time of the signing, buyer has no knowledge of defect of title of seller?

A: May not be considered in GF bec. GF should exist up to the full payment

Q: When can seller have possession if thing not lost/stolen?

A: If he acts as a depositary

Q: When can there be a transfer of ownership even w/o delivery?

A: None! Ownership is transferred only upon delivery

Q: How many kinds of delivery are there?

A: Two kinds 1) Actual/Physical

2)Constructive a) symbolica b) tradition brevi mano c) longa mano d) constitutum

possesorium e) formal delivery * there should be delivery= contract + possession delivery of public instrument=formal delivery

Q: Delivery where seller still in possession?

A: constitutum possessorium Symbolica- key to the place

where goods are locatedLonga Manu- why cant be delivered?

-may only be depository]

INSTANCES WHERE SELLER STILL THE OWNER DESPITE DELIVERY

a) conditional sale- ownership passess upon fulfillment of condition bec. Ownership was reservedb) sale/trial approval return- ownership is transferred already but the buyer may revert title back to the sellerc) sale on installment- not necessarily depends on stipulation 1502(2)- Read instances when buyer deem to have accepted goods

Art. 1502. When goods are delivered to the buyer "on sale or return" to give the buyer an option to return the goods instead of paying the price, the ownership passes to the buyer of delivery, but he may revest the




ownership in the seller by returning or tendering the goods within the time fixed in the contract, or, if no time has been fixed, within a reasonable time. (n)

Q: lapse of 12 hrs. will it be reasonable time as acceptance?

A: Yes, depending on the circumstances i.e. perishable goods

Q: Contract to sell, when does ownership pass?

A: Upon full payment?when? -execution of final deed of sale

Q: if thing is lost/destroyed, who is liable?

A: First to consider if due to FE, who is at FAULT

GR: if who is at fault, liable

Q: When can buyer bears loss?

A: If buyer is in delay *RES PERIT DOMINO XPN: 1) stipulation of reservation of ownership

2) security title-ownership was retained only for purposes of security

-buyer bears the lost

Lawyers Cooperative Case

DOUBLE SALE

Q: A sold to B, A sold the same thing to C who took possession

A: depends on who registered it in GF. One must be in GF at the time of the possession

Q: if both A&B did not take possession, did not register, is it possible for B to have a better right?

A: if A was in BF; Immovable: Registration of deed of sale in GF

Q: A 1st registered w/ knowledge of 2nd

sale?

A: A has a better right, no knowledge of defect at the time of sale

Q:A 1st register w/ knowledge of 1st

sale?

A: 2nd buyer has better right

Q: no possession, can 2nd buyer have a right? Such as when A sold to B who leased same land to A while A sold the same land to C.Who has a better right?

A: B has a better right. B 1st took possession, B deemed to be in legal possessionQ: A sold land to B (took possession) A--------C (judgment CR sold; Buyer, registered w/o knowledge of 1st sale Can B have a better right?

A: Yes, if land is unregistered land, 1544 does not apply

Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. (1473)

Q: Delivery to common carrier=delivery to buyer?




A: depends on stipulation & reservation of ownership by seller

Q: As to bill of lading, no delivery to buyer when?

A: on the face of bill of lading deliverable to the seller

Q: delivery to the common carrier-delivery to buyer? When?

A: if bill is not retained by sellerQ: delivered 10 dozens, 8 dozens was only delivered

A: accept 8, reject excess

Q: if less?

A: if agreed to partial delivery, may be compelled to accept

Q: if to deliver 8, only delivered 7 dozens & never delivered 1 dozen

A: WON at the time he accepted 7 dozens buyer knows that seller will not deliver balance If knows- contract rate Does not know- FMV

Q: To deliver 1 sack durado, wagwag, when is the sale void?

A: When what is to be delivered is indivisible, buyer may reject

Q: Call seller demand increase in price of sale of land?

A: If lump sum-No! If per unit measure- Yes!

Q: Price 1K-100 sq.m.area delivered is greater

A: Buyer may accept + payment of contract price

Q: if only 93 sq.m.

A: Remedies of buyer

a) may accept, proportional reductionb) specific performance

c) damages»less than 1/10 rescission is not a remedy Rescission- remedy if buyer could prove that he would not have bought land if less than…

Q: Is it possible for buyer to have the right to rescind if 100 sq.m. was delivered

A: Yes if land is inferior quality or if value is less than 1/10 of the value

Q: Bound to deliver upon perfection of sale

A: Not necessarily1. stip as to

period2. no payment of

purchase price

Q: If parties agreed…delivery after 5 days; is he obliged to make deliver? When not obliged?

A: not obliged to deliver if buyer does not pay yet Not yet obliged-when the buyer loses the right to make use of the period 1198

if buyer became insolvent?-if he delivers a securityPLACE OF DELIVERY1) stipulation2) place fixed by usage of trade3) depends on nature of object determinate-where thing is located at time of perfection generic- seller’s placeUSAGE OF TRADEF.O.B.-free on board-seller shall only be liable to shoulder expenses up to port of originC.I.F.-cost insurance freight -delivery already taken place at port of originF.O.B.-port of origin(Mla) -port of destination(Cebu) »”these shipping arrangements are only presumptions, parties may still stipulate manner & payment” – SC

OBLIGATION TO WARRANT




Caveat emptor- not adopted by Phil.Law; De Leon bec. Of implied warranties.

BAR QUESTION:

Q:sale of parcel of land for IM, down payment Php 100, bal.to be paid after squatters will be evicted, if within 6 mos.,squatters still there,seller shall return 100k, in 6 mos.,value of land doubled,squatters still there, seller offered to return Php100k buyer did not accept,seller refuse to execute final deed of sale,seller filed for rescission.

A: 1)NO! seller is not the aggrieved party 2)(1545) buyer given option to refuse to proceed with contract 3) waive the happening of condition & proceed with the contract *mere opinion not breach of warranty unless given by expert. *if warranty is as to title,fitness & characters,mere opinion= express warranty ex. Fertilizers to yield better harvestguarantee ‡ warranty

Art. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition. If the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the nonperformance of the condition as a breach of warranty.

IMPLIED WARRANTYa) warranty against hidden

defectsb) warranty in case of evictionc) warranty of quality as to quality,

fitness

WARRANTY IN CASE OF EVICTION

Q: is it required for buyer to be deprive?

A: also includes peaceful possession

Q: is it possible if buyer is not deprived of ownership but deprived of possession?

A: Yes, in case of Contract of Lease

REQUIREMENTS:1) there should be a final judgment

in favor of 3rd person -seller must be summoned,impleaded2) based on a right prior to the sale3) no valid waiver in the form of waiver intencionada4) act imputable to the seller after the sale (non-payment of taxes, double sale in the case of the 2nd

buyer)

Q: How about if somebody was already occupying the land, acquired it by acquisitive prescription, buyer did not visit land, can he hold seller for breach of warranty?

A: No!

VENDOR’S LIABILITY IN CASE OF EVICTION (see TABLE 1)

Waiver intencionada»waiver made by buyer if he already knew of the defect of the thing.Waiver consciente»waiver made by buyer where both buyer & seller knew that there was no defect on the thing sold.VENDOR’S LIABILITY IN CASE OF EVICTION




TABLE 1

Warranty Against Hidden Defects 1) thing is already defective at the time of sell 2) he would not have bought if he knew/bought for less than the Php

Q: can buyer not hold seller liable for hidden defects?

A: Yes if buyer was an expert

Q: What if the thing which is defective was lost?

A: XPN to 1174,vendor liable even through FE

EXTENT OF LIABILITY OF THE VENDOR IN CASE OF LOSS OF THE THING WITH HIDDEN DEFECTS (SEE TABLE 2)

THE DEFECT CAUSE OF LOSS: FE OR FAULT OF VENDEE

VENDOR IS IN BAD FAITH

VENDOR IS IN GF

VENDOR IS IN BAD FAITH

VENDOR IS IN GOOD FAITH

1) RETURN PRICE YES YES NO NO

2) PRICE/VALUE AT THE TIME OF LOSS

NO NO YES YES

3) REFUND OF EXPENSES OF CONTRACT

YES YES NO NO

4) DAMAGES YES NO YES NO

5) ONLY INTEREST

NO YES NO NO

Q: Is it possible for vendor not liable for anything?

A: Yes, if vendor was not aware of the defect if the return price is less than

the value of the thing at the time of

loss.

SALE OF ANIMALS WITH DEFECT Redhibitory- when even after the sale it cannot be seen even by expert

Q: If 10 birds,1 defective, can be rescind?

A: GR: No. XPN: if buyer could prove that he would not have bought if he had known of the defect-- presumption if bought in pairs

Q: If animal died 10 days after sale?

A: No, can recover if died within 3 days for a disease existing at the


Extent of liability of vendor

If vendor in bad faith.

If there is waiver If there is no waiverVendor in good

faithconciente

intencionada

Vendee inGood faith

Vendee in bad faith

1) value of the thing at the time of the eviction

YES

YES NO YES YES

2) income or fruits

YES

NO NO YES YES

3) cost of suit

YES

NO NO YES YES

4) expenses of contract

YES

NO NO YES YES

5) damages and interest

YES

NO NO NO YES



time of sale.If died with contagious disease, he can recover.

NON-APPARENT ENCUMBRANCE Ex. Encumbrance on a Road requirements-

1) non-apparent2) not known to the buyer

Q: If knowledge of buyer can he hold seller liable?

A: Yes, if it was annotated in the title Remedy: rescission/damages Rescission- invoke within 1 yr. from date of contract

Q: If he filed damages 1 yr.& 6 mos, can the case prosper?

A: It depends on when was the discovery, damages should be filed within 1 yr. from discovery

Q: If animals bought from fairs, auctions, no warranty at all?

A: Not necessarily, only there is no warranty as to hidden defects; there is still warranty as to title & warranty against eviction 2nd hand sale- “as is where is basis”

Q: Is it correct to say that there is no IW in judicial/ execution sale?

A: No! there is still warranty by express provision of law- warranty as to title even to judgment debtor except if he was exempted fr. Such liability by order of the court.

There are people who cannot be liable for warranties, not sale without warranty/

Ex.: sheriff

RIGHTS AND OBLIGATIONS OF VENDEE

Q: If he received the goods, means acceptance?

A: not necessarily, “receive” is only preliminary to acceptance, subject to inspection

Q: If buyer accepted, is seller discharged of his warranty?

A: No. XPN: 1) stipulation 2) buyer failed to give notice of such breach within reasonable time

Q: If goods already at the warehouse of buyer, informed seller of refusal, fire broke out, can seller be liable?

A: It depends whether there has a just cause for refusal. If no just cause, ownership is transferred to buyer, RES PERIT DOMINO

As to Price -payment to be made at place of delivery

Q: 1/1/03 delivery----------1/1/04 buyer paid

A: can buyer be held to pay %? NO.

XPN:1) stipulation2) thing delivered produces fruits 3) if buyer was already in default after Extra J demand(needed if there was stipulation as to payment of price) contact of sale results to reciprocal obligation

Q: right of inspection, absolute?

A: No, no law providing for such Buyer has no right to inspection preliminary to acceptance Ex.: delivery of mining co. of coal to NAPOCOR

BAR EXAM QUESTION:

Q: 1/1/03-----7/1/03 (delivery of mango plantation)8/1/03 (delivered)seller sold fruits to X between the period 7/1/03- 8/1/03 Can buyer recover the fruits from X?

A: 1537 only applies if both parties are already obliged, not applicable if there is a stip as to delivery 1164-




7/1/03------5/1/03 Buyer entitled to fruits but 2nd par. 1164 not yet delivered so, remedy is for damages

Art. 1537. The vendor is bound to deliver the thing sold and its accessions and accessories in the condition in which they were upon the perfection of the contract.

All the fruits shall pertain to the vendee from the day on which the contract was perfected. (1468a)

MACEDA LAW RA 6652 REALTY INSTALLMENT BUYER ACT»only applies to residential realty not applicable to commercial & industrial sale on installment= sale on credit »sale on credit not necessarily sale or installment-maybe on a straight term basis even only one instrument is paid, already covered by MACEDA LAW »60 days grace period without interestif he paid at least 2 yrs.-entitled to CASH SURRENDER VALUE-50% paid by buyer, only up to 90%

Grace Period-claimed only once every 5 yrs. there must be a delivery to the

buyer of cash surrender value not a mere notice

REMEDIES FOR BREACH OF WARRANTY1) UNPAID SELLER 1526 a. withhold goods b. stoppage in transit c. resale d. rescind» GR: the following remedies are alternative except for letter a and b.

MACEDA LAW

Q: A sold a house for 10M---downpayment of 3M was given while remaining 7M will be paid in 60 equal monthly installment defaulted 47th,49th, offered to pay arrears.Seller cancel the sale,Cancellation Valid?

A: No. Paid for at least 2 yrs. He is entitled to 1 mo.for every year.

Facts: 46 installments 3 days=90 days grace period. A is within the grace period to update account.

Q: if seller only paid 80% can he invoke 1526?

A: Yes!

Art. 1526. Subject to the provisions of this Title, notwithstanding that the ownership in the goods may have passed to the buyer, the unpaid seller of goods, as such, has:

(1) A lien on the goods or right to retain them for the price while he is in possession of them;

(2) In case of the insolvency of the buyer, a right of stopping the goods in transitu after he has parted with the possession of them;

(3) A right of resale as limited by this Title;

(4) A right to rescind the sale as likewise limited by this Title.

Where the ownership in the goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies a right of withholding delivery similar to and coextensive with his rights of lien and stoppage in transitu where the ownership has passed to the buyer. (n)

Q: If buyer paid seller a check, can 1526 be invoke?

A: Yes if check was dishonored not through the fault of the seller

Q: Remedies exclusive?

A: No! he nay file action for specific performance/ damages

Q: Even if ownership had passed to the buyer, may seller invoke 1526?




A: Yes! Ex. Constructive deliveryPOSSESSORY LIEN- right to withhold the goods lien – if goods already deliveredthe buyer & seller not yet paid

»not required that buyer be insolvent»seller will not lose lien over the goods

--requiring the buyer to pay

STOPPAGE IN TRANSIT---seller must have parted possession---buyer is insolvent---goods are in transit

How exercised? By mere notice to common carrier if goods are covered by

NDT,NDT should be surrendered to common carrier

in order for the goods to be no longer in transit, buyer should have obtained it lawfully

Q: S-------------B Has possessory lien, Does C S loses his lien if B sold it to C?

A: No. Unless he consented; if B sold the goods to C covered by NDT & was sold by B to C through negotiation & C bought it in GF

RESALE---seller must still have the goods---maybe exercised if buyer is in default for unreasonable time; if perishable goods are involve, if by stipulation seller reserves right to resale

Q: if seller failed to give notice to resale, valid? If no notice as to date, time & place

A: notice not necessary as to validity of resale. These notice are valid only if seller use the ground that buyer has been in default for immeasurable length of time.2nd notice is relevant whether the sale is a GF sale.

Q: Buyer has unpaid Php 100,000, seller sold goods for 70,000 can he recover 30k from buyer?

A: Yes. As long as the sale is a GF sale

Q: What if goods sold for Php 150,000, who is entitled to 50k?

A: seller shall not be responsible to the buyer for whatever profit he may have obtained

Q: If from 100k, 50k was paid by buyer, remaining goods sold for 100k, who is entitled?

A: seller! Is there unjust enrichment? No, it was the buyer who was really at fault

Q: If the buyer already acquired ownership should seller rescind 1st?A: No. he can automatically resale as ruled by SC Katigbak vs.CA

RIGHT TO RESCIND---same requirements in resale except for perishable goods

RECTO LAW 1484

Art. 1484. 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:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;

(3) 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. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. (1454-A-a)




Q: What are this recto law & maceda law in connection with installment?

A: Recto law- sale & movable property on installment1) EXACT FULFILLMENT/SPECIFIC PERFORMANCE2) CANCELLATION3) FORECLOSURE(alternative in character)

Q: Sale of jewelry,10M, 100k,(10 yrs. Equal installment),buyer defaulted, 3rd

installment

A: exact fulfillment is the remedy

Q: after 1 month S filed action for recovery of balance?

A: As a rule no, only 100k is due. XPN if there’s an acceleration clause

Q: defaulted 3rd installment, and so with 7th, can cancellation of sale be involve?

A: No! cancellation to be involve 2/more consecutive installment is defaulted

Q: If 3rd,4th, defaulted, cancellation, is seller compelled to return all amount?

A: No! he may retain reasonable amt. for the use of the thing

Q: Is it possible for S to retain everything?

A: Yes,if there is forfeiture clause

Q: Is it possible even if there is forfeiture, S is not able to retain everything?

A: Yes if amt. is unconscionable

Q: A bought brand new BMV, 5M installment basis. A mortgaged his jewelries worth 5M to secure fulfillment S foreclose.deficiency of 1M, can seller recover 1M from buyer?

A: Yes! Bec. The very thing bought is not the thing mortgaged. For 1484 to

apply. It should be the thing bought w/c is mortgaged.

BAR QUESTION: Q: A bought car, seller required real estate mortgage aside from the chattel mortgage covering the car. Seller foreclose mortgage on the car, despite foreclosure there is still a deficiency. May S, foreclose the real estate mortgage?

A: No! 1484 applicable

REMEDY OF BUYER1) action for specific performance-determinate substitute performance-generic

thing2) action for damage3) rescission (1191)- if there was a substantial breach

MODES OF EXTINGUISHMENT

1) 1236 IN GENERAL- ORDINARY MODE2) RESCISSION-those provided a law on sales-special modes3) EXTRA SPECIAL-REDEMTION

REDEMPTION1) CONVENTIONAL-available only if there was an agreement of repurchase

Q: Who has this right?

A: Seller, owners previous to the seller, assignee,heirs, creditors of seller

BAR QUESTION: S (debtotr) sold land to B with right of repurchase for 50K

Q: If seller offered 200k, can buyer refuse?

A: Yes! Bec. Seller is responsible also for the useful & necessary expenses

Q: On 1/1/02 sold mango plantation 4/ 1/02 supposed delivery but was only delivered on 10/1/06. if there were fruits between the period it should had been delivered, Can seller be compelled to pay entire 100k?




A: It depends if there were fruits at the time of the sale, determine if buyer paid the fruits at the time of sale, when it comes to repurchase seller should also pay.

Q: If no fruits at the time of sale, at the time of repurchase there were fruits.

A: 75k value of fruits should be divided into proportion counted unto the last anniversary date

BAR EXAM QUESTION:

Q: A sold to B land w/ right of repurchase, no fix period as to repurchase – when should it be? If A failed to repurchase, what will you suggest to your client? »4 yrs, ownership of the thing delivered to buyer- not absolute ownership-subject to resolutory condition of proper exercise of right of repurchase if seller a retro failed,ownership of buyer becomes absolute? If movable? Yes. Immovable? Yes!

FILE ACTION FOR CONSOLIDATION OF TITLE NEEDED----Consolidation of title needed. Yes with respect to immovable, necessary for buyer to be able to register the prop in his own name

Q: If expiration of date of repurchase, can no longer recover?

A: No! it might be an equitable mortgage; file for reformation (read 1602 for presumptions)

Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:

(1) When the price of a sale with right to repurchase is unusually inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed;

(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) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws. (n)

Q: Why would the CR have Dr signed a sale w/ right of repurchase than a mortgage?

A: to avoid pactum commissorium

Q: Against whom should right of repurchase be exercise?

A: Anyone who derive the title from buyer a retro

Q: X with right to purchaseQ:

A BC D

D sold to X his lot with right of repurchase, can X compel D to repurchase entire land?A: GR: No




XPN: If the thing is essentially an inadmissible thing ex. Bungalow house, painting w/c is immovable by destination 2) LEGAL- a) co-owners- any propb) of adjacent lnd-immovableQ: Co-owners

A BC D

D donated his land to X, Can co owners redeem?

A: No! for redemption to exist; onerous title

Q: Same table, D sold the land to B, can their be a right of redemption?

A: No! should be sold to other person for redemption to arise

CASE: 3 bros. had mother title cancelled… RD registered still in their names instead of one TCT each, despite actual partition one of bro. sold, can the two redeem?

A: As adjacent owner,Yes! But can’t claim as co-owner

Q: If only 350k is stated in deed of sale, actual payment is 1M, purchase price should be?

A: 350k only! Contrary to public policy case of Doromal

Q: If 1M is stated in deed of sale, 350k interest how much can co-owner be compelled to pay in order to redeem?

A: 1M

Q: 2 sisters, A& B, A sold her interest to X-(2006) w/o B knowing.B paid real property tax & knew of the sale, informed X right of redemption, can he still redeem?

A: When will the 30 days run? 30 days fr. Actual knowledge

Q: A-X (buyer) informed B of the sale, co-owner did not react; buyer wanted

prop. Be annotated at RD, RD send another notice to co-owner (deadma!)After more than a year, buyer filed for partition, co-owner received summons, filed for redemption-prosper?

A: Yes! Notice in writing given by vendor not vendee,not RDAlternative answer: No! bec. She already received notices, the 30 day period should have already runDOROMAL VS. CA notice should be w/ deed of sale!

TGMOct2007

IV.LEASE

Kinds of Lease1. things- consensual contract;

onerous2. work or service

Household service- Labor Employment contract- Labor Contract for a piece of work- Civil Contract of Carriage- Commercial

3. Right

COMMODATUM LEASE

Essentially gratuitous

For a price certain; onerous

Q: What is the nature of the contract in the boundary system?

A: It is contract for the Lease of Service. Employment contract which requires the elements of an employer-employee relationship.

Q: Is the lease of a safety deposit box, considered lease of things?

A: NO. It is a special kind of deposit. The lessee has no control over the object.

Characteristics

CASE Dimaculangan - In lease of things, a death of the party does not extinguish the contract of lease.




It is essentially onerous. Consensual, Nominate, Bilateral

CASE:Bagtas-

The 2nd bull was not turned over due to a fortuitous event- crossfire during the era of the Huks. Is it a contract of commodatum by which the government bears the loss? SC-This is a Lease.

Bagtas has to pay a certain breeding fee.

Spouses, guardians and those enumerated under Article 1490 and 1491 cannot enter into a lease contract with each other.

Art. 1490. The husband and the wife cannot sell property to each other, except:

(1) When a separation of property was agreed upon in the marriage settlements; or

(2) When there has been a judicial separation or property under Article 191. (1458a)





(4) Public officers and employees, 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 intrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale;

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, 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.


As to Formalities

Q: A appointed B as his agent. A withholds no power against B granting the latter a Power of Attorney. B entered into 3 contracts…

1) Contract of lease of parcel of land for 4 years and a rental of 60,000php annually.2) Contract of lease of a parcel of land with a rental on a monthly basis of 3,000php.3) Contract of sale of a parcel of land for 3x the value of the land.

What is the status of these contracts?

A: 1) Unenforceable. What is authorized of B is an act of administration. SPA is needed. 2) Valid and Binding. Rental of an immovable without a fixed period, the same period as payment of rentals; It is an act of administration only.




3) Void. Authorization of the agent is not in writing.

CASE Donald Dee- Documentary formalism is not an element in employment.

BAR EXAM QUESTION:

Q: A leased a cockpit to B. During the pendency of the lease, the cockpit collapsed. Who is liable for the collapse?

A: Lessor. His is the duty to repair, unless there’s a stipulation to the contrary.

CASE:Gonzales v. Mateo-

Lessee is liable because heagreed to repair.

BAR EXAM QUESTION:

Q: A leased a parcel of land to B for 10 years. There was an agreement to extend the Lease and it’s binding. B put up a 2-storey building. Upon expiration of the Lease, B failed to renew the Lease. A filed an ejectment suit against B. B contended that he is a builder in good faith thus reimbursement of the expenses.

A: Builder in good faith cant be invoked. Lessee can’t build in the concept of an owner. He is neither entitled to reimbursement. The option is with the lessor if he opts to retain ½ amount paid by the lessee or remove the improvements though causing damages. Damages must not be necessary, though.

Q: Is chapel a useful improvement?

A: Yes.

Q: There was a lease over a fishpond for 5 yrs. The rental for next year will be reduced to ½. However, the harvest was only ½ due to the rebels. The lessee contended that the lease period is extended for 10 yrs now. Will there be a reduction?

A: None. The right of reduction can only be invoked if failure to harvest was due to an extraordinary fortuitous event such as war, fire, pestilence. It does not include the intrusion of lawless elements, flood, and typhoon.» reduction can be allowed only in cases where B harvested less than one half and that it should had been due to fortuitous event»lawless element is not a fortuitous event

Q: Will there be an extension?

A: None. Lease is suspended during the fortuitous event. He can claim not to pay the monthly rental.» Fortuitous event is not a reasonable ground for extension but only for suspension of payment of lease during that period

Q: May the lessee sublease with the consent of the lessor?

A: Yes. As long as it is not prohibited from subleasing. Assignment of lease is valid if with the consent of the lessor. In sublease, it is valid although absent consent of the lessor provided it is not prohibited.

CASE:Manlapac v. Salazar-

A leased his fishpond to B till the end of June 1, 1947. During the existence of the contract, B contracted with C, the latter to have the rights in the fishpond. The contract between B and C was made without A’s consent. The heirs of A contended that the contract is void because it is only an assignment.

SC- The lease agreement constitutes as an assignment only if the lessee absolutely transferred all his rights to 3rd persons, dissociating himself in the lease. The 3rd person becomes the new lessee.»there should be absolute transfer

CASE: Frezel vs. Mariano

There was a construction contract (labor and materials). Frezel as the




supplier. A took over the construction of the building. C demanded payment from A. Is C, the owner, liable for the unpaid amount? The claims of C are as follows:There’s no privity between A and C. B is an agent.

SC- There’s no agency because A’s extent of control over B goes only into the result and not the manner, therefore, it is to be considered as a contract for a piece of work.

C can recover from A

SC- Only to the extent of the unpaid amount by B to C.

Might be asked in the finals!

Termination of Lease

Q: A constructed a building for 5M and leased it to B. B will be the lessee for 10 years for 100,000/month. After completion of the construction, B will become the owner thereof. On the 5th

year, the entire building was burned. A constructed another building. Before completion, B gave notice to A that he will continue the lease. Can A refuse B as lessee?

A: Yes. With the original building destroyed by a fortuitous event, the lease contract is extinguished, since there is total destruction.

Death of the lessee does not extinguish the lease. Except is there is a stipulation to the contrary.

BAR EXAM QUESTION:

Q: A entered into a lease contract with B for 3 years. There was a stipulation in the contract that B will have the option to buy the parcel of land leased by him. However, B failed to exercise the option as stipulated in the contract. B still continued paying the rentals and A continues to receive the same. B, now, exercised the option. A refused to sell the land to B. Can A be compelled to sell the land?

A: There was a renewal of the lease known as IMPLIED NEW LEASE.

Q: Does B have the right to exercise the option?

A: No. Only the terms and conditions GERMANE to the Lease contract is deemed renewed. Otherwise, it is not renewed. If payment be on an annual basis in the original contract, the same period and manner of payment will also be adopted in the renewed contract. NOTE ARTICLE 1670.

Art. 1670. If at the end of the contract the lessee should continue enjoying the thing leased for fifteen 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. The other terms of the original contract shall be revived. (1566a)

Pvt/101707

V. AGENCYQ: baptismal proxy, agency?A: No. political and social relations are not included»Agency refers only to juridical act- BOUND himself to another

>objective : execution of juridical act


In 1952, A lease to B a house, in 1967 B transferred his rights to C. Will the transfer be valid and binding against A, the lessor?A: It depends on the nature of the transfer if it was assignment or sublease.SC: If the transfer of rights is absolute, where lessee cease to be lessee, then the transfer is not bindind on the lessor however if lessee reserves reversionary interest no matter how small, it would be binding on the lessor



extinguish legal relationship such as payment

- there must be consent- “ agency “ includes instrumentality

as government instrumentality.

CASE:Quiroga V. Parsons

– exclusive right to sell is an exclusive agency.

Nature of AGENCY vs. SALEConsensual

Nominal

May be Gratuitous*burden: principal*presumption: for compensation

Essentially Onerous

Preparatory contract-a means by which other contracts may enter into.

Based on trust and confidence

There’s no transfer of ownership but only transfer of possession.

Ownership passes upon delivery.

AGENCY vs. CONTRACT FOR A

PIECE OF WORKExtent of control by the Principal over the agent is with the Result and Manner.

Extent of control by the Principal over the agent is with the Result only.

AGENCY vs. NEGOTIORUM GESTIOBy agreement By law

AGENCY vs GUARDIANSHIPPerson represented must be capacitated

Person represented is incapacitated

AGENCY vs PARTNERSHIPTermination may be by the will of either party Principal- revocation Agent- withdrawal

It has a separate juridical entity

KINDS of AGECY:Actual

Apparent/OstensibleAgency by estoppel

I. ACTUAL AGENCY

Mack vs. Cams (?)

X is clothed with full authority to manage restaurant of Y (owner). X purchased some items from Z. X was indebted to Z. Y’s defense is that X was not authorized to purchase. However, X led other people to believe that X has authority such as signing as agent.

SC-Estoppel lies. Y is liable.

II. APPARENT/OSTENSIBLE

Rallos vs. Yangco

A sent a letter to B authorizing C to buy abaca/copra. B transacted with C. Consequently, from Jan. 2, the purchases remained unpaid. B complained to A. A contended that before Jan. 2 he revoked the authorization from C. Therefore, transactions hereafter are not binding upon A.

SC-Invoked Article 1873. Revocation is immaterial. C’s transaction has full force and effect in exercising authority until rescission. If C is specially informed of the revocation of the authorization, B shall also be informed in the same manner as C.- JBL REYES: If B had actual knowledge of the revocation, he cannot hold A liable as it would amount to Bad Faith.

Q: What if A actually caused a notice of publication?A: Can still be liable pursuant to Article 1873

Art. 1873. If a person specially informs another or states by public advertisement that he has given a power of attorney to a third person, the latter thereby becomes a duly authorized agent, in the former case with respect to the person who received the special information, and in the latter case with regard to any person.




The power shall continue to be in full force until the notice is rescinded in the same manner in which it was given. (n)

Classifications of Actual Agency

as to manner of creation express – consent of both parties given implied

CASE: Dela Pena vs. Hidalgo-

After the authorization was executed, the agent appointed a substitute. The principal did nothing to repudiate such appointment.

SC-There is an Implied agency by the principal’s silence or inaction. The principal is deemed to have accepted the new agency.

Agent

- When the agent is authorized to sell a parcel of land and he just stared at the ceiling, he is NOT deemed to have given his consent. However, if the agent accepted a special power of attorney and he did nothing, it depends upon the kind of business as to consider it as an implied agency, with the agent giving his consent. If the principal and agent are engaged in the same business, there is an implied agency whereby the agent is deemed to have given his consent.

Q: Mere silence of agent deem accepted agency?A: not necessarily»If parties are in the same place, no problem, stipulation on the SPA governs Q: if not in the same place such as when using the telegram, if did not reply deem accepted?A: It depends on the nature of the business, if the task is also within the nature of the agency, yes.

Q: A authorized B to sell land of A in Baguio, did not do anything, Is B an agent?A: No.Q: How about if A gave the letter to B and B accepted?A: There is an implied agency

As to consideration or compensation

Onerous- presumption is for consideration. Gratuitous- liability is mitigated in the part of the agent.

BAR EXAM QUESTION:Contract of Agency as to scope of authority

1. Acts of administration2. Acts of strict dominion

Q: In the sale of Rolex, the agent has no SPA, with the act bind the principal?

A: No. Any act of strict dominion requires an SPA.

As to form:1. Oral2.Writing1. Oral2.Writing2.Writing

Q: Why is the form of agency peculiar?A: Because it involves two contracts, the agency itself and the contract to be contracted by the agent.


Q: Principal was in the hospital and executed a GPA with the following:

- contact of lease of a parcel of land with a term

- contract of lease with no agreement as to term and payment

- contract of sale for a three times higher than the land

A: Discuss the status: Depends on the power given, GPA was only given » unenforceable if not in a public instrument » valid and binding if merely acts of administration» sale is void under 1874 ; SELLING IS AN ACT OF STRICT DOMINION



Q : A is represented by B. There is a lease for 5 years and such lease was not put into writing.

A: First, determine the object. If it is personal, SPA is not required. If it is an immovable, it depends on B’s capacity in the contract of Lease.

Q: 3rd person is the lessee and the principal is the lessor, SPA is needed. However, if the principal is the lessee, authority of A must be in writing in order for it to bind B?

A: Not necessarily. For lease to be in writing or not, the provisions on Statute of Frauds must find application.

BAR EXAMINATION QUESTION

Q: The deceased principal authorized the agent to dispose of his land. The heirs of the principal, however, sold the 12 hectares to B. The agent sold the same land to C. Who has the better right?

A: It depends on the authority of the agent. If it is not in writing, the contract of sale is void. Thus, C has a better right.

Q: If it is in writing, the authority of the agent is extinguished. B has a better right?

A: Not necessarily. If the agent has no knowledge of the death of the principal and C is in good faith, C being the 1st

registrant, therefore, C has a better right.

»Notarization or recording in a public instrument is not a requirement.

CASE:Jimenez-

X mailed a letter to Y giving him the authority to sell a parcel of land. So Y

sold the same to a third person. The letter is sufficient to bind X.» In a SPA, the only requirement must be in writing , need not be notarized

Essential Elements

1. consent of the parties2. object3. act within the scope4. act in representation of principal » 3 and 4 are not necessary to the

validity of the contract but these are the obligations of the agent. Absence of these, Agency remains valid.

3 and 4 are the TWIN REQTS.How to know whether it is within or in

excess of authority?

Consider the SPA.

CASE: Linan

- Whether or not the agent is authorized to sell a parcel of land.

Justice Perfecto: under the SPA, he has no authority. Good faith is not within the scope.

Rely on the provisions of law- the authority to manage the restaurant includes the authority to buy the equipments.

Art. 1882. The limits of the agent's authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him. (1715)

Article 1882- Considered within if it is to the advantage of the Principal.

CASE:Insular Drug-

The agent’s authority to collect money does not include encashing or endorsing of check.

Municipality of Ilo-ilo vs. Evangelista




»The authority to hire a lawyer includes authority to pay said lawyer.

»If the agent’s authority to borrow money and mortgage, he cannot use it to satisfy his own debts.

Q: A authorized B to borrow money from any bank, agent borrowed money in his name to buy land, defaulted, can bank go after the principalA: No. Third person may have recourse against principal except if it was property of principal which was involve

Q: SPA may be oral?A: NO! It is a written authorization as the following provision provides:

1871 “delivers”1872 “transmit”19001902 “presentation”

Art. 1871. Between persons who are present, the acceptance of the agency may also be implied if the principal delivers his power of attorney to the agent and the latter receives it without any objection. (n)

Art. 1872. Between persons who are absent, the acceptance of the agency cannot be implied from the silence of the agent, except:

(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. (n)

Art. 1900. So far as third persons are concerned, an act is deemed to have been performed within the scope of the agent's authority, if such 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. (n)

Art. 1902. 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. Private or secret orders and instructions of the principal do not prejudice third persons who have relied upon the power of attorney or instructions shown them. (n)

Rights and Obligations of the Agent

His main obligation is to CARRY OUT THE AGENCY. If the principal died…

GR: The agency is extinguished.EXC: If it will endanger the

Agency, the latter shall be continued

Ex: X sold the car to Y with the breaks in a defective condition and without the principal’s knowledge, Y bought the car. Therefore, the principal incurred loss/damage. (Art. 1888- An agent shall not carry out an agency if its execution would manifestly result in loss or damage to the principal.)

Art. 1888. An agent shall not carry out an agency if its execution would manifestly result in loss or damage to the principal. (n)

Liability of Agents to 3rd persons:Personally bound himselfActed negligentlyActed outside the scope of his

authority Even if the agent acted outside the scope of his authority, the agent is NOT liable if:




The principal ratified the agent’s actsThe 3rd person was informed by the agent that he acted outsideThe 3rd person was aware thereof

CASE:Domingo vs. Domingo-

Whatever commission is received by the agent as a consequence of his agency, albeit the absence of knowledge of the principal of the agreement between the 3rd person and the agent, the latter shall give to the principal whatever he received.The agent is not the insurer of the principal’s success in business.

GR: The agent cannot sell the goods on credit. EXC: Without consent of the principal, the sale is not void but the principal holds him liable as sale in cash basis.

Q: When can agent be held liable?A: When he bound himself. Exception:

1. When the principal ratified2. When 3rd person informed that agent is acting beyond the scope of his authority3. When agent informed 3rd

person such as when he promise to secure ratification and was not able to

Case LawQ: P authorized A too sell his house and A introduced prospective buyer. The buyer gave him 1K. P terminated the authority of the agent and the agent went to RD and found out that a sale was consummated. A demanded commission, can the case prosper?

SC: No. Failure of agent to deliver to principal even not owing to him the 1k given by the buyer constitute a forfeiture of agent’s right to commission

Case Law:

Q: Agent to collect P800 he was able to collect only P500 and deducted 20% as commission. SC: The act of the agent constitutes estafa.

BAR EXAM QUESTION:

Q: A authorized B to sell property in Cebu, B appointed a subagent. Can B appoint a subagent?UPLAW Center:

A: Yes, under 1892 if it was not prohibited.» Sir said with due respect to the UP law Center, the answer is erroneous.Subagent – does not take the relationship of B as agent; assistant agent

Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be responsible for the acts of the substitute:

(1) When he was not given the power to appoint one;

(2) When he was given such power, but without designating the person, and the person appointed was notoriously incompetent or insolvent.

All acts of the substitute appointed against the prohibition of the principal shall be void. (1721)

Substitute – “kapalit niya” Article 1892 shall apply» if principal was informed of the substitute Article 1892 shall not apply

Modes of Extinguishment (EDWARD)

E- expiration of the period

D- deathW- withdrawalA- accomplishmentR- revocationD- dissolution of entity» not exclusive, Article 1231 also applies




Other modes may apply to agency.

BAR EXAM QUESTION

Q: X authorized Y to sell a pendant with diamond. The pendant was robbed. X sued Y. Y’s defense is robbery.

A: Austria Case

- Robbery is a fortuitous event.

- The perpetrators need not be convicted of robbery.

- For a fortuitous event to be a valid defense, there must be no concurrent event.

- However, if it happened today, Agent is considered to be negligent. If it happened in the 60’s, the agent is not liable.

- The SC held that the agent is liable because there’s negligence.

On DeathEffect of death of the agent

It will absolutely extinguish the agency. If the agency is for the benefit of a 3rd person, the agency will continue to be in full force and effect despite the death of the principal.

Effect of death of the principal

If without knowledge and the agent is in good faith, the agency is extinguished but the act of registration in good faith even after the death of the principal is valid as the law says so.

On Revocation May be made anytime; at will Q: If there’s a period, will the revocation before the stipulated period hold the principal liable?

A: NO.

CASE:Barreto

Agency is based on trust and confidence therefore, the principal can revoke anytime. P can only be held liable for damages if he acted in bad faith.

CASE: Collongco

A authorized B to sell the land for 100M. B did not remit the 100M. What was agreed was that B will be the agent of A in subdividing the land and constituting the house. The proceeds will go to A as payment. The authority granted was for 10 yrs. On the 5th yr., A revoked the authority given to B. Was the revocation valid?

SC: NO. The agency is was coupled with interest and as such, it cannot be validly revoked after the interest ceases; means of fulfilling interest must be different from the commissioner given; very interest that an agent is claiming should be stated at the SPA without prejudice to his liability if revocation was done in bad faith

Pvt/101707

VI. PARTNERSHIP

BAR EXAM: A used all his savings to put up a

restaurant, B gave A 4k as financial assistance in exchange of 20% profits, 22 years after B filed action demanding profits. A denied and invoked prescription.A: UP Law Center – Contract of Partneship exists because they contributed to a common fund plus there was a stipulation as to profit.»Sir said, no contract of partnership exists. There was no agreement to contribute to a common fund, only financial assistance.

Q: Partnership vs. Co-ownershipA: Contract of partnership is created by mere agreement while co-ownership is created by operation of law.




Essential Element:» object is to engage in a lawful activity

General Partnership and Limited Partnership (relevant only in Limited Partnership)

Q: Can the spouses enter into a limited partnership and engage in real estate businessA: Yes, prohibition is only on universal partnership

Q: Can two corporations organize a general partnership, can a corporation enter into a partnership?A: No! Corporation and partnership may organize a joint venture but they cannot enter into partnership contract» Sir said that Corporation can enter into a contract of partnership if there was an express grant of power in its articles of incorporation. (Tecson vs. Bolaños) Q: What is the effect of illegality of contract? Can a partner recover what he had given if cause was illegal?A: Yes, because it will result in unjust enrichment.Q; How about if both was in pari delicto?A: If there was repudiation before there was any damage, the court is in its discretion to allow recovery

BAR QUESTION: A and B put up a car repair shop. A contributed money while B contributed his services. A likewise put up a coffee shop on the left side of the car repair shop. B likewise engaged in another business of his own. Are they legally allowed to venture into such businesses? ANSWER: A under the facts can engage in such services since he is only a capitalist partner. As to B, since he is an industrial partner, he is prohibited from engaging in any kind of business without the consent of the other partners.

» Partnership may be constituted in any other form. – Article 1172

Q: How about 3rd person who contracted with Partnership with unlawful object, can recover?A: Yes, as long as no knowledge of the illegality

When one or more parties contribute an immoveable

If there is no inventory – VOID;If there is an inventory, but not put in

writing

If such partnership is not put into public instrument -> it will not affect the validity of the partnership agreement, though it may affect the greater efficacy or the enforceability of the contract.

Case: Hernandez v. Angeles

» Form is not necessary for the validity, maybe necessary for enforceability»ENTITY THEORY/LEGAL PERSON THEORY means that a partnership has a juridical personality separate and distinct from the partners

A general partner can be an industrial partner.

Can a partner be both capitalist and industrial partner at the same time? YES

Can a limited partner be both an industrial and a capitalist partner at the same time? NO

CLASSIFICATION OF PARTNERSHIP:I. As to Object: a) present property b) profits II. a) General » all general partners b) Limited » one or more general and one or more limited partner; a limited partner (has no right to partake in the managementCommercial Partnership » governed by Code of CommerceIII. As to term:

a) maybe for a particular undertaking (Ortega vs. CA)

Admission of a new partner»If given a question concerning the liability of a newly-admitted partner for a partnership obligation, ask, “when was the partnership obligation incurred? Was it incurred PRIOR TO / AFTER the new partner’s admission to the partnership?




Q: ABC partnership admitted D as new partner. The ABC partnership incurred the following liabilities. ABC- 100; X- 30K, A- 50k. What is the liability of D as a new partner? If A is a managing partner.A: GR: up to capital contribution only unless he bound himself to be solidarily liable NOTA BENE: application of proportionate sharing:

a) if A is a general partnerb) both debts are due and

demandablec) receipt was given in the

name of the partnership

d) payment should be applied to the most onerous

LIMITED PARTNER IS LIABLE WHEN:a) he participated in the

managementb) if surname appears in the

partnership name except;a) already existing surnameb) if also the surname of a

general partnershipc) if at the same time general

or limited partner

» Article 1892 subagent is not equivalent to substitute» in having a substitute, must be with the knowledge of the principal. (De la Peña vs. Hidalgo)

Proportional Application of Debts:

One obtaining is a managing partner;

Both debts are due and demandable;

If the partner receipted the amount in the name of the partnership

estoppel agency

If the debt is more onerous

Property Rights of a Partner

see the 3 major classification of the property rights of partners

plus right to formal accounting

plus the right to the access of partnership book

Rights in specific partnership property = a partner is co-owner with his partners of specific partnership property; see 1811 = co-ownership sui generis.

Cf. co-ownership in partnership law and co-ownership in property law. In the former, a co-owner may sell his share even without the knowledge and consent of the other co-owners, whereas, in partnership law, such would not be allowed.

Interest in partnership = pertains to the share in profits and surplus.

Sharing of the Partners in the Profits and in the Losses

if there is a STIPULATION (except when there is a stipulation where one or more of the parties shall be excluded from the profits, the stipulation shall be VOID)

if there is NO STIPULATION , sharing shall be in proportion to the capital contributions.

What about the Industrial Partner? => give him the value of his service; the balance of which should be distributes to the capitalist partners in proportion to their capital contributions.

BAR QUESTION: A, B, and C entered into a partnership. Agreed to Php360 share profits equally. C assigned his interest in the partnership to X. Therefore, X demanded share in the profits and management. Are these demands of X legally justifiable?

ANSWER: As to the management, an assignee cannot participate in the management, not even right to access… As




to the share in the profits, an assignee has the right to receive the profits the assignor would have received. As to interest, a partner may assign however limited only to the receipt of such amount and nothing more. Therefore, to receive PHp 120k (360/3)

BAR QUESTION: W (industrial partner), X (industrial partner), Y (P 50 K) and Z (P 20 K) entered into a partnership agreement. W and X will act as managing partners.

Thereafter, two persons were appointed:. W and X appointed the SECRETARY, one

of the two persons appointed. Y and Z however opposed such appointment. The ACCOUNTANT, the other person named,

was appointed by W and Z, whose appointment was however opposed by X and Y. Whose appointment will bind the

Partnership?

ANSWER: The secretary’s appointment will bind the partnership. As to the accountant, it should be resolved as to the partnership having the controlling interest, such controlling interest being dependent on the aggregate capital contributions of those who appointed vis-à-vis those who opposed.

MANAGEMENT ARRANGEMENTS One managing partner Solidary management Joint Management Partner as Agent

RIGHTS/ OBLIGATIONS OF PARTNERS

To make good his promise to contribute MONEY PROPERTY INDUSTRY

If money = equally, unless there is a stipulation

If in default, he is a debtor of the partnership plus interest plus damages (i= 12%)

If property = ask what was actually contributed. Was it the property

itself or the use of such property. If property itself => transfer ownership plus obligation to warrant in case of eviction. If thing was lost before delivery, the partner bears the loss, RES PERIT DOMINO. See Exceptions (1) FUNGIBLE (2) FOR SALE (3) WITH APPRAISAL.

Partnership bears the loss if possession is with partnership already.

If services, SPECIFIC PERFORMANCE WOULD NOT LIE. Remedy is to demand the value of service plus damages incurred by partnership

PROPERTY RIGHTS:1) specific partnership property » a partners is a co-owner as to his co-parners not

partnership;l co-ownership is sui generis2) interest3) participate

Q: Can a creditor of a co-owner levy such interest of a co-owner in a partnership landA: Yes, but he cannot do so if indebted to partnership

Q: W and X are managing partners, Y-50k, Z-20k. W and X were appointed as secretary by 2 persons, opposed to by Y and Z; accountant appointed by W and Z but opposed by X and YA: In the 1st case, YZ has no right to oppose. In the second case, controlling partners shall prevail based on capital contribution. Appointment shall not be valid having opposed by Y who has controlling interest. This case is called subsidiary management

FIDUCIARY OBLIGATIONS; Honesty and Good faith starts during the negotiation stage. Obligation would continue not only up to dissolution but also until termination.

REMEDIES OF A NON-DEFAULTING PARTNER

Specific performance Dissolution RESCISSION IS NOT A REMEDY

AS TO DISTRIBUTION: »As to stipulation, if it excludes a partner, stipulation is void not the partnership.Share in the Losses:




1. determine agreementQ: if one partner is excluded valid?A: depends: if capitalist, stipulation is void; if industrial partner was excluded – valid among partners but void as to third persons. –Article 18162. if no stipulation to losses, use stipulation on the sharing of profits3. no stipulation at all = share in their capital contribution

LIABILITY AS TO: Contractual Obiligation = jointJoint and solidarily 1822 & 1823 – tortious/ wrongful acts of partners

Q: Bought set of SCRA in the account of the partnership, can partnership be liable?A: It depends if the act is for the apparent carrying of the usual business of partnership.Q: Can partnership be liable even if not related to the business?A: Yes, if such party was not authorized

DISSOLUTION:» change in relation where partner ceases to be associated in carrying on the business of partnership»marriage of partners not a ground

Entry of a new Partner

General Rule: It will dissolve the partnership

Exceptions: a) act is necessary to wing

up partnership affairsb)

CAUSES OF DISSOLUTION 1) extrajudicial a) voluntary » No. 1 & 2 of Article 1830 b) involuntary » No. 3-72) judicial Article 1831Q: A B C assigned whole interest to X against the will of A & B and decided to dissolve the partnership, X filed for a dissolution, which dissolution will be valid?A: That made by A & B is valid. X was mere assignee, no legal interest to file dissolution for he is not by law a partner.

DEATH OF A PARTNER:» if general, partnership is not extinguished if biz nis continued or not stated due to unanimous consent.

EFFECT of DISSOLUTION:» termination of authority of partners.

LIABILITY OF SUBSTITUTE

NOT GIVEN POWER TO APPOINT

All acts of the substitute appointed against the prohibition of the principal shall be void

LIABLE if substitute acted outside the scope of authority or there is bad faith or negligence on the part of the substitute

NOT LIABLE if the substitute acted within the scope of authorization representation of the principal and acted with due diligence and in good faith

» the agent is not an insurer of the success of the business of the principal

EFFECTS OF APPOINMENT OF SUBSTITUTE/LIABILITY IN DAMAGE TO PRINCIPAL

GIVEN POWER TO APPOINT

Designated Not designated

Not liable unless he knew that the designated person is notoriously incompetent or already insolvent

Agent shall be responsible for the acts of the substitute if substitute is notoriously incompetent or insolvent

Not liable as agent shall NOT be responsible for the acts of the substitute if the substitute is notoriously incompetent or insolvent

VII. CREDIT TRANSACTIONS

not the same as bailment




not all credit transactions are bailment

in bailment, there has to be a delivery (deposit, loan, mutuum, commodatum)

in some credit transactions, delivery is not necessary (guaranty, mortgage)

sale may be a credit transaction of the sale is on credit

not all credit transactions are contracts (judicial deposits, legal deposits)

Loan consider first the kind

whether mutuum or commodatum

mutuum or simple loan- the agreement between the parties to constitute a loan is already a binding agreement, however, unless it is delivered there is no perfected contract of loan yet.

If the contract of loan is not yet perfected, cannot be revoked

In mutuum, if without express stipulation, contract is compensatory

case: Rep vs Bagtas

case: Soccoro - What is the effect of a declaration that the interest is unconscionable? Still liable to pay interest but at the legal rate in a contract of commodatum, the bailor need not be the owner because there is no transfer of ownership in mutuum, lender has to be the owner precarium, a special form of commodatum wherein the bailor may demand the thing at will (1947) RA 8183 all monetary obligations shall be settled in Philippine currency which is the legal tender. However, parties may

agree that the obligation be settled in other currencies thing pledged must be delivered to the creditor unlike in chattel mortgage and real estate mortgage

Deposit essentially gratuitous, unless stipulated otherwise irregular deposits- a depositary has the right to use the thing in deposit, object cannot refer to future thing because it requires delivery

characteristics

a) principalb) realc) gratuitous or onerous

kinds of deposit a) judicialb) extra-judicial

i. Conventional / voluntaryii. Necessaryiii. Legal

Guaranty

covered by the Statute of Frauds

1. Personal- personal commitment to answer for the debt, default of another2. Real – guarantor delivers collateral a. pledgeb. chattel mortgage c. real estate mortgaged. antichresis

continuing guaranty – Art. 2053 the only parties in guaranty are the creditor and the debtor sub guarantor- benefit of excussion




co-guarantor- benefit of division guarantor- insures the solvency of the debtor surety- insures the solvency of the debt

Pledge/ Mortgage

free disposition means that the mortgagor should be capacitated pledge may be perfected even if delivery is merely constructive liability of the pledgor or mortgagor is only up to the value of the pledged/ mortgaged property. Nawala na sa kanya yung property, kaya tama na yun unless expressly stipulated otherwise

creditor cannot recover if property is covered by Recto Law

no right of redemption in chattel mortgage and pledge

TABLE 1

PLEDGE All are accessory contracts

A pledge or mortgage cannot exist without a valid obligation

Real Article 1316, Article 2093)

But a promise to constitute a pledge gives rise to a personal action

Unilateral

between the parties; public interest.

CHATTEL MORTGAGE

Nevertheless, a pledgor or mortgagor maybe constituted to guarantee the performance of a voidable/ unenforceable contract.It may guarantee a natural obligation

Solemn or Formal (De leon)CM Registration is indepensable. If not recorded, binding on the parties.Promise to constitute mortgage. Affidavit of GF to binf 3rd parties. If not executed, mortgage may still bind third persons if the latter had knowledge of the promise to constitute mortgage

unilateral

REAL ESTATEMORTGAGE» maybe foreclosed even if only written in a private instrument

Solemn. (Vitug)Must be recorded, if not binding to parties.promise» personal/action

ANTICHRESIS A conditional obligation may also be secured.

Solemn.

Amount of principal and interest must be in writing, if not void.

BILATERAL

TABLE 2

KINDS RIGHT TO USE RIGHT TO APPROPRIATE(PACTUM COMMISORIUM)

INDIVISIBILITY

PLEDGE NONE, unless1. authorized2. necessary for

the preservation of the thing

Creditor cannot appropriate. Any stipulation to the contrary is null and void.

However, in pledge, if at the first auction the

Pledgor or Mortgagor is indivisible, eventhough debt may be divided among the successors-in-interest of the debtor/ creditor.




thing sold, a 2nd one with the same formalities shall be held, but there is no sale either. Creditor may appropriate but the shall acquit the entire claim.

Encashment of a deposit certificate given as security.» not postdated check (Chua vs. CA, Sept. 26, 1989)

EXCEPT:Where several things are given in a pledge or mortgage, each one of them guarantees only a determinate portion of the credit.

Right of Extinguishment.

Indivisibility is not affected by the fact that the debtors are not solidarily liable.

CHATTEL MORTGAGE

Not applicable unless stipulated

REAL ESTATE MORTGAGE

Not applicable unless stipulated

ANTICHRESIS Only right to receive fruits unless stipulated.


TABLE 3: RIGHTS OF MORTGAGOR

KINDS RIGHT OF SALE/ FORECLOSURE

RIGHT TO BID

RIGHT TO RECOVER DEFICIENCY

SPECIFIC PERFORMANCE

PLEDGEArticle 2112 The creditor to whom the credit has not been satisfied in due time pledged may proceed before a NP. X x x

YES. Provided he is the not the only bidder. Article 2113

VOLUNTARY: None even if there’s stipulation. Article 2112, Article 2115

LEGAL: YES

YES, but pledged deemed abandoned.

CHATTELMORTGAGE

1. Judicial Foreclosure Sec.13 Article 1508

2. Extrajudicial Foreclosure Sec. 14 Article 1508

YES. Except on installment.

YES, but chattel mortgage deemed abandoned.

REAL ESTATEMORTGAGE

1. Judicial (Rule 68 of the Rules of Court)2. Extrajudicial Foreclosure Act. 3135

YES. Rules of Court on Foreclosure.

YES, but security deemed abandoned.

ANTICHRESIS

TABLE 4: RIGHTS OF PLEDGOR

KINDS RIGHT TO ALIENATE RIGHT TO BID

RIGHT TO RECOVER EXCESS EQUITY OF REDEMPTION

PLEDGEARTICLE 2097 YES!

ARTICLE 2108YES

ARTICLE 2113

VOLUNTARY: NONE:ARTICLE 2115

LEGAL: YES, ARTICLE 2121NONE

CHATTELMORTGAGE

Sale valid and buyer may acquire ownership but if

not consented to by mortgagee, mortgagor is criminally liable. (Art. 319

RPC)

YES. Act 1528Equity of redemption within 90 days from order of foreclosure.

After foreclosure no right of redemption.

Equity of redemption within 90 days from foreclosure. After

foreclosure no right of redemption. Except foreclosure

of real property by banking institution and in extrajudicial foreclosure of real property—full amount of purchase price

within 1 year

REAL ESTATEMORTGAGE

Article 2130 A stipulation forbidding the owner from alienating the immovable mortgaged shall be void.

YES (Rules of Court on Foreclosures)

ANTICHRESIS Same as above, Article 2130.

YES. Article 2137, Rules on Foreclosures

VII. TORTS

» there is no need for a pre-existing contractQ: Why file for action for quasi-delict?A: Claim for moral damages which has many grounds

Essential Elements:I. Act or Omission there being fault/negligence» negligent act, even acts punished by lawDulay vs. CA» Quasi-delict is not limited to negligent acts, even a malicious or intentional act may be the basis of a quasi delict.

Article 2177» acts punished by law maybe the basis, the only exception is that there be no double recovery

Q: May an action for quasi-delict subsist with a criminal case?A: Yes, they are distinct from each other

Q: Driver in a acquitted in a criminal case, heirs filed civil case for quasi-delict, may action prosper?A: Yes, in quasi delict mere preponderance of evi is enough

II. DAMAGES

» any hurt or harm inflictedQ: What will be the degree of diligence required?A: That of a good father of a family or that which the law provides Extraordinary » common carrier, doctors, banksQ: Who has the burden of proof?A: plaintiff

III. CAUSAL CONNECTION BETWEEN ACT OR OMISSION AND DAMAGE

- end-

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Atty. Crisostomo Uribe notesCivil Law Review 2

Bogs Quitain; Tere Morales; Paulette Tongcua; Tino Occiano; Budz Occiano

7

uribe notes

Documents

civil obligation

natural obligations

source of obligation

conditional obligation

sources of obligation

civil law review

natural justice

indigent person