PROPERTY
commodity. Hence, bills carried in
CHARACTERISTICS OF PROPERTY:
1. Utility for the satisfaction of moral or
economic wants
2. Susceptibility of appropriation
3. Individuality or substantivity (i.e., it can
exist by itself and not merely as a part
of a whole. Hence, the human hair
becomes property only when it is
detached from the owner)
CLASSIFICATION OF PROPERTY:
Properties may be classified from different
viewpoints:
A. Mobility and non-mobility
1. Movable or personal property
2. Immovable or real property
B. Ownership
1. Public Dominion or ownership
2. Private Dominion or ownership
C. Alienability
1. Within the commerce of man (or
which may be the objects of
contracts or judicial transaction)
2. Outside the commerce of man (like
prohibited drugs)
D. Existence
1. Present property (res existentes)
2. Future property (res future)
Both present and future property, like a
harvest, may be the subject of sale but
generally not the subject of donation)
E. Materiality or Immateriality
1. Tangible or corporeal (objects
which can be seen or touched)
2. Intangible or incorporeal (rights or
credits)
The Philippine Peso bills when
attempted to be exported may be
deemed to have been taken out of
domestic circulation as legal tender,
and may therefore be treated as a
excess of that allowed by the Bangko
Sentral may be forfeited under Sec
1363(f) of the Revised Administrative
Code (Commissioner of Customs v.
Capstrano, L-11075, June 30, 1960)
F. Dependence or Importance
1. Principal
2. Accessory
G. Capability of Substitution
1. Fungible (capable of substitution by
other things of the same quantity
and quality)
2. Non-fungible (incapable of such
substitution, hence, the identical
thing must be given or returned)
H. Nature or Definiteness
1. Generic (one referring to a group or
class)
2. Specific (one referring to a since,
unique object)
I. Whether in the Custody of the Court or
Free
1. In custodia legis (in the custody of
the court) – when it has been seized
by an officer under a writ of
attachment or writ of execution
2. “free” property (not in custodia
legis)
OWNERSHIP
Ownership – is the independent and general
right of a person to control a thing in his
possession, enjoyment, disposition, and
recovery, subject to no restrictions except those
imposed by the state or private persons,
without prejudice to the provisions of law.
 Forest lands or forest reserves are not
capable of private appropriation, and
possession thereof cannot ripen into
private ownership, unless such lands
 are classified and considered disposable
and alienable (Republic v. CA, 208 SCRA
428)
Disputable Presumption of Ownership (Art
433) requires:
a. Actual possession
b. Claim of ownership
 The true owner has to resort to judicial
process to recover his property, only if
the possessor does not want to
surrender the property to him, after
proper request or demand has been
made. Judicial process must then be
had to prevent disturbances of the
peace (Supia v. Quintero, 59 Phil 312).
RIGHT OF ACCESSION
Accession is the right of a property owner to
everything which is:
a. Produced thereby (accession discreta)
b. Or which is incorporated or attached
thereto, either naturally or artificially
(accession continua or accession non-
interrumpida), which in turn is divided
into:
1. Natural accession (accession
natural)
2. Artificial accession (accession
artificial or accession industrial)
 Because if the word “artificially”, it is
understood that IMPROVEMENT made
on the property are included within the
scope of “accession”.
Classification of Accession:
1. Accession Discreta (to the fruits)
a. Natural fruits
b. Industrial fruits
c. Civil fruits
2. Accession Continua (Attachment or
Incorporation)
With reference to Real Property
a. Accession industrial (building,
plating, sowing)
b. Accession natural (alluvium,
avulsion, change in the course of
rivers, formation of islands)
With reference to Personal Property
a. Adjunction or conjunction
(inclusion/engraftment,
soldadura/attachment,
tejido/weaving, pintura/painting,
escritura/writing
b. Mixture (confusion – liquids;
commixtion – solid)
c. Specification
 Accession is not a mode of acquiring
ownership. Accession presupposes a
previously existing ownership by the
owner over the principal.
Fundamentally, accession is a right
implicitly included in ownership,
without which it will have no basis or
existence. Truly, it is one of the
attributes or characteristics which will
make up the concept of dominion or
ownership (Manresa, 6th Ed., Vol 3 p.
116; 180-182).
Right of Accession With Respect to Immovable
Property
Accession Industrial is described under Art 445.
The difference between sowing and planting is
that in the former, each deposit of seed gives
rise merely to a single crop or harvest; while
planting, more or less permanent trunks or
trees are produced, which in turn produce fruits
themselves. In the latter case therefore,
without replanting, crops will continue to grow
every season.
  Art 445 applies only when the land greater, the whole thing belongs to the
owner is known owner-spouse, without prejudice to
reimbursement of the conjugal
Basic Principles of Accession Continue
partnership.
(accession industrial):
- However, if the value after the
a. To the owner of the principal (land) improvement including the cost is
must belong also the accessions, in greater, the whole thing belongs to the
accordance with the principle that “the conjugal partnership but the owner-
accessory follows the principal” (accesio spouse must be reimbursed.
cedit principali)
Whatever is built under Art 445 refers to all
b. The union or incorporation must, with
kinds of constructions with a roof, and used as
certain exceptions, be effected in such a
residence, for office, or social meetings, etc.
manner that to separate the principal
(Philippine Sugar Estate Development v. Pozat,
from the accessory would result in
48 Phil 536).
substantial injury to either
c. He who is in good faith may be held Two Disputable Presumptions under Art 446:
responsible but he should not be
a. The works, sowing, and planting were
penalized
made by the owner (Art 437 on surface
d. He who is in bad faith may be penalized
right and Art 445)
e. No one should enrich himself unjustly at
b. They were made at the owner’s
the expense of another
expense – even if another actually
f. Bad faith of one party neutralizes the
undertook the task, for then he might
bad faith of the other so both should be
have been acting only as agent.
considered in good faith

Rights and Obligation of the Landowner who

 If a landowner upon whose land grows uses the Materials of Another
a tree with branches extending to the
a. If the owner is in GOOD FAITH
neighboring tenement, decides to cut
- He becomes the owner of the material
down the tree, and his deprive his
but he must pay for their value. The
neighbor of whatever advantage the
only exception is when they can be
branches afforded the neighbor, he is
removed without destruction to the
not required to pay his neighbor any
work made or to the plants. In such
indemnity occasioned by the loss of the
case, the owner of the materials can
branches for he merely cuts down what
remove them
is his, by the principle of accession
b. If the landowner is in BAD FAITH
(Crudo v. Mancilla, CA, 37 O.G. 2089).
- He becomes the owner of the materials
Exception to the General Rule under Art 445, but he must pay their value and
where the landowner is also the owner of damages
whatever is built, planted, or sown thereon - The exception is when the owner of the
materials decides to remove them
- On the basis of Art 120 of the Family
whether or not destruction would be
Code, when the value of the property
caused. In this case, the materials
before the improvement was made is
would still belong to the owner of said
 materials, who in addition will still be
entitled to damages.
Rights and Obligation of the Owner of the
Materials:
a. If the landowner is in GOOD FAITH
- The owner of the materials is entitled to
reimbursement, provided he does not
remove
- He is entitled to removal, provided no
substantial injury is caused
b. If the landowner is in BAD FAITH
- The owner of the materials is entitled to
absolute right of removal and damages,
whether or not substantial injury is
caused
- He is entitled to reimbursement and
damages , in case he chooses not to
remove
 If the landowner has already
demolished or removed the plantings,
constructions, or works, the owner of
the materials is still entitled to claim the
materials since the law makes no
Rule when on the Land of a Person in Good
distinction (3 Manresa 206-207).
Faith, Another Builds, Sows or Plants in Good
Faith under Art 448, the landowner is allowed
to:
Although Art 447 does not define good faith or
bad faith, the definitions provided by Arts 453
and 526 may apply:
- The builder, planter, or sower is in bad
faith if he makes use of the land or
materials which he knows belong to
another
- He is in good faith if he did not know
that he had no right to such land or
materials.
- The owner of the materials is in bad
faith is he allows another to use the
materials without informing him of the
ownership thereof
- The owner of the materials is in good
faith is he did not know that another
was using his materials; or granting that
he did know, if he informed the user of
the ownership thereof and made the
necessary prohibition
(Paras, 2013)
 When both the landowner and the
owner of the materials are both in bad
faith, consider them in good faith
 There is no provision provided when
the landowner is in good faith but the
owner of the materials is in bad faith.
But it would seem that the landowner
would not only be exempted from
reimbursement, but he would also be
entitled to consequential damages.
Moreover, the owner of the materials
would also lose all rights of removal,
regardless of whether or not substantial
injury would be cause
(Paras, 2013)
a. Appropriate for himself the house upon
payment of proper indemnity
b. Compel the builder to buy the land
upon which the house has been built,
unless the value of the land be
considerably more than the value of the
house. In which case, rent should be
paid.
 The landowner has no right of removal
or demolition, unless after having
selected a compulsory sale, the builder
 fails to pay for the land (Ignacio v. Art 448 does not apply when:
Hilario, 43 O.G. 140, 76 Phil 605).
a. The builder, planter or sower does not
 The option given to the landowner is
claim ownership over the land, but
not absolute, as when it is impractical
possesses it as mere holder, agent,
for the landowner to exercise the first
usufructuary, or tenant. Here he knows
alternative (Leonor Grana and Julieta
that the land is not his (Alburo v.
Torralba v. CA, L-12486, Aug 31, 1960).
Villanueva, 7 Phil 277, and Quemal,
 The builder is considered in good faith if
et.al. vs. Olaes, L-11084, April 29, 1961).
he thought the land was his; while the
b. The builder, planter or sower is not a
landowner is in good faith if he did not
stranger but a co-owner, even if later
know that somebody was building on
on, during the partition, the portion of
his land, or even if he did know, if he
land used id awarded to another co-
expressed his objection (Co Tao v. Chan
owner (Viuda de Arias v. Aguilar, CA,
Chico, L-49167, April 30, 1949).
O.G. Supp., Aug 30, 1941, p. 126).
Option is given to the Landowner because: c. A person constructs a building on his
own land, and then sells the land but
a. His right is older
not the building to another, there can
b. By principle of accession, he is entitled
be no question of good faith or bad
to the ownership of the accessory thing
faith on the part of the builder
(Bernardo v. Bataclan, 37 O.G. No. 74,
(Golengco v. Regalado, et.al., 48 O.G.
p. 1382).
5282).
Indemnity in case of Appropriation d. The builder is a belligerent occupant,
such as the Japanese Imperial Armed
- Indemnity provided for under Arts 546 Forces. The constructions made by it
and 548 during the war are owned not by the
- The ownership the thing built or sown owner of the land but by the
or planted does not pass to the Philippines, since the latter emerged
landowner until after payment therefor victor in the last war (Republic v. Lara,
has been given (TS, Jan 2, 1982) May 29, 1954, 50 O.G. 5778).
- Payment is to be made either on the
date fixed by agreement or the date If the Landowner refuses to make a Choice, the
fixed by the court (Bataclan v. CFI, 61 Landowner shall:
Phil 428).
a. Pay for the building
- After the ; landowner has given to the
b. Sell the land to the builder who was in
builder or possessor in good faith the
good faith
proper indemnities, the builder or
possessor may be ordered to vacate the In case the Landowner Sells or in any other
land way Alienates the Land - the action should be
primarily directed against the new owner,
Indemnities to be Given:
because he benefitted from the accession
a. Necessary Expenses – Art 546, par 1
a. If the new owner, in buying the land,
b. Useful Expenses – Art 546, par 2
DID NOT PAY for the construction, he
c. Luxurious Expenses – if he desires to
alone is responsible, because he
appropriate them for himself – Art 548
 profited by the accession (Gongon v.
Tiangco, 36 O.G. 822)
b. If the new owner PAID for the
construction, the action may be
directed against him, but this time, he
can file a third-party complaint against
the original owner, who ultimately will
have to pay (Gongon v. Tiangco).
 Once a choice is made by the
landowner, it is generally irrevocable.
Thus, if the landowner has elected to
get the building, but is finally unable to
pay for the indemnity or value of the
building, she cannot afterwards elect to
sell the land. Her monetary obligation
to indemnify can indeed be satisfied by
a levy of execution on her properties
(Tayag v.v Yuseco, 97 Phil 712).
Art 449 applies, in case of planting or sowing,
only to growing or standing crops, not to
gathered crops which are governed by Art 443
(Dizon v. Rivera, 39 O.G. 1744).
Landowner has three Alternative Rights in
case the Builder is in Bad Faith:
a. Get the house without paying
indemnity for its value or expenses (but
with the obligation to pay under Art 452
necessary expenses for the preservation
of the land) PLUS damages (Art 449, 451
and 453); or
b. Demand the demolition of the house, at
the builder’s expense, PLUS damages;
or
c. Compel the builder to buy the land,
whether or not the value of the land is
considerably more than the value of the
house, PLUS damages (Art 450 and 451)
 If a buyer introduces improvements on
the property after the filing of a suit
against him for the annulment of sale,
he becomes a builder in bad faith
without the right to reimbursement
(Mindanao Academy, Inc. et.al. v.
Ildefonso D. Yap, L-17681-82, Feb 26,
1965).
On Gathered and Growing Crops – in case one
plants and grows on the farm of a neighbor
knowing fully well that the farm is not his
a. If the crops have already been
gathered, then you have to return the
value of the crops, or the crops
themselves minus the expenses
essential for their production, gathering
and preservation (Art 443)
b. If the crops have not yet been gathered,
that is, if the crops are still standing,
you completely forfeit them in favor of
the owner of the land, without any right
to indemnity, except for necessary
expenses of the land (Art 449, 452)
(Jison v. Fernandez, 2 O.G. No. 5, 492;
Dimson v. Rivera, CA, 39 O.G. 1744).
As provided under Art 452, builder, planter or
sower in bad faith is entitled to reimbursement
for the necessary expenses of preservation of
the land
- A builder in bad faith can lose the
building, without indemnity for the
necessary or useful expenses for the
building, BUT he must be indemnified
for the necessary expenses for the
preservation of the land, because after
all, the true owner would have borne
such expenses anyway, even if nothing
had been built on the land (Paras,
2013).
Under Art 453, in case of bad faith on the part
of both parties, the rights of one and the other
shall be the same as though both had acted in
good faith
- The bad faith of one neutralizes the bad
faith of the other (3 Manresa 223), so
both will be considered in good faith.
Three Parties involved under Art 455
- Landowner
- Builder, planter or sower (BPS)
- Owner of the materials
Rights of the Owner of the Materials
a. If he acted in BAD FAITH, he loses all
rights to be indemnified. He can even
be liable for consequential damages
b. If he acted in GOOD FAITH, he is
entitled to reimbursement from the BPS
principally, since it was the BPS who
first made use of the materials. In case
of insolvency on the part of BPS,
landowner is subsidiarily liable, if he
makes use of the materials
 The landowner makes use of the
materials only if he appropriates the
construction. If he compels the BPS to
purchase the land or to demolish the
construction, the landowner does not
make use of the materials, hence, he
cannot be held subsidiarily liable (Paras,
2013).
 If all the three parties are in bad faith,
all must be considered to have acted in
good faith (3 Manresa, pp. 226-227).
Good Faith may Co-exist with Negligence
- It is possible that a person may be in
good faith and also negligent. In fact, in
negligence, there is not intent to do
wrong. On the other hand, bad faith
presupposes an intent to cause damage
or prejudice.
- In case the be negligence, damages for
his culpa will arise under Art 2176
- (Paras, 2013)
Right of Accession With Respect to
Movable Property
Three types of Accession with respect to
Movable Property:
a) Adjunction
b) Mixture (commixtion or confusion)
c) Specification
Adjunction – is the process by virtue of which
two movable things belonging to different
owners are united in such a way that they form
a single object
Different Kinds of Adjunction
a) Inclusion (ex. sapphire set on a ring)
b) Soldering (ex. joining legs made of lead
to a body also made of lead
i) Ferruminatio – objects are of the
same metal
ii) Plumbatura – objects are of
different metals
c) Escritura (writing)
d) Pintura (painting)
e) Weaving
Test to determine which is the Principal and
Accessory:
In the order of preference, the principal is:
a. That to which the other has been united
as an ornament. Or for its use, or
perfection – Test of Intention
b. That of greater value
c. That of greater volume
d. Finally that which has greater merits
(from the combined consideration of
utility and volume)
Under Art 469, when there can be separation
without injury, their respective owners may
demand their separation. Separation although Rules for Specification under Art 474:
with injury (but not destruction) is allowed, if
a) If the worker (principal) is in good faith
the thing united for the use, embellishment or
1) He appropriates the new thing
perfection of the other is much more precious
2) But he must indemnify for the
than the principal.
materials – exception: if the
Indemnity under Art 471 may be paid either by: materials (accessory) is more
precious than the new thing or
a) Delivery of the thing equal in kind and
is more valuable, the owner of
value (quality and quantity)
the material has an option:
b) Payment of price as appraised by exerts
i. to get the new thing
 Sentimental value must be considered
but he pays for the
 The right to indemnity applies only if
work
material was employed without the
ii. Demand indemnity for
owner’s consent. The material may
the material
have been the principal or the
b) If the worker is in bad faith, the owner
accessory.
of the material has an option:
Mixture – the combination or union of 1) He can appropriate the work
materials where the respective identities if the without paying for the labor
component elements are lost. 2) Or demand indemnity for the
material plus damages
Rules of Mixture  The option of appropriation is not
a) If mixture is cause by one owner in available if the value of the resultant
good faith, or by the will of both work is more valuable for artistic or
owners, or by chance (accident), or by a scientific reasons
common agent, then co-ownership Specification – is the giving of a new form to
results, each owner acquiring an another’s material thru the application of labor
interest or right proportional to the
value of his material - The material undergoes a
b) If mixture is made by one owner in bad transformation or change of identity
faith –
Adjunction Mixture Specification
1. He loses his material, in favor of
Involves at Involves at May involve
the other least 2 things least 2 things only one
2. Liable for damages thing (maybe
 In case both are in bad faith, they are more) but
both considered in good faith the form is
 If mixture is made by common consent, changed
the stipulations of the parties should be As a rule, As a rule, co- As a rule,
controlling accessory ownership accessory
 When the thing mixed or confused are follows results follows
of exactly the same kind, quantity and principal
quality, all that is needed would be to Things joined Thing mixed The new
divide the mixture into two equal parts retain their or confused object
nature may either retains or
retain or lose preserves the
 their nature of the ex malefi cio or ex delicto) — like the
respective original duty to return a stolen
natures object Carabao.
(e) Quasi-delicts or Torts — (obligation
ex quasi-delicto or ex
OBLIGATIONS AND CONTRACTS
quasi-maleficio) — like the duty to
repair damage due to
A. Obligation:
Negligence. (Paras , Civil Code of the
1a. Definition:
Phils., 2016ed., pp. 84)
An obligation is a juridical necessity to
give, to do, or not to do. (Art 1156, NCC)
C. Nature and Effects of
1b.Elements:
Obligations
1. an active subject (called the
obligee or creditor) — the
Meaning of Specific and Generic thing:
possessor of a right; he in whose
Specific - particularly designated or
favor the obligation is
physically segregated from all others of
Constituted.
the same class.
2. a passive subject (called the
- It is identified by its
obligor or debtor) — he who has the
individuality. The debtor cannot
duty of giving, doing, or not doing.
substitute it with another
3. the object or prestation (the
although the latter is of the
subject matter of the obligation).
same kind and quality without
4. the efficient cause (the vinculum
the consent of the creditor. ex.
or juridical tie) — the
this car, the car with plate no.
reason why the obligation exists.
AAA 123
(Paras , Civil Code of the Phils., 2016ed.,
pp. 78)
Generic - refers only to a class
or genus to which it pertains and cannot
B. Sources of Obligations:
be pointed out with particularity.
LaCoQuaDeQua
- Identified only by its specie. The
(a) Law (obligations ex lege) — like the
debtor can give anything of the
duty to pay taxes and
same class as long as it is of the
to support one’s family.
same kind. ex. a car, a 2005
(b) Contracts (obligations ex contractu)
BMW automobile, the sum of 5
— like the duty to repay
million. (De Leon, Comments
a loan by virtue of an agreement.
and Cases on Obligation and
(c) Quasi-contracts (obligations ex
Contracts, 2014, pp33) .
quasi-contractu) — like the
duty to refund an “over change” of
Duties of the debtor in obligation to
money because of the
give a determinate thing.
quasi-contract of solutio indebiti or
1. To preserve or take care of the thing
“undue payment.”
due;
(d) Crimes or Acts or Omissions
a. Diligence of a good father of
Punished by Law (obligations
a family – with ordinary care or
 diligence which an average person corresponds with the circumstances of the
exercises over his own property persons, of the time and of the place
b. Another standard of care – slight or
b. Culpa aquiliana - the fault or
extraordinary diligence
negligence of a person, who, because of the
c. based on stipulation - the required
omission of the diligence which is required by
diligence to be exercised based on the
the nature of the obligation and which must
agreement between the parties.
correspond with the circumstances of the
2. To deliver the fruits of the thing;
persons, of the time and of the place, causes
damage to another.
Performance of an Constitution of an
obligation obligation

present only during the present only at the time of

performance of a pre- the birth of the obligation. Culpa contractual Culpa aquiliana
existing
Character he negligence of it is substantive
obligation
the defendant is and independent.
merely an incident
employed for the purpose employed for
in the performance
of evading the normal
the purpose of securing of an obligation
fulfillment of an obligation
the consent of the other
party to enter into the Relationship of the there is always a there may or may
contract parties pre-existing not be a pre-
contractual existing
results in the if it is the reason for the relation contractual
nonfulfillment or breach other party upon whom it relation
of the obligation is employed for entering
into the contract, results source of the the source of the the source is the
in the vitiation of his obligation obligation of the defendant’s
consent defendant to pay negligent act or
damages to the omission itself
plaintiff is the
breach or nonfulfi
gives rise to a right of the Gives rise to a right of the llment of the
creditor or obligee to innocent party to ask for contract
recover damages from the the annulment of the
debtor or obligor contract if the fraud is proof required for proof of the the negligence of
causal or to recover recovery existence of the the defendant
damages if it is incidental. contract and of its must be proved
breach or nonfulfi
llment is sufficient
2. Negligence (fault or culpa) prima facie to
warrant a recovery
a. Culpa contractual - the first may be
defined as the fault or negligence of the obligor availability of due proof of diligence Due diligence is a
diligence as a in the selection defense.
by virtue of which he is unable to perform his
defense and supervision of
obligation arising from a pre-existing contract, employees is not
because of the omission of the diligence which available as a
is required by the nature of the obligation and defense
 Test of negligence. — The test by which
we can determine the existence of
negligence in a particular case may be
stated as follows: Did the defendant in
doing the alleged negligent act use the
reasonable care and caution which an
ordinarily prudent person would have
used in the same situation? If not, then he
is guilty of negligence.
Effects of negligence. — If the debtor or
obligor is unable to comply with his
obligation because of his fault or
negligence, the creditor or obligee can
hold him liable for damages and even if he
has been acquitted in a criminal action
charging him with a criminal offense
based on his negligent act or omission.
3. Delay (Mora) - delay in the fulfillment of
an obligation with respect to time.
a. Mora solvendi or the delay of the
obligor or debtor to perform his
obligation.
b. Mora accipiendi or the delay of the
obligee or creditor to accept the delivery
of the thing which is the object of the
obligation.
c. Compensatio morae or the delay of the
parties or obligors in reciprocal
obligations.
Kinds of Delay:
1. Ordinary delay – is merely the failure
to perform an obligation on time.
2. Legal delay (default/mora) – is the
failure to perform an obligation on time
which failure constitutes a breach of the
obligation. (Paras, Civil Code of the
Philippines, pp. 117)
Requisites to be
considered in default:
1 The obligation is demandable and
already liquidated;
2. The obligor or debtor delays
performance; and
3. The creditor requires the performance
judicially or extrajudicially.
General Rule: No demand, no delay.
Exception: Delay is incurred from the
time the obligee or creditor demands from
him the fulfillment of the obligation.
When demand is not necessary.
1. Obligation or the law expressly so
declares.
2. Nature and the circumstances of the
obligation.
3. Demand would be useless.
NOTE: The obligor can not possibly incur
in delay in negative obligations. (598
Manresa, 5th Ed., Bk. 1, p. 127.)
Effects of delay:
1. Liable for interest and damages
2. Liable even for fortuitous event when
the obligation is to delivery a determinate
thing.
D. Kinds of Obligations
A. Pure and Conditional Obligations
A1. Pure obligation - as one whose
effectivity or extinguishment does not
depend upon the fulfillment or non
fulfillment of a condition or upon the
expiration of a term or period, and which,
as a consequence, is characterized by the
quality of immediate demandability.
(Jurado, Comments and Jurisprudence on
Obligations and Contracts, 2010, pp. 107)
A2. Conditional Obligation - as one whose
effectivity is subordinated to the
fulfillment or non fulfillment of a future
and uncertain fact or event. (Jurado,
Comments and Jurisprudence on
Obligations and Contracts, 2010 pp. 108)
Classification of Conditions:
(1) a. Suspensive — when the fulfillment
of the condition results in the acquisition
of rights arising out of the obligation.
b. Resolutory — when the fulfillment
of the condition results in the
extinguishment of rights arising out of the
obligation.
(2) a. Potestative — when the fulfillment
of the condition depends upon the will
of a party to the obligation.
b. Casual — when the fulfillment of the
condition depends upon chance and/or
upon the will of a third person.
c. Mixed — when the fulfillment of the
condition depends partly upon the will of
a party to the obligation and partly upon
chance and/or the will of a third person.
(3) a. Possible — when the
condition is capable of realization
according to nature, law, public policy or
good customs.
b. Impossible — when the condition is
not capable of realization according to
nature, law, public policy or good
customs.
(4) a. Positive — when the
condition involves the performance of an
act.
b. Negative — when the condition
involves the omission of an act.
(5) a. Divisible — when the
condition is susceptible of partial
realization.
B. Indivisible — when the condition is not
susceptible of partial realization.
(6) a Conjunctive — when there are
several conditions, all of which must be
realized.
b. Alternative — when there are several
conditions, but only one must be realized.
(7) a. Express — when the condition is
stated expressly.
b. Implied — when the condition is tacit
(Jurado, Comments and Jurisprudence on
Obligations and Contracts, 2010, pp. 110)
B. Obligation with a period - is one
whose consequences are subjected in one
way or another to the expiration of said
period of term.
Period or term, meaning - a
period is a future and certain event upon
the arrival of which the obligation subject
to either arises or is terminated. It is a day
certain which must necessarily come. (De
Leon, Comments and Cases on Obligation
and Contracts, 2014, pp190)
Similar Phrases
(a) “when my means permit to do so”;
(b) “when I can afford it”;
(c) “when I am able to”;
(d) “when I have money,” etc. (Paras , Civil
Code of the Phils., 2016ed., pp. 190)
C. Alternative Obligations - An
alternative (or facultative) obligation is
one where out of the two or more
prestations which may be given, only one
is due. As a general rule, the right belongs
to the debtor. By way of exception it may
belong to the creditor when such right has
expressly been granted to him. (De Leon,
Comments and Cases on Obligation and
Contracts, 2014, pp218) Moreover, the
The debtor shall have no right to choose
those prestations which are: (a)
impossible (b) unlawful (c) or which could
not have been the object of the
obligation. (Art. 1200, par. 2, Civil Code).
Kinds of Obligation:
1. Simple obligation - one where
there is only one prestation.
 2. Compound obligation - one
where two or more prestation.
(De Leon, Comments and Cases
on Obligation and Contracts,
2014, pp217)
Requisites for the Making of the Choice
(a) made properly; (b) made with full
knowledge that a selection is indeed being
made. (c) made voluntarily and freely (d)
made in due time, (e) made to all the
proper persons (f) made without
conditions unless agreed to by the
creditor (g) may be waived, expressly or
impliedly. (Paras , Civil Code of the Phils.,
2016ed., pp. 267)
D. Joint and Solidary Obligations - When
there is a concurrence of two or more
creditors or of two or more debtors in one
and the same obligation, the obligation
may be either joint (obligación
mancomunada) or solidary (obligación
solidaria).
Joint obligation - is a concurrence of
several creditors, or of several debtors, or
of several creditors and debtors, by virtue
of which each of the creditors has a right
to demand, and each of the debtors is
bound to render, compliance with his
proportionate part of the prestation which
constitutes the object of the obligation.
Solidary obligation - each of the creditors
is entitled to demand the payment of the
entire credit, while each of the debtors is
liable for the payment of the entire debt.
(Jurado, Comments and Jurisprudence on
Obligations and Contracts, 2010, pp. 176)
E. Divisible and Indivisible Obligations -
Divisible obligations are those which have
as their object a prestation which is
susceptible of partial performance
without the essence of the obligation
being changed. Indivisible obligations, on
the other hand, are those which have as
their object a prestation which is not
susceptible of partial performance,
because, otherwise, the essence of the
obligation will be changed. (Jurado,
Comments and Jurisprudence on
Obligations and Contracts, 2010, pp. 212)
1. Divisible obligation is capable
of partial fulfillment.
2. Indivisible obligation - not
capable of partial fulfillment.
(De Leon, Comments and Cases
on Obligation and Contracts,
2014, pp264)
F. Obligation with a Penal Clause - one
which contains an accessory undertaking
to pay a previously stipulated indemnity in
case of breach of the principal prestation
intended primarily to induce its
fulfillment.
Penal Clause - is an accessory
undertaking attached to an obligation to
assume greater liability on the part of the
obligor in case of breach of obligation.
Principal Purpose of the Penal Clause
Its principal purpose is to insure the
performance of an obligation and also to
substitute for damages and the payment
of interest in case of non-compliance. (Art.
1224, 1st par., Civil Code)
E. Extinguishment of Obligations
a. Payment or Performance -
Payment is that mode of extinguishing
obligations which consists of:
(a) the delivery of money, or
(b) the performance in any other manner
of an obligation.
Acceptance by Creditor For payment to
properly exist, the creditor has to accept
the same, expressly or implicitly. Payment,
for valid reasons, may properly be
rejected. (Paras , Civil Code of the Phils.,
2016ed., pp. 346)
Requisites for a valid payment under this
Article:
(a) The very thing or service contemplated
must be paid.
(b) Fulfillment must be complete.
Burden of proving payment is the duty of
a party to present evidence of the facts in
issue necessary to prove the truth of his
claim or defense by the amount of
evidence required by law. (De Leon,
Comments and Cases on Obligation and
Contracts, 2014, pp299)
B. Loss of the thing due
There is a loss when the object either
perishes (physically, it is destroyed, it goes
out of commerce, it disappears in such a
way that its existence is unknown or it
cannot be recovered. (Art. 1189, No. 2,
Civil Code) (Paras , Civil Code of the Phils.,
2016ed., pp. 435)
C. Condonation or remission of debt - it
is the gratuitous abandonment by the
creditor of his right. (Jurado, Comments
and Jurisprudence on Obligations and
Contracts, 2010, pp. 298)
Requisites must concur:
1. it must be gratuitous;
2. it must be accepted by the
obligor;
3. the obligation must be
demandable.
As to form
Express implied
As to extent
total partial
As to constitution
Inter vivos inter causa
Kinds of remission:
Note: Whether express or implied, the
extent of the remission or condonation
shall be governed by the rules regarding
inofficious donations. (Jurado, Comments
and Jurisprudence on Obligations and
Contracts, 2010, pp. 300)
D. Confusion or merger of rights of
creditor and debtor
It is the meeting in one person of the
qualities of creditor and debtor with
respect to the same obligation.
Requisites of a Valid Merger:
1. It should take place between
the principal debtor and
creditor.
2. The merger must be clear and
definite.
3. The very obligation involved
must be the same or
identical.(Paras , Civil Code of
the Phils., 2016ed., pp. 456)
E. Compensation
Extinguishment to the concurrent amount
amount of the debts or obligations of two
persons whom in their own right, are
reciprocally principal debtors and
creditors of each other.(De Leon,
Comments and Cases on Obligation and
Contracts, 2014, pp415)

When compensation cannot exist when,
under the law, the two persons concerned
are creditors and debtors of each other;
therefore, a debtor of a corporation
cannot compensate his debt with his share
of stock in the corporation, since the
corporation is not considered his debtor.
(Garcia v. Lim Chu Sing, 59 Phil. 562).
F. Novation
It is the substitution or change of an
obligation by another, which extinguishes
or modifies the first, either changing its
object or principal condition, or
substituting another in place of the
debtor, or subrogating a third person in
the right of the creditor.” (8 Manresa
428).
Requisites. — In every novation there are
four essential requisites: 1. A previous
valid obligation;
2. agreement of the parties to the new
obligation;
3. extinguishment of the old obligation;
and
4. validity of the new obligation. (Jurado,
Comments and Jurisprudence on
Obligations and Contracts, 2010, pp. 326)
SALES
I. Nature and Form of Contract
 ART. 1458: By the contract of sale
one of the contracting parties
obligates himself to transfer the
ownership of 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.
 The contract of sale is an agreement
whereby one of the parties (called the
seller or vendor) obligates himself to
deliver something to the other (called
the buyer or purchaser or vendee)
who, on his part, binds himself to pay
therefor a sum of money or its
equivalent (known as the price).
Characteristics:
(a) Consensual: perfected by mere consent
without any further act
(b) Bilateral: both the contracting parties are
bound to fulfill correlative obligations
towards each other (seller to deliver and
transfer ownership of the thing sold; buyer
to pay the price)
(c) Onerous: thing sold is conveyed in
consideration of the price and vice versa
(d) Commutative: the things sold is
considered the equivalent of the price paid
and vice versa.
 It may also be aleatory as in the
case of the sale of a hope
(e) Nominate: it is given a special name or
designation in the Civil Code (“Sale”)
(f) Principal: it does not depend for its
existence and validity upon another
contract
Essential Requisites:
(a) Consent | Meeting of the minds: refers to
the consent on the part of the seller to
transfer and deliver and on the part of the
buyer to pay.
 The parties must have legal
capacity to give consent and to
obligate themselves.
 The essence of consent is the
conformity of the parties on the
terms of the contract, the
acceptance by one of the offer
made by the other. The contract to
sell is a bilateral contract. Where
there is merely an offer by one party
without the acceptance of the other,
there is no consent
(b) Object | Subject matter: refers to the
determinate thing which is the object of
the contract.
 The thing must be determinate or
at least capable of being made
determinate because if the seller
and the buyer differ in regard to
the thing sold, there is no meeting
of the minds
 The subject matter may be
personal or real property
(c) Cause or consideration: refers to the
“price certain in money or its equivalent”
such as a check or a promissory note,
which is the consideration for the thing
sold.
 does not include goods or
merchandise
 the price must be real, not fictitious;
otherwise, the sale is void although
the transaction may be shown to
have been in reality a donation or
some other contract
II. Capacity to Buy or Sell
Any person who has “capacity to act”
or “ the power to do acts with legal
effects”, or more specifically with the
power to obligate himself, may enter
into a contract of sale, whether as
seller or as buyer
 Minors, insane or demented persons,
and/or deaf-mutes have no legal
capacity to contract and therefore
are disqualified from being parties to
a sale.
o Contracts entered into by
such legally incapacitated
persons are not void, but
merely voidable, subject to
annulment or ratification
Minors
 Although not capacitated to validly
enter into a sale, where necessaries are
sold and delivered to a minor or other
person without capacity to act, he must
pay a reasonable price and the resulting
sale is valid and no merely voidable
Senility and/or serious illness
 Incapacity to give consent (senility,
advanced age, and serious illness) –
constitute only vice in consent, and
would render the contract merely
voidable
Sale by spouses
 Upon the present Family Code,
common provisions apply equally to
both spouses more so even when the
spouses chose under their marriage
settlements to be governed by the
conjugal partnership of gains, the
spouses would still have joint
administration of the conjugal
properties
 A spouse may, without the consent of
the other spouse, enter into sale
transactions in the regular or normal
pursuit of his or her profession,
vocation or trade
o However, under Articles 96 and
124 of the FC, the administration
and enjoyment of the community
property or the conjugal property,
as the case may be, shall belong
to both spouses jointly; and in
case of disagreement, the
husband’s decision shall prevail,
subject to the wife seeking
remedy from the courts, which
must be availed of within 5 years
from the date of the contract
 Disposition or encumbrance of
community property or conjugal
property, as the case may be, shall be
void without authority of the court or
the written consent of the other
spouse. The transaction shall be
construed as a continuing offer on the
part of the consenting spouse and the
3rd person, and may be perfected as a
binding contract upon the acceptance
by the other spouse or authorization by
the court
Sale between spouses
 Under Article 1490, spouses cannot sell
property to each other except (a) when
a separation of property was agreed
upon in the marriage settlements or
 (b) when there has been a judicial
decree for the separation of property
o the prohibition relating to
spouses selling to one another
is applicable even to sales in
legal redemption, compromises
and renunciations (Art. 1492)
 Contracts entered into in violation of
Articles 1490 and 1492 are not merely
voidable but are null and void.
Sales between common-law spouses are
void, it being contrary to morals and
public policy.
III. Effects of the Contract when the
Thing Sold has been Lost
 If at the time the contract of sale is
perfected, the thing which is the
object of the contract has been
entirely lost, the contract shall be
without any effect (Art. 1493)
o The thing is considered lost
when it perishes, or goes out
of commerce, or disappears in
such a way that its existence
is unknown or it cannot be
recovered
 If the thing should have been lost in
part only, the vendee may choose
between withdrawing from the
contract and demanding the
remaining part, paying its price in
proportion to the total sum agreed
upon (Art. 1493)
 Where the specific goods have
perished in part or have wholly or in
a material part so deteriorated in
quality as to substantially change in
character, the buyer may either:
(a) Rescind or withdraw from the
contract
(b) Give it a legal effect, paying
the proportionate price of the
remaining object (this is
available only if the sale is
divisible)
 Loss of the thing before
perfection of the contract – the
thing perishes with the owner
IV. Obligations of the Vendor
I. Preserve the subject matter:
Every person obliged to give a
determinate thing is also obliged
to take care of it with the proper
diligence of a good father of a
family, unless the law or the
stipulation of the parties requires
another standard of care
 When a sale covers a
specific or determinate
object, upon perfection
and even prior to delivery,
and although the seller
still owns the subject
matter with the diligence
of a good father of a
family; otherwise, he
becomes liable to the
buyer for breach of such
obligation
V. Obligations of the Vendee
I. Pay the price
 mere sending of a letter by
the buyer expressing his
intention to pay without
the accompanying
payment is not considered
a valid tender of payment
 Buyer is also obliged to pay
interest for the period between
delivery of the subject matter
and the payment of the price
when (a) the same has been
stipulated; (b) should object
delivered produce fruits or
income; (c) in case the buyer is in
 default, from the time of judicial
or extrajudicial demand (Art.
1589)
 Non-payment of the
consideration in the sale does
not prove simulation; at most, it
gives the seller the right to sue
for collection
 Rights of the buyer:
(a) Suspension of payment
 EXCEPTIONS:
a. Vendor gives security for the
return of the price in a proper
case
b. Stipulation that vendee must
make payment notwithstanding
such contingency
c. Cessation of disturbance or
danger
d. Disturbance is a mere act of
trespass
e. Vendee has paid the price in full
(b) In the sale of immovable
property, to pay even after the
expiration of the period agreed
upon, as long as no demand for
rescission of the contract has
been made upon him either
judicially or by a notarial act,
even though it may have been
stipulated that rescission shall of
right take place upon failure to
pay the price at the time agreed
upon
VI. Extinguishment of Sale
 Obligations are extinguished (Art.
1231):
(a) By payment or performance;
(b) By the loss of the thing due;
(c) By the condonation or
remission of the debt;
(d) By the confusion or merger of
the rights of creditor and
debtor;
(e) By compensation;
(f) By novation.
 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 (Art. 1484):
(a) Exact fulfillment of the
obligation, should the vendee
fail to pay;
(b) Cancel the sale, should the
vendee's failure to pay cover
two or more installments;
(c) Foreclose the chattel
mortgage on the thing sold, if
one has been constituted,
should the vendee's failure to
pay cover two or more
installments. 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
LEASE
A. General Provisions
Lease: consensual, bilateral, onerous, and
commutative contract by which one person
binds himself to grant temporarily the use of
a thing or the rendering of some service to
another who undertakes to pay some rent,
compensation, or price
 Consumable goods cannot be the
subject matter of a contract of lease,
except when they are merely to be
exhibited or when they are accessory
to an industrial establishment. (Art.
1645)
o REASON: to use or enjoy them,
they will have to be consumed.
 This cannot be done by the lessee from the rent, is
since ownership over them is not usually not
transferred to him by the contract mentioned
of lease

I. Lease of Things  Distinctions between lease and

o In the lease of things, one of simple loan
the parties binds himself to give Lease Simple Loan
to another the enjoyment or use Lessor does not Lender loses
lose ownership ownership
of a thing for a price certain,
Relationship is Relationship is
and for a period which may be
one of lessor one of obligor
definite or indefinite. However, no and lessee and obligee
lease for more than ninety-nine Not governed Governed by
years shall be valid (Art. 1643) by the Usury the Usury Law
 Applies to lease of things, Law
whether movable or If what is Not governed
immovable leased is real by the Statute
property for of Frauds
o Requisites or Characteristics: more than one
(a) Consensual year, the
(b) Principal contract, not statute of
dependent on any other frauds must be
contract complied with
(c) Nominate Refers to real Refers only to
(d) Purpose is to allow and personal personal
enjoyment or a use of a thing property property
(e) Subject matter must be
within the commerce of man
(f) Purpose to which the thing II. Lease of Work and Services
will be devoted should not be  In the lease of work or service,
immoral one of the parties binds himself
(g) Onerous to execute a piece of work or
(h) Period is temporary to render to the other some
(i) Lessor need not be the service for a price certain, but
owner the relation of principal and
agent does not exist between
 Distinctions between lease of them (Art. 1644)
things and sales  Distinctions between Lease of
Lease Sale Service and Contract for a Piece
Only use or Ownership is of Work
enjoyment is transferred
Lease of Contract for a
transferred
Service Piece of Work
Transfer is Transfer is
The important The important
temporary permanent
object is the object is the
Lessor need not Seller must be labor performed work done (the
be the owner the owner at for the lessor result of the
the time the labor)
property is
The result is The result is
supposed to
generally not generally
be delivered
important, the important. The
The price of the Usually, the laborer is thus price is not
object, selling price is entitled to be payable until
distinguished mentioned paid even if the work is
 there is completed, and
destruction of said
the work thru a cannot
fortuitous event generally
lawfully
demanded
the work is
destroyed
before it
finished
accepted
 If no specific agreement as to
the compensation is made, the
price should be the reasonable
value or worth of the services
that have been rendered
o Custom or local use may
be availed of in
determining the
compensation
CONTRACT OF PARTNERSHIP
Art. 1767. By the contract of partnership two
or more persons bind themselves to contribute
money, property, or industry to a common
fund, with the intention of dividing the profits
among themselves.
Two or more persons may also form a
partnership for the exercise of a profession.
CHARACTERISTICS OF PARTNERSHIP
1. Principal — does not depend on its existence
on other contracts
2. Preparatory — means to an end
3. Commutative — undertaking of each partner
is considered as equivalent of the others
4. Consensual — perfected by mere consent,
express or implied
5. Bilateral — entered into by two or more
persons and the rights and obligations are
reciprocal
6. Onerous — benefit by giving something
7. Nominate — special name or designation in
law
ESSENTIAL REQUISITES
price 1. There must be a valid contract;
be
a. The partnership relation is
fundamentally contractual.
if b. It is fiduciary in nature
c. The principle of estoppel applies
is
and Note: The partnership relation is not the
contract itself, but the result of the contract.
Although a corporation cannot enter into a
partnership contract, it may however engage in
a joint venture (Aurbach v. Sanitary Wares
Manufacturing Corporation, GR No. 75875,
December 15, 1989).
There is no prohibition against a partnership
being a partner in another partnership (De
Leon, Comments and Cases on Partnership,
Agency and Trusts, 2010 ed., p. 17).
PARTNERSHIP TERM
General Rule: A partnership begins from the
moment of the execution of the contract.
As a rule, even if contributions have not been
made, the form already exists, for partnership
is a consensual contract (Paras, Civil Code of
the Philippines, Volume V, 2008 ed., p. 580).
Exception: Partners may stipulate some other
date for the commencement of the
partnership.
When a partnership for a fixed term or
particular undertaking is continued after the
termination of such term or particular
undertaking without any express agreement,
the rights and duties of the partners remain
the same as they were at such termination, so
far as is consistent with a partnership at will
(Art. 1785, par. 1).
A continuation of the business by the partners
or such of them as habitually acted therein
during the term, without any settlement or
liquidation of the partnership affairs, is prima
facie evidence of a continuation of the
partnership (Art. 1785 (2)).
In a sense, a partnership is unlimited to its
duration as no time limit is fixed by law. The
term may be agreed upon expressly, as when
there is a definite period, or impliedly, as when
a particular enterprise is undertaken- it being
understood that the firm ends as soon as its
purpose is achieved (Paras, Civil Code of the
Philippines, Volume V, 2008 ed., p. 580).
Note: A partnership with a fixed term is one
which the term of its existence has been
agreed upon expressly or impliedly. The
expiration of the term or the accomplishment
of the particular undertaking will cause the
automatic dissolution of the partnership.
With such continuation, the partnership for a
fixed term is dissolved and a new one is
created by implied agreement.
Kinds of Partnership at Will
1. When at the onset, there is no term
express or implied.
2. When it is continued by the habitual
managers- although the period has ended
or the purpose has been accomplished
(This is prima facie evidence of the firm’s
continuation).
It is called “at will” because its continued
existence really depends upon the will of the
partners, or even on the will of any of them.
Anyone of the partners may dictate dissolution
of the partnership at will but he must act in
good faith.
RELATIONS CREATED BY A CONTRACT OF
PARTNERSHIP
1.Relations among the partners themselves;
2.Relations of the partners with the
partnership;
3.Relations of the partnership with third
persons with whom it contracts; and
4.Relations of the partners with such third
persons.
Partnership relation fundamentally
contractual.
• There is no such thing as partnership
created by law or operation of law alone
• Form – oral or written, express or implied
subject to the provisions of Art. 1771,
1773, and Statute of Frauds. Thus a
member need not sign articles of co-
partnership to become a member,
election is sufficient
• Articles of partnership — a written
document embodying the terms of the
association. It contains the name, nature
or purpose and location of the firm, and
defining, among members, the powers,
rights, duties, and liabilities of the
partners among themselves, their
contributions, the manner by which the
profits and losses are to be shared, and
the procedure for dissolving the
partnership.
• Requisites as a contract:
• consent of at least 2 parties;
• object; and
• cause which is established
• Partnership relation fiduciary in nature —
voluntary association entered into by the
associates
• In general partnership there is the
element of delectus personae (choice of
the person/s that law gives such wide
authority to one partner to bind another
by contract or otherwise). Delectus
personae allows one partner the power
(not the right) to dissolve partnership
• Application of principles of estoppel
 themselves of the benefits which he
• A partner holds himself out or permits
may have obtained (Art. 1789).
himself to be held out as a partner in an
enterprise in favour of third persons.
Although Art. 1789 mentions only the
Even if no real partnership exists, they are
capitalist partners, the industrial partners are
bound to third persons by their conduct
also entitled to the remedy since they are
B.Obligation with respect to contribution of
equally prejudiced by the act of their co-
property
partner engaging in business for himself (De
2.To contribute what had been promised
Leon, Comments and Cases on Partnership,
(Art. 1786)
Agency and Trusts, 2010 ed., p. 99).
Note: In case of failure, the remedy is not
rescission but an action for specific
E.Obligation to Contribute Capital and
performance with damages and interest.
Additional Capital
3.To warrant property contributed in case of
9.Contribution to Partnership Capital
eviction (Art. 1786)
General Rule: It depends upon the
4.To deliver the fruits of the property from
stipulation of parties. In the absence of
the time they should have been delivered,
stipulation, the presumption is that the
without the need of any demand (Art. 1786)
contribution shall be in equal shares.
C.Obligations with respect to contribution of
money and money converted to personal
10.Contribution of Additional Capital.
use
General Rule: A partner is not bound to
5.To contribute on the date due the amount
contribute additional capital.
promised to be given (Art. 1788)
Note: Liability arises from the
Exception: In case of an imminent loss of the
commencement of partnership unless
business, and there is no agreement to the
otherwise stipulated.
contrary, CAPITALIST partners are under
6.To reimburse any amount he may have
obligation to contribute an additional share
taken from the partnership coffers and
to save the venture. If he refuses to
converted to his own personal use (Art.
contribute, he shall be obliged to sell his
1788)
interest in the partnership to other partners
7.To pay the agreed or legal interest, if he
(Art. 1791).
fails to pay (a & b) in due time (Art. 1788)
Liability of partnership for acts of partners
8.To indemnify the partnership for the
Acts for apparently carrying on, in the usual
damages caused to it by the delay in the
way, the business of the partnership – the
contribution (a, b & c)
partnership will be liable when:
D.Obligation Not to Engage in Other Business • The partner so acting has in fact no
for Himself authority; and
1. Industrial partner – cannot engage in
• The third person has no knowledge of the
any business for himself unless the
absence of authority
partnership expressly permits him to
Acts of strict dominion or ownership – the
do so. The other partners have the
partnership is not bound unless:
remedy of either excluding the erring
partner from the firm or of availing • Authorized by all the other partners; or
 enforcement of an obligation or of protecting
• The partners have abandoned the business
some interest in the property
TYPES OF SECURITY:
Acts in contravention of a restriction on
1. personal – when an individual becomes a
authority —
surety or a guarantor
• Whether or not the acts are for apparently 2. real or property – when an emcumbrance
carrying on, in the usual way, the business of is made on property
the partnership, the partnership is not liable BAILMENT
to third persons having actual or is the delivery of property of one person to
presumptive knowledge of the restrictions another in trust for a specific purpose, with a
• Even if the partner acted within the contract, express or implied, that the trust
customary business of the partnership, the shall be faithfully executed and the property
partnership will not be liable to third returned or duly accounted for when a
persons having actual or presumptive special purpose is accomplished or kept until
knowledge of the restrictions on the power the bailor reclaims it.
of the acting partner PARTIES IN BAILMENT
Liability of partner acting without authority – bailor (comodatario)– the giver, the party
as a general rule, the partner who who delivers possession or custody of the
undertakes to bind his co-partners by a thing bailed
contract without authority is himself bailee (comodante) – the recipient, the
personally liable on such contract. He cannot party who receives the possession or custody
be admitted to say that he was not of the thing delivered
authorized to make a contract, as he is COMMODATUM MUTUUM/
SIMPLE LOAN
estopped to deny its effect or validity
Object GEN RULE: Money or other
non-consumable consumable
CREDIT TRANSACTIONS
EXCEPTION: thing (cannot be
CREDIT TRANSACTIONS, defined: If the purpose of used in a
-include all transactions involving the loan of the contract is not manner
money and goods ,or the purchase or consumption but appropriate with
delivery of goods and services in the present, mere exhibition their nature w/o
with a promise to pay and deliver in the them being
future.-- enjoy a thing today but pay for it consumed)
later. Ownership ownership is transferred to the
retained by the bailee
TYPES OF CREDIT TRANSACTIONS:
bailor
1. secured transactions – those transactions Cause Essentially Gratuitous or
supported by a collateral or an encumbrance gratuitous onerous (or with
of property stipulation to pay
2. unsecured transactions – those interest)
transactions supported only by a promise to Return of Bailee must Bailee need only
pay or the personal commitment of another the thing return the EXACT pay the same
such as a guarantor or surety . thing loaned amount of the
SECURITY same kind and
quality
is something given, deposited or serving as a
Subject May involve real ONLY personal
means to ensure the fulfillment or Matter or personal property
 property If the safekeeping of the thing delivered is
Purpose Use or temporary Consumption not the principal purpose of the contract,
possession there is no deposit but some other contract.
Time of In case of urgent Upon expiration (it is essential that the depository is not the
return need and of term only owner of the thing deposited)
commission of
any acts of
ingratitude, even GUARANTY AND SURETYSHIP
before the (Articles 2047-2084)
expiration of term
Guaranty,defined:
COMMODATUM A contract whereby a person (guarantor) binds
(Articles 1935-1952) himself to the creditor to fulfill the obligation
NATURE of the principal debtor in case the latter fail to
do so. (Art.2047)
1. PURPOSE PLEDGE, MORTGAGE, ANTICHRESIS
- Bailee in commodatum acquires the
temporary use of the thing but not its fruits ESSENTIAL REQUISITES COMMON TO PLEDGE
(unless stipulated as an incidental part of the AND MORTGAGE (Art. 2085)
contract Art 1935--However, the fruits
mentioned in Art 1940 are those not 1. Constituted to secure the fulfillment of a
consumable fruits e.g animal principal obligation.
offspring,purpose of the loan of the car is for 2. Pledgor or mortgagor must be the absolute
business but the bailee used it for personal owner of the thing pledged or mortgaged.
use such as grab or uber) 3. The persons constituting the pledge or
mortgage have the free disposal of their
The use of the thing loaned must be property, and in the absence thereof, that they
temporary, otherwise the contract may be a be legally authorized for the purpose. 4.
deposit. Cannot exist without a valid obligation.
5. Debtor retains the ownership of the thing
MUTUUM given as a security.
(Articles 1953-1955) 6. When the principal obligation becomes due,
Mutuum or Simple Loan defined: the thing pledged or mortgaged may be
A contract whereby one party delivers to alienated for the payment to the creditor.
another, money or other consumable thing PROHIBITION AGAINST PACTUM
with the understanding that the same COMMISSORIUM (Art. 2088)
amount of the same kind and quality shall be
paid. (Art. 1953) 1. Stipulation is null and void: Stipulation
where thing or mortgaged shall automatically
DEPOSIT become the property of the creditor in the
(Articles 1962-2009) event of nonpayment of the debt within the
Deposit, defined: term fixed.
A contract of deposit is constituted from the 2. Requisites of pactum commissorium: a.
moment a person receives a thing belong to Pledge or mortgage.
another, with the obligation of safely keeping
it and of returning the same.
 b. A stipulation for an automatic appropriation
by the creditor of the property in the event of
nonpayment.
3. Effect on security contract: Nullity of the
stipulation does not affect validity and efficacy
of the principal contract.
MORTGAGE
MORTGAGE,defined
a contract whereby the debtor secures to the
creditor the fulfillment of a principal obligation,
immediately making immovable property or real
rights over immovable property answerable to the
principal obligation in case it is not complied with at
the time stipulated.
OBJECTS OF REAL MORTGAGE (Art. 2124)
1. Immovables
2. Alienable real rights over immovables.
**Future property cannot be object of mortgage;
however, a stipulation subjecting to the mortgage
improvements which the mortgagor may
subsequently acquire, install or use in connection
with real property already mortgaged belonging to
the mortgagor is valid.
CONCURRENCE AND PREFERENCE OF CREDITS
(Arts. 2236-2251)
CONCURRENCE OF CREDIT:
implies possession by two or more creditors of
equal right or privileges over the same property or
all of the property of a debtor.
PREFERENCE OF CREDIT:
It is the right held by a creditor to be preferred in
the payment of his claim above other out of the
debtor’s assets.
The Liquidation Plan and its Implementation shall
ensure that the concurrence and preference of
credits as enumerated in the Civil Code of the
Philippines and other relevant laws shall be
observed, unless a preferred creditor voluntarily
waives his preferred right. For purposes of this
chapter, credits for services rendered by employees
or laborers to the debtor shall enjoy first preference
under Article 2244 of the Civil Code, unless the
claims constitute legal liens under Article 2241 and
2242 thereof.
(Section 133. Concurrence and Preference of Credits)
ORDER OF PREFERENCE OF CREDIT
1. credits which enjoy preference with respect to
specific movables, exclude all others to the extent
of the value of the personal property to which the
preference refers.
2. if there are 2 or more credits with respect to the
same specific movable property, they shall be
satisfied pro rata, after the payment of duties, taxes
and fees due the State or any subdivision thereof
3. those credits which enjoy preference in relation
to specific real property or real rights, exclude all
others to the extent of the value of the immovable
or real right to which the preference refers.
4. if there are 2 or more credits with respect to the
same specific real property or real rights, they shall
be satisfied pro rata, after the payment of the taxes
and assessment of the taxes and assessments upon
the immovable property or real right.
5. the excess, if any, after the payment of the
credits which enjoy preference with respect to
specific property, real or personal, shall be added to
the free property which the debtor may have, for
the payment of other credits.
6. those credits which do not enjoy any preference
with respect to specific property, and those which
enjoy preference, as to the amount not paid, shall
be satisfied according to the following rules:
• order established by Art 2244
• common credits referred to in Art 2245 shall be
paid pro rata regardless of dates.
SUCCESSION
A mode of acquisition by virtue of which the
property, rights and obligations to the extent of
the value of the inheritance, of a person are
transmitted through his death to another or
others either by his will or by operation of law.
(Art. 774)
Kinds:
1. Testamentary or Testacy (by will);
2. Legal or intestacy (by operation of law based
on the decedent’s presumed will);
3. Mixed (Partly Testamentary and Legal); and
4. Partition inter vivos (to a certain degree).
TESTAMENTARY SUCCESSION
:an act whereby a person is permitted, with the
formalities prescribed by law, to control to a
certain degree the disposition of his estate to
take effect after his death (Art. 783)
: a document that does not purport to dispose
of one’s estate either by the institution of heirs
or designation of devisees/legatees or,
indirectly, by effecting a disinheritance, is not to
be governed by the law on testamentary
succession but by some other applicable laws.
Kinds of Wills:
1. Notarial or ordinary
2. Holographic
FORMALITIES OF WILLS (refers to extrinsic
validity)
1. Every will must be in writing; and
2. Executed in a language or dialect known to
the testator.
Other formalities
A. For NOTARIAL OR ORDINARY WILL
1. SUBSCRIPTION – made at the end
thereof by the testator himself or by
the testator's name written by some
other person in his presence and by his
express direction. Refers to the manual
act of testator and also of his
instrumental witnesses of affixing their
signature to the instrument.
2. ATTESTATION AND SUBSCRIPTION – of
and by 3 or more credible witnesses in
the presence of the testator and of one
another. It consists in the act of
witnesses of witnessing the execution
of the will in order to see and take note
mentally that such will has been
executed in accordance with
requirements prescribed by law.
3. MARGINAL SIGNATURES – affixed by
the testator or the person requested by
him to write his name and the
instrumental witnesses of the will on
each and every page thereof, except the
last, on the left margin.
Exceptions to the rule that all of the
pages of the will shall have to be signed
on the left margin by the testator and
witnesses:
(1) in the last page, when the will
consists of two or more pages;
(2) when the will consists of only one
page;
(3) when the will consists of two pages,
the first of which contains all the
testamentary dispositions and is signed
at the bottom by the testator and the
witnesses and the second contains only
the attestation clause duly signed at the
bottom by the witnesses.
4. PAGE NUMBERINGS – Written
correlatively in letters placed on the
upper part of each page. This is not
necessary when all of the dispositive
parts of a will are written on one sheet
only.
 5. ACKNOWLEDGMENT – Done before a
notary public by the testator and the
instrumental witnesses. The notary
public before whom the will was
acknowledged cannot be considered as
the third instrumental witness since he
cannot acknowledge before himself his
having signed the will.
TEST OF PRESENCE
Not whether they actually saw each other sign,
but whether they might have seen each other
sign had they chosen to do so considering their
mental and physical condition and position with
relation to each other at the moment of
inscription of each signature. (Jaboneta vs.
Gustilo)
MANNER OF SIGNING
A signature by mark will be sufficient even if at
the time of placing it, the testator knew how to
write and is able to do so. A complete signature
is not essential to the validity of a will, provided
the part of the name written was affixed to the
instrument with intent to execute it as a will.
ATTESTATION CLAUSE
This is a memorandum or record of facts
wherein the witnesses certify that the will has
been executed before them, and that it has
been executed in accordance with the
formalities prescribed by law. Absence of this
clause will render the will a nullity.
In the case of an ordinary or attested will, its
attestation clause need not be written in a
language or dialect known to the testator since
it does not form part of the testamentary
disposition.
LEGAL OR INTESTATE SUCCESSION
That which is effected by operation of law in the
absence or default of a will.
CAUSES OF INTESTACY
1. If a person dies without a will, or with a void
will, or one which has subsequently lost its
validity;
2. Absence of an institution of heir;
3. Partial institution of heir. In such case,
intestacy takes place as to the undisposed
portion (mixed succession);
4. Non-fulfillment of suspensive condition
attached to the institution of heir;
5. Predecease of the instituted heir;
6. Repudiation by the instituted heir;
7. Incapacity of instituted heir;
8. Preterition. Intestacy may be total or partial
depending on whether or not there are
legacies/devises;
9. Fulfillment of resolutory condition;
10. Expiration of term or period of institution;
11. Non-compliance or impossibility of
compliance with the will.
DOCTRINE OF PRESUMED REVOCATION
Whenever it is established that the testator had
in his possession or had ready access to the will,
but upon his death it cannot be found or
located, the presumption arises that it must
have been revoked by him by an overt act.
DOCTRINE OF DEPENDENT RELATIVE
REVOCATION
A revocation subject to a condition does not
revoke a will unless and until the condition
occurs. Thus, where a testator “revokes” a will
with the proven intention that he would
execute another will, his failure to validly make
a latter will would permit the allowance of the
earlier will.
Rule of Preference between lines
Those in the direct descending line shall exclude
those in the direct ascending and collateral
lines, and those in the direct ascending line
shall, in turn, exclude those in the collateral
line.
Rule of Proximity
The relative nearest in degree excludes the
more distant ones, saving the right of
representation when it properly takes place.
This rule is subject to the rule of preference
between lines.
Rule of Equal Division
Relatives in the same degree shall inherit in
equal shares. EXCEPTIONS:
1. Division in the ascending line (between
paternal and maternal grandparents);
2. Division among brothers and sisters,
some of whom are of the full and others
of half blood; and
3. Division In cases where the right of
representation takes place. This rule is
subject to the rule of preference
between lines.
Rule of Barrier between the legitimate family
and the illegitimate family
The illegitimate family cannot inherit by
intestate succession from the legitimate family
and vice-versa.
Rule of Double Share for full blood collaterals
When full and half-blood brothers or sisters,
nephews or nieces, survive, the full blood shall
take a portion in the inheritance double that of
the half-blood.
Land Titles and Deeds
LAND REGISTRATION
Purposes:
1. To quiet title to land and to stop forever any
question as to the legality of said title.
2. To provide a means of publication
TORRENS SYSTEM
A system for registration of land under which,
upon the landowner’s application, the court
may, after appropriate proceedings, direct the
issuance of a certificate of title. Registration
was never intended as a means of acquiring
ownership. Purposes:
1. To avoid possible conflicts of title regarding
real property;
2. To facilitate transactions relative thereto by
giving the public the right to rely upon the face
of the Torrens certificate of title and to dispense
with the need of inquiring further (EXCEPT
when the party concerned has actual
knowledge of facts and circumstances that
should imply a reasonably cautious man to
make such further inquiry.)
Modes of Acquiring Title:
1. Public Grant: based on the Public Land Acts.
It is obtained through issuance of Spanish
Government. of Royal Grants and concessions
to discoverers and settlers.
2. Reclamation: the filling up of parts of the sea
for conversion to land.
3. Emancipation patent or gran: based on P.D.
No. 27 (CARP of 1972)it isfor the purpose of
ameliorating the sad plight of farmers and of
releasing them from the bondage of the soil.
4. Private grant or voluntary transfer
5. Adverse possession or prescription: adverse
possession is actual possession of land in
opposition to all other claimants and
prescription is possession of land for required
number of years and assertion of ownership
through an interrupted actual possession of
property within the period of time prescribed
by law.
6. Accretion: Requisites are 1) deposition of soil
or sediment be gradual and imperceptible; 2)
result of the action of waters of the river; 3)
land where accretion takes place is adjacent to
bank of rivers or sea coast.
7. Involuntary alienation: like eminent
domain/expropriation
8. Descent or devise: By descent, title is
acquired when an heir succeeds the deceased
owner in testate or intestate. By devise, person
acquires land from one who may not be a
relative, if he is named in the deceased’s will.
Register of Deeds
The public repository of records of instruments
affecting registered or unregistered lands and
chattel mortgages in the province or city
wherein such office is located. (Sec. 10, P.D.
1529)
They are tasked to immediately register an
instrument presented for registration dealing
with real or personal property which complies
with all the requisites for registration.
Can Register of Deeds deny registration? YES
1. Where there are more than 1 copy of the
owner’s duplicate certificate of title and not all
such copies are presented in the Register of
Deeds
2. Where the voluntary instrument bears on its
face infirmity
3. Where the validity of the instrument sought
to be registered is in issue in a pending court
suit 4. When the document is not verified and
notarized
Registering Title
1. Judicial: a) by filing of petition with the
regular courts or b) by issuance of a
decree by Land Registration Authority
or c) by issuance of Original Certificate
of Title (OCT) by Register of Deeds
2. Administrative: by filing of application
at CENRO/ PENRO forwarded to the
Reg. Director and/or DENR for the
issuance of patent and Register of
Deeds for issuance of OCT
CADASTRAL REGISTRATION
It is a proceeding in rem, initiated by the filing
of a petition for registration by the government,
not by the persons claiming ownership of the
land subject thereof, and the latter are, on the
pain of losing their claim thereto, in effect
compelled to go to court to make known their
claim or interest therein, and to substantiate
such claim or interest
:The Cadastral court is not limited to merely
adjudication of ownership in favor of one or
more claimants. If there are no successful
claimants, the property is declared public land.
Additionally, while the court has no jurisdiction
to adjudicate lands already covered by a
Certificate of Title, it is nonetheless true that
this rule only applies where there exists no
serious controversy as to the certificate’s
authenticity vis-à-vis the land covered therein.
LAND PATENTS
Registrable Lands:
1. Alienable public agricultural lands
2. Private lands Non-registrable lands: those
found in Civil Code provisions dealing with non-
registrable properties (e.g. property of public
dominion)
When RD may deny registration
1. Where there are more than 1 copy of the
owner’s duplicate certificate of title and not all
such copies are presented in the Register of
Deeds
2. Where the voluntary instrument bears on its
face infirmity
3. Where the validity of the instrument sought
to be registered is in issue in a pending court
suit 4. When the document is not verified and
notarized (Gallardo vs. IAC, 155 SCRA 248)
Ways of Registering Title
1. Judicial: by filing of petition with the
regular courts issuance of a decree by
LRA
2. Administrative: filing of application at
CENRO/ PENRO forwarded to the Reg.
Director and/or DENR for the issuance
of patent and Register of Deeds for
issuance of OCT
Non-registrable lands: Those found in Civil
Code provisions dealing with non-registrable
properties (e.g. property of public dominion
CERTIFICATE OF TITLE
This is the true copy of the decree of
registration or the transcription thereof and like
the decree shall also be signed by LRA
Administrator (Sec. 39, PD No. 1529)
:It takes effect upon the date of entry thereof,
and the land covered thereby becomes
registered land on that date
: However, simple possession of a certificate of
title does not necessarily make the holder
thereof a true owner of all the property
described therein, such as when title includes
by mistake or oversight, land which can no
longer be registered under the Torrens system,
as when the same land has already been
registered and an earlier certificate for the
same land is in existence.
1. Homestead Patent
: Granted to any Filipino citizen over the age of
18 years or head of a family
: Requirements
a. does not own more than 24 hectares of
land in the Phils. or has not had the
benefit of any gratuitous allotment of
more than 24 hectares
b. must have resided continuously for at
least 1 year in the municipality where
the land is situated
c. must have cultivated at least 1/5 of the
land applied for
2. Free Patent
: granted to any natural born citizen of the Phils.
: requirements
a. does not own more than 12
hectares of land
b. has continuously occupied and
cultivated, either by himself or his
predecessors -in- interest tract/s of
agricultural public land subject to
disposition
3. Sales Patent
: granted to citizens of the Phils. of lawful age or
such citizens of lawful age who is head of a
family may purchase public agricultural land of
not more than 12 hectares
: requirements
a. to have at least 1/5 of the land
broken and cultivated within 5
years from the date of the award
b. shall have established actual
occupancy, cultivation and
improvement of at least 1/5 of the
land until the date of such final
payment
4. Special Patents
: granted to Non- Christian Filipinos under Sec.
84 of the Public Land Act.
: Secretary of the DILG shall certify that the
majority of the non- Christian inhabitants of any
given reservation have advanced sufficiently in
civilization
RECONSTITUTION OF CERTIFICATE OF TITLE
: The restoration of the instrument which is
supposed to have been lost or destroyed in its
original form and condition, under the custody
of Register of Deeds.
: Judicial reconstitution partakes the nature
of a land registration proceeding in rem.
: Administrative reconstitution may be
availed of only in case of:
a. Substantial loss or destruction of the
original land titles due to fire, flood, or
other force majeure as determined by the
Administrator of the Land Registration
Authority;
b. The number of certificates of title lost or
damaged should be at least 10% of the total
number in the possession of the Office of
the Register of Deeds;
c. in no case shall the number of certificates
of title lost or damaged be less than P500;
and
d. Petitioner must have the duplicate copy
of the certificate of title. (RA 6732)