c.

According its alienability –

PROPERTY
1. Define property -
ANS: Property may be defined as anything which is or may be the
object of appropriation.
2. Distinguish between thing and property –
ANS: Strictly speaking, the concept of thing is broader than the
concept of property, because while property refers only to those
objects which are or may be the object of appropriation, thing
refers also to those which are not or may not be the object of
appropriation. In other words, thing is the genus, while property
is the species.
3. The three kinds of things, depending on the nature of their
ownership:
a. Res nullius – belong to no one and the reason is that they have
not yet been appropriated
b. Res communes – really owned by everybody in that their use
and enjoyment are given to all mankind.
c. Res alicujus – are owned privately, either collectively or
individually
4. Classification of property:
a. According to its nature, mobility and non-mobility –
1. Movable or personal property
2. Immovable or real property
b. According to its ownership –
1. Public dominion
2. Private ownership
1. Within the commerce of man
2. Outside the commerce of man
d. According to its existence –
1. present property
2. future property
e. According to its materiality or immateriality –
1. Tangible or corporeal (can be seen or touched)
2. Intangible or incorporeal (rights or credits)
f. According to its dependence or importance –
1. Principal
2. Accessory
g. According to its 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. According to its definiteness –
1. Generic
2. Specific
i. According to whether in the custody of the court of free –
1. In “custodia legis”
2. Free property (not in “custodia legis”)
5. Is the Human Body, whether dead or alive, a real or personal
property-
ANS: Whether dead or alive, it is neither real or personal property, for
it is not even property at all, in that it generally cannot be
appropriated. It is indeed, a thing or a being, for it exists; in fact,
it is tangible or corporeal being a thing. While a human being is
alive, he cannot, as such, be the object of a contract, for he is
considered outside the commerce of man. He may, of course,
offer to another the use of various parts of the body. He may
donate part of his blood, may even sell part of his hair; but he
cannot sell his body.
6. The different academic classifications of real properties –

ANS:
1. Immovables by nature, or those which cannot be moved from
place to place, such as those mentioned in Nos. 1 (with respect
to land and roads) and 8 in Art. 415 of the NCC.
2. Immovables by incorporation, or those which are attached to an
immovable in such a manner as to form and integral part
thereof, such as those mentioned in Nos.1 (except lands &
roads), 2, 3, and 4 of Art. 415, NCC.
3. Immovables by destination, or those which are placed in an
immovable for the use, exploitation or perfection of such
immovable, such as those mentioned in Nos. 4, 5, 6, 7 and 9 of
Art. 415, NCC.
4. Immovables by analogy, or those which are considered
immovables by operation of law, such as those mentioned in No.
10 of art. 415, NCC.
7. The following are immovable properties enumerated by law –
ANS:
a. Land, buildings, roads and constructions of all kinds adhered to
the soil;
b. Tress, plants, and growing fruits, while they are attached to the
land or form an integral part of an immovable;
c. Everything attached to an immovable in a fixed manner in such
a way that it cannot be separated therefrom without breaking the
material or deterioration of the object;
d. Statues, reliefs, paintings or other objects for use or
ornamentation, placed in buildings or on lands by the owner of
the immovable in such a manner that it reveals the intention to
attach them permanently to the tenements;
e. Machinery, receptacles, instruments or implements intended by
the owner of the tenement for an industry or works which may
be carried on in a building or on a piece of land, and which tend
directly to meet the needs of the said industry or works;
f. Animal houses, pigeon houses, beehives, fishponds or breeding
places of similar nature, in case their owner has placed them or
preserves them with the intention to have them permanently
attached to the land and forming a permanent part of it; the
animals in these places are included;
g. Fertilizer actually used on a piece of land;
h. Mines, quarries, and slag dumps, while the matter thereof forms
part of the bed, and waters either running or stagnant;
i. Docks and structures which, though floating, are intended by
their nature and object to remain at affixed place on the river,
lake or coast;
j. Contracts for public works, and servitudes and other real rights
over immovable property. (Art. 415NCC)
8. Requisites in order that machinery may be considered an
immovable property –
ANS:
1. The machinery must have been placed by the owner or an
agent of the same.
2. An industry or works must be carried on in the building or land;
3. The machinery must tend directly to meet the needs of the
industry or works;
4. The machinery must be essential and principal to the pursuance
of the business of the owner, and not merely incidental.
9. When a Machinery attached to a land or a tenement considered
immovable –
ANS: In par. 5 of Art. 415, NCC.
The exception is when placed on the land or tenement by a
tenant. (Davao Sawmill vs. Castillo)
The exception to the exception – is when the tenant had
promised to leave the machinery on the tenement at the end of
lease, or when he acted only as agent of the owner of the land.
(Valdez vs. Central)

10. Is a building an immovable property?
ANS: Yes, it is obvious that in the enumeration of immovable
properties in Art. 415, NCC, a building is mentioned
independently of the land. By this, there is no other conclusion
that a building is by itself an immovable property. (Lopez vs.
Oroso, Jr.)
11. May a building be considered a personal property –
ANS: Yes. If there is a stipulation as when it is used as security in the
payment of an obligation where a chattel mortgage is executed
over it. It may also be considered personal if the building is
being bought for purpose of demolishing the same. In this case,
the materials resulting from the demolition are being bought.
12. Is mortgage on land movable or immovable property?
ANS: It depends. If the mortgage is registered in the Registry of
Property, it constitutes a real right over an immovable within the
meaning of No. 10 of Art. 415 of the NCC, which declares that
the contracts for the public works, servitudes and other real
rights over immovable property are classified as immovable
property. However, if the mortgage is not registered in the
Registry of Property although valid as between the contracting
parties, it cannot be classified as immovable property.
13. Is a barong-barong built on the parcel of land belonging to him be
classified as immovable property –
ANS: No, because the structure must be more or less permanent in
nature in order that it may be classified as an immovable. If the
same is a mere superimposition on the land, like the
barongbarong, the same is not an immovable property.
14. Sapphire owns a house and lot. The house is made of concrete
materials. Sapphire sold it to Emerald for purposes of demolition.
How is the house classified?
ANS: It is movable or personal property. In one case the Supreme
Court ruled that a building sold to be demolished may be
considered personal property because the true object of the
sale would be the materials.
15. The following things are deemed to be personal property –
ANS:
1. Those movables susceptible of the appropriation which are
not included in Art. 415, NCC.
2. Real property which by any special provision of law is
considered as personalty;
3. Forces of nature which are brought under control by
science;
4. In general, all things which can be transferred from place to
place without impairment of the real property to which they
are fixed. (Art 416, NCC)
The following are also considered personal property:
1. Obligations and actions which have for their object
movables or demandable sums; and
2. Shares of stocks of agricultural, commercial and industrial
entities, although they may have real estate. (Art. 417,
NCC.)
16. How is movable property classified according to its nature –
ANS: As to their possibility of being consumed by their use, movable
or personal property may be either:
1. Consummable or those which cannot be used in a manner
appropriate to their nature without their being consumed; or
 2. Non-consummable or those which can be used in a manner
appropriate to their nature without their being consumed. (Art.
418, NCC)
As to their possibility of being substituted by others of the same
kind and quality, they may be either:
Fungibles, or those which can be substituted by others of the
same kind and quality; or
Non-fungibles, or those which cannot be substituted by other of
the same kind and quality.
17. The tests to be applied successively in order to determine whether
an object is movable or not –
ANS: 1. Whether the object can be transported from place to place;
2. Whether the change of location can take place without injury
to the immovable to which it may be attached; and whether it
is not included in the enumeration found in Art. 415, NCC.
If the answer to all the above question is in the affirmative,
then the object is movable.
18. Is a painting which the owner lent to somebody, who then
attached the same on the wall of his house to beautify it with the
obligation to return it within one week considered as movable or
immovable –
ANS: It is movable due to lack of intent to attach it permanently.
19. May certain things partake both of the nature of real and personal
property –
ANS: Yes, certain things may partake of the nature of real and
personal property at the same time. This is expressly recognized
in No. 2 Art. 416 of the NCC, which states that real property
which by any provision of law is considered as personalty is
deemed to be movable or personal property. Thus, under the
Chattel Mortgage Law (Sec. 7, Act No. 1508), growing crops
may be the object of a contract of chattel mortgage. Similarly,
growing crops may also be considered as personalty for the
purpose of a contract of sale.
20. Is a vessel personal or real property –
ANS: It is a personal property. In the first place, it can be transported
from place to place; in the second place, the change of location
can take place without injury to immovable to which it may be
attached; and in the third place, it is not included in the
enumeration of immovable in Art. 415 of the NCC. However,
because of its importance in the world of commerce, it partakes
of the nature of immovables when it comes to requirement of
registration. Thus, if it is mortgaged under the Chattel Mortgage
Law, the mortgage must be registered not only in the Chattel
Mortgage Register but also in the office of the Collector of
Customs at the port of entry.
21. The following things are property of public dominion –
ANS:
1. Those intended for public use such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, banks,
shores, roadsteads and others of similar character.
Those which belong to the State, without being for public use,
and are intended for some public service or for the development
of the national wealth.
22. What is meant by “public lands”, “public domain” and
“government lands”, and how shall we distinguish one from the
other –
ANS: Public lands and public domain are synonymous. They refer
only to government lands which are opened to private
 appropriation and settlement by homestead and other similar
acts as provided by law. On the other hand, public lands and
government lands are not only public lands, but also other lands
already reserved for or devoted to pubic use or subject to private
right. Therefore, the government owns lands which are known
as public lands or public domain as well as lands which are not
public lands or public domain.
23. Lands of the public domain are classified into –
ANS: 1. Agricultural; 2. Forest or timber; 3. Mineral lands, and 4.
National parks.
24. Patrimonial property of the State or of provinces, cities and
municipalities –
ANS: Those properties of the State which are not intended for public
use, or public service or for the development of national wealth,
as well as those property of provinces, cities and municipalities
which are not intended for public use are patrimonial.
25. What is meant by property of private ownership –
ANS: Property or private ownership, besides that patrimonial property
of the State, provinces, cities and municipalities, consists of all
property belonging to private persons, either individually or
collectively.
26. May the Roponggi property in Japan be sold –
ANS: No, because the said property is a property of the State intended
for public use or public service.
27. What is the Regalian Doctrine –
ANS: It is a doctrine which reserves to the State the full ownership of
all natural resources or natural wealth that may be found in the
bounds of the earth.
28. If you are an owner of parcel of land, what rights do you have on
the same –
ANS: You are also the owner of the surface and everything under it.
You can make constructions, works, plantations and
excavations. But your right is not absolute because it is subject
to certain restrictions or limitations like servitudes, special laws,
ordinances, requirements of aerial navigation and the principles
of human relations.
As regards, the mineral found in it, you are not the owner
because ownership of minerals is reserved in favour of the State
even if the land is a private land. In fact you have no right to
extract the mineral without the permission of the State.
29. What is a hidden treasure and who owns the same –
ANS: By hidden treasure is understood, for legal purpose, any hidden
and unknown deposit of money, jewelry, or other precious
objects, the lawful ownership of which does not appear.
It belongs to the owner of the land, building or other property on
which it is found.
30. Alberta found a hidden treasure inside the land of Terence. How
will the treasure be divided if Alberta is a usufructuary of the land;
lessee; farmer; labourer hired to look for it –
ANS: If Alberta is usufructuary, or lessee or farmer, she is entitled to ½
of the hidden treasure because they are considered as
strangers to the land.
 If she is the labourer intended or hired to look for it, she is
entitled to her wage or salary only.
31. Suppose Alberta in the preceding question has an instrument to
look for a hidden treasure, can she still be considered a finder by
chance –
ANS: Yes, because the word “by chance” means there should be
purpose or intention to look for it.
The better rule however, is that “by chance” means “ good luck”,
whether there was a deliberate search or not for the treasure,
but no prior agreement as to how it is to be divided. One who
intentionally looks for it is embraced if he does not ask for
permission, he is a trespasser.
32. Define ownership –
ANS: It is an independent right of exclusive enjoyment and control of a
thing for the purpose of deriving therefrom all advantages
required by the reasonable needs of the owner and the
promotion of the general welfare but subject to the restrictions
imposed by law and the rights of others.
33. The traditional attributes or elements of ownership or the rights of
person over his property are –
ANS: a. The right to enjoy, which includes:
Jus utendi, or the right to use;
Jus fruendi, or the right to enjoy the fruits; and
Jus abutendi, or the right to consume the thing by its use.
b. The right to dispose (jus disponendi), or the right to alienate,
encumber, transform, or even to destroy the property.
c. The right to vindicate (jus vindicandi), or the right of action
available to the owner to recover the property against the
holder or possessor.
34. The kinds of ownership are –
ANS: a. full ownership – this includes all the rights of the owner
b. naked ownership – ownership where the rights to the use
and fruits are denied.
c. sole ownership – where ownership is vested in only one
person.
d. co-ownership – where the ownership is vested in two or
more owners.
35. Is the right of ownership absolute –
ANS: It is not absolute because it has limitations which are imposed
for the benefit of humanity and based on certain legal maxims:
a. the welfare of the people is the supreme law of the land –
“salus populi suprema est lex”;
b. use your property so as not to impair the rights of others –
“sic utere tuo ut alienum non laedas”.
36. The limitations upon the right of ownership –
ANS:
1. General limitations imposed by the State for its benefit such as
the power of eminent domain, the police power, and the power
of taxation;
2. Specific limitations imposed by law, such as legal servitudes;
3. Limitations imposed by the party transmitting the property either
by contract or by will;
4. Limitations imposed by the owner himself, such as voluntary
servitudes, mortgages, pledges, and lease rights; and
5. Inherent limitations arising from conflict with other rights, such
as those caused by contiguity of property.
We might add to the above enumeration the constitutional
prohibition regarding acquisition of private land by aliens and other
constitutional limitations.
37. As a consequence of ownership, the rights of a person over his 712 of the NCC which enumerates the different modes of
property are – acquiring ownership or other real rights, accession is not included.

ANS: 40. The different kinds of accession are –

1. To enjoy the property;
2. To dispose of the property; ANS: A.) Accession discreta, or the right pertaining to the owner of a
3. To recover the property from any holder or possessor; thing over everything which is produced thereby.
4. To exclude any person from the enjoyment and disposal of the
property; 1. Natural fruits, or spontaneous products of the soil, and
5. To enclose or fence his land or tenement; the young and other products of animals.
6. To just compensation in case of eminent domain; 2. Industrial fruits are those produced by lands of any kind
7. To construct any works, or make any plantation or excavation on through cultivation of labor.
the surface or subsurface of his land; 3. Civil fruits are rents of buildings, the price of leases of
8. To the ownership of all or a part of hidden treasures found in his lands and other property and the amount of perpetual or
property; and life annuities or other similar income. (Art. 442, NCC)
9. To the ownership of all accessions to his property.
B.) Accession continua, or the right pertaining to the owner of a
38. Force in defense of property justified if the following requisites thing over everything which is incorporated or attached
concur – thereto, either naturally or artificially.

ANS: 1. With regard to immovable property:

a. Accession industrial, or that which takes place in case
1. The force must be employed by the owner or lawful possessor of of:
the property; (i) Building
2. There must be an actual or threatened physical invasion or (ii) Planting, or
usurpation of the property. (iii) Sowing (Arts. 445-455, NCC)

b. Accession natural, which may be in the form of either;

ACCESSION (i) Alluvium, or the accretion which lands
adjoining the banks of rivers, lakes, creeks or
torrents gradually receive from the effects of
39. Define accession and is it a mode of acquiring ownership – the currents of the waters. (Art. 457, NCC)
(ii) Avulsion or the accretion which takes place
ANS:It is the right pertaining to the owner of a thing over everything whenever the current of a river, lake, creek or
which is produced thereby, or which is incorporated or attached torrent segregates from one estate on its
thereto, either naturally or artificially. From the very definition itself, bank a known portion of land and transfers it
it is clear that it is not a mode of acquiring ownership; it is merely a to another estate. (Art. 459, NCC)
consequence of the right of ownership. Furthermore, under Art. (iii) Change of river beds, or that which takes
place when a river bed is abandoned through
 the natural change in the course of the
waters. (Art. 461, NCC)
(iv) Formation of islands either on the seas within
the jurisdiction of the Philippines, on lakes,
and on navigable or floatable rivers or non-
navigable and non-floatable rivers. (Art. 465,
NCC)
2. With regard to movable property:
a. Adjunction or conjunction, or that which takes place
whenever movable things belonging to different
owners are united in such a way that they cannot be
separated without injury, thereby forming a single
object. (Art. 466, NCC)
b. Commixtion or confusion, or that which takes place
whenever there is a mixture of things solid or liquid
belonging to different owners, the mixture of solids
being called commixtion, while that of liquids,
confusion. (Art. 472, NCC)
c. Specification or that which takes place whenever a
person imparts a new form to materials belonging to
another person. (Art. 474, NCC)
41. To whom does the offspring of animals belong when the male and
female belong to different owners –
ANS: Applying the principle of “partus sequitur ventrem”, the offspring
belongs to the owner of the female.
41. Is the rule of accession discreta – that to the owner of the thing
belong the natural, industrial and civil fruits – absolute in
character –
ANS: No. It is subject to the following exceptions:
1. the thing is in possession of a possessor in good faith in
which case such possessor is entitled to the fruits.
2. If the thing is subject to a usufruct in which case the
usufructuary is entitled to the fruits.
3. If the thing is leased in which case the lessee is entitled to
the fruits of the thing, although such lessee must pay the
owner rentals which are in the nature of civil fruits.
4. If the thing is in possession of an antichretic creditor in which
case such creditor is entitled to the fruits with the obligation
of applying them to the interest and principal.
42. The basic principles governing accession continua are –
ANS: 1. That to the owner of a thing belong the extension or increase
of such thing;
2. That this extension of the right of ownership is realized, as a
general rule, under the juridical principle that the accessory
follows the principal (Accessio cedit principali);
3 That this incorporation of the accessory with the principal
saving the exceptions provided by law is effected only when
two things are so united that they cannot be separated
without injuring or destroying the juridical nature of one of
them; and
4. That, as a general rule, punitive liability attaches to the party
who acts in bad faith, but not to the party who acts in good
faith.
43. If Alpha builds in good faith a house on the land of Bravo, what are
the rights of the parties –
ANS: a. The rights of the owner of the land are:
1.) He can appropriate the house upon payment of
indemnity. The phrase “upon payment of indemnity”
means that Alpha has the right to retain the house for as
long as Bravo has not yet paid the indemnity; or
2.) He has the right to sell the land to the builder in good
faith. He can compel the builder to buy the land, unless
the value of the land is considerably more than the value
of the building. If so, then the builder must rent or the
remedy is a “forced lease’.
 b. The right of the builder is to ask for indemnity if the
landowner opts to appropriate the house. The reason for this
is that the appropriation without compensation would amount
to solutio indebiti. Anyway, Alpha is in good faith.
44. In the immediately preceding question, can Bravo file a suit for
ejectment and pray for demolition upon knowing that Alpha built
her house on his land –
ANS: No. He has yet to make a choice. If he has not yet done so, he
cannot ask for the ejectment of Alpha, but if he opted to sell
the land where the value of the same is not considerably more
than the value of the house, and the builder does not pay the
land then Alpha can be ejected. If she cannot pay, she should
not be allowed to continue using the land.
45. If the landowner chooses to appropriate the building, can the
builder ask the owner of the land to sell it instead –
ANS: No, because the option to appropriate the building or sell the
land belongs to the landowner. The only right of the builder in
good faith is the right to reimbursement, not to compel the owner
of the land to sell. The option is not to buy but to sell. The option
is given to the landowner because his right is older; and
because of the principle of accession, he is entitled to the thing
attached to his land.
46. What then is the remedy left to the owner of the land if the builder
fails to pay-
ANS: While the NCC is silent on this point, guidance may be derived
from the decision of the Supreme Court, thus: (1) In Miranda vs.
Fudalan, 97 Phil. 801, the Supreme Court said that the parties
may decide to leave the things as they are and assume the
relation of lessor and lessee, and should they disagree as to the
amount of rental, then they can got to the court to have the
amount fixed. (2) Should the parties not agree to assume the
relation of the lessor and lessee, another remedy is suggested in
the Ignacio vs. Hilario case wherein the Supreme Court ruled
that the owner of the land is entitled to have the improvement
removed when after having chosen to sell his land, the builder in
good faith fails to pay for the same. (3) A further remedy is
indicated in Bernardo vs. Bataclan case where the Supreme
Court approved the sale of the land and improvement in a public
auction, applying the proceeds thereof first to the payment of
the value of the land and the excess, if nay, to be delivered to
the owner of the house in payment thereof.
47. May a lessee be a builder in good faith –
ANS:In one case, it was held that lessees are not builders in good faith.
They came into the possession of the lot by virtue of a contract of
lease executed by petitioner’s mother in their favor. They are then
estopped to deny their landlord’s title, or to assert a better title not
only in themselves, but also in some third person while they
remain in possession of the leased premises and until they
surrender possession to the landlord. This estoppel applies even
though the lessor had no title at the time. The relation of lessor
and lessee was created and may be asserted not only by the
original lessor, but also by those who succeed to his title.
Being mere lessees, they knew that their occupation of the
premises would continue only for the life of the lease. Plainly, they
cannot be considered as possessors or builders in good faith.
48. What are the rights, if any, of a builder in bad faith –
ANS:As a rule, he has no right. But he is entitled to reimbursement for
necessary expenses for the preservation of the land, not the value
of the building (Art. 452, NCC). The reason for this rule is, after
all, the owner would have borne the same expenses of
preservation of the land.
49. What are the rights of the owner of the land in case there is a
builder in bad faith –
ANS: 1. To appropriate the building without payment of indemnity
plus damages. In this case, the builder is like a donor;
2. He can demand the demolition of the house plus damages;
 3. He can compel the builder to buy the land even if the value
is considerably more than the value of the building plus
damages. (Arts. 450 and 451, NCC)
50. What are the rights and obligations of the owner of the land who
uses the materials of another –
ANS: a. If the landowner acted in good faith –
1. He becomes the owner of the materials but he must pay
for their value. The only exception is when they can be
removed without destruction to the work made or to the
plants. In such case, the owner of the materials can
move them.
b. If the landowner is in bad faith –
2. He becomes the owner of the materials but he may pay
their value and damages. The only exception is when the
owner of the materials decides to remove them whether
or not destruction would be caused. In this case, the
materials would still belong to the owner of said materials
who in addition will still be entitled to damages.
51. What are the rights and obligations of the owner of the materials –
ANS: a.) If the landowner acted in good faith –
1. The owner of the materials is entitled to reimbursement
provided he does not remove them;
2. He is entitled to removal provided no substantial injury is
caused;
b.) If the landowner acted in bad faith –
1. The owner of the materials is entitled to absolute right of
removal and damages whether or not substantial injury is
caused;
2. He is entitled to reimbursement and damages in case he
chooses not to remove.
52. If you plant and grow crops on the farm of your neighbor knowing
fully well that the farm is not yours, what are yours rights with
reference to the crops, if your neighbor is in good faith –
ANS: There is a distinction:
1) If the crops have been already 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;
2) If not yet gathered, that is, the crops are still standing, you
completely forfeit them in favor of the owner of the land without any
right of indemnity except of course for the necessary expenses, not
of the crops but of the land.
53. Define alluvium –
ANS: Alluvium may be defined as the accretion which the lands
adjoining the banks of rivers, creeks, torrents or lakes gradually
received from the effects of the current of the waters.
54. The rule with regard to alluvium?
ANS: To the owners of the land adjoining the banks of rivers belongs
the accretion which they gradually receive from the effects of
the current of the waters. (Art 457, NCC)
The owners of the estates adjoining ponds or lagoons do not
acquire the land left dry by the natural decrease of the waters,
or lose that inundated by them in extraordinary floods. (Art 458,
NCC)
55. Define avulsion –
ANS: Avulsion may be defined as the accretion which takes place
whenever the current of a river, creek, torrent or lake segregates
from an estate on its bank a known portion of the land and
transfers it to another estate.
The rule with regard to avulsion –
 ANS: Whenever the current of a river, creek or torrent segregates from
an estate on its bank a known portion of land and transfer it to
another estate, the owner of the land to which the segregated
portion belonged retains the ownership of it, provided that he
removes the same within 2 years.
Trees uprooted and carried away by the current of the waters
belong to the owner of the land upon which they may be cast, if
the owners do not claim them within 6 months. If such owners
claim them, they shall pay the expenses incurred in gathering
them or putting them in a safe place.
56. Rule on uprooted trees –
Example: Because of the force of the river current, some trees on the
estate of A were uprooted and cast on the estate of B, who
owns the trees?
ANS: A should still be considered as the owner of the uprooted trees
but if he does not claim them within six months, B will become
the owner. If A makes the claim, he will have to shoulder the
expenses for gathering or putting them in a safe place.
Failure to make the claim within 6 months will bar any future
action to recover the trees.
57. Rule if the trees have been transplanted –
ANS: In the example given above, even if the trees have been
transplanted by the owner of the land upon which they have
been cast on his own land – ownership still pertains to the
person who lost the trees provided that the claim was made
properly. Incidentally, the owner of the land upon which the trees
have been cast does not have to wait for six months before he
can temporarily set them aside to make proper use of his own
land.
58. Effect if claim is made but trees are not removed –
If say within 4 months a claim is made but no steps are yet taken to
recover the trees, may an action still be filed afterwards for recovery
of the trees?
ANS: It is submitted that the answer is YES, provided the action is
brought within the period set by law for prescription of
movable (since uprooted) property. (Art. 1140 – 4 years for
ordinary prescription). The six-month period given in Art. 460
should be considered only as condition precedent; in other
words, A has to make the claim within 6 months. The recovery
(as distinguished from the claim) can be made within the
period for prescription. If no claim is made within six months,
the ownership changes.
59. Article applies to uprooted trees –
If instead of being uprooted, the trees still remain attached to the land
that has been carried away, it is Art. 459 that must govern.
Article 459: “Whenever the current of a river, creek or torrent
segregates from an estate on its bank a known portion of the land and
transfers it to another estate, the owner of the land to which segregated
portion belonged retains the ownership of it provided that he removes
the same within two years.”
60. Must owner of land upon which the uprooted trees have been cast
be given compensation?
ANS: It depends. If he has incurred expenses for preserving them
as when he gathered them in a safe place for eventual return
or when he transplants them only for preservation purposes,
he is doubtless entitled to indemnification. If he has done
nothing, he cannot demand indemnification unless he has
suffered in any way and the real owner has benefited in that,
for example, they were not carried away by the current. (See
Art. 22)
Article 461. River beds which are abandoned through the natural change
in the course of the waters ipso facto belong to the owners
 whose lands are occupied by the new course in proportion to
the area lost. However, the owners of the lands adjoining the
old bed shall have the right to acquire the same by paying the
value thereof, which value shall not exceed the value of the
area occupied by the new bed.
61. Distinguish between alluvium and avulsion.
ANS: The 2 may be distinguished from each other in the following
ways:
1. In alluvium, the accretion is gradual, whereas in avulsion,
it is sudden and abrupt;
2. In alluvium, the accretion cannot be identified, whereas
in avulsion, it can be identified;
3. In alluvium, there is merely an attachment, whereas in
avulsion there is first detachment followed by
attachment; and
4. In alluvium, the accretion belongs to the owner of the
land to which the attachment is made ipso jure, whereas
in avulsion, the ownership is retained by the owner of the
land from which it is detached, at least, for a certain
period.
62. The rule with regard to changes in the course of rivers.
ANS: River beds which are abandoned through the natural change
in the course of the waters ipso facto belong to the owners
whose lands are occupied by the new course in proportion the
area lost. However, the owners of the lands adjoining the old
bed shall have the right to acquire the same by paying the
value thereof, which value shall not exceed the value of the
area occupied by the new bed (Art. 461, NCC)
Attention, however, must be called to the fact that the above
provision has already been superseded by the following
provision of the Water Code of the Philippines (P.D. No. 1067).
Article 58. When a river or stream suddenly changes its course to
traverse private lands, the owners of the affected lands may
not compel the government to restore the river to its former
bed; nor can they restrain the government from taking steps to
revert the river or stream to its former course. The owners of
the lands thus affected are not entitled to any compensation
for any damage sustained thereby. However, the former
owners of the new bed shall be the owners of the abandoned
bed in proportion to the area lost by each.
“The owners of the affected lands may undertake to return the river
or stream to its old bed at their own expense; Provided, that a permit
therefore is secured from the Minister of Public Works and works pertaining
thereto are commenced within two years from the change in the course of
the river or stream.”
Requisites that must be complied with in order that the owner of the
land adjoining the bank of a river may become the owner of an accretion on
the land.
ANS: They are the following:
1. The deposit must be gradual or imperceptible or
impervious;
2. It must be cause by the current of a river;
3. The current must be that of a river;
4. The river must continue to exist; and
5. The increase must be comparatively little. (Art. 457,
NCC)
NOTE: If the increase is through artificial means, the law does
not apply.
63. Suppose that a river dries up, who is the owner of the old bed?
ANS: The old bed will be considered as property of public
ownership
64. What is accretion?

ANS: Accretion is the process whereby the soil is deposited while
alluvium is the soil deposited. Accretion is broader scope that
alluvium because strictly speaking, alluvium applies only to the
soil deposited on river banks.
65. Reasons why alluvium is granted to the riparian owner.
ANS: a. to compensate him for the loss he may suffer due to
erosion or destructive force of the water and danger from
floods;
b. to compensate him because the property is subject to
encumbrances and legal easement;
c. the interest of agriculture require that the soil be given to
the person who is in the best position to cultivate the
same;
d. since, it cannot be said with certainty from where the soil
came, it is but just that it be given to him who can best
utilize the property.
66. If the riparian owner has a title to the land, does that cover the
alluvial deposit? Why?
ANS: No, because there is specific technical description of the
land. There must first be an independent application for
registration of the land.
67. May the alluvial deposits be lost by prescription in favor of
another? Reason.
ANS: Yes, because it is not covered by a Torrens title. It can be
lost by prescription after 30 years.
68. Who owns an abandoned river bed? How about an island
formed on a river?
ANS: a. River beds which are abandoned through the natural
change in the course of the waters ipso facto belong to
the owners whose lands are occupied by the new course
in proportion to the area lost. (Art. 461, NCC)
b. If the river on which the land is formed is navigable, the
island belongs to the State. (Art. 464, NCC)
If the river is non-navigable, the island belongs to the
riparian owner, nearer the island. If the said island is formed
exactly at the middle of the river, it shall be divided longitudinally in
halves between the two riparian owners. (Art. 465, NCC)
69. What is adjunction and give the kinds of adjunction?
ANS: It is a process by virtue of which two movables belonging to
the different owners are united in such a way that they form
a single object.
The kinds of adjunction are:
a. engraftment
b. attachment
c. weaving
d. painting
e. writing
70. If two movables belonging to different owners are united in
such a way that they form a single object, to whom shall the
object belong?
ANS: 1. When both owners had acted in good faith: If the two
things which are united cannot be separated from each
other without injury, the owner of the principal things
acquires the accessory, indemnifying the owner of such
accessory for its value. (Art. 466, NCC)
If the two things can be separated without injury, their
respective owners may demand their separation. (Art.
469, par.1, NCC)
 Nevertheless, in case the thing united for the use,
embellishment or perfection of the other is much more
precious that the principal thing, the owner of the former
may demand its separation, even though the thing to
which is has been incorporated may suffer some injury.
(Art. 469, par.2, NCC)
2. When the owner of the accessory had acted in bad faith:
Whenever the owner of the accessory thing had made
the incorporation in bad faith, he shall lose the thing
incorporated and shall have the obligation to indemnify
the owner of the principal thing for the damages he may
have suffered. (Art. 470, NCC).
3. When the owner of the principal had acted in bad faith: if
the one who has acted in bad faith is the owner of the
principal thing, the owner of the accessory thing have a
right to choose between the former, paying him its value
or that the thing belonging to him be separated, even
though for this purpose it be necessary to destroy the
principal thing; and in both cases, furthermore, there
shall be indemnity for damages. (Art. 470, NCC)
4. When both owners had acted in bad faith: If either one
of the owners has made the incorporation with the
knowledge and without the objection of the other, their
respective rights shall be determined as though both
acted in good faith. (Art. 470, NCC)
71. In adjunction or conjunction, what are the tests to be applied in
order to determine the principal?
ANS: In general, there are 4 tests which may be applied. In their
order of preference, they are as follows:
1. That to which the other has been united as an ornament
or for its use or perfection;
2. The thing of greater value;
3. If they are of equal value, that of the greater volume;
4. If not one of these tests can be applied, then, the
question will be resolved by taking into consideration all
pertinent provisions applicable as well as their respective
merits, utility and volume. (Arts. 467 and 468, NCC.)
In painting and sculpture, writings, printed matter, engraving
and lithographs, the board, metal, stone, canvas, paper or
parchment shall be deemed the accessory thing. (Art. 468. par.2,
NCC)
72. What is mixture and state its kind?
ANS: Mixture is combination or union of materials where the
respective identities of the component elements are lost.
The kinds of mixture are:
a. Commixion which is a mixture of solids;
b. Confusion which is a mixture of liquids.
73. State the rules on mixture.
ANS: The rules in mixture may be stated this way:
a. If mixture is caused by one owner in good faith, or by will
of both owners, or by chance, or by common agent, co-
ownership results.
b. If mixture is made by one owner in bad faith, then he
loses his material in favor of another and he is liable for
damages.
74. What is specification?
ANS: Specification is the giving of a new form to another’s
material through application of labor where labor becomes
the principal.
75. State the rules in specification.
ANS: The rules in specification can be stated in this manner:
1. If the worker is in good faith:
a. he appropriates the new thing but he must indemnify
the owner of the materials. If the material is more
precious than the new thing, the owner of the
material has the option:
aa. to get the new thing but he has to pay for the
work; or
ab. demand indemnity for material
2. If the worker is in bad faith, the owner of the material has
the option:
a. to appropriate the work without paying for the labor;
or
b. to demand indemnity for the materials with damages.
The option to appropriate, however, does not apply if the
value of the resultant work is more valuable for artistic or scientific
reasons.
76. State the distinctions among adjunction, specification and
mixture:
ANS: 1. Adjunction involves at least two things.
Mixture involves at least two things.
Specification may involve only one thing but the form is
changed.
2. In adjunction and specification, accessory follows the
principal.
In mixture, co-ownership results.
3. In adjunction, the things joined retain their nature.
In mixture, the things mixed or confused, retain or loss
their respective nature.
In specification, the new object retains or preserves the
nature of the original object.
77. What are the tests in determining which of two things is the
principal and the accessory?
ANS: The tests are: (1) intention; (2) value; (3) volume and (4)
merits.
Under the test of intention, the rule is, that to which a thing is
attached is the principal; and that to which is attached to the thing is
the accessory.
Example: A ring and a diamond. Based on the test of
intention, the ring is the principal and the diamond is the accessory.
In the case of the ring, if the diamond is more valuable, the
latter is the principal and the ring is the accessory.
Under the test of volume, that which is bigger is the
principal; that which is smaller is the accessory.
Since the ring is bigger than the diamond, the ring is the
principal and the diamond is the accessory.
The test of merits is a combination of utility and volume.
QUIETING OF TITLE
78. When may an Action to quiet title prosper?
ANS: When the following requisites are present:
1. Existence of an instrument or record or claim or
encumbrances or proceeding;
2. The document appears to be valid or effective;
3. But the document is in truth and in fact; invalid,
ineffective, voidable or unenforceable; and
4. The document is prejudicial to the title. (Art. 476, NCC)
79. Kinds of Action referred to:

ANS: a. Remedial - action to remove the cloud or to quiet
title. (Art. 476, par. 1)
b. Preventive - action to prevent a future cloud or
doubt
80. Reasons for allowing the Action:
ANS: a. the prevention of litigation (eventual litigation);
b. the protection of the true title and possession;
c. the promotion of right and justice.
81. Nature of the Action –
The result is not binding upon the whole world, therefore not
“in rem”. It is “in rem”. It is really “in personam” because it is
enforceable only against the defeated party, or privies and that a
suit to quiet title brought against one co-owner, is NOT res judicata
with respect to the other co-owners who were not made parties
thereto. In fact, an action for conveyance, which is really “in
personam”, has, in at least one case, been considered by our
Supreme Court, as an action to quiet title. Technically, it is “quasi in
rem”, which is an action ”in personam” concerning real property.
82. Are personal (movable) properties referred to in the action to
quiet title?
As the law is worded, NO, because the law says “real
property or any interest therein”. But by analogy, the same
principles should apply to personal property, particularly vessels,
which although movable, partake of the nature of real property.
83. Does the Action to Quiet Title Prescribe?
ANS: It depends.
a. If the plaintiff is in possession of the property, the action
DOES NOT PRESCRIBE.
Reason: While the owner continues to be liable to an
action, proceeding, or suit upon the adverse claim, he has a
continuing right to be given aid by the court to ascertain and
determine the nature of such claim and its effect on his title, or to
assert any superior equity in his favor. He may wait until his
possession is disturbed or his title is attacked before taking steps to
vindicate his right. Thus, a buyer of land in 1931, who possesses it
from that date may still compel the seller’s successors-interest to
execute the proper deed of conveyance in 1954, so that the deed
may be registered.
b. If the plaintiff is NOT in possession of the property, the
action MAY PRESCRIBE. Moreover, even if the action
is brought within the period of limitations, it may be
barred by LACHES, where there is no excuse offered for
the failure to assert the title sooner. If somebody else
has possession, the period of prescription for the
recovery of the land is either 10 or 30 years, depending
on ordinary or extraordinary prescription. And even if
brought within the prescriptive period, the action may no
longer prosper if there has been an unreasonable or
unjustified delay in filing the suit.
As a general rule, it is settle that an action to quiet title does
not prescribe.
The plaintiff must either have legal or equitable title to or
interest in the real property which is the subject matter of the action.
Otherwise, the action will not prosper. He need not be in
possession of said property. (Art. 477, NCC).
84. Non-necessity of Possession –
The plaintiff may be in possession or not in possession. The
differences in effect are:
If Plaintiff is in If Plaintiff Is Out Possession
possession
a. period does not a. period
 prescribe prescribes travelers over a public or private road, the owner of the tree
b. onl b. aside from being given the right shall be obliged to fell and remove it; and should he not do so,
y right is to remove or to remove or prevent cloud, he it shall be done at his expense by order of the administrative
prevent cloud may also bring the ordinary authorities.
actions of ejectment, publiciana
or reinvindicatoria within the
proper prescriptive periods. C0-OWNERSHIP
RUINOUS BUILDINGS AND
TREES IN DANGER OF FALLING 01. Define Co-ownership?

There is co-ownership whenever the ownership of an undivided

thing or right belongs to different persons.
Article 485. If a building, wall, column, or any other construction is in danger
of falling, the owner shall be obliged to demolish it or to
02. What Governs Co-ownership?
execute the necessary work in order to prevent it from falling.
a. contracts
If the proprietor does not comply with this obligation, the b. special legal provisions
administrative authorities may order the demolition of the c. provisions of the Title on Co-ownership
structure at the expense of the owner, or take measures to
insure public safety. In default of the 1st, apply the 2nd; in the absence of the 2 nd,
apply the 3rd. (Art. 484, NCC)
Rule in Case of Building, etc., In Danger of Falling
03. Sources of Co-ownership (How It Arises)
Example:
a. By law
b. By contract
On A’s estate is a wall facing the street. The wall is in danger of
c. By chance
falling. May the owner be compelled to demolish or repair it? Yes, and if he
d. By Occupation or occupancy
does not do so, the administrative authorities may either order its demolition
e. By succession or will
at A’s expense or take measures to insure public safety.
04. Characteristics of Co-ownership
The Complainant –
1. There must be more than one subject or owner;
The complainant who brings the case must either have his property
2. There is one physical whole divided into ideal shares;
adjacent to the dangerous construction, or must have to pass by necessity
3. Each ideal share is definite in amount, but is not physically
in the immediate vicinity. If the construction falls, the owner would be liable
segregated from the rest;
for damages, as a general rule.
4. Regarding the physical whole, each co-owner must respect
each other in the common use, enjoyment or preservation of the
Article 483. Whenever a large tree threatens to fall in such a way as to
physical whole;
cause damage to the land or tenement of another or to
 5. Regarding the ideal share, each co-owner holds almost absolute
control over the same;
6. The co-ownership does not have juridical personality
7. A co-owner is in a sense a trustee for other co-owners.
05. Distinctions between co-ownership and partnership-
1. Co-ownership has no legal personality; while partnership has a
legal or juridical personality;
2. Co-ownership is created by contract or the other things; while a
partnership is created by contract only;
3. The purpose of co-ownership is for collective enjoyment; while
partnership is for profit;
4. An agreement of a co-ownership exist for 10 years is valid; while
in partnership, there is no term limit;
5. There is no mutual representation in co-ownership; while there is
mutual representation in partnership;
6. Co-ownership is not dissolved by death or incapacity of a co-
owner; while partnership is dissolved by death or incapacity of a
partner;
7. A co-owner can dispose of his share without the consent of the
others; while in partnership, a partner cannot substitute another
in his place without the consent of the others;
8. In co-ownership, profits must depend on proportionate share;
while in partnership, profits may be stipulated by the partners.
06. Distinctions between conjugal partnership and co-ownership-
1. Conjugal partnership arises only because of a marriage contract;
while co-ownership arises by an ordinary contract;
2. The parties in a conjugal partnership must be a male and a
female; while in co-ownership sex is immaterial;
3. In conjugal partnership, the owners are always two; while in co-
ownership, the co-owner may be more than two;
4. In conjugal partnership, the profits are divided equally, unless
there is contrary stipulation in the marriage settlement; while in co-
ownership, profits are proportional to their respective shares;
5. Death of either party in conjugal partnership dissolves it; while
death of one in co-ownership does not dissolve it.
07. Kinds of Co-ownership
a. From the viewpoint of subject matter:
1. Co-ownership of an undivided thing
2. Co-ownership of an undivided right
b. From the viewpoint of source
1. Contractual co-ownership (an agreement not to divide for ten
years allowed (Art.494, NCC)
2. Non-contractual co-ownership (if the source is not a contract).
c. From the viewpoint of the rights of the co-owners:
1. Tenancy in common (or ownership in common or just co-
ownership as contemplated in Art. 484).
2. Joint tenancy (also called joint ownership).
08. Rights of the co-owners-
1. Full ownership of his part and share of fruits or benefits;
2. The right to alienate, assign or mortgage his share;
3. The right to substitute another in his enjoyment, except when
personal rights are involved (Art. 493, NCC)
4. The right to exempt himself from necessary expenses or taxes by
renouncing part of his interest in the co-ownership (Art. 488, NCC).
09. Actions covered by the term “Ejectment” which is one of the
rights of co-owners are the following --
a. forcible entry;
b. unlawful detainer;
c. accion publiciana;
d. accion reindivicatoria;
e. quieting of title;
f. replevin.
10. May prescription run against a co-owner? Are there exceptions?

ANS: No, as a rule. Prescription does not run against co-owners and
co-heirs as long as the co-ownership is expressly or impliedly
recognized.
The exception is repudiation, provided that the following
requisites are present:
1. He must make known to the others that he is repudiating the co-
ownership and claiming complete ownership of the entire
property.
2. Evidence of repudiation and knowledge of others is clear and
convincing.
3. There is open, continuous, peaceful, public and adverse
possession for a period to time required under the law.
Note: Mere receiving of rents or profits, payment of taxes, or construction
of a fence or building would not be sufficient proof of exclusive or
adverse possession because anyone in the co-ownership may do it.
Definite repudiation is necessary.
11. How do you determine the share of the co-owners to the benefits
and charges arising from the co-ownership?
ANS : The share of the co-owners in the benefits and charges arising
from the co-ownership shall be proportional to their respective
interests and any stipulation in a contract to the contrary shall be
void. Consequently, in order to determine the share of the co-
owners in the benefits and charges, we must first determine their
respective interests in the co-ownership. Under the law, such
interests are presumed equal, unless the contrary is proved.
(Art. 485, par.2, NCC)
12. What are the limitations upon the right of a co-owner to use the
thing owned in common?
ANS: The thing should be used only: (1) in accordance with the
purpose for which it is intended; (2) in such a way as not to
injure the interest of the co-ownership; (3) in such a way as not
to prevent the other co-owners from using it according to their
rights. (Art. 486, NCC)
13. Perpendicular Co-ownership-
This is not an ordinary case of ownership where all the floors and
everything else belong to all co-owners. Here, we have a case of
“perpendicular co-ownership” where the different stories belong to different
persons. This is still co-ownership for there is some unity in the use or
ornamentation of the property, particularly in the main and common walls,
roof, stairs, etc. This is uncommon in our country.
NOTE: If the various units are in one plane – as when one storey units
all sets on the ground – the co-ownership may be referred to as a
“horizontal co-ownership”. A combination of both perpendicular
and horizontal co-ownership can result in a situation very similar
to a condominium which may be in the form of a building
consisting of several stories, each storey being by itself divided
into different units, owned by different persons. Note that each
unit cannot be considered owned in common. Under the
Condominium Law, a condominium corporation can be formed –
to take care of common property, like the common stairs, common
halls, etc.
14. In a co-ownership, under what circumstances may a co-owner not
demand partition?
ANS: They are the following:
1.) When there is an agreement, but the period should not exceed ten
years;
2.) When the testator prohibits it, but the period shall be limited to
twenty years;
3.) When it is prohibited by law (As in conjugal partnership or absolute
community property except in case of legal separation);
4.) When partition renders the object unserviceable;
5.) When the legal nature of the property does not allow partition of the
object, like a party wall. (Arts. 494 & 495, NCC)
15. How co-ownership is extinguished/terminated?

(a) judicial partition
(b) extrajudicial partition
(c) when by prescription, one co-owner has acquired the whole property
by adverse possession as against all the others, and repudiating
unequivocally the co-ownership of the other
(d) when a stranger acquires by prescription the thing owned in
common
(e) merger in one co-owner
(f) loss or destruction
(g) expropriation (here the indemnity will be distributed accordingly).
16. May the co-owners of a property agree that the co-ownership shall
be for an indefinite period? Why?
ANS: NO. In one case, the Supreme Court ruled that the duration of
the juridical condition of co-ownership is not limitless. Under
Arts. 494 and 1083 of New Civil Code, co-ownership of an
estate should not exceed 20 years. Any agreement to keep the
thing or property undivided should be for ten year period only. If
the parties stipulate a definite period of indivision which exceeds
the maximum allowed by law, said stipulation is void only as to
the period beyond such maximum period.
The Civil Code is silent as to the effect of the indivision of
property for more than twenty years. The Supreme Court,
however, said that it would be contrary to public policy to
sanction co-ownership beyond the period set by law. Otherwise,
the 20 year limitation would be rendered meaningless.
17. Is an existing mortgage a bar to the partition of a property? Why?
ANS: No, because the latter does not operate to extinguish the
mortgage. A mortgage is inseparable from the property. Under
Art. 2126 of NCC, a mortgage directly and immediately subjects
the property upon which it is imposed, whoever, the possessor
may be, to the fulfillment of the obligation for whose security it
was constituted. Furthermore, Art. 494 of the NCC, provides that
no co-owner shall be obliged to remain in the co-ownership.
Each co-owner may demand at any time the partition of the
thing owned in common, insofar as his share is concerned.
18. Will redemption by a co-owner of a co-owned property, in its
entirety, terminate or extinguish co-ownership?
ANS:The fact that a co-owner redeems a co-owned property in its
entirety, shouldering the expenses therefor, does not make said
co-owner the owner of it all. The redemption made by him does
not put an end to the existing state of co-ownership. The property
remains to be in a condition of co-ownership.
The redemption of the property, however, entails a necessary
expense. Necessary expenses may be incurred by one co-owner
but this is subject to his right to collect reimbursement from the
remaining co-owners.
19. Distinguish between the right of a co-owner to make repairs for
the preservation of the property owned in common, to perform
acts of administration, and to perform acts of ownership or
alteration.
ANS: 1. With regard to acts of preservation: Repairs for preservation
may be made at the will of one of the co-owners, but he
must, if practicable, first notify the owners of the necessity
for such repairs. (Art. 489, NCC)
2. With regard to acts of administration: Acts of administration
can be performed only with the concurrence of the majority
of the co-owners. (Art. 492, NCC)
3. With regard to acts of alteration: Acts of alterations can be
performed only with the concurrence of the co-owners. (Art.
491, NCC)
20. What is meant by acts of administration and acts of alteration?
Distinguish one from the other.
ANS: Acts of administration are those which refer to the enjoyment,
exploitation and alteration of the thing which do no affect its
substance or form, while acts of alteration are those by virtue of
 which a co-owner, in opposition to the expressed or tacit
agreement of all the co-owners, and in violation of their will,
changes the thing from the state in which the others believe it
should remain, or withdraws it from the use to which they believe it
is intended.
Consequently, acts of administration are transitory in character,
while acts of alteration are more permanent. The former do not affect
the substance or form of the thing, while the latter relate to the
substance or essence of the thing itself. And in relation to the right of a
co-owner, the former require the consent or resolution of the majority of
the co-owners, while the latter require the consent of all.
23. a. What is meant by condominium?
21. Who has the right of administration of the property owned in
common?
ANS: The management of the property owned in common lies, in the
first place, in the co-owners themselves. In this, management,
the majority of interest control, and their decisions are binding
upon the minority. However, the administration may be
delegated by the co-owners to one or more persons, whether
co-owners or not. In such case, the powers and duties of such
administrators shall be governed by the rules on agency.
Should there be no majority, or should the resolution of the
majority be seriously prejudicial to those interested in the
property owned in common, the court, at the instance of an
interested party, may order the appointment of an
administrator.
22. Is the lease of the entire community property an act of
administration or an act of ownership or alteration?
ANS: Lease of personal property is a mere act of administration and
therefore, requires the resolution of the majority of the co-
owners. However, lease of real property may be an act of
administration or an act of alteration depending upon the
circumstances of each particular case. Thus: (1) If the lease is
recorded in the Registry of Property, whatever may be the
duration thereof, it is an act of ownership and therefore,
requires the unanimous consent of all the co-owners, since
under the law, a special power of attorney is required. (see
Art. 1647, NCC) (2) If the lease is not recorded in the Registry
of Property, but the duration thereof is more than one year, it
is also an act of ownership and, therefore, requires the
unanimous consent of all the co-owners, since, again, under
the law, a special power of attorney is required. (see Art. 1878,
No. 8, NCC) (3) If the lease however, is not recorded in the
Registry of Property and the duration thereof is only one year
or less, it is an act of administration and therefore, merely
requires the resolution of the majority of the co-owners.
b. Who has title to the condominium project?
ANS:
a. According to the Condominium Act (R. A. No. 4726), a
condominium is an interest in real property consisting of a separate
interest in a unit in a residential, industrial or commercial building
and an undivided interest in common, directly or indirectly, in the
land on which it is located and in other common areas of the
building. A condominium may include, in addition, a separate
interest in other portions of such real property.
b. We must qualify our answer. When we speak of the condominium
project, we refer to the entire parcel of real property divided or to be
divided in condominiums, including all structures thereon. Thus, as
far as the unit of the project which is being used by a condominium
owner is concerned, such owner has title thereto, but as far as the
common areas, including the land are concerned, all of the
condominium owners have an undivided interest or title thereto.
However, title to such common areas, including the land, may be
held by a corporation (hereinafter known as condominium
corporation) in which the holder of separate interests shall
automatically be members or shareholders, to the exclusion of
others, in proportion to the appurtenant interest of their respective
units in the common areas.
 POSSESSION
Possession defined - it is the holding of a thing or the enjoyment of
a right.
It is really a fact since it exists but from the moment it exists, certain
consequences follows, thus making possession also a right.
“Right to possession” is a right or incident of ownership while “Right
of possession” is an independent right of itself, independent of ownership.
Q : What are the degrees of possession?
ANS : a. Mere holding or having without any right whatsoever like the
possession itself.
b. Possession with juridical title, but not that of an owner like that of
a lessee, pledgee or depositary. This is called juridical
possession.
c. Possession with just title, but not from the true owner. This is
called real possessory right. Example is when a person in
goodfaith buys an automobile from another who delivers the
same to the former and who merely pretended to be the owner.
d. Possession with a title of dominium, that is, with a just title from
the owner. This is really ownership or possession that springs
from ownership.
Requisites or Elements of possession:
1) There must be a holding or control of a thing or a right.
2) There must be a deliberate intention to possess (animus possidendi)
3) The possession must be by virtue of one’s own right.
Classes of possession:
1) In one’s own name or in that of another
2) In the concept of owner or in the concept of holder
3) In good faith or in bad faith
Ownership is different from possession.
A person may be declared the owner, but he may not be entitled to
possession. The possession in the concept of holder may in the hands of
another, such as a lessee or tenant.
Article 524 – Possession may be exercised in one’s own name or in that
of another.”
Who is in actual possession of a rented parcel of land?
The lessor, thru the tenant, is in actual possession of the land (in
the concept of the owner) that is, if the lessor is not the owner; if he is the
owner, he is called the possessor-owner. The tenant, by himself, is in
actual possession in the concept of holder.
Possession in another’s name -
a. voluntary – as when an agent possesses for the principal by virtue
of an agreement.
b. Necessary – as when a mother possesses for a child still in the
maternal womb.
c. Unauthorized – no authority given to possess a thing.
Suppose I visit a piece of land once in a while and I declare for taxation
purposes the fact that the land belongs to me, this does not necessarily
mean that I am in possession of the land, for those facts, by themselves,
do not show possession. Note however, that the holding of a possessory
information is considered evidence of possession. (Bishop of Nueva
Segovia vs. Mun. of Bantay, 24 Phils. 347)
Specific examples of possession in the concept of holder:
1) that of the tenant
2) that of the usufructuary
3) that of the depositary
4) that of the bailee in commodatum
Article 526. “He is deemed a possessor in good faith who is not aware that
there exists in his title or mode of acquisition any flow which
invalidates it.
He is deemed a possessor in bad faith who possesses in any case
contrary to the foregoing.
Mistake upon a doubtful or difficult question of law may be the basis
of good faith.”
Q : If a person is aware of the defects of his predecessor’s title,
should he be considered in good faith or bad faith?
ANS : Although Manresa says he should be considered in good faith
because after all the law speaks of his title, not that of the
predecessor, still the fact remains that he is not allowed to get from
a person who is not the owner. Therefore, we should consider him in
bad faith unless of course he has valid reasons to believe that his
own title is good.
Bad faith is personal. Just because a person is in bad faith (knows
of the defect or flaw of his title) does not necessarily mean that his
successors in interest are also in bad faith. As a matter of fact, a child or
heir may even be presumed in good faith, notwithstanding the father’s bad
faith.
Article 527. Good faith is always presumed, and upon him who alleges
bad faith on the part of a possessor rests the burden of
proof.
Article 528. Possession acquired in good faith does not lose this
character except in the case and from the moment facts
exist which shows that the possessor is not unaware that he
possesses the thing improperly or wrongfully.
Article 529. It is presumed that possession continues to be enjoyed in
the same character in which it was acquired, until the
contrary is proved.
Article 530. Only things and rights which are susceptible of being
appropriated may be the object of possession.”
The following cannot be appropriated and hence cannot be possessed:
a) property of public dominion
b) res communes
c) easements (if discontinuous or non-apparent)
d) things specifically prohibited by law
“Res Nullius” (abandoned or ownerless property) may be
possessed but cannot be acquired because prescription presupposes prior
ownership in another. However, said “res nullius” may be acquired by
occupation.
ACQUISITION OF POSSESSION
How is possession acquired-(Article 531 correlate with Article 555)
a) by material occupation of a thing or the exercise of a right
(quasi-possession). This includes constitutom possessorium or
traditio brevi manu.
b) by the subjection to our will (this includes tradition longa manu)-
by mere agreement; or by the delivery of keys-traditio simbolica)
c) by constructive possession or proper acts and legal formalities
Constitutom possessorium- exists when a person who
possessed property as an owner, now possesses it in some other capacity,
as that of a lease or depositary.
Traditio brevi manu- (the opposite of constitutom possessorium)
this exists when a person who possessed property not as an owner (like a
lessee), now possesses it as an owner.
Essential requirements for possession:
1) the corpus (or the thing physically detained)
2) the animus or intent to possess
Acquisition of possession from the viewpoint of who possesses:
1) personal
2) through authorized person (agent or legal representative)
3) thru unauthorized person (but if only subsequently ratified)
Essential requisites:
1) for personal acquisition
a) intent to possess
b) capacity to possess
c) object must be capable of being possessed
2) thru an authorized person
a) intent to possess for the principal
b) authority/capacity to possess for another
c) principal has intent and capacity to possess
3) thru an unauthorized person (as in negotiorium gestio)
a) intent to posses for another (the principal)
b) capacity of “principal“ to possess
c) ratification by “principal”
Article 533. The possession of hereditary property is deemed transmitted
to the heir without interruption and from the moment of the
death of the decedent, in case the inheritance is accepted.
One who validly renounces an inheritance is deemed never to
have possessed the same.
Time of acquisition of possession:
a) if the heir accepts-from the moment of death since there is no
interruption
b) if the heir refuses (or is incapacitated to inherit)-he is deemed
never to have possessed the same
Some effects of acquisition of possession thru succession:
 If the father or decedent was in bad faith, it does not necessarily
mean that the son was also in bad faith. The son is presumed to
be in good faith. However, since the father was in bad faith, the
consequences of the good faith of the son should be counted
only from the date of the decedent’s death.
 A minor may acquire the possession of a fountain pen donated
to him, but in case of a court action, his parent or legal
representative must intervene. (Article 535)
 A minor and other incapacitated persons may acquire property
or rights by prescription, either personally or thru their parents,
guardians or legal representatives. (Article 1107)
Modes through which possession cannot be acquired:
1) thru force or intimidation
2) thru mere tolerance (permission)
3) thru clandestine, secret possession
The “intruder” does not acquire any right to possession (no legal
possession)
The legal possessor, even if physically ousted, is still the possessor and
therefore:
1) still entitled to the benefit of prescription
2) still entitled to the fruits
3) still entitled as possessor for all purposes favorable to his
possession
General Rule regarding possession as a Fact:
Possession as a fact cannot be recognized at the same time in two
different personalities.
Exceptions:
  co-possessors since here, there is no conflict of interest, both of
them acting as co-owners
 possession in different concepts or different degrees, example,
both owner and tenant are the possessors as a fact at the same
time; the first, in the concept of an owner; the second, in the
concept of holder (Article 538)
Rules/Criteria to be used in case of conflict or dispute regarding
possession:
1) present possessor shall be preferred
2) if both are present, the longer in possession
3) if both began to possess at the same time, the one who presents a
title
4) if both present a title, the Court will determine. In the meantime, the
thing shall be judicially deposited.
Preferences of ownership (not possession) in case of double sale
(Article 1544) and in double donation (Article 744):
a) movable property-preference in ownership is given to the
person who first possessed it in good faith
b) immovable property-preference in ownership is given:
1) to the first who registered his right in good faith in the
Registry of Property
2) if there was no registration, to the person who first
possessed in good faith
3) if there was no possession, to the person who presents
the oldest title, provided that the title had been acquired
in good faith
In case of conflict between a sale and a mortgage-it is the
unrecorded sale that is preferred for the reason that if the original owner
had parted with his ownership of the thing sold, he no longer had the
ownership and free disposal of that thing so as to be able to mortgage it.
(Maria Bautista vda. de Reyes vs. de Leon L-22331, June 6, 1967)
Co-possessors of a parcel of land that is mortgaged must be made
parties to foreclosure proceedings, otherwise they cannot be deprived of
possession of that portion of land actually possessed by them. (Concha vs.
Hen. Divinagracia, L-27042, September 30, 1981)
EFFECTS OF POSSESSION
Article 539. Every possessor has a right to be respected in his
possession; and should he be disturbed there he shall be
protected in or restored to said possession by the means
established by the laws and the Rules of Court.
A possessor deprived of his possession through forcible entry may
within ten days from the filing of the complaint present a motion to secure
from the competent court, in the action for forcible entry, a writ of
preliminary mandatory injunction to restore him in his possession. The
court shall decide the motion within 30 days from the filing thereof.”
Article 540. Only the possession acquired and enjoyed in the concept of
owner can serve as title for acquiring dominion.”
The following cannot acquire ownership by prescription as long as
they remain such-mere possessors in the concept of holder: lessees;
trustees; antichretic creditors; agents; attorneys regarding their client’s
properties; depositaries; co-owners
Although payment of land taxes is not evidence of ownership and
although a mere tax declaration or a tax assessment does not by itself give
the title, and is of little value in proving one’s ownership, still the payment of
the land tax is one of the most persuasive and positive indicia, which
shows the will of a person to possess in concepto de dueno or with claim of
ownership. And therefore, prescription may eventually be had, provided
that the other requisites are present.
Article 541. A possessor in the concept of owner has in his favor the legal
presumption that he possesses with a just title and he cannot
be obliged to show or prove it.”
 Difference with respect to “just title” in possession and “just title” on
prescription:
1) in possession, “just title” here is presumed, while in prescription,
“just title” here must be proved;
2) in possession, “just title” here means “titulo verdadero y valido” (true
and valid title sufficient to transfer ownership) while in prescription,
“just title” means “titulo colorado” (merely colorable) title although
there was a mode of transferring ownership, the grantor was not the
owner
The kinds of titles:
1) true and valid title-here there was a mode of transferring ownership
and the grantor was the owner
2) colorable title-that title where, although there was a mode of
transferring ownership, still something is wrong, because the grantor
is not the owner
3) putative title-that title where although a person believes himself to
be the owner, he nonetheless is not, because there was no mode of
acquiring ownership
Article 542. The possession of real property presumes that of the
movables therein, so long as it is not shown or proved that
they should be excluded.
Article 544. A possessor in good faith is entitled to the fruits received
before the possession is legally interrupted.
Natural and industrial fruits are considered received from the time they
are gathered or secured.
Civil fruits are deemed to accrue daily and belong to the ges possessor
in good faith in that proportion.”
Article 545. If at the time the good faith ceases. There should be any
natural or industrial fruits, the possessor shall have a right to
a part of the expenses of cultivation, and to a part of the net
harvest, both in proportion to the time of possession.
The charges shall be divided on the same basis by the two possessors.
The owner of the thing may, should he so desire, give the possessor in
good faith the right to finish the cultivation and gathering of the growing
fruits, as an indemnity for his part of the expenses of cultivation and the net
proceeds; the possessor in good faith who for any reason whatever should
refuse to accept this concession, shall lose the right to be indemnified in
any other manner.”
Rights of a possessor (in the concept of owner) as to the
necessary expenses:
a) if in good faith-entitled to:
1. refund
2. retain the premises till paid
b) if in bad faith-entitled only to a refund (no right of retention
as penalty) (Article 546)
Rights of possessor (in the concept of owner) as to the useful
expenses:
a) if in good faith-(Article 546)
1. right to reimbursement (of either the amount spent or
increase in value- “plus value”-at owner’s option
2. right of retention till paid
3. right of removal (provided no substantial injury is caused
to the principal, reducing its value-unless the owner
exercises the option in paragraph 1 of Article 547
b) if in bad faith-the possessor in bad faith is not entitled to
any right regarding the useful expenses
Article 547. If the useful improvements can be removed without damage to
the principal thing, the possessor in good faith may remove
them, unless the person who recovers the possession
 exercises the option under paragraph 2 of Article 546.” (which
is the option of refunding the amount of the expenses or of
paying the increase in value which the thing may have
acquired by reason thereof.)
Rights of a possessor (in the concept of owner) with reference to
luxurious or ornamental expenses:
a) if in good faith-
In general, no right of refund or retention but can remove if no
substantial injury is caused. However, owner has the option to allow:
1) possessor to remove
2) or retain for himself (the owner) the ornament by refunding
the amount spent (Article 548)
b) if in bad faith-
In general, no right of refund or retention but can remove if no
substantial injury is caused. However the owner has the option to
allow:
1) possessor to remove
2) or retain for himself (the owner) the ornament by refunding
the value it has at the time the owner enters into possession
(Article 549)
Rights of the possessor (in concept of owner) regarding fruits:
a). If in Good Faith :
1) Gathered or severed or harvested fruits are his own
2) Pending or ungathered fruits – pro-rating between possessor
and owner of expenses, net harvest and charges (Art. 545)
b). If in Bad Faith:
1) Gathered fruits – must return value of fruits already received
as well as value of fruits which the owner or legitimate
possessor could have received with due care or diligence
minus necessary expenses for cultivation, gathering and
harvesting to prevent the owner from being unjustly
enriched.
2) Pending or ungathered fruits – no rights at all, not even to
expenses for cultivation because by accession, all should
belong to the owner, without indemnity. (Art. 449)
Article 550 – The cost of litigation over the property shall be borne by
every possessor.
Article 551 – Improvements caused by nature or time shall always
inure to the benefit of the person who has succeeded in
recovering possession.
Article 552 – A possessor in good faith shall not be liable for the
deterioration or loss of the thing possessed, except in
cases in which it is proved that he has acted with
fraudulent intent or negligence, after the judicial
summons.
A possessor in bad faith shall be liable for deterioration
or loss in every case, even if caused by a fortuitous
event.
Article 553 – One who recovers possession shall not be obliged to
pay for improvements which have ceased to exist at the
time he takes possession of the thing.
Article 554 – A present possessor who shows his possession at some
previous time, is presumed to have held possession at
also during the intermediate period, in the absence of
proof to the contrary.
Article 555 – A possessor may loss his possession:
a) By the abandonment of the thing;
b) By an assignment made to another either by onerous
or gratuitous title;
c) By the destruction or total loss of the thing, or
because it goes out of commerce;
d) By the possession of another, subject to the
provisions of Art 537, if the new possession has
 lasted longer than one year. But the real right of
possession is not lost till after the lapse of 10years.
Article 556 – The possession of movables is not deemed lost so long
as they remain under the control of the possessor, even
though for the time being he may not know their
whereabouts.
Article 557 – The possession of immovables and of real rights is not
deemed lost, or transferred for purposes of prescription
to the prejudice of third persons, except in accordance
with the provisions of the Mortgage Law and the Land
Registration Laws.
Article 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 of 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.
Article 560 – Wild animals are possessed only while they are under
one’s control; domesticated or tamed animals are
considered domestic or tame, if they retain the habit of
returning to the premises of the possessor.
Article 561 – One who recovers, according to law, possession unjustly
lost, shall be deemed for all purposes which may
redound to his benefit, to have enjoyed it without
interruption.
USUFRUCT
Article 562 – Usufruct gives a right to enjoy the property of another
with the obligation pf preserving its form and substance,
unless the title constituting it or the law otherwise
provides.
Ownership really consist of 3 fundamental rights
1) Jus disponendi (the right to dispose)
2) Jus utendi (right to use)
3) Jus fruendi (right to the fruits)
The combination of the latter two is called “usufruct” (from the term
“usufructus”. The remaining right (jus disponendi) is really the essence of
what is termed “naked ownership”
Rights of action available to usufructuary (the person entitled to the
usufruct):
1) Action to protect the usufruct itself
2) Action to protect the exercise of the usufruct
Usufruct distinguished from easements (servitudes):
1) In usufruct, the object may be real or personal property while in
easement, only real property;
2) In usufruct, what can be enjoyed are all uses and fruits of the
property while easement is limited to a particular use;
3) A usufruct cannot be constituted on an easement, but it may be
constituted on the land burdened by an easement while an
easement may be constituted in favor of, or burdening, a piece
of land held in usufruct;
4) Usually extinguished by death of usufructuary while easement is
not extinguished by the death of the owner of the dominant
estate.
Similarities between the two:
a) Both are real rights, whether registered or not;
b) Both right may be registered;
c) Both may ordinarily be alienated or transmitted in accordance
with the formalities set by law.
Article 563 – Usufruct is constituted by law, by the will of private persons
 expressed in acts inter vivos, or in a last will and testament
and by prescription.
A usufruct over real property being a real right, must be duly
registered in order to bind innocent third parties.
Classification of usufruct – according to quantity or extent of fruits:
a) As to fruits – total or partial
b) As to object – universal or singular or particular
Classification of usufruct – as to the number of persons enjoying the
right:
1) Simple – if only one usufructuary enjoys
2) Multiple – if several usufructuaries enjoy
1) Simultaneous – at the same time
2) Successive – one after the other
Classification of usufruct – as to quality or kind of objects:
i. Usufruct over rights
ii. Usufruct over things
1) Normal usufruct – this involves non-consumable things where
the form and substance are preserved
2) Abnormal usufruct – usufruct over consumable property like
vinegar or money (this is also called quasi-usufruct)
Classification as to terms or conditions:
1) Pure usufruct – no term or condition
2) With a term or period
Ex die – from a certain day
In diem – up to a certain day
3) With a condition (conditional)
Rules governing a usufruct:
a) First, the agreement of the parties or the title giving the usufruct
b) Second, in case of deficiency, apply the Civil Code
In case of conflict – between the rights granted as usufructuary by
virtue of a will, and codal provisions, the former, unless repugnant to the
mandatory provisions of the Civil Code, should prevail.
RIGHTS OF THE USUFRUCTUARY
Article 566 – “The usufructuary shall be entitled to all the natural,
industrial and civil fruits of the property in usufruct. With
respect to hidden treasures which may be found on the land
or tenement in any name, that is, with respect to hidden
treasure which may be found on land or tenement, shall be
considered a stranger.”
Article 567 – Natural or industrial fruits growing at the time the usufruct
begins, belong to the usufructuary. Those growing at the
time the usufruct terminates belong to the owner.
This article refers to pending natural or industrial fruits (as there can
be no pending civil fruits, for they accrue daily)
Rules as to fruits pending at the beginning of usufruct:
1. Belong to the usufructuary;
2. No necessity of refunding owner for expenses incurred (for the
owner gave the usufruct evidently without any thought to being
reimbursed for the pending fruits);
3. But without prejudice to the right of third persons (Thus, if the fruits
had been planted by a possessor in good faith, the pending crops
expenses and charges shall be pro-rated between said possessor
and the usufructuary)
Rules as to fruits pending at the termination of usufruct:
1. Belong to the owner;
2. But the owner must reimburse the usufructuary for ordinary
cultivation expenses and for the seeds and similar expenses, from
the proceeds of the fruit;
3. Also, rights of innocent third parties should not be prejudiced.
Article 568 – If the usufructuary has leased the lands or tenement given in
usufruct, and the usufruct should expire before the
termination of the lease, he or his heirs and successors shall
receive only the proportionate share of the rent that must be
paid by the lessees.
Article 569 – Civil fruits are deemed to accrue daily and belong to the
usufructuary in proportion to the time the usufruct may last.
Article 571 – The usufructuary shall have the right to enjoy any increase
which the thing in usufruct may acquire through accession,
the servitudes established in its favor and in general, all the
benefit inherent therein.
Article 572 – The usufructuary may personally enjoy the thing in usufruct,
lease it to another, or alienate his right of usufruct, even by a
gratuitous title; but all the contracts he may enter into as
such usufructuary shall terminate upon the expiration of the
usufruct, saving leases of rural lands, which shall be
considered as subsisting during the agricultural year.
Article 573 – Whenever the usufruct includes things which, without being
consumed, gradually deteriorate through wear and tear, the
usufructuary shall have the right to make use thereof in
accordance with the purpose for which they are intended,
and shall not be obliged to return them at the termination of
the usufruct except in their condition at that time; but he shall
be obliged to indemnify the owner for any deterioration they
may have suffered by reason of his fraud or negligence.
Article 574 – Whenever the usufruct includes things which cannot be used
without being consumed, the usufructuary shall have the
right to make use of them under the obligation of paying their
appraised value at the termination of the usufruct, if they
were appraised when delivered. In case they were not
appraised, he shall have the right to return the same quantity
and quality, or pay their current price at the time the usufruct
ceases. (This is a quasi-usufruct)
Article 575 – The usufructuary of fruit-hearing trees and shrubs may make
use of the dead trunks, and even of those cut-off or uprooted
by accident, under the obligation to replace them with new
plants.
Article 576 – If in consequence of a calamity or extraordinary event, the
trees or shrubs shall have disappeared in such a
considerable number that it would not be possible or it would
be too burdensome to replace them, the usufructuary may
leave the dead, fallen or uprooted trunks at the disposal of
the owner, and demand that the latter remove them and
clear the land.
The obligations of a usufructuary in the enjoyment of a special
usufruct over a woodland:
1. Must bear in mind that he is not the owner and therefore, in the
exercise of the diligence in caring for the property, he must see to it that
the woodland is preserved, either by development or by replanting, thus
he cannot consume all, otherwise nothing would be left for the owner;
2. In the cutting or felling of trees, he must –
a. Follow the owner’s habit or practices
b. In default thereof, follow the customs of the place
c. If there be no customs, the only time the usufructuary can cut
down trees will be for repair or improvement, but here the owner
must first be informed.
3. Cannot alienate the trees unless he is permitted by the owner or unless
he needs the money to do some repairs. (Article 577, NCC)
In a usufruct of an action to recover through the courts, the usufructuary
can demand from the owner:
1) The authority to bring the action (usually a special power of
attorney); and
2) Proof needed for a recovery.
The institution of the action may in the usufructary’s name, for being the
owner of the usufruct, he is properly deemed a proper party-in-interest. If
the purpose is the recovery of the property or right, he is still required to
obtain the naked owner’s authority. If the purpose is to object to or prevent
disturbance over the property, no special authority from the naked owner is
needed. (Article 578, NCC)
Article 580 – The usufructuary may set off the improvements he may have
made on the property against any damage to the same.
Article 581 – The owner of the property the usufruct of which is held by
another, may alienate it, but he cannot alter its form or
substance, or do anything thereon which may be prejudicial
to the usufructuary.
A co-owner may give the usufruct of his share to another even
without the consent of the others, unless personal considerations are
present. The usufructuray in such a case takes the owner’s place as to
administration (management) and collection of fruits or interest. (Article
582, NCC)
If there be partition, the usufructuary continues to have the usufruct
of the part allotted to the co-owner concerned and if the owners make a
partition without the intervention of the usufructuary, this is all right and the
partition binds the usufructuary. Necessarily however, the naked owner
must also respect the usufruct. (Article 582, NCC).
OBLIGATIONS OF THE USUFRUCTUARY
The usufructuary has obligations before, during and after the usufruct
The usufructuary, before entering upon the enjoyment of the property
is obliged:
1) To make an inventory of all the property, which shall contain an
appraisal of the movables and a description of the condition of the
immovables;
2) To give security binding himself to fulfill the obligations imposed
upon him. (Article 583, NCC)
Effects of failure to give security (unless exempted) – (Article 586,
NCC)
a) In the rights of the naked owner:
1. He may deliver the property to the usufructuary but even if
delivery is made, the naked owner may still later on demand the
needed security;
2. Or the naked owner may choose retention of the property as
administrator;
3. Or the naked owner may demand receivership or administration
of the real property, sale of movable, conversion or deposit of
credit retirements or investments of cash or profits.
b) In the rights of the usufructuary:
1. The usufructuary cannot possess the property till he gives the
security
2. He cannot administer the property, hence, he cannot execute a
lease thereon
3. He cannot collect credits that have matured, nor invest them
unless the Court or the naked owner consents
4. But he can alienate his right to the usufruct since failure to give
the security did not extinguish the usufruct.
The “Caucion Juratoria”- is the promise under oath made by the
usufructuary to take care of the property and return the same at the end of
the usufruct. It take s the place of the bond and is based on necessity and
humanity as when a poor family acquires by inheritance, of a badly needed
house.
After the security is given by the usufructuary, he shall have the
right to all the proceeds and benefits from the day on which he should have
commenced to receive them – (retroactive effect) – (Article 598, NCC)
He (the usufructuary) shall take good care of the things given in
usufruct as a good father of a family. (Article 589, NCC)
 3. make reimbursements to the usufructuary in proper cases.
A usufruct is extinguished: (Article 603, NCC)

a. by the death of the usufructuary, unless a contrary intention EASEMENTS OR SERVITUDES

appears;
b. by the expiration of the period for which it was constituted or by Easement or Servitude –
the fulfillment of any resolutory condition provived in the title
creating the usufruct; Is an encumbrance imposed upon an immovable for the benefit of
c. by the merger of the usufruct and ownership in the same person; a community or one or more persons (personal easements) or for the
d. by renunciation of the usufruct; benefit of another person belonging to a different owner (real or predial
e. by the total loss of the thing in usufruct; easement).
f. by the termination of the right of the person constituting the
usufruct; Lease distinguished from Easement:
g. by prescription
1. Lease is a real right only when it is registered or when the (lease
Other causes are: of the real property) exceeds one year; while Easement is always
a real right;
a. Annulment; 2. In Lease, there is rightful and limited use and possession without
b. Rescission; ownership; while in Easement, there is rightful limited use but
c. mutual withdrawal; without ownership or possession;
d. legal causes ending legal usurfruct 3. Lease may involved real or personal property; while easement
refer only to immovable.
Rights and Obligations at the end of the usufruct: (Article 612, NCC)
Dominant Estate – the immovable in favor of which the easement is
A. on the part of the usufructuary: established and that which is subject thereto is the servient estate.

1. must return he property to the naked owner;
2. the right to retain the property till he is reimbursed for the taxes
on the capital and indispensble extraordinary repairs or
expenses;
3. to remove removable improvements or set them off against
Damages he has caused (Article 580, NCC).
B. On the part of the naked owner:
1. must cancel the security or mortgage provided the usufructuary
has complied with all his obligations;
2. must in case of rural leases, respect leases made by the
usufructuary till the end of the agricultural year;
Personal Easement distinguished from Usufruct:
1. A personal easement cannot be alienated while usufruct can be
alienated;
2. In personal easement, the use is specifically designated while in
usufruct, the use has a broader scope and in general
comprehends all the possible uses of the thing.
Characteristics of Easement:
1. It is a real right, therefore an action IN REM is possible against the
possessor of the servient estate;
2. Impossible only in another’s property;
 3. It is a real right may be alienated although the naked ownership is
maintained;
4. It is a limitation or encumbrance on the servient estate for another’s
benefit;
5. There is inseparability from the estate to which it belongs;
6. It is indivisible even if the tenement is divided;
7. It is intransmissible unless the tenement affected be also
transmitted or alienated;
8. It is perpetual as long as the dominant and/or the servient estate
exists unless sooner extinguished by causes enumerated by law.
There is no easement on personal property only immovables may
be burdened with easements.
Classification of Easements:
A. According to party given the benefit-
1. Real or predial – for the benefit of another immovable
belonging to a different owner.
2. Personal – for the benefit of one or more persons or of a
community. Example: easement or right of way for the
passage of the community.
B. According to the manner that they are exercised:
1. Continuous – their use is incessant without the intervention
of any act of man; example – easement of drainage.
2. Discontinuous – they are used at intervals and depend upon
the act of man. Example: Easement of a right of way.
Easement of Light and View is continuous.
C. According to whether or not their existence is indicated:
1. Apparent – those made known and continually kept in
enjoyment of the same. Example – Right of way when
there is an alley or path.
2. Non-apparent – they show no external indication of their
existence. Example: right of way when there is no visible
path or alley.
D. According to the purpose of the easement or the nature of
the limitation:
1. Positive Easement – the owner of the servient estate is
obliged to:
a.) Allow something to be done on his property; or
b.) Do it himself.
2. Negative Easement – the owner of the servient estate is
prohibited to do something which he could lawfully do were
it not for the existence of the easement. Example: Easement
of light and view when the window or opening is on one’s
wall or estate.
E. According to the source or origin:
1. Voluntary
2. Mixed
3. Legal – example: waters: right of way, party wall
How easements are acquired:
a.) If continuous or apparent
1. by Title
2. by Prescription (10 years)
b.) If discontinuous and apparent (only by Title)
c.) If continuous and non-apparent (only by Title)
d.) If discontinuous and non-apparent (only by Title)
Q : May the easement of right of way be acquired by prescription?
ANS: No, because it is discontinuous or intermittent. Since the dominant
owner cannot be continually crossing the servient estate, but can do
so only at intervals, the easement is of a discontinuous nature.
The Rights of the Dominant Estate
a. To exercise the easement and all the necessary rights for its use
including accessory easement.
b. To make on the servient estate all works necessary for the use
and preservation of the servitude, but-
1. this must be at his own expense
2. he must notify the servient owner
3. select convenient time and manner
4. he must not alter the easement nor render it more
burdensome
c.) To ask for a mandatory injunction to prevent impairment or
obstruction in the exercise of the easement as when the owner of
the servient estaste obstructs the right of way by building a wall or
fence.
d.) To renounce totally the easement if he desires exemption from
contribution to expenses
Obligation of the Dominant Estate
a.) He cannot alter the easement
b.) He cannot make it more burdensome
1.) thus, he cannot use the easement except for movable
originally contemplated;
2.) In the easement of right of way, he cannot increase
c.) If there be several dominant estate, each must contribute to
necessary repairs and expenses in proportion to the benefits
received by each estate and not in proportion to the value of
each estate.
Rights of the Servient Estate:
a. To retain ownership and possession of the portion of his land
affected by the easement even if indemnity for the right is given
unless the contrary has been stipulated;
b. To make use of the easement, unless deprived by stipulation
provided that the exercise of the easement is he not adversely
affected and provided further that he contributes to the expenses
in proportion to benefits received, unless there is a contrary
stipulation;
c. To change the location of a very inconvenient substitute is made
without injury to the dominant estate;
Obligations of the Servient Estate:
a.) He cannot impair the use of the easement;
b.) He must contribute to the expenses in case he uses the
easement, unless there is a contrary stipulation;
c.) In case of impairment, to restore conditions to the status quo at
his expense plus damages;
d.) To pay for the expenses incurred for the change of location or
form of the easement.
Easements are extinguished: (Article 631)
1.) By merger of the same person of the ownership of the dominant
and servient estates;
2.) By non-use for ten-years, with respect to discontinuous
easements, this period shall be computed from the day on
which they ceased to be used, with respect to continuous
easements from the day on which an act contrary to the same
took place;
3.) When either or both of the estates fall into such condition that
the easement cannot be used, but it shall revive if the
subsequent easement condition of the estates or either of them
should again permit its use, unless when the use becomes
possible, sufficient time for prescription has elapsed;
 4.) By the expiration of the term or fulfillment of the condition, if the
easement is temporarily or conditional;
5.) By the renunciation of the owner of the dominant estate;
6.) By the redemption agreed upon the owners of dominant and
servient estates.
Legal Easements – they are easements imposed by the law, and which
have for their object – either: for public use or in the interest of private
persons.
How Legal Easements for private interest are governed:
a.) Agreement of interested parties provided not prohibited by law nor
prejudicial to third person;
b.) In default of A, general or local laws and ordinances for the
general welfare;
c.) In default of B, the Civil Code
Causes for extinguishment of the easement of right of way:
a.) Opening of a new road;
b.) Joining the dominant estate to another
For Easement of Right of Way for the passage of livestock is:
a.) animal path – 75 meters (width maximum)
b.) animal trail – 37 meters and 50 centimeters
c.) cattle – 10 meters
The easement of a party wall is a compulsory kind of co-ownership
where the shares of each owner cannot be separated physically.
The existence of an easement of an easement of a party wall is
presumed, unless there is title, or exterior sign, or proof of the contrary.
(Article 659)
Article 668 – The period of prescription for the acquisition of an easement
of light and view shall be counted --
a.) from the time of the opening of the window, if it is through a
party wall
b.) from the time of the formal prohibition upon the proprietor of
the adjoining land or tenement, if the window is through a wall
on the dominant estate.
When easement of light and view positive and negative:
a.) Positive - if the window is thru a party wall. Therefore, the
period of prescription commences from the time the
window is opened;
b.) Negative - If the window is thru one’s own wall, that is, thru a
wall of the dominant estate. Therefore, the time for
the period of prescription should begin from the time
of notarial prohibition upon the adjoining owner.
Rules with respect to the planting of trees – (Article 679, NCC)
Regarding distances, follow ordinances (if there be any), then
customs. If either ordinances, nor customs are present, the following
distances must be observed:
a.) Tall trees – two (2) meters from the boundary line to center of
the tree.
b.) Small trees or shrubs – 50 centimeters from boundary line to the
center of the tree or shrub
The remedy for violation: demand uprooting of the tree or shrub.
Rules regarding intrusions or extensions of branches and roots
(Article 680)
a.) Branches – the adjacent owner has the right to demand that
they be cut off (insofar as they spread over his
property)
 b.) Roots – he may cut them off himself (because by accession or
incorporation he has acquired ownership over them)
Prescription:
a. of the right to demand the cutting of the branches – this does not
prescribe if tolerated by invaded owner; if demand is made,
prescription runs from the date of said demand;
b. of the right to cut off the roots – this is imprescriptible unless a
notarial prohibition is made
The owner of the trees even if the branches and roots have invaded
the adjacent land can cut down the tree himself, for he owns the tree.
Article 681 – Fruits naturally falling upon adjacent land belong to the
owner of said land
Rules as to fruits:
a. If the fruits still hang on to the trees, they are still owned by the
tree owner;
b. It is only after they have naturally fallen (not taken by poles or
shaken that they belong to the owner of the invaded land.
Reason for the Rule – It is based not on accession for they were not
grown or produced by the land nor added to it (naturally or artificially)
nor on occupation (for they are not res nullius); but to avoid disputes
and arguments between the neighbors. The mode of acquisition may
be said to be the law.
Q : Who is servient in an easement against nuisance?
ANS. : The proprietor or possessor of the building or piece of land, who
commits the nuisance thru noise, offensive odor, etc., is servient. In
another sense, the building or the land itself is the servient estate,
since the easement is inherent in every building or land.
Who is dominant in an easement against nuisance?
The general public, or anybody injured by the nuisance.
What are the rights of the dominant estate?
1. if it is a public nuisance, the remedies are:
a) a prosecution under the Revised Penal Code or any local
ordinance; or
b) a civil action; or
c) abatement, without prejudicial proceedings
2. if the nuisance is a private nuisance, the remedies are:
a) a civil action; or
b) abatement, without judicial proceedings
NUISANCE
Nuisance - is an act, omission, establishment, business, condition of
property, or anything else which:
a) injures or endangers the health or safety of others; or
b) annoys or offends the senses; or
c) shocks, defies or disregards decency or morality; or
d) obstructs or interferes with the free passage of any public highway
or street, or any body of water; or
e) hinders or impairs the use of property
The word “nuisance” is derived from Latin nocumentum or the French nuire
(to harm or hurt or injure).
Nuisance as distinguished from negligence and from trespass:
a) from negligence - negligence is penalized because of lack of proper
care; but a nuisance is wrong, not because of the presence or
absence of care, but because of the injury caused.
 b) from trespass - in trespass, there is entry into another’s property;
this is not necessarily so in nuisance. In trespass, the injury is direct The remedies against a public nuisance are:
and immediate; in nuisance, it is only consequential.
1) prosecution under the Penal Code or any local ordinance; or
Classification of nuisances: 2) a civil action; or
3) abatement without judicial proceedings
a.) old classification -
Article 701 - If a civil action is brought by reason of the maintenance of a
1) nuisance per se - always a nuisance. public nuisance, such action shall be commenced by the city
Ex: house of prostitution or municipal mayor.
2) nuisance per accidens - a nuisance only because of the location
or other circumstances. Article 702 - The district health officer shall determine whether or not
Ex: noisy factory in a residential district abatement, without judicial proceedings, is the best remedy
against a public nuisance.
b) new classification -
In the City of Manila, it is the City Engineer who is the official
1) according to relief whether given or not
concerned regarding illegal construction.
a. actionable
b. non-actionable
Article 704 - Any private person may abate a public nuisance which is
2) according to manner of relief
specially injurious to him by removing, or if necessary, by
destroying the thing which constitutes the same, without
a. those abatable by criminal and civil actions
committing a breach of the peace or doing unnecessary
b. those abatable only by civil actions
injury. But it is necessary:
c. those abatable judicially
a) that demand be first made upon the owner or possessor of
d. those abatable extrajudicially
the property to abate the nuisance;
b) that such demand has been rejected;
3) according to the Civil Code
c) that the abatement be approved by the district health officer
and executed with the assistance of the local police; and
a. public - affects a community or neighborhood or any
d) that the value of the destruction does not exceed three
considerable number of persons
thousand pesos.”
b. private - that which is not public
Article 707 - A private person or a public official extrajudicially abating a
Article 698 - Lapse of time cannot legalize any nuisance, whether
nuisance shall be liable for damages:
public or private.
a) if he causes unnecessary injury; or
b) if an alleged nuisance is later declared by the courts to be
Article 1143 - The action to abate a public or private nuisance is not
not a real nuisance.”
extinguished by prescription.

The above articles 698 and 1143 do not apply to easements which
are extinguished by prescription. PARTNERSHIP

Article 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 the contract:
a. It is consensual, because it is perfected by mere consent. It
is also bilateral or multilateral, because it is entered into
between two or more persons; nominate, because it is
designated by a specific name; principal, because its
existence does not depend on the life of another contract;
onerous, because certain contributions have to be made;
and preparatory, in the sense that after it has been entered
into, other contracts essential in the carrying of its purposes
can be entered into;
b. There must be a contribution of money, property or industry
to a common fund;
c. The object must be a lawful one;
d. There must be an intention of dividing the profit among the
partners since the firm is for the common benefit or interest
of its partners.
e. There must be the “affectio societatis” – the desire to
formulate an active union with people among whom there
exists mutual confidence and trust (delectus personarum).
f. A new personality – that of the firm – must arise, distinct
from the separate personality of each of the members.
Capacity to become partners:
a) In general, a person capacitated to enter into contractual
relation may become a partner;
b) A minor cannot become a partner unless his parents or
guardian consents. Without such consent, the partnership
contract is voidable, unless other partners are in the same
situation in which case the contract is unenforceable.
c) A married woman cannot contribute conjugal funds as her
contribution to the partnership, unless she is permitted to do
so by her husband or unless she is the administrator of the
conjugal partnership, in which latter case, the court must
give its consent/authority;
d) A partnership being a juridical person by itself can form
another partnership, either with private individuals or with
other partnerships, there being no prohibition on the matter;
e) A Corporation cannot become a partner on grounds of public
policy; otherwise, people other than its officers may be able
to bind it. However, a corporation can enter into a joint
venture with another where the nature of that venture is in
line with the business authorized in its charter.
Article 1768 -The partnership has a juridical personality separate and
distinct from that of each of the partners, even in case of
failure to comply with the requirements of Article 1772, first
paragraph.”
Q: Under Article 1772, “every contract of partnership having a capital
of P3,000.00 or more in money or property, shall appear in a public
instrument, which must be recorded in the office of the SEC.”
Suppose this requirement has not been complied with, is the
partnership still a juridical person, assuming all other requirements
are present?
ANS : Yes, in view of the express provision of Art. 1768. Par. 1 of 1772, is
not intended as a prerequisite for its acquisition of juridical
personality by the partnership, but merely as a condition for the
issuance of license to engage in business or trade.
Consequences of the partnership being a juridical entity:
1) Its juridical personality is separate and distinct from that of
each of the partners.
2) The partnership can, in general:
a) acquire and possess property of all kinds;
 b) incur obligations;
c) bring civil or criminal actions;
d) can be adjudged insolvent even if the individual members
be each financially solvent.
Unless he is personally sued, a partner has no right to make a
separate appearance in court, if the partnership being sued is already
represented.
Article 1769 - In determining whether a partnership exists, these rules
shall apply:
a) Except as provided by Article 1825, persons who are not
partners as to each other are not partners as to third persons;
b) Co-ownership or co-possession does not itself establish a
partnership, whether such co-owners or co-possessors do or do
not share any profits made by the use of the property;
c) The sharing of gross returns does not of itself establish a
partnership, whether or not the persons sharing them have a
joint common right or interest in any property from which the
returns are derived;
d) The receipt by a person of a share of the profits of a business is
prima facie evidence that he is a partner in the business, but no
such inference shall be drawn if such profit were received in
payment:
a. as a debt by installments or otherwise;
b. as wage of an employee or rent to a landlord;
c. an an annuity to a widow or representative of a deceased
partner;
d. as interest on a loan, though its amount of payment vary
with the profits of the business;
e. as the consideration for the sale of a goodwill of a
business or other property by installment or otherwise.”
Article 1770 - A partnership must have a lawful object or purpose, and
must be established for the common benefit or interest of
the partners. When an unlawful partnership is dissolved by
a judicial decree, the profits shall be confiscated in favor of
the State, without prejudice to the provisions of the Penal
Code governing the confiscation of the instruments and
effects of a crime.
If a partnership has several purposes, one of which is
unlawful; the partnership can still validly exists so long as
the illegal purpose can be separated from the legal
purpose.
Is a judicial decree needed to dissolve an unlawful partnership?
ANS: No, for the contract is void from the very beginning, and therefore,
never existed from the viewpoint of the law. However, there would
be nothing wrong in having the court dissolve the partnership. This
will be good and convenient for everybody; moreover, there maybe
a question as to whether or not the partnership is indeed unlawful.
This is particularly true when the object was lawful at the beginning
but has later on become unlawful.
The consequences of unlawful partnership:
a) If the firm is also guilty of a crime, the Revised Penal Code governs
both the criminal liability and the forfeiture of the proceeds of the
crime and the instruments or tools with which it was committed.
Such proceeds and the instruments or tools shall be confiscated
and forfeited in favor of the government, unless they be the property
of a third person not liable for the offense, but those articles which
are not subject of lawful commerce shall be destroyed. (Art. 45,
RPC)
b) The partners forfeit the proceeds or profits, but not their
contributions, provided no criminal prosecution has been instituted.
If the contributions have already been made, they can be returned;
if the contributions have not been made, the partners cannot be
made to make the contribution;
c) An unlawful partnership has no legal personality.
Article 1771 - A partnership maybe constituted in any form, except,
where immovable property or real rights are contributed
 thereto, in which case a public instrument shall be
necessary.
For the validity of the contract among the partners as well as for
enforceability, no form is required, as a general rule, regardless of the value
of the contributions. Therefore, the contract may even be oral.
Exception: Whenever real properties or real rights in real properties
are contributed – regardless of the value – a public
instrument is needed. The contract itself must be in the
public instrument; moreover, there must be an inventory of
the immovables.
This inventory must be signed by the parties and attached to the
public instrument. (Art. 1773, NCC)
The inventory is important to show how much is due from each
partner to complete his share in the common fund and how much is due to
each of them in the event of liquidation. Without such inventory, the contract
is void.
For effectivity of the partnership contract insofar as innocent third
persons are concerned, the same must be registered if real properties are
involved.
Article 1772 - Every contract of partnership having a capital of 3,000
pesos or more, money or property, shall appear in a public
instrument, which must be recorded in the office of the
SEC. Failure to comply with the requirements of the
preceding paragraph shall not affect the liability of the
partnership and the member thereof to third persons.
The purpose of the registration with the office of the SEC is to set a
condition for the issuance of licenses to engage in business or trade.
Effect of non-registration:
a) Even if not registered, the partnership having a capital of
3,000 or more is still a valid one, and therefore has legal
personality. Of course, if real properties had been contributed,
regardless of value, a public instrument is needed for the
attainment of legal personality.
b) If registration is needed or desired, any of the partners of a
valid partnership can compel the others to execute the needed
public instrument and to subsequently cause its registration.
This right cannot be availed of if the partnership is void.
Article 1773 – A contract of partnership is void, whenever immovable
property is contributed thereto, if an inventory of said
property is not made, signed by the parties, and attached
to the public instrument.
A general partnership – is one where all the parties are general
partners, that is, they are liable even with respect to their individual
properties, after the assets of the partnership have been exhausted.
A limited partnership - is one where at least one partner is a
general partner and the others are limited partners.
A limited partner - is one whose liability is limited only up to the
extent of his contribution.
A partnership where all the partners are “limited partners’ cannot
exist as a limited partnership; it will even be refused registration. If at all it
continues, it will be a general partnership, and all the partners will be
general partners.
Persons who together cannot form a universal partnership:
a) husband and wife - as a rule. (Art. 133)
b) those guilty of adultery or concubinage (Art. 739)
c) those guilty of the same criminal offense, if the partnership
was entered into in consideration of the same. (Art. 739)
A particular partnership - has for its object determinate things,
their use or fruits, or specific undertaking, or the exercise of a profession or
vocation. (Art. 1783, NCC)
Obligations of a partner: A partnership is unlimited as to its duration in the sense that no time
limit is fixed by law. The duration may be agreed upon expressly (as when
a) to give his contribution; (Art. 1786 & 1788) there is a definite period) or impliedly (as when a particular enterprise is
b) not to convert firm money or property for his own use; (Art. undertaken – it being understood that the firm ends as soon as its purpose
1788) has been achieved.
c) not to engage in unfair competition with his own firm: (Art.
1808)
d) to account for and hold as trustee, unauthorized personal Two kinds of a partnership “at will” -
profits;
(Art.1807)
e) pay for damages caused by his fault; (Art. 1794) a) 1st kind - when there is no term, express or implied;
f) duty to credit to the firm, payment made by a debtor who
owes him b) 2nd kind - when it is continued by the habitual managers -
and the firm; (Art. 1792) although the period has ended, or the purpose has been
g) to share with the other partners the share of the partnership accomplished.
credit,
which he has received from an insolvent debtor. (Art. 1743)
The essential differences between a partnership and corporation:
Rights of a partner:

a) property rights - (Art. 1810) a) with regard to creation -

1. rights in specific partnership property (SPP)
2. interest in the partnership, that is, share in the profits and surplus:
3. right to participate in the management
b) right to associate with another person in his share. (Art.1804)
c) right to inspect and copy partnership books. (Art. 1805)
d) right to demand a formal account. (Art. 1809)
e) right to ask for the dissolution of the firm at the proper time.
Generally, a partnership begins, from the moment of the execution of
the contract.
A partnership is created by voluntary agreement of the partners
WHEREAS a corporation is always created by some express legislative
authority, either in the form of a special or of a general law.
b) with regards to liability of members-
Partners are usually liable to partnership creditors not only to the
extent of their capital contribution to the firm but even with their own private
property, WHEREAS the stockholders of a corporation, after they have paid
for their shares are not subject to any further liability unless otherwise
provided by law.

Exception: - when there is a contrary stipulation.
Generally, even if contribution have not yet been made, the firm already
exists, for partnership is a consensual contract.
c) with regards to effect of transfer of interest -
Because of the rule of “delectus personarum”, the third person to
whom a partner has transferred his interest in the partnership does not
become a partner without the consent of all the other partners, WHEREAS
the third person to whom a stockholder has transferred his share becomes
automatically a stockholder even without the consent of the other
stockholders;
d) with regards to effect of death or bankruptcy of members -
The death or bankruptcy of a partner usually covers the dissolution
of the firm, WHEREAS the death or bankruptcy of a stockholder does not
result in such dissolution;
e) with regards to the effect of acts of member -
As a general rule, the partners are the agent of the partnership,
hence act of partners done or the account of the partnership is binding not
only on the partnership but also on the members. ON THE OTHER HAND,
whatever acts the stockholders might execute for the account of the
corporation, either individually or collectively, are not binding on the
corporation.
THE DIFFERENT KINDS OF PARTNERS
a) As to Liability -
1.) General Partners – those who can be held liable for partner-
Ship obligation even to the extent of their private property
2.) Limited Partners – those who cannot be held liable for part-
nership obligations
b) As to Contribution -
1.) Capitalist Partners – those who contribute money or property
To the common fund
2.) Industrial Partners – those who contribute only their skill or
Industry to the common fund
c) As to Management -
1.) Managing Partners – those who manage or administer
Partnership affairs
2.) Silent Partners – those who have no voice in the manage-
ment of partnership affairs
d) As to Third Persons -
1.) Ostensible Partners – those publicly known as such
2.) Secret Partners – those whose connection to the partnership
is not known.
3.) Partners by Estoppel – those who represent themselves, or
consent to another or others representing them to anyone as
partners either in an existing partnership or the one that is
fictitious or apparent. They are also known as “ de facto”
partners.
e) As to Object --
1.) universal
2.) particular
A universal partnership profits comprises all that the partners may
acquire by their industry or work during the existence of the partnership.
CAN A HUSBAND AND WIFE ENTER INTO A CONTRACT OF
PARTNERSHIP?
If a partnership is a universal partnership, they cannot enter into
such contract,. This is so because person prohibited from making
donations to each other are prohibited from entering into universal
partnership. However, if the partnership is a particular partnership or a
limited partnership, they can.
HOW SHALL THE PROFITS AND LOSSES OF A PARTNERSHIP BE
DISTRIBUTED?
ANS : We must distinguish whether there is an agreement or none.
1.) If there is an agreement the profits and losses shall be
distributed in conformity with such agreement . If the agreement
is only with respect to the profits the share for the partners in
losses shall be in the same proportion as their share in the
profits.
2.) If there is no agreement –
 a.) Profits -
1. Capitalist Partners – their share shall be in proportion to
what they may have contributed to the common fund
2. Industrial Partner – their share shall be that which is
just and equitable under the circumstances
b.) Losses –
1. Capitalist Partners – their share shall be in proportion to
what they may have contributed to the common fund
2. Industrial Partners- they shall not be liable or the losses
CAN AN INDUSTRIAL PARTNER ENGAGE IN A BUSINESS OTHER
THAN THAT OF THE PARTNERSHIP?
An industrial partner cannot engage in business for himself, unless
the partnership expressly permits him to do so, and if he should do o, the
capitalist partners may either exclude him from the firm or avail themselves
of the benefits which he may have obtained in violation of the provision,
with right to damages in either case (Art. 1789, NCC)
CAN A CAPITALIST PARTNER ENGAGE IN A BUSINESS OTHER THAN
THAT OF THE PARTNERSHIP?
The capitalist partner cannot engage for their own account in any
operation, which is of the kind of business in which the partnership is
engaged, unless there is stipulation to the contrary. Any capitalist partner
violating this prohibition shall bring to the common fund any profit accruing
to him from his transactions and shall personally bear all the losses.(Art.
1808)
WHO SHALL MANAGE THE PARTNERSHIP?
The management of the partnership may be vested by agreement in
one, or some, or all o the partners, or even in a third person, either in the
articles of partnership or after the partnership had already been constituted,
If there is no agreement, it is vested in all the partners (Art. 1803, NCC)
Principle of a “delectus personarum” – refers to the rule which is
inherent in every partnership that no one can become a member of the
partnership without the consent of all the partners. Consequently, even if a
partner will associate another person in his share in the partnership, the
associate shall not be admitted into the partnership without the consent of
all the partners, even if the partner having an associate should be a
manager (Art. 1804, NCC).
If a partner assigns his whole interest in the partnership to a third
person, such an assignment does not result in the latter becoming a
substitute partner.
May a partner from a sub-partnership with a third person with respect
to his interest in the partnership?
ANS: Yes, and even without the consent of the other partners.
When may a partner demand for a formal accounting of partnership
affairs?
1. If he is wrongfully excluded from the partnership business or
possession of its property of its property by his co-partners;
2. If the right exists under the terms of any agreement;
3. If a partner has derived profits from any transaction connected
with the formation, conduct or liquidation of the partnership of
from any use by him of its property, or;
4. Whenever other circumstances under it just and reasonable.
What are the property rights of a partner? Are these rights
assignable?
ANS:
1. his rights in specific partnership property
2. his interest in the partnership
3. his right to participate in the management
Only the second right is assignable but not the others.
Partner’s Interest – It is his share of the profits and surplus.
Effects of a conveyance by a partnership of his whole interest in the
partnership –
1. it does not dissolve the partnership;
2. it does not entitle the assignee to interfere in the management of the
business, or to require an accounting of partnership transaction, or
to inspect the partnership books; however, in case of fraud in the
management of the partnership, he may avail himself of the usual
remedies;
3. it entitles the assignee to receive in accordance with his contract the
profits to which the assignor would otherwise be entitled; and
4. upon dissolution of the partnership, the assignee is entitled to
receive his assignor’s interest and may then demand for an
accounting.
“Charging Order” – upon a partner’s interest in the partnership refers
to the remedy available to a judgment creditor of a debtor partner to charge
the interest of the latter in the partnership by means of a court order for the
purpose of satisfying the amount of the judgment. This changing order,
however, is always subject to the preferred rights of partnership creditors.
Can the partners be held liable for a partnership obligation? If so,
what is the nature of their liability?
ANS: Yes, in the case of partnership obligations arising from the
contracts, all general partners, including industrial ones, shall be liable pro-
rata with all their property and after all the partnership assets have been
exhausted: in other words, the liability o the partners is joint an subsidiary.
In the case of a partnership obligation arising from a criminal offense, or a
quasi-delict, all partners are liable solidarily with the partnership. In the case
of a partnership obligation under the Workmen’s Compensation Act all
partners are also liable solidarily with the partnership. (Liwanag Case)
A PARTNER BY ESTOPPEL – refers to a person who represents him-
self or consents to another or others representing him to anyone as a
partner either in an existing partnership or in one that is fictitious or
apparent (Art. 1825, NCC)
The only instance when an existing partnership is bound by the
representation made by or in behalf o a partner by estoppel is when all the
partners had given their consent to such representation. It will be only then
that a partnership obligation shall result. In such a case, any third person
who, relying on such representations, gave credit to the partnership, can
hold the partnership as well as all the of the partners, including the partner
by estoppel, liable in accordance with Art.1805. A good example would be
those who, not being members of the partnership, include their names in
the firm name.(Art. 1815)
DISSOLUTION – is the change in the relation of the partners caused by
any partner ceasing to be associated in the carrying on of the members’
business.
WINDING UP - refers to the process of liquidating partnership affairs
TERMINATION – refers to that moment when partnership affairs are
wound up
CAUSES FOR THE DISSOLUTION OF A PARTNERSHIP – (ART. 1830):
1. Without violation of the agreement between the partners:
a. By the termination of the definite term or particular un-
dertaking specified in the agreement;
b. By the express will of any partner, who must act in
good faith when no definite term or particular
undertaking is specified;
c. By the express will o all the partners who have not
assigned their interest or suffered them to be charged for
their separate debts either before or after the termination
o any specified term or particular undertaking;
d. By the expulsion of any partner from the business bond
file in accordance with such a power conferred by the
agreement between the partners;
2. In contravention of the agreement between the partners where
the circumstances do not permit a dissolution under any other
 provision o this article, by the express will of any partner at any
time.
3. By any event which makes it unlawful for the business of the
partnership to be carries on or for the members to carry it on in
partnership
4. When a specific thing which a partner had promised to
contribute to the partnership, perishes before the delivery, in any
case by the loss of the thing, when the partner who contributed it
having reserved the ownership thereof, has only transferred to
the partnership the use or enjoyment of the same, but the
partnership shall not be dissolved by the loss of the thing when it
occurs after the partnership has acquired ownership thereof;
5. By the death of any partner;
6. By the insolvency of any partner or of the partnership;
7. By the civil interdiction o any partner;
8. By the decree of court.
ON THE APPLICATION OF A PARTNER, THE COURT SHALL DECREE
A DISOLUTION WHENEVER:
1.) A partner has been declared insane in any judicial proceedings
or is shown to be o unsound mind;
2.) A partner becomes in any other way incapable of the partnership
contract;
3.) A partner has been guilty of such conduct as tends to affect
prejudicially the carrying on of the business;
4.) A partner willfully or persistently commits breach of the
partnership agreement , or otherwise so conduct himself in
matters relating to the partnership’s business that I not
reasonably practicable to carry on the business in partnership
with him;
5.) The business o the partnership can only be carried on at a Loss.
ON THE APPLICATION OF THE PURCHASER OF A PARTNER’S
INTEREST:
1.) At the termination of the specific term or particular undertaking;
2.) At any time if the partnership was a partnership at will when the
interest was assigned or when the charging order was issued
(Art. 1831)
THE DISSOLUTION OF THE PARTNERSHIP, TERMINATES ALL
AUTHORITY O THE MANAGING PARTNER OR OF ANY PARTNER, AS
THE CASE MAY BE, TO ACT OR THE PARNERSHIP. THIS RULE IS
SUBJECT TO THE FOLLOWINGEXCEPTIONS:
- Acts necessary to wind up partnership affairs;
- Acts necessary to complete transactions begun but not when
finished
- Acts or transactions which would bind the partnership I
dissolution had not taken place, provided the other party to such
transactions:
 had extended credit to the partnership prior to dissolution
and had no knowledge or notice of such dissolution;
 Although he had not so extended credit , had nevertheless
known o the partnership prior to dissolution and having no
knowledge or notice o dissolution, the act of dissolution had
not been advertised in a newspaper o general circulation in
the place of which the business was regularly carried on .
WHO HAS THE RIGHT OR DUTY TO WIND UP OR LIQUIDATE
PARTNERSHIP AFFAIRS?
1. If the winding up or liquidation of the affairs is judicial, the right
or duty to wind up or liquidate partnership affairs devolves upon
the partner or legal representative or assignee designated by
the court. If it is extrajudicial, the right or duty devolves upon the
managing partner. But where there is no managing or even
where there is, he dies, then the right or duty evolves upon the
partner who have not wrongfully dissolved the partnership or its
legal representative o the last surviving partner, not insolvent.
(Art. 1836)
DISTINCTION BETWEEN A GENERAL PARTNERSHIP AND A LIMITED
PARTNERSHIP:
1.) As to composition: A general partnership is composed only of
general partners, WHEREAS, a limited partnership is composed
of at least one general partner and one limited partner
2.) As to constitution: A general partnership as a general rule,
maybe constituted in any form whereas a limited partnership
must be stated in a certificate of limited partnership, duly signed
and sworn by all the partners and recorded in the office o the
SEC;
3.) As to firm name: A “GP” must operate under a firm name which
may or may not include the name of one or more partners,
whereas a “LP” must also operate under a firm name, followed
by the word “Limited”;
4.) As to must also operate under a firm name, followed by the word
“Limited”;
5.) As to dissolution and winding up: there are also differences,
formal and procedural between the dissolution and winding up of
a GP or LP.
DISTINGUISH A GENERAL PARTNER AND LIMITED PARTNER:
1) A general partner can be held personally liable for partnership
obligation after all of the assets of the partnership have been
exhausted, whereas a limited partner cannot be held liable;
2) A general partner may participate in the management o the
partnership, whereas a limited partner does not;
3) A general partner may contribute money, property or industry to a
common fund, whereas a limited partner, as such can only
contribute money or other property only;
4) The name o a general partner may appear in the firm name,
whereas, that of a limited partner does not;
5) There is limitation on the right of a general partner to engage in
another business or in the same kind of business as that in which
the partnership is engaged, whereas there is no such limitation in
the case of a limited partner.
CAN A LIMITED PARTNER BE HELD LIABLE FOR PARTNERSHIP
OBLIGATIONS? –
ANS : A limited partner as such cannot be held liable for
partnership obligations. However, if his surname appears in the
partnership or firm name or if he participates in the
management or control of the business, then he is liable as a
general partner.
The interest of a limited partner is assignable.
A SUBSTITUTED LIMITED PARTNER - is a person admitted to
all the rights of a limited partner who has died or has assigned his
interest in
partnership.
An assignee of the interest of a limited partner shall have the right
to become a substituted limited partner if all the members consent thereto
or if the assignor, being thereunto empowered by the certificate of
limited partnership gives the assignee that right. However, he becomes a
substituted limited partner only from the moment that the certificate is
appropriately amended.
The substituted limited partner has all the rights and powers, and is
subject to all the restrictions and liabilities of his assignor, except those
liabilities of which he was ignorant at the time he become a limited partner
an which could not be ascertained from the certificate.
*WHAT IS THE ORDER OF PAYMENT IN THE WINDING UP OF
PARTNERSHIP LIABILITIES:
If it is a general partnership, the order of payment is as follows:
a. those owing to creditors other than partners;
b. those owing to partners other than for capital and profits;
c. this owing to partners in respect of capital
d. those owing to partners in respect of profit(Art.1839)
 If the partnership is a limited partnership the order of payment is as
follows:
1) those to creditors in the order of priority as provided
by
law except those to limited partners on account of their
contributions, and to the general partners
2) those limited to partners in respect to their share of
the
profits and other compensation by way of income on their
contribution;
3) those to limited partners in respect to the capital of
their contributions;
4) those to general partners other than for capital and
profits
5) those to general partners in respect to profits;
6) those to general partners in respect to capital
ART. 1787 – When the capital or part thereof which a partner is about to
contribute consist of goods, their appraisal must be made
in the manner prescribed in the contract of partnership, and
in the absence of stipulation, it shall be made by experts
chosen by the partners, and according to current prices, the
subsequent changes thereof for the account of the
partnership.
ART. 1788 – A partner who has undertaken to contribute a sum of money
and fails to do so becomes a debtor for the interest and
damages from the time he should have complied with
his obligation.
The same rule applies to any amount he may have taken
from the partnership coffers, an his liability shall begin from
the time he converted the amount to his own use
ART. 1791 – If there is no agreement to the contrary, in case of imminent
loss of the business of the partnership, any partner who
refuses to contribute an additional share to the capital,
except on industrial partners, to save the venture, shall be
obliged to sell his interest to the other partners.
ART. 1792 – If a partner authorized to manage collects a demandable sum,
which was owed to him in his own name, from a person who
owed the partnership another sum also demandable, the
sum thus collected shall be applied to the credits in
proportion to their amount, even though he may have given
a receipt for his own credit only, but should he have given it
for the account of the partnership credit, the amount shall be
fully applied to the latter.
ART. 1793 – A partner who has received, in whole or in part, his
share of a partnership credit, when the other partners have
not collected theirs, shall be obliged if the debtor should
thereafter become insolvent, to bring to the partnership
capital what he received even though he may have
given receipt or his own share only.
ART. 1794 – Every partner is responsible to the partnership for
damages suffered by it through his fault, and he
cannot compensate them with the profits and benefits
which he may have earned for the partnership by his
industry. However, the courts may equitably lessen his
responsibility if through the partner’s extraordinary efforts
in other activities of the partnership, unusual profits have
been realized.
ART. 1798 – If the partners have agreed to entrust to a third person the
designation of the share of each one in the profits an
losses, such designation may impugned only when it is
manifestly inequitable. In no case may a partner who has
begun to execute the decision of the third person, or who
has not impugned the same within a period o three (3)
months from the time he had knowledge thereof, complain
of such decision.
The designation of losses and profits cannot be entrusted to
one of the partners.
 The general rule is that a stipulation excluding one or more
partners from any share in the profits or losses is void.
Reason:
the partnership is for common benefit. One exception is in
the case of the industrial partner whom the law itself
excludes from losses. If the law does this, a stipulation
exempting the industrial partner from losses is naturally
valid.
ART. 1800 – The partner who has been appointed manager in the
Articles of partnership may execute all acts of
administration despite the opposition of his partners,
unless he should act in bad faith; and his power is
irrevocable without just or lawful cause. The vote of the
partners representing the controlling interest shall be
necessary for such revocation of power.
A power granted after the partnership has been constituted
maybe revoked at anytime”.
ART.1801 - If two or more partners have been entrusted with the
management of the partnership without specification of their
respective duties, or without a stipulation that one of them
shall not act without the consent of all the others, each one
may separately execute all acts of administration, but if any
of them should oppose the acts of the others, the decision of
the majority shall prevail. In case of a tie, the matter shall be
decided by the partners owning the controlling interest
ART. 1802 - In case it should have been stipulated that none of the
managing partners shall act without the consent of the
others, the concurrence of all shall be necessary for the
validity of the acts, and the absence or disability of any one
of them cannot be alleged, unless there is imminent
danger or grave or irreparable injury to the partnership”.
ART. 1803 - When the manner of management has not been agreed
upon, the following rules shall be observed;
1) All the partners shall be considered agents and whatever
anyone of them may do alone shall bind the partnership,
without prejudice to the provisions of ART. 1801.
2) None of the partners may ,without the consent of the
others, make any important alteration in the immovable
property of the partnership, even if it may be useful to
the partnership.
But if the refusal or consent by the other partners
is manifestly prejudicial to the interest of the partnership,
the court’s intervention may be sought.
ART.1805 - The partnership books shall be kept, subject to an
agreement between the partners, at the principal place of
business of the partnership and every partner shall at
any reasonable hour have access to and may inspect and
copy any of them.
ART.1807 - Every partner must account to the partnership for any
benefit, and hold as trustee for it any profit derived by him
without the consent of the other partners from any
transaction connected with the formation, conduct, or
liquidation of the partnership or from any use by him of its
property.
ART.1811 - A partner is a co-owner with his partners of specific
partnership property. (SPP)
THE INCIDENCE OF THI CO-OWNERSHIP ARE THE FOLLOWING:
a) A partner subject to any agreement between the partners,
has an equal right with his partners to possess specific
partnership property for partnership purposes but he has no
right to possess such property for any purposes without the
consent of his partners;
 b) A partner’s right in specific partnership property is not
assignable except in connection with the assignment of rights of
all the partners in the same property;
c) A partner’s right in specific partnership property is not subject to
attachment or execution, except on a claim against the
partnership;
d) A partner’ right in specific partnership property is not subject
to legal support under Article 291
ART. 1826 - A person admitted as a partner into an existing partnership
is liable for all the obligations of the partnership arising
before his admission as though he had been a partner when
such obligation were incurred, except that this
liability shall be satisfied only out of partnership property,
unless there is a stipulation to the contrary.
ART. 1827 - The creditors for the partnership shall be preferred to those of
each partner as regards the partnership property. Without
prejudice to this right, the private creditors of each Partner
may ask the attachment and public sale of the share
of the latter in the partnership
assets.
ART. 1864 - The certificate hall be cancelled when the partnership
is dissolved or all limited
partners cease to be such.
A certificate shall be amended when:
1. there is a change in the name of the partnership or in the
or character of the contribution of any limited partner;
2. a person is substituted as a limited partner;
3. an additional limited partner is admitted;
4. a person is admitted as a general partner;
5. a general partner retires, dies, becomes insolvent or
insane, or is sentenced to civil interdiction and the
business is continued under Article 1860;
6. there is change in the character of the business of the
partnership;
7. there is a false or erroneous statement in the certificate;
8. a person is substituted as a limited partner;
9. there is a change in the time as stated in the certificate
for the dissolution of the partnership of for the return of a
contribution;
10. a time is fixed for the dissolution of the partnership or the
return of a contribution, no time having been specified in
the certificate, or
11. the members desire to make a change in any other
statement in the certificate in order that it shall
accurately represent the agreement among them.
Article 1866 – A contribution, unless he is general partner, is not a proper
party to proceeding by or against a partnership, except
where the object is to enforce a limited partner’s right
against or liability of the partnership.
Article 1846 – The surname of a limited partner shall not appear in the
partnership name unless:
1. it is also the surname of a general partner; or
2. prior to the time when the limited partner become such, the
business had been carried on under a name in which his surname
appeared.
SALE
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 therefore a price certain in money or its equivalent. ( Art.1458)
Essential Requirements:
1) Consent of the parties by virtue of which the vendor obligates
himself to transfer the ownership of and to deliver a determinate
thing, and the vendee obligates himself to pay therefore a price
certain in money or its equivalent;
2) Object certain which is subject matter of the contract;
 3) The Cause of the obligation, the cause as far as the vendor is
concerned is the acquisition of the price certain in money or its
equivalent while the cause as far as the vendee is concerned is the
acquisition of the thing which is the object of the contract.
Characteristics:
Consensual, bilateral, and reciprocal; principal; onerous,
commutative, and nominate.
Contract of Sale distinguished from Contract to Sell
1. In the first, title passes to the vendee upon delivery of the thing sold,
whereas, in the second, by agreement, ownership is reserved in the
vendor and is not to pass until full payment of the price;
2. In the first, non-payment is a negative resolutory condition, whereas
in the second, full payment is a positive suspensive condition;
3. In the first, the vendor lost and cannot recover ownership until and
unless the contract is rescinded. Whereas in the second, title
remains in the vendor, and when he seeks to eject vendee because
of non compliance of such vendee with the suspensive condition
stipulated, he is enforcing the contact and not resolving the same.
Emptio Res Speratae distinguished from Emptio Spei
1. The first refers to a sale of a thing having a potential existence,
whereas the second refers to a sale of a mere hope or expectancy.
2. In the first, uncertainty is with regard the quantity and quality but not
with regard the existence of the thing, in the second, the uncertainty
is with regard with the existence of the thing;
3. In the first, the contract deals with a future thing, in the second, the
contract deals with a present thing-the hope or expectancy;
4. In the first, the sale is subject to the condition that the thing should
exist, so that if it does not, there is no contract for lack of an
essential requisite, in the second, the sale produces effects even
though the thing itself does not come to existence, since the subject
matter is the hope itself.
Since the contract of sale is consensual, “it is perfected at the moment
when there is a meeting of the minds upon the thing which is the object of
the contact and upon the price. However, in case of a sale by auction, it is
perfected when the auctioneer announces its perfection by the fall of the
hammer or in any other customary manner”.
In a contract of sale, the ownership of the thing sold shall be transferred
to the vendee upon the actual or constructive delivery. The parties however
may stipulate that the ownership will not pass to the vendee until the latter
shall have fully paid the purchase price.
A promise to buy and sell a determinate thing for a certain price is
reciprocally demandable. An accepted unilateral promise to buy or sell a
determinate thing for a price certain is binding upon the promissor is the
promise is supported by a consideration distinct from the price.
“Earnest money” whenever earnest money is given in a contract of
sale, it shall be considered as part of the price and as proof of the
perfection of the contract. It then could be simply defined as part of the
purchase price advanced by the vendee to the vendor as a token of the
perfection of the contract.
In a contract of sale of personal property, the price of which is
payable in installments, the different remedies in case of breach
available to the vendor are:
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. The last case, have shall have no further action
against the purchaser to recover any unpaid balance of the price.
Any agreement to the contrary shall be void.
The foregoing remedies of the unpaid seller are alternative, not
cumulative.
When goods are delivered to the buyer “on sale or return” to give
buyer an option to return the goods instead of paying the price, the
ownership passes to the buyer on delivery, but he may revert 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.
When goods are delivered to the buyer “on approval” or “on trial” or
“on satisfaction”, or other similar terms, the ownership passes to the buyer:
1. When he signifies his approval or acceptance to the seller or does
any act adopting the transaction;
2. if he does not signify his approval or acceptance to the seller but
retains the goods without giving notice of rejection, then if a time
has been fixed for the return of the goods, on the expiration of such
time, and if no such time has been fixed, on the expiration of a
reasonable time. What is a reasonable time is a question of fact.
(Art.1502)
What title is acquired by the vendee or buyer if the object which he
bought was sold by somebody who is not the ownner thereof and who
was not authorized to sell it?
ANS: The vendee in such case, acquires no better title to the object than
the vendor had. This rule is subject to the following exceptions:
1. when the true owner is estopped or precluded by his conduct from
denying the vendor’s authority to sell;
2. when the sale is made by the registered or apparent owner in
accordance with recording or registration laws;
3. where the sale is made pursuant to a statutory power of sale or
under the order of a court of a competent authority; and
4. where the purchase is made in a merchant’s store, or in fairs, or in
markets in accordance with the Code of Commerce and special
laws.
As far as the third exception is concerned, it must be observed that if the
object which was sold at the public sale if movable property, the true owner
who had lost it or who has been unduly deprived of it can still recover the
same from the vendee. However, if the latter had acquired it in good faith,
such owner cannot obtain its return without reimbursing the price paid
therefore.
What are the obligations of the seller and the buyer in contracts of
“C.I.F” and “F.O.B” sale.
ANS: In “C.I.F” sales of goods, the buyer pays a fixed price, while the
seller pays the insurance freight up to the place of destination. In
“F.O.B” sales of goods, the goods are shipped by the seller to a
certain point without any expense to the buyer, but after delivery at
such point all subsequent expenses incident to the transportation
and delivery shall be paid by the buyer. Thus the sale is F.O.B at
the place of shipment, the buyer must pay the freight. (Art.1525)
Remedies of the “unpaid seller” (Art.1526)
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 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;
4. A right to rescind the sale.
The unpaid seller of goods who is in possession of them is entitled to
retain possession of them until payment or tender of the price in the
following cases:
1. When the goods have been sold without any stipulation as to credit;
2. Where the goods have been sold on credit, but the term of credit
has expired;
3. Where the buyer becomes insolvent.
The unpaid seller losses his right of lien or retention in the following
cases;
1. When he delivers the goods to a carrier or other bailee for the
purpose of transmission to the buyer without reserving the
ownership in the goods or the right to possession thereof;
2. When the buyer or his agent lawfully obtains possession of the
goods;
3. By waiver thereof (Art. 1529)

The right of stoppage in transitu refers to the right of the unpaid seller
to resume possession of the goods anytime while they are in transit by
virtue of which he will then be entitled to same rights in regard to the goods
as he would have had if he had never parted with the possession. This right
is available to the unpaid seller when he has already parted with the
possession of the goods and the buyer is or becomes insolvent. (Art. 1530)
How Right of Stoppage In Transitu Exercised – either by obtaining
actual possession of the goods or by giving notice of his claim to the carrier
or other bailee in whose possession the goods are. Such notice may be
given either to the person in actual possession of the goods or to his
principal. In the latter cases, the notice, to be effectual, must be given at
such time and under circumstances that the principal, by its exercise of
reasonable diligence, may present a delivery to the buyer.
When notice is given by the seller to the carrier, or other bailee in
possession of the goods, he must redeliver the goods to, or according to
the directions of the seller. The expenses of such delivery must be borne by
the seller. If, however, a negotiable document of title representing the goods
has been issued by the carrier, or other bailee, he shall not be obliged to
deliver or justified in delivering the goods to the seller unless such
document is first surrendered for cancellation. (Art.1532)
Right of Resale available to the unpaid seller :
1. When the goods are perishable in nature;
2. Where the seller has expressly reserved the right of resale in case
the buyer should make default;
3. Where the buyer has been in default in payment of the price for
unreasonable time.
It is however, essential before the resale can be made that the unpaid
seller should have a right of lien or should have stopped the goods in
transitu.
Effect of the Resale- buyer acquires a good title against the original
buyer. The unpaid seller, on the other hand, shall not be liable to the
original buyer upon the contract of sale or for any profit made by reason of
the resale.
HOW IS RESALE EFFECTED?
ANS: Maybe made either by public or private sale. However, the unpaid,
who is bound to exercise reasonable care and judgment in making
the resale, cannot directly or indirectly buy the goods.
It is not essential to the validity of the resale that notice of an
intention to resell the goods be goods be given by the seller to the
original buyer. But where the right to resell is not based on the
perishable nature of the goods, or upon express provision of the
contract of sale, the giving or failure to give such notice shall be
relevant in any issue involving the question whether the buyer had
been in default for an unreasonable time before the resale was
made ( Art.1533)
Right of rescission available to the unpaid seller, when:
1. Where he expressly reserved the right to do so in case the buyer
should make default; and
2. Where the buyer has been in default in the payment of the price for
un reasonable time.
It is essential however that before rescission can be made, the unpaid
seller should have a right of lien or should have stopped the goods in
transitu.
Effect of Rescission – once the unpaid seller has rescinded the
transfer of title and resumed ownership on the goods, he shall not be
thereafter be liable to the buyer upon the contract of sale. As a matter of
fact, he may recover from the buyer damages for any loss occasioned by
the breach of the contract.
It is not essential that such overt act should be communicated to the
buyer.
 The unpaid seller’s right of lien or stoppage in transitu is not affected
should the buyer sold the goods to another before he exercises the right,
unless he assented thereto.
WHERE THE SAME THING IS SOLD TO DIFFERENT PURCHASERS,
TO WHOM SHALL THE OWNERSHIP BE TRANSFERRED?
ANS: As to movables, the ownership shall be transferred to the person
who may have first taken possession thereof in good faith.
As to immovables
a. to the person acquiring it who in good faith first recorded it in
the Registry of Property;
b. In default thereof, to the person who in good faith was first in
possession;
c. In default thereof, to the person who presents the oldest title,
provided there is good faith. ( Art. 1544)
Warranty in case of eviction is an implied warranty in contracts of
sale, by virtue of which, if the vendee is deprived of the whole or part of the
thing purchased by a final judgment based on a prior right to the sale or an
act imputable to the vendee, such vendor shall answer for the eviction even
though nothing has been said in the contract on the subject. (Art.1548)
Two kinds of Waiver of Warranty Against Eviction:
1. Consciente waiver – there is merely voluntary renunciation made by
the vendee of the right to warranty in case of eviction.
2. Intencionada waiver- there is voluntary renunciation by the vendee
of the right to warranty against eviction, with knowledge of the risk of
eviction and assuming the consequences thereof. The effect of such
renunciation in case of eviction is to relieve the vendor of any
liability. ( Art 1554)
IF THERE IS NO AGREEMENT WITH REGARD TO WARRANTY IN
CASE OF EVICTION, WHAT IS THE EXTENT OF THE LIABILITY OF
THE VENDOR?
ANS: The Vendee shall have the right to demand of the vendor:
1. the return of the value of the thing sold had at the time of eviction,
be it greater or less than the price of the sale;
2. the income or the fruits;
3. the cost of the suit which caused the eviction and those of the suit
brought against the vendor for the warranty;
4. the expenses of the contract, if the vendee has paid them;
5. the damages and interests, and the ornamental expenses, if the
sale was made in bad faith.
Accion Redhibitoria is the action instituted by the vendee against the
vendor to avoid a sale on account of some one of defect in the thing sold
which renders it unfit for the use intended of which will diminish its fitness
for such use to such extent, that had the vendee been aware thereof, he
would have not acquired it.
Accion Quanti Minoris is an action to procure the return of a part of
the purchase price paid by the vendee to the vendor by reason of such
defect.
Instances when vendee may suspend payment of the price:
1. Should he be disturb in the possession or ownership of the thing
sold; or
2. Should he have reasonable grounds to fear such disturbance by a
vindicatory action or by a foreclosure of mortgage.
The right, however, does not exist in the following cases:
1. Should there be a stipulation to that effect, or
2. Should the vendor give security for the return of the purchase price,
or
3. Should the vendor have caused the disturbance or danger to cease;
or
4. Should the disturbance consist only of a mere act of trespass.
 A Contract of Sale is extinguished by the same causes in all other
obligations, and also by conventional or legal redemption.
Conventional Redemption is that which takes place when the vendor
reserves the right to repurchase the thing sold with the obligation to
reimburse to the vendee the price of the sale, the expenses of the cntract,
other legitimate payments made by reason of the sale, as well as
necessary and useful expenses made on the thing sold.
WHEN IS CONVENTIONAL REDEMPTION PRESUMED TO BE AN
EQUITABLE MORTGAGE?
ANS: Under the following circumstances:
1. When the price of the sale with right to repurchase is unusually
inadequate;
2. When the vendor remains in possession as a lessee or otherwise;
3. When upon of 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 cases, 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 another obligation;
7. When there is doubt as to whether the contract is a contract of sale
with right to repurchase or an equitable mortgage.
WHAT IS THE PERIOD FOR THE REDEMPTION OF PROPERTY SOLD
WITH THE RIGHT OF REPURCHASE?
ANS : In absence of any express agreement, that period of redemption
shall be four (4) years from the date of the contract. Should there be
any agreement, the period cannot extend ten (10) years. However,
the vendor may still exercise the right to repurchase within thirty (30)
days from the time final judgment was rendered in a civil action on
the basis that the contract was a true sale with right to repurchase.
WHAT ARE THE OBLIGATIONS OF THE VENDOR A RETRO WHEN HE
EXERCISES HIS RIGHT OF REPURCHASE?
ANS:
1. To return to the vendee the price of the sale;
2. To pay the expenses of the contract and other legitimate payments
made by reason of sale; and
3. To pay all necessary and useful expenses made on the thing sold.
Legal Redemption is the right subrogated upon the same terms and
conditions stipulated in the contract, in the place of one who acquires a
thing by purchase or dation in payment, or by any other transaction
whereby ownership is transmitted by onerous title.
INSTANCES OF LEGAL REDEMPTION, RECOGNIZED BY OUR LAW:
Under the Civil Code:
1. Redemption by the other co-heirs, or by any or some of them,
should a co-heir sell his hereditary right to a stranger;
2. Redemption by an owner of an adjoining land should the owner of a
piece of rural land, the area of which does not exceed one hectare,
alienate it to a third person. If two or more adjoining owners desire
to exercise the right at the same time, the owner of a smaller area
shall be preferred; and should both lands have the same area, the
one who first requested the redemption. (Art. 1621)
3. Redemption by an owner of adjoining land should the owner of a
piece of urban land, which is so small and so situated that a major
portion thereof cannot be used for any practical purpose within a
reasonable time and which said owner had bought merely for
speculation, resell it to a third person. If the resale has not yet been
perfected, an owner of adjoining land shall have the right of
preemption; in other words, his right to buy the property is preferred
 to that of third persons. If two or more adjoining owners desire to
exercise the right of pre-emption or redemption, as the case may
be, the owner whose intended use of the land appears best justified
shall be preferred. (Art. 1622)
4. Redemption by a debtor should the credit or other incorporeal right
in litigation be sold by the creditor to a third person. (Art. 1634)
Under other laws:
1. Redemption by the applicant, his widow, and legal heirs within five
years should a piece of land under a homestead of free patent be
alienated to a third person. ( Sec. 119, Com. Act. No. 141)
2. Redemption by a judgment debtor within one year should real
property belonging to him be sold on execution. (Revised Rules of
Court)
3. Redemption by owner should the property belonging to him be sold
for delinquent realty taxes. (Section 736, Rev. Adm. Code)
4. Redemption by mortgagor within one year should his
mortgaged property be foreclosed and subsequently sold. (Revised
Rules of Court)
Distinction between redemption and pre-emption –
1. In redemption, the sale to a third person has already been
perfected, whereas in pre-emption, the sale to a third person has
not yet been perfected;
2. The right of redemption has a much broader scope than the right of
pre-emption. As a matter of fact, the latter may be exercised only
where there is a prospective resale of a small piece of urban land
originally bought by the prospective vendor merely for speculation;
3. The right of redemption is directed against the third person who
bought the property, whereas the right of pre-emption is directed
against the prospective vendor who is about to resell the property;
4. The effect of redemption is to extinguish a contract that
has already been perfected or even consummated, whereas the
effect of pre-emption is to prevent the birth or perfection of a
contract.
THE RIGHT OF PRE-EMPTION OR REDEMPTION REGULATED BY
ARTS. 1630 TO 1622 OF THE CIVIL CODE IS TO BE EXERCISED? –
ANS: The right must be exercised within thirty (30) days from the notice in
writing by the prospective vendor, or by the vendor as the case may
be.
Sale distinguished from dation in payment: –
1. In sale, there is no pre-existing credit. While in dation there’s a pre-
existing credit;
2. In the first, gives rise to obligations while in the second, it
extinguishes obligations;
3. In the first, the cause or consideration is the price from the
viewpoint of the seller or obtaining the object from the viewpoint of
the buyer, while in the second, the cause or consideration from the
viewpoint of the person offering dation in payment is the
extinguishment of his debt and from the viewpoint of the creditor, it
is the acquisition of the object offered in lieu of the original credit;
4. In the first, there is greater freedom in the determination of the
price, while in the second, there is less freedom.
Sale distinguished from lease –
In a sale, the seller transfers ownership; in a lease, the lessor or
landlord transfers merely the temporary possession and use of the
property.
Article 1460 – A thing is determinate when it is particularly or physically
segregated from all others of the same class. The requisite
that a thing be determined is satisfied if at the time the
contract is entered into, the thing is capable of being made
determinate without the necessity of a new or further
agreement between the parties.
Future goods are those still to be:
1. Manufactured or printed;
2. Raised or future agricultural products;
3. Acquired by seller after the perfection of the contract;
 4. Those whose acquisition depends upon a contingency which may or
may not happen.
The sole owner of a thing may sell an undivided interest therein. (Art.
663)
Distinction between a contract of sale and an agency to sell:
a. In sale, the buyer pays the price; the agent delivers the
price which in turn he got from this buyer;
b. In sale, the buyer after delivery becomes the owner, the agent who
is supposed to sell does not become the owner even if the property
has already been delivered to him;
c. In sale, the seller warrants; the agent who sells assumes no
personal liability as long as her acts within his authority and in the
name of the principal.
In the Quiroga vs Parsons Hardware Co. (38 Phil. 501), the
defendant entered into a contract of sale not an agency to sell. There was
the price that was fixed and there was the duty to pay the same regardless
of whether or not the defendant had sold the beds. The word “agent”
simply means that the defendant was the only one who could sell the
plaintiff’s beds in Visayas”.
Rules to determine if the contract is one of sale or a piece of work: –
a. If ordered in the ordinary course of business – sale
b. If manufactures specially and not for the market – piece of work.
If one will construct a house on his own land and I will get both the
land and the house, it would seem that this could be a sale.
Rules to determine whether a contract is one of sale or of barter: (Art.
1468)
a. First rule – Intent
b. If intent does not clearly appear –
1. If thing is more valuable than money – barter
2. of 50-50 sale
3. If thins is less valuable than money – sale
Under the statute of fraud, the sale of:
1. Real property (regardless of the amount)
2. Personal property – if P500 or more must be in writing to be
enforceable.
A seller, in an auction sale, can bid, provided such a right to bid is
reserved; and notice was given that the sale by auction is subject to a right
to bid on behalf of the seller.
A seller also may employ others to bid for him, provided he has notified
the public that the auction is subject to the right to bid on behalf of the
seller. People who bid for the seller, but are not themselves bound, are
called “by-bidders” or “puffers”.
The ownership of the thing sold is transferred to the vendee upon
actual or constructive delivery thereof” – (Art. 1477)
Ownership is not transferred by perfection but by delivery.
The parties may stipulate that ownership in the thing shall not
pass to the purchaser until he has fully paid the price”. (Art. 1478)
Generally, ownership is transferred upon delivery, but even if delivered,
the ownership may still be with the seller till full payment of the price is
made, if there is a stipulation to this effect. But of course, innocent third
parties cannot be prejudiced. This stipulation is usually known as pactum
reservati dominii and is common in sales on the installment plan.
“Policitacion” – this is a unilateral promise to buy or sell which is not
accepted. This produces no juridical effect and creates no legal
bond. This is a mere offer.
Option – it is a contract granting a person the privilege to buy or not to buy
certain object at any time within the agreed period at a fixed price.
The contract of option is a separate and distinct contract from the
contract. It must have its own cause or consideration.

Who bears the risk of loss? –
a. If the object has been lost before perfection, the seller bears the
loss because there was no contract and being the owner, the seller
bears the loss;
b. If the object was lost after delivery to the buyer,
clearly the buyer bears the loss. “Res perit domino” – the owner
bears the loss;
c. If the object is lost after perfection but before
delivery, here the buyer bears the loss, as exception to the rule of
res perit domino.
(The implication in the case of “Roman vs Grimalt” is that had the sale
been perfected, the buyer would have borne the loss, that is, he would still
have had to pay for the object even if no delivery had been made.)
Art. 1493 – 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.
But is the thing is 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.
Obligations of the vendor: -
a. To transfer ownership (cannot be waived);
b. To deliver ( cannot be waived);
c. To warrant the object sold (this can be waived)
d. To preserve the thing from perfection to delivery, otherwise, he can
be held liable for damages. (Art. 1495)

Meaning of “fungibles” – are personal property which may be As a rule, in the absence of agreement, ownership is not
replaced with equivalent things. Fungibles are almost the same as transferred, even if sold, unless there has been delivery.
consumable goods with this difference: that while the distinction between
consumables and non-consumables is based on the nature of the thing, the In general, “delivery of the property to a person who has purchased the
differences between fungibles and non-fungibles is based on the intention. property in his own name (although he used the money of another) will give
Thus rice is ordinarily consumable, but if I borrowed a sack of rice for title to said purchaser and not the owner of the money used.”
display purposes only, and I promised to return the identical sack of rice,
the rice here is non-fungible.
Kinds of delivery or tradition: -
If the deed of sale of land is notarized by a notary public whose authority
had expired, the sale would still be valid, since for the validity of its 1. Actual or real
sale, a public instrument is not even essential. 2. Legal or constructive
a. Legal Formalities
b. symbolical tradition
The husband and wife cannot sell property to each other, except: c. traditio longa manu
d. traditio brevi manu
1. When there is a separation of property agreed upon in the marriage e. tradition constitutum possessorium
settlements;
2. When there has been a judicial separation of property. (Art. 1490) The instances when seller is still owner despite delivery: -

1. Express stipulation;
 2. If under the bill of lading the goods are deliverable to seller or agent
or their order;
3. If the bill of lading, although stating that the goods are to be
delivered to buyer or his agent, is kept by the seller or his agent;
4. When the buyer although the goods are deliverable to order of
buyer, and although the bill of lading is given to him, does not honor
the bill of exchange sent along with it. But of course, innocent third
parties should not be adversely affected.
Rules when the quantity is less than that agreed upon – (Art. 1522)
1. Buyer may reject;
2. Or buyer may accept what have been delivered, at the contract rate.
Rules when the quantity is more than the agreement: -
a. Buyer may reject all. He must not be burdened with the duty of
segregation, if he does not so desire;
b. Buyer may accept the goods agreed upon and reject the rest;
c. If he gets all, he must pay for item at the contract rate.
Rules when quantity is different: -
a. accept the goods which are in accordance with the contract;
b. and reject the rest.
When is the vendor not obliged to make delivery after the perfection
of the contract of sale? –
The vendor is not obliged to make said delivery in the following:
a. If the vendee has not paid him the price;
b. If no period for the payment has been fixed in the contract
otherwise, the vendor might play a futile “waiting game”;
c. Even if a period for such payment has been fixed in the contract if
the vendee has lost the right to make use of the period and still
refuse to pay.
A seller is deemed an “unpaid seller” –
1. If only part of the price has been paid or delivered;
2. Mere delivery of a negotiable instrument does not extinguish the
obligation because it may be dishonored.
When are “goods in transit”–
1. From the time when they are delivered to a carrier by land, water, or
air, or other bailee for the purpose of transmission to the buyer, until
the buyer, or his agent in that behalf, takes delivery of them from
such carrier or other bailee;
2. If the goods are rejected by the buyer, and the carrier or other
bailee continues in possession of them, even if the seller has
refused to receive them back.
When are goods “ no longer in transit” –
 If the buyer, or his agent in that behalf, obtains delivery of the goods
before their arrival of the appointed destination;
 If, after the arrival of the goods at the appointed destination, the
carrier or other bailee acknowledges to the buyer or his agent that
he holds the goods on his behalf and continues in possession of
item as bailee for the buyer or his agent; and it is immaterial that
further destination for the goods may have been indicated by the
buyer;
 If the carrier or other bailee wrongly refuses to deliver the goods to
the buyer or his agent in that behalf. (Art. 1531)
The period of limitation (prescriptive period) for a redhibitory action
based on the fraud or defects of animals is forty (40) days from the date of
their delivery to the vendee. And six (6) months for breach of warranty
against hidden defects; rescission of the contract because of the same; or
proportionate reduction in the price because of the same; rescission or
proportionate reduction in the price of sales of real estate either by the unit
or for a lump sum because of failure to comply with the provisions of the
contract.
 If an animal should die within three (3) days after its purchase, the
vendor shall be liable if the disease which caused the death existed of the
time of the contract. (Art. 1578)
AGENCY
Article 1868 – By the contract of agency, a person binds himself to
render some service, or to do something in
representation or in behalf of another with the consent
or authority of the latter
a. The definition is so broad and therefore defective.
As it is so worded, it would seem that the agent must always
expressly represent the principal. This is not necessarily so, for
sometimes an agent does not disclose his principal; he may soon
act in behalf of himself, but here the principal would still be bound as
when the contract involves things belonging to the principal.
b. Its Characterestics:
 Agency is a principal, nominate, bilateral, preparatory, cumulative
and generally onerous contract;
 Generally, it is also a representative relation, not a status since
agency is not inherent or permanent;
 It is a fiduciary relation since it is based on trust and confidence.
Essential elements of a contract of agency:
 There is consent, express or implied of the parties to establish the
relationship of agency;
 The object is the execution of a juridical act in relation to a third
person;
 The agent acts as a representative and not for himself; and
 The agent acts within the scope of his authority.
1. Distinguish a “contract of agency” from contract of lease of
services”
a. In the first, the principle of representation is
applied, whereas in the second, it is not; in other words, in the first,
the basis of the contract is representation, whereas in the second,
the basis is employment;
b. In the first, the contract may be extinguished at will by the principal,
whereas in the second, concurrence of both party is necessary;
c. The agent exercises discretionary powers in order to attain the ends
for which he was appointed, whereas the employee exercises
ministerial function only;
d. The first is a preparatory contract; whereas the second is a principal
contract.
2. Distinguish a “contract of agency” from contract with an
independent contractor”
1. In the first, the principle of representation exists, whereas in the
second, such principle is not recognized;
2. An agent is more or less under the control of his
principal, whereas, an independent contractor is not under the
control of the person with whom he contracts;
3. An agent binds his principal provided that he acts
within the scope of his authority, whereas an independent
contractor cannot bind the person with whom he contracts, by his
acts;
4. If a third person is injured through the fault or
negligence of an agent, he can proceed against the principal for
damages, but if he is injured through the fault or negligence of an
independent contractor, he cannot proceed against the person with
whom the latter had contracted damages;
5. The first is a preparatory contract, whereas the
second, is a principal contract.
THE DIFFERENT KINDS OF AGENCY

1. As to Constitution:
 Express – when it is expressly constituted
 Implied – a. from the acts of the principal
b. from his silence or inaction
c. from his failure to repudiate the agency, knowing that
another is acting in his behalf without authority.
2. As to form –
 oral
 written
3. As to cause –
 onerous – when it is for compensation
 gratuitous – when there is no compensation
4. As to extent-
 general – when it comprises all of the business of the principal
 special –when it comprises one or more specific transactions
5. As to third persons –
 agent de jure
 agent by estoppel – as when a person, who is not really an agent,
represents himself or is represented as such.
There can be a perfected contract of agency even if the acceptance
by the agent is merely implied. As far as acceptance by mere silence of
inaction is concerned, the following rules shall govern:
RULES GOVERNING IMPLIED AGENCY:
Between the persons who are present, the acceptance may be implied
if the principal delivers his power of attorney to the agent and the latter
receives it without objection;
Between the persons who are absent, the acceptance cannot be
implied, unless:
The principal transmits his power of attorney to the agent, who receives
it without objection, or
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.
In a sale of a piece of land, or any interest therein through an agent, the
authority of an agent must be in writing, otherwise, the sale shall be void.
(Art. 1874)
DISTINCTION OF GENERAL AND SPECIAL AGENCY:
GENERAL AGENCY – refers to that type of agency with comprises all
of the business of the principal, whereas special agency, refers to that type
of agency which comprises one or more transactions. Whether general or
special, the agency may be couched in general terms. In such a case, the
agency merely authorizes the agent to perform acts of administration.
Consequently, a general agency may or may not be couched in general
terms but an agency couched in general agency, if it comprises all of the
business of the principal, or a special agency, it is comprises only one or
more specific transactions.
Instances where a special power of attorney is necessary in order
to bind the principal (Art. 1878)
- to make such payment as are not usually considered as acts of
administration;
- to effect novation which put an end to obligations existing at the
time
of the constitution of the agency;
- to compromise, to submit to arbitration, to renounce right to appeal,
- to waive objections to venue, or to abandon a prescription already
acquired;
- to waive any obligation gratuitously;
- to enter into any contract by which ownership of an immovable is
transmitted or acquired gratuitously or for a valuable consideration;
- to make gifts, except customary ones for charity or those made to
employees in the business managed by the agent;
 - to loan or borrow money, unless the latter’s act be urgent and
indispensable for the preservation of the things under
administration;
- to lease any real property to another person for more than one year.
- to bind the principal to render some services without compensation
- to bind the principal in a contract of partnership;
- to obligate the principal as a guarantor or surety;
- to create or convey real rights over immovable property;
- to accept or repudiate an inheritance;
- to ratify or recognize obligations contracted before agency,
any other act of dominion.
A special power to sell excludes the power to mortgage, and a special
power to mortgage does not include the power to sell. Consequently, if an
agent, holding a special power to sell, mortgages the property, the contract
would be unenforceable (Art. 1879).
If the special power to sell does not specify the manner or terms of
payment, the agent may not sell the property on credit.
The most fundamental obligations of an agent:
a) to carry out the agency;
b) to act within the scope of his authority; and
c) to act on behalf of his principal.
Broadly speaking, the words “authority” and “power” of an agent are
interchangeable terms. However “authority” refers to the mandate given to
the agent by his principal, whereas “power” refers to the extent of the
mandate of the agency. In other words, the first is the cause, whereas the
second is the effect.
An agent authorized to sell a given authority cannot bind his principal by
selling such commodity, either directly or indirectly, to himself.
Consequently, if he sells the commodity to himself, by acting through a sub-
agent, the sale is unenforceable unless the principal ratifies the sale after
he has full knowledge of the facts.
If the agent entered into a contract with a third person in his own name
or without disclosing his principal, the contract could be binding only as
between the two parties, because obviously, the third person did not rely on
the credit of the principal when he entered into the contract. However,
there are two instances where the principal is bound by the contract:
a) where the contract involves things belonging to him; and
b) where he ratifies the contract or derives benefit therefrom.
SUPPOSE AN AGENT CONTRACTS IN THE NAME OF HIS PRINCIPAL
BUT EXCEEDING THE SCOPE OF HIS AUTHORITY, WHAT IS THE
STATUS AND EFFECT OF THE CONTRACT?
ANS: The answer is a distinction.
Its effect upon the principal: As far as the principal is concerned, the
contract is unenforceable. This is true whether the third person is aware or
unaware of the fact that the agent was acting outside the scope of his
authority. Consequently, is such third person is prejudiced as a result of
the contract, he would not be able to proceed against the principal. There
are, however, two (2) instances, where he may hold the principal liable,
namely:
a) where such principal has ratified the contract. In such case, the
contract becomes valid and binding; and
b) where such principal had allowed the agent to act as though he had
full power. In such a case, the former is solidarily liable with the
latter.
Its effect upon the agent: As far as the agent is concerned, the status of
the contract shall depend upon whether the third person was unaware or
aware of the fact that such agent was acting beyond the scope of his
authority. If the third person was unaware of such fact, the contract is
certainly binding as between the two parties, although unenforceable
insofar as the principal is concern. If the third person was aware of such
fact, the contract is unenforceable, even as between the two parties. In
such a case, the agent cannot be held liable, unless he undertook effort to
secure the principal’s ratification. Obviously, the principal cannot be held
liable unless he ratifies the contract.
 An agent who receives something by virtue of the agency, such as gift
or an amount in excess of the purchase price is bound to make an
accounting to his principal even if such thing, gift or excess is not owing to
the latter because of Art. 1891 which provides that “Every agent is bound to
render an account of his transactions and to deliver to the principal
whatever he may have received by virtue of the agency, even though it may
not be owing to the principal. Any stipulation exempting the agent from the
obligation to render an account shall be void”.
An agent may appoint a substitute if the principal has not prohibited him
from doing so; but he shall be responsible for the acts of his substitute:
1) when he was no 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.
A commission agent – is one who is engaged in the business of buying
and selling for a principal of personal property, which for this purpose has to
be placed in his possession and at his disposal.
A broker – is a middleman or intermediary who, in behalf of others, and
for a commission, or fee, negotiates contracts or transactions relative to
real or personal property in the name of the principal.
Distinction between a broker and a commission agent relative to
real or personal property:
1) The job of a commission agent involves a three-fold relationship, in
other words, the agent is related not only to his principal and to the
buyer or seller, but also to the property constituting the object of the
transaction which should be placed in his possession and at his
disposal. The job of a broker on the other hand, involved only a
double relationship, in other words, the broker is a pure
intermediary, a pure go-between who does not have either the
custody or the possession of the property that he disposes of.
2) A commission agent engages only in the business of buying and
selling personal property for his principal; whereas, a broker
engages in the business of buying or selling for his client’s
personal or real property;
3) A commission agent should have a place of business, whereas,
this is not necessary for the broker;
4) The broker is much more independent than the commission agent.
A commission merchant – is a commercial agent to whom the
possession of personalty is entrusted by or for the owner, to be sold, for
compensation, in pursuance of the agent’s usual trade or business, with
the title to the goods remaining in the principal. He differs from a broker
can only buy or sell in the name of his principal.
The ordinary commission given to a commission agent is merely the fee
or compensation for the sale of the goods which are placed in his
possession and at his disposal, whereas the guarantee commission (del
credere commission) is merely additional compensation for the risks of the
collection. Should the commission agent receive on a sale, in addition to
the ordinary commission, a guarantee commission: (1) he shall bear the
risk of collection, and (2) he shall pay the principal, the proceeds of the sale
on the same terms agreed upon with the purchaser.
A contract of agency may be revoked, either express or implied.
Implied revocation may be effected:
1) by the act of the principal in appointing another agent for the same
business or transactions.
2) by the act of the principal in directly managing the business
entrusted to the agent.
3) by the act of the principal in subsequently granting a special power
of attorney as regards the business to another agent where he had
previously granted a general power of attorney to the agent.
Causes for the extinguishment of a contract of agency. (Art 1919)
(E D W A R D)
1) by the Expiration of the period for which the agency was constituted
2) by the Death, civil interdiction, insanity or insolvency of the principal
or the agent
3) by the Withdrawal of the agent
 4) by the Accomplishment of the object or purpose of agency
5) by Revocation
6) by the Dissolution of the firm or corporation which entrusted or
accepted the agency
An agency is not revocable at will in the following cases:
1) if a bilateral contract depends upon it;
2) if it is the means of fulfilling an obligation already contracted;
3) if a partner is appointed manager of the partnership and his
removal from the management is unjustifiable;
4) if it has been constituted in the common interest of the principal and
of the agent or with interest of a third person who has accepted the
stipulation in his favor.
An agency coupled with an interest refers to “an agency wherein the
agent has acquired some interest of his own in the execution of the
authority granted to him, in addition to his mere interest in the contract of
employment with the resulting gains”.
DISTINCTIONS
Between agency and partnership – an agent acts not for himself but
for his principal; a partner acts for himself, for his firm and for his partners.
Agency from loan – an agent may be given funds by the principal to
advance the latter’s business, while a borrower is given money for
purposes of his own, and he must generally return it, whether or not his
business is successful.
Agency from lease of property – the agent is controlled by the
principal whereas the lessee is not controlled by the lessor; The agency
may involve things other than property whereas a lease of property involves
property only. The agent can bind the principal, while the lessee, as such
cannot bind the lessor.
Agency from Trust:
1) an agent usually hold no title at all; while a trustee may hold legal
title to the property;
2) usually, an agent acts in the name of the principal; while a trustee
may act in his own name;
3) usually, agency may be revoked or terminated at any time, while
trust is usually ended by the accomplishment of the purposes for
which it was formed
4) agency may not be connected at all with the property, while trust
involves control over the property;
5) the agent has authority to make contracts which will be binding on
his principal; while a trustee does not necessarily or even possess
such authority to bind the trustor or the cestui que trust;
6) agency is really a contractual relation, while a trust may be the
result of the contract or not; it may be created by law.
“Agency to sell” from sale:
1) in the first, the ownership of the goods is not transferred to the
agent while in the second, the ownership is transferred to the buyer
after delivery;
2) in the first, the agent delivers the price, while in the second, the
buyer pays the price.
“Agency to buy” from sale:
1) in the first, the agent acquires ownership in behalf of the principal,
while in the second, the buyer acquires ownership for himself;
2) in the first, the agent must account for all benefits or discounts
received from the seller, while in the sale, the buyer who obtains
discount does not have to reveal such fact to its own buyer.
3) The agent delivers the price, while the buyer pays the price.
Agency from Guardianship”
1) the agent represents a capacitated person while a guardian
represents an incapacitated person;
2) the agent is appointed by the principal and can be removed by the
latter, while the guardian is appointed by the court and stands in
“loco parentis”;
3) the agent is subject to the direction of the principal while the
guardian is not subject to the directions of the ward, but must of
course act for the benefit of the latter;
 4) the agent can make the principal personally liable, while the
guardian has no power to impose personal liability on the ward.
Agency from Judicial administrator:
1) an agent is appointed by the principal, while a judicial administrator
is appointed by the court;
2) an agent represents the principal, while a judicial administrator
represents not only the court but also the heirs and creditors of the
estate;
3) an agent generally does not file a bond, while an administrator files
a bond;
4) an agent is controlled by the principal thru their agreement, while an
administrator’s acts are subject to specific orders from the court.
“An agency is presumed to be for a compensation, unless there is proof
to the contrary” (Art. 1875)
A special promise to compromise does not authorize submission to
arbitration (Art. 1880)
Two fundamental principles of agency (Art 1881)
1) the agent must act within the scope of his authority
2) the agent must act in behalf of his principal
Authority distinguished from instructions:
1) the principal affects only third persons, because if the act is done
beyond the scope of the agent’s authority, the principal is not bound;
while instruction concerns only the principal and the agent;
2) Third persons must therefore verify or investigate the authority,
while in instruction, third persons do not have to verify or investigate
the instructions.
CREDIT TRANSACTIONS
“Credit” refers to the belief or trust by a person in another’s ability
to comply with an obligation; and “credit transaction” refers to the
contracts of agreements based on the said trust or credit.
Scope of the Credit Transactions:
a. the principal contracts of loan (both “commodatum” and
“mutuum”) and deposit;
b. the accessory contracts of personal guaranty and real guaranty;
c. preference and concurrence of credits.
Article 1933 – By the contract of loan, one of the parties delivers to
another, either something not consumable so that the
latter may use the same for a certain time and return it, in
which case the contract is called a commodatum, or
money or other consumable thing upon the condition that
the same amount of the same thing and quality shall be
paid, in which case the contract is simply called a loan or
mutuum.
Commodatum is essentially GRATUITOUS.
Simple loan maybe gratuitous or with a stipulation to pay interest in
commodatum, the bailor retains the ownership of the thing loaned while in
simple loan, ownership passes to the borrower.
Distinctions between mutuum and commodatum:
1) In the first, equivalent amount is to be returned (subject matter is
fungible); while in the second, the same thing is to be returned
(subject matter is non-fungible);
2) Mutuum may be gratuitous or onerous (with interest) while
commodatum is gratuitous ( if there is compensation, it ceases to
be commodatum);
3) Ownership goes to the borrower or bailee; while in commodatum
ownership is retained by the lender or bailor;
4) Refers only to personal property, while in the second, may involve
real and personal property;
5) Referred to as loan for consumption, while commodatum referred to
as loan for use or temporary possession;
6) Borrower, because of his ownership, bears risks of loss; while
lender, because of ownership, bears risks of loss;
 7) Can be generally obliged to pay only at the end of period, while
object at the end of period, still in some cases as return can be
demanded even before the end of the period.
Consumable and Non-consumable distinguished:
1) Consumable – a movable which cannot be used in a manner
appropriate for its nature without its being consumed. i.e. gasoline.
2) Non-consumable – a movable which can be used in a manner
appropriate to its nature without its being consumed. i.e. book
Fungible and Non-fungible distinguished:
1) Fungible – if the intention is to allow a substitution of the thing given
2) Non – fungible – if the intention is to compel a return of the identical
thing given.
Whether a thing is consumable or not depends on the nature of the
thing; whether it is fungible or not depends on the intention. Hence, sugar
is consumable and ordinarily fungible but if the intention is merely to display
the sugar for exhibition (ad ostentationem) then it is still consumable
(nature) but non-fungible (intention).
Bailment – it is derived from a French word “ bailler” meaning to deliver.
It is defined as the “delivery by one person to another in trust for a specific
purpose, with a contract express or implied, that the first shall be faithfully
executed and the property returned or duly accounted for when the special
purpose is accomplished or kept until the bailor reclaims it”
Parties in a bailment:
1) bailor – the giver; and
2) bailee – the recipient of the thing bailed.
Insofar as the borrower is concerned, the cause of consideration in a
contract of bailment of loan is the acquisition of thing; insofar as the lender
is concerned, it is the right or require the return of the same thing or its
equivalent.
Credit defined as applied to “loans” –
It is the ability to borrow money or thing by virtue of the confidence
or trust reposed by a lender that the borrower will pay what he may
promise. It is derived from a Latin word “credere” meaning “to trust”.
Loan distinguished from Rent or Lease:
1) In loan, the lender losses his property for the borrower becomes the
owner thereof, while in rent or lease, the owner of the property does
not lose his ownership, he merely loses control thereof in a limited
way for the duration of the rent or lease;
2) The relationship is one of lender and borrower, while the
relationship is one of lessor and lessee.
Loan distinguished from deposit:
1) In loan, the purpose is to grant its use to the borrower, while in
deposit, the purpose is safekeeping by depository (who generally
cannot use);
2) Generally, the borrower pays only at the end of the period; while in
deposit, the returning can be demanded by the depositor at any
time;
3) Relationship is that of lender (creditor) and borrower (debtor), while
the relationship is that of depositor and depository;
4) There can be compensation of credits, while in deposit, there’s no
compensation of things deposited with each other (except by
mutual agreement)
Loan distinguished from Sale:
1) Loan is a real contract, while sale is a consensual contract;
2) Generally, unilateral because only borrower has the obligations
while sale is bilateral and reciprocal.
COMMODATUM
 Commodatum and Loan are real contracts. They are perfected by
the delivery of the object loaned. On the other hand, consensual contracts
are perfected by mere consent.
Commodatum – is a real, principal, essentially gratuitous and
personal contract where one of the parties (called a bailor or lender)
delivers to another (called the bailee or borrower) a non-consumable object,
so that the latter may use the same for a certain period and later return it.
The term is derived from the Latin “Commodum” or “commodo”
meaning usefulness to a borrower.
Features or Characteristics of Commodatum as a Contract:
1) Real (because it is perfected by delivery)
2) Principal (because it can stand alone by itself)
3) Gratuitous (otherwise, the contract is one of lease)
4) Personal in Nature (because of trust)
What bailee (borrower) in commodatum acquires:
Commodatum gives the right to the use (jus utendi) and not the
rights to the fruits (jus fruendi) otherwise the contract maybe one of
usurfruct. But of course a stipulation that the bailee may make use of the
fruits of the thing loaned is valid. In such a case, however, the right to get
the fruits us merely incidental and not the main cause of the contract.
Bailor in commodatum (lender) is called “comodatario” in Spanish,
bailee in commodatum (borrower) is termed “comodante”.
Subject matter of Commodatum
Usually, only non- consumable goods may be the object of a
commodatum for the thing itself should not be consumed and must be
returned, but when a jar of vinegar is given merely for exhibition the thing
itself is not consumed. It is only used “ad ostentationem”. Note that the
vinegar in this case is non-fungible for the same vinegar must be returned.
Properties that may be the object of Commodatum:
1. Immovable property
2. Movable property
Example of Commodatum involving Land:
A borrowed B’s land so that he can erect thereon a small barong-
barong to be used for the time that A works in B’s province. If there is no
rental this is a case of commodatum, but if rental is paid, this would be a
lease.
Article 1938 – The bailor in commodatum need not be the owner of
the thing leased.
Bailor (lender) need not be the owner. Reason: the contract of
commodatum does not transfer ownership. All that is required is that the
bailor has the right to use the property which he is lending, and that he be
allowed to alienate his right to use. Hence, in lease for example, a lessee
may become a sub-lessor, unless he has been expressly prohibited to do
so in contract of lease.
Take note of the Mercado vs Aguilar case, wherein Mercado, the
occupant of a stall in the Batangas market has allowed Aguilar to occupy
the same gratuitously with the promise of Aguilar to return it upon demand.
Aguilar claims that Mercado has no right to demand because Mercado,
being a mere lessee of the municipality has no right to cede its occupancy
in commodatum.
Held: Mercado had the right to give it in commdatum. If a lessee,
by a contract of a sub-lease, may transfer to another the enjoyment of the
thing leased for a consideration, there is no reason why he should be
unable to cede gratuitously its use. Aguilar should return the stall.
Article 1939 – Commodatum is purely personal in character.
Consequently:
1. The death of either the bailor or bailee extinguishes the contract;
2. The bailee can neither lend nor lease the object of the contract to a
third person. However, the members of the bailee’s household may
 make use of the thing loaned, unless there is a stipulation to the
contrary or unless the nature of the thing forbids such use.”
Example of the first paragraph:
A loaned to B the former’s car by way of commodatum. If either A or B
dies, the contract is extinguished.
(Note: If there are two or more borrowers, the death of one does not
extinguish the commodatum as to the other, unless there is stipulation
to the contrary).
Example of the 2nd paragraph:
A loaned to B a stereo by way of commodatum. B cannot lend or lease
this to a friend. But the children of B, his household may use the same
unless there is a stipulation to the contrary. But said stereo cannot be
used as a chair, because the nature of the thing forbids such use.
Article 1940 – A stipulation that the bailee may make use of the fruits of the
things loaned is valid”
As a rule, the bailee is not entitled to the fruits, otherwise the contract
may be one of usufruct. It should be noted that the right to use is distinct
from the right to enjoy the fruits, since under the law, fruits should as a rule
pertain to the owner of the thing producing the fruits. However, to stipulate
that the bailee may make use of the fruits would not destroy the essence of
a commodatum for liberality is still the actual cause or consideration of the
contract.
Obligations of the bailee:
a) “The bailee is obliged to pay for the ordinary expenses for the use
and preservation of the thing loaned.” (Art. 1941)
Reason: The bailee is supposed to return the identical thing, so he
is obliged to take care of the thing with the diligence of a
good father of a family.
b) The bailee is liable for the loss of the thing, even if it should be
through a fortuitous event under the following instances: (Art. 1942)
1. If he devotes the thing to any purpose different from that for
which it has been loaned (amounts to bad faith or abuse of
generosity considering that commodatum is gratuitous);
2. If he keeps it longer than the period stipulated or after the
accomplishment of the use for which the commodatum has
been constituted (guilty of default or mora);
3. If the thing loaned has been delivered with appraisal of its value,
unless there is a stipulation exempting the bailee from
responsibility in case of a fortuitous event (the giving of the
value was made to hold the bailee liable for after all this is not a
sale and neither is ownerhip transferred);
4. If he lends or leases the thing to a third person, who is not a
member of his household (amounts to violation of its personal
character);
5. If being able to save either the thing borrowed or his own thing,
he chose to save the latter (amounts to an act of ingratitude and
to a failure to exercise due diligence).
“The bailee does not answer for the deterioration of the thing loaned
due only to the use thereof and without his fault” (Art. 1943)
“The bailee cannot retain the thing loaned on the ground that the
bailor owes him something, even though it maybe by reason of expenses.
However, the bailee has a right of retention for damages mentioned
in Article 1951”. (Art. 1944)
“When there are two or more bailees to whom the thing is loaned in
the same contract, they are liable solidarily”. (Art. 1945)
Obligation of the bailor:

a) “The bailor cannot demand the return of the thing loaned till after the
expiration of the period stipulated or after the accomplishment of the
use for which the commodatum has been constituted. However, if in
the meantime, he should have urgent need of the thing, he may
demand its return or temporary use.
In case of temporary use by the bailor, the contract of commodatum
is suspended while the thing is in the possession of the bailor”. (Art.
1946)
b) The bailor may demand the thing at will, and the contractual
relation is called a “precarium”, in the following cases:
1. If either the duration of the contract nor the use to which the
thing loaned should be devoted has been stipulated;
2. If the use of the thing is merely tolerated by the owner (Art.
1947)
Precarium – a special form of commodatum wherein the
possession of the borrower is precarious, that
is, dependent on the lender’s will.
c) “The bailor may demand the immediate return of the thing, if the
bailee commits any act of ingratitude as specified in Art. 765”. (Art.
1948)
The grounds of ingratitude under Art. 765 (which are the same
grounds for the revocation of a donation):
a. If the donee should commit offense against the person, the
honor or the property of the donor, or his wife, or children under
his parental authority;
b. If the donee imputes to the donor any criminal offense or any act
involving moral turpitude, even though he should prove it, unless
the crime or the act has been committed against the donee
himself, his wife, or children under his authority;
c. If he unduly refuses him support when the donee is legally or
morally bound to give support to the donor.
d) The bailor shall refund the extraordinary expenses during the
contract for the preservation of the thing loaned, provided the bailee
brings the same to the knowledge of the bailor before incurring
them, except when they are so urgent that the reply to the
notification cannot be awaited without danger.
If the extraordinary expenses arise on the occasion of the actual
use of the thing by the bailee, even though he acted without fault
they shall be borne by both the bailor and bailee, unless there is a
stipulation to the contrary. (Art. 1949)
e) If for the purpose of making use of the thing, the bailee incurs
expenses other than those referred to in Articles 1941 and 1949, he
is not entitled to reimbursement. (Art. 1950)
f) “The bailor, who, knowing the flaws of the thing loaned does not
inform the bailee of the same, shall be liable to the latter for the
damages which he may suffer by reason thereof.” (Art. 1951)
g) “The bailor cannot exempt himself from the payment of expenses or
damages by abandoning the thing to the bailee.” (Art. 1952)
Reason: The value of the thing loaned/borrowed might be less than
the value of the expenses or damages.
Simple Loan or Mutuum:
Article 1953 – A person who receives a loan of money or any other
fungible thing acquires thereof, and is bound to pay to the
creditor an equal amount of the same kind an quality.
 In “mutuum” the ownership passes to the borrower, but of course,
he must pay later.
Take note of the Grijaldo case (L-20240, Dec. 31, 1965) where
Grijaldo who borrowed money from a bank secured by a chattel mortgage
in the standing crops on his land, which crops were destroyed by the
Japanese during the war, was still obliged to pay, for his obligation was to
pay a generic thing – money representing the loan with interest. The chattel
mortgage on the crops simply stood as security for the fulfillment of his
obligation and therefore, the loss of the crops did not extinguish his
obligation to pay, because the account can still be paid from sources other
than the mortgaged crops.
Article 1954 – A contract whereby one person transfers the ownership of
non-fungible things to another with the obligation on the
part of the latter to give things of the same kind, quantity
and quality is considered a “barter”. (It is not a
commodatum nor a mutuum).
Article 1955 – The obligation of a person who borrows money shall be
governed by the provision of Art. 1249 and 1250.
“If what was loaned is a fungible thing other than money,
the debtor owes another thing of the same kind, quantity
and quality, even if it should change in value. In case it is
impossible to deliver the same kind, its value at the time of
the perfection of the loan shall be paid.”
Article 1956 – No interest shall be due unless it has been expressly
stipulated in writing.” (for the use of the money)
Kinds of interest:
Interest may be paid either as compensation for the use of the
money (monetary interest) or as damages (compensatory interest).
How Interest Arises:
The right to interest arises only by virtue of a contract or by virtue of
damages for delay or failure to pay principal on which interest is
demanded.
When Interest Earns Interest:
Interest due shall earn legal interest from the time it is judicially
demanded, although the obligation may be silent. (Art. 2212)
Interest by way of damages:
a) Part of the contract said: “The first installment payable in three
(3) months shall have no interest.” But the debtor was in default.
Should he pay interest for damages? Held: Yes, not interest for
compensation but interest for damages.
b) In contracts for the payment of a sum of money, the measure of
damages for delay is limited to the interest provided by law.
c) 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 now 12% per annum (not anymore 6% per
annum).
Repeal of the Usury Law:
Central Bank Circular No. 905 has repealed the Usury law. Today,
there is no more maximum rate of interest. The rate will just depend on the
mutual agreement of the parties. Interest can now be charged as the lender
and borrower may agree upon. Central Bank Circular No. 416 fixing the
rate of interest at 12% per annum deals with: loans, forbearance of any
money; goods or credit; and judgments.
In the determination of the interest, if it is payable in kind, its value
shall be appraised at the current price of the products or goods at the time
and place of payment. (Art. 1958)
 The general rule is that accrued interest (interest due and unpaid)
will not bear interest, except:
a) If there is agreement to this effect (Art. 1959) or
b) If there is judicial demand (Art. 2212)
Then, such accrued interest will bear interest at the legal rate,
unless a different rate is stipulated. (Art. 1959)
If the borrower pays interest when there has been no stipulation
therefore, the provisions concerning solutio indebiti or natural obligations,
shall be applied as the case may be. (Art. 1960)
If a borrower borrows money and orally agrees to pay legal interest
at 10% per annum, there is really no obligation to pay since the interest was
not agreed upon in writing. If he nevertheless pays because he considers it
his moral obligation to pay said interest, he cannot recover the interest that
he has given voluntarily. This will now be a natural obligation.
But if no interest was stipulated and by mistake he pays interest,
this will be a question of undue payment or solutio indebiti.
Charging interest in advance is permissible provided said interest
does not correspond to interest for more than one year.
IF A DEBTOR HAS PAID USURIOUS INTEREST, HOW MUCH CAN HE
GET BACK FROM HIS CREDITOR?
ANS: Under Art. 1961, in case of conflict between the NCC and the Usury
Law, the NCC applies, and therefore, the interest in excess of 12%
or 14% maybe recovered, with interest. However, in the case of
Angel Rose Warehousing vs. Chelda Enterprises, the Supreme
Court ruled that the entire interest can be recovered by the debtor
for such stipulation is void, (thus, it is as if there is no stipulation as
to interest). On the other hand, the principal contract of loan by itself
is valid, hence, this maybe recovered by the creditor. In case of
demand, and if the debtor is in default, said principal debt earns
interest from the date of the demand. The interest is not by way of
compensation but by way of damages.
DEPOSIT
A deposit is constituted from the moment a person receives a thing
belonging to another, with the obligation of safely keeping it and of
returning the same. If the safekeeping of the thing delivered is not the
principal purpose of the contract, there is no deposit but some other
contract. (Art. 1962)
A contract of deposit, being a real contract, is perfected by delivery
but on agreement to constitute a deposit is merely consensual, and is
therefore binding upon mere consent.
The principal purpose of a deposit is the safekeeping of the thing
delivered, but this does not mean that the depositary can never use. He
can, in two instances:
a) With the express permission of the depositor;
b) When the preservation of the thing deposited requires its use, it
must be used but only for that purpose.
Of course, if safekeeping is not the principal purpose, there is no
deposit but some other contract like one of lease or commodatum.
Kinds of deposits
1. Judicial (sequestration) – when an attachment or seizure of
property in litigation is ordered.
2. Extra-judicial –
a) voluntary – made by the will of the depositor
b) necessary –
1. made in compliance with a legal obligation;
2. on the occasion of a calamity;
3. made by travelers in hotels or inns;
4. made by travelers with common carrier.
CHARACTERISTICS OF THE CONTRACT OF DEPOSIT:
a) It is a real contract perfected by delivery. Nonetheless, there can
be consensual contract to make or constitute a deposit;
b) The principal purpose is the safekeeping of the thing delivered.
Thus, if safekeeping is merely secondary, the contract is not a
deposit but some other contract like one of lease or
commodatum;
c) The depositary cannot use the thing deposited except:
1. With the express permission of the depositor; or
2. When the preservation of the thing deposited requires its
use, but then it must be used only for that purpose.
d) Only movable things can be the object of deposit;
e) It is a gratuitous contract, except when there is an agreement to
the contrary or unless the depositary is engaged in the business
of storing goods;
f) The contract is neither unilateral or bilateral according to
whether it is gratuitous or compensated (onerous).
Deposit distinguished from Sale and Barter:
1. In deposit, ownership is not transferred but in S & B, ownership is
transferred upon delivery;
2. It’s a real contract, while S & B are consensual (perfected by mere
consent);
3. Generally gratuitous, while S & B always onerous.
Deposit distinguished from Commodatum:
1. It may be gratuitous, while the second is essentially and always
gratuitous.
2. Principal purpose is safekeeping, while the second, the principal
purpose is use.
Deposit distinguished from Agency:
1. In deposit, the purpose is safekeeping, while in agency, the purpose
is the representation by the agent of the principal’s affairs;
2. The custody of the things is the principal and essential reason for
deposit, while the custody of the things is merely an incidental or
accessory obligation of the agent;
3. It’s generally gratuitous, while agency is generally onerous or for a
compensation.
A so-called deposit of an advance payment in the case of a sale is not
the deposit contemplated by law. It is advance payment and ownership is
transferred to the seller once given.
“An agreement to constitute a deposit is binding, but the deposit itself is
not perfected until the delivery of the thing.” (Art. 1963)
“A deposit may be constituted judicially or extra-judicially.” (Art. 1964)
Distinctions between extra-judicial deposit and judicial deposit:
a) In EJD, the origin is the will of the parties, while JD, it’s the will of
the court;
b) In EJD, the status is that there’s a contract, while in JD, there’s no
contract;
c) In EJD, the purpose is the custody and safekeeping of the thing for
the benefit of the depositor, while in JD, it is to guarantee the right
of the plaintiff in case of a favorable judgment;
d) In EJD, the cause is gratuitous as a rule, while in JD, it’s onerous;
e) In EJD, the subject matter is always a movable property, while in
JD, it’s either movable or immovable property, but generally
immovable;
f) In EJD, it’s always in behalf of the depositor, while in JD, it’s in
behalf of the winner.
Generally, deposit is gratuitous. Exceptions: (Art. 1965)
1. When there is a contrary agreement.
2. When its depositary is engaged in the business of storing goods.
Kinds of Extra-Judicial Deposit (EJD):
 a) Voluntary – as when there is mutual consent;
b) Necessary – when there is a deposit because of a calamity
(depositum miserable)
Voluntary deposit is that wherein the delivery of the object is made by
the will of the depositor. (Art. 1968)
A deposit may also be made by two or more persons each of whom
believes himself entitled to the thing deposited with a third person, who
shall deliver it in a proper case to the one to whom it belongs. (Art. 1968)
The depositor need not be the owner – as a matter of fact, the law
provides “that the depositary cannot demand that the depositor prove his
ownership of the thing deposited.” After all, a depositor does not transfer
ownership over the subject matter.
Form of contract of deposit – (Art. 1969)
 Oral
 Written.
In either case, however, there must be a delivery.
Rule when depositor is incapacitated – (Art. 1970)
“If a person having capacity to contract accepts a deposit made by
one who is incapacitated, the former shall be the subject to all the
obligations of a depositary, and maybe compelled to return the thing by the
guardian, or administrator of the person who made the deposit, or by latter
himself if he could acquire capacity.”
Rule if depository is incapacitated – (Art. 1971)
If the deposit has been made by a capacitated person with another
who is not the depositor shall only have an action to recover the thing
deposited while it is still in the possession of the depositary, or to compel
the latter to pay him the amount by which he may have enriched or
benefited himself with the thing or its price. However, if a third person who
acquired the thing acted in bad faith, the depositor may bring an action
against him for its recovery.
The two principal obligations of the depositary:
a.) the safekeeping and
b.) the return of the ring, when required
The duty of safekeeping:
a.) If the contract does not state the diligence which is to be observed
in the performance, that of a good father of a family shall be
required;
b.) The depositary is responsible if the loss occurs through his fault, but
as a rule not if the loss is through a fortuitous event.
Effect if deposit is gratuitious or onerous –
More care is required if the deposit is for a compensation than if it is
gratuitous. But even if gratuitous, care must still be exercised. In case of
non-fault on the depository, the depositor-owner bears the loss because of
the maxim “res perit domino”. A guardian is not the depositary of the ward’s
properties (Phil. Trust Co. Vs. Ballestero, L8261, April, 1956)
Article 1973 – Unless there is a stipulation to the contrary, the depositary
cannot deposit the thing with a third person. If deposit with
a third person is allowed, the depositary is liable for the
loss if he deposited the thing with a person who is
manifestly careless on unfit. The depository is responsible
for the negligence of his employee”.
REASON : The depositary is as a rule not allowed to deposit with a
third person because a deposit is founded on the fact that
the depositor has precisely chosen a particular depository
by virtue of the latter’s qualification and because of the
trust and confidence reposed on him by the depositor.
Article. 1974. The depositary may change the way of the deposit if under
the circumstances he may reasonably presume that the
depositor would consent to the change if he knew of the
 facts of the situation. However, before the depositary may
make such change, he shall notify the depositor thereof
and wait for his decision, unless delay would cause
danger. (n)
The depositary holding certificates, bonds, securities or instruments
which earn interest is duty bound to collect not only the interest on
intangible properties, when due, but also the capital itself, and to whatever
may have been received or collected, to the depositor. Naturally, this would
not be the case should there be a contrary agreement (Art.1975, 1st par.)
This above particular provision does not apply to contracts for the
rent of safety deposit boxes. (Art. 1975, 2nd par.) The reason for this is that
here the renter of the box is supposed to have control over the box and
contents thereof, and the real owner of said boxes should therefore not
have the duty imposed in the first par. As A matter of fact, this is really a
lease of a thing (the box) and not a contract of deposit.
Article 1976. Unless there is a stipulation to the contrary, the depositary
may commingle grain or other articles of the same kind and
quality, in which case the various depositors shall own or
have a proportionate interest in the mass.
Article. 1977. The depositary cannot make use of the thing deposited
without the express permission of the depositor. Otherwise,
he shall be liable for damages. However, when the
preservation of the thing deposited requires its use, it must
be used but only for that purpose.
Article.1978. When the depositary has permission to use the thing
deposited, the contract loses the concept of a deposit and
becomes a loan or commodatum, except where safekeeping
is still the principal purpose of the contract. The permission
shall not be presumed, and its existence must be proved.
Palay was deposited so that it would be threshed into rice. Is this a
deposit or a hire of services? – Answer: While deposit of palay was
converted into a hire of services, yet, after the object of the hiring
(conversion into rice) has been fulfilled, the rice continued to be a deposit
in the possession of the thresher for them to return to the owner upon
demand. (Delgado vs. Bonnevie and Arandex, 23 Phils. 308)
WHEN DEPOSIT IS REALLY A LOAN:
1. Where money, consisting of coins of legal tender, is deposited with
a person, and the latter is authorized by the depositor to use and
dispose of the same, the agreement thus entered between the
depositor and the depository is not a contract of deposit but a loan
(Levellena vs. Lion, et.al, (11 Phils 141);
2. Evidence showing that interest has been offered as compensation
for the use of money deposited leads one to the conclusion that the
contract, although denominated by the parties as deposit is really
one of loan. (CO Agriela vs. Nepomuceno, 55 Phils. 283)
CAN THE RIGHT TO DEMAND THE RETURN OF THE THING
DEPOSITED PRESCRIBED?
ANS: Things received on deposit do not prescribed for the depositary
cannot claim that ownership of the thing deposited was transferred
to him, but simply the custody thereof. The possession of a
depositary as such, is not adverse to that of the depositor.
Possession in order to ripen into prescription, must among other
things be in the concept of an owner, public, peaceful and
uninterrupted. Adverse possession, can of course, give rise to
prescription.
Art. 1979. The depositary is liable for the loss of the thing through a
fortuitous event:
 (1) If it is so stipulated;
(2) If he uses the thing without the depositor's permission;
(3) If he delays its return;
(4) If he allows others to use it, even though he himself may
have been authorized to use the same.
A bank can compensate a debtor’s debt with a debtor’s deposit
because insofar as the deposit is concerned, the relationship between them
is that of a debtor and creditor not depositary and depositor”. (Gullas vs.
PNB, 62 Phils. 619)
A depositor is disputably presumed to be the owner of the funds
standing in his name in a bank deposit.” (Fultun Iron Works case 55 Phils.
208)
Current and savings deposits are loans to bank because it can use
the same.
A post dated check cannot be regarded as a check. A bank cannot
therefore deduct from a client’s checking (current) amount postdated
checks which have been issued by the depositor at least not until the date
indicated on the check (Ong Sip vs. PBTC, GR. No. 27328)
Because the PNB has a charter of its own, it is not an ordinary
corporation, and is not therefore governed by the Corporation Law. Thus, a
stockholder cannot inspect its books, otherwise its charter would be
violated. Only the Central Bank can inspect” (Gonzales vs. PNB, GR. #
33320, May 30, 1983)
The recovery of time deposits from a distressed bank as well as
damages should be in the RTC in an ordinary action, not a petition for
mandamus and prohibition. Bank deposits are really loans, and failure to
return the same is failure to pay an obligation as a debtor, not a breach of
trust for there is no trust, constructive or otherwise. The depositor’s remedy
is to file his claim in the liquidation proceeding of the bank.” (Serrano vs.
Central Bank, L-30571, Feb. 14, 1980, 96 SCRA 96)
Banks are not required to pay interest on deposit for the period
during which they are not allowed to operate by the Central Bank. This is
demanded by fairness. However, interest that had accrued prior to the
suspension should be paid by the bank for after all, it had made use then of
the money deposited. (The Oversees Bank of Manila vs. CA, L-49363,
June 11,1981)
Article. 1981. When the thing deposited is delivered closed and sealed,
the depositary must return it in the same condition, and he
shall be liable for damages should the seal or lock be
broken through his fault.
Fault on the part of the depositary is presumed, unless there is
proof to the contrary.
As regards the value of the thing deposited, the statement of the
depositor shall be accepted, when the forcible opening is imputable to the
depositary, should there be no proof to the contrary. However, the courts
may pass upon the credibility of the depositor with respect to the value
claimed by him.
When the seal or lock is broken, with or without the depositary's
fault, he shall keep the secret of the deposit.
Article1982. When it becomes necessary to open a locked box or
receptacle, the depositary is presumed authorized to do so,
if the key has been delivered to him; or when the
instructions of the depositor as regards the deposit cannot
be executed without opening the box or receptacle. (n)
Article 1983. The thing deposited shall be returned with all its products,
accessories and accessions. Should the deposit consist of
money, the provisions relative to agents in article 1896 shall
be applied to the depositary.
Article 1896. The agent owes interest on the sums he has applied to his
own use from the day on which he did so, and on those
which he still owes after the extinguishment of the agency.
Article 1984. The depositary cannot demand that the depositor prove his
ownership of the thing deposited. Nevertheless, should he
discover that the thing has been stolen and who its true
owner is, he must advise the latter of the deposit. If the
owner, in spite of such information, does not claim it within
the period of one month, the depositary shall be relieved of
all responsibility by returning the thing deposited to the
depositor. If the depositary has reasonable grounds to
believe that the thing has not been lawfully acquired by the
depositor, the former may return the same.
Article 1985. When there are two or more depositors, if they are not
solidary, and the thing admits of division, each one cannot
demand more than his share. When there is solidarity or the
thing does not admit of division, the provisions of Articles
1212 and 1214 shall govern. However, if there is a
stipulation that the thing should be returned to one of the
depositors, the depositary shall return it only to the person
designated.
Article 1986. If the depositor should lose his capacity to contract after
having made the deposit, the thing cannot be returned
except to the persons who may have the administration of
his property and rights.
Article 1987 If at the time the deposit was made a place was designated
for the return of the thing, the depositary must take the thing
deposited to such place; but the expenses for transportation
shall be borne by the depositor.
If no place has been designated for the return, it shall be made
where the thing deposited may be, even if it should not be the same place
where the deposit was made, provided that there was no malice on the part
of the depositary.
Article. 1988. The thing deposited must be returned to the depositor upon
demand, even though a specified period or time for such
return may have been fixed.
This provision shall not apply when the thing is judicially
attached while in the depositary's possession, or should he
have been notified of the opposition of a third person to the
return or the removal of the thing deposited. In these cases,
the depositary must immediately inform the depositor of the
attachment or opposition
Article 1989. Unless the deposit is for a valuable consideration, the
depositary who may have justifiable reasons for not keeping
the thing deposited may, even before the time designated,
return it to the depositor; and if the latter should refuse to
receive it, the depositary may secure its consignation from
the court. (1776a)
Article 1990. If the depositary by force majeure or government order loses
the thing and receives money or another thing in its place,
he shall deliver the sum or other thing to the depositor.
Article 1991 The depositor's heir who in good faith may have sold the
thing which he did not know was deposited, shall only be
bound to return the price he may have received or to assign
his right of action against the buyer in case the price has not
been paid him.
OBLIGATIONS OF THE DEPOSITOR
Article.1992 If the deposit is gratuitous, the depositor is obliged to
reimburse the depositary for the expenses he may have
incurred for the preservation of the thing deposited.
Article 1993. The depositor shall reimburse the depositary for any loss
arising from the character of the thing deposited, unless at
the time of the constitution of the deposit the former was not
aware of, or was not expected to know the dangerous
character of the thing, or unless he notified the depositary of
the same, or the latter was aware of it without advice from
the depositor.
Article 1994. The depositary may retain the thing in pledge until the full
payment of what may be due him by reason of the deposit.
(1780)
Article 1995. A deposit its extinguished:
(1) Upon the loss or destruction of the thing deposited;
(2) In case of a gratuitous deposit, upon the death of either
the depositor or the depositary. (n)
The above enumeration is not exclusive – there are other grounds, namely:
1) Expiration of the term
2) Demand at will of the depositor
3) Termination of the purpose of the deposit
4) Fulfilment of the resolutory condition
5) Mutual withdrawal from the contract.
Art.icle 1996. A deposit is necessary:
(1) When it is made in compliance with a legal obligation;
(2) When it takes place on the occasion of any calamity,
such as fire, storm, flood, pillage, shipwreck, or other
similar events”; otherwise termed as depositor
miserables.”
Two other kinds of necessary deposits
a) That made by travellers in hotels or inns;
b) That made with common
Example of necessary deposit made in compliance with a legal obligation:
A borrowed 20,000 from B and as a security thereof, pledged his
rolex watch. If B uses the said watch without authority of A, A may ask that
the watch be judicially or extra judicially deposited.
Other examples of necessary deposit in compliance with a legal obligation:
1. Cash deposits to be made by certain officers and officials;
2. Deposits to be made by those who desire to use firearms.
Example of necessary deposit under par. 2:
In a fire, Felicity saves Ina’s car. Felicity is in possession of the car
and she is supposed to be its depositary.
A TRAVELLER SPENT A NIGHT IN A HOTEL. A HOTEL SERVANT
MALICIOUSLY DESTROYED THE CELLULAR PHONE OF THE
TRAVELLER. IS THE HOTEL-KEEPER LIABLE?
ANS: Yes, provided that he had previously been informed about it and
provided further that the traveller followed any precaution that may
have been given by the hotel-keeper or his substitutes regarding its
care and vigilance of said property.
For purposes of necessary deposits, the word “guests” and
“travellers” are synonymous.
The liability of the hotel or innkeeper commences as soon as there
is an evident intention on the part of the travellers to avail himself of the
accommodation of the hotel or inn. It does not matter whether
compensation has already been paid or not, or whether guest has already
partaken of the food and drink or not.
He is liable for the vehicles, animals and articles which have been
introduced or placed in the annexes of the hotel. ( Art. 1999)
It shall include the loss of, or injury to the personal property of the
guests caused by the servants or employees of the keepers as well as
strangers but not that which may proceed from any force majeure. (Art. The depositary of property or objects sequestrated cannot be
2000) relieved of his responsibility until the controversy which gave rise thereto
has come to an end, unless the court so orders. ( Art. 2007)
The act of a thief or robber, who has entered the hotel is not
deemed force majeure, unless it is done with the use of arms or through an
irresistible force. (Art. 2001)

But he (hotel-keeper) is not liable for compensation if the loss is due

to the acts of the guest, his family, servants or visitors, or if the loss arises
from the character of the things brought into the hotel. (Art. 2002)

IF A WAS A GUEST IN B’S HOTEL. C, A DRUNKARD, ENTERED THE

HOTEL AND DESTROYED HIS PERSONAL BELONGINGS DESPITE
THE FACT THAT A HAD BEEN GIVEN PROPER NOTICE AND HAD
FOLLOWED ALL PRECAUTIONS. IS B LIABLE?

ANS: Yes. This is an act of stranger, not considered a force majeure. The
management should have been taken the necessary steps to
prevent the occurrence of things like this.

He cannot free himself from responsibility by posting notices to the

effect that he is not liable for the articles brought by the guest. Any
stipulation to this effect (between him and the guests) shall be void. ( Art.
2003)

He keeper has a right to retain the things brought into the hotel by
the guest, as a security for credits on account of lodging, and supplies
usually furnished to hotel guests. (Art. 2004) This right of retention is given
to compensate the innkeeper for the extra ordinary liabilities imposed upon
him by the law. It does not exists when the debtor is not a guest of the
hotel.

A sequestration or judicial deposit takes place when an attachment

or seizure of property in litigation is ordered.( Art. 2005)

Movables or immovables may be the subjects of sequestration.

GUIRITAN NOTES
A COMPILATION OF NOTES IN
PARTNERSHIP, SALES, AGENCY,
CREDIT TRANSACTIONS AND PROPERTY

FELIXBERTO L. GUIRITAN, NPS-VI

CITY PROSECUTOR
DEPUTIZED OMBUDSMAN PROSECUTOR
Butuan City