Aligada Lecture Notes

8/12/2019 Aligada Lecture Notes

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Jan 10 2014

Subrogatory and Recissory Action

Usurious Transactions

- Anti Usury Act (not the Civil Code)- Civil Code should never be confused by Civil Law- Civil Lawgoverns property, family rights, succession and laws that are civil in character- Civil laws of Spaniardsnot at all Spanish (Napoleon Code)- Not all civil laws are found in the civil code (special civil laws e.g., family code, condominium

code, water code)

Usury lawstate regulates the interest that could be charged if an obligation is unsecured, the

maximum rate of interest that can be charged is 14% per annum

- If an obligation is secured, the maximum rate of interest that can be charged is 12% per annum- Any rate of interest that is agreed upon, charged and imposed upon an obligation is usurious

Who has the power to regulate the rates of interest in the country?

- Vested in the monetary board (agency in the Central Bank)- Dec. 1982 rates > the monetary board passed Resolution 2224 abolishing the ceiling on interest

rates (Jan 1983)

- CB issued Circular 905 after 2224 to disseminate the content of Resolution 2224 2224 increased the legal rate of interest Abolished the ceiling

Did this give the parties freedom to agree in any interest? (Medera v Gonzales Enterprises)

- Medera applied an additional loan subject to the ff conditions: New obligation under one promissory note Consolidated 5.5% interest per month

- Lower court > 5.5% is excessive; 12% should be per annum- Gonzales assailed the ruling of the lower court

There was no legal basis for the lower court to apply the 12% rate of interest Legal rate of interest > shall only be applied if the parties only agreed to the terms of

payment, but did not agree upon the rate of interest

- SC > This is not a usurious transaction but the amount 5.5% per month is indeed excessive,unconscionable (unenforceable, shocking to the morals of the world)

Pay principal + 12% interest per annum- SC has never been consistent in the ruling in usurious transactions

Legal rate of interest


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When is an interest be said as a legal rate?

- When parties to a contract have agreed that the interest should be there, but failed to stipulatethe interest rate

- Will apply only if they agreed upon the payment of interestCivil code > 6% per annum legal rate of interest

Resol. 2224 > increased to 12% per annum

Did Resolution 2224 repeal the Civil Code? (Phil Rabbit Lines v Judge Leonardo de Castro)

- Mishandled a bus > 1 passenger was injured- Lower court said award damages to injuries suffered with interest at legal rate- Passenger filed a motion to execute judgment > computed an amount he believed which should

be awarded to him

- Phil Rabbit Lines said it will only pay P60,000 When an obligation arise from a loan, involves a loan, forebearance of money, goods,

chattels or judgments thereon, then the legal rate is 12% < under Monetary board

circular 2224

Based on a claim for damages so it should not be 12% but 6%- Monetary board is not a legislation body so it could not repeal a law

(Eastern Shipping Lines case)

- ___ dues < dues paid in the pier6%- Although the obligation does not arise from a loan, forbearance of money, if after judgment of

the court has become final and executor and still the debtor fails/refuses to pay the obligation,it automatically becomes a forbearance of loan > 12% should apply

- Subsequent to the monetary board resolution 2224 Another resolution was passed with respect only to the legal rate of interest

- Under the present Monetary Board resolution Has been returned from 12% to 6% effective July 1, 2013

Effects: 1) returned 12% to 6% interest rates Abandoned the ruling of eastern shipping with respect to forbearance

of money (no longer applicable)

Jan. 14, 2014

Demandabilityclasses of obligations

1. Pureimmediately demandable / not subject to a condition or period or term2. Subject to condition3. Subject to period or term


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Conditionfuturity and uncertainty

Periodupon which the demandablity of the obligation depends

- Future and certainDistinguish an obligation from a period

Suspensive condition (birth)gives rise to an obligation; as long as the condition still exists, there will be

no obligation

Suspensive period (demandability)makes the obligation demandable; only effect; no retroactivity

1187 effects of conditional obligationrise to an obligation entire effects shall retroact to the day of the

constitution of the obligation

To giveretroact

To do or not to docourts shall determine the retroactivity

Reciprocal obligationmutually compensate; need not deliver the fruits

Unilateral (debtor)keep interest, fruits, because he is not receiving anything

Rights of the creditor when the debtor does not comply

3 primary remedies

1. Specific performanceonly applies to give; creditor seeking to enforce the obligation2. Recissionnot seeking of performance; unmaking of the contract3. Damagesreturn the parties to status quo ante; if the debtor return everything to the creditor

*1 & 2 can never be combined; others can be combined

Additional remedies (art 1177):

1. Levyingafter exhausting primary; running after assets; court determines if ok to levy; creditorbecomes a judgment creditor

2. Accion subrogatoria3. Accion pauliana

Levyingyou can levy only in pursuance of a court order

follow the rules of court > execution of judgment

- Personal things first; no to real as long as there are still real properties


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Acion paulianaonly applies on valid contracts; if void > action for nullity of contract

- To impugn / assail acts and contracts entered into by the debtor for the purpose of defraudingthe creditor

Eg. Void contract: No other properties but one > but that only one was retained; gave to his

friend to defraud

Jan 24, 2014

1191the power to rescind is implied in reciprocal obligations

- Tacit resolutory in reciprocal obligationsIn ordinary obligations (not reciprocal)to be able to rescind, the power must be expressly provided in

the contract (general rule)

In reciprocal obligationsrecission is implied; need not be agreed upon; implied only in reciprocal

1191 > in order to apply, identify first if obligation is reciprocal

Reciprocal > the parties are debtors and creditor of each other but their respective obligations must

arise from the same cause

power to rescind is implied in case of breach in reciprocal obligations, the injured is given the power

to rescind

How may it be availed of/exercised?

- If it has been established that the obligation is reciprocal, the method shall depend upon theterms of the contract

If the contract recognizes extrajudicial recissionthen extrajudicial If it doesnt rescind judicially

1191remedies in case of breach of contract

1. Specific performance2. Recissiondespite the repeated use of the word recission, jurisprudence said the civil code

means resolution

Distinctions between recission and resolution

1. Resolution is a primary remedyinjured party can avail immediatelya. Recission is subsidiary remedyonly a remedy of last resort

i. Why subsidiary? Very harsh remedy; third parties can be affected by recission2. in resolutionavailable only to the party to the contract


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a. in recissioneven third persons can invoke the recission if the contract has caused thethird person damages

3. in resolutionshould there be just and valid reasons, the court can deny the action to resolvea. in recissionunder the law, once you have established the crown of recission, the court

has no power to deny the petition for recission

1191recission? No! resolution!

- Why? Apply the 3 distinctions- On what ground can be availed of (specific performance and recission)?

Only on the ground of breachWill any kind of breach justify the availment of specific performance and recission?

According to jurisprudence (Phil amusement board v natividad)

- Involved a contract of lease of a jukebox- PAB supplied the boxes; Natividad was the lessee- After using, boxes started to work usatisfactorily- PAB sent mechanicsstill malfunctioned- After three times, Natividad wanted to rescind- On the ground of breach- Despite the breach > SC said no because recission is a harsh penalty- If the breach is simple or merely casual, the remedy will not lie- Only when the breach committed is substantial will the remedy of recission lie

it will only depend on the initially chosen remedy

Nature of the two remedies provided on 1191

- Alternative (not cumulative)- You have to choose only one, but the choosing of one doesnt necessarily mean the waiver of

another

- If specific performance becomes impossible, can shift to recission Cannot be reversed because recission can never be impossible

- If the chosen remedy is recission, what is the period of prescription to be able to choose thatremedy?

Go to the law on recission > 4 years When to begin? From the date the contract sought to be rescinded

Exceptions according to 1191 Recission as initial remedy > shall prescribe from the date the contract

sought to be rescinded

Recission s a substitute remedy > will prescribe from the time theinitially chosen remedy becomes impossible


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o WHY?? Because it is the time which the law allows the shiftingCases: UP v Alumcor? Alonco?

- Forest concession offered for lease to the highest bidder- Contract of lease awarded to alonco

Should the lessee fail to comply, UP shall be free to terminate the contract- Failed to update payment of rentals despite repeated demands- UP rebidded the same property- Alonco said you cannot terminate; should be judicial- SC: No, because contract expressly provided for extrajudicial recission- When alonco failed to update rentals, under 1191 is UP of right to rescind?

What is the status of the recission? Is the act of UP terminating the said contract final?

No. while the injured party becomes entitled, it is not final because thedetermining entity to validate/invalidate the act is still the court

Case: involved a sale of piece of land (Conspicula/Adomos)

- Sale is done > title was cancelled and new title was transferred to the new buyer Conspicula died > heirs questioned validity

- Court found the sale defective > not valid Ordered to reconvey the property to the heirs The buyer did not agree, appealed to CA During the pendency, the buyer sold the subject land to another buyer

- Duringthe 2ndsale, buyer presented the undertakings to the 2ndbuyer 2ndbuyer went to the court to compel the seller to comply with the undertakings

Replaced the specific performance with the action to rescind- Seller: under 1191, being alternative, the choice of one is a waiver of another

The replacement should not be allowed Even assuming that the buyer went to the court for action to rescind, it has already

prescribed

- SC: 1. Wrong, while it is alternative, it is not a waiver. Shifting from specific performance torecission is not proper because specific performance became impossible

- Yes, it is true that it had been more than four years but it is valid because the specificperformance became impossible, so the period of prescription will start on the time it became

impossible

- Even after the establishment of recission, the court may deny the action of recission to be ableto comply with specific performance

Case: Roque v Gapuzsale of land

- 120 equal monthly instalmentsfirst 3 months update


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- In succeeding became in default > failed to update payment and arrears- Seller brought an action seeking recission on account of breach

According to paragraph 3 there is just and valid reasons so he should be allowed forextension of period (gave 45 days CA)

- SC: CA was wrong 3rdparagraph will apply only as long as the debtor had not incurred delay1191who has the power to bring an action?

Reyes v CA; Solomon caseonly the injured party

Feb. 11, 2014

Alternative obligations

Alternativeseveral things due but performance of one extinguishes

Conjunctiveseveral things due but all should be completed to extinguish

Facultative

Conjunctivepresence of the conjunctive and

Alternativepresence of the disjunctive or

Plural objects > if one is unlawful, would the entire obligations be invalid? > distinguish:

Conjunctive > invalidate > why? > all should be delivered

Alternative > still okay > deliver only one as long as he doesnt choose the unlawful object

Facultative

Right of choice

Alternative > debtor + creditor + 3rd

parties (consent is required-WHY? The choice should be accepted by

both)

Conjunctive > no right of choice

Facultative > debtor only; cannot be transferred

Only one obligation need to be performed


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Solidarity can exist on one side and joint on the other s ide

- Any term as long as the term connotes solidarity

Tests of solidarity: determining the nature of the obligation

1. Parties stipulated solidarity2. Law requires solidarity3. Nature of the obligation requires solidarity

Solidary obligations

1. Passivedebtors side2. Activecreditors side3. Mixeddebtors and creditors

PNB casecan the creditor sure one of the debtors or all of the debtors in passive solidary obligations?

although they are necessary parties, they are not indispensable

You can leave one, you can go against othersCase: Imperial insurance v Stella David

Bonds > secure answer to the judgment that the court shall render

Indemnity agreement > should the bonds be demandable? > the spouses shall indemnify the bonds

Husband died > stella was sued by Imperial insurance > instead of answering, she filed a motion to

dismiss > on the ground that Imperial had no cause of action against her bec. Of solidarity > should

proceed against the estate under the rules of court within 6 months

Supreme court said WRONG, you bound yourself solidarily, they are indispensable parties but not

necessary parties, you can file as many actions as you want

Any one of the solidary creditors may seek from any of the solidary debtors > basismutual agency (one

creditor acts not only on his behalf)

Start? From the moment of the perfection of the obligation

If did not comply > it is joint > the law does not

presume


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End? The moment one of the solidary creditors demands from any of the solidary debtors > the debtor

can only pay to the demanding creditor (the mutual agency bet. The demanding and paying is

extinguished)

If the debtor paid not to the demanding creditor > the payment is void because it is considered as

payment to a 3rd

person > the demanding creditor can compel the repeat of payment

With respect to the other debtors who were not given demand they may pay to all the solidary creditors

including the one who made the demand beforehand (mutual agency still exists between the other

debtors)

The demanding creditor cannot refuse payment even though he received the demand beforehand >

principles of mutual agency and guaranty apply

Feb. 14, 2014

In how many ways may solidarity exist?

1. Stipulation of the parties2. By law3. By reason of the nature of the obligation

There is nothing on the face of the obligations > that is why it is presumed

Why is it presumed (not just joint?)

- Nothing on the face of the obligation that characterizes / says if its joint or solidary- On the part of the creditors, it imposes greater power on the debtor because anyone of them

can demand for compliance of the obligation from any one of the solidary debtors; and anyone

of the debtors can be compelled to perform the obligation in favor of any of the debtors

- Basis? Mutual agency (creditor) > one creditor acts on behalf of all the creditor Mutual guaranty (debtor) > any one of the debtors guarantee any one of the creditors of

the performance of the obligation

The moment the demand is made by any of the solidary creditors, the principle of mutual agency ceases

to exist because the rights of the other creditors are consolidated into the person of the demanding

creditor.

Should X pay the entire obligation, it is extinguished. However, X acquires the right to be reimbursed

with respect to the extent of their respective shares. The obligation now becomes joint because the

right of B and C does not go beyond their respective shares

Tests of solidarity


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Does the payment of X makes him subrogated into the right of the creditors? No. Because he only

acquires the right to seek reimbursement. If X if subrogated into the creditors, he shall have the right to

collect the entire payment, that would be unfair

Agreement to exclude of the debtors shall be valid inter se, but not on the part of the debtors

1212. creditor cannot do anything prejudicial to the other creditors (basis: mutual agency). But in

relation to Article 1215, the creditor shall deliver to others the share in the obligation (novation)

In case the creditor who novated or condoned becomes insolvent, the other creditors doesnt have any

remedy (lapse of the law) > assuming that insolvency is total insolvency

Condonation and remission are allowed in solidary obligations

- Effect of remission? Depends on the object of remission-

Obligations with a penal clause (obligations which contain a penalty)

- Purpose of a penal clause To strengthen the coercive force or tie of the obligaton Gives more teeth to the obligation

The debtor breaches an obligation without a penal clause, what is the right of the creditor? > becomes

entitled to claim damages however he must first prove that he incurred damages

With a penal clause? He must first prove breach/damages before claiming payment of the penalty

What is the purpose of penalty? Serves as substitute for the indemnification of damages

The creditor cannot claim damages and penalties simultaneously. EXCEPTIONS

1. Partial performance2. Irregularity3. Unconscionable

Modes of extinguishment of the obligation

1. 6 primary causes2. Additional causesannulment, recission, fulfillment of the resolutory condition, prescription,

death

When will death extinguish the obligation?

- Not absolute, only a qualified cause- Only if the obligation is personal (to do)


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When will prescription extinguish the obligation?

- Case: DBP v Judge Adil?- Prescription does not extinguish the obligation- What is extinguished is the right to enforce the obligation- Obligation is still valid after 80 years (prescribed in 50 years) because the creditor did not make

a demand, the debtor himself voluntarily paid the obligation

- The civil character of the obligation is the one extinguished- Civil vs natural obligationsthe difference lies in the sanctions- Civilactions in court- Naturaljustice, equity, conscience; voluntary performance extinguishes the obligation

PAYMENT

- Not only delivery but also performance- Not only applies to give, but also to do or not to do- There shall be payment in ALL kinds of obligations- What if a 3rdperson pays? What is the status?

If it is a donation, it is validConsignation? > Special form of payment

- Not all consignation requires tender of payment- How do you make a consignation?

Judicialalways made in pursuant of the Civil code Extrajudicialmade in pursuant of BP 25 (only if obligation allows extrajudicial / judicial

consignation) / ONLY in rentals and arrears

- When is consignation not proper? Quirino case Right of redemption (no debt) or right of option (no debt)

How do you make consignation (PAYMENT)?

- Judicial: prior tender of payment as a rule (upon the unjust refusal of the offer of payment,consignation becomes unjustified)

There is unjust refusal of offer of payment First notice to the debtor Still refuses the notice; creditor may file an action before the court Case: Lopez v CA > 2ndnotice rule > it is indispensable Tender of payment (judicial deposit is not always required)

What is required is judicial placement at courts disposal so that the debtor canstill use the thing due

- Extrajudicial: consignation under BP 25


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Law always require deposit (in the proper place of playment) Must always comply with the requisites of a valid payment Case: Lim v Chuangcai ?

Feb. 18, 2014

Requisites of paymentmatters essential to the validity of payment; absence of one may affect the

validity

Characteristics of paymentmanners of how payment should be made

1. Integritysubstantial performancepartial performance (with damages)estoppel (waiver onthe part of the creditor)

Accept performance knowingly that it is defective; you are not entitled to damages2.

Identityto deliver the very thing due

EXCEPTION: Dation in paymentoInvolves the sale of all properties for the satisfaction of a debt in moneyoDation in payment is not limited to money, it also even include goods / if there

is a change in the object

oThe purpose is to extinguish the obligation Novationan old obligation is replaced with a new one

oConsent is needed because he will be receiving a new thing (extinguishment iseither partial / total

oDation in payment: extinguished obligation Value of payment should be commensurate?

Not necessarily (extinguishment partial / total)

*payment by cessionwhat is ceded is not property but only the authority to sell

Why? > the debtor continues to be the owner of the properties

How? > requires the consent of all the creditors

- If one of the creditors does not permit > can resolve into insolvency proceedings- Insolvency proceedingsinitiated by creditor

How? Courts shall determine if the debtor is indeed insolvent Does not extinguish debtors insolvency or obligation Courts shall issue a discharge after

Payment by cession depends on how much is realized on the sale of the debtors property (reason for

not absolute extinguishment)

*Novationnot an absolute mode of extinguishment; the old obligation is replaced with a new one


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CONTRACTSdefinition not complete because the law does not require plurality

1. Essentialconsent, object, consideration2. Naturalmatters __ not because parties stipulated it, but because the law made it (e.g.

warranty, contract of sales, law on sales)

3. Accidentalstipulated by parties (manner of payment; manners agreed upon by parties)Characteristics of a contract

1. Autonomy of the willfreedom to contract, to enter into agreements of their choice whichincludes freedom to stipulate

EXCEPTION: There can never be freedom outside the law Art. 13062. Obligatory forceparties to a contract are bound not only by what they expressly provided,

they are also bound by the consequences

3. Mutualitythe terms must be on a common ground between the parties Case: PNB v Padilla

- Former Sen. Padilla obtained a loan from PNB- With promissory note > rate of interest 18% > PNB shall have the right to

increase the rate of interest whenever it becomes necessary > interest became

48%

- In law, you cannot increase rate of interest more than once per year Effectivity, validity of the terms of the contract must not be left to one of the parties

4. Relativityanswers the question of who are bound by the contract Transmissible rightssuccessors, assigns, heirs Intransmissible rightsonly the parties are bound How does it become transmissible / intransmissible

- By law- By stipulation- By nature of the right- EXCEPTION: stipulation pour autrubi

Stipulation in a contract whereby both parties deliberately confersrights to a third person

Why? A person complete stranger can enforce the contract Can be withdrawn if the third person has not yet accepted; both parties

should withdraw

Art. 1311. An heir cannot be held liable beyond what he is entitled

- Meaning: an heir is entitled to only the residual value of the estate (what remains after thepayment of all the debts

- Heirs already paid indirectly (subtracted from the total estate)- Can an heir be liable to the debts of the deceased? An heir can never be held liable


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When a person dies, the debts should be paid before the computation of the estate sent)Perfection of contract?


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1. Consent (consensual contracts)2. Delivery of object (real contracts)

a. What perfects the contract is deliveryb. Is not consent necessary here? It is still necessary. The mere consent does not perfect

the contract.

Who cannot give consent?

1. Unemancipated minors (18 below)2. Insane / demented3. Deaf mutes who does not know how to read and write

Unemancipated minors (they are things on the past subject to RA 6809)

- Reduction of the age of majority from 21 to 18Art. 14 A minor 18 to 21 can contract marriage provided with parental consent

- Already modified by RA 6809- Minor is a person below 18- Also modified on law on emancipation in the Civil code (3 ways)

Law (reaching age of majority) Marriage Voluntary concession of parents and child to be emancipated according to the Civil Code

- Family code Law Marriage Agreement between parent and child

- RA 6809 > only one mode of emancipationby lawObligation and contracts should only read minors (not unemancipated)

- In contraction with other laws- Rule law on sales > minors can contract by themselves provided if it is a necessity (food, clothing

etc. exclusive)

Insane and demented

- They are not the same but common (mental ailment)- Insanity is greater than dementia- Dementiathink like children- Deaf mute who does not know how to write

Should be total deafness Mutism / shortness of tongue Lack of knowledge of writing

1327. Not disqualified


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Others who cannot give consent > other provisions

incapacity v. disqualification

- incapacityprovided that he can be represented by someone, can still contract- disqualificationhe cannot be represented, cannot contract

alienage is a special disqualification for certain contracts not an absolute rule on disqualification

- Case: Chisman (alien, relaxed rule)- Case: a Chinaman (acquired land before naturalization)- Law on sale: if brought by a foreigner

Real propertynull and void Personal propertyallowed by law

Art. 1332 When a person does not know how to read, or if the language of the contract is written on the

language not known to him, and if there is fraud or mistake, the other party must prove to the court

that he has explained the contract

When will this obligation arise?

- Case: Bunyi v. Reyes- Will arise only after when the party claiming the fraud or mistake does not really know how to

read, this should be first determined

Vices of consentdefect in the consent

Read Braganza v Villa-Abrille (cited Mercado case)

Can the minor invoke as a defense his minority?

- If passive misrepresentation: yes (Villa Abrille: contract was silent, never claimed age)- If active misrepresentation: no (Mercado: expressly represented)

Cannot bring an action to annul Bound by estoppel (stopped from denying the truth as to what you had misrepresented)

If minor had allowed the contract to prescribe without seeking annulment?

- In passive misrepresentation the prescription is 4 years-

You lose the right to annul if prescribed- He loses the right, however he cannot have any positive relief

Vices of consentdefect in the consent that is given to a contract

1. Mistake2. Violence3. Intimidation


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4. Undue influene5. Fraud

Mistake? What kind of mistake?

- Must be a mistake of fact (excused for noncompliance)- Not a mistake of law (not an excuse)- Must be unilateral / only one party should commit it- If mutual mistake refer to legal / confuses the parties- Must be a substantial mistake > refers to the object or purpose or conditions- If merely accidental, shall not vitiate

Violence? Intimidation?

- Refers to external force, irresistible < Violence- Involves internal force / threats < intimidation- Purpose of both is to get the consent of a person- If consent is given as a result? Will it become voidable?

NO. Case: Ruiz v Atienza Not all threats will vitiate consent; only those which shall produce a wrongful act. (e.g.

fear/danger to life or property)

- are in-laws included among those persons be intimidated? YES. Under ascendants

March 11, 2014

Vices of consentfor the purpose of getting the consent of a person/s to a contract

1. MistakeArt. 1332 If one of the contracting parties does not know how to read contract , theenforcing party must prove that he explained the contents of the contract.

When? Must first show to the courts that he is an illiterate, cannot understand thelanguage of the contract > if not established > need not be shown to the court

2. /3. Violence and Intimidationvitiate consent (know the distinctions) Violencephysical, external Intimidationinternal, emotional force, fear

- Ruiz v Atienza Not all threats will vitiate consent, only threats to commit anunlawful act

- In the case of violence and intimidation, even though employed by 3rdpersons,will also vitiate consent

Why? It is not necessary that there be connivance > violence andintimidation immediately produce effect

- If fraud, it will not affect / invalidate the contract; EXCEPTION 3 rdpersonsconnived with one of the parties


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4. Undue Influence No physical, no moral force Imposition of ones will over another Should not be confused with referential fear (does not vitiate consent; fear of displacing

another to whom respect is due; it is a unilateral act)

5. Fraud (must be serious) and machinations intended to induce the other to enter into a contractwithout which he did not enter

One who tries to exaggerate (sales talk)will not vitiate as long as the other party wasgiven chances

Opinion persona; if given by an expert shall not vitiate consent Should not be made by both parties or else the fraud of one another will compensate

each other

Simulation

- You do two things: pretend that there is (a contract) and pretend that it is (what appears)Kinds of simulation

1. Absoluteno contract at all, although the parties do not intent to be bound by what appears2. Relativethe parties intended to be bound, but not in the manner that it is intended to appear

Act of simulating is like fraud

Declaration of nullity of a contract

In absolute simulationcontract is void

Conceal their true agreement < relative simulation

Status of absolutevoid; relativevalid unless it was INTENDED to cause prejudice

VALIDITY is the general rule, NULLITY is the exception

3 essential elements of a contract

1. Consent2. Object3. Cause / consideration

Objectthings within the commerce of men e.g. rights, services

within the commerce of man

- Things which are susceptible of private ownership


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- Present or future things- Art. 1409 paragraph 3 present at the time of transaction

Future thingsdoes not exist at the time of perfection > as long as it exists at the time of performance

(Law on sales, not necessarily at time of perfection)

- When the object of the contract on the Law on sales is a future thing, it must have potentialexistence

- potential existence susceptible of coming from an existing thing Coconut seller even without coconut fruits > valid, because the person have coconut

trees

- Sales m__ resparati? > law on sales- Other laws > future things are valid if they have potential existence- With respect to future things, the law requires it only to be present at the time of the

performance

As long as he is the owner of the thing in the time of the deliveryRightsit must be lawful and transmissible (intransmissible rights only binds the parties)

- If the contract involves transmissible rights > parties, heirs, assigns, successors in interest- If the contract involves intransmissible rights > only the parties

Serviceslawful and possible

Last element: cause / consideration

- Reason of the existence of the contract- Why of the contract- Is this the same with juridical tie? YES- Is there a difference between cause and consideration? Phil. Laws-NO / U.S. Laws-YES- Is there a difference between cause and motive?

Motivepersonal reason Cause is known to both parties, motive-no

If the cause is valid, does it mean that the contract is valid? YES

If the motive is unlawful will it affect validity? YES, provided except if illegality will affect validity

- Example: motive becomes integral part of the existence of the contractIs it necessary that the cause to be adequate? NO, what the law requires is sufficient

Cause may be sufficient, valid, insufficient / inadequate, void > void unless you will make it appear that it

is founded on another valid contract

Presumptions of cause


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1. Existence2. Validity

If the law on the contract of sale is inadequate, it does not invalidate the contract, it just does not have

an effect, only a defect on part of the parties

Forms of contract

March 18, 2014

Restitution only on damages

Restitution not available on fraud

2 grounds for recission

1. damages2. fraud

in contracts involving fraud, when will recission lie:

1. if gratuitouswithout leaving / reserving enough property to answer for his obligations2. if oneroussell the property after the issuance of writ of attachment / judgment

what must be returned after recission > no exception: principle of quasi-contract

1. the thing received altogether2. fruits3. the price plus interest

incapacity only applies to voidable contracts! Not applicable to recissible! Incapacity not a ground for

recission!

In voidable contractsthere is ratification

If the ground for annulment is incapacity to give consent, who may ratify? > parents and guardians

From date of recording > fraud (registered)

From date of discovery > (not registered)

Can there be annulment without restitutiom?

- Yes. If the ground for annulment is incapacity but he was required to restore what he hasbenefitted

Statute of Frauds

No right of choice


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1. One of those enumerated under the 2ndparagraph2. Must be totally executor on both sides3. In writing4. Applies only on specific performance or damages

Effect if not complied with: you cannot prove the oral agreement by an oral evidence

What does in writing mean?

- Requirement that in writing does not mean the entire agreement must be in writing- Only the essentials must appear, not the entire agreement

Purpose of State of Fraudsto prevent fraud / perjury through reliance of ones memory

1. The nonperformance by agreement of the parties (not external)2. Only applies to personal guaranty (no collateral)

Real guaranty (always with a security / collateral)3. Under the Civil Code in settlement and donations propter nuptias must be covered by the

Statute of Frauds (oral is valid)

Under the Family code > marriage settlement must be in writingi. in donation propter nuptiaspresentdonationsii. in testamentary and formality of willsfutureit must be in a will; not enough

in writing

what can be donated? > all present property EXCEPTION donation propter nuptiasallows future

4. not absolute, auction sale 2

nd

paragraphthere is no sales agreement yet Does not allow the use of ?? price

5. Must be a real property Hernandez case statute sale itself agencyauthority of the agent Mindanao casegrant of the right of way Espina v Abayapartition agreement

Who may avail (recission)?

- Either one of the parties who suffered lesion- Defrauded party- Third person

Who may avail in voidable?

- Those who are bond primarily and subsidiarily- EXCEPTION: third persons who suffered injury

Who may avail in unenforceable?

Not all property included; must be within

s ecific erformance leasin /sale


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- Either of the partiesVoid contracts

- Pari delicto / in delicto- Torres v Ventura (when will pari delicto not apply)

violation of the homestead law Navarra v Navarra (in cases of Family Code)

March 25, 2014

Unenforceable Contracts

Statute of Frauds

1. Writing2. 6 enumeration3. Executor on both sides4. For specific performance / damages

Effect: you cannot produce an oral contract by oral evidence

Hernandez case (2 enumeration, only in real properties)

1. Leasing for more than one year2. Sale

The law on agency 1874whenever the sale of an immovable is made through an agent, if the authority

of the agent is not in writing, it is void

Statute of fraudssale itself must be in writing

An oral sale of an immovable property is valid, but not registrable

Void Contracts Art. 1409

- A non-existing contract- Confers no right- Imposes no obligation- Imprescriptible > can be brought at any time by anyone- What does not exist cannot produce any effect

Ninal case (rulings, 2 parts)

- Distinction between an action for annulment and declaration of nullity- Interpretation of article 34 of Family code; art. 47 applies to voidable, not void marriages


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Pari delictothey cannot bring an action against each other

- Not allowed to sue each other (basis:)- He who goes to court for purposes for seeking redress must come with clean hands

In delictonot equally at fault

Can there be a void contract outside of Article 1409?law on sales

1306 is the only limitation on the right to contract and right to stipulate (connect)

Law on sales (Art 1544 Double sale) > Laureta case > same seller, same object, different buyers not only

on double sale but also on double donation

1. Who registers 1stin good faith2. Possession 1stin good faith3. Gets the title 1stin good faith

Natural obligationvalid obligation not enforceable by court action

- Have sanctions but not similar to civil- Justice, equity and conscience

Payment made by an incapacitatedcan recover what he has paid subject to Art. 1427

1311heir is not liable beyond the value of the inheritance that he has received

- What he is entitled to is what is left after the debt has been paid1430 you cannot be compelled to perform

- Not an actionable obligation- Supreme Court: prescription does not extinguish an obligation

What is extinguished is the sealing character Converting to it a natural obligation

If the payment is made voluntarilycannot be recovered

March 28, 2014

Void contracts (Laureta case)

Under the doctrine of pari delicto > essential that both parties are equally at fault

Effects of pari delicto

1. Neither one can sue each other (basis: clean hands)


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2. Neither one can recover what he has given to anotherRules in pari delicto, not absolute EXCEPTIONS:

1. Ventura casepari delicto does not apply to violations of the Homestead Law- Why? The moment the grant under it has been violated > it is converted into a public

character but not automatically

i. Ligao v CA > no automatic cancellation or reversion of the Homestead grantii. Should bring an action for reversion

Only the solicitor general is authorized to bring an action, the State isnot precluded to bring an action

- Homestead law not allows performance of the any within 5 years:i. Cannot encumberii. Cannot alienate

iii. Cannot dispose

Cannot be done by the patentee or the grantee; if committed any of the3 acts, it amounts to a violation

2. Velasco casedoes not apply to actions under Art. 36 for nullity on the basis of psychologicalincapacity

- Nothing can prevent the court to declare both parties / spouses as psychologicallyincapacitated

3. Actions for disbarment (Mortel v. Aspiras?)- Case about an atty who promised to marry a girl but let his son marry her instead- Disbarments are exceptions to pari delicto- Relief is not granted to the complainant- Purpose of disbarment is to remove misfits and persons who does not deserve to belegal practitioners

Natural obligations

- Not based on law / not human law- Based on equity and natural law

Distinctions between law and equity

Law Equity

Law is a rule of conduct which must be just and

obligatory and formulated by a competent

legislative power for common good / common

benefit (Manresa)

Law is an ordinance of reason promulgated by

competent authority and must be for the common

good (St. Augustine)

Equity is justice outside legality.

Cannot and does not supplant the law but it may

supplement the law (Aguila v CFI)

Law is always promulgated by competent

authority-congress

Equity is not enacted by law-making bodies, it

emanates from natural law


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When there is conflict between law and equity,

law always prevails

Equity is grounded on the precepts of conscience

rather than sanctions based on positive law

When there is an applicable law, equity does not

apply

Applies only in the absence of law > not a

replacement

Dural in nature (sanctions of positive law) Ethical in nature (morals)

The sanction of natural obligationjustice, equity, conscience

- Cannot be enforced through a civil action- No recovery on what has been paid (rule applies on voluntary payments only!)- If voluntary, can be recovered

In relation to RA 6809 (reduced the age of minority to 18)

Recovery in cases of pari delicto > may be allowed EXCEPTIONS:

1. Violations of price control law2. Violations of labor law3. Violations of minimum wage law

REVIEW REVIEW REVIEW

Obligations

Delaythe mere fact that the debtor has not performed on the due date on the moment of demand

does not put him in delay. IT MUST BE CULPABLE DELAY.

If the cause is not imputableNOT IN DELAY

Last paragraph of Art. 1169 < demand is not necessary (demand is replaced by the offer)

- Not in delay (4)- When will there be delay in reciprocal obligations?

- If there is an offer or performance of the other, and the other party does not perform,there is delay

USURIOUSno more usurious transactions according to Resolution 2224 (removed the ceiling on

interest rates)

Case: Medel v CA (never asked in the bar because of the flip flopping rulings regarding the amount of

interest)

Legal rate of interestincreased from 6 > 12%

- Case: Eastern Shipping Lines no longer holds handsince July 1, 2013 > 6% again

In other cases, it is the courts discretion.

In these cases, it is a matter of right


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- Will apply only if the parties have agreed on the payment of interest but failed to stipulate onthe rate

Kinds of Interests

1. Moratoryuse of somebody elses money2. Compensatoryinterest in form of punishment3. Interest to become due

a. Moratorymust appear in writingb. Compensatoryinterest imposed by the court, need not in writing

Compounding of interest > payment of interest of the interest is not paid

- Not illegal but not favored by the law- More /heavier burden on the part of the debtor- Requirements (there must be agreement in writing / oral not allowed)

- EXCEPTION: Judicial _____Classification of obligations in so far as demandability is concerned

1. Know the distinction between condition and period2. What obligations are immediately demandable3. What are the effects of an illegal / impossible condition

a. Does not automatically nullifyi. If the illegal / impossible condition can be separated from valid conditions; validii. If cannot separate > find out how the illegal / impossible condition was

attached:

1. Attached negativelyvalid2. Attached positivelyvoid

Alternative obligations (as per plurality of obligations)

1. Conjunctive obligationscharacterized by and; several obligations, everything should becomplied with

a. No right of choice2. Alternative obligationsseveral things due, compliance of one is enough3. Facultativeone thing due, debtor has the right for substitution of the principal

Cause or consideration

- If contract has no cause?- If it may be proven: valid- If it appears not to have any cause: not necessarily void (establish another valid cause)

PROBLEMS 10 ONLY FOR FINALS


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READ THE PROBLEM CAREFULLY

DO NOT FORGET TO QUALIFY ANSWERS

Documents

Aligada Lecture Notes