Civil Law Review Ii Midterms.docx

CIVIL LAW REVIEW II MIDTERMS 1. When a 3rd person pays the creditor without the knowledge and consent of the debtor, the debtor must reimburse to the 3 rd person the amount for which he benefited. If the payment was made with the knowledge and consent of the debtor, the 3 rd person is entitled to reimbursement and subrogation to the rights of a creditor.  Art. 1236. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary. Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor. 

Art. 1237. Whoever pays on behalf of the debtor without the knowledge or against the will of the latter, cannot compel the creditor to subrogate him in his rights, such as those arising from a mortgage, guaranty, or penalty.

2. Defenses of a Solidary Debtor. A Solidary Debtor may raise the complete defense (personal) of Minority; thus she cannot be held liable by the creditor. However, if the defense belongs to another solidary debtor, she may raise a partial defense of minority up to the extent of the part of the debt of the latter  Art. 1222. A solidary debtor may, in actions filed by the creditor, avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him, or pertain to his own share. With respect to those which personally belong to the others, he may avail himself thereof only as regards that part of the debt for which the latter are responsible. 3. The creditor may compel any one of the solidary debtors to pay the full amount of the obligation. The solidary debtor who pays the obligation is entitled to reimbursement from her co-debtors. If one of the solidary debtors cannot reimburse his co-debtor who paid the obligation because of his insolvency, his share shall be borne by all his co-debtors, in proportion to the debt of each.  Art. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected. 

Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept. He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made. If the payment is made before the debt is due, no interest for the intervening period may be demanded. When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying the obligation, such share shall be borne by all his co-debtors, in proportion to the debt of each.

4. The statement “pay as soon as he has money” is an obligation with a period. The remedy available to the creditor is to go to court and have the court fix the duration.  Art. 1180. When the debtor binds himself to pay when his means permit him to do so, the obligation shall be deemed to be one with a period, subject to the provisions of Article 1197. 

Art. 1197. If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was intended, the courts may fix the duration thereof. The courts shall also fix the duration of the period when it depends upon the will of the debtor.

In every case, the courts shall determine such period as may under the circumstances have been probably contemplated by the parties. Once fixed by the courts, the period cannot be changed by them. 5. If the loan was paid through delivery of property, the value of the property delivered shall be the amount that shall be deducted to the loan. Dacion En Pago.  Dacion en Pago - mode of extinguishing an obligation whereby the debtor alienates in favor of the creditor property for the satisfaction of monetary debt;  Extinguish up to amount of property unless w/ contrary stipulation; 6. A debtor can be compelled to pay his debt if he lost his right to make use of the period.  Art. 1198. The debtor shall lose every right to make use of the period: (1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the debt; (2) When he does not furnish to the creditor the guaranties or securities which he has promised; (3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through a fortuitous event they disappear, unless he immediately gives new ones equally satisfactory; (4) When the debtor violates any undertaking, in consideration of which the creditor agreed to the period; (5) When the debtor attempts to abscond.

7. A creditor cannot be compelled to accept a Manager’s Check. A Manager’s Check is not a valid legal tender because a valid legal tender in the Philippines is Philippine currency whether coins or bills. There is still no payment if payment was made through a Managers Check because a Manager’s Check is not a valid legal tender. It will only be considered as payment after the Manager’s Check has been encashed. 8. Consignation – to be released from his obligation to pay monthly rentals.  The requisites of consignation are as follows: 1. To prove the existence of a valid debt. 2. To prove a valid prior tender of payment, unless tender is excuse [sic]; 3. There must be prior notice of consignation (before deposit) to the creditor; 4. Actual consignation (deposit) to court; 5. Subsequent notice to the creditor of the consignation; Art. 1256. If the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due. 

Instances when prior tender of payment is no longer necessary: (1) When the creditor is absent or unknown, or does not appear at the place of payment; (2) When he is incapacitated to receive the payment at the time it is due; (3) When, without just cause, he refuses to give a receipt; (4) When two or more persons claim the same right to collect; (5) When the title of the obligation has been lost.

9. Joint Debtors. As joint debtors, the debt shall be divided into equal shares. A joint debtor is only obliged to pay up to the extent of the amount of her proportionate share. 10. Indeterminate thing – generic. If the obligation is to deliver an indeterminate thing, the loss or destruction of the thing does not extinguish the obligation because an indeterminate thing is generic and can be replaced. Thus, the obligee may still demand the delivery of the generic/indeterminate thing.  General Rule in Loss of the Thing Due: Art. 1262. An obligation which consists in the delivery of a determinate thing shall be extinguished if it should be lost or destroyed without the fault of the debtor, and before he has incurred in delay.

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When by law or stipulation, the obligor is liable even for fortuitous events, the loss of the thing does not extinguish the obligation, and he shall be responsible for damages. The same rule applies when the nature of the obligation requires the assumption of risk. Exception: In an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not extinguish the obligation.

11. The debtor used Compensation as a mode of extinguishing his obligation. Compensation takes place when 2 or more persons, in their own right, are creditors and debtors of each other. Requisites of Compensation:  Art. 1279. In order that compensation may be proper, it is necessary: (1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other; (2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated; (3) That the two debts be due; (4) That they be liquidated and demandable; (5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor. For there to be compensation, both parties must be creditors and debtors of each other. The debts must be between them only and both debts should consist in a sum of money. The sum of money need not be of equal amount. 12. Novation – is the substitution or change of an obligation by another, resulting in its extinguishment or modification, either by changing its object or principal conditions, or by substituting another in place of the debtor, or by subrogating a 3 rd person in the rights of the creditor.  Art. 1291. Obligations may be modified by: (1) Changing their object or principal conditions; (2) Substituting the person of the debtor; (3) Subrogating a third person in the rights of the creditor. For there to be a valid novation, the substitution of another debtor must be made with the knowledge and consent of the creditors, since it is an indispensable requirement.  Art. 1293. Novation which consists in substituting a new debtor in the place of the original one, may be made even without the knowledge or against the will of the latter, but not without the consent of the creditor. Payment by the new debtor gives him the rights mentioned in Articles 1236 and 1237. Requisites of Novation: a. Previous valid and existing obligation; b. Capacity of the contracting parties; c. Animus Novandi or intent to novate; d. Substantial difference between the old obligation and the new obligation; consequently, extinguishment of the obligation; e. Validity of the new obligation. 13. Option Contract – is a contract granting a privilege to one person, for which he has paid a consideration, giving him the right to buy certain property at any time within the agreed period at a fixed price. It is an Option Contract if the consideration is separate and distinct from the purchase price. Consideration may be anything of value (e.g. use of condo unit for whole month). 14. Reformation of Instrument – when there was a meeting of minds between the parties, however their true intention is not expressed in the instrument, by reason of mistake, fraud, inequitable conduct or accident.  Art. 1359. When, there having been a meeting of the minds of the parties to a contract, their true intention is not expressed in the instrument purporting to embody the agreement, by reason of mistake, fraud, inequitable conduct or

accident, one of the parties may ask for the reformation of the instrument to the end that such true intention may be expressed. If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds of the parties, the proper remedy is not reformation of the instrument but annulment of the contract. If because of the inadvertence or mistake of the typist, the true intention of the party was not expressed, the instrument may be reformed. (e.g. true intent is to donate a Benz) Art. 1364. When through the ignorance, lack of skill, negligence or bad faith on the part of the person drafting the instrument or of the clerk or typist, the instrument does not express the true intention of the parties, the courts may order that the instrument be reformed. 15. The contract shall be voidable if one of the contracting parties is a minor because he is incapable of giving consent; thus, he incapacitated to enter into a contract sale.  Art. 1390. The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving consent to a contract; (2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. 

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These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification. The law states that subleasing is allowed unless there is an express stipulation to the contrary. Thus, if the contract of lease does not prohibit subleasing, it is therefore allowed. Ejectment case will not prosper.  Art. 1650. When in the contract of lease of things there is no express prohibition, the lessee may sublet the thing leased, in whole or in part, without prejudice to his responsibility for the performance of the contract toward the lessor. In an Implied Lease (Tacita Reconduccion), the period of the implied renewal of lease shall be based on the frequency of payment. If in the terms of the contract, payment is done monthly, hence the new lease is monthly. Therefore, upon expiration of such, the lessor can ask for judicial termination of lease. When the monthly renewal of lease has already expired, the lessor can eject the lessee even without demand since the lease is already terminated upon its expiration. Hence, Ejectment case will prosper.  Tacita Reconduccion (Implied Lease) – arises If at the end of the contract, the lessee should continue enjoying the thing leased for at least 15 days with the consent of the lessor unless a notice to the contrary had been previously given by either party.  Requisites: a. The term of the original contract has expired; b. The lessor or lessee has not previously given a notice to vacate; and c. The lessee continued enjoying the thing leased for at least 15 days at the end of the contract with the consent of the lessor. Remedies of the Unpaid Seller under RECTO LAW: (alternative and exclusive) a. Specific Performance upon Vendee’s failure to pay; b. Rescission of the Sale if Vendee shall have failed to pay 2 or more installments; and c. Foreclosure of the Chattel Mortgage Constituted on the thing sold if vendee shall have failed to pay 2 or more installments. Remedies of the Unpaid Seller under MACEDA LAW: a. Specific Performance. The unpaid seller can demand specific performance from the buyer within a grace period of 60 days. No additional interest can be imposed on the buyer; b. Rescission of the Contract. Rescission may be done after notice of cancellation or rescission by notarial act and full payment of the cash surrender value. c. Right of Retention. In case the installments made do not reach 2 years, the seller can retain the same. However, the seller can only retain a maximum of 50% of the installments made. d. Payment of damages by buyer. Remedies of Buyer under MACEDA LAW:  IMMOVABLES: a. Suspension of Payment b. Non-Forfeiture of Payments c. Right to the grace period stipulated (60 days)

MOVABLES a. Specific Performance b. Recoupment c. Accept goods and maintain an action for damages d. Action or counterclaim for damages e. Rescission of contract f. Suspension of Payment 21. All the partners, including industrial partners, are liable pro rata with their respective personal property for partnership debts after all the partnership assets have been exhausted. Any stipulation that exempts a partner is void.  Art. 1816. All partners, including industrial ones, shall be liable pro rata with all their property and after all the partnership assets have been exhausted, for the contracts which may be entered into in the name and for the account of the partnership, under its signature and by a person authorized to act for the partnership. However, any partner may enter into a separate obligation to perform a partnership contract. 22. Partner by Estoppel. Only those partners who represented themselves as partners and gave consent shall be liable pro rata. Those persons who did not consent or did not have knowledge is not liable.  Art. 1825. When a person, by words spoken or written or by conduct, represents himself, or consents to another representing him to anyone, as a partner in an existing partnership or with one or more persons not actual partners, he is liable to any such persons to whom such representation has been made, who has, on the faith of such representation, given credit to the actual or apparent partnership, and if he has made such representation or consented to its being made in a public manner he is liable to such person, whether the representation has or has not been made or communicated to such person so giving credit by or with the knowledge of the apparent partner making the representation or consenting to its being made: (1) When a partnership liability results, he is liable as though he were an actual member of the partnership; (2) When no partnership liability results, he is liable pro rata with the other persons, if any, so consenting to the contract or representation as to incur liability, otherwise separately. 

When a person has been thus represented to be a partner in an existing partnership, or with one or more persons not actual partners, he is an agent of the persons consenting to such representation to bind them to the same extent and in the same manner as though he were a partner in fact, with respect to persons who rely upon the representation. When all the members of the existing partnership consent to the representation, a partnership act or obligation results; but in all other cases it is the joint act or obligation of the person acting and the persons consenting to the representation. 23. General Rule: A partnership may constituted in any form for validity and enforceability of the contract among the parties. Exception: However, If the contract of the partnership has a capital of 3,000 or more, in money or property, it must appear in a public instrument and must be recorded in the SEC. Also, where immovable property or real rights are contributed, regardless of value, the contract itself must be in writing and in a public instrument and an inventory of the property contributed, signed by the parties is attached to the public instrument.  Art. 1771. A partnership may be constituted in any form, except where immovable property or real rights are contributed thereto, in which case a public instrument shall be necessary. (1667a) 

Art. 1772. Every contract of partnership having a capital of three thousand pesos or more, in money or property, shall appear in a public instrument, which must be recorded in the Office of the Securities and Exchange Commission. Failure to comply with the requirements of the preceding paragraph shall not affect the liability of the partnership and the members thereof to third persons. (n)

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Art. 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.

The Recto Law, which forms part of the Civil Code, covers installment sales of personal property while the Maceda Law governs installment sales of real property.

THE RECTO LAW The Recto Law comprises Articles 1484 to 1486 of the Civil Code. It was added to the Civil Code to prevent abuses in the foreclosure of chattel mortgages, such as when mortgagee-creditors foreclosed mortgaged property, bought them at a low price (on purpose,) then prosecuted the mortgagor-debtors to recover the deficiencies.

In the event a buyer of personal property defaults by failing to pay two or more of the agreed installments, the seller can do any of the following:

1. Demand that the buyer pay (a.k.a. specific performance) 2. Cancel or rescind the sale 3. Foreclose the mortgage on the property bought (if there ever was a chattel mortgage) Regarding no. 3, this happens when a person takes a loan to buy something and he mortgages the thing he bought to ensure the creditor that he will pay the loan. Remember: If you choose one remedy, you can’t choose the others. These remedies, believe it or not, are also available to the buyer. You also can’t use all or any of them at the same time. The Recto Law also won’t apply to a straight sale (i.e. a sale where there is a downpayment and the balance is payable in the future in a single payment only.) The seller can also assign his credit to another person, making that person the new creditor.

If the buyer refuses to surrender the items to the seller, he becomes a perverse buyer-mortgagor. When that happens, the seller can recover expenses and attorney’s fees.

The Recto Law also covers leases with the option to purchase.

THE MACEDA LAW, RA 6552 Do you want to know your rights as a real estate investor, or simply as a real estate buyer who is making installment payments? The first logical step would be to know what law applies and what that particular law contains, which in this case would be the full text of Republic Act No. 6552. More popularly known as the Maceda Law, the RA 6552 follows.

The Maceda Law, RA 6552, is the real estate equivalent of the Recto Law. Like the Recto Law, it also covers financing of sales of real property (which is why mortgages also come in.) It doesn’t apply, however, to the following sales: 1. Industrial lots 2. Commercial buildings and lots 3. Lands under the CARP Law MACEDA LAW (RA6552) Maceda Law in the Philippines applies to the purchaser of real property by installment payments when the purchase becomes cancelled by a delinquency in payment. It provides the buyer with a right to a refund as a requisite for cancellation of contract due to delinquency when the

buyer has paid at least two years. The refund is 50% of total payments; additional 5% per year after 5th year.

To qualify for the Maceda Law, the buyer must have already paid at least 2 years of installment payments.

The buyer has the right to continue the unpaid installments due without additional interest provided that the buyer must pay within the grace period. The grace period provided is one month for every one year of installments paid. The buyer has the right to opt for a refund of the installment payments being made (This includes the down payments, deposits or options on the contract). The buyer is entitled to 50% refund from his total payments made. An additional of 5% refund per year for every 5 years. If the buyer has paid less than two years installment: The buyer has the right to continue his payments within a grace period of 60 days.

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CONTRACT OF SALE Ownership is transferred upon delivery. Transfer is Permanent, unless subject to a resolutory condition. Seller must be the owner at the time the property is delivered, or atleast authorized by the owner to transfer ownership Usually, the selling price is mentioned, as the parties involved can fix it.

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CONTRACT OF LEASE No transfer of ownership.

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Transfer is temporary.

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Lessor need not be the owner.

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The price of the object, distinguished from the rent, is usually not mentioned.

RESOLUTORY CONDITION 

a condition whereby, upon fulfillment terminates an already enforceable obligation.

SUSPENSIVE CONDITION 

SALE

a condition which suspends rights and obligations until the uncertain future event occurs.

DATION

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No pre-existing credit

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Pre-existing credit

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Obligations are created

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Obligations are extinguished

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Less freedom in determining the price

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Greater freedom in determining the price Buyer still has to pay the price

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Debtor receives payment before the contract is perfected

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Governed by law on sales

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Governed by law on sales

GUARANTOR

SURETY

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Liability is subsidiary

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Liability is solidary

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Pays when the principal debtor cannot pay

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Pays when the debtor does not pay

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Is an insurer of debtor’s insolvency

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Is an insurer of debt

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Can set up excussion GENERAL PARTNER General Partners have an equal right in the management of the business Personally liable for partnership obligations Name of a general partner may appear in firm name Contributes money, property or industry to the partnership Retirement, death, insanity or insolvency of a general partner dissolves the partnership

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Cannot set up excussion LIMTED PARTNER Limited Partner has no share in the management of a limited partnership Liability extends only to his capital contribution Generally, name of a limited partner must not appear in the firm name. Contributes cash or property but not services Retirement, death, insanity or insolvency of a limited partner does not dissolve partnership