4 Oblicon Finals
4 Oblicon Finals
Held:
CHAPTER 7. VOIDABLE CONTRACTS The sale was a defective contract under the category of voidable
contracts (no capacity to give consent). The wife had no capacity to
GENERAL CONCEPT give consent to the contract of sale because such capacity belonged to
both the spouses. Hence, it was subject to annulment by the husband
VOIDABLE CONTRACTS only during the marriage because he was the victim. The wife who has
A contract where all the essential elements for validity are present, responsible for the defect cannot ask for its annulment nor can the
although the element of consent is vititiated by reason of lack of legal heirs because they merely had an inchoate right to the lands sold.
capacity or by mistake, violence, fraud, etc.
However, the case of Sofia and Salvador is different. After Maximo’s
Essential feature: Binding until annulled by a competent court. death, they acquired the right to question to defective contract
because it deprived them of their hereditary rights in their father’s
Two remedies share in the land.
1. Attack its validity (direct or collateral)
2. Convalidate it either by ratification or by prescription Felipes have been in possession of the lands since 1951. It was only in
1976 when Maximo died that the action to recover the lands was
TN: instituted.
Annulment – the action itself
Annulability or relative nullity - defense Has the action for annulment already prescribed?
CHARACTERISTICS Held:
Felipes could not have acquired ownership of the lots by prescription
1. Defect is the vitiation of consent of one of the parties because of their bad faith, and even if there was good faith, the action
2. Binding until annulled has not yet prescribed for it has been just 25 years. Further, the
3. Susceptible of convalidation by ratification or prescription children’s cause of action accrued from the death of their father, hence
4. Voidable character cannot be invoked by third person they had 30 years to institute it. (Abandoned ruling)
Distinguished from rescissible contracts Caveat. Others believe that the contract of sale is unenforceable
because it consists of lack of authority and not incapacity.
(d) Both a remedy and a sanction (d) Mere remedy Art 1391. PRESCRIPTIVE PERIOD
(g) Based on law (g) Based on equity A. Incapacitated persons –guardianship ceases
B. Violence, intimidation, undue influence – ceases or disappears
(h) Public interest predominates (i) Private interest predominates C. Mistake or fraud – discovery
(i) plaintiff must be a party to the (i) plaintiff may be a contracting TN: If not commenced within such period, the action shall prescribe.
contract party or a third person
Carantes v. CA
Facts:
Art 1390. CONTRACTS WHICH ARE VOIDABLE Carantes was the original owner of the land, evidenced by a COT. In
1913, he died, and was survived by his widow and 6 children. In 1930,
Two general classes of voidable contracts construction of the Loakan airport was commenced by the
1. Incapacity to give consent (minors, insane, deaf-mute) Government, where the latter expropriated a portion of the land
2. Vitiated by reason of mistake, violence, intimidation, undue because the same was needed for the landing field.
influence or fraud.
In 1939, heirs assigned their right to inheritance to their co-heir,
Damage is immaterial Maximo in consideration of P1. After Maximo registered the deed of
Even though there may have been no damage to the contracting Assignment of Right to Inheritance, he sold to the Government the
parties, it is still voidable, regardless of whether the contract has said portion of the land and divided the proceeds of the sale amongst
already been consummated or is merely executory. his co-heirs.
TN: Binding unless annulled by the court and is susceptibe of In 1958, the said heirs filed a complaint against Maximo, alleging that
ratification. they only executed the Deed of Assignment because they were made
to believe that it merely authorized Maxim to convey the land to the
Felipe v. Heirs of Aldon Government in their behalf. Hence, prayed to void the said deed.
Facts:
Spouses Aldon bought lands and were subsequently divided into 3 lots. Issue: WON contract is void or merely voidable. WON action has
Sometime later, the wife sold the lots to spouses Felipe, without the prescribed.
consent of her husband. When the husband died, his heirs, the wife
and their children Sofia and Salvador, filed a complaint against the Held:
Felipes, praying for the recovery of the said lands.. Merely voidable because it is complete lack of consideration which
makes a contract absolutely simulated thus rendering it void and
Felipes contend that the property was acquired by sale and were inexistent. Here, there was a consideration – P1. In this case, there
delivered to them. Lower court ruled in their favor. However, upon was consent but only vitiated. Hence, the action is one to annul the
appeal, the decision was reversed – because the sale was invalid for tit contract on the ground of fraud. An action based on fraud prescribes
it was executed without the needed consent of her husband, the lots in 4 years from discovery of the fraud. In this case, it alleged fraud
being conjugal. must have been discovered on 1940 when the deed of assignment was
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registered for it serves as a constructive notice to the world. Hence, Example: A minor contracted with X. X’s heir cannot sue for annulment
the action already prescribed. on the ground that the other party was a minor.
Presciption period of defense XPN: Those not being a principal or subsidiary party, but:
The defense of annulability shall also prescribe after the lapse of four
years, since the basis of the action and that of defense are identical. A. Is prejudiced in his rights with respect to one of the parties
(except minority as a defense – not contolling but Jurado is of the B. Can show detriment which would positively result to him
opinion that this is more logical and just) from the contract in which he has no intervention.
TN: If the misrepresentation of age is active, rule on estoppel applies. Example: Remaining partners executed a chattel mortgage over the
However, if merely constructive, the defense of minority can be properties of the partnership in favor of a former partner to the
invoked as a defense, and the 4 year prescription cannot apply. prejudice of ceditors of the partnership. The creditors can file for the
annulment of the chattel mortage.
Arts 1392 – 1396. RATIFICATION
REQUISITES
RATIFICATION
The act or means by virtue of which efficacy is given to a contract 1. Plaintiff must have an interest in the contract
which suffers from a vice of curable nullity. 2. The victim and not the party responsible for the vice must
be the person who must assert the same.
Requisites
1. Contract is tainted by a vice susceptible of being cured. Arts 1398 – 1399. MUTUAL RESTITUTION
2. Ratification by the person who is entitled to do so by law. GR: Upon the annulment, the parties shall restore to each other the
things which they have received from each other.
A. Incapacitated person – him upon regaining
capacity or by his guardian A. Obligations to give – object with their fruits and price with
B. Other vices – only the innocent party its interest
B. Obligations to do or not to do – apportionment of damages
3. Effected with knowledge of the vice. based on the value of the prestation with interests.
TN: If two or more vices are present, knowledge of all of XPN: Incapacitated persons – not obliged to make restitution, except
them is required. insofar as he has benefited by the thing or price received by him.
4. Cause of defect should have already disappeared. TN: Benefit does not presuppose material and permanent
augmentation of fortune. Prudent and beneficial use is sufficient.
TN: Xpn – ratification by guardian of incapacitated person (food, clothing, shelter, health, etc)
Forms of ratification How to determine? Know the person’s necessities and social position.
A. Express – oral or written Burden to prove benefit – upon the person who has capacity.
B. Tacit – implied as from conduct implying a waiver
Example:
Example: Two minors borrowed from a creditor, evidenced by a PN. While they
A minor bought a land and sold the same after reaching the age of cannot be bound because of their signatures, they can be compelled to
majority or the use of the proceeds of a property by a person who had make restitution to the extent that they may have been benefited by
been previously intimidated into selling said property. the money.
Conformity of guilty party not needed Caveat: Cannot be applied when the incapacited person can still return
Reason: The guilty party’s consent is not needed, otherwise, he may the thing which he received. He shall return the same after attaining
find a way of getting out of the contract by the simple expedient of capacity.
refusing to ratify.
Hence, if after attaining capacity, he did not just annul the contract but
Effects of ratification also squandered the money – implied ratification.
1. Extinguishes the action to annul the contract Arts 1400 – 1402. LOSS OF OBJECT BEFORE ANNULMENT
2. Cleanses the contract of its defects from the moment of
constitution (retroactive effect)
LOSS DUE TO DEFENDANT’S FAULT
Xpn: when rights of innocent third persons are prejudiced. When the person obliged by the annulment decree cannot return the
thing because the same has been lost through his fault –
Example:
A minor sold his land to X. When he was already of age, he Effect: Contract can still be annulled.
became indebted to Y. To avoid paying Y, he decided to
ratify the sale of the land. He then had no other property. A. Return the fruits received
May Y still rescind the contract? YES. Although ratification B. Return the value of the thing at the time of the loss, with
has retroactive effects, still the rights of an innocent third interest.
person must not be prejudiced.
LOSS DUE TO PLAINTIFF’S FAULT
Art 1397. WHO MAY INSTITUTE ACTION When the loss is due to the fraud or fault of the party entitled to
institute the proceedings –
GR: Only the injured party (principal or subsidiary), and not the guilty Rule when action is based upon incapacity
party or his successor. If the right of action is based upon incapacity,loss of the thing shall not
be an obstacle to the success of the action, unless said loss took place
Reason – he who comes to equity must come with clean hands. (TN: through fraud or fault of the plaintiff. (omitted phrase: after having
This statement is misleading because in voidable contracts, damage is acquired capacity)
immaterial)
Old rule: Loss due to the fraud or fault of the plaintiff:
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Example: Principles
Insane sold his house and squandered the proceeds while insane. Can 1. No one may contract in the name of another without being
he ask for annulment later and recover the house? NO, the action is authorized by the latter or unless has has a right to represent
extinguished under Art 1401. him. If duly authorized, must act within the scope of his
powers.
Caveat – This contradicts Art 1399 because incapacitated person is not
obliged to make restitution except insofar as he has been benefited. 2. Effect – unenforceable.
Being insane, he could not have profited by squandering the money.
Also, the loss was not due to fraud or fault. 3. However, it may be ratified (express or implied) by the person
in whose behalf it has been executed, before it is revoked by
LOSS DUE TO FORTUITOUS EVENT the other contracting party.
GENERAL CONCEPT
Has a vice to be No vice to be remedied
remedied
UNENFORCEABLE CONTRACTS
Those which cannot be enforced by a proper action in court, unless
they are ratified, because: The person acting The person acting
A. They are entered into without or in excess of authority on behalf of on behalf of
B. Non-compliance with the Statute of Frauds another is duly another is duly
C. Both contracting parties do not possess legal capacity authorized to do so. not authorized to
do so.
Classes
A. Contracts entered into in the name of another person by one CONTRACTS INFRINGING STATUTE OF FRAUDS
without or in excess of authority
Purpose of Statute
Defect: No consent from the person in whose name the To prevent fraud. Hence, it should not be made the instrument to
contract is entered into. further them.
B. Those which do not comply with the Statute of Frauds Form required by Statute
1. Contract must be in writing and
Defect: No writing, note or memo to prove the contract 2. Subscribed by the other party charged or by his agent
C. Where both contracting parties are not legally capacitated Effect of non-compliance with Statute
A contract exists and is valid even though it is not clothed with the
Defect: Consent absolutely vitiated by incapacity of both necessary form. Effect of non-compliance is simply that no action can
be enforced, unless the requirement is complied with.
Characteristics
1. Cannot be enforced by a proper action in court TN: SOF simply provides a method by which the contracts listed may
2. Susceptible of ratification be proved. It does not declare that said contrats are invalid because
3. Cannot be assailed by third persons they are not reduced to writing. The form required is merely for
evidential purposes.
Unenforceable Rescissible Voidable
Contracts covered by Statute
Cannot be enforced Can be enforced, Can be enforced,
in court unless rescinded unless annulled 1. An agreement that by its terms is not to be
performed within a year from its making.
Can’t be assailed by Can be assailed by a Can’t be assailed by
third persons prejudiced 3rd person third persons TN: Refers only to agreements by which their terms are not
to be performed on either side within 1 year from execution.
Susceptible of Not susceptible of Susceptible of
ratification ratification ratification 2. A special promise to answer for the debt, default or
miscarriage of another.
The causes or grounds are different TN: Promise must be collateral, not independent or original.
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(a) In reality, no contract at all (a) There is a contract, only not However, because the property donated is conjugal, under the Civil
enforceable, unless ratified Code, the donation is merely fraudulent. Hence, Conchita is entitled to
so much of the donated property as may be found proper upon
(b) Not susceptible of ratification (b) Susceptible of ratification liquidation not to prejudice the heir of the widow or the legitimes of
the compulsory heirs.
(c) Can be assailed by third (c) Cannot be assailed by third
persons whose interests are persons If New Civil Code – the same rule applies to the donor. However, for
directly affected the wife, the rules are different. The wife can bring an action for the
declaration of absolute nullity of the contract – imprescriptible. If she
dies without bringing the action, the heirs can. Principle of pari delicto
cannot be applied because the wife nor heirs are not parties to the
ART 1409. VOID AND INEXISTENT CONTRACTS
illegal contract.
Inexistent contracts – produces no legal effects Cases in point: Castillo v. Galvan & Mapalo case
Void contracts – bars any action by a guilty party to An action to declare the nullity of a void contract does not prescribe.
recover what he has already given under the contract. The same equally applies when the same is invoked as a matter of
(illegal cause or object) defense.
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The spouses had little education. Consequently, they were made to Applicability of the in pari delicto rule
sign a document which according to Josefa Galvan (daughter of first Applies only to cases of existing contracts with an illegal cause or
marriage) was necessary in order to have separate tax declarations for object and NOT to simulated or fictitious contracts nor to whose which
their respective ½ portions of the 2 lots – but turned to be a deed of are inexistent for lack of an essential requisite such as cause or
sale, written in a language not known to the spouses (English). The consideration.
consideration listed P500, when in fact the share was worth at least
P22,500. TN: Illegality must be with the cause/object and not with the motive.
An action to declare void the contract of sale was instituted. Effect if only one party is at fault
IT DEPENDS.
Issue: Whether the contract was void or merely voidable.
A. Executed contract
Held:
CA held that it was merely voidable for consent was vitiated by fraud, Guilty party – barred from recovering what he has given to
and the action prescribes in 4 years. However, SC reversed the deision the other party. It is repugnant for a party to invoke his own
holding that the contract was void and inexistent, for having been guilt as a reason for relief.
absolutely simulated (no cause or consideration). Hence, an action to
declare a contract void does not prescribe. Innocent party – may demand for the return of what he has
given.
Mapalo case
Facts: B. Executory contract
Illiterate farmers were deceived into signing a deed of absolute sale
for a land in favor of Maximo Mapalo. They were made to believe that Cannot produce any legal effect whatsoever. Neither of the
the document was a deed of donaton covering the eastern half of their contracting parties can demand its fulfillment nor be compelled
land. The deed stated a consideration of P500 but the spouses did not to comply.
receive anything.
EXCEPTIONS
Eventually, Maximo sold the land to the Narcisos and the latter The in pari delicto is not absolute in character.
eventually sued the spouses praying that they be declared the owners
of the entire land. Mapalo spouses alleged that their signatures to the 1. Payment of usurious interest – Law allows debtor to
deed of sale was obtained through fraud and asked that the sale be recover the interest paid in excess of that allowed by the
declread void as to the western portion. usury laws, with interest from the date of payment.
Issue: Whether the sale was void or merely voidable. 2. Payment or delivery for an illegal purpose, where the
party who paid repudiates the contract before the purpose
Held: has been accomplished, or before an damages has been
CA held that it was merely voidable for consent was vitiated by fraud, caused to a third person – recover what was paid or
and the action prescribes in 4 years. However, SC reversed the deision delivered.
holding that the contract was void and inexistent, for having been
absolutely simulated (no cause or consideration). Hence, an action to Example: For a reward, A promised to kill C for B. B gave the
declare a contract void does not prescribe. reward. Before A could kill C, B repudiated the contract. Is B
allowed to do so? Yes, because here, the purpose has not
ARTS 1411 – 1412. PRINCIPLE OF IN PARI DELICTO yet been accomplished and no damage has as yet been
caused to a third person. May B recover what he has paid?
It depends on the discretion of the court.
IN PARI DELICTO
When the defect of a void contract consists in the illegality of the 3. Payment or delivery of property by an incapacitated
cause or object of the contract, and both are at fault or in pari delicto person – recover what was paid or delivered.
– law refuses them remedy and leaves them where they are.
4. Agreement or contract which is not illegal per se but
TN: This presupposes that the fault of one party is more or less equal is merely prohibited by law, and the prohibition is
to the fault of the other. designed for the protection of the plaintiff – latter can
recover what he has paid or delivered.
Rodriguez v. Rodriguez
Facts: Example: A donated to B everything that he (A) possessed
Concepcion Felix contracted a second marriage with Domingo and owned, leaving nothing for himself. This is prohibited
Rodriguez. Prior to the second marriage however, Concepcion was the but not illegal per se. Since public policy is hereby enhanced,
registered owner of 2 fishponds. It appears that she executed a deed A will be allowed to recover, at least that necessary for his
of sale of the said properties in favor of his daughter, which the latter own support and the support of his relatives.
in turn transferred to her mother and stepfather. Hence, the ownership
of the fishponds were now under the name of Concepcion and 5. Payment in excess of the maximum price of any
Domingo. article fixed by law – Buyer may recover the excess
Domingo eventually died intestate and the heirs entered into an 6. Contract whereby a labou]rer undertakes to work
extrajudicial settlement of his estate, consisting of 1/2 of the longer than the maximum number of hours fixed by
properties allegedly belonging to the conjugal partnership. law –Laborer may demand for overtime pay.
Held:
No, in simulation, the contract is not really desired to produce an ART 1413. RECOVERYBY DEBTOR OF USURIOUS INTERESTS
illegal effect, whereas an illegal contract is intended to be real and
effected, and entered in such form as to circumvent a prohibited act. RECOVERY BY DEBTOR OF USURIOUS INTERESTS
Hence, the contract of sale in question could not have been simulated, Debtor may recover the interest paid in excess of the interest allowed
but were real and intended to be fully operative, being the means to by the Usury law, with interest theeon from date of payment.
achieve the result desired.
However, Sec 6 Usury law – debtor may recover the whole interest
However, although not inexistent, it is void for having an illegal causa paid with costs and attorney’s fees. (Is there conflict?)
– circumvent the prohibition against donation between spouses.
Consequently, as a void contract, the principle of in pari delicto
applies. Hence, the wife cannot question its nullity.
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Distinguished from civil obligations in fulfillment of the obligation, there shall be no right to recover the
same from the obligee who has spent or consumed it in good faith.
Natural Obligation Civil Obligation Notes
A. Generally, annulment requires mutual restitution. Here, the
obligee who has spent or consumed the object in good faith is
(a) Based on equity & natural law (a) Based on positive law not required to restore.
(b) Not enforceable in the courts (b) Enforceable in the courts B. Good faith of the obligee must be present at the time of
spending or consuming.
Distinguished from moral obligations C. Note that the majority age today is 18. And “fungible” here
really means “consumable.’’
Natural Obligation Moral Obligation ART 1428. WINNER IN AN ACTION ENFORCING OBLIGATION
(a) There is a juridical tie (a) There is no juridical tie WINNER IN AN ACTION TO ENFORCE AN OBLIGATION
between the parties which is not whatsoever When, after an action to enforce a civil obligation has failed, the
enforceable by court action defendant voluntarily performs the obligation, he cannot demand the
return of what he has delivered or the payment of the value of the
(b) Voluntary fulfillment by the (b) Voluntary fulfillment does service he has rendered.
obligor produces legal effects not produce any legal effects
which the courts will recognize Example:
and protect A owes B P500,000. B brings a suit against A, but B loses the case for
insufficient evidence. No appeal is made from the decision, and the
judgment becomes final. Later, A paid B voluntarily the debt. May A
REASONS FOR REGULATION OF NATURAL OBLIGATIONS now recover from B what he has paid? No.
In natural obligations, there is a moral but not a legal duty to perform ART 1429. PAYMENT BEYOND THE VALUE OF ESTATE
or pay but the person thus paying feels that in good conscience he
should comply with his obligation based on moral grounds. PAYMENT BEYOND THE VALUE OF DECEDENT’S ESTATE
When a testate or intestate heir voluntarily pays a debt of the
Shold the law permit him to change his mind? decedent exceeding the value of the property which he received by will
or by the law of intestacy from the estate of the deceased, the
No, for it is more just that the law should compel him to abide by his
payment is valid and cannot be rescinded by the payer.
honor and conscience.
Example:
ART 1424. EXTINCTIVE PRESCRIPTION
A dies, leaving an estate of P10,000,000 and debts amounting to
P15,000,000. His heir here is not expected to make up for the
EXTINCTIVE PRESCRIPTION
difference, BUT if he does so voluntarily, then he cannot recover said
When a right to sue upon a civil obligation has lapsed by extinctive
difference. After all, one does have a moral duty to see to it that the
prescription, the obligor who voluntarily performs the contract cannot
dead relative’s or friend’s obligations in life are all carried out. Here,
recover what he has delivered or the value of the service he has
the heir is not really required by law to shoulder the defi cit, but since
rendered.
he does so voluntarily, he cannot now back out.
Example:
ART 1430. PAYMENT OF LEGACIES DESPITE VOID WILL
A’s debt to C has been extinguished by prescription. Yet A, knowing of
the prescription, voluntarily paid the prescribed debt. A cannot now
PAYMENT OF LEGACIES DESPITE VOID WILL
recover what he has paid C. Prescribed debt may indeed give rise to
When a will is declared void because it has not been executed in
new obligation.
accordance with the formalities required by law, but one of the
intestate heirs, after the settlement of the debts of the deceased, pays
ART 1425. PAYMENT BY A THIRD PERSON a legacy in compliance with a clause in the defective will, the payment
is effective and irrevocable.
PAYMENT BY THIRD PERSONS
When without the knowledge or against the will of the debtor, a third Example:
person pays a debt which the obligor is not legally bound to pay In a will defective for lack of the needed legal formalities, X, a friend,
because the action thereon has prescribed, but the debtor later was given a legacy. The legacy is void, and the whole estate should go
voluntarily reimburses the third person, the obligor cannot recover to the intestate heirs. If however, the intestate heirs give X the legacy,
what he has paid. they cannot get it back now, provided that the debts of the deceased
have been settled.
Example:
A owes B P700,000. But the debt soon prescribes. Later C, against the
ART 1423.
TITLE IV. CONCEPT
ESTOPPEL
consent of A, pays B the P700,000. A here does not have to reimburse
C because he (A) has not at all been benefited by the transaction.
However, A later voluntarily reimburses C. May A now recover what he ART 1431. CONCEPT
has given to C? NO more. This is the express provision of the law.
ESTOPPEL
ART 1426. PAYMENT BY MINORS AND ANNULMENT Condition by virtue of which an admission is rendered conclusive upon
the person making it and cannot be denied or disproved as against the
PAYMENT BY MINORS AFTER ANNULMENT person relyin thereon.
When a minor between eighteen and twenty \one years of age who
has entered into a contract without the consent of the parent or Reason: Afford solution to many questions which are not foreseen in
guardian, after the annulment of the contract voluntarily returns the our legislation.
whole thing or price received, notwithstanding the fact that he has not
been benefited thereby, there is no right to demand the thing or price TWO KINDS OF ESTOPPEL
thus returned. 1. Estoppel in pais (equitable estoppel)
2. Estoppel by deed (technical estoppel)
ART 1427. PAYMENT BY MINORS – BEFORE ANNULMENT
TN: Classification is too broad. Hence, Supreme Court classified
estoppels into three and added estoppel by laches.
PAYMENT BY MINORS BEFORE ANNULMENT
When a minor between eighteen and twenty one years of age, who ESTOPPEL IN PAIS (EQUITABLE ESTOPPEL)
has entered into a contract without the consent of the parent or It arises when one, by his acts, representations or by his silence when
guardian, voluntarily pays a sum of money or delivers a fungible thing he ought to speak out, intentionally or through culpable negligence,
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induces another to believe certain facts to exist, and such other Miguel v. Catalino
rightfully relies and acts on such belief, so that he will be prejudiced if Facts:
the former is permitted to deny the existence of such facts. Father of plaintiff is a non-Christian who sold a land to the father of
the defendant in 1928 without executive approval. Despite the
Examples: invalidity of the sale, former allowed the latter to enjoy the land
If a seller accepts a check in payment of the purchase price, he cannot without protest from 1928 to 1943, when the former died. Plaintiff did
afterwards allege that the check is not legal tender. He is bound by his not take any step to revindicate the property from 1943 to 1962.
own act.
Issue: Is the suit barred by laches?
A. Estoppel by silence or inaction – when a party who has
a right and opportunity to speak, as well as the duty to do Held: YES. Despite the fact that there is no prescription with regards to
so under the circumstances, does not do so to the prejudice void contracts, the passivity and inaction of plaintiff for more than 34
of the other person. years justifies the defendant in setting up the equitable defense of
laches. Hence, the action is barred.
TN: Just because a person is silent does not necessarily
mean that he will be in estoppel. There should have been a Heirs of Lacamen v. Heirs of Laruan
duty or obligation to speak. Facts:
Laruan executed a deed of sale over a land in favor of Lacamen, duly
B. Estoppel by acceptance of benefits – when a party notarized. Immediately after the sale, Laruan delivered the COT to
accepted benefits derived from a certain transaction, he can Lacamen. His possession was continuous, peaceful and open. His heirs
no longer be allowed to deny the existence of the same. also continued possession of the land after his death and they too paid
taxes.
ESTOPPEL BY DEED OR BY RECORD (TECHNICAL ESTOPPEL)
TN: Lacamen and Laruan are illiterate Igorots belonging to the non-
A. Estoppel by deed –By virtue of which, a party to a deed is Christian tribes – contract should have the approval of the Director of
precluded from asserting as against the other party any right Bureau of Non-Christian Tribes, otherwise, null and void.
or title in derogation of the deed.
Heirs of Laruan were able to get a new owner’s copy of the COT by a
Example: If a shipper has his goods valued at only P200, he petition in court alleging that their copy has been lost. Hence, they
cannot later on recover damages for its value more than caused the transfer of the tittle on the lot in their names. This was
what he has declared in the bill of lading, even if the value contended by the heirs of Lacamen. However, heirs of Laruan claimed
of the goods be worth much more, for he is in estoppel. that their father never sold the property and that the deed of sale was
not thumbmarked by him.
B. Estoppel by record – By virtue of which, a party is
precluded from denying the truth of matters set forth in a Issue: Can heirs of Laruan recover the property?
record whether judicial or legislative.
Held:
C. Estoppel by judgment – By virtue of which the party to a The heirs lost their right to recover back the property by reason of
case is precluded fromm denying the facts adjudicated by a laches. In this case, Lacamen and his heirs possessed the property for
court of competent jurisdiction. nearly 30 years which although did not have the approval of executive
authority, the vendor never questioned during his lifetime. Laruan’s
Estoppel by judgment Res judicata laches extend to his heirs since they stand in privity with him. Even
Bars the parties from raising Makes a judgment granting that no prescription lies, their inaction for almost 30 years
any question that might have conclusive between the commands the imposition of laches.
been put in issue and decided same parties as to the
in the previous litigation matter directly adjudged. Laches distinguished from prescription
Disclaimer. This is a consolidated reviewer taken from the books of Jurado and Paras. Most words, if not all, are adopted in verbatim.
My right over this property is limited to word-processing and structuring. #transcribingblues
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ART 1435. SALE IN REPRESENTATION OF ANOTHER 2. Trustee – one in whom confidence is reposed as regards the
property for the benefit of another person
SALE IN REPRESENTATION OF ANOTHER
If a person in representation of another sells or alienates a thing, the 3. Beneficiary – person for whose benefit the trust has been
former cannot subsequently set up his own title as against the buyer created
or grantee.
Trust res
TN: This is estoppel created in a representative capacity. In this kind Object of the trust. Consists of property, actually in existence, in which
of estoppel, prejudice is also not essential. the trustor has a transferable interest or title, although as a rule, it
consists of any kind of transferable property, either realty or
Example personality, including undivided, future, or contingent interest therein.
Amalia, in representation of Romeo, sells to Juanito a car. Amalia
cannot afterwards allege that she was really the owner of the car, and ART 1441. KINDS OF TRUSTS
that, therefore, the sale is not valid.
Disclaimer. This is a consolidated reviewer taken from the books of Jurado and Paras. Most words, if not all, are adopted in verbatim.
My right over this property is limited to word-processing and structuring. #transcribingblues
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Express trust Implied trust ART 1446. NECESSITY OF ACCEPTANCE BY THE BENEFICIARY
Created by the intention of the Comes into being by operation of NECESSITY OF ACCEPTANCE BY THE BENEFICIARY
trustor or of the parties law Acceptance by the beneficiary is necessary. Nevertheless, if the trust
imposes no onerous condition upon the beneficiary, his acceptance
Created by the direct and positive Those without being expressed, shall be presumed, if there is no proof to the contrary.
acts of the parties, by some are deducible from the nature of
writing or deed or by words the transaction by operation of For the trust to be effect, the beneficiary must accept:
evidencing the intention to create law as matters of equity, A. Expressly
a trust independently of the particular B. Impliedly
intention of the parties C. Presumably
Disclaimer. This is a consolidated reviewer taken from the books of Jurado and Paras. Most words, if not all, are adopted in verbatim.
My right over this property is limited to word-processing and structuring. #transcribingblues
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Example:
A donated land to B. But it was agreed that B is supposed to have only ART 1454. ABSOLUTE CONVEYANCE FOR SECURITY
1/3 of the products of said land. There is a trust here, with B as the
trustee. ABSOLUTE CONVEYANCE FOR SECURITY
If an absolute conveyance of property is made in order to secure the
ART 1450. PROPERTY AS SECURITY performance of an obligation of the grantor toward the grantee, a trust
by virtue of law is established. If the fulfillment of the obligation is
CONVEYANCE OF PROPERTY AS SECURITY offered by the grantor when it becomes due, he may demand the
If the price of a sale of property is loaned or paid by one person for reconveyance of the property to him.
the benefit of another and the conveyance is made to the lender or
payor to secure the payment of the debt, a trust arises by operation of This is a constructive trust
law in favor of the person to whom the money is loaned or for whom it The purpose of the law being to prevent unjust enrichment to the
is paid. The latter may redeem the property and compel a conveyance prejudice of the true owner
thereof to him.
Example:
This is a constructive trust Marlene was indebted to Susan. For the sole purpose of guaranteeing
The reason of the law being to prevent unjust enrichment her debt, Marlene sold her parcel of land to Susan. Here, a trust has
been created. If Marlene pays her debt when it becomes due, Marlene
Example: may demand the resale of the property to her.
Jose wants to buy a piece of land but he has no money. So Jose asks
Carlos to pay for the land. The land is then given in Carlos’ name. This ART 1455. USE OF TRUST FUNDS
is supposed to be Carlos’ security until the debt of Jose is paid. Here
an implied trust has been created. Carlos is only a trustee, the USE OF TRUST FUNDS
beneficiary being Jose. When Jose has the money, he may redeem the When any trustee, guardian or other person holding a fiduciary
property from Carlos and compel a conveyance thereof to him. The relationship uses trust funds for the purchase of property and causes
trust here is implied, hence it exists even if in the title taken by Carlos, the conveyance to be made to him or to a third person, a trust is
there is no mention of the interest of Jose or of his right to redeem. established by operation of law in favor of the person to whom the
funds belong.
Trust receipt
A security transaction intended to aid in financing importers and retail Applies to:
dealers who do not have suffi cient funds or resources to fi nance the A. Any trustee
importation or purchase of merchandise, and who may not be able to B. Guardian
acquire credit except thru utilization, as collateral, of the merchandise C. Other person holding a fiduciary relationship (ex. Agent)
imported or purchased.
Reasons for the rule:
ART 1451. INHERITED LAND’S TITLE NOT IN OWNER’S NAME A. Fiduciary or trust relations
B. Estoppel
TITLE TO INHERITED LAND NOT IN OWNER’S NAME C. To remove the temptation to place self-interest above all
When land passes by succession to any person and he causes the legal other things, and at the expense of one’s integrity and duty
title to be put in the name of another, a trust is established by to another
implication of law for the benefit of the true owner.
This is a constructive trust
This is a resulting trust Example:
For a trust is intended An agent using his principal’s money purchases land in his own name.
He also registers it under his name. Here, he will be considered only a
Example: trustee, and the principal is the beneficiary. The principal can bring an
A inherited a piece of land from his father, but A caused the legal title action for conveyance of the property to himself, so long as the rights
to be put in the name of X, a brother. Here a trust is impliedly of innocent third persons are not adversely affected.
established, with X as trustee and A as beneficiary.
Another example:
ART 1452. PROPERTY IN THE NAME OF ONLY ONE CO-BUYER A was a confidential employee of B. B intended to purchase an
hacienda and he told A about it and of his option to buy the same.
PROPERTY IN THE NAME OF ONE CO-BUYER Thinking that the purchase seems good, A, in his wife’s name, bought
If two or more persons agree to purchase a property and by common the hacienda, to the prejudice of B. Can B sue A for damages? YES, in
consent, the legal title is taken in the name of one of them for the view of the breach of trust.
benefit of all, a trust is created by force of law in favor of the others in
proportion to the interest of each. ART 1456. PROPERTY ACQUIRED THRU MISTAKE OR FRAUD
ART 1453. INTENT TO HOLD PROPERTY FOR SOMEONE ELSE Another example:
After the death of the decedent, some of the co-heirs entered into an
INTENT TO HOLD PROPERTY FOR SOMEONE ELSE extrajudicial settlement or partition of the hereditary estate with
When property is conveyed to a person in reliance upon his declared preterition of the other coheirs, and subsequently, secured original or
intention to hold it for, or transfer it to another or the grantor, there is transfer certificates of title in their names. In such a case, such co-
an implied trust in favor of the person whose benefit is contemplated. heirs are considered trustees of an implied or constructive trust for the
benefit of the other co-heirs who were omitted in the settlement or
This is a resulting trust partition.
Example: Feds bought from Tanya a parel of land and it was conveyed
to him upon his declaration that he would hold it in behalf of Kads. Mistake should be by a third person
Here, Feds is merely the trustee while Kads is the beneficiary. And not by a party to the contract. Otherwise, no trust is created.
Disclaimer. This is a consolidated reviewer taken from the books of Jurado and Paras. Most words, if not all, are adopted in verbatim.
My right over this property is limited to word-processing and structuring. #transcribingblues
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A. 4 years from discovery of the fraud – If action involves In 1962, heirs of Bueno who had always been in possession of the
annulment of voidable contract as basis for the fraudulent property, discovered the fraud. Hence, action for reconveyance.
registration Defendants interposed the defense of prescription.
B. 10 years from discovery of fraud – if action does not involve Issue: Has the action prescribed?
the annulment of a contract but there was fraud in
registration Held:
Action to enforce prescribes in 10 years. Prescription starts to run the
C. Imprescribtible moment fraud is discovered. However, in this case, defendants cannot
If action involves declration of the nullity or invoke the constructive notice rule on the basis of their own breach of
inexistence of a void contract as basis for the the authority thus given to file the cadastral answer. Also, it were
fraudulent registration plaintiffs who possessed the property continuously up to 1962. Hence,
a full-blown litigation is warranted to afford both parties the
If the legitimate owner of the property which was opportunity to lay their respective claims and defenses before the
fraudulently registered in the name of another had court.
always been in possession thereof (in reality, only an
action to quiet title) De la Cerna et al v. De la Cerna et al
Facts:
Laches may bar action Narciso de la Cerna died in 1945. His widow and their two children
Laches may bar an action to enforce a constructive trust. Repudiation then executed a deed of extrajudicial partition which they registered
is not required, unless there is a concealment of the facts giving rise to on Sep 14, 1946, stating that they are the owners of the property and
the trust. that ½ is the share of the widow and the other half is the share of the
children. On the basis of such deed, a transfer of COT was issued to
ACQUISITION OF PROPERTY THRU PRESCRIPTION them. 20 years later, children of Narciso by a prior marriage brought
an action against defendants. Has their right of action prescribed?
GR: Trustee cannot acquire property through prescription.
Held:
XPN: Express trust Yes, action has already prescribed. It is immaterial to bother whether
the action is founded on fraud (prescribes after 4 years) or one based
Requisites before absolute title can be vested to the trustee: on constructive trust (prescribes after 10 years), since the action was
A. Trustee must expressly repudiate the right of the beneficiary filed 20 years after the registration of the property. It is from the date
B. Such repudiation must be brought to the knowledge of the of the issuance of such title that the effective assertion of adverse title
beneficiary for purpose of the statute of limitations is counted.
C. Evidence thereon must be clear and conclusive
D. Expiration of the period prescribed by law Constructive trust
A constructive trust is a form of implied trust created by equity to meet
XPN TO XPN: Implied trusts the demands of justice. It arises contrary to intention against one who,
Express repudiation of the trust by the trustee is not required. by fraud, duress or mistake or breach of fiduciary duty or wrongful
A. Trustee must set up a title which is adverse to that of the disposition of another’s property, obtains or holds the legal right to
beneficiary property which he is not entitled to under the law.
XPN TO XPN TO XPN: Implied constructive trust ART 1457. ORAL EVIDENCE
ORAL EVIDENCE
Fabian v. Fabian An implied trust may be proved by oral evidence.
Facts:
Land in question was acquired by Pablo Fabian in 1909. He died in TN: Applies whether property is real of personal.
1928 and was survived by 4 children. In 1937, through a series of
fraudulent acts, one of the children and a niece of Pablo secured an
original COT in their name. In 1945, they subdivided the lot into 2
equal parts, as a result of which, two new transfer COT were issued in
their names. In 1960, other heirs brought an action against them for
reconveyance on the ground of the existence of an implied or
constructive trust. Defendants invoked the defense of laches,
extinctive prescription and acquisition prescription.
Disclaimer. This is a consolidated reviewer taken from the books of Jurado and Paras. Most words, if not all, are adopted in verbatim.
My right over this property is limited to word-processing and structuring. #transcribingblues
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