Questions:

1. In January 2018, Mrs. A, a married woman on her sixth (6th) month of pregnancy, was crossing a street when she was suddenly hit by a car being recklessly driven by Mr. X. As a result, Mrs. A sustained serious injuries and further, suffered an unintentional abortion. Mrs. A was hospitalized for two (2) months, during which she incurred 400,000.00 in medical fees. Her expenses were all duly substantiated by official receipts. During the two (2)-month period of her confinement, she was unable to report for work and earn any salary, which was established at the rate of 50,000.00 per month. Mrs. A then filed a civil case for damages against Mr. X.

   (a) Based on the case filed by Mrs. A, what is the source of Mr. X's obligation to her as a result of his acts? Explain. (2%)
   (b) May Mrs. A claim actual damages from Mr. X? If so, how much can Mrs. A claim? Explain. (2%)
   (c) May Mrs. A claim damages on behalf of her unborn baby? Explain. (3%)
   (d) What must Mrs. A prove if she wants to recover moral damages from Mr. X? (2%)

   Suggested Answers:

   (a) The source is quasi-delict as there are no pre existing contractual relations between Mrs. A and Mr. X who are strangers yet damage was done through the negligence of Mr. X.
   
   Article 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter. (Civil Code)

   (b) Yes, she may claim P500,000 as she can prove P400,000 in medical fees through the official receipts and her loss of salary of P100,000 during the time of her confinement.
   
   Article 2199 of the Civil Code provides that "one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved." In Ong v. Court of Appeals, we held that "(a)ctual damages are such compensation or damages for an injury that will put the injured party in the position in which he had been before he was injured. They pertain to such injuries or losses that are actually sustained and susceptible of measurement." To be recoverable, actual damages must not only be capable of proof, but must actually be proved with reasonable degree of certainty.  (Dueñas vs. Guce-africa G.R. No. 165679 October 05, 2009)
   
   (c) No she may not claim as a similar case has been settled in Supreme Court Jurisprudence.

   Since an action for pecuniary damages on account of personal injury or death pertains primarily to the one injured, it is easy to see that if no action for such damages could be instituted on behalf of the unborn child on account of the injuries it received, no such right of action could derivatively accrue to its parents or heirs. In fact, even if a cause of action did accrue on behalf of the unborn child, the same was extinguished by its pre-natal death, since no transmission to anyone can take place from one that lacked juridical personality (or juridical capacity, as distinguished from capacity to act). It is no answer to invoke the provisional personality of a conceived child (conceptus pro nato habetur) under Article 40 of the Civil Code, because that same article expressly limits such provisional personality by imposing the condition that the child should be subsequently born alive: "provided it be born later with the conditions specified in the following article". In the present case, there is no dispute that the child was dead when separated from its mother's womb. (Geluz vs. CA G.R. No. L-16439 July 20, 1961)
   
   (d) She must prove the 4 elements of moral damages are present. 
   
   In fine, an award of moral damages calls for the presentation of 1) evidence of besmirched reputation or physical, mental or psychological suffering sustained by the claimant; 2) a culpable act or omission factually established; 3) proof that the wrongful act or omission of the defendant is the Proximate Cause of the damages sustained by the claimant; and 4) the proof that the act is predicated on any of the instances expressed or envisioned by Article 2219 and Article 2220 of the Civil Code. (Mendoza vs. Gomez G.R. No. 160110 June 18, 2014)

2. H and W were married in 1990. H, being a member of the Armed Forces of the Philippines (AFP), was deployed to a rebel-infested area in 1992. Since then, W has not heard from her husband, H.

   One day, the AFP informed W that H had been declared missing since 1995. In consequence, W diligently pursued all available means to ascertain her husband's whereabouts, but to no avail.

   Firmly believing that H had already died, W filed a claim before the AFP in 2008 for the death benefits of the missing serviceman. However, the AFP, despite being cognizant of H's status, would not act on the claim, contending that H could not be presumed dead unless a judicial declaration to this effect is issued by the proper court.

   In what instance/s is a judicial declaration of presumptive death necessary? In this case, is the contention of the AFP correct? Explain. (3%)

   Suggested Answers:

   It may be brought for purposes of remarriage under Article 41 of the Family Code. 
   
   For the purpose of contracting the subsequent marriage under the preceding paragraph the spouse present must institute a summary proceeding as provided in this Code for the declaration of presumptive death of the absentee, without prejudice to the effect of reappearance of the absent spouse. (Family Code) 
   
   No, the AFP's contention is not correct as the Supreme Court has decided on a similar case.
   
   The PVAO and the AFP can decide claims of death benefits of a missing soldier without requiring the claimant to first produce a court declaration of the presumptive death of such soldier. In such claims, the PVAO and the AFP can make their own determination, on the basis of evidence presented by the claimant, whether the presumption of death under Articles 390 and 391 of the Civil Code may be applied or not. It must be stressed that the presumption of death under Articles 390 and 391 of the Civil Code arises by operation of law, without need of a court declaration, once the factual conditions mentioned in the said articles are established. Hence, requiring the claimant to further secure a court declaration in order to establish the presumptive death of a missing soldier is not proper and contravenes established jurisprudence on the matter. (Tadeo-matias v. People G.R. No. 230751 April 25, 2018)

3. Mr. Reyes is legally married to Mrs. Reyes. During the subsistence of their marriage, Mr. Reyes cohabited with another woman, Ms. Cruz. Out of Mr. Reyes and Ms. Cruz's illicit relationship, a child named C was born. In C's birth certificate, "Cruz" appears as the child's surname, although Mr. Reyes expressly acknowledged C as his child.

   In 2018, Mr. Reyes and Ms. Cruz ended their relationship. Mr. Reyes thereafter lodged a petition in court for parental custody and change or correction of C's surname in the child's birth certificate from "Cruz" to "Reyes." At that time, C was only ten (10) years old.

   (a) Should Mr. Reyes be granted custody of C? Explain. (2.5%)
   (b) Can Mr. Reyes validly compel the change or correction of C's surname from "Cruz" to "Reyes"? Explain. (2.5%)

   Suggested Answers:

   (a) No unless there is a showing she is unfit. Parental authority over minor children is lodged by Art. 176 on the mother; hence, respondent's prayer has no legal mooring. Since parental authority is given to the mother, then custody over the minor children also goes to the mother, unless she is shown to be unfit. (Grande vs. Antonio G.R. No. 206248 February 18, 2014)
   
   (b) Art. 176 [of the Family Code] gives illegitimate children the right to decide if they want to use the surname of their father or not. It is not the father (herein respondent) or the mother (herein petitioner) who is granted by law the right to dictate the surname of their illegitimate children. (Grande vs. Antonio G.R. No. 206248 February 18, 2014)

4. F, a Filipina, married J, a Japanese, in the Philippines. After three (3) years, they had a falling out and thus, separated. Soon after, F initiated a divorce petition in Japan which was not opposed by J because under Japanese law, a grant of divorce will capacitate him to remarry. F's divorce petition was then granted by the Japanese court with finality.

   May the legal effects of the divorce decree be recognized in the Philippines, and consequently, capacitate F to remarry here? Explain. (3%)

   Suggested Answers:

   Yes as the Supreme Court has ruled similarly in jurisprudence. Hence F can remarry. 
   
   When this Court recognized a foreign divorce decree that was initiated and obtained by the Filipino spouse and extended its legal effects on the issues of child custody and property relation, it should not stop short in likewise acknowledging that one of the usual and necessary consequences of absolute divorce is the right to remarry. (Republic vs. Manalo G.R. No. 221029 April 24, 2018)

5. X and Y were in a live-in relationship for the longest time, and were already blessed with a child, Z. They finally decided to get married on March 15, 2020. When X's parents found about the news, they were thrilled and thus, donated in favor of Z, the family heirloom, particularly, a gold ring valued at 250,000.00, which X and Y orally accepted on behalf of their minor child. One day, X and Y got into a serious quarrel, which resulted in them setting aside their marriage plans.

   (a) Is the donation to Z valid? Explain. (3%)
   (b) Assuming that the donation to Z is valid, may X's parents revoke the donation on the ground that the marriage of X with Y did not push through? Explain. (3%)

   Suggested Answers:

   (a) No it is invalid as the value of the donation exceeds P5,000 pesos yet it was not accepted in writing. 
   
   If the value of the personal property donated exceeds five thousand pesos, the donation and the acceptance shall be made in writing, otherwise, the donation shall be void. (Article 748, Civil Code)
   
   (b) No as such ground for revocation is only valid in donations propter nuptias. 
   
   Art. 82. Donations by reason of marriage are those which are made before its celebration, in consideration of the same, and in favor of one or both of the future spouses. (Family Code)
   
   In this case, this donation was in favor of the child Z which means such ground to revoke is not available as it was not made in favor of one or both future spouses.

6. Name at least two (2) exclusions from the following property regimes as enumerated under the Family Code:

   (a) Absolute community of property (2%)
   (b) Conjugal partnership of gains (2%)

   Suggested Answers:

   (a) 

   Art. 92. The following shall be excluded from the community property:

   (1) Property acquired during the marriage by gratuitous title by either spouse, and the fruits as well as the income thereof, if any, unless it is expressly provided by the donor, testator or grantor that they shall form part of the community property;

   (2) Property for personal and exclusive use of either spouse. However, jewelry shall form part of the community property;

   (3) Property acquired before the marriage by either spouse who has legitimate descendants by a former marriage, and the fruits as well as the income, if any, of such property. (201a)

   (Family Code)

   
   (b) 

   Art. 109. The following shall be the exclusive property of each spouse:

   (1) That which is brought to the marriage as his or her own;

   (2) That which each acquires during the marriage by gratuitous title;

   (3) That which is acquired by right of redemption, by barter or by exchange with property belonging to only one of the spouses; and

   (4) That which is purchased with exclusive money of the wife or of the husband. (148a)
   
   (Family Code)

7. Believing that he owned a certain parcel of land and completely unaware of any defect in his title thereto, Mr. A started to build a house thereon. When Mr. P, the real owner of the land learned of Mr. A's actions, Mr. P immediately demanded Mr. A to leave the premises. However, Mr. A refused to leave, and instead, asserted that as a builder in good faith, Mr. P is obliged to sell the land to him.

   (a) Is the claim of Mr. A correct? Explain. (3%)
   (b) Assuming that Mr. P all the while, knew but did not object to Mr. A's construction of the house on his property, may Mr. A compel Mr. P to purchase the said improvement due to Mr. P's bad faith? Explain. (3%)

   Suggested Answers:

   (a) No, the choice belongs to the landowner and not the builder in good faith. 
   
   Rosales v. Castelltort has emphasized that the choice belongs to the landowner, but the landowner must choose from the two (2) available options.
   
   The choice belongs to the owner of the land, a rule that accords with the principle of accession, i.e., that the accessory follows the principal and not the other way around. Even as the option lies with the landowner, the grant to him, nevertheless, is preclusive. The landowner cannot refuse to exercise either option and compel instead the owner of the building to remove it from the land. (Padilla vs. Malicsi G.R. No. 201354 September 21, 2016)
   
   (b) No, as Article 447 and 454 of the Civil Code are applicable. No right to compel is given to the builder in good faith even if the land owner is in bad faith. 

   Art. 454. When the landowner acted in bad faith and the builder, planter or sower proceeded in good faith, the provisions of article 447 shall apply.

   Art. 447. The owner of the land who makes thereon, personally or through another, plantings, constructions or works with the materials of another, shall pay their value; and, if he acted in bad faith, he shall also be obliged to the reparation of damages. The owner of the materials shall have the right to remove them only in case he can do so without injury to the work constructed, or without the plantings, constructions or works being destroyed. However, if the landowner acted in bad faith, the owner of the materials may remove them in any event, with a right to be indemnified for damages. (Civil Code)

8. Mr. E leased a piece of land from Mr. F to be used for his sawmill business for a period of ten (10) years. Consequently, Mr. E placed heavy machineries thereon to be used for his aforementioned business, with the intention of removing them after the expiration of the lease period.

   Are Mr. E's heavy machineries considered real properties under the Civil Code? Explain. (3%)

   Suggested Answers:

   (a) No it is not real property as it was not placed by the owner of the tenement as Mr. E is a mere lessee.

   Article 415. The following are immovable property:

   (5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works;

   (Civil Code)

   A similar question arose in Puerto Rico, and on appeal being taken, to the United States Supreme Court, it was held that machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner. (Davao Saw Mill vs. Castillo G.R. No. 40411 August 07, 1935)

9. Ms. U is a usufructuary of a piece of land owned by Mr. L. During the existence of the usufruct, Ms. U introduced various useful improvements on the land. Upon termination of the usufruct, Mr. L requested Ms. U to remove the said improvements, but Ms. U refused, demanding instead that Mr. L reimburse her the value of the same.

   (a) What is a usufruct? (2%)
   (b) Is Ms. U's demand proper? Explain. (3%)

   Suggested Answers:

   (a) Article 562. Usufruct gives a right to enjoy the property of another with the obligation of preserving its form and substance, unless the title constituting it or the law otherwise provides. (Civil Code)
   
   (b) No, it is not proper as the law provides he has no right to be indemnified for improvements.
   
   Art. 579. The usufructuary may make on the property held in usufruct such useful improvements or expenses for mere pleasure as he may deem proper, provided he does not alter its form or substance; but he shall have no right to be indemnified therefor. He may, however, remove such improvements, should it be possible to do so without damage to the property.  (Civil Code)

10. Village Hand Village L are adjoining residential villages in a mountainous portion of Antipolo City, Rizal, with Village L being lower in elevation than Village H. In an effort to beautify Village H, its developer, X, Inc., constructed a clubhouse which included an Olympic-sized swimming pool and an artificial lagoon on a portion of land overlooking Village L.

    During the monsoon season, the continuous heavy rains caused Village H's swimming pool and artificial lagoon to overflow, resulting into a massive spillover that damaged various properties in Village L. Aggrieved, the homeowners of Village L filed a complaint for damages against X, Inc. In defense, X, Inc. contended that pursuant to the Civil Code, Village L, as the lower estate, was obliged to receive the waters descending from Village H, the higher estate. Hence, it cannot be held liable for damages.

    Is X, Inc.'s position tenable? Explain. (3%)

    Suggested Answers:

    No, X's position is not tenable as the law specifically provides that the owner of the higher estate cannot increase the burden unlike what happened in this case.

    Article 637. Lower estates are obliged to receive the waters which naturally and without the intervention of man descend from the higher estates, as well as the stones or earth which they carry with them.

    The owner of the lower estate cannot construct works which will impede this easement; neither can the owner of the higher estate make works which will increase the burden. (Civil Code)

11. Mr. R is the registered owner of a parcel of land located in Cebu City covered by Transfer Certificate of Title (TCT) No. 1234 issued in 1955. Since his acquisition of the lot, Mr. R and his family had been in continuous, open, and peaceful possession thereof. Mr. R died in 1980, resulting in the land being transferred in the names of his heirs, i.e., A, B, and C, who became registered owners thereof as per TCT No. 5678. During the entire time, said land had never been encumbered or disposed, and that its possession always remained with them.

    Sometime in 1999, A, B, and C wanted to build a concrete fence around the parcel of land, but they were opposed by Mrs. X, who started claiming ownership over the same property on the strength of a Deed of Absolute Sale purportedly entered into by her with Mr. R during the time that he was still alive. Aggrieved, A, B, and C intend to file a complaint for quieting of title against Mrs. X.

    (a) What are the substantive requisites for the action to prosper? Do they obtain in this case? Explain. (3%)
    (b) Within what period should A, B, and C tile the complaint for quieting of title? Explain. (2%)
    (c) Assuming that Band Care residing abroad, may A, without the knowledge of B and C, file the complaint for quieting of title on behalf of all the heirs? Explain. (2%)

    Suggested Answers:

    (a) We reiterate the rule that for an action to quiet title to prosper, two indispensable requisites must concur, namely:
    
    (1) the plaintiff or complainant has a legal or an equitable title to or interest in the real property subject of the action; and
    (2) the deed, claim, encumbrance or proceeding claimed to be casting cloud on his title must be shown to be in fact invalid or inoperative despite its prima facie appearance of validity or legal efficacy. (Heirs Of Delfin vs. Heirs Of Bacud G.R. No. 187633 April 04, 2016)
    
    (b) No period as A,B, and C are in possession of the land. We have already ruled that the one-year prescriptive period does not apply when the person seeking annulment of title or reconveyance is in possession of the property. This is because the action partakes of a suit to quiet title, which is imprescriptible. (Heirs Of Delfin vs. Heirs Of Bacud G.R. No. 187633 April 04, 2016)
    
    (c)  Yes, A may file as he is a co-owner. Under Article 487 of the New Civil Code, any of the co-owners may bring an action in ejectment. This article covers all kinds of actions for the recovery of possession, including an accion publiciana and a reinvidicatory action. A co-owner may bring such an action without the necessity of joining all the other co-owners as co-plaintiffs because the suit is deemed to be instituted for the benefit of all. Any judgment of the court in favor of the co-owner will benefit the others but if such judgment is adverse, the same cannot prejudice the rights of the unimpleaded co-owners. If the action is for the benefit of the plaintiff alone who claims to be the sole owner and entitled to the possession thereof, the action will not prosper unless he impleads the other co-owners who are indispensable parties. (Baloloy vs. Hular G.R. No. 157767 September 09, 2004)

12. D, an Overseas Filipino Worker, was on his way home to the Philippines after working for so many years in the Middle East. He had saved 100,000.00 in his local savings account which he intended to use to start up a business in his home country. On his flight home, tragedy struck as a suicide bomber blew up the plane. All the passengers, including D, died. He left behind his widowed mother M; his common-law wife, W, who is the mother of his twin sons, T and S; and his brother, B. He left no will, no debts, no other relatives, and no other properties except the money in his savings account.

    Who are the heirs entitled to inherit from D and how much should each receive? Explain. (5%)

    Suggested Answers:

    This falls under the rules on intestate succession as D died without a will. 
    
    The common law wife W is excluded as she does not fall within the legal definition of widow or widower under Article 887 of the Civil Code. 
    
    B is excluded as a brother is a collateral relative that can only inherit if there are no descendants, ascendants, or spouses. 
    
    Hence the twins T and S as illegitimate children split half of D's estate while the surviving legitimate parent gets the other half M. In this case, the twins get P25,000 each while the mother as the only parent gets P50,000.

    Art. 887. The following are compulsory heirs:

    (1) Legitimate children and descendants, with respect to their legitimate parents and ascendants;

    (2) In default of the foregoing, legitimate parents and ascendants, with respect to their legitimate children and descendants;

    (3) The widow or widower;

    (4) Acknowledged natural children, and natural children by legal fiction;

    (5) Other illegitimate children referred to in Article 287.
    
    Art. 962. In every inheritance, the relative nearest in degree excludes the more distant ones, saving the right of representation when it properly takes place. (Civil Code)

13. M, single, named his sister N in his will, as a devisee over a certain parcel of land that he owned, with the obligation of preserving the land and transferring it, upon N's death, to her illegitimate daughter 0, who was then only a year old.

    Is the condition imposed on N to preserve the land and to transmit it upon her death to O a valid case of fideicommissary substitution? Explain. (3%)

    Suggested Answers:

    Yes, all the elements of fideicommissary are satisfied. There is an obligation of the first heir N to preserve the property and transmit to the second heir O. O is the illegitimate child of N meaning it is within one degree required by law. It will be held valid so long as N and O are alive at the time of the death of M.
    
    Art. 863. A fideicommissary substitution by virtue of which the fiduciary or first heir instituted is entrusted with the obligation to preserve and to transmit to a second heir the whole or part of the inheritance, shall be valid and shall take effect, provided such substitution does not go beyond one degree from the heir originally instituted, and provided further, that the fiduciary or first heir and the second heir are living at the time of the death of the testator. (Civil Code)

14. Prior to his death, H, married to W, with children X, Y, and Z, executed a holographic will entirely written, dated, and signed by him. In his will, H instituted W, X, and Y as his heirs, and consequently, made testamentary dispositions in their favor. H, however, expressly disinherited Z on the ground that the latter once filed a civil case against him in order to collect a particular sum of money he previously owed Z.

    (a) Was the disinheritance of Z proper? Explain. (3%)
    (b) Assuming that the disinheritance of Z was improper, how will it affect the institution of heirs and testamentary dispositions made in H's will? Explain. (3%)

    Suggested Answers:

    (a) No, it was not proper as filing of a civil case is not one of the grounds for disinheritance.

    Art. 919. The following shall be sufficient causes for the disinheritance of children and descendants, legitimate as well as illegitimate:

    (1) When a child or descendant has been found guilty of an attempt against the life of the testator, his or her spouse, descendants, or ascendants;

    (2) When a child or descendant has accused the testator of a crime for which the law prescribes imprisonment for six years or more, if the accusation has been found groundless;

    (3) When a child or descendant has been convicted of adultery or concubinage with the spouse of the testator;

    (4) When a child or descendant by fraud, violence, intimidation, or undue influence causes the testator to make a will or to change one already made;

    (5) A refusal without justifiable cause to support the parent or ascendant who disinherits such child or descendant;

    (6) Maltreatment of the testator by word or deed, by the child or descendant;

    (7) When a child or descendant leads a dishonorable or disgraceful life;

    (8) Conviction of a crime which carries with it the penalty of civil interdiction. (Civil Code)
    
    (b)  It shall annul the institution of heirs inso far as it may prejudice Z's legitime.
    
    Art. 918. Disinheritance without a specification of the cause, or for a cause the truth of which, if contradicted, is not proved, or which is not one of those set forth in this Code, shall annul the institution of heirs insofar as it may prejudice the person disinherited; but the devises and legacies and other testamentary dispositions shall be valid to such extent as will not impair the legitime. (Civil Code)

15. Mr. P offered to sell his Manila Polo Club shares to Ms. Q for 2,500,000.00. Ms. Q accepted on the condition that their agreement will not take effect until after one (1) year. Mr. P then acceded and both of them shook hands. Excited about the prospect of acquiring Mr. P's shares, Ms. Q approached the former and offered to pay him an earnest money equivalent to 1 % of the purchase price, which Mr. P accepted. After one (1) year, Ms. Q approached Mr. P seeking the enforcement of their agreement for Mr. P to sell his shares to her. Mr. P refused to honor their agreement, claiming that the same was covered by the Statute of Frauds because it was not reduced into writing and hence, unenforceable.

    Is the position of Mr. P correct? Explain. (3%)

    Suggested Answers:

    No, Mr. P is not correct as the payment of earnest money means there was partial performance. It is established doctrine in this jurisdiction that partial performance takes an oral contract out of the scope of the Statute of Frauds. (Paterno vs. Yan G.R. No. L-12218 February 28, 1961)

16. C Corp. entered into a contract with D, Inc. for the construction of the latter's production warehouse. In consideration thereof, D, Inc. was obliged to pay C Corp. the amount of 50,000,000.00 within a period of one (1) month from the time of the project's completion. To secure the payment of the said sum, D, Inc. entered into a surety agreement with S Company.

    After more than a month from the completion date of the project, C Corp. remained unpaid. Claiming that it was suffering from serious financial reverses, D, Inc. asked C Corp. for an extension of three (3) months to pay the 50,000,000.00 it still owed, to which C Corp. agreed. However, after more than three (3) months, D, Inc. still refused to pay. Hence, C Corp. proceeded to collect the above sum from the surety, S Company.

    For its part, S Company refused the claim and raised the defense that the extension of time granted by C Corp. to D, Inc. without its consent released it from liability.

    (a) Will the defense of S Company against the claim bold water? Explain. (3%)
    (b) Assuming that S Company instead refused the claim on the ground that C Corp. has yet to exhaust D, Inc.'s property to satisfy the claim before proceeding against it, will this defense prosper? Explain. (2%)

    Suggested Answers:

    (a) Yes, the extension granted to D by C without the consent of S releases S from liability. 
    
    Article 2079. An extension granted to the debtor by the creditor without the consent of the guarantor extinguishes the guaranty. The mere failure on the part of the creditor to demand payment after the debt has become due does not of itself constitute any extension of time referred to herein. (Civil Code)
    
    That provision has been recognized by the Supreme Court to be applicable to surety contracts. The provisions of the Civil Code on Guarantee, other than the benefit of excussion, are applicable and available to the surety (Autocorp Group vs. Intra Strata G.R. No. 166662 June 27, 2008)
    
    (b) No as S is a surety. In a suretyship contract, however, the benefit of excussion is not available to the surety as he is principally liable for the payment of the debt.  (Spouses Ong vs. Philippine Commercial International G.R. No. 160466 January 17, 2005)

17. In 2015, O, the original registered owner of a 300-square meter property covered by Original Certificate of Title (OCT) No. 0-1234, appointed F as its caretaker. A year after, while O was abroad, F surreptitiously broke open O's safe and stole the duplicate copy of the said OCT. F then forged a Deed of Absolute Sale and made it appear that O sold the property to him. Consequently, F was able to have OCT No. 0-1234 cancelled and in lieu thereof, a new title, Transfer Certificate of Title (TCT) No. T-4321, was issued in his name.

    A few months after, F offered the property for sale to X. After conducting the required due diligence to verify the title of F, and finding no occupant in the property during ocular inspection, X signed the contract of sale, and thereupon, fully paid the purchase price. A few days later, X was able to obtain TCT No. T-5678 under his name.

    When O discovered F's fraudulent acts upon his return in 2017, O immediately filed a complaint for reconveyance against F and X, principally pointing out that F merely forged his signature in the Deed of Absolute Sale purportedly made in F's favor and thus, F could not have validly transferred the title thereof to X. Consequently, he sought the return of the subject property to him.

    (a) Will the prayer of O for the return of the subject property prosper? Explain. (3%)
    (b) Assuming that O could no longer recover the subject property in view of X's registration thereof in his name, may a claim against the Assurance Fund pursuant to the provisions of the Property Registration Decree be instituted? Explain. (3%)

    Suggested Answers:

    (a) No, it will not prosper as the law provides that no petition shall be entertained where an innocent purchases for value has acquired the land. In this case, X is the innocent purchaser for value having conducted due diligence.

    Section 32. Review of decree of registration; Innocent purchaser for value. The decree of registration shall not be reopened or revised by reason of absence, minority, or other disability of any person adversely affected thereby, nor by any proceeding in any court for reversing judgments, subject, however, to the right of any person, including the government and the branches thereof, deprived of land or of any estate or interest therein by such adjudication or confirmation of title obtained by actual fraud, to file in the proper Court of First Instance a petition for reopening and review of the decree of registration not later than one year from and after the date of the entry of such decree of registration, but in no case shall such petition be entertained by the court where an innocent purchaser for value has acquired the land or an interest therein, whose rights may be prejudiced. Whenever the phrase "innocent purchaser for value" or an equivalent phrase occurs in this Decree, it shall be deemed to include an innocent lessee, mortgagee, or other encumbrancer for value.

    Upon the expiration of said period of one year, the decree of registration and the certificate of title issued shall become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy by action for damages against the applicant or any other persons responsible for the fraud. (Property Registration Decree)
    
    (b) Yes, O may recover against the Assurance Fund as he sustained loss of land under the Torrens System through fraud. The mere fact he appointed F as caretaker would not be considered neglitence.
    
    Section 95. Action for compensation from funds. A person who, without negligence on his part, sustains loss or damage, or is deprived of land or any estate or interest therein in consequence of the bringing of the land under the operation of the Torrens system of arising after original registration of land, through fraud or in consequence of any error, omission, mistake or misdescription in any certificate of title or in any entry or memorandum in the registration book, and who by the provisions of this Decree is barred or otherwise precluded under the provision of any law from bringing an action for the recovery of such land or the estate or interest therein, may bring an action in any court of competent jurisdiction for the recovery of damages to be paid out of the Assurance Fund. (Property Registration Decree)

18. In light of a new business venture, Mr. A entered into a lease contract with Mr. B involving one of the latter's warehouses. One day, Mr. B, who was then encountering financial difficulties, approached Mr. A and sought for a loan, which Mr. A readily granted to him. In order to secure the loan obligation, Mr. B mortgaged the leased warehouse in favor of Mr. A. In addition, Mr. B executed a promissory note in favor of A, wherein prior demand was waived by him.

    When Mr. B defaulted on his loan obligation, Mr. A simply stopped paying rentals due to Mr. B on the ground that legal compensation had already set in up to the concurrent amount. Furthermore, since there was still a balance due on the promissory note, Mr. A foreclosed the real estate mortgage over Mr. B's property, without any prior demand furnished to Mr. B.

    Aggrieved, Mr. B opposed the foreclosure due to the lack of prior demand, contending that the waiver of prior demand was stipulated in the promissory note and not in the mortgage instrument. Mr. B likewise argued that when Mr. A invoked legal compensation between the unpaid rentals and the loan arrearages, it amounted to a novation that resulted in the extinguishment of the loan contract between them. As such, the real estate mortgage, being a mere accessory contract to the principal loan, was necessarily extinguished.

    (a) May Mr. A validly claim legal compensation? Explain. (2%)
    (b) May Mr. A validly foreclose on the real estate mortgage even without prior demand to Mr. B? Explain. (2%)
    (c) Is Mr. B's claim of novation correct? Explain. (2%)

    Suggested Answers:

    (a) Yes, A may validly claim legal compensation as all the elements are present. They are mutual creditors and debtors of one another as B is the creditor in the lease contract while B is the debtor in the loan contract. They both owe sums of money that are due, demandable, and liquidated.

    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. (Civil Code)
    
    (b) Yes, Mr. A may validly foreclose as the Supreme Court in jurisprudence has sustained foreclosures of mortgages without need for demand when so stipulated in the promissory notes. The Civil Code in Article 1169 provides that one incurs in delay or is in default from the time the obligor demands the fulfillment of the obligation from the obligee. However, the law expressly provides that demand is not necessary under certain circumstances, and one of these circumstances is when the parties expressly waive demand. Hence, since the co-signors expressly waived demand in the promissory notes, demand was unnecessary for them to be in default. (BPI vs. CA G.R. No. 142731 June 08, 2006)
    
    (c) No, as novation can only be done implied or expressly. It is express when the new obligation declares in unequivocal terms that the old obligation is extinguished. It is implied when the new obligation is incompatible with the old one on every point.The test of incompatibility is whether the two obligations can stand together, each one with its own independent existence. (Garcia vs. Llamas G.R. No. 154127 December 08, 2003) In this case, they did not expressly agree to novation. It is also not implied as the two obligations are not incompatible with each other. 

19. Mr. A entered into a lease contract covering one of his commercial buildings with XYZ Company, a partnership composed of X, Y, and Z, as lessee, for use as an office space. Upon failure to receive the rental payments when they fell due, Mr. A immediately sought payment of the same from X, Y, and Z, asserting that the individual partners are solidarily liable together with the partnership for its debts.

    X, Y, and Z disagreed with Mr. A's contention, arguing further that in any event, rentals should not be paid up until Mr. A makes the necessary arrangements for the repair of the defective electrical wirings in the office that caused power outages and hence, made it difficult, if not impossible, for them to conduct their usual business operations.

    Rule on the parties' respective arguments. (5%)

    Suggested Answers:

    Both arguments have merit but I would rule in favor of X, Y, and Z.
    
    The partners X, Y, and Z, are indeed pro rata liable for contracts entered into by the XYZ partnership.
    
    Article 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. (n) (Civil Code)
    
    However, the law authorizes the lessee to suspend payment in case the lessor fails to make the necessary repairs.
    
    Article 1658. The lessee may suspend the payment of the rent in case the lessor fails to make the necessary repairs or to maintain the lessee in peaceful and adequate enjoyment of the property leased. (n) (Civil Code)
     

20. Distinguish the following:

    (a) Contract of sale and contract to sell (2%)
    (b) Interruption and tolling of prescription of actions (2%)

    Suggested Answers:

    (a) A contract to sell is a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price.

    In such contract, the prospective seller expressly reserves the transfer of title to the prospective buyer, until the happening of an event, which in this case is the full payment of the purchase price. What the seller agrees or obligates himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him. Stated differently, the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective buyer.

    It is different from contracts of sale, since ownership in contracts to sell is reserved by the vendor and is not to pass to the vendee until full payment of the purchase price, while in contracts of sale, title to the property passess to the vendee upon the delivery of the thing sold. In contracts of sale the vendor loses ownership over the property and cannot recover it unless and until the contract is resolved or rescinded, while in contracts to sell, title is retained by the vendor until full payment of the price. In contracts to sell, full payment is a positive suspensive condition while in contracts of sale, non-payment is a negative resolutory condition (Ursal vs. CA G.R. No. 142411 October 14, 2005)
    
    (b) The interruption of the prescriptive period by written extrajudicial demand means that the said period would commence anew from the receipt of the demand. That is the correct meaning of interruption as distinguished from mere suspension or tolling of the prescriptive period. (Overseas Bank Of Manila vs. Geraldez G.R. No. L-46541 December 28, 1979)