Legal Writing 1-D

April 12, 2019

Inter-Office Memorandum

To: Senior Lawyer

From: Suero, Stefi Monika
Subject: Stolen Car
Date: April 12, 2019

Issues

1) In the contract of sale of the Toyota Altis car between Car Nation (seller) and
Jose (buyer who was a minor), what is Jose’s liability under the Civil Code to
Car Nation given that the car was stolen after Jose has acquired it?

2) After issuing post dated checks as installment payments for Jose’s purchase of
the Toyota Altis car, is Juan liable under the Anti-Bouncing Checks Law for
not funding such checks?

Brief Answer

1) Jose is liable for Php 300,000 and damages. In accordance with De Braganza
v. De Villa Abrille, the contract between Jose and Car Nation is merely
voidable and the parties are not bound by estoppel rather Jose is guilty of
passive misrepresentation. But according to the Civil Code, this does not
absolve him from monetary responsibility because he shall be liable up to the
extent he was benefitted and for the damages due to the delay in the payment.

2) Juan is liable under the Anti-Bouncing Checks Laws. All the requisites for
violation of such law were met regardless of whether or not intent to damage
is present because this has the nature of a mala prohibita.

Statement of Facts

When our client, Jose Domingo, was 17 years old he bought a Toyota Altis
second hand car worth Php 600,000 from Car Nation Inc. Prior to the sale, the sales
agent that sold Jose the car did not raise the issue of Jose’s age nor did she ask for any
proof of identification instead she proceeded with the sale. The payment agreed upon
was a down payment of Php 300,000 cash with the balance payable in 12 monthly
installments of Php 25,000. Jose signed the sales agreement, paid the down payment
and got the car. Juan Miguel, Jose’s father, issued 12 postdated checks to cover the
monthly installments. Soon after, the car was stolen which led Juan to stop funding
the checks he issued to Car Nation. The sales agent has been calling Jose and Juan
about the payment and has threatened legal action against them.

Discussion

I. Jose is liable up to extent he was benefitted and damages for delay

Although Jose was a minor when he entered into the contract, such action does
not constitute estoppel instead he is only guilty of passive misrepresentation therefore
he must only make restitution up to the extent he was benefitted and pay damages for
the delay of payment.

A. Contract is voidable

It must first be settled that the contract of sale of the Toyota Altis car between Car
Nation and Jose, a minor at the time of execution, is voidable.

Individuals who are incapacitated to enter into contracts was stated in Article
13271of the Civil Code which provides that, “The following cannot give consent to a
contract:
1) Unemancipated minors;
2) Insane or demented persons, and deaf-mutes who do not know how to write.”

The age of emancipation has been declared in R.A. No. 68092 entitled “An Act
Lowering the Age of Majority from Twenty-One to Eighteen Years, Amending for
the Purpose Executive Order Numbered Two Hundred Nine, and for Other Purposes,”
which repealed Article 2304 of the Family Code, which states, “Emancipation takes
place by the attainment of majority. Unless otherwise provided, majority commences
at the age of eighteen years.”

At the time the contract of sale for the Toyota Altis car was executed Jose was 17
years old. Given that the age of majority is 18 years, Jose was without legal capacity
to give his consent to a contract while Car Nation, through the sales agent, was with
legal capacity to enter into a contract. The situation before us was declared as
voidable in Article 1390 3 of the Civil Code, which states that, “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

1 CIVIL CODE, art. 1327

2 An Act Lowering the Age of Majority from Twenty-one to Eighteen Years,
Amending for the Purpose Executive Order Numbered Two Hundred Nine, and
for Other Purposes [R.A. No. 6809], R.A. No. 6809 (1989).
3 CIVIL CODE, art. 1390.
 2) Those where the consent is vitiated by mistake, violence, intimidation, undue
influence or fraud.
These contracts are binding, unless they are annulled by a proper action in court. They
are susceptible of ratification.”

Therefore, absent any action for annulment by any of the contracting parties, the
voidable contract shall remain binding between Jose and Car Nation.

B. Parties are not bound by estoppel

The essential requisites of estoppel as held in Tanay Recreation Center &

Development Corp. v. Fausto4 are:
1) “Conduct of a party amounting to false representation or concealment of
material facts or at least calculated to convey the impression that the facts are
otherwise than, and inconsistent with, those which the party subsequently
attempts to assert;
2) Intent, or at least expectation, that this conduct shall be acted upon by, or at
least influence, the other party; and
3) Knowledge, actual or constructive, of the real facts.”

It is important to note that the sales agent of Car Nation did not raise the issue of
Jose’s age nor did she ask for any proof of identification. Therefore, Jose did not
assert his age nor was it used when he entered the contract. The mere silence of Jose
with regard to his age when it was not requested by the sales agent, does not amount
to a false representation or concealment of material facts that is contemplated in the
first requisite of estoppel.

Assuming that there was indeed estoppel, the sales agent could not raise this as a
defense to run after Jose. In the case of Manila Memorial Park Cemetery, Inc.
(MMPCI) v. Linsangan5 wherein Baluyot offered a certain lot owned by MMPCI to
Linsangan. After Linsangan has paid the down payment to Baluyot the latter advised
the former that their contract has been cancelled. For the alleged failure of MMPCI
and Baluyot to conform to their agreement, Atty. Linsangan filed a Complaint for
Breach of Contract and Damages against the former. MMPCI stated that Baluyot was
not an agent but an independent contractor, and as such was not authorized to
represent MMPCI or to use its name except as to the extent expressly stated in the
Agency Manager Agreement. Moreover, MMPCI was not aware of the arrangements
entered into by Atty. Linsangan and Baluyot, as it in fact received a down payment
and monthly installments as indicated in the contract.

4 Tanay Recreation Center & Development Corp. v. Fausto, G.R. No. 140182, 2005
CDAsia Online.
5 Manila Memorial Park Cemetery, Inc. v. Linsangan, G.R. No. 151319, 2004

CDAsia Online.
 As stated in the Court’s decision in Manila Memorial Park Cemetery, Inc. v.
Linsangan6, “One who claims the benefit of an estoppel on the ground that he has
been misled by the representations of another must not have been misled
through his own want of reasonable care and circumspection. Even assuming that
Atty. Linsangan was misled by MMPCI's actuations, he still cannot invoke the
principle of estoppel, as he was clearly negligent in his dealings with Baluyot, and
could have easily determined, had he only been cautious and prudent, whether said
agent was clothed with the authority to change the terms of the principal's written
contract.”

As applied to the case at hand, there was a lack of reasonable care and
circumspection on the part of the sales agent when she failed to raise the issue of
Jose’s age. Moreso, she failed to ask for any proof of identification from Jose. A car
has a relatively big value, therefore, in selling such the act of asking for proof of
identification in order to assure the smoothness of transactions is the level of diligence
required from the sales agent. Therefore, because she was not able to do so, she is not
allowed to raise the defense of estoppel. ||

What is more applicable to the current situation is the case of De Braganza v. De

Villa Abrille 7 wherein De Braganza and her minor sons ages 16 and 18, without
disclosing their age, signed a promissory note to pay Abrille a certain sum of money.
The Court held that “The Mercado case cited in the decision under review is different
because the document signed therein by the minor specifically stated he was of age;
here Exhibit A contained no such statement. In other words, in the Mercado case, the
minor was guilty of active misrepresentation; whereas in this case, if the minors were
guilty at all, which we doubt it is of passive (or constructive) misrepresentation.”

As applied in this case, Jose’s mere signing in the sales contract without stating
his age only makes him guilty of passive misrepresentation. He could not be legally
bound by his signature.

However, he is not entirely absolved from monetary responsibility. As stated in

Article 1399 8 of the Civil Code “When the defect of the contract consists in the
incapacity of one of the parties, the incapacitated person is not obliged to make any
restitution except insofar as he has been benefitted by the thing or price received by
him.” Because there was no estoppel but only passive misrepresentation by the minor
who is incapacitated such provision of the Civil Code shall apply making Jose liable
insofar as he has been benefitted by the thing.

6 Id.
7 De Braganza v. De Villa Abrille, G.R. No. 12471, 1959 CDAsia Online.
8 CIVIL CODE, art. 1399.
C. Extent of Jose’s liability

In order to establish the extent of the benefit received by Jose, it must be

established that the ownership of the Toyota Altis car was transferred to him upon
delivery of the thing. This is in accordance with Article 1477 9 of the Civil Code,
which provides that, “The ownership of the thing sold shall be transferred to the
vendee upon the constructive delivery thereof.” Even though the there has been no
full payment yet by Jose, the mere delivery of the car to him constitutes transfer of
ownership.

The fact that the car was stolen while in Jose’s possession does not diminish his
liability to Car Nation. As provided tin Article 1504 10 of the Civil Code, “Unless
otherwise agreed, the goods remain at the seller’s risk until the ownership therein is
transferred to the buyer, but when the ownership therein is transferred to the buyer the
goods are at the buyer’s risk whether actual delivery has been made or not xxx.” As
such, upon transfer of ownership of the car at the time of its delivery, Jose bears the
risk of its loss. But because the car was lost the benefit received by Jose is converted
to a monetary amount equivalent to the value of the car. Because he already paid the
down payment of Php 300,000 he is only liable to the remaining balance equivalent to
Php 300,000.

D. Jose’s liability for damages due to delay

Aside from the extent of the benefit received by Jose, he is also liable for damages
in connection with the delay in the payment of the monthly installments. The concept
of delay is found in Article 1169 11of the Civil Code, which states, “Those obliged to
deliver or to do something incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of their obligations. Xxx”In this
case, there was already extrajudicial demand by the sales agent through her phone
calls to Jose. In spite of such demands, Juan still chose not to fund the the post dated
checks he issued as payment for the installments. Therefore, Jose is rendered to be in
delay.

As stated in Article 1170 12of the Civil Code “Those who in the performance of
their obligations are guilty of fraud, negligence or delay and those who in any manner
contravene the tenor thereof, are liable for damages.” Because Jose was in delay, he is
liable for damages from the moment he incurred delay which was when demand from
time of the demand of the sales agent.

9 CIVIL CODE, art. 1477.

10 CIVIL CODE, art. 1504.
11 CIVIL CODE, art. 1169.
12 CIVIL CODE, art. 1170.
II. Juan is liable under the Bouncing Checks Law

Juan is liable under the Anti-Bouncing Checks Law 13 entitled “An Act
Penalizing the Making or Drawing and Issuance of a Check Without Sufficient Funds
or Credit and for Other Purposes.” The aforementioned law punishes “Any person:
1) Who makes or draws and issues any check to apply on account or for value,
2) Knowing at the time of issue that he does not have sufficient funds in or credit
with the drawee bank for the payment of such check in full upon its
presentment,
3) Which check is subsequently dishonored by the drawee bank for insufficiency
of funds or credit or would have been dishonored for the same reason had not
the drawer, without any valid reason, ordered the bank to stop payment.”

Furthermore, in the case of Lim v People 14 wherein Lim bought various

jewelries from Antonia Seguan’s store and as payment, Lim issued checks payable to
“cash” drawn on Metrobank. However, when Seguan deposited the two checks with
her bank, they were returned with a notice of dishonor because Lim’s account was
closed. The Court ruled that “This case is a perfect example of an act mala prohibita.”
In order to explain the nature of mala prohibita the case cited United States v Go
Chico15, which states that, “…it is not necessary that the appellant should have acted
with criminal intent. In many crimes, made such by statutory enactment, the intention
of the person who commits the crime is entirely immaterial.”

In the present case, the requisites for being punished under the Anti-Bouncing
Checks Law16 were met. The first requisite was met when Juan issued checks for Car
Nation in order to pay the installment balances of his son, Jose, when the latter bought
a car from the payee. For the second requisite, what is essential is the knowledge that
the offender does not have sufficient funds. As stated in the decision of Lim v
People 17 , because the law has a nature of mala prohibita intent to damage is not
essential. In this case, regardless of Juan’s intentions for not funding the post dated
checks he previously issued, the mere fact that he had knowledge of such insufficieny
woulf be sufficient for this requisite to be met. It can be inferred from the acts of the
sales agent when she was calling about the payment and even threatened legal action
against Jose and Juan that the checks iussed by Juan were indeed deishonored by the
drawee bank and thus meeting the third requisite.

13 An Act Penalizing the Making or Drawing and Issuance of a Check Without

Sufficient Fundsor Credit and for Other Purposes [Anti-Bouncing Check Law],
Batas Pambansa Blg. 22 (1979).
14 Lim v. People, G.R. No. 130038, 2000 CDAsia Online.
15 U.S. v Go Chico, G.R. No. 4963, 1909, CDAsia Online.
16 Supra 13.
17 Supra 14.
 In conclusion, because all the requisites under the Anti-Bouncing Checks
18
Law were met and regardless of the presence of intent to damage, Juan is liable for
violating the said law.

Conclusion

In sum, Jose is liable to Car Nation for Php 300,000 and damages. Neither
Jose nor Car Nation can be bound by estoppel because the requisites for such were not
met instead Jose is guilty of passive misrepresentation. Even assuming that there was
indeed estoppel, the fact that the sales agent was negligent when she did not ask for
any proof of identification from Jose is enough to warrant that she cannot avail the
defense of estoppel. However, this does not exempt Jose from monetary
responsibility. According to the Civil Code, Jose would still be liable up to the extent
that he was benefitted. Jose was benefitted with the car when such car was delivered
to him and therefore ownership was transferred to him. However, because the car was
stolen, the benefit would be converted into a monetary obligation equivalent to the
value of the car less the down payment he has already paid. Also, because there was
delay in the payment after extrajudicial demand from the sales agent, Jose is liable for
damages due to delay. Juan, on the other hand, is guilty of violating the Anti-
Bouncing Checks Law19 because all the requisites stated in the said law were met.

Respectfully Submitted.

STEFI MONIKA SUERO

18 Supra 13.
19 Supra 13.