LEASE
Upon expiration of the lease,
Lease could be over things or services.
Lease of THING is one whereby one party
binds himself to allow another the
enjoyment/use of a thing for a price certain for
a definite period.
The lessor need NOT be the owner of the
property (as long as he is the lawful owner)
Lease of SERVICE is one whereby one of the
party binds himself to execute a piece of work
or render to the other service for a price certain.
Parties in a contract of lease:
a. LESSOR
b. LESSEE
THING could be REAL or PERSONAL
property.
Most common is real property.
Leasing companies held personal properties for
lease. (Lease purchase agreement)
Who may be a lessor?
The lessor need not be the owner of the
property. He only needs to be the lawful
possessor. Hence, the existence of sublease.
Lease purchase agreement -
Obligations of the lessor:
1. Deliver the object of lease.
2. Maintain the peaceful enjoyment by
the lessee of the object of lease.
3. Bear the cost of maintaining the
object of the lease.
Obligations of the lessee:
1. Pay the stipulated rental
2.
surrender the object of the lease to the
lessor.
Requirement of the contract of lease:
1. Price certain
Sublease vs Assignment of Lease
Sublease – the lessee enters into a separate
contract of lease with another person. The
lessee remains a lessee. He does not abandon
the contract and he remains the person obliged
to pay the lessor; whereas, in
Assignment of lease, the lessee steps out of
the picture and transfer his right to another
person who becomes the new lessee.
Unless there is a specific prohibition in the
contract of lease, a person may sublease even
without the consent of the lessor as the lessee
remains the person responsible to pay the
lessor.
Assignment of lease needs the consent of the
lessor.
Ratio: the assignee may not be acceptable to
the lessor.
When may the lessor evict the lessee?
1. When the lessee does not return the object
of the lease to the lessor upon the expiration of
the term of the lease;
2. When the lessee fails to pay the stipulated
rental;
3. When the lessee violates a condition of the
lease.
If the ground is expiration of the term of the
lease, no need to make an extrajudicial
demand to vacate the property before filing the
compliant in court.
Ratio: when the term of the lease has expired
and the lessee did not vacate the property,
there is already a cause of action for eviction.
However, if the ground for evicting the lessee is
non-payment of rental or violation of the
condition of the lease, before a cause of action
for ejectment would arise, prior extrajudicial
demand to vacate is necessary.
Is a lessee a possessor of good faith or bad
faith?
Before: possessor in bad faith as he knows that
he is not the owner of the property.
Now: The lessee is neither a possessor in good
faith nor in bad faith.
He is not a possessor in good faith because he
knows he is not the owner of the property. Also,
he is not a possessor in bad faith because he is
in possession by virtue of a right ceded to him
by the lessor.
A possessor in bad faith losses whatever he
may have sow, built or planted in bad faith.
Article 1678, CC – the lessee may oblige the
lessor ½ the value of the improvements he
introduced in the premises.
If the lessor does not choose to appropriate,
the lessee may remove even though it may
cause damage to the property but it should not
cause more damage than what is necessary for
the removal of the improvement.
e.g. yung lessee naglagay ng mga cabinets
then upon expiration, ayaw magbayad ni lessor
ng ½ of the value of the improvements, the
lessee may choose to remove the cabinets.
One obligation of the lessor is to maintain the
object of the lease, hence, repairs are for the
account of the lessor. There is no prohibition
under the law that the lessor and the lessee
may stipulate otherwise.
Minor repairs – lessee
Major repairs – lessors
Dapat define and stipulated sa contract of
lease.
LEASE OF SERVICES
PARTIES:
1. Owner
2. Contractor
By the contract of service, the contractor
agrees to perform an act or service for another
for an agreed amount.
e.g. construction of a house (contract for a
piece of service)
Under the local ordinances: Building plans,
building permit
Building plans prepared by an architect.
Executed by a contractor. The contract with a
contractor is called a contract for a piece of
work.
Contract for a piece of work for a fixed amount,
the contractor cannot demand for an increase if
the price of the material and/or labor increase.
Likewise, if the cost of material decreases, the
owner cannot demand a decrease in the
contract price.
If the contract price is fixed, the same may be
adjusted if there is a stipulation to that effect.
Escalation clause – the contractor could charge
more if the cost of the material and /or labor
increase.
If the contractor and the owner agreed for a
definite amount for the construction, the
contractor shall not be entitled to ask for an
increase in the price in the absence of any
agreement to the contrary or an escalation
clause.
On the other hand, the owner cannot ask for a
diminution of the price, if the contract is for a
fixed amount, even though there is a decrease
in the cost of materials unless there is a
descalation clause.
For an escalation clause to be valid, there must
be a corresponding descalation clause.
If there would be any change in the building
plan, the change should be agreed upon in
writing. New agreement for the amendment.
Change could mean an adjustment in the price.
It could increase or decrease.
If you were the contractor, ask the owner to
sign an agreement indicating the adjusted price
and vice versa. Otherwise, no change in the
price.
There must be a provision for referral for
arbitration before going to court in the contract.
COMMON CARRIER
Who is a Common Carrier?
• A common carrier is a person, natural,
juridical or mere association.
Article 1732. Common carriers are persons,
corporations, firms or associations engaged in
the business of carrying or transporting
passengers or goods or both, by land, water, or
air, for compensation, offering their services to
the public.
 A mere association is not a juridical
personality. It is a group of persons
without juridical personality. Thus the
liability is of each person in the
association.
 Firm – sole proprietorship, which shall
be registered with DTI.
• If you are a carrier, you may choose what to
transport. Can be only goods, only passengers,
or both goods and passengers.
There are carriers that only want to
transport goods, therefore able to
maximize the transportation.
May need special equipment to lift and
move goods.
In transporting passengers, cannot
maximize since people cannot be piled
on top of the other.
• Common Carriers –
Only Goods: JRS, lalamove, LBC
Only Passengers: Taxicab operators,
jeepney operators, bus operators,
pedicabs, tricycle operators
Both Goods and Passengers:
provincial bus operators, shipping
companies, airlines, inter-island
vessels
• Nowadays, there are no more stevedores, just
porters.
The practice now, is that the entire
truck, where goods are stored, is the
one carried on the vessels = Roll on
Roll off (RORO) or
The goods are stored in metal
containers, which are carried on the
container ship.
• Should a common carrier have a motor
vehicle?
There is no requirement in any law that
a common carrier shall have a vehicle.
Kalesa – a common carrier.
Public is not necessarily the general public. It
could be just a narrow segment of the public.
Example: school bus operator
(common carrier although catering a
narrow segment of the public).
Pipeline operator (petroleum) – only 2
customers; common carrier
Customs broker who, as part of his
services to the client, agrees to
transport goods of the client qualifies
as a common carrier. Thus, must
exercise extraordinary diligence.
For as long as the services is available to those
who wants to avail the same, the carrier is
considered a common carrier.
Carpooling with neighbors who shares in the
cost of the fuel and wheels is NOT considered
a common carrier as the services is not offered
to the public.
Private carrier – diligence of a good father of a
family
• In the transportation of goods, what does civil
code require with respect to standard of care?
Article 1733. Common carriers, from
the nature of their business and for
reasons of public policy, are bound to
observe extraordinary diligence in the
vigilance over the goods and for the
safety of the passengers transported
by them, according to all the
circumstances of each case.
Such extraordinary diligence in the
vigilance over the goods is further
expressed in articles 1734, 1735, and
1745, Nos. 5, 6, and 7, while the
extraordinary diligence for the safety of
the passengers is further set forth in
articles 1755 and 1756.
Article 1755. A common carrier is
bound to carry the passengers safely
as far as human care and foresight can
provide, using the utmost diligence of
very cautious persons, with a due
regard for all the circumstances.
• In the transportation of goods, when should a
common carrier start exercising extraordinary
diligence?
In the transportation of goods, a
common carrier shall start exercising
extraordinary diligence the moment the
goods are unconditionally placed at its
disposal and shall last until goods have
been delivered to the consignee. But if
there is no undertaking on the part of
carrier to deliver goods to consignee,
then until consignee shall have been
informed of arrival of goods and have
been given reasonable opportunity to
claim goods from carrier.
Article 1736. The extraordinary
responsibility of the common carrier
lasts from the time the goods are
unconditionally placed in the
possession of, and received by the
carrier for transportation until the same
are delivered, actually or
constructively, by the carrier to the
consignee, or to the person who has a
right to receive them, without prejudice
to the provisions of article 1738.
• Not all carriers do door to door delivery.
PAL transports passengers and goods.
It does not do door to door delivery.
Example: It is your birthday tonight,
you will celebrate with your family.
Your child requested for lechon. You
know that Cebu Lechon tastes better
and is cheaper. You placed an order
with a friend from Cebu. The Lechon
was shipped thru PAL Cargo. Since
PAL does not do door to door deliver,
you need to pick up the lechon from
the cargo upon its arrival. PAL must
ensure that goods won’t be damaged
when the lechon arrives in Manila and
ensure the goods will not perish while
in the hands of the carrier.
Is there an exception?
YES. When the shipper exercises his
right of Stoppage in Transitu.
Example: Shipper has given item to
carrier, then discovers that the receiver
of goods has become insolvent.
Shipper informs carrier that item should
not be delivered. Thus terminating
contract of carriage. (Stoppage in
transit).
While the goods are still with the
carrier, he shall leave it in the
warehouse. The liability then of the
carrier will be as a warehouseman,
because he will not anymore transport
said goods.
• As the law obliges the common carrier
transporting goods to exercise extra ordinary
diligence, does that make the common carrier
an insurer against transportation?
NO. While law obliges common carrier
to observe high standard of care in
transportation of goods, that does not
make common carrier an insurer
against all risks of transportation.
Law provides that a common carrier
may avoid liability to loss or damage
during shipment of goods:
(1) When proximate and only cause of
the loss or damage is storm, damage,
earthquake, lightning, or any other
natural calamity;
(2) When proximate and only cause of
loss is an act of a public enemy, in
times of war, whether civil or
international;
(3) When proximate and only cause of
loss is an act of omission of shipper
himself;
(4) When proximate and only cause of
loss is the character of the goods or
defect in container or packaging; and
(5) When proximate and only cause of
loss is an order of a competent public
authority.
Article 1734. Common carriers are responsible
for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the
following causes only:
(1) Flood, storm, earthquake, lightning,
or other natural disaster or calamity;
(2) Act of the public enemy in war,
whether international or civil;
(3) Act or omission of the shipper or
owner of the goods;
(4) The character of the goods or
defects in the packing or in the
containers;
(5) Order or act of competent public
authority.
SC: There are 5 occasions in law that
may exempt common carrier from
liability. However, the common carrier
should not have incurred unnecessary
delay (improper deviation) in the
prosecution of voyage.
“May” if proximate and only cause is
one of the 5, the carrier may avoid the
liability
Shipper: (when proximate and
only cause is 1 of the
exceptions) If shipper would
like to recover from carrier, the
shipper shall have burden of
proving that carrier failed to
exercise extraordinary
diligence.
Carrier: (when proximate and
only cause is NOT one of the 5
exceptions) the common
carrier could still avoid liability.
The common carrier must
prove that under the
circumstances, carrier
exercised extraordinary due
diligence.
Diligence is always determined by
circumstances:
(1) Time
(2) Place
(3) Persons
Is driving a vehicle at 60kph considered an
exercise of diligence or considered negligence?
It depends on the circumstances: TPP.
(a) At Taft Ave, in front of Arellano at 9pm. Not
exercising diligence, because there might be
law students crossing. Law students are
exhausted at that time. Thus driving at 60kph is
negligent.
(b) At SLEX, and you saw ahead of you that a
tanker turtled and spilled gas. Do not move or
move slow, with due regard to the other
circumstances, such as slippery road.
• May common carrier and shipper validly
stipulate on the standard of care less than
extraordinary diligence?
YES. Shipper and carrier may validly
stipulate on a standard of care less
than that required by law, under the
following conditions:
(1) Stipulation must be in writing and signed by
parties;
(2) It must be supported by a consideration
other than the promise to transport;
Under Law on Contracts there are bilateral
contracts and onerous contracts.
Is contract of carriage bilateral? Yes.
Is contract of carriage onerous? Yes.
The shipper pays for the transportation of
goods. It is bilateral because there are 2
parties: shipper and carrier.
Consideration in a contract: it is synonymous
with prestation and consideration. Promise of
one party to do something for the other.
In a contract of sale, what are the prestations?
With respect to the seller, the consideration is
promise of buyer to pay the price. On part of
the buyer, prestation is the promise to transfer
ownership over the object of sale.
In a contract of common carriage, what are the
considerations?
In the contract of common carriage, the
consideration or prestation insofar as the
carrier is concerned is the promise of shipper to
pay the fare.
With respect to the shipper, the consideration is
the promise of the carrier to transport the
goods.
In every contract consideration or prestation is
the promise of 1 party to do something for the
other. It is never an object and never an
amount of money.
What is that consideration other than the
promise to transport? The usual consideration
is the promise of carrier to give a discount in
the fare.
(3) The stipulated standard of care less than
extraordinary diligence must not be less than
diligence of a good father of a family; and
- Highest standard of care is standard of care
required in transportation of passengers:
utmost diligence of a very cautious person
- Extraordinary diligence is next - Least
standard of care is diligence of a good father of
the family, otherwise known as ordinary
diligence.
- Thus standard of care agreed can by between
extraordinary diligence and diligence of a good
father of a family.
- May a passenger and common carrier validly
stipulate on a standard of care less than that
required by law?
NO. with respect to safety of passenger there
can be no compromise. Still common carrier
does not become an insurer against all risks of
transportation.
Example: you are in an international airplane, it
is over international airspace. Someone, who is
insane from the ground, fired a missile, plane
crashed. Airline should not be made liable
because it was totally unforeseen.
(4) If there would be other stipulations, those
other stipulations must be fair and reasonable.
Article 1744. A stipulation between the common
carrier and the shipper or owner limiting the
liability of the former for the loss, destruction, or
deterioration of the goods to a degree less than
extraordinary diligence shall be valid, provided
it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other
than the service rendered by the common
carrier; and
(3) Reasonable, just and not contrary to public
policy.
• Article 1759. Common carriers are liable for
the death of or injuries to passengers through
the negligence or willful acts of the former’s
employees, although such employees may
have acted beyond the scope of their authority
or in violation of the orders of the common
carriers. This liability of the common carriers
does not cease upon proof that they exercised
all the diligence of a good father of a family in
the selection and supervision of their
employees.
No exceptions on the liability of
employer for the acts of its employees.
When should a common carrier start exercising
the required standard of care with respect to
transporting passengers?
With respect to safety of passengers, the
moment the common carrier agrees to take any
person as a passenger it must start exercising
the required standard of care.
Negligence: overloading or boarding
passengers while the common carrier is
moving.
A common carrier cannot avoid liability simply
by posting signs or notices to that effect.
• Article 1763. A common carrier is responsible
for injuries suffered by a passenger on account
of the willful acts or negligence of other
passengers or of strangers, if the common
carrier’s employees through the exercise of the
diligence of a good father of a family could
have prevented or stopped the act or omission.
Example: driver of a bus or jeepney saw
someone who wanted to ride the vehicle cannot
walk straight and looked drunk. The driver
should not let him ride, to prevent him from
hitting a passenger or from vomiting on a
passenger.
Against Driver: action based on quasi-delict
Against Operator (common carrier): action
based on breach of contract
• Article 1761. The passenger must observe the
diligence of a good father of a family to avoid
injury to himself.
While law requires the common carrier to
observe a very high standard of care towards
the safety of its passenger, civil code also
obliges passenger to observe for its own safety
diligence of a good father of a family.
Example: you are a passenger of an aircon bus
and you feel hot. Do not put your head or any
part of your body outside the window. If there
was a truck from the opposite direction, you
might be injured.
• Article 1757. The responsibility of a common
carrier for the safety of passengers as required
in articles 1733 and 1755 cannot be dispensed
with or lessened by stipulation, by the posting
of notices, by statements on tickets, or
otherwise.
• When may common carrier be made liable for
moral damages?
Supreme Court has held that a common carrier
may be made liable for moral damages in the
following instances:
(1) When a passenger dies
- shall be awarded to immediate members of
passenger’s family (spouse, children, parents
only –does not include brother or sister)
- a foster parent may also recover moral
damages for the death of the foster child. A
foster child doesn’t have papers, unlike an
adoptee who has a court order or decree of
adoption.
(2) In case of physical injuries
Awarded to the injured passenger only, not to
any member of his family.
(3) When any employee of the common carrier
is discourteous to its passengers.
Case: Husband and wife, both Filipino, flew in
to the Philippines from Hawaii, ultimately
destined to Surigao (Hawaii – Cebu – Surigao).
When the couple arrived in Cebu, they were
informed that their luggage has to be left
behind so as to not overload the aircraft. While
waiting for luggage, the couple should stay in
Cebu and everything will be on PAL. Couple
wanted to stay at Cebu Plaza Hotel, the only 5
star hotel in Cebu. Employee of PAL informed
couple that the hotel is fully booked. The couple
called Cebu Plaza Hotel directly and were told
they could be accommodated. So couple
informed the PAL employee that they can be
accommodated. Before the couple was brought
to the hotel, the couple asked for P300. PAL
employee said they will not pay anything and
only sign cheques. The couple asked for
money to be given as tips to servers. - Couple
filed a case for moral damages alleging that
PAL employee was discourteous.
(4) When any employee of common carrier had
committed discrimination among passengers –
Case: A prosecutor from Surigao flew to Cebu
to MNL. On the way back, upon arrival at Cebu,
PAL informed passengers that it cannot fly to
Surigao due to ongoing storms so passengers
have to stay overnight in Cebu. Fiscal asked if
they will be accommodated for free PAL
employee declined stating that the delay of
flight is not due to the airline’s fault but for the
safety of passengers caused by natural event.
Fiscal pleaded another passenger if he could
be accommodated in the room. The following
day, passengers were brought to the aircraft.
During the flight to surigao, the fiscal learned
that some of the passengers were
accommodated for free. Fiscal filed a claim for
moral damages.
Sps Vazquez vs Cathay Pacific. Sps Vazquez
flew to HK via Cathay Pacific with confirmed
reservation in business class. Upon check in,
they were told that all business class seats
were full but offered and upgraded to 1 st class
but they refused as they have other
companions. Sps Vazquez were persuaded b
their companion to take the 1 st class. When
they arrived in Manila they sue Cathay Pacific
for moral damages. RTC ruled on their favour.
Overbooking of airline companies does not
constitute bad faith.
Held: When there is no bad faith, there is no
basis for moral damages. However, as the was
a slight breach of contract, nominal damages
amounting to P5000 was awarded to the
plaintiff.
Common carriers are responsible not only for
the acts or omissions of its employees but also
for their discourteous acts and acts of
discrimination.
PARTNERSHIP
What is a partnership?
A partnership is a person. He is one of the
juridical person mentioned in the preliminary
title of the Civil Code. Kaya lang, a partnership
is also a contract. So, yan ang pinagkaiba ng
corporation at partnership. Ung partnership,
juridical person. Ang corporation also is a
juridical person but Civil Code says that a
partnership is a contract. A corporation is an
artificial being. That’s one of the difference
between a partnership and a corporation.
Ngayon, as defined in the Civil Code, a
partnership is contract whereby two or more
persons agreed to contribute money, property
or industry for the purpose of dividing the profits
among themselves. Kaya ang partnership is
always for profits. The intention of the partners
is to make profits and divide the profits among
themselves. That’s another difference between
a partnership and a corporation. Corporation
may not be for profits. E.g. Religious
corporations. Sasabihin nyo sir hindi, pag
religious profits din yan. Kasi bendisyon
lamang, nakaabang na ang collection box. Yun
lamang incidental kung may perang involve.
The primary purpose of a corporation sole is
propagation of faith.
SO ulit, a partnership is a contract whereby two
or more persons agree to contribute money,
property or industry for the purpose of dividing
the profits among themselves. So ang tanong,
how many person may form partnership? At
least dalawa. Kasi kung nag-iisa ka, hindi
pwedeng partnership yun. Para magkaroon ng
partnership, at least two.
What may the partners contribute? Pwedeng
money, property or industry. So, how do you
call the partners who will going to contribute
money or property. The partners who are going
to contribute money or property are known as
capitalist partners. But ang partner who will be
contributing only his industry, ang tawag natin,
industrial partners.
Now, it’s possible that a capitalist partner could
also be an industrial partner. Pwedeng
kumbinasyon ang pwedeng i-contribute. Hindi
naman necessarily money, property or industry
lamang. Pwedeng parepareho. So partner
could at the same time be a capitalist or a an
industrial.
Purpose of a partnership - to make profits. So
there is an agreement among the partners that
they should divide profits among themselves.
TANONG: If there would be agreement about
sharing of profits, does that certainly mean that
there is a partner? HINDI. Not because there is
an agreement about sharing of profits would it
mean that there is a partnership, hindi. Kahit
merong agreement about sharing of profits, not
necessarily merong partnership. E.G. Sa
Muslim, sa Islam. Tayong mga Christians or
other sects except Islam, pagnapautang tayo,
merong usapang magbabayad ng interest.
Kaya lang ang Islam, it is immoral to agree on
payment of interest. So kung magpapautang ka
sa Muslim, how do you earn from the money
you are lending? The agreement in Islam is to
share profits. Kung uutang ka sa akin, say to
improve your poultry or piggery, we cannot
agree on payment on interest kasi immoral nga
yun. Kaya ang tanong, what do I get from
lending money to you? So sasabihin mo, share
tayo sa profits. We agree on the mechanics.
Meron tayong profit sharing agreement. Ang
tanong meron ba tayong partnership? WALA
because the law expressly provides that there
may be agreement about sharing of profit but
such agreement of sharing of profits will not
necessarily give rise to a partnership. There
must be a true intention to form a partnership.
How do you create a partnership? Well, a
partnership could be created by mere
agreement. E.g. I want to play the lotto. Meron
akong P10, kulang pantaya sa lotto ang P10.
Ikaw you also wanto play the lotto but you also
have only P10. Kaya pareho tayong kulang. Sir:
Friend pagsamahin kaya natin ang P10 natin
para makapaglaro tayo sa lotto. At ang
arrangement natin, tatlong numero sa akin,
tatlong numero sayo. At kung manalo, hati
tayo. So you agree. Tanong: Meron ba tayong
partnership? Meron tayong partnership
because we agreed to contribute money for the
purpose of dividing the profits later on. At
ngayon dahil maliit lang naman ang amount to
be invested it could be an oral partnership.
The law says that if the capital contribution
would be at least Php3000, the partnership
agreement must be in writing. But if any partner
agreed to contribute real property, requirement
is, the partnership agreement must have a
lease of the real property/properties contributed
and must be in a public instrument.
Modes of Creating a Partnership:
 Mere agreement
 if the capital
contribution is
Php3000 or more, the
partnership
agreement must be in
writing and filed with
the SCC.
 if any partner agreed
to contribute real
property, regardless
of value, titled or not,
the partnership
agreement must have
a lease or inventory of
the real property or
 properties contributed
and must be in a
public instrument
otherwise, the
partnership
agreement is void.
How about the sharing of profits? Tandaan nyo
partnership ito, the intention of the partners is
to make money. So they must have the
agreement of sharing profits. TANONG: How
do the partners divide the profits? The profits
and the losses shall be divided between and
among the partners according to their
agreement. Ngayon, kung walang agreement?
Only then, the division should be per capita or
proportionate – pro rata. And the law expressly
provides that any agreement to exclude any
partner from the profits or the losses shall be
void. So again, profits and losses shall be
divided according to the agreement of partners.
And if there was no agreement, profits and
losses shall be divided pro rata.
Now, what about industrial partners? The share
of the industrial partners in the partnership
should also be agreed upon. And keep in mind,
that any agreement to exclude any partner from
the profits or the losses shall be void.
RESTRICTIONS:
 Pag industrial partner, you should not
engage in any other activity because
your contribution to your partnership is
your industry, your time. So an
industrial partner should devote his full
time to the partnership business.
 Pag capitalist partner, you can engage
in any activity for as long as that
activity won’t compete with the
partnership business. Again, capitalist
partners may engage in any other
business for as long as that business
would not compete with the partnership
business.
If the partner agreed to contribute anything to
the partnership for as long as he has not
brought into the partnership what he promised
to contribute, he becomes a debtor of the
partnership. Kung ikaw ay partner and you
promised to contribute any amount but you
have not contributed in full what you have
promised to contribute, you become a debtor of
the partnership for the unremitted amount.
What are the property rights of partners? The
property rights of partners include (1) with
respect to specific partnership property, (2)
participate in the management and (3) to share
in the profits.
Now, eto ang pinagkaiba sa corporation. Sa
corporations if any property is registered in the
name of the corporation, the owner of that
property is the corporation. But if it is a
partnership, the property in the name of the
partnership, it belongs to the partners. Kaya
kung partner ka, you were right in saying: may-
ari ako nyang property na yan. Yun ang
pinagkaiba, kung corporation yun, hindi mo
pwedeng sabihin: Property ko yan! Kaya lang
kung partnership you were correct in saying:
Property ko yan or property namin yan.
Now, about management of the partnership
business. Management of the partnership
business should be all by the partners. But in
case of conflict, decision should be made by
the partner or partners having the controlling
interest. So, hindi yan plurality of partners.
Decisions are made by the partner, kahit isa
lang, or partners having a controlling interest.
Kaya kung halimbawa, meron tayong
partnership. Halimbawa, lima tayo. Kaya lang
ang holdings ko already represent 51%. Kahit
apat kayo, it’s my decision that prevails
because decision are made by the partner/s
having controlling interest. Iba yan sa
corporation, sa corporation tandaan nyo ha, sa
corporation decisions are made by a majority of
the quorum in a meeting of the board. Tandaan
nyo ha, sa corporation kung ikaw ay director
with a million share. Ako, director with only one
share. Sa board, ang boto mo isa, ang boto ko
isa. So yan ang pagkaiba ng partnership sa
corporation. Sa corporation, every director has
only one vote but in a partnership, decisions
are made by a partner/s having the controlling
interest.
Isa pang tatandaan nyong principle sa
partnership. In a partnership, the partners
served as an agent of the partnership. So, a
partner may represent the partnership. If you’d
recall dun sa Nego Law, if there is an
instrument drawn payable to a partnership, any
of the partners may endorse the instrument.
TANONG: How will be a partnership be
dissolved? What cause the dissolution of a
partnership?
1. Death of a partner
2. Insolvency of a partner
3. Incapacity of a partner
4. Expiration of the agreed period
5. Accomplishment of the purpose
When a partnership is dissolved, what’s next?
Parang corporation yan, pagnadissolved na
ang partnership, patay na yun. Legally, its
dead. Ganun din pag corporation, when the
corporation has been dissolved, that’s the end
of a corporation. TANONG: Anong susunod?
When the partnership or corporation is
dissolved, legally the partnership or corporation
is dead. Ngayon, anong gagawin? Winding up
or liquidation. So after dissolution the next step
is winding up.
So pagsinabing winding up, that means that
liabilities shall be paid from the assets of the
partnership. After which mabayaran ang mga
liabilities at meron pang natira, there shall be
return of capital. TANONG: Yung bang return of
the capital is it considered income on the part
of the partners? HINDI. Tandaan nyo ha, basta
soli lamang ang capital, hindi yun income. Mere
return of capital is not income. Ang income,
yung sobra sa return of capital.
TANONG: if a partnership had been dissolved
by the death of one partners, halimbawa meron
tayong partnership, isa sa atin namatay. Ang
tanong: dissolved na ang partnership?
Dissolved na. Pag merong partner na namatay,
wala nang magagawa, partnership is dissolved.
Kaya lang, sabi natin, ang mga buhay pa:
sayang naman tong partnership business.
Kumikita. Matagal nating pinalago ito.
TANONG: May the surviving partners continue
with the partnership business? PWEDE. Kaya
lang kahit pareho pa ang pangalang gagamitin,
the original partnership was already dissolved.
Kasi kung halimbawa, original partnership
natin, apat tayo. Isa namatay. Ilan natira? Tatlo.
Yung partnership ng tatlong partners cannot be
the same as the partnership of 4 partners. Kaya
tandaan nyo, pag merong namatay na partner,
walang magagawa, certainly partnership is
dissolved. Ang pwede lang magawa, yung
surviving partners continue with the partnership
business. Kaya lang, if they would continue
with the partnership business that is under a
different partnership. Kasi originally apat tayo,
eh yung isa tinawag na ni Lord. Naiwan tatlo na
lang. Yung partnership ng apat cannot be the
same ng partnership ng tatlo.
Anong requirement ng law? If the remaining
partner continue the remaining business, anong
dapat nilang gagawin? The remaining partners
who intend to continue the partnership
business should account to the heirs of the
deceased partners. So kung halimbawa may
namatay na partner at tayong naiwan, dapat
mag accounting tayo dun sa mga heirs ng
namatay na partner. Kasi meron pa syang
interest doon. Kaya dapat i-account natin. Oh,
based on the records, eto ang halaga nung
partnership business. Heto ang halaga ng
share corresponding to the deceased partners.
Ngayon, pangalan ng partnership. The name of
the partnership may include the name of all the
partners. Or pwede rin, name of just one
partner. Kung hindi ka partner, kung partner ka,
liable ka as a partner. Kaya lang kung hindi ka
naman partner, sabihin mo: friend pwede bang
isama mo ang pangalan ko sa partnership
name? Sikat kayo. Gusto ko naman maging
sikat din. Sama na ako sa inyo. Oh sige,
isinama ang apelyido mo, ang pangalan mo.
Hindi ka partner kaya lang para bang you
represented as if you’re a partner. So you
become liable as a partner. If a person who is
not a partner, allows his name to be included in
the partnership business, he becomes liable as
a partner. Unless, his name happens to be
similar to the name of a partner. Kung hawig
lamang, hindi ka liable. Kaya lang kung hindi ka
naman talaga partner kaya lang sama ka pa
rin, you became liable as a partner because
you hold to the worlds that you are a partner to
that partnership.
KINDS of PARTNERSHIP
1. General partners
2. Limited partners
Anong pinagkaiba? Pag general partners,
walang limit ang liability. Pag limited partners,
limited ang liability to your capital contributions.
Kaya lang, ang pinagkaiba naman, pag general
partner, you participate in the management.
Kung limited partner, investor ka lang. You
should not participate in the management. If
you would participate in the management of the
partnership business, you become liable as a
general partner.
PARTICULAR PARTNERSHIP VS
UNIVERSAL
Pagsinabing particular partnership, your
business is limited. E.g. in the case of
professionals like lawyers. Ang mga abogado,
nagtatayo ng professional partnership, For
what purpose? To exercise a profession. And
so far, exercise of profession could only be by
or through a partnership. Hindi pa pwedeng
mag exercise ng profession with a corporation.
So profession can only be exercised jointly by
several persons through a partnership not a
corporation.
Meron kayong madidinig na universal
partnership of future profits tsaka of all present
properties. Pagsinabing all present properties,
lahat ng properties natin, i-cocontribute natin
dun sa partnership. The law expressly provides
that unless the partnership would limit,
specifies that it is a universal partnership of all
present properties, it is just a universal
partnership of future profits.
So ulit ha, pagpinag usapan universal
partnership, dalawang klase yan – of all
present properties and of future profits.
Pagsinabing “all present properties”, lahat ng
properties natin, i-cocontribute natin dun sa
partnership. Kung hindi naman nakalagay sa
agreement natin na this is a partnership of all
present properties, it is only one of future
profits.
How do you form a limited partnership? To form
a limited partnership, it’s like forming a
corporation that you have to file with the SEC
the Articles of Limited Partnership in the form
provided in the Civil Code. Kung magtatayo
kayo ng Corporation meron kayong susunduing
format ng AOI. Ngayon, in forming a limited
partnership meron din kayong format na
susundin in preparing the articles of limited
partnership. Nakalagay yan sa Civil Code.
TANONG: How will you recognize a limited
partnership? You can recognize a limited
partnership by looking at the partnership name.
Sa dulo ng partnership name, nakalagay dun
“limited”. E.g. Ortigas and Company Limited.
Kaya pag nakita nyo ang “limited” or minsan
abbreviated na, “Ltd.”, that is a limited
partnership.
TANONG: When you are forming a limited
partnership, anong kinakailangan? Pag limited
partnership, hindi pwedeng lahat limited
partners. There must be at least one general
partner. So ulit, in forming a limited partnership,
there must be at least one general partner and
one or more limited partners. Pwede namang
maraming general partners kaya lang at least
isang general partner and at least isang limited
partner. Hindi pwedeng magkaroon ng limited
partnership were all the partners are limited
partners. KInakailangang mayroon isa man
lamang general partner kasi yung general
partner is onegoing to manage the partnership
business.
TaNONG: Do you know the difference between
assigning your interest in the partnership from
associating another with a partner. Pagsinabing
assigning your interest as a partner, you get out
of the partnership. You transfer your interest to
another person. And it can be done kasi if you
assign yourself to another person, your
intention is to get out of the partnership that
needs consent of your co-partners. Ngayon,
somebody wants to be associated with you.
Anong ibig sabihin ng being associated? E.g.
tayong dalawa partners and we are the only
partners in the partnership. Ngayon,
Bro1: Pwede bang sali ako sa partnership
ninyo?
Sir: May usapan kami ng partner ko na kaming
dalawa lamang kasi good vibes kami kaya
kaming dalawa lang ang partner. Kaya hindi
sya papayag na magdagdag pa ng isa.
Bro1: Sana naman, gusto kong kumita rin. Sali
ako sayo.
Sir: Sige bakas ka na lang saken. Kaya lang
hindi ka magiging partner. Kami pa rin ang
partners. Ikaw at ako, magkakaroon lang ng
agreement na halimbawa kung may kikitain, i-
divide natin ang kikitain ko sa atin.
Halimbawa, kunwari partner kami si Jess.
Jess&Sir: sige partners tayo. Tayong dalawa
lang ha? Walang iba.
So in short, we form a partnership.
Ngayon, here you come.
Bro2: Brod, gusto kong may pagkakitaan. Sali
ako sa inyo.
Sir: Hindi pwede kasi usapan naming ni Jess,
kami lang ang partners.
Bro2: pwede bang bumakas na lang ako sayo?
Sir: Pwede yun. Kung ano man ikocontribute
nya saken, pwede kaming magkaroon ng
arrangement na kung anong kikitain ko
halimbawa equal ang participation namin, yun
ang ibig sabihin ng a person associating with
himself another person. Kaya lang ang
associate hindi sya partner. Ang kausap
lamang nya yung partner with whom he is
associating.
TANONG: May pakialam ba sa management
yung associate? WALA nga kasi ang
agreement is only with a partner and not with
the other partners. So kung ano man ang
napagkasunduan nung partner and the person
who had been associated with him sa kanilang
dalawa lamang yun. It does not bind the
partnership. Kaya lang pag nadissolved na ang
partnership, the associate, may participate in
the share of the partnership. Kaya lang habang
existing ang partnership, ang associate walang
personality with respect to the partnership.
Kaya lang pagnadissolved na, syempre may
winding up yan, merong distribution of the
assets, pwede na magparticipate yung
associate.
AGENCY
What is a contract of agency? By a contract of
agency, a person binds himself to render some
service or to do something in representation or
on behalf of another with a consent or authority
of the latter.
TANONG: Who are the parties in a contract of
agency? The parties in a contract of agency are
known as the principal and the agent. Pareho
yan ha? Principal and agent must have the
capacity to act. Kasi hindi ka pwedeng maging
principal if you don’t have capacity to act. At
kung agent ka naman, remember ha, yung
agency is a contract, if you are a minor or
incapacited to act, you cannot be an agent.
TANONG: How may an agency be created? An
agency may be created expressly or impliedly.
Kaya lang, there are certain acts that require
something in writing. And that in writing must
be specific. TANONG: if in writing, anong tawag
dun sa dokumentot? Yung dokumento, tawag
dun, Power of Attorney. If I were to authorize
you to represent me and we will prepare a
document, and tawag natin dun, Power of
Attorney.
Kinds of POA
1. General
2. Special
So anong pinagkaiba? Pag sinabing Special,
the agent is authorize to form specific acts. Pag
general, agent is authorize to perform only acts
of management or administration. Kapag ang
nakalagay sa POA, halimbawa to receive,
general power yun. Administration lang kasi.
Meron akong pinirmahang dokumento.
Sir: Kelan ko makukuha ang kopya ko? Kasi
alam nyo naman pag nasa opisina, you deal
with a clerk. You sign documents then
sasabihin mo sa clerk, kelan ko makukuha ang
signed copy.
Clerk: Sir, papakuha nyo lamang bigyan nyo
lamang ng SPA ang utusan ninyo.
Ang natutuwa ako, ang kausap ko abogado.
Akalain ba namang irerequire pa ako ng SPA
para ipatanggap lamang yung kopya ng
dokumento. Hindi ganun yun. General power
pwede na.
Ginagamit ang special power, only for those
acts mentioned in the law. And those
mentioned in the law as requiring for special
power, they are those acts of disposition. Kaya
kung acts of administration, pwede na ang
general power. Nakaenumerate naman sa law
yung what should have need special power.
Nakalagay yun sa ART1878. Nakalagay dun
kung ano dapat ang sa special power. Kung
wala sa Art1878, pwede na ang general power.
Sabi ng SC, it not the title of the document that
determines whether it is general or special .
Maari ngang nakalagay general power kaya
lang nakalagay naman nandun, “with authority
to sell”, “to mortgage” kahit nakalagay general
power ang title ng dokumento, it qualifies as
special power. Tulad nga ng sinabi ko sa inyo,
nakalagay nga ang title Special Power, kaya
lang nakalagay naman dun, “to receive
documents”, to receive this or that, general
power yun.
Basahin nyo lamang yung Art 1878 para
malaman nyo kung anong mga acts that
require special power. And acts of strictt
dominion ang dapat dun sa Special Power.
Acts of administration or management, pwede
na ang general power.
By specific provision of the law, an authority to
sell does not include an authority to mortgage.
Also, an express authority to mortgage does
not include an authority to sell.
Also, by specific provision of the law, if the
agent had been authorized to lend money of
the principal, may mga tao ang negosyo
magpautang. Dami nilang pera. Kaya ang
ginagawa, merong mga ahente. Ang role ng
ahente, maghanap ng uutang. TANONG:
Ahente: Ako mismo kailangan ng pera. Ako na
ang uutang.
Pwede ba? The law expressly provides that an
agent authorized to lend money may not be
himself the borrower without the consent of the
principal. But an agent authorized to borrow
money for the principal, may himself be the
lender.
Principal: Oh ihanap mo nga ako ng
magpapautang saken, kailangan ko ng pera at
magpapasko na.
Yung agent mismo ang pwedeng magpautang.
Agent: Boss may pera ako. Ako na
magpautang sayo.
Principal: y hanap mo nga ako nang uutang
para kumita tong pera ko.
Agent: Ako na lang kaya ang uutang?
Kung ang uutang mismo yung agent,
kinakailangan ang written consent ng principal.
Under the law, if an agent have been
authorized to lend money, meron syang
obligasyon pagkatapos. First thing, if you were
the agent and you were authorized to lend
money, wag naman kahit sino ang papautangin
mo. You should exercise discretion.
Pagkatapos mo magpautang, syempre
nagpautang ka, pinapirma mo ng credit
instrument yung umutang, after which you have
to account to your principal the amount
interested to you and which you have lend to
other. Kaya kung agent ka, binigyan ka ng pera
para magpautang, kung magpautang ka, wag
naman kahit sino pauutangin. Mamimili ka rin
because you should exercise discretion. In
exercising discretion, observe the diligence of a
good father of the family.
Pagkatapos mo pautangin, syempre
papipirmahin mo ng dokumento ang umutang.
Then after that, you should account with your
principal the amount that you have lent and
deliver to the principal the credit instruments
signed by the person to whom you have lend.
Principal: Bakit mo pinautang ito?
Agent: Boss, okay magbayad yan.
Principal: Hindi. Alam ko hindi ito nagbabayad.
Ba’t mo pinautang?
Agent: Boss sigurado ako, magbabayad yan.
Principal: Sigurado ka ha? Bibigyan kita ng
dagdag na commission, i-guarantee mo yang
payment ng pinautang mo.
Agent: Sige po, walang problema. In addition to
my regular commission dahil pagguarantee ko,
sinsagot ko ito na magbabayad sayo.
Anong tawag sa commission na yun?
Guarantee Commission. the addition to
compensation to be received by the agent for
guaranteeing the amounts that he had loan, we
called that GUARANTEE COMMISSION.
Agency can be gratuitous or it could be
onerous.
Gratuitious.
P: Friend, total pupunta ka naman sa bangko,
pakiwithdraw mo nga ako ng pera. Eto ang
withdrawal slip, pinirmahan ko na.
In short, wala tayong pinag-usapan. You’ve just
decided to get it out my wishes. Meron tayong
contract of agency kaya lang gratuitous yun.
P: Friend, binibenta ko ang aking lote.
Tulungan mo akong humanap ng buyer.
A: Ano naman ang ibibigay mo saken kung
makahanap ako ng buyer?
P: BIgyan kita ng commission. Two percent ng
selling price.
In short, that is onerous. TANONG: When does
the agent entitled to the stipulated
compensation? The agent becomes entitled to
the stipulated compensation the moment he is
able to carry out the agency.
P: Friend, hanap ka ng buyer para sa lote ko.
Presyo 1M. Commission: 2%. Bigyan kita
hangang Dec 30, 2020.
So, ikaw naman you look for a buyer. Nakakita
ka ng buyer.
December 10:
A: Boss meron na akong buyer.
P: Sayang naman ang Commision. P20k din
yun.
I wanted to avoid paying the commission. Kaya
sabi ko idedefer ko kaya. Anyway, yung usapan
naming hanggang Dec30, 2020. Pag hindi pa
natapos ang agency. Hindi pa na carry out so
hindi pa sya entitled sa commission.
SC: The moment the agent is able to carry out
the agency, he becomes entitle to the
stipulated compensation.

Kaya kung Dec10 pa lang sinasabi mon a,
Boss may buyer ako. Idefer defer ko pa
hanggang sa Jan1 or 2, you as the agent
become entitle to the commission the moment
you are able to carry out the agency. Basta
nagawa na ng agent ang dapat gawin, within
the agreed period, the agent becomes entitled
to the stipulated compensation.
Alam nyo ba kung ano ang agency coupled
with interest? When you say agency coupled
with interest, ibig sabihin nun, the agency was
created purposely for the benefit of the agent.
E.g. May utang ako sayo. I owe you P100K and
its very overdue.
P: Friend, hiyang hiya ako sayo talaga. Gusto
kong bayaran ang utang ang problema wala pa
akong pera. BInibenta ko na nga ang aking lote
para mabayaran kita.
A: Friend tulungan kitang magbenta. Basta ang
usapan, babayaran mo ako dun sa proceeds of
sale?
That is an agency coupled with interest. Kasi
we create an agency so that I may be able to
pay you. Ang kagandahan ng agency coupled
with interest, though the principal may die, the
agent may continue the agency because the
agency was created for his benefit.
May utang ako sayo P100K. Gusto ko namang
bayaran, problema lang wala akong cash. Kaya
ako na mismo ang nagsabi na may binibenta
akong lote. At dun sa loteng yun, dun kita
babayaran. Kaya sabi mo naman, Boss ako na
magbebenta. Kaya agency coupled with an
interest kasi yung agency para maibenta ang
lote para mabayaran ako from the proceed of
the sale. As ruled by the SC, when an agency
coupled with an interest, though the principal
may have died, the agency continues.
EMPHASIS: An agency to sell does not include
an agency to mortgage. An agency to mortgage
does not include an agency to sell. Magkaiba
yun. So if the person authorized to sell, he
could not mortgage. If an agent is authorize to
mortgage, he cannot sell.
TANONG: May an agent appoint a substitute?
Halimbawa, ikaw ang agent. Ako ang principal.
Can you appoint a substitute? PWEDE unless
prohibited by the principal. So, an agent may
appoint a substitute unless prohibited by the
principal. If ever there’ll be a contract, the
contract will be between the substitute and the
agent.
What may cause the extinguishment of an
agency?
1. Revocation of agency – ang
nagrerevoke ang principal.
2. Withdrawal of the agent – pag ayaw na
ng agent
3. Death of either of them
4. Civil interdiction – if either the principal
or agent could no longer act with legal
effects
5. Insanity
6. Insolvency of the principal or of the
agent
7. If the principal is a corporation or
partnership. Pag nadissolved na ang
partnership or corporation, wala na ring
agency. Kasi pagnadissolved na ang
partnership or corporation para ring
natural person na namatay so there is
nothing more to represented
8. When the purpose was already
accomplished
9. Expiration of the period. if the agency
is for a definite period, that period had
already arrived whether or not the
agency was carried out, the agency is
extinguished.
TANONG: Yung bang agency to sell pareho
lang din ng agency to find a buyer? Is there any
difference between agency to sell and agency
to find a buyer? Halimbawa meron kayong
binibentang lote. If your purpose is to locate a
buyer, ang gagawin nyo, wag authority to sell.
Gagawing mo authority or agency to look for a
buyer. Kasi kung gagawin nyo ng agency to sell
or authority to sell, yung agent pwede na syang
magbenta, pwede na syang tumanggap ng
bayad, pwede na syang pumirma ng deed of
sale. Samantalan kung authority to look for a
buyer, ang papel lang ng agent is to look for a
buyer. No authority to sign any deed of sale.
EMPHASIS: Pag general power, dapat ang
ilalagay nyo lang, acts of management or
administration. Pag special power, acts of strict
dominion.
Loans
What are the kinds of loans?
1. Commodatum
2. Mutuum
Commodatum – loan involving a non-
consumable
Ex. Friend, pahiram ng martilyo (surely yung
martilyo hindi consumable)
Pwede bang magkaron ng commodatum over a
consumable?
Pwede rin but only if the purpose of the loan is
for exhibition.
Ex. Today is my birthday (A) and panay ang
kantyaw mo (B).
B: Wala ka bang handa dyan?
A: Meron naman
– pumunta sa La Loma: Friend, pahiram ng
lechon
- pumunta sa friend na may franchise ng red
ribbon: Friend, pahiram ng isang cake dyan.
Babalik ko din mamaya
- in short, I borrowed those consumables but
only for the purpose of display. Para lalagay ko
bahay ko/ bintana, para makita mo na meron
akong lechon at meron din akong cake. Meron
akong celebration.
- Commodatum pa din
Generally speaking, commodatum is loan over
non-consumables.
How are the parties in commodatum called?
 Bailee – person borrowing
 Bailor - sya yung
nagpapahiram/lending
Pag commodatum, walang bayad yan. A
contract of commodatum is gratuitous. Why?
Kasi kung may bayad, ang tawag na dun lease.
Ex.
A: Friend, pahiram ng martilyo mo.
B: O sige, 10 pesos per day
Dahil may bayad na, contract of lease na.
Precarium - a contract of commodatum except
that the thing shall be returned demands its
return
Ex. Sige gamitin mo, pero pag kelangan ko na
balik mo sakin
Ano obligation nung borrower with respect to
the thing borrowed?
- Use it according to its purpose
- To return the thing upon
accomplishment of the purpose or
upon arrival of the period agreed upon
Who shall suffer the ordinary wear and tear?
Yung bailor, yung nagpapahiram.
Yung bailor, kelangan ba sya ang owner?
Not necessarily. The bailor need not be the
owner but he should be the lawful possessor.
How do you call the loan over a consumable?
The loan over a consumable, which includes
money, ang tawag dun mutuum.
So when you hear the word mutuum, it’s a
contract of loan over a consumable.
Pag commodatum, libre. Pag mutuum,
especially if it involved money, it could be
onerous.
In a contract of mutuum, anu object?
It could be a consumable. It could be money.
Mutuum could be gratuitous. Kaya lang if it is
over money, it could be also onerous.

What’s the obligation of the borrower in a
contract of mutuum?
Sa commodatum, you should return the same
thing borrowed.
Pag mutuum, you should return another thing
of the same kind and quality.
Ex. Magkapitbahay tayo.
Friend, pwede makahingi ng asukal? Surely
ang ibabalik mo sakin is not the same thing
borrowed. But another of the same kind and
quality. Pag consumable ang hiniram, na-
consume na. Hindi na mababalik yung same
thing.
Pag hiniram mo sakin brown sugar, balik mo
sakin brown sugar.
Loan over money
Loan over money can onerous or gratuitous.
Kadalasan pag hihiram ka sa bf/gf/nanay/tatay,
gratuitous yan.
If you borrow from someone in the business of
lending money, it is onerous.
What’s the compensation for the use of
money?
Interest
Anu ba ang rules sa collection of interest?
1. Interest shall be due when stipulated in
writing, including the rate. [Art. 1956.
No interest shall be due unless it has
been expressly stipulated in writing.]
2. When the debtors incurs delay
Kinds of Interest
1. Lawful
2. Usurious
3. Legal
Di po ba pareho ang lawful at legal?
Magkaiba yun.
Lawful interest – rate of interest that is within
the rates permitted by law. Its opposite is
usurious.
Ano ang usury?
It is an agreement to pay interest beyond the
rates allowed by law.
For now, meron bang usury?
Meron tayong usury law. Hindi pa nare-repeal.
Pero sa ngayon, pwede bang magkaron ng
usury? Wala. Kasi policy ng Bangko Sentral to
allow market forces to determine interest. Dati
merong law na nakalagay that if the loan is
secured by real property, the maximum rate
that may be collected by the lender is 12% per
annum and if the loan is not secured/ or
secured by chattels/ secured by real property
but not registered – 14% per annum. Yun ang
limits dati. But when the usury law allowed the
Central Bank to fix rates on loans of
forbearances, the market forces were used to
determine interest rates.
Ano ang legal interest?
Rate of interest that may be charged on loans
or forbearances in the absence of any written
agreement or if what was agreed upon is
excessive.
BPI Case
- Charges 3.5% per month pag di mo
nabayaran
- BPI charged a client 3.5% per month +
2% per month for late payment.
- Di nakabayad yung client. BPI sued the
client.
SC: Stipulated interest and penalties are
excessive.
-being excessive is immoral. And being
immoral is contrary to law.
-Ruling: pay interest rate 1% per month and
1% per month for penalty. Kaya ang lumabas
na kailangan bayaran nung credit card holder
ay 2% per month.
*applicable ang rates na ito kung magkakaso
However, starting November, BSP issued a
circular that maximum monthly interest that can
changed charged for delinquent accounts is 2%
per month. Pero walang pronouncement sa
rate sa penalty.
Recap: A mutuum over money may be onerous
or gratuitous. And the compensation for the use
of money is called interest. Under the law,
interest will be collected only if stipulated in
writing or if the debtor had committed delay or
defaulted in the stipulation. Lawful interest
when the rate is within the limits provided by
law. Usurious, when the interest is more than
what the law provides. However, for now, there
is no usury. Usury is agreeing to pay interest
rates more than that permitted by law. And so
far, the policy of BSP is to let market forces
determine interest rates.
For credit cards accounts, for now 2% per
month. No limit on penalties. Penalties accrue
only if there will be delinquency. And based
from the ruling of the SC, the maximum penalty
that may charged on overdue credit card
accounts is 1% per month (BPI case).
Pag commodatum, there is no transfer of
ownership. Pag hiniram mo yung martilyo, akin
pa din yung martilyo. Pero pag mutuum, there
is transfer of ownership. Pag hiniram mo yung
asukal, di mo naman ibabalik yung same na
asukal. You will return to me another thing of
the same kind and quality.
Deposit
Kung ordinaryong tao lang, ang alam na
deposit ay yung deposit sa bangko. Pero as the
law expressly provides, when the parties to a
deposit is a bank and a depositor, it’s actually a
contract of loan. The depositor is actually a
creditor and the bank is the debtor.
Yung tunay na deposit, the parties are called
the depositor and depositary.
Yung magdedeposito, tawag ay depositor.
Yung tatanggap ng goods for safekeeping,
depositary.
Sinu ang depository?
Yung pinaglalagyan ng goods for safekeeping.
Ex. Yung warehouse ang depository.
Yung warehouseman ang depositary.
Pag “tary” – tao
“tory” – taguan
Ang purpose ng deposit ay safekeeping.
By a contract of deposit, a person delivers to
another something for safekeeping or storage.
Kinds of deposits
1. Voluntary – agreed upon by the parties
2. Judicial Deposits/ sequestration
Deposits can be onerous or gratuitous. B,
Ex. Mamasyal ka. Meron kang mga alahas.
Nilagay mo sa isang pouch. Pinatago mo sa
sister mo habang out of town ka (kasi sa bahay
baka mabudol-budol yung aking kasambahay).
Wala kayong pinagusapan na babayaran mo
sya. In short, gratuitous.
Example ng onerous:
May establishments na ang business ay to
accept things for safekeeping.
What law governs the business of
safekeeping? Storage? Warehousing?
Meron tayong General Bonded Warehouse Act
-under the law, before anyone can engage in
the business of warehousing, he should first
secure a license from DTI.
-but before he is issued a license, he is
required to post a bond.
(kaya ang title nung batas ay General Bonded
Warehouse Act)
-may mga negosyante, hindi enough ang
storage
Ex. Importer of fresh apples
-walang storage for apples (40 ft container)
-merong may bodega for safekeeping
-when a warehouse receives goods for
safekeeping, what does the warehouseman
issue? Warehouse receipt.
Meron tayong separate law for warehouse
receipts and sa Civil Code mismo meron
tayong rules about Documents of Title.
Applicable laws:
-Pagtanggap ng goods – General Bonded
Warehouse Act
-Pag issue ng warehouse receipt:
–General Law: Civil Code – Rules on
Documents of Title
-Special law: Warehouse Receipts Act
Pag documents of title: merong bills of
lading and warehouse receipts
What law governs the bills of lading?
-General law: Civil Code (Documents
of title)
-Special law: Code of Commerce
What are the obligations of the depositor?
To pay stipulated compensation for
safekeeping.
What are the obligations of the depositary?
1. To safely keep the things subject of
deposit
2. To return to the depositor when the
depositor demands its return
May the depositary use the thing in deposit?
Yes, if agreed upon in writing (pinayagan ni
depositor)
When using the thing deposited, it shall be
necessary to preserve it.
Example:
A car has to be used every now and then. If
hindi mo gagamitin, ma-discharge ang battery.
Park and Fly na business – paandarin nila yung
sasakyan para di ma-stuck up yung
brake/clutch/ discharge ang battery
When may a depositary be made liable for
damages?
-He uses the thing without being permitted
-He uses the thing not according to its purpose
Judicial deposit/Sequestration
Things that are in controversy are meanwhile
placed in the disposition of the court.
Ex. Writ of Preliminary Attachment
- You were able to levy the assets of
your debtor, yung property – di pa
kagad ibibigay sa’yo.
- The property will be at the disposition
of the court/ nakatago sa court
Anu ang necessary deposit?
For travellers
1. Kung byahero ka, nag check-in ka sa
hotel/inn – yung hotel keeper or
innkeeper should be informed of
whatever valuables you may have
brought to the hotel or inn.
2. Kung anuman meron ka, you should
provide instructions to the hotelkeeper/
innkeeper on how to safeguard your
valuables.
Before: may safety deposit box
Today: may safe ka sa room mismo
Guaranty and Chattel Mortgage – under
Commercial Law Review
Pledge and Chattel Mortgage – under Personal
Property Security Act
Real Estate Mortgage
It is a contract whereby real property is
recorded to secure the fulfilment of any valid
obligation.
-recorded in the Registry of Deeds
Who may be a mortgagor in a REM?
-yung mortgagor may not be the borrower
themselves
-mortgagor may be a 3rd person who agreed to
secure the obligation of the principal debtor
-mortgagor dapat ang may-ari nung property
-mortgagor may not be the principal debtor
(principal debtor may be another person and
the obligation of that other person shall be
secured by a mortgage over the property of the
owner of that property)
-makakapag-mortgage ka lang kung ikaw ang
owner nung property
If the principal debtor would default, and you
are the creditor and at the same time the
mortgagee -anu options mo for the
enforcement of the obligation?
-Pwede ka mag-demanda. File for specific
performance.1
How may the mortgage be foreclosed?
1. Judicially – pursuant to the rules of
court
 2. Extrajudicially – pursuant to Act 3135,
as amended [Act No. 3135 – An Act to
Regulate the Sale of Property under
Special Powers Inserted in or Annexed
to Real Estate Mortgages]
Anu ang requirement ng Act 3135 to enable the
mortgagee to foreclose the mortgage
extrajudicially?
1. Dapat sa Deed of Mortgage or in a
separate instrument - merong specific
authority/expressly authorized yung
mortgagee to sell the property in case
of default
Dati: In case of default, the bank may
foreclose extrajudicially pursuant to Act
3135
-sabi ng SC, that is not enough.
Walang expressed authority to sell.
Include dapat sa Deed of Mortgage: in case the
debtor/ mortgagor would default in the payment
of the obligations to the bank/mortgagee, the
latter shall be authorized to sell, as the bank is
hereby authorized to sell. May clear authority to
sell na.
Pag may authority to sell na, anu gagawin ng
mortgagee?
Gagawa ng verified petition to foreclose
pursuant to Act 3135, as amended.
San i-ffile ang verified petition?
File it with the Clerk of Court of the RTC where
the real property is located.
Procedure:
1. File with the COC
2. Yung proceeding out of court
(extrajudicial), pero magbabayad ka ng
court fees (by virtue of the SC circular).
3. Yung clerk of court ay ex-officio sheriff
(boss ng mga sheriffs ng different
branches). I-assign ng COC sa deputy
sheriff (lahat magkakaroon ng
assignment). *hindi na makikipag-usap
sa branch COC.
4. Deputy sheriff prepares a Notice of
Auction Sale. He will copy from your
petition.
*warning: be sure that the property
mortgaged is properly described
5. Deputy sheriff will post the Notice of
Auction Sale in 3 public places in the
city/province where the property is
located – bulletin board ng Bulwagan
ng Katarungan, lobby of city
hall/capitol, barangay hall, public
market etc.
6. Publication in a newspaper of general
circulation in the city/province where
the property is located once a week for
2 consecutive weeks
*check if the description in the
publication is correct. Publication
serves as notice to the whole world.
7. Date of Auction:
Mortgagor – dumating asking for 60
day extension
Mortgagee – pumayag to be
rescheduled on another day
On the day of the reschedule auction
hindi dumating si mortgagor.
Mortgagee – “Sheriff, tuloy na natin
yung auction sale”
Q: May the sheriff validly proceed with
the auction sale?
A: No.
SC Ruling: Valid ang postponement ng
auction sale to a new date pero para
maging valid auction sale on the new
date, dapat naigawa ng bagong Notice
of Auction Sale, to be posted in at least
3 public places, published again in a
newspaper of general circulation –
1x/week for 2 consecutive weeks. Pag
hindi nagawa yun, the auction sale
cannot validly proceed.
*Ulitin ang posting at publication
requirement
8. Natuloy na ang auction.
If ang highest bidder, another person
(stranger) – he must deliver to the
sheriff the full amount of his bid
 Sheriff will give the amount received to
the mortgagee
Mortgagee will pay Recovery Fee to
the court
If mortgagee ang highest bidder, hindi
kailangan magdala ng kahit anung
halaga. Kung anu bid nya shall be
used to partly or fully pay his claim
against the principal debtor.
Bakit hindi kailangan magbayad?
Ibabalik lang din ng sheriff sa kanya
(mortagee) to remit the proceeds of
sale.
Apply the amount of bid to the total
claims.
9. After the sale, Sheriff will prepare the
Certificate of Sale.
Certificate of Sale – from auction sale
Deed of Sale – voluntary dealing
Q: Ikaw yung buyer, you were issued
Certificate of Sale – anu dapat mong
gawin?
A: As soon as possible, register it with
the Register of Deeds.
Why?
Yung mortgagor and some other
persons will have the right to redeem
the property and the period of
redemption is 1 year (365 days).
Counted from the registration of the
certificate of sale.
Yung bang redemption right
transferable?
Yes. Kasi yung redemption right is
property right. And being property right,
it is transferable. The transfer of right
could be by onerous or gratuitous title.
Pwede bang i-waive?
Hindi pwedeng gumawa ng express
waiver ng right of redemption and if
one will be made, it shall be void for
being contrary to public policy.
Yung right of redemption ay ginawa ng
batas to enable the owner of the
property to redeem within that period.
Walang expressed waiver ng right of
redemption.
Ang pinaka “waiver” ay kung di mo i-
exercise.
Yung bang right of redemption
pwedeng ibenta? Yes.
Being a property right it may be sold or
donated.
Basta hindi lang pwede i-waive.
Who may exercise the right of
redemption?
The right of redemption could be
exercised by the mortgagor, his
successor in interest, and judgment-
creditor of the mortgagor.
Gaano katagal redemption period?
1 year from the registration of
Certificate of Sale
Gusto mong i-redeem, pero kukulangin
ka oras kasi wala ka pang pang-
redeem. Can you go to court and ask
for a TRO to suspend the running
period? No.
How may the right of redemption be
exercised?
By making a valid tender of the
redemption price with the redemption
period.
Anu ang redemption price?
1. If the mortgagee is a GOCC, kung
anu nakalagay sa special
law/charter – yun ang susunding
redemptiio price
2. If the mortgagee is a bank,
according to the General Banking
Law 2000, susundin whatever may
 be found in the credit documents
(promisory noted).
3. Kung ordinaryong tao/ corporation:
Bid price+Interest on the bid price
(12% per annum)+Taxes and assessment
paid by the highest bidder+Interest on said
taxes at the rate of 12% per annum=
amount ng redemption price
Offer to redeem must be for the full
price and within the redemption period.
TRO cannot stop the running of
time.
Yung bang 12% per annum same with 1% per
month?
No.
Pag 12% per annum, 12%/365. Pag 1% per
month, 1%/30 days. Kaya may slight difference.
Kaya di pareho.
Under the General Banking Law, kapag and
mortgagor ay juridical person at ang
mortgagee/highest bidder ay bank, ang
redemption period ay 3 months or 90 days. Or
before the bank registers its title over the
property. Kung ikaw ang mortgagor at ayaw
mong mawala yung property, magmadali ka.
Raise the amount of the bid price and tender
the price to the bank.
Remember: 3 months or 90 days or before the
bank registers its title = whichever comes first.
Lumagpas ang redemption period at interesado
kang makuha yung property. Anu gagawin mo?
1. Balikan yung sheriff, ask the Sheriff na
mag-issue ng Final Certificate of Sale
2. Gawa ka ng Affidavit of No
Redemption
Tandaan ang redemption period. May mga
babayaran na taxes sa BIR within the periods
set by the BIR counted at expiry of the
redemption period.
1. Bayaran ang documentary stamps –
bayaran by the 5th day following the
expiry of the redemption period
2. Capital gains tax – bayaran within 30
days following the expiry of the
redemption period
If you fail to pay within these periods, may
automatic na surcharge na 5% and interest
starts running.
Taxes are based on BIR valuation or the bid
price, whichever is higher.
After bayaran sa BIR, punta sa local
government. Bayaran ang transfer tax.
Update the realty taxes and ask for a
clearance. Hihingin yun ng Registry of Deeds.
After BIR at clearance from the local
government, register mo na. In a month’s time,
you’ll have a certificate of title in your name.
Yung mortgagor ayaw umalis.
Lagpas na yung redemption period mo, ako na
ang registered owner.
Dahil ayaw umalis, nagdemanda ka. Anu iffile
mo?
Hindi accion publiciana nor unlawful detainer.
Kung ikaw ang highest bidder, file ka sa court
ng ex-parte petition for the issuance of a writ of
possession
Parang di na mag-present ng testimonial
evidence, attach ka na lang certified true copy
ng mga documents.
The issuance of writ of possession is a
ministerial duty of the court.
Meron bang pagkakataon na hindi ministerial
ang writ of possession? Meron.
If there is a person who has a better right of
possession than the highest bidder. Sinu yun?
Baka bago i-mortgage sa’yo, na-lease yung
property to another person.
Kung ikaw ay gagawing mortgagee, alamin
kung anu ang right to possession nung tao.
Pag contract of lease, ask for a copy of the
contract of lease so that you will know his
rights.
Pag 25 years, mag-isip.
To qualify as a buyer in good faith, you should
find out who is in actual possession. And once
finding out who is in actual possession, find out
how long his possession shall be.
Pag nalaman mo na may person who has
better right of possession, pag-isipan kung
tatanggapin mo as collateral. Pag binili mo na
in a public auction, you have to respect the
right of the mortgagor. Once you get the writ of
possession pwede na paalisin.
Ex-parte petition man ang tawag, it is in the
nature of a motion.
TORTS AND DAMAGES
What are torts?
Torts are also known as quasi-delict – they
could be acts or omission. If acts, it should not
qualify as a crime.
Torts – are acts or omission which cause
damaged to another person thereby entitling
the injured party to recover damages. There
should be no pre-exsting contractual
relationship.
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.  shall be liable for being the owner of the motor
If there is a contract – action is breach of
contract.
Reckless driving of a public conveyance:
Driver – action is quasi-delict (no pre-
existing contractual relationship)
Operator (common carrier) – action is
breach of contract
A person is responsible not only for his own act
but also for the acts of persons whom he is
responsible.
The common carrier is responsible for the acts
or omission of its employees though such
employee may have acted without authority or
in excess of his authority.
Article 2183. The possessor of an animal or
whoever may make use of the same is
responsible for the damage which it may cause,
although it may escape or be lost. This
responsibility shall cease only in case the
damage should come from force majeure or
from the fault of the person who has suffered
damage. 
Example: Aso nangagat – owner is liable for
damages
Flower pot/vase fell from the veranda due to
strong winds causing damaga – owner is liable
for the same.
Article 2184. In motor vehicle mishaps, the
owner is solidarily liable with his driver, if the
former, who was in the vehicle, could have, by
the use of the due diligence, prevented the
misfortune. It is disputably presumed that a
driver was negligent, if he had been found
guilty of reckless driving or violating traffic
regulations at least twice within the next
preceding two months.
If the owner was not in the motor vehicle, the
provisions of article 2180 are applicable.
If you are the registered owner of a motor
vehicle, even if you are not in the motor vehicle,
and the same caused damaged to another, you
vehicle.
PCIB Leasing case. PCIB is a corporation in
the business of leasing properties. PCIB buys
motor vehicles and subsequently entered into a
lease contract with a client (lessee). When the
motor vehicle under lease figured in an
accident, PCIB Leasing being the registered
owner is also liable.
Example: buying a sausage with broken glass
inside – sue the manufacturer/processor not
the supermarket owner.
If you already noticed the defect in the item, do
not consume it, otherwise, it shall be the
consumer’s fault and not the manufacturer’s.
DAMAGES
Article 2197. Damages may be:
(MENTAL/MANTLE)
(1) Actual or compensatory;
(2) Moral;
(3) Nominal;
(4) Temperate or moderate;
(5) Liquidated; or
(6) Exemplary or corrective.
Damages has 2 meanings: (a) injury; and (b)
compensation for injury.
Whoever alleges that he suffered actual
damages must be able to prove his actual
damages. The best proof is RECEIPT.
There are times that actual damages may not
be easily proven.
Example: infringement of a patent or copyright
If you cannot prove actual damages in case of
infringement cases. The defendant shall simply
be ordered to pay royalties.
Moral damages – are those awarded to
physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation,
wounded feelings, moral shock, social
humiliation, and similar injury. Though
incapable of pecuniary computation, moral
damages may be recovered if they are the
proximate result of the defendant's wrongful act
for omission.
Should moral damages also be proven?
YES. It is proven by the kwento of the
victim/plaintiff. Dapat detalyado ang
kwento.
Are corporations entitled to moral damages?
Yes, for besmirch reputation. It must be
proven how the business was affected.
Before, the corporation enjoys a credit
line but now all its purchases are COD.
There is a loss opportunity, business is
affected.
Rape – 75K for every count of rape
Exemplary Damages – cannot be awarded by
itself. It should be awarded in additional to
actual, moral, liquidated, and temperate
damages.
The purpose is to deter others who are similarly
inclined with the plaintiff so that the public will
not imitate the acts or omissions of the
defendant.
Usually, not all the time, ½ of moral damages.
Liquidated Damages – are those agreed upon
by the parties to a contract, to be paid in case
of breach.
It is already agreed by the parties.
Most common in contracts with stipulations with
a penal clause.
 Construction contracts/contracts for a
piece of work
Penal Clause – additional undertaking to
assume greater responsibility in case of
breach.
No need to prove liquidated damages.
However, the court may mitigate the
penalty if under the circumstances it is
considered excessive or unconscionable.
Temperate or moderate Damages – this
are damages which a person may actually
suffered which he cannot prove.
No need to prove but assumed incurred.
Example: burial expenses with no receipts.
By SC decision, usually, 25K.
Nominal Damages – those awarded for
case with light breach of rights.
 Damages for an obligation that consist in
the payment of a sum of money?

For monetary obligations, the damages

shall consist of the stipulated interest. It
must be lawful and in writing.

Meron pa rin tayong Usury Act kaya lang it is

not in effect.

Lawful interest – 12% p.a if the loan is secured

by REM (real estate mortgage).

If there is no security, or the security consists of

personal properties, or unregistered parcel of
land – 14% p.a. maximum interest

Legal rate – 6% p.a.

Attorney’s fees – not applicable to all cases.

Awarding of attorney’s fees could be
considered as a premium in going to court,
which the SC want to avoid.

Awarded to the plaintiff and not to the

counsel.