CIVIL LAW REVIEW 2 HOMEWORK (2019-2020)

TRUE OF FALSE UNLESS OTHERWISE REQUIRED. If the answer is False, explain in

one sentence. (Use yellow pad or any paper available)

1.     In sales, knowledge of a third party of an unregistered right to repurchase

is equivalent to registration negating good faith on his part. FALSE: ART
1623 The right of legal pre-emption or redemption shall not be
exercised except within thirty days from the notice in writing by the
prospective vendor, or by the vendor, as the case may be. The deed
of sale shall not be recorded in the Registry of Property, unless
accompanied by an affidavit of the vendor that he has given written
notice thereof to all possible redemptioners. 

2.     Consumable goods may be the subject matter of a contract of lease. TRUE

3.      It shall be unlawful to employ a 16-year-old man as domestic worker.

FALSE. RA 10361 Provides that it shall be unlawful to employ any
person below 15 years of age as domestic worker as one is defined
as a working child. Therefore, it is lawful to employ a 16 year-old-
man as domestic worker. 

4.      It is unlawful for X to wash the clothes of Y for a week in payment of the
former’s obligation to the latter in the amount of P500. TRUE

5.      A travel agency must observe extraordinary diligence in the performance

of its contractual obligations. FALSE. A travel agency is not the same as
a common carrier which requires observance of extraordinary
diligence. 

6.      It may be agreed that goods may be transported at the risk of the owner.
FALSE. Only to limit the liability is allowed.

7.     Additional limited partners may be admitted without need of amending the

certificate of partnership. FALSE. ART. 1864 A certificate shall be
amended when (3) an additional limited partner is admitted.  

 
8.    A contract entered into by an agent exceeding his authority is
unenforceable. TRUE.

9.     The lack of a license to sell in violation of a mandatory provision of PD 957

results to the invalidation of the contract to sell entered into by a subdivision
developer with a buyer. FALSE. Lack of license to sell does not affect
validity of a contract to sell. 

10. 10. Article 1544 of the Civil Code on double sale will also apply to sales
involving unregistered land. False. Art. 1544 does not apply to
unregistered lands.

11. In a contract to sell, the buyer may file an action for specific performance if
the seller refuses to accept the full purchase price tendered by the former.
FALSE. Buyer may not file for specific performance if the seller
refuses to accept the full purchase price tendered by the former.  

12.  A separate action for reformation of instrument is no longer necessary

before foreclosure as a court declaration that the parties' intention was to
execute an equitable mortgage is sufficient reformation of such instrument.
TRUE

13.  In a potential sale transaction, the prior payment of earnest money even
before the property owner can agree to sell his property can be used to bind
the owner to the obligations of a seller under an otherwise perfected contract
of sale. FALSE. Art. 1482 provides that there must first be a perfected
contract of sale before we can speak of earnest money.

14.  An action for reconveyance based on implied trust prescribes in 10 years to
be counted from the date of issuance of the Torrens title over the property
except when the person enforcing the trust is not in possession of the
property. FALSE. Such rule is applicable to a person enforcing the
trust and not in possession of the property, otherwise such is
imprescriptible.

15.  In a joint indivisible obligation, the insolvency of a debtor makes the others
liable for his share as an exception to the general rule because the creditor
 must proceed against all debtors. FALSE. A joint debtor in an indivisible
obligation is not liable for the insolvency of other debtor.

16.  The rule on relativity of contracts applies to a contract entered into by the
gestor in negotiorum gestio. FALSE. It will necessary find the owner of
the property, then the contract entered into 

17.  A contract of lease with an option to renew shall be extinguished by the

death of either the lessor or the lessee. FALSE. A contract of lease is not
personal.

18.  A duly registered levy on attachment could not prevail over a prior sale
even if unregistered because of the rule of first in time better in right.
FALSE. It is doctrinal that a levy on attachment, duly registered, has
preference over a prior unregistered sale and, even if the prior
unregistered sale is subsequently registered before the sale on
execution but after the levy is made, the validity of the execution
sale should be upheld because it retroacts to the date of levy.

19. Rescission may be availed of by a party in a partnership contract upon the

failure of a contracting party to perform the reciprocal obligation of delivering
his promised contribution. FALSE. The remedy of the partner is not
rescission but an action for specific performance with damages and
interest from the defaulting partner from the time he should have
complied with his obligation.  

20. The death of the principal terminates the agency. TRUE.

21.  The death of a general partner terminates the partnership. FALSE. Death of a
general partner results to dissolution of partnership and not termination.

22. The death of a debtor in an obligation to do extinguishes the obligation. FALSE.

Exception: does not terminate the agency when a bilateral contract
depends upon it or if it is a means of fulfilling an obligation already
contracted.
  

23. The loss of the thing used to secure an obligation due to the fault of the creditor
terminates the principal obligation. FALSE. Principal thing is different from that
of a security.

24. There will be delay if the debtor refuses to choose an alternative prestation
within the period agreed upon for the choice to be done. FALSE. There is no
delay when the debtor refuses to choose an alternative prestation within
the period agreed upon for the choice to be done.

25. A debtor may compel his creditor to accept as legal tender the commemorative
Php50,000 bill in payment of an obligation incurred during the expanded
community quarantine. FALSE. Central Bank has issued a circular
withdrawing such bill as a legal tender.

26. A common debtor may opt to apply payment to his personal debt owing to the
managing partner over his obligation to the partnership even if the latter obligation
bears a higher rate of interest. FALSE. Managing partner must apply the
payment to the obligation owing to partnership as it is more onerous.

27. In all instances, a limited partner shall be liable as a general partner if he

participates in the management of the partnership. TRUE.

28. There can be delay on the part of the creditor in an obligation not to do if he
fails to stop the prohibited act within a reasonable period of time. FALSE. No delay
in negative obligation.

29. The Recto Law applies to assignment of leasehold rights. FALSE. Applies only
to personal property. 

30. The principal has a subrogatory right against a sub-agent for damages incurred
through the latter’s Fault. TRUE. ARTICLE 1893.

31. Warranty in sales is a natural element of the contract. TRUE.

32. Formality of the sale is an essential element of a sale of land through an agent.
FALSE. It is authorization that is an essential element.

33. Vices of consent that affects cognition includes incapacity, error and fraud.
TRUE.

34. The intention prevails as against third parties in case conflict exists between the
words and the intention of the parties. FALSE. Only between contracting party.

35. Relative nullity and rescissibility may be cured by confirmation or prescription.

FALSE. Void contracts cannot be ratified by confirmation or prescription.

36. Inadequacy of cause upon the contract invalidates the same. FALSE. Art. 1355

37. A relative simulation makes the apparent contract void as between parties, but
the hidden contract is valid if it is lawful and has the necessary requisites. TRUE.

38. Gross negligence in the performance of an obligation will have the same
consequences as fraud. FALSE. Negligence results to damages; fraud leads to
rescission.

39. A stipulation for an incentive of plus 1 in the final grade in Civil Law Review 1
for students who watched the Red Lions win the NCAA championship is valid.
FALSE.

40. As a rule, the execution of a notarized deed of sale is equivalent to delivery of

the thing sold. TRUE.

41. A court judgment for the price of goods in an action for collection results to a
waiver of the unpaid seller’s lien on the goods. FALSE. Lien remains until the
seller gets paid.
42-45. Enumerate the warranties of an assignor of a claim secured by a document
of title to goods. Art. 1516 A person who for value negotiates or transfers a
document of title by indorsement or delivery, including one who assigns
for value a claim secured by a document of title unless a contrary intention
appears, warrants: 

(1) That the document is genuine;

(2) That he has a legal right to negotiate or transfer it;

(3) That he has knowledge of no fact which would impair the validity or
worth of the document; and 

(4) That he has a right to transfer the title to the goods and that the goods
are merchantable or fit for a particular purpose, whenever such warranties
would have been implied if the contract of the parties had been to transfer
without a document of title the goods represented thereby.

46. The hen sold to Y yesterday laid 2 eggs this morning. At the agreed time of
delivery tomorrow, the seller must deliver the 2 eggs to Y. 

True. Deliver the fruits (eggs) as well.

47. If the buyer does not appeal the judgment of eviction, the warranty against
eviction will not apply. False. No need to appeal for warranty to set in.

48-50.Instances when the sale of a subdivision lot is exempt from the requirement
of a license to sell. PD 957, Sec 7 (a) Sale of a subdivision lot resulting from
the partition of land among co-owners and co-heirs.

(b) Sale or transfer of a subdivision lot by the original purchaser thereof

and any subsequent sale of the same lot.

(c) Sale of a subdivision lot or a condominium unit by or for the account of

a mortgagee in the ordinary course of business when necessary to
liquidate a bona fide debt.

51-56. Grounds for the revocation of a license to sell issued to a subdivision owner.
SEC. 9 a) Is insolvent; or 
b) Has violated any of the provisions of this Decree or any applicable rule
or regulation of the Authority, or any undertaking of his/its performance
bond; or 

c) Has been or is engaged or is about to engage in fraudulent transactions;

or 

d) Has made any misrepresentation in any prospectus, brochure, circular

or Other literature about the subdivision project or condominium project
that has been distributed to prospective buyer; or 

e) Is of bad business repute; or 

f) Does not conduct his business in accordance with law or sound business
principles. 

57-68. Give 12 distinctions between limited partnership and general partnership.

As to creation

LP: composed of one or more general partners and one or more limited partners

GP: composed only of general partners

Contribution

LP: may only contribute cash or property to the partnership but not services

GP: may contribute money, property or industry to the partnership

Organizational Requirement

LP: must be executed in a certificate of limited partnership, duly signed and sworn
to by all the partners and recorded in the SEC

GP: as a general rule, may be constituted in any form by contract or conduct of the
partnership, unless immovable property is contributed.

Rules Governing Dissolution and Winding Up

LP: governed by Art. 1863; Insanity of a general partner automatically dissolves

the partnership.
GP: governed by Art. 1839; Insanity of a general partner being a judicial ground for
dissolution under Art. 1831 of the Civil Code, it will not automatically dissolve the
partnership.

Right to participate in the management of ownership

LP: has no share in the management of a limited partnership and renders himself
liable to partnership creditors as a general partner if he takes part in the control of
the business

GP: general partners have an equal right in the management if the business (when
the manner of management has not been agreed upon)

Business name

LP: generally, the name of a limited partner must not appear in the firm name. firm
name must be followed by the word “limited”

GP: name of a general partner may appear in the firm name

Proper party to proceedings by or against the partnership

LP: Limited partner is not a proper party to proceedings by or against a partnership

unless:

a. He is also a general partner (his liability is to the partners not to the

creditors); or
b. Where the object of the proceeding is to enforce a limited partner’s right
against or liability to the partnership

GP: general partner is the proper party to proceedings by or against the partnership

Prohibition to engage in other business

LP: No such prohibition in the case of a limited partner for he is considered a mere
contributor to the partnership

GP: Capitalist partner – prohibited from engaging in a business which is of the

same kind of business in which the partnership is engaged; or Industrial partner –
in any of business for himself
Effect of retirement, death, insanity or insolvency

LP: retirement, death, insanity or insolvency of a limited partner does not dissolve
the partnership for his executor or administrator shall have the rights of a limited
partner for the purpose of selling his estate.

GP: retirement, death, insanity or insolvency of a general partner dissolves the

partnership

Term of Existence

LP: required to have a fixed term or particular undertaking

GP: may be a partnership with a term or a partnership at will

Assignability of interest

LP: freely assignable, with assignee acquiring all the rights of the limited partner
subject to certain qualifications

GP: not assignable without the consent of the other partners, although he may
associate a third person with him in his share

Extent of Liability

LP: limited partner’s liability extends only to his capital contribution

GP: general partner is personally liable for partnership obligations after exhaustion
of partnership assets.

69-74.Give the order of priority in the payment of the liabilities of a limited

partnership upon liquidation.

Article 1863. In settling accounts after dissolution the liabilities of the partnership
shall be entitled to payment in the following order:
 (1)Those to creditors, in the order of priority as provided by law, except those to
limited partners on account of their contributions, and to general partners;
(2)Those to limited partners in respect to their share of the profits and other
compensation by way of income on their contributions;
(3)Those to limited partners in respect to the capital of their contributions;
(4)Those to general partners other than for capital and profits;
(5)Those to general partners in respect to profits;
(6)Those to general partners in respect to capital.

Subject to any statement in the certificate or to subsequent agreement, limited

partners share in the partnership assets in respect to their claims for capital, and in
respect to their claims for profits or for compensation by way of income on their
contribution respectively, in proportion to the respective amounts of such claims.

75-80.Give six characteristics of a contract of agency.

The 8 characteristics of a contract of agency are:

1. Preparatory
2. Consensual
3. Nominate
4. Bilateral
5. Generally onerous
6. Representative relation
7. Fiduciary
8. Principal

81-95. Enumerate 15 obligations of the agent to his principal.

The obligations of the agent to his principal are as follows:

General Obligations:
1. To obey all lawful orders and instructions of the principal within the scope of
his agency (Duty of Obedience)
2. To act with utmost good faith and loyalty for furtherance of principal’s
interest (Duty of Loyalty), and
3. To exercise reasonable care, skill and diligence (Duty of Diligence)

Specific obligations:
1. To carry out the agency which he has accepted (Art. 1884, NCC)
2. To answer for damages which through his non-performance the principal may
suffer (Art. 1884)
 3. To finish the business already begun on the death of the principal should
delay entail any danger (Art. 1884)
4. To observe diligence of a good father of a family in the custody and
preservation of the goods forwarded to him by the owner in case he declines
an agency until an agent is appointed (Art. 1885)
5. To advance the necessary funds should there be a stipulation to do so (Art.
1836)
6. Not to carry out the agency if its execution would manifestly result in loss or
damage to the principal (Art. 1888)
7. To answer for damages if there being a conflict between his interest and
those of the principal, he should prefer his own (Art. 1889)
8. Not to loan to himself if he has been authorized to lend money at interest
(Art. 1890)
9. To render an account of his transactions and to deliver to the principal
whatever he may have received by virtue of the agency, even though it may
not be owing to the principal (Art. 1891)
10. To be responsible in certain cases for the acts of the substitute
appointed by him when he was not given power to appoint one, and if he was
given such power but without designating the person, the person appointed
was notorious, incompetent or insolvent (Art. 1892)
11. To pay interest on funds he has applied to his own use (Art. 1896)
12. To act in accordance with the instructions of the principal, and in
default thereof, to do all that a good father of a family would do (Art. 1887)
13. To inform the principal where an authorized sale of credit has been
made of such sale (Art. 1906)
14. To distinguish goods by countermarks and designate the merchandise
respectively belonging to each principal, in the case of a commission agent
who handles goods of the same kind and mark, which belong to different
owners. (Art. 1904)
15. To bear the risk of collection, should be receive also on sale, a
guarantee commission (Art. 1907)
16. To indemnify the principal for damages for his failure to collect the
credits of his principal at the time they become due (Art. 1908)
17. To be responsible for fraud or negligence (Art. 1909)

[source: enumeration from memaid]

96-98.Explain the doctrine of marshaling of assets in partnership.

The Doctrine of marshalling of assets in partnership states that when partnership

property and the individual properties of the partners are in possession of a court
for distribution, partnership creditors shall have priority on partnership property
and separate creditors on individual property, saving the rights of lien or secured
creditors. (Art. 1839(8))
[source: p. 685, Rabuya reviewer]

99. A foreign-owned partnership may engage in retail trade in the

Philippines.

TRUE. There is no express prohibition to the same.

100. Barter in effect is a mutual sale where both are vendors and vendees
to each other.

TRUE. Barter is an exchange of goods but in effect is a mutual sale.

[source: p.646, 2019 memaid]

101. All the Civil Code provisions on pledge were repealed by the Personal
Property Security Act.

FALSE, RA 11057 Sec. 66 only repealed provisions on chattel mortgage and

conventional pledge.

[source: RA 11057 s6, and 2019 memaid]

102. Deposit accounts and intellectual property rights may now be used as
loan collateral.

TRUE. Section 23 (c ) for intellectual property, Section 8 (b) for deposit accounts.
RA 11057 allows both as collateral for loan.

103. Under the PPSA, future income cannot be pledged to secure an

obligation because of the uncertainty of income.

FALSE. Future income can be pledged to secure an obligation.

Section 5(b) RA 11057 - A security agreement may provide for the creation of a
security interest in a future property, but the security interest in that property is
created only when the grantor acquires rights in it or the power to encumber it.

104. An airplane may be pledged or mortgaged.

TRUE, under RA 9497 (Creation of CAAP, Sec. 23 (e)).

Note: Airplanes are not covered by RA 11057 or PPSA. It is covered under RA 9497.

105. Under the PPSA, delivery of the thing pledged is necessary to perfect
the contract.

FALSE, it is only one of the modes of perfecting a security agreement.

Section 12. Means of Perfection.— A security interest may be perfected by:

(a) Registration of a notice with the Registry;
(b) Possession of the collateral by the secured creditor; and
(c) Control of investment property and deposit account.
A security interest in any tangible asset may be perfected by registration or
possession. A security interest in investment property and deposit account may be
perfected by registration or control.

106. A security interest by way of pledge must be in a public instrument.

FALSE. The security agreement is only required to be in writing.

Section 6. Security Agreement.— A security agreement must be contained in a

written contract signed by the parties. It may consist of one or more writings that,
taken together, establish the intent of the parties to create a security interest.
The security agreement shall likewise provide for the language to be used in
agreements and notices. The grantor shall be given the option to have the
agreement and notices in Filipino. The Department of Finance (DOF) shall prepare
model agreements in plain English and Filipino.

107. Under the PPSA, the pledgee shall return to the pledgor the excess of
proceeds over the debt.

TRUE.

Section 52 (b) The secured creditor shall account to the grantor for any surplus,
and, unless otherwise agreed, the debtor is liable for any deficiency.

108. Under the PPSA, the pledgor is liable for any deficiency of the
proceeds.

TRUE.

Section 52 (b) The secured creditor shall account to the grantor for any surplus,
and, unless otherwise agreed, the debtor is liable for any deficiency.

109. The bailee in commodatum acquires the use of the thing loaned as
well as its fruits for the duration of the contract.

FALSE, he does not acquire the fruits for the duration of the contract.

Article 1935. The bailee in commodatum acquires the use of the thing loaned but
not its fruits; if any compensation is to be paid by him who acquires the use, the
contract ceases to be a commodatum. 

110. Consumable goods may be the subject of commodatum.

TRUE.
Article 1936. Consumable goods may be the subject of commodatum if the purpose
of the contract is not the consumption of the object, as when it is merely for
exhibition.

111. A thief, lessee, or usufructuary may be a bailor in commodatum.

TRUE.

Article 1938. The bailor in commodatum need not be the owner of the thing loaned.

112. The bailee in commodatum can never lend or lease the object of the
contract to a third person.

TRUE.

Article 1939 (2) The bailee can neither lend nor lease the object of the contract to a
third person. However, the members of the bailee's household may make use of the
thing loaned, unless there is a stipulation to the contrary, or unless the nature of
the thing forbids such use. 

113. The bailee is obliged to pay the ordinary expenses for the use and
preservation of the thing loaned.

TRUE.

Article 1941. The bailee is obliged to pay for the ordinary expenses for the use and
preservation of the thing loaned.

114. The bailee is liable for the loss of the thing if he lends or leases the
thing to a third person who is not a member of his family except when it is
lost through a fortuitous event.

FALSE, he is liable even when it is lost through fortuitous event.

Article 1942. The bailee is liable for the loss of the thing, even if it should be
through a fortuitous event:
xxx
(4) If he lends or leases the thing to a third person, who is not a member of his
household;

115. The bailor may demand the thing at will if neither the duration of the
contract nor the use to which the thing loaned should be devoted has been
stipulated.

TRUE.

Article 1947. The bailor may demand the thing at will, and the contractual relation
is called a precarium, in the following cases:
(1)If neither the duration of the contract nor the use to which the thing loaned
should be devoted, has been stipulated; or
xxx

116. The bailor may exempt himself from the payment of expenses or
damages by abandoning the thing to the bailee.

FALSE, express prohibition of law.

Article 1952. The bailor cannot exempt himself from the payment of expenses or
damages by abandoning the thing to the bailee. (n)

117. Only in loan contracts, with or without security, may interest be

demanded.

FALSE. Interest may also be demanded as compensatory interest. (interest for

actual damages incurred/suffered)

Case: Nacar v. Gallery Frames – provides for interest arising from 1. breach of an
obligation for payment for sum of money, or 2. Obligation breached is NOT
forbearance of loan or money.
118. A contract of deposit is binding and perfected even before the delivery
of the thing.

FALSE. A contract of deposit is perfected by delivery of the thing.

Article 1963. An agreement to constitute a deposit is binding, but the deposit itself
is not perfected until the delivery of the thing.

119. Exceptionally, the ownership of the thing loaned may be retained by

the Creditor.

TRUE.

Article 1944. The bailee cannot retain the thing loaned on the ground that the bailor
owes him something, even though it may be by reason of expenses. However, the
bailee has a right of retention for damages mentioned in article 1951.

120. A stipulation to pay interest in a contract of loan is unenforceable if

not reduced in writing.

TRUE.
Article 1956. No interest shall be due unless it has been expressly stipulated in
writing. 

121. Compounding of interest is allowed only by agreement.

TRUE.
Article 1959. Without prejudice to the provisions of article 2212, interest due and
unpaid shall not earn interest. However, the contracting parties may by stipulation
capitalize the interest due and unpaid, which as added principal, shall earn new
interest.
122. Payment of interest in the absence of stipulation shall be governed by
solutio indebiti.

TRUE.
Article 1960. If the borrower pays interest when there has been no stipulation
therefor, the provisions of this Code concerning solutio indebiti, or natural
obligations, shall be applied, as the case may be. 

123. The current legal rate of interest for forbearance of money is 12% per
annum.

FALSE. BSP Circular No. 799 s. 2013 lowered the legal rate to 6% per annum
effective July 1, 2013.

124. A contract of irregular deposit allows the depositary to use the

property of the depositor.

TRUE.
Irregular deposit – if the safekeeping is still the principal purpose of the contract
although there is permission to use the consumable thing. Ie: bank deposit

[Source: p. 656 2019 memaid]

125. A movable or immovable thing may be the object of a voluntary

deposit.

FALSE, only movable things.

Article 1966. Only movable things may be the object of a deposit.

126. A contract of deposit must be in writing in order to be valid.

FALSE, no form is required.

Article 1969. A contract of deposit may be entered into orally or in writing
127. The depositary cannot deposit the thing with a third person.

FALSE
Article 1968. A voluntary deposit is that wherein the delivery is made by the will of
the depositor. A deposit may also be made by two or more persons each of whom
believes himself entitled to the thing deposited with a third person, who shall
deliver it in a proper case to the one to whom it belongs. 

Article 1973. Unless there is a stipulation to the contrary, the depositary cannot

deposit the thing with a third person. If deposit with a third person is allowed, the
depositary is liable for the loss if he deposited the thing with a person who is
manifestly careless or unfit. The depositary is responsible for the negligence of his
employees. 

128. The depositary shall be liable for the loss of the thing deposited if he
allows others to use it, even though he himself may have been authorized
to use the same.

TRUE.
Article 1979. The depositary is liable for the loss of the thing through a fortuitous
event:
xxx
(4) If he allows others to use it, even though he himself may have been authorized
to use the same. 

129. The depositary can demand that the depositor prove his ownership of
the thing deposited.

FALSE.
Article 1984. The depositary cannot demand that the depositor prove his ownership
of the thing deposited.
xxx
130. When there are two or more depositors who are not solidary, each
one cannot demand more than his share if the thing can be divided.

TRUE.
Article 1985. When there are two or more depositors, if they are not solidary, and
the thing admits of division, each one cannot demand more than his share.
xxx

131. The depositary may not return the thing deposited upon demand if a
specified period or time for such return has been fixed.

FALSE.
Article 1988. The thing deposited must be returned to the depositor upon demand,
even though a specified period or time for such return may have been fixed.

This provision shall not apply when the thing is judicially attached while in the
depositary's possession, or should he have been notified of the opposition of a third
person to the return or the removal of the thing deposited. In these cases, the
depositary must immediately inform the depositor of the attachment or opposition. 

132. A deposit is necessary when it is made in compliance with a legal

obligation.

TRUE.
Article 1996. A deposit is necessary:
(1) When it is made in compliance with a legal obligation;
xxx

133. A gratuitous deposit is extinguished upon the death of either the

depositor or the depositary.

TRUE.
Article 1995. A deposit its extinguished:
xxx
(2) In case of a gratuitous deposit, upon the death of either the depositor or the
depositary.

134. The insolvency of the guarantor entitles the creditor to demand

another guarantor.

TRUE.
Article 2057. If the guarantor should be convicted in first instance of a crime
involving dishonesty or should become insolvent, the creditor may demand another
who has all the qualifications required in the preceding article. The case is excepted
where the creditor has required and stipulated that a specified person should be the
guarantor. 

135. Future debts of unknown amount may be guaranteed and the

guarantor may be sued even before the debt is liquidated.

FALSE. The debt must be liquidated first before the guarantor can be sued.
Article 2053. A guaranty may also be given as security for future debts, the amount
of which is not yet known; there can be no claim against the guarantor until the
debt is liquidated. A conditional obligation may also be secured. 

136. Guaranty must be express and is never presumed.

TRUE.

Basis: Article 2055.  A guaranty is not presumed; it must be express and

cannot extend to more than what is stipulated therein.

137. The guarantor can bind himself for more or less than what the debtor
is liable to pay.

FALSE. A guarantor may only bind himself for less, but not more than the
principal debtor.

Basis: Article 2054.  A guarantor may bind himself for less, but not for more
than the principal debtor, both as regards the amount and the onerous
nature of the conditions.
138. The debtor may interpose against the guarantor all defenses available
against the creditor.

FALSE. Only when the guarantor pays without notifying the debtor.

139. The benefit of exhaustion in favor of the guarantor is not available

where the guaranty is in the form of a mortgage of the guarantor’s
property.

TRUE.

140. Execution may be enforced against the guarantor whenever a writ of

execution is issued against the debtor.

FALSE. The benefit of exhaustion must be exercised first.

Basis: Article 2058.  The guarantor cannot be compelled to pay the creditor
unless the latter has exhausted all the property of the debtor, and has resorted to
all the legal remedies against the debtor.

141. If the guarantor pays before the due date, he cannot proceed against
the debtor until that date arrives, unless the debtor ratifies the payment.

TRUE.

Basis: Article 2069.  If the debt was for a period and the guarantor paid it
before it became due, he cannot demand reimbursement of the debtor until
the expiration of the period unless the payment has been ratified by the
debtor.

142. The pledgee cannot deposit the thing pledged with a third person,
unless there is a stipulation authorizing it.

TRUE.
 Basis: Article 2100.  The pledgee cannot deposit the thing pledged with a
third person, unless there is a stipulation authorizing him to do so.

143. The pledgor remains the owner of the thing pledged until its sale.

TRUE.

144. The pledgor has the right to the return of the thing pledged upon
extinction of the principal obligation.  

TRUE.

145. The pledgee may use the thing pledged on his own will.

FALSE. Article 2104.  The creditor cannot use the thing pledged, without the
authority of the owner, and if he should do so, or should misuse the thing in
any other way, the owner may ask that it be judicially or extrajudicially
deposited

146. In a real estate mortgage, a stipulation forbidding the owner from

alienating the immovable is valid.

FALSE. Under Article 2130 of the New Civil Code, a stipulation forbidding the
owner from alienating the immovable mortgaged shall be void.

147. The mortgage credit may be alienated or assigned to a third person,

in whole or in part.

TRUE.

Basis: Article 2128.  The mortgage credit may be alienated or assigned to a

third person, in whole or in part, with the formalities required by law.
148. In a real estate mortgage, the creditor has the right to appropriate
the fruits.

FALSE. The creditor cannot appropriate the things given by way of pledge or
mortgage, or dispose of them. The real estate mortgage is not limited to the
property itself but also extends to all its accessions, improvements, growing
fruits, and rents and income.

Basis:

Article 2088. The creditor cannot appropriate the things given by way of

pledge or mortgage, or dispose of them

Article 2127. The mortgage extends to the natural accessions, to the

improvements, growing fruits, and the rents or income not yet received
when the obligation becomes due, and to the amount of the indemnity
granted or owing to the proprietor from the insurers of the property
mortgaged, or in virtue of expropriation for public use, with the declarations,
amplifications and limitations established by law, whether the estate remains
in the possession of the mortgagor, or it passes into the hands of a third
person.

149. Antichresis may be constituted only on immovable property.

TRUE.

Basis: Article 2132 provides that “By the contract of antichresis the creditor
acquires the right to receive the fruits of an immovable of his debtor, with
the obligation to apply them to the payment of the interest, if owing, and
thereafter to the principal of his credit.” Hence, by the definition itself, it is
clear that the subject-matter of the contract is an immovable.

150. A pledgor who is not the debtor, has the rights of a guarantor to seek
reimbursement, subrogation, or excussion and is not prejudiced by any
waiver of defense by the debtor.
 FALSE. Excussion is not included in pledge.

151. The incorporeal right of lease over a condominium unit evidenced by a

notarized contract of lease may be validly pledged.

FALSE. A lease contract is not an incorporeal right evidenced by documents

of title.

Basis: Article 2095.  Incorporeal rights, evidenced by negotiable

instruments, bills of lading, shares of stock, bonds, warehouse receipts and
similar documents may also be pledged. The instrument proving the right
pledged shall be delivered to the creditor, and if negotiable, must be
indorsed. (n)

Not all incorporeal rights can be the subject of a pledge. The incorporeal
rights must be evidenced by negotiable instruments, bills of lading, shares of
stock, bonds, warehouse receipts and similar documents. In this regard,
Article 2095, enumerates documents in which the transfer of the instrument
(delivery or indorsement) transfers ownership of the right or property
represented by the instrument.

Ordinary contract rights cannot be pledged by delivery of the signed contract

to the pledgee as the delivery of the contract does not transfer ownership of
the contract rights. (Credit De Leon, p. 449)

152. A pledge made by a third party who is not the owner of the thing
pledged is void because only an owner without exception may pledge his
property.

FALSE. A third party may constitute the pledge as long as it is with the
authority or consent of the owner of the property pledged.

Basis: Article 2085

153. An agreement to the effect that the thing pledged should be applied in
payment of the obligation by way of dacion en pago is void because this
will constitute pactum commissorium.
 FALSE. This will constitute dacion en pago. Under Article 2088, pactum
commisorium is where the creditor appropriates the things given by way of pledge
or mortgage, or dispose of them.

154. If there are three debtors who are jointly liable, the creditor may
enforce the obligation of each against the whole thing pledged.

FALSE. The creditor cannot immediately enforce the obligation of the joint
debtors against the whole thing pledged because he may do this only when
the credit has not been satisfied in due time.

155. The pledgee cannot use the thing pledged without the express
authority of the pledgor even if its preservation so requires.

FALSE. When the preservation of the thing pledged requires its use, it must
be used by the credit but only for that particular purpose.

Basis: Article 2104.  The creditor cannot use the thing pledged, without the
authority of the owner, and if he should do so, or should misuse the thing in
any other way, the owner may ask that it be judicially or extrajudicially
deposited. When the preservation of the thing pledged requires its use, it
must be used by the creditor but only for that purpose.

156. All fruits produced by the thing pledged are subject to legal
compensation even in the absence of a stipulation to this effect.

TRUE.

Basis: Article 2102.  If the pledge earns or produces fruits, income,

dividends, or interests, the creditor shall compensate what he receives with
those which are owing him; but if none are owing him, or insofar as the
amount may exceed that which is due, he shall apply it to the principal.
Unless there is a stipulation to the contrary, the pledge shall extend to the
interest and earnings of the right pledged.
157. The pledgee of a pawn ticket must renew it when necessary.

TRUE.

Basis: Credit De Leon, p. 455

Illustrative case: Cruz and Serrano vs. Chua A.H. Lee, 54 Phil. 10 (1929)-
Pledged pawn ticket was lost for failure of creditor to renew loan of debtor
with pawnshop.

158. Unless stipulated otherwise, the return of the thing pledged to the
owner extinguishes the pledge.

FALSE. Any stipulation that provides that the return of the thing pledged will
not extinguish the pledge is void.

Basis: Article 2110.  If the thing pledged is returned by the pledgee to the
pledgor or owner, the pledge is extinguished. Any stipulation to the contrary
shall be void.

159. In all instances, the pledge is extinguished when the thing pledged is
in the possession of the pledgor.

FALSE. It is only a disputable presumption.

Basis: Article 2110 (2) If subsequent to the perfection of the pledge, the
thing is in the possession of the pledgor or owner, there is a prima facie
presumption that the same has been returned by the pledgee. This same
presumption exists if the thing pledged is in the possession of a third person
who has received it from the pledgor or owner after the constitution of the
pledge. (n)

160. The pledgor must pay the necessary and useful expenses incurred by
the pledgee on the thing pledged.

TRUE.
 Basis: Article 2099.  The creditor shall take care of the thing pledged with
the diligence of a good father of a family; he has a right to the
reimbursement of the expenses made for its preservation, and is liable for its
loss or deterioration, in conformity with the provisions of this Code.

161-168.What are the modes of extinguishing guaranty? (8 items)

1. Extension - An extension granted to the debtor by the creditor without the

consent of the guarantor (Article 2079, 1st sentence)
2. Payment or performance
3. Dacion en pago – The guarantor is released if the creditor voluntarily
accepts immovable or other property in payment of the debt, even if he
should afterwards lose the same through eviction (Article 2077)
4. Loss of the thing due - An obligation which consists in the delivery of a
determinate thing shall be extinguished if it should be lost or destroyed
without the fault of the debtor, and before he has incurred in delay (Article
1262)
5. Service becomes impossible - The debtor in obligations to do shall also be
released when the prestation becomes legally or physically impossible
without the fault of the obligor. (Article 1266)
6. Consignation - If, the consignation having been made, the creditor should
authorize the debtor to withdraw the same, he shall lose every preference
which he may have over the thing. The co-debtors, guarantors and sureties
shall be released. (Article 1261)
7. Condonation - The renunciation of the principal debt shall extinguish the
accessory obligations; but the waiver of the latter shall leave the former in
force (Article 1273)
8. Merger or confusion- The guaranty is extinguished from the time the
characters of creditor and debtor are merged in the same person (Article
1275)
9. Compensation – A compensation of the debts of the debtor and the creditor
will extinguish the guarantee. (Article 1279, 1280)
10. Novation- In general, the novation of the obligation will extinguish
the guaranty. However, when the principal obligation is extinguished as a
consequence of novation, the guaranty may subsist only insofar as it benefits
third persons who did not give their consent (1296)
11. Failure of subrogation – The guarantors are released from their
obligation whenever by some act of the creditor, they cannot be subrogated
to the rights, mortgages, and preferences of the latter. (Article 2080)
12. Release – Creditor may release the guarantor from the guarantee.
(Article 2080)

From pages 377-379 of Credit De Leon 2016 edition

169-174.What are the obligations of the pledgee in preservation of the
thing? (6 items)

1. Obligation of pledgee to take due care of thing pledged with the

diligence of a good father of a family. - The creditor shall take care of the
thing pledged with the diligence of a good father of a family. (Article 2099)
2. Obligation of pledgee not to deposit thing pledged with another. - The
pledgee cannot deposit the thing pledged with a third person, unless there is
a stipulation authorizing him to do so. (Article 2100)
3. Obligation of the pledgee not to use the thing pledged. – The pledgee
who is in possession of the thing pledged has no right to make use of it
without permission from the owner. (Article 2104)
4. Obligation of pledgee to advise pledgor of the flaws of the thing
pledged. - The pledgor has the same responsibility as a bailor in
commodatum in the case under article 1951. (Article 2101) Article 1951. The
bailor who, knowing the flaws of the thing loaned, does not advise the bailee
of the same, shall be liable to the latter for the damages which he may suffer
by reason thereof.
5. Responsibility for acts of agents and employees as regards the thing
pledged. The pledgee is responsible for the acts of his agents or employees
with respect to the thing pledged. (Article 2100 (2)
6. Obligation to advise pledger of the result of public auction- After the
public auction, the pledgee shall promptly advise the pledgor or owner of the
result thereof. (Article 2116)
7. Obligation to return the thing upon payment of the debt.

175-177.What are the obligations of the depositor? 3 items

1. Duty to reimburse - The depositor is obliged to reimburse the depositary

for the expenses he may have incurred for the preservation of the thing
deposited.
2. Duty to pay compensation- There is a duty to give recompense where
there is an agreement for the payment thereof or where the depositary is
engaged in the business of storing goods.
3. Depositary’s lien - The depositary may retain the thing in pledge until the
full payment of what may be due him by reason of the deposit (Article 1994)

Basis:

Article 1992. If the deposit is gratuitous, the depositor is obliged to reimburse

the depositary for the expenses he may have incurred for the preservation of
the thing deposited.
 Article 1994. The depositary may retain the thing in pledge until the full
payment of what may be due him by reason of the deposit.

Rabuya pages 774-775

178.In antichresis, the debtor is obliged to account to the creditor for

fruits and their application to the interest and the principal of the credit.

FALSE. Article 2132. By the contract of antichresis the creditor acquires the
right to receive the fruits of an immovable of his debtor, with the obligation
to apply them to the payment of the interest, if owing, and thereafter to the
principal of his credit.

179-181.What are the kinds of necessary deposits? (3 items)

1. Necessary deposit in compliance with a legal obligation. Article 1996 (1)

2. Necessary deposit made on the occasion of any calamity. Article 1996 (2)
3. The deposit of effects made by travellers in hotels or inns. (Articles 1998)

Basis:

Article 1996.  A deposit is necessary:

(1) When it is made in compliance with a legal obligation;

(2) When it takes place on the occasion of any calamity, such as fire, storm,
flood, pillage, shipwreck, or other similar events.

Article 1998. The deposit of effects made by travellers in hotels or inns shall

also be regarded as necessary.

182-185.How is voluntary deposit extinguished? (4 items)

1. Upon the loss or destruction of the thing deposited. Article 1995 (1)
2. In case of a gratuitous deposit, upon the death of either the depositor or the
depositary. Article 1995 (2)
3. The return of the thing by the depositary. (Article 1989)
4. The conversion of a deposit into another contract if the depositor allows the
depositary to use the thing. (Article 1978)
 5. General modes for the extinguishment of obligations under 1231
(condonation, merger and novation) TAKE NOTE: Compensation as a mode of
extinguishment of obligations is not applicable to a deposit.

From page 203 Credit De Leon 2016 edition

186-189.What are the special rules governing judicial deposit? (4 items)

1. SUBJECT MATTER: Movable as well as immovable property may be the object

of sequestration. (Article 2006)
2. OBLIGATIONS OF SEQUESTRATOR: The depositary of property or objects
sequestrated cannot be relieved of his responsibility until the controversy
which gave rise thereto has come to an end, unless the court so orders.
(Article 2007)
3. DURATION: The depositary of property sequestrated is bound to comply,
with respect to the same, with all the obligations of a good father of a family.
(Article 2008)
4. RULES GOVERNING: As to matters not provided for in this Code, judicial
sequestration shall be governed by the Rules of Court. (Article 2009)

190-193.What are the characteristic features of guaranty? (4 items)

1. Unilateral – It is unilateral because what arises from the contract are solely
obligations on the part of the guarantor with relation to the creditor, although
its fulfillment or consummation gives rise to obligations on the part of the
person guaranteed with respect to the guarantor.
2. Subsidiary – Contract of guaranty gives rise to a subsidiary obligation on
the part of the guarantor. It is only after the creditor has proceeded against
the properties of the principal debtor and the debt remains unsatisfied that a
guarantor can be held liable to answer for any unpaid amount.
3. Accessory – It is an accessory contract in the sense that it is entered into
for the purpose of securing the performance of a principal obligation.
4. Distinctness of guarantor from debtor – Guarantor is a person distinct
from the person guaranteed. Thus, a person cannot be both the primary
debtor and the guarantor of his own debt, for it is inconsistent with the
purpose of the guarantee which is for the creditor to proceed against a third
person if the debtor defaults in his obligation.

From pages 781-782 of Rabuya Civil Law Reviewer

194-198.In guaranty, in what cases is the Benefit of Exhaustion not

available? (5 items)
 1. Guarantor has expressly renounced it.
2. Guarantor has bound himself solidarily liable with the debtor.
3. In case of insolvency of the debtor.
4. When debtor has absconded, or cannot be sued within the Philippines unless
he has left a manager or representative.
5. If it may be presumed that an execution on the property of the principal
debtor would not result in the satisfaction of the obligation.

Basis: Article 2059.  The excussion shall not take place:

(1) If the guarantor has expressly renounced it;

(2) If he has bound himself solidarily with the debtor;

(3) In case of insolvency of the debtor;

(4) When he has absconded, or cannot be sued within the Philippines unless
he has left a manager or representative;

(5) If it may be presumed that an execution on the property of the principal

debtor would not result in the satisfaction of the obligation.

pp. 796-797 of Rabuya Civil Law Reviewer

199-202.What are the rights of the guarantor before making payment? (4

items)

1. The right to obtain release from the guaranty. (Article 2071, last paragraph)
2. The right to demand a security that shall protect him from any proceedings
by the creditor and from the danger of insolvency of the debtor (Article 2071,
last paragraph)
3. Benefit of excussion
4. Benefit of division
5. Right to subrogation

RIGHTS OF GUARANTOR

1. Benefit of excussion
2. Benefit of division
3. Right of guarantor to proceed against debtor before payment
4. Right of subrogation

Basis: From memaid 2018, p. 504

203.The failure on the part of the creditor to demand payment after the
debt becomes due will extinguish the guaranty.

False. Article 2079. An extension granted to the debtor by the creditor without the
consent of the guarantor extinguishes the guaranty. The mere failure on the part of
the creditor to demand payment after the debt has become due does not of itself
constitute any extension of time referred to herein. 

204-208.What is a clawback clause? If it is incorporated in a contract of

agency against the paid commission of the commission agent in the event
of annual profit shortfall, how shall it be treated?

A clawback clause is a stipulation by which money already paid must be paid back
under certain conditions as stated in the contract. If imposed upon a commission
agent, the same would be valid unless it is unreasonably confiscatory and violative
of public policy.

209. What is a quasi-contract?

A quasi contract is a juridical relation arising from certain lawful, voluntary, and
unilateral acts with the objective of preventing unjust enrichment or benefit at the
expense of another.

210. An oral real estate mortgage is void against innocent third parties but
valid between the parties themselves.

False. Article 2131. The form, extent and consequences of a mortgage, both as to

its constitution, modification and extinguishment, and as to other matters not
included in this Chapter, shall be governed by the provisions of the Mortgage Law
and of the Land Registration Law.

211. An unregistered real estate mortgage may still be the subject of

foreclosure.

True. Article 2125. In addition to the requisites stated in article 2085, it is

indispensable, in order that a mortgage may be validly constituted, that the
document in which it appears be recorded in the Registry of Property. If the
instrument is not recorded, the mortgage is nevertheless binding between the
parties.
212. A contract of antichresis that does not specify the interest in writing
although it expressly mentioned the principal amount is void and of no
effect at all.

True. Article 2134. The amount of the principal and of the interest shall be
specified in writing; otherwise, the contract of antichresis shall be void. 

213. A lessee may mortgage the thing leased but only valid during the
effectivity of the lease.

False. Article 2085. The following requisites are essential to the contracts of pledge
and mortgage:(1) That they be constituted to secure the fulfillment of a principal
obligation; (2) That the pledgor or mortgagor be the absolute owner of the thing
pledged or mortgaged; (3) That the persons constituting the pledge or mortgage
have the free disposal of their property, and in the absence thereof, that they be
legally authorized for the purpose.

214. A mortgage made by a co-owner of a parcel of land owned in common

without the consent of the other co-owners produces no legal effect.

False. It still produces legal effects but only with respect to the share of that co-
owner who did not seek the consent of the other co-owners.

215. The nullity of a mortgage does not render null and void the principal
obligation it guarantees.

True.

216. A municipality may not mortgage a patrimonial property being used

as a public market.

False. Article 424. Property for public use, in the provinces, cities, and
municipalities, consist of the provincial roads, city streets, municipal streets, the
squares, fountains, public waters, promenades, and public works for public service
paid for by said provinces, cities, or municipalities. All other property possessed by
any of them is patrimonial and shall be governed by this Code, without prejudice to
the provisions of special laws.

Municipality is still the absolute owner of a patrimonial property.

217. Growing fruits while they are attached to the land may not be proper
objects of a chattel mortgage.
False. Article 2127. The mortgage extends to the natural accessions, to the
improvements, growing fruits, and the rents or income not yet received when the
obligation becomes due, and to the amount of the indemnity granted or owing to
the proprietor from the insurers of the property mortgaged, or in virtue of
expropriation for public use, with the declarations, amplifications and limitations
established by law, whether the estate remains in the possession of the mortgagor,
or it passes into the hands of a third person.

218. Define an agency coupled with an interest.

An agency couple with an interest is an agency which has become a part of another
obligation or agreement.

219. A mortgage may be gratuitous.

True.

220. A mortgage follows the property whoever the possessor only when
there is a formal assumption of mortgage by the transferee.

False. Article 2126. The mortgage directly and immediately subjects the property
upon which it is imposed, whoever the possessor may be, to the fulfillment of the
obligation for whose security it was constituted. Formal assumption is not
necessary.

221. While the law does not specifically require the delivery of possession
of the property to the antichretic creditor, delivery has been held to be a
standard characteristic of a contract of antichresis.

False. It is only a special requisite not a standard characteristic.

222. All immovable properties may be the object of a contract of

antichresis.

False. Article 2132. By the contract of antichresis the creditor acquires the right to
receive the fruits of an immovable of his debtor, with the obligation to apply them
to the payment of the interest, if owing, and thereafter to the principal of his credit.
Only the fruits of the immovable.

223. The mortgage extends to both natural and artificial accessions.

True. Article 2127. The mortgage extends to the natural accessions, to the
improvements, growing fruits, and the rents or income not yet received when the
obligation becomes due, and to the amount of the indemnity granted or owing to
the proprietor from the insurers of the property mortgaged, or in virtue of
expropriation for public use, with the declarations, amplifications and limitations
established by law, whether the estate remains in the possession of the mortgagor,
or it passes into the hands of a third person.

224. The parties must agree on the valuation of the fruits for application to
the interest and principal of the debt.

False. Article 2133. The actual market value of the fruits at the time of the
application thereof to the interest and principal shall be the measure of such
application.

225. The parties may stipulate to share the taxes and charges upon the
estate during the period of antichresis.

True. Article 2135. The creditor, unless there is a stipulation to the contrary, is

obliged to pay the taxes and charges upon the estate.

226. The expenses for preservation of the property in antichresis shall be

deducted from the fruits of the same.

True. Article 2135. … The sums spent for the purposes stated in this article shall be
deducted from the fruits.

227. The obligation of two debtors in solutio indebiti is solidary.

True. Article 2157. The responsibility of two or more payees, when there has been
payment of what is not due, is solidary.

228. To suppress rampant lawlessness in the community, majority of the

residents agreed to hold a prayer rally. An atheist who objected to the
holding of the prayer rally has no liability to pay a share of the expenses
for the event even if there was notable peace in the community after the
prayer rally.

False. He is liable to pay his share of the expenses.

229-231.Give three rights of an antichretic creditor.

- The to the fruits and income of the thing

- To retain the thing until the debt is paid
- To have the thing sold upon non-payment at maturity
- Preference to the proceeds of the sale of the thing
- To be reimbursed for his expense for machinery and other improvements on
the land, and for the sums paid as land taxes

232-234.Give three (3) obligations of an antichretic creditor.

- To pay taxes and charges on the state, if there has been no stipulation the
contrary, and to bear the expenses necessary for preservation and repair
- To apply all the fruits, after receiving them, to the payment of interest, if
owing, and thereafter to the principal in accordance with the Civil Code
- To bear the necessary expenses for its preservation and repair
- To render and account of the fruits to the debtor

235. Stipulations in a contract of antichresis for the extrajudicial

foreclosure of the security is void for lack of legal basis.

False. Article 2137. The creditor does not acquire the ownership of the real estate
for non-payment of the debt within the period agreed upon.

Every stipulation to the contrary shall be void. But the creditor may petition the
court for the payment of the debt or the sale of the real property. In this case, the
Rules of Court on the foreclosure of mortgages shall apply

236. In a real estate mortgage, foreclosure pursuant to Act No. 3135 does
not require a personal notice to the mortgagor.

True. Act No. 3135, Sec. 3. Notice shall be given by posting notices of the sale for
not less than twenty days in at least three public places of the municipality or city
where the property is situated, and if such property is worth more than four
hundred pesos, such notice shall also be published once a week for at least three
consecutive weeks in a newspaper of general circulation in the municipality or city.

237. In real estate mortgage and antichresis, the deficiency or excess is

for the account or credit of the debtor unlike in the case of pledge.

True.

238. Illustrate a “purchase money resulting trust”.

Purchase money resulting trust occurs when property is sold and the legal estate is
granted to one party but the price is paid by another for the purpose of having the
beneficial interest of the property.

239. A survivorship agreement that upon the death of one of the joint
account holders the full amount of money in their account shall become the
property of the survivor, is a valid aleatory contract.

True.

240. Betting in basketball games is valid because basketball is a game of

skill and not of chance.

False. Article 2019. Betting on the result of sports, athletic competitions, or games

of skill may be prohibited by local ordinances.

241. The insolvency of the guarantor entitles the creditor to demand

another guarantor even if the creditor designated the guarantor.

False. Article 2057. If the guarantor should be convicted in first instance of a crime
involving dishonesty or should become insolvent, the creditor may demand another
who has all the qualifications required in the preceding article. The case is excepted
where the creditor has required and stipulated that a specified person should be the
guarantor.

242. Future debts of unknown amount may not be guaranteed because

there is yet no principal obligation.

False. Article 2053. A guaranty may also be given as security for future debts, the
amount of which is not yet known; there can be no claim against the guarantor
until the debt is liquidated. A conditional obligation may also be secured.

243. Guaranty must be express but exceptionally it could be implied from

the acts of the guarantor as in a guaranty by estoppel.

False. Article 2055. A guaranty is not presumed; it must be express and cannot
extend to more than what is stipulated therein.

244. The guarantor can bind himself for more than what the debtor is liable
but not for less.
False. Article 2054. A guarantor may bind himself for less, but not for more than
the principal debtor, both as regards the amount and the onerous nature of the
conditions.

245. If the parties avail of a contractual provision for an automatic

extension, the guarantor will be released.

True. Article 2079. An extension granted to the debtor by the creditor without the
consent of the guarantor extinguishes the guaranty. The mere failure on the part of
the creditor to demand payment after the debt has become due does not of itself
constitute any extension of time referred to herein. 

246. In case of merger between the debtor and guarantor, the guaranty is
extinguished but a sub-guarantor, if any, is not released.

False. Article 2076. The obligation of the guarantor is extinguished at the same

time as that of the debtor, and for the same causes as all other obligations

247. There is no excussion in judicial guaranty.

True.

248. When the principal obligation is modified by agreement, the

guarantor is released if he did not agree to the modification even if the
modified obligation will be less onerous.

False. Alteration should be onerous.

249. A remission in favor of one of five guarantors extinguishes the

principal obligation but only to the extent of 1/5.

False. Article 2078. A release made by the creditor in favor of one of the
guarantors, without the consent of the others, benefits all to the extent of the share
of the guarantor to whom it has been granted. Only if without the consent of
others.

250-255.Give six (6) examples of legal pledge.

- Right of retention by a possessor in good faith in connection with necessary

expenses
 - Right of retention in connection with useful expenses
- In contract for piece of work, he who has executed work upon a movable
- The usufructuary may retain the property until he is reimbursed for taxes
and extraordinary expenses
- In deposit, the depositary may retain the thing until full payment
- In agency, the agent may retain in pledge the things which are the object of
agency until full reimbursement

256.For all intents and purposes the pledge is extinguished when the thing
pledged is in the possession of the pledgor.

False. It may be extinguished even if not in the hands of the pledgor.

257.The rules governing possession and preservation of a thing pledged by

agreement also apply to legal pledges.

False. Article 2121. Pledges created by operation of law, such as those referred to

in articles 546, 1731, and 1994, are governed by the foregoing articles on the
possession, care and sale of the thing as well as on the termination of the pledge.
However, after payment of the debt and expenses, the remainder of the price of the
sale shall be delivered to the obligor.

258-262.Characteristics and features of conventional deposit.

- For safe-keeping
- Involves corporeal movable property
- Generally gratuitous
- Real contract
- Unilateral contract

263-265.Obligations of the depositary.

- To keep the thing safely

- To return the thing
- Not to deposit the thing with a third person unless authorized

266-270.Distinctions between judicial deposit from conventional deposit.

- As to creation, judicial deposit is by will of the court while conventional

deposit is by will of the parties.
- As to purpose, judicial deposit is to insure the right of a party to property
while conventional deposit is for custody and safekeeping
 - As to subject matter, judicial deposit may cover movable or immovable while
conventional deposit only covers movable.
271-274.Distinctions between solidary guarantor and solidary debtor.

The following are the distinctions:

1. A solidary guarantor is only subsidiarily liable. A solidary debtor is principally

and primarily liable for the obligation.
2. A solidary guarantor is not the principal debtor in an obligation, and he
retains his character as a guarantor. In a solidary obligation, the solidary
debtor is himself the principal debtor.
3. A solidary guarantor has the benefit of excussion under Article 2058 of the
NCC. A solidary debtor is not entitled to the benefit of excussion.
4. A solidary guarantor is not bound to know the default of his principal and he
must be given notice if he is to be made liable. A solidary debtor is bound to
know the default of his co-debtors even if he is not given notice.

275. A quasi-contract may be nominate or innominate.

TRUE. Nominate contracts include negotiorum gestio under Article 2144 and
solution indebiti under Article 2154, while innominate quasi contracts include those
enumerated under Articles 2164-2175.

276. The rights under quasi-contract prescribe in six years.

TRUE. Article 1145 provides that actions upon quasi-contracts must be commenced
within six (6) years.

277. Negotiorum gestio arises when a person takes charge of an

abandoned property of another who does not oppose notwithstanding
knowledge.

FALSE. Negotiorum gestio is the voluntary management of the property or affairs of

another without the knowledge or consent of the latter (Article 2144, NCC).

278. Why cannot an interest of a limited partner subjected to a charging

order be redeemed using partnership property?

Article 1862 paragraph 2 of the NCC provides that the interest of the indebted
limited partner charged with the payment of the unsatisfied amount of a claim may
be redeemed with the separate property of any general partner but may not be
redeemed with partnership property.
279. Solutio indebiti arises when payment is made through mistake,
liberality or some other cause.

FALSE. Article 2154 provides that solution indebiti arises payment is made through
mistake and not through liberality or some other casue, otherwise, Article 2163
applies (Spouses Abella v. Spouses Abella).

280-284. Requisites of “negotiorum gestio”.

Requisites:

1. There is no meeting of the minds;

2. A person takes charge of the property or business of another;
3. The property or business must have been abandoned or neglected;
4. The officious manager (gestor) must not have been authorized, expressly or
implicitly; and
5. The officious manager (gestor) must have taken charge of the business or
property voluntarily.

285-292.When is the gestor in “negostiorum gestio” liable for damages

even if due to fortuitous event.

A. Article 2147 and 2148 of the New Civil Code provides that the officious manager
shall be liable for any fortuitous event in the following cases:
1. If he undertakes risky operations which the owner was not accustomed to
embark upon;
2. If he has preferred his own interest to that of the owner;
3. If he fails to return the property or business after demand by the owner;
4. If he assumed the management in bad faith;
5. If he is manifestly unfit to carry on the management;
6. If by his intervention he prevented a more competent person from taking up
the management;
B. Article 2146 provides that if the officious manager delegates to another person
all or some of his duties, he shall be liable for the acts of the delegate, without
prejudice to the direct obligation of the latter toward the owner of the business.
C. The gestor is liable if there is a stipulation that he is liable for damages even if
due to fortuitous events (Article 1174, NCC).

293-298.Modes of extinguishing “negotiorum gestio”.

Under Article 2153 of the New Civil Code, the management is extinguished:
 1. When the owner repudiates it or puts an end to it;
2. The officious manager withdraws from the management;
3. Death of the owner or the officious manager;
4. Civil interdiction of the owner or the officious manager;
5. Insanity of the owner or the officious manager; and
6. Insolvency of the owner or the officious manager.

299. If the payer was in doubt whether the debt was due, he may recover
upon proof that it was not due.

TRUE. Article 2156 of the New Civil Code provides that if the payer was in doubt
whether the debt was due, he may recover if he proves that it was not due.

300. Negotiorum gestio and solutio indebiti may apply in one and the same
situation.

FALSE. Negotiorum gestio is the voluntary management of the property or affairs of

another without the knowledge or consent of the latter (Article 2144) while solutio
indebiti juridical relation which is created when something is received when there is
no right to demand it and it was unduly delivered through mistake (Article 2154).

301. Negotiorum gestio is the management of affairs or property of

another without the latter’s consent whether express or implied and for his
benefit.

TRUE. Article 2144 expressly provides that the voluntary management is without
any authority from the owner.

302. A person who receives in good faith a payment made erroneously by

the payor shall only answer for the thing and its accessories to the extent
of his enrichment.

TRUE. Article 2160 provides that he who in good faith accepts an undue payment of
a thing certain and determinate shall only be responsible for the impairment or loss
of the same or its accessories and accessions insofar as he has thereby been
benefited

303-306.Requisites of “solutio indebiti”

1. There must be payment or delivery made by one person to another;

2. The person who made the payment or delivery was under no obligation to do
so;
3. The payment or delivery was made by reason of mistake; and
 4. There is receipt by another person without right to receive such (Article
2154, NCC). (ewan ko dito wala to sa memaid tas 3 reqs lang sa Jurado).

307. If the thing paid to the payee in good faith was thereafter alienated,
the payee may restore the price or assign the action to collect it.

TRUE. Article 2160 provides that if the payee has alienated it, he shall return the
price or assign the action to collect the sum.

308. What is the doctrine of efficient procuring cause?

Under the doctrine of efficient procuring cause, in order for an agent to be entitled
to a commission, he must be the procuring cause of the sale, which simply means
that the measures employed by him and the efforts he exerted must result in a
sale. There must a proximate, close, and causal connection between the agent’s
efforts and the principal’s sale of his property. In other words, an agent receives his
commission only upon the successful conclusion of a sale. Conversely, it follows
that where his efforts are unsuccessful, or there was no effort on his part, he is not
entitled to a commission (Sanchez v.Medicard Phils., Inc.).

The doctrine of efficient procuring cause is meant to describe a broker’s activity,

which refers to a cause originating a series of events which, without break in their
continuity, result in accomplishment of prime objective of the employment of the
broker – producing a purchaser ready, willing and able to buy real estate on the
owner’s terms. A broker will be regarded as the "procuring cause" of a sale, so as
to be entitled to commission, if his efforts are the foundation on which the
negotiations resulting in a sale are begun. The broker must be the efficient agent or
the procuring cause of the sale. The means employed by him and his efforts must
result in the sale. He must find the purchaser, and the sale must proceed from his
efforts acting as broker (Medrano v. Court of Appeals).

309. The payee in bad faith can demand reimbursement for necessary and
useful expenses with right to retention.

FALSE. A payee in bad faith is only entitle to reimbursement of necessary expenses

and not useful expenses, without any right of retention (Article 2161 in relation to
Article 546, NCC).

310. What is agency by necessity?

An agency by necessity is created if there is an emergency to be met and the
authority of the agent is expanded to cover the exigencies of the moment. The
requisites are:

1. The real existence of an emergency;

2. Inability of the agent to communicate with the principal;
3. Exercise of the additional authority for the principal’s own protection;
4. The adoption of a fairly reasonable means, premises duly considered; and
5. The ceasing of the authority the moment the emergency no longer demands
the same.

311. A stranger who gives support has a right to claim from the one legally
bound unless he gave it out of piety and without intention of being repaid.

TRUE. Article 2166, NCC

312. When through an accident, a person was injured and is treated or

helped by another while not in a condition to give consent, he shall be
liable to pay for the services rendered him even when they were rendered
on pure generosity.

FALSE. Article 2167 provides the qualification that the injured person shall be liable
to pay for the services of the physician or other person aiding him, unless the
service has been rendered out of pure generosity

313-316.Who are the parties in a contract of life annuity?

1. Annuity issuer/Insurance company

2. Annuitant
3. Annuity owner
4. Beneficiary

317. Motive is material in negligence cases.

IT DEPENDS/FALSE. AS A GENERAL RULE, motive is immaterial in negligence cases

because it is the conduct and not the mental attitude of the defendant in a
negligence case which determines liability and whether or not the act is lawful.

However, a bad motive is occasionally important in cases involving certain

economic torts such as interference with business opportunity without physical
threat or harm and claims for punitive damages.
318. An insane person is exempt from liability arising from a quasi-delict.

FALSE. As a general rule, liability shall devolve upon those having such insane
person under their legal authority or control, unless it appears that there was no
fault or negligence on their part. However, should there be no such person, the
insane person shall be liable with their own property (Article 2182, NCC).

319. A violation of a statutory duty does not constitute negligence.

FALSE. A tort essentially consists in the violation of a right given or omission of

statutory duty imposed by law (Naguiat v. NLRC).

320. Error of judgment on the part of a surgeon necessarily makes him

liable for damages.

FALSE. Physicians are not warrantors of cures or insurers against personal injuries
or death of a patient. Difficulties and uncertainties in the practice of profession are
such that no practitioner can guarantee results (Cruz v. CA).

321-324. Give 4 instances when the principal is not obliged to reimburse

the expenses incurred by the agent.

Under Article 1918, the principal is not liable for the expenses incurred by the agent
in the following cases:

1. If the agent acted in contravention of the principal's instructions, unless the

latter should wish to avail himself of the benefits derived from the contract;
2. When the expenses were due to the fault of the agent;
3. When the agent incurred them with knowledge that an unfavorable result
would ensue, if the principal was not aware thereof; and
4. When it was stipulated that the expenses would be borne by the agent, or
that the latter would be allowed only a certain sum.

325.Unlike in the case of fraud, a person may validly waive his right to
recover damages which may result from negligence, provided it is not
gross.

FALSE. A person cannot contract away his right to recover damages resulting from
negligence as it is contrary to public policy (Pleasantville Development Corp. v. CA,
Article 6 of the NCC).

326-328.Explain the “emergency rule” in torts.

Under the emergency rule, one who suddenly finds himself in a place of danger,
and is required to act without time to consider the best means that may be adopted
to avoid the impending danger, is not guilty of negligence, if he fails to adopt what
subsequently and upon reflection may appear to have been a better method, unless
the emergency in which he finds himself is brought about by his own negligence.

It cannot be disregarded, however, that while the emergency rule applies to those
cases in which reflective thought, or the opportunity to adequately weigh a
threatening situation is absent, the conduct which is required of an individual in
such cases is dictated not exclusively by the suddenness of the event which
absolutely negates thoughtful care, but by the over-all nature of the circumstances.
(Valenzuela vs. Court of Appeals).

329. In an express trust, the action to compel the trustee to convey the
property to the beneficiary prescribes in 10 years.

FALSE. An action to compel the trustee to convey property registered in his name
for the benefit of the cestui que trust does not prescribe, unless the trustee
repudiates the trust (Viloria v. CA).

330. An action based on an implied constructive trust prescribes in ten

years from the time of repudiation.

FALSE. The action prescribes within 10 years from the accrual of the cause of action
as the obligation of the constructive trustee is created by law (Article 22 in relation
to Article 1144 par. 2, NCC)

331. The fact that the price in a pacto de retro sale is not the true value of
the property justifies the conclusion that the contract is one of equitable
mortgage.

FALSE. Article 1602 (1) of the NCC provides that it is only presumed to an equitable
mortgage if the price of the sale in the pacto de retro sale is unusually inadequate.

332. A co-owner has the pre-emptive right to buy the shares of his co-
owners.

FALSE.  Under Article 1620 of the NCC, a co-owner of a thing may exercise the
right of redemption only in case the shares of all the other co-owners or of any of
them are sold to a third person.
333. What must the lessee do if the lessor refuses to accept the rentals?

Under Article 1256 of the NCC, the lessee should make a valid tender of payment
and if the lessor refuses to accept it, the lessee shall be released from responsibility
by consignation of the rentals due, subject to the right of the lessee to immediately
consignate the sum due if any of the circumstances mentioned in Article 1256 are
present.

334. A provision in a lease contract that it will subsist for as long as the
lessee promptly pays rent is void for being contrary to public order and
public policy.

FALSE. The provisions of Article 1308 and 1687 are not applicable as the contract is
one with a resolutory condition which is that the contract will be terminated if the
lessee fails to promptly pay the rent. Furthermore, the lessor is estopped from
backing out of his/her representations in the contract with the lessee, to the
prejudice of the latter who relied on them (Opulencia v. CA).

335. The extraordinary liability of the common carrier does not apply when
the goods are already stored in its warehouse because the rules on deposit
would already apply.

FALSE. The extraordinary liability subsists until ownership is transferred to the

intended recipient of the goods or persons authorized to receive the goods on
behalf of the intended recipient.

- As to cause, judicial deposit is always onerous while conventional deposit is

generally gratuitous.
- Judicial deposit is for the person who has right while conventional deposit is
for the depositor.
336-338. Enumerate the specific obligations of the agent in performing the
agency with exactness.

(a) Duty of Obedience – The agent is required to act in accordance with the
instructions of the principal (Article 1887);
(b) Duty of Good Faith and Loyalty – The agent shall be liable for damages if,
there being a conflict between his interests and those of the principal, he
should prefer his own (Article 1889); and
(c) Duty to Exercise Due Diligence – An agent shall not carry out an agency if its
execution would manifestly result in loss or damage to the principal (Article
1888).
339.The liability of an industrial partner for outstand/ing partnership
obligation is solidary.

TRUE. All partners, including industrial ones, shall be liable pro rata with all their
property and after all the partnership assets have been exhausted, for all the
contracts which may be entered into in the name of and for the account of the
partnership, under its signature and by a person authorized to act for the
partnership. (Article 1816) Without prejudice to the right of industrial partner to
recover from capitalist partner/s.

340-344. Give five distinctions between rescission of contracts under

Article 1380 and rescission under Article 1191.

ARTICLE 1191 ARTICLE 1380

Both Valid and Existing Contracts
One of the parties to the contract
demands
Ground is based on non-performance
Court determines sufficiency of reason
to justify extension of time to perform
the obligation
Reciprocal Obligations
Principal remedy
Demand is on the part of the party who
suffered lesion of the third party
prejudiced by the contract
Equity grounds
Sufficiency of reason does not affect
the right to ask for rescission
Unilateral or Reciprocal Obligations
Subsidiary remedy

345. Extraordinary expenses on the occasion of the actual use by the

bailee without fault shall be borne by the bailor.

FALSE. Article 1949, paragraph 2 provides that if the extraordinary expenses arise
on the occasion of actual use by the bailee, even though he acted without fault,
they shall be borne equally by BOTH the bailor and the bailee, unless there is a
stipulation to the contrary.
346. If in a subsequent agreement a third person assumes payment of an
obligation there is already novation even if the old debtor was not released
from responsibility.

FALSE. To effect a subjective novation by change in the person of the debtor, it is

necessary that the old debtor be released expressly from the obligation, and the
third person or new debtor assumes his place in the relation. There is no novation
without such release as the third person who has assumed the debtor’s obligation
becomes merely a co-debtor or a surety. (Ajax Marketing & Development Corp. v.
CA, G.R. No. 118585)

347-356. In a criminal case for homicide through reckless imprudence,

upon arraignment, defendant driver, D, pleaded guilty. The trial court
rendered judgment convicting him and sentencing him to pay the heirs of
the deceased P12,000. Upon motion of the heirs of the deceased, a writ of
execution was issued against D, but was returned unsatisfied because of
the latter’s insolvency. Whereupon, a motion for the issuance of a
subsidiary writ of execution was filed against E, D’s employer. E now
contends that since he is not impleaded in the criminal case, the proper
remedy in order to enforce the subsidiary liability of employers under Art.
103 of the Revised Penal Code is to bring a separate civil action against
him. Is E correct?

NO, E’s contention is incorrect. No separate civil action is necessary to enforce

employer’s subsidiary liability in a delict/crime committed by its employee.

In order that an employer may be held subsidiarily liable for the employee’s civil
liability in the criminal action, it should be shown that: (1) the employer is engaged
in any kind of industry; (2) that the employee committed the offense in the
discharge of his duties; and (3) that he is insolvent. The subsidiary liability of the
employer arises only after the conviction of the employee in the criminal action. If
all these requisites are present, the employer becomes ipso facto subsidiarily liable
upon the employee’s conviction and upon proof of the latter’s insolvency.
Considering the subsidiary liability imposed upon the employer by law, he is in
substance and in effect a party to the criminal case. Ergo, the employer’s subsidiary
liability may be determined and enforced in the criminal case as part of the
execution proceedings against the employee. ONCE ALL THE REQUISITES ARE MET,
THE EMPLOYER BECOMES IPSO FACTO SUBSIDIARILY LIABLE, WITHOUT NEED OF
A SEPARATE ACTION. (Carpio v. Hon. Doroja, G.R. No. 84516)
357-366. A parcel of land covered by a tax declaration has already been
the subject of a series of transfers until it was mortgaged to a bank by X
who did not pay the obligation. The bank foreclosed the mortgage. The
bank’s ownership was later on consolidated; then, A and B acquired it from
the bank with a warranty against eviction but no warranty that its title was
perfectly valid. When A and B asked for a certification from the Bureau of
Forest Development, it was found out that the land was a timberland,
hence, they asked for the refund of their money. The bank contended that
it was the absolute owner, having bought it at an auction sale, and that
there was no malice or fraud in its sale to A and B, hence it could not be
compelled to return the purchase price. Is the bank correct?

No, the bank’s contention is untenable. It has been a settled rule that banks
must show that they exercised the required due diligence before claiming to be
mortgagees in good faith or innocent purchasers for value. Thus, it shall return the
purchase price paid by A and B.

The rule that persons dealing with registered lands can rely solely on the
certificate of title does not apply to banks (PNB v. Heirs of Estanislao, G.R. No.
164801). In the light of the common practice of banking institutions, it is the duty
of a bank before approving a loan, to send representatives to the land offered as
collateral and investigate who are the true owners thereof. Banks, indeed, should
exercise more care and prudence in dealing even with registered lands, than private
individuals, for their business is one affected with public interest, keeping in trust
money belonging to their depositors, which they should guard against loss by not
committing any act of negligence which amounts to lack of good faith by which they
would be denied the protective mantle of the land registration statute, extended
only to purchasers for value and in good faith (Rural Bank of Compostela v. CA,
G.R. No. 122801).

In this case, the failure of the bank to ascertain the true owners and the
nature of the land mortgaged to it constitutes negligence and lack of good faith in
the performance of its duty. Thus, it should reimburse A and B of the purchase
price they paid for the land.

367. Where negligence is punishable under the Penal Code, the

responsibility for quasi-delict is distinct from the civil liability arising from
the felony and may therefore be pursued separately.

TRUE. Article 2177 provides that responsibility for fault or negligence under Article
2176 (quasi-delict) is entirely separate and distinct from the civil liability arising
from negligence under the penal code. But the plaintiff cannot recover damages
twice for the same act or omission.

Offended party may pursue the civil liability arising from delict and quasi-delict
separately. If civil liabilities were awarded in both, he would be entitled in such
eventuality only to the bigger award of the two, assuming the awards made in the
two cases vary. (Safeguard Security Agency v. Tangco, G.R. No. 165732)

368. A breach of contract may result from a quasi-delict.

TRUE. An act that breaks a contract may also be a tort. (Air France v. Carrascoso,
G.R. No. L-21438).

369-370. Define proximate cause.

Proximate cause is defined as that cause, which in the natural and continuous
sequence of events, unbroken by any efficient intervening cause, produces the
injury, and without which, the result would not have occurred.

371-372. What is the doctrine of contributory negligence?

The Doctrine of Contributory Negligence is embodied in Article 2179, which provides

that when the plaintiff’s own negligence was only contributory, the immediate and
proximate cause of the injury being the defendant’s lack of due care, the plaintiff
may recover damages, but the courts shall mitigate the damages to be awarded.

The rationale for the rule is that a plaintiff who is partly responsible for his own
negligence should not be entitled to recover damages in full but must bear the
consequences of his own negligence. The defendant must thus be held liable only
for the damages actually caused by his negligence (Lambert v. Heirs of Castillon,
G.R. No. 16709).
373-374. Explain the doctrine of discovered peril.

The Doctrine of Discovered Peril is another name for “Doctrine of Last Clear
Chance” and “Supervening Negligence.” In essence, it provides that where both
parties are negligent, but the negligent act of one is appreciably later in time than
that of the other, or when it is impossible to determine whose fault or negligence
should be attributed to the incident, the one who had the last clear opportunity to
avoid the impending harm and failed to do so is chargeable with the consequences
thereof (Picart v. Smith, G.R. No. L-12219).

An antecedent negligence of a person does not preclude recovery of damages for

the supervening negligence of, or bar a defense against the liability sought by
another, if the latter, who had the last fair chance could have avoided the
impending harm by the exercise of due care (Pantranco North Express v. Baesa,
G.R. Nos. 79050-51).

375. Under the doctrine of “supervening negligence”, the antecedent

negligence of a telephone company in not providing warning signs on its
excavations would not make it liable if the plaintiff had a clear chance to
avoid the accident.

FALSE. The doctrine of last clear chance applies to a situation where the plaintiff
was guilty of prior or antecedent negligence but the defendant – who had the last
fair chance to avoid the impending harm and failed to do so – is made liable for all
the consequences of the accident, notwithstanding the prior negligence of the
plaintiff (Achevara v. Ramos, G.R. No. 175172, citing Pantranco North Express v.
Baesa).

Analysis: In this case, the plaintiff’s negligence was later than that of the telephone
company. A defendant is being made liable if he had the last clear chance but did
not exercise due care to avoid the harm. The telephone company’s negligence was
anterior or prior to that of the plaintiff. Thus, the doctrine is inapplicable. (In the
samplex, the answer is TRUE).

376. The “volenti non fit injuria” rule does not apply if a person, aware of
the possible danger, takes some risks in order to preserve life.
TRUE. The doctrine volenti non fit injuria which translates “to that which a person
assents is not esteemed in law as injury” refers to self-inflicted injury or to consent
to injury which precludes the recovery of damages by one who has knowingly and
voluntarily exposed himself to danger, even if he is not negligent in doing so.
(Nikko Hotel Manila Garden v. Reyes, G.R. No. 154259)

377-378. What is the doctrine of imputed negligence?

The doctrine of imputed negligence is one where a person is not only liable for torts
committed by himself but also for torts committed by others with whom he has a
certain relationship and for whom he is responsible (Tamargo v. CA, G.R. No.
85044). Also known as vicarious liability.

BASIS. Article 2180, paragraph 1 - The obligation imposed by Article 2176 is

demandable not only for one’s own act or omissions, but also for those of persons
for whom one is responsible.

379. The burden of proof is the same in actions culpa contractual and culpa
aquiliana.

FALSE. In quasi-delict, as a rule it is the plaintiff who has the burden of proof and
who is required to establish the existence of negligence which is the basis of the
action. Whereas, in culpa contractual the action can be prosecuted merely by
proving the existence of the contract and the fact that the obligor failed to perform
its obligation in the contract, thus, necessarily shifting the burden on the defendant.
(Calalas v. CA, G.R. No. 122039)

380-381. Explain the res ipsa loquitor rule.

Res ipsa loquitor literally means the thing or transaction speaks for itself. It holds a
defendant liable where the thing which caused the injury complained of is shown to
be under the latter’s management and the accident is such that, in the ordinary
course of things, cannot be expected to happen if those who have its management
or control use proper care. It affords reasonable evidence, in the absence of
explanation by the defendant, that the accident arose from want of care (D.M.
Consunji, Inc. v. CA, G.R. No. 137873).

It is regarded as a mode of proof, or a mere procedural convenience since it

furnishes a substitute for, and relieves the plaintiff of, the burden producing specific
proof of negligence. The maxim simply places on the defendant the burden of going
forward with proof. (FGU Insurance Corp. v. G.P. Sarmiento Trucking Corp., G.R.
No. 141910)

Requisites for application:

(a) The accident is of a kind which ordinarily does not occur in the absence of
someone’s negligence;
(b) It is caused by an instrumentality within the exclusive control of the
defendant/s; and
(c) The possibility of contributing conduct which would make the plaintiff
responsible is eliminated (Tan v. Jam Transit, Inc., G.R. No. 183198).

382. Philippine law also recognizes the “strict liability in torts” rule.

TRUE. Strict liability rule is recognized in the Philippines. One is made liable
independent of fault, negligence, or intent, after establishing certain facts specified
by law.

383. Liability may be created even if there is no fault or negligence.

TRUE. Refers to instances where strict liability rule may apply.

(a) Liability of possessors or users of animals (Article 2183)

(b) Product liability (Article 2187)
(c) Liability for falling objects (Article 2193)

384. If the driver and owner of a cargo truck which figured in a road
mishap were found liable for tort, their liability is solidary.
TRUE. The responsibility of two or more persons who are liable for quasi-delict is
solidary (Article 2194)

385. A subsidiary writ of execution may be issued against the employer of

an accused even if the former did not participate in the criminal
proceedings.

TRUE. Same basis with item no. 347-356.

386. Exceptionally, the crime of rape may be considered a quasi-delict.

FALSE. It is a criminal offense. Article 1161 states that civil obligations arising from
criminal offenses shall be governed by the penal laws, subject to the provisions of
Article 2177, pertinent provisions on Human Relations, and of Damages.

387-390. Requisites of quasi-delict.

To sustain a claim based on quasi-delict, the following requisites must concur:

(a) Damage suffered by the plaintiff;

(b) Fault or negligence of the defendant;
(c) Connection of cause and effect between the fault or negligence of the
defendant and the damage incurred by the plaintiff; and
(d) No pre-existing contractual relations between the parties.

391. Culpa contractual and culpa aquiliana both give rise to an obligation
to indemnify.

TRUE. Both are sources of obligations. Culpa contractual is premised in the

negligence in the performance of an obligation. Culpa aquiliana, has as its source
the negligence of the tortfeasor.

392. As a general rule, quasi-delict covers all negligent or culpable acts or

omissions whether punished by law or not so long as they do not
constitute breach of contract.
TRUE. Generally, while Article 2176 seems to suggest that the presence of pre-
existing contractual relations between the parties may prevent recovery from quasi-
delict, the Court has repeatedly held, however, that the existence of a contract
between the parties does not bar the commission of a tort by the one against the
other and the consequent recovery of the damages therefore, because the act
which breaks the contract may also be a tort (Air France v. Carrascoso).

393. Factors affecting negligence are circumstances of person, time, place

and skills.

TRUE. Article 1173 provides that the fault or negligence of the obligor consists in
the omission of that diligence which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the time, and of the place.

394. A person may be held responsible for the acts and negligence of
others under his control and supervision as in injury caused by stray
animals.

TRUE. 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.

395-399. Enumerate the persons responsible for the acts and negligence of
others.

Basis: Article 2180

(a) The father, or on the case of his death or incapacity, the mother;
(b) Guardians;
(c) Owners and managers of an establishment or enterprise;
(d) Employers;
(e) State; and
(f) Teachers or head of establishments of arts and trades.
400. The head of families that live in buildings or parts thereof shall be
liable for damages caused by things thrown or falling from the same and
no proof of negligence is required to hold them liable.

TRUE. Article 2193 may incur liability even without negligence or fault. Strict
liability rule applies.

401. Damages recoverable for quasi-delicts include damnum emergens and

lucrum cessans.

TRUE.  Indemnification for damages comprehends not only the loss suffered, or
actual damages ("damnum emergens") but also the profits which the obligee failed
to obtain, or compensatory damages ("lucrum cessans"). (Coca Cola Bottlers v.
Roque, G.R. No. 118985)

402. Fault must be the proximate and need to be the only cause for the
damage in order to recover indemnification.

FALSE. The doctrine of proximate cause is applicable only in actions for quasi-
delict, not in actions involving breach of contract. (Calalas v. CA) Also,
indemnification may still be recovered even if fault is not the proximate cause of
injury, i.e. contributory negligence/strict liability.

403. Actual damages are reparation of pecuniary losses.

TRUE. Article 2199 provides that actual or compensatory damages refers to
adequate compensation for pecuniary loss suffered.

404. Moral damages are reparation for non-pecuniary losses.

TRUE. Article 2217 provides that moral damages refer to those damages
incapable of pecuniary computation.

405. Liquidated damages must be proved by the claimant.

FALSE. Article 2234 provides that in case liquidated damages have been
agreed upon, no proof of loss is necessary in order that such liquidated
damages may be recovered

406. Exemplary damages are for deterring future violations.

 TRUE. Article 2229 provides that exemplary or corrective damages are
imposed by way of example or correction for the public good.

407. Fixing the amount of indemnity may only be by law or by the courts.
FALSE. Exceptionally, liquidated damages are agreed upon by the parties to
the contract which is to be paid in case of breach thereof as provided under
Article 2226.

408-409. What is the extent of compensatory damages?

In contracts and quasi-contracts, the extent of compensatory damages are
those which are the natural and probable consequences of the breach of the
obligation, and which the parties have foreseen or could have reasonably
foreseen at the time the obligation was constituted. (Article 2201)

In crimes and quasi-delicts, the extent of compensatory damages are those

which are the natural and probable consequences of the act or omission
complained of. It is not necessary that such damages have been foreseen or
could have reasonably been foreseen by the defendant. (Article 2202)

410-412.Give the requisites for the recovery of actual damages.

As held in the case of Yamauchi v. Suñiga (G.R. No. 199513, April 18, 2018),
the requisites to recover actual damages are the following:
1. The actual amount of loss proved with reasonable degree of certainty;
2. It must be supported by competent proof; and
3. It must be specifically prayed for.

413. Equitable mitigation of damages may be decreed if loss would have

resulted in any event even if there was no breach by the defendant.
TRUE. In contracts, quasi-contracts, and quasi-delicts, the court may
equitably mitigate the damages where the loss would have resulted in any
event as provided in Article 2215.

414. No interest may be recovered on unliquidated claims or damages,

except when the demand can be established with reasonable certainty at
the Court’s discretion.
TRUE. It is expressly provided for under Article 2213.
415-418.Enumerate the cases where attorney’s fees and costs of litigation
may be recovered. (4)
Article 2208 enumerates the instances wherein attorney's fees and expenses
of litigation may be recovered, to wit:
1. When exemplary damages are awarded;
2. When the defendant's act or omission has compelled the plaintiff to
litigate with third persons or to incur expenses to protect his interest;
3. In criminal cases of malicious prosecution against the plaintiff;
4. In case of a clearly unfounded civil action or proceeding against the
plaintiff;
5. Where the defendant acted in gross and evident bad faith in refusing to
satisfy the plaintiff's plainly valid, just and demandable claim;
6. In actions for legal support;
7. In actions for the recovery of wages of household helpers, laborers and
skilled workers;
8. In actions for indemnity under workmen's compensation and employer's
liability laws;
9. In a separate civil action to recover civil liability arising from a crime;
10. When at least double judicial costs are awarded;
11. In any other case where the court deems it just and equitable that
attorney's fees and expenses of litigation should be recovered.

419-423.In what cases may an award for moral damages be made? (5)
Under Article 2219, moral damages may be recovered in the following and
analogous cases:
1. A criminal offense resulting in physical injuries;
2. Quasi-delicts causing physical injuries;
3. Seduction, abduction, rape or other lascivious acts;
4. Adultery or concubinage;
5. Illegal or arbitrary detention or arrest;
6. Illegal search;
7. Libel, slander or any other form of defamation;
8. Malicious prosecution;
9. Acts mentioned in Article 309;
10. Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34,
and 35.

424-426.Characteristics of liquidated damages.

1. By Agreement of the Parties.
It is agreed upon by the parties to a contract, to be paid in case of
breach thereof. (Article 2226)
2. Equitable Reduction in Case of Iniquity or Unconscionability.
 Whether intended as an indemnity or penalty, it shall be equitably
reduced if they are iniquitous or unconscionable. (Article 2227)
3. Determination by Law In Case Breach is Not Contemplated.
When the breach of contract committed by the defendant is not the
one contemplated by the parties in agreeing upon liquidated damages,
the law shall determine the measure of damages, and not the
stipulation. (Article 2228)

427. Liquidated damages are those damages agreed upon by the parties to
a contract and may not be equitably reduced.
FALSE. It is provided under Article 2227 that liquidated damages, whether
intended as an indemnity or a penalty, shall be equitably reduced if they are
iniquitous or unconscionable.

428. Exemplary damages cannot be awarded alone.

TRUE. Article 2229 provides that exemplary or corrective damages are
imposed only in addition to the moral, temperate, liquidated or compensatory
damages.

429. The preference provided in article 2241 of the Civil Code can only be
applied if there is an insolvency proceeding.
FALSE. The Court held in the case of DBP v. Secretary of Labor (G.R. No.
79351 November 28, 1989) that in this jurisdiction, bankruptcy, insolvency
and general judicial liquidation proceedings provide the only proper venue for
the enforcement of a creditor's preferential right for these are in rem
proceedings binding against the whole world where all persons having any
interest in the assets of the debtor are given the opportunity to establish
their respective credits.

Note: Sabi sa samplex, TRUE daw ito  Hindi ko sure if same ang insolvency
proceedings sa bankruptcy and liquidation proceedings. Tapos ang sabi
naman ni Atty. Aquino na in settlement of estate, the rules on concurrence
and preference of credits are also applicable.

430. With reference to specific movable property, the claims of employees

of the owner now enjoy preference over taxes.
FALSE. The Court ruled in the case of Barayoga v. Asset Privatization Trust
(G.R. No. 160073 October 24, 2005) that the worker’s preference under
Article 110 of the Labor Code is an ordinary preferred credit. While this
provision raises the worker’s money claim to first priority in the order of
 preference established under Article 2244 of the Civil Code, the claim has no
preference over special preferred credits such as taxes.

431. With respect to specific immovable property, only taxes enjoy

absolute preference and the other preferred credits must be paid pro rata.
TRUE. In the case of Republic v. Peralta (G.R. No. L-56568 May 20, 1987),
the Court explained that Articles 2241 and 2242 jointly with Articles 2246 to
2249 establish a two-tier order of preference. The first tier includes only
taxes, duties and fees due on specific movable or immovable property. All
other special preferred credits stand on the same second tier to be satisfied,
pari passu and pro rata, out of any residual value of the specific property to
which such other credits relate.

432-435.What are the 4 elements involved in medical negligence cases?

1. DUTY
Duty means that there is a professional relationship between the doctor
and the patient. There is a duty on the part of the physician to observe
the same level of care that any reasonably competent doctor would use to
treat the condition under the same circumstances.

2. BREACH
The breach referred to in medical malpractice cases is the breach of such
professional duty or improper performance thereof.

3. INJURY
The injury contemplated by the law is a bodily injury to or death of the
patient.

4. CAUSATION
The act or omission complained of is the proximate cause of the injury
suffered. In other words, the injury to the patient is either a direct result
or a reasonably probable consequence of the negligence or breach of the
doctor.

436. A partner may be both limited and general in one partnership.

FALSE. With regard to extent of liability, a partner is either a general or a
limited partner. A general partner is liable pro rata beyond the partnership
assets while a limited partner is liable for partnership debts only to the
extent of their stipulated contributions under the articles of partnership.
437-439.What are the elements of abuse of right?
The elements of abuse of right are as follows:
1. There is a legal right or duty;
2. The legal right or duty is exercised in bad faith; and
3. The exercise is for the sole intent of prejudicing or injuring another.

440-442.In what instances are the partners solidarily liable with the
partnership?
Partners can be held solidarily liable with the partnership specifically in the
following instances:
1. Tort committed in the ordinary course of business (Article 1822);
2. For misappropriation of funds received from third persons when partner
acts within the scope of apparent authority (Article 1823 par. 1); and
3. For misapplication of money in partnership custody (Article 1823 par. 2).

443-447.What are the requisites of agency by necessity?

Agency by necessity – by virtue of the existence of an emergency, the
authority of an agent is correspondingly enlarged in order to cope with the
exigencies or the necessities of the moment.

The following are the requisites of agency by necessity:

1. Real existence of an emergency;
2. Inability of the agent to communicate with the principal;
3. Exercise of the additional authority for the principal’s own protection; and
4. Adoption of fairly reasonable means, premises duly considered.

448. Extraordinary expenses on the occasion of the actual use by the

bailee without fault shall be borne by the bailor.
FALSE. Article 1949 provides that if the extraordinary expenses arise on the
occasion of the actual use of the thing by the bailee, even though he acted
without fault, they shall be borne equally by both the bailor and the bailee,
unless there is a stipulation to the contrary.

449-458. X borrowed money from Y. As a surety for the payment of the

obligation, Z executed a real estate mortgage in favor of the creditor, Y. X
failed to pay his obligation, hence, Y demanded the payment of the
obligation. As X failed to comply, Y foreclosed the mortgage executed by Z,
who moved for the nullification of the same contending that Y should have
resorted first to the properties of X before the foreclosure. Is Z’s action
correct? Why?
 No, Z’s action is incorrect.

The Court held in the case of Ong v. PCIB (G.R. No. 160466, January 17,
2005) that in suretyship contract, the benefit of excussion is not available to
the surety as he is principally liable for the payment of the debt. As the
surety insures the debt itself, he obligates himself to pay the debt if the
principal debtor will not pay, regardless of whether or not the latter is
financially capable to fulfill his obligation. Thus, a creditor can go directly
against the surety although the principal debtor is solvent and is able to pay
or no prior demand is made on the principal debtor.

From the facts herein, it is clear that Z obligated himself as a surety when he
executed a real estate mortgage in favor of the creditor Y. As a surety, he is
directly bound with X for the payment of the debt and is deemed an original
debtor from the beginning. Consequently, Y need not have to file a case
against X and exhaust his properties before he can proceed against Z.

Therefore, Z’s argument that Y should have resorted first to the properties of
X is without merit.

459-468.“O”, owner of a copying machine, leased it to “L” at a rental of

P4,000.00 a month for a period of one year with option on the part of “L”
to buy the copying machine at the end of one year for P80,000.00, to be
paid by applying the rentals, so that “L” needs only to pay P32,000.00. “L”
failed to pay rentals for the 4th, 5th and 6th months so that “O”
terminated the lease and repossessed the copying machine, then sued “L”
for the unpaid rental of three months, or P12,000.00. Is “O’s” suit legally
tenable? Explain.

No, O’s suit is untenable.

By express provision of Article 1485 of the NCC, Article 1484 shall be applied
to contracts purporting to be leases of personal property with option to buy,
when the lessor deprives the lessee of the possession or enjoyment of the
thing. In Article 1484, the lessor may choose to exercise the remedy of
specific performance, rescission, or foreclosure if a mortgage has been
constituted thereon. Such remedies have been held to be alternative in such
that the exercise of one bars the lessor from resorting to the other.
 In the present case, O chose to terminate the lease and repossess the
copying machine. Consequently, upon taking possession of the thing leased,
O has no further action against L to recover any unpaid rents.

Therefore, his suit to recover L’s unpaid rental of three months in the amount
of P12,000 will not prosper.
469. The agent is obliged to deliver to the principal whatever he may have
received by virtue of the agency, even though it may not be owing to the
principal. Give one

exception.

1. When the agent informed the principal of the gift, bonus or profit he received
from the purchaser and his principal did not object.
2. If the agent or broker acted only as a middleman with the task of merely
bringing together the vendor and the vendee, who themselves thereafter will
negotiate on the terms and conditions of the transaction.

470.A third person dealing with a partner or an agent must ascertain the
limits of authority of the acting partner or agent.

True.

It is a settled rule that persons dealing with an agent are bound at their peril,
if they would hold the principal liable, to ascertain not only the fact of agency but
also the nature and extent of authority, and in case either is controverted, the
burden of proof is upon them to establish it. The basis for agency is representation
and a person dealing with an agent is put upon inquiry and must discover upon his
peril the authority of the agent. If he does not make such an inquiry, he is
chargeable with knowledge of the agent's authority and his ignorance of that
authority will not be any excuse. (Manila Memorial Park Cemetery, Inc. v.
Linsangan, G.R. No. 151319, [November 22, 2004], 485 PHIL 764-786)

Every person dealing with an agent is put upon inquiry and must discover
upon his peril the authority of the agent. If he does not make such inquiry, he is
chargeable with knowledge of the agent's authority, and his ignorance of that
authority will not be any excuse. (Bacaltos Coal Mines v. Court of Appeals, G.R. No.
114091, [June 29, 1995], 315 PHIL 506-529)
 Same application with a partner since a partner is considered as an agent of
the partnership (Article 1818).

471.In an express trust, acceptance by the trustee is not necessary for the
creation of the trust.

True.

In an express trust, acceptance of the trust is not necessary for the existence
and validity and existence of the trust, since if he declines the trust, the courts will
appoint a trustee to fill the office that he declines. His acceptance is necessary only
to charge him with the office of the trustee and the administration of the trust and
to vest the legal title in him.

472.Acceptance by the beneficiary is not necessary for the creation of an

express trust.

False.

Article 1446. Acceptance by the beneficiary is necessary. Nevertheless, if the

trust imposes no onerous condition upon the beneficiary, his acceptance shall be
presumed, if there is no proof to the contrary.

473.The trustor may or may not have the capacity to transfer property.

False. The trustor must have the capacity to transfer or convey property.
(Paras, pg, 898)

474.Express trust is created by declaration of the trustee that he holds the

property in trust.

False.
 Article 1441. Trusts are either express or implied. Express trusts are created
by the intention of the trustor or of the parties. Implied trusts come into being by
operation of law.

475.Trusts over real property are enforceable in any form.

False.

General rule - Article 1443. No express trusts concerning an immovable or

any interest therein may be proved by parol evidence. Hence, express trusts
concerning real property may not be established by parol evidence. It must be
proven by some writing or deed. Exception – Ringor v. Ringor – oral testimony was
allowed to prove the existence of a trust because there was partial performance.

476.The trustee can acquire the trust property by adverse possession even
without repudiation of the trust.

False.

As a rule, a trustee cannot acquire the property held in trust by prescription

because his possession is not adverse. However, acquisitive prescription may set in
provided that: (1) there is repudiation, (2) it is made known to the cestui qui trust,
and (3) there is clear and conclusive evidence.

477.In order to bind third persons to a trust, the same must be in a public
instrument.

False.

With regard to an express trust in relation with third persons, the trust must
be in a public instrument and registered in the Registry of property, only if it
concerns real property. When it comes to an implied trust (whether or personal), it
may be proved by oral evidence. (Paras, pg. 895)
478.Statute of limitations applies to express trusts.

False.

An action upon a trust is imprescriptible. However, according to

jurisprudence, prescription does supervene where the trust is merely an implied
one.

479.There is partnership when two or more persons bind themselves to

contribute money, property, reputation or industry to a common fund, with
the intention of dividing the profits among themselves.

False.

Article 1767. By the contract of partnership two or more persons bind

themselves to contribute money, property, or industry to a common fund, with the
intention of dividing the profits among themselves. Two or more persons may also
form a partnership for the exercise of a profession. (1665a)

480.A contract of partnership may be constituted in any form except when

a parcel of land is contributed in which case the contract must be in a
private or public instrument.

False. It must be in a public instrument.

Article 1773. A contract of partnership is void, whenever immovable property

is contributed thereto, if an inventory of said property is not made, signed by the
parties, and attached to the public instrument. (1668a)

481.Husband and wife may enter into a partnership for the exercise of a
profession
 True.

As a rule, while spouses can enter into a universal partnership, they can
enter into a particular partnership (the exercise of a profession or vocation).

482.The sharing of net returns may indicate the existence of a partnership.

True.

Article. 1749. The receipt by a person of a share of the profits of a business

is prima facie evidence that he is a partner in the business, but no such inference
shall be drawn if such profits were received in payment (exceptions); (a) As a debt
by installments or otherwise; (b) As wages of an employee or rent to a landlord; (c)
As an annuity to a widow or representative of a deceased partner; (d) As interest
on a loan, though the amount of payment vary with the profits of the business; (e)
As the consideration for the sale of a goodwill of a business or other property by
installments or otherwise. (n)

483.A person who, not being a partner in fact, allows his name to be
included in the firm name, may subject himself to the liabilities of a limited
partner.

False. He is considered as a partner by estoppel (although not an actual

partner, he has made himself liable as such by holding himself out as a partner or
allowing himself to be so held out). He cannot claim that is liabilities are limited as
that of a limited partner.

Article 1825. When a person, by words spoken or written or by conduct,

represents himself, or consents to another representing him to anyone, as a
partner in an existing partnership or with one or more persons not actual partners,
he is liable to any such persons to whom such representation has been made, who
has, on the faith of such representation, given credit to the actual or apparent
partnership, and if he has made such representation or consented to its being made
in a public manner he is liable to such person, whether the representation has or
has not been made or communicated to such person so giving credit by or with the
knowledge of the apparent partner making the representation or consenting to its
being made: (1) When a partnership liability results, he is liable as though he were
an actual member of the partnership; (2) When no partnership liability results, he is
liable pro rata with the other persons, if any, so consenting to the contract or
representation as to incur liability, otherwise separately.

484.Appraisal of goods contributed to the partnership must be based on

the value at the time of perfection of the contract if different from delivery.

False. As a general rule, it must be determined based on the manner

prescribed in the contract of partnership. As an exception, it is based on the current
prices.

Article 1787. When the capital or a part thereof which a partner is bound to
contribute consists of goods, their appraisal must be made in the manner
prescribed in the contract of partnership, and in the absence of stipulation, it shall
be made by experts chosen by the partners, and according to current prices, the
subsequent changes thereof being for account of the partnership. (n)

485.An industrial partner may engage himself in any other business with
the authority of the other partners.

True.

Article 1789. An industrial partner cannot engage in business for himself,

unless the partnership expressly permits him to do so; and if he should do so, the
capitalist partners may either exclude him from the firm or avail themselves of the
benefits which he may have obtained in violation of this provision, with a right to
damages in either case. (n)

486.When there is no specification as to the management of the

partnership, the partner with the highest contribution becomes the
manager.

False.

Article 1803. When the manner of management has not been agreed upon,
the following rules shall be observed: (1) All the partners shall be considered
agents and whatever any one of them may do alone shall bind the partnership,
without prejudice to the provisions of article 1801. (2) None of the partners may,
without the consent of the others, make any important alteration in the immovable
property of the partnership, even if it may be useful to the partnership. But if the
refusal of consent by the other partners is manifestly prejudicial to the interest of
the partnership, the court's intervention may be sought. (1695a)

487.The capitalist partners may exclude from the partnership an industrial

partner who engages himself in a business without the required authority
even if the industrial partner also contributed a parcel of land to the
partnership.

False. The industrial partner shall be considered as a capital partner. Under

Article 1808. The capitalist partners cannot engage for their own account in any
operation which is of the kind of business in which the partnership is engaged,
unless there is a stipulation to the contrary. Any capitalist partner violating this
prohibition shall bring to the common funds any profits accruing to him from his
transactions, and shall personally bear all the losses.

488.A limited partner is a partner in a partnership.

False.

A limited partner is a partner in a limited partnership. Article 1843. A limited

partnership is one formed by two or more persons under the provisions of the
following article, having as members one or more general partners and one or more
limited partners. The limited partners as such shall not be bound by the obligations
of the partnership.

489.A limited partner who is also a general partner is liable to the creditors
of the partnership but only up to his contribution.

False. He is liable as if he is only a general partner (as to third persons).

However, with respect to his contribution as a limited partner, he would have the
right of a limited partner insofar as the other partners are concerned.
 Article 1853. A person may be a general partner and a limited partner in the
same partnership at the same time, provided that this fact shall be stated in the
certificate provided for in article 1844.

A person who is a general, and also at the same time a limited partner, shall
have all the rights and powers and be subject to all the restrictions of a general
partner; except that, in respect to his contribution, he shall have the rights against
the other members which he would have had if he were not also a general partner.

490.A limited partnership is dissolved upon retirement, death, insolvency,

insanity or civil interdiction of a general partner.

False. Insolvency is not included.

Article 1860. The retirement, death, insolvency, insanity or civil interdiction

of a general partner dissolves the partnership, unless the business is continued by
the remaining general partners: (1) Under a right so to do stated in the certificate,
or (2) With the consent of all members.

491.A contract of agency to sell personal property is a real contract that

would require the delivery of the thing to be sold.

False. A contract of agency is a consensual contract. Article 1869. Agency

may be express, or implied from the acts of the principal, from his silence or lack of
action, or his failure to repudiate the agency, knowing that another person is acting
on his behalf without authority. Agency may be oral, unless the law requires a
specific form. (1710a)

492.A partnership is formed even if no inventory and public instrument of

real properties contributed to the partnership was made.

False. Article 1773. A contract of partnership is void, whenever immovable

property is contributed thereto, if an inventory of said property is not made, signed
by the parties, and attached to the public instrument.
493.Universal partnership of all present property includes title to all
present and future property as well as future properties acquired by
gratuitous title.

False.

Article 1779. In a universal partnership of all present property, the property

which belonged to each of the partners at the time of the constitution of the
partnership, becomes the common property of all the partners, as well as all the
profits which they may acquire therewith.

A stipulation for the common enjoyment of any other profits may also be
made; but the property which the partners may acquire subsequently by
inheritance, legacy, or donation cannot be included in such stipulation, except the
fruits thereof. (1674a)

494.A contract of partnership with a capital of P3,000 must appear in a

public instrument and recorded in the Securities and Exchange Commission
to be enforceable.

False. The purpose of registration is related only to the issuance of a license

to engage in a business or trade. The failure to register does not invalidate the
contract among the partners so long as the essential requisites of the contract are
present.

Article 1772. Every contract of partnership having a capital of three thousand

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

495.A stipulation excluding an industrial partner, from any share in the

profits or losses is valid.
 False. As a rule, Article 1799. A stipulation which excludes one or more
partners from any share in the profits or losses is void. Exception, a stipulation
exempting an industrial partner from losses is naturally valid because he is not
liable for losses (he cannot withdraw the work or labor already done by him [unlike
a capitalist partner]).

496.An industrial partner is exempt from payment of liabilities to

partnership creditors.

False. An industrial partner, even though not liable for losses, would have to
pay (but he can recover what he has paid from the capitalist partners, unless there
is an agreement to the contrary. Neither on principle nor on authority can the
industrial partner be relieved from liability to third persons for the debts of the
partnership.

Article 1816. All partners, including industrial ones, shall be liable pro rata
with all their property and after all the partnership assets have been exhausted, for
the contracts which may be entered into in the name and for the account of the
partnership, under its signature and by a person authorized to act for the
partnership. However, any partner may enter into a separate obligation to perform
a partnership contract. (n)

Article 1817. Any stipulation against the liability laid down in the preceding
article shall be void, except as among the partners. (n)

497.A transfer of a partner’s entire interest in the partnership to his only

partner dissolves the partnership.

False. It will only give the only partner a ground for dissolving the
partnership.

Article 1813. A conveyance by a partner of his whole interest in the

partnership does not of itself dissolve the partnership, or, as against the other
partners in the absence of agreement, entitle the assignee, during the continuance
of the partnership, to interfere in the management or administration of the
partnership business or affairs, or to require any information or account of
partnership transactions, or to inspect the partnership books; but it merely entitles
the assignee to receive in accordance with his contract the profits to which the
assigning partner would otherwise be entitled. However, in case of fraud in the
management of the partnership, the assignee may avail himself of the usual
remedies.

In case of a dissolution of the partnership, the assignee is entitled to receive his

assignor's interest and may require an account from the date only of the last
account agreed to by all the partners. (n)

498.In voluntary transfer of a partner’s interest in the partnership, the

assignee becomes a partner if majority of the partners consent thereto.

False. For the assignee to become a partner, there must be unanimous

consent of the other partners. Mere majority vote is not enough. The assignment
does not divest the assignor of his status and rights as a partner nor operate as a
dissolution of the partnership.

499.A person admitted as partner in an already existing partnership is also

liable with his individual properties for all obligations of the partnership
arising before his admission unless there is a contrary stipulation.

False. The general rule is that an incoming partner’s liability for obligations
incurred before his admission shall be satisfied out of the properties of the
partnership, unless it is otherwise provided.

Article 1826. A person admitted as a partner into an existing partnership is

liable for all the obligations of the partnership arising before his admission as
though he had been a partner when such obligations were incurred, except that this
liability shall be satisfied only out of partnership property, unless there is a
stipulation to the contrary.

500.A commission agent cannot sell on credit goods or items without the
express or implied consent of the principal.

True.
 Article 1905. The commission agent cannot, without the express or implied
consent of the principal, sell on credit. Should he do so, the principal may demand
from him payment in cash, but the commission agent shall be entitled to any
interest or benefit, which may result from such sale.

501.An agency “coupled with an interest” survives the grantor’s death.

True.

Article 1930. The agency shall remain in full force and effect even after the
death of the principal, if it has been constituted in the common interest of the latter
and of the agent, or in the interest of a third person who has accepted the
stipulation in his favor. (n)

502.In case there are two or more principals, any one of them may revoke
the agency provided the consent of the other is sought.

False.

Article 1925. When two or more principals have granted a power of attorney
for a common transaction, any one of them may revoke the same without the
consent of the others. (n)

503.Constructive trusts are imposed by the law to carry out the actual or
presumed intent of the parties if the express trust is prejudicial to the
interest of the beneficiary.

False. A constructive trust is not based on any agreement or intention (either

express or implied). It is imposed by law to satisfy the demands of justice and to
defeat or prevent the wrongful act of one of the parties.

504.Resulting Trusts are established by law, regardless of intention, in

order to prevent fraud, oppression or unjust enrichment.
 False. Resulting trust are also called “intention-enforcing trusts” because
they arise from the nature or circumstances of the consideration involved in a
transaction whereby a one person becomes invested with legal title but is obligated
in equity to hold his title for the benefit of another.

505.No express trust concerning an immovable or any interest therein may

be proved by parol evidence.

True.

Article 1443. No express trusts concerning an immovable or any interest

therein may be proved by parol evidence.

506.There is a resulting trust when a donation is made to a person but it

appears that although the legal estate is transmitted to the donee, he
nevertheless is either to have no beneficial interest or only a part thereof.

True. Article 1449 is a resulting trust.

Article 1449. There is also an implied trust when a donation is made to a

person but it appears that although the legal estate is transmitted to the donee, he
nevertheless is either to have no beneficial interest or only a part thereof.

507.There is a constructive trust when land passes by succession to any

person and he causes the legal title to be put in the name of another.

False. This is a resulting trust.

Article 1451. When land passes by succession to any person and he causes
the legal title to be put in the name of another, a trust is established by implication
of law for the benefit of the true owner.
508.There is constructive trust if the price of a sale of property is loaned or
paid by one person for the benefit of another and the conveyance is made
to the borrower but mortgaged to secure the payment of the debt.

False. There is a resulting trust.

Article 1448. There is an implied trust when property is sold, and the legal
estate is granted to one party but the price is paid by another for the purpose of
having the beneficial interest of the property. The former is the trustee, while the
latter is the beneficiary. However, if the person to whom the title is conveyed is a
child, legitimate or illegitimate, of the one paying the price of the sale, no trust is
implied by law, it being disputably presumed that there is a gift in favor of the
child.

509.Laches is a defense in resulting trusts unless the beneficiary had no

knowledge of the facts.

True. Whether for resulting or constructive, its enforcement may be barred

by laches. For laches to be a defense, the beneficiary must have knowledge

510.In express trusts, the statute of limitations does not apply to

subsisting and continuing trusts, so long as there is no denial or
repudiation thereof.

True.

As a rule, the trustee cannot acquire by prescription the ownership of the

property entrusted to him because his possession is always adverse. Exception is
when there is repudiation on the part of the trustee.

511.The sharing of gross returns is sufficient to establish existence of a

partnership.

False.
 Article 1769. (3) The sharing of gross returns does not of itself establish a
partnership, whether or not the persons sharing them have a joint or common right
or interest in any property from which the returns are derived;

512.When an unlawful partnership is dissolved by a judicial decree, the

profits and unlawful objects shall be confiscated in favor of the State.

True.

Article 1770. A partnership must have a lawful object or purpose, and must
be established for the common benefit or interest of the partners.

When an unlawful partnership is dissolved by a judicial decree, the profits

shall be confiscated in favor of the State, without prejudice to the provisions of the
Penal Code governing the confiscation of the instruments and effects of a crime.
(1666a)

513.The land owned by the partnership where it operates a shabu

laboratory may be confiscated by the State.

False.

Since contributions are not included in Article 1770, the general rules of law
must be followed because of such exclusion. Hence, the partners must be
reimbursed with the amount of their respective contributions. Applying this
principle, the land must be returned to the partner who contributed the property.
(Di ko talaga mahanap categorial answer dito, need your help criminalist Isma)

514.When a partnership for a fixed term or particular undertaking is

continued after the termination of such term or particular undertaking
without any express agreement, the rights and duties of the partners
remain the same as they were at such termination for the same period as
initially fixed in the contract of partnership.
 False. The partnership becomes a partnership at will (no definite term or no
particular undertaking).

Article 1785. When a partnership for a fixed term or particular undertaking is

continued after the termination of such term or particular undertaking without any
express agreement, the rights and duties of the partners remain the same as they
were at such termination, so far as is consistent with a partnership at will.

A continuation of the business by the partners or such of them as habitually

acted therein during the term, without any settlement or liquidation of the
partnership affairs, is prima facie evidence of a continuation of the partnership. (n)

515.Important alterations in the immovable property of partnership, if

useful and beneficial to the partnership, is a mere act of administration
and may be made upon the consent of the financial majority.

False. There must be unanimous consent of all the partners. (De Leon, pg.
129)

Article 1803. (2) None of the partners may, without the consent of the
others, make any important alteration in the immovable property of the
partnership, even if it may be useful to the partnership. But if the refusal of consent
by the other partners is manifestly prejudicial to the interest of the partnership, the
court's intervention may be sought. (1695a)

516.Strangers are bound to inquire into the existence of any restriction of

authority on the part of a partner.

True.

It is a settled rule that persons dealing with an agent are bound at their peril,
if they would hold the principal liable, to ascertain not only the fact of agency but
also the nature and extent of authority, and in case either is controverted, the
burden of proof is upon them to establish it. The basis for agency is representation
and a person dealing with an agent is put upon inquiry and must discover upon his
peril the authority of the agent. If he does not make such an inquiry, he is
chargeable with knowledge of the agent's authority and his ignorance of that
authority will not be any excuse.

As noted by one author, the ignorance of a person dealing with an agent as to the
scope of the latter's authority is no excuse to such person and the fault cannot be
thrown upon the principal. A person dealing with an agent assumes the risk of lack
of authority in the agent. He cannot charge the principal by relying upon the
agent's assumption of authority that proves to be unfounded. The principal, on the
other hand, may act on the presumption that third persons dealing with his agent
will not be negligent in failing to ascertain the extent of his authority as well as the
existence of his agency. (Manila Memorial Park Cemetery, Inc. v. Linsangan, G.R.
No. 151319, [November 22, 2004], 485 PHIL 764-786)

517.Misappropriation of one partner binds the partnership when the

partner in the course of business receives money or property of a third
person and the money or property so received is misapplied without the
knowledge of the other partners.

True.

Article 1823. The partnership is bound to make good the loss: (2) Where the
partnership in the course of its business receives money or property of a third
person and the money or property so received is misapplied by any partner while it
is in the custody of the partnership. (n)

518.If a person specially informs another or states by public advertisement

that he has given a power of attorney to a third person, the latter thereby
becomes a duly authorized agent, in the former case with respect to the
person who received the special information, and in the latter case with
regard to any person even if the latter did not read the publication when
he transacted with the agent.

True.

Article 1873. If a person specially informs another or states by public

advertisement that he has given a power of attorney to a third person, the latter
thereby becomes a duly authorized agent, in the former case with respect to the
person who received the special information, and in the latter case with regard to
any person.

The power shall continue to be in full force until the notice is rescinded in the same
manner in which it was given. (n)

519.A special power of attorney is necessary to make gifts for charity or to

employees in the business managed by the agent.

False.

Article 1878. Special powers of attorney are necessary in the following cases:
(6) To make gifts, except customary ones for charity or those made to employees
in the business managed by the agent;

520.A special power of attorney is necessary to loan or borrow money,

unless the latter act be urgent and indispensable for the improvement or
preservation of the things which are under administration.

False. Improvement does not come within the purview of the exception.

Article 1878. Special powers of attorney are necessary in the following cases:
(7) To loan or borrow money, unless the latter act be urgent and indispensable for
the preservation of the things which are under administration;

521.An agent may be relieved by agreement from the obligation to make

an accounting.

False.

Article 1891. Every agent is bound to render an account of his transactions

and to deliver to the principal whatever he may have received by virtue of the
agency, even though it may not be owing to the principal. Every stipulation
exempting the agent from the obligation to render an account shall be void.
522.If the commission agent receives guaranty commission in addition to
ordinary commission, the agent shall bear the risk of collection and shall
pay the principal the proceeds of the sale on the same terms agreed upon
with the purchaser unless the principal consented to the sale on credit.

False. Article 1907 applies both to cash and credit sales because it makes no
distinction.

Article 1907. Should the commission agent receive on a sale, in addition to

the ordinary commission, another called a guarantee commission, he shall bear the
risk of collection and shall pay the principal the proceeds of the sale on the same
terms agreed upon with the purchaser. (n)

523.If the third person does not know that the agent exceeded the scope
of his authority, he may hold the agent liable as well as the principal, even
if he has not inquired into the authority of the agent.

True.

It is a settled rule that persons dealing with an agent are bound at their peril,
if they would hold the principal liable, to ascertain not only the fact of agency but
also the nature and extent of authority, and in case either is controverted, the
burden of proof is upon them to establish it. The basis for agency is representation
and a person dealing with an agent is put upon inquiry and must discover upon his
peril the authority of the agent. If he does not make such an inquiry, he is
chargeable with knowledge of the agent's authority and his ignorance of that
authority will not be any excuse.

As noted by one author, the ignorance of a person dealing with an agent as to the
scope of the latter's authority is no excuse to such person and the fault cannot be
thrown upon the principal. A person dealing with an agent assumes the risk of lack
of authority in the agent. He cannot charge the principal by relying upon the
agent's assumption of authority that proves to be unfounded. The principal, on the
other hand, may act on the presumption that third persons dealing with his agent
will not be negligent in failing to ascertain the extent of his authority as well as the
existence of his agency. (Manila Memorial Park Cemetery, Inc. v. Linsangan, G.R.
No. 151319, [November 22, 2004], 485 PHIL 764-786)

524.Agency by ostensible authority consists in the conscious permission of

acts beyond those powers granted.

True.

Agency by ostensible authority (or apparent) may be created by the

intentional clothing of the principal over the agent which indicates authority or by
negligence by knowingly permitting an agent without authority to hold himself out
as having authority.

525.If two or more principals have appointed an agent for a common

transaction or undertaking, they are jointly liable unless solidarity is
agreed upon.

False.

Article 1915. If two or more persons have appointed an agent for a common
transaction or undertaking, they shall be solidarily liable to the agent for all the
consequences of the agency. (1731)

526.An agency is not revoked by the principal’s death if it has been

constituted in the interest of a third person without notice or knowledge of
the interest.

False. The agency survives the death of the principal despite knowledge on
the part of the agent.

Article 1930. The agency shall remain in full force and effect even after the
death of the principal, if it has been constituted in the common interest of the latter
and of the agent, or in the interest of a third person who has accepted the
stipulation in his favor. (n)
527.An oral trust over personalty is valid.

True. By implication, for a trust over personal property, an oral agreement is

valid and enforceable between the parties.

Article 1444. No particular words are required for the creation of an express
trust, it being sufficient that a trust is clearly intended.

528.There is no need for the trustee to render his account under oath.

True. There is no duty imposed by the law to render an account under oath,
on the part of the trustee.

529.The trustor cannot prohibit alienation of the subject property for a

period more than 25 years.

True.

530.Merger is a cause for the termination of an implied or express trust.

True. (Memaid; list lang)

531.In an implied trust, the action to recover must be brought within five
years from the issuance of the title to the property.

False.

It is now well settled that an action for reconveyance to enforce an implied

trust in one’s favour prescribes in ten (10) years.
532.A partner may transfer his interest to another over the objections of
the other partners.

True.

A partner’s interest in the partnership may be transferred to any of his co-

partners or to a third person even without the consent of the other partners, in the
absence of a contrary agreement. (De Leon, pg. 160).

533.A secret and silent partner is one who has no voice in the management
of the partnership and is not known to the other partners.

False.

A secret partner takes active part in the business but is not known to be a
partner by the outside parties nor held out as a partner by the other partners. On
the other hand, a silent partner does not take an active part in the business
although he may be known to be a partner (he need not be a secret partner).

534.The partnership begins from the moment it is recorded in the

Securities and Exchange Commission.

False.

The personality of a partnership begins from the concurrence of the essential

requisites of a contract of partnership. Article 1768. The partnership has a juridical
personality separate and distinct from that of each of the partners, even in case of
failure to comply with the requirements of article 1772, first paragraph. (n)

535.The fruits of the property promised to be contributed by a partner

should also be delivered without exception.

FALSE. Article 1786. If property has been promised, the fruits thereof should also
be given. The fruits referred to are those arising from the time they should have
been delivered, without need of any demand. If the partner is in bad faith, he is
liable not only for the fruits actually produced, but also for those that could have
been produced.

536.In case of imminent loss of the business of the partnership, an

industrial partner shall be required to contribute additional service to the
partnership.

FALSE. The industrial partner is explicitly excluded to render additional service.

Art. 1791. If there is no agreement to the contrary, in case of an imminent loss of

the business of the partnership, any partner who refuses to contribute an additional
share to the capital, except an industrial partner, to save the venture, shall he
obliged to sell his interest to the other partners)

537.An industrial partner can engage in other business, but must not
compete with the partnership, unless otherwise stipulated.

FALSE. Art. 1789. An industrial partner cannot engage in business for himself,
unless the partnership expressly permits him to do so; and if he should do so, the
capitalist partners may either exclude him from the firm or avail themselves of the
benefits which he may have obtained in violation of this provision, with a right to
damages in either case.

538.A partner, as agent, cannot assign partnership property in payment of

partnership debt.

FALSE. Art. 1818. Every partner is an agent of the partnership for the purpose of its
business xxx Except when authorized by the other partners or unless they have
abandoned the business, one or more but less than all the partners have no
authority to:

(1) Assign the partnership property in trust for creditors or on the assignee's
promise to pay the debts of the partnership. xxx

[Therefore, he can assign the partnership property, provided he is authorized by

the other partners, or that they have abandoned the business]

539.Dissolution terminates the partnership.

FALSE. Art. 1829. On dissolution the partnership is not terminated, but continues
until the winding up of partnership affairs is completed.
540.Insolvency of a partner is one of the causes for voluntary dissolution
of a partnership.

FALSE. Involuntary dissolution, not voluntary.

541.In case of an agreement between a partner, the partnership debtors

and the persons continuing the business, a partner may be discharged
from liabilities.

FALSE. Art. 1835. A partner is discharged from any existing liability upon
dissolution of the partnership by an agreement to that effect between himself, the
partnership creditor and the person or partnership continuing the business; and
such agreement may be inferred from the course of dealing between the creditor
having knowledge of the dissolution and the person or partnership continuing the
business.

542.Creditors of the old partnership are no longer considered as creditors

of the continued partnership.

FALSE. The law makes the creditors of the dissolved partnership also creditors of
the persons or partnership continuing the business, such those cases mentioned in
Article 1840.

543.The individual property of a deceased partner, whose name is being

used by the continuing partnership, shall be held liable for debts
contracted after his death.

FALSE. Last paragraph of Art. 1840 - The use by the person or partnership
continuing the business of the partnership name, or the name of a deceased
partner as part thereof, shall not of itself make the individual property of the
deceased partner liable for any debts contracted by such person or partnership.

544.A limited partner may contribute services to the partnership.

FALSE. Art. 1845. The contributions of a limited partner may be cash or property,
but not services.

545.A limited partner’s surname may appear in the partnership name but
he becomes a general partner with respect to the partners and third
parties.
FALSE. Art. 1846, second paragraph. A limited partner whose surname appears in a
partnership name contrary to the provisions of the first paragraph is liable as a
general partner to partnership creditors who extend credit to the partnership
without actual knowledge that he is not a general partner.

546.A substituted partner is one admitted to all the rights of a limited

partner.

FALSE. Art. 1859, second paragraph. A substituted limited partner is a person

admitted to all the rights of a limited partner who has died or has assigned his
interest in a partnership.

547.An assignee of a limited partner acquires the rights of the assignor.

FALSE. Art. 1859, third paragraph. An assignee, who does not become a
substituted limited partner, has no right to require any information or account of
the partnership transactions or to inspect the partnership books; he is only entitled
to receive the share of the profits or other compensation by way of income, or the
return of his contribution, to which his assignor would otherwise be entitled.

548.A principal may be bound by an agent to render service without

compensation.

TRUE. Provided there is Special Power of Attorney. - Art. 1878 (9)

549.In all cases, a special power of attorney is necessary to loan or borrow

money.

FALSE. Art. 1878 (7). To loan or borrow money, unless the latter act be urgent and
indispensable for the preservation of the things which are under administration

550.Why is submission to arbitration not included in a special power to

compromise?

[Reason for Art.1880] A principal may authorize his agent to compromise because
of absolute confidence in the latter’s judgment and discretion to protect the
former’s rights and obtain for him the best bargain the transaction. If the
transaction would be left in the hands of an arbitrator, said arbitrator may not enjoy
the trust of the principal. A fundamental principle of agency shall have been
violated, namely, that an agent must possess the trust and confidence of the
principal. (Paras, citing Manresa)
551.There is an implied acceptance if the principal delivers his power of
attorney to the agent and the latter receives it without objection.

TRUE.

Art. 1871. Between persons who are present, the acceptance of the agency may
also be implied if the principal delivers his power of attorney to the agent and the
latter receives it without any objection.

552.An agent may be exempted by stipulation from rendering an

accounting.

FALSE. Art. 1891. Every agent is bound to render an account of his transactions
and to deliver to the principal whatever he may have received by virtue of the
agency, even though it may not be owing to the principal. Every stipulation
exempting the agent from the obligation to render an account shall be void.

553.If the principal does not mention the power to substitute at all, the
agent may appoint one but he is responsible for the acts of the substitute.

TRUE.

Art. 1892. The agent may appoint a substitute if the principal has not prohibited
him from doing so; but he shall be responsible for the acts of the substitute:

(1) When he was not given the power to appoint one;

(2) When he was given such power, but without designating the person, and the
person appointed was notoriously incompetent or insolvent.

554.An agency is gratuitous unless compensation is agreed upon.

FALSE. Art. 1875. Agency is presumed to be for a compensation, unless there is

proof to the contrary.

555.The accomplishment of the object of the agency extinguishes an

agency even prior to the final accounting.

TRUE.

Art. 1919. Agency is extinguished:

xxx (5) By the accomplishment of the object or purpose of the agency

556.An agency at will is revoked even if the revocation is not brought to
the knowledge of the agent.

TRUE.

Art. 1920. The principal may revoke the agency at will, and compel the agent to
return the document evidencing the agency. Such revocation may be express or
implied. (not sure with the legal basis)

557.When a partner by estoppel combines with another partner and on the

strength of the representation, contracted with a third person, both of
them are liable pro rata.

TRUE.

Art. 1825. When a person, by words spoken or written or by conduct, represents

himself, or consents to another representing him to anyone, as a partner in an
existing partnership or with one or more persons not actual partners, he is liable to
any such persons to whom such representation has been made, who has, on the
faith of such representation, given credit to the actual or apparent partnership, and
if he has made such representation or consented to its being made in a public
manner he is liable to such person, whether the representation has or has not been
made or communicated to such person so giving credit by or with the knowledge of
the apparent partner making the representation or consenting to its being made:

(1) When a partnership liability results, he is liable as though he were an actual

member of the partnership;

(2) When no partnership liability results, he is liable pro rata with the other
persons, if any, so consenting to the contract or representation as to incur liability,
otherwise separately.

558.A partner is a co-owner of the other partners with respect to the

undistributed net profits of the partnership.

FALSE. Refers only to specific partnership property. (Art. 1811. A partner is co-
owner with his partners of specific partnership property.)

559.Winding up may be done by a mere assignee in exceptional

circumstance.

TRUE.
Art. 1836. Unless otherwise agreed, the partners who have not wrongfully dissolved
the partnership or the legal representative of the last surviving partner, not
insolvent, has the right to wind up the partnership affairs, provided, however, that
any partner, his legal representative or his assignee, upon cause shown, may
obtain winding up by the court.

560.A decree of dissolution of a partnership may be granted upon

application of the purchaser of partnership interest in case of termination
of the term or undertaking.

FALSE. Art. 1831. xxx On the application of the purchaser of a partner's interest
under Article 1813 or 1814: (1) After the termination of the specified term or
particular undertaking xxx

561.Except as necessary for winding up, dissolution terminates all

authority of partners to act for the partnership.

TRUE.

Art. 1832. Except so far as may be necessary to wind up partnership affairs or to

complete transactions begun but not then finished, dissolution terminates all
authority of any partner to act for the partnership:

(1) With respect to the partners:

(a) When the dissolution is not by the act, insolvency or death of a partner;
or

(b) When the dissolution is by such act, insolvency or death of a partner, in

cases where article 1833 so requires;

(2) With respect to persons not partners, as declared in article 1834.

562. After dissolution, a partner can bind the partnership by any

transaction which would bind the partnership if dissolution had not taken
place, provided the other party to the transaction had extended credit to
the partnership after the dissolution.

FALSE. Art. 1834. After dissolution, a partner can bind the partnership, except as
provided in the third paragraph of this article:

(1) By any act appropriate for winding up partnership affairs or completing

transactions unfinished at dissolution;

(2) By any transaction which would bind the partnership if dissolution had not taken
place, provided the other party to the transaction:
 a) Had extended credit to the partnership prior to dissolution and had no
knowledge or notice of the dissolution; or
b) Though he had not so extended credit, had nevertheless known of the
partnership prior to dissolution, and, having no knowledge or notice of
dissolution, the fact of dissolution had not been advertised in a newspaper of
general circulation in the place (or in each place if more than one) at which
the partnership business was regularly carried on.

563.Dissolution necessarily discharges a partner of liability for obligations

incurred thereafter.

FALSE. Where a person enters into a new contract with a third person after
dissolution, the new contract generally will bind the partners. Each of them is liable
for his share of any liability created by the acting partner as if the partnership had
not been dissolved

564.When a partnership agreement is rescinded on the ground of fraud or

misrepresentation, partners who are not guilty shall have the right to
subrogation for any payments made by them of partnership liabilities.

TRUE.

Art. 1838. Where a partnership contract is rescinded on the ground of the fraud or
misrepresentation of one of the parties thereto, the party entitled to rescind is,
without prejudice to any other right, entitled:

(1) To a lien on, or right of retention of, the surplus of the partnership property
after satisfying the partnership liabilities to third persons for any sum of money
paid by him for the purchase of an interest in the partnership and for any capital or
advances contributed by him;

(2) To stand, after all liabilities to third persons have been satisfied, in the place of
the creditors of the partnership for any payments made by him in respect of the
partnership liabilities; and

(3) To be indemnified by the person guilty of the fraud or making the

representation against all debts and liabilities of the partnership.

565-569.What are the causes for involuntary dissolution of a partnership?

 By any event which makes it unlawful for the business of the partnership to
be carried on or for the members to carry it on in partnership
  When a specific thing which a partner had promised to contribute to the
partnership, perishes before the delivery; in any case by the loss of the
thing, when the partner who contributed it having reserved the ownership
thereof, has only transferred to the partnership the use or enjoyment of the
same
 By the death of any partner
 By the insolvency of any partner or of the partnership
 By the civil interdiction of any partner

570-573.What are the liabilities of the partnership in their rank in the

order of payment?

Art. 1839 (2) - The liabilities of the partnership shall rank in order of payment, as
follows:

(a) Those owing to creditors other than partners,

(b) Those owing to partners other than for capital and profits,

(c) Those owing to partners in respect of capital,

(d) Those owing to partners in respect of profits.

574-579Enumerate some rights of a limited partner?

Art. 1851

 To have the partnership books kept at the principal place of business of the
partnership,
 To inspect at a reasonable hour partnership books and copy any of them;
 To demand true and full information of all things affecting the partnership;
 To demand a formal account of partnership affairs whenever circumstances
render it just and reasonable; and
 To have dissolution and winding up by decree of court.
 Right to receive a share of the profits or other compensation by way of
income,
 Right to the return of his contribution as provided in Articles 1856 and 1857.

580-585. What are the grounds for the extinguishment of agency?

 By its revocation
 By the withdrawal of the agent
 By the death, civil interdiction, insanity or insolvency of the principal or of the
agent
  By the dissolution of the firm or corporation which entrusted or accepted the
agency
 By the accomplishment of the object or purpose of the agency
 By the expiration if the period for which the agency was constituted

586-595.Give ten instances when an agency couched in general terms

would not be sufficient.

1) Making such payments as are not usually considered as acts of

administration;
2) Effecting novations which put an end to obligations already in existence at
the time the agency was constituted;
3) To compromise, to submit questions to arbitration, to renounce the right to
appeal from a judgment, to waive objections to the venue of an action or to
abandon a prescription already acquired;
4) Waiving any obligation gratuitously;
5) Entering into any contract by which the ownership of an immovable is
transmitted or acquired either gratuitously or for a valuable consideration;
6) Making gifts, except customary ones for charity or those made to employees
in the business managed by the agent;
7) To loan or borrow money, unless the latter act be urgent and indispensable
for the preservation of the things which are under administration;
8) To lease any real property to another person for more than one year;
9) Binding the principal to render some service without compensation;
10) Binding the principal in a contract of partnership;
11) To obligate the principal as a guarantor or surety;
12) To create or convey real rights over immovable property;
13) To accept or repudiate an inheritance;
14) To ratify or recognize obligations contracted before the agency;
15) Any other act of strict dominion.

596.In what instance may an assignee of a partner’s interest judicially

demand for dissolution at any time?

Art. 1813. A conveyance by a partner of his whole interest in the partnership does
not of itself dissolve the partnership, or, as against the other partners in the
absence of agreement, entitle the assignee, during the continuance of the
partnership, to interfere in the management or administration of the partnership
business or affairs, or to require any information or account of partnership
transactions, or to inspect the partnership books; but it merely entitles the assignee
to receive in accordance with his contract the profits to which the assigning partner
would otherwise be entitled. However, IN CASE OF FRAUD IN THE MANAGEMENT
OF THE PARTNERSHIP, the assignee may avail himself of the usual remedies.
597-599.Give three (3) examples of implied resulting trusts.

Resulting Trust – trust raised by implication of law and presumed always to have
been contemplated by the parties, the intention as to which is found in the nature
of transaction BUT not expressed in the instrument.

EXAMPLES:

 When a property is sold and the legal estate is granted to one party but the
price is paid by another for the purpose of having the beneficial interest in
the property
 When a donation is made to a person but it appears that although the legal
estate is transmitted to the donee, he nevertheless is either to have no
beneficial interest or only a part thereof
 Two or more people agree to purchase a property and by common consent
the legal title is taken in the name of one of them for the benefit of all
 When a property is conveyed to a person in reliance upon his declared
intention to hold it for, or transfer it to another or to the grantor, there is
implied trust in favor of the person whose benefit is contemplated

600++++.Write your original, poem, song, story, essay, or any creative

literature about the covid-19 pandemic.