REVIEWER ON CTVIL LAW

CREDIT TRANSACTIONS
858 Security Transaction 859

sufficient to pay the entire obligation of the persons

the as
date themortgagee: within
(2010 Bar). debtorl certifiofcate of saleoneis regi
with the Register year from
2.03.07. Redemption. One of the Deedso (1989 Bar).stered
Equity of Redemption distinguished can redeemco-owners
the
of a
mortgaged the co-
a)
Right of Redemption. (1))Equity of from owners (2000 Bar). whole property forproperty
-the right of the mortgagor after Redemption
judgment
in
ajudicial foreclosure to acquire the property by
2.04. CHATTEL MORTGAGE (Act No. 1508).
paying the obligation before the auction sale or a) Chattel
virtue ofmortgage
is an accessory
registration of the sale; (2) Right of which personal property contract by
Redemption
- the right to redeem the property after an extra the Chattel Mortgage Register as is recorded in
judicial foreclosure foreclosure sale within one performance of an obligation. security for the
year from registration of the sale (1999, 2000, and b) Chattel mortgage need not be the
2011 Bar). exclusive
security for the debt. Thus, securing an
b) Redemption in Judicial Foreclosure - no right additional real estate mortegage is not by itself
of redemption but only equity of redemption considered extinctive novation of the chattel
within the 90-day period after the judgment mortgage (1982 Bar).
becomes final, in accordance with Rule 68, or
even after the foreclosure salebut prior to its c) Distinguished from Pledge: (1) Pledge is areal
contract while chattel mortgage is a solemn or
confirmation.
formal contract; (2) Possession is transferred
Period of Equity of Redemption and Right of of
to the pledgee in pledge while no transfer (3)
Redemption in Extrajudicial Foreclosure (Act possession is required in chattel mortgage;
3135). Chattel mortgage is required to be registered
must be in
(1) Banks is the mortgagee: to bind third persons while pledge
description of
containing
(i) Redemption Period for Natural a public instrument the date thereof to bind
and
the thing pledged Affidavit of good faith is
Persons within one year after the third persons; (4) mortgage while there is no
registration of sale of the real estate.
required in chattel pledge: (5) Deficiencyafter
(ü) Redemption Period for Juridical such requirement in in chattel
Persons equity or redemption generally be recovered allowed in
the sale can such recover is the sale
only before the registration of the mortgage while no of
certificate of foreclosure sale with the pledge; (6) Excess in the proceeds
chattel mortgage
mortgagor in pledgee-creditor
proper Register of Deeds, which in no belongs to the belongs to the
case shall be more than three months while the excess
Bar).
after foreclosure. whichever isearlier.
natural
inpledge(1999
(2) Non-bank juridical persons and

Sec. 6., Act No. 3135.

1Metropolitan Bank and Trust August1,2016. MArt. 2140, NCC.
Company v. Tan, G.R. No. 202176,
 CREDIT TRANSACTIONS
860
REVIEWER ON CIVIL LAW Security Transaction 861
a) An
2.04.01. Subject Matter. It covers personal or
movable unregistered
the parties but notmortgage is binding
properties
New
contemplated
Civil Code
under
including
Articles 416 and
shares 417 b) Affidavit of Good
on third
persons (1999betBar).
ween
of the of
stocksthe of the Faith. Even in the
and interest in business. Example: Land
object of chattel mortgage (1994 Bar).
cannot be affidavit,
as between the the chattel mortgage isabsence
valid
as to third parties. FHowever, it is not vlid
a) Buildings cannot, as arule, be subject of
chattel mortgagees.
persons inchuding other creditors or
mortgage because they are real properties under
Article 415(1) of the New Civili1 Code even if t Righttof
after the Redemption.
2.04.04.
are houses of mixed materials or if the buildthey Thereeisi no right of
sale; there is onlyredempt
is on rented land 172 ing foreclosure
redemption before the foreclosure. equity ioofn
(1) Exception is Estoppel the chattel
mortgage over a building is considered 2.04.05. Detficiency After Foreclosure. After foreclosure. the
valid as between the parties on the basis mortgagee may generally recover any deficiency
of estoppel but not against third persons that may result after applying the proceeds of the
(2000 and 2003 Bar), 173 foreclosure sale to the obligation (1986 Bar)."
b) After-Acquired Properties. Chattel mortgage Exception: Whern the transaction secured is sale of
shall be deemed to cover only the property personal property on installment basis under Article
described therein and not like or substituted 1484 of the New Civil Code otherwise known as the
property thereafter acquired." "Recto Law."
2.04.02. After-Incurred Obligations. A chattel mortgage
can cover only obligations existing at the time the 3. ANTICHRESIS.
mortgage is constituted. It cannot cover after-incurred 3.01. ANTICHRESIS DEFINED. It is an accessory
obligations (1991 Bar). the right to
2.04.03. Formalities. The Chattel Mortgage must be registered agreement whereby the creditor acquires his debtor, with
receive the fruits of an immovable of
in the Chattel Mortgage Register of the Register or them to the payment of the
Deeds: (1) where the mortgagor resides at the time the obligation to apply to the principal of his
ofthe making of the mortgage; (2) if the mortgagor interest, if owing, and thereafter
Crediti (1952, 1995 and 2007 Bar).
resides outside or without the Philippines in the place mortgage
where the property is situated; (3) if the property S the view that amortgagee
There is authority forantichresis
a) if the
an
situated in the province that is different from the is converted into 178

province where the mortgagor resides, it should takes possession of the property"
register in both the Register of Deeds where e express agree-
involves an
Antichresis
chattel is located and the Register of Deeds wherethe 3.01.01. Requisites.
mortgagor resides!75 (1990 Bar). between parties whereby:
ment
Metal
172Tumalad v. Inc. v. Tojan
Wearever Textile Mills,Vicencio,
41 SCRA143
122 SCRA 296 (1983). (1971); Makati Leasing8 and Finance Corp. Leasing and Finance,
Law: PCI
17Evangelista
Industr176Sec.
v. Alto Surety &Ins. 14, Chattel Mortgage
174Sec. 7(4), Co., 103 Phil. 401 (1958).
Act No. 1508; Tsai v. CA,366
17%Sec. 4, Act No. 1508. SCRA 324 (2001). i"Art.
es, Inc.,2132, NCC.
638 SCRA 615 (2010).

69 Phil. 217.
178Kasilag v. Rodriguez,
 REVIEWER ON CIVIL LAW
CREDIT TRANSACTIONS
862 Security Transaction 863

(1) the creditor will have possession of the

existence of such
must be rejected contract, otherwise the
real property given as security; debtor's claim
3.01.04. Delivery of Immovabl e. The the involved is an
(2) such creditor will apply the fruits of the said immovable that is delivered to property
property to the interest owed by the debtor, if as a security antichretic creditor
any, then to the principal amount; The debtor cannot Ownership is NOT transferred.
(3) the creditor retains enjoyment of such1
property, immovable until fullreacquire
(1995 Bar).
the
payment ofenjoyment
his
of the
obligation
and
(4) should the obligation be duly paid, then the 3.01.05. Indivisible. Antichresis is also
contract is automatically extinguished until the rules that apply to mortgage andindivisible and the
pledge regarding
debtor has totally paid what he owes; proceeding indivisibility applies to antichresis,
from the accessory character of the agreement,n OBLIGATIONS OF THE
3.02. ANTICHRETIC
3.01.02. Measure of Application. The actual market value CREDITOR.
of the fruits at the time of the application thereof to (1) To pay the taxes and charges upon the
the interest and principal shall be the measure of the estate, unless there is a stipulation to the
application of fruits to the obligation,'*0 contrary -to be deducted from the fruitsi
(1) Stipulated Interest. The contracting parties (1995 Bar).
may stipulate that the interest upon the debt for its
(2) To bear the expenses necessarydeducted
be compensated with the fruits of the property preservation and repair - to be
which is the object of the antichresis,1 from the fruits, Is
The creditor, in
(2) Effect of Usury. If the value of the fruits should
a) Option to Exempt Himself. the obligations
exceed the amount of interest allowed by the from
order to exempt himself theabove-mentioned
laws against usury, the excess shall be applied mposed upon him to paycompel the debtor to
to the principal. expenses, may alwaysenjoymentoftheproperty,
3.01.03. Formal Contract: MUST BE IN WRITING. The enter again upon the is a stipulation to the
amount of the principal and of the interest shall except when there
be specified in writing; otherwise, the contract of contrary.59
ANTICHRETICCREDITOR.
antichresis shall be VOIDIs (1995 and 2007 Bar). KEMEDIES OF THE
3.03. the Property.
(1) Any one who claims that there is antichresi8 Creditor CANNOTappropriate the ownership of
must present the document evidencing the a) doesnotacquire
The creditor June 190875,
G.R. No.
and Salud Adolfo,
August 24, of Serafin
17Spouses Reyes v. Heirs of Benjamin Malance, et al., v. Heirs
13, 2012.184See Aniceto
2016. G.R. No. 219071, Bangis
180 Art. 2133, supra. lSArt. 2136, NCC.
181 Art.2138, ibid. l6 Art, 2139, ibid.
182[bid. Art. 2135, ibid.
183 Art. 2134, ibid.; Aniceto G.R. No.
190875, June 13, 2012. Bangis v. Heirs of Serafin and Salud Adolfo, T881bid.
Art. 2136, ibid.
 REVIEWER ON CIVIL LAW CREDIT TRANSACTIONS
864
Security Transaction 865

no foreclosure
the real estate for non-payment of the
edebt
the period agreed upon. Every stipulation towitthe
hin Thereis
public
sale. Foreclosure
is necessary Foreclosure is
contrary shallbe VOID, 190 to satisfy the necessary to satisfy
the obligation
b) Remedies. The remedies of the creditor
ofnon-payment of debt within the period in case
obligatmortgage.
the ion using mortgage.
using the
upon (the fruits are not enough) are as lagreed
(1) To abandon the security and file an follows: PROBLEM:
action Olivia owns a vast mango
for specificperformance; properly manage dueto alingering iplantation which she can no
illness. Since she is indebted longer
(2) Petition the court for the in the amount of P500,000 she asks
Peter to manage the to Peter
payment of the the harvest to the plantation
debt or the sale of the real property pO apply payment of her and
the Rules of Court on the foreclosure e
interest, until her indebtednesss shall haveobligation to him, princpal and
been fully paid. Peter
of agrees.
mortgages shall apply.91 a) What kind of contract is entered into
between Olivia and
Peter? Explain.
3.04. DISTINGUISHED FROM MORTGAGE (1950 and b) What specific obligations are imposed by law on Peter as a
1989).
consequence of their contract?
ANTICHRESIS CHATTEL REAL ESTATE c) Does the law require any specific form for the validity of
MORTGAGE their contract? Explain.
MORTGAGE
Immovable property is
|involved.
Movable Immovable d) May Olivia re-acquire the plantation before her entire
indebtedness shall have been fully paid? Explain (1995 Bar).
properties are properties are
Article
involved. involved. A: a) Olivia and Peter entered intoacontract of antichresis.
The property is 2132 of the New Civil Code provides that by a contract of
No delivery of receive the
antichresis the creditor acquires the right toobligation
No delivery of the
delivered to the creditor. the property. property. fruits of an immovable of his debtor, with the to
The creditor receives them to the payment of the interest, and thereafter
The creditor does The creditor does apply Peter
credit. Under their agreement,
the fruits to be applied not receive the not receive the to the principal of his receive the fruits mango plantation
to the interest and acquired the right to applied to Olivia's
fruits. fruits.
with the agreement that the same will be
principal.
obligations. pay taxes and charges
It is require that antichreticcreditormust: (i)necessaryexpensesfor
the amount of the The mortgage The mortgage must b) Ieter as the
and (ii) shouldermaydeductfrom thefruits
must be be registered. pon the land, whichhe
principal and interest Preservation andrepair
registered. New
is in writing, otherwise (Art. 2135, NCC). Article2134ofthe
the same is void but must be in writing, ofthe principaland
amount
theantichresis
c) agreement
e that the
there is no registration Civil Code provides writing,otherwise
requirement. interest must
bespecifiedin
debtor cannot
willbe void. providesthatthe hisfirst
specifically immovable without However,it
d) 2136
No. Article enjoymentof the creditor.
190Art. 2137, NCC. the
191Art. 2137, ibid. re-acquire the paid what heowes
having totally
 REVIEWER ON CIVIL LAW CREDIT TRANSACTIONS
866
Concurrence and Preference of Credits 867

is potestative on the part of the

to exempt him fromn his obligation
creditor to
do so in
under Article order
2135, NCC
2.01.
<IMMARY
of
OF
assets of the RULES. The rules on the
The debtor cannot re-acquire the enjoyment
unless follows: insolvent debtor are divisions
compels Olivia to enter again the enjoyment of the Peter
property. a) Claims or summarized as
Credits With Respect to
C. cONCURRENCE AND PREFERENCE Properties ofShould be Satisied First.Specific
OF CREDITS12 settlement the In the
the claims with assets of an insolvent debtor,
respect to specific properties
shall be satisfied first
1. BASIC RULES AND DEFINITIONS. The in accordance with
2241 and 2242 using the
Concurrence and preference of credit under theprovisions on
Civil Code (Special Preferred Credits).same Articles
specific properties
applies only if there is an insolvency and
liquidationlawproceed-
ing involving an insolvent debtor. The applicable for thie (1) There is
preference with respect to taxes
purpose is R.A. No. 10142 otherwise known as the Financial ONLY under Articles 2241 and 2242 of the
Rehabilitation and Insolvency Law (FRIA). The applicable New Civil Code (NCC).
procedure is A.M. No. 12-12-11-sC known as the Financial (2) As to all the other claims or liens
Rehabilitation Rules of Procedure (2013). mentioned in Articles 2241 and 2242 of the
a) Without the proper proceeding, then the rules NCC, there is NO ORDER of preference
on concurrence and preference of credits under and the balance (after taxes are deducted)
the Civil Code cannot operate. of the proceeds of the specific movable or
b) Credits. The kinds of credits are: (1) Credits with immovable propertyy as the case may be
shall be divided among the claimants or
respect to personal properties; and (2) Credits creditors in proportion tothe value of the
with respect to real properties; (3) Common claims or PRO RATA. 3
Credits.Consequently, the rules on concurrence
and preference involve the identification of the b) If there is Excess of Specific Properties. The
kinds of credit. after the
excess of the specific property, if any,preference,
c) payment of the credits which enjoy the
Liquidation. It is the process where the shall be added to the free property which
of an insolvent debtor are disposed andassets
the debtor may have, for the payment of the other
proceeds are divided among the insolvent accordance with
credits and shall be disposed inArticle 2244 of the
debtor's creditors. under
the order of preferenceArticle 110 of the Labor
2. NCC as modified by
PROCEDURE DIVISION OF THE ASSETS OF Th Code (Ordinary Prefrred
Credits).
INSOLVENT DEBTOR. After the Court had issued a Decision the Excess. If there is an
declaring the debtor, whether natural or c) What Happens to
the claims or liens under
insolvent, the assets of the insolvent debtor
juridical persoy
shall be divided excess after satisfying Common Credits shall be
among the creditors in Article 2244, all other
of the New Civil Code. accordance with to 2250
Articles 2241 satisied PRO RATA,195

12See Part V
which provides for an[H] of
outlineSundiang and Aquino, Reviewer on Commercial Law, 2014 Ed.
of the rules 9Arts, 2246-2249, NCC. 146555,July 3,2007.
provided for under FRIA. 1Art. 2250, ibid. Daway,et al., G.R. No.
196 Art. 2251, ibid.; Jose Cordova v. Reyes,
 REVIEWER ON CIVIL LAW CREDIT TRANSACTIONS
868
Concurrence and Preference of Credits 869

NOTES: (1) Duties, taxes and fees is

still
Government enjoy priority only in due the on the unpaid, the lien may be
reference price; this right is lostenforced
of the thingnot
real
to specific personal or the properties
Articles 2241 and 2242 of New Civil under
Code.
immobilization
provided
by the
it has not lost its by destination,
With respect to the free properties under and identity; neither is theform, substance
2244, duties, taxes and fees payable to the Articde the sale of the thing right lost by
Government are only 9th, 1%
for a together
property lump sum, whenwiththe other
(2) BIR CANNOT REQUIRE that a TAX thereof can be determined price
CLEARANCE is first secured before
distribution is made including for taxes
(4) Credits
guaranteed with aproport
as the things
ionally;
pledge so long
of the creditor,pledged
that are not included in Articles 2241(1) are in the hands
or those guaranteed by a
and 2242(1) because if such clearance is chattel mortgage, upon the things pledged
required, the tax liabilities (even other than or mortgaged, up to the value thereof;
those preferred under Articles 2241(1) and (5) Credits for the making, repair, safekeeping
2242(1) will be erroneously given absolute or preservation of personal property, on
preference197 the movable thus made, repaired, kept or
possessed;
3. PREFERENCE AS TO MOVABLE OR PERSONAL PRO.
PERTIES (Art. 2241, NCC). With respect to specific personal (6) Claims for laborers wages, on the goods
properties, there is real preference only with respect to taxes manufactured or the work done;
(No. 1) among the identified credits under Article 2241; taxes (7) For expenses of salvage, upon the goods
shallbe paid first while the claims under Nos. (2) to No. (13) salvaged;
shall be divided PRO RATA among the creditors (1995 Bar): landlord and the
(8) Credits between the
(1) Duties, taxes and fees due thereon to the tenant, arising from the contract of tenancy
of each in the fruits
State or any subdivision thereof; on shares, on the share
(2) Claims arising from misappropriation, or harvest;
breach of trust, or malfeasance by public transportation, upon the goods
(9) Credits for the price of the contract and
officials committed in the performance of carried, for until their delivery
their duties, on the movables, money or incidental expenses,
securities obtained by them; thereafter;
and for 30days usually
(3) Claims for the unpaid price of movables Credits for lodging and supplies
hotelkeepers,
(10) by
sold,on said movables, so long as they ate furnished to travellers
belonging to the guestbut
as
in the possession of the debtor, up to u movables hotel,
on the movables are in the
value of the same; and if the movable has longassuch loaned to theguests;
been resold by the debtor and the price money for
notfor and expensesto the
Credits for seedsharvest
advanced
(11)
1% See PDIC v. BIR, G.R. No. cultivation and harvested:
the fruits
172892, June 13, 2013. debtor,upon
19Philippine Deposit Insurance Corporation v. BIR, 689 SCRA 311 (2013).
 CREDIT TRANSACTIONS
870
REVIEWER ON CIVIL LAW Concurrence and Preference of Credits 871

(12) Credits for rent for one year, upon the sit
(7)
Credits annotated in the
order,Registry
in virtue of a of Property,
personal property of the lessee judicial by
existing
the immovable leased and on the on
fruits nt executions, upon the attachments
only as to later credits; property affected, and
or
thesame, but not on money or instrumente
of credit; (8) Claims of co-heirs for warranty in the
(13) Claims in favor of the depositor if the
of an
immovable among them, upon partition
property thus divided; the real
depositary has wrongfully sold the thing (a)
deposited, upon the price of the sale. Claims of donors or real property for
charges or other conditions imposed pecuniary
a) Ih the foregoing cases, if the movables to
which the lien or preference attaches have been donee, upon the immovable donated; upon the
wrongfully taken, the creditor may demand (10) Credits of insurers, upon the property insured,
them from any possessor, within 30 days from for the insurance premium for two years.
the unlawful seizure.
6 ORDER OF PREFERENCE WITH RESPECT TO OTHER
4. PREFERENCE WITH RESPECT TO IMMOVABLE OR REAL PROPERTIES.The balance of the specificproperties liquidated
PROPERTIES (Art. 2242, NCC). The taxes (No. 1) shall be in accordance with Articles 2241 and 2242 shall be added to free
paid first while the claims under Nos. (2) to No. (10) shall be properties. These properties, real and personal, of the debtor,
divided pro rataamong the creditors: shall be divided to answer for the following Ordinary Preferred
(1) Taxes due upon the land or building; Credits IN THE ORDERNAMED:1%
by
(2) For the unpaid price of real property sold, (1) Credits for services rendered the insolventprior
upon the immovable sold; employees, laborers, or household helpers
to the proceedings in insolvency - this was
(3) Claimsof laborers, masons, mechanics and Labor Code which
other workmen, as well as of architects, modified by Articles 110,
limitation under Article
removed the one year
engineers and contractors, engaged in the elevated these credits from 2nd to lst;
Construction, reconstruction or repair or 2244 and
buildings, canals or other works, upon said expenses for the debtor, or
(2) Proper funeralhis orher parentalauthority who
buildings, canals or other works; children under approved
their own, when
(4) Claims of furnishers of materials used in have no property of
the construction, econstruction, or repalr by the court; ofthe debtor or
of buildings, canals or other works, upon during the last illness
under his or
said buildings, canals or other workS; (3) Expensesher spouse and children property
of his or authority,ifthey have no
(5) her parental
ofMortgage
credits recorded in the Registry
Property, upon tthe real estatemortgaged; of their own;
laborers or their
(6) Compensation due the indemnity
Expenses for of the preservation
when the
or
(4) underlaws
providingfor
improvement
law real property upon the
dependernts
authorizes reimbursement, Philippines.
immovable preserved or improved; modified by Art.
110,Labor
Code ofthe
"Art. 2244, NCC, as
 REVIEWER ON CIVIL LAW
872

for damages in cases

of labor accident, or
from the nature of fthe illness
resulting
employment;
Credits and advancements made to the debtor PART XII
(5) himself or herself,
for support of and family,
during the last year preceding the insolvencv.
(6) Support during theiinsolvency proceedings, and
QUASI-CONTRACTS
for three months thereafter; QUASI-CONTRACT It is the
juridical relation that
(7) Fines and civil indemnification arising from a through certain lawful, voluntary and unilateral acts toarises
criminal offense; end that no one shall be unjustly enriched or benefited at the
the
expense of another'(2012Bar).
(8) Legal expenses, and expenses incurred in the
administration of the insolvent' s estate for the a) Kinds:
common interest of the creditors, when properly Nominate Quasi-Contracts (i) Negotio
authorized and approved by the court;
rumGestio, and (i) Solutio Indebiti;
(9) Taxes and assessments due the national (2 Innominate Quasi-Contracts those that
government, other than those mentioned in are covered by definition of quasi-contract.
Articles 2241, No. 1, and 2242, No. 1;
The two contracts specified in the New
(10) Taxes and assessments due any province, other Civil Code do hot) exclude other quasi
than those referred to in Articles 2241, No. 1, and Contracts which may come within_the
2242, No. 1; purview of the conceptof quasi-contracts.
(}
(11) Taxes and assessments due any city or b) Distinguished from Implied Contract.there
municipality, other than those indicated in contract requires consent while
Implied
Articles 2241, No. 1, and 2242, No. 1; agreement in quasi-contract;
nO consent_or is based on the will on
of
(12) Damages for death or personal injuries caused (2 Implied contracts
quasi-contracts is based
by a quasi-delict; the parties while unjustenrichment (1989
against
(13) Gifts due to public and private institutions O the principle
Bar). relation
charity or beneficence; is a juridical
NEGOTIORUM GESTIO, Thisthe OfficiousManager
(14) Credits which, without special privilege L01.
when one-
called agencyor
appear in (a) a public instrument; or (b) in that arises voluntarilytakeschargeofthe another,
property of
final judgment, if they have been the subject of or Gestor
management of the
business or
latter, is
cbliged_to
itigation. These credits shall have preference
the any power from the
among themselves in the order of priority of
judgments,
Without
dates of the instruments and of the
respectively.
'Art. 2142, NCC.
'Art. 2143, ibid.
873
874
REVIEWER ON CVIL LAW
QUASI-CONTRACTS 875

Tf in fact the
continue the same until the termination of the by the ownermanager has been tacitly
and its incidents, or to require the person concerned affair applies; -in which casethe lawautonhagency
orized
to substitute him, if the owner is in aa position to do (3) If there is a
(1977 Bar). so contract;
AY If the act
a) Solidary Liability of Two or More
Officmore
ious involved is unlawful;
Manager. The responsibility of two or If there is no unjust
officious managers shall be solidary. enrichment.
Exception: when the management was assumed
1.02. OBLIGATIONS
(1992 Bar).
OF THE OFFICIOUS MANAGER
to save the thing or businss from imminent
danger. (1) To continue the management until the
b)
termination of the affair and its incidents:
Distinguished from Agency. (1) Agency is
a contract while negotiorum gestio is a quasi (i) He can ask the owner to substitute him ån
contract; (2) Consent of the parties is present less the owner is notyetin aposition to do
8
in agency while the same is not present in So;
negotiorum gestio; (3) There is necessity for the (2) To perform his duties with all the diligence ofa
exercise of management of the property or good father of afamily (1959 Bar);
business becau_e is negleçted or abandoned in
negotiorum gestio while therenoneed for such (3) To pay the damages which through his faultof
the owner
or negligence may be suffered bymanagement;"
necessity in agency (1962 and 1963 Bar). property or business under
the
1.01.01. Requisites (1952 Bar): delegate if the
(4) To be liable for the acts of the another person
(1) A person takes charge of the business ofis officious manager delegates to
another; all or soOme of his duties;
fortuitous
(2)-Aproperty or business was neglected or for damages caused by
(5) To be liable cases(See 1.03 below);
abandoned; event in exceptional
Contractswhichhehas
personallyliableforpersons,
(3) There is no agreement or authority given, (6) Tobe eventhough he
with third
expressly or impliedly by the owner; and entered into (See 1.04below
in the name oftheowner
(4) The officious manager voluntarily took acted
charge of the property. for exceptions).
1.01.02. When there is NO Negotiorum Gestio. This juridical
relation does not arise in either of these instances:
When the property or business is not neglected
or abandoned;
Art. 2144, NCC.
71bid.
Art. 2144, NCC. 81bid.
*Art. 2146, ibid. 'Art. 2145, ibid.
Art. 2144, ibid.; Arts. 1317, 1493(1) and 1404 of the New Civil Code appies. °Art. 2145, ibid.
876
REVIEWER ON CIVIL LAW QUASI-CONTRACTS 877

(1) be liable for

1.03.
LIABILITY FOR FORTUITQUS EVENT.
The
interest; obligations incurred in his
officious manager shall be (iable)for any
event (1993 Bar):1 tortuitous (2) reimburse the
necessary and usefuloffiexpenses;,
cious manager for the
(1) If he undertakes risky perations which and
OWner was hotaccustomed te-embarkt (3) reimburse the officious
damages which the latter maymanager for the
(2) Ifhe has preferred his owninterest to.that offhe the performance of his duties. have suffered in
owner;
1.05.01. Requirement of Liability. The owner shall ONLY be
(3) Ifhe fails to retunthe propertyor business after 13able for the
demand by the owner; above-enumerated
and damages only if: interests, expenses
(4) If he assumed the managementin bad faith; (1) The owner enjoys the benefits or
(5) If he is manifestly. unfit tocarry on the his property or business:" or
advantages of
management Exception: when the (2) When the management had for its purpo_e the
managemenit was assumed to save property or preventiÍn of an imminent and manifest loss,
business from imminent darnger;
although no benefit may have been derived?" or
(6) If by his intervention he prevented (3) Even though the owner did not derive any
more competent person from taking-up benefit and there has been no imminent and
the management Exception: when the
management was assumed to save property or manifest danger to the property or business,
business from imminent danger. the owner is liable provided the following
requisites are present:s
1.04. LIABILTY FOR CONTRACTS. The officious in good
manager is personally liable for contracts which he The officious manager has acted
has entered into with third persons, kyen thougb he faith, and
acted in the name of the owner. There shall be no business is intact, ready to
right of action between the owner and third persons. () The propertytoorthe owner.
be returned
rati
1.04.01. EXCEPTIONS, -The officious manager shall NOD RATIELCATION BY OWNER. The
106. EFFECT OF the owner of the busi
BE LIABLEif: management by
ication of the EXPRESSAGENCY,
(1) I the owner has expressly or tacitly ratifiedthe produces the effectsof an beensuccessful.
ness businessmáyhot háve
managemnent, or) even ifthe management is extin
(2) When the contract refers to things pertaining to EXTINGUISHMENT. The
107.
the owner of the business. guished:"
105.
OBLIGATIONS OF THE OWNER. The owner or ie
property or business shall (1992 Bar):12
13Supra.
14Jbid.
11Arts. 2147 and 2148, NCC. Art, 2151, ibid.
12Art. 2150, NCC. Art. 2149, NCC.
"Art. 2153, ibid.
 878 REVIEWER ON CIVIL LAW
QUASI-CONTRACTS 879
he from
(1) When the owner
repudiates 1t or puts an end the whomwasthe return is
thereto; delivery_
other just cause made bu clofaimed may orprove that
(2) When the officious manager withdraws liberality for any
the management;
(3) By the death, civil interdiction,
from r2.02. cOLIDARY
payees, LIABILITY,
more The
there has responsibility of two or
when
is noy due, is solidary2 been payment of what
insolvency oftheowner or the officious insanity or
SOLUTIO INDEBITI. It is a quasi-contract that manager. 203.
OBLIGATIONS OF PAYEE.
something is received when there is no right to demandarises
it
it was unduly delivered through mistake, the
it a a) Return. The payee must return the
return it arises8 (1977 Bar). obligation to delivered to the owner or athird person; thing
b) Interest. If the payee
a) Requisites. The following must be accepts payment in bad)
faith he shall pay legal interest if a
present for
the obligation to refurn, to arise based money is involved, (orshall be liable forsum of
on this fruits
quasi-contract (1952, 1980, and 2012 Bar): received or which should have been received if
(1) There is delivery to a payee; the thing produces fruits.
(2) The payee has no right to denmand what Loss and Impairment.
was delivered; and (1) IE the Payee is in bad fajth he shall
(3) The delivery was through mistake. furthermore be answerable for any loss
b) This can be distinguished from Article 22 or impairment of the thing rom any
(which iustifies an accion in rem verso) because case, and for damagesto the person who
in Artice 22, there is ho heed for delivery delivered thething, nt] it is recovered."
by he shall
mistake, 19 (2) If the Payee is in good faith
only be responsible for the impairment
Difficult Question of Law. Payment by reason or loss of same or its accessories and
the
ofa mistakein the construction or application of thereby been
accessions insofar as he has it. he shall
a doubtful or difficult question of law may come
benefited. If he has alienatedthe action to
within the scope of solutio indebiti.» return the price ar
assign
d) There is solutio indebiti if there is no agreement callect thesum.
Article 2161 provides
as to interest but the debtor mistakenly paid the NOTE: reimbursement for
interest. the
that as regards expenses incurred by
2.01. PRESUMPTION, It is presumed that there was a improvements and the thing, the
undulyreceived
mistake in the payment if something which had never him who
been due or had already been paid was delivered; Du
18Art. 2154, Supra. 2Art, 2163, NCC.
19See
Law, 1984 Ed.,Aquino, Torts and Damages, 20133 Ed., p. 852 2Art. 2157, ibid.
p. 73. citing. Jurado, Personal and Family BArt. 2159, ibid.
"Art. 2155, NCC.
24[bid.
25Art. 2160, ibid.
 REVIEWER ON CIVIL LAW
880
QUASI-CONTRACTS 881

provisions of Possession child under 18 years of

Title Vof Book II, Property,shall goyern191(seeof
see page Support him» age unjustly
this work). (4) refuses to
PROPERTY OF THIRD PERSONS. The
Medical
or other Expenses. When through an accident
2.04.
property cause a person is injured or
or money delivered may belong to a person seriously or becomes
ill,
with he is not in and he is treated
to givehelped
whom the payee has an existing contractual while
or it may belong to a third person. If the relation contract,
a
condition
he shallbe liable to pay consent to a
propertyH
or money delivered belongs to third person
payee must advi_e the third person of the payment
of the
physician or other personfor theaidingservices
utes the him,
by mistake and the third person MUST CLAIM the service has been rendered out of pure
generosity" (1964 Bar).
money or property within one month otherwise (5) Property Saved During Calamity.
the payee is ho Jonger responsible for the return a fire, flood, storm, or other When during
thereof.*
is saved from destruction bycalamity, property
another
EXAMPLES OF INNOMINATE QUASI-CONTRACTS. withoub the knowledge of the owner, theperson
latter
is bound to pay the former ust compensation."
(1) Support by Stranger. When, without _the
knowledge of the person obliged ta give (6) Non-Compliance with Health or Safety Regu
support, it is given by astranger, the latter shall lation. When the government, upon the failure
have a right to claim the same from the former, of ány person to comply with health or _afety
unless it appears that he gave it out of pietyand regulations concerming property, undertakes to
without intention of being repaid." do the necessary work, even over his objection
he shall be liable to pay theexnenses.z
(2) Funeral Expenses. When funeral expenses are When in a small
borne by a third person, without the knowledge (7) Loss Prevention Measures. inhabitants of
of those relatives who were obliged to give community, a nationality of the
for protection against
Support to the deceased, said relatives shall age decide upon ameasurestorn or other calamity,
reimburse the third person, should the latter lawlessness, fire, lood, nlan and ref:sses to
claim reimbursement. 7 any one who objects to thebut is(enefitedby
contribute to thÇexpenss liable to pay his
(3) Support to Orphans and the like. When the executedshallbe
the project as
person obliged to support an orphan, or an share of said expenses is
insane or other indigent person unjustly refuses Any person who
of Taxes. taxes
to give support to the latter, any third person Payment of anothershall be
(8) Constrained to pay the latter*
m¡y furnish Support to the needy individual, reimbursementfromthe
with right of reimbursement from the perso entitled to
obliged to give Support. The provisions of this
article apply when the father or mother of a Art, 2166, NCC.
26Arts. 2158 and 1984, NCC.
30Art, 2167, ibid.
Art. 2164, ibid. SArt. 2168, ibid.
2BArt. 2165, ibid. 2Art. 2169, ibid.
Art. 2174, ibid.
Art. 2175, ibid.
882 REVIEWER ON CIVIL LAW
QUASI-CONTRACTs 883

Mis
tA2hojustified
(a)
Payment of Interest. There is of the Newin forfeiting the
A:
(9)
the borrower pays interest when there
solutio indebit it insst amount of P112,500. Article
Civil Code applies
(no stipulationntherefor thinking that the
has been ko the enrichment "when a under which there is
loss of another, or persona unjustly retains
is due.* interest property of when person retains money a benefit
iustice, equityanother against the
and good conscience.fundament
or
al priofncispecific
In the absence ples of
PROBLEMS:

terms and conditions

hetween the AL and governinga the car plan arrangement
() DPOwent to a store to buy a pack ot cigarettes worth P225 only, He TWAs created between MCorp., auasi-contractual relatioD
them. Consequent
gave the vendor, RRA, a P500-peso bill. The vendor gave hi th AL for the uselyof, itsCorp.
enrich itself by charging M may not
pack plus P375 change. What would be DPOsduty, if any. in can
of an excess in the amount of change given by the vendor? Explain
is otherwise
absolutelyl necessary to the fullvehicle which
and effective
promotion of itsbusiness. may under the claim that
It
A: DPOhas an gbligatien to retum the amount of P100. This is a case AL's payments Constitute rents fornot,
the use
of Solutioindehiti Article 2154 of the New Civil Code provides that vehicle, refuse to refund what petitioner hadof the company
paid, for the
if something is received when there is no right to demand it. and reasons that the car plan did not carry such a condition; the
was unduly delivered through mistake, the obligation to return y subject vehicle is an old car that is substantially. if not fully,
arises. In the present case, the dhange should have been P275 depreciated; the car plaF arrangement benefited MCorp., for
instead of P375, hence, there was mistake in the delivery of P10. the most part; and any personal benefit obtained by AL.from
DPO has the obligation to return the amount of P100. using the vehicle was merely incidental.
In February 2004, M Corp., a company engaged in food (b) Conversely, AL cannot recover the monetary value of M
manufacturing and meat processing hired AL as Regional Corp.'sRQunterpart contribution to the cost of the vehicle;
Sales Manager to oversee M Corp.'s National Capital Region that isnot þroperty or money that belongs to him, nor wasIn
it intended to be given to him in lien of
the car plan.
Supermarket/Food Service and South Luzon operations. In cost was not
addition to a compensation and benefit package, AL was given other words, M Corp.'s share of the vehicle'sstart with, the
package. To
a car plan, under which one-half of the cost of the vehicle is to part of petitioner's compensation Corp. Just as MCorp.
be paid by thecompany and the other half to be deducted from vehicle is an asset that belonged to M payments, so
A's salary. AL availed of the car plan and paid for his 50% share by failing to refund AL'sCorp's COunter
is unjustly enrichedawarded
hot be the value of M
through salary deductions of P5,000 each month. Subsequently, AL should AL would unjustly
contribution to the car plan, as this . Mekeni Food
resigned and by then, a total of P112,500 had been deducted from part Corp's expense. (Locsin lI
his monthly salary and applied as part of the employee's share enrich him at M December9, 2013)
in the car plan. AL offered to purchase the car but they could not Corp., G.R. No. 192105,
agree on the terms of the proposed purchase. Hence, AL returned
the vehicle to MCorp. but the latter refused to return the P112,500
deducted and considered the same as rentals. AL however argued
that there is no stipulation in the agreement that if AL failed to
completely cover one-half of the cost of the vehicle, then all the
deductions from his salary going to the cost of the vehicle will be
treated as rentals for his use thereof while working with MOrp
and shall not be refunded. AL believes that he is even entitied
the amount equivalent to the balance of the price of the car that was
shouldered by MCorp. Is MCorporation justified in (a foreo
the amount ofPi12,500 as rentalsand (bYin not paying the balarnce
of the value of the car?

35Art. 1960, NCC.