Sidley and Sol were married with one (1) daughter, Solenn. Sedfrey and Sonia were another couple with one son, Sonny. Sol and Sedfrey both perished in the same plane accident. Sidley and Sonia met when the families of those who died sued the airlines and went through grief counseling sessions. Years later, Sidley and Sonia got married. At that time, Solenn was four (4) years old and Sonny was 5 years old. These two (2) were then brought up in the same household. Fifteen (15) years later, Solenn and Sonny developed romantic feelings towards each other, and eventually eloped. On their own and against their parents’ wishes, they procured a marriage license and got married in church.
(a) Is the marriage of Solenn and Sonny valid, voidable, or void? (2.5%)
The marriage is voidable for lack of parental consent. At the time of their marriage, Solenn and Sonny were only 19 and 20 years old, respectively. Assuming their marriage was under the Family Code, Article 14 provides that parental consent is required where either or both of the parties are between 18 and 21 years old at the time of marriage. In the absence of such parental consent, Article 45 of the Family Code provides that the marriage is voidable. Since the marriage was against their parents’ wishes, their marriage is void able. Unlike in the Civil Code, their being step-siblings is immaterial under the Family Code and will not render the marriage void since such is not considered incestuous nor against public policy.
(b) If the marriage is defective, can the marriage be ratified by free cohabitation of the parties? (2.5%)
Yes, it can be ratified by free cohabitation. Article 45(1) of the Fam ily Code provides that such voidable marriage may be ratified by free cohabitation of the party/ies over 18 years old but below 21 who married without the consent of his/her parents, by living together as husband and wife after attaining the age of 21.
Here, Solenn and Sonny freely cohabitated and lived as husband and wife after attaining 21 years; thus, the marriage is considered ratified, provided that the parents have not filed an action for annulment before the parties reached 21 years old.
After finding out that his girlfriend Sandy was four months pregnant, Sancho married Sandy. Both were single and had never been in any seri ous relationship in the past. Prior to the marriage, they agreed in a marriage settlement that the regime of conjugal partnership of gains shall govern their property relations during marriage. Shortly after the marriage, their daughter, Shalimar, was born.
Before they met and got married, Sancho purchased a parcel of land on installment, under a Contract of Sale, with the full purchase price payable in equal annual amortizations over a period of ten (10) years, with no down payment, and secured by a mortgage on the land. The full purchase price was PhP1 million, with interest at the rate of 6% per annum. After paying the fourth (4th) annual installment, Sancho and Sandy got married, and Sancho completed the payments in the subsequent years from his salary as an accountant. The previous payments were also paid out of his salary.
During their marriage, Sandy also won PhP 1 million in the lottery and used it to purchase jewelry. When things didn’t work out for the couple, they filed an action for declaration of nullity of their marriage based on the psychological incapacity of both of them. When the petition was granted, the parcel of land and the jewelry bought by Sandy were found to be the only properties of the couple.
(a) What is the filiation status of Shalimar? (2.5%)
(a) Shalimar is a legitimate child. Children conceived or born before the judgment of absolute nullity of the marriage because of psychological incapacity under Article 36 has become final and executory shall be con sidered legitimate (Article 54, Family Code). Since Shalimar was born before the judgment granting the petition for declaration of absolute nul lity of marriage of Sancho and Sandy under Art. 36 became final and executory, Shalimar is a legitimate child.
It was not established that Sandy cared for or maintained the family; hence, she should not be deemed to have contributed to the acquisition of the parcel of land. The jewelry was acquired by Sandy using her lottery winnings which she obtained not by work or industry but by chance.
(b) What system of property relationship will be liquidated following the declaration of nullity of their marriage? (2.5%)
(b) The property regime that will be liquidated is co-ownership un der Article 147 of the Family Code. When a man and a woman who are capacitated to marry each other live exclusively with each other as hus band and wife under a void marriage, their wages and salaries shall be owned by them in equal shares and the property acquired by both of them through their work or industry shall be governed by the rules on co-own ership (Article 147, Family Code). Sancho and Sandy were capacitated to marry each other; however, their marriage was declared void under Article 36.
(c) In the liquidation, who should get the parcel of land? The jewelry? (2.5%)
(c) Sancho should get the parcel of land while Sandy should get the Jewelry. According to Article 147 of the Family Code, property acquired through their work or industry by a man and a woman, who are capacitated to marry each other and who cohabited under a void marriage, shall be governed by rules on co-ownership and in the absence of proof to the contrary, properties acquired while they live together shall be presumed to have been obtained by their joint efforts, work or industry. In the given ease, Sancho bought the parcel of land and paid for it using his salary while Sandy used her winnings from the lottery to purchase the jewelry.
(d) Is Shalimar entitled to payment of presumptive legitime? If yes, how much should be her share and from where should this be taken? (2.5%)
No, Shalimar is not entitled to presumptive legitime. The liquidation of the co-ownership under Article 147 did not provide for the obligation to pay the presumptive legitime of the common children. Said obligation applies only to the liquidation of the absolute community or conjugal partnership of gains pursuant to Articles 50 and 51 of the Family Code, which provisions are inapplicable to a void marriage under Article 36 of the Family Code. The rules on co-ownership apply and the properties of the parties should be liquidated in accordance with the Civil Code provisions on co-ownership (Diñox Diño, G.R. No. 178044, Janu ary 19, 2011; Valdez w RTC, G.R. No. 122749, January 31, 1996).
Silverio was a woman trapped in a man’s body. He was born male and his birth certificate indicated his gender as male, and his name as Silverio Stalon. When he reached the age of 21, he had a sex reassignment surgery in Bangkok, and, from then on, he lived as a female. On the basis of his sex reas signment, he filed an action to have his first name changed to Shelley, and his gender, to female. While he was following up his case with the Regional Trial Court of Manila, he met Sharon Ston, who also filed a similar action to change her first name to Shariff, and her gender, from female to male.
Sharon was registered as a female upon birth. While growing up, she developed male characteristics and was diagnosed to have congenital adrenal hyperplasia (“CAH”) which is a condition where a person possesses both male and female characteristics. At puberty, tests revealed that her ovarian struc tures had greatly minimized, and she had no breast or menstrual development Alleging that for all intents and appearances, as well as mind and emotion, she had become a male, she prayed that her birth certificate be corrected such that her gender should be changed from female to male, and that her first name should be changed from Sharon to Shariff.
Silverio and Sharon fell in love and decided to marry. Realizing that their marriage will be frowned upon in the Philippines, they travelled to Las Vegas, USA where they got married based on the law of the place of celebration of the marriage. They, however, kept their Philippine citizenship.
(a) Is there any legal basis for the court to approve Silverio’s petition for correction of entries in his birth certificate? (2.5%)
No, there is no legal basis for the court to approve Silverio’s petition. At settled in the case of Silverio v. Republic (G.R. No. 174689, October 22, 2007), our laws do not sanction change of name and correction of entry in the civil register as to sex on the ground of sex reassignment. Sex reas signment is not one of the grounds for which change of first name may be allowed under Republic Act No. 9048. The petition for correction of entry as to sex of the birth certificate of Silverio cannot prosper, because the said document contained no error and it cannot be corrected. Silverio was born a male. The sex of a person is determined at birth. Considering that there is no law legally recognizing sex reassignment, the determina tion of a person’s sex made at the time of his or her birth, if not attended by error, is immutable.
(b) Will your answer be the same in the case of Sharon’s petition? (2.5%)
(b) No, my answer will not be the same. In the case of Republic v. Cagandahan (G.R. 166676, September 12, 2008), the Supreme Court held that where the person is biologically or naturally intersex the determining factor in his gender classification would be what the individual, having reached the age of majority, with good reason thinks of his/her sex. Sha ron is considered an intersex, because he has CAH, which means that she has the biological characteristics of both male and female. Based on that case, Sharon’s petition should be granted since he has simply let nature take its course and has not taken unnatural steps to arrest or interfere with what he was born with. The change of name should also be granted considering that it merely recognizes Sharon’s preferred gender.
(c) Can the marriage of Silverio (Shelley) and Sharon (Shariff) be legally recognized as valid in the Philippines? (2.5%)
No, it cannot be legally recognized as valid. Laws relating to the status, condition and legal capacity of persons are binding upon citizens of the Philippines even though living abroad (Article 15, Civil Code). One of the requisites of a marriage is that the contracting parties must be a male and a female (Article 2, Family Code). Since Silverio and Sharon are Filipino citizens their status, condition and legal capacity is determined by Philippine law, their marriage abroad is not a valid marriage under Philippine law, because both contracting parties are males.
Yes, the marriage can be legally recognized in the Philippines. Since Silverio is male and Sharon is also male, they cannot be legally married in the Philippines; however, they got married in a place outside the Phil ippines where same-sex marriages are allowed. Under Article 26 of the Family Code, marriages solem nized outside the Philippines and consid ered valid there should also be considered valid here, except for specific exceptions. Being of the same gender is not one of the exceptions, so the marriage should be considered valid.
ANOTHER ALTERNATIVE ANSWER:
Yes. If Silverio and Sharon used their original birth certificates–one showing that one is registered male and one showing that the other is registered female, then the marriage may be a valid marriage under Philippine law.
Severino died intestate, survived by his wife Saturnina, and legitimate children Soler, Sulpicio, Segundo, and the twins Sandro and Sandra. At the time of his death, the twins were only 11 years of age, while all the older children were of age. He left only one property: a 5,000 sq. m. parcel of land. After his death, the older siblings Soler, Sulpicio, and Segundo sold the land in Dr. Santos for PhP500,000 with a right to repurchase, at the same price, within five (5) years from the date of the sale. The deed of sale was signed only by the three (3) older siblings and covered the entire property. Before the five (5) years expired, Soler, and Sulpicio tendered their respective shares of PhP166,666 each to redeem the property. Since Segundo did not have the means because he was still unemployed, Saturnina paid the remaining PHP 166,666 to redeem the property. After the property was redeemed from Dr. Santos, the three (3) older children and Saturnina, for herself and on behalf of the twins who were still minors, sold the property to Dr. Sazon, in an abso lute sale, for PhP1 million. In representing the twins, Saturnina relied on the fact that she was the natural guardian of her minor children.
(a) Was the first sale to Dr. Santos, and the subsequent repurchase, valid? (2.5%)
(a) Yes, the sale is valid but only with respect to the shares pertaining to Soler, Sulpicio, and Segundo. Upon Severino’s death, his heirs became the co-owners of the only property he left since the rights to the succession are transmitted from the moment of the death of the decedent (Art. 777, Civil Code). In a co-ownership, each co-owner may alienate his part but the effect of the alienation with respect to the co-owners shall be limited to the portion which may be allotted to the co-owner who alienated his share (Article 493, Civil Code). The repurchase by Soler and Sulpicio was valid up to their respective shares. The repurchase of Segundo’s share did not make Saturnina the owner of the share redeemed although she is entitled to reimbursement.
(b) Was the second sale to Dr. Sazon valid? May the twins redeem their share after they reach the age of majority? (2.5%)
(b) The second sale was valid only as to the aliquot shares of Saturnina and of the three older siblings. Under Article 225 of the Family Code, the father and the mother shall jointly exercise legal guardianship over the property of the unemancipated common child without the necessity of a court appointment. This guardianship, however, only extends to pow ers of administration over the property of the child, and does not include the power to alienate, which is an act of strict dominion. Saturnina had no authority to sell the twins’ property, and the sale to that extent is unenforceable. Since it is already unenforceable, the twins do not need to redeem the property upon reaching the age of majority.
(b) The second sale is valid as to Saturnina and the other siblings, but as to the twins the sale is invalid and the twins are allowed to recover or demand the reconveyance of their share in the property.
Sol Soldivino, widow, passed away, leaving two (2) legitimate children: a 25-year old son, Santino (whom she had not spoken to for five (5) years prior to her death since he attempted to kill her at that time), and a 20-year old daughter, Sara. She left an estate worth PhP 8 million and a will which contained only one provision: that Php1 million should be given to the priest who officiated at my wedding to my children’s late father.” Sara, together with two (2) of her friends, acted as an attesting witness to the will.
On the assumption that the will is admitted for probate and that there are no debts, divide the estate and indicate the heirs/legatees entitled to inherit, the amount that each of them will inherit, and where (i.e., legitime/free portion/ Intestate share) their shares should be charged. (5%)
Santino and Sara are entitled to P3.5 Million each while the priest who officiated at the wedding of Sol to her children’s father is entitled to receive P1 Million as legacy from the free portion of the Sol’s estate. 2 Million out of the 3.5 Million comes from their legitime, while the remaining 1.5 Million Is from the free portion.
Santino is not disqualified to inherit from her mother, because an attempt against the life of the decedent is a cause for unworthiness of an heir only if there is a final judgment of conviction (Article 1032, Civil Code). The given facts do not mention that Santino was convicted of an attempt against the life of Sol.
Sara is also capacitated to inherit from Sol. The statement found in Article 1027 of the Civil Code that an attesting witness to the execution of a will shall be incapable of succeeding is qualified by Article 823, Civil Code, which provides that the devise or legacy in favor of a person who is an attesting witness to the execution to the will shall be void. Sara is not a devisee or legatee under Sol’s will. She is an intestate and compulsory heir.
The priest is also capable of succeeding as a legatee, because un der Article 1027, Civil Code only the priest who heard the confession of the testator during his last illness and his relatives within the fourth degree and the church to which he belongs are disqualified from in heriting from the decedent by will. The priest only officiated at the wedding of the decedent.
Sammy and Santi are cousins who separately inherited two (2) adjoining lots from their grandfather. Sammy is based overseas but wants to earn income from his inherited land, so he asked a local contractor to build a row of apartments on his property which he could rent out. The contrac tor sent him the plans and Sammy noticed that the construction encroached on a part of Santi’s land but he said nothing and gave approval to construct based on the plans submitted by the local contractor. Santi, based locally, and who loved his cousin dearly, did not object even if he knew of the encroachment since he was privy to the plans and visited the property regularly. Later, the cousins had a falling out and Santi demanded that the portion of the apartments that encroached on his land be demolished.
Can Santi successfully file legal action to require the demolition? (5%)
No, Santi cannot successfully file a legal action to require the demoli tion. Since the builder and the landowner both acted in bad faith, their rights shall be the same as though both had acted in good faith (Article 453, Civil Code). Sammy was not a builder in good faith with respect to the portion of the apartment encroaching on Santi’s property, because he knew that he was not the owner of the land when he built the apartment. There was bad faith, likewise, on Santi’s part, because he did not object to the construction although he had knowledge thereof (Article 453, Civil Code).
In cases where both the landowner and the builder acted in good faith, the landowner does not have the option to demand the demolition of the work (Article 448, Civil Code).
Sydney, during her lifetime, was a successful lawyer. By her own choice, she remained unmarried and devoted all her time to taking care of her nephew and two (2) nieces: Socrates, Saffinia, and Sophia. She wrote a will giving all her properties remaining upon her death to the three (3) of them. The will was admitted to probate during her lifetime. Later, she decided to make a new will giving all her remaining properties only to the two (2) girls, Saffinia and Sophia. She then tore up the previously probated will. The second will was presented for probate only after her death. However, the probate court found the second will to be void for failure to comply with formal requirements.
(a) Will the doctrine of dependent relative revocation apply? (2.5%)
(a) No, the said doctrine will not apply.
In the case of Molo v. Molo (G.R. No. L-2538, September 21, 1951), the court stated that the doctrine of relative revocation is a rule where revocation of the old will is a suspensive condition or depends upon the efficacy of the new disposition, and if the new will intended as a substitute is inoperative, the revocation fails and the original will remains in force. This was applied based on the fact that the original will appeared to be lost; hence, the second will was executed with a revocatory clause, but in both instances, the wife was instituted as the universal heir.
In this case, however, the revocation of the original was not through the execution of a subsequent will with a revocatory clause, but through destruction with intent to do so. It does not appear either that the revocation of the old will operates as a suspensive condition to the efficacy of the subsequent will, because the testator revoked the 1″ original will, as she did not wish to institute the same heirs, unlike in Molo v. Molo where the wife was the heir in both wills.
(a) Yes, because the act of destroying the previous will is connected with the making of the new will raising a presumption that the testator meant the revocation of the previous will dependent upon the efficacy of the new will. This is the doctrine of dependent relative revocation. Here, the revocation is conditional and dependent upon the efficacy of the new will. Since the new will in this case turns out to be void for failure to com ply with formal requirements, the previous will is not considered revoked [Tolentino III, Civil Code of the Philippines, 1990 ed., p. 145).
(b) Will your answer be the same if the second will was found to be valid but both Saffinia and Sophia renounced their inheritance? (2.5%)
Yes, the usufruct will continue after the house was burned. If the usufruct is constituted on immovable property of which a building forms part, and the latter should be destroyed in any manner whatsoever, the usufructuary shall have a right to make use of the land and the materials (Article 607, Civil Code). The usufruct over the land and the materials continues. The thing was lost only in part, the right continues on the re maining parts (Article 604, Civil Code).
Sofronio was a married father of two when he had a brief fling with Sa brina, resulting in her pregnancy and the birth of their son Sinforoso. Though his wife knew nothing of the affair, Sofronio regretted it, but secretly provided child support for Sinforoso. Unfortunately, when Sinforoso was 10 years old, Sofronio died. Only Sofronio’s father, Salumbides, knew of Sabrina and Sin foroso. For the purpose of providing support to Sinforoso, Salumbides gave Sabrina usufructruary rights over one of his properties – a house and lot – to last until Sinforoso reached the age of majority. Sabrina was given possession of the property on the basis of caucion juratoria. Two (2) years after the creation of the usufruct, the house accidentally burned down, and three (3) years thereafter, Sinforoso died before he could reach the age of 18.
Will the usufruct continue after the house has burned down? If yes, will it continue after Sinforoso’s death? (2.5 %)
(b) Yes, my answer will be the same. The doctrine of dependent rela tive revocation does not apply where the the new will is rendered ineffec tive due to the renunciation of the heirs instituted therein. Renunciation has nothing to do with the validity of the will, but only pertains to whether or not the heirs accept their share in the inheritance. Since the new will is still valid, the doctrine does not apply (Article 832, Civil Code).
No, it will be extinguished after Sinforoso’s death. A usufruct grant ed for the time that may elapse before a third person attains a certain age, shall subsist for the number of years specified, even if the third per son should die before the period expires, unless such usufruct has been expressly granted only in consideration of the existence of such person or contrary intention clearly appears (Article 603, 606, Civil Code). The cir cumstances given show that the usufruct was established by Salum bides in consideration of the existence of Sinfroso. It was meant for his support; hence, his death extinguished the usufruct even though he died before reaching the age of majority.
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Newlyweds Sam and Sienna had contracted with Sangria Hotel for their wedding reception. The couple was so unhappy with the service, claiming, among other things, that there was an unreasonable delay in the service of din ner and that certain items promised were unavailable. The hotel claimed that, while there was a delay in the service of the meals, the same was occasioned by the sudden increase of guests to 450 from the guaranteed expected number of 350, as stated in the Banquet and Meeting Services Contract. In the action for damages for breach of contract instituted by the couple, they claimed that the Banquet and Meeting Services Contract was a contract of adhesion since they only provided the number of guests and chose the menu. On the other hand, the hotel’s defense was that the proximate cause of the complainant’s injury was the unexpected increase in their guests, and this was what set the chain of events that resulted in the alleged inconveniences.
(a) Does the doctrine of proximate cause apply in this case? (2.5%)
(a) No, the doctrine does not apply. In the case of Spouses Guanio v. Makati Shangri-la Hotel (G.R. No. 190601, September 7, 2011), the doctrine of proximate cause, was made applicable only in actions for quasi-delicts, not in actions involving breach of contract. The doctrine is a device for imputing liability to a person where there is no relation between him and another party. Where, however, there is a pre-existing contractual relation between the parties, it is the parties themselves who make the law between them.
Here, there is a contract; the terms and conditions of such contract will govern the rights and obligations between the contracting parties in case of breach thereof, not the doctrine of proximate cause.
(b) Was the Banquet and Meeting Services Contract a contract of adheSion? If yes, is the contract void? (2.5%)
(b) Yes, it is a contract of adhesion, but the same is not void.
A contract of adhesion is defined as one in which one of the parties imposes a ready-made form of contract, which the other party may ac eept or reject, but which the latter cannot modify. Here, the contract is ready-made by Sangria, as the spouses only chose the menu and provided the number of guests but they cannot modify the terms thereof; hence, a contract of adhesion.
Although a contract of adhesion, it is not entirely against the law and is as binding is ordinary contracts, the reason being that the party who adheres to the contract is free to reject it entirely, but the effect, as ruled in Orient Air v. CA (G.R. No. 76931, May 29, 1991), is that in case of am biguity it is construed against the party who caused it to be drafted and could have avoided it by the exercise of a little more care.
Sinclair and Steffi had an illicit relationship while Sinclair was married to another. The relationship produced a daughter Sabina, who grew up with her mother. For the most part of Sabina’s youth, Steffi spent for her support and education. When Sabina was 21 years old, Sinclair’s wife of many years died. Sinclair and Steffi lost no time in legitimizing their relationship. A ter the 40-day prayers for Sinclair’s late wife, Sinclair and Steffi got married without a marriage license, claiming that they had been cohabiting for the last 20 years.
After graduating from college, Sabina decided to enroll in law school. Sinclair said that he was not willing to pay for her school fees since she was no longer a minor. Sinclair claimed that if Sabina wanted to be a lawyer, she had to work and spend for her law education.
(a) What is Sabina’s filiation status? (2.5%)
(a) Sabina is an illegitimate child of Sinclair and Steffi because she was conceived and born outside a valid marriage (Article 165, Family Code). She was not legitimated by the subsequent marriage between Sin clair and Steffi. Only children conceived and born outside of wedlock of parents who, at the time of conception of the former, were not disquali fied by any impediment to marry each other may be legitimated (Art. 177, Family Code). At the time of Sabina’s conception, her parents were disqualified by an impediment to marry each other, because Sinclair was married to someone else.
(b) Is Sinclair legally required to finance Sabina’s law education? (2.5%)
(b) Yes, he is legally required to finance Sabina’s education. Support comprises everything indispensable for education among other things in keeping with the financial capacity of the family. The education of the person entitled to be supported shall include his schooling or training for nome profession even beyond the age of majority (Art. 194, Family Code). l’arents and their illegitimate children are obliged to support each other (Article 195, Family Code). Considering the foregoing rules, Sinclair is enjoined by law to finance Sabrina’s law education even beyond the age of majority.
Samantha sold all her business interest in a sole proprietorship to Ser gio for the amount of PhP 1 million. Under the sale agreement, Samantha was supposed to pay for all prior unpaid utility bills incurred by the sole proprietorship. A month after the Contract to Sell was executed, Samantha still had not paid the PhP 50,000 electricity bills incurred prior to the sale. Since Sergio could not operate the business without electricity and the utility company refused to restore electricity services unless the unpaid bills were settled in full, Sergio had to pay the unpaid electricity bills. When the date for payment arrived, Sergio only tendered PhP 950,000 representing the full purchase price, less the amount he paid for the unpaid utility bills. Samantha refused to accept the tender on the ground that she was the one supposed to pay the bills and Sergio did not have authorization to pay on her behalf.
(a) What is the effect of payment made by Sergio without the knowledge and consent of Samantha? (2.5%)
(a) The payment by Sergio resulted in the extinguishment of the obligation of Samantha to the utility company and Sergio was legally subrogated to the utility company’s credit. Sergio, thus, became Samantha’s new creditor.
Under Article 1302 (3), Civil Code, it is presumed that there is legal subrogation when, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latter’s share. A person interested in the fulfillment is one who will benefit from the extinguishment of the obligation.
Here, Sergio is an interested person since he was the business successor-in-interest of Samantha and he could not conduct his busi ness without paying the debt of Samantha. Since there is legal sub rogation, Sergio stepped into the shoes of the utility company as the new creditor to the P50,000 credit; thus there can be valid partially legal compensation of the two credits between him and Samantha who are principally debtor and creditor of each other up to the con current amount of P50,000 (Art. 1279, NCC).
(b) Is Samantha guilty of mora accipiendi? (2.5%)
(b) Yes, Samantha is guilty of mora accipiendi.
The requisites for mora accipiendi are: (i) offer of performance by the debtor; (ii) offer must be to comply with prestation as it should be performed; and (iii) the creditor refuses to accept the performance without just cause.
Here, Sergio validly made an offer to comply with the prestation of payment, albeit for P950,000 only. Sergio’s offer is justified based on the concept of partial legal compensation up to the amount of P50,000, since Nergio and Samantha are in their own right principal debtor and creditor of each other. Samantha’s refusal is without just cause as she cannot be permitted to benefit or use as a defense her own failure to fulfill her part of the obligation to pay the electricity bills.
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QUESTIONS IN CIVIL LAW UP LAW COMPLEX
Saachi opened a savings bank account with Shanghainese Bank. He made an initial deposit of PhP100,000. Part of the bank opening forms that he was required to sign when he opened the account was a Holdout Agreement which provided that should he incur any liability or obligation to the bank, the bank shall have the right to immediately and automatically take over his sav ings account deposit. After he opened his deposit account, the Shanghainese Bank discovered a scam wherein the fund in the account of another depositor in the bank was withdrawn by an impostor. Shanghainese Bank suspected Saachi to be the impostor, and filed a criminal case of estafa against him. While the case was still pending with the Prosecutor’s office, the bank took over Saachi’s savings deposit on the basis of the Holdout Agreement.
(a) What kind of contract is created when a depositor opens a deposit account with a bank? (2.5%)
(a) A contract of simple loan is created when a depositor opens a deposit account with a bank. Fixed, savings and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan (Article 1980, Civil Code). The creditor is the depositor, while the debtor is the bank.
(b) In this case, did the bank have the right to take over Saachi’s bank deposit? (2.5%)
No, the bank did not have the right to take over Saachi’s bank deposit. In the case of Metropolitan Bank & Trust Co. v. Rosales (G.R. No. 183204, January 13, 2014), it was held that the “Hold Out” clause, which was similar to the Holdout Agreement in the instant case, can be invoked only if there was a valid and existing obligation arising from any of the sources of obligation enumerated in Article 1157 of the Civil Code, to wit: law, contracts, quasi-contracts, delict, and quasi- delict. The only possible source of obligation of Saachi to Shanghainese Bank based on the given facts is delict. As the criminal case filed by the bank against Saachi was still pending and no final judgment of conviction had been rendered, Saachi had no valid and existing obligation to the bank; thus, the bank had no right to take over the deposits of Saachi.
Sonny Inc., (SI) purchased several heavy machineries from Single Equipment Philippines, Inc. (SEP) for PhP 10 million, payable in 36 monthly installments. A chattel mortgage was constituted on the same machineries as security for the amount. As additional security, the President of SI, Stan Smith, mortgaged his personal house and lot. SI failed to pay the 16th and suc ceeding monthly installments. SEP then commenced a collection suit against SI, and in the course of the proceedings, a writ of attachment was issued against Si’s properties, including the mortgaged machineries. The attached properties were subsequently sold at public action, but the proceeds thereof were insufficient to satisfy the judgment credit.
(a) Can SEP legally recover the deficiency? (2.5%)
Yes, SEP can legally recover the deficiency. The prohibition against further collection under Article 1484 of the Civil Code, or the Recto Law, only applies if the seller chooses to foreclose the chattel mortgage and not when the seller opts to exact the fulfilment of the obligation (Tajanlangit Southern Motors, G.R. 10789, May 28, 1957). SEP chose to exact the fulfillment of the obligation by commencing a collection suit against SI. SEP did not opt to foreclose the chattel mortgage over the equipment. The machineries were sold in an execution sale and not in a foreclosure sale; hence, the prohibition against further collection does not apply.
(b) Instead of collecting the deficiency, can SEP commence extrajudicial proceedings to foreclose the mortgage on Stan’s house and lot in order to recover the deficiency? (2.5%)
Yes, SEP can commence extrajudicial proceedings to foreclose the mortgage. SEP may choose to foreclose the mortgage on Stan’s house and lot. What SEP is prohibited to do, based on the case of Cruz v. Filipinas Investment & Finance Corporation (G.R. No. L-24772, May 27, 1968), is to extrajudicially foreclose the mortgage after it has extrajudicially fore closed the chattel mortgage on the machineries sold on instalment, be cause if such is allowed, the protection given by Article 1484 would be indirectly subverted, and public policy overturned. In this case, SEP had not foreclosed the chattel mortgage over the machineries.