TOPIC: CONTRACTS; INEXISTENT AND ANNULABLE CONTRACTS

YEAR: 2004

QUESTION:

Distinguish briefly but clearly between Inexistent and annullable contracts.

SUGGESTED ANSWER:

Inexistent contracts are considered as not having been entered into and, therefore, void ab initio. They do not create any obligation and cannot be ratified or validated, as there is no agreement to ratify or validate. On the other hand, annullable of voidable contracts are valid until invalidated by the court or may be ratified. In inexistent contracts, one or more requisites of a valid contract are present except that the consent of one of the contracting parties was vitiated or one of them has no capacity to give consent.

LEGAL BASIS/ES: Article 1409, Civil Code

TOPIC: CONTRACTS; ALETORY CONTRACTS-GAMBLING

BAR EXAM YEAR: 2004

QUESTION:

Mr. YZ lost P100,000.000 in a card game called Russian poker, but he had no more cash to pay inful the winner at the time the session ended. He promised to pay PX, the winner, two weeks thereafter. But he failed to do so despite the lapse of two months, so PX filed in court a suit to collect the amount of P50,000.00 that he won but remained unpaid. With the collection suit against PX to recover the P100,000.00 that her husband lost? Reason. (5%)

SUGGESTED ANSWER:

The suit by PX to collect the balance of what he won from YZ will not prosper. Under Article 204 of the Civil Code, no action can be maintained by the winner of the collection of what he has won in a game of chance. Although poker may depend in part on ability, it is fundamentally a game of chance.

If the money paid by ZY to PX was conjugal or community property, the wife of ZY could sue to recover it because Article 117(7) of the Family Code provides that the losses in gambling or betting are borne exclusively by the loser-spouse. Hence, conjugal or community funds may not be used to pay for such losses. If the money were exclusive property of ZY, his wife may also sue to recover it under Article 206 of the Civil Code if she and the family needed the money for support.

LEGAL BASIS/ES: Article 204, 206, 117 (7), Civil Code

TOPIC: CONTRACTS; EXTINGUISHMENT

BAR EXAM YEAR: 2004

QUESTION:

TX filed a suit for ejectment against BD for non-payment of condominium rentals amounting to P150,000.00. during the pendency of the case, BD offered and TX accepted the full amount due as rentals from BD, who then filed a motion to dismiss the ejectment suit on the ground that the action is already extinguished. Is BD’s contention correct? Why or why not? Reason. (5%)

SUGGESTED ANSWER:

BD’s connection is not correct. TX can still maintain the suit for ejectment. The acceptance by the lessor of the payment by the lessee of the rentals in arrears even during the pendency of the ejectment case does not constitute a waiver or abandonment of the ejectment case.

LEGAL BASIS/ES:

TOPIC: COMMODATUM

BAR EXAM YEAR: 2004

QUESTION:

Distinguish briefly but clearly between Mutuum and commodatum.

SUGGESTED ANSWER:

In mutuum, the object borrowed must be a consumable thing in ownership of which is transferred to the borrower who incurs the obligation to return the same consumable to the lender in an equal amount, and of the same kind and quality. In comodatum, the object borrowed is usually a non-consumable thing the ownership of which is not transferred to the borrower who incurs the obligation to return the very thing to the lender.

LEGAL BASIS/ES:

TOPIC: OBLIGATIONS; OFFER

BAR EXAM YEAR: 2005 (No. 9)

QUESTION:

Marvin offered to construct the house of Carlos for a very reasonable price of P900,000.00, giving the latter 10 days within which to accept or reject the offer. On the fifth day, before Carlos could make up his mind, Marvin withdrew his offer.

a) What is the effect of the withdrawal of Marvin’s offer? (2%)

b) Will your answer be the same if Carlos paid Marvin p10,000.00 as consideration for the option? Explain. (2%)

c) Supposing that Carlos accepted the offer before Marvin could communicate his withdrawal thereof?

Discuss the Legal Consequences. (2%)

SUGGESTED ANSWER:

a) The withdrawal of Marvin is valid as long as it is arbitrary, otherwise, offeror is liable for damages.

b) No, if there is separate consideration, offeror cannot withdraw the offer until after the expiration of the period.

c) An offer which is not converted into a contract except at the moment it is accepted. Acceptance is the act that gives life to a juridical obligation, because, before the promise is accepted, the promissor may withdraw it at any time. Upon acceptance, however, a bilateral contract to is created, and the offeree ipso facto assumes the obligations of a purchaser; the offeror, on the other hand, would be liable for damages if he fails to deliver the thing/service he had offered.

LEGAL BASIS/ES:

TOPIC: OBLIGATIONS; NON-PAYMENT OF AMORTIZATIONSBAR EXAM YEAR: 2005 (No. 10)

QUESTION:

Bernie bought on installment a residential subdivision lot from DEVLAND. After having faithfully paid the installments for 48 months, Bernie discovered that DEVLAND had failed to develop the subdivision in accordance with the approved plans and specifications within the time frame in the plan. He thus wrote a letter to DEVLAND informing it that he was stopping payment. Consequently, DEVLAND cancelled the sale and wrote Bernie, informing him that his payments are forfeited in its favor.

a) Was the action of DEVLAND proper? Explain. (2%)

b) Discuss the rights of Bernie under the circumstances. (2%)

c) Supposing DEVLAND had fully developed the subdivision but Bernie failed to pay further installments after 4 years due to business reverses. Discuss the rights and obligations of the parties. (2%)

SUGGESTED ANSWER:

a) Assuming that the land is a residential subdivision project under P.D. No. 957, DEVLAND’s action is not proper because under Section 23 of said decree, no installment payment shall be forfeited to the owner or developer when the buyer, after due notice, desists from further payment due to the failure of the owner-developer to develop the subdivision according to the approved plans within the time limit for complying the same.

b) Under the same section of the Decree, Bernie may at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests at the legal rate. He may also ask the HLURB to apply penal sanction against DEVLAND consisting of payment of administrative fine of not more that P20,000.00 and/or imprisonment for not more than 20 years.

c) Under R.A. No 6552, DEVLAND has the right to cancel the contract but it has to refund Bernie the cash surrender value of the payments on the property equivalent to 50% of the total payments made.

LEGAL BASIS/ES:

TOPIC: COMMODATUM

BAR EXAM YEAR: 2005 (11)

QUESTION:

Before he left for Riyadh to work as a mechanic, Pedro left his Adventure van with Tito, with the understanding that the latter could use it for one year for his personal or family use while Pedro works in Riyadh. He did not tell Tito that the brakes of the van were faulty. Tito had the van tuned up and the brakes repaired. He spent a total amount of P15,000.00. After using the vehicle for two weeks, Tito discovered that it consumed too much fuel. To make up for the expenses, he leased it to Annabelle. Two months later, Pedro returned to the Philippines and asked Tito to return the van. Unfortunately, while being driven by Tito, the van was accidentally damaged by a cargo truck without his fault.

a) Who shall bear the P15,000.00 spent for the repair of the van? Explain. (2%)

b) Who shall bear the costs for the van’s fuel, oil and other materials while it was with Tito? Explain. (2%)

c) Does Pedro have the right to retrieve the van even before the lapse of one year? Explain. (2%)

d) Who shall bear the expenses for the accidental damage caused by the cargo truck, granting that the truck driver and truck owner are insolvent? Explain. (2%)

SUGGESTED ANSWER:

a) The contract between the parties is one of commodatum. Herein case, Pedro, the bailor, shall bear the expense for the repair of the faulty brakes, they being extraordinary expense incurred due to the non-disclosure by the bailor of the defect or fault; Tito, on the other hand shall, shoulder the part spent for the tune-up, as it is considered an ordinary expense for the use and preservation of the van.

b) Oil and other materials are considered ordinary expense, consequently, Tito, the bailee shall shoulder the expense.

c) No, Pedro cannot demand the return of the van until after the expiration of the one-year period stipulated.

d) Bothe Tito and Pedro shall bear equally the costs of the extraordinary expenses, having been incurred on the occasion of actual use of the van by Tito, the bailee, even though he acted without fault.

LEGAL BASIS/ES:

TOPIC: SALES; EQUITABLE MORTGAGE VS. SALE

BAR EXAM YEAR: 2005 (No. 13)

QUESTION:

On July 14, 2004, Pedro executed in favor of Juan a Deed of Absolute Sale over a parcel of land covered by TCT No. 6245. It appears in the Deed of Sale that Pedro received from Juan P120,000.00 as purchase price. However, Pedro retained the owner’s duplicate of said title. Thereafter, Juan, as lessor, and Pedro, as lessee, executed a contract of lease over the property for a period of one (1) year with a monthly rental of P1,000.00. Pedro, as lessee, was also obligated to pay the realty taxes on the property during the period of lease.

Subsequently, Pedro filed a complaint against Juan for the reformation of the Deed of Absolute Sale, alleging that the transaction covered by the deed was an equitable mortgage. In his verified answer to the complaint, Juan alleged that the property was sold to him under the Deed of Absolute Sale, and interposed counterclaims to recover possession of the property and to compel Pedro to turn over to him the owner’s duplicate of title. Resolve the case with reasons. (6%)

SUGGESTED ANSWER:

The complaint should be dismissed. The contract in this case is one of equitable mortgage pursuant to article 1602 of the civil code. Additionally, article 1604 provides that “the provision of article 1602 shall also apply to a contract purporting to be an absolute sale.”

For the following articles to apply, two requisites must concur:

1. The parties entered into a contract denominated as a contract of sale.

2. Their intention was to secure an existing debt by way of mortgage.

Herein case, although Pedro retained possession of the property as lessee after the execution of the Deed of Sale, there is no showing that the intention of the parties was to secure an existing debt by way of mortgage. Hence, the complaint of Pedro should be dismissed.

LEGAL BASIS/ES: 1602, 1604, Civil Code

TOPIC: LAND TRANSFER AND DEEDS; INNOCENT PURCHASER AND HOLDER IN BAD FAITH

BAR EXAM YEAR: 2005 (No. 13)

QUESTION:

Rod, the owner of an FX taxi, found in his vehicle an envelope containing TCT No. 65432 over a lot registered in Cesar’s name. Posing as Cesar, Rod forged Cesar’s signature on a Deed of Sale in Rod’s favor. Rod registered the said document with the Register of Deeds, and obtained a new title in his name. After a year, he sold the lot to Don, a buyer in good faith and for value, who also registered the lot in his name.

a) Did Rod acquire title to the land? Explain. (2%)

b) Discuss the rights of Don, if any, over the property. (2%)

c) In an ejectment case filed by Don against Cesar, can the latter ask for the cancellation of Don’s title considering that he (Cesar) is the rightful owner of the lot? Explain. (2%)

.SUGGESTED ANSWER:

a) No, Rod did not acquire title to the land. The inscription in the registry, to be effective, must be made in good faith. The defense of indefeasibility of a torrents title does not extend to a transferee who takes the certificate of title with notice of flaw. A holder in bad faith of a certificate of title is not entitled to the protection of the law, for the law cannot be used a shield for frauds.

b) The property was already registered in the name of Rod when he bought the same from the latter. Thus, Don could be considered as a buyer in good faith and for value. However, since Rod did not actually sell any property to him, Don has no right to retain ownership over the property. He has only the right to recover the purchased price plus damages

LEGAL BASIS/ES:

TOPIC: LEASE;RECISSION OF CONTRACT

BAR EXAM YEAR: 2005 (No. 14)

QUESTION:

Under a written contract dated December 1, 1989, Victor leased his land to Joel for a period of five (5) years at a monthly rental of P1,000.00, to be increased to P1,200.00 and P1,500.00 on the third and fifth year, respectively. On January 1, 1991, Joel subleased the land to Conrad for a period of two (2) years at a monthly rental of P1,500.00. On December 31, 1992, Joel assigned the lease to his compadre, Ernie, who acted on the belief that Joel was the rightful owner and possessor of the said lot. Joel has been faithfully paying the stipulated rentals to Victor. When Victor learned on May 15, 1992 about the sublease and assignment, he sued Joel, Conrad and Ernie for rescission of the contract of lease and for damages.

a) Will the action prosper? If so, against whom? Explain. (2%)

b) In case of rescission, discuss the rights and obligations of the parties. (2%)

SUGGESTED ANSWER:

a) Yes, the action for rescission of the lease and for damages will prosper as provided by Article 1659 of the civil code. Thus, Consent is necessary because assignment would cause novation by the substitution of one of the parties.

b) Rescission of the lease necessarily requires the return of the thing the lessor. Hence, the judgment granting rescission of the contract should also order the lessee to vacate and return the leased premises to the lessor. However, since the sublessee can invoke no right superior to that of his sublessor, the moment the sublessor is duly ousted from the premises, the sublessee has no leg to stand on, the sublessee’s right, if any, is to demand reparation for damages from his sublessor, should the latter be at fault.

LEGAL BASIS/ES: 1659 Civil Code

TOPIC: TORTS AND DAMAGES; QUASI DELICTS

BAR EXAM YEAR: 2005 (No. 15)

QUESTION:

Under the law on quasi-delict, aside from the persons who caused injury to persons, who else are liable under the following circumstances:

a) When a 7-year-old boy injures his playmate while playing with his father’s rifle. Explain. (2%)

b) When a domestic helper, while haggling for a lower price with a fish vendor in the course of buying foodstuffs for her employer’s family, slaps the fish vendor, causing her to fall and sustain injuries. Explain. (2%)

c) A carpenter in a construction company accidentally hits the right foot of his co-worker with a hammer. Explain. (2%)

d) A 15-year-old high school student stabs his classmate who is his rival for a girl while they were going out of the classroom after their last class. Explain. (2%)

e) What defense, if any, is available to them? (2%)

SUGGESTE ANSWER:

a) The parents of the 7-year old boy who caused injury to his playmate are liable under Article 219 of the Family Code, in relation to Article 2180 of the Civil Code since they exercise parental authority over the person of the boy.

b) Employer if the domestic helper who slapped a fish vendor. Under Article 2180, par. 5 of the Civil Code.

c) The owner of the Construction Company under Article 2180, par. 5.

d) The School, the teacher and the administrator as they exercise special parental authority.

e) The defense that might be available to them is the observance of a good father of the the family to prevent damages.

LEGAL BASIS/ES: 2180 Civil Code