2005 BAR QUESTIONS

LTD; Ejectment Suit vs. Cancellation of Title (2005)

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:
Cesar cannot ask for the cancellation of Don's title even if he is the rightful owner of the lot. In
an action for ejectment, the only issue involved is one of possession de facto, the purpose of
which is merely to protect the owner from any physical encroachment from without. The title of
the land or its ownership is not involved, for if a person is in actual possession thereof, he is
entitled to be maintained and respected in it even against the owner himself. (Garcia v. Anas,
G.R. No. L-20617, May 31, 1965)

SALES AND LEASE; Contract of Option; Elements (2005)

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%)
SUGGESTED ANSWER:
The withdrawal of Marvin's offer will cause the offer to cease in law. Hence, even if subsequently
accepted, there could be no concurrence of the offer and the acceptance. In the absence of
concurrence of offer and acceptance, there can be no consent. (Laudico v. Arias Rodriguez,
G.R. No. 16530, March 31, 1922) Without consent, there is no perfected contract for the
construction of the house of Carlos. (Salonga v. Farrales, G.R. No. L-47088, July 10, 1981)

Article 1318 of the Civil Code provides that there can be no contract unless the following requisites
concur: (1) consent of the parties; (2) object certain which is the subject matter of the contract;
and (3) cause of the obligation.

Marvin will not be liable to pay Carlos any damages for withdrawing the offer before the lapse of
the period granted. In this case, no consideration was given by Carlos for the option given, thus
there is no perfected contract of option for lack of cause of obligation. Marvin cannot be held to
have breached the contract. Thus, he cannot be held liable for damages.

b) Will your answer be the same if Carlos paid Marvin

P10,000.00 as consideration for that option? Explain.
(2%)

ALTERNATIVE ANSWER:
My answer will be the same as to the perfection of the contract for the construction of the house
of Carlos. No perfected contract arises because of lack of consent. With the withdrawal of the
offer, there could be no concurrence of offer and acceptance. My answer will not be the same as
to damages. Marvin will be liable for damages for breach of contract of option. With the payment
of the consideration for the option given, and with the consent of the parties and the object of
contract being present, a perfected contract of option was created. (San Miguel, Inc. v. Huang,
G.R. No. 137290, July 31, 2000)

Under Article 1170 of the Civil Code, those who in the performance of their obligation are guilty
of contravention thereof, as in this case, when Marvin did not give Carlos the agreed period of
ten days, are liable for damages.

ALTERNATIVE ANSWER:
My answer will not be the same if Carlos paid Marvin P10,000.00 because an option contract
was perfected. Thus, if Marvin withdrew the offer prior to the expiration of the 10-day period,
he breached the option contract. (Article 1324, Civil Code).

c) Supposing that Carlos accepted the offer before

Marvin could communicate his withdrawal thereof?
Discuss the legal consequences. (2%)

SUGGESTED ANSWER:

A contract to construct the house of Carlos is perfected. Contracts are perfected by mere consent
manifested by the meeting of the offer and the acceptance upon the thing and the cause which
are to constitute the contract. (Gomez v. Court of Appeals, G.R. No. 120747, September
21, 2000)

Under Article 1315 of the Civil Code, Carlos and Marvin are bound to fulfill what has been expressly
stipulated and all consequences thereof. Under Article 1167, if Marvin would refuse to construct
the house, Carlos is entitled to have the construction be done by a third person at the expense
of Marvin. Marvin in that case will be liable for damages under Article 1170.

SALES AND LEASE; Non-Payment of Amortizations; Subdivision Buyer;

When justified (2005)

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%)

SUGGESTED ANSWER:
No, the action of DEVLAND is not proper. Under Section 23 ofPresidential Decree No. 957,
otherwise known as the Subdivision and Condominium Buyer's Protection Decree, non-payment
of amortizations by the buyer is justified if non-payment is due to the failure of the subdivision
owner to develop the subdivision project according to the approved plans and within the limit for
complying. (Eugenio v. Drilon, G.R. No. 109404, January 22, 1996)

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

SUGGESTED ANSWER:

Under P.D. No. 957, a cancellation option is available to Bernie. If Bernie opts to cancel the
contract, DEVLAND must reimburse Bernie the total amount paid and the amortizations interest,
excluding delinquency interest, plus interest at legal rate. (Eugenio v. Drilon, G.R. No.
109404, January 22, 1996)

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:
In this case, pursuant to Section 24 of P.D. No. 957, R.A. No. 6552 otherwise known as the Realty
Installment Buyer Protection Act, shall govern. Under Section 3 thereof, Bernie is entitled: 1) to
pay without additional interest the unpaid installments due within a grace period of four (4)
months or one month for every year of installment paid; 2) if the contract is cancelled, Bernie is
entitled to the refund of the cash surrender value equal to 50% of the total payments made.

DEVLAND on the other hand has the right to cancel the contract after 30 days from receipt by
Bernie of notice of cancellation. DEVLAND is however obliged to refund to Bernie 50% of the total
payments made. (Rillo v. Court oAppeals, G.R. No. 125347, June 19,1997)

SALES AND LEASE; Equitable Mortgage vs. Sale (2005)

On July 14, 2004, Pedro executed in favor of Juan a Deed of Absolute Sale over a parcel of land
covered by TCT No6245. It appears in the Deed of Sale that Pedro received from Juan P120,000
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 Pl,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 of Pedro against Juan should be dismissed. The instances when a contract —
regardless of its nomenclature — may be presumed to be an equitable mortgage are
enumerated in Article 1602 of the Civil Code: "Art. 1602. The contract shall be presumed to be
an equitable mortgage, in any of the following cases:
1. When the price of a sale with right to repurchase is unusually inadequate:
2. When the vendor remains in possession as lessee or otherwise;
3. When upon or after the expiration of the right to repurchase another instrument
extending the period of redemption or granting a new period is executed;
4. When the purchaser retains for himself a part of the purchase price;
5. When the vendor binds himself to pay the taxes on the thing sold;
6. In any other case where it may be fairly inferred that the real intention of the parties is
that the transaction shall secure the payment of a debt or the performance of any other
obligation.

"In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee
as rent or otherwise shall be considered as interest which shall be subject to the usury laws."
Article 1604 states that "the provisions of article 1602 shall also apply to a contract purporting to
be an absolute sale." For Articles 1602 and 1604 to apply, two requisites must concur: 1) the
parties entered into a contract denominated as a contract of sale; and 2) their intention was to
secure an existing debt by way of mortgage. (Heirs of Balite v. Lim, G.R. No. 152168,
December 10, 2004)

In the given 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

SALES AND LEASE; Sublease vs. Assignment of Lease;

Rescission of Contract
(2005)

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 Pl,000.00, to be increased to Pl,200.00 and Pl,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 Pl,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 18, 1992 about the sublease and assignment, he sued Joel, Conrad and
Ernie for rescission of the contract of lease and for damages

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

SUGGESTED ANSWER:

Yes, the action of for rescission of the contract of lease and for damages will prosper. Under
Article 1659 of the Civil Code, "if the lessor or the lessee should not comply with the obligations
set forth in Articles 1654 and 1657, the aggrieved party may ask for rescission of the contract
and indemnification for damages, or only the latter, allowing the contract to remain in force."
Article 1649 of the same Code provides that "the lessee cannot assign the lease without the
consent of the lessor, unless there is a stipulation to the contrary." Consent is necessary
because assignment would cause novation by the substitution of one of the parties.
(Bangayan v. Court of Appeals, G.R. No. 123581, August 29, 1997) However, the rule is
different in the case of subleasing. When there is no express prohibition in the Contract of
Lease, the lessee may sublet the thing leased. (Art. 1650, Civil Code)

In the given case, when Joel assigned the lease to Ernie, the same was done without the
consent of Victor. The assignment is void. However, there is no indication that in the written
contract of lease between Victor and Joel, that subleasing the premises is prohibited. Hence,
the sublease of Joel with Conrad is valid. In view of the foregoing, Victor can file the case of
rescission and damages only against Joel and Ernie but he cannot include Conrad

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

SUGGESTED ANSWER:
Rescission of the lease necessarily requires the return of the thing to 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. (Heirs ofSevilla v. Court of Appeals G.R. No.
49823, February 26, 1992).

CREDIT TRANSACTIONS; Commodatum (2005)

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%)

ALTERNATIVE ANSWER:

Tito must bear the P15,000.00 expenses for the van. Generally, extraordinary expenses for the
preservation of the thing loaned are paid by the bailor, he being the owner of the thing loaned.
In this case however, Tito should bear the expenses because he incurred the expenses without
first informing Pedro about it. Neither was the repair shown to be urgent. Under Article 1949 of
the Civil Code, bailor generally bears the extraordinary expenses for the preservation of the thing
and should refund the said expenses if made by the bailee; Provided, The bailee brings the same
to the attention of the bailor before incurring them, except only if the repair is urgent that reply
cannot be awaited.

ALTERNATIVE ANSWER:
The P15,000.00 spent for the repair of the van should be borne by Pedro. Where the bailor
delivers to the bailee a non-consummable thing so that the latter may use it for a certain time
and return the identical thing, the contract perfected is a Contract of Commodatum. (Art. 1933,
Civil Code) The bailor shall refund the extraordinary expenses during the contract for the
preservation of the thing loaned provided the bailee brings the same to the knowledge of the
bailor before incurring the same, except when they are so urgent that the reply to the
notification cannot be awaited without danger. (Art. 1949 of the Civil Code)

In the given problem, Pedro left his Adventure van with Tito so that the latter could use it for one
year while he was in Riyadh. There was no mention of a consideration. Thus, the contract
perfected was commodatum. The amount of P15,000.00 was spent by Tito to tune up the van
and to repair its brakes. Such expenses are extra-ordinary expenses because they are necessary
for the preservation of the van Thus, the same should be borne by the bailor, Pedro

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

Tito must also pay for the ordinary expenses for the use and preservation of the thing loaned. He
must pay for the gasoline, oil, greasing and spraying. He cannot ask for reimbursement because
he has the obligation to return the identical thing to the bailor. Under Article 1941 of the Civil
Code, the bailee is obliged to pay for the ordinary expenses for the use and preservation of the
thing loaned.

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

ALTERNATIVE ANSWER:

No, Pedro does not have the right to retrieve the van before the lapse of one year. The parties
are mutually bound by the terms of the contract. Under the Civil Code, there are only 3 instances
when the bailor could validly ask for the return of the thing loaned even before the expiration of
the period. These are when: (1) a precarium contract was entered (Article
1947); (2) if the bailor urgently needs the thing (Article 1946); and (3) if the bailee commits acts
of ingratitude (Article 1948). Not one of the situations is present in this case.

The fact that Tito had leased the thing loaned to Annabelle would not justify the demand for the
return of the thing loaned before expiration of the period. Under Article 1942 of the Civil Code,
leasing of the thing loaned to a third person not member of the household of the bailee, will only
entitle bailor to hold bailee liable for the loss of the thing loaned.

ALTERNATIVE ANSWER:

As a rule, Pedro does not have the right to retrieve the van before the lapse of one year. Article
1946 of the Code provides that "the bailor cannot demand the return of the thing loaned till after
the expiration of the period stipulated, or after the accomplishment of the use for which the
commodatum has been constituted. However, if in the meantime, he should have urgent need of
the thing, he may demand its return or temporary use." In the given problem Pedro allowed Tito
to use the van for one year. Thus, he should be bound by the said agreement and he cannot ask
for the return of the car before the expiration of the one year period. However, if Pedro has
urgent need of the van, he may demand for its return or temporary use.

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:
Generally, extraordinary expenses arising on the occasion of the actual use of the thing loaned
by the bailee, even if incurred without fault of the bailee, shall be shouldered equally by the
bailor and the bailee. (Art. 1949 of the Civil Code). However, if Pedro had an urgent need for
the vehicle, Tito would be in delay for failure to immediately return the same, then Tito would
be held liable for the extraordinary expenses.

TORTS AND DAMAGES; Liability; Airline Company;

Non-Performance of an Obligation
(2005)

Dr. and Mrs. Almeda are prominent citizens of the country and are frequent travelers abroad. In
1996, they booked round-trip business class tickets for the Manila-Hong Kong-Manila route of the
Pinoy Airlines, where they are holders of Gold Mabalos Class Frequent Flier cards. On their return
flight, Pinoy Airlines upgraded their tickets to first class without their consent and, inspite of their
protestations to be allowed to remain in the business class so that they could be with their friends,
they were told that the business class was already fully booked, and that they were given priority
in upgrading because they are elite members/holders of Gold Mabalos Class cards. Since they
were embarrassed at the discussions with the flight attendants, they were forced to take the flight
at the first class section apart from their friends who were in the business class. Upon their return
to Manila, they demanded a written apology from Pinoy Airlines. When it went unheeded, the
couple sued Pinoy Airlines for breach of contract claiming moral and exemplary damages, as well
as attorney's fees. Will the action prosper? Give reasons. (5%)

ALTERNATIVE ANSWER:
Yes, the action will prosper. Article 2201 of the Civil Code entitles the person to recover damages
which may be attributed to non-performance of an obligation. In Alitalia Airways v. Court of
Appeals (G.R. No. 77011, July 24, 1990), when an airline issues ticket to a passenger confirmed
on a particular flight, a contract of carriage arises and the passenger expects that he would fly
on that day. When the airline deliberately overbooked, it took the risk of having to deprive some
passengers of their seat in case all of them would show up. For the indignity and inconvenience
of being refused the confirmed seat, said passenger is entitled to moral damages.

In the given problem, spouses Almeda had a booked roundtrip business class ticket with Pinoy
Airlines. When their tickets were upgraded to first class without their consent, Pinoy Airlines
breached the contract. As ruled in Zulueta v. Pan American (G.R. No. L-28589, January 8, 1973),
in case of overbooking, airline is in bad faith. Therefore, spouses Almeda are entitled to
damages.

ALTERNATIVE ANSWER:
The action may or may not prosper. Moral damages include ephysical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury. Although incapable of pecuniary computation, moral damages
may be recovered if they are the proximate result of the defendant's wrongful act or omission.
Moral damages predicated upon a breach of contract of carriage are recoverable only in
instances where the carrier is guilty of fraud or bad faith or where the mishap resulted in the
death of a passenger. (Cathay Pacific Airways, Ltd. v. Court of Appeals, G.R. No.
60501, March 5, 1993) Where there is no showing that the airline acted fraudulently or in
bad faith, liability for damages is limited to the natural and probable consequences of the
breach of the contract of carriage which the parties had foreseen or could have reasonably
foreseen. In such a case the liability does not include moral and exemplary damages.

In the instant case, if the involuntary upgrading of the Almedas' seat accommodation was not
attended by fraud or bad faith, the award of moral damages has no leg to stand on.

Thus, spouses would not also be entitled to exemplary damages. It is a requisite in the grant of
exemplary damages that the act of the offender must be accompanied by bad faith or done in
wanton, fraudulent or malevolent manner. (Morris v. Court of Appeals, G.R. No. 127957,
February 21, 2001)

Moreover, to be entitled thereto, the claimant must first establish his right to moral, temperate,
or compensatory damages. (Art. 2234, Civil Code) Since the Almedas are not entitled to any of
these damages, the award for exemplary damages has no legal basis. Where the awards for
moral and exemplary damages are eliminated, so must the award for attorney's fees be
eliminated. (Orosa v. Court of Appeals, G.R. No. 111080, April 5, 2000; Morris v. Court
of Appeals, G.R. No. 127957, February 21, 2001) The most that can be adjudged in their
favor for Pinoy Airlines' breach of contract is an award for nominal damages under Article 2221
of the Civil Code. (Cathay Pacific Airways v. Sps. Daniel & Maria Luisa Vasquez,
G.R. No. 150843, March 14, 2003)

However, if spouses Almeda could prove that there was bad faith on the part of Pinoy Airlines
when it breached the contract of carriage, it could be liable for moral, exemplary as well as
attorney's fees.

TORTS AND DAMAGES; Quasi-Delict (2005)

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%)
SUGGESTED ANSWER:
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. (Tamargo v. Court of Appeals, G.R. No. 85044, June
3, 1992; Elcano v. Hill, G.R. No. L-24803, May 26, 1977)

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%)

SUGGESTED ANSWER:

Employer of the domestic helper who slapped a fish vendor. Under Article 2180, par. 5 of the Civil
Code, "employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not engaged
in any business or industry."

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

SUGGESTED ANSWER:
The owner of the construction company. Article 2180, paragraph 4 states that "the owners and
managers of an establishment or enterprise are likewise responsible for damages caused by
their employees in the service of the branches in which the latter are employed or on the
occasion of their functions."

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%)

SUGGESTED ANSWER:
The school, teacher and administrator as they exercise special parental authority. (Art. 2180,
par. 7 in relation to Art. 218 and Art. 219 of the Family Code)

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

SUGGESTED ANSWER:
The defense that might be available to them is the observance of a good father of the family to
prevent the damage. (Last par., Art. 2180, Civil Code)