Defective Contracts (1) Flashcards
ARPIL 17 - ONLINE LEC DEFECTIVE CONTRACTS
foind in 704 in de leon’s PDF
ARPIL 17 - ONLINE LEC
RESCISSION
1381 (5)
(5) All other contracts specially declared by law to be subject to rescission. (1291a)
there are provisions in civil code and special laws that allow rescission **But the point is that the law on
the fact that a contract prejudices other parties will not necsssarily give rise to rescission unless the law provides otherwise. The CAVEAT, the court likened some contracts under 1381 like paragraph 3
“(3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them;”
- this is an accion pauliana
- in JP, the right of first refusal when violated is rescibble and the court can say while it is not spcfclly in 1381’s list, it is likened to para. 3 of 1381
IOW, not just those provided for by law but also by analogy (a decision of the court forms
the law FRIA allows debtor’s strugglign business to recover or revive.
If it isn’t revived, liquidation comes in
it becomes FRAUDULENT.
C(1) is fully paid while other C’s end up with nothing and have to wait for the debtor to be rehabiliatated.
In insolvency law, it is not rescissible, it is VOID. (
If insolvency outside of FRIA, then it is RESCISSIBLE
6TH ELEMENT
purpose of rescission is to repair damage.
it means rescission depends only to the extent necessary
ex. D has (4) parcels of land in a total amount of 20mil. D dispose all to someone else in order to hide it from the collecting creditor, that is a contract to defraud the C.
Let’s say the C has a claim only for 5 mil. there can be sale of properties in just one document
7th element
Filed within the prescriptive period of four (4) years from the time action accrues, to be reckoned from the time action is legally possible (e.g. termination of guardianship, actual or constructive discovery of fraud); (1389) cf. Khe Hong Cheng
if COA is 4 years,
when applying PRESCRIPTIVE PERIOD, when does it start (reckoning point)?
‘from the time action accrues’ meaning
- accrues when that action becomes LEGALLY POSSIBLE. if it is under 1381 (1) - guardianship, the minor has a guardian, the guardiansihp terminates when minor becomes of age. You start from there since it becomes legally possible to file an action of rescission. (guilty party is guardian)
Khe Hong Cheng’s case on accion pauliana
the definition of prescriptive period in 1150
“The time for prescription for all kinds of actions, when there is no special provision which ordains otherwise, shall be counted from the day they may be brought”
elements of accion pauliana
An accion pauliana thus presupposes the following:
1) A judgment;
2) the issuance by the trial court of a writ of execution for the satisfaction of the judgment, and
3) the failure of the sheriff to enforce and satisfy the judgment of the court. It requires that the creditor has exhausted the property of the debtor. (Khe Hong Cheng v. CA)
insofar as WARDS are concerned, if he dispose the property of the absentee and the absentee suffers more than 1/4 of the value of the property, this is RESCISSIBLE
WITH APPROVAL OF COURT, even if there was lesion on the minor but court allowed the sale, the contract is NOT RESCISSIBLE
ex. a minor owns an apartment (due to child actor, or parents died) so needs guardian
acts of ADMINISTARTION of the aprtment includes
- repairs, maintenance.
- no need for court approval
act of OWNERSHIP
- disposition of apratment (selling) or donating, transfer.
- as a matter of practice, guardians of minors if they do disposition, ask the court of approval. even if, in fact, the minor suffers a lesion of 1/4 more than, it is not RESCIBBLE
the role of the court in a guardianship scenario is to always look after the welfare of the minor.
Slide “
““Premature” Payments by Insolvent (with or without judicial
declaration);”
found in 1382
“Art. 1382. Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they were effected, are also rescissible”
because it is not yet due and demandable and D already paid. that is still rescibble. clear act of perfering one creditor to the other
CO-OWNERSHP
- you need consent of the other co-owners if you want to dispose of the properties.
suggest to client “dont waste time after death of parents, it must be subdivided ofthe properties so there be no fight.”
unless remaining the purpose of staying in co-ownership to keep the sentimental value.
in a PARTITION, one of the several co-owners can RESCIND if there is no fairness and equity in the,
”* Violation of Right of First Refusal (Guzman, Rosencor, etc.)”
common in CONTRACT OF LEASE
- leasor (owner) has the right to sell the leased property (apartment). as the lessee, the contract should have right of first refusal be favored to the lessee
if the lessor decides to sell or dispose the leased premises, the lessor must first offer the leased property to the lessee. if lessor, in violation of that lease contract and sells it without offering it to the lessee, then the lessee HAS THE RIGHT TO RESCIND the deed of sale executed by the lessors
sale without offering is a violation of first refusela
on ACCION PAULIANA SLIDE
gratuitious transfer - is free
onerous = purchase price
the 3rd party must be a party to the fraud for accion pualiana
base of accion pualiana is fraudaulent rasnaction entered into the DEBTOR
the transaction MUST BE for the purposes of defrauding the CREDITOR.
how then do you prove the mental element of fraud?
how then do you prove the mental element of fraud?
“BADGES OF FRAUD” slide
Fictitious or Inadequate consideration;
- ex you executed a simulated sale mentioning that you sold your asset to your cousin in the amount of 5mil but there was no transfer of hands in 5mil beaues the purpose is to hide the property. or the amount was inadequate selling that for 1million
- this is a badge of fraud
”* Transfer of all or substantially all assets; “
- unsuaul to do so unless legitmate reason (like migating to another country) but without any other legal reason, that is a badge of fraud.
- Failure of vendee to take exclusive possession of the property; (see Oria vs. McMicking)
- why transfer property to the child if the child cannot even use (you transfer a farm to your 14 y/o son)
- Fictitious or Inadequate consideration;
- Transfer of property during pendency of suit against the debtor when there is no other property to satisfy judgment;
- Sale on credit by an insolvent debtor;
- Transfer of all or substantially all assets;
- Complete Insolvency;
- Transfer is between Parent and Child; (see: Oria vs. McMicking)
- Failure of vendee to take exclusive possession of the property; (see Oria vs. McMicking)
- if you are Buyer, how is it you bought the property but it is still in possession of the seller? bade of fraud
- Vendee knows of judgment against vendor-debtor;
- Certificate of Title remains with Vendor who continues to pay real property taxes;
- if you are a buyer and have paid for the property, you need the TCT (tranfer certificate of title)
- ETC.
slide 11 VOIDABLE CONTRACTS
- Valid until annulled;
- Ratifiable by express or tacit ratification *
Grounds:- ONE of the Contracting Parties is Incapable of Giving Consent,
- Vitiated Consent;
- Prescribes in four (4) years:
a. intimidation/violence/Undue influence = from the time cause ceases,
b. mistake/fraud = from discovery thereof,
c. incapacity = from the time guardianship ceases
GROUNDS OF VOIDABLE CONTRACT
Grounds:
1. ONE of the Contracting Parties is Incapable of Giving Consent,
2. Vitiated Consent;
1 = voidable
all parties = unenforceable
ex. 2 minors enter into contract is called 1403 UNENFORCEABLE
“Art. 1403. The following contracts are unenforceable
xxx .. (3) Those where both parties are incapable of giving consent to a contract.
- Vitiated Consent
mistake, undue influence, fraud, violence, intimidation
ex. 5 yeras from last intimidation,
Issues on “Discovery of Fraud”
* Execution of Contract?
* Registration with Assessor’s Office?
* Registration with RD?
from disc of fraud, the problem is what constitutes ‘DISCOVERY of fraud”?
[a] * Execution of Contract?
- if you are party to the contract, you must have
another ex. fraudaulent machination in transfer of propert —
one filing annulment is a party to the contract and the party will assail that the contract does not represent the real intention, when they printed the contract, by fraudualent machination, the other party inserted an additional paragraph.
- discovery of fraud is from that EXECUTION OF CONTRACT
in some transaction in DOS, the one PREJDUIED is not a party to the contract, when will it be disocered, if NOT REGISTERED land, means no CERT OF TITLE, ownership evidence is the property is the TAX DECLARATION
- if titled, it is registed with the register of deeds and a cert of title is given
- if unreigstered,it is the TAX DECLAR the discvoery of fraud is deemed to occur upon the registation of the assessor’s office.
the purpose of registering the fraudalunet sale (the victim is not a party) the real owner
it was reigstered for the purpose of cancelling the tax declaration of the real owner COUNTED FROM THAT TIME
if it was registed thus having certificate of title from the register of deeds. the DOS has to be registered in the REGISTER OF DEEDS xxx.. the 4 year is counted from the registry of deeds.
Constructive Notice To The Whole World - even if in reality there is no actual knokwledge of the real owner, the four years is from the registry of deeds
if transfer of property by reason of FORGERY, that is NOT voidABLE but VOID (beause there is no consent), this will not prescribe or IMPRESCRIPTIBLE because this is a VOID contract. if voidABLE, then it is 4 years
MODES OF RATIFICATION
- By Prescription of Action (1391)
- Express or Tacit Ratification (1393) by the Injured person (or Guardian), not by the guilty party
- Loss of Thing through fraud or fault of injured party (1401)
