Civil Law Review 2 Notes for Uribe

CIVIL LAW REVIEW 2 Notes[ATTY. CRISOSTOMO A. URIBE] (1) Active Subject – This refers to the creditor or the obligee.  A creditor generally used in an obligation to give  while obligee is used in an obligation to do I. OBLIGATIONS [June 18, 2008] (2) Passive Subject – This refers to the debtor or the obligor.  debtor is used in an obligation to give  while obligor is used in an obligation to do The first two elements must be determinate or determinable. The following are possible combinations: A. IN GENERAL: 1. DEFINITION: Article 1156. an obligation is a juridical necessity to give, to do or not to do.  Defines CIVIL Ø; “JURID. NECESSITY” makes it enforceable by court action;   Balane: Book IV starts w/ an inaccuracy. It gives the impression that obligations & contracts are of the same status, w/c they are not. A contract is only one of the sources of obligations. Book IV should have been simply titled "Obligations." Etymology – two Latin words, ligare, meaning "to bind" & ob w/c is a proposition used to intensify a verb. Literally obligare means "to bind securely."  (3) Object of the obligation - the conduct or activity that must be observed by the debtor, this is always an activity or conduct, the prestation. Requisites of an object:  It must be licit.  It must be possible.  It must be determinate or determinable.  It must have pecuniary value so that if not performed it is converted into damages. Tolentino: the juridical tie between two or more persons, by virtue of which one of them, the creditor or oblige, has the right to demand of the other, the debtor or obligor, a definite prestation. Manresa: legal relation established between one party and another whereby the latter is bound to the fulfillment of a prestation which the former may demand of him. (4) Vinculum juris - the legal tie, whereby upon default or refusal of the debtor to perform, the creditor can go to court.  When a person says "I promise to pay you when I like to," there is no obligation here bec. there is no vinculum juris.  Juridical tie, the efficient cause established by the various sources of Ø’s > by virtue of which the debtor is bound in favor of the creditor to perform the prestation. Efficient cause / vinculum  may either be relation established by: 1. Law (e.g. marital relation giving rise to Ø for support; 2. Bilateral acts (e.g. contracts give rise to the Øs stipulated therein) 3. Unilateral acts (e.g. crimes and quasidelicts) Arias Ramos: [more complete definition, accdg to T, whch gives the element of responsibility essential to an Ø] An Ø is a juridical relation whereby a person (called the creditor) may demand from another (called the debtor) the observance of a determinate conduct, and in case of breach, may obtain satisfaction from the assets of the latter.  Where there is a right or power to demand, there is a correlative Ø or an imposition upon a person of a definite conduct. Balane: A better definition would be, An obligation is a juridical relation (bec. there are 2 parties) whereby a person should engage or refrain fr. engaging in a certain activity for the satisfaction of the private interests of another, who in case of non-fulfillment of such duty may obtain fr. the patrimony of the former through proper judicial proceedings the very prestation due or in default thereof, the economic equivalent (damages) that it represents. (Diaz Piero.) ** All the above 3/4 elements are agreed upon by commentators as essential elements. The following two are being debated. (i) Causa debendi/ obligationes (Castan) – This is what makes the obligation demandable. This is the proximate why of an obligation. (ii) Form - This is controversial. This is acceptable only if form means some manifestation of the intent of the parties. Obligation (Ø) – is a juridical relation whereby a person (called the creditor) may demand from another (debtor) the observance of determinate conduct, and in case of breach, may obtain satisfaction from the assets of the latter. [TOLENTINO: Ø “to give”  prestation consists in the delivery of a movable or an immovable thing in order to create a real right, orfor the use of the recipient, or for possession, or to return to its owner; e.g. Ø to deliver the thing in a © of sale, deposit, lease, antichresis, pledge and donation. Characteristics of an Obligation:    Both parties are determined at the time of the execution of the obligation. one party is determined at the constitution of the obligation & the other to be determined subsequently in accordance w/ a criteria that is previously established. the subject is determined in accordance w/ his relation to a thing & therefor it changes where the thing passes fr. one person to another. This is a property-linked obligation. It represents an exclusively private interest It creates ties that are by nature transitory It involves the power to make the juridical tie effective in case of non-fulfillment through an economic equivalent obtained fr. the debtor's patrimony. Ø “to do”  incl. all kinds of work or services. E.g. © of employment or professional services. Ø “not to do”  consists in abstaining from some act, e.g. duty not to create a nuisance; Essential Elements of an Obligation: 1 Requisites of a prestation: 1. it must be possible, physically and juridically 2. it must be determinate, or atleast determinable; and 3. it must have a positive equivalent in money. (susceptible of pecuniary appreciation) & effect Enforceability Positive Law – valid legal laws enacted by the legislative department; (b) CIVIL OBLIGATIONS: Article 1157. Obligations arise from: (1) Law; (Ø’s ex lege) (2) Contracts; (3) Quasi-contracts; (4) Acts or omissions punished by law; and (5) Quasi-delicts. 2. KINDS OF OBLIGATIONS AS TO BASIS & ENFORCEABILITY (a) NATURAL OBLIGATIONS SOURCES OF Ø’s: 1. LAW: Article 1158. Obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are demandable, and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen, by the provisions of this Book. Article 1423. Obligations are civil or natural. Civil obligations give a right of action to compel their performance. Natural obligations, not being based on positive law but on equity and natural law, do not grant a right of action to enforce their performance, but after voluntary fulfillment by the obligor, they authorize the retention of what has been delivered or rendered by reason thereof. Some natural obligations are set forth in the following articles. (Arts. 1423 – 1430  not exclusive enumeration; some others…)  Requisites of Natural Ø: 1. there is a juridical tie between two persons 2. the tie is not given effect by law  an Ø w/o a sanction, susceptible of voluntary performance, but not thru compulsion by legal means. Juridical tie Performance by debtor Basis of existence of Ø Enforceability of Within the domain of law Sources of Obligations according to Sanchez Roman.-- Law & Acts. The latter are further classified, as follows: (1) licit acts created by concurrence of wills (contracts); (2) licit acts either voluntary or involuntary w/o concurrence of wills (quasi-contract); (3) illicit acts of civil character w/c are not punishable, voluntary or involuntary (torts & all damages arising fr. delay); (4) illicit acts w/c are voluntary & are punishable by law (crimes) Moral Ø none act of pure liberality which springs from blood, affection or benevolence entirely domain of morals Baviera: When the source of the obligation is Law, there is no need for an act or omission for the obligation to arise. CASE: SAGRADA ORDEN VS. NACOCO [91 P 503] True Ø but for moral duty is certain causes inexistent in cannot be the juridical enforced by point of view law Examples of natural Ø’s:  Support of a natural child  Indemnification of a woman seduced  Support of relatives, by consanguinity or affinity Source of binding force CIVIL Ø’s From positive law an agreement is not necessary in order that a party may demand from another the fulfillment of an Ø arising from the application of a law in the circumstances; Balane: Law as a source of obligation – It is my opinion that there is an overlap in the enumeration bec. all obligations arise fr. law. Law is the only source of obligation, in the ultimate sense. But, as a proximate source, there are five sources of obligations. Law is both the ultimate & a proximate source of obligations. Voluntary fulfillment – may be understood as spontaneous, free from fraud or coercion or it may be understood as meaning without knowledge or free from error; - w/knowledge that he cannot be compelled to pay Ø; RATIO: “reputation” (clan) Moral Ø: Natural Ø Exists legal fulfillment an Ø cannot be compelled by court action but depends upon good conscience of the debtor Illicit Ø’s  Ø’s which are contrary to morals and good customs do not constitute natural Ø’s, whatver is paid under such Ø’s can be recovered, (apply Art. 1414, 1411, 1412.) Natural Ø – not sanctioned by any action but have a relative juridical effect;  do not grant the right of action to enforce their performance but after voluntary fulfillment by their obligor, they authorize the retention of what has been delivered or rendered by reason thereof (Art. 1423); Natural Ø vs. can be enforced by court action or the coercive power of public authority Plaintiff owned disputed property in Pandacan, Mla whc was acquired during the Japanese occupation by Taiwan Tekkosho with TCT. When RP was ceded to USA, the same was entrusted to Alien Property Custodian, APC by the US govt. APC took possession, control and custody under the Trading with the Enemy Act. APC allowed Copra Export Management Co. to occupy the property for a fee. RP later made representation with APC to use the same property with warehouse. The warehouse was repaired by NACOCO and was leased to Dioscoro Sarile. The latter failed to pay rentals on the property. In an action to recover possession of the property, the court nullified the sale to T.Tekkosho and cancelled its NATURAL Ø’s from equity and natural justice 2 TCT and ordered reversion of title to plaintiff, and right of recovery from NACOCO of rentals to the property. binds himself, with respect to the other, to give something or to render some service. ISSUE: WON NACOCO is liable to pay back rentals? HELD: If def.-appellant (NaCoCo) is liable at all, its obligations must arise fr. any of the 4 sources of obligations, namely, law, contract or quasi contract, crime, or negligence. (Art. 1089, OCC.) Negotiation of © is initiated by an OFFER; Autonomy of Will  supposing the contract is valid and enforceable, the terms of © not contrary to law, morals, GC, PP or PO, the stipulations therewith shd be given effect. (one of fundamental principles of ©’s) As to crimes: Def.-appellant is not guilty of any offense at all, bec. it entered into the premises & occupied it w/ the permission of the entity w/c had the legal control & admin. thereof, the Alien Prop. Admin. (APA) Balane: There are two parts in Art. 1159.   As to QD: Neither was there any negligence on its part. CASE: PEOPLE'S CAR VS. COMMANDO SECURITY SCRA 40] As to Contract: There was also no privity (of contract or obligation) bet. the APA & Taiwan Tekkosho, w/c had secured the possession of the prop. fr. the pltff-appellee by the use of duress, such that the Alien Prop. Custodian or its permittee (def.-appellant) may be held responsible for the supposed illegality of the occupation of the prop. by said Tekkosho. Neither is it a trustee of the former owner, the pltffappellee herein, but a trustee of the US Govt., in its own right, to the exclusion of, & against the claim or title of, the enemy owner. From Aug. 1946, when def.-appellant took possession, to the date of the judgment on 2/28/48, the APA had the absolute control of the prop. as trustee of the US Govt., w/ power to dispose of it by sale or otherwise, as though it were the absolute owner. 3. QUASI-CONTRACTS: Article 1160. Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII, of this Book. Therefore, even if def. were liable to the APA for rentals, these would not accrue to the benefit of the pltff., the old owner, but the US Govt. in Art. [51 Pltff. (People's Car) was in law liable to its customers for the damages caused the customer's car, w/c had been entrusted into its custody. Pltff. therefore was in law justified in making good such damages & relying in turn on def.(Commando Security) to honor its contract & indemnify it for such undisputed damages, w/c had been caused directly by the unlawful & wrongful acts of def.'s security guard in breach of their contract. WON commando security is liable to damages in accordance w/ provisions of ©/ whc provision/ The APA had the control & admin. of the prop. not as successor to the interests of the enemy holder of the title, the T. Tekkosho, but by express provision of law. Balane: Is the enumeration exclusive or merely illustrative? obligations derived fr. contract has the force of law bet. the contracting parties (jus civili ) there must be compliance in good faith (jus gentium.) QUASI-CONTRACT is a juridical relation which arises from certain unlawful, voluntary and unilateral acts, to the end that no one may be unjustly enriched or benefited at the expense of another. 1157 Doctrine: The sense that the case of Sagrada Orden tells us is that the enumeration is exclusive. In resolving the issue of whether the def. should be liable to pay rentals, the SC used the process of exclusion. For there to be an obligation to pay rentals, that obligation must arise fr. either of the five (5) sources of obligations. If it does not, then there is no obligation. The clear implication of this ruling is that, these five (5) are the only sources of obligations. The act must be: (1) Lawful – thus different from delict which is unlawful; (2) Voluntary – thus different from quasidelict which is based on fault or negligence or lack of foresight; (3) Unilateral – thus different from contract, in which parties agree. e.g. in negotiorum gestio:  Benefits Conferred Voluntarily  For preservation of Property or Business The problem w/ Art. 1157 is that it might not cover all situations. For example: Carale uses Dove as his soap. He then hears an advertisement fr. Proctor & Gamble that it is offering a nice tumbler for those who can collect 30 wrappers of Tide before Feb. 29, 1996. So, Carale stopped using Dove & started using Tide. He was able to consume all 30 wrappers on Feb. 29, 1996. He then went to Proctor & Gamble (P & G) to exchange the 30 Tide wrappers for a tumbler. But P & G told Carale that their tumblers run out of stock. Carale contracted a skin allergy as a result of using Tide in taking a bath. The question is: Does P & G have any obligation to Carale. If we look at Art. 1157, this situation does not fall in any of the five sources. So, we know have a problem. The German Civil Code (BGB) covers this situation. The BGB has a sixth source of obligation, the Auslobung, w/c means a unilateral offer. EXTRA-CONTRACTUAL OBLIGATIONS (Øs without an agreement / based in IMPLIED CONSENT) Q: HOW MANY? A: In NCC, 2 nominate and “some” innominate QC’s a. Quasi-contracts Article 2142. Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another. 2. CONTRACTS: © Article 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Article 2143. The provisions for quasicontracts in this Chapter do not exclude other quasi-contracts which may come within the purview of the preceding article. Article 1305. A contract is a meeting of minds between two persons whereby one 3 Molina is a driver of one of the buses of Alinea Bus Co. Restitution. RPC: Includes] Article 104. creditor may do it himself or get a 3 rd person at the expense of the debtor. Lagdameo suffered injuries. (2) If in fact the manager has been tacitly authorized by the owner. w/c. Alinea is the owner of a bus co. the rules on agency in Title X of this Book shall be applicable. quasi-delict or on crime. plaintiff has the right to institute a civil action for damages (culpa aquiliana). Article 1167. 102. without any power from the latter.Civil Liability.e. Article 2177.Every person criminally liable for a felony is also civilly liable. For example. as an offense against the state. Responsibility for fault or negligence under the preceding article is entirely separate and distinct from the civil 4 .  NEGOTIORUM GESTIO – juridical relation which arises whenever a person voluntarily takes charge of an agency or management of the business or property of another without any power or authority from the latter. and 103 of this Code includes: 1. Whoever voluntarily takes charge of the agency or management of the business or property of another. Lagdameo has a choice-he can sue on either contract. There is no res judicata as regards the ER as there is a difference in the COA.Persons Civilly Liable for Felonies Article 100.) The defense of the common carrier would be diligence in the selection & supervision of Performance at debtor’s cost  non-compliance with Ø to do. To those punished under RPC ): A person while not criminally liable may still be civilly liable  Failure of the plaintiff to reserve in the criminal case his right to file a separate civil action is not fatal to the civil action after the acquittal of the accused. and 1404 regarding unauthorized contracts shall govern. EE has been found to be insolvent. As a result of the reckless driving of Molina. according to the case of Araneta v. in addition to the criminal penalty attached to them. the only remedy is damages. 3. In this case. the Alinea Bus Co.. But the plaintiff cannot recover damages twice for the same act or omission of the defendant. What is included in civil liability. ACTS OR OMISSIONS PUNISHED BY LAW (DELICT or CRIMES  but not Felony whc is ltd. This same rule shall be observed if he does it in contravention of the tenor of the obligation. Lagdameo rode the bus being driven by Molina. such defense of the family may be set up GFF is not available by the ER as a defense SOLUTIO INDEBITI – juridical relation which arise whenever person unduly delivers a thing through or by mistake of another who has no right to demand it. the provisions of articles 1317.. 1. Baviera: Requisites of enforcing the subsidiary obligation of the employer under the RPC: criminal case was filed against the EE the act or negligence arose during or in connection w/ the performance of the latter’s employment the EE is found guilty of criminal negligence a writ of execution has been returned unsatisfied. The same act can give rise to obligations arising fr. . Article 2144. and delivered through mistake. 57 SCRA 59. This underlines the two aspects in a crime: one. de Joya. different sources. or to require the person concerned to substitute him. Furthermore. & two as an offense against the victim. c. RPC: CHAPTER ONE . As far as crime is concerned. 2. he can sue the common carrier but not the driver bec. all he has to prove is the (existence of the contract) & that it was not performed. Negotiorum Gestio liability arising from negligence under the Penal Code. – The civil liability established in articles 100. [CHAPTER 2. 4. In the first case. 1403. the parties. to return it arises. if the owner is in a position to do so. civil liability arises in their commission. it may be decreed that what has been poorly done be undone. If he decided to sue on the breach of the contract of carriage. In this case. 101. Reparation of the damage caused.  What Civil Liability when Ø to do can only be performed by debtor he cannot compelled to do so by force. This juridical relation does not arise in either of these instances: ELEMENTS – (1) When the property or business is not neglected or abandoned. is obliged to continue the same until the termination of the affair and its incidents. The defense of the driver would be diligence in driving (or fortuitous event. Indemnification for consequential damages.b. If a person obliged to do something fails to do it. civil law is not concerned w/ the penal liability but only w/ the civil liability. an action based on delict on the following grounds: QUASI DELICT DELICT it is subsidiary (imputed) ER’s liability is primary in RPC Diligence of good father of In RPC.  When the acquittal is based on ground that the guilt of the accused has not been proved beyond reasonable doubt. Solutio indebiti Article 2154. a quasi-delict can still be committed by one against the other regarding the area covered by the contract? A: Yes.  Balane: Crime as a source of obligation – There are many crimes fr. when there is it was unduly the obligation  If something is received no right to demand it. No. If he sues on quasi-delict. TITLE V . he can sue both the common carrier & the driver. Civil liability of a person guilty of felony. the same shall be executed at his cost. In the second case. i. Quasi-delict (QD) differs fr. It is in the latter case that civil liability is recoverable. he has no contract w/ the driver. Q: Is it possible that even if there is a contract bet. & the question of whom to sue. man is responsible not only for acts conscious and intentional acts but also for his lack of foresight. 32 & 33 (CC) 2. the damage suffered or incurred by the plaintiff 3. QUASI-DELICTS – the fault or negligence of a person who. 5. is called a quasi-delict and is governed by the provisions of this Chapter. employers 5. There are some QD w/c are not covered by tort. Whoever by act or omission causes damage to another. Art. 2180) 1. This is bec. Tort [BROADER] covers intentional torts w/c in quasi-delict is considered as civil liability arising fr. Such fault or negligence. causes damage to another person. it shall have the force of law between the contracting parties.  PERSONS LIABLE: LIABILITY.    (IMPUTED/vicarious Q: If there is a contract bet. 1179 (common carrier). tort does not exactly have the same meaning as quasi-delict.  ELEMENTS: (1) A duty on the part of the defendant to protect the plaintiff from the injury of which the latter complains.Quasi-delicts] / REQUISITES OF LIABILITY (IMPUTED): 1. Baviera: The terms of the contract cannot be against mandatory & prohibitive laws. Classes of Torts According to Manner of Commission 1. that he cannot recover damages twice for the same injury. In case the driver is convicted & has been sentenced to pay civil liability. remember that in this case. Art.  A TORT is a civil wrong (an actionable wrong) consisting of a violation of a right or a breach of duty for which the law grants a remedy in damages or other relief. Case: KINDS OF NEGLIGENCE: 5 . if there is no pre-existing contractual relation between the parties. Article 1162.. 2176. is obliged to pay for the damage done. guardians 3. 2183 & 2187 (CC) The omission to do something which ordinarily reasonable men guided by those considerations whch ordinarily regulate the conduct of human affairs. ex.) is subsidiarily liable. Negligent Torts: d.employees. 2176-2194  NO contractual relation at all Notice that the choice of cause of action will determine three things: the theory of the plaintiff. QUASI-DELICT. there being fault or negligence. further. & all on contracts  Again. foresee harm to the person injured as a reasonable consequence of the course about to be pursued? A: If you look at Art. in the position of the person on who negligence is attributed. tortfeasor desires to cause the consequences of his act. The right is created by law in favor of a person called a creditor to compel another called a debtor to observe duty or a prestation either to render what is due him or to refrain from causing him injury. father / mother 2. CHAPTER 2 . Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2. the State 6. Art. acts or omissions punishable by law. or doing something which prudent and reasonable men would not do. it is broader term for actionable wrong whc may not be negligence. may be malicious tortuous act whc is not anymore QD. the parties.  Governed by Arts. And if the contract is valid. (memorize!) Balane: The Code Commission did not choose to use tort. If he sues under crime.  (1) Culpa aquiliana. Strict Liability Torts: f. 26. If Molina is insolvent. the parties. (2) A failure to perform that duty.  Governed by Art. or negligence in the performance of a contractual Ø. he has to sue the driver. by his act or omission connected or not with. and (3) An injury to the plaintiff through such failure. the victim has a choice. teachers  The responsibility shall cease if they can prove that they have observed diligence of good father of the family to prevent damage. will pay. * Torts is seldom used by SC in juris. Intentional Torts a. the fault of negligence of the defendant 2. QUASI-DELICTS: (culpa aquiliana negligence / torts*) [NCC. The case of Cangco has not really resolve this controversy. Alinea Bus Co. the defense of the def. or b. also known as culpa extra-contractual. tortfeasor believes that the consequences are substantially certain to result from it c. and by special laws. (2) Culpa contractual. or negligence as a source of Ø. the employer (Alinea Bus Co. 2176 (CC) 3. tortfeasor’s conduct merely creates a forseeable risk of harm which may or may not occur e. ex. owners/managers 4. can there be a quasi-delict committed by one against the other regarding the area covered by the contract? TEST OF NEGLIGENCE: Would a prudent man. but independent from any contractual relation. care and diligence which may cause harm to another. Dean Bocobo suggested the ancient term culpa aquiliana.  Liability on QD is based on Equity. the relation of the fault or negligence and damage incurred by the plaintiff Article 2176. you get the impression that if there is a contract bet. Title XVII of this Book. Provided that he is consistent w/ his theory & provided. would do. But this did not merit the approval of the Code Commission. they cannot be liable for quasi-delict on an area covered by the contract. is that of ordinary or reasonable care. to avoid injury. There is no reason to believe that plaintiff would have suffered any injury whatever in alighting as he did had it not been for defendant's negligent failure to perform its duty to provide a safe alighting place. 3. the direct and proximate cause of the injury suffered by plaintiff was his own contributory negligence in failing to wait until the train had come to a complete stop before alighting (Doctrine of comparative negligence. The railroad company's defense involves the assumption that even granting that the negligent conduct of its servants in placing an obstruction upon the platform was a breach of its contractual obligation to maintain safe means of approaching and leaving its trains. CASE: Where there could still be QD even when there is contract of carriage – GUTIERREZ VS. generally embraced in the concept of status. which can be rebutted by proof of the exercise of due care in their selection and supervision. A passenger of the truck was injured and filed a case. of age. If the accident was caused by plaintiff's own negligence. GUTIERREZ [56 P 177] FACTS: A truck and a car collided on a narrow bridge. or to use the technical form of expression. it is precisely the wrongful act w/c gives rise to the juridical tie. Balane: There are two important principles that we learn fr. but the care which a man of ordinary prudence would use under similar circumstances. That duty. sec. that article relates only to culpa aquiliana and not to culpa contractual. under the contract of carriage. The owner of the car was made liable under Art. He takes the train going home from work. the duty to carry him in safety and to provide safe means of entering and leaving its trains (contract of carriage). and that the obligation to respond for the damage which plaintiff has suffered arises. that their presence caused the plaintiff to fall as he alighted from the train. 18 yrs. [RESPONDEAT SUPERIOR]. by implication. Liability & juridical tie are simultaneous. was direct and immediate. [Note: There is a little mistake in Cangco. This is wrong. MANILA RAILROAD CO. HELD: The court found both drivers negligent. this case: The difference in concept bet. RULING: …that the train was barely moving when plaintiff alighted is shown conclusively by the fact that it came to stop within six meters from the place where he stepped from it. The test by which to determine whether the passenger has been guilty of negligence in attempting to alight from a moving railway train.] FACTS: Cangco was an EE of MRR Co." (Thompson. other than contractual. whereas in contractual relations the vinculum exists independently of the breach of the voluntary duty assumed by the parties when entering into the contractual relation. Every legal obligation must of necessity be extra-contractual or contractual. no liability is imposed upon defendant's negligence and plaintiff's negligence merely contributed to his injury. and that they therefore constituted an effective legal cause of the injuries sustained by the plaintiff. the damages should be apportioned. imputed liability for culpa aquiliana. or which arise from these relations. not voluntary act . there is a pre-existing juridical tie bet. Imputed liability in NCC is not applicable to obligations arising ex contractu. rests upon the fact that in cases of non-contractual obligation it is the wrongful or negligent act or omission itself which creates the vinculum juris. Violation of the contract gives rise to liability but not to the juridical tie. The seriousness of his injury made him file a case for damages vs MRR Co. therefore. being contractual. It is. [38 P 768] - The contract of defendant to transport plaintiff carried with it. in legal viewpoint from that presumptive responsibility for the negligence of its servants. The owner of the truck was made liable for culpa contractual. Commentaries on Negligence. not the care which may or should be used by the prudent man generally. of certain members of society to others. rebuttable). w/ other members of the family accommodated therein. would have acted as the passenger acted under the circumstances disclosed by the evidence. of the age. differing essentially. It is to be considered whether an ordinarily prudent person. (presumption juris tantum. its liability is direct and immediate. Contracts & quasi-delicts create two concentric circles w/ quasi-delict as the bigger circle. It is important to note that the foundation of the legal liability of the defendant is the contract of carriage. He landed on the elevated platform on top of some sacks of watermelon which made him fall violently. if at all. Thousands of person alight from trains under these conditions every day of the year. The owner of the car was also made defendant although the driver of the car at the time of the collision was his son. but only to extra-contractual obligations. 3010. Cangco’s arm was amputated twice. but not the car owner. and sustain no injury where the company has kept its platform free from dangerous obstructions. Juridical tie is not borne by a violation. from the breach of that contract by reason of the failure of defendant to exercise due care in its performance.) HELD: It can not be doubted that the employees of the railroad company were guilty of negligence in piling these sacks on the platform in the manner above stated.CANGCO VS. The driver cannot be sued as he has no privity of contract w/ the passenger. the parties. vol. It happened at night bet 7-8pm and d station was poorly lit. rolled away from the platform under the moving train where he badly crashed and lacerated his right arm. Rakes doctrine). and its non-performance could not be excused by proof that the fault was morally imputable to defendant's servants. important to ascertain if defendant was in fact guilty of negligence. In quasi-delict. The owner of the truck was made defendant although his driver was driving the truck at that time and he was not a passenger of the truck. That day he alighted from the train while it was still slightly in motion. The SC said that the driver can be sued under culpa contractual. Nature of Act 6 FRAUD dolo involves willfulness or deliberate intent to cause NEGLIGENCE Culpa mere want of care or diligence. Extra-contractual obligation has its source in the breach or omission of those mutual duties which civilized society imposes upon it members. contract & quasi-delict is that in a contract. 2180. That is to say. It necessarily follows that the defendant company is liable for the damage thereby occasioned unless recovery is barred by the plaintiff's own contributory negligence. sex and condition of the passenger. The fundamental distinction between obligations of this character and those which arise from contract. This care has been defined to be. -. specific performance . the final event in the chain immediately affecting the injury as a natural and probable result of the cause which first acted under such circumstances that the person responsible for the first event should. or has promised to deliver the same thing to two or more persons who do not have the same interest. viz: "(T)he proximate legal cause is that acting first and producing the injury. 2. The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. (2) obligation to do. unbroken by any efficient intervening cause. he shall acquire no real right over it until the same has been delivered to him.-. he shall be responsible for any fortuitous event until he has effected the delivery. as an ordinarily prudent and intelligent person. & (3) obligation not to do. even though they may not have been mentioned. (3) A direct causal connection between the negligent act and the injury.1166 cover obligation to give. Obligation to give A. give everyone his due. Balane: Three types of obligations. equivalent performance .) C. I. have reasonable ground to expect at the 3. (must choose 1 Rem.-. COMPLIANCE WITH OBLIGATIONS: Article 19. To do III. in natural and continuous sequence. substitute performance performance at the expense of the debtor The exemplification by the Court in one case is simple and explicit. Every person obliged to give something is also obliged to take care of it with the proper diligence of a good father of a family.Gives rise to Ø   As to nature of Right violat ed Is a Wrong agains t Crimin al Intent Legal Basis for liabilit y Liabili ty for Dama ges Form of Redre ss Quant um of Eviden ce Compr omise damage or injury to another the act itself moment of his act or default that an injury to some person might probably result therefrom. each having a close causal connection with its immediate predecessor. may compel the debtor to make the delivery.) Kinds of performance. and observe honesty and good faith. However. CRIME public right Article 1163.) 7 . RPC) Injured party cannot recover damages twice for the same act or omission of defendant. Not to do (this includes all negative obligations like obligation not to give. Article 1166. When what is to be delivered is a determinate thing. all constituting a natural and continuous chain of events. in the exercise of his rights and in the performance of his duties. 2. 1163. crimes civil reparation for injury suffered/indemnificatio n/compensation punishment/fine/i mprisonment preponderance beyond reasonable doubt can be compromised criminal liability can never be compromised If the obligor delays. unless the law or the stipulation of the parties requires another standard of care. produces injury and without which the result would not have occurred. (Art. act with justice. the individual the State Article 1164. The obligation to give a determinate thing includes that of delivering all its accessions and accessories.To take care of the thing w/ the diligence of a good father of a family until actual delivery. in addition to the right granted him by article 1170. REQUISITES FOR LIABILITY: (onus) (1) Wrongful act or omission imputable to the defendant by reason of his fault or negligence. the creditor. either immediately or by setting other events in motion. law If the thing is indeterminate or generic. 100. 1164.-1. not needed Necessary Broad penal necessary QUASI-DELICT private right every QD gives rise to liability for damages there are without liability Article 1165.grant of damages Articles 1163 .performance by the debtor himself ( applies only to Ø to give ) DOCTRINE OF PROXIMATE CAUSE  is that which." or omission the want or care or diligence A single act may be a crime and a QD at the same time. Three Accessory Obligations: 1. Generic thing II. Art. Specific thing B. he may ask that the obligation be complied with at the expense of the debtor. Art. Every person must.(1) obligation to give.To deliver the fruits to the creditor (fruits produced after obligation to deliver arises. (2) Damage or injury proven by the person claiming recovery. Obligation not to do 1. shall be governed by the law of sales. Article 1245. PERSONAL RIGHT  belongs to a person who may demand from another. whereby property is alienated to the creditor in satisfaction of a debt in money. To deliver one of SEVERAL things. of the principle Non nudis pactis. The debtor of a thing cannot compel the creditor to receive a different one. Equivalent performance 2. although the latter may be of the same value as. . PRINCIPAL Ø – to give (to deliver) a determinate thing. But he has no real right over them until actual delivery. the object is determinable. is ownership transferred. or more valuable than that which is due. susceptible of being exercised against the whole world. When the obligation consists in the delivery of an indeterminate or generic thing. equivalent performance. as a definite passive subject.1167. REAL RIGHT  is the power by a person over a specific thing. substitute performance 2. A generic thing. whose quality and circumstances have not been stated. In an obligation to do. Dation in payment.Remedies Available to the Creditor (specific performance. (441)  natural / industrial / civil  the Ø to deliver arises only if the creditor is entitled. Rule re Fortuitous Events still apply.-. dominia rerum transferentur (It is not by mere agreement. to do  3. the creditors earns a personal right over the thing and its fruits. In obligations to do or not to do.  The reason for this is that specific performance will give rise to involuntary servitude. oblig.) A. C. DELIMITED GENERIC  not totally generic nor specific. not to do  personal Ø  positive (to do) or negative (not to do) REAL Ø: a. In obligation to do. but only delivery or tradition transfers ownership that is a real right over the thing against the whole world. The purpose of the obligation and other circumstances shall be taken into consideration. 1163 – to take care of the thing with proper diligence of a good father of the family. when delivered it becomes determinate. Neither can the debtor deliver a thing of inferior quality. 1164 – to deliver the fruits. (1) Art. sed traditione. the creditor has the option of resolution or rescission under Art. an act or forbearance cannot be substituted by another act or forbearance against the obligee's will. substitute performance b. the price of leases of lands and other property and the amount of perpetual or life annuities or other similar income This is bec.   Article 442. specific performance is not available. make a distinction: (2) Art.  In all these cases. extra ordinary diligence required in Common carriers (2) Stipulation of Parties (3) Presumed: diligence of a Good father of the Family if none is specified/expressed by law or agreement. w/c is purely personal  only equivalent performance is available In an obligation to do w/c is not personal: a. equivalent performance (3) Art. 1166 – delivery of the accessions and of the accessories (Art 440). 1191. Natural fruits are the spontaneous products of the soil. without being distinguished from others of the same kind. A thing is determinate when it is particularly designated or physical segregated from all others of the same class. ACCESSORY Ø – exists even when not expressly stipulated. the time the obligation to deliver arises whereas the real right does not arise until actual delivery. Articles 1165 . b. does not have designation nor physical segregation. the creditor has a personal right against the debtor as to the fruits.3. DETERMINATE Ø – particularly designated from a particular class. Note: In obligations to do. to give  real Ø  determinate (specific) or indeterminate (generic) 2.-accessories. he can also claim damages. GENERIC THING  is one that is indicated only by its kinds. DETERMINATION OF DILIGENCE REQUIRED: (1) LAW  e. In addition. all remedies are available B. the thing is capable of being made determinate without the necessity of a new or further agreement between the parties Balane:  From the time the obligation arises.  Article 1460. 1166.g. Civil fruits are the rents of buildings. Article 1244. Personal right arises fr. To deliver accessions & into. and the young and other products of animals. He has only the personal right against the debtor w/ regard to the undelivered fruits. (indeterminate)  In an Ø to deliver a generic thing. Specific performance b. the fulfillment of a prestation.  Real right is a right w/c is enforceable against the whole world. A determinate thing a. but by delivery.) NATURE AND EFFECTS OF Ø’s OBJECT OF THE Ø: 1. equivalent performance. Art. The requisite that a thing be determinate is satisfied if at the time the contract is entered 8 From the moment the Ø to deliver a determinate thing arises. In obligations to give 1. Article 1246. Industrial fruits are those produced by lands of any kind through cultivation or labor. substitute performance. the creditor cannot demand a thing of superior quality. Its merit is rather obvious. starts immediately upon creation of the Ø. Article 1197. In every case. Of the phrase “upon demand”). was much too late. Article 1182. Pinatubo erupts this year. 1) CIVIL – derived by virtue of juridical relation 2) Natural – spontaneous products of the soil and the young and other products of animals. When the fulfillment of the condition depends upon the sole will of the debtor. In fact. binding at once. 1179. . shall depend upon the happening of the event which constitutes the condition. the period cannot be changed by them. CONDITIONAL D. PURE – (CHAPTER 3) Different Kinds of Obligations SECTION 1 . or. the courts may fix the duration thereof. it would appear that petitioner was hopeful that the satisfaction of his credit could be realized either through the debtor sued receiving cash payment fr. 9 Where the fulfillment of the condition does not depend on the will of the obligor. Balane:  We are talking here of a suspensive condition. Kinds of Fruits. such an obligation lacks one of the essential elements of an obligation. 1179. par. as expressed therein. the conditional obligation shall be void. KINDS OF CIVIL OBLIGATIONS: Article 1181. it would appear that the filing of the suit after 15 yrs.. Every obligation whose performance does not depend upon a future or uncertain event. SOTELO MATTI [44 P 874]  The obligation being due & demandable (bec. either naturally or artificially. In conditional obligations. but on that of a 3rd person who can. the courts shall determine such period as may under the circumstances have been probably contemplated by the parties. Potestative Condition  is one w/c depends solely on the will of either one party. AS TO PERFECTION & EXTINGUISHMENT: a. The courts shall also fix the duration of the period when it depends upon the will of the debtor." A pure obligation is one w/c is not subject to a condition or a term. or upon a past event unknown to the parties. If it depends upon chance or upon the will of a third person. Art. this petition was filed. only if suspensive condi. if he does all that is in his power. the obligation is not even a condition obligation. EXAMPLE: " I will give you my plantation in Davao provided you reside in Davao permanently. [CHAPTER 2: Right of Accession – GENERAL PROVISIONS] Article 440. the acquisition of rights. the obligor's part of the contract is complied w/. the obligation shall take effect in conformity with the provisions of this Code. If the obligation does not fix a period. Q: Does the happening of a condition give rise to the Ø? A: Not necessarily. For failure to deliver.Pure and Conditional Obligations Article 1179. the happening exctinguishes the Ø. Every obligation whose performance does not depend upon a future or uncertain event. Article 1179.- The condition must be suspensive. The defense interposed was prescription. in no way be compelled to carry it out. without prejudice to the effects of the happening of the event. the estate of the late Carlos Palanca presumptively as one of the heirs." Q: Why does it make the obligation void? A: Bec. the binding force-. xxx CASE: the term whc parties attempted to fix were so uncertain it must be regarded as condition A: Yes.pd. 2 PAY V. What is undeniable is that on 8/26/67. PURE Ø  demandable at once  running of Rx. if resolutory condi. Once fixed by the courts.00 whenever I like. The ownership of property gives the right by accession to everything which is produced thereby.the means by w/c it is enforceable in court. more than 15 yrs. is demandable at once." (ALTERNATIVE Ø) Q: What if the condition is suspensive. as well as the extinguishment or loss of those already acquired.  EXAMPLE: "I promise to sell you my car for P1. PALANCA [57 SCRA 618] Mixed Condition  is one w/c depends partly upon the will of one of the parties & partly on either chance or the will of a third person. 1. par. or which is incorporated or attached thereto. after the execution of the P/N on 1/30/52. potestative & depends on the sole will of the debtor. but from its nature and the circumstances it can be inferred that a period was intended. In this case. Casual Condition  is one where the condition is made to depend upon a third person or upon chance. is demandable at once. EXAMPLE: "I will give you my land in Floridablanca if Mt. SMITH BELL V." CASE: re Art. Every obligation which contains a resolutory condition shall also be demandable. It is a pure obligation. It is a joke. Q: In an Ø with a TERM will the answer above be the same? A: b. is the conditional obligation valid? There is nothing in the record that would indicate whether or not the first alternative was fulfilled. potestative & depends solely on the will of the creditor. or upon a past event unknown to the parties. there is no binding force. There is no obligation. 1 says so. the creditor’s remedy is not reivindicacion but specific performance. 3) Industrial – produced by lands of any kind through cultivation or labor or by reason of human labor. "upon demand. 1182. the vinculum juris. First sentence of Art. & it then becomes incumbent upon the other contracting party to comply w/ the terms of the contract. From the manner in w/c the P/N was executed. The condition that some event happen at a determinate time shall extinguish the obligation as soon as the time expires or if it has become indubitable that the event will not take place. par. Paras: Record shows that plaintiff did all w/in its power to have machinery arrive in Mla. the term whc parties attempted to fix were so uncertain it must be regarded as condition. donation is a contract & in a donation. If the obligation is divisible. EXAMPLE: "I will sell you a piece of land provided you do not plant marijuana on it. It is simply disregarded. there is failure of causa. that impossible condition becomes part of the causa. those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. in a donation as well as in a testamentary disposition. 1183. Article 1183.delivery w/in 90days – This is not guaranteed. The condition not to do an impossible thing shall be considered as not having been agreed upon. If no time has been fixed. Impossible in law  or one w/c attaches an illegal condition EXAMPLE: "I promise to sell my car to Mr. the condition shall be deemed fulfilled at such time as may have probably been contemplated.. even if the testator should otherwise provide. Art. and notified defendant of such arrival STAT.FACTS: Øs in ©s entered bet. There are 2 classes of impossible conditions: 1. Art. 27. Plaintiff was ordered to pay. as in a donation or testamentary disposition.War was still ongoing and the US govt was rigid on exportation of machinery such as the subjects of this ©. M for P2 on condition that he burns the College of Law. Balane: This refers to a suspensive condition. if the condition is impossible. Impossible conditions. or 3rd person who could in no way be compelled to issue certificate of priority and permission.)  A negative condition (not to do an impossible thing)  Just disregard the condition (Art. 2.  In a gratuitous disposition. 1. Effect of Impossible Condition  It annuls the obligation w/c depends upon them. 873." Balane: This article refers to a suspensive condition." 2. Correlate this w/ Articles 727 & 873. an impossible condition annuls the condition obligation. since an onerous prestation w/c is reciprocal requires concomitant performances.  In gratuitous dispositions. the effect is the opposite. Article 1185. Even if you take away the impossible condition. Balane: This article refers to suspensive conditions. The obligation is valid. The condition that some event will not happen at a determinate time shall render the obligation effective from the moment the time indicated has elapsed.in reality was not fulfilled. time is not of the essence. 25Kea to be shipped fr SF in Sept. April 27. the causa or consideration is the liberality of the donor or testator.liberality.delivery must be made w/in a reasonable time. Impossible conditions & those contrary to law or good customs shall be considered as not imposed & shall in no manner prejudice the heir. an impossible condition annuls the contract." Article 1184. Therefore. court considered such as reasonable time. liberality.)  A condition not to do an illegal thing (negative)  This is not expressly provided for in the provision but is implied. The intent does not have to be malicious. as the case may be. They (donation & testamentary disposition) have both their underpinnings. 1183. 1919) Two expellers or 26. HELD: At the constitution of the ©. Plaintiff Corp. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. Illegal or impossible conditions in simple & remuneratory donations shall be considered as not imposed. 10 . If the condition is resolutory. the impossible condition does not annul the contract. 727. Thus the obligor will be deemed to have sufficiently fulfilled his part of the Ø if he has done all that is in his power even if condi. Doctrine of Constructive Compliance  There are three requisites in order that this article may apply: 1. or if it has become evident that the event cannot occur. bearing in mind the nature of the obligation. 1919)  defendant refused to accept and pay deliveries b/c of delay Q: Why is there a difference? A: Bec. The proper way to say it is that:  In an onerous transaction.  The entire juridical tie is tainted by the impossible condition. as seller and defendant as buyer: Tolentino:  In contracts. Intent on the part of the obligor to prevent fulfillment of the condition. par. there is still a reason for the disposition to exist-.” (Feb. the impossible condition is simply disregarded. Impossible in fact EXAMPLE: "I promise to sell my car to Mr. their fulfillment depended not only upon the effort of plaintiff Co. that part thereof which is not affected by the impossible or unlawful condition shall be valid. st But in an onerous transaction.  Positive suspensive condition to do an impossible/ illegal thing  The obligation is void (Art. an impossible condition attached to the disposition is simply considered as not imposed. but upon that of the US govt. Article 1186. © constituted on August 1918: 2 steel tanks 21K to be shipped fr NY delivered to Mla “w/in 3 or 4 mos. the 1 W. 2 electric motors 2K ea “Approx. 1918) Balane: The first statement is inaccurate bec. And when time of delivery is not fixed. there is also no contract. stated in general terms or is indefinite.” (Delivered. M for P2 if he can swim across the Pacific Ocean for 2 hours.1918 ASAP (Delivered:Oct. ASAP. Balane: This article refers to a suspensive condition. In no causa. future certain always . The fruits are deemed to cancel out each other. or disappears in such a way that its existence is unknown or it cannot be recovered. The proper verb is not "bring" but "take. as a matter of fact. A condition is always future & uncertain. In case of the loss. Nevertheless. the provisions of the second paragraph of article 1187 shall be observed as regards the effect of the extinguishment of the obligation. This is just the opposite of Art. Tolentino: xxx Futurity & uncertainty must concur as characteristics of the event. No Retroactivity as to the Fruits  Notice that there is no retroactivity w/ respect to the fruits. the creditor may choose between the rescission of the obligation and its fulfillment. the event (getting the highest score) is already a past event. the phrase "may xxx bring the appropriate actions" is inaccurate. Balane: This article refers to suspensive condition. If only one of the thing produces fruits. the improvement shall inure to the benefit of the creditor. improvement. Bring the appropriate actions  According to JBL Reyes. in each case. with indemnity for damages in either case. As to element of futurity Article 1189. are laid down in the preceding article shall be applied to the party who is bound to return. (6) If it is improved at the expense of the debtor. may be past event unknown to parties uncertain Conditions can either be: 11 Term Same. As for the obligations to do and not to do.  A past thing can never be a condition. the creditor should have the suspensive condition annotated on the title of the land. Many modern Civil Codes have discarded it. If the obligation is unilateral. the provisions which. The debtor may recover what during the same time he has paid by mistake in case of a suspensive condition. once the condition has been fulfilled. The effects of a conditional obligation to give. although technically the creditor still have no right." For example. the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. the retroactive effect of the condition that has been complied with. the courts shall determine. loss or deterioration of the thing during the pendency of the condition: (1) If the thing is lost without the fault of the debtor. before the fulfillment of the condition. This rule is logical but impractical. with respect to the debtor. Q: Why does Art. the obligation shall be extinguished. or goes out of commerce. 1190 refers to resolutory conditions. The principle in this article is: Vigilantibus et non dormientibus jura subveniunt  w/c means that the laws aid those who are vigilant. not those who sleep upon their rights. It is the knowledge w/c is future & uncertain. in a sale of land subject to suspensive condition. It can also apply to Mixed condition as to that part w/c the obligor should perform. (2) If the thing is lost through the fault of the debtor. the impairment is to be borne by the creditor. the following rules shall be observed in case of the in the aspect of certainty Condition Same. (3) When the thing deteriorates without the fault of the debtor. The creditor may. he shall be obliged to pay damages. Past event unknown to the parties  It is really the knowledge of the event w/c constitutes the future. Suspensive Condition (Condition precedent) Article 1187. (b) Resolutory Condition (Condition subsequent) Balane: Art. Balane: This article refers to suspensive conditions.)" Here. Balane has already finished checking the papers. he shall have no other right than that granted to the usufructuary. (1122) Kinds of Conditional Obligations: a. (5) If the thing is improved by its nature. To bring action is to file a suit. Article 1188. 1188 give the creditor a recourse although technically the creditor still have no right? Condition compared to a term  A: Bec. 1189. When the conditions have for their purpose the extinguishment of an obligation to give. shall return to each other what they have received. it is understood that the thing is lost when it perishes. When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give. Constructive compliance can have application only if the condition is potestative. But the creditor is not restricted to filing a suit.2. Balane: A condition is a future & uncertain event upon w/c an obligation or provision is made to depend. upon the fulfillment of said conditions. Article 1190. the debtor shall appropriate the fruits and interests received. EXAMPLE: " I will treat you for lunch if you get the highest score in the Civil Law Final Exams (on the assumption that Prof. deterioration or improvement of the thing. there is no obligation to deliver the fruits. or by time. he is already expecting a right. unless from the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the same was different. bring the appropriate actions for the preservation of his right. This article sets forth the rule of retroactivity in an obligation to give. yet the knowledge is future & uncertain. This is not bringing an appropriate action but taking an appropriate action. (4) If it deteriorates through the fault of the debtor. the parties. You cannot let the creditor sit & fold his arms & wait for his right of expectancy to be rendered illusory. shall retroact to the day of the constitution of the obligation. Actual prevention of compliance (by the obligor) 3. when the obligation imposes reciprocal prestations upon the parties.  In obligations to do and not to do. 12 . Resolutory condition (condition subsequent) wherein the happening of the event will extinguish the obligation.1. Suspensive condition (condition precedent) wherein the happening of the event gives birth to an obligation 2. extension fixed by parties 2. a condition gives rise to an May have retroactive effect Article 1194. When the period is for the creditor's exclusive benefit. whether on a date known before hand or at a time w/c cannot be predetermined has no effect upon the 2. Condition: CONDITION As to uncertain event fulfillment obligation or extinguishes one already existing As to will of debtor Tolentino: Period must be (1) future (2) certain and (3) possible. Obligations for whose fulfillment a day certain has been fixed. w/c. although it may not be known when. 3. When the obligation is a loan in w/c the debtor is bound to pay interest.into the day) or one the arrival of w/c will extinguish the obligation. resolutory term (in die -. (Knowledge. Legal. the debtor is entitled to the fruits produced in the meantime. When the debtor is aware of the period & pays anyway. original period 2. stipulated by parties judicial. There is an obligation to deliver a determinate thing (on the part of the debtor) 3. Presumed for whose benefit: BOTH 13 .g. subject to the provisions of article 1197. shall be demandable only when that day comes. If the term has already arrived. Caguioa : According to another school of thought. the term arrives. When the debtor binds himself to pay when his means permit him to do so. Anything paid or delivered before the arrival of the period. except when there is a special agreement always refer to the future Balane: In a (suspensive) term. but terminate upon arrival of the day certain. the obligation is conditional. b. The condition happens. 2. 2. Rt.fr. If the uncertainty consists in whether the day will come or not. When the obligation is reciprocal & there has been premature performance (by both parties). deterioration or improvement of the thing before the arrival of the day certain. 1. deterioration or delay May also be. The period after which the performance must terminate. There is loss. classified accdg to source. WITH A TERM OR PERIOD: Article 1180. (2) the mistake was discovered bef. with the fruits and interests. As to time may refer to a past event unknown to the parties a condition w/c depends exclusively on the will of the debtor annuls the obligation a period left to the debtor's will merely empowers the court to fix such period Balane: There are three requisites in order for Art. 3. either suspends its demandability or produces its extinguishment. event will happen but not known when 4. stipulated to do some work whc may only be done at a particular season. grace period. Balane: A term is a future and certain event upon w/c the demandability (or extinguishment) of an obligation depends. the question is moot & academic. Terms 1. There is loss. all the fruits received during the pendency of the term belong to the creditor. tacit waiver of benefit of term) TERM / PERIOD an event that must necessarily come. Both the things & the fruits can be recovered. definite. 1195 applies only in Ø to give. Distinguished fr. Or a. But can he recover the fruits produced during the meantime? It depends on what school of thought you follow: Tolentino : According to one school of thought. Of Axn arises only when date fixed arrives. 2. A term can either be: 1. In case of loss. the day) or one the arrival of w/c will make the obligation demandable. deterioration or improvement before the happening of the condition. period fixed by law voluntary. the obligation has already arisen except that it is not yet demandable. obligation When fruits & interests cannot be recovered notw/standing premature delivery: 1. Or. (a) express. Article 1195. exerting an influence on an obligation as a consequence of a juridical act. the obligor being unaware of the period or believing that the obligation has become due and demandable. 4. but only their demandability or performance NO retroactive effect. and it shall be regulated by the rules of the preceding Section. Balane: Mistaken Premature Delivery  This article assumes 2 things: (1) the delivery was by mistake. suspensive term (ex die -. may be recovered. fixed known date or time. MANRESA: A term or period is an interval of time. e.  A day certain is understood to be that which must necessarily come. Effect of Period: Ø with term are demandable only when day fixed for performance arrive. 1189 to apply-1. the obligation shall be deemed to be one with a period. indefinite. specified (b) tacit. the rules in article 1189 shall be observed. Obligations with a resolutory period take effect at once.  Article 1193.c. fixed/allowed by courts As to influence on the Effect existence of obligations. 1256. The right referred to in article 1601 (the right of conventional redemption on the part of the vendor a retro). contract of services for an indefinite term (bec. Def. unless there be just cause authorizing the fixing of a period. xxx However. 1180. is prohibited by Art. it was academic for the pltff. Xxx the court shall decree the rescission claimed. If the term is for the benefit of the debtor  The creditor cannot demand performance anytime. The fixing of a period would thus be a mere formality & would serve no purpose than to delay. unless he also pays interest in full.000 on or before Oct. Manila leased to defendant on month-to-month basis with rental of P35. the presumption is that it is for the benefit of both parties. w/ essential parts. fixing of a period by the courts may amount to involuntary servitude) Art. If there is stipulation as to interest. it is presumed to have been established for the benefit of both the creditor and the debtor. may not be held liable b/c © did not contain a period. 1197. 1197 of the NCC. virtually admitted non-performance by returning the typewriter he was obliged to repair in a non-working condition. will of creditor. unless from the tenor of the same or other circumstances it should appear that the period has been established in favor of one or of the other. & no period for the lease has been set. fr. This. 1606 in pacto de retro sale where the period is not specified by the parties Article 1196. Once fixed by the courts. the period cannot be changed by them. 1197." This is a term for the benefit of the debtor. LAWN TENNIS CLUB [2 P309] - 14 . so long as defs. & there being a breach of contract by non-performance. the courts may likewise determine a longer period after the lessee has been in possession for over six months. Art. fr. to vacate b/c he needed it d/t destruction of his office. payment of actual. month to month. 1606. without interest. although the owner should desire the lease to continue. the date of the contract. HELD: He cannot invoke Art. ISSUE: WON Def. In © of Loan.Art. the courts may also fix a longer period after the lessee has stayed in the place for over one month. but from its nature and the circumstances it can be inferred that a period was intended. year to year. 1996. Xxx The courts shall also fix the duration of the period when it depends upon the will of the debtor. Article 1687. the courts shall determine such period as may under the circumstances have been probably contemplated by the parties. Art. 1191. When NO period is fixed Art. week to week. (a) Art. NCC. par. 1682 Article 1682. compensatory.   The consequence is that the creditor cannot compel the performance before the arrival of the term. In every case. 1 CHAVEZ V. or w/c it may yield once. missing. When fixing a period is mere formality — 1. if it is monthly. After the was plainitiff demanded def. to have first petitioned the court to fix a period for the performance of the contract before filing his complaint in this case." This is a term for the benefit of the debtor. Balane: Cases where the Courts may fix a period  CASE: Where obligation does not fix a period. debtor cannot pay in advance vs. The lease of a piece of rural land. subject to the provisions of article 1197. "I promise to pay Clara the sum of P100. Whenever in an obligation a period is designated. temperate and moral damages. 1687. of course. continuing paying the rentals or not. The time for compliance having evidently expired. & fr. If the period for the lease has not been fixed. When the debtor binds himself to pay when his means permit him to do so. Article 1197. even though a monthly rent is paid. if the rent agreed upon is annual. in the absence of an express agreement. EXAMPLE: "I promise to pay w/in 60 days. If the term is for the benefit of the creditor  The creditor can demand performance anytime. 3. If the obligation does not fix a period. xxx ELEIZEUI V. the arrival of the term. it is understood to be fr. although two or more years may have to elapse for the purpose. if the rent is weekly. but the debtor cannot insist on payment bef. WON:def may continue to occupy indefinitely as long as he pays rentals HELD: The continuance & fulfillment of the contract of lease cannot be made to depend solely & exclusively upon the free & uncontrolled choice of the lessees bet. GONZALES [32 SCRA 547] Def. if the rent is to be paid daily. elected to continue the lease by continuing the payment of the rentals the owner would never be able to discontinue it. the courts may fix the duration thereof. the debtor cannot compel acceptance bef. completely depriving the owner of all say in the matter. day to day. If the rent is weekly. Art. is understood to have been made for all the time necessary for the gathering of the fruits w/c the whole estate leased may yield in one year. period is generally for both parties. the obligation shall be deemed to be one w/ a period. the period. The courts shall also fix the duration of the period when it depends upon the will of the debtor. conversely. term is usually for benefit of debtor. but the debtor can insist on performance anytime. For if this were allowed. when its duration has not been fixed. Exceptions: ENCARNACION V. 31. XXX Balane: General rule: If a period is attached in an obligation. Plaintiff had the thing fixed by another and later demanded fr. BALDOMAR [77 P 470] Plaintiff was owner of a house in Legarda. the lessees could effectively thwart his purpose if they should prefer to terminate the contract by the simple expedient of stopping payment of the rentals. Art. In case of daily rent. thus he may pay in advance. shall last four years fr. the courts may fix a longer term for the lease after the lessee has occupied the premises for over one year. The herein Contract of Lease was made to endure at the will of the lessee who is expressedly authorized to make improvements upon the subject land by erecting buildings therein. A judicial declaration of insolvency is not required.If the creditor is deceived on the substance or quality of the thing pledged. w/c had expired. and when through a fortuitous event they disappear. 2109 . Hence. 1197 of the NCC. or demand immediate payment of the principal obligation. DOCTRINE: The term of a lease whose termination is expressly left to the will of the lessee must be fixed by the courts according to the character & conditions of the mutual undertakings. Balane: In number one. PEOPLE [133 SCRA 333] . [THUS. Art. AGAIN! ] DIFFERENT KINDS OF Øs: PURE AND CONDITIONAL Øs – when the Ø contains no terms or conditions. 15 . that on November 18. d discussion was set aside. FUTURE & UNCERTAIN EVENT – the acquisition or resolution of the rights is made to depend by those who execute the juridical act. (4) When the debtor violates any undertaking. HERNANDO [151 SCRA 484] FACTS: Pacifica Millare.rental in court.. The 2nd par. 1 about which we shall have something more to say toward the end of this resolution. in an action brought for that purpose xxx. perm or temp. 1197 applies only where a contract of lease clearly exists. No period was fixed for the existence of the ©. in consideration of which the creditor agreed to the period. (3) When by his own acts he has impaired said guaranties or securities after their establishment. does not apply." (6) Art. the contract was not renewed at all. in consideration that the markup would be hers. PHILBANKING V. making fills. (5) When the debtor attempts to abscond. par. Effects of Loss of Term (1198):  Ø becomes immediately due & demandb even if period has not yet expired. 13 of the contract that the parties reserved to themselves the faculty of agreeing upon the period of the renewal contract. spouses counter-offered p700. ISSUE: WON court may fix period of Ø under Art. lay pipes. unless he gives a guaranty or security for the debt. Basis. They agreed that proceeds of the tobacco sale shd be turned over as soon as sold. There was implied renewal of lease © but only on a month-2-mo. plaintiff filed M2D for lack of ju’s &no COA. Spouses deposited monthly CONDITIONAL Øs – one which is subject to condition. HELD: It is evident that the lessors did not intend to reserve to themselves the right to rescind that which they have expressly conferred to lessee whc is exclusively in favor of the latter. he becomes insolvent. 1197 HELD: 1197 does not apply in this case. M2D denied. after failing to secure naturalization and after finding that adoption does not confer the citizenship of the adopting parent on the adopted. 1958. that the obligation was immediately demandable as soon as the tobacco was disposed of. less than a month after. lower court convicted Lim of estafa. (The sixth ground was added by Prof. CONDITION – every future and uncertain event upon which an Ø or provision is made to depend. When debtor loses the benefit of period Article 1198. Balane.It is clear in the agreement that the proceeds of the sale of the tobacco should be turned over to the complainant as soon as the same was sold. spouses Co filed a separate case for the court to order renewal of © and fix rental at p700 a mo. the obligation shall be deemed to be one w/ a period. unless he immediately gives new ones equally satisfactory. they entered into another contract giving Wong Heng the option to buy the leased premises should his pending petition for naturalization be granted. of Art. later a demand letter was issued by lessor to vacate premises w/o renewal of expired ©. w/c provides that the courts may fix the duration of the obligation if it does not fix a period. lessor offered to extend d lease if spouses Co will agree to increase rental from P350 to P1200 a mo. or. the parties entered into two other contracts extending the lease to 99 years and fixing the period of the option to buy at 50 years. Them was one of agency with the Ø to return the unsold tobacco and the proceeds of the sale demandable stat. there was in fact no contract at all the period of w/c could have been fixed. but rather to the will of both the lessor & the lessee. Here. that is on November 25. he may either claim another thing in its stead. Art. When the debtor binds himself to pay when his means permit him to do so. Art. that on December 21. the parties entered into the lease contract for 50 years: that ten days after.  Ø is converted to a pure Ø  Insolvency of DEBTOR – need not be judicially declared. 4.. The agreement bet. factual insolvency is enough. (2) When he does not furnish to the creditor the guaranties or securities which he has promised. lessor disagreed and filed an ejectment case. LUI SHE [21 SCRA 53] DOCTRINE: A lease to an alien for a reasonable period is valid. they amended the contract so as to make it cover the entire property of Justina Santos. Most importantly. make such other improvements at his own convenience. which indubitably demonstrate that each of the contracts in question was designed to carry out Justina Santos' expressed wish to give the land to Wong and thereby in effect place its ownership in alien hands. lessor and spouses Co lessee in a 5-yr © of lease of People’s Resto. For failure to remit all the sales. 1 of Art. It is also clear fr. 1180. at d last wk of d 5-yr period. SC granted TRO and injunction. since the Contract of Lease did in fact fix an original period of 5 yrs. LIM proposed to sell Ayroso’s tobacco for her at a price. The debtor shall lose every right to make use of the period: (1) When after the obligation has been contracted. 1957. MILLARE V. subject to the provisions of article 1197. on November 15. Par. or demandable immediately after all the tobacco was disposed of. not for another 5yrs. ISSUE: WON spouses Co have valid COA in claiming renewal of lease © HELD: YES. state of financial difficulty is enough.) LIM V. We concluded that "as the lease contract was part of a scheme to violate the Constitution it suffers from the same infirmity that renders the other contracts void and can no more be saved from illegality than the rest of the contracts. 1197 is equally inapplicable since the duration of the renewal period was not left to the will of the lessee alone. 1197 is clearly inapplicable. [1544] Retroactive effect Art. unless he gives a guaranty or security for the debt. PAST BUT UNKNOWN – a condition may refer to past event unknown to the parties. SUSPENSIVE CONDITION: * rights are acquired. upon the happening of a condi. (3) by his own acts he has impaired said guaranties or securities after their establishment. but from its nature & circumstances it can be inferred that a period was intended by the parties. give time for debtor to comply PERIOD = is an event that is future but certain (just a matter of time). Register with the Registry of Property 2. SUSPENSIVE – the happening of the former gives rise to an Ø.2004 perfection Sept.the Ø to deliver arises upon the perfection of the contract if subject to suspensive period & not suspensive condi. possession in good faith 4. witness 3. 727 – donation CONDITION 1. Art. there is already an Ø. 1M Condition: if B will pass the bar exam Term: effect retroacts after the passing is announced on April. (4) the debtor violates any undertaking. 1183 – impossible condition 1. 1188 – preserve his interest PROTECT HIS EXPECTANCY 1. he becomes insolvent. IMPOSSIBLE CONDITION: 1. period and no condition.the contract shall be deemed suspended but the F. the benefit is for both the creditor & debtor Art. Injunction  if the sell was not consummated or not for sale Art. A will give 5% commission to B. A sold a house&lot to B. Ex. EFFECTS OF FORTUITOUS EVENT IN PERIOD / TERM: . e. Ex. POTESTATIVE – when the fulfillment of the condi. void.its immediate demandability. but it is suspensive by the period. future&certain 2. walang matitira SUSPENSIVE CONDI – upon the happening of the condi. 1164 . unless he immediately gives new ones equally satisfactory. the Ø exists (“existence of Ø is affected) CLASSIFICATION OF CONDITION: 1. and when through a fortuitous event they disappear.  All other potestative conditions. (5) the debtor attempts to abscond. in the duration of the time depends upon the will of the debtor 3.extinguished.suspensive period/“demandability” 3. applied only to suspensive not to resolutory condi. 2. PHYSICALLY IMPOSSIBLE – when it is contrary to law of nature. 1186 – deemed constructively fulfilled. 2004 Oct. 1190 – no exception. Art. shall not stop the running of the term or period agreed upon. 873 – impossible testamentary conditions  disregard Ex. RESOLUTORY PERIOD – “terminated” but the effects that accrued in the past will remain.demandable at once . Art. Potestative suspensive is VOID. The debtor shall lose every right to make use of the period WHEN: (1) after the obligation has been contracted. Art. RESOLUTORY – the happening of the latter extinguishes rights already existing. resolutory period SUSPENSIVE PERIOD – prior to the period. future&uncertain event 2. Exception: the tenor of the same or other circumstances. morals. 2.04 (w/o condi. in consideration of which the creditor agreed to the period. depends upon the will of the party to the Ø.E. 1195 – advanced payment Art. Jan. 2. RESOLUTORY . upon the happening of a condi. resolutory condition PERIOD / TERM 1. MIXED – depends partly upon the will of the party & partly upon chance or a 3rd person Art. cannot be considered uncertain. Art. (2) he does not furnish to the creditor the guaranties or securities which he has promised. CAUSAL – depends upon chance 2 nd or 3rd person 3. passing this class (oblicon) PAST EVENT – cannot be future event. it should appear that the period has been established in favor of one or the other. but it depends on the will of A. 1187 – effects of conditional Ø to give. 1196 – be perfected but its Art. CLASSIFICATION OF CONDITIONS: 1. valid. if the debtor binds himself to pay when his means permit him to do so Art. good customs and public safety PURE Øs  when it is not subject to a term.. 1182: Potestative – sole will of the debtor Q: How cud there be guaranty when debtor is insolvent? 16 . suspensive condition 3. 1181 – Ø created upon the happening of a condition RESOLUTORY CONDITION – “extinguishes” as if nothing happens.g. JUDICIALLY IMPOSSIBLE – when contrary to law. 1198 – memorize! Article 1198. if the Ø does not fix a period. 1197 – 3 reasons why the court will fix the period: 1. RESOLUTORY CONDITION Art. legal impossibility Art. retroactive effect of Ø. physical impossibility 2. * Thus a contract may demandability suspended. or loss of existing rts. Presumption – if the period is designated.05 condi./ Pure) Apr. 2. . (before creditor files his action) Art. If the choice is limited through the creditor's own acts. 1. PO. No right to choose b/c all must be performed. or the compliance of the obligation has become impossible.) Exception: When expressly granted to the creditor (cannot be implied) d. If the choice is debtor's Q: In an agreement where there is no stipulation as to who has rt. morals. Art. A person alternatively bound by different prestations shall completely perform one of them. only one is practicable. Here. the fulfillment of one is sufficient xxx. the latter is liable to indemnify the creditor for damages. Q: A promised to deliver to B his carabao. The creditor cannot be compelled to receive part of one & part of the other undertaking. * There is a third possibility where the choice may be made by a third person upon agreement of the parties. The debtor shall lose the right of choice when among the prestations whereby he is alternatively bound. Balane: Q: To whom does the right of choice belong? A: General rule: To the debtor (Art. dog & goat. 1202. The debtor shall have no right to choose those prestations w/c are impossible. to choose and he delays? A: rt. If through the creditor's acts the debtor cannot make a choice according to the terms of the obligation.A: 3rd person (surety) Q: What is the technical term of the act of making a choice in alternative obligations? A: Concentration. If some things are lost through the debtor's fault. To choose can be given to 3rd person? A: YES. Art. the debtor may perform the one that is left. why require communication before performance if the choice belongs to him anyway? A: To give the creditor an opportunity to consent to the choice or impugn it. communicated to the other party. Sempio-Dy. Damages other than the value of the last thing or service may also be awarded. of course. Alternative Obligations  where the debtor must perform any of several prestations when several objects due. only with debtor a.) D. (2) Obligations according to plurality of objects: A. Conjunctive  where the debtor must perform more than one prestation No required form  may be ORAL. What kind of Ø is this? A: conjunctive Q: If the choice belongs to the debtor. 1199. 1000) as long as it is not contrary to law. BUT how can the creditor impugn it if the choice belongs to the debtor. 1206)  The right to choose is indivisible  debtor cant choose part of one prestation and part of another.of will. Q: in Alternative. c. 17 . Multiple C. PP. 46 P 592. unless it has been expressly granted to the creditor. election here is never granted to creditor Articles 1202 to 1205 talk of the loss of some of the prestations before performance.-- Art. Facultative  where only one thing is due but the debtor has reserved the right to substitute it w/ another (Art. Not CONSENT: only declaration of choice made. If Alternative. (Ong v. is not lost by mere delay. IN WRITING. E. unilateral decal. If all are lost through fortuitous event. the time it has been communicated. (b) Alternative Obligations b. 1200. 1201. The indemnity shall be fixed taking as a basis the value of the last thing w/c disappeared. generally debtor chooses. TACITLY. Q: when is Ø due&demandb even if period has expired? A: if debtor has lost rt. to choose? A: It depends. The creditor shall have a right to indemnity for damages when. Art. the fulfillment of one is sufficient. or that of the service w/c last became impossible. (expressed) e. the debtor can still choose fr. etc. all the things w/c are alternatively the object of the obligation have been lost. If everything is lost through the debtor's fault. the debtor can ask for resolution plus damages.-.-- Art. right to choose is always with debtor? A: NO. generally the debtor chooses which one. B. to make use of such period (1198)   D. unlawful or w/c could not have been the object of the obligation. 1200. Tolentino: The characteristic of alternative obligations is that. The choice shall produce no effect except fr. Q: In conjunctive. 1202. plaintiff’s action must be in alternative form. The better reason would be to give the creditor a chance to prepare for the performance. those remaining. if facultative. several objects being due.Art. 1203. he has to communicate his choice to the debtor. the latter may rescind the contract w/ damages. Q: What if debtor has rt. The right of choice belongs to the debtor. rt. Simple Balane: Requirement of Communication of choice  If the choice belongs to the creditor. The debtor is not a prophet. 1204. OR OTHER UNEQUIVOCAL MEANS. through the fault of the debtor. the obligation is extinguished. (Art. When only one prestation is left (whether or not the rest of the prestations have been lost through fortuitous event or through the fault of the debtor). d. if the substitute becomes impossible d/t fault of debtor the Ø is not affected.  The same rules shall be applied to obligations to do or not to do in case one. 1205. the choice of the creditor shall fall upon the price of any of them. When the choice has been expressly given to the creditor. f. As to nullity the nullity of one prestation does not invalidate the obligation.Art. the obligation is extinguished. the obligation is extinguished. (2) If the loss of one of the things occurs through the fault of the debtor. 1206. the creditor may choose fr.Art. Balane:  Facultative obligations choice by the debtor. debtor cannot be compelled to perform the substitute (no more substitute. the remainder or the value of the things lost plus damages. If all but one are lost through the fault of the debtor & the last one was lost through fortuitous event. Only One prestation is DUE and enforceable by the creditor at the time of choice. w/ a right to damages. the nullity of the principal prestation invalidates the obligation & the creditor cannot demand the substitute even when this is valid only the debtor can choose the substitute prestation. but the obligor may render another in substitution. the latter is liable to indemnify the creditor for damages. If all are lost through fortuitous event. the obligor is liable for the loss of the substitute on account of his delay. the obligation is called facultative.-. the impossibility of the principal prestation is sufficient to extinguish the obligation. . those remaining. supra. it is difficult to distinguish the two. parts of the obligation g. the choice by the creditor shall fall upon the price of any one of them. becomes simple) – extinguished. Ø is not extinguished but has become a simple Ø that must be performed. 1205 (1) b. an alternative one. it is easy to distinguish a facultative obligation fr. If principal Ø becomes impossible by fault or negligence of creditor. or that w/c remains if only one subsists. supra. w/c is still in force w/ respect to those w/c have no vice As to choice the right to choose may be given to the creditor only the impossibility of all the prestations due w/o fault of the debtor extinguishes the obligation 2. or the price of that w/c. When only one prestation has been agreed upon. has disappeared. the day when the selection has been communicated to the debtor. But once the substitution has been made. 1205 (3). Facultative obligations: Art. Alternative As to contents of the obligation Alternative Ø there are various prestations all of w/c constitute constitutes the obligation. through the fault of the former. Distinguished fr. the obligation is extinguished.-. & the remaining prestation was lost through the debtor's fault. the creditor may choose fr. does not render him liable. If some are lost through the creditor's fault. 1205 (2). some or all of the prestations should become impossible. thus no damages. w/ indemnity for damages. If after choosing the substitute and choice is communicated to creditor. and he will be liable for damages in delay. the obligation shall cease to be alternative fr. the remainder.f. among the remainder. neglect or bad faith. through the negligence of the obligor. the principal prestation becomes impossible.  c. But in practice.Art. Until then the responsibility of the debtor shall be governed by the following rules: As to effect of loss (1) If one of the things is lost through a fortuitous event. e. You just have to find out what the parties really intended. also w/ indemnity for damages. the accessory being only a means to facilitate payment. he shall perform the obligation by delivering that w/c the creditor should choose fr. If one or some are lost through fortuitous event. the creditor has choice fr.-. If all are lost through the debtor's fault. even if the substitute is possible Facultative Ø only ONE principal prestation 18 always involve In theory.  a. negligence or fraud. The loss or deterioration of the thing intended as a substitute. If all prestations but one are lost through fortuitous event. the creditor may claim any of those subsisting. If one or some are lost through the debtor's fault.  (3) If all the things are lost through the fault of the debtor. Tolentino: Facultative vs. If all are lost through the creditor's fault. Choice is the creditor's Art. (Manresa) Art. Art. the defense of res judicata is not extended fr. there are as many obligations as there are debtors multiplied by the number of creditors. individually and jointly. debtor is liable for damages  here w/respect to damages." used by 2 or more signers. The indivisibility of an obligation does not necessarily give rise to solidarity. 1210. 4. 2008 CLASS] generally be given the choice to whom shall he give payment. 3. Tolentino: The joint obligation has been variously termed mancomunada or mancomunada simple or pro rata. A joint indivisible obligation gives rise to indemnity for damages fr. If there is plurality of creditors to only one debtor. although they are each for his part. 1209.  Delivery to only one creditor makes the debtor liable for damages to the other debtors for nonperformance. unless they have authorized this one creditor to collect in their behalf. produces the effects of default only w/ respect to the creditor who demanded & the debtor on whom the demand was made. 3. Indivisible Obligations Balane: A joint obligation is one in w/c each of the debtors is liable only for a proportionate part of the debt or each creditor is entitled only to a proportionate part of the credit. one another. Joint Obligations b. a partial payment or acknowledgement made by one of several joint debtors does not stop the running of the statute of limitations as to the others. presumption is joint. INDIVISIBILITY SOLIDARITY Refers to the prestation. individually and collectively. If one of the latter should be insolvent.  the Ø here is joint even if the performance is indivisible. The vices of each obligation arising fr. court cannot amend. each creditor may recover proportionately. 2. creates a pro rata liability (JOINT). Arts. The demand by one creditor upon one debtor. and each is liable only for his proportionate part of the Ø. the personal defect of a particular debtor or creditor does not affect the obligation or rights of the others. the credit or debt shall be presumed to be divided into as many equal shares as there are creditors or debtors. the right of the creditors may be prejudiced only by their collective acts. Effects of Joint Liability: 1. JOINT character is PRESUMED: WHEN no stipulation as to liability of several debtors. nor does it authorize a creditor to demand anything fr. the other shall not be liable for his share. The interruption of prescription by the judicial demand of one creditor upon a debtor. Art. the credits or debts being considered distinct fr. There are three kinds of joint obligations: 1) Active joint  where the obligation is joint on the creditor's side.  If only one or some. 1207-1222] Example: A binds himself to pay P100 either to X or Y  A or B will pay 100 to X. Art. the liability of the defendants in joint. 5. 2) Passive joint  where the obligation is joint on the debtor's side. The debtors who may have been ready to fulfill their promises shall not contribute to the indemnity beyond the corresponding portion of the price of the thing or of the value of the service in w/c the obligation consists. (GR) the Ø can be performed by delivery of the object to all the creditors jointly. & the debt can be enforced only by proceeding against all the debtors. not all creditors demand fulfillment the debtor may refuse to deliver and insist that all the creditors together receive the thing. and on side of creditors. collective action required for acts whc may be prejudicial. & 3) Multiple Joint  where there are multiple parties on each side of a joint obligation. whc is not capable of partial performance Refers to the legal tie or vinculum defining the extent of liability Effects to Joint creditors Each cannot demand more than his share Each may demand the full prestation Effects to joint debtors Each is not liable for more than his share Each has the duty to comply with entire prestation J/FO of court as to several defendants when solidarity has not been specified. there are 2 or more creditors and 2 or more debtors but they are named disjunctively as debtors and creditors in the alternative. Delivery of a house or a determinate thing. AS TO RIGHTS & Ø’s OF MULTIPLE PARTIES: [Joint & Solidary Obligations.  Consent required.  fulfillment requires the concurrence of ALL debtors. In the joint divisible obligation. but not w/ respect to the others. If the division is impossible. his co-creditors. one debtor to another. or the nature or the wording of the obligations to w/c the preceding article refers the contrary does not appear.  In non-performance. the time anyone of the debtors does not comply w/ his undertaking. subject to the Rules of Court governing the multiplicity of suits. In joint obligations. must still communicate choice after consensus In P/N the phrase "We promise to pay. If fr. the law.[JULY 3. Disjunctive Ø: not covered by NCC. On the same principle. 1208. the prestation becomes divisible. Nor does solidarity of itself imply indivisibility. The insolvency of a debtor does not increase the responsibility of his co-debtors. 1224. if not consignation to the court may be had. * rules on solidary Øs must apply  b/c if rules on alternative Øs will be applied then the debtor will Q: Is an Ø-not do divisible or not? No (Tolentino) 19 . does not benefit the other creditors nor interrupt the prescription as to other debtors. While “I promise to pay” followed by signatures of 2 or more persons – solidary. Joint Indivisible Ø: there are several debtors or creditors but the prestation is indivisible  Ex. a. or that each one of the latter is bound to render. he can recover fr. cooperate in. 1. 19-22. RPC. conspiracy. NCC Balane: A solidary obligation is one in w/c the debtor is liable for the entire obligation or each creditor is entitled to demand the whole obligation. & Art. Art. countenance. the extinguishment of the obligation by prescription extinguishes also the mutual representation among the solidary debtors. per stirpes by rt. Each creditor may renounce his right even against the will of the debtor.  Where there are no words used to indicate the character of a liability. Characteristics of Active creditors): (Tolentino) Solidarity (solidary ESSENCE  mutual agency. Each creditor represents others in the act of requiring payment. NCC. but the renunciation by one debtor of prescription already had does not prejudice the others. aid or abet the commission of a tort. of the nature of the obligation. their liability should be solidary bec. if he receives only a partial payment. akin to mutual guaranty (Manresa): (2) when a will expressly makes charging or a condition in solidum. the phrase "I promise to pay. w/d resulting Ø to pay ea one what belongs to him. (4) nature of the obligation requires solidarity – Art.  Art. Art. after it is done. instigate. In these cases. If there is only one obligation. 1207. 2157. Art. (2) Passive solidarity where there is one creditor w/ several debtors solidary bound. The debtor who is required to pay may set up by way of compensation his own claim against 2. in torts – joint tortfeasors  The liability of joint tortfeasors. & the latter need not thereafter pay the obligation to the former. of Passive Solidarity (solidary ESSENCE  ea debtor can be made to answer for the others. or who approve of it. Balane: Q: When is an obligation w/ several parties on either side Joint or Solidary? A: The presumption is that an obligation is joint bec. 5. & in all other acts w/c tend to secure the credit or make it more advantageous. 3. the death of a solidary creditor does not transmit the solidarity to each of his heirs but to all of them taken together.A: Ø-not do when there are several debtors. encourage. Characteristics debtors): There is solidary obligation in the ff. w/resulting right to the debtor-payor to recover fr others their respective shares. is a joint indivisible Ø. 3. 20 . bec. compensation & remission (even if the credit becomes more advantageous). gives rise to an individual or solidary responsibility. judicial or extrajudicial is made on him. 1214). whc consists in the authority of ea creditor to claim & enforce the rts. even if the debtor is released.  (Similar to Art. Debtor may pay any of the creditors but if any demand. the co-debtors their respective shares (this is something similar to subrogation). Active Solidarity 2. or when the law or the nature of the obligation requires solidarity. for the benefit of all other creditors. 10. thus must be solidary." (5) imposed by final judgment upon several defendants – must be expressed in the JFO. act or 1 is act of all. the other creditors can still enforce their rights against the creditor who made the novation. There are three kinds of solidarity: (1) Active solidarity where there are several creditors w/ one debtor in a solidary obligation. (Tolentino) 1.&sisters of decedent inherit in their own rt. Solidary obligations  Liability may arise fr. cannot be amended after finality. he must divide it among the other creditors. 6. compensation or remission. w/c include all persons who command. he must pay only to the one demanding payment (Art. 1005 where bros. Hence. (3) Mixed Solidarity where there are several creditors & several debtors in a solidary obligation. If 2 or more persons acting jointly become liable under these provisions. a joint obligation is less onerous that a solidary one. akin to QD/QC (2183 & 2187) c. of representation. promote. entire compliance w/ the prestation.1.: (1) when the obligation expressly so states – stipulation by parties. Solidarity may exist although the creditors & the debtors may not be bound in the same manner & by the same periods & conditions. 1211. A credit once paid is shared equally among the creditors unless a different intention appears. Since it is a reciprocal agency.  The words "individually & collectively" also create a solidary liability. it is a solidary obligation. Each debtor may be required to pay the entire obligation but after payment. or mutual representation. The concurrence of two or more creditors or of two or more debtors in one & the same obligation does not imply that each one of the former has a right to demand. (3) when the law requires  crimes. Tolentino:  Solidary obligations may also be referred to as mancomunada solidaria or joint & several or in solidum. advise." followed by the signatures of 2 or more persons.) c. Interruption of prescription as to one debtor affects all the others. 2194. 4. xxx The acts giving rise to liability under these articles have a common element-they are morally wrong. Of all.  a moral wrong cannot be divided into parts. There is solidary liability only when the obligation expressly so states.  It has also been held that the terms "juntos o separadamente" in a promissory note creates a solidary responsibility. One creditor does not represent the others in such acts as novation. per capita while nephews & nieces. the provisions of articles 19 to 22 of the NCC. So does an agreement to be "individually liable" or "individually & jointly liable. He can interrupt the period of prescription or render the debtor in default. if done for their benefit. upon happening however. or by fortuitous event after one of the debtors has incurred in delay. for instance a suspensive condition or a suspensive period." "separately.of co-creditors whc subsists and may be enforced vs such creditor who performed the act alone. interrupt prescription. BUT." the same is therefore enforceable against one of the numerous obligors. creditors may still demand for fulfillment of the whole prestation prior to the happening of the condition or arrival of the term." "respectively" or "severally. Each one of the solidary creditors may do whatever may be useful to the others. by changing only the terms of payment and adding other Øs not incompatible w/the old one. an action may be brought vs. Is sureties who are solidarily liable w/other debtors but binds themselves to varied conditions distinct fr the principal debtors." An agreement to be "individually liable" undoubtedly creates a several obligation. like remission. payment should be made to him. but when this remission affects only the share of one debtor. 1212 & 1215. merger or confusion  but such provision in 1212 conflicts w/ 1215. xxx [T]he phrase juntos or separadamente used in the P/N is an express statement making each of the persons who signed it individually liable for the payment of the full amount of the obligation contained therein. In an compromise agreement approved by the court. but not w/respect to the rts. Inc. RONQUILLO V. HELD: While it is true that where the insurance contract provide for indemnity against liability to 3rd persons.al. Varied  where obligors. has been made by one of them. Art." "distinctively. et. 21 . bring suit so that Ø may produce interest CASE: An agreement to be “individually liable” or “individually and jointly” liable denotes a solidary obligation. asking for full payment.) Collection for sum of money Acts prejudicial: solidary creditor cannot do anything prejudicial to the others. the direct liability of the insurer under the indemnity contracts against TPL does not mean that the insurer can be held solidarily liable w/ the insured &/ or the other parties found at fault. 6. the effect is the same as that of payment. CASE DOCTRINE: The direct liability of the insurer under indemnity contracts against TPL does not mean that the insurer can be held solidarily liable w/ the insured &/ or the other parties found at fault. The debtor may pay any one of the solidary creditors. and his vicarious (2 principal tortfeasors) ER. The liability of the insurer is based on contract. are nevertheless not subject to same terms and conditions. against 3rd party liability-. Yulo. 1212. he can do an acts prejudicial to the other creditors. whc is prejudicial to co-creditors. 1213. in this case." Ronquillo and Tan were already trying to pay their share of the Ø. that of the insured is based on tort. constitute a debtor in default. nor more burdensome. 1215. but the creditor refused. the Ø of surety may not be greater than that of ea principal debtor. Acts beneficial: each solidary debtor may." Balane: There is an apparent conflict bet. CA [165 S 536] FACTS: Collision of a Jeep and a Pantranco Passenger BUS JEEP: driver – Campollo is an EE of San Leon Rice Mill. 1212 states that the agency extends only to things w/c will benefit all co-creditors. 5. before fulfillment of such condition or arrival of such term.this will result in a violation of the principles underlying solidary obligations & insurance contracts. Tolentino: Harmonize 1212 & 1215 by  such acts of extinguishment. 34 Phil 978. xxx In the absence of a finding of facts that the defendants made themselves Art. but if any demand. 1908] Art. minus the share of this debtor bound by varied condition/term. however. All the debtors are liable for the loss of the thing due. The term "individually" has the same meaning as "collectively.such debtor or any other solidary debtor for recovery of the entire Ø. The total remission of the debt in favor of a debtor releases all the debtors. CA [132 S 274. although liable for the same prestation. the defendants obligated themselves to pay "individually & jointly. [Inchausti & Co. this portion may be claimed by creditor from any of the debtors.the creditor. Liability of Malayan – culpa contractual (liability is direct but not solidary) Liability of Jeep Driver  QD. 4. the defs. obligated themselves to pay their obligation "individually & jointly.  when one of solidary debtors is bound by varied terms and conditions. HELD: Clearly then. novation. but not anything w/c may be prejudicial to the latter. This latter portion may be demanded from anyone of the debtors soon as the term arrives or condition happens. not a joint liability. they are each liable only for 1/2 of said amount. 1214. The interests due by reason of the delay of one of the debtors are borne by all of them. will be valid so as to extinguish the claim vs. even if such loss is caused by the fault of only one of them. such 3rd persons can directly sue the insurer.  EX.under w/c an insurer can be directly sued by a 3rd party-. in accord w/d compromise agreement. But not anything w/c is prejudicial to the latter. In Art. minus the portion corresponding to the debtor affected by the varied condition or term.  An Ø to pay sum of money is not novated in a new instrument wherein the old is ratified. The obligation in the case at bar being described as "individually & jointly. Art. 28. & a "several obligation" is one by w/c one individual binds himself to perform the whole obligation. by the express term of the compromise agreement & the decision based upon it. individually liable for the debts incurred. 1983] FACTS: 1 creditor (Antonio So) and 4 debtors (Ronquillo. compensation. like remission for instance. Owner of jeep is Sio Choy Insurer of jeep (TPL) is Malayan BUS: passenger VALLEJOS was injured and sues for damages Legal Bonds in solidarity may be uniform or varied: Uniform  when debtors are bound by same conditions and clauses. v. MALAYAN INSURANCE V. A solidary creditor cannot assign his rights w/o the consent of the others. the other debtors are still liable for the balance of the obligation. Sept. debtors. Art. judicial or extrajudicial. For if petitioner-insurer were solidarily liable w/ said 2 respondents by reason of the indemnity contract. debtors. this creditor is liable to cocreditors for their shares. Exception  If demand is made by one creditor upon the debtor. in w/c case the latter must pay the demanding creditor only. co-creditors and debtor/s not bound by such transfer. tacit mutual representation is deemed revoked. Passive Solidarity Tolentino warns that to make the debtors pay for the whole amount to the demanding creditor even if partial payment has already been made to another creditor might amount to unjust enrichment. his responsibility towards the co-debtors. 2.g. there may already be an agreement on the part of the creditors. releases the other debtors. if the assignee is also one of the cocreditors. par. suit filed by him may not interrupt Rx. A makes a demand on Y. Creditor A makes demand on debtor Y  Does it mean that he cannot pay the share pertaining to creditor B? A: According to commentators he can. When merger & compensation is total there is extinguishment of the Øs. Extra-judicial Demand  same as above. thus one creditor cannot assign/transfer his rts to another w/o consent of the others. 1241. Art. assumes the debt. the extent of that particular Ø is extinguish. 1219. shall extinguish the obligation. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. 1213 places unjustifiable and unnecessary burden on the rts of solidary creditors upon his own share.  EXCEPT.  plaintiff-creditor merely consolidates in himself the representation of all the others. or collectively. This rule/restriction has already been scrapped in some modern civil codes allowing freedom of choice to the debtor even after demand. Mere extension of time given by creditor to a solidary debtor does not release others from the Ø  no novation here. Q: There are three creditors A. so long as the debt has not been fully collected. as in installment payments. compensation. he retains the solidary Ø & becomes a surety of the whole Ø. made by any of the solidary creditors or w/ any of the solidary 22 . Art. 1215. A: This is not covered by Art. if partial tho. no rts. debtor may choose to whom to pay. But this debtor cannot bind himself to a new debt w/o the consent of others. X pays B. A surety who is bound in solidum will be released by any material alteration in the principal contract made w/o knowledge & consent of surety.  payment made by this assignee will not extinguish Ø. they shall be solidarily liable to the agent for all the consequences of the agency. only reimbursements remain. the total amount due even if he paid the entire amount due to that creditor. 1214  This is considered payment to a third person (Art. When 1 creditor makes a remission. The article shd have read as:  A solidary creditor who assigns his rts w/o the consent of his co-creditors shall answer subsidiarily for any prejudice caused by the assignee in connection w/ d credit assigned. otherwise if promised only. 1216. the relation bet. if they demand at d same time. If two or more persons have appointed an agent for a common transaction or undertaking. Y & Z. The demand made against one of them shall not be an obstacle to those w/c may subsequently be directed against the others. Effects of Unauthorized Transfer: no effect. assignee does not become solidary creditor. this debtor is released fr solidary Ø. Factors to consider in Effects of Acts under 1215: 1. 1214. prejudice to the provisions of article 1219. When remission favors only one debtor. Art. unless surety’s liability is varied. but actually consolidates in him all the Art. Q: If a judgment made in an action brought by a solidary cretditor vs a solidary debtor will it be res judicata vs the co-debtors? A: A favorable judgment that inures to the benefit of the co-creditors will be res judicata as to the latter. w/o The creditor who may have executed any of these acts. The new contract binds only the debtor who secured the novation. Dation in payment by one debtor extinguishes as in payment if made immediately.  Defendant-debtor shd pay to d plaintiff-creditor to effect extinguishment. Of payments shd govern. applic. in full share. but the essence of solidarity of creditors shd not be nullified. in case the debt had been totally paid by anyone of them before the remission was effected. Other Instances: Debtor upon whom demand was made pays to a creditor other than the one who made the demand in violation of Art.  Liability was compared to agent&principal. Creditors and that of debtors. If creditor makes the novation w/one debtor and does not secure consent of other debtors. Novation. Baviera:   Principals are always liable solidarily. extension of time. Agents are not liable solidarily unless expressly stipulated (res inter alios acta) b. the latter is released. e. debtor shd pay the one who notified him 1st .Tolentino: Mutual agency whc is the essence of active solidarity. 1915. if partial. 2) & the debtor can still be made to pay the debt. An adverse judgment would have the same effect if the action of the plaintiff-creditor is not founded on a cause personal to him. confusion or remission of the debt. this is a novation. But this is dangerous bec. implies mutual confidence. b/c mutual confidence is incumbent. The only concession given to the debtor is that he is allowed to deduct the share of the receiving creditor fr. Tolentino: Novation  A solidary debtor binds himself alone. The remission made by the creditor of the share w/c affects one of the solidary debtors does not release the latter fr. Justice JBL REYES: Art. Balane: General Rule  A debtor may pay any of the solidary creditors. transferred. demand by several creditors separately. as well as he who collects the debt. payment to any of other creditors who did not sue would be deemed payment to a 3rd person. shall be liable to the others for the share in the obligation corresponding to them. Tolentino: Judicial Demand  when such is made by one of solidary creditors. B & C & there are three debtors X. the relation among co-debtors themselves. 1216 would. When one of the solidary debtors cannot. he (the creditor) may. Art. INDEPENDENT PLANTERS [122 SCRA 113] FACTS: PNB’s complaint vs. The remission made by the creditor of the share w/c affects one of the solidary debtors does not release the latter fr. this provision diminishes the Bank's right under the NCC to proceed against any one. solidary guaranty only to the extent of contract stipulations/as expressed Subsidiary releases the surety He who made the payment may claim fr. while the latter.000 fr. 1424). one of defendants (Ceferino Valencia) died during the pendency of the caase after plaintiff had presented its evidence. if he so chooses.If Sec. the court where said case is pending retains jurisdiction to continue hearing the charge as against the surviving defendants. Obviously. except perhaps under solutio indebiti. If two or more solidary debtors offer to pay.  Generally. the former being merely procedural. neither could he recover fr the creditor to whom he paid (Art. A judgment that declares the Ø does not exist extinguished the Ø the defendant-debtor. (2) both may require reimbursement If surety binds itself in solidum. Move to dismiss the money claim in accord w/ Rule 86 ROC. EXCEPT: If payment was made after the Ø prescribed or become illegal (mistake or not). Sec. notwithstanding plurality of subjects. (1) both stands for some other person. in case the debt has been totally paid by anyone of them before the remission was effected. Q: Can A demand the P9. Balane: Effect of Remission. 1218. reimburse his share to the debtor paying the obligation. If the payment is made before the debt is due. unless the cause is personal to the defdebtor.   Distinctions Since in solidarity.6 Solidary Ø of decedent – where directs that the claim shd be filed vs the estate of the decedentdebtor w/o prejudice to rt. Y? 23 . PNB V. 1216 is the applicable provision in this matter.  Thus. w/ the interest for the payment already made. petitioner has no choice but to proceed against the estate of Manuel Barredo only. no interest for the intervening period may be demanded. Y & Z are indebted to A for P12.000) Q: Can Y be sued? A: Yes.Problem: Solidary debtors W. Art. Said provision gives the creditor the SUBSTANTIVE right to proceed against anyone of the solidary debtors or some or all of them simultaneously. ROC were applied literally.several solidary debtors for collection of sum of money.000 less P3. d surviving defs. Suretyship –  of by SURETY CASE: If one of the alleged solidary debtor dies during the pendency of the collection case. In case of the death of the solidary debtors. creditor may go vs. 1217. (Tolentino)  similarly translated as to co-debtors. and such decision inures to the benefit of codebtors. in effect. ISSUE: WON death of one solidary debtor-defendant deprives the court of ju’s to proceed w/d case vs. 6 of Rule 86 cannot be made to prevail over Art.000.. 1219. Art. bec.-. in proportion to the debt of each. Rules of Procedure cannot prevail over substantive law. such share shall be borne by all his co-debtors. proceed against the surviving solidary debtors w/o necessity of filing a claim in the estate of the deceased debtors. anyone of them. 1216. (1218)  After the Ø has prescribed or becomes illegal. being a money-claim based on ©? Tolentino: Payment by one solidary debtor in whole – extinguishes the Ø and releases the credit  gives rise to a new Ø for reimbursement by the other debtors to this one debtor who paid (JOINT Ø).000 (P12. Payment made by one of the solidary debtors extinguishes the obligation. The choice is undoubtedly left to the solidary creditor to determine against whom he will enforce collection. His liability in case of insolvency of one co-creditor is not affected. if one debtor pays. his codebtors only the share w/c corresponds to each. his co-debtors if such payment is made after the obligation has prescribed or become illegal. Payment by a solidary debtor shall not entitle him to reimbursement fr. sec. some or all of the solidary debtors. Such a construction is not sanctioned by the principle xxx that a substantive law cannot be amended by a procedural law. None of the solidary debtors can be compelled by the creditors to pay. 6. of d estate to go vs the other debtors for reimbursement.000 share of Y) his share was remitted but not the solidary Ø Tolentino: Passive Solidarity vs. for the P9. Rule 86.-. It is not mandatory for him to have the case dismissed against the surviving debtors & file its claim in the estate of the deceased solidary debtor. plaintiff creditor may be properly substituted by the debtor who paid. Otherwise stated. PASSIVE SOLIDARITY Solidary debtors Extent Liability of Liability Effects of Extension of time granted by creditor whole Ø Primary solidary remains Ø Extension Time given creditor does not release a solidary debtor (novation) Suretyship liable only as to his own Ø Subsidiary liability releases a solidary guarantor or surety (extinguishment) Art. Held: It is crystal clear that Art. of his insolvency. the creditor may choose w/c offer to accept. there is unity of legal tie. A remits the share of Y (P3. substantive. Defs. X. his responsibility towards the co-debtors. it is no longer due & demandable. he cannot reimburse fr his co-debtors b/c his action will not revive the inexistent Ø. Remission will benefit Y only in so far as his share is concerned. be repealed since under the ROC.rts.as well of his co-creditors. (1216) Similarity: Passive Solidarity Solidary debtor is liable for his own Ø & that of his co-debtors’ Primary liability Q: Supposing X is insolvent? A: Y can still be made to contribute. may W still demand reimbursement of Y’s share? A: Yes. Thus.e. Divisible obligation is one susceptible of partial performance. A: Yes. If through a fortuitous event. Y could be compelled to contribute 1000 as to the insolvency of X.g. fraud. total defense. unenforceability under the Statute of Frauds. 3. suspensive condition or period as to the Ø of one co-debtor.e. i. Those defenses personal to other codebtors. 1.  The thing may be divisible but the Ø may still be indivisible. If it involves a special term or a condition. inheritance. par. 1223. But he can recover the same fr. Guilty debtor shoulders the amount of damages though.1378). or limits may be set if immovable. in actions filed by the creditor. each of the agents is responsible for the nonfulfillment of the agency. the creditor cannot be compelled partially to receive the prestations in w/c the obligation consists. his co-debtors. here. An indivisible obligation is one that must be performed in one act. the obligation shall be extinguished. as in proindiviso co-owners. With respect to those w/c personally belong to the others.    Tolentino:  When division would diminish the value of the whole  QUALITATIVE. defense as to the share corresponding to other debtors is a partial defense.e. when parts are not separated materially.000. then Ø is extinguished. 1.) Effects of 1221 limited to non-performance b/c of loss of d thing or impossibility of prestation that’s due  if such is d/t FE. non-happening of condition. there’s nothing more to remit in Y’s favor. The remission of the whole obligation.. General rule: Obligation is indivisible w/c means that it has to be performed in one act singly. vitiated consent. insanity  If it involves vitiation of consent. creditor may also recover damages. a. i. i.  QUANTITATIVE. If debtor is at fault on the loss/impossibility. e. 1895. no debtor is liable.g. A solidary debtor may. his codebtors will pay him their equivalent share in the original Ø. Neither may the debtor be required to make partial payments. AS TO PERFORMANCE OF PRESTATION If there was fault on the part of any one of them. Balane: Three Defenses of Solidary Debtor: Art.  IDEAL. prescription. avail himself of all defenses w/c are derived fr. The divisibility or indivisibility of the things that are the object of obligations in w/c there is only one debtor & only one creditor does not alter or modify the provisions of Chapter 2 of this Title (Nature & Effect of Obligations). when the thing divided is homogeneous and may be separated into parts if movable. 4. e. Those defenses personal to the debtordefendant. & for the fault or negligence of his fellow agents. 24 . Test of Divisibility: WON it is susceptible of partial performance. extinguished Ø d/t payment. remission. but assigned to several persons. he will not shoulder the whole amount.. obtained by one of the solidary debtors. e. w/o fault or delay on any debtor. he cannot recover fr his co-debtors (if there was loss/imp). Art. the nature of the obligation is a total defense. & not to the thing. for the price & the payment of damages & interest. Q: If W paid the whole debt before A remits Y’s share. 1222. In case of non-performance without loss of the thing/has not become impossible: but there is delay. or pertain to his own share. performance bonds here may also be termed as such.000 and X and Z were suppose to reimburse him 3000 ea. 1220.  Or thing is indivisible but performance is divisible. he may avail himself thereof only as regards that part of the debt for w/c the latter are responsible. e. If guilty debtor is made to pay by demand of creditor. gratuitous acts shd be construed restrictively as to permit the least transmission of rts (Art. Art. Q: After A remits share of Y. fault or negligence. the thing is lost or the performance has become impossible after one of the solidary debtors has incurred in delay through the judicial or extrajudicial demand upon him by the creditor. the law provides so: Unless there is an express stipulation to that effect. 2.g. if guilty debtor pays. the provisions of the preceding paragraph shall apply. xxx (Art. the nature of the obligation & of those w/c are personal to him. when the thing is not really homogeneous. Balane:  This kind of obligations has something to do w/ the performance of the prestation. 1221. Those derived fr. Art. W. If another co-debtor pays the whole amount he could recover fr his co-debtors. w/o prejudice to their action against the guilty or negligent debtor. arrival of resolutory period. or some other breach of Ø. stage-by-stage construction of a public road where obligor may deliver every 15% of work done and collect its proportionate cost from govt agency concerned. If the thing has been lost or if the prestation has become impossible w/o the fault of the solidary debtors. May Y be compelled to contribute to the share of X? A: Yes (Manresa and Tolentino). all shall be responsible to the creditor. Or if in delay even b4 d loss/impossibility  the Ø is converted to indemnification (of the price. Divisible Obligations Art. 1248. he will shoulder the whole amount of the loss thing + indemnity. Upon W’s full payment the entire Ø was extinguished. X then becomes insolvent. except in the latter case when the fellow agents acted beyond the scope of their authority.. 1219. does not entitle him to reimbursement fr. X & Z. illegality of obligation (illicit object). Art. damages & interests).g. if W paid 9. Y will not be released from his solidary Ø. a partial defense. W pays in full the remaining 12. Why? Bec. If solidarity has been agreed upon. Ø to deliver 100 sacks of jasmine rice found in Warehouse of specific address on a fixed date (determinate Ø). if one debtor is insolvent. If the servient estate is divided between two or more persons. Indivisibility: Solidarity Refers to vinculum. 2.  THUS. The debtors who may have been ready to fulfill their promises shall not contribute to the indemnity beyond the corresponding portion of the piece of the thing or of the value of the service in w/c the obligation consists. Divisibility of Obligation distinguished fr. 1209 has established the necessity of COLLECTIVE FULFILLMENT and the action must be against all the debtors.) 2. 1224. 3. 4.  Divisibility of object is not the same as divisibility of obligation. 1. separate items partly enforceable if not illegal. (2) Creditor accepts. the easement is not modified. the indivisibility ceases to exist. © not affected b. (1) By virtue of its object Art. Statute of Frauds must be in writing TOLENTINO: To enforce a Joint Indivisible Ø. they all remain liable for indemnity Death of debtor terminates solidarity SEVERABLE © apportioned (expressly/implie d) several. nature of the thing. the right of the creditors may be prejudiced only by their collective acts. The indivisibility of an obligation does not necessarily give rise to solidarity. par. 1248. Indivisibility of object means an indivisible obligation. Where the law provides otherwise. If the division is impossible. despite partial performance. and principally to the subjects of Ø Requires plurality of subjects Solidarity remains even in case of breach of one. & each of 25 . objective or purpose of stipulated prestation. & the debt can be enforced only by proceeding against all the debtors. distinct. 1209. When a part is illegal One void undertaking whole © unenforceable void © Viz. each debtor becomes liable for his part of indemnity indivisibility affects the heirs of a decedent debtor. Art. (Arts. without protest  Ø is deemed fully performed. when work is agreed to be by units of time or measure. Easements are indivisible. with knowledge of incompleteness. partial payment based on quantum meruit is not availed. it shall be divisible. even though the object or service may be physically divisible.  in case of non-performance by any of the debtors. 2. the time anyone of the debtors does not comply w/ his undertaking. the other debtors will no longer be liable for his share. obligations to give definite things & those w/c are not susceptible of partial performance shall be deemed to be indivisible. or otherwise susceptible of partial performance = divisible  In indivisible Ø. Indivisible Obligations Art.Three Exceptions to the Rule on Indivisibility: 1. 1210.  But the reverse is not the same. Consideration ENTIRE © single Prestation/s However. Indivisibility refers to the prestation or the object of the Ø Art. provisions of law affecting the prestation  In Øs to give. minus the damages suffered by creditor. indivisibility is presumed. In obligations not to do. or analogous things w/c by their nature are susceptible of partial performance. then valid covenants may be enforced if separate chattels may be sold below limits set by Statute of Frauds. If one of the latter should be insolvent. divisibility of object:  Divisibility of obligation or prestation does not necessarily mean a divisible obligation. whc may be expressed or presumed. (Art. The entire liability for all damages is shouldered by the defaulting debtor. partial performance is equal to non-performance. will or intention of the parties. 1233 and 1248 forbids partial fulfillment) “Work half done is worst than work undone!” Exceptions: (1) Ø has been substantially performed in good faith  debtor may recover as if there had been complete performance. the others shall not be liable for his share. or fails to pay his share. even when the sumtotal exceeds. When the parties so provide. the accomplishment of work by metrical units. Solidarity vs. they remain to be bound to perform the same prestation Factors to Determine Whether Ø is Divisible or not: 1. When the obligation has for its object the execution of a certain number of days of work. A joint indivisible obligation gives rise to indemnity for damages fr. 3. Thus. Art. the Ø is converted into liability for losses & damages = DIVISIBLE. Art. For the purposes of the preceding articles. an obligation is indivisible if so provided by law or intended by the parties. 1225. When the nature of the obligation necessarily entails performance in parts. 618. plurality not req’d Examples of Indivisible Obligations: when Ø is converted to liability for damages. Nor does solidarity of itself imply indivisibility. except: 1. divisibility or indivisibility shall be determined by the character of the prestation in each particular case. AS TO THE PRESENCE OF AN ACCESSORY UNDERTAKING IN CASE OF BREACH: The debtor.A penal clause is an accessory undertaking to assume greater liability in case of breach." Notice the word clearly (not explicitly) w/c means that the right can be clearly granted by implication. Art. 1714. damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation. Thus. and should they fail to do so. whether the breach of contract is so material as to justify the injured party in refusing to proceed further & suing for damages for breach of the entire contract. in w/c case each of the latter may only redeem the part w/c he may have acquired. Art. 1227. However. second sentence: "xxx unless this right has been clearly granted him. 26 . Unless there is an express stipulation to that effect. or making it more burdensome in any other way. the vendee cannot be compelled to consent to a partial redemption. Characteristics of Penal Clause: 1. there being several things given in mortgage or pledge. material furnished by him. (3) Express agreement Neither can the creditor's heir who received his share of the debt return the pledge or cancel the mortgage. Where there is a contract of sale of goods to be delivered by stated installments. The purpose is to strengthen the coercive force of the obligation. if there is no stipulation to the contrary. From these provisions. the creditor cannot be compelled partially to receive the prestations in w/c the obligation consists.in case of breach. 5. none of them may exercise this right for more than his respective share. A pledge or mortgage is indivisible. Therefore. When a penal clause is present. should sell an undivided immovable w/ a right of repurchase. the debtor's heir who has paid a part of the debt cannot ask for the proportionate extinguishment of the pledge or mortgage as long as the debt is not completely satisfied. 1612. each of them may use the easement in its entirety. damages do not have to be proved. 1248. In the case of the preceding article. it is expected the case in w/c. Art. Subsidiary (also called alternative)  upon nonperformance.-. the penalty shall substitute the indemnity for damages & the payment of interests in case of non-compliance. 2090. If the contractor agrees to produce the work fr. the creditor may demand & the debtor may effect the payment of the former w/o waiting for the liquidation of the latter. 1583. 2089. Neither may the debtor be required to make partial payments. In obligations w/ a penal clause. 588. & the seller makes defective deliveries in respect of one or more installments. a. to the prejudice of the other heirs who have not been paid. Art. each one of them guarantees only a determinate portion of the credit. w/c are to be separately paid for. or the buyer neglects or refuses w/o just cause to take delivery of or pay for one or more installments. 1226. 26 Phil. 1613. The same rule shall apply if the person who sold an immovable alone has left several heirs. w/o changing the place of its use. Unless otherwise agreed. Exception: Where penalty is joint (cumulative) where both the principal undertaking & penalty may be demanded -Art. when the debt is in part liquidated & in part unliquidated. Balane: Articles 1226 to 1230 on obligation w/ a penal clause is the same as liquidated damages found in Articles 2226 to 2228 by authority of Lambert v. even though the debt may be divided among the successors in interest of the debtor or of the creditor. The penalty may be enforced only when it is demandable in accordance w/ the provisions of this Code. Obligations w/ a Penal Clause Art. Nevertheless. The indivisibility of a pledge or mortgage is not affected by the fact that the debtors are not solidarily liable. giving rise to a claim for compensation but not to a right to treat the whole contract as broken. he shall deliver the thing produced to the employer & transfer dominion over the thing. If it is the dominant estate that is divided between two or more persons. If several persons. DUAL FUNCTION OF PENAL CLAUSE: (1) To provide for liquidated damages (2) To strengthen the coercive force of the Ø by threat of greater resp. only the penalty may be demanded.them must bear it on the part w/c corresponds to him. it depends in each case on the terms of the contract & the circumstances of the case. Fox. in this case. Art. or whether the breach is severable. This contract shall be governed by the following articles as well as by the pertinent provisions on warranty of title & against hidden defects & the payment of price in a contract of sale. (2) Express provision of law Art. shall have a right to the extinguishment of the pledge or mortgage as the portion of the debt for w/c each thing is specially answerable is satisfied. Art. jointly & in the same contract. the vendee may demand of all the vendors or coheirs that they come to an agreement upon the repurchase of the whole thing sold. the buyer of goods is not bound to accept delivery thereof by installments. (Tolentino) Penal Clause. & not to award to it the stipulated liquidated damages of P10. Millan filed a case of specific performance and damages vs. 1226. aside fr penalty may be had. in exchange for collateral importation of plastic sheetings of equal value. failed to comply thereto. CASE: BACHRACH V. PAMINTUAN. Petitioner here invokes Art. the date of full payment. 2221/2222) When there could be damages aside from Penalty: (1) Express provision: ex. Legality of Penal clause: not contrary lo law. Rosario appeared as intervenor in the collection suits alleging to be the sole owner of the two other trucks mortgaged. aside fr mortgage deed. damages shall be paid if the obligor xxx is guilty of fraud in the fulfillment of the obligation. asked the president of the Co.1925. there was a PN. a 12% p/a/ interest was agreed upon the unpaid portion of the ©s. Caloocan on installment basis. execution of final deed of sale and issuance of her TCT. Thus. “legal interest of 12% p. the settled rule is that there is no difference bet. HELD: The foregoing argument of petitioner is totally devoid of merit. LTD. JAPAN. said clause does not convey any penalty.a. CFI [86 S 59] FACTS: In May 1962. for even w/o it. it shall refund to the vendee the total amount paid for w/ interest at the rate of 4% p.agreed to. namely- If there is a stipulation that both penalty & damages are recoverable in case of breach  If the obligor refuses to pay the penalty  If the obligor is guilty of fraud in the fulfillment of his obligation.g. He alleged that he did not sign the mortgage and did not consent to the inclusion of his two trucks therein. co-signed by def. He also ©’s TO SELL the plastic sheetings to YU PING KUN. This truck was mortgaged. and upon maturity. thus Art. INC. failed to deliver the TCT b/c such was mortgaged w/GSIS. Millan demanded from the Corp.  Party to a contract whc was breached by the other. she is atleast entitled to nominal damages. is entitled only to liquidated damages as appearing in the contract of sale? ROBES-FRANCISCO V. 1925 def. and moral damages. xxx Penalty & Liquidated damages:  There is no justification for the NCC to make an apparent distinction bet. public order (e. that in lieu of the contract Millan shd be allowed to recover damages more than what was agreed upon. The proven damages supersede the stipulated liquidated damages. placing this truck on mortgage for security and incl the 2 above mortgaged trucks also. We hold that appellant's contention cannot be sustained bec. unjust.. 1971. the proven damages & the stipulated penalty may be recovered. Exclusive  penal clause is for reparation. in accord w/stipulation. fr. Robes in CFI. the vendee would be entitled to recover the amount paid by her w/ legal rate of interest w/c is even more than the 4% provided for in the clause. filed for damages vs. Corp. def. ISSUE:WON the Co. Deed of sale was executed in Mar. 1973.. debtor has burden of proof: defenses may be force majeure. Lower court damages as Pamintuan appealed. w/his barter license. or act of creditor himself. should the vendor fail to issue the TCT w/in 6 mos.. In 1960.000 for any breach of the contract. morals. 1170 was applied. Further agreed that Pamintuan would deliver the PS to bodegas of Yu Ping in Manila and suburbs “within 1month upon arrival of carrying vessels”. sold to Lolita Millan a parcel of land in Camarin." xxx The trial court & the CA found that Pamintuan was guilty of fraud bec. a 2-ton white-truck on installment basis. to recover only the actual damages proven. he invoked that the © was novated and Co. failed to pay this debt. two other white trucks owned by defendant whc are fully paid for. plus attorney’s fees of 20%” CASE DOCTRINES: The theory that penal and liquidated damages are the same cannot be sustained where obligor is guilty of fraud in fulfillment of Ø. also purchased another 1-ton white truck fr same plaintiff corp. CO. incl. aggrieved party may collect liquidated damages of php 10K. he did not make a complete delivery of the plastic sheeting & he overpriced the same. w/downpd. Xxx Failing to do so. balance on installment basis also. usurious. for Php 265K. &that upon breach.2. Nevertheless.Tons of white flint corn valued @USD 47K. for very obvious reasons. penalty & liquidated damages bec. incl. it does not strengthen the coercive force of the obligation.the proven damages & such stipulated penalty. 27 . merciless) How construed: strictly construed. We would agree w/ petitioner if the clause in question were to be considered as a penal clause. was found guilty of delay amounting to non-performance of Ø. interests and expenses for registration of title. When Pamintuan refused to complete his deliveries. may be given the rt. 2209 of the NCC. which the co. In both sales. the second sentence of Art.a. wherein VENDOR warrants that it shall issue TCT w/in 6 mos. Inc. was authorized to export to Japan 1000 m. for cash payment and adjustments in price. CA [94 S 556] FACTS: RE: Recovery of compensatory damages for breach of © of sale in addition to liquidated damages. Balane: The SC considered the 4% interest as not a penal clause bec. pursuant to Art. immoral.  We further hold that justice would be adequately done in this case by allowing Yu Ping Kun Co. Millan complied w/her side of the Ø and finished paying in full on Dec. Again. thus the latter undertook to open an irrevocable domestic letter of credit in favor of Pamintuan. PAMINTUAN V. Exception: When it is for punishment  in w/c case both penalty & damages may be demanded. In FEB.brother solidarily. and sustained the LC. ESPIRITU [52 P 346] RE: Chattel Mortgage with PENAL CLAUSE FACTS: Faustino Espiritu purchased from Bachrach Motor in JULY. takes the place of damages. Thus. (2) Debtor refused to pay penalty (3) There’s fraud in debtor’s non-performance  Non-performance gives rise to presumption of fault. Co. On trial it was found that Corp. Petitioner Realty Corp. in case of fraud by the obligor is entitled to stipulated penalty plus the difference bet.. As such he entered into © w/ TOKYO MENKA KAISHA. CA found Pamintuan guilty of fraud. liquidated stipulated. 1226 itself provides that "nevertheless.  The penalty clause does not partake of the nature of liquidated damages.  This view finds support in the opinion of Manresa that in cases of fraud the difference bet. Pamintuan. ISSUE: WON award by CFI of nominal damages of P20K improper. penalty & liquidated damages insofar as legal results are concerned & either may be recovered w/o the necessity of proving actual damages & both may be reduced when proper. non-payment of total remaining debt would give rise to 25% penalty. Of OSAKA. when due. MARIANO C. to secure the loan. whc is not indemnification but recognition of a right violated (Art.  A creditor. It Pamintuan made incomplete deliveries. (effecting minimal rts) Vendee failing to present evidence of actual damages. awarded actual damages. to recover actual damages instead of stipulated liquidated damages. when it becomes impossible w/o creditor’s fault  will happen only if thru debtor’s fault or delay. Neither can the creditor demand the fulfillment of the obligation & the satisfaction of the penalty at the same time. unless expressed X obliged to deliver a horse to Y. The debtor cannot exempt himself fr. Neither can the creditor demand the fulfillment of the obligation & the satisfaction of the penalty at the same time. negligence or fraud. Art.a. save in the case where this right has been expressly reserved for him. Alleged that these amounts to usury. the penalty may be enforced. the performance of the obligation by paying the penalty. principal Ø would be extinguished and so will the penal clause. The penalty is not to be added to the interest for the determination of whether the interest exceeds the rate fixed by law. the penalty xxx does not include the interest. the performance thereof should become impossible w/o his fault. 1154. through the negligence of the obligor does not render him liable. unless this right has been clearly granted him. Facultative obligations Art. b/c if thru FE w/o credotor’s nor debtor’s fault. the penalty may be enforced. save in the case where his right has been expressly reserved for him. for penalty to become enforceable. 1229. but the obligor may render another in substitution. the performance thereof should become impossible w/o his fault. when the clause is clearly punitive. in penal. unless this right has been clearly granted him. The nullity of the principal obligation carries w/ it that of the penal clause. Impossibility of one of Øs. 1230. However. Should there be such an agreement. Art. The right of choice belongs to the debtor. NCC) Art. 1. (Art. in penal there is already a principal Ø  The principal Ø itself is dependent upon a future and uncertain event. 1200. ALTERNATIVE Ø 2 or more Øs are due but performance of 1 is enough  GR as to creditor: may not demand both fulfillment and payment of penalty at the same time. 1227. Art. the performance thereof should become impossible w/o his fault. 2. except when expressly granted to debtor. Art. the penalty may also be reduced by the courts if it is iniquitous or unconscionable. unless this right has been clearly granted him. SC reduced penalty to 10% in accord with Art. the performance of the obligation by paying the penalty. However. is granted clearly. Ø with suspensive condition:  Happening of the condition gives rise to the Ø. The loss or deterioration of the thing intended as a substitute. iniquitous or unconscionable penalty X obliged to deliver a horse to Y or pay him P500 Ø W/PENAL CLAUSE there’s only 1 principal Ø. Baviera: terms Thus penalty is mitigated in: 1. The nullity of the penal clause does not carry w/ it that of the principal obligation. 1227. unlawful or w/c could not have been the object of the obligation. the trucks were sold by virtue of the mortgage and brought in a net sum not enough to settle the debts due. When only one prestation has been agreed upon. 1227. save in the case where this right has been expressly reserved for him. Distinguished fr. only in case of nonperformance shall the penal clause be enforceable impossibility of principal Ø. since said rate was fixed only for the interest. unless it has been expressly granted to the creditor. penal clause extinguished debtor cannot choose to pay penalty to avoid performance. 1228. the interest. Distinguished fr. the penalty may be enforced. alternative obligations Art. ISSUE: WON the 12% interest p. Lower court directed payments of all the sums due and in both two cases ordered the payment of 12% interest p. 28 . 1229. the obligor is liable for the loss of the substitute on account of his delay. if he fails he will pay him P500 2. Courts enforce contracts according to their Art. Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be demanded. Distinguished fr. plus additional penalty of 25% makes the contract usurious? HELD: Art. the obligation is called facultative. The debtor cannot exempt himself fr.a. the other/s subsists Debtor can choose whc prestation to fulfill  as to the last sentence. But once the substitution has been made.  GR: Debtor cannot avoid performance by paying the penalty. except if such rt. until fully paid and a penalty of 25% in addition as appearing in the contracts. if after the creditor has decided to require the fulfillment of the obligation. Even if there has been no performance. 1206. However. The debtor cannot exempt himself fr. not when it is impliedly intended as liquidated damages. partial or irregular performance 2. The debtor shall have no right to choose those prestations w/c are impossible. BUT. only the accessory Ø (the penalty) depends upon nonperformance or breach. 1152 of the OCC permits the agreement upon a penalty apart fr. Neither can the creditor demand the fulfillment of the obligation & the satisfaction of the penalty at the same time. While the cases were pending in lower court. To these matters the defs. if after the creditor has decided to require the fulfillment of the obligation. & as such the two are different & distinct things w/c may be demanded separately. the performance of the obligation by paying the penalty. if after the creditor has decided to require the fulfillment of the obligation. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied w/ by the debtor. considering partial performance. Partial Performance  refers to extent or quantity of fulfillment Irregular Performance  refers to the form  Doctrine of Strict Construction will apply as against the enforcement of the penalty in its entirety. ) This is called mora solvendi ex re Q: What kind of demand is necessary? A: Judicial or extra-judicial Exceptions: When the obligation or the law expressly so declare. When demand would be useless. Inno says there was no demand. Feb. unless assumed by 3rd person Q: When does delay set in? A: Delay sets-in in the following manner: 1.-.-. Ella gets married in blue jeans & T-shirt. default sets in upon the failure of the obligor to perform on due date. no gown was delivered. par. In this case. When fr. Inno Sotto was supposed to make Ella's (the bride) wedding gown. Exception: When demand is not necessary (the exceptions are found in Art. There must be something in the contract w/c explicitly states that the demand is not necessary in order that delay may set in. Gonzales. 11 69. on Feb. 14 comes . Rule: Demand is necessary (Art. demand is not necessary in order that delay may exist. & the other party is not ready to comply in a proper manner w/ what is incumbent upon him. For Reciprocal obligations w/c are not simultaneous  Gen. but also paid in lieu of debtor’s non-performance Intended to insure performance of principal Ø Accessory & subsidiary Ø both Øs can be assumed by one person penalty is extinguished in such case. except when expressed such right to demand both may be given GUARANTY Is a © by whc virtue. Inno delivers the gown. none. (1) This is called mora solvendi ex persona.FACULTATIVE Ø Debtor has power to make substitution Creditor cannot demand both prestations Ø w/ PENAL CLAUSE GR. as when the obligor has rendered it beyond his power to perform. the nature & the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract.Example is the case of Chavez v. For Reciprocal simultaneous obligations  by the readiness of one of the parties to perform & his letting the other party know. Finally. 1169. 2. 29 . infra. par. Illustration: Bong Baylon is getting married in Valentines '96. 15. xxx Ella sues Inno for breach. a 3rd person (guarantor) obliged himself to fulfill prestation in lieu of debtor’s nonperformance Intended to insure performance of principal Ø Accessory & subsidiary Ø Principal debtor cannot be guarantor Subsists even when principal Ø is voidable or unenforceable Ø w/ PENAL CLAUSE Ø to pay penalty is different fr the principal Ø.when the contract says that w/o the necessity of demand. 2. Irregularity of Performance [Articles 1169 . REQUISITES to be In Default: Ø is demandable and liquidated debtor delays performance 30 . thus. Damages in either case (Art. 1380. are liable for damages. et seq. 1170. according to the circumstances. paragraph 2. Effects of Fraud: 1. Art.There are two guides: 1. Any waiver of an action for future fraud is void. 1191. for liability to attach. Creditor may insist on performance. such negligence must be the proximate cause of the injury to plaintiff. neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner w/ what is incumbent upon him. From the moment one of the parties fulfills his obligation. However. the time the obligee judicially or extrajudicially demands fr.) (2) Negligence Art. 1170. Delay 2. negligence by the presence of deliberate intent.) 2. When negligence shows bad faith. Those who in the performance of their obligation are guilty of fraud. In order that fraud may make a contract voidable. 1170 is different fr. Any waiver of an action for future fraud is void. Creditor may resolve/ rescind (Art. 1170 means deceit or insidious machinations? No. 1233. The fault or negligence of the obligor consists in the omission of that diligence w/c is required by the nature of the obligation & corresponds w/ the circumstances of the persons. Article 1344.Definition of Fraud. this is found in Art. 1170? A: Malice.  From 1173 = culpa contractual  from 2176 = culpa aquiliana or extra-contractual Balane: Is it correct to say that fraud in Art.) 2. the other is induced to enter into a contract which. Fortuitous event.  It is distinguished fr. as when the obligor has rendered it beyond his power to perform. 1191. (3) Delay  See Art. fraud is demandable in all obligations. negligence in the performance of every kind of obligation is also demandable.) Incidental fraud only obliges the person employing it to pay damages. Negligence is the absence of something that should be there  due diligence. but such liability shall may be regulated by the courts. Negligence C.) 3. caution & protection in Roman law. Diligence demanded by circumstances of person. such act or omission. 1169. ** In both cases. arising.Ø for benefits admittedly received constitutes unjust enrichment. 1171. Article 1338. without them. Art. Creditor may insist on performance.  The fraud referred to in Art. or willful omission. erros of judgment made in GF. 2008 Fraud as used in Art. specific or substitute (Art.) In common law. Balane: Two Performance: Classes of Irregularity Q: What is a synonym for fraud as used in Art.- In general. 1169. the nature & the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract. negligence or delay. Attributable to the debtor A. he would not have agreed to. shall apply. There is fraud when. Those obliged to deliver or to do something incur in delay fr. through insidious words or machinations of one of the contracting parties. in the fulfillment of Øs.) 3. whc does not cover mistake. 1170 is the deliberate & intentional evasion of the normal fulfillment of obligation. 1170) Art. of the time & of the place. 1170.1174]  Evasion of a legit. the provisions of articles 1171 & 2201. Not attributable to the debtor A. it should be serious and should not have been employed by both contracting parties. knowing & intending the effects w/c naturally & necessarily arise fr. specific or substitute (Art.  (1) Fraud Art. 1233. 2. Responsibility arising fr. them the fulfillment of their obligation. Fraud B. 1172. LEGASPI OIL VS. implies some kind of malice or dishonesty.-. w/c is lacking in the latter. delay by the other begins.July 9. 1171. fraud is demandable in all obligations. Damages in either case (Art. In reciprocal obligations. 1173. CA [224 S 213] . & those who in any manner contravene the tenor thereof. Creditor may resolve/ rescind (Art. Art. as ground for damages fr this article. the degree of care required is the diligence of a prudent businessman. fraud as a cause for vitiation of consent in contracts (more properly called deceit w/c prevents the contract fr. BREACH OF OBLIGATIONS (ART. Measure of Due Diligence.  fraud as referred here is the deliberate and intentional evasion of normal fulfillment of Øs. Effects of Negligence: 1. = default / mora. When demand would be useless. the demand by the creditor shall not be necessary in order that delay may exist: When the obligation or the law expressly so declare. This is actually the same as the diligence of a good father of a family. place & time Care required of a good father of a family (fictional bonus pater familias who was the embodiment of care. of 1. Responsibility arising fr. fraud may be defined as the voluntary execution of a wrongful act. Responsibility arising fr.) E. When fr. Mora Accipiendi -. WON Agcaoili breached the © by failing to occupy the house w/in 3 days as stipulated? NO.to condition that latter shd forthwith occupy the house: “If you fail to occupy the same w/in 3 days fr receipt of this notice. This applic.Tons of Burmese rice. malice or wanton attitude. 31 . Agcaoili filed w/CFI case for specific performance and won. the moment the parties acquired the right to reciprocally demand performance. without the need of any demand. Will be considered automatically disapprovd & said H&L will be awarded to another. xxx. and his liability shall begin from the time he converted the amount to his own use.delay in the acceptance (on the part of the creditor). Article 1896. being the lowest bidder she was awarded the contract. CASE: contract” “in any manner contravene the tenor of AGCAOILI VS. the applic for LOC despite such fact in lieu of this © w/Arrieta. Article 1942.) On May 1952. to be sure. CASE DOCTRINE: One who assumes a contractual obligation & fails to perform the same on account of his inability to meet certain bank requirements w/c inability he knew & was aware of when he entered into the contract. double walling. He shall also be liable for the fruits thereof from the time they should have been delivered. he shall be responsible for any fortuitous event until he has effected the delivery. irrevocable. even if it should be through a fortuitous event: (1) If he devotes the thing to any purpose different from that for which it has been loaned. It did not have a ceiling. Every partner is a debtor of the partnership for whatever he may have promised to contribute thereto. at a definite price payable in amortizations at P31. (5) If. Art. Compensation Morae -.. Kinds of Delay: 1. the damages for w/c the obligor who acted in good faith is liable shall be those that are the natural & probable consequences of the breach of the obligation.56 per mo. ARRIETA VS. Delay is the non-fulfillment of the obligation w/ respect to time. it cannot invoke Agcaoili's suspension of payment of amortization as cause to cancel the contract bet. The same rule applies to any amount he may have taken from the partnership coffers. who is not a member of his household. 1165. Instead. or has promised to deliver the same thing to two or more persons who do not have the same interest. (4) ANY OTHER MANNER OF CONTRAVENTION:  includes any illicit acts which impair the strict and faithful fulfillment of Ø. drainage. 2201. Agcaoili could not stay in the haus whc was only a shell.” 2. After st paying 1 installment &other fees. NARIC [10 S 79] FACTS: (Paz Arrieta vs. lights. If the obligor delays. water. Arrieta took part in public bidding by NARIC to supply 20K m. subjc. & was not willing to put the house in habitable state. (2) If he keeps it longer than the period stipulated. ur applic. the duty of the GSIS. Thus GSIS’ appeal must fail.delay in the performance (on the part of the debtor). Mora Solvendi -. Article 1786. as seller. He asked a homeless friend instead to stay and watch over the property. CR. in the same cases and in the same manner as the vendor is bound with respect to the vendee. Marikina. stairs. A partner who has undertaken to contribute a sum of money and fails to do so becomes a debtor for the interest and damages from the time he should have complied with his obligation. He shall also be bound for warranty in case of eviction with regard to specific and determinate things which he may have contributed to the partnership. the parties. refused to make further payments until GSIS wud make d haus habitable. Rizal. (OBLIGATIONS OF THE BAILEE) There being a perfected © of sale. neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner w/ what is incumbent upon him. NARIC knew that it did not have enough deposit in PNB to cover the Ø. The agent owes interest on the sums he has applied to his own use from the day on which he did so. them. jud or extrajud demand In case of fraud. thus it wrote a letter of request to accom. & fr. being able to save either the thing borrowed or his own thing. or after the accomplishment of the use for which the commodatum has been constituted. (3) If the thing loaned has been delivered with appraisal of its value. 3. xxx Since GSIS did not fulfill that obligation. (4) If he lends or leases the thing to a third person. a month after it entered in the © w/Arrieta and promised to open the LOC “immediately. Article 1788. 1952. argument of GSIS devoid of merit. and on those which he still owes after the extinguishment of the agency. It was. confirmed and assignable.” By this time Arrieta has made a 5% tender to her supplier in Burma. to deliver the house subject of the contract in a reasonably livable state. & w/c the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted.” There was then a perfected contract of sale bet. to deliver the thing sold in a condition suitable for its enjoyment by the buyer for the purpose contemplated. GSIS cancelled the © and demanded Agcaoili to vacate. should be held liable in damages for breach of contract. GSIS [165 S 1] FACTS: GSIS approved applic. Of Artemio Agcaoili for purchase of H&L in Marikina. xxx (2) In contracts & quasi-contracts. the obligor shall be responsible for all damages w/c may be reasonably attributed to the non-performance of the obligation. In the © of sale. he chose to save the latter. This it failed to do.creditor requires performance. Was made by PNB on July 30. It is axiomatic that "(i)n reciprocal obligations. Arrieta’s Ø was to deliver the rice at d price of her bid. The bailee is liable for the loss of the thing. unless there is a stipulation exempting the bailee from responsibility in case of a fortuitous event. while NARIC’s Ø was to pay her in LOC. in other words. there had been a meeting of the minds upon the purchase by Agcaoili of a determinate house & lot in the GSIS Housing Project at Nangka. National Rice & Corn Corp. it was the duty of GSIS as seller to deliver the thing sold in a condition suitable for enjoyment by the buyer for the purpose contemplated.mutual delay Art. or every kind of defective performance. bad faith. “immediately. in USD in favor of Arrieta or supplier in Burma. not only debtors guilty of fraud. The depositary is liable for the loss of the thing through a fortuitous event: (1) If it is so stipulated. In Negotiorum Gestio Art. unless there is a stipulation exempting the bailee fr. To sustain petitioner’s contention and award actual damages only would be iniquitous such that he would be liable only for the cost of that telegram paid for 30 yrs ago. negligence or default but also every debtor.  IN Depositary Art. Her mother was interred w/o her father nor siblings in attendance. there is a safety net just in case there is a culpable irregularity of performance w/c is not covered by fraud. or after the accomplishment of the use for w/c the commodatum has been constituted. EXAMPLES OF BY Express Provision of Law: Under Art. or aggravation of. Except in cases expressly specified by law. NARIC and PNB did not even make the 15-day grace period given by the supplier.R.e. the injury to the creditor. Meaning of phrase "in any manner contravene the tenor" of the obligation in Art. At best. PNB conseq.. 1174. or every kind of defective performance. ALSO Art. or when it otherwise declared by stipulation. negligence or delay. of her obligation by paying the required charges. Art.her father siblings were all abroad. When the law so specifies. for a fee. 1170  The phrase includes any illicit task w/c impairs the strict & faithful fulfillment of the obligation. In this case. responsibility. 1170. Arrieta demanded for payment of damages of USD 286K representing unrealized profits. that for w/c it has been loaned. CASTRO [158 s 445] FACTS: Sofia’s mother died while they were here in RP visiting. 1170. he chooses to save the latter. rules on deposit will not apply bec. that same day she sent a telegram to her father in the USA via TELEFAST. 1979.whc will be confiscated if the required LOC will not be received before August 4. 1979 provides for instances wherein depositary is still liable even in cases of fortuitous event. the event must be independent of human will. if the debtor is already in delay (Art. 2176 applied. WON NARIC was in breach of contract? 2. Thus. Bailee in Commodatum Art.: 1. NARIC rejected.. 3. Q: What if a depositor was in the premises of the bank & was robbed of his money w/c he was about to deposit? A: Bank cannot be held liable for fortuitous event (robbery) esp in CAB where the money has not yet been actually deposited.. responsibility in case of a fortuitous event.g. in general. In delay. Such fact was apprised by Arrieta to NARIC in a letter thru counsel. it is a superfluity. the occurrence must render it impossible for the debtor to fulfill the obligation in a normal manner. 1165. (2) If he keeps it longer than the period stipulated.) When the parties so agree When the nature of the obligation requires the assumption of risk.WON there was here breach of contract. Abad. The Burmese supplier has cancelled the order on Aug. and forfeited the 5% tender of Arrieta amounting to P200K. no person shall be responsible for those events w/c could not be foreseen. (3) If he delays its return. this case.-. or when the nature of the obligation requires the assumption of risk. (5) If. 20. To constitute a caso fortuito that will exempt a person fr. 3. EXEMPTIONS FROM APPLICATION OF G. Art. Q: What kind of diligence is required of a depositary? A: Ordinary Diligence. 2147. *Safety Deposit Box: If the jewelry inside a SDB was stolen.E. 1952. At worst. ON F. (4) If he allows others to use it. that the obligor must be free of participation in. This liability is not limited to actual or quantified damages. resp. even if it should be through a fortuitous event: (1) If he devotes the thing to any purpose different fr. Loss due to Fortuitous Events Art. The officious manager shall be liable for any fortuitous event: 32 . HELD: Petitioner & private respondent Sofia C. ISSUE. who is not a member of his household. Approved &released the LOC 2-mos. YES> NARIC’s culpability arises from its willful and deliberate assumption of ©’al Øs even as it was well aware of its own financial incapacity to undertake the prestation. 2. “ TIME IS OF THE ESSENCE” TELEFAST VS. Balane: General Rule: The happening of a fortuitous event exonerates the debtor fr.June 10. PNB required NARIC to make a marginal deposit of 50% of the amount of LOC before such will be released in favor of Arrieta’s supplier in Burma. being able to save either the thing borrowed or his own thing. This phrase is not really an independent ground. Again rejected. petitioner did not do. Thus. even though he himself may have been authorized to use the same. Arrieta endeavored to restore to no avail. or w/c . par. 1971] 1. e. and WON only actual damages are due? YES.g. If the thing loaned has been delivered w/ appraisal of its value. despite performance by said pvt. who fails the performance of his obligation is bound to indemnify for the losses & damages caused thereby. This. an insurance contract. Such condition NARIC is not in any financial position to meet. 1952. 3. petitioner undertook to send said private respondent's message overseas by telegram. the contract governing the transaction is LEASE of safety deposit box. Thus. It offered to substitute w/Thailand rice. If he lends or leases the thing to a third person. it is necessary that: [Austria vs. 1942. Crouch entered into a contract whereby. (2) If he uses the thing w/o the depositor's permission. Petitioner was therefore guilty of contravening its obligation to said private respondent & is thus liable for damages. liability.though foreseen. When Sofia went back to the USA she learned that her telegram never reached her father. EXCUSE FOR NON-PERFORMANCE: 1. Balane: This phrase is a catch-all provision. The bailee is liable for the loss of the thing. the SC was apparently not sure as to what category the breach fell. were inevitable. (4) If he assumed the management in bad faith.The Usury Law was Act No. 1728. (3) “when the nature of the Ø requires the assumption of risks” Aleatory Contract Art. good customs. to construct ipo-Bicti Tunnel in Norza. The contractor is responsible for the work done by persons employed by him. Art. public order. leaving parties free to stipulate higher rates. clauses. & for damages to the person who delivered the thing. NPC cannot escape liability bec. it was predicted that Welming wud pass through NPC’s Angat Hydroelectric Project and Dam at Ipo. Thus. Art. active intervention or neglect. such person is not exempt fr. whether it be fr. 1170. terms & conditions as they may deem convenient. Whoever in bad faith accepts an undue payment. 1763. Thus. By an aleatory contract. 1967. 1175. & of third persons for death or physical injuries during the construction. What was absent was the last element. & removed fr. negligence. petitioner NPC was undoubtedly negligent bec. (2) “when it is otherwise declared by stipulation” (1174) Express agreement Art. even if caused by a fortuitous event. NPC VS. goods or chattels. It has finished 1 st stage of the excavation works and was already on the Ipo site phase when typhoon “Welming” came in Sept. Common Carrier Art. he must be free fr. _________________________________________________________ CASES: Balane: Some of the elements were present in this case. it actually struck. It is clear fr. Art. delay or violation or contravention in any manner of the tenor of the obligation as provided for in Art. its negligence was the proximate cause of the loss & damage even though the typhoon was an act of God. A possessor in bad faith shall be liable for deterioration or loss in every case. w/c results in a loss or damage. the cause of w/c is to be considered. And even though the typhoon was an act of God or what we may call force majeure.-Usury is the contracting for or receiving something in excess of the amount allowed by law for the loan or forbearance or money. Unless a lease is recorded. 2148.Inc) entered © w/NAWASA on Aug. When the effect. xxx. it shall not be binding upon third persons. 144 SCRA 596. or w/c is to occur at an indeterminate time. (2) If he has preferred his own interest to that of the owner. imminent danger.-. or shall be liable for fruits received or w/c should have been received if the thing produces fruits. FACTS: Typhoon “Welming” Plaintiff ECI (Engr. it opened the spillway gates of the Angat Dam only at the height of typhoon "Welming" when it knew very well that it was safer to have opened the same gradually & earlier. the officious manager shall be liable for fortuitous events: (1) If he is manifestly unfit to carry on the management. the rules applicable to the acts of God. Tolentino: Usury. (3) If he fails to return the property or business after demand by the owner. one of the parties or both reciprocally bind themselves to give or to do something in consideration of what the other shall give or do upon the happening of an event w/c is uncertain. Usurious transactions shall be governed by special laws. morals. Special law on usury. Payee in Solutio Indebiti Art. as it was also undeniable that NPC knew of the coming of the typhoon at least 4 days bef. as it was. Lessee Art. if the common carrier's employees through the exercise of the diligence of a good father of a family could have prevented or stopped the act or omission. provided they are not contrary to law. the obligor cannot escape liability. until it is recovered. it has been held that when the negligence of a person concurs w/ an act of God in producing a loss. (2) If by his intervention he prevented a more competent person fr. Except when the management was assumed to save the property or business fr. A common carrier is responsible for injuries suffered by a passenger on account of the willful acts or negligence of other passengers or of strangers.Constrx. 1727. the dam reached danger height of 212 m. Every lease of real estate may be recorded in the Registry of Property. 1306.(1) If he undertakes risky operations w/c the owner was not accustomed to embark upon. or public policy. Consequent to the heavy downpour. the whole occurrence is thereby humanized. w/in 800 days. over the lessor's objection.Bul. 552. or failure to act. there concurs a corresponding fraud. its negligence was the proximate cause of the loss & damage. of an act of God. To be exempt fr. As we have said in Juan Nakpil & Sons vs. the appellate court's decision that based on its findings of fact & that of the trial court's. 1671. The contractor is liable for all the claims of laborers & others employed by him. Art. liability for loss bec. (2) ACT OF CREDITOR 33 . shall pay legal interest if a sum of money is involved. is found to be in part the result of the participation of man. Art. The principle embodied in the act of God doctrine strictly requires that the act must be one occasioned exclusively by the violence of nature & human agencies are to be excluded fr. Independent Contractor Art. The contracting parties may establish such stipulations.NPC cannot escape liability bec. CA. This law was repealed during the period of martial law. any previous negligence or misconduct by w/c the loss or damage may have been occasioned. If the lessee continues enjoying the thing after the expiration of the contract. creating or entering into the cause of the mischief. liability by showing that the immediate cause of the damage was the act of God. above sea level causing the NPC to decide to open spillway gates at that point. any cause. the extraordinary large volume of water rushed out of the gates and hit the installations and constx worx of ECI at Ipo Site w/terrific impact washing away and/or destroying supplies and equipment of ECI. 2159. the former shall be subject to the responsibilities of a possessor in bad faith. if upon the happening of a fortuitous event or an act of God. He shall furthermore be answerable for any loss or impairment of the thing fr. Thus. 1648.. taking up the management. 2010. 2655.1964. CA [161 S 334] . to the bldg. was due to breach by def. of the terms of © and failure to follow the plan&specs. Def. filed 3rd party complaint vs.the architects, petitioner herein. JFN&sons stipulated in writing that it not be impleaded by amendment of complaint. That in case court finds it liable, it would be as if it was duly impleaded therein. CASE: City of Mla. failed to exercise the diligence of a good father of a family w/c is a defense in quasi-delict. JIMENEZ vs. CITY OF MANILA [150 S 510] FACTS: Bernardino Jimenez went to Sta. Ana Public market to buy “bagoong” when his left foot fell in an open hole that was hidden by muddy rainwater in the flooded market. His left leg was stuck by a rusty 4-in nail. His leg later on swelled and he was brought for treatment to Veteran’s MH. He walked around w/crutches for 15 days, unable to work, forced to hire a temp.driver for his sch.bus biz.. Thus, he sued the City of Mla. For damages, and the Asiatic Integ. Corp. (AIC) who had the managing and operating © to that market. Lower court dismissed his complaint for insuff. Of evid. The appellate court found in his favor and placed sole liability on AIC. ISSUE: WON the City of Manila shd be held solidarily liable w/ Asiatic integ. Corp. for injuries suffered by petitioner? HELD: As a defense against liability on the basis of quasi-delict, one must have exercised the diligence of a good father of a family. (Art. 1173, NCC) There is no argument that it is the duty of the City of Mla. to exercise reasonable care to keep the public market reasonably safe for people frequenting the place for their marketing needs. While it may be conceded that the fulfillment of such duties is extremely difficult during storms & floods, it must, however, be admitted that ordinary precautions could have been taken during good weather to minimize the dangers to life & limb under those difficult circumstances. For instance, the drainage hole could have been placed under the stalls instead of on the passage ways. Even more important is the fact, that the City should have seen to it that the openings were covered. Sadly, the evidence indicates that long before petitioner fell into the opening, it was already uncovered, & 5 mos. after the incident happened, the opening was still uncovered. Moreover, while there are findings that during floods the vendors remove the iron grills to hasten the flow of water, there is no showing that such practice has ever been prohibited, much less penalized by the City of Mla. Neither was it shown that any sign had been placed thereabouts to warn passers-by of the impending danger. April 30, 1979, bldg. disputed was authorized to be demolished at expense of plaintiff, after further earthquakes caused further damage to the bldg; ISSUE: WON AN ACT OF GOD WHC CAUSED DAMAGE TO THIS BLDG, EXEMPTS FR LIABILITY, PARTIES WHO ARE OTHERWISE LIABLE B/C OF NEGLIGENCE? ART. 1723 To exempt obligor fr liability under Art. 1174, FE; or for a breach of Ø d/t an act of God, the ff. must concur: 1. cause of the breach of Ø must be independent of the will of the debtor; 2. the event must be either unforeseeable or unavoidable 3. the event must be such as to render it impossible for debtor to fulfill Ø in normal manner; 4. debtor must be free from any participation in, or aggravation of the injury to the creditor. Thus, if upon the happening of a FE or an AOG, there concurs a corresponding fraud, negligence, delay or violation or contravention in any manner of the tenor of the Ø as provided in Art. 1170, whc results in loss or damage, the obligor cannot escape liability. To be an AOG, the event must be occasioned exclusively by violence of nature and all human agencies are excluded from creating or entering into the cause of mischief. With participation of man, whether active or neglect or failure to act, the occurrence is humanized, and removed from the doctrine’s application. Findings of lower court and IAC were both beyond dispute that United and JFNakpil &Sons were both liable. The defects in the plans&specs were proximate cause, the deviations of United fr the specs and failure to observe required workmanship & degree of supervision on both makes them liable. For liability under Art. 2189 NCC to attach, it is not necessary that the defective public works belong to the LGU concerned. What is req’d is “control or supervision.” CASE DOCTRINE: "One who negligently creates a dangerous condition cannot escape liability for the natural & probable consequences thereof, although the act of a third person, or an act of God for w/c he is not responsible, intervenes to precipitate the loss." (citing Tucker v. Milan, 49 OG 4379, 4380.) CASE: Requisites for exemption fr. liability due to an "act of God." Juan F. NAKPIL & SONS vs. CA October 3, 1986 [144 S 596] NAKPIL & SONS VS. CA 1988 - [160 S 334] - APRIL 15, FACTS: M.R. on the above decision ISSUES RAISED ON THIS MR: (1) That the building did not collapse on d earthquake of 4/2/68, thus the premise of the LC findings is negated, Art. 1173 cannot apply  HELD: it is not the fact of collapse that was the premise on applying Art. 1173 but on who shd be responsible for the extreme damage to the bldg. whc inevitably led to its collapse, or demolition. Trial court correctly found defs. Liable; (2) That court failed to impute liability on PBA or on Ozaeta for failure to provide legal duty to supervise, as owner  HELD: no legal nor contractual basis. PBA sought technical expertise of both United & JFN&sons for such costs on this purpose. It was even JFN who suggested administration basis. (3) That findings of bad faith had no factual anchor  HELD: Wanton negligence of both United & JFN&sons in effecting plans, specs, & constrx designs is equivalent to BF in performance of their resp. duties; (4) Award of 5M had no basis, Commissioner’s report est.only 1.1M  such initial report was based on the partial collapse only, after d 4/2/68 EQ, for repairs; but after total collapse almost 20 yrs later, unrealized rentals and major reconstrx makes even 5M a very conservative est. (5) As to award of attys fees & damages  was court discretion (6) 12% interest p.a. accdg to CB Circular 416 (PD 116) applies only to (1) loans; (2) forbearance of To exempt the obligor fr. liability under Art. 1174, for a breach of an obligation due to an "act of God," the following must concur: 1. the cause of the breach of the obligation must be independent of the will of the debtor; 2. the event must be either unforeseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; & 3. the debtor must be fee fr. any participation in, or aggravation of the injury to the creditor. FACTS: Construction of the office building of Plaintiff Phil. Bar Assoc. (PBA) in Intramuros was undertaken by United Constrx. Inc. on an “administration” basis on suggestion of United Pres. Juan Carlos. Such was approved by PBA Board, & Pres. Roman Ozaeta. Plans and specs were done by Juan f. Nakpil & Sons. Bldg. was completed June 1966. August 1968 an unusually strong earthquake hit Manila. The PBA bldg.sustained major damage, tenants had to vacate. Temp. rem. Worx done by United cost P13K+ Nov. 1968 PBA filed action to recover damages vs. United, &Juan Carlos, as def, alleging that the damage 34 money, goods or credit; (3) rate allowed in JFO’s involving 1 & 2.  HELD: True, but, 12% is imposable only when there is delay in payment of judgment after its finality. (penalty, not really interest) Article 1178. Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has been no stipulation to the contrary. Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law. Article 1192. In case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties first violated the contract, the same shall be deemed extinguished, and each shall bear his own damages. NPC VS. CA [222 S 415]  Petitioners cannot be heard to invoke the act of God or force majeure to escape liability for the loss or damage sustained by the pvt. respondents since they, the petitioners, were guilty of negligence. The event then was not occasioned exclusively by an act of God or force majeure; a human factor-- negligence or imprudence-- had intervened. The effect then of the force majeure in question may be deemed to have, even if only partly, resulted fr. the participation of man. Thus, the whole occurrence was thereby humanized, as it were, & removed fr. the rules applicable to acts of God. NPC VS. CA [223 S 649]  Petitioners have raised the same issues & defenses as in the 2 other decided cases therein mentioned. Predictably therefore, this petition must perforce be dismissed bec. the losses & damages sustained by the private resp.'s had been proximately caused by the negligence of the petitioners, although the typhoon w/c preceded the flooding could be considered as a force majeure. Article 2236. The debtor is liable with all his property, present and future, for the fulfillment of his obligations, subject to the exemptions provided by law. (Concurrence & Preference of Credits) Article 302. Neither the right to receive legal support nor any money or property obtained as such support or any pension or gratuity from the government is subject to attachment or execution. (Support) Article 1708. The laborer's wages shall not be subject to execution or attachment, except for debts incurred for food, shelter, clothing and medical attendance. (Contract Labor) F. REMEDIES FOR BREECH OF OBLIGATIONS: Article 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by article 1170, may compel the debtor to make the delivery. If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor. If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the same interest, he shall be responsible for any fortuitous event until he has effected the delivery. Article 1166. The obligation to give a determinate thing includes that of delivering all its accessions and accessories, even though they may not have been mentioned. Article 1167. If a person obliged to do something fails to do it, the same shall be executed at his cost. This same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore, it may be decreed that what has been poorly done be undone. Article 1168. When the obligation consists in not doing, and the obligor does what has been forbidden him, it shall also be undone at his expense. Article 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages. Article 1177. The creditors, after having pursued the property in possession of the debtor to satisfy their claims, may exercise all the rights and bring all the actions of the latter for the same purpose, save those which are inherent in his person; they may also impugn the acts which the debtor may have done to defraud them. FAMILY CODE: Art. 153. The family home is deemed constituted on a house and lot from the time it is occupied as a family residence. From the time of its constitution and so long as any of its beneficiaries actually resides therein, the family home continues to be such and is exempt from execution, forced sale or attachment except as hereinafter provided and to the extent of the value allowed by law. Art. 155. The family home shall be exempt from execution, forced sale or attachment except: (1) For nonpayment of taxes; (2) For debts incurred prior to the constitution of the family home; (3) For debts secured by mortgages on the premises before or after such constitution; and (4) For debts due to laborers, mechanics, architects, builders, materialmen and others who have rendered service or furnished material for the construction of the building. R.O.C. RULE 39, SEC. 13: Section 13. Property exempt from execution. � Except as otherwise expressly provided by law, the following property, and no other, shall be exempt from execution: 35  debt, no imprisonment. If Ø can only be done by debtor, then only rem is damages. The judgment obligor's family home as provided by law, or the homestead in which he resides, and land necessarily used in connection therewith;  Ordinary tools and implements personally used by him in his trade, employment, or livelihood;  Three horses, or three cows, or three carabaos, or other beasts of burden, such as the judgment obligor may select necessarily used by him in his ordinary occupation;  His necessary clothing and articles for ordinary personal use, excluding jewelry;  Household furniture and utensils necessary for housekeeping, and used for that purpose by the judgment obligor and his family, such as the judgment obligor may select, of a value not exceeding one hundred thousand pesos;  Provisions for individual or family use sufficient for four months;  The professional libraries and equipment of judges, lawyers, physicians, pharmacists, dentists, engineers, surveyors, clergymen, teachers, and other professionals, not exceeding three hundred thousand pesos in value;  One fishing boat and accessories not exceeding the total value of one hundred thousand pesos owned by a fisherman and by the lawful use of which he earns his livelihood;  So much of the salaries, wages, or earnings of the judgment obligor for his personal services within the four months preceding the levy as are necessary for the support of his family;  Lettered gravestones;  Monies, benefits, privileges, or annuities accruing or in any manner growing out of any life insurance;  The right to receive legal support, or money or property obtained as such support, or any pension or gratuity from the Government;  Properties specially exempted by law. RE 1168 Ø NOT TO DO was done  may compel debtor to UNDO; but if impossible to undo, rem is damages. RE 1170  RECOVERABLE DAMAGES = when the Ø is to do something other than the payment of money; If Ø is payment of money, 2209 is the rule re damages  when debtors incurs in delay, is payment of interest if w/o stipulation to the contrary, as agreed upon, if if no agreement, the legal interest. RE 1177  RIGHTS OF CREDITORS: 1. To levy by attachment & execution upon all the property of debtor except if exempt by law; 2. to exercise all the rights and actions of the debtor, except those inherently personal to him; accion subrogatoria; prior court approval is not required. This shd concur w/d ff. requisites: a. Cr. Has interest in the rt. or axn. Not only bcoz of his credit but d/t insolvency of debtor; b. Malicious or negligent inaction of debtor at level whc endanger claim of Cr; c. Debtor’s rt. vs. 3rd person must be patrimonial, or susceptible of being transformed to patrim.value. 3. ask for rescission of ©s made by debtor in fraud of Cr.’s rts. Balane: Q: Against what performance? can the obligee demand A: Against non-exempt properties of the debtor.-- The debtor is liable w/ all his property, present & future, for the fulfillment of his obligations, subject to the exemptions provided by law. (Art. 2236.) If number one is not enough, the creditor goes to any claims w/c the debtor may have against third persons. This is called accion subrogatoria, wherein the creditor is subrogated in the rights of the debtor. Personal rts. Of debtor: 1. Rt. to subsistence, support he receives exempt 2. Public rts; 3. Rts. Pertaining to honor 4. Rt. to use remaining powers available to him, e.g. SPA of agency or deposit; administrator; to accept a © 5. Non-patrimonial rts – estab. Status, legit or illegit child; annulment of marriage, legal sep., those arising fr, PFR; 6. Personal rts. Arising fr. Patrimonial source, e.g. to revoke a donation d/t ingratitude, to demand exclusion of an unworthy heir; But no article or species of property mentioned in this section shall be exempt from execution issued upon a judgment recovered for its price or upon a judgment of foreclosure of a mortgage thereon. Tolentino: RE 1165  REMEDIES OF CREDITOR: For failure of debtor to comply, 1. SPECIFIC PERFORMANCE, to obtain compliance of the prestations, whether determinate or generic; this action implies a contractual relation; 2. TO RESCIND OR RESOLVE THE Ø 3. AN ACTION FOR DAMAGES exclusively or in addition to 1 & 2. Accion pauliana (Articles 1380-89).-- This is the right of creditors to set aside fraudulent transfers w/c the debtor made so much of it as is necessary to pay the debts.  pertains to acts whc debtor may have done in fraud of Cr. E.g. alienation of property, renunciation of inheritance or rt. of usufruct, assgnmnt of credit, remission of debts.  Constitutional prohibition vs. imprisonment for debt applies, except in subsidiary imprisonment when civil liability arising from crime is not paid; or in contempt;  Exception to exception on the GR re FE: Debtor in default may still prove that he is not liable for FE bcoz even if he had not performed, the loss wud still have occurred in the same manner. (1) EXTRAJUDICIAL REMEDIES: RE 1167  Performance of Ø by another at creditor’s choice a& at debtor’s cost – court may not by discretion merely award damages to Cr. When the Ø may be done in spite of debtor’s refusal to do so; (a) EXPRESSLY GRANTED BY LAW (b) STIPULATED BY THE PARTIES (a) EXPRESSLY GRANTED BY LAW, extrajudicial rem. But, law may not compel or force debtor to comply w/ Ø, if to do, would amount to invol. Serv., if 36 & not due to circs subseq thereto or unknown to the parties. in addition to his other remedies a right of withholding delivery similar to and coextensive with his rights of lien and stoppage in transitu where the ownership has passed to the buyer. 2 where he may also seek rescission even after he has chosen fulfillment if the latter should become impossible Test: WON conveyance by dbtor a bona fide transxn Badges/ Signs of Fraud: 1. 1381 par. has: (1) A lien on the goods or right to retain them for the price while he is in possession of them. as those in Art. He shall also be bound for warranty in case of eviction with regard to specific and determinate things which he may have contributed to the partnership. Every partner is a debtor of the partnership for whatever he may have promised to contribute thereto. in case one of the obligors should not comply with what is incumbent upon him. (3) A right of resale as limited by this Title. He may also seek rescission. if by onerous title. He shall also be liable for the fruits thereof from the time they should have been delivered. to have Rsn As a rule. The court shall decree the rescission claimed. Art. & 37 . (a) PRINCIPAL REMEDY  1191 / 1170 Article 1191. Direct proceeding necessary. transfer of all or nearly all of prop of Db who is insolvent or greatly embarrassed financially 6. Notes on 1191: Two remedies are alternative & not cumulative. The power to rescind obligations is implied in reciprocal ones. if the latter should become impossible. The same rule applies to any amount he may have taken from the partnership coffers. in the same cases and in the same manner as the vendor is bound with respect to the vendee. him 3. 1170. 1380+. 1 & 2. as such. Those who in the performance of their obligation are guilty of fraud. a sale upon credit by insolvent Db 4. is accomplice in the fraud (2) JUDICIAL REMEDIES: (a) PRINCIPAL REMEDY  1191 / 1170 (b) SUBSIDIARY REM  1380 /1177 (c) ANCILLARY REM  The Rules of Court Rsn.W. --Rescission in reciprocal Ø in Art. Asking for Rsn has a credit prior to alienation. ex. 1191 is not identical to Rescission of ©s in Art. may exercise all the rights and bring all the actions of the latter for the same purpose. Cr-Pff has no other legal remedy to satisfy his claim 4. The creditors. consideration of conveyance is inadequate 2. in GF (Art. (4) A right to rescind the sale as likewise limited by this Title. and his liability shall begin from the time he converted the amount to his own use.  Rsn only for legal cause. 3.. 3) Requisites for Accion Pauliana: 1.  Rescindable Ks are valid until voided & can’t be attacked collaterally as in a land registration proceeding. GF of transferee does NOT protect him O. 1381 & 1382 no other legal means to obtain reparation for damages (Art. with the payment of damages in either case. save those which are inherent in his person. 1389) (In Delivery of the Thing Sold) Article 1526. (2) In case of the insolvency of the buyer. Accion Pauliana: Axn to set aside Ks in fraud of Crs. the alienation is maintained Axn for Rsn may be brought by: (1) the person injured by the Rescue K. Unjust enrichment 9. who received prop. of the Db. 1381 par. subject to the exception in par. 1381 & 1382 “Lesion” under Art. Pff. (Rescissible Contracts) Article 1177. Subject to the provisions of this Title.(In Obligations of the Partners) Article 1786. in accordance with articles 1385 and 1388 and the Mortgage Law. This is understood to be without prejudice to the rights of third persons who have acquired the thing. under Art. the unpaid seller of goods. 1383) person demanding Rsn must be able to return whatever he may be obliged to restore if Rsn granted (Art. Requisites of Rsn of a K (1380): a rescissible K. w/c presupposes that the Cr has exhausted the prop. Dbt has made a subsequent K conveying a patrimonial benefit to 3rd p. unless there be just cause authorizing the fixing of a period. a right of stopping the goods in transitu after he has parted with the possession of them. without the need of any demand. If alienation is by onerous title. And the extent of revocation is only to the amount of prejudice suffered by Cr. transfer made by Db after suit has begun & while pending v. transfer is made between father & son 7. Rsn benefits only Cr who obtained Rsn. notwithstanding that the ownership in the goods may have passed to the buyer. though demandable later 2. 1385) objects of K must not have passed legally to poss’n of 3rd p. after having pursued the property in possession of the debtor to satisfy their claims. Article 1788. The injured party may choose between the fulfillment and the rescission of the obligation. they may also impugn the acts which the debtor may have done to defraud them. 3rd p. Where the ownership in the goods has not passed to the buyer. (2) heirs of this person. 1385) Axn for Rsn brought w/in 4 years (Art. transferee must be a party to the fraud. the unpaid seller has. If alienation is gratuitous. must be known or could have been known at the time of making the K. are liable for damages. negligence or delay. even after he has chosen fulfillment. A partner who has undertaken to contribute a sum of money and fails to do so becomes a debtor for the interest and damages from the time he should have complied with his obligation. Contracts validly agreed upon may be rescinded in the cases established by law. failure of vendee to take exclusive poss’n of prop 8. evidence of large indebtedness or complete insolvency 5. Fraudulent conveyance must be shown. As to the excess. to give rise to Rsn. Act being impugned is fraudulent 5. is a subsidiary axn. (b) SUBSIDIARY REM  1380 /1177 Article 1380. (Art. & those who in any manner contravene the tenor thereof. subsequence transferees only when an axn lies v. under 1380+ by 3rd p. vs. if the latter should become impossible. ds. The ct.000. Tolentino may choose between specific performance or rescission w/ damages in either case. The Bank filed an application for extrajudicial foreclosure of the real estate mortgage of Tolentino for non-payment of the promissory note for P17. & Art. (3) Non-perf. said resolution merely prohibited the Bank fr. specific performance or rescission. unless there be just cause authorizing the fixing of a period. 1385 & 1388 & the Mortgage Law.000 loan when it falls due. Sr. If it cannot be det. the bank is in default only insofar as such amount is concerned. With axn only v. the Monetary Board of the Central Bank issued Resolution No. However. CA: (1970) Differences: (1) Rsn under 1191 may be demanded only by party to the ©. In reciprocal obligations. shall decree the rescission claimed. doing business in the Philippines. while under 1380(+) Ø may be unilateral or reciprocal & even when © has been fulfilled. May be rebutted by satisfactory & convincing evidence. The injured party may choose between the fulfillment & the rescission of the ds. 1192 provides that in case both parties have committed a breach of their reciprocal obligations. Rescission is the only alternative remedy left. lasted for 3 years or when the Monetary Board issued Resolution No. & each shall bear his own damages. 3rd p. Of 2 nd alienation depends upon how 2nd Tfee acquired the thing. PATENTEE or owner and author of the formula for MAFRAN SAUCE. (2) Rsn under 1191 may be denied when there is sufficient reason to justify extension of time to perform. prejudiced by the ©. 1192. Issues: 38 . & (2) both require mutual restitution when declared proper. 1388: Cr. in accordance w/ Arts. Rt. the obligation or promise of each party is the consideration for that of the other.000 accrued.000. In turn. where one party has not performed. depends upon the nature of the transfer & upon the complicity of the former in the fraud. Resolution No. to order UFC to pay Magdalo his unpaid salary from December 1. an action for rescission of a contract entitled "Bill of Assignment. CA (1985) Petitioner UFC contends that the CA erred in granting above prayers of plaintiff. Only P17. Art. w/c prohibited the Bank fr. Since the Bank was in default in fulfilling its reciprocal obligation under the loan agreement. as well as damages in the sum of P40. he signified his willingness to pay the loan. making new loans. filed with the CFI-Manila. in case on of the obligors should not comply w/ what is incumbent upon him. To secure the loan. Held: NO. Art. W/N Tolentino can compel specific performance. W/N Tolentino’s liability to pay the P17. that the appellate court awarded the respondents both remedies as it held that the respondents are entitled to rescind the Bill of Assignment and also that the respondent patentee is entitled to his salary aforesaid.000. Is implied in reciprocal ones.(3) their Crs by virtue of rt granted under Art. that a plaintiff cannot ask for both remedies. and to pay the costs of suit. 1387: Presumptions. the obligation of the Bank to furnish the P80. under 1380+ such reason does NOT affect rt. 1177. and order the latter to restore to them the said right of user. This is understood to be w/o prejudice to the rts of third persons who have acquired the thing. Tolentino filed an action for injunction.. In case both parties have committed a breach of the obligation. that this is a gross error of law.000 bec. rescission is only for the P63. is the only grd. is in GF. Art. doing further business. bec. 967 in 1968. 1191 & Art. for w/c Tolentino executed a promissory note payable w/in 3 years.000 debt." The plaintiffs prayed the court to adjudge the defendant as without any right to the use of the Mafran trademark and formula. Which of the parties 1st violated the ©. 1049 cannot interrupt the default of the Bank in releasing the P63. Tolentino executed a real estate mortgage on his 100hectare land.000 was released by the Bank. 1 st transferee. w/c is a reciprocal obligation. FACTS: Magdalo V. In 1965. & when one party has performed or is ready & willing to perform his part of the contract.000. of transferee to retain prop. 1380+: (1) both presuppose ©s validly entered into & existing. even after he has chosen fulfillment. 1191. The agreement is a loan agreement. The liability of the Bank for damages in not furnishing the entire loan is offset by the liability of Tolentino for damages. Francisco. Certain provisions of the Bill of Assignment would seem to support the petitioner's position that the respondent patentee ceded and transferred to the petitioner the formula for Mafran sauce. manufactured and distributed by UFC. while there are various reasons of equity as grds. alleging that the Bank failed to fulfill its obligation to lend the balance of P63.000 balance. He may also seek rescission. 1960. for Rsn under 1191. the same shall be deemed extinguished. the rescissible char. holding that right to specific performance is not conjunctive with the right to rescind a reciprocal contract. --CASES: UNIVERSAL FOOD CORP. The Bank’s delay started in 1965. under 1191 applies only to recip. w/ the payment of damages in either case. the liability of the first infractor shall be equitably tempered by the Court. The balance was not released. The promise of Tolentino to pay was the consideration for the obligation of the Bank to furnish the P80. the other party who has not performed or is not ready & willing to perform incurs in delay. 1049 prohibiting the Bank fr. no liability. the party who caused the loss is liable for the damages Badges of fraud.000 covered by the promissory note subsists. When Tolentino executed a real estate mortgage. If 1st Tfee in GF. From such date. to ask for Rsn. Tolentino: Similarities between Rsn under Art. in the form of penalties & surcharges for not paying his overdue P17. CENTRAL BANK VS. The promissory note gave rise to Tolentino’s reciprocal obligation to pay the P17. the liability of the 1st infractor shall be equally tempered bye the cts. the Court cannot grant specific performance.000. But since the Bank is now prohibited fr. When K can’t be rescinded bec. Art. Facts: Islands Savings Bank approved the loan application of Tolentino for P80. If 1st Tfee in BF. doing further business. The power to rescind obs. under Article 1381. The petitioner corporation violated the Bill of Assignment. He was dismissed without any fault or negligence on his part. but only for such substantial and fundamental breach as would defeat the very object of the parties in making the agreement. The general rule is that rescission of a contract will not be permitted for a slight or casual breach. It is not a subsidiary action.." Hence. prevent its proliferation. with payment of damages in either case. should be denied because under Article 1383. concurring: ART. rescission is a subsidiary remedy 39 . in the process afford and secure for himself a lifetime job and steady income. et seq. apart from the legal principle that the option to demand performance or ask for rescission of a contract belongs to the injured party. specifically paragraph 5-(a) and (b). Justice Fred Ruiz Castro. the fact remains that the respondents-appellees had no alternative but to file the present action for rescission and damages. NCC rescission can not be demanded except when the party suffering damage has no other legal means to obtain reparation. that violates the reciprocity between the parties. if the latter should become impossible. namely. it being unjust that a party be held bound to fulfill his promises when the other violates his.. provisions to preserve utmost secrecy and monopoly of the formula by the patentee. by terminating the services of the respondent patentee Magdalo V. The court shall decree the rescission claimed. J. I concur with the opinion penned by Mr. It is to be emphasized that the respondent patentee would not have agreed to the other terms of the Bill of Assignment were it not for the basic commitment of the petitioner corporation to appoint him as its Second Vice-President and Chief Chemist on a permanent basis.However. that in the manufacture of Mafran sauce and other food products he would have "absolute control and supervision over the laboratory assistants and personnel and in the purchase and safeguarding of said products.. but I would like to add that the argument of petitioner. etc. non est fides servanda. in accordance with articles 1385 and 1388 of the Mortgage Law. The action for rescission is subsidiary. This was the precise intention of the parties: (1) 2% ROYALTY. This rescission is in principal action retaliatory in character. The petitioner contends that rescission of the Bill of Assignment should be denied. Thus. unless there be just cause authorizing the fixing of a period. and. ISSUE: WON the rescission of the Bill of Assignment by the CA is proper? In this connection. in case one of the obligors should not comply with what is incumbent upon him. This is understood to be without prejudice to the rights of third persons who have acquired the thing. which cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. the obligation of the said respondent patentee to continue research on the patent to improve the quality of the products of the corporation. The injured party may choose between fulfillment and rescission of the obligation. Sr. ART. J. is predicated on a failure to distinguish between a rescission for breach of contract under Article 1191 of the Civil Code and a rescission by reason of lesion or economic prejudice. the need of absolute control and supervision over the laboratory assistants and personnel and in the purchase and safekeeping of the chemicals and other mixtures used in the preparation of said product  all these provisions of the Bill of Assignment are so interdependent that violation of one would result in virtual nullification of the rest. we quote for ready reference the following articles of the new Civil Code governing rescission of contracts: ART. enjoy its monopoly.B. in case one of the obligors should not comply with what is incumbent upon him. as the permanent chief chemist of the corporation is a fundamental and substantial breach of the Bill of Assignment.. However. The power to rescind obligations is implied in reciprocal ones. Magdalo Francisco. Separate Opinion: REYES. it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. that the rescission demanded by the respondent-appellee." and that only by all these measures could the respondent patentee preserve effectively the secrecy of the formula. because under article 1383. He may also seek rescission even after he has chosen fulfillment. Francisco. As expressed in the old Latin aphorism: "Non servanti fidem. in this case the dismissal of the respondent patentee Magdalo V. the appointment of the respondent patentee as Second Vice-President and chief chemist on a permanent status. 1191.L. The salient provisions of the Bill of Assignment. without lawful and justifiable cause. the reparation of damages for the breach is purely secondary. and Article 1191 may be scanned without disclosing anywhere that the action for rescission thereunder is subordinated to anything other than the culpable breach of his obligations by the defendant. Francisco. a perceptive analysis of the entire instrument and the language employed therein would lead one to the conclusion that what was actually ceded and transferred was only the use of the Mafran sauce formula. the transfer to the corporation of only the use of the formula. (rescission for breach of contract under Article 1191 )  The rescission on account of breach of stipulations is not predicated on injury to economic interests of the party plaintiff but on the breach of faith by the defendant. The question of whether a breach of a contract is substantial depends upon the attendant circumstances. In this case before us. Sr. Rescission shall be only to the extent necessary to cover the damages caused. with the payment of damages in either case. The injured party may choose between the fulfillment and the rescission of the obligation. there is no controversy that the provisions of the Bill of Assignment are reciprocal in nature. 1383. HELD: The power to rescind obligations is implied in reciprocal ones. 1384. in the letter of the Scotch law. thereby relieving him of any further obligation thereunder. for the period from 9 December 1964 to 15 July 1965. UP informed ALUMCO that it had. against MEI for the sum of P2. ALUMCO. collect and remove timber from the Land Grant. for a period starting from the date of the agreement to 31 December 1965. the DEBTOR agrees without reservation that the CREDITOR shall have the right and the power to consider the Logging Agreement dated December 2. which is approved by the judgment of the proper court. for the collection or payment of sums of money w/ The fact that the contracting parties herein did not provide for resolution is now of no moment. or occupy inconsistent positions. to cut. unlike the previous Spanish Civil Code of 1889.000. Myrick. 5. and which stipulated the following: FACTS: Magdalena Estate. pursuant to Act 3608. Co) entered into a logging agreement under which the latter was granted exclusive authority. LOUIS MYRICK (1941) In 1960. as of 8 December 1964. to be operated and developed for the purpose of raising additional income for its support. vendor notified the vendee that. ALUMCO continued its logging operations.00) by way of and for liquidated damages. Hence. in addition to the indebtedness that it had previously acknowledged. In the event that the DEBTOR fails to comply with any of its promises or undertakings in this document. ALUMCO cut and removed timber therefrom but. to "approbate and reprobate. ISSUE: WON petitioner’s contention is correct. respondent herein. VS.596. or. Lumber Manuf. as expressly provided in Articles 1383 and 1384.(Rescission by reason of lesion or economic prejudice. 1930. at CFI-Rizal. is implied. said agreement had been cancelled as of that date. HELD: Where the terms of a writing are clear. with contract of sale providing for the price which shall be payable in 120 equal monthly installments of each on the 2nd day of ea. San Juan Rizal. entitled "Acknowledgment of Debt and Proposed Manner of Payments. But the operation of these two articles is limited to the cases of rescission for lesion enumerated in Article 1381 of the Civil Code of the Philippines." dated 9 December 1964. Myrick Parcel of lots in San Juan Subdivision. )  On the contrary. as in this case. Inc. in consideration of payment to UP of royalties. and therefore. despite repeated demands. etc. where. Upon the other hand. but was in default as to May payment. Myrick made several installment payments the last being Oct. the petitioner cancelled the contract. MAGDALENA ESTATES VS. and led said respondent to believe it so and act upon such belief.94. sold to Louis J. advised the respondent that he has been relieved of his obligations thereunder. that differentiated "resolution" for breach of stipulations from "rescission" by reason of lesion or damage. and that all amounts paid by him had been forfeited in favor of the vendor. even if it ever was intended. That legal interest shd be computed fr d date of the cancellation of the ©. cannot be deemed to have produced a cancellation. the cause of action is subordinated to the existence of that prejudice. but again incurred an unpaid account. U.. forest fees. because it is the raison d'etre as well as the measure of the right to rescind. commenced the present action in CFI-Albay. in the amount of P61. To this communication. that a bilateral contract may be resolved or cancelled only by the prior mutual agreement of the parties. the vendee did not reply. positive and unambiguous.362. which was approved by the president of UP. in any litigation the course of litigation or in dealings in nais. Land Grants were segregated from the public domain and given as an endowment to UP. In the event that the payments called for in Nos. sale being reciprocal. the action cannot be maintained or continued. extendible for a further period of five (5) years by mutual agreement. CA affirmed w/modif. Lower court granted. considered as rescinded and of no further legal effect the logging agreement that they had entered in 1960. and that the letter of MEI was not assented to by the respondent. Thus this petition. 1960 as rescinded without the necessity of any judicial suit. and the CREDITOR shall be entitled as a matter of right to Fifty Thousand Pesos (P50.74. Thus.. 1 and 2 of this paragraph are not sufficient to liquidate the foregoing indebtedness of the DEBTOR in favor of the CREDITOR. the balance outstanding after the said payments have been applied shall be paid by the DEBTOR in full no later than June 30. which. After it had received notice that UP would rescind or terminate the logging agreement. the vendee executed and delivered to the vendor a PN for the whole purchase price. et seq. apply to cases under Article 1191. where the defendant makes good the damages caused.133. and UP filed a complaint vs. in view of his inability to comply with the terms of their contract. fr. be permitted to repudiate his representations. it had failed to pay. and does not. the petitioner may not be allowed. in the event that one of the obligors should not perform his part. Thus. considering the patent difference in causes and results of either action.08 with legal interest thereon from the filing of the complaint until its payment. the date of execution of the agreement. Simultaneously. and it appears likewise that the vendor thereafter did not require him to make any further disbursements on account of the purchase price. which is conclusive in the absence of mistake. the intention of the parties should be gleaned from the language therein employed. 1 But the terminological vagueness does not justify confusing one case with the other. The letter said “cancelled” and it was unequivocal.P.mo. in the rescission by reason of lesion or economic prejudice. such obligations are governed by article 1124 of the Civil Code which declares that the power to resolve. in the language of section 333 of the Code of Civil Procedure (now section 68 (a) of Rule 123 of the New Rules of Court). 1965. UP and ALUMCO (Assoc. DELOS ANGELES (1970) In the provincesof Laguna & Quezon. and for costs of the suit. 3. ALUMCO executed an instrument. for the reason that the obligations arising from the contract of 40 . who assumes the absolute right over the lots in question. as of that date. it had incurred an unpaid account of P219. under Article 1381." It is probable that the petitioner's confusion arose from the defective technique of the new Code that terms both instances as rescission without distinctions between them. estoppel or prescription. by advertising an invitation to bid. ISSUE: WON the original © to sell was rescinded d/t the automatic resc. there is nothing in the law that prohibits the parties from entering into agreement that violation of the terms of the contract would cause cancellation thereof. ALUMCO had filed several motions to discharge the writs of attachment and preliminary injunction but were denied by the court. If the other party denies that rescission is justified. commenced an Ejectment suit against respondent before the MTC-Pasig. ZULUETA VS. Pan Oriental Shipping Co. and the consequent indemnity awarded to the party prejudiced. For it is only the final judgment of the corresponding court that will conclusively and finally settle whether the action taken was or was not correct in law. An allegation of such violation in a detainer suit may be proved by competent evidence. petitioner. UP’s MR was denied. CA reversed & ruled vs. Upon the allegation that respondent had failed to comply with the monthly amortizations stipulated in the contract. Thus. And as the illegality of the possession of realty by a party to a contract to sell is premised upon the resolution of the contract. as without it..000. Article 2203). UP and ALUMCO had expressly stipulated that. despite demands to pay and to vacate the premises. the logging contract was signed on 16 February 1966. Clara Lumber Company. thus the case was unlawful detainer cognizable by the MTC or one of judicial rescission of © cognizable by then CFI? HELD: Thus. the basic issue is not possession but one of rescission or annulment of a contract. but it proceeds at its own risk. to vacate & pay back rentals. But before pre. And if proved a justice of the peace court might make a finding to that effect. the resolution will be affirmed. and bring the matter to court. the court. and may disregard the same before any judicial pronouncement to that effect. the extrajudicial resolution will remain contestable and subject to judicial invalidation. We see no conflict between this ruling and the previous jurisprudence of this Court invoked by respondent declaring that judicial action is necessary for the resolution of a reciprocal obligation. a condition precedent to such In other words. can treat its contract with ALUMCO rescinded. UP received the TRO after it had concluded its contract with Sta. et al. Of course.00 and a monthly installment of P630. a movie director. 31 October 1964. L-11897. should the court. in the contrary case. Otherwise. the responsible party will be sentenced to damages. without previous court action. and the concession was awarded to Sta. that bidding was conducted. Clara. ALUMCO filed a petition to enjoin petitioner University from conducting the bidding & for preliminary injunction. and said company had started logging operations.court finding the case as one of interpretation & rescission of © b/c d © to sell was converted to © of lease. the Logging Agreement as rescinded without the necessity of any judicial suit. entered into a "Contract to Sell" the aforementioned property for P75. unless attack thereon should become barred by acquiescence.injunction may be issued. asked def. ISSUE: whether petitioner U. it follows that an allegation and proof of such violation. even without court intervention. it is not always necessary for the injured party to resort to court for rescission of the contract. enjoining UP from awarding logging rights over the concession to any other party. it is free to resort to judicial action in its own behalf.. starting with December.etc. But the law definitely does not require that the contracting party who believes itself injured must first file suit and wait for a judgment before taking extrajudicial steps to protect its interest.. Rizal. Respondent judge issued the first of the questioned orders. In other words. ju’s of muni. and act accordingly. final judgment of rescission is rendered when the law itself requires that he should exercise due diligence to minimize its own damages (Civil Code. petitioner Zulueta and private respondent Lamberto Avellana. It is beyond its power so to do. ALUMCO and one Jose Rico. In the first place. but it certainly cannot declare and hold that the contract is resolved or rescinded. being ever subject to scrutiny and review by the proper court. the party who deems the contract violated may consider it resolved or rescinded. 1 since in every case where the extrajudicial resolution is contested only the final award of the court of competent jurisdiction can conclusively settle whether the resolution was proper or not. Pasig.00 payable in advance before the 5th day of the corresponding month. and in connection with Article 1191 of the Civil Code. MARIANO FACTS: Petitioner Jose C. declared petitioner UP in contempt of court and Sta. UP had taken steps to have another concessionaire take over the logging operation. this Court stated in Froilan vs. and that thereby the contract was converted into one of lease. Lower court found in favor of plaintiff. decide that the resolution of the contract was not warranted. MR denied. It is in this sense that judicial action will be necessary. Inc.clause in the ©. the party injured by the other's breach will have to passively sit and watch its damages accumulate during the pendency of the suit until the 41 . Zulueta is the registered owner of a residential house and lot situated within the Antonio Subdivision. Clara Lumber to refrain from exercising logging rights or conducting logging operations in the concession. 1964 – WITH FURTHER SPECIFIC STIPULATIONS IN CASE OF BREACH OF SUCH ©.prayer for injunction. after due hearing. which is beyond the jurisdiction of the Municipal Court to hear and determine.000. and made some affirmative defenses and counterclaim. Respondent controverted by contending that the Municipal Court had no jurisdiction over the nature of the action as it involved the interpretation and/or rescission of the contract.00 payable in twenty years with respondent buyer assuming to pay a down payment of P5.P. On November 6. On motion. it must be understood that the act of party in treating a contract as cancelled or resolved on account of infractions by the other contracting party must be made known to the other and is always provisional. upon default by the debtor ALUMCO. A violation by a party of any of the stipulations of a contract on agreement to sell real property would entitle the other party to resolved or rescind it. 1964." As to such special stipulation. 12 SCRA 276: Avellana occupied the property but title remained with petitioner Zulueta. Then. the creditor (UP) has "the right and the power to consider. except to dismiss the appeal. the defendantsappellants cancelled the said contract because the plaintiffs-appellees failed to meet subsequent payments.. 1967. unless the parties agree to the exercise by the CFI of its original jurisdiction to try the case on the merits.38 including interests. 1966 for more than five (5) months. the defendants-appellants wrote the plaintiffsappellees a letter requesting the remittance of past due accounts. payable with a downpayment of P4. Replying petitioners informed respondent that his Contract to Sell had long been rescinded and the lot had already been resold.. Inc. however.722. private respondent wrote petitioner offering to update all his overdue accounts with interest. The last payment was made on December 5. However. The defendants-appellants alleged in their answer that the complaint states no cause of action and that the plaintiffs-appellees violated paragraph six (6) of the contract to sell when they failed and refused to pay and/or offer to pay the monthly installments corresponding to the month of August. The lower court rendered judgment in favor of the plaintiffs-appellees. even in the cited cases.50. Nazario Dumpit. Lack of jurisdiction �A case tried by an inferior court without jurisdiction over the subject matter shall be dismiss on appeal by the Court of First Instance. and Alberto Onstott. and seeking its written consent to the assignment of his rights to a certain Lourdes Dizon. . jointly and severally.38. as held in previous jurisprudence. the Court of First Instance may try the case on the merits. On numerous occasions. Petitioners' MR was denied. thereby constraining the defendants-appellants to cancel the said contract. finding the rescission void in the absence of either judicial or notarial demand. to render unlawful the possession of the land or building erected thereon by the party who has violated the contract. HELD: Well settled is the rule.00 with 9% interest p. But instead of dismissing the case. to refund immediately to Dumpit the amount of P13. cannot be taken cognizance of by a justice of the peace court.533. 1967 for installments up to September 1967. if the parties therein file their pleadings and go to trial without any objection to such jurisdiction. A stipulation entitling one party to take possession of the land and building if the other party violates the contract does not ex proprio vigore confer upon the former the right to take possession thereof if objected to without judicial intervention and' determination. The sale price was P23.20 until fully paid..533. Rule 40. INC. when their aggregate payment already amounted to P4.00 upon the execution of the contract. they found out that they have already paid the total amount of P4.50 with 12% interest from the filing of the complaint. without need of notice and with forfeiture of all installments paid.300. Section 11. CLAVE (1983) The plaintiffs-appellees filed with CFI-Rizal to compel the defendants-appellants to execute in their favor the final deed of sale alleging inter alia that after computing all subsequent payments for the land in question. there was at least a written notice sent to the defaulter informing him of the rescission. Inc.722. Walfrido de los Angeles the act of a party in treating a contract as cancelled should be made known to the other. through its President.. he erred in assuming original jurisdiction. The plaintiffs' letter with their plea for reconsideration of the said cancellation was denied by the defendants-appellants. petitioner's prayer for a Writ of Execution of the judgment of the Municipal Court of Pasig must perforce be denied.a. realty taxes and incidental expenses for the registration and transfer of the land. that judicial action for the rescission of a contract is not necessary where the contract provides that it may be revoked and cancelled for violation of any of its terms and conditions.660. Albert Onstott executed in favor of private respondent. Where it is objected to. This has legal effect. The plaintiffsappellees paid the monthly installments until July 1966. Contract provided for automatic extrajudicial rescission upon default in payment of any monthly installment after the lapse of 90 days from the expiration of the grace period of one month. leaves no room for doubt on this point: ANGELES VS CALASANZ FACTS: Ursula Torres Calasanz and Tomas Calasanz and plaintiffs-appellees Buenaventura Angeles and Teofila Juani entered into a contract to sell a piece of land located in Cainta. Questioning the validity of the rescission of the contract. Appeal to the OP was also denied. 4 The foregoing premises considered. On January 28. Almost six (6) years later. in Antipolo.00 and monthly installments of P246. vs. The plaintiffs-appellees made a downpayment of P392. They promised to pay the balance in monthly installments of P 41. On December 7. PALAY. FACTS: Petitioner Palay. ordered Palay.42 until fully paid. the installments being due and payable on the 19th day of each month.resolution or rescission. NHA. Respondent Dumpit paid the downpayment and several installments amounting to P13. the contract between the parties provided for extrajudicial rescission. Rizal for the amount of P3. True. where the other party does not oppose it.00 plus 7% interest per annum. owned by said corporation. therefore. a judicial determination of the issue is still necessary. As stressed in University of the Philippines vs. a Contract to Sell a parcel of Land of the Crestview Heights Subd. But while respondent Judge correctly ruled that the Municipal Court had no jurisdiction over the case and correctly dismissed the appeal. 1966. the defendantsappellants accepted and received delayed installment payments from the plaintiffs-appellees. MR denied. respondent filed a letter complaint with the National Housing Authority (NHA) for reconveyance with an altenative prayer for refund. in the face of the objection interposed by petitioner.920. If an inferior court tries a case without jurisdiction over the subject-matter on appeal. ISSUE: WON the contract to sell has been automatically and validly cancelled by the defendantsappellants 42 . Rizal. the only authority of the CFI is to declare the inferior court to have acted without jurisdiction and dismiss the case. There was no other recourse left for respondent Judge. Section 11. . v. and in its entirety is most unfair to the buyers. 1961 or not later than thirty [30] days thereafter should a postponement be mutually agreed upon. yet. [Part 1. Willie Ketchum. low income group people of realizing their dream of a little parcel of land which they can really call their own. The plaintiffs-appellees. of the managerial rights over Boysaw without the knowledge or consent of Interphil. Sr. may be made even without the knowledge or against the will of the latter. Araneta assigned to Alfredo J.HELD: The right to rescind the contract for nonperformance of one of its stipulations. Boysaw and Yulo. signed with Interphil Promotions. The defendants-appellants drafted and prepared the contract. but not without the consent of the creditor. were in fact novations of the original contract which. wrote to Sarreal informing him of his acquisition of the managerial rights over Boysaw and indicating his and Boysaw's readiness to comply with the boxing contract of May 1. and subsequently. and from Araneta to Yulo. affixed their signatures and assented to the terms and conditions of the contract. or recover damages by reason of his own breach " [Seva vs. "Reciprocal obligations are those which arise from the same cause. It was stipulated that the bout would be held at the Rizal Memorial Stadium in Manila on September 30. in only a short time. Jr. (Song Fo & Co. Yulo. such that the obligation of one is dependent upon the obligation of the other. 1191. indispensable requirement . The assignments. so that the performance of one is conditioned upon the simultaneous fulfillment of the other" [Tolentino] The power to rescind is given to the injured party. the entire obligation would have been paid. The contract to sell entered into by the parties has some characteristics of a contract of adhesion. it cannot be denied that this subdivision is likewise purposely done to afford those landless. 581]. Boysaw wrote Lope Sarreal. Sarreal wrote a letter to the Games and Amusement Board [GAB] expressing concern over reports that there had been a switch of managers in the case of Boysaw. Hawaiian-Philippine Co. 43 . the obligor may recover as though there had been a strict and complete fulfillment. engage in any other such contest without the written consent of Interphil Promotions. The next day. the aggrieved creditor is not bound to deal with the substitute. 47 Phil. from Ketchum to Araneta. is not absolute.. Court of Appeals (33 SCRA 1) the Court stated that� Ketchum on his own behalf assigned to J. Yulo. 821. Civil Code]. Jr. Sarreal. informing him of his arrival and presence in the Philippines.. We agree with the observation of the lower court to the effect that: Although the primary object of selling subdivided lots is business. should have been consented to by Interphil. after having invested a big amount of money. sued Interphil. They are to be performed simultaneously. in case one of the obligors should not comply with what is incumbent upon him.Under the law when a contract is unlawfully novated by an applicable and unilateral substitution of the obligor by another. and in which each party is a debtor and a creditor of the other. & Nieto in CFI-Rizal for damages. There is no doubt that the contract in question gave rise to reciprocal obligations. in reciprocal ones. a contract to engage Gabriel "Flash" Elorde in a boxing contest for the junior lightweight championship of the world. Inc. whether in expromision or delegacion is an. . and that Boysaw would not. Jr. Thus. therefore. must be construed against the party causing it. represented by Lope Sarreal. In Universal Food Corp. are now sought to be deprived of the same thru the prayed application of a contract clever in its phraseology. of which he had not been formally notified. The breach of the contract adverted to by the defendants-appellants is so slight and casual when we consider that apart from the initial downpayment of P392. The fight never materialized. presumably in preparation for his engagement with Elorde. first to J. hence. On the same date. condemnable in its lopsidedness and injurious in its effect which. The GAB called a series of conferences & changed the schedule the Elorde-Boysaw fight. the managerial rights over Boysaw. prior to the date of the boxing contest. refused to accept the change in the fight date. Yulo. Alfredo Berwin 48 Phil. The power to rescind obligations is implied. The contract to sell. Art. "Where the plaintiff is the party who did not perform the undertaking which he was bound by the terms of the agreement to perform 4 he is not entitled to insist upon the performance of the contract by the defendant. to be valid. Jr. on behalf of Interphil. 1961. The USA National Boxing Association which has supervisory control of all world title fights approved the date set by the GAB. Article 1234  If the obligation has been substantially performed in good faith. The consent of the creditor to the change of debtors. Amado Araneta the managerial rights over Solomon Boysaw. Inc. but only for such substantial and fundamental breach as would defeat the very object of the parties in making the agreement. Jr. being a contract of adhesion. 827) The question of whether a breach of a contract is substantial depends upon the attendant circumstances. the creditor should agree to accept the substitution in order that it may be binding on him. especially where such interpretation will help effect justice to buyers who. less damages suffered by the obligee.00 the plaintiffs-appellees had already paid the monthly installments for a period of almost nine (9) years. It was offered to them on a "take it or leave it" basis. Sr. [Art. to appellant Yulo. They had no opportunity to question nor change any of the terms of the agreement. . We agree with the observation of the plaintiffs-appellees to the effect that "the terms of a contract must be interpreted against the party who drafted the same. Novation which consists in substituting a new debtor in the place of the original one. The general rule is that rescission of a contract will not be permitted for a slight or casual breach. Another violation of the contract in question was the assignment and transfer. 1293] Creditor not bound to deal w/unilaterally substituted debtor . Then. Amado Araneta. In other words. v. in essence. eager to acquire a lot upon which they could build a home." BOYSAW VS INTERPHIL FACTS: Solomon Boysaw and his then Manager. Substitution of one debtor for another may delay or prevent the fulfillment of the obligation by reason of the inability or insolvency of the new debtor. and requesting that Boysaw be called to an inquiry to clarify the situation. 1192 provides that in case both parties have committed a breach of their reciprocal obligations. Tolentino executed a REM on his 100-hectare land. alleging that the Bank failed to fulfill its obligation to lend the balance of P63. However. After trial. ISSUE: WON the Contract to Sell was rescinded or cancelled. but such transfer is not consented to or approved by x. and private respondents. Under the circumstances. because: (a) petitioner waived the automatic rescission clause by accepting payment on September 1967. 967 in 1968. holding that petitioner could not rescind the contract to sell. if y enters into a contract with z. Tolentino for non-payment of the PN. b/c she had a prospective buyer of the property. under the automatic rescission clause contained therein. The Bank’s delay started in 1965. private respondents filed Complaint for Specific Performance with Damages to compel petitioner to execute a deed of sale in their favor. if any. The liability of the Bank for damages in not furnishing the entire loan is offset by the liability of Tolentino for damages. (b) in any event. Only P17. w/c prohibited the Bank fr. still in the instant case there is a clear WAIVER of the stipulated right of "automatic rescission. the bank is in default only insofar as such amount is concerned. 1049 prohibiting the Bank fr.A. together with the obligations thereunder. FACTS: Hacienda Benito.000 accrued. particularly the fight date is undeniable from the facts aforestated. While it is true that a contractual provision allowing "automatic rescission" (without prior need of judicial rescission. Rizal. (petitioner's predecessorin-interest) as vendor.000 debt." CENTRAL BANK VS.000 balance. so. for w/c Tolentino executed a PN payable w/in 3 years. the GAB did not act arbitrarily in acceding to the appellee's request to reset the fight date to November 4. Tolentino may choose between specific performance or rescission w/ damages in either case. CA affirmed. I.No.000 was released by the Bank.C. That the appellees had the justification to renegotiate the original contract. instead of availing themselves of the options given to them by law of rescission or refusal to recognize the substitute obligor Yulo. [Tolentino] From the evidence. really wanted to postpone the fight date owing to an injury that Elorde sustained in a recent bout. the obligation of the Bank to furnish the P80. CA (1985) Facts: Islands Savings Bank approved the loan application of Tolentino for P80. 1189. requests for extensions were give.000 loan when it falls due. 1977 (when petitioner made arrangements for the acquisition of additional 870 square meters) petitioner could not have delivered the entire area contracted for. Jose W. Tolentino filed an action for injunction. the lower court rendered a decision in private respondents' favor. Since the Bank was in default in fulfilling its reciprocal obligation under the loan agreement. the appellees' desire to postpone the fight date could neither be unlawful nor unreasonable. It must be noted that appellant Yulo had earlier agreed to abide by the GAB ruling. lasted for 3 years or when the Monetary Board issued Resolution No. To secure the loan. In turn. 1049 cannot interrupt the default of the Bank in releasing the P63. Held: NO. doing business in RP. We uphold the appellees' contention that since all the rights on the matter rested with the appellees. But since the Bank is now prohibited fr.000 bec. Issues: W/N Tolentino can compel specific performance. it is clear that the appellees. under the circumstances. subject to terms and conditions as stipulated. vendor sent several demands for the former to settle arrearages. doing further business. The promise of Tolentino to pay was the consideration for the obligation of the Bank to furnish the P80. claiming that Contract to Sell has been automatically rescinded or cancelled by virtue of private respondents' failure to pay the installments due in the contract under the automatic rescission clause. NCC. When Tolentino executed a real estate mortgage. In reciprocal obligations. specific performance or rescission. in the form of penalties & surcharges for not paying his overdue P17. citing Art. w/c is a reciprocal obligation. Resolution No. said resolution merely prohibited the Bank fr. and appellants' claims. there is no novation. in case the rescission is found unjustified 44 . resolution or cancellation) is VALID." as evidenced by the many extensions granted private respondents by the petitioner. neither could private respondents be liable in default. he signified his willingness to pay the loan. From such date. the Court cannot grant specific performance. under which he transfers to z all his rights under the first contract. rescission is only for the P63. until a Notice of rescission was given to Carmen Diokno after she informed the Corp that she wanted an audience with the Pres. The promissory note gave rise to Tolentino’s reciprocal obligation to pay the P17. The balance was not released. At vendees’ failure to pay. making new loans. and to deliver to them the title of the lot in question. doing further business. X can still bring his action against y for performance of their contract or damages in case of breach. Petitioner filed an Answer with counterclaim for damages in the form of attorney's fees. the remedy of one who feels aggrieved being to go to Court for the cancellation of the rescission itself. thus. as vendees executed a Contract to Sell over a parcel of land in Victoria Valley Subdivision in Antipolo. the obligation or promise of each party is the consideration for that of the other. the Monetary Board of the Central Bank issued Reso. Thus. to the enforcement of the contract hung entirely upon the former's pleasure and sufferance. In all these extensions. the other party who has not performed or is not ready & willing to perform incurs in delay. PILIPINAS BANK VS. In 1965. bec. in a contract where x is the creditor and y is the debtor. WON Tolentino is entitled to rescission. Rescission is the only alternative remedy left.000. HELD: We find the petition meritless.Thus. further demand was again given several times. Diokno. looking forward to receiving payments thereon. Inc. Diokno and Carmen I.000. the petitioner never called attention to the proviso on "automatic rescission. The agreement is a loan agreement. and by sending letters advising private respondents of the balances due.000. until May 18. & when one party has performed or is ready & willing to perform his part of the contract. 1961. The Bank filed an application for extrajudicial FREM vs. the liability of the first infractor shall be equitably tempered by the Court. Art. Carale's restaurant & wants to apply to Mildo's House of Chicken. fulfillment of a resolutory condition. DBP) 6. Molina cannot work w/ Mildo's bec.g. G. under which contract Saura. draperies.of a vessel under Code of Comm.00. another restaurant for a period of five years.000.FOR JULY 16. Mutual Desistance or mutuo disenso (Saura v. &as the construction of the factory buildings progresses. did not pursue the matter further. does not deny that the factory he was building in Davao was for the manufacture of bags from local raw materials. a Kenaf mill plant. Instead. seq. subject to availability of funds. the land site thereof.) 9. and the loan to be released at the discretion of RFC. Arrival of Resolutory reso. 500K to 300K. for example. alleging failure of RFC /DBP to comply with its obligation to release the proceeds of the loan applied for and approved. and P9. DBP [44 S 445] FACTS: Plaintiff Saura. Molina can apply for work at Mildo's even before the lapse of the five year prohibitive period. Carale's restaurant. if marriage is annulled. Obligations are extinguished BY: (1) Payment or Performance. floor mattings. If it means both.100. (4) Confusion or Merger of the rights of creditor & debtor. It appears further that for failure to pay the said obligation PBTC sued Saura. Inc. It appears that the cancellation was requested to make way for the registration of a mortgage contract. of the stipulation in the contract he signed w/ Carale. Ltd. NINE YRS LATER. change of civil status. he cannot seek employment fr. 662. Suppose. He hires Molina as a chef. But it does not tell us whether this is rescission Art. it extinguishes obligations like the obligation to give support.900. it requested RFC to cancel the mortgage which RFC did. closes down his restaurant & engages in a totally different business. applied to the Rehabilitation Finance Corporation (RFC). out of 100% local raw materials. Unforeseen Events  (rebus sic stantibus) (Art. 2008: In this case. 1380. Inc. the negotiations which had been going on for the implementation of the loan agreement reached an impasse. (3) Condonation or Remission of the debt. among others. So instead of doing so and insisting that the loan be released as agreed upon. & prescription are governed elsewhere in this Code. The trial court rendered judgment for the plaintiff. before its conversion into DBP. Carale. death of one partner dissolves the partnership/agency. Want of Interest  GR: No. RFC signified that the Loan Agreement has been cancelled. 1231 gives us ten modes of extinguishing an obligation. Compromise 4. Other modes of extinguishing an obligation are the following: 1. Inc. to manufacture copra and corn bags. there was a stipulation that if Molina resigns fr. 2. ISSUE: WON the Ø of RFC to Saura in the perfected loan © subsists Illustration: Carale owns a restaurant. (2) Loss of the thing due. When RFC turned down the request of Saura. e.00 to pay the balance of the purchase price of the jute mill machinery and equipment. Saura. China Eng signified to withdraw as co-maker. rescission. The jute mill machinery had already been purchased by Saura on the strength of a LOC by PBTC. Death  particularly where the obligation is purely personal. 1231. Molina can make out a case of extinguishment of obligation on the ground of want of interest. One of the modes mentioned is rescission. had again agreed to act as co-signer for the loan. Saura commenced the present suit for damages. partywall. carpets.g.g. asked that the mortgage be cancelled. China Engineers. such as annulment. Molina resigns fr. to be used as follows: P250. Thus. Saura. Saura.. Inc. In this case. and the machinery and equipment to be installed. e. to be certified to by an appraiser of RFC.what 45 .000. Subsequently. 5.. which was done by RFC. The obvious purpose of the stipulation is to prevent unfair competition. Other causes of extinguishment of obligations. runners. In some cases. (5) Compensation. The action thus taken by both parties was in the nature of mutual desistance . Balane: Art. in partnership. Saura. 8. executed over the same property in favor of PBTC. e. any partner can w/draw any time fr. Or aband. Renunciation by the creditor 3. P240. obviously was in no position to comply with RFC's conditions. MODES OF EXTINGUISHMENT OF OBLIGATIONS Art. RFC approved the loan secured by a first mortgage on the factory building to be constructed. Term / fulfillment of 10. but there are certain cases:  if it is equitable to deem the Ø extinguished d/t want of interest of Cr in the fulfillment of such Ø. 11. a construction business. (6) Novation. in connection with its jute mill project. et. Inc. Inc. Insolvency of debtor judicially declared & discharged. 7.00 as additional working capital. then we have eleven modes of extinguishing an obligation under Art. 1267. When negotiations came to a standstill. (Similar to Tolentino’s) under  This enumeration is not exclusive. however. the partnership. when Saura requested for the release of the 500K loan. for an industrial loan of P500. had up to December 31 of the same year within which to pay its obligation on the trust receipt heretofore mentioned. 1191 (resolution) or rescission under Art. Unilateral Withdrawal. thereby preventing the plaintiff from completing or paying contractual commitments it had entered into.condi. In some cases. When the RFC Board later decided to decrease the loan fr.00 for the construction of a factory building (for the manufacture of jute sacks). Abandonment of the thing  as in Art. 1231.. CASE: SAURA IMPORT & EXPORT BANK VS. In the contract of employment. Every provision contained in. Payment made to the creditor by the debtor after the latter has been judicially ordered to retain the debt shall not be valid. Republic Act No. In obligations to give. When a third person. Payment made in good faith to any person in possession of the credit shall release the debtor. 1243. even without the debtor's knowledge. any obligation contracted in the Philippines which provision purports to give the obligee the right to require payment in gold or in a particular kind of coin or currency other than Philippine currency or in an amount of money of the Philippines measured thereby. 46 . the creditor cannot be compelled partially to receive the prestations in w/c the obligation consists. when the debt is in part liquidated & in part unliquidated. the value of the currency at the time of the establishment of the obligation shall be the basis of payment. There being no express stipulation & if the undertaking is to deliver a determinate thing. With regard to judicial costs. In any other case the place of payment shall be the domicile of the Art. In case an extraordinary inflation or deflation of the currency stipulated should supervene. 1246. The delivery of promissory notes payable to order.which is a mode of extinguishing obligations. Art. It is a concept that derives from the principle that since mutual agreement can create a contract. mutual disagreement by the parties can cause its extinguishment. Art. When the obligation consists in the delivery of an indeterminate or generic thing. of an obligation. Art. the additional expenses shall be borne by him. In obligations to do or not to do. the creditor cannot demand a thing of superior quality. & w/o expressing any protest or objection. In the meantime. 1248. financial investment and industrial transactions.what Manresa terms "mutuo disenso" . A debt shall not be understood to have been paid unless the thing or service in w/c the obligation consists has been completely delivered or rendered. the extrajudicial expenses required by the payment shall be for the account of the debtor. 529. the principle that since mutual agreement can create a contract. a mortgage. and null. (3) If by the creditor's conduct. Art. the creditor may demand & the debtor may effect the payment of the former w/o waiting for the liquidation of the latter. It is presumed that there is legal subrogation: Art. & if it is not possible to deliver such currency. 1235. Manresa terms as "mutuo disenso" . Article 1302. the debtor has been led to believe that the third person had authority to receive the payment. Payment to a person who is incapacitated to administer his property shall be valid if he has kept the thing delivered. Art. Payment or Performance PERTINENT PROVISIONS/ reading matters: Art. any domestic obligation to wit. their agencies and instrumentalities. Such benefit to the creditor need not be proved in the following cases: If the creditor ratifies the payment to the third person. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation. Unless it is otherwise stipulated. be as it is hereby declared against public policy. Art. and no such provision shall be contained in. not interested in the obligation. Art. 1241. although the latter may be of the same value as. 1233. 1244. pays with the express or tacit approval of the debtor. or more valuable than that w/c is due. Whoever pays for another may demand fr. 1250. Payment made by a third person who does not intend to be reimbursed by the debtor is deemed to be a donation.A. unless there is a stipulation to the contrary. Art. less damages suffered by the obligee. the payment shall be made wherever the thing might be at the moment the obligation was constituted. or any person authorized to receive it. Art.Art. (2) 2) SECTION 1. by foreign governments. as the case may be. The payment of debts in money shall be made in the currency stipulated. 1232. as having emanated from the sources enumerated above. he can recover only insofar as the payment has been beneficial to the debtor. through bona fide intermediaries or agents. instead of insisting for its release. the Rules of Court shall govern. the obligation is deemed fully complied w/. knowing its incompleteness or irregularity. a person interested in the fulfillment of the obligation pays. The debtor of a thing cannot compel the creditor to receive a different one. in any other manner. Payment shall be made to the person in whose favor the obligation has been constituted. the obligor may recover as though there had been a strict & complete fulfillment. 1234. A. the action taken by both parties was in the nature of mutual desistance ." (1) 1) (b) transactions affecting high-priority economic projects for agricultural. as amended by R. or his successor in interest. Neither may the debtor be required to make partial payments. 1236. Payment made to a third person shall also be valid insofar as it has redounded to the benefit of the creditor. Payment shall be made in the place designated in the obligation. the original obligation shall be held in abeyance. 1247. If after the payment. 3) When. However. and of no effect. the debtor what he has paid. 4100. It is a concept that derives fr. When the obligee accepts the performance. w/o prejudice to the provisions of article 1427 under the Title on "Natural Obligations. even without the knowledge of the debtor. Art. the borrower. (d) import-export and other international banking. any obligation hereafter incurred. provides: Art. such as those arising fr. or made with respect to. The purpose of the obligation & other circumstances shall be taken into consideration. debtor. 1249. asked that the mortgage given as security be cancelled & the creditor acceded thereto. 1239. the third persons acquires the creditor's rights. These provisions are w/o prejudice to venue under the Rules of Court. No. But the payment is in any case valid as to the creditor who has accepted it. Extinguishment of Øs by mutual desistance  Where after approval of his loan. or made with respect to. then in the currency w/c is legal tender in the Philippines. unless there is an agreement to the contrary. If the debtor changes his domicile in bad faith or after he has incurred in delay. or insofar as the payment has been beneficial to him. Payment means not only the delivery of money but also the performance. 1237. without prejudice to the effects of confusion as to the latter's share (a) transactions where the funds involved are the proceeds of loans or investments made directly or indirectly. Art. guaranty. 1240. and international financial banking institutions so long as the funds are identifiable. Whoever pays on behalf of the debtor w/o the knowledge or against the will of the latter. or penalty. 1251. industrial and power development as may be determined by the National Economic Council which are financed by or through foreign funds. or when through the fault of the creditor they have been impaired. Unless there is an express stipulation to that effect. except that if he paid w/o the knowledge or against the will of the debtor. Art. mutual disagreement by the parties can cause its extinguishment. or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed. 1242. cannot compel the creditor to subrogate him in his rights. 1238. If the obligation has been substantially performed in good faith. w/c requires the debtor's consent. Neither can the debtor deliver a thing of inferior quality. The above prohibition shall not apply to Art. void. whose quality & circumstances have not been stated. the action derived fr. (c) forward exchange transactions entered into between banks or between banks and individuals or juridical persons. payment made by one who does not have the free disposal of the thing due & capacity to alienate it shall not be valid.w/c is a mode of extinguishing obligations. an act or forbearance cannot be substituted by another act or forbearance against the obligee's will. Art. When a creditor pays another creditor who is preferred. A. No. RP silver peso & half peso for debts of any amount. the obligation to pay is valid but the obligation to pay in foreign currency is void. Performance  in obligations to do. applying R.Payment  in obligations to give. it shall be discharged in Philippine currency. 1944. Identity  If specific prestation. Payment means not only the delivery of money but also the performance.A. No. including Central Bank notes. (RA 529. etc. the person who pays  must have requisite capacity 2.00 debts.  It is the only normal way of extinguishing an obligation. as amended. 8183 states: SECTION 1. All monetary obligations shall be settled in the Philippine currency which is legal tender in the Philippines.) It follows. (c) and (d) in the foregoing provision. the manner.13 the Court. sustained the ruling of the NLRC that obligations in foreign currency may be discharged in Philippine currency based on the prevailing rate at the time of payment. heretofore or hereafter issued and declared by the Government of the Philippines shall be legal tender for all debts. It must be something in the middle. Thus. except in case of a loan made in a foreign currency stipulated to be payable in the same currency in which case the rate of exchange prevailing at the time of the stipulated date of payment shall prevail. Integrity 3. 1233. therefore. Re: The prestation 1. the person to whom payment is made  “ 3. A debt shall not be understood to have been paid unless the thing or service in w/c the obligation consists has been completely delivered or rendered.   it is the fulfillment of the prestation due whc extinguishes the Ø by the realization of the purposes for whc it was constituted. 2.  it is a juridical act whc is voluntary. Requisites of Payment or Performance: [TOLENTINO] 1. (Art. Inc. Payment in manager's check or certified check is not payment in legal tender. I. RA 529. Tolentino: This art. 8183 has the effect of removing the prohibition on the stipulation of currency other than Philippine currency. in any other manner. 529. If the parties stipulate that payment will be made in foreign currency. National Labor Relations Commission. every other domestic obligation heretofore or hereafter incurred. Art. Payment will be made in Phil. such that obligations or transactions may now be paid in the currency agreed upon by the parties. Payment/ performance is the paradigmatic mode of extinguishment of an obligation. entitled "An Act to Assure the Uniform Value of Philippine Coin and Currency" is hereby repealed. in which cases the terms of the parties’ agreement shall apply. 529 regarding the rate of conversion remains applicable. RP subsidiary silver coins 20 ¢& 10 ¢ for up to P20 debts. (Approved on June 11. If incurred after RA 529 became effective. time and place of payment. Luz) KINDS: 1. &whc cannot be refused by Cr. already w/drawn fr circ) 3. the requisite requires the delivery of something of neither inferior or superior quality (Art. Thus. 1249. 1. you will have to pay in legal tender in the Philippines. there are special rules: Governing rule: RA 529 as amended by RA 4100 CONCEPT OF PAYMENT  Art. new Victory series (EO 25. Q: How do you convert? A: In case of an obligation w/c is not a loan in foreign currency.  it is made not only by 1 who owes money but also by 1 bound to do something or to refrain fr doing  Re: The parties In the RP the ff are legal tender: (sec. 529 by R. 1233 states these requisites of payment – I. All coin and currency.  payment shd be made by the debtor to the creditor at the right time and place. Identity 2.) proceeding Balane: Payment or Performance are used interchangeably.A. however. Payment is identical w/ Fulfillment. In case of money debts. For BALANE: Art. that the jurisprudence established in R. &  the very thing or service due must be delivered or released. this requisite means that the very thing or service must be delivered. in Asia World Recruitment. of an obligation. R. No. 1232. The . (2) its integrity  prestation must be fulfilled completely Pertinent portion of Republic Act No. RP Treasury certs. public and private. In case of money. But technically. the new law does not provide for the applicable rate of exchange for the conversion of foreign currency  incurred obligations in their peso equivalent. the thing to be paid  in accordance w/ the Ø 4. However.  If generic. (b). as the case may be. and RP minor nickel &copper coins for up to P2. Provided.A. NORMAL  when Db voluntarily performs 2. shall be discharged upon payment in any coin or currency which at the time of payment is legal tender for public and private debts. currency. With the exception of the cases enumerated in items (a). 8183. No. 47 Payment in negotiable paper  This may be refused by the creditor.    The repeal of R. of the prestation. States Two requisites for Payment: (1) Identity. licit and made with the intent to exting. LEGAL TENDER – means such currency whc in a given ju’s can be used for payment of debts public & priv. 1244.. 2.A. With respect to prestation: 1. Payor/ obligor/ debtor 2. No. whether or not any such provision as to payment is contained therein or made with respect thereto. the conversion must be as of the time the obligation was incurred (Kalalo v. d Ø. v. This law supersedes Art. s. ABNORMAL  when Db is forced by judicial If the loan is in foreign currency. RA 265) 1. Payee/ obligee/ creditor III. the parties may agree that the obligation or transaction shall be settled in any other currency at the time of payment. All notes and coins issued by CB. Indivisibility SEC. Re: Time & place Discussion: Just like R. That if the obligation was incurred prior to the enactment of this Act and required payment in a particular kind of coin or currency other than Philippine currency. No. the conversion is as of the time of payment.A. measured at the prevailing rates of exchange at the time the obligation was incurred. 1996) II. conversion must be as of the time the obligation was incurred. 54. 529. if incurred bef. 1246). There are several exceptions to this requirement: 1. the third person may demand repayment to the extent that the debtor has been benefited. 2. 1242. It is the only normal way of extinguishing an obligation. Art. payment is used in obligations to give whereas performance is used in obligations to do. I found it hard to accept that manager's check or certified check is good as legal tender. The debtor himself 2. 1290. 3. With respect to the time & place of payment: 2.) (ii) Novation (Art. party claiming substantial perf. 1243. (Art. 1238.  In all these five (5) cases. Revaluation in case of extraordinary inflation or deflation (Art. 4. Effect of payment by a third person:  In any event. (Art. (Art. 2) 3. 1211. par. The case of Namarco v. In solidary obligations when the debtors are bound under different terms & conditions. In case of prestations w/c necessarily entail partial performance. less damages suffered by the obligee. it is required that the debt should not have been garnished. 1241. (Art. 1720. c. 1241. provided it redounded to the obligee's benefit & only to the extent of such benefit. w/o any willful or intentional departure fr it 2. must show attempt in GF II.) 6. par. 1248. Federation.) Any third person subject to the following qualifications: a. they have been impaired" as to apply only to a check used in payment if issued by a person other than the debtor. The Malolos ruling is better. His heirs or assigns 3. If the debt is liquidated in part & unliquidated in part. 2065. 2.) 3.) 8. Exceptions to the requirement of identity The obligee proper (Articles 1240. court may grant the vendee a new term where he substantially performed in good faith according to Art.) Exception: If the person paying intended it to be a donation. In case of several guarantors who demand the right of division. 1250)  This rule has never been used. Anyone interested in the fulfillment of the obligation. 2. 1592 of the same Code. Substantial Performance: 1. a guarantor b. Integrity  There must be delivery of the entire prestation due. (Art. 49 SCRA 238.) This is an equity rule. & must not pervade the whole. If the work is to be delivered partially. (Art. Requirements: 1. In case of application of payments if several debts are equally onerous (Art. Art. 1. must not be so material to the achievement of the very purpose of the parties. JAVIER [31 S 829] . 1233) or completely fulfilled. 1226 . When payment to be made: When due 2.) 2.) His successor or transferee (Art. 1245. (Art. the rule in the Old Civil Code w/c did not require consent on the part of the creditor. 1234. e. 2. Payee/ obligee/ creditor CASES on Payment: J. of Ø must be slight. Payment/ performance is the paradigmatic mode of extinguishment of an obligation.g. 1248. there is a voluntary change in the object. (Art. 1234. Anyone in possession of the credit.  This is a departure fr. If it falls under Art. In case or express stipulation.) In both cases.) b. 1225. 2 nos.Anyone. & omission or defect must be so technical & unimpt. There are always risks to w/c cashier's checks are subject. 1251. (Art. all that the debtor have to do is to issue another check. are used  But technically.ruling in Seneris has been reversed in the case of Bishop of Malolos. what happens to your cashier's check? 4. the acceptance is only a provisional payment until the check is (a) encashed or (b) when through the fault of the creditor they have been impaired. Place (Art. 1235.) 2.) 5. With respect to the parties There are two parties involved: 1.) The exceptions to the requirement of integrity are: 1. If the obligation has been substantially performed in good faith. 1626. Who may be the payee? Why? Bec.) 9. payment by check can be refused by the creditor. 2 & 3. And even if payment by check is accepted by the creditor. 5. interprets the phrase "when through the fault of the creditor. His agent FACTS: 48 . par.) Primary rule: As stipulated Secondary rule: Place where the thing was at the time the obligation was constituted if the obligation is to deliver a determinate thing. If the payment was w/ the debtor's consent. if the check was issued by the debtor himself. he becomes the agent of the debtor. 1.) 2. regardless of Art. 1234. Indivisibility  This means that the obligor must perform the prestation in one act & not in parts. 1248. Payor/ obligor/ debtor 2. Without need of the creditor's consent 1. In case of joint divisible obligations (Art. III. the obligor may recover as though there had been a strict & complete fulfillment. It was only during the Japanese occupation that there was a recognition of extraordinary inflation in this country. 1254. In compensation when a balance is left. With the creditor's consent -. (Art. 2. (Art. deviation fr perf. TUASON V. 1240.) 4. In case of impossibility or extreme difficulty of single performance. 1. par.In the interest of justice & equity.) 7.) His agent (ibid.M. In case of substantial performance in good faith (Art. 3. par.1238. (Art. 1236. In case of waiver of obligee/ creditor (Art. (Art. an attempt in GF to perform. Tertiary rule: At the debtor's domicile 3. What if after having issued a cashier's check.) (i) Dacion en pago (Art. Who should the payor be: a. If payment was w/o the debtor's consent. 1. The effect is subrogation (Articles 1236-1237.. benefit is deemed to be total. the price or compensation for each part having been fixed. the drawee-bank closes.) Balane: ** Payment or Performance interchangeably. 1208. 1960. or any person authorized to receive it. After the demand. If the obligation has been substantially performed in good faith. but made the latter pay arrears w/in 60 days. and that title shd be transferred after such payment w/costs at the expense of def. To whom payment should be made Art. payable for 10yrs. Thus. CFI found in favor of def. Thus. on 2 written ©’s. UTEX. Art. & w/o expressing any protest or objection. But def. On installment w/ down & interest of 10% p. This court a quo rendered decision in August 1971. > In April 1961.000. Applying Doctrine in JM Tuazon v. Payment made to one having apparent authority to receive the money will. called attention of vendors that he wanted to build a house on his lot but they have to start improvements on d subd. def. the receipt showed full payment as per contract.installmts until Jan. UTEX made a motion for clarification and such was answered in 1972 clearly directing UTEX to pay sps. the 120installments and his payments were to be treated as rents. to receive the particular payment. 1962. payment must be made to the obligee himself or to an agent having authority. 49 . filed complaint. Used by Pet. after it has already paid the same to Manuel and Castañeda. he was informed of cancellation of © for failure to pay as stipulated. After subseq. be treated as though actual authority had been given for its receipt. But the rest of the © subsists. roads. subdivision-owner. whc means that rental was reduced. e. HELD: NO.a. pltff filed case w/CFI-Rizal for judicial rescission of © and payment of arrears. 1235 is applicable. Thus. (for equity and justice) ISSUE: WON UTEX shd be made to pay sps. w/o reservation & apparently w/o protest only P7. Arañas as owner of 400 shares of stocks in Universal Textile Mills.petitioners as rightful owners of all accruing dividends from their stocks fr after the judgment by the court. 1960. But this would not have prevented him fr. fr. Felipe Saldana and Def. To CIRILO JAMANDRE. and ordered the conveyance of one of the 2 lots to defs. Notified Resp. less damages suffered by the obligee. 1960 of P7000. > LC dismissed resp. > resp. In the sale of immovable property.a. Msa Hts. RE Substantial performance of © Ø in GF. Plaintiff vendee. refused to vacate. JAMANDRE [151 S 317] FACTS: GUILLERMO AZCONA leased 80 Ha. Javier HELD: The burden of recovering the supposed payments of the cash dividends made by UTEX to the wrong parties Castaneda & Manuel squarely falls upon itself by its own action & cannot be passed by it to petitioners as innocent parties. whc the Corp-defendant issued to co-def. Based on Art. the obligor may recover as though there had been a strict & complete fulfillment. but resp. 120 equal monthly installments w/ 10% interst p. he made any demand. of monthly inst. filed counterclaim. the vendee may pay. TUTAAN [127 S 828] Payment by judgment debtor to the wrong party does not extinguish judgment debt. Saldana faithfully pd. 1234. written or verbal. Art.Quezon declared petitioner-plaintiff sps. Payment shall be made to the person in whose favor the obligation has been constituted. Petitioner says that he could not demand payment of the balance of P200 on 10/26/60. UTEX failed to transfer the names of the shares and pay the dividends to petitioners.vendor. Gene Manuel and BR Castaneda.’s complaint. Default by def. Inc. > Yearly rental agreed: P7. xxx  A payment in order to be effective to discharge an obligation must be made to the proper parties. Article 1592. date of receipt bec. despite knowledge of the court’s decision otherwise. 1235. incl. sps-pet asked for a writ of execution fr court a quo for payment of cash dividends fr 1972-1979 w/interest and to effect the transfer of the shares to them. he stopped paying fr. When the obligee accepts the performance. and for the transfer of the disputed shares of stocks to the names of petitioner-sps. as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act.-- In general. 1954 & pd. After payment of 1 st installment on execution of © in Sept. as a rule. Def. perhaps b/c of the reduction of the 80Ha. xxx If the petitioner is fussy enough to invoke it now.200 for 3-agri. knowing its incompleteness or irregularity. ISSUE: WON cancellation here was proper? HELD: NO. even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place. What applies here is Art. Subd.years fr. or his successor in interest. even after the expiration of the period. Legarda Hermanos. Plaintiff JM Tuazon and def. attys fees. reserving in the receipt his right to collect the balance when it fell due. Out of his 150 Ha pro-indiviso share in hacienda Sta. At the latter’s choice. Javier is fully applicable to the present case. after his 1st 5yrs of paying. a payment. Appellate court reversed.Contract to Sell bet. As grazing land.Arañas the cash dividends fr 1972-1979 w/interests. FACTS: CFI-Rizal. Ligaya Javier on a parcel of land in Sta. Plaintf informed her that © has been rescinded.. It was found that the lots cud not be delivered bcoz they were still submerged in water and there were no roads in the subdv. To deliver possn of the prop. Thus pltff appealed for erroneous applic of 1592 b/c this is a © TO Sell not OF Sale. no mention of the short of 200. it stands to reason that he would have fussed it too in the receipt he willingly signed after accepting. FACTS: Contract to Sell bet. upheld the cancellation of the ©. for the payment of that amount. amounts to delay and ground for rescission HELD: No.M. Art. must be made to the proper person. in order to be effective to discharge an obligation. stock dividends whc accrued to said shares. 1234: Art. ARAÑAS V. ISSUE: WON CFI erred in NOT declaring herewith © rescinded. May 1948  resp. Tuason v. AZCONA V. lacking of 200 fr the agreed annual rental of 7200. that © is deemed cancelled for failure to comply w/conditions therein. there is evidence in the record that when the due date arrived. In lieu of the appeal filed by Manuel and Castaneda. plus interests. LEGARDA HERMANOS V. SALDANA [55 S 324] The Court's doctrine in J. Pet. 1592. the obligation is deemed fully complied w/. express or implied. 1.g. Moreover. extendible to 1965 at lessee’s option.instalmnts out of 120. *** It is elementary that payment made by a judgment debtor to a wrong party cannot extinguish the judgment obligation of such debtor to its creditor. 1st annual rental due on Mar. 1234. For 8-yrs about 95mos. Filing of this case w/CFI-Manila in 1961. Negros Occ. the rental for the crop year 1961-1962 was due on or before 1/30/61. Instead. By 16Ha. decedent rep. To him until he pd in Oct. 1240. fe in Escalante. took poss’n of prop.by Administrator to his Estate. both were dismissed by TC for pari de licto. Lower court granted such order but absolved UTEX of payment of cash dividends whc they have already paid to Manuel and Castaneda on the ground of equity. Mo. the court may not grant him a new term. resp. did not pay for failure of Pet. ISSUE: WON the payment of P7000. Art. due. if there is no fault or negligence w/c can be imputed to the latter. 2173. except that if he paid w/o the knowledge or against the will of the debtor. 1626. in the name of & to the credit of Cr. Cases. oblig. [PAL V. if payment is made to one who by law is authorized to act for the creditor. Db may be made to pay again by Cr when he attains capacity. 1237.  NOTE: age of majority is now 18. cannot compel the creditor to subrogate him in his rights. Same principles are applicable to paymt made to 3P. 1236. CA (181 S 557)] Art. paymt. 1241  Deposit by Db in bank. the debtor has been led to believe that the third person had authority to receive the payment. xxx The theory is where a payment is made to a person authorized & recognized by the creditor. The receipt of money due on a judgment by an officer authorized by law to accept it will. payment made by one who does not have the free disposal of the thing due & capacity to alienate it shall not be valid. Payment made in good faith to any person in possession of the credit shall release the debtor. either express or implied. IN ART. When a third person.Likewise. 1427. creditor (Cr). xxx Unless authorized by law or by consent of the obligee. 1626] & (b) when in GF he pays to one in poss’n of credit [Art. When a minor between eighteen & twenty-one years of age. (Other QuasiContracts) Art. In the absence of an agreement. Art. 1242] 5. before having knowledge of the assignment. or thru error induced by fraud of 3P. there shall be no right to recover the same fr. to substitute something in lieu of cash as medium of payment of his debt. But the payment is in any case valid as to the creditor who has accepted it. of thing or amt. such as authority of guardian to inc. 1256 Art. the payment to such a person so authorized is deemed payment to the creditor. a debtor has no rights. the Cr cannot be compelled to accept it. the acceptance by the sheriff of the petitioner's checks. as when agent is appted. per se. w/c requires the debtor's consent. payment must be made to his legal rep. a mortgage. then Cr cannot demand anew When Cr is incapacitated. Strictly speaking. or his legal rep during the inc. except in the case provided in A 1427. 1239. the third persons acquires the creditor's rights. In obligations to give. therefore satisfy the debt. Cr himself. 3. To collect fr. 1238. In ff. Fr. Tolentino:  Where the person paying has no capacity to make the pymt. The debtor who. or penalty. Cr shall be valid only insofar as it accrued to his benefit. a public officer has no authority to accept anything other than money in payment of an obligation under a judgment being executed. Payment to a person who is incapacitated to administer his property shall be valid if he has kept the thing delivered. Tolentino: 2. Who shall make payment Art.  In case Cr accepts. EXCEPT AS PROV. If mistake of Db due to fault of Cr. To 3P releases Db:  (a) when w/o notice to assngmt. Whoever pays for another may demand fr. the obligation. but person who paid has right to recover fr. Baviera: Number three is Estoppel in Pais Tolentino: 1. w/o latter’s autho. Does NOT constitute payment. even when Db acted in utmost GF & by mistake as to the person of his Cr. the obligee who has spent or consumed it in good faith. Unless authorized by law or by consent of the obligee. (2) If the creditor ratifies the payment to the third person. Consign’n will not be proper. Absence of benefit. but when the Cr cannot be found in the place of payment. the rights of the former are governed by articles 1236 & 1237. except at his own peril." Art. 3P 4. Payment made to the creditor by the debtor after the latter has been judicially ordered to retain the debt shall not be valid. 1242. 1243. or the adm’r of estate Conventional: autho. (3) If by the creditor's conduct. pays the debt. Payment made by a third person who does not intend to be reimbursed by the debtor is deemed to be a donation. he can recover only insofar as the payment has been beneficial to the debtor. 2. voluntarily pays a sum of money or delivers a fungible thing in fulfillment of the obligation. guaranty. Paymt. when properly made will ext. Such benefit to the creditor need not be proved in the following cases: (1) If after the payment. Debtor (Dr)  Payment to wrong party does NOT extinguish oblig to Cr. w/o prejudice to the provisions of article 1427 under the Title on "Natural Obligations. the pymt will not be valid. operate as a discharge of the judgment debt. Payment made to a third person shall also be valid insofar as it has redounded to the benefit of the creditor. Consequently. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation. to Incap. he pays to original Cr [Art. a public officer has no authority to accept anything other than money in payment of an obligation under a judgment being executed. such as those arising fr. payment means the discharge of a debt or obligation in money & unless the parties so agree. pays his creditor shall be released fr. Whoever pays on behalf of the debtor w/o the knowledge or against the will of the latter. 1241. Art. or insofar as the payment has been beneficial to him. for consignation ff. does not. Authority to receive: LEGAL or CONVENTIONAL Legal: conferred by law. such deposit may be a valid excuse for not holding the Db in default GR: Consignation in ct. 50 . Art. unless there is a stipulation to the contrary. in the case at bar. who has entered into a contract w/o the consent of the parent or guardian. it will work a discharge. (Assignment of Credits & Other Incorporeal Rights) Art. Art. or deliver the thing to ct. of credit. w/o the knowledge of the debtor. the debtor what he has paid. In the meantime. holding that payment by cashier's check is not payment in legal tender as required by RA No. In the meantime. is not legal tender. In obligations to do or not to do. or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed.. When the obligation consists in the delivery of an indeterminate or generic thing. shall be governed by the law of sales. refused to accept such payment and instead insisted that the garnished funds deposited with RTC-Pasig be withdrawn to satisfy the judgment obligation. Section 63 of Republic Act No. 1. shall be as it is hereby declared against public policy null and void.70 = Total P398. 529. and in Cash 135. 1246. 1244. then in the currency which is legal tender in the Philippines. 265. although the latter may be of the same value as. A check.  TIBAJIA V. Article 1249 of the Civil Code which provides: Art. and Carmen Tibajia. or more valuable than that w/c is due. or made with respect to. The payment of debts in money shall be made in the currency stipulated. both public and private. Art. the action derived from the original obligation shall be held in abeyance. 1245. Trial court denied on the ground that payment in cashier's check is not payment in legal tender and that payment was made by a third party other than the defendant. Art. whether a manager's check or ordinary check. Jr. as amended (Central Bank Act) which provides: Art. and no such provision shall be contained in. or if. CA affirmed. which provides: Sec. Section 1 of Republic Act No. shall be discharged upon payment in any coin or currency which at the time of payment is legal tender for public and private debts. and an offer of a check in payment of a debt is not a valid 51 . Every provision contained in. 1249. the creditor cannot be compelled partially to receive the prestations in w/c the obligation consists. or when through the fault of the creditor they have been impaired. The payment of debts in money shall be made in the currency stipulated. Defendant spouses (petitioners) filed a motion to lift the writ of execution on the ground that the judgment debt had already been paid. & if it is not possible to deliver such currency. Every obligation heretofore and hereafter incurred. However. however. MR was denied. if he expressly so declares. Dation in payment. Neither may the debtor be required to make partial payments. 529. an act or forbearance cannot be substituted by another act or forbearance against the obligee's will. to the extent of the amt of jdgmt in his favor. and of no effect. The decision having become final. the action derived fr. MR denied again. The debtor of a thing cannot compel the creditor to receive a different one. any obligation which purports to give the obligee the right to require payment in gold or in any particular kind of coin or currency other than Philippine currency or in an amount of money of the Philippines measured thereby. Unless it is otherwise stipulated. he accepts the thing w/o protest or disposes of it or consumes it ISSUE: whether or not payment by means of check (even by cashier's check) is considered payment in legal tender as required by the Civil Code. is at the option of the creditor: Provided. or made with respect to. Sec. The purpose of the obligation & other circumstances shall be taken into consideration. the Rules of Court shall govern.483. Art. Eden Tan filed motion for execution and the garnished funds which by then were on deposit with the cashier of the RTC-Pasig were levied upon. BALANE CASE: c.750. and the Central Bank Act. From the aforequoted provisions of law. 529. the extrajudicial expenses required by the payment shall be for the account of the debtor.Tolentino:  Pmt to Cr after the credit has been attached or garnished is void as to the party who obtained the attachmt or garnishmt. as amended. 63. The delivery of promissory notes payable to order. 1249.70. whose quality & circumstances have not been stated. Legal character � Checks representing deposit money do not have legal tender power and their acceptance in the payment of debts. CA (1993) Facts: In a suit for collection of a sum of money. Tan. Art. Neither can the debtor deliver a thing of inferior quality. Tolentino:  Cr or Db may waive the benefit of this Art. Unless there is an express stipulation to that effect. spouses Norberto Tibajia.733.  Cr may require a thing of inferior qlty & Db may deliver a thing of superior qlty. whether or not any such provision as to payment is contained therein or made with respect thereto. Tolentino:  Defects of the thing delivered may be waived by the Cr. Republic Act No.00. the original obligation shall be held in abeyance. but he can recover the same to the extent of what he has pd to his Cr Tibajia spouses delivered to Deputy Sheriff Eduardo Bolima the total money judgment in Cashier's Check P262. the creditor cannot demand a thing of superior quality. Art. that a check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his account. or when through the fault of the creditor they have been impaired. whereby property is alienated to the creditor in satisfaction of a debt in money. b. then in the currency w/c is legal tender in the Philippines. unless the price to be pd in the latter case is dependent upon the qlty The delivery of promissory notes payable to order. 1247. and if it is not possible to deliver such currency. or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed. any obligation thereafter incurred. w/ knowledge thereof. Db can therefor be made to pay again to the party who secured the attachtmt or garnishmt. it is clear that this petition must fail. when the debt is in part liquidated & in part unliquidated. the creditor may demand & the debtor may effect the payment of the former w/o waiting for the liquidation of the latter. With regard to judicial costs. 1248. Eden Tan obtained judgment against Petitioners. The provisions of law applicable to the case at bar are the following: a. appellee was entitled to 20% of $140. at what rate of exchange it should be paid in pesos. 1961. currency measured at the prevailing rate of exchange at the time the obligation was incurred. It does not defeat a creditor's claim for payment.00. This payment in dollars is prohibited by Republic Act 529 which was enacted on June 16.It is to be noted that while an agreement to pay in dollars is declared as null & void & of no effect. as it specifically provides that "every other domestic obligation xxx whether or not any such provision as to payment is contained therein or made w/ respect thereto. Mendoza and Ma. It follows that the provision of Republic Act 529 which requires payment at the prevailing rate of exchange when the obligation was incurred cannot be applied.00. PONCE V. contract drawing and technical specifications of all engineering phases of the project designed by O. as stipulated in the agreement. The fees agreed upon were percentages of the architect's fee. or after the enactment of Republic Act 529. entered into an agreement with Alfredo LUZ. of which some were paid.475. be as it is hereby declared against public policy. including Central Bank notes.29. or made with respect to. A. Kalalo in his complaint against Luz alleged that for services rendered in connection with the different projects there was due him fees in US$. of which P69.46 which was already paid by the appellant.868.00. In the case now before us the obligation of appellant to pay appellee the 20% of $140. doing business under firm name of A. Mendoza and Ma. and actual damages.00 as attorney's fees. thus leaving a balance of only P10. excluding interests. currency the same shall be discharged in Phil. FACTS: On June 3. the debtors shall execute a first mortgage in favor of the creditor over their properties or of the Carmen Planas Memorial. or made with respect to. The logical conclusion is that the rate of exchange should be that prevailing at the time of payment for such contracts. public and private.000. it shall be discharged in Philippine currency measured at the prevailing rate of exchange at the time the obligation was incurred. Every obligation heretofore or here after incurred. admissions and/or silence. Kalalo and Associates. whether or not any such provision as to payment is contained therein or made with respect thereto. Luz admitted that appellee rendered engineering services. Republic Act 529 was enacted on June 16. and that appellee's services were not complete or were performed in violation of the agreement and/or otherwise unsatisfactory. KALALO V. a licensed civil engineer doing business under the firm name of O. Trial Court rendered judgment ordering respondent Afable and her co-debtors. plus 12% interest per annum from July 31. cannot oblige the appellant to pay him in dollars. and P51. Felisa L. LUZ [34 S 337] .08. private respondent Jesusa B. alleging that appellee had no cause of action. and no such provision shall be contained in. or the sum of $28. the debtors shall pay a sum equivalent to 10% of the total amount due for attorney's fees. 1969.475. Said act provides as follows: SECTION 1. Both had no objection to the findings of fact of the Commissioner contained in the Report ISSUE: WON the recommendation in the Report that the payment of the amount due to the plaintiff in dollars was legally permissible. which led appellant to believe certain facts to exist and to act upon said facts. where this Court held that even if the obligation assumed by the defendant was to pay the plaintiff a sum of money expressed in American currency. shall be discharged upon payment in any coin or currency w/c at the time of payment is legal tender for public & pvt. together with Felisa L. if the obligation was incurred prior to the enactment of the Act and require payment in a particular kind of coin or currency other than the Philippine currency the same shall be discharged in Philippine currency measured at the prevailing rate of exchange at the time the obligation was incurred. on or before July 31. The Commissioner also recommended the payment to appellee of the sum of P5.Under RA 529. void and of no effect. use. the sum of P814. Republic Act 529 does not provide for the rate of exchange for the payment of obligation incurred after the enactment of said Act. thus leaving unpaid the balance plus prayer for consequential and moral damages.000. and null. to pay petitioners. 1950. Diño . or the amount of $28. 1969 until full 52 . CA [90 S 533] .000. and consultation and advice during construction relative to the work. in the event of failure to pay the indebtedness plus interest in accordance with its terms. if the obligation was incurred prior to the enactment in a particular kind of coin or currency other than the Phil. as alleged. Appellant also set up affirmative and special defenses. HELD: Under the agreement. a licensed architect.21 had already been paid. The Commissioner rendered a report which. Aurora C. Appellant also set up a counterclaim for actual and moral damages for such amount as the court may deem fair to assess.42. a Complaint was filed by PONCE at CFI-Manila for the recovery of the principal sum of P814. That.000. is that the rate of exchange should be that prevailing at the time of payment. Luz denied liability for any damage claimed by appellee to have suffered. without demand. states that the amount due to appellee was US$28K as his fee in the IRRI Project. and for attorney's fees. Exhibit A. in resume.336. whereby the former was to render engineering design services to the latter for fees. accrued on August 25. Afable. representations. Velasco & Co. that appellee was in estoppel because of certain acts.868. The logical conclusion. plus interest and damages. All coin and currency. FACTS: Octavio KALALO. Aurora C.Provided. jointly and severally. It was further provided therein that should the indebtedness be not paid at maturity. heretofore or hereafter issued and declared by the Government of the Philippines shall be legal tender for all debts. and that the aggregate amount actually due was only P80. and if not. however. Appellee. The services included design computation and sketches. as well as moral damages. 1950. TC authorized the case to be heard before a Commissioner. payable. what the law specifically prohibits is payment in currency other than legal tender. and. without interest. Luz and Associates. third and fourth causes of action.91 for the other projects. that appellee's claim regarding the Menzi project was premature because appellant had not yet been paid for said project. the indemnity to be allowed should be expressed in Philippine currency at the rate of exchange at the time of judgment rather than at the rate of exchange prevailing on the date of defendant's breach. attorney's fees and expenses of litigation. Inc. Under the above-quoted provision of Republic Act 529. that should it be necessary to bring suit to enforce pay ment of the note. any obligation hereafter incurred.539. This is also the ruling of American court as follows: The value in domestic money of a payment made in foreign money is fixed with respect to the rate of exchange at the time of payment. it shall draw interest at 12% per annum.42. but averred that some were not in accordance with the agreement and such claims were not justified by the services actually rendered. Philippine Currency. A. even if appellant himself had received his fee for the IRRI project in dollars. 1969. RA 529 does not provide for the rate of exchange for the payment of the obligation incurred after the enactment of said Act. Kalalo and Associates bill of quantities and cost estimate. This view finds support in the ruling of this Court in the case of Engel vs.861. Ponce in the sum of P814.00.000. Diño executed a promissory note in favor of petitioner Nelia G. tender of payment and may be refused receipt by the obligee or creditor. less the sum of P69.868. ( a) if the obligation was incurred prior to the enactment of this Act and required payment in a particular kind of coin or currency other than Philippine currency. J. shall be discharged upon payment in any coin or currency which at the time of payment is legal tender for public and private debts: For failure to comply w/Ø. Every provision contained in. (b) except in case of a loan made in a foreign currency stipulated to be payable in the same currency in which case the rate of exchange prevailing at the time of the stipulated date of payment shall prevail. As we have adverted to. any obligation which provision purports to give the obligee the right to require payment in gold or in a particular kind of coin or currency other than Philippine currency or in an amount of money of the Philippines measured thereby.42. as alleged in the second." A contrary rule would allow a person to profit or enrich himself inequitably at another's expense. therefore. . TC favored pet. NEW PACIFIC TIMBER V. through bona fide intermediaries or agents. the latter becomes the depositor of the drawee bank. Tong was the highest bidder in the auction. p. illegal. "the check operates as an assignment of a part of the funds to the creditors.a. Priv. resp. 1950: Section 1. Priv. resp. granted only 5 days grace period. whether or not any such provision as to payment is contained therein or made with respect thereto. Currency? HELD: Finding of suff. Prior to whc date of auction. and a sum equivalent to 10% of the total amount due as attorney's fees and costs. had sufficient funds at the time of tender of check payment to pet. doctrine of pari delicto applies. heretofore and hereafter issued and d by the Government of the Philippines shall be legal tender for all debts. and for the latter’s failure to comply. That if the obligation was incurred prior to the enactment of this Act and required payment in a particular kind of coin or currency other than Philippine currency. and concluded that there was valid tender of paymnt. MR denied. IAC [191 S 411] FACTS: Petitioner is vendor of parcels of land in Bulacan to vendee Robes-Francisco Realty Corp. any obligation hereafter incurred. Petitioner denied. HELD: WE DISAGREE. And set such for auction sale.funds by CA does not constitute proof of tender of pymnt. Of sale is in Phil. 529. whether a manager's check or ordinary check. public & private. w/ rights & duties of one in such situation. by respondent Afable appealed to the Court of Appeals. w/ downpym of 20K+ and bal of 100K payable w/in 4yrs w/12% int. It was even a certified crossed check. Section 1. neither one can recover. Act by the obligor of offering legal tender currency as payment to oblige for the Ø & demanding that the latter accept the same. the exception to the rule enunciated under Sec. fr exec. It does not defeat a creditor's claim for payment.. is not legal tender. 63. Sheriff levied on personal properties or pet. or any other obligation it can assume. Since a negotiable instrument is only a substitute for money & not money.. & an offer of a check in payment of a debt is not a valid tender of payment & may be refused receipt by the obligee or creditor. public and private. 529. payment. a certificate of deposit payable to the order of the depositor. Ricardo TONG refused to accept and requested the auction to proceed. 63 of the CB Act shall apply in this case: Sec. what the law specifically prohibits is payment in currency other than legal tender. & for all intents & purposes. any domestic obligation to wit. shall be discharged upon payment in any coin or currency which at the time of payment is legal tender for public and private debts: Provided. Provided. Tolentino:  ISSUE: WON judge erred in not issuing a cert. (d) import-export and other international banking financial investment and industrial transactions.debt. Legal Character – Checks representing deposit do not have legal tender power and their acceptance in payment of debts. Under the doctrine of pari delicto. It is to be noted that said defense was not raised in her Answer. by the certification. (non sequitur) Tender of Payment involves a positive & uncondi.000 is not an ordinary check but a Cashier's check of the Equitable Banking Corp. (c) forward exchange transactions entered into between banks or between banks and individuals or juridical persons. & this agreement is as binding on the bank as its notes in circulation. On the 5th day of the grace period. SENERIS [101 S 686] FACTS: Upon a compromise judgment against petitioner.resp. as it specifically provides that "every other domestic obligation . that they have been set apart fort its satisfaction. Said certification "implies that the check is drawn upon sufficient funds in the hands of the drawee. operate as payment. approved June 19. both pub & priv. as having emanated from the sources enumerated above. Request for 30-days grace on the 4 th day was also denied by pet. by itself. is to enable the holder to use it as money.. ex-officio sheriff. Section 1 of Republic Act No. On July 17. 1975. which cases the terms of the parties' agreement shall apply. by foreign governments. w/forfeiture clause in case vendee fails to pay in 4yrs. since the said check has been certified by the drawee bank. (As amended by RA 4100. for total amount short of the judg. The object of certifying a check. Moreover. The above prohibition shall not apply to (a) transactions were the funds involved are the proceeds of loans or investments made directly or indirectly. pet. no recovery can be made in favor of the plaintiffs for being themselves guilty of violating the law. and that under the in pari delicto rule. is at the option of the Cr. however that a check w/c has been cleared & credited to the account of the creditor shall be equivalent to a delivery to the creditor in cash in an amount equal to the amount credited to his account. as regards both parties. except in case of a loan made in foreign currency stipulated to be payable in the currency in which case the rate of exchange prevailing at the time of the stipulated date of payment shall prevail All coin and currency. From said Decision. and null and void and of no effect and no such provision shall be contained in. thus. CFI-Zambo issued a writ of exec. vendee wrote a letter requesting for extension and allowance to pay in installment w/in 6mos w/interests. & that they shall be so applied whenever the check is presented for payment. in." A contrary rule would allow a person to profit or enrich himself inequitably at another's expense. therefore. and international financial and banking institutions so long as the funds are Identifiable." When the holder procures the check to be certified. the credit of the maker to that of the payee or holder. any obligation contracted in the Philippines which provision purports to give the obligee the right to require payment in gold or in a particular kind of coin or currency other than Philippine currency or in an amount of money of the Philippines measured thereby. (b) transactions affecting high priority economic projects for agricultural industrial and power development as may be determined by the National Economic Council which are financed by or through foreign funds. & w/c cannot be refused by the Cr . including Central Bank notes. & shall continue to be good. It is to be noted that while an agreement to pay in dollars is declared as null and void and of no effect. A check. IAC reversed after finding that resp. the funds represented by the check are transferred fr. since both parties are guilty of violating the law." Hence. With the exception of the cases enumerated in items (a) (b).HELD: It is to be emphasized that the check deposited by the petitioner in the amount of P50. their agencies and instrumentalities. or made with respect to. it shall be discharge in Philippine currency measured at the prevailing rates of exchange at the time the obligation was incurred. Deposited w/clerk of court. every other domestic obligation heretofore or hereafter incurred whether or not any such provision as to payment is contained therein or made withrespect thereto. 53 Legal tender: such currency w/c in a given jurisdiction can be used for the pmts of debts. or made with respect to. ISSUE: WON the subject matter is illegal and against public policy. the delivery of such an instrument does not. Of © on July 7. She argued that the contract under consideration involved the payment of US dollars and was. of satisfaction of judgment after priv. refused to accept payment in checks and cash. ISSUE: WON offer of check is vaid tender of pymnt of Ø under a © whc stipulates that consid. 1975. CA’s holding: the agreement is null and void and of no effect under Republic Act No. shall be discharged upon payment in any coin or currency which at the time of payment is legal tender for public and private debts. the certification is equivalent to acceptance. Where a check is certified by the bank on w/c it is drawn. a bank of good standing & reputation. (c) and (d) in the foregoing provision. Every provision contained in.avail. 1964) BISHOP OF MALOLOS V. which was enacted on June 16. later purports tender of payment (in check) on 5th day was refused by pet. CA affirmed TC. It is an understanding that the check is good then. be as it is hereby declared against public policy. the payment of the judgment Ø consisting of cash and checks. It is well known & accepted practice in the business sector that a Cashier's check is deemed as cash. not foreseen Art. In 1959. V. Albay at 250/mo. These provisions are w/o prejudice to venue under the Rules of Court. defendants also invoking the non-suability of the Government. hence it is inapplicable to obligations arising fr. unless there is an agreement to the contrary.redeemable in 10yrs w/6%p. it can be seen that the same envisages contractual obligations where a specific currency is selected by the parties as the medium of payment. Thus DR filed w/CFI-Mla whc was dismissed. FPFC filed another complaint seeking an adjustment of the unpaid balance d/t change in value of judgment in peso in ’67 to ‘71. independent of Ks. BURGOS [96 S 831] FACTS: Victoria Amigable is the owner of parcel of land in Cebu whc the Government took for road-right-of-way purpose in 1924. w/stipulation on currency adjustment accdg to inflation. there nonetheless is a reduction in par value or in the purchasing power of Phil. applying Art 1250. The decline of the purchasing pwr of the currency cannot be considered extraord. pmt in check even when good may be validly refused by Cr  Pymt by Check: WON MgrC or ordinary is NOT a valid tender of pmt damages in the sum of P25.00 for the alleged illegal occupation of the land by the Government. If the debtor changes his domicile in bad faith or after he has incurred in delay. It was due to oil embargo crisis the effect of w/c was worldwide. SC decision incorrectly reduced amt of damages due him based only his BIR assessed income not consid his undeclared source of income whc he did not disclose. It does not apply where the obligation to pay arises fr. Baviera: ISSUE: WON Article 1250 applicable in determining JUST compensation payable to Amigable fr taking in 1924. MERALCO [42 S 556] FACTS: Velasco’s MR. law. Amigable filed in CFI-Cebu a complaint. Extraord.. PIPE & FOUNDRY CORP. NAWASA Facts: In ’61 NWS entered © w/FPFC for d supply of cast iron pressure pipes for the constrxn of the Waterworx Msbate & Samar. 1250. In ’71.") Moreover. to recover the value of said property was already barred by estoppel and the statute of limitations. In any other case the place of payment shall be the domicile of the debtor. SHELL [164 S 556] FACTS: DR leased to Shell his land in Ligao. int. + unpd. Leaving a bal. also directed the determination of just compensation on the basis of the price or value thereof at the time of the taking. COMMISSIONER OF PUBLIC HIGHWAYS V.interests. Art. This article applies to contracts only. The rentals should therefore. Tolentino: Does NOT apply where oblig to pay arises fr law.000. by their agreement.NWS failed to pay. Since pmt must be in money that is legal tender. TC dismissed the complaint holding that the inflation was a worldwide occurrence & that there was no proof of extraord inflation in the sense contemplated by Art. be proportionately increased. Art. and attorney's fees in the sum of P5. as contemplated by the parties herein in their lease agreement. Besides. & such dec or inc cud not have been reasonably foreseen or was manifestly beyond the contemplation of the parties at the time of the estab of the obligation. ISSUE: WON the effect of EO 195 is official devaluation of peso as contemplated in the Lease Contract HELD: In the case at bar. Issue: 1250 DEL ROSARIO V. 1250. the term "devaluation" may be regarded as synonymous w/ "depreciation. WON there was extraord inflation to apply Art Held: None.000. He now urges that damages awarded him was inadeq consid present hi cost of living. like the taking of private prop by the govt in the exercise of its pwr of emt domain FIL. currency. EXTRAORDINARY means unusual or beyond the common fluctuation. among others. Hence. SC reversed. The taking of private property by the govt in the exercise of its power of eminent domain does not give rise to a contractual obligation. 1250 does applies only to cases where a contract or agreement is involved. thus there has been a "depreciation" (opposite of "appreciation.00. while no express reference has been made to metallic content. fpfc filed a collexn case vs NWS in CFI-Mla In ’67. the right of the owner. tort & not fr. and that in any case." for certainly both refer to a decrease in the value of the currency. the payment shall be made wherever the thing might be at the moment the obligation was constituted. plus costs of suit. and the case was remanded to the court of origin for the determination of the compensation to be paid the plaintiff-appellant as owner of the land. contract. CFI ordered NAWASA to pay FPFC the balance IN NWS negotiable bonds. 1251. that the land was either donated or sold by its owners to the province of Cebu to enhance its value. NWS paid in installments. including attorney's fees. the additional expenses shall be borne by him. when laymen unskilled in the semantics of economics use the terms "devaluation" or "depreciation" they certainly mean them in their ordinary signification-decrease in value. the value of the currency at the time of the establishment of the obligation shall be the basis of payment. there is no showing that the factual assumption of said article has come into existence.a. the Republic alleged. moral 54 . 1250. if any. There being no express stipulation & if the undertaking is to deliver a determinate thing. Even assuming there has been no official devaluation as the term is technically understood. In its answer. the fact is that there has been a diminution or lessening in the purchasing power of the peso. independent of contracts. An EO was promulgated by Pres D. thus. The land had since become streets known as Mango Avenue and Gorordo Avenue.000. and for damages in the sum of P50. Macapagal prompting DR to demand for increase in rental fr Shell whc the latter refused to pay. Plaintiff's complaint was dismissed on the grounds relied upon by the defendants therein. to recover ownership and possession of the land. neither delivered bonds. VELASCO V. inflation exists when there is a decrease or increase in the purchasing pwr of the Phil currency w/c is unusual or beyond the common fluctuation value of the said currency.00. Payment shall be made in the place designated in the obligation. HELD: From the employment of the words "extraordinary inflation or deflation of the currency stipulated" in Art. In case an extraordinary inflation or deflation of the currency stipulated should supervene. the herein appellee. v. does not constitute dation in payment in the absence.) 4. Perez averred that his liability to the surety has been extinguished by the deed of assgnmnt of the lumber. hence. There was nothing to be extinguished on that date. Pay Perez’s Øs. made after d death of decedent. the herein appellant. (Dation en pago is explained in the case of Filinvest v. be it sale or novation. w/12% int. The demand for return merely showed appellee’s interest to secure the value of the vehicle and prevent loss. Application of payments (Subsection 1. PHIL. reflected in a PN. Phil. common consent is an essential prerequisite. CA. supra. there could not have been a dation in payment. “Vol. as in dacion en pago? HELD: We find appellant's contention devoid of persuasive force.-. [Balane]  Dacion en pago. Modern concept  w/c treats dacion en pago as a novation. CA. Fil thus filed a complaint for collection of money w/damages in CFI-Mla. there was no obligation yet on the part of the petitioner. Warranties of Db  Dation is an onerous transmission or © of alienation. the old obligation is extinguished & a new obligation takes its place. 1555. a thing is delivered in satisfaction of the debt in money. is the transmission of the ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of an obligation. Db is vendor. his interests in the PN 2ND SPECIAL KIND OF PAYMENT: Payment 55 Application of . agreement only betw d parties makes dation possible.  If Cr is evcted. Surr. And a 2nd REM to guaranty reimbursement of whatever liability it will be made to pay in the future on Perez’s liabilities.In its modern concept. consent. Dacion en pago (Art. The mere return of the mortgaged motor vehicle by the mortgagor. CITIZENS SURETY V. Castan has another view  Both are wrong.a. After defaulting in 9 installments. and balance payable for 34 mos. Thus pet. supra. In any case. TC held Perez and the estate of Sarmiento solidarily liable to Citizens Surety. object certain. the creditor is really buying the thing or property of the debtor. express or implied of the true intention of the parties. CA [162 S 738] RATIO: There is no dation in payment when there is no obligation to be extinguished FACTS: Pet. Payment by cession (Subsection 2. * It is not also a novation bec. There are two ways at looking at dacion en pago: 1. ACETYLENE [111 S 421] FACTS: Phil. 1245. Citizens' to pay Singer Sewing Machine Co. to have the effect of totally extinguishing the debt or obligation. unless parties clearly stipulate. according to Manresa. ** But here. [Tolentino] Dation in payment is the delivery & transmission of ownership of a thing by the Db to the Cr as an accepted equivalent of perf. 114 SCRA 671:  ISSUE: WON CA erred in concluding there was dation in payment by the execution of the Deed of Assgment? Dacion en pago can take place only if both parties consent.  It may be a thing or a real rt (i. Cr is vendee. as shown in the doc. the latter refused. w/chattel mortgage as security in Lim’s favor. shall be governed by the law of sales. the presumption is pledge. Perez failed to comply. to the mortgagee. Phil Acetylene). the Ø was extinguished.  As such. the old obligation is extinguished. there is no intention to enter into a contract of sale. payment for w/c is to be charged against the debtor's debt. FILINVEST V. When personal prop is delivered it is PLEDGE. In other words. the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt. whereby property is alienated to the creditor in satisfaction of a debt in money. Effect on Ø  extinguished to the extent of the value of thng delivered  Db does not have to be insolvent. (Lopez. Perez in turn executed a deed of assignment of its stock of lumber to pet. Instead of money. Classical way  where dacion en pago is treated as a sale. "dation en paiement. original Ø is not revived. There are two more things to remember in the cases of Filinvest v. what actually takes place in dacion en pago is an objective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale. in novation. Acetylene Co. the essential elements of a contract of sale. So what is it? It is a special form of payment w/c resembles a sale. of Ø. & cause or consideration must be present. the obligation of the assignor to refund the assignee had not yet arisen. & Lopez v. in French. namely. What takes its place? Nothing. * A dacion en pago is not a sale bec. Acetylene. xxx [W]hen the deed of assignment was executed on 12/4/59. ISSUE: WON the return of mortgaged vehicle to appellee by voluntary surrender by appellant totally extinguished the Ø. w/SPA To Sell” whc never said that such return is in full satisfaction of the mortgaged debt.p. but in doubt. Filinvest sent demand letter to PAC. PAC returned the car but Filinvest cannot sell the car d/t unpaid taxes thereon incurred by PAC. as such burdens on the property shd still be shouldered by him.e." in Spanish. extinguishes d Ø.) 2. Dacion en pago in its modern concept. not dation. while the debt is considered as the purchase price. 2. Consignation (Subsection 3. PAC averred that Fil has no COA vs PAC b/c when the car was returned after the demand letter. that is. w/lesser transmission of rts. but Cr is entitled to recover fr breach of warranty in Art. a Chevrolet 1969 model w/downpd. The conveyance was as to rts only. ownership never left the mortgagor. Filed a claim vs the estate of Nicasia Sarmiento whc was being administered by Perez. called "datio in solutum". Issued 2 surety bonds to Pascual Perez to guarantee his compliance in a Contract of Sale of Goods he entered w/Singer Sawing Machine Co. as a special mode of payment.Four Special Kinds of Payments: and Chattel m. in Roman law.) Art. Dation in payment. Lim assigned to Filinvest Finance Corp. Dacion en pago. Q: To what extent is the obligation extinguished? Answer: Up to the value of the thing given (the thing must be appraised) unless the parties agree on a total extinguishment. usufruct). destruction or fraudulent transfer to 3P. purchased fr Alexander LIM w/Deed of Sale. Singer made pet. Fil offered to deliver back the car to Pac.")  Dation in payment is possible only if there is a debt in money. CA reversed and dismissed Citizens’ claim vs the estate of Sarmiento. 1. 1245.  In dacion en pago.-The undertaking really partakes in one sense of the nature of sale. Pascual failed to reimburse pet. provision in Sales Re warranty vs eviction & vs hidden defects of d thing applies. to pay or return the vehicle. EX: assgmnt by an heir-Db of his interests in Sx to the Cr.) HELD: The transaction could not be dation in payment. Dacion en pago in the nature of sale. or of a credit vs a 3P. damage.) 3. "dacion en pago. w/o just cause. the debtor to the creditor. [Tolentino]  Tender of pmt b4 consig’n is required by the present Art only in case where the Cr refuses to accept it w/o just cause 3rd SPECIAL FORM OF Payment – by Cession [Balane]  Property is turned over by the debtor to the creditor who acquires the right to sell it & divide the net proceeds among themselves.2: Debtor may apply the amount (an obvious limitation bec. The extinguishment of the obligation is pro tanto. unless there is stipulation to the contrary. given the option to consign. the newer one is more onerous bec. the creditor a receipt in w/c an application of the payment is made. 1256. the debt w/c is interest paying is more onerous. Art. 1252.) Q. Legal cession is governed by the Insolvency Law. that is the special mode of payment & not the tender of payment.If the Db did not choose.The first choice belongs to the Db 2 . or when the application of payment is made by the party for whose benefit the term has been constituted. No. (Art. the secured debt is more onerous en In payment by cession. When. If one is a secured debt & the other is not. payment is made not to the creditor but to the court. Q: Difference between payment by cession: Apply in accordance w/ the agreement. the debt w/c is most onerous to the debtor. Rules where the amount sent by the debtor to the creditor is less than all that is due: Q: Why is payment by cession a special form of payment?-A: Bec. It should have been Consignation only bec. there is no completeness of performance (re: integrity. Creditor can make the application. If both are interest free. 1255. unless there is a cause for invalidating the contract. of the principles of indivisibility & integrity) where there would be partial payment. that pmts may be applied to Øs w/c have not yet matured Art.. other circumstances. No.Tender of Payment & Consignation” The title of the subsection is wrong. Unless the parties so stipulate. there is a transfer of ownership fr. application shall not be made as to debts w/c are not yet due. If the creditor to whom tender of payment has been made refuses w/o just cause to accept it. 4th SPECIAL FORM OF PAYMENT: Tender of Payment & Consignation Art. When two or more persons claim the same right to collect. The creditors simply acquire the right to sell the properties of the debtor & apply the proceeds of the sale to the satisfaction of their credit. If the debtor accepts fr. or if application can not be inferred fr. What are the rules to determine w/c is the most onerous debt? A: (1252) 1. 1252.3: 3. may declare at the time of making the payment.) In most cases. the former cannot complain of the same.[Balane] Application of payment (Imputacion in Spanish) is the designation of a debt w/c is being paid by the debtor who has several obligations of the same kind in favor of the creditor to whom the payment is made. refuses to accept payment. If the debts due are of the same nature & burden. 2. 3 .-.  Exc. [Tolentino]  Necessary that Øs must all be due  Only in case of mutual agreement. 4. BGB (German Civil Code) w/c states that mora accipiendi extinguishes the obligation. When the payment cannot be applied in accordance w/ the preceding rules. among those due. If the debt produces interest. are made between the debtor & his creditors shall be governed by special laws. 3. consignation assumes that the creditor was in mora accipiendi (when the creditor w/o just cause. payment of the principal shall not be deemed to have been made until the interests have been covered. or upon consent of the party in whose favor the term was estab. the accrual of interest will be suspended fr. pmt shall be made to the most onerous debt. If one is interest paying & the other is not. to w/c of them the same must be applied. followed by a prompt attempt of the Db to make consign’n. dacion Art. the date of such tender. No. refuses to accept payment  The debtor may just delay payment. on the effect of the cession. Consignation alone shall produce the same effect in the following cases: 1. pago & Q: Does payment by cession terminate all debts due?A: Generally. 1253. the debtor shall be released fr. responsibility for the net proceeds of the thing assigned. The debtor may cede or assign his property to his creditors in payment of his debts. The agreements w/c. he refuses to give a receipt. or does not appear at the place of payment. This cession.1: In dacion en pago. When the title of the obligation has been lost. [Balane] “Subsection 3. w/c he will manifest in a receipt. there is no transfer of ownership. He who has various debts of the same kind in favor of one & the same creditor. Effect on INTEREST: When tender is made in a form that Cr cld have immdtly realized pymt (cash). prescription will take longer w/ respect to the newer debt. 56 . 1. Are the rules for applic’n of pmts: 1 . He is therefore. When he is incapacitated to receive the payment at the time it is due. there will be a balance due. 5. the payment shall be applied to all of them proportionately. shall only release the debtor fr. responsibility by the consignation of the thing or sum due. only to the extent of the net proceeds. the Cr may choose. 5th Rule: Proportional application if the debts are equally onerous. Art. 1254.If neither specified the applic’n. one is older than the first. When the creditor is absent or unknown. Distinguish this fr. 2. Consignation is an option on the part of the debtor bec. No. shall be deemed to have been satisfied.  It is a special mode of payment bec. par. NO.) Consequence when the creditor w/o just cause.  [Baviera] The ff. In Legal cession where the extinguishment of the obligation is total.4: Apply to the most onerous debt. But something still hangs above his head. the debtor must first comply with certain requirements prescribed by law. 1178. the tender of payment must be made in lawful currency. when properly made. Eufemio. that previous notice of the consignation had been given to the person interested in the performance of the obligation (Art. [Tolentino]  Notice: The reqmt is fulfilled by the service of summons upon the Def together w/ copy of complaint Consignation Defined:  Consignation is the act of depositing the thing due w/ the court or judicial authorities whenever the creditor (1) cannot accept or (2) refuses to accept payment. Or 1. it must first be announced to the persons interested in the fulfillment of the obligation. 1958). a consignation is void as payment. Damages. the time of such tender. shall be charged against the creditor. Tender is the antecedent of consignation. 90 Phil.NCC). MILITANTE [123 S 160] . and the priority of the first is the attempt to make a private settlement before proceeding to the solemnities of consignation. the interested parties shall also be notified thereof. (8 Manresa 325). Santiago Syjuco.NCC). The consignation having been made. Inc. or because several persons claimed to be entitled to receive the amount due (Art. Teodoro. 1176. L-4915. de Mortera. if no prompt objection to said payment is made (Desbarats vs.  Thus. Once the consignation has been duly made. 74 Phil 313) 57 1. 1257. that after the consignation had been made the person interested was notified thereof (Art. that the consignation of the obligation had been made because the creditor to whom tender of payment was made refused to accept it. Vda. We hold that the essential requisites of a valid consignation must be complied with fully and strictly in accordance with the law. 2. err in ruling substantial compliance thereto? Tender of payment is extrajudicial. the debtor may w/draw the thing or the sum deposited. The debtor must show Tolentino] Proper when  1. Francisco subleased the bldg for a rental of 3. Articles 1256 to 1261. While payment in check by the debtor may be acceptable as valid. Before the creditor has accepted the consignation. Knowing this. that is. The Civil Code Articles expressly and explicitly direct what must be essentially done in order that consignation shall be valid and effectual. mandatorily / did the lower ct. in a proper case. & the announcement of the consignation in other cases. or before a judicial declaration that the consignation has been properly made. REGINO FRANCISCO JR. Db is released in the same manner as if he had performed the oblig 2. CASES:  In order to be valid. NCC re rquisites of Consignation must be complied w/fully & strictly.Requiremts of consign’n FACTS: Disputed here is decision of lower court in an UD case filed by lessor SOLEDAD SOCO vs.But when tender is not accompanied by means of pmt. The expenses of consignation. That these Articles must be accorded a mandatory construction is clearly evident and plain from the very language of the codal provisions themselves which require absolute compliance with the essential requisites therein provided. positively indicate that all the essential requisites of a valid consignation must be complied with. (Jose Ponce de Leon vs. Art. Without prior notice.  Tender of payment must be distinguished from consignation – SOCO V. or because he was absent or incapacitated. Francisco and Soco entered into a Contract of Lease for a monthly rental of P 800.NCC). Accrual of INTEREST is suspended 3.00 for a period of 10 years renewable for another 10 years at the option of the lessee. private resp. and 5. Vda. (Limkako vs. declares consig’n as validly made Art. Soco apparently stopped accepting rental payments of Francisco and later demanded him to vacate the bldg. that the amount due was placed at the disposal of the court (Art. whose payments of rentals were considered valid and effective. that there was a debt due. de Mortera. 1260. Art. Consignation shall be made by depositing the things due at the disposal of judicial authority. before whom the tender of payment shall be proved. 1177. Art. Cr accepts consign’n after deposit w/o protest though Db failed to comply w/ reqs. which is the principal. The use of the words "shall" and "must" which are imperative. New Civil Code. the debtor may ask the judge to order the cancellation of the obligation. Deterioration or loss of thing or amt consigned w/o fault of Db must be borne by Cr 4. Substantial compliance is not enough for that would render only a directory construction to the law. In order that the consignation of the thing due may release the obligor.. Any increment or increase in value of thing inures to the benefit of Cr . The consignation shall be ineffectual if it is not made strictly in consonance w/ the provisions w/c regulate payment.NCC). & it generally requires a prior tender of payment. 1178. and from which are derived the immediate consequences which the debtor desires or seeks to obtain. HELD: We do not agree with the questioned decision. Ct. an act preparatory to the consignation. operating to impose a duty which may be enforced. allowing the obligation to remain in force. the tender of a check to pay for an obligation is not a valid tender of payment thereof (Desbarats vs. May 25. and filed for rescission/annulment of Lease Contract w/CFI-Cebu.000/month. dismissed the UD case and made lessor pay moral & exemp. while consignation is necessarily judicial. Sept. 3. 30. 1259.   2. 4. 1956)  The fact that in previous years payment in check was accepted does not place its creditor in estoppel from requiring the debtor to pay his obligation in cash (Sy vs. attys fees. then interest is not suspended fr. L-10572. [Tolentino] Effects of Consignation: Failure in any of these requirements is enough ground to render a consignation ineffective. Requisites of Valid Consignation: [ In order that consignation may be effective. 1258. supra). holding there was substantial compliance in the w/d requisites of consignation. 311). & the Db did not take any immdte step to consign. lessee of a building owned by Soco. 1256-1261.  ISSUE: WON the provisions in Arts. respondent Court directed the respondent Sheriff to execute the deed of conveyance prayed for by Juanito Victoria. unless there is proof to the contrary. 119. Why is this? A: So that the Cr can get the money fr. (Sec.m. by unduly taking advantage of the mental illness and/or weakness of petitioner and thru deceit and fraudulent means. the consignation having been made. 1262. for P 58K. negligence.SC:  ISSUE: WON offer to redeem was insincere in the absence of consignation of such amount in Court? When money is deposited in ct under the provs of the law on consig’n. it is no longer generic. consignation is not required. the partial loss of the object of the obligation is so important as to extinguish the obligation. FACTS: A previous complaint. the obligor is liable even for fortuitous events. a 5. 1263. Art. *** that. it is in custodia legis & therefore exempt fr. there is a need to notify the Cr. 1262. In an obligation to deliver a generic thing." ) Q: K of Sale w/ pacto de retro. The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible w/o the fault of the obligor. & as ordered by the court a quo. & he shall be responsible for damages.000. & those who in any manner contravene the tenor thereof are liable for damages. 141) 58 . without the knowledge and consent of petitioner. 1266. period of legal redemption allowed by the Public Land Act.We hereby grant said alternative cause of action or prayer. 1170. purportedly disposed of by way of absolute sale. 1974 when. When what is to be delivered is a determinate thing. Q: Why tender first? A: ‘Coz no need to consign if Cr accept pymt.g. (EXHAUSTION OF EXTRAJUDICIAL MEANS) Q: B4 & after consign’n. The same rule applies when the nature of the obligation requires the assumption of risk. So if you want to redeem. Lampa) HELD: NO. 1174. Q: There are 2 or more claims. While the sale was originally executed in Dec. 1262 is the same as fortuitous event in Art. Art. Art. petitioner prays that he be allowed to repurchase the property within five (5) years from the time judgment is rendered by the respondent court upholding the validity of the proceedings and the sale since the land in question was originally covered by a Free Patent title. 1165. Those who in the performance of their obligations are guilty of fraud. Art. Accordingly. Tenable argument? But what is not covered by this rule is an Ø to deliver a limited generic – something in bet. 3. may compel the debtor to make the delivery. 1262 or Art. by reason of which. The effect is the same:  The Ø is extinguished if the Ø is to deliver a determinate thing. but in truth and in fact did not. no need to consign. the court held that reasonable price is det accdg to the circums. What will Db do after consignation? A: File INTERPLEADER. But this Ø really falls under Art. & before he has incurred in delay. 1261. "For P3. it was only on Feb. Public Land Act. Art. thus no consignation is required. Vr cannot claim rt of repurchase. [GR] Genus nunquam perit ("Genus never perishes. he shall lose every preference w/c he may have over the thing. the creditor. 1264. he may ask that the obligation be complied w/ at the expense of the debtor. We can only know this through tender. When money is consigned. Hearing…B4 the ct cld approve. for annulment of judgment and deed of sale with reconveyance of real property alleged that Juanito Victoria. in the alternative. Since the offer to redeem was made on 3/24/75.  Art. & w/o prejudice to the provisions of article 1165. it shall be presumed that the loss was due to his fault.000-sq. Balane: Art. Axn for spec perf by Vr. or has promised to deliver the same thing to two or more persons who do not have the same interest. he shall be responsible for any fortuitous event until he has effected the delivery. Art. that the said TCT is null and void having been based on void proceedings. Whenever the thing is lost in the possession of the debtor. But in one case of a co-owner wanting to redeem at reasonable price (was exorbitant). guarantors & sureties shall be released. In this case. If the Ø is to deliver a generic thing. The courts shall determine. When by law or stipulation. flood. the creditor should authorize the debtor to w/draw the same. storm. the loss of the thing does not extinguish the obligation. 1265. Merely asks of this Court to consider a point inadvertently missed – the matter of LEGAL REDEMPTION. the Ø is not extinguished. NAVARRO [160 S 211] . the City Hall burned + money. Jus of the court over the person of the defendant was also questioned but such was upheld thru valid service of summons to the guardian ad litem and also later thru voluntary appearance in lieu of pleadings asking for exercise of jus by the same court. It becomes specific. or delay. I promise to deliver to you one of my watches. Attachmt & execution (Manejero v." This Ø does not really fall under either Art. e. IMMACULATA V. CA No. The vendor tendered pmt w/in the 3-yr pd but vendee refused to accept. Accdg to Ve. the loss or destruction of anything of the same kind does not extinguish the obligation. specific & generic thing. a new TCT was issued in favor of Juanito Victoria. If the thing is indeterminate or generic. If the obligor delays. a deed of conveyance was formally executed. The bar of res jud is as to questions on the validity of the sale. the pet. A: No. (2nd MODE OF EXTINGUISHEMENT) LOSS OF THE THING DUE OR IMPOSSIBILITY OF PERFORMANCE [Baviera] Q: When is there a need to tender pmt? A: (a) upon demand & (b) when debt is due Art. But to actually redeem. Respondent Court dismissed the complaint on the ground of res judicata. in addition to the right granted him by article 1170. although it was due to a fortuitous event. there must of course be payment or consignation (deposit) itself. To preserve the right to redeem. Shld Db pay again? A: No. In this present MR. with the cooperation of defendant Juanita Naval and others succeeded in causing plaintiff Lauro Immaculata. this was clearly w/in the 5-yr. 1969. or other natural calamity. As long as there was tender.parcel of land w/TCT. 1263. under the circumstances. consign the full amt in ct & ask it to fix the reasonable compensation. The co-debtors. whc has remained unresolved. the Ø may be extinguished by the loss of all the thing through FE. Cr bears the loss bec. there was delay on his part when he refused to accept pymt. [Balane] Objective & Subjective Impossibility: An offer to redeem was made clearly within the 5-yr-period allowed by law. Q: Db consigns. since money was not consigned. If. as prayed for by prvt. the Clerk of ct & avoid costs of litigation. to execute a Deed of Absolute Sale in favor of Juanito Victoria. whether. The right to redeem is a RIGHT NOT AN Ø. res. This presumption does not apply in case of earthquake. petitioner herein. which petitioner supposedly received. An obligation w/c consists in the delivery of a determinate thing shall be extinguished if it should be lost or destroyed w/o the fault of the debtor.. Balane: Rebus sic stantibus. If the contract is of immediate fulfillment. on one hand. This could have been accomplished by seasonably informing the Department of Foreign Affairs and other agencies of the government of the fact that the accused for whose provisional liberty it had posted a bail bond was facing a criminal charge in a particular court of the country. To give it a liberal application is to undermine the binding force of an obligation. NOTES:  Liability of Sureties on a bail bond is conditioned upon appearance of accused t time set for arraignment or trial or any other time as fixed by court. One of the requisites is that the cause of the loss of the fruits of the leased prop. due to the surety company's fault because it was its duty to do everything and take all steps necessary to prevent that departure. ISSUE: WON petitioners may ask PSC for reduction of rentals in lieu of such suspension and decl.  Surety will be exonerated where the perf. Of the Lease ©. Manabat opposed the ju’s of PSC to suspend the lease © being an impairment of Ø.(cert. its failure to produce & surrender the accused was due to the negligence of the Phil. One view holds that the Ø is not extinguished. PSC contended that it had the power to suspend. This principle has always been strictly applied. death of accused). must be an "extraordinary & unforeseen fortuitous event. all liability under the bail bond bec.CO. 2. & the State. as a consequence of its power to issue the same CPC. xxx Even if the cited article were a general rule on lease. 1267. and not as an interpretation of the prov. that in the eyes of the law a surety becomes the legal custodian and jailer of the accused. The event must not be due to an act of either party. HELD: Art. there can be no doubt that no Philippine passport would have been issued to Natividad Franklin. on a K for a piece of work. namely.courts. In support of this contention. as a general rule. Govt itself in issuing a passport to said accused. in fact. When the service has become so difficult as to be manifestly beyond the contemplation of the parties. Thus they asked for permission of PSC to suspend operation of the CPC also in lieu of low passenger trafc on these lines and high cost of operation. it contends that lower court should have released it fr. 3. BTC and LTB. therefore. be ascribed to FE or circumstances Art. Rentals were still paid. CASES: LAGUNA V. sureties on ordinary bonds or commercial contracts. [Baviera] Ordinarily. Had the surety company done this." The circumstances of the case fail to satisfy such requisite.-. 1266 are invoked. This doctrine is also called the doctrine of extreme difficulty & frustration of commercial object. 4. the provisions of Art.. 16. the obligor may also be released therefr. the gross inequality of the reciprocal prestation may involve lesion or want of cause. It has four (4) requisites: 1.  It is clear. of the obligee (arrested by govt). The attitude of the courts on this doctrine is very strict. citing Art. Or also under Rule 114. The effect of objective impossibility is to extinguish the Ø. Every obligation is difficult. ISSUE: WON Surety shd be held liable? HELD: Art. it will be observed is a special provision for leases of rural lands. such 59 . sec. There are 3 views as to the effect of a subjective impossibility: 1.") This is a principle of international law w/c holds that when 2 countries enter into a treaty. Another view holds that the Ø is extinguished. the act cannot be done by anyone. of public conv. xxx [T]he alleged causes for the suspension of operations on the lines leased. "already existed when the contract of lease was executed. 3. an increase in prices will not relieve the K’or bec. the court did not consider the 4th element as an element. The performance must be extremely difficult in order for rebus sic stantibus to apply. its provisions nevertheless do not extend to petitioners. For while sureties upon a bail bond (or recognizance) can discharge themselves fr. the bondsman being the jailer of the accused and absolutey responsible for his custody. FRANKLIN [39 S 363] FACTS: Appellant. as said Art. w/c does not exist in the case of a surety upon a bail bond. of insolvency of the corp. therefore. A third view distinguishes one prestation w/c is very personal & one w/c are not personal such that subjective impossibility is a cause for extinguishes a very personal Ø.INC.whc is a fxn of reg. public service comm. 1680. BAR Q: What if the prices rose so high as to be beyond the contemplation of the parties due to the oil crisis? Answer: Released. 2.Literally means "things as they stand. thereby enabling her to leave the country. MANABAT [59 S 650] FACTS: LEASE © was executed betw. and to produce and surrender him to the court upon the latter's demand. thereby assuming the obligation to keep the latter at all times under his surveillance. in whole or in part. w/monthly rental of Php 2500 of CPC. until strikes by EEs of BTC caused them some further losses. In the case of Naga. Of bail bond is rendered impossible by act of God (e. This principle of international law has spilled over into Civil law. No other legal provision makes it applicable to ordinary leases. speaks of a relation bet. but not an Ø w/c is not very personal. the high prices of spare parts & gasoline & the reduction of the dollar allocations (by the CB Monetary B). as it did so. The contract is for a future prestation. CASES: PEOPLE V. 1680. of condi. or the law (law punishing him is repealed). 1266 does not apply to a surety upon a bail bond. BTC was declared insolvent and FRANCISCO MANABAT was appointed as assignee. w/duty at all times to keep him under surveillance. The obligor should ask another to do the Ø. The event or change could not have been foreseen at the time of the execution of the contract. the Ø becomes impossible only w/ respect to the obligor. contends that the CFI-PAMPANGA erred in forfeiting its bail bond for the provisional release of NATIVIDAD FRANKLIN. ASIAN SURETY & INS. they enter taking into account the circumstances at the time it was entered into & should the circumstances change as to make the fulfillment of the treaty very difficult. NCC does not apply to a surety upon a bail bond Art. The event or change makes the performance extremely difficult but not impossible. liability by surrendering their principal." It is short for clausula rebus sic stantibus ("agreement of things as they stand. a debtor & creditor. In objective impossibility. one may ask for a termination of the treaty. That the accused in this case was able to secure a Philippine passport which enabled her to go to the United States was.  In subjective impossibility. can only be released by payment of the debt or performance of the act stipulated.) provisionally approved by the PSC. was already considered by the parties when they entered into the K. Later." The cause of petitioners' inability to operate on the lines cannot. circum. on the other. 1266.g. Art. or by stagnation of business. 2159: Art. the obligation shall be extinguished. by failure of a party to avail himself of the benefits to be had under the contract. The obligation having been extinguished by the loss of the thing. the following rules shall be observed in case of the improvement. by strikes. w/ the oblig to use due diligence. JABSON [73 S 637] FACTS: Tropical HOMES INC. But if you look at Art. Neither is performance excused by the fact that the contract turns out to be hard & improvident. Art. unprofitable or impracticable. he shall be responsible for any fortuitous event until he has effected the delivery. [Tolentino] When Db tenders pmt & Cr refuses to accept w/o just cause. The condition happens. Art. or less profitable. by unusual or unexpected expenses. or by time. by financial stringency. 1267 states in our law the doctrine of unforeseen events."  Art. Art. citing Art. If it is improved at the expense of the debtor. or w/c . and the worldwide increases in prices. loss or deterioration of the thing during the pendency of the condition. *** Performance is not excused by subsequent inability to perform. filed complaint for modification of Terms & Condi of subdv. 1268. the creditor may choose between the rescission of the obligation & its fulfillment. CA [230 S 351] .Art. © w/pet. by the breaking of machinery. the creditor. If the thing is improved by its nature. 1268. modify. the creditor shall have all the rights of action w/c the debtor may have against third persons by reason of the loss. Art. unless the thing having been offered by him to the person who should receive it. If the thing is lost w/o the fault of the debtor. he may ask that the obligation be complied w/ at the expense of the debtor. In the present case. so as to substitute its own terms for those covenanted by the parties themselves. or revise the contract or to fix the division of shares bet. by inevitable accident. by unforeseen difficulties. 1174. w/ indemnity for damages in either case: 5. This is said to be based on the discredited theory of rebus sic stantibus in public international law. There is loss. If the thing is lost through the fault of the debtor. Balane: In this case the interpretation of the court is too literal. 60 . Except in cases expressly specified by law. OCCENA V. consists in allowing petitioners to use its posts in Naga City. it can release a debtor fr.. Considering practical needs & the demands of equity & good faith. unless the thing having been offered by him to the person who should receive it. & once these conditions cease to exist the contract also ceases to exist. no person shall be responsible for those events w/c could not be foreseen. were inevitable. If it deteriorates through the fault of the debtor. the sales of subdivided lots of subject subdivision. Gives the court the authority to consequently modify the contents of the contract HELD: Respondent's complaint seeks not release fr. 1165. If he devotes the thing to any purpose different fr. 4. 1189. the obligation of prvt. the parties stipulate in the light of certain prevailing conditions. 1165. If the thing is indeterminate or generic. that for w/c it has been loaned. in addition to the right granted him by article 1170. the impairment is to be borne by the creditor. 1267. deterioration or improvement before the happening of the condition. or has promised to deliver the same thing to two or more persons who do not have the same interest. the parties as contractually stipulated w/ the force of law bet. by danger. w/c is the service contemplated in said article. or after the accomplishment of the use for w/c the commodatum has been constituted. 1267. the improvement shall inure to the benefit of the creditor. 6. by sickness. but to their own voluntary desistance. If he keeps it longer than the period stipulated. 1.beyond their control. 1189 to apply-1.The term "service" should be understood as referring to the "performance" of the obligation. or unexpectedly burdensome. to Tolentino. NAGA TELEPHONE V. 3. Art. 2. Db has 2 alternatives: (1) to consign or (2) to just keep the thing in his poss’n. a bare reading of this article reveals that it is not a requirement thereunder that the contract be for future service w/ future unusual change. 1942. but no longer to the spec liab under Article 1268. ART. the debtor shall not be exempted fr. it is understood that the thing is lost when it perishes. 1268. resp.-. ISSUE: WON the above art. When the debt of a thing certain & determinate proceeds fr. he shall be obliged to pay damages. the payment of its price. Furthermore. the latter refused w/o justification to accept it. Taking into consideration the rationale behind this provision. 1269. subj to the gen rules of Øs. 2. Occena. 1174. whatever may be the cause for the loss. the latter refused w/o justification to accept it. According to the court. or goes out of commerce. The NCC authorizes the release of an obligor when the service has become so difficult as to be manifestly beyond the contemplation of the parties. When the thing deteriorates w/o the fault of the debtor. the payment of its price. or when it otherwise declared by stipulation. The bailee is liable for the loss of the thing. by fixing the proper shares that should pertain to the herein parties out of the gross proceeds fr. Accdg. landowners of disputed lands in Davao. There is an obligation to deliver a determinate thing (on the part of the debtor) 3. If the obligor delays. It even went to the extent of stipulating for the parties in the name of equity. the disappearance of the basis of a contract gives rise to a right to relief in favor of the party prejudiced. may compel the debtor to make the delivery. partial release is permitted. the obligation but it cannot make the obligation lighter. the debtor shall not be exempted fr. 1979. ill-advised or even foolish. 1942. 1267 speaks of "service" w/c has become so difficult. or when the nature of the obligation requires the assumption of risk. whatever may be the cause for the loss. the parties. the term "service" should be understood as referring to the "performance" of the obligation. under this theory. When the conditions have been imposed w/ the intention of suspending the efficacy of an obligation to give. 1189. a criminal offense. 1267 does not grant the courts this authority to remake. Art. When the debt of a thing certain & determinate proceeds fr. he shall have no other right than that granted to the usufructuary. When what is to be delivered is a determinate thing. or disappears in such a way that its existence is unknown or it cannot be recovered. the subdivision contract but that the court "render judgment modifying the terms & conditions of the contract. a criminal offense. Balane: The Court went too far in this case. 2. by weather conditions. [Balane] There are three requisites in order for Art. even if it should be through a fortuitous event: 1.though foreseen.. In both cases. rules on deposit will not apply bec. 61 . sufficient means for the support of himself. Acceptance must be made during the lifetime of the donor & of the donee. 4. The legacy referred to in the preceding article shall lapse if the testator. If the thing loaned has been delivered w/ appraisal of its value. In Negotiorum Gestio Art. Art. Art. In the first case. should he request one. apply Art. in full ownership or in usufruct. the donation shall be reduced on petition of any person affected. Whoever in bad faith accepts an undue payment. 3. Art. responsibility in case of a fortuitous event. (3) If he fails to return the property or business after demand by the owner. This has four (4) requisites: 1. Q: What kind of diligence is required of a depositary? A: Ordinary Diligence.  Art. You can remit a debt even before it is due. The officious manager shall be liable for any fortuitous event: (1) If he undertakes risky operations w/c the owner was not accustomed to embark upon. furthermore. 4. w/o receiving any equivalent. The provision of article 750 notw/standing. Condonation or remission is essentially gratuitous. FORMS of Condonation: a. 748. The form of donation must be observed. Express condonation shall. Acceptance by the debtor Art. 2159. by giving the legatee an acquittance. If renunciation is for a consideration. If the condonation involves movables. & requires the acceptance by the obligor. after having made it. 1979. the legacy shall comprise all interests on the credit or debt w/c may be due the testator at the time of his death. Renunciation must be gratuitous. But note that the creditor may just refuse to collect (w/o observing any form. 749. the Ø will be extinguished not by virtue of condonation but by waiver under Art. Art. more than he may give or receive by will. (3) If he delays its return. no person may give or receive. 2147. If it involves immovables. any cause. Payee in Solutio Indebiti Art. The donation of a movable may be made orally or in writing. Art. 752. & of all relatives who. In the second case. If. the mode of extinguishment may be something else. & for damages to the person who delivered the thing. He shall furthermore be answerable for any loss or impairment of the thing fr. even though he himself may have been authorized to use the same. at the time of the acceptance of the donation are by law entitled to be supported by the donor. By Agreement Art. he chooses to save the latter. 748.3. The legacy of a credit against a third person or of the remission or release of a debt of the legatee shall be effective only as regards that part of the credit or debt existing at the time of the death of the testator. Art. The donation may comprehend all the present property of the donor. provided he reserves. An oral donation requires the simultaneous delivery of the thing or of the document representing the right donated. comply w/ the forms of donation. being able to save either the thing borrowed or his own thing. 935. One & the other kind shall be subject to the rules w/c govern inofficious donations. 936. 2. or shall be liable for fruits received or w/c should have been received if the thing produces fruits. Without such reservation. should bring an action against the debtor for payment of his debt. & requires the acceptance by the obligor. The legacy to the debtor of the thing pledged by him is understood to discharge only the right of pledge. 746. Express condonation shall. unless there is a stipulation exempting the bailee fr. or part thereof. (2) If he uses the thing w/o the depositor's permission. 1270. The donation shall be inofficious in all that it may exceed this limitation. even if such payment should not have been effected at the time of his death. Debt that is existing. [Balane]  Condonation or remission is an act of liberality by virtue of w/c. the contract governing the transaction is LEASE of safety deposit box. 3rd MODE OF EXTINGUISHMENT OF Ø: CONDONATION OF REMISSION OF THE DEBT Art. compromise of dacion en pago. apply Art. If he lends or leases the thing to a third person.) In this case. the estate shall comply w/ the legacy by assigning to the legatee all rights of action it may have against the debtor. until it is recovered. b. 1979 provides for instances wherein depositary is still liable even in cases of fortuitous event. who is not a member of his household. 6. the creditor renounces enforcement of an obligation w/c is extinguished in whole or in part. One & the other kind shall be subject to the rules w/c govern inofficious donations. 5. Capacity of the parties. (4) If he assumed the management in bad faith. by way of donation. Condonation or remission is essentially gratuitous. (4) If he allows others to use it. It may be made expressly or impliedly. furthermore. It may be made expressly or impliedly. It may be novation. The depositary is liable for the loss of the thing through a fortuitous event: (1) If it is so stipulated. shall pay legal interest if a sum of money is involved. By a Will Q: What if a depositor was in the premises of the bank & was robbed of his money w/c he was about to deposit? A: Bank cannot be held liable for fortuitous event (robbery) esp in CAB where the money has not yet been actually deposited. comply w/ the forms of donation. 750. *Safety Deposit Box: If the jewelry inside a SDB was stolen. 1270. (2) If he has preferred his own interest to that of the owner. that things w/c a person possesses. V filed a crim case b4 v. Sec. The renunciation of the principal debt shall extinguish the accessory obligations. v. Rules of Court. xxx (f) That money paid by one to another was due to the latter. & doer of the whole act. For this reason. Art. but the waiver of the latter shall leave the former in force. are owned by him. the donation shall be void. as amended: Rule 131. but it shall not take effect unless it is done during the lifetime of the donor. & this step shall be noted in both instruments. but may be contradicted & overcome by other evidence: xxx (c) That a person intends the ordinary consequences of his voluntary act. The acceptance may be made in the same deed of donation or in a separate public document. CA [234 S 494] HELD: It may not be amiss to add that Art. not of payment. If in order to nullify this waiver it should be claimed to be inofficious. Otherwise.  Private document refers to the original in order for Art. there is always a copy in the archives w/c can be used to prove the credit. 1271 were to be applied differently. in the absence of proof that the doc was delivered for some other reason than the gratuitous waiver of the debt & the complete extinction of the oblig to pay. The rationale for allowing the presumption of renunciation in the delivery of a private instrument is that. supra. the debtor & his heirs may uphold it by providing that the delivery of the document was made in virtue of payment of the debt. This is Limited to Private Document  Art. Disputable presumptions. that delivery was voluntarily made. this provision is absurd & immoral in that it authorizes the debtor & his heirs to prove that they paid the debt. the donation & the acceptance shall be made in writing. unless the contrary is proved. Where several originals are made out of a private document. so that a tacit renunciation of the debt may be presumed. unlike that of a public instrument.If the value of the personal property donated exceeds five thousand pesos. Rule 131. specifying therein the property donated & the value of the charges w/c the donee must satisfy. otherwise. Under the 1985 Rules of Court.The following presumptions are satisfactory if uncontradicted. This fact implies a renunciation of the axn w/c Cr had for the recovery of his credit. (k). According to De Diego. it must be made in a public document. Disputable presumptions. 1271 to apply. xxx (j) That a person found in possession of a thing taken in the doing of a wrongful act is the taker Effect of Partial Remission: Art. but of the renunciation of the credit where more convincing evidence would be required than what normally would be called for to prove payment. If the acceptance is made in a separate instrument. [Balane:] Articles 1271 & 1272 refer to a kind of implied renunciation when the creditor divests himself of the proof credit. Issue: WON there was condonation Held: Yes. TC dismissed the axn. the only case subj to the provs of Articles 1187 to 1189 OCC. V claims that while he was imprisoned during the Jap occupation. or exercises acts of ownership over. M w/c was dismissed for lack of juris. xxx Presumption IN Condonation: Art. has paid the money or delivered the thing accordingly. (k) That a person in possession of an order on himself for the payment of they money. 1273. unless the contrary is proven. M coerced & tricked V’s wife into surrendering the doc to M. or the delivery of anything. CA. w/c is gratuitous.-The following presumptions are satisfactory if uncontradicted. No satisfactory proof as to allegation of coercion & trickery on V’s wife. it must be presumed that in accdance w/ the provisions of the law. 5 (b). (k) That a person in possession of an order on himself for the payment of money. (Trans-Pacific. 1271 raises a presumption. but may be contradicted & overcome by other evidence: xxx (b) That an unlawful act was done w/ an unlawful intent. 1272. Whenever the private document in w/c the debt appears is found in the possession of the debtor. Sec. there could be just one copy of the evidence of credit. when the provision itself assumes that there has been a remission. It is an unquestionable fact that the instru proving the debt now claimed passed to the possession of the Dr. It would thus be absurd if Art. In order that the donation of an immovable may be valid. xxx Art. MASA Facts: Velasco filed a complaint for the recovery of a sum of money he gave to Masa as a loan. It shld be noted that the doc is of a private nature. 62 . [Tolentino] VELASCO V. (h) That an obligation delivered up to the debtor has been paid. has paid the money or delivered the thing accordingly. 3. The delivery of a private document.-. (j). 1271 has no application to public documents bec. as contained in a private doc. made voluntarily by the creditor to the debtor. (g) That a thing delivered by one to another belonged to the latter. evidencing a credit. the intendment of the law would thus be to refer to the delivery only of the original rather than to the original duplicate of w/c the debtor would normally retain a copy. M contends that doc was voluntarily delivered to him through Osmena. the donor shall be notified thereof in an authentic form.) CASE: TRANS-PACIFIC V. implies the renunciation of the action w/c the former had against the latter. or the delivery of anything. it shall be presumed that the creditor delivered it voluntarily. (i) That prior rents or installments had been paid when a receipt for the later ones is produced. 1271. 749. in order to constitute the contract of pledge. unless the payment has been made in virtue of a judicial demand or unless the principal debtor is insolvent. So how can you sue yourself. a. The provisions of this article shall not be applicable. Art. is found in the possession of the debtor. But in this case. w/o prejudice to the provisions of article 1219. The very same obligation must be involved. (3) Negotiation of a negotiable instrument. unless & until he has paid the debt & its interest. 1277. Olores P100. The creditor who may have executed any of these acts. no interest for the intervening period may be demanded. [Tolentino]  Extinguishment of the principal oblig through confusion releases the guarantors. oblig is NOT extinguished. If the payment is made before the debt is due. The following requisites are essential to the contracts of pledge & mortgage: (1) That they be constituted to secure the fulfillment of a principal obligation. it is necessary. shall be liable to the others for the share in the obligation corresponding to them. The obligation of the guarantor is extinguished at the same time as that of the debtor. The obligation is extinguished fr. after its delivery to the creditor.  The presumption in this case is that the pledgee has surrendered the thing pledged to the pledgor. confusion/ merger may overlap w/ other causes of extinguishment. or of a third person by common agreement. 1215. 2076. [Balane] The accesory obligation of pledge is extinguished bec. w/ the interest for the payment already made. there is extinguishment both by merger. If any of the guarantors should be insolvent. She bequeath to me that credit. The remission made by the creditor of the share w/c affects one of the solidary debtors does not release the latter fr. pledge is a possessory lien. compensation. Solidary Obligations Art. 1275. When there are two or more guarantors of the same debtor & for the same debt. or of a third person who owns the thing. The guarantors. In addition to the requisites prescribed in article 2085. & for the same causes as all other obligations. xxx Art. Article 1219. his codebtors only the share w/c corresponds to each. reimburse his share to the debtor paying the obligation. Art. w/ expenses in a proper case. There are two (2) requisites: 1. Art. Art. so long as the debt has not been fully collected.  Because of its nature. Among guarantors (Effects of Guaranty as Between Co-Guarantors) Art. & preferences of the latter. 4TH MODE OF EXTINGUISHMENT: Confusion or Merger of Rights d. their obligation whenever by some act of the creditor they cannot be subrogated to the rights. 2073. (2) Donation. 2105. Merger w/c takes place in the person of the principal debtor or creditor benefits the guarantors. b. Novation.000.Art. It is presumed that the accessory obligation of pledge has been remitted when the thing pledged. He who made the payment may claim fr. in proportion to the debt of each. par. And then she died. confusion or remission of the debt. whether compulsory. 1217. 1276 ( below) is perfectly in consonance w/ Art.) 2. his responsibility towards the co-debtors. Principal Parties Art. his share shall be borne by the others. 1276. Joint Obligations Art. merger could overlap w/ payment. It must take place between the creditor & the principle debtor (Art. are released fr. even though they be solidary. When one of the solidary debtors cannot. the time the characters of creditor & debtor are merged in the same person. In this case. testamentary or intestate. of his insolvency. mortgages. 1216. the creditor may choose w/c offer to accept. Payment made by one of the solidary debtors extinguishes the obligation. including the payer. that the thing pledged be placed in the possession of the creditor. bec. 2. him. The creditor may proceed against any of one of the solidary debtors or some or all of them simultaneously. made by any of the solidary creditors or w/ any of the solidary debtors. the one among them who has paid may demand of each of the others the share w/c is proportionally owing fr. (Provisions Common to Pledge & Mortgage) Art. If two or more solidary debtors offer to pay. 1275. I owe Ms. 2085. as well as he who collects the debt. 2110. Confusion w/c takes place in the person of any of the latter does not extinguish the obligation. Art. [Balane]  Confusion is the meeting in one person of the qualities of the creditor & debtor w/ respect to the same obligation. whose oblig is merely accessory  When merger takes place in the person of the guarantor. 63 . This is not a conclusive presumption according to Art. c. Confusion does not extinguish a joint obligation except as regards the share corresponding to the creditor or debtor in whom the two characters concur. in the same proportion. Art. in case the debt had been totally paid by anyone of them before the remission was effected. Art. shall extinguish the obligation. For example. 1276. The debtor cannot ask for the return of the thing pledged against the will of the creditor. 1274. 2093. Rationale  You become your own creditor or you become your own debtor. 2080. What may cause a merger or confusion? (1) Succession. The demand made against one of them shall not be an obstacle to those w/c may subsequently be directed against the others. such share shall be borne by all his codebtors. such was sold on public auction by the City Treas of Pasay City pursuant to sec. Confusion  In compensation. And the requisites of Art. even though the debts may be payable at different places. 1279. Circumstances do not satisfy requirements of Art. The debtors who may have been ready to fulfill their promises shall not contribute to the indemnity beyond the corresponding portion of the price of the thing or of the value of the service in w/c the obligation consists. In ’79 Francia received notice that Ho wants TCT transferred to him after a Final Bill of Sale was issued to him. This became final. Ct said that atty’s fees may not be legally compensated b/c such constitute trust fund for benefit of lawyer. Compensation shall take place when two persons. Gan filed ejectment case vs. 1278 not complied with. Ho Fernandez was the highest bidder. Trial court favored plaintiff. Different Kinds of Compensation: HELD: Yes. In Cordero v. IAC decided vs PNB. In order that compensation may be proper. ISSUE: WON by operation of Art. CA [28 S 235. 1279. Art. The award of atty’s fees is in favor of litigant not of his counsel. Appellate ct reversed & ordered plaintiff to pay Atty’s fees of P500. there are 2 parties & 2 debts. A joint indivisible gives rise to indemnity for damages fr. & the debt can be enforced only by proceeding against all the debtors. Art. HELD: NO. the party & party but grow out of duty to. 1209. 1286. ONG ACERO [148 S 166. next to payment. 1278. 1224. & are the positive acts of the govt to the making & enforcing of w/c. Pet Gan Tion and resp. When Ong obtained writ of exec. Ong Wan Sieng. The only evidence presented by PNB towards this end consists of 2 documents marked in its behalf. are creditors & debtors of each other. 5TH MODE OF EXTINGUISHMENT: Compensation Art. but such was dismissed & court ordered RD to effect the transfer of title. 1278 & a "claim for taxes is not such a debt. A claim for taxes is not such a debt. these documents do not prove any indebtedness of ISABELA to PNB.e. contract or judgment as is allowed to be set-off. 1278. (3) That the two debts be due. (5) That over neither of them there by any retention or controversy. IAC [162 S 753] RATIO: [T]here can be no off-setting of taxes against the claims that the taxpayer may have against the govt. He was in Iligan at that time.  The reason on w/c the gen. to 1977 Francia has not paid RETs on the prop. 1987] RATIO: There is no compensation where the parties are not creditors & debtors of each other. the obligations of those persons who in their own right are reciprocally debtors & creditors of each other. Gonda. there are 2 debts & only 1 party. If one of the latter should be insolvent. A person cannot refuse to pay a tax on the ground that the govt owes him an amount equal to or greater than the tax being collected. a portion of whc lot was subject of exprop by RP. Thus. or if the things due are consumable. and pleaded legal compensation averring that Ong owed him more than P4K in rentals fr Aug ’61 to Oct. FACTS: Ong Wan Sieng was a tenant in certain premises owned by Gan Tion. but not that the credit was ever availed of [by ISABELA's foreign correspondent (MAN)]. to the concurrent amount. judgment Cr of ISABELA and of PNB as Cr of the depositor d/t a loan or credit agreement by ISABELA w/PNB the deposit being the collateral. or that the goods thereby covered were in fact shipped. Compensation takes place by operation of law. Such is credit therefore whc can be proper subject of legal compensation.) CASES: GAN TION vs. but there shall be an indemnity for expenses of exchange or transportation to the place of payment. rule is based. we held that: "xxx internal revenue taxes can not be the subject of compensation: Reason: govt & taxpayer 'are not mutually creditors & debtors of each other under Art. (2) That both debts consist in a sum of money. the personal consent of individual taxpayers is not required. & that he be at the same time a principal creditor of the other. compensation is the most common mode of extinguishing an obligation. where PNB and ISABELA has become here debtors and creditors of each other HELD: The insuperable obstacle to the success of PNB's cause is the factual finding of the IAC that it has not proven by competent evidence that it is a creditor of ISABELA. in their own right. Fr 1963. Perhaps. (4) That they be liquidated & demandable. the others shall not be liable for his share. Ong in 1961 for non-payment of rents for 2 mos. [Balane] Requisites under Art. 1290) w/c takes place automatically by operation of law once all the requisites are present. Distinguished fr. FRANCIA V. But as the IAC has cogently observed. ’63. contract or judgment as is allowed to be set-off xxx The general rule based on grounds of public policy is well-settled that no set-off admissible against demands for taxes levied for general or local governmental purposes. whereas in confusion. Appel. IAC affirmed. Total of P360. Ong denied and said that agreed rental was not 180 but 160 whc he offered but was refused by Gan. Mambulao Lumber. [Castan]  ISSUE: WON Francia’s tax delinquency of 2400 has been set-off by the govt’s indebtedness to him of 4116 after apportion of his lot was expropriated. If the division is impossible. demand. FACTS: ENGRACIO FRANCIA is regd owner of lot & 2storey house in Pasay City. Gan Tion went to the appellate ct. it is necessary: (1) That each one of the obligors be bound principally. A.Tax Code to satisfy his delinquency. Art. Legal Compensation (Articles 1279. Francia filed a complaint to annul the auction sale. All 64 . the time anyone of the debtors does no comply w/ his undertaking. commenced by third persons & communicated in due time to the debtor. they be of the same kind. The collection of a tax cannot await the results of a lawsuit against the govt. w/ just comp computed at assessed value. the right of the creditors may be prejudiced only by their collective acts. & received by ISABELA. demand. 73 PD 464 Real Prop. FACTS: Savings account of ISABELA Constrx & Devt Corp with the PNB of P2M is subject of 2 conflicting claims – that of the Aceros. Art. 1969] – Award of atty’s fees is proper subject of legal compensation. Indivisible Obligations they do prove is that a letter of credit might have been opened for ISABELA by PNB. & also of the same quality if the latter has been stated. and for him to pay Ho atty’s fees. xxx (Republic v. 1279: PNB V. ISSUE: WON there was legal compensation bet. is that taxes are not in the nature of contracts bet. [Balane]  Compensation is a mode of extinguishing. thus litigant is judgment Cr who may enforce judgment by execution. . The debt must not have been garnished. MARCELO STEEL invoked par.w/PNB w/ rts of subrogation. 3. a penal offense. 1287. it can be compensated. testate est.1. Accdg to Jose. can defeat petitioner's demand. 1288 & 1794. a party is a principal obligor & in another obligation. Fungible Things Due  The word consumable is wrong. he is a guarantor. There can be no compensation if 1 party occupies only a representative capacity. the counterclaim interposed by them. HELD: YES. Neither can compensation be set up against a creditor who has a claim for support due by gratuitous title. that the amount involved be certain & liquidated.Lutero. Series of their transactions were duly paid for and transferred. xxx Before a judicial decree of rescission or annulment. Demandable & Liquidated Debts  Tolentino: Demandable means that the debts are enforceable in court. 1278 to the effect that compensation shall take place when 2 persons. sps. xxx  ISSUE: WON TC erred in not holding that legal compensation has taken place in these cases by operation of Art. Mutual Debtors & Creditors  The parties must be mutually debtors & creditors (1) in their own right. TC ratiocinated that RCA never presented any proof of Farin’s indebtedness whc it wants to offset w/its rentals. to direct their rental payments to MARCELO STEEL. excluding those that are purely natural. the obligations of a depositary or of a bailee in commodatum. for compensation to take place. & he cannot compensate them w/ the profits & benefits w/c he may have earned for the partnership by his industry. Art. 1794. Art. 1288. his claim in that case cannot be categorized as liquidated credit w/c may properly be set-off against his obligation. In the case at bar. HELD: Petitioner contends that respondent judge gravely abused her discretion in not declaring the mutual obligations of the parties extinguished to the extent of their respective amounts.) The proper terminology is "fungible" w/c refers to things of the same kind w/c in payment can be substituted for another. are creditors & debtors of each other. 1278-79 despite evidence showing Lapuz’ indebtedness to pet. xxx And a debt is considered liquidated. Farin for RCA to release rentals incurred for repair of the bldg. the things due are not consumable. Luteros is still pending determination by the court. w/ respect to the money involved in the estafa case. it appears that the claim asserted therein is disputed by the Luteros on both factual & legal grounds. DEL ROSARIO [123 S 640] RATIO: Compensation cannot take place where one's claim against the other is still the subject of court litigation. Thus. ISSUE: WON resp. Sycip approached him and volunteered to sell the shares. owners of Hacienda Tambal. Upon this premise. the complainant was merely acting as agent of another. that the amount involved be certain & liquidated. It is a requirement. a depositum or fr. More. Such an order was issued by the court. RCA filed an MR praying to be excluded fr such order b/c sps Farin has a standing Ø w/RCA whc shd be setoff w/ their rental Øs. if the claim is undisputed. It is a requirement. consumable things are those w/c cannot be used in a manner appropriate to their nature w/o their being consumed. The obligations must be civil obligations. Sps Farin FACTS: JOSE LAPUZ received fr ALBERT SMITH 2000 shares of stock of REPUBLIC FLOUR MILLS in the name of Dwight Dill who left for Honolulu. w/o prejudice to the provisions of paragraph 2 of article 301. 4. DE LOS ANGELES [98 S 103] RATIO: Compensation of debts arising even w/o proof of liquidation of claim is allowable where the claim is undisputed. the statement is sufficient & no other proof may be required. in their own right. Art. Lutero. 1278. FACTS: SPS TIBURCIO LUTERO & ASUNCION MAGALONA. Compensation cannot take place where one's claim against the other is still the subject of court litigation. (Tolentino. In a reciprocal obligation to deliver horses. ISSUE: WON CA erred in not applying Art. unusual profits have been realized. there can be no compensation if in one obligation. TC denied both MRs. incl the Rice & Corn Admin (RCA). Neither shall there be compensation if one of the debts consists in civil liability arising fr. 1279 w/c provides that compensation can take place only if both obligations are liquidated. a rescissible or voidable debt is valid & demandable. also filed MR asking court to exclude lessees of the bldg fr such order as they are not parties to the case. Proof of the liquidation of a claim. but also when the determination of the exact amount depends only on a simple arithmetical operation. there being no apparent defenses inherent in them. the courts may equitably lessen this responsibility if through the partner's extraordinary efforts in other activities of the partnership. grandson of decedent. not only when it is expressed already in definite figures w/c do not require verification. Compensation shall not be proper when one of the debts arises fr. Judge erred in denying claim of RCA that compensation of debts has taken place b/c records showed no proof of plaintiffs’ indebtedness to RCA. Solinap instituted separate action vs. (additional requirement) Compensation is not prohibited by any provision of law like Articles 1287. if ultimately found to be meritorious. Judge Nicolas Lutero. yet there can be compensation. the administrator. But the later payments were pocketed by Sycip. A debt is liquidated when its existence & amount are determined. TC granted motion of sps. thus rents of RCA has been previously assigned by sps Farin to Vidal Tan. the latter transacted w/Sycip. 5 in the mortgage © and asked the court instead to compel the lessees of “Dona Petra Bldg” situated on the mortgaged lot. While it is not for Us to pass upon the merits of the pltff's cause of action in that case. for compensation to take place. 418. In set-off the two persons must in their own right be creditor & debtor of each other CASES: REPUBLIC V. the heirs who paid subjugated to the PNBs claim vs lessee Solinap for payment of rentals. as in the case at bar. to take fr the heirs and pay rising Øs of the est. A yr later MARCELO STEEL asked sheriff assist in extrajud FREM of such lot. Maturity of Debts  Both debts must be due to permit compensation. Jose was suppose to sell his shares at market value fr whc he wud get commission. is proper if such claim is disputed. He relies on Art. CA [134 S 317] RATIO: Compensation cannot take place where. who allegedly owed Solinap P71K w/REM as security. Under Art. After compliance. hence. SPA was granted by Dill to Lapuz. SYCIP V . the petitioner's claim against the resp. xxx SOLINAP V. But. & (2) as principals. 2. Sps Farin filed for injunction and succeeded. leased such to LOTERO SOLINAP for 10yrs w/ rental of P50K/yr. The argument fails to consider Art. Every partner is responsible to the partnership for damages suffered by it through his fault. Likewise. further agreed that half of annual rental would be paid by Solinap to PNB as amort. FACTS: Sps FARIN got a loan fr MARCELO STEEL CORP of p600k & did a REM of their lot in QC as security in favor of MARCELO STEEL. In this case sps Lutero setup a counterclaim of P125K in unpaid rentals of pet. When Tiburcio died.on indebtedness of sps. 65 . proceedings was instituted at CFI-Iloilo whc authorized the administrator of est. However. in order that there be compensation of debts.on Hacienda Tambal. Sycip. Whc same amount went to pay her standing Øs w/d same bank. whc she secured w/REM of her properties in Quiapo & Bulacan w/total market value of 110M. failing to consider legal compensation betwn.-FACTS: NATIVIDAD PAJARDO secured from Investment Underwiriting and ATRIUM Capital. and upon motion by plaintiff. 1279 are present." Effect of Legal Compensation: Art. Before formal bareboat charter was to be approved by GM of Sh.797. Notw/standing the provisions of the preceding article. Froilan defaulted in payment of the balance and interests as well as insurance premiums on the vessel whc was paid for by the SH. (4) That they be liquidated & demandable. Deducting the latter amount fr. even w/o the consent or knowledge of the debtors. thus she did not receive the same amt./govt. & also of the same quality if the latter has been stated. Pan Oriental resisted. resps as deficiency the amount of P6. Only 20M of the loan was approved for release. 1280. She also made a money-market placement w/ATRIUM of more than P1M @17% int. That argument loses sight of the fact that to the sum of P40. CA [135 S 593] RATIO: Compensation cannot take place where one of the debts is not liquidated as when there is a running interest still to be paid thereon. There can be no doubt that petitioner is indebted to prvt resp. compensation takes effect by operation of law. even though the creditors & debtors are not aware of the compensation. 1283. it has the right to setoff plaintiff’s money-market investments proceeds. Compensation cannot take place in this case since the evidence shows that Jose Lapuz is only an agent of Albert Smith &/ or Dr. 1290. In order that compensation may be proper. Thus.83. we find w/o basis REPUBLIC's allegation that PAN-ORIENTAL'S claim in the amount of P40. PAN ORIENTAL offered to charter the same vessel w/monthly rental of 3K. predecessors of ICB. disputed claim arising fr. compensation takes effect by operation of law.500 while the expenses reach only P40. Moreover. for 32 days. 1951 until fully paid. despite evidence showing that Jose Lapuz still owed him an amount of more than P5. & extinguishes both debts to the concurrent amount. Sh. representing useful expenses incurred by PAN-ORIENTAL.Ad. the guarantor may set up compensation as regards what the creditor may owe the principal debtor. RP Pres. compensation cannot extend to unliquidated. the rules on the application of payments shall apply to the order of the compensation. HELD: The argument is w/o merit. But whether prvt.54 was extinguished by compensation since the rentals payable by PAN-ORIENTAL amount to P59.000 & in not dismissing the appeal considering that the latter is not legally the aggrieved party. RP and Pan O.797.. COMPANIA MARITIMA as purchaser of the vessel fr Froilan was allowed to be intervenor. Approved the contract. Art. 1290.063. upon the deficiency amount. IAC [163 S 296] Requisite of legal compensation under Art. reimburse Pan Oriental of its expenses incurred. COMPANIA MARITIMA v.81 million representing the deficiency balance after the foreclosure of the mortgage executed to secure the loan extended to her. Her properties were auctioned and 66 . drydocking and repairs.702. Art. w/claim that the vessel is not repossessed but its ownership is retransferred to the Sh. took imme. the former may set it off by proving his right to said damages & the amount thereof.p.062. This is admitted. in their own right are creditors & debtors of each other. Dwight Dill.81 million against w/c it has the right to apply or set off prvt. ICB’s 20 motor vehicles were levied upon. Froilan protested to the Pres this charter agreement. 'the two debts be due' & 'they be liquidated & demandable.46 would still be owing by PAN-ORIENTAL to REPUBLIC. Feb. pd down of 50K. Compensation takes place only when two persons in their own right are creditors & debtors of each other. The date of dispossession. She thus filed a complaint w/TC for annulment of the sheriff’s sale of her mortgaged properties the debt not yet being due & demandable. they be of the same kind.797.54. the legal interest payable fr.54. from the time of disbursement.AD. taking place. the release of the balance of her loan of P30M.a. 3. the former. This circumstance prevents legal compensation fr. Art. 1278 & 1279. CA erred in not applying the provisions on compensation or setting-off debts under Art. & that each one of the obligors is bound principally & is at the same time a principal creditor of the other. INTERNATIONAL CORPORATE BANK V. incl spareparts needed. 1279.54 will still have to be added the legal rate of interest "fr. When all the requisites mentioned in Art. prvt. and recovery of the proceeds of her money-market investments. REPUBLIC claims that P18.Atrium being the sole bidder. Art. and file a bond to cover the rest of his undertaking w/govt. (Art. a Cabinet resolution was issued revoking the cancellation of the © of Sale to Froilan.Ad. This contention is untenable. breach of contract. When all the requisites mentioned in article 1279 are present. ISSUE: WON the Court erred in holding that Froilan.83 representing the proceeds of her money market investment. (2) That both debts consist in a sum of money. Art. court ordered to restore Froilan’s poss’n of the vessel.797.81M. ISSUE: WON there was legal compensation in this case. in the amount of P1." Thus. a loan of P50M. that after Pet. After posting his bond. 1279 requires among others. or if the things due are consumable. respondent's money market claim of P1. (3) That the two debts be due. it is necessary: (1) That each one of the obligors be bound principally. acquired them only at 20M in all.) FACTS: FERNANDO FROILAN purchased fr SHIPPING ADMIN a boat for 200K. 2/3/51 on the sum of P40. HELD: Petitioner contends that resp. its branches were ordered to pay. If one of the parties to a suit over an obligation has a claim for damages against the other. HELD: More. govt agreed w/further stipulation that charterer will pay cost of labor. & that he be at the same time a principal creditor of the other. Compania and rp shd pay pan oriental reimbursements of its legitimate expenses w/legal int.' Compensation is not proper where the claim of the person asserting the set-off against the other is not clear nor liquidated. xxx Lapuz did not consent to the off-setting of his obligation w/ petitioner's obligation to pay for the 500 shares. Petitioner contends that after foreclosing the mortgage. is vigorously disputed. constituted a mortgage on the vessel for the unpaid balance. At the end she is still indebted in the amt of P6. restored him to all his rts. Foreclosed the mortgage. that in order that legal compensation shall take place. is also still unliquidated since interest does not stop accruing "until the expenses are fully paid. there is still due fr. The IAC ordered ICB to pay plaintiff Pajardo the proceeds of her money-market investments. instead of fr. If a person should have against him several debts w/c are susceptible of compensation. CA affirmed. 1279.ADMIN. on condition he will pay at least 10K to settle partially his outstanding accounts.063. At maturity. Compensation shall take place when two persons. 1289. On execution.possn of the vessel as well as its cargoes.062. resp is indebted to petitioner in the amount of P6. proceeds of such was not released to her but instead allegedly applied to her mortgaged indebtedness whc she failed to pay. 1279 for automatic compensation "even though the creditors & debtors are not aware of the compensation" were duly present. a father who paid damages for son’s q-delict cannot claim comp by not giving support to his son. MPCC opposed this motion stating that such amt is compensated w/ an equal amt it is entitled fr Pacweld after the latter is also adjudged by same CFI-Mla in another case to pay to MPCC. 301 of the NCC is not found in FC. Assignment w/ the debtor's knowledge but w/o his consent  The debtor can set up 67 . commenced by third persons & communicated in due time to the debtor. & he cannot compensate them w/ the profits & benefits w/c he may have earned for the partnership by his industry. (Baviera OL: F. The right to receive support cannot be renounced. e. ( Baviera OL: F. therefore. that he reserved his right to the compensation. can there be set-off? A: No since it arose out of a deposit. Kinds b. final & executory judgments due to compensation by operation of law. ISSUE: WON TC erred in not holding the 2 judgment debts of the 2 corps.  But the depositor can set up the compensation. Neither shall there be compensation if one of the debts consists in civil liability arising fr. were creditors & debtors of each other. Art. Thus. w/o prejudice to the provisions of paragraph 2 of article 301. Art. 2. Art. However. Pacweld Steel Corp. Denied MR of MPCC. The parties may compensate by agreement any obligations.) Rules: Assignment w/ the debtor's consent  Debtor cannot set up compensation at all unless the right is reserved. If the creditor communicated the cession to him but the debtor did not consent thereto. 1285. he may set up the compensation of all credits prior to the same & also later ones until he had knowledge of the assignment. [Baviera]  The oblig of the depositary to return a spec thing cannot be compensated or substituted by delivery of a thing of the same kind. Not allowed by law. nor can it be transmitted to a third person. but not of subsequent ones. unusual profits have been realized. CA [120 S 930] FACTS: Atty. 1288. 1282. 1287. Every partner is responsible to the partnership for damaged suffered by it through his fault. However.. Facultative Compensation w/c takes place when compensation is claimable by only one of the parties but not of the other. cannot set up against the assignee the compensation w/c would pertain to him against the assignor. (appellee). 1288. Effect of Assignment of Credit: Art. compensation having taken effect by operation of law & extinguished both debts to the concurrent amount of P10T. upon the [Tolentino] 1. xx 2. 1. Comp 1. 301. Judicial Compensation when decreed by the court in a case where there is a counterclaim. Kinds a. Court issued the motion of Atty. respectively offset each other. MINDANAO PORTLAND CEMENT V. 1279 & 1290. petitioner Mindanao Portland Cement Corp. requisites of.MPCC was adjudged to pay Pacweld 10K in atty’s fees. If the assignment is made w/o the knowledge of the debtor. the latter may set up the compensation of debts previous to the cession.g. Art. Art. [Baviera] Note that Art. Neither can compensation be set up against a creditor who has a claim for support due by gratuitous title.. However under 301. Q: If there is an oblig of the depositary to the depositor for damages(already liquidated & demandable) in case of negligence & if the depositor owes the depositary a sum of money. 1278. [Balane] There are 3 situations covered in this article: [Balane]  The depositary cannot set up compensation w/ respect to the things deposited to him. If one of the parties to a suit over an obligation has a claim for damages against the other. 1283. Cld be a way of Cr to collect a bad debt.(5) That over neither of them there by any retention or controversy. support IN ARREARS may be compensated & renounced & the rt to demand the same may be transmitted by onerous or gratuitous title. a penal offense. Laquihon. the obligations of a depositary or of a bailee in commodatum. 1283.  Future support cannot be compensated. 1794. their debts to each other consisting in final & executory judgements of the CFI in 2 separate cases. 3. 1282. since all the requisites provided in Art. Comp 1. Judicial) Art. Assignment w/ the debtor's knowledge but w/o his consent. Voluntary) HELD: It is clear fr. unless the assignor was notified by the debtor at the time he gave his consent. Voluntary Compensation is not limited to obligations w/c are not yet due.g. Articles 1287. pursuant to the provisions of Art. Assignment w/ the debtor's consent. the former may set it off by proving his right to said damages & the amount thereof. & Assignment w/o the debtor's knowledge (& obviously w/o his consent. such as that provided in Art. Automatic compensation. the record that both corporations. Art. Neither can it be compensated w/ what the recipient owes the obligor. [Baviera} What is the idea behind legal comp?  To facilitate collxn of money. The parties may agree compensation of debts w/c are not yet due. ordering the payment to each other of the sum of P10T by way of attorney's fees. & the right to demand the same may be transmitted by onerous or gratuitous title. e. vs ea other mutually compensated Contractual/ Conventional compensation w/c takes place when parties agree to set-off even if the requisites of legal compensation are not present. (appellant) & resp. in w/c the objective requisites provided for legal compensation are not present. For expediency. present  Extinguishment of two debts arising fr. Laquihon. Pacweld Steel Corp filed a Motion to direct payment of atty’s fees to counsel” invoking the fact that Pet. support in arrears may be compensated & renounced. a depositum or fr. the courts may equitably lessen this responsibility if through the partner’s extraordinary efforts in other activities of the partnership. The debtor who has consented to the assignment of rights made by a creditor in favor of a third person. in behalf of 3P def. The 2 obligations. Compensation shall not be proper when one of the debts arises fr. Subjective (Personal) or novation by a change of subject 2. It must be established that  1. 1284. (3) Subrogating a third person in the rights of the creditor. Obligations may be modified by: (1) Changing their object or principal conditions. The chattel mortgage reduced the amount to be paid by G. When one or both debts are rescissible or voidable. not the creation of the obligation There must be a previous valid obligation. 6 MODE OF EXTINGUISHMENT: Novation TH Art. straight terms to installment terms & a change fr.compensation w/ a credit already existing at the time of the assignment. the mortgage was executed only to secure the judgment. COURT OF APPEALS FACTS: Millar obtained a judgment against Gabriel. remitted the parties to their original rights under the judgment award. the failure of the party to comply w/d suspensive & conditional nature of d agreement. you have to determine whether or not the change in the conditions is principal or merely incidental. (Manresa.  It is the only mode whereby an obligation is extinguished & a new obligation is created to take its place. 3. Agreed to There must be CONSENT of all the parties to the substitution. Active subjective or a change of creditor. Habana.’s. Subsequently. 2. or by subrogating a third person in the rights of the creditor. on the other hand. or that the old & the new obligations be on every point incompatible w/ each other. [146 SC 360] Mixed novation w/c is a combination of both subjective & objective novation. In the case at bar. 1292. Pets.) CASES: MILLAR VS. Agreement of the parties to create the new obligation.  For example. although the former effects but minor alterations or slight modifications w/ respect to the cause or object or conditions of the latter. Novation. and Eng’rg.  [TOLENTINO]  Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one w/c extinguishes or modifies the first. A mere extension of the term of payment does not result in novation. Art. the old & the new contracts are incompatible in all points. 68 . Passive subjective or a change of debtor 4.  Novation by a change in the principal conditions is the most problematic kind of novation bec. A writ of execution was issued. While the tenor of the subsequent letter-agreement in a sense novates the judgment award there being a shortening of the period within which to pay. Classification of Novation: 1.) FACTS: Pets. Integrated. The TC said there was no novation bec. WON the mortgage K novated the judgment HELD: Where the new obligation merely reiterates or ratifies the old Ø. sued the MWSS.) ISSUE: debt. 5. Novation. 1291. INTEGRATED CONSTRUCTION VS. on the basis of w/c G’s Willy’s Ford Jeep was seized. (2) Substituting the person of the debtor. 2. (I would consider this an effect. Validity of the new obligation. ordered MWSS t pay pets. 5. 3. RELOVA. is a relative mode of extinguishing an obligation. or that the will to novate appear by express agreement of the parties 3. All that is required is INCOMPATIBILITY between the original & the subsequent contracts. Art.Balane). In order that an obligation may be extinguished by another w/c substitute the same. the 2 Ø s. resulting in the extinction of the old obligation & the creation of a valid one. Only those essential & principal changes introduced by the new Ø producing an alteration or modification of the essence of the old Ø result in implied novation. they may be compensated against each other before they are judicially rescinded or avoided. The other modes of extinguishing an obligation are absolute in the sense that the extinguishment of the obligation is total (w/ the exception of compromise. G pleaded w/ M to release the jeep under an agreement whereby G would mortgage the jeep in favor of M to secure the payment of the judgment debt. 2 constrx co. also known as subrogation. or by substituting the person of the debtor. IMPLIED NOVATION  There is no specific form required for an implied novation. the mere reduction of the amount due in no sense constitutes a sufficient indicium of incompatibility. Assignment w/o the debtor's knowledge  Debtor can set up as compensation any credit existing at the time he acquired knowledge even if it arose after the actual assignment.. [TOLENTINO]  Novation is NEVER presumed. 45 P 707. for the period affects only the performance. Requisites of Novation: 1. 4. either by changing the object of principal conditions. noninterest bearing obligation to an interest bearing one are changes in the principal conditions. it is imperative that it be so declared in unequivocal terms. a change fr. rather than a requisite of novation-. (Tiu Siuco v. The Arbitration Board rendered decision-award whc became final & exec. Extinguishment of the old obligation. & (b) the latter's admissions bearing thereon. before the execution of the chattel mortgage agreement. Objective (Real) or novation by change in the object or in the principal conditions.  Novation is the most unusual mode of extinguishing an obligation. at CFI-Mla. formerly NAWASA. such changes do not effectuate any substantial incompatibility bet. especially in the light of (a) the explanation by the petitioner that the reduced indebtedness was the result of the partial payments made by the resp. or in acts of equivalent import. Subseq. Accordingly. Novation through a change of the object or principal conditions of an existing obligation is referred to as objective (or real) novation. unless it was extinguished. no novation occurs & the third person who has assumed the obligation of the debtor becomes merely a co-debtor or surety or a co-surety.-. the award is still subject to execution by mere motion. As to whether or not petitioners are now in estoppel to question the subsequent agreement.  Again. PNB had the right to proceed directly against R&B w/o going after P. T&C f whc was approved by MWSS Board.538. YAP [74 P 287] NOVATION BY SUBSEQUENT AGREEMENT FACTS: Fua Cam Lu. who refused to pay on the ground that the trust agreement had extinguished their oblig under the Indemnity Agreements. PIGUING [42 S 322] FACTS: Sps. When def. the parties to the original contract is extended to a third person. Although the mortgage did not expressly cancel the old obligation. PACOCO. Failing therefrom. or that the new obligation be on every point incompatible w/ the old one. agreed subsequently to execution of a mortgage in his favor by the Yaps of a camarin plus reduction of debt to 1. no novation occurs & the third person who assumed the obligation becomes a co-debtor or surety or a cosurety. Rollo) Novation is not implied when the parties to the new obligation expressly negated the lapsing of the old obligation. COCHINGYAN VS. R%B. as trustee.If objective novation is to take place. Petitioners. R&B in turn demanded reimbursement fr. the judgment debt was later on agreed by them to be reduced and was subseq paid by def. R & B SURETY [151 S 339] Novation defined. Liu Tua Beth. FACTS: PAGRICO (P) submitted a surety bond issued by R & B surety in favor of PNB. on the contrary. their respective liabilities under the bond. Sandico and Timbol as rep of Est of Sixta Paras obtained judgment in their favor against Desiderio Paras for the recog of easement and payment of damages. therefore. pets. & the third person or new debtor take the place in the new relation. a dual purpose is achieved  an obligation is extinguished & a new one is created in lieu thereof. as PACOCO prexy. the parties expressly negated the lapsing of the old obligation. a TRUST AGREEMENT was entered into bet. 2 indemnity agreements were entered into w/ R&B by CCM & Joseph Cochingyan in his capacity as CCM prexy & in his personal capacity. FUA VS. 2 years after the execution of these documents. HELD: Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one w/c terminates it. The issue of implied n ovation is not reached at all. Novation may also be both objective & subjective (mixed) at the same time. HELD: The Yap’s liability under the judgment has been extinguished by the new agreement. the parties to the new obligation expressly recognize the continuing existence & validity of the old one. Jose Villanueva as P’s manager & in his personal capacity. thus there is nothing more to be executed. rendering some ineffective. 55 Phil. Joseph Cochingyan & Jose V.refused.give MWSS some discounts.200 payable in 4 installments. Rule 39 of the Rules of Court. which may be availed of as a matter of right any time within (5) years from entry of final judgment in accordance with Section 5. Absent an unequivocal declaration of extinguishment of a pre-existing obligation. When the sps demanded for performance of the part of d judgment abt the recof of d easement. sps.Alias writ of exec was issued whc was later on appeal was ordered quashed by the CA bec. in any manner release R&B fr. Novation is never presumed. The trust agreement expressly provided that it shall not. as in this case. The later agreement did not merely extend the time to pay the judgment. the court denied d/t novation. the old & the new obligation (& nothing else) would sustain a finding of novation by implication. either by changing its object or principal conditions. this was impliedly novated by reason of incompatibility resulting fr. SANDICO VS. the fact that. or by substituting a new debtor in place of the old one. The parties “novated by subseq. HELD: While the tenor of the subsequent letter-agreement in a sense novates the judgment award there being a shortening of the period within which to pay (Kabangkalan Sugar Co.04 payable at one time. it is not enough that the juridical relation bet. stipulates for attorney's fees & is secured by a mortgage.  Neither can the petitioners anchor their defense on implied novation. Jose & Susana Cochingyan. MWSS' failure to pay within the stipulated period removed the very cause and reason for the agreement. & PNB was the beneficiary. ** Foreclosure of such new mortgage under the judgment in the old Ø was VOID. Pacheco. Novation by the change of either the person of the debtor or of the creditor is described as subjective (or personal) novation. it was therein recited that appellants promised to pay P1. judgment-Cr of Yap Fauco and Yap Singco. it is imperative that the new obligation expressly declare that the old obligation is 69 . the new obligation is for P1200 payable in installments. In both objective & subjective novation. were remitted to their original rights under the judgment award. & was not secured. When P failed to pay. or by the acts of the parties whose intention to dissolve the old obligation as a consideration of the emergence of the new one must be clearly discernible. Tomas Besa. 125. thereby extinguished. suffice it to state that petitioners never acknowledged full payment. or by subrogating a third person to the rights of the creditor. where. vs. & in his personal capacity. & by P. Said judgment cannot be said to have been settled. they demanded that def rebuild & reconstruct the irrigation canal in its original dimensions. whereas the judgment was for P1. It is essential that the old debtor be released fr. Moved for Execution of judgment vs MWSS. it must be established either by the discharge of the old debt by the express terms of the new agreement. if subjective novation by a change in the person of the debtor is to occur. there can be no novation.asked d court a quo in a motion for exec 2compel them or hold them in contempt.200 to appellee as a settlement of the said judgment. in other words. In turn. that in case of default they wud pay balance plus the discounted amount and 10% attys fees. a PNB officer. the suspensive and conditional nature of the said agreement (making the novation conditional) is expressly acknowledged and stipulated in the 14th whereas clause of MWSS' Resolution. bec. 555). Under the bond. Novation is never presumed. petitioners refused MWSS' request for a conforme or quitclaim. IF the old debtor is not released. did not provide for attorney's fees. a showing of complete incompatibility bet. But where. the obligation. PNB demanded payment fr. If old debtor is not released. (p. Agreement” the judgment in question. This chattel mortgage was duly registered in RD of Manila and Pasay City. there is nothing in the May 14. plaintiff will pay or return materials lost & found by his agency. rep. doing business under the name and style of United Veterans Security Agency and Foreign Boats Watchmen. It is elementary that novation is never presumed. The purpose of the suit was to compel the NPC to restore the contract of Roxas for security services which the former had terminated. the © for security services w/NPC will remain. Novation results in 2 stipulations  (1) to extinguish an existing obligation. In the case at bar. Contracted another security agency. defendant Antonio V. 1292. Us. it must be explicitly stated or there must be manifest incompatibility bet. in connection with a credit commercial line in the amount of P900K granted to Syvel’s. Novation is never presumed. No novation in the absence of explicit novation or incompatibility on every point between the old & the new agreements of the parties. The contract on its face does not show the existence of an explicit novation nor incompatibility on every point bet. ISSUE: WON novation of judgment by subseq agreement of parties extinguished d Ø of NPC to sustain the security © w/plantff HELD: It is elementary that novation is never presumed. on the failure of the petitioners to present evidences or proofs of payment in the lower court & the appellate court. In the case at hand. Thus the Civil Code provides: Art. Antonio de las Alas. 1982 agreement w/c supports the petitioner's contention. FACTS: Amicable settlement of this dispute was arrived at and made basis of decision of TC. Subseq. there is nothing in the REM w/c supports appellants' submission. the old & the new agreements as the second contract evidently indicates that the same was executed as new additional security to the CM previously entered into by the parties. Mr. The agreement consisted of NPC paying plaintiff sum of money. During its pendency. Mr. we fail to see what new or modified obligation arose out of the payment by the resp. Syyap requested that the plaintiff dismiss this case because he did not want to have the goodwill of Syvel's Incorporated impaired.000 of the said resp. DAYRIT [125 S 849] RATIO: Novation is never presumed but must be explicitly stated. Fundamental it is that novation effects a substitution or modification of an obligation by another or an extinguishment of one obligation by the creation of another. the "old" & the "new" agreements…said contract was executed precisely to implement the compromise agreement for which reason there was no novation. NPC appealed claiming that d judgment was novated thus extinguished.nothing more to exec. of the reduced amount of P4.000 & substituted the monetary liability for P6. the old & the new obligations in every aspect. HELD: The fact therefore remains that the amount of P84. Defendants admitted "having sold under a pacto de retro sale the parcels of land 4 described in the complaint in the amount of P84. Such partial recons does not constitute substantial compliance. If objective novation is to take place. or that the old and the new obligations be on every point incompatible with each other. de del Castillo. As no payment was made. FACTS: DANIEL E.000. Thus SC remanded d case to TC for ocular on the job done & if def refuses to complete to ask another to do the work at the expense of def. Absence of existence of an explicit novation nor incompatibility between the old & the new agreements. Syyap guaranteed absolutely and unconditionally and without the benefit of excussion the full and prompt payment of any indebtedness to be incurred on account of the said credit line. bank started to foreclose extrajudicially the chattel mortgage but was not pushed thru after Syvel’s attempted to settle. appellee's cause of action thereon was extinguished. plaintiff.00" and that they "hereby promise to pay the said amount within the period of four (4) months but not later than May 15.resp. the 2 obligations. and therefore. This answers the claim of the resps. and they both waive other claims & counter-c w/ea other. accepted payments from petitioners and gave petitioners several extensions of time to pay their remaining Øs. and (2) to substitute a new one in its place. The parties drafted a Compromise Agreement which the TC approved. sued the NATIONAL POWER CORPORATION (NPC) and two of its officers in Iligan City. Additionally. Mendoza were present. SYVEL'S [164 S 247] RATIO: When does novation take place. to sustain novation necessitates that the same be so declared in unequivocal terms  clearly & unmistakably shown by the express agreement of the parties or by acts of equivalent import  or that there is complete & substantial incompatibility bet. ISSUE: WON on the ground that by the execution of said real estate mortgage. whc was not disputed by both parties. it is imperative that it be so declared in unequivocal terms. and offered to execute a REM on his property in Bacoor.son Waldo del Castillo as for attorney-in-fact. of the order of the trial court dated 4/26/83. CA was not in grave abuse of disc. De las Alas consented. plntf asked court a quo for writ of exec whc was granted. under the appellate court's judgment. There is neither explicit novation nor incompatibility on every point bet. That the subseq agreement extingusihd d def’s Ø on d judgment of court a quo ISSUE: WON decision of trial court in its judgment by compromise was novated and amended by the subsequent mutual agreements and actions of petitioners and private respondents HELD: NO. this case was filed in Court. PEOPLE'S BANK VS. IAC [155 S 262] RATIO: Subsequent mutual agreements & actions of petitioners & private respondents allowing the former extension of time to pay their obligations & in installments novated & amended the period of payment decreed by the trial court in its judgement by compromise. In order that an obligation may be extinguished by another which substitutes the same. xxx FACTS: Action for foreclosure of chattel mortgage executed in favor of the plaintiff by the def. Syyap and Atty. 1981 decreed by the trial court in its judgment by compromise was novated & amended by the subsequent mutual agreements & actions of petitioners & prvt.by her In the case at bar. resps no less than 8 extensions of time to pay their obligation. BALILA V. Novation was not intended in the case at bar as the REM was taken as additional security for the performance of the contract. NPC VS. > failure of Syvels’ to pay in accord w/terms and conditions of the Commercial Credit Agreement. during the pendency of the petition for certiorari before the IAC & after the filing of the petition bef. Syvel's Inc. it must be explicitly stated or there must be manifest incompatibility between the old and the new obligations in every aspect. the obligation secured by the chattel mortgage subject of this case was novated. Syyap proposed to have the case settled amicably and to that end a conference was held in which Mr. defendants Antonio & Angel V. ROXAS. personal properties and other materials owned by it and located at its stores or warehouses. These transactions took place during the pendency of the motion for recon.1981. NPC subseq. HELD: Novation takes place when the object or principal condition of an obligation is changed or altered. ISSUE: WON CA erred in quashing the alias writ of exec d/t its interpret. VP of the Bank. on its stocks of goods. Jr. resps. priv.Guadalupe Vda. Petitioners paid the aforestated amount on an installment basis & they were given by prvt.000 payable on or before May 15. and so the REM. Record showed that def attempted to rebuild the irrigation canal but not in the original dimensions. 70 . Thus. it is essential that the new obligation expressly declare that the old obligation is to be extinguished or that the new obligation be on every point incompatible w/ the old one.. Art. MALLARI a. (2) When a third person. unless there is a stipulation to the contrary. when he delegated his debt. (3) When. Substitution of debtor-Art. pays w/ the express or tacit approval of the debtor. KINDS OF NOVATION: PNB VS. pays w/ the express or tacit approval of the debtor. 1302. defendant’s Er.  Assignment is also a novation but much simpler. Whoever pays on behalf of the debtor w/o the knowledge or against the will of the latter. a mortgage. Q: Is it possible for a creditor to transfer his credit w/o consent of the debtor? A: Yes. Art. Art. even w/o the debtor's knowledge. there is a total compensation. 2. 1302. debtor & new creditor) are required. I think this should have been Art. until after they have exhausted the property of the vendor. HELD: The acceptance of PNB of the offer of G to pay under the terms specified by him constituted not only a substitution of the debtor but an alteration or modification of the terms & conditions of the original K. & such agreement may be inferred fr. save those w/c are inherent in his person. such as those arising fr.3. 1291. Change of Principal Condition or Object 71 . the debtor’s insolvency or non-fulfillment of the obligation shall not give rise to any liability on the part of the original debtor." It is clear. Art. 1177. The creditors. the latter must be clearly established in or order that it may take effect. 1302)  In all cases of Art. 1729. Guanzon defaulted in his payment so PNB sued the def on the same obligation. It is presumed that there is legal subrogation: (1) When a creditor pays another creditor who is preferred. except when said insolvency was already existing & of public knowledge. that a novation was not intended. When the two debts are of the same amount. after having pursued the property in possession of the debtor to satisfy their claims. subrogation takes place by operation of law. (Conventional Redemption) Art. any existing liability upon dissolution of the partnership by an agreement to that effect between himself. not interested in the obligation. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation. Subrogation of a third person in the rights of the creditor is either legal or conventional. The creditors of the vendor cannot make use of the right of redemption against the vendee. Mallari defaulted so the sacks of rice deposited in a warehouse were attached. 1624. a person interested in the fulfillment of the obligation pays. reproduced below) Legal (Art. Art. appellants agreed that the chattel mortgage "shall remain in full force and shall not be impaired by this (real estate) mortgage. Whoever pays for another may demand fr. employees & furnishers of materials: Effect of insolvency of new debtor-Article 1294. Conventional subrogation of a third person requires the consent of the original parties & of the third person. But this is not novation but an assignment of rights under Art. they may also impugn the acts w/c the debtor may have done to defraud them. who has been proposed by the original debtor & accepted by the creditor. Conventional/ Contractual (Art. may exercise all the rights & bring all the actions of the latter for the same purpose. Compensation may be total or partial. But is not subrogation. offered to pay the obli of the latter. even w/o the knowledge of the debtor. If the substitution is w/o the knowledge or against the will of the debtor. It is presumed that there is legal subrogation: (1) When a creditor pays another creditor who is preferred. 1301)  Consent of the 3 parties (old creditor. or known to the debtor. or penalty. (2) When a third person. the course of dealing between the creditor having knowledge of the dissolution & the person or partnership continuing the business. Art. Subrogation/Subjective Novation Records show that in the real estate mortgage. 1301. The former is not presumed. 1. he can recover only insofar as the payment has been beneficial to the debtor. The LC dismissed the comp on the ground that there was novation brought about by the alteration of the principal conditions of the original obli & the substitution of a news debtor. except in cases expressly mentioned in this Code. The real estate mortgage was evidently taken as additional security for the performance of the contract a. even w/o the knowledge of the debtor. This was accepted by PNB so the attachment was later lifted. The insolvency of the new debtor. Those who put their labor upon or furnish materials for a piece of work undertaken by the contractor have an action against the owner up to the amount owing fr. a person interested in the fulfillment of the obligation pays. However. w/o prejudice to the effects of confusion as to the latter's share. 1281. (3) When. except that if he paid w/o the knowledge or against the will of the debtor. I think there was a typo error in Ma’am Bubbles’ outline. b. cannot compel the creditor to subrogate him in his rights. 1295. the latter to the contractor at the time the claim is made. the debtor what he has paid. 1236. the following shall not prejudice the laborers. 1300. (Classmates. Guanzon. novation In case of active subjective Art. Legal FACTS: Def borrowed fr. not interested in the obligation. Art. shall not revive the action of the latter against the original obligor. the partnership creditor & the person or partnership continuing the business. w/o prejudice to the effects of confusion as to the latter's share. FORMS OF NOVATION: Art. 1835 second paragraph A partner is discharged fr. 1302. guaranty. even w/o the debtor's knowledge. 1237. Art. PNB & this loan was secured by a chattel mortgage on his standing crop. therefore. 1610. Novation w/c consists in substituting a new debtor in the place of the original one. Look at Art. Art. 1629. 1303. such as those arising fr. the liability shall cease one year after the maturity. or when ratification validates acts w/c are voidable. the course of dealing between the creditor having knowledge of the dissolution & the person or partnership continuing the business. stipulation pour atrui General rule: In a novation. 1236. Dualan only undertook either to pay or else allow the land's being sold if the mortgage creditor could not or did not obtain payment fr. How do you resolve? According to commentators. but not w/o the consent of the creditor. Certainly. 1293 talks of expromission (not upon the old debtor's initiative. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation. whether or not he gave his consent.)  Art. e. 1295 talks of delegacion (change at the old debtor's initiative. 1237. 1297. [Balane]  Effect of novation as to accessory obligations Accessory obligations may subsist only insofar as they may benefit third persons who did not give their consent. 1296. & he could not do so in law w/o the creditor's consent. fr.  In both cases. guaranty or penalty. xxx Art. Whoever pays on behalf of the debtor w/o the knowledge or against the will of the latter. resp. accessory obligations are not extinguished. Payment by the new debtor gives him the rights mentioned in articles 1236 & 1237. (2) Renunciation by the contractor of any amount due him fr. to whom partial payment has been made. What is the difference in expromission & delegacion? b. a mortgage. 1303 is an exception to Art. petitioners herein. 1298. Art. the partnership creditor & the person or partnership continuing the business. The novation is void if the original obligation was void. xxx A partnership is discharged fr. 1293. except when annulment may be claimed only by the debtor. & he shall be preferred to the person who has been subrogated in his place in virtue of the partial payment of the same credit. 48979 w/ notice that it was mortgaged. the person causing the loss or injury. Art.  Art. the aggrieved party shall be entitled to recover the deficiency fr. the debtor what he has paid. So there is a conflict. accessory obligations may subsist only insofar as they may benefit third persons who did not give their consent. 1303. since the record is devoid of any evidence of contrary intent. unless there is a stipulation to the contrary. REYES Art. The obligation to discharge the mortgage indebtedness therefore. As soon as a new debtor & creditor agree.g. cannot compel the creditor to subrogate him in his rights. the accesory obligation is extinguished. the guarantors. HELD: By buying the property covered by TCT No. mortgagors are not released. the buyer did not obligated himself to replace the debtor in the principal obligation.. RODRIGUEZ V. Passive Subjective Novation (Substitution of the debtor) Articles effect between  In expromission. If the credit should be payable w/in a term or period w/c has not yet expired. Effect: Art. & (2) such insolvency was either known to the old debtor or of public knowledge. the insurance company for the injury or loss arising out of the wrong or breach of contract complained of. If the new obligation is void. Exception: In an active subjective novation. Cases of expromission are quite rare. may exercise his right for the remainder. novation takes place. 1304. may be made even w/o the knowledge or against the will of the latter. be they guarantors or possessors of mortgages. If the plaintiff's property has been insured. 1296. Subrogation transfers to the person subrogated the credit w/ all the rights thereto appertaining. [Balane] Passive Subjective Novation-1293 & 1295 2. & he has received indemnity fr. This article is subject to the provisions of special laws: (Assignment of Credits & Other Incorporeal Rights) Art. & such agreement may be inferred fr. 1835. subject to stipulation in a conventional subrogation. If the amount paid by the insurance company does not fully cover the injury or loss. it shall last for one year only. 1293) 72 . & the contracting parties should not have agreed upon the duration of the liability. either against the debtor or against third persons. A creditor. he can recover only insofar as the payment has been beneficial to the debtor. the change in the person of the debtor is not upon the initiative of the old debtor. the owner. Art. When the principal obligation is extinguished in consequence of a novation. He may be held liable (1) if the new debtor was already insolvent at the time of the delegacion.)  In expromission. (Art.(1) Payments made by the owner to the contractor before they are due. It could be upon the initiative of the creditor or of the new debtor. the principal debtor when the debt matured. remained on the shoulders of the original debtors & their heirs. Art. any existing liability upon dissolution of the partnership by an agreement to that effect between himself. Nothing else. Effect of Novation Art. 2207. the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. unless the parties intended that the former relation should be extinguished in any event. except that if he paid w/o the knowledge or against the will of the debtor. the original one shall subsist. Whoever pays for another may demand fr. pledgors. the release of the old debtor is absolute (even if it turns out that the new debtor is insolvent. the release of the old debtor is not absolute. Art. In case the assignor in good faith should have made himself responsible for the solvency of the debtor. the time of the assignment if the period had already expired. Art. the intent of the parties must be to release the old debtor.)  In delegacion. the action thereon has prescribed. Obligations are civil or natural. When a right to sue upon a civil obligation has lapsed by extinctive prescription. Art. the estate of the deceased. 1960. Art. but the debtor later voluntarily reimburses the third person. When a testate or intestate heir voluntarily pays a debt of the decedent exceeding the value of the property w/c he received by will or by the law of intestacy fr. Art. 1423-1430. 1423.Art. If the original obligation was subject to a suspensive or resolutory condition. No interest shall be due unless it has been expressly stipulated in writing. 1429. but after voluntary fulfillment by the obligor. 1430. pays a legacy in compliance w/ a clause in the defective will. 1425. the obligor who voluntarily performs the contract cannot recover what he has delivered or the value of the service he has rendered. ESTRADA ANSAY v. the provisions of this Code concerning solutio indebiti. Natural obligations. NDC H. the obligor cannot recover what he has paid. If the borrower pays interest when there has been no stipulation therefor. but one of the intestate heirs. not being based on positive law but on equity & natural law. 1956. the new obligation shall be under the same condition. Art. When. after an action to enforce a civil obligation has failed. 1424. 1155 Art. When w/o the knowledge or against the will of the debtor. Art. DBP v. shall be applied. 1428. Civil obligations give a right of action to compel their performance. VILLAROEL v. it has not been executed in accordance w/ the formalities required by law. they authorize the retention of what has been delivered or rendered by reason thereof. unless it is otherwise stipulated. after the settlement of the debts of the deceased. When a will is declared void bec. or natural obligations. Some natural obligations are set forth in the following articles. 73 . he cannot demand the return of what he has delivered or the payment of the value of the service he has rendered. NATURAL OBLIGATIONS – ARTS. Art. the payment is valid & cannot be rescinded by the payer. a third person pays a debt w/c the obligor is not legally bound to pay bec. CONFESSOR: Art. do not grant a right of action to enforce their performance. the payment is effective & irrevocable. 1299. the defendant voluntarily performs the obligation. as the case may be. 74 .