OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.

REGADO

1. SAGRADA OPEN DE PREDICADORES DEL SANTISIMO  Victims of negligence/their heirs have hoice between an action to
ROSARIO DE FILIPINAS VS NATIONAL COCONUUT enforce civil liability arising from culpa criminal (Art 100 RPC) or
CORPORATION action for quasi-delict Art 2176
 Occupant’s obligation to pay rentals must arise from contracts,  Criminal case against employee driver was prematurely terminated
quasi-contracts, etc. (sources of obligation) due to his death
 If occupant took possession of property without any 6. CAMINOS JR V. PEOPLE
express/implied agreement between hem that rentals must be pad
for use and occupation of property none may be recovered by pre-  Reckless Imprudence: voluntary but without malice, doing/failing to
war owner do an act from which material damage results by reason of
inexcusable lack of precaution on the part of person performing or
2. PEOPLE’S CAR INC. V. CAMMANDO SECURITY ACT failing to perform such act
 Actual damages which was paid by plaintiff to its customer, security  Requisites of reckless imprudence (1) Offender failed to do an act
company is liable to full amount through the negligence of its guard (2) Act voluntary (3) W/o malice (4) Material damage results (5)
during watch hours Inexcusable lack of precaution
 Par 4 limiting liability for damages is by its own terms is applicable  Test : Reasonable foreseeability that harm might result if
only through the negligence of its guards during watch hours commensurate care is not exercised
3. FGU INSURANCE CORP VS. GP SARMIENTO TRUCKING CORP 7. CANGCO V. MANILA RAIL ROAD CO
 In culpa-contractual, mere proof of existence of contract and failure CONTRACTUAL EXTRA-CONTRACTUAL
of its compliance justify prima facie a corresponding right of relief
Liability of masters: based on ere Necessary : some fault attributable to
 Effect of every infraction is to create new duty that is to recompense
presumption of master’s negligence : defendant personally & that last
to one who has been injured by failure of another to observe
requirement utmost diligence paragraph of Art 1903 merely
contractual obligation
establishes a rebuttable presumption
4. LRT VS. NATIVIDAD
Vinculum exists independently of Wrongful or negligence act/omission
 Law requires common carriers to carry passengers safely using breach of voluntary duty when itself which creates vinculum juris
utmost diligence of a very cautious person with due regard for all entering contractual relation
circumstances
Proof of contract and its non- Limit : Moral culpability can be
 In case of death, injury, carrier is presumed to have been at fault,
performance is sufficient to prima directly imputed to persons to be
presumption juris tatum that employer failed to exercise diligence of
facie warrant recovery charged
a good father of a family in the selection and supervision of its
employees 8. CABUGAO V. PEOPLE
 Liability for tory may arise under a contract where tort is that which  Inexcusable lack of precaution : conscious indifference to the
breaches the contract consequences of conduct
 GR: liability of common carrier and contractor : SOLIDARY  Death of an accused pending appeal extinguishes criminal and civil
5. L.G FOODS CORP V. PAGAPONG liability
 Civil liability survives notwithstanding death of accused if same may
 Act or omission causing damage to another may give rise to 2
separate liabilities on part of the offender a) Civil liability ex delicto also be predicated on a source of obligation other than delict
b) independent civil liabilities 9. CEREZO V. TUAZON
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO
 Action based on quasi-delict may proceed independently from
criminal action
 Employer’s liability in an action for quasi-delict not solidary but also
primary and direct
 Employer’s liability if based on delict is merely subsidiary : to hold
employer liable delict, offended party must initiate criminal action
10.MINDANAO TERMINAL AND BROKERAGE SERVICES INC VS
PHOENIX ASSURANCE COMPANY/MCGEE
 Art 1173 CC: If law/contract does not state degree of diligence
which is to be observed in the performance of obligation, that which
is expected of a good father of a family/ordinary diligence shall be
required
11. RAMOS VS CA (INTUBATION)
 Res ipsa loquitur is not available in malpractice suit f only showing
is that the desired result of an operation or treatment was not
accomplished
 Res ipsa loquitur : “Transaction speaks for itself” : fact of an
occurrence of an injury taken with surrounding circumstances may
permit an inference or raise presumption of negligence make out a
plaintiff prima facie case
 Proximate cause: in natural and continuous sequence unbroken by
any efficient intervening cause produces injury without which result
would have not have occurred
 For purposes of allocating responsibility in medical negligence
cases, employer-employee relationship in effect exists between
hospitals and their attending and visiting physicians
 Art 2180: Person accountable not only for his own acts but also for
those of others based on former’s responsibility
 Captain of the Ship doctrine: Head of Surgical team
12. NOGALES VS. CAPITOL MEDICAL CENTER
 Doctrine of apparent authority requisites (1) Hospital/Agent acted in
manner that would lead a reasonable perso to conclude that
individual who was alleged to be negligence was its employee/agent
(2) Act of agent creates appearance of authority + hospital had
knowledge of and acquiesced them (3)Plaintiff acted in reliance
upon conduct of hospital and its agent
 Doctrine of apparent authority is a specie of doctrine of estoppel
 Consent & release forms: Blanket release in favor of hospitals from
any and all claims which includes claims due to bad faith and gross
negligence would be contrary to public policy and thus void
13.PROFESSIONAL SERVICE INC V. AGANA
 An initial act of negligence ripened into a deliberate wrongful act of
deceiving patient : did not inform
 Res Ipsa Loquitur requisites (1) Injury (2) Thing which caused injury
under control and management of defendant (3)Occurrence ordinary
course of things would not have happened if those who had
control/management used proper care (4) Absence of explanation by
defendant
14. CANTRE V GO
 Intent is immaterial in negligence cases because where negligence
exists and is proven, it automatically gives injured party a right of
reparation for damages
15. PHIL HAWK CORP V. LEE
 Foreseeability
 Test of negligence: ordinary reasonable man
16. CERENO V. CA
 Medical malpractice : patient must prove that health care provider
failed to do something which reasonably prudent health care
provider would do/something a reasonably prudent would not have
done
 Best way to prove medical malpractice :opinion of an expert witness
: same neighborhood and same general line of practice
17. NAGUID V. NICDAO
 Person acquitted of criminal charge not necessarily civilly free
because quantum of proof in criminal prosecution is less as
compared to that required for civil liability
 To be completely free, persons acquittal must be based on fact of
reasonable doubt, accused may still be civilly liable since this does
not mean that he didn’t commit act complained of
18. LI V. SOLIMAN
 Informed Consent –physician has the duty to disclose what a
reasonably prudent physician in the medical community in exercise
of reasonable care would disclose to his patient as a course of
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO
treatment so that patient exercising ordinary care for his own welfare
& faced with choice of undergoing proposed treatment/alternative
treatment/none at all.
 4 essential elements : (1) Duty to disclose material risk (2) Failed to
disclose/inadequately disclosed (3) Direct & Proximate cause/result :
failure to disclose (4) Injury by proposed treatment
CHAPTER 2
1. AGCAOILI V. GSIS
 There being a perfected contract of sale, it was the duty of GSIS as
the seller to deliver thing sold in a condition suitable for its
enjoyment by the buyer
 In reciprocal obligations, neither party incurs in delay if the other
does not comply/not ready to comply in a proper manner with what
is incumbent upon him
2. SSS VS MOONWALK
 Requisites in order that the debtor may be in default (1) Obligation is
demandable and already liquidated (2( Debtor delays performance
(3) Creditor requires performance: Judicially or extra-judicially
 Penal clause is an accessory undertaking to assume liability in case
of breach
 Principal obligation may exist without an accessory obligation but an
accessory obligation cannot exists without principal obligation
3. BRICKTOWN DEV’T CORP V. AMOR TIERRA DEV CORP
 Grace period is a right, not an obligation of debtor and when
unconditionally conferred the grace period is effective without
further need to demand either calling for payment of obligation or
honoring his right
4. LORENZO SHIPPING V. BJ MARTHEL
 In determining whether time is of essence n a contract, ultimate
criterion is the actual or apparent intention of parties & before time
may be regarded by court there must be sufficient manifestation
either in contract itself/surrounding circumstances
 When time of delivery is not fixed, time is not of essence of a
contract
 Even where time is of essence, breach of contract in that respect by
one of the parties may be waived by another parties subsequently
treating the contract still in force
5. BPI V. CA
 Requisite of legal compensation (1) Each debtor is bound principally
(2) Both debts consis in sum of money/same kind & quality (3) Two
debts due (4) Liquidated and demandable (5) Iver neither rof them,
there be any retention/controversy commenced by 3P and
communicated in due time to debtor
6. RAQUEL SANTOS V CA
 Mora Solvendi/Debtor’s Fault : Requisites (1) Obligation is
demandale (2) Debtor delays performance (3) Creditor demand
Jud/extrajud
 Debt is liquidated when the amount is known/determinable
7. CORTES V. CA
 Mutual delay of parties cancels out effects of default such that it is as
if no one is guilty of delay
8.PHIL. EXPORT V. EUSEBIO CONSTRUCTION
 Guarany: person called guarantor binds himself t creditor to fulfill
obligation of principal debtor in case LATTER SHOULD FAIL TO
DO SO
 Delay/Non-completion: Caused by the factors imputable to
respondent contractor
9. NPC V. CA
 NPC cannot escape liability from negligence: proximate cause : even
though typhoon was an act of God
 Principle embodied in Act of God doctrine strictly requires act must
be occasioned exclusively by violence of nature and human agencies
are to be excluded from entering into cause of mischief
10. JIMENEZ V. CITY OF MANILA
 Art 2189: Governs liability due to defective streets, public buildins
and other public works
 For liability under Art 2189 CC to attach, control, supervision by
province city municipality is enough
 Duty of Manila to exercise reasonable care to keep market safe for
people frequenting place
 Ordinary precautions could have been done during good weather to
minimize damage
11.NAKPIL & SONS V. CA
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO
 To exempt obligor from act of God requisites [IF-UI!] (1) Cause of
breach : independent of will of debtor (2)Event either unforeseeable
or unavoidable (3)Such as to render impossible for debtor to fulfill
his obligation in a normal manner (4) Debtor: free from
participation/Aggravation
12. SOUTHERN COLLEGE INC V. CA
 Person claiming damages from negligence of another has burden of
proving existence offault/negligence causative of injury or loss :
CLEAR AND CONVINCING EVIDENCE
 Having obtained both building permit and cert of occupancy: Very
least prima facie evidence of regular and proper construction of
building
 Annual maintenance inspection and repair : prima facie evidence of
diligence
13.MINDEX RESOURCES DEVELOPMENT V. MORILLO
 Act of God cannot be invoked to protect a person who has failed to
take steps to forestall possible adverse consequences of loss
 When effect is found to be partly result of person’s participation,
whether active intervention/neglect to act: whole occurrence is
humanized and removed from the rules applicable to acts of God
14. ACE-ARGO DEVELOPMENT CORP V. CA
 Period during which work is suspended due to force majeure does
not justify an extension of term of contract nor was petitioner
justified in refusing to resume work
15. PHILIPPINE COMMUNICATIONS SATELLITE CORP V. GLOBE
TELECOM
 Art 1174 exempts an obligor from liability only of events that are
unforeseeable but also that are foreseeable but inevitable
 Philcomsat and globe have no control over non-renewal of RP US
Agreement
16.SINGUAN V. LIM
 Action to rescind contracts in fraud of creditors : Accion pauliana
(1)Plaintiff asking rescission has credit PRIOR to alienation
although demandable later (2) Debtor made subsequent contract
conveying patrimonial benefit of 3rd person (3) Creditor has no other
legal remedy to satisfy his claim (4) Act being impugned is
fraudulent (5) Third person who received property conveyed it by
onerous title : Accomplice in fraud
17. LIAM-LAW V. OLYMPIC SAWMILL CO
 Usury law now legally non-existent under CB Circular No.905
CHAVES V. GONZALES
 There was a perfected contract of cleaning and servicing of type writer.
 They intended that defendant was to finish it at some future time
although such time was not specified;
 Time for compliance has evidently expired and there being a breach of
contract , it was academic for plaintiff to first petition for court to fix a
period of performance
 Defendant cannot invoke Art 1197 of CC1 for he has virtually admitted
non-performance by returning typewriter that he was obliged to repair in
a non-working condition with essential parts missing.
ENCARNACION V. BALDOMAR
 Defense set up by Lefrado would leave to the sole and exclusive will of
one of the contracting parties (defendants) the validity and fulfillment of
contract of lease within the meaning of Art 1256
 Since the continuance and fulfillment of contract would depend solely
and exclusively upon their free and uncontrolled choce between
continuing paying the rentals or not, completely depriving the owner of
all say in the matter.
 So long as defendants elected to continue the leas by continuing
payment, owner would never be able to discontinue it.
 This course is prohibited by the aforesaid Article of the Civil Code.
ELEIZEGUI V. THE MANILA LAWN TENNIS CLUB
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO
 In view of the clauses however, it cannot be said that there is no
stipulation with respect to the duration of the lease, or that
notwithstanding Art 1581 in connection with Art 1569 can be applied.
 If this were so, it would be necessary to hold that the lessor spoke in
vain.
 . It is evident that the lessors did not intend to reserve to themselves the
right to rescind that which they expressly conferred upon the lessee by
establishing it exclusively in favor of the latter.
 If the lease could last during such time as the lessee might see fit,
because it has been so stipulated by the lessor, it would last, (1) as long
as the will of the lessee that is, all his life; (2) during all the time that he
may have succession, inasmuch as he who contracts does so for himself
and his heirs. (Art. 1257 of the Civil Code.)
 The lease in question does not ,fall within any of the cases in which the
rights and obligations arising from a contract cannot be transmitted to
heirs, either by its nature, by agreement, or by provision of law.
 The only action which can be maintained under the terms of the contract
is that by which it is sought to obtain from the judge the determination of
this period, and not the unlawful detainer action which has been brought-
- an action which presupposes the expiration of the term and makes it the
duty of the judge to simply decree an eviction
PHILIPPINE BANKING CORP V. LUI SHE
 consent of Justina Santos was given freely and voluntarily.
 This is not to say, however, that the contracts are valid.
 To be sure, a lease to an alien for a reasonable period is valid. So is an
option giving an alien the right to buy real property on condition that he
is granted Philippine citizenship.
 But if an alien is given not only a lease of, but also an option to buy, a
piece of land, by virtue of which the Filipino owner cannot sell or
otherwise dispose of his property,21 this to last for 50 years, then it
becomes clear that the arrangement is a virtual transfer of ownership
whereby the owner divests himself in stages not only of the right to enjoy
the land ( jus possidendi, jus utendi, jus fruendi and jus abutendi) but also
of the right to dispose of it ( jus disponendi) — rights the sum total of
which make up ownership.
 If this can be done, then the Constitutional ban against alien landholding
in the Philippines, as announced in Krivenko v. Register of Deeds,22 is
indeed in grave peril.
LIM V. PEOPLE
 It is clear that the agreement exhibit A that the proceeds of sale of
tobacco should be turned over as soon as the same was sold or that the
obligation was immediately demandable as soon as the tobacco was
disposed of.
 Hence Art 1197 of NCC which provides that the courts may fix the
duration of obligaton if it does not fix a period does not apply.
GREGORIO ARANETA INC V. PHIL SUGAR ESTATES
DEVELOPMENT CO LTD
 Article 1197 of the Civil Code involves a two-step process. The Court
must first determine that "the obligation does not fix a period" (or that the
period is made to depend upon the will of the debtor)," but from the
nature and the circumstances it can be inferred that a period was
intended" (Art. 1197, pars. 1 and 2). This preliminary point settled, the
Court must then proceed to the second step, and decide what period was
"probably contemplated by the parties"
 So that, ultimately, the Court cannot fix a period merely because in its
opinion it is or should be reasonable, but must set the time that the parties
are shown to have intended
MILLARE V. HERNANDO
 The second paragraph of Article 1197 is equally clearly inapplicable
since the duration of the renewal period was not left to the will of the
lessee alone, but rather to the will of both the lessor and the lessee.
 Most importantly, Article 1197 applies only where a contract of lease
clearly exists. Here, the contract was not renewed at all, there was in fact
no contract at all the period of which could have been fixed.
 As pointed out by Mr. Justice J.B.L. Reyes in Republic vs. Philippine
Long Distance Telephone,Co.,[[18
 [P]arties cannot be coerced to enter into a contract where no agreement
is had between them as to the principal terms and conditions of the
contract. Freedom to stipulate such terms and conditions is of the
essence of our contractual system, and by express provision of the
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO
statute, a contract may be annulled if tainted by violence, intimidation
or undue influence
 That volition cannot be supplied by a judge and a judge who pretends to
do so, acts tyrannically, arbitrarily and in excess of his jurisdiction.
CHUA V. CA
 lease contract between the parties has already expired.
 The potestative authority of the courts to fix a longer term for a lease
under Art. 1687 of the Civil Code applies only to cases where there is
no period fixed by the parties.
 To the contrary, in this case, the contract of lease provided for a fixed
period of five (5) years from January 1, 1985 to December 31, 1989.
 It is not the province of the court to alter a contract by construction or to
make a new contract for the parties; its duty is confined to the
interpretation of the one which they have made for themselves, without
regard to its wisdom or folly, as the court cannot supply material
stipulations or read into contract words which it does not contain.
 Indeed, Art. 1675 of the Civil Code excludes cases falling under Art.
1673 (which provides among others, that the lessor may judicially eject
the lessee when the period agreed upon or that which is fixed has
expired) from the cases wherein, pursuant to Art. 1687, courts may fix a
longer period of lease.
 The fact that petitioners allegedly made repairs on the premises in
question is not a reason for them to retain the possession of the
premises.
 There is no provision of law which grants the lessee a right of retention
over the leased premises on that ground.
LO CHUA V. CA
 It is settled that if the rent is paid monthly, the lease is on a month-to-
month basis and may be terminated at the end of each month.
 Article 1687 of the Civil Code provides that if the period for the lease
has not been fixed, it is understood to be from year to year, if the rent
agreed upon is annual; from month to month if it is monthly.
 The notice or demand to vacate is not necessary when the unlawful
detainer is based on expiration of the contract of leaseas what obtains
here.
 However, even though a monthly rent is paid, and no period for the
lease has been set, the courts may fix a longer term for the lease after
the lessee has occupied the premises for over a year.
 Thus, the provision contemplates two (2) situations. One, where the
period for the lease has not been fixed but the rent agreed upon is
monthly, in which event the period is understood to be from month to
month. In other words, the law itself fixes the period. Two, where no
period for the lease has been set, a monthly rent is paid and the lessee
has occupied the premises for over a year authorizing the courts to fix a
longer period of lease. In this second situation, both circumstances
mentioned in the first situation also exist and coupled with another
circumstance, i.e., the lessee has occupied the premises for over a
year.The second situation is understood thus: where no period for the
lease has been set and and a monthly rent is paid the law itself fixes the
period as monthly; yet, the circumstance that the lessee has occupied the
premises for over a year warrants the fixing of a longer period by the
courts.
PAY V. VDA. DE PALANCA
 Undeniable : more than 15 years after execution of promissory note---
when this petition was filed
 Art 1179 of CC: “Every obligation whose performance does not depend
upon future or uncertain event or upon a past event unknown to parties is
demandable at once.
 Obligation being due and demandable it would appear that filling of suit
after 15 years was much too late. --- Prescriptive period : 10 years.
GONZALES V. HEIRS OF THOMAS AND PAULA CRUZ
 Hence when the contract of lease/purchase was executed, there was no
assurance that the respondents were indeed the owners of the lot, in what
concept and to what extent.
 Clear intent of the 9th par. Was for respondents to obtain separate and
distinct TCT in their names.
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO
 In a contract of sale title to property passes to vendee upon delivery of
thing sold. In this case, the respondent could not deliver ownership or
title to a specific of a portion of the yet undivided property.
 they have not caused he transfer of TCT to their names, which is a
condition precedent to the petitioner’s obligation
SMITH BELL & CO V. SOTELO MATTI
 At time of execution, parties were not unmindful of the contingency of
US govt not allowing the export of goods nor of the fact hat the other
foreseen circumstances therein stated might prevent it.
 Considering these contracts in light of civil law, we cannot but conclude
that the term which parties attempted to fix is so uncertain that one
cannot just tell whether as a matter of fat, those goods could be brought
to MNL or not.
 Obligee having done all that was in his power, was entitled to enforce
performance of obligation
 It is sufficiently proved in the records that plaintiff has made all the
efforts it could possible be expected to make under the circumstances to
bring the goods in question to manila as soon as possible.
 When time of delivery: not fixed = reasonable time: determined by
circumstances
SECURITY BANK AND TRUST COMPANY V. CA
 Art 22 of CC: No man ought to be made rich out of another’s injury
 Private respondent informed petitioner of drastic increase in construction
 Art 1182 of CC: conditional obligation shall be void if its fulfillment
depends upon the sole will of the debtor, In present case, mutual
agreement, the absence of which petitioner bank relies upon to support
non-liability for increased construction cos is in effet a condition
depending on bank’s sole will
 Petitioner bank derived benefits when private resp completed building.
 To allow petitioner ban to acquire building at price far below its actual
construction cost would undoubtedly constitute unjust enrichment for
bank to the prejudice of the private respondent.
ROMERO V. CA
 Condition : compliance of party : undertake fulfillment of which
demandability of reciprocal resentation of another party
 In the case – vendee: payment & vendor : fulfillment of certain express
warranties (timely eviction of squatters on the property
 Sale: perfected when a person obligates himself, for a price certain to
deliver and to transfer ownership of specified thing/right to another over
which latter agrees.
 In any case: private respondent’s action for rescission is not warranted.
She is not the injured arty. He right of resolution of party to an obligation
under Art 1191 is predicated on breach of faith by party that violates
reciprocity.
 Petitioners have opted to proceed with the sale, neither may petitioner
demand its reimbursement from private respondent nor may private
respondent subject it to forfeiture.
DUCUSIN V. CA
Affirms
 Lease contract expressly stipulates that lessor may terminate the lease
when his children shall need the same, such condition is valid as
happening of such dodition depends not on the lessor but on a third party
RUSTAN PULP & PAPER MILLS INC V. IAC
 There is a cogent basis for private respondent’s apprehension on illusory
resumption of deliveries inasmuch as the prerogative suggests a
condition solely dependent upon will of petitioners
 Petitioners can stop delivery of pulp wood from private respondents if
the supply at plant is sufficient as ascertained by petitioners subject there-
delivery when need arises as determined by the petitioners
 A purely potestative imposition of this character must be obliterated from
the face of contract without affecting the rest of the stipulations
considering that the condition relates to the fulfillment of an already
existing obligation and not its inception.
LIM V DEVELOPMENT BANK OF THE PHILIPPINES
Obligation was not extinguished or discharged
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO
 Art 1186 of CC: Condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment does not apply in this case.
 3 requisites : Constructive fulfillment of suspensive condtion
1. Condition is suspensive
2. Obligor actually prevents fulfillment of condition
3.He acts voluntarily
 Since restructuring agreement was cancelled, it could not have novated or
extinguished petitioner’s loan obligation.
 And in absence of perfected restructuring agreement, there was no
impediment for DBP to exercise its right to foreclose mortgage properties
Penalties and interest rates should be expressly stipulated in writing
 The act of respondent bank in unilaterally changing stipulated interest
rate is violative of principle of mutuality of contracts under 1308 of CC
and contravenes Art 1956 of CC.
UNIVERSAL FOOD CORP V. CA
 Art 1191 provides:
The power to rescind obligations is implied in reciprocal ones, in case one of
the obligors should not comply with what s incumbent upon him.
The injured party may choose between 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 latter should become
impossible.
The court shall decree the rescission claimed unless there be just cause
authorizing the fixing of period
This should be understood without prejudice to the rights of third persons
who have acquired the thing in accordance with Art 1385 and 1388 of
Mortgage law
 Bills of Assignment : reciprocal in nature.
 The petitioner corporation violated Bill of assignments by terminating
services of respondent patentee without lawful and justifiable cause.
 The general rule is that rescission of contract will not be permitted for
slight or casual breach but only for such substantial and fundamental
breach as would defeat the very object of the parties in making
assignment.
 One of the considerations for transfer of use was the undertaking made
by petitioner corporation to employ respondent patentee on a permanent
status, its monthly salary and the right of succession of his heir as priority
in case of his death/disability.
MAGDALENA ESTATE V. LOUIS MYRICK
 Under article 1124 of the Civil Code, however, he may choose
between demanding the full- fillment of the contract or its resolution.
These remedies are alternative and not cumulative, and the petitioner
in this case, having elected to cancel the contract, cannot avail
himself of the other remedy of exacting performance: which can be
approximated only by ordering, as we do now, the return of the
things which were the object of the contract, with their fruits and of
the price, with its interest (article 1295, Civil Code), computed from
the date of the institution of the action.
UP V. DE LOS ANGELES
 In the first place, UP and ALUMCO had expressly stipulated in the
"Acknowledgment of Debt and Proposed Manner of Payments" that,
upon default by the debtor ALUMCO, the creditor (UP) has "the right
and the power to consider, the Logging Agreement dated 2 December
1960 as rescinded without the necessity of any judicial suit."
 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, even without court intervention.
 It is not always necessary for the injured party to resort to court for
rescission of the contract.
 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, being ever subject to scrutiny and review
by the proper court.
 If the other party denies that rescission is justified, it is free to resort to
judicial action in its own behalf, and bring the matter to court.
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO
 Then, should the court, after due hearing, decide that the resolution of the
contract was not warranted, the responsible party will be sentenced to
damages; in the contrary case, the resolution will be affirmed, and the
consequent indemnity awarded to the party prejudiced.
 In other words, the party who deems the contract violated may consider it
resolved or rescinded, and act accordingly, without previous court action,
but it proceeds at its own risk.
 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.
 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.
 Otherwise, 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 final judgment of rescission is rendered when the law itself
requires that he should exercise due diligence to minimize its own
damages
ZULUETA V. MARIANO
 True, the contract between the parties provided for extrajudicial
rescission. This has legal effect, however, where the other party does not
oppose it. Where it is objected to, a judicial determination of the issue is
still necessary.
 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.
ANGELES V. CALASANZ
 Article 1191 is explicit. In reciprocal obligations, either party the right to
rescind the contract upon the failure of the other to perform the
obligation assumed thereunder. Moreover, there is nothing in the law that
prohibits the parties from entering into an agreement that violation of the
terms of the contract would cause its cancellation even without court
intervention.
 The general rule is that rescission of a contract will not be permitted for a
slight or casual breach, but only for such substantial and fundamental
breach as would defeat the very object of the parties in making the
agreement.
 In this case 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 P392.00 the plaintiffs-appellees had already paid
the monthly installments for a period of almost nine (9) years
BOYSAW V. INTERPHIL PROMOTIONS INC
 Those who in the performance of their obligations are guilty of fraud,
negligence or delay, and those who in any manner contravene the terms
thereof, are liable for damages. [Art. 1170, Civil Code].Also: 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. [Part 1,
Art. 1191, Civil Code].
 Novation which consists in substituting a new debtor in the place of the
original one, may be made even without the knowledge or against the
will of the latter, but not without the consent of the creditor. [Art. 1293,
Civil Code,
 Under the law when a contract is unlawfully novated by an applicable
and unilateral substitution of the obligor by another, the aggrieved
creditor is not bound to deal with the substitute.
 The refusal of appellants to accept a postponement without any other
reason but the implementation of the terms of the original boxing
contract entirely overlooks the fact that by virtue of the violations they
have committed of the terms thereof, they have forfeited any right to its
enforcement.
 On the validity of the fight postponement, the violations of the terms of
the original contract by appellants vested the appellees with the right to
rescind and repudiate such contract altogether.
PILIPINAS BANK V. IAC
 A contractual provision allowing "automatic rescission" (without prior
need of judicial rescission, resolution or cancellation) is VALID, the
remedy of one who feels aggrieved being to go to Court for the
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO

cancellation of the rescission itself, in case the rescission is found they have been entered into by the
unjustified under the circumstances. defendant without the knowledge and
 In the instant case there is a clear WAIVER of the stipulated right of approval of the litigants or of
"automatic rescission," as evidenced by the many extensions granted competent judicial authority;
private respondents by the petitioner. 5. All other contracts specially
 In all these extensions, the petitioner never called attention to the proviso declared by law to be subject to
rescission.
on "automatic rescission."

ONG V. CA Contract to Sell Contract of Sale

Art 1380
 remedy granted by law to the
contracting parties and even to
third persons, to secure the
reparation of damages caused to
them by a contract, even if this
should be valid, by restoration of
things to their condition at the
moment prior to the celebration
of the contract.
 It implies a contract, which even
if initially valid, produces a
lesion or a pecuniary damage to
someone.
rescission under Article 1383 is a
subsidiary action limited to cases of
rescission for lesion under Article
1381 of the New Civil Code
1. Entered into by guardians
2. Those agreed upon in
representation of absentees
3. Undertaken in fraud of creditors
when the latter cannot in any manner
collect the claims due them
4. Refer to things under litigation if
Art 1191
 Refers to rescission applicable to
reciprocal obligations.
Reciprocal obligations are those
which arise from the same cause,
and in which each party is a
debtor and a creditor of the
other, such that the obligation of
one is dependent upon the
obligation of the other.
 They are to be performed
simultaneously such that the
performance of one is
conditioned upon the
simultaneous fulfillment of the
other
Resolution is a principal action
which is based on breach of a party
ownership is, by agreement, reserved the title to the property passes to the
in the vendor and is not to pass to the vendee upon the delivery of the thing
vendee until full payment of the sold
purchase price
payment of the purchase price is a ownership is transferred to the buyer
positive suspensive condition right upon its execution
In order for novation to take place, the concurrence of the following
requisites :
(1) there must be a previous valid obligation;
(2) there must be an agreement of the parties concerned to a new contract;
(3) there must be the extinguishment of the old contract; and
(4) there must be the validity of the new contract.[
 petitioner is a builder in bad faith. He introduced the improvements on
the premises knowing fully well that he has not paid the consideration of
the contract in full and over the vigorous objections of respondent
spouses.
FIL-ESTATE GOLF AND DEVELOPMNET INC V. VERTEX SALES
AND TRADIG INC
 This was a substantial breach of their contract that entitles Vertex the
right to rescind the sale under Article 1191 of the Civil Code.
 Vertex already enjoyed the rights a shareholder can exercise but the
enjoyment of these rights cannot suffice where the law, by its express
terms, requires a specific form to transfer ownership.
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO
GOTESCO PROPERTIES INC V. FAJARDO
 Sps. Fajardo’s right to rescind
 In a contract to sell, the seller's obligation to deliver the corresponding
certificates of title is simultaneous and reciprocal to the buyer's full
payment of the purchase price
 Clearly, the long delay in the performance of GPI's obligation from date
of demand on September 16, 2002 was unreasonable and unjustified.
 It cannot therefore be denied that GPI substantially breached its contract
to sell with Sps. Fajardo which thereby accords the latter the right to
rescind the same pursuant to Article 1191 of the Code
 Rescission does not merely terminate the contract and release the parties
from further obligations to each other, but abrogates the contract from its
inception and restores the parties to their original positions as if no
contract has been made.
REYES V. ROSSI
 A prejudicial question generally comes into play in a situation where a
civil action and a criminal action are both pending, and there exists in the
former an issue that must first be determined before the latter may
proceed, because howsoever the issue raised in the civil action is
resolved would be determinative juris et de jure of the guilt or innocence
of the accused in the criminal case.
 Article 1191 of the Civil Code recognizes an implied or tacit resolutory
condition in reciprocal obligations. The condition is imposed by law, and
applies even if there is no corresponding agreement thereon between the
parties.
 The explanation for this is that in reciprocal obligations a party incurs in
delay once the other party has performed his part of the contract; hence,
the party who has performed or is ready and willing to perform may
rescind the obligation if the other does not perform, or is not ready and
willing to perform.
 However, until the contract is rescinded, the juridical tie and the
concomitant obligations subsist.
 Considering that the contracts are deemed to be valid until rescinded, the
consideration and obligatory effect thereof are also deemed to have been
validly made, thus demandable. Consequently, there was no failure of
consideration at the time when the subject checks were dishonored.
SANDOVAL V. PMMA
 THE FACTUAL CIRCUMSTANCES HOWEVER RENDERED
MUTUAL RESTITUTION IMPOSSIBLE.
 Both RTC and CA found that petitioner delivered life boats to Rosario.
Petitioners never authorized him to receive life boats
 Hence as the delivery to Rosario was invalid, it was as if respondent ever
received the life boats. As it never reeived the object of contract, it
cannot return the object (wiity besh)
 Unfortunately, the same thing cannot be said of the petitioners. They
admit that they received a total amount of P1,516,680, for this reason
they should return the same
EDS MANUFACTURING V. HEALTHCHECK
 The General rule is that rescission (resolution) of contract will not be
permitted for a slight casual breach but only for such substantial and
fundamental violations as would defeat the very object of parties in
making the agreement
 Rescission referred in Art 1191 more appropriately referred to as
resolution is on the breach of faith by one of parties which is violative of
the reciprocity between them
 In the present case, it is apparent that HCI violated its contract with EMI
to provide medical services to its employees in a substantial way.
 However although a ground exists to validly rescind the contract between
the parties, it appears that EMI failed to judicially rescind the same
 In absence of stipulation, a party cannot unilaterally and extrajudicially
rescind a contract. A judicial or notarial act is necessary before a valid
rescission can take place.
 Even if Art 1191 were applicable, the petitioner would still not be
entitled to automatic rescission The right to resolve reciprocal obligations
is deemed implied in case one of the obligor shall fail to comply with
what is incumbent upon him. But that right must be invoked judicially.
 EMI has not rescinded contract at all. Despite of EM’s announcement it
failed to surrender HMO cards of its employees although it was reqired
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO

by the agreemet and allowed them to continue using them beyond date of in the vendor and is not to pass to the vendee upon the delivery of the thing
rescission. vendee until full payment of the sold
 Continued use by them of their privileges under contract with apparent purchase price
consent of EMI belies any intention to cancel or rescind it. payment of the purchase price is a ownership is transferred to the buyer
PLANTERS DEVELOPMENT BANK V. LOPEZ positive suspensive condition, failure right upon its execution
of which is not breach, casual or non-payment of price is a negative
 Planters Bank is estopped from opposing spouses Lopez deviation from serious but a situation that prevents
construction project ; resolutory condition
obligation of vendor to convey title
 Inaction or silence may under some circumstances amount to a from acquiring an obligatory force.
misrepresentation, so as to raise equitable estoppel,  Breach contemplated in 1191 is the obligor’s failure to comply with an
 Principle of equitable estoppel prevents Planters Bank from raising the obligation already extant and not a failure of a condition to render
spouses Lopez’s violation of loan agreement. binding that obligation.
 Planters Bank only committed slight/casual breach of contract.  Failure to pay is not even breach but an event that prevents vendor’s
obligation to convey title from acquiring binding force.
 Breach is not sufficiently fundamental to defeat object of parties in
entering into loan agreement. BARREDO V. LEANO
 Released P3,500,000 out of P4,200,000 loan.(16.66% of actual loan)  Leano spouses merely bound themselves to assume which they actually
(85% building was completed) did, the obligations of Barredo spouses with SSS and Apex.
RELIANCE V IAC  Nowhere in the agreement was it stipulated that the sale was conditioned
upon their full payment of loans with SSS and Apex.
 Paez failed to make even a single delivery of manganese ores to stockpile
yard. There’s no mining operation at all  To include full payment of obligations with SSS and Apex as a condition
would be unnecessarily stretch and put a new meaning to the provisions
 In reciprocal obligations, power to rescind or resolve is given to the
of the agreement
injured party.
 BUT EVEN IF WE CONSIDER PAYMENT OF MORTGAGE
 Rescission of contract requires the parties to restore to each other what
AMORTIZATION TO SSS AND APEX AS A CONDITION ON
they have received by reason of contracts. Rescission has the effect of
WHICH THE SALE IS BASED, RESCISSION WOULD NOT BE
abrogating contracts in all parts.
AVAILABLE
 If Barredo spouses were really protective of their reputation, and credit
RIVERA V. DEL ROSARIO standing, they should have sought the consent or at least notified SSS and
ART 1383 ART 1191 Apex of the assumption by the Leano spouses of their indebtedness.
Subsidary action limited to cases of Resolution : principal action that is
lesion under Art 1381 based on breach of a party VILLANUEVA V. ESTATE OF GERARDO GONZAGA
 Kasunduan reveals that it is in the nature of contract to sell as  In a contract to sell, title remains with the vendor and does not pass on
distinguished from contract of sale vendee until the purchase price is paid in full.
Contract to Sell Contract of Sale  Payment of purchase price is a positive suspense condition. Failure to
ownership is, by agreement, reserved the title to the property passes to the pay price agreed upon is not mere breach, casual or serious but a
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO
situation that prevents obligation of vendor to convey title from acquiring
obligatory force.
 This is entirely different from contract of sale, where non-payment of
price is a negative resolutory condition
 MOA : is a conditional contract to sell. Ownership over lots shall not
pass to petitioners until full payment of purchase price. Petitioners
obligation to pay, in turn is conditioned upon the elease of lots from
mortgage with PNB to be secured by respondents.
 Although there was no express provision regarding reserved ownership
until full payment of purchase price,the intent of the parties in this regard
is evident in the provision that that deed of absolute sale shall be
executed only when lots have been released from mortgage and balance
paid by petitioners .
 Since ownership has not been transferred, no further legal action need
have been taken by respondents except an action to recover possession in
case petitioners refuse to voluntarily surrender lots. .
CO V. CA
Art 1191:
(1) Power to rescind obligations is implied in reciprocal ones in case one of
the obligors should not comply with what is incumbent upon him
(2) The injured party may choose between fulfillmen and rescission of
obligation, with payment of damages in either case. He may also seek
rescission even after he has chosen fulfillment if latter should be impossible
(3) The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period
(4) This is understood to be without prejudice to the rights of third person
who have acquired the thing in accordance with Art 1385 and 1388 and
Mortgage law
 Certainly, non-payment of purchase price constitutes a very good reason
to rescind a sale for it violates the very essence of contract of sale
 Non-payment of purchase price is a resolutory condition for which the
remedy of either rescission or specific performance under Art 1191
 By law, vendee is bound to accept delivery and to pay price of thing sold
at time and place stipulated in the contract .
 In the case at bench, petitioner’s obligation to pay arose as soon was deed
of sale was registered and a clean title was issued. However, petitioner
justifies non-payment on breach of several stipulations of contract
 In this context, respondents should not be allowed to rescind contract
where they themselves did not perform their essential obligation
thereunder. Respondents : in bad faith
IRIGAN V. COURT OF APPEALS
 Art 1592: In the sale of immovable property, even though it may have
been stipulated that upon failure to pay the price at the time agreed upon
the rescission of contract shall of right take place, the vendee may pay
even after the expiration of period, as long as no demand for rescission of
contract has been made upon him either judicially or by notarial act.
After the demand, the court may no grant him new term,
 Art 1592 requires the rescinding party to serve judicial or notarial act of
his intent to resolve the contract
 Clearly a judicial and notarial act is necessary before a valid rescission
can take place, whether or not automatic rescission has been stipulated.
 In our view, even if Art 1191 were applicable petitioner would still not
be entitled to automatic rescission.
 Right to resolve reciprocal obligations is deemed implied in case one of
the obligors fail to comply with what is incumbent upon him; but right
must be invoked judicially.
SURIA V. IAC
 Art 1191 on reciprocal obligations is not applicable under the facts of this
case.
 Art 1383 provides : “Action for rescission is subsidiary; it cannot be
instituted except when party suffering damage has no other legal means
to obtain reparation of the same.
(J.B.L REYES OPINION IN UNIVERSAL FOOD CORP)
The rescission on account of breach of stipulation is not predicated on
injury to economic interest of party plaintiff but on the breach of faith by
the defendant that violates the reciprocity between the parties.
It is not in subsidiary action, and under Art 1191 may be scanned without
disclosing anywhere that action for rescission thereunder is subordinated
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO
on anything other than the culpable breach of his obligation by the
defendant.
This rescission is principal action retaliatory in character; it being
unjust that the party be held bound to fulfill his promises when the other
violates his.
On the contrary, recession by reason of lesion or economic prejudice, the
cause of action is subordinated to the existence of prejudice because its
raison d’etre as well as the measure of right to rescind
Hence when defendant makes good the damages caused, the action
cannot be maintained or continued as expressly provided in Art 1383and
1384. (Limited to those enumerated in Art 1381)
 By a contract of sale: vendor obliges himself to transfer ownership of and
to deliver a determinate thing to buyer who in turn, is obliged to pay a
price certain in money or its equivalent.
 The breach of obligation is not with respect to contract of sale but in the
obligation created by mortgage contract.
 Remedy of rescission is not a principal action retaliatory in character but
becomes a subsidiary one, which by law is available only I absence of
any other legal remedy.
 Foreclosure here is not only a remedy accorded by law but is a specific
provision found in the contract of parties.
 (Remedy of sale with mortagage) : Foreclosure and not Art 1191
JACINTO V. KAPARAZ
 Private respondents unqualifiedly bound themselves to execute the final
deed of sale “as soon as the settlement or patition of estate of deceased
Narcisa R. Kaparaz shall have been consummated and effected but not
latter than March 31,1967 and only upon full payment of unpaid portion
of purchase price.
 Private respondents did not reserve unto themselves the ownership of
property until full payment of unpaid balance of P1,000.
 There is no stipulation giving the private respondents the right to
unilaterally rescind the contract the moment when vendee fails to pay
within a fixed period.
 Even if we apply Art 1191, our decision would still be for the petitioners.
It is not denied that petitioners made 2 payments in the sums of P200 and
P300 at time when what remained unsettled under the agreement was
only P400.
 Private respondents neither complained of delay in these payments or
rejected the application to their account. They were undoubtedly
benefited by application because it either satisfied their account or
correspondingly reduced it.
CENTRAL BANK OF THE PHILIPPINES VS CA
 Mere fact of insolvency of debtor is never an excuse for the
nonfulfillment of an obligation but instead it is taken as a breach of
contract by him.
 Alleged discovery of Island Savings Bank of overvaluation of loan
collateral cannot exempt it from complying with its reciprocal obligation
to furnish entire loan It is their oblation to investigate the existence and
valuation of properties being offered as loan security.
 Since Island Savings Bank was in default in fulfilling its reciprocal
obligation under their loan agreement, under Art 1191, Tolentino may
choose between specific performace or rescission with damages in either
case.
 But since Island Savings Bank is now prohibited from doing business, we
cannot grant specific performance. Rescission is the only alternative
remedy left.
 Art 1192 provides that in case both parties have committed a breach of
their reciprocal obligations, the liability of the first infractor shall be
equitably tempered by the courts.
 Liability of Island Savings Bank for damages in not furnishing entire
loan is offset by the liability of Tolentino for damages in form of
penalties and subcharges for not paying overdue debt.
YAO v. MATELA
 Considering all the discrepancies, conclusiveness of said documents fall
when arrayed against the pieces of evidence produced by spouses Yao.
 However, we find that spouses Yao likewise failed to comply with their
undertakings
 They refused to pay balance agreed upon despite demands, justifying
such by reason of the abandonment and defects of project
 Evidently both parties in this case breached their respective obligations.
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO
 The law does not relieve party from effects of unwise, foolish, or
disastrous contracts entered into with full awareness of what he was
doing and entered into and carried out in good faith.
 Art 1192: In case both parties have committed a breach of obligation, the
liability of 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.
 Losses incurred by parties will come, as far as Matela is concerned in
form of alleged unpaid balance For the latter, the losses that they will
bear is the cost of repairing the defects of project. We considered the
amount of P4,699,610.93 which Matela has received as sufficient
payment for his services and materials used in the project
RONQUILLO V. CA
 Clearly, by express term of compromise agreement and the decision
based upon it, the defendants obliged themselves their obligation
individually and jointly.
 Term individually = “collectively” “separately” “distinctively” or
“severally” ; undoubtedly it creates a several obligation
 A several obligation is one by which one individual binds himself to
perform the whole obligation
MALAYAN INSURANCE CO INC V. CA
 Sio Choy liable as owner of ill fated jeep pursuant to Art 2184
 2184: owner solidarily liable with driver if the former could have used
due diligence to prevent misfortune
 San Leon Rice Mill is liable for being the employer of the driver under
2180
 2180: employers shall be liable for damages caused by employees and
household helpers acting within their assigned task
 Sio Choy and San Leon Rice Mill are the principal tortfeasors who are
primarily liable to respondent Vallejos
 While it is true that where the insurance contract provides for indemnity
against liability to third persons, such third persons can directly sue the
insurer.
 However, directly liability of insurer under indemniy contract against
liability does not mean that insurer can be held solidarily liable with
insured and/or third parties found at fault
 Subrogation is a normal incident of insurance contracts
 Art 1217 :
Payment made by one of the solidary debtors extinguishes obligation. If 2 or
more solidary debtors offer to pay, the creditor may choose which to accept
He who made payment may claim from his co-debtors only the share which
corresponds to each, with the interest of payment made. If payment is made
before the debt is due, no interest for intervening period may be demanded
RIZAL COMMERCIAL BANKING CORP V. CA
 ART 1207 : Where an obligation expressly states a solidary liability, the
concurrence of two or more creditors or two or more debtors in one and
the same obligation implies that each one of the former has a right o
demand and that each one of the latter is bound to render the entire
compliance with the prestation
 Art 1216: The creditor may proceed against any one of the solidary
debtors or some or all of them simultaneously
 There exist a Comprehensive Surety Agreement between RCBC and
respondent Ching ---liability binds Ching as he is bou by the said
contract
 SEC injuctive order can not effect a suspension of payment of respondent
Surety’s due and demandable obligation, it being clear therefrom that the
rehabilitation receivers were limited to “taking custody and control over
all existing assets and property of PBM
QUIOMBING V. CA
Art 1212: Each one of the solidary creditors may do whatever may be useful
to the others but not anything which may be prejudicial to the latter
Art 1214: Debtor may pay any of the solidary creditors; but if any demand,
judicial or extrajudicial what has been made by any one of them, payment
should be made to him
Tolentino:::
Joint Obligation Solidary Obligation
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO

Each debtor is liable only for the Each debtor is liable for the entire  “in his personal capacity” (x) affect liability, with or without it, he is
proportionate part of debt and each obligation and each creditor is primarily liable as a co-maker
creditor is entitled only for a entitled to demand the whole  Change of name (x) New Corp : It is the same corp with a different
proportionate part of credit obligation name, no change in its property, rights and liability
Creditor can recover only his share of Each creditor can enforce the entire
INCIONG JR. V. CA
obligation obligation and each debtor is obliged
to pay in full  It should be noted however that petitioner signed the promissory note as
a solidary co-maker and not as a guarantor
Active Solidarity
 A solidary or joint and several obligation is one which each debtor is
 Question of who should sue was a personal issue between Quiombing
liable for the entire obligation and each creditor is entitled to demand the
and Biscocho in which the spouses Saligo has no right to interfere
whole obligation
 It was not necessary for both Quiombing and Biscocho to file complaint,
 Art 2047: by guaranty, a person called as guarantor binds himself to the
it will be a useless formality
creditor to fulfill the obligations of the principal debtor in case the latter
 Art 1212: Each one of the solidary creditors may do whatever may be should fail to do so .
useful to the others but not anything which may be prejudicial to the
 If a person binds himself solidarily, with the principal debtor, the
latter
provision of Sec 4, Chapt 3, Title I of this book shall be observed
 Art 1214: Debtor may pay any of the solidary creditors; but if any
Guarantor Solidary Debtor
demand, judicial or extrajudicial what has been made by any one of
them, payment should be made to him Binds himself I solidum with the Two or more debtors in one and the
principal debtor under the provisions same obligation, the presumption is
 If Quiombing eventually collects the amount due from solidary debtors, of 2nd par does not become solidary that the obligation is join so that each
Biscocho may later claim his share thereof, that decision is for him alone co-debtor to all intents and purposes of the debtors is liable only for a
to make proportionate part of debt. There is
REPUBLIC PLANTERS BANK V. CA solidary liability only when
Negotiable instruments law : persons who write their names on the face of a obligation expressly so states when
promissory note are makers and are liable as such. By signing the notes, law so provides or when nature of
maker promises to pay to order of the payee or any holder obligation so requires
Change in name (x) change in liability Outside liability, he assumes to pay No other rights than that bestowed
the debt before the property of upon him by Sec 4, Chapt 3 Title I,
“I”,”We” Either of Us” promise to pay = solidarily liable principal debtor has been exhausted Book IV of CC
 Negotiable instruments law : persons who write their names on the face retains all the other rights, actions
of a promissory note are makers and are liable as such. By signing the and benefits which pertain to him
notes, maker promises to pay to order of the payee or any holder  Promissory note involved expressly states that three signatories are
 Fermin: one of the makers jointly and severally liable, any one, some or all of the may be proceeded
against the entire obligations
 “I promise to pay” = Joint & Severally :: Solidarily liable
TIU V CA
 In this case, solidary liability is even made clear by the words “Joint and
several describing unconditional promise to pay”
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO
 George Tiu never signed the receipts nor received any money from
appellant Go while Joaquin Tiue signed and received he money for and
in behalf of Rosalina
 There is solidary obligation only when obligation expressly so states or
when law or nature of obligation requires solidarity(Art 1207)
 No truth in the allegation that George and Joaquin Tiu admitted that they
are jointly and solidarily liable for said amount
 Only Rosalina Tiu received monies
 (Un Fak Leang v Nigurra) admission of two debtors in their brief that
their liability in the contract is a solidary one does not convert the joint
character of their obligation as appearing in the contract, for what
determines the nature of obligation is the tenor of the contract itself, not
the admission of parties.
CEMBRANO V. CITY OF BUTUAN
HELD: NO
 Payment made by debtor to person of the creditor or to one authorized by
the law to receive it extinguishes the obligation
 When payment is made to wrong party, obligation is not
extinguished as to the creditor who is without fault or negligence
even if debtor acted in utmost good faith and by mistake as to the
person of the creditor or through error induced by fraud of a third
person
 In general—payment in order to be effective to discharge an obligation
must be made to proper person
 Proper person = obligee / its authorized agent
 When there is a concurrence of several creditors or of several debtors or
of several creditors and debtors in one and the same obligation, it is
presumed that the obligation is joint and not solidary.
 The most fundamental effect of joint divisible obligations is that
each creditor can demand only for the payment of his proportionate
share of the credit, while each debtor can be held liable only for the
payment of his proportionate share of the debt.
 It necessarily follows that a joint creditor cannot act in representation of
the others.
 Neither can a joint debtor be compelled to answer for the liability of the
others. The pertinent rules are provided in Articles 1207 and 1208 of the
Civil Code.
REPUBLIC GLASS CORP V. QUA
 Payment of the entire obligation by one or some of the solidary debtors
results in a corresponding obligation of the other debtors to reimburse the
paying debtor.
 Contrary to RGC and Gervels claim, payment of any amount will not
automatically result in reimbursement. If a solidary debtor pays the
obligation in part, he can recover reimbursement from the co-debtors
only in so far as his payment exceeded his share in the obligation a
solidary debtor pays an amount equal to his proportionate share in the
obligation, then he in effect pays only what is due from him
 If the debtor pays less than his share in the obligation, he cannot
demand reimbursement because his payment is less than his actual
debt.
 No novation of the Agreements. The parties did not constitute a new
obligation to substitute the Agreements.
 There was also no showing of complete incompatibility in the manner of
payment of the parties obligations. Contrary to the Court of Appeals
ruling, the mode or manner of payment by the parties did not change
from one for the entire obligation to one merely of proportionate share.
 The creditors, namely Metrobank and PDCP, merely proceeded against
RGC and Gervel for their proportionate shares only
 This preference is within the creditors discretion which did not
necessarily affect the nature of the obligations as well as the terms and
conditions of the Agreements.
 A creditor may choose to proceed only against some and not all of the
solidary debtors. The creditor may also choose to collect part of the debt
from some of the solidary debtors, and the remaining debt from the other
solidary debtors.
ONGKEKO V. BPI EXPRESS CARD CORPORATION
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO
 Petitioner's liability shall be extinguished only when the obligations are
fully paid and satisfied.
 terms and conditions of his undertaking are unambiguous and well
defined; there is no room for any interpretationonly application. Given
that Lodovica reneged on her obligations covered by the credit card
account, petitioner is, therefore, liable.
PH CREDIT CROP V CA
Solidary Joint
each of the debtors is liable for the each debtors is liable only for a
entire obligation, and each of the proportionate part of the debt, and
creditors is entitled to demand the the creditor is entitled to demand
satisfaction of the whole obligation only a proportionate part of the credit
from any or all of the debtors. from each debtor.
solidary obligations cannot be inferred lightly. They must be positively and
clearly expressed
A liability is solidary only when the obligation expressly so states, when the
law so provides or when the nature of the obligation so requires
 We should stress that respondents obligation is based on the judgment
rendered by the trial court.
 Where there is a conflict between the dispositive part and the opinion of
the court contained in the text or body of the decision, the former must
prevail over the latter on the theory that the dispositive portion is the
final order, while the opinion is merely a statement ordering nothing.
 Hence the execution must conform with that which is ordained or
decreed in the dispositive portion of the decision.
 The final judgment, which superseded the action brought for the
enforcement of said contract, declared the obligation to be merely joint,
and the same cannot be executed otherwise.
 It would be the height of inequity if we allow judgment obligors to
shoulder entire monetary judgments when their legal liabilities are
limited only to their proportionate shares in the entire obligation.
SMITH BELL & CO V CA
 Absence of Solidary Liability: There is a solidary liability only when
the obligation expressly so states, or when the law or the nature of
the obligation requires solidarity. The Insurance Code is quite clear
as to the purpose and role of a resident agent. Such agent, as a
representative of the foreign insurance company, is tasked only to
receive legal processes on behalf of its principal and not to answer
personally for any insurance claims.
 Not Real Party - In – Interest: Lastly, being a mere agent and
representative, petitioner is also not the real party - in - interest in
this case.
HERNANDEZ V. DOLOR
 Hernandez spouses are solidarily liable.
 Article 2180… employers shall be liable for the damages caused by
their employees and household helpers acting within the scope of
their assigned tasks, even thought eh former are not engaged in any
business or activity
 Article 2176. Whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is governed
by the provisions of this Chapter
 While the above provisions do not expressly provide for the solidary
liability, they should be read in consonance with Article 2180 – one
can be liable for the acts or omission of another whom he is
responsible for, meaning that an employer is accountable for the
actions of his employees. Article 2194 categorically states that
responsibility of two or more persons who are liable for quasi-delict
is solidary.
 SC held that there exists an employer-employee relationship because
by agreeing to the Hernandez, there would be a villation of the
Public Service Law and we are going to place the riding public at the
mercy of reckless and irresponsible drivers because most drivers are
in no position to pay for damages when accidents occur.
STRONGHOLD INSURANCE COMPANY INC V. REPUBLIC ASAHI-
GLASS CORP
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO

 As a general rule, the death of either the creditor or the debtor does not
extinguish the obligation.
 Obligations are transmissible to the heirs, except when the transmission
is prevented by the law, the stipulations of the parties, or the nature of the
obligation.
 Only obligations that are personal or are identified with the persons
themselves are extinguished by death.
 The participating bank’s obligation under the letter of credit are solidary
with respondent Maynilad in that it is a primary, direct, definite and an
absolute undertaking to pay and is not conditioned on the prior
exhaustion of the debtors assets.
 These are the same characteristics of a surety or solidary obligor. And
being solidary, the claims against them can be pursued separately from
and independently of the rehabilitation case.

 Hence, his death did not result in the extinguishment of those obligations Irrevocable Letter of Credit Guarnatee
or liabilities, which merely passed on to his estate. Undertakes a primary obligation. Guarantors obligation is
merely collateral and arises
 Death is not a defense that he or his estate can set up to wipe out the Engagement by bank or other persons made at
the request of a customer that issuer shall only upon default of person
obligations under the performance bond. Consequently, Stronghold as
honor drafts or other demands of payment primarily liable
surety cannot use his death to escape its monetary obligation under its
performance bond. upon compliance with conditions specified in
credit
TIU HIONG GUAN V. METROPOLITAN BANK TRUST COMPANY
Insures seller payment of a definite amount used to essentially insure a
 Petitioners should be held liable for their unpaid obligation of
upon the presentation of documents buyer or seller from loss or
 liability of a surety is determined strictly on the basis of the terms and damage due to
conditions set out in the surety agreement." nonperformance by the
 Solidary liability is one of its primary characteristics... creditor may... other party in a contract.
proceed against any one of the solidary debtors or some or all of them Commitment by issuer that the party in whose sum is only paid if the
simultaneously."[8] Thus, respondent may proceed against Sunta alone or favor it is issued and who can collect upon it opposing party does not
some or all of petitioners herein. will have his credit against the applicant of fulfill the stipulated
 Suretyship arises upon the solidary binding of a person deemed the letter, duly paid the amount specified in the obligations under the
surety with the principal debtor, for the purpose of fulfilling an letter contract. This can be used
obligation... merely an accessory x x x to a principal obligation... Absolute undertakings to pay the money to essentially insure a buyer
advanced or the amount for which credit is or seller from loss or
 surety becomes liable to the debt and duty of the principal obligor even damage due to
without possessing a direct or personal... interest in the obligations given on the faith of instrument
nonperformance by the
constituted by the latter other party in a contract.
MWSS V. DAWAY Primary Obligation Accessory Obligation
 The prohibition under Sec 6 (b) of Rule 4 of the Interim Rules does not  What distinguishes letters of credit from other accessory contracts is the
apply to the the standby letter of credit issued by the bank as the former engagement of issuing bank to pay the seller once the draft or other
prohibition is on the enforcement of claims against guarantors or sureties required shipping documents are presented to it
of the debtors whose obligations are not solidary with the debtor.
 Banks obligation are solidary with the respondent Maynilad in that it’s
 Sec 6 (b) of Rule 4 of Interim Rules does not enjoin the enforcement of primary, direct, definite and an absolute undertaking to pay and is not
all claims against guarantors and sureties but only those claims against conditioned on the prior exhaustion of debtor’s assets.
guarantors and sureties who are NOT solidarily liable with the debtor
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO
 These are the same characteristics of a surety or solidary obligor
 Being solidary, the claims against them can be pursued separately from
and independently of rehabilitation case
 Being a solidary obligation, letter of credit is exclude from the
jurisdiction of the rehabilitation court and therefore in enjoining
petitioner from proceeding against Standby Letters of Credit to which it
had clear right under the law and the terms of the said Standby Letter of
Credit.
GREAT ASIAN SALES CENTER CORP V. CA
 There is no iota of doubt whatsoever about the purpose of the two board
resolutions, and about the authority of Arsenio to act and sign for Great
Asian. The second board resolution even gave Arsenio... full authority to
agree with Bancasia on the terms and conditions of the discounting line.
 Significantly, the two board resolutions specifically refer to Bancasia as
the financing institution from whom Great Asian will secure the loan
accommodation or discounting line.
 Armed with the two board resolutions, Arsenio signed the Deeds of
Assignment selling, and endorsing, the fifteen checks of Great Asian to
Bancasia.
 On the face of the Deeds of Assignment, the contracting parties are
indisputably Great Asian and Bancasia as the names of... these entities
are expressly mentioned therein as the assignor and assignee,
respectively.
 Great Asian claims that Arsenio signed the Deeds of Assignment in his
personal capacity because Arsenio signed above his printed name, below
which was the word "Assignor", thereby... making Arsenio the assignor.
 The assignor is undoubtedly Great Asian, represented by its Treasurer,
Arsenio.
 Arsenio did exactly what the board of directors of Great Asian directed
and authorized him to do
 Arsenio signed the Deeds of Assignment as agent and authorized
signatory of Great Asian under an authority expressly granted by its
board of directors.
 The explicit with recourse stipulation against Great Asian effectively
enlarges, by agreement of the parties, the liability of Great Asian beyond
that of a mere endorser of a negotiable instrument.
 The exercise by Bancasia of its option to sue for breach of contract under
the Civil Code will not leave Great Asian holding an empty bag. Great
Asian, after paying Bancasia, is subrogated back as creditor of the
receivables. Great Asian can then proceed against the... drawers who
issued the checks.
 Tan Chong Lin, the President of Great Asian, is being sued in his
personal capacity based on the Surety Agreements he signed wherein he
solidarily held himself liable with Great Asian for the payment of its
debts to Bancasia. The Surety Agreements contain the following...
common condition:
PNB v. Independent Planters Association Inc
 It is now settled that the quoted Article 1216 grants the creditor the
substantive right to seek satisfaction of his credit from one, some or all of
his solidary debtors, as he deems fit or convenient for the protection of
his interests;
 and if, after instituting a collection suit based on contract against some or
all of them and, during its pendency, one of the defendants dies, the court
retains jurisdiction to continue the proceedings and decide the case in
respect of the surviving defendants.
 It is crystal clear that Article 1216 of the New Civil Code is the
applicable provision in this matter.
 Section 6, Rule 86 of the Revised Rules of Court cannot be made to
prevail over Article 1216 of the New Civil Code, the former being
merely procedural, while the latter, substantive.
UNIVERSAL MOTORS CORP V. CA
 It is erroneous to rule that the decision of the trial court could be reversed
as to the appealing private respondent and continue in force against the
other PRs.
 The latter could not remain bound after the former had been released;
although the other PRs had not joined in the appeal, the decision
rendered by the CA inured to their benefit.
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO
 When the obligation of the other solidary debtors is so dependent on that
of their co-solidary debtor, the release of the one who appealed, provided
it be not on grounds personal to such appealing private respondent,
operates as well as to the others who did not appeal. It is for this reason,
that a decision or judgment in favor of the PR who appealed can be
invoked as res judicata by the other PRs.
SECURITY BANK AND TRUST COMPANY INC V. CUENCA
 petitioner bank cannot hold herein respondent liable for loans obtained in
excess of the amount or beyond the period stipulated in the original
agreement, absent any clear stipulation showing that the latter waived his
right to be notified thereof, or to give consent thereto.
 An obligation may be extinguished by novation, pursuant to Article 1292
of the Civil Code, Novation of a contract is never presumed. Indeed, the
following requisites must be established:
(1) there is a previous valid obligation;
(2) the parties concerned agree to a new contract;
(3) the old contract is extinguished; and
(4) there is a valid new contract.16
 We reject these contentions. Clearly, the requisites of novation are
present in this case.
 The 1989 Loan Agreement extinguished the obligation obtained under
the 1980 credit accomodation.
 This is evident from its explicit provision to "liquidate" the principal and
the interest of the earlier indebtedness, as the following shows:"1.02.
Purpose. The First Loan shall be applied to liquidate the principal portion
of the Borrower’s present total outstanding Indebtedness to the Lender
(the "Indebtedness") while the Second Loan shall be applied to
liquidatethe past due interest and penalty portion of the Indebtedness.
 Since the 1989 Loan Agreement had extinguished the original credit
accommodation, the Indemnity Agreement
 To repeat, in the present case, the Indemnity Agreement was subject to
the two limitations of the credit accommodation: (1) that the obligation
should not exceed P8 million, and (2) that the accommodation should
expire not later than November 30, 1981.
 Hence, it was a continuing surety only in regard to loans obtained on or
before the aforementioned expiry date and not exceeding the total of P8
million.
 It is a common banking practice to require the JSS ("joint and solidary
signature") of a major stockholder or corporate officer, as an additional
security for loans granted to corporations.
 There was no reason or logic, however, for the bank or Sta. Ines to
assume that he would still agree to act as surety in the 1989 Loan
Agreement, because at that time, he was no longer an officer or a
stockholder of the debtor-corporation.
 Verily, he was not in a position then to ensure the payment of the
obligation. Neither did he have any reason to bind himself further to a
bigger and more onerous obligation.
DIFFERENT KINDS OF OBLIGATIONS: OBLIGATIONS WITH A
PENAL CLAUSE
BACHRACH V. ESPIRITU
 No, Article 1152 of the civil code permits the agreement upon a penalty
apart from the interest.
 Penalty is not to be added to interest for the determination of whether
interest exceeds the rate fixed by law, since said rate was fixed only for
interest.
ROBES-FRANCISCO v. REALTY DEVELOPMENT CORPORATION V.
CFI
 From this alone, the 4% provision does not come to be penal in character,
hence, Robes Corporation’s contention that the penalty shall substitute
the indemnity for damages and the payment of interest in case of non-
compliance does not hold water.
 Unfortunately, Millan failed to show the actual damages she suffered as a
result of the nonperformance. Nonetheless, the facts show that the right
of the vendee was violated and this entitles her at the very least to
nominal damages
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO
COUNTRY BANKERS INSURANCE CORP V. CA
Facts:
 General rule : In obligations with a penal clause, the penalty shall
substitutute the indemnity for damages and the payment of interest in
case of non-compliance
 In such case, proof of actual damages suffered by the creditor is not
necessary in order that the penalty may be demanded (Article 1228, New
Civil Code).
 However, there are exceptions to the rule that the penalty shall substitute
the indemnity for damages and the payment of interests in case of non-
compliance with the principal obligation.
 They are first, when there is a stipulation to the contrary; second, when
the obligor is sued for refusal to pay the agreed penalty; and third, when
the obligor is guilty of fraud (Article 1226, par. 1, New Civil Code). It is
evident that in all said cases, the purpose of the penalty is to punish the
obligor.
 It held that the cancellation or termination of the agreement prior to its
expiration period is justified as it was brought about by Sy's own default
in his compliance with the terms of the agreement and not motivated by
fraud or greed.
HEIRS OF MANUEL UY EK LIONG V. CASTILLO
FACTS:
 The Kasunduan contained a penal clause which provides that a party who
violates any of its provisions shall be liable to pay the aggrieved party a
penalty fixed at P50K, together with the attorney’s fees and litigation
expenses incurred by the latter should judicial resolution of the matter
becomes necessary.
 The obligor would then be bound to pay the stipulated indemnity without
the necessity of proof of the existence and the measure of damages
caused by the breach.
 The penalty clause generally substitutes the indemnity for damages and
the payment of interests in case of non¬compliance. The rule is settled
that a penal clause is not limited to actual and compensatory damages.
 The RTC’s award of attorney’s fees in the sum of P50,000.00 is,
however, proper.
LO VS CA
 Generally, courts are not at liberty to ignore the freedom of the parties to
agree on such terms and conditions as they see fit as long as they are not
contrary to law, morals, good customs, public order or public policy.
 This power of the courts is explicitly sanctioned by Article 1229 of the
Civil Code which provides:
Article 1229. The judge shall equitably reduce the penalty when the principal
obligation has been partly or irregularly complied with by the debtor. Even if
there has been no performance, the penalty may also be reduced by the courts
if it is iniquitous or... unconscionable.
 question of whether a penalty is reasonable or iniquitous is addressed to
the sound discretion of the court and depends on several factors,
including, but not limited to, the following: the type, extent and purpose
of the penalty, the nature of the obligation, the mode of... breach and its
consequences, the supervening realities, the standing and relationship of
the parties
GSIS V CA
 GSIS claims that the amendment of the real estate mortgage did not
Based on the finding that the GSIS had the legal right to impose an
interest 9% per annum, compounded monthly, on the loans of the
Medinas and an interest of 9%/12% per annum on all due and unpaid
amortizations or installments,
 there is no question that the Medinas failed to... settle their accounts with
the GSIS which as computed by the latter reached an outstanding balance
of P630,130.55 as of April 12, 1975 and that the GSIS had a perfect right
to foreclose the mortgage.
JISON V. CA
 While the resolution of the contract and the forfeiture of the amounts
already paid are valid and binding upon petitioners, the Court is
convinced that the forfeiture of the amount of P47,312.64, although it
includes the accumulated fines for petitioners' failure to construct... a
house as required by the contract, is clearly iniquitous considering that
the contract price is only P55,000.00.
 OBLIGATIONS AND CONTRACTS CASE DOCTRINES: MIDTERMS REVIEWER—A.REGADO

 The forfeiture of fifty percent (50%) of the amount already paid,

orP23,656.32, appears to be a fair settlement.
 Further, in obligation with a penal clause, the judge shall equitably
reduce the penalty when the principal obligation has been partly or
irregularly complied with by the debtor