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Civil Law Obligations Contracts Soriano Notes Uribe Civil Law Review
Civil Law Obligations Contracts Soriano Notes Uribe Civil Law Review
I. OBLIGATIONS
guardian, after the annulment of the contract voluntarily returns the whole
thing or price received, notwithstanding the fact the he has not been
A. IN GENERAL
benefited thereby, there is no right to demand the thing or price thus
returned.
1. Definition
Art. 1427. When a minor between eighteen and twenty-one years of age,
Article 1156. An obligation is a juridical necessity to give, to do or not to
who has entered into a contract without the consent of the parent or
do.
guardian, voluntarily pays a sum of money or delivers a fungible thing in
in accordance with the formalities required by law, but one of the intestate
EXAMPLE: If the action for the payment of a debt has already prescribed,
heirs, after the settlement of the debts of the deceased, pays a legacy in
the obligation is converted from civil to natural (See Art. 1139 to 1155 for
compliance with a clause in the defective will, the payment is effective and
Prescription). Note that what prescribed is the “action” and not the
irrevocable.
obligation. If still fulfilled after the period has expired, debtor can no longer
demand the return of what has been delivered. Art. 1428 provides:
CASES:
Art. 1428. When, after an action to enforce a civil obligation has failed
JUAN F. VILLAROEL
the defendant voluntarily performs the obligation, he cannot demand the
vs.
return of what he has delivered or the payment of the value of the service
BERNARDINO ESTRADA
he has rendered.
G.R. No. L-47362 December 19, 1940
On August 30, 1930, Villaroel signed a document which states that he owed
Art. 1424. When a right to sue upon a civil obligation has lapsed by
Estrada P1,000 with an interest of 12% per year, which pertains to the
extinctive prescription, the obligor who voluntarily performs the contract
original debt. When the obligation became due, Villaroel failed to pay. An
cannot recover what he has delivered or the value of the service he has
action was brought in the CFI Laguna to collect the amount. CFI ordered
rendered.
Villaroel to pay the claimed amount with interest from August 30, 1930 until
full payment.
Art. 1425. When without the knowledge or against the will of the debtor,
a third person pays a debt which the obligor is not legally bound to pay
ISSUE: WON the obligation arising from the original contract of loan,
because the action thereon has prescribed, but the debtor later voluntarily
having been prescribed, would still be demandable from the only heir of the
reimburses the third person, the obligor cannot recover what he has paid.
original debtor?
Art. 1426. When a minor between eighteen and twenty-one years of age
HELD: YES. The prescribed debt of the mother of the debtor was
who has entered into a contract without the consent of the parent or
held to be sufficient consideration to make valid and effective the
promise of the son to pay the same. Although the action to recover the
Cesar Nickolai F. Soriano Jr.
1 Arellano University School of Law 2011-0303
Civil Law Review 2 under the class of Atty. Uribe
original debt has prescribed when the lawsuit was filed, the question that
vs.
arises in this appeal is whether, notwithstanding such prescription, the
HON. ADIL and SPOUSES PATRICIO CONFESSOR
debtor is liable to pay.
G.R. No. L-48889 May 11, 1989
even after the lapse of the aforesaid ten-year period, Confesor, who was by
A promise to perform a natural obligation is as effective as
then a member of the Congress of the Philippines, executed a second
performance itself and converts the obligation into a civil one. The
promissory note on April 11, 1961 expressly acknowledging said loan and
natural obligation is a valid cause for a civil obligation.
promising to pay the same on or before June 15, 1961. The new promissory
filed a complaint against the spouses for the payment of the loan.
(a) A bonus is an act of liberality and the court takes it that it is not within
its judicial powers to command respondents to be liberal;
City Court ruled in favor of DBP, ordering the spouses to pay the loan. CFI
prescription already obtained, but not the right to prescribe in the future.
HELD: NO. Article 1423 of the New Civil Code classifies obligations into civil
or natural. "Civil obligations are a right of action to compel their
Prescription is deemed to have been tacitly renounced when the
performance. Natural obligations, not being based on positive law but on
renunciation results from acts which imply the abandonment of the right
equity and natural law, do not grant a right of action to enforce their
acquired.
performance, but after voluntary fulfillment by the obligor, they authorize
the retention of what has been delivered or rendered by reason thereof".
There is no doubt that prescription has set in as to the first promissory note
And while it is true that the subsequent case of H. E. Heacock vs. National
Where, therefore, a party acknowledges the correctness of a debt and
Labor Union, et al, we stated that:
promises to pay it after the same has prescribed and with full knowledge of
... It is this new promise, either made in express terms or deduced from an 3.
QUASI-CONTRACTS:
acknowledgement as a legal implication, which is to be regarded as
reanimating the old promise, or as imparting vitality to the remedy (which
Art. 1160. Obligations derived from quasi-contracts shall be subject to the
by lapse of time had become extinct) and thus enabling the creditor to
provisions of Chapter 1, Title XVII, of this Book.
recover upon his original contract.
Art. 2142. Certain lawful, voluntary and unilateral acts give rise to the
3. ESSENTIAL ELEMENTS OF OBLIGATION
juridical relation of quasi-contract to the end that no one shall be unjustly
Code provides:
This is the element lacking in natural obligations.
following are obliged to support each other to the whole extent set
tying/binding; at least one person would be bound.
(3) Parents and their legitimate children and the legitimate and
contracts. Contracts are not obligations, but is a source of obligation.
(4) Parents and their illegitimate children and the legitimate and
BAR QUESTION: what is an obligation without agreement?
NEGOTIORUM GESTIO
from four sources: law (pay taxes), quasi-contract, quasi-delict, acts or
omissions punished by law.
from the latter, is obliged to continue the same until the termination of the
him, if the owner is in a position to do so. This juridical relation does not
(2) If in fact the manager has been tacitly authorized by the owner.
(1) Law;
In
the first case, the provisions of Articles 1317, 1403, No. 1, and 1404
(2) Contracts;
seeing the fishes ready for harvest, harvested the same, and sold them to
Art. 1158. Obligations derived from law are not presumed. Only those
Z.
Y borrowed from W to prepare the fishpond for the next batch.
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
a.
What is the juridical relation between X and Y? Negotiorum gestio: X is
as to what has not been foreseen, by the provisions of this Book.
refused to convey to him the 3,000 square meters of land occupied by him,
Why? (a
part of the 20 quinones above) which said defendants had promised to
1. A gestor takes charge of a business or property of another. In this do
"within ten years from and after date of signing of the compromise
case, the neighbors did not take charge of the management of the
agreement", as consideration for his services.
house, only saved it from total destruction. “Management” may
connote repainting, repairs, etc.; CFI
of Quezon City dismissed the complaint on the grounds of
2. House was not “abandoned” since the family went out only for a
unenforceability, lack of cause of action, and prescription.
vacation. In the Family Code, “abandonment” of the father arises only
after 90 days, and that’s only a disputable presumption.
ISSUE: WON Faustino Cruz can claim reimbursement for the expenses and
3. It is not negotiorum gestin, at most, Art. 2168 of the Civil Code (i.e.,
services rendered?
Other Quasi Contracts):
HELD:
No. We hold that the allegations in his complaint do not sufficiently
Art. 2168. When during a fire, flood, storm, or other calamity,
Appellants' reliance on Article 2142 of Civil Code is misplaced. Said article
property is saved from destruction by another person without the
provides:
knowledge of the owner, the latter is bound to pay the former just
compensation.
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
SOLUTIO INDEBITI
benefited at the expense of another.
Art. 2154. If something is received when there is no right to demand it, From
the very language of this provision, it is obvious that a presumed
and it was unduly delivered through mistake, the obligation to return it
quasi-contract cannot emerge as against one party when the
arises.
subject matter thereof is already covered by an existing contract
with
another party. Predicated on the principle that no one should be
PROBLEM: BPO asked RRA to go to a store to buy a pack of cigarettes
allowed to unjustly enrich himself at the expense of another, Article 2124
which costs P225, BPO gave RRA P500. Store owner gave RRA the cigarette
creates the legal fiction of a quasi-contract precisely because of the absence
and P375 as change. of
any actual agreement between the parties concerned. Corollarily, if the
one
who claims having enriched somebody has done so pursuant to a
How is this relationship denominated?
contract with a third party, his cause of action should be against the latter,
a. Solutio indebiti - BPO received something which he does not have the who
in turn may, if there is any ground therefor, seek relief against the
right to demand, i.e., P100. Change should have been P275 only. (Art. party
benefited. It is essential that the act by which the defendant is
2154)
benefited must have been voluntary and unilateral on the part of the
b. Donation – if the delivery of the excess P100 was not made through
plaintiff. As one distinguished civilian puts it, "The act is voluntary. because
mistake. the
actor in quasi-contracts is not bound by any pre-existing obligation to
act.
It is unilateral, because it arises from the sole will of the actor who is
PROBLEM: A bus accident happened, X tried to help by carrying Z, one of not
previously bound by any reciprocal or bilateral agreement. The reason
the passengers of the bus and brought her to the hospital. why
the law creates a juridical relations and imposes certain obligation is to
(Ambrosio Padilla, Civil Law, Vol. VI, p. 748, 1969 ed.) In the case at bar,
a. Is there a quasi-contract between X and Z? Yes. Z is liable to since
appellant has a clearer and more direct recourse against the Deudors
reimburse for the gasoline expense and cleaning of the car. with
whom he had entered into an agreement regarding the improvements
and
expenditures made by him on the land of appellees. it Cannot be said,
b. Can Z, when asked to pay the bill of the hospital, refuse payment on in
the sense contemplated in Article 2142, that appellees have been
the ground that she did not give her consent? No. Quasi-contract. If
enriched at the expense of appellant.
she is not allowed to pay, she would be unjustly enriched.
GUTIEREZ HERMANOS
OTHER QUASI-CONTRACTS: see Arts. 2164 to 2175. vs.
ENGRACIO ORENSE
CASES: G.R.
No. L-9188 December 4, 1914
FAUSTINO CRUZ
FACTS: Engracio Orense is the owner of a parcel of land, which nephew,
vs. Jose
Duran, with the former’s consent and knowledge, sold and conveyed
J.M. TUASON & COMPANY, INC. vs. GREGORIO ARANETA, INC. the
same to Hermano’s company for P1,500 with the reservation of the right
G.R. No. L-23749 April 29, 1977 to
repurchase it for the same price within a period of 4 years. But the same
land
was not repurchased by Jose Duran due to insolvency. Despite
FACTS: Faustino Cruz’ complaint alleged two causes of action, namely:
repeated demand upon Duran, the latter never vacated the land.
(1) that upon request of the Deudors (the family of Telesforo Deudor who His
refusal was based on allegations that he did not know of said sale and
laid claim on the land in question on the strength of an "informacion that
he remains the owner of the land.
posesoria" ) plaintiff made permanent improvements valued at P30,400.00
on said land having an area of more or less 20 quinones and for which he
Cesar Nickolai F. Soriano Jr.
4 Arellano University School of Law 2011-0303
Civil Law Review 2 under the class of Atty. Uribe
Petitioner filed a complaint for estafa against Jose Duran. However, at the
in a criminal action by the sworn testimony of the principal and presented in
trial of the case Engracio Orense, called as a witness, being interrogated by
this civil suit by other sworn testimony of the same principal and by other
the fiscal as to whether he had consented to Duran's selling the said
evidence to which the defendant made no objection. Therefore the principal
property under right of redemption to the firm of Gutierrez Hermanos,
is bound to abide by the consequences of his agency as though it had
replied that he had. In view of this statement by the defendant, the court
actually been given in writing.
acquitted Jose Duran of the charge of estafa.
FACTS: Feliza Azul owns a parcel of land. She married twice in her lifetime:
HELD: YES. It having been proven at the trial that he gave his consent to
the first, with Bernabe Adille, with whom she had a child, Rustico Adille; the
the said sale, it follows that the defendant conferred verbal, or at least
second marriage with Procopio Asejo, her children were Emetria Asejo, et.
implied, power of agency upon his nephew Duran, who accepted it in the
al.
same way by selling the said property. The principal must therefore fulfill all
the obligations contracted by the agent, who acted within the scope of his
Sometime in 1939, said Felisa sold the property in pacto de retro to certain
authority.
3rd persons, period of repurchase being 3 years, but she died in 1942
without being able to redeem and after her death, but during the period of
Even should it be held that the said consent was granted subsequently to
redemption, herein defendant repurchased, by himself alone, and after that,
the sale, it is unquestionable that the defendant, the owner of the property,
he executed a deed of extra-judicial partition representing himself to be the
approved the action of his nephew, who in this case acted as the manager
only heir and child of his mother Felisa with the consequence that he was
of his uncle's business, and Orense's ratification produced the effect of an
able to secure title in his name alone also, so that OCT. No. 21137 in the
express authorization to make the said sale.
name of his mother was transferred to his name, that was in 1955; that was
why after some efforts of compromise had failed, his half-brothers and
Article 1259 of the Civil Code prescribes: "No one can contract in the name
sisters, herein plaintiffs, filed present case for partition with accounting on
of another without being authorized by him or without his legal
the position that he was only a trustee on an implied trust when he
representation according to law.
redeemed,-and this is the evidence, but as it also turned out that one of
HELD: NO. It is the view of the respondent Court that the petitioner, in
The sworn statement made by the defendant, Orense, while testifying as a
taking over the property, did so either on behalf of his co-heirs, in which
witness at the trial of Duran for estafa, virtually confirms and ratifies the
event, he had constituted himself a negotiorum gestor under Article 2144 of
sale of his property effected by his nephew, Duran, and, pursuant to article
the Civil Code, or for his exclusive benefit, in which case, he is guilty of
1313 of the Civil Code, remedies all defects which the contract may have
fraud, and must act as trustee, the private respondents being the
contained from the moment of its execution.
beneficiaries, under the Article 1456. The evidence, of course, points to the
which was indebted to petitioner. On the other hand, the contract for the
However, due to communication problems, delay and unawareness that
transmittal of dollars from the United States to petitioner was entered into
herein petitioner already received the amount remitted, effectuated another
by private respondent with FNSB. Petitioner, although named as the payee
delivery to herein petitioner for the same amount.
was not privy to the contract of remittance of dollars. Neither was private
persons must suffer by the wrongful act of a third person, the loss must be
The trial Court rendered its decision in favor of herein petitioner. On appeal,
borne by the one whose negligence was the proximate cause of the loss.
respondent appellate Court reversed the decision of the trial Court, hence
this petition.
The rule is that principles of equity cannot be applied if there is a provision
SCRA 409; Cruz v. Pahati, 98 Phil. 788 (1956)]. Hence, the Court in the case
HELD: Yes, the Court held that herein petitioner has the right to recover
of De Garcia v. Court of Appeals, G.R. No. L-20264, January 30, 1971, 37
the second remittance, as provided for under Article 2154 of the Civil Code.
SCRA 129, citing Aznar v. Yapdiangco, G.R. No. L-18536, March 31, 1965,
suffer by a fraud perpetrated by another, the law imposes the loss upon the
Art. 2154. If something received when there is no right to demand it, and it
party who, by his misplaced confidence, has enabled the fraud to be
was unduly delivered through mistake, the obligation to return it arises.
committed, cannot be applied in a case which is covered by an express
provision of the new Civil Code, specifically Article 559. Between a common
This provision is taken from Art. 1895 of the Spanish Civil Code which
law principle and a statutory provision, the latter must prevail in this
provided that:
jurisdiction. [at p. 135.]
Art. 1895. If a thing is received when there was no right to claim it and
Puyat & Sons
which, through an error, has been unduly delivered, an obligation to restore
vs.
it arises.
City of Manila
"It is too well settled in this state to need the citation of authority that if
The contention is without merit.
money be paid through a clear mistake of law or fact, essentially affecting
petition.
Art. 104. What is included in civil liability. — The civil liability
established in Articles 100, 101, 102, and 103 of this Code includes:
ISSUE: Whether or not the appellate Court erred when it reversed the
1. Restitution;
decision of the trial Court and held that private respondent is not liable for
2. Reparation of the damage caused;
the damages on the ground that the Rosete is not a party to the contract to
3. Indemnification for consequential damages.
which the petitioner is suing.
5. QUASI-DELICTS
HELD: Yes, the Court held that the appellate Court did err when it reversed
that:
Art. 2176. Whoever by act or omission causes damage to another, there
both parties are bound to comply with. For its part, the school undertakes to
the parties, is called a quasi-delict and is governed by the provisions of this
equip him with the necessary tools and skills to pursue higher education or
grenades exploding in the air or where there looms around the school
Note still, that no recovery from more than one source is allowed. Example:
premises a constant threat to life and limb. Necessarily, the school must
Art. 2177 “double recovery rule”:
ensure that adequate steps are taken to maintain peace and order within
with the rules and regulations of the school. On the other hand, respondent
See case of Saludaga vs. FEU
FEU, as a learning institution is mandated to impart knowledge and equip its
Respondents also failed to show that they undertook steps to ascertain and
Likewise, attorney's fees and litigation expenses in the amount of
confirm that the security guards assigned to them actually possess the
P50,000.00 as part of damages is reasonable in view of Article 2208 of the
qualifications required in the Security Service Agreement. It was not proven
Civil Code. However, the award of exemplary damages is deleted
that they examined the clearances, psychiatric test results, 201 files, and
considering the absence of proof that respondents acted in a wanton,
other vital documents enumerated in its contract with Galaxy. Total reliance
fraudulent, reckless, oppressive, or malevolent manner.
on the security agency about these matters or failure to check the papers
stating the qualifications of the guards is negligence on the part of
We note that the trial court held respondent De Jesus solidarily liable with
respondents. A learning institution should not be allowed to completely
respondent FEU. In Powton Conglomerate, Inc. v. Agcolicol, we held that:
relinquish or abdicate security matters in its premises to the security agency
it hired. To do so would result to contracting away its inherent obligation to
[A] corporation is invested by law with a personality separate and distinct
ensure a safe learning environment for its students.
from those of the persons composing it, such that, save for certain
Article 1170 of the Civil Code provides that those who are negligent in the
None of the foregoing exceptions was established in the instant case;
performance of their obligations are liable for damages. Accordingly, for
hence, respondent De Jesus should not be held solidarily liable with
breach of contract due to negligence in providing a safe learning
respondent FEU.
environment, respondent FEU is liable to petitioner for damages. It is
essential in the award of damages that the claimant must have satisfactorily
Incidentally, although the main cause of action in the instant case is the
proven during the trial the existence of the factual basis of the damages and
breach of the school-student contract, petitioner, in the alternative, also
its causal connection to defendant's acts.
holds respondents vicariously liable under Article 2180 of the Civil Code,
which provides:
In the instant case, it was established that petitioner spent P35,298.25 for
his hospitalization and other medical expenses. While the trial court
Art. 2180. The obligation imposed by Article 2176 is demandable not only
correctly imposed interest on said amount, however, the case at bar
for one's own acts or omissions, but also for those of persons for whom one
involves an obligation arising from a contract and not a loan or forbearance
is responsible.
of money. As such, the proper rate of legal interest is six percent (6%) per
annum of the amount demanded. Such interest shall continue to run from
xxxx
the filing of the complaint until the finality of this Decision. After this
Decision becomes final and executory, the applicable rate shall be twelve
Employers shall be liable for the damages caused by their employees and
percent (12%) per annum until its satisfaction.
household helpers acting within the scope of their assigned tasks, even
The trial Court rendered its decision in favor of herein appellee, hence this
The responsibility treated of in this article shall cease when the persons
appeal.
herein mentioned prove that they observed all the diligence of a good father
of a family to prevent damage.
ISSUE: WON appellant National Coconut Corporation is liable for rentals in
Taiwan Tekkosho, which had secured the possession of the property from
… [I]t is settled in our jurisdiction that where the security agency, as here,
the plaintiff-appellee by the use of duress, such that the Alien Property
recruits, hires and assigns the work of its watchmen or security guards, the
Custodian or its permittee (defendant-appellant) may be held responsible
agency is the employer of such guards or watchmen. Liability for illegal or
for the supposed illegality of the occupation of the property by the said
harmful acts committed by the security guards attaches to the employer
Taiwan Tekkosho. The Allien Property Administration had the control and
agency, and not to the clients or customers of such agency. As a general
administration of the property not as successor to the interests of the
rule, a client or customer of a security agency has no hand in selecting who
enemy holder of the title, the Taiwan Tekkosho, but by express provision of
among the pool of security guards or watchmen employed by the agency
law (Trading with the Enemy Act of the United States, 40 Stat., 411; 50
shall be assigned to it; the duty to observe the diligence of a good father of
U.S.C.A., 189). Neither is it a trustee of the former owner, the plaintiff-
a family in the selection of the guards cannot, in the ordinary course of
appellee herein, but a trustee of then Government of the United States (32
events, be demanded from the client whose premises or property are
Op. Atty. Gen. 249; 50 U.S.C.A. 283), in its own right, to the exclusion of,
protected by the security guards.
and against the claim or title of, the enemy owner. (Youghioheny & Ohio
Coal Co. vs. Lasevich [1920], 179 N.W., 355; 171 Wis., 347; U.S.C.A., 282-
xxxx
283.) From August, 1946, when defendant-appellant took possession, to the
were liable to the Allien Property Administration for rentals, these would not
Sagada Orden
accrue to the benefit of the plaintiff-appellee, the owner, but to the United
vs.
States Government.
National Coconut Corporation
G. R. No. L-3756 June 30, 1952
But there is another ground why the claim or rentals cannot be made
custody and or occupation and the use. The Trading with the Enemy Act, as
FACTS: A parcel of land belong to herein appellee Sagada Orden,
originally enacted, was purely a measure of conversation, hence, it is very
registered before the war, was acquired by a Japanese Corporation during
unlikely that rentals were demanded for the use of the property. When the
the period of Japanese Military occupation.
National coconut Corporation succeeded the Copra Export Management
Company in the possession and use of the property, it must have been also
After liberation, it was occupied by Copra Export Management Company
free from payment of rentals, especially as it was Government corporation,
under a custodianship agreement with United States Alien Property
and steps where then being taken by the Philippine Government to secure
Custodian, and thereafter, occupied by herein appellant National Coconut
the property for the National Coconut Corporation. So that the
Corporation. Aside from such occupation, the property in question was also
circumstances do not justify the finding that there was an implied
subjected to a contract of sale, which was later on declared null.
agreement that the defendant-appellant was to pay for the use and
before it obtained the judgment annulling the sale of the Taiwan Tekkosho
Appellant contends that it occupied the property in good faith, under no
may not be predicated on any negligence or offense of the defendant-
obligation whatsoever to pay rentals for the use and occupation of the
appellant, or any contract, express or implied, because the Allien Property
warehouse.
Administration was neither a trustee of plaintiff-appellee, nor a privy to the
of the parties to one another. But where relations already formed give rise
Lastly, the reservation of this action may not be considered as vesting a
to duties, whether springing from contract or quasi-contract, then breaches
new right; if no right to claim for rentals existed at the time of the
of those duties are subject to article 1101, 1103, and 1104 of the same
reservation, no rights can arise or accrue from such reservation alone.
code. (Rakes vs. Atlantic, Gulf and Pacific Co., 7 Phil. Rep., 359 at 365.)
Cangco
his distinction is of the utmost importance. The liability, which, under the
vs.
Spanish law, is, in certain cases imposed upon employers with respect to
Manila Railroad
damages occasioned by the negligence of their employees to persons to
G.R. No. L-12191 October 14, 1918
whom they are not bound by contract, is not based, as in the English
servant, he is not liable for the acts of the latter, whatever done within the
FACTS: Appellant Cango incurred injuries when he alighted from the train,
scope of his employment or not, if the damage done by the servant does
by accidentally stepping of watermelon sacks placed all over the platform.
not amount to a breach of the contract between the master and the person
injured.
Appellant filed a complaint against herein appellee Manila Railroad for the
damages and medical expenses for such incident. Appellant contends that
It is not accurate to say that proof of diligence and care in the selection and
herein appellee is negligent in maintaining the safety of the train station, by
control of the servant relieves the master from liability for the latter's acts —
allowing sacks of watermelon to be placed over the premises.
on the contrary, that proof shows that the responsibility has never existed.
servant, taking into consideration the qualifications they should possess for
ISSUE: WON appellant is entitled to damages due to the sustained injuries
the discharge of the duties which it is his purpose to confide to them, and
caused by the negligence of herein appellee Manila Railroad.
directs them with equal diligence, thereby performs his duty to third persons
under article 1903 of the Civil Code the law creates a presumption that he
It can not be doubted that the employees of the railroad company were
has been negligent in the selection or direction of his servant, but the
guilty of negligence in piling these sacks on the platform in the manner
presumption is rebuttable and yield to proof of due care and diligence in this
above stated; that their presence caused the plaintiff to fall as he alighted
respect.
from the train; and that they therefore constituted an effective legal cause
of the injuries sustained by the plaintiff. It necessarily follows that the
The supreme court of Porto Rico, in interpreting identical provisions, as
defendant company is liable for the damage thereby occasioned unless
found in the Porto Rico Code, has held that these articles are applicable to
recovery is barred by the plaintiff's own contributory negligence. In
cases of extra-contractual culpa exclusively. (Carmona vs. Cuesta, 20 Porto
resolving this problem it is necessary that each of these conceptions of
Rico Reports, 215.)
liability, to-wit, the primary responsibility of the defendant company and the
contributory negligence of the plaintiff should be separately examined.
This distinction was again made patent by this Court in its decision in the
case of Bahia vs. Litonjua and Leynes, (30 Phil. rep., 624), which was an
It is important to note that the foundation of the legal liability of the
action brought upon the theory of the extra-contractual liability of the
defendant is the contract of carriage, and that the obligation to respond for
defendant to respond for the damage caused by the carelessness of his
the damage which plaintiff has suffered arises, if at all, from the breach of
employee while acting within the scope of his employment. The Court, after
that contract by reason of the failure of defendant to exercise due care in its
citing the last paragraph of article 1903 of the Civil Code, said:
performance. That is to say, its liability is direct and immediate, differing
essentially, in legal viewpoint from that presumptive responsibility for the
From this article two things are apparent: (1) That when an injury is caused
negligence of its servants, imposed by article 1903 of the Civil Code, which
by the negligence of a servant or employee there instantly arises a
can be rebutted by proof of the exercise of due care in their selection and
presumption of law that there was negligence on the part of the master or
supervision. Article 1903 of the Civil Code is not applicable to obligations
employer either in selection of the servant or employee, or in supervision
arising ex contractu, but only to extra-contractual obligations — or to use
over him after the selection, or both; and (2) that that presumption is juris
the technical form of expression, that article relates only to culpa aquiliana
tantum and not juris et de jure, and consequently, may be rebutted. It
and not to culpa contractual.
follows necessarily that if the employer shows to the satisfaction of the
relates, but of damages caused by the defendant's failure to carry out the
Every legal obligation must of necessity be extra-contractual or contractual.
undertakings imposed by the contracts
Extra-contractual obligation has its source in the breach or omission of
those mutual duties which civilized society imposes upon it members, or
A brief review of the earlier decision of this court involving the liability of
which arise from these relations, other than contractual, of certain members
employers for damage done by the negligent acts of their servants will show
of society to others, generally embraced in the concept of status. The legal
that in no case has the court ever decided that the negligence of the
rights of each member of society constitute the measure of the
defendant's servants has been held to constitute a defense to an action for
corresponding legal duties, mainly negative in character, which the
damages for breach of contract.
existence of those rights imposes upon all other members of society. The
breach of these general duties whether due to willful intent or to mere
As the case now before us presents itself, the only fact from which a
inattention, if productive of injury, give rise to an obligation to indemnify the
conclusion can be drawn to the effect that plaintiff was guilty of contributory
injured party. The fundamental distinction between obligations of this
negligence is that he stepped off the car without being able to discern
character and those which arise from contract, rests upon the fact that in
clearly the condition of the platform and while the train was yet slowly
cases of non-contractual obligation it is the wrongful or negligent act or
moving. In considering the situation thus presented, it should not be
omission itself which creates the vinculum juris, whereas in contractual
overlooked that the plaintiff was, as we find, ignorant of the fact that the
relations the vinculum exists independently of the breach of the voluntary
obstruction which was caused by the sacks of melons piled on the platform
duty assumed by the parties when entering into the contractual relation.
existed; and as the defendant was bound by reason of its duty as a public
carrier to afford to its passengers facilities for safe egress from its trains,
With respect to extra-contractual obligation arising from negligence,
the plaintiff had a right to assume, in the absence of some circumstance to
whether of act or omission, it is competent for the legislature to elect — and
warn him to the contrary, that the platform was clear. The place, as we
our Legislature has so elected — whom such an obligation is imposed is
have already stated, was dark, or dimly lighted, and this also is proof of a
morally culpable, or, on the contrary, for reasons of public policy, to extend
failure upon the part of the defendant in the performance of a duty owing
that liability, without regard to the lack of moral culpability, so as to include
by it to the plaintiff; for if it were by any possibility concede that it had right
responsibility for the negligence of those person who acts or mission are
to pile these sacks in the path of alighting passengers, the placing of them
imputable, by a legal fiction, to others who are in a position to exercise an
adequately so that their presence would be revealed.
absolute or limited control over them. The legislature which adopted our
Civil Code has elected to limit extra-contractual liability — with certain well-
As pertinent to the question of contributory negligence on the part of the
defined exceptions — to cases in which moral culpability can be directly
plaintiff in this case the following circumstances are to be noted: The
imputed to the persons to be charged. This moral responsibility may consist
company's platform was constructed upon a level higher than that of the
in having failed to exercise due care in the selection and control of one's
roadbed and the surrounding ground. The distance from the steps of the car
agents or servants, or in the control of persons who, by reason of their
to the spot where the alighting passenger would place his feet on the
status, occupy a position of dependency with respect to the person made
platform was thus reduced, thereby decreasing the risk incident to stepping
liable for their conduct.
off. The nature of the platform, constructed as it was of cement material,
also assured to the passenger a stable and even surface on which to alight.
As it is not necessary for the plaintiff in an action for the breach of a
Furthermore, the plaintiff was possessed of the vigor and agility of young
contract to show that the breach was due to the negligent conduct of
manhood, and it was by no means so risky for him to get off while the train
defendant or of his servants, even though such be in fact the actual cause
was yet moving as the same act would have been in an aged or feeble
of the breach, it is obvious that proof on the part of defendant that the
person. In determining the question of contributory negligence in
negligence or omission of his servants or agents caused the breach of the
performing such act — that is to say, whether the passenger acted
contract would not constitute a defense to the action. If the negligence of
prudently or recklessly — the age, sex, and physical condition of the
servants or agents could be invoked as a means of discharging the liability
passenger are circumstances necessarily affecting the safety of the
arising from contract, the anomalous result would be that person acting
passenger, and should be considered. Women, it has been observed, as a
through the medium of agents or servants in the performance of their
general rule are less capable than men of alighting with safety under such
contracts, would be in a better position than those acting in person. If one
conditions, as the nature of their wearing apparel obstructs the free
delivers a valuable watch to watchmaker who contract to repair it, and the
movement of the limbs. Again, it may be noted that the place was perfectly
faith."
FACTS: Appellant People’s Car Inc. filed a complaint against herein appellee
Commando Security Agency, on the ground that the appellee’s security
Plaintiff in law could not tell its customer, as per the trial court's view, that
guard while on duty at the appellant’s premises, without any authority or
"under the Guard Service Contract it was not liable for the damage but the
consent, brought out of the compound a car belonging to the appellant’s
defendant" — since the customer could not hold defendant to account for
customer.
the damages as he had no privity of contract with defendant. Such an
ISSUE: WON the trial Court erred when it awarded the sum of Php
NARCISO GUTIERREZ, plaintiff-appellee,
1,000.00 instead of the actual damages of P8,489.10, pursuant to their
vs.
“Guard Service Contract.
BONIFACIO GUTIERREZ, MARIA V. DE GUTIERREZ, MANUEL
Paragraph 4 of the contract, which limits defendant's liability for the amount
FACTS: A passenger truck, driven by Velasco and Cortez, and an
of loss or damage to any property of plaintiff to "P1,000.00 per guard post,"
automobile owned by spouses-defendants Gutierrez and was being driven at
is by its own terms applicable only for loss or damage 'through the
that time by their son, Bonifacio who was 18 y/o, collided. At the time of the
negligence of its guards ... during the watch hours" provided that the same
collision, the father was not in the car, but the mother, together will several
is duly reported by plaintiff within 24 hours of the occurrence and the
other members of the Gutierrez family, seven in all, were accommodated
guard's negligence is verified after proper investigation with the attendance
therein. As a result of the said incident, herein plaintiff, a passenger in the
of both contracting parties. Said paragraph is manifestly inapplicable to the
autobus, suffered a fracture which required medical attendance, prompting
stipulated facts of record, which involve neither property of plaintiff that has
him to sue herein defendants. It was found by the trial court that both the
been lost or damaged at its premises nor mere negligence of defendant's
boy and the driver of the autobus were negligent by which neither of them
security guard on duty.
were willing to slow up and give the right of way to the other.
the time of the injury for the pleasure of other members of the owner's
Defendant is therefore undoubtedly liable to indemnify plaintiff for the entire
family than the child driving it. The theory of the law is that the running of
damages thus incurred, since under paragraph 5 of their contract it
the machine by a child to carry other members of the family is within the
"assumed the responsibility for the proper performance by the guards
scope of the owner's business, so that he is liable for the negligence of the
employed of their duties and (contracted to) be solely responsible for the
child because of the relationship of master and servant.
acts done during their watch hours" and "specifically released (plaintiff)
from any and all liabilities ... to the third parties arising from the acts or
The liability of Saturnino Cortez, the owner of the truck, and of his chauffeur
omissions done by the guards during their tour of duty." As plaintiff had
Abelardo Velasco rests on a different basis, namely, that of contract which,
duly discharged its liability to the third party, its customer, Joseph Luy, for
we think, has been sufficiently demonstrated by the allegations of the
the undisputed damages of P8,489.10 caused said customer, due to the
complaint, not controverted, and the evidence. The reason for this
wanton and unlawful act of defendant's guard, defendant in turn was clearly
conclusion reaches to the findings of the trial court concerning the position
liable under the terms of paragraph 5 of their contract to indemnify plaintiff
of the truck on the bridge, the speed in operating the machine, and the lack
in the same amount.
of care employed by the chauffeur. While these facts are not as clearly
As for the obligations to do and not to do, the provisions of the second
Chapter 2: Nature of Obligations:
paragraph of Article 1187 shall be observed as regards the effect of the
party
Art. 1244. The debtor of a thing cannot compel the creditor to receive a
as to whether the possible can be fulfilled
different one, although the latter may be of the same value as, or more
obligation can be impossible cannot be fulfilled either
valuable than that which is due.
fulfilled physically or legally
NOTE: Art. 1182 does not apply when there is a pre-existing debt.
The requisite that a thing be determinate is satisfied if at the time the
contract is entered into, the thing is capable of being made determinate
BAR-EXAM QUESTION: Pedro promised to give his grandson his car after
without the necessity of a new or further agreement between the parties.
the latter passed the bar. Upon passing the bar, Pedro refused to give the
car claiming that the condition is purely potestative and is thus void. Is
D. KINDS OF CIVIL OBLIGATIONS
Pedro correct?
it is not dependent solely upon the will of one of the parties, therefore the
PURE OBLIGATIONS
obligation is not void.
Art. 1179. Every obligation whose performance does not depend upon a
Likewise, Art. 1182 is not applicable, the fulfillment must be dependent
future or uncertain event, or upon a past event unknown to the parties, is
upon the sole will of the debtor in order for the obligation to be void. In this
demandable at once.
case, the debtor is the grandfather, Pedro, and he is not the one taking the
bar exam.
Every obligation which contains a resolutory condition shall also be
demandable, without prejudice to the effects of the happening of the
When debtor prevented the happening of the condition:
event.
Art. 1186. The condition shall be deemed fulfilled when the obligor
CONDITIONAL
voluntarily prevents its fulfillment.
condition has been fulfilled, shall retroact to the day of the constitution
Answer: Generally, no.
of the obligation. Nevertheless, when the obligation imposes reciprocal
prestations upon the parties, the fruits and interests during the
Exception: Art. 1186. If the debtor voluntarily prevented the happening of
pendency of the condition shall be deemed to have been mutually
the condition, it is deemed fulfilled.
compensated. If the obligation is unilateral, the debtor shall
appropriate the fruits and interests received, unless from the nature
EXAMPLE: In a contract for a piece of work, where A hired B as contractor
and circumstances of the obligation it should be inferred that the
to build his house where 50% of the contract price is payable as
intention of the person constituting the same was different.
downpayment and 50% upon completion. If A voluntarily prevented the
happening of the condition for the payment of the remaining 50%, i.e., the
In obligations to do and not to do, the courts shall determine, in each
completion of the house, say by preventing the workers from entering the
case, the retroactive effect of the condition that has been complied
premises, is the condition deemed fulfilled?
with.
Answer: Yes. Applying Art. 1186, by preventing the workers from entering
Answer: No. Under Art. 1187, the happening of the condition, in an
the premises, A, as debtor, prevented the happening of the condition, i.e.,
obligation to give, retroacts to the day of the constitution of the
completion of the house. B is entitled to the remaining 50%.
obligation. However, since there are reciprocal obligations, to pay on
the part of Eva, and to deliver the house and lot on the part of Manuel,
NOTE, HOWEVER: if prevention is pursuant to a valid right, say, workers
they are deemed mutually compensated for the rent and interests on
are not following the plans, or the contractor uses inferior materials – the
the property and money, respectively.
debtor is not compelled to pay. He can even ask for the demolition of the
work already completed at the expense of the contractor.
As such, the seller would just deliver and the buyer would pay the
property.
PROBLEM: A promised to pay P100 to B on the condition that B will go to
the sun on the same day. What is the status of the obligation?
Rules as to improvement, loss or deterioration:
choose between the rescission of the obligation and its fulfillment, with
“MEANS TO PAY” – valid obligation with a period, because the remedy of
indemnity for damages in either case;
the creditor is to go to court once the debtor has the means to pay.
(5) If the thing is improved by its nature, or by time, the improvement
exams. As such, A had the car repainted and seat covers were changed.In
Yes. Three essential requisites are present. It can be a valid contract of
the following bar exam, B passed and demanded that A deliver the car. B
sale. “can” because other information not given, it may be void for
refused demanding reimbursement for the repainting and the new seat
some other reason, e.g., if they are husband and wife, or Eva is a
covers. Can he validly do so?
foreigner not allowed to own land in the Philippines.
Answer: No. Under Art. 1189, par. 6, A has no better right than a
Note that in this case, the condition had not yet happened, as such,
usufructuary. Accordingly, he has no right to demand reimbursement for the
ownership remains with Manuel and he has the right to dispose of it.
repainting and the new seat covers, he will only have the right to remove
the improvements as long as it will not cause damage to the thing. Likewise,
b. Assuming Eva is the one entitled to buy the house and lot, is she
he does not have the right to retain the thing.
entitled to the rental before she passed the bar exams?
Suppose in the above question, the property was land which was increased
No. because, the condition was fulfilled only in 1998, she is entitled to
by alluvion, who is entitled to the improvement? The creditor. As provided
the fruits after she passed the bar. – defective answer.
Cesar Nickolai F. Soriano Jr.
14 Arellano University School of Law 2011-0303
Civil Law Review 2 under the class of Atty. Uribe
under par. 5 above, improvement of the thing by nature inures to the
a. If the period intended has not yet expired, specific performance
benefit of the creditor.
would be premature.
creditor and the debtor, unless from the tenor of the same or other
or
circumstances it should appear that the period has been established in
3. Legal – imposed or provided by law, e.g. filing of taxes; obligation to
favor of one or of the other
give support – within the first 5 days of the month.
4. Voluntary – agreed upon by the parties.
PRESUMPTION: is that the period was fixed for the benefit of both
5. Judicial – those fixed by courts.
parties. EXCEPTION: when from the tenor of the obligation or other
1983. A pledged his car with the agreement that B can use it. Can A
This is understood to be without prejudice to the rights of third persons
compel B to accept payment before due date?
who have acquired the thing, in accordance with Articles 1385 and 1388
and the Mortgage Law.
Answer: No, the presumption is that the period is established for the
benefit of both parties. In this case, the period is actually for the benefit
2. Under Art. 1197:
both, for the debtor to have time to pay, while the creditor to have time to
use the car. As such, B cannot be compelled to accept payment prior to the
Art. 1197. If the obligation does not fix a period, but from its nature and
arrival of the period agreed upon.
the circumstances it can be inferred that a period was intended, the courts
may fix the duration thereof.
Can B be compelled to deliver the car? It depends, pledge is an accessory
(2) When he does not furnish to the creditor the guaranties or securities
There are two instances when the court may fix a period as provided above:
which he has promised;
1. The parties intended a period, but no period was fixed;
(3) When by his own acts he has impaired said guaranties or securities
2. The period depends solely on the will of the debtor.
after their establishment, and when through a fortuitous event they
due. As such, the creditor may not wait for the arrival of period because at
If there was a period agreed upon by the parties, Art. 1197 would not
that time, there may be insufficient assets to cover his claim.
be applicable. (see Lim vs. People)
mortgage on A’s house. The said house was later on destroyed by fire. B
Note: sometimes, action to fix a period is concurrent with specific
collected from A before the arrival of the period. A countered that the period
performance.
is for both their benefit and thus, he cannot be compelled to pay. Is A
correct?
Cesar Nickolai F. Soriano Jr.
15 Arellano University School of Law 2011-0303
Civil Law Review 2 under the class of Atty. Uribe
1179
of the Civil Code applies. The spouses Broqueza’s obligation to pay
Answer: No. A lost the benefit of the period when the mortgaged house
HSBCL-SRP is a pure obligation. The fact that HSBCL-SRP was content with
was destroyed by fire, as provided under Art. 1198 (3). the
prior monthly check-off from Editha Broqueza’s salary is of no moment.
Once
Editha Broqueza defaulted in her monthly payment, HSBCL-SRP made
Why should A bear the loss? a
demand to enforce a pure obligation.
1. The lender would not have lent the money if there was no security;
2. Lender likewise did not cause the loss; In
their Answer, the spouses Broqueza admitted that prior to Editha
3. Borrower remains the owner of the property who should bear the loss.
Broqueza’s dismissal from HSBC in December 1993, she "religiously paid the
loan
amortizations, which HSBC collected through payroll check-off."1 A
MULTIPLE CHOICE: On june 1, 1999, 15% loan A signed PM to pay X
definite amount is paid to HSBCL-SRP on a specific date. Editha Broqueza
P100,000 on June 30, 1999. For whose benefit was the period fixed?
authorized HSBCL-SRP to make deductions from her payroll until her loans
are
fully paid. Editha Broqueza, however, defaulted in her monthly loan
a. Can X demand payment before June 30, 1999? No. Presumption is that
payment due to her dismissal. Despite the spouses Broqueza’s
the benefit of both. Debtor cannot be compelled to pay.
protestations, the payroll deduction is merely a convenient mode of
b. On June 30, 1999, can X refuse payment? No. The debt is already due
payment and not the sole source of payment for the loans. HSBCL-
regardless for whose benefit it is paid. SRP
never agreed that the loans will be paid only through salary deductions.
c. Can X be compelled to accept before? No. Why would creditor would
Neither did HSBCL-SRP agree that if Editha Broqueza ceases to be an
not like to accept? Because debtor may pay interest only upto time of
employee of HSBC, her obligation to pay the loans will be suspended.
payment.
HSBCL-SRP can immediately demand payment of the loans at anytime
d. Benefit of both. – correct.
because the obligation to pay has no period. Moreover, the spouses
CASES: IN
THE MATTER OF THE INTESTATE ESTATE OF JUSTO PALANCA,
MeTC ruled that the nature of HSBCL-SRP’s demands for payment is civil The
lower court held that the ten-year period of limitation of actions did
and has no connection to the ongoing labor dispute. Gerong and Editha
apply, the note being immediately due and demandable, the creditor
Broqueza’s termination from employment resulted in the loss of continued
admitting expressly that he was relying on the wording "upon demand."
benefits under their retirement plans. Thus, the loans secured by their
future retirement benefits to which they are no longer entitled are reduced
Petitioner appealed the lower court’s decision.
to unsecured and pure civil obligations. As unsecured and pure obligations,
the loans are immediately demandable.
ISSUE: WON a creditor is barred by prescription in his attempt to collect on
a
promissory note executed more than fifteen years earlier with the debtor
RTC affirmed the MeTC’s decision in toto. On appeal, the CA reversed the sued
promising to pay either upon receipt by him of his share from a certain
RTC.
estate or upon demand, the basis for the action being the latter alternative?
ISSUE: WON the obligations of Broqueza and Gerong are pure obligations HELD:
Yes. Prescribed. From the manner in which the promissory note was
which are immediately demandable?
executed, it would appear that petitioner was hopeful that the satisfaction
of
his credit could be realized either through the debtor sued receiving cash
HELD: YES In ruling for HSBCL-SRP, we apply the first paragraph of Article
payment from the estate of the late Carlos Palanca presumptively as one of
1179 of the Civil Code: the
heirs, or, as expressed therein, "upon demand." There is nothing in the
record that would indicate whether or not the first alternative was fulfilled.
Art. 1179. Every obligation whose performance does not depend upon a What
is undeniable is that on August 26, 1967, more than fifteen years after
future or uncertain event, or upon a past event unknown to the parties, is the
execution of the promissory note on January 30, 1952, this petition was
demandable at once.
filed. The defense interposed was prescription. Its merit is rather obvious.
x x x.
Article 1179 of the Civil Code provides: "Every obligation whose
fixed for the delivery of the goods. As to the tanks, the agreement was
SMITH, BELL & CO., LTD., plaintiff-appellant,
that the delivery was to be made "within 3 or 4 months," but that period
vs.
was subject to the contingencies referred to in a subsequent clause. With
VICENTE SOTELO MATTI, defendant-appellant.
regard to the expellers, the contract says "within the month of September,
[G.R. No. L-16570 | March 9, 1922 | En Banc | J. Romualdez]
1918," but to this is added "or as soon as possible." And with reference to
connection with the tanks and "Priority Certificate, subject to the United
The plaintiff corporation immediately notified the defendant of the arrival of
State Government requirements," with respect to the motors. At the time of
the goods, but the latter refused to receive them and to pay the prices
the execution of the contracts, the parties were not unmindful of the
stipulated. Consequently, the plaintiff filed an action against the defendant.
contingency of the United States Government not allowing the export of the
The defendant, and the intervenor, the Manila Oil Refining and By-Products
goods, nor of the fact that the other foreseen circumstances therein stated
Co., Inc. claimed that the latter suffered damages for the non-delivery of
might prevent it.
the tanks, and on account of the expellers and the motors not having
arrived in due time.
Considering these contracts in the light of the civil law, we cannot but
Obligations for the performance of which a day certain has been fixed
Both parties appealed to the SC.
shall be demandable only when the day arrives.
ISSUE: WON, under the contracts entered into and the circumstances
A day certain is understood to be one which must necessarily arrive,
established in the record, the plaintiff has fulfilled, in due time, its obligation
even though its date be unknown.
to bring the goods in question to Manila?
that was in his power, even if the condition has not been fulfilled in
The following articles, hereinbelow more particularly described, to be
reality.
shipped at San Francisco within the month of September /18, or as soon
as possible. — Two Anderson oil expellers . . . .
In such cases, the decisions prior to the Civil Code have held that the
obligee having done all that was in his power, was entitled to enforce
FACTS: Plaintiff leased his house to Jacinto Baldomar, and her son, Lefrado
Plaintiff commenced this action before the City Court of Manila, demanding
Fernando, upon a month-to-month basis. Subsequently, plaintiff notified
from the defendant the payment of P90 as actual and compensatory
defendants to vacate the said house because plaintiff needed it for his
damages, P100 for temperate damages, P500 for moral damages, and P500
offices. Despite this demand, defendants insisted on continuing their
as attorney’s fees. Defendant claimed that the total cost of P89.95 should
occupancy. Plaintiff filed an action before the Municipal Court of Manila
be fully chargeable against him since the repair invoice showed that the
during which defendants were in arrears in the payment of the rental for
missing parts had total value of only P31.10. The court order the defendant
that month.
to pay the sum of P31.10.
On
appeal to the CFI, the defendants interposed that their lease contract
Plaintiff directly appealed to the SC contending that the court a quo erred
with the plaintiff authorized them to continue occupying the house
when it did not award the whole cost of labor and materials that went into
indefinitely as long as they faithfully pay their rentals. The CFI decided in
the repair of the machine, as provided for in Article 1167 CC.
favor of the plaintiff ratiocinating that the lease had always been upon a
month-to-month basis.
Defendant countered that he is not liable at all, not even for the sum of
P31.10, because his contract with plaintiff did not contain a period, so that
ISSUE: WON the lease contract entered into by the parties is for an
plaintiff should have first filed a petition for the court to fix the period,
indefinite period (as long as rentals are paid), or on a month-to-month
under Article 1197 of the Civil Code.
basis?
ISSUE: WON defendant can invoke Article 1197 CC on the ground that his
HELD: month-to-month. The defense thus set up by defendant Lefrado
contract with plaintiff did not contain a period?
Fernando would leave to the sole and exclusive will of one of the
when it has been left to the will of the debtor," and provides that in this
The lower court ruled in favor of the plaintiff relying on Art. 1581.
case the term shall be fixed by the courts. (Art. 1128, sec. 2.) In every
parties are mutually creditors and debtors. Thus, in this contract of lease,
HELD: Yes. The legal term cannot be applied, there being a
the lessee is the creditor with respect to the rights enumerated in article
conventional term, this destroys the assumption that the contract
1554, and is the debtor with respect to the obligations imposed by articles
of lease was wholly terminated by the notice given by the
1555 and 1561. The term within which performance of the latter obligation
plaintiffs, this notice being necessary only when it becomes
is due is what has been left to the will of the debtor. This term it is which
necessary to have recourse to the legal term. Nor had the
must be fixed by the courts.
plaintiffs, under the contract, any right to give such notice. It is
evident that they had no intention of stipulating that they reserved
The only action which can be maintained under the terms of the contract is
the right to give such notice. Clause 3 begins as follows: "Mr.
that by which it is sought to obtain from the judge the determination of this
Williamson, or whoever may succeed him as secretary of said club, may
period, and not the unlawful detainer action which has been brought — an
terminate this lease whenever desired without other formality than that of
action which presupposes the expiration of the term and makes it the duty
giving a month's notice. The owners of the land undertake to maintain the
of the judge to simply decree an eviction. To maintain the latter action it is
club as tenant as long as the latter shall see fit." The right of the one and
sufficient to show the expiration of the term of the contract, whether
the obligation of the others being thus placed in antithesis, there is
conventional or legal; in order to decree the relief to be granted in the
something more, much more, than the inclusio unius, exclusio alterius. It is
former action it is necessary for the judge to look into the character and
evident that the lessors did not intend to reserve to themselves the right to
conditions of the mutual undertakings with a view to supplying the lacking
rescind that which they expressly conferred upon the lessee by establishing
element of a time at which the lease is to expire. In the case of a loan of
it exclusively in favor of the latter.
money or a commodatum of furniture, the payment or return to be made
when the borrower "can conveniently do so" does not mean that he is to be
It would be the greatest absurdity to conclude that in a contract by
allowed to enjoy the money or to make use of the thing indefinitely or
which the lessor has left the termination of the lease to the will of
perpetually. The courts will fix in each case, according to the circumstances,
the lessee, such a lease can or should be terminated at the will of
the time for the payment or return. This is the theory also maintained by
the lessor.
the defendant in his demonstration of the fifth assignment of error. "Under
article 1128 of the Civil Code," thus his proposition concludes, "contracts
ISSUE2: WON the lease can be considered as a life tenancy?
whose term is left to the will of one of the contracting parties must be fixed
by the courts, . . . the conditions as to the term of this lease has a direct
HELD: No. It is not to be understood that we admit that the lease entered
legislative sanction," and he cites articles 1128. "In place of the ruthless
into was stipulated as a life tenancy, and still less as a perpetual lease. The
method of annihilating a solemn obligation, which the plaintiffs in this case
terms of the contract express nothing to this effect. They do, whatever,
have sought to pursue, the Code has provided a legitimate and easily
imply this idea. If the lease could last during such time as the lessee might
available remedy. . . . The Code has provided for the proper disposition of
see fit, because it has been so stipulated by the lessor, it would last, first, as
those covenants, and a case can hardly arise more clearly demonstrating
long as the will of the lessee — that is, all his life; second, during all the
the usefulness of that provision than the case at bar."
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
PHILIPPINE BANKING CORPORATION, representing the estate of
does not fall within any of the cases in which the rights and obligations
JUSTINA SANTOS Y CANON FAUSTINO, deceased, plaintiff-appellant,
arising from a contract cannot be transmitted to heirs, either by its nature,
vs.
by agreement, or by provision of law. Furthermore, the lessee is an English
LUI SHE in her own behalf and as administratrix of the intestate
association.
estate of Wong Heng, deceased,defendant-appellant.
Santos, at the same time gives the clue to what we view as a scheme to
In two will executed, she bade her legatees to respect the contracts she had
circumvent the Constitutional prohibition against the transfer of lands to
entered into with Wong but in a later dated codicil, she appears to have a
aliens. "The illicit purpose then becomes the illegal causa" rendering the
change of heart, directing the executor to secure annulment of the contracts
contracts void.
on the ground of machinations and inducements practiced by Wong.
Taken singly, the contracts show nothing that is necessarily illegal, but
A complaint was filed for the annulment of contracts alleging fraud,
considered collectively, they reveal an insidious pattern to subvert by
misrepresentation, inequitable conduct, undue influence and abuse of
indirection what the Constitution directly prohibits. To be sure, a lease to
confidence and trust; and that the contracts were made to circumvent the
an alien for a reasonable period is valid. So is an option giving an
constitutional prohibition on aliens acquiring lands and Philippine
alien the right to buy real property on condition that he is granted
Naturalization Laws.
Philippine citizenship. As this Court said in Krivenko v. Register of Deeds:
In the meantime, Security Bank and Trust Co, was appointed guardian of
[A]liens are not completely excluded by the Constitution from the use of
the properties of Justina Santos, while Ephraim G. Gochangco was
lands for residential purposes. Since their residence in the Philippines is
appointed guardian of her person.
temporary, they may be granted temporary rights such as a lease contract
fruendi and jus abutendi) but also of the right to dispose of it ( jus
ISSUE: WON the above-cited provision of the lease contract makes it
disponendi) — rights the sum total of which make up ownership. It
invalid?
is just as if today the possession is transferred, tomorrow, the use, the next
day, the disposition, and so on, until ultimately all the rights of which
HELD: No. We have had occasion to delineate the scope and application of
ownership is made up are consolidated in an alien. And yet this is just
article 1308 in the early case of Taylor v. Uy Tieng Piao.1 We said in that
exactly what the parties in this case did within the space of one year, with
case:
the result that Justina Santos' ownership of her property was reduced to a
hollow concept. If this can be done, then the Constitutional ban against
Article 1256 [now art. 1308] of the Civil Code in our opinion
alien landholding in the Philippines, as announced in Krivenko v. Register of
creates no impediment to the insertion in a contract for personal
Deeds, is indeed in grave peril.
service of a resolutory condition permitting the cancellation of the
contract by one of the parties. Such a stipulation, as can be readily
It does not follow from what has been said, however, that because the
seen, does not make either the validity or the fulfillment of the
parties are in pari delicto they will be left where they are, without relief. For
contract dependent upon the will of the party to whom is conceded
one thing, the original parties who were guilty of a violation of the
the privilege of cancellation; for where the contracting parties
fundamental charter have died and have since been substituted by their
have agreed that such option shall exist, the exercise of the option
administrators to whom it would be unjust to impute their guilt. For another
is as much in the fulfillment of the contract as any other act which
thing, and this is not only cogent but also important, article 1416 of the Civil
may have been the subject of agreement. Indeed, the cancellation
Code provides, as an exception to the rule on pari delicto, that "When the
of a contract in accordance with conditions agreed upon
agreement is not illegal per se but is merely prohibited, and the prohibition
beforehand is fulfillment.
by law is designed for the protection of the plaintiff, he may, if public policy
it had passed, then the court should declare that petitioner had breached
LOURDES VALERIO LIM, petitioner,
the contract, as averred in the complaint, and fix the resulting damages. On
vs.
the other hand, if the reasonable time had not yet elapsed, the court
PEOPLE OF THE PHILIPPINES, respondent.
perforce was bound to dismiss the action for being premature. But
G.R. No. L-34338 November 21, 1984
in no case can it be logically held that under the plea above
Even on the assumption that the court should have found that no
This is to certify that I have received from Mrs. Maria de Guzman Vda. de
reasonable time or no period at all had been fixed (and the trial court's
Ayroso. of Gapan, Nueva Ecija, six hundred fifteen kilos of leaf tobacco to
amended decision nowhere declared any such fact) still, the complaint not
be sold at Pl.30 per kilo. The proceed in the amount of Seven Hundred
having sought that the Court should set a period, the court could not
Ninety Nine Pesos and 50/100 (P 799.50) will be given to her as soon as it
proceed to do so unless the complaint in as first amended; for the original
was sold.
decision is clear that the complaint proceeded on the theory that the period
for performance had already elapsed, that the contract had been breached
Appellant obtained the said tobacco leaves but paid only P240. Demands for
and defendant was already answerable in damages.
payment were made upon appellant by Ayroso, through the latter’s sister
Salud Bantug. After receiving some money orders which failed to cover the
Granting, however, that it lay within the Court's power to fix the period of
full amount, a complaint for estafa was filed.
performance, still the amended decision is defective in that no basis is
stated to support the conclusion that the period should be set at two years
Peititioner was found guilty. On appeal, the CA affirmed the conviction.
after finality of the judgment. The list paragraph of Article 1197 is clear that
the period cannot be set arbitrarily. The law expressly prescribes that — the
ISSUE: WON Exhibit A was for a “fixed period” and "the obligation was
Court shall determine such period as may under the circumstances been
therefore, immediately demandable as soon as the tobacco was sold"?
probably contemplated by the parties.
HELD: Yes. It is clear in the agreement, Exhibit "A", that the proceeds of
All that the trial court's amended decision (Rec. on Appeal, p. 124) says in
the sale of the tobacco should be turned over to the complainant as soon as
this respect is that "the proven facts precisely warrant the fixing of such a
the same was sold, or, that the obligation was immediately demandable as
period," a statement manifestly insufficient to explain how the two period
soon as the tobacco was disposed of. Hence, Article 1197 of the New Civil
given to petitioner herein was arrived at.
Code, which provides that the courts may fix the duration of the obligation if
it does not fix a period, does not apply.
It must be recalled that Article 1197 of the Civil Code involves a
contemplated by the parties" (Do., par. 3). So that, ultimately, the Court
FACTS: JM Tuason & Co, Inc., through Gregorio Araneta, Inc., sold a
cannot fix a period merely because in its opinion it is or should be
portion of its parcel of land known as Sta. Mesa Heights Subdivision to
reasonable, but must set the time that the parties are shown to have
respondent Philippine Sugar Estates Development Co., Ltd., with a
intended. As the record stands, the trial Court appears to have pulled the
stipulation, aside from the mortgage, that the buyer will build on the said
two-year period set in its decision out of thin air, since no circumstances are
parcel of land the Sto. Domingo Church and Convent, while the seller will
mentioned to support it. Plainly, this is not warranted by the Civil Code.
clear the block surrounding the lot.
In this connection, it is to be borne in mind that the contract shows that the
The buyer complied, but the seller which began constructing the streets, is
parties were fully aware that the land described therein was occupied by
unable to finish the construction in the Northeast side because a third-party,
squatters, because the fact is expressly mentioned therein (Rec. on Appeal,
by the name of Manuel Abundo, who is occupying the middle part thereof,
Petitioner's Appendix B, pp. 12-13). As the parties must have known that
refused to vacate the same.
they could not take the law into their own hands, but must resort to legal
processes in evicting the squatters, they must have realized that the
Respondent filed a complaint for specific performance against petitioner. In
duration of the suits to be brought would not be under their control nor
their answer, JM Tuason & Co., and petitioner Gregorio Araneta, Inc.
could the same be determined in advance. The conclusion is thus forced
alleged that the action was premature since its obligation was without a
that the parties must have intended to defer the performance of the
definite period which needs to be fixed first by ht ecourt in a proper suit.
obligations under the contract until the squatters were duly evicted, as
ISSUE: WON the contract between the parties did not contain a period
It follows that there is no justification in law for the setting the date of
which justifies the trial and appellate court to fix the same?
performance at any other time than that of the eviction of the squatters
occupying the land in question; and in not so holding, both the trial Court
HELD: No. Neither of the courts below seems to have noticed that, on the
and the Court of Appeals committed reversible error. It is not denied that
hypothesis stated, what the answer put in issue was not whether the court
the case against one of the squatters, Abundo, was still pending in the
should fix the time of performance, but whether or not the parties agreed
Court of Appeals when its decision in this case was rendered.
that the petitioner should have reasonable time to perform its part of the
bargain. If the contract so provided, then there was a period fixed, a
PACIFICA MILLARE, petitioner,
inapplicable since the duration of the renewal period was not left to the will
The present dispute arose from events which transpired during the months of
the lessee alone, but rather to the will of both the lessor and the lessee.
of May and July in 1980. According to the Co spouses, sometime during the Most
importantly, Article 1197 applies only where a contract of lease clearly
last week of May 1980, the lessor informed them that they could continue
exists. Here, the contract was not renewed at all, there was in fact no
leasing the People's Restaurant so long as they were amenable to paying
contract at all the period of which could have been fixed.
creased rentals of P1,200.00 a month. In response, a counteroffer of
P700.00 a month was made by the Co spouses. At this point, the lessor
Article 1670 of the Civil Code reads thus:
allegedly stated that the amount of monthly rentals could be resolved at a
later time since "the matter is simple among us", which alleged remark was If
at the end of the contract the lessee should continue enjoying the thing
supposedly taken by the spouses Co to mean that the Contract of Lease had left
for 15 days with the acquiescence of the lessor and unless a notice to
been renewed, prompting them to continue occupying the subject premises the
contrary by either party has previously been given. It is understood that
and to forego their search for a substitute place to rent. In contrast, the
there is an implied new lease, not for the period of the original contract but
lessor flatly denied ever having considered, much less offered, a renewal of for
the time established in Articles 1682 and 1687. The ther terms of the
the Contract of Lease.
original contract shall be revived. (Emphasis suplied.)
The above notwithstanding, Mrs. Millare wrote the Co spouses to vacate the The
respondents themselves, public and private, do not pretend that the
leased premises as she had no intention of renewing the contract. In reply,
continued occupancy of the leased premises after 31 May 1980, the date of
the Co spouses signified their unwillingness to pay the P1,200 monthly
expiration of the contract, was with the acquiescence of the lessor. Even if it
rentals. be
assumed that tacite reconduccion had occurred, the implied new lease
could not possibly have a period of five years, but rather would have been a
The Co spouses filed a complaint seeking reneweal of the lease contract at
month-to-month lease since the rentals (under the original contract) were
a rate of P700 a month. Later on, Mrs. Millare filed an ejectment case
payable on a monthly basis. At the latest, an implied new lease (had one
against the Co Spouses.
arisen) would have expired as of the end of July 1980 in view of the written
situations envisaged in Articles 1197 and 1670 of the Civil Code, which do
Par. 13 reads: not
obtain here, courts have no authority to prescribe the terms and
terms and conditions cannot be the law as between the parties themselves.
HELD: No. Clearly, the respondent judge's grasp of both the law and the
Contracts spring from the volition of the parties. That volition cannot be
Enghsh language is tenuous at best. We are otherwise unable to
supplied by a judge and a judge who pretends to do so, acts tyrannically,
comprehend how he arrived at the reading set forth above. Paragraph 13 of
arbitrarily and in excess of his jurisdiction.
the Contract of Lease can only mean that the lessor and lessee may agree
to renew the contract upon their reaching agreement on the terms and 2.
As to Plurality of Prestation
conditions to be embodied in such renewal contract. Failure to reach
agreement on the terms and conditions of the renewal contract will of
a. Conjunctive usually use the word “and” compared to alternative
course prevent the contract from being renewed at all. In the instant case,
obligations which use the word “or”.
the lessor and the lessee conspicuously failed to reach agreement both on
b. Alternative
the amount of the rental to be payable during the renewal term, and on the
term of the renewed contract. Art.
1199. A person alternatively bound by different prestations shall
impossible, unlawful or which could not have been the object of the
obligation.
OBLIGATION OBLIGATION
Concentration: technical term of the act of making a choice in alternative As
to there are various only ONE principal
obligations.
contents prestations all of which prestation constitutes the
of
the constitute parts of the obligation, the accessory
Choice is indivisible: the debtor cannot choose part of one prestation and
obligation obligation being only a means to
part of another.
facilitate payment.
As
to the nullity of one prestation the nullity of the principal
Art. 1202. The debtor shall lose the right of choice when among the
nullity does not invalidate the prestation invalidates the
prestations whereby he is alternatively bound, only one is practicable.
obligation, which is still in obligation & the creditor
substitute is possible
The indemnity shall be fixed taking as a basis the value of the last thing
which disappeared, or that of the service which last became impossible.
QUESTION: When one of the prestations become impossible to perform,
creditor:
(1) If one of the things is lost through a fortuitous event, he shall perform
i. Demand value of thing lost plus damages;
the obligation by delivering that which the creditor should choose from
ii. Choose from the remaining plus damages (according to the
among the remainder, or that which remains if only one subsists;
provision, however, according to Jurado and Atty. Uribe, no
(2) If the loss of one of the things occurs through the fault of the debtor,
damages, since creditor did not actually sustain any damage)
the creditor may claim any of those subsisting, or the price of that which,
through the fault of the former, has disappeared, with a right to damages;
*if due to fortuitous event, the debtor may perform the obligation
(3) If all the things are lost through the fault of the debtor, the choice by
as to the choice of the creditor from the remaining prestations.
the creditor shall fall upon the price of any one of them, also with
indemnity for damages.
d. Due to the fault of the creditor, if the right of choice belongs to
the debtor;
The same rules shall be applied to obligations to do or not to do in case
i. He may rescind the obligation (option only, not automatic)
one, some or all of the prestations should become impossible.
plus damages;
owner may go against the creditor for the loss of the thing)
Art. 1206. When only one prestation has been agreed upon, but the 3.
Facultative: It depends:
obligor may render another in substitution, the obligation is called
a. If the loss happened BEFORE substitution, and
facultative.
i. the prestation lost is the SUBSTITUTE: not extinguished;
comply with the foregoing terms and conditions, the innocent party will
Other Terms: mancomunada or mancomunada simple or pro rata.
be entitled to an execution of the decision based on this compromise
(Tolentino)
agreement and the defaulting party agrees and hold themselves to
reimburse the innocent party for attorney's fees, execution fees and
EFFECTS:
other fees related with the execution.
fact is that only P27,500.00 has been paid. There appears to be a non-
A solidary obligation is one in which the debtor is liable for the entire
payment in accordance with the compromise agreement of the amount
obligation or each creditor is entitled to demand the whole obligation. If
of P27,500.00 on or before December 24, 1979. The parties are
there is only one obligation, it is a solidary obligation.
reminded that the payment is condition sine qua non to the lifting of
ISSUE: WON the petitioner is solidarily liable with the other defendants in
SOLIDRY OBLIGATION: arises when the obligation:
accordance with the compromise agreement?
1. Expressly so states (stipulated);
HELD: Yes. Article 1207 and 1208 of the Civil Code provides —
Terms which may indicate solidarity: mancomunada solidaria or joint &
several; in solidum; juntos o separadamente; individually and
Art. 1207. The concurrence of two or more debtors in one and the
collectively.
same obligation does not imply that each one of the former has a right
the obligation expressly so states, or when the law or the nature of the
ERNESTO V. RONQUILLO, petitioner,
obligation requires solidarity.
vs.
HONORABLE COURT OF APPEALS AND ANTONIO P. SO, respondents.
Art. 1208. If from the law,or the nature or the wording of the
G.R. No. L-55138 September 28, 1984
obligation to which the preceding article refers the contrary does not
On December 13, 1979, the lower court rendered its Decision based on the
The term "individually" has the same meaning as "collectively", "separately",
compromise agreement submitted by the parties, the pertinent portion of
"distinctively", respectively or "severally". An agreement to be "individually
which reads as follows:
liable" undoubtedly creates a several obligation, and a "several obligation is
one by which one individual binds himself to perform the whole obligation.
1. Plaintiff agrees to reduce its total claim of P117,498-95 to only
P11,000 .00 and defendants agree to acknowledge the validity of such
In the case of Parot vs. Gemora We therein ruled that "the phrase juntos
claim and further bind themselves to initially pay out of the total
or separadamente or in the promissory note is an express
indebtedness of P10,000.00 the amount of P55,000.00 on or before
statement making each of the persons who signed it individually
December 24, 1979, the balance of P55,000.00,
liable for the payment of the full amount of the obligation
defendants individually and jointly agree to pay within a period of
contained therein." Likewise in Un Pak Leung vs. Negorra We held that
Partnership
The subsidiary liability shall be enforced, first against the property
enforced, the person by whom payment has been made shall have
Agency
a right of action against the others for the amount of their
respective shares.
Art. 1911. Even when the agent has exceeded his authority, the
principal is solidarily liable with the agent if the former allowed the
ROLITO CALANG and PHILTRANCO SERVICE ENTERPRISES,
latter to act as though he had full powers. (n)
INC., Petitioners,
vs.
Art. 1915. If two or more persons have appointed an agent for a
PEOPLE OF THE PHILIPPINES, Respondent.
common transaction or undertaking, they shall be solidarily liable
G.R. No. 190696 August 3, 2010
to the agent for all the consequences of the agency. (1731)
Since the cause of action against Calang arose from delict, Philtranco,
Loan
whose liability arose from quasi-delict, cannot be made solidarily liable with
Calang. Art. 2180 does not apply to civil liability arising from delict.
Art. 1945. When there are two or more bailees to whom a thing is
loaned in the same contract, they are liable solidarily. (1748a)
FACTS: As a result of the collision of Philtranco Bus driven by one Rolito
Calang to the left portion of a jeep coming from the opposite direction,
Solutio Indebiti
Cresencio Pinohermoso, the driver of the jeep, lost control of the vehicle
and bumped and killed Jose Mabansag, a bystander. The jeep turned turtle
Art. 2157. The responsibility of two or more payees, when there
three times and two of the passengers thereof, Armando Nablo and an
has been payment of what is not due, is solidary. (n)
unidentified woman, were instantly killed, while the other passengers were
private complainants.
The responsibility of two or more officious managers shall be
solidary, unless the management was assumed to save the thing or
On appeal, the CA affirmed the RTC in toto. The CA found that the RTC
correctly held Philtranco jointly and severally liable with petitioner Calang,
business from imminent danger. (1890a)
for failing to prove that it had exercised the diligence of a good father of the
The petitioners filed with this Court a petition for review on certiorari. In our
Art. 2194. The responsibility of two or more persons who are
Resolution dated February 17, 2010, we denied the petition for failure to
liable for quasi-delict is solidary. (n)
sufficiently show any reversible error in the assailed decision to warrant the
ISSUE: WON Philtranco can be held jointly and severally liable with Calang
Art. 94. The absolute community of property shall be liable for:
even if it was not a party to the criminal case?
xxx
If the community property is insufficient to cover the foregoing
HELD: No.
liabilities, except those falling under paragraph (9), the spouses
shall be solidarily liable for the unpaid balance with their separate
Liability of Calang
properties.
In their answers:
In default of the persons criminally liable, innkeepers, tavernkeepers,
PANTRANCO claimed that the jeep of Sio Choy was then operated at
and any other persons or corporations shall be civilly liable for crimes
an excessive speed and bumped PANTRANCO which had moved to,
committed in their establishments, in all cases where a violation of
and stopped at, the shoulder of the highway to avoid the jeep; and
municipal ordinances or some general or special police regulations shall
that it had observed the diligence of a good father of a family to
have been committed by them or their employees.
prevent damage, especially in the selection and supervision of its
Also later, the herein petitioner sought, and was granted, leave to file a
The foregoing subsidiary liability applies to employers, according to Article
third-party complaint against the San Leon Rice Mill, Inc. for the
103 of the Revised Penal Code, which reads:
reason that the person driving the jeep of Sio Choy, at the time of the
accident, was an employee of the San Leon Rice Mill, Inc. performing
The subsidiary liability established in the next preceding article shall
his duties within the scope of his assigned task, and not an employee
also apply to employers, teachers, persons, and corporations engaged
of Sio Choy; and that, as the San Leon Rice Mill, Inc. is the employer of
in any kind of industry for felonies committed by their servants, pupils,
the deceased driver, Juan P. Campollo, it should be liable for the acts
workmen, apprentices, or employees in the discharge of their duties.
of its employee, pursuant to Art. 2180 of the Civil Code.
it is only respondents Sio Choy and San Leon Rice Mill, Inc, (to the exclusion
3. When the nature of the obligation requires solidarity.
of the petitioner) that are solidarily liable to respondent Vallejos for the
If the owner was not in the motor vehicle, the provisions of article 2180 are
In the case at bar, the trial court held petitioner together with respondents
applicable.
Sio Choy and San Leon Rice Mills Inc. solidarily liable to respondent Vallejos
obliged to pay the entire obligation when the amount stated in its
Art. 2180. The obligation imposed by article 2176 is demandable not only
insurance policy with respondent Sio Choy for indemnity against
for one's own acts or omissions, but also for those of persons for whom one
third party liability is only P20,000.00? Moreover, the qualification
is responsible.
made in the decision of the trial court to the effect that petitioner is
xxx xxx xxx
sentenced to pay up to P20,000.00 only when the obligation to pay
Employers shall be liable for the damages caused by their employees and
P29,103.00 is made solidary, is an evident breach of the concept of a
household helpers acting within the scope of their assigned tasks, even
solidary obligation. Thus, We hold that the trial court, as upheld by the
though the former are not engaged ill any business or industry.
Court of Appeals, erred in holding petitioner, solidarily liable with
xxx xxx xxx
respondents Sio Choy and San Leon Rice Mill, Inc. to respondent Vallejos.
The responsibility treated in this article shall cease when the persons herein
mentioned proved that they observed all the diligence of a good father of a
ISSUE2: WON petitioner can seek reimbursement from San Leon even
family to prevent damage.
though it is not a party to its contract with Sio Choi?
It thus appears that respondents Sio Choy and San Leon Rice Mill, Inc. are
HELD: Yes. Petitioner, upon paying respondent Vallejos the amount of riot
the principal tortfeasors who are primarily liable to respondent Vallejos.
exceeding P20,000.00, shall become the subrogee of the insured, the
The law states that the responsibility of two or more persons who
respondent Sio Choy; as such, it is subrogated to whatever rights the latter
are liable for a quasi-delict is solidarily.
has against respondent San Leon Rice Mill, Inc. Article 1217 of the Civil
Code gives to a solidary debtor who has paid the entire obligation the right
On the other hand, the basis of petitioner's liability is its insurance
to be reimbursed by his co-debtors for the share which corresponds to each.
contract with respondent Sio Choy. If petitioner is adjudged to pay
respondent Vallejos in the amount of not more than P20,000.00,
Art. 1217. Payment made by one of the solidary debtors extinguishes the
this is on account of its being the insurer of respondent Sio Choy
obligation. If two or more solidary debtors offer to pay, the creditor may
under the third party liability clause included in the private car
choose which offer to accept.
comprehensive policy existing between petitioner and respondent
Sio Choy at the time of the complained vehicular accident.
He who made the payment may claim from his co-debtors only the share
which corresponds to each, with the interest for the payment already made.
In Guingon vs. Del Monte, `a passenger of a jeepney had just alighted
If the payment is made before the debt is due, no interest for the
therefrom, when he was bumped by another passenger jeepney. He died as
intervening period may be demanded.
a result thereof. In the damage suit filed by the heirs of said passenger
xxx xxx xxx
against the driver and owner of the jeepney at fault as well as against the
insurance company which insured the latter jeepney against third party
In accordance with Article 1217, petitioner, upon payment to
liability, the trial court, affirmed by this Court, adjudged the owner and the
respondent Vallejos and thereby becoming the subrogee of
driver of the jeepney at fault jointly and severally liable to the heirs of the
solidary debtor Sio Choy, is entitled to reimbursement from
victim in the total amount of P9,572.95 as damages and attorney's fees;
respondent San Leon Rice Mill, Inc.
while the insurance company was sentenced to pay the heirs the amount of
P5,500.00 which was to be applied as partial satisfaction of the judgment
To recapitulate then: We hold that only respondents Sio Choy and San Leon
rendered against said owner and driver of the jeepney. Thus, in
Rice Mill, Inc. are solidarily liable to the respondent Martin C. Vallejos for the
said Guingon case, it was only the owner and the driver of the
amount of P29,103.00. Vallejos may enforce the entire obligation on only
jeepney at fault, not including the insurance company, who were
one of said solidary debtors. If Sio Choy as solidary debtor is made to pay
held solidarily liable to the heirs of the victim.
for the entire obligation (P29,103.00) and petitioner, as insurer of Sio Choy,
Art. 1208. If from the law, or the nature or the wording of the
In the case at bar, petitioner as insurer of Sio Choy, is liable to respondent
obligations to which the preceding article refers the contrary does not
Vallejos, but it cannot, as incorrectly held by the trial court, be made
appear, the credit or debt shall be presumed to be divided into as
"solidarily" liable with the two principal tortfeasors namely respondents Sio
many shares as there are creditors or debtors, the credits or debts
Choy and San Leon Rice Mill, Inc. For if petitioner-insurer were
being considered distinct from one another, subject to the Rules of
solidarily liable with said two (2) respondents by reason of the
Court governing the multiplicity of suits. (1138a)
indemnity contract against third party liability-under which an
insurer can be directly sued by a third party — this will result in a
PROBLEM: Four foreign medical students rented the apartment of Thelma
violation of the principles underlying solidary obligation and
for a period of one year. After one semester, three of them returned to
insurance contracts.
their home country and the fourth transferred to a boarding house. Thelma
discovered that they left unpaid telephone bills in the total amount of
In solidary obligation, the creditor may enforce the entire obligation against
P80,000.00 The lease contract provided that the lessees shall pay for the
one of the solidary debtors. On the other hand, insurance is defined as "a
telephone services in the leased premises. Thelma demanded that the
respect to those which personally belong to the others, he may avail himself
ANSWER: The student is correct. Since the obligation does not expressly
thereof only as regards that part of the debt for which the latter are
provide for solidarity, nor does the law (on lease) provide for solidary
responsible. (1148a)
liability, nor does the nature of the obligation require solidarity, the student
is correct that the obligation is joint in accordance with Art. 1208.
PROBLEM: Joey, Jovy and Jojo are solidary debtors under a loan obligation
of P300,000.00 which has fallen due. The creditor has, however, condoned
And since there is no designation as to their respective shares, it is
Jojo’s entire share in the debt. Since Jovy has become insolvent, the
presumed to be divided equally among the debtoes. As such, the student
creditor makes a demand on Joey to pay the debt.
may only be made liable for ¼ or P20,000.
ANSWER:
May Y compel A and B deliver what he bought? If so, to what extent?
1. Since there was condonation of the part of Joey, there was partial
does not release him from his liability for the share of Jovy.
Moreover, nothing was turned over to Y, as such, no benefit redounded to
him so as to render the payment to a wrong party (X) to have extinguished
Insolvency of one of the debtors:
the obligation.
Art. 1217. Payment made by one of the solidary debtors extinguishes the
Based on the foregoing, Y can compel A to deliver 250 sacks and B to
obligation. If two or more solidary debtors offer to pay, the creditor may
deliver 250 sacks.
choose which offer to accept.
Art. 1211. Solidarity may exist although the creditors and the debtors may
He who made the payment may claim from his co-debtors only the share
not be bound in the same manner and by the same periods and conditions.
which corresponds to each, with the interest for the payment already made.
(1140)
If the payment is made before the debt is due, no interest for the
What recourse does D have against A and B? What are the rights of A and
Art. 1214. The debtor may pay any one of the solidary creditors; but if any
B as against each other?
demand, judicial or extrajudicial, has been made by one of them, payment
should be made to him. (1142a)
ANSWER: D can hold either A and/or B liable for P3,000. In solidary
obligations, the insolvency of one of the debtors does not reduce the
Art. 1215. Novation, compensation, confusion or remission of the debt,
obligation. The share of the insolvent debtors will be shouldered by the
made by any of the solidary creditors or with any of the solidary debtors,
other debtors who are not insolvent in accordance with the 3rd paragraph of
shall extinguish the obligation, without prejudice to the provisions of Article
Art. 1217.
1219.
If A paid the whole obligation, he will have the right to seek reimbursement
The creditor who may have executed any of these acts, as well as he who
from B the amount of P1,500 in accordance with the 2 nd paragraph of Art.
collects the debt, shall be liable to the others for the share in the obligation
1217.
corresponding to them. (1143)
in the facts, 1/5 of the debt is annulled by B’s minority, since such
Art. 1222. A solidary debtor may, in actions filed by the creditor, avail
Cesar Nickolai F. Soriano Jr.
28 Arellano University School of Law 2011-0303
Civil Law Review 2 under the class of Atty. Uribe
minority is a partial defense. A can still be held liable for the remaining
the latter, the decedent's liability being absolute and primary; and if
P40,000.
the claim is not presented within the time provided by the rules, the
2. A can still be made liable for P40,000;
same will be barred as against the estate. It is evident from the
3. The insolvency of D does not reduce the obligation. As such, A can still
foregoing that Section 6 of Rule 87 (now Rule 86) provides the
be made liable for the whole P50,000;
procedure should the creditor desire to go against the
4. The extension given to E applies to A as well. As such, A cannot be
deceased debtor, but there is certainly nothing in the said
made to pay prior to the expiration of the 6 months.
provision making compliance with such procedure a condition
Rules of Court were applied literally, Article 1216 of the New Civil Code
The appellant assails the order of dismissal, invoking its right of recourse
would, in effect, be repealed since under the Rules of Court, petitioner
against one, some or all of its solidary debtors under Article 1216 of the Civil
has no choice but to proceed against the estate of Manuel Barredo
Code —
only. Obviously, this provision diminishes the Bank's right under the
New Civil, Code to proceed against any one, some or all of the solidary
ART. 1216. The creditor may proceed against any one of the solidary
debtors. Such a construction is not sanctioned by the principle, which
debtors or some or all of them simultaneously. The demand made
is too well settled to require citation, that a substantive law cannot be
against one of them shall not be an obstacle to those which may
amended by a procedural rule. Otherwise stared, Section 6, Rule 86 of
subsequently be directed against the others, so long as the debt has
the Revised Rules of Court cannot be made to prevail over Article 1216
not been fully collected.
of the New Civil Code, the former being merely procedural, while the
latter, substantive.
ISSUE: WON the action for collection of a sum of money based on contract
against all the solidary debtors, the death of one defendant deprives the
Art. 1218. Payment by a solidary debtor shall not entitle him to
court of jurisdiction to proceed with the case against the surviving
reimbursement from his co-debtors if such payment is made after the
defendants?
obligation has prescribed or become illegal. (n)
HELD: No. It is now settled that the quoted Article 1216 grants the creditor
Art. 1220. The remission of the whole obligation, obtained by one of the
the substantive right to seek satisfaction of his credit from one, some or all
solidary debtors, does not entitle him to reimbursement from his co-debtors.
of his solidary debtors, as he deems fit or convenient for the protection of
(n)
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
c. Disjunctive
dies, the court retains jurisdiction to continue the proceedings and decide
the case in respect of the surviving defendants. Thus in Manila Surety &
This is not covered by New Civil Code. In this case, there are 2 or more
Fidelity Co., Inc. vs. Villarama et al., 107 Phil. 891 at 897, this Court ruled:
creditors and 2 or more debtors but they are named disjunctively as debtors
Art. 1210. The indivisibility of an obligation does not necessarily give rise
a. With a Penal Clause
to solidarity. Nor does solidarity of itself imply indivisibility. (n)
Art. 1226. In obligations with a penal clause, the penalty shall substitute
In determining whether an obligation is divisible or indivisible, the question
the indemnity for damages and the payment of interests in case of
asked should be: whether the obligation is capable of partial performance?
noncompliance, if there is no stipulation to the contrary. Nevertheless,
damages shall be paid if the obligor refuses to pay the penalty or is guilty of
GENERAL RULE: the creditor cannot be compelled to accept partial
fraud in the fulfillment of the obligation.
performance.
however, countered that if it were liable for damages at all, the maximum
Art. 1221. If the thing has been lost or if the prestation has become
award should not exceed P100,000.00 as stated in the penal clause of the
impossible without the fault of the solidary debtors, the obligation shall be
contract.
extinguished.
vs.
ESPIRITU, intervenor-appellant.
definite things and those which are not susceptible of partial performance
In both sales it was agreed that 12 per cent interest would be paid upon the
The trial court decided in favor of respondent and ordered petitioner to
unpaid portion of the price at the executon of the contracts, and in case of
execute the deed and cause the issuance of the TCT, otherwise it will be
non-payment of the total debt upon its maturity, 25 per cent thereon, as
liable for total amount paid plus 4% interest until fully paid. On top of
penalty.
which, the trial court awarded nominal damages of P20,000 and attorney’s
fees of P5,000.
In addition to the mortagage deeds referred to, which the defendant
executed in favor of the plaintiff, the defendant at the same time also
ISSUE: WON the 4% interest is a penalty?
signed a promissory note solidarily with his brother Rosario Espiritu for the
several sums secured by the two mortgages.
HELD: No. Yes. We hold that the trial court did not err in awarding nominal
her. Article 1170 of the Civil Code expressly provides that those who in the
Aside from the legality of the mortgage, the defendant and intervenor
performance of their obligations are guilty of fraud, negligence, or delay,
assails the validity of the 25% penalty.
and those who in any manner contravene the tenor thereof, are liable for
damages.
ISSUE: WON they are liable for the 25% penalty?
Petitioner contends that the deed of absolute sale executed between the
HELD: Yes. But reduced due to partial performance. It is finally contended
parties stipulates that should the vendor fail to issue the transfer certificate
that the 25 per cent penalty upon the debt, in addition to the interest of 12
of title within six months from the date of full payment, it shall refund to the
per cent per annum, makes the contract usurious. Such a contention is not
vendee the total amount paid for with interest at the rate of 4% per annum,
well founded. Article 1152 of the Civil Code permits the agreement upon a
hence, the vendee is bound by the terms of the provision and cannot
penalty apart from the interest. Should there be such an agreemnet, the
recover more than what is agreed upon. Presumably, petitioner in invoking
penalty, as was held in the case of Lopez vs. Hernaez (32 Phil., 631), does
Article 1226 of the Civil Code which provides that in obligations with a penal
not include the interest, and which may be demamded separetely.
clause, the penalty shall substitute the indemnity for damages and the
According to this, the penalty is not to be added to the interest for
payment of interests in case of noncompliance, if there is no stipulation to
the determination of whether the interest exceeds the rate fixed
the contrary.
by the law, since said rate was fixed only for the interest. But
considering that the obligation was partly performed, and making
The foregoing argument of petitioner is totally devoid of merit. We would
use of the power given to the court by article 1154 of the Civil
agree with petitioner if the clause in question were to be considered as a
Code, this penalty is reduced to 10 per cent of the unpaid debt.
penal clause. Nevertheless, for very obvious reasons, said clause does
not convey any penalty, for even without it, pursuant to Article
With the sole modification that instead of 25 per cent upon the sum owed,
2209 of the Civil Code, the vendee would be entitled to recover the
the defendants need pay only 10 per cent thereon as penalty, the judgment
amount paid by her with legal rate of interest which is even more
appealed from is affired in all other respects without special pronouncement
than the 4% provided for in the clause.
as to costs. So ordered.
the plaintiff, which has been violated or invaded by the defendant, may
Their contract embodied a provision, as follows:
be vindicated or recognized, and not for the purpose of indemnifying
Here, respondent Millan did not submit below any evidence to prove that
Under the foregoing provisions nominal damages are not intended for
she suffered actual or compensatory damages.
indemnification of loss suffered but for the vindication or recognition of a
right violated or invaded. They are recoverable where some injury has been
To conclude, We hold that the sum of Ten Thousand Pesos (P10,000.00) by
done the amount of which the evidence fails to show, the assessment of
way of nominal damages is fair and just under the following
damages being left to the discretion of the court according to the
circumstances, viz: respondent Millan bought the lot from petitioner in May,
circumstances of the case.
1962, and paid in full her installments on December 22, 1971, but it was
only on March 2, 1973, that a deed of absolute sale was executed in her
It is true as petitioner claims that under American jurisprudence nominal
favor, and notwithstanding the lapse of almost three years since she made
damages by their very nature are small sums fixed by the court without
her last payment, petitioner still failed to convey the corresponding transfer
regard to the extent of the harm done to the injured party.
certificate of title to Millan who accordingly was compelled to file the instant
Tokyo Menka Kaisah Ltd. of Osaka, Japan in exchange for plastic sheetings.
In a subsequent case, viz: Northwest Airlines, Inc. v. Nicolas L.
He contracted to sell these to Yu Ping Kun Co., Inc. (respondent company)
Cuenca, 1965, this Court, however, through then Justice Roberto
for P265,000. The Company undertook to open an irrevocable domestic
Concepcion who later became Chief Justice of this Court, sustained an
letter of credit for that amount in favor of Pamintuan.
award of P20,000.00 as nominal damages in favor of respnodent Cuenca.
The Court there found special reasons for considering P20,000.00 as
It was further agreed that Pamintuan would deliver the plastic sheetings to
"nominal". Cuenca who was the holder of a first class ticket from Manila to
the company at its bodegas in Manila or suburbs directly from the piers
Tokyo was rudely compelled by an agent of petitioner Airlines to move to
"within one month upon arrival of" the carrying vessels. Any violation of
the tourist class notwithstanding its knowledge that Cuenca as
the contract of sale would entitle the aggreived party to collect
Commissioner of Public Highways of the Republic of the Philippines was
from the offending party liquidated damages in the sum of ten
travelling in his official capacity as a delegate of the country to a conference
thousand pesos (Exh. A).
in Tokyo."
The plastic sheetings arrived in Manila and were received by Pamintuan. Out
Actually, as explained in the Court's decision in Northwest Airlines, there is
of the shipments, Pamintuan delivered to the company's warehouse only the
no conflict between that case and Medina, for in the latter, the P10,000.00
following quantities of plastic sheetings:
award for nominal damages was eliminated principally because the
aggrieved party had already been awarded P6,000.00 as compensatory
November 11, 1960 — 140 cases, size 48 inches by 50 yards.
damages, P30,000.00 as moral damages and P10,000.00 as exemplary
November 14, 1960 — 258 cases out of 352 cases. November 15, 1960
damages, and "nominal damages cannot coexist with compensatory
— 11 cases out of 352 cases. November 15, 1960 — 10 cases out of
damages," while in the case of Commissioner Cuenca, no such
100 cases. November 15, 1960 — 30 cases out of 100 cases.
compensatory, moral, or exemplary damages were granted to the latter.
While the plastic sheetings were arriving in Manila, Pamintuan informed the
At any rate, the circumstances of a particular case will determine whether or
president of Yu Ping Kun Co., Inc. that he was in dire need of cash with
not the amount assessed as nominal damages is within the scope or intent
which to pay his obligations to the Philippine National Bank. Inasmuch as
of the law, more particularly, Article 2221 of the Civil Code.
the computation of the prices of each delivery would allegedly be a long
For that reason We cannot agree with respondent Millan Chat the
The company filed a complaint for damages against Pamintuan. The trial
P20,000.00 award may be considered in the nature of exemplary damages.
court rendered judgment ordering Pamintuan to deliver certain plastic
damages.
Art. 19. Every person must, in the exercise of his rights and in the
The trial court and the Court of Appeals found that Pamintuan was guilty
performance of his duties, act with justice, give everyone his due, and
of fraud because he did not make a complete delivery of the plastic
performance of obligations.
There is no justification for the Civil Code to make an apparent distinction
between penalty and liquidated damages because the settled rule is that
MANNER OF BREACH
there is no difference between penalty and liquidated damages
insofar as legal results are concerned and that either may be
Art. 1170. Those who in the performance of their obligations are guilty of
recovered without the necessity of proving actual damages and
fraud, negligence, or delay, and those who in any manner contravene the
both may be reduced when proper (Arts. 1229, 2216 and 2227, Civil
a. Fraud
The penalty clause is strictly penal or cumulative in character and does not
partake of the nature of liquidated damages (pena sustitutiva) when the
Art. 1171. Responsibility arising from fraud is demandable in all
parties agree "que el acreedor podra pedir, en el supuesto incumplimiento o
obligations. Any waiver of an action for future fraud is void. (1102a)
mero retardo de la obligacion principal, ademas de la pena, los danos y
perjuicios. Se habla en este caso depena cumulativa, a differencia de
Art. 1338. There is fraud when, through insidious words or machinations of
aquellos otros ordinarios, en que la pena es sustitutiva de la reparacion
one of the contracting parties, the other is induced to enter into a contract
ordinaria." (Ibid, Castan Tobenas, p. 130).
which, without them, he would not have agreed to. (1269)
Under this kind, a party would have entered the obligation with or
Art. 1227. The debtor cannot exempt himself from the performance of the
without the fraud. Remedy is damages.
obligation by paying the penalty, save in the case where this right has been
expressly reserved for him. Neither can the creditor demand the
b. Negligence
fulfillment of the obligation and the satisfaction of the penalty at the same
time, unless this right has been clearly granted him. However, if after the
Art. 1172. Responsibility arising from negligence in the performance of
Art. 1173. The fault or negligence of the obligor consists in the omission of
In reciprocal obligations, neither party incurs in delay if the other does not
that diligence which is required by the nature of the obligation and
comply or is not ready to comply in a proper manner with what is incumbent
corresponds with the circumstances of the persons, of the time and of the
upon him. From the moment one of the parties fulfills his obligation, delay
place. When negligence shows bad faith, the provisions of Articles 1171 and
by the other begins. (1100a)
2201, paragraph 2, shall apply.
Kinds of Delay:
If the law or contract does not state the diligence which is to be observed in
1. Mora Solvendi – delay on the part of the debtor;
the performance, that which is expected of a good father of a family shall
2. Mora Accipiendi – delay on the part of the creditor;
be required. (1104a)
3. Compensatio Morae – delay on the part of both parties.
creditor fails to fulfill his part of the obligation. This could have been the
Circumstances of the persons, of the time and of the place: in the
proper basis, instead of justice and equity, in Agcaoili vs. GSIS.
case of Cangco vs. MRR, where Cangco alighted a still moving train and
stepped on watermelons in the platform and was injured, sued MRR for
When in delay? As a rule, upon demand, exceptions:
damages. MRR countered that the act of Cangco was the cause of his injury
1. When stipulated – e.g., credit card due dates;
and thus, it should not be held liable. However, the SC ruled that it is
2. When the law so declares – examples:
negligent considering the circumstances surrounding the incident, as
follows:
Obligation to deliver a determinate thing:
Person – Cangco was at his prime (20s) and could’ve alighted safely,
as he has done so in the past, even if the train was still moving.
Art. 1165. When what is to be delivered is a determinate thing, the
Moreover, there was a passenger who alighted earlier when the train
creditor, in addition to the right granted him by Article 1170, may
was moving faster as compared to when Cangco alighted.
compel the debtor to make the delivery.
Time – it was nighttime, but the platform was poorly lit;
Place – Cangco was familiar with the place as it was his daily routine to
If the thing is indeterminate or generic, he may ask that the
take the train going home. Moreover, the employees of MRR were
obligation be complied with at the expense of the debtor.
negligent when they allowed watermelons to be stacked on the
platform which caused the fall of Cangco.
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
Standard of Care:
responsible for any fortuitous event until he has effected the delivery.
1. Ordinary: that which is expected of a good father of a family (bonus
(1096)
pater pamilyas);
2. Extraordinary: utmost diligence. E.g., common carriers, banks, public
Art. 1786. Every partner is a debtor of the partnership for whatever
utility companies (Meralco vs. Ramoy) and realty firms.
he may have promised to contribute thereto.
c. Delay
Art. 1942. The bailee is liable for the loss of the thing, even if it
February 15, 1985. On March 15, 1985 Mekanico, in a telephone call, asked
ANSWER: Even if we consider the incident (stealing) as a fortuitous event,
Masipag to return the leased property that same day. Because this truck
the action may still prosper since at the time of the loss, the debtor is
broke down, Masipag was unable to comply. Early the next morning, the
already in delay as provided under Art. 1165.
equipment was burned in an accidental fire that stated in a nearby
restaurant and gutted Masipag’s auto repair shop. Mekanico seeks to hold
Reciprocal Obligations: In reciprocal obligations, as in a contract of sale,
Masipag liable for the value of the lost property plus damages on the
the general rule is that the fulfillment of the parties' respective obligations
ground that he did not return it as agreed upon. Is Mekanico’s claim
should be simultaneous. Hence, no demand is generally necessary because,
tenable? Explain.
once a party fulfills his obligation and the other party does not fulfill his, the
latter automatically incurs in delay. But when different dates for
ANSWER: No. The general rule provided under Art. 1774 is that no person
performance of the obligations are fixed, the default for each obligation
shall be responsible for those events which could not be foreseen, or though
must be determined by the rules given in the first paragraph of the present
foreseen, are inevitable. Except when the parties so stipulate, or if the law
article, that is, the other party would incur in delay only from the moment
so provides, or if the nature of the obligation requires the assumption of
the other party demands fulfillment of the former's obligation. Thus, even in
risk.
reciprocal obligations, if the period for the fulfillment of the obligation is
fixed, demand upon the obligee is still necessary before the obligor can be
In the case at bar, there was no stipulation, nor did the obligation of
considered in default and before a cause of action for rescission will accrue.
Mekaniko entail assumption of risk. However, under Art. 1165, even if the
(Solar Harvest, Inc. vs. Davao Corrugated Carton Corporation)
loss was due to a fortuitous event, if the debtor was already in delay, he
Art. 552. A possessor in good faith shall not be liable for the deterioration
Fortuitous events by definition are extraordinary events not foreseeable
or loss of the thing possessed, except in cases in which it is proved that he
or avoidable. It is therefore, not enough that the event should not have
has acted with fraudulent intent or negligence, after the judicial summons.
been foreseen or anticipated, as is commonly believed but it must be one
impossible to foresee or to avoid. The mere difficulty to foresee the
A possessor in bad faith shall be liable for deterioration or loss in
happening is not impossibility to foresee the same. (Sicam vs. Jorge)
every case, even if caused by a fortuitous event. (457a)
Art. 1168. When the obligation consists in not doing, and the obligor
Art. 2159. Whoever in bad faith accepts an undue payment, shall pay legal
does what has been forbidden him, it shall also be undone at his
interest if a sum of money is involved, or shall be liable for fruits received or
expense. (1099a)
which should have been received if the thing produces fruits.
2. Act of creditor
May the court compel A to deliver the TV set and the refrigerator and repair
the piano? Why? If not, what relief may the court grant B? Why?
Negligence, Delay or Fraud concurring with Fortuitous Event: if
upon the happening of a fortuitous event or an act of God, there concurs a
ANSWER: TV set: generic. 1460: a thing is determinate only when:
corresponding fraud, negligence, delay or violation or contravention in any
physically segregated or particularly designated. Specific performance is not
manner of the tenor of the obligation as provided for in Article 1170 of the
a remedy. However, the creditor can have another person to have such kind
Civil Code, which results in loss or damage, the obligor cannot escape
of thing delivered at the cost of the debtor plus damages - substitute
liability.
performance.
The principle embodied in the act of God doctrine strictly requires that the
Refrigerator: determinate: physically segregated (store) and particularly
act must be one occasioned exclusively by the violence of nature and
designated (by motor number). Specific performance is an available remedy
human agencies are to be excluded from creating or entering into the cause
only if it is still possible (legal and physical) to have it delivered. Substitute
of the mischief. When the effect, the cause of which is to be considered, is
performance is not a remedy. Specific performance –
found to be in part the result of the participation of man, whether it be from
active intervention or neglect, or failure to act, the whole occurrence is
Piano – the court can never compel anyone to do anything against his will
thereby humanized, as it was, and removed from the rules applicable to the
as this would be violative of his right against involuntary servitude. The
acts of God.
relief the court can give is that the debtor should’ve asked somebody else
do the obligation at the cost of the debtor plus damages. – substitute
Thus, it has been held that when the negligence of a person concurs with
performance.
an act of God in producing a loss, such person is not exempt from liability
by showing that the immediate cause of the damage was the act of God. To
RESCISSION AS A REMEDY: TWO KINDS:
be exempt from liability for loss because of an act of God, he must be free
1. Rescission under Art. 1191, which should’ve been properly termed as
from any previous negligence or misconduct by which the loss or damage
“resolution”
may have been occasioned. (NPC vs. CA)
him.
Obligations to give:
The injured party may choose between the fulfillment and the rescission of
Art. 1165. When what is to be delivered is a determinate thing, the
the obligation, with the payment of damages in either case. He may also
creditor, in addition to the right granted him by Article 1170, may compel
seek rescission, even after he has chosen fulfillment, if the latter should
the debtor to make the delivery.
become impossible.
If the obligor delays, or has promised to deliver the same thing to two or
This is understood to be without prejudice to the rights of third persons who
more persons who do not have the same interest, he shall be responsible
have acquired the thing, in accordance with Articles 1385 and 1388 and the
for any fortuitous event until he has effected the delivery. (1096)
Mortgage Law. (1124)
fundamental breach”
Art. 1167. If a person obliged to do something fails to do it, the
May be invoked even if both parties
same shall be executed at his cost.
already complied with their
obligation.
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
Cause of action is lesion or
been poorly done be undone. (1098)
economic injury to a party.
Cesar Nickolai F. Soriano Jr.
36 Arellano University School of Law 2011-0303
Civil Law Review 2 under the class of Atty. Uribe
sale or attachment except as hereinafter provided and to the extent of the
Rescission under Art. 1911 not necessarily judicial: since it is implied
value allowed by law.(223a)
in reciprocal obligations. However, rescission shall take effect only at the
time notice was given to the other party but without prejudice to the right
Art. 155. The family home shall be exempt from execution, forced sale or
of such party to question the validity of rescission. Court action here is only
attachment except:
to determine the validity of the rescission, such as to determine if there was
(1) For nonpayment of taxes;
substantial breach. However still, the rescission takes effect from notice and
(2) For debts incurred prior to the constitution of the family home;
not from court decision. (Magdalena Estate vs. Myrick and UP vs.
(3) For debts secured by mortgages on the premises before or after such
DLANDelos Angeles.
constitution; and
jewelry;
OTHER PROVISIONS:
(e) Household furniture and utensils necessary for housekeeping, and used
for that purpose by the judgment obligor and his family, such as the
Art. 1166. The obligation to give a determinate thing includes that of
judgment obligor may select, of a value not exceeding one hundred
delivering all its accessions and accessories, even though they may not have
thousand pesos;
been mentioned. (1097a)
(f) Provisions for individual or family use sufficient for four months;
Art. 2236. The debtor is liable with all his property, present and future, for
1. Extra-judicial remedies
the fulfillment of his obligations, subject to the exemptions provided by law.
a. Expressly granted by law – Art. 1786, 1788, 1526
(1911a)
The same rule applies to any amount he may have taken from the
the family home continues to be such and is exempt from execution, forced
partnership coffers, and his liability shall begin from the time he converted
Cesar Nickolai F. Soriano Jr.
37 Arellano University School of Law 2011-0303
Civil Law Review 2 under the class of Atty. Uribe
the amount to his own use. (1682)
the debtor. (1158a)
Art. 1526. Subject to the provisions of this Title, notwithstanding that the
Art. 1237. Whoever pays on behalf of the debtor without the knowledge or
ownership in the goods may have passed to the buyer, the unpaid seller of
against the will of the latter, cannot compel the creditor to subrogate him in
goods, as such, has:
his rights, such as those arising from a mortgage, guaranty, or penalty.
(1) A lien on the goods or right to retain them for the price while he is in
(1159a)
possession of them;
(2) In case of the insolvency of the buyer, a right of stopping the goods in
Payment made by a third person:
transitu after he has parted with the possession of them;
a. Who has an interest in the fulfilment of the obligation or when the
(3) A right of resale as limited by this Title;
debtor consents.
(4) A right to rescind the sale as likewise limited by this Title.
Effects:
b. Stipulated
1. The creditor can be compelled to receive payment
2. The third party payor may demand reimbursement for the full
2. Judicial remedies
amount
a. Principal remedies – 1191, 1170
3. Results in subrogation: As such, the 3rd party payor may exercise
The court shall decree the rescission claimed, unless there be just cause
Effects:
authorizing the fixing of a period.
1. The creditor cannot be compelled to receive payment.
Subrogation: when the 3rd party payor steps in the shoes of the creditor.
b. Subsidiary remedies – 1380, 1177
There is legal subrogation when:
Art. 1380. Contracts validly agreed upon may be rescinded in the cases
Art. 1302. It is presumed that there is legal subrogation:
established by law. (1290)
(1) When a creditor pays another creditor who is preferred, even
person:
G. MODES OF EXTINGUISHMENT OF OBLIGATIONS – Art. 1231
1. When stipulated;
2. When the 3rd party payor has an interest in the fulfilment of the
Art. 1231. Obligations are extinguished:
obligation
(1) By payment or performance:
3. When the debtor gives his consent.
(2) By the loss of the thing due:
(3) By the condonation or remission of the debt;
Art. 1238. Payment made by a third person who does not intend to be
(4) By the confusion or merger of the rights of creditor and debtor;
reimbursed by the debtor is deemed to be a donation, which requires the
(5) By compensation;
debtor's consent. But the payment is in any case valid as to the creditor
(6) By novation.
who has accepted it. (n)
1. Payment or performance
Art. 1239. In obligations to give, payment made by one who does not have
the free disposal of the thing due and capacity to alienate it shall not be
1. Provisions as to the payor
valid, without prejudice to the provisions of Article 1427 under the Title on
minors (who don’t have capacity) and those suffering the penalty of civil
Whoever pays for another may demand from the debtor what he has paid,
interdiction (no free disposal) cannot make a valid payment.
except that if he paid without the knowledge or against the will of the
debtor, he can recover only insofar as the payment has been beneficial to
c. Provisions as to the payee
or generic thing, whose quality and circumstances have not been stated, the
Payment may be made to:
creditor cannot demand a thing of superior quality. Neither can the
1. Person in whose favour the obligation has been constituted – not
debtor deliver a thing of inferior quality. The purpose of the
necessarily a party to the constitution of the obligation;
obligation and other circumstances shall be taken into consideration.
2. His successor in interest – who may not be creditors at the time of
(1167a)
constitution, but may be creditors at the time of fulfilment.
3. Any person authorized to receive it – agents are creditors because they
Art. 1249. The payment of debts in money shall be made in the currency
have the right to collect, but not in their own right. (This is relevant as
stipulated, and if it is not possible to deliver such currency, then in the
to Compensation as a mode of extinguishing obligation)
currency which is legal tender in the Philippines.
other mercantile documents shall produce the effect of payment only when
Art. 1241. Payment to a person who is incapacitated to administer his
they have been cashed, or when through the fault of the creditor they have
property shall be valid if he has kept the thing delivered, or insofar as the
been impaired.
payment has been beneficial to him.
In the meantime, the action derived from the original obligation shall be
Payment made to a third person shall also be valid insofar as it has
held in the abeyance. (1170)
redounded to the benefit of the creditor. Such benefit to the creditor need
not be proved in the following cases:
Art. 1250. In case an extraordinary inflation or deflation of the
(1) If after the payment, the third person acquires the creditor's rights;
currency stipulated should supervene, the value of the currency at the time
(2) If the creditor ratifies the payment to the third person;
of the establishment of the obligation shall be the basis of payment, unless
(3) If by the creditor's conduct, the debtor has been led to believe that the
there is an agreement to the contrary. (n)
third person had authority to receive the payment. (1163a)
as follows:
ANSWER: Yes, B was justified in refusing to accept payment because as a
rule, the creditor cannot be bound to accept partial payment.
"Sec. 54. Legal tender power. All notes and coins issued by the Central
as follows:
d. Thing to be paid or delivered
"Sec. 63. Legal character. Checks representing deposit money do not have
Art. 1232. Payment means not only the delivery of money but also the
legal tender power and their acceptance in the payment of debts, both
performance, in any other manner, of an obligation. (n)
public and private, is at the option of the creditor: Provided, however, That
a check which has been cleared and credited to the account of the creditor
Art. 1244. The debtor of a thing cannot compel the creditor to receive a
shall be equivalent to a delivery to the creditor of cash in an amount equal
different one, although the latter may be of the same value as, or more
to the amount credited to his account."
valuable than that which is due.
determinate thing, the payment shall be made wherever the thing might be
Checks: creditors cannot be compelled to receive payment through checks,
at the moment the obligation was constituted.
they may, however, accept the same if they want to.
In any other case the place of payment shall be the domicile of the debtor.
Extinguishment: of the obligation through payment shall only be at the
If the debtor changes his domicile in bad faith or after he has incurred in
time the check or other mercantile documents have been encashed.
delay, the additional expenses shall be borne by him.
Stale Checks: when the check becomes stale, this does not result in
These provisions are without prejudice to venue under the Rules of Court.
extinguishment of the obligation, unless, by the fault of the creditor, the
(1171a)
check’s value has been impaired.
thing;
BAR QUESTION: Mr. Magaling obtained a judgment against Mr. Mayaman
Application – not necessarily. As a rule, the debtor can designate to
in the amount of P500,000.00. A writ of execution was issued pursuant to
which debt payment applies.
which various personal properties of Mayaman were levied upon by the
Payment by cession – absolutely, because the creditors would accept
sheriff. An auction sale was scheduled.
these properties for them to sell.
Acetyline, the SC held that after the letter was given representing the
ANSWER: In 1986: No. The effective ruling of the SC in New Pacific Timber
assignment of the car, a SPA was executed authorizing creditor to sell
vs. Seneris is that manager’s check, certified check and cashier’s check are
the thing. Thus, it is clear that there was no transfer of ownership.
as good as cash. As such, the creditor does not have a right to refuse.
Thus, no dation in payment.
Application of payment – yes. Question is to which debt shall it apply.
Today: Yes. The SC reverted back to earlier decisions that checks of
Cession – none. Creditors are merely constituted as agents to sell the
whatever kind do not have legal tender power. A creditor cannot be
properties.
compelled to accept payment through checks.
Consignation – it depends. Only when the creditor accepts or the court
Effect as to extinguishment:
e. Place, date, time and manner of payment
Dation in payment – total extinguishment UNLESS intention of the
Dation in Payment
Art. 1235. When the obligee accepts the performance, knowing its
incompleteness or irregularity, and without expressing any protest or
Art. 1245. Dation in payment, whereby property is alienated to the creditor
objection, the obligation is deemed fully complied with. (n)
in satisfaction of a debt in money, shall be governed by the law of sales.
Art. 1243. Payment made to the creditor by the debtor after the latter has
Dation in payment is the delivery or transmission of ownership of a thing
been judicially ordered to retain the debt shall not be valid. (1165)
by the debtor to the creditor as an accepted equivalent of the performance
of the obligation.
Art. 1247. Unless it is otherwise stipulated, the extrajudicial expenses
required by the payment shall be for the account of the debtor. With regard
It may consists not only of a thing but also of rights, i.e., usufruct or credit.
to judicial costs, the Rules of Court shall govern. (1168a)
Nature: there has to be delivery of the thing and prior acceptance and a
Art. 1248. Unless there is an express stipulation to that effect, the creditor
consequent transfer of ownership to consider it a dation in payment. A mere
cannot be compelled partially to receive the prestations in which the
promise to deliver a thing in lieu of the originally constituted subject
obligation consists. Neither may the debtor be required to make partial
amounts to a novation.
payments.
Applicability of warranties in sales: since the law of sales is applicable
However, when the debt is in part liquidated and in part unliquidated, the
as provided under Art. 1245, the warranties and the breach thereof under
creditor may demand and the debtor may effect the payment of the former
Art. 1155 are applicable.
without waiting for the liquidation of the latter. (1169a)
Article 1555. When the warranty has been agreed upon or nothing
Art. 1251. Payment shall be made in the place designated in the obligation.
has been stipulated on this point, in case eviction occurs, the vendee
sale, while the debt is considered as the purchase price. 5 In any case,
FILINVEST CREDIT CORPORATION, plaintiff-appellee,
common consent is an essential prerequisite, be it sale or innovation to
vs.
have the effect of totally extinguishing the debt or obligation.
PHILIPPINE ACETYLENE, CO., INC., defendant-appellant.
G.R. No. L-50449 | January 30, 1982 | Second Division | J. De Castro
The evidence on the record fails to show that the mortgagee, the herein
appellee, consented, or at least intended, that the mere delivery to, and
FACTS: On October 30, 1971, the Philippine Acetylene (appellant)
acceptance by him, of the mortgaged motor vehicle be construed as actual
purchased from one Alexander Lim, as evidenced by a Deed of Sale, a
payment, more specifically dation in payment or dacion en pago. The fact
motor vehicle described as Chevorlet, 1969 model with Serial No.
that the mortgaged motor vehicle was delivered to him does not necessarily
136699Z303652 for P55,247.80 with a down payment of P20,000.00 and
mean that ownership thereof, as juridically contemplated by dacion en
the balance of P35,247.80 payable, under the terms and conditions of the
pago, was transferred from appellant to appellee. In the absence of clear
promissory note, at a monthly installment of P1,036.70 for 34 months, due
consent of appellee to the proferred special mode of payment, there can be
and payable on the first day of each month starting December 1971 through
no transfer of ownership of the mortgaged motor vehicle from appellant to
and inclusive September 1, 1974 with 12 % interest per annum on each
appellee. If at all, only transfer of possession of the mortgaged motor
unpaid installment, and attorney's fees in the amount equivalent to 25% of
vehicle took place, for it is quite possible that appellee, as mortgagee,
the total of the outstanding unpaid amount.
merely wanted to secure possession to forestall the loss, destruction,
Special Power of Attorney To Sell" dated March 12, 1973, attached as Annex
Since appellant defaulted in 9 successive installments, appellee sent the
"C" of the appellant's answer to the complaint. An examination of the
former a letter demanding "that you (appellant) remit the aforesaid amount
language of the document reveals that the possession of the mortgaged
in full in addition to stipulated interest and charges or return the mortgaged
motor vehicle was voluntarily surrendered by the appellant to the appellee
property to my client at its office at 2133 Taft Avenue, Malate, Manila within
authorizing the latter to look for a buyer and sell the vehicle in behalf of the
five (5) days from date of this letter during office hours." In reply, appellant
appellant who retains ownership thereof, and to apply the proceeds of the
advised appellee of its decision to "return the mortgaged property, which
sale to the mortgage indebtedness, with the undertaking of the appellant to
return shall be in full satisfaction of its indebtedness pursuant to Article
pay the difference, if any, between the selling price and the mortgage
1484 of the New Civil Code." Accordingly, the mortgaged vehicle was
obligation. With the stipulated conditions as stated, the appellee, in essence
returned to the appellee together with the document "Voluntary Surrender
was constituted as a mere agent to sell the motor vehicle which was
with Special Power of Attorney To Sell" executed by appellant on March 12,
delivered to the appellee, not as its property, for if it were, he would have
1973 and confirmed to by appellee's vice-president.
full power of disposition of the property, not only to sell it as is the limited
authority given him in the special power of attorney. Had appellee intended
Unable to sell the motor vehicle due to unpaid taxes, appellee offered to
to completely release appellant of its mortgage obligation, there would be
deliver back the motor vehicle to the appellant but the latter refused to
no necessity of executing the document captioned "Voluntary Surrender
accept it, so appellee instituted an action for collection of a sum of money
with Special Power of Attorney To Sell." Nowhere in the said document can
with damages in the CFI of Manila on September 14, 1973.
We find that the mere surrender of the mortgaged motor vehicle to the
noting that it is the fact of foreclosure and actual sale of the mortgaged
ISSUE: Whether the return of the mortgaged motor vehicle to the appellee
chattel that bar the recovery by the vendor of any balance of the
by virtue of its voluntary surrender by the appellant constituted dacion en
purchaser's outstanding obligation not satisfied by the sale. 7 As held by this
pago, which totally extinguished and/or cancelled its obligation to the
Court, if the vendor desisted, on his own initiative, from consummating the
appellee.
auction sale, such desistance was a timely disavowal of the remedy of
if the terms thereof are clear and leave no doubt as to the intention of
As Pascual M. Perez Enterprises failed to comply with its obligation, the
the contracting parties, then the literal meaning of the stipulations
petitioner was compelled to pay, as it did pay, the fair value of the two
shall control but when the words appear contrary to the evident
surety bonds in the total amount of P144,000. Except for partial payments
intention of the parties, the latter shall prevail over the former.
in the total sum of P55,600 and notwithstanding several demands, Pascual
(Labasan v. Lacuesta, 86 SCRA 16) In order to judge the intention of
M. Perez Enterprises failed to reimburse the petitioner for the losses it
the parties, their contemporaneous and subsequent acts shall be
sustained under the said surety bonds.
principally considered. (Emphasis supplied)
The petitioner filed before the CFI of Batanga a claim for sum of money
The petitioner issued the two (2) surety bonds on December 4, 1959 in
against the estate of the late Nicasia Sarmiento which was being
behalf of the Pascual M. Perez Enterprises to guaranty fullfillment of its
administered by Pascual M. Perez.
obligation under the "Contract of Sale of Goods" entered into with the
Singer Sewing Machine Co. In consideration of the two surety bonds, two
CFI of Batangas ordered the administrator Pascual M. Perez to pay the
indemnity agreements were executed by Pascual M. Perez followed by a
claimant P144,000.00 with interest, minus the payments already made in
Deed of Assignment which was also executed on the same date.
the amount of P55,600 considering that the estate of the late, Nicasia
Sarmiento is jointly and severally liable to the petitioner for the amount the In
the case of Lopez v. Court of appeals (114 SCRA 673), we stated that:
latter had paid the Singer Sewing Machine Company, Ltd.
and cogent reasons to conclude that the parties intended said stock
I, Pascual M. Perez, Filipino, of legal age, married, with residence and
assignment to complement the indemnity agreement and thereby
postal address at 115 D. Silang, Batangas, as the owner and operator
sufficiently guarantee the indemnification of Philamgen should it be
of a business styled "PASCUAL M. PEREZ ENTERPRISES," with office at
required to pay Lopez" loan to Prudential Bank. (at pp. 682-683)
R-31 Madrigal Building, Escolta, Manila, hereinafter referred to as
ASSIGNOR, for and in consideration of the issuance in my behalf and
The respondent court stated that "by virtue of the execution of the deed of
in favor of the SINGER SEWING MACHINE COMPANY, LTD., of two
assignment ownership of administrator-appellant's lumber materials had
Surety Bonds (CSIC) Bond Nos. 2631 and 2632 each in the amount of
been transferred to the claimant-appellant and this amounted to dation in
SEVENTY TWO THOUSAND PESOS (P72,000.00), or with a total sum of
payment whereby the former is considered to have alienated his property in
ONE RED FORTY-FOUR THOUSAND PESOS (Pl44,000.00), Philippine
favor of the latter in satisfaction of a monetary debt (Artide 1245). As a
Currency, by the CITIZENS' SURETY AND INSURANCE CO., INC., a
consequence thereof, administrator-appellant's obligation under the surety
corporation duly organized and existing under and by virtue of the
bonds is thereby extinguished upon the execution of the deed of
laws of the Republic of the Philippines, with principal office at R-306
assignment." This statement is not sustained by the records.
Samanillo Building, Escolta, Manila, Philippines, and duly represented
in the act by its Vice-President and General Manager, ARISTEO L. LAT,
The transaction could not be dation in payment. As pointed out in the
hereinafter referred to as ASSIGNEE, assign by these presents, unto
concurring and dissenting opinion of Justice Edgardo L. Paras and the
said ASSIGNEE, its heirs, successors, administrators or assigns the
dissenting opinion of Justice Mariano Serrano when the deed of assignment
the former without waiting for the liquidation of the latter. (1169a)
Considering the above jurisprudence, We find that the debt or
obligation at bar has not matured on June 2, 1959 when Lopez 2.
Debtor cannot apply payment to principal if interest has not been paid.
'alienated' his 4,000 shares of stock to Philamgen. Lopez' obligation
would arise only when he would default in the payment of the principal
Art. 1253. If the debt produces interest, payment of the principal
obligation (the loan) to the bank and Philamgen had to pay for it. Such
shall not be deemed to have been made until the interests have been
fact being adverse to the nature and concept of dation in payment, the
covered. (1173)
same could not have been constituted when the stock assignment was
executed. Moreover, there is no express provision in the terms of the 3.
The debt must be liquidated, except when the parties agree otherwise;
stock assignment between Philamgen and Lopez that the principal 4.
Cannot be made when the period has not arrived and such period was
obligation (which is the loan) is immediately extinguished by reason of
constituted in favour of the creditor, except with the consent of the
such assignment. (at p. 686)
creditor (Art. 1252);
5.
When there is agreement as to which debt must be paid first.
The deed of assignment cannot be regarded as an absolute conveyance
whereby the obligation under the surety bonds was automatically
Example: if A is indebted to B for P100, P50 and P25, and A pays P25, to
extinguished. The subsequent acts of the private respondent bolster the fact
which shall the payment apply?
that the deed of assignment was intended merely as a security for the
issuance of the two bonds. Partial payments amounting to P55,600.00 were
Answer: Generally, the debt which was assigned by the debtor.
made after the execution of the deed of assignment to satisfy the obligation
under the two surety bonds. Since later payments were made to pay the What
if A designates the second debt, P50? Not allowed, because a
indebtedness, it follows that no debt was extinguished upon the execution
limitation as to his right to designate is that the creditor cannot be
of the deed of assignment. Moreover, a second real estate mortgage was
compelled to receive partial payment. Except if it is partly liquidated and
executed on April 12, 1960 and eventually cancelled only on May 15, 1962.
partly unliquidated.
If indeed the deed of assignment extinguished the obligation, there was no
reason for a second mortgage to still have to be executed. We agree with What
if A designates the third debt, P25? Generally allowed, except if the
the two dissenting opinions in the Court of Appeals that the only same
is not yet due and the benefit of the period was constituted for the
conceivable reason for the execution of still another mortgage on April 12,
creditor.
1960 was because the obligation under the indemnity bonds still existed. It
was not yet extinguished when the deed of assignment was executed on If
the debtor did not designate, to which debt shall payment
December 4, 1959. The deed of assignment was therefore intended merely
apply? That which was chosen by the creditor as reflected in the receipt
as another collateral security for the issuance of the two surety bonds.
which is accepted by the debtor without protest. (Art. 1252, 2nd par.)
proportionately.
Application of Payment: is the designation of the debt which is being
paid by a debtor who has several obligations of the same kind in favor of
Debts which are considered more onerous:
the creditor to whom payment is made.
1.
Requisites:
PRINCIPAL
1. There is only one debtor; 2.
ebt
2. There are several debts;
where he is the SOLE DEBTOR
3. The debts are of the same kind; 3.
4. There is only one and the same creditor.
each is more burdensome than as to every debtor
4.
Due and demandable debts: as a general rule, all the debts must be due 5.
t with
and demandable. EXCEPTION: when there is mutual agreement or when the
HIGHEST INTEREST RATE
consent of the party for whose benefit the term was constituted was 6.
When there is an unsecured debt with interest and a secured debt
obtained.
7.
Right to apply payment: generally, the debtor has the right to apply the 8.
When there is a bond where the principal and surety are solidarily
payment at the time of making the payment, subject to the following
LIMITATIONS:
principal, the UNSECURED PORTION of the debt is more onerous
1. Creditor cannot be compelled to accept partial payment. (Art. 1248);
made refuses without just cause to accept it, the debtor shall be
Art. 1255. The debtor may cede or assign his property to his creditors in
released from responsibility by the consignation of the thing or sum
payment of his debts. This cession, unless there is stipulation to the
due.
contrary, shall only release the debtor from responsibility for the net
proceeds of the thing assigned. The agreements which, on the effect of the
Consignation alone shall produce the same effect in the following
cession, are made between the debtor and his creditors shall be governed
cases:
by special laws. (1175a)
(1) When the creditor is absent or unknown, or does not appear at
(5) When the title of the obligation has been lost. (1176a)
Advantages of judicial cession is that the court discharges the debtor of
his debts and the obligations are extinguished.
As a rule, tender of payment is not required prior to consignation.
The consignation having been made, the interested parties shall also
Tender of Payment is the manifestation made by the debtor to the
be notified thereof. (1178)
creditor of his desire to comply with his obligation, with the offer of
immediate performance. It is a PREPARATORY ACT to consignation and in
Art. 1259. The expenses of consignation, when properly made, shall be
itself DOES NOT extinguish the obligation.
charged against the creditor. (1178)
495, Vda. de Quirino v. Palarca, L-28269, Aug. 16, 1969) to preserve the
Withdrawal as a matter of right: debtor withdraws before acceptance
right to redeem (Villegas v. Capistrano, 9 Phil. 416).
by the creditor or before judicial declaration of propriety of consignation. In
this case, no extinguishment yet of the obligation. As such, no revival since
The case is remanded to the court a quo for it to accept payment or
the obligation has not been extinguished to begin with.
consignation 2 (in connection with the legal redemption which We are
Loss: means when the thing goes out of commerce, perishes or disappears
INTEREST LIABILITY OF DEBTOR: A was indebted to B payable in
in such a way that its existence is unknown or that it cannot be recovered.
2003. The following transpired:
2005: tender of payment;
Art. 1262. An obligation which consists in the delivery of a determinate
2009: consignation in court;
thing shall be extinguished if it should be lost or destroyed without the fault
2014: promulgation of the decision finding that the consignation was
of the debtor, and before he has incurred in delay.
proper.
When by law or stipulation, the obligor is liable even for fortuitous events,
What is the liability of A as to interest? From 2003 to 2005 only. Although
the loss of the thing does not extinguish the obligation, and he shall be
the obligation was extinguished only in 2009 when the consignation in court
responsible for damages. The same rule applies when the nature of the
was made, in this case, A made a tender of payment in 2005, which B
obligation requires the assumption of risk. (1182a)
refused. At that moment, A was already in delay for non-payment, but B
was also in delay for unjustified refusal to accept payment. As such, both of
Fortuitous Event: generally, the debtor is not liable for damages if the
them are already in delay starting 2005. As such, no one is in delay.
thing is lost due to fortuitous event, EXCEPTIONS:
Accordingly, A should not be liable for interest from the time the tender of
1. When the law so provides;
payment was made.
2. When stipulation so provides;
Article 1942. The bailee is liable for the loss of the thing, even if it should
HELD: The reconsideration of this issue is hereby GRANTED.
be through a fortuitous event:
(1) If he devotes the thing to any purpose different from that for which it
While res judicata may bar questions on the validity of the sale in view of
has been loaned;
alleged insanity and intimidation (and this point is no longer pressed by
(2) If he keeps it longer than the period stipulated, or after the
counsel for the petitioner) still the question of the right of legal redemption
accomplishment of the use for which the commodatum has been
has remained unresolved.
constituted;
(3) If the thing loaned has been delivered with appraisal of its value, unless
Be it noted that in an action (Civil Case No. 20968) filed on March 24, 1975
there is a stipulation exempting the bailee from responsibility in case of a
before the defunct Court of First Instance of Rizal, petitioner presented an
fortuitous event;
alternative cause of action or prayer just in case the validity of the sale
(4) If he lends or leases the thing to a third person, who is not a member of
would be sustained. And this alternative cause of action or prayer is to allow
his household;
petitioner to legally redeem the property.
(5) If, being able to save either the thing borrowed or his own thing, he
casing? Yes, if the primary consideration of the creditor was to obtain the
Article 2159. Whoever in bad faith accepts an undue payment, shall pay
casing.
legal interest if a sum of money is involved, or shall be liable for fruits
received or which should have been received if the thing produces fruits.
The test is whether the parties would not have entered into the obligation
without the thing that have been lost, then the obligation is extinguished.
He shall furthermore be answerable for any loss or impairment of the thing
from any cause, and for damages to the person who delivered the thing,
Art. 1265. Whenever the thing is lost in the possession of the debtor, it
until it is recovered. (1896a)
shall be presumed that the loss was due to his fault, unless there is proof to
the contrary, and without prejudice to the provisions of article 1165. This
Article 1174. Except in cases expressly specified by the law, or when it is
presumption does not apply in case of earthquake, flood, storm, or other
otherwise declared by stipulation, or when the nature of the obligation
natural calamity. (1183a)
requires the assumption of risk, no person shall be responsible for those
events which could not be foreseen, or which, though foreseen, were
Burden of proof: is generally with the creditor claiming that the loss was
inevitable. (1105a)
due to the fault of the debtor. However, if the thing is lost while in the
possession of the debtor, a presumption arises that it was due to his fault,
Article 1165. When what is to be delivered is a determinate thing, the
thus, the burden of proof shifts to him. However still, if the thing was lost
creditor, in addition to the right granted him by article 1170, may compel
on the occasion of a calamity, then no such presumption arises, the burden
the debtor to make the delivery.
of proof is still with the creditor.
obligor. (1184a)
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
Loss of the thing may likewise cover impossibility of performance, e.g.,
for any fortuitous event until he has effected the delivery. (1096) a
debtor is obliged to paint a building and the building was destroyed
the DFA provided the accused with a passport: it is still the duty of
BAR EXAM QUESITON: For value received, Pedro promised to deliver to
the surety to make sure that the accused will appear before the trial and to
Juan on or before Aug. 15, 1984 a Mercedes benz with plate number 123
do everything and take all steps necessary to prevent departure. As such, it
which he had just brought home from Germany as well as a 1984 tv set.
should have informed the DFA of the pending case against the accused.
Unfortunately the two were destroyed by an accidental fire. Are obligations
of Pedro extinguished?
Moreover, Art. 1266 is not applicable since it pertains to the relationship of
creditor and debtor which does not exists between a surety company on
ANSWER: CAR – due to fortuitous event – extinguished. This is an
one hand, and the State on the other. (See People vs. Franklin)
obligation to deliver a determinate thing, therefore, with the loss of the
thing due to a FE, the obligation is extinguished without liability for
PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
damages on the part of the debtor.
vs.
FACTS: Natividad Franklin was charged before the Justice of the Peace
Art. 1264. The courts shall determine whether, under the circumstances,
Court of Angeles, Pampanga with estafa. Upon a bail bond posted by the
the partial loss of the object of the obligation is so important as to
Asian Surety & Insurance Company, Inc. in the amount of P2,000, she was
extinguish the obligation. (n)
released from custody.
Cesar Nickolai F. Soriano Jr.
46 Arellano University School of Law 2011-0303
Civil Law Review 2 under the class of Atty. Uribe
That the accused in this case was able to secure a Philippine passport which
After preliminary investigation, the Justice of the Peace Court elevated it to
enabled her to go to the United States was, in fact, due to the surety
the CFI of Pampanga where the Provincial Fiscal filed the corresponding
company's fault because it was its duty to do everything and take all
information against the accused. As the accused failed to appear on the
steps necessary to prevent that departure. This could have been
date set for her arraignment, the court ordered her arrest and required the
accomplished by seasonably informing the Department of Foreign Affairs
surety company to show cause why the bail bond posted by it should not be
and other agencies of the government of the fact that the accused for
forfeited.
whose provisional liberty it had posted a bail bond was facing a criminal
charge in a particular court of the country. Had the surety company done
Due to the failure of the surety company to produce the accused again
this, there can be no doubt that no Philippine passport would have been
notwithstanding the 60-day period granted to it, the court rendered the
issued to Natividad Franklin.
judgment of forfeiture of the bail bond posted by it for the provisional
release of Natividad Franklin.
Difficulty of prestation
Subsequently, the trial court denied the surety company’s motion for a
Art. 1267. When the service has become so difficult as to be manifestly
reduction of bail and its ensuing motion for reconsideration.
beyond the contemplation of the parties, the obligor may also be released
exception thereto similar to Art. 1267 is rebus sic stantibus. However, Art.
ISSUE: WON Article 1266 of the NCC is applicable in this case?
1267 is not an absolute application of the latin maxim since it may impair
By the mere fact that a person binds himself as surety for the
Difficulty must be caused by an event not contemplated by the
accused, he takes charge of, and absolutely becomes
parties: For Art. 1267 to apply, the difficulty must be something beyond
responsible for the latter's custody, and under such
the contemplation of the parties, such that, increase in the prices of
circumstances it is incumbent upon him, or rather, it is his
construction materials would not warrant extinguishment of the obligation
inevitable obligation not merely a right, to keep the accused as
this is not a fortuitous event beyond the contemplation of the parties.
at all times under his surveillance, inasmuch as the authority
emanating from his character as surety is no more nor less
Moreover, assuming it was not foreseen, the power of the court is only to
than the Government's authority to hold the said accused
release the debtor from his obligations and does not cover changing the
under preventive imprisonment. In allowing the accused Eugenio
terms of the obligation. (see Occena vs. Jabson)
Uy Tuising to leave the jurisdiction of the Philippines, the appellee
necessarily ran the risk of violating and in fact it clearly violated the
JESUS V. OCCENA and EFIGENIA C. OCCENA, petitioners,
terms of its bail bonds because it failed to produce the said accused
vs.
when on January 15, 1932, it was required to do so. Undoubtedly, the
HON. RAMON V. JABSON, Presiding Judge of the Court Of First
result of the obligation assumed by the appellee to hold the accused at
Instance of Rizal, Branch XXVI; COURT OF APPEALS and TROPICAL
all times to the orders and processes of the lower court was to prohibit
HOMES, INC., respondents.
said accused from leaving the jurisdiction of the Philippines because,
G.R. No. L-44349 | October 29, 1976 |
otherwise, said orders and processes would be nugatory and inasmuch
as the jurisdiction of the court from which they issued does not extend
FACTS: On February 25, 1975, private respondent Tropical Homes, Inc.
beyond that of the Philippines, they would have no binding force
filed a complaint for modification of the terms and conditions of its
outside of said jurisdiction.
subdivision contract with petitioners (landowners of a 55,330 square meter
parcel of land in Davao City), making the following allegations:
It is clear, therefore, that in the eyes of the law a surety becomes the
legal custodian and jailer of the accused, thereby assuming the
"That due to the increase in price of oil and its derivatives and the
obligation to keep the latter at all times under his surveillance, and
concomitant worldwide spiralling of prices, which are not within the
to produce and surrender him to the court upon the latter's
control of plaintiff, of all commodities including basis raw materials
demand.
required for such development work, the cost of development has
risen to levels which are unanticipated, unimagined and not within the
circumstances therein averred, the courts cannot even in equity grant the
Petitioners moved to dismiss the complaint principally for lack of cause of
relief sought.
action, and upon denial thereof and of reconsideration by the lower court,
elevated the matter on certiorari to the CA.
LAGUNA TAYABAS BUS COMPANY and BATANGAS
truck, for a period of five years, renewable for another similar period, to
Hence, the petition at bar wherein petitioners insist that the worldwide
commence from the approval of the lease contract by the Public Service
increase in prices cited by respondent does not constitute a sufficient
Commission. On the same date, the Public Service Commission provisionally
cause of action for modification of the subdivision contract.
approved the lease contract subject to certain conditions.
Tayabas Bus Company separately filed with the Public Service Commission a
While respondent court correctly cited in its decision the Code Commission's
petition for authority to suspend the operation on the lines covered by the
report giving the rationale for Article 1267 of the Civil Code, to wit;
certificates of public convenience leased to each of them by the Biñan
Transportation Company.
The general rule is that impossibility of performance releases the
obligor. However, it is submitted that when the service has become so
The petitioners alleged as reasons the reduction in the amount of dollars
difficult as to be manifestly beyond the contemplation of the parties,
allowed by the Monetary Board of the Central Bank of the Philippines for the
the court should be authorized to release the obligor in whole or in
purchase of spare parts needed in the operation of their trucks, the alleged
part. The intention of the parties should govern and if it appears that
difficulty encountered in securing said parts, and their procurement at
the service turns out to be so difficult as have been beyond their
exorbitant costs, thus rendering the operation of the leased lines prohibitive.
contemplation, it would be doing violence to that intention to hold the
They further alleged that the high cost of operation, coupled with the lack of
obligor still responsible. ...
passenger traffic on the leased lines resulted in financial losses.
It misapplied the same to respondent's complaint.
Biñan’s assignee opposed the petition on the ground that the Public Service
Commission had no jurisdiction to grant the relief prayed for. The latter,
If respondent's complaint were to be released from having to comply with
however, overruled all oppositions filed by the assignee and other creditors
the subdivision contract, assuming it could show at the trial that the service of
the insolvent.
undertaken contractually by it had "become so difficult as to be manifestly
beyond the contemplation of the parties", then respondent court's upholding On
May 19, 1959, plaintiff Biñan Transportation Company represented by
of respondent's complaint and dismissal of the petition would be justifiable
Francisco C. Manabat, assignee, filed this action against defendants Laguna
under the cited codal article. Without said article, respondent would remain
Tayabas Bus Company and Batangas Transportation Company for the
bound by its contract under the theretofore prevailing doctrine that
recovery of the sum of P42,500 representing the accrued rentals for the
yield no substantial profit for the lessee bus company. Petitioners' profits
On appeal, the CA affirmed in toto the CFI decision.
may be reduced due to increase operating costs; but the volume of
passenger traffic along the leased lines not only remains same but may
On September 21, 1964, appellants filed the present appeal before the SC
even increase as the tempo of the movement of population is intensified by
which issued a resolution dismissing said petition "for lack of merit."
the industrial development of the areas covered or connected by the leased
economy. The citizenry and the economy will suffer by reason of any
... The amendment includes an alternative ground relating to
disruption in the transportation facilities.
petitioners' prayer for the reduction of the rentals payable by them.
This alternative petition was not included in the original one as
Furthermore, we are not at all convinced that the lease contract brought no
petitioners where genuinely convinced that they should have been
material advantage to the lessor for the period of suspension. It must be
absolved from all liabilities whatever. However, in view of the apparent
recalled that the lease contract not only stipulated for the transfer of the
position taken by this Honorable Court, as implied in its resolution on
lessor's right to operate the lines covered by the contract, but also for a
October 12, 1964, notice of which was received on October 16, 1964,
forbearance on the part of the lessor to operate transportation business
petitioners now squarely submit their alternative position for
along the same lines — and to hold a certificate for that purpose. Thus,
consideration. There is decisional authority for the reduction of rentals
even if the lessee would not actually make use of the lessor's certificates
payable (see Reyes v. Caltex, 47 O.G. 1193, 1203-1204) (p. 44, rec).
over the leased lines, the contractual commitment of the lessor not to
operate on the lines would sufficiently insure added profit to the lessees on
ISSUE: WON Article 1680 of the Civil Code is applicable to the case at bar?
account of the lease contract. In other words, the commitment alone of the
lessor under the contract would enable the lessees to reap full benefits
HELD: NO. The authorities from which the petitioners draw support,
therefrom since the commuting public would, after all, be forced — at their
however, are not applicable to the case at bar.
inconvenience and prejudice — to patronize petitioner's remaining buses.
solidarity).
Art. 1270. Condonation or remission is essentially gratuitous, and requires
the acceptance by the obligor. It may be made expressly or impliedly.
3. As to manner of remission
a. Inter vivos
One and the other kind shall be subject to the rules which govern inofficious
b. Mortis causa – must be in a will.
donations. Express condonation shall, furthermore, comply with the forms of
donation. (1187)
BAR QUESTION: Arturo borrowed P500,000.00 from his father. After he
had paid P300,000.00, his father died. When the administrator of his
Condonation/Remission is an act of liberality, by virtue of which, without
father’s estate requested payment of the balance of P200,000.00, Arturo
receiving any equivalent, the creditor renounces the enforcement of an
replied that the same had been condoned by his father as evidenced by a
obligation, which is extinguished in its entirety or in that part or aspect of
notation at the back of his check payment for the P300,000.00 reading: “In
the same to which the remission refers.
full payment of the loan”. Will this be a valid defense in an action for
collection? (3%)
Gratuitous: If not gratuitous, it will be considered:
1. Dation in payment – when the creditor receives a thing different from
ANSWER: No. The condonation in this case is express. However, the same
that stipulated;
covering movable real property and more than P500, the law requires it to
2. Novation – when the subject or principal conditions of the obligation
be written and the acceptance thereof must likewise be in writing.
should be changed;
3. Compromise – when the matter renounced is in litigation or dispute
In this scenario, the condonation is written, however, there is nothing that
and in exchange of some concession which the creditor receives.
shows acceptance was made in writing neither in the instrument itself or on
a
separate instrument.
Kinds of Condonation:
1. As to form:
Art. 1271. The delivery of a private document evidencing a credit, made
a. Express – when made formally; should be in accordance with the
voluntarily by the creditor to the debtor, implies the renunciation of the
forms of ordinary donations.
action which the former had against the latter.
debtor and his heirs may uphold it by proving that the delivery of the
Article 745. The donee must accept the donation personally, or
document was made in virtue of payment of the debt. (1188)
through an authorized person with a special power for the
purpose, or with a general and sufficient power; otherwise, the
Implied/Tacit Remission may be had from:
donation shall be void. (630)
1. Delivery of a private document evidencing a credit, voluntarily made by
Art. 1272. Whenever the private document in which the debt appears is
An oral donation requires the simultaneous delivery of the thing
found in the possession of the debtor, it shall be presumed that the creditor
or of the document representing the right donated.
delivered it voluntarily, unless the contrary is proved. (1189)
Art. 1278. Compensation shall take place when two persons, in their own
4. Confusion or Merger of Rights
right, are creditors and debtors of each other. (1195)
Art. 1275. The obligation is extinguished from the time the characters of
Compensation: a mode of extinguishment to the concurrent amount, the
creditor and debtor are merged in the same person. (1192a)
obligations of those persons who in their own right, are reciprocally
Requisites:
Compensation Payment
a. Must take place between the credit and the principal debtor;
capacity of party not necessary because it indispensable
b. Must involve the very same obligation;
to dispose of thing takes effect by operation of
c. Must be total.
law
obligation
a. PNB is indebted to Allied. PNB and Allied Bank entered into a merger
agreement. In this case, the indebtedness of PNB is extinguished due
Compensation Merger
to the merger.
number of always 2 only one
b. H is indebted to his father T. When T dies and H is his only heir, the
obligations
obligation becomes extinguished since H will inherit the credit. The
parties 2 persons are mutually the the creditor and the
characters of the creditor and debtor in the said obligation are merged
creditor and debtor of each debtor become one
in his person.
other and the same
QUESTION: A borrowed money from B for P3B in 1998. In 2005, there was
Compensation Counterclaim
merger of the credit and the debt in the person of B. In 2014, there was
by operation of law
Will the action prosper?
Kinds of Compensation:
1. As to effects/extent:
ANSWER: Yes. The running of the prescriptive period is suspended during
b. Partial – when the amounts are not equal. This is total as to the
Art. 1276. Merger which takes place in the person of the principal debtor
2. As to origin/cause:
person of any of the latter does not extinguish the obligation. (1193)
are present;
Guarantors: this article is for the benefit of the guarantor. But the merger
Requisites:
which corresponds to each, with the interest for the payment already made.
If the payment is made before the debt is due, no interest for the
(1) That each one of the obligors be bound principally, and that he be at
(2) That both debts consist in a sum of money, or if the things due are
reimburse his share to the debtor paying the obligation, such share shall be
consumable, they be of the same kind, and also of the same quality if the
borne by all his co-debtors, in proportion to the debt of each. (1145a)
make the deposits of the latter beyond the garnishment of the respondnets?
BAR QUESTION: “B” borrowed from “C” P1,000.00 payable in one year.
When “C” was in the province, “C’s” 17-year old son borrowed P500.00 from
HELD: No. PNB's main thesis is that when it opened a savings account for
“B” for his school tuition. However, the son spent it instead nightclubbing.
ISABELA on March 9, 1979 in the amount of P 2M, it (PNB) became
When the debt to “C” fell due, “B” tendered only P500.00, claiming
indebted to ISABELA in that amount. So that when ISABELA itself
compensation o on the P500.00 borrowed by “C’s” son.
subsequently came to be indebted to it on account of ISABELA's breach of
the terms of the Credit Agreement of October 13, 1977, and therefore
a) Is there legal compensation? Why?
ISABELA and PNB became at the same time creditors and debtors of each
b) Suppose the minor son actually used the money for school tuition, would
other, compensation automatically took place between them, in accordance
the answer be different? Reasons.
with Article 1278 of the Civil Code. The amounts due from each other were,
take when two persons, in their own right, are creditors and debtors of each
Credit Line – the existence of a credit line does not necessarily create a
other. " Also true is that compensation may transpire by operation of law, as
debtor-creditor relationship if the debtor did not avail of said credit line. (see
when all the requisites therefor, set out in Article 1279, are present.
PNB vs. Vda de Ong Acero)
Nonetheless, these legal provisions cannot apply to PNB's advantage under
consists of two (2) documents marked in its behalf as Exhibits 1 and 2, But
FACTS: Savings Account No. 010-5878868-D of Isabela Wood Construction
as the IAC has cogently observed, these documents do not prove any
& Development Corporation, opened with the Philippine National Bank on
indebtedness of ISABELA to PNB. All they do prove is that a letter of credit
March 9, 1979 in the amount of P2 million is the subject of two (2)
might have been opened for ISABELA by PNB, but not that the credit was
conflicting claims, sought to be definitively resolved in the proceedings at
ever availed of (by ISABELA's foreign correspondent MAN, or that the goods
bar:
thereby covered were in fact shipped, and received by ISABELA.
It bears stressing that PNB did not at all lack want for opportunity to
The other claim has been put forth by the Philippine National Bank
produce these documents, if it does indeed have them. Judge Solano, it
(hereafter, simply PNB) which claims that since ISABELA was at some point
should be recalled, specifically allowed PNB to introduce evidence in relation
in time both its debtor and creditor-ISABELA's deposit being deemed a loan
to its Motion for Reconsideration filed on August 26, 1980, and thus
to it (PNB)-there had occurred a mutual set-off between them, which
furnished the occasion for PNB to prove, among others, ISABELA's debt to
effectively precluded the ACEROS' recourse to that deposit, by virtue of an
it. PNB unaccountably failed to do so. Moreover, PNB never even attempted
agreement between ISABELA and PNB that the said deposit was collateral in
to offer or exhibit such evidence, in the course of the appellate proceedings
connection to the indebtedness to PNB as to which ISABELA had assumed
before the IAC, which is a certain indication, in that Court's view, that PNB
certain undertakings and failure to fulfill the same would empower PNB to
does not really have these proofs at all.
apply the deposit as payment of that indebtedness.
For this singular omission PNB offers no explanation except that it saw no
As such, PNB intervened in the execution of the judgment in favor of the
necessity to submit the Documents in evidence, because sometime on
ACEROS and moved for reconsideration but was denied by the lower court.
March 14, 1980, the ACEROS's attorney had been shown those precise
Petitioner again moved for the reconsideration of the second judgment
documents — setting forth ISABELA's loan obligations, such as the import
where the trial court (now under Judge Solano) set aside the two judgments
bills and the sight draft covering drawings on the L/C for ISABELA's account
and set for hearing PNB’s first motion for reconsideration of the earlier
— and after all, the ACEROS had not really put this indebtedness in
judgment which was eventually stricken down, holding that there was a
issue. The explanation cannot be taken seriously. In the picturesque but
valid assignment by ISABELA to PNB which effectively placed the amounts
forceful language of the Appellate Court, the explanation "is silly as you do
beyond the reach of PNB.
not prove a fact in issue by showing evidence in support thereof to the
FERNANDEZ, respondents.
PNB has however deposited an alternative theory, which is that the P2M
G.R. No. L-67649 June 28, 1988
deposit had been assigned to it by ISABELA as "collateral," although not by
way of pledge; that ISABELA had explicitly authorized it to apply the P2M
FACTS: Engracio Francia is the registered owner of a residential lot and a
deposit in payment of its indebtedness; and that PNB had in fact applied the
two-story house built upon it.
deposit to the payment of ISABELA's debt on February 26, 1980, in concept
of voluntary compensation. This second, alternative theory, is as untenable
On October 15, 1977, a 125 square meter portion of Francia's property was
as the first.
expropriated by the Republic of the Philippines for the sum of P4,116.00
him P4,116.00 when a portion of his land was expropriated on October 15,
Even if it be assumed that such an assignment had indeed been made, and
1977. Hence, his tax obligation had been set-off by operation of law as of
PNB had been really authorized to apply the P2M deposit to the satisfaction
October 15, 1977.
of ISABELA's indebtedness to it, nevertheless, since the record reveals
that the application was attempted to be made by PNB only on
There is no legal basis for the contention. By legal compensation,
February 26, 1980, that essayed application was ineffectual and
obligations of persons, who in their own right are reciprocally
futile because at that time, the deposit was already in custodia
debtors and creditors of each other, are extinguished (Art. 1278,
legis, notice of garnishment thereof having been served on PNB on
Civil Code). The circumstances of the case do not satisfy the requirements
January 9, 1980 (pursuant to the writ of execution issued by the Court of
provided by Article 1279, to wit:
First Instance on December 23, 1979 for the enforcement of the partial
(1) that each one of the obligors be bound principally and that he be at the
judgment in the ACEROS' favor rendered on November 18,1979).
same time a principal creditor of the other;
(Exhibit "I"), confirming their conversation on that date that "500 shares out
A claim for taxes is not such a debt, demand, contract or judgment as of
the 1,000 shares of the Republic Flour ... has been sold," and stating
is allowed to be set-off under the statutes of set-off, which are
further that "pending receipt of the payment, expected next week, we are
construed uniformly, in the light of public policy, to exclude the remedy
enclosing herewith our draft to cover the full value of 500 shares." He asked
in an action or any indebtedness of the state or municipality to one in
that letter, "Please give me the 50 shares in the name of Mr. Felix
who is liable to the state or municipality for taxes. Neither are they a
Gonzales and the photostat of 208 shares in the name of Trans Oceanic
proper subject of recoupment since they do not arise out of the
Factors and Company."
contract or transaction sued on. ... (80 C.J.S., 7374). "The general rule
based on grounds of public policy is well-settled that no set-off
The accused-appellant sold and paid for the other 500 shares of stock, for
admissible against demands for taxes levied for general or local
the payment of which Jose K. Lapuz issued in his favor a receipt, dated June
governmental purposes. The reason on which the general rule is 9,
1961 (Exhibit "H").
based, is that taxes are not in the nature of contracts between
the party and party but grow out of duty to, and are the
The draft (Exhibit "J") for P8,000.00, "the full value of the 500 shares'
positive acts of the government to the making and enforcing
mentioned in the letter of the accused-appellant (Exhibit "I"), was
of which, the personal consent of individual taxpayers is not
dishonored by the bank, for lack of funds. Jose K. Lapuz then "discovered
required. ..."
from the bookkeeper that he got the money and he pocketed it already, so I
(he) started hunting for Mr. Sycip" (accused-appellant). When he found the
We stated that a taxpayer cannot refuse to pay his tax when called upon by
accused-appellant, the latter gave him a check in the amount of P5,000.00,
the collector because he has a claim against the governmental body not
issued by his daughter on July 12, 1961 (Exhibit "K"). This also was
included in the tax levy.
dishonored by the bank for lack of sufficient funds to cover it (Exhibits "K-l"
and "K-2").
This rule was reiterated in the case of Corders v. Gonda (18 SCRA 331)
where we stated that: "... internal revenue taxes cannot be the subject of
When Jose K. Lapuz sent a wire to him, telling him that he would "file estafa
compensation: Reason: government and taxpayer are not mutually
case (in the) fiscals office ... against him' unless he raise [the] balance left
creditors and debtors of each other' under Article 1278 of the Civil Code
eight thousand" (Exhibit "L"), the accused-appellant answered him by
and a "claim for taxes is not such a debt, demand, contract or judgment as
sending a wire, "P5,000 remitted ask boy check Equitable (Exhibit "M"). But
is allowed to be set-off."
"the check was never made good," so Jose K. Lapuz testified. He had to pay
Albert Smith the value of the 500 shares of stock." (Petitioner's brief, pp.
There are other factors which compel us to rule against the petitioner. The
58-62)
tax was due to the city government while the expropriation was
effected by the national government. Moreover, the amount of
Petitioner was then charged and convicted by the trial court of estafa.
P4,116.00 paid by the national government for the 125 square meter
portion of his lot was deposited with the Philippine National Bank long
ISSUE: WON there should have been compensation since Lapuz still owned
before the sale at public auction of his remaining property. Notice of the
petitioner P5,000?
deposit dated September 28, 1977 was received by the petitioner on
September 30, 1977. The petitioner admitted in his testimony that he knew
HELD: No. Compensation cannot take place in this case since the
about the P4,116.00 deposited with the bank but he did not withdraw it. It
evidence shows that Jose K. Lapuz is only an agent of Albert Smith
would have been an easy matter to withdraw P2,400.00 from the deposit so
and/or Dr. Dwight Dill. Compensation takes place only when two
that he could pay the tax obligation thus aborting the sale at public auction.
persons in their own right are creditors and debtors of each other,
and that each one of the obligors is bound principally and is at the
Petitioner had one year within which to redeem his property although, as
same time a principal creditor of the other. Moreover, as correctly
well be shown later, he claimed that he pocketed the notice of the auction
pointed out by the trial court, Lapuz did not consent to the off-setting of his
sale without reading it.
obligation with petitioner's obligation to pay for the 500 shares.
Petitioner, therefore, was notified about the auction sale. It was negligence
Indeed, Jose K. Lapuz demanded from petitioner the amount of P5,000.00
on his part when he ignored such notice. By his very own admission that he
with a notice that in the event he (petitioner) would fail to pay the amount,
received the notice, his now coming to court assailing the validity of the
Lapuz would file an estafa case against him.
auction sale loses its force.
By
and large, respondent Court of Appeals has not overlooked facts of
They must be creditors in their own right – If one of the creditors is
substance and value that, if considered, would alter the result of the
not a creditor in his own right, that is, his right to collect is because of a
judgment.
contract of agency, compensation cannot take place between the debt of
such agent to a party who is indebted to the principal. (See Sycip vs. CA) 2.
Both debts must be due and demandable – does not necessitate
that both debts are due AT THE SAME TIME; one debt may have been
FRANCISCO SYCIP, petitioner,
due earlier. The requirement is that at the time of the compensation,
vs.
both debts are already due.
HONORABLE COURT OF APPEALS and PEOPLE OF THE
PHILIPPINES, respondents. 3.
Debts must pertain to sums of money or if consumables, they
G.R. No. L-38711 January 31, 1985
must be of the same kind and quality
FACTS: Jose Lapuz received from Albert Smith 2,000 shares of stock of the No
compensation in reciprocal obligations:
Republic Flour Mills, Inc. in the name of the Dwight Dill who had left for a.
They must have arisen from the same cause, as such they can never
Honolulu. Lapuz was supposed to sell the shares at present market value
involve both sums of money or the same consumables of the same
out of which he was supposed to get certain commission.
kind and quality;
b.
Otherwise, no one can be compelled to perform an obligation
Sycip approached Lapuz and told him that he had good connections in the
Stock Exchange, assuring him that he could sell them at a good price. The
Attorney’s Fees may be the subject of legal compensation
shares of stocks were given to Sycip with knowledge that the shares did not
belong to Lapuz and that the same are entrusted for sale only.
MINDANAO PORTLAND CEMENT CORPORATION
MPCC opposed this, stating that said amount is set-off by a sum of 10K In
the opinion of said court, the requisites of legal compensation, namely,
which MPCC has collectible in its favor from Pacweld, also by way of
that the parties must be creditors and debtors of each other in their own
attorney’s fees which MPCC recovered from CFI Manila, by virtue of a writ of
right (Art. 1278, Civil Code) and that each one of them must be bound
execution.
principally and at the same time be a principal creditor of the other (Art.
CFI ordered MPCC to pay the amount of 10K attorney’s fees to Atty. Casiano
1279), are not present in the instant case, since the real creditor with
Laquihon.
respect to the sum of P500 was the defendant's counsel.
HELD: Yes. This is not an accurate statement of the nature of an award for
HELD: YES. It is clear from the record that both corporations, petitioner
attorney's fee's. The award is made in favor of the litigant, not of his
Mindanao Portland Cement Corporation (appellant) and respondent Pacweld
counsel, and is justified by way of indemnity for damages recoverable by
Steel Corporation (appellee), were creditors and debtors of each other, the
former in the cases enumerated in Article 2208 of the Civil Code. It is
their debts to each other consisting in final and executory the
litigant, not his counsel, who is the judgment creditor and who
judgments of the Court of First Instance in two (2) separate cases, may
enforce the judgment by execution. Such credit, therefore,
ordering the payment to each other of the sum of P10,000.00 by may
properly be the subject of legal compensation. Quite obviously it
way of attorney's fees. The two (2) obligations, therefore,
would be unjust to compel petitioner to pay his debt for P500 when
respectively offset each other, compensation having taken effect
admittedly his creditor is indebted to him for more than P4,000.
by operation of law and extinguished both debts to the concurrent
amount of P10,000.00, pursuant to the provisions of Arts. 1278, 1279
WHEREFORE, the judgment of the Court of Appeals is reversed, and the
and 1290 of the Civil Code, since all the requisites provided in Art. 1279 of
writ of execution issued by the Court of First Instance of Manila in its Civil
the said Code for automatic compensation "even though the creditors and
Case No. 49535 is set aside. Costs against respondent.
debtors are not aware of the compensation" were duly present.
4.
The claim must be clearly demandable, i.e., no controversy as
Necessarily, the appealed order of June 26, 1978 granting Atty. Laquihon's
to the claim.
motion for amendment of the judgment of September 14, 1976 against
Mindanao Portland Cement Corporation so as to make the award therein of BAR
QUESTION: Stockton is a stockholder of Core Corp. He desires to sell
P10,000.00 as attorney's fees payable directly to himself as counsel of his
shares in Core Corp. in vies of a court suit that Core Corp. has filed
Pacweld Steel Corporation instead of payable directly to said corporation as
against him for damages in the amount of P10 million, plus attorney’s fees
provided in the judgment, which had become final and executory long of
P1 million, as a result of statements published by Stockton which are
before the issuance of said "amendatory" order was a void alteration of
allegedly defamatory because it was calculated to injure and damage the
judgment. It was a substantial change or amendment beyond the trial
corporation’s reputation and goodwill.
court's jurisdiction and authority and it could not defeat the compensation
or set-off of the two (2) obligations of the corporations to each other which The
articles of incorporation of Core Corp. provide for a right of first refusal
had already extinguished both debts by operation of law. in
favor of the corporation. Accordingly, Stockton gave written notice to the
corporation of his offer to sell his shares of P10 million. The response of
GAN TION, petitioner,
Core Corp. was an acceptance of the offer in the exercise of its rights of first
vs.
refusal, offering for the purpose payment in form of compensation or set-off
HON. COURT OF APPEALS, HON. JUDGE AGUSTIN P. MONTESA, as
against the amount of damages it is claiming against him, exclusive of the
Judge of the Court of First Instance of Manila, ONG WAN SIENG
claim for attorney’s fees. Stockton rejected the offer of the corporation,
and THE SHERIFF OF MANILA, respondents.
arguing that compensation between the value of the shares and the amount
G.R. No. L-22490 May 21, 1969 of
damages demanded by the corporation cannot legally take effect. It
required.
On October 10, 1963 Gan Tion served notice on Ong Wan Sieng that he was
increasing the rent to P180 a month, effective November 1st, and at the
REPUBLIC OF THE PHILIPPINES, in behalf of the RICE AND CORN
same time demanded the rents in arrears at the old rate in the aggregate
ADMINISTRATION, petitioner,
amount of P4,320.00, corresponding to a period from August 1961 to vs.
October 1963.
HON. WALFRIDO DE LOS ANGELES, in his capacity as Judge of the
the record is bereft of the proof mentioned by the respondent Judge of first
On July 24, 1965, the mortgagee foreclosed said mortgage. A petition for
instance, it is because the respondent Judge did not call for the submission
prohibition was filed by the mortgagors Farins together with damages of
such proof. Had the respondent Judge issued an order calling for proof,
against Benito Macrohon, as sheriff of QC and MSC.
the RCA would have presented sufficient evidence to the satisfaction of the
court.
Acting upon the petition, the herein respondent Judge Walfrido de los
Angeles, issued an order commanding the respondent Sheriff and the
respondent Corporation to desist from proceeding with the public auction
Compensation cannot take place where one's claim against the other is still
sale of the property scheduled.
the subject of court litigation. It is a requirement, for compensation to take
were neither due and demandable at the time of dispossession but only
FACTS: On March 7, 1947, Fernando Froilan purchased from the shipping
after this Court had issued its Resolution of August 27, 1965.
Administration a boat for P200K with a downpayment of P50K, secured by a
real mortgage on the vessel in favor of the Shipping Administration.
More, the legal interest payable from February 3, 1951 on the sum of
expenses are fully paid." Thus, we find without basis REPUBLIC's allegation
The GM of Shipping Administration ordered the immediate possession of the
that PAN- ORIENTAL's claim in the amount of P40,797.54 was extinguished
vessel and to suspend the unloading of all cargoes. The boat was by
compensation since the rentals payable by PAN-ORIENTAL amount to
repossessed and the title thereto was registered again in the name of the
P59,500.00 while the expenses reach only P40,797.54. Deducting the latter
Shipping Administration, thereby re-transferring the ownership thereof to
amount from the former, REPUBLIC claims that P18,702.46 would still be
the government.
owing by PAN-ORIENTAL to REPUBLIC. That argument loses sight of the
fact that to the sum of P40,797.54 will still have to be added the legal rate
In 1949, Pan Oriental Shipping offered to charter said vessel for a monthly of
interest "from February 3, 1951 until fully paid."
rent of P3K. The vessel was delivered to the possession of Pan Oriental.
They entered into a bareboat charter with option to purchase filed on June
But although compensation by operation of law cannot take place as
4, 1949 with the Office of the President.
between REPUBLIC and PAN-ORIENTAL, by specific pronouncement of this
Court in its Resolution of November 23, 1966, supra, the rentals payable by
Meanwhile, upon protest of Froilan, the Cabinet restored to him all his rights
PAN-ORIENTAL in the amount of P59,500.00 should be deducted from the
in the contract of sale on condition that he would settle partially the
sum of useful expenses plus legal interest due, assuming that the latter
amounts overdue and to reimburse for repair and drydocking performed by
amount would still be greater. Otherwise, the corresponding adjustments
Pan Oriental.
can be made depending on the totality of the respective amounts.
Because of this, the formal bareboat charter agreement was not approved.
Since we are holding that the obligation of REPUBLIC to pay P40,797.54 to
PAN-ORIENTAL was not extinguished by compensation, the obligation of
Pan Oriental protested the restoration of Froilan’s rights under the contract
REPUBLIC to pay legal interest on said amount has neither become stale as
of sale. Pan Oriental refused to surrender possession of the vessel despite
REPUBLIC contends. Of special note is the fact that payment of that interest
payment by Froilan of the required cash.
was the specific ruling of this Court in its Resolution of August 27, 1965,
thus:
Froilan filed an action for replevin in the CFI Manila to recover possession
thereof and to have him declared as the rightful owner of the property.
This ... For this reason, Froilan and the REPUBLIC of the Philippines are
declared
jointly and severally liable, not only for reimbursement to Pan Oriental, of
Art. 1284. When one or both debts are rescissible or voidable, they may be
On September 11, 1980, Fajardo made a money market placement with
compensated against each other before they are judicially rescinded or
Atrium in the amount of P1M.
avoided. (n)
consent thereto, the latter may set up the compensation of debts previous
Fajardo filed a complaint for annulment of the sheriff’s sale of her
to the cession, but not of subsequent ones.
properties, and prayed for the release of P30M loan, and recovery of P1M
money market investment.
If the assignment is made without the knowledge of the debtor, he may set
up the compensation of all credits prior to the same and also later ones until
ICB answered that it had the right to set off Fajardo’s money market claim.
he had knowledge of the assignment. (1198a)
The trial court ruled for Fajardo, ordering ICB to deliver to her the amount
Debtor may still invoke compensation even after assignment, if:
covered by the money market investment (P1,046,253.77).
1. Had no knowledge of or did not consent to the assignment; or
ISSUE: WON there can be legal compensation for the proceeds of the
a. How much can X demand from A on June 5, 2016? None. The debt is
money market placement and deficiency from the foreclosure of the
not yet due.
mortgage?
b. If demand was made on Aug. 5, 2015, how much can X collect from A?
It depends:
HELD: No. Compensation shall take place when two persons, in their own
1. If A had knowledge of the assignment and gave his consent
right, are creditors and debtors of each other. (Art. 1278, Civil Code).
thereto, and made no reservation as to his right to set-up
"When all the requisites mentioned in Art. 1279 of the Civil Code are
compensation: P100k
present, compensation takes effect by operation of law, even without the
2. If he made a reservation: P60k, the debt that became due on
consent or knowledge of the debtors." (Art. 1290, Civil Code). Article 1279
Feb. 1, 2016 is compensated.
of the Civil Code requires among others, that in order that legal
3. If he had knowledge but did not give his consent: P60k, the debt
compensation shall take place, "the two debts be due" and "they be
that became due before the assignment is compensated.
liquidated and demandable." Compensation is not proper where the claim of
4. If he had no knowledge: P60k.
the person asserting the set-off against the other is not clear nor liquidated;
c. If demand was made on September 30, 2016, how much can X collect
compensation cannot extend to unliquidated, disputed claim arising from
from A?
breach of contract.
1. If A had knowledge of the assignment and gave his consent
Art. 1286. Compensation takes place by operation of law, even though the In
its Answer, BPI alleged hat Julio Templonuevo, 3rd party defendant and
debts may be payable at different places, but there shall be an
herein private respondent, demanded from the former payment in the said
indemnity for expenses of exchange or transportation to the place of
amount representing the aggregate of 3 checks which were allegedly
payment. (1199a)
payable to him but which were deposited with the account of Salazar
checks were deposited, since the latter account was alredy closed by
Neither can compensation be set up against a creditor who has a claim for
respondent Salazar or had an insufficient balance.
support due by gratuitous title, without prejudice to the provisions of
paragraph 2 of Article 301. (1200a) As
it appeared that Salazar was not entitled to the funds represented by the
checks, BPI decided to debit the amount from Salazar’s account (0201-
Art. 1288. Neither shall there be compensation if one of the debts consists
0588-48) and the same was paid to Templonuevo by means of a cashier’s
in civil liability arising from a penal offense. (n)
check.
BAR QUESTION: X, who has a savings deposit with Y Bank in the sum of On
appeal, the CA affirmed the trial court holding that Salazar and
P1,000,000.00, incurs a loan obligation with the said Bank in the sum of
Templonuevo had previously agreed that the checks payable to JRT
P800,000.00 which has become due. When X tries to withdraw his deposit,
Construction and Trading actually belonged to Salazar and would be
Y Bank allows only P200,000.00 to be withdrawn, less service charges,
deposited to her account, with petitioner acquiescing to the arrangement.
claiming that compensation has extinguished its obligation under the
savings account to the concurrent amount of X’s debt. X contends that
ISSUE: WON petitioner Bank had the right to set-off Salazar’s account for
compensation is improper when one of the debts, as here, arises from a the
said checks?
contract of deposit. Assuming that the promissory note signed by X to
evidence the loan does not provide for compensation between said loan and
HELD: Yes. The right of set-off was explained in Associated Bank v. Tan:
his savings deposit, who is correct? (3%)
A
bank generally has a right of set-off over the deposits therein for
ANSWER: By opening a deposit, they did not enter a contract of deposit. the
payment of any withdrawals on the part of a depositor. The
Deposits in bank are simple loans. The bank is correct.
right of a collecting bank to debit a client's account for the value of a
dishonored check that has previously been credited has fairly been
MODIFIED: instead of opening a savings account, X instead delivered a
established by jurisprudence. To begin with, Article 1980 of the Civil Code
sum of money with the bank for safekeeping in a safety deposit box. If the
provides that "[f]ixed, savings, and current deposits of money in banks and
bank would invoke compensation for the debt due, can the Bank do that?
similar institutions shall be governed by the provisions concerning simple
loan."
ANSWER: No. this time, one of the debts pertain to an obligation arising
from a depositum. SC would consider this a special kind of deposit,
Hence, the relationship between banks and depositors has been
therefore, 1287 is applicable, compensation would not be proper since one
held to be that of creditor and debtor. Thus, legal compensation
of the contract is a depositum.
under Article 1278 of the Civil Code may take place "when all the
their depositors with meticulous care, always having in mind the fiduciary
The creditor who may have executed any of these acts, as well as he who
More importantly, however, solely upon the prompting of Templonuevo, and
collects the debt, shall be liable to the others for the share in the obligation
with full knowledge of the brewing dispute between Salazar and
corresponding to them. (1143)
Templonuevo, petitioner debited the account held in the name of the sole
proprietorship of Salazar without even serving due notice upon her. This ran 6.
Novation
contrary to petitioner’s assurances to private respondent Salazar that the
account would remain untouched, pending the resolution of the controversy
Dual Function: extinguishes the obligation and creates a new one.
between her and Templonuevo.
Requisites:
The records further bear out the fact that respondent Salazar had issued
1.
Previous valid obligation
several checks drawn against the account of A.A. Salazar Construction and
Engineering Services prior to any notice of deduction being served. The CA
Art. 1298. The novation is void if the original obligation was void,
sustained private respondent Salazar’s claim of damages in this regard:
Art. 1297. If the new obligation is void, the original one shall
September 8, 1991, October 28, 1991, and November 14, 1991 (Exhibits
subsist, unless the parties intended that the former relation should be
"D", "E" and "F" respectively)
For the above reasons, the Court finds no reason to disturb the award of
Death of one of the creditor: the new creditor is(are) the heir(s), no
damages granted by the CA against petitioner. This whole incident would
novation. Mere change in the person of the creditor does not cause
have been avoided had petitioner adhered to the standard of diligence
novation.
expected of one engaged in the banking business. A depositor has the right
to recover reasonable moral damages even if the bank’s negligence may not
Art. 1291. Obligations may be modified by:
have been attended with malice and bad faith, if the former suffered mental
(1) Changing their object or principal conditions;
anguish, serious anxiety, embarrassment and humiliation. Moral damages
(2) Substituting the person of the debtor;
are not meant to enrich a complainant at the expense of defendant. It is
(3) Subrogating a third person in the rights of the creditor. (1203)
only intended to alleviate the moral suffering she has undergone. The award
of exemplary damages is justified, on the other hand, when the acts of the
Kinds of Novation:
bank are attended by malice, bad faith or gross negligence. The award of 1.
As to nature:
reasonable attorney’s fees is proper where exemplary damages are
a. Subjective/Personal
awarded. It is proper where depositors are compelled to litigate to protect
b. Objective/Real
their interest.
c. Mixed
2.
As to form:
WHEREFORE, the petition is partially GRANTED. The assailed Decision
a. Express;
dated April 3, 1998 and Resolution dated April 3, 1998 rendered by the
b. Implied
Court of Appeals in CA-G.R. CV No. 42241 are MODIFIED insofar as it 3.
As to extent:
ordered petitioner Bank of the Philippine Islands to return the amount of
a. Total;
Two Hundred Sixty-seven Thousand Seven Hundred and Seven and 70/100
b. Partial.
Pesos (P267,707.70) to respondent Annabelle A. Salazar, which portion is
REVERSED and SET ASIDE. In all other respects, the same
Subjective Novation: changing the subject:
are AFFIRMED. 1.
Active – if a third person is subrogated to the rights of the creditor;
How?
a. By agreement or express
Cesar Nickolai F. Soriano Jr.
60 Arellano University School of Law 2011-0303
Civil Law Review 2 under the class of Atty. Uribe
As to right of the creditor when the new debtor becomes insolvent
Whose consent necessary:
or fails to fulfil the obligation – he cannot run after the old debtor.
change.
b. By law or implied – Art. 1302
Parties:
Art. 1302. It is presumed that there is legal subrogation:
Delegante – the old debtor;
(1) When a creditor pays another creditor who is preferred, even
Delegado – the new debtor
without the debtor's knowledge;
Delegatorio – the creditor.
(2) When a third person, not interested in the obligation, pays with
the express or tacit approval of the debtor;
As to extent of reimbursement – the whole amount paid
(3) When, even without the knowledge of the debtor, a person
regardless of the extent the old debtor was benefited.
interested in the fulfillment of the obligation pays, without prejudice
As to right of the creditor when the new debtor becomes insolvent
to the effects of confusion as to the latter's share. (1210a)
– he can run after the old debtor, IF: the insolvency was already
water and telephone services in the leased premises during the period
In this case, the acceptance of the partial payment was not a clear act
of the lease. Six months later, Jose surreptitiously vacated the
of consenting to the substitution. The creditor merely accepted
premises. He left behind unpaid telephone bills for overseas telephone
payments but the debtor JC was not released from his obligation.
calls amounting to over P20,000.00. Baldomero refused to pay the
said bill on the ground that Jose had already substituted him as the
Effects of subrogation:
customer of the telephone company. The latter maintained that
on the shoulders of the original debtors and their heirs, petitioners herein,
Commenting on the aforesaid motion, private respondents Benipayo and
since the record is devoid of any evidence of contrary intent. This Court has
Dualan prayed that the respondent Judge Reyes order (1) the payment of
so ruled in Bank of the Philippine Islands vs. Concepcion e Hijos, Inc., 53
the mortgage debt in favor of the Development Bank of the Philippines in
Phil. 806, from which We quote:
the amount of P37,121.96 from the proceeds of the auction sale; (2) the
issuance by the sheriff of Manila of a certificate of sale in favor of Dualan of
But the plaintiff argues that in American jurisprudence, the purchaser
the property sold to him free from all liens and encumbrances; and (3) the
of mortgaged property who assumes the payment of the mortgage
payment to respondent Benipayo of 1/12 of the proceeds of the sale after
debt, may for that reason alone be sued for the debt by the creditor
deducting therefrom the payment to the Development Bank of the
and that that rule is applicable in this jurisdiction. Aside from the fact
Philippines.
we are not here dealing with a mere assumption of the debt, but with
a subrogation, it may be noted that this court has already held that the
In resolving the said motion, respondent Judge issued an order stating:
American doctrine in this respect is not in harmony with the spirit of
our legislation and has not been adopted in this country. In the case of
WHEREFORE, the Manila Sheriff's Report dated March 30, 1964, and the
E. C. McCullough & Co. vs. Veloso and Serna (46 Phil., 1), the court,
Quezon City Sheriff's Report dated April 6, 1964, are hereby approved,
speaking through its present Chief Justice, said:
subject to the following conditions:
(Art. 136 of the same law.) This clearly shows that the spirit of
ISSUE: WON private respondent Dualan is liable for the payment of the
the Civil Code is to let the obligation of the debtor to pay the debt
unpaid obligation of the petitioners with the DBP, on the ground of the
stand although the property mortgaged to secure the payment of
doctrine of caveat emptor and novation?
said debt may have been transferred to a third person. While the
Thus, the questioned order of the trial court ordering the vendors-heirs to
A final deed of sale was executed in favor of FUA.
clear the property of all its encumbrances is not in accordance with law.
FUA filed an action in the CFI of Sorsogon against the YAPs for their refusal
Objective or Real Novation
to recognize FUA’s title and to vacate the land.
1. Change in the object
2. Change in the principal conditions of the obligation, which may either
YAPs interposed the defense of novation by the mortgage they executed in
be:
favor of FUA.
a. Express; or
b. Implied:
CFI ruled for FUA, recognizing the latter to be the owner of the land and
and does not require the sheriff to publish anew the public sale which was
CASES ON EXPRESS AND IMPLIED NOVATION:
adjourned." The appellee has correctly stated the law but has failed to show
that it supports his side, for it is not pretended that there was any written
FUA CAM LU
agreement between the parties to adjourn the sale advertised for December
vs.
12, 1933, to May 28, 1934. Neither may it be pretended that the sale in
YAP FAUCO and YAP SINGCO
favor of the appellee was by virtue of a mere adjournment, it appearing that
G.R. No. L-48797 July 30, 1943
it was made pursuant to an alias writ of execution. Appellee's admission has
thus destroyed the legal presumption that official duty was regularly
FACTS: FUA obtained a favorable judgment in the CFI Manila ordering YAP
performed.
FAUCO and YAP SINGCO to pay FUA P1,538.04 with legal interest and costs.
respondents.
"having sold under a pacto de retro sale the parcels of land 4 described in
These transactions took place during the pendency of the motion
the complaint in the amount of P84,000.00" and
for reconsideration of the Order of the trial court dated April 26,
1983 in Civil Case No. U-3501, during the pendency of the petition
"hereby promise to pay the said amount within the period of four (4)
for certiorari in AC-G.R. SP-01307 before the Intermediate
months but not later than May 15,1981."
Appellate Court and after the filing of the petition before us. This
executory judgment, or quash it, or order its stay, for, as a general rule,
On June 8, 1983, while the order of the lower Court was not yet enforced,
parties will not be allowed, after final judgment, to object to the execution
petitioners tendered the amount of P28,800.00, leaving a balance of
by raising new issues of fact or of law, except when there had been a
P35,200.00. Petitioners were given 45 days to comply with such obligation.
change in the situation of the parties which makes such execution in-
However, despite the given period of 45 days, petitioners still failed to
equitable; or when it appears that the controversy has never been
comply.
submitted to the judgment of the court, or when it appears that the writ of
What was done by respondent Judge in setting aside the writ of execution
ISSUE: WON the decision rendered by the trial Court was novated by the
in Civil Case No. 5111 finds support in the applicable authorities. There is
subsequent mutual agreements between the parties?
this relevant excerpt in Barretto v. Lopez this Court speaking through the
then Chief Justice Paras: "Allegating that the respondent judge of the
HELD: Yes. The root of all the issues raised before Us is that judgment by
municipal court had acted in excess of her jurisdiction and with grave abuse
compromise rendered by the lower court based on the terms of the
of discretion in issuing the writ of execution of December 15, 1947, the
amicable settlement of the contending parties. Such agreement not being
petitioner has filed the present petition for certiorari and prohibition for the
contrary to law, good morals or public policy was approved by the lower
purpose of having said writ of execution annulled. Said petition is
court and therefore binds the parties who are enjoined to comply therewith.
meritorious. The agreement filed by the parties in the ejectment case
However, the records show that petitioners made partial payments
created as between them new rights and obligations which naturally
to private respondent Waldo del Castillo after May 15, 1981 or the
superseded the judgment of the municipal court." In Santos v. Acuna, it was
last day for making payments, redeeming Lot No. 52 as earlier
contended that a lower court decision was novated by the subsequent
stated. (Annex "A," Petition).
agreement of the parties. Implicit in this Court's ruling is that such a plea
would merit approval if indeed that was what the parties intended.
There is no question that petitioners tendered several payments to Waldo
del Castillo even after redeeming lot No. 52. A total of these payments
reveal that petitioners fully paid the amount stated in the judgment by
EUSEBIO S. MILLAR, petitioner,
compromise. The only issue is whether Waldo del Castillo was a person duly
vs.
authorized by his mother Guadalupe Vda. de del Castillo, as her attorney-in-
THE HON. COURT OF APPEALS and ANTONIO P. GABRIEL,
fact to represent her in transactions involving the properties in question. We
respondents.
believe that he was so authorized in the same way that the appellate court
G.R. No. L-29981 April 30, 1971
took cognizance of such fact as embodied in its assailed decision. reading as
follows:
The defense of implied novation requires clear and convincing proof of
the date of the filing of the complaint, the sum of P400 as attorney's fees,
The fact therefore remains that the amount of P84,000.00 payable on or
and the costs of suit.
before May 15, 1981 decreed by the trial court in its judgment by
compromise was novated and amended by the subsequent mutual
Upon motion of petitioner, a writ of execution was issued on which basis the
agreements and actions of petitioners and private respondents. Petitioners
sheriff of Manila seized the respondent's Willy's Ford jeep.
the old obligation result in implied novation. In the case at bar, the
Despite such, private respondent still failed to comply with the obligation to
mere reduction of the amount due in no sense constitutes a
pay the sum of money, which constrained the petitioner to obtain an alias
sufficient indictum of incompatibility, especially in the light of (a) the
writ of execution. On the fifth alias writ of execution, the sheriff levied on
explanation by the petitioner that the reduced indebtedness was the result
certain personal properties belonging to the respondent, and then scheduled of
the partial payments made by the respondent before the execution of the
them for execution sale.
chattel mortgage agreement and (b) the latter's admissions bearing
thereon.
The private respondent filed an urgent motion for suspension of the
execution sale on the ground of payment of the judgement obligation. The At
best, the deed of chattel mortgage simply specified exactly how much
lower Court resolved the motion, reiterated the execution, and held that
the respondent still owed the petitioner by virtue of the judgment in civil
novation had taken place, and that the parties had executed the chattel
case 27116. The parties apparently in their desire to avoid any future
mortgage only "to secure or get better security for the judgment.”
confusion as to the amounts already paid and as to the sum still due,
decoded to state with specificity in the deed of chattel mortgage only the
On appeal, respondent Court of Appeals set aside the order of execution,
balance of the judgment debt properly collectible from the respondent. All
and held that the subsequent agreement of the parties impliedly novated
told, therefore, the first circumstance fails to satisfy the test of substantial
the judgment obligation, hence this petition.
and complete incompatibility between the judgment debt and the pecuniary
court pointed out that while the judgment made no mention of payment of
1. Whereas the judgment orders the respondent to pay the petitioner the
damages, the deed of chattel mortgage stipulated the payment of liquidated
sum of P1,746.98 with interest at 12% per annum from the filing of
damages in the amount of P300 in case of default on the part of the
the complaint, plus the amount of P400 and the costs of suit, the deed
respondent.
of chattel mortgage limits the principal obligation of the respondent to
P1,700;
However, the petitioner contends that the respondent himself in his brief
filed with the Court of Appeals admitted his obligation, under the deed of
2. Whereas the judgment mentions no specific mode of payment of the
chattel mortgage, to pay the amount of P300 by way of attorney's fees and
amount due to the petitioner, the deed of chattel mortgage stipulates
not as liquidated damages. Similarly, the judgment makes mention of the
payment of the sum of P1,700 in two equal installments;
payment of the sum of P400 as attorney's fees and omits any reference to
liquidated damages.
3. Whereas the judgment makes no mention of damages, the deed of
chattel mortgage obligates the respondent to pay liquidated damages
The discrepancy between the amount of P400 and tile sum of P300 fixed as
in the amount of P300 in case of default on his part; and
attorney's fees in the judgment and the deed of chattel mortgage,
ISSUE: WON respondent Court of Appeals erred when it held that the At
all events, in the absence of clear and convincing proof showing
judgment obligation was novated due to the subsequent agreement of the
that the parties, in stipulating the payment of P300 as attorney's
parties in the deed of chattel mortgage entered into between the petitioner
fees in the deed of chattel mortgage, intended the same as an
and the private respondent?
obligation for the payment of liquidated damages in case of default
on
the part of the respondent, we find it difficult to agree with the
HELD: Yes, the Court held that respondent Court of Appeals did err when it
conclusion reached by the Court of Appeals.
held that the judgment obligation was novated.
3.
As to the second and fourth circumstances relied upon by the Court of
The Court of Appeals, in arriving at the conclusion that implied novation has
Appeals in holding that the montage obligation superseded, through implied
taken place, took into account the four circumstances heretofore already
novation, the judgment debt, the petitioner points out that the appellate
adverted to as indicative of the incompatibility between the judgment debt
court considered said circumstances in a way not in accordance with law or
and the principal obligation under the deed of chattel mortgage.
accepted jurisprudence. The appellate court stated that while the judgment
specified no mode for the payment of the judgment debt, the deed of
1. Anent the first circumstance, the petitioner argues that this does not
chattel mortgage provided for the payment of the amount fixed therein in
constitute a circumstance in implying novation of the judgment debt, stating
two equal installments.
that in the interim — from the time of the rendition of the judgment in civil
case 27116 to the time of the execution of the deed of chattel mortgage — On
this point, we see no substantial incompatibility between the mortgage
the respondent made partial payments, necessarily resulting in the lesser
obligation and the judgment liability of the respondent sufficient to justify a
sum stated in the deed of chattel mortgage. He adds that on record appears
conclusion of implied novation. The stipulation for the payment of the
the admission by both parties of the partial payments made before the
obligation under the terms of the deed of chattel mortgage serves only to
execution of the deed of chattel mortgage. The erroneous conclusion
provide an express and specific method for its extinguishment — payment in
arrived at by the Court of Appeals, the petitioner argues, creates the wrong
two equal installments. The chattel mortgage simply gave the
impression that the execution of the deed of chattel mortgage provided the
respondent a method and more time to enable him to fully satisfy
consideration or the reason for the reduced judgment indebtedness.
the judgment indebtedness. The chattel mortgage agreement in no
incompatibility on every point between the "old" and the "new" agreements.
2. The defendant shall pay plaintiff the value of the line materials which
FACTS: An action for Foreclosure of Chattel Mortgage was filed by herein
were stolen but recovered, by plaintiff's agency which value is to be
appellee People’s Bank and Trust Company against appellant Syvel’s Inc.,
determined after a joint inventory by the representatives of both
against its stocks of goods, personal properties and other materials owned
parties; by
it and located at its stores or warehouses at No. 406, Escolta, Manila,
The trial Court rendered its decision in favor of herein appellee, hence this
MWSS' failure to pay within the stipulated period removed the very cause
appeal.
and reason for the agreement, rendering some ineffective. Petitioners,
therefore, were remitted to their original rights under the judgment award.
Appellant contend that there was novation by the subsequent execution of a
real estate mortgage as additional collateral to the obligation secured by
FACTS: Herein petitioners Integrated Construction Service and Engineering
said chattel mortgage.
Construction Inc. filed an action against private respondent Metropolitan
Waterworks and Sewerage System (MWSS) with the Court of First instance
ISSUE: WON the original obligation to pay the commercial credit line was
of Manila, wherein respondent Judge Relova was the presiding Judge, for
novated through the execution of a subsequent real estate mortgage?
breach of contract.
HELD: No. Novation takes place when the object or principal condition of
The parties entered into arbitration, which resulted to a decision-award in
an obligation is changed or altered. It is elementary that novation is
favor of herein petitioners. Subsequently, however, petitioners agreed to
never presumed; it must be explicitly stated or there must be
give MWSS some discounts in consideration of an early payment of the
manifest incompatibility between the old and the new obligations
award.
in every aspect.
Upon MWSS' request, the petitioners signed their "Conforme" to the said
In the case at bar, there is nothing in the Real Estate Mortgage which
letter-agreement, and extended the period to pay the judgment less the
supports appellants' submission. The contract on its face does not
discounts aforesaid to October 31, 1972. MWSS, however, paid only on
show the existence of an explicit novation nor incompatibility on
December 22, 1972, the amount stated in the decision but less the
every point between the "old and the "new" agreements as the
reductions provided for in the October 2, 1972 letter-agreement.
second contract evidently indicates that the same was executed as
new additional security to the chattel mortgage previously entered
Three years thereafter, or on June, 1975, after the last balance of the trust
into by the parties.
fund had been released and used to satisfy creditors' claims, the petitioners
filed a motion for execution in said civil case against MWSS for the balance
Moreover, records show that in the real estate mortgage, appellants agreed
due under the decision-award. Respondent MWSS opposed execution
that the chattel mortgage "shall remain in full force and shall not be
setting forth the defenses of payment and estoppel.
impaired by this (real estate) mortgage."
ISSUE: Whether or not respondent Judge erred when it denied the Motion
Art. 1296. When the principal obligation is extinguished in consequence of
for Execution on the ground that the parties novated the award through the
a novation, accessory obligations may subsist only insofar as they may
letter-agreement.
benefit third persons who did not give their consent. (1207)
HELD: Yes, the Court held that respondent Judge did err when it denied the
Accessory obligations: General Rule: extinguished as a consequence of
Motion for Execution.
novation.
Joint Venture;
The creditor who may have executed any of these acts, as well as he who
collects the debt, shall be liable to the others for the share in the obligation
MWSS' failure to pay within the stipulated period removed the very cause
corresponding to them. (1143)
and reason for the agreement, rendering some ineffective. Petitioners,
therefore, were remitted to their original rights under the judgment award.
Case on Novation subject to a suspensive period:
The placing of MWSS under the control and management of the Secretary
INTEGRATED CONSTRUCTION SERVICES, INC., and ENGINEERING
of National Defense thru Letter of Instruction No. 2, dated September 22,
CONSTRUCTION, INC., petitioners,
1972 was not an unforeseen supervening factor because when MWSS
vs.
forwarded the letter-agreement to the petitioners on October 2, 1972, the
THE HONORABLE LORENZO RELOVA, as Judge of the Court of First
MWSS was already aware of LOI No. 2.
Instance of Manila, and METROPOLITAN WATERWORKS &
SEWERAGE SYSTEM, respondents.
MWSS' contention that the stipulated period was intended to pressure
G.R. No. L-41117 December 29, 1986
MWSS officials to process the voucher is untenable. As aforestated, it is
apparent from the terms of the agreement that the 15-day period was
While the tenor of the subsequent letter-agreement in a sense novates the
intended to be a suspensive condition. MWSS, admittedly, was aware of
judgment award there being a shortening of the period within which to pay
this, as shown by the internal memorandum of a responsible MWSS official,
(Kabangkalan Sugar Co. vs. Pacheco, 55 Phil. 555), the suspensive and
stating that necessary steps should be taken to effect payment within 15
days, for otherwise, MWSS would forego the advantages of the discount.
rights which may be the object of any litigation in which they may take part
1. DEFINITION – Art. 1305
by virtue of their profession.
therein.
Definition by Sanchez Roman: juridical convention manifested in legal
form, by virtue of which one or more person bind themselves in favor of
Art. 1890. If the agent has been empowered to borrow money, he may
another or others, or reciprocally, to the fulfillment of a prestation to give,
himself be the lender at the current rate of interest. If he has been
to do, or not to do.
authorized to lend money at interest, he cannot borrow it without the
vs.
E.g., in a contract of agency, where A authorized B to borrow money in his
THE CENTRAL BANK OF THE PHILIPPINES, defendant-appellant.
behalf. If B would lend the money himself, he would be signing both as the
G.R. No. L-25071 March 29, 1972
lender and the borrower (in behalf of A). Void? No. As long as the interest
rate is the current market rate.
FACTS: On March 30, 1960, the U.S. Navy accepted the proposal of the
plaintiff of March 18, 1960 in the sum of $188,000.00 for the construction of
Generally valid: the number of parties is not determinative of the
the Mindanao Weather Station, Bukidnon, Mindanao, Philippines, in
existence of a contract; what is important is that there be at least 2
accordance with Bid Item 3, Yards and Docks Specifications No. 13374/59."
declaration of wills.
Defendant Central Bank issued several circulars covering the sale of foreign
Auto-Contracts which are void:
exchange in the Philippines, the full decontrol of which was when it issued
Circular No. 133 on Jan. 21, 1962. Under its Memorandum to Authorized
Art. 1491. The following persons cannot acquire by purchase, even at a
Agent Bank ID-FM No. 11, and under Resolution No. 857 of the Monetary
public or judicial auction, either in person or through the mediation of
Board of the Central Bank, it was specifically provided that: "For imports
another:
against proceeds of contracts entered into prior to April 25, 1960, the
(1) The guardian, the property of the person or persons who may be under
preferred buying rate shall govern, regardless of the present commodity
his guardianship;
classifications." There was however a modification arising from Monetary
(2) Agents, the property whose administration or sale may have been
Board Resolution No. 695 of April 28, 1961, which specified that the agent
entrusted to them, unless the consent of the principal has been given;
bank should, upon compliance with its terms, credit the contractor's
(3) Executors and administrators, the property of the estate under
accounts in pesos, the buying rate being governed by the appropriate rules
administration;
and regulations.
Cesar Nickolai F. Soriano Jr.
68 Arellano University School of Law 2011-0303
Civil Law Review 2 under the class of Atty. Uribe
included, it still exists in a projected state. There remains to give its
In compliance with defendant's Monetary Board Resolutions Nos. 857 and
obligatory force by an act of will, expressing the individual adherence of
695, plaintiff surrendered to the Central Bank, through the latter's
each one of the parties to the act thus prepared. When all the necessary
authorized agents, his dollar earnings amounting to U.S. $199,966.00. The
consents (sic) are obtained, and manifested in legal form, the contract is
plaintiff also appears to have applied with the defendant for license to utilize
formed, the lien of law is tied. It is therefore the union of these
90% of his surrendered earnings or the sum of U.S. $25,847.84 or 21.41%
adherences (sic) which constitute the contract and which gives
of the amount applied for. The plaintiff demanded from the defendant that
birth to the obligations which are derived from it. It is an act of
it be allowed to utilize the balance of the 90% of his surrendered dollar
volition, while the preliminary operation of discussion of the
earnings. However, it was only on March 21, 1963, after the plaintiff had
project is a work of the mind and reasoning.
filed the complaint in the present case and after full decontrol had been
established through Circular No. 133 dated January 21, 1962, that the
In their Jurisprudence and Legal Philosophy, the late Professors Morris R.
defendant informed the plaintiff, through its communication, that the latter
Cohen and Felix R. Cohen, father and son and jurists of note, noted that the
could utilize at the free market rate the balance of his said 90% of
concepts found in the Civil Code of Spain showing basic contract rules are
surrendered earnings which had not been previously granted by the
"equally valid in France, Chile, Columbia, Germany, Holland, Italy, Mexico,
defendant for his importations.
Portugal and many other lands, and equally honored across eighteen and
more centuries." Even more impressive is their conclusion that the views of
Plaintiff Batchelder filed a complaint to compel defendant Central Bank of
such common law scholars as Maine, Williston, Pound, Holdsworth,
the Philippines to resell to him $170,210.60 at the preferred rate of
Llewellyn, and Kessler, are not dissimilar. Thus Pollock could describe the
exchange of two Philippine pesos for one American dollar (P2:$1), more
English common law quoting whole paragraphs from a German scholar's
specifically P2.00375, or, in the alternative, to pay to him the difference
description of the law of ancient Rome. It is in that sense that for them the
between the peso cost of such amount at the market rate prevailing on the
Roman phrasing contrahitur obligation “throws more light than volumes of
date of the satisfaction of the judgment in his favor and the peso cost of
exegesis: One contracts an obligation as one contracts pneumonia or any
$170,210.60 at said preferred rate.
other disability. Contract is that part of our legal burdens that we bring on
ourselves."
On the other hand, the CB was insistent on the absence of any such right
on the part of plaintiff to re-acquire from it the sum of $170,210.60 at the
If there be full cognizance of the implications of the controlling principles as
preferred rate of exchange.
thus expounded, impressive for their well-nigh unanimity of approach, the
Central Bank to use the powers granted to it under this Act to achieve the
Planiol states the following: "The consent of the parties, that is to say, the
following objectives: (a) to maintain monetary stability in the Philippines;
accord of wills, is the essential element of every contract. The consent, in
(b) to preserve the international value of the peso and the convertibility of
the matter of contracts, is composed of a double operation. (1) The
the peso into other freely convertible currencies; and (c) to promote a rising
parties must commence by agreeing as to the contents the
level of production, employment and real income in the Philippines."
"convention" that is to say, by making sufficiently precise the
object and the essential conditions, and discussing the particular
It would be then to set at naught fundamental concepts in administrative
clauses which they desire to introduce to modify or to complete
law that accord due recognition to the vesting of quasi-legislative and quasi-
the ordinary effects. (2) This first operation having been
judicial power in administrative law for the purpose of attaining statutory
terminated, the parties are in accord on the projected contract:
objectives, especially now that government is saddled with greater
there is between them what Littre calls the uniformity of opinions,
responsibilities due to the complex situation of the modern era, if the lower
which is one sense of the word "consent", but the contract is not
court is to be upheld. For if such be the case then, by the judiciary failing to
the Supreme Court held that the provision is valid even if it was contained in
Nor is this to deal unjustly with plaintiff. Defendant Central Bank in its
a contract of adhesion since the passenger could not have consented
motion to dismiss before the lower court was quite explicit as to why under
thereto if he did not agree on the same.
the circumstances, no right could be recognized as possessed by him. As set
forth in such pleading: "We contend that Monetary Board Resolution No.
Exceptional case: if a WAIVER is contained in a contract of adhesion, the
857, dated June 17, 1960, as amended by Monetary Board Resolution No.
contract is void, not because it is contrary to public policy but because of
695, dated April 28, 1961, does not give right to Filipino and resident
the fact that consent to such waiver was not freely given, the waiver being
American contractors undertaking construction projects in U.S. military
in a contract of adhesion affects the voluntariness of the act. E.g., In
bases to reacquire at the preferred rate ninety per cent (90%) of the
relation to a real estate mortgage, the principal debtor defaulted and the
foreign exchange sold or surrendered to defendant Central Bank thru the
Bank foreclosed the property and there was foreclosure sale where the Bank
authorized agent banks. Nor does said resolution serve as a general
is the winning bidder. The mortgagor signified his intent to redeem. The
authorization or license granted by the Central Bank to utilize the ninety per
Bank countered that their mortgage agreement contained a waiver of the
cent (90%) of their dollar earnings. M.B. Resolution No. 857, as
right to redeem. The Supreme Court held that the waiver is void since it is
amended, merely laid down a general policy on the utilization of
contained in a contract of adhesion.
the dollar earnings of Filipino and resident American contractors
undertaking projects in U.S. military bases, ... ." Further, there is this
PAL case: A’s luggage was lost. He sued PAL for damages. PAL raised the
equally relevant portion in such motion to dismiss: "It is clear from the
defense that it can only be made liable upto P100 as written in the contract.
aforecited provisions of said memorandum that not all imports against
SC: sustained PAL. Though this contract is a contract of carriage, and one of
proceeds of contracts entered into prior to April 25, 1960 are entitled to the
adhesion, still, A gave his consent to the terms and conditions thereof. As
preferred buying rate of exchange. Only imports against proceeds of
such, he is bound by such stipulation.
contracts entered into prior to April 25, 1960, not otherwise classified as
dollar-to-dollar transactions, are entitled to the preferred rate of exchange.
Not even the government can force someone to enter into a
It is for this reason that the contractor is required to first file an application
contract: as such, in the case of PLDT, the SC held that it cannot compel
with defendant Central Bank (Import Department) thru the Authorized
PLDT to enter into an interconnection with the government. However, the
Agent Banks, for the purpose of determining whether the imports against
government may exercise its sovereign power of eminent domain and
proceeds of contracts entered into prior to April 25, 1960 are classified as
compel PLDT to allow the use of its facilities subject to just compensation.
dollar-to-dollar transactions (which are not entitled to the preferred rate of
In this case, the Court treated the action as one of expropriation. (See
exchange), or not (which are entitled to the preferred rate of exchange),
Republic vs. PLDT)
and that if said imports are entitled to the preferred rate of exchange,
defendant Central Bank would issue a license to the contractor for authority
REPUBLIC OF THE PHILIPPINES, plaintiff-appellant,
to buy foreign exchange at the preferred rate for the payment of said
vs.
imports."
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, defendant-
appellant.
Had there been greater care therefore on the part of the plaintiff to
G.R. No. L-18841 January 27, 1969
show why in his opinion he could assert a right in accordance not
with a contract binding on the Central Bank, because there is none,
FACTS: Soon after its creation in 1947, the Bureau of Telecommunications,
but by virtue of compliance with rules and regulations of an
a government instrumentality of plaintiff, set up its own Government
administrative tribunal, then perhaps a different outcome would
Telephone System (GTS) by utilizing its own appropriation and equipment
have been justified.
and by renting trunk lines of the PLDT to enable government offices to call
private parties. Its application for the use of these trunk lines was in the
WHEREFORE, the decision of the lower court of January 10, 1963 is
usual form of applications for telephone service, containing a statement,
reversed and the complaint of the plaintiff dismissed, without prejudice to
above the signature of the applicant, that the latter will abide by the rules
his taking the appropriate action to enforce whatever rights he possesses
and regulations of the PLDT which are on file with the Public Service
against defendant Central Bank in accordance with its valid and binding
Commission. One of the many rules prohibits the public use of the service
rules and regulations. With costs against plaintiff.
furnished the telephone subscriber for his private use. The Bureau has
extended its services to the general public since 1948, using the same trunk
B. FUNDAMENTAL CHARACTERISTICS/ PRINCIPLES
OF lines owned by, and rented from, the PLDT, and prescribing its (the
CONTRACTS
Bureau's) own schedule of rates. Through these trunk lines, a Government
A contract entered into in the name of another by one who has no authority
The Bureau of Telecommunications had proposed to the PLDT on 8 January
or legal representation, or who has acted beyond his powers, shall be
1958 that both enter into an interconnecting agreement, with the
unenforceable, unless it is ratified, expressly or impliedly, by the person on
government paying (on a call basis) for all calls passing through the
whose behalf it has been executed, before it is revoked by the other
interconnecting facilities from the Government Telephone System to the
contracting party. (1259a)
PLDT. The PLDT replied that it was willing to enter into an agreement on
overseas telephone service to Europe and Asian countries provided that the
CONTRACT OF ADHESION - one where there is already a prepared form
Bureau would submit to the jurisdiction and regulations of the Public Service
containing the stipulations desired by one party whereby the latter only asks
Commission and in consideration of 37 1/2% of the gross revenues. In its
the other party to agree to them if he wants to enter into a contract.
memorandum in lieu of oral argument in this Court dated 9 February 1964,
on page 8, the defendant reduced its offer to 33 1/3 % (1/3) as its share in
including the period elapsed from the filing of the original complaint or
ISSUE: WON PLDT may be forced to enter into an interconnection
petition. And for this purpose, the records are ordered returned to the court
contract? of
origin for further hearings and other proceedings not inconsistent with
ISSUE2: WON the Republic may exercise its eminent domain power for the
this opinion.
use of PLDT’s facilities?
Dear Juaning
In the ultimate analysis, the true objection of the PLDT to continue the link
Will you please accept the attached check in the amount of TWO
between its network and that of the Government is that the latter competes
THOUSAND P2,000.00) PESOS for legal services in the handling of L-
"parasitically" (sic) with its own telephone services. Considering, however,
17860 recently decided by the Court? I wish I could give more but as
Article 1307 that such contracts shall be regulated by the stipulations of the
When the case was remanded, the evidence was presented by Atty.
parties, by the general provisions or principles of obligations and contracts,
Alvarez with the cooperation of plaintiff David. Judge Lantin later on by
the rules governing the most analogous nominate contracts, and by the
rendered a decision in favor of defendant Carlos. Appeals were made.
customs of the people. The rationale of this article was stated in the 1903
Later on, the SC rendered a decision affirming the trial court.
case of Perez vs. Pomar (2 Phil. 982). In that case, the Court sustained the
supplied; see also Tolentino, Civil Code of the Philippines, p. 388, Vol.
ISSUE: WON private respondent Atty. Juan T. David is entitled to attorney's
IV 119621, citing Estate of Reguera vs. Tandra 81 Phil. 404 [1948];
fees?
exchange rate of the Philippine peso to the dollar had increased from
WE reiterated this rule in Pacific Merchandising Corp. vs. Consolacion
P25.00=$1.00 to P50.00=$1.00. Brian refused to pay the increased rate
Insurance & Surety Co., Inc. (73 SCRA 564 [1976]) citing the case of Perez and
an action for unlawful detainer was filed against him. Will the action
v. Pomar, supra thus:
prosper? Why? (5%)
date; (3) the remaining period of the loan must be at least 730 days. (See
2. AUTONOMY OF CONTRACTS – ARTS. 1306, 1799, 2088, 2130
Banco Filipino Savings vs. Navarro and Florendo vs. CA)
Art. 1306. The contracting parties may establish such stipulations, clauses,
BANCO FILIPINO SAVINGS and MORTGAGE BANK, petitioner,
terms and conditions as they may deem convenient, provided they are not vs.
contrary to law, morals, good customs, public order, or public policy. HON.
MIGUEL NAVARRO, Presiding Judge, Court of First Instance
(1255a) of
Manila, Branch XXXI and FLORANTE DEL VALLE, respondents.
G.R.
No. L-46591 July 28, 1987
Otherwise known as the Freedom or Liberty to Contract.
FACTS: On May 20, 1975, respondent Florante del Valle (the BORROWER)
Examples of void stipulations for being CONTRARY TO LAW:
obtained a loan secured by a real estate mortgage (the LOAN, for short)
from
petitioner BANCO FILIPINO in the sum of P41,300.00, payable and to
a. Partnership: Pactum Leonina be
amortized within fifteen (15) years at 12% interest annually. Hence, the
LOAN
still had more than 730 days to run by January 2, 1976, the date
Art. 1799. A stipulation which excludes one or more partners from any when
CIRCULAR No. 494 was issued by the Central Bank.
share in the profits or losses is void. (1691)
Art. 2088. The creditor cannot appropriate the things given by way of
I/We hereby authorize Banco Filipino to correspondingly increase the
pledge or mortgage, or dispose of them. Any stipulation to the contrary is
interest rate stipulated in this contract without advance notice to
null and void. (1859a)
me/us in the event law should be enacted increasing the lawful rates of
supplied).
HELD: Yes. Some contracts contain what is known as an "escalator
clause," which is defined as one in which the contract fixes a base
It is now clear that from March 17, 1980, escalation clauses to be valid
price but contains a provision that in the event of specified cost
should specifically provide: (1) that there can be an increase in
increases, the seller or contractor may raise the price up to a fixed
interest if increased by law or by the Monetary Board; and (2) in
percentage of the base. Attacks on such a clause have usually been
order for such stipulation to be valid, it must include a provision
based on the claim that, because of the open price-provision, the contract
for reduction of the stipulated interest "in the event that the
was too indefinite to be enforceable and did not evidence an actual meeting
applicable maximum rate of interest is reduced by law or by the
of the minds of the parties, or that the arrangement left the price to be
Monetary Board."
determined arbitrarily by one party so that the contract lacked mutuality. In
most instances, however, these attacks have been unsuccessful.
While P.D. No. 1684 is not to be given retroactive effect, the absence of a
Bank’s Provident Fund. Under the Loan Agreement, a Real Estate Mortgage
CIRCULAR No. 494, although it has the effect of law, is not a law.
and Promissory Note was executed.
"Although a circular duly issued is not strictly a statute or a law, it has,
however, the force and effect of law." (Italics supplied). "An administrative
On March 19, 1985, the Bank increased the interest rate on said loan from
regulation adopted pursuant to law has the force and effect of law." 7 "That
9% to 17%, the said increase to take effect on March 19, 1985 and
administrative rules and regulations have the force of law can no longer be
petitioner was informed for said increase.
questioned.”
Petitioners protested the increase without any heed from the Bank. The
The distinction between a law and an administrative regulation is recognized
Bank continued to demand the increased interest or the new monthly
in the Monetary Board guidelines quoted in the letter to the BORROWER of
installments based on the increased interest rates, but petitioner
Ms. Paderes of September 24, 1976 (supra). According to the guidelines, for
vehemently maintained that the said increase is unlawful and unjustifiable.
a loan's interest to be subject to the increases provided in CIRCULAR No.
494, there must be an Escalation Clause allowing the increase "in the event
Because of the Bank’s repeated demands, the petitioner filed the instant
that any law or Central Bank regulation is promulgated increasing the
injunction suit and damages.
maximum interest rate for loans." The guidelines thus presuppose that a
Central Bank regulation is not within the term "any law."
The clauses or provisions in the Housing Loan Agreement and the Real
became effective on January 29, 1973. CB Circular No. 416 was issued on
c. and ManCom (Management Committee) Resolution No. 85-08, together
July 29, 1974. CB Circ. 504 was issued February 6, 1976. CB Circ. 706 was
with PF (Provident Fund) Memorandum Circular No. 85-08, which
issued December 1, 1979. CB Circ. 905, lifting any interest rate ceiling
escalated the interest rates on outstanding housing loans of bank
prescribed under or pursuant to the Usury Law, as amended, was
employees who voluntarily "secede" (resign) from the Bank; the range of
promulgated in 1982. These and other relevant CB issuances had
rates varied depending upon the number of years service rendered by the
already come into existence prior to the perfection of the housing
employees concerned. The rates were made applicable to those who had
loan agreement and mortgage contract, and thus it may be said
previously resigned from the bank as well as those who would be
that these regulations had been taken into consideration by the
resigning in the future.
contracting parties when they first entered into their loan contract.
In
light of the CB issuances in force at that time, respondent bank was fully
The trial court ruled in favor of respondent bank, and held that the bank
aware that it could have imposed an interest rate higher than 9% per
was vested with authority to increase the interest rate (and the
annum rate for the housing loans of its employees, but it did not. In the
corresponding monthly amortizations) pursuant to said escalation provisions
subject loan, the respondent bank knowingly agreed that the interest rate
in the housing loan agreement and the mortgage contract. on
petitioners' loan shall remain at 9% p.a. unless a CB issuance is passed
the parties were concerned, all other onerous factors, such as employee
ISSUE: WON the escalation clause is valid?
resignations, which could have been used to trigger an application of the
further provides that the increased interest rate "shall only take effect on
We note that Section 1-F of Article VI of the HLA cannot be read as an
the date of effectivity of (the) increase/decrease" authorized by the CB rule,
escalation clause as it does not make any reference to increases or
regulation or circular. Without such CB issuance, any proposed increased
decreases in the interest rate on loans. However, paragraph (f) of the
rate will never become effective.
mortgage contract is clearly and indubitably an escalation provision, and
therefore, the parties were and are bound by the said stipulation that "(t)he We
have already mentioned (and now reiterate our holding in several cases)
rate of interest charged on the obligation secured by this mortgage . . .,
that by virtue of CB Circular 905, the Usury Law has been rendered
shall be subject, during the life of this contract, to such an
ineffective. Thus, petitioners' contention that the escalation clause is
increase/decrease in accordance with prevailing rules, regulations and
violative of the said law is bereft of any merit.
circulars of the Central Bank of the Philippines as the Provident Fund Board
of Trustees of the Mortgagee (respondent bank) may prescribe for its On
the other hand, it will not be amiss to point out that the unilateral
debtors . . . ." Contrary to petitioners' allegation, there is no vagueness in
determination and imposition of increased interest rates by the
the aforequoted proviso; even their own arguments (below) indicate that
herein respondent bank is obviously violative of the principle of
this provision is quite clear to them.
mutuality of contracts ordained in Article 1308 of the Civil Code. As
Rita Legarda, Inc., 21 SCRA 555). Hence, even assuming that the . . .
ISSUE2: WON the Bank may validly increase the interest rate?
loan agreement between the PNB and the private respondent gave the
PNB a license (although in fact there was none) to increase the interest
HELD: No. In Banco Filipino, this Court, speaking through Mme. Justice
rate at will during the term of the loan, that license would have been
Ameurfina M. Herrera, disallowed the bank from increasing the interest rate
null and void for being violative of the principle of mutuality essential in
on the subject loan from 12% to 17% despite an escalation clause in the
contracts. It would have invested the loan agreement with the
loan agreement authorizing the bank to "correspondingly increase the
character of a contract of adhesion, where the parties do not bargain
interest rate stipulated in this contract without advance notice to me/us in
on equal footing, the weaker party's (the debtor) participation being
the event a law should be enacted increasing the lawful rates of
reduced to the alternative "to take it or leave it" (Qua vs. Law Union &
interest that may be charged on this particular kind of loan". In said case,
Rock Insurance Co., 95 Phil 85). Such a contract is a veritable trap for
the bank had relied upon a Central Bank circular as authority to up its rates.
the weaker party whom the courts of justice must protect against
The Court ruled that CB Circular No. 494, although it has the effect of law,
abuse and imposition.
is not a law, but an administrative regulation.
entered into the contract on her own will and volition. Thus, she bound
To allay fears that respondent bank will inordinately be prejudiced by being
herself to fulfill not only what was expressly stipulated in the contract, but
stuck with this "sweetheart loan" at patently concessionary interest rates,
also all its consequences that were not against good faith, usage, and law.
which according to respondent bank is the "sweetest deal" anyone could
The appellate court also ruled that the stipulation prohibiting non-
obtain and is an act of generosity considering that in 1985 lending rates in
employment for two years was valid and enforceable considering the nature
the banking industry were peaking well over 30% p.a., we need only point
of respondent’s business.
out that the bank had the option to impose in its loan contracts the
condition that resignation of an employee-borrower would be a ground for
ISSUE: WON the non-involvement clause is valid?
escalation. The fact is it did not. Hence, it must live with such omission. And
it would be totally unfair to now impose said condition, not to mention that
HELD: Yes. Petitioner avers that the non-involvement clause is offensive to
it would violate the principle of mutuality of consent in contracts. It goes
public policy since the restraint imposed is much greater than what is
without saying that such escalation ground can be included in future
necessary to afford respondent a fair and reasonable protection. She adds
contracts — not to agreements already validly entered into.
that since the products sold in the pre-need industry are more or less the
occupation in the Philippines for a period of five years after the termination
DAISY B. TIU, Petitioner
of his employment contract and must first get the written permission of his
vs.
employer if he were to do so. The Court ruled that while the stipulation was
PLATINUM PLANS PHIL., INC., Respondent.
indeed limited as to time and space, it was not limited as to trade. Such
G.R. No. 163512 February 28, 2007
prohibition, in effect, forces an employee to leave the Philippines to work
employer, the Court considered the restraint too broad since it effectively
On September 16, 1995, petitioner stopped reporting for work. In
prevented the employee from working in any other business similar to his
November 1995, she became the Vice-President for Sales of Professional
employer even if his employment was limited only to one of its multifarious
Pension Plans, Inc., a corporation engaged also in the pre-need industry.
business activities.
with any other drugstore within a radius of four miles from the employer’s
8. NON INVOLVEMENT PROVISION – The EMPLOYEE further
place of business during the time the employer was operating his drugstore.
undertakes that during his/her engagement with EMPLOYER and in
We said that a contract in restraint of trade is valid provided there is
case of separation from the Company, whether voluntary or for cause, a
limitation upon either time or place and the restraint upon one
he/she shall not, for the next TWO (2) years thereafter, engage in or
party is not greater than the protection the other party requires.
be involved with any corporation, association or entity, whether directly
or indirectly, engaged in the same business or belonging to the same
Finally, in Consulta v. Court of Appeals, we considered a non-involvement
pre-need industry as the EMPLOYER. Any breach of the foregoing
clause in accordance with Article 1306 of the Civil Code. While the
society has an established interest or a first lien. (see Cui vs. Arellano)
Conformably then with the aforementioned pronouncements, a non-
Prohibiting a losing candidate in a convention to run as an independent
involvement clause is not necessarily void for being in restraint of
candidate which contrary to constitutionality protected right to be
trade as long as there are reasonable limitations as to time, trade,
elected in public office and the right of the electorate to choose. (see
and place.
Saura vs. Sindico)
In this case, the non-involvement clause has a time limit: two years from
EMETERIO CUI, plaintiff-appellant,
the time petitioner’s employment with respondent ends. It is also limited as
vs.
to trade, since it only prohibits petitioner from engaging in any pre-need
ARELLANO UNIVERSITY, defendant-appellee.
business akin to respondent’s.
G.R. No. L-15127 May 30, 1961
defendant university but failed to pay his tuition fees because his uncle
In any event, Article 1306 of the Civil Code provides that parties to a
Dean Francisco R. Capistrano having severed his connection with defendant
contract may establish such stipulations, clauses, terms and conditions as
and having accepted the deanship and chancellorship of the College of Law
they may deem convenient, provided they are not contrary to law, morals, of
Abad Santos University, plaintiff left the defendant's law college and
good customs, public order, or public policy.
enrolled for the last semester of his fourth year law in the college of law of
the Abad Santos University graduating from the college of law of the latter
Article 1159 of the same Code also provides that obligations arising from
university.
contracts have the force of law between the contracting parties and should
be complied with in good faith. Courts cannot stipulate for the parties
Plaintiff, during all the time he was studying law in defendant university was
nor amend their agreement where the same does not contravene
awarded scholarship grants, for scholastic merit, so that his semestral
law, morals, good customs, public order or public policy, for to do
tuition fees were returned to him after the ends of semester. The whole
so would be to alter the real intent of the parties, and would run
amount of tuition fees paid by plaintiff to defendant and refunded to him by
contrary to the function of the courts to give force and effect
the latter from the first semester up to and including the first semester of
thereto. Not being contrary to public policy, the non-involvement
his last year in the college of law or the fourth year, is in total P1,033.87.
clause, which petitioner and respondent freely agreed upon, has
After graduating in law from Abad Santos University he applied to take the
the force of law between them, and thus, should be complied with
bar examination. To secure permission to take the bar he needed the
in good faith.
transcripts of his records in defendant Arellano University. Plaintiff
petitioned the latter to issue to him the needed transcripts. The defendant
Thus, as held by the trial court and the Court of Appeals, petitioner is bound
refused until after he had paid back the P1,033.87 which defendant
to pay respondent P100,000 as liquidated damages. While we have
refunded to him as above stated. As he could not take the bar examination
equitably reduced liquidated damages in certain cases, we cannot do so in
without those transcripts, plaintiff paid to defendant the said sum under
this case, since it appears that even from the start, petitioner had not
protest. This is the sum which plaintiff seeks to recover from defendant in
shown the least intention to fulfill the non-involvement clause in good faith.
this case.
ANSWER: No. Just because a contract is valid in the place where it was
1. School catalogs and prospectuses submitted to this Bureau show
celebrated, it can be enforced here in the Philippines. The Philippine
that some schools offer full or partial scholarships to deserving
Constitution affords full protection to labor. Such stipulation reducing the
students — for excellence in scholarship or for leadership in extra-
The trial court ruled in favor of defendant and upheld the validity of the
RAMON E. SAURA, plaintiff-appellant,
above-quoted provision.
vs.
Art. 1315. Contracts are perfected by mere consent, and from that
In common law, certain agreements in consideration of the withdrawal of
moment the parties are bound not only to the fulfillment of what has been
candidates for office have invariably been condemned by the courts as
their nature, may be in keeping with good faith, usage and law. (1258)
or, after nomination, from the race for election.
Art. 1316. Real contracts, such as deposit, pledge and Commodatum, are
In the case at hand, plaintiff complains on account of defendant's alleged
person is not sufficient. The contracting parties must have clearly and
STIPULATION WHICH IS VOID FOR BEING CONTRARY TO
deliberately conferred a favor upon a third person. (1257a)
MORALS: in a contract of loan, where the interest rate is 50%, is void for
being contrary to morals, the same being unconscionable, confiscatory,
Art. 1178. Subject to the laws, all rights acquired in virtue of an obligation
exorbitant, excessive or inequitable, not because of it is usurious.
are transmissible, if there has been no stipulation to the contrary. (1112)
between the parties, their assigns and heirs which are referred to as privies.
Art. 1308. The contract must bind both contracting parties; its validity or
compliance cannot be left to the will of one of them. (1256a)
When not transmissible:
of breach of contract.
Example: in a contract of mortgage where the mortgagor A sold his
property to C. C shall be bound by the contract of mortgage on the
BAR QUESTION: Roland, a basketball star, was under contract for
premise that the mortgage in favor of B, the mortgagor, is registered.
one year to play-for-play exclusively for Lady Love, Inc. However,
This is because real rights attaches to the property. As such, under Art.
even before the basketball season could open, he was offered a more
1312, any person who comes into the possession of said real property
attractive pay plus fringe benefits by Sweet Taste, Inc. Roland
shall be bound by the encumbrance therein, i.e., the mortgage.
accepted the offer and transferred to Sweet Taste. Lady Love sues
Roland and Sweet Taste for breach of contract. Defendants claim that
The exception to the above example, is when the mortgage is not
the restriction to play for Lady Love alone is void, hence,
registered. Accordingly, the buyer, C, will not be bound by it.
unenforceable, as it constitutes an undue interference with the right of
Can Roland be bound by the contract he entered into with Lady Love
Art. 1313. Creditors are protected in cases of contracts intended to
or can he disregard the same? Is he liable at all? How about Sweet
defraud them. (n)
Taste? Is it liable to Lady Love?
Art. 1314. Any third person who induces another to violate his contract
Subject matter: must be secondary or incidental only, not the main
shall be liable for damages to the other contracting party.
object of the contract. E.g., in a contract of loan with a stipulation that
has held that if this revocation is a unilateral act of one of the parties,
How to know if there was malice: usually, the words use would
it is void for violation of the principle of mutuality of contracts. For a
C. CLASSIFICATION OF CONTRACTS
BAR QUESTION: Francis Albert, a citizen and resident of New Jersey
U.S.A., under whose law he was still a minor, being only 20 years of
1. ACCORDING TO DEGREE OF DEPENDENCE
age, was hired by ABC Corporation of Manila to serve for two years as
its chief computer programmer. But after serving for only four months,
a. PREPARATORY – ARTS. 1479, 1767, 1868
he resigned to join XYZ Corporation, which enticed him by offering
more advantageous terms. His first employer sues him in Manila for
Art. 1479. A promise to buy and sell a determinate thing for a price certain
damages arising from the breach of his contract of employment. He
is reciprocally demandable.
sets up his minority as a defense and asks for annulment of the
Cesar Nickolai F. Soriano Jr.
80 Arellano University School of Law 2011-0303
Civil Law Review 2 under the class of Atty. Uribe
An accepted unilateral promise to buy or to sell a determinate thing for a
a. CONSENSUAL – are those perfected by mere consent.
price certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price. (1451a)
Art. 1315. Contracts are perfected by mere consent, and from that
moment the parties are bound not only to the fulfillment of what has been
Art. 1767. By the contract of partnership two or more persons bind
expressly stipulated but also to all the consequences which, according to
themselves to contribute money, property, or industry to a common fund,
their nature, may be in keeping with good faith, usage and law. (1258)
with the intention of dividing the profits among themselves.
not perfected until the delivery of the object of the obligation. (n)
A contract of sale may be absolute or conditional. (1445a)
Art. 1642. The contract of lease may be of things, or of work and service.
c. FORMAL – those which require a certain form for its validity.
(1542)
E.g., antichresis
Art. 1933. By the contract of loan, one of the parties delivers to another,
Art. 1356. Contracts shall be obligatory, in whatever form they may have
either something not consumable so that the latter may use the same for a
been entered into, provided all the essential requisites for their validity are
certain time and return it, in which case the contract is called a
present. However, when the law requires that a contract be in some form in
commodatum; or money or other consumable thing, upon the condition that
order that it may be valid or enforceable, or that a contract be proved in a
the same amount of the same kind and quality shall be paid, in which case
certain way, that requirement is absolute and indispensable. In such cases,
the contract is simply called a loan or mutuum.
the right of the parties stated in the following article cannot be exercised.
(1278a)
Commodatum is essentially gratuitous.
parties may compel each other to observe that form, once the contract has
In commodatum the bailor retains the ownership of the thing loaned, while
been perfected. This right may be exercised simultaneously with the action
in simple loan, ownership passes to the borrower. (1740a)
upon the contract.
(1278a)
All other contracts where the amount involved exceeds five hundred pesos
must appear in writing, even a private one. But sales of goods, chattels or
a. ANY FORM – e.g. loan.
things in action are governed by articles, 1403, No. 2 and 1405. (1280a)
b. SPECIAL FORM – e.g. donations, mortgage of immovable
property.
Formal requirements to prove existence: STATUTE OF FRAUDS:
4. ACCORDING TO PURPOSE
Article 1403. The following contracts are unenforceable, unless they are
a. TRANSFER OF OWNERSHIP – Donation, Sale and Barter
ratified:
(ARTS. 725, 1458, 1638)
(1) Those entered into in the name of another person by one who has been
given no authority or legal representation, or who has acted beyond his
Art. 725. Donation is an act of liberality whereby a person disposes
powers;
gratuitously of a thing or right in favor of another, who accepts it. (618a)
(2) Those that do not comply with the Statute of Frauds as set forth in this
number. In the following cases an agreement hereafter made shall be
Art. 1458. By the contract of sale one of the contracting parties obligates
unenforceable by action, unless the same, or some note or memorandum,
himself to transfer the ownership and to deliver a determinate thing, and
thereof, be in writing, and subscribed by the party charged, or by his agent;
the other to pay therefor a price certain in money or its equivalent.
evidence, therefore, of the agreement cannot be received without the
writing, or a secondary evidence of its contents:
A contract of sale may be absolute or conditional. (1445a)
(a) An agreement that by its terms is not to be performed within a
year from the making thereof;
Art. 1638. By the contract of barter or exchange one of the parties binds
(b) A special promise to answer for the debt, default, or
himself to give one thing in consideration of the other's promise to give
miscarriage of another;
another thing. (1538a)
(c) An agreement made in consideration of marriage, other than a
mutual promise to marry;
b. CONVEYANCE OF USE – Usufruct, Lease and Loan (ARTS. 562,
(d) An agreement for the sale of goods, chattels or things in action, at a
1642, 1933)
price not less than five hundred pesos, unless the buyer accept and
receive part of such goods and chattels, or the evidences, or some of
Art. 562. Usufruct gives a right to enjoy the property of another with the
them, of such things in action or pay at the time some part of the
obligation of preserving its form and substance, unless the title constituting
purchase money; but when a sale is made by auction and entry is made
it or the law otherwise provides. (467)
by the auctioneer in his sales book, at the time of the sale, of the amount
and kind of property sold, terms of sale, price, names of the purchasers
Art. 1642. The contract of lease may be of things, or of work and service.
and person on whose account the sale is made, it is a sufficient
(1542)
memorandum;
(e) An agreement for the leasing for a longer period than one year,
Art. 1643. In the lease of things, one of the parties binds himself to give to
or for the sale of real property or of an interest therein;
another the enjoyment or use of a thing for a price certain, and for a period
(f) A representation as to the credit of a third person.
which may be definite or indefinite. However, no lease for more than ninety-
(3) Those where both parties are incapable of giving consent to a contract.
nine years shall be valid. (1543a)
IMPORTANCE OF CLASSIFICATION AS TO PERFECTION: if the
Art. 1933. By the contract of loan, one of the parties delivers to another,
contract is consensual, it is perfected by mere consent; if real, by delivery; if
either something not consumable so that the latter may use the same for a
formal; upon compliance with the required form.
certain time and return it, in which case the contract is called a
the same amount of the same kind and quality shall be paid, in which case
P60,000.00. After inspecting the automobile, Violy offered to buy it for
In commodatum the bailor retains the ownership of the thing loaned, while
Is there a perfected contract in this case? Why?
Art. 1642. The contract of lease may be of things, or of work and service.
(1542)
In this case, there was meeting of the minds the moment the counter-offer
or offer to buy was accepted. As such, there is a perfected contract.
Art. 1933. By the contract of loan, one of the parties delivers to another,
Art. 1642. The contract of lease may be of things, or of work and service.
either something not consumable so that the latter may use the same for a
(1542)
certain time and return it, in which case the contract is called a
case, it may not necessarily be in fraud of X, since the sale may have been
Art. 2093. In addition to the requisites prescribed in Article 2085, it is
precisely to have the proceeds delivered to X for payment. Would there be
necessary, in order to constitute the contract of pledge, that the thing
such presumption? It depends:
pledged be placed in the possession of the creditor, or of a third person by
common agreement. (1863)
Onerous: if there is already a judgment against A as to his liability to X
delivery, B noticed that the car stereo was missing. B asked for the stereo
Rescission: under Art. 1191, is implied in reciprocal obligations, or in this
but A claims that he is the owner thereof. Who is entitled to the stereo? It
case, bilateral contracts where both are reciprocally obligated. But if the
depends:
contract is unilateral, logically, the creditor would not rescind, he would
Gratuitous: such as a donation, the principle that would apply is the
either demand performance or seek damages.
least transmission of rights, such that the donor would be entitled
to the stereo.
Delay: in reciprocal obligations (bilateral contracts), from the moment one
Onerous: such as a sale, the principle that would apply is the greatest
of the parties had already complied and the other did not, the latter shall be
reciprocity of interests, such that the buyer would be entitled to the
considered in delay even if there is no demand.
stereo.
June 2, 2012, they agreed on the price of P600,000 and a period until June
D. STAGES OF CONTRACTS 30,
2012 within which Marcel may raise the amount. Marcelo in a light tone,
1. NEGOTIATION
usual between them, said that they should seal their agreement through a
case of Jack Daniel’s Black and P5,000 pulutan, which they did. On June 13,
CONTRACT OF OPTION – ARTS. 1324, 1479, 1482
2015, Sergio learned of a new buyer Roberto who is offering to buy the land
for
P800,000 cash. Sergio withdrew his offer to Marcelo. Marcelo objected
Art. 1324. When the offerer has allowed the offeree a certain period to
claiming that there is an option to buy supported by a valuable
accept, the offer may be withdrawn at any time before acceptance by
consideration. Does Marcelo have a cause of action against Sergio?
communicating such withdrawal, except when the option is founded upon a
consideration, as something paid or promised.
Answer: Yes. There is already a perfected contract of sale. From the facts,
“succeeded in persuading Sergio to sell it to him” and given the period “until
Option Agreement: in an option agreement, as provided under Art. 1324,
June 30, 2012” is only for the performance.
the offeror may withdraw the offer before acceptance is communicated to
him, and he would not be liable for damages. The
case of bourbon and P5,000 pulutan - can be considered only as to
statute of frauds that this should be in writing, but the party had already
Offeror is not bound, he may withdraw anytime before acceptance is
performed. “Decided to withdraw his offer” is not accurate, because he did
conveyed to him. not
withdraw from the offer, but from the contract of sale.
Art. 1479. A promise to buy and sell a determinate thing for a price certain
Art. 1482. Whenever earnest money is given in a contract of sale, it shall
is reciprocally demandable. be
considered as part of the price and as proof of the perfection of the
contract. (1454a)
An accepted unilateral promise to buy or to sell a determinate thing for a
price certain is binding upon the promissor if the promise is supported by a
Earnest Money: the above provision refers to earnest money which is
consideration distinct from the price. (1451a)
considered part of the price and proof of the perfection of the contract of
sale.
Option Contract: there is already a perfected contract of option. Here,
there is a consideration distinct and separate from the price. As such, the
2. PERFECTION – goes into the essential elements of the contract.
offeror cannot validly withdraw before the period agreed upon without being
3. PERFORMANCE
liable for damages. This does not, however, entitle the offeree the right to
4. CONSUMMATION
demand specific performance since there is no perfected contract of sale
yet. E.
ESSENTIAL ELEMENTS OF CONTRACTS – ART. 1318
Likewise, an option contract does not bind the offeror to enter into a 1.
CONSENT OF CONTRACTING PARTIES – ARTS. 1319-1346, 37-
contract, he has the choice whether to pursue or not the contract, if he
42, 739, 1476(4), 1490-1491, 1533(5), 1646, 1782, 1409(7),
does not pursue, he loses his right to the option money given. (What if the
5;
the exercise of the option was at the fault of the offeree, e.g., reservation
fee paid for a car, and the color chosen for which the option payment was
Art. 1319. Consent is manifested by the meeting of the offer and the
given, was not available?)
acceptance upon the thing and the cause which are to constitute the
contract. The offer must be certain and the acceptance absolute. A qualified
Offeree accepted before withdrawal of the offer is communicated to him:
acceptance constitutes a counter-offer.
the contract of sale, being consensual, is already perfected.
Acceptance made by letter or telegram does not bind the offerer except
Option Money:
from the time it came to his knowledge. The contract, in such a case, is
is not necessarily “money” only, it can be any prestation like services
presumed to have been entered into in the place where the offer was made.
or other things.
(1262a)
Not necessarily “paid” already. “Promise” may also be considered as a
consideration for the option contract.
Art. 1320. An acceptance may be express or implied. (n)
BAR QUESTION: Marvin offered to construct the house of Carlos for a very
Art. 1321. The person making the offer may fix the time, place, and
reasonable price of P900,000.00, giving the latter 10 days within which to
manner of acceptance, all of which must be complied with. (n)
accept or reject the offer. On the fifth day, before Carlos could make up his
mind, Marvin withdrew his offer.
Art. 1322. An offer made through an agent is accepted from the time
Art. 1324. When the offerer has allowed the offeree a certain period to
as consideration for that option? Explain. (2%) No. Here there is an
made by an expert and the other party has relied on the former's special
Art. 1328. Contracts entered into during a lucid interval are valid. Contracts
knowledge. (n)
agreed to in a state of drunkenness or during a hypnotic spell are voidable.
(n)
Art. 1342. Misrepresentation by a third person does not vitiate consent,
unless such misrepresentation has created substantial mistake and the same
Art. 1329. The incapacity declared in Article 1327 is subject to the
is mutual. (n)
modifications determined by law, and is understood to be without prejudice
to special disqualifications established in the laws. (1264)
Art. 1343. Misrepresentation made in good faith is not fraudulent but may
serious and should not have been employed by both contracting parties.
Art. 1331. In order that mistake may invalidate consent, it should refer to
the substance of the thing which is the object of the contract, or to those
Incidental fraud only obliges the person employing it to pay damages.
conditions which have principally moved one or both parties to enter into
(1270)
the contract.
any purpose contrary to law, morals, good customs, public order or public
Art. 1332. When one of the parties is unable to read, or if the contract is in
policy binds the parties to their real agreement.
a language not understood by him, and mistake or fraud is alleged, the
person enforcing the contract must show that the terms thereof have been
Art. 37. Juridical capacity, which is the fitness to be the subject of legal
fully explained to the former. (n)
relations, is inherent in every natural person and is lost only through death.
Capacity to act, which is the power to do acts with legal effect, is acquired
Art. 1333. There is no mistake if the party alleging it knew the doubt,
and may be lost. (n)
contingency or risk affecting the object of the contract. (n)
Art. 38. Minority, insanity or imbecility, the state of being a deaf-mute,
Art. 1334. Mutual error as to the legal effect of an agreement when the
prodigality and civil interdiction are mere restrictions on capacity to act, and
real purpose of the parties is frustrated, may vitiate consent. (n)
do not exempt the incapacitated person from certain obligations, as when
the latter arise from his acts or from property relations, such as
Art. 1335. There is violence when in order to wrest consent, serious or
easements. (32a)
irresistible force is employed.
considered born for all purposes that are favorable to it, provided it be born
Art. 1336. Violence or intimidation shall annul the obligation, although it
later with the conditions specified in the following article. (29a)
may have been employed by a third person who did not take part in the
contract. (1268)
Art. 41. For civil purposes, the fetus is considered born if it is alive at the
Art. 1782. Persons who are prohibited from giving each other any donation
In the case referred to in No. 1, the action for declaration of nullity may be
or advantage cannot enter into universal partnership. (1677)
brought by the spouse of the donor or donee; and the guilt of the donor
and donee may be proved by preponderance of evidence in the same
ARTS. 87, 124, 234 FAMILY CODE; RA 6809;
action.
Art. 1646. The persons disqualified to buy referred to in Articles 1490 and
Section 1. Article 234 of Executive Order No. 209, the Family Code of the
1491, are also disqualified to become lessees of the things mentioned
Philippines, is hereby amended to read as follows:
therein. (n)
follows:
Art. 1409. The following contracts are inexistent and void from the
beginning:
"Art. 236. Emancipation shall terminate parental authority over the person
(1) Those whose cause, object or purpose is contrary to law, morals, good
and property of the child who shall then be qualified and responsible for all
customs, public order or public policy;
acts of civil life, save the exceptions established by existing laws in special
(2) Those which are absolutely simulated or fictitious;
cases.
(3) Those whose cause or object did not exist at the time of the transaction;
(4) Those whose object is outside the commerce of men;
"Contracting marriage shall require parental consent until the age of twenty-
(5) Those which contemplate an impossible service;
one.
(6) Those where the intention of the parties relative to the principal object
of the contract cannot be ascertained;
"Nothing in this Code shall be construed to derogate from the duty or
(7) Those expressly prohibited or declared void by law
responsibility of parents and guardians for children and wards below
influence – voidable.
Here the contract is void. Art. 1409 involves fictitious or simulated contracts:
Fictitious Contracts: where one of the parties did not actually gave
Can be grouped into two:
his consent. E.g., a party’s signature in a deed of sale is forged;
Simulated Contracts: where the parties would make it appear that
i. Those affecting COGNITION or the awareness of certain facts:
they entered into a contract when in fact they did not.
mistake and fraud.
employed.
ii. Relatively Simulated Contracts – the parties intended another
contract.
d. Both parties gave their consent, but both of the parties’
because the law expressly provides that the cause is presumed to exists and
BASIC REQUIREMENTS:
is lawful.
Rights – must not be intransmissible;
Services – not contrary to law, morals, good customs, public order or
Rationale: ordinarily, when one enters into a contract, there is a cause.
public policy;
Things – must not be outside of commerce of men, it must be licit and
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause
not impossible. Example: internal organs of humans.
shall not invalidate a contract, unless there has been fraud, mistake or
e. FORMS OF CONTRACT
Art. 1311. Contracts take effect only between the parties, their assigns and
heirs, except in case where the rights and obligations arising from the
Art. 1356. Contracts shall be obligatory, in whatever form they may have
contract are not transmissible by their nature, or by stipulation or by
been entered into, provided all the essential requisites for their validity are
provision of law. The heir is not liable beyond the value of the property he
present. However, when the law requires that a contract be in some form in
received from the decedent.
order that it may be valid or enforceable, or that a contract be proved in a
parties may compel each other to observe that form, once the contract has
Art. 1178. Subject to the laws, all rights acquired in virtue of an obligation
been perfected. This right may be exercised simultaneously with the action
are transmissible, if there has been no stipulation to the contrary. (1112)
upon the contract.
Art. 1350. In onerous contracts the cause is understood to be, for each
(1) Acts and contracts which have for their object the creation,
contracting party, the prestation or promise of a thing or service by the
transmission, modification or extinguishment of real rights over immovable
other; in remuneratory ones, the service or benefit which is remunerated;
property; sales of real property or of an interest therein a governed by
and in contracts of pure beneficence, the mere liberality of the
Articles 1403, No. 2, and 1405;
benefactor. (1274)
(2) The cession, repudiation or renunciation of hereditary rights or of those
All other contracts where the amount involved exceeds five hundred pesos
Question: A bought a gun to kill B and he was able to do so. Was the sale
must appear in writing, even a private one. But sales of goods, chattels or
valid? Yes. As a rule, motive does not affect the validity of a contract since
things in action are governed by Articles, 1403, No. 2 and 1405. (1280a)
motive is different from cause and the illegality of motive does not affect
the validity of the contract.
1. GENERAL RULE: contracts are obligatory in whatever form they may
have been entered into, provided all the essential requisites are
Exception: if it predominates the purpose of the party to enter into a
present.
contract. E.g., sale to defraud creditors.
2. SPECIAL FORM:
Art. 1352. Contracts without cause, or with unlawful cause, produce no
effect whatever. The cause is unlawful if it is contrary to law, morals, good
a. VALIDITY – ARTS. 748, 749, 1744, 1773, 1874, 1956,
customs, public order or public policy. (1275a)
2134
Art. 1353. The statement of a false cause in contracts shall render them
Art. 748. The donation of a movable may be made orally or in writing.
void, if it should not be proved that they were founded upon another cause
which is true and lawful. (1276)
An oral donation requires the simultaneous delivery of the thing or of the
them, of such things in action or pay at the time some part of the
The acceptance may be made in the same deed of donation or in a separate
purchase money; but when a sale is made by auction and entry is
public document, but it shall not take effect unless it is done during the
made by the auctioneer in his sales book, at the time of the sale, of
lifetime of the donor.
the amount and kind of property sold, terms of sale, price, names of
(7) To loan or borrow money, unless the latter act be urgent and
Art. 1956. No interest shall be due unless it has been expressly stipulated
indispensable for the preservation of the things which are under
administration;
in writing. (1755a)
(8) To lease any real property to another person for more than one year;
(1) Acts and contracts which have for their object the creation,
registered and there must be a certificate of transfer.
(3) The power to administer property, or any other power which has for its
Art. 1403. The following contracts are unenforceable, unless they are
object an act appearing or which should appear in a public document, or
ratified:
should prejudice a third person;
must appear in writing, even a private one. But sales of goods, chattels or
(2) Those that do not comply with the Statute of Frauds as set forth in this
things in action are governed by Articles, 1403, No. 2 and 1405. (1280a)
number. In the following cases an agreement hereafter made shall be
unenforceable by action, unless the same, or some note or memorandum,
only to bind third persons and does not affect the validity of the contract.
evidence, therefore, of the agreement cannot be received without the
writing, or a secondary evidence of its contents:
sale of land, the same article would tell us that a contract of sale involving
(a) An agreement that by its terms is not to be performed within a
determine if the parties’ intention are different from the clear words of the
Art. 1359. When, there having been a meeting of the minds of the
agreement.
parties to a contract, their true intention is not expressed in the
instrument purporting to embody the agreement, by reason of mistake, In
a case where a Deed of Assignment was issued as payment for the
fraud, inequitable conduct or accident, one of the parties may ask for the
obligation of the debtor in an indemnity agreement by way of dacion en
reformation of the instrument to the end that such true intention may be
pago, the debtor thereafter made subsequent installment payments and
expressed.
executed a mortgage, the SC held that clearly the subsequent acts of the
debtor does not reflect his claim that the deed of assignment was by dacion
If mistake, fraud, inequitable conduct, or accident has prevented a meeting en
pago. The deed of assignment was a form of security for the indemnity
of the minds of the parties, the proper remedy is not reformation of the
agreement.
instrument but annulment of the contract.
Art. 1372. However general the terms of a contract may be, they shall not
Art. 1360. The principles of the general law on the reformation of be
understood to comprehend things that are distinct and cases that are
instruments are hereby adopted insofar as they are not in conflict with the
different from those upon which the parties intended to agree. (1283)
provisions of this Code.
Art. 1376. The usage or custom of the place shall be borne in mind in the
Art. 1364. When through the ignorance, lack of skill, negligence or bad
interpretation of the ambiguities of a contract, and shall fill the omission of
faith on the part of the person drafting the instrument or of the clerk or
stipulations which are ordinarily established. (1287)
typist, the instrument does not express the true intention of the parties, the
courts may order that the instrument be reformed.
Art. 1377. The interpretation of obscure words or stipulations in a contract
shall not favor the party who caused the obscurity. (1288)
Art. 1365. If two parties agree upon the mortgage or pledge of real or
personal property, but the instrument states that the property is sold
Art. 1378. When it is absolutely impossible to settle doubts by the rules
absolutely or with a right of repurchase, reformation of the instrument is
established in the preceding articles, and the doubts refer to incidental
proper.
circumstances of a gratuitous contract, the least transmission of rights
and interests shall prevail. If the contract is onerous, the doubt shall be
Art. 1366. There shall be no reformation in the following cases:
settled in favor of the greatest reciprocity of interests.
(1) Simple donations inter vivos wherein no condition is imposed;
(2) Wills; If
the doubts are cast upon the principal object of the contract in such a
(3) When the real agreement is void.
way that it cannot be known what may have been the intention or will of
one of the five lots he owns without specifying which lot. Later on, the
Art. 1368. Reformation may be ordered at the instance of either party or
parties cannot agree which of the five lots is the subject of the contract.
his successors in interest, if the mistake was mutual; otherwise, upon
petition of the injured party, or his heirs and assigns.
What is the status of the contract? Void under Art. 1409(6): those where
the intention of the parties relative to the principal object of the contract
Art. 1369. The procedure for the reformation of instrument shall be
cannot be ascertained.
governed by rules of court to be promulgated by the Supreme Court.
h.
KINDS OF CONTRACT AS TO VALIDITY
g. INTERPRETATION OF CONTRACTS – ARTS. 1370-1379
1.
VALID AND BINDING
Art. 1370. If the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations 2.
VALID BUT DEFECTIVE
shall control.
a. RESCISSIBLE CONTRACTS – ARTS. 1380-1389
(Exhibits I and I-1) on the ground that these are public documents and as
Contracts undertaken in fraud of creditors when the latter cannot
such are presumed by law to have been fair and legal; that the vendee
in any other collect the claims due them; how to prove fraud?
Sotero Sadorra, is presumed to have acted in good faith, citing Art. 44,
1. Presumptions: Examples:
Spanish Civil Code, Art. 627 New Civil Code; that fraud is never presumed,
a. Onerous alienation of property after judgment has been rendered
and it is settled in this jurisdiction that strong and convincing evidence is
against the debtor in favour of any creditor, or after an order of
necessary to overthrow the validity of an existing public instrument. The
garnishment or attachment was issued by the court.
appellate court continued that inasmuch as under the old Civil Code in force
b. Gratuitous alienation of property wherein the debtor did not at
the time of the sale, the husband was empowered to dispose of the
reserve sufficient property to cover his debts.
conjugal property without the consent of the wife, the sales made by
2. Badges of Fraud: examples:
Benigno Sadorra were valid, and the wife Isidora cannot now recover the
a. Close relationship of the parties;
property from the vendee.
b. When the debtor is the seller but is in continued possession of the
property;
ISSUE: WON respondent Court of Appeals erred when it reversed the
c. When the price in the contract is grossly inadequate;
decision of the trial Court and held that fraud cannot be presumed in the
d. When the debtor is already insolvent and he sells his property in
transaction of Benigno and herein private respondents?
credit.
HELD: Yes. The facts narrated in the first portion of this Decision which are
CASE:
not disputed, convincingly show or prove that the conveyances made by
Benigno Sadorra in favor of his son-in-law were fraudulent. For the heart of
ISIDORA L. CABALIW and SOLEDAD SADORRA, petitioners,
the matter is that about seven months after a judgment was rendered
vs.
against him in Civil Case No. 43192 of the Court of First Instance of Manila
SOTERO SADORRA, ENCARNACION SADORRA, EMILIO ANTONIO,
and without paying any part of that judgment, Benigno Sadorra sold the
ESPERANZA RANJO, ANSELMO RALA, BASION VELASCO, IGNACIO
only two parcels of land belonging to the conjugal partnership to his son-in-
SALMAZAN, and THE HONORABLE COURT OF APPEALS,
law. Such a sale even if made for a valuable consideration is presumed to
respondents. be
in fraud of the judgment creditor who in this case happens to be the
G.R. No. L-25650 June 11, 1975
offended wife.
attachment need not refer to the property alienated and need not have
Facts: Petitioner Isidora Cabaliw was the wife of Benigno Sadorra by his
been obtained by the party seeking rescission.
second marriage, they had a child, herein petitioner Soledad Sadorra.
During their marriage, the spouses acquired two (2) parcels of land situated
The above-quoted legal provision was totally disregarded by the appellate
in Iniangan, Dupax, Nueva Vizcaya.
court, and there lies its basic error.
where the case is one wherein the suit is not between the parties inter se
Unknown to petitioner Cabaliw, Benigno executed two deeds of sale and
but is one instituted by a third person, not a party to the contract but
sold the subject properties to herein private respondents. Such was fact
precisely the victim of it because executed to his prejudice and behind his
only discovered after the judgment which authorized her to manage the
back; neither law, nor justice, nor reason, nor logic, should so permit,
same,
otherwise, in such a suit, the courts would be furnishing a most effective
vendor and vendee. Thus (1) the vendee is the son-in-law of the vendor. In
On appeal, the CA reversed the decision of the trial Court, hence this
the early case of Regalado vs. Luchsinger & Co., 5 Phil. 625, this Court held
petition.
that the close relationship between the vendor and the vendee is one of the
known badges of fraud. (2) At the time of the conveyance, the vendee,
In Civil Case No. 75319 dated January 13, 1969, having discovered the
Added to the above circumstances is the undisputed fact that the vendee
hidden property of herein appellant filed for the revival of Civil Case No.
Sotero Sadorra secured the cancellation of the lis pendens on O.C.T. No. 1,
32799, which was granted by the trial Court.
which was annotated in 1940 at the instance of Isidora Cabaliw, and the
issuance of a transfer certificate of title in his favor, by executing an
On February 17, 1971, in Civil Case No 465, herein appellant filed another
affidavit, Exhibit H, on June 7, 1948, wherein he referred to Isidora as "the
action against appellee Pauli, praying for the annulment of Conditional Sale
late Isidora Cabaliw' when he knew for a fact that she was alive, and
as well as the Deed of Sale, of Hacienda Riverside to the Garganeras and
alleged that Civil Case 449 of the Court of First Instance of Nueva Vizcaya
also for annulment of Garganera's Certificate of Title No. T-34425.
was decided in his favor where in truth there was no such decision because
the proceedings in said case were interrupted by the last world war. Such
However, appellee Pauli filed a motion to dismiss on the grounds of res
conduct of Sotero Sadorra reveals, as stated by the lower court, an "utter
judicata, prescription, waiver and abandonment of claim, which was granted
lack of sincerity and truthfulness" and belies his pretensions of good faith.
by the trial Court on the ground of prescription, hence this appeal.
On the part of the transferee, he did not present satisfactory and convincing
ISSUE: WON the trial Court erred when it dismissed Civil Case No. 465 on
evidence sufficient to overthrow the presumption and evidence of a
the ground of prescription?
fraudulent transaction. His is the burden of rebutting the presumption of
fraud established by law, and having failed to do so, the fraudulent nature
HELD: No, the Court held that the trial Court did no err when it dismissed
of the conveyance in question prevails.
Civil Case No. 465.
The decision of the Court of Appeals makes mention of Art. 1413 of the old
Has the action for annulment of the sale of Lot 693 to the Garganeras
Civil Code which authorizes the husband as administrator to alienate and
prescribed? Did prescription of the action commence to run from the
bind by onerous title the property of the conjugal partnership without the
registration of the sale, or from the discovery of the transaction by the
consent of the wife, and by reason thereof, concludes that petitioner Isidora
Bank?
Cabaliw cannot now seek annulment of the sale made by her husband. On
this point, counsel for petitioners rightly claims that the lack of consent of
When a transaction involves registered land, the four-year period fixed in
the wife to the conveyances made by her husband was never invoked nor
Article 1391 within winch to bring an action for annulment of the deed, shall
placed in issue before the trial court. What was claimed all along by plaintiff,
be computed from the registration of the conveyance (March 5, 1963) on
Isidora Cabaliw now petitioner, was that the conveyances or deeds of sale
the familiar theory that the registration of the document is constructive
were executed by her husband to avoid payment of the monthly support
notice of the conveyance to the whole world (Armentia vs. Patriarca, 18
adjudged in her favor and to deprive her of the means to execute said
SCRA 1253; Avecilla vs. Yatco, 103 Phil. 666).
judgment. In other words, petitioner seeks relief not so much as an
aggrieved wife but more as a judgment creditor of Benigno Sadorra. Art.
Plaintiff's submission that the four-year period commenced to run from the
1413 therefore is inapplicable; but even if it were, the result would be the
date when the Bank obtained actual knowledge of the fraudulent sale of
same because the very article reserves to the wife the right to seek redress
Pauli's land to the Garganeras (sometime in 1969) and that hence the four-
in court for alienations which prejudice her or her heirs. The undisputed
year period for bringing an action to annul the sale had not yet expired
facts before Us clearly show that, the sales made by the husband were
when it filed the action for annullment on February 17, 1971, is
merely a scheme to place beyond the reach of the wife the only properties
unacceptable. That theory would diminish public faith in the integrity of
belonging to the conjugal partnership and deprive her of what rightly
torrens titles and impair commercial transactions involving registered lands
belongs to her and her only daughter Soledad.
for it would render uncertain the computation of the period for the
who has a right to invoke it should execute an act which necessarily implies
Neither shall rescission take place when the things which are the object of
an intention to waive his right. (1311a)
the contract are legally in the possession of third persons who did not act in
bad faith.
Art. 1394. Ratification may be effected by the guardian of the
party who has no right to bring the action for annulment. (1312)
Art. 1386. Rescission referred to in Nos. 1 and 2 of Article 1381 shall not
take place with respect to contracts approved by the courts. (1296a)
Art. 1396. Ratification cleanses the contract from all its defects from the
restore to each other the things which have been the subject matter of the
In addition to these presumptions, the design to defraud creditors may be
contract, with their fruits, and the price with its interest, except in cases
proved in any other manner recognized by the law of evidence. (1297a)
provided by law.
Art. 1388. Whoever acquires in bad faith the things alienated in fraud of
In obligations to render service, the value thereof shall be the basis for
creditors, shall indemnify the latter for damages suffered by them on
damages. (1303a)
account of the alienation, whenever, due to any cause, it should be
impossible for him to return them.
Art. 1399. When the defect of the contract consists in the incapacity of one
shall return the fruits received and the value of the thing at the time of the
For persons under guardianship and for absentees, the period of four years
loss, with interest from the same date. (1307a)
shall not begin until the termination of the former's incapacity, or until the
domicile of the latter is known. (1299)
Art. 1401. The action for annulment of contracts shall be extinguished
when the thing which is the object thereof is lost through the fraud or fault
b. VOIDABLE CONTRACTS – ARTS. 1390-1402, 1327-1328,
of the person who has a right to institute the proceedings.
1339
If the right of action is based upon the incapacity of any one of the
Art. 1390. The following contracts are voidable or annullable, even though
contracting parties, the loss of the thing shall not be an obstacle to the
there may have been no damage to the contracting parties:
success of the action, unless said loss took place through the fraud or fault
Art. 1402. As long as one of the contracting parties does not restore what
(2) Those where the consent is vitiated by mistake, violence, intimidation,
in virtue of the decree of annulment he is bound to return, the other cannot
undue influence or fraud.
(2) Insane or demented persons, and deaf-mutes who do not know how to
Art. 1391. The action for annulment shall be brought within four years.
write. (1263a)
This period shall begin:
Art. 1328. Contracts entered into during a lucid interval are valid. Contracts
(n)
defect of the consent ceases.
In case of mistake or fraud, from the time of the discovery of the same.
Art. 1339. Failure to disclose facts, when there is a duty to reveal them, as
when the parties are bound by confidential relations, constitutes fraud. (n)
And when the action refers to contracts entered into by minors or other
incapacitated persons, from the time the guardianship ceases. (1301a)
c. UNENFORCEABLE CONTRACTS – ARTS. 1403-1408, 1317,
1878
Art. 1392. Ratification extinguishes the action to annul a voidable contract.
(1309a)
Art. 1403. The following contracts are unenforceable, unless they are
ratified:
(1) Those entered into in the name of another person by one who has been
Art. 1393. Ratification may be effected expressly or tacitly. It is understood
Art. 1317. No one may contract in the name of another without being
For breach of that mutual promise to marry, Geronimo may sue Socorro for
Art. 1878. Special powers of attorney are necessary in the following cases:
against herein appellees Matias Auxilio and Socorro Auxilio, to recover
administration;
agreed marriage between Socorro and Geronimo.
(6) To make gifts, except customary ones for charity or those made to
Herein appellees moved to dismiss the case on the ground that the contract
(7) To loan or borrow money, unless the latter act be urgent and
which was granted by the trial Court. On appeal, the appellate Court
administration;
(8) To lease any real property to another person for more than one year;
ISSUE: Whether or not the contract of promise to marry is unenforceable,
These contracts cannot be ratified. Neither can the right to set up the
defense of illegality be waived.
III. SPECIAL CONTRACTS
Art. 1410. The action or defense for the declaration of the inexistence of a A.
SALES
contract does not prescribe.
after stipulations;
Art. 1415. Where one of the parties to an illegal contract is incapable of 7.
Commutative: classic commutative in the sense that there is
giving consent, the courts may, if the interest of justice so demands allow
equivalence in the prestation of the parties. Ordinarily, price reflects
recovery of money or property delivered by the incapacitated person.
the value of the property, since the seller would not normally accept a
price below the value of the property and the buyer would not
Art. 1416. When the agreement is not illegal per se but is merely
normally pay an amount more than the value of the property.
prohibited, and the prohibition by the law is designated for the protection of
the plaintiff, he may, if public policy is thereby enhanced, recover what he
Aleatory: there is also a sale of hope where there is no equivalence in
has paid or delivered.
the value of prestations. Since the obligation of the other party is not
Art. 1419. When the law sets, or authorizes the setting of a minimum
HELD: No. This cannot be a contact to sell, because there is nothing in the
Relevant as to mode of delivery.
contract that he reserved ownership until a certain condition is fulfilled.
Thus, the contract is one of absolute sale. As such, upon delivery, Monica
KINDS OF SALE AS TO VALIDITY: valid, rescissible, voidable,
acquired ownership of the property.
unenforceable, or void.
The action will not prosper because Monica is the owner and has a right to
BAR QUESTION: State the basic difference (only in their legal effects) –
possess the property. Remedy of Nante should be “rescission” since there is
(a) Between a contract to sell, on the one hand, and a contract of sale, on
substantial breach.
the other hand;
(b) Between a conditional sale, on the one hand, and an absolute sale, on
DISTINGUISHED FROM OTHER TRANSACTIONS::
the other hand.
Rationale for distinguishing: because there are similarities which may cause
ANSWER: contract to sell vs. contract of sale (both absolute and
confusion as to the rights and obligations of the parties.
conditional): contract to sell is a special kind of conditional sale where
ownership does not automatically pass upon fulfillment of the condition
1. Contract for a piece of work
which is usually the full payment of the purchase price. It will only give the
buyer the right to demand the execution of a deed of sale or to compel the
Art. 1467. A contract for the delivery at a certain price of an article which
seller to sell and the seller is now bound to sell. Ownership transfers upon
the vendor in the ordinary course of his business manufactures or procures
execution of the deed of sale. The premise is that the buyer is already in
for the general market, whether the same is on hand at the time or not, is a
possession of the property even before execution of the deed of sale.
contract of sale, but if the goods are to be manufactured specially for the
customer and upon his special order, and not for the general market, it is a
Whereas a conditional sale, ownership automatically transfers to the
contract for a piece of work. (n)
buyer upon fulfillment of the condition, without need of a new agreement or
to execute a new contract
Importance of Distinction: sale is covered by the statute of frauds. On
ANSWER: No. there is nothing in the receipt that would indicate that the
Similarity: upon delivery, ownership passes. Although, dacion en pago,
seller reserved ownership. In a contract where the seller did not reserve
there is always transfer of ownership.
ownership, it is an absolute sale. In a contract to sell, you have to impose
as a condition for the transfer of ownership, the full payment of the price.
Delivery – in dacion en pago is always required.
defendant to order the beds by the dozen and in no other manner, none of
In an agreement where A obliged himself to give to B a watch worth
the obligations imputed to the defendant in the two causes of action are
P800,000, and B obliged himself to give to A, his car and cash P350,000.
expressly set forth in the contract. But the plaintiff alleged that the
What contract was entered into?
defendant was his agent for the sale of his beds in Iloilo, and that said
HELD: SALE. In order to classify a contract, due regard must be given to its
Art. 1466. In construing a contract containing provisions characteristic of
essential clauses. In the contract in question, what was essential, as
both the contract of sale and of the contract of agency to sell, the essential
constituting its cause and subject matter, is that the plaintiff was to furnish
clauses of the whole instrument shall be considered. (n)
the defendant with the beds which the latter might order, at the price
stipulated, and that the defendant was to pay the price in the manner
BAR QUESTION: A granted B the exclusive right to sell his brand of
stipulated. The price agreed upon was the one determined by the plaintiff
maong pants in Isabela, the price for his merchandise payable 60 days from
for the sale of these beds in Manila, with a discount of from 20 to 25 per
delivery, and promising B a commission of 20% on all sales. After the
cent, according to their class. Payment was to be made at the end of sixty
delivery of the merchandise to B but before he could sell any of them, B’s
days, or before, at the plaintiff's request, or in cash, if the defendant so
store in Isabela was completely burned without his fault, together with all
preferred, and in these last two cases an additional discount was to be
A’s pants. Must B pay A for his lost pants? Why?
allowed for prompt payment. These are precisely the essential features of a
contract of purchase and sale. There was the obligation on the part of the
ANSWER: Yes. Risk of Loss – who bears the loss? The owner bears the
plaintiff to supply the beds, and, on the part of the defendant, to pay their
loss – res perit domino. Under the facts, who is the owner of the loss when
price. These features exclude the legal conception of an agency or order to
the maong pants were burned? Issue – what kind of contract was entered
sell whereby the mandatory or agent received the thing to sell it, and does
into? Quiroga vs. Parsons. The contract seems like an agency to sell: (1)
not pay its price, but delivers to the principal the price he obtains from the
exclusive right to sell; (2) commission. However, this is a contract of sale.
sale of the thing to a third person, and if he does not succeed in selling it,
he returns it. By virtue of the contract between the plaintiff and the
1466: if a contract has characteristics both of sale and agency, consider
defendant, the latter, on receiving the beds, was necessarily obliged to pay
essential clauses of the contract: (1) A has the obligation to deliver the
their price within the term fixed, without any other consideration and
maong pants; (2) B has the obligation to pay the price within 60 days from
regardless as to whether he had or had not sold the beds.
delivery.
It would be enough to hold, as we do, that the contract by and between the
The above clauses pertain to sales. “pay the price within 60 days” – not
defendant and the plaintiff is one of purchase and sale, in order to show
agency. In agency, the agent has the right to return the unsold pants and
that it was not one made on the basis of a commission on sales, as the
not to pay the price within a certain period.
plaintiff claims it was, for these contracts are incompatible with each other.
But, besides, examining the clauses of this contract, none of them is found
What kind of sale? Absolute or conditional? Absolute. Nothing in the
that substantially supports the plaintiff's contention. Not a single one of
problem would tell us that the seller reserved ownership and here there is
these clauses necessarily conveys the idea of an agency. The
delivery already. Therefore, B was the owner at the time of loss. B has the
words commission on sales used in clause (A) of article 1 mean
obligation to pay for the lost pants.
nothing else, as stated in the contract itself, than a mere discount
on the invoice price. The word agency, also used in articles 2 and 3, only
ANDRES QUIROGA, plaintiff-appellant,
expresses that the defendant was the only one that could sell the plaintiff's
vs.
beds in the Visayan Islands. With regard to the remaining clauses, the least
PARSONS HARDWARE CO., defendant-appellee.
that can be said is that they are not incompatible with the contract of
G.R. No. L-11491 August 23, 1918
purchase and sale.
commission for the beds sold by the plaintiff directly to persons in Iloilo. But
1. Quiroga would invoice the beds on the price fixed for sales in
all this, at the most only shows that, on the part of both of them, there was
Manila and shall make an allowance of 25% of the invoiced prices
mutual tolerance in the performance of the contract in disregard of its
as commission on the sale;
terms; and it gives no right to have the contract considered, not as the
2. Quiroga would order by the dozen, whether the same or different
parties stipulated it, but as they performed it. Only the acts of the
styles;
contracting parties, subsequent to, and in connection with, the
3. Mr. Quiroga to give notice 15 days before any alteration in the
execution of the contract, must be considered for the purpose of
price which he may plan to make in respect to his beds;
interpreting the contract, when such interpretation is necessary,
4. Mr. Parsons binds himself not to sell any other kind except the
but not when, as in the instant case, its essential agreements are
“Quiroga” beds;
clearly set forth and plainly show that the contract belongs to a
certain kind and not to another. Furthermore, the return made was of
Of the three causes of action alleged by the plaintiff in his complaint, only
certain brass beds, and was not effected in exchange for the price paid for
two of them constitute the subject matter of this appeal and both
them, but was for other beds of another kind; and for the letter Exhibit L-1,
substantially amount to the averment that the defendant violated the
requested the plaintiff's prior consent with respect to said beds, which
following obligations: not to sell the beds at higher prices than those of the
shows that it was not considered that the defendant had a right, by virtue
things.
In respect to the defendant's obligation to order by the dozen, the only one
expressly imposed by the contract, the effect of its breach would only entitle
1490: spouses are prohibited from selling to each other. Rationale:
the plaintiff to disregard the orders which the defendant might place under
possibility of undue influence. Except: when there is complete separation of
other conditions; but if the plaintiff consents to fill them, he waives his right
property regime or there is a decree of separation of property (not legal
and cannot complain for having acted thus at his own free will.
separation).
For the foregoing reasons, we are of opinion that the contract by and
Art. 1490. The husband and the wife cannot sell property to each
between the plaintiff and the defendant was one of purchase and sale, and
other, except:
that the obligations the breach of which is alleged as a cause of action are
(1) When a separation of property was agreed upon in the marriage
not imposed upon the defendant, either by agreement or by law.
settlements; or
(2) When there has been a judicial separation or property under Article
The judgment appealed from is affirmed, with costs against the appellant.
191. (1458a)
So ordered.
Art. 1471. If the price is simulated, the sale is void, but the act may be
Status of Contract: VOID. Contrary to public policy. Not subject to
shown to have been in reality a donation, or some other act or contract.
ratification.
(n)
Rubias vs. Batiller – the SC held that 1491 cannot be “ratified.” There are
Why would they enter into such simulated contract?
others who claim that these can be ratified. The execution of a second
a. To defraud creditors – the seller might sell all of his assets to make it
contract does not retroact to the first contract. Ruling in Waltson vs.
appear as if he had no more assets left;
Martinez, holding that sale under 1491 is voidable, has long been
b. To defraud the government – to make it appear that the applicant for a
abandoned even before the effectivity of the new Civil Code.
resident visa has real property in the Philippines or in some other
country for purposes of such visa.
BAR QUESTION: Rica filed a petition for annulment of his marriage with
c. To minimize tax liabilities – this is when the parties would normally
Richard. Richard hired Atty. Cruz who was paid through conveyance of a
make it appear that they entered into a donation to minimize the tax
parcel of land which he recently purchased with his lotto winnings. The
liabilities imposable compared to the taxes due on a regular sale.
transfer documents were duly signed and Atty .Cruz took possession by
Cesar Nickolai F. Soriano Jr.
98 Arellano University School of Law 2011-0303
Civil Law Review 2 under the class of Atty. Uribe
fencing the entire parameter. Richard then offered the same parcel of land
Both would pertain to generic thing. Under the law, a thing is considered
to spouses Garcia. Immediately after the sale, Sps. Garcia commenced the
determinate only when it is particularly designated or physically segregated
construction on the land which was objected to by Atty. Cruz, who claims he
from all others of the same class. Both transactions pertain to generic so
has a better right over the property. Is Atty. Cruz correct?
both transactions are void?
ANSWER: Atty. Cruz is not correct. First contract with Atty. Cruz is a dation A:
No. The first transaction is void. The second transaction is valid because
in payment. Second contract is a sale. Double sale applicable despite dation
Article 1460 requires that the requirement of the law that a thing should be
since it is governed by law on sales. However, 1544 requires that both sales
determinate would be sufficiently complied with if the thing which is the
are valid.
object of the sale is capable of being made determinate without a need of a
Art. 1469. In order that the price may be considered certain, it shall be
and agency.
persons.
always a contract of sale, since it can be done by donation or dacion
en pago.
Should such person or persons be unable or unwilling to fix it, the contract
shall be inefficacious, unless the parties subsequently agree upon the price.
Must be within the commerce of men: Examples: sale of a navigable
If
the third person or persons acted in bad faith or by mistake, the courts
river is void, sale of a cadaver is void but donation of a cadaver is allowed,
Where such third person or persons are prevented from fixing the price or
terms by fault of the seller or the buyer, the party not in fault may have
Art. 1459. The thing must be licit and the vendor must have a right to
such remedies against the party in fault as are allowed the seller or the
transfer the ownership thereof at the time it is delivered. (n)
buyer, as the case may be. (1447a)
Thing must be licit: not contrary to law, i.e., sale of prohibited drugs, wild
Price Certain in Money: it is sufficient that it be so:
flowers or wild animals. 1.
With reference to another thing certain; or
2.
That the determination thereof be left to the judgment of a special
Art. 1460. A thing is determinate when it is particularly designated or
person or persons.
physical segregated from all other of the same class.
Art. 1470. Gross inadequacy of price does not affect a contract of sale,
The requisite that a thing be determinate is satisfied if at the time the
except as it may indicate a defect in the consent, or that the parties really
contract is entered into, the thing is capable of being made determinate
intended a donation or some other act or contract. (n)
without the necessity of a new or further agreement between the parties.
(n)
OTHER PROVISIONS ON PRICE:
Must be determinate: or at least capable of being made determinate
Art. 1472. The price of securities, grain, liquids, and other things shall also
without the requirement of a new or further agreement.
be
considered certain, when the price fixed is that which the thing sold
Art. 1473. The fixing of the price can never be left to the discretion of one
expires without being liable for damages. This does not, however, entitle
Art. 1474. Where the price cannot be determined in accordance with
the offeree the right to demand specific performance since there is no
the preceding articles, or in any other manner, the contract is
perfected contract of sale yet.
inefficacious.
or other things.
PERFECTION:
Not necessarily “paid” already. “Promise” may also be considered as a
that it concerns “price” only, which is just one element of a contract of sale.
However, ownership over the thing or rights subject of the sale, does not
transfer until delivery:
Art. 1481. In the contract of sale of goods by description or by sample, the
correspond with the sample if they do not also correspond with the
Moreover, the parties may stipulate that ownership shall not pass until full
description.
payment of the price:
The buyer shall have a reasonable opportunity of comparing the bulk with
Art. 1478. The parties may stipulate that ownership in the thing shall
the description or the sample. (n)
not pass to the purchaser until he has fully paid the price. (n)
Art. 1483. Subject to the provisions of the Statute of Frauds and of any
Art. 1476. In the case of a sale by auction:
other applicable statute, a contract of sale may be made in writing, or by
(1) Where goods are put up for sale by auction in lots, each lot is the
word of mouth, or partly in writing and partly by word of mouth, or may be
subject of a separate contract of sale.
inferred from the conduct of the parties. (n)
(2) A sale by auction is perfected when the auctioneer announces its
perfection by the fall of the hammer, or in other customary manner. Until
Form: no specific form is required for the perfection of a contract of sale.
such announcement is made, any bidder may retract his bid; and the
However, the same is still subject to the Statute of Frauds for its
auctioneer may withdraw the goods from the sale unless the auction has
enforceability.
been announced to be without reserve.
(3) A right to bid may be reserved expressly by or on behalf of the seller,
BAR QUESTION: (2) “X” came across an advertisement in the “Manila
unless otherwise provided by law or by stipulation.
Daily Bulletin” about the rush sale of three slightly used TOYOTA cars,
(4) Where notice has not been given that a sale by auction is subject to a
Model 1989 for only P200,000 each. Finding the price to be very cheap and
right to bid on behalf of the seller, it shall not be lawful for the seller to bid
in order to be sure that he gets one unit ahead of the others, “X”
himself or to employ or induce any person to bid at such sale on his behalf
immediately phoned the advertiser “Y” and placed an order for one car. “Y”
or for the auctioneer, to employ or induce any person to bid at such sale on
accepted the order and promised to deliver the ordered unit on July 15,
behalf of the seller or knowingly to take any bid from the seller or any
1989. On the said date, however, “Y” did not deliver the unit. “X” brings an
person employed by him. Any sale contravening this rule may be treated as
action to compel “Y” to deliver the unit. Will such action prosper? Give
fraudulent by the buyer. (n)
your reasons.
Art. 1479. A promise to buy and sell a determinate thing for a price certain
ANSWER: WON the action will prosper goes into perfection, which may
is reciprocally demandable.
also be subject to formalities required by law. Since the subject matter is a
agreed to sell to “B” his only parcel of land for P20,000.00, and “B” agreed
Option Agreement: in an option agreement, as provided under Art. 1324,
to buy at the aforementioned price. “B” went to the bank, withdrew the
the offerer may withdraw the offer before acceptance is communicated to
necessary amount, and returned to “A” for the consummation of the
him, and he would not be liable for damages.
contract. “A” however, had changed his mind and refused to go through
with the sale. Is the agreement valid? Will an action by “B” against “A” for
Offerer is not bound, he may withdraw anytime before acceptance is
specific performance prosper? Reason.
conveyed to him.
ANSWER: even though there was an agreement as to the object and the
The above rule is likewise applicable to contracts of sale.
price, and all the essential requisites are present and there is a valid
Court below entertained any doubts about the existence of the written
Can it be argued that since B wen to the bank to withdraw the money and
memorandum, it should have called for a preliminary hearing on that point,
returned to A for consummation, there was part performance? No. The act
and not dismissed the complaint
of B is just preliminary to performance.
(2) Cancel the sale, should the vendee's failure to pay cover two or more
A transaction closed by a letter/telegram is perfected and is not covered by
installments;
the Statute of Frauds, the letter/telegram being a “note or memorandum,”
(3) Foreclose the chattel mortgage on the thing sold, if one has been
since they were signed, refer to the property sold and its area, and indicate
constituted, should the vendee's failure to pay cover two or more
the price.
installments. In this case, he shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement to the
A sufficient memorandum may be contained in two or more documents.
contrary shall be void. (1454-A-a)
first remedy, since the 2nd and 3rd requires that there must be non-payment
FACTS: Appellant Cirilo Parades filed an action to compel defendant-
of two or more consecutive installments. Consecutive since the law does not
appellee Jose L. Espino to execute a deed of sale and to pay damages
state that “the buyer failed to pay TWICE”. (Uribe, 2016)
alleging that the defendant "had entered into the sale" of a lot; that the
deal had been "closed by letter and telegram" but the actual execution of
Restitution of payments under the 2nd option, cancellation of the
the deed of sale and payment of the price were deferred to the arrival of
sale:
defendant at Puerto Princesa; that defendant upon arrival had refused to
1. The cancellation would entail mutual restitution by the parties;
execute the deed of sale although plaintiff was able and willing to pay the
2. The seller may retain a reasonable amount of the purchase price
price, and continued to refuse despite written demands of plaintiff; that as a
already paid as compensation for the use of the thing;
result, plaintiff had lost expected profits from a resale of the property, and
3. The seller cannot retain ALL of the purchase price, EXCEPT: if there is
caused plaintiff mental anguish and suffering.
a forfeiture clause, which entitles him to the purchase price already
paid at the time of cancellation. However, this clause will not apply if
Defendant filed a motion to dismiss upon the ground that the complaint
the retention of ALL the purchase price would be unconscionable.
stated no cause of action, and that the plaintiff's claim upon which the
action was founded was unenforceable under the Statute of Frauds which
Note that under the MACEDA law, a forfeiture clause would not be
was granted by the court on the ground that there is no written contract
valid.
between the parties.
Art. 1495. The vendor is bound to transfer the ownership of and deliver, as
well as warrant the thing which is the object of the sale. (1461a)
Can the vendor rescind the contract? (2%)
Art. 1496. The ownership of the thing sold is acquired by the vendee from
ANSWER: Sale of condominium unit and it would appear that it is a
the
moment it is delivered to him in any of the ways specified in Articles
residential unit, in installment. This is covered by the Maceda Law. The
What if 5th month defaulted: grace period is 60 days since the default
This is different from a pledge or mortgage which requires the pledger or
happened only on the first year, unless otherwise stipulated. If she was able
mortgagor to be the absolute owner of the thing.
to pay within the 60 days, and eventually failed to pay on the 3 rd month of
the 5th year. The payment is made beyond the grace period. Under the law,
TRANSFER OF OWNERSHIP: Yes. If the seller had authority to sell:
the buyer is entitled only to a grace period once in every 5 years of the 1.
From the owner himself – agent;
lifetime of the contract. 2.
From the law – such as those mentioned under validity of contract
above.
INJURY OR BENEFIT PENDING DELIVERY: 3.
From the court – in cases of judicial sale.
Art. 1480. Any injury to or benefit from the thing sold, after the contract
Art. 1505. Subject to the provisions of this Title, where goods are sold by a
Cesar Nickolai F. Soriano Jr.
102 Arellano University School of Law 2011-0303
Civil Law Review 2 under the class of Atty. Uribe
person who is not the owner thereof, and who does not sell them under
BAR QUESTION: Before migrating to Canada in 1992, the spouses
authority or with the consent of the owner, the buyer acquires no better
Teodoro and Anita entrusted all their legal papers and documents to
title to the goods than the seller had, unless the owner of the goods is by
their nephew, Atty. Tan. Taking advantage of the situation, Atty. Tan
his conduct precluded from denying the seller's authority to sell.
forged a deed of sale, making it appear that he had bought the
title over the land? If “B” sells the property to “C”, does the latter
b. As to the seller: estoppel by deed – if after the sale, he acquired
acquire a valid title over it?
ownership, such ownership automatically passes to the buyer.
THERE MUST BE DELIVERY.
ANSWER: B does not have a valid title to the land. A forger will never
acquire any right over the object of the contract. Otherwise stated, a
Article 1434. When a person who is not the owner of a thing sells or
forged document cannot convey any title.
alienates and delivers it, and later the seller or grantor acquires title
thereto, such title passes by operation of law to the buyer or grantee.
However, C may acquire valid title to the land because, while a forged
deed cannot convey a valid title, it may be a root of a valid title if as a
2. Sale of an Apparent Owner, REQUISITES:
result of the forgery, the forger was able to register the land in his
name and the land is bought by a purchaser in good faith and for
a. There is apparent ownership: usually involves a registered
value.
piece of land.
CASE:
Examples:
An old lady asked a lawyer to register her land in her name.
MIGUEL MAPALO, ET AL., petitioners,
However, the lawyer instead registered it in his name.
vs.
A group of businessmen agreed to register the lot in the
MAXIMO MAPALO, ET AL., respondents.
name of the one who will manage the business.
G.R. No. L-21489 and L-21628 May 19, 1966
did not take the witness stand to rebut the plaintiffs' testimony supporting
(2) Art. 1518 – for goods covered by negotiable instruments.
the allegation of fraud in the preparation of the document.
Accordingly, since the deed of sale of 1936 is governed by the Old Civil
The Mapalo spouses filed their answer with a counterclaim seeking
Code, it should be asked whether its case is one wherein there is no
cancellation of the Transfer Certificate of Title of the Narcisos as to the
consideration, or one with a statement of a false consideration. If the
western half of the land, on the grounds that their (Mapalo spouses)
former, it is void and inexistent; if the latter, only voidable, under the Old
signatures to the deed of sale of 1936 was procured by fraud and that the
Civil Code. As observed earlier, the deed of sale of 1936 stated that it had
Narcisos were buyers in bad faith. They asked for reconveyance to them of
for its consideration Five Hundred (P500.00) Pesos. In fact, however, said
the western portion of the land and issuance of a Transfer Certificate of
consideration was totally absent. The problem, therefore, is whether a deed
Title in their names as to said portion.
which states a consideration that in fact did not exist, is a contract without
On appeal by the Narcisos, the CA reversed the trial court declaring that the
In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs.
sale was merely voidable and not void ab initio and therefore an action to
Flores, 40 Phil. 921, is squarely applicable herein. In that case we ruled that
annul the same within four years had long prescribed. From said decision of
a contract of purchase and sale is null and void and produces no
the Court of Appeals, the Mapalo spouses appealed to this Court.
effect whatsoever where the same is without cause or
good faith, the trial court in its decision resolved this issue, thus:
As regards the eastern portion of the land, the Mapalo spouses are not
claiming the same, it being their stand that they have donated and freely
With regard to the second issue, the Narcisos contend that they are
given said half of their land to Maximo Mapalo. And since they did not
the owners of the above-described property by virtue of the deed of
appeal from the decision of the trial court finding that there was a valid and
sale (Exh. B, plaintiffs in 11991 and Exh. 2, defendants in U-133)
effective donation of the eastern portion of their land in favor of Maximo
executed in their favor by Maximo Mapalo, and further claim that they
Mapalo, the same pronouncement has become final as to them, rendering it
are purchasers for value and in good faith. This court, however, cannot
no longer proper herein to examine the existence, validity efficacy of said
also give weight and credit on this theory of the Narcisos on the
donation as to said eastern portion.
following reasons: Firstly, it has been positively shown by the
The rule under the Civil Code, again be it the old or the new, is that
Aside from the fact that all the parties in these cases are neighbors,
contracts without a cause or consideration produce no effect
except Maximo Mapalo the foregoing facts are explicit enough and
whatsoever. Nonetheless, under the Old Civil Code, the statement of a
sufficiently reveal that the Narcisos were aware of the nature and
false consideration renders the contract voidable, unless it is proven that it
extent of the interest of Maximo Mapalo their vendor, over the above-
Wherefore, the decision of the Court of Appeals is hereby reversed and set
What if the thing is also not lost but bought from a seller who
aside, and another one is hereby rendered affirming in toto the judgment of
doesn’t have the right to sell, can the owner recover? Will he
the Court of First Instance a quo, with attorney's fees on appeal in favor of
reimburse? If the owner was NOT unlawfully deprived of the thing or lost
appellants in the amount of P1,000.00, plus the costs, both against the
it, Art. 559 is no longer applicable. See Sun Brothers vs. Velasco.
private appellees. So ordered.
2nd sale: Lopez sold the same the day after, misrepresenting himself as a
Article 559. The possession of movable property acquired in good faith is
certain “LIM”, to JV Trading owned by Velasco.
equivalent to a title. Nevertheless, one who has lost any movable or has
been unlawfully deprived thereof, may recover it from the person in
3rd sale: Velasco to Co.
possession of the same.
case. If the seller omit so to do, and the goods are lost or damaged in
Art. 559 does not apply because SBC neither lost the property nor was it
course of transit, the buyer may decline to treat the delivery to the carrier
unlawfully deprived of such. The proper remedy for SBC is a claim for
as a delivery to himself, or may hold the seller responsible in damages.
indemnity against Lopez.
Unless otherwise agreed, where goods are sent by the seller to the buyer
OBLIGATION TO DELIVER
under circumstances in which the seller knows or ought to know that it is
usual to insure, the seller must give such notice to the buyer as may enable
Delivery is the mode by which ownership is transferred. This is relevant
him to insure them during their transit, and, if the seller fails to do so, the
especially in determining who bears the risk of loss.
goods shall be deemed to be at his risk during such transit. (n)
will deliver to the common carrier for ultimate delivery to the buyer. In this
Art. 1497. The thing sold shall be understood as delivered, when it is
case, there is already delivery upon receipt of the common carrier.
placed in the control and possession of the vendee. (1462a)
Art. 1503. When there is a contract of sale of specific goods, the seller
Actual Delivery: The actual and physical transfer of the thing to the
may, by the terms of the contract, reserve the right of possession or
buyer. Note that actual delivery entails that the “control” over the thing is
ownership in the goods until certain conditions have been fulfilled. The right
transferred to the transferee. As such, if a thing is delivered to a depositary,
of possession or ownership may be thus reserved notwithstanding the
there is no delivery, since there is no transfer of ownership.
delivery of the goods to the buyer or to a carrier or other bailee for the
Where goods are shipped, and by the bill of lading the goods are deliverable
Art. 1498. When the sale is made through a public instrument, the
to the seller or his agent, or to the order of the seller or of his agent, the
execution thereof shall be equivalent to the delivery of the thing which is
seller thereby reserves the ownership in the goods. But, if except for the
the object of the contract, if from the deed the contrary does not appear or
form of the bill of lading, the ownership would have passed to the buyer on
cannot clearly be inferred.
shipment of the goods, the seller's property in the goods shall be deemed to
to order of the buyer or of his agent, but possession of the bill of lading is
Execution of Public Instrument: This mode of delivery is available to
retained by the seller or his agent, the seller thereby reserves a right to the
both sale of rights and sale of things.
possession of the goods as against the buyer.
Art. 1499. The delivery of movable property may likewise be made by the
Where the seller of goods draws on the buyer for the price and transmits
mere consent or agreement of the contracting parties, if the thing sold
the bill of exchange and bill of lading together to the buyer to secure
cannot be transferred to the possession of the vendee at the time of the
acceptance or payment of the bill of exchange, the buyer is bound to return
sale, or if the latter already had it in his possession for any other reason.
the bill of lading if he does not honor the bill of exchange, and if he
(1463a)
wrongfully retains the bill of lading he acquires no added right thereby. If,
however, the bill of lading provides that the goods are deliverable to the
Traditio Longa Manu: by mere consent of the seller, ownership transfers
buyer or to the order of the buyer, or is indorsed in blank, or to the buyer
to the buyer, because at the time of sale, the seller cannot transfer
by the consignee named therein, one who purchases in good faith, for
possession to the buyer, e.g., the thing is leased by another.
value, the bill of lading, or goods from the buyer will obtain the ownership
in the goods, although the bill of exchange has not been honored, provided
Art. 1500. There may also be tradition constitutum possessorium. (n)
that such purchaser has received delivery of the bill of lading indorsed by
the consignee named therein, or of the goods, without notice of the facts
Consitutum Posessorium: at the time of sale, the seller is in possession
making the transfer wrongful. (n)
and remains in possession in another concept other than an owner, like that
of a lessee, depositary or borrower.
EXCEPTIONS TO 1523:
1. By stipulation;
SALE OR RETURN AND SALE ON APPROVAL OR ON TRIAL OR ON
2. If ownership is retained only to secure performance by the buyer. Title
SATISFACTION:
of the seller is known as “SECURITY TITLE”. This is what’s provided
the loss.
Art. 1504. Unless otherwise agreed, the goods remain at the seller's risk
until the ownership therein is transferred to the buyer, but when the
The trial court rendered judgment in favor of petitioner. On appeal, the case
ownership therein is transferred to the buyer the goods are at the buyer's
was forwarded to the SC involving purely questions of law.
risk whether actual delivery has been made or not, except that:
ISSUE: WON respondent may be held liable for the balance of the purchase
(1) Where delivery of the goods has been made to the buyer or to a bailee
price?
for the buyer, in pursuance of the contract and the ownership in the goods
has been retained by the seller merely to secure performance by the buyer
HELD: Yes. Appellant bought from appellee one set of American
of his obligations under the contract, the goods are at the buyer's risk from
Jurisprudence, including one set of general index, payable on installment
the time of such delivery;
plan. It was provided in the contract that "title to and ownership of the
(2) Where actual delivery has been delayed through the fault of either the
books shall remain with the seller until the purchase price shall have been
buyer or seller the goods are at the risk of the party in fault. (n)
fully paid. Loss or damage to the books after delivery to the buyer shall be
borne by the buyer." The total price of the books, including the cost of
Res Perit Domino: as a rule, the one who bears the loss of the thing is
freight, amounts to P1,682.40. Appellant only made a down payment of
the owner thereof.
P300.00 thereby leaving a balance of P1,382.40. This is now the import of
until the purchase price shall have been fully paid, but such stipulation
ANSWER: Yes. This case involves an absolute sale and there was already
cannot make the seller liable in case of loss not only because such was
delivery. As such, ownership already passed to the buyer. Applying the res
agreed merely to secure the performance by the buyer of his obligation but
perit domino doctrine, the buyer bears the loss since he is already the
in the very contract it was expressly agreed that the "loss or damage to the
owner at the time of loss. He can be compelled to pay the unpaid balance.
books after delivery to the buyer shall be borne by the buyer." Any such
Is buyer “B” still legally obligated to pay the purchase price? Explain.
Neither can appellant find comfort in the claim that since the books were
destroyed by fire without any fault on his part he should be relieved from
Art. 1506. Where the seller of goods has a voidable title thereto, but his
Art. 1582. The vendee is bound to accept delivery and to pay the
title has not been avoided at the time of the sale, the buyer acquires a good
price of the thing sold at the time and place stipulated in the
title to the goods, provided he buys them in good faith, for value, and
contract.
without notice of the seller's defect of title. (n)
If the time and place should not have been stipulated, the payment
Art. 1507. A document of title in which it is stated that the goods referred
must be made at the time and place of the delivery of the thing sold.
to therein will be delivered to the bearer, or to the order of any person
(1500a)
named in such document is a negotiable document of title. (n)
residence.
Art. 1521. Whether it is for the buyer to take possession of the goods or of
the seller to send them to the buyer is a question depending in each case
DELIVERY OF LESS OR MORE OF THE QUANTITY AGREED UPON:
on the contract, express or implied, between the parties. Apart from any
such contract, express or implied, or usage of trade to the contrary, the
Art. 1522. Where the seller delivers to the buyer a quantity of goods less
place of delivery is the seller's place of business if he has one, and if not his
than he contracted to sell, the buyer may reject them, but if the buyer
residence; but in case of a contract of sale of specific goods, which to the
accepts or retains the goods so delivered, knowing that the seller is not
knowledge of the parties when the contract or the sale was made were in
going to perform the contract in full, he must pay for them at the contract
some other place, then that place is the place of delivery.
rate. If, however, the buyer has used or disposed of the goods delivered
before he knows that the seller is not going to perform his contract in full,
Where by a contract of sale the seller is bound to send the goods to the
the buyer shall not be liable for more than the fair value to him of the goods
buyer, but no time for sending them is fixed, the seller is bound to send
so received.
them within a reasonable time.
Where the seller delivers to the buyer a quantity of goods larger than he
Where the goods at the time of sale are in the possession of a third person,
contracted to sell, the buyer may accept the goods included in the contract
the seller has not fulfilled his obligation to deliver to the buyer unless and
and reject the rest. If the buyer accepts the whole of the goods so delivered
until such third person acknowledges to the buyer that he holds the goods
he must pay for them at the contract rate.
on the buyer's behalf.
Where the seller delivers to the buyer the goods he contracted to sell mixed
Demand or tender of delivery may be treated as ineffectual unless made at
with goods of a different description not included in the contract, the buyer
a reasonable hour. What is a reasonable hour is a question of fact.
may accept the goods which are in accordance with the contract and reject
the rest.
Unless otherwise agreed, the expenses of and incidental to putting the
goods into a deliverable state must be borne by the seller. (n)
In the preceding two paragraphs, if the subject matter is indivisible, the
Art. 1524. The vendor shall not be bound to deliver the thing sold, if
Delivery of less than that agreed upon:
the vendee has not paid him the price, or if no period for the
1. The buyer may reject;
payment has been fixed in the contract. (1466)
2. The buyer may accept:
a. If the buyer had knowledge that the seller is not going to perform
2. Period agreed upon. Except, if the buyer loses the right to make use of
the contract in full – he must pay for them at the contract rate.
the period under Art. 1198:
b. If the buyer had no such knowledge – he is liable for the fair
3. If the subject matter is indivisible – the buyer may reject the whole.
Place of Delivery:
1. Stipulated;
Delivery in excess of that agreed upon:
2. Place fixed by usage or trade – this may be determined by the shipping
1. The buyer may accept the quantity agreed upon and reject the rest;
arrangements. Examples:
2. The buyer may accept all and pay them at the contract price;
Cesar Nickolai F. Soriano Jr.
108 Arellano University School of Law 2011-0303
Civil Law Review 2 under the class of Atty. Uribe
3. If the subject matter is indivisible – the buyer may reject the whole
buyer is not entitled to the excess as provided under Art. 1542. This is
because the parties agreed to an area “more or less” and the difference
Art. 1539. The obligation to deliver the thing sold includes that of placing
with the actual area cannot be considered a slight deviation which the
in the control of the vendee all that is mentioned in the contract, in
phrase connotes. See Sps Caballero vs. Carmen Del Prado.
conformity with the following rules:
Art. 1543. The actions arising from Articles 1539 and 1542 shall prescribe
If the sale of real estate should be made with a statement of its area, at the
in six months, counted from the day of delivery. (1472a)
rate of a certain price for a unit of measure or number, the vendor shall be
obliged to deliver to the vendee, if the latter should demand it, all that may
UNPAID SELLER:
have been stated in the contract; but, should this be not possible, the
vendee may choose between a proportional reduction of the price and the
Art. 1525. The seller of goods is deemed to be an unpaid seller within
rescission of the contract, provided that, in the latter case, the lack in the
the meaning of this Title:
area be not less than one-tenth of that stated.
(1) When the whole of the price has not been paid or tendered;
The same shall be done, even when the area is the same, if any part of the
(2) When a bill of exchange or other negotiable instrument has been
immovable is not of the quality specified in the contract.
received as conditional payment, and the condition on which it was
received has been broken by reason of the dishonor of the instrument, the
The rescission, in this case, shall only take place at the will of the vendee,
insolvency of the buyer, or otherwise.
when the inferior value of the thing sold exceeds one-tenth of the price
agreed upon.
In Articles 1525 to 1535 the term "seller" includes an agent of the seller to
whom the bill of lading has been indorsed, or a consignor or agent who has
Nevertheless, if the vendee would not have bought the immovable had he
himself paid, or is directly responsible for the price, or any other person who
known of its smaller area of inferior quality, he may rescind the sale.
is in the position of a seller. (n)
(1469a)
Art. 1541. The provisions of the two preceding articles shall apply to
(1) Where the goods have been sold without any stipulation as to credit;
judicial sales. (n)
(2) Where the goods have been sold on credit, but the term of credit has
expired;
Art. 1542. In the sale of real estate, made for a lump sum and not at the
(3) Where the buyer becomes insolvent.
rate of a certain sum for a unit of measure or number, there shall be no
increase or decrease of the price, although there be a greater or less area
The seller may exercise his right of lien notwithstanding that he is in
or number than that stated in the contract.
possession of the goods as agent or bailee for the buyer. (n)
The same rule shall be applied when two or more immovables as sold for a
Art. 1528. Where an unpaid seller has made part delivery of the goods, he
single price; but if, besides mentioning the boundaries, which is
may exercise his right of lien on the remainder, unless such part delivery
indispensable in every conveyance of real estate, its area or number should
has been made under such circumstances as to show an intent to waive the
be designated in the contract, the vendor shall be bound to deliver all that is
lien or right of retention. (n)
included within said boundaries, even when it exceeds the area or number
specified in the contract; and, should he not be able to do so, he shall suffer
Difference with lien of the seller under rules on concurrence and
a reduction in the price, in proportion to what is lacking in the area or
preference of credit: “possessory” lien entails that the possession of the
number, unless the contract is rescinded because the vendee does not
goods is still with the seller. In concurrence and preference of credits, the
accede to the failure to deliver what has been stipulated. (1471)
goods are already with the buyer. In the former, insolvency is not a
Requisites:
Loss of Possessory Lien:
a. The seller already parted with the possession of the goods;
or where the buyer has been in default in the payment of the price for an
Art. 1531. Goods are in transit within the meaning of the preceding article:
unreasonable time, an unpaid seller having a right of lien or having stopped
(1) From the time when they are delivered to a carrier by land, water, or
the goods in transitu may resell the goods. He shall not thereafter be liable
air, or other bailee for the purpose of transmission to the buyer, until the
to the original buyer upon the contract of sale or for any profit made by
buyer, or his agent in that behalf, takes delivery of them from such carrier
such resale, but may recover from the buyer damages for any loss
or other bailee;
occasioned by the breach of the contract of sale.
(2) If the goods are rejected by the buyer, and the carrier or other bailee
continues in possession of them, even if the seller has refused to receive
Where a resale is made, as authorized in this article, the buyer acquires a
them back.
good title as against the original buyer.
Goods are no longer in transit within the meaning of the preceding article:
It is not essential to the validity of resale that notice of an intention to resell
(1) If the buyer, or his agent in that behalf, obtains delivery of the goods
the goods be given by the seller to the original buyer. But where the right to
before their arrival at the appointed destination;
resell is not based on the perishable nature of the goods or upon an express
(2) If, after the arrival of the goods at the appointed destination, the carrier
provision of the contract of sale, the giving or failure to give such notice
or other bailee acknowledges to the buyer or his agent that he holds the
shall be relevant in any issue involving the question whether the buyer had
goods on his behalf and continues in possession of them as bailee for the
been in default for an unreasonable time before the resale was made.
buyer or his agent; and it is immaterial that further destination for the
goods may have been indicated by the buyer;
It is not essential to the validity of a resale that notice of the time and place
(3) If the carrier or other bailee wrongfully refuses to deliver the goods to
of such resale should be given by the seller to the original buyer.
the buyer or his agent in that behalf.
a. Stipulated;
If part delivery of the goods has been made to the buyer, or his agent in
b. The buyer was in default for an unreasonable length of time;
that behalf, the remainder of the goods may be stopped in transitu, unless
c. The goods are perishable.
such part delivery has been under such circumstances as to show an
agreement with the buyer to give up possession of the whole of the goods.
Notice Requirement:
(n)
(1) intention of the seller to resell - the first notice is relevant if the ground
of the seller is (b) above, as proof that the buyer has been in default for an
Art. 1532. The unpaid seller may exercise his right of stoppage in transitu
unreasonable length of time.
Cesar Nickolai F. Soriano Jr.
110 Arellano University School of Law 2011-0303
Civil Law Review 2 under the class of Atty. Uribe
(2) date, time and place of resale – The seller is only entitled to the
molasses and that the agreed sale was for only 300,000 gallons (not
deficiency (price in resale and unpaid amount) if the resale was made in
400,000).
good faith and the notice would be a manifestation since the buyer was
notified of the resale and he could’ve been there.
ISSUE: WON the agreement was for only 300,000 gallons and not 400,000
supplying the latter company with an extra 100,000 gallons. But the
Non-compliance with the notice requirement does not invalidate the resale.
language used with reference to the additional 100,000 gallons was not a
gallons of molasses.
4. Rescission
The transfer of title shall not be held to have been rescinded by an unpaid
The terms of payment fixed by the parties are controlling. The time
seller until he has manifested by notice to the buyer or by some other overt
of payment stipulated for in the contract should be treated as of
act an intention to rescind. It is not necessary that such overt act should be
the essence of the contract. Theoretically, agreeable to certain
communicated to the buyer, but the giving or failure to give notice to the
conditions which could easily be imagined, the Hawaiian-Philippine Co.
buyer of the intention to rescind shall be relevant in any issue involving the
would have had the right to rescind the contract because of the breach of
question whether the buyer had been in default for an unreasonable time
Song Fo & Company. But actually, there is here present no outstanding fact
before the right of rescission was asserted. (n)
which would legally sanction the rescission of the contract by the Hawaiian-
Philippine Co.
Grounds:
1. Stipulated;
The general rule is that rescission will not be permitted for a slight
2. The buyer was in default for an unreasonable length of time;
or casual breach of the contract, but only for such breaches as are
cancelling the contract. (Warner, Barnes & Co. vs. Inza [1922], 43 Phil.,
Waiver of the condition of when to pay: accepting payment of the
505.)
overdue accounts and continuing with the contract.
We rule that the appellant had no legal right to rescind the contract of sale
SONG FO & COMPANY, plaintiff-appellee,
because of the failure of Song Fo & Company to pay for the molasses within
vs.
the time agreed upon by the parties. We sustain the finding of the trial
HAWAIIAN PHILIPPINE CO., defendant-appellant.
judge in this respect.
G.R. No. 23769 September 16, 1925
that the latter requires that the seller had already delivered possession of
In an amended answer and cross-complaint, the defendant set up the
the goods to the seller. However still, if the seller retained possession, such
special defense that since the plaintiff had defaulted in the payment for the
as when the goods are deliverable to the seller, the right to be invoked is
molasses delivered to it by the defendant under the contract between the
possessory lien and not stoppage in transit.
parties, the latter was compelled to cancel and rescind the said contract.
Unregistered land: is not covered by Art. 1544. (see Carumba vs. CA)
All the fruits shall pertain to the vendee from the day on which the contract
was perfected. (1468a)
Possession: need not be actual. Delivery by execution of a public
that the first buyer must have exercised his rights as owner, like in the case
LOSS, DETERIORATOIN OR IMPROVEMENT BEFORE DELIVERY:
of Bautista where she leased the property to the sellers.
the spouses to her within the 2 year period, she initiated a complaint which
If the thing sold is immovable property:
was granted by the trial court.
1. The first to register in good faith;
2. The first to take possession;
The trial court declared her the owner of the two properties subject of the
3. If no one registered nor took possession, the person with the oldest
case and ordered defendant to place her in possession of the same.
title, who is in good faith.
ISSUE: Who is the owner of the camarin of strong materials with an iron
“Good faith” pertains to the “Registrant” not the “buyer”: as such, if
roof: (1) Rosalio Bautista, in whose favor its ownership became consolidated
at the time of the second sale, the buyer had no knowledge of the prior
by the lapse of the term of two years without its having been repurchased
sale, but learns of it prior to registration, he may still be considered a
by the vendors; or to (2) Raymundo de la Cruz, to whom Francisco Sioson
registrant NOT in good faith.
likewise sold the said camarin on August 5, 1914, one year and eleven
months after the sale of this building to the plaintiff Bautista, effected on
First buyer in bad faith: the first buyer cannot be in bad faith in relation
September 4, 1912?
to the second sale. However, he may be considered in bad faith if he has
knowledge of any defect in the title of the seller or if he obtained title not
HELD: Rosalio Bautista. Both alienations, effected successively by Francisco
through legal means (e.g., duress or intimidation).
Sioson in favor of Bautista and Cruz, are recorded in notarial instruments,
though they were not entered in the registry of property. To determine who
BAR QUESTION: On June 15, 1995, Jesus sold a parcel of registered land
is the lawful owner of the camarin sold, if the provisions of said article of
to Jaime. On June 30, 1995, he sold the same land to Jose. Who has a
the Code are to be observed, we have first to determine the contention in
better right if:
regard to which of the two purchasers is in possession thereof, and if, on
the execution of the contract of lease by the first purchaser in favor of the
a) the first sale is registered ahead of the second sale with knowledge of
vendor himself, the constitutum possessorium agreement is to be
the latter. Why? (3%)
considered to have been stipulated, the conclusion must necessarily be
b) the second sale is registered ahead of the first sale, with knowledge of
reached as to which of the two purchasers first took possession of
the latter? Why? (2%)
the camarin sold, and also whether the material possession of the tenant is
FACTS: On April 12, 1955, the spouses Amado Canuto and Nemesia Ibasco,
Where the ownership in the thing has not passed, the buyer may treat the
by virtue of a "Deed of Sale of Unregistered Land with Covenants of
fulfillment by the seller of his obligation to deliver the same as described
Warranty" (Exh. A), sold a parcel of land, partly residential and partly and
as warranted expressly or by implication in the contract of sale as a
coconut land to the spouses Amado Carumba and Benita Canuto, for the
condition of the obligation of the buyer to perform his promise to accept
sum of P350.00. The referred deed of sale was never registered in the and
pay for the thing. (n)
Office of the Register of Deeds of Camarines Sur, and the Notary, Mr.
Vicente Malaya, was not then an authorized notary public in the place, as
Conditions not fulfilled: the buyer may:
shown by Exh. 5. 1.
Cancel the sale;
2.
Waive the happening of the condition and proceed with the sale;
On January 21, 1957, a complaint (Exh. B) for a sum or money was filed by 3.
Treat the non-happening of the condition as a breach of warranty and
Santiago Balbuena against Amado Canuto and Nemesia Ibasco which
hold the seller liable for damages.
rendered a decision in favor of the plaintiff and against the defendants. On
October 1, 1968, the ex-officio Sheriff, Justo V. Imperial, of Camarines Sur,
OBLIGATION TO WARRANT
issued a "Definite Deed of Sale (Exh. D) of the property now in question in
favor of Santiago Balbuena, which instrument of sale was registered before
Art. 1546. Any affirmation of fact or any promise by the seller relating to
the Office of the Register of Deeds of Camarines Sur, on October 3, 1958. the
thing is an express warranty if the natural tendency of such affirmation
The aforesaid property was declared for taxation purposes (Exh. 1) in the or
promise is to induce the buyer to purchase the same, and if the buyer
name of Santiago Balbuena in 1958.
purchase the thing relying thereon. No affirmation of the value of the thing,
nor
any statement purporting to be a statement of the seller's opinion only,
On appeal, the CFI reversed the justice of the peace. On appeal to the CA,
shall be construed as a warranty, unless the seller made such affirmation or
the CA, without altering the findings of fact made by the court of origin,
statement as an expert and it was relied upon by the buyer. (n)
declared that there having been a double sale of the land subject of the suit
Balbuena's title was superior to that of his adversary under Article 1544 of
Express Warranty: is an affirmation of fact or promise by the seller
the Civil Code of the Philippines, since the execution sale had been properly
relating to the thing which would induce the buyer to buy the same.
registered in good faith and the sale to Carumba was not recorded.
However, those relating to opinions of the seller are not considered
warranties unless they are made by experts and the buyer relies upon them.
ISSUE: WON there was a double sale and Balbuena has a right to the said
property?
Implied Warranties:
stipulated on this point, in case eviction occurs, the vendee shall have the
This Article shall not, however, be held to render liable a sheriff, auctioneer,
right to demand of the vendor:
mortgagee, pledgee, or other person professing to sell by virtue of authority
(1) The return of the value which the thing sold had at the time of the
in fact or law, for the sale of a thing in which a third person has a legal or
eviction, be it greater or less than the price of the sale;
equitable interest. (n)
(2) The income or fruits, if he has been ordered to deliver them to the party
Art. 1548. Eviction shall take place whenever by a final judgment based on
Art. 1553. Any stipulation exempting the vendor from the obligation
a right prior to the sale or an act imputable to the vendor, the vendee is
to answer for eviction shall be void, if he acted in bad faith. (1476)
deprived of the whole or of a part of the thing purchased.
have bought it without said part, he may demand the rescission of the
When would the seller be liable? If the buyer is deprived of ownership
contract; but with the obligation to return the thing without other
and/or possession because of:
encumbrances that those which it had when he acquired it.
1. .
other. (1479a)
Example: the first buyer who is deprived of the thing by the second
buyer whose right accrued after the first sale but the deprivation would
Art. 1557. The warranty cannot be enforced until a final judgment has
be imputable to the vendor
been rendered, whereby the vendee loses the thing acquired or a part
thereof. (1480)
Art. 1549. The vendee need not appeal from the decision in order that the
vendor may become liable for eviction. (n)
Art. 1558. The vendor shall not be obliged to make good the proper
Rules of Court for answering the complaint, that the vendor be made a co-
Art. 1551. If the property is sold for nonpayment of taxes due and not
defendant. (1482a)
made known to the vendee before the sale, the vendor is liable for eviction.
(n)
Art. 1560. If the immovable sold should be encumbered with any non-
Within one year, to be computed from the execution of the deed, the
Art. 1565. In the case of a contract of sale by sample, if the seller is a
vendee may bring the action for rescission, or sue for damages.
dealer in goods of that kind, there is an implied warranty that the goods
Art. 1566. The vendor is responsible to the vendee for any hidden faults or
Non-apparent encumbrances: example: a right of way. Seller’s liability
defects in the thing sold, even though he was not aware thereof.
shall attach only if the encumbrance was not:
1. Apparent;
This provision shall not apply if the contrary has been stipulated, and the
2. Not declared at the time of sale; or
vendor was not aware of the hidden faults or defects in the thing sold.
3. Not annotated.
(1485)
Otherwise, if it should have been known to the vendee, the seller would not
Art. 1567. In the cases of Articles 1561, 1562, 1564, 1565 and 1566, the
be liable.
vendee may elect between withdrawing from the contract and demanding a
expenses of the contract which the vendee might have paid. (1487a)
Defects: must be physical and hidden, i.e., not obvious to the buyer even
after exercising his right of inspection. Note that the seller is NOT liable:
2.
If the cause is fortuitous event – the price less the value at the time of
1. For patent defects or those which may be visible; or
loss, plus damages (if he was aware).
2. Those which are invisible but the buyer is an expert on the thing and
by reason of his trade or profession, he should have known.
Art. 1569. If the thing sold had any hidden fault at the time of the
the fault of the vendee, the latter may demand of the vendor the
1. It would render the thing unfit for its intended use;
price which he paid, less the value which the thing had when it was
2. Diminish its fitness for such use to such extent that, had the vendee
lost.
ben aware thereof, he would not have acquired it or would have given
a lower price for it.
If the vendor acted in bad faith, he shall pay damages to the vendee.
(1488a)
Art. 1562. In a sale of goods, there is an implied warranty or condition as
to the quality or fitness of the goods, as follows:
(1) Where the buyer, expressly or by implication, makes known to the seller
judicial sales, except that the judgment debtor shall not be liable for
the buyer relies on the seller's skill or judgment (whether he be the grower
damages. (1489a)
or manufacturer or not), there is an implied warranty that the goods shall
be reasonably fit for such purpose;
(2) Where the goods are brought by description from a seller who deals in
Art. 1571. Actions arising from the provisions of the preceding ten articles
goods of that description (whether he be the grower or manufacturer or
shall be barred after six months, from the delivery of the thing sold. (1490)
not), there is an implied warranty that the goods shall be of merchantable
quality. (n)
Prescription of action: 6 months from DELIVERY.
Warranty of Quality: in this case, there is no hidden defect, it’s just that
Art. 1572. If two or more animals are sold together, whether for a lump
the thing is unfit for the particular purpose which the buyer intended it for.
sum or for a separate price for each of them, the redhibitory defect of one
Liability attaches if:
shall only give rise to its redhibition, and not that of the others; unless it
1. The buyer expressly or impliedly made known such purpose and he
should appear that the vendee would not have purchased the sound animal
relies on the seller’s skill or judgment that the thing sold would be or
animals without the defective one.
reasonably fit therefor;
2. Where the goods are brought by description from a seller who deals in
The latter case shall be presumed when a team, yoke pair, or set is bought,
goods of that description.
even if a separate price has been fixed for each one of the animals
installments, which are to be separately paid for, and the seller makes
Art. 1576. If the hidden defect of animals, even in case a professional
defective deliveries in respect of one or more instalments, or the buyer
inspection has been made, should be of such a nature that expert
neglects or refuses without just cause to take delivery of or pay for one
knowledge is not sufficient to discover it, the defect shall be considered as
more instalments, it depends in each case on the terms of the contract and
redhibitory.
the circumstances of the case, whether the breach of contract is so material
as to justify the injured party in refusing to proceed further and suing for
But if the veterinarian, through ignorance or bad faith should fail to discover
damages for breach of the entire contract, or whether the breach is
or disclose it, he shall be liable for damages. (1495)
severable, giving rise to a claim for compensation but not to a right to treat
Art. 1585. The buyer is deemed to have accepted the goods when he
This action can only be exercised with respect to faults and defects which
intimates to the seller that he has accepted them, or when the goods have
are determined by law or by local customs. (1496a)
been delivered to him, and he does any act in relation to them which is
inconsistent with the ownership of the seller, or when, after the lapse of a
Art. 1578. If the animal should die within three days after its purchase, the
reasonable time, he retains the goods without intimating to the seller that
vendor shall be liable if the disease which cause the death existed at the
he has rejected them. (n)
time of the contract. (1497a)
Art. 1580. In the sale of animals with redhibitory defects, the vendee shall
Art. 1587. Unless otherwise agreed, where goods are delivered to the
also enjoy the right mentioned in article 1567; but he must make use
buyer, and he refuses to accept them, having the right so to do, he is not
thereof within the same period which has been fixed for the exercise of the
bound to return them to the seller, but it is sufficient if he notifies the seller
redhibitory action. (1499)
that he refuses to accept them. If he voluntarily constitutes himself a
CHAPTER 5
OBLIGATION TO ACCEPT: Aside from paying the price, it is the obligation
Art. 1589. The vendee shall owe interest for the period between the
If the time and place should not have been stipulated, the payment must be
delivery of the thing and the payment of the price, in the following three
cases:
made at the time and place of the delivery of the thing sold. (1500a)
(2) Should the thing sold and delivered produce fruits or income;
Cesar Nickolai F. Soriano Jr.
116 Arellano University School of Law 2011-0303
Civil Law Review 2 under the class of Atty. Uribe
(3) Should he be in default, from the time of judicial or extrajudicial
paragraph, are not applicable, the seller may offer to deliver the goods to
demand for the payment of the price. (1501a)
the buyer, and, if the buyer refuses to receive them, may notify the buyer
that the goods are thereafter held by the seller as bailee for the buyer.
Art. 1590. Should the vendee be disturbed in the possession or ownership
Thereafter the seller may treat the goods as the buyer's and may maintain
of the thing acquired, or should he have reasonable grounds to fear such
an action for the price. (n)
disturbance, by a vindicatory action or a foreclosure of mortgage, he may
suspend the payment of the price until the vendor has caused the
Art. 1596. Where the buyer wrongfully neglects or refuses to accept and
disturbance or danger to cease, unless the latter gives security for the
pay for the goods, the seller may maintain an action against him for
return of the price in a proper case, or it has been stipulated that,
damages for nonacceptance.
notwithstanding any such contingency, the vendee shall be bound to make
the payment. A mere act of trespass shall not authorize the suspension of
The measure of damages is the estimated loss directly and naturally
the payment of the price. (1502a)
resulting in the ordinary course of events from the buyer's breach of
contract.
Suspension of payments: may be made by the vendee if he is disturbed
or have reasonable grounds to fear such disturbance upon his possession or
Where there is an available market for the goods in question, the measure
ownership, by a vindicatory action or a foreclosure of mortgage. EXCEPT:
of damages is, in the absence of special circumstances showing proximate
1. The vendor gives security for the return of the price in a proper case;
damage of a different amount, the difference between the contract price
2. It has been stipulated that there shall be no suspension of payments
and the market or current price at the time or times when the goods ought
even if there is such contingency.
to have been accepted, or, if no time was fixed for acceptance, then at the
If, while labor or expense of material amount is necessary on the part of the
However, if the fear of loss covers immovable property, the vendor may
seller to enable him to fulfill his obligations under the contract of sale, the
immediately sue for rescission:
buyer repudiates the contract or notifies the seller to proceed no further
therewith, the buyer shall be liable to the seller for labor performed or
Art. 1591. Should the vendor have reasonable grounds to fear the
expenses made before receiving notice of the buyer's repudiation or
loss of immovable property sold and its price, he may immediately sue
countermand. The profit the seller would have made if the contract or the
for the rescission of the sale.
sale had been fully performed shall be considered in awarding the damages.
(n)
Should such ground not exist, the provisions of Article 1191 shall be
observed. (1503)
Art. 1597. Where the goods have not been delivered to the buyer, and the
buyer has repudiated the contract of sale, or has manifested his inability to
Length of suspension: until the seller caused the disturbance or danger
perform his obligations thereunder, or has committed a breach thereof, the
to cease.
seller may totally rescind the contract of sale by giving notice of his election
damages, payment of the price and otherwise, as the court may deem just.
Art. 1593. With respect to movable property, the rescission of the sale
(n)
shall of right take place in the interest of the vendor, if the vendee, upon
the expiration of the period fixed for the delivery of the thing, should not
Art. 1599. Where there is a breach of warranty by the seller, the buyer
have appeared to receive it, or, having appeared, he should not have
may, at his election:
tendered the price at the same time, unless a longer period has been
(1) Accept or keep the goods and set up against the seller, the breach of
stipulated for its payment. (1505)
warranty by way of recoupment in diminution or extinction of the price;
(2) Accept or keep the goods and maintain an action against the seller for
CHAPTER 6
damages for the breach of warranty;
ACTIONS FOR BREACH OF CONTRACT OF SALE OF GOODS
(3) Refuse to accept the goods, and maintain an action against the seller for
When the buyer has claimed and been granted a remedy in anyone of these
Art. 1595. Where, under a contract of sale, the ownership of the goods has
ways, no other remedy can thereafter be granted, without prejudice to the
passed to the buyer and he wrongfully neglects or refuses to pay for the
provisions of the second paragraph of Article 1191.
goods according to the terms of the contract of sale, the seller may
maintain an action against him for the price of the goods.
Where the goods have been delivered to the buyer, he cannot rescind the
Although the ownership in the goods has not passed, if they cannot readily
Where the buyer is entitled to rescind the sale and elects to do so, he shall
be resold for a reasonable price, and if the provisions of article 1596, fourth
cease to be liable for the price upon returning or offering to return the
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goods. If the price or any part thereof has already been paid, the seller shall
apparent vendor may ask for the reformation of the instrument. (n)
be liable to repay so much thereof as has been paid, concurrently with the
return of the goods, or immediately after an offer to return the goods in
Possible reason of the creditor to enter in to a sale with right of
exchange for repayment of the price.
repurchase rather than mortgage: he wants to circumvent the law on
mortgage.
Where the buyer is entitled to rescind the sale and elects to do so, if the
1. Sale would transfer ownership upon delivery. In mortgage, ownership
seller refuses to accept an offer of the buyer to return the goods, the buyer
remains with the mortgagor;
shall thereafter be deemed to hold the goods as bailee for the seller, but
2. Buyer would already be entitled to the fruits and to possession. In
subject to a lien to secure payment of any portion of the price which has
mortgage, these remain with the mortgagor;
been paid, and with the remedies for the enforcement of such lien allowed
3. Upon default, after the lapse of the period, buyer’s ownership becomes
to an unpaid seller by Article 1526.
absolute. In mortgage, there should be foreclosure and compliance
Art. 1600. Sales are extinguished by the same causes as all other
In case of doubt: equitable mortgage, under Art. 1603:
obligations, by those stated in the preceding articles of this Title, and by
conventional or legal redemption. (1506)
Art. 1603. In case of doubt, a contract purporting to be a sale with right to
Art. 1604. The provisions of Article 1602 shall also apply to a contract
Art. 1601. Conventional redemption shall take place when the vendor
purporting to be an absolute sale. (n)
reserves the right to repurchase the thing sold, with the obligation to
comply with the provisions of Article 1616 and other stipulations which may
Art. 1606. The right referred to in Article 1601, in the absence of an
have been agreed upon. (1507)
express agreement, shall last four years from the date of the
contract.
Right to repurchase: for a party to be exercise conventional redemption,
the contract must have been a contract of sale with right to repurchase, or
Should there be an agreement, the period cannot exceed ten years.
a pacto de retro sale.
However, the vendor may still exercise the right to repurchase within thirty
Ownership: transfers to the vendee a retro upon delivery. However, this
days from the time final judgment was rendered in a civil action on the
ownership is not absolute but only conditional. This is because the seller a
basis that the contract was a true sale with right to repurchase. (1508a)
retro may be able to exercise the right to repurchase and the ownership of
the buyer will be terminated.
PERIOD TO REDEEM:
judicial order, after the vendor has been duly heard. (n)
Remedy: of the seller is for reformation of the contract.
Art. 1608. The vendor may bring his action against every possessor whose
Art. 1605. In the cases referred to in Articles 1602 and 1604, the
right is derived from the vendee, even if in the second contract no mention
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118 Arellano University School of Law 2011-0303
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should have been made of the right to repurchase, without prejudice to the 2.
Owners of adjoining lands
provisions of the Mortgage Law and the Land Registration Law with respect
to third persons. (1510)
Subject property: In co-owners, the property may either be movable or
terms and conditions stipulated in the contract, in the place of one who
Art. 1610. The creditors of the vendor cannot make use of the right of
acquires a thing by purchase or dation in payment, or by any other
redemption against the vendee, until after they have exhausted the
transaction whereby ownership is transmitted by onerous title. (1521a)
property of the vendor. (1512)
Onerous transfer: not only sale, although sale is the most common
Art. 1611. In a sale with a right to repurchase, the vendee of a part of an
transaction where right of redemption arises. Note that the law also
undivided immovable who acquires the whole thereof in the case of article
provides “dation in payment” as a possible transaction where the right may
498, may compel the vendor to redeem the whole property, if the latter
arise. Thus, even barter may give rise to a right to redeem.
wishes to make use of the right of redemption. (1513)
If
the transfer made is not onerous (like donation), there can be no right of
Art. 1612. If several persons, jointly and in the same contract, should sell
redemption.
an undivided immovable with a right of repurchase, none of them may
exercise this right for more than his respective share.
Art. 1620. A co-owner of a thing may exercise the right of redemption in
case the shares of all the other co-owners or of any of them, are sold to a
The same rule shall apply if the person who sold an immovable alone has
third person. If the price of the alienation is grossly excessive, the
left several heirs, in which case each of the latter may only redeem the part
redemptioner shall pay only a reasonable one.
which he may have acquired. (1514)
their father. Before the land could be partitioned, Raul sold his hereditary
right to Raffy, a stranger to the family for P5M. Do Esther and Rufo have a
Art. 1614. Each one of the co-owners of an undivided immovable who may
right of redemption. Within the required time, they may redeem Raul’s
adjoining lands, not all may redeem, in case there are multiple
them.
redemptioners, the one with the smallest land area will be prioritized. If the
areas are the same, the first one to request would be prioritized. See Art.
But if the inheritance has been divided, and the thing sold has been
Amount to be paid: the amount actually paid for the share sold. Even if
the
amount indicated in the deed of sale is higher, the amount actually paid
Art. 1616. The vendor cannot avail himself of the right of repurchase
will be the redemption price. This applies if the amount that appears in the
without returning to the vendee the price of the sale, and in addition:
deed is unconscionable. The redemptioner cannot be compelled to pay the
(1) The expenses of the contract, and any other legitimate payments made
same.
by reason of the sale;
(2) The necessary and useful expenses made on the thing sold. (1518)
Spouses RAMON DOROMAL, SR., and ROSARIO SALAS, and
FACTS: The subject land was originally decreed to the late Justice Antonio
Should there have been no fruits at the time of the sale and some exist at
Horilleno, in 1916, under an OCT; but before he died, he executed a last will
the time of redemption, they shall be prorated between the redemptioner and
testament attesting to the fact that it was a co-ownership between
and the vendee, giving the latter the part corresponding to the time he
himself and his brothers and sisters, Luis, Soledad, Fe, Rosita, Carlos and
possessed the land in the last year, counted from the anniversary of the
Esperanza, all surnamed Horilleno, and since Esperanza had already died,
date of the sale. (1519a) she
was succeeded by her only daughter and heir herein plaintiff, Filomena
Javellana, in the proportion of 1/7 undivided ownership each.
Art. 1618. The vendor who recovers the thing sold shall receive it free
from all charges or mortgages constituted by the vendee, but he shall
Even though their right had not as yet been annotated in the title, the co-
respect the leases which the latter may have executed in good faith, and in
owners led by Carlos, and as to deceased Justice Antonio Horilleno, his
accordance with the custom of the place where the land is situated. (1520)
daughter Mary, sometime since early 1967, had wanted to sell their shares,
or
if possible if Filomena Javellana were agreeable, to sell the entire
SECTION 2. - Legal Redemption
property, and they hired an acquaintance Cresencia Harder, to look for
buyers, and the latter came to interest defendants, the father and son,
TWO GROUPS OF PERSONS WHO WOULD HAVE RIGHT OF LEGAL
named Ramon Doromal, Sr. and Jr., and in preparation for the execution of
REDEMPTION: the
sale, since the brothers and sisters Horilleno were scattered in various
1. Co-owners – when one of the co-owners alienated his interest in the
parts of the country, Carlos in Ilocos Sur, Mary in Baguio, Soledad and Fe, in
co-owned property by onerous title.
Mandaluyong, Rizal, and Rosita in Basilan City, they all executed various
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119 Arellano University School of Law 2011-0303
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powers of attorney in favor of their niece, Mary H. Jimenez, they also
have indeed been paid to Carlos in October, 1967, there is nothing to show
caused preparation of a power of attorney of identical tenor for signature by
that the same was in the concept of the earnest money contemplated in
plaintiff, Filomena Javellana.
Article 1482 of the Civil Code, invoked by petitioner, as signifying perfection
of the sale. Viewed in the backdrop of the factual milieu thereof extant in
It now turns out according to Exh. 3 that as early as 22 October, 1967,
the record, We are more inclined to believe that the said P5,000 were paid
Carlos had received in check as earnest money from defendant Ramon
in the concept of earnest money as the term was understood under the Old
Doromal, Jr., the sum of P5,000.00 and the price therein agreed upon was
Civil Code, that is, as a guarantee that the buyer would not back out,
five (P5.00) pesos a square meter.
considering that it is not clear that there was already a definite agreement
as to the price then and that petitioners were decided to buy 6/7 only of the
At any rate, plaintiff not being agreeable, did not sign the power of
property should respondent Javellana refuse to agree to part with her 1/7
attorney, and the rest of the co-owners went ahead with their sale of their
share.
6/7.
delivery of the deed of sale. This is implied from the latter portion of
Javellana filed a case against the Doromals asserting that, as a co-owner,
Article 1623 which requires that before a register of deeds can record a sale
she had the right to redeem the property at the price stipulated in the deed
by a co-owner, there must be presented to him, an affidavit to the effect
of sale, namely P30,000.
that the notice of the sale had been sent in writing to the other co-owners.
A
sale may not be presented to the register of deeds for registration unless
In their answer, the defendants alleged that the plaintiff no longer had the
it be in the form of a duly executed public instrument. Moreover, the law
right to redeem because he was informed of the intended sale of the 6/7
prefers that all the terms and conditions of the sale should be definite and
share belonging to the Horillenos; that if she thus had the right to redeem,
in writing. As aptly observed by Justice Gatmaitan in the decision under
she should pay P115,250 which was actually paid by the defendants to the
review, Article 1619 of the Civil Code bestows unto a co-owner the
co-owners.
right to redeem and "to be subrogated under the same terms and
Indeed, it is immaterial when she might have actually come to know about
ISSUE: WON notice was given to Javellana and the 30-day period to
said deed, it appearing she has never been shown a copy thereof through a
redeem already prescribed?
written communication by either any of the petitioners-purchasers or any of
that what she is seeking to enforce is not an abuse but a mere exercise
and here, the stipulation in the public evidence of the contract,
of a right; if it be stated that just the same, the effect of sustaining
made public by both vendors and vendees is that the price was
plaintiff would be to promote not justice but injustice, the answer
P30,000.00;
again simply is that this solution is not unjust because it only binds the
estates.
The right of a legal pre-emption or redemption shall not be exercised
except within thirty (30) days from the notice in writing by the If
two or more adjoining owners desire to exercise the right of redemption
prospective vendor, or by the vendor as the case may be. The deed of at
the same time, the owner of the adjoining land of smaller area shall be
sale shall not be recorded in the Registry of Property, unless
preferred; and should both lands have the same area, the one who first
accompanied by an affidavit of the vendor that he has given written
requested the redemption. (1523a)
notice thereof of all possible redemptioners.' p. 473, New Civil Code,
(1542)
BAR QUESTION: Betty and Lydia were co-owners of a parcel of land. Last
January 1, 2001, when she paid her real estate tax, Betty discovered that
KINDS OF LEASES:
Lydia had sold her share to Emma on November 10, 2000. The following 1.
Labor;
day, Betty offered to redeem but the latter replied that her right to redeem 2.
Involving household help;
had already prescribed. Is Emma correct? 3.
Carriage;
4.
Piece of work
ANSWER: EMMA is not correct. Because the law provides 30 days from the
time notice was given to the co-owner. In this problem, the 30 days had not
Jardin vs. NLRC: the drivers of Goodman taxicab complained about the
even started to run because no notice was given.
P30 deducted from their salary purportedly for carwash of the taxicabs.
What kind of relationship does the drivers and the operator have?
BAR QUESTION: Adella and Beth are co-owners of an undivided parcel of
land. Beth sold her share to Sandro, who promptly told Adella of the sale
SC: Lease of labor. The relationship between the drivers and the operator
and furnished the latter a copy of the deed of absolute sale. When Sandro
under the boundary system, is that of an employer-employee following the
presented the deed of absolute sale for registration, the register of deeds
control test
also notified Adella of the said sale, enclosing a copy of the deed with the
notice. However, Adella ignored the notices. A year later, Sandro, the buyer,
Art. 1643. In the lease of things, one of the parties binds himself to give to
filed a petition for the partition of the property. Upon receipt of the
another the enjoyment or use of a thing for a price certain, and for a period
summons, Adella immediately tendered the requisite amount for the
which may be definite or indefinite. However, no lease for more than ninety-
redemption. Sandro contends that Adella lost her right of redemption after
nine years shall be valid. (1543a)
the expiration of 30days from her receipt of notice of sale given by him. May
Adella still exercise her right of redemption?
One of the parties binds himself: this makes the contract consensual.
Even if the obligation involves delivery, it does not make the contract “real”.
ANSWER: No. Even if the notice was not given by the VENDOR as stated
under Art. 1623, the provision should not be interpreted so literally. Sandro, To
give to another the enjoyment or the use: this is the purpose of a
the buyer, already informed Adella through notice with a copy of the deed,
lease. This is likewise the purpose of commodatum. However, in lease it
twice.
involves a “price certain”, which means the contract is essentially onerous.
If
the “lease” of thing is gratuitous, it is considered a commodatum.
As interpredted by the SC in the case of DOROMAL vs. CA, the 30 day
period will begin to run from the time a COPY of the DEED of SALE is given
Art. 1644. In the lease of work or service, one of the parties binds himself
to the REDEMPTIONER. Not just any other writing. to
execute a piece of work or to render to the other some service for a price
certain, but the relation of principal and agent does not exist between them.
CASE: There was a sale of a parcel of land, and the adjoining lot owner,
(1544a)
the parents of Dolores Banias, manifested their intention to redeem. But this
Amador Barcellano, did not give written notice, only oral. The parties went
Essentially onerous: lease of service is essentially onerous in character. If
to the Baranggay to solve their claims but nothing happened. More than 1
the services are free, it could be another contract but not lease of service.
year after the sale to Barcellano, Dolores Banias expressed his intention to
exercise her right of redemption.
Principal-agent relationship: in order to be classified as a lease of
lease, except when they are merely to be exhibited or when they are
B. BARTER OR EXCHANGE
monthly rental of P250 a month. After the first year, O demanded a rental
2. WITH COMMODATUM: the subject matter is a thing, the purpose is
increase of P500 claiming that due to energy crisis, with a sudden increase
delivery of the thing for the use of the other. in
the price of oil, which no one expected, there was also a general increase
in
all of the prices. O proved an inflation rate of 100%. When L refused to
However, Lease is essentially onerous, while commodatum is
vacate the house, O brought an action for ejectment. O denied that he
essentially gratuitous.
agreed for the lease for 2 years.
guardian as to the property of the minor or ward, and the manager without
2. Subject matter – a thing, right or service.
special power. (1548a)
SUBLEASE: the lessee has the right to sublease, by law but this right may
its validity. However, a contract of lease over a real property with a period be
limited or removed by stipulation.
more than one year must be IN WRITING in order to be enforceable under
the Statute of Frauds. Subject to the exception of part performance.
the amount of rent due from him, in accordance with the terms of the
ANSWER: Yes. It is valid. For as long as the elements of valid sublease are
sublease, at the time of the extrajudicial demand by the lessor.
present.
made in proportion to the time during which the lessee enjoyed the thing.
ANSWER: No. The right to sublease is granted by law which may be limited
(1553)
by stipulation. The contract did not prohibit the lessee from subleasing, only
assignment of the lease. As such, since there was no violation of the
SECTION 2. - Rights and Obligations of the Lessor and the Lessee
contract, there is no ground for cancellation of the contract.
the lessor. This obligation does not cover trespass in fact as provided under
UP Law Center: Assignment of the sublease by C to D is not valid since the
Art. 1664:
law prohibits assignment of the lease without the express consent of the
lessor, and in the problem, there was no such consent.
Art. 1664. The lessor is not obliged to answer for a mere act of
trespass which a third person may cause on the use of the thing
Uribe: C did not assign the “lease”, he assigned a “sublease”. The rights of
leased; but the lessee shall have a direct action against the intruder.
D are those of C. If the sublease to C is not prohibited, then the assignment
to of the sublease to D should also not be prohibited.
There is a mere act of trespass when the third person claims no right
whatever. (1560a)
TEST to determine if sublease or assignment: If in the agreement,
there is an absolute transfer of rights of the lessee to the third person, sich
The remedy of the lessee is to seek the help of police officers to remove the
that the personality of the lessee would disappear dissociating himself from
physical trespass. Plus, the lessee is actually obliged to inform the lessor
the lease, practically making the third person the new lessee – assignment
about it:
of the lease.
untoward act which any third person may have committed or may be
He is also obliged to advise the owner, with the same urgency, of the
will expire on May 31 of the same year. As such, upon expiration of the
In both cases the lessee shall be liable for the damages which,
agreement is a sublease. (Manlapat vs. Salazar)
If the lessor fails to make urgent repairs, the lessee, in order to avoid
leased premises, the agreement is a sublease since the lessee reserved
(1559a)
BAR QUESTION: A leased a condo unit to B for a period of 5 years. After 1
rent in the event that the lessor fails to make the necessary repairs or
Art. 1658. The lessee may suspend the payment of the rent in case
lessee.
(n)
sublessee is bound to the lessor for all acts which refer to the use and
preservation of the thing leased in the manner stipulated between the lessor
The lessee cannot seek extension of the lease period nor a reduction in the
and the lessee. (1551)
rent.
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proportion to the time - including the first forty days - and the part of the
Extension: of the term of the lease is a matter left to the parties. The
property of which the lessee has been deprived.
lessee can not demand an extension of the lease term even if the cause of
his inability to use the property is an extraordinary fortuitous event, such as
When the work is of such a nature that the portion which the lessee and his
the Second World War. (Nielsen vs. Lepanto Mining)
family need for their dwelling becomes uninhabitable, he may rescind the
contract if the main purpose of the lease is to provide a dwelling place for
Reduction of rent: Lease of Rural Lands:
the lessee. (1558a)
Art. 1680. The lessee shall have no right to a reduction of the rent on
Art. 1665. The lessee shall return the thing leased, upon the termination of
account of the sterility of the land leased, or by reason of the loss of fruits
the lease, as he received it, save what has been lost or impaired by the
due to ordinary fortuitous events; but he shall have such right in case of the
lapse of time, or by ordinary wear and tear, or from an inevitable cause.
loss of more than one-half of the fruits through extraordinary and
(1561a)
unforeseen fortuitous events, save always when there is a specific
stipulation to the contrary.
Art. 1666. In the absence of a statement concerning the condition of the
thing at the time the lease was constituted, the law presumes that the
Extraordinary fortuitous events are understood to be: fire, war, pestilence,
lessee received it in good condition, unless there is proof to the contrary.
unusual flood, locusts, earthquake, or others which are uncommon, and
(1562)
which the contracting parties could not have reasonably foreseen. (1575)
Art. 1667. The lessee is responsible for the deterioration or loss of the
Right to a reduced rent:
thing leased, unless he proves that it took place without his fault. This
1. In case of loss of more than ½ of the fruits;
burden of proof on the lessee does not apply when the destruction is due to
2. The cause of the loss is extraordinary and unforesen fortuitous events.
earthquake, flood, storm or other natural calamity. (1563a)
Art. 1669. If the lease was made for a determinate time, it ceases upon
Art. 1670. If at the end of the contract the lessee should continue enjoying
Art. 1681. Neither does the lessee have any right to a reduction of the rent
the thing leased for fifteen days with the acquiescence of the lessor, and
if the fruits are lost after they have been separated from their stalk, root or
unless a notice to the contrary by either party has previously been given, it
trunk. (1576)
is understood that there is an implied new lease, not for the period of the
original contract, but for the time established in Articles 1682 and 1687. The
Art. 1656. The lessor of a business or industrial establishment may
other terms of the original contract shall be revived. (1566a)
continue engaging in the same business or industry to which the lessee
devotes the thing leased, unless there is a stipulation to the contrary. (n)
Art. 1659. If the lessor or the lessee should not comply with the
1. Rural Lands: all the time necessary for the gathering of whole estate:
obligations set forth in Articles 1654 and 1657, the aggrieved party may ask
a. May yield in one year;
for the rescission of the contract and indemnification for damages, or only
b. Yield once, although two or more years have to elapse
the latter, allowing the contract to remain in force. (1556)
Art. 1682. The lease of a piece of rural land, when its duration has
Art. 1660. If a dwelling place or any other building intended for human
not been fixed, is understood to have been for all the time necessary
habitation is in such a condition that its use brings imminent and serious
for the gathering of the fruits which the whole estate leased may
danger to life or health, the lessee may terminate the lease at once by
yield in one year, or which it may yield once, although two or more
notifying the lessor, even if at the time the contract was perfected the
years have to elapse for the purpose. (1577a)
former knew of the dangerous condition or waived the right to rescind the
lease on account of this condition. (n)
2. Urban Lands:
Art. 1662. If during the lease it should become necessary to make some
However, the courts may fix a longer period, even if the rent is paid:
urgent repairs upon the thing leased, which cannot be deferred until the
a. Monthly – if the lessee has rented for more than 1 year;
termination of the lease, the lessee is obliged to tolerate the work, although
b. Weekly – if the lessee has rented for over 6 months;
it may be very annoying to him, and although during the same, he may be
c. Daily – if the lessee has rented for more than 1 month.
deprived of a part of the premises.
Art. 1687. If the period for the lease has not been fixed, it is
If the repairs last more than forty days the rent shall be reduced in
understood to be from year to year, if the rent agreed upon is
the supposed vendee demands the termination of the lease, the sale is not
Other Terms of the Lease: the last sentence of Art. 1670 provides that
recorded in the Registry of Property. (1571a)
“other terms of the original contract shall be revived.” – not to be
interpreted literally.
THE BUYER IS BOUND TO RESPECT THE LEASE CONTRACT ON THE
THING SOLD:
Despite Art. 1670, only those terms and conditions which are germane to
1. If there was a STIPULATION in the contract of SALE;
the contract of lease are deemed renewed in an implied new lease.
2. If the lease is REGISTERED – which would be notice to the buyer;
form or substance of the property leased, the lessor upon the termination of
HELD: No. When Nestor offered to purchase the lease, it was after the
the lease shall pay the lessee one-half of the value of the improvements at
expiration of the lease contract for 3 years. Therefore, the option to buy
that time. Should the lessor refuse to reimburse said amount, the lessee
already expired as well.
may remove the improvements, even though the principal thing may suffer
damage thereby. He shall not, however, cause any more impairment upon
Even if Nestor was allowed to continue with the lease, there was an implied
the property leased than is necessary.
new lease, the option to purchase is not revived. Despite Art. 1670, only
those terms and conditions which are germane to the contract of lease are
With regard to ornamental expenses, the lessee shall not be entitled to any
deemed renewed in an implied new lease. An option to buy is not germane
reimbursement, but he may remove the ornamental objects, provided no
to a contract of lease.
damage is caused to the principal thing, and the lessor does not choose to
retain them by paying their value at the time the lease is extinguished. (n)
Art. 1671. If the lessee continues enjoying the thing after the expiration of
the contract, over the lessor's objection, the former shall be subject to the
Improvements; OPTION: is with the LESSOR, whether he will
responsibilities of a possessor in bad faith. (n)
appropriate the improvement to himself or not.
demolished.
Art. 1674. In ejectment cases where an appeal is taken the remedy
granted in Article 539, second paragraph, shall also apply, if the higher
ART. 448 on BUILDER IN GOOD FAITH DOES NOT APPLY: a lessee is
court is satisfied that the lessee's appeal is frivolous or dilatory, or that the
neither a builder nor a possessor in good faith – This principle of possessor
lessor's appeal is prima facie meritorious. The period of ten days referred to
in good faith naturally cannot apply to a lessee because as such lessee
in said article shall be counted from the time the appeal is perfected. (n)
he knows that he is not the owner of the leased property. Neither
can he deny the ownership or title of his lessor. Knowing that his occupation
Art. 1675. Except in cases stated in Article 1673, the lessee shall have a
of the premises continues only during the life of the lease contract and that
right to make use of the periods established in Articles 1682 and 1687.
he must vacate the property upon termination of the lease or upon the
(1570)
violation by him of any of its terms, he introduces improvements on said
property at his own risk in the sense that he cannot recover their value from
Art. 1676. The purchaser of a piece of land which is under a lease that is
the lessor, much less retain the premises until such reimbursement. Being
not recorded in the Registry of Property may terminate the lease, save
mere lessees, respondents knew that their right to occupy the premises
when there is a stipulation to the contrary in the contract of sale, or when
existed only for the duration of the lease. (Lopez v. Philippine & Eastern
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Trading Co., Inc.)
In this case, the lessee was not allowed to rescind the sale since the buyer
In Cortez v. Manimbo, the Court held that if the rule were otherwise, ‘it
was not impleaded. Rescission of the sale would violate the buyer’s right to
would always be in the power of the tenant to improve his landlord out of
due process.
his property. Under Article 1678 of the Civil Code, the lessor has the primary
right (or the first move) to reimburse the lessee for 50% of the value of the
Equatorial Realty vs. Mayfair Theater: the lessee has a right to rescind
improvements at the end of the lease. If the lessor refuses to make the
if the buyer is in bad faith, i.e., he had knowledge of the existence of the
reimbursement, the subsidiary right of the lessee to remove the
lease contract, and the lessee has the right to compel the lessor to sell to
improvements, even though the principal thing suffers damage, arises.
him.
(Cheng vs. Vittorio)
BAR QUESTION: Dax leased his house to Iris for a period of 2 years, at a
Note that under Art. 448, the BUILDER, PLANTER or SOWER as such must
rate of P25K monthly, payable annually in advance. The contract stipulated
be IN THE CONCEPT OF AN OWNER. Thus, the lessee cannot be
that it may be renewed for another 2 years by agreement of the parties.
considered as such because he cannot even question the title of the lessor
The contract also granted Iris a right of first refusal to purchase the
under Sec. 2(b) Rule 131 of the Rules of Court:
property at anytime during the lease if Dax decided to sell the property at
the same price or the property is offered for sale to another third party. 23
"[o]nce a contact of lease is shown to exist between the parties, the lessee
months after the execution of the lease contract, Dax sold the house to his
cannot by any proof, however strong, overturn the conclusive presumption
mother for 2M. Iris claimed that the sale was a breach of her right of first
that the lessor has a valid title to or a better right of possession to the
refusal but Dax said that there was no breach because the property was
subject premises than the lessee”
sold to his mother who is not a third party. Iris filed an action to rescind the
sale and asked Dax to sell the property to her. Alternatively, she asked the
BAR QUESTION: Anselmo is a registered owner of a land and a house that
court to extend the lease for another two years for the same terms.
his friend Boboy occupied for a nominal rental, and on a condition that
Boboy would vacate the property on demand. With Anselmo’s knowledge,
CAN Iris seek rescission of the sale of the property to Dax’s mother?
Boboy introduced renovations consisting of an additional bedroom, a
covered veranda, and a concrete fence, all at his own expense. Suddenly,
ANSWER: No. For rescission to be a remedy of the lessee in order to
Anselmo needed the property for his residence and thus asked Boboy to
exercise his right of first refusal, there must ba showing that the buyer was
vacate the property and turn it over to him. Boboy failed to vacate the
in bad faith and the lessee has the burden of proving the same.
property prompting Anselmo to send him a written demand to vacate. In his
own written reply, Boboy signified that he is ready to leave but Anselmo
In the problem, there is nothing that would indicate that the mother was in
must first reimburse him the value of improvements on the property as he
bad faith. As such, the presumption of good faith stands. Accordingly, Iris
was a builder in good faith. Anselmo refused, insisting that Boboy cannot
cannot seek the rescission of the sale.
ask for reimbursement as he is a mere lessee. Boboy responded by
removing the improvements and leaving the building in its original state.
BAR QUESTION: Tess leased her 1,500 sqm lot in Antipolo city to Ruth for
Resolving Boboy’s claim, that as a builder in good faith, he should be
a period of 3 years from Jan 2010 to Feb. 2013. On March 19, 2011, Tess
reimbursed the value of improvements he introduced. Resolve Boboy’s
sent a letter to Ruth as follows: “I am offering you to buy the property you
claim.
are presently leasing at 5k per sqm of 7.5M. You can pay the installment
price for two years without interest. I will give you a period of 1 year from
ANSWER: There is a contract of lease. Boboy’s claim of being a builder a
the receipt of this letter to decide whether you will buy the property or not.”
good faith is untenable because he did not make such improvements on the
After the expiration of the lease contract, Tess sold the property to
property as the owner thereof. Art. 448 applies only to a builder who was
her niece for a total consideration of P4M. Ruth filed a complaint for the
such in the concept of an owner.
annulment of sale, reconveyance and damages against Tess and her niece.
Ruth alleged that the sale of the property to the niece violated her right to
However, Boboy cannot be held liable for damages. Anselmo, as the lessor,
buy under the right of first refusal. Is the allegation Ruth tenable?
already made a choice of NOT appropriating the improvements. As such, the
lessee would have the right to remove the necessary and useful
ANSWER: No. What is involved in this problem is an option to buy, not the
improvement even if it caused damage to the principal. So long as no
right of first refusal. It appears that Ruth did not exercise her option to buy
unnecessary damage was caused. In the problem, there wasn’t even
because the lease term, which is also the period within which she can
damage to the thing leased since it was stated that the building was left in
exercise such right, already expired.
its original state.
This right is not provided for under the Civil Code, only under jurisprudence.
Art. 1685. The tenant on shares cannot be ejected except in cases
within the same period, on account of defects in the construction or the use
SECTION 3. - Contract for a Piece of Work
of materials of inferior quality furnished by him, or due to any violation of
paragraph.
Art. 1714. If the contractor agrees to produce the work from material
furnished by him, he shall deliver the thing produced to the employer and
The action must be brought within ten years following the collapse of the
transfer dominion over the thing. This contract shall be governed by the
building. (n)
following articles as well as by the pertinent provisions on warranty of title
and against hidden defects and the payment of price in a contract of sale.
BAR EXAM: O (lot owner), contracted with B (builder), to build a mall,
(n)
designed by A (architect). A was paid a fee to supervise the construction
and execution of his design. When completed, O accepted the work and
Art. 1715. The contract shall execute the work in such a manner that it has
occupied the same but within one year, it collapsed in an earthquake which
the qualities agreed upon and has no defects which destroy or lessen its
destroyed only the building but not the surrounding buildings. The
value or fitness for its ordinary or stipulated use. Should the work be not of
construction was faulty. The building costs P3M, but reconstruction would
such quality, the employer may require that the contractor remove the
cost P10M.
defect or execute another work. If the contract fails or refuses to comply
with this obligation, the employer may have the defect removed or another
1) What are the rights of O against A and B?
work executed, at the contractor's cost. (n)
2) Could O demand reconstruction of the building?
2) Yes. The law is clear that if the work is poorly done, the creditor has
was caused by the poor quality of the material, provided this fact was
Art. 1725. The owner may withdraw at will from the construction of the
expected to recognize the same; or
for all the latter's expenses, work, and the usefulness which the owner may
reason of the defect. (n)
Art. 1726. When a piece of work has been entrusted to a person by reason
delivery of the work, unless there is a stipulation to the contrary. If the work
In this case the proprietor shall pay the heirs of the contractor in proportion
absence if stipulation. (n)
to the price agreed upon, the value of the part of the work done, and of the
materials prepared, provided the latter yield him some benefit.
Art. 1721. If, in the execution of the work, an act of the employer is
required, and he incurs in delay or fails to perform the act, the contractor is
The same rule shall apply if the contractor cannot finish the work due to
entitled to a reasonable compensation.
circumstances beyond his control. (1595)
The amount of the compensation is computed, on the one hand, by the
Art. 1727. The contractor is responsible for the work done by persons
duration of the delay and the amount of the compensation stipulated, and
employed by him, and of third persons for death or physical injuries during
who would claim that it is gratuitous since the law already presumes it to be
Art. 1731. He who has executed work upon a movable has a right to retain
with compensation.
it by way of pledge until he is paid. (1600)
Why agent? Under Art. 1909, if the agent caused damaged to the principal,
TERMINATION OF THE LEASE:
the liability may be mitigated if the agency is gratuitous.
in the supermarket, was there a nominate contract entered into by Joan and
2. Loss of the thing subject of the contract of lease through a
Aiza?
fortuitous event:
from one thing to another: if there will be tranasfer of ownership at the time
control: in a contract for a piece of work, the control aspect is only as to the
1. Demand for the reduction of the rent;
2. Rescind the contract if the loss is substantial – consistent with the Art.
end result and does not include the manner the contractor will perform his
obligation.
1911.
Cesar Nickolai F. Soriano Jr.
129 Arellano University School of Law 2011-0303
Civil Law Review 2 under the class of Atty. Uribe
Accordingly, B leased A’s parcel of land in Manila to C for four years at
AS TO TERMINATION: just like any other contract involving trust and
P60,000 per year, payable annually in advance. Also, B leased A’s land in
confidence, this may be terminated by the unilateral act of one of the
Caloocan to D without a fixed term for P3,000 per month, payable manually.
parties without prejudice to the liability of the party who caused the
termination: as to principal – revocation; as to agent – withdrawal.
All these contracts are entered into by B while A was in the hospital due to
The lease contract to C: contract of lease involving a real property for more
When the parties are present or absent:
than 1 year – act of ownership. There being no Special Power of Attorney,
1) Parties are both present: one of them delivered a SPA and
this contract of lease is not binding, it is unenforceable upon A.
the same was accepted without any objections, an agency is
created by mere silence.
The lease contract to D: contract of lease involving a real property with no
2) Parties are absent: A sent an email to B for the creation of
period. Since the contract did not state a term, and the subject being an
agency, B did not reply, is there an agency? If the subject of
urban land (being situtated in Caloocan), the law fixes the term to be on a
the contract is a business he is habitually engaged in, yes.
month-to-month basis since the payment of the rent is monthly. As such,
the period of the lease is only one month. Therefore, it is merely an act of
2. Apparent or Ostensible – Art. 1873 (Rallos vs. Yangco)
administration that does not require a Special Power of Attorney. The
the minor is the only one who can invoke such incapacity.
PROBLEM: A company wrote a circular letter to its customers
introducing a certain X as its duly authorized agent. One customer then
2. Object: the execution of a juridical act.
dealt with the company thru X. One day, X’s authority was revoked,
3. Cause: presumed to be for compensation, but may be gratuitous.
but the customer continued to deal thru X since it never was informed
by circular or otherwise of the revocation. Is the Company still liable
FORM: does not pertain to the agency itself, since no particular form is
for X’s acts even after the revocation of the agency?
required for its VALIDITY. Under Art. 1869, a contract of agency may be
parents a 500 sqm lot which they leased to Maria for 3 years. One year
2) The 3rd person is aware that the agent exceeded his authority.
1. Agent must act within the scope of his authority
However, the agent may still be held liable if he undertook to
to secure a loan from any Bank and to mortgage his property covered by
Katigbak vs. Tai Hing Company: the agent was authoried to sell
the owner’s copy of the certificate of title. In securing a loan from M Bank,
properties of the principal and was able to do so. Thereafter, the
DY did not specify that he was acting for CX in the transaction with said
principal does not want to recognize the transactions covering
bank. Can M Bank hold CX liable?
properties acquired after constitution of the agency. SC: the power of
attorney contained a phrase “which might belong”. As such, the scope
ANSWER: No. When DY did no specify that he was acting in behalf of CX,
of the authority of the agent covers after acquired proeprties.
the Bank allowed him to borrow money on his own, since the Bank had no
knowledge that he was merely acting as an agent. The agent must act not
“sell, buy, lease, let in relation to the good administration of the land”
only within his scope, but also in representation of the principal.
– the right to sell and buy does not pertain to the land itself since the
power of the agent is qualified by the “good administration”. If the
Under Art. 1883, if the agent did not act in representation of the principal,
agent was authorized to sell the land itself, then there is no more land
the latter and the third person would have no cause of action against each
to administer. It must be interpreted as to pertain to selling the fruits
other. The transaction is deemed to be only between DY and M Bank.
of the land, buying the necessaries for the cultivation thereof, etc.
Even though there was property in the problem belonging to the principal,
b. The law:
the same is not the object of the loan, which is the transaction entered into
1) The power to sell does not include the power to mortgage.
by the agent. Moreover, it does not appear that the principal’s property was
(Art. 1879)
mortgaged. Furthermore, even if the property was indeed mortgaged, DY
acting as the owner thereof, the mortgage would have been invalid not
the principal may furthermore bring an action against the substitute with
BREACH OF FIDUCIARY DUTY:
respect to the obligations which the latter has contracted under the
substitution.
Domingo vs. Domingo: the principal Domingo (defendant) authorized
plaintiff Domingo to sell a specific parcel of land. Pursuant to such, plaintiff
COMMISSION AGENT: DEFENSE: as long as the agent performed his
was able to induce Oscar de Leon to buy the land. Oscar de Leon gave the
duties with the diligence required. As such, even if he was not able to
agent as gift, which was not disclosed by the agent to the principal.
comply with his obligation, say to sell the products of the principal, he will
Thereafter, the principal and Oscar de Leon was not able to agree on the
not be liable. Note that the agent is not the insurer of the business of the
price. They eventually agreed to remove the agent to save on commission,
principal.
where the principal agreed to sell at the lower price acceptable to de Leon.
The two dramatisized that the sale will not push through and the principal
Guaranty Commission Agent: receives a guaranty commission, and as
revoked the authority of the agent. The agent went to the Register of Deeds
such, he bears the risk of collection. Accordingly, failure to collect from the
and discovered that there was a Deed of Sale where the principal sold the
buyers, he shall be liable to the principal.
land to the wife of Oscar de Leon. The agent demanded for his commission
claiming that the sale actually proceeded despite the fact that the buyer was
RIGHTS AND OBLIGATIONS OF THE PRINCIPAL:
the wife of de leon. Is the agent entitled to his commission?
1. The principal must comply with the tranasctions entered into by the
the contract;
Appointment of SUBSTITUTE AGENT:
b. Expenses were due to the fault of the agent;
All acts of the substitute appointed against the prohibition of the principal
Agent is likewise liable if he acted in bad faith.
shall be void
revocation?
BAR QUESTION: In a telephone conversation, A authorized B in 1950 to
sell a parcel of land. A died in 1954. In 1956, heirs of A sold the same land
SC: Yes. A bilateral contract (loan) was dependent upon the agency. He
to C. In 1957 B sold the same land to D. C did not register the sale. D who
would not have loaned money if the agency would not be constituted.
was not aware of the previous sale registered the land.
Although the agency was one coupled with interest, there was still valid
revocation because there was a just cause. In this case, the just cause is
Who has a better right to the land?
because Collongco sent to the banks derogatory letters which was the cause
With a SPA, who has a better right? Art. 1931 will be applicable. D has a
Just cause: there is no need for the principal to have a just cause to
better right. B did not have knowledge of the death of A. As such, the
revoke the agency, such right being available at will. However, the principal
transaction entered into by B would still bind the principal (or in this case,
cannot revoke the agency at will if it is coupled with interest. However still,
his estate). As such, his sale to D was valid. if
the principal revoked the agency, even if coupled with interest, the
Richard until the price is fully paid. To enable Leo to pay the price, Richard
EXCEPTION: the agent should continue with tasks already begun and there
gave him a power of attorney authorizing him to subdivide the land and sell
would be danger (to the estate of the deceased or third persons).
the lands and to deliver the proceeds as payment for the land. 5 years later,
Richard revoked the power of attorney and took over the sale of the
Death of Agent: agency is representative in character, if the agent is
subdivision lots himself. Is the revocation valid?
dead, who will represent the principal? As such, the death of the agent
would extinguish the agency.
ANSWER: No. The scenario pertains to an agency coupled with interest
against those who may enter it without the latter’s authority. JM agreed to
ANSWER:
pay 40% of the treasure that may be found on the land. Thereafter, JP filed
1. The criminality rate in the 80s was already high. As such, Mario is a
case against Lilo for illegally entering JM’s land. Subsequently, JP hired the
negligent to be wearing a necklace with diamonds at night time.
services of Atty. Audrey agreeing to give the latter 30% of JM’s share in
2. In Austria vs. CA, the court ruled that as a fortuitous event to be a
whatever treasure may be found on the land. Dissatisfied, however, with
defense, it is not required that the perpetrator be apprehended nor
the strategies implemented by JP, JM revoked the SPA granted. Is the
much worse, convicted. It is only necessary that the event was proven
revocation proper?
by preponderance of evidence.
ANSWER: No. because the agency is one coupled with interest because a
REVOCATION: the principal may revoke the agency at will.
bilateral contract depends upon the agency, i.e., contract involving the legal
services of Atty. Audrey. Thus, the principal cannot revoke the authority of
What if with period? Sta. Marina vs. Barretto: even if there was a period
the agency.
agreed upon by the parties, the principal can revoke the authority of such
agent at any time because agency is based on trust and confidence. E.
PARTNERSHIP
CASE: Collongco vs. Claparols: Claparols is the owner of a factory and badly
needed funds for his business to survive. He tried to obtain loans from
banks, but he was rejected. Collongco offered to lend money to Claparols on
the condition that, among others, he should be appointed as agent of
Claparols to obtain the bills of lading upon shipment to buyers and to
market the products.