Art.

1163
Every person obliged to give something is also obliged to take care of it with the proper
diligence ​of a good father of a family​, unless law or the stipulation of the parties requires
another standard of care (1094a).
● Tradicio - meaning delivery
○ Tradicio symbolica (ex: key to the house)
○ Tradicio instrumental - the actual binding contract
○ Tradicio longa manu - gentleman’s agreement (verbal)
○ Tradicio brevi manu - change of ownership (renter to owner)
○ Constitutum possessorium (owner to renter)
● The above refers to an ​obligation specific​ or ​obligation determinate​ thing.
○ Something is specific and determinate when it is designated as someone’s, when
it is physically separate/segregated from others of the same kind or class.
○ Ex: The toyota car sold by Briones vs. the toyota car.
● A determinate thing is identified by its individuality (the fact that it is a ​separate object
from others that are of the same kind).
○ A debtor cannot substitute a determinate thing with another even if it is of the
same kind, because the determinate thing has individuality or a specific
quality/identifier to it (ex: the toyota car example above had individuality because
Briones sold it).
● A generic thing is identified only by its specie (kind).
○ The debtor can give anything of the same class as long as it is the same kind.
● Duties of a debtor in obligation to give a ​determinate thing
1. Preserve the thing - there is an incidental duty to take care of the determinate
thing with the ‘diligence of a good father of a family’ pending delivery (before
delivering the item in question to the appropriate party).
a. Diligence of a good father of a family - means that the debtor should take
care of the thing with the ordinary care or a diligence which an average
person exercises over their own property. (take care of the thing as if it’s
your own if you haven’t delivered it yet!)
b. Another standard of care - law or the stipulation of the parties can also
specify another standard of care (either slightly less or extraordinary
diligence). Debtor must follow whatever is stipulated.
i. However, it is contrary to public policy to stipulate for absolute
exemption of liability of the obligor for any fault or negligence on
his part.
c. Factors to be considered - the debtor is not liable if his failure to preserve
the thing is not due to his fault or negligence but to fortuitous
circumstance (unforeseen events that could not be avoided or prevented,
was inevitable if foreseen, and was not a product of the debtor’s will).
d. Reason for the debtor’s obligation - the reason a debtor must exercise
diligence to insure the thing to be delivered is in the same condition it was
when the obligation was contracted is because without the obligation to
 take care of the thing, the debtor would be able to be negligent and would
not be held liable even if the thing is lost or destroyed (this is so that there
is someone to take responsibility for their negligence/fault).
2. Deliver the fruits of the thing (Art. 1164)
3. Deliver the accessions and accessories (Art. 1166)
4. Deliver the thing itself (Art. 1163, 1233, 1244) (types of delivery is under Art
1497-1501)
5. Answer for damages in the case of non-fulfillment (Art. 1170)
● When a determinate thing is damaged/destroyed/lost etc, the creditor can no longer
compel the debtor to deliver the thing, however the creditor can ask for compensation for
damages.
● Duties of a debtor to give a ​generic thing
1. To deliver a thing which of the quality intended by the parties taking into
consideration the purpose of the obligation and other circumstances. - should be
the same quality and able to perform the same uses as the rest of its kind + what
was stipulated in the obligation.
2. To be liable for damages in case of fraud, negligence, or delay in the
performance of his obligation, or contravention of the tenor thereof.
● Genus nunquam perit - genus does not perish (it doesn’t perish because there will
always be a replacement the debtor can find). Only applies to generic things and not
determinate things.
○ “It is based on the principle that a generic thing never perishes. The debtor can
still be compelled to deliver a thing of the same kind. The creditor however,
cannot demand a thing of superior quality and neither can a debtor deliver a thing
of inferior quality.”

Art. 1164
The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises.
However, he shall acquire no real right over it until the same has been delivered to him. (1095).
● Fruits of the thing - additional things that come from the original thing in the contract. (ex:
additional crops on a farm, rent from buildings)
● Types of fruits:
1. Natural fruits - spontaneous products, made without human labor/intervention
(ex: grass, all trees and plants, all natural resources found on land)
2. Industrial fruits - cultivated products, made through human labor/intervention (ex:
crops)
3. Civil fruits - by virtue of a juridical relation (ex: from an obligation, like rent)
● Right of creditor to the fruits - they are entitled to the fruits the moment the obligation is
made, it is to protect the interest of the creditor should the debtor purposely or
unintentionally commits delay in the fulfillment of the obligation.
● The obligation to deliver the thing and consequentially, any fruits from that thing, arises
from the time of the ‘perfection of the contract’ aka the birth of the contract/meeting of
the minds between the 2 parties.
● If the obligation is subject to a suspensive condition or period (ex: to be fulfilled the next
year, when the debtor’s means allow him to do so, payment in installments, etc), the
obligation to deliver fruits arises the same time the stated condition/period arrives.
Parties can stipulate something to the contrary of this as is the right of the creditor to the
fruits of the thing. - obligation to deliver the fruits of the thing is created at the same time
when the obligation to deliver the original thing is created.
● Condition - a provision in a written instrument which is to take effect upon the occurrence
in an uncertain contingency
● Period - any point, space or division of time
● Condition VS. Period:
○ in terms of fulfillment:
■ a period is a future and certain event.
■ a condition is an uncertain event.
○ in terms of time:
■ a period refers only to the future.
■ a condition may refer also to the past.
○ in terms of influence on the obligation:
■ a period fixes the time for the performance of an obligation. It does
prevent its existence (suspensive) and conception in due time
(resolutory).
■ a condition causes the existence or the extinguishment of an obligation.
● Both a period and a condition are required to be legally and physically possible to be
valid.
○ Kinds of Periods
1. according to effect:
a. Suspensive period (ex die) - wherein the obligation begins only
from a day certain or upon the arrival of the period (ex: D will pay
C beginning tomorrow.)
b. Resolutory period (in diem) - wherein the obligation is performed
only up to a day certain and terminated upon the arrival of the
period (ex: D will pay C every week until the end of the month.)
2. according to source:
a. Legal period - when it is provided by law.
b. Conventional/Voluntary period - when it is agreed upon by the
parties.
c. Judicial period - when it is fixed by the court.
3. according to definiteness:
a. Definite period - when it is fixed and its exact date or time is
known.
b. Indefinite period - when it is not fixed and its exact date or time is
unknown, but surely happen.
● In the contract of sale, the obligation arises from the ‘perfection of contract’ even if the
obligation is subject even if the obligation is subject to a suspensive condition or a
 suspensive period where the price has been paid. - because its a sale, something must
be delivered.
● Personal right vs. real right
○ Personal right - the right or power of a person (creditor) to demand from another
(debtor), as a definite passive subject, the fulfillment of the latter’s obligation to
give, to do, or not do
■ There is a definite passive subject and active subject
■ Binding or enforceable against a particular person (ex: when someone
takes ownership of land from someone else)
■ Jus ad rem - a right enforceable only
○ Real right - the right or interest of a person over a specific thing (ownership,
possession, mortgage), without a definite passive subject against whom the right
may be personally enforced.
■ There is only a definite active subject without any definite passive subject
■ Directed at the whole world - can be directed at anyone (ex: in the cases
of owner vs. outsiders, mortgages)
■ Jus in re - a right enforceable against
● Ownership acquired by delivery - ownership and real rights are acquired and transmitted
in consequence of certain contracts by tradition or delivery.
○ ‘He shall acquire no real right over it until the same has been delivered to him’ -
creditor doesn’t become the owner until the specific thing as been delivered to
him.
○ When there has been no delivery yet, the proper court action by the creditor is
not one for recovery of possession and ownership but one for specific
performance of the obligation or recission of the obligation - cannot compel the
debtor to recover their possessions but can compel them to fulfill their obligations
in other ways (ex: replacement of a generic item).
Art. 1165
When what is to be delivered is a determinate thing, the creditor, in addition to the right granted
him by Article 1170, may compel the debtor to make the delivery.

If the thing is indeterminate or generic, he may ask that the obligation be complied with at the
expense of the debtor.

If the obligor delays, or has promised to deliver the same thing to two or more persons who do
not have the same interest, he shall be responsible for any fortuitous event until he has effected
the delivery. (1096)
● Remedies of a creditor
○ In a ​specific​ ​real obligation ​- real right + determinate thing
■ Demand specific performance or fulfillment (if possible) of the obligation
with a right to indemnity for damages
■ Demand rescission or cancellation (in certain cases) of the obligation with
the right to recover damages.
 ■ Demand payment of damages only, when it is the only feasible remedy.
○ In a ​generic real obligation​ - real right + generic thing
■ Can be performed by a third person since the object is expressed only
according to its family or genus. (ex: can ask someone else to make the
delivery of the item)
■ Not necessary for the creditor to compel the debtor to make the delivery,
but can ask for the performance of the obligation. (ex: can make the
original debtor pay for additional expenses on the part of the creditor).
➢ Under the constitution, no person shall be imprisoned for non
payment of debt (Art. III, Sec. 20) but the person may be subject
to subsidiary imprisonment for non-payment of ​civil liability
adjudged in a criminal case (Art. 1161). Refers to civil debt or one
arising from contractual obligations only.
■ In any case, the creditor has the right to recover damages (under Art.
1170) in case of breach or violation of the obligation.
● There are 2 instances when a fortuitous event does not exempt the debtor from
responsibility. It is in reference to a determinate thing. An indeterminate thing CANNOT
be the object of destruction by a fortuitous event because of ‘​genus nunquam perit’ -
genus never perishes.
● Remedies of a creditor in case of non-performance
○ Specific performance - performance of the debtor of the prestation itself.
○ Substitute performance - someone else performs or something else is performed
at the expense of the debtor.
○ Equivalent performance - payment of damages equal to what was to be received
will be given.
 Real Obligations Personal Obligations
Remedies
Determinate Generic To do To not do

Specific to undo the

performance x x x things already
done

Can only be
Equivalent x x demanded if x
performance obligation is not
very personal

Undo the things

Substitute x x already done at
performance the debtor’s
expense

Rescission / x x x x
cancellation

Art. 1166
The obligation to give a determinate thing includes that of delivering all its accessions and
accessories, even though they may not have been mentioned. (1097a)
● Accessions are fruits of a thing or additions to/improvements upon a principal thing.
○ Not necessary to the principal thing
○ Also used in the sense of a right (right to the fruits of a thing)
○ Ex: houses on a plot of land, aircon in a car, dividends from a stock, interest from
an investment
○ Accession discreta – right to the fruits
○ Accession continua – includes both accession natural (ex: mineral deposits) and
accession industrial (ex: those built, planted or sowed on the land of the
landowner)
● Accessories are things joined to or included with the principal thing for the principal
thing’s embellishment, decoration, better use, or completion.
○ Must always go with the principal thing
○ Ex: keys of a house, new paint job of a car, charms of a bracelet, machinery in a
factory
● Both can exist only in relation to the principal thing.
● General rule is that all accessions and accessories are considered included in the
obligation to deliver a determinate thing - even if it may not have been mentioned in the
creation of the obligation.
○ Based on the principle of law that the accessory follows the principal thing.
 ○ Ex: leasing a house naturally includes the lease of the land it is built on, because
the possession of the lot is implied in the lease of improvement.
● Although the delivery of determinate thing includes all its accessions and accessories,
the parties in the contract may stipulate that certain accessions or accessories may not
be included in the delivery. Both parties have the freedom to stipulate such things.
● Unless otherwise stipulated, an obligation to deliver the accessions or accessories of a
thing does not include the principal thing.
○ Ex: the sale of improvements, like a house, does not mean you also own the title
to the land it is on.
Art. 1167
If a person obliged to do something fails to do it, the same shall be executed at his cost.

This same rule shall be observed if he does it in contravention of the tenor of the obligation.
Furthermore, it may be decreed that what has been poorly done be undone. (1098)
● refers to an obligation to do, that is, to perform an act or render a service. It
contemplates three situations:
1. The debtor fails to perform an obligation to do.
2. The debtor performs an obligation to do but contrary to the terms thereof.
3. The debtor performs an obligation to do in poor manner.
● Performance at debtor’s cost.
○ If the debtor fails to comply with his obligation to do, the creditor has the right:
1. to have the obligation performed by himself, or by another, at the debtor’s
expense.
2. to recover damages.
○ In case the obligation is done in contravention of the terms or is poorly done, it
may be ordered (by the court) that it shall be reversed if still possible.
● Personal Compulsion.
○ If no law was implemented that regards to the cause of action. Then the only
sanction of civil obligations is compensation for the damages.
● Indemnification for Damages.
○ If the obligation to do cannot be done by another, in case of non-performance the
only feasible remedy of the creditor is indemnification for damages.
● There are different sources of damages:
1. Fraud
2. Negligence
3. Delay - delay in delivering what was promised.
4. Breach - failed to perform based on what was agreed.
Art. 1168
When the obligation consists in not doing, and the obligor does what has been forbidden him, it
shall also be undone at his expense. (1099a)
● This article pertains to negative personal obligation, or the obligation not to do. In
addition to the obligation of the obligor to undo the forbidden act of thing, he may also be
made liable for damages caused by doing that which was forbidden.

Art. 1169
Those obliged to deliver or to do something incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delay may exist:

(1) When the obligation or the law expressly so declare; or

(2) When from the nature and the circumstances of the obligation it appears that the designation
of the time when the thing is to be delivered or the service is to be rendered was a controlling
motive for the establishment of the contract; or

(3) When demand would be useless, as when the obligor has rendered it beyond his power to
perform.

In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready
to comply in a proper manner with what is incumbent upon him. From the moment one of the
parties fulfills his obligation, delay by the other begins. (1100a)
Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or
delay, and those who in any manner contravene the tenor thereof, are liable for damages.
(1101)
● Concepts and Nature of Delay
○ default or ​mora​, means delay in the fulfillment of obligation (default).
○ Types of Delay
1. Ordinary Delay - failure to perform an obligation on time
2. Legal Delay/Default - failure to perform an obligation on time which failure
constitutes a breach of the obligation.
○ 4 Requisites to a Delay:
1. Obligation must be due, demandable and liquidated
2. Debtor fails to perform his positive obligation on the date agreed upon
3. A demand (not merely a reminder or notice), judicial or extra-judicial,
made by the creditor upon the debtor to fulfill, perform or comply with his
obligation otherwise, he will be in default
4. 4. Failure of the debtor to comply with such demand.
● Kinds of MORA
1. Mora Solvendi – default/mora on debtor
 a. Ex re - default in real obligations
b. Ex persona - default in personal obligations
○ 4 Requisites:
1. positive act or prestation of the debtor
2. obligation should be demandable, due and liquidated.
3. that the debtor shall delay by fraud or by negligence
4. creditor should demand either judicially or extra-judicially.
○ GENERAL RULE - Those obliged to deliver or to do something incur in delay
from the time the obligee judicially or extra judicially demands from them the
fulfillment of their obligation.
○ EXCEPTIONS (no demand necessary)
1. When the obligation or the law expressly so declare
2. When from the nature and the circumstances of the obligation it appears
that the designation of the time when the thing is to be delivered or the
service is to be rendered was a controlling motive for the establishment of
the contract
3. When demand would be useless, as when the obligor has rendered it
beyond his power to perform.
○ EFFECTS:
1. Debtor is guilty of breach of the obligation
2. Liability: If obligation to pay money- must pay interest. If no extra-judicial
demand, interest runs from the filing of the complaint. In other obligations,
pay damages.
3. Obligations to deliver a determinate thing, liable for fortuitous events. If
debtor can prove that loss would have resulted even if he had not been in
default, the court may equitably mitigate the damages (Art. 2215)
4. Resolution (Art 1170, in proper cases)
2. Mora Accipiendi – default/mora on creditor OR there is no source of damage
■ delay in performance based on omission by creditor of necessary
cooperation.
■ When he unjustifiably refuses to accept the performance of the obligation.
○ REQUISITES:
1. Offer of performance by the debtor
2. Offer must be to comply with the prestation as it should be performed
3. Creditor refuses the performance without just cause
○ EFFECTS:
1. The responsibility of the debtor for the thing is reduced and limited to
fraud and gross negligence
2. Debtor is exempted from the risk of loss of the thing w/c automatically
pass to creditor
3. All expenses incurred by the debtor for the preservation of the thing after
the mora shall be chargeable to creditor
 4. If the obligations bears interest the debtor does not have to pay the same
from the moment of the mora
5. The creditors becomes liable for damages
6. Debtor may relieve himself of the obligation by the consignation of thing
3. Compensatio Morae – default on both parties in reciprocal obligations.
○ There is no actionable default on the part of both parties.
○ Rule in Reciprocal Obligations - In reciprocal obligations, neither party incurs in
delay if the other does not comply or is not ready to comply in a proper manner
with what is incumbent upon him. From the moment one of the parties fulfills his
obligation, delay by the other begins.
○ Performance must be simultaneous unless different dates for the performance of
the obligation were fixed by the parties.
Art. 1170
Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof, are liable for damages. (1101)
● 4 grounds for liability that may entitle the injured party to damages
1. Fraud
2. Negligence
3. Delay
4. Contravention of the terms of the obligation - contravention must not be due to a
fortuitous event, if it is due to a fortuitous event it is a valid excuse
● Culpa Contractual - non-performance by fault or negligence, or the fault of the debtor as
an incident in fulfilling an existing obligation.
● Damages are referred to as any damage caused in any human being. It can be in the
form of money, physical damage, moral damage, mental damage, etc.
● If the damage is monetary and the damage to be incurred from is not indicated in the
contract, a legal interest of 6% per year will be observed in computing for damage.

FRAUD NEGLIGENCE

Intentional / Intent must be proven Not intentional

Proved Presumed

Can be waived (past) / Can be waived

cannot be waived(future)

No reduction of liabilities There is a reduction of liabilities

Art. 1171
Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for
future fraud is void. (1102a)
● Fraud (Dolo) - the deliberate or intentional evasion of the normal fulfillment of an
obligation.
 ○ O’leary Macondray states that it implies some kind of malice or dishonesty and it
cannot cover cases of mistake and errors of judgment made in good faith. It is
synonymous to bad faith
● Types of Fraud
1. Causal Fraud (Dolo Causante) - fraud employed in the execution of the contract
2. Incidental Fraud (Dolo Incidente) - fraud in performance of obligation already
existing because of a contract.
● According to time of commission, fraud may be past or future.
○ NOTE: Future fraud cannot be waived. However, the law does not prohibit
renunciation of the action for damages on the ground of fraud already committed.
● Waiver of action for past fraud is valid - is valid bc the waiver is considered an act of
generosity on the part of the victim, because the victim renounces their right to remedy
the damages against them.
○ The waiver must be expressed in clear language that leaves no doubt to the
intention of the victim to give up his right against the debtor.
● Remedies of the defrauded party
1. Insist on specific performance (Art 1233)
2. Resolve contract (Art 1191)
3. Claim damages, in either case

Art. 1172
Responsibility arising from negligence in the performance of every kind of obligation is also
demandable, but such liability may be regulated by the courts, according to the circumstances.
(1103)
● Courts decide which parties will be held responsible for negligence - ex: an employee
will not be held liable for his employer’s negligence.
● The Court of Appeals held that the liability arising from culpa contractual cannot be
divided nor extended to persons who have nothing to do with the obligation.
● The employee cannot be sentenced to pay for damages despite of his negligence
because the responsibility for his acts lodged on the part of his master (para 4, Art. 2180
and Art. 1170 of Civil Code)
● The court is ​given a discretion to mitigate liability according to circumstances on
cases arising from culpa contractual
● No such discretion is given by the Code in dealing with liability arising from ​cases
involving culpa aquiliana.

Art. 1173
The fault or negligence of the obligor consists in the omission of that diligence which is required
by the nature of the obligation and corresponds with the circumstances of the persons, of the
time and of the place. When negligence shows bad faith, the provisions of Articles 1171 and
2201, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be observed in the performance,
that which is expected of a good father of a family shall be required. (1104a)
● Minimum benchmark of diligence – DILIGENCE OF A GOOD FATHER OF A FAMILY
● The parties to a contract are free to set a higher standard of care.
● Contracts of carriage/Transportation contracts – asks for extraordinary diligence
● 2 Kinds of Negligence
1. Culpa Contractual - exists when there is a pre-existing obligation and the debtor
is negligent
2. Culpa Aquiliana - civil negligence-wrongful negligent act which creates a
vinculum juris (legal bound)
● Example: Chauffeur-driven truck collided with a car. Judge ruled in favor of the injured
truck owner. Liability for employee’s negligence If the negligence of an employee causes
damages to a third party,the employer can be made liable to the third party.
● Contributory Negligence - conduct on the part of the injured party, contributing as a legal
cause to the harm he has suffered. Negligent party’s liability may be mitigated

Art. 1174
Except in cases expressly specified by the law, or when it is otherwise declared by stipulation,
or when the nature of the obligation requires the assumption of risk, no person shall be
responsible for those events which could not be foreseen, or which, though foreseen, were
inevitable. (1105a)
● 2 main types of fortuitous events
1. Acts of god - aka ​majeure​, like natural disasters
2. Acts of man - robbery, riots, etc.
● The Philippine Civil Code distinguishes between two kinds of fortuitous events namely:
1. Ordinary fortuitous events or those which are common and which the contracting
parties could reasonably foresee (ex: rain)
2. Extra-ordinary fortuitous events which are uncommon and which the contracting
parties could not have reasonably foreseen (ex: flash floods, earthquakes, etc)
● Requisites of a fortuitous event:
1. Independent of human will - in acts of man, it is independent from the will of the
debtor but not from other human wills
2. Could not be foreseen, if foreseen, it is inevitable
3. Impossible to perform due to the event
4. No concurrent negligence - your negligence should not have led to this event
● Exceptions of a fortuitous event - when someone will be held liable
1. Law (specifically Arts. 552(2,) 1165(3,) 1268, 1942, 2147 and 2159 of the Civil
Code)
a. When the debtor is guilty of fraud, negligence or delay, or contravention of
the tenor of the obligation - when the debtors actions are in violation of
the law
 b. The debtor has promised to deliver the same specific thing to two or more
persons who do not have the same interest - the two people promised the
thing are not associated, will not own the thing together, etc
c. The obligation to deliver the specific thing arises from a crime
d. The thing to be delivered is generic (​genus nunquam peruit​)
2. Stipulation of parties - rests upon the freedom of the parties in creating their
contracts, the intention to make the debtor liable even in a fortuitous event must
be clearly expressed
3. When the nature of the obligation requires the assumption of risk - risk of loss or
damage is an essential part of the contract that was made
4. The obligor/debtor is in delay (Art. 1165)
5. The possessor is in bad faith and the thing is lost or deteriorates because of the
fortuitous event (Art. 552)
6. The obligor/debtor contributed to the loss of the thing (Tan vs Inchausti, 22 Phil
152)
● Common carriers (delivery) must pay heed to the following:
1. Mechanical defects in vehicles or vessels are not fortuitous events (Sweet Lines
vs. CA 121 SCRA 769, Necesito vs. Paras 104 Phil 75)
2. Blowout of a passenger bus tire is not a fortuitous event (La Mallorca vs. de
Jesus 123 Phil 875, Juntilla vs. Fontanar 136 SCRA 624)
3. Defective brakes of the vehicle do not constitute a fortuitous event (Vergara vs.
CA 154 SCRA 564)
● Effects of a Fortuitous Event
○ In a determinate obligation - obligation is extinguished
○ In a generic obligation - obligation is not extinguished due to ​genus nunquam
peruit
Art. 1175
Usurious transactions shall be governed by special laws. (n)
● Usurious - the practice of usury, the illegal action or practice of lending money at
unreasonably high rates of interest. (loan sharks)
● No creditor may take a higher rate of interest than 12% per annum.
● If a court finds that the rate of interest on a loan is usurious, the interest due becomes
void and only the principal of the loan needs to be repaid.
● To constitute usury there must be an knowing and consensual obligation of the borrower
to return the principal as well as pay an amount greater than lawful interest.
● Usury is usually only considered a crime if a person is a "loan-shark" someone in the
business of loaning money at usurious rates banks and other commercial lenders
generally are not subject to anti-usury laws, but are governed by the marketplace and
the competitive rates based upon the Federal Reserve’s rates for bank loans.
● The special laws that used to govern usury are:
1. Act No. 2655 as amended by Act No. 3998
2. Commonwealth Act No. 399
3. Republic Act No. 337
4. Presidential Decree No. 116, 858 and 1684

Art. 1176
The receipt of the principal by the creditor without reservation with respect to the interest, shall
give rise to the presumption that said interest has been paid.

The receipt of a later installment of a debt without reservation as to prior installments, shall
likewise raise the presumption that such installments have been paid. (1110a)
● Before the presumption that a prior installment had been paid may arise, the receipt
must specify the installment for which payment is made
● Conclusive Presumption - cannot be contradicted (ex: the presumption that everyone is
conclusively presumed to know the law, like when you are pulled over for traffic
violations you cannot say you didn’t know there were certain laws as an excuse)
● Disputable Presumption - you can present evidence to contradict/rebut the presumption
● 2 Presumptions regarding:
1. Interest bearing debt - Presumption that interest has been paid if the principal
has been received without reservation regarding interest
2. Debt payable in installments - Presumption that earlier installments have been
paid if the later installment has been received without reservation regarding the
previous installments.
○ These are only rebuttable presumptions, you can prove through other evidence.
You can prove mistake.
● When presumptions in this article do not apply
1. With the reservation as interest - when there is a reservation that no payment has
been made in regards to interest or prior installments (can be made verbally or in
writing)
 2. Receipt without indication of particular installment paid - if the receipt does not
recite that it was issued for a particular installment due as when the receipt is
only dated (ex: the receipt is dated on a different day therefore you cannot infer it
covers other dates of payment)
3. Receipt for a part of the principal - (when the receipt is only for a part of the
principal) only when the principal is fully receipted for and there is failure of the
creditor to reserve the claim for interest is when presumption is applicable
4. Payment of taxes - this article does not apply to taxes (no presumption that you
paid for your previous taxes just because you paid for a recent one)
5. Non-payment proven - when non-payment of previous obligations is proven

Art. 1177
The creditors, after having pursued the property in possession of the debtor to satisfy their
claims, may exercise all the rights and bring all the actions of the latter for the same purpose,
save those which are inherent in his person; they may also impugn the acts which the debtor
may have done to defraud them. (1111)
● Remedies of the creditor
1. Exact fulfillment of the obligation through specific or substitute performance.
2. In case of reciprocal obligations, petition the court to resolve the contract
3. Confiscation of property from the debtor - Levy or Distraints
a. Levy - real property
b. Distraint - personal property
4. Accion directa - direct action, right of the lessor to go directly to sublessee for
unpaid rents of the lessee. Right of the laborers or persons who furnish materials
for a piece of work undertaken by a contractor to go directly to the owner for any
unpaid claims due to the contractor
5. Subrogatory/Accion subrogatoria - to be subrogated to all the rights and actions
of the debtor save those which are inherent in his person
● Requisites
a. The debtor to whom the right of action properly pertains must be indebted
to the creditor
b. The creditor must be prejudiced by the inaction or failure of the debtor to
proceed against the third person
c. The creditor must have pursued first or exhausted all the properties of the
debtor which are not exempt from execution
d. The debtor's assets are insufficient to satisfy his claims
e. The right of account is not purely personal
6. Accion Pauliana - aka rescissory action - asking the court to rescind (take back)
or to impugn (call into question) all the acts which the debtor may have done to
defraud the creditors (Arts. 1380-1389)
● REQUISITES
a. There is a credit in favor of plaintiff
 b. The debtor has performed an act subsequent to the contract, giving
advantage to other persons
c. The creditor is prejudiced by the debtor's act which are in favor of 3rd
parties and rescission will benefit the creditor
d. The creditor has no other legal remedy
e. The debtor's acts are fraudulent - the acts of th involve deception
Art. 1178
Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has
been no stipulation to the contrary. (1112)
● All rights acquired from an obligation can be passed from one person to another (unless
the obligation in question is personal)
● The following are exceptions to this rule
1. Prohibited by law
a. By the contract of partnership - when two or more persons bind
themselves to contribute money, property, and/or industry to a common
fund with the intention of dividing the profits amongst themselves (aka
partnerships).
b. By the contract of agency - a person binds themselves to render some
service or to do something as a representative/on behalf of someone else
c. By contract of commodatum - one party delivers to another something not
consumable (ex: a car, furniture, etc) do that the latter may use the item
for a certain amount of time and return it (ex: renting tables for a party)
2. Prohibited by stipulation of the parties - when prohibited by stipulations made by
the parties (ex: upon the death of the creditor, the obligation will be extinguished
and the credit cannot be passed for someone else to collect)