ASSESSMENT

WEEK 1 AND WEEK 2

ANSWERS

I.

YES. The contention of Q in his appeal is correct. Under Art. 1212 of the New Civil
Code, each one of the solidary creditors may do whatever may be useful to the others, but not
anything which may be prejudice to the latter. Suing for the recovery of the contract price is
certainly a useful act that Q could do by himself alone. A solidary obligation is one in which
each debtor is liable for the entire obligation, and each creditor is entitled to demand the whole
obligation. Hence, each creditor may enforce the entire obligation, and each debtor may be
obliged to pay it in full. The essence of active solidarity consists in the authority of each creditor
to claim and enforce the rights of all, with the resulting obligation of paying everyone what
belongs to him; there is no merger, much less a renunciation of rights, but only mutual
representation. In the case at bar, the question of who should sue the private respondents was a
personal issue between Q and B in which the spouses’ C and D had no right to interfere. It did
not matter who as between them filed the complaint because the private respondents were liable
to either of the two as a solidary creditor for the full amount of the debt. Full satisfaction of a
judgment obtained against them by Q would discharge their obligation to B, and vice versa;
hence, it was not necessary for both Q and B to file the complaint. Inclusion of B as a co-
plaintiff, when Q was competent to sue by himself alone, would be a useless formality. Although
he signed the original Construction Agreement, B need not be included as a co-plaintiff in the
complaint filed by the petitioner against the private respondents. Q as solidary creditor can by
himself alone enforce payment of the construction costs by the private respondents and as a
solidary debtor may by himself alone be held liable for any possible breach of contract that may
be proved by the private respondents.

II.
YES. The deduction of the amount from the deposit savings account of Q as a form of
compensation allowed by law is correct. Under Article 1279 of the New Civil Code, in order that
a compensation may be proper it is necessary that each one of the obligors be bound principally,
and that he be at the same time a principal creditor of the other, that both debts consist in a sum
of money, or if the things due are consumable, they be of the same kind, and also of the same
quality, that the two debts be due, that they be liquidated and demandable and that over neither
of them there be any retention or controversy, commenced by third persons and communicated in
due time to the debtor. In the case at bar, all the requisites of compensation are present, thus both
parties are not only mutually creditors and debtors in their own right but also principally bound
as creditors and debtors. Thus, when all the requisites are present, compensation takes effect by
operation of law, and extinguishes both debts to the concurrent amount even though the creditors

OBLIGATIONS AND CONTRACTS 1

and debtors are not aware of the compensation (Art. 1290). Moreover, in the case of Gullas vs.
Phil. National Bank, the Supreme Court held that as a general rule, a bank has a right of set-off
of the deposits in its hands for the payment of any indebtedness to it on the part of the depositors.
Therefore, since Q is a depositor and at the same time a debtor in B Bank, B Bank has the right
to set-off his deposits as a payment for his indebtedness whether or not the debtor is not aware of
it.

III.

YES. AB Construction is no longer liable on the nonfulfillment of the obligation to CD

industries since it was already extinguished by novation. Under the provision of Article 1295 of
the New Civil Code, the insolvency of the new debtor, who has been proposed by the original
debtor and accepted by the creditor, shall not revive the action of the latter against the original
obligor; except when said insolvency was already existing and of public knowledge, or known to
the debtor, when he delegated his debt. Thus, in the case at bar, AB Construction delegated to
Mr. GH its debt to CD Industries, which makes Mr. GH as the new debtor and the payment made
by the new debtor was accepted by the creditor. Moreover, during the delegation of the new
debtor the exemptions provided in the provision of Art. 1295 are not present. With this, the
contention of AB Construction that its obligation to CD industries were already extinguished is
correct.

IV.

YES. The telephone company` s contention is correct. B should be held liable of the
unpaid telephone bills since B is the one who has the obligation to the Telephone Company.
Wherein, A is only a tenant of B and A has an obligation to B not to the Telephone Company. A
is a guarantor of B for the reason that it was part of the lease contract between him and B to pay
the telephone service. Hence, the guaranty is extinguished but the principal obligation still
subsists based on Art. 1276 of the New Civil Code. A cannot be subrogated over B in the
telephone service agreement for such was not part of the stipulated terms in B`s service contract
with the telephone company. The contract between A and B is different between the contract of
B and the telephone company. Therefore, B must pay the unpaid bills to the Telephone Company
whether or not A paid him.

OBLIGATIONS AND CONTRACTS 2