OBLIGATIONS

MODULE 1. A. General Provisions

1. Definition (Article 1156, Civil Code)

The term obligation is derived from the Latin word “obligatio” which means a “tying” or
“binding.”
(1) It is a tie of law or a juridical bond by virtue of which one is bound in favor of
another to render something — and this may consist in giving a thing, doing a certain
act, or not doing a certain act.
(2) Manresa defines the term as “a legal relation established between one party and
another, whereby the latter is bound to the fulfillment of a prestation which the
former may demand of him.” (8 Manresa 13.)
(3) Article 1156 gives the Civil Code definition of obligation, in its passive aspect. Our
law merely stresses the duty of the debtor or obligor (he who has the duty of giving,
doing, or not doing) when it speaks of obligation as a juridical necessity.

2. Elements

An obligation as defined in Article 1156 is constituted upon the concurrence of the four
(4) essential elements thereof, namely:

a. Active Subject

An active subject (called creditor or obligee) or the person who is entitled to demand
the fulfillment of the obligation; he who has a right;

b. Passive Subject

A passive subject (called debtor or obligor) or the person who is bound to the
fulfillment of the obligation; he who has a duty;

c. Object or Prestation

Object or prestation (subject matter of the obligation) or the con- duct required to be
observed by the debtor. It may consist in giving, doing, or not doing. (see Art. 1232.)
Without the prestation, there is nothing to perform. In bilateral obligations (see Art.
1191.), the parties are reciprocally debtors and creditors; and

d. Efficient Cause or Juridical Tie

 A juridical or legal tie (also called efficient cause) or that which binds or connects the
parties to the obligation. The tie in an obligation can easily be determined by
knowing the source of the obligation. (Art. 1157.)

3. Natural Obligations

a. Definition (Art. 1423, CC)

ART. 1423. Obligations are civil or natural. Civil obligations give a right of action to
compel their performance. Natural ob- ligations, not being based on positive law but
on equity and natural law, do not grant a right of action to enforce their per-
formance, but after voluntary fulfillment by the obligor, they au- thorize the retention
of what has been delivered or rendered by reason thereof. Some natural obligations
are set forth in the following articles.

b. Examples (Articles 1424 to 1430)

Note that Article 1423 says “Some natural obligations, x x x.” This indicates that the
enumeration in the Code is not exclusive. Thus, if the borrower pays interest agreed
upon orally, the provisions on natural obligations apply. (see Art. 1960.) Under the
law, “no interest shall be due unless it has been expressly stipulated in writing.” (Art.
1956; see Art. 1175.)

ART. 1424. When a right to sue upon a civil obligation has lapsed by extinctive
prescription, the obligor who voluntarily performs the contract cannot recover
what he has delivered or the value of the service he has rendered.

Performance after civil obligation has prescribed.

By prescription (acquisitive), one acquires ownership and other real rights through the lapse
of time in the manner and under the conditions laid down by law. In the same way, rights
and actions are lost by prescription (extinctive). (Art. 1106; see Art. 1218.)

EXAMPLE:

D owes C the sum of P5,000.00 under a written contract. After 10 years, the debt of
D prescribes for failure of C to file the necessary action for the recovery of the same.
(Art. 1144[1].)

If D, knowing of the prescription, voluntarily pays C, he cannot recover anymore

what he has paid. He has the moral duty to pay his debt.

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 because the
action thereon has pre- scribed, but the debtor later voluntarily reimburses the
third person, the obligor cannot recover what he has paid.

Reimbursement of third person for debt that has prescribed.

If a third person pays the prescribed debt of the debtor without his knowledge or against his
will, the latter is not legally bound to pay him. (see Art. 1236, par. 2.) But the debtor
cannot recover what he has paid, in case he voluntarily reimburses the third person.

EXAMPLE:

In the above example, if T pays C after the debt has prescribed without the
knowledge or consent of D, but D nevertheless reimburses T, D cannot recover what
he has paid.

ART. 1426. When a minor between eighteen and twenty- one years of age who
has entered into a contract without the consent of the parent or guardian, after the
annulment of the contract voluntarily returns the whole thing or price received,
notwithstanding the fact that he has not been benefited thereby, there is no right
to demand the thing or price thus returned.

Restitution by minor after annulment of contract.

When a contract is annulled, a minor is not obliged to make any restitution except insofar
as he has been benefited by the thing or price received by him. (Art. 1399.) However, should
he voluntarily return the thing or price received although he has not been benefited thereby,
he cannot recover what he has returned.

Take note that this article applies only if the minor who has entered into a contract without
the consent of his parent or guardian is between 18 and 21 years of age.1 The law considers
that at such age, a minor has already a conscious idea of what is morally just or unjust.

EXAMPLE:

S, a minor 18 years old, sold for P100,000.00 his car to B without securing the
consent of his parents. He lost P20,000.00 to a pickpocket although he was able to
deposit the P80,000.00 in a bank.

If the contract is annulled, S is obliged to return only P80,000.00. However, he has

the natural obligation to return P100,000.00. If he volun- tarily returns the whole
amount, there is no right to demand the same.

ART. 1427. When a minor between eighteen and twenty-one years of age, who
has entered into a contract without the con- sent of the parent or guardian,
voluntarily pays a sum of money or delivers a fungible thing in fulfillment of the
obligation, there shall be no right to recover the same from the obligee who has
spent or consumed it in good faith. (1160a)

Delivery by minor of money or fungible thing in fulfillment of obligation.

By the decree of annulment, the parties, as a general rule, are obliged to make mutual
restitution. (Art. 1398.) However, the obligee

who has spent or consumed in good faith the money or consumable2 thing voluntarily paid
or delivered by the minor, is not bound to make restitution.

Although Article 1427 speaks of “fungible thing,” nevertheless it may also apply to things
that are non-consumable when they have been lost without fault of the obligee or in case of
alienation by him to a third person who did not act in bad faith. The obligee shall be liable
for damages if he is guilty of fault or bad faith at the time of spending or consumption.

Note again that this article is applicable only if the minor is between 18 and 21 years of
age.

ART. 1428. When, after an action to enforce a civil obliga- tion has failed, the
defendant voluntarily performs the obliga- tion, he cannot demand the return of
what he has delivered or the payment of the value of the service he has rendered.

Performance after action to enforce civil obligation has failed.

This article contemplates a situation where a debtor, who has failed to pay his obligation, is
sued by the creditor and instead of losing the case, he has won it. If, notwithstanding this
fact, the debtor voluntarily performs his obligation, he cannot demand the return of what he
has delivered or the payment of the value of the service he has rendered. He must be deemed
to have considered it his moral duty to fulfill his obligation.

ART. 1429. When a testate or intestate heir voluntarily pays a debt of the
decedent exceeding the value of the property which he received by will or by the
law of intestacy from the estate of the deceased, the payment is valid and cannot
be rescinded by the payer.

Payment by heir of debt exceeding value of property inherited.

The heir is not personally liable beyond the value of the property he received from the
decedent. (Art. 1311, par. 1.) But if he voluntarily pays the difference, the payment is valid
and cannot be rescinded by him. An heir has a moral duty to perform or pay obligations
legally contracted by his dead relatives.
 ART. 1430. When a will is declared void because it has not been executed in
accordance with the formalities required by law, but one of the intestate heirs,
after the settlement of the debts of the deceased, pays a legacy in compliance with
a clause in the defective will, the payment is effective and irrevo- cable.

Payment of legacy after will has been declared void.

Legacy is the act of disposition by the testator in separating from the inheritance for definite
purposes, things, rights, or a definite portion of his property. It may be viewed also as that
same portion, or those things or special rights, which the testator separates from his
inheritance for a definite purpose. (6 Manresa 654.) The purpose of a legacy is to reward
friends, servants and others for services they have rendered, to give alms, etc.

If a will is disallowed for non-compliance with the formalities prescribed by law (see Arts.
805, 839[1].), the legacy made in the will would also be void. The effect is the same as if the
deceased had died without a will, and, therefore, the intestate heir is not legally required to
pay the legacy. If, however, he still pays the legacy, the payment is effective and irrevocable,
subject to the rights of the creditors of the deceased. Since, it was the intention of the testator
to give the legacy, it is the moral duty of the heir to carry it out.

c. Difference between Natural and Civil Obligation (Art. 1423)

Article 1423 gives the distinctions between civil obligations and natural obligations,
viz.:

(1) Civil obligations arise from law, contracts, quasi-contracts, delicts, and quasi-delicts
(Art. 1157.), while natural obligations are based not on positive law but on equity
and natural law; and
(2) Civil obligations give a right of action in courts of justice to compel their fulfillment
or performance (Art. 1156.), while natural obligations do not grant such right of
action to enforce their perfor- mance.

d. Distinguished from moral obligations

A purely moral obligation cannot constitute a sufficient cause to support an onerous

contract (Fischer vs. Robb, 69 Phil. 101 [1939].) but a natural obligation is a
sufficient cause to sustain such contract. (see Villareal vs. Estrada, 71 Phil. 140
[1940].)

4. Sources of Obligations (Art. 1157)

An obligation imposed on a person and the corresponding right granted to another must be
rooted in at least any of the following sources:

a. Law (Art. 1158)

When they are imposed by the law itself, e.g., obligation to pay taxes; obligation to
support one’s family (see Art. 195, Family Code.);

b. Contracts (Art. 1159, 1305)

When they arise from the stipulation of the parties (Art. 1306.), e.g., the obligation to
repay a loan by virtue of an agreement;

c. Quasi-contracts (Art. 1160, 2142)

When they arise from lawful, voluntary and unilateral acts and which are
enforceable to the end that no one shall be unjustly enriched or benefited at the
expense of another (Art. 2142.), e.g., the obligation to return money paid by mistake
or which is not due. (Art. 2154.) In a sense, these obligations may be considered as
arising from law;

• Kinds:

i. Negotiorum gestio (Art. 2144)

Negotiorum gestio is the voluntary management of the property or affairs of another

without the knowledge or consent of the latter. (Art. 2144.) Thus, if through the
efforts of X, a neighbor, the house of Y was saved from being burned, Y has the
obligation to reimburse X for the expenses X incurred although Y did not actually
give his consent to the act of X in saving his house on the principle of quasi-contract.

This juridical relation does not arise in either of these instances:

(a) When the property or business is not neglected or aban- doned, in which case
the provisions of the Civil Code regarding unauthorized contracts (Arts. 1317,
1403[1], 1404.) shall govern; or
(b) If, in fact, the manager has been tacitly authorized by the owner, in which
case the rules on agency shall govern. (Art. 2144.)
ii. Solutio indebiti (Art. 2154)

Solutio indebiti is the juridical relation which is created when something is received
when there is no right to demand it and it was unduly delivered through mistake.
(Art. 2154.) The obligation to pay money mistakenly paid arises from the moment
said payment was made, and not from the time the payee admits the obligation to
reimburse. (Comm. of Internal Revenue vs. Esso Standard Eastern, Inc., 172 SCRA
 364 [1989].) Under the principle, the government has to restore (credit or refund) to
the taxpayer the amounts representing erroneous payments of taxes. (Phil.
Geothermal, Inc. vs. Comm. of Internal Revenue, 465 SCRA 308 [2005].) The quasi-
contract of solutio indebiti is based on the ancient principle that no one shall enrich
himself unjustly at the expense of another.

Solutio indebiti applies where:

(a) payment is made when there exists no binding relation between the payor, who
has no duty to pay, and the person who received the payment; and
(b) the payment is made through mistake11 and not through liberality or some other
cause. (Power Commercial and Industrial Corp. vs. Court of Appeals, 274 SCRA
597 [1997]; National Commercial Bank of Saudi Arabia vs. Court of Appeals,
396 SCRA 541 [2003]; Moreño-Lenifer vs. Wolf, 144 SCRA 584 [2004]; Bank of
the Phil. Islands vs. Sarmiento, 484 SCRA 261 [2006].)
iii. Others (Art. 2164 to 2175)

Other examples of quasi-contracts are provided in Article 2164 to Article 2175 of the
Civil Code.12

The cases that have been classified as quasi-contracts are of infinite variety, and
when for some reason recovery cannot be had on a true contract, recovery may be
allowed on the basis of a quasi-contract in view of the peculiar circumstances or
factual environment to the end that a recipient of benefits or favors resulting from
lawful, voluntary and unilateral acts of another may not be unjustly enriched at the
expense of the latter.13 (Phil. National Bank vs. Court of Appeals, 217 SCRA 347
[1993].)

d. Delicts or Crime (Art. 1161)

When they arise from civil liability which is the consequence of a criminal offense
(Art. 1161.), e.g., the obligation of a thief to return the car stolen by him; the duty of
a killer to indemnify the heirs of his victim; and

e. Quasi-delicts (Art. 1162, 2176)

when they arise from damage caused to another through an act or omission, there
being fault or negligence, but no contractual relation exists between the parties (Art.
2176.), e.g., the obligation of the head of a family that lives in a building or a part
thereof to answer for damages caused by things thrown or falling from the same (Art.
2193.); the obligation of the possessor of an animal to pay for the damage which it
may have caused. (Art. 2183.)
• Distinction between crimes and quasi-delicts

The following are the distinctions:

(1) In crime or delict, there is criminal or malicious intent or crimi- nal

negligence, while in quasi-delict, there is only negligence;
(2) Crime affects public interest, while quasi-delict concerns private interest;
(3) In crime, there are generally two liabilities: criminal and civil,23 while in
quasi-delict, there is only civil liability;
(4) In crime or delict, the purpose is punishment, while in quasi- delict,
indemnification24 of the offended party;
(5) Criminal liability can not be compromised or settled by the parties
themselves, while the liability for quasi-delict can be compromised as any
other civil liability;
(6) In crime, the guilt of the accused must be proved beyond rea- sonable doubt,
while in quasi-delict, the fault or negligence of the de- fendant need only be
proved by preponderance of evidence; and
(7) In crime, the liability of the person responsible for the author of the negligent
act or omission is subsidiary, while in quasi-delict, it is direct and primary.

• Civil liability arising from crime (Art. 1161; Rule 111)

This article deals with civil liability arising from crimes or delicts.

(1) The commission of an offense has a two-pronged effect: one, on the public as
it breaches the social order and the other, upon the private victim as it causes
personal sufferings or injury, each of which is addressed, respectively, by the
imposition of heavier punishment on the accused and by an award of
additional damages to the victim. (People vs. Catubig, 363 SCRA 621 [2001].)
(2) Oftentimes, the commission of a crime causes not only moral evil but also
material damage. From this principle, the rule has been established that every
person criminally liable for a felony17 is also civilly liable. (Art. 100, Revised
Penal Code; see Albert, the Revised Penal Code Annotated, p. 276.) In
crimes, however, which cause no material damage (like contempt, insults to
person in authority, gambling, violations of traffic regulations, etc.), there is
no civil liability to be enforced. But a person not criminally responsible may
still be liable civilly. (Art. 29; Rules of Court, Rule 111, Sec. 2[c].)