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Law on Obligation and Contracts (Ateneo de Davao University)
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OBLIGATIONS &
CONTRACTS

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OBLIGATIONS & CONTRACTS (Transcription)

From the lectures of Atty. Bruneson Alabastro
NOVEMBER 13, 2018 Another one is Intellectual creation—by intellectual creation or the
*** exercise of one's will. One can claim ownership to the creation of certain
books, literaries, artistic works or scientific inventions.
PRESCRIPTION
Another mode of acquiring ownership is by law. So, if the law itself
ART. 1106. By prescription, one acquires ownership and other real provides that you can originally acquire ownership over a thing or right,
rights through the lapse of time in the manner and under the then the law is the source of that right. Or the law is the mode by which
conditions laid down by law. you acquire ownership. Example is acquisitive prescription.
In the same way, rights and conditions are lost by prescription. We also have derivative modes of acquiring ownership. This means that
(1930a) there is a mere transfer of ownership from one person to another.
Example is by way of sale: when a person sells property in favor of the
husband or the wife, it is by way of onerous title.
Prescription partakes the form of: either one or two ways, or two
concepts. Prescription is either (1) a mode of acquiring ownership over An example of a gratuitous title is donation. So, when someone donates
things or rights, and prescription can also be (2) a mode of relinquishing in your favor, that is a derivative mode of acquiring ownership.
or renouncing them such as when you are barred by law to enforce a
certain right. When we talk about acquisitive prescription, it partakes the form of two
kinds. It could either be ordinary or extraordinary acquisitive prescription.
The first concept is acquisitive prescription. The second is extinctive
prescription. Ordinary prescription is defined in the second paragraph of Art. 1117:
Acquisitive prescription – is that type of prescription by the virtue of Art. 1117. Acquisitive prescription of dominion and other real
which one acquires ownership and other real rights from the lapse of rights may be ordinary or extraordinary.
time, and in the manner and other conditions provided for or laid down
by the law. Ordinary acquisitive prescription requires possession of
things in good faith and with just title for the time fixed by law.
In relation to Art. 1117, we have two types of acquisitive prescription. By
the lapse of time, one may acquire certain rights through: So that is briefly what we call ordinary acquisitive prescription. It is a
mode of acquiring ownership by way of possession of things or rights in
2 TYPES OF ACQUISITIVE PRESCRIPTION: good faith and with just title, according to the time fixed by law.
1. Ordinary Acquisitive Prescription Extraordinary acquisitive prescription is still a mode of acquiring

2. Extraordinary Acquisitive Prescription ownership by way of possession of things, but it is by a possessor who
is in bad faith or without just title, according to the time fixed by law.
Extinctive Prescription – by the lapse of time, a person shall be barred
from claiming rights he has already acquired. In another sense, prescription partakes the form of extinguishment of
rights which have already been acquired. This is the concept of extinctive
Acquisitive and Extinctive Prescription, Distinguished. prescription.
According to Tolentino, acquisitive prescription is based on an assertion
by a usurper of an adverse right for such a long period of time. It is Extinctive prescription is based on a probability born of experience that
uncontested by the true owner of the right in order to give rise to the the alleged right has accrued. Meaning, one has already acquired it in
presumption that the latter has given up such rights in favor of the former. the distant past and it never existed, or has been extinguished, or if it
It is also called as prescription of ownership, or other real rights and existed, the inconvenience caused by the lapse of time should be borne
adverse possession, or uso captio. Acquisitive prescription is an original by the party negligent in the assertion of such right. (Tolentino)
mode of acquiring ownership. Under the law on property, there are
different modes of acquiring ownership. We have what we call original Extinctive prescription is also referred to as:
modes of acquiring ownership and we also have derivative of acquiring 1. Liberatory prescription
modes of ownership. 2. Prescription of actions
3. Statute of limitations
What do we mean by original modes of acquiring ownership? It is the
independent act of acquiring ownership which does not depend on any Example: In an action to declare a void marriage as void, the action is
pre-existing right, preceding title, or right of another person. Your title or imprescriptible, except those marriages under Article 36 (prescriptive
ownership over a certain thing or right is not based on the title or right of period is 10 years).
another person, so it is independent and original. That is why it is called
an original mode of acquiring ownership. In actions for annulment of marriage (Art. 46, in rel. to Art. 47), the action
must be instituted according to the periods laid down in Art. 47.
What do we mean by derivative modes of acquiring ownership?
Somebody else was the owner of the thing or right before the current When the law says that these periods will have the effect that the action
owner or possessor. This means that in derivative modes of acquiring will prescribe, that is an example of extinctive prescription. You currently
ownership, it partakes the form of a mere transfer of ownership from one acquire the right, but because of lapse of time and you negligently do not
person who is already an owner to that of another. You derive your file an action for that right, you will lose the right you have already
ownership from another person. acquired.
Acquisitive prescription is an original mode of acquiring ownership. It is LACHES

the law itself that provides that you can originally acquire ownership over
things or rights.
By the lapse of time, a person can be barred by laches or estoppel by
What are other original modes of acquiring ownership? We have laches.
occupation, under Art. 117 of the Family Code, which involves those
acquired by occupation by way of fishing or hunting. So, before you fish Laches is defined as the failure or neglect for an unreasonable and
or hunt animals, no one owns them until such time you've occupied or unexplained length of time to do that which—by exercising due
you have occupation over them. This is an original mode of acquiring diligence—could or should have been done earlier.
ownership, because prior to your fishing and hunting no one owns them. • It is negligence or omission to assert a right within a reasonable
time, warranting a presumption that the party entitled to assert
it has either abandoned it or declined to assert it.
Transcribed by: Alcoran | Aranjuez | Ballos | Clarabal | Cullo | Delfin | Espinosa | Gulanes | Layog | Paracale | Somcio Page 1
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4 ELEMENTS OF LACHES: (1) Minors
1. Conduct on the part of the defendant, or of one under whom he Effects of Parental Authority.
claims, giving rise to the situation of which complaint is made, and Under Art. 225 of the FC, parents are jointly the legal guardians over
for which the complaint seeks a remedy; their minor children, and to the property that they own. Under Art. 226,
it is provided that the children are the owners of the property.
2. Delay in asserting the complainant's rights, the complainant having
had knowledge or notice of the defendant's conduct, and having But what is the role of the parents during the minority of the children?
been afforded an opportunity to institute a suit; Even if ownership is vested to the minor children, parents are considered
as the legal guardians or the administrators over the property of their
3. Lack of knowledge or notice on the part of the defendant that the minor child. So, even if you are a minor, under the law you can acquire
complainant would assert the right on which he bases his suit; and ownership over properties, and one of the modes that one can acquire
a property is by way of prescription.
4. Injury or prejudice to the defendant in the event relief is accorded to
the complainant, or the suit is not held to be barred. (2) Under incapacitated persons
Difference Between Prescription and Laches. Question: Can persons living together or cohabiting without the benefit
of marriage donate to each other properties that they owned?
BUENAVENTURA V. CA AND MANOTOK REALTY, INC. No, under Art. 87. This prohibition is likewise imposed between
G.R. No. 50837 December 28, 1992 husbands and wives.
Additional case
RULING: Example: A paramour will donate in favor of the married husband she is
Prescription Laches cohabiting with, is that donation allowed?
Concerned with the fact of delay Concerned with the effect of No, because during the period of their cohabitation, they are disallowed
delay from donating to each other.
A matter of time Principally a question of
inequity of permitting a claim Under OBLICON, is there a way for the husband to acquire ownership
to be enforced, this inequity over the thing donated by the paramour? Take note, donation is only one
being founded on the same mode of acquiring ownership, and that is a derivative mode. There is
change in the condition of another way for the husband to acquire ownership, and that is by way of
the property or the relation of prescription.
the parties
Statutory – product of positive law Not statutory Since the donation is void, the husband, the done, or the one who will
Based on fixed time provided for by Applies in equity; not based receive that property cannot claim any just title over that property.
law on fixed time
So, how can the husband acquire ownership over the thing donated if
What comes first – prescriptive period or laches? the husband, from the very beginning does not have a just title? The
Extinctive prescription means that by a certain period of time, a person husband can acquire ownership over the property donated by way of
may be barred from claiming certain rights. extraordinary acquisitive prescription.
Prescriptive period is a matter of time fixed by law. But, laches is also It does not mean that, just because the donation is void that under the
related to a period of time that must lapse, which is based on equity. law, there will be no way for persons who are incapacitated to receive
those things or from acquiring the same.
Can a person be barred by laches first before reaching the period of
extinctive prescription? ART. 1108 (1). Prescription, both acquisitive and extinctive, runs
against:
PHILIPPINE CARPET MANUFACTURING CORPORATION VS.
TAGYAMON 1) Minors and other incapacitated persons who have parents,
G.R. No. 191475 December 11, 2013 guardians or other legal representatives;
Additional case 2) Absentees who have administrators, either appointed by them
before their disappearance, or appointed by the courts;
RULING: Where the claim was filed within the statutory prescriptive 3) Persons living abroad, who have managers or administrators;
period, recovery cannot be barred by laches. Courts should never 4) Juridical persons, except the State and its subdivisions.
apply the doctrine of laches earlier than the expiration of time
limited for the commencement of actions at law. Laches will always
be subsequent to extinctive prescription. Take note in Art. 1107, we talk about prescription in the sense that it
shall favor certain persons. 1107 is the rule where prescription will favor
ART. 1107. Persons who are capable of acquiring property or rights these persons.
by the other legal modes may acquire the same by means of
Question: But can prescription also run against them?
prescription.
The answer is YES. It is clear that the rule that we apply is Art.1108.
Minors and other incapacitated persons may acquire property or
So that means under Art. 1108, this acquisitive prescription is the type
rights by prescription, either personally or through their parents,
of prescription which is a mode of acquiring ownership exercised by
guardians or legal representatives. (1931a)
some other persons, or by 3rd persons against these persons
enumerated under Art. 1108. These persons enumerated under Art.
1108 may lose property or rights by way of prescription, because
GENERAL RULE: Juridical capacity and capacity to act are necessary prescription runs against them.
for a person to acquire property or rights by way of prescription.
Example: A certain parcel of land (1 ha.) is located in Davao City. It is
EXCEPTION: Second paragraph of Art. 1107 – even if a person does unregistered, and a person who is 17 years of age claimed the property.
not have capacity to act, he can still acquire property or rights by way of If this person will possess this property in the manner provided for by law
prescription. and according to the time fixed by law, this person—even if he is a
minor—can acquire this property by way of prescription.
Therefore, the minimum requirement provided for by law is that one
must have juridical capacity.
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But, for example, there is a property that is acquired already by A (minor) the fruits of the properties left by the estate of the husband. Another
who is not occupying the same, and there is B (minor) who subsequently instance is: married women alone cannot acquire property by way of
acquired the property. So, if B will go over such property, possess it in acquisitive prescription; they can only do so if they acquire it through
the manner provided for by law and according to the time fixed by law, prescription—through her husband. Thus, married women were very
A, who is away, may lose his property and prescription may run against dependent on their husbands under the Spanish Civil Code.
him. Even if they are minors, prescription can run against them.
ART. 1111. Prescription obtained by a co-proprietor or a co-owner
Take note, in this case prescription may run against these persons
shall benefit the others. (1933)
(minors, absentees, persons living abroad) if they left certain persons
(parents, guardians, legal representatives, etc.)
Co-proprietors are partners in a business or in a partnership.
Does prescription run against minors who don’t have parents, guardians, Co-ownership – when two or more persons come into common
or legal representatives? It is clear in Article 1108 that prescription will ownership over an undivided thing.
run against minors, or other incapacitated persons who have parents,
guardians, or legal representatives. Prescription obtained by co-proprietors in a partnership or co-owners in
Yes, prescription still runs against these persons. It is because Sections a co-ownership is allowed for the benefit of others.
42, 45 and 46 of Act no. 190 which is the Code of Civil Procedure. Under Such Article only applies to in cases that it pertains to properties owned
the said code, prescription can still run against minors, insane persons, in common by the co-proprietors or co-owners. Acquisitive prescription
and absentees who do not have parents, guardians, or legal will not benefit other co-proprietors or co-owners, if the property pertains
representatives. However, the law gives them special benefits. These only to the capacity of that of the person personally.
persons may still bring an action within a number of years after their
disability has been removed. So, from the time that their disability has Example:
been removed, they are given by the law a certain period of time to
protect the rights that they have previously lost. The periods are: 3 years There is a parcel of land, beside a river, owned by A, B, and C in equal
in the case of land, and 2 years in other civil actions. shares. Common ownership is observed over an undivided property.
In the concept of Alluvium, or the gradual and imperceptible deposit
What is the right of action of a minor or other incapacitated person, who of sediment by natural action of a current of fresh water (not sea
has parents, guardians, or other legal representative, that has been water), the original identity of the deposit is lost. Where it is by sea
acquired by another person through acquisitive prescription? water, it belongs to the State, and certain land will accumulate. And
The 2nd paragraph of Art. 1108 gives these persons a right to claim by such, a new portion of land exists and is owned by no one. And,
damages against their legal representatives. upon such, B occupies the new parcel of land.
ART. 1108 (2). Persons who are disqualified from administering If B acquires it by way of acquisitive prescription, pursuant to Article
their property have a right to claim damages from their legal 1111, the new parcel of land will also benefit A and C.
representatives whose negligence has been the cause of
prescription. (1932a) However, if through Alluvium, a new parcel of land arises adjoining
the land of B alone. Then, such new parcel of land, if acquired through
prescription, will only for the benefit of B.
Who are the persons where prescription does not run against? Meaning,
they cannot acquire property through prescription, and their rights also ART. 1112. Persons with capacity to alienate property may renounce
cannot be extinguished by way of prescription. prescription already obtained, but not the right to prescribe in the
future.
ART. 1109. Prescription does not run between husband and wife,
even though there be a separation of property agreed upon in the Prescription is deemed to have been tacitly renounced when the
marriage settlements or by judicial decree. renunciation results from acts which imply the abandonment of the
right acquired. (1935)
Neither does prescription run between parents and children, during
the minority or insanity of the latter, and between guardian and ward Article 1112 partakes the form a renunciation or a waiver. In the case of
during the continuance of the guardianship.(n) Guy vs. CA, in relation to Article 6 of the CC, a waiver pertains to the
intentional relinquishment of a known or existing right. This renunciation
is personal on the part of the person who owns that right. Hence, it
According to Tolentino, the reason for Art. 1109 is that: it is by way of the cannot be waived by some other persons.
influence or affection, which may often prevent one from bringing an
action against the other. Thus, prescription does not run between the FORMS OF RENUNCIATION:
persons mentioned in Art. 1109.
1. Express - when it is manifest, or clear from the intention, or the acts
According to Pineda, the reason for Art. 1109 is because of the fiduciary of the parties that they intended an abandonment of the benefits of
relationship between these parties. A fiduciary relationship is one prescription.
characterized by utmost trust and confidence. Thus, because they trust
each other, prescription should not run between them. If prescription 2. Implied/Tacit- when it is not manifest or it is unclear.
runs between them, it will disrupt the harmony between them, or there
will be a breach in the trust and confidence that they observe. (Ex. A Under Article 1112, we have a legal presumption of a tacit renunciation
property donated to a newborn child cannot be acquired by his parents of the benefits of prescription. Renunciation results from acts which imply
after the lapse of 10 years.) the abandonment of the right acquired.
Prescription is a mode to acquire ownership, but such cannot be

ART. 1110. Prescription, acquisitive and extinctive, runs in favor
compelled, so one has the right to renounce such right in favor of
of, or against a married woman. (n) another. A waiver is valid as long as it is not contrary to law, morals,
public policy, public order, and customs, and as long as it will not
The reason behind this article is because in the Spanish Civil Code, prejudice third persons.
personalities of wives, with respect to their husbands, were very limited.
One example is that when the husband dies, his estate will be inherited Thus, pursuant to Article 1112, such renunciation must not prejudice the
only by the children. The wife did not have any right of ownership under right of third persons. This is provided for under Article 1114.
the said code, but only have the usufruct – they can only use and enjoy
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prejudice, which is provided in other laws. So, if it is specifically provided

ART. 1114. Creditors and all other persons interested in making the
for in a law, that law—with respect to that issue—will govern.
prescription effective may avail themselves thereof notwithstanding
the express or tacit renunciation by the debtor or proprietor. (1937)
Example:
Those persons who feel that their rights are prejudiced in relation to the Marriages. If you want to institute an action for marriage as void, it is
renunciation of another, they may exercise their rights as creditors to the imprescriptible, except for those marriages under Articles 36 of Family
extent of interest or credit. Code; Art. 39; Annulment for marriages under art. 47; legal separation
Example: under article 57, etc.
B occupies a parcel of land and is insolvent. Now, X, the creditor, Action for claims of legitimacy; Action to claim legitimate filiation; Action
demands that B should pay his obligations. However, B is unable to to impugn legitimacy on the part of the husband, and extraordinary cases
pay and that he only has his land as his only property. on the part of the heirs.
Under the law, one can acquire in good faith through acquisitive So, if these issues are provided for in a special law, take note of its
prescription a parcel of land after a period of 10 years. prescriptive periods. The provision of the general law or NCC will not
become applicable. The Civil Code will only be suppletory only in the
In this case, B has been occupying the said land for a period of 8 absence of the special law, such as the Family Code for those issues
years. Hence, B has 2 more years before he can own such land. mentioned for marriages.
Suddenly, B renounces his right on the benefit of prescription over the
parcel of land in favor of A. ART. 1116. Prescription already running before the effectivity of this
Code shall be governed by laws previously in force; but if since the
Can X pursue the claim against B by going after the right waived in time this Code took effect the entire period herein required for
favor of A? prescription should elapse, the present Code shall be applicable,
even though by the former laws a longer period might be required.
Yes. This is because the waiver or renunciation of B in favor of A will (1939)
prejudice the right of X. That is why the creditor also has the right to
pursue the claim of B by going to the extent of what has been waived
in favor of A. Art. 1116 talks about Rules on Transitory Prescriptions:
Hence, if the property is worth 10M and the debt is 5M, X cannot claim Rule 1: If the period for prescription began and ended under the Spanish
the entirety of the property, as he is only entitled to the extent of his Civil Code or old law, then the old law shall govern.
interest therein.
Rule 2: If the period for prescription began under the New Civil Code
When you talk about renunciation or a waiver, this pertains to jus such that it will also end during the NCC, then the NCC provisions will
disponendi or to dispose certain properties or rights. That means you govern.
must have the capacity to alienate these properties.
The Civil Code took effect on August 30, 1950, the rules are:
Second, you must have already that right with you. Meaning, it must be
a real and existing right. It must not be a mere expectancy or 1. If lapsed before effectivity, the old rule applies.
contingency. It must be a known or legal right or one which a person
already has acquired. 2. If running from old law until the effectivity of the new law, but the
NCC provides a different period for the same situation, the NCC shall
That is why, as stated in Art. 1112, this pertains to prescription already prevail; provided that, such period counted from the effectivity of the
obtained. So has B already obtained prescription? No, because only 8 NCC has already lapsed even though it may not have lapsed yet
years elapsed. That may be continued by A. But, A cannot acquire those under the old law.
rights by prescription in the future. Why? Because the right to prescribe
in the future is a mere expectancy or contingency. Therefore, since it is 3. If the prescriptive period under the old law is still running under
not an existing right of B, B cannot waive that in favor of A, because it is effectivity of the NCC, and if the remaining balance of such period is
a right that remains to be received. shorter than provided under the NCC, the old prescriptive period
shall apply.
Another example, in debts.
Example:
A is the debtor. B is the creditor. The debt obligation is by way of
promissory note or a document. Under the law, you must file an action GENERAL RULE: If prescriptive period of a contract under the Spanish
within a period of 10 years. Otherwise, if you do not institute an action Civil Code is 5 years but in the NCC it is already 10 years; which
to claim this debt, your action will have already prescribed through prescriptive period will apply? It is the Spanish Civil Code that shall
extinctive prescription. apply, if it began under the old law and ended under the new law.
Suppose, after the lapse of period for prescription, A still EXCEPTION: If the period of the new law or NCC provides for a shorter
acknowledged his debt and paid B. A, in acknowledging the debt in period, then the new law shall govern.
favor of B, that is what you call an implied renunciation. This illustrates
a waiver or renunciation of the right acquired by prescription. Why? Because laws shall not have retroactive effect except as it may be
beneficial to the one who has that right.
What if A voluntarily paid without acknowledging or recognizing the
existing right? There is no implied renunciation, but, in this case, there
PRESCRIPTION OF OWNERSHIP AND OTHER REAL RIGHTS
is a natural obligation. And that natural obligation will be discussed
later.
ART. 1117. Acquisitive prescription of dominion and other real rights
ART. 1115. The provisions of the present Title are understood to be may be ordinary or extraordinary.
without prejudice to what in this Code or in special laws is established
with respect to specific cases of prescription. (1938) Ordinary acquisitive prescription requires possession of things in
good faith and with just title for the time fixed by law. (1940a)
When we talk about the provision under the New Civil Code, take note
that the period of prescription in this case is not exclusive. It is not
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Acquisitive Prescription of Ownership or Real Rights.

ART. 1121. Possession is naturally interrupted when through any
cause it should cease for more than one year.
Regardless of either ordinary or extraordinary acquisitive prescription,
the common element is: it must be that person in a possession of a
The old possession is not revived if a new possession should be
thing or things for the period provided for by law.
exercised by the same adverse claimant. (1944a)
ACQUISITIVE PRESCRIPTION
1. Ordinary Acquisitive Prescription – It requires uninterrupted
possession for the required statutory period of 10 years in good ART. 1122. If the natural interruption is for only one year or less, the
faith with a just title. time elapsed shall be counted in favor the prescription. Possession is
interrupted for the purposes of prescription, naturally or civilly. (n)
Under Art. 1117, it requires: (1) possession, (2) it must be of things,
(3) that possession be in good faith, (4) possession must be with Natural Interruption - possession is interrupted by any cause. Any
just title, (5) possession must be for the time fixed by law. cause which would bring about discontinuity or interruption of one’s
holding of a thing or enjoyment of a right.
2. Extraordinary Acquisitive Prescription – Likewise requires an
uninterrupted possession for the statutory period of 30 years but Effect of Interruption: It will cease the running of the period of
without the need of just title and good faith on the part of the possession for purposes of prescription. It will cease by the time of the
possessor. occurrence of the natural interruption.
WHAT IS POSSESSION? • If the period of interruption is less than one year, that period will
Defined in Art. 523. Possession refers to the holding of a thing or be counted in favor of prescription.
enjoyment of a right.
So even if it is an intangible property or improprio property—one which ART. 1123. Civil interruption is produced by judicial summons to the
not physically or actually exist but only exists in contemplation of law— possessor. (1945a)
you can still possess it if you enjoy that right.
By the filing of a complaint, generally, a person is given 15 days (except
Character of Possession with respect to acquisitive prescription. otherwise provided by law) to give an Answer.
ART. 1118. Possession has to be in the concept of an owner, public, Judicial Summons - a document issued by the Court informing the
peaceful and uninterrupted. (1941) defendant that there is a complaint filed against him.
• Any cause other than judicial summons is considered natural
interruption.
Possession must be: (OCEAN)
Open, Continuous, Exclusive, Adverse, Notorious
ACQUISITIVE PRESCRIPTION
Art. 525. Two Concepts of Possession – The possession of
things or rights may be had in one of the two concepts: either ELEMENTS OF ACQUISITIVE PRESCRIPTION:
in the concept of owner, or in that of the holder of the thing or
right to keep or enjoy it, the ownership pertaining to another 1. Possession
person. 2. Things or rights or property in general
3. Possession of things or rights in good faith
Concept of an Owner - possessor is the owner itself or one who claims 4. Just title
to be such an owner. The person must do outward acts so that the public 5. Lapse of time (common to EAP-OAP)
will know that that person is actually the owner.
In order to reap the benefits of prescription or acquisitive prescription,
Concept of a Holder- recognizes that other person is exercising the time of possession must be uninterrupted. Meaning, it must be
ownership over the thing. CONTINOUS.
Ex. Boarding house – the person is merely holding the said house in the When it is interrupted?
concept of a holder by renting the place and paying dues to the owner.
By doing so, you acknowledge that somebody else is the owner of the TWO FORMS OF INTERRUPTION
house.
Natural Interruption Civil Interruption
Art. 1121 Art. 1123
ART. 1119. Possession through License or Tolerance It can be interrupted by any By the issuance or production of
Acts of possessory character executed in virtue of license or by mere cause. Meaning if it is not a proper judicial summon, the
tolerance of the owner shall not be available for the purposes of judicial summon issued by the possessor is considered to have
possession. (1942) courts, it can constitute natural been civilly interrupted.
interruption.
One’s possession is civilly
Concept of a Holder - it will not ripen to ownership by way of acquisitive
Example: interrupted upon the issuance of
prescription
PACHECO VS CA a proper judicial summon.
August 31, 1987
Possession through license or tolerance of the owner.
• License - positive act of the owner in favor of the holder of the thing.
• Possession by mere tolerance - passive acquiescence on the part CIRIACO PACHECO, ESTRELLA RAZO-REY and BENVENUTO
of the owner to the acts being performed by another which appear to ABITRIA, Petitioners, V. CA, DANIEL HERNANDEZ and
be contrary as that of the owner, but such person recognizes ANASTACIO RANESES, Respondents
ownership as that of the latter. Additional case
ART. 1120. Possession is interrupted for the purposes of prescription, FACTS: Emiliano Pacheco owned a parcel of unregistered land covered
naturally or civilly. (1943) by Tax Declaration No. 12490, later changed to Tax Declaration No.
3420 and then to Tax Declaration No. 6704, with an area of 4,698 square
meters.
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In 1939, Emiliano Pacheco sold to Rafael Pacheco some 1,170 square of the Civil Code. Consequently, when he mortgaged the land to the
meters of the said land, which portion was then covered by Tax PNB, he did so not as a mere possessor but as an owner by virtue of
Declaration No. 3431. prescription under Article 1134 of the Civil code. Article 1121 could no
longer apply to him because the ten-year prescriptive period had already
This portion was mortgaged by Rafael Pacheco to the Philippine been completed at the time.
National Bank, sold at public auction upon foreclosure of the mortgage
in 1959, and repurchased by Rafael Pacheco on April 20, 1960. It follows that when Rafael Pacheco sold the land to Ciriano Pacheco,
the latter acquired the rights of the former as owner of the property, and
On September 7, 1964, Rafael Pacheco sold the said land to Ciriaco not as a mere possessor thereof, and so did the other petitioners who
Pacheco, who thereafter sold a portion thereof to his co-petitioner, derived their title from Ciriaco Pacheco.
Estrella Razo-Rey.
Take note, Article 1124 provides for the instances where judicial
In a civil case entitled "Daniel Hernandez v. Emiliano Pacheco," a summons are deemed not to have been issued, and shall not give rise
decision was rendered on October 10, 1963, in favor of the plaintiff. To to interruption.
enforce it, certain properties, including the land in question, were levied
upon and sold at public auction. Hernandez, herein private respondent,
ART. 1124. Judicial summons shall be deemed not to have been
was the purchaser. These properties were covered by new Tax
issued and shall not give rise to interruption:
Declarations Nos. 6522 and 5924, which cancelled the earlier tax
declarations covering the portions claimed by the herein petitioners.
(1) If it should be void for lack of legal solemnities;
(2) If the plaintiff should desist from the complaint or should allow the
On December 2, 1969, private respondent Hernandez filed a complaint
proceedings to lapse;
against the petitioners, alleging that the lands the latter were occupying
(3) If the possessor should be absolved from the complaint.
and which they refused to vacate were part of the property covered by
Tax Declaration No. 6704 which he had acquired in the judgment sale.
In all these cases, the period of the interruption shall be counted for
the prescription. (1946a)
This complaint was dismissed, the Court of First Instance declaring the
petitioners as the lawful owners of the disputed property, which they had
acquired through prescription. Take note, under Art 1124, even if there is an issuance or production of
a judicial summon, it will not produce the effect of interruption, such that
Upon appeal, the CA held that the petitioner’s claim of acquisitive the one who possesses a thing or who wants to enjoy the prescription,
prescription was untenable because their possession of the property in they will not be interrupted over their possession of that thing or property.
dispute was interrupted when the Philippine National Bank acquired it at
the foreclosure sale in 1959 and held it for one year before it was Instances under the law:
repurchased by Rafael Pacheco in 1960. The ten-year period for If the judicial summon is void for lack of legal solemnities.
prescription had not been completed.
Illustration:
ISSUE: WON the petitioners acquired the property by acquisitive
prescription. You will learn in your CivPro that there are certain cases that you can
only lodge before certain courts. We have what we call jurisdiction.
RULING: The respondent court held that as the land was acquired in the Jurisdiction is the power of a court to hear and decide a case.
foreclosure proceedings by the PNB in 1959, the 10-year period of
acquisitive prescription was not completed. As a consequence of the For example, a case is lodged before a court that does not exercise
cut-off caused by the take-over of the land by the bank, Rafael Pacheco jurisdiction over the subject matter to which the complaint is filed. It
ceased to be the possessor of the property for more than one year and means that: the court does not have the power to hear and decide that
the period of prescription was thus interrupted. The applicable provision case on the ground of lack of jurisdiction.
is Article 1121 of the Civil Code, reading as follows:
Nevertheless, if the complaint is filed before the MTC, but in truth and in
Art. 1121. Possession is naturally interrupted when through fact, that compliant is cognizable only by the RTC, and the MTC issued
any cause it should cease for more than one year. the summon in order for the defendant to file his answer.
The old possession is not revived if a new possession should Question: Upon the issuance of those summons, will that have the effect
be exercised by the same adverse claimant. of interruption of the running of the period for purposes of the acquisitive
prescription?
Briefly stated then, the argument of the private respondents runs as
follows: Rafael Pacheco repurchased the land in question from the PNB The answer is NO. Those judicial summons are VOID because they lack
on April 20, 1960. Since Ciriaco Pacheco derived his title from Rafael the proper legal formalities. Specifically, they are issued by a court that
Pacheco, the latter’s possession from April 20, 1960 up to September 7, does not have jurisdiction.
1964, when the land was sold to the former, could be tacked to the
possession taken over by Ciriaco Pacheco when he bought the land. When we talk about legal formalities, we are not only talking about the
However, his total possession did not ripen into acquisitive title because form of the summon. It could also mean that the summon is correct in
the ten-year prescriptive period was not completed. Reckoned from April terms of its form but it comes from a court which does not exercise
20, 1960, when Rafael Pacheco repurchased the land from the jurisdiction over it. Thus, the judicial summon is void and it does not have
Philippine National Bank, the period would have been completed on April any legal effect. Necessarily, it will not give rise to interruption.
20, 1970. The trouble is that on December 2, 1969, before prescription
could set in, the complaint for the recovery of the land was filed by the If the plaintiff should desist from the complaint or should allow the
private respondents, thus interrupting the running of the period. proceedings to lapse
This argument, however, has not taken into account an earlier Illustration:
possession, to wit, that of Rafael Pacheco also, but beginning 1939,
when he bought the land in question from Emiliano Pacheco. If there is a case filed but the plaintiff does not do anything, does not
participate in the proceedings, this will allow the proceedings just to
It was clearly established that Rafael Pacheco started occupying the move forward but without his or her participation.
same since 1939 and that his possession was public, open, peaceful,
continuous, uninterrupted, adverse and in the concept of owner until and Under the rules in your CivPro, you will learn that there is a right on the
even beyond 1949. After ten years of such possession, acquisitive part of the defendant to have the complaint dismissed on the ground of
prescriptive title was vested in Rafael Pacheco, pursuant to Article 1134 lack of interest or non-participation of the plaintiff.
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Considering that there were summons issued in favor of the defendant Other instances of suspension (prescription).
in that case, but eventually, the plaintiff desisted or did not participate in
that action or allow the proceedings to lapse, meaning, later on it will be 1. There is a moratorium of the debt.
dismissed, will the summons issued in that case have the effect of
interruption? The answer is NO. For example, someone owes another person a sum of money. That
obligation has a prescriptive period under the law. After that period,
If the possessor should be absolved from the complaint the creditor could not anymore collect that from the debtor.
Illustration: What if there is a moratorium on that debt, such that there is a period
of time that the law provides that you will not have to pay that debt?
For example, after the filing of the complaint, the plaintiff will withdraw
the complaint. That absolution or withdrawal of the complaint is a form That moratorium will have an effect of interrupting the running of the
that the possessor is absolved from the complaint. Despite the fact that period.
summons have been issued, it will not interrupt the running of the period
for acquisitive prescription. But is that interruption legally speaking? The answer is NO. It merely
suspends the running of the prescriptive period. So, after the
Take note, in all these cases, the period of interruption shall be counted moratorium has been lifted, it can be counted anew in favor of
in favor of one’s possession in order for him to avail the benefits of prescription.
prescription.
2. Insane Person
1ST ELEMENT - POSSESSION
Another example is that, if a person has been occupying a parcel of
land for a certain number of years, and that person adversely
ART. 1125. Any express or tacit recognition which the possessor may possesses the land in good faith with just title, and on the 6th year that
make of the owner's right also interrupts possession. (1948) person became insane. It is established that an insane person is
incapacitated, and a guardian will most likely be appointed.
Take note, we have to make a distinction. When we say interruption, it The appointment of a guardian will continue the manner of possession
means that if the prescriptive period or the running for the period of by the insane person.
prescription is interrupted. Generally, the old period will not be counted,
so the period will run anew from the moment that it has been interrupted. In the period of the appointment of the guardian, because it is not
automatic, it could take years before a guardian will be appointed by
You have to distinguish these from instances that merely suspend the the court. What about that lull period, when there is no appointed
prescriptive period, such that it will continue, and the old period for the guardian? Is that a period of interruption?
benefit of prescription shall be counted in favor of the possessor.
The answer is NO. That period awaiting for the moment of
When the possessor recognizes another person and the right of guardianship only suspends the running of the prescriptive period. It
ownership over the thing or property that he possesses, that will not have the effect of interruption such that you will count anew.
recognition—whether it is express or implied—will interrupt the running
of prescription. What happens when there is a mistake with respect to the parcel of land
or area of certain property to which a person possesses?
Why? Because the possessor does not anymore possess the property
or thing in the concept of an owner. Precisely, such possessor Art. 1135. In case the adverse claimant possesses by mistake
acknowledges that some other person has a greater right, or has the an area greater, or less than that expressed in his title,
right of ownership over that property or thing to his exclusion. prescription shall be based on the possession.
Illustration: When we talk about title for purposes of prescription, it does not literally
mean the title of the land (the piece of paper) that you know of. When
Suppose, a person is occupying a parcel of land. Despite the number of we talk about title, it means a valid legal claim of a person to a certain
years that have lapsed, 8 years have already gone by, and on the 8th property or thing.
year such person gives a certain amount for purpose of paying rental to
another person. If the adverse claimant possesses by mistake an area greater, or less
than that expressed in his title, what factor should be considered for
On the 8th year, we can say that the possession of that person has purposes of prescription? Will it be the area based on the title or will it
already been interrupted. Why? Because that person, on the 8th year, be the area based on one’s possession?
has already recognized a great right of ownership pertaining to some
other person—whether that is expressed or implied. Under Art. 1135, it is the area based on possession. Because, again, the
concept of acquisitive prescription is based on one’s possession, and
That recognition alone will already interrupt the running of the period for not one’s title.
possession.
*** Example:
What are those instances where the period for prescription will only be For example, someone sold you a parcel of land with the area of 1 ha.
suspended, and it is not interrupted? but the portion of land you are occupying is 1.5 ha. Let’s assume that
you complied with the manner of possession under the law, and with
Art. 1136. Possession in wartime, when the civil courts are the period under acquisitive prescription. What should be controlling?
not open, shall not be counted in favor of the adverse
claimant. a. 1 ha, the area that was given to you by virtue of a sale
b. 1.5 ha, the area that is based on your actual adverse possession
We have instances before wherein one possesses during wartime that
possession may not be counted in his favor. But, despite the fact that the Art. 1135 provides that it is based on one’s possession and not that of
possession will not be counted in his favor, under Art. 1136, it will not the title.
mean that the running of period for prescription has been interrupted.
This is an example of SUSPENSION. So that is the first element under acquisitive prescription. The first
element is POSSESSION. Take note of the nature of possession and
what kind of possession is required under the law.
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2ND ELEMENT – THINGS, RIGHTS OR We know that if things or movables are stolen, they are products of a
PROPERTY IN GENERAL crime. No matter how long the offender possesses them, they cannot
acquire that by way of prescription. Is there a way that these products of
crime or stolen goods can be acquired lawfully?
Under Art. 1117, the law defines acquisitive prescription as requiring
possession of things, so that’s the second element. The answer is YES. We have Art 559. If a 3rd party acquires it in good
faith at a public sale, the owner can acquire a valid title thereto, possess
Definition of things. it, and enjoy the benefits of acquisitive prescription.
Art. 530. Only things and rights which are susceptible of being But there is a condition: that owner cannot obtain it without reimbursing
appropriated may be the object of possession. the one who lost it, or the one who is the victim of the stolen good.
A. Things that are susceptible of appropriation B. Land registered under the Torrens system
If a thing may be appropriated legally speaking, we call that thing as
PROPERTY. All properties are things but not all things are properties.
ART. 1126. Against a title recorded in the Registry of Property,
Because not all things can be appropriated.
ordinary prescription of ownership or real rights shall not take place to
the prejudice of a third person, except in virtue of another title also
What is an example? This is the time that we will discuss, Art. 1113.
recorded. The time shall begin to run from the recording of the latter.
Art. 1113. All things which are within the commerce of men
As to lands registered under the Land Registration Act, the provisions
are susceptible of prescription, unless otherwise provided.
of that special law shall govern. (1949a)
Property of the State or any of its subdivisions not patrimonial
in character shall not be the object of prescription.
Art. 1113 is very specific. What are the things or rights that you can In cases of registered lands (meaning, they have a title recorded in the
acquire by way of your adverse possession through prescription? Torrens System) for purposes of prescription, the type of land that can
be acquired by way of acquisitive prescription are those parcels of land
Things or property that may be possessed by purposes of which are unregistered. No matter how long you possess a registered
prescription are those which are: land, you cannot acquire it by way of acquisitive prescription.
1. Susceptible of appropriation: it can be appropriated, it can be owned EXCEPTION: Except in virtue of another title that you yourself recorded
by someone. as against that parcel of land, then the running of the period for
2. It must be within the commerce of men. prescription can begin.
3. If it is a property pertaining to the State or any of its subdivisions, it
must be patrimonial in character. Those properties that are (2) Those things which we call as res nullius or those which are
patrimonial can be possessed by prescription, and not those owned by no one
occupied by the State in its sovereign capacity.
These are things that belong to no one, because they cannot be
What are those things that are not allowed to be possessed? Meaning, appropriated or at least they have not been appropriated yet. Thus, they
no matter the period of time you possessed them, you cannot actually cannot be acquired by way of acquisitive prescription.
possess them by way of acquisitive prescription?
Examples:
(1) Those things which are specifically prohibited by law.
Moon, sun, stars, and wild animals: these are things but they are not
There are certain things or rights that, even if they may seem property because they cannot be appropriated
appropriable or they are within the commerce of men, those things are
prohibited from being possessed for purposes of prescription. No matter Those things which we call as res communis or those which
how long you possess them, you cannot acquire them by way of belonged to everyone
prescription.
Examples:
Examples:
Public utilities, public goods, public roads, bridges, parks
A. Products of a crime
Art. 1133. Movables possessed through a crime can never be These are properties of the State in their public domain, meaning, these
acquired through prescription by the offender. are properties that are set aside by the State for public use, or for certain
public service or national development. Although they are owned, they
TYPES OF PROPERTY: are owned by everyone because they are owned by the State. No matter
how long you possess them, you cannot acquire them by way of
According to their mobility (capability of a property to be moved or to be acquisitive prescription.
placed from one location to another)
a. movables: properties which are by their nature they can be moved or The state has different types of property: (1) those properties which can
they can be placed from one location to another be set aside for public domain and (2) those which are private in
b. immovables: opposite character.
Take note of this provision: exception of the rule in Art. 1133 Take note, those properties which are private in character or patrimonial
property are the only type of properties which can be acquired by way of
Article 559. The possession of movable property acquired in prescription. But there are certain conditions before a property can be
good faith is equivalent to a title. Nevertheless, one who has considered patrimonial property.
lost any movable or has been unlawfully deprived thereof,
may recover it from the person in possession of the same. 3RD ELEMENT - POSSESSION OF THINGS
OR RIGHTS IN GOOD FAITH
If the possessor of a movable lost or which the owner has been
unlawfully deprived, has acquired it in good faith at a public sale, the
The third is possession of things or rights in good faith. Take note
owner cannot obtain its return without reimbursing the price paid
that this element is only necessary to ordinary acquisitive prescription.
therefor.
Because, in extraordinary acquisitive prescription, one can acquire
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ownership over a thing even if that person is not in good faith or is in bad Article 528. Possession acquired in good faith does not lose
faith. this character except in the case and from the moment facts
exist which show that the possessor is not unaware that he
What is this concept of good faith and bad faith? How do we define good possesses the thing improperly or wrongfully.
faith?
Article 529. It is presumed that possession continues to be
enjoyed in the same character in which it was acquired, until
ART. 1127. The good faith of the possessor consists in the
the contrary is proved.
reasonable belief that the person from whom he received the thing
was the owner thereof, and could transmit his ownership. (1950a)
4TH ELEMENT – JUST TITLE
Take note, good faith of the possessor is defined, or consists of his
reasonable belief that the person from whom he received the thing was Fourth is just title. This is another element under acquisitive
the owner thereof, and could transmit his ownership. prescription that distinguishes ordinary acquisitive prescription from
extraordinary acquisitive prescription.
Possession in the concept of an owner and possession in good
faith, distinguished. Take note, the requirement of just title pertains only to ordinary
acquisitive prescription. In extraordinary acquisitive prescription, it is not
Possession in the concept of Possession in good faith necessary.
an owner concepto de dueno possession in buena fe
Pertains to the element of Pertains to the reasonable belief What do you mean by just title?
possession in acquisitive of a possessor that with respect Just title or a lawful claim of ownership or possession is that which is
prescription. to his title, the grantor can legally sufficient to transfer ownership of a thing or a real right. It is not a
transmit ownership to him perfect title. A title is sufficient that a person may possess it, in order for
The opposite of a concept of an that possession to ripen to ownership by way of acquisitive prescription.
owner is not good faith or bad Meaning, it is a title where, although there is a mode of transfer of
faith. The opposite concept is the ownership, there is still something wrong, because the grantor is not the
concept of a mere holder. owner.
That’s why mere possessory In relation to the requirement of a just title in ordinary acquisitive
acts no matter how long if it is by prescription, we have Art. 1129-1131.
virtue of a valid license or by
mere tolerance, they will not give ART. 1129. For the purposes of prescription, there is just title when
rise to prescription. Because this the adverse claimant came into possession of the property through
type of possession is not in the one of the modes recognized by law for the acquisition of ownership
concept of an owner. or other real rights, but the grantor was not the owner or could not
transmit any right. (n)
PCO is the type of possession
required in order for that
possession to be considered as This pertains to a colorable title. It means that title which is sufficient that
adverse or in order for the if the person or the possessor possesses it in the manner and in the
possessor’s possession can period provided for by the law, that possession may ripen to ownership
ripen into ownership by way of by way of acquisitive prescription.
acquisitive prescription.
ART. 1130. The title for prescription must be true and valid. (1953)
Concept means an opinion not of PGF refers to the belief of the
the possessor but of the others. owner himself
Opinion that is independent of ART. 1131. For the purposes of prescription, just title must be proved;
the possessor’s belief it is never presumed. (1954a)
Elements of Possession in Good Faith

How can we say that a person possesses a thing or property in good When we talk about just title, it is one which is true. It is not a mere
faith? expectancy or inchoate right.
If a person acquires a possession of a thing by way of a just title (he has

ART. 1128. The conditions of good faith required for possession in lawful claim over the property), that just title must be proved. It is never
articles 526, 527, 528, and 529 of this Code are likewise necessary presumed.
for the determination of good faith in the prescription of ownership and
other real rights. (1951)
5TH ELEMENT – LAPSE OF TIME (PERIOD)
References to other provisions in NCC: The last element which is common to Ordinary Acquisitive Prescription
and Extinctive Acquisitive Prescription is lapse of time. The possessor
Article 526. He is deemed a possessor in good faith who is must possess the property or things for the period fixed under the law.
not aware that there exists in his title or mode of acquisition There must be an observance of the period. Only upon compliance with
any flaw which invalidates it. the period provided for under the law shall that person acquire that thing
He is deemed a possessor in bad faith who possesses in any or property by way of acquisitive prescription.
case contrary to the foregoing.
TWO TYPES OF PERIOD:
Mistake upon a doubtful or difficult question of law may be the
basis of good faith. Possession in Possession in Bad
Good Faith Faith
Article 527. Good faith is always presumed, and upon him Movables: Personal Uninterrupted period 8 years
who alleges bad faith on the part of a possessor rests the Property of 4 years
burden of proof.
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Immovables: Real 10 years 30 years for a specific prescriptive period with respect to a certain issue, then the
Property provisions or the prescriptive period under that law shall govern.
These are the prescriptive periods in general—if there is no prescriptive
Movables period provided under the special laws or if we go to the provisions of
the NCC.
ART. 1132. The ownership of movables prescribes through
By the mere lapse of time, rights that are acquired (the right to file an
uninterrupted possession for four years in good faith.
action or a claim to protect one’s rights which a person already enjoys or
which a person already has), it shall prescribe or be extinguished by the
The ownership of personal property also prescribes through
mere lapse of time. This is the concept of extinctive prescription.
uninterrupted possession for eight years, without need of any other
condition.
What are the periods that you have to know under the law so that
you can have a concept on whether it has prescribed or not? We
With regard to the right of the owner to recover personal property lost
have Art. 1140.
or of which he has been illegally deprived, as well as with respect to
movables acquired in a public sale, fair, or market, or from a
merchant's store the provisions of articles 559 and 1505 of this Code ART. 1140. Actions to recover movables shall prescribe eight years
shall be observed. (1955a) from the time the possession thereof is lost, unless the possessor has
acquired the ownership by prescription for a less period, according to
With regard to the right of the owner to recover personal property lost or articles 1132, and without prejudice to the provisions of articles 559,
of which he has been illegally deprived, as well as with respect to 1505, and 1133. (1962a)
movables acquired in a public sale, fair, or market, or from a merchant's
GENERAL RULE: In actions to recover movables, it shall prescribe 8
store the provisions of articles 559 and 1505 of this Code shall be
years from the time the possession thereof is lost.
observed.
Why? Because after 8 years, the one who possesses it can already
Immovables
acquire it by way of acquisitive prescription, despite it being
extraordinary. That’s why an action to recover movables will prescribe
ART. 1134. Ownership and other real rights over immovable property after 8 years, because after that period, the person who possesses it
are acquired by ordinary prescription through possession of ten years. would have already acquired by extraordinary acquisitive prescription.
(1957a)
But again, take note of Art. 1133, movables possessed through a crime
can never be acquired through prescription by the offender in relation to
ART. 1137. Ownership and other real rights over immovables also the exception under Art. 559.
prescribe through uninterrupted adverse possession thereof for thirty
years, without need of title or of good faith. (1959a) Art. 559. The possession of movable property acquired in good
faith is equivalent to a title. Nevertheless, one who has lost any
movable or has been unlawfully deprived thereof, may recover it
ART. 1138. In the computation of time necessary for prescription the from the person in possession of the same
following rules shall be observed:
EXCEPTION: This exception is provided for under Art. 1140, unless the
(1) The present possessor may complete the period necessary for possessor has acquired the ownership by prescription for a less period,
prescription by tacking his possession to that of his grantor or according to articles 1132, and without prejudice to the provisions of
predecessor in interest; articles 559, 1505, and 1133.
(2) It is presumed that the present possessor who was also the
possessor at a previous time, has continued to be in possession
ART. 1141. Real actions over immovables prescribe after thirty years.
during the intervening time, unless there is proof to the contrary;
(3) The first day shall be excluded and the last day included. (1960a) This provision is without prejudice to what is established for the
acquisition of ownership and other real rights by prescription. (1963)
Take note, this period of computation is applicable only to acquisitive Real actions over immovables shall prescribe after 30 years. Why?
prescription. Because after the period of 30 years, the one who possesses that real
property or that immovable could have already acquired it by way of
Par. 1: principle of tacking of possession extraordinary acquisitive prescription.
Tacking or adding; meaning, you assume the period of your grantor or
predecessor-in-interest. In terms of real actions (actions to recover immovables or real property),
they shall prescribe after the period of 30 years. That is why Art. 1141
Par. 2: is very specific that this provision is without prejudice to what is
This means that it is continuous even during the intervening time, unless established for the acquisition of ownership and other real rights
there is proof to the contrary. by prescription.
How is the contrary be proven? There must be a showing of interruption, The second paragraph pertains to acquisitive prescription. Meaning,
whether natural or civil. it could be acquired by some other person possessing it in bad faith or
without just title.
Par. 3:
The first day shall be excluded and the last day included.
ART. 1142. A mortgage action prescribes after ten years. (1964a)
EXTINCTIVE PRESCRIPTION / PRESCRIPTION OF ACTIONS

Mortgage actions, or an action to foreclose upon a mortgage constituted
on a certain property, it shall prescribe after 10 years.
ART. 1139. Actions prescribe by the mere lapse of time fixed by law.
ART. 1143. The following rights, among others specified elsewhere
Under the NCC, it provides for the general prescriptive period. In the in this Code, are not extinguished by prescription:
absence of any provision in a special law, we can apply the NCC (1) To demand a right of way, regulated in article 649;
suppletorily. But the governing laws will be, if a special law will provide (2) To bring an action to abate a public or private nuisance (n)
lOMoARcPSD|7732614

rule, contracts are valid in any form under the principle of

There are certain rights and certain rights of action that, despite the lapse consequentiality.
of time, they can never prescribe. The right to institute an action for
declaration of nullity of marriage, as a rule, it is imprescriptible. There
ART. 1146. The following actions must be instituted within four years:
are instances provided for under Art. 1143 wherein, as a rule, they shall
not prescribe, meaning you can file an action at any period of time.
(1) Upon an injury to the rights of the plaintiff;
(2) Upon a quasi-delict;
ART. 1144. The following actions must be brought within ten years
from the time the right of action accrues: However, when the action arises from or out of any act, activity, or
(1) Upon a written contract; conduct of any public officer involving the exercise of powers or
(2) Upon an obligation created by law; authority arising from Martial Law including the arrest, detention
(3) Upon a judgment. (n) and/or trial of the plaintiff, the same must be brought within one (1)
year. (As amended by PD No. 1755, Dec. 24, 1980.)
We have those actions that must be brought within 10 years from the
time the right of action accrues. Take note of this enumeration.
ART. 1147. The following actions must be filed within one year:
When will we know that a right of action accrues? (1) For forcible entry and detainer;
A right of action accrues, if there is a cause of action. A cause of (2) For defamation. (n)
action means that on the part of the plaintiff, (1) there is a right, and on
the part of the defendant, (2) there is an obligation. Because of the act
Par 1: These are actions that pertain to possession de facto. Remember,
or omission on the part of the defendant, it will breach or prejudice the
possession de facto is lost after a period of one year. Why? Because it
right of the plaintiff and that will give the plaintiff the right of action.
is within that 1-year period that you can file an action for forcible entry or
unlawful detainer—in order for the one who should possess the property
That is why the right of action will accrue from the time that a cause of
to protect his possession.
action exists. There must be a right. There must be an obligation to be
observed, an act or omission, and finally, it violates the right of the
plaintiff. ART. 1149. All other actions whose periods are not fixed in this Code
or in other laws must be brought within five years from the time the
So it must be brought within 10 years from the time the right of right of action accrues. (n)
action accrues under the following instances:
1. if it is based on a written contract
2. an obligation created by law or a legal obligation For all other actions which not have been specifically indicated under the
3. upon a judgment – take note, when we talk about upon judgment, law or at least under the NCC, those actions which are not indicated on
when do we count the period of prescription, if that action is to be brought the prior provisions must be brought within five years from the time the
against a judgment? This is in relation with Art. 1152. right of action accrues.
What must be observed with respect to judgment? ART. 1150. The time for prescription for all kinds of actions, when
there is no special provision which ordains otherwise, shall be
ART. 1152. The period for prescription of actions to demand the counted from the day they may be brought. (1969)
fulfillment of obligation declared by a judgment commences from the
time the judgment became final. (1971)
What are some of the prescriptive periods or reckoning point that you
should know of with respect to these prescriptive periods? First, it is
When does a judgment become final? provided under Art. 1150.
A judgment becomes final after the period of appeal has already lapsed,
and there is no appeal that has yet to be perfected. You reckon the time of counting that period from the day that those
actions may be brought When may the action be brought? Refer to the
So, from the rendition of the judgment, or from the time the judgment is previous provisions.
made, it is final in the sense that it completely disposes of the case.
ART. 1153. The period for prescription of actions to demand
But when does it become final as provided under Art. 1152? accounting runs from the day the persons who should render the
From the time the judgment became final, or, in other words, after the same cease in their functions.
lapse of the period to make an appeal, and an appeal has not been
perfected. Generally, under the law, an appeal takes 15 days from the The period for the action arising from the result of the accounting runs
time of receipt of the judgment. from the date when said result was recognized by agreement of the
interested parties. (1972)
For example, you received a judgment on Jan 1, 2019. When does the
judgment become final? After the 15th day period. So, on Jan 16, 2019,
if the appeal has not been made—based on that judgment by the A right to demand accounting means that, as to between the parties,
adverse party—then that judgment becomes final. there has to be a determination as to what is the amount of the liability
or obligation. In the meantime, we don’t know how much is the obligation
It is upon that time that the right of action on the part of the prevailing but we know that an obligation exists.
party will have the right of action against that judgment. In terms of
judgment, they can have the judgment executed. Meaning, they will carry So, in order for us to determine with certainty how much the obligation
out the provisions found on the judgment. should be, a person can demand a right of action accounting.
ART. 1145. The following actions must be commenced within six But take note, this will only apply, or this can be reckoned only from the
years: time or only from the day that the persons—who should render the
(1) Upon an oral contract; same—cease in their functions.
(2) Upon a quasi-contract. (n)
Example:
Take note of the definition of contract. A contract is defined as the Under the law on BusOrg, when 2 or more persons contribute money,
meeting of minds, so therefore, whether it is oral or written, as a general property, or industry to a common fund, and with the intention of
lOMoARcPSD|7732614

dividing the profits as to between them that will create a partnership, For example, an obligee can already demand payment from the obligor
there is a contract of partnership between them. but the obligee is prevented by a certain fortuitous event, like a flood. As
a result, it shall excuse that person from responsibility therein.
A, B, and C formed a partnership, but eventually, they will dissolve
said partnership because of insolvency. They will change their What instances will interrupt the running of prescriptive period (in terms
relationship towards the termination of the partnership. Suppose in the of extinctive prescription)?
meantime, they have obligations between them as partners, and they
also have obligations to pay their debts to their suppliers for example,
ART. 1155. The prescription of actions is interrupted when they are
but they do not know how much that obligation is.
filed before the court, when there is a written extrajudicial demand by
So the right of action as between the partners in the partnership is a
the creditors, and when there is any written acknowledgment of the
Action Prescriptive Period debt by the debtor. (1973a)
actions to recover movables 8 years from the time the
possession thereof is lost
real actions over immovables prescribe after 30 years Interruption means that it will be temporarily suspended. Here, when
after thirty years we say interrupt we will not count anew.
mortgage action after 10 years
1. a written contract actions must be brought 3 INSTANCES THAT WILL INTERRUPT THE PRESCRIPTIVE
2. an obligation created by law within 10 years from the PERIOD OF ACTIONS:
3. upon a judgment (it commences from time the right of action
the judgment became final) accrues 1. When an action is filed before a competent court: same principle
under Art. 91 of Revised Penal Code.
1. upon an oral contract; actions must be
2. When there is a written extrajudicial demand by the creditors:
2. upon a quasi-contract. commenced within 6
prescription may be interrupted the moment creditors will make a
years
demand—even an extrajudicial one—provided that it must be in
1. upon an injury to the rights of the actions must be instituted
writing
plaintiff; within 4 years
2. upon a quasi-delict;
3. When there is any written acknowledgment of the debt by the
1. for forcible entry and detainer; actions must be filed
debtor: if the debtor himself—without demand from the creditor—
2. for defamation within 1 year
will acknowledge his indebtedness, it will also interrupt the running
of period for extinctive prescription. Meaning, the period for the right
all other actions whose periods are not actions must be brought of the creditor to collect a sum of money or to enforce his right will
fixed in this Code or in other laws within 5 years from the not run, provided that it must be in writing.
time the right of action
accrues
right to demand accounting, in order for them to determine how much
their obligations are to their supplier, or their obligations between them
as partners. And that right shall only begin from the time they ceased
from their functions. In this case, from the time they ceased to become
partners, and that time is upon the dissolution of the partnership.
The same rule shall apply with respect to co-ownerships and

guardianship. Function in this case pertains to the juridical relationship
between the parties
What are the events that will prevent the running the period for extinctive
prescription?
ART. 1154. The period during which the obligee was prevented by a
fortuitous event from enforcing his right is not reckoned against him.
PERSONS INVOLVED IN AN OBLIGATION:
1. Active subject is the one who has the right of demand the fulfillment
of the obligation. (creditor/obligee)
2. Passive subject is the one to whom or against the obligation may

be demanded. (debtor/obligor)
What are these events that are considered or known as fortuitous event,
such that it will prevent the running for the enforcing of the right of an
oblige, and if the obligee is prevented by these events, the period for the
running of extinctive prescription is not reckoned against him (that period
will not be counted against him)? That is provided under Art 1174.
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.
As a general rule, no person shall be responsible for those events which

could not be foreseen or which, though foreseen, were inevitable. This
is the definition of a fortuitous event.
lOMoARcPSD|7732614

CASES FOR PRESCRIPTION dispute that the action has already prescribed based on the Civil Code,
because of the lapse of 13 years. For this reason, the RTC of Catbalogan
PANGASINAN V. ALMAZORA motu proprio dismissed the complaint.
761 SCRA 220 (JULY 1, 2015)
Art. 1106 – Laches However, in a motion for reconsideration, Caltex waived the prescription
FACTS: To rebuild their house due to the war, Aquilina and Leoncia ISSUE: WON there is a valid renunciation of prescription.
borrowed money from their relative, Conrado Almazora. In return, they
entrusted to Conrado the owner’s duplicate copy of the TCT for HELD: A waiver on acquisitive or extinctive prescription may be waived.
safekeeping. There must be a certain act that constitutes a waiver on the benefit
of prescription.
In 1996, an action for damages was filed by Aurora and Arturo against
the heirs of Conrado and Cristina because in 1994, she learned that the In this case, even if a waiver was allowed, the Supreme Court held that
parcel of land was sold by Conrado. the waiver came in too late because the judgment has already
become final. The RTC of Catbalogan has already dismissed the
ISSUE: WON the action for damages is barred by laches. complaint, saying that: with regards to the heirs, they don’t have any right
of action against Caltex for the alleged collision at sea. Considering that
RULING: The four (4) elements of laches are as follows: the judgment has already become final, under the principle of res
judicata, that finding of the court could not be disturbed. Therefore,
(1) Conduct on the part of the defendant, or of one under whom he since the waiver on the benefit of prescription on the part of Caltex
claims, giving rise to the situation of which complaint is made for which would disturb the final judgment, the Supreme Court said that the
the complaint seeks a remedy; waiver cannot be allowed in this case.
(2) Delay in asserting the complainant’s rights, the complainant having REPUBLIC V. ESPINOSA
had knowledge or notice, of the defendant’s conduct and having been G.R. No. 171514 (MARCH 18, 2012)
afforded an opportunity to institute a suit; Art. 1113 – Object of Prescription;
Re: Property of the State
(3) Lack of knowledge or notice on the part of the defendant that the
complainant would assert the right on which he bases his suit; and FACTS: The property involved in this case is a parcel of land which was
claimed by Espinosa, who alleged that the property was alienable and
(4) Injury or prejudice to the defendant in the event relief is accorded disposable and was acquired by him through extraordinary prescription.
to the complainant, or the suit is not held to be barred. He claimed that he and his predecessor-in-interest were in possession
of the property for at least 30 years.
In this case, the 4 elements of laches are present.
ISSUE: WON the property can be acquired through acquisitive
First, Aurora and her family entrusted to Conrado the owner’s duplicate prescription due to the adverse possession of Espinosa and his
of the certificate of title of the subject property in 1945. In their complaint, predecessors-in-interest.
petitioners even admitted that Conrado’s family had been staying in the
subject property since 1912. RULING: No, the subject property is still a property of public domain.
Second, it took five decades, from 1945 to 1996, before Aurora and Accordingly, there must be an express declaration by the State that the
petitioners decided to enforce their right thereon. public dominion property is no longer intended for public service, or the
development of the national wealth, or that the property has been
Third, respondents who lived all their lives in the disputed property converted into patrimonial. Without such express declaration, the
apparently were not aware that Aurora would one day come out and property, even if classified as alienable or disposable, is still the property
claim ownership thereon. of the public dominion, pursuant to Art. 420 (2), and thus incapable of
acquisition by prescription. It is only when such alienable and
Fourth, there was no question that respondents would be prejudiced in disposable lands are expressly declared by the State to be no
the event that the suit would be allowed to prosper. longer intended for public service or for the development of the
national wealth that the period of acquisitive prescription can begin
The mere lapse of 50 years does not bar the action by laches. In this to run. Such declaration shall be in the form of a law duly enacted by
case. for 50 years, Aurora and her heirs did not take any legal step Congress or a Presidential Proclamation in cases where the President
to uphold their claim over the subject property, despite being fully is duly authorized by law (there must be a valid delegation of power to
aware that Conrado and his family were occupying the same for a the President).
very long time. Even petitioner Pangasinan testified that Conrado had
been using the property for 30 years, and that Aurora had never shown Thus, no matter how long a person possesses a certain parcel of
her any evidence of ownership of the property. This delay, coupled with land, for as long as it is a property which is part of the public
the present circumstances, would lead to the conclusion that the action dominion, one can never acquire such property by way of
for damages has already been barred because of the lapse of 50 years acquisitive prescription.
and the other factual circumstances accompanying the delay.
The court also cited the case of Malabanan v. Republic:
CALTEX V. AGUIRRE
787 SCRA 73 (MARCH 7, 2016) “For prescription to run against the State, there must be proof that
Art. 1112 – Acquisitive Prescription; there was an official declaration that the subject property is no
Renunciation of Prescription already obtained longer earmarked for public service or the development of national
wealth. Moreover, such official declaration should have been issued at
When a party to any action—or a party who claims ownership over a least ten (10) or thirty (30) years, as the case may be, prior to the filing
thing—enjoys the benefit of prescription with respect to actions which of the application for registration. The period of possession and
may be filed against him, the benefit of prescription may be waived by occupation prior to the conversion of the property to private or
the one who acquired the right. patrimonial shall not be considered in determining completion of the
prescriptive period. Indeed, while a piece of land is still reserved for
FACTS: Because of the lapse of time of 13 years from the collision, public service or the development of national wealth, even if the same is
prescription was running in favor of Caltex—in accordance with the Civil alienable and disposable, possession and occupation no matter how
Code—such that Caltex could not be sued because of the maritime lengthy will not ripen to ownership or give rise to any title that would
incident which caused damage to the lives of the passengers of a ship. defeat that of the State’s if such did not commence on June 12, 1945 or
Whether the action is based on Article 1144, 1145, or 1146, there is no earlier.”
lOMoARcPSD|7732614

acquire by prescription the share of the other co-owners, absent a clear

In accordance with the Regalian Doctrine, public lands not shown to repudiation of the co-ownership.
have been reclassified or released as alienable agricultural land, or
alienated to a private person by the State, remain part of the inalienable Prescription may nevertheless run against a co-owner if there is adverse,
public domain. The burden of proof in overcoming the presumption of open, continuous and exclusive possession of the co-owned property by
State ownership of the lands of the public domain is on the person the other co-owner/s. In order that co-owners possession may be
applying for registration (or claiming ownership), who must prove that deemed adverse to the other co-owners, the following requisites
the land subject of the application is alienable or disposable. To must concur: (1) that he has performed unequivocal acts of
overcome this presumption, incontrovertible evidence must be repudiation amounting to an ouster of the other co-owners; (2) that
established that the land subject of the application (or claim) is alienable such positive acts of repudiation have been made known to
or disposable. the other co-owners; and (3) that the evidence thereon must be
clear and convincing.
In this case, Espinosa didn’t acquire the subject property through
acquisitive prescription because the property was not a patrimonial Thus, in order for prescription to run between co-owners, there
property of the State. The property was not alienable and must be an express or manifest repudiation of that trust, they must
disposable, since there was no official declaration made by the repudiate or perform acts that will extinguish the trust or fiduciary
State. relationship between the co-owners. Only from that time will
prescription start to run, otherwise the fact that they had not done
Furthermore, they were not able to prove that they were in possession anything to the title or the ownership of the other co-owners as regards
of such land for 30 years. to the co-owned property, prescription will not run, because that they do
not possess it in the concept of an owner since they acknowledge the
HEIRS OF DELFIN V. NHA right of other co-owners to possess the same property.
810 SCRA 478 (NOV. 28, 2016)
Art. 1113 – Object of Prescription; Did the Heirs of Feliciano acquired the property through prescription?
Re: Property of the State
NO. Although the issuance of the certificate of title would constitute an
In this case, in comparison to Republic v. Espinosa, the property was open and clear repudiation of any trust, an action to demand partition is
already alienable and disposable through Proclamation 2151. The imprescriptible as between co-owners. In order for the prescriptive
possessors were the Delfin spouses, and they proved that they were the period (10 yrs.) for an action to demand partition to begin to run, (1)
possessors through the commission of acts in the concept of an owner, there must be a demand for partition and (2) must be coupled with
such as planting trees and tax declarations. the fact that the other co-owners are not anymore in possession of
the said property. Only when these 2 requirements concur that there
Tax declaration is persuasive evidence over the possession of a will be repudiation. This is because the partition of the property will put
property, since it is only the owner who pays taxes over the same. to an end the co-ownership.
It does not prove the good faith nor bad faith of the possessor.
However, in this case, the action did not prescribe because the heirs
Art. 1118. Possession has to be in the concept of an owner, of Hermogenes only ceased to be in possession when they were
public, peaceful, and uninterrupted. ejected from the said property. It cannot be said that the heirs of
Feliciano possessed the said property for 10 years in the concept of an
NOTE: Only alienable and disposable lands from the State can be owner, since they allowed their co-owners to possess the same property.
acquired by prescription. These lands must not be allotted for public use,
development, national wealth, etc. It must be patrimonial. The court ruled in favor of the heirs of Hermogenes.
Article 1118 talks about possession in the concept of an owner. When
there is benefit arising therefrom, it shall also benefit other co-owners. ABALOS V. HEIRS OF TORIO
662 SCRA 530
In order that a party’s possession may be considered as possession in Art. 1119 – Possession by mere tolerance
the concept of an owner, it must be clear and it must be that in the
opinion of a third person, that the person is possessing the said property ISSUE: Does recognition of ownership by indication in the tax
with the rights and attributes of ownership. It does not constitute of the declaration constitute possession by mere tolerance such that you are
belief of that person, but what others see. not considered a possessor in the concept of an owner?
Prescription will not run between co-owners. It is because of their RULING: YES.
relationship which is fiduciary (characterized by utmost trust and In this case, the court said that since there was recognition of
confidence), that the law requires that one cannot acquire property from ownership of another person in the tax declaration, it is a
the other, especially if that property is under the administration, or co- possession by mere tolerance, and not a possessor in the concept
owned by other persons. of an owner.
It is not possession in the concept of an owner because it is not an
HEIRS OF FELICIANO YAMBAO V. HERMOGENES YAMBAO adverse possession. There is recognition of the fact that the property is
G.R. No. 194260 (APRIL 13, 2016) owned by another.
Art. 1118 – Possession on the Concept of An Owner
However, a possession by mere tolerance does not automatically render
FACTS: The heirs of Feliciano prohibited Eleanor and the heirs of the possessor to be in bad faith. In this case, there was bad faith because
Hermogenes from entering the co-owned property. The heirs of he built a house knowing that the land was owned by another.
Feliciano argued that Feliciano solely owned the property and was in
possession of the subject property in the concept of owner since time ***
immemorial.
When a land is registered under the Torrens system, the land is already
ISSUE: WON prescription runs as between co-owners outside the ambit of prescription because only unregistered land which
is patrimonial may be the subject of acquisitive prescription.
RULING: A co-ownership is a form of trust, with each owner being a
trustee for each other. Mere actual possession by one will not give rise SUPAPO V. DE JESUS
to the inference that the possession was adverse because a co-owner 756 SCRA 211 (APRIL 30, 2015)
is, after all, entitled to possession of the property. Thus, as a rule, Art. 1126 – Recorded titles as to third persons
prescription does not run in favor of a co-heir or co-owner as long as he
expressly or impliedly recognizes the co-ownership; and he cannot This case involved a certain parcel of land which was covered by a TCT
under the name of Supapo, which was being claimed by the respondent
lOMoARcPSD|7732614

spouses De Jesus and Macario Bernardo. The respondents alleged that correctness of the certificate of title, courts cannot disregard the rights
they have been in actual, public, peaceful and uninterrupted possession they acquired and order the cancellation of the certificate.
of the subject property in the concept of an owner since 1992. The
respondents contend that they built their houses on the subject lot in In this case, the court ruled that Lopez was not a purchaser in good faith
good faith. Having possessed the subject lot for more than ten (10) and thus, the TCTs were declared null.
years, they claim that they can no longer be disturbed in their
possession. REPUBLIC V. CA
301 SCRA 366
It is clear that since the beginning, the respondents recognize that the Art. 1135 – Possession by mistake of an area
land was owned by Supapo. greater or less than that expressed in the title
In a long line of cases, the court ruled lands covered by a title cannot FACTS: The land area owned by the respondent was 40,523 square
be acquired by prescription or adverse possession. It is because meters. However in his TCT, the area covered 42,044 square meters.
the Torrens system was set up in our law in order to protect the rights of This expansion or increase in area was confirmed by the Land
registered owners. In this case, the Spouses Supapo could not be Registration Commission.
considered to have lost their possession or ownership thereof by the fact
that they were not in possession or occupation of the property for one or The Solicitor General moved for the cancellation of the TCT because of
more years. the said expansion of a total of 1,421 square meters.
LAUSA V. QUILATON RULING: The Supreme Court ruled that the government cannot acquire
767 SCRA 399 (AUG. 19, 2015) the 1,421 square meters back, because the persons who acquired the
Art. 1126 – Recorded titles as to third persons land were already purchasers for value and in good faith. More
importantly, the 42,044 square meters is the area of the land which is
FACTS: It involves Lot No. 557 in Cebu. The petitioners and the indicated in the TCT. The court explained that the purpose of the Torrens
respondents are relatives residing in the same lot. Respondent Lopez system is to avoid conflicts in the ownership of the land. The land area
acquired a portion of Lot No. 557 due to Rodrigo’s default on his loan. reflected in the TCT is presumed to be the area of the land. If there is an
Lot No. 557 was part of the Banilad Friar Estate Lands, which had been argument on whether the area of the land should be the 42,044 or the
bought by the government through Act No. 1120 for distribution of its 40,523, the very purpose of the Torrens system should be considered
occupants. Martin Antonio was the initial beneficiary and assigned it to so that people will not keep on baselessly question the validity of a title.
Alejandro Tugot which was the grandfather of most of the respondents Thus, since the Torrens title was enacted such that it would avoid
and petitioners. possible conflicts in the title, whatever the description of the land is in the
Torrens title, it is presumed to be the description of the land. That is why
Alejandro possessed the lot until his death, thus his children and in case there is a difference or mistake of possession, in order to
grandchildren continued to reside in the lot. The present controversy avoid conflict over lands registered in the Torrens system, the area
arose when the respondents claiming to be its registered owners, expressed in the title will be controlling. Furthermore, in this case,
attempted to eject the petitioners. In 1994, Mauricia donated Lot No. 557 the court said that the 40,523 square meters was a mere approximation,
to her four children thus and thus not exact.
the TCT No. 571 was cancelled and was reissued as four TCT’s for the
children. The children of Mauricia then performed several acts of FUDALAN V. OCIAL
ownership on the property. 759 SCRA 160
Art. 1137 – Prescription of ownership
Rodrigo: Mortgaged his TCT to Lopez as security loan but defaulted and other real rights
leading to foreclosure and was sold to public auction to Lopez issuing a
new TCT. In this case, there was a contention that the subject land was impossible
to have been acquired by acquisitive prescription.
ISSUE: CA erred in relying on fake title to deny prescription
CA concluded that it cannot prescribe, for it was under the Torrens ISSUE: WON the property was acquired by prescription
system. Still, the lot cannot be acquired through prescription but for a
different reason. RULING: No.
First, there was no proof with respect to the possession over the property
RULING: The Deed of Assignment between Antonio and Alejandro was or any just title thereto. There was no showing of any just title with
cancelled three months after execution, thus it could have not vested respect to the possessor over the parcel of land. Second, there was no
Antonio’s rights over Lot No. 557. Thus, it reverted to its original status showing that the land can be acquired by extraordinary prescription. In
as a subject of conditional sale between Bureau of Lands and extraordinary prescription, despite the absence of good faith or just
Antonio upon full payment. title, a person may acquire it by lapse of the period provided for by
law. In case of real property, the lapse of 30 years is required. That
• Under Act No. 1120 for the administration, temporary lease and sale of period was not observed in this case and thus, the court said that it could
friar lands until full payment. not have been acquired by way of extraordinary prescription.
Three possible scenarios: ANDRES V. STA LUCIA

1. Antonio completed payment and it would be Registered under 768 SCRA 56
Antonio’s name. Land registered under the Torrens system cannot be Art. 1137 – Prescription of ownership
acquired through prescription. and other real rights
2. If he failed, the title remains with the government. And as such, In this case, Andres filed a complaint which was an action to demand
prescription will not run against the government (1107). right of way, because the unregistered agricultural land which was
allegedly owned by them was being blocked by the land of Sta. Lucia
3. Another person could have bought the rights. from the highway. In order to demand right of way, it must be proved that
they owned the property. In this case, Andres argued that they already
All these scenarios negate the possibility of prescription. acquired the property through acquisitive prescription.
Effects of the Nullity of TCT No. 571 ISSUE: WON the property can be the subject of acquisitive prescription
Neither Mauricia nor Alejandro has title over Lot No. 557. A person only
transmits rights that he possesses. When innocent third persons, RULING: In this case, it appears that the subject property is an
however purchase or acquire rights over the property relying on unregistered public agricultural land. Thus, being a land of the public
domain, petitioners, in order to validly claim acquisition thereof
lOMoARcPSD|7732614

through prescription, must first be able to show that the State has RULING: The remedy of reformation of an instrument is grounded on the
- principle of equity where, in order to express the true intention of the
contracting parties, an instrument already executed is allowed by law to
expressly declared through either a law enacted by Congress or a be reformed. The right of reformation is necessarily an invasion or
proclamation issued by the President that the subject [property] is no limitation of the parole evidence rule since, when a writing is reformed,
longer retained for public service or the development of the national the result is that an oral agreement is by court decree made legally
wealth or that the property has been converted into patrimonial. effective. Consequently, the courts, as the agencies authorized by law
Consequently, without an express declaration by the State, the land to exercise the power to reform an instrument, must necessarily exercise
remains to be a property of public dominion and hence, not susceptible that power sparingly and with great caution and zealous care.
to acquisition by virtue of prescription.
Moreover, the remedy, being an extraordinary one, must be subject to
Thus, the petition was denied, since only the owners can demand a right limitations as may be provided by law. Our law and jurisprudence set
of way. such limitations, among which is laches. A suit for reformation of an
instrument may be barred by lapse of time. The prescriptive period for
MAYBANK PHILIPPINES V. TARROSA actions based upon a written contract and for reformation of an
772 SCRA 670 instrument is ten (10) years under Article 1144 of the Civil Code.
Art. 1142 – Extinctive Prescription; Prescription is intended to suppress stale and fraudulent claims arising
Mortgage Action from transactions like the one at bar which facts had become so obscure
from the lapse of time or defective memory.
The reckoning point for the accrual of the action for mortgage or the
action to file a foreclosure upon a mortgage shall be reckoned upon from In the case at bar, Leyte Gulf had ten (10) years from 1968, the time
the time when the mortgagor defaults in the payment of his when the contract of lease was executed, to file an action for
obligation to the mortgagee. reformation. Sadly, it did so only on May 15, 1992 or twenty-four
(24) years after the cause of action accrued, hence, its cause of
When can the debtor be considered to be in delay? action has become stale, hence, time-barred.
In order that the debtor may be in default, it is necessary that: (a) the Why do we reckon the prescriptive period from the execution of the
obligation be demandable and already liquidated; (b) the debtor contract, and not from its extension?
delays performance; and (c) the creditor requires the performance
judicially or extrajudicially, unless demand is not necessary. First, if, according to Leyte Gulf, there was an agreement between the
parties to extend the lease contract for four (4) years after the original
In this case, Maybank's right to foreclose the real estate mortgage contract expired in 1988, then Art. 1670 would not apply as this provision
accrued only after the lapse of the period indicated in its final demand speaks of an implied new lease (tacita reconduccion) where at the end
letter for Sps. Tarrosa to pay, i.e., after the lapse of five (5) days from of the contract, the lessee continues to enjoy the thing leased "with the
receipt of the final demand letter. acquiescence of the lessor", so that the duration of the lease is "not for
the period of the original contract, but for the time established in Article
Thus, their action for foreclosure has not yet prescribed. 1682 and 1687." In other words, if the extended period of lease was
expressly agreed upon by the parties, then the term should be
(Review) exactly what the parties stipulated, not more, not less.
MAYBANK PHILPPINES V. TARROSA
G.R. No. 213014 (OCT. 14, 2015) Second, even if the supposed 4-year extended lease be considered as
Art. 1142 – Extinctive Prescription; an implied new lease under Art. 1670, "the other terms of the original
Mortgage Action contract" contemplated in said provision are only those terms which are
germane to the lessees’ right of continued enjoyment of the property
RULING: As to the period where we reckon the time the closure for leased. The prescriptive period of ten (10) years provided for in Art. 1144
mortgage can be made, it accrues from the time of receipt of the last applies by operation of law, not by the will of the parties. Therefore, the
demand letter. From that time, a foreclosure can be made. However, if right of action for reformation accrued from the date of execution
the debtor is not in delay, foreclosure upon a mortgage is premature. of the contract of lease in 1968.
BENTIR V. LEANDA Art. 1144. The following actions must be brought within ten
G.R. No. 128991 (APRIL 12, 2000) years from the time the right of action accrues:
Art. 1144 – Actions that prescribe within 10 years
(1) Upon a written contract;
FACTS: On May 15, 1992, respondent Leyte Gulf Traders, Inc. filed a (2) Upon an obligation created by law;
complaint for reformation of instrument, specific performance, (3) Upon a judgment.
annulment of conditional sale and damages with prayer for writ of
injunction against petitioners Yolanda Rosello-Bentir and the spouses
Samuel and Charito Pormida alleged that it entered into a contract of Take note: In the case at bar, the written instrument is the basis for the
lease of a parcel of land with petitioner Bentir for a period of twenty (20) cause of action. Since the law itself provides for the prescriptive period
years starting May 5, 1968. (under Art. 1144), it necessarily follows that it must be reckoned from the
execution of the written instrument.
According to Leyte Gulf, the lease was extended for another four (4)
years or until May 31, 1992. On May 5, 1989, petitioner Bentir sold the The contract of lease itself provides that the 4-year extension period is
leased premises to petitioner spouses Samuel Pormada and Charito not automatic – it must be agreed upon by the parties. If the parties would
Pormada. Leyte Gulf questioned the sale alleging that it had a right of agree to extend the lease, this is not anymore contained in the written
first refusal. Rebuffed, it filed a civil case seeking the reformation of the instrument (which is the basis of 10-year prescriptive period).
expired contract of lease on the ground that its lawyer inadvertently
omitted to incorporate in the contract of lease executed in 1968, the REPUBLIC V. BAÑEZ
verbal agreement or understanding between the parties that in the event G.R. No. 169442 (OCT. 14, 2015)
petitioner Bentir leases or sells the lot after the expiration of the lease, Art. 1144 – Actions that prescribe within 10 years
respondent corporation has the right to equal the highest offer.
FACTS: In 1976, Antonio V. Bañez, Luisita Bañez Valera, and Nena
ISSUE: When do we reckon the 10-year prescriptive period? (The right Bañez Hojilla (collectively, respondents) offered for sale a parcel of land
of action for reformation accrued from the date of execution of the (subject property).
contract of lease.)
lOMoARcPSD|7732614

Pursuant to the offer to sell on 7 December 1981, respondents executed which remains valid, binding and effective to this day. Demand is hereby
a Letter Agreement irrevocably giving CRC the option to purchase the made upon you to discontinue such unauthorized acts and vacate the
subject property, which CRC accepted. The pertinent portion of the premises within fifteen (15) days from receipt hereof.”
Letter Agreement (hereinafter referred to as Contract), to wit:
Clearly, the 29 May 1991 and 24 October 1991 letters demanded
“The co-owners shall take all necessary steps to cause the CRC Portion respondents to return the properties, discontinue the construction,
to be brought under the operation of Republic Act No. 496, as amended, repair, demolition and occupancy of several staff houses, and
and to cause the issuance in their name of the corresponding original unlock the gates, which is to enforce respondents' obligations
certificate of title, all of the foregoing to be accomplished within a pursuant to paragraph 7 of the Contract which reads:
reasonable time from date hereof.
8. An absolute deed of sale containing the above provisions and “7. The co-owners hereby confirm their agreement and permission to
standard warranties on conveyances of real property shall be executed CRC's entry into, construction of building and improvements, and
by the co-owners in favor of CRC or its assignee/s and the same occupancy of, any portion of the Property, and hereby accordingly waive
delivered to the latter together with the original certificate of title upon any right of action they may have against CRC respecting such entry,
payment of the purchase price less the advances made by CRC in construction, or occupancy by the latter of any Portion of the Property.”
accordance with Paragraphs 2 and 3 above; provided, that payment
shall be made by CRC only upon presentation by the co-owners to CRC The letters dated 29 May 1991 and 24 October 1991 are deemed
of certificate/s and/or clearances, with corresponding receipts, issued by demand letters as contemplated under Article 1155. They are demand
the appropriate government office/s or agency/ies to the effect that letters to enforce respondents' obligation under the Contract, which is to
capital gains tax, real estate taxes on the Property and local transfer tax cede possession to petitioner. The letters interrupted the running of the
and other taxes, fees or charges due on the transaction and/or on the prescriptive period which commenced to run anew.
Property have been paid.”
Did the action already prescribe?
As alleged by petitioner, respondents declared afterwards the subject
property as Urbano Bañez property, rented out to third parties the staff The accrual of the cause of action to demand the titling of the land cannot
houses petitioner constructed, and ordered its guards to prohibit the be earlier than 15 August 1984 (based on the letter where respondents
petitioner from entering the compound, which impelled petitioner to file a acknowledged their obligation to deliver the title and asked for a new
complaint for specific performance, recovery of possession, and period to do so).
damages against respondents, including Hojilla, on 10 April 2000.
Among others, the complaint prayed for respondents to surrender and So that, the petitioner can sue on the contract until 15 August 1994. Prior
deliver the title of the subject property and execute a deed of absolute to the expiration of the aforesaid period, the petitioner sent a demand
sale in favor of petitioner upon full payment. It mentioned three letters letter to Hojilla dated 29 May 1991. A few months thereafter, petitioner
sent to respondents on 29 May 1991, 24 October 1991, and 6 July 1999. sent another demand letter to Hojilla dated 24 October 1991. The
prescriptive period was interrupted on 29 May 1991.
There was an allegation:
1. That the complaint that was filed more than eighteen (18) years The consequence is stated in Article 1155 of the Civil Code. It states,
since the contract was executed was beyond the 10-year "[t]he prescription of actions is interrupted when they are filed before the
prescriptive period. Within that 18-year period, there was no act on court, when there is a written extrajudicial demand by the creditors, and
the part of PMO, whether judicial or extrajudicial, to interrupt when there is any written acknowledgment of the debt by the debtor."
prescription.
2. That the letters PMO sent to respondents (Heirs of Banez) were not Following the law, the new ten-year period for the filing of a case by the
demands for respondents to comply with their obligation to deliver petitioner should be counted from 29 May 1991, ending on 29 May 2001.
the title as to interrupt the running of the prescriptive period. The complaint at bar was filed on 10 April 2000, well within the required
period.
ISSUE: WON the action for the titling of the land has already prescribed
(YES) Notably, before the expiration of the new prescriptive period, the
petitioner again sent a new demand letter on 6 July 1999, which again
RULING: We deem material, for the resolution of the issues in this case, caused the same to run anew, which will expire on 6 July 2009. The
the letters that were exchanged by the parties. complaint filed on 10 April 2000 was timely.
Petitioner's letters dated 29 May 1991 and 24 October 1991 – latest Take note: You have to reconcile Art. 1144, with respect to Art. 1155 –
demand letter the effect of interruption as to the running of the prescriptive period.
With regard to the letters, petitioner sent to Hojilla dated 29 May 1991 AINZA V. PADUA
and 24 October 1991, we lift the pertinent portion from the letter dated G.R. No. 165420 (June 30, 2005)
29 May 1991, which demanded respondents to return the properties and Art. 1145 – Actions that must be commenced within 6 years
to unlock the gates:
FACTS: In her complaint for partition of real property, annulment of titles
“Under the agreement to purchase the lot, APT-CRC shall pay the whole with damages, Concepcion Ainza (Concepcion) alleged that respondent-
of the purchase price thereof when the certificate of title and other spouses Eugenia (Eugenia) and Antonio Padua (Antonio) owned a lot
documents enumerated therein are presented to it. Clearly, the with an unfinished residential house, covered by Transfer Certificate of
consummation of the sale is within your control. Title No. 271935. Sometime in April 1987, she bought one-half of an
undivided portion of the property from her daughter, Eugenia, and the
In view of the foregoing, demand is hereby made upon you and your latter’s husband, Antonio, for One Hundred Thousand Pesos
principals, the heirs of Urbano Bañez, to return the properties withdrawn (P100,000.00).
and to unlock the gates leading to the staffhouses (sic), within fifteen
(15) days from receipt thereof, otherwise we will be constrained to No Deed of Absolute Sale was executed to evidence the transaction, but
institute the necessary action to protect the interest of APT-CRC.” cash payment was received by the respondents, and ownership was
transferred to Concepcion through physical delivery to her attorney-in-
In the same vein, the letter dated 24 October 1991 demanded fact and daughter, Natividad Tuliao (Natividad). Concepcion authorized
respondents to discontinue the construction, repair, demolition, and Natividad and the latter’s husband, Ceferino Tuliao (Ceferino) to occupy
occupancy of several staff houses. A pertinent portion of the 24 October the premises, and make improvements on the unfinished building.
1991 letter reads:
In this case, there was a perfected contract of sale (verbal) between
“Considering that these action are unauthorized, they constitute Eugenia and Concepcion. The records show that Eugenia offered to sell
violations of the irrevocable option to purchase dated December 7, 1981, a portion of the property to Concepcion, who accepted the offer and
lOMoARcPSD|7732614

agreed to pay P100,000.00 as consideration. The contract of sale was 1997 increasing the number of dismissed employees to 119, for
consummated when both parties fully complied with their respective participating in the illegal strike.
obligations. Eugenia delivered the property to Concepcion, who, in turn,
paid Eugenia the price of 100,000 pesos. On May 14, 1998, petitioners filed several complaints against TTCI and
MENCORP before the NLRC. However, this case was withdrawn on
However, the consent of both Eugenia and Antonio is necessary for the March 4, 1999 upon motion by the TEU’s counsel which was given due
sale of the conjugal property to be valid. Eugenia alone is incapable of course on March 22, 1999.
giving consent to the contract. Therefore, in the absence of Antonio’s
consent, the disposition made by Eugenia is voidable. Four years later, several complaints for unfair labor practice, illegal
dismissal with money claims, damages and attorney’s fees were filed
Antonio requested Natividad to vacate the premises but the latter against TTCI, Santiago, MENCORP and its General Manager Virginia
refused and claimed that Concepcion owned the property. Antonio thus Mendoza, including the latter’s husband Reynaldo Mendoza (collectively
filed an ejectment suit on April 1, 1999. Concepcion, represented by called the respondents), before the LA from June to July 2002.
Natividad, also filed on May 4, 1999 a civil case for partition of real
property and annulment of titles with damages. In response, TTCI asserted that the petitioners’ cause of action had
already been barred by prescription because the complaints were filed
ISSUE: WON Antonio’s right to seek the annulment of the voidable only in June 2002 or after almost five years from the date of their
contract of sale has prescribed (YES) dismissal.
RULING: The contract of sale between Eugenia and Concepcion, being ISSUE: Whether or not the petitioners’ complaints for illegal dismissal
an oral contract, the action to annul the same must be commenced have already prescribed (YES)
within six years from the time the right of action accrued.
RULING: In the case at bar, October 26, 1997 and November 24, 1997
Eugenia sold the property in April 1987. Hence, Antonio should have appear on record to be the dates when the petitioners’ employment were
asked the courts to annul the sale on or before April 1993. No action terminated by TTCI.
was commenced by Antonio to annul the sale, hence his right to
seek its annulment was extinguished by prescription. The petitioners contend that the period when they filed a labor case on
May 14, 1998 but withdrawn on March 22, 1999 should be excluded from
Even assuming that the 10-year prescriptive period under Art. 173 the computation of the four-year prescriptive period for illegal dismissal
should apply, Antonio is still barred from instituting an action to annul the cases. However, the Court had already ruled that the prescriptive
sale because since April 1987, more than ten (10) years had already period continues even after the withdrawal of the case as though
lapsed without any such action being filed. no action has been filed at all. The applicability of Article 1155 of the
Civil Code in labor cases was upheld in the case of Intercontinental
In sum, the sale of the conjugal property by Eugenia without the consent Broadcasting Corporation v. Panganiban, where the Court held that
of her husband is voidable. It is binding unless annulled. Antonio failed “although the commencement of a civil action stops the running of the
to exercise his right to ask for the annulment within the prescribed period, statute of prescription or limitations, its dismissal or voluntary
hence, he is now barred from questioning the validity of the sale between abandonment by plaintiff leaves the parties in exactly the same position
his wife and Concepcion. as though no action had been commenced at all.”
Take note: A contract of sale, even if an oral one, is valid in whatever In like manner, while the filing of the complaint for illegal dismissal before
form. the LA interrupted the running of the prescriptive period, its voluntary
• A contract of sale is valid, provided that the following elements are withdrawal left the petitioners in exactly the same position as though no
present: complaint had been filed at all. The withdrawal of their complaint
1. Cause effectively erased the tolling of the reglementary period.
2. Object
3. Consent A prudent review of the antecedents of the claim reveals that it has in
fact prescribed due to the petitioners’ withdrawal of their labor case.
• The running of the prescriptive period is reckoned from the Hence, while the filing of the said case could have interrupted the
perfection of the contract, even if it is an oral contract. running of the 4-year prescriptive period, the voluntary withdrawal of
the petitioners effectively cancelled the tolling of the prescriptive
In this case, the prescriptive period was counted from the time the parcel period within which to file their illegal dismissal case, leaving them
of land was sold. The sale could have been questioned since it is in exactly the same position as though no labor case had been filed
voidable (under the Civil Code). Correspondingly, there is an action to at all. The running of the 4-year prescriptive period not having been
have the sale voidable. interrupted by the filing of the labor case, the petitioners’ cause of action
had already prescribed in four years after their cessation of employment
However, it was filed beyond the 6-year prescription period, which must on October 26, 1997 and November 24, 1997. Consequently, when the
be reckoned from the time of the perfection of the contract or that petitioners filed their complaint for illegal dismissal, separation pay,
moment where all the elements of the contract concurred. retirement benefits, and damages in 2002, their claim, clearly, had
already been barred by prescription.
MONTERO V. TIMES TRANSPORTATION
G.R. No. 190828 (MARCH 16, 2015) VIRTUCIO V. ALEGARBES
Art. 1145 – Actions that must be filed within 4 years G.R. No. 187451 (AUG. 29, 2012)
Art.1155 – Interruption of prescription of actions
FACTS: Respondent Times Transportation Co., Inc., (TTCI) is a
company engaged in the business of land transportation for passengers FACTS: Respondent Jose Alegarbes (Alegarbes) filed a Homestead
and goods serving the Ilocos Region to Metro Manila route. TTCI Application for a tract of unsurVeyed land situated in Bañas, Lantawan,
employed the herein 21 petitioners as bus drivers, conductors, Basilan in 1949. His application was approved on January 23, 1952. In
mechanics, welders, security guards and utility personnel. 1955, however, the land was subdivided into three (3) lots – Lot Nos.
138,139, and 140. Lot 139 was allocated to Ulpiano Custodio, while Lot
Sometime in 1995, the rank-and-file employees of TTCI formed a union 140 was allocated to Jesus Virtucio. Custodio and Virtucio both applied
named as Times Employees Union (TEU). for Homestead Applications.
For a second time, on October 17, 1997, TEU declared a strike against
TTCI, but the latter merely reiterated the earlier return-to-work order of Alegarbes opposed the homestead applications filed by Custodio and
the Labor Secretary. For disregarding the said return-to-work order, Virtucio. The Director of Lands rendered a decision denying Alegarbes'
Santiago issued two notices of termination dated October 26, 1997 protest. The applications of Custodio and Virtucio for Lots 139 and 140,
terminating some 106 workers and a revised list dated November 24, respectively, were likewise given due course.
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On May 11, 1989, an order of execution was issued by the Lands

Management Bureau of the Department of Environment and Natural
Resources. It ordered Alegarbes and all those acting in his behalf to
vacate the subject lot, but he refused.
Alegarbes argued that the approval of his homestead application on

January 23, 1952 by the Bureau of Lands had already attained finality
and could not be reversed, modified or set aside. His possession of Lot
Nos. 138, 139 and 140 had been open, continuous, peaceful and
uninterrupted in the concept of an owner for more than 30 years and had
acquired such lots by acquisitive prescription.
Virtucio insists that the period of acquisitive prescription was interrupted

on October 30, 1961 (or in 1954 when Alegarbes filed the protest) when
the Director of Lands rendered a decision giving due course to his
homestead application and that of Ulpiano Custodio. Virtucio further
claims that since 1954, several extrajudicial demands were also made
upon Alegarbes demanding that he vacate said lot. Those demands
constitute the "extrajudicial demand" contemplated in Article 1155, thus,
tolling the period of acquisitive prescription.
ISSUE:
1. WON a protest filed before an administrative agency is considered a
complaint under Article 1155, which would interrupt the running of the
prescriptive period? (NO)
2. WON Alegarbes acquired ownership over the subject property by

acquisitive prescription (YES)
RULING: Civil interruption takes place with the service of judicial

summons to the possessor. When no action is filed, then there is no
occasion to issue a judicial summons against the respondents. The
period of acquisitive prescription continues to run.
In this case, Virtucio claims that the protest filed by Alegarbes against
his homestead application interrupted the thirty (30)-year period of
acquisitive prescription. The law, as well as jurisprudence, however,
dictates that only a judicial summons can effectively toll the said period.
In the same vein, a protest filed before an administrative agency and

even the decision resulting from it cannot effectively toll the running of
the period of acquisitive prescription. In such an instance, no civil
interruption can take place. Only in cases filed before the courts may
judicial summons be issued and, thus, interrupt possession.
Records show that it was only in 1997 when Virtucio filed a case before
the RTC. The CA was, therefore, correct in ruling that Alegarbes
became ipso jure owner of Lot 140 entitling him to retain
possession of it because he was in open, continuous and exclusive
possession for over thirty (30) years of alienable public land.
What is the connection between Article 1155 and acquisitive

prescription?
Article 1155 of the New Civil Code refers to the interruption of

prescription of actions. Interruption of acquisitive prescription, on
the other hand, is found in Articles 1120-1125 of the same Code.
Thus, Virtucio’s reliance on Article 1155 for purposes of tolling the period
of acquisitive prescription is misplaced. The only kinds of interruption
that effectively toll the period of acquisitive prescription are natural and
civil interruption.
Take note: Since the protest is not a complaint, which must necessarily
be judicial in nature, whatever is issued by the Bureau of Lands, that is
not a summons. Thus, it would not have the effect of civil interruption.
***
END OF PRESCRIPTION
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OBLIGATIONS
General Provisions
• Real or Personal Obligations:
Definition of Obligation. Real Obligations Personal Obligations
Obligation to give – delivery of Obligation to do or not to do
a thing:
ART. 1156. An obligation is a juridical necessity to give, to do or a) Positive personal
not to do. (n) a) Determinate thing – see obligation – obligation to
Art. 1460 below do; involves all kinds of
(CIVIL) OBLIGATION as defined by Arias Ramos is a juridical work or services, whether
relation whereby a person (called the creditor) may demand from b) Generic or indeterminate physical or mental
another (called the debtor) the observance of a determinate conduct, thing – not specifically
and, in case of breach, may obtain satisfaction from the assets of the designated or physically b) Negative personal
latter. segregated from all other obligation – obligation not
of the same class to do; involves abstaining
KINDS OF OBLIGATIONS: from doing a certain act
Limited generic thing (based
1. As to juridical quality – on other authors) – generic Note: An obligation to give
a. Natural – see Art. 1423; see Art. 1424 to 1430 for examples objects classified according to a partakes the nature of an
particular class obligation not to do
Example: A certain debt has already prescribed, such that the
collection of sum of money has already lapsed according to law. Susceptible of demand through Not susceptible of actions for
Despite the lapse of that period, the debtor still voluntary pays the filing for an action for specific performance; may file
without acknowledging the existence of the debt. specific performance for breach of contract
In this case, the debtor, when he voluntarily pays, cannot demand Determinate Thing
what he has paid back. As a natural obligation, it authorizes the
creditor to have the right of retention to what has been delivered to Art. 1460. A thing is determinate when it is particularly
him. designated or physical segregated from all other of the same
class.
b. Civil – see Art. 1423
The requisite that a thing be determinate is satisfied if at the
Art. 1423. Obligations are civil or natural. Civil obligations time the contract is entered into, the thing is capable of being
give a right of action to compel their performance. Natural made determinate without the necessity of a new or further
obligations, not being based on positive law but on equity and agreement between the parties.
natural law, do not grant a right of action to enforce their
performance, but after voluntary fulfillment by the obligor, they Rules as to Determinate/Generic Thing
authorize the retention of what has been delivered or rendered
by reason thereof. Some natural obligations are set forth in the Art. 1262. An obligation which consists in the delivery of a
following articles. determinate thing shall be extinguished if it should be lost or
destroyed without the fault of the debtor, and before he has
c. Mixed incurred in delay.
ESSENTIAL REQUISITES OF AN OBLIGATION: When by law or stipulation, the obligor is liable even for
fortuitous events, the loss of the thing does not extinguish the
1. Vinculum juris or the juridical/legal tie – may arise from bilateral or obligation, and he shall be responsible for damages. The
unliteral acts of persons same rule applies when the nature of the obligation requires
the assumption of risk.
2. Active Subject (Creditor or Obligee) – may demand the fulfillment
of the obligation; creditor or oblige Genus nunquam perit -- Genus never perishes
3. Passive Subject (Debtor or Obligor)– against whom the obligation Art. 1263. In an obligation to deliver a generic thing, the loss
is juridically demandable or destruction of anything of the same kind does not
extinguish the obligation.
What is the consequence of limitations of person’s capacity to act (to
enter into contracts)? ANCILLARY ELEMENTS OF AN OBLIGATION
• Since not all obligations are contracts, these limitations are Accompanying but not essential elements in the creation of an obligation
understood in relation to capacity to enter into contracts. For
example, the fact of insanity will not prejudice the creation of an 1. Formality
obligation from another source – a source other than contracts. Example: Donations propter nuptias – follows the formalities of
ordinary donations:
Example: If one of the parties to a contract is a minor, the contract
is voidable. But if that minor kills another person, he is not Art. 748. The donation of a movable may be made orally or in
automatically exempted from liability from acts or omissions writing.
punished by law or liability arising from quasi-delicts.
An oral donation requires the simultaneous delivery of the
4. Prestation – act or service which constitutes the subject of the thing or of the document representing the right donated.
obligation
If the value of the personal property donated exceeds five
• Requisites for a prestation to exist: thousand pesos, the donation and the acceptance shall be
a) Must be licit or legal (possible in fact and in law) made in writing, otherwise, the donation shall be void.
b) Must be determinate, or at least, determinable
c) Must be, as a rule, of pecuniary value Art. 749. In order that the donation of an immovable may be
valid, it must be made in a public document, specifying therein
the property donated and the value of the charges which the
donee must satisfy.
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2. Delivery
Example: Real contracts (e.g. contract of loan, contract of deposit)
– apart from the 4 elements, the subject matter of real contracts
must be accompanied by delivery.
SERRANO V. CENTRAL BANK OF THE PHILPPINES

G.R. No. L-30511. February 14, 1980
Additional Case
RULING: In bank deposits, there is no depositor-depositary relationship.

Therefore, there is no contract of deposit, but of a simple loan. All kinds
of bank deposits, whether fixed, savings, or current are to be treated as
loans and are to be covered by the law on loans.
There actually exists a debtor-creditor relationship. The petitioner here

in making time deposits with respondent Overseas Bank of Manila was
in reality a creditor of the respondent Bank and not a depositor. The
respondent Bank was in turn a debtor of petitioner. Failure of the
respondent Bank to honor the time deposit is failure to pay its obligation
as a debtor.
3. Causa vivendi or causa obligationis -- the proximate or

reasonable cause why parties enter into a contract
Example: Time is of the essence (Art. 1169) – You commission
someone to bake a cake for your wedding. If your wedding is
scheduled today, demand is not necessary. It is understood that if
they don’t deliver the cake on your wedding day, they are already
in delay. In this case, time is the motivating factor why you entered
into that contract.
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*** OBLIGATIONS ARISING FROM CONTRACTS

SOURCES OF OBLIGATION
Again, you have to remember that you have to correlate the provisions ART. 1159. Obligations arising from contracts have the force of law
with one another – Art. 1157 in relation to 1158, 1159, 1160, & 1161 between the contracting parties and should be complied with in
depending on the source of the obligation. good faith. (1091a)
What are the sources of obligations?

How do we define a contract?
The enumeration provided for under Art. 1157 is exclusive.
A contract is defined under Art. 1305:
ART. 1157. Obligations arise from: Article 1305. A contract is a meeting of minds between two
(1) Law; persons whereby one binds himself, with respect to the other,
(2) Contracts; to give something or to render some service.
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and What are the characteristics of the obligations arising from contracts?
(5) Quasi-delicts. (1089a) It is provided for under the Principle of Autonomy of Will under Art. 1159.
In here, “compliance in good faith” does not necessarily preclude

If there are some other sources other than that provided for under Art. substantial compliance. What the law requires is exactly “compliance in
1157, any injury that will arise therefrom is not actionable because only good faith” especially in cases of contracts—not necessarily a literal or
these sources are recognized under the law. clear observance of the only stipulations of the contract. You have to
comply or oblige yourself in accordance with the stipulations, conditions,
OBLIGATIONS ARISING FROM LAW terms, or other provisions/clauses provided for in the contract.
Those are some of the matters that you have to consider, in order to
ART. 1158. Obligations derived from law are not presumed. Only know if the obligations have been complied with in good faith.
those expressly determined in this Code or in special laws are
demandable, and shall be regulated by the precepts of the law However, in default of an agreement between the parties, it is the Civil
which establishes them; and as to what has not been foreseen, by Code that shall regulate the manner of which the parties to that contract
the provisions of this Book. (1090) shall carry out their obligations. it is important that apart from
understanding the contract itself, it is required that we learn how the law
regulates contracts. It is deemed implied that the law is included in each
It is very specific that obligations arising from positive law are never and every contract.
presumed. If the law does not provide for such an obligation, then that
obligation does not exist legally. Remember, even if it is a contract and has the force of law between the
contracting parties, contracts still have to abide with the provisions of
There are some commentaries or books that would say that the law.
enumeration under Art. 1157 is actually misleading, because, in truth,
the actual basis of obligations are only contracts and law. Why? One of the laws that regulates contracts in general is the NCC (New Civil
Because the fact that our New Civil Code (NCC) has already recognized Code).
the law, then other sources of obligations may be subsumed under the
category of law—like quasi-contracts, acts or omissions punished by From the definition of contract, take note of the phraseology of the law:
law, and quasi-delicts. Nevertheless, you already know Art. 1157. “A contract is a meeting of minds” – in each and every contract, one of
the essential requisites is the existence of consent between the
How do we determine that an obligation actually arises from law or some contracting parties. There must be at least two persons involved. These
other source? persons are what we call the contracting parties.
It must be noted that in the birth of an obligation, there must always be Contracts with consent and have no observation of any formality are
a concurrence between 1) the law that establishes or recognizes that deemed valid under the law (such as oral contracts). That is one of the
obligation and 2) an act or condition upon which the obligation is based things we already learned in Ainza vs. Padua where the SC held that:
or predicated; such that when the law establishes the obligation—and
the act or condition upon where it is based is nothing more but a factor “Even if it is a sale of parcel of land, no formality is required
for determining the moment it becomes demandable—then, we say it is for the validity of that contract, because a contract of sale is a
the law that is the source of the obligation. CONSENSUAL contract and not a formal contract.”
But, if the law merely recognizes the existence of an obligation Formal contract – one which requires certain formalities in
generated by an act which may constitute a contract, quasi-contract, order for it to be valid.
acts or omissions punished by law, and quasi-delict, and the law’s only
purpose is to regulate such an obligation, then we say that it is the act What may be the object of a contract?
itself is the source of the obligation, and not the law. (Hurado) In a contract, the object or subject matter therein may be either:
1. To give something (OBLIGATION TO GIVE)
2. To do/render some service (OBLIGATION TO DO)
Examples of obligations arising from law (legal obligations):
1. Art. 36 of the Family Code – psychological incapacity Debtor– a person who binds himself to give something or to render
2. Art. 68-71 of the Family Code – marital obligations some service
If those obligations that are to be observed in marriage are not provided If you look at the meaning of “contract”, it incorporates the meaning of
for under the Family Code, then the obligation itself does not exist. an “obligation” because a contract is one of its sources.
Because there are no other acts or conditions upon which we can
predicate or base these obligations on.
(ART. 1159) AUTONOMY OF WILL
Under the Principle of Autonomy of Will, the contracting parties are

presumed under the law to be on equal level or equal footing when they
enter into a contract.
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When the SC sees that the parties in a contract are not on equal footing, Settled is the rule that: any contract which appears to be heavily
or heavily weighs in favor of only one of the contracting parties, it is weighted in favor of one of the parties so as to lead to an unconscionable
violative of the principle. Why? Because it is only the will of one of the result is void. Any stipulation regarding the validity or compliance of the
contracting parties that dictates the terms and stipulations in a contract. contract which is left solely to the will of one of the parties, is likewise,
invalid.
The Principle of Autonomy of Will of Contracts was illustrated in the case
of United Alloy vs. UCPB. Courts have the authority to strike down or to modify provisions in
promissory notes that grant the lenders unrestrained power to increase
UNITED ALLOY V. UCPB interest rates, penalties and other charges at the latter's sole discretion,
816 SCRA 70 (JAN. 30, 2017) and without giving prior notice to and securing the consent of the
Art. 1159 – Autonomy of Will borrowers.
FACTS: UNIALLOY was granted a credit accommodation by Courts may still reduce iniquitous or unconscionable rates charged for
respondent United Coconut Planters Bank (UCPB) in the amount of 50 the use of money.
million, as evidenced by a Credit Agreement. Part of UNIALLOY's
obligation under the Credit Agreement was secured by a Surety SUMMARY: Take note that in this case, the debtor UNIALLOY
Agreement, dated December 18, 2000, executed by UNIALLOY contracted a loan from UCPB. Alongside this contract of loan, as
Chairman Van Der Sluis, UNIALLOY President David Chua and his evidenced by the PNs, there were stipulations as to the interest; that is
spouse, Luten Chua (Spouses Chua), and one Yang Kim Eng. Six (6) a separate and distinct contract because it is accessory to in the contract
Promissory Notes were later executed by UNIALLOY in UCPB's favor. of loan. In order that this contract of loan be allowed by UCPB, the latter
placed the condition that it must be a secured loan. That is why there is
UNIALLOY and UCPB also entered into a "lease-purchase" contract an execution of a Surety Agreement.
wherein the former assured the latter that it will purchase several real
properties which UCPB co-owns with the DBP. Subsequently, In the Surety Agreement, there are persons involved: Sps. Chua, Yang,
UNIALLOY failed to pay its loan obligations. The last day of the PNs is and Van Der Sluis. They are the sureties. Based on the stipulations, they
on April 30, 2001. On August 27, 2001, UCPB filed against UNIALLOY, bound themselves to be solidarily liable with UNIIALLOY to UCPB.
the spouses Chua, Yang and Van Der Sluis an action for Sum of Money
with Prayer for Preliminary Attachment. Consequently, UCPB also In this situation alone, we already have 3 contracts – (1) contract of loan,
unilaterally rescinded its lease-purchase contract with UNIALLOY. (2) contract of interest (as part of the contract of loan), and (3) contract
of surety agreement.
On the other hand, UNIALLOY filed against UCPB, UCPB Vice-
President Robert Chua and Van Der Sluis a complaint for Annulment Sureties are principally liable with the principal debtor.
and/or Reformation of Contract with Damages, with Prayer for a Writ of Guarantors are only liable in default of the principal debtor.
Preliminary Injunction or Temporary Restraining Order.
UNIALLOY is the principal debtor in this case. Sps. Chua, Yang, and
UNIALLOY’s contention – that Van Der Sluis, in cahoots with UCPB Van Der Sluis, as sureties, are therefore principally and solidarily liable
Vice-President Robert Chua, committed fraud, manipulation and with UNIALLOY. If UNIALLOY cannot pay the loan with UCPB, then
misrepresentation to obtain the subject loan for their own benefit. UCPB has a right of action to collect, as against not only UNIALLOY, but
UNIALLOY prayed, among others, that three (3) of the six (6) also with the sureties.
Promissory Notes it executed be annulled or reformed or that it be
released from liability thereon. How do you distinguish sureties from guarantors?
Guarantors are not principally liable with the principal debtors. They are
UCPB’s contention – Based on the Surety Agreement, UNIALLOY’s only liable in default of the principal debtor. They are merely subsidiarily
failed to pay their obligation by non-payment of the promissory notes. liable, not solidarily.
ISSUE #1: WON UNIALLOY failed to pay their obligations to UCPB. On the contract of interest (which is an accessory contract), the Court
held that it is assumed that in a contract, the contracting parties are on
What did UNIALLOY breach that the SC held them liable? equal level as they entered into their contract, pursuant to the Priniciple
Source of obligation: (Contract) Surety agreement’s promissory notes of Autonomy of Will. Was that observed in this case? No.
HELD (as explained by Atty. Alabastro): UCPB made a judicial The SC held that it was even UCPB who unilaterally determined the
demand by filing an action for the Sum of Money against UNIALLOY increase in the stipulated interest rate. That violates the Priniciple of
after almost 4 months from the due date. Autonomy of Will in a contract. Why? Because it was only the decision
of one contracting party to increase the interest rate. It was without
Petitioners do not deny their liability under the Surety Agreement. consent and knowledge on the part of UNIALLOY as the debtor. That is
According to the SC, their obligations were arising from a contract. Since why the SC had to strike down those stipulations as void.
obligations arising from contracts require compliance in good faith, and
since it was based on the autonomy of the parties to enter that contract, OBLIGATIONS ARISING FROM QUASI-CONTRACTS
there is no other reason why UNIALLOY did not pay UCPB—other than
the fact that they were evading that payment. Therefore, they failed to
pay their obligations provided for in the promissory notes in the Surety What are quasi-contracts? What are the governing laws on quasi-
Agreement. contracts?
Alongside those, there were stipulations regarding the interest. Obligations derived from quasi-contracts are provided for under Art.
Promissory notes are debts. It must be in writing; otherwise, no one can 1160.
agree on an interest. There were certain interests written on the PNs.
ART. 1160. Obligations derived from quasi-contracts shall be
What is the issue in relation to the interest rates? subject to the provisions of Chapter 1, Title XVII, of this Book. (n)
ISSUE #2: WON the 24% interest rate on the total amount due is void.
HELD: The Court finds it proper to modify the interest rates imposed on How do we define a quasi-contract?
respondents' obligation. Based on the attached Consolidated Statement A quasi-contract is defined under Art. 2142:
of Account, UCPB has already imposed a 24% interest rate on the total
amount due on respondents' peso obligation for a short period of six Article 2142. Certain lawful, voluntary and unilateral acts give
months. rise to the juridical relation of quasi-contract to the end that no
one shall be unjustly enriched or benefited at the expense of
another.
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The main principle why the law recognizes quasi-contracts is on the Article 2154. If something is received when there is no right
basis of equity “such that no one shall be unjustly enriched or benefited to demand it, and it was unduly delivered through mistake, the
at the expense of another”. obligation to return it arises.
In quasi-contracts, remember the mnemonic LUV.
In this payment by mistake, take note that there was something received
1. Lawful where no obligation, no contract, and no juridical relation were set or
2. Unilateral existed whereby that person who received the thing may able to demand
3. Voluntary Acts it. The receipt or the delivery of that thing in favor of another was made
through mistake.
These give rise to a juridical relation between the parties. That juridical Under the quasi-contract of payment by mistake, it gives rise to an
relation is based on a quasi-contract. obligation on the part of the person who received it to return it to the
other.
What distinguishes a quasi-contract from an ordinary contract is the
absence of consent. There is a presumption under the law under Art. 2163 where we can say
that payment was made by mistake.
In the case of Perez vs. Pomar (2 Phil. 682), the SC noted that a quasi-
contract, no express consent is given by one party in favor of the other. Article 2163. It is presumed that there was a mistake in the
The consent needed in a contract is provided by law through a payment if something which had never been due or had
presumption or a presumptive consent. already been paid was delivered; but he from whom the return
is claimed may prove that the delivery was made out of
2 TYPES OF QUASI-CONTRACT: liberality or for any other just cause.
1. Negotiorum gestio (Quasi-contract of officious management)
2. Solutio indebiti (Quasi-contract of payment by mistake) If it were out of liberality or any other just cause, then it doesn’t pertain
to a quasi-contract. That actually partakes the form of natural
Negotiorum gestio obligation (Art. 1424 and 1428.
How do we define a negotiorum gestio? What are essentials in payment by mistake are the facts that (1) the
A negotiorum gestio is defined under Art. 2144: debtor who has received the thing has no right to demand it and (2) it
was made through mistake. There is an implied trust on both parties.
Article 2144. Whoever voluntarily takes charge of the agency
or management of the business or property of another, Solutio indebiti vs. Natural obligations
without any power from the latter, is obliged to continue the
same until the termination of the affair and its incidents, or to Solutio indebiti is a civil obligation; one that is based on a quasi-
require the person concerned to substitute him, if the owner is contract. There is no prior civil obligation in order that one party may
in a position to do so. This juridical relation does not arise in take another, or may be obliged in favor of another; whereas, Art. 1424
either of these instances: and 1428 are natural obligations:
(1) When the property or business is not neglected or Article 1424. When a right to sue upon a civil obligation has
abandoned; lapsed by extinctive prescription, the obligor who voluntarily
performs the contract cannot recover what he has delivered
(2) If in fact the manager has been tacitly authorized by the or the value of the service he has rendered.
owner.
Article 1428. When, after an action to enforce a civil
In the first case, the provisions of Articles 1317, 1403, No. 1, obligation has failed the defendant voluntarily performs the
and 1404 regarding unauthorized contracts shall govern. obligation, he cannot demand the return of what he has
delivered or the payment of the value of the service he has
In the second case, the rules on agency in Title X of this Book rendered.
shall be applicable.
Natural obligations are not based on positive law but are based on
In a negotiorum gestio, we are introduced to a situation where a gestator natural law and equity. There is a prior civil obligation to pay, however,
is actually obliged under the law to observe a certain conduct in favor of the right of action to pay it has already elapsed or has been extinguished
the owner of a property. by prescription. Nevertheless, despite the fact that the obligation has
been extinguished, there is a voluntary payment.
Example:
Payment under solutio indebiti is made based on mistake on the part
There are two bundoks grazed by animals/cattle. One bundok is of the payor which may be demanded back. For natural obligations, it
owned by A, and the other by B. By sheer luck, it was only the is voluntary, there is no mistake, and you cannot demand the payment
mountain of B that was hit by rainstorm. Since B is away, there is no back because it allows the retention of the thing that was given.
one to fend for the animals of B. A allowed the animals of B to go over
his bundok. As a result, the animals grazed on the bundok of A. A is Another concept you have to take note of under solutio indebiti is accion
called the gestator. in rem verso.
Accion in rem verso (unjust enrichment)
That is the quasi-contract of officious management. Even if there is
no express consent between A & B, if A will voluntarily assume a More or less, they are the same, except that in accion in rem verso, there
liability, under the law, this juridical relation will give rise to an is no mistake. This is provided for under Art. 22 of the NCC.
obligation on the part of A.
Article 22. Every person who through an act of performance
Once B returns, he must reimburse A if A has already incurred certain by another, or any other means, acquires or comes into
expenses in taking care of B’s animals. Otherwise, B will be unjustly possession of something at the expense of the latter without
enriched at the expense of A. just or legal ground, shall return the same to him.
Solutio indebiti Accion in rem verso is also not immediately demandable, in contrast with
solutio indebiti. In the case of Shinryo Company vs. RRN Inc., the SC
How do we define a solutio indebiti? said that an accion in rem verso is considered merely an auxiliary action
A solution indebiti is defined under Art. 2154:
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available only when there is no remedy to demand the return of the thing Let’s say one person filed for a suit on estafa. As a general rule, in
based on contract, quasi-contract, crime, and quasi-delict. the absence of any showing that there is a reservation, waiver, etc.,
the civil liability is deemed instituted or already placed as part of the
The right to demand a thing in solutio indebiti is a principal action. You criminal action such that if you file a case for estafa against a person,
can demand it right away. that person may be criminally liable and at the same time may be held
civilly liable.
Other examples of quasi-contracts
Exceptions to the institution of civil liability:
There are other quasi-contracts provided for under the NCC. Read Is there an instance where you can pursue the civil action separate
Articles 2064-2075 which provides situations where quasi-contracts and distinct from the criminal action? Yes.
may arise.
1. When there is a waiver of criminal action and if the offended party
But take note that principal quasi-contracts are negotiorum gestio and will only institute a civil action based on the civil liability ex-delicto
solutio indebiti.
2. When there is an express reservation such that the offended party
OBLIGATIONS ARISING FROM ACTS & or will file the civil action first before filing the criminal action
OMISSIONS PUNISHED BY LAW
3. When it is based on an independent civil action such that the civil
liability may be pursued in another action, but the source is one
We have now the 4th source of an obligation. This should be read which is different from the civil liability ex-delicto, meaning one
alongside Art. 1161. which arises from contract, quasi-contract, or quasi-delict
ART. 1161. Civil obligations arising from criminal offenses shall be In criminal proceedings, there are certain consequences that happen
governed by the penal laws, subject to the provisions of article 2177, upon the death of the accused such as extinguishment of the criminal
and of the pertinent provisions of Chapter 2, Preliminary Title, on liability.
Human Relations, and of Title XVIII of this Book, regulating
damages. (1092a) Cases (for our consumption | may be asked in the exam):
1. Bernardo vs. People (10/05/2015)
2. People vs. Paras (10/22/2014)
Remember that Art. 100 of the RPC states that “Every person criminally
liable is also civilly liable.” Acts or omissions punished by law may be Finally, take note that with respect to the civil liability ex-delicto, there
sources of civil obligations or civil liability ex-delicto. are certain consequences with regard to the civil liability if the accused
is acquitted. This would depend on the ground of acquittal.
Civil liability ex-delicto – civil liability which arises from an act or
omission punished as a felony • If the acquittal is based on the non-committal of the crime, then
the civil liability is extinguished.
What are the civil liabilities that will arise out of a felony which is
committed? • If the acquittal is on the ground that the accused is not identified
1. Art. 105 of the RPC – Restitution as the person who committed a felony, civil liability cannot also
2. Art. 106 of the RPC – Reparation arise.
3. Art. 107 of the RPC – Indemnification for damages
4. Art. 108 of the RPC – Obligation to make restoration, reparation for • If the acquittal is on the ground that the guilt is not proven beyond
damages, or indemnification for consequential damages and actions reasonable doubt, civil liability is not extinguished.
to demand the same
If the accused, during the duration of the trial, will set-up the defense of
Take note of Art. 31 of the NCC as well which talks about independent an exempting circumstance under Art. 12 of the RPC, will this mean the
civil actions: extinguishment of the civil liability ex-delicto? No. Because exempting
circumstances pertain only to criminal liability.
Article 31. When the civil action is based on an obligation
not arising from the act or omission complained of as a Example:
felony, such civil action may proceed independently of the
criminal proceedings and regardless of the result of the An insane person or a minor cannot be criminally liable for murder or
latter. homicide because of Art. 12 of the RPC. But with respect to the
damages that would arise from the death of the victim, extinguishment
Take note that there are those actions which we consider as an of civil liability is not automatic. The law provides that the ones who
independent civil action. In independent civil actions, the sources of will answer for the civil liability would be the persons charged
civil obligations are different. If a certain act or omission exists, it will give responsible to have the parental authority over them such as their
rise to different types of obligation. parents, guardians, etc.
Example: Take note that even if you have Art. 100 of the RPC, there are certain
crimes that do not give rise to a civil liability although they are considered
A pedestrian was hit by a car. From that incident, the driver can as felonies. (Ex. Treason, rebellion because there is no injured party)
actually be criminally liable for reckless imprudence resulting in
homicide, etc. This crime can be a source of civil obligations, and this
civil liability ex-delicto can be pursued separate and distinct from other OBLIGATIONS ARISING FROM QUASI-DELICTS
civil obligations, which may be based on some other source.
When you pursue an action for the civil liability ex-delicto, can you file ART. 1162. Obligations derived from quasi-delicts shall be
another action for damages? Yes, but based on another source – a governed by the provisions of Chapter 2, Title XVII of this Book, and
quasi-delict. That is why you may pursue both actions at the same time. by special laws. (1093a)
But take note that there are some limitations to these actions such as
the limitation on double recovery where you cannot recover the same Quasi-delicts are also called culpa aquiliana or tort. The law that
amount of damages from the same incident. generally governs quasi-delicts is Art. 1162 of the NCC.
Example: How do we define a quasi-delict?
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A contract is defined under Art. 2176: person who is injured may recover damages. But, we will also learn
later on about tortuous interference where, if a third person will
Article 2176. Whoever by act or omission causes damage to interfere in the performance of a certain obligation, it shall also give
another, there being fault or negligence, is obliged to pay for rise to a liability for damages.
the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a In this case, the contracting parties are A & X. With regard to the
quasi-delict and is governed by the provisions of this Chapter. breach of contract, it is A who is liable and not X, because there is no
contract between B & X. A may only interpose the defense that the
Rule on the limitation of double recovery under Art. 2177: proximate cause of the loss of the goods is on the account of B.
Article 2177. Responsibility for fault or negligence under the A may file a case against B for culpa aquiliana. Remember that B’s
preceding article is entirely separate and distinct from the civil truck driver and B are solidarily liable.
Ðliability arising from negligence under the Penal Code. But
the plaintiff cannot recover damages twice for the same act or X does not have privity with respect to B. It is only as against A. The
omission of the defendant. liability of B as the actual tortfeasor is only subsidiary. X can file an
action for breach of contract against A, because it is against A that X
There is no recovery for damages twice on account of the same incident, has a contract with. But if X will hold B liable, it will only be possible if
even if that incident would give rise to different sources of obligations. A will interpose the defense that the proximate cause of the loss is the
negligence of B.
Does it mean that if there is a pre-existing contractual relation between *Contract of carriage – perfected upon delivery
the parties? And if there is a breach of that contract, that breach cannot
be considered as a quasi-delict? It’s not automatic. For as long as there Culpa aquiliana vs. Culpa criminal
is negligence, which would give rise to an action for damages against
the one who committed the act constituting a tort or a quasi-delict, then Culpa aquiliana Culpa criminal
the liability may be based on a quasi-delict under Art. 2176.
The legal basis for the liability of In culpa criminal, there is no
culpa aquiliana is that there crime unless the law punishes it.
What are those instances where by negligence it will give rise to certain
exists a quasi-delict. For as long Under the law, the only culpa
obligations?
as there is fault or negligence criminal that we punish is
resulting in damage or injury to reckless imprudence resulting in
3 KINDS OF CULPA (NEGLIGENCE):
another, culpa aquiliana can homicide, serious physical
1. Culpa criminal
arise. injuries, destruction of property,
2. Culpa contractual
etc.
3. Culpa aquiliana (quasi-delict)
As to criminal intent, it is not In culpa criminal, it is essential in
ELEMENTS IN ORDER TO RECOVER DAMAGES FROM THE
necessary in culpa aquiliana. order for a person may be held
TORTFEASOR:
liable.
1. There must be a fault or negligence on the part of the defendant
2. Damage is suffered or incurred by the plaintiff
3. The proximate cause or the relation of cause and effect between the The nature of the right violated In culpa criminal, it is a public one
fault and negligence of the defendant and the damage incurred by in culpa aquiliana is a private since it is a wrong committed
the plaintiff right. against the State.
In culpa aquiliana, every quasi- In culpa criminal, not every form
Example: delict gives rise to a liability for of negligence can give rise to a
damages. civil liability ex-delicto especially if
A is a common carrier under the law of certain goods. A has certain that culpa criminal does not bear
trucks. One truck of his collides with a truck owned by B. This collision civil liability.
would give rise to different types of obligations.
As to quantum of proof, In culpa criminal, the quantum of
In the truck of A, X has his goods, because A & X entered into a preponderance of evidence in proof is “beyond reasonable
contract of carriage. These goods must be delivered from Davao to sufficient. doubt”.
Bukidnon within the day. In A’s truck are 2 of his employees who are As to the sanctions, the In culpa criminal, sanctions are
charged responsible to deliver the goods of X. Because of the damages under culpa aquilana imprisonment or payment of fine
negligence on the part of the A’s driver, it resulted to a collision and is based on Art. 2176 in with damages (civil liability ex-
the death of the employees. The collision also resulted to the relation to Art. 2177 of the delicto), restitution, reparation,
destruction of X’s goods. NCC. and indemnification for damages.
Take note that in this case, even on account of the single incident, it
may give rise to the three kinds of culpa. Culpa aquiliana vs. Culpa contractual
Culpa aquiliana – Because of the gross negligence on the part of B’s In the case of Sps. Estrada vs. Phil. Rabbit Bus Lines, the Court
truck driver, it resulted to injuries and death of the employees of A; compared culpa aquiliana and culpa contractual.
even if there is no pre-existing contractual relationship between A &
B. Considering the gross negligence, it will give rise to liabilities on the Culpa aquiliana Culpa contractual
part of B for culpa aquiliana. As you will learn, employees and Based on a quasi-delict. The The type of negligence is direct
employers are solidarily liable. Therefore, B’s truck driver and B are liability of the tortfeasor is direct, and immediate (meaning it
solidarily liable. primary, and solidary. depends on the privity of
contract), but not solidary. It is
Culpa criminal – Assuming that B’s truck driver is alive, he will also be merely subsidiary.
liable for reckless imprudence resulting to homicide. This partakes the
form of culpa criminal. As to the defense of a good In culpa contractual, this is not a
father of a family or due complete or proper defense. The
Culpa contractual – Finally, because of this incident, this caused a diligence, it is a proper defense complete defense is alleging that
breach of contract of carriage between A & X on account of insofar as parents, guardians, there is no contract such that
negligence. As a rule under culpa contractual, the ones who are and employers are concerned in there is none to be breached. (But
considered negligent must be the contracting parties in order that the culpa aquiliana (Art. 2180).
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remember that a contract of

carriage is a real contract).
There is no presumption of In culpa contractual, there is a
negligence in culpa aquiliana. legal presumption of negligence
The injured party must clearly for as long as there was a
prove the negligence of the contract, and the contract was
defendant because this is the breached. The breach will already
very basis of his right of action. give rise to a liability for culpa
contractual. The plaintiff only
needs to establish the existence
of a contract and the obligor’s
failure to perform his obligations.
It is not necessary for the plaintiff
to prove or allege that the
obligor’s non-compliance was
due to his fault or negligence.
Under Art. 1735, it is the law that

imposes the legal obligation of
common carriers to observe
extra-ordinary diligence.
Culpa criminal vs. Culpa contractual
We have the case of Cancio vs. Isip where it talked about the retroactivity
of procedural laws, and why it is allowed as an exception to the rule
under Art. 7 of the NCC. In this case, there were violations of BP 22 and
estafa. The criminal actions for these were actually dismissed. What the
injured party did was to file an action for collection for sum of money.
The issue is WON the dismissal of the criminal action also extinguished
the right of action for collection of sum of money. The SC held that it
does not extinguish, because the basis for the action of the collection of
sum of money was actually the breach of contract of loan.
With respect to quasi-delict, the law is very particular. The reason why
an obligation based on a quasi-delict arises is because of some fault or
negligence on the part of one of the parties or the tortfeasor.
While the law provides that there must be negligence, the law does not
give us a definition of what is negligence—precisely because negligence
is a factual matter. That is why jurisprudence supplants that void.
In the case of Picart vs. Smith, the SC laid down the test for the
existence of negligence in order that the liability for quasi-delict may
be determined. It is stated as:
“Did the defendant in doing the alleged negligent act use that person
would have used in the same situation? If not, then he is guilty of
negligence.”
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*** Actual or Real Delivery

NATURE AND EFFECTS OF OBLIGATIONS When can we say that actual delivery can be made? That is provided for
under Art. 1497:
What are some of the consequences that we can expect to happen
given that an obligation exists?
Article 1497. The thing sold shall be understood as delivered,
when it is placed in the control and possession of the vendee.
THREE (3) PRESTATIONS:
(1) Obligations to give;
When will we say that there is control and possession?
(2) Obligations to do;
Coupled with the act of actually delivering the thing, the SC held in the
(3) Obligations not to do
case of Equatorial vs. Mayfair that there must be an intention of the
parties to actually make such delivery. Otherwise if there is no such
OBLIGATIONS TO GIVE intention, then delivery is more apparent than real. Meaning, it’s only a
legal fiction.
The nature and effects of this obligation is provided for under Art. 1163:
Therefore, there must be (1) the act of actually delivering the thing, and
(2) intention of the parties to deliver.
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 Legal or Constructive Delivery
family, unless the law or the stipulation of the parties requires
another standard of care. (1094a) Under these circumstances, there is no real or actual delivery, but by
legal fiction or by operation of law, a delivery is presumed to have been
made. There are different types of constructive delivery:
In obligations to give, always remember to ask: Is it to give (1) a
determinate thing or (2) a generic thing? • Tradición instrumental – execution of public instruments. The
delivery of these instruments is already sufficient. This is provided for
Under Art. 1163, even if it is not expressly provided for, the principal
under
obligation in every obligation to give is to deliver. This obligation is
Art. 1498 (1): When the sale is made through a public instrument, the
already implied in the provision.
execution thereof shall be equivalent to the delivery of the thing which is
the object of the contract, if from the deed the contrary does not appear
In obligations to deliver a thing or to perform the obligations specifically,
or cannot clearly be inferred.
what is the distinction between delivering a determinate thing and a
generic thing.
Example: Donation of parcel of land by executing a public instrument in
In obligations to give a determinate thing, the obligor or the debtor binds
the donee’s favor.
himself to deliver to the obligee or to the creditor a thing or object which
is physically segregated from all others of the same class. The obligation
on the part of the debtor must be to give that specific thing. • Tradición simbolica – delivery of symbolic things.
Art. 1498 (2): With regard to movable property, its delivery may also be
In obligations to give a generic thing, we have a different rule. A generic made by the delivery of the keys of the place or depository where it is
thing is not specifically segregated from all others of the same class. So, stored or kept.
for as long as you give a thing from the same class, then you have
already complied with your obligation. Even if the provision states that with regard to movable property,
tradicion simbolica is also applicable to immovable properties.
But we also have Art. 1246:
Example: Delivery of car keys to you is symbolical of giving you a car, or
Article 1246. When the obligation consists in the delivery of keys to a condo unit for a condo.
an indeterminate or generic thing, whose quality and
circumstances have not been stated, the creditor cannot • Tradición longa manu – also known as delivery by long hand by mere
demand a thing of superior quality. Neither can the debtor consent or agreement of the contracting parties.
deliver a thing of inferior quality. The purpose of the obligation Art. 1499: The delivery of movable property may likewise be made by
and other circumstances shall be taken into consideration. the mere consent or agreement of the contracting parties, if the thing
sold cannot be transferred to the possession of the vendee at the time
This provision talks about the medium-quality rule. That is the rule of the sale, or if the latter already had it in his possession for any other
which must be observed with respect to obligations to give a generic reason.
thing. You do not give a thing of inferior quality even if the thing is
indeterminate or generic. The creditor cannot also demand a thing of Example: Pointing to the car your father promised to give you.
superior quality. This is also a case-to-case basis.
Since we said that under Art. 1163 that the principal obligation is to
• Tradición brevi manu – also known as delivery by short hand. Take
deliver a thing or to specifically perform the obligation, we have two note that this is not the opposite of longa manu.
main types of delivery. Art. 1499: The delivery of movable property may likewise be made by
the mere consent or agreement of the contracting parties, if the thing
2 MAIN TYPES OF DELIVERY: sold cannot be transferred to the possession of the vendee at the time
of the sale, or if the latter already had it in his possession for any other
1. Actual/Real delivery reason.
2. Legal/Constructive delivery
a) Tradición instrumental Example: If the possessor of that thing already changes the capacity by
b) Tradición simbolica which he possesses it by the agreement of the parties.
c) Tradición longa manu
d) Tradición brevi manu • Tradición constitutum possessorium – delivery by possessory
e) Tradición constitutum possessorium agreement. It is the change in intention of one having legal possession
f) Tradición by operation of law of real or personal property whereby the original possessor of the
g) Quasi-tradición property remains in control but transfers the legal possession to another.
This is the opposite of brevi manu.
Art. 1500: There may also be tradition constitutum possessorium.
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• Tradición by operation of law – the law itself that provides that there 3. Industrial fruits – those produced by lands of any kind through
is delivery. This happens on the law on sales. cultivation or labor
Example: There is that rule of “nemo dat quod non habet” or “you cannot When does the right of the creditor under Ar.t 1164 arise?
give what you don’t have”. There is an exception to that rule that even if In this provision, there are two types of right – (1) personal right, and (2)
you don’t have a valid title to a certain thing, you may still sell it in favor real right.
of some other persons.
The personal right to the fruits is defined as the right pertaining to a
person (creditor) to demand from the debtor as a definitive passive
• Quasi-tradición – this refers to delivery of incorporeal or intangible subject the fulfillment of a prestation to give. This is a right only
property. enforceable against a definitive person or group of persons.
Art. 1501: With respect to incorporeal property, the provisions of the first A real right is the right pertaining to the creditor over a specific thing,
paragraph of article 1498 shall govern. In any other case wherein said without a passive subject individually determined against whom such
provisions are not applicable, the placing of the titles of ownership in the right may be personally enforced. This is a right enforceable against the
possession of the vendee or the use by the vendee of his rights, with the whole world, such as a right of ownership, possession, or usufruct. The
vendor's consent, shall be understood as a delivery. real right of the fruits will only occur from the time that there is actually
delivery. That is why Art. 1164 provides that the creditor shall not acquire
Example: Under the law on intellectual property, there are three main any real right over the fruits until the same has been delivered.
types of intellectual property – patent, trademark, and copyright. These
are incorporeal property. Meaning they do not actually, manifestly exist. Therefore, delivery is a mode of acquiring ownership.
They only exist by legal fiction. So if you want to sell your right to a
patent, you deliver the instruments that express the existence of those The right to the fruits and demand is important because it will place the
property (patent certificate, etc). obligor in delay.
Diligence of a good father Example:
Another obligation in obligations to give, aside from delivery, is the A has the obligation in favor of B to give a certain parcel of land. This
debtor’s obligation to take care of the thing with the proper diligence of contract was entered into on July 1, 2018. This is only an obligation
a good father of the family—unless the stipulation of the parties which arises from a contract. Prior to the delivery of the land, B cannot
requires some other standard of care, whether it is determinate or claim ownership of the land yet.
generic. This is an accessory obligation. This is also considered as the
default degree of diligence. The law does not make a distinction from What if A actually made the delivery of the parcel of land only on Dec.
that of the determinate or generic thing. This is also expressed in Art. 31, 2019? Prior to the delivery of the land, B only has a personal right
1173 (2): to demand delivery not only of the thing but also of the fruit.
Art. 1173: If the law or contract does not state the diligence From the time B made a demand on Oct. 1, 2018, A is already
which is to be observed in the performance, that which is considered in delay. However, from this date that B exercised his
expected of a good father of a family shall be required. personal right, he did not acquire any real right over the property or
over its fruits. What if upon delivery on Dec. 31, 2019, that land was
Other authors are of the impression that this degree of diligence only actually bountiful of natural fruits? In that case, B can only claim a real
applies to determinate thing. Why can it not be imposed upon generic right that he is the owner of the parcel of land along with its fruits only
things? It’s because of the principle of genus nunquam perit or genus when there is a delivery made. Therefore, it is only on Dec. 31, 2019.
never perishes, such that if you are negligent, your negligence won’t
extinguish your obligation. You can always deliver the thing of the same Why is demand important to place the creditor in delay? Because it gives
kind or quality. (Ex. money) rise to legal consequences.
EXCEPTIONS TO THE DILIGENCE OF A GOOD FATHER OF THE Since the creditor does not have a real right over the thing until the
FAMILY: obligation to deliver it arises, when does the obligation to deliver a thing
arise? It depends.
1. If the law requires some other standard of care to be observed.
(Ex. extraordinary diligence for common carriers under Art. 1735 in Hurado states that in case of obligations arising from law, quasi-
relation to Art. 1733) contracts, crimes, or quasi-delicts, the obligation to deliver arises from
the time designated by the provisions of that law. But in case of
2. If the parties themselves agree to stipulate another standard of care obligations arising from a contract, the general rule is that the obligation
that must be observed in the performance of the obligation. to deliver arises from the moment of the perfection of the contract. Why?
Because the obligation to perform an obligation will depend if that is a
Another accessory obligation that should be observed in obligations to pure obligation (one that is dependent on a period) or a conditional
give is to deliver the fruits. Art. 1164 provides: obligation.
ART. 1164. The creditor has a right to the fruits of the thing from Let’s skip Art. 1165 first. Another accessory obligation is to deliver all its
the time the obligation to deliver it arises. However, he shall acquire accessions and accessories even though they were not mentioned in
no real right over it until the same has been delivered to him. (1095) the contract.
First, we are talking about the debtor’s obligation to deliver the fruits Article 1166. The obligation to give a determinate thing includes
because the creditor has the right to the fruits of the thing. that of delivering all its accessions and accessories, even though
they may not have been mentioned. (1097a)
What are fruits?
FRUITS (Art. 442 of the NCC) What are accessions?
1. Natural fruits – the spontaneous products of the soil, and the young It signifies all of those things which are produced by the thing which is
and other products of animals the object of the obligation as well as all of those which are naturally or
2. Civil fruits – rents of buildings, the price of leases of lands and artificially attached thereto.
other property and the amount of perpetual or life annuities or other
similar income
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Under your law on property, you will learn that there are different types the time the rent accrued. It is beyond question that Spouses Marañon
of accession – accession natural, accession industrial, and accession never lost ownership over the subject lot.
discreta.
Art. 442. Natural fruits are the spontaneous products of the
Accession industrial – by labor or cultivation, it was placed on that soil, and the young and other products of animals.
thing to be delivered. (Ex. special bumper of a car that you as the Industrial fruits are those produced by lands of any kind
purchaser wants) through cultivation of labor.
Civil fruits are the rent of buildings, the price of leases of lands
What are accessories? and other property and the amount of perpetual or life
Under this provision, accessories are understood as its popular sense, annuities or other similar income.
or all of those things which further the embellishment, use, or
preservation of another thing which is more important, and to which they Art. 441. To the owner belongs:
are not incorporated or attached. These things are actually included in (1) The natural fruits;
the thing or the object of the obligation only for luxury or usefulness or (2) The industrial fruits;
for purposes of embellishment. (Ex. spare kit or tires of a car) (3) The civil fruits.
PNB V. MARAÑON Rent, as an accessory follow the principal. In fact, when the principal
700 SCRA 297 property is mortgaged, the mortgage shall include all natural or civil fruits
Art. 1164 – Right of creditor to the fruits; Acquisition of real right and improvements found thereon when the secured obligation becomes
due, as provided in Article 2127 of the Civil Code:
What was the security that was constituted on the land?
The land was mortgaged to PNB as a security for a loan. Art. 2127. The mortgage extends to the natural accessions,
to the improvements, growing fruits, and the rents or income
Based on this loan borrowed from PNB, and there was a mortgaged not yet received when the obligation becomes due, and to the
constituted on the parcel of land. Was the obligation paid off? amount of the indemnity granted or owing to the proprietor
No, it resulted to the foreclosure by the bank on the basis of nonpayment from the insurers of the property mortgaged, or in virtue of
of the loan. The land was foreclosed in order to satisfy the obligation in expropriation for public use, with the declarations,
favor of PNB, because the spouses Montealegre did not comply with amplifications and limitations established by law, whether the
their obligation to pay off the loan they borrowed from the bank. estate remains in the possession of the mortgagor, or it
passes into the hands of a third person.
In relation to ART.1164, what was the issue presented before the SC on
this case? However, the rule is not without qualifications. In Castro, Jr. v. CA, the
WON PNB is entitled to the fruits (rent) of the disputed property Court explained that Article 2127 is predicated on the presumption that
the ownership of accessions and accessories also belongs to the
What type of fruit is the rent? mortgagor as the owner of the principal. After all, it is an indispensable
Civil Fruit, because its arises out of a juridical relation a lease agreement. requisite of a valid real estate mortgage that the mortgagor be the
absolute owner of the encumbered property.
Was PNB entitled to the fruits?
No, the rightful owner is Marañon Corollary, any evidence sufficiently overthrowing the presumption that
the mortgagor owns the mortgaged property precludes the application of
Can the bank foreclose on the mortgage constituted on the said parcel Article 2127. Otherwise stated, the provision is irrelevant and
of land? inapplicable to mortgages and their resultant foreclosures if the
No, Montealegre was not the owner of the land mortgaged. mortgagor is later on found or declared to be not the true owner of the
property, as in the instant case.
FACTS: The controversy at bar involves a 152-square meter parcel of
land located at Cuadra-Smith Streets, Downtown, Bacolod (subject lot) All told, albeit the dispositive portions of the assailed CA decision and
erected with a building leased by various tenants. The subject lot was resolution are differently premised, they ought to be upheld as they
among the properties mortgaged by Spouses Rodolfo and Emilie convey the similar conclusion that Spouses Marañon are the rightful
Montealegre (Spouses Montealegre) to PNB as a security for a loan. owners of the rent earned by the building on the subject lot.
When Spouses Montealegre failed to pay the loan, PNB initiated Take note: The Supreme Court talked about how the mortgage was void
foreclosure proceedings on the mortgaged properties, including the on the ground that: you cannot mortgage something if you are not the
subject lot. In the auction sale held on August 16, 1991, PNB emerged owner thereof.
as the highest bidder. It was issued the corresponding Certificate of Sale
dated December 17, 1991 which was subsequently registered on In this case, there is a ruling where SC said that: fruits, as accessory,
February 4, 1992. follow the principal. So, since rent are civil fruits, they necessarily follow
the principal object to which they pertain.
Before the expiration of the redemption period or on July 29, 1992,
Spouses Marañon filed before the RTC a complaint for Annulment of Therefore, in the analysis of the SC, since PNB cannot foreclose on the
Title, Reconveyance and Damages against Spouses Montealegre, PNB, mortgage constituted on the land, it is not entitled to the principal object.
the Register of Deeds of Bacolod City and the Ex-Officio Provincial Along with that, there is no obligation to deliver the fruits, because the
Sheriff of Negros Occidental. land should be given or should pertain to the owner, which is the spouses
Marañon.
The complaint, docketed as Civil Case No. 7213, alleged that Spouses
Marañon are the true registered owners of the subject lot by virtue of Considering that, the bank cannot foreclose upon its mortgage, since the
TCT No. T-129577 which was illegally cancelled by TCT No. T-156512 spouses Montealegre defrauded the bank saying that they were owners.
under the name of Emilie who used a falsified Deed of Sale bearing the But, in truth and in fact, they were not. Since the land cannot be
forged signatures of Spouse Marañon to effect the transfer of title to the foreclosed, PNB is also not entitled to the fruits which arose out of the
property in her name. land.
ISSUE: WON PNB is entitled to the fruits of the disputed property (in this There is no obligation to deliver all accessions, accessories, and fruits if
case, fruits=RENT) there is no obligation to deliver the principal object of that obligation or
the subject matter of the contract.
RULING: Rent is a civil fruit that belongs to the owner of the
property3 producing it by right of accession. The rightful recipient of the
disputed rent in this case should thus be the owner of the subject lot at
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MAGDALINO V. BRAGAT they claimed that Pastrano was subsequently able to obtain a free patent
757 SCRA 131 and a title, OCT No. P-2035, over Lot No. 19986. According to the
Art. 1164 – Right of creditor to the fruits; Acquisition of real right Badillas, Pastrano made a sale to Bragat on October 2, 1987, but such
sale is not valid since Pastrano was no longer the owner of the property
FACTS: Azur Pastrano and his wife Profitiza Ebaning (Spouses on that date. Consequently, the Spouses Badilla prayed that TCT No. T-
Pastrano) were the original owners of Lot No. 19986 (subject property), 47759 issued to Bragat pursuant to that sale be declared null and void.
located at Tablon, Cagayan de Oro City. Its Original Certificate of Title
(OCT) No. P-2035, consisting of 1,015 sq. m. was issued on November Petitioners Spouses Badilla contend that ownership of the 200-sq.-m.
18, 1980. The OCT was in the name of Azur Pastrano. portion was transferred to them when they purchased the same and
possession was delivered to them by Ledesma in 1970.They also
Before the issuance of the OCT, however, the Spouses Pastrano, on contend that when OCT No. P-2035 was actually issued in 1980, it was
November 18, 1968, sold the lot to Eustaquio P. Ledesma, Jr. first delivered by Pastrano to Ledesma and, the latter delivered the same
(Ledesma), as evidenced by a Deed of Definite Sale of Unregistered to them (the Badillas).Thus, Bragat allegedly falsely claimed the "loss"
Coconut and Residential Land. of the title when she petitioned the court for a new duplicate original,
because such title was not lost but had been with the Badillas all along.
The petitioners, the spouses Magdalino and Cleofe Badilla (Spouses Another fraud that Bragat allegedly committed was the Deed of Sale
Badilla) claimed that in 1970, Ledesma sold to them, "on installment" dated October 2, 1987, in which Profitiza Pastrano signed (in marital
basis, a portion amounting to 200 sq. m. of Lot No. 19986 (subject consent) although she had been dead since March 30, 1985.
property). The sale was not reduced in writing, however, possession of
the portion sold was transferred to the Badillas, which portion the ISSUE: WON ownership of the 200 sqm has been transferred to
Badillas claim was designated as Lot No. 19986-B. spouses Badilla
On April 18, 1978, the spouses Florito Bragat and Fe Bragat (Spouses RULING: It is not disputed that the spouses Azur and Profitiza Pastrano
Bragat) bought 991 sq. m. of the property from Ledesma and his wife, had previously sold on November 18, 1968, via a Deed of Definite Sale
via a Deed of Absolute Sale of a Residential Lot.[5] Two (2) tax of Unregistered Coconut and Residential Land, the property to
declarations were allegedly issued as a result of the sale: one Eustaquio Ledesma. Therefore, as early as such date, it is established
designated a lot as Lot No. 19986-A with an area of 642 sq. m.,[6] while that the Pastranos no longer had ownership over the property.
another designated the other lot as Lot No. 19986-B with an area of 349
sq. m. Then, as Ledesma subsequently sold, in 1970, a portion of the property
to the petitioner Spouses Badilla, who immediately took delivery and
On May 5, 1984, the Spouses Pastrano executed another Deed of possession, ownership of this portion had also been transferred to the
Absolute Sale of Registered Land in favor of herein petitioner Fe Bragat said spouses. Although that sale appears to be merely verbal, and
(Bragat), covered by OCT No. P-2035 and with an area of 1,015 sq. payment therefor was to be made on installment, it is a partially
m.[8] On the same date, Azur Pastrano executed an Affidavit of Loss consummated sale, with the Badillas paying the initial purchase price
reporting the loss of the owner's duplicate copy of OCT No. P-2035. and Ledesma surrendering possession. That the parties intended for
ownership to be transferred may be inferred from their lack of any
It was Bragat, however, who petitioned the court for the issuance of a agreement stipulating that ownership of the property is reserved by the
new owner's duplicate copy of OCT No. P-2035. Thus, on July 24, 1987, seller and shall not pass to the buyer until the latter has fully paid the
the RTC ordered the issuance of a new owner's copy of OCT No. P- purchase price. The fact is, Ledesma even delivered to the Badillas the
2035. owner's duplicate copy of OCT No. P-2035. The Civil Code states that
On October 2, 1987, the Spouses Pastrano executed yet another Deed ownership of the thing sold is transferred to the vendee upon the actual
of Sale of Registered Land in favor of Bragat, which land is again or constructive delivery of the same. And the thing is understood as
covered by OCT No. P-2035 with an area of 1,015 sq. m.As a result, delivered when it is placed in the control and possession of the vendee.
OCT No. P-2035 was canceled and TCT No. T-47759 was issued in the Payment of the purchase price is not essential to the transfer of
name of Bragat. ownership as long as the property sold has been delivered; and such
delivery (traditio) operated to divest the vendor of title to the property
On March 7, 1991, Bragat, through her counsel, made a written demand which may not be regained or recovered until and unless the contract is
to vacate against the Spouses Badilla. In response, the Spouses Badilla, resolved or rescinded in accordance with law.
also through their counsel's letter, refused the demand and raised the
earlier sale made by the Spouses Pastrano to Ledesma and the Therefore, Fe Bragat is entitled to a new transfer certificate of title issued
subsequent sale by Ledesma to the Badillas. in her name, but on the basis of the Deed of Absolute Sale dated April
18, 1978, and excluding the 152 sq. m. in area that the Spouses Badilla
Hence, the parties filed their respective complaints within days of each have already bought and have been occupying since 1970.
other.
Hence, Bragat's TCT No. T-47759 (which canceled OCT No. P-2035),
Bragat filed her Complaint for Recovery of Posession and Damages covering 1,015 sq. m., should be declared void and cancelled and, in its
against the spouses Magdalino and Cleofe Badilla on June 5, 1992, place, two (2) new ones should be issued: (1) in the name of the spouses
alleging therein that she is the absolute owner of Lot No. 19986, covered Magdalino and Cleofe Badilla, covering the 152 sq. m. that they are
by TCT No. T-47759. She claimed to have purchased the property, first, occupying, and (2) in the name of Fe Bragat, covering the remaining 863
from Eustaquio Ledesma, Jr., but later, when she found out that sq. m.
Ledesma was "unauthorized" to sell, she again allegedly made another
purchase of the same property from Azur Pastrano, on May 5, 1984. This WHEREFORE, premises considered, the petition is GRANTED. The
led to the cancellation of Pastrano's OCT No. P-2035 and the issuance assailed Decision dated October 9, 2008 and Resolution dated February
of Bragat's TCT No. T-47759. Thus, she prays for the Spouses Badilla 12, 2009 of the Court of Appeals in CA-G.R. CV No. 70423 -MM are
to be ordered to vacate the around 149-square-meter portion that they hereby REVERSED and SET ASIDE. Transfer Certificate of Title No. T-
occupy in the property. 47759 is DECLARED VOID, and, in its place, two (2) new transfer
certificates of titles are ORDERED ISSUED, namely: (1) in the name of
Just six days later, on June 11, 1992, the Spouses Badilla filed their own the Spouses Magdalino and Cleofe Badilla, covering the 152 sq. m. that
Complaint for Quieting of Title, Declaration of Nullity of TCT No. T-47759 they are occupying, and (2) in the name of Fe Bragat, covering the
and Damages against Bragat, claiming that the Spouses Badilla are the remaining 863 sq. m. of the property, of which measurements are to be
lawful owners and possessors of Lot No. 19986-B (a portion of Lot No. based on Exhibits "N" and Exhibit "N-2".
19986), having acquired it in 1970 from Ledesma. The latter, on his part,
allegedly bought the bigger Lot No. 19986 from Pastrano earlier on Take note: the issue with respect to delivery. Was there delivery under
November 18, 1968. The Spouses Badilla alleged that they took the law if the sale was not embodied in a particular instrument? One of
possession of and built a house on the property upon their purchase the modes by which constructive delivery can be made is there is an
thereof from Ledesma and has since remained in possession. However, execution of the instrument regarding the agreement of the parties.
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In this case, the sale was questioned on the ground that it was a mere Example:
oral contract. Even if the sale is valid, in the absence of any instrument
conveying that contract of sale, can we say that there was delivery of the For the same parcel of land, A promised to donate it in favor of B, and
thing? B has already accepted. But A, at the same time, also promised to sell
that parcel of land in favor of D. And D has also given a purchase
According to the SC, YES. Delivery can pertain to actual or constructive price.
delivery. In this case, there was actually a delivery of the instrument, but
the delivery of the instrument here did not pertain to the instrument So the two parties the done (B) and the buyer (D) do not have the
embodied in the contract of sale. It was actually the title which registered same interest. The donee accepted precisely because it is a donation
the parcel of land. The mere delivery, coupled with the actual control or and the buyer wants to buy the parcel of land. This involves two
possession of the parcel of land, is already sufficient under the law that different persons that have two different interests. Because of this, the
there was already a delivery of the thing. obligor shall be liable upon the breach of that obligation and for any
damages that may arise therefrom.
SC here said that payment of the purchase price is not material in the
transfer of ownership or in the perfection of a contract of sale. It is More importantly, if the thing is lost by way of a fortuitous event, that
sufficient that there is an agreement as to the purchase price that was person shall be liable for damages.
made. But, according to the SC, if such purchase price was delivered by
the buyer in favor of the seller, then the delivery of the purchase price— In obligations to do, you have to do that which you promise to do. or
even if it is not the actual parcel of land or any instrument conveying the render service that which you specifically promise to render.
existence or rights over the land—will already be considered the delivery
of that object. What are the remedies of the creditor in case the obligor will not perform
that service? Or not comply with his obligation to do. This is provided in
Because, in a contract of sale—or at least in this contract—from Art 1167.
Pastrano to Ledesma and from Ledesma to Badilla, the object of these
contracts of sale was the parcel of land. It is understood that the delivery ART. 1167. If a person obliged to do something fails to do it, the
of the purchase price would also mean the performance of that obligation same shall be executed at his cost.
under the contract of sale, which is at the same time coupled with the
intention of the parties and the delivery of the title thereof. 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
What are the remedies of a creditor in an obligation to give? The first has been poorly done be undone. (1098)
remedy is to demand delivery, but it depends if it is to demand the
delivery of a determinate thing or one which is generic. It is important to
know whether it is a determinate or generic thing, because the remedies In obligations to do, you have to make a distinction if the debtor fails to
on the part of the creditor to make as against the debtor will differ if it is comply with the obligation meaning wala jud siyay gibuhat, and no
an obligation to give a determinate thing or one which is to give a generic service is rendered.
thing.
What are the remedies on the part of the creditor?
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 The creditor may oblige that person to do it, and if he fails to do it, that
compel the debtor to make the delivery. performance of the obligation or that service may be made by some
other person and any expense or obligation that may arise shall be
If the thing is indeterminate or generic, he may ask that the executed at his cost. So the primary debtor will pay off any expense in
obligation be complied with at the expense of the debtor. relation to having that obligation be done by some other person, and will
give rise to an action for damages.
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 If the debtor performs the obligation, but performs it poorly, (meaning it
be responsible for any fortuitous event until he has effected the contravenes the tenor of their obligation), what is the remedy on the part
delivery. (1096) of the creditor?
The creditor may have that service executed at the his cost, meaning,
Read Art. 1165 in relation to the right to demand damages from the some other person will perform that obligation to do, or if what has been
debtor on the part of the creditor based on Art. 1170. done was poorly done, the creditor may demand that what was poorly
done be undone. and liability for damages under Art. 1170.
What are the remedies of a creditor in an obligation to give, if that which
is to be delivered is a determinate thing? If the debtor fails to perform his obligation, it may be executed at his cost
which means that it mayb e performed by some other person and the
The creditor may compel the debtor to make delivery specifically, debtor will be responsible for all the cost and expenses of the other
meaning no other thing other than that which was agreed upon. In case person who performed the obligation. This is only allowed if the
the debtor cannot make a delivery of that thing, he shall be responsible obligation to do is not specific as to the nature or characteristics of the
for damages. Because it contravenes their agreement. obligor.
If the obligation on the part of the debtor is to deliver a generic thing. Example:
What are the remedies of the creditor? The creditor may compel the
delivery of the thing, but take note of the "Medium Quality Rule" under Ang creditor gusto lang niya naa’y mag host sa iyang party or gusto
Art 1265. More importantly, the creditor may ask that the obligation be niya naa’y magkanta sa iya og happy birthday, so nagbayad siya og
complied with at the expense of the debtor—should the debtor not 10K. That obligation to do can be performed by some other person,
deliver or specifically perform the obligation to deliver that generic thing. because it is not dependent on the characteristic of the obligor. So, if
This is without prejudice to the right of damages by the creditor against the obligor fails to perform it, the creditor may have that obligation
the debtor under Art. 1170. executed at the cost of the debtor.
If the obligor will delay or has promised the same thing to two different Example:
persons that do not have the same interest, what is the
consequence? That person will not be exonerated from the liability to What if the obligor kay gusto jud niya na ang mukanta sa iyang
pay damages, that person will be responsible for any fortuitous event graduation kay si Sharon Cuneta or Regine Velasquez. No other
under Art. 1174. person can sing like them except for themselves, so these types of
personal obligation are specific as to the characteristics of the obligor.
lOMoARcPSD|7732614

So, if the obligor fails to perform specifically that which he is obliged The above restrictions were also contained in Transfer Certificate of Title
or promised to do, it cannot be executed at his cost because it is No. N-115384 covering the lot issued in the name of petitioner-spouses.
specific to his characteristics. Under this exception, the creditor may
only demand damages as against the obligor. The controversy arose when petitioners, despite repeated warnings from
respondent, extended the roof of their house to the property line and
expanded the second floor of their house to a point directly above the
ART. 1168. When the obligation consists in not doing, and the obligor
original front wall. Respondent filed before the Regional Trial Court,
does what has been forbidden him, it shall also be undone at his
National Capital Judicial Region, Branch 261, Pasig City, an action to
expense. (1099a)
demolish the unauthorized structures.
REMEDIES OF A CREDITOR in obligations not to do - This provision After trial, judgment was rendered against petitioners; thus:
applies specifically to negative personal obligations. Negative,
because it talks about an obligation of preclusion or prohibition. And "WHEREFORE, premises considered, defendant spouses Eliseo B.
personal, because it talks about service, and not about giving a thing or Fajardo, Jr., and Marissa F. Fajardo are hereby directed to immediately
a certain object. demolish and remove the extension of their expanded housing unit that
exceeds the limitations imposed by the Restrictive Covenant, otherwise
If the debtor does what has been forbidden of him, or carries out that the Branch Sheriff of this Court shall execute this decision at the expense
which was prohibited by the creditor, the creditor has the right to demand of the defendants.
that which has been done should be undone at the expense of the
debtor. This is always coupled with a right to an action for damages as "As to damages and attorney's fees, it appearing from the records of this
provided for under Article 1170. case that no evidence to sustain the same was adduced by either of the
However, this provision cannot be just be applied haphazardly, as it parties, the Court deems it proper not to award any.
doesn’t apply to all obligations not to do, or negative personal
obligations. There are two situations wherein one cannot apply Article "SO ORDERED.”
1168 - On appeal to it, the Court of Appeals affirmed the decision of the trial
court.
1. Where the effects of the act, which is forbidden or prohibited, are
definite in character. Even if it is possible for the obligee to ask that In their petition for review to this Court, the spouses contest the judgment
the act be undone at the expense of the obligor, consequences of the courts below. Adjacent owners reportedly have no objection to the
contrary to the object of the obligation will have been produced, construction, and have even expressed interest in undertaking a similar
which are permanent in character. Therefore, it cannot be undone. expansion in their respective residences. Moreover, the couple's two
children, a son and a daughter, might soon get married and then share,
2. In cases wherein it would be physically and/or legally impossible to with their families, living quarters with petitioners. The latter also assail
undo what has been done. the personality of private respondent to question the construction which
have effectively relinquished its ownership, right or interest over the
If such case or occasion takes place, it would only give rise to an action subdivision upon the execution of the Deed of Absolute Sale in favor of
for damages on the part of the obligee. Hence, the obligee (creditor) has the individual homeowners. Per the contract between Freedom to Build
no right to demand that which has been done be undone at the expense Incorporated and the De la Costa Low Income Project Homeowners'
of the debtor. Association (hereinafter homeowners' association), petitioners aver, the
enforcement of the prohibitions contained in the "Restrictive Covenant"
Note: Article 1168 contemplates obligations not to do, or negative originally residing on respondent is now lodged in the homeowners'
personal obligations which can be undone. association. Petitioners maintain that it is incumbent upon the
homeowners' association, not on respondent, to enforce compliance
Example: with the provisions of the covenant.
Obligation not to violate the provisions in a construction contract. The A perusal of the provisions of the covenant would show that the
provisions actually pertain to service—if there are certain preclusions or restrictions therein imposed were intended -
prohibitions in the construction agreement, and the obligor does those
preclusions. Like, when the obligee wants a blue roof, and the obligor "For the protection and benefit of the De La Costa Low Income Housing
deliberately painted it red. Can that action be undone? Yes, at the Project, and of all the persons who may now, or hereafter become
expense of the one who is obliged under the construction contract. owners of any part of the project, and as part of the consideration for the
conveyance of the housing unit, these restrictions are promulgated in
Example Case - order that; the intents and purposes for which the project was designed
shall be upheld; to wit: subsequent duly approved sale and assignments
FAJARDO V. FREEDOM TO BUILD, Inc. of housing units shall be made only to low income families; a certain level
of privacy shall be observed; a community spirit shall be fostered; and
Freedom To Build, Incorporated, an owner-developer and seller of low- an undisturbed possession and occupancy at the homeowners shall be
cost housing, sold to petitioner-spouses, a house and lot designated Lot maintained.”
No. 33, Block 14, of the De la Costa Homes in Barangka, Marikina, Metro
Manila. The Contract to Sell executed between the parties, contained a Restrictive covenants are not, strictly speaking, synonymous with
Restrictive Covenant providing certain prohibitions, to wit: easements. While it may be correct to state that restrictive covenants on
"Easements. For the good of the entire community, the homeowner must the use of land or the location or character of buildings or other structures
observe a two-meter easement in front. No structure of any kind (store, thereon may broadly be said to create easements or rights, it can also
garage, bodega, etc.) may be built on the front easement. be contended that such covenants, being limitations on the manner in
which one may use his own property, do not result in true easements,
"Upward expansion. A second storey is not prohibited. But the second but a case of servitudes (burden), sometimes characterized to be
storey expansion must be placed above the back portion of the house negative easements or reciprocal negative easements. Negative
and should not extend forward beyond the apex of the original building. easement is the most common easement created by covenant or
agreement whose effect is to preclude the owner of the land from doing
"Front expansion: 2nd Storey: No unit may be extended in the front an act, which, if no easement existed, he would be entitled to do.
beyond the line as designed and implemented by the developer in the Courts which generally view restrictive covenants with disfavor for being
60 sq. m. unit. In other words, the 2nd floor expansion, in front, is 6 a restriction on the use of one's property, have, nevertheless, sustained
meters back from the front property line and 4 meters back from the front them where the covenants are reasonable, not contrary to public policy,
wall of the house, just as provided in the 60 sq. m. units.” or to law, and not in restraint of trade. Subject to these limitations, courts
enforce restrictions to the same extent that will lend judicial sanction to
lOMoARcPSD|7732614

any other valid contractual relationship. In general, frontline restrictions WHEREFORE, the assailed decision, dated 13 July 1998, of the Court
on constructions have been held to be valid stipulations. of Appeals in CA-G.R. CV No. 50085, sustaining that of the court a quo,
is AFFIRMED. No costs.
The provisions in a restrictive covenant prescribing the type of the SO ORDERED.
building to be erected are crafted not solely for the purpose of creating
easements, generally of light and view, nor as a restriction as to the type BREACH OF OBLIGATIONS
of construction, but may also be aimed as a check on the subsequent
uses of the building conformably with what the developer originally might
have intended the stipulations to be. In its Memorandum, respondent I. Voluntary Breaches
states in arguing for the validity of the restrictive covenant that the -
ART. 1170. Those who in the performance of their obligations are
"x x x restrictions are not without specific purpose. In a low cost- guilty of fraud, negligence, or delay, and those who in any manner
socialized housing, it is of public knowledge that owners-developers are contravene the tenor thereof, are liable for damages. (1101)
constrained to build as many number of houses on a limited land area
precisely to accommodate marginalized lot buyers, providing as much
as possible the safety, aesthetic and decent living condition by Fraud, negligence, or delay, and those who, in any manner contravene
controlling overcrowding. Such project has been designed to the tenor thereof, are the instances wherein voluntary breaches may
accommodate at least 100 families per hectare.” arise. Regardless of whether it is intentional or not, voluntary breaches
There appears to be no cogent reasons for not upholding restrictive give rise to an action for damages.
covenants aimed to promote aesthetics, health, and privacy or to prevent
overcrowding. The general rule is that which is provided in Article 2201 (2) - In cases
of fraud, bad faith, malice or. wanton attitude, the obligor shall be
Viewed accordingly, the statement of petitioners that their immediate responsible for all damages which may be reasonably attributed to the
neighbors have not opposed the construction is unavailing to their cause, non-performance of the obligation.
the subject restrictive covenant not being intended for the benefit of
adjacent owners but to prescribe the uses of the building, i.e., to ensure,
among other things, that the structures built on De la Costa Homes TYPES of DAMAGES
Subdivision would prevent overcrowding and promote privacy among (MENTAL)
subdivision dwellers. The argument then of petitioners that expansion is
necessary in order to accommodate the individual families of their two 1. Moral
children must fail for like reason. Nor can petitioners claim good faith;
the restrictive covenants are explicitly written in the Contract To Sell and Art. 2270. Moral damages include physical suffering, mental
annotated at the back of the Transfer Certificate of Title. anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury. Though
Petitioners raise the issue of the personality of respondent to enforce the incapable of pecuniary computation, moral damages may be
provisions of the covenant. Broadly speaking, a suit for equitable recovered if they are the proximate result of the defendant’s
enforcement of a restrictive covenant can only be made by one for wrongful act or omission.
whose benefit it is intended. It is not thus normally enforceable by one
who has no right nor interest in the land for the benefit of which the
restriction has been imposed. Thus, a developer of a subdivision can 2. Exemplary
enforce restrictions, even as against remote grantees of lots, only if he
retains part of the land. There would have been merit in the argument of Art. 2221. Nominal damages are adjudicated in order that a right of
petitioners - that respondent, having relinquished ownership of the the plaintiff, which has been violated or invaded by the defendant,
subdivision to the homeowners, is precluded from claiming any right or may be vindicated or recognized, and not for the purpose of
interest on the same property - had not the homeowners' association, indemnifying the plaintiff for any loss suffered by him.
confirmed by its board of directors, allowed respondent to enforce the
provisions of the restrictive covenant.
3. Nominal
Finally, petitioners argue that for lack of a specific provision, prescribing
the penalty of demolition in the "Restrictive Covenant" in the event of a Art. 2229. Exemplary or corrective damages are imposed, by way
breach thereof, the prayer of respondent to demolish the structure of example or correction for the public good, in addition to the moral,
should fail. This argument has no merit; Article 1168 of the New Civil temperate, liquidated or compensatory damages.
Code states:
4. Temperate
"When the obligation consists in not doing and the obligor does what has
been forbidden him, it shall be undone at his expense.” Art. 2224. Temperate or moderate damages, which are more than
nominal but less than compensatory damages, may be recovered
This Court is not unaware of its ruling in Ayala Corporation vs. Ray when the court finds that some pecuniary loss has been suffered
Burton Development Corporation, which has merely adjudged the but its amount can not, from the nature of the case, be proved with
payment of damages in lieu of demolition. In the aforementioned case, certainty.
however, the elaborate mathematical formula for the determination of
compensatory damages which takes into account the current 5. Actual
construction cost index during the immediately preceding 5 years based
on the weighted average of wholesale price and wage indices of the Art. 2199. Except as provided by law of by stipulation, one is
National Census and Statistics Office and the Bureau of Labor Statistics entitled to an adequate only for such pecuniary loss suffered by him
is explicitly provided for in the Deed of Restrictions entered into by the as he has duly proved. Such compensation is referred to as actual
parties. This unique and peculiar circumstance, among other strong or compensatory damages.
justifications therein mentioned, is not extant in the case at bar.
6. Liquidated
In sum, the Court holds that -
(1)....The provisions of the Restrictive Covenant are valid; Art. 2226. Liquidated damages are those agreed upon by the
(2)....Petitioners must be held to be bound thereby; and parties to a contract, to paid in case of breach thereof.
(3)....Since the extension constructed exceeds the floor area limits of the
Restrictive Covenant, petitioner-spouses can be required to demolish
the structure to the extent that it exceeds the prescribed floor area limits.
lOMoARcPSD|7732614

MODES of VOLUNTARY BREACHES
1. FRAUD (DOLO) - ART. 1173. The fault or negligence of the obligor consists in the
omission of that diligence which is required by the nature of the
It is one of the instances wherein there is a voluntary breach and, at the obligation and corresponds with the circumstances of the persons, of
same time, an intentional breach. that time and of the place. When negligence shows bad faith, the
provisions of the Articles 1171 and 2201, paragraph 2 shall apply.
Art. 1171. Responsibility arising from fraud is demandable in all If the law or contract does not state the diligence which is to be
obligations. Any waiver of an action for future fraud is void. (1102a) observed in the performance, that which is expected of a good father
of a family shall be required. (1104a)
CLASSIFICATIONS OF FRAUD
Under Article 1173 is fraud or negligence on the part of the obligor which
• Fraud from the viewpoint of VITIATION OF CONSENT- consist of the omission of that diligence. If negligence is coupled with
bad faith, it is not mere negligence, but it constitutes fraud. Hence, fraud
Whether or not it vitiates the consent of one of the contracting parties,
pertains to bad faith or malice, while negligence is the omission of the
fraud can be either casual fraud (dolo causante) or incidental fraud (dolo
required diligence under the circumstances under the law.
incidente).
2. NEGLIGENCE (CULPA) -
a. Casual Fraud/Dolo Causante - is the type of fraud wherein without
which consent would not have been given on the part of one of the
As discussed before, there are 3 types of culpa- culpa contractual,
contracting parties. This renders the contract voidable, on the
culpa criminal and culpa aquiliana.
ground of vitiation of consent.
Negligence or culpa, in general, is provided for under Article 1172.
Art. 1338. There is fraud when, through insidious words or
machinations of one of the contracting parties, the other is
induced to enter into a contract which without them, he would ART. 1172. Responsibility arising from negligence in the performance
not have agreed to. of every kind of obligation. Is also demandable, but such liability may
be regulated by the courts, according to the circumstances. (1103)
b. Incidental Fraud/Dolo Incidente - is the type of fraud wherein

consent would have still been given despite the employment of acts Under Article 1172, in relation to Article 1170 and 1173, if there is an
constituting fraud. This does not affect the contract, but will affect omission of the diligence which was required by the nature of the
the performance of the obligation. This will give rise to damages. obligation, and corresponds with the circumstances of the persons, of
This is the one referred to in 1170 in relation 1171. that time and of the place, these negligent acts will give rise to a liability
for damages. However, negligence here is in the carrying out of the
According to Manresa, although the law does not specifically provide the provisions, performance, and stipulations of a contract. It does not
definition of fraud or dolo, incidental fraud/dolo incidente/fraud in the necessarily pertain to securing consent. This is in relation to the rule that,
performance of an obligation, consists in the conscious and intentional under contracts, the law could not protect you from bad bargains.
preposition to evade the normal fulfillment of the obligation. It pertains
only to the performance of an obligation, or how the obligation is carried DEFAULT DILIGENCE -
out. It does not have any effect with the securing of the consent of the Diligence of a good father of a family or due diligence.
other party. Since it is only incidental, it does not have any effect on the
validity of the contract. But, it gives rise to a liability for damages. However, there is nothing to preclude the law or the stipulations of the
party from providing for a standard care which may be greater or less
• Fraud from the viewpoint of the type of the COMMISSION OF THE than that of a good father of a family.
FRAUD
Instances wherein the law provides for a higher required diligence
a. Future Fraud -
A waiver of future fraud is void. Any agreement thereto, under Article Extraordinary diligence - is the utmost diligence of a very cautious
1171, renders the contract void. Even if it is fraud in the performance of person having due regard to all circumstances in a given set of facts.
the obligation, the parties cannot agree to a contract that they will waive
any acts of future fraud. 1. Common Carriers
Example: For instance, in a construction contract, the parties stipulated Art. 1733 (1). Common carriers, from the nature of their
that, on the part of the client (creditor), responsibility of the construction business and for reasons of public policy, are bound to
company shall be waived in cases of non-compliance. Thus, even if what observe extraordinary diligence in the vigilance over the
was stipulated therein would be a house with 4 rooms, and the goods and for the safety of the passengers transported by
construction company built a house with just one room. them, according to all circumstances of each case.
Such case or circumstance is not allowed. Even if it pertains to the 2. Banks

normal performance of the obligation or the evasion thereof, even if it’s
only incidental fraud or dolo incidente, waiver of future fraud is not Banks, being imbued with public interest and with the fiduciary
allowed. relationship of the banks with its clients, are imposed by law that, in the
carrying of their transactions, they must observe extraordinary diligence.
b. Past Fraud -
A waiver of past fraud is allowed. This pertains to a remission or a 3. Writ of Amparo
renunciation. Although previously, a person has committed acts which
are fraudulent against you, if you waive past fraud, that partakes the form Under the rules of the writ of amparo, in the determination of the grounds
of condonation or a valid waiver. Hence, you cannot have any action for for the writ, there is an imposition by the law that public offers should
damages. exercise extraordinary diligence if there has been a violation thereof.
Art. 2201 (2). In case of fraud, bad faith, malice or wanton

attitude, the obligor shall be responsible for all damages which
may be reasonably attributed to the non-performance of the
obligation.
lOMoARcPSD|7732614

FRAUD VS NEGLIGENCE 3. DELAY (MORA) –
Fraud is the conscious and intentional proposition to evade the normal

ART. 1169. Those obliged to deliver or to do something incur in delay
fulfillment of an obligation. Intent or malice to cause damage or injury is
from the time the obligee judicially or extrajudicially demands from
important. And, it will give rise to a liability for damages.
them the fulfillment of their obligation.
Negligence signifies an act or omission which is voluntary in character,
However, the demand by the creditor shall not be necessary in order
by virtue of which another person suffers damage or injury due to the
that delay may exist:
failure on the part of the other party to observe the diligence required by
(1) When the obligation or the law expressly so declare; or
the nature of the obligation, and corresponds with the circumstances of
(2) When from the nature and the circumstances of the obligation it
the persons, of that time, and of the place. It merely pertains to the
appears that the designation of the time when the thing is to be
abandonment, inattention, carelessness, or lack of due diligence.
delivered or the service is to be rendered was a controlling motive for
the establishment of the contract; or
TEST of NEGLIGENCE (from the case of Picart vs Smith)
(3) When demand would be useless, as when the obligor has
rendered it beyond his power to perform.
The test by which to determine the existence of negligence in a particular
case may be stated as follows: Did the defendant, in doing the alleged
In reciprocal obligations, neither party incurs in delay if the other does
negligent act use that which another person would have used in the
not comply or is not ready to comply in a proper manner with what is
same situation? If not, then he is guilty of negligence. The law here in
incumbent upon him. From the moment one of the parties fulfills his
effect adopts the standard supposed to be supplied by the imaginary
obligation, delay by the other begins. (1100a)
conduct of the discreet paterfamilias of the Roman law. The existence of
negligence in a given case is not determined by reference to the
personal judgment of the actor in the situation before him. The law As a general rule, there must be demand, either judicially or
considers what would be reckless, blameworthy, or negligent in the man extrajudicially, in order to place the obligor in delay. No demand, no
of ordinary intelligence and prudence, and determines liability by that. delay.
The question as to what would constitute the conduct of a prudent man EXCEPTIONS:
in a given situation must, of course, be always determined in the light of
human experience and in view of the facts involved in the particular case. 1. When the obligation expressly so declares.
Abstract speculations cannot here be of much value but this much can
be profitably said: Reasonable men govern their conduct by the Example - The obligation arises from a contract and the parties
circumstances which are before them or known to them. They are not, themselves agreed that there is no need for demand on the part of a
and are not supposed to be, omniscient of the future. Hence they can be party, in order for the other to incur delay. Such stipulation is valid.
expected to take care only when there is something before them to
suggest or warn of danger. 2. When the law, itself, expresses that demand is not necessary
Under the law on partnership, there is a partnership when two or more
Could a prudent man, in the case under consideration, foresee harm as persons promise to contribute money, property, or industry to a common
a result of the course actually pursued? If so, it was the duty of the actor fund with the intention to divide profits among themselves. Since a
to take precautions to guard against that harm. Reasonable foresight of partnership is a contract, every partner can become a debtor to the
harm, followed by ignoring of the suggestion born of this prevision, is partnership. This is because private partnerships, are considered
always necessary before negligence can be held to exist. Stated in these juridical persons. Thus, they are persons that have existence under the
terms, the proper criterion for determining the existence of law which are separate and distinct from the persons creating them.
negligence in a given case is this: Conduct is said to be negligent Hence, the partners are actually debtors of the partnership itself.
when a prudent man in the position of the tortfeasor would have foreseen
that an effect harmful to another was sufficiently probable to warrant his
Art. 1788. A partner who has undertaken to contribute a sum
foregoing conduct or guarding against its consequences.
of money and fails to do so becomes a debtor for the interest
Culpa is actually civil negligence. Thus, the basis for damages would be and damages from the time he should have complied with his
Article 1170, 1172 and 1173. But, negligence can also be criminal (culpa obligation.
criminal). The basis for this kind of negligence is Article 365 of the
Revised Penal Code. The same rule applies to any amount he may have taken from
the partnership coffers, and his liability shall begin from the
Negligence with good faith and negligence with bad faith time he converted the amount to his own use.
If the debtor or obligor has acted in good faith, the debtor or obligor shall
only be liable for the damages which are the natural and probable Under Article 1788, even if there is no express stipulation in the contract,
consequences of the breach of the obligation, and which the parties have the individual partners of the partnership are considered debtors of the
foreseen or could have reasonably foreseen at the time of the obligation. latter for everything that the former promised at the time of the
commencement of the partnership. Thus, they will incur delay even if the
On the other hand, if negligence is coupled with bad faith, Article 1173 partnership won’t make any demands.
in relation to Article 2201 (2) shall be applied. Thus, the obligor can be
held responsible for ALL damages which may be reasonably attributed Another would be in taxation laws, the obligation to pay taxes, as
to the non-performance of an obligation. imposed by law, does not require demand from the government in order
for a taxpayer to incur delay.
The negligence on the part of the obligor must be the proximate cause
which gave rise to an injury to another person. 3. From the nature and the circumstances of the obligation it
appears that the designation of the time when the thing is to be
Proximate cause is that cause, which, in natural and continuous delivered or the service is to be rendered was a controlling
sequence, unbroken by any efficient intervening cause, produces the motive for the establishment of the contract
injury, and without which the result would not have occurred.
As a general rule, causa debendi, is not an essential element of an
"He who is the cause of the cause is the cause of the evil caused.” obligation as it is only incidental. There are certain instances wherein an
obligation can exist even if the motives of the parties will not matter. But,
this 3rd exception in Article 1169 signifies that time is of an essence.
Time was the very reason why the parties entered into that obligation,
lOMoARcPSD|7732614

such that there is no need for a demand on the part of the obligee in How can demand be made?
order for the obligor to incur delay.
In Article 1169, demand can be made either judicially or extrajudicially.
4. When demand would be useless, as when the obligor has
rendered it beyond his power to perform CRUZ V. GRUSPRE
G.R. No. 191431 March 13, 2013
For instance, in an obligation to give a determinate thing, and if the Article 1169 – Principle of Delay
obligor already destroyed such determinate thing, he himself, had
rendered it beyond his power to perform the obligation. Thus, there is no FACTS: The claim arose from an accident that occurred on October 24,
need for demand to incur delay. 1999, when the mini bus owned and operated by Cruz and driven by one
Arturo Davin collided with the Toyota Corolla car of Gruspe; Gruspe’s
In general, one can only incur delay in positive obligations. This is car was a total wreck. The next day, on October 25, 1999, Cruz, along
because delay cannot be incurred from negative obligations, as they are with Leonardo Q. Ibias went to Gruspe’s office, apologized for the
immediately demandable and, from the time that one do not perform that incident, and executed a Joint Affidavit of Undertaking promising
which is prohibited or precluded, one does not incur delay. jointly and severally to replace the Gruspe’s damaged car in 20 days, or
until November 15, 1999, of the same model and of at least the same
REQUISITES in order for one to be in DEFAULT: quality; or, alternatively, they would pay the cost of Gruspe’s car
amounting to ₱350,000.00, with interest at 12% per month for any
GENERAL MILLING V RAMOS delayed payment after November 15, 1999, until fully paid.5 When Cruz
G.R. No. 193723 July 20, 2011 and Leonardo failed to comply with their undertaking, Gruspe filed a
Article 1169 – Principle of Delay complaint for collection of sum of money against them on November 19,
1999 before the RTC.
FACTS: General Milling Corporation (GMC) entered into a Growers
Contract with spouses Librado and Remedios Ramos (Spouses ISSUE: WON demand was made.
Ramos). Under the contract, GMC was to supply broiler chickens for
the spouses to raise on their land. The contact was accompanied by a RULING: The Court held that there was demand. Upon the filing of
Deed of Real Estate Mortgage to guaranty compliance. complaint by Gruspe.
However, as alleged by the Sps. Ramos, they were unable to fully satisfy Contracts are obligatory no matter what their forms may be, whenever
their account with GMC because of the latter’s negligence. the essential requisites for their validity are present. In determining
whether a document is an affidavit or a contract, the Court looks beyond
The counsel of the GMC notified the Sps. Ramos that the former will the title of the document, since the denomination or title given by the
institute a foreclosure upon the mortgaged property. parties in their document is not conclusive of the nature of its contents. In
the construction or interpretation of an instrument, the intention of the
parties is primordial and is to be pursued. If the terms of the document
ISSUE: WON Sps. Ramos are in default. are clear and leave no doubt on the intention of the contracting parties,
RULING: The Court held that there are three requisites necessary for a the literal meaning of its stipulations shall control. If the words appear to
finding of default which are- be contrary to the parties’ evident intention, the latter shall prevail over
the former.
(a) the obligation is demandable and liquidated;
(b) the debtor delays performance; and A simple reading of the terms of the Joint Affidavit of Undertaking readily
(c) the creditor judicially or extrajudicially requires the debtors discloses that it contains stipulations characteristic of a contract.
performance.
Demand is essential to put the obligor in delay. Moreover, in this case,
In the case at bar, GMC did not make a demand on Spouses Ramos but demand is necessary to determine the computation of interest.
merely requested them to go to GMCs office to discuss the settlement
of their account. In spite of the lack of demand made on the spouses, Further, the Court held that In order that the debtor may be in default, it
however, GMC proceeded with the foreclosure proceedings. Neither is necessary that the following requisites be present: (1) that the
was there any provision in the Deed of Real Estate Mortgage allowing obligation be demandable and already liquidated; (2) that the debtor
GMC to extrajudicially foreclose the mortgage without need of demand. delays performance; and (3) that the creditor requires the performance
judicially and extrajudicially. Default generally begins from the moment
Indeed, Article 1169 of the Civil Code on delay requires the following: the creditor demands the performance of the obligation. In this case,
demand could be considered to have been made upon the filing of the
Those obliged to deliver or to do something incur in delay from the time complaint on November 19, 1999, and it is only from this date that the
the obligee judicially or extrajudicially demands from them the fulfilment interest should be computed.
of their obligation.
Petition is affirmed.
However, the demand by the creditor shall not be necessary in order that Note: In obligations with a period, mere lapse of the period will not be
delay may exist: sufficient, under the contract, in order to place a party in delay.
Distinction must be made between actual delay and legal delay. Actual
(1) When the obligation or the law expressly so declares; x x x delay is delay in fact. Whereas, legal delay can only be achieved when
there is demand. Hence, the concept of legal delay pertains to “ NO
As the contract in the instant case carries no such provision on demand DEMAND, NO DELAY.”
not being necessary for delay to exist, We agree with the appellate court
that GMC should have first made a demand on the spouses before RECIPROCAL OBLIGATIONS - pertains to those which the fulfillment
proceeding to foreclose the real estate mortgage. of the prestation of one party is dependent on the fulfillment of the other
party. Demand is not necessary, since the controlling test for delay is the
Also, as the Court held in the case of Development Bank of the fulfillment of the other which is incumbent upon him. Example- Contract
Philippines v. Licuanan - Foreclosure is valid only when the debtor is in of sale.
default in the payment of his obligation.
BILATERAL OBLIGATION- the fulfillment of the prestation of one party
Petition is denied. is not necessary in order that the other party will fulfill his obligation. In
this case, demand must be invoked in order for the other party to be in
Note: Mere request does not constitute demand. A demand must be delay. Example- Contract of piece of work (Article 1713).
categorical upon the prestation. In the absence of demand, there is no
delay.
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The distinction is necessary in the application of Article 1191 or of the purchase price is a positive suspensive condition which will give
rescission or resolution. The power to rescind is implied in reciprocal rise to the parties to enter into a contract of sale.
obligations. Hence, Article 1169 (3) and the power to rescind is not
applicable to bilateral obligations. HEIRS OF BACUS V. CA
G.R. No. 127695 December 3, 2001
LEAÑO V. CA Article 1169 – Principle of Delay
G.R. No. 129018 November 15, 2001
Article 1169 – Principle of Delay FACTS: Luis Bacus leased to private respondent Faustino Duray a
parcel of agricultural land. The contract contained an option to buy
FACTS: Hermogenes Fernando, as vendor and Carmelita Leaño, as clause. Under said option, the lessee had the exclusive and irrevocable
vendee executed a contract to sell involving a piece of land. right to buy 2,000 square meters of the property within five years from a
year after the effectivity of the contract, at P200 per square meter. That
The manner of paying the total purchase price was as follows: rate shall be proportionately adjusted depending on the peso rate
against the US dollar, which at the time of the execution of the contract
"The sum of TEN THOUSAND SEVEN HUNDRED SEVENTY FIVE was fourteen pesos.
(P10,775.00) PESOS, shall be paid at the signing of this contract as
DOWN PAYMENT, the balance of NINETY SIX THOUSAND NINE On March 15, 1990, the Duray spouses informed Roque Bacus, one of
HUNDRED SEVENTY FIVE PESOS (P96,975.00) shall be paid within a the heirs of Luis Bacus, that they were willing and ready to purchase the
period of TEN (10) years at a monthly amortization of P1,747.30 to begin property under the option to buy clause. They requested Roque Bacus
from December 7, 1985 with interest at eighteen per cent (18%) per to prepare the necessary documents, such as a Special Power of
annum based on balances.” Attorney authorizing him to enter into a contract of sale, on behalf of his
sisters who were then abroad.
The contract provided for a grace period. And, upon expiry of a period of
90 days, Fernando was authorized to declare the contract cancelled and On March 30, 1990, due to the refusal of petitioners to sell the property,
to dispose the parcel of land. Faustino Durays annotated their adverse claim in the Registry of Deeds.
After the execution of the contract, Carmelita Leaño made several ISSUE: WON Sps. Duray were in delay.
payments in lump sum.7 Thereafter, she constructed a house on the lot
valued at P800,000.00.8 The last payment that she made was on April RULING: Obligations under an option to buy are reciprocal obligations.
1, 1989. The performance of one obligation is conditioned on the simultaneous
fulfillment of the other obligation. In other words, in an option to buy, the
ISSUE: WON Leaño was in delay. payment of the purchase price by the creditor is contingent upon the
execution and delivery of a deed of sale by the debtor. In this case, when
RULING: The Court held that the transaction between the parties was a private respondents opted to buy the property, their obligation was to
conditional sale not an absolute sale. The intention of the parties was to advise petitioners of their decision and their readiness to pay the
reserve the ownership of the land in the seller until the buyer has paid price. They were not yet obliged to make actual payment. Only upon
the total purchase price. petitioners actual execution and delivery of the deed of sale were they
required to pay. As earlier stated, the latter was contingent upon the
On the issue of whether petitioner Leaño was in delay in paying the former.
amortizations, we rule that while the contract provided that the total
purchase price was payable within a ten-year period, the same contract Corollary, private respondents did not incur in delay when they did not
specified that the purchase price shall be paid in monthly installments yet deliver payment nor make a consignation before the expiration of the
for which the corresponding penalty shall be imposed in case of default. contract. In reciprocal obligations, neither party incurs in delay if the
Petitioner Leaño cannot ignore the provision on the payment of monthly other does not comply or is not ready to comply in a proper manner with
installments by claiming that the 10-year period within which to pay has what is incumbent upon him. Only from the moment one of the parties
not elapsed. fulfills his obligation, does delay by the other begin.
Article 1169 of the Civil Code provides that in reciprocal obligations, In this case, private respondents, as early as March 15, 1990,
neither party incurs in delay if the other does not comply or is not ready communicated to petitioners their intention to buy the property and they
to comply in a proper manner with what is incumbent upon him. From were at that time undertaking to meet their obligation before the
the moment one of the parties fulfills his obligation, delay by the other expiration of the contract on May 31, 1990. However, petitioners refused
begins. to execute the deed of sale and it was their demand to private
respondents to first deliver the money before they would execute the
In the case at bar, respondent Fernando performed his part of the same, which prompted private respondents to institute a case for specific
obligation by allowing petitioner Leaño to continue in possession and performance.
use of the property. Clearly, when petitioner Leaño did not pay the
monthly amortizations in accordance with the terms of the contract, she
was in delay and liable for damages. However, we agree with the trial MEGAWORLD V. TANSECO
court that the default committed by petitioner Leaño in respect of the G.R. No. 181206 October 9, 2009
obligation could be compensated by the interest and surcharges Article 1169 – Principle of Delay
imposed upon her under the contract in question.
FACTS: Megaworld and Mila S. Tanseco (Tanseco) entered into a
It is a cardinal rule in the interpretation of contracts that if the terms of a Contract to Buy and Sell condominium unit.
contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulation shall Tanseco paid all installments due pending delivery of the unit.
control. Thus, as there is no ambiguity in the language of the contract, Megaworld, however, failed to deliver the unit within the stipulated period
there is no room for construction, only compliance. on October 31, 1998 or April 30, 1999, the last day of the six-month grace
period.
Note: As a rule, if you borrow money and you want to pay off back in
installments, the debtor, who will pay in installments, will not incur delay A few days shy of three years later, Megaworld, by notice dated April 23,
unless the creditor will make a demand for each and every installment 2002 (notice of turnover), informed Tanseco that the unit was ready for
as they become due. inspection preparatory to delivery. Tanseco replied through counsel, by
letter of May 6, 2002, that in view of Megaworlds failure to deliver the
A contract to sell is preparatory for a contract of sale. In a contract to unit on time, she was demanding the return of P14,281,731.70
sell, the obligor has an obligation to pay off the prestation which is, representing the total installment payment she had made, with interest
usually, the full payment of the purchase price. Actually, the full payment at 12% per annum from April 30, 1999, the expiration of the six-month
lOMoARcPSD|7732614

grace period. Tanseco pointed out that none of the excepted causes of
delay existed.
In its Answer, Megaworld attributed the delay to the 1997 Asian financial
crisis which was beyond its control; and argued that default had not set
in, Tanseco not having made any judicial or extrajudicial demand for
delivery before receipt of the notice of turnover.
ISSUE: WON Megwaorld was is delay.
RULING: The Contract to Buy and Sell of the parties contains reciprocal
obligations, i.e., to complete and deliver the condominium unit on
October 31, 1998 or six months thereafter on the part of Megaworld, and
to pay the balance of the purchase price at or about the time of delivery
on the part of Tanseco. Compliance by Megaworld with its obligation is
determinative of compliance by Tanseco with her obligation to pay the
balance of the purchase price. Megaworld having failed to comply with
its obligation under the contract, it is liable therefor.
That Megaworld’s sending of a notice of turnover preceded Tansecos

demand for refund does not abate her cause. For demand would have
been useless, Megaworld admittedly having failed in its obligation to
deliver the unit on the agreed date.
II. Involuntary Breaches
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. (Fortuitous Events) (1105a)
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)
GROUNDS FOR LIABILITY:

1. Fraud
2. Negligence
3. Delay
4. Contravention of the terms of obligation
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PRINCIPLE OF DELAY 2. It must be impossible to foresee the event which constitute the case
caso fortuito, or foreseen but impossible to avoid.
3. Occurrence must be of such as to render it impossible for the debtor
As a general rule in Article 1169, the debtor or obligor does not incur in to fulfill the obligation in a normal manner.
delay except when the creditor or obligee makes a demand. Demand
can be made judicially or extra-judicially such as the filing of complaint 4. The obligor must be free from any participation in, or aggravation of,
in court. the injury resulting to the creditor.
The concept of delay is applicable as to positive obligations. It will not NOTE: There is no fortuitous event if the proximate cause is the
partake negative obligation because the moment a person does not do negligence on the part of the debtor.
what is precluded upon him, he does not incur in delay.
In order that it will be independent of the will of the obligor, the proximate
It is sufficient that tolerance or benevolence on the part of the creditor cause of the fortuitous event must not have been caused by any act or
has ended, such that the creditor would like to demand the specific omission on the part of the debtor.
fulfillment of the obligation. Sps. Vasquez v. Ayala Corporation GR. No.
149734 (11-19-2004) If the acts of the debtor brought about the injury, the event is only a
remote cause, and thus, the parties thereto are not exonerated of their
KINDS OF DELAY: obligations.
1. Mora solvendi – delay on the part of the debtor which may either be GENERAL RULE: An obligor cannot be liable for a fortuitous event
ex re (delay on the part of the debtor in real obligation) or ex
persona (delay on the part of the debtor with respect to personal EXCEPTIONS:
obligation). 1. When expressly specified by law
• Obligor promises the same thing to 2 or more persons of different
2. Mora accipiendi – delay on the part of the creditor. interests. (Art. 1165)
• Object of prestation is generic, even if the object is wiped out by a
3. Compensatio morae – delay on the part of both parties in reciprocal fortuitous event. Genus nunquam perit. (Art. 1263)
obligations. 2. When declared by the stipulation of the parties
• Despite presence of a fortuitous event, if it is specifically agreed
CONTRAVENTION OF THE TERMS OF OBLIGATION upon by the parties, they are still liable.
3. When the nature of the obligation requires the assumption of risk
Article 1167. If a person obliged to do something fails to do
it, the same shall be executed at his cost. The Supreme Court discussed that the nature of the obligation in
repairing cars require the assumption of risk, which is carnapping as
This same rule shall be observed if he does it in normal business risk. Such that, these repair shops must observe that
contravention of the tenor of the obligation. Furthermore, diligence which is adequate, as a consequence of the undertaking of
it may be decreed that what has been poorly done be undone. their business. If they do not foresee these events, they will be
responsible for the loss. Co v. CA GR. No. 124922 (06-22-1998)
• Intent of the parties
• Manifest with respect to agreements, contracts terms, and Fire outbreaks are not necessarily fortuitous event, because they require
stipulations pertaining to the said obligation certain intervention of acts of men.
• If it violates those things, the performance of the obligation is in
contravention of the tenor of the obligation. Contract of carriage - observance of utmost diligence of very cautious
• A construction agreement was executed where certain works were persons having due regard to certain circumstances that may happen
done with respect to defective materials. The defect on the materials due to certain event; slight diligence will make them automatically liable
in carrying out the work that was undertaken, pursuant to the for damages that will arise out of that situation.
construction agreement, gave rise to a remedy on the part of the
creditor to have that construction of the building executed at the cost ART. 1175. Usurious transactions shall be governed by special laws.
of the original contractor. The Supreme Court held that the manner
by which the construction was done was in contravention of the tenor
of the construction agreement. It gave rise to a liability on the part of Usury is contracting for or receiving something in excess of the amount
the contractor for damages. BF Corporation vs. Werdenberg GR. No. allowed by law for the loan or forbearance of money, goods, or chattels.
174387 (12-09-2015) It is the taking of more interest for the use of money, goods, or chattels
than the law allows.
NOTE: Article 1170 is your basis for damages but always remember that
you have to correlate this with 1171, 1172, 1173, and 1169. The Supreme Court held that the prevailing rate of legal interest is 6%
If any of these co-exist with a fortuitous event or aggravates the loss per annum. This 6% is to be applied prospectively. Effectivity: July 1,
caused by a fortuitous event, the obligor cannot be excused from liability. 2013. Nacar v. Gallery Frames GR. No. 189871 (08-13-2013)
ART. 1174. Except in cases expressly specified by the law, or when ART. 1176. The receipt of the principal by the creditor without
it is otherwise declared by stipulation, or when the nature of the reservation with respect to the interest, shall give rise to the
obligation requires the assumption of risk, no person shall be presumption that said interest has been paid.
responsible for those events which, could not be foreseen, or which,
though foreseen, were inevitable. (Fortuitous Events) (1105a) 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)
Fortuitous event – events which could not be foreseen, or which,
though foreseen, were inevitable; force majeure.
A presumption must always arise from a fact or set of facts.
REQUISITES OF A FORTUITOUS EVENT: Legally presumed under the law unless facts and circumstances prove
otherwise.
1. The cause of the unforeseen and unexpected occurrence, or the
failure of the debtor to comply with his obligations must be
independent of the human will or the debtor’s will.
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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 Creditors to Satisfy their Claims against Debtor (must

be in particular order) [Available in obligations to give, especially if money
claims]
1. The debtor must make a demand for specific performance of an

obligation.
2. In default of demand, the creditor can pursue through levying by
attachment and execution the properties in the possession of the
debtor, except those which are exempt from execution. (Ex. exempt
property- family home)
3. Exercise all the rights and actions of the debtor, save those personal
to him. (accion subrogatoria)
4. Seek rescission of the contracts executed by the debtor in fraud of
their rights. (accion pauliana)
5. Accion directa - right of the lessor to go directly against the sub-
lessee for unpaid rents of the lessee (Art 1552, 5th remedy under
Property)
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)
GENERAL RULE: All rights acquired in virtue of an obligation are

transmissible.
EXCEPTIONS:
1. If law provides otherwise;
2. If contract provides otherwise;
3. If obligation is purely personal.
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*** Impossible Conditions - render the obligation dependent upon them as

legally ineffective. The condition annuls the prestation.
DIFFERENT KINDS OF OBLIGATIONS
ART. 1184. Positive Condition. The condition that some event
PURE AND CONDITIONAL OBLIGATIONS
happen at a determinate time shall extinguish the obligation as soon
as the time expires, or it has become indubitable that the event will
not take place. (1117)
ART. 1179. Every obligation whose performance does not depend
upon a future or uncertain event, or upon a past event unknown to the
parties, is demandable at once. Positive Condition - the happening of an event at a determinate time
extinguishes the obligation.
Every obligation which contains a resolutory condition shall also be Ex. A promises B to give an amount of 2,000 pesos if B passes the bar
demandable, without prejudice to the effects happening the event. exam on his first attempt.
- B fails on his first attempt
- B passed on his second take
ART. 1181. n conditional obligations, the acquisition of rights, as well - The condition is fulfilled, but it is not within the determinate time
as the extinguishment or loss of those already acquired, shall depend - Thus, A’s obligation is extinguished.
upon the happening of the event which constitutes the condition.
ART. 1185. Negative Condition. The condition that some event will
not happen at a determinate time shall render the obligation effective
Pure Obligation - it is an obligation which contains no term or condition from the moment the time indicated has elapsed, or if it has become
whatever upon which depends the fulfillment of the obligation contracted evident that the event cannot occur.
by the debtor, the obligation is a pure obligation. It is immediately
demandable, and there is nothing to exempt the debtor from compliance If no time has been fixed, the condition shall be deemed fulfilled at
therewith. such time as may have probably been contemplated, bearing in mind
the nature of the obligation. (1118)
Condition - uncertain, future events which yield an influence on a legal
or juridical relationship. (Manresa)
- Future and uncertain Negative Condition - if the event does not happen at a determinate
- Past but unknown time, the obligation shall become effective and binding.
Ex. A promised to give 1M to B, provided that B will not marry until he
ELEMENTS OF CONDITIONS: reaches the age of 25.
1. Future events; CASES

2. Uncertainty of occurrence;
3. Happening of occurrence must have an effect upon the LIABILITY FOR DAMAGES
demandability of the obligation.
PRUDENTIAL BANK V. CA
KINDS OF CONDITIONS: GR# 125536 (March 03, 2009)
Article 1170 – Non-performance by fraud, negligence, and delay
1. Suspensive Condition (condition precedent) - a condition which must
be fulfilled before the obligation may be demandable. What is the basis of the liability for damages here? What act under Article
2. Resolutory Condition (condition subsequent) - operates to extinguish 1170?
an already existing obligation.
ISSUE: WON Prudential Bank is liable for damages on account of
negligence with respect to Valenzuela? YES.
ART. 1182. When the fulfillment of the condition depends upon the
sole will of the debtor, the conditional obligation shall be void. If it Why is Prudential Bank liable for Damages?
depends upon chance or upon the will of a third person, the obligation Prudential Bank (Debtor) committed a breach in its fiduciary relationship
shall take effect in conformity with the provisions of this Code. (1115) with its client (Leticia Valenzuela (Creditor), when the former misposted
the funds of the latter's account to other person.
1. Potestative Condition - dependent on the will of one of the parties.
If dependent on the will of the debtor: FACTS: Private respondent Leticia Tupasi-Valenzuela opened an
a) suspensive- VOID account with the petitioner Prudential bank. On June 1, 1988, herein
b) resolutory- VALID private respondent deposited P35,271.60 drawn against the Philippine
If dependent on the will of the creditor: Commercial International Bank (PCIB). Thereafter, private respondent
a) suspensive- VALID issued to Prudential Bank a check in the amount of P11,500 post-dated
b) resolutory- VALID June 20, 1988 in favor of one Belen Legaspi. Legaspi, who was in
jewelry trade, endorsed the check to Philip Lhuiller, a businessman in
2. Casual Condition - depends on chance, hazard, or the will of a the same field. When the check was deposited with the PCIB, it was
third person. dishonored for being drawn against insufficient funds.
3. Mixed Condition - depends not only upon the will of the debtor but Private respondent asked why her check was dishonored where there
also upon some chance or some other factors. were sufficient funds. The bank officer told her that there was no need
to review the passbook, because the bank ledger was the best proof that
she did not have sufficient funds. Then, he abruptly faced his typewriter
ART. 1183. Impossible conditions, those contrary to good customs or and started typing. Later, it was found out that the bank misposted
public policy and those prohibited by law shall annul the obligation private respondent’s check, and it was deposited to
which depends upon them. If the obligation is divisible, that part there another account and delayed the posting of the same to the
of which is not affected by the impossible or unlawful condition shall proper account. The bank admitted that it was at fault. But, since it is not
be valid. the first time that private respondent experienced this scenario, she
commenced a suit for damages.
The condition not to do an impossible thing shall be considered as not
having been agreed upon. (1116a) RULING: In this case, how was this degree of care not observed by the
Bank such that it may be liable for damages?
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The law expressly requires that the Bank must observe extraordinary of third person, (Rapanot). So the SC said, when it forecloses on those
diligence, such that the slightest negligence in the manner that they carry security without having secured that those properties were not sold to
out their operations in handling and managing the accounts of the clients third person, it is negligence.
will already give rise to liability for damages on account of negligence.
Take note: Even if the Bank here is the creditor, the law requires
The SC held that the mistake here, no matter how serious, it cannot be extraordinary diligence. Bank should not be ignorant to PD 957, because
considered as malicious or on account of bad faith. There is no fraud in section 18 thereof imposes on banks that they should know approval
this case, because there is no showing of that intent on the part of the requirements, notice requirements, etc. before they foreclosed. So when
bank with respect to dishonoring of the check upon its clients. the bank summarily foreclosed on mortgage property without
Nevertheless, that mistake, since it is a serious one, that constitutes as ascertaining first those properties, in effect, bank becomes negligent,
negligence because it does not observe the degree of diligence that is and gives rise to a liability for damages.
required of banks in recognizing its fiduciary relationships with regards
to its clients. PHILIPPINE AIRLINES V. CA
226 SCRA 423 GR No. L-82619
PRUDENTIAL BANK V. RAPANOT Article 1174 – Doctrine of Fortuitous Event
816 SCRA 334
Article 1170 – Non-performance by fraud, negligence, and delay Is Article 1174 applicable here?
FACTS: Golden Dragon is the developer of Wack-Wack Twin Towers FACTS: On November 1976, private respondent filed a complaint for
Condominium, located in Mandaluyong City. On May 9, 1995, Rapanot damages for breach of contract of carriage against PAL. On August 2,
paid Golden Dragon the amount of P453,329.64 as reservation fee for a 1976, he was among the 21-passenger of Flight 477 that took off from
41.1050-square meter unit in said condominium, particularly designated Cebu for Ozamiz.
as Unit 2308-B2,and covered by Condominium Certificate of Title (CCT)
No. 2383 in the name of Golden Dragon. While on flight about fifteen minutes before landing, the pilot received a
radio message that the airport was closed due to heavy rains and
On September 13, 1995, the Bank extended a loan to Golden Dragon inclement weather and should proceed to Cotabato instead.
amounting to P50,000,000.00 to be utilized by the latter as additional
working capital. To secure the loan, Golden Dragon executed a Upon arrival in Cotabato City, PAL informed the passengers of their
Mortgage Agreement in favor of the Bank, which had the effect of options to return to Cebu on Flight 560 on the same day, and to Ozamis
constituting a real estate mortgage over several condominium units on August 4, 1976 or take the next flight to Cebu on 3, and arrive at
owned and registered under Golden Dragon's name. Among the units Ozamis at 5. From Flight 560, there were only six seats left and the
subject of the Mortgage Agreement was Unit 2308-B2. priority is based on check-in sequence.
On May 21, 1996, Rapanot and Golden Dragon entered into a Contract He was passenger No. 9. He insisted on being given priority but refused
to Sell covering Unit 2308-B2. On April 23, 1997, Rapanot completed for the predicament was due to force majeure not of PAL’s own doing.
payment of the full purchase price of said unit amounting to He tried to stop the flight due to some packages till on board. PAL issued
P1,511,098.97. Golden Dragon executed a Deed of Absolute Sale in a free ticket to Iligan which he received under protest. He was left in the
favor of Rapanot of the same date. Thereafter, Rapanot made several airport with no food and accommodation for his stay in Cotabato. In Iligan
verbal demands for the delivery of Unit 2308-B2. City, private respondent hired a car from the airport to Ozamis City and
his personal effects were no longer recovered.
Prompted by Rapanot's verbal demands, Golden Dragon sent a letter to
the Bank dated March 17, 1998, requesting for a substitution of collateral PAL answered, denying its unjust refusal to accommodate respondent.
for the purpose of replacing Unit 2308-B2 with another unit with the same It argued that the first six passengers chose to take Flight 560 and it was
area. However, the Bank denied Golden Dragon's request due to the explained of the inability to transport all of them back to Cebu, and it was
latter's unpaid accounts. Because of this, Golden Dragon failed to only the private respondent who insisted on such. Runway was wet and
comply with Rapanot's verbal demands. Thereafter, Rapanot, through a danger to life. RTC decided in favor of PAL and CA affirmed such.
his counsel, sent several demand letters to Golden Dragon and the
Bank, formally demanding the delivery of Unit 2308-B2 and its So remember, we're talking about involuntary breaches of obligation.
corresponding CCT No. 2383, free from all liens and encumbrances.
Neither Golden Dragon nor the Bank complied with Rapanot's written General Rule: If these fortuitous events happen, then you are
demands. expropriated from many obligation which arises from contract or
whatever agreement entered into.
How will you distinguish the case of Prudential Bank v. Rapanot with that
of Prudential Bank v. CA? ISSUE: So why is PAL liable for damages? Is the inclement weather per
se the proximate cause or reason of the injury or damage with respect
Generally, most cases, if clients of a bank make deposit accounts, there to the passengers?
is a creditor-debtor relationship. Bank (Debtor) must observe
extraordinary diligence in handling the accounts of its clients, (Creditor). RULING: The SC said that common carriers have—under the law—
And so the slightest negligence of the debtor will already incur liability liability to observe extraordinary diligence with the carriage of goods or
for damages under Art. 1170. passengers. So, in this case, passengers were stranded in Cotabato City
because of the diversion in the flight on account of inclement weather.
Here, in this case, it talks about credit accommodation with respect to According to SC, even if the inclement weather was a fortuitous event,
real estate mortgages that have entered into by banks as a form of you look at the proximate cause of any injury or damage that was
security for the loan obligation that a client may borrow from the bank. sustained by the passengers.
So the Bank here is now the Creditor and the client, the Debtor. But still,
extraordinary diligence should be imposed on banks with respect to how Was it on account of inclement weather per se?
it carries out its operation in credit accommodation transactions.
The SC said NO. Considering that PAL, and common carriers in general,
ISSUE: How is Prudential Bank negligent in this case? must observe extraordinary diligence. Again, the slightest negligence to
carry out this diligence will already make it liable. Meaning, in the series
RULING: Prudential bank haphazardly foreclosed on mortgage of events that happened, PAL had committed something wrong that
property, which it did not verify first if it was the mortgage property of the breaches its contract of carriage with its passengers.
debtor. In this case, it was shown that the condominium unit was
mortgaged for and in behalf of Golden Dragon which was supposed to What was that?
be the debtor, the bank as creditor. But the bank did not verify, prior to
its foreclosure, that these condominium units were actually sold in favor
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PAL grossly failed, considering that there was an ongoing battle between
rebels and government forces in Cotabato, and respondent was a FACTS: On October 19, 1987 two armed men entered the pawnshop
stranger, and exposed the passengers to great danger. More and took away whatever cash and jewelry were found inside the vault.
importantly, there was a breach of contract of carriage because PAL was Petitioner Sicam sent Respondent Jorge informing her of the loss of her
not able to carry its passengers to its designated destination. jewelry due to the robbery incident in the pawnshop.
TAKE NOTE: What is the duration of this extraordinary diligence that Respondent Jorge then expressed her disbelief, stating that when the
must be observed in common carriers? robbery happened, all jewelry pawned were deposited with Far East
Bank near the pawnshop, since it had been the practice that before they
This extraordinary diligence is not extinguished from the time the would withdraw, advance notice must be given to the pawnshop, so it
passengers get on plane, for as long as they did not reach their could withdraw the jewelry from the bank. Thus, she requested
destination, that extraordinary diligence can still be imposed on the part withdrawal but Sicam failed to return such jewelry.
of common carriers and they are responsible for any outcome.
RTC held that petitioner Sicam could not be made personally liable for a
GAISANO CAGAYAN V. INSURANCE COMPANY claim arising out of a corporate transaction and that the corporate debt
490 SCRA 286 or credit is not the debt or credit of a stockholder. The loss was also due
Article 1174 – Doctrine of Fortuitous Event to an armed robbery which is considered as a fortuitous event.
FACTS: IMC is the maker of Wrangler Blue Jeans. Levi Strauss Phils. CA reversed stating that the doctrine of piercing the veil of corporate
(LSPI) is the local distributor of products bearing trademarks owned by entity. Corresponding diligence required of a pawnshop is that it should
LCI, IMC. LSPI obtained from respondent fire insurance policies with take steps to insure itself against the loss of articles which are entrusted
book debt endorsements. Petitioner is a customer and dealer of the for custody. Sicam was found also to be personally liable.
products of IMC and LSPI. On February 25,1991 the Gaisano
Superstore Complex in CDO was consumed by fire. Included in the items Piercing the Veil of Corporate Fiction. The rule is that the veil of
lost were stocks of ready-made clothing materials by IMC and LSPI. corporate fiction may be pierce when made as a shield to perpetrate
fraud and/or confuse legitimate issues. The theory of corporate entity
On February 1992, respondent filed for damages against petitioner. It was not meant to promote unfair objectives or otherwise shield them.
alleges that IMC and LSPI filed with respondents their claims under their
respective fire insurance policies and that petitioner has unpaid accounts In the case, respondent Lulu pawned her jewelry in a pawnshop owned
and by virtue of such respondent was subrogated to their rights against by Sicam himself. All the receipts all bear the words Agencia de R.C.
petitioner, that respondent made several demands but unheeded. Sicam, notwithstanding its incorporation on 1987. It was misleading that
the pawnshop was owned solely by the petitioner Sicam and not by a
Petitioner contends that it could not be held liable because the property corporation.
covered by the insurance policies were destroyed due to force majeure,
right of subrogation has no basis. There was no breach of contract for In view of the alleged incorporation of the pawnshop, the issue of
that there was no way the fire could have been prevented or foreseen. whether petitioner Sicam is personally liable is inextricably connected
with the determination of the question whether the doctrine should apply
RTC dismissed respondent’s complaint holding that fire was purely to the case.
accidental and that it was not attributable to the negligence of the
petitioner. CA set aside RTC, for the sales invoice are proofs of sale and ISSUE: Are the petitioners exempted from liability since robbery is a
that the loss of the good in the fire must be borne by the petitioner for fortuitous event and they were not negligent?
the thing lost by a fortuitous event the risk is borne by the owner of thing
by doctrine of res perit domino. RULING: Fortuitous Events and Requirement of Diligence
The burden of proving that the loss was due to a fortuitous event rests
ISSUE: Is Gaisano Cagayan be held liable for the unpaid accounts of on him who invokes it. And, in order for a fortuitous event to exempt one
good sold consumed by fire? YES. from liability, it is necessary that one has not committed negligence or
misconduct that may have occasioned the loss.
HELD: What is the nature of the obligation here in this case?
The SC cited Article 1263 in an obligation to deliver a generic thing, the An act of God cannot be invoked to protect a person who has failed to
loss or destruction of such does not extinguish obligation. (Genus take steps to forestall the possible adverse consequences of such a loss.
nunquan perit) Genus of a thing can never perish. An obligation to pay One’s negligence may have concurred and would not exempt liability.
money is generic, therefore, it is not excused by force majeure. In the case, Sicam had testified that there was a security guard in their
*Whether fire is force majeure or not is immaterial, what is relevant here pawnshop at the time of the robbery. He testified that he intended to
is that whether petitioner has outstanding account to IMC and LSPI. have a separate vault. But they failed to show that they were free from
any negligence.
If we look the obligation of the Gaisano Cagayan to deliver certain
clothing materials, etc. and those things were lost on account of a fire, Robbery, per se, is not a fortuitous event. It does not foreclose the
then the G.R. of the Art. 1174 will have been applicable because there possibility of negligence. The fact that a thing was unlawfully and
is a determinate thing. forcefully taken from another’s rightful possession does not
automatically give rise to a fortuitous event. To be considered as such,
But what is the obligation are we talking in the complaint filed? it must be proved and established that the event was an act of God, or
It was the FAILURE on the part of Gaisano Cagayan to pay the sum of was done solely by third person, and that neither the claimant nor the
money on account of that insurance contract. So, the obligation is to give person alleged to be negligent has any participation.
or deliver generic thing. Thus, the obligation is for payment of money,
wherein the insurance in this case was not the loss of goods by fire, but In the case, petitioners merely presented the police report of the police
for the petitioner's account with IMC and LSPI that were remain unpaid station which is not sufficient to prove robbery, and does not show that
45 days after the fire. they were not at fault.
As a general rule: a fire outbreak is not a fortuitous event per se, because On Diligence
it must necessitate a certain intervention or negligence on the part of Article 2209 provides that the creditor shall take care of the thing pledged
acts of certain persons in order to start that fire, unless if the fire was due with the diligence of a good father of a family. This means that petitioners
to a thunder, then that is an act of God. must take care of the pawns the way a prudent person would as to his
own property.
SICAM V. JORGE
529 SCRA 443 A review of the records clearly shows that petitioners failed to exercise
Article 1174 – Doctrine of Fortuitous Event reasonable care and caution that an ordinarily prudent person would
lOMoARcPSD|7732614

have used in the same situation. Sicam’s testimony reveals that the vault While it may be argued that Peakstar's breach of the MoA was
was partly open, and the combination was off. unforeseen by petitioners, the same is clearly not "impossible" to
• This reveals that there were no security measures adopted by foresee, or even an event which is "independent of human will." Neither
petitioners in the operation of the pawnshop. has it been shown that said occurrence rendered it impossible for
• No sufficient precaution and vigilance were adopted by petitioners to petitioners to pay their loan obligations to Allied Bank and thus, negates
protect the pawnshop from unlawful intrusion. the former's force majeure theory altogether. In any case, as earlier
• There was no clear showing that there was any security at all. Or if stated, the performance or breach of the MoA bears no relation to the
there was one, that he had sufficient training in securing a pawnshop. performance or breach of the subject loan transactions, them being
He was unable to notice that the robbers were armed with pistols. separate and distinct sources of obligation. The fact of the matter is that
• The security guards were not presented at all to corroborate Sicam’s petitioners' loan obligations to Allied Bank remain subsisting for the basic
claim. Not one of the petitioner’s employee was present during the reason that the former has not been able to prove that the same had
robbery incident. already been paid or, in any way, extinguished.
HELD: Preponderance of evidence shows that petitioners failed to CASES that held there is a fortuitous event
exercise the diligence required under Article 1173. The diligence with
which the law requires the individual at all times to govern his conduct SOUTHEASTERN COLLEGE V. CA
varies with the nature of the situation in which he is placed, and the 292 SCRA 422
importance of the act which he is to perform. Article 1174 – Doctrine of Fortuitous Event
To properly invoke fortuitous events, the following must be considered: FACTS: De Jesus are owners of a house at Pasay, while petitioner owns
(1) Are the requisites present? a four-floor school building along the same College road. On October 11,
(2) What is the proximate cause of that loss or injury on the part of other 1989 at 6:30AM typhoon Saling hit Manila. Buffeted by strong winds, the
person? If it is on account of the event per se, then it is fortuitous event, roof of the petitioner’s building ripped and was blown away, landing on
but if it is intervention or negligence on the part of the obligor, then you and destroying portions of the roofing of the house of the private
cannot say that event was the reason of the loss or injury. respondent.
METRO CONCAST V. ALLIED BANKING After an investigation, it was recommended that the school building was
711 SCRA 479 to be declared as a structural hazard due to a defective roofing structure
Article 1174 – Doctrine of Fortuitous Event and could have been avoided if the construction was not faulty.
In a complaint for culpa aquiliana, it was alleged that the damage to their
FACTS: On various dates and for different amounts, Metro Concast, house renders it inhabitable, forcing them to stay in other houses. In their
through its officers, obtained several loans from Allied Bank. Petitioners Answer, it stated that the school did its best to have in good condition,
failed to settle their obligations. Allied Bank, through counsel, sent them and that the typhoon is beyond human control, thus absent negligence.
demand letters, all dated December 10, 1998, seeking payment of the RTC favored the private respondents. CA affirmed but reduced the
total amount of P51,064,093.62, but to no avail. Thus, Allied Bank was damages.
prompted to file a complaint for collection of sum of money against
petitioners before the RTC. Metro Concast already ceased its business ISSUE: Whether the damage on the roof of the building of private
due to some reason. Hence, in order to settle their debts with Allied respondents resulting from the impact of the falling roof the school
Bank, they offered the sale of Metro Concast’s remaining assets to Allied building by Saling due to fortuitous event?
Bank, which the latter, however, refused. Peakstar Oil Corporation,
expressed interest in buying the scrap metal. During the negotiations HELD: There is no question that a typhoon is a fortuitous event which
with Peakstar, petitioners claimed Atty. Saw, a member of Allied Bank’s may be foreseen but is somehow unavoidable. The person claiming
legal department, acted as the latter’s agent. A Memorandum of negligence has the burden of proof proving such by competent evidence,
Agreement, through Atty. Saw, was drawn between Metro Concast, not merely presumptions.
represented by petitioner Jose Dychiao, and Peakstar under which
Peakstar obligated itself to purchase the scrap metal. Unfortunately, We find no clear and convincing evidence to affirm the judgment of CA.
Peakstar reneged on all its obligations under the MOA. The petition has not been shown to be negligent or a fault, regarding the
construction and maintenance of the school building. The claim for
What was the source of the obligation here? damages must fail more so, because no bad faith or even willful act to
A loan obligation or an obligation to pay a certain loan amount. cause damage was alleged and proven.
ISSUE: WON the breach in the MOA on the part of Peakstar is a The SC found out that the Dimaanos only conducted the ocular
fortuitous event. inspection at the site where the things were, but there were no certain
studies, and no investigation conducted that the plans were defective,
HELD: Fortuitous events, by definition, are extraordinary events not and that the material used were not proper, etc. So meaning, the
foreseeable or avoidable. It is, therefore, not enough that the event absence of those facts could not lead that conclusion that, indeed,
should not have been foreseen or anticipated, as is commonly believed, Southeastern College was negligent. And so, the injury incurred by the
but it must be one impossible to foresee or to avoid. The mere difficulty Dimaanos was on the account of fortuitous event, which is Typhoon
to foresee the happening is not impossibility to foresee the same. Saling.
ELEMENTS: Negligence or omission on the part of Southeastern College was not the
To constitute a fortuitous event, the following elements must concur: proximate cause, or the reason that brought about the injury or damage
the cause of the unforeseen and unexpected occurrence or of the failure on the part of Dimaanos.
of the debtor to comply with obligations must be independent of human
will; PHILCOMSAT V. GLOBE
429 SCRA 153
It must be impossible to foresee the event that constitutes the caso Article 1174 – Doctrine of Fortuitous Event
fortuito or, if it can be foreseen, it must be impossible to avoid;
FACTS: For several years, prior to 1991, Globe Telecom had been
The occurrence must be such as to render it impossible for the debtor to engaged in the coordination of the provision of various communication
fulfill obligations in a normal manner; and, facilities for the military bases of US. They were configured for the
exclusive use of US Defense Communications Agency. USDCA
The obligor must be free from any participation in the aggravation of the contracted with Globe for the use of communication facilities. Globe, on
injury or loss. the other hand, contracted with local service providers such as
PHILCOMSAT for the provision of communication facilities.
lOMoARcPSD|7732614

May 07, 1991 - Philcomsat and Globe entered into Agreement whereby
Philcomsat obligated itself to establish, operate, and provide and IBS April 6, 1984, they entered into a Deed of Conditional Sale wherein
Standard B Earth Station for exclusive use of the USDCA. Term was for petitioner agreed to reconvey the foreclosed property to the private
60 months or five years. Globe promised to pay Philcomsat monthly respondents, agreement are as follows:
rentals for each leased circuit involved.
Vendees offered to repurchase, and the Vendor agree to sell the
At the time of agreement, both parties knew of the RP-US Military Bases property for the sum of P73,700 with a down payment of P8,900 and the
Agreement that it was to expire also on 1991. Subsequently, they balance shall be payable in six years on equal quarterly amortization
installed and established the earth station. On September 16, 1991 the plan at 18% interest per annum. The first quarterly amortization of
Senate decided not to concur on the Treaty of Friendship that was P4,470.36 shall be payable three months from the date of the execution
supposed to extend and shall terminate on December 31, 1992. of the documents. That upon completion of the payment herein
stipulated and agreed, the Vendor agrees to deliver to the Vendees a
On August 06, 1992, Globe notified Philcomsat of its intention to good and sufficient deed of conveyance covering the property, subject
discontinue the use of the earth station on November 06, 1992, in view matter of this deed of condition sale.
of the withdrawal of US Military Personnel. Globe invoked Section 8 on
Default of the Agreement stipulating about force majeure. Philcomsat, On April 6, 1990, upon completing the payment of the full repurchase
however, demanded payment of outstanding obligations under the price, they demanded from the petition the execution of the Deed of
Agreement. Conveyance in their favor. Petitioner informed that the prestation to
execute had become legally impossible in view of the RA 6657,
Globe answered that it was constrained to end the Agreement due to the Comprehensive Agrarian Reform Law.
termination of the Senate of the Treaty which allegedly constituted ‘force
majeure’ under the Agreement and such exempted it from paying ISSUE: Did the subject property become a legally impossible prestation
rentals. due to the enactment of the CARL?
ISSUE: Is the termination of the RP-US Agreement constitutive of force The full payment of the purchase price, as agreed of in the conditional
majeure that would exempt obligation to perform payment? deed of sale, was it a suspensive condition or a resolutory one?
It was a suspensive one, because the happening of which will give rise
HELD: Article 1174 of the Civil Code exempts the obligor from liability to an obligation.
because fortuitous event or force majeure, which refers to events that
are unforeseeable, but also those which are foreseeable but inevitable. HELD: Acquisition and Loss of Rights in Conditional Obligations
Not being contrary to law, Section 8 of the Agreement has force of law The acquisition, as well as the extinguishment or loss of those already
between them. acquired, shall depend upon the happening of the event which
constitutes the condition.
Requisites to exempt Globe from non-compliance: (1) Event must be
independent of human will; (2) Occurrence must render it impossible for The deed of conditional sale between petitioner and private respondents
the debtor to fulfill the obligation in a normal manner; (3) That the obligor was executed on April 6, 1984, and that they paid religiously the agreed
must be free of participation in or aggravation of the injury to the creditor. installments until they completed the payment on April 6, 1990.
Petitioner, in fact, had allowed them to fulfill the condition effecting full
The following are present in the instant case. Both parties do not have payment and then invoked Section 6 of RA 6657 only after private
control over the non-renewal of the agreement because the prerogative respondents have fully paid the repurchase price.
to ratify thereof belonged to the Senate. Neither did they have control
over withdrawal. So was the bank liable to Spouses Carpio? Yes.
• The events made it impossible the continuation of the five-year terms
without fault on either party. On the contention that RA 6657 rendered prestation impossible: It will
• It would be unjust for Globe to continue paying rentals. be noted that RA 6657 was enacted on June 10, 1988. However, neither
RA 6657 nor EO 407 was intended to impair the obligation of contract.
On December 1992 Payment Petition had much earlier concluded with the private respondents.
Philcomsat could not have removed or rendered ineffective said
communication until after December 31, 1992 because the Cubi Point The last paragraph of Section 6 of RA 6657 provides that “any sale,
was accessible only to US naval personnel that time. Thus, payment is lease or possession of private lands executed by the original landowner.”
due. The original landowner in this case is not the bank, but the private
respondents. Petitioner acquired the land through the foreclosure
The payment for rentals was extinguished on the basis that the RP-US proceedings but agreed reconveyance.
Treaty was not renewed, which constitute a fortuitous event.
Section 6 of RA 6657 deals with the retention limits allowed by law to
DEVELOPMENT BANK V. CA small landowners. Since the property is 10 hectares, it is then within the
262 SCRA 245 jurisdiction of the DAR to determine whether the property can be
Article 1181 – Acquisition/Extinguishment of Rights subjected to agrarian reform.
FACTS: What is the source of obligation? The law did not intend to take away property without due process of law.
Deed of Conditional Sale between Development Bank and Spouses Nor is it intended to impair the obligation of contracts. EO 407 was also
Carpio, et.al enacted two months after private respondents fulfilled condition, and
these laws cannot have retroactive effect unless there is express
Why it was entered into by both parties? provision in them.
To be able to secure a loan, the Spouses Carpio mortgages the property
to the said bank. What portion of Article 1181 is applicable in this case?
Take note in this case, it is the happening of the suspensive condition.
Private respondents were the original owners of a parcel of agricultural
land covered by TCT No. T-1432, situated in Barrio Capucao, Ozamis, HELD: The decision of the RTC to grant the petition of the private
City of 113,695 sq.m. On 30 May 1977, private respondents mortgaged respondents on the delivery of obligation is affirmed.
the said land to the petitioner, and the latter foreclosed the mortgage on
the land and emerged as the sole bidder in the ensuing action sale (TCT Difference between Contract to Sell and Deed of Conditional Sale
T-10913). In Contract to Sell, the full payment of purchase price actually partakes
a form of suspensive condition, such that after full payment of purchase
What is the condition in this case? price, the parties will execute a deed of absolute sale in order to convey
It is the full payment of the purchase price. the property. So take note, that non-fulfilment of that condition, is not
lOMoARcPSD|7732614

considered breach of an obligation but the non-happening of an event and resettlement of the occupants in the joint venture property subject
will not give rise to the obligation. to reimbursement of the owners. Developer would deposit the initial
amount of P10M to defray the expenses for the relocation and settlement
Why? Because in contract to sell, the full payment of the purchase price and the costs for obtaining Government permits and required
is a suspensive condition, that happening of which will give rise to an clearances.
obligation.
On September 24, 1994, the developer and owner agreed, through an
Deed of Conditional Sale addendum to the JVA to increase initial deposit of P10M to P60M.
Unlike in Contract to Sell, there is actually a perfected contract of sale
between the parties. So, Contract to Sell is a preparatory to Contract of On October 27, 1994, the developer by Deed of Assignment transferred,
Sale. But in a Deed of Conditional Sale, there is already a Contract of conveyed and assigned to Empire East Land Holdings
Sale; it’s just that the performance of the parties in that obligation is (developer/assignee) all its rights and obligations under the JVA
dependent on the happening of a certain condition, which is usually the including the addendum.
fulfillment of the purchase price.
On February 29, 2000, Majestic filed RTC for specific performance with
CENTRAL PHILIPPINE UNIVERSITY V. CA damages against the developer, the developer/assignee and Andrew
246 SCRA 511 Tan. It was based on the failure of the petitioner to comply with their
Article 1181 – Acquisition/Extinguishment of Rights obligation under the JVA, including the obligation to maintain a strong
security force to safeguard the property from illegal entrants and
What type of condition is discussed in this case? occupants. There was an attempt to reach amicable settlement.
It was a resolutory condition.
On September 16, 2002, Majestic filed again that petitioners be directed
FACTS: Sometime in 1939, the late Don Ramon Lopez, Sr., who was to provide round the clock security for the property to defend and protect
then a member of the Board of Trustees of the CPU executed a Deed of it from invasion of unauthorized persons. Petitioners opposed alleging
Donation in favor of the latter of a parcel of land issued in the name of that (1) it was premature and that (2) under the principle of reciprocal
the CPU with annotations: obligations, the owner could not compel them to perform their obligations
1. The land described shall be utilized by the CPU exclusively for the under the JVA if owner does not honor its obligations.
establishment and use of a medical college with all its buildings as part
of the curriculum. ISSUE: WON Megaworld Inc. liable in favor of Majestic Finance for its
2. The said college shall not sell, transfer, or convey to any third party obligation under the Joint Venture Agreement?
nor in any way encumber said land.
3. The said land shall be called Ramon Lopez Campus and the said HELD:
college shall be under obligation to erect a cornerstone bearing such What is the nature of the JVA?
name. Any net income shall be put into a fund knows as Ramon Lopez Joint Venture Agreement is a reciprocal obligation. They are those that
Campus fund to be used for the improvements of said campus and arise from the same cause, and in which, each party is a debtor and
erection of building. creditor to each other at the same time such that the obligations of one
are dependent upon the obligations of the other. They are to be
On May 31, 1989, the private respondents who are the heirs of Don performed simultaneously, so that the performance by one is
Ramon Lopez, Sr., filed an action for Annulment of the Donation, conditioned upon the simultaneous fulfillment of the other.
Reconveyance and Damages against the CPU alleging that since 1939
up to the time the action was filed the latter had not complied with the How’s Article 1184 relevant in this case? What is the definite period of
conditions of the donation. Petitioners argue that the action had time?
prescribed. The common cause of the parties in entering into the joint venture was
the development of the joint venture property into the residential
In other words, a land shall be donated with a condition a school shall subdivision as to eventually profit therefrom. Consequently, all of the
be erected. obligations under the JVA were subject to the happening of the complete
development of the joint venture property, or if it would become
ISSUE: Was there a breach on the conditions stipulated in the deed of indubitable that the completion would not take place.
donation committed by the CPU?
Should any of the obligations, whether continuous or activity be not
HELD: YES. performed, all other remaining obligations would not ripen into
So why is it a resolutory condition? demandable obligations while those already performed would cease to
The SC said, when a person donates land to another on the condition take effect.
that the latter would build upon the land a school, the condition imposed
was not a suspensive condition. It was resolutory, because the right to The performance of one is conditioned on the performance of the other.
possess on the said donated land will be extinguished if the stipulated So meaning, the non-happening of that obligations or fulfillment, it will
conditions were not fulfilled. The petitioners have failed to comply the not incur to any obligation on the part of the other party to carry out its
said condition, which took them 50 years to fulfill the same from the time obligation under the JVA.
of the acceptance and acknowledgement of the obligation on the deed
of donation. The donation has already been effective, so in order to own Refer to the table summarized by the SC:
the donated land, you must comply the condition of erecting a school in Sequence of Activities:
the said land. (1) Signing of the JVA, (2) Developer will negotiate to all tenants, (3)
Developer will pay all monetary claims, (4) Developer will relocate and
MEGAWORLD INC. V. MAJESTIC FINANCE transfer all tenants, etc. within a period of 1 year from the date of the
777 SCRA 479 execution of the agreement.
Article 1184 – Positive Conditions
The remaining 25% of the said requirements complied with in 6 mos.
FACTS: On September 23, 1994, Megaworld Properties (developer) from the date of expiration of the original one year period, etc.
entered into a Joint Venture Agreement (JVA) with Majestic Finance
(owner) for the development of residential subdivision located in Cavite. In these obligations as identified as continuous or activities, the SC said
these obligations, they are actually based on reciprocal obligations
According to the JVA, the development of the 215 hectares of land conditioned on the other performance of the contracting party.
belonging to the owner would be for the sole account of the developer
and upon completion of the development of the subdivision, the owner Take note: It must be complied within a certain definite period of time.
would compensate the developer in the form of saleable residential So, it will be extinguished if there is non-performance of the other. So,
subdivision lots. Developer would advance all costs for the relocation Megaworld's obligation is extinguished based on Art. 1184.
lOMoARcPSD|7732614

Delay in Reciprocal Obligations

Being reciprocal in nature, their respective obligations as the owner and
the developer were dependent upon the performance by the other of its
obligations; hence, any claim of delay or non-performance against the
other could prosper only if the complaining party had faithfully complied
with its own correlative obligation.
The record is bereft of the proof to support that Majestic had performed
its obligation as to place itself in the position to demand from the
developer. There was also insufficiency in showing that the developer
failed to provide security for the protection of the property.
lOMoARcPSD|7732614

CONSTRUCTIVE FULFILMENT Conditional Obligation.

Example:
Consequences of Conditional Obligations A and B entered into a contract. A borrowed a certain amount of
money from B, 10M. A has the obligation to give the money if B will
What is the effect if the debtor voluntary prevents the fulfilment of that get married. So that is the suspensive condition (condition to give).
condition? What if the execution was on January 01, 2016, but it was on February
Doctrine of Constructive Fulfilment refers to a condition which, 01, 2018 that B actually got married?
although not exclusively within the will of the debtor, may in some way
be prevented by the debtor from happening. The mere intention of the So the general rule is that the obligation to give, once fulfilled, shall
debtor to prevent its happening, or the mere placing of ineffective retroact to the day of the constitution of the obligation, such that all
obstacles is not sufficient. the elements of obligations concur. So here, it is on Jan. 01, 2016.
REQUISITES: Unilateral Obligation.

Debtor shall appropriate the fruits and interest received unless, from the
1. Intent of the obligor to prevent fulfilment of the condition nature of the obligation, it should be inferred that the intention was
2. Actual prevention of compliance different. So in the example, we know that money will earn interest. So
let say the legal rate interest is 6%, so 2 years had lapsed, that is 12%
Example: of 10M = 120K. Now, question, will the debtor also be liable to pay off
the creditor not only the 10M but also the amount of the interest received
X promises to pay Y a certain sum if the latter, within a certain time, therefrom? The answer is NO, as a general rule.
makes dikes along sides of a canal through which X conducts water
to his land. When work is started by Y, X deviates the flow of the water So all the fruits, let’s say, this is a parcel of land, and in the meantime,
to enable Y to make the dikes. there were fruit-bearing trees that grow there, will that mean, that fruits
will be given in favor of creditor? The answer is NO.
But before Y has finished the work, X allows water to run again
through the canal, thus preventing Y from finishing the work in the time Take Note: The debtor may appropriate, may use, may construe those
agreed upon. fruits and interest received, except—from the intention of the parties—if
The condition shall be deemed as fulfilled in this case. it was otherwise provided. So if they agreed on that, A will not just give
the 10M but also the interest received.
EXCEPTION: Where the act of the debtor, however, although voluntary,
did not have for its purpose the prevention of fulfillment of the condition,
will not fall under Article 1186. Reciprocal Obligations.
Fruits and interests during the pendency shall be considered as mutually
Example: compensated. That means they are set off, or they cancel each other off.
Let’s say that is a conditional deed of sale; one of the conditions is that
A promised to pay B a certain amount, if the latter constructs a wall the one party will get married. Since a conditional deed of sale is
for the former within a certain number of days. Before the work is considered a reciprocal obligation, let’s say, A had a parcel with fruit-
finished, A prosecutes B for a crime committed against him, resulting bearing trees, and B, the buyer has the money. With that, even if the
to B’s imprisonment and nonfulfillment of the condition fruits will be greater in amount than the legal interest, it is not correct
because A and B are mutually compensated, or they cancel each other
Provoking Resolutory Condition off.
When the condition is resolutory and not dependent on the will of the
debtor, and debtor unjustifiably provokes or produces the condition, it As to the Personal Obligation (to do/not to do)
will be considered as not fulfilled.
The court shall determine the retroactive effect of the condition that has
ART. 1186. The condition shall be deemed fulfilled when the obligor been complied with.
voluntarily prevents its fulfillment. (1119)
EFFECTS OF A RESOLUTORY CONDITIONS
Effect of malice, fraud, or bad faith: May incur a liability based on Art.
1170. ART. 1190. When the conditions have for their purpose the
extinguishment of an obligation to give, the parties, upon the
Fulfillment of Suspensive Condition fulfillment of said conditions, shall return to each other what they
have received.
ART. 1187. The effects of a conditional obligation to give, once the
condition has been fulfilled, shall retroact to the day of the In case of the loss, deterioration or improvement of the thing, the
constitution of the obligation. Nevertheless, when the obligation provisions which, with respect to the debtor, are laid down in the
imposes reciprocal prestations upon the parties, the fruits and preceding article shall be applied to the party who is bound to return.
interests during the pendency of the condition shall be deemed to
have been mutually compensated. If the obligation is unilateral, the As for the obligations to do and not to do, the provisions of the
debtor shall appropriate the fruits and interests received, unless second paragraph of article 1187 shall be observed as regards the
from the nature and circumstances of the obligation it should be effect of the extinguishment of the obligation. (1123)
inferred that the intention of the person constituting the same was
different.
EFFECTS WHEN RESOLUTORY CONDITIONS IS FULFILLED:
In obligations to do and not to do, the courts shall determine, in each
case, the retroactive effect of the condition that has been complied In conditional obligations, the rights of the creditor are vested but are
with. (1120) always in the danger of being extinguished by happening of the
resolutory condition.
Retroactivity of the Condition 1. Obligation is extinguished

2. Parties shall return what they have received, including fruits sand
The application of the principle of retroactivity of conditional obligations interests.
is not absolute. 3. Courts shall determine the retroactivity.
4. In case of loss, deterioration, or improvement apply Article 1189.
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VDA DE OUANO VS. REPUBLIC ART. 1189. When the conditions have been imposed with the
GR#168770 (Feb. 9, 2011) intention of suspending the efficacy of an obligation to give, the
Additional case following rules shall be observed in case of the improvement, loss
or deterioration of the thing during the pendency of the condition:
How is Article 1187 related to Art. 1189 and 1190?
(1) If the thing is lost without the fault of the debtor, the obligation
HELD: Given the foregoing disquisitions, equity and justice demand the shall be extinguished;
reconveyance by MCIAA of the litigated lands in question to the Ouanos
and Inocians. In the same token, justice and fair play also dictate that (2) If the thing is lost through the fault of the debtor, he shall be
the Ouanos and Inocian return to MCIAA what they received as just obliged to pay damages; it is understood that the thing is lost when
compensation for the expropriation of their respective properties plus it perishes, or goes out of commerce, or disappears in such a way
legal interest to be computed from default, which in this case should run that its existence is unknown, or it cannot be recovered;
from the time MCIAA complies with the reconveyance obligation. They
must likewise pay MCIAA the necessary expenses it might have incurred (3) When the thing deteriorates without the fault of the debtor, the
in sustaining their respective lots and the monetary value of its services impairment is to be borne by the creditor;
in managing the lots in question to the extent that they, as private
owners, were benefited thereby. (4) If it deteriorates through the fault of the debtor, the creditor may
choose between the rescission of the obligation and its fulfillment,
In accordance with Art. 1187 of the Civil Code on mutual compensation, with indemnity for damages in either case;
MCIAA may keep whatever income or fruits it may have obtained from
the parcels of land expropriated. In turn, the Ouanos and Inocians need (5) If the thing is improved by its nature, or by time, the improvement
not require the accounting of interests earned by the amounts they shall inure to the benefit of the creditor;
received as just compensation.
(6) If it is improved at the expense of the debtor, he shall have no
Following Art. 1189 of the Civil Code providing that [i]f the thing is other right than that granted to the usufructuary. (1122)
improved by its nature, or by time, the improvement shall inure to the
benefit of the creditor x x x, the Ouanos and Inocians do not have to
settle the appreciation of the values of their respective lots as part of the Article 1189 (1): Applicable only in obligations to give a determinate
reconveyance process, since the value increase is merely the natural thing, not on generic thing, because generic thing is never lost.
effect of nature and time.
Article 1189 (2): Who shall bear the loss, deterioration, and
What are the rights of the parties prior to the fulfilment of the condition? improvement of a thing?
ART. 1188. The creditor may, before the fulfillment of the condition, LOSS OF THE THING
bring the appropriate actions for the preservation of his right. 1. When it perishes
2. When it goes out of the commerce of man
The debtor may recover what during the same time he has paid by 3. When it disappears in such a manner that its existence is unknown or
mistake in case of a suspensive condition. (1121a) cannot be recovered.
If loss is due to the fault of the debtor, he becomes liable for damages to
Preservation of the Creditor’s Rights. the creditor upon the fulfillment of the obligation. But, if without fault,
Inasmuch as pending the happening of the suspensive condition, the obligation is extinguished, unless there is a stipulation to the contrary.
creditor has only an expectancy and cannot compel the debtor to
perform acts or events that may take place which might render his right Deterioration of the Thing.
illusory when the condition happens. Hence, he is given remedies to
preserve his rights, and to prevent loss or deterioration of the things Deterioration is any reduction or impairment in the substance or value
which are the objects of the obligation by enjoining or restraining the of a thing which does not amount to a loss. In other words, the thing still
alienation or destruction by the debtor or by third persons. exists at the time the condition is fulfilled, but it is no longer intact, or is
less than what is was.
Payment Before Condition.
Article 1188(2) permits the debtor who paid before the happening of the If not imputable to the debtor, he is not liable for any damages and must
condition to recover only when he paid by mistake, provided that the accept it in its impaired condition.
action to recover is brought before the action happens. If due to the debtor, then the creditor can either demand for the thing or
ask for rescission, with damages in either case.
If the payment was of a determinate thing, and still in the hands of the
creditor, the accion reinvidicatoria will lie, or else solutio indebiti. Rule on res perit domino: The owner shall bear the risk of loss. So if
there is a deterioration of a thing, then the creditor shall bear the risk of
If not by mistake, recovery is: loss.
1. If condition is fulfilled, no recovery.
2. If not fulfilled, there must be recovery—unless it was intended to be of What if the debtor did not observe due diligence—such of that of a good
pure donation. father—while in the possession of a thing before the fulfilment of the
condition?
Payment by Mistake is not just payment, but this also includes a delivery
of a thing when there is no right on the part of the party who received it. Creditor has two options:
• demand for the thing or ask for rescission with damages, or;
• just deliver it anyway even if it is deteriorated.
Improvement of a Thing.
Anything added in, incorporated in, or attached to the thing due is
considered an improvement.
If caused by nature or by time, such as alluvion, this improvement shall
be to the benefit of the creditor.
If it were at the expense of the debtor, the law says he shall have the
same rights as a usufructuary with respect to the improvement.
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Usufructuary rights – The right to use and the right to the fruits.
In Art. 1190, it is only applicable in reciprocal obligations. Now, what do
Law on Property on Usufructuary: you mean by reciprocal obligation? In the case of Consolidated Industrial
Gases v. Alabang Medical Center, November 13, 2013, the Supreme
1. If the debtor will remove those improvements without causing any Court provided the definition of reciprocal obligations.
damage to the principal thing, then the debtor may revoke and enjoy
those fruits. Reciprocal Obligations – it pertains to those which arise from the same
cause, and if each party is a debtor and creditor of each other, such that
2. But if the removal cannot be made without injury to the thing due, the obligation of one is dependent upon the obligation of the other. Take
then the improvement must be delivered together with the thing to note that the performance of this obligation, with respect to one as
the creditor without the latter paying any indemnity. against the other, must be simultaneous.
RESOLUTION/RESCISSION OF CONTRACTS The third and the most important aspect of resolution is that it is an
implied power. What is an implied power?
Because the power to rescind is implied in reciprocal ones. The
Resolution/Rescission of contracts are provided for or discussed in two characteristic of resolution as an implied power, partakes actually the
provisions – Article 1191 and 1193. First, we have to know the rules with nature of a tacit resolutory condition.
respect to resolution. When is it applicable? What are the appropriate
remedies? What are certain limitations do we have to observe with this Tacit – means that it is not expressly provided for by the parties. It does
rule? not spring out of their agreement, but nevertheless, it is implied and
embedded in each and every obligation, especially obligations arising
ART. 1191. The power to rescind obligations is implied in reciprocal from a contract.
ones, in case one of the obligors should not comply with what is
incumbent upon him. In relation to Art. 1159, contracts have the force and effect of law
between the contracting parties, and that it must be complied with in
The injured party may choose between the fulfillment and the good faith. Remember the principle in contracts that: the law is actually
rescission of the obligation, with the payment of damages in either embedded in each and every contract, such that even if the contract has
case. He may also seek rescission, even after he has chosen a force of law, the parties cannot enter into an agreement which
fulfillment, if the latter should become impossible. contravenes the law itself. The law is embedded in each and every
contract entered into an agreement made between parties. Since the law
The court shall decree the rescission claimed, unless there be just is embedded in each and every contract, even in those obligations that
cause authorizing the fixing of a period. may be sourced out of law other than contracts–delicts, quasi-delicts,
etc.– the reason why resolution is implied is because it is only the law
This is understood to be without prejudice to the rights of third that provides for this power. This provision under Art. 1191 is properly
persons who have acquired the thing, in accordance with articles invoked, or the power to rescind obligations in reciprocal obligations is
1385 and 1388 and the Mortgage Law. (1124) proper only in cases when this power is not agreed upon expressly by
the parties, either in a contract or other obligation that they may have
entered into.
ART. 1192. In case both parties have committed a breach of the
obligation, the liability of the first infractor shall be equitably The reason why this partakes the nature of a tacit resolutory condition is
tempered by the courts. If it cannot be determined which of the because the breach of the obligation is the condition, and that condition,
parties first violated the contract, the same shall be deemed the breach, is actually resolutory, such that it will extinguish the rights of
extinguished, and each shall bear his own damages. (n) the parties that have already been acquired on account of that obligation.
So, the breach is tacit or implied because it is provided for in the law.
Even if it is not expressly agreed upon by the parties, the contract, or
Art. 1192 talks about a situation wherein both parties have committed a under a certain undertaking. But, take note that it is a resolutory
breach of the obligation and what their appropriate remedy is. Of course, condition–that breach or that obligation will give rise to an exercise to the
it is still resolution, but again, the damages that may be awarded or the power to rescind on the part of the injured party.
liability thereto may be equitably tempered by the courts. But take note
this is only applicable to the first infractor. Second, apart from the characteristics and the grounds of resolution,
there are appropriate remedies that the injured party may make on
The Concept of RESOLUTION in rel. to Art. 1191 and Art. 1192. account of invoking Art. 1191.
Art. 1191 happens when only one of the parties will commit such a What are the rights of the injured party in Art. 1191?
breach and Art. 1192 will happen in case of both. The concept of Actually, the injured party has two options: first, the injured party, instead
resolution is actually, first and foremost, a power. So, what does this of rescinding, cancelling or terminating the obligation, the injured party
power entail? This power means the power to rescind obligations which may actually demand for specific performance, or for the fulfilment of the
is implied in reciprocal obligations. obligation. But in consideration that there is a breach, nevertheless,
there is a liability for damages. The first option is specific
When will this occur? Only in cases when one of the obligors should not performance or the fulfilment of the obligation plus damages.
comply what is incumbent of him, pursuant to the object of that Second, this injured party may exercise the power to rescind. Meaning,
obligation. the injured party might want the obligation or the contract cancelled on
account of the breach that has been brought about by the other party to
Now, when we say that it is a power, some authors might emphasize that that contract or obligation.
the power to rescind is implied in reciprocal ones. It means that,
primarily, the power emanates on the part of the injured party (the person These two remedies of rescission are always with damages, because
who has been victimized or injured on account of the breach of one of under Art. 1170, the performance of the obligation which constitutes the
the parties of that obligation). So, it is that person who has the right to breach thereof—especially if it is in contravention to the tenor of the
demand or even to carry out acts that may appropriately resolve or obligation as between the parties—will give rise to a liability for damages.
rescind that obligation. The second option is rescission plus damages.
Take note that this resolution is a power to rescind an obligation. But These remedies are only alternative, you can only choose one. And if
again, it doesn’t apply to all kinds of obligations. Specifically, this power you choose one, you forego the other. That is the general rule. Except
to rescind obligations is implied only in reciprocal ones. There is a in case where the injured parties may ask for the fulfillment of the
distinction between reciprocal obligations and that of bilateral obligation and rescission.
obligations.
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But when does this happen? When is it cumulative as an exception? Otherwise, the injured party by the others’ breach will have to passively
When the party asks for the fulfilment, or has chosen the fulfillment of sit and watch its damage accumulate during the pendency of the suit
the obligation, but it is already impossible on the part of the obligor to until the final judgement of rescission is rendered, when the law itself
carry out the obligation in the normal manner, or to perform the obligation already requires that he should exercise due diligence to minimize its
at all. Despite choosing the option of fulfillment, it is shown that the own damages under Art. 1191.
performance of the obligation is already impossible, then the same
injured party may subsequently choose rescission. What can we take in the case of University of the Philippines v. De los
Angeles? A proper understanding of Art. 1191 is this: since it is a power
That is the exception to the rule that these two remedies are actually to rescind and it is implied in reciprocal ones, every party in reciprocal
alternative. There is a situation, such as when the injured party has obligation, the moment that there is a breach, they may invoke their
chosen the fulfillment of the obligation, and it is impossible then that party implied power to rescind–if they feel that they are the injured party. But
may subsequently choose rescission of that obligation. There must be a of course, at that moment, they extrajudicially resolve or rescind the
showing of the impossibility of the obligation before that exception can obligation, there is no final determination whether or not that rescission
come in. is proper.
PARAGRAPH 3 - The court shall decree the rescission claimed, unless So, those parties, even if they can invoke that power to rescind under
there be just cause authorizing the fixing of a period. Art 1191, they are not at a limbo. They do not know if they are correct in
exercising Art 1191 or not. The decisions of the SC have provided that
The right to rescind or resolve the obligation is a right which belongs to you must invoke the power to rescind or to resolve obligations judicially,
the injured party alone. The issue that we are presented here is: is it because it is only when a competent court will declare, by final judgment,
essentially judicial? Meaning, you should only recourse to the court that there was a breach, that the exercise of the powers is correct or
before you can exercise this power. Therefore, you cannot exercise it incorrect. It is only at that time that the issues will be settled—whether
extrajudicially. So, some authors of some books continuously cite some the invocation of 1191 was proper or not. That is why there are decisions
Supreme Court rulings in order to avail of Art. 1191 in relation to Art. in the SC saying that, in 1191, a prior judicial recourse to the court isn’t
1192 as distinguished from Art. 1381, etc.–there must be judicial necessary, such that in the cases of Sps. Lam vs. Kodak Philippines.
intervention or there must be judicial relief. In short, they must file a case Although there is a judicial recourse or rescission of an obligation by
in Court. filing an action in court, this power to rescind is not essentially judicial.
You can invoke it even extrajudicially, but, if there are questions and
But, invoking it judicially, is it essential? Meaning, can you exercise it issues that may arise because of the inculcation of Art 1191, it is the
extrajudicially? Actually, in instances where the party chooses to court, that can only properly and finally adjudicate whether the invocation
exercise the power to rescind by way of filing a complaint in court – that of 1191 is proper.
is allowed. But, it is not essential in the exercise of the power to rescind.
Meaning, in choosing Art. 1191, the injured party may actually The right to cancel or resolve obligations, we already know that it is tacit,
extrajudicially resolve or rescind that obligation. Meaning, prior recourse it is a power, and it applies to reciprocal obligations. But the nature of the
to the courts is not a prerequisite before this power to rescind can be breach which constitutes a tacit resolutory condition, it must contain a
availed of. The reason why actually you resort to the court, or there is a substantial breach. So, not every breach of an obligation may allow or
judicial intervention, or when you file a complaint in court for resolution, may justify the invocation of 1191. If it is a slight or causal breach, if it is
it is actually for the purpose of due process. very incidental to the performance, or negligible in the carrying out or
fulfillment of the obligation, then 1191 is not proper. This is because the
There are some cases that I want for you to look closely to, so that you basis of 1191 is actually a breach of faith on the part of the parties or on
will understand the nature of resolution. Is it essentially judicial? Or can the part of the obligor and the obligee in the reciprocal obligation. This is
it be invoked extrajudicially? only applicable or proper in cases of substantial breaches of an
obligation, such as to render the object of the obligation nugatory or
In the case of Tan v. Court of Appeals, 175 SCRA 656, the Supreme impossible for the parties to carry out. But if it is merely consequential,
Court said: ‘the power to rescind obligations is implied in reciprocal ones, causal, incidental, or a slight breach, then 1191 is not allowed.
in case one of the obligors should not comply with what is incumbent
upon him.’ That is clear under Art. 1191. However, in this case, the Limitation to Article 1191 – this provision, or the power to rescind, is to
Supreme Court said: ‘it is equally settled that in the absence of be understood without prejudice to the rights of 3rd persons who have
stipulations to the contrary, this power must be invoked judicially. It acquired the things in accordance with Article 1385 and 1388 and the
cannot be exercised solely on a parties’ own judgement that a party has Mortgage Law. The right to rescind is subordinated to the rights of 3rd
committed a breach of that obligation. persons who have acquired things in good faith and for value. In 1385,
rescission shall not take place when the things which are the object of
On one hand, you have the case of Tan v. Court of Appeals. On the other the contract are legally in the possession of 3rd persons who did not act
hand, in the case of Spouses Lam v. Kodak Phils., Ltd., G.R. No. 16761, in bad faith and 1388 also provides further limitation. Whoever acquired,
January 11, 2016 where the Supreme Court said: in bad faith, the things alienated in fraud of creditors shall indemnify the
“When rescission is thought under Art. 1191 of the Civil Code, it need latter for damages suffered by them on account of such alienation, when
not be judicially invoked because the power to resolve is implied in due to any cause, it would be impossible for him to return them.
reciprocal obligations.”
The issue therefore is: Is there a conflict? Can it be invoked What does this limitation provide under 1191? There are instances
extrajudicially or is it always judicial? There is actually no conflict, and where a certain contract which is reciprocal in nature are which consist
that has been already discussed in the case of University of the of reciprocal obligations may be rescinded.
Philippines v. De los Angeles, as cited in the case of EDS Manufacturing
v. Health Check International, October 9, 2013, G.R. No. 162802. What is the usual scenario in a contract of sale? In a contract of sale,
In the case of University of the Philippines v. De los Angeles, the usually, there is a seller and there is a buyer. Let’s say, it is a seller of a
Supreme Court clarified the characteristic of Art. 1191. If a party who parcel of land, and we also have a buyer, so their obligation is reciprocal
deems a contract violated and considers it resolved and rescinded, that in the absence of provisions or stipulations to the contrary. Of course,
party acted accordingly without previous court action. Take note that the buyer will pay that amount due to the seller. The seller will sell the
invocation of Art. 1911 is proper but the Supreme Court sets a caveat— land in favor of the buyer, and the buyer also undertakes to pay the
that party who resolved or rescinded that obligation proceeds at his own amount, or the purchase price for that sale.
risk, for it is only the final judgment of the corresponding court to
conclusively and finally settle whether the action taken was, or was not
correct in law.
But the law definitely does not require the contracting party—who
believes itself injured—that he must first file a suit and wait for a
judgment before taking extrajudicial steps to protect his interest.
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What if the seller has already given the title to the land in favor of the of sale, the vendor has lost and cannot recover ownership until and
buyer? unless the contract is resolved or rescinded under 1191. Whereas, in a
contract to sell, the title is retained by the vendor until full payment of the
Example: purchase price. Such payment may be positive and suspensive
condition, and failure of which is not considered a breach in the
Let’s say they have already executed a deed of absolute sale, and this obligation, but an event that prevents the obligation of the vendor to
deed of absolute sale is already with the buyer. This is a form of a convey the title from becoming effective.
constructive delivery. This is an instrumental delivery of a delivery of
public instruments. Properties may already be delivered especially if This case also distinguished a conditional contract of sale from a
they are immovable properties. Now, despite the fact that this deed of contract to sell. In a conditional contract of sale, if the suspensive
sale has already been executed in favor of the buyer, the buyer hasn’t condition is fulfilled, the contract of sale is thereby prevented, such that
yet paid the seller the amount of 10M for the land. there had already been a previous delivery of the property subject to the
sale to the buyer. Ownership thereto automatically transfers to the buyer
In the meantime, the buyer has already and actually further sold this by operation of law, without any further act having to be performed by
parcel of land in favor of C. Here, C has paid B (Buyer) the amount of the seller. Because, in a conditional contract of sale, the parties already
5M as the purchase price in order for C to acquire the deed of sale for perfected, or agreed to, in a contract of sale. The manner by which they
the same land. So, this land of S (Seller) has already been given to C. carry out their obligation is subject to a condition.
C is a purchaser in good faith, or a buyer in good faith for value that,
at the time C purchased the land from B, and B delivered it to C, C In a contract to sell, it is not yet perfected because it is merely
has not yet acquired any knowledge of infirmity of the sale. He preparatory. In this case, the SC said that a contract to sell upon
checked the title and there is no problem. So C is a buyer in good fulfillment of the suspensive condition which is usually the full payment
faith, and subsequently, C has registered the land under his name. of the purchase price. Ownership over the thing or property subject of
When S demanded from B, he found out that the title of the parcel of that contract will not automatically transfer to the buyer, although the
land has already been cancelled under the name of S, and a new title property may have been previously delivered to him. The prospective
has been issued under the name of C. S exercises the power to seller still has to convey the title to the prospective buyer in an absolute
rescind under 1191. manner by entering into a contract of sale.
The question is, can the deed of sale and the contract be rescinded? Limitations of the right to rescind – First, 1191 and 1192 will not be
It would seem like it because the breach on B’s part is substantial. applicable in cases of casual or slight breaches in an obligation or
contract. Second, the remedy of resolution is alternative to specific
But the question is, in resolving or rescinding the deed of sale between performance, so you cannot avail of both at the same time or
S and B, can S reacquire the property already titled under the name simultaneously. You can only choose one, and in choosing one, it
of C—who is a buyer in good faith or a purchaser for value? excludes the other. Third, this can only be filed, or this power can only
The answer is no, because 1191, as provided for in 1385 and 1388, be invoked by a person who do not have any fault, or who is not at fault,
is limited or is subject to those provisions, such that the person has (the injured party). Finally, availing 1191, or invoking the power to
lawfully or legally acquired possession over this property, then the rescind, this requires a mutual restitution between the parties.
injured party cannot ask for that property back, despite his exercise of Rescission abrogates the contract from its very inception, and requires
resolving or rescinding the contract pursuant to 1191. a mutual restitution of the benefits received. Rescission creates the
obligation to both parties to return what they have received under the
Remedy – What is now the remedy or recourse of S? S will now only obligation—as if they have never entered into that contract or obligation
be entitled to damages, which is pecuniary loss or actual damages for at its inception.
the amount or for the fair market value of the parcel of land because,
actually, the land cannot be returned anymore, so what is given back You have to place them back to the status quo antedated, or the
is the value of such land. It is without prejudice to the rights of the 3rd situation as if prior to litigation. Finally, just like any other right or any
persons who actually acquired that thing, despite the exercise of other power, this is subject to a waiver.
1191.
When can we say that the power to rescind has been waived?
Distinguish contract to sell and a contract of sale – It is important to Accepting delayed payments beyond the grace period amounts to a
distinguish, because 1191 cannot be invoked for contracts to sell. waiver of the right to rescind an obligation to pay.
Because in a contract to sell, it is not a reciprocal obligation; it is a
unilateral one, whereas in a contact of sale, it is reciprocal. This is where This has been discussed in the case of Angeles vs. Calasanz (not in the
1191 is applicable. syllabus) This power is subject to a waiver. Waiver may be express or
implied.
Contract to sell Contract of sale
A mere preparatory contract A principal contract and not ANGELES V. CALASANZ
merely preparatory (Additional case)
A contract usually entered into The parties actually want to buy
by an interested buyer and an or sell the subject matter of the FACTS: On December 19, 1957, defendants-appellants Ursula Torres
interested seller in order that, sale. Calasanz and Tomas Calasanz and plaintiffs-appellees Buenaventura
after the full payment of the Angeles and Teofila Juani entered into a contract to sell a piece of land
amount of the purchase price, located in Cainta, Rizal for the amount of P3,920.00 plus 7% interest per
the parties agree thereafter that annum.
they shall execute a contract of
sale or a deed of absolute sale. The plaintiffs-appellees made a downpayment of P392.00 upon the
Ownership remains with the Sale is absolute. There is no execution of the contract. They promised to pay the balance in monthly
vendor, and does not pass to the stipulation in the contract that the installments of P 41.20 until fully paid, the installments being due and
vendee until full payment of the title to the property remains to payable on the 19th day of each month. The plaintiffs-appellees paid the
purchase price the seller until full payment of the monthly installments until July 1966, when their aggregate payment
purchase price has been made already amounted to P4,533.38. On numerous occasions, the
on the part of the buyer. defendants-appellants accepted and received delayed installment
payments from the plaintiffs-appellees.
In the case of Caroscoso vs CA GR No. 123672 Dec 14, 2005, the SC
said that, in a contract of sale, the title that passes to the vendee upon On December 7, 1966, the defendants-appellants wrote the plaintiffs-
delivery of the thing sold, whereas in a contract to sell, ownership is not appellees a letter requesting the remittance of past due accounts.
transferred upon delivery of the property or any title thereto, but upon the
full payment of the purchase price on the part of the obligor. In a contract
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On January 28, 1967, the defendants-appellants cancelled the said

contract because the plaintiffs-appellees failed to meet subsequent In other words, the party who deems the contract violated many consider
payments. The plaintiffs' letter with their plea for reconsideration of the it resolved or rescinded, and act accordingly, without previous court
said cancellation was denied by the defendants-appellants. action, but it proceeds at its own risk. For it is only the final judgment of
the corresponding court that will conclusively and finally settle whether
The plaintiffs-appellees filed Civil Case No. 8943 with the Court of First the action taken was or was not correct in law.
Instance of Rizal, Seventh Judicial District, Branch X to compel the
defendants-appellants to execute in their favor the final deed of sale We see no conflict between this ruling and the previous jurisprudence of
alleging inter alia that after computing all subsequent payments for the this Court invoked by respondent declaring that judicial action is
land in question, they found out that they have already paid the total necessary for the resolution of a reciprocal obligation; (Ocejo, Perez &
amount of P4,533.38 including interests, realty taxes and incidental Co. v. International Banking Corp., 37 Phil. 631; Republic v. Hospital de
expenses for the registration and transfer of the land. San Juan de Dios, et al., 84 Phil. 820) since in every case where the
extrajudicial resolution is contested only the final award of the court of
The defendants-appellants alleged in their answer that the complaint competent jurisdiction can conclusively settle whether the resolution was
states no cause of action and that the plaintiffs-appellees violated proper or not. It is in this sense that judicial action will be necessary, as
paragraph six (6) of the contract to sell when they failed and refused to without it, the extrajudicial resolution will remain contestable and subject
pay and/or offer to pay the monthly installments corresponding to the to judicial invalidation, unless attack thereon should become barred by
month of August, 1966 for more than five (5) months, thereby acquiescence, estoppel or prescription.
constraining the defendants-appellants to cancel the said contract.
The right to rescind the contract for non-performance of one of its
The main issue to be resolved is whether or not the contract to sell has stipulations, therefore, is not absolute. In Universal Food Corp. v. Court
been automatically and validly cancelled by the defendants-appellants. of Appeals (33 SCRA 1) the Court stated that—
Art. 1191. The power to rescind obligations is implied in The general rule is that rescission of a contract will not be permitted for
reciprocal ones, in case one of the obligors should not comply a slight or casual breach, but only for such substantial and fundamental
with what is incumbent upon him. breach as would defeat the very object of the parties in making the
agreement. (Song Fo & Co. v. Hawaiian-Philippine Co., 47 Phil. 821,
The injured party may choose between the fulfillment and the 827) The question of whether a breach of a contract is substantial
rescission of the obligation, with the payment of damages in depends upon the attendant circumstances. (Corpus v. Hon. Alikpala, et
either case. He may also seek rescission, even after he has al., L-23707 & L-23720, Jan. 17, 1968).
chosen fulfillment, if the latter should become impossible.
The breach of the contract adverted to by the defendants-appellants is
The court shall decree the rescission claimed, unless there be so slight and casual when we consider that apart from the initial
just cause authorizing the fixing of a period. downpayment of P392.00 the plaintiffs-appellees had already paid the
monthly installments for a period of almost nine (9) years. In other words,
This is understood to be without prejudice to the rights of third in only a short time, the entire obligation would have been paid.
persons who have acquired the thing, in accordance with Furthermore, although the principal obligation was only P 3,920.00
articles 1385 and 1388 and the Mortgage Law. excluding the 7 percent interests, the plaintiffs- appellees had already
paid an aggregate amount of P 4,533.38. To sanction the rescission
ISSUE: Was the contract to sell validly cancelled? made by the defendants-appellants will work injustice to the plaintiffs-
appellees.
RULING: Article 1191 is explicit. In reciprocal obligations, either party
the right to rescind the contract upon the failure of the other to perform The contract was not validly cancelled.
the obligation assumed thereunder. Moreover, there is nothing in the law
that prohibits the parties from entering into an agreement that violation How do you distinguish Art. 1191 from the right to terminate a contract
of the terms of the contract would cause its cancellation even without or obligation based on a happening of a resolutory condition? Both, in a
court intervention (Froilan v. Pan Oriental Shipping, Co., et al., 12 SCRA sense, are resolutory, so how do you distinguish them?
276)—
The power to rescind in Art. 1191 is tacit or implied, meaning, 1191 is
Well settled is, however, the rule that a judicial action for the rescission properly appreciated and applicable if no such condition has been
of a contract is not necessary where the contract provides that it may be agreed upon prior to or beforehand by the parties. But, if the obligation
revoked and cancelled for violation of any of its terms and conditions' or contract is terminated based on a resolutory condition, the existence
(Lopez v. Commissioner of Customs, 37 SCRA 327, and cases cited of this resolutory condition is actually based upon a contract or based on
therein) the agreement of the parties, so beforehand, they have agreed that this
Resort to judicial action for rescission is obviously not contemplated . . . contract or obligation is subject to a resolutory condition.
The validity of the stipulation cannot be seriously disputed. It is in the
nature of a facultative resolutory condition which in many cases has In Art 1191, there are a lot of limitations. If the parties to an obligation or
been upheld by this Court. (Ponce Enrile v. Court of Appeals, 29 SCRA in a contract have agreed that it shall be subject to a resolutory condition,
504). the only limitation is that the contract should not be contrary to law,
morals, good customs, public order, or public policy.
The rule that it is not always necessary for the injured party to resort to Remember the principle that, as between the parties to a contract, it has
court for rescission of the contract when the contract itself provides that a force of law between them.
it may be rescinded for violation of its terms and conditions, was qualified
by this Court in University of the Philippines v. De los Angeles, (35 SCRA Remember the rule under conditional obligation that, if what has been
102) where we explained that: agreed upon by the parties is an impossible condition, what is the effect?
It shall annul the obligation. When is it impossible? It could either be
Of course, it must be understood that the act of a party in treating a physically impossible or legally possible.
contract as cancelled or resolved on account of infractions by the other
contracting party must be made known to the other and is always Distinguish Art. 1191 from Art. 1380 or rescission proper. There are
provisional, being ever subject to scrutiny and review by the proper court. contracts in your Persons and Family Relations that are defective.
If the other party denies that rescission is justified, it is free to resort to Example is that there are defective marriages as it can be void, voidable,
judicial action in its own behalf, and bring the matter to court. Then, or they are valid, but the spouses may legally separate from one another.
should the court, after due hearing, decide that the resolution of the
contract was not warranted, the responsible party will be sentenced to In obligations and contracts, there are also different kinds of defective
damages; in the contrary case, the resolution will be affirmed, and the contracts. One kind is rescissible contracts. If these contracts are
consequent indemnity awarded to the party prejudiced.
lOMoARcPSD|7732614

rescissible, you can rescind them, as rescissible is the ability to be OBLIGATIONS WITH A PERIOD
subject to rescission.
Art 1380 onwards actually talks about rescission also. The question is ART. 1193. Obligations for whose fulfillment a day certain has been
how do you distinguish it from Art 1191? fixed, shall be demandable only when that day comes.
Art 1191 is rescission, or more properly called as resolution, but in Art Obligations with a resolutory period take effect at once but terminate
1380, it is rescission proper. Art 1380 is applicable to cases of rescissible upon arrival of the day certain.
contracts, while Art 1191 is applicable in cases of reciprocal obligations.
Art 1380 is not necessarily reciprocal. Art 1380 is applicable even in A day certain is understood to be that which must necessarily come,
cases of bilateral obligations. although it may not be known when.
In Art 1191, there is an obligation and there is an injured party, so in Art If the uncertainty consists in whether the day will come or not, the
1191 only the injured party to that obligation may avail of Art 1191. In Art obligation is conditional, and it shall be regulated by the rules of the
1380, even if you are a third party for that obligation or contract, you may preceding Section. (1125a)
invoke rescission, such as in a case where there is contract entered into
in fraud of creditors in relation to Art 1177.
Obligation with a period is the last type of obligation from the viewpoint
Art. 1177. The creditors, after having pursued the property in of demandability. We have pure obligations, conditional obligations, and
possession of the debtor to satisfy their claims, may exercise obligations with a period.
all the rights and bring all the actions of the latter for the same
purpose, save those which are inherent in his person; they How do we define a period?
may also impugn the acts which the debtor may have done to A period is actually a day certain, which must necessarily come,
defraud them. although it may not be known when.
In Art. 1177, we set forth in order to determine what are the remedies How do we distinguish a condition from that of a period?
available to a creditor in case that the things are not satisfied by the A condition pertains to a future event, and the certainty of which cannot
debtor. It is first to demand, second to pursue leviable property, be determined, or there is no certainty that it will happen in the future.
third is accion subrogatoria, and fourth to impugn acts that have But, with respect to a period, although it is also future-oriented, or it
been entered into to defraud creditors or accion pauliana. pertains to the future, it pertains to an event which must necessarily
come, although it may not be known when. So do not think that
The fourth remedy in Art 1177 actually partakes the form of rescission obligations with a period is subject only to "dates".
proper under Art 1380. Art 1191 is a principal action, which is retaliatory
in character, whereas under Art 1380 it is a mere subsidiary action. So Example: I promise to pay you on July, 2019. It is not only these types
you can't file rescission under Art 1380 right away, as you still need to of obligations that are considered as one with a period.
exhaust certain remedies.
Example: If a person promises to pay another based on the event that
Art. 1380. Contracts validly agreed upon may be rescinded in the person will get married is a condition, and not an obligation with a
the cases established by law. period.
You can only avail of accion pauliana or impugning acts which defraud Example: I promise to pay you until I die. The death of a person is an
creditors if you have already availed of other remedies as provided in Art event in the future; you do not know when but it is certain to happen. It
1383. does not necessarily pertain to a specific date or time, but to a future
event which must necessarily come, although the happening of which is
Art. 1383. The action for rescission is subsidiary; it cannot be not known. Thus this is an obligation with a period.
instituted except when the party suffering damage has no
other legal means to obtain reparation for the same. A period has different types, obligations for whose fulfillment a day
certain has been fixed shall be demandable only when that day comes.
In 1191, only the injured party may avail of it. But, in 1380, it is not This pertains to an ex-die period (suspensive period). The arrival of the
necessary as even third persons—such as creditors who have been period will create necessarily the obligations that have been agreed upon
defrauded—may rescind a contract or obligation that defrauds them. by the parties.
The basis of 1191 is actually a breach of faith, which is a substantial We also have in-diem (resolutory period). The arrival of which will
breach in reciprocal obligation, but, the breach in 1380 is not necessarily extinguish the obligation. Under Art 1193, obligations with a resolutory
the basis for the rescission. In 1380, the basis for rescission is what we period take effect at once, because if it is resolutory, it is demandable at
call economic injury or, in latin, lesion. once, and it shall terminate upon the arrival of that day certain.
The basis of 1380 is economic injury, as provided for under the grounds Art. 1180. When the debtor binds himself to pay when his
of rescissible contracts under Art 1381. means permit him to do so, the obligation shall be deemed to
be one with a period, subject to the provisions of article 1197.
As to the scope of the cancellation of the obligation, if you avail of 1191,
the power to rescind reciprocal obligation annuls or cancels the entirety Example:
of that obligation or contract.
But, under 1380, it doesn't necessarily cancel the entirety of that contract A person will promise to pay you when he already has the money or
or obligation, as provided in Art 1384, rescission shall be only to the his means permit him to do so. Bayran lang tika pag naa nako’y
extent necessary to cover the damages caused. It is not necessary to kwarta. This is an example of an obligation with a period, because the
cancel the entirety of that obligation or contract, but only to that extent. law presumes that persons are solvent. Your means to do so will
necessary come, although we do not know when.
The prescriptive period, with respect to 1191, depends–with regard to
1144 and 1145. If it is based on a written contract, 10 years. If it is based If an obligation provides that the debtor binds himself to pay when his
on an oral contract, 6 years. So the prescriptive period under 1191 means permit him to do so, it is not a conditional obligation, but an
depends upon the source of that reciprocal obligation. But in 1380, the obligation with a period.
prescription period is only 4 years. The action to claim rescission must
be commenced within 4 years, under Art 1380. So that is one type of period—those which are categorized according to
their effectivity. There are different types of periods, depending on their
lOMoARcPSD|7732614

origin. These periods may either be legal, voluntary or conventional, or How will the court fix the period? It depends on such circumstances as
judicial. may be contemplated by the parties. During trial, the court will hear the
parties, and thereafter, adjudicate what is the possible period that may
If it is the law that is the source of the period, then it is the law who be contemplated by the parties in their agreement, or under the
imposes when that obligation must be performed. Example: Under Art. obligation.
103 of the Family Code, if the spouses have been previously married,
and that previous marriage has been terminated on account of the death What are the general rules that must be observed with respect to
of his/her spouse, and that spouse subsequently marries. The property obligations with a period? First is under Art 1194.
regime is mandatory complete separation of properties. It is the law itself
that provides for their complete separation. ART. 1194. In case of loss, deterioration or improvement of the thing
before the arrival of the day certain, the rules in article 1189 shall be
But, take note on the obligation imposed against the surviving spouse. observed. (n)
The surviving spouse must liquidate the community/conjugal property
within a period of 1 year from the time that the previous marriage has
been terminated by the death. Take note, the rule under 1189 about loss, deterioration, and
improvement. If lost without fault on the part of the debtor, it shall
The obligation to liquidate within 1 year is an obligation with a period, extinguish the obligation. Remember the definition of lost in 1189. A thing
and the period is provided for by law. As to its origin, this is what we call is lost when it perishes, goes out of commerce, or existence is unknown.
a legal period. But if it is lost through the fault of the debtor, it shall give rise to a liability
for damages.
There are voluntary or conventional periods. These are obligations
subject to a period, as agreed upon by parties of a contract or any Deterioration, if it is without fault on the part of the debtor, the impairment
agreement. shall be borne by the creditor. But if it is with such fault, then the creditor
may avail of either fulfillment + damages or rescission + damages on the
There are also judicial periods. It is provided for in Art 1197. part of the debtor.
ART. 1197. If the obligation does not fix a period, but from its nature If there is an improvement on the part of the thing, if it is by nature or by
and the circumstances it can be inferred that a period was intended, the lapse of time, the benefits therein shall inure to the benefit of the
the courts may fix the duration thereof. creditor. If it is at the expense of the debtor, the debtor shall have no
other right than that of a usufructuary. The debtor may enjoy the use and
The courts shall also fix the duration of the period when it depends the fruits, up until such time the creditor reimburses the debtor to the
upon the will of the debtor. expense made for the improvement.
In every case, the courts shall determine such period as may under The rules in Art 1189 is not only applicable with respect to conditional
the circumstances have been probably contemplated by the parties. obligations, but are also applicable to obligations with a period,
Once fixed by the courts, the period cannot be changed by them. regardless if they are suspensive or resolutory periods.
(1128a)
ART. 1195. Anything paid or delivered before the arrival of the
Judicial periods are those fixed by the court, in 1197 once fixed by the period, the obligor being unaware of the period or believing that the
court, the period cannot be changed by those parties. What are the obligation has become due and demandable, may be recovered,
grounds whereby the court may fix a period? If the obligation does not with the fruits and interests. (1126a)
fix a period, but from its nature and circumstances, it can be inferred that
a period was intended by the parties. When there is a payment made by mistake, or solutio indebiti (quasi-
contract) so it requires the return of the thing paid or delivered by
Example of this is Art 1180—if a debtor binds himself to pay the creditor mistake. Learn to correlate 1196 with 1198.
when his means permit him to do so. As a rule, Art 1180 is subject to the
provisions of Art 1197. Meaning, if the debtor binds himself to pay the
ART. 1196. Whenever in an obligation a period is designated, it is
creditor when his means permit him to do so. It is an obligation with a
presumed to have been established for the benefit of both the
period, but the period—although from the nature and circumstances a
creditor and the debtor, unless from the tenor of the same or other
period was contemplated—we don't have an idea when it is. So it is now
circumstances it should appear that the period has been established
the court that must fix the period. It cannot be up to any one of the
in favor of one or of the other. (1127)
parties.
Example: When I bind myself when my means permit me to do so, that Who enjoys the benefit of the period? The general rule in Art 1196 is
is an obligation with a period. So, I should decide when I will pay. On the that: it is presumed if a period has been agreed upon by the parties in
part of the creditor, it is an obligation with a period, so, I am telling you any obligation or contract. It is presumed that the period has been
now that you should pay me already. established for the benefit of both the creditor and the debtor. So, the
creditor cannot compel the debtor to perform the obligation prior to the
Under Art 1180, it subjects it to the fixing of the period by the court under arrival of the period. At the same time, the debtor cannot compel the
Art 1197 to be fair, as both mentioned in the example are not allowed. creditor prior to the arrival of the period to perform that which is
Because even if in the obligation it does not fix a period, it is clear from incumbent upon him.
the nature and circumstances of that obligation that a period has been
contemplated. GENERAL RULE: Presumes that if a period has been agreed upon, and
in the absence to the contrary, this period has been established for the
When that condition depends upon the will of the debtor is the another benefit of both the creditor and the debtor.
ground. The rule in conditional obligation is: when it is potestative and
suspensive on the part of the debtor, the status of the obligation is void. In the provision, it states that: unless from the tenor of the same, or other
Meaning, that obligation is not allowed, so that condition is also not circumstances, it should appear that the period has been established in
allowed. The parties—specifically, the creditor—actually has the remedy favor of one or of the other. This is the exception to the general rule.
under Art 1197 for the courts to fix a period on when the debtor should Meaning, there are instances where the period—based on the
perform his obligations. Because, originally, that obligation depends circumstances of the obligation—has been constituted to the benefit of
upon the sole will of the debtor. The remedy of the creditor is either to the debtor only, or that the obligation has been constituted to the benefit
annul the obligation altogether (to declare it null and void) or to file an of the creditor only.
action in court, under Art 1197 for the court to fix a period.
lOMoARcPSD|7732614

When can we say that a period has been established for the benefit of creditor has to wait for the arrival of that day certain. Any demand before
the debtor? If the debtor executed a promissory note promising to pay that day would be premature.
his indebtedness to the creditor within a period of 5 years to be counted
from the date of the promissory note. In this case, it is evident that the (2) When he does not furnish to the creditor the guaranties or securities
term or period is for the benefit of the debtor, because the creditor cannot which he has promised;
make a demand up until 5 years after the promissory note was made.
These are instances where, despite the fact of the solvency of the
There are also instances where a period has been constituted for the debtor, he still loses the benefit of the period. We do not look at the
creditor. For one, if the debtor executed a promissory note promising to financial capacity of the debtor to perform the obligation. What is material
pay his indebtedness to the creditor within a period of 1 year after the is the fact that he promised to give a security or guaranty, but he did not.
demand of the creditor. In this case, the period is established for the
creditor, because even if only one day has passed from the making of (3) When by his own acts he has impaired said guaranties or securities
the promissory note, the creditor may demand from the debtor and the 1 after their establishment, and when through a fortuitous event they
year period will start to run already. Thus, it is clear that the period was disappear, unless he immediately gives new ones equally satisfactory;
for the benefit of the creditor.
Example: The obligation is to pay out 5M, 5 years from the constitution
If it is shown that the period has been established for the benefit of the of the obligation. As guaranty to ensure that the obligation will be paid
debtor, does the debtor have an absolute right to avail the benefits of off, the debtor will provide a house and lot in the amount of 5M. In this
that period? Of course not. This is under Art 1198. case, the creditor can still pursue this property.
ART. 1198. The debtor shall lose every right to make use of the Example: If, by the debtor’s own acts, he rendered those guaranties or
period: securities impaired; if he ensures that the house will not be used (e.g.
setting the house on fire) or rendered beyond what is serviceable to the
(1) When after the obligation has been contracted, he becomes creditor, he shall lose the benefit of the period. Thus, the creditor may
insolvent, unless he gives a guaranty or security for the debt; already demand specific performance immediately.
(2) When he does not furnish to the creditor the guaranties or
securities which he has promised; When through a fortuitous event they disappear, unless he immediately
(3) When by his own acts he has impaired said guaranties or gives new ones equally satisfactory
securities after their establishment, and when through a fortuitous
event they disappear, unless he immediately gives new ones EXCEPTION to Art. 1174, which provides:
equally satisfactory;
(4) When the debtor violates any undertaking, in consideration of Art. 1174. Except in cases expressly specified by the law, or
which the creditor agreed to the period; when it is otherwise declared by stipulation, or when the
(5) When the debtor attempts to abscond. (1129a) 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.
Take note again of the general rule under Art 1196. If an obligation
contains a period, the presumption under the law is that it is for the Such that, even if fortuitous events will happen, it will not excuse the
benefit of both the creditor and the debtor. The exception is: if it is shown debtor from compliance of the obligation.
that the benefit was constituted to only one party, then those
circumstances will be concurring. (4) When the debtor violates any undertaking, in consideration of which
the creditor agreed to the period;
In a situation where a period in an obligation has been established or
constituted for the benefit of the debtor, the benefit of the debtor to that If there are certain motivations or promises that have led the creditor to
period is not absolute. Because there are situations under Art 1198 agree to the terms and conditions provided for in any obligation, and if
where the debtor will lose the benefit of that period. If these the debtor himself will violate that undertaking, that will be sufficient
circumstances in Art 1198 are present, the debtor will lose the right to ground for the creditor to make a demand right away.
make use of the period.
The undertaking should be in consideration, or the motivating factor why
GENERAL RULE: Under Article 1196, as a rule, we presume that: when the creditor obliged himself to be part of that obligation.
a period has been constituted in an obligation, that period is established
for the benefit of both the debtor and creditor. (5) When the debtor attempts to abscond.
If the period has been constituted for the benefit of the debtor, there are This is when the debtor evades the fulfillment of the obligation. It is not
instances under Article 1198 whereby the debtor loses the right to make necessary that the debtor actually absconds, escapes, or goes into
use of the period. hiding. It is sufficient that the debtor makes it apparent that he attempts
to abscond the normal fulfillment of the obligation.
Instances Where the Debtor Loses the Right to the Period.
EXCEPTIONS:
(1) When after the obligation has been contracted, he becomes
insolvent, unless he gives a guaranty or security for the debt;
Since it is an obligation subject to a period, the arrival of that future time

or event is certain to happen, but it is not yet demandable. If, prior to the
arrival of the period (especially if it’s a suspensive one), the debtor
suddenly becomes insolvent, the creditor may demand right away the
performance of the obligation. Otherwise, it would be rendered nugatory
or null and void if we await the arrival of the period, or such time that the
debtor could already have become insolvent.
EXCEPTION TO THE EXCEPTION: Debtor will not lose the benefit of

period despite his imminent insolvency IF he provides a guaranty or
security for the debt, such that upon the arrival of the period, it is certain
that the debtor can still perform that which is incumbent upon him. The
lOMoARcPSD|7732614

CASES execute a deed of sale upon full payment of the purchase price. The
buyers, in this case, already complied with that but the vendors did not
(ART. 1186) CONSTRUCTIVE FULFILLMENT execute the deed of sale.
The vendors (heirs of Galicia, Sr. and Celerina Labuguin) are also
TAYAG V. CA bound, as obligors, to respect the stipulation in permitting Leyva to
GR# 96053 (March 3, 1993) assume the loan with the Philippine Veterans Bank, which vendors
Article 1186 – Constructive fulfillment impeded when they paid the balance of said loan (remaining
indebtedness paid by Labuguin). Therefore, there was constructive
FACTS: The deed of conveyance executed on May 28, 1975 by Juan fulfillment, and the vendors are supposed to execute the final deed of
Galicia, Sr., prior to his demise in 1979, and Celerina Labuguin, in favor sale upon full payment of the balance.
of Albrigido Leyva involving the undivided one-half portion of a piece of
land situated at Poblacion, Guimba, Nueva Ecija for the sum of DEVELOPMENT BANK V. STA. INES MELALE
P50,000.00 under the following terms: GR# 193068 (February 01, 2017)
Article 1186 – Constructive fulfillment
1. The sum of PESOS: THREE THOUSAND (P3,000.00) is HEREBY
acknowledged to have been paid upon the execution of this agreement; FACTS: Galleon experienced financial difficulties and had to take out
2. The sum of PESOS: TEN THOUSAND (P10,000.00) shall be paid several loans from different sources such as foreign financial institutions,
within ten (10) days from and after the execution of this agreement; its shareholders and other entities "with whom it had ongoing
3. The sum of PESOS: TEN THOUSAND (P10,000.00) represents the commercial relationships."
VENDORS' (Galicia, Sr.) indebtedness with the Philippine Veterans
Bank which is hereby assumed by the VENDEE (Leyva); and DBP guaranteed Galleon's foreign loans. In return, Galleon and its
4. The balance of PESOS: TWENTY-SEVEN THOUSAND stockholders Sta. Ines, Cuenca Investment, Universal Holdings,
(P27,000.00.) shall be paid within one (1) year from and after the Cuenca, and Tinio, executed a Deed of Undertaking and obligated
execution of this instrument. themselves to guarantee DBP's potential liabilities.
is the subject matter of the present litigation between the heirs of Juan Galleon's stockholders, represented by Cuenca, and NDC, through its
Galicia, Sr. who assert breach of the conditions as against private then Chairman of the Board of Directors, Roberto V. Ongpin (Ongpin)
respondent's claim anchored on full payment and compliance with the entered into a Memorandum of Agreement, where NDC and Galleon
stipulations thereof. undertook to prepare and sign a share purchase agreement covering
100% of Galleon's equity.The purchase price was to be paid after five
According to heirs of Galicia, Sr., of the P10,000.00 to be paid within ten years from the execution of the share purchase agreement. The share
days from execution of the instrument, only P9,707.00 was tendered to, purchase agreement also provided for the release of Sta. Ines, Cuenca,
and received by, them on numerous occasions from May 29, 1975, up Tinio and Construction Development Corporation of the Philippines from
to November 3, 1979. Concerning Leyva’s (vendee) assumption of the the personal counter-guarantees they issued in DBP's favor under the
vendors' obligation to the Philippine Veterans Bank, the vendee paid Deed of Undertaking.
only the sum of P6,926.41 while the difference the indebtedness came
from Celerina Labuguin. The Court of Appeals found that the NDC prevented the execution of the
share purchase agreement by deliberately delaying its review of
Regarding the third condition, the trial court noted that plaintiff below paid Galleon's financial accounts.
more than P6,000.00 to the Philippine Veterans Bank but Celerina
Labuguin, the sister and co-vendor of Juan Galicia, Sr. paid P3,778.77 ISSUE: WON the nonperformance of NDC of review of financial
which circumstance was construed to be a ploy under Article 1186 of the accounts would render the share purchase agreement as constructively
Civil Code that "prematurely prevented plaintiff from paying the fulfilled (YES)
installment fully" and "for the purpose of withdrawing the title to the lot".
RULING: NDC and the respondents undertook to prepare and sign a
ISSUE: WON the conditions of the instrument were performed by herein share purchase agreement over 100% of respondents' shares in Galleon
private respondent as vendee (Leyva) on the basis of constructive not more than sixty days after the signing of the Memorandum of
fulfillment under Article 1186 (YES) Agreement:
RULING: Insofar as the third item of the contract is concerned, it may be 3. As soon as possible, but not more than 60 days after the signing
recalled that respondent court applied Article 1186 of the Civil Code on hereof, the parties shall endeavor to prepare and sign a share purchase
constructive fulfillment which petitioners claim should not have been agreement covering 100% of the shareholdings of Sellers in GSC to be
appreciated because they are the obligees while the proviso in point transferred to Buyer, i.e. 10,000,000 fully paid common shares of the par
speaks of the obligor. value of P1.00 per share and subscription of an additional 100,000,000
common shares of the par value of P1.00 per share of which
But, petitioners must concede that in a reciprocal obligation like a P36,740,755.00 has been paid, but not yet issued.
contract of purchase, both parties are mutually obligors and also
obligees, and any of the contracting parties may, upon non-fulfillment by The execution of a share purchase agreement was a condition
the other privy of his part of the prestation, rescind the contract or seek precedent to the transfer of Galleon's shares to NDC. However, the
fulfillment (Article 1191, Civil Code). Court of Appeals found that the NDC prevented its execution by
deliberately delaying its review of Galleon's financial accounts:
In short, it is puerile for petitioners to say that they are the only obligees
under the contract, since they are also bound as obligors to respect the The evidence on record show that the share purchase agreement was
stipulation in permitting private respondent to assume the loan with the not formally executed because then Minister Roberto Ongpin claimed
Philippine Veterans Bank which petitioners impeded when they paid the that the accounts of defendant Galleon had to be reviewed and cleared
balance of said loan. As vendors, they are supposed to execute the final up before the share purchase agreement is signed. While defendant
deed of sale upon full payment of the balance as determined hereafter. Galleon made its financial records available to defendant-appellant NDC
for their review, the latter never made any serious effort to review the
Take note: In this case, the nature of the obligation is one which is financial accounts of the defendant Galleon, hence, effectively
reciprocal. The parties to that reciprocal obligation are deemed mutual preventing the execution of the share purchase agreement.
debtors and creditors of each other.
Upon receiving Galleon's outstanding accounts, NDC and Sta. Ines,
In a contract of sale or conveyance of property, it is a reciprocal Cuenca, Tinio, Cuenca Investment and Universal Holdings should have
obligation. The vendor also has an undertaking or an obligation. In that initiated the execution of the share purchase agreement. However, the
sense, they are debtors. In this case, the vendors are supposed to
lOMoARcPSD|7732614

share purchase agreement was never executed, through no fault of (ART. 1191) RESOLUTION/RESCISSION
Galleon's stockholders.
The Memorandum of Agreement was executed on August 10, 1981, SPOUSES VELARDE V. CA, RAYMUNDO
giving the parties no more than sixty days or up to October 9, 1981, to GR# 108346 (July 11, 2001)
prepare and sign the share purchase agreement. However, it was only Article 1191 – Resolution/Rescission
on April 26, 1982, or more than eight months after the Memorandum of
Agreement was signed, did NDC's General Director submit his FACTS: Raymundo executed a Deed of Sale with Assumption of
recommendation on Galleon's outstanding account. Even then, there Mortgage, with a balance of P1.8 million, in favor of Spouses Velarde.
was no clear intention to execute a share purchase agreement as Pursuant to said agreements, they paid the bank (BPI) for three (3)
compliance with the Memorandum of Agreement. Article 1186 of the Civil months until they were advised that the Application for Assumption of
Code is categorical that a "condition shall be deemed fulfilled when the Mortgage was denied and prompted them not to make any further
obligor voluntarily prevents its fulfilment." Considering NDC's delay, the payment.
execution of the share purchase agreement should be considered
fulfilled with NDC as the new owner of 100% of Galleon's shares of Raymundo wrote the petitioners informing the non-fulfillment of the
stocks. obligations. Petitioners, thru counsel responded that they are willing to
pay in cash the balance subject to several conditions.
There was a certain period with which this obligation is to be complied
with. Can NDC enjoy the benefit of this period? Private respondents sent a notarial notice of cancellation/rescission of
the Deed of Sale. Petitioners filed a complaint which was consequently
The due execution of the share purchase agreement is further bolstered dismissed by an outgoing judge but was reversed by the assuming judge
by Article 1198(4) of the Civil Code, which states that the debtor loses in their Motion for Reconsideration. The Court of Appeals reinstated the
the right to make use of the period when a condition is violated, making decision to dismiss.
the obligation immediately demandable:
ISSUE: WON there is a substantial breach of contract that would entitle
Art. 1198. The debtor shall lose every right to make use of the its rescission.
period:
RULING: YES. Article 1191 of the New Civil Code applies.
(1) When after the obligation has been contracted, he
becomes insolvent, unless he gives a guaranty or security for The breach committed by petitioners was the nonperformance of a
the debt; reciprocal obligation, not a violation of the terms and conditions of the
(2) When he does not furnish to the creditor the guaranties or mortgage contract. Therefore, the automatic rescission and forfeiture of
securities which he has promised; payment clauses stipulated in the contract does not apply. Instead, Civil
(3) When by his own acts he has impaired said guaranties or Code provisions shall govern and regulate the resolution of this
securities after their establishment, and when through a controversy.
fortuitous event they disappear, unless he immediately gives
new ones equally satisfactory; The breach committed did not merely consist of a slight delay in payment
(4) When the debtor violates any undertaking, in or an irregularity; such breach would not normally defeat the intention of
consideration of which the creditor agreed to the period the parties to the contract. Here, petitioners not only failed to pay the
(applicable in this case); P1.8 million balance, but they also imposed upon private respondents
(5) When the debtor attempts to abscond. new obligations as preconditions to the performance of their own
obligation. In effect, the qualified offer to pay was a repudiation of an
Take note: There was an agreement between DBP as creditor, and existing obligation, which was legally due and demandable under the
Galleon as the debtor. DBP would extend certain loan obligations in contract of sale. Hence, private respondents were left with the legal
favor and Galleon. Galleon was subsequently assumed by NDC and etc. option of seeking rescission to protect their own interest.
Discussion:
The condition, based on the Memorandum of Agreement, was that there Take note, 1191 is applicable to reciprocal obligation. In the case at
must be an execution of a share purchase agreement, in order that those bar, the contract entered by the parties is a contract of sale. In a
persons who assumed Galleon’s operations (NDC and etc.) can be liable contract of sale, the seller obliges itself to transfer the ownership of and
for the loans that Galleon previously had. Otherwise, they are not liable. deliver a determinate thing, and the buyer to pay therefor a price certain
in money or its equivalent.
There was an obligation on the part of NDC to review the financial
accounts of Galleon. NDC’s delay was because of its own inaction. Raymundo had already performed his obligation through the execution
Because of this, there was a voluntary prevention of the happening of of the Deed of Sale, which effectively transferred ownership of the
the condition. This voluntary prevention would make Art. 1186 property to the spouses through constructive delivery. Prior physical
applicable, such that there is a constructive fulfillment of the condition to delivery or possession is not legally required, and the execution of the
execute a share purchase agreement. Deed of Sale is deemed equivalent to delivery.
Considering that the share purchase agreement is deemed fulfilled, NDC Spouses Velarde, on the other hand, did not perform their correlative
is the new owner of 100% of Galleon’s shares of stocks. Therefore, NDC obligation of paying the contract price in the manner agreed
is considered as the obligor and, therefore, liable to pay DBP. upon. Worse, they wanted private respondents to perform obligations
beyond those stipulated in the contract before fulfilling their own
NDC now alleges that the obligation is not yet due and demandable obligation to pay the full purchase price.
because there is a period. However, applying paragraph 4 of Article
1198, NDC, as the new debtor, will lose the benefit of the period. The Take note of the obligation between the two parties after rescission.
violation is the nonperformance of the review of Galleon’s financial Invoking the power to rescind under Art 1191 would result to mutual
accounts. restitution. Mutual restitution is required to bring back the parties to their
original situation—prior to the inception of the contract. Accordingly, the
initial payment and the corresponding mortgage payments advanced by
Spouses Velarde should be returned by Raymundo, lest the latter
unjustly enrich themselves at the expense of the former.
Rescission creates the obligation to return the object of the contract. It

can be carried out only when the one who demands rescission can return
whatever he may be obliged to restore.
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To rescind is to declare a contract void at its inception, and to put an end Fernandina Galang paid the outstanding balance of the mortgage
to it—as though it never was. It is not merely to terminate it and release loan with NHMFC, the intention of petitioners to renege on their
the parties from further obligations to each other, but to abrogate it from obligation is utterly clear.
the beginning and restore the parties to their relative positions as if no
contract has been made. On the issue of waiver
We likewise rule that there was no waiver on the part of petitioners to
CANNU V. GALANG demand the rescission of the Deed of Sale with Assumption of Mortgage.
459 SCRA 80 The fact that respondents-spouses accepted, through their attorney-in-
Article 1191 – Resolution/Rescission fact, payments in installments does not constitute waiver on their part to
exercise their right to rescind the Deed of Sale with Assumption of
FACTS: A complaint for Specific Performance and Damages was filed Mortgage.
by petitioners-spouses Felipe and Leticia Cannu against respondents-
spouses Gil and Fernandina Galang and the National Home Mortgage Adelina Timbang merely accepted the installment payments as an
Finance Corporation (NHMFC). accommodation to petitioners since they kept on promising they would
pay. However, after the lapse of considerable time (18 months from last
Respondents obtained a loan from Fortune Savings & Loan Association payment) and the purchase price was not yet fully paid, respondents-
for P173,800.00 to purchase a house and lot located at Las Piñas, with spouses exercised their right of rescission when they paid the
an area of 150 square meters. To secure payment, a real estate outstanding balance of the mortgage loan with NHMFC. It was only after
mortgage was constituted on the said house and lot in favor of Fortune petitioners stopped paying that respondents-spouses moved to exercise
Savings and Loan and in 1990 the NHMFC purchased the mortgage loan their right of rescission.
for a price of P173,800.
Rescission under Article 1191 and 1381, Distinguished.
Respondent Galang authorized her attorney-in-fact Timbang to sell the
house and lot. Petitioner Leticia Cannu agreed to buy the property for Article 1191 Article 1381
P120,000 and to assume the balance of the mortgage obligations with
It is predicated on the breach of It is because of lesion or economic
the NHMFC and CERF Realty. They have a balance of P45,000.
faith by the defendant that prejudice based on pecuniary
violates the reciprocity between injury.
A Deed of Sale with Assumption of Mortgage Obligation on August
the parties.
20, 1990 was made and entered between spouses Galang and spouses
It is a principal action based on It is a subsidiary action. One must
Cannu. Despite requests from Adelina R. Timbang and Galang to have
breach that violates the exhaust prior remedies before you
them pay the balance of P45,000 or in alternative to vacate the property
reciprocity. go to 1381
in question, the petitioners refused to do so.
Only on reciprocal obligations. Applicable to unilateral
In 1993, Cannu informed the Vice President of the NHMFC that the obligations.
property’s ownership rights have been transferred to her per deed of sale Only among the parties, It can be invoked by a third
with assumption mortgage and that they were obliged to assume the especially injured party. person.
mortgage and pay the remaining unpaid loan balance, but the formal
assumption was not approved. 1191 and not 1381 is applicable in this case because there is
reciprocity between parties that was violated when the petitioners failed
Because Cannu failed to fully comply with their obligations, respondent to fully pay the P45,000 to the respondent spouses and failure to update
Galang on May 21, 1993 paid P233,957 as full payment of her remaining their amortizations
mortgage with the NHMFC.
Discussion:
Petitioners oppose the release of the title because the subject property Take note, this is the scenario where the SC discussed that there must
has already been sold to them. They filed a Complaint for Specific be necessity for judicial intervention, not in order for one to invoke 1191,
Performance asking that Cannu be declared the owners of the property but for the purpose of ensuring that the invocation of 1191 is proper.
involved subject to reimbursements. NHMFC answered that they have
no cause of action because they failed to pay the consideration. Since Art 1191 or resolution of a reciprocal obligation necessitates the
parties to observe mutual restitution, the Court said that there must be
ISSUE: WON the nonpayment of a certain balance to an outstanding intervention by the courts to ensure that what has been given to the other
obligation would constitute a substantial breach such that you can invoke will be returned in favor of that party.
Art 1191.
The SC emphasized that there must be judicial intervention when
RULING: you invoke Art 1191. However, 1191 is not essentially judicial.
On the issue of substantial breach
YES. The non-payment of a certain balance to an outstanding obligation You can invoke it, like in the case at bar—extrajudicially. However, at a
would constitute a substantial breach such that invoking Art 1191 is certain point in time, the SC must necessarily intervene, in order to
warranted ensure that the parties will carry out their mutual obligations.
Settled is the rule that rescission or, more accurately, resolution of a In this case, the SC said they would no longer require the Spouses
party to an obligation under Article 1191 is predicated on a breach of Galang to go through court by way of judicial rescission, because it
faith by the other party that violates the reciprocity between them. would again delay the parties of their rights. Considering that there was
a proper invocation of extrajudicial rescission, here the SC said that 1191
Rescission will not be permitted for a slight or casual breach of the is proper. It creates the obligation of mutual restitution.
contract. Rescission may be had only for such breaches that are
substantial and fundamental as to defeat the object of the parties FOREST HILL V. VERTEX
in making the agreement. The question of whether a breach of contract 692 SCRA 707
is substantial depends upon the attending circumstances and not Article 1191 – Resolution/Rescission
merely on the percentage of the amount not paid.
FACTS: Petitioner Forest Hills Golf & Country Club (Forest Hills) is a
In the case at bar, we find petitioners failure to pay the remaining balance domestic non-profit stock corporation created as a result of a joint
of P45,000.00 to be substantial. Even assuming arguendo that only said venture agreement between Kings Properties Corporation (Kings) and
amount was left out of the supposed consideration of P250,000.00, or Fil-Estate Golf and Development, Inc. (FEGDI).
eighteen (18%) percent thereof, this percentage is still substantial.
Taken together with the fact that the last payment made was on 28 In August 1997, FEGDI sold to RS Asuncion Construction Corporation
November 1991, eighteen months before the respondent (RSACC) one Class C common share of Forest Hills. Prior to the full
lOMoARcPSD|7732614

payment of the purchase price, RSACC transferred its interests over the We consider the amount paid as sufficient consideration for the
common share to respondent Vertex Sales and Trading, Inc. (Vertex). privileges enjoyed by Vertex's nominees as members of Forest Hills.
RSACC advised FEGDI of the transfer and FEGDI, in turn, requested Discussion:
Forest Hills to recognize Vertex as a shareholder. Forest Hills acceded In a sale of shares of stock under Section 63 of the Corporation Code, it
to the request, and Vertex was able to enjoy membership privileges in provides that apart from the sale there must be a delivery, negotiation,
the golf and country club. issuance of the shares of stock, and the sale must be registered in the
Stocks Transaction Book of the corporation.
Despite the sale of FEGDI's Class "C" common share to Vertex, the
share remained in the name of FEGDI, prompting Vertex to demand for Likewise, Forest Hill cannot be considered an injured party such that it
the issuance of a stock certificate in its name. will have an involvement with the restitution.
As its demand went unheeded, Vertex filed a complaint for rescission MAGLASANG V. NORTHWESTERN UNIVERSITY
with damages against defendants Forest Hills, FEGDI, and Fil-Estate 694 SCRA 128
Land, Inc. (FELI) – the developer of the Forest Hills golf course. Vertex Article 1191 – Resolution/Rescission
averred that the defendants defaulted in their obligation as sellers when
they failed and refused to issue the stock certificate covering the Class FACTS: On June 10, 2004 respondent Northwestern University
"C" common share. It prayed for the rescission of the sale and the return engaged the services of GL Enterprises to install a new IBS in Laoag
of the sums it paid; it also claimed payment of actual damages for the City for it was required for training laboratory so that the school could
defendants’ unjustified refusal to issue the stock certificate. offer maritime transportation programs.
Forest Hills denied transacting business with Vertex and claimed that it Since its Integrated Bridge System was obsolete it required the petitioner
was not a party to the sale of the share; FELI claimed the same defense. to supply and install specific components to perform standards required.
While admitting that no stock certificate was issued, FEGDI alleged that
Vertex nonetheless was recognized as a stockholder of Forest Hills and, They executed two contracts with the similar provisions:
as such, it exercised rights and privileges of one. FEGDI added that (1) The IBS and its components must be compliant with
during the pendency of Vertex's action for rescission, a stock certificate IMO and CHED standards.
was issued in Vertex's name, but Vertex refused to accept it. (2) The contracts ay be terminated if one party commits a
substantial breach of its undertaking.
ISSUE: WON there is a proper invocation of Art 1191, and (3) Any dispute under the agreement shall first be settled
WON mutual restitution is warranted between Forest Hill and Vertex. mutually between the parties before court action.
RULING: Subsequently respondent Northwestern paid P1M as downpayment to

On the issue of the invocation of Art 1191 the GL Enterprises. Two months after the execution of the contracts, GL
YES. There was a proper invocation of Art 1191. Enterprises technicians delivered various materials to the project site.
At the outset, we declare that the question of rescission of the sale of the When they start installing the components respondent halted the
share is a settled matter that the Court can no longer review in this operations. Northwestern justified the work stoppage upon its finding
petition. As correctly pointed out by Forest Hills, it was not a party to the that the delivered equipment was substandard. It explained further that
sale even though the subject of the sale was its share of stock. GL Enterprises violated the terms and conditions of the contracts.
The corporation whose shares of stock are the subject of a transfer The reasons constituting the allegation are because the equipment:
transaction (through sale, assignment, donation, or any other mode of (1) were old;
conveyance) need not be a party to the transaction, as may be inferred (2) did not have instruction manuals and warranty
from the terms of Section 63 of the Corporation Code. However, to certificates;
bind the corporation as well as third parties, it is necessary that the (3) contained indications of being reconditioned
transfer is recorded in the books of the corporation. machines; and
(4) did not meet the IMO and CHED standards.
In the present case, the parties to the sale of the share were FEGDI as
the seller and Vertex as the buyer (after it succeeded RSACC). As party Northwestern demanded compliance with the agreement and suggested
to the sale, FEGDI is the one who may appeal the ruling rescinding the that GL Enterprises meet with the former’s representatives to iron out
sale. The rescission of the sale does not in any way prejudice Forest the situation.
Hills in such a manner that its interest in the subject matter – the share
of stock – is injuriously affected. Thus, Forest Hills is in no position to Instead of heeding such suggestion, GL Enterprises filed a complaint for
appeal the ruling rescinding the sale of the share. Since FEGDI, as party breach of contract and prayed for P1.97M representing how much it
to the sale, filed no appeal against its rescission, we consider as final the could have earned. Petitioner alleged that Northwestern breached the
CA’s ruling on this matter. contracts by ordering the work stoppage and thus preventing the
installation of the materials for the IBS.
On the issue of mutual restitution
A necessary consequence of rescission is restitution: the parties to a ISSUE: WON, there is a substantial breach of the contracts that would
rescinded contract must be brought back to their original situation prior warrant the application of Article 1191
to the inception of the contract; hence, they must return what they
received pursuant to the contract. RULING: On the issue of the invocation of Art 1191
YES. There is a substantial breach of the contracts that would
Not being a party to the rescinded contract, Forest Hills is under no warrant the application of Article 1191
obligation to return the amount paid by Vertex by reason of the sale.
Indeed, Vertex failed to present sufficient evidence showing that Forest The contracts require no less than substantial breach before they can be
Hills received the purchase price for the share or any other fee paid on rescinded. As held in Cannu v. Galang, the question of whether a breach
account of the sale to make Forest Hills jointly or solidarily liable with of contract is substantial depends upon the attending circumstances.
FEGDI for restitution.
In the case at bar, the parties explicitly agreed that the materials to be
Although Forest Hills received ₱150,000.00 from Vertex as membership delivered must be compliant with the CHED and IMO standards and
fee, it should be allowed to retain this amount. For three years prior to must be complete with manuals. Evidently, the materials delivered were
the rescission of the sale, the nominees of Vertex enjoyed membership less likely to pass the CHED standards, because the navigation system
privileges and used the golf course and the amenities of Forest Hills.25 to be installed might not accurately point to the true north; and the
steering well was one from automobile rather than those from the ships.
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GL Enterprises did not dispute the allegation their equipment being the other hand, if there is a mutual breach but one is only slight, then
substandard. 1191 applies and can only be invoked by the injured party who
experienced substantial breach.
GL Enterprises reiterates its rejected excuse that Northwestern should
have made an assessment only after the completion of the IBS. Thus, NOLASCO V. CUERPO
petitioner stresses that it was Northwestern that breached the 777 SCRA 447
agreement when the latter halted the installation of the materials for the Article 1191 – Resolution/Rescission
IBS, even if the parties had contemplated a completed project to be
evaluated by CHED. However, as aptly considered by the CA, FACTS: A contract to sell was entered into by the respondents and the
respondent could not just sit still and wait for such day that its petitioners. It was alleged that there was a substantial breach on the part
accreditation may not be granted by CHED due to the apparent of the petitioners for failure to complete the transfer of registration of title
substandard equipment installed in the bridge system. The appellate of the property from petitioners to respondents as stated in paragraph 7
court correctly emphasized that, by that time, both parties would have of the contract. Respondents wanted to rescind the contract.
incurred more costs for nothing.
ISSUE: WON there is substantial breach.
SWIRE REALTY V. YU
752 SCRA 135 RULING: No, it cannot be said that petitioners' failure to undertake their
Article 1191 – Resolution/Rescission obligation under paragraph 7 defeats the object of the parties in entering
into the subject contract, considering that the same paragraph provides
FACTS: This case involves a construction for a certain condominium respondents contractual recourse in the event of petitioners' non-
unit. Respondent paid the full purchase price of for the unit. However, performance of the aforesaid obligation, that is, to cause such transfer
notwithstanding full payment of the contract price, petitioner failed to themselves in behalf and at the expense of petitioners.
complete and deliver the subject unit on time.
Paragraph 7 of the subject contract states in full:
ISSUE: WON there is a valid invocation of rescission or resolution. 7. [Petitioners] shall, within ninety (90) days from the signing of [the
subject contract], cause the completion of the transfer of registration of
RULING: In a contract to sell, rescission is not proper because it only title of the property subject of [the subject contract], from Edilberta N.
constitutes a unilateral promise. But in this case, there was no fulfillment Santos to their names, at [petitioners'] own expense. Failure on the part
of the condition which was a positive suspensive condition. Upon the full of [petitioners] to undertake the foregoing within the prescribed period
payment of the purchase price, it was incumbent on the part of Swire shall automatically authorize [respondents] to undertake the same in
Realty to deliver the condominium unit. The long period of delay of Swire behalf of [petitioners] and charge the costs incidental to the monthly
Realty to fulfill its obligation constitutes a substantial breach which would amortizations upon due date.
necessitate rescission. Thus, the invocation of rescission was proper.
The object of the contract was that the subject parcel of land be
FONG V. DUENAS transferred to the names of the respondents. Thus, because of the
757 SCRA 412 immediate recourse provided in the contract, the breach was not
Article 1191 – Resolution/Rescission substantial since it did not defeat the object of the parties in entering into
the agreement. Thus, rescission was not proper.
The Supreme Court talked about a joint venture agreement. A joint
venture agreement is an agreement between corporations, partnerships, ASB REALTY V. ORTIGAS
persons, etc. that they will engage in a common undertaking with the 777 SCRA 284
intention of dividing the profit out of this business between them. Article 1191 – Resolution/Rescission
FACTS: In this case, there was a joint venture agreement allegedly ISSUE: WON the invocation of Article 1191 was proper.
entered into by the parties but there was also a breach in this agreement.
It was alleged that Fong unilaterally rescinded the joint venture RULING: Ortigas did not have cause of action because it is not a party
agreement by limiting his investment from ₱32.5 Million to ₱5 Million. On to the contract. Ortigas cannot invoke the right of rescission because,
the other hand, Duenas invested this 5 million to his own companies, with respect to the deed of sale, he is a third person. Rescission under
Danton and Bakcom. Such investment was not agreed upon by the article 1191 can only be invoked by the injured party. In this case, Ortigas
parties. was not a party or a privy to the deed of sale.
ISSUE: Whether the action was for Specific Performance or Rescission. XXX
Different classification of obligations
RULING: The court ruled that the action was for rescission and not for Kinds of obligations from the view point of their prestation (object)
specific performance. This is because Fong was not only after the I. Simple obligation – one where there is only one prestation
amount of 5 million but it was clear in his complaint that he wanted to II. Compound obligation– where there are two or more prestations.
abrogate the entirety of the Joint venture agreement.
DIFFERENT TYPES OF COMPOUND OBLIGATION:
However in this case, the court ruled that Art. 1192 applies as both
parties failed to comply with their respective reciprocal obligation, Article 1. Conjunctive Obligation - when all of the prestations must be
1192 provides: complied with in order to fulfill the obligation
Art. 1192. In case both parties have committed a breach of 2. Distributive Obligation - one can be performed at the expense of
the obligation, the liability of the first infractor shall be the other. Thus, it is not necessary to comply with all the prestations
equitably tempered by the courts. If it cannot be determined
which of the parties first violated the contract, the same shall 2 TYPES OF DISTRIBUTIVE OBLIGATION:
be deemed extinguished, and each shall bear his own
damages. (a) Alternative obligation – Defined under 1199
Art. 1199. “A person alternatively bound by different
Difference bet. this case and the case of Maglasang v. prestations shall completely perform one of them.
Northwestern
The creditor cannot be compelled to receive part of one and
In this case, 1192 is applicable, because there were substantial part of the other undertaking.”
breaches on the part of both parties. Whereas, in the case of Maglasang
v. Northwestern, the Supreme Court said that Northwestern’s breach The concept of alternative obligation is that a person may
was only slight and cannot allow rescission. Thus, 1192 can only be alternatively be bound under that obligation to deliver or to perform
applied if there is a mutual breach and the breaches are substantial. On
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different prestations. The performance of one shall completely

perform the entirety of the obligation.
Example: In the option to give a parcel of land or P1 million, the
performance or completion of either of the 2 options will already
satisfy the entirety of the obligation to give.
(b) Facultative obligation – Defined under 1206

Art. 1206. When only one prestation has been agreed
upon, but the obligor may render another in substitution, the
obligation is called facultative.
One prestation is substituted for another. The difference

between alternative and facultative is that: in alternative
obligations, all of the prestations are principal. In
facultative, only one prestation is the principal, and the
others can be rendered in substitution thereof.
3. Disjunctive Obligation – When there are two or more prestations

but there are different persons who can carry out these different
obligations.
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ALTERNATIVE OBLIGATIONS ART. 1204. The creditor shall have a right to indemnity for damages
when, through the fault of the debtor, all the things which are
alternatively the object of the obligation have been lost, or the
ART. 1200. The right of choice belongs to the debtor, unless it has compliance of the obligation has become impossible.
been expressly granted to the creditor.
The indemnity shall be fixed taking as a basis the value of the last
The debtor shall have no right to choose those prestations which are thing which disappeared, or that of the service which last became
impossible, unlawful or which could not have been the object of the impossible.
obligation. (1132)
Damages other than the value of the last thing or service may also be
awarded. (1135a)
In alternative obligations, although at the onset, or at the constitution of
the obligation, there is more than one prestation involved, necessarily,
there must be an exercise of a choice to make that obligation a simple When among the prestations whereby he is alternatively bound, only one
one. Hence, an alternative obligation ceases to be alternative from the is practicable, the debtor will lose his right of choice. As discussed
moment that any one of the parties make a choice. earlier, when prestations are physically or legally impossible, the debtor
cannot choose such prestations. One cannot choose which is
In rendering the making of a choice, as a general rule, the debtor is given impracticable.
the right to choose. This is because the debtor is the passive party,
hence, it is upon him that the fulfillment of the obligation is dependent ART. 1205. When the choice has been expressly given to the creditor,
on. Thus, necessarily, since it is the debtor who must carry out the the obligation shall cease to be alternative from the day when the
obligation; the right to choose belongs to the debtor in the absence of selection has been communicated to the debtor.
any stipulation.
Until then the responsibility of the debtor shall be governed by the
Exception: right of choice has been expressly granted to the creditor. following rules:
However, the right of the debtor or creditor, to choose is not absolute. (1) If one of the things is lost through a fortuitous event, he shall
Some of the limitations are found in Article 1199 (2) and Article 1200 perform the obligation by delivering that which the creditor should
(2). choose from among the remainder, or that which remains if only one
subsists;
ART. 1199 (2). The creditor cannot be compelled to receive part of
one and part of the other undertaking. (2) If the loss of one of the things occurs through the fault of the
debtor, the creditor may claim any of those subsisting, or the price of
ART. 1200 (2). The debtor shall have no right to choose those that which, through the fault of the former, has disappeared, with a
prestations which are impossible, unlawful or which could not have right to damages;
been the object of the obligation.
(3) If all the things are lost through the fault of the debtor, the choice
by the creditor shall fall upon the price of any one of them, also with
indemnity for damages.
Example:
The same rules shall be applied to obligations to do or not to do in
In a Deed of Sale where the debtor has the choice, the creditor case one, some or all of the prestations should become impossible.
cannot be compelled to receive a portion of one of the prestations. (1136a)
It should be completely either one of the choices.
And if one of the alternative prestations in an obligation is illegal, Regardless of who has the right to choose which prestation shall be
the debtor could not choose such prestation. This is because it performed or fulfilled, such choices will produce no legal effect unless it
would negate the existence of the obligation. is communicated in favor of another.
For instance, A sells a parcel of land and, in consideration thereof, Under Article 1203, the debtor has the right to rescind for the reason that
B is given the choice to either pay A 10M, or give A a sack of shabu. such acts of the creditor constitutes a substantial breach. On obligations
The debtor cannot choose the option of shabu even if such right is which are not reciprocal, the law gives the debtor a right to rescind, not
given to him. Otherwise, B can allege the impossibility or illicit on the ground of Article 1191, but on the ground of economic injury or
nature of the prestation in order to evade the performance of the lesion (Article 1380 and onwards).
obligation. Impossibility does not only pertain to physical
impossibility, but it also partakes the form of legal impossibility. There is a liability for damages because, pursuant to Article 1170, if any
act is committed by a party to an obligation which contravenes the tenor
ART. 1201. The choice shall produce no effect except from the time of such obligation, it gives rise to a liability for damages. This is because,
it has been communicated. (1133) in the absence of fraud, negligence, or delay, the fact that the creditor
will do certain acts in order to render the debtor’s choice impossible or
nugatory, such will prejudice the debtor.
ART. 1202. The debtor shall lose the right of choice when among the Article 1204 is the right of recourse of the creditor, in cases which the
prestations whereby he is alternatively bound, only one is practicable. right of choice is expressly granted to him. Further, it provides that the
creditor has the right of indemnity for damages only upon the instance
when the
Under Article 1201, the choice, no matter when it is made, or no matter 1. debtor is at fault, and
who makes it, produces no legal effect until the time it has been 2. the effect of the fault of the debtor will render all the things, which are
communicated in favor of the other. In the absence of such alternatively the object of the obligation, as having been lost, or
communication, the obligation will not cease to be an alternative one. compliance of that obligation is already impossible.
ART. 1203. If through the creditor's acts the debtor cannot make a Unlike what is provided for under Article 1203 where, if the right of choice
choice according to the terms of the obligation, the latter may rescind is given to the debtor, he has the right to rescind and a right for an action
the contract with damages. (n) for damages. In Article 1204, on the other hand, it is clearly provided that
the creditor only has a right to indemnity for damages. But, nonetheless,
lOMoARcPSD|7732614

if the acts of the debtor can be proved that it constitutes a substantial The same rules shall also apply to obligations to do or not to do in cases
breach, and all the requisites of Article 1191 is present, the creditor can where one, some, or all prestations will become impossible, depending
also invoke rescission or resolution. on whether or not it is with or without the fault of the debtor.
When is a debtor at fault? FACULTATIVE OBLIGATIONS

Fault refers to all acts pertaining to either fraud, negligence or other acts
which may impair the ordinary performance of the obligation.
ART. 1206. When only one prestation has been agreed upon, but the
If the debtor will do certain acts, either consciously and voluntarily, such
obligor may render another in substitution, the obligation is called
that it will render it impossible on the part of the creditor to make a choice,
or to make the prestations of the obligation alternatively bound, it shall facultative.
inure to a liability for damages on the part of the debtor.
The loss or deterioration of the thing intended as a substitute, through
Example: the negligence of the obligor, does not render him liable. But once the
substitution has been made, the obligor is liable for the loss of the
A promised to give B either a car, a parcel of land or a condo unit. substitute on account of his delay, negligence or fraud. (n)
And, in this case, the right of choice has been expressly granted in
favor of B. But, before B could exercise such right, A deliberately
destroyed the car, secretly sold the land to an unknown person, and Distinction between Alternative and Facultative Obligations.
intentionally sold the condo unit to another person who is also In alternative obligations, all of the objects which are alternatively the
unknown. Hence, A shall indemnify B for the amount of the value of object of the obligation, are principal objects. Such objects may be
the last thing lost. chosen by either the debtor or the creditor.
In facultative obligations, there is only one principal object. But, there is
However, such right is only available in cases wherein the right of another object that can be given in substitution thereof. Hence, the
choice is expressly granted to the creditor. exercise of choice is not with respect as to what principal object will be
given. It is, however, whether that principal object will be given or will be
RULES in cases of LOSS in an ALTERNATIVE OBLIGATION performed, or should it be the substitute. There must be an option, on
either part of the debtor or creditor, to make a choice with respect to the
These rules are to be observed if the right of choice is expressly granted substitution.
to the creditor. Further, Article 1205 enumerates the responsibilities on
the part of the debtor during the time the creditor has not yet made a Example:
choice, and the consequences in cases wherein the creditor has made
a choice but, in some way, the debtor is responsible for certain acts that A promises to give one sack of rice in favor of B. And, A also provided
render the loss of the possibility of making the choice of the creditor. that he can give 5 packs of quinoa seeds in substitution thereof.
Right No. of Here, only one prestation or object is due, and that is the sack of rice.
of Prestations At fault Liability
Choice Lost But, WON the substitute will be chosen, such choice will depend upon
who has the right to do so. However, even though it may seem similar to
Debtor may choose from the an alternative obligation, it does not have multiple prestations which are
Debtor Some Dr. due. It has, on the other hand, only one prestation which is due and
remaining
another one that may be substituted thereof.
Not the Debtor may choose from the
Dr. Some Under Article 1206, it provides for the rules in cases of loss or
Dr. remaining
deterioration of the thing intended to be a substitute. In facultative
Not the obligations, the thing due depends on when it was made—prior or after
Dr. All Extinguished
Dr. substitution, which could either be the principal or the substitute.
Debtor is liable for indemnity of If made prior to substitution and the principal thing was lost,
Dr. All Dr. the value of the last thing which 1. On account of a fortuitous event and the creditor chooses the
has been lost principal thing - the obligation is extinguished.
2. On account of the fault of the debtor - the debtor shall be liable of the
Creditor may choose from the value of the thing which has been lost.
Creditor Some Dr. remaining or the value of the
thing lost with damages If made prior to substitution and the substitute was lost, whether on
account of a fortuitous event or of the debtor is immaterial, since it is the
principal object, at that time, was due.
Creditor may choose from the
Not the remaining or, if he chooses the If after the substitution, the principal thing was lost, either by fortuitous
Cr. Some event or by the debtor, such is also immaterial, since what has become
Dr. thing lost, the obligation is
extinguished due is the substitute thing.
If after the substitution, the substitute was lost,

Not the
Cr. All Extinguished 1. On account of a fortuitous event - the obligation is extinguished.
Dr.
2. On account of the fault of the debtor - the debtor shall be liable for
the value of the substitute, plus a liability for damages.
Creditor may choose among the
lost prestations and the debtor
Cr. All Dr. is liable for the value of the
chosen prestation with
indemnity for damages
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JOINT AND SOLIDARY OBLIGATIONS PACIFIC BANKING V. IAC

203 SCRA 496
Article 1207-1222 – Joint/Solidary Obligations
JOINT and SOLIDARY OBLIGATIONS
In what capacity are the parties liable? FACTS: In this case, defendant Celia Regala applied for and obtained
from the plaintiff the issuance and use of Pacificard credit card under the
The concurrence of two or more creditors or of two or more debtors in “Terms and Conditions Governing the Issuance and Use of Pacificard” a
any given obligation will not give rise to a presumption or an implication copy of which was issued to and received by the said defendant on the
of solidarity. Hence, as a general rule, the default liability of the parties date of the application and expressly agreed that the use of the
are joint. Pacificard is governed by said Terms and Conditions. On the same date,
Robert Regala, Jr., spouse of defendant Celia Regala, executed a
ART. 1207. The concurrence of two or more creditors or of two or ‘Guarantor’s Undertaking’ (Exh. ‘A-1-a’) in favor of the appellee Bank,
whereby the latter agreed ‘jointly and severally of Celia Aurora Syjuco
more debtors in one and the same obligation does not imply that each
Regala, to pay the Pacific Banking Corporation upon demand, any and
one of the former has a right to demand, or that each one of the latter
all indebtedness, obligations, charges or liabilities due and incurred by
is bound to render, entire compliance with the prestation. There is a said Celia Aurora Syjuco Regala with the use of the Pacificard, or
solidary liability only when the obligation expressly so states, or when renewals thereof, issued in her favor by the Pacific Banking Corporation.
the law or the nature of the obligation requires solidarity. (1137a)
ISSUE: Whether husband Robert Regala Jr is jointly or solidarily liable
for the debt with his wife.
ART. 1208. If from the law, or the nature or the wording of the
obligations to which the preceding article refers the contrary does not The contention that Robert Regala is only jointly liable for the debt is
appear, the credit or debt shall be presumed to be divided into as because of the misunderstanding of the contract signed by the husband
of the wife that such contract was merely a guaranty, whereas the
many shares as there are creditors or debtors, the credits or debts
position of Pacific Banking is that actually, even if the name of the
being considered distinct from one another, subject to the Rules of
contract was a “Guarantor’s Undertaking,” it is actually one which is a
Court governing the multiplicity of suits. (1138a) suretyship or a contract of surety.
HELD: Robert Regala’s liability is solidary with his wife.

As provided for in Article 1208, the credit or debt shall be presumed to The Undertaking signed by Robert Jr, although denominated as a
be divided into as many shares as there are creditors or debtors—the Guaranty, was in substance a contract of surety. As distinguished from
credits or debts being considered distinct from one another. a contract of guaranty, the guarantor binds himself to the creditor only
when the principal debtor will be in default; in the case suretyship, the
On the other hand, solidary obligations do not partake the form of surety binds himself solidarily with the principal debtor.
separation or distinction as that of joint obligations. Solidary obligation
means that each one of the creditors has the right to demand, and each What was the source of obligation for the solidary liability in this case?
one of the debtors is bound to render entire compliance with the
prestation. The source is the contract, which provides for the specific stipulation:
Solidary liability cannot be presumed, the law recognizes the existence. “I/We, the undersigned, hereby agree, jointly and severally with Celia
Syjuco Regala to pay the Pacific Banking Corporation upon demand any
DIFFERENT SOURCES OF SOLIDARY OBLIGATIONS: and all indebtedness, obligations, charges or liabilities due and incurred
by said Celia Syjuco Regala with the use of the Pacificard or renewals
1. Conventional Solidarity - When the obligation itself expressly thereof issued in his favor by the Pacific Banking Corporation. Any
provides for solidarity, for the burden is now assumed voluntarily by changes of or Novation in the terms and conditions in connection with
the debtor/s who are supposed to take care of their own concerns the issuance or use of said Pacificard, or any extension of time to pay
and affairs; such obligations, charges or liabilities shall not in any manner release
me/us from the responsibility hereunder, it being understood that the
Other Names or Statements Equivalent to Solidarity undertaking is a continuing one and shall subsist and bind me/us until all
• mancomunada solidaria the liabilities of the said Celia Syjuco Regala have been fully satisfied or
• de mancomun e insolidum paid.”
• in solidum
XXXXX
• juntos or separadamente
• jointly or severally In this case, we are talking about solidary liability. In here, it is a
• individually & collectively conventional one. It arises from an obligation, and it is expressly stated
• Each to pay the whole value in the contract or by the agreement of the parties.
• “I promise to pay” signed by two or more debtors.
Note the distinction of guaranty and suretyship:
Other Names or Statements Equivalent to Joint Obligations In a guaranty, the guarantor is subsidiarily liable with the debtor. The
• mancum creditor can only demand from the guarantor in case of default by the
principal debtor. While in a suretyship, the surety is solidarily liable with
• mancomunada
the principal debtor. This means that the creditor can make demand
• mancomunadamente against the sureties themselves. In suretyship, the sureties are bound
• pro rata for the entire prestation, together with the principal debtor.
• proportionately
• jointly In joint obligations, to each his own. There are as many debts and credits
as there are debtors and creditors. In solidary obligations, all for one,
• conjoint
one for all. The liability of one is the liability of all.
• “we promise to pay” signed by two or more persons.
Now we go to another case with a conventional or contractual solidary
2. Legal Solidarity - When the law expressly provides for solidarity for
obligation.
which the law has its own legal reason for the imposition of solidarity;
3. Real Solidarity- When the nature of the obligation requires solidarity
Conventional solidarity was illustrated in Pacific Banking vs IAC.

lOMoARcPSD|7732614

YULIM INTERNATIONAL V. INTERNATIONAL EXCHANGE BANK and labor benefits, the party liable is not only the direct employer but also
751 SCRA 129 the indirect employer, and their liability is solidary.
In this case, Mariveles Shipyard is an indirect employer, while Longest
ISSUE: Whether parties herein are solidarily or jointly liable to the Bank. Force is a direct employer. Since the employees were not paid and were
illegally dismissed, both the indirect and direct employers are solidarily
When an obligation is solidary: liable for the unpaid wages and damages.
When the obligation expressly so states;
When the law requires solidarity; and The employees therefore can make a demand not only from the direct
When the nature of the obligation requires solidarity. employer or the agency but also the indirect employer. The employees
do not need to make a demand from the agency first before they can
RULING: In this case, the agreement expressly states so that the parties make a demand from the indirect employer. Solidary debtors are liable
are solidarily liable. By expressly stating that the parties are ‘jointly and for the entire prestation.
severally liable’, it gives rise to a solidary obligation. Such wording was
found upon perusal of the agreement by the Supreme Court. LRT V. MENDOZA
767 SCRA 624
Article 2047 was used to determine whether it is a contract of guaranty Article 1207-1222 – Joint/Solidary Obligations
or suretyship. From Article I of the Agreement, it was found that the
agreement was a continuing suretyship agreement. FACTS: LRTA entered into a ten-year operations and management (O
& M) agreement with the Meralco Transit Organization, Inc. (MTOI) from
INDUSTRIAL MANAGEMENT V. NLRC June 8, 1984, to June 8, 1994, for an annual fee of P5,000,000.00.
331 SCRA 640 Subject to specified conditions, and in connection with the operation and
Article 1207-1222 – Joint/Solidary Obligations maintenance of the system not covered by the O & M agreement, LRTA
undertook to reimburse MTOI such operating expenses and advances
The Supreme Court echoed the principle that we never presume to the revolving fund.
solidarity. In fact, by default, pursuant to Art 1207, and in the absence of
the circumstance that the obligation expressly states so, or there is no MTOI hired the necessary employees for its operations and forged
legal provision, or the nature of the obligation does not require solidarity, collective bargaining agreements (CBAs) with the employees’ unions,
by default there is a legal presumption that obligations are joint. with the LRTA’s approval.
Now let us go to cases where there is a legal provision. Meaning, it is On June 9, 1989, the Manila Electric Company, who owned 499,990 of
the law that provides that there is solidary obligation. MTOI shares of stocks, sold said shares to the LRTA. Consequently,
MTOI became a wholly owned subsidiary of LRTA. MTOI changed its
MARIVELES SHIPYARD VS CA corporate name to Metro Transit Organization, Inc. (METRO), but
415 SCRA 573 maintained its distinct and separate personality.
On July 25, 2000, the Pinag-isang Lakas ng Manggagawa sa METRO,
The liability arose from the complaint of security guards of illegal INC., the rank-and-file union at METRO, staged an illegal strike over a
dismissal and certain amounts of pay and labor benefits due them were bargaining deadlock, paralyzing the operations of the light rail transport
not paid. system. On July 28, 2000, the LRTA Board of Directors issued
Resolution No. 00-446 where LRTA agreed to shoulder METRO’s
ISSUE: Whether Mariveles Shipyard and Longest Force Security are operating expenses for a maximum of two months counted from August
solidary or joint with respect to their liability with security guards. 1, 2000. It also updated the Employee Retirement Fund.
HELD: Mariveles Shipyard’s liability is solidary with Longest Force Because of the strike, LRTA no longer renewed the O & M agreement
pursuant to Articles 106, 107, and 109 of the Labor Code which provide: when it expired on July 31, 2000, resulting in the cessation of METRO’s
operations and the termination of employment of its workforce, including
ART. 106. CONTRACTOR OR SUBCONTRACTOR—Whenever an the respondents Romulo Mendoza, Francisco Mercado, Roberto
employer enters into a contract with another person for the performance Reyes, Edgardo Cristobal, Jr., and Rodolfo Roman.
of the former’s work, the employees of the contractor and of the latter’s
subcontractor, if any, shall be paid in accordance with the provisions of Respondents herein claim they were illegally dismissed due to the mere
this Code. In the event that the contractor or subcontractor fails to pay holding of the said illegal strike.
the wages of his employees in accordance with this Code, the employer
shall be jointly and severally liable with his contractor or subcontractor ISSUE: Who shall become liable to them, will it only be METRO or
to such employees to the extent of the work performed under the METRO with respect to LRTA solidarily?
contract, in the same manner and extent that he is liable to employees
directly employed by him. HELD: METRO and LRTA are solidarily liable.
xxx
LRTA is an indirect employer while METRO is a direct employer of the
ART. 107. INDIRECT EMPLOYER.—The provisions of the immediately respondents herein. The O&M Agreement created a principal-job
preceding Article shall likewise apply to any person, partnership, contractor relationship between LRTA and METRO. LRTA was in need
association or corporation which, not being an employer, contracts with of labor and METRO was the one farming out labor.
an independent contractor for the performance of any work, task, job or
project. Pursuant to Article 107 and 109, LRTA here acted as an indirect
employer and thus solidarily liable with METRO who is the direct
ART. 109. SOLIDARY LIABILITY.—The provisions of existing laws to employer of the respondents. DOLE Dept Order 18-02, the rules
the contrary notwithstanding, every employer or indirect employer shall implementing Articles 106-109 of the Labor Code, provides in its Section
be held responsible with his contractor or subcontractor for any violation 19 that “the principal shall also be solidarily liable in case the contract
of any provision of this Code. For purposes of determining the extent of between the principal is preterminated for reasons not attributable to the
their civil liability under this Chapter, they shall be considered as direct contractor or subcontractor.”
employers.
Atty Alabastro comments: Remember that this case deals with another
According to the Labor Code, the general rule is that the employer is aspect of the solidary liability of the indirect employer and direct
liable for the unpaid wages and labor benefits to the employee. There is employee.
a special rule however, as stated above, that when there are direct and
indirect employers, Article 109 provides that in case of unpaid wages
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Will that solidary liability only arise in case of unpaid wages? No. Labor
ART. 1208. Joint Obligation. If from the law, or the nature or the
Code provides that even in a pre-termination of the contract, any adverse
wording of the obligations to which the preceding article refers the
effect that the employees may experience out of that pre-termination, the
direct employer as well as the direct employer are solidarily liable for the contrary does not appear, the credit or debt shall be presumed to be
consequences of that pre-termination. That is provided for in the Labor divided into as many shares as there are creditors or debtors, the
Dept Order 18-02 as it implemented Articles 106-109 of the Labor Code. credits or debts being considered distinct from one another, subject to
the Rules of Court governing the multiplicity of suits. (1138a)
Look closely at the two preceding cases. In the Mariveles case the issue
was nonpayment of wages, in LRTA was the pre-termination of that
agreement.
RULES ON CIVIL PROCEDURE
Rule 2, Section 3 - One suit for a single cause of action.
In the latter case, it was LRTA who pre-terminated the agreement. It can A party may not institute more than one suit for a single cause of
be argued that LRTA should be the only one liable since it was the one
action.
who pre-terminated the agreement. But the SC held that the Labor Code
is clear. Any pretermination and any adverse effect which may arise Rule 2, Section 4 - Splitting a single cause of action; effect of.
therefrom, the direct and the indirect employers are solidarily liable.
If two or more suits are instituted on the basis of the same cause of
action, the filing of one or a judgment upon the merits in any one is
Other provisions which provide for solidary liability: available as a ground for the dismissal of the others.
Art 2047, CC – Suretyship – the principal debtor is solidarily liable with .
his sureties.
ART. 1209. If the division is impossible, the right of the creditors may
be prejudiced only by their collective acts, and the debt can be
Law on Succession – Article 927, CC – two or more heirs who take the
enforced only by proceeding against all the debtors. If one of the latter
estate, those heirs shall be solidarily liable for the loss of the thing
should be insolvent, the others shall not be liable for his share. (1139)
devised or bequeathed at the time of the death of the decedent even
though only one of them should have become negligent. Negligence of
one, even only one heir, shall give rise to a solidary liability on the part DIFFERENT SOLIDARY OBLIGATIONS FROM THE VIEWPOINT OF
of all heirs with respect to any interment or destruction of a thing devised THE PARTIES INVOLVED:
or bequeathed.
1. Active Solidarity - solidary liability on the part of active subjects. (Ex.
Law on Partnerships – All partners are liable solidarily with the Creditors)
partnership for any thing chargeable to the partnership (Art 1824, CC). 2. Passive Solidarity - solidary liability on the part of passive subjects.
(Ex. Debtors)
Law on Agency (Art 1915, CC) – If two or more persons (principals) 3. Mixed Solidarity - solidary liability of both creditor and debtor.
appoint one agent, these principals are solidarily liable with the agent for
any consequence of the agency. REQUISITES THAT NEED TO CONCUR IN ORDER FOR AN
OBLIGATION TO ARISE:
Contract of Commodatum (Art 1945, CC)
1. vinculum juris
Quasidelict (Art 2176, CC) – if your liability falls under any of those 2. prestation
provided in Art 2180. This is illustrated in Construction Dev vs Estrella. 3. active subject
4. passive subject
DIFFERENT SOURCES OF SOLIDARY OBLIGATIONS:
If the division of the obligation is impossible, and the obligation is joint,
1. Conventional - obligation expressly states so or arises out of a the creditors must act collectively. One creditor cannot undertake an act
contract. which will prejudice the others.
2. Legal - what the law states.
3. Real - parties do not expressly state so; requires solidarity; nature If several debtors are obliged to give an indivisible obligation (ex. house),
of the obligation. all of them must be sued if they reneged on their obligation.
• Take note of Article 2176 and correlate it with 2180.
If one of the debtors refuses to deliver the house, the obligation is turned
CONSTRUCTION DEVELOPMENT V. ESTRELLA into a claim for damages.
501 SCRA 228
Article 1207-1222 – Joint/Solidary Obligations A joint indivisible obligation becomes a claim for damages the moment
any one of the debtors does not comply with the undertaking.
Source of Obligation: Complaint for damages based on culpa
contractual. Debtors shall not be responsible for another debtor who becomes
insolvent.
SC: There must be an exercise of extraordinary diligence for the carriage Divisible - susceptible of partial performance.
of goods and persons.
The Supreme Court held that this is an action for damages based on ART. 1210. The indivisibility of an obligation does not necessarily give
gross negligence or culpa acquliana. rise to solidarity. Nor does solidarity itself imply indivisibility. (n)
Culpa acquiliana - solidary obligation on the part of the employer. Solidary refers to nature of the obligors and obligees. Indivisibility refers
to nature of the prestation.
ART. 1207. Solidary Obligation. The concurrence of two or more
creditors or of two or more debtors in one and the same obligation ART. 1211. Solidarity may exist although the creditors and the debtors
does not imply that each one of the former has a right to demand, or may not be bound in the same manner and by the same periods and
that each one of the latter is bound to render, entire compliance with conditions. (1140)
the prestation. There is a solidary liability only when the obligation
expressly so states, or when the law or the nature of the obligation
Solidarity may exist even if creditors and debtors are not bound in the
requires solidarity. (1137a)
same manner or periods and conditions.
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the petitioners, because in the said article the situation contemplated

ART. 1212. Each one of the solidary creditors may do whatever may
is that of a debtor with several debts due, whereas the reverse is
be useful to the others but no anything which may be prejudicial to the
true, with each solidary debt imputable to several debtors.
latter. (1141a)
• Source of Obligation: Promissory Notes
Solidary creditors may not do anything which may prejudice the others. • Loan obligation which arose out of a contract.
They can, however, do acts which may be useful for the others. • The Sps. Bound themselves jointly and severally to China Bank
• The SC held that using the word jointly and severally to China
ART. 1213. A solidary creditor cannot assign his rights without the Bank purports that they are solidary liable.
consent of the others. (n) • China bank has the right to demand against one of the solidary
debtors, or all of them simultaneously.
As a rule, they are not allowed to make a demand without the consent • In order to not violate multiplicity of suits, the demand must be
of the other. All for one, one for all. A solidary creditor cannot assign his made against all of them SIMULTANEOUSLY in the same
rights to others without the consent of the others. action.
ART. 1214. The debtor may pay any one of the solidary creditors; but NOTE: Pursuant to Monetary Board Circular No. 799, effective July
if any demand, judicial or extrajudicial has been made by one of them, 1, 2013, the rate of interest for the loan or forbearance of any money,
payment should be made to him. (1142a) goods, or credits and the rate allowed in judgments, in the absence
of an express contract as to such rate of interest, has been reduced
to six percent (6%) per annum.
ART. 1216. The creditor may proceed against any one of the solidary
debtors or some or all of them simultaneously. The demand made ART. 1215. Extinguishment by a Solidary Creditor
against one of them shall not be an obstacle to those which may Novation, compensation, confusion or remission of the debt, made by
subsequently be directed against the others, so long as the debt has any of the solidary creditors or with any of the solidary debtors, shall
not been fully collected. (1144a) extinguish the obligation, without prejudice to the provisions of article
1219.
Any one or some or all of the solidary debtors may be made to pay the The creditor who may have executed any of these acts, as well as he
debt, so long as it has not been fully collected. Thus, proceedings who collects the debt, shall be liable to the others for the share in the
against one of the debtors will not be a bar to any further proceedings obligation corresponding to them. (1143)
against another, provided that the debt is still subsisting.
There are as many debts as there are debtors, and there are many MODES OF EXTINGUISHING OBLIGATIONS:
credits as there are creditors. 1. Novation
2. Compensation
The debtor may pay any one of the solidary debtor but only to the extent 3. Confusion
of his responsibility or share. If any demand is made whether judicial or 4. Remission - condonation; voluntary and free waiver of the collection
extrajudicial against any one of them, payment should be made to the of debt. Partakes a form of donation
demanding creditor.
Any of the solidary debtors can undertake these options with any of the
SINAMBAN V. CHINA BANKING solidary debtors, thus, making the obligation extinguished. However, he
G.R. NO. 193890 (MARCH 11, 2015) who does these acts will be liable to his fellow creditors for their share in
the obligation.
ISSUES:
1. WON Sps. Sinamban are solidary liable with Sps. Manalastas
ART. 1219. Remission of a Solidary Debtor’s Liability
2. WON China Bank can file a suit to both Sps. Manalastas and
The remission made by the creditor of the share which affects one of
Sinamban
the solidary debtors does not release the latter from his responsibility
towards the co-debtors, in case the debt had been totally paid by
RULING:
anyone of them before the remission was effected. (1146a)
1. Sps. Sinamban are solidary liable with Sps. Manalastas. A co-maker
of a PN who binds himself with the maker "jointly and severally"
renders himself directly and primarily liable with the maker on the
debt, without reference to his solvency. "A promissory note is a ART. 1220. The remission of the whole obligation, obtained by one of
solemn acknowledgment of a debt and a formal commitment to the solidary debtors, does not entitle him to reimbursement from his
repay it on the date and under the conditions agreed upon by the co-debtors. (n)
borrower and the lender. A person who signs such an instrument is
bound to honor it as a legitimate obligation duly assumed by him
When a creditor remits the debt of one of the solidary debtors, the effects
through the signature he affixes thereto as a token of his good faith.
depend on when such remission was done. If the creditor remits the
If he reneges on his promise without cause, he forfeits the sympathy
whole debt before payment was made, the person who convinced the
and assistance of this Court and deserves instead its sharp
creditor to remit cannot claim anything from his co-debtors, because he
repudiation." It is settled that when the obligor or obligors undertake
didn’t pay anything.
to be "jointly and severally" liable, it means that the obligation is
solidary. In this case, the spouses Sinamban expressly bound
If debt has been paid already and the creditor is convinced to condone
themselves to be jointly and severally, or solidarily, liable with the
the debt, this has no effect. However, the debtor who paid can still go
principal makers of the PNs, the spouses Manalastas.
after his other co-debtors for their share. This is applicable if there is one
creditor.
2. China Bank opted to proceed against the co-debtors simultaneously,
as implied in its May 18, 1998 statement of account when it applied
the entire amount of its auction bid to the aggregate amount of the
loan obligations. Pursuant to Article 1216 of the Civil Code, "[t]he
creditor may proceed against any one of the solidary debtors or
some or all of them simultaneously. The demand made against one
of them shall not be an obstacle to those which may subsequently
be directed against the others, so long as the debt has not been fully
collected." Article 1252 of the Civil Code does not apply, as urged by
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ART. 1217. Payment made by one of the solidary debtors ART. 1222. Solidary Debtor’s Defenses
extinguishes the obligation. If two or more solidary debtors offer to The solidary debtor may, in actions filed by the creditor, avail himself
pay, the creditor may choose which offer to accept. of all defenses which are derived from the nature of the obligation and
of those which are personal to him, or pertain to his own share. With
He who made the payment may claim from his co-debtors only the respect to those which personally belong to the others, he may avail
share which corresponds to each, with the interest for the payment himself thereof only as regards that part of the debt for which the latter
already made. If the payment is made before the debt is due, no are responsible. (1148a)
interest for the intervening period may be demanded.
When one of the solidary debtors cannot, because of his insolvency, Defenses available to solidary debtors:
reimburse his share to the debtor paying the obligation, such share 1. derived from the nature of the obligation
shall be borne by all his co-debtors, in proportion to the debt of each. 2. personal to him or pertains to his shares
(1145a) 3. personal to other solidary debtors
• Payment or delivery of what is due or the specific performance of an
obligation. DIVISIBLE AND INDIVISBLE OBLIGATIONS
• The effect of payment by solidary debtors, with regard to several
relationships.
ART. 1223. Nature and Effect of Divisible and Indivisible
Payment by a Solidary Debtor. Obligations
Payment by one of the solidary debtors releases all co-debtors from the The divisibility or indivisibility of the things that are the object of
creditor. In case of partial payments, he can recover reimbursement from obligations in which there is only one debtor and only one creditor
the co-debtors only in so far as his payment exceeded his share of the does not alter or modify the provisions of Chapter 2 of this Title.
obligation.
Divisible Obligation - an obligation whose object, in its delivery or
performance, is capable of partial fulfillment.
Reimbursement.
Indivisible Obligation - not capable of partial fulfillment.
When a solidary debtor pays the entire obligation, the resulting obligation
of the co-debtors to reimburse him is joint. If one, by insolvency cannot
pay his share in the reimbursement, the others shall bear such share ART. 1224. Liabilities in Joint Indivisible Obligations
proportionately. A joint indivisible obligation gives rise to indemnity for damages from
the time anyone of the debtors does not comply with his undertaking.
The debtors who may have been ready to fulfill their promises shall
ART. 1218. When Payment Has Prescribed
not contribute to the indemnity beyond the corresponding portion of
Payment by a solidary debtor shall not entitle him to reimbursement
the price of the thing or of value of the service in which the obligation
from his co-debtors if such payment is made after the obligation has
consists.
prescribed or become illegal.
Joint debtors - only bound to perform their respective portion.

If a debtor pays AFTER the obligation is prescribed or has become
illegal, essentially, he is paying a non-existent debt. Thus, he cannot If obligation is indivisible: A, B, and C are required to deliver a car, land,
demand from his co-debtors a reimbursement. This is a natural and a condominium unit. C unjustly refuses to deliver his share. A and B
obligation. are liable for their respective portions, but only C will be liable for all
damages caused by his delay.
ART. 1221. If the thing has been lost or if the prestation has become
impossible without the fault of the solidary debtors, the obligation shall SPS. LAM VS KODAK PHILIPPINES
be extinguished. GR NO. 167615 (JAN. 11, 2016)
Article 1223 – Joint indivisible obligation
If there was fault on the part of any one of them, all shall be
responsible to the creditor, for the price and the payment of damages ISSUE: WON the agreement between Sps. Lam and Kodak is severable,
and interest, without prejudice to their action against the guilty or divisible and susceptible of partial performance
negligent debtor.
RULING: It is a joint and indivisible obligation. The specified terms and
If through a fortuitous event, the thing is lost or the performance has conditions, the tenor of the Letter Agreement indicated an intention for a
become impossible after one of the solidary debtors has incurred in single transaction. This intent must prevail even though the articles
delay through the judicial or extrajudicial demand upon him by the involved are physically separable and capable of being paid for and
creditor, the provisions of the preceding paragraph shall apply. delivered individually, consistent with the New Civil Code: Article 1225.
(1147a) For the purposes of the preceding articles, obligations to give definite
things and those which are not susceptible of partial performance shall
be deemed to be indivisible.
1. Loss is without fault of debtors and without delay - obligation is
EXTINGUISHED. When the obligation has for its object the execution of a certain number
2. If with fault of any of the debtors - ALL SHALL BE LIABLE FOR of days of work, the accomplishment of work by metrical units, or
DAMAGES with interest and without prejudice to innocent debtors’ analogous things which by their nature are susceptible of partial
actions against the guilty or negligent debtor. performance, it shall be divisible.
3. Loss is due to fault of solidary debtor - in solidary obligations, the
fault or delay of one of the debtors is the fault or delay of all, However, even though the object or service may be physically divisible,
4. Loss is without fault but after delay - if one of them was in default, an obligation is indivisible if so provided by law or intended by the parties.
all of them are responsible even if it is a fortuitous event.
There is no indication in the Letter Agreement that the units’ petitioners
ordered were covered by three (3) separate transactions. The factors
considered by the Court of Appeals are mere incidents of the execution
of the obligation, which is to deliver three units of the Minilab Equipment
on the part of respondent and payment for all three on the part of
petitioners. The intention to create an indivisible contract is
apparent from the benefits that the Letter Agreement afforded to
both parties.
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ART. 1225. For the purposes of the preceding articles, obligations to

give definite things and those which are not susceptible of partial
performance shall be deemed to be indivisible.
When the obligation has for its object the execution of a certain
number of days of work, the accomplishment of work by metrical units,
or analogous things which by their nature are susceptible of partial
performance, it shall be divisible.
However, even though the object or service may be physically

divisible, an obligation is indivisible if so provided by law or intended
by the parties.
In obligations not to do, divisibility or indivisibility shall be determined

by the character of the prestation in each particular case. (1151a)
A. Obligations deemed indivisible:

1. Obligations to give definite things.
2. Obligations which are not susceptible of partial performance.
3. Obligations provided by law to be indivisible.
4. Obligations intended by parties to be indivisible.
B. Obligations deemed divisible:

1. When the object is the execution of a certain number of days’ work.
2. When the object is the accomplish of work by metrical units.
3. When the purpose of the obligation is to pay certain amount in
installment.
4. Susceptible of partial performance.
Exam Tips from Atty. Brunx
“Review the cases in its entirety again. Dili porke’t naa mo’y mga case
digests, or naa mo’y mga classmates na dili manghatag so nagcopy paste
mo online or whatever, that’s your problem. I suggest na para masabtan niyo
og lalum, pagbasa mo og full text.
Dili ta mo matudluan what you should learn, kay dapat tun-an ninyo tanan.
Expect, assume, and anticipate na apil tanan.
Study systematically. Kabalo na dapat mo mag-correlate og provisions with

one another.
Karon pa lang, if medyo pangit na mo og handwriting, work on it. Wala jud

ko’y tolerance ug pangit na handwriting. Kung hilig mo og alibata, siguro pag-
isip na mo og lain na profession. This is a profession that requires not only
substance but also form.
The way of answering should be: first, provide a categorical and responsive
answer. Diretso. The parties are jointly liable on the basis of their contract.
Kana. Klaro. ‘Di ba?
Ayaw pud ibutang sa inyo notebook og legal basis, kanang the law or
jurisprudence provides. Specify pud ninyo gamay.
You shoud learn how to conclude. Sa bawat umpisa, may katapusan.
Kung wala moy pangandoy na mahimo’g abogado, why are you even here?
Undangi niyo na ang kalisod sa inyong kinabuhi.
Kung mag-ingon ko ug ambak mo, dili mo mangutana ngano mo maambak,

you ask yourself how high, so salig lang mo.
-END OF 1ST EXAM-

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Oblicon - 1st Exam

Law on Obligation and Contracts (Ateneo de Davao University)

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OBLIGATIONS & CONTRACTS (Transcription)

1. Ordinary Acquisitive Prescription Extraordinary acquisitive prescription is still a mode of acquiring

Acquisitive prescription is an original mode of acquiring ownership. It is LACHES

OBLIGATIONS & CONTRACTS (Transcription)

4 ELEMENTS OF LACHES: (1) Minors

OBLIGATIONS & CONTRACTS (Transcription)

Prescription is a mode to acquire ownership, but such cannot be

OBLIGATIONS & CONTRACTS (Transcription)

prejudice, which is provided in other laws. So, if it is specifically provided

OBLIGATIONS & CONTRACTS (Transcription)

Acquisitive Prescription of Ownership or Real Rights.

OBLIGATIONS & CONTRACTS (Transcription)

OBLIGATIONS & CONTRACTS (Transcription)

OBLIGATIONS & CONTRACTS (Transcription)

OBLIGATIONS & CONTRACTS (Transcription)

Elements of Possession in Good Faith

If a person acquires a possession of a thing by way of a just title (he has

OBLIGATIONS & CONTRACTS (Transcription)

EXTINCTIVE PRESCRIPTION / PRESCRIPTION OF ACTIONS

OBLIGATIONS & CONTRACTS (Transcription)

rule, contracts are valid in any form under the principle of

OBLIGATIONS & CONTRACTS (Transcription)

The same rule shall apply with respect to co-ownerships and

PERSONS INVOLVED IN AN OBLIGATION:

2. Passive subject is the one to whom or against the obligation may

Art. 1174. Except in cases expressly specified by the law, or

As a general rule, no person shall be responsible for those events which

OBLIGATIONS & CONTRACTS (Transcription)

OBLIGATIONS & CONTRACTS (Transcription)

acquire by prescription the share of the other co-owners, absent a clear

OBLIGATIONS & CONTRACTS (Transcription)

Three possible scenarios: ANDRES V. STA LUCIA

OBLIGATIONS & CONTRACTS (Transcription)

OBLIGATIONS & CONTRACTS (Transcription)

OBLIGATIONS & CONTRACTS (Transcription)

OBLIGATIONS & CONTRACTS (Transcription)

On May 11, 1989, an order of execution was issued by the Lands

Alegarbes argued that the approval of his homestead application on

Virtucio insists that the period of acquisitive prescription was interrupted

2. WON Alegarbes acquired ownership over the subject property by

RULING: Civil interruption takes place with the service of judicial

In the same vein, a protest filed before an administrative agency and

What is the connection between Article 1155 and acquisitive

Article 1155 of the New Civil Code refers to the interruption of

OBLIGATIONS & CONTRACTS (Transcription)

OBLIGATIONS & CONTRACTS (Transcription)

SERRANO V. CENTRAL BANK OF THE PHILPPINES

RULING: In bank deposits, there is no depositor-depositary relationship.

There actually exists a debtor-creditor relationship. The petitioner here

3. Causa vivendi or causa obligationis -- the proximate or

OBLIGATIONS & CONTRACTS (Transcription)

*** OBLIGATIONS ARISING FROM CONTRACTS

What are the sources of obligations?

In here, “compliance in good faith” does not necessarily preclude

Under the Principle of Autonomy of Will, the contracting parties are

OBLIGATIONS & CONTRACTS (Transcription)

OBLIGATIONS & CONTRACTS (Transcription)

OBLIGATIONS & CONTRACTS (Transcription)