REVIEW ON THE LAWS ON OBLIGATIONS: PRINCIPLES AND CASES
ANGELO LOBO
DIFFERENT KINDS OF
OBLIGATIONS: PART II
☐Joint and Solidary Obligations
☐Divisible and Indivisible Obligations
☐Obligations with a Penal Clause
Topic 1: Joint and Solidary Obligations
Art. 1207 - The concurrence of two or
more creditors or of two or more debtors
in one and the same obligation does not
imply that each one of the former has a
right to demand, or that each one of the
latter is bound to render, entire
compliance with the prestation. There is
a solidary liability only when the
obligation expressly so states, or when
the law or the nature of the obligation
requires solidarity.
• Joint Obligations – each obligor answers
only for a part of the whole liability and to
each oblige belongs only a part of the
correlative rights.
o Example: A and B are joint debtors
of C to the amount of P1 Million. C
can demand only P500 Thousand
from A and only P500 Thousand to
B.
o Example: A and B are joint debtors
of C, D, E, and F, who are joint
creditors to the amount of P1
Million. C may demand only P125
Thousand from A and P125
Thousand B. D, E, and F have the
same rights as C.
• Solidary Obligations – the relationship
between the active and the passive
subjects is so close that each of the former
or of the latter may demand the fulfillment
of or must comply with the whole
obligation.
CIVIL CODE | BOOK IV | TITLE I | ARTICLES 1207 - 1230 | LOBO
o Example: A and B are solidary
debtors of C to the amount of P1
Million. C can demand the whole
P1 Million from A. A in turn, after
paying C, can ask reimbursement
from B to the amount P500
Thousand.
o Example: A and B are solidary
debtors of C, D, E, F, solidary
debtors, to the amount of P1
Million. Any creditor, like C, can
demand from any debtor, like A,
the whole of P1 Million. In turn, C
has to give P250 Thousand each to
D, E, and F. B has to reimburse A for
P500 Thousand which is really B’s
share of the obligation.
• Joint – “To each his own.”
• Solidary – “One for all, all for one.”
• General rule: where there are two or more
debtors or two or more creditors, the
obligation is joint.
o Exceptions: (a) when there is a
stipulation in the contract that the
obligation is solidary.
o (b) when the nature of the
obligation requires liability to the
solidary.
o (c) when the law declares the
obligation to be solidary.
• Instances where the law imposes solidary
liability:
o Obligations arising from tort;
o Obligations arising from quasi-
contract;
o Legal provisions regarding the
obligations of devisees and
legatees;
o Liability of principals, accomplices,
and accessories of a felony;
o Bailees in commodatum.
 REVIEW ON THE LAWS ON OBLIGATIONS: PRINCIPLES AND CASES
ANGELO LOBO
• May the obligation be joint on the side of
the creditors and solidary on the side of
the debtors or vice-versa?
ANS: Yes. “In such cases, the rules
applicable to each subject of the obligation
should be applied, the character of the
creditors or the debtors determining their
respective rights and liabilities.
1 Illustrative Example A:
A and B are joint debtors of C, D, E, and F,
solidary creditors to the amount of
P1,000,000. How much can C collect from A?
ANS.: C is a solidary creditor, so presumably
he can collect the whole debt. But since A is
only a joint debtor, C is entitled to collect
only P500,000 from A.
1 Illustrative Example B:
A and B are solidary debtors of C, D, E, and F,
joint creditors to the amount of P1,000,000.
How much can C recover from A?
ANS.: Since C is only a joint creditor, he can
only recover his share which is P250,000
from A, a solidary debtor.
1 Case A: Uk Pa Leung v. Nigorra
9 Phil. 381
FACTS: The defendants, as partners in the
management of a bakery, owed the plaintiff
the amount of P 43.35. The trial court
ordered each of the defendants liable for the
whole amount.
ISSUE: In the absence of any fact or law
which would make the defendants solidary
liable, are they jointly or solidarily
responsible.
CIVIL CODE | BOOK IV | TITLE I | ARTICLES 1207 - 1230 | LOBO
HELD: The presumption is that they are only
jointly liable. Hence, one should pay only
half of the debt.
1 Case B: Pimental v. Gutierrez
14 Phil. 49
FACTS: Three persons signed a contract. No
words were used to make each liable for the
whole amount.
HELD: Each one is liable only for his
proportion or aliquot share of the
obligation. “If three persons sign a contract
under the provisions of the Civil Code, and
no words are used to make each liable for
the full amount, each is only liable for the
proportionate amount of the contract.”
1 Case C: De Leon v. Nepomuceno and De
Jesus
37 Phil. 180
FACTS: In an election contest, the protestee
and the intervenor were sentenced to pay
the costs and expenses of the contest.
ISSUE: Is the obligation joint or solidary?
HELD: The obligation is joint.
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 appear, the credit or
debt shall be presumed to be divided
into as many shares as there are
creditors or debtors, the credits or debts
being considered distinct from one
another, subject to the Rules of Court
governing the multiplicity of suits.
• Presumption that obligation is joint, as a
consequence:
 REVIEW ON THE LAWS ON OBLIGATIONS: PRINCIPLES AND CASES
ANGELO LOBO
o The debt shall be divided into as
many shares as there are creditors
and debtors.
o The credits or the debts will be
distinct from one another, but
regarding the bringing of the
action in court, the Rules of Court
governing the multiplicity of suits
will be followed.
1 Case D: Oriental Commercial Co. v.
Abeto
60 Phil. 723
FACTS: A borrowed money from B on the
strength of two sureties, C and D, who
assumed joint and several liability with A.
The trial judge, upon non-payment of the
debt, rendered a judgment against all the
defendants (A, C, D) for the total amount
sought by B. But the judgment did not state
whether the liability of the defendants was
joint or solidary. B then asked for execution
on the properties of C, one of the sureties for
the whole obligation.
ISSUE: In the contract, liability was solidary
but in the judgment, nothing was said about
the nature of the obligation, hence it is now
merely joint and not solidary. How will the
obligation now be considered: joint as in the
judgment, or solidary as in the contract?
HELD: The obligation should now be
considered as merely a joint one; hence, B
can get from the properties of C only the
proportional share of C. The judgment did
not state that the obligation was joint and
several, so none of the defendants may be
required to pay for the whole obligation. It
does not matter that under the provisions of
the written contract entered into by the
parties the obligation contracted by the
sureties was solidary. It must be
CIVIL CODE | BOOK IV | TITLE I | ARTICLES 1207 - 1230 | LOBO
remembered that there was no appeal from
said judgment, and hence the judgment was
final. Since the final judgment superseded
the action brought for the enforcement of
said contract and since it implicitly declared
the obligation to be joint and not solidary, it
follows that said final judgment cannot be
executed otherwise. Hence, it should be
executed as imposing merely joint liabilities.
• Synonyms for Joint Obligation:
o Mancomunada
o Mancomunada simple
o Proportionate
o Pro rata
• Synonyms for Solidary Obligations
o Joint and several
o In solidum
o Mancomunada solidaria
o Juntos o separadamente
o Individually and collectively
o Each will pay the whole value
• Consequences of Joint Liability:
o Vitiated consent on the part of one
debtor does not affect the others.
o Insolvency of one debtor does not
make others responsible for his
share.
o Demand by the creditor on one
joint debtor puts him in default,
but not the others since the debts
are distinct.
o When the creditors interrupt the
running of the prescriptive period
by demanding judicially from one,
the others are not affected.
o Defenses of one debtor are not
necessarily available to the others.
• Liabilities of Partners
o If it arises out of a contract, the
liability is joint or pro rata.
o If it arises out of a crime or quasi-
delict, the liability is solidary.
 REVIEW ON THE LAWS ON OBLIGATIONS: PRINCIPLES AND CASES
ANGELO LOBO
• Liabilities of agents – joint, unless
solidarity has been agreed upon.
• Liabilities of co-principals – solidary.
• Liabilities of husband and wife – after
conjugal funds have been exhausted, the
husband and wife are liable jointly to
creditors of the conjugal partnership.
• Liabilities of employer and employee for
the latter’s tortious act – the liability of an
employer is primary and solidary with that
of the employees.
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 enforced only by
proceeding against all the debtors. If one
of the latter should be insolvent, the
others shall not be liable for his share.
• Indivisible joint obligation – indivisible –
referring to the object; joint – referring to
the tie between the parties, who are
merely proportionately liable.
• Characteristics:
o The obligation is joint but since the
object is indivisible, the creditor
must proceed against all the joint
debtors, for compliance is possible
only if all the joint debtors would
act together.
o Demand must, be made on all the
joint debtors.
o If any one of the debtors does not
comply with his monetary
obligation for damages.
o If any of the joint debtors be
insolvent, the others shall not be
liable for his share.
o If there be joint creditor, delivery
must be made to all, and not
merely to one, unless that one be
CIVIL CODE | BOOK IV | TITLE I | ARTICLES 1207 - 1230 | LOBO
specifically authorized by the
others.
o Each joint creditor is allowed to
renounce his proportionate credit.
• In a joint indivisible obligation, if one of the
joint creditors makes a demand upon one
of the debtors, there is no doubt that the
debtor is in default with reference to the
demanding creditor’s share. Is she also in
default with reference to the others?
ANS: Although it would seem that the
answer is YES because this act benefits,
and does not prejudice the others, and is
therefore implicitly what the law provides.
Art. 1210 – The indivisibility of an
obligation does not necessarily give rise
to solidarity. Nor does solidarity of itself
imply indivisibility.
• Indivisibility – refers to the subject matter.
• Solidarity – refers to the tie between the
parties.
(a) Joint divisible obligation – A and B are
jointly liable to X for P1 million.
(b) Joint indivisible obligation – A and B
are jointly liable to give X this car.
(c) Solidary divisible obligation – A and B
are solidary bound to give X P1 million.
(d) Solidary indivisible obligation – A and
B are solidary liable bound to give X
this car.
• Different Kinds of Solidarity
First Classification:
o Active solidarity – on the part of
the creditors or oblige.
o Passive solidarity – on the part of
debtors or obligors.
 REVIEW ON THE LAWS ON OBLIGATIONS: PRINCIPLES AND CASES
ANGELO LOBO
o Mixed solidarity – on the part of
the obligors and obliges, or on the
part of debtors and creditors.
Second Classification:
o Conventional solidarity – agreed
upon by the parties.
o Legal solidarity – that imposed by
the law.
Art. 1211 – Solidarity may exist although
the creditors and the debtors may not be
bound in the same manner and by the
same periods and conditions.
• Different ways by which two debtors may
be bound (Sanchez Roman):
o Uniform – when the debtors are
bound by the same stipulations
and clauses.
o Otherwise – where the obligors
through are liable for the same
prestation, are nevertheless not
subject to the same secondary
stipulations and clauses.
Art. 1212 – Each one of the solidary
creditors may do whatever may be useful
to the others, but not anything which
may be prejudicial to the latter.
• Example of Beneficial Act – to interrupt
the running of the prescription, the act of
one solidary creditor in making a judicial
demand upon any of the solidary debtors
is sufficient. The law provides that “the
prescription of actions is interrupted when
they are filed before the Courts.” (Art.
1155, NCC)
• Prejudicial Acts – should not be performed,
otherwise, damages will be liable. In the
case of remission or condonation, the
solidary creditor is allowed to so remit,
and the obligation is extinguished.
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Art. 1213 – A solidary creditor cannot
assign his rights without the consent of
the others.
Art. 1214 – The debtor may pay any one
of the solidary creditors; but if any
demand, judicial or extrajudicial, has
been made by one of them, payment
should be made to him.
Illustrative Example A:
A and B are solidary debtors of C, D, and E,
solidary creditors. May A pay C the whole
obligation?
ANS.: Yes, provided, no judicial or
extrajudicial demand had been made by
either D or E.
Illustrative Example B:
A and B are solidary debtors of C, D, and E,
solidary creditors. E makes judicial demand.
There is no extrajudicial demand upon A. To
whom should A pay?
ANS.: Only E, who had made the judicial
demand. Payment to any other creditor will
not extinguish the obligation except insofar
as the payee’s share is concerned.
Illustrative Example C:
A and B are solidary debtors of C, D, and E,
solidary creditors. C makes a judicial
demand on A. Can D and E sue A?
ANS.: In the meantime, no, because C is
supposed to be representing already D and
E. If judgment is rendered against A, and A
does not have enough money, then D, E, or C
(individually or collectively) may still sue B
 REVIEW ON THE LAWS ON OBLIGATIONS: PRINCIPLES AND CASES
ANGELO LOBO
for the remainder. But it is essential that the
first action be first terminated.
Illustrative Example D:
A and B are solidary debtors of C, D, and E. C
makes an extrajudicial demand upon A, who
does not pay. Can D and E sue (judicial
demand) A?
ANS.: Although strictly speaking, the answer
may be in the NEGATIVE since under the law
payment must be made to C, who had made
the extrajudicial demand, still the law
should not be construed to effect an
absurdity in that D and E would be
compelled to just stand by idly, since C does
not institute any judicial action. Since C’s act
(or inaction) is prejudicial to D and E, the
two (D and E) should be allowed to make the
judicial demand.
Illustrative Example E:
A and B, solidarily debtors, are indebted to
C, D, and E, solidary creditors. C
extrajudicially demands from A, but B (upon
whom no demand has been made), pays the
whole debt to E. Is B allowed to do that, and
is the solidary obligation extinguished?
ANS.: Yes, for after all no demand had been
made by C upon B. It is only A that is bound,
not B.
Art. 1215 – Novation, compensation,
confusion or remission of the debt, made
by any of the solidary creditors or with
any of the solidary debtors, shall
extinguish the obligation, without
prejudice to the provisions of Article
1219.
CIVIL CODE | BOOK IV | TITLE I | ARTICLES 1207 - 1230 | LOBO
The creditor who may have executed any
of these acts, as well as he who collects
the debt, shall be liable to the others for
the share in the obligation
corresponding to them.
• Novation –is the modification of an
obligation by changing its object or
principal conditions, or substituting the
person of the debtor, or by subrogating the
person of the debtor, or subrogating a third
person in the rights of the creditor.
• Compensation – is that which takes place
when two persons, in their own right, are
creditors and debtors of each other.
Compensation may be total or partial,
depending upon the amount involved.
Total compensation of course
automatically extinguishes the obligation,
whether known or unknown to the parties.
• Confusion or Merger – is that which takes
place when the characters of creditor and
debtor are merged in the same person, as
when my check in the course of
negotiation, is eventually endorsed to me.
• Remission or Waiver - is that act of
liberality whereby a creditor condones the
obligation of the debtor; that where the
creditor tells the debtor to “forget about
the whole thing.”
Art. 1216 – The creditor may proceed
against any one of the solidary debtors
or some or all of them simultaneously.
The demand made against any 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.
• Art. 1216 applies only to solidary
obligations, not to joint ones.
 REVIEW ON THE LAWS ON OBLIGATIONS: PRINCIPLES AND CASES
ANGELO LOBO
Art. 1217 – Payment made by one of the
solidary debtors extinguishes the
obligation. If two or more solidary
debtors offer to pay, the creditor may
choose which offer to accept.
He who made the payment may claim
from his co-debtors only the share which
corresponds to each, with the interest
for the payment already made. If the
payment is made before the debt is due,
no interest for the intervening period
may be demanded.
When one of the solidary debtors cannot,
because of his insolvency, reimburse his
share to the debtor paying the
obligation, such share shall be borne by
all his co-debtors, in proportion to the
debt of each.
• Payment, defined: one of the ways by
which an obligation is extinguished and
consists in the delivery of the thing or the
rendition of the service which is the object
of the obligation.
(a) If a solidary debtor pays the creditor,
what happens to the obligation?
ANS: The obligation is extinguished.
(b) A, B, and C are the solidary debtors of
D. A and B offer to pay. Is the creditor
allowed to choose which offer to
accept?
ANS: Yes. Art. 1217 of the NCC provides
the legal basis.
(c) A, B, C, and D are solidary debtors of E
to the amount of P1.2 Million. It is clear
that A is entitled to reimbursement A
CIVIL CODE | BOOK IV | TITLE I | ARTICLES 1207 - 1230 | LOBO
pays E the whole P1.2 Million. Is a
entitled to reimbursement from B, C,
and D.
ANS: Yes, reimbursement plus interest
from the date of payment.
1 Case E: Inchausti & Co. v. Yulo
34 Phil. 978
FACTS: A, B, C, D, E, and F were solidary
debtors of G to the amount of P253,445.42.
Later in an agreement with B, C, D, E, and F,
the debt was reduced by G to P225,000. G
sued A. Because of the partial remission, A
was made to pay only P225,000. Issue
ISSUE: How much can A recover from the
other solidary debtors?
HELD: A can recover the proportional
shares of the other, not with respect to
P253,445.42 but with respect to P225,000,
the amount as reduced. Since there are 6
solidary debtors, he can recover 1/6 of
P225,000 from each plus interest from the
time of payment.
Illustrative Example A:
A, B, and C executed jointly and severally a
promissory note for P300,000 in favor of D
payable after 6 months. Upon maturity, A
and B refused to pay. Is D entitled to recover
from C the P300,000? In case of payment by
C, what right, if any, has he against A and B?
ANS.: Yes, D can get the whole P300,000
from C, because C bound himself in solidum.
If C pays the whole amount, B and A will
each be liable to him for P100,000.
Illustrative Example B:
 REVIEW ON THE LAWS ON OBLIGATIONS: PRINCIPLES AND CASES
ANGELO LOBO
A and B were sued on a promissory note
which read as follows: “Manila, May 1, 2004.
For value received, we, the undersigned,
promise solidarily to pay C or his order, on
or before May 1, 2005, the sum of
P1,000,000, plus an interest of 6% (Sgd.) A
and B.” Should B turn out to be insolvent,
may C recover all his claim from A who is
solvent? Why?
ANS.: Yes, because A had bound himself
solidarily, without prejudice, of course, to
his recovering later on from B, the share of
B in the debt, plus interest from the date of
payment.
Art. 1218 – Payment by a solidary debtor
shall not entitle him to reimbursement
from his co-debtors if such payment is
made after the obligation has prescribed
or become illegal.
Illustrative Example:
A and B are solidary debtors of C to the
amount of P1,000,000. The debt prescribed.
But A voluntarily paid C, nevertheless,
because A felt morally obliged to so pay.
(a) May A recover from C what he has
paid?
(b) May A get any reimbursement from
B?
ANS:
(a) A cannot recover from C what he has
paid because it was voluntarily
given after A knew of the
prescription of the debt. The law
says, “when a right to sue upon a
civil obligation has lapsed by
• Effect of Loss or Impossibility
extinctive prescription, the obligor
cannot recover what he has
CIVIL CODE | BOOK IV | TITLE I | ARTICLES 1207 - 1230 | LOBO
delivered or the value of the service
he has rendered.’’
(b) A cannot get any reimbursement
from B because A paid the debt after
it had prescribed.
Art. 1219 – The remission made by the
creditor of the share which affects one of
the solidary debtors does not release the
latter from his responsibility towards
the co-debtors, in case the debt had been
totally paid by anyone of them before the
remission was effected.
Art. 1220 – The remission of the whole
obligation, obtained by one of the
solidary debtors, does not entitle him to
reimbursement from his co-debtors.
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 be extinguished.
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 and interest, without prejudice
to their action against the guilty or
negligent debtor.
If through a fortuitous event, the thing is
lost or the performance has become
impossible after one of the solidary
debtors has incurred in delay through
the judicial or extrajudicial demand
upon him by the creditor, the provisions
of the preceding paragraph shall apply.
o If without fault – no liability.
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o If with fault – there is liability plus • Example: A, B, and C are solidarily

damages and interest. indebted to X for the selling of shabu or the
o Loss because of a fortuitous event sale of property of public dominion. If A, B,
AFTER default – here, there will be or C is sued, none can be held liable. This is
liability because of the DEFAULT. a complete defense.
•
Art. 1222 – A solidary debtor may, in
actions filed by the creditor, avail himself Topic 2: Divisible and Indivisible
of all defenses which are derived from Obligations
the nature of the obligation and of those Art. 1223 – The divisibility or
which are personal to him, or pertain to indivisibility of the things that are the
his own share. With respect to those object of obligations in which there is
which personally belong to the others, he only one debtor and only one creditor
may avail himself thereof only as regards does not alter or modify the provisions of
that part of the debt for which the latter Chapter 2 of this Title.
are responsible.
• Divisible obligations – one capable of
• Kinds of Defenses: partial performance. (Example: to deliver
(a) Those derived from the nature of the 200 kilos of sugar)
obligation. • Indivisible obligations – one not capable
Examples: of partial performance. (Example: to
o Lack of consideration or cause. deliver a specific car)
o Absolute simulation (as when the
contract is fictitious). SOLIDARITY INDIVISIBILITY
o Illegal consideration. 1) Refers to tie 1) Refers to nature
o Extinguishment of the obligation. between the of obligation.
o Non-fulfillment of the suspensive parties. 2) May exist even if
condition. 2) Needs at least there is only one
o Statute of Frauds two debtors or debtor and only
o When all the debtors were creditors. one creditor.
incapacitated to give consent. 3) The fault of one 3) The fault of one
o When there are vices of consent on is the fault of the is not the fault of
the part of all debtors. others. the others.
(b) Those personal to the debtor sued.
o Vitiated consent – COMPLETE • Classes or Kinds of Indivisibility
defense. o Conventional indivisibility – by
o Incapacity to give consent – common agreement
COMPLETE defense. o Natural or absolute indivisibility –
o Non-fulfillment of condition because of the nature of the object
imposed regarding his share. of the undertaking
o Non-arrival of term. o Legal indivisibility – if so provided
(c) Those personal to others. by law
• Kinds of Division

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 REVIEW ON THE LAWS ON OBLIGATIONS: PRINCIPLES AND CASES
ANGELO LOBO
o Quantitative division – depends on
quantity; ex: if ten chairs are
equally divided between two
brothers.
o Qualitative division – depends on
quality; ex: if one child inherits
land, and another inherits cash.
o Intellectual or Moral division – one
that exists merely in mind and not
in physical reality; ex: my brother
and I own in common a car. My
one-half share is only the mind.
Art. 1224 – 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 not have been ready to
fulfill their promises shall not contribute
to the indemnity beyond the
corresponding portion of the price of the
thing or of the value of the service in
which the obligation consists.
• Joint indivisible obligation – here the
object is indivisible and yet the parties are
merely bound jointly.
o Ex: A and B are jointly bound to
give something to C.
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.
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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.
• Obligations that are deemed
indivisible:
o Obligations to give definite things.
o Those which are not susceptible of
partial performance.
o Even if the thing is physically
divisible, it may be indivisible if so
provided by law.
o Even if the thing is physically
divisible, it may be indivisible if
such was the intention of the
parties concerned.
• Obligations that are deemed divisible:
o When the object of the obligation is
the execution of a certain number
of days of work.
▪ Ex: when a laborer is hired
to work for ten days.
o When the object of the obligation is
the accomplishment of work by
metrical units.
▪ Ex: when a laborer is hired
to construct a street three
meters and fifty meters
long.
o When the purpose of the
obligation is to pay a certain
amount in installments.
▪ When a debtor is required
to pay in ten annual
installments.
 REVIEW ON THE LAWS ON OBLIGATIONS: PRINCIPLES AND CASES
ANGELO LOBO
o When the object of the obligation is
the accomplishment of work
susceptible of partial performance.
2 Case A: L. Buck & Son Lumber Co. v.
Atlantic Lumber Co.
109 Federal 411
FACTS: A contract was made for the sale of a
large quantity of logs to be delivered in
monthly installments during a period of 8
years, payments to be made also in
installment, at times having relations to the
deliveries. It contained stipulations as to
such payments, and guaranties as to the
average size of the logs to be delivered in
each installment. The seller terminated the
contract for alleged breaches by the buyer
and brought suit for damages, among them
payments due for installments of the logs
already delivered. The seller got some
damages. Later, he wanted to recover for the
other installments.
ISSUE:
(a) Is this a divisible or indivisible
obligation?
(b) After the recovery has been had of prior
installments in a court action, may
another court action prosper for the
recovery of the remaining installments?
HELD:
(a) “This is an indivisible contract, and not a
number of separate and independent
agreements for the sale of the quantity
to be delivered and paid for each month,
although there might be breaches of the
minor stipulations and warranties with
reference thereto which would warrant
suits with a termination of the contract.”
(b) The later court action for the recovery of
the remaining installments cannot
prosper. “The judgment in such action
CIVIL CODE | BOOK IV | TITLE I | ARTICLES 1207 - 1230 | LOBO
was conclusive as to all claims or
demands of either party against the
other, growing out of the indivisible
contract.’’
Topic 3: Obligations with a Penal Clause
Art. 1226 – In obligations with a penal
clause, the penalty shall substitute the
indemnity for damages and the payment
of interests in case of noncompliance, if
there is no stipulation to the contrary.
Nevertheless, damages shall be paid if
the obligor refuses to pay the penalty or
is guilty of fraud in the fulfillment of the
obligation.
The penalty may be enforced only when
it is demandable in accordance with the
provisions of this Code.
• Penal Clause, defined: It is a coercive
means to obtain from the debtor
compliance from the debtor (Georg). A
penal clause is an accessory undertaking
to assume greater liability in case of
breach. It is attached to obligations in
order to insure their performance.
• Kinds of Penal Clauses
First Classification:
o Legal penal clause – one that is
imposed by law.
o Conventional penal clause – that
which has been agreed upon by the
parties.
Second Classification:
o Subsidiary – when only the penalty
may be asked.
o Joint – when both the principal
contract and the penal clause may
be enforced.
3 Case A: Navarro v. Mallari
 REVIEW ON THE LAWS ON OBLIGATIONS: PRINCIPLES AND CASES
ANGELO LOBO
45 Phil. 242
FACTS: In a building contract, there was
stipulation for a penalty clause. The builder,
however, was sued for additional damages
on account of breach of the contract. But the
breach was not occasioned by fraud.
ISSUE: Is the owner entitled to get more
damages from the builder?
HELD: No, he cannot get damages other than
what has been stipulated upon as the
penalty or waiver of other damages, except
if otherwise provided by law. A party to a
building contract who is given the benefit of
a stipulation fixing a round sum as
liquidated damages for breach of contract
on the part of the builder cannot be awarded
additional damages at large for the same
breach. Insistence upon receiving
satisfaction of the penal clause operates as a
renunciation of the right to other damages.
Art. 1227 – The debtor cannot exempt
himself from the performance of the
obligation by paying the penalty, save in
the case where this right has been
expressly reserved for him. Neither can
the creditor demand the fulfillment of
the obligation and the satisfaction of the
penalty at the same time, unless this
right has been clearly granted him.
However, if after the creditor has decided
to require the fulfillment of the
obligation, the performance thereof
should become impossible without his
fault, the penalty may be enforced.
3 Case B: Cui v. Sun Chan
41 Phil. 523
CIVIL CODE | BOOK IV | TITLE I | ARTICLES 1207 - 1230 | LOBO
FACTS: A lessee rented property from a
lessor. The contract of lease contained a
stipulation to the effect that the lessee
should not make any construction on the
property without the permission of the
lessor, and that should the lessee do so
without the permission of the lessor said
improvements would inure to the benefit of
the estate (lessor) and the lessee, in such a
case, would not have any right to ask for any
reimbursement for the cost of the
construction. The lessee made some
improvements without the consent of the
lessor. Now, the lessor wants to evict the
lessee for the violation of the conditions of
the lease. The lessee, on the other hand, said
that he should not be ousted because he was
ready to forfeit the improvements in favor of
the lessor’s estate.
ISSUE: Is the fact that the lessee is ready to
forfeit the improvement on the estate
sufficient to prevent his being ousted from
the premises?
HELD: Even if the lessee is ready to forfeit
the improvements on the estate, he may still
be ousted from the premises for his having
violated the condition imposed upon him,
namely, not to make any such improvements
without the permission of the lessor. It is
true that the lessee was ready to fulfill what
may perhaps be termed a penalty, but this
does not excuse him from complying with
the principal obligation of not making any
improvements without the consent of the
lessor. It must be borne in mind that a
debtor (the lessee) cannot escape the
fulfillment of the obligation by just paying
the penalty, unless such right has expressly
been granted him. Hence, everything
considered, the lessee may lawfully be
ousted from the premises.
 REVIEW ON THE LAWS ON OBLIGATIONS: PRINCIPLES AND CASES
ANGELO LOBO

granted the lessor of the lessee’s advance

Art. 1228 – Proof of actual damages
suffered by the creditor is not necessary
in order that the penalty may be
demanded.
• Reason: If a party can provide evidence of
a violation of the agreed-upon conditions,
the injured party is not required to prove
the specific losses or damages suffered.
The enforcement of the penal clause can be
demanded without demonstrating the
extent of the harm incurred.
Art. 1229 – The judge shall equitably
reduce the penalty when the principal
obligation has been partly or irregularly
complied with by the debtor. Even if
there has been no performance, the
penalty may also be reduced by the
courts if it is iniquitous or
unconscionable.
• When the court may reduce penalty:
o When the obligation has been
partly complied with by the debtor.
o When the obligation has been
irregularly complied with by the
debtor.
o When the penalty is iniquitous or
unconscionable, even if there has
been no performance at all.
payment as damages.”
ISSUE: Is the stipulation valid?
HELD: The stipulation is a penalty clause,
and even if iniquitous or unconscionable, in
a sense, it is not void, but subject merely to
equitable reduction. Moreover, the amount
that can be recovered is not limited merely
to actual or compensatory damages.
Art. 1230 – The nullity of the penal
clause does not carry with it that of the
principal obligation.
The nullity of the principal obligation
carries with it that of the penal clause.
• If the principal obligation is null and void,
the penal clause will have no more use for
existence and is therefore also considered
null and void.
• If however, the penal clause is null and
void, it does not mean that the principal
obligation is null and void.

3 Case C: Yulo v. Pe
L-10061, April 22, 1957

FACTS: A building was leased, with an

advance payment of P6,000. It was provided
in the contract that if the tenant defaults in
the payment of the monthly rent, the
contract will be automatically cancelled, and
“at the same time, a right of confiscation is

CIVIL CODE | BOOK IV | TITLE I | ARTICLES 1207 - 1230 | LOBO