PART I
PRESCRIPTION (BOOK III TITLE V)Arts. 1106-1155
Prescriptionmeans by which one acquires ownership and other real
rights through the lapse of time in the manner and under the
conditions laid down by law. -means by which rights and actions are
lost.- mode of acquiring or losing ownership
Under the Civil Code Prescription covers both acquisitive and
extinctive prescription.(US vs. Serapio 23 Phil 597)
Common Law Prescription is equivalent to acquisitive
prescription, that is acquisition of right through lapse of time.
While limitation refers to the time within which an action may be
brought or extinctive prescription.
A. Acquisitive Prescription Art. 1117
1. Requisites for Ordinary Acquisitive Prescription
a. Capacity to acquire by prescription;(no prescription between
husband and wife, between parent and child during minority of the
latter, between guardian and ward during the continuance of
guardianship, between co-owners, etc.)b. The object must be
susceptible of prescription;(property of the State or any of its
subdivisions, except patrimonial property, movables possessed
through a crime by the offender, lands under the Torrens System of
registration with a torrens certificate of title, are not
susceptible of prescription).c. Possession must be in the concept
of owner, public, peaceful, continuous and uninterrupted (Art.
1118, NCC);d. Possession must be by virtue of a title and in good
faith;
Good faith for purposes of prescription consists in a reasonable
belief that the person from whom the possessor received the thing
was the owner thereof, and could transfer the ownership (Article
1127, NCC); or that it consists in the ignorance of the possessor
of any flaw which would invalidate his title or mode of
acquisition. (Article 526, NCC).
Just title for purposes of prescription exists when the adverse
claimant came into possession of the property through one of the
modes recognized by law for the acquisition of ownership or other
real rights, but the grantor was not the owner or could not
transmit any right. (Article 1129, NCC).
e. The period of possession must be four (4) years for movable
property and ten (10) years for immovable property
2. Requisites for Extraordinary Acquisitive Prescription
a. Capacity to acquire by prescription;(no prescription between
husband and wife, between parent and child during minority of the
other, between guardian and ward during the continuance of
guardianship, between co-owners, etc.)b. The object must be
susceptible of prescription;(property of the State or any of its
subdivisions, except patrimonial property, movables possessed
through a crime by the offender, lands covered by the Torrens
System, are not susceptible of prescription).c. Possession must be
in the concept of owner, public, peaceful, continuous and
uninterrupted (Art. 1118, NCC);d. Possession may be without title
and in bad faith;e. The period of possession must be eight (8)
years for movable property and thirty (30) years for immovable
property
3.What Cannot Be Required By Acquisitive Prescriptiona. Those
not within the commerce of men (Art. 1113);b. Property of the State
or any of its subdivisions not patrimonial in character (Art.
1113);c.Movables possessed through a crime (Art. 1133)d.Lands
registered under the Torrens system (Sec. 47 of PD 1529)
A. Extinctive Prescription orPrescription of Actions/Statutes of
Limitations
1. Characteristics2. Requisites3. PeriodsImprescriptible
Actions:
(1)action to demand a right of way (Article 1143, Civil
Code);(2)action to abate a public or private nuisance (Article.
1143, Civil Code);(3)action to declare ordinary contract void
(Article 1410, Civil Code);(4)petition to declare contract of
marriage void (Article 39, Family Code);(5)petition for probate of
will;(6)action for partition of co-ownership so long as co-owner
has not expressly repudiated co-ownership (Article 494, Civil
Code);(7)action for present or future support, but no support in
arrears;(8)action by beneficiary to recover property placed in
trust so long as trustee has not expressly repudiated the
trust;(9)action by registered owner to recover property brought
under the Torrens System (Section 47, P.D. 1539);(10)action by the
state to recover lands of public dominion;(11)action to recover
movables possessed through a crime against the offender (Article
1133, Civil Code).(12)action for quieting of title so long as
plaintiff is in possession of the property (Cabrera vs. CA 267 SCRA
339);
Other Actions
a. To Recover Movables Art. 1140 (8 years)b. To Recover
Immovables Art. 1141 (30 years)
c.Other Actions Arts. 1142-1149 1) Within 10 years upon a
written contract, upon an obligation created by law and upon a
judgment, Mortgage (Art.1142) (Art. 1144)2) Within 6 years upon an
oral contract; quasi-contract3) Witihin 5 years other actions whose
periods are not fixed in the Code or other law4) Within 4 years
upon injury to rights of plaintiff; quasi-delict5) Within 1 year
forcible entry and detainer; defamationB. Distinction Between
Acquisitive and Extinctive Prescription
1. As to elements: the first requires a positive fact, the
possession by one who is not the owner, while the second requires a
negative fact, the inaction of the owner;2. As to purpose the first
is for the purpose of acquisition of rights, while the second is
for the purpose of extinction of rights;3. As to extent the first
is applicable only to real rights which are susceptible of
possession, while the second is applicable to all kinds of rights,
real or personal;4. As to effect the first results in the
acquisition and extinction of a real right while the second merely
results in the extinction of a real or personal right.5. As to
interruption
Acquisitive prescription (Arts.1120 to 1125) Naturally
(possession ceases for over 1 year) Civilly (through summons to the
possessor except for the cases provided under Art. 1124) Express or
tacit (recognition by possessor of the owners right)
Extinctive prescription (Art. 1155) Filed in court Written
extra-judicial demand by creditor Written acknowledgment by
debtor
Case Studies:
Morales vs. CFI (97 SCRA 872)
Re: Article 1106 NCC There are two kinds of prescription
provided in the Civil Code. One is acquisitive, i.e; the
acquisition of ownership and other real rights by the lapse of time
(Article 1109, par. 1), other names for acquisitive prescription
are adverse possession and usucapcion. The other kind is extinctive
prescription whereby rights and actions are lost by the lapse of
time (Arts. 1106 par. 2 and 1139). Another name for extinctive
prescription is limitation of action.
(Note: Limitation of action or statute of limitation is one of
the grounds for a Motion to Dismiss under Rule 16, Revised Rules of
Court). Petitioner filed an action for recovery of possession,
ownership of a parcel of land against private respondents, who in
their answer, set up, among others, the affirmative defense that
petitioners (as plaintiff) cause of action is barred by extinctive
prescription or statute of limitations. During the hearing on the
affirmative defense of extinctive prescription or statute of
limitation, the evidence proved that the recovery action was filed
after 10 years but before 30 years from the time private
respondents took possession of the land. The CFI dismissed the
complaint, which was reversed/set aside and the case remanded for
trial to the CFI. The action has not prescribed or been barred by
the statute of limitations pursuant to Article 1141, NCC which
provides that real actions to recover immovables prescribe in 30
years. The law requires that one who asserts ownership by ordinary
acquisitive prescription of real estate,good faith and just title
are never presumed but must be proved pursuant to Article 1131 NCC.
Hence, ordinary acquisitive prescription, unlike extinctive
prescription or statute of limitations, is not among the grounds
for a motion to dismiss (Rule 16, Rev- Rules of Court) but the same
must be threshed out and proved in full blown trial.
Hrs. of Arzadon-Crisologo vs. Raon (532 SCRA 391)
Re: Article 1137 (extraordinary acquisitive prescription) and
Article 1123 (civil interruption of possession). Prescription as a
mode of acquiring ownership and other real rights over immovable is
concerned with the lapse of time in the manner and under the
conditions laid down by law, namely: that the possession should be
in the concept of owner, public, peaceful, uninterrupted and
adverse. Article 1137, NCC on acquisitive prescription provides:
ownership and other real rights over immovables also prescribe
through uninterrupted adverse possession thereof for thirty years
without need of title or good faith.Notice of adverse claim does
not interrupt the running of acquisitive prescription. It does not
take place of judicial summons under Art. 1123. Extraordinary
acquisitive prescription may bestow ownership on possessor
Hrs. of Maningding vs. CA (276 SCRA 601)
A donation, though void for lack of formal requisites, could be
a basis for adverse possession for extraordinary acquisitive
prescription. While a donation propter nuptias is void for failure
to comply with formal requisites, it could still constitute a legal
basis for adverse possession.
Vda. De Cabrera vs. CA (267 SCRA 339)
(Article 1143) An action for reconveyance of a parcel of land
based on implied or constructive trust ordinarily prescribed in ten
(10) years, the point of reference being the date of registration
of the issuance of the certificates of title over the property
(Article 1144); but this rule applies only when the plaintiff is
not in possession of the property; however, if the person claiming
to be the owner thereof is in actual possession of the property,
the right to seek reconveyance which in effect seeks to quiet title
to the property, does not prescribe.
Hrs. of Flores Restar vs. Hrs. of Cichon (475 SCRA 731)
While an action to demand partition does not prescribe, a
co-owner may acquire ownership thereof by clear repudiation of the
co-ownership and the co-owners are appraised of their rights.
Tenales vs. IAC (143 SCRA 223)
Statute of limitations are statutes of repose, the object of
which is to suppress fraudulent and stale claims from springing up
at great distances of time and surprising parties and their
representatives when all the proper vouchers and evidences are lost
or the facts have become obscure from the lapse of time or the
defective memory or death or removal of witnesses. Suchstatutes
apply with full force even to most meritorious claims. The purpose
of these statutes is to protect the diligent and vigilant, not
those who sleep on their rights.
Nielson & Company, Inc vs. Lepanto Consolidated Mining Co. (
18 SCRA 1040)
Laches is different from prescription. Prescription is concerned
with the fact of delay, whereas laches is concerned with the effect
of delay. Prescription is a matter of time; laches is principally a
question of inequity of permitting a claim to be enforced, this
inequity being founded on some change in the condition of the
property or the relation of the parties. Prescription is statutory;
laches is not. Laches applies in equity; whereas prescription
applies at law. Prescription is based on fixed time, laches is
not
C. Interruption Art. 1155
3 Ways In Which Prescription of Action (Extinctive Prescription)
Is Interrupted:
a. Filed before the courtb. Written extra-judicial demandc.
Written acknowledgment of debt by debtor
Interruption of Possession vs. Suspension of Prescription
Interruption of Possession -all benefits acquired so far from
possession ceases. When the prescription runs again, it is a new
one. Suspension of Prescription- the past period is included after
prescription is resumed.
OBLIGATIONS (BOOK IV TITLE I)Arts. 1156-1304
I. General Provisions (Chapter 1) Arts. 1156-1162
Obligation juridical necessity to give, to do or not to do
Elements of an Obligation
Sources of Obligations Art. 11571. Law. (Not Presumed Art.
1158)2. Contracts3. Quasi-Contracts4. Acts or Omissions Punished By
Law5. Quasi-Delicts
Case Studies:
Pelayo vs. Lauron (12 Phil 453)
(Re: Article 1158, Civil Code) Medical services rendered by a
physician for delivery of the child are chargeable to the husband,
not to the parents-in-law of the wife, even if it was the
parents-in-law who brought the daughter-in-law to the
physician.
Cruz vs. Northern Theatrical Enterprises (95 Phil 739)
While it is to the interest of the employer to give legal help
to, and defend, its employees charged criminally in court, in order
to show that he was not guilty of any crime either deliberately or
through negligence, because should the employee be finally held
criminally liable and he is found to be insolvent, the employer
would be subsidiarily liable, such legal assistance might be
regarded as a moral obligation but it does not at present count
with the sanction of man-made laws. If the employer is not legally
obliged to give legal assistance to its employee and provide him
with a lawyer, naturally said employee may not a recover from his
employer the amount he may have paid a lawyer hired by him.
PARTIES WHO MAY BE HELD RESPONSIBLE FOR DAMAGES. If despite the
absence of any criminal responsibility on the part of the employee
he was accused of homicide, the responsibility for the improper
accusation may be laid at the door of the heirs of the deceased at
whose instance the action was filed by the State through the
Fiscal. This responsibility can not be transferred to his employer,
who in no way intervened, much less initiated the criminal
proceedings and whose only connection or relation to the whole
affair was that it employed plaintiff to perform a specific duty or
task, which was performed lawfully and without negligence.
II. Nature and Effect of Obligations (Chapter 2) Arts.
1163-1178
A. Obligation To Give (Art. 1165)
1. A Determinate Or Specific ThingIndividualized and can be
identified or distinguished from others of its kind2. An
Indeterminate Or Generic ThingIndicated only by its kind, without
being distinguished from others of the same kind.
Case Study:
Adorable vs. CA (319 SCRA 200)(Real right distinguished from
Personal right)
Re: (Art. 1164)Areal right, like rights of ownership and
possession is the power belonging to a person over a specific
thing, without a passive subject individually determined against
whom such right may be personally exercised; it gives a person a
direct and immediate juridical power over a thing, which can be
exercised not only against a determinate person, but against the
whole world. A personal right on the other hand, is the power
belonging to one person to demand of another, as a definite passive
subject, the fulfillment of a prestation to give, to do, or not to
do.
B. Obligation To Do Or Not To Do (Arts. 1167 & 1168) C.
Breaches Of Obligations1. Complete Failure To Perform2. Default,
Delay Or Mora No Default Unless Creditors Makes A Demand;Exceptions
(Art. 1169)
Delay, default or Mora: delay in the fulfillment of obligations;
it is non-fulfillment with respect to time
Different Kinds of Mora:a. Mora solvendib.Mora accipiendic.
Compensatio morae
Requisites of Default: That the obligation be demandable and
liquidated That the debtor delays performance That the creditor
demands performance judicially or extrajudicially, subject to the
exceptions provided by law.
3.Fraud In The Performance Of Obligation a. Waiver Of Future
Fraud Is Void (Art. 1171)
Fraud: (Dolo) (Art. 1171)The deliberate and intentional evasion
of the normal fulfillment of obligations. It implies malice or
dishonesty and it cannot cover cases of mistake/error in
judgment
Fraud: (Dolo) (Art. 1138)
Fraud in the negotiation, perfection or consummation of the
contract entitles the aggrieved party the remedy of rescission plus
damages
Case Study:
Sps. Tongson vs. Emergency Pawnshop Bula, Inc. (610 SCRA
150)
Fraud in the negotiation, perfection or consummation of contract
entitles aggrieved party to the remedy of rescission plus
damages.
4. Negligence (Culpa) In The Performance Of Obligation (Art.
1173)a. Diligence Normally Required Is Ordinary Diligence Or
Diligence Of A Good Father Of A Family; Exceptions Common Carriers
Requiring Extraordinary Diligence (Arts. 1998-2002)
3 Different Kinds of Negligence As Source of Obligation: Culpa
contractual Culpa aquiliana (quasi delict) Culpa criminal
Test of Negligence - if defendant did not use ordinary care and
caution which an ordinary prudent man would have used in the same
situation
Case Studies:
Valencia vs. RFC and CA (103 Phil. 444)
(Re: Article 1186, Civil Code) The condition to put up a bond by
the winning bidder to construct a building, may be waived by the
owner, and failure of winning bidder to put up a bond, will make
winning bidder liable for breach of contract and damages, because
of failure of winning bidder to proceed with the construction.Thus,
pursuant to Article 1186, Civil Code, the condition shall be deemed
fulfilled when the obligor (the winning bidder) voluntarily
prevents its fulfillment.
Picart vs. Smith (37 Phil 805)
(Re: Article 1157, numbers 4 and 5, Civil Code) The principal
issue is whether or not petitioners, heirs of deceased Arsenio
Virata, can prosecute a civil action for damages based on
quasi-delict against both Maximo Borilla (driver employee) and
Victorio Ochoa (owner-employer) that bumped Arsenio Virata, while
the criminal action for homicide thru reckless imprudence was still
pending against Maximo Borilla, the driver-employees. Yes, pursuant
to Article 2177, Civil Code; however, the plaintiff cannot recover
damages twice for the same act or omission of the defendant.
5. Contravention Of The Tenor Of Obligation6. Legal Excuse For
Breach Of Obligation Fortuitous Event; Requisites (Art. 1174)Case
Studies:
Co vs. CA (291 SCRA 111)
Under Articles 1174 and 1262 of the New Civil Code, liability
attaches even if the loss was due to a fortuitous event if "the
nature of the obligation requires the assumption of risk."
Carnapping is a normal business risk for those engaged in the
repair of motor vehicles. For just as the owner is exposed to that
risk so is the repair shop since the car was entrusted to it.
Failure of repair shops to first register with the Department of
Trade and Industry (DTI) and to secure an insurance policy for the
"shop covering the property entrusted by its customer for repair,
service or maintenance" constitutes negligence per se. Carnapping
per se cannot be considered as a fortuitous event. To be considered
a fortuitous event or an act of God or was done solely by third
parties, neither the claimant nor the person alleged to be
negligent must not have any participation. The law adopts the
standard of a discreet pater familias of Roman Law the degree of
care exercised by a reasonable man under the circumstances.
Nakpil & Sons vs. CA (144 SCRA 596)
(Re: Article 1174 Force Majeure or Fortuitous Event) To exempt
the obligor from liability under Article 1174 of the Civil Code,
for a breach of an obligation due to an act of God, (force
majeure/caso fortuito) the following must concur:
(a)The cause of the breach of the obligation must be independent
of the will of the obligor;(b)The event must either be
unforeseeable or unavoidable;(c)The event must be such as to render
it impossible for the debtor to fulfill his obligation in a normal
manner; and(d)The debtor must be free from any participation in, or
aggravation of the injury to the creditor (see also Republic vs.
Luzon Stevedoring Corporation).
The Supreme Court, interpreted the provision of Article 1174,
Civil Code, the general provision on force majeure or fortuitous
event which states generally, x x x no person shall be responsible
for those events which could not be foreseen, or which though
foreseen is inevitable.
Republic vs. Luzon Stevedoring Corp (21 SCRA 279)
(Re: Article 1174, Civil Code, Caso Fortuito or Force Majeure)
For caso forfuito or force majeure (which in law are identical
insofar as they exempt an obligor from liability) by definition,
are extraordinary events not foreseeable or avoidable, events that
could not be foreseen or which, though foreseen, were inevitable.
It is not enough that the event should not have been foreseen or
anticipated, as is commonly believed, but it must be one impossible
to foresee or to avoid. The mere difficulty to foresee the
happening is not impossibility to see the same. The very measures
adopted by appellant prove that the possibility of danger was not
only foreseeable, but actually foreseen, and not caso fortuito.
D. Remedies Available To Creditor In Cases Of Breach1.Specific
Performancea. Substituted Performance by a third person in
Obligation to deliver generic thing and in obligation to do, unless
a purely personal act2. Rescission (resolution in reciprocal
obligations)3. Damages, in any event4. Subsidiary Remedies Of
Creditors (Art. 1177)a. Accion subrogatoriab. Accion paulianac.
Accion directa (Arts. 1652lessors right to sue directly sublessee,
1608- vendors right to sue directly assignee of vendee in pacto de
retro sale, 1729-laborers/material suppliers right to sue directly
owner, 1893-principals right to sue directly sub-agent)
III. Kinds of Obligations (Chapter 3) Arts. 1179-1230
A.Pure and Conditional Obligations - (Section 1)Arts.
1179-1192
Pure Obligation without a condition or term (Arts. 1179-1180)-
demandable at once
Conditional Obligation with a condition (Art. 1181)
1. Classifications ofConditions:
a. Potestative /Casual/Mixed
i. Potestative it depends exclusively on the will of one of the
parties
a. Potestative on part of Debtor If also suspensive void If also
resolutory - validb. Potestative of the part of the Creditor -
valid
2 Kinds of Potestative Conditions:
Simple Potestative (valid) If a decide to sell my house, the
first offer will be to you (the right of first refusal) Purely
Potestative (void) I will sell my house to you if I like
ii. Casual its fulfillment depends upon chance or the will or a
third personiii. Mixed its fulfillment depends upon the will of a
party; the obligation upon chance or the will or a third person. b.
Suspensive vs. Resolutory
Suspensive Condition happening of condition gives rise to
obligationResolutory Condition happening of condition extinguishes
obligation
1. Effect Of The Happening Of ASuspensive Condition (Art. 1187);
Resolutory Condition
Kind of ObligationCondition FulfilledRetroactivity
To giveSuspensiveRetroacts to day of constitution of
obligation
To do or not to doSuspensiveCourts shall determine retroactive
effect
To give, to do or not to doResolutoryNo retroactivity
2. Effect Of Loss Of Specific Thing Or Deterioration or
improvement of specific thing before suspensive condition (Art.
1189); if this occurs in resolutory condition in obligation to do
or not to do (1190, par. 3)
EventParty ResponsibleEffect On Obligation
iv. Thing LostNo fault of debtorExtinguished
Fault of debtorDebtor Pays Damages
v. Thing deterioratesNo fault of debtorImpairment borne by
Creditor
Fault of debtorCreditor may choose between rescission and
fulfillment with damages in either case
vi. Thing ImprovesDue to nature/timeImprovement to creditor
Due to debtorDebtor has rights of usufructuary for the
improvements
6. Power To Rescind In Reciprocal Obligations (Art. 1191)
Reciprocal Obligations - arise from the same cause, and in which
each is a debtor and a creditor of the other, such that the
obligation of one is dependent upon the obligation of the other.
They are to be performed simultaneously so that the performance of
one is conditioned upon the performance of the other.
Art. 1191 Does Not Apply In:
In sale of immovable property with a proviso that in case buyer
fails to pay, seller can rescind. Art. 1592 applies which grants
the buyer the right to pay as long as there is no judicial or
notarial demand for rescission.
In contracts of lease because while Art. 1191 grants the court
the power to fix a longer period for compliance, Art. 1659 (on
lease) such discretionary power is not granted to the courts.
In contract to sell of immovable property; hence no judicial nor
notarial demand is needed to resolve(rescind) the contract. Relate
to Maceda Law (RA 6552). Failure to pay installment or balance of
the full purchase price is a positive suspensive condition, the
failure of which is not a breach casual or serious but simply an
event which prevented the obligation of vendor to convey title .
The transfer of ownership and title would occur after full payment
of purchase price.
Art. 1191 Applies In:
In a lease contract which provides that in case of non-payment
of rentals, the lessor can eject without judicial proceedings,
because such provision is valid as even under Art. 1191, lease
contract being reciprocal contract, can be rescinded in the event
of non-fulfillment (Consing vs. Jamandre 64 SCRA 1)
In a sale of movable properties in which case, no judicial
approval is necessary if buyer does not pay price on date
stipulated.
Case Studies:
Consing vs. Jamandre (64 SCRA 1)
(Re: Article 1191, Civil Code) The contract between sublessor
and sublessee authorizing sublessor to take possession of leased
premises in case of breach of contract without judicial action, is
valid and binding.This stipulation is in the nature of a resolutory
condition; judicial permission to cancel agreement is not necessary
as judicial permission is needed only in the absence of a special
provision granting the power of cancellation. The sublessee cannot
complain of deprivation of rights without due process of law.
Liu vs. Loy, Jr. (405 SCRA 316)
Although the law allows the extra-judicial cancellation of a
contract to sell upon failure of the party to comply with his
obligation, notice of such cancellation must still be given to the
party who is at fault. The notice of cancellation to the other
party is one of the requirements for a valid cancellation of a
contract to sell, aside from the existence of a lawful cause,
citing the case of Lim v. Court of Appeals, G.R. No. 85733, 23
February 1990, 182 SCRA 564, 571.There was no valid cancellation of
the contract to sell, not even an implied one where there was no
written notice of the cancellation given to Benito Liu or Frank
Liu.. The letter does not mention anything about rescinding or
canceling the contract to sell.
B.Obligations With A Period - (Section 2)Arts. 1193-1198
1. Suspensive Period;a suspensive period is for the benefit of
both debtor and of creditor, unless given in favor of one of them.
If given to debtor alone, debtor losses benefit of period in any of
the 5 cases in Art. 1198 obligation retroact to the day of its
constitution
2. Resolutory Period
3. Definite Or Indefinite Period
a. When Courts May Fix The Period (Art. 1197) when period
depends on will of debtor when from nature or circumstances, it can
be inferred that period was intended
Case Study:
Borromeo vs. CA (47 SCRA 65)
The complaint by the creditor may embody the fixing of the
period within which the debtor was to pay andalso the collection of
the amount that until then was not paid. An action combining both
features was approved by the Supreme Court. In Tiglao v. The Manila
Railroad Company:(98 Phil. 181 (1956). "The duration of the term
should be fixed in a separate action for that express purpose but
thereare good reasons for not adhering to technicalities in its
desire to do substantial justice." (Ibid, 184.) Defendant does not
claim that if a separate action were instituted to fix the duration
of the term of its obligation, it could present better proofs than
those already adduced in the present case. Such separate action
would, therefore, be a mere formality and would serve no purpose
other than to delay." (Ibid, 185.) There is no legal obstacle then
to the action for collection filed by the creditor.
b. Creditor Must Ask Court To Set The Period, before he can
demand payment
c.Debtors Shall Lose Right To Make Use Of Period When: He
becomes insolvent after obligation contracted He Does Not Furnish
Guaranties/Securities promised, Has Impaired Guaranties; Does Not
Furnish Equally Satisfactory Guaranties When Originals Lost Thru
Fortuitous Event; Violates Any Undertaking In Consideration For
Which Creditor Guaranteed Period (Art. 1198)
Case Study:
Song Fo vs. Oria (33 Phil 3)
Re: Article 1198, paragraph 3 and Article 1504, Civil Code) Song
Fo sold to Oria a motor launch for P16,500.00 payable in quarterly
installments at P1,000.00 with the motor launch as security for
payment of the purchase price. The motor launch was delivered to
Oria in Manila but was shipwrecked en route to Samar. Ownership of
launch was transferred to Oria upon delivery in Manila (Article
1504 and 712, Civil Code) and according to the principle of res
perit domino (things perish for or at the risk of their owner),
Oria bears the loss even thru fortuitous event. Hence, all the
other quarterly installments even if not due becomes demandable.
(Article 1198, par. 3, Civil Code) which provides that debtor shall
use the right to make use of the period when the security of the
obligation disappear thru fortuitous event.
C.Alternative Obligations - (Section 3)Arts. 1199-1206
Alternative Obligation one where out of 2 or more prestations
which may be given, only one is due. Right to choice given to
debtor unless expressly granted to creditor
Facultative Obligation one where only one prestation has been
agreed upon but the obligor may render another in substitution.
Right to choose given only to debtor
Case Study:
Agoncillo vs. Javier (38 Phil. 424)
(Re: Article 1200, Civil Code) Alternative Obligations: The
agreement to convey the house and lot in the event of failure to
pay a debt in payment, is simply an undertaking that if the debt is
not paid in money, it will be paid in another way, or a case of
alternative obligations, and therefore valid. It is not pacto
commissorio, which is prohibited under Article 2088, Civil Code,
which provides: The creditor cannot appropriate the things given by
way of pledge or mortgage or dispose of them. Any stipulation to
the contrary shall be void. (Note: It is the automatic transfer of
the ownership of the mortgaged property upon default that is
prohibited as pactum commissorio.)
When Choice is Given to Debtor And Loss/Impossibility Happened
Before Choice Is Made
EventConsequence
Debtor cannot make a choice bec. Of creditors faultDebtor may
rescind contract with damages
All things are lost because of fault of debtor/compliance has
become impossibleCreditor may ask for damages
When Choice is Given To Creditor and Before Creditor
Communicates His Choice To Debtor:
EventObligation of Debtor
1oss of the 1 thing lost thru fortuitous eventDeliver what
creditor chooses from among remaining, or the only one
remaining
Loss of 1 thing thru fault of debtorDeliver what creditor
chooses from among remaining or the price of that which disappeared
with damages
Loss of all things thru fault of debtorDeliver the price of what
creditor would have chosen with damages
E.Joint and Solidary Obligations - (Section 4)Arts.
1207-1225
1. Joint (Divisible) Obligation - Concurrence Of Two Or More
Creditors And/Or Two Or More Debtors In One And The Same
Obligationa. Joint Obligation Is Presumed, unless otherwise
providedby law or the nature of obligation (Art. 1207)b. Obligation
Presumed To Be Divided into as many equal shares as there are
creditors or debtorsc. Each Credit Is Distinct From One Another,
therefore a joint debtor cannot be required to pay for the share of
another co-debtor, although he may pay if he wants to (Art. 1209)d.
Insolvency Of A Joint Debtor, others not liable for his share (Art.
1209)
Case Study:
Oriental Commercial Corp vs. Abeto (60 Phil 723)
When it is not provided in a judgment that the defendants are
liable to pay jointly and severally a certain sum of money, none of
them may be compelled to satisfy in full said judgment even ifin
the contract of suretyship executed by the parties, the obligation
contracted by the sureties was joint and several in character. The
final judgment, which superseded the action for the enforcement of
said contract, declared the obligation to be merely joint, and the
same cannot be executed otherwise. (De Leon vs. Nepomuceno and De
Jesus, 37 Phil., 180; Sharruf vs. Tayabas Land Co. and Ginainati,
37 Phil., 655.)
2.Joint (Indivisible) Obligation a. Obligation Cannot Be
Performed In Parts but debtors are bound jointlyb. In Case Of
Failure Of One Joint Debtor To Perform his part (share), there is
default but only debtor guilty shall be liable for damages
3. Solidary Obligation
a. Anyone Of The Solidary Creditors May Collect or demand
payment of whole obligation; there is mutual agency among solidary
creditors (Arts. 1214, 1215)b. Any Of The Solidary Debtor May Be
Required To Pay The Whole obligation; there is mutual guaranty
among solidary debtors (Arts. 1216, 1217, 1222)c. Each One Of
Solidary Creditors May Do Whatever maybe useful to the others, but
not anything prejudicial to them (Art. 1212); however, any
novation, compensation, confusion or remission of debt executed by
any solidary creditor shall extinguish the obligation without
prejudice to his liability for the shares of the other solidary
creditorsIn solidary obligations, the credits/debts are still
divided among creditors/debtors but there is mutual representation
(agency) among each debtor/creditor respectively. Solidarity is the
vinculum that binds creditors to debtors only; among debtors and
creditors themselves, once payment is made, there is no
solidarity.
Surety a person who binds himself solidarily with the principal
debtor
Obligations In Which The Law Requires Solidarity: If 2 or more
heirs take possession of the estate, they are solidarily liable for
the loss/destruction All partners are liable solidarily for
everything chargeable to the partnership under Arts. 1822
(quasi-delict) and 1823 (crimes) Principal and agent are liable
solidarily to third persons if principal allowed the latter to act
as though he had authority 2 or more principals are liable
solidarily to a common agent for all the consequences of the
agency. 2 or more bailees of the same thing are liable solidarily
to the bailor. 2 or more officious managers are liable solidarily.
2 or more payees in a negotiorum gestio are solidarily liable. 2 or
more joint tortfeasor are liable solidarily. 2 or more
principals/accomplices/accessories in each respective class in the
commission of the crime are liable solidarily.
Case Studies:
Stronghold Insurance vs. Republic Asahi Glass Corp (492 SCRA
179)
Respondent creditor may sue, separately or together, the
principal debtor and the petitioner herein, in view of the solidary
nature of their liability. The death of the principal debtor will
not work to convert, decrease or nullify the substantive right of
the solidary creditor. Despite the death of the principal debtor,
respondent creditor may still sue petitioner alone, in accordance
with the solidary nature of the latter's liability under the
performance bond. As a surety, petitioner is solidarily liable with
principal debtor in accordance with the Civil Code, which provides
as follows: "Art. 2047.By guaranty a person, called the guarantor,
binds himself to the creditor to fulfill the obligation of the
principal debtor in case the latter should fail to do so. "If a
person binds himself solidarily with the principal debtor, the
provisions of Section 4, 17 Chapter 3, Title I of this Book shall
be observed. In such case the contract is called a surety. Art.
1216.The creditor may proceed against any one of the solidary
debtorsor 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."
Kay Products Inc vs. CA (464 SCRA 544)
In labor cases, corporate directors and officers are solidarily
liable with the corporation for the termination of employment of
corporate employees done with malice or in bad faith (Uichico v.
National Labor Relations Commission, G.R. No. 121434, 2 June 1997,
273 SCRA 35.). The president of a corporation, who actively manages
the business, falls within the meaning of an "employer" as
contemplated by the Labor Code, and may be held jointly and
severally liable for the obligations of the corporation to its
dismissed employees Naguiat v. NLRC (G.R. No. 116123, 13 March
1997, 269 SCRA 564.)
E.Divisible and Indivisible Obligations - (Section 5)Arts.
1223-1225
Divisible Obligation one capable of partial performance
F. Obligations with a Penal Clause (Section 6) Arts. 1226,
1228-1230
Purposes of a Penal Clause:1. Insurance: To insure the
performance of the obligation;2. Compensation: to liquidate the
amount of damages to be awarded the injured party in case of breach
of the obligation
3. Punitive: to punish the obligor in case of breach of the
principal obligation
Although the same as liquidated damages (Art. 2226), a penalty
in its punitive aspect is different because the creditor can
recover damages in addition to the penalty when the debtor refuses
to pay the penalty or when the debtor is guilty of fraud
Case Study:
IBAA vs. Spouses Salazar (159 SCRA 133)
(Re: Penal Clause, Article 1226, Civil Code). The Civil Code
permits the agreement upon a penalty apart from the interest. The
penalty does not include the interest, and as such, the two are
different and distinct things which may be demanded separately.
IV. Extinguishment Of Obligations (Chapter 4) Arts.
1231-1304
A.Payment Or Performance - (Section 1)Arts. 1232-1261
Case Studies:
BPI vs. Roxas (536 SCRA 168)
In International Corporate Bank v. Spouses Gueco, (404 SCRA 353
(2001), it was held that a cashier's check is really the bank's own
check and may be treated as a promissory note with the bank as the
maker. The check becomes the primary obligation of the bank which
issues it and constitutes a written promise to pay upon demand. In
New Pacific Timber & Supply Co. Inc. v. Seeris, (G.R. No.
41764, December 19, 1980, 101 SCRA 686), this Court took judicial
notice of the "well-known and accepted practice in the business
sector that a cashier's check is deemed as cash" because the mere
issuance of a cashier's check is considered acceptance thereof.
New Pacific Timber vs. Seneris (101 SCRA 686)
(Re: Article 1249, Civil Code) Article 1249 provides: The
delivery of promissory notes, bills of exchange or other mercantile
documents shall produce the effect of payment only when they have
been encashed or when thru the fault of the debtor they have been
impaired. A cashiers check is deemed as cash when certified by
drawee bank which for all intents and purposes, the payee becomes
the depositor of the drawee bank. The certification implies that
the check is drawn upon sufficient funds in the hands of the drawee
bank; that they have been set apart for its satisfaction and that
they shall be so applied whenever the check is presented for
payment.:
Roman Catholic Bishop of Malolos Inc vs. IAC (191 SCRA 411)
(Re: Article 1249, Civil Code) A certified personal check is not
legal tender; a check whether managers check or ordinary check, is
not a legal tender and an offer of a check in payment of a debt, is
not a valid tender of payment; hence, if creditor refused to
accept, the subsequent consignation did not operate to discharge
private respondent from his obligation to petitioner.
See also R.A. 8183 An Act Repealing RA 529 (Uniform Currency
Law)1. Extraordinary Inflation Or Deflation Art. 1250
Case Study:
Citibank vs. Sabeniano (514 SCRA 441)
(Re: Article 1250, Civil Code) Extraordinary inflation or
deflation exists when there is a decrease or increase in the
purchasing power of the Philippine currency which is unusual or
beyond the common fluctuation in the value of said currency, and
such increase or decrease could not have been reasonably foreseen
or was manifestly beyond the contemplation of the parties at the
time of the establishment of the obligation.Article 1250 of the
Civil Code is based on equitable considerations. But only the
Bangko Sentral ng Pilipinas (BSP) and not the court ,can declare
the existence of extraordinary inflation. .
Comm. Of Public Highways vs. Burgos (96 SCRA 831)
Article 1250 of the New Civil Code seems to be the only
provision in our statutes which provides for payment of an
obligation in an amount different from what has been agreed upon by
the parties because of the supervention of extra-ordinary inflation
or deflation. It applies only to cases where a contract or
agreement is involved and does not apply where the obligation to
pay arises from law, independent of contract. The taking of private
property by the Government in the exercise of its power of eminent
domain does not give rise to a contractual obligation.
Ramos vs. CA (275 SCRA 167)
(Re: Article 1250, Civil Code) But petitioner's last contention
(that private respondents failed to pay increased rent despite
supervening inflation or devaluation of the Philippine peso) is
untenable. The provision of Art. 1250 requires for its application
a declaration of inflation by the Central Bank. Without such
declaration creditors cannot demand an increase of what is due
them. (Mobil Oil Philippines, Inc. v. Court of Appeals, 180 SCRA
651 (1989).
Filipino Pipe & Foundry Corp. vs. NAWASA (161 SCRA 32)
Extraordinary inflation exists when "there is a decrease or
increase in the purchasing power of the Philippine currency which
is unusual or beyond the common fluctuation in the value of said
currency, and such decrease or increase could not have been
reasonably foreseen or was manifestly beyond the contemplation of
the parties at the time of the establishment of the obligation.
(Tolentino Commentaries and Jurisprudence on the Civil Code Vol.
IV, p. 284.) The price index of commodities, which is the usual
evidence of the value of the currency has been rising. There is a
worldwide occurrence, but this is hardly proof that the inflation
is extraordinary in the sense contemplated by Article 1250 of the
Civil Code, which was adopted by the Code Commission to provide "a
just solution" to the 'uncertainty and confusion as a result of
contracts entered into or payments made during the last war."
(Report of the Code Commission, 132-133.)
2. Special Forms Of Paymentsa. Dacion In Payment (Dacion En
Pago) Art. 1245b. Application of Payments (Subsection 1)Arts.
1252-1254
Requisites of Application of Payments: Two or more debts between
same debtor and creditor Debts must be of the same kind All debts
must be due Payment must not be enough to extinguish all debtsc.
Payment by Cession (Subsection 2)Arts. 1255When debtor cedes or
assigns hs.is property to his creditors in payment of his debt
Kinds of Payment by Cession: Contractual (Art. 1255); Voluntary
and Involuntary Liquidation of Individual & Corporate Debtors
(RA 10142 (fria) law).
d. Tender of Payment & Consignation (Subsection 3) Arts.
1256-1261
Tender of Payment (Extra-Judicial) manifestation made by a
debtor of his desire to comply with his obligation with the offer
of immediate compliance
Requisites of Consignation (Judicial): Existence of a valid
debt; Valid prior tender of payment to creditor by debtor unless
tender is excused; Prior notice of consignation to creditor by
debtor; Actual consignation in court by debtor; Subsequent notice
of consignation to creditor by debtor.
Case Study:
Immaculata vs. Navarro (160 SCRA 211)
The right to redeem is a RIGHT, not an obligation, therefore,
there is no consignation required (De Jesus v. Garcia, C.A. 47 O.G.
2406; Rosales v. Reyes, 25 Phil. 495, Vda. de Quirino v. Palarca,
L-28269, Aug. 16, 1969) to preserve the right to redeem (Villegas
v. Capistrano, 9 Phil. 416).
B.Loss Of The Thing Due - (Section 2)Arts. 1262-1268 (broadly
means legal or physical impossibility of performance)
Exceptions To Rule That Loss of Determinate Thing By Fortuitous
Event Extinguishes The Obligation: When the law expressly provides
When by express stipulation the obligor is made liable even if loss
is by fortuitous event When the nature of the obligation requires
the assumption of risk When the fault/negligence of the obligor
concurs with the fortuitous event When the loss occurs after the
debtor has incurred in delay (Art. 1169) When the debtor has
promised to deliver the same thing to 2 or more persons who do not
have the same rights When the obligation to deliver a determinate
thing arises from a criminal act
Case Studies:
Ortigas & Co vs. Feati Bank & Trust Co. (94 SCRA
533)
(Re: Article 1266, Civil Code) A contractual stipulation
annotated on the title that the land purchased shall be used
exclusively for residential purposes is extinguished and ceases to
be binding between parties upon the enactment of an ordinance or
resolution of the Municipal Council reclassifying the area as
commercial. The resolution or Ordinance, under the general welfare
clause, is a valid exercise of the police power of the LGU and is
superior to the contractual stipulations between the parties on the
use of the land even if said conditions are annotated on the
title.
Naga Telephone Co Inc. vs. CA (230 SCRA 351)
(Re: Article 1267, Civil Code) The term service in Article 1267
is understood to mean performance of the obligation which in the
present case, is the obligation of allowing petitioners to use
posts of respondent for ten (10) free telephone connections, which
has become very onerous against the respondent. Article 1267, Civil
Code, provides: When the service has become so difficult has to be
manifestly beyond the contemplation of the parties, the obligor may
also be released therefrom in whole or in part. This is the
doctrine of unforeseen event, and is based on the discredited
theory rebus sic stantibus in Public International Law. Under the
theory, the parties stipulate in the light of certain prevailing
conditions, and one of these conditions cease to exist, the
contract also ceases to exist. Considering practical needs and the
demands of equity and good faith, the disappearance of the basis of
the contract gives right to relief in favor of the party
prejudiced.
C.Condonation Or Remission Of Debt - (Section 3)Arts.
1270-1274Condonation/Remission the gratuitous abandonment by the
creditor of his right. It is an act of liberality by virtue of
which the oblige, without receiving any price or its equivalent,
renounces the enforcement of the obligation as a result of which it
is extinguished in its entirety or in part.
1. Express Formality of Donation art. 12702. Implied Arts. 1271,
1272, 1274
D.Confusion Or Merger of Rights - (Section 4)Arts. 1275-1277
Confusion/Merger the meeting in one person of the qualifies of
creditor and debtor which respect to the same obligation
extinguishes obligation
E.Compensation - (Section 5)Arts. 1278-1290
Compensation takes place when 2 persons, in their own right, are
creditors and debtors of each other
Kinds Arts. 1278, 1279a. Legal Compensation Arts.
1286-1290b.Agreement Art. 1282c. Voluntary Art. 1282d. Judicial
Art. 1283e.Facultative
Case Studies:
Gullas vs. PNB (62 Phil 519)
Gullas, who had a checking account with PNB, endorsed and
encashed a check with PNB. The check was later dishonored and PNB
applied the balance of the checking account of Gullas by way of
compensation with the obligation of Gullas as endorser of the
dishonored check. There can be compensation where the depositor in
a bank has an indebtedness in favor of the bank. This old ruling in
the Gullas case is further strengthened by Article 1980 (new) Civil
Code, which provides:Fixed, savings and current deposits of money
in banks and similar institutions shall be governed by the
provisions concerning simple loan.
Bank of the Phil Islands vs. CA (232 SCRA 302)
Article 1980 of the Civil Code provides that "[f]ixed, savings,
and current deposits of money in banks and similar institutions
shall be governed by the provisions concerning simple loan." In
Serrano vs. Central Bank of the Philippines, (96 SCRA 96 [1980].
See also, Guingona vs. City Fiscal of Manila, 128 SCRA 577 [1984];
People vs. Ong, 204 SCRA 942 [1991]), we held that bank deposits
are in the nature of irregular deposits; they are really loans
because they earn interest. The relationship then between a
depositor and a bank is one of creditor and debtor. The deposit
under the questioned account was an ordinary bank deposit; hence,
it was payable on demand of the depositor. (10 Am Jur 2d, Banks, S
356)
Obligations /Debts That Are Not Compensable Debts arising from
contracts of depositum Debts arising from contracts of commodatum
Claims for support due by gratuitous title Obligations arising from
criminal offenses Certain obligations in favor of the government
such as taxes, fees, duties and others of similar nature
Case Studies:
Garcia vs. Lim Chu Sing (59 Phil 562)(Re: Article 1279, Civil
Code) A stockholders shares of stock of the Mercantile Bank of
China do not constitute an indebtedness of the bank to the
stockholder and therefore there can be no compensation with the
latters indebtedness to the bank. Stockholders are not creditors of
the corporation. The capital stock of the corporation is a trust
fund as security of creditors of the corporation who presumably
deal with it on the credit of its capital stock.
PNB vs. CA (259 SCRA 174)
A local bank, while acting as local correspondent bank, does not
have the right to intercept funds being coursed through it by its
foreign counterpart for transmittal and deposit to the account of
an individual with another local bank, and apply the said funds to
certain obligations owed to it by the said individual.Petitioner
bank wasnot legally justified in making the compensation or set-off
against the two remittances coursed through it in favor of private
respondent to recover on the double credits it erroneously made in
1980 and 1981, based on the principle of solutio indebiti.
F.Novation - (Section 6)Arts. 1291-1304
Novationis the substitution of change of an obligation by
another, resulting in its extinguishment or modification, either by
changing its object of principal conditions, or by substituting the
person of the debtor, or by subrogating a third person in the
rights of a creditor.
An extension of the period of payment no novation Agreement to
shorten period of payment novation because of incompatibility
between old and new obligations
4 Essential Requisites of Novation: A previous valid obligation
Agreement of the parties to the new obligation Extinguishment of
the old obligation Validity of the new obligation
2 Kinds of Novation By Substitution of Debtors:
Expromision (First Kind) substitution of debtors with the
consent of creditors at the instance of new debtors . New debtor
and creditor must consent.Expromision (Second Kind) substitution of
debtors without the knowledge or against the will of the old
debtor. Insolvency/non-fulfillment of new debtor will not give rise
to any liability on the part of old debtor. Delegacion substitution
of debtors with the consent of the creditor (delegatario) at the
instance of the old debtor (delegante) with the concurrence of the
new debtor (delegado). New and old debtors and creditor must
consent.
Subrogation: Transfer to the person subrogated the credit with
all the rights thereto appertaining, either against the debtor or
against third persons, be they guarantors or possessors of
mortgage, subject to stipulations in conventional subrogation
2 Forms of Subrogation Of Creditors
Conventional Subrogation takes place by the agreement of the
original creditor, the third person substituting the original
creditor and debtor (Art. 1301) Legal Subrogation takes place by
operation of law (Art. 1302)
When creditor pays another creditor who is preferred even
without debtors knowledge When a 3rd person, not interested in
obligation, pays with express/tacit approval of debtor When, even
without knowledge of debtor, a person interested in the fulfillment
of obligation pays, without prejudice to effect of confusion in
latters share
Conventional SubrogationAssignment of Credit
governed by Arts. 1301, 1303, 1304;governed by Arts. 1624 &
1627
extinguishes the obligation and creates a new onecredit is not
extinguished
Requires debtors consentDoes not require debtors consent
Defect of old credit/right may be cured and new obligation
becomes entirely validDefect in credit/right is not cured
Case Studies:
Magdalena Estate vs. Rodriguez (18 SCRA 967);Dungo vs. Lopena (6
SCRA 1007) Re: Article 1292, Civil Code:
Novation is never presumed; it must be established that the old
and the new contracts are incompatible on every point, or that the
will to novate appear by express agreement of the parties. There is
no implied novation, if in the second contract a bond is filed or a
third person assumes payment of the obligation and the creditor
accepts partial payment from the third person, so long as the
creditor did not agree that the first debtor shall be released from
the obligation.
People vs. Nery (10 SCRA 244)
Re: Article 1292, Civil Code Accused who was charged for estafa
for misappropriating the proceeds of diamond rings consigned to her
for sale, cannot escape criminal liability by the defense of
novation. The promissory note executed by the accused in favor of
complainant executed pending trial at the RTC did not convert the
relationship between parties to a contract of loan from a contract
of agency to sell. The novation theory may perhaps apply prior to
the filing of the criminal information in court by the State
Prosecutors because up to that time the original trust relation may
be converted by the parties into an ordinary creditor-debtor
situation, thereby placing complainant in estoppel to insist on the
original trust. A crime being an offense against the State, only
the latter can renounce it.
Guingona vs. City Fiscal of Manila (128 SCRA 577)
Time and savings deposits with the bank are contracts of simple
loan or mutuum.The relationship between the depositor and bank is
that of creditor and debtor. But even if bank failed to pay the
time and savings deposits of depositor, violating paragraph 1(b) of
Article 315 of the Revised Penal Code, there was no criminal
liability. When the bank was placed under receivership by the
Central Bank, petitioners Guingona and Martin assumed the
obligation of the bank to depositor, thereby resulting in the
novation of the original contractual obligation arising from
deposit into a contract of loan and converting the original trust
relation between the bank and depositor into an ordinary
debtor-creditor relation between the petitioners and private
respondent. Hence, the failure of the bank or petitioners Guingona
and Martin to pay the deposits of depositor would not constitute a
breach of trust but would merely be a failure to pay the obligation
as a debtor.
For Mid-Term Examinations: .(5 weeks = 20 lecture hours)Possible
Exam Date: Feb. 27, 2012
CONTRACTS (BOOK IV TITLE II)Arts.1305-1422
I. General Provisions (Chapter 1) Arts. 1305-1317
Perfect Promise tends only to assure and pave the way for the
celebration of the contract in the future, whereas a contract
establishes and determines the obligations arising therefrom;
Imperfect Promise (Policitation) is a mere unaccepted offer
Pact a special part of the contract, merely incidental and
separable from the principal agreement
Stipulation refers to the essential and dispositive part of the
contract, as distinguished from the exposition of the facts and
antecedents on which it is based
Contract juridical convention manifested in legal form, by
virtue of which one or more persons bind themselves in favor of
another or others, or reciprocally, to the fulfillment of the
prestation to give to do or not to do (Sanchez Roman)
Stages of a Contract:1. Preparation, Conception or Generation
period of negotiation and bargaining, ending at the moment of
agreement between the parties2. Perfection or Birth of the Contract
the moment when the parties come to agree on the terms of the
contract;3. Consummation or Death the fulfillment or performance of
the terms agreed upon in the contract (Soler vs. CA, 358 SCRA
63)
Theories When Or The Moment Of Perfection Of A Contract:1.
Manifestation theory the contract is perfected from the moment the
acceptance is declared or made (Art. 54 Code of Commerce)2.
Expedition Theory the contract is perfected from the moment the
offeree transmits the letter/notification of acceptance to the
offeror, as when the letter is placed in mailbox (U.S.A.)3.
Reception Theory contract is perfected when the acceptance is in
the hand of the offeror, even if the offeror has no actual
knowledge of it because of absence, sickness, etc.4. Cognition
Theory contract is perfected from the moment the acceptance comes
to the knowledge of the offeror. (Art. 1319) (Note: Cognition
Theory is adopted by New Civil Code)
Four (4) Essential Characteristics of Contracts:1. Obligatory
force of Contracts that is once a contract is perfected, it shall
have obligatory force upon both contracting parties (Arts. 1159,
1315, 1356)2. Autonomy or Freedom of Contracts contracting parties
are free to enter into a contract, to establish such terms,
conditions, stipulations and clauses as they may deem convenient,
provided they are not contrary to law, morals, good customs, public
order, or public policy.3. Mutuality of Contracts the essential
equality of contracts whereby the parties are mutually bound by the
contract; hence its validity or compliance cannot be left to the
will of one of them (Art. 1308)4. Relativity of Contracts contracts
take effect only between the parties, their heirs and assigns (Art.
1311) There are exceptions to the principle of relativity of
contracts
Case Studies:
Almeda vs. CA (256 SCRA 292)
The binding effect of any agreement between parties to a
contract is premised on two settled principles: (1) that any
obligation arising from contract has the force of law between the
parties; and (2) that there must be mutuality between the parties
based on their essential equality. Any contract which appears to be
heavily weighed in favor of one of the parties so as to lead to an
unconscionable result is void. Any stipulation regarding the
validity or compliance of the contract which is left solely to the
will of one of the parties, is likewise, invalid.
Floirendo vs. Metrobank (532 SCRA 43)
Increases of interest rate unilaterally imposed by respondent
bank without petitioner's assent are violative of the principle of
mutuality of contracts ordained in Article 1308 of the Civil
Code.The provision in the promissory note authorizing respondent
bank to increase, decrease or otherwise change from time to time
the rate of interest and/or bank charges "without advance notice"
to petitioner, "in the event of change in the interest rate
prescribed by law or the Monetary Board of the Central Bank of the
Philippines," does not give respondent bank unrestrained freedom to
charge any rate other than that which was agreed upon. Here, the
monthly upward/downward adjustment of interest rate is left to the
will of respondent bank alone. It violates the essence of mutuality
of the contract.
UCPB vs. Beluso(530 SCRA 567)
The provision stating that the interest shall be at the "rate
indicative of DBD retail rate or as determined by the Branch Head"
is indeed dependent solely on the will of petitioner UCPB and
violates Art. 1308 of the Civil Code.Here, petitioner UCPB has two
choices on what the interest rate shall be: (1) a rate indicative
of the DBD retail rate; or (2) a rate as determined by the Branch
Head.. If either of these two choices presents an opportunity for
UCPB to fix the rate at will, the bank can easily choose such an
option, thus making the entire interest rate provision violative of
the principle of mutuality of contracts.
Singson Encarnacion vs. Baldomar (77 Phil 470)
The continuance and fulfillment of the contract of lease cannot
be made to depend solely and exclusively upon the free and
uncontrolled choice of the lessees between continuing paying the
rentals or not, completely depriving the owner of all say in the
matter. If this were allowed, so long as defendants elected to
continue the lease by continuing the payment of the rentals, the
owner would never be able to discontinue it; conversely, although
the owner should desire the lease to continue, the lessees could
effectively thwart his purpose if they should prefer to terminate
the contract by the simple expedient of stopping payment of the
rentals. This, of course, is prohibited by article 1256 (now Art.
1308) of the Civil Code.
Laolim vs. CA (191 SCRA 150)
The disputed stipulation "for as long as the defendant needed
the premises and can meet and pay said increases" is a purely
potestative condition because it leaves the effectivity and
enjoyment of leasehold rights to the sole and exclusive will of the
lessee. The continuance, effectivity and fulfillment of a contract
of lease cannot be made to depend exclusively upon the free and
uncontrolled choice of the lessee between continuing the payment of
the rentals or not, completely depriving the owner of any say in
the matter. Mutuality does not obtain in such a contract of lease
and no equality exists between the lessor and the lessee since the
life of the contract is dictated solely by the lessee.
Jespajo Realty Corp. vs. CA (390 SCRA 27)
The contention of the petitioner that a provision in a contract
that the lease period shall subsist for 'an indefinite period
provided the lessee is up-to-date in the payment of his monthly
rentals' is contrary to Art. 1308 of the Civil Code is not
plausible. As expounded by the Court in the case of Philippine
Banking Corporation vs. Lui She (21 SCRA 52, 58 (1967)):"We have
had occasion to delineate the scope and application of Article 1308
in the early case of Taylor v. Uy Tieng Piao. (43 Phil. 873 (1922).
We said in that case: 'Article 1256 [now Art. 1308] of the Civil
Code in our opinion creates no impediment to the insertion in a
contract for personal service of a resolutory condition permitting
the cancellation of the contract by one of the parties. Such a
stipulation, as can be readily seen, does not make either the
validity or the fulfillment of the contract dependent upon the will
of the party to whom is conceded the privilege of cancellation; for
where the contracting parties have agreed that such option shall
exist, the exercise of the option is as much in the fulfillment of
the contract as any other act which may have been the subject of
agreement. . . . .'" (Supra note 18 at p. 58.)
Allied Banking vs. CA (284 SCRA 357)
The option which gives the lessee the sole option to renew the
lease and which is provided in the same lease agreement, is
fundamentally part of the consideration in the contract and is no
different from any other provision of the lease carrying an
undertaking on the part of the lessor to act conditioned on the
performance by the lessee. It is a purely executory contract and at
most confers a right to obtain a renewal if there is compliance
with the conditions on which the right is made to depend. The right
of renewal constitutes a part of the lessee's interest in the land
and forms a substantial and integral part of the agreement. The
fact that such option is binding only on the lessor and can be
exercised only by the lessee does not render it void for lack of
mutuality. After all, the lessor is free to give or not to give the
option to the lessee.
Garcia vs. Rita Legarda Inc. (21 SCRA 555)
Where in a contract to sell subdivided lots in monthly
installments, there has been a stipulation that in case of vendee's
default in the payment of installments he should have a month of
grace and an additional period of ninety days to pay all the
amounts due otherwise the vendor should have the right to declare
the contract cancelled and of no effect, such stipulation is valid
and not violative of Art. 1308 of the new Civil Code. The validity
or compliance thereof is not entirely left to the will of one of
the contracting parties, but it merely gives the vendor the right
to declare such contract cancelled and of no effect. Indeed, the
power thus granted cannot be said to be immoral, much less
unlawful, for it could not be arbitrarily exercised without the
other party committing the breach of contract for nonpayment of the
installments agreed upon. Obviously, all that said party had to do
to prevent the other from exercising the power to cancel was for
him to comply with his part of the contract.
Case Studies (Exceptions to Principle of Relativity of
Contracts):
Coquia vs. Fieldmens Insurance Co. (26 SCRA 178)(Stipulation
pour autrui)
Although, in general, only parties to a contract may bring an
action based thereon, this rule is subject to exceptions, one of
which is found in the second paragraph of Article 1311 of the Civil
Code of the Philippines, reading: "If a contract should contain
some stipulation in favor of a third person, he may demand its
fulfillment provided he communicated his acceptance to the obligor
before its revocation. A mere incidental benefit or interest of a
person is not sufficient. The contracting parties must have clearly
and deliberately conferred a favor upon a third person." This is a
restatement of a well-known principle concerning contracts pour
autrui, the enforcement of which may be demanded by a third party
for whose benefit it was made, although not a party to the
contract, before the stipulation in his favor has been revoked by
the contracting parties.
The insurance policy contains stipulations pursuant to which the
insurance company "will indemnify any authorized Driver who is
driving the Motor Vehicle" of the Insured and, in the event of
death of said driver, the Company shall, likewise, "indemnify his
personal representatives," and the Company "may, at its option,
make indemnity payable directly to the claimants or heirs of
claimants . . . in other words, third parties. This is typical of
contracts pour autrui. This character being made more manifest by
the fact that the deceased driver paid fifty percent (50%) of the
corresponding premiums, which were deducted from his weekly
commissions. Under these conditions, it is clear that the sole
heirs of the deceased have a direct cause of action against the
Company (Uy Tam v. Leonard, 30 Phil. 471, 485-486; Kauffman v.
Philippine National Bank, 42 Phil. 182, 187, 189), and, since they
could have maintained this action by themselves, without the
assistance of the insured it goes without saying that they could
and did properly join the latter in filing the complaint herein
(Guingon v. Capital Insurance & Surety Co., Inc., L-22042, Aug.
17, 1967).
Mandarin Villa Inc. vs. CA (257 SCRA 538)(Stipulation pour
autrui)
While private respondent may not be a party to the said
agreement, the above-quoted stipulation conferred a favor upon the
private respondent, a holder of credit card validly issued by
BANKARD. This is a stipulation pour autrui and under Article 1311
of the Civil Code, private respondent may demand its fulfillment
provided he communicated his acceptance to the petitioner before
its revocation. In this case, private respondent's offer to pay by
means of his BANKARD credit card constitutes not only an acceptance
of the said stipulation but also an explicit communication of his
acceptance to the obligor.
Kaufman vs. PNB (42 Phil 182)(Stipulation pour autrui)
A person in whose favor a bank sells telegraphic exchange on a
foreign country may, in case payment is refused by the bank of
destination, maintain an action against the bank selling the
exchange, without regard to whether such payee was an immediate
party to the purchase of the exchange or not. A stipulation in
favor of a third person cannot be revoked by the obligated party
alone, without the conformity of the other contracting party.
II. Essential Requisites (Chapter 2) - Arts. 1318-1354
a. Consent (Section 1) Arts. 1319-1346
Option - contract granting a person the privilege to buy or not
to buy certain objects at any time within the agreed period at a
fixed price.
Right of First Refusal identity of terms and conditions offered
to lessee and prospective buyers
Right of First Refusal vs. Option (Arts. 1324 and 1479)In a
contract of lease with 30-day exclusive option to purchase (leased
premises), the proviso is valid even if there is no agreed purchase
price the consideration is the contract of lease itself. This is
not covered by Art. 1324 and 1479 which requires consideration
distinct from the prucahse pri
Two Kinds Of Vices of Consent: Vices of Declaration simulated
contracts (Arts. 1345/1346) Vices of the Will mistake, violence,
intimidation, undue influence, and fraud (Art. 1330)
Classes of Fraud:1. In general: criminal fraud and civil fraud2.
Civil fraud: b. Fraud in the performance of an existing obligation
(Art. 1170)c. Fraud employed by the party to a contract in securing
the consent of the other party (Art. 1338)
Classifications of Fraud In Securing The Consent Of Other
Party:1. Dolo causante (causal fraud) deceptions or
misrepresentations of a serious character employed by one party
without which the other party would not have entered into the
contract2. Doloincidente (incidental fraud)incidental deceptions or
misrepresentations without which the other party would still have
entered into the contract
Case Studies:
Vales vs. Villa (35 Phil 769)
All men are presumed to be sane and normal and subject to be
moved by substantially the same motives. When of age and sane, they
must take care of themselves. In their relations with others in the
business of life, wits, sense, intelligence, training, ability and
judgment meet and clash and contest, sometimes with gain and
advantage to all, sometimes to a few only, with loss and injury to
others. In these contests men must depend upon themselves upon
their own abilities, talents, training, sense, acumen, judgment.x x
x The foolish may lose all they have to the wise; but that does not
mean that the law will give it back to them again. Courts cannot
follow one every step of his life and extricate him from bad
bargains, protect him from unwise investments, relieve him from
one-sided contracts, or annul the effects of foolish acts. Courts
cannot constitute themselves guardians of persons who are not
legally incompetent. Courts operate not because one person has been
defeated or overcome by another, but because he has been overcome
illegally. Men may do foolish things, make ridiculous contracts,
use miserable judgment, and lose money by them indeed, all they
have in the world; but not for that alone can the law intervene and
restore. There must be, in addition, a violation of law, the
commission of what the law knows as an actionable wrong, before the
courts are authorized to lay hold of the situation and remedy
it.
Sanchez vs. Rigos (45 SCRA 368)
X x x an option to sell can still be withdrawn, even if
accepted, if the same is not supported by any consideration, and
the reaffirmance of the doctrine in Atkins, Kroll & Co., Inc.
vs. Cua Hian Tek, (102 Phil 948) holding that "an option implies .
. . the legal obligation to keep the offer (to sell) open for the
time specified;" that it could be withdrawn before acceptance, if
there was no consideration for the option, but once the "offer to
sell" is accepted, a bilateral promise to sell and to buy ensues,
and the offeree ipso facto assumes the obligations of a purchaser
In other words, if the option is given without a consideration, it
is a mere offer to sell, which is not binding until accepted. If,
however, acceptance is made before a withdrawal, it constitutes a
binding contract of sale. The concurrence of both acts the offer
and the acceptance could in such event generate a contract.While
the law permits the offeror to withdraw the offer at any time
before acceptance even before the period has expired, some writers
hold the view, that the offeror can not exercise this right in an
arbitrary or capricious manner. This is upon the principle that an
offer implies an obligation on the part of the offeror to maintain
it for such length of time as to permit the offeree to decide
whether to accept or not, and therefore cannot arbitrarily revoke
the offer without being liable for damages which the offeree may
suffer. A contrary view would remove the stability and security of
business transactions. (I Gasperi 302, 6 Planiol & Ripert
180).
Sabalvaro vs. Erlanger (64 Phil 588)
CONSENT IN A CONTRACT. Plaintiff allegedly signed the document
in question for fear of being dismissed from the corporation, but
it does not appear that he has been intimidated by somebody. This
does not prove that his consent was obtained by means of
intimidation, and if he were to allege that it was for fear of
incurring the displeasure of his employers that he signed the
document in question, the answer would be the provision of article
1267 of the Civil Code that: "Fear of displeasing persons to whom
obedience and respect are due shall not annul a contract."
(Doctrine of Reverential Fear)
Villegas vs. CA (499 SCRA 276)
(Re: Article 1324) Where a time is stated in an offer for its
acceptance, the offer is terminated at the expiration of the time
given for its acceptance. The offer may also be terminated when the
person to whom the offer is made either rejects the offer outright
or makes a counter-offer of his own. (Minneapolis & S.L.
Railway v. Columbus Rolling Mill, 119 US 149, 30 L Ed. 376
(1886))
Equatorial Realty vs. Mayfair Theater Inc. (264 SCRA 483)
(Re: Article 1324) Where an action for annulment (rescission
would have been proper) was granted, setting aside a contract of
sale by the lessor in favor of a third person, in violation of the
Right Of First Refusal, in the contract of lease between lessor and
lessee. The court made a distinction between option and the right
of first refusal in that in an option, an option money is
necessary, but not in the right of first refusal.
Tang vs. CA (90 SCRA 236)
(Re: Article 1332) A deliberate concealment on the part of the
insured of material facts about his physical condition and history
entitles the insurer to rescind the contract.Under Article 1332,
the obligation to show that the terms of the contract had been
fully explained to the party who is unable to read or understand
the language of the contract, when fraud or mistake is alleged,
devolves in the party seeking to enforce it. Where fraud or mistake
is not alleged, and the one seeking to enforce the contract is the
illiterate party, the party against whom the action is brought and
who is seeking to avoid the performance of the contract is under no
obligation to prove that the terms of the contracts were fully
explained to the other party. In a life insurance contract, where
the insurer is seeking to avoid its performance on the ground of
concealment on the part of the insured, the insurer is not under
obligation to prove that the terms of the contract were fully
explained to the insured who was an illiterate. But even if we were
to say that the insurer is the one seeking the performance of the
contract by avoiding paying the claim, Article 1332 is inapplicable
where there has been no imputation of mistake or fraud by the
insured whose personality is represented by the beneficiary.
B. Object of Contracts (Section 2) Arts. 1347-1349
Object vs. Cause In a bilateral contract like sale, the object
is the thing sold because it is the starting point of negotiation;
the cause for the vendor is the price paid, while the cause for the
vendee is the acquisition of the thing sold.
May include future things and transmissible rights.
2 Exceptions To Prohibition of Contracts Of Future
Inheritance:a. Art. 84 of Family Code on donations of future
spouses to each other in donations propter nuptias (formalities of
a will must be followed)b. Art. 1080 NCC. A person may partition
intervivos his estate so long as legitime is not impaired.
C. Cause of Contracts(Section 3) Arts. 1350-1355
Cause of Contract why of the contract the immediate and most
proximate purpose of the contract, the essential reason which
impels the contracting parties to enter into it.
Distinction Between Motive and Cause (Art. 1351)
CauseMotive
the direct proximate reason of a contractthe indirect or remote
reasons;
the objective or juridical reason of a contractthe psychological
or personal reasons
cause for a certain contract is always the samemotives will
differ or vary upon who are the parties
can affect the validity of a contractcannot affect validity of
contract
Case Studies:Uy vs. CA (314 SCRA 69)
The realization by the buyer of the mistake as regards the
quality of the land resulted in the negation of the motive/cause
thus rendering the contract inexistent. Under Article 1318 of the
Civil Code, there is no contract unless there is consent, object
certain andcause. Cause is the essential reason which moves the
contracting and is the essential reason for the contract, should be
distinguished from motive, which is the particular reason of a
contracting party which does not affect the other party.Ordinarily,
a party's motives for entering into the contract do not affect the
contract. When the motive predetermines the cause, the motive may
be regarded as the cause. In Liguez vs. Court of Appeals, this
Court, speaking through Justice J.B.L. Reyes, held: . . . It is
well to note, however, that Manresa himself (Vol. 8, pp. 641-642),
while maintaining the distinction and upholding the inoperativeness
of the motives of the parties to determine the validity of the
contract, expressly excepts from the rule, those contracts that are
conditioned upon the attainment of the motives of their party. The
same view is held by the Supreme Court of Spain, in its decisions
of February 4, 1941, and December 4, 1946, holding that the motive
may be regarded as causa when it predetermines the purpose of the
contract.
Hrs. of Balite vs. Lim (446 SCRA 56)
(Re: Article 1345) Article 1345 of the Civil Code provides that
the simulation of a contract may either be absolute or relative. In
absolute simulation, there is a colorable contract but without any
substance, because the parties have no intention to be bound by it.
An absolutely simulated contract is void, and the parties may
recover from each other what they may have given under the
"contract". On the other hand, if the parties state a false cause
in the contract to conceal their real agreement, such a contract is
relatively simulated. Here, the parties' real agreement binds
them.
Velez vs. Ramas (40 Phil 787)
(Re: Article 1352) A promise given in consideration of a promise
on the part of the obligee to refrain from instituting a criminal
prosecution is void on account of the illicit character of the
consideration.
Mactal vs. Melegrito (1 SCRA 763)
(Re: Article 1352) Where the defendant admits his indebtedness,
and the dismissal of the estafa case against him merely furnished
the occasion for the execution of a promissory note acknowledging
said indebtedness, the consideration is the pre-existing obligation
and not the dismissal of the criminal case, hence the promissory
note is valid and enforceable.
Ong vs. Ong (139 SCRA 133)
Although the cause is not stated in the contract it is presumed
that it is existing unless the debtor proves the contrary (Article
1354 of the Civil Code). One of the disputable presumptions is that
there is a sufficient cause of the contract (Section 5, (r), Rule
131, Rules of Court). It is a legal presumption of sufficient cause
or consideration supporting a contract even if such cause is not
stated therein (Article 1354, New Civil Code of the Philippines
which cannot be overcome by a simple assertion of lack of
consideration especially when the contract itself states that
consideration was given, and the same has been reduced into a
public instrument with all due formalities and solemnities. To
overcome the presumption of consideration the alleged lack of
consideration must be shown by preponderance of evidence in a
proper action. (Samanilla vs. Cajucom, et al., 107 Phil. 432). Bad
faith and inadequacy of the monetary consideration do not render a
conveyance inexistent, for the assignor's liberality may be
sufficient cause for a valid contract (Article 1350, Civil Code),
whereas fraud or bad faith may render either rescissible or
voidable, although valid until annulled, a contract concerning an
object certain entered into with a cause and with the consent of
the contracting parties, as in the case at bar."
Liguez vs. CA (102 Phil 577)
(Re: Article 1350). Under Article 1274, of the Civil Code of
1889 (now Art. 1350, NCC), liberality of the donor is deemed causa
only in those contracts that are of "pure" beneficience that is to
say, contracts designed solely and exclusively to procure the
welfare of the beneficiary, without any intent of producing any
satisfaction for the donor; contacts, in other words, in which the
idea of self-interest is totally absent on the part of the
transferor. Article 1274 (now Art. 1350, NCC) provides that in
remuneratory contracts, the consideration is the service or benefit
for which the remuneration is given; causa is not liberality in
these cases because the contract or conveyance is not made out of
pure beneficience, but "solvendi animo".The motive of the parties
may be regarded as causa when it predetermines the purpose of the
contract.
E. Razon Inc. vs. Phil Ports Authority (151 SCRA 233)
(Re: Article 1352) The invalidity of the transfer of shares of
stock springs not from vitiated consent nor absolute want of
monetary consideration, but for its having had an unlawful cause
that of obtaining a government contract in violation of law. While
the general rule is that the causa of the contract must not be
confused with the motives of the parties, this case squarely fits
into the exception that the motive may be regarded as causa when it
predetermines the purpose of the contract.(Liguez v. Court of
Appeals, 102 Phil. 577). On the part of Romualdez, the motive was
to be able to contract with the government which he was then
prohibited by law from doing, and on petitioner Razon's part, to be
able to renew his management contract..
III. Form of Contracts (Chapter 3) Arts. 1356-1358
Kinds of ContractsA. Consensual perfected by mere consentB. Real
perfected upon deliveryC. Formal or Solemn Donations Real Property
(Art. 749) Personal Property exceeding P5T (Art. 748) Stipulation
To Charge Interest Art. 1956 Sale Of Large Cattle Agency To Sell
Real Property Or An Interest Therein Art. 1874 Antichresis Art.
2134 Partnership Where Real Property Contributed Arts. 1771, 1773
Stipulation Limiting Common Carriers Duty Of Extraordinary
Diligence To Ordinary Diligence Art. 1744 Chattel Mortgage
Case Studies:
Tan vs. Lim (296 SCRA 455)
(Re: Article 1356 in relation to Article 1403, No. 2 Statute of
Frauds).There is no provision of law requiring a note or memorandum
for a contract of partition to be valid. Contracts are obligatory
in whatever form they may have been entered into provided all
essential requirements are present. A note, transfer certificate of
title, subdivision plan or memorandum are not necessary for the
enforceability/validity of anoral contract of partition. A contract
of partition is not one of the contracts mentioned in Article 1403
of the Civil Code which lists the limited instances when written
proof of a contract is essential for enforceability.
Dauden-Hernaez vs. De Los Angeles (27 SCRA 1276)
(Re: Article 1356). Form (oral and written) is irrelevant to the
binding effect inter partes of a contract that possesses the three
validating elements of consent, subject matter and causa, Article
1356 of the Civil Code establishes only two exceptions, to wit: (a)
Contracts of which the law itself requires that they be in some
particular form (writing) in order to make them valid and
enforceable (the so-called solemn contracts). Of these the typical
example are the donation of immovable property (Article 749) and
donation of movables worth more than P5,000.00 (Article 743);
contracts to pay interest on loans (mutuum) (Article 1956); and the
agreements contemplated by Articles 1744, 1773, 1874 and 2134 of
the present Civil Code. (b) Contracts that the law requires to be
proved by some writing (memorandum) of its terms, as in those
covered by the old Statute of Frauds, now Article 1403(2) of the
Civil Code. Their existence not being provable by mere oral
testimony (unless wholly or partly executed), these contracts are
exceptional in requiring a writing embodying the terms thereof for
their enforceability by action in court. The contract sued upon by
petitioner (compensation for services) need not be in written form.
It is true that it appears included in Article 1358, last clause,
providing that "all other contracts where the amount involved
exceeds five hundred pesos must appear in writing, even a private
one." But Article 1358 nowhere provides that the absence of written
form in this case will make the agreement invalid or unenforceable.
On the contrary, Article 1357 clearly indicates that contracts
covered by Article 1358 are binding and enforceable by action or
suit despite the absence of writing.
Valencia vs. Tantoco (99 Phil 824)
A recital in a public document celebrated with all the legal
formalities under the safeguard of a notarial certificate is
"evidence against the parties" and "a high degree of proof is
necessary to overcome the legal presumption that such recital is
true." The biased, interested testimony of plaintiff can not
overcome the evidentiary force of the provisional contract of lease
which was ratified before a notary public, and, hence, a public
document.
IV. Reformation Of Instruments (Chapter 4) Arts. 1359-1369
This is the remedy if there is a meeting of minds of the parties
but true intention is not expressed in the instrument because of
mistake, fraud, inequitable conduct or accident
Code Commission: Equity dictates the reformation of an
instrument in order that the true intention of the contracting
parties may be expressed. The rigor of the legalistic rule that a
written instrument should be the final and inflexible criterion and
measure of the rights and obligations of the parties, is thus
tempered, to forestall the effects of mistake, fraud or inequitable
conduct.
No Reformation Allowed In: Simple donations inter vivos where no
condition imposed Wills When the real agreement is void
V. Interpretation of Contracts (Chapter 5) Arts. 1370 - 1379
Case Studies:
Manila Electric Company vs. Board of Public Utility
Commissioners (30 Phil 387)
The franchise granted by the city of Manila to the Manila
Electric Railroad and Light Company is a contract, and the
construction placed thereon by the parties, for a long period of
time, should have great weight in a controversy between them as to
its scope and meaning. That a proposed statute was amended in the
course of its enactment may be considered by this court; and the
statute as amended may be compared with the original draft, in
order to determine the proper construction of the law as finally
passed.
Phil. Trust Co vs. Lucio Echaus Tan Siua (52 Phil 852)
In a mortgage on real property executed by the defendant in
favor of the plaintiff ban