ATTY
MOTO-Q NOTES
Morales, Occiano, Tongcua, Occiano, Quitain
Atty. Crisostomo Uribe
Notes in Civil Law Review 2
I. OBLIGATIONS 20% Midterm
30% quizzes and recitations
50% finals
Digest Sales; starting with Sanchez v. Rigos
2 quizzes in oblicon
Certification that the digest is complete and is in your own
handwriting -( from 2 classmates
-( cases penned by justice Azcuna -( 2 quizzes
OBLICON Tolentino
Sales Baviera
Partnership Bautista
Common Law general and ordinary law of a country/ community;
unwritten law founded on memorial usage and natural justice and
reason.
Passive solidarity not always one debtor; may/ may have 2 or
more debtors/creditors.
When the fulfillment of the condition depends upon the sole will
of the debtor, the conditional obligation shall be void this is
true only in resolutory conditions.
Alternative obligations simple when choice has already been
communicated! If not communicated there is no consent.Facultative
obligations is the choice always with the creditor?
Obligations:
Art. 1156. An obligation is a juridical necessity to give, to do
or not to do. (n)
it is a civil obligation because of the phrase juridical
necessity.
Q: Does a creditor have a right under natural obligations?
A: Yes
Q: Suppose a promissory note was made:
1/2/93
I promise to pay B P1M
A
Is it civil or natural?
A: It may be civil or natural. Civil-within 10 years
prescriptive period; natural-beyond ten years.
Q: If it was made beyond the prescriptive period, may it be
considered a civil obligation?
A: Yes. If prescriptive period was interrupted or if no written
demand was made. Only if demanded within the prescriptive period
may it be due and demandable.
Q: Is consent one of the essential elements of obligations?
A: NO. It is true only with contracts.
Essential elements of obligation:1. Active Subject
creditor/obligeeQ: Is any kind of person subject to obligation?
A: Yes. Not only Natural persons but also juridical
entities/persons.
2. Prestation to give, to do, or not to do.
Q: Is it a thing?
A: No. It is the particular conduct of the debtor.
3 Juridical tie vinculum juris
that which binds the parties.
Q: When can there be a tie? What creates a tie?
A: when there is an existence of the source of
obligation.Sources of Obligation:
Art. 1157. Obligations arise from:
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts. (1089a)QUASI CONTRACTS:
Kinds:
1.Nominate:
a.) solutio indebiti
b.) Negotiorum gestio
2. Innominate Articles 2164-2175
SECTION 3. - Other Quasi-Contracts Art. 2164. When, without the
knowledge of the person obliged to give support, it is given by a
stranger, the latter shall have a right to claim the same from the
former, unless it appears that he gave it out of piety and without
intention of being repaid. (1894a)
Art. 2165. When funeral expenses are borne by a third person,
without the knowledge of those relatives who were obliged to give
support to the deceased, said relatives shall reimburse the third
person, should the latter claim reimbursement. (1894a)
Art. 2166. When the person obliged to support an orphan, or an
insane or other indigent person unjustly refuses to give support to
the latter, any third person may furnish support to the needy
individual, with right of reimbursement from the person obliged to
give support. The provisions of this article apply when the father
or mother of a child under eighteen years of age unjustly refuses
to support him.
Art. 2167. When through an accident or other cause a person is
injured or becomes seriously ill, and he is treated or helped while
he is not in a condition to give consent to a contract, he shall be
liable to pay for the services of the physician or other person
aiding him, unless the service has been rendered out of pure
generosity.
Art. 2168. When during a fire, flood, storm, or other calamity,
property is saved from destruction by another person without the
knowledge of the owner, the latter is bound to pay the former just
compensation.
Art. 2169. When the government, upon the failure of any person
to comply with health or safety regulations concerning property,
undertakes to do the necessary work, even over his objection, he
shall be liable to pay the expenses.
Art. 2170. When by accident or other fortuitous event, movables
separately pertaining to two or more persons are commingled or
confused, the rules on co-ownership shall be applicable.
Art. 2171. The rights and obligations of the finder of lost
personal property shall be governed by Articles 719 and 720.
Art. 2172. The right of every possessor in good faith to
reimbursement for necessary and useful expenses is governed by
Article 546.
Art. 2173. When a third person, without the knowledge of the
debtor, pays the debt, the rights of the former are governed by
Articles 1236 and 1237.
Art. 2174. When in a small community a nationality of the
inhabitants of age decide upon a measure for protection against
lawlessness, fire, flood, storm or other calamity, any one who
objects to the plan and refuses to contribute to the expenses but
is benefited by the project as executed shall be liable to pay his
share of said expenses.
Art. 2175. Any person who is constrained to pay the taxes of
another shall be entitled to reimbursement from the latter.
certain lawful, unilateral act must concur.
For negotiorum gestio- there must be abandonment.
BAR EXAM QUESTION:
A bought a pack of cigar worth P225.00. He paid P375.00. What
relationship was created?
A: Quasi contract; solutio indebiti
Q: A had a fishpond. Lawless events forced to go to Manila and
then Europe. B, who has in the business of buying and selling fish,
realized that it was harvest time, harvested the fish and sold them
to X. B borrowed money from Y in order to buy the fingerlings.
a. What Juridical relationship was created between A and B?
A: Negotiorum gestio
b. What juridical relationship was created by A with respect to
B and X?
A: to remit the sale of fish sold to X
c. A with respect to B and Y?
A: A must pay the loan to B because it was for the benefit of
A.
d. If A ratified the acts of B, what will happen?
A: A shall be indebted to BQ: Is innominate quasi contract
exclusive?
A: No. Acts or omissions punishable by law.-> crimes and
delicts.
felony is limited only to the RPC.
Requisites for it to arise:
There must be a conviction. Proof beyond reasonable doubt.
Q: Is there a crime where there is no civil liability?
A: Justifying Circumstances.
QUASI DELICT:
Quasi-delict = culpa aquiliana
- it is not culpa extra contractual or torts.
Culpa extra contractual includes:
1. contractual
2. Extra contractual includes other sources under 1157.
Pineda would say that torts is not quasi-delict because torts
include malicious and negligent acts.
Atty. Uribe does not agree with him. Torts is the same as quasi
delict.
Art. 2177. Responsibility for fault or negligence under the
preceding article is entirely separate and distinct from the civil
liability arising from negligence under the Penal Code. But the
plaintiff cannot recover damages twice for the same act or omission
of the defendant. (n) Cangco v. Manila Railroad (18 Phil 768)
Q: What were the defendant's defenses?A: plaintiff was
negligent; defendant exercised due diligence in selecting its
employees. (not a good defense. It is raised only in quasi
delict.MRRs liability was based on contract of carriage.)
Q: Was it the negligence of Cangco?
A: No. the proximate cause was the bulk of watermelon. It was
dimly lighted. There is negligence considering the person, time and
place.
Gutierrez v. Gutierrez (56 Phil 177)
- there were 5 defendants. 3 were held liable. The mother and
child were not held liable.
Q: A obliged himself the following to B: a. to give a
refrigerator, model 123; b. an 18 inch TV set; c. fix piano of B. A
failed to perform any. What are the remedies?
A: Determine first the nature of the thing to be delivered
whether determinate or indeterminate:
a. determinate/specific(ref)- specific performance plus
damages.
b. Generic (TV) to have another person perform at the expense of
the debtor.
c. Service (to do) damages;involuntary servitude.
Generic depends on the purpose and circumstances.July 7, 2007
(7/7/07)
Compliance of Obligation; specific obligation of the debtor;
different kinds of obligation joint solidary.
July 10 and 28 -make up class
Compliance determine the kind of obligation; determine the
purpose.
BAR EXAM QUESTION:
There was an obligation on the part of A to deliver mangoes on
july 1, 2006, 6 months after agreement with B. One month before
delivery, A sold to the fruit to X. Can B recover the fruits from
X?
A: No. B has no real rights over the fruits since it was not
delivered to him.
KINDS OF OBLIGATIONS AS TO PERFECTION AND EXTINGUISHMENT:
Q: promissory note:
1/2/93
I promise to pay B P1M
A
What kind of obligation?
A: Pure Obligation
even if suspensive or postestative condition, the debtor may be
compelled if there is a pre existing condition.
Impossible Conditions:
If with a term shall annul condition
If without a term it is void
If negative impossible valid condition
Art. 1187. The effects of a conditional obligation to give, once
the condition has been fulfilled, shall retroact to the day of the
constitution of the obligation. Nevertheless, when the obligation
imposes reciprocal prestations upon the parties, the fruits and
interests during the pendency of the condition shall be deemed to
have been mutually compensated. If the obligation is unilateral,
the debtor shall appropriate the fruits and interests received,
unless from the nature and circumstances of the obligation it
should be inferred that the intention of the person constituting
the same was different.
Reciprocal sale
Unilateral donation
Q: A obliged himself to B to deliver a thing on September 2005,
after they agreed in January 2003. A however delivered it to C in
April of 2003. Who has a better right? What about C?A: B has a
better right. C will have a better right if he acted in good
faith.
* with regard to improvements, if voluntarily made by the
debtor, no other right than usufructuary.
BAR EXAM QUESTION:Q: A borrowed P1M from B payable at the end of
the year; A delivered a car as stipulated, B may use the car. On
August 1, A offered to pay P1M, can B be compelled to accept
P1M?
A: It depends on whose benefit the term was constituted. If for
the benefit of both parties, there may be no compulsion. If for the
benefit of the debtor, creditor may be compelled to accept.
Instances for the benefit of the debtor:
1. on or before
2. Not later than
3. within ___ mos.
Q: A borrowed from B P1M, payable at the end of the year. August
1, creditor demanded a mortgage constituted on the house of A. No
mortgage was delivered. On Aug.16, can creditor demand? When?A:
When he loses the right to make use of the period. If debtor has
promised, in this case the debtor did not promise anything.
Q: If insolvent, will he lose his right?
A: No, if he furnishes a guaranty which is acceptable to the
creditor.
Q: How will he be insolvent?
A: by giving one or more of his property.
Q: What if he has no assets?
A: third person may guarantee.
Art. 1198. The debtor shall lose every right to make use of the
period:
(1) When after the obligation has been contracted, he becomes
insolvent, unless he gives a guaranty or security for the debt;
(2) When he does not furnish to the creditor the guaranties or
securities which he has promised;
(3) When by his own acts he has impaired said guaranties or
securities after their establishment, and when through a fortuitous
event they disappear, unless he immediately gives new ones equally
satisfactory;
(4) When the debtor violates any undertaking, in consideration
of which the creditor agreed to the period;
(5) When the debtor attempts to abscond. (1129a) Lim v. People
(133 SCRA 333)-> merely an agent; 1197 is not applicable. Period
as soon as sold
Millares v. Hernando (151 SCRA 484)-> 1197 is not
applicable.
Art. 1197. If the obligation does not fix a period, but from its
nature and the circumstances it can be inferred that a period was
intended, the courts may fix the duration thereof.
The courts shall also fix the duration of the period when it
depends upon the will of the debtor.
In every case, the courts shall determine such period as may
under the circumstances have been probably contemplated by the
parties. Once fixed by the courts, the period cannot be changed by
them. (1128a)
AS TO PLURALITY OF PRESTATION:
SECTION 3. - Alternative Obligations Art. 1199. A person
alternatively bound by different prestations shall completely
perform one of them.
The creditor cannot be compelled to receive part of one and part
of the other undertaking. (1131)
Art. 1200. The right of choice belongs to the debtor, unless it
has been expressly granted to the creditor.
The debtor shall have no right to choose those prestations which
are impossible, unlawful or which could not have been the object of
the obligation. (1132)
Art. 1201. The choice shall produce no effect except from the
time it has been communicated. (1133)
Art. 1202. The debtor shall lose the right of choice when among
the prestations whereby he is alternatively bound, only one is
practicable. (1134)
Art. 1203. If through the creditor's acts the debtor cannot make
a choice according to the terms of the obligation, the latter may
rescind the contract with damages. (n)
Art. 1204. The creditor shall have a right to indemnity for
damages when, through the fault of the debtor, all the things which
are alternatively the object of the obligation have been lost, or
the compliance of the obligation has become impossible.
The indemnity shall be fixed taking as a basis the value of the
last thing which disappeared, or that of the service which last
became impossible.
Damages other than the value of the last thing or service may
also be awarded. (1135a)
Art. 1205. When the choice has been expressly given to the
creditor, the obligation shall cease to be alternative from the day
when the selection has been communicated to the debtor.
Until then the responsibility of the debtor shall be governed by
the following rules:
(1) If one of the things is lost through a fortuitous event, he
shall perform the obligation by delivering that which the creditor
should choose from among the remainder, or that which remains if
only one subsists;
(2) If the loss of one of the things occurs through the fault of
the debtor, the creditor may claim any of those subsisting, or the
price of that which, through the fault of the former, has
disappeared, with a right to damages;
(3) If all the things are lost through the fault of the debtor,
the choice by the creditor shall fall upon the price of any one of
them, also with indemnity for damages.The same rules shall be
applied to obligations to do or not to do in case one, some or all
of the prestations should become impossible. (1136a)
Art. 1206. When only one prestation has been agreed upon, but
the obligor may render another in substitution, the obligation is
called facultative.
The loss or deterioration of the thing intended as a substitute,
through the negligence of the obligor, does not render him liable.
But once the substitution has been made, the obligor is liable for
the loss of the substitute on account of his delay, negligence or
fraud. (n)
a.) alternative
b.) facultative
c.) conjunctive 2 or more prestations which shall be complied
with.
Example:
I promise to __,__,and ___ (conjunctive)
I promise to __,__,or ___ (alternative)
In conjunctive and facultative, no choice is made.
In alternative, choice is with debtor unless:
Art. 1205. When the choice has been expressly given to the
creditor, the obligation shall cease to be alternative from the day
when the selection has been communicated to the debtor.
* choice must be communicated. (relevant if one of the
prestation was lost)
1. if fault of debtor after communication debtor is liable.
2. if loss happened before communication due to fortuitous event
debtor may still choose from the remaining.
IF FAULT WAS DUE TO ONE OF THE PARTIES; MAKE A DISTINCTION, WHO
HAS AT FAULT AND WHO HAS THE CHOICE:1. Choice of debtor; fault of
creditor.
- debtor may choose from those remaining or debtor may opt to
rescind the obligation.
2. Choice of creditor; fault of debtor.- creditor may opt to
choose from those remaining or that value of which was lost plus
damages.
Example:
Choice of debtor, first prestations were lost due to his fault,
only one is left and yet was lost through fortuitous event.
- debtor cant be held liable.
In alternative, if all prestations were lost due to the fault of
the debtor?
depends on who has the right to choose:
1. if debtor: value of last prestation plus damages.
2. if creditors choice: anything of those lost plus damages.
In Facultative: involves 2 or more prestations but only one is
due.
if one is lost, depends if there was a communication.
Tolentino: if debtor destroys the substitute, it doesnt
matter.
Q: What if debtor refuses to make a choice?
A: Creditor file an action in the alternative.
Final exams/ midterms (might be asked)
In July 1, 2003, A and B entered into an agreement. When it fell
due, B failed to fulfill and was in delay. (Sir said that he is not
in delay, because there was no demand.)
Q: When can debtor make a choice of the substitution?
A: He can make a choice even before it becomes due and
demandable.
Facultative vs. Penal clause (there should be non-compliance.)AS
TO THE RIGHTS AND OBLIGATION OF MULTIPLE PARTIES:
SECTION 4. - 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.
(1137a)
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. (1138a)
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. (1139)
Art. 1210. The indivisibility of an obligation does not
necessarily give rise to solidarity. Nor does solidarity of itself
imply indivisibility. (n)
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. (1140)
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. (1141a)
Art. 1213. A solidary creditor cannot assign his rights without
the consent of the others. (n)
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. (1142a)
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.
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. (1143)
Art. 1216. The creditor may proceed against any one of the
solidary debtors or some or all of them simultaneously. The demand
made against one of them shall not be an obstacle to those which
may subsequently be directed against the others, so long as the
debt has not been fully collected. (1144a)
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. (1145a)
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. (n)
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. (1146a)
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. (n)
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. (1147a)
Art. 1222. A solidary debtor may, in actions filed by the
creditor, avail himself of all defenses which are derived from the
nature of the obligation and of those which are personal to him, or
pertain to his own share. With respect to those which personally
belong to the others, he may avail himself thereof only as regards
that part of the debt for which the latter are responsible.
(1148a)
1. Joint obligation
2. Solidary obligation
In the exams if A, B and C are debtors and X and Y are
creditors, and it speaks of solidarity, presume solidarity on both
sides.
BAR EXAM QUESTION:
Q: A and B obliged themselves to deliver 1thousand pesos worth
of specific sacks of rice to X and Y. What is the type of
obligation?A: It is a joint obligation unless there is a
stipulation; the law requires it; the nature of the obligation
requires it.
Q: B delivered entire 1 thousand pesos to X, can Y compel B to
deliver?
A: Yes. Because the obligation is joint.
Solidary:
1. Joint and several.
2. jointly and severally.
Ronquillo v. CA (132 SCRA 274)
individually and jointly, respectively, collectively and
distinctively.
In promissory note: I promise to pay A and B (solidary).We
promise to pay. (solidary)
If simple We joint
Solidary liability examples:
LAW
Solution indebiti, crimes, negotiorum gestio. In agency read
b.solidary on the on the outline, 1823-1824-> tortuous act of
one of the parties.
Art. 1823. The partnership is bound to make good the loss:
(1) Where one partner acting within the scope of his apparent
authority receives money or property of a third person and
misapplies it; and
(2) Where the partnership in the course of its business receives
money or property of a third person and the money or property so
received is misapplied by any partner while it is in the custody of
the partnership. (n)Art. 1824. All partners are liable solidarily
with the partnership for everything chargeable to the partnership
under Articles 1822 and 1823. (n)
NATURE OF THE OBLIGATION WHICH REQUIRES SOLIDARITY:
Example:
1. Liability arising from human relations. (torts-2194)
Art. 2194. The responsibility of two or more persons who are
liable for quasi-delict is solidary.2. Decisions of the Supreme
Court which became final.
Liwanag v. WCC
Computations:
Joint obligations
P120
AX
B
CY
-> X may demand P60If X demands from A, A is to pay only
P20.
Mixed SolidarityX may demand 120 from any of them.
What if there was an agreement? A = ; B = ; C =1/4; X = ; Y
=
A: If joint- X with respect to A can demand 45;
Q: If mixed:
A: X= 90; Y = 30; X may demand P22.50 from A.Passive
solidarity:
No agreement debtors are solidarily bound. X may demand 60 from
A.
If there is an agreement: X may demand from A- 45, B and C-
22.50.Active Solidarity:
Creditor solidarily bound. X can demand from A = 40; if Y
receives 40, he should give 20 to X.
If there is an agreement: X may demand 45 from A and Y may
demand 15 from A.
In a joint obligation if A paid the whole 120, he cannot claim
reimbursement from B and C unless he proves that they have been
benefited. There was payment to the wrong party.
Solidary:
Q: A demanded payment from X, can Y still collect?
A: No. the payment of one debtor extinguishes the obligation.Q:
In joint, C became insolvent, how much can X demand from A?
A: Still P20. Insolvency shall not increase the debt of joint
debtors.
Q: if X remitted entire obligation in favor of A, can Y still
collect from B and C?
A: Yes.
Q: If solidary, C became insolvent, how much can X demand? A:
120. The share of 1 solidary debtor shall be shouldered by other
solidary debtors.
Q: If A was compelled to pay X, how much can A recover?
A: From B=P60
REMISSION IN SOLIDARY:
Q: X condones share of A and demanded payment from B. How much
can B pay?
A: P80
Q: If after condonation C was already insolvent, how much can B
recover from A?
A: Having paid 80, B shall recover 20, even if remitted, it does
not exempt if one is insolvent.
EFFECT OF DISMISSAL OF ACTIONQ: X and Y filed a case against A,
however it was dismissed. Y filed a case again. Will his action
prosper?A: it depends if joint or solidary.
Q: If joint: If reason is prescription, Y still files, may it
prosper?
A: Yes. The debts are separate and distinct in joint. Action
shall not inure to X.
Q: If the ground is subject to different conditions?
A: Yes. The debts are separate and distinct in joint. Action
shall not inure to X.
Q: If ground is minority. May it prosper?
A: No, it is an absolute defense.
Q: If dismissed because contract is void, will it prosper?
A: No.
Q: if solidary?
A: No. The demand of one creditor inures to the benefit of other
creditors.
BAR EXAMINATION QUESTION:
Q: Four medical students rented an apartment. They agreed for
the payment of utilities. Before the lease contract ended, 3 of the
4 went back to their country. They have unpaid telephone bills
worth 100k, can the one left pay only P25?
A: Yes. It is presumed to be a joint obligation as provided in
Article 1207.
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. (1137a)
DISJUNCTIVE
1. A will pay P120 either to X or Y2. A or B will pay X
Q: If X demands payment, A paid Y, can X still demand payment
from A? Who has the right to choose? A: Depends on the
agreement.
Q: What if there is no agreement?
A: Tolentino- should be treated like solidary. Payment should be
made to the solidary creditor who demanded first.
* Sir does not agree! Rules on alternative obligation should
govern because under the law solidarity is not presumed hence
disjunctive is not one of it.NEXT MEETING TUESDAY!
July 24, 2007BAR EXAM QUESTION:
Q: Corporation promised to deliver furniture set to A. they
agreed that in case of non compliance, a penalty of 100 thousand
pesos must be paid. The corporation delivered furniture set which
is different, instead of Narra. Buyer is asking for 300 thousand
pesos as damages and 100 thousand for the penalty. Is this claim
tenable?
A: UP Law Center: It is not tenable. The penalty is the
substitute for damages.
Alternative answer: Yes, he may claim for damages because there
was fraud committed.
PENAL CLAUSE provides for greater liability.
Robes-Francisco v. CFI 86 SCRA 59The supreme court ruled that
the 4% stipulation is not a penal clause. Even without such
stipulation, corporation is still liable to pay 6% based on Article
2209.
Art. 2209. If the obligation consists in the payment of a sum of
money, and the debtor incurs in delay, the indemnity for damages,
there being no stipulation to the contrary, shall be the payment of
the interest agreed upon, and in the absence of stipulation, the
legal interest, which is six per cent per annum. (1108) Bachrach v.
Espiritu 52 PHIL 346Facts: There was a sale of 2 trucks with
interest of 12% for the unpaid portion and a penalty of 25%.
Held: Parties expressly stipulated the payment of interest hence
liable, the penalty was reduced to 10% because there was partial
performance; usurious.
* no need to present proof of damages as long as there is breach
of the obligation.
Q: May the aggrieved party be able to compel the other party to
pay penalty plus performance?
A: The general rule is they may not, however if it is clearly
granted, they may.
Illustration: A construction of a building which has a penalty
of 10 thousand pesos per day if not completed on the agreed day,
plus performance was agreed upon.
Q: Debtor offered his car instead of paying the penalty. May a
debtor compel creditor to accept penalty instead of car.
A: General rule: No; Exception: Unless expressly reserved.
Q: If the principal is void, will it follow that the accessory
is void?
A: General Rule: Yes
Exception: if the basis is the nullity of the obligation there
can be a penalty.
Example:Foreigners who contracted Filipinos usually penalty is
provided in case contract is declared void. In this case the
nullity of the principal does not affect the penalty.
BREACH OF OBLIGATION:
Q: Who can be held liable?
A: Those who are enumerated in Article 1170; hence, anyone.
Art. 1170. Those who in the performance of their obligations are
guilty of fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable for damages. (1101)
FRAUD:
1. Fraud in contract art. 1338
Art. 1338. There is fraud when, through insidious words or
machinations of one of the contracting parties, the other is
induced to enter into a contract which, without them, he would not
have agreed to. (1269)2. Causal fraud dolo causante in contracts;
voidable.
3. Incidental fraud dolo incidente
Art. 1170. Those who in the performance of their obligations are
guilty of fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable for damages. (1101) - if
obligation is monetary in character for example, P1M, it is
interest by way of damages.
Compensatory damages expressly stipulated in writing.
Q: Is article 1170 by way of dolo?
A: No. Better term is bad faith or malice. The phrase in any
manner covers not only fraud but also negligence and delay.
WAIVER of future fraud is void:
consider the dated when waiver was made, and date when the
fraudulent act happened.
NEGLIGENCE (memorize)
Art. 1173. The fault or negligence of the obligor consists in
the omission of that diligence which is required by the nature of
the obligation and corresponds with the circumstances of the
persons, of the time and of the place. When negligence shows bad
faith, the provisions of Articles 1171 and 2201, paragraph 2, shall
apply.
If the law or contract does not state the diligence which is to
be observed in the performance, that which is expected of a good
father of a family shall be required. (1104a) depends on the
circumstances, time and place.
Degree of diligence: that of a good father of a family unless
the law or the stipulations provide otherwise.
Q: May a waiver of future negligence be considered void.
A: Yes. Gross negligence is equivalent to fraud.
Telefast v. Castro 158 SCRA 445The negligence in this case was
considered gross in character.
DELAY:
Mora; non-fulfillment with respect to time.
no delay in obligation not to do. (obviously!)
Effects of delay:
1. If determinate thing to deliver, there was a fortuitous event
the obligor is still liable.
BAR EXAM QUESTION:
Q: A and B entered into a lease agreement over certain
machineries. B was to open a car repair shop. On February 15, they
agreed that the machineries will be leased for one month. On March
15, the lessor demanded return of the machineries. Because the
truck of B had a problem, the machineries were not returned. Is B
liable?
A: No, B is not liable. There were only 28 days. An agreement of
1 month is 30 days.
*As a rule there has to be a demand.
*Demand need not be in writing; It is different from demand to
interrupt the prescriptive period.
Art. 1169. Those obliged to deliver or to do something incur in
delay from the time the obligee judicially or extrajudicially
demands from them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in
order that delay may exist:
(1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the obligation
it appears that the designation of the time when the thing is to be
delivered or the service is to be rendered was a controlling motive
for the establishment of the contract; or
(3) When demand would be useless, as when the obligor has
rendered it beyond his power to perform.In 1169 no demand is
needed.
1. by law eg. Payment of tax, agency.
2. Stipulation
3. When period is the controlling motive. Ex. Wedding.
4. Demand would be useless due to the of the debtor.
In reciprocal obligations, neither party incurs in delay if the
other does not comply or is not ready to comply in a proper manner
with what is incumbent upon him. From the moment one of the parties
fulfills his obligation, delay by the other begins. (1100a)
Reciprocal obligations:
- arise from the same transaction.
Example: Contract of sale.
1169 should apply only if both are already due and demandable
upon establishment or at the same time.
Agcaoili v. GSIS 165 SCRA 1
if both in delay, no right of recission.
Art. 1174. Except in cases expressly specified by the law, or
when it is otherwise declared by stipulation, or when the nature of
the obligation requires the assumption of risk, no person shall be
responsible for those events which could not be foreseen, or which,
though foreseen, were inevitable. (1105a)
it is the happening of a fortuitous event. It applies to any
kind of obligation.
In obligation to give, Article 1262 applies:
Art. 1262. An obligation which consists in the delivery of a
determinate thing shall be extinguished if it should be lost or
destroyed without the fault of the debtor, and before he has
incurred in delay.
When by law or stipulation, the obligor is liable even for
fortuitous events, the loss of the thing does not extinguish the
obligation, and he shall be responsible for damages. The same rule
applies when the nature of the obligation requires the assumption
of risk. (1182a) In Article 1165, even if obligation became
impossible due to Fortuitous event, debtor is still liable.
Art. 1165. When what is to be delivered is a determinate thing,
the creditor, in addition to the right granted him by Article 1170,
may compel the debtor to make the delivery.
If the thing is indeterminate or generic, he may ask that the
obligation be complied with at the expense of the debtor.
If the obligor delays, or has promised to deliver the same thing
to two or more persons who do not have the same interest, he shall
be responsible for any fortuitous event until he has effected the
delivery. (1096)
promise to deliver to two or more persons, the debtor is still
liable. In Napocor v. CA (161 SCRA 344), to be excused there should
be no concurring negligence.BAR EXAM QUESTION:
Q: A ring was delivered to a jewelry shop for cleaning. After a
week, the ring was not yet cleaned. Thereafter, the ring was lost
due to robbery. Is the jewelry shop liable?
A: Yes. Before the fortuitous event, the jewelry shop was
already in delay.
REMEDIES FOR BREACH:
A. Extra judicial principal remedy, expressly granted by law. -
1191. It can be invoked aside from other remedy. Art.1381 is only a
subsidiary remedy.
Art. 1191. The power to rescind obligations is implied in
reciprocal ones, in case one of the obligors should not comply with
what is incumbent upon him. The injured party may choose between
the fulfillment and the rescission of the obligation, with the
payment of damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should become
impossible.
The court shall decree the rescission claimed, unless there be
just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of
third persons who have acquired the thing, in accordance with
Articles 1385 and 1388 and the Mortgage Law. (1124) Art. 1381. The
following contracts are rescissible:
(1) Those which are entered into by guardians whenever the wards
whom they represent suffer lesion by more than one-fourth of the
value of the things which are the object thereof;
(2) Those agreed upon in representation of absentees, if the
latter suffer the lesion stated in the preceding number;
(3) Those undertaken in fraud of creditors when the latter
cannot in any other manner collect the claims due them;
(4) Those which refer to things under litigation if they have
been entered into by the defendant without the knowledge and
approval of the litigants or of competent judicial authority;
(5) All other contracts specially declared by law to be subject
to rescission. (1291a)If court declared the act as rescissory, it
will retroact from the time notice was given to the other
party.
Q: Why is there a need to file a rescission with the courts when
it can be extrajudicial?
A: Because a party cannot take the law in his own hands
especially if there is recovery needed.
UP v. de los Angeles (35 SCRA 102)
- there can be unilateral decision provided it is agreed upon.
BAR EXAMINATION QUESTION
Q: A sold a parcel of land to B for P1M, B paid 100 thousand as
down payment. Vendor will be liable for eviction of squatters,
balance to be paid 30 days after eviction, if squatters are still
there for 6 months buyer should return the money. During the 6th
month period, the price of the land was doubled. Seller offered to
return the 100 thousand pesos. Buyer refused and offered to pay the
balance and asked seller to sign. Seller filed an action for
rescission. Is the action proper?
A: No. The seller was not the aggrieved party. Rescission as a
remedy maybe invoked only by the aggrieved party.
UFC v. CA (33 SCRA 1)
1. Only those who have complied with their obligation or at
least ready to comply.
2. Violation must be substantial/fundamental in character.
There was no showing that Mafran had exhausted all the remedies
available.
SC: rescission is under 1191 not 1381.Q: If obligation becomes
impossible, what is the remedy?
A: Rescission. If already rescinded, he can no longer demand for
the fulfillment.
Magdalena Estate v. Myrick (71 Phil 344) Myrick was able to
recover because there was no stipulation as to forfeiture. Other
extrajudicial remedies:Rights of unpaid seller:
Art. 1526. Subject to the provisions of this Title,
notwithstanding that the ownership in the goods may have passed to
the buyer, the unpaid seller of goods, as such, has:
(1) A lien on the goods or right to retain them for the price
while he is in possession of them;
(2) In case of the insolvency of the buyer, a right of stopping
the goods in transitu after he has parted with the possession of
them;
(3) A right of resale as limited by this Title;
(4) A right to rescind the sale as likewise limited by this
Title.Where the ownership in the goods has not passed to the buyer,
the unpaid seller has, in addition to his other remedies a right of
withholding delivery similar to and coextensive with his rights of
lien and stoppage in transitu where the ownership has passed to the
buyer. (n) B. Judicial Remedies:
a.) Principal remedies specific performance
Q: In obligation to do, is substitute performance allowed?A: It
depends. If personal qualification was stipulated.
If no specific performance, it amounts to involuntary
servitude.
Q: If obligation was to do and obligation was poorly done.
A: Art. 1167. If a person obliged to do something fails to do
it, the same shall be executed at his cost.
This same rule shall be observed if he does it in contravention
of the tenor of the obligation. Furthermore, it may be decreed that
what has been poorly done be undone. (1098) b.) Subsidiary
remedies
1. accion pauliana to be discussed in rescissible contracts.
2. accion subrogatoria creditor may be subrogated to the right
of the debtor as to 3rd persons.
- pertains to obligation to give; monetary obligation. It does
not pertain to purely personal right. Example: acts of agency.
Q: What is the extent of liability?
A: 2236, applies to present and future property.Art. 2236. The
debtor is liable with all his property, present and future, for the
fulfillment of his obligations, subject to the exemptions provided
by law. (1911a) If a person is judicially declared to be insolvent,
when he inherits, the future property is exempt.
Family Home: May be a subject for tax nonpayment, creditors for
construction, claim of laborers and mortgagee. (Rules of Court rule
39, sec.13)
MODES OF EXTINGUISHMENT Article 1231Art. 1231. Obligations are
extinguished:
(1) By payment or performance:
(2) By the loss of the thing due:
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of creditor and
debtor;
(5) By compensation;
(6) By novation.Other causes of extinguishment of obligations,
such as annulment, rescission, fulfillment of a resolutory
condition, and prescription, are governed elsewhere in this Code.
(1156a)
It presupposes that there is an existing valid obligation.
Recission principal remedy is under article 1191.
Art. 1191. The power to rescind obligations is implied in
reciprocal ones, in case one of the obligors should not comply with
what is incumbent upon him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either
case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be
just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of
third persons who have acquired the thing, in accordance with
Articles 1385 and 1388 and the Mortgage Law. (1124) Extinctive
prescription conversion of civil to natural.
Q: Are thes modes exclusive?
A: No! In Saura v. DBP, there was a mutual dissent. This also
considered as a mode. The Supreme Court said that there was a
perfected consensual contract of loan. (mutuum)
Q: Aside from it, what are the other modes?
A: Death - To the extent of personal obligation to do. It does
not extinguish property rights. Eg. Agency death of an agent;
Partnership death of a partner.
Q: Fulfillment of resolutory condition in 1231 pertains to?
A: Happening of a resolutory condition. will of one of the
parties in contracts as a general rule does not extinguish
obligation.
Exception: contracts involving trust and confidence. Partnership
without prejudice to the possible liability of partner causing
dissolution.
Q: Is happening of a fortuitous event a mode of
extinguishment?
A: Fortuitous events are not modes of extinguishment. Only
results to loss of the thing due.
Insolvency per se is not a mode of extinguishment, there must be
a judicial declaration.
Q: What about renunciation by the creditor?
A: Not necessarily. If it is gratuitous, it would fall under
condonation/remission. If for a consideration, it falls under
novation.
Q: Compromise?
A: It may. But it would fall under one of those mentioned by
law; common result reduction of obligation which falls under
condonation; if it would fall under a totally new obligation, it is
novation.1. PAYMENT synonymous with performance.
May apply to all kinds of obligation.
Rules:
a.) As to person who pays.
b.) As to whom payment is made.
c.) Prestation in obligation.
d.) Date, time and place.
a.) person who pays. Should be called payor, not only debtor,
because third persons may pay.
Not every person under the NCC can compel a person to pay except
those who have an interest and those who by virtue of
stipulation.
Eg. A is indebted to B. X is a 3rd person.
Q: Who are those who have interest?
A: Joint debtors have interest in the fulfillment of the entire
obligation, those who are subsidiary liable. (guarantors,
mortgagors, pledgors.)
Q: If a third person pays, if he has interest, what happens?
A: Subrogation.
If X is a guarantor, Y is a mortgagor who secured debt, Y pays,
he shall be subrogated to the rights of B and can exercise right of
a creditor.
if X pays B, obligation of A to B is extinguished but accessory
obligations are not extinguished. It subsists that is why X can
still foreclose the mortgage.
Q: A is indebted to B. X pays 100 thousand to B for As debt.
Does A have a right to recover from A and can he have a right of
foreclosure?
A: It depends. If A consented, he has the right.
Q: If before X pays, A partially paid 20 thousand, X paid entire
100 thousand, how much can Y ask for reimbursement?
A: Only 80 thousand, that which redounded to the benefit of
A.
Q: If X pays without the knowledge of A, can he compel A to
pay?
A: No. He is not subrogated to the rights of B, hence he cannot
foreclose the mortgage.
consented means debtor failed to object at a reasonable
time.
Q: X had agreement with B without knowledge of A, can he recover
the payment made?
A: As long as payment was without knowledge, third person shall
not be subrogated to the rights of the creditor. (1236-1237)
Art. 1236. The creditor is not bound to accept payment or
performance by a third person who has no interest in the
fulfillment of the obligation, unless there is a stipulation to the
contrary.
Whoever pays for another may demand from the debtor what he has
paid, except that if he paid without the knowledge or against the
will of the debtor, he can recover only insofar as the payment has
been beneficial to the debtor. (1158a)
Art. 1237. Whoever pays on behalf of the debtor without the
knowledge or against the will of the latter, cannot compel the
creditor to subrogate him in his rights, such as those arising from
a mortgage, guaranty, or penalty. (1159a)
Q: X paid B without any intention of being reimbursed. What if X
demanded the return after one week?
A: Indirect Donation. As far as payment, it is valid and
binding.
- Payor must have the capacity to alienate the thing or has free
disposal.
b.) as to the person to whom payment is made.- called payee;
normally the creditor.
CASE: Araas v. Tutaan
creditor does not have to be a party. A creditor may be any
person who has the right to compel the performance.
Eg. A is indebted to B. But the real payment should be given to
Y; even if A pays B, Y can still compel A to pay.
there is also payment to a person authorize to receive payment;
the law may provide. Eg. Payment to a sheriff, executors and
administrators.
Q: May payment to a wrong person extinguish obligation?
A: Gen. rule: No! Except: 1. if payment redounded to the benefit
of B. Otherwise, obligation is not extinguished.Q: Who has the
burden to prove?
A: No need to prove if: 1. it was ratified by the creditor; 2.
principle of estoppel; 3. if the person to whom payment made
acquired rights of creditor after the payment.
Q: Are there any more exceptions?
A: Yes. If payment was made in good faith to a person in
possession of the credit, not a mere possession of the
instrument.Q: X (in possession of PN) demanded payment from A when
the promissory note became due and demandable, A paid x in good
faith.A: Obligation is extinguished.
Q: A is indebted to B. However, B dies and is survived by Y.
Even if A paid Y, can it be invalidated?
A: Yes. If the payment was not made in good faith, such as when
there is a pending action to declare Y incapacitated.
Q: A is indebted to B. B assigned the credit to X. May it
extinguish the assignment?
A: Yes.c.)Prestation in obligation- identity of the obligation;
consider the purpose.
General Rule: A partial performance is non-compliance.
Except:
1. The parties expressly stipulate. - Subject to different terms
integrity of the prestation. Rescission is not a remedy if there is
substantial performance.Case: JM Tuason v. JavierA obligated
himself to deliver 100 sacks to B for 1000 pesos. He only delivered
95.
Q: How much can he recover?
A: Amount or value delivered, less damages.
As to kind of obligation:
Q: A is obliged to B. He paid Japanese yen. Is it valid?A: Yes.
RA 8183. Payment may be made in any currency as long as stipulated.
Before: RA 529-payment not in Philippine currency is
prohibited.
Q: Can creditor be compelled to accept check?
A: No. As stated in New pacific timber v. Seeris. Creditor may
refuse to accept check.
Before: If Manager or Cashiers check, it is deemed as cash.
Q: If partly check and partly cash?
A: Creditor may refuse. Except if stipulated. In Article 1249,
it is extinguished if encashed.
Art. 1249. The payment of debts in money shall be made in the
currency stipulated, and if it is not possible to deliver such
currency, then in the currency which is legal tender in the
Philippines.
The delivery of promissory notes payable to order, or bills of
exchange or other mercantile documents shall produce the effect of
payment only when they have been cashed, or when through the fault
of the creditor they have been impaired.
In the meantime, the action derived from the original obligation
shall be held in the abeyance. (1170)
Q: If check is stale, will the obligation be extinguished?
A: No.
Q: When is payment thru check extinguish obligation?
A: When it is encashed or through fault of the debtor when it
had been impaired.Q: B owes A 1M in 1968. A claimed that in 1968,
the value of 1M is only 500k compared to the present because of
devaluation, hence he claimed 2M base on Art.1250.
Art. 1250. In case an extraordinary inflation or deflation of
the currency stipulated should supervene, the value of the currency
at the time of the establishment of the obligation shall be the
basis of payment, unless there is an agreement to the contrary.
(n)
Is his contention correct?
A: No. As decided in the Philippine Pipe Foundry case, the
supreme court said as far as Philippine experience is concerned,
there has never been an extraordinary inflation as experienced by
Germany in 1920-1923. Art.1250 may only be invoked if the source is
a contract. In Velasco v. Meralco, Article 1250 may not be invoked
because the source is a quasi delict.
d.)date, time, place Determinate place where obligation was
constituted.Generic domicile of the debtor.
SPECIAL FORMS OF PAYMENT
1. Payment by Cession and decion en pago.
Art. 1255. The debtor may cede or assign his property to his
creditors in payment of his debts. This cession, unless there is
stipulation to the contrary, shall only release the debtor from
responsibility for the net proceeds of the thing assigned. The
agreements which, on the effect of the cession, are made between
the debtor and his creditors shall be governed by special laws.
(1175a)
( conventional assignment
( requires consent of both parties.
CASE: Filinvest v. Philippine Acetylene
no dation en pago, the delivery of the case was not consented
to.
Filinvest was only an agent; there was no transfer of
ownership.
Dacion en pagoCession
As to transfer of ownership:
The delivery results to the transfer of ownership, same is true
with application of payment.No transfer of ownership, creditor only
given the power to sell.
As to effect of payment:
General rule: Extinguished only as to the extent of value
delivered.
Exception: unless stipulated upon that anything delivered shall
extend the entire obligation.General Rule: governed by law on sales
only if the pre- existing obligation is in money.
Art. 1245. Dation in payment, whereby property is alienated to
the creditor in satisfaction of a debt in money, shall be governed
by the law of sales. (n)
General Rule: Extinguish only as to the extent of the proceeds
of the sale of creditor.
Exception: Unless there is an express agreement.
Q: If A is to deliver a carabao, but instead gave a
refrigerator. Is it dacion en pago on sale?A: No. It is novation.
The pre-existing obligation is not in money.
CASE: Citizens Surety v. CA
no dation en pago if at the time of the transaction there is no
obligation.
All transactions were executed within one day. The indemnity
agreement that they will be liable upon default on payment of
surety bond, hence no obligation yet on that day.
SC: Dation en pago may pertain to delivery of rights/things.
2. Application of payments:Problem: X is the creditor. A owes
him, 100k, 50k, 20k and 10k.Rules:
1. debtor ha the right to designate to which payment is to be
applied.
a.) no partial payment.
b.) to that which is due and demandable, except if payment was
made for the benefit of the debtor.
c.) If the debt is interest bearing.
2.) if debtor fails to designate, the creditor may
designate.
3.) if both failed to designate:
Note: provision for application of payment is not applicable
here.
3. that which is most onerous.
4. Proportionate application (provided, it is of the same nature
and burden) if the debts are of different amounts.
Q: How do we determine what is the most onerous?
A: There is no hard and fast rule. We must consider factors and
circumstances.
3. Payment by cession:1255: voluntary assignment requires
consent of the creditor.
Art. 1255. The debtor may cede or assign his property to his
creditors in payment of his debts. This cession, unless there is
stipulation to the contrary, shall only release the debtor from
responsibility for the net proceeds of the thing assigned. The
agreements which, on the effect of the cession, are made between
the debtor and his creditors shall be governed by special laws.
(1175a)
Q: How will the proceeds of the sale be applied?A: 1. based on
stipulation. 2. without agreement; rules in concurrence and
preference of credits shall be applied.
debtor must deliver his property to creditor.
Resorted to by debtor who is experiencing financial
difficulty.
4. Tender of payment and consignation:
tender of payment alone shall never extinguish the
obligation.
Actual offering of the amount or thing.
1256 the only one scenario when tender of payment should be
made, when creditor refuses to accept without just cause.Art. 1256.
If the creditor to whom tender of payment has been made refuses
without just cause to accept it, the debtor shall be released from
responsibility by the consignation of the thing or sum due.
Consignation alone shall produce the same effect in the
following cases:
(1) When the creditor is absent or unknown, or does not appear
at the place of payment;
(2) When he is incapacitated to receive the payment at the time
it is due;
(3) When, without just cause, he refuses to give a receipt;
(4) When two or more persons claim the same right to
collect;
(5) When the title of the obligation has been lost. (1176a)CASE:
Soco v. Militante:
Q: When may Tender of payment be made judicial?
A: No. Tender of payment by its nature is extra judicial.
Illustration:
Q: There was a sale with right to repurchase. Seller a retro
refuses to accept money, an action was filed. Plaintiff said that
he is not obliged because there is no tender of payment required.
Is his contention correct?
A: Yes. No tender of payment is required. No consignation is
required in sale with right to repurchase.
Q: Is notice required by consignation?
A: Yes.
Q: 2nd notice after consignation is required?
A: Yes. Required but it does not need to come from the debtor,
it is in the form of summons.
Soco v. militante 2 notices per amount due.
Q: When will obligation be extinguished?
A: When creditor accepted, even if debtor refuses, may
extinguish after consignation, it retroacts from the time of
delivery.
Q: The obligation was due in January, 1998. There was a tender
of payment in January 1, 2000 but was refused. In January 2, 2004,
there was consignation. In January 2, 2007 there was a court
ruling. Is the debtor liable to pay interest?
A: Yes. If from January 1998 he was already in delay, up to
consignation if court ruled to be valid. If the consignation was
ruled by the court to be invalid, the interest must be from January
1998 till court ruled.
According to Sir: however, mora accipiendi.-delay of the
creditor to accept. Debtor may release himself from the obligation
by the consignation of the thing.Q: Can debtor withdraw the
consignated money?
A: Yes. If the withdrawal is made before acceptance of creditor
and before court ruled on the consignation.
if creditor accepted and court ruled, no withdrawal. If no
ruling yet, it may be withdrawn if creditor accepted.
Revival without consent of accessory creditor is released.
LOSSWhen not valid?
when it goes out of commerce.
Prohibited by law. Impossibility of performance.
Q: To deliver shabu? Is the obligation extinguished?
A: No. This is not a valid obligation therefore no
extinguishment.
Q: If the thing is lost, who has the burden to prove?
A: depends on who is in possession of the thing at the time of
the loss. However, this rule is not absolute when the loss occurred
during the happening of a calamity, like typhoon.
Read: Art 1265 and Art 1262.
Art. 1265. Whenever the thing is lost in the possession of the
debtor, it shall be presumed that the loss was due to his fault,
unless there is proof to the contrary, and without prejudice to the
provisions of article 1165. This presumption does not apply in case
of earthquake, flood, storm, or other natural calamity. (1183a)Art.
1262. An obligation which consists in the delivery of a determinate
thing shall be extinguished if it should be lost or destroyed
without the fault of the debtor, and before he has incurred in
delay.
When by law or stipulation, the obligor is liable even for
fortuitous events, the loss of the thing does not extinguish the
obligation, and he shall be responsible for damages. The same rule
applies when the nature of the obligation requires the assumption
of risk. (1182a)
Q: In an agreement between A and B for construction of house,
proceeds shall be equally distributed from the sale. B didnt give
his share in the house because of the high price of materials. A
filed an action. May court grant the action?
A: Yes. Because the event of increase of price is foreseen. 1267
is not applicable.
CASE: Occea v. Jacobsen court cant change agreement of the
parties.
1267 only difficulty not impossibility.
Art. 1267. When the service has become so difficult as to be
manifestly beyond the contemplation of the parties, the obligor may
also be released therefrom, in whole or in part. (n) 1264 depends
on the intention of the parties.
Art. 1264. The courts shall determine whether, under the
circumstances, the partial loss of the object of the obligation is
so important as to extinguish the obligation. (n) CONDONATION OR
REMISSION
donation of a credit
1272 refers to private document only . If public document, it
needs many copies.
Art. 1270. Condonation or remission is essentially gratuitous,
and requires the acceptance by the obligor. It may be made
expressly or impliedly.
One and the other kind shall be subject to the rules which
govern inofficious donations. Express condonation shall,
furthermore, comply with the forms of donation. (1187)
Art. 1271. The delivery of a private document evidencing a
credit, made voluntarily by the creditor to the debtor, implies the
renunciation of the action which the former had against the
latter.
If in order to nullify this waiver it should be claimed to be
inofficious, the debtor and his heirs may uphold it by proving that
the delivery of the document was made in virtue of payment of the
debt. (1188)
Art. 1272. Whenever the private document in which the debt
appears is found in the possession of the debtor, it shall be
presumed that the creditor delivered it voluntarily, unless the
contrary is proved. (1189)
Q: X owes A 1M, he lends the same amount to A. Is there
condonation?
A: Maybe, if payment of interest is remitted.
Q: If evidence of interest is found in debtor X? Is it
condonation?
A: No.
Q: If evidence of interest is found in debtors possession, is
there necessarily condonation?
A: No, may be through other modes, like payment.
Q: A is the creditor of 100k to B. X, a third party, pledged his
car to B. May the pledged car be used as condonation? A: Determine
first the status of X. Whether he is the owner or for what the
pledge is for.
Then state the accessory v. principal. Not X. Because A and B
are the parties in the principal obligation; there is only a
presumption of X on part of the accessory obligation of the
pledge.
CONFUSION OR MERGER OF RIGHTS
Art. 1275. The obligation is extinguished from the time the
characters of creditor and debtor are merged in the same person.
(1192a)
Q: May it be made through agreement of parties?
A: May be. It depends upon the intention. Ex. Merger of rights
of a corporation.
Q: By operation of law, can there be confusion?
A: By succession, creditor died, debtor is son or daughter.
Q: debtor died, creditor is an heir, can confusion take
place?
A: there can be, when there is acceptance.
Q: A is indebted to B. The debt is secured by a mortgage by M on
B. Can there be a confusion of B and M?
A: No.
Q: If there is an agreement?
A: No. It will be subrogation. If B assigned his rights to M,
but still obligation is not extinguished.Q: Will confusion result
in total extinguishment?
A: No. In cases of joint obligations, in 1277.
Art. 1277. Confusion does not extinguish a joint obligation
except as regards the share corresponding to the creditor or debtor
in whom the two characters concur. (1194)
COMPENSATIONQ: If 2 or ore persons are debtors and creditors,
will there be compensation?A: No, the requirements must be complied
with. Art. 1279
Art. 1279. In order that compensation may be proper, it is
necessary:
(1) That each one of the obligors be bound principally, and that
he be at the same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things
due are consumable, they be of the same kind, and also of the same
quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or
controversy, commenced by third persons and communicated in due
time to the debtor. (1196)Q: In compensation, is it a reciprocal
obligation?
A: Not necessarily.
Q: When is it a reciprocal obligation?
A: Reciprocal obligations arise from a single transaction;
contract of sale.
Q: What about legal compensation? Will it take place in
reciprocal obligations?
A: Not necessarily. In reciprocal obligations, there can be
none.
Q: In partial compensation, is debt totally extinguished?
A: No. Extinguished as to at least one debt.
Q: In compensation, how many debts are involved?A: 2 or more
debts.
Q: Which debts will be extinguished?
A: Less onerous amount.
Q: A owes B the following, 50k, 100k, 75k, 225k, 100k. B owes A
100k. How many of the debts will be totally extinguished?
A: 2 debts of A and debt of B.
Q: A paid 100k to B. A has the following debts to B; 50k, 25k,
10k. How many debts are extinguished?A: 3 debts are extinguished.
Partial compensation because there is still a balance.
Q: How many kinds of compensation are there?
A: 4: legal, conventional, facultative, judicial.
Q: In some books, there are three; facultative is removed,
why?
A: It is a modification only of conventional.
Q: What are the other names of compensation?
A: set off or counterclaim.
Q: Not really the same because?
A: Set-off and counterclaim must be invoked in courts of
law.
Q: What distinguishes legal from conventional?
A: As to requirements, not the same. In legal, all requirements
should be present, in conventional, not necessary that all
requirements are present. i.e. different amounts or objects; one
debt is not yet due.
Q: Give an example of facultative.
A: Support. Invoked by the one who claims for support.Q: A
opened a checking account with a bank, he borrowed money with the
same bank. A failed to pay, Bank invoked compensation. A said that
his checking account is depositum. Is his claim tenable?
A: No. In a checking account, the bank is the creditor, A is a
debtor governed by mutuum, hence compensation cant take place.
Q: When is there a deposit?A: If the delivery is only for safe
keeping.
Q: Other kind of facultative.A: In case of commodatum, bailor
can invoke. In a civil case/penal, invoke by injured party.
CASE: PNB v. Acero
PNB invoked: No legal compensation, the credit line was used,
lawyer of PNB claimed that credit line was shown to Acero.
you dont prove a fact by showing it to the other party.Q: A is
indebted to B with G as guarantor. Can G invoke compensation?A: No.
they are not debtors and creditors to each other. The law requires
that they are principally bound.
CASE: Sycip V. CA
SC: debtors and creditors should be debtors and creditors in
their own rights.CASE: Francia v. IAC
SC: There is no compensation when Francia paid real property tax
to the LG of Pasay. The national government was the one who
expropriated. compensation takes place if debt became due at the
same time.
Q: Monetary debts must arise from contracts?
A: Not necessarily. Eg. Attorneys fees
Q: Are all monetary debts subject to compensation?
A: No. Custom duties. (Francia v. IAC)
CASE: International Corp. Bank v. IAC
Facts: Villanueva applied a loan from ICB for 50M. Only 1M was
delivered by the bank. The loan was secured by a mortgage, which is
110 M asset. Villanueva deposited 1M to ICB. He invoked
compensation.SC: Since there was a question on the foreclosure
sale, there was no legal compensation.CASE: Solinap v. del
RosarioFacts: The lessee did not pay rentals. He invoked that the
lessor had made advancements.
SC: No legal compensation because alleged debt were being
questioned in the estate proceedings. no legal compensation if
debts arise from depositum, commodatum, civil liability arising
from crime.
Q: A is the creditor of B worth 100k secured by a mortgage. B
gave 50k. If there is a partial compensation, will the mortgage be
extinguished?A: Not necessarily. It depends which debt is most
onerous.
Q: If there is total compensation, will the mortgage be
extinguished?A: Yes. Mortgage will be extinguished.
Q: B is indebted to A for 100k which is interest bearing. B gave
50 k to A. Will there be payment of interest even after payment of
compensation?
A: Depends. If there is total compensation, no interest will be
paid. If partial, depends on whose debt is bigger.
Q: Will partial compensation be extinguished by
prescription?
A: Yes. Partial compensation does not toll the running of the
period.
ASSIGNMENT OF THE CREDITQ: On January 1, 2002, A owes B 100k. B
assigned the credit to C on June 1, 2002. Can C demand payment from
A?A: Determine when the assignment was made; if made after both
obligation was due and demandable, there will already be
compensation.
Q: What if A paid B 50k in May 1, 2002? How much can C
claim?
A: 50k. He must ask B for the other 50k.
Q: In the same case, the debt is demandable on May 1, 2002. The
credit was assigned to on March 1, 2002. May D validly demand it on
the same date?
A: No. The obligation is not yet due.
Q: A owes B 100k due and demandable on May 1, 2003. B assigned
it to X on April 1, 2003. A made the following payments to B:
20k-March 1, 2003; 30K-June 1, 2003; 40k-decemeber 1, 2003. On May
1, 2003, how much may X validly demand?
A: It depends: If A had knowledge of assignment of X and he
consented with reservation, X may claim 90k, if he consented
without reservation, 100k. If it was without knowledge of A, X may
claim 10k.NOVATIONI. Subjective/Personal
II. Objective/Real
III. Mixed
Art. 1291. Obligations may be modified by:
(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the creditor.
(1203.)
I. Subjective:A. Active third person is subrogated in the rights
of the creditor.
B. Passive substitution of the person of the debtor.
* other classifications:
1. express or implied.
2. extinctive.
3. modificatory.Eg. PrescriptionQ: In ACTIVE SUBJECTIVE,
operative word is subrogated. When does this happen?
A: 1. by agreement (express);
2. art. 1302 legal subrogation.
a. Third Party pays creditor without consent of debtor.
b. TP who has an interest pays creditor with or without consent
of debtor.
c. Creditor of debtor pays creditor of the same debtor.
Art. 1302. It is presumed that there is legal subrogation:
(1) When a creditor pays another creditor who is preferred, even
without the debtor's knowledge;
(2) When a third person, not interested in the obligation, pays
with the express or tacit approval of the debtor;
(3) When, even without the knowledge of the debtor, a person
interested in the fulfillment of the obligation pays, without
prejudice to the effects of confusion as to the latter's share.
(1210a)Q: In PASSIVE SUBJECTIVE, operative word is substitution.
When does this happen?
A: 1. Expromission substitution was made without knowledge or
against will of original debtor.
2. delegacion substitution was made with knowledge of
debtor.
Q: A is indebted to B. A mortgaged to B his property worth 100k.
B is indebted to C, 100k also. If A does not pay, can C foreclose
the mortgage?
A: No. He was not subrogated.
DELEGACION there is already subrogation, therefore, C may
foreclose the mortgage.
if there is already novation through delegacion, no consent of
original debtor is void.
If payment consented to by A, no novation, subrogation.
(1236-1237)
Art. 1236. The creditor is not bound to accept payment or
performance by a third person who has no interest in the
fulfillment of the obligation, unless there is a stipulation to the
contrary.
Whoever pays for another may demand from the debtor what he has
paid, except that if he paid without the knowledge or against the
will of the debtor, he can recover only insofar as the payment has
been beneficial to the debtor. (1158a)
Art. 1237. Whoever pays on behalf of the debtor without the
knowledge or against the will of the latter, cannot compel the
creditor to subrogate him in his rights, such as those arising from
a mortgage, guaranty, or penalty. (1159a)
Effect of Insolvency of new debtor: If C becomes insolvent after
substitution, A is no longer liable.
If C was already insolvent at the time of substitution, A cant
be held liable if no knowledge except if he acted in Bad Faith or
such insolvency is of public knowledge.
II. ObjectiveA. Change in object no problem, eg. Money to
celphone (art.1245)
Art. 1245. Dation in payment, whereby property is alienated to
the creditor in satisfaction of a debt in money, shall be governed
by the law of sales. (n)
B. Change in principal obligation:a. express
b. implied
* if 2 obligations cant stand together, there is novation, there
is incompatibility.
* there was novation in FOA and the Villar case.
There was a lease contract entered into for 5 years. Another
contract was entered into for 10 years. The contention is that the
2nd agreement is void, therefore novation is void.CASE: Ronquillo
v. CA
Facts: The obligation was due in 1952, In 1967, debtor
acknowledge debt and promised to pay. Since it is now transformed
to a natural obligation, will the action for novation prosper?SC:
Even natural obligations may be subject of novation.Q: X is the
creditor of A, B and C for 10M. After 3 months, C paid 10M to X
without the knowledge of A and B. After 6 months A and B paid 7M to
X. May A and B recover the 7M from X?
A: if voluntarily given, the creditor can retain.
According to sir: It is actually a payment by mistake therefore
solution indebiti.
In natural obligations, payor knows he cant be compelled to pay
but nonetheless pays. II. CONTRACTS
while all contracts are agreements, not all agreements are
contracts.
Prohibited:
Auto contracts a person contracts himself. article 1491.Art.
1491. The following persons cannot acquire by purchase, even at a
public or judicial auction, either in person or through the
mediation of another:
(1) The guardian, the property of the person or persons who may
be under his guardianship;
(2) Agents, the property whose administration or sale may have
been entrusted to them, unless the consent of the principal has
been given;
(3) Executors and administrators, the property of the estate
under administration;
(4) Public officers and employees, the property of the State or
of any subdivision thereof, or of any government-owned or
controlled corporation, or institution, the administration of which
has been intrusted to them; this provision shall apply to judges
and government experts who, in any manner whatsoever, take part in
the sale;
(5) Justices, judges, prosecuting attorneys, clerks of superior
and inferior courts, and other officers and employees connected
with the administration of justice, the property and rights in
litigation or levied upon an execution before the court within
whose jurisdiction or territory they exercise their respective
functions; this prohibition includes the act of acquiring by
assignment and shall apply to lawyers, with respect to the property
and rights which may be the object of any litigation in which they
may take part by virtue of their profession.
(6) Any others specially disqualified by law. (1459a)ELEMENTS OF
A CONTRACT:Natural implied warranties.
Essential Consent, Object, Consideration
Accidental payment of interest. (compensatory)
CHARACTERISTICS:1. Autonomy freedom of contract/liberty of
contract.
Art. 1306. The contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy. (1255a) Void
waiver:Example:
a. for agent to waive accounting.b. pactum commisoriumc.
partnership, exclusive partner from sharing profits pactum
aliena
mortgage pactum aliendro
d. Public policy:
CASE: Cui v. Arellano
scholarship in law school must not be contrary to public
policy.CASE: Saura v. Sandico
Escalation clause ex. Construction contracts. Creditor has right
to demand a higher compensation upon the happening of a
contingency. Ex. Contract of loan (interest). Acceleration clause
stipulation whereby in an obligation to pay on installment, balance
shall automatically become due and demandable when debtor fails to
pay.
Q: Will an escalation clause be valid when there is no
descalation clause?
A: It is relevant only in contracts of loan; only effect of
circular issued by the Central Bank provided the escalation clause
only happens once a year.
2. Consensuality:
Art. 1306. The contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy. (1255a)
CASE: Republic v. PLDT to compel PLDT to enter into inter-
connection agreements is actually expropriation.Validity of
contracts of adhesion:
CASE: Ong Yu v. CA
plaintiff bought ticket from PAL, eventually he lost his
baggage. In the ticket it contained a waiver of a right.SC: waiver
of a right in a contract of adhesion are not considered gladly by
the Supreme Court.3. Mutuality: goes to validity and
compliance.Art. 1308. The contract must bind both contracting
parties; its validity or compliance cannot be left to the will of
one of them. (1256a)
( termination by mere notice valid.4.Obligatory: Art. 1315.
Contracts are perfected by mere consent, and from that moment the
parties are bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage
and law. (1258)
Q: When is a contract obligatory?
A: Upon perfection of the contract.
Q: When is a contract perfected?
A: It depends if it is consensual (concurrence between the offer
and acceptance), real (like deposit, pledge, commodatum requires
delivery), formal/solemn (requires compliance with certain
formalities prescribed by law).
5. Relativity:
Art. 1311. Contracts take effect only between the parties, their
assigns and heirs, except in case where the rights and obligations
arising from the contract are not transmissible by their nature, or
by stipulation or by provision of law. The heir is not liable
beyond the value of the property he received from the decedent.
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. (1257a)
General rule: Contracts take effect only between parties, their
assigns and heirs.Exceptions: 1. creation of real rightsQ: A
mortgaged his land to B and eventually A sold it to C. Can C be
bound by the mortgage?
A: Yes.
2. Interference by a third party.Art. 1314. Any third person who
induces another to violate his contract shall be liable for damages
to the other contracting party. (n) Requisites:
existence of a valid contract
knowledge of contract by third persons
interference by third persons without legal justification or
excuse.Q: A has a contract with GMA. Subsequently, A entered a
contract with ABS-CBN. A was in bad faith. May ABS CBN be
liable?
A: No. To be liable there must be malice impugned. Third Party
liability does not impugn liability of debtor who violated.
3. Contracts in fraud of creditors:
Q: A is the debtor of B. A sold his property to C. May B rescind
the contract between A and C?A: Yes.
4. Stipulation pour atrui stipulation in favor of third persons.
It is not the main agreement.
CASE: Kaufman v. PNBCASE: Florentino v. Encarnacion
acceptance may be implied.CASE: Bonifacio bros. v. Mira
enforcement of insurance.
CLASSIFICATION OF CONTRACTS:
A: Degree of Dependence
1) principal (agency, partnership)
2) accessory (Real Estate Mortgage, Chattel Morgtage, Pledge,
Antichresis)
example: crop loan scenario
B. As to Perfection
1) Real (Pledge, Commodatum,
Mutuum. Deposit)
2) Formal (antichresis; donation)
C. Purpose
D. As to cause
1) onerous
2) pure beneficience
a) gratuitous
b) lucrative
liberality id the consideration
3) remuneratory
seller (payment); buyer
(deliver)
E. Risk of Fulfillment
1) Aleatory
sale of hope emptio spei
risk of fulfillment
insurance
life annuity
2) commutative
F. Name and Designation
1) Nominate
2) innominate
G. As to subject matter
1) Things
2) Right
3) Services
PAQIII/Oct2007III. SALES
- there must be an agreement to transfer ownership.
Q: A sold goods to B for purpose of resale, Y bought goods from
X for personal consumption. What law shall govern this
contract?
A: NCC and Code of Commerce,
A-B commercial sale
Y-X civil sale
now no distinction, NCC governs Characteristics:
1. principal
2. bilateral-imposes obligations on two parties
3. nominate
4. onerous- always! otherwise donation
5. commutative- emptio spei
Subject matter:
things and rights, service is not included
As to object:
a. movable
b. immoxable
Concepts involve:
a) Recto Law- personal prop by
installment
b) Maceda- immovable
c) double sale
d) Statute of Frauds
Q: As to WON tangible/intangible?
A: corporeal (things); incorporeal
(rights)
Q: relevant as to what concept?
A: delivery
Q: As to validity?
A: void, unenforceable, rescissible, voidable
Q: 1458 2nd par: provides for?
A: absolute/conditional sale:
In an absolute sale there is an automatic transfer of ownership
while in conditional sale, there is a reservation of ownership.
Art. 1458. By the contract of sale one of the contracting
parties obligates himself to transfer the ownership and to deliver
a determinate thing, and the other to pay therefor a price certain
in money or its equivalent.
A contract of sale may be absolute or conditional. (1445a)
Q: Conditional sale vs. contract to sell A: In conditional sale,
ownership depends on the happening of condition and it take place
by operation of law. In contract to sell, ownership passes after
full payment passes. There is no automatic transfer, buyer have
right to ask execute final deed.
Q: A delivered receipt to B as partial payment to my car,
received by D, balance payable at the end of the month, signed by
A.
Is this contract pertaining to a contract to sell?
A: NO, there is already transfer of ownership, there was no
reservation as to ownership.
dacion en pago vs. contract of sale
dacion en pago is a mode of extinguishing obli, it is a pecial
form of payment; while contract of sale is a source of obli.
Q: Kobe & companion B is to buy shoes, Bshoes to be
delivered, upon payment, Kobe ordered a particular shoe.
A: Kobe- contract of piece of work
B- contract of sale
contract for a piece of work under (Aticle1467) is also called
Massachusetts RuleArt. 1467. A contract for the delivery at a
certain price of an article which the vendor in the ordinary course
of his business manufactures or procures for the general market,
whether the same is on hand at the time or not, is a contract of
sale, but if the goods are to be manufactured specially for the
customer and upon his special order, and not for the general
market, it is a contract for a piece of work. (n)
Q: A to deliver his car to B, B to give A his watch plus money,
100k. What law should govern?
A: 1st. depends on manifest intention of parties.
Barter = value of thing given as a part of consideration >
money/its equivalent; if value of watch >100k
Sale- if same value
Q: A granted B exclusive right (right to sell within a specific
area) to sell maong pants to Isabela, before B could sell, his
store was burned, can B be compelled to pay?
A: contract of sale bec. There is a stipulation. B is a
distributor/dealer 99.99% Quiroga vs. Parsons- will supply the bed
and pay price within a certain period. No obli to remit the price,
no stipulation.
ELEMENTS OF SALE:
1. Consent
2. Price- consideration as to whom? The seller.
Buyer- acquisition of ownership over the thing.
3. Object
Contracts which are void: Absolutely simulated contract (parties
voluntarily entered)
ex. To defraud creditors, wife hide property from husband, buyer
go abroad.
relatively simulated- why? To reduce tax liability, circumvent
law on legitime
SPECIFIC PERSONS PROHIBITED TO ENTER INTO SALE
Guardian- absolute
Agent- administration/sale
Q: A inherited property from father to transfer property;
executor to pay 700k, status?
A: valid; Assignment of rights which A can validly sell, not
part of the estate under Ys administration.
Q: a sued B for recovery of a parcel of land, hired lawyer, one
year after filing, entered into a contract of sale with B involving
the land.
A: not valid. object of sale is subject to litigation-actually
depends. WON the case is still pending.
Q: 1491 status of contracts
A:GR: voidable
Except: agents- subject to ratification
Par.1,2,3 voidable- can be ratified
private interests is involved.
4,5,6 void
1,2,3 can be ratified because after lapse of incapacity, another
contract maybe entered into Rubias VS. Materia
Wolfgang vs. Martinez
Art. 1491. The following persons cannot acquire by purchase,
even at a public or judicial auctio