Nego Case Digests

Negotiable Instruments Lex Talionis Fraternitas Inc.
NEGOTIABLE INSTRUMENTS change the relations between the parties. The name of the
drawer and the drawee were not altered. The intended
(7) A printed form of promissory note had on the margin the printed words,
"Extended to ________." The holder on or after maturity wrote in the blank
Case Digests space the words "May 1, 1913," as a reference memorandum of a promise
payee was the same. The sum of money due to the payee made by him to the principal maker at the time the words were written to
PNB vs CA (G.R. No. 107508 Apr 25, 1996) remained the same. Petitioner, thus cannot refuse to accept extend the time of payment.
the check in question on the ground that the serial number (8) Where there was a blank for the place of payment, filling in the blank
with the place desired.
Alteration of a checks serial number is not a material alteration was altered, the same being an immaterial or innocent one.
(9) Adding to an indorsee's name the abbreviation "Cash" when it had been
contemplated in the Section 125 of NIL. Justice Jose C. Vitug opines in his book that "an innocent agreed that the draft should be discounted by the trust company of which
alteration (generally, changes on items other than those the indorsee was cashier.
A check with serial number 7-3666-223-3, dated August 7, required to be stated under Sec. 1, N.I.L.) and spoliation (10) The indorsement of a note by a stranger after its delivery to the payee
at the time the note was negotiated to the plaintiff.
1981 in the amount of P97,650.00 was issued by the Ministry (alterations done by a stranger) will not avoid the
(11) An extension of time given by the holder of a note to the principal
of Education and Culture payable to F. Abante Marketing. instrument, but the holder may enforce it only according to maker, without the consent of a surety co-maker.
This check was drawn against Philippine National Bank. its original tenor."
Abante Marketing, a client of Capitol City Development Bank, International Corporate Bank vs. CA (G.R. No. 129910 Sep
deposited the questioned check in its savings account with NOTE: SC in this case provided examples of material and 5, 2006)
said bank. In turn, Capitol deposited the same in its account immaterial alterations
with the Philippine Bank of Communications which, in turn, Alteration of a checks serial number is not a material alteration
sent the check to petitioner for clearing. Petitioner cleared A. Material Alterations: contemplated in the Section 125 of NIL.
(1) Substituting the words "or bearer" for "order."
the check as good and, thereafter, PBCom credited Capitol's (2) Writing "protest waived" above blank indorsements.
account for the amount stated in the check. However, (3) A change in the date from which interest is to run. The Ministry of Education and Culture issued 15 checks drawn
petitioner returned the check to PBCom and debited PBCom's (4) A check was originally drawn as follows: "Iron County Bank, Crystal Falls, against respondent PNB which petitioner ICB accepted for
account for the amount covered by the check, the reason Mich. Aug. 5, 1901. Pay to G.L. or order $9 fifty cents CTR" The insertion of
the figure 5 before the figure 9, the instrument being otherwise unchanged.
deposit on various dates. After 24 hours from submission of
being that there was a "material alteration" of the check (5) Adding the words "with interest" with or without a fixed rate. the checks to respondent for clearing, petitioner paid the
number. (6) An alteration in the maturity of a note, whether the time for payment is value of the checks and allowed the withdrawals of the
thereby curtailed or extended. deposits. However, on 14 October 1981, respondent returned
(7) An instrument was payable "First Nat'l Bank" the plaintiff added the word
Issue: WoN alteration of serial number in a check is "Marion."
all the checks to petitioner without clearing them on the
considered material alteration (8) Plaintiff, without consent of the defendant, struck out the name of the ground that they were materially altered (checks serial
defendant as payee and inserted the name of the maker of the original note. number is altered). Thus, petitioner instituted an action for
(9) Striking out the name of the payee and substituting that of the person collection of sums of money against respondent to recover
Held: No, An alteration is said to be material if it alters the who actually discounted the note.
effect of the instrument. It means an unauthorized change in the value of the checks.
(10) Substituting the address of the maker for the name of a co-maker. 10
an instrument that purports to modify in any respect the
obligation of a party or an unauthorized addition of words or B. Immaterial Alterations: Issue: WON alteration of serial number in a check is
(1) Changing "I promise to pay" to "We promise to pay", where there are two
numbers or other change to an incomplete instrument considered material alteration
makers.
relating to the obligation of a party. In other words, a (2) Adding the word "annual" after the interest clause.
material alteration is one which changes the items which are (3) Adding the date of maturity as a marginal notation. Held: see ruling in the next preceding case
required to be stated under Section 1 of the Negotiable (4) Filling in the date of actual delivery where the makers of a note gave it
with the date in blank, "July ____."
Instruments Law. Serial number of the check in question, an Lim vs. CA (G.R. No. 107898 Dec 19, 1995)
(5) An alteration of the marginal figures of a note where the sum stated in
item which, it can readily be observed, is not an essential words in the body remained unchanged.
requisite for negotiability under Section 1 of the Negotiable (6) The insertion of the legal rate of interest where the note had a provision The important place to consider in the consummation of a negotiable
for "interest at _______ per cent." instrument is the place of delivery. Delivery is the final act essential
Instruments Law. The aforementioned alteration did not to its consummation as an obligation. The place where the bills were
fallschirmja ger Page 1

written, signed, or dated does not necessarily fix or determine the place necessarily fix or determine the place where they were on the back of the check "all prior and/or lack of
where they were executed.
executed. What is of decisive importance is the delivery indorsement guaranteed" and presented it to FNCB for
Spouses Lim were charged with estafa and violations of BP22 thereof. The delivery of the instrument is the final payment through the Central Bank Clearing House. Believing
for allegedly purchasing goods from Linton Commercial act essential to its consummation as an obligation. An the check was genuine, and relying on the guaranty and
Corporation and issuing checks as payment thereof. The undelivered bill or note is inoperative. Until delivery, the endorsement of Republic appearing on the back of the check,
checks when presented to the bank were dishonored for contract is revocable. And the issuance as well as the FNCB paid P9,240 to Republic through the Central Bank
insufficiency of funds or the payment for the checks delivery of the check must be to a person who takes it as Clearing House on 15 March 1966. On 19 April 1966, SMC
has been stopped. Petitioners questioned the jurisdiction of a holder, which means "(t)he payee or indorsee of a bill or notified FNCB of the material alteration in the amount of the
the RTC of Malabon contending that the prosecution failed to note, who is in possession of it, or the bearer thereof." check in question. FNCB lost no time in recrediting P9,240 to
prove that any of the essential elements of the crime Delivery of the check signifies transfer of possession, SMC. On 19 May 1966, FNCB informed Republic in writing of
punishable under B.P. Blg. 22 was committed within its whether actual or constructive, from one person to another the alteration and the forgery of the endorsement of J.
territorial jurisdiction. They claimed that what was proved with intent to transfer title thereto. Although LINTON sent a Roberto C. Delgado. By then, Delgado had already withdrawn
was that all the elements of the offense were committed in collector who received the checks from petitioners at their his account from Republic. On 15 August 1966, FNCB
Kalookan City. The checks were issued at their place of place of business in Kalookan City, they were actually issued demanded that Republic refund the P9,240 on the basis of
business, received by a collector of LINTON, and dishonored and delivered to LINTON at its place of business in Balut, the latter's endorsement and guaranty. Republic refused,
by the drawee bank, all in Kalookan City. Navotas. The receipt of the checks by the collector of claiming there was delay in giving it notice of the alteration;
LINTON is not the issuance and delivery to the payee in that it was not guilty of negligence; that it was the drawer's
Issue: WON the RTC of Malabon has the jurisdiction in the contemplation of law. The collector was not the person who (SMC's) fault in drawing the check in such a way as to permit
case at bar could take the checks as a holder,i.e., as a payee or indorsee the insertion of numerals increasing the amount; that FNCB,
thereof, with the intent to transfer title thereto. Neither as drawee, was absolved of any liability to the drawer (SMC),
Held: Yes, venue or jurisdiction lies either in the Regional could the collector be deemed an agent of LINTON with thus, FNCB had no right of recourse against Republic.
Trial Court of Kalookan City or Malabon. It is settled that respect to the checks because he was a mere employee.
venue in criminal cases is a vital ingredient of jurisdiction. Issue: WON Republic Bank is liable to reimburse FNCB of its
It shall be where the crime or offense was committed Republic Bank vs CA (G.R. No. 42725 Apr 22, 1991) loss
or any one of the essential ingredients thereof took place.
In determining the proper venue for these cases, the When the drawee bank fails to return a forged or altered check to the Held: No, the 24-hour clearing house rule embodied in
following are material facts a) the checks were issued at collecting bank within the 24-hour clearing period, the collecting bank is Section 4(c) of Central Bank Circular 9, as amended,
the place of business of Linton; b) they were delivered to absolved from liability.
provides, "Items which should be returned for any reason
Linton at the same place; c) they were dishonored in whatsoever shall be returned directly to the bank, institution
Kalookan City; d) petitioners had knowledge of the On 25 January 1966, San Miguel Corporation (SMC), drew a
dividend Check 108854 for P240, Philippine currency, on its or entity from which the item was received. For this purpose,
insufficiency of funds in their account. Under Section 191 the Receipt for Returned Checks (Cash Form 9) should be
of the Negotiable Instruments Law, issue means the first account in First National City Bank (FNCB) in favor of J.
Roberto C. Delgado, a stockholder. After the check had been used. The original and duplicate copies of said Receipt shall
delivery of the instrument complete in its form to a person be given to the Bank, institution or entity which returned the
who takes it as holder. The term holder on the other hand delivered to Delgado, the amount on its face was
fraudulently and without authority of the drawer, SMC, items and the triplicate copy should be retained by the bank,
refers to the payee or indorsee of a bill or note who is in institution or entity whose demand is being returned. At the
possession of it or the bearer thereof. The important place altered by increasing it from P240 to P9,240. The check was
indorsed and deposited on 14 March 1966 by Delgado in his following clearing, the original of the Receipt for Returned
to consider in the consummation of a negotiable instrument Checks shall be presented through the Clearing Office as a
is the place of delivery. Delivery is the final act account with the Republic Bank. Republic accepted the
check for deposit without ascertaining its genuineness and demand against the bank, institution or entity whose item
essential to its consummation as an obligation. The place has been returned. Nothing in this section shall prevent the
where the bills were written, signed, or dated does not regularity. Republic endorsed the check to FNCB by stamping

returned items from being settled by direct reimbursement warranties as an indorser and cannot set up the defense of forgery as Issue: Where checks bearing forged endorsements are paid,
against the drawee bank.
to the bank, institution or entity returning the items. All who bears the loss, the drawer, the drawee bank or the
items cleared at 11:00 o'clock A.M. shall be returned not collecting bank?
later than 2:00 o'clock P.M. on the same day and all items The Province of Tarlac maintains a current account with the
cleared at 3:00 o'clock P.M. shall be returned not later than Philippine National Bank (PNB) Tarlac Branch where the
provincial funds are deposited. Checks issued by the Province Held: The collecting bank bears the loss. Checks having
8:30 A.M. of the following business day except for items forged indorsements should be differentiated from forged
cleared on Saturday which may be returned not later than are signed by the Provincial Treasurer and countersigned by
the Provincial Auditor or the Secretary of the Sangguniang checks or checks bearing the forged signature of the drawer.
8:30 A.M. of the following day." The 24-hour clearing house A forged signature, whether it be that of the drawer or the
rule is a valid rule applicable to commercial banks. It is true Bayan. A portion of the funds of the province is allocated to
the Concepcion Emergency Hospital. The allotment checks payee, is wholly inoperative and no one can gain title to the
that when an endorsement is forged, the collecting bank or instrument through it. A person whose signature to an
last endorser, as a general rule, bears the loss. But the for said government hospital are drawn to the order of
"Concepcion Emergency Hospital, Concepcion, Tarlac" or "The instrument was forged was never a party and never
unqualified endorsement of the collecting bank on the check consented to the contract which allegedly gave rise to such
should be read together with the 24-hour regulation on Chief, Concepcion Emergency Hospital, Concepcion, Tarlac."
The checks are released by the Office of the Provincial instrument. Section 23 does not avoid the instrument but
clearing house operation. Thus, when the drawee bank fails only the forged signature. Thus, a forged indorsement does
to return a forged or altered check to the collecting bank Treasurer and received for the hospital by its administrative
officer and cashier. In January 1981, the books of account of not operate as the payee's indorsement. The exception to the
within the 24-hour clearing period, the collecting bank is general rule in Section 23 is where "a party against whom it is
absolved from liability. In the case at bar, FNCB failed to the Provincial Treasurer were post-audited by the Provincial
Auditor. It was then discovered that the hospital did not sought to enforce a right is precluded from setting up the
return the altered check to Republic Bank within the 24-hour forgery or want of authority." A) Parties who warrant or
clearing period thus absolving Republic from liability. Unless receive several allotment checks drawn by the Province. On
February 19, 1981, the Provincial Treasurer requested the admit the genuineness of the signature in question and B)
an alteration is attributable to the fault or negligence of the those who, by their acts, silence or negligence are estopped
drawer himself, such as when he leaves spaces on the check manager of the PNB to return all of its cleared checks which
were issued from 1977 to 1980 in order to verify the from setting up the defense of forgery, are precluded from
which would allow the fraudulent insertion of additional using this defense. Indorsers, persons negotiating by delivery
numerals in the amount appearing thereon, the remedy of regularity of their encashment. After the checks were
examined, the Provincial Treasurer learned that 30 checks and acceptors are warrantors of the genuineness of the
the drawee bank that negligently clears a forged and/or signatures on the instrument. In bearer instruments, the
altered check for payment is against the party responsible for amounting to P203,300.00 were encashed by one Fausto
Pangilinan, with the Associated Bank acting as collecting signature of the payee or holder is unnecessary to pass title
the forgery or alteration otherwise, it bears the loss. It may to the instrument. Hence, when the indorsement is a forgery,
not charge the amount so paid to the account of the drawer, bank. Pangilinan is a retired cashier of Concepcion
Emergency Hospital but continues to be the one collecting only the person whose signature is forged can raise the
if the latter was free from blame, nor recover it from the defense of forgery against a holder in due course. The checks
collecting bank if the latter made payment after proper the check from the Office of Provincial Treasurer. It turned
out that Pangilinan is forging the signature of Dr. Adena involved in this case are order instruments, hence, the
clearance from the drawee. following discussion is made with reference to the effects of
Canlas who was chief of the payee hospital making him an
indorsee of the check. All the checks bore the stamp of a forged indorsement on an instrument payable to order.
Associated Bank vs CA (G.R. No. 107382 Jan 31, 1996) Associated Bank which reads "All prior endorsements Where the instrument is payable to order at the time of the
guaranteed ASSOCIATED BANK." On February 26, 1981, the forgery, such as the checks in this case, the signature of its
An indorser of an order instrument warrants "that the instrument is genuine rightful holder (here, the payee hospital) is essential to
and in all respects what it purports to be; that he has a good title to it; Provincial Treasurer wrote the manager of the PNB seeking
the restoration of the various amounts debited from the transfer title to the same instrument. When the holder's
that all prior parties had capacity to contract; and that the instrument is at
the time of his indorsement valid and subsisting." He cannot interpose the current account of the Province. indorsement is forged, all parties prior to the forgery may
defense that signatures prior to him are forged. A collecting bank where a raise the real defense of forgery against all parties
check is deposited and which indorses the check upon presentment with the subsequent thereto. An indorser of an order instrument
drawee bank, is such an indorser. So even if the indorsement on the check
warrants "that the instrument is genuine and in all respects
deposited by the bank's client is forged, the collecting bank is bound by his
what it purports to be; that he has a good title to it; that all

prior parties had capacity to contract; and that the bank. The drawee bank may not debit the account of the genuineness of any indorsement. The drawee bank's duty is
instrument is at the time of his indorsement valid and drawer but may generally pass liability back through the but to verify the genuineness of the drawer's signature and
subsisting." He cannot interpose the defense that signatures collection chain to the party who took from the forger and, not of the indorsement because the drawer is its client.
prior to him are forged. A collecting bank where a check is of course, to the forger himself, if available. In other words, Moreover, the collecting bank is made liable because it is
deposited and which indorses the check upon presentment the drawee bank canseek reimbursement or a return of the privy to the depositor who negotiated the check. The bank
with the drawee bank, is such an indorser. So even if the amount it paid from the presentor bank or person. 29 knows him, his address and history because he is a client. It
indorsement on the check deposited by the bank's client is Theoretically, the latter can demand reimbursement from has taken a risk on his deposit. The bank is also in a better
forged, the collecting bank is bound by his warranties as an the person who indorsed the check to it and so on. The loss position to detect forgery, fraud or irregularity in the
indorser and cannot set up the defense of forgery as against falls on the party who took the check from the forger, or on indorsement. Hence, the drawee bank can recover the
the drawee bank. The bank on which a check is drawn, the forger himself. In this case, the checks were indorsed by amount paid on the check bearing a forged indorsement from
known as the drawee bank, is under strict liability to pay the the collecting bank (Associated Bank) to the drawee bank the collecting bank. However, a drawee bank has the duty to
check to the order of the payee. The drawer's instructions (PNB). The former will necessarily be liable to the latter for promptly inform the presentor of the forgery upon discovery.
are reflected on the face and by the terms of the check. the checks bearing forged indorsements. If the forgery is that If the drawee bank delays in informing the presentor of the
Payment under a forged indorsement is not to the drawer's of the payee's or holder's indorsement, the collecting bank is forgery, thereby depriving said presentor of the right to
order. When the drawee bank pays a person other than the held liable, without prejudice to the latter proceeding recover from the forger, the former is deemed negligent and
payee, it does not comply with the terms of the check and against the forger. Since a forged indorsement is inoperative, can no longer recover from the presentor. Applying these
violates its duty to charge its customer's (the drawer) the collecting bank had no right to be paid by the drawee rules to the case at bench, PNB, the drawee bank, cannot
account only for properly payable items. Since the drawee bank. The former must necessarily return the money paid by debit the current account of the Province of Tarlac because
bank did not pay a holder or other person entitled to receive the latter because it was paid wrongfully. More importantly, it paid checks which bore forged indorsements. However, if
payment, it has no right to reimbursement from the drawer. by reason of the statutory warranty of a general indorser in the Province of Tarlac as drawer was negligent to the point
The general rule then is that the drawee bank may not debit section 66 of the Negotiable Instruments Law, a collecting of substantially contributing to the loss, then the drawee
the drawer's account and is not entitled to indemnification bank which indorses a check bearing a forged indorsement bank PNB can charge its account. If both drawee bank-PNB
from the drawer. The risk of loss must perforce fall on the and presents it to the drawee bank guarantees all prior and drawer-Province of Tarlac were negligent, the loss
drawee bank. However, if the drawee bank can prove a indorsements, including the forged indorsement. It warrants should be properly apportioned between them. The loss
failure by the customer/drawer to exercise ordinary care that the instrument is genuine, and that it is valid and incurred by drawee bank-PNB can be passed on to the
that substantially contributed to the making of the forged subsisting at the time of his indorsement. Because the collecting bank-Associated Bank which presented and
signature, the drawer is precluded from asserting the indorsement is a forgery, the collecting bank commits a indorsed the checks to it. Associated Bank can, in turn, hold
forgery. If at the same time the drawee bank was also breach of this warranty and will be accountable to the the forger, Fausto Pangilinan, liable. The Court finds as
negligent to the point of substantially contributing to the drawee bank. This liability scheme operates without regard reasonable, the proportionate sharing of fifty percent - fifty
loss, then such loss from the forgery can be apportioned to fault on the part of the collecting/presenting bank. Even if percent (50%-50%). Due to the negligence of the Province of
between the negligent drawer and the negligent bank. In the latter bank was not negligent, it would still be liable to Tarlac in releasing the checks to an unauthorized person
cases involving a forged check, where the drawer's signature the drawee bank because of its indorsement. The Court has (Fausto Pangilinan), in allowing the retired hospital cashier
is forged, the drawer can recover from the drawee bank. No consistently ruled that "the collecting bank or last endorser to receive the checks for the payee hospital for a period
drawee bank has a right to pay a forged check. If it does, it generally suffers the loss because it has the duty to ascertain close to three years and in not properly ascertaining why the
shall have to recredit the amount of the check to the the genuineness of all prior endorsements considering that retired hospital cashier was collecting checks for the payee
account of the drawer. The liability chain ends with the the act of presenting the check for payment to the drawee is hospital in addition to the hospital's real cashier, respondent
drawee bank whose responsibility it is to know the drawer's an assertion that the party making the presentment has done Province contributed to the loss amounting to P203,300.00
signature since the latter is its customer. In cases involving its duty to ascertain the genuineness of the endorsements." and shall be liable to the PNB for fifty (50%) percent thereof.
checks with forged indorsements, such as the present The drawee bank is not similarly situated as the collecting In effect, the Province of Tarlac can only recover fifty
petition, the chain of liability does not end with the drawee bank because the former makes no warranty as to the percent (50%) of P203,300.00 from PNB. The collecting bank,

Associated Bank, shall be liable to PNB for fifty (50%) percent contract. Ong, however, claims that these checks were never
of P203,300.00. It is liable on its warranties as indorser of delivered to HCCC. Upon inquiry with Diaz, Ong learned that
the checks which were deposited by Fausto Pangilinan, the GSIS gave Francisco custody of the checks since she
having guaranteed the genuineness of all prior indorsements, promised that she would deliver the same to HCCC. Instead,
including that of the chief of the payee hospital, Dr. Adena Francisco forged the signature of Ong, without his knowledge
Canlas. Associated Bank was also remiss in its duty to or consent, at the dorsal portion of the said checks to make
ascertain the genuineness of the payee's indorsement. it appear that HCCC had indorsed the checks; Francisco then
indorsed the checks for a second time by signing her name at
Francisco vs CA (G.R. No. 116320 Nov 29, 1999) the back of the checks and deposited the checks in her IBAA
savings account. IBAA credited Francisco's account with the
An agent, when so signing, should indicate that he is merely signing in amount of the checks and the latter withdrew the amount so
behalf of the principal and must disclose the name of his principal; credited. Francisco claims that she was, in any event,
otherwise he shall be held personally liable. authorized to sign Ong's name on the checks by virtue of the
Certification executed by Ong in her favor giving her the
A Land Development and Construction Contract was entered authority to collect all the receivables of HCCC from the
into on June 23, 1977 by A. Francisco Realty & Development GSIS, including the questioned checks.
Corporation (AFRDC), of which petitioner Adalia Francisco
(Francisco) is the president, and private respondent Herby Issue: WON Franciscos defense of agency is tenable
Commercial & Construction Corporation (HCCC), represented
by its President and General Manager private respondent Held: No, petitioner's defense must fail. The Negotiable
Jaime C. Ong (Ong), pursuant to a housing project of AFRDC Instruments Law provides that where any person is under
at San Jose del Monte, Bulacan, financed by the Government obligation to indorse in a representative capacity, he may
Service Insurance System (GSIS). Under the contract, HCCC indorse in such terms as to negative personal liability. An
agreed to undertake the construction of 35 housing units and agent, when so signing, should indicate that he is merely
the development of 35 hectares of land. The payment of signing in behalf of the principal and must disclose the name
HCCC for its services was on a turn-key basis, that is, HCCC of his principal; otherwise he shall be held personally liable.
was to be paid on the basis of the completed houses and Even assuming that Francisco was authorized by HCCC to sign
developed lands delivered to and accepted by AFRDC and the Ong's name, still, Francisco did not indorse the instrument in
GSIS. To facilitate payment, AFRDC executed a Deed of accordance with law. Instead of signing Ong's name,
Assignment in favor of HCCC to enable the latter to collect Francisco should have signed her own name and expressly
payments directly from the GSIS. Furthermore, the GSIS and indicated that she was signing as an agent of HCCC. Thus, the
AFRDC put up an Executive Committee Account with the Certification cannot be used by Francisco to validate her act
Insular Bank of Asia & America (IBAA) in the amount of of forgery.
P4,000,000.00 from which checks would be issued and co-
signed by petitioner Francisco and the GSIS Vice-President
Armando Diaz (Diaz). Sometime in 1979, after an
examination of the records of the GSIS, Ong discovered that
Diaz and Francisco had executed and signed seven checks, of
various dates and amounts, drawn against the IBAA and
payable to HCCC for completed and delivered work under the

government structure instituted through a system of

Issue: WON the contention of Paras is tenable decentralization with effective mechanism of recall,
initiative, and referendum . . . ."
Held: No. It is a rule in statutory construction that every part
of the statute must be interpreted with reference to the Davide (concurring): A regular election, whether national or
context, i.e., that every part of the statute must be local, can only refer to an election participated in by those
considered together with the other parts, and kept who possess the right of suffrage, are not otherwise
subservient to the general intent of the whole enactment. disqualified by law, and who are registered voters. One of
The evident intent of Section 74 is to subject an elective the requirements for the exercise of suffrage under Section
Paras vs COMELEC (G.R. No. 123169 Nov 4, 1996) local official to recall election once during his term of office. 1, Article V of the Constitution is that the person must be at
Paragraph (b) construed together with paragraph (a) merely least 18 years of age, and one requisite before he can vote is
designates the period when such elective local official may that he be a registered voter pursuant to the rules on
SK includes the youth with ages ranging from 15 to 21 (Sec. 424, Local be subject of a recall election, that is, during the second registration prescribed in the Omnibus Election Code (Section
Government Code of 1991). Accordingly, they include many who are not
qualified to vote in a regular election, viz., those from ages 15 to less than year of his term of office. Thus, subscribing to petitioner's 113-118). Under the law, the SK includes the youth with ages
18. In no manner then may SK elections be considered a regular election interpretation of the phrase regular local election to include ranging from 15 to 21 (Sec. 424, Local Government Code of
(whether national or local). the SK election will unduly circumscribe the novel provision 1991). Accordingly, they include many who are not qualified
of the Local Government Code on recall, a mode of removal to vote in a regular election, viz., those from ages 15 to less
Petitioner Danilo E. Paras is the incumbent Punong Barangay of public officers by initiation of the people before the end than 18. In no manner then may SK elections be considered a
of Pula, Cabanatuan City who won during the last regular of his term. And if the SK election which is set by R.A No. regular election (whether national or local).
barangay election in 1994. A petition for his recall as Punong 7808 to be held every three years from May 1996 were to be
Barangay was filed by the registered voters of the barangay. deemed within the purview of the phrase "regular local
Acting on the petition for recall, public respondent election", as erroneously insisted by petitioner, then no
Commission on Elections (COMELEC) resolved to approve the recall election can be conducted rendering inutile the recall
petition, scheduled the petition signing on October 14, 1995, provision of the Local Government Code. In the
and set the recall election on November 13, 1995. Petitioner interpretation of a statute, the Court should start with the
opposed the proceedings Citing Section 74 (b) of the Local assumption that the legislature intended to enact an
Government Code, which states that "no recall shall take effective law, and the legislature is not presumed to have
place within one (1) year from the date of the official's done a vain thing in the enactment of a statute. 5 An
assumption to office or one (1) year immediately preceding interpretation should, if possible, be avoided under which a
a regular local election", petitioner insists that the scheduled statute or provision being construed is defeated, or as
January 13, 1996 recall election is now barred as the otherwise expressed, nullified, destroyed, emasculated,
Sangguniang Kabataan (SK) election was set by Republic Act repealed, explained away, or rendered insignificant,
No. 7808 on the first Monday of May 1996, and every three meaningless, inoperative or nugatory. It is likewise a basic
years thereafter. In support thereof, petitioner precept in statutory construction that a statute should be
cites Associated Labor Union v. Letrondo-Montejo, 237 SCRA interpreted in harmony with the Constitution. Thus, the
621, where the Court considered the SK election as a regular interpretation of Section 74 of the Local Government Code,
local election. Petitioner maintains that as the SK election is specifically paragraph (b) thereof, should not be in conflict
a regular local election, hence no recall election can be had with the Constitutional mandate of Section 3 of Article X of
for barely four months separate the SK election from the the Constitution to "enact a local government code which
recall election. shall provide for a more responsive and accountable local

Abungan convicted of murder sentenced to RP and ordered to II. NATURE AND EFFECTS OF OBLIGATION
pay indemnity of P50,000. Abungan died.
A. Obligation to give
Issue: WON death of Abungan extinguishes his criminal and
civil liability 1. Determinate Thing
Held: Yes. Extinguised based on delicts. Art. 89(1) of RPC, Equatorial vs. MayfairRight of First Refusal
death of convict occurs before final judgment, extinguished.
But only criminal liability is extinguished and also the civil Carmelo owned a parcel of land with 2-storey building and
**Tan vs. Nifatan Isa-isa na silang namamatay, na-acquit liability directly arising from and based solely on offense. leased said portions to Mayfair. On their contract, stipulation
pa. Claim for Civil liability survives if the same may also be that Mayfair has 30-day exclusive option to purchase the
predicated on a source of oblig other than delict. same should the lessor decide to sell the leased premises.
Lim of a wealthy family was shot dead by the Tan brothers. Source: Crimes or Delicts. Acts or omission. But Carmelo wanted to sell the whole property. He sold
But the Tan brothers one by one died before the instant entire prop to Equatorial. Mayfair filed for annulment of sale
petition could be filed. The wife of Lim with the children DBP vs CA Restructuring of Debt bec of lack of consideration. Mayfair claimed that he told
instituted an action for damages against charged 10 years Carmelo that it is willing to purchase the same and that it
from the happening of the crime. Tans filed motion to DBP granted PHUMACO and PHILICO an industrial loan for has the right of first refusal.
dismiss because of acquittal. P2.5M, 2M in bonds and 500k in cash. Promissory note
executed and a mortgage over their present and future Issue: WON the sale can be nullified because of Mayfairs
ISSUE: a. WON the action has prescribed. properties. DBP granted another loan of 1.7M reflected in the action
b. WON civil action would still prosper even when the amended mortgage contract. After 7 yrs the outstanding
accused were acquitted. balance was restructured bec Resp failed to pay. Resp still Held: The contract is deemed rescinded. Rescission a relief
failed to pay under the restructured payment. DBP allowed for protection of one of the contracting parties and
Held: a. No. Action for prescription for liabilities and charges refinanced the matured obligation and granted 3 foreign even 3rd persons from injury or to protect some incompatible
of crimes is 20 years. currency denominated loans. Apart from interest, there are and preferred right by the contract. Mayfair has the
additional charges and penalties in case of default. After 10 opportunity to negotiate.
b. Yes. The reason for acquittal was not stated or explained years, DBP initiated for forclosure of mortgaged prop and the
and Art. 33 allows independent civil action in case of physical balance shoot up to P63M. Resp claim that reason for non- Determinate Thing: There is a problem because
injuries including death. (ROC?). payment is because financial rehabilitation from a contract determination cannot be made bec prop is indivisible. You
with the military didnt push thru. cannot pinpoint which is the 25% of the property.
10 years prescription for actions when source is created by Determination of the exact portion of the building.
law. 5 years when not fixed by the Code or other laws. 20 Issue: WON the resp can claim without fault in default of the
years for crimes or delicts as source of obligations. non-happening of the contract with the military. De Leon vs. Sorianobigyan ng palay si nanay.
Source: Delict or Crimes. Held: NO. DBP is no party to resp and AFPs contract. Resp Natural children of Soriano agreed that they are to deliver
can claim from AFP but without prejudice to its contract with certain number of cavanes of palay each year to Soriano and
DBP. DBP has given Resp all the possible options for payment. shall only cease upon death of mother. But deliveries were of
People vs Abungan namatay yung kriminal 3,400 cavanes and children claimed that due to Huk troubles
Source: Contract in Central Luzon.

Issue: WON inability to deliver was permissible due to force the ff day when they first bought the 345 sqm lot. Proof of argues that it can only be held liable under the conditions
majeure sale was attached and that payable in 5 years. Resp expressly set in the pension plan. But the Court held that the
deposited the balance in court. Company that violated the contract with its employees, by
Held: No. The object to be delivered was generic and set no discontinuing the plan without their consent, is not in the
bounds or limits to the palay to be paid. Any palay of the Issue: WON there was a contract of sale. position to insist upon the terms of the very contract they
same quality can replace. Impossibility must consist in the have breached.
nature of the thing to be done and not the inability of the Held: Yes. There was a contract of sale which transferred the
party to do it. ownership to resp. Pet claimed that the object cannot be
determined with sufficient certainty. Court held that it is
capable of being determined w/o need for new contract and CO vs. CApinagawa kong kotse, na-carnap.
the receipts showed that payment was to the lot adjoining
Norkis vs. CAAko ang bumili ng motor iba ang gumamit. the prev paid lot on three sides thereof. The land is Pet entrusted his car to Resp to make same job repair
determinate or determinable. Ownership transferred by services and supply of parts which was to be returned after 3
Nepales bought a motorcycle from Norkis and issued a chattel constructive delivery which is the execution of public days as per the contract. Pet paid in full. After 3 days the
mortgage in favor of DBP. Invoice was issued and motorcycle document. vehicle cant still be released due to failed battery so pet
was registered by Norkis evidenced by receipts of bought battery. When Pet was about to get it, resp said the
registration. Motor was delivered to a certain Julian Nepales Determinate Thing: The lot. car was carnapped while being road-tested. Resp claims
and an accident happened while being driven by a certain force majeure.
Payba. Norkis claims it cannot be held liable since ownership 2. Generic Thing
was already transferred to Nepales evidenced by the receipts Issue: WON Resp will be liable for the carnapping.
and the invoice. Norkis vs. CA
Held: Yes. It was due to negligence premised on delay which
Issue: WON ownership was transferred to Nepales. Generic thing: motorcycle is the basis of the complaint. Carnapping cannot be
considered as fortuitous. It must be proved and established
Held: No. No actually delivery nor constructive one. The PLDT vs. JeturianPension bago gera. that it is an act of God. No other evidence but the police
receipts of reg fees and the invoice is nothing but a detailed report. Even when Pet agreed to resked repair, cant be
statement of the nature and quantity sold and not a bill of PLDT adopted in 1923 a Plan for Emloyees Pension. In 1945 taken as waiver bec he really has no other choice but to
sale. Intent considered. Intent was not to transfer ownership the BOD adopted a resolution discontinuing the pension plan. leave it since he cant have it run.
but to facilitate execution of chattel mortgage. Hence this action of Resp.
3. Effect of Loss
Determinate Thing: The motorcycle was a generic thing. (?) Issue: WON the pre-war employees are entitled to the
pension. Bunge vs. CamenforteCopra ko sayo binenta ko.
Heirs of Juan San Andres vs. RodriguezBinili ko na ang
nakapaligid na lupa. Held: Yes. But with the exception of those who died or left Plaintiffs filed to recover certain damages from the def bec
before the outbreak of the war. The pension plan was not a of the latters failure to deliver Phil copra they agreed to
JSA sold 345 sqm lot to Rodriguez. There was a deed of sale. gratuity but an inducement for employees to continue deliver. A contract was entered into where the VPC sold 500
JSA died and Rodriguez appointed administrator. The heirs indefinitely in service. The plan ripened into a binding tons of Phil Copra to BC. The vendor would ship the copra to
engaged services of a geodetic engg and found out that resp contract upon its implied acceptance of the employees. USA but even with demands, failed to do so. The vendee
has encroached the lot by 509 sqm. They sent letter to Acceptance is inferred from their entering the employ of the however believed in good faith that it shall be delivered so it
vacate. Resp claimed they bought the said portion of the lot company and staying after the plan was made known. PLDT sold the expected copra to EDOW. Bec vendor failed, vendee

suffered damages. VPC denies contract and said that Held: Yes. 1167 states that when a person is obliged to do
Vicente, the manager who contracted had no authority to do something and fails to do the same, it shall be executed at
so. Force majeure is also claimed since a storm destroyed the his cost. What is poorly done be undone. D claims no period
bodega. but Court held that fixing a period would only be a mere
formality and would serve no purpose than to delay. Liable
Issue: WON VPC is held liable. B. Obligation to do under 1170.
Held: Yes. Subject matter is Phil Copra, does not refer to any Hahn vs. CAI want these diamond rings. To do: Specific performance repair typewriter.
particular or specific copra. Since generic, obligation cant
be deemed extinguished by the destruction/disappearance. Santos received 2 diamond rings with a total amount of 47K. Oceana vs Jabsonsubdivision kontrata, maling akala.
Obligation subsists as long as commodity is available. Pet can She issued separate receipts therefore in which she
also sell the copra which they expect to acquire in the future acknowledged that they have been delivered by Letty Hahn To do: To give 40% of the cash receipts from sale of
for purposes of speculation. for sale on commission and that they would be returned upon subdivision lots.
demand if unsold. The rings were not sold nor returned after
Effect: Subsistence of obligation since generic object. demand. Thus this action. **Woodhouse vs. HaliliMission Softdrinks
Ocena vs. Jabsonsubdivision na kontrata, maling akala. Issue: WON the contract was of sale or agency. P and D entered into an agreement that they will form a
partnership for the bottling and distribution of Mission
Resp filed a complaint for modification of the terms and Held: Of agency. There is no evidence that would tell that is softdrinks, P as manager and D as capitalist. When the
conditions of its subdivision contract with petitioners. was of sale. Their contracts stipulation does not show it was bottling plant was in operation P wants to execute the
Allegations are that price in oil and derivatives have of sale. Although resp was willing to give a different object, partnership papers but D refuses. D claims that he was made
increased, not within the control of the plaintiff. It will the debtor cannot compel the creditor to receive a diff to believe that P has the exclusive ownership of the bottling
cause unjust enrichment to the pet. In the contract, the pet object. franchise.
are guaranteed as landowners and that they will receive 40%
of all cash receipts from the sale of the subdivision lots. Resp To do: Deliver the rings, the specific rings. Issue: WON the misrepresentation of P can vitiate the
hinged their argument on 1267 when the service has become contract.
so difficult beyond contemplation, release from obligation. Chavez vs. GonzalesDahil sa typewriter.
Held: No. Although P was guilty of misrepresentation, it was
Issue: WON there is a sufficient cause of action for P delivered to D a typewriter for D to repair. D was not able not the causal consideration or the principal inducement that
modification of the subdivision contract. to repair the typewriter and asked for P6 for spare parts. P led defendant to enter into the partnership. D may not be
went to D and demanded the typewriter which D gave in a compelled to carry out the agreement which is to execute
Held: No. Cited article does not grant the courts this wrapped package. When P opened it at home, he saw that the partnership papers. The defendant has obligation to do
authority to remake, modify or revise the contract. Their the typewriter had missing parts and found it in shambles. P and not to give. The D reduced the percentage of P from 30%
contract has a force of law and should there be substitution demanded missing parts, interior cover and P6. P brought it to 15% bec of his misrepresentation.
or modification, it should be amongst the parties themselves. to a diff repair shop and spent P89.95. P filed for payment of
A showing of mere inconvenience, unexpected impediments P90 and damages. Obligation to do: Execute partnership contract.
or increased expenses is not enough. Equity cannot relieve
from bad bargains simply bec they are such. Issue: WON D is liable for damages. Ong vs. BognalbalShe wants her Kenzo Tiles, now na.
Effect: The contract has the force of law.

Bognalbal was an architect hired by Ong who was a Issue: WON resp has the auth to ask for demolition since enjoyment of lease. 1560, lessor shall not be liable for any
businesswoman to construct her boutique. Bog agrees to ownership already transferred to the prop owners or act of mere disturbance of 3rd person but lessee would have
furnish labor within 45 days and owner to pay every 2 weeks homeowners association. direct action against trespassers. No lessee would agree to
based on the accomplishment of work value. 4 th billing came pay rent for premises he could not enjoy.
and Ong refused to pay but reason was not clear on the Held: Yes. Restrictive covenant should still be followed.
record. She wanted to change Vinyl tiles to Kenzo flooring. Although courts generally view restrictive covenant with Delay in performance: It was the creditor who was in default
Ong claimed Bog abandoned job. disfavor but sustain them if reasonable, not contrary to or delay when it refused to get the payment given by the
Issue: WON Bog be liable for abandoning job. public policy, law etc. Intent of developer was to provide resp.
safety, aesthetic and decent living conditions and prevent
Held: No. He is not liable but is not justified for doing so. overcrowding. Art. 1168, when ob consists in not doing, Lopez vs. Tan TiocoIbenta mo ang asukal pag sinabi kong
1191, it was a reciprocal obligation and there is power to obligor does what was forbidden, shall be undone at his ibenta mo.
rescind it in case one doesnt comply with what is incumbent expense.
upon him. But this article should be judicially invoked. Lopez and Tan Tioco entered into a verbal contract that
Novation is not presumed. There must be an express Not to do: Expand structures of house. shell deliver certain sugar to Tan Tioco which he obligated
stipulation. Novation a. change of obj or principal conditions, himself to store until he receives instructions from her to sell
b. substituting person of debtor c. subrogating 3rd person in D. Effect of Breach them. She delivered the piculs of sugar and instructed to sell
the rights of creditor. Liability is on the first infractor, 1192. in on Sept 1904 but def did not do so. Pet filed action. Def
There has been no contract novation that required Bog to 1. Delay in Performance denies allegations.
finish the Kenzo flooring before the 4 th billing shall be paid.
1186. Condition shall be deemed fulfilled when the obligor Villaruel vs. Manila MotorsKasalanan ng lawyer, naningil Issue: WON the defendant was in default.
voluntarily prevents the fulfillment. ng renta nung may gera.
Held: Yes. He was in default from the time the Pet
To do: Pay 4th billing. (Reciprocal-di mo ginawa di ko rin Manila Motors and Villaruel entered into a contract whereby demanded to deliver or do something, or the fulfillment of
gagawin-pero sabi nga ng court hindi pa rin yun justification, the former agreed to convey by lease to the latter some the obligation. Neither the contract nor the law demands to
but only the first infractor shall be liable). premises. The term of lease is 5 years. The premises were make judicial demand than extrajudicial. The price of the
invaded by the Japanese and then the American occupied the sugar should be from the time she instructed the def to sell
same building. The occupants paid the same rate as the them.
C. Obligation not to do defendants after which they have vacated the premises. Def
renewed contract for addtl 5 yrs. Pet, as per his lawyers Delay in Performance: Delay in selling the sugar upon
Fajardo vs. Freedom to BuildWag dagdagan kung hindi advise, demanded for rental from the Def for the period instructions.
bawasan! when the Jap and the Americans occupied the premises. The
premises was set on fire and the reason was unknown. Dela Rosa vs. BPIAtat sa announcement ng winners ng
FTB, owner-developer and seller of low-cost housing, sold to design contest.
petitioner-spouses a house and lot. Restrictive covenant was Issue: WON Pet has power to demand rentals and recover the
contained in the contract, easement. No upward and front same due to default. BPI held this contest of designs and plans for the construction
expansion which is contained in their Transfer Certificate. of a building. Prizes would be awarded not later than Nov.
Pets children are to wed so extended their house thus Held: No. Art. 1554 of CC of Spain states the duties of a 30, 1921. Plaintiff took part in the said contest and after the
contravening the terms of contract. Pet filed, demolish the lessor. A. deliver to the lessee the subject matter b. make date stipulated, the bank didnt award prize nor made any
unauth structures. thereon, during the lease, all repairs necessary and maintain announcement. Plaintiff filed.
serviceable condition c. maintain lessee in peaceful

Issue: WON BPI was in default when it did not release the Delay: Not in the Def for non-construction but in Plaintiff in Issue: WON force majeure can be claimed by defendant from
announcement on the date stipulated. non-payment of rentals. his non-fulfillment of obligation.
Held: The bank cannot be held in default through the mere Held: No. Ownership was already transferred to the buyer.
lapse of time. Plaintiff never demanded from bank and just Although there has been an agreement that the ownership
filed the case in Court. A binding obligation may originate shall remain with the seller until the price has been fully
from advertisements addressed to the general public. Bachrach Motor vs. Lee TayKinuha ng Kano ang truck paid, it was only for the security of payment but in the very
Demand will not be necessary only in certain conditions, but niya, ayaw na niyang magbayad. contract in was expressly agreed that the loss or damage
demand is indispensable as a general rule. Plaintiff has no after delivery to the buyer shall be borne by the buyer.
cause of action bec he alleges that the contest didnt push Def executed and delivered to the plaintiff a promissory note Exemptions from liability due to fortuitous event: 1.
thru but in consideration of the evidence, the materials are payable in installments which represents the balance of one determinate thing (in the present case, pecuniary in nature)
on their way to New York and were sent to a technical white chasses purchased by def from pet. The truck was 2. No stipulation holding him liable even in case of fortuitous
committee. delivered to the def. After the outbreak of war, the truck
was one of the trucks that were commandeered by the Delay: Non-payment of balance.
Delay: Bank was not in default. No demand. USAFEE. Neither the plaintiff not def filed an official claim
from the US govt.
Lizares vs. HernaezCamarin was burned and lessee wont Equatorial vs. Mayfairright of first refusal
pay. Issue: WON the commandeering of the truck exempts the def
from payment of the obligation represented by the prom Delay: ***By not giving to Mayfair the 30-day period of which
Lizares and Hernaez entered into a contract, the former note. it is entitled to exercise right of first refusal upon
became the lessee of the two haciendas. Pet used one of the communication of Carmelo that he would sell the property.
improvements there which was a roofed camarin used in Held: No. There is no principle of law by which the obligation
manufacture of sugar. A fire occurred and destroyed the was extinguished. The interest was not reduced due to Co vs. CA--carnap
camarin. Pet demanded from Def that he reconstruct suspension since the pet was generous enough to compute
camarin. Def refused. Pet did not pay the rentals bec of non- only from 1948, the truck was commandeered in 1941. Def Delay: Delay in delivering the car to Co after demand which
construction of the camarin. Def claims Pet should be liable could have filed a claim from the US govt and he would have is the premise of negligence of resp.
for the fire since he is the lessee when the fire occurred. been paid but he failed to do so.
Aerospace vs. CASulfuric Acid na ayaw pang kunin.
Issue: WON plaintiff has responsibility to the damages caused Delay: Non-payment of the prom note.
by fire. Pet purchased from resp Philphos 500 MT of Sulfuric Acid. In
Lawyers Coop Pub vs. Taborabumili ng law books, their contract it was pets responsibility to get the acid from
Held. No. And so is the def. Force Majeure. But the plaintiff nasunog. resp. Philphos demanded that pet get the acid and pet
is in default with regard to the non-payment of rentals due chartered a vessel MT Sultan but the vessel was not able to
to non-construction of camarin. Although there is Tabora bought books from Pet and made partial payment. It get the whole volume bec it tilted. Resp sent a demand
presumption against lessee when loss in the leased prop was delivered to his law office. On the same date, a fire letter that the acid should be emptied or else petitioner will
occurs, proof is necessary to prove he is not responsible. broke out in the office and destroyed the building including be liable for the storage and other incremental expenses if
1183. When a thing is lost while in the possession of the the books. Def doesnt want to pay balance since the books pet fails to do so. Pet chartered MT Sultan again but it tilted
debtor, it is presumed that it loss occurred by his fault and were loss due to force majeure and the ownership has not so never gotten the whole volume. Chartered another vessel
not by fortuitous even in the absence of the contrary. been transferred to him yet. Don Victor and asked Resp to deliver additional orders. Resp
did not do so unless the remaining acid be emptied and that

pet pay the maintenance and storage. Pet filed and Held: Yes. The contract is the law and the resp is justified in P30K DP and P15K installment. Vincente didnt pay the
contended Resp is in default. invoking the acceleration clause declaring the entire oblig remaining P15K bec he paid it to SPGMI who constructed the
due and payable. The resp had the right to foreclose the deep well to which the windmill would be attached. And
Issue: WON the Resp is in default. mortgages extra-judicially. Failure to furnish a detailed even assuming that he owes pet P15K, it should have been
statement of account doesnt ipso facto result in offset by the collapse after a strong wind.
Held: No. The obligation to withdrew the 500MT of H2SO4 unliquidated obligation. Pet was in default.
before Aug. 1989 and the resp was already ready to deliver Issue: a. WON agreement to construct windmill included in
the same but it was Plaintiffs fault for not chartering Delay: Non-payment of availement of accommodation. the installation of a deep well.
another vessel which has the capacity to withdraw the b. WON the pet is under the obligation to reconstruct the
volume. It has the duty of emptying the acid. Pet claim that 2. Non-fulfillment windmill.
it was due to a storm thats why it cant empty the storage
but evidence proved that it was of the incapability of the Chavez vs. Gonzales Held: a. No. It was not included in the agreement. Intention
vessels. There was an obligation on the pet to empty the of the parties must be accorded primordial consideration and
storage. Non-fulfillment: The typewriter was not fixed. in case of doubt, contemporaneous and subsequent acts shall
They were the ones in delay. be principally considered.
Telefast vs. Castrodahil sa telegrama, mag-isa lang nang b. Yes. Pet claimed there is a strong wind but this is actually
Delay: Pet for not emptying the storage. ilibing ang mama. necessary for the windmill to turn. It was just newly
constructed, it should have not collapsed.
Selegna vs. UCPBcredit facility which ballooned. Consolacion Bravo-Castro died in Pangasinan and on the same
day the daughter sent a telegram to the US to inform the Non-fulfillment: Payment of last installment.
Selegna, rep by spouses Edgardo and Zenaida Angeles were other siblings and dad about death of Mom. The Mom was
granted a credit facility for P70M by UCPB. As a security, pet interred by daughter alone. When she came back to the Perez vs. CAniloko yung businessman at pinaalaga ang
executed real estate mortgages over several parcels of land. states, she found out that the telegram never reached her fishpond.
Pet also executed prom note every time they avail of credit siblings. Telefast claimed force majeure bec of technical
facility. In their credit agreement, it was stipulated that and atmospheric factors but no evidence to support. Juan Perez usufructuary of a parcel of land called Papaya
failure to pay any availment of the accommodation or Fishpond with other usufructuaries. The usufructuaries
interest or any sum due shall constitute an event of default Issue: WON force majeure applies. entered into a contract leasing the fishpond to Luis Keh for a
which shall allow resp bank to declare as immediate and period of 5 years. The contract states that the lessee cannot
payable all outstanding availments together with accrued Held: No. No evidence to support. And even so, def should sublease the fishpond nor assign his rights to anyone. But
interest. Pet increased credit facility and they agreed to have informed the plaintiff that it cannot transmit the Crisostomo was persuaded by the pet Keh to take over the
21.75% interest per annum. Demand letters were sent upon telegram. 1170 and 2176, guilty of fraud, negligence or Papaya fishpond bec Cris is a businessman. Executed a
failure to pay. Pet paid 10M as partial payment of accrued delay. 2217 for moral damages. written agreement. Cris even paid the rentals until 1985, 10
interest. UCPB applied for extra-judicial foreclosure of years of taking care of the fishpond. In 1979 however, pet
petitioners mortgaged properties. The obligation has Non-fulfillment: Sending of telegram. with armed men went to fishpond and showed that Keh
ballooned to 132M and pet alleged that 10M as payment had surrendered the fishpond to the usufructuaries.
the effect of updating and thereby averting the maturity of Tanguiling vs. CAwindmill na nasira sa wind.
the obligation. Issue: WON the resp is a sublessee of Keh which is barred by
A case involving proper interpretation of contract. JMI Engr the lease contract.
Issue: WON the Pet were in default. and GM proposed to resp Vicente to construct windmilling
system for him. They agreed on the construction for P60K.

Held: Yes. He was a sublessee. But Perez and his counsel short-sellling or forward sales. Prev contracts without prior
knew and acquiesced to that arrangement by their act of auth from Board. And evidence showed that Kalaw actually Necessito vs. ParasKnuckles killed the passengers.
receiving from the resp rentals evidenced by the receipts handled the corp well for it to profit. Force majeure reason.
which puts the pet in estoppelwhich arises when one by his Action against owners and operators of the commom carrier
acts and representations and admission or by his own silence Fraud: There is no fraud because Kalaw didnt need the known as the Phil Rabbit Bus Lines filed by one passenger and
when he is obliged to speak out, intentionally or thru Boards approval due to practice of trade. No negligence too the heirs of another who were injured as a result of the fall
culpable negligence induces another to believe certain facts on his part. into a river in which they were riding. The mother of the pet
to exist and such other rightfully relies and acts on such drowned and the son Necessito was injured.
beliefs so that he will be prejudiced if the former is ICB vs. GuecoJoint Motion to Dismiss for the car.
permitted to deny the existence of such facts. 1168: Oblig is Issue: WON the carrier is liable for damages.
in not doing and obligor has done what is forbidden, shall be Gueco spouses obtained a loan from UPC to purchase car and
done at his expense. executed prom note which were payable in mnthly Held: Yes. Although resp claims that force majeure since
installments and chattel mortgage over car to serve as knuckles were the reason for the accident and they have
Non-fulfillment: of the obligation not to do which is to security over the notes. Spouses defaulted in payment. The inspected the knuckles, does exercised diligence. Carrier
sublease the fishpond. payment was lowered but still no payment. Car was detained claims liability of manufacturer. Court said that the
inside the banks compound. Gueco went to bank and inspection done was merely visual and not meeting the
3. Fraud negotiated and issued a managers check. But car was not requirement of expected due diligence.
released bec Gueco doesnt want to sign Joint Motion to
Board of Liquidators vs. Heirs of Maximo KalawCopra Dismiss claiming not in the contract that they have to sign. Negligence: In not exercising the proper diligence required.
Trading, hindi na kelangan ng pirma ng Board of Directors.
Issue: WON the bank in not informing the spouses to sign 5. Contravention of the tenor of the obligation
Nacoco is for the protection, preservation and development motion to dismiss liable for damages for not releasing car.
of the coconut industry. Kalaw is the manager and board Arrieta vs. NaricBurmese Rice, di naman pala kayang
chairman. Nacoco embarked on copra trading activities, thus Held: No. Joint Motion to Dismiss for the spouses benefit and mag-open ng Letter of Credit.
entering into contracts. For 3 years, profited 3M but after 4 not for the bank. It would only state that the case would be
typhoons, left the coconut lands devastated throughout the dropped and that the spouses had fully settled his obligation Pet participated in the public bidding by Naric for the supply
country. It was not able to fulfill the contracts it has engaged thus the dismissal of the case. There is no fraudno of 20K MT of Burmese rice. Her bidding being the highest,
in. Nacoco paid damages to one of the parties. Nacoco now intentional and deliberate evasion of the normal fulfillment she was awarded the contract. In 1952, entered into
sues Kalaw for having approved the contracts. of obligations. contract, Naric and Pet, sale of rice. Pet obligated herself to
deliver to the latter the tons os Burmese rice and in turn
Issue: WON Kalaw is guilty of negligence for entering into Fraud: In not stating that they have to sign Joint Motion to corp has to pay for the imported rice by means of an
contracts without prior approval of the Board of Directors. Dismiss but this is not considered Fraud. No intent and for irrevocable, confirmed and assignable letter of credit in US
the benefit of the Plaintiff. currency. It was only In July that def took first step to open
Held: No. Consideration of practice. Corporate officer letter of credit. Pet already made a tender to her supplier a
entrusted with the gen management and control of business 5% and this will be confiscated if L/C will not be received
has implied authority to make any contract or do other act before Aug. 4. PNB informed Naric that L?C approved but has
wichi is necessary or appropriate to the conduct of the a condition that the 50% marginal cash deposit be paid. Naric
ordinary business of the corporation. But there is a citation was not in any financial position to meet the condition and
on the Nacocos by-laws requiring prior directorate approval wrote the pet about it. L/C was opened in Sept thus 5%
of Nacoco contracts. Court considered practice of trade of 4. Negligence

deposit was forfeited. When appellee failed to restore agreed upon. It only relieves the parties from fulfilling their period on acct of defects in the construction or the use of
cancelled Burmese rice she offered a sub but Naric rejected. obligation that time. To require the pet to deliver the materials of inferior quality. Engr/archi will be held solidary
sugarcane during the 6 yrs of suspension was impossible of liable if supervises construction.
Issue: WON Naric should be liable for damages. being performed. 6 yrs cant be deducted from 30 yrs.
Fortuitous Event: Will not apply bec there is negligence.
Held: Yes. Failure of the letter of credit to be opened in the La Mallorca vs. De Jesustire blow-out.
contemplated period. Immediate cause of damages. No Austria vs. CANaglakad mag-isa sa gabi, nanakawan ng
necessary data but pet would not win bid had she not furnish Held: Cause of the blow-out was known. It was a mechanical diamond pendant.
them with it. Waiver bec Pet suggested to sub it Thai rice. defect of the conveyance or a fault in its equipment which
Waiver are not presumed. Express stipulation. was easily discoverable if the bus had been subjected to a Abad acknowledged receiving from Austria one pendant with
more thorough or rigid check-up before it took the road that diamonds valued at P4,500 to be sold on commission basis or
Contravention: That Burmese Rice should be delivered and day. The bus was driving fast as was evidenced in the trial. to be returned on demand. While walking home, Abad was
should not deliver another thing. robbed and her things were taken including pendant. Estafa.
Nakpil vs. CAEngr/Archi pati Contractors liable sa RTC ruled negligence. CA held that robbery was established,
Chavez vs. Gonzales pagguho ng bldg. fortuitous event.
Contravention: That they agree that after 3 days, typewriter Phil Bar Assoc decided to construct its building in INtramuros Issue: WON Abad is liable for the loss of the pendant.
would be usable. Manila. Construction was undertaken by UCCI on
administration basis and the plans and specifications of the Held: No. It was undisputed that Abad was a victim of
E. Effect of fortuitous event building were prepared by another party Nakpil. It was robbery. Even when she walked alone at night knowing that
completed in June 1966. In 1968, a strong earthquake hit she had with her the pendant and a large amount of money,
Necessito vs. Paras Manila and building sustained major damages. As temporary the crimes then were not as prevalent as the present time.
remedy UCCI shoved up the building at its own expense. PBA
Effect: Not fortuitous since knuckles should have been commenced action against UCCI for the partial collapse of Fortuitous event: Robbery was unforeseen and evidence
inspected more than the visual inspection done. the building. Allegations were that there was a failure of the established that it happened.
contractors to follow plans and specifications and violations
Ampang vs. Guincothe bus that skidded. by the defendants of the terms of the contract. Def then Vasquez vs. CAsinabi na sa captain na may bagyo,
filed against 3rd party-architects who prepared plans and tumuloy pa rin. Lumubog.
Held: The accident was caused by an accident which was specifications alleging collapse was due to the defect of it.
unforeseen and beyond the control of the company on its Pioneer Cebu left the port of Manila. The vessel encountered
driver. Issue: WON UCCI and Nakpil be held liable. a typhoon and struck a reef and subsequently sank. Plaintiffs
seek the recovery of damages due to the loss of children and
Victoria Planters vs. Victorias Milling30 years contract Held: Yes. The case was referred to the Commissioner and other people due to voyage. There was a storm as def claims
suspended due to Japanese Invasion. found out that there were defects in plans and specifications but it was established that the captain knew about it but still
and that contractors failed to observe requisite of proceeded.
Held: 1174 relieves obligor from fulfilling a contractual workmanship and even the owners failed to observe requisite
obligation (fortuitous event). The stipulation in the contract degree of supervision in the construction. Fortuitous even Issue: WON fortuitous event shall be considered and exempt
that in the event of force majeure, the contract shall be will not be applied bec there is negligence. 1723 will apply. def from liability.
deemed suspended during the said period does not mean that Engineer/ arch who drew up plans and spec liable for
the happening of those events stops the running of the period damages. Contractor liable if edifice falls within the same

Held: No. They already knew the risk they were taking. They Interest which would be allowed is the interest bec of delay abandoned or neglected by him AND of making execution
already receive report of the typhoon but proceeded anyway. and default due to the general provisions of the law. on such property effective thereafter. Debtors debtor is
Def claim Art. 587 Code of Commerce, loss of vessel exempt my own debtor. Debtor who is sued may set up against
liability. But it is cited there that the liability of the owner is Usurious obligation: Principal only, usurious interest not the plaintiff the same defense he could set up against his
limited to the value of the vessel or to the insurance enforced. own creditor. If the action succeeds, the plaintiff is
thereon. It was held that the insurance of the vessel would entitled only to so much as is needed to satisfy his credit;
be liable for the damages that the shipowner or agent be Briones vs. CammayoP1500 lang utang pero interest P300 if there is any balance, it shall pertain to his debtor.
liable for the death of the passengers. per year-usurious.
Goldstar Minig vs. Lim Jimenamining claims pinondohan,
Fortuitous Event: Will not apply bec captain had knowledge Briones filed against Cammayo to recover P1500. They hindi na siya binayaran sa usapan.
of the event thus making it not unforeseen. executed a real mortgage as security for the loan of P1200
given by Cammayo upon usurious agreement and reserved to Jimena lent to Lincallo money to purchase mining claims and
F. Usurious transactions himself P300 payment of interest for a year. Plaintiff paid they agreed that f the proceeds shall be given to Jimena.
total sum of P330 but Cammayo refused to acknowledge it as Mining rights over part of the claim were assigned to Gold
Angel Jose Warehousing Co vs. CheldaLoans with payment for principal but for interest of loan for a year. Star before WWII and copr paid Lincallo P5000 royalties.
usurious interest, principal still enforced but interest not. Lincallo entered contracts without the knowledge of
(P20K+) Issue: WON creditor entitled to collect the principal Jimeana. Marquez contracted with Gold Mining and 45%
obligation and interest. should go to Lincallo. Another company contracted and
Angel Jose filed against Chelda, its capitalist partner for the stipulated 43% would go to Lincallo. Jimena demanded part
recovery of the unpaid loans with legal interest and attys Held: Yes. But only as to the principal. Ruling of Angel vs. but he was not paid.
fees (P20K+). Def paid bal of P5.6K. Plaintiff charged and Chelda.
deducted from the loan usurious interest at the rate of 2% Issue: WON Jimena has a cause of action against Gold Mine
and 2.5% PER MONTH and consequently, as claimed by def Usurious obligation: Principal only, usurious interest not when it contracted only with Lincallo.
should not be permitted to recover under the law. RTC- enforced.
P1048.15 usurious interest which the payment was deducted Held: Yes. Art. 1177 provides that creditors after having
from the interest and def claims that it should have been G. Presumption of interest and installments pursued the property in possession of the debtor to satisfy
deducted from the principal obligation. their claims, may exercise all the rights and bring all the
***Hill vs. Veloso actions of the latter (debtor) for the same purpose, save
Issue: a. WON in loans with usurious interest, the plaintiff which are inherent in his person. 1883: the principal may
may still recover the principal of the loan. sue the person with whom the agent dealt with in his own
b. WON the illegal terms as to the payment of interest ***Vda De Ongsiako vs. Cabatuando name, when the transaction involves things belonging to the
renders nullity as to the payment of the principal debt. principal.
H. Action Subrogation
Held: a. Yes. Creditor may still recover principal of the loan. AS: File against debtor of his debtor.
Loans with usurious interest are not totally void but only as Accion Subrogatoria: action which the creditor may
to the interest. Renunciation of the principal would exercise in the place of his negligent debtor in order to Estate of Hernandez vs. Luzon Suretynamatay yung
extinguish accessory but waiver of the accessory would not preserve or recover for the patrimony of the debtor the guarantor, namana rin yung utang niya.
extinguish the principal. product of such action, and then obtain therefrom the
b. Yes. Divisible contract, that which is illegal can be satisfaction of his own credit. Double function: conserving Luzon Surety filed against estate of Hemady based on 20
separated from legal ones and the latter may be enforced. the patrimony of the debtor by bringing into it property different indemnity agreements and couterbounds by the

deceased in consideration of guaranteeing various principals winners. Second contract has no force but the first one. No revocation 2. judicially decreed. Onerous donations, 10 yrs
in favor of different creditors. Hemady died and estate claim showing that they have given new life to the agreement. prescription.
not liable bec of death.
Wise & Co vs. Kellyhindi naman sinabi na ibenta yung CPU vs. CAnagdonate ng land for medical school pero
Issue: WON death extinguishes obligation of the estate. goods sa ganitong halaga. hindi ginawa. No period but 50 yrs na nakalipas di pa rin
ginawa.
Held: No. Obligations extinguished by death are: a. support Held: No proof that Kelly has not turned over all the money
b. parental auth c. usufruct d. contracts for a piece of work received from the sale of the merchandize so that Lim, the Don Lopez donated land to CPU on the condition that it
d. partnership e. agency. Articles that regulate guaranty or surety, has no liability. The condition is that Lim will pay if would be used for the establishment of a medical school and
suretyship contain no provision that the guaranty is Kelly has not turned over all the sales of the merchandise but that CPU cannot sell or convey the land to any party. CPU
extinguished upon the death of guarantor. Art. 774 and 776 not that he shall pay if all the sales has not amounted to the failed to do so and even exchanged land with another with
(succession and inheritance) state that heir succeed no only original amount of obligation. There is no stipulation that the the NHA. Heirs filed for annulment of donation.
to the rights but also to the obligations. goods were to be sold at a certain price, or not less than
what it should be. Issue: WON donation annulled.
AS: Obligation was subrogated to the heirs of the dead
person. Santiago vs. Millarnanalo sa sweepstakes pero nawala ang Held: No. Although there is a need to fix a period bec the
ticket. contract did not stipulate period when to commence
III. KINDS OF OBLIGATION condition. However, in consideration of the facts, 50 years
Held: The ticket sold has a notation that prize will be paid have lapsed for the condition to be complied with and CPU
A. PURE AND CONDITIONAL OBLIGATIONS upon the surrender of the ticket. The surrender or was not able to perform. SC ruled to reconvey to heirs the
presentation of the ticket is a condition precedent of land.
1. Pure Obligations payment.
Aguilar vs. Cititrustyung hindi ko maintindihang kaso or
Pay vs. Palancananingil ng utang after 15 yrs, Parks vs. Prov of Tarlacnagdonate ng land for school and baka hindi lang siya talaga relevant under this title.
nagprescribe. public park in 6 mos pero hindi ginawa.
Held: Every obligation whose performance does not depend Cirer and Hill were owners of parcels of land and donated it b. Potestative Mixed Conditions
upon a future or uncertain event or upon a past unknown to to the municipality of Tarlac on the condition that erection
the parties, it is demandable at once. of a public school and a public park shall be commenced Shotwell vs. Manila MotorBanks were chartered to accept
within the period of 6 months. Tarlac failed. Cicer and Hill liability.
2. Conditional Obligations sold land to Parks. Parks pray for annulment of donation.
Held: The banks will not be liable since they didnt accept
a. with suspensive/resolutory conditions Issue: WON Parks is the owner of the land bec of non- that they will should liability. The lease was extinguished by
performance of the condition of the mun of tarlac. the fire that occurred and the chartered banks being a
Lichauco vs. Figueras-HermanosLorchas, emergency and sublessee of the Manila Motor which contracted lease also
regular use. Held: No. The action for revocation of a donation is 10 yrs. from Shotwell, will not be liable for the construction of the
They have filed case after 14 yrs. Although condition was destroyed buildings. No potestative condition.
Held: The amendment to the contract bet the plaintiff and not complied with, revocation should have been made before Lease for the enjoyment of the premises. No fault on part of
def was expressly conditioned on the defs being the the sale of the land. Req: 1. consent of the donee of the anyone.
successful bidders at the letting and they were not the

Smith Bell vs. Sotello Mattii-deliver yung equipment pero Held: The condition implies that the obligor has already Held: Should the machinery to be installed in the said
depende sa gobyerno. decided to sell his house or at least that he had made his factory fail, for ANY REASON, 6 months from the date hereof,
creditors to pay his indebtedness demandable is that the sale this contract may be cancelled. The def can rescind the
Held: The conditions did not depend upon the will of the be consummated and the price thereof remitted to the contract bec their reason falls under any reason.
debtor alone. There is no delay since there existed rigid islands. Not a purely potestative one, depending upon the
restrictions during the that time of world war. It is a mixed will of the obligor, but partly upon chance, i.e. presence of But there is no constructive fulfillment on this case.
one because dependent also of the will of the third person or the buyer of the property for the price and under conditions Constructive fulfillment: condition shall be deemed fulfilled
the US govt whether to allow the delivery or not. desired by the obligor. if the obligor intentionally impedes its fulfillment, has no
application to the cases of the resolutory provision giving to
c. Impossible and Illicit conditions the obligor a right to cancel contract upon contingency
within the control of the obligor.
Trillana vs. Quezon Collegesif I harvested fish. Luneta Motor Co. vs. Abadif I recovered judgment in the
action but he died during the trial. Herrera vs. LevisteGSIS and Leviste Case. Teehankees
The stipulation in this case was that the obligor would pay Dissent.
the full value of a subscription for shares in the Quezon Held: The obligation is subject to the condition that when
College after she had harvested fish. the plaintiff recovered judgment, they shall deliver the Tehankees Dissent: Leviste was guilty of bad faith and
property so released to the officer of the court for the violated the terms of the contract thus there is constructive
Held: This condition is obviously depended upon the sole will payment of said judgment of in default, pay its full value. fulfillment. Herrera was required by GSIS to submit papers to
of the obligor, and the conditional obligation is void, because Since Abad died, it has become a legal impossibility since no support his assumption but could not be approved until
it would have served to create an obligation to pay, the judgment shall be rendered. Herrera could submit a final deed of sale and Leviste did not
whole obligation is void. execute this deed. He prevented the assumption of Herrera
Galang vs. CAyou pay 25% within 3 months or upon the of the mortgage. Not only that, Leviste is in arrears for 14
**When conditional obligation is void, then it would convert removal of the encargado. months in its amortization and Herrera did not know that.
the obligation to a pure obligation which would be 1186 and 1169 (reciprocal obligations).
demandable at once. Held: The removal of the encargado was not a condition
precedent to the fulfillment of the contract. What we have is Tayag vs. CAestopped bec receipt of payments and
Osmena vs. RamaIf the house of strong materials is sold, I a contract to sell wherein the ownership is retained or title knowledge of irregularities.
will pay my debt. until the fulfillment of a positive condition, normally the
payment of the purchase price in the manner agreed upon. It Held: The acceptance of the petitioners of the various
Held: If the statement found in the acknowledgement should was just an alternative period for the payment of the second payments even beyond the periods agreed upon, was
be regarded as a condition, it was a condition dependent installment. perceibved by the lower court as tantamount to faithful
upon the exclusive will of the debtor, and is, therefore, void. performance of the obligation. 1186 applies to both obligees
The acknowledgement, therefore, was an absolute d. positive and negative conditions and obligors in reciprocal obligations even when the proviso
acknowledgement of the obligation and was sufficient to only speaks of the obligor. Pet accepted the performance
prevent the statute of limitations from barring the action 3. Constructive Fulfillment knowing its incompleteness and irregularity and without
upon the original contract. expressing any protest or objection, the obligation is deemed
Taylor vs. Uy Tiengdapat may trabaho siya pero binawi ni to be complied with.
Hermosa vs. Longaraas soon as I receive funds derived Uy Tieng dahil di maganda sitwasyon. FOR ANY REASON
from the sale of my property in Spain. Coronel vs. CAReceipt of Downpayment

Held: Intent of the parties has to be considered. It was a Art. 1188: The creditor may, before the fulfillment of the UP vs. Delos Angelesaward of logging rights; rescission
contract of sale and not a contract to sell. Contract of sale condition, bring the appropriate actions for the without need of judicial suit.
ownership already transferred upon fulfillment of the preservation of his right.
suspensive condition. Absolute sale. Contract to sell-although The debtor may recover what during the same time Held: In the agreement, there is a stipulation that UP has
suspensive condition was complied with, ownership will not he has paid by mistake in case of a suspensive condition. the right and power to consider the Logging Agreement date
automatically transfer. There is still a need to convey title to Dec 2 1960 rescinded without the necessity of a judicial suit.
the prospective buyer by entering into a contract of absolute 6. Rescission in Reciprocal Obligations 1191s consideration: There is nothing in the law that
sale. prohibits that parties from entering into agreement that
Ocejo vs. Interbankmaswerteng assignee. violation of the terms of contract would cause cancellation
4. Retroactivity of Obligation Yung asukal na nasa ibang warehouse na kinuha ng banko. thereof even without court intervention. BUT PROCEEDS AT
ITS RISK. Extra-judicial resolution will remain contestable
Padilla vs. Paterno-his mom is the universal heir and not Held: The thing sold not subject to condition that the buyer and subject to judicial invalidation, unless attack thereon
his wife-paraphernal. was the pay the price before the delivery. On demandability: should become barred by acquiescence, estoppel or
No term having been stipulated on payment, it should be prescription.
Held: The ownership of the land is retained by the wife until demandable at the time and place of the delivery of the
she is paid the value of the lot, as a result of the liquidation thing sold. Demandable at once and failure to do so would Roque vs. Lapuz10 yrs to pay, I can pay anytime within
of the conjugal partnership. There mere construction of the entitle obligor either performance or rescission. But the 10 years.
building from common funds does not automatically convey rescission should be applied to the court for a decree for the
the ownership of the wifes land to the conjugal partnership. rescission of the contract. No rescission was made before Held: Qualification for rescission: so substantial and
The properties conversion from paraphernal to conjugal the insolvency of plaintiff, the assignee standing on the shoes fundamental to defeat the object of the parties. Absence of
assets would be deemed to retroact to the time the conjugal of the buyer has a better right. a formal deed of conveyance is a very strong indication that
buildings were first constructed thereon or at the very latest, the parties did not intend immediate transfer of ownership
the time before the death of Narcisso Padilla that ended the Albert vs. University Publishingpublishing the Revised and title, but only a transfer after full payment of the price.
partnership. The acquisition by the partnership of theses Penal Code. Intent of the parties was to have the obligation be paid in
properties was subject to the suspensive condition that their monthly installment.
values would be reimbursed to the widow at the liquidation Held: It was the defendant corporation who had breached
of the conjugal partnership; once paid, the effects of the the contract. The plaintiff has written letters reminding the Herrera vs. Leviste
fulfillment of the condition should be deemed to retroact to corp that the contract will be deemed rescinded if the corp
the date the obligation was constituted. would not fulfill its obligation. Tehankees dissent: Upon Levistes refusal to execute the
deed of sale, Herrera has the option of specific performance
Accg to Tolentiono: Rescission must be judicially invoked. or the rescission of the contract.
Coronel vs. CADownpayment Unless there is a stipulation of period when the contract
would be deemed rescinded. If one party is willing to Zulueta vs. MarianoAvellana a movie director made
Retroactive: From the moment the obligation was perform and the other is not extra-judicial rescission would movies for Zulueta for his political campaign, automatic
constituted, upon payment of full balance, retroact to that suffice if there is stipulation. However, if there has been a rescission clause.
date. performance already by one of the parties, rescission should
already be judicially invoked regardless whether there is a Held: There is an automatic rescission clause in the contract
5.Preservation of Creditors Rights stipulation or none, especially if the other party rejects and the fact that pet has cancelled contract, resp has no
rescission. right to remain in the premises. Extra-judicial rescission shall

only take legal effect where the other party does not oppose contract doesnt stipulate a period, thus the court held that
it. B. OBLIGATIONS WITH A PERIOD resp has to institute a judicial action to fix the period. (this
case is an ejectment case so fixing a period was not alleged
Delta Motor Corp vs. Genuinodelivery of black iron pipes PNB vs. Lopez Vitoloan of spouses when there is a in the case).
for iceplant and storage. condition and a period stipulated.
Sarmiento vs. Villasenorloan with a pledge of a medal
Held: Power to rescind under 1191 is not absolute. The act of Held: The non-fulfillment of the conditions of the contract with a diamond in the center with 10 diamonds
a part in treating a contract as canceled or resolved on renders the period ineffective, and makes the obligation surrounding it, pair of diamond earrings, comb with 22
account of infractions by the other contracting party must be demandable at the will of the creditor. Failure to pay would diamds, and two diamond rings! Daming diamonds!!!
made known to the other and is always provisional subject to make the entire obligation due and demandable, so
the scrutiny and review by the proper court. regardless of the period of other installments, def has to pay Held: In a contract of loan with interest wherein a term was
Delta no manifestation that it had opted to rescind contract, the entire obligation. fixed for the payment thereof, it is presumed that said terms
it has possession of the two irons and the downpayment and was established for the benefit of the creditor as well as that
has waived the performance of conditions of the contract Smith Bell vs. Matti of the debtor, unless from its tenor or other circumstances it
when they opted to go on with the contract only with a much appears to have been stipulated for the benefit of one only.
higher price. Held: There also was a stipulated period however there is In such a case the debtor has no right to pay the debt before
also a condition which states that delivery would depend the lapse of said period, without the consent of the creditor,
Ong vs. Bognalbal upon the US govt. Upon the lapse of the period and the and demand the devolution of the goods that were pledged
condition bars the performance, def will not be liable. to secure the payment. Only after the expiration of said
Rescission: Upon the infraction of Ong, Bognalbal could have period may the debtor make payment, and, therefore, the
filed rescission of the contract or the performance of it. Gaite vs. Fonacierexpiration of the surety, debtor loses action for the recovery of the goods pledged arises only after
the benefit of the period. Mining claim case. the lapse of said for the purpose of the computation for he
Carrascoso vs. CAnotice of lis pendence but continued period of prescription of said actions.
with the sale of the land. Held: 1198 states when debtor loses the benefit of the
period. The surety contract expired and Fonacier didnt Daguhoy Enterprises vs. Poncenagsecure ng mortgage as
1972-El Dorado sold to Carrascoso the parcel of land renew or replaced the surety. Sale of the ore was not a guaraty sa loan sa isang corp tapos after ibigay yung loan,
July 1975- Buy and Sell bet Carrasco and PLDT suspensive condition but a suspensive period, fixing the withdrew mortgaged properties then mortgage them again
April 1977- Carrasco to PLDT future date of the payment. sa ibang corp for another loan. Madaya.
May 30, 1977 PLDT to PLDTAC
May 15, 1977-notice of lis pendens Qui vs. CAfactory was razed to the ground and failure of Held: Although the contract stipulates that loan payable in 6
lease to rebuild the building of the lessee. (the building to years, but because of the failure to give and register the
Held: Notice of Lis pendens, but still PLDT conveyed land to be constructed shall belong to the resp lessor after 20 security agreed upon in the form of two deeds of mortgage,
PLDTAC. Where a contract is rescinded it is the duty of the yrs). the obligation becomes pure and without condition thus due
Court to require both parties to surrender that which they and immediately demandable. 1198, lost the benefit of the
may have respectively received and to place each other as Held: 1197. If obligation does not fix a period but from its period.
far as practicable in his original situation. The exercise of the nature and circumstance it can be inferred that a period was
power to rescind extinguished the obligatory relation as if it intended , the courts may fix the duration thereof. Will also Victorias Planter, supra
had never been created, the extinction having a retroactive fix period when it depends upon will of the debtor. In
effect. determining period, courts will have to consider the De Leon vs. Syjucogusto ng magbayad ng debtor pero
circumstances and see if period was contemplate. The ayaw pang tanggapin ng creditor.

Song Fo vs. Orialaunch was sold but was shipwrecked, The effect of notice is to give the creditor, that is, the
Held: Consignation was not valid. Req: a. debt due b. Song Fo did not insure and Oria did not secure. plaintiff in the instant case, opportunity to express his
consignation has been made bec creditor to whom payment is consent, or to impugn the election made by the debtor, and
made refused to accept, or was absent or incapacitated c. Held: The launch was with Oria already and knowing that the only after said notice shall the election take legal effect
prev notice of consignation to the person interested in the launch has not been insured yet, sent it from Manila to Samar when consented by the creditor, or impugned by the latter,
performance d. amount due placed at the disposal of the and on the trip it was shipwrecked. The contract stipulates when declared improper by the competent court.
court 3. after consignation had been made, the person quarterly installments. Since the vessel is lost, Oria doesnt
interested was notified thereof. Reasons why creditor cant want to pay. That unpaid installments of the purchase price
be forced to accept payment a. may want to keep his money of the launch, which under the express terms of the contract D. JOINT AND SOLIDARY
invested safely instead of having it in his hands. B. to protect had not become due and payable at the time of the loss of
himself of sudden decline on the purchasing power of the the vessel, became due and payable under the provisions of Jaucian vs. Queroisurety was solidarily liable, then
currency loaned. Unless creditor consents, debtor cannot article 1129 of the Civil Code, upon the failure of the surety died.
accelerate payment. purchaser, within a reasonable time after the loss of the
launch, to offer either satisfactory security or to give bond to Held: The right of a guarantor or surety to insist on the
Millare vs. Hernandoyung bahay niya gusting gawing resto secure the payment of the unpaid installment of the exhaustion of the property of the principal debtor, before his
e ayaw niya nga. purchase price. own shall be taken in execution does not exist where the
guarantor or surety is jointly and severally bound with the
Held: On the contract, it is stipulated that the lease may be principal debtor.
renewed after a period of 5 years under the terms and C. ALTERNATIVE AND FACULTATIVE OBLIGATIONS
conditions as will be mutually agreed upon by the parties at Ramos vs. GibbonMining Claims, Possessory Rights of a
the time of the renewal. 1197 and 1670 of the CC (fixing of Agoncillo vs. JavierAnastacio Alano mortgaging his Qualified Locator.
period, and after 15 days of occupying the leased property property to pay the debt.
and without any notice from lessor, contract shall be Held: The concurrence of two or more creditors or of two or
renewed). It is understood that there is an implied new Held: Anastacio was only a rep of his children, and his partial more debtors with respect to the same obligation does not
lease, not for the period of the original contract, but for the payment does not affect prescription not for the benefit of imply that each of the former is entitled to demand the
time established by 1682 and 1687. The other terms of the the other debtors. The mortgage was never recorded performance of the obligation in its entirety or that each of
contract shall be revived. After the expiration of the therefore invalid. Action to recover has prescribed, the the latter is bound to perform it. This shall be the case only
contract, the implied new lease could not possibly have the action to compel a conveyance of the house and lot is when the expressly so provided by the terms of the
period of 5 years, but rather would have been a month-to- likewise barred as the agreement to make such conveyance obligation, and the parties are bound in solido. The
month lease since the rentals were payable on a monthly was not an independent principal undertaking, but merely a presumption, in the absence of the stipulation as to how
basis. subsidiary alternative pact relating to the method by which certain debtors are bound, is that they are bound jointly.
the debt might be paid.
Pacific Banking Corp vs. CAnegosyo sa cultivation of fish Versoza vs. LimCollision of Perla and Ban Yek.
and saltmaking bumagsak. Ong Guan Can vs. Centurythe insurance company doesnt
want to rebuild with the same materials. Held: Where a collision occurs between tow sea-going
Held: An agreement to extend the time of payment in order vessels, caused exclusively by the carelessness of the
to be valid must be for a definite time. The cause of action Held: On the contract the insurance company obligated itself navigating officers in charge of one of the vessels, both the
was for the fixing of the period. to either pay the amount to which the house was insured or owner and the operating company directly in charge of the
rebuild it. The debtor must notify the creditor of his offending vessel are liable for the damage done. The rule
election, stating which prestation he is disposed to fulfill. that joint obligations are apportionable unless otherwise

specially provided has no application to obligations arising Imperial Insurance vs. Davidspouses bound themselves to person is subrogated to the rights of the common creditor
from tort. Persons who cooperate in the tortuous infliction of be solidary and jointly liable, husband died. and may properly substituted in the same action as plaintiff
damage are jointly and severally liable. for the purpose of enforcing contribution from his former
Contractual Obligations-joint Held: If husband and wife bound themselves jointly and associates under art. 1145.
Tortuous act-joint and severally liable severally, in case of his death her liability is still solidary and
may be sued for the whole debt. The Rules of Court provide **But Maam said, this is not the same meaning of real
Ronquillo vs. CAfoodstuff, individually and jointly, the procedure should the creditor desire to go against the subrogation of rights.
auction of furnitures on same day of hearing for deceased debtor, but there is nothing in the said provision
reconsideration. making compliance with such procedure a condition Chinese Chamber of Commerce vs. Pua Te ChingSurety
precedent before an ordinary action against the surviving was jointly ans severally liable, principal died.
Held: Clearly then, by the express term of the compromise solidary debtors, should the creditor choose to demand
agreement and the decision based upon it, the defendants payment from the latter, could be entertained to the extent Held: The surety may use against the creditors all the
obligated themselves to pay their obligation, individually that failure to observe the same would deprive the court defenses which the principal debtor is entitled and that are
and jointly. The term individually has the same meaning jurisdiction to take cognizance of the action against the inherent in the debt, but not those purely personal to the
as collectively, separately, distinctively, respectively, surviving debtors. CIVIL Code allows the creditor to proceed debtor, to wit, those which may contribute to weaken or
and severally. An agreement to be individually liable against any of the solidary debtors or some or all of them destroy the juridical bond existing between the creditor and
undoubtedly creates a several obligation and a several simultaneously. Hence, there is nothing improper in the the principal debtor, not any means of defense which may
obligation is one by which one individual binds himself to creditors filing of an action against the surviving solidary invalidate the original contract from which the tight or the
perform the whole obligation. debtors alone, instead of instituting a proceeding for the action of the creditor against the security arises in this class
settlement of the estate of the deceased debtor wherein his of actins is not included the means of defense as to how the
Oritz vs. CayanonBartolome Ortiz, ayaw umalis sa claim could be filed. trial may be continued and the writ of execution issued in
premises dahil sa mga improvements na ginawa niya at case of the death of the principal debtor which can not
hindi siya nakasama sa bidding. Nangolekta pa ng toll. Inchausti vs. Yulomagkakapatid na hindi pa nagkasundo affect the original contract nor destroy the bond existing bet
sa remission na binigay. the creditor and the principal debtor, it being, therefore, an
Held: Presumption when two persons are liable under a exception or means of defense no inherent in the debt, but
contract or judgment and no mention of the specific liability Held: The remission of any part of the debt, made by the at the most, a purely personal one of the debtor or the
of each for the entire obligation. With respect to the amount creditor in favor of one or more his solidary debtors, inures successors-in-interest of the debtor.
of reimbursement to be paid by Comintan, it appears that to the benefit of the rest of them, and these latter may
the dispositive portion of the decision was lacking in utilize in their favor the defense of remission. The solidary
specificity, as it merely provided Zamora and Comintan debtor unconditionally obligated or whose period for Intl Finance vs. Imperial Textileguarantee vs. surety
jointly liable therefore. When two persons are liable under a payment has expired, may not, with respect to the part of
contract or under a judgment, no words appear in the the debt he is liable, plead the defense of prematurity of the Held: Although it states Guarantee, the stipulations of the
contract or judgment to make each liable for the entire action, which is personal to his co-debtors. contract make it clear that jointly and severally phrase is
obligation, the presumption is that their obligation is the one used in the contract.
mancommunada, and each debtor is liable only for a BPI vs. McCoyMcCoy paid all the debts and was Surety: person binds himself solidary with the principal
proportionate part of the obligation. The judgment debt of subrogated with the rights to contribution from his co- debtor, primary liability
13K should be pro-rated in equal shares to Comintan and debtors. Guaranty: contract whereby a person binds himself to the
Zamora. creditor to fulfill the obligation of the principal in case the
Held: Where one of the several persons who are sued upon a latter should fail to do so, secondary liability.
joint and several liability elects to pay the whole, such

Construction Dev. Vs. EstrellaBus was rammed and their Caridad Est. vs. Santeroloan to be paid in 60 days and for payment was made, plaintiff must be considered to have
knees are pinned to the seats in front of them. failure to do so, those already paid shall be forfeited. made such demand only from the filing of the complaint.
Held: The bus company, its driver, the operator of the other Antichresis: a contract whereby the creditor acquires the Hodges vs. Javellana--iceplant machinery, softdrint, ice
vehicle and the driver of the vehicle were jointly and right to receive the fuirts of an immovable of his debtor with drop and fixture.
severally liable to the injured passenger or the latters heirs. the obligation to apply them to the payment of interest if
Nor should it make any difference that the liability of pet owing and thereafter to the principal of his credit. Held: The provisions in the contract between the parties
(bus owner) springs from contract while that of respondents relative to the compounding of interest partake the nature of
(owner and driver of other vehicle) arises from quasi-delict. Penal ClauseL generally intended to substitute the indemnity a penal clause and under 1229, may be reduced by court if
Bus owner-contract, owner and owner of other vehicle-quasi- for damages and the payment of interests in case of non- iniquitous or unconscionable.
delict : both jointly and severally liable. compliance of the obligation.
Pamintuan vs. CAplastic sheetings
Held: The provisions in which the parties have indicated in
E. DIVISIBLE AND INDIVISIBLE OBLIGATION the contract is a penal clause which carries the express Held: The theory that penal and liquidated damages are the
Art. 1223-1225 waiver of the vendee to any all sums he had paid when the same cannot be sustained where the obligor is guilty of fraud
vendor, upon his inability to comply with his duty, seeks to in the fulfillment of his obligation. The penalty clause is
F. OBLIGATION WITH A PENAL CAUSE recover passions of the property, a conclusive recognition of strictly penal or cumulative in character and does not
the right of the vendor to the said sums, and avoid partake the nature of liquidated damages when the parties
Manila Racing vs. Manila Jockeyforfeiture of what was unnecessary litigation designed to enforce fulfillment of the agree.
partially paid. terms and conditions agreed upon. Said provisions are not
unjust or inequitable and does not, as appellant contends, Concurring Antonio: A creditor in case of fraud by the obligor
Held: The clause of the contract referring to the forfeiture of make the vendor unduly rich at his cost and expense. is entitled only to the stipulated penalty plus the difference
the P100,00 already paid, should the purchases C fail to pay bet the proven damages and such stipulated penalty.
the subsequent installments, is valid, It is in the nature of a
penal clause which be legally established by the parties. In Bachrach Motors vs. Espirituobligation partly performed, Robes-Francisco Realty vs. CFJ
its double purpose of insuring compliance with the contract 25% penalty, reduced. WHITE TRUCKS.
and of otherwise measuring beforehand the damages which Held: A contract of sale which stipulate payment of interest
may result from non-compliance, it is not contrary to law, Held: Interest and penalty are not the same. When the at 4% per annum in case vendor fails to issue a certificate of
morals or public order bec it was voluntarily and knowingly obligation has been partly performed, the CC authorizes the title to vendee is not a penal clause because even without it
agreed upon by the parties. Viewing concretely the true court to reduce the penalty thereon. vendee would be entitled to interest at the legal rate of 6%
effects thereof in the present case, the amount forfeited per annum. It is therefore inconceivable that the aforecited
constitutes only 8% of the stipulated price, which is not Cabbarroguis vs. Vicentejeep accident. provision in the deed of sale is a penal clause which will
excessive if considered as the profit which would have been preclude an award of damages to the vendee Millan.
obtained had the contract been complied with. There is, Held: The refusal of the defendant to pay when the demand
moreover, evidence that the defendants, because of this was made by plaintiff entitles the latter to interest on the Makati Devt Corp vs. Empire Insurance Co.you should
contract with C, had to reject other propositions to buy the penalty. 2210 provides that in the discretion of the court, build a house on the lot or else.
same property. At any rate, the penal clause does away with interest may be allowed upon damages warded for breach of
the duty to prove the existence and measure of the damages contract. This interest is recoverable from the time of delay, Held: Mitigation of the penalty is allowed where there is
caused by the breach. that is to say, from the date of demand, either judicial or partial payment of the obligation, the reduction of the
extrajudicial. And if there is no showing as to when demand penalty is justified. This is true where the indemnity

provided for is essentially a mere penalty , having for its

object to compel compliance with the contract.
Umali vs. Miclatcreation of an advertisement LAGRIMAS
Held: Under the law, a penalty takes the place of interests

only if there is no stipulation to the contrary, and even then,
damages may still be collected if the obligor refuses to pay
the penalty.

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Negotiable Instruments Lex Talionis Fraternitas Inc.

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government structure instituted through a system of

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Effect: The contract has the force of law.

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provided for is essentially a mere penalty , having for its

Umali vs. Miclatcreation of an advertisement LAGRIMAS

Held: Under the law, a penalty takes the place of interests

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