Karichi Amended

!!!!!!!1! OBLIGATIONS!AND!CONTRACTS!|!Prof.!E.!A.!Labitag!|!A.Y.!2013?2014!!!
Karichi!Amended!|!B2017!
!!!!
TITLE%I.%OBLIGATIONS%
• It! is! one! sided,! reflects! only! the! debtor’s! side! of! the!
agreement!–!Sanchez!Roman!
• Article!1156!gives!the!Civil!Code!definition!of!obligation!in!
it’s!passive!aspect.!!
• Our!law!merely!stresses!the!duty!of!the!debtor!or!obligor!
! when!it!speaks!of!an!obligation!as!a!juridical!necessity.!(De!
CHAPTER(1:((( !
Leon)!
GENERAL(PROVISIONS(( B. Elements((
!
1. ACTIVE!SUBJECT!!
• Has!the!power!to!demand!the!prestation!!
I. Concept*of*Obligations** !
• Also!known!as!the!obligee!or!creditor!
A. Definition(( 2. PASSIVE!SUBJECT!!
! Has!the!duty!to!perform!the!prestation!!
•
Art.!1156.!!An!obligation!is!a!juridical!necessity!to!give!to!do!or!not! Also!known!as!the!obligor,or!debtor,!
•
to!do.! !
! 3. PRESTATION!OR!OBJECT!!
OBLIGATION! • May!consist!in!giving,!doing,!or!not!doing.!!
• From! the! Latin! word! obligare,! which! means! tying,! or! • Must!be!(a)!possible,!(b)!determinable,!and!(c)!capable!of!
binding.!! pecuniary!estimation!
• Tie! or! bond! recognized! by! law! by! virtue! of! which! one! is! !
bound!in!favor!of!another!to!render!something! KINDS%OF%PRESTATION%
• This!may!consist!in!giving!a!thing,!doing!a!certain!act!or!not! • TO!GIVE!–!consists!in!the!delivery!of!a!movable!or!an!
doing!a!certain!act.!! immovable!thing,!in!order!to!create!a!real!right!or!for!
! the! use! of! the! recipient! or! for! its! simple! possession!
JURIDICAL!NECESSITY! or!in!order!to!return!to!its!owner!
• In! case! of! noncompliance,! the! courts! of! justice! may! be! • TO! DO! –! all! kinds! of! work! or! services,! whether!
called! upon! by! the! aggrieved! party! to! enforce! its! mental!or!physical!
fulfillment,!or!in!default!thereof,!the!economic!value!that! • NOT! TO! DO! –! consists! in! abstaining! from! some! act,!
it!represents.! includes! “not! to! give,”! both! being! negative!
• The! debtor! may! be! made! liable! for! damages! which! obligations!!
represents!the!sum!of!money!given!as!a!compensation!for! !
the!injury!or!harm!suffered!by!the!creditor!or!oblige! REQUISITES%OF%PRESTATION%
• The! debtor! must! comply! with! his! obligation! whether! he! • Is!physically!and!juridically!possible!
likes!it!or!not;!failure!will!have!harmful!consequences!! • Is!determinate!or!at!least!determinable!according!to!
! pre?established!elements!or!criteria!
NATURE!OF!OBLIGATIONS!UNDER!THE!CIVIL!CODE! • Has!a!possible!equivalent!in!money!!
• Civil!obligations!are!obligations!which!give!the!creditor!or! o Pecuniary! interest! need! not! be! for! one! of! the!
rd
oblige!a!right!under!the!law!to!enforce!their!performance! parties,!it!maybe!for!the!benefit!of!3 !person/s!
in!courts!of!justice! distinct!from!the!parties!to!the!contract!
• Natural! obligations! are! not! based! on! positive! law! but! on! o Prestation! need! not! be! of! economic! character!
equity! and! natural! law,! do! not! grant! a! right! of! action! to! to! have! pecuniary! value,! if! it! does! not! have!
enforce! their! performance! although! in! case! of! voluntary! value! the! law! attributes! to! it! economic! value!
fulfillment!by!the!debtor,!the!latter!may!not!recover!what! e.g.!moral!and!nominal!damages!
has!been!delivered!or!rendered!by!reason!thereof!(article! !
1423)! !
! 4. JURIDICAL!OR!LEGAL!TIE!!
OBLIGATORY! RELATION! IN! ITS! TOTALITY:! The! juridical! relation,! • That!which!binds!or!connects!the!parties!to!the!obligation!
created! by! virtue! of! certain! facts,! between! two! or! more! persons,! • Established!by!(a)!law,!(b)!bilateral!acts!(contracts),!and!(c)!
whereby! the! creditor! or! obligee,! may! demand! of! the! debtor! or! unilateral!acts!(crimes!and!quasi?delicts)!
obligor,!a!definite!prestation.! • Also!called!efficient,cause,or!vinculum!
! • Form! in! which! the! obligation! is! manifested! –! cannot! be!
PASSIVE!SIDE:!Where!there!is!a!right!or!power!to!demand,!there!is!a! considered!essential!!
correlative! obligation! or! an! imposition! upon! a! person! of! a! definite! !
conduct.!!! NOTE:! The! form! in! which! an! obligation! is! manifested! cannot! be!
! considered!essential.!
! !
CRITICISM!OF!DEFINITION! !
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C. Distinction(between(Natural(and(Civil( • Binding! force?obligations! arising! from! contracts! have! the!
Obligation( force!of!law!between!the!contracting!parties!!
! o Contracts!are!not!superior!to!law.!!
AS!TO! NATURAL! CIVIL! o Must!be!valid!and!cannot!be!valid!if!it!is!against!the!
Enforceability! Cannot!be!enforced!by! Can!be!compelled!by! law.!!
and!How! court!orders;!depends! the!person!holding!the! o Compliance!in!good!faith?in!accordance!with!the!
Enforced! on!the!good! right!to!compel,! stipulations!or!terms!of!the!contract!or!agreement.!!
conscience!of!the! through!the!courts!or! o There!is!sincerity!and!honesty!
debtor! public!authorities!
Source!and!Basis! Equity,!Natural!Justice! Positive!Law! C. QUASIJCONTRACTS( or( DELICTS( [Quasi( ExJ
and!Conscience! Contractu](
!
Art.! 1160.! Obligations! derived! from! quasi?contracts! shall! be!
subject!to!the!provisions!of!Chapter!1,!Title!XVII.!
II. Sources*of*Obligations** !
Art.!2142.!Certain!lawful,!voluntary!and!unilateral!acts!give!rise!
A. LAW([ExJLege]( to!the!juridical!relation!of!quasi?contract!to!the!end!that!no!one!
! shall! be! unjustly! enriched! or! benefited! at! the! expense! of!
Art.! 1158.! Obligations! derived! from! law! are! NOT, PRESUMED.! Only! another.!!
those! expressly! determined, in, this, Code! or! in! special, laws! are! !
demandable,! and! shall! be! regulated! by! the! precepts, of, the, law! • Juridical!relation!which!arises!from!certain!acts!that!are:!!
which! establishes! them;! and! as! to! what, has, not, been, foreseen,! by! o LAWFUL!–!against!crime!
the!provisions!of!this!book.!! o VOLUNTARY!–!against!quasi?delict;!based!on!
! negligence!or!mere!lack!of!foresight!!
• Is!an!independent!sources!of!obligations! o UNILATERAL!–!against!contract!in!which!there!are!
• Governed!by!the!law!itself! two!parties!
• Agreement! of! the! parties! is! not! necessary! (e.g.! tax! o E.g.!!Art!2144,!Art!2150,!Art!2154,!Art!2164,!Art!2167,!
collection,!Art!448!and!Art!488)! Art!2168,!Art!2174,!and!Art!2175!
• Is! not! presumed;! only! those! expressly! provided! are! !
enforceable! 1. KINDS!OF!QUASI[CONTRACTS!
• To! be! demandable,! they! must! clearly! be! set! forth! in! the! !
law!(i.e.,!Civil!Code!or!special!laws.)! a. NEGOTIORUM%GESTIO%(OFFICIOUS%
• “Special!laws”!refer!to!all!other!laws!not!contained!in!the!
MANAGEMENT)%%
Civil!Code.!!
!
!
Art.!2144.!Whoever!voluntarily!takes!charge!of!the!agency!or!
management!of!the!business!or!property!of!another,!without!
B. CONTRACTS([ExJContractu,(Culpa(Contractual](
any! power! from! the! latter,! is! obliged! to! continue! the! same!
! until! the! termination! of! the! affair! and! its! incidents,! or! to!
Art.!1159.!Obligations!arising!from!contracts!have!the!force!of!law! require!the!person!concerned!to!substitute!him,!if!the!owner!
between! the! contracting! parties! and! should! be! complied! with! in! is!in!a!position!to!do!so.!This!juridical!relation!does!not,arise!in!
good!faith.! either!of!these!instances:!
! !
• Expresses!principle!of!autonomy!of!will,!presupposes!that! 1)! When! the! property! or! business! is! not! neglected! or!
contract!is!valid!and!enforceable!! abandoned!
• PRE?CONTRACTUAL! OBLIGATION:! Damages! can! be! !
recovered!when!contract!is!not!perfected!if:! 2)! If! in! fact! the! manager! has! been! tacitly! authorized! by! the!
o Offer!is!clear!and!definite,!leaving!offeree!in!good! owner!
faith!to!incur!expenses!in!expectation!of!entering! !
into!a!contract!! !
o Withdrawal!of!the!offer!must!be!without!any! b. SOLUTIO%INDEBITI%(PAYMENT%NOT%DUE)%
illegitimate!cause.!If!offeror!is…!! !
! Guilty,of,fault,or,negligence,!liability!would!be!
Art.! 2154.! If! something! is! received! when! there! is! no! right! to!
based!on!Art!2176!
demand! it,! and! it! was! unduly! delivered! through! mistake,! the!
! Not,guilt,fault,nor,negligence,!withdrawal!was!in!
obligation!to!return!it!arises.!
abuse!of!right,!liability!would!be!based!on!Art!19!
!
e.g.!breach!of!promise!to!marry,
• The! juridical! relation! which! is! created! when! something! is!
!
received! when! there! is! no! right! to! demand! it! and! it! was!
Art.! 1305.! A! contract! is! a! meeting! of! minds! between! two! persons!
unduly!delivered!by!mistake!(Article!2154)!
whereby! one! binds! himself,! with! respect! to! the! other,! to! give!
• Requisites:!!
something!or!to!render!some!service.!!
o No!right!to!receive!the!thing!delivered!
!
o The!thing!was!delivered!through!mistake.!!
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c. OTHER%QUASI=CONTRACTS%(SUPPORT%GIVEN% D. ACTS( or( OMISSIONS( PUNISHED( BY( LAW( [ExJ
BY%STRANGERS%AND%OTHER%“GOOD% Delictu,(ExJMaleficio,(Culpa(Criminal](
SAMARITANS”)% !
% Art.!1611.!Civil!obligations!arising!from!criminal!offense!shall!be!
Art.! 2164.! When,! without! the! knowledge! of! the! person! obliged! to! governed! by! the! penal! laws,! subject! to! the! provisions! of! Art!
give!support,!it!is!given!by!a!stranger,!the!latter!shall!have!a!right!to! 2177,!and!of!the!pertinent!provisions!of!Chapter!2,!Preliminary!
claim!the!same!from!the!former,!UNLESS!it!appears!that!he!gave!it! Title! on! Human! Relations! and! of! Title! XVIII! of! this! Book,!
out!of!piety!and!without!intention!of!being!repaid.! regulating!damages.!!
! !
Art.! 2165.! When! funeral! expenses! are! borne! by! a! third! person,! Art.!100,!RPC.!Every!person!criminally!liable!for!a!felony!is!also!
without!the!knowledge!of!those!relatives!who!were!obliged!to!give! civilly!liable.!!
support! to! the! deceased,! said! relatives! shall! reimburse, the, third, !
person,!should!the!latter!claim!reimbursement.! !
! • GENERAL!RULE!"Civil!liability!is!a!necessary!consequence!
Art.! 2166.! When! the! person! obliged! to! support! an! orphan,! or! an! of!criminal!liability!
insane!or!other!indigent!person!unjustly!refuses!to!give!support!to! o Reason!"!Commission!of!crime!causes!not!only!
the! latter,! any! third! person! may! furnish! support! to! the! needy! moral!evil!but!also!material!damage.!!
individual,! with! right! of! reimbursement! from! the! person! obliged! to! o Art!12,!RPC!Exempting!circumstances;!do!not!incur!
give!support.!The!provisions!of!this!article!apply!when!the!father!or! liability!but!are!NOT!EXEMPT!from!civil!liability!
mother! of! a! child! under! eighteen! years! of! age! unjustly! refuses! to! ! Imbecile,or,insane,person,,unless,acting,in,a,lucid,
support!him.! interval,
! ! Person,under,9,years,of,age,
Art.! 2167.! When! through! an! accident! or! other! cause! a! person! is! ! Person,over,9,years,of,age,and,under,15,,unless,
injured!or!becomes!seriously!ill,!and!he!is!treated!or!helped!while!he! acting,with,discernment,
is!not!in!a!condition!to!give!consent!to!a!contract,!he!shall!be!liable! ! Acting,under,compulsion,of,an,irresistible,force,
to!pay!for!the!services!of!the!physician!or!other!person!aiding!him,! ! Acting,under,impulse,of,an,uncontrollable,fear,of,
unless!the!service!has!been!rendered!out!of!pure!generosity.! an,equal,or,greater,injury,
! • EXCEPTION!"!Certain!crimes!without!civil!liability!
Art.! 2168.! When! during! a! fire,! flood,! storm,! or! other! calamity,! o Criminal!contempt!
property! is! saved! from! destruction! by! another! person! without! the! o Gambling!
knowledge!of!the!owner,!the!latter!is!bound!to!pay!the!former!just! o Traffic!violations!
compensation.! !
! SUBSIDIARY%LIABILITY%FOR%CRIME%
Art.!2169.!When!the!government,!upon!the!failure!of!any!person!to! • Innkeepers,! tavern! keepers! and! any! other! persons! or!
comply! with! health! or! safety! regulations! concerning! property,! corporations!shall!be!civilly!liable!for!crimes!committed!in!
undertakes! to! do! the! necessary! work,! even! over! his! objection,! he! their! establishment,! in! all! cases! where! a! violation! of!
shall!be!liable!to!pay!the!expenses.! municipal! ordinances! or! some! general! or! special! police!
! regulation! shall! have! been! committed! by! them! or! their!
Art.! 2171.! The! rights! and! obligations! of! the! finder! of! lost! personal! employees.!!
property!shall!be!governed!by!Articles!719!and!720.! • Also! applicable! to! employers,! teachers,! persons! and!
! corporations! engaged! in! any! kind! of! industry! for! felonies!
Art.! 2172.! The! right! of! every! possessor, in, good, faith! to! committed! by! their! servants,! pupils,! apprentices! or!
reimbursement! for! necessary! and! useful! expenses! is! governed! by! employees!in!discharge!of!their!duties.!
Article!546.! o To!hold!employers!subsidiarily!liable!for!CRIME!of!an!
! employee:!committed!in!the!performance!of!the!
Art.! 2173.! When! a! third! person,! without! the! knowledge! of! the! functions!or!duties!of!the!employee.!!
debtor,! pays! the! debt,! the! rights! of! the! former! are! governed! by! o But!if!action!is!based!on!CONTRACT,!and!not!upon!
Articles!1236!(recover!what!has!been!beneficial!to!debtor)!and!1237! previous!conviction!of!employee!for!a!crime:!
(cannot!compel!creditor!to!subrogate!payor!in!his!rights).! employer’s!liability!is!PRIMARY!and!INDEPENDENT,!
! not!merely!subsidiary.!!
Art.! 2174.! When! in! a! small! community! a! nationality! of! the! %
inhabitants! of! age! decide! upon! a! measure! for! protection! against! CIVIL%LIABILITY%ARISING%FROM%CRIME%
lawlessness,! fire,! flood,! storm! or! other! calamity,! any! one! who! %
objects!to!the!plan!and!refuses!to!contribute!to!the!expenses!but!is! Rules!on!Criminal!Procedure!Rule!111.!When!a!criminal!action!
benefited!by!the!project!as!executed!shall!be!liable!to!pay!his!share! is! instituted,! the! civil! action! for! the! recovery! of! civil! liability!
of!said!expenses.! arising! from! the! offense! charged! shall! be! deemed, instituted,
! with,the,criminal,action!UNLESS!the!offended!party!waives!the,
Art.! 2175.! Any! person! who! is! constrained! to! pay! the! taxes! of! civil, action,! reserves, the, right, to, institute, it, separately! or!
another!shall!be!entitled!to!reimbursement!from!the!latter.! institutes!the!civil!action!prior!to!the!criminal!action.!!
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EXTENT%OF%CIVIL%LIABILITY% • NEW! SOURCES! OF! OBLIGATION! "! generally! recognized!
! by!law!although!not!included!in!the!code!
Art.! 104,! RPC! What, is, included, in, civil, liability, –! The! civil! liability! 1. Unjust!enrichment!(CC!categorized!under!quasi?
establish!in!Articles!100,!101,!102!and!103!include:! contract)!
! 2. Unilateral!declaration!of!will!
1)!Restitution! 3. Abuse!of!rights!(CC!categorized!under!quasi?delict)!
2)!Reparation!of!the!damage!caused! !
3)!Indemnification!for!consequential!damages! • TEST! OF! NEGLIGENCE! "! Would! a! prudent! man,! in! the!
! position! of! the! person! to! whom! negligence! is! attributed,!
• RESTITUTION!"!thing!itself!is!restored!(Art!105,!RPC)! foresee! harm! to! the! person! injured! as! a! reasonable!
• REPARATION! OF! DAMAGE! CAUSED! "! court! determines! consequence!of!the!course!about!to!be!pursued?!
amount!of!damage!(Art!106,!RPC)! !
• INDEMNIFICATION! FOR! CONSEQUENTIAL! DAMAGES! "! not! ELEMENTS%OF%NEGLIGENCE%
only! caused! the! 3rd! party! but! also! those! suffered! by! his! • Duty!on!the!part!of!the!defendant!to!protect!the!plaintiff!
family! or! by! a! 3rd! person! by! reason! of! the! crime! (Art! 107,! from!injury!of!which!the!latter!complains!
RPC)! • Failure!to!perform!such!duty!
• Civil!liability!for!crimes!is!extinguished!the!same!causes! • An!injury!to!the!plaintiff!through!such!failure!
provided!in!the!CC!for!the!extinguishment!of!other! !
obligations.! KINDS%OF%NEGLIGENCE%
• GENERAL!RULE:!Criminal!action!bars!civil!action!for!the!same! a. CULPA% AQUILANA% –! or! culpa! extra?contractual;!
offense!! negligence!as!a!source!of!obligation,!a!quasi?delict!
o Civil!action!for!recovery!of!civil!liability!arising!from!the! b. CULPA% CONTRACTUAL% –! negligence! in! the!
offense!is!impliedly!instituted!with!the!criminal!action! performance!of!a!contract%
• EXCEPTIONS:!! c. CULPA%CRIMINAL!–!criminal!negligence!
o Offended!party!reserves!the!right!to!institute!it!
%
separately!!
DISTINCTION% BETWEEN% CULPA% AQUILANA% AND% CULPA%
o The!law!provides!for!an!independent!civil!action!(i.e.!civil!
CONTRACTUAL%
action!may!proceed!to!final!judgment!irrespective!of!
!
result!of!the!criminal!action!and!filing!of!the!criminal!
CULPA!AQUILANA! CULPA!CONTRACTUAL!
action!does!not!suspend!the!civil!action)!!
(culpa!extra[contractual!or!
! Obligations!arising!from!the!act!or!omission!claimed!
quasi!delict)!
to!be!criminal!(Art!31)!
! Violations!of!constitutional!rights!and!liberties!of! Governed!by!Art!2176!to!2194! Governed!by!Art!1179!et,sequel,!
individuals!(Art!32)! Negligence! as! a! source! of! Negligence!in!the!performance!of!
! Defamation,!fraud!or!physical!injuries!(Art!33)! obligation! a!contract!
! Refusal!or!failure!of!members!of!police!force!to! ?Parties! have! no! pre?existing! ?Parties! have! pre?existing!
render!protection!to!life!or!property!!(Art!34)! contractual!relations! contractual!relations!
?Fault! or! negligence! which! ?Fault!or!negligence!of!the!debtor!
E. QUASIJDELICTS( [Quasi( ExJDelicto,( Quasi( ExJ constitutes! an! independent! as!an!incident!in!the!fulfillment!of!
source! of! obligation! between! an!existing!obligation!
Maleficio,( Culpa( Aquilana,( Tort( (common( parties!not!previously!bound!!
law)]( Negligence!of!defendant!should! ?Negligence! serves! to! increase!
! be! the! proximate! cause! of! the! liability! arising! from! the!
Art.! 1162.! Obligations! derived! from! quasi?delicts! shall! be! damage!if!liability!is!to!attach! contractual!obligation.!!
governed!by!the!provisions!of!Chapter!2,!Title!XVII!of!this!Book! ?Quasi! delict! may! arise! even! if! !
and!by!special!laws.! there!is!pre?existing!contractual!
! relation.!!
Art.! 2176.! Whoever! by! act! or! omission! causes! damage! to! !
another,! there! being! fault! or! negligence,! is! obliged! to! pay! for! !
the! damage! done.! Such! fault! or! negligence! when! there! is! no! !
pre?existing! contractual! relation! between! the! parties,! is! called! !
quasiMdelict!and!is!governed!by!the!provisions!of!this!Chapter.! !
! !
• BASIS! "! Undisputable! principle! of! equity;! fault! or! !
negligence!cannot!prejudice!anyone!else!besides!its!author! !
and! in! no! case! should! its! consequences! be! borne! by! him! !
who! suffers! the! harm! produced! by! such! fault! or! !
negligence.! !
o Man!is!responsible!not!only!for!his!voluntary!willful! !
acts,!executed!consciously!and!intentionally!but!also! !
for!those!acts!performed!with!lack!of!foresight,!care! !
and!diligence,!which!cause!material!harm!to!society! !
or!to!other!individuals.! !
!
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1. DISTINCTION!BETWEEN!QUASI[DELICTS!AND!CRIMES! 2. LIABILITY!FOR!FAULT!OF!OTHERS!!
! • Obligation!arising!from!quasi?delict!is!demandable!not!only!
AS!TO…! QUASI[DELICT! CRIMES! for! one’s! own! acts! or! omissions,! but! also! for! those! of!
Nature!of!right! Private!rights;!wrong! Public!right;!wrong! persons!for!whom!one!is!responsible.!!
violated! against!the!individual! against!the!state! !
Condition!of! Criminal!intent!is!not! Criminal!intent!is! Art.! 2180.! The! obligation! imposed! by! Article! 2176! is!
mind! necessary.!Possible! necessary!for!the! demandable!not!only!for!one's!own!acts!or!omissions,!but!also!
that!there!is!not! existence!of!liability,! for!those!of!persons!for!whom!one!is!responsible.!!
criminal!charge!but! without!it,!there!can! !
only!civil!liability!for! be!no!crime! The!father!and,!in!case!of!his!death!or!incapacity,!the!mother,!
damages!arising!from! are! responsible! for! the! damages! caused! by! the! minor! children!
quasi?delict! who!live!in!their!company.!!
Legal!basis!of! Actionable!in!any!act! Not!as!broad!as! !
liability! or!omission!wherein! quasi?delict,!can!be! Guardians! are! liable! for! damages! caused! by! the! minors! or!
fault!or!negligence! punished!only!when! incapacitated!persons!who!are!under!their!authority!and!live!in!
intervenes! there!is!a!penal!law! their!company.!!
clearly!penalizing!it! !
Liability!for! Liability! for! damages! Certain!crimes!do!not! The! owners! and! managers! of! an! establishment! or! enterprise!
damages! to!the!injured!party! have!civil!liability!e.g.! are! likewise! responsible! for! damages! caused! by! their!
contempt,! gambling,! employees!in!the!service!of!the!branches!in!which!the!latter!are!
violations! of! employed!or!on!the!occasion!of!their!functions.!!
ordinances! and! !
traffic! regulations! Employers! shall! be! liable! for! the! damages! caused! by! their!
when! nobody! is! employees! and! household! helpers! acting! within! the! scope! of!
injured! their! assigned! tasks,! even! though! the! former! are! not! engaged!
Forms!of!redress! Reparation! of! the! Fine! (accruing! to! the! in!any!business!or!industry.!!
injury! suffered! by! the! public! treasury),! !
injured! party! "! imprisonment! or! The!State!is!responsible!in!like!manner!when!it!acts!through!a!
compensation,! both!"!punishment! special! agent;! but! not! when! the! damage! has! been! caused! by!
indemnification! the!official!to!whom!the!task!done!properly!pertains,!in!which!
Amount! of! Preponderance! of! Beyond! reasonable! case!what!is!provided!in!Article!2176!shall!be!applicable.!!
evidence! evidence! doubt! !
Compromise! Can! be! compromised! Can! never! be! Lastly,! teachers! or! heads! of! establishments! of! arts! and! trades!
as! any! other! civil! compromised! shall!be!liable!for!damages!caused!by!their!pupils!and!students!
liability!! or!apprentices,!so!long!as!they!remain!in!their!custody.!!
!
!
The!responsibility!treated!of!in!this!article!shall!cease!when!the!
REQUISITES%OF%LIABILITY%UNDER%QUASI=DELICTS%
persons! herein! mentioned! prove! that! they! observed! all! the!
• There! exists! a! wrongful! act! or! omission! imputable! to! the!
diligence!of!a!good!father!of!a!family!to!prevent!damage.!!
defendant!by!reason!of!his!fault!or!negligence!
!
• There!exists!a!damage!or!injury!
Art.!218,!FC.!The!school,!its!administrators!and!teachers,!or!the!
• Direct!causal!connection!or!relation!of!cause!and!effect!between!
individual,! entity! or! institution! engaged! in! child! are! shall! have!
the! fault! or! negligence! and! the! damage! or! injury! OR! that! the!
special! parental! authority! and! responsibility! over! the! minor!
fault!or!negligence!be!the!cause!of!damage!or!injury!!
child!while!under!their!supervision,!instruction!or!custody.!!
o DOCTRINE! OF! PROXIMATE! CAUSE:! such! adequate! and!
!
efficient!cause!as,!in!the!natural!order!of!events,!and!under!
Authority! and! responsibility! shall! apply! to! all! authorized!
the! particular! circumstance! surrounding! the! cause,! would!
activities!whether!inside!or!outside!the!premises!of!the!school,!
necessarily!produce!the!event!!
entity!or!institution.!!
o NATURAL! AND! PROBABLE! CAUSE:! either! when! it! acts!
!
directly!producing!the!injury,!or!sets!in!motion!other!causes!
Art.!219,!FC.!Those!given!the!authority!and!responsibility!under!
so! producing! it! and! forming! a! continuous! chain! in! natural!
the!preceding!Article!shall!be!principally!and!solidarily!liable!for!
sequence!down!to!the!injury!
damages!caused!by!the!acts!or!omissions!of!the!unemancipated!
o CONCURRENT! CAUSE:! if! two! causes! operate! at! the! same!
minor.!The!parents,!judicial!guardians!or!the!persons!exercising!
time!to!produce!a!result!which!might!be!produced!by!either!
substitute! parental! authority! over! said! minor! shall! be!
independently! of! the! other,! each! of! them! is! a! proximate!
subsidiarily!liable.!!
cause!
!
o When!the!plaintiff’s!own!negligence!was!the!immediate!and!
The! respective! liabilities! of! those! referred! to! in! the! preceding!
proximate!cause!of!his!injury,!he!cannot!recover!damages.!!
paragraph!shall!not!apply!if!it!is!proved!that!they!exercised!the!
o BUT! if! negligence! is! only! contributory,! the! immediate! and!
proper!diligence!required!under!the!particular!circumstances.!!
proximate! cause! of! the! injury! is! defendant’s! lack! of! due!
!
care,! the! plaintiff! may! recover! damages,! the! courts! shall!
All! other! cases! not! covered! by! this! and! the! preceding! articles!
mitigate!the!damages!to!be!awarded!(Art!2179)!
shall!be!governed!by!the!provisions!of!the!Civil!Code!on!quasi?
!
delicts.!
!
!!!!
! 2. WITH!A!PERIOD!OR!TERM!
DILIGENCE%OF%EMPLOYERS% !
• !An!employer!may!be!held!civilly!liable!for!the!quasi?delict!
• Obligations! with! a! Period! or! Term! deal! with! when! an!
or!crime!of!his!employee.!!
obligation!is!demandable!
!
!
LIABILITY!OF!EMPLOYERS!FOR! LIABILITY!OF!EMPLOYERS!FOR!
EMPLOYEES’! EMPLOYEES’!
PERIOD!"!a!future!and!certain!event;!an!event!that!must!
QUASI[DELICT!(Art!2180,!CC)! CRIME!(Art!103,!RPC)! necessarily!come!
!
Primary,!can!be!sued!directly!by! Subsidiary,!employee!must!
the!injured!party!and!after!he!has! have!first!been!convicted!and! AS!TO! PERIOD! CONDITION!
paid!the!damages!to!such!injured! sentenced!to!pay!civil! Fulfillment! Certain!event! Uncertain!
party,!he!can!recover,from,his, indemnity!and!it!must!be! event!
employee!amount!paid!by!him! shown!that!he!is!insolvent!in! Time! Future!event! Past!event!
order!that!employee!may!be! unknown!to!parties!
liable! Influence!on! Fixes!the!time!for! Causes!an!
Employer!can!avoid!liability!by! Liability!is!absolute!and!cannot, the!obligation! the!efficaciousness!of! obligation!either!to!
proving!that!he!exercised!the! avail,of,the,defense!by!proof!of! the!obligation! arise!or!to!cease!
diligence,of,a,good,father,of!a! such!diligence! Effect!when!left! Empowers!the! Invalidates!the!
family!to!prevent!damage! to!the!debtor’s!will! court!to!fix!the! obligation!
All!employers,!whether!they!are! Employer!is!liable!only!when!he! duration!
engaged!in!some!enterprise!or! is!engaged!in!some!kind!of! Retroactivity!of! Does!not!have!any! Has!retroactive!
not,!are!liable!for!the!acts!of!their! business!or!industry!(during! effects! retroactive!effect! effect!
employees!including!house! performance!of!duty)! unless!there!is!an!
helpers! agreement!to!the!
contrary!
?Must!be!possible!
!
III. Classification*of*Obligations** 3. ALTERNATIVE!AND!FACULTATIVE!
• Alternative! and! Facultative! focus! on! classifiying!
A. Primary(Classification(under(the(Civil(Code(( obligations!with!multiple!objects.!
! !
1. PURE!AND!CONDITIONAL! ALTERNATIVE%
! # An!obligation!with!multiple!prestations!but!debtor!will!
PURE!"!not!subject!to!any!condition;!no!specific!date!is! perform!one,or,some,but,not,all,!depending!on!whose!
mentioned;!demandable!at!once! ! choice!it!is!
! ! # Performance! of! one! of! them! is! sufficient! as!
CONDITIONAL!"!fulfillment!or!extinguishment!depends! determined!by!the!choice!of!the!DEBTOR,!but!may!be!
exercised! by! the! creditor! when! EXPRESSLY! granted! to!
upon!a!future!and!uncertain!event!!
him! (article! 1205),! or! by! a! third! person! when! a!
!
COMMON!AGREEMENT!gives!the!right!to!him.!!
• Pure! and! Conditional! obligations! deal! with! when! the!
!
obligation!is!enforceable.!
! FACULTATIVE%
# An!obligation!with!multiple!prestations!with!a!principal!
CONDITION! "! future! AND! uncertain! event,! upon! the!
obligation!and!substitute!prestation.!
happening! of! which,! the! effectivity! or! extinguishment! of! an!
# The!choice!is!generally!given!to!the!DEBTOR!!
obligation!(or!right)!subject!to!it!depends!
# Only! one! prestation! is! agreed! upon! but! the! obligor!
!
may!render!another!in!substitution.!
• Characteristics!of!a!condition!
# Examples:!!
o Future!and!uncertain!–!the!word!“or”!should!be!
• “I!will!give!you!my!piano!but!I!may!give!my!
“and”.!!
television!set!as!a!substitute.”!!
o Past!but!unknown!–!Both!future!and!past!events!
must!be!UNCERTAIN.!! • “I!will!mortgage!my!land!to!secure!my!debt!which!
shall!be!payable!within!90!days!upon!my!failure!to!
!
pay!my!debt!within!30!days.”!!
• Two!principal!kinds!of!condition!
!
o Suspensive!(Condition!precedent!or!condition!
!
antecedent)?!gives!rise!to!an!obligation!or!right!
!
o Resolutory!(Condition!subsequent)!?!fulfillment!will!
!
extinguish!an!obligation!
!
!
!
• Effects!of!Happening!of!Condition!
!
o Acquisition!of!Rights!!
!
o Loss!of!rights!already!acquired!
!
!
!
!!!!
AS!TO! ALTERNATIVE! FACULTATIVE! 6. WITH!A!PENAL!CLAUSE!
Number!of! ?Several! are! due,! but! ?Only! one! althought! •Deals!with!obligations!containing!an!accessory!obligation!
Prestations! compliance! of! one! is! the! DEBTOR! is! to! assume! a! greater! liability! in! case! of! a! breach! of! the!
sufficient! allowed! to! substitute! principal!obligation!
! it.! • Purpose!of!a!Penal!Clause!
Right!of!choice! ?may! be! given! to! the! ?Right! to! make! the! o To!insure!their!performance!by!creating!an!effective!
creditor! or! third! substitution! is! given! deterrent! against! breach,! making! the! consequences!
person! only!to!the!debtor! of! such! breach! as! onerous! as! it! may! possibly! be!
Loss!through!a! ?loss! of! one! or! more! ?loss!of!the!thing!due! (general!purpose)!
fortuitous!event! of! the! alternatives! extinguishes! the! o To! substitute! a! penalty! for! the! indemnity! for!
through! a! fortuitous! obligation! damages! and! the! payment! of! interests! in! case! of!
event! does! not! non?compliance! (Article! 1226);! or! to! punish! the!
extinguish! the! debtor! for! the! non?fulfillment! or! violation! of! his!
obligation! obligation.!!
Loss!through!fault! a.! does! not! render! a.! loss! of! the! thing! !
of!the!debtor! debtor!liable! due! through! his! fault! ! !
b.! Where! the! choice! makes!him!liable.! PENAL!CLAUSE! CONDITION!
belongs! to! the! b.! the! loss! of! the! Constitutes!an!obligation! Does!not!constitute!an!
creditor,! the! loss! of! substitute! before! the! although!accessory! obligation!
one! alternative! substitution! through! May!become!demandable!in! Never!demandable!
through! the! fault! of! the! fault! of! the! default!of!the!unperformed!
the! debtor! gives! rise! debtor! does! not! obligation!and!sometimes!jointly!
to!liability! render!him!liable.! with!it!
! !
4. JOINT!AND!SOLIDARY!
• Classifies! obligation! according! to! the! subjects! of! the! B. Secondary(Classification(
obligation,!their!number!and!the!ties!that!bind!them! !
! 1. LEGAL,!CONVENTIONAL!AND!PENAL!!
JOINT%% !
# each! can! be! made! to! pay! only! his! share! in! the!
Legal!"!derived!from!law!and!is!not!presumed;!expressly!
obligation!
determined!in!the!Civil!Code.!!
# the! whole! obligation! is! to! be! paid! or! fulfilled!
proportionately! by! the! different! debtors! and/or! is! to! %
be! demanded! proportionately! by! the! different! Conventional! "! from! contracts/stipulation! of! parties;!
creditors.!! should!be!complied!with!in!good!faith!!
SOLIDARY%% %
# one! can! be! made! to! pay! for! the! whole! obligation! Penal!"!from!commission!of!a!crime!
subject!to!reimbursement! !
# one!where!each!one!of!the!debtors!is!bound!to!render,! 2. REAL!AND!PERSONAL!
and! /! or! each! one! of! the! creditors! has! a! right! to!
demand! from! any! of! the! debtors,! entire! compliance!
!
with!the!prestation!! Real"!an!obligation!to!give!
# Solidary!liability!only!when!(Article!1207):!! %
• The!obligation!expressly!so!states!! Personal!"!an!obligation!to!do!or!not!to!do!
• Law!requires!solidarity! !
• The!nature!of!the!obligation!requires!solidarity!! 3. DETERMINATE!AND!GENERIC!
! !
5. DIVISIBLE!AND!INDIVISIBLE! Determinate%"!an!obligation!to!give!a!unique,!specific!
• Focuses! on! whether! the! performance! of! the! obligation! thing;!capable!of!perishing!
must!be!done!as!whole!or!capable!of!being!done!in!parts!
%
%
Generic% "! an! obligation! to! give! a! generic! thing;! generally!
DIVISIBLE% "! one! the! object! of! which,! in! its! delivery! or! does!not!perish!
performance,!is!capable!of!PARTIAL!FULFILLMENT.! !
!
4. POSITIVE!AND!NEGATIVE!
INDIVISIBLE!"!one!the!object!of!which,!in!its!delivery!or!
!
performance,!is!NOT!capable!of!partial!fulfillment.!!!
! Positive%"!an!obligation!requiring!a!positive!act!(to!give!or!
! to!do)!
! %
! Negative! "! an! obligation! requiring! an! omission! (not! to!
! give!or!not!to!do)!
! !
!!!!
CHAPTER(2:(NATURE(AND(
5. UNILATERAL!AND!BILATERAL!
!
Unilateral%"!an!obligation!with!a!prestation!incumbent!
only!on!one!of!the!parties!
%
EFFECTS(OF(OBLIGATIONS(
Bilateral!"!an!obligation!with!reciprocal!prestations!
!
6. INDIVIDUAL!AND!COLLECTIVE! I. Kinds*of*Prestation*
!
Individual%"!Only!has!one!creditor!and!one!debtor! A. Obligation(to(Give((Real(Obligation)(
(
%
1. A!SPECIFIC!THING!
Collective!"!May!have!multiple!creditors!and/or!debtors! !
! REAL!OBLIGATION!–!the!subject!matter!is!a!thing!which!the!obligor!
7. PRINCIPAL!AND!ACCESSORY! must!deliver!to!the!obligee!
! !
Principal%"!independent!and!capable!of!standing!on!its! SPECIFIC! THING! GENERIC! THING!
own! (determinate)! (indeterminate)!
One! that! is! individualized! Indicated! only! by! its! kind! or!
%
and! can! be! identified! or! specie,! without! being!
Accessory! "! depends! on! another! obligation! for! its! distinguished!from!others!of!its! designated! and! distinguished!
existence! kind! from!others!of!the!same!kind!
! ! !
8. AS!TO!OBJECT!OR!PRESTATION!! Debtor!cannot!substitute!it! Object! due! becomes!
! with! another! although! the! determinable! from! moment! of!
Simple%"!an!obligation!with!only!one!prestation! latter! is! of! the! same! kind! and! delivery!!
quality! without! the! consent! of! !
% the!creditor!(Art.!1244)! Debtor! can! give! anything! of!
Multiple!"!an!obligation!with!two!or!more!prestations! the!same!class!as!long!as!it!is!of!
! the!same!kind!
• Conjunctive!–!all!must!be!performed! !
• Distributive!–!one!or!some!must!be!performed! SPECIFIC%THING%(DETERMINATE)%%
o Alternative! –! more! than! one! prestation! but! one! !
party! may! choose! which! one;! several! are! due! but! a. DUTIES%OF%THE%OBLIGOR/DEBTOR%(Letters%B=D%
only! one! must! be! fulfilled! at! the! election! of! the!
debtor!
are%the%accessory/incidental%obligations)%%
!
o Facultative! –! main! prestation! and! a! substitute!
prestation!and!it!is!the!debtor!who!chooses;!only!one! i. To%deliver%thing%itself%
thing!is!due!but!the!debtor!has!reserved!the!right!to! !
substitute!it!with!another! Art.!1244,!Par.!1.!The!debtor!of!a!thing!cannot%compel!the!creditor!
! to! receive% a, different! one,! although! the! latter! may! be! of! the! same!
9. POSSIBLE!AND!IMPOSSIBLE! value!as,!or!more!valuable!than!which!is!due.!
! !
• “He!shall!acquire!no!real!right!over!it!until!the!same!has!been!
Possible%"!an!obligation!capable!of!being! delivered!to!him”!–!the!creditor!does!not!become!the!owner!
performed/complied!with!
until!the!specific!thing!has!been!delivered!to!him!
% • Though! upon, agreement, or, consent, of, the, creditor,! the!
Impossible! "! an! obligation! incapable! of! being! debtor! may! deliver! a! different! thing! or! perform! a! different!
performed,!either!physically!or!legally! prestation! in! lieu! of! that! stipulated! "! DATION! in! payment!
! (Art!1245)!or!OBJECTIVE!NOVATION!(Art!1291)!
! • Generally,! arises! from! the! perfection! of! the! contract! (Art.!
1305,!1315,!1319)!
!
• If!it!is!subject!to!a!suspensive!condition!or!period!(Art.!1179,!
! 1189,! 1193),! it! arises! upon! fulfillment! of! the! condition! or!
! arrival!of!the!period;!OR!parties!make!stipulate!otherwise!
! • In!a!sale,!obligation!arises!from!the!perfection!of!the!contract!
! even!if!the!obligation!is!subject!to!a!suspensive!condition!or!a!
suspensive!period!where!the!price!has!been!paid!
! • In! obligations! arising! from! law,! quasi?contracts,! delicts,! and!
! quasi?delicts,! time! of! the! performance! is! determined! by! the!
! provisions!of!law!applicable!
! !
!!!!
• Defects!of!the!thing!may!be!waived!by!the!creditor!IF!! ACCESSIONS%AND%ACCESSORIES%DISTINGUISHED:%
o Expressly!declares!! !
o With!knowledge!thereof,!he!accepts!the!thing!without! ACCESSIONS! ACCESSORIES!
protest! or! disposes! or! consumes! it! "! “waiver! of! Can! exist! only! in! relation! to! Can! exist! only! in! relation!
defect”! the!principal! to!the!principal!
! ! !
ii. To%preserve%thing% Fruits! of,! or! additions! to,! or! Those! things! which,!
! improvements! upon,! a! thing! (the! destined! for! embellishment,!
principal);! not! necessary! to! the! use! or! preservation! of!
Art.!1163.!Every!person!obliged!to!give!something!is!also!obliged%to%
principal!thing! another! thing! or! more!
take% care! of! it! with! the! proper% diligence! of! a! good% father% of% a%
! important,! have! for! their!
family,! UNLESS! the! law! or! the! stipulation! of! the! parties! requires!
Includes! everything! which! is! object! the! completion! of! the!
another!standard!of!care.!
produced! by! a! thing,! or! which! is! latter! for! which! they! are!
!
incorporated!or!attached!thereto,! indispensable!or!convenient.!!
• Why:! the! obligation! to! deliver! would! be! illusory,! so! the! either! naturally! or! artificially.! !
debtor! has! the! incidental! duty! to! take! care! of! the! thing! Does! not! include! fruits! because! The! things! joined! to,! or!
due!! Art!1164!mentioned!it!already! included! with,! the! principal!
• What! kind! of! diligence:! DILIGENCE! OF! GOOD! FATHER! OF! Accesion! continua! which! thing! for! the! latter’s!
FAMILY;!elaborated!in!Art!1173! includes:! embellishment,! use,! or!
• It!is!the!ordinary,care!or!that!diligence!which!an!average!(a! 1. Accesion,natural! completion;! accessory! and!
reasonably! prudent)! person! exercises! over! his! own! e.g.!alluvion! principal! thing! must! go!
property! 2. Accesion,industrial! together!
o Failure! to! preserve! the! thing! "! Liability! for! e.g.! building,! planting,! !
damages!! sowing!
o BUT! if! due! to! FORTUITOUS! EVENTS! or! FORCE! !
MAJEURE! "!Exempted!from!responsibility!!(Art.! !
1174)! iv. To%deliver%the%fruits%
• Factors! to! consider:! Nature! of! the! obligation,! the! !
circumstances!of!the!person,!of!the!time,!and!of!the!place!
Art.!1164,!Par.!1.!The!creditor!has!a!right!to!the!fruits!of!the!thing!
(Art.!1173)!
from! the! time% the% obligation% to% deliver! it! arises.! However,! there! is!
• Exception:! When! the! law! or! the! stipulation! provides! for! no%real%right!until!the!same!has!been!delivered!to!him.!
another! standard! of! care! (slight! or! extraordinary!
!
diligence),! said! law! or! stipulation! must! prevail! (Art.! 1163!
• Non, nudis, pactis,, sed, traditione, domina, rerum,
UNLESS!clause)!
trasferentur,"!the!ownership!of!things!is!transferred!
o Art.!1755!–!a!common!carrier!should!use!utmost!
not!only!by!mere!agreements!but!by!delivery%
(extraordinary)! diligence! of! very! cautious!
persons,! with! a! due! regard! for! all! the! • By! law,! the! creditor! is! entitled! to! the! fruits! of! the!
circumstances! thing!to!be!delivered!from!the!time!the!obligation!to!
o Reyes, v, CA! –! banks! are! duty! bound! to! treat! make! delivery! of! the! thing! arises! –! the! intention! of!
the!law!is!to!protect!the!interest!of!the!oblige!should!
deposit!accounts!with!the!highest!degree!of!care!
where! the! fiduciary! nature! of! relationship! is! the! obligor! commit! delay,! purposely! or! otherwise,! in!
concerned! the!fulfillment!of!his!obligation%
o Exception:! It! is! contrary! to! public! policy! to! ,
REAL%RIGHT!–!power!or!right!or!interest!belonging!to!a!person!over!
stipulate! for! absolute! exemption! from! liability!
for!any!fault!or!negligence!(Art.!1173,!1174)! a! specific! thing,! without! a! definite! passive! subject! individually!
! determined,!against!whom!such!right!may!be!personally!exercised!
• Gives!to!a!person!a!direct!and!immediate!power!over!
iii. To%deliver%the%accessions%and%accessories% a! thing,! which! is! susceptible! of! being! exercised,! not!
!
only! against! a! determinate! person! but! against! the!
Art.! 1166.! Obligation! to! give! a! determinate! thing! includes! that! of! whole!world!
delivering%all%its%accessions%and%accessories,!even!though!they!may! • E.g.!rights!of!ownership!and!possession!
not!have!been!mentioned.! ,
! PERSONAL% RIGHT, –! power! belonging! to! one! person! (creditor)! to!
• General! rule:! all! accessions! and! accessories! are! demand! of! another! (debtor),! as! a! definite! passive! subject,! the!
considered! included! in! the! obligation;! principal! of! law! fulfillment!of!a!prestation!to!give,!to!do!or!not!to!do!
that!the!accessory!follows!the!principal! !
• May! be! qualified! by! contrary! intentions! of! the! parties,! ,
e.g.! exclude! delivery! of! accession! or! accessory! of! the! ,
thing.!! ,
! ,
! ,
! ,
! ,
! ,
!!!!
PERSONAL%RIGHT%AND%REAL%RIGHT%DISTINGUISHED:! b. Fraud!
! c. Negligence!in!performance!
PERSONAL!RIGHT!(JUS!IN! REAL!RIGHT!(JUS!IN!RE)! d. Delay!or!default!
PERSONAM!OR!JUS!AD!REM)! e. Any!manner!in!contravention!of!the!tenor!of!obligation!!
There! is! a! definite! active! There! is! only! a! definite! active! !
subject! and! a! definite! passive! subject! without! any! definite! 2. A!GENERIC!THING!
subject! passive!subject! ,
! ! GENERIC%THING%(INDETERMINATE)%
Binding! or! enforceable! only! Directed! against! the! whole! !
against!a!particular!person! world! Art.! 1246.! When! the! obligation! consists! in! the! delivery% of% an%
! indeterminate% or% generic% thing,! whose! quality! and! circumstances!
TYPES%OF%FRUITS%(Art.!442):! have! not! been! stated,! the! creditor! cannot! demand! a! thing! of!
1. Natural!Fruits!–!spontaneous!products!of!the!soil,!and!the! superior, quality.! Neither! can! the! debtor! deliver! a! thing! of! inferior,
young! and! other! products! of! animals;! without! the! quality.!The!purpose!of!the!obligation!and!other!circumstances!shall!
intervention!of!human!labor! be!taken!into!consideration.!
2. Industrial! Fruits! –! those! produced! by! lands! of! any! kind! !
rd
through!cultivation!or!labor;!by!reason!of!human!labor! • Creditor! may! ask! for! compliance! by, 3 , person, at, debtor’s,
3. Civil!Fruits!–!those!derived!by!virtue!of!juridical!relation! expense;!action!for!substituted!performance!(Art!1165)!
! !
CORRELATIVE% RIGHTS% OF% THE% OBLIGEE/CREDITOR% (Sir! Labitag’s! LIMITED% GENERIC% THING! –! generic! objects! confined! to! a! particular!
diagrammatical!outline)!! class,!the!class!is!considered!in!itself!a!determinate!object!
1. Right!to!compel!delivery!! !
a. Fruits!(both!industrial!and!natural!from!the!time!obligation! DUTIES%OF%THE%OBLIGOR/DEBTOR!
to!deliver!arises),!accessions!and!accessories! • To! deliver! a! thing! which! is! of! the! quality! intended! by! the!
b. No! real! right! until! delivery! "! personal! action! against! parties! taking! into! consideration! the! purpose! of! the!
debtor,!no!right!against!the!world! obligation!and!other!circumstances!(see!Art.!1246)!
2. Right!to!rescission!or!resolution!! • To! be! liable! for! damages! in! case! of! fraud,! negligence,! or!
3. Right!to!damages! delay,! in! the! performance! of! his! obligation,! or!
a. Failure!to!deliver! contravention!of!the!tenor!thereof!(see!Art.!1170)!
• Legal! excuse! for! breach! of! obligation! or! delay— ,
FORTUITOUS!EVENT!unless!there!is! CORRELATIVE% RIGHTS% OF% THE% OBLIGEE/CREDITOR, (from! Sir!
o Law!e.g.!possession!in!bad!faith!(Art!552)! Labitag’s!diagrammatical!outline)!!
o Stipulation!to!the!contrary! 1. Right!to!ask!for!rescission!or!damages!
o Nature!of!obligation!requires!assumption!of! 2. Right!to!damages!
risk! a. Failure!to!deliver!
• FE!APPLICABLE!TO:!! b. Fraud!(malice!or!bad!faith)!
o Nonperformance!! c. Negligence!
o Delay! d. Delay!
o Loss/deterioration!of!specific!thing!! e. Any!manner!contravene!the!tenor!of!obligation!
! Art! 1189! Before! happening! of! !
suspensive!condition! RIGHTS%OF%A%CREDITOR,(from!BarOps!Reviewer!2008)!
! Art! 1190! Before! happening! of! !
resolutory!condition! SPECIFIC! GENERIC!
• Debtor!still!liable!despite!FE:! To! compel! specific! To! ask! for! the! performance!
o Expressly!specified!by!law!! performance! of!the!obligation!
! Art! 1942! Bailee! liable! for! loss! To!recover!damages,!in!case! To!ask!that!the!obligation!be!
(commodatum)! of! breach! of! the! obligation,! complied!with!at!the!expense!of!
! Art!2001!Act!of!a!thief! exclusive! or! in! addition! to! the!debtor!!
! Art!2147!Negotiorum!gestio!! specific!performance!
! Art!1993!Loss!of!deposit!! Entitlement! to! fruits,! To! recover! damages! in! case!
o Stipulation!e.g.!debtor!becomes!“insurer”!of! interests! from! the! time! of!breach!of!obligation!!
the!obligation! obligation!to!deliver!arises!
o Assumption!of!risk! !
o Fraud!or!malice!(bad!faith)!! !
! Art!1165!Par!3!Delivers!to!two!or!more! !
persons!having!different!interest! !
o Debtor!in!delay!already!when!FE!happened!! !
! (Art!1165!Par!3)! !
o Debtor!guilty!of!concurrent!negligence!"!in! !
this!case,!no!long!FE! !
o Liability! arises! from! criminal! act! except! if!
debtor! tenders! thing! and! creditor!
unjustifiably!refuses!to!receive!(Art!1268)!
!!!!
B. Obligation( to( Do( (Positive( Personal( II. Breach*of*Obligation*
Obligation)(
! A. Concept(
POSITIVE! PERSONAL! OBLIGATION!–!the!subject!matter!is!an!act!to! !
do!or!to!render!service! VOLUNTARY!breach!of!obligation!arises!from!the!modes!provided!in!
! Art.!1170!
Art.! 1244,! Par.! 2.! In! obligations! to! do! or! not! to! do,! an! act! or! !
forbearance! cannot% be% substituted! by! another! act! or! forbearance! INVOLUNTARY! breach! of! obligation! arises! because! of! fortuitous%
against,the,obligee’s,will.! events%provided!in!Art.!1174%
! !!
• If! the! prestation! is! a! personal! one,! and! specific! to! the! SUBSTANTIAL%AND%CASUAL/SLIGHT%BREACH%DISTINGUISHED:%
debtor,!only!he!can!do!it;!no!substitution!of!the!debtor!can! !
be!done! SUBSTANTIAL! CASUAL!
• Exception:! FACULTATIVE! OBLIGATION! wherein! the! debtor, Total!! Partial!
reserves,the,right,to,substitute!another!prestation!! Amounts! to! non? A!part!is!performed!
! performance!
Art.! 1167.! If! a! person! is! obliged! to! do! something! fails! to! do! it,! the! Basis! for! rescission! and! Gives! rise! to! liability! for!
same!shall!be!executed,at,his,cost.!! payment!of!damages! damages!
! The!same!rule!may!be!observed!if!he!does!it!in!contravention,of, !
the, tenor, of, the, obligation.! Furthermore,! it! may! be! decreed! that! GENERAL! RULE:! Rescission! will! not! be! permitted! for! a! slight! or!
what,has,been,poorly,done,be,undone.! casual! breach! of! the! contract,! but! only! for! such! breaches! as! are!so%
! substantial%and%fundamental!as!to!defeat!the!object!of!the!parties!
DUTIES%OF%OBLIGOR,(from!BarOps!Reviewer!2008)! in!making!the!agreement.!!
1. To!do!it!(Art!1167)!!! !
2. To!shoulder!the!cost!if!someone!else!does!it!(Art!1167)! Cases:!
3. To!undo!what!has!been!poorly!done!(Art!1167)! !
4. To!pay!damages!(Art!1170?1172,!2201?2202)! SONG!FO!v.!HAWAIIAN!PHIL!CO!
! Facts:!Hawaiian!Phil!agreed!to!deliver!300k!gallons!of!molasses!but!!
• No! action! for! compliance! because! that! would! be! Song!Fo!requested!for!another!100k!gallons!to!which!Hawaiian!said!
involuntary! servitude! which! is! prohibited! by! the! that,!“we!believe!that!this!is!possible!and!we!will!do!our!best!to!let!
constitution.!! you! have! these! extra! 100k! gallons…”.! Song! Fo! defaulted! in! the!
payment!for!the!molasses!the!defendant!delivered!to!it!so!the!latter!
C. Obligation( Not( to( Do( (Negative( Personal( was!compelled!to!cancel!and!rescind!the!said!contract.!
!
Obligation)(
Held:! The! court! ruled! that! the! agreement! was! for! 300k! gallons! of!
! molasses! only,! and! that! there! is! only! slight! breach! and! therefore!
NEGATIVE%PERSONAL%OBLIGATION!–!the!subject!matter!is!an!act!not! Hawaiian! had! no! right! to! rescind! the! sale.! General! rule! is! that!
to!do!(which!naturally!includes!obligations!“not!to!give”! rescission! will! not! be! permitted! for! a! slight! or! casual! breach! of! the!
! contract! and! will! only! be! allowed! when! such! breaches! are! so!
Art.! 1244,! Par.! 2.! In! obligations! to! do! or! not! to! do,! an! act! or! substantial!and!fundamental!as!to!defeat!the!object!of!the!parties!in!
forbearance! cannot% be% substituted! by! another! act! or! forbearance! making!the!agreement.!!A!delay!in!payment!for!a!small!quantity!of!
against,the,obligee’s,will.! molasses! for! about! 20! days! isn’t! such! a! grave! violation! of! an!
! essential!condition!of!the!contract!that!would!warrant!rescission!for!
• Performance!cannot!be!by!a!delegate!or!an!agent! non?performance.!
• No! legal! accessory! obligations! arise! (as! compared! to! !
obligation!to!give)!! VELARDE!v.!CA!
• This!is!the!MOST!STRICT!type!of!obligation,!no!substitution! Facts:!Raymundo!sold!a!parcel!of!land!to!Velarde!with!the!condition!
of!the!prestation! of! assuming! the! mortgage! amounting! to! P1.8M.! Assumption! of!
! mortgage!was!not!approved!and!Valerde!stopped!paying!to!BPI.!
Art!1268!When!the!obligation!consists!in!not!doing,!and!the!obligor! !
does! what! has! been! forbidden! him,! it! shall! also! be! undone, at, his, Held:! Court! held! that! Raymundo’s! act! of! rescinding! the! contract,! is!
expense.!! justified,!but!ordered!the!restitution!to!Velarde!of!P874,150,!which!
! the! latter! paid! as! a! consequence! of! the! contract! until! it! was!
DUTIES%OF%OBLIGOR%(from!BarOps!Reviewer!2008)! rescinded.!In!a!contract!of!sale,!the!seller!obligates!itself!to!transfer!
1. Not!to!do!what!should!not!be!done!! the!ownership!of!and!deliver!a!determinate!thing,!and!the!buyer!to!
2. To! should! the! cost! to! undo! what! should! not! have! been! pay! therefor! a! price! certain! in! money! or! its! equivalent.! Petitioners!
done!(Art!1168)! did! not! perform! their! correlative! obligation! of! paying! the! contract!
3. To!pay!damages!(Art!1170,!2201?2202)! price!in!the!manner!agreed!upon.!
!
!
!
!
!
!!!!
B. Modes(of(Breach( RESULTS! Breach! of! Vitiation! of! Does! not!
1. FRAUD!(Dolo)! IN! the!obligation! consent;!! result! in! the!
Voidable! vitiation! of!
! contract! consent!
Art.! 1170.! Those! who! in% the% performance! of! their! obligations! are! GIVES! Right! in! Right!of!the! Gives!rise!to!
guilty! of! FRAUD,! NEGLIGENCE,! or! DELAY! and! those! who! in! any! RISE!TO! favor! of! creditor! innocent! party! a! right! of! the!
manner!CONTRAVENE,THE,TENOR,thereof,!are!liable!for!damages.!!! to! recover! to! annul! the! innocent! party!
% damages! contract! to! claim! for!
a. Concept%of%Fraud% damages!!
! !
• Fraud! is! the! voluntary% execution% of% a% wrongful% act,! or! a! Case:!
willful! omission,! knowing! and! intending! the! effects! which! !
naturally!and!necessarily!arise!from!such!act!or!omission.! WOODHOUSE!v.!HALILI!
• Deliberate! and! intentional! evasion! of! the! normal! Facts:! Woodhouse! and! Halili! had! an! agreement! to! organize! a!
fulfillment!of!obligations!! partnership! for! the! bottling! and! distribution! of! Mission! soft! drinks!
(Woodhouse! to! act! as! industrial! partner/manager! and! Halili! as!
• Any! voluntary! and! willful! act! or! omission! which! prevents!
capitalist).!Woodhouse!secured!an!option!for!exclusive!franchise!but!
the! normal! realization! of! the! prestation,! knowing! and!
it!expired!without!him!availing!of!such!franchise.!Upon!signing!of!the!
intending!the!effects!which!naturally!and!necessarily!arise!
contract,!Woodhouse!got!a!30%!cut!on!the!profits.!Halili!only!knew!
from!such!act!
that! Woodhouse! all! along! was! not! able! to! secure! the! exclusive!
• Fraud!contemplated!in!this!article!is!in!the!performance!of!!
franchise!when!they!went!to!US!for!signing!of!contract!with!Mision.!
a!pre=existing%obligation!!
!
• Here,! the! breach! of! the! obligation! is! voluntary;! in! Article!
Held:!There!is!false!misrepresentation!by!Woodhouse!but!it!does!not!
1174,!it!is!involuntary.!
annul!the!agreement!to!form!a!partnership.!In!order!that!fraud!may!
• Cannot! cover! mistake! and! errors! of! judgment! made! in!
vitiate!consent,!and!thus!annul!a!contract,!it!must!be!the!causal!and!
good! faith,! ergo! synonymous! to! bad! faith! (dishonest!
not!merely!the!incidental!inducement!to!the!making!of!the!contract.!
purpose! or! some! moral! obliquity! and! conscious! doing! of!
In! Woodhouse’s! acts! of! pretending! that! he! had! the! exclusive!
wrong)!!
franchise! and! promising! to! transfer! it! to! Halili,! he! obtained! the!
• The!element!of!INTENT!and!NOT!the!harm!done!is!the!test!
consent! of! the! latter! to! give! him! (Woodhouse)! a! 30%! share! in! the!
(there!must!be!malice/bad!faith)!
net! profits.! This! is! the! dolo! incidente! defined! in! Art! 1270! of! the!
• Moral! damages! may! be! recovered! in! addition! to! other! Spanish! Civil! Code,! because! it! was! used! to! get! the! other! party's!
damages.! consent!to!a!big!share!in!the!profits,!a!matter!that!is!only!incidental!
• The! fraud! is! employed! for! the! purpose! of! evading! the! to!the!main!agreement!to!form!a!partnership.!
normal!fulfillment!of!an!obligation!and!its!existence!merely! !
results! in! breach! thereof! giving! rise! to! a! right! by! the!
b. %Non=waiver%of%Future%Fraud%%
innocent!party!to!recover!damages.!
!
!
KINDS%OF%FRAUD% Art.! 1171.! Responsibility! arising! from! fraud! is! demandable! in! ALL!
1. Fraud!in!the!performance!(Art!1171)! OBLIGATIONS.!Any!waiver!of!action!for!future!fraud!is!VOID.!
2. Fraud!in!the!execution/creation/birth!of!the!contract! !
a. Dolo,causante!(Art!1344)! • To! permit! such! advance! renunciations! would! practically!
b. Dolo,incidente,(Art!1338)! leave!the!obligation!without!effect.!!
! • The! law! does! not! prohibit! the! renunciation! of! the! action!
FRAUD,%DOLO%CAUSANTE,%AND%DOLO%INCIDENTE%DISTINGUISHED:% for!damages!on!the!ground!of!fraud!already!committed.!!
% !
! DOLO! DOLO! c. Effects%of%Fraud%
FRAUD!!
CAUSANTE! INCIDENTE! Liability! for! damages,! a! crime! or! a! quasi?delict! (Art!
(Art!1171)! •
(Art!1338)! (Art!1344)! 1170)!
WHEN! During! the! During! the! During! the! !
PRESENT! performance! of! perfection! of! a! perfection! of! a!
2. NEGLIGENCE!(CULPA!CONTRACTUAL)!!
a! pre?existing! contract! contract!
!
obligation!
PURPOSE! Evade! the! Secure! the! Secure! the! a. Concept%of%Negligence%
normal! consent! of! consent! of! !
fulfillment! of! another! to! another! to! Art.!1172.!Responsibility!arising!from!negligence!in!the!performance!
obligation! enter! into! enter! into! of!EVERY!KIND!OF!OBLIGATION!is!also!demandable,!but!such!liability!
contract! contract! BUT! may!be!REGULATED,BY,COURTS,!according!to!the!circumstances.!
fraud! was! not! !
the! principal! • Negligence!or!Culpa!is!any!voluntary!act!or!omission,!there!
inducement! in! being!no!malice,!which!prevents!the!normal!fulfillment!of!
making! the! an!obligation.!
contract! • It!is!the!!absence!of!due!diligence!required!
! !
!
!!!!
Art.! 1173,! Par.! 1.! The! fault! or! negligence! of! the! obligor! consists! in! VASQUEZ!v!BORJA!
the! omission% of% that% diligence! which! is! required! by! the! nature! of! Facts:!Vasquez!and!Busuego!obligated!themselves!to!sell!to!De!Borja!
obligation! and! corresponds! with! the! circumstances! of! the! persons,! 4,000! cavans! of! palay! at! P2.10! per! cavan,! but! upon! receiving! P8,!
of!the!time!and!the!place.!When!negligence!shows!BAD%FAITH,!the! 400,!they!delivered!only!2,488!cavans!of!palay!and!refused!to!deliver!
provisions!of!Art!1171!!and!Art!2201!Par!2!shall!apply.! the!balance!of!1,512!cavans.!
! !
• Art!2201!Par!2!In!case!of!fraud,!bad!faith,!malice!or!wanton! Held:! The! party! liable! on! the! contract! is! Natividad?Vazquez! Sabani!
attitude,! the! obligor! shall! be! responsible% for% all% damages! Development! Co.,! Inc.,! and! not! Vazquez! himselfbecause! a!
which! may! be! REASONABLY! ATTRIBUTED! to! the! non? corporation!is!an!artificial!being!invested!by!law!with!a!personality!of!
performance!of!obligation.!! its!own,!separate!and!distinct!from!that!of!its!stockholders!and!from!
% that!of!its!officers!who!manage!and!run!its!affairs.!Since!it!was!the!
% corporation’s!contract,!its!nonfulfillment,!whether!due!to!negligence!
CULPA%AND%DOLO%DISTINGUISHED:! or! fault! or! to! any! other! cause,! made! the! corporation! and! not! its!
! agent!liable.!Since!the!corporation!was!not!a!party!in!the!case,!the!
CULPA!(Negligence)! DOLO!(Fraud)! complaint!should!be!dismissed.!
!
Mere! want! of! care! or! diligence,! Willfulness! or! deliberate! intent! !
not! the! voluntariness! of! act! or! to! cause! damage! or! injury! to!
omission!! another!
b. %Standard%of%care%required%%
.!!
Liability! may! be! mitigated! by! Liability! cannot! be! mitigated! by!
courts! courts! Art.!1173.!Par!2.!If!law!or!contract!does!not!state!diligence!which!is!
to! be! observed! in! the! performance,! that! which! is! expected! of! a!
Waiver!for!future!negligence!! Waiver!for!future!fraud!is!void! GOOD!FATHER!OF!FAMILY!is!required!
valid!if!simple!! !
void!if!gross! DILIGENCE, ?! the! attention! and! care! required! of! a! person! in! a! given!
situation!and!is!the!opposite!of!negligence!
%
!
%
DILIGENCE%REQUIRED:%
CULPA%AQUILANA%AND%CULPA%CONTRACTUAL%DISTINGUISHED:%
1. that!agreed!upon!by!the!parties,!orally!or!in!writing!
∗ Different!provisions!that!apply!to!the!two!concepts,!hence! 2. in! the! absence! of! stipulation,! that! required! by! law! in! the!
different!legal!effects! particular!case!
! 3. if!both!the!contract!and!law!are!silent,!then!the!diligence!
CULPA!AQUILANA! expected!of!a!good!father!of!a!family!or!ordinary!diligence.!
CULPA!CONTRACTUAL!
(Culpa!Extra[contractual)! !
Governed! by! Art! 2176! to! Governed! by! Art! 1179! et, EXTRA=ORDINARY%DILIGENCE%REQUIRED%IN:%
2194! sequel,! • Art!1733!Common!carriers!!
Negligence! as! a! source! of! Negligence! in! the! • Art!1744!Lesser!than!extraordinary!!
obligation! performance!of!a!contract! • Art!1998?2002!Inn!keepers,!hotel!keepers!
Fault! or! negligence! which! Fault! or! negligence! of! the! ,
constitutes! an! independent! debtor! as! an! incident! in! the! TEST%FOR%DETERMINING%WHETHER%A%PERSON%IS%NEGLIGENT%
source! of! obligation! between! fulfillment! of! an! existing! • Would, a, prudent, man,, in, the, position, of, the, person, to,
parties!not!previously!bound!! obligation! whom,negligence,is,attributed,,foresee,harm,to,the,person,
An!employer!of!master!may! Due! diligence! defense! of! the! injured, as, a, reasonable, consequence, of, the, course, about,
exculpate! or! exempt! himself! employer! or! master! is! not! to,the,pursued?,
from! liability! by! proving! due! available! • Negligence! is! a! question! of! fact,! its! existence! being!
diligence! to! prevent! damage! dependent! upon! the! particular! circumstances! of! each!
(Art!2180)! case.!,
Negligence!of!defendant!should!be!the!proximate!cause!of! • It!is!never!presumed!but!must!be!proven!by!the!party!who!
damage!if!liability!is!to!attach.! alleges!it.,
! !
Cases:! FACTORS%TO%CONSIDER%IN%DETERMINING%NEGLIGENCE:%
! 1. Nature!of!obligation!
GUTIERREZ!v.!!GUTIERREZ! 2. Circumstance!of!the!person!
Facts:! Private! car! (driven! by! a! minor),! a! truck,! and! a! bus! collided! 3. Circumstance!of!time!
which! resulted! to! a! fractured! leg! of! the! bus’! passenger,! Narciso! 4. Circumstance!of!the!place!
Gutierrez.! Narciso! seeks! to! recover! damages! from! both! the! drivers! ,
and!owners!of!the!private!car!and!the!truck.! ,
! ,
Held:! Father! is! liable! for! the! act! of! his! minor! son,! whose! civil! law! ,
liability! for! obligations! which! arise! from! fault! or! negligence.! The! ,
truck!driver!and!owner!are!also!liable,!but!on!the!basis!of!contract.! ,
! ,
! ,
! ,
!!!!
EXEMPTION%FROM%LIABILITY%FOR%NEGLIGENCE:% 3. DELAY!(MORA)!
1. INSURANCE:! A! party! to! a! contract! is! relieved! from! the!
rd a. %Concept%of%Delay%
effects!of!his!fault!or!negligence!by!a!3 !person!
2. Party! to! a! contract! renounces! in! advance! the! right! to!
enforce!liability!arising!from!the!fault!or!negligence!of!the! Art.! 1169.! Those! obliged! to! DELIVER! or! to! DO! something! incur% in%
other! delay! from! the! time! the! OBLIGEE, JUDICIALLY, OR, EXTRAJUDICIALLY,
a. VOID! if! gross! negligence! "! Stipulations! exempting! DEMANDS!from!them!the!fulfillment!of!their!obligations!
from!liability!for!that!amount!to!a!fraud! !
b. VALID!if!simple!negligence!only! DELAY/MORA/DEFAULT%–!non?fulfillment!of!obligation!with!respect!
! to!time!
Cases:! !
! ORDINARY%DELAY%AND%MORA%DISTINGUISHED:%
DE!GUIA!v.!MANILA!ELECTRIC!CO! Ordinary!delay! Mora!
Facts:!Train!where!De!Guia!boarded!was!derailed.!De!Guia!received! merely! the! failure! to! failure! to! perform! an!
bruises! and! possibly! certain! internal! injuries.! Trial! court! found! the! perform!an!obligation!on!time! obligation!on!time!which!failure,!
motorman! of! the! derailed! car! negligent! for! having! maintained! too! constitutes! a! breach! of! the!
rapid! speed,! but! defendant! company! claimed! the! derailment! was! obligation.!
due!to!a!goose?egg?sized!stone,!thus!the!derailment!of!the!car!was! !
due!to!a!fortuitous!event.! WHEN%DEMAND%NOT%NECESSARY%TO%INCUR%DELAY%
! 1. When!there!is!EXPRESS!STIPULATION!
Held:!If!the!law!or!contract!does!not!state!the!diligence!which!is!to! 2. When!the!LAW!so!provides!
be! observed! in! the! performance! of! an! obligation,! that! which! is! 3. When! from! the! nature, and! the! circumstances! of! the!
expected! of! a! good! father! of! a! family! shall! be! required.! When! De! obligation!it!appears!that!the!DESIGNATION!OF!THE!TIME!
Guia! boarded! the! train,! the! company! undertook! to! convey! him! to! when! the! thing! to! be! delivered! or! the! service! is! to! be!
Manila.! The! relation! between! plaintiff! and! defendant! was! a! of! a! rendered!was!a!controlling,motive!for!the!establishment!of!
contractual! nature! with! the! defendant! bound! to! carry! the! plaintiff! the!contract!
safely!to!destination!with!a!degree!of!care.!Failure!to!carry!out!this! 4. When!demand!would!be!USELESS,!as!when!the!obligor!has!
obligation!incurs!liability.! rendered,it,beyond,his,power,to,perform,
! ,
SARMIENTO!v.!SPS!CABRIDO! In! reciprocal! obligations,! neither! party! incurs! in! delay! if! the! other!
FACTS:! Sarmiento! had! her! pair! of! diamond! earrings! reset! into! two! DOES!NOT!COMPLY!or!is!NOT!READY!to!comply!in!a!proper!manner!
gold!rings!through!Dingding’s!Jewelry!Shop,!owned!by!Cabrido.!The! with! what! is! incumbent! upon! him.! From! the! moment! ONE% of% the%
goldsmith! used! pliers! to! remove! the! diamond! by! twisting! the! parties%fulfills%his%obligation,!delay!by!the!other!begins.!!
setting,!breaking!the!gem!in!the!process.! !
! • There!can!only!be!delay!in!positive%obligations!(to!give!and!
HELD:! Goldsmith! acted! negligently! in! dismounting! the! diamond.! to!do)!and!not!in!negative!obligations!(not!to!give!and!not!
Being! a! goldsmith! of! 40! years,! he! should! have! been! aware! of! the! to!do).!!
practice!to!use!a!miniature!wire!saw!in!dismounting!gems!from!their! • There!is!no!mora!in!natural!obligations!
settings.! !
! !!
CRISOSTOMO!v.!CA!! b.%%%%Kinds%of%Mora%%
Facts:! Crisostomo! bought! “Jewels! of! Europe”! tour! package! offered! !
by! Caravan! Travel! and! Tours.! Crisostomo! claimed! that! when! the!
i. %Mora%solvendi,–!default!on!the!part!of!the!debtor!
documents! were! delivered,! she! when! he! flight! will! be.! She! did! not!
!
check! her! travel! documents! and! on! the! day! of! the! supposed! flight,!
# EX!RE!referring!to!obligations!to!give!
she! found! out! that! the! flight! had! already! left! the! day! before.! She!
# EX!PERSONA!referring!to!obligations!to!do!!
was!advised!by!the!travel!agency!to!avail!of!a!different!tour!which!is!
!
cheaper! than! the! Jewels! of! Europe.! Upon! arrival,! she! asked! for!
REQUISITES%OF%MORA%SOLVENDI:%
reimbursement!of!the!difference!between!the!sum!she!paid.!
1. PRESTATION!is!demandable!and!already!liquidated!
!
• There! can! be! no! delay! if! the! obligation! is! not! yet!
Held:! The! petitioner! is! not! entitled! to! a! refund! because! she! was!
due.! There! is! no! mora! in! natural! obligations!
negligent.! Common! carriers! are! required! to! observe! extraordinary!
because!performance!is!optional!and!voluntary!
diligence.!However,!in!accordance!to!Art.!1732,!respondent!is!not!a!
2. That!the!debtor!delays!performance!
common! carrier! since! it! is! only! engaged! in! making! the! travel!
• Effects!of!mora!only!arise!when!the!delay!is!due!to!
arrangements! for! customers,! acting! merely! as! an! agent! for! the!
the!causes,imputable,to,the,debtor;!hence!there!is!
airlines.!
legally! no! delay! if! this! is! caused! by! factors! not!
!
imputable!to!the!debtor!(e.g.!fortuitous!events)!
c. %Effects%of%Negligence% 3. That! the! creditor! requires! or! demands! the! performance!
1. Damages! are! demandable,! which! the! courts! may! extrajudicially!or!judicially!!
regulate!according!to!circumstances! • Mere! reminder! is! not! a! demand! because! it! must!
2. Invalidates!defense!of!fortuitous!event! appear! that! the! benevolence! and! tolerance! of! the!
! creditor!has!ended.!
! !
!!!!
GENERAL!RULE:!Creditor!should!make!demand!before!debtor!incurs! of! the! subject! lots.! Therefore,! the! petitioners! cannot! demand! the!
delay!! performance!of!the!same!without!having!asked!the!courts!to!fix!the!
• Default! begins! from! the! moment! creditor! demands! period! in! accordance! with! Art.! 1197.! The! letters! that! the! spouses!
the!performance!of!obligation.! and! their! heirs! sent! to! Ayala! did! not! constitute! a! demand! as! these!
o If!extrajudicial:!date!of!demand! did! not! categorically! demand! the! specific! performance! but! only!
o If! uncertain:! date! of! filing! of! complaint! (for! articulated!their!desire!to!exercise!their!option.!
purposes! of! computing! payment! of! interests! or! !
damages)!! EXCEPTION:%When%demand%is%not%required%
• Demand! may! be! in! any! form,! provided! it! can! be! 1. Express! stipulation! –! Insertion! of! the! clause! “without,
proved.!It!is!also!generally!necessary!even!if!a!period! further,notice/demand”!
has! been! fixed! in! the! obligation.! Burden! of! proof! of! 2. Law! so! provides! ?! Not! enough! to! merely! fix! date! for!
demand!on!the!creditor.!! performance,! but! also! that! default! will! commence! after!
• Demand!must!refer!to!the!prestation!that!is!due!and! the!period!lapses!
not!another.!! 3. Period! is! the! controlling! motive! or! the! principal!
• But!even!if!without!demand,!debtor!incurs!in!delay!if! inducement! for! the! creation! of! the! obligation! –! in! cases!
he! acknowledges, his, delay.! Request! for! extension! of! where!it!appears!that!the!obligation!would!not!have!been!
time! for! payment! is! not! sufficient! though,! the! created! for! a! date! other! than! that! fixed! (Abella, v.,
acknowledgement!must!be!express.!! Francisco)!
Cases:! 4. Demand! would! be! useless! –! performance! has! become!
! impossible!
CETUS!DEVELOPMENT!CORP!v.!CA!! a. Caused! by! some! act! or! fault! of! the! debtor,! e.g.!
Facts:! Respondents! were! lessees! of! land! owned! by! Susana! Realty,! hiding!or!disposed!of!the!thing!to!be!delivered!
which!the!latter!sold!to!the!plaintiff.!Lessees!pay!to!the!collector!but! b. Impossibility! caused! by! fortuitous! event! but!
when!none!arrived,!they!weren’t!able!to!pay.!Thus,!Cetus!wanted!to! debtor! bound! himself! liable! in! cases! of! such!
evict! them.! However,! immediately! upon! the! receipt! of! the! said! events!!!
demand,!the!private!respondents!paid!their!respective!arrearages!in! ,
rent! which! were! accepted! by! Cetus! subject! to! the! unilateral! PRESUMPTION% OF% TIME% BEING% OF% THE% ESSENCE% (EVEN% WITHOUT%
condition!that!the!acceptance!was!without!prejudice!to!the!filing!of! EXPRESS%STIPULATION):%
an!ejectment!suit.!!! 1. In!agreements!which!are!executed!in!the!form!of!options,!
! time! is! always! held! to! be! of! the! essence! of! the! contract,!
Held:!Default!only!accrues!after!demand.!Paying!to!the!collector!was! and!it!is!well!recognized!that!in!such!contracts,!acceptance!
the! common! practice! and! upon! demand! the! lessees! complied! of! the! option! and! payment! of! the! purchase! price!
immediately.! constitute!conditions!precedent!to!specific!performance.!!
! 2. The!same!is!true!generally!of!all!unilateral,contracts.!,
SANTOS!VENTURA!HOCORMA!FOUNDATION!v.!SANTOS! 3. In! mercantile! contracts! for! the! manufacture, and, sale, of,
Facts:! A! Compromise! Agreement! stipulated! that! SVHFI! should! pay! goods,! time! is! also! held! to! be! of! the! essence! of! the!
Santos:!P1.5mill!upon!execution!of!the!agreement;!and!P13mill,!in!1! agreement.!
lump! sum! or! in! installments,! within! 2! years! from! execution.! SVHFI! 4. Where!the!subject!matter!of!a!contract!is!of!speculative,or,
did! not! pay.! Sheriff! levied! SVHFI's! real! properties.! Santos! further! fluctuating,value,
asked!for!legal!interest!on!the!obligation!because!of!the!delay.!SVHFI! 5. Most! conspicuous! among! all! the! situations! where! time! is!
claimed!that!there!is!no!cause!of!action!because!it!had!already!fully! presumed!to!be!of!the!essence!of!a!contract!from!the!very!
paid!its!obligation.! nature! of! the! subject?matter! is! that! where! the! contract!
! relates!to!mining,property.,
Held:!SVHFI!is!liable!for!legal!interest!for!damages!in!the!delay!of!the! ,
performance! of! its! obligation,! pursuant! to! Art! 1170.! 3! requisites! of! Case:!
default! are! present.! The! obligation! was! already! demandable! !
because! the! 2?year! period! had! already.! The! obligation! is! already! ABELLA!v.!FRANCISCO!
liquidated!because!the!debtor!knows!precisely!how!much!he!should! Facts:!Francisco!purchased!lots!from!the!government!on!installment!
pay!and!when!he!should!pay!it.!SVHFI!also!delayed!the!performance! but! was! in! arrears! on! payments! (due! on! Dec! 1928).! So! he! sold! a!
of! the! obligation! because! it! only! settled! its! obligation! on! Feb.! 8,! parcel! of! land! to! Abella,! payment! of! which! is! due! on! Dec! 15! 1928!
1995.! Santos! required! the! extrajudicial! performance! of! the! extendible! by! 15! days.! Abella! was! only! able! to! Pay! P915.34! out! of!
obligation!by!sending!the!letter!on!Oct.!28,!1992.! the!P21,600!total!amount!due.!It!was!only!on!Jan.!9!1929!did!Abella!
! offered!to!pay!the!balance.!
VASQUEZ!v.!AYALA!CORP!! !
Facts:! Ayala! bought! Vasquez’! share! in! Conduit! in! exchange! for! an! Held:!There!is!no!need!for!demand!because!time!is!of!the!essence.!It!
option!to!buy!a!property!in!the!subdivision!they!are!developing.!The! should! be! noted! that! Francisco! had! obligations! due! on! December!
construction!was!extended!and!the!value!of!the!property!fluctuated.! 1928!for!which!he!expected!to!use!the!payment!on!the!said!lots.!!
Vasquez! sent! letter! of! reminder! that! the! due! date! is! approaching.! !
The! whole! project! was! completed! in! 1990,! when! Ayala! offered! the! !
lots! to! the! spouses! but! the! latter! wanted! the! lots! to! be! priced! at! !
1984!market!prices.! !
! !
Held:!Not!all!requisites!of!Mora!Solvendi!are!not!present!in!the!case.!
There!was!no!day!certain!fixed!in!the!agreement!in!the!development!
!!!!
ii. %Mora% accipiendi! –! default! on! the! part! of! Tengco’s! knowledge! of! said! transfer,! she! attempted! to! pay! her!
the!creditor! rentals!to!the!person!whom!she!used!to!pay!her!dues.!Said!person!
! refused!to!accept!payment!as!she!no!longer!had!the!authority!to!do!
• Delay! in! the! performance! based! on! the! so.!
omission! by! the! creditor! of! the! necessary! !
cooperation,! especially! acceptance! on! his! Held:! The! lessor! is! not! guilty! of! mora, accipiendi.! The! refusal! to!
part.!! accept!payment!was!not!without!justification.!The!ownership!of!the!
property!was!already!transferred!to!Benjamin,!and!the!payment!was!
• Generally,! debtor! can! perform! at, any, time!
offered! to! a! person! who! no! longer! had! authority! to! accept! such.! It!
after!the!obligation!has!been!created,!even!
should!be!noted!that!the!contract!was!not!recorded.!The!Court!held!
before!the!date!of!maturity.!!
that! in! the! absence! of! contrary! agreement,! a! contract! of! lease!
• It!is!necessary!however!that!it!be!lawful!for!
executed! by! the! vendor,! unless! recorded,! ceases! to! have! effect!
the! debtor! to! perform,! and! that! he! can!
when!the!property!is!sold.!
perform! (e.g.! when! the! period! is!
!
established!for!the!benefit!of!the!creditor!or!
both!of!the!parties).!! iii. Compensatio% morae, –! parties! in! a! bilateral!
! contract! can! regulate! the! order! in! which! they! shall!
REQUISITES%OF%MORA%ACCIPIENDI:% comply! with! their! reciprocal! prestations.! Otherwise,!
1. Offer! of! performance! by! the! debtor! who! has! the! required! the! fulfillment! must! be! SIMULTANEOUS! and!
capacity! RECIPROCAL.! If! there! is! mutual! default,! the! parties!
2. Offer! must! be! to! comply! with! the! prestation! as! it! should! be! cannot!ask!for!damages!
performed! !
3. Creditor!refuses!the!performance!without,just,cause! GENERAL!RULE:!Fulfillment!of!parties!should!be!simultaneous!!
∗ See, also! Art! 1268! When! the! debt! of! a! thing! certain! and! EXCEPTION:!Contrary!stipulation!(e.g.!installment!plans)!
determinate!proceeds!from!a!criminal!offense,!the!debtor! !
shall! not! be! exempted! from! the! payment! of! its! price,! Cases:!
whatever!may!be!the!cause!for!the!loss,!UNLESS!the!thing! !
having! been! offered! by! him! to! the! person! who! should! CENTRAL!BANK!v.!CA!
receive! it,! the! latter! refused! without! justification! to! Facts:!Sulpicio!Tolentino!obtained!an!P80K!loan!from!Island!Savings!
accept!it.!! Bank! (ISB),! and! a! mere! P17K! partial! release! was! made,! with!
! Tolentino! signing! a! promissory! note! therefor.! An! advance! interest!
Cases:! was! deducted! from! this! partial! release! but! was! refunded! to! him!
! after!being!informed!there!was!no!money!yet!for!the!P63K!balance.!
VDA.!DE!VILLARUEL!v.!MANILA!MOTOR!CO.,!INC.!! The! Monetary! Board! of! the! Central! Bank! found! out! that! ISB! going!
Facts:!Manila!Motor!Co.!leased!a!building!from!Villaruel!(contract!is! bankrupt! and! after! failing! to! restore! its! solvency,! it! was! prohibited!
if!for!5!years!and!the!amount!of!P350!is!to!e!paid!monthly)!in!1940.! from! doing! business! in! the! Philippines.! For! the! nonpayment! of! the!
Manila! Motor! enjoyed! the! premises! until! the! Japanese! invasion! in! P17K,! ISB! filed! an! application! for! the! foreclosure! of! a! real! estate!
1941.! The! quarters! were! occupied! by! the! enemy! forces! from! June! mortgage,!which!Tolentino!opposed.!
1942!until!March!1945;!no!rentals!were!paid!during!this!period.!The! !
American! subsequently! occupied! the! same! building.! When! the! Held:!The!loan!implied!reciprocal!obligations,!and!when!one!party!is!
American!Forces!gave!up!their!occupancy,!Manila!Motor!decided!to! willing! and! ready! to! perform,! the! other! does! not! occur! in! delay;!
renew!the!contract.!Villaruel!wanted!the!contract!rescinded!and!for! insolvency,! however,! is! not! an! excuse! but! is! a! breach! of! contract.!
Manila! Motor! to! pay! rentals! for! the! duration! of! the! Japanese! When! Tolentino! executed! the! real! estate! mortgage,! he! signified!
occupation!of!the!said!building.! willingness!to!pay,!but!ISB!was!insolvent!and!Central!Bank!prohibited!
! it!from!doing!further!business.!Since!ISB!was!in!default,!Tolentino’s!
Held:! Manila! Motor! is! not! in! default! for! refusal! to! comply! with! the! only! choice! was! to! rescind! the! obligation! (specific! performance! is!
demand!to!pay!rents!for!the!duration!of!the!Japanese!occupation!of! impossible! due! to! the! prohibition! by! Central! Bank),! but! the!
building! in! question.! The! lessors! accepted! payment! of! rentals! from! rescission!should!only!be!for!the!P63K!balance.!
October! 1945! to! June! 1946.! It! was! only! in! July! 1946! that! they! !
insisted!upon!collecting!the!1942?1945!rents,!and!refused!to!accept! !
further!payments!tendered!by!the!lessee!unless!their!right!to!collect! !
the!occupation!rental!was!recognized!or!reserved.!The!dispossession! !
during! the! Japanese! occupation! exempted! Manila! Motor! from! its! !
obligation!to!pay!rent!for!that!period.!Also,!even!if!Manila!Motor!is! !
liable,!the!collection!of!rents!in!1946!was!barred!by!the!moratorium! !
order! (EO! 32).! The! lessors’! refusal! to! accept! the! current! rentals! !
without! qualification! placed! them! in! default! (mora, accipiendi)! with! !
the! result! that! thereafter,! they! had! to! bear! all! supervening! risks! of! !
accidental!injury!or!destruction!of!the!leased!premises.! !
! !
TENGCO!v.!CA!! !
Facts:! Lutgarda! Cifra! leased! a! property! to! Emilia! Tengco;! contract! !
was!not!in!writing.!While!the!contract!was!still!subsisting,!Lutgarda! !
transferred!the!ownership!of!the!property!to!Benjamin!Cifra.!Despite! !
!!!!
c. Effects%of%Mora%% !
! Held:!Chavez!and!Gonzales!had!a!perfected!contract!for!service!and!
MORA!SOLVENDI:! cleaning,! which! Gonzales! was! unable! to! do.! He! is! liable! for! P31.10!
1. When!it!has!for!its!object!a!determinate!thing,!the!delay!places! under!Art.!1165!(for!the!proper!execution!of!the!obligation!and!the!
the!risk!of!the!thing!on!the!debtor! missing!parts)!because!of!the!non?performance!of!his!obligation.!He!
2. Debtor!becomes!liable!for!damages!of!the!delay! contravened!the!tenor!of!the!obligation!because!not!only!did!he!not!
3. Debtor!is!liable!even!for!a!fortuitous!event!when!the!obligation! fulfill! the! obligation! (repair! the! typewriter),! but! he! returned! “in!
is!to!deliver!a!determinate,thing.! shambles”!and!missing!some!parts.!Contravention!of!the!tenor!is!an!
! illicit! act! which! impairs! the! strict! and! faithful! fulfillment! of! the!
MORA!ACCIPIENDI:! obligation.!
1. Responsibility!of!the!debtor!for!the!thing!is!reduced!and!limited! !
to!fraud!and!gross!negligence! TELEFAST!v.!CASTRO!
2. Debtor! is! exempted! from! the! risks! of! loss! of! thing,! which! Facts:! Consolacion! Bravo?Castro,! wife! and! mother! of! the! plaintiffs,!
automatically!pass!to!the!creditor! passed! away! in! Lingayen,! Pangasinan.! Her! daughter,! Sofia! Crouch,!
3. All!expenses!incurred!by!the!debtor!for!the!preservation!of!the! addressed! a! telegram! to! the! relatives! abroad! announcing!
thing!after!the!mora!shall!be!chargeable!to!the!creditor! Consolacion’s!death,!which!telegram!was!accepted!by!Telefast!in!its!
4. If!the!obligation!bears!interest,!the!debtor!does!not!have!to!pay! Dagupan! office! for! transmission,! after! payment! of! the! fees.!
it!from!the!moment!of!the!mora! Consolacion! was! interred! with! just! Sofia,! and! Sofia! later! found! out!
5. The!creditor!becomes!liable!for!damages! that!the!telegram!never!reached!the!relatives!abroad.!The!family!is!
6. The! debtor! may! relieve! himself! of! the! obligation! by! the! claiming!for!damages.!
consignation!of!the!thing! !
! Held:!Telefast!and!Sofia!Crouch!entered!into!a!contract!where!Sofia!
COMPENSATION!MORAE:! pays! a! fee,! and! Telefast! sends! the! message! overseas! by! telegram.!
• Exceptio,non,adempleti,contractus,–,one!is!not!compelled! Telefast! failed! to! comply! despite! Sofia! complying! with! her!
to!perform!his!prestation!when!the!other!contracting!party! obligation,!making!Telefast!guilty!of!contravening!its!obligation!and!
is! not! yet! prepared! to! perform! his! prestation;! default! of! liable! for! damages.! Telefast’s! act! or! omission! amounted! to! gross!
one!compensates!the!default!of!the!other! negligence,!which!was!the!cause!of!the!suffering!of!the!family!–!they!
! can’t!just!be!liable!for!the!fees,!but!must!be!liable!for!damages.!
CESSATION%OF%EFFECTS%OF%MORA:%% !
1. Renunciation!by!the!creditor! ARRIETA!v.!NARIC!
a. Express!! Facts:! Arrieta! won! a! bid! called! by! NARIC! for! the! supply! of! 20,000!
b. Implied:! when! after! delay! has! been! incurred,! the! metric! tons! of! Burmese! rice! because! was! the! lowest! cost.! They!
creditor! grants, an, extension, of, time! to! the! debtor! or! entered!into!a!contract,!making!NARIC!liable!for!a!letter!of!credit!in!
agrees!to!a!novation!of!the!obligation!! favor! of! Arrieta,! and! Arietta! being! obligated! to! deliver! the! rice! at!
2. Prescription!! $203!per!metric!ton.!Arrieta!told!NARIC!of!the!urgency!to!open!the!
! letter! of! credit! because! it! would! be! necessary! to! keep! an! allocated!
space! on! the! ship! for! the! rice! (after! her! paying! 5%! downpayment).!
4.!!!!CONTRAVENTION!OF!TENOR!!
Despite!Arrieta!informing!NARIC!that!the!supplier!in!Rangoon!would!
!
keep!the!space!open!until!Aug.!4,!1952,!NARIC!still!failed!to!supply!
Contravention! of! the! terms! of! the! obligation, M! any! illicit! act! which!
the! letter! of! credit,! and! the! space! was! forfeited! (costing! Arrieta!
impairs! the! strict! and! faithful! fulfillment! of! the! obligation! or! every!
approx..! P200,000).! Arrieta! offered! to! substitute! it! with! Thailand!
kind!of!defective!performance!
rice,!but!it!declined,!and!now!Arrieta!is!asking!for!compensation.!
• Malicious! or! negligent! violation, of, the, terms, and,
!
conditions,stipulated!in!the!obligation!!
Held:! Arrieta! is! entitled! to! compensation! because! it! was! NARIC’s!
• Must! not! be! due! to! fortuitous! even! or! force! majeure,! fault! that! the! space! was! closed! and! the! 5%! cost! of! it! forfeited! in!
otherwise!there!would!be!no!liability! favor! of! the! supplier.! Its! liability! stems! not! only! from! its! failure! to!
• Immaterial! whether! or! not! the! actor! is! in! bad, faith, or, satisfy! the! requirements! of! the! bank! (which! was! why! they! didn’t!
negligent,!what!is!required!is!that!it!is!his!fault!or!the!act! issue!the!letter!of!credit)!but!its!culpability!arises!from!its!deliberate!
done!contravenes!their!agreement! assumption! of! contractual! obligations! despite! knowledge! of! its!
• Sir!Labitag:!It!is!a!catch!all!phrase!for!any!kind!of!breach! financial!incapacity!(through!its!letter).!It!is!liable!because!of!“in!any!
! manner! contravene! the! tenor”! which! impairs! the! strict! and! faithful!
Cases:! fulfillment!of!the!obligation.!
! !
CHAVEZ!v.!GONZALES! !
Facts:! Chavez! brought! his! typewriter! to! Gonzales! for! cleaning! and! !
service!and,!despite!repeated!reminders!from!Chavez,!Gonzales!was! !
unable! to! finish! the! job.! Gonzales! asked! for! P6.00! for! spare! parts,! !
which! Chavez! gave,! but! after! still! failing! to! finish! the! job,! he! !
demanded! the! typewriter! be! returned! to! him.! He! realized! the! !
typewriter! was! returned! dismantled! and! parts! were! missing,! such! !
parts! returned! to! him! by! Gonzales! along! with! the! P6.00! (after! he! !
demanded).!Another!person!fixed!the!typewriter,!which!cost!Chavez! !
P89.95! (materials! and! labor)! and! he! is! praying! for! damages! against! !
Gonzales.! !
!!!!
5. ABSOLUTE!NON[PERFORMANCE! REMEDIES%FOR%THE%SATISFACTION%OF%CLAIMS:!
• Not!liable!if!non?performance!was!due!to!fortuitous!event,! 1. Exact! fulfillment! (specific! performance)! with! the! right! to!
unless! there! is! an! express! stipulation! to! the! contrary,! or! damages;!
the!law!otherwise!provides!in!particular!cases! 2. Pursue! the! leviable! (not! exempt! from! attachment! under!
• Not! liable! for! non?performance! if! the! impossibility! arises! the!law)!property!of!the!debtor;!
from! a! cause! which! neither! party! could! reasonably! have! a. The!debtor!is!liable!with!all!his!property,!present!and!
foreseen.! future,!for!the!fulfillment!of!his!obligations,!subject!to!
• Mere!pecuniary!inability!to!fulfill!an!engagement!does!not! the!exemptions!provided!by!law!(see!Art.!2236)!
discharge! an! obligation! nor! constitute! a! defnse! to! an! b. Art.! 1708! CC! –! laborer’s! wages! not! subject! to!
action!for!specific!performance! execution! or! attachment,! except! for! debts! incurred!
! for!food,!shelter,!clothing!and!medical!attendance!
c. Art.! 155! FC! –! family! home! shall! be! exempt! from!
III. Remedies* Of* Creditor* in* Case* Of* execution,!forced!sale!or!attachment,!except!for!non?
Breach* payment!of!taxes,!debts!incurred!prior!to!constitution!
! of! family! home,! debts! secured! by! mortgages! before!
REMEDIES%IN%GENERAL:% or! after! constitution,! debts! due! to! those! who!
1. Action! for! performance! (specific! performance! or! obtain! rendered! service! or! furnished! material! for! the!
compliance)! building.!
2. Action!for!rescission!! d. Sec.!13,!Rule!39,!Rules!of!Court!
3. Action!for!damages!(exclusively!OR!in!addition!to!either!of! 3. After! having! pursued! the! property! in! possession! of! the!
the!first!actions)!! debtor,! exercise! all! the! rights! (like! the! right! to! redeem)!
! and! bring! all! the! actions! of! the! debtor! (like! the! right! to!
REMEDIES%OF%CREDITOR%IN%REAL%OBLIGATION:! collect! from! the! debtor! of! his! debtor)! except! those!
1. In! a! specific, real, obligation! (obligation! to! deliver! a! inherent!in!or!personal!to!the!person!of!the!latter!(such!as!
determinate!thing):! the!right!to!vote,!to!hold!office,!to!receive!legal!support,!to!
a. Demand! specific! performance! or! fulfillment! of! the! revoke!a!donation!on!the!ground!of!ingratitude,!etc.);!and!
obligation!with!a!right!to!indemnity!for!damages;!or! 4. Ask!the!court!to!rescind!or!impugn!acts!or!contracts!which!
b. Demand! rescission! or! cancellation! (in! certain! cases)! the!debtor!may!have!done!to!defraud!him!when!he!cannot!
of!the!obligation!also!with!a!right!to!recover!damages! in!any!other!manner!recover!his!claim.!
(Art.!1170);!or! !
c. Demand! the! payment! of! damages! only! (Art.! 1170)! SITUATIONS%WHICH%MAY%GIVE%RISE%TO%THE%NEED%FOR%REMEDIES:!
when!it!is!the!only!feasible!remedy! 1. The!debtor!fails!to!perform!an!obligation!to!do;!or!
2. In!a!generic,real,obligation!(obligation!to!deliver!a!generic! 2. The! debtor! performs! an! obligation! to! do! but! contrary! to!
thing)! the!terms!thereof;!or!
a. Can!be!performed!by!a!third!person!or!the!debtor!but! 3. The! debtor! performs! an! obligation! to! but! in! a! poor!
the! creditor! may! ask! for! performance! of! the! manner.!
obligation! ,
b. Whether! by! a! third! person! or! by! a! debtor,! the!
A. Action(for(Performance(
creditor!can!recover!damages!
! 1. ACTION! FOR! SPECIFIC! PERFORMANCE! OR! FULFILLMENT! OF!
REMEDIES%OF%CREDITOR%IN%POSITIVE%PERSONAL%OBLIGATION:! THE!OBLIGATION!(IN!OBLIGATION!TO!GIVE!SPECIFIC!THING)!
1. If!the!debtor!fails!to!comply!with!his!obligation!to!do,!the! !
creditor!has!the!right:! !
a. To! have! the! obligation! performed! by! himself,! or! by! Art.! 1165,! Par.! 1.! When! what! is! to! be! delivered! is! a! determinate!
another! unless! personal! considerations! are! involved,! thing,!the!creditor,!in!addition!to!the!right!granted!him!by!Art!1170!
at!the!debtor’s!expense;!and! (indemnification!for!damages),!may!compel!the!debtor!to!make%the%
b. To!recover!damages!(Art.!1170)! delivery.!
2. In! case! the! obligation! is! done! in! contravention! of! the! !
terms!of!the!same!or!is!poorly!done,!it!may!be!ordered!(by! ROC!39,!Sec!10!Execution,!satisfaction!and!effect!of!judgment.!!
the! court)! that! it! be! undone! if! it! is! still! possible! to! undo! !
what!was!done.! • Implies! that! the! basis! is! a! contractual! relation! between!
! plaintiff!and!defendants.!!!
REMEDIES%OF%CREDITOR%IN%NEGATIVE%PERSONAL%OBLIGATION:! !
∗ Since! the! duty! is! to! obtain! from! an! act,! there! is! no! 2. ACTION! FOR! SUBSTITUTED! PERFORMANCE! (IN! OBLIGATION!
specific!performance!
TO!GIVE!GENERIC!THING)!
∗ In!this!kind!of!obligation,!the!debtor!cannot!be!guilty!
!
of!delay!
1. The! remedy! is! the! undoing! of! the! forbidden! thing! plus! Art.!1165,!Par.!2.!If!the!thing!is!indeterminate!or!generic,!he!may!ask!
damages! that!the!obligation!be!complied%with!at!the!expense!of!the!debtor!
2. If!it!is!not!possible!to!undo!what!was!done,!the!remedy!is! !
an!action!for!damages.! • Delivery! of! anything! belonging! to! the! species! stipulated!
! will!be!sufficient.!!
! • Debtor! cannot! avoid! obligation! by! paying! damages! if! the!
creditor!insists!on!the!performance.!!
!!!!
! o If!has!become!impossible!to!undo!the!thing!physically!
3. ACTION! FOR! SUBSTITUTED! PERFORMANCE! OR! UNDOING! OF! or!legally!
POOR!WORK!(IN!OBLIGATION!TO!DO)! o If!the!act!is!definite!and!will!not!cease!even!if!undone!
! !
Art.!1167.!If!a!person!obliged!to!do!something!fails,to,do,it,!the!same! B. Action(for(Damages(
shall!be!executed%at%his%cost!! • Art!1170!"!Recoverable!damages!include!any,and,all,
! damages!that!a!human!being!may!suffer.!Responsibility!for!
This!same!rule!shall!be!observed!if!he!does!it!in!contravention%of%the% damages!is!indivisible.!
tenor%of%the%obligation.!Furthermore,!it!may!be!decreed!that!what% (
has%been%done%poorly%be%undone! C. Action(for(Rescission(
! *
• The! court! has! no! discretion! to! merely! award! damages! to! Art.! 1191.! The! power! to! rescind! obligation! is! implied, in, reciprocal,
the! creditor! when! the! act! can! be! done! in! spite! of! the! ones,! in! case! one! of! the! obligors! should! not! comply! with! what! is!
refusal!or!failure!of!debtor!to!do!so.!! incumbent!upon!him.!!
• EXCEPTION:!Imposition!of!personal!force!or!coercion!upon! The! injured! party! may! choose! between! FULFILLMENT! and! the!
the!debtor!to!comply!with!his!obligation!"!tantamount!to! RESCISSION! of! the! obligation,! with! the! payment! of! damages! in!
involuntary!servitude!and!imprisonment!for!debt! either! case.! He! may! also! seek! rescission,! even, after, he, has, chosen,
! fulfillment,!if!the!latter!should!become!IMPOSSIBLE.!!
Cases:! The!court!shall!decree!the!rescission!claimed!UNLESS!there!be!a!just,
! cause,authorizing,the,fixing%of%a%period.!!
CHAVEZ!v.!GONZALES!(see!Contravention!of!the!Tenor!digest)! This! is! understood! to! be! without, prejudice, to, the, rights, of, third,
FACTS:! Chavez! asked! Gonzales! to! repair! a! typewriter,! but!Gonzales! persons! who! have! acquired! the! thing,! in! accordance! with! Articles!
failed! to! repair! it.! In! fact,! when! Chavez! finally! asked! for! the! 1385!and!1388!and!the!Mortgage!Law.!
typewriter!back!(after!failing!to!fix!it!despite!repeated!demands),!it! !
was!returned!to!him!“in!shambles”!and!with!missing!parts.! Art.! 1192.! In! case! both! parties! have! committed! breach! of!
! obligation,! the! liability! of! the! first! infractor! shall! be! equitably,
HELD:! Chavez! and! Gonzales! had! a! perfected! contract! where! tempered! by! the! courts.! If! it! cannot! be! determined! which! of! the!
Gonzales! would! repair! the! typewriter! for! a! cost.! Instead,! Gonzales! parties! first! violated! the! contract,! the! same! shall! be! extinguished!
returned! it! in! a! condition! worse! than! when! it! was! brought! in,! and! and!each,shall,bear,his,own,damages%
now! he! must! be! liable! for! the! cost! of! the! service! and! the! missing!
parts.! Since! he! failed! in! his! obligation,! he! must! be! liable! for! he! !
correction! of! what! he! did! poorly! and! for! the! contravention! of! the! • The! remedy! is! alternative.! Party! seeking! rescission! can! only!
tenor!of!his!obligation.! elect! one! between! fulfillment! and! rescission.! There! can! be! no!
! partial!performance!and!partial!rescission.!!
TANGUILIG!v.!CA! • Only! applies! to! reciprocal! obligations,! where! there! is!
FACTS:! Jacinto! Tanguilig! (under! JMT! Engineering)! proposed! to! “reciprocity”! between! the! parties! i.e.! creditor! debtor! relations!
Vicente! Herce! Jr.! to! construct! a! windmill! system! for! him! for! P60K! arise!from!the!same!cause!or!“identity!of!cause”!
(w/1?year! guarantee! after! completion).! Herce! paid! P30K! • Reciprocal!obligations!have!a!“TACIT,RESOLUTORY,CONDITION.”!!
downpayment! and! an! installment! of! P15K.! Tanguilig! filed! a! • Power%to%rescind:!!
complaint! to! collect! the! balance! because! of! Herce’s! refusal! and! o Pertains! to! the! injured! party,! party! who! did! not! perform!
failure!to!pay!it.!Herce!said!that!he!paid!P15K!to!SPGMI!for!a!deep! not!entitled!to!insist!upon!the!performance!of!the!contract!
well,! and! it! should! be! credited! to! his! account.! Also,! the! windmill! by!the!defendant!or!recover!damages!by!reason!of!his!own!
system! created! collapsed! after! a! strong! wind! hit! their! place,! and! it! breach!
should!offset!the!P15K!debt!to!JMT.!Tanguilig!said!the!deep!well!was! ! Rights!of!injured!party!subordinated!to!the!rights!of!a!
rd
not!part!of!the!agreement!for!the!windmill!system.! 3 !person!to!whom!bad!faith!is!not!imputable!!
! o Not! absolute,! not! permitted! in! casual/slight! breach,! may!
HELD:!The!terms!of!the!instruments!were!clear!–!although!the!words! only! be! claimed! in! substantial! breach! , (Song, Fo, v.,
“deep! well”! were! used,! they! were! only! meant! to! convey! the! idea! Hawaiian,Philippines)!
that!the!windmill!would!be!appropriate!for!a!deep!well!pump!with!a! o Rescission!requires!judicial,approval,to,produce,legal,effect!
certain! size.! Herce! is! not! in! default! yet! for! not! paying! the! P15K! ! EXCEPTION:! object! is! not! yet! delivered! AND!
because! JMT! hasn’t! complied! with! its! obligation! to! repair! the! obligation!has!not!yet!been!performed!!
windmill!(guarantee).!When!the!windmill!failed!to!function!properly,! ! If! the! obligation! has! not! yet! been! performed:!
it! became! incumbent! upon! JMT! to! institute! the! repairs! in! extrajudicial! declaration! of! party! willing! to! perform!
accordance!with!the!guaranty!(Art.!1167!–!if!a!person!obliged!to!do! would!suffice;!can!refuse!to!perform!if!the!other!party!
something!fails!to!do!it,!the!same!shall!be!executed!at!his!cost).! is!not!yet!ready!to!comply!
! ! If! the! injured! party! has! already! performed:! cannot!
4. ACTION!FOR!UNDOING!(IN!OBLIGATION!NOT!TO!DO)!! extrajudicially!rescind!IF!the!other!party!opposes!the!
! rescission! (otherwise,! rescission! produces! legal!
• Art! 1168! When! the! obligation! consists! in! not! doing,! and! effect).! In! the! case! the! other! party! impugns!
the!obligor!does!what!has!been!forbidden!him,!it!shall!also! rescission,!the!court!comes!in!either!to:!!
be!undone%at%his%expense.!! a.!Declare!the!rescission!as!properly!made!
• EXCEPTION:! When! the! only! feasible! remedy! is! b.!Give!a!period!to!the!debtor!in!which!to!perform!
indemnification,for,the,damages!caused:!! !
!!!!
EFFECTS%OF%RESCISSION:% 2. REQUISITES!
1. Extinguishes! obligatory! relation! as! if! it! had! never! been! 1. The!creditor!has!an!interest!in!the!right!or!action!not!
created,! extinction! has! a! retroactive! effect.! Equivalent! to! only! because! of! his! credit! but! because! of! the!
invalidate! the! juridical! tie,! leaving! things! in! their! status! insolvency!of!the!debtor!
before!the!celebration!of!the!contract!! 2. Malicious! or! negligent! inaction! of! the! debtor! in! the!
2. Mutual!restitution! exercise! of! his! right! or! action! of! such! seriousness! as!
• EXPRESS% RESOLUTORY% CONDITION:! automatic! to!endanger!the!claim!of!the!creditor!
resolution!if!one!of!the!parties!does!not!comply!with! 3. The! credit! of! the! debtor! against! a! third! person! is!
his!obligation.!Often!found!in!insurance!contracts.!Its! certain,!demandable!and!liquidated!
nature!is!a!“facultative!resolutory!condition”!(Taylor,v, 4. The! debtor’s! right! against! the! third! person! must! be!
Uy,Tieng)! patrimonial,! or! susceptible! of! being! transformed! to!
! patrimonial!value!for!the!benefit!of!the!creditor!
!
IV. Subsidiary*Remedies*of*Creditor** • Not!essential!that!the!creditor’s!claim!be!prior!to!
! the!acquisition!of!the!right!by!the!debtor!
A. Accion*Subrogatoria*(action(for(collection)* !
* 3. EXCEPTIONS!–!INHERENT!RIGHTS!OF!A!DEBTOR!
Art.! 1177.! The! creditors,! after! having! pursued! the! property! in! • Rights! of! the! debtor! which! cannot! be! exercised! by! the!
possession!of!the!debtor!to!satisfy!their!claims,!may!exercise!all!the! creditor:!
rights! and! bring! all! the! actions! of! the! latter! for! the! same! purpose,! 1. Right! to! existence! (exempts! from! the! reach! of!
save!those!which!are!inherent!in!his!person;!they!may!also!impugn! creditors!whatever!he!may!be!receiving!as!support)!
the!acts!which!the!debtor!may!have!done!to!defraud!them.! 2. Right!or!relation!of!a!public!character!
3. Rights!of!an!honorary!character!
!
4. Rights! consisting! of! powers! which! have! not! been!
1. CONCEPT:! ! action! which! the! creditor! may! exercise! in! the! used!
place!of!his!negligent!debtor!in!order!to!preserve!or!recover!for! a. Power!to!administer!
the! patrimony! of! the! debtor! the! product! of! such! action,! and! b. Power!to!carry!out!an!agency!or!deposit!
then!obtain!therefrom!the!satisfaction!of!his!own!credit! c. Power!to!accept!an!order!for!a!contract!
! 5. Non?patrimonial! rights! (e.g.,! rights! arising! from!
• Double!function:!! family!relations)!
1. conserve!patrimony!of!debtor!and!! 6. Patrimonial! rights! not! subject! to! execution! (e.g.,!
2. make! execution! on! such! property! effective! right!to!a!government!gratuity!or!pension)!
thereafter! 7. Patrimonial! rights! inherent! in! the! person! of! the!
• Rights!of!creditors:! debtor! (e.g.,! right! to! revoke! a! donation! by! reason!
1. To! levy! by! attachment! and! execution! upon! all! of! ingratitude,! and! the! right! to! demand! the!
the! property! of! the! debtor,! except! such! as! are! exclusion!of!an!unworthy!heir)!
exempt!by!law!from!execution! !
2. To! exercise! all! the! rights! and! actions! of! the! !
debtor,!except!such!as!are!inherently!personal!to! Art.! 772.! Only! those! who! at! the! time! of! the! donor's! death! have! a!
him! right!to!the!legitime!and!their!heirs!and!successors!in!interest!may!
3. To! ask! for! the! rescission! of! the! contracts! made! ask!for!the!reduction!or!inofficious!donations.!
by!the!debtor!in!defraud!of!their!rights! Those!referred!to!in!the!preceding!paragraph!cannot!renounce!
• Property! of! the! debtor! is! subject! to! liability! for! his! their! right! during! the! lifetime! of! the! donor,! either! by! express!
obligations! (Art! 2236);! the! liability! of! the! property! is! declaration,!or!by!consenting!to!the!donation.!
the! legal! guaranty! in! favor! of! creditors! and,! hence,! The!donees,!devisees!and!legatees,!who!are!not!entitled!to!the!
debtors! cannot! maliciously! reduce! such! guaranty! legitime! and! the! creditors! of! the! deceased! can! neither! ask! for! the!
(NOTE:!there!are!properties!exempt!from!execution)! reduction!nor!avail!themselves!thereof.!!
• Previous! approval! of! court! is! not! necessary! in!
!
exercising!the!accion,subrogatoria!
• Defenses:!debtor!sued!may!set!up!against!the!plaintiff! Sec!13,!Rule!39,!Rules!of!Court!Property!exempt!from!execution.—
the! same! defenses! he! could! set! up! against! his! own! Except! as! otherwise! expressly! provided! by! law,! the! following!
creditor! property,!and!no!other,!shall!be!exempt!from!execution:!
• Extent:! plaintiff! is! entitled! only! to! so! much! as! is! a) The!judgment!obligor’s!family!home!as!provided!by!law,!or!the!
needed!to!satisfy!his!credit;!any!balance!shall!pertain! homestead! in! which! he! resides,! and! land! necessarily! used! in!
to!the!debtor! connection!therewith;!
• Remedies! available! to! the! debtor! for! the! satisfaction! b) Ordinary! tools! and! implements! personally! used! by! him! in! his!
of!their!claims!(de!Leon):! trade,!employment,!or!livelihood;!
1. Specific!performance!with!the!right!to!damages! c) Three! horses,! or! three! cows,! or! three! carabaos,! or! other!
2. Pursue!the!leviable!property!of!the!debtor! beasts! of! burden,! such! as! the! judgment! obligor! may! select!
3. Accion,subrogatoria, necessarily!used!by!him!in!his!ordinary!occupation;!
4. Accion,pauliana, d) His! necessary! clothing! and! articles! for! ordinary! personal! use,!
! excluding!jewelry;!
!
!!!!
2. REQUISITES!
e) Household!furniture!and!utensils!necessary!for!house?keeping,!
and! used! for! that! purpose! by! the! judgment! obligor! and! his!
1. Plaintiff! asking! for! rescission! has! a! credit! prior! to! the!
alienation,!although!demandable!later!
family,!such!as!the!judgment!obligor!may!select,!of!a!value!not!
exceeding!one!hundred!thousand!pesos;! 2. Debtor! has! made! a! subsequent! contract! conveying! a!
f) Provisions! for! individual! or! family! use! sufficient! for! four! patrimonial!benefit!to!a!third!person!
months;! 3. Creditor!has!no!clear!legal!remedy!to!satisfy!his!claim,!but!
h) The! professional! libraries! and! equipment! of! judges,! lawyers,! would! benefit! by! the! rescission! of! the! conveyance! to! the!
physicians,! pharmacists,! dentists,! engineers,! surveyors,! third!person!
clergymen,! teachers,! and! other! professionals,! not! exceeding! 4. Act!being!impugned!is!fraudulent!
three!hundred!!thousand!pesos!in!value;!One!fishing!boat!and! • Presumption! of! fraud! may! be! found! in! Art! 1387!
accessories! not! exceeding! the! total! value! of! one! hundred! (gratuitous! transfer! without! leaving! sufficient! funds!
thousand!pesos!owned!by!a!fisherman!and!by!the!lawful!use!of! for!obligations!OR!gratuitous!transfers!by!a!judgment!
which!he!earns!his!livelihood;! debtor)!
i) So! much! of! the! salaries,! wages,! or! earnings! of! the! judgment! 5. Third! person! who! received! the! property! conveyed,! if! it! is!
obligor! for! his! personal! services! within! the! four! months! by!onerous!title,!has!been!an!accomplice!in!the!fraud!
preceding! the! levy! as! are! necessary! for! the! support! of! his! !
family;! ACCION%PAULIANA%AND%SIMULATION%DISTINGUISHED:%
j) Lettered!gravestones;! %
k) Monies,! benefits,! privileges,! or! annuities! accruing! or! in! any! ! Accion,Pauliana, Simulation!
manner!growing!out!of!any!life!insurance;! Real!alienation! Present,! but! None;! mere! pretense!
l) The! right! to! receive! legal! support,! or! money! or! property! fraudulent! that! one! has! been!
obtained!as!such!support,!or!any!pension!or!gratuity!from!the! made!
Government;! When!can!it!be!alleged! Only! prior! to! the! Before! or! after! the!
m) Properties!specially!exempted!by!law.!! by!creditors?! act! simulation!
But!no!article!or!species!of!property!mentioned!in!this!section!shall! Impossibility!of! Required! Not!required!
be! exempt! from! execution! issued! upon! a! judgment! recovered! for! satisfying!plaintiff’s!
its!price!or!upon!a!judgment!of!foreclosure!of!a!mortgage!thereon.! claim!
(12a)! Sets!aside!a!valid! Yes! No;! merely! declares!
contract?! its!inexistence!
!
!
B. Accion*Pauliana* Cases:!
% !
Art.!1177.![…]!they!may!also!impugn!the!acts!which!the!debtor!may! KHE!HONG!CHENG!v.!CA!!
have!done!to!defraud!them.! Facts:!M/V!Prince!Eric!(owned!by!Khe!Hong!Cheng)!sank,!resulting!in!
! the! total! loss! of! copra! shipment! (owned! by! the! Philippine!
Art.!1381,!Par.!3.!The!following!contracts!are!rescissible:! Agricultural! Trading! Center).! The! said! copra! shipment! was! covered!
(3)! Those! undertaken! in! fraud! of! creditors! when! the! latter! by! a! marine! insurance! policy! issued! by! American! Home! Insurance!
cannot!in!any!other!manner!collect!the!claims!due!them! Company.! American! Home! instituted! a! civil! case! against! Khe! Hong!
Cheng.! While! the! case! was! pending,! Khe! Hong! Cheng! executed!
! Deeds! of! Donation! of! parcels! of! land! in! favor! of! his! children.! TC!
1. CONCEPT:! action!to!revoke!or!rescind!acts!which!the!debtor! rendered!judgment!against!Khe!Hong!Cheng!4!years!after!donations!
may!have!done!to!defraud!the!creditor! were!made;!sheriff!found!no!property!to!levy!for!the!satisfaction!of!
• Regulated!by!Arts!1380!to!1389! TC’s!decision.!
• Can! revoke! all! acts! of! the! debtor! which! reduces! his! !
patrimony!in!fraud!of!his!creditors,!whether!by!gratuitous! Held:!Action!for!rescission!still!hasn’t!prescribed.!Art!1389!is!silent!as!
or! onerous! title! (e.g.,! alienations! of! property,! payment! of! to!when!the!prescriptive!period!will!commence.!General!rule!is!that!
debts! which! are! not! due,! renunciation! of! rights;! prescriptive! period! will! commence! from! the! moment! the! cause! of!
assignments!of!credit,!remission!of!debts)! action! accrues.! Accion, pauliana! must! be! of! last! resort! and! all! the!
• Payments!of!pre?existing!obligations!already!due,!whether! requisites! must! concur! (see! above).! It! presupposes:! 1)! a! judgment,!
natural!or!civil,!cannot!be!impugned!by!an!accion,pauliana! 2)!the!issuance!by!TC!of!a!writ!of!execution!for!the!satisfaction!of!the!
! judgment,!and!3)!the!failure!of!the!sheriff!to!enforce!and!satisfy!the!
a. Distinction% between% accion% pauliana% and% judgment!of!the!court.!It!doesn’t!matter!that!the!Deeds!of!Donation!
accion%subrogatoria% were!executed!in!1989.!It!was!only!in!1997!that!all!legal!means!were!
exhausted! by! creditor! and! the! action! for! rescission! was! filed! in! the!
!
same!year.!
ACCION%SUBROGATORIA% ACCION%PAULIANA%
!
Not!essential!that!credit!is!prior! Credit! must! exist! before! fraudulent!
!
to! the! acquisition! of! debtor’s! act!
!
right!
!
Intent! to! defraud! creditors! is! If! contracts! rescinded! is! onerous,! !
not!required! there!must!be!fraudulent!intent! !
No!period!of!prescription!! Action! prescribes! within! 4! years! of! !
the!discovery!of!the!fraud! !
!!!!
SIGUAN!v.!LIM!
!
V.*******Extinguishment*of*Liability*In*Case*
Facts:! In! 1990,! Lim! issued! 2! Metrobank! checks! (P300,000! and! Of*Breach*Due*To*Fortuitous*Event*
P241,668),! payable! to! “cash”.! The! checks! were! dishonored! for! the!
reason! that! the! account! was! already! “closed”.! Demands! to! make!
(
Art.!1174.!Except!in!cases!expressly!specified!by!the!law,!or!when!it!
good!the!checks!were!futile!and!a!criminal!case!for!violation!of!BP!22!
is! otherwise! declared! by! stipulation,! or! when! the! nature! of! the!
was!filed!against!Lim!in!1992.!Lim!was!acquitted!but!was!held!civilly!
obligation! requires! the! assumption! of! risk,! no! person! shall! be!
liable!for!P169,000.!However,!in!1991,!a!Deed!of!Donation!conveying!
responsible!for!those!events!which!could!not!be!foreseen,!or!which,!
parcels! of! land! (purportedly! executed! in! 1989! in! favor! of! her!
though!foreseen,!were!inevitable.!
children)! was! registered! with! the! Register! of! Deeds.! An! action! for!
rescission!was!filed.! !
! A. Exceptions:( law,( stipulation,( or( when( nature(
Held:!Deed!of!Donation!executed!by!Lim!in!favor!of!her!children!was! of(obligation(requires(the(assumption(of(risk(
made!in!fraud!and,!therefore,!not!rescissible.!Contracts!entered!into!
(
in! fraud! may! be! rescinded! only! when! the! creditors! cannot! in! any!
manner! collect! the! claims! due! them! →! not! proven! by! petitioner.!
1. CASES!SPECIFIED!BY!LAW!
Also,!fourth!requisite!for!accion,pauliana!is!not!present.!Donation!is! • Art!552!Par!2!Possessor!in!bad!faith!
always!presumed!to!be!in!fraud!of!creditors!when!the!donor!did!not! • Art!1165!Debtor’s!delay!
reserve! sufficient! property! to! pay! his! debts! prior! to! the! donation! • Art!1942!Obligation!of!bailee!in!commodatum!
(Art!759,!CC).!First,!petitioner’s!alleged!credited!existed!only!a!year! • Art!1268!Proceeds!in!a!criminal!offense!
after! the! deed! of! donation! was! executed.! Second,! when! the! Deed! • Art!1979!and!Art!1993!Depositary!
was! executed,! Lim! had! other! properties! sufficient! to! cover! the! • Art!2001!Act!of!a!thief!
debts.! • Art!2147!Officious!management!
! • Art!2148!Negotiorum!gestio!!
C. Other(Specific(Remedies(–(accion*directa( • Art!2159!Accepts!undue!payment!in!bad!faith!
( • Art!1198!Loss!of!benefit!to!make!use!period!
Art.! 1652.! The! sublessee! is! subsidiarily! liable! to! the! lessor! for! any! !
rent! due! from! the! lessee.! However,! the! sublessee! shall! not! be! 2. EXPRESS!STIPULATION!BY!THE!PARTIES!
responsible!beyond!the!amount!of!rent!due!from!him,!in!accordance! • Parties! may! expressly! stipulate! in! their! contract! that!
with! the! terms! of! the! sublease,! at! the! time! of! the! extra?judicial! the! debtor! shall! be! liable! to! the! creditor! even! if!
demand!by!the!lessor.!! performance! is! rendered! impossible! by! fortuitous!
Payments!of!rent!in!advance!by!the!sublessee!shall!be!deemed! event;! provision! in! a! contract! imposing! liability! even!
not! to! have! been! made,! so! far! as! the! lessor's! claim! is! concerned,! in! case! of! fortuitous! event! should! be! clearly!
unless! said! payments! were! effected! in! virtue! of! the! custom! of! the! expressed!
place.! !
! 3. ASSUMPTION!OF!RISK!
Art.!1729.!Those!who!put!their!labor!upon!or!furnish!materials!for!a! • The! principle! is! based! on! social! justice,! an! ethico?
piece! of! work! undertaken! by! the! contractor! have! an! action! against! economic! sensibility! of! modern! society! which! has!
the!owner!up!to!the!amount!owing!from!the!latter!to!the!contractor! noted! the! injustices! which! industrial! civilization! has!
at! the! time! the! claim! is! made.! However,! the! following! shall! not! created!
prejudice!the!laborers,!employees!and!furnishers!of!materials:!! • Applies! to! all! kinds! of! public! services! but! limited! to!
1) Payments! made! by! the! owner! to! the! contractor! before! risks! and! events! that! are! typical! of! the! business!
they!are!due;! concerned!
2) Renunciation! by! the! contractor! of! any! amount! due! him! !
from!the!owner.!!
This!article!is!subject!to!the!provisions!of!special!laws.!
B. Law(requires(liability(even(if(fortuitous(event(
! occurs:(
Art.!1608.!The!vendor!may!bring!his!action!against!every!possessor! (
whose! right! is! derived! from! the! vendee,! even! if! in! the! second! 1. ART!552!(2)!–!POSSESSOR!IN!BAD!FAITH!
contract! no! mention! should! have! been! made! of! the! Mortgage! Law! !
and!the!Land!Registration!Law!with!respect!to!third!persons.! Art.! 552,! Par.! 2.! A! possessor! in! bad! faith! shall! be! liable! for!
! deterioration! or! loss! in! every! case,! even! if! caused! by! a! fortuitous!
Art.!1893.!In!the!cases!mentioned!in!Nos.!1!and!2!of!the!preceding! event.!
article,! the! principal! may! furthermore! bring! an! action! against! the! !
substitute! with! respect! to! the! obligations! which! the! latter! has!
contracted!under!the!substitution.!
!
! !
! !
! !
! !
!!!!
C. Concept( of( Fortuitous( Event( (force* intervention! or! neglect! or! failure! to! act,! the! whole!
majeure/fuerza*mayor/caso*fortuito)! occurrence!is!then!humanized!and!removed!from!the!rules!
! applicable! to! the! acts! of! God! (NPC! v.! CA! –! the! case! of!
FOIRTUITIOUS% EVENT% –! an! unexpected! event! or! act! of! God! which! Welming!and!the!exploding!dam)!
could!neither!be!foreseen!nor!resisted!(Escriche).! !
• Essential! element:! some! extraordinary! circumstance! Cases:!
independent!of!the!will!of!the!obligor,!or!of!his!employees! !
! JUAN!NAKPIL!&!SONS!v.!CA!!
Facts:! Philippine! Bar! Association! decided! to! construct! an! office!
1. ACT! OF! GOD! –! by! nature,! e.g.! earthquakes,! storms,! floods,! building! in! Manila.! The! constructor! was! United! Construction,! Inc.!
epidemics,!fires! and!the!architect!was!Juan!Nakpil!&!Sons.!A!little!more!than!2!years!
2. ACT! OF! MAN! –! by! acts! of! man,! e.g.! armed! invasion,! attack! after! the! building! was! completed,! a! 7.3! magnitude! earthquake! hit!
by!bandits,!governmental!prohibitions,!robbery! Manila!and!the!building!sustained!major!damage.!Commissioner!(to!
• In! order! that! acts! of! man! may! constitute! fortuitous! whom!the!technical!issues!were!referred)!reported!that!the!damage!
event,! it! is! necessary! that! they! have! the! force! of! an! sustained! by! the! PBA! building! was! directly! caused! by! the!
imposition!which!the!debtor!could!not!have!resisted! earthquake.! However,! there! were! defects! in! the! plans! and!
% specifications! prepared! by! the! architects,! and! deviations! from! said!
FORTUITOUS%EVENT:% plans!by!the!constructor.!
• Includes!unavoidable!accidents,!even!if!there!has!been!an! !
intervention! of! human! element,! provided! fault! or! Held:!Art!1723!of!NCC!(which!holds!the!architects!liable!for!damages!
negligence!cannot!be!imputed!to!the!debtor.! on! the! building! due! to! defects! in! the! design,! and! contractors! for!
• Force,majeure!and!fortuitous!event!are!not!identical.!Force, damages! due! to! defects! in! construction)! must! concur)! applies.! To!
majeure! refers! to! “acts! of! god”! while! fortuitous! event! exempt! the! obligor! from! liability! under! Art! 1174! of! NCC! for! breach!
refers! to! “acts! of! man”.! However,! for! purposes! of! of! obligation! due! to! fortuitous! events,! all! four! requisites! must!
exempting!an!obligor!from!liability,!they!are!similar!in!our! concur! (see! Subheading! D.! Requisites).! If! upon! happening! of! a!
jurisdiction.!(de!Leon)! fortuitous! event,! there! concurs! a! corresponding! fraud,! negligence,!
• Two! kinds! of! fortuitous! event! in! contract! of! lease! as! delay!or!violation!or!contravention!in!any!manner!of!the!tenor!of!the!
distinguished!in!CC!(de!Leon):! obligation!which!results!in!loss!or!damage,!the!obligor!cannot!escape!
1. Ordinary! fortuitous! events! –! those! which! are! liability.!
common! and! which! the! contracting! parties! can! !
reasonably!foresee!(e.g.,!rain)! REPUBLIC!v.!LUZON!STEVEDORING!CO.!!
2. Extraordinary! fortuitous! events! –! those! which! are! Facts:! A! barged! owned! by! Luzon! Stevedoring! Co.! was! being! towed!
uncommon! and! which! the! parties! could! not! have! down!the!Pasig!river!by!tugboats!of!the!same!company.!At!that!time,!
reasonably!foreseen!(e.g.,!earthquake,!fire,!war)! the!river!was!swollen!and!the!current!was!swift.!The!barge!rammed!
! against! one! of! the! wooden! piles! of! Nagtahan! Bridge,! smashing! the!
D. Requisites( posts!and!causing!the!bridge!to!list.!RP!sued!for!damages.!
! !
Characteristics!of!fortuitous!events:! Held:!Luzon!Stevedoring!is!liable!for!damages.!The!mere!difficulty!to!
1. The! cause! of! the! unforeseen! and! unexpected! occurrence,! or! foresee!the!happening!is!not!tantamount!to!impossibility!to!foresee!
the!failure!of!the!debtor!to!comply!with!his!obligations,!must!be! the! same.! Luzon! Stevedoring,! knowing! and! appreciating! the! perils!
independent!of!the!human!ill! posed! by! the! swollen! stream! and! its! swift! current,! voluntarily!
2. It!must!be!impossible!to!foresee!the!event!which!constitute!the! entered!into!a!situation!involving!obvious!danger.!Also,!since!Luzon!
caso, fortuito! (ordinary),! or! if! it! can! be! foreseen,! it! must! be! Stevedoring! Company! has! barges! and! tugboats! travelling! up! and!
impossible!to!avoid!(extraordinary)! down!the!river!everyday,!it!could!not!safely!ignore!the!danger!posed!
3. The!occurrence!must!be!such!as!to!render!it!impossible!for!the! by!allegedly!improper!construction!that!had!been!in!place!for!years.!
debtor!to!fulfill!his!obligation!in!a!normal!manner! !
4. The! obligor! must! be! free! from! any! participation! in! the! E. Extinguishment(of(Liability;(Exceptions(
aggravation! of! the! injury! resulting! to! the! creditor! (no! • Art!1174!
concurrent!negligence)! • General!rule:!debtor!cannot!be!held!liable!for!damages!for!
! non?performance! if! he! is! unable! to! fulfill! his! obligation!
because!of!fortuitous!event!
1. EFFECT!OF!CONCURRENT!FAULT!
• Specific!application:!
• When! the! negligence! of! a! person! concurs! with! an! act! of!
o Non!performance!
God! in! producing! a! loss,! such! person! is! not! exempt! from!
o Delay!
liability! by! showing! that! the! immediate! cause! of! the!
o Loss!and!deterioration!of!a!specific,thing!
damage!was!the!act!of!god.!
o Art! 1189! Loss! without! the! fault! of! debtor! in!
• If!he!creates!a!dangerous!condition!or!negligence!although!
suspensive!condition!!
the!act!of!god!was!the!immediate!cause,!he!cannot!escape!
o Art!1190!Loss!without!the!fault!of!debtor!in!resolutory!
liability!for!the!natural!and!probable!consequence!thereof.!
condition!!
• There! must! be! no! fraud,! negligence,! delay! or!
o Art! 1194! Loss! without! the! fault! of! the! debtor! in!
violation/contravention!in!any!manner!of!the!tenor!of!the!
suspensive!period!!
obligation.!!
o Art!1204!Loss!of!all!alternative!prestations!!
• When! the! effect! is! found! to! be! partly! resulting! from! the! o Art! 1205! In! alternative! obligations,! in! case! of! loss! of!
participation! of! man,! whether! due! to! his! active! one!alternative,!creditor!chooses!from!remainder!
!!!!
EXCEPTIONS:% determination! of! the! damages! due! to! the! delay! in!
% fulfillment!of!the!obligation.!
Art.!1165,!Par.!3.!If!the!obligor!delays,!or!has!promised!to!deliver!the! o Compensatory! –! those! which! have! an! extra?
same! thing! to! two! or! more! persons! who! do! not! have! the! same! contractual!or!delictual!origin!
interest,!he!shall!be!responsible!for!any!fortuitous!event!until!he!has! • Kinds!of!interest!(de!Leon):!
effected!the!delivery.! 1. Simple! interest! –! when! the! rate! is! stipulated! by! the!
! parties!(Art!2209)!
Art! 552.! A! possessor! in! good! faith! shall! not! be! liable! for! the! 2. Compound! interest! –! when! the! earned! is! upon!
deterioration!or!loss!of!the!thing!possessed,!except!in!cases!in!which! interest!due!(Arts!2212,!1959)!
it! is! proved! that! he! has! acted! with! fraudulent! intent! or! negligence,! 3. Legal!interest!–!when!the!rate!of!interest!intended!by!
after!the!judicial!summons.!! the! parties! is! presumed! by! law,! as! when! the! loan!
A!possessor!in!bad!faith!shall!be!liable!for!deterioration!or!loss! mentions! interest! but! does! not! specify! the! rate!
in!every!case,!even!if!caused!by!a!fortuitous!event.! thereof!(Art!2209)!
! 4. Lawful! interest! –! when! the! rate! of! interest! is! within!
Art! 1942.! The! bailee! is! liable! for! the! loss! of! the! thing,! even! if! it! the!maximum!allowed!by!Usury!Law!
should!be!through!a!fortuitous!event:! 5. Unlawful! interest! –! when! the! rate! of! interest! is!
1) If!he!devotes!the!thing!to!any!purpose!different!from!that! beyond!the!maximum!fixed!by!law!
for!which!it!has!been!loaned;! • Usury!–!contracting!or!receiving!something!in!excess!of!the!
2) If!he!keeps!it!longer!than!the!period!stipulated,!or!after!the! amount! allowed! by! law! for! the! loan! or! forbearance! of!
accomplishment! of! the! use! for! which! the! commodatum! money,!goods!or!chattels.!
has!been!constituted;! !
3) If!the!thing!loaned!has!been!delivered!with!appraisal!of!its! Art.! 1413.! Interest! paid! in! excess! of! the! interest! allowed! by! the!
value,! unless! there! is! a! stipulation! exempting! the! bailee! usury! laws! may! be! recovered! by! the! debtor,! with! interest! thereon!
from!responsibility!in!case!of!a!fortuitous!event;! from!the!date!of!the!payment.!
4) If!he!lends!or!leases!the!thing!to!a!third!person,!who!is!not! !
a!member!of!his!household;!
Art.! 1961.! Usurious! contracts! shall! be! governed! by! the! Usury! Law!
5) If,!being!able!to!save!either!the!thing!borrowed!or!his!own!
and!other!special!laws,!so!far!as!they!are!not!inconsistent!with!this!
thing,!he!chose!to!save!the!latter.!
Code.!
!
Art.!1979.!The!depositary!is!liable!for!the!loss!of!the!thing!through!a! !
fortuitous!event:!! A. PD(858;(PD(1685(
1) If!it!is!so!stipulated;! (
2) If!he!uses!the!thing!without!the!depositor's!permission;!
PD! 858! (1975)! –! Amending! Further! Act! Numbered! 2655,! As!
3) If!he!delays!its!return;!
Amended,!Otherwise!Known!as!the!“Usury!Law”!
4) If!he!allows!others!to!use!it,!even!though!he!himself!may!
Sec!1!(amending!Sec!1[a!of!Act!2655)!–!The!Monetary!Board!is!
have!been!authorized!to!use!the!same.!
hereby! authorized! to! prescribe! the! maximum! rate! or! rates! of!
!
interest! for! the! loan! or! renewal! thereof! or! the! forbearance! of! any!
Art!2001.!The!act!of!a!thief!or!robber,!who!has!entered!the!hotel!is! money,!goods!or!credits,!and!to!change!such!rate!of!rates!whenever!
not!deemed!force!majeure,!unless!it!is!done!with!the!use!of!arms!or! warranted!by!prevailing!economic!and!social!conditions.!
through!an!irresistible!force.! In! the! exercise! of! the! authority! herein! granted,! the! Monetary!
! ! Board!may!prescribe!higher!maximum!rates!for!loans!of!low!priority,!
Art! 2147.! The! officious! manager! shall! be! liable! for! any! fortuitous! such! as! consumer! loans! or! renewals! thereof! as! well! as! such! loans!
event:! made! by! pawnshops,! finance! companies! and! other! similar! credit!
1) If!he!undertakes!risky!operations!which!the!owner!was!not! institutions!although!the!rates!prescribed!for!these!institutions!need!
accustomed!to!embark!upon;! not! necessarily! be! uniform.! The! Monetary! Board! is! also! authorized!
2) If!he!has!preferred!his!own!interest!to!that!of!the!owner;! to! prescribe! different! maximum! rate! or! rates! for! different! types! of!
3) If!he!fails!to!return!the!property!or!business!after!demand! borrowings,! including! deposits! and! deposit! substitutes,! or! loans! of!
by!the!owner;! financial!intermediaries.!
4) If!he!assumed!the!management!in!bad!faith.! Sec! ! 2! (amending! Sec! 4[a! of! Act! 2655)! –! The! Monetary! Board!
! may! eliminate,! exempt! from,! or! suspend! the! effectivity! of,! interest!
! rate! ceilings! on! certain! types! of! loans! or! renewals! thereof! or!
VI. Usurious*Transactions* forbearances! of! money,! goods,! or! credit,! whenever! warranted! by!
prevailing!economic!and!social!conditions.!
( !
Art.!1175.!Usurious!transactions!shall!be!governed!by!special!laws.!
PD!1685!(1980)!–!Amending!PD!1309!Authorizing!the!Central!Bank!
! of! the! Philippines! to! Engage! in! Special! Borrowing! and! Lending!
• Interest! –! income! produced! by! money! in! relation! to! its! Operations!
amount! and! to! the! time! that! it! cannot! be! utilized! by! its! Sec! 4! –! The! Monetary! Board! shall!establish! safeguards! as! it! may!
owner;!may!either!be!moratory!or!compensatory! deem! proper! to!prevent! undue! inflationary! effect! of! the!
o Moratory! –! those! paid! in! contractual! obligations! to! lending!operations!of!the!Central!Bank!and!shall!issue!such!rules!and!
pay!a!sum!of!money,!either!as!the!price!for!the!use!of! regulations! as! may! be! necessary! to! implement! this! Decree! and! to!
the! money,! or! as! the! stipulated! advanced! insure! a! rational! and! coordinated!! approach! to! the! international!
capital!markets.!
!!!!
! 6) Foreign! currency! checks! and! other! cash! items!
B. Central(Bank(Circular(416( denominated! in! currencies! acceptable! as! international!
• Amends! the! provisions! of! the! Manual! of! Regulation! for! reserves;!and!
Banks! 7) Claims! on! Philippine! incorporated! banks,! which! claims!
! obtain!and!maintain!credit!ratings!of!at!least!equal!to!that!
1. Subsection!X116.2!is!amended!to!reflect!(1)!the!reduction!in!the! of! the! Philippine! national! government! from! a! BSP!
risk!weight!of!multilateral!development!banks!from!20%!to!0%;! recognized!international!credit!rating!agency;!
and!(2)!to!remove!loans!to!exporters!to!the!extent!guaranteed! x,,x,,x.”!!
by! the! Guarantee! Fund! for! Small! and! Medium! Enterprises! !
(GFSME)!from!the!list!of!0%!risk!weighted!assets,!as!follows:! 2.!!!Subsection!X116.3!is!amended!to!expand!the!list!of!multilateral!
! development! banks! assigned! a! zero! percent! risk! weight,! as!
“,x!x!x!! follows:!!
0%,risk,weight,–!! “x,,x,,x!!
1) Cash!on!hand;! u.,, Multilateral,development,banks.!These!refer!to!the!World!
2) Claims! on! or! portions! of! claims! guaranteed! by! or! Bank! Group! comprised! of! the! International! Bank! for!
collateralized!by!securities!issued!by!–! Reconstruction! and! Development! (IBRD)! and! the!
i. Philippine!national!government!and!BSP;!and! International! Finance! Corporation! (IFC),! the! Asian!
ii. Central! governments! and! central! banks! of! foreign! Development! Bank! (ADB),! the! African! Development! Bank!
countries!with!the!highest!credit!quality!as!defined!in! (AfDB),! the! European! Bank! for! Reconstruction! and!
Subsec.!X116.3;!! Development! (EBRD),! the! Inter?American! Development!
3) Claims! on! or! portions! of! claims! guaranteed! by! or! Bank! (IADB),! the! European! Investment! Bank! (EIB);! the!
collateralized! by! securities! issued! by! multilateral! Nordic! Investment! Bank! (NIB);! the! Caribbean!
development!banks;! Development! Bank! (CDB),! the! Council! of! Europe!
4) Loans!to!the!extent!covered!by!hold?out!on,!or!assignment! Development! Bank! (CEDB)! and! such! others! as! may! be!
of! deposits/deposit! substitutes! maintained! with! the! recognized!by!the!BSP.!x!x!x”!!
lending!bank;! !
5) Loans!or!acceptances!under!letters!of!credit!to!the!extent! C. Monetary( Board( Circular( #905( lifting( the(
covered!by!margin!deposits;! interest(rate(ceiling(
6) Portions!of!special!time!deposit!loans!covered!by!Industrial! (
Guarantee!and!Loan!Fund!(IGLF)!guarantee;! MB! 905! Interest! can! now! be! charged! as! lender! and! borrower! may!
7) Real! estate! mortgage! loans! to! the! extent! guaranteed! by! agree!upon.!It!shall!not!be!subject!to!any!ceiling!prescribed!under!or!
the!Home!Guaranty!Corporation!(HGC);! pursuant!to!the!Usury!Law!as!amended.!!
8) Loans! to! the! extent! guaranteed! by! the! Trade! and! !
Investment! Development! Corporation! of! the! Philippines! Art! 2209! If! the! obligation! consists! in! the! payment! of! a! sum! of!
(TIDCORP);! money,!and!the!debtor!incurs!in!delay,!the!indemnity!for!damages,!
9) Foreign! currency! notes! and! coins! on! hand! acceptable! as! there! being! no! stipulation! to! the! contrary,! shall! be! the! payment! of!
international!reserves;!and! the!interest!agreed!upon,!and!in!the!absence!of!stipulation,!the!legal!
10) Gold! bullion! held! either! in! own! vaults,! or! in! another’s! interest,!which!is!six!per!cent!per!annum.!!
vaults! on! an! allocated! basis,! to! the! extent! it! is! offset! by! !
gold!bullion!liabilities;!!
!
1. TWO! CONCEPTS! ON! PAYMENT! OF! INTEREST% (from!
20%,risk,weight,–! Sir!Labitag’s!handout)!
1) Checks!and!other!cash!items;! !
2) Claims! on! or! portions! of! claims! guaranteed! by! or! a. Interest% for% the% use% or% loan% or% forbearance% of%
collateralized! by! securities! issued! by! non?central! money,%goods%or!credit!!
government!public!sector!entities!of!foreign!countries!with! !
the!highest!credit!quality!as!defined!in!Subsec.!X116.3;!
No! interest! for! use! or!
3) Claims! on! or! portions! of! claims! guaranteed! by! Philippine!
forbearance!!
incorporated! banks/quasi?banks! with! the! highest! credit!
If! no! stipulation! re:! payment! • No!interest!shall!be!due!
quality!as!defined!in!Subsec.!X116.3;!
of!interest:!! unless! it! has! been!
4) Claims! on! or! portions! of! claims! guaranteed! by! foreign!
expressly! stipulated! in!
incorporated! banks! with! the! highest! credit! quality! as!
writing!(Art!1956)!
defined!in!Subsec.!X116.3;!
If! there! is! express! stipulation!
5) Loans! to! exporters! to! the! extent! guaranteed! by! Small! Interest! shall! be! 12%! per!
(which! must! be! in! writing! to!
Business! Guarantee! and! Finance! Corporation! (SBGFC):! annum! (Sec.! 2,! Monetary!
be! valid)! for! payment! of!
Provided,! That! loans! to! exporters! to! the! extent! Board! Circular! 905,! 10! Dec!
interests,! but! no, rate,
guaranteed! by! the! Guarantee! Fund! for! Small! and! 1982)!
mentioned!
Medium! Enterprises! (GFSME)! outstanding! as! of! the! date!
If!there!is!stipulation!in!writing! Such! interest! shall! not! be!
of! the! effectivity! of! the! merger! of! the! SBGFC! and! the!
and! rate, of, interest, is, agreed, subject! to! ceiling! prescribed!
GFSME!shall!continue!to!have!a!zero!percent!risk!weight:!
upon! (including! commissions,! under! the! Usury! Law! (Sec.! 1,!
Provided,%further,!That!the!zero!percent!risk!weight!shall!
premiums,! fees! and! other! Monetary!Board!Circular!905,!
not! apply! to! loans! renewed! after! the! merger! of! the!
charges)! 10!Dec!1982))!
SBGFC!and!the!GFSME.!
!!
!!!!
b. Interest% as% damages% for% breach% or% default% in% With! regard! to! ward! of! interest! for! actual! and! compensatory!
payment% of% loan% or% forbearance% of% money,% damages,!the!rate!of!interest!imposed!is!as!follows:!
i. Obligation!is!breached!and!it!consists!in!the!payment!of!a!
goods,%credit! sum! of! money! →! interest! should! be! that! stipulated! in!
! writing;! legal! interest! from! the! time! it! is! judicially!
In! case! of! default,! loan! or! demanded.! In! the! absence! of! stipulation,! rate! of! interest!
forbearance! shall! earn! legal! shall!be!12%!per!annum,!computed!from!default.!
No! stipulation! as! to! interest,! at! rate! of! 12%! per! ii. Obligation,! not! constituting! a! loan! or! forbearance! of!
interest!for!use!of!money! annum!from!date!of!judicial!or! money,!is!breached!→!6%!per!annum.!Demand!must!first!
extrajudicial! demand,! subject! be! established! with! reasonable! certainty.! When!
to!Art!1169!(delay/mora)! established! with! reasonable! certainty,! interest! shall! begin!
Loan! +! stipulated! interest,! to! run! from! the! time! that! the! claim! is! made! judicially! or!
shall! earn! 12%! per! annum! extrajudicially.! When! demand! cannot! be! established! with!
from!date!of!judicial!demand! certainty,!the!interest!shall!begin!to!run!from!the!date!that!
If! rate! of! interest! *! Interest! due! shall! earn! a!judgment!in!court!is!made.!
stipulated,! e.g.! 24%! per! legal! interest! from! the! time! it! iii. Judgment!of!court!awarding!sum!of!money!becomes!final!
annum! is! judicially! demanded,! and!executor!→!12%!per!annum!from!such!finality!until!its!
although!the!obligation!may!be! satisfaction.!
silent! upon! this! point! (Art! !
2212)! Case:!
! !
c. If% obligation% not% consisting% of% a% loan% or% ALMEDA!V.!CA!
Facts:! PNB! granted! to! spouses! Almeda! several! loan/credit!
forbearance% of% money,% goods% or% credit% is%
accommodations!(P18M!payable!in!6!years!at!21%!per!annum).!The!
breached,%e.g.%obligation%to%give,%to%do,%not%to% credit! agreement! between! PNB! and! the! Almedas! contained! an!
do% escalation! clause,! providing! PNB! reserves! the! right! to! increase! the!
• Interest!may!be!imposed!at!the!discretion!of!court!at! interest!rate!within!limits!allowed!by!law!at!any!time!depending!on!
the!rate!of!6%!per!annum.! whatever! policy! it! may! adopt! in! the! future.! Interest! rate! reached! a!
• No! interest! adjudged! on! unliquidated! claims! or! high!of!68%.!
damages,! until! demand! can! be! established! with! !
reasonable!certainty.!! Held:! Art! 1956,! CC! expressly! says! that! “no! interest! shall! be! due!
• After! thus! established! with! reasonable! certainty,! unless! it! has! been! expressly! stipulated! in! writing.”! PNB! unilaterally!
interest!of!6%!per!annum!shall!begin!to!run!from!the! altered! the! terms! of! its! conditions.! What! has! been! stipulated! in!
date!of!judicial!or!extrajudicial!demand.! writing!is!that!the!Almedas!were!bound!merely!to!pay!21%,!subject!
• But! if! obligation! cannot! be! established! with! to! possible! escalation! or! de?escalation! when! the! circumstances!
reasonable! certainty! at! time! of! demand,! 6%! per! warrant!it!is!within!the!law,!and!upon!agreement.!
annum! interest! shall! begin! to! run! only! from! date! of! !
judgment!–!on!amount!finally!adjudged!by!court.!!
! VII. Fulfillment*of*Obligations***
d. When% judgment% of% court% awarding% money% ∗ See*Chapter*4:*Payment*
!
becomes% final% and% executory,% money% judgment% is% PRESUMPTIONS%IN%PAYMENT%OF%INTERESTS%AND%INSTALLMENTS%%
A,%B%and%C%(above)%shall%earn%12%%per%annum%from% !
finality% of% judgment% until% full% payment% –% money% Art.! 1176.! The! receipt! of! the! principal! by! the! creditor,! without!
judgment% shall% be% considered% as% forbearance% of% reservation! with! respect! to! the! interest,! shall! give! rise! to! the!
credit%(Eastern%Shipping%Lines%vs.%CA,%1994)% presumption!that!interest%has%been%paid.!
The!receipt!of!a!later!installment!of!a!debt!without!reservation!
, as! to! prior! installments,! shall! likewise! raise! the! presumption! that!
Cases:! such!installments%have%been%paid.!
!
!
EASTERN!SHIPPING!LINES!v.!CA!!
• GENERAL!RULE:!If!the!debt!produces!interests,!payment!of!
Facts:! Two! fiber! drums! of! riboflavin! were! shipped! from! Japan! via!
the!principal!shall!not!be!deemed!to!have!been!made!
Eastern!Shipping!Lines.!Upon!arrival!of!shipment,!it!was!discharged!
unless!the!interests!have!been!covered.!
to! Metro! Port! Service,! Inc! which,! in! turn,! delivered! it! to! Allied!
!
Brokerage! Corporation.! Allied! Brokerage! delivered! the! shipment! to!
2%KINDS%OF%PRESUMPTION:!
the!consignee.!Said!shipment!had!spillages!and!was!adulterated.!
1. Conclusive!Presumption!–!one!which!cannot!be!
!
contradicted,!like!the!presumption!that!everyone!is!
Held:!The!payment!of!legal!interest!shall!be!computed!from!the!date!
presumed!to!know!the!law!
of! the! decision! of! the! court! a, quo,! as! explicitly! stated! in! the!
2. Disputable!(or!rebuttable)!Presumption!–!one!which!can!
Disposition:!“The!legal!interest!to!be!paid!is!6%!on!the!amount!due!
be!contradicted!or!rebutted!by!presenting!proof!to!the!
computed!from!the!decision,!dated!03!February!1988,!of!the!court!a,
contrary!like!the!presumption!in!Art.!1176!(see!Sec.!69[i],!
quo.!A!12%!interest,!in!lieu!of!6%,!shall!be!imposed!on!such!amount!
Rule!123,!Rules!of!Court)!
upon!finality!of!this!decision!until!the!payment!thereof.”!!
!
!
!!!!
WHEN%PRESUMPTIONS%DO%NOT%APPLY:!
1. With!reservation!as!to!interest!
• Does!not!arise!where!there!is!a!reservation!as!to!
CHAPTER(3:((DIFFERENT(
•
interest!or!prior!installments!
Reservation!can!be!made!in!writing!or!verbally! KINDS(OF(OBLIGATIONS(
2. Receipt!for!a!part!of!principal!
• A!receipt!for!a!part!of!the!principal,!without!
mentioning!the!interest,!merely!implies!that!the!
creditor!waives!his!right!to!apply!the!payment!first!to! I. Pure*and*Conditional*Obligations*
the!interest!and!then!to!the!principal,!as!permitted!by!
Art.!1253! A. Pure(Obligations(
3. Receipt!without!indication!of!particular!installment!paid! !
• The!presumption!in!par.!2!is!not!applicable!if!the!
receipt!does!not!recite!that!it!was!issued!for!a! Art.! 1179,! Par.! 1.! Every! obligation! whose! performance! DOES!
particular!installment!due!as!when!the!receipt!is!only! NOT% depend! upon! a! future, or, uncertain, event, OR! upon! a! past,
dated! event,unknown!to!the!parties!is!demandable%at%once!
4. Payment!of!taxes! .!
• Taxes!payable!by!the!year!are!not!installments!of!the! PURE! OBLIGATIONS! contain! no! term! or! condition! whatever! upon!
same!obligation!–!separate!obligations!every!year! which! depends! the! fulfillment! of! the! obligation! contracted! by! the!
5. Non[payment!proven! debtor.! Immediately! demandable! and! nothing! would! exempt! that!
• Not!applicable!where!the!non?payment!of!the!prior! debtor!from!compliance!therewith.!
obligations!has!been!proven!
• Between!a!proven!fact!and!a!presumption!pro,tanto,! B. Conditional(Obligations!
the!former!stands!and!the!latter!falls! !
* Art.!1181.!In!conditional!obligations,!the!acquisition,of!rights,!as!
VIII. Transmissibility*of*Rights* well! as! extinguishment, or, loss! of! those! already! acquired,! shall!
depend%upon%the%happening,of!the!event!which!constitutes!the!
!
condition.!!
Art.! 1178.! Subject! to! the! laws,! all! rights! acquired! in! virtue! of! an!
obligation!are!transmissible,!if!there!has!been!no!stipulation!to!the! One! whose! consequences! are! subject! in! one! or! another! to! the!
contrary.! fulfillment!of!a!condition!
! !
EXCEPTIONS:%% 1. CONDITION!!
1. Not!transmissible!by!their!very!nature!e.g.!purely!personal! a. Concept%
rights!
• every!future!and!uncertain!event!upon!which!an!obligation!
2. There! is! a! stipulation! of! the! parties! that! they! are! not!
or!provision!is!made!to!depend!
transmissible!!
• characteristics!of!a!condition:!
• The! stipulation! against! transmission! must! not! be!
o Future! and! uncertain! [! The! first! paragraph! of! Art.!
contrary!to!public!policy.!(Art!1306)!
1179! uses! the! disjunctive! or, between! “future”! and!
• Not!be!easily!implied!but!clearly!established!or!at!the! “uncertain”! to! distinguish! pure! obligation! from! both!
very!least,!clearly!inferable! the!conditional!obligation!and!one!with!a!period.!!
3. Not!transmissible!by!law! o Past! but! unknown! –! a! condition! may! refer! to! a! past!
a. By! the! contract, of, partnership,, two! or! more! persons!
event! unknown! to! the! parties.! If! it! refers! to! a! future!
bind! themselves! to! contribute! money,! property! or! event,! both! its! occurrence! and! the! time! of! such!
industry! to! a! common! fund,! with! the! intention! of! occurrence! must! be! uncertain.! A! condition! must! not!
dividing!the!profi!ts!among!themselves.!!(Art.!1767.)! be!impossible.!
b. By! the! contract, of, agency,, a! person! binds! himself! to!
• must! be! imposed! by! the! will! of! a! party! and! NOT! a!
render! some! service! or! to! do! something! in!
necessary! legal! requisite! of! the! act! e.g.! promise! to! give!
representation! or! on! behalf! of! another,! with! the!
donation! propter, nuptias! if! a! person! gets! married! is! not!
consent!or!authority!of!the!latter.!(Art.!1868.)!
conditional!(DPN!presupposes!marriage)!
c. By! the! contract, of, commodatum,, one! of! the! parties!
• “past! event”! cannot! be! a! condition! because! it! is! not! a!
delivers! to! another! something! not! consumable! so!
future! and! uncertain! event,! more! properly! called! as!
that! the! latter! may! use! the! same! for! a! certain! time!
“basis”;!although!proof!of!a!past!event!may!be!a!condition!!
and! return! it.! Commodatum, is! essentially! gratuitous.!
• TERM! –! a! future! AND! certain! event! upon! the! arrival! of!
(Art.!1933.)!
which! the! obligation! subject! to! it! either! arises! or! is!
!
extinguished.!!!
( %
%
! %
%
b. Condition%v.%Period/Term%
!!!!
% which! shall! be! the! same! with! this! contract! of! lease/purchase.!
CONDITION! PERIOD/TERM! Gonzales! did! not! exercise! the! purchase! option,! remained! in!
Determines!existence!of!an! Determines!demandability!of!an! possession! of! the! property! without! paying! purchase! price! and!
obligation! obligation! without!paying!rentals.!Respondents!filed!complaint!for!recovery!of!
property!alleging!breach!of!paragraph!9.!RTC!ruled!for!Gonzales.!CA!
! ruled!for!the!Heirs,!saying!that!paragraph!9!is!a!condition!precedent!
Case:!
to!the!payment!of!purchase!price.!!
!
!
GAITE!V.!FONACIER!
Held:!Paragraph!9!is!a!condition!precedent.!The!clear!intent!of!it!is!
Facts:!Fonacier!agreed!to!pay!P65,000!to!Gaite!from!the!first!letter!
that!Heirs!must!obtain!a!separate!certificate!of!title!in!their!names!to!
of!credit!covering!the!first!shipment!of!iron!ores!and!from!the!first!
show!ownership!of!the!portion!of!land!and!their!right!to!dispose!it.!
amount! derived! from! the! local! sale! of! iron! ore.! Fonacier! sought! a!
The! obligation! of! Gonzales! to! buy! the! land! cannot! be! enforced!
bond,! which! Gaite! put! up! provided! that! the! liability! of! the! surety!
unless!respondents!comply!with!the!suspensive!condition!that!they!
company!would!have!effect!if!there!had!been!actual!sale!of!iron!ore!
acquire!first!a!separate!title.!RTC!decision!is!reinstated.!
for!an!amount!not!less!than!P65,000,!and!that!his!liability!will!expire!
!
after!one!year.!The!bond!expired!and!was!not!renewed,!and!none!of!
the!24,000!tons!of!iron!ore!had!been!sold,!thus!Fonacier!was!unable! i. SUSPENSIVE%(condition%precedent/antecedent)%%
to!pay!Gaite!P65,000!upon!demand.!Fonacier!said!that!payment!was! !
conditioned! on! sale! of! iron! ore! by! the! company,! which! had! not! • The!obligation!arises,!but!if!the!condition!does!not!happen,!
happened,! rendering! their! obligation! to! pay! not! yet! demandable.! obligation!does!not!come!into!existence!
Lower!court!ruled!for!the!plaintiff.!! • The!demandability!of!the!obligation!is!suspended!until!the!
! happening!of!a!future!and!uncertain!event.!!
Held:!The!obligation!to!pay!Gaite!P65,000!is!one!with!a!period,!and! • It! must! appear! that! the! performance! of! an! act! or! the!
not!one!with!a!suspensive!condition.!The!term!expired.!The!words!of! happening! of! an! event! was! intended! by! the! parties! as! a!
the! contract! express! no! uncertainty! in! the! existence! of! the! suspensive! condition,! otherwise,! its! non?fulfillment! will!
obligation!to!pay.!Only!the!maturity!and!demandability!are!deferred,! not!prevent!the!perfection!of!a!contract.!!
not!the!existence.!That!defendant!put!up!bonds!is!admittance!of!the! !
existence!of!the!obligation!to!pay.!! Retroactive! effect! when! “suspensive”! condition! is! fulfilled! [! The!
! binding! tie! of! conditional! obligation! is! produced! from! the! time! of!
2. KINDS!OF!CONDITIONS! perfection,!not!happening!of!condition.!!
• Can! also! be! seen! as! “Rights! of! creditor! and! debtor! after!
a. As%to%effect%on%obligation%% fulfillment!of!the!condition”!
! !
• Art!1181!Conditional!obligations,!the!acquisition!of!rights,!
as! well! as! the! extinguishment! of! or! loss! of! those! already! Art.! 1187.! The! effects! of! a! conditional! obligation! to! give,! once!
acquired,! shall! depend! upon! the! happening! of! the! event! the!condition!has!been!fulfilled!shall!retroact%to%the%day%of%the%
which!constitutes!the!condition.!! constitution!of!the!obligation.!Nevertheless,!when!the!obligation!
! imposes! reciprocal% prestations! upon! the! parties,! the! fruits! and!
! SUSPENSIVE! RESOLUTORY! interests!during!the!pendency!of!the!condition!shall!be!deemed!
to! have! been! mutually! compensated.! If! the! obligation! is!
When! Obligation!arises! Obligation! is!
unilateral,! the! debtor! shall! appropriate! the! fruits! and! interests!
condition! extinguished!
received,! UNLESS! from! the! nature! and! circumstances! of! the!
fulfilled!
obligation!it!should!be!inferred!that!the!intention!of!the!person!
When! The!juridical!or!legal!tie! Tie! of! law! is!
constituting!the!same!was!different.!!
condition! does!not!appear! consolidated,! becomes!
!
not!fulfilled! absolute!
In!obligations!to!do!or!not!to!do,!the!courts%shall%determine,!in!
Until!it! Obligation!is!a!mere! The! effect! flow,! but!
each! case,! the! retroactive! effect! of! condition! that! has! been!
takes!place! hope! over! it! hovers!
complied!with.!
possibility! of!
termination! like! Sword! !
of!Damocles! OBLIGATION!TO!GIVE! OBLIGATION!TO!DO!or!NOT!TO!
Effect! Acquisition!of!rights! Extinguishment! or! loss! DO!
of! those! already! Bilateral!(reciprocal!obligation)! Courts! shall! determine! the!
acquired! 1. Deemed! to! have! been! retroactive! effect! of! the!
Also!known! Condition!precedent!or! Condition!subsequent! mutually!compensated! condition!
as! condition!antecedent! !
! Unilateral,
Case:! 2. There! is! usually! no!
! retroactive! effect! because! they!
GONZALES!V.!HEIRS!OF!THOMAS! are! deemed! gratuitous.! But!
Facts:! Par.! 9! of! Contract! of! Lease/Purchase! entered! into! by! the! debtor! shall! appropriate! fruits!
respondents! and! petitioner! states! that! the! lessors! shall! obtain! a! and! interests! received,! UNLESS!
separate! Certificate! of! Title! over! the! leased! portion! of! the! lessee! there!was!a!different!intention!
within! a! reasonable! period! of! time! which! shall! not! exceed! four! !
years,! after! which! a! new! contract! shall! be! executed! by! the! parties!
!!!!
• Until! the! fulfillment! of! suspensive! condition,! creditor! cannot! • Otherwise!(not!a!determinate!thing):!solutio,indebiti!
enforce! the! obligation! as! his! right! then! was! merely, an, • If! the! payment! was! with! knowledge! of! condition:! implied!
expectancy.! However,! upon! happening,! the! debtor! can! be! waiver!of!condition!and!cannot!recover!
compelled!to!perform.!! • If!the!payment!was!with!knowledge!but!the!condition!did!not!
• REASON!FOR!RETROACTIVITY:!Condition!is!only!accidental!and! happen:!debtor!can!recover!lest!the!creditor!will!be!unjustly!
not! an! essential! element! of! the! obligation.! The! obligation! is! enriched.!!
constituted! when! the! essential! elements! which! give! rise! there! • The!law!is!silent!as!to!whether!fruits!may!be!recovered!like!in!
to!concur.!! Art!1195,!but!Tolentino!says!we!can!apply!principle!of!solutio!
• Rule! on! retroactivity! has! no! application! in! real! contracts! indebiti,! especially! if! creditor! is! in! bad! faith! (knew! that! the!
because!they!are!perfected!only!by!delivery!of!the!object! debtor! is! paying! before! the! suspensive! condition! has!
of!the!obligation.!! happened).!!Sir,Labitag,says,yes,,though.!It,follows,the,same,
• Contracts! entered! into! PENDENTE, CONDITIONE! (before! rules.,!
happening!of!suspensive!condition)!! !
a. CREDITOR! transfers! his! rights! prior! to! happening! of! Case:!!
condition!e.g.!mortgage!over!the!property!to!be!delivered! !
to! him! "! Effect:! consolidate! or! makes! effective! the! act! CORONEL!V.!CA!
performed.! Facts:!In!the!“Receipt!of!Down!Payment”!(P50,000)!executed!by!the!
b. DEBTOR:! cannot! alienate! or! dispose! the! thing,! if! he! does! Coronels!and!Alcaraz,!it!was!stipulated!that!the!Coronels!will!effect!
so,!all!such!contracts!are!abrogated!and!cease!to!have!any! the!transfer!in!their!names!of!the!TCT!from!the!name!of!their!father.!
effect! upon! happening! of! the! suspensive! condition.! But! Upon! presentation! of! the! new! TCT,! they! will! execute! a! deed! of!
because!delivery!transfers!real!right!over!the!thing:! absolute! sale! with! Alcaraz.! The! title! was! transferred! to! names! of!
rd
1. 3 !person!in!good!faith!"!retains!ownership;!debtor! petitioners,! but! they! sold! the! property! to! Mabanag! and! cancelled!
becomes!liable!to!creditor!for!damages.! the!contract!with!Alcaraz!by!depositing!the!P50,000!down!payment.!
rd
2. 3 !person!is!in!bad!faith!"!he!may!be!compelled!to! Alcaraz!filed!complaint!for!specific!performance.!TC!and!CA!ruled!in!
deliver!the!thing!to!the!creditor.!! favor!of!Alcaraz.!!
• LIMITATIONS! ON! RETROACTIVITY! (as! dictated! by! justice! and! !!
required!by!practicability!or!convenience):!! Held:!“Receipt!of!Down!Payment”!was!a!conditional!contract!of!sale,!
a. Loss! of! the! thing! by! fortuitous! event,! debtor! suffers! the! with!the!transfer!of!title!as!the!suspensive!condition.!As!soon!as!the!
loss!because!he!is!still!the!owner! transfer! of! title! was! effected,! the! obligations! of! theparties! became!
b. Acts, of, administration! before! fulfillment! not! affected! by! mutually! demandable,! and! petitioners! were! committed! to! execute!
retroactivity;! however! abuse! of! rights! in! guise! of! the!sale.!TC!and!CA!decisions!were!affirmed.!!
administration!are!not!allowed!to!defeat!rights!of!creditor! !
c. Usufructuary,rights!not!within!the!principle!of!retroactivity! ii. RESOLUTORY%(condition%subsequent)%
of!conditional!obligations!! • Extinguishes!rights!and!obligations!already!existing!!
• In!obligations!to!do!or!not!to!do,!there!is!no!fixed!rule!as!to! !
the! retroactive! effect! of! the! fulfillment! of! a! suspensive! Cases:!
condition.!This!does!not!mean!that!retroactivity!principle!is! !
not! applicable.! Courts! have! the! discretion! to! determine! PARKS!V.!PROVINCE!OF!TARLAC!
the!retroactive!effect!of!the!suspensive!condition!that!has! Facts:!Hill!donated!a!parcel!of!land!perpetually!to!the!municipality!of!
been!complied!with.!! Tarlac!with!a!condition!that!a!public!school!and!public!park!shall!be!
! erected! on! it! within! 6! months.! The! donation! was! accepted.! The!
RIGHTS% OF% CREDITOR% AND% DEBTOR% BEFORE% FULFILLMENT% OF% donors! sold! the! land! to! George! Parks,! while! the! Municipality!
CONDITION:%% transferred! the! land! to! the! province! of! Tarlac.! Parks! brought! the!
present!action.!!
Art.! 1188.! The! creditor,! may! before, the, fulfillment, of, the, !
obligation,! bring! the! appropriate! action! for! the!preservation! of! Held:! The! condition! could! not! be! complied! with! except! after! giving!
his!right.!! effect! to! the! donation.! Thus! there! is! a! resolutory! condition,! non?
The!debtor!may!recover!what!during!the!same!time!he!has!paid! compliance!of!which!will!revoke!the!donation.!However,!even!if!non?
by!mistake!in!case!of!a!suspensive!condition.!! compliance! is! sufficient! cause! for! revocation! of! the! donation,! the!
The!debtor!may!recover!what!during!the!same!time!he!has!paid! period!for!bringing!action!for!revocation!has!already!prescribed.!!!
by!mistake!in!case!of!a!suspensive!condition.!! !
CENTRAL!PHILIPPINE!UNIVERSITY!V.!CA!
!
Facts:! In! 1939,! Don! Ramon! Lopez! donated! a! land! in! favor! of! CPU!
!
with!the!condition,!among!others,!that!the!land!shall!be!utilized!for!
• No! preference! of! credit! is! granted! to! the! creditor! but! only! the!establishment!of!a!medical!college.!In!1989,!heirs!of!Lopez!filed!
allows!him!to!bring!proper!action!for!the!preservation!of!his! action! for! annulment! of! donation! saying! that! the! conditions! were!
rights.!!
not!complied!with.!!
! !
PAYMENT% BEFORE% HAPPENING% OF% CONDITION:! Debtor! may! only! Held:! Donation! had! to! be! valid! first! before! construction! of! medical!
recover! what! he! paid! by! mistake! before, happening! of! suspensive! college.! Thus! the! condition! is! resolutory,! non?compliance! of! which!
condition,! hence! if! condition! has! been! fulfilled,! he! can! no! longer!
will! result! to! revocation! of! donation.! The! period! of! time! for!
claim!because!of!retroactivity!of!the!condition.!! establishment! of! medical! college! could! not! be! quantified.! Court!
• If! the! payment! was! for! a! determinate! thing:! accion, declared!donation!already!ineffective!and!revoked.!!
reivindicatoria!(for!inexistent!contracts)!
!!!!
b. As%to%cause%or%origin%% !
! Held:! There! is! a! purely! potestative! condition! because! it! leaves! the!
effectivity! and! enjoyment! of! the! leasehold! rights! to! the! sole! and!
Art.!1182.!When!the!fulfillment!of!the!condition!depends!upon!
exclusive! will! of! the! lessee.! Renewal! of! lease! depends! on! such!
the! sole, will, of, the, debtor! the! conditional! obligation! shall! be!
rd condition.! However,! continuance! of! a! contract! of! lease! cannot! be!
VOID.!If!it!depends!upon!chance!or!upon!the!will,of,a,3 ,person,!
made!to!depend!upon!the!choice!of!the!lessee.!!Dy!was!ordered!to!
the! obligation! shall! TAKE! EFFECT! in! conformity! with! the!
vacate!and!return!the!possession!of!the!leased!premises!and!to!pay!
provisions!of!this!Code.!
the!monthly!rentals!due.!!
! !
i. %POTESTATIVE% –! One! which! depends! upon! the! will! of! ii. CASUAL!–!depends!exclusively!upon!chance,!will!of!a!
one!of!the!contracting!parties;!in!the!power!of!one!of!the! third!person!or!other!factors,!and!not!upon!the!will!
parties!to!realize!or!prevent;!suspensive!in!nature.!! of!the!contracting!parties!
! !
KINDS%OF%POTESTATIVE%CONDITION:% Case:!!
1. Simple! potestative! –! presupposes! not! only! a! !
manifestation! of! will! but! also! the! realization! of! an! NATELCO!v.!CA!
external!act!! Facts:! NATELCO! entered! into! a! contract! with! CASURECO.! NATELCO!
• On! the! part! of! the! debtor:! Does! not! prevent! will! use! CASURECO’s! light! posts! and! shall! install! 10! telephone!
formation! of! valid! obligation! because! in! part! connections!for!the!use!of!CASURECO.!Period!of!contract!shall!be!as!
depends! on! contingencies! over! which! he! has! long! as! NATELCO! has! need! of! the! light! posts,! it! being! understood!
no!control! that!the!contract!shall!terminate!when!for!any!reason!CASURECO!is!
2. Purely! potestative! –! depends! solely! and! exclusively! forced!to!stop!and!it!becomes!necessary!to!remove!the!light!posts.!
upon!the!will!! In! 1989,! Casureco! filed! for! reformation! of! contract! with! damages!
• Destroys!the!efficacy!of!the!legal!tie! because! the! contract! is! one?sided! for! NATELCO.! Also,! the! cables!
• Effect! if! fulfillment! of! condition! depends! strung! by! them! on! electrical! posts! have! become! heavier! as!
solely! on! the! will! of! the! debtor! "! VOID! subscribers!increased.!RTC!and!CA!ruled!in!favor!of!CASURECO.!!
because! it! is! a! direct! contravention! of! Art! !
1308!on!mutuality!of!contracts!and!to!do!so!is! Held:! Rebus, sic, stantibus! (doctrine! of! unforeseen! events)! applies.!
to!sanction!illusory!conditions!!! Parties! stipulate! in! the! light! of! certain! prevailing! conditions,! and!
• If! depends! exclusively! on! the! will! of! creditor! once! these! conditions! cease! to! exist,! the! contract! also! ceases! to!
exist.! Art.! 1267! (When! service! has! become! so! difficult! as! to! be!
"!VALID!!
manifestly!beyond!the!contemplation!of!the!parties,!the!obligor!may!
• Applicable! only! to! SUSPENSIVE! and! NOT! to!
also!be!released!therefrom,!in!whole!or!in!part.)!also!applies.!!!
RESOLUTORY!!
!
• Hence,! resolutory! potestative! (facultative)!
conditions!are!perfectly!valid,!even!if!made!to! iii. MIXED% –! depends! upon! the! will! of! one! of! the!
depend! upon! the! obligor/debtor,! since! the! contracting! parties! and! other! circumstances,! including!
obligation!is!already!in!force! the!will!of!third!persons!!
! !
Debtor’s! promise! to! pay! when! he! can! is! not! a! conditional! Cases:!
obligation.!"!Obligation!with!a!period.!! !
OSMENA!V.!RAMA!
Facts:! Rama! acknowledged! her! indebtedness! to! Osmena! by! an!
Art.! 1180.! When! the! debtor! binds! himself! to! pay! WHEN! his! indorsement! which! said! that! if! her! house! in! Pagina! is! sold,! she! will!
means!permit!him!to!do!so,!the!obligation!shall!be!deemed!to!be! pay!her!indebtedness!to!Osmena.!
one!with!a!period!subject!to!the!conditions!of!Art!1197!(period! !
was!intended).!! Held:!The!condition!imposed!by!debtor!depends!upon!her!exclusive!
! will!and!thus!void.!!
# Creditor!will!have!to!ask!the!court!to!fix!a!period!because! !
an! immediate! action! to! enforce! the! obligation! would! be! HERMOSA!V.!LONGORA!
premature.!! Facts:! Longora! had! claims! against! the! estate! of! Hermosa.! He! said!
# What! depends! upon! the! debtor’s! will! is! not! whether! he! that! the! estate! asked! for! credit! advances! to! Longora! “on! condition!
should! pay! or! not,! for! indeed! he! binds! himself! to! pay.! that! their! payment! should! be! made! as! soon! as! funds! derived! from!
What!is!left!only!to!his!will!is!the!duration!of!the!period.!! the! sale! of! a! property! in! Spain! are! received.”! CA! said! that! the!
! payment! did! not! become! due! until! the! administratrix! received! the!
Case:!! payment! from! the! buyer! of! the! property.! The! property! was! sold! in!
! November!1947!and!the!claim!was!filed!on!Oct.!1948.!
LIM!V.!CA! !
Facts:! Lim! and! Dy! entered! into! a! compromise! agreement! whereby! Held:! The! condition! is! not! potestative! since! it! also! depends! upon!
the!term!of!lease!shall!be!renewed!every!3!years!“for!as!long!as!the! circumstances! beyond! the! debtor’s! control.! It! is! a! mixed! one.! The!
Dy! needed! the! premises! and! can! meet! and! pay! the! increases.”! In! will!to!sell!was!present,!but!there!are!other!factors!like!buyers!that!
1985,! Lim! advised! Dy! that! he! would! no! longer! renew! the! contract.! are!able!and!willing!to!purchase!the!property.!
Dy! informed! Lim! of! his! intention! to! renew! the! contract! but! Lim! !
disagreed.!Lim!filed!action!for!ejectment.!! !
!!!!
TAYLOR!V.!UY!TIENG!PIAO! TWO%KINDS%OF%IMPOSSIBILITY:,
Facts:!A!contract!was!entered!into!whereby!it!was!understood!that! • Physical!impossibility!–!cannot!exist!or!cannot!be!done!in!
should!the!machinery!to!be!installed!fail!for!any!reason!to!arrive!in! the!nature!of!things.!
Manila!within!6!months,!the!contract!may!be!cancelled.!Machinery! • Legal! impossibility! [! contrary! to! law,! morals,! good!
did! not! arrive! within! 6! months.! Evidence! showed! also! that! the! customs,! and! public! policy! AND! restricts! certain! rights!
defendants!either!cancelled!the!order!or!were!unable!to!supply!the! which! are! necessary! for! the! free! development! of! human!
capital!needed.!Taylor!instituted!action!to!recover!damages.!! activity!i.e.!!political!rights,!family!rights!and!constitutional!
! rights!and!liberties!e.g.!condition!not!to!change!domicile,!
Held:!There!is!no!breach!of!contract.!The!language!in!the!stipulation! religion!or!contract!marriage.!
is!broad!enough!to!cover!the!circumstances!of!the!case.!SC!held!that! !
the!word!“any”!should!be!construed!in!the!ordinary!sense.!There!is! ILLICIT%CHARACTER!–!determined!not!by!the!facts!but!by!the!effect!
nothing!in!Art.!1256!which!warrants!a!warping!of!“for!any!reason”!to! upon!one!of!the!parties.!Thus,!the!criterion!is!subjective.!Not!the!act!
mean! “for! any! reason! not! having! its! origin! in! the! will! or! acts! of! but!the!intention!and!its!effect!that!determine!the!illicit!character!of!
defendants.”! Also,! a! condition! once! facultative! and! resolutory! may! the!condition.!!
be!valid!even!though!the!condition!is!made!to!dependent!on!the!will! • Why?! Impossibility! of! fulfillment! implies! he! does, not,
of! the! obligor.! Plaintiff’s! claim! for! damages! for! the! period! intend,to,be,bound,!thus!the!nullity!of!the!promise!
subsequent! to! the! expiration! of! the! first! six! months! was! rejected,! !
but!he!is!entitled!to!P360!house!rent!yet!unpaid.!! EFFECT%OF%IMPOSSIBLE%CONDITIONS:%
! • Impossible!conditions!annul!the!obligation!which!depends!
SMITH!BELL!V.!SOTELO!MATTI! upon! them.! Both! obligation! and! condition! are! void.! The!
Facts:! Petitioners! obliged! itself! to! sell! to! respondents! steel! tanks,! reason! is! that! the! obligor! knows! his! obligation! cannot! be!
expellers! and! electric! motors! from! abroad.! Deliveries! were! to! be! fulfilled.!He!has!no!intention!to!comply!with!his!obligation.!!
made! within! specified! periods.! The! orders! did! not! arrive! within! • If!the!condition!is!negative,!that!is,!not!to!do!an!impossible!
these!periods.!Petitioners!notified!respondents!of!the!arrival!of!the! thing,!it!is!disregarded!and!the!obligation!is!rendered!pure!
orders!but!respondents!refused!to!accept.!! and!valid.!The!condition!is!always!fulfilled!when!it!is!not!to!
! do! an! impossible! thing! so! that! it! is! the! same! as! if! there!
Held:! There! was! no! delay! or! liability.! The! contract! was! executed! were!not!condition.!The!negative!condition!may!be!not!to!
during! World! War! II! when! there! were! rigid! restrictions! on! exports! give!an!impossible!thing.!!
from! US.! When! delivery! is! subject! to! the! fulfillment! of! a! condition! • Applies! only! to! contracts! and! not! to! simple! and!
rd
dependent! upon! the! will! of! 3 ! persons! who! could! in! no! way! be! testamentary!donations!and!to!testamentary!dispositions!
compelled! to! fulfill! the! condition,! the! obligor! is! deemed! to! have! • Impossibility! of! condition! must! exist! at! the! time! of! the!
sufficiently!performed!his!part.!! creation! of! the! obligation! (not! existence! of! a! valid!
!! obligation! subsequently! rendered! impossible! under! Art!
ROMERO!V.!CA! 1266!on!“subsequent!impossibility”)!
Facts:! Romero! executed! Deed! of! Conditional! Sale! with! respondent.! • DIVISIBLE!OBLIGATION:!part!not!affected!by!the!impossible!
Among!the!conditions!was!that!the!balance!will!be!paid!45!days!after! condition!shall!remain!valid!
the!removal!of!squatters!from!the!property.!If!respondent!is!unable! !
to! remove! squatters! 60! days! after! the! signing! of! contract,! down! GENERAL! RULE:! Impossible! condition! annuls! the! obligation!
payment! will! be! returned.! Respondent! was! not! able! to! evict! dependent!upon!them!
squatters,! and! sought! to! return! the! down! payment,! but! petitioner! EXCEPTIONS:!pre?existing!obligation!
refused,! offering! to! take! it! upon! himself! to! have! squatters! evicted.! • Divisible!obligation!
RTC!dismissed!petition!for!rescission.!CA!reversed.!!
• Simple!or!remuneratory!obligation!!
!
• Testamentary!disposition!
Held:! Respondent! could! not! validly! rescind! the! contract.! It! was! a!
• Negative!impossible!things!
contact!of!sale!which,!once!perfected,!would!have!the!seller!transfer!
!
the! ownership! to! the! buyer! for! an! agreed! price.! Both! parties! are!
Case:!!
bound! to! fulfill! what! was! stipulated! in! the! contract.! Since!
!
respondent! failed! to! evict! squatters,! the! right! to! refuse! to! proceed!
ROMAN!CATHOLIC!ARCHDIOCESE!OF!MANILA!V.!CA!
with! the! agreement! or! waive! that! condition! belonged! to! the!
Facts:!In!1930,!!a!land!was!donated!to!RCAM!with!a!condition!that!a!
petitioner.!
done!shall!not!dispose/sell!such!property!within!100!years!from!the!
!
execution!of!the!Deed!of!Donation,!otherwise!such!donation!shall!be!
c. As%to%possibility% void.!In!1980,!the!Bishop!of!Imus!sold!the!property.!The!heirs!of!the!
i. Possible%Condition% donors! filed! complaint! for! nullification! of! deed! of! donation,! which!
ii. Impossible%Condition% was!denied!by!the!lower!court.!CA!reversed.!!
! !
Held:! The! condition! imposes! undue! restriction! on! the! rights! of! the!
Art.! 1183.! IMPOSSIBLE! CONDITIONS,! those! contrary! to! good!
owners! and! is! contrary! to! public! policy.! Donors! may! impose!
customs!or!public!policy!and!those!prohibited!by!law!shall!annul%
conditions! but! such! must! not! be! contrary! to! law,! morals,! good!
the% obligation! which! depends! upon! them.! If! the! obligation! is!
customs,!etc.!The!condition!here!is!unreasonable.!The!judgemen!of!
DIVISIBLE,! that! part! thereof! which! is! not, affected, by, the,
CA!was!set!aside.!!
impossible,or,unlawful,condition%shall!be%valid.!!
!
!
!
The!condition!not!to!do!an!impossible!thing!shall!be!considered!
!
as!not,having,been,agreed,upon.!!
!!!!
d. As%to%mode% !
! !
i. POSITIVE%(suspensive)% 3. LOSS,! DETERIORATION! OR! IMPROVEMENT! PENDING!
HAPPENING!OF!THE!CONDITION!
Art.! 1184.! The! condition! that! some! event! happen! at! a! !
determinate! time! shall! EXTINGUISH! the! obligation! as! soon! as! a. Meaning% of% “loss”,% deterioration% or%
the! time, expires! OR! if! it! has! become, indubitable, that, the, event, improvement% pending% the% happening% of% the%
will,not,take,place.!!
condition%
!
Art.! 1189.! When! the! conditions! have! been! imposed! with! the!
• If! there! is! no! period! fixed,! the! rule! in! Par! 2! of! Art! 1185! is!
intention! of! SUSPENDING! the! efficacy! of! an! obligation! to! give,!
applicable.!Intention!of!the!parties!is!controlling,!and!the!time!
the! following! rules! shall! be! observed! in! case! of! the!
shall! be! that! which! the! parties! may! have! probably!
improvement,! loss! or! deterioration! of! the! thing! during! the!
contemplated,!taking!into!account!the!nature!of!the!obligation.!
pendency!of!the!condition:!!
% 1. Loss!without!fault!of!debtor:!obligation!extinguished!!
ii. NEGATIVE%(suspensive)% 2. Loss! through! the! fault! of! debtor:! obliged! to! pay!
! damages.!A!thing!is!lost!when!it:!!
1. Perishes!
Art.! 1189.! When! the! conditions! have! been! imposed! with! the! 2. Goes!out!the!commerce!of!man!
intention!of!SUSPENDING!the!efficacy!of!an!obligation!to!give,!the! 3. Disappears!in!such!a!way!that!its!existence!is!
following!rules!shall!be!observed!in!case!of!the!improvement,!loss! unknown!or!it!cannot!be!recovered!
or!deterioration!of!the!thing!during!the!pendency!of!the!condition:!! 3. Deteriorates! without! fault! of! the! debtor:! impairment!
1. Loss!without!fault!of!debtor:!obligation!extinguished!! to!be!borne!by!the!creditor!
2. Loss!through!the!fault!of!debtor:!obliged!to!pay!damages.! 4. Deteriorates!through!the!fault!of!debtor:!creditor!may!
A!thing!is!lost!when!it:!! choose!between!the!rescission!of!the!obligation!and!its!
a. Perishes! fulfillment!with!indemnity!for!damages!in!either!case!
b. Goes!out!the!commerce!of!man! 5. Improved!by!its!nature,!time:!inure!to!the!creditor!
c. Disappears! in! such! a! way! that! its! existence! is! 6. Improved!at!the!expense!of!the!debtor:!no!other!right!
unknown!or!it!cannot!be!recovered! than!that!granted!to!the!usufructuary!
3. Deteriorates! without! fault! of! the! debtor:! impairment! to! !
be!borne!by!the!creditor! ART.%1189%APPLIES%ONLY%IF:!
4. Deteriorates! through! the! fault! of! debtor:! creditor! may! 1. The!obligation!is!a!real!obligation;!
choose! between! the! rescission! of! the! obligation! and! its! 2. The!object!is!a!specific!or!determinate!thing;!
fulfillment!with!indemnity!for!damages!in!either!case!
3. The!obligation!is!subject!to!a!suspensive!condition;!
5. Improved!by!its!nature,!time:!inure!to!the!creditor!
4. The!condition!is!fulfilled;!and!
6. Improved! at! the! expense! of! the! debtor:! no! other! right! 5. There! is! loss,! deterioration,! or! improvement! of! the! thing!
than!that!granted!to!the!usufructuary! during!the!pendency!of!the!happening!on!one!condition.!!
!
!
! KINDS%OF%LOSS:,
6. PHYSICAL!LOSS!–!when!a!thing!perishes.!
Art.! 1185.! The! conditions! that! some! event! will! not! happen! at! a! 7. LEGAL! LOSS! –! when! the! thing! goes! out! of! commerce,! or!
determinate! time! shall! render! the! obligation! EFFECTIVE! from! the! when!a!thing!heretofore!legal!becomes!illegal!
moment!the!time,indicated,has,elapsed!OR!if!it!has!become!evident, 8. CIVIL!LOSS!–!when!a!thing!disappears!in!such!a!way!that!its!
that,the,event,cannot,occur.! existence! is! unknown,! or! even! if! known,! it! cannot! be!
! recovered,!whether!as!a!matter!of!fact!or!of!law.!!
If!no,time,has,been,fixed,!the!condition!shall!be!deemed!fulfilled!at! !
such! time! as! may! have! probably! been! contemplated,! bearing! in! !
mind!the!nature!of!obligation.!! Art.! 1190.! When! the! conditions! have! for! their! purpose! the!
! EXTINGUISHMENT! of! an! obligation! to! give,! the! parties,! upon!
the!fulfillment!of!the!said!conditions,!shall!return!to!each!other!
!
what!they!have!received.!!
% !
! In! case! of! the! loss,! deterioration,! or! improvement! of! the!
! thing,! the! provisions! which! with! respect! to! the! debtor,! are! laid!
! down!in!the!preceding!article!shall!be!applied!to!the!party!who!
! is!bound!to!return.!!
! !
! nd
As! for! obligations! to! do! or! not! to! do,! the! provisions! of! 2 !
! par! of! Art! 1187! (courts, shall, determine)! shall! be! observed! as!
! regards!the!effect!of!the!extinguishment!of!obligation.!!
!
! !
LOSS,%DETERIORATION,%AND%IMPROVEMENT%DISTINGUISHED:%
!!!!
LOSS! 1. Perishes! !
2. Goes!out!of!the!commerce!of!man! TAYLOR!V.!UY!TIENG!PIAO!
3. Disappears!in!such!a!way!that!its!existence! Facts:!A!contract!was!entered!into!whereby!it!was!understood!that!
is!unknown!or!it!cannot!be!recovered! should!the!machinery!to!be!installed!fail!for!any!reason!to!arrive!in!
DETERIORATION! Any! reduction! or! impairment! in! the! Manila!within!6!months,!the!contract!may!be!cancelled.!Machinery!
substance!or!value!of!a!thing!which!does!not! did! not! arrive! within! 6! months.! Evidence! showed! also! that! the!
amount!to!a!loss.!The!thing!still!exists!at!the! defendants!either!cancelled!the!order!or!were!unable!to!supply!the!
time! the! condition! is! fulfilled,! but! it! is! no! capital!needed.!Taylor!instituted!action!to!recover!damages.!!
longer! intact,! OR! is! less! than! what! it! was! !
when!the!obligation!was!constituted.!! Held:!There!is!no!breach!of!contract.!The!language!in!the!stipulation!
IMPROVEMENT! Anything! added! to,! incorporated! in,! or! is!broad!enough!to!cover!the!circumstances!of!the!case.!SC!held!that!
attached!to!the!thing!that!is!due.! the!word!“any”!should!be!construed!in!the!ordinary!sense.!There!is!
! nothing!in!Art.!1256!which!warrants!a!warping!of!“for!any!reason”!to!
b. Effect%of%loss%or%deterioration% mean! “for! any! reason! not! having! its! origin! in! the! will! or! acts! of!
defendants.”!Art!1119!of!the!Civil!Code!supposes!a!case!where!the!
% obligor! intentionally! impedes! the! fulfilment! of! a! condition! which!
! LOSS! DETERIORATION! would!entitle!the!obligee!to!exact!performance!from!the!obligor.!An!
Without! Extinguished,!unless! Not!liable!for!damage,! assumption!underlying!the!provision!is!that!the!obligor!prevents!the!
debtor’s! there!is!a!stipulation!to! creditor!must!accept!the! oblige! from! performing! some! act! which! the! oblige! is! entitled! to!
fault! the!contrary.!Mode!of! thing!in!impaired! perform!as!a!condition!precedent!to!the!exaction!of!what!Is!due!him.%
extinguishment!Art! condition!! This! article! can! have! no! application! to! an! external! contingency!
1262!Par!1! which,! like! in! this! case! is! lawfully! within! the! control! of! the!
With! Liable!to!damages!upon! May!demand!the!thing! obligor.Plaintiff’s! claim! for! damages! for! the! period! subsequent! to!
debtor’s! fulfillment!of!condition!! OR!ask!for!rescission,!in! the!expiration!of!the!first!six!months!was!rejected,!but!he!is!entitled!
fault! either!case,!creditor!may! to!P360!house!rent!yet!unpaid.!!
recover!damages!
% c. Reciprocal(Obligations(
c. Effect%of%improvement% !
i. By%nature% Art.! 1192.! In! case! both! parties! have! committed! a! breach! of! the!
ii. At%the%debtor’s%expense% obligation,! the! liability! of! the! first! infractor! shall! be! equitably!
tempered! by! the! courts.! If! it! cannot! be! determined! which! of! the!
%
parties! first! violated! the! contract,! the! same! shall! be! deemed!
4. EFFECT! OF! PREVENTION! OF! THE! FULFILLMENT! OF! THE! extinguished,!and!each!shall!bear!his!own!damages.!
CONDITION!BY!THE!OBLIGOR!! !
! 1. CONCEPT!!
Art.! 1186.! The! condition! shall! be! deemed% fulfilled! when! the! %
obligor!voluntarily!prevents!fulfillment.!! RECIPROCITY! arises! from! identity! of! cause! and! necessarily,! two!
, obligations!are!created!at!the!same!time.!Each!party!is!a!creditor!and!
CONSTRUCTIVE% FULFILLMENT! –! a! condition! which! although! not! debtor!of!the!other!and!they!are!to!perform!simultaneously.!!
exclusively! within! the! will! of! the! debtor,! may! in! some! way! be! • Recognized! “implied! or! tacit! resolutory! condition”!
prevented!by!the!debtor!from!happening.!! imposed! exclusively! by! law,! even! if! there! is! no!
! corresponding! agreement! between! parties! "! it’s! also!
REQUISITES:% called!RESOLUTION!
a. Intent! of! the! obligor! to! prevent! the! fulfillment! of! the! • Power!to!rescind!is!given!to!the!injured!party!
condition!"!ESSENTIAL!! !
b. Actual!prevention!of!the!compliance!! 2. ALTERNATIVE! REMEDIES! OF! INJURED! PARTY! IN! CASE! OF!
• The! law! does! not! require! that! the! obligor! acts! with! BREACH!
malice! or! fraud! as! long! as! his! purpose! is! to! prevent! !
the!fulfillment!of!the!condition.!! Alternative! remedies! of! injured! party! in! case! of! breach! "! injured!
• Why?! Party! to! a! contract! may! not! be! excused! from! party! should! choose! only! one,! cannot! ask! for! partial! rescission! and!
performing!his!promise!by!the!non?occurrence!of!the! partial!fulfillment!
event!which!he!himself!prevented.!! !
• Also! applicable! to! provocation, of, resolutory, a. Action%for%Fulfillment!
conditions!
!
i. When%fulfillment%no%longer%possible;%effect!
!
!
! • When! fulfillment! no! longer! possible,! rescission!
! takes!place!
! !
! !
! !
CASE:!! !
b. %Action%for%Rescission%
!!!!
i. Requisites%for%rescission%% !
1. One!of!the!creditors!failed!to!comply!with!what! SONG!FO!V.!HAWAIIAN!PHILIPPINES!
is!incumbent!upon!him! Facts:! Song! Fo! filed! causes! of! action! against! Hawaiian! for! alleged!
2. Obligor! who! performed! chose! rescission! over! breach!of!contract.!Hawaiian!set!up!a!defense!that!since!plaintiff!had!
fulfillment!or!performance!is!impossible! defaulted! in! the! payment! for! the! molasses! delivered! to! it! by! the!
3. The! breach! is! substantial! so! as! to! defeat! the! defendant,! the! latter! was! compelled! to! cancel! and! rescind! said!
object!of!the!parties!in!making!the!agreement!–! contract.!
it!will!not!be!granted!in!slight!or!casual!breach! !
! Held:!Hawaiian!cannot!rescind!the!contract!of!sale.!The!general!rule!
ii. How% made! –! Rescission! requires! judicial! approval! is!that!rescission!will!not!be!permitted!for!a!slight!or!casual!breach!of!
the! contract,! but! only! for! such! breaches! as! are! so! substantial! and!
to!produce!legal!effect!
fundamental! as! to! defeat! the! object! of! the! parties! in! making! the!
• EXCEPTION:! object! is! not! yet! delivered! AND!
agreement.!!!
obligation!has!not!yet!been!performed!!
!
• If! the! obligation! has! not! yet! been! performed:!
UP!V.!DE!LOS!ANGELES!
extrajudicial! declaration! of! party! willing! to!
Facts:! UP! rescinded! the! contract! regarding! its! logging! agreement!
perform!would!suffice;!can!refuse!to!perform!if!
with!ALUMCO!because!of!the!latter’s!failure!to!pay!its!debts.!!
the!other!party!is!not!yet!ready!to!comply!
!
• If! the! injured! party! has! already! performed:!
Held:! The! party! who! deems! the! contract! violated! may! consider! it!
cannot!extrajudicially!rescind!IF!the!other!party!
resolved! or! rescinded,! and! act! accordingly! without! previous! court!
opposes! the! rescission! (otherwise,! rescission!
action,!but!it!proceeds!at!its!own!risk.!It!is!only!the!final!judgment!of!
produces! legal! effect).! In! the! case! the! other!
court! that! will! finally! settle! whether! action! taken! was! or! was! not!
party! impugns! rescission,! the! court! comes! in!
correct!in!law.!
either!to:!!
o Declare!the!rescission!as!properly!made!
o Give! a! period! to! the! debtor! in! which! to!
perform! II. Obligation*with*a*Period**
! !
EFFECTS%OF%RESCISSION:%
1. Extinguishes! obligatory! relation! as! if! it! had! never! been! Art.! 1193.! Obligations! whose! fulfillment! a! day% certain! has! been!
created!"!Equivalent!to!invalidate!the!juridical!tie,!leaving! fixed,!shall!be!demandable!only!when!that!day!comes.!!
things!in!their!status!before!the!celebration!of!the!contract!! !
2. Mutual!restitution! Obligations! with! a! resolutory! period, take! effect! at! once! but!
! terminate!upon!arrival!of!the!day!certain.!
RESCISSION% ART% 1380% DISTINGUISHED% FROM% RESOLUTION% ART% !
1191:% A! “day! certain”! is! understood! to! be! that! which! must% necessarily%
! come,!although!it!may!not%be%known%when.!
! Art!1191!Resolution! Art!1380!Rescission! !
Similarities! Presuppose! contracts! validly! entered! into! and! If!the!uncertainty!consists!in!whether!the!day!will!come!or!not,!the!
existing!! obligation!is!CONDITIONAL,!and!it!shall!be!regulated!by!the!rules!of!
• Rescission!v.!Annulment:!the!latter!there!is! the!preceding!Section.!
a! defect! which! vitiates/invalidates! the!
!
contract!!
Mutual!restitution!when!declared!proper! Art.!1180.!When!the!debtor!binds!himself!to!pay!WHEN!his!means!
Who!may! Only! by! a! party! to! Party! to! the! contract! permit!him!to!do!so,!the!obligation!shall!be!deemed%to%be%one%with%
demand! the!contract! suffering!lesion! a%period,!subject!to!the!provisions!of!Art!1197.!!
Third! parties! prejudiced! by!
the!contract!
Grounds! Non?performance! Various! reasons! of! equity! A. Period(or(Term(
(implied! tacit! provided! by! the! grounds,! 1. CONCEPT!!
condition! in! mainly! economic! injury! or! !
reciprocal!obligation)!! lesions! A! space! of! time! which,! exerting! an! influence! on! obligations! as! a!
Scope!of! Court! determines! Sufficiency! of! reason! does! consequence! of! a! juridical! act,! suspends, their, demandability! or!
judicial! sufficiency! of! reason! not! affect! right! to! ask! for! determines,their,extinguishment.!!
control! to! justify! extension! rescission!(cannot!be!refused! %
of! time! to! perform! if! all! the! requisites! are! REQUISITES%OF%PERIOD:%
obligation! (whether! satisfied)! • Future!
slight! or! casual! • Certain!
breach)!! • Possible!
Kind!of! Only!to!reciprocal! Unilateral,!reciprocal!! !
obligation! Even! when! contract! is! fully! !
applicable!to! fulfilled! !
Character! Principal!Remedy! Secondary/Subsidiary! 2. PERIOD/TERM!VS.!CONDITION!!
Cases:!
!!!!
! b. RESOLUTORY%(In%diem)!!
• A!period!is!a!future!AND!certain!event!upon!the!arrival!of! !
which!the!obligation!(or!right)!subject!to!it!either!arises!or!
Art! .1193,! Par.! 2.! Obligations! with! a! resolutory! period, take!
is! terminated.! It! is! a! day! certain! which! must! necessarily!
effect!at!once!but%terminate!upon!arrival!of!the!day!certain.!
come,!although!it!may!not!be!known!when,!like!the!death!
of!a!person.!! • Period!after!which!the!performance!must!terminate!
! • Think:!expiry!date!
AS!TO! TERM/PERIOD! CONDITION! !
Fulfillment! Event! must! necessarily! Event!is!uncertain!! 2. AS!TO!EXPRESSION!
come,! whether! known! ,
before! hand! OR! at! a! a. EXPRESS%–!when!specifically!stated!
time! which! cannot! be!
,
predetermined!
Influence!on! No! effect! on! the! Gives! rise! to! an!
b. IMPLIED%–!when!parties!“intended!a!period”!!
the!obligation! existence,! but! only! on! obligation! or! !
their! demandability! or! extinguishes! one! E.g.! Art! 1197! Par! 3! (period! has! been! contemplated! by! the!
performance,! HENCE,! already!existing!! parties),! Art! 1180! (promise! to! pay! when! able),! or! when! a!
does, not! carry! with! it! person! undertakes! to! do! some! work! which! can! be! done! only!
any!retroactive!effect! during!a!particular!season!!
!
Time! Always!to!the!future! May! refer! to! past!
!
event!not!know!to!the!
parties! 3. AS!TO!DEFINITENESS!
! ,
! a. DEFINITE%–!refers!to!a!fixed!known!date!or!time!
Will!of!the! If! dependent! on! will! of! If!dependent!on!will!of! ,
debtor! debtor,! merely! debtor,!ANNUL! b. INDEFINITE% –! event! which! will! necessarily! happen! but!
empowers! court! to! fix! the!date!of!its!happening!is!unknown!
such!period! • The! uncertainty! of! the! date! of! occurrence! in!
Retroactivity! Unless! there! is! an! Happening! of! indeterminate! period! DOES! NOT! convert! it! into! a!
of!effects! agreement! to! the! condition! has! condition,! so! long! as! there! is! no, uncertainty, as,
contrary,! the! arrival! retroactive!effect.!! whether,it,will,happen,or,not.!
does! not! have! any! • E.g.! death! of! a! person,! movable! religious! holidays!
retroactive!effect.! (Holy! Week),! events! in! civil! or! political! life! (age! of!
! majority!or!becoming!a!qualified!voter)!
• Debtor! promises! to! “pay! when! able”! or! “little! by!
B. Kinds(of(Period/Term( little”!or!“as!soon!as!possible”!
! • Two!steps!in!dealing!with!an!indefinite!period!(from!
1. AS!TO!EFFECT! Sir!Labitag’s!lecture)!
% 1. Make!the!indefinite!period!definite!by!asking!for!
a. SUSPENSIVE%(Ex%die)! payment!or!making!an!extrajudicial!demand!
2. Make!judicial!demand,!then!ask!the!courts!to!fix!!
the!period!
Art.!1193,!Par.!1.!Obligations!whose!fulfillment,a,day,certain,has,
• No!need!to!file!to!actions,!just!ask!for!two!prayers!to!
been,fixed,!shall!be!demandable%only!when!that!day!comes.!!
avoid! multiplicity! of! suits:! (1)! fix! period! and! (2)!
! require! the! debtor! to! comply! on! the! fixed! period!
! (action!for!specific!performance)!
• Must! lapse! before! the! performance! of! the! obligation! can! • The! 2?in?1! action! discussed! by! Sir! Labitag! is! actually!
be!demanded! contradictory!with!Tolentino’s!commentary.!!!
• Think:!incubating!period! !
• The!obligor!has!the!burden!of!proving!any!extension!of!the! 4. AS!TO!SOURCE!
period!by!satisfactory!evidence! ,
• SUSPENSION!OF!PERIOD:!If!a!fortuitous!event!supervenes,! a. CONVENTIONAL/VOLUNTARY! –! stipulated! by! the!
the!obligor!is!merely!relieved!of!the!obligation!to!fulfill!at! parties!
that! time,! and! does! not! stop! the! running! of! the! period! ,
because!in!effect!that!would!be!an!extension!of!the!term!
b. LEGAL! –! period! fixed! by! law;! spread! in! the! CC! e.g.! Art!
of! the! contract.! Force! majeure! cannot! be! deducted! from!
1682!lease!of!rural!land!and!Art!1687!lease!of!urban!land;!
the!period!stipulated.!
Franchise!agreement!in!the!Constitution!(for!25!years)!
• MORATORIUM! LAWS:! postponement! of! the! fulfillment! of!
,
an! obligation,! an! extension! of! the! period! for! the!
performance! of! the! obligation,! decreed! by! the! statute.! c. JUDICIAL% –! set! by! the! courts! in! case! of! implied! and!
However,! to! meet! constitutional! requirements:! The! indefinite!periods!(See:,When,courts,may,fix,period)!
suspension!should!be!definite!and!reasonable.!! !
!
!!!!
C. Rules( in( case( of( loss,( deterioration( or( o Reciprocal! obligation! and! there! has! been! a! premature!
improvement(before(arrival(of(period(( performance!on!both!sides,
o When! the! obligation! is! a! loan! on! which! the! debtor! is!
! bound!to!pay!interest,
Art.! 1194.! In! case! of! loss,! deterioration! or! improvement! of! the! o When! the! period! is! exclusively! for! the! benefit! of! the!
thing!before!the!arrival!of!the!day!certain,!the!rules!in!Art!1189! creditor,! because! the! debtor! who! pays! in! advance! loses!
shall!be!observed.!! nothing!,
o If!payment!was!with!knowledge!of!the!term,!it!cannot!be!
∗ Same,as,Art,1189,
recovered! because! it! is! considered! as! tacit! waiver! of! the!
%
benefit! of! the! term! (not! only! fruits! and! interest,! but! also!
EFFECT%OF%LOSS%OR%DETERIORATION:%
principal),
!
,
! LOSS! DETERIORATION!
∗ Note! Art! 1197! Par! 3! In! every! case,! the! court! shall!
Without! Extinguished,! unless! Not! liable! for! damage,!
determine% such% period! as! may! under! the! circumstances!
debtor’s! there!is!a!stipulation!to! creditor!must!accept!the!
have! been! probably! contemplated! by! the! parties.! Once,
fault! the! contrary.! Mode! of! thing! in! impaired!
fixed,by,the,courts,!the!period,cannot,be,changed,by,them.!!
extinguishment! Art! condition!!
1262!Par!1! !
! E. Benefit(of(Period(
! !
With! Liable!to!damages!upon! May! demand! the! thing! 1. FOR!WHOSE!BENEFIT!AND!ITS!EFFECTS!
debtor’s! fulfillment!of!condition!! OR! ask! for! rescission,! in! !
fault! either!case,!creditor!may! Creditor! May! demand! performance! anytime,! but! not!
recover!damages! compelled!to!accept!before!period!expires!
! E.g.! payment! of! interest,! wants! to! keep! his! money!
! safely! invested! instead! of! having! it! in! his! hands,!
EFFECT%OF%IMPROVEMENT:% protects!himself!from!sudden!decline!in!purchasing!
! power!of!the!currency!loaned!!
MODE! ! Debtor! May! oppose! a! premature! demand,! but! may! validly!
By!nature!or! Inures!to!the!benefit!of!the!creditor!by!virtue!of! pay!any!time!before!period!expires!
time! principle! of! retroactivity! of! conditional! E.g.!time!to!raise!money!!
obligations! Both! Presumption!in!absence!of!stipulation!or!in!case!of!
At!debtor’s! Only! usufructuary! rights;! Governed! by! Art! 579! doubt!
expense! (useful! improvements! or! for! mere! pleasure,! Creditor!must!give!consent!first!before!debtor!may!
remove!if!possible!to!remove!without!damage!to! pay! in! advance! especially! when! creditor! receives!
property)!and!Art!580!(set!off!the!improvements! other!benefits!by!reason!of!the!term!!
he!may!have!made!against!any!damage)! !
! 2. EFFECTS!
!
D. Effect(of(payment(in(advance( 3. PRESUMPTION! "! for! the! benefit! of! BOTH! the! creditor! and!
! debtor!!
Art.! 1195.! Anything! paid! or! delivered! before! the! arrival! period,! Art.!1196.!Whenever!in!an!obligation!a!period!is!designated,!it!is!
the! obligor! being! unaware! of! the! period! OR, believing! that! the! presumed! to! have! been! established! for! the! benefit! of! BOTH!
obligation! has! become! due! and! demandable,! may! be! creditor!and!debtor,!UNLESS!from!the!tenor!of!the!same!or!other,
RECOVERED,!with,the,fruits,and,interests.,! circumstances! it! should! appear! that! the! period! has! been!
established!in!favor!of!one!or!the!other.!!
• Only!applies!to!obligations!to!give.!
• The!action!only!lies!before!the!arrival!of!the!day!certain,!when! !
the!day!certain!comes!cannot!recover! • Thus,! before! the! expiration! of! the! period,! the! debtor! may! not!
• The! debtor! is! presumed! to! be! aware! of! the! period.! It! is! fulfill! the! obligation! and! neither! may! the! creditor! demand! its!
presumed!that!he!knew!that!the!debt!was!not!yet!due,!Thus,!he! fulfillment!without!the!consent!off!the!other!especially!if!the!later!
has!the!burden!of!proving!that!he!was!unaware!of!the!period.! would!be!prejudiced!or!inconvenienced!thereby.!!
• If!the!creditor!refuses,!debtor!will!have!to!go!to!the!court,!but! • Acceleration! by! debtor! of! time! of! payment.! The! payment! of!
when! judgment! comes,! the! day! certain! has! already! arrived.! interest! may! not! be! the! only! reason! why! creditor! may! not! be!
Poor!him.!(Sir!Labitag)! bound!to!accept!payment!before!maturity.!Other!reasons!include:!
• Manresa:! good! faith/bad! faith! of! the! creditor! in! accepting! the! “that!the!creditor!wants!to!keep!his!money!invested!safely!instead!
premature!payment!is!immaterial! of!having!it!in!his!hands,”!and!“that!the!creditor!by!fixing!a!period,!
• Tolentino:! In! accordance! with! solutio, indebiti,! good! faith! of! protects! himself! against! sudden! decline! in! the! purchasing! power!
creditor! makes! him! liable! to! restore! the! fruits! and! interests! of!the!currency!loaned!especially!at!a!time!when!there!are!many!
insofar!as!it!benefited!him., factors!that!may!influence!the!fluctuation!of!the!currency.!!!
• The! same! principle! as! regards! fruits! and! interest! is! true! for! !
payment!before!happening!of!suspensive!condition!in!Art!1188! !
Par!2!! !
• Fruits!and!interests!not!recoverable!in!these!cases:, !
!!!!
Case:! Held:!“Reasonable!time”!refers!to!when!all!the!squatters!are!evicted,!
! which! can! be! deduced! from! the! fact! that! the! parties! were! fully!
PONCE!DE!LEON!V.!SYJUCO! aware! the! there! were! squatters! when! they! entered! the! contract.!
Facts:!It!was!stated!in!the!promissory!note!that!Ponce!de!Leon!could! Trial!court!and!CA!need!not!fix!the!period!because!the!real!issue!is!
not!pay,!and!Syjuco!cannot!demand!the!payment!of!Ponce!de!Leon’s! whether!the!reasonable!time!stipulated!has!already!elapsed.!!
loan!EXCEPT!within!one!year!from!May!1948.!!On!several!occasions!
in!October!1948,!Ponce!de!Leon!tendered!to!Syjuco!the!full!payment!
of! his! previous! loans,! including! the! interest! for! his! loan! payable!
III. Alternative*Obligations*
within! one! year! from! May! 1948.! Syjuco! refused! to! accept! these!
tenders.! Lower! court! absolved! Syjuco! from! Ponce! de! Leon’s! A. Concept(
complaint!and!condemned!Ponce!de!Leon!to!pay!Syjuco!the!amount!
Art.!1199.!A!person!alternatively!bound!by!different!prestations!
of!P23,!130.!
shall!completely!perform!one!of!them.!
!
!
Held:! The! consignation! made! by! the! plaintiff! is! invalid! and! did! not!
The! creditor! cannot! be! compelled! to! receive! part! of! one! and!
relieve! him! from! his! obligation.! The! plaintiff,! before! making! the!
part!of!the!other!undertaking.!
consignation,! did! not! give! previous! notice! to! Syjuco! regarding! the!
performance!of!the!obligation,!and!the!obligation!is!also!not!yet!due!
and!demandable.!! !
! • One! wherein! various! prestations! are! due! but! the!
performance!of!one!of!them!is!sufficiently!
4. WHEN!DEBTOR!LOSES!RIGHT!TO!MAKE!USE!OF!PERIOD!
!
!
KINDS%OF%COMPUND%OBLIGATIONS:%
• Par!1:!“insolvency”!need!not!be!declared!in!an!insolvency!
1. CONJUNCTIVE! "! all! prestations! must! be! performed! to!
proceeding,! enough! that! he! is! in! a! state! of! financial!
extinguish!obligation!
difficulty!that!he!is!unable!to!pay!his!debts!!
!
• Par! 3:! “impaired”! need! not! be! total;! “disappear! through! 2. DISJUNCTIVE! "! one! or! some! prestations! must! be!
fortuitous!event”!total,!used!in!the!sense!of!“loss”!! performed!to!extinguish!obligation!
• Obligation! becomes! immediately! due! and! demandable! !
even! if! period! has! not! yet! expired;! converted! to! a! pure! a. ALTERNATIVE% "!Debtor!must!perform!one!of!several!
obligation! alternatives;! choice! belongs! to! debtor! UNLESS!
• Does!not!apply!to!extension!of!period!fixed!by!moratorium! expressly!given!to!creditor!
statutes!!
%
!
b. FACULTATIVE% "!One!principal!prestation!but!one!
F. When(court(may(fix(period( or!more!substitutes,!choice!belongs!to!DEBTOR!ONLY!
! !
• Refers!to!a!judicial!period!as!distinguished!from!the!period! • A! disjunctive! obligation! is! presumed! to! be! ALTERNATIVE,!
fixed! by! the! parties! in! their! contract! which! is! known! as! unless!it!is!expressly!indicated!that!it!is!FACULTATIVE.%
contractual!period.!! • The! reason! for! such! a! presumption! is! that! the! creditor! is!
• If! the! obligation! does! not! state! a! period! and! no! period! is! more! disadvantaged! if! it! is! a! FACULTATIVE! rather! than!
intended,! the! court! is! not! authorized! to! fi! a! period.! The! ALTERNATIVE.%
courts!have!no!right!to!make!contracts!for!the!parties.!!!
• Period! is! implied! "! a! period! was! intended;! also! B. Right(of(Choice(
INDEFINITE,PERIOD!
Art.!1200.!The!right!of!choice!belongs!to!the!debtor,!unless!it!
• Period!depends!solely!on!will!of!debtor!!
has!been!expressly!granted!to!the!creditor.!
o If!it!were!condition:!void!
• When!the!court!fixes!the!term!of!an!obligation,!it!does!not!
amend! or! modify! the! same.! It! merely! enforces! or! carries! The!debtor!shall!have!no!right!to!choose!those!prestations!
out!the!intention!of!the!parties.! which!are!impossible,!unlawful!or!which!could!not!have!been!
! the!object!of!the!obligation.!
CASE:! !
! • General!rule:!The!choice!belongs!to!the!debtor!
ARANETA!V.!PHILIPPINE!SUGAR!ESTATE!DEVELOPMENT!CO.!! o Exception:! If! expressly! granted,! it! may! be! the! creditor’s!
Facts:!JM!Tuason!and!Co.!(owned!by!Araneta)!sold!a!track!of!land!to! choice! OR! entrusted! to! a! third! person! (with! the! agreement!
the! respondent! on! a! condition! that! the! latter! will! build! the! Sto.! of!the!parties)!
Domingo! Church! and! Convent,! and! that! JM! Tuason! will! construct! • An!implied,grant!of!choice!to!the!creditor!will!not!be!recognized.!
streets!on!the!NE,!NW!and!SW!sides!“within!a!reasonable!time”.!The! • The!right!of!choice!is!limited!by!the!following!rules:!
church! and! convent! were! constructed! but! the! streets! were! not! o The!right!to!choose!is!indivisible;!the!one!making!the!choice!
because! there! were! squatters.! Respondent! sued! JMT! for! specific! cannot!choose!part!of!one!and!then!part!of!another.!
performance! and! damages.! JM! Tuason’s! defense:! action! is! o Prestations!that!are!impossible,,unlawful,,or!those,that,could,
premature! since! obligation! to! construct! the! street! was! without! a! not,have,been,the,object,of,the,obligation!cannot!be!chosen.!
definite!period.!!!
!
!!!!
C. Effect(of(Notice(of(Choice( E. Effect( of( Loss( or( Impossibility( of( One( or( All(
! Prestations(
• When! notice! of! choice! has! been! expressed,! it! shall! limit! the! !
obligation!to!the!object!or!prestation!selected.! Art.! 1202.! The! debtor! shall! lose! the! right! of! choice,! when! among!
• The!obligation,!from!an!alternative!one,!shall!be!converted!into! the! prestations! whereby! he! is! alternatively! bound,! only! one! is!
a!simple!obligation.! practicable.!
• Once! a! prestation! has! been! chosen! and! the! other! party!
!
notified,!the!choice!is!irrevocable!
• The! situation! (impossibility! of! all! the! other! prestations! except!
• The! other! party’s! consent! is! not! required.! A! contrary! rule!
for! only! one)! contemplated! in! Article! 1202! should! NOT! have!
would!destroy!the!essence!of!the!right!to!choose.!
been!due!to!the!creditor’s!act(s).!
o Exception:! If! the! debtor! has! chosen! a! prestation! which!
• Article!1203!applies!if!said!situation!is!due!to!the!creditor’s!acts!
could! not! have! been! the! object! of! the! obligation,! the!
creditor’s!consent!to!such!would!be!a!novation! • The! article! is! applicable! only! to! obligations! where! debtor! has!
the!right!to!choose.!
• When! a! debtor! performs! one! of! the! alternative! prestations,!
o Article!1205!is!the!one!applicable!when!the!creditor!has!the!
believing! he! has! a! simple! obligation! (when! he! actually! had! an!
right.!
alternative! obligation! with! different! prestations),! it! is!
considered!that…! • The!creditor!cannot!claim!damages!for!the!loss!of!some!of!the!
o There! is! no! exercise! of! the! right! to! choose! and! the! other! prestations/choices,! for! the! right! to! choose! is! the!
performance!shall!not!be!binding.! debtor’s.!
o It!shall!only!be!considered!as!a!payment!of!what!is!not!due! !
and!therefore,!may!be!recovered.! Art.! 1203.! If! through! the! creditor’s! act,! the! debtor! cannot! make! a!
• On!Plurality!of!Subjects!(JOINT!and!SOLIDARY!Obligations)! choice! according! to! the! terms! of! the! obligation,! the! latter! may!
a. Joint! "! the! choice! made! must! have! the! consent! of! all! rescind!the!contract!with!damages.!
debtors!(or!all!creditors)!to!be!valid! !
b. Solidary! "! the! choice! made! by! one! will! be! personally! • The! right! to! rescind! provided! by! Article! 1203! is! only!
binding!to!him!but!not!to!the!others.! optional;!the!debtor!may!still!choose!to!perform!the!only!
o Ex.!A!and!B,!solidary!debtors!of!C,!may!choose!to!(a)! practicable! prestation! (if! only! one! remains)! OR! choose!
pay! to! C! the! amount! P10,000! or! (b)! give! 10! sacks! of! among!the!other!remaining!options!(if!there!are!more!than!
rice.! If! A! has! properly! given! a! notice! to! C! that! he! one!left).!
chose! to! perform! prestation! (b),! A! must! perform! (b)! !
to! extinguish! the! obligation.! However,! B! can! choose! Art.!1204.!The!creditor!shall!have!a!right!to!indemnity!for!damages!
to! perform! either! (a)! or! (b)! to! extinguish! the! when,! through! the! fault! of! the! debtor,! all! the! things! which! are!
obligation;!A’s!choice!is!not!binding!to!him.!! alternatively! the! object! of! the! obligation! have! been! lost,! or! the!
compliance!of!the!obligation!has!become!impossible.!!
D. When(Notice(Produces(Effect( !
! The!indemnity!shall!be!fixed! taking! as! a! basis! the! value! of! the! last!
thing! which! disappeared,! or! that! of! the! service! which! last! became!
• The!notice!of!choice!may!come!in!any!form!provided!that!it!is!
impossible.!
sufficient! to! let! the! other! party! know! that! a! choice! has! been!
!
made.!
Damages!other!than!the!value!of!the!last!thing!or!service!may!also!
• They!may!be!conveyed:!
be!awarded.!
o Orally!
o Written! !
o Tacitly! !
o Debtor!having!the!right!to!choose!(and!with!knowledge! !
of!such!right),!performs!one!of!the!prestations;! !
o Creditor,! having! the! right! to! choose,! accepts! the! !
performance!of!one!of!the!prestations;! !
o Creditor,!having!the!right!to!choose,!files!an!action!for! !
specific! performance! of! one! of! the! alternative! !
prestations! !
• Duly! authorized! representatives! can! give! and! accept! a! notice! !
of!choice.! !
! !
! !
! !
! !
! !
! !
! !
!
!
!
!
!!!!
• There! is! only! one! prestation;! the! thing! intended! as! a!
Art.!1205.!When!the!choice!has!been!expressly!given!to!the!creditor,! substitute!is!not!the!one!due!but,!if!the!debtor!so!chooses,!
the! obligation! shall! cease! to! be! alternative! from! the! day! when! the! it!may!be!delivered!as!a!substitute.!
selection!has!been!communicated!to!the!debtor.! • If! the! debtor! chooses! the! substitute,! the! obligation! is!
! converted!to!a!simple!one,!from!a!facultative!one.!
Until!then!the!responsibility!of!the!debtor!shall!be!governed!by!the! !
following!rules:! EFFECTS%OF%LOSS:%
! • If!the!principal!obligation!is!lost!before!the!substitution!due!to!
(1)! If! one! of! the! things! is! lost! through! a! fortuitous! event,! he! shall! a! fortuitous! event,! the! obligation! is! extinguished;! otherwise,!
perform!the!obligation!by!delivering!that!which!the!creditor!should! the!debtor!becomes!liable!for!damages!
choose! from! among! the! remainder,! or! that! which! remains! if! only! o Loss! of! the! substitution! during! this! period! will! not! affect!
one!subsists;! obligation! nor! give! rise! to! any! liability,! even! if! the!
! substitution! was! made! impossible! through! debtor’s! bad!
(2)! If! the! loss! of! one! of! the! things! occurs! through! the! fault! of! the! faith.!
debtor,!the!creditor!may!claim!any!of!those!subsisting,!or!the!price!
• If! principal! obligation! is! lost! after! the! substitution,! it! will! not!
of! that! which,! through! the! fault! of! the! former,! has! disappeared,!
extinguish! the! obligation! nor! give! rise! to! liability;! it! is! not! the!
with!a!right!to!damages;!
thing!due!anymore.!
!
o Upon! substitution,! the! substitute! will! now! become! the!
(3)! If! all! the! things! are! lost! through! the! fault! of! the! debtor,! the!
only! prestation! that! the! debtor! can! perform;! the!
choice!by!the!creditor!shall!fall!upon!the!price!of!any!one!of!them,!
obligation!is!now!a!simple!one.!
also!with!indemnity!for!damages.!
!
!
The!same!rules!shall!be!applied!to!obligations!to!do!or!not!to!do!in! 2. FACULTATIVE! AND! ALTERNATIVE! OBLIGATIONS!
case!one,!some!or!all!of!the!prestations!should!become!impossible.! DISTINGHUISHED!
%
! AS!TO! FACULTATIVE! ALTERNATIVE!
• Article! 1204! is! applicable! when! the! debtor! has! the! right! to! Prestations! Only! one! but! debtor! Two!or!more!
choose.! may! opt! to! perform! a!
• The!debtor!will!only!become!liable!if!ALL!the!choices/prestation! substitute!
become! lost! (in! obligations! to! give)! or! the! compliance! of! the! Right!to! Debtor!only!! Generally,! it! belongs! to!
obligation! becomes! impossible! (in! obligations! to! do).! There! is! choose! the! debtor! but! may!
no! liability! for! the! debtor! when! only! some! of! the! prestations! also! be! given! to! the!
are!lost.! creditor!or!a!third!party!
• The! article! above! sets! the! value! of! last! prestation! that!
Loss!and! Loss! of! the! principal! Loss! of! one! will! not!
disappeared!as!the!basis!for!indemnity!for!damages.! Nullity! prestation! will! nullify! the! obligation;!
• Other! damages! (i.e.,! moral,! exemplary,! etc.)! may! also! be! invalidate! the! all!the!prestations!must!
awarded.! obligation! AND! make! be! lost! or! become!
• Article!1205!is!applicable!to!obligations!where!the!creditor!has! debtor!liable,!while!loss! impossible!to!invalidate!
the!right!to!choose! of! the! substitute! will! the!obligation!
• If!the!creditor!is!delayed!in!making!a!choice!or!has!not!made!a! not! invalidate! the! !
choice!at!all,!the!debtor!CANNOT!incur!in!delay;!there!can!be! obligation! nor! give! rise! The! creditor! may!
no!mora,solvendi.!This!is!true!even!if!there!is!a!definite!period! to!liability.! choose! the! remaining!
fixed!for!the!performance!of!the!obligation.! ! prestation(s)! if! one! of!
If! the! principal! them!is!lost.!
F. Facultative(Obligations( prestation! is! lost,! the!
! debtor! cannot! choose!
Art.!1206.!When!only!one!prestation!has!been!agreed!upon,!but! to! perform! the!
the!obligor!may!render!another!in!substitution,!the!obligation!is! substitute! even! if! it! is!
called!facultative.! possible!to!perform.!
! %
The!loss!or!deterioration!of!the!thing!intended!as!a!substitute,! %
through!the!negligence!of!the!obligor,!does!not!render!him!liable.!
%
But!once!the!substitution!has!been!made,!the!obligor!is!liable!for!
the!loss!of!the!substitute!on!account!of!his!delay,!negligence!or! %
fraud! %
! %
1. CONCEPT! %
! %
It!is!an!obligation!where!only!ONE!prestation!has!been!agreed!upon! %
but!the!debtor!may!render!another!in!substitute.!
%
!
%
%
!!!!
3. EFFECT!OF!SUBSTITUTION! 3. EFFECTS!
! !
TIME! PRINCIPAL! SUBSTITUTE! a. Extent%of%liability%of%debtor%
OBLIGATION! OBLIGATION! • Only!with!respect!to!his!particular!share!in!the!debt!
Before! Due!and!can!be! Not!due!and!cannot!be! • Vices! of! each! obligation! arising! from! the! personal!
Substitution! demanded! demanded!but!debtor! defect! of! a! particular! debtor! or! creditor! does! not!
may!choose!to!submit! affect!the!obligation!or!rights!of!the!others!
this! • The! insolvency! of! a! debtor! does! not! increase! the!
After! Considered!discarded;! Will!become!the!only! responsibility! of! his! co?debtors! nor! does! it!
substitution! will!not!affect!the! prestation!that!debtor! authorize!a!creditor!demand!anything!from!his!co?
obligation!anymore!! can!perform! creditors!
! • JOINT! DIVISIBLE! OBLIGATION:! defense! of! res!
• The! rules! on! when! the! right! to! choose! takes! effect! (in! judicata! is! not! extended! from! one! debtor! to!
alternative!obligations)!are!applied!here,!by!analogy.! another!
o Ex.! Substitution! takes! effect! after! notice! by! the! debtor! !
to!the!creditor.! b. Extent%of%right%of%creditor%
a. Demand! by! one! creditor! upon! one! debtor!
IV. Joint*and*Solidary*Obligations* produces!the!effects!of!default!only!with!respect!
to! the! creditor! who! demanded! and! the! debtor!
A. Joint(Obligations( on! whom! the! demand! was! made,! but! not! with!
! respect!to!others!!
1. CONCEPT! b. Interruption! of! prescription! by! the! judicial!
! demand!of!one!creditor!upon!a!debtor!does!not!
Each! of! the! debtors! is! liable! only! for! a! proportionate! part! of! the! benefit! the! other! creditors! nor! interrupt! the!
debt,! and! each! creditor! is! entitled! only! to! a! proportionate! part! of! prescription!as!to!other!debtors!!
the!credit.!Each!creditor!can!recover!only!his!share!of!the!obligation! !
and!each!debtor!can!be!made!to!pay!only!his!part.!! c. In%case%of%Novation,%Compensation,%Confusion,%
! Remission%
a. Requisites%of%Joint%Obligations%% • Novation:! Affects! only! the! share! of! the! joint! co?
1. Plurality!of!subjects! debtor!in!whom!the!novation!is!created!
2. Determination! of! the! shares! in! the! demandability! of! the! • Compensation:!Affects!only!the!share!of!the!joint!co?
fulfillment!of!the!obligation!! debtor!in!whom!the!compensation!takes!place!
! • Confusion:!Art!1277!Confusion!does!not!extinguish!a!
b. Words%used%to%indicate%joint%obligations%% joint! obligation! except! as! regards! the! share!
1. Mancomunada! corresponding!to!the!creditor!or!debtor!in!whom!the!
2. Mancomunada!Simple! two!characters!concur.!!!
3. Pro!rata! • Remission:! Benefits! only! the! joint! co?debtor! in!
4. “We!promise!to!pay…”!used!by!two!or!more!signers! whom! the! remission! is! granted,! obligation!
! extinguished!
Sir!Labitag’s!magic!shortcut!formula!(applicable!only!to!joint!liability!
on!both!sides)!! B. Solidary(Obligations(
• #! of! debtors! x! #! of! creditors! =! divisor! of! the! total! amount! of!
obligation! 1. CONCEPT!
! Each! of! the! debtors! is! liable! for! the! entire! obligation,! and! each!
2. PRESUMPTIONS! creditor! is! entitled! to! demand! the! whole! obligation.! Each! creditor!
! may! enforce! the! entire! obligation! and! each! debtor! may! be! obliged!
Art.! 1207.! The! concurrence! of! two! or! more! creditors! or! of! two! or! to!pay!it!in!full.!
more! debtors! in! one! and! the! same! obligation! does! not! imply! that! !
each!one!of!the!former!has!a!right!to!demand,!OR!that!each!one!of! Solidary!obligations!exist!only!by:!!
the!latter!is!bound!to!render!entire!compliance!with!the!prestations.! 1. Stipulation!of!the!parties!
There!is!a!SOLIDARY!LIABILITY!only!when!the!obligation!expressly!so! 2. Law!
states! OR! when! the! law! OR! the! nature! of! the! obligation! requires! 3. Nature!of!obligation!
solidarity.! 4. Charge!of!condition!is!imposed!upon!legatees!or!heirs!
! 5. Imputed!by!final!judgment!upon!several!defendants!
Art.! 1208.! If! from! the! law,! or! the! nature! or! the! wording! of! the! !
obligations! to! which! the! preceding! article! refers! the! contrary! does! a. Requisites%of%Joint%Obligations%
not! appear,! the! credit! or! debit! shall! be! presumed! to! be! divided! as! 1.!!Plurality!of!subjects!
many! equal! shares! as! there! are! creditors! or! debtors,! the! credits! or! 2.!!Determination!of!the!shares!in!the!demandability!of!the!
debts! being! considered! distinct! from! one! another,! subject! to! the! fulfillment! of! the! obligation! ! ??! this! is! in! relation! to! the!
Rules!of!Court!governing!the!multiplicity!of!suits.! debtor!with!regard!to!his!co?debtors!and!the!creditor!with!
• Joint!character!of!liability!and!equal!shares!is!presumed! regard! to! his! co?creditors! (presupposes! a! situation! after!
payment)!
!!!!
! One!creditor!does!not!represent! The! total! remission! of! the! debt!
b. Words%used%to%indicate%joint%obligations%% the!others!in!acts!prejudicial.!But! in! favor! of! a! debtor! releases! all!
1.!!Mancomunada!solidaria! a! solidary! creditor! who! makes! a! the! debtors;! but! when! this!
2.!!Joint!and!several! novation,! compensation! and! remission! affects! only! the! share!
3.!!In!solidum! remission! extinguishes! the! of!one!debtor,!the!other!debtors!
4.!!“I!promise!to!pay…”!followed!by!the!signature!of!two!or! obligation!but!he!is!liable!to!the! are!still!liable!for!the!balance!
more!persons! others! for! the! share! in! the!
5.!!“Individual!and!collectively”!! obligation! corresponding! to!
them!
2. KINDS! The! credit! and! its! benefits! are! All!the!debtors!are!liable!for!the!
divided! equally! among! the! loss! of! the! thing! due,! even! if!
!
creditors! unless! there! is! an! such! loss! is! caused! by! the! fault!
a. As%to%source% agreement! among! them! to! of!only!one!of!them!
, divide!differently!
i. Legal% Each! creditor! may! renounce! his! The! interruption! of! prescription!
% right! and! the! latter! need! not! as! to! one! debtor! affects! all! the!
Art.!1915.!Two!or!more!principals!appointed!an!agent!for!common! thereafter! pay! the! obligation! to! others,! but! the! renunciation! by!
transaction,!solidarily!liable!to!agent! the!former! one! debtor! of! prescription!
! already! had! does! not! prejudice!
Art.! 1945.! Two! or! more! bailees! to! whom! a! thing! is! loaned! in! the! the!others!
same!contracts!(commodatum)! ! The! interests! due! by! reason! of!
! delay! of! one! of! the! debtors! are!
Art.!2194.!Joint!tort!feasors! borne!by!all!of!them!
! ,
Art.!2146.!Joint!officious!management,!two!or!more!managers! c. As%to%uniformity%
!
,
Art.!2157.!Joint!payees!in!solutio!indebiti!(payment!when!obligation!
not!yet!due)!! i. Uniform%–%same!terms!and!condition!for!all%
! ,
Art.!2047(2).!A!surety!is!solidarily!liable!with!the!principal! ii. Varied/non=uniform%
! %
Art.!109!of!RPC.!If!there!are!two!or!more!persons!civilly!liable!for!a! Art.! 1211.! Solidarity! may! exist! although! the! creditors! and! the!
felony,!the!courts!shall!determine!the!amount!for!which!each!must! debtors! may! not! be! bound! in! the! same! manner! and! by! the! same!
respond.! periods!and!conditions.!!
, %
ii. Conventional:,by!stipulation!of!parties! • Effects! of! non[uniform!solidary!liability! only! the! portion! due!
! at! the! time! of! the! demand! is! collectible! from! any! of! the!
iii. Real:!the!nature!of!the!obligation!so!requires! debtors!or!by!anyone!of!the!creditors!
!
!
Case:!
b. As%to%parties%bound% !
, INCHAUSTI!v.!YULO!
i. Active% –%solidarity!of!creditors;!each!has!right!to!collect! Facts:!Gregorio!Yulo!and!his!8!siblings!are!indebted!to!Inchausti!and!
the!whole!of!the!prestation!from!the!common!debtor!! Co.,! of! which! Gregorio,! representing! the! other! siblings!
% acknowledged! debt! (solidarily! liable)! with! a! stipulation! that! the!
ii. Passive%–%solidarity!of!debtors;!each!is!liable!to!pay!the! whole!debt!will!be!due!and!demandable!if!any!of!the!installments!is!
whole!to!the!common!creditor!, not! paid.! The! first! installment! was! not! paid! and! Inchausti! brought!
, action! against! Gregorio.! Afterwards! 3! of! the! siblings! executed! a!
iii. Mixed%–%simultaneously!active!and!passive!! notarial!document!which!says!that!the!debt!is!reduced.!
! !
From!Sir!Labitag’s!Reviewer:! Held:!New!instruments!signed!by!the!parties!of!the!old!contract!do!
! not! destroy! solidary! nature! of! the! old! contract,! and! solidarity! may!
Active!Solidarity! Passive!Solidarity! still!exist!if!the!debtors!are!not!bound!in!the!same!manner.!
Mutual!Agency! Mutual!Guaranty! !
LAFARGE!CEMENT!PHIL.!v.!CONTINENTAL!CEMENT!
Each! creditor! represents! the! Each! debtor! can! be! required! to!
Facts:! Lafarge! entered! into! a! contract! to! buy! cement! from!
others! in! the! act! of! receiving! pay! the! entire! obligation;! but!
Continental! Cement,! the! latter! having! a! pending! case! against! APT.!
payment,! and! all! other! acts! after! the! payment,! he! can!
The!contract!had!a!stipulation!that!if!Continental!Cement!loses,!part!
which!tend!to!secure!the!credit!! recover! from! the! co?debtors!
of! the! payment! to! be! given! to! Continental! Cement! will! be! given! to!
their!respective!shares!
APT.! Continental! Cement! filed! a! case! of! preliminary! attachment!
The! death! of! a! solidary! creditor! The! debtor! who! is! required! to!
against! Lafarge,! the! latter! filing! a! compulsory! counterclaim! ad!
does! not! transmit! the! solidarity! pay! may! set! up! by! way! of!
cautelam!against!Continental!Cement,!Gregory!Lim!(president),!and!
to! each! of! his! heirs! but! to! all! of! compensation! his! own! claim!
Anthony!Mariano!(secretary)!
them!taken!together! against!the!creditor!
!
!!!!
Held:!The!obligation!of!Continental!Cement,!Mariano!and!Lim!arose! o E.g.! remission,! novation,! compensation! and!
from!a!tort!and!joint!tort!feasors!are!solidarily!liable.! merger/confusion!!
o Take!note!that!the!same!act!is!permitted!by!Art!1215,!
3. EFFECTS! wherefore! Tolentino! concludes! that! the! provision! is!
! “unhappily!inaccurate”.!
a. SOLIDARY%CREDITOR%in%relation%to:% o To! harmonize! with! Art! 1215:! The! prejudicial! acts! are!
! valid!as!to!the!debtor,!but!not!with!respect!to!the!co?
creditors! whose! rights! subsists! and! can! be! enforced!
i. Common%debtor% against!the!creditor!who!performed!prejudicial!acts!
,
!
RIGHT%TO%DEMAND%
ASSIGNMENT%OF%RIGHTS%NOT%ALLOWED%
• Debtor! may! pay! to! any! solidary! creditor,! but! if! a! judicial!
• Solidary! creditor! cannot! assign! his! rights! without! the!
demand!is!made!against!him,!he!must!pay!only!to!the!plaintiff.!
consent!of!others!(Art!1213)!
(Art!1214)!
o Why?! As! a! solidary! creditor,! he! is! an! agent! of! others,!
o Judicial!demand!revokes!the!tacit!mutual!representation!
cannot! assign! that! agency! without! the! consent! of! his!
of! co?creditors,! though! not! perpetually:! only! until! such!
principals.! Implies! mutual! confidence! may! take! into!
time!the!action!exists.!!
rd account!the!personal!qualification!of!each!creditor.!!
o Payment!to!creditor!who!did!not!sue!is!a!payment!to!3 !
o Assignment!of!rights!allowed!as!to!co?creditor!
person.!
!
o Same!effect!granted!to!extrajudicial!demand.!
!
o DEMAND! BY! SEVERAL! CREDITORS:! Pay! the! one! who!
notified! him! first.! If! simultaneous,! debtor! reserves! the!
b. SOLIDARY%DEBTOR%in%relation%to:%%
right!to!choose.!! !
o Does!not!apply!to!MIXED!SOLIDARITY:!solidary!co?debtor! i. Common%creditor%
may!pay!in!behalf!of!the!one!to!whom!demand!has!been! !
made!AND!to!any!of!the!solidary!creditors! OBLIGATION%TO%PERFORM%
• The! demand! made, against, one! of! them! shall! not, be, an, • Each!one!of!the!solidary!co?debtor!is!bound!to!render!entire!
obstacle! to! those! which! may! be! subsequently, be, directed, compliance!with!the!prestations!(Art!1207)!
against, others,! so! long! as! the! debt! has! not! been! fully! !
collected.!(Art!1216)! ,
• Payment!made!by!one!of!the!solidary!debtors!extinguishes!the! IN%CASE%OF%NOVATION,%COMPENSATION,%CONFUSION,%REMISSION%
obligation.! If! two! or! more! solidary! debtors! offer! to! pay,! the! BY%A%CREDITOR%
creditor!may!choose!which!to!accept.!(Art!1217(1))! • Extinguishes! the! obligation! without! prejudice! to! the!
• Each!creditor!may!renounce!his!right!even!against!the!will!of! responsibility! of! a! solidary! co?debtor! with! respect! to!
the! debtor,! and! the! latter! need! not! thereafter! pay! the! reimbursement!prior!to!his!remission!(Art!1215(1))!
obligation!to!the!former.!! !
! ii. Solidary%co=debtor%
% !
IN%CASE%OF%NOVATION,%COMPENSATION,%CONFUSION,%REMISSION% IN%CASE%OF%PAYMENT%BY%A%CO=DEBTOR%
BY%A%CREDITOR%% • Payment!by!one!of!the!solidary!co?debtors!extinguishes!the!
• Novation,! compensation,! confusion! or! remission! of! the! obligation.!(Art!1217(1))!
debt,!made!by!any!of!the!solidary!creditors!OR!with!any!of! • Solidary! co?debtor! who! paid! may! reimburse! from! his! co?
the! solidary! debtors,! shall! extinguish! the! obligation,! debtors!only!the!share!which!corresponds!to!each,!with!the!
without! prejudice! to! the! provisions! of! Art! 1219! i.e.! interest!for!the!payment!already!made,!but!if!the!payment!
responsibility! of! a! solidary! co?debtor! with! respect! to! is!made!before!debt!is!due,!no!interest!for!the!intervening!
reimbursement!prior!to!his!remission!(Art!1215(1))! period!may!be!demanded.!(Art!1217(3))!
% o Converted!into!a!Joint!Obligation!as!to!co?debtors,!but!
ii. Solidary%co=creditor/s! no! real! case! of! subrogation! because! the! old! one! is!
! extinguished!and!the!new!one!is!created!
IN%CASE%OF%NOVATION,%COMPENSATION,%CONFUSION,%REMISSION% o Partial! payment:! may! recover! only! insofar! as! the!
payment!exceeded!his!share!of!the!obligation!!
• The! creditor! who! may! have! executed! any! of! these! acts,! as!
well!as!he!who!collects!the!debt,!shall!be!liable%to%others%for% • When! one! of! the! solidary! debtors! is! insolvent! and! cannot!
the%share!in!the!obligation!corresponding!to!them!(Art!1215! reimburse,! his! share! will! be! borne! by! all! his! co?debtors! in!
Par!2)! proportion!to!the!debt!of!each.!(Art!1217(3))!
o Remission!done!by!several!but!not!all!of!the!creditors:! • Payment! by! co?debtor! does! not! entitle! him! to! reimburse!
those! who! made! it! do! not! have! action! against! each! from! co?debtors! if! such! payment! is! made! after! the!
other,! but! all! of! them! liable! for! the! share! of! one! who! obligation!has!prescribed!or!become!illegal.!(Art!1218)!
does!not!remit! o Also! applies! to! prior! total! remission! in! favor! of! one!
! debtor!!
PREJUDICIAL%ACTS%PROHIBITED% • The! remission! made! by! the! creditor! of! the! share! which!
• Each!one!of!the!solidary!creditors!may!do!whatever!is!useful! affects! one! of! the! solidary! debtors! does! not! release! the!
to!the!others,!but!not!anything!which!may!be!prejudicial!to! latter!from!his!responsibility!towards!the!co?debtors,!in!case!
the!latter.!(Art!1212)! debt! had! been! totally! paid! by! anyone! of! them! before!
remission!was!effected.!(Art!1219)!
!!!!
o Applies!when!one!of!the!debtors!has!already!paid!the! RFC!v.!CA!
obligation! in! full! (in! such! a! case,! the! obligation! as! to! Facts:! Jesus! Anduiza! and! Quintana! Cano! borrowed! money! with!
the!creditor!is!already!extinguished!and!nothing!more! mortgage! on! the! house! and! lot! from! RFC! but! failed! to! pay!
to!remit!even!partially)! amortizations.!Estelito!Madrid,!who!was!staying!at!Anduiza’s!house!
o Relationship! of! the! creditor! with! the! solidary! debtor! offered!to!pay!the!balance.!Madrid!then!filed!an!action!to!consider!
does! not! extend! to! the! relationship! among! solidary! the!balance!paid,!for!RFC!to!cancel!the!mortgage!and!for!Anduiza!to!
co?debtors! repay!him.!!
• The! remission! of! the! whole! obligation,! obtained! by! one! of! !
the!solidary!debtors,!does!not!entitle!him!to!reimbursement! Held:! Anduiza! had! impliedly! accepted! the! payments! by! Madrid! by!
from!his!co?debtors.!(Art!1220)! joining!him!in!appealing!the!decision!of!the!TC.!RFC!issued!receipts!
! acknowledging!the!payment!without!qualification.!
IN%CASE%OF%FORTUITOUS%EVENT% !
• If! the! thing! has! been! lost! of! if! the! prestation! has! become! QUIOMBING!v.!CA!
impossible! without% the% fault! of! the! solidary! debtors,! the! Facts:! Nicencio! Quiombing! and! Dante! Biscocho! solidarily! bound!
obligation!shall!be!extinguished!(Art!1221(1))! themselves! to! build! a! house! for! the! Saligo! spouses.! The! spouses!
• If!there!was!fault!on!the!part!of!any!one!of!them,!all!shall!be! failed!to!pay!the!fee!agreed!upon,!hence!Quiombing!filed!to!collect!
responsible! to! the! creditor,! for! the! price! and! payment! of! the! balance.! The! spouses! filed! a! motion! to! dismiss! saying! that!
damages! and! interests,! without! prejudice! to! their! action! Biscocho! is! an! indispensible! party! and! hence! should! have! been!
against!the!guilty!or!negligent!debtor.!(Art!1221(2))! impleaded.!
o Guilty! creditor! who! pays! indemnity! cannot! recover! !
from!his!co?debtors.!! Held:!The!concept!of!solidarity!in!terms!of!the!debtors!is!the!same!as!
o Other!co?debtors!who!pay!the!indemnity!can!recover! in!the!terms!of!the!creditors;!hence!one!may!sue!by!himself!for!the!
the!full,amount!from!the!guilty!co?debtor.! whole!amount!due.!!
• If! through! a! fortuitous% event,! the! thing! is! lost! or! the! !
performance!of!the!prestation!has!become!impossible!after! INCIONG!v.!CA!
one! of! the! solidary! debtors! has! incurred% in% delay! through! Facts:! Rene! Naybe,! Gregorio! Pantanosas! and! Baldomero! Inciong!
the!judicial!or!extra?judicial!demand!!upon!him!by!creditor,! became! solidarily! liable! to! a! debt! to! Philippine! Bank! of!
the! provisions! of! the! preceding! paragraph! shall! apply.! (Art! Communications.!They!failed!to!pay!so!Phil.!Bank!filed!for!collection!
1221(3))! against! the! 3! of! them.! The! case! was! dismissed! against! Pantanosas!
! and!Naybe!was!in!Saudi!so!the!summons!was!only!served!to!Inciong.!
LIABILITY%IN%CASE%OF%LOSS% !
! Held:! Dismissal! of! case! against! Pantanosas! and! Naybe! not! being!
LOST! or! IMPOSSIBLE! without! impleaded!would!not!release!Inciong!from!the!obligation!so!he!could!
Obligation!is!extinguished! be! ordered! to! pay! the! whole! amount.! The! recourse! of! Inciong! is!
fault!/!fortuitous!event!
All! liable! for! damages! and! against!his!creditors.!
LOST!or!IMPOSSIBLE!with!fault!
interest,! but! co?debtors! have!
of!any!one! 4. DEFENSES!AVAILABLE!TO!A!SOLIDARY!DEBTOR!
right!against!guilty!debtor!!
LOST! or! IMPOSSIBLE! without! All! liable! for! damages! and! !
fault! /! fortuitous! event! but! after! interest,! but! co?debtors! have! Art.1222.!A!solidary!debtor!may,!in!actions!filed!by!the!creditor,!avail!
any!one!incurred%in%delay! right!against!guilty!debtor! himself!of!all!defense!which!are!of!four!types!
! !
∗ Note:! An! extension! of! time! granted! by! the! creditor! to! a! a. Types% %
solidary! debtor! does! not! amount! to! a! novation! that! will! !
discharge! the! other! solidary! debtors.! The! latter! shall! be!
i. Those% derived% from% the% nature% of% the%
liable! for! the! whole! debt! less! the! share! of! the! debtor!
granted! the! extension.! Upon! the! expiration! of! the! term,! obligation%
the! creditor! can! demand! payment! of! the! unpaid! share! %
from!any!of!the!solidary!debtors.!(De!Leon)! • Connected!with!the!obligation!and!derived!from!its!nature!
! • Constitutes!a!total!defense!
Cases:! • E.g.! non?existence! of! the! obligation! because! of! illicit! cause,!
! object!or!absolute!simulation,!nullity!due!to!defect!in!capacity!
JAUCIAN!v.!QUEROL! or! consent! of! all! the! debtors! (minority,! fraud! or! violence),!
Facts:!Hermenegilda!Rogero!signed!for!herself!and!as!surety!for!Lino! unenforceability! because! of! lack! of! proper! proof! under! the!
Dayandante! a! document! acknowledging! themselves! as! jointly! and! Statute!of!Fraud,!non?performance!of!suspensive!condition!or!
severally! indebted! to! Roman! Jaucian.! Jaucian! prayed! for! order! non?arrival! of! period! affecting! the! entire! obligation,!
ordering! Rogero’s! estate! to! pay! for! the! debt! and! TC! dismissed! extinguishment! of! the! obligation! such! as! by! payment! and!
petition! on! the! ground! that! Dayandante’s! properties! should! be! remission,! all! other! means! of! defense! which! may! invalidate!
exhausted!first!as!he!is!the!principal.! the!original!contract!
! !
Held:! Jointly! and! severally! liable! means! solidarily! liable.! “Jointly”! !
really!means!solidarily!in!Art.!1831!which!says!that!exhaustion!to!the! !
properties!of!principal!need!not!be!resorted!to!first!if!principal!and! !
surety!are!jointly!liable.! !
!!!!
• Sir! Labitag:! Look! for! these! things! because! it! will! give! you! a! C. Joint(Indivisible(Obligations(
total!defense:!! !
1. Vices!of!consent! 1. CONCEPT!
2. Cause!of!action!has!prescribed! !
3. Entire!obligation!is!void! Art.!1209.!Their!tie!is!joint,!but!the!performance!is!indivisible.!One!in!
4. Voidable! at! the! instance! of! “all! of! them”,! BUT! if! just! which! the! object! of! the! object! or! prestation! is! indivisible,! not!
one,!you!can!use!the!defense!as!well! susceptible!of!division;!while!the!tie!between!the!parties!is!joint,!that!
! is!liable!only!to!a!proportionate!share.!
ii. Personal%defenses% !
% # Several! creditors! or! debtors! but! the! prestation! is! indivisible,!
• Total! defense! e.g.! minority,! insanity,! fraud,! violence,! obligation!is!joint!unless!solidary!has!been!stipulated!
intimidation!(sufficient!causes!to!annul!consent)!! # Midway! between! joint! (no! creditor! can! do! prejudicial! acts! to!
• Partial! defense! e.g.! special! terms! or! conditions! affecting! his! others,!no!debtor!can!be!made!to!answer!for!the!others)!and!
part!of!the!obligation!! solidarity! (fulfillment! requires! the! concurrence! of! all! the!
! debtors,! collective! action! is! expressly! required! for! prejudicial!
acts)!
iii. Defenses%pertaining%to%his%share%
# Sir! Labitag’s! example:! obligation! to! assemble! a! jeepney!
% between! three! different! specialist:! mechanic,! welder,!
• Partial!defense!! upholsterer!or!car!painter.!!
• E.g.! may! share! is! not! yet! due,! so! you! can! only! compel! me! to!
give!the!share!of!the!co?debtors! 2. INDIVISIBILITY!DISTINGUISHED!FROM!SOLIDARITY!
! !
iv. Those% personally% belonging% to% the% other% Art.!1210.!The!indivisibility!of!an!obligation!does!not!necessarily!give!
co=debtors! "! avail! himself! thereof! only! as! rise!to!solidarity.!Nor!does!solidarity!of!itself!imply!indivisibility.!
regards!that!part!of!the!debt!for!which!the!latter!are! !
responsible!! INDIVISIBILITY! SOLIDARITY!
! Each! creditor! cannot! demand! Each! creditor! may! demand! the!
• Partial!defense!only!for!the!debtor?defendant! more! than! his! share! and! each! full! prestation! and! each! debtor!
• E.g.! the! co?debtor’s! share! is! not! yet! due,! so! you! can! only! debtor! is! not! liable! for! more! has!the!duty!to!comply!with!the!
compel!me!to!give!my!share! than!his!share! entire!prestation!!
5.!!!!!In!suretyship,!the!effect!of!extension!given!to!the!principal! Indivisibility! refers! to! the! Solidarity! refers! to! the! legal, tie,
debtor! without! the! consent! of! the! surety! is! to! extinguish! the! prestation! that! is! not! capable! or, vinculum! defining! the! extent!
contract!of!suretyship!(De!Leon)! of!partial,performance! of!liability!!
! Only! the! debtor! guilty! of! All! of! the! debtors! is! liable! for!
b. Effects%of%the%defenses% breach!of!obligation!is!liable!for! the! breach! of! obligation!
1. If! derived! from! the! nature:! all! the! solidary! co? damages,! thereby! terminating! committed! by! any! one! of! the!
debtors!are!benefited!! the!agency!! debtors!
2. If!personal!one:!only!him!benefited!(exclusively)! Can! exist! even! if! there! is! only! Can! only! exist! when! there! is! at!
3. If!personally!to!the!co?debtor:!partial!defense! one!debtor!or!only!one!creditor! least! creditor! or! debtors!!
! (requires!plurality!of!subjects)!!
Case:! The!other!debtors!are!not!liable! The! other! debtors! are!
! in! case! of! insolvency! of! one! proportionately!liable!in!case!of!
INCHAUSTI!v.!YULO! debtor!! insolvency!of!one!debtor!
Facts:!supra!
3. EFFECTS!
!
Held:!Remission!of!any!part!of!the!debt!made!by!creditors!in!favor!of! !
one! or! more! solidary! debtors! inures! to! the! benefit! of! the! other! Art.!1209.!If!the!division!is!impossible,!the!right!of!the!creditors!may!
solidary!debtors.!!Gregorio!cannot!set!up!defense!of!prematurity!as! be!prejudiced!only!by!their!collective!acts!
it!was!personal!to!the!3!siblings!who!signed!the!new!document,!but! !
since!the!shares!of!the!3!are!not!yet!mature,!only!the!mature!part!of! 1. Creditors!prejudiced!only!by!their!collective!acts!
the!obligation!(1st!installment)!should!be!paid!by!Gregorio.! 2. Co?debtors!not!liable!for!the!share!of!the!insolvent!debtor!
! 3. Creditor! must! proceed! against! all! the! joint! debtors,! because!
ALIPIO!v.!CA! the!compliance!of!the!obligation!is!possible!only!if!all!the!joint!
Facts:!Romero!Jaring,!a!lessee,!subleased!a!part!of!a!fishpond!to!the! debtors!would!act!together.!
spouses! Alipio! and! spouses! Manuel! wherein! all! 4! signed! the! 4. If! one! of! the! debtors! cannot! comply,! the! obligation! is!
contract.! There! was! a! failure! to! pay! the! second! installment! hence! converted!into!monetary!consideration!(liability!for!losses!and!
Jaring!filed!for!collection!against!the!4!sublessees!which!was!granted! damages).!One!who!is!ready!and!willing!to!comply!will!pay!his!
! proportionate! share! plus! damages! when! his! financial!
Held:!There!was!an!error!in!the!judgment!of!the!TC!as!it!did!not!even! condition!improves.!!
say! if! the! Alipio’s! and! the! Manuel’s! were! jointly! or! solidarily! liable.! 5. Debtor!must!deliver!to!all!the!creditors.!If!he!delivers!to!only!
Since! it! is! silent,! joint! liability! will! be! presumed.! There! were! no! one,! liable! for! non?performance! as! to! other! creditors.!
allegations!that!the!sublessees!refused!to!vacate!the!fishpond!after! Damages! are! divisible! and! each! creditor! can! recover!
expiration!of!sublease!so!they!could!not!be!held!as!joint!tort!feasors.! separately!his!proportionate!share.!
!!!!
4. LIABILITIES!IN!CASE!OF!BREACH! B. Indivisible(Obligations(
!
Art.1224.! A! joint! indivisible! obligation! gives! rise! to! indemnity! for! 1. CONCEPT!
damages!from!the!time!anyone!of!the!debtors!does!not!comply!with! Whatever! may! be! the! nature! of! the! thing! which! is! the! object!
his! undertaking.! The! debtors! who! may! have! been! ready! to! fulfill! thereof,!when!it!cannot!be!validly!performed!in!parts.!!
their! promises! shall! not! contribute! to! the! indemnity! beyond! the!
corresponding!portion!of!the!price!of!the!thing!or!of!the!value!of!the! 2. KINDS!
service!which!the!obligation!consists.! %
! a. Natural%
1. Gives!rise!to!indemnity!for!damages,!non?compliance!with! !
undertaking! Art.!1225(1).!For!the!purposes!of!the!preceding!articles,!obligations!
2. Debtors!ready!to!fulfill!shall!not!be!liable! to! give! definite! things! and! those! which! are! not! susceptible! of!
partial!performance!shall!be!deemed!to!be!indivisible.!!!
V. Divisible( and( Indivisible( 1. Obligation!to!give!definite!things!
2. Not!susceptible!of!partial!performance!
Obligations( %
b. Legal%%
A. Divisible(Obligations( !
Art.! 1225(3).! However,! even! though! the! object! or! service! may! be!
1. CONCEPT! physically!divisible,!an!obligation!is!indivisible!if!so%provided%by%law!
! or!intended!by!parties.!!
One!which!is!susceptible!of!partial!performance;!debtor!can!legally! ,
perform! the! obligation! by! parts! and! the! creditor! cannot! demand! a! c. Conventional% %
single!performance!of!the!entire!obligation.!! !
# DIVISIBILITY! OF! THINGS! different! from! DIVISIBILITY! OF! Art.! 1225(3).! However,! even! though! the! object! or! service! may! be!
OBLIGATIONS! physically! divisible,! an! obligation! is! indivisible! if! so! provided! by! law!
o Divisible,Thing:!When!each!one!of!the!parts!into! or!intended%by%parties.!!
which! it! is! divided! forms! a! homogenous! and!
analogous!object!to!the!other!parts!as!well!as!to! 4. PRESUMPTIONS!
the!thing!itself!
o Indivisible, Thing:! When! if! divided! into! parts,! its!
!
value!is!diminished!disproportionately!! a. Of%indivisibility%
# Test,of,Divisibility% !
1. Will!or!intention!of!the!parties!! Art.!1225(1).!For!the!purposes!of!the!preceding!articles,!obligations!
2. Objective!or!purpose!of!the!stipulated!prestation!! to!give!definite!things!and!those!which!are!not!susceptible!of!partial!
3. Nature!of!the!thing! performance,shall!be!deemed!to!be!indivisible.!!
4. Provisions!of!law!affecting!the!prestation # Presumption! of! indivisibility! also! applies! in! obligations! to!
do!!
2. EFFECTS! !
! b. Of%divisibility%%
!
Art.! 1223.! The! divisibility! or! indivisibility! of! the! things! that! are! the!
Art.!1225(2.)!When!the!obligation!has!for!its!object!the!execution!of!
object!of!obligations!in!which!there!is!only!one!debtor!and!only!one!
certain! number! of! days! of! work,! the! accomplishment! of! work! by!
creditor!does!not!alter!or!modify!the!provisions!of!Chapter!2!of!this!
metrical! units! or! analogous! things! which! by! their! nature! are!
Title!(Nature!and!Effect!of!Obligations).!!
susceptible!of!partial!performance,!shall!be!divisible.!!!
!
!
Art.!1233.!A!debt!shall!not!be!understood!to!have!been!paid!unless!
the! thing! or! service! in! which! the! obligation! consists! has! been!
5. DIVISIBILITY!AND!INDIVISIBILITY!IN!OBLIGATIONS!NOT!TO!DO!
!
completely!delivered!or!rendered!as!the!case!may!be.!
Art.!1225(4).!In!obligations!not!to!do,!divisibility!or!indivisibility!shall!
be!determined!by!the!character!of!the!prestation!in!each!particular!
3. KINDS!(DE!LEON)! case.!!
a. Qualitative! Division! –! based! on! quality! and! not! the!
number!of!objects! 6. EFFECTS!
• Eg.! A! and! B! are! heirs! and! agreed! to! divide! the!
!
inheritance!with!A!receiving!the!house!and!lot!and!B!
1. Art.!1223.!The!divisibility!or!indivisibility!of!the!things!that!
receiving!the!car!and!rice!fields! are! the! object! of! obligations! in! which! there! is! only, one,
b. Quantitative!Division!–!based!on!number!of!things! debtor,and,only,one,creditor!does!not%alter%or%modify!the!
• Eg.!Divide!equally!between!two!creditors!300!cavans! provisions! of! Chapter! 2! of! this! Title! (Nature! and! Effect! of!
of!rice! Obligations).!!
c. Ideal!of!Intellectual!Division!–!exists!only!in!the!minds!of! 2. Art.! 1233.! A! debt! shall! not! be! understood! to! have! been!
the!parties! paid! unless! the! thing! or! service! in! which! the! obligation!
• Eg.! The! shares! of! two! co?owners! of! a! car! are! not! consists!has!been!completely%delivered%or%rendered!as!the!
materially!separable!but!only!mentally! case!may!be.!
!!!!
i. EXCEPTIONS:!! o Punishment! –! the! injured! party’s! right! to! claim! for!
a. Obligation! has! been! substantially! performed! damages! remains! and! is! demandable! along! with! the!
in!good!faith!(Art.!1234.)! penal!clause.!
b. When! the! creditor! accepts! performance,! • The!penal!clause!is!to!be!construed!strictly.!
knowing! its! completeness,! and! without! !
protest,! the! obligation! is! deemed! fully! 1. PRINCIPAL! OBLIGATIONS! AND! ACCESSORY! OBLIGATIONS!
performed!(Art.!1235.)!
DISTINGUISHED!
3. Art.! 1224.! A! joint! indivisible! obligation! gives! rise! to!
indemnity, for, damages! from! the! time! anyone! of! the! %
debtors! does! not! comply! with! his! undertaking.! The! PRINCIPAL% OBLIGATION% "! an! obligation! that! can! stand! by!
debtors!who!may!have!been!ready!to!fulfill!their!promises! itself! and! does! NOT! depend! on! another! obligation! for! its!
shall! not% contribute% to% the% indemnity! beyond! the! validity!and!existence.!!
corresponding! portion! of! the! price! of! the! thing! or! of! the! !
value!of!the!service!which!the!obligation!consists.! ACCESSORY% OBLIGATION%"!an!obligation!which!is!attached!
4. See,Joint,Indivisible,Obligations! to!a!principal!obligation!and!cannot!stand!alone.!
!
7. CESSATION!OF!INDIVISIBILITY! 2. DISTINGUISHED!FROM!CONDITIONAL!OBLIGATIONS!
a) Natural, Indivisibility:! conversion! of! the! obligation! to! pay! !
damages! AS!TO! OBLIGATIONS!WITH!A! CONDITIONAL!
b) Conventional/Legal, Indivisibility:! novation,! death! of! PENAL!CLAUSE! OBLIGATION!
creditor!(division!among!heirs)! Existence!of! Certain;!one!already! Uncertain;!no!
! Obligation! exists!(principal! obligation!exists!prior!
Entire,and,Severable,Contracts!–!depends!upon!the!consideration!to! obligation)! to!fulfillment!of!
be!paid,!not!upon!its!object! suspensive!condition!
• Not! in! the! syllabus! but! Sir! mentioned! in! passing! during! Dependence! The!penal!clause!is! The!principal!obligation!
lecture! dependent!(accessory! itself!is!dependent!
• ENTIRE!–!consideration!is!entire!and!single;!e.g.!Sir!Labitag:! obligation)!on!the!non? upon!the!happening!of!
yearly!subscription!to!Herald!Tribune! performance!of!the! an!uncertain!event!
• SEVERABLE! –! consideration! is! expressly! or! by! implication! principal!obligation!
apportioned;! e.g.! part! to! be! performed! by! one! party! !
consists! in! several! distinct! and! separate! items,! and! the!
3. DISTINGUISHED!FROM!ALTERNATIVE!OBLIGATIONS!
price!is!apportioned!to!each!of!them!!!
!
AS!TO! OBLIGATIONS!WITH!A! ALTERNATIVE!
VI. Obligations*with*a*Penal*Clause* PENAL!CLAUSE! OBLIGATION!
Prestations! Only!one!exists!and! There!are!two!or!more!
A. Concept( must!be!performed! prestations!but!
(principal);!otherwise,! performing!one!of!
Art.!1226,!Par.!1.!In!obligations!with!a!penal!clause,!the!penalty! the!penalty!clause! them!is!sufficient!
shall!substitute!the!indemnity!for!damages!and!the!payment!of! becomes!enforceable!
interests!in!case!of!noncompliance,!if!there!is!no!stipulation!to! Impossibility! The!impossibility!of!the! Impossibility!of!one!of!
the!contrary.!Nevertheless,!damages!shall!be!paid!if!the!obligor! principal!obligation!will! the!prestations!will!not!
refuses!to!pay!the!penalty!or!is!guilty!of!fraud!in!the!fulfillment! also!extinguish!the! invalidate!the!
of!the!obligation.! penal!clause! obligation!for!the!
others!subsist!
! Choice! The!debtor!may!not! The!debtor!may!choose!
• It!is!an!obligation!that!contains!an!accessory!undertaking!to! choose!to!perform!the! which!prestation!to!
pay! a! previously! stipulated! indemnity! in! case! of! breach! of! obligation!imposed!by! comply!with!!
the! principal! obligation,! intended! primarily! to! induce! its! the!penal!clause!to!
fulfillment.! relieve!himself!of!the!
• The!object!of!the!penal!clause!is!generally!a!sum!of!money! principal!(unless!such!
but!it!can!be!any!other!thing!stipulated!by!the!parties,!such! right!is!expressly!
as!an!act!or!abstention.! granted)!
• The!penal!clause!may!have!reparation%OR!punishment!as!its! !
purpose.!The!purpose!is!material!in!determining!the!question!
of!damages.!
!
o Reparation! –! the! penal! clause! replaces! the! claim! for! !
damages;!the!object!of!the!penal!clause!now!represents! !
the! estimate! of! the! damages! that! a! party! might! suffer! !
from! non?performance! of! the! obligation.! The! penal!
!
clause! may! be! enforced! without! the! proof! of! damages!
from! the! prejudiced! party! and! even! if! the! value! of! the! !
object! of! the! penal! clause! be! greater! than! that! of! the! !
value!of!the!actual!damages.! !
!!!!
4. DISTINGUISHED!FROM!FACULTATIVE!OBLIGATIONS! 3. AS!TO!PURPOSE!
! %
AS!TO! OBLIGATIONS!WITH!A! FACULTATIVE! a. PUNITIVE% "! the! penal! clause! is! imposed! as! a!
PENAL!CLAUSE! OBLIGATION! punishment!for!breach!of!the!principal!obligation!
Availability!of! The!debtor!will!only! The!right!of!the!debtor! !
Right!to! acquire!the!right!when! to!choose!is!absolute! b. REPARATORY% "! the! penal! clause! is! imposed! as! a!
Choose! it!is!expressly!granted! replacement!for!damages!%
Demandability! If!the!penalty!is! Creditor!cannot!
of!Both! complementary!in! demand!both!nor!the! C. Demandability(of(Penalty(
Prestations! nature,!it!can!be! substitute;!only!the!
demanded!WITH!the! principal!prestation!
!
principal!obligation! may!be!demanded.! Art.!1226,!Par.!2.!The!penalty!may!be!enforced!only!when!it!is!
demandable!in!accordance!with!the!provisions!of!this!Code.!
! !
5. DISTINGUISHED!FROM!GUARANTY!
• The!penal!clause!becomes!demandable!only!when!the!non?
! performance!of!the!principal!obligation!is!due!to!the!fault!or!
AS!TO! OBLIGATIONS!WITH! GUARANTY! fraud!of!the!debtor!
A!PENAL!CLAUSE!
• In!the!non?performance!of!the!principal!obligation,!the!fault!
Object/Prestation! The!object/prestation! The!obligation!of! of! the! debtor! is! presumed.! The! debtor! has! the! burden! of!
of!the!principal! principal!debtor!and! proof! to! show! that! he! was! not! the! cause! of! the! non?
differs!from!that!of! the!obligation!of!a! performance! (i.e.,! fortuitous! event! or! fault! of! the! creditor!
the!penal!clause! third!person!as! himself)!
guarantor!deal!with! • In!an!obligation!with!two!or!more!debtors,!the!divisibility!of!
the!same!
the!principal!obligation!will!not!equate!to!the!divisibility!of!
object/prestation! the! penalty;! the! principal! obligation! may! be! joint! but! the!
Assumption!of! The!principal! Cannot!be!assumed! penalty! can! be! joint! (each! co?debtor! must! pay! his! share! in!
Obligation(s)! obligation!and!the! by!the!same!person;! the!penalty)!or!solidary!(the!whole!penalty!can!be!enforced!
penal!clause!can!be! a!debtor!cannot!be! against!any!of!the!solidary!debtors).!
assumed!by!the! his!own!guarantor! o However,! if! the! debtors! are! solidary! co?debtors! of! each!
SAME!person! other,!the!penalty!must!be!enforced!in!its!entirety.!
Defects! The!nullity!of!the! The!obligation!as!a! !
principal!obligation! guarantor!will!subsist! Art.!1228.!Proof!of!actual!damages!suffered!by!the!creditor!is!not!
extinguishes!the! even!if!the!obligation! necessary!in!order!that!the!penalty!may!be!demanded!
penal!clause! is!voidable,!
! unenforceable!or!is!a! !
Exception:!if!the! natural!obligation.! • The!article!only!applies!when!the!penal!clause!is!reparatory,
penal!clause!is!to!be! (the! penalty! replaces! the! indemnity! for! damages).! Should!
assumed!by!a!third! the!penal!clause!be!punitive,(indemnity!for!damages!can!still!
person,!it!will!not!be! be!claimed!along!with!the!penalty),!the!creditor!must!prove!
extinguished! the!amount!of!damages!he!is!asking!for.!
!
D. Effects(of(Penal(Clause(
B. Kinds(of(Penal(Clauses( !
! 1. BECOMES!A!SUBSTITUTE!FOR!INDEMNITY!FOR!DAMAGES!AND!
1. AS!TO!EFFECT! PAYMENT!OF!INTEREST!IN!CASE!OF!NON[COMPLIANCE!
! !
a. SUBSIDIARY%"!only!the!penalty!clause!can!be!enforced.! a. EXCEPTION! (Art! 1226! Par.! 1):! “…unless! there! is! a!
! stipulation!to!the!contrary.”!
b. COMPLEMENTARY/CUMULATIVE% "! both! the! !
principal!obligation!and!the!penal!clause!can!be!enforced! Cases:!
MAKATI!DEV’T!CORP!v.!EMPIRE!INSURANCE!CO.!
% Facts:! Makati! Dev’t! Corp! (MDC)! sold! a! piece! of! land! to! a! certain!
2. AS!TO!SOURCE! Andal!and!part!of!the!provisions!of!the!deed!of!sale!was!that!Andal!
! should! build! a! house! within! two! years! from! the! stipulated! date.! In!
a. CONVENTIONAL% "!it!is!provided!for!by!the!stipulation! compliance,! Andal! gave! a! surety! bond! worth! P12,000! to! MDC!
of!the!parties! wherein! he! (as! the! principal)! was! jointly! and! severally! liable! with!
! Empire!Insurance!(as!a!surety).!Andal!however!sold!the!land!and!no!
house! was! built! within! the! two?year! period,! though! construction!
b. LEGAL%"!it!is!provided!for!by!law!
was! began! after! the! lapse! of! the! period.! The! trial! court! found! for!
% MDC! but! lessened! the! penalty! from! P12,000! to! P1,500.! MDC!
% appealed!the!amount.!
% !
!!!!
Held:! The! provision! providing! for! the! P12,000! penalty! is! a! penal! 2. WILL! NOT! EXEMPT! DEBTOR! FROM! PERFORMANCE! OF! THE!
obligation! which! takes! place! of! payment! of! damages! and! interest! PRINCIPAL!OBLIGATION!
when! there! is! non?compliance.! MDC! is! entitled! to! such! penalty!
without! proving! the! damages! incurred.! However,! the! court! was! !
correct!in!reducing!the!amount!of!the!damages!in!view!of!the!partial! Art!.1227.!The!debtor!cannot!exempt!himself!from!the!performance!
performance! (that! the! construction! was! started! after! the! lapse);! it! of!the!obligation!by!paying!the!penalty,!save!in!the!case!where!this!
correctly!applied!Article!1229.!Decision!affirmed.! right!has!been!expressly!reserved!for!him…!
! !
TAN!v.!CA! • Performing! the! penalty! will! not! absolve! the! debtor! of! his!
Facts:! Tan! obtained! two! loans! (evidenced! by! their! respective! duty!to!perform!the!principal!obligation!because!the!penal!
promissory!notes)!from!the!CCP,!to!the!total!amount!of!P4!million.! clause!is!not!the!one!due.!
Tan! defaulted! but! the! debt! was! later! on! restructured! (new! • EXCEPTION:! “…save! in! the! case! where! the! right! has! been!
promissory!note!with!a!balance!of!P3.4!million!which!is!payable!in!5! expressly!reserved!for!him.”!
installments!with!14%!interest;!an!added!provision!was!that!2%!per! !
month!rate!of!surcharge!will!apply!upon!default!of!Tan!in!paying!and! 3. CREDITOR! CANNOT! DEMAND! BOTH!THE! PERFORMANCE!AND!
that! such! surcharge! will! be! compounded! to! the! stipulated! interest!
PENALTY!AT!THE!SAME!TIME!
rate).!Tan!again!defaulted!and!twice!tried!to!propose!the!restructure!
of!the!debt!again!but!were!unanswered!and,!later!on,!rejected.!CCP! !
filed! suit.! The! trial! court! and! the! CA! both! found! for! CCP;! as! to! the! Art.!1227.!…!Neither!can!the!creditor!demand!the!fulfillment!of!the!
computation,!the!court!applied!the!penalty!(2%!monthly!surcharge)! obligation!and!the!satisfaction!of!the!penalty!at!the!same!time,!
on! the! principal! amount! (P3.4! million)! and! the! interest! therefrom! unless!this!right!has!been!clearly!granted!him. However,!if!after!the!
(14%).! Tan! appealed,! inter! alia,! such! computation,! arguing! there! is! creditor!has!decided!to!require!the!fulfillment!of!the!obligation,!the!
no!legal!basis.! performance!thereof!should!become!impossible!without!his!fault,!
! the!penalty!may!be!enforced.!
Held:! Decision! affirmed! with! modification.! Firstly,! the! court! noted! !
that! the! promissory! note’s! clear! provisions! allowed! the! • Where!the!creditor!has!been!given!the!choice!of!enforcing!
compounding! of! such! interests.! The! 14%! stipulated! interest! is! the! the! principal! obligation! or! the! penalty,! he! cannot! have!
monetary! interest! and! is! allowed! by! Article! 1956,! while! the! 2%! both!at!the!same!time.!
monthly! surcharge! has! the! nature! of! a! penalty! and! is! governed! by! a. Where!there!is!performance! "!if!the!obligation!has!
the! articles! on! obligations! with! a! penal! clause.! Such! penalty! is! been!fulfilled,!there!will!be!no!need!for!the!penalty!
distinct! from! the! monetary! interest.! And! an! obligation! with! such! a! to! be! enforced! or! even! demanded.! The! exception!
penalty,!apart!from!that!of!a!stipulated!monetary!interest!is!allowed! arises! when! the! right! is! “clearly! granted”! him.! In!
under! Article! 2209.! However,! given! that! the! 2%! interest! which! is! effect,! the! article! connotes! that! as! a! general! rule,!
monthly! compounded! is! unconscionable,! it! is! reduced! by! the! court! the! penal! clause! is! subsidiary! and! not! joint! in!
to! the! legal! rate! of! interest:! 12%! per! annum.! Such! legal! interest! is! nature.!
still! applicable! to! the! 14%! monetary! interest,! as! such! was! agreed! • Note:! the! phrase! “clearly! granted”! does! not!
upon!by!the!parties.! require! an! express! grant;! inferences! and!
! presumptions! may! be! made,! provided! that!
COUNTRY!BANKERS!INSURANCE!v.!CA! they!have!their!basis!in!evidence.!
Facts:! Sy! and! OVEC! (a! corporation)! entered! into! a! lease! contract! b. Where! there! is! no! performance! "! In! case! of! non?
involving! OVEC! leasing! 3! of! its! theaters! to! Sy;! Sy! deposited! the! compliance,! the! creditor! may! require! specific!
amount! of! P290,000! in! compliance! with! ! forfeiture! clause! in! the! performance!OR!ask!for!the!penalty.!These!remedies!
lease! agreement.! However,! Sy! eventually! fell! into! arrears! with! are!neither!cumulative!nor!successive.!
respect!to!his!rent,!payment!of!amusement!taxes!and!the!payment! • EXCEPTION:! If! the! creditor! has! chosen! the!
of! the! increase! in! rent.! OVEC! ended! up! padlocking! the! leased! performance! of! the! principal! obligation! and!
premises! but! Sy! was! able! to! secure! (by! posting! a! bond)! a! writ! of! such!performance!becomes!impossible!without!
preliminary!injunction.!In!the!case!in!the!trial!court,!it!was!decided!in! his!fault,!he!may!enforce!the!penalty.!
favor!of!OVEC,!ordering!Sy!to!pay!damages!along!with!his!arrears!in! !
rent! and! amusement! taxes.! The! deposit! was! forfeited! in! exchange! 4. CREDITOR! CANNOT! COLLECT! OTHER! DAMAGES! IN!
for!the!total!value!of!the!increase!in!rent!that!Sy!was!unable!to!pay.!!
Sy!appealed,!inter!alia,!the!validity!of!the!forfeiture!clause!given!that!
ADDITION!TO!THE!PENALTY!
damages!were!already!awarded!while!OVEC!appealed!the!ruling!that!
the! forfeited! deposit! would! serve! as! the! payment! for! the! unpaid! Art.!1226,!Par.!1.!In!obligations!with!a!penal!clause,!the!penalty!
increase! in! rent! (whose! value! was! greater! than! the! forfeited! shall!substitute!the!indemnity!for!damages!and!the!payment!of!
deposit).!! interests!in!case!of!noncompliance,!if!there!is!no!stipulation!to!
! the!contrary.!Nevertheless,!damages!shall!be!paid!if!the!obligor!
Held:! The! forfeiture! clause! (a! penal! clause! by! nature)! was! refuses!to!pay!the!penalty!or!is!guilty!of!fraud!in!the!fulfillment!
considered!valid.!Generally,!the!penalty!substitutes!for!the!payment! of!the!obligation.!
of! damages! and! interest! in! case! of! non?compliance.! There! are!
exceptions! however:! (a)! contrary! is! expressly! stipulated,! (b)! debtor! !
refuses!to!pay/comply!with!the!penalty!and!(c)!the!debtor!is!guilty!of!
fraud.! The! forfeiture! clause! falls! under! the! said! exception! as! it!was! !
expressly! stipulated! therein! that! it! may! be! forfeited! without! !
prejudice!to!any!other!obligation!still!owing.!Decision!affirmed.! !
!!!!
CHAPTER(4:((
a. EXCEPTIONS%(Art%1226):%
1. There!is!an!express!provision!to!that!effect!
2. The! debtor! refuses! to! pay/comply! with! the!
3.
penalty!
Debtor! is! guilty! of! fraud! in! the! performance! of! EXTINGUISHMENT(OF(
OBLIGATIONS(
the!obligation.!
E. When(Penalty(Will(Be(Equitably(Reduced(
!
Art.!1229.!The!judge!shall!equitably!reduce!the!penalty!when!the!
principal!obligation!has!been!partly!or!irregularly!complied!with!by! I. Modes*of*Extinguishment*
the!debtor.!Even!if!there!has!been!no!performance,!the!penalty!may!
also!be!reduced!by!the!courts!if!it!is!iniquitous!or!unconscionable.! (
Art.!1231.!Obligations!are!extinguished:!
!
1. By! payment! or! performance! –! most! natural! way! of!
• Partiality, of! the! performance! refers! to! the! extent! of! the! extinguishing!obligation!!
fulfillment!of!the!obligation!while!irregularity,refers!to!the! 2. By!loss!of!the!thing!due!or!Impossibility!of!performance!!
manner!in!which!the!obligation!is!fulfilled.! 3. By!condonation!or!Remission!of!the!debt!
• The!courts!also!have!the!discretion!to!reduce!the!penalty! 4. By! confusion! or! Merger! of! the! rights! of! the! creditor! and!
when!it!is!iniquitous,or,unconscionable.! debtor!!
a. It! has! been! held! that! while! stipulated! rates! of! interest! in! 5. By!compensation!
obligations! to! pay! a! sum! of! money! are! not! penal! clauses! by! 6. Novation!!
nature,! they! may! also! be! reduced! if! they! are! iniquitous! or! Other! causes! of! extinguishment! of! obligations,! such! as! annulment,!
unconscionable! rescission!,! fulfillment! of! resolutory! condition,! and! prescription,! are!
b. EXCEPTION:! The! article! will! not! apply! to! surcharges! on! taxes! governed!elsewhere!in!this!Code.!
that! are! due! for! they! are! of! mandatory! character! against! the! !
taxpayer.! • Additional! miscellaneous! causes! from! Sir! Labitag,! Tolentino,!
and!De!Leon!
F. Nullity(of(Principal(Obligation(or(Penal(Clause( o Arrival!of!resolutory!period!
! o Compromise!
Art.!1230.!The!nullity!of!the!penal!clause!does!not!carry!with!it!that! o Mutual,dissent!(opposite!of!mutual!agreement)!
of!the!principal!obligation.! o Death! –! extinguishes! obligations! which! are! of! a! purely!
! personal!character,!apart!from!its!extinctive!effect!in!some!
The!nullity!of!the!principal!obligation!carries!with!it!that!of!the! contracts!such!as!partnership!and!agency!!
penal!clause.! o Renunciation!by!the!creditor!
o Abandonment! e.g.! Art! 662! (abandonment! of! interest! in! a!
!
party!wall)!and!abandonment!of!a!vessel!under!the!code!of!
• An!obligation!and!its!penal!clause!shares!the!relationship!of! commerce!!
a!principal!obligation!and!an!accessory!obligation! o Insolvency! –! does! not! extinguish! obligation! unless!
o The!existence!of!the!accessory!obligation!depends!upon! judicially!declared!and!a!discharge!was!given!him.!!
the!principal!while!the!principal!obligation!can!stand!on! o Impossibility!of!fulfillment!
its!own.! o Happening!of!a!fortuitous!event!
o Nullity!of!the!principal!obligation,!as!a!general!rule,!also!
nullifies! the! penal! clause.! There! are! however,!
exceptions:! II. Payment*or*Performance*
! The! penalty! is! undertaken! by! a! third! person!
precisely! for! an! obligation! that! is! unenforceable,! A. Concept!
voidable,!or!natural;!this!is!a!form!of!guaranty! !
! If!the!nullity!of!the!principal!obligation!gives!rise!to! Fulfillment!of!the!prestation!due,!a!fulfillment!that!extinguishes!the!
a! liability! of! the! debtor! for! damages,! the! penalty! obligation! by! the! realization! of! the! purposes! for! which! it! was!
may!be!enforced!as!a!substitute!for!damages.! constituted.!In!law,!payment!and!performance!are!synonymous!
o A!penal!clause!may!be!void!because!it!is!contrary!to!law,! • Juridical! act! which! is! VOLUNTARY,! LICIT,! and! MADE! WITH!
morals,! public! order! or! public! policy.! In! such! a! case,! THE!INTENT!TO!EXTINGUISH!THE!OBLIGATION!!
nullity! of! the! penal! clause! will! not! invalidate! the!
principal! obligation.! Should! there! be! non?performance,!
damages! will! be! determined! as! if! no! penal! clause! had! B. Requisites(of(a(Valid(Payment((
existed.! 1. WHO!CAN!PAY!
! 2. TO!WHOM!PAYMENT!MAY!BE!MADE!
! 3. WHAT!IS!TO!BE!PAID!(“IDENTITY”)!
4. HOW!IS!PAYMENT!TO!BE!MADE!(“INTEGRITY”)!
!
!
!
!!!!
KINDS!OF!PAYMENT:! c. Third% person% who% is% NOT% AN% INTERESTED%
• Normal! –! debtor! voluntarily! performs! the! prestation! PARTY%but%WITH%CONSENT%of%debtor%
stipulated!!
• Abnormal! –! debtor! is! forced! by! means! of! judicial!
,
proceeding,! either! to! comply! with! the! prestation! or! pay! Art.! 1302,! Par.! 2.! When! a! third! person,! not! interested! in! the!
indemnity! obligations,!pays!with!the!express!or!tacit!approval!of!the!creditor.!!
! ,
Why!do!you!pay?!Biggerconsequences!if!you!don’t!pay,!the!creditor! Art.! 1236.! Par.! 1.! The! creditor% is% not% bound% to% accept! payment! or!
will! file! action! for! collection! then! the! sheriff! will! levy! upon! your! performance!by!a!third!person!who!has!no!interest!in!the!fulfillment!
other!properties!! of!the!obligation,!unless!there!is!a!stipulation!to!the!contrary.!!
! %
What!are!the!elements/characteristics!of!a!valid!payment?!
1) Identity!–!what!is!to!be!paid,!payment!should!be!the!
i. Effects% of% Payment% by% 3rd% Person% –% Not%
very! same! obligation/prestation! promised! to! be! Interested%–%With%Debtor’s%Consent%
rd
performed/not! performed.! The! burden! of! proving! 1. 3 !person!is!entitled!to!full!reimbursement!!
extinguishment! by! payment! devolves! upon! the! ! Demand!from!the!debtor!what!he!has!paid!!
rd
debtor!who!claims!payment! 2. Legal! subrogation! (novation)! –! 3 ! person! is!
2) Integrity! –! how! payment! should! be! made,! it! should! subrogated/steps!into!the!shoes!of!creditor!
be! complete! (not! only! specific! thing! but! all! of! its! ! Payor! can! exercise! all! the! rights! of! the!
accessions! and! accessories)! Partial! or! irregular! creditor! arising! from! the! very! obligation!
performance! will! not! extinguish! an! obligation! as! a! itself,! whether! against! the! debtor! or! third!
general!rule! person!
! 3. Creditor!may!refuse!to!accept!payment!
Can! anybody! pay?! YES,! as! long! as! his! payment! has! integrity! and! !
identity!and!the!creditor!accepts!it!as!a!valid!tender!of!payment! d. Third% person% who% is% NOT% AN% INTERESTED%
% PARTY% and% WITHOUT% THE% KNOWLEDGE% OR%
1. WHO!CAN!PAY! AGAINST%THE%WILL%OF%THEDEBTOR%
!
%
a. In% general% (creditor! cannot! refuse! valid! tender! of! Art.! 1236,! Par.! 1.! The! creditor% is% not% bound% to% accept! payment! or!
payment)% performance!by!a!third!person!who!has!no!interest!in!the!fulfillment!
a) Debtor! of!the!obligation,!unless!there!is!a!stipulation!to!the!contrary.!!
b) Anyone!acting!on!his!behalf!
!
1. Duly!authorized!agent!or!representatives!
2. Heirs! (means! that! debtor! is! dead,! if! alive,! Art.!1236,!Par.!2.!Whoever!pays!for!another!may!demand!from!the!
they! would! be! third! persons! interested! in! debtor! what! he! has! paid,! except! that! if! he! paid! without! the!
obligation)!! knowledge! or! against! the! will! of! the! debtor,! he! can! recover% only%
3. Successors!in!interest!and!assignees! insofar%as%the%payment%has%been%beneficial%to%the%debtor.!!
! !
b. Third% person% who% is% an% INTERESTED% PARTY% Art.! 1237.! Whoever! pays! on! behalf! of! the! debtor! without, the,
(creditor!cannot!refuse!valid!tender!of!payment)% knowledge, or, against, the, will, of, the, latter,! cannot! compel% the%
creditor%to%subrogate%him%in%his%rights,!such!as!those!arising!from!a!
i. %Meaning%of%INTERESTED%PARTY%–!interested!
mortgage,!guaranty!or!penalty.!! !
in!the!extinguishment!of!the!obligations!such!as%
a) Co?debtors! ,
b) Sureties! i. Effects% of% Payment% by% 3rd% Person% –% Not%
c) Guarantors! Interested%–%Without%Knowledge%or%Against%
d) Owners!of!mortgaged!property!or!pledge!
the%Will%
% rd
1. 3 ! person! can! only! be! reimbursed! insofar! as!
ii. Effects% of% Payment% by% 3rd% Person% –% payment!has!been!beneficial!to!debtor!!
Interested% ! Burden! of! proof! of! payment! on! the! 3 !
rd
! person!!
Art.! 1302! (3).! When! even! without, the, knowledge, of, the, debtor,! a! ! Benefit! to! the! creditor% need% not% be%
person! interested% in% the% fulfillment! of! the! obligation! pays,! without! proved!in!the!following!cases:!
prejudice!to!the!effects!of!confusion!as!to!the!latter’s!share.! o If! after! the! payment,! the! third!
% person!acquires!the!creditor’s!right!
rd o If! the! creditor! ratifies! the! payment!
Effects!of!payment!by!3 !person:!
to!the!third!person!
1. Valid!payment;!obligation!extinguished!
rd o If! by! the! creditor’s! conduct,! the!
2. Debtor!to!reimburse!fully!3 !person!interested!
rd debtor! has! been! led! to! believe! that!
3. 3 !person!subrogated!to!the!rights!of!the!creditor!!
the! third! person! had! authority! to!
!
receive!the!payment!!
% o Assignment! of! credit! without! notice!
to!debtor!(Art!1626)!
!!!!
rd
2. 3 ! person! cannot! compel! creditor! to! o Legal! –! conferred! by! law! (i.e.! administrator! of! a!
subrogate!him!in!the!latter’s!rights! deceased!creditor)!
3. But! the! obligation! between! the! debtor! and! o Conventional! –! authority! has! been! given! by! the!
creditor!is!extinguished! creditor!himself!
% !
e. Third% person% who% does% NOT% INTEND% TO% BE% PAYMENT%TO%A%WRONG%THIRD%PARTY:%%
o GENERAL! RULE:! Not! valid,! obligation! is! not!
REIMBURSED%! %DEBTOR%MUST%GIVE%CONSENT% extinguished,!even!if!in!good!faith!of!the!debtor!
! o EXCEPTION:!!
Art.! 1238.! Payment! by! third! person! who! does! not! intend! to! be! • Extinguished! if! the! mistake! is! imputable! to! the! fault! or!
reimbursed! by! the! debtor! is! deemed% to% be% a% donation,! which! negligence!of!the!creditor!(PAL,v,CA),
requires, the, debtor’s, consent.! But! the! payment! is! in! any! case! valid% • Payment! in! good! faith! to! person! in! possession! of! credit!
as%to%the%creditor!who!has!accepted!it.! (Art!1242),
! ,
Effects% of% Payment% by% 3rd% person% –% Interested% or% not% –% Does% not% Incapacitated%person%%
intend%to%be%reimbursed:% %
• Payment!is!deemed!as!a!donation/offer!of!donation!
Art.! 1241,! Par.! 1.! Payment! to! a! third! person! incapacitated! to!
• Donation!must!be!in!proper!form!(i.e.!if!above!P5K!it!must!
administer! his! property! shall! be! valid! if! he! has! kept! the! thing!
be!in!writing)!!
delivered!or!insofar!as!the!payment!has!been!beneficial!to!him.!!
!
!
f. In%obligation%to%give% • GENERAL!RULE:!Payment!not!valid!!
, • EXCEPTION:!When!payment!to!an!incapacitated!person!is!
Art.!1239.!In!obligation!to!give,!payment!made!by!one!who!does!not! valid:!
have!free!disposal!of!the!thing!due!and!capacity!to!alienate!it!shall! • If!creditor!has!kept!the!thing!delivered!
not%be%valid,!without!prejudice!to!the!provisions!of!Art!1427!under! • Insofar!as!payment!benefited!creditor!
Title!on!Natural!Obligations., • Benefit%to%the%creditor%need%not%be%proved!in!the!following!
, cases:!
Art.!1427.!When!a!minor!18?21!entered!into!a!contract!without!the! a. If! after! the! payment,! the! third! person! acquires! the!
consent!of!the!parent!or!guardian,!voluntarily!pays,a,sum,of,money, creditor’s!right!
or,delivers,a,fungible,thing!in!fulfillment!of!an!obligation,!there!shall! b. If! the! creditor! ratifies! the! payment! to! the! third!
be! no% right% to% recover! the! same! from! the! oblige! who! has! spent, or, person!
consumed,it,in,good,faith., c. If!by!the!creditor’s!conduct,!the!debtor!has!been!led!
to! believe! that! the! third! person! had! authority! to!
, receive!the!payment!!
i. Effects%of%Incapacity%of%the%payor% d. Assignment! of! credit! without! notice! to! debtor! (Art!
• No!free!disposal!and!no!capacity!to!alienate! 1626)! !
• Payment! is! invalid,! but! without! prejudice! to! !
natural!obligations! b. Third%person%
• Minor!who!entered!contract!without!consent!of! ,
parent/guardian!!
Art.! 1241,! Par.! 2.! Payment! to! a! third! person! shall! also! be! valid!
• No! right! to! recover! fungible! thing! delivered! to!
insofar!as!it!has!redounded!to!the!benefit!of!the!creditor.!!
the! creditor! who! spent! or! consumed! it! in! good!
faith! ,
! • GENERAL! RULE:! VALID! if! third! person! proves! that! it!
g. In%case%of%active%solidarity% redounded!to!creditor’s!benefit;!otherwise!VOID!
, • EXCEPTION:! When% proof% of% benefit% not% required" also!
applicable!to!INCAPACITATED!PERSONS!
Art.!1214.!The!debtor!may!pay!any!one!of!the!solidary!creditors,!but!
!
if! any! demand,! judicial! or! extrajudicial! has! been! made! by! one! of!
Art.!1241,!Par.!3.!Such!benefit!to!the!creditor!need!not!be!proved!in!
them,!payment!should!be!made!to!him.!!!
the!following!cases:!
, 1. If! after! the! payment,! the! third! person! acquires! the!
2. TO!WHOM!PAYMENT!CAN!BE!MADE! creditor’s!right!
! 2. If!the!creditor!ratifies!the!payment!to!the!third!person!
a. In%general% 3. If! by! the! creditor’s! conduct,! the! debtor! has! been! led! to!
believe!that!the!third!person!had!authority!to!receive!the!
, payment!!
Art.!1240.!Payment!shall!be!made!to!the!person!in%whose%favor!the! 4. Assignment!of!credit!without!notice!to!debtor!(Art!1626)!
obligation!has!been!constituted,!or!his!successor%in%interest,!or!any! 5. Payment!in!good!faith!to!any!person!in!possession%of%the%
person!authorized!to!receive!it.!! credit! shall! release! the! debtor! (Art! 1242)! "! EFFECT:!
! Debtor!is!released!
1. Creditor/person!in!whose!favor!obligation!was!constituted!! !
2. His!successor!in!interest! • Possession!of!the!credit!should!be!distinguished!from!
3. Any!person!authorized!to!receive!it!! possession! of! the! title! or! evidence! of! the! credit.!
!!!!
When! the! document! is! payable! to! the! bearer,! iii. Pay%money%
payment!to!holder!is!valid.!But!if!document!is!payable! ,
to! assignment,! mere! possession! of! the! document! is!
not! possession! of! credit! itself! but! only! of! title,! and! Art.! 1249.! The! payment! of! debts! in! money! shall! be! made! in! the!
currency!stipulated,!and!if!it!is!not!possible!to!deliver!such!currency,!
payment!to!him!is!not!valid.!
then!in!the!currency!which!is!the!legal!tender!in!the!Philippines.!!
!
The! delivery! of! promissory! notes! payable! to! order,! or! bills! of!
Art.! 1243.! Debtor! pays! creditor! after! being! judicially! ordered! to!
exchange! or! other! mercantile! documents! shall! produce! effect! of!
retain!debt!
payment! only! when! they! have! been! cashed,! or! when! through% the%
! fault%of%the%creditor%they%have%been%impaired.!!
• EFFECT:!Payment!not!valid!if!the!property!is!attached! In!the!meantime,!the!action!derived!from!the!original!obligation!
or!garnished!! shall!be!held!in!abeyance.!!
! !!
c. In%case%of%active%solidarity% • Legal,Tender,is!that!currency!which!a!debtor!can!legally!compel!
, a! creditor! to! accept! in! payment! of! a! debt! in! money! when!
Art.!1214.!The!debtor!may!pay!any!one!of!the!solidary!creditors,!but! tendered! by! the! debtor! in! the! right! amount.! (Black’s! Law!
if! any! demand,! judicial! or! extrajudicial! has! been! made! by! one! of! dictionary)!
them,!payment!should!be!made!to!him.!!! • EXCEPTION;!RA!4100,!RA!8183:!Foreign!currency!if!agreed!to!by!
, parties!!
!
• If!no!demand!is!made,!debtor!may!pay!to!any!of!the!
solidary!creditors! Art.! 1250.! In! case! of! an! extraordinary! inflation! or! deflation! of! the!
• If!any!judicial/extrajudicial!demand!is!made!by!any!of! currency! stipulated! should! supervene,! the! value! of! the! currency!at%
the!creditors!who!made!the!demand! the%time%of%the%establishment%of%the%obligation!shall!be!the!basis!of!
! the!payment,!unless!there!is!an!agreement!to!the!contrary.!
3. WHAT!IS!TO!BE!PAID!(“IDENTITY”)! !
! RA!529!
a. In%general% Under! this! Act,! payments! of! all! monetary! obligations! should! be!
made! in! currency! which! is! legal! tender! in! the! Philippines.! A!
• The!very!prestation!(thing!or!service)!due!
stipulation!providing!payment!in!a!foreign!currency!is!null!and!void,!
!
but!it!does!not!invalidate!the!entire!contract.!
b. In%obligations%to:% !
i. GIVE%a%specific%thing% RA!4100!
, Payment!by!means!of!instruments!of!credits!
Art.!1244,!Par.!1.!The!debtor!of!a!thing!cannot!compel!the!creditor! • Promissory! notes,! checks,! bills! of! exchange! and! other!
to! receive! a! different! one,! although! the! latter! may! be! of! the! same! commercial! documents! are! not! legal! tender! and,!
value!as,!or!more!valuable!than!which!is!due.!! therefore,! the! creditor! cannot! be! compelled! to! accept!
them.!
,
o The!creditor,!however,!if!he!chooses,!may!accept!
• Give!specific!things!itself!
them,! without! the! acceptance! producing! the!
• Accessions!and!accessories! effect! of! payment.! In! the! meantime,! the!
• If! with! loss,! improvements,! deterioration! "! Apply! Art! demandability! of! the! original! obligation! is!
1189! suspended.!
! o The!creditor!must!cash!the!instruments,!and!it!is!
ii. GIVE%a%generic%thing% only!when!it!is!dishonored!that!he!can!bring!an!
, action!for!non?payment!of!the!debt!
Art.! 1246.! When! the! obligation! consists! in! the! delivery! of! an! • Payment! by! means! of! mercantile! documents! does! not!
indeterminate! or! generic! thing,! whose! quality! and! circumstances! extinguish! the! obligation! until! they! have! been! cashed,! or!
have! not! been! stated,! the! creditor! cannot! demand! a! thing! of! unless! they! have! been! impaired! through! the! fault! of! the!
superior! quality.! Neither! can! the! debtor! deliver! a! thing! of! inferior! creditor.!
quality.!The!purpose!of!obligation!and!other!circumstances!shall!be! !
taken!into!consideration.!! !
, Cases:!
• GENERAL! RULE:! Creditor! cannot! demand! a! superior! ! !
quality;!Debtor!cannot!deliver!a!thing!of!inferior!quality!! ARRIETA!v.!NARIC,!supra,(Breach)!
• EXCEPTION:! Unless! quality! and! circumstances! have! been! Facts:!RTC!awarded!to!plaintiffs!the!amount!of!$286,000!as!damages!
stated,! purpose! and! other! circumstances! of! obligation! for! breach! of! contract.! However,! in! view! of! RA! 529,! dispositive!
considered.!! portion!of!the!decision!appeal!insofar!as!it!expresses!the!amount!of!
! damages!in!U.S.!currency!and!not!in!Philippine!Peso.!Only!question!
! left!is!what!rate!of!exchange!should!apply!in!the!conversion.!Should!
! it! be! at! the! time! of! the! breach,! at! the! time! the! obligation! was!
! incurred! or! at! the! rate! of! exchange! prevailing! on! the! promulgation!
! of!this!decision?!
!
!!!!
Held:! Citing! Eastboard, Navigation,, Ltd., V., Juan, Ysmael, &, Co.,, Inc.,, through! a! check! payable! to! Reyes,! as! evidenced! by! the! voucher!
any! agreement! to! pay! an! obligation! in! a! currency! other! than! signed!by!him.!Said!sheriff!absconded!with!the!check!and!could!not!
Philippine! legal! tender! I! null! and! void! as! contrary! to! public! policy,! be!found.!
and! the! most! that! could! be! demanded! is! to! pay! said! obligation! in! !
Philippine! currency! “to! be! measured! in! the! prevailing! rate! of! Held:! Acceptance! by! the! sheriff! of! petitioner’s! check! does! not,! per!
exchange!at!the!time!the!obligation!was!incurred.”! se,!operate!as!a!discharge!of!a!judgment!debt.!Checks!are!not!legal!
! tender! and! is! not! a! valid! payment! until! encashed.! In! this! case,! PAL!
KALALO!v.!LUZ! made!the!checks!payable!to!the!Sheriff!instead!of!Tan!and!provided!
Facts:! Respondent! contracted! plaintiff! to! render! engineer! design! the! opportunity! for! Reyes! to! misappropriate! it! for! himself.! The!
services.! Contract! stipulated! that! respondent’s! fees! would! be! a! cut! current! and! prudent! thing! to! do! for! PAL! was! to! have! issued! the!
from! the! fees! which! would! be! paid! to! plaintiff.! Pursuant! to! such! checks!in!the!intended!payee’s!name.!
stipulation,! respondent! argues! that! he! should! be! paid! $28,000,! !
which!is!20%!of!the!$140,000!contract!which!plaintiff!secured.!! DO!or!NOT!TO!DO!
! !
Held:! Payment! in! currency! other! than! Philippine! currency! is! Art.! 1244,! Par.! 2.! In! obligations! to! do! or! not! to! do,! an! act! or!
prohibited! by! RA! 529.! Said! law! states! that! obligations! incurred! forbearance! cannot! be! substituted! by! another! act! or! forbearance!
before! its! enactment! should! be! exchanged! at! the! rate! at! the! time! against!the!obligee’s!will.!
the! obligation! was! incurred.! However,! it! is! silent! as! to! obligations! !
incurred! after! its! enactment,! which! is! the! situation! in! the! case! at! • Substitution!cannot!be!done!against!the!will!of!creditor!
bar.!Logical!conclusion!is!that!rate!of!exchange!should!be!at!the!time! !
of! payment! of! this! judgment,! rather! than! that! at! the! time! of! the! c. Payment%of%interest%
breach.! !
! • Art.! 1956.! No! interest! shall! be! due! unless! it!
ST.!PAUL!FIRE!AND!MARINE!INSURANCE!v.!MACONDRAY! has!been!expressly!stipulated!in!writing.!!
Facts:!Consignee!Winthrop!Steams,!Inc.!filed!claims!against!insurer?
• Art!1253!Interest!must!be!satisfied!first!before!
plaintiff!after!a!drum!containing!drugs!and!medicine!reached!manila!
capital!
in! bad! condition,! to! which! the! latter! paid! a! total! of! $1,134.46.! In!
!
turn,! plaintiff! filed! claims! against! the! carrier! and! the! Manila! Port!
Service! for! the! recovery! of! said! amount,! which! included! other! 4. HOW!IS!PAYMENT!TO!BE!MADE!(“INTEGRITY”)!
expenses!such!as!duties!and!cost!of!survey!of!shipment.!In!addition,! a. In%general%
they!argued!that!exchange!rate!that!should!be!used!should!be!that! ,
prevailing! on! the! date! of! judgment! and! not! on! date! of! loss! or! Art.!1233.!A!debt!shall!not!be!understood!to!have!been!paid!unless!
damage.! the! thing! or! service! in! which! the! obligation! consists! has! been!
! completely%delivered%or%rendered!as!the!case!may!be.!!
Held:!The!bill!of!lading,!which!stipulates!the!liability!of!carrier,!clearly! !
shows!that!it!is!limited!to!the!C.I.F.!value!of!the!goods!which!appear! • GENERAL! RULE:! Partial! payment! is! not! allowed! "!
in!the!contract.!As!such,!it!is!limited!only!to!$550.70.!The!contention! Creditor! cannot! be! compelled! to! receive! partial!
of!plaintiff!that!rate!of!exchange!at!the!time!of!judgment!should!be! prestations;! Debtor! cannot! be! compelled! to! give! partial!
used! due! to! extraordinary! inflation! is! untenable! because! the! payments!!
obligation!of!the!carrier!to!pay!arose!on!the!date!it!failed!to!deliver! • EXCEPTIONS:!!
the! shipment! in! good! condition! and! should! be! converted! at! the! !
exchange!rate!existing!at!that!time.! CONTRARY%STIPULATION%
! !
PAPA!v.!A.V.!VALENCIA!
Art.! 1248,! Par.! 1.! Unless! there! is! an! express% stipulation% to% that%
Facts:! Respondents! filed! an! action! for! specific! performance! to!
effect,! the! creditor! cannot! be! compelled! partially! to! receive! the!
compel! plaintiff! to! deliver! land! title! to! them! after! tendering!
prestations,!in!which!the!obligation!consists.!Neither!may!the!debtor!
payment!in!check.!Plaintiff!argued!that!he!could!not!recall!in!detail! be!required!to!make!partial!payments.!!
such! transaction! between! them,! and! while! he! admits! to! issuing!
!
receipts!for!the!checks,!he!claims!that!they!were!never!cashed,!and!
DEBT%IS%PARTLY%LIQUIDATED%AND%PARTLY%UNLIQUIDATED%
pursuant! to! Art! 1249,! payment! never! produced! the! effect! of!
!
perfecting!a!sale.!
Art.!1248,!Par.!2.!However,!when!the!debt!is!in%part%liquidated%and%
!
in%part%unliquidated,!the!creditor!may!demand!and!the!debtor!may!
Held:! Since! there! was! no! denial! from! petitioner! that! there! was! a!
effect!the!payment!of!the!former!without!waiting!for!the!liquidation!
payment! by! check,! it! is! presumed! that! it! was! encashed,! especially!
of!the!latter.!!!
considering! that! 10! years! have! elapsed.! Acceptance! of! a! check!
!
implies!an!undertaking!of!due!diligence!in!presenting!it!for!payment.!
Granting! that! it! was! never! encashed,! it! is! through! the! own! fault! of! • When! the! different! prestations! in! which! the! obligation!
consists! are! subject! to! different! terms! or! conditions! which!
the!petitioner.!
affect!some!of!them!
!
PAL!v.!CA! • When! by! the! nature! of! the! obligation,! it! can! reasonably! be!
Facts:! CFI! Manila! rendered! judgment! against! PAL! and! ordered! it! to! expected!to!be!made!in!various!deliveries.!
indemnify!Amelia!Tan.!It!ordered!a!Writ!of!Execution!in!favor!of!Tan! • When! there! are! several! subjects/parties! are! bound! under!
and! duly! referred! it! to! Deputy! Sheriff! Reyes.! PAL! filed! a! motion! to! different!terms!and!conditions!
quash!said!Writ!on!the!bases!that!it!had!already!paid!the!obligation! • Compensation!!
!!!!
b. Substantial%performance%in%good%faith% !
, 5. WHEN!IS!PAYMENT!TO!BE!MADE!!
Art.!1234.!If!the!obligation!has!been!substantially!performed!in!good! !
faith,!the!obligor!may%recover%as%though%there%had%been%a%strict%and% When!obligation!is!due!and!demandable!but!debtor!may!pay!before!
complete%fulfillment,!less!damages!suffered!by!the!oblige.!! due! date! if! period! is! for! the! benefit! of! debtor.! If! for! the! benefit! of!
both!the!debtor!and!creditor,!debtor!may!only!prior!to!the!due!date!
,
if!creditor!consents!thereto.!!
REQUISITES%OF%SUBSTANTIAL%PERFORMANCE:%%
!
1. Attempt! in! good! faith! to! perform,! without! any! willful! or!
intentional!departure! a. In%general%
2. Deviation!from!the!obligation!must!be!slight! ,
3. Omission!or!defect!is!unimportant!and!technical! Art.!1169.Debtor!incurs!in!delay!from!the!time!creditor!judicially%or%
4. Must!not!be!so!material!that!intention!of!the!parties!is!not! extrajudicially%demands!fulfillment!of!the!obligation!!
attained!! ,
! b. See%Chapter%2:%Delay%
c. Estoppel% !
, 6. WHERE!PAYMENT!IS!TO!BE!MADE!!
Art.! 1235.! When! oblige! accepts, the, performance,! knowing! its! !
incompleteness! or! irregularity,! and! without, expressing, any, protest, Art.!1251,!Par.!1.!Payment!shall!be!made!in!the!place!designated!in!
or,objection,!the!obligation!is!deemed!fully%complied%with.!! the!obligation.!!
, !
• Constitutes!a!“waiver!of!defect!in!performance”! "!there! a. If%no%place%is%expressly%designated%
must! however! be! an! intentional! relinquishment! of! a!
,
known! right.! Waiver! will! not! result! from! mere! failure! to!
assert!a!claim!for!defective!performance!when!the!thing!or! Art.! 1251,! Par.! 2.! There! being! no! express! stipulation! and! if! the!
work!is!received! undertaking!is!to!deliver!a!determinate!thing!the!payment!shall!be!
• Applies! only! when! he! knows! the! incompleteness! or! made! wherever! the! thing! might! be! at! the! moment! the! obligation!
irregularity! of! the! payment,! and! he! accepts! the! was!constituted.%
performance!without!expressing!any!protest!or!objection,! %
obligation! is! deemed! extinguished.! Estopped! from! Art.! 1251,! Par.! 3.! In! any! other! case! (not! to! deliver! a! determinate!
complaining! thing),!the!place!of!payment!shall!be!at!the!domicile!of!the!debtor.%
! %
d. Presumptions% in% payment% of% interests% and% Art.!1251,!Par.!4.!If!the!debtor!changes!his!domicile!in!bad!faith,!or!
installments% after! he! has! incurred! in! delay,! the! additional! expenses! shall! be!
% borne! by! him.! (Absent! such! circumstances,! it! will! be! borne! by! the!
INTEREST% creditor),
%
,
Art! 1176.! The! receipt! of! the! principal! by! the! creditor,! without! 7. EXPENSES!OF!MAKING!PAYMENT!!
reservation! with! respect! to! the! interest,! shall! give! rise! to! the! !
presumption!that!said!interest!has!been!paid.!
Art.! 1247.! Unless! it! is! otherwise! stipulated,! the! extraMjudicial,
!
expenses, required, by, the, payment! shall! be! for! the! account! of! the!
Art.! 1253.! If! the! debt! produces! interest,! payment! of! the! principal!
debtor! with! regard! to! the! judicial! costs,! the! Rules! of! Court! shall!
shall! not! be! deemed! to! have! been! made! until! the! interests! have!
govern.!!
been!covered.%
!
% • This!does!not!apply!to!expenses!incurred!by!creditor!in!going!to!
• This! provision! has! an! obligatory! character,! not! merely! the!debtor’s!domicile!to!collect.!
suppletory,!and!cannot!be!dispensed!with!except!by!mutual!
agreement.% C. Application(of(Payments(
o If!principal!amount!is!received!without!reservation!as!to!
interest!%
(
"!interest!is!presumed!to!have!been!paid% Art.!1252.!He!who!has!various!debts!of!thesame!kind!in!favor!of!one!
! and! the! same! creditor,! may! declare! at! the! time! of! making! the!
INSTALLMENTS% payment,!to!which!of!them!the!same!must!be!applied.!UNLESS!the!
% parties!so!stipulate,!or!when!the!application!of!payment!is!made!by!
the! party! for! whose! benefit! the! term! has! been! constituted,!
Art.!1176,!Par.!2.!The!receipt!of!a!later!installment!of!debt,!without!
application!shall!not!be!made!as!to!debts!that!are!not!yet!due.!!
reservation! as! to! prior! installments! shall! likewise! raise! the!
!
presumption!that!such!installments!have!been!paid.!!
If! the! debtor! accepts! from! the! creditor! a! receipt! in! which! an!
%
application!of!the!payment!is!made,!the!former!cannot!complain!of!
• If!a!latter!installment!is!received!without!reservation!to!prior!
the!same,!UNLESS!there!is!a!cause!for!invalidating!the!consent.!!
installments%
!
"!prior!installments!are!presumed!to!have!been!paid!%
!
!!!!
1. CONCEPT! o Cannot!make!partial!payments!
Designation! of! the! debt! which! is! being! paid! by! a! debtor! who! o Cannot!apply!to!unliquidated!debts!
has! SEVERAL, OBLIGATIONS, OF, THE, SAME, KIND,! in! favor! of! o Cannot! choose! a! debt! whose! period! is! for! the!
onecreditor!to!whom!payment!is!being!made! benefit! of! the! creditor,! and! period! has! not! yet!
! arrived!
Cases:! o Right! to! apply! debts! must! be! exercised! at! the!
! time!when!debt!is!paid!
REPARATIONS!COMMISSION!v.!UNIVERSAL!DEEP!SEA!FISHING! !
Facts:! Respondent! obtained! 6! trawl! boats! from! petitioner! under! 3! 3. RULES!IN!APPLICATION!OF!PAYMENT!
contracts! of! conditional! purchase! and! sale! of! reparations! goods.! a)Right! to! apply! must! be! exercised! at! the! time! of! the!
Manila!Surety!&!Fidelity!Co.!Inc.!acted!as!a!security!for!respondent,! payment!(Art!1252)!
st
which!guaranteed!all!1 !installment!payments.!Defendant!defaulted! b) Creditor! may! undertake! application,! subject! to! the!
in!payments,!and!petitioner!filed!action!to!recover.!Surety!company! debtor’s! approval.! Once! the! latter! accepts! receipt! of!
argues!that!the!P10,!000!downpayment!paid!by!respondent!should! application,! he! cannot! complain! UNLESS! there! is! a! cause!
st
be!applied!to!the!1 !installment.! for!invalidating!the!contract.!(Art!1252)!
! c) Apply!to!interest!first.!BOTH!(1)!interest!stipulated!and!(2)!
Held:!Liability!of!Surety!Company!could!not!be!reduced.!Its!reliance! interest!due!because!of!debtor’s!delay!
on! Art! 1254! is! misplaced! since! it! applies! only! to! persons! owing! !
several! debts! to! one! creditor,! not! to! sureties! whose! obligation! is! Art.! 1253.! If! debt! produces! interest,! payment! of! the! principal! shall!
both! “contingent! and! singular.”! The! debt! of! respondent! is! not! just! not!be!deemed!to!have!been!made!until,the,interest,are,covered.!!
st
the! 1 ! installment! but! 10! equal! yearly! installments.! Thus,! said! !
downpayment!could!not!be!applied!to!only!one!of!them.! a. If%rules%are%inapplicable%and%application%cannot%
!
be%inferred%
PACULDO!v.!REGALADO!
Facts:!Plaintiff!and!defendant!entered!into!a!contract!of!lease!over!a! ,
parcel! of! land! with! a! Wet! Market! building,! and! 11! other! leased! Art.! 1254.! When! payment! cannot! be! applied! in! accordance! with!
properties,!and!8!units!of!heavy!equipment.!When!Paculdo!failed!to! preceding! rules,! or! if! application! can! not! be! inferred! from! other!
pay!monthly!rental!fees,!Regalado!sent!a!demand!letter!demanding! circumstances,! the! debt! which! is! MOST! ONEROUS! TO! THE! DEBTOR!
payment! of! back! rentals,! including! a! notice! that! failure! to! comply! among!those!due,!shall!be!deemed!to!have!been!satisfied.!!
would!cause!cancellation!of!lease!contract.!Plaintiff!contends!that!he! If! the! debts! are! of! the! same! nature! and! burden,! the! payment!
was! not! in! arrears! for! the! monthly! rentals! of! the! subject! property! shall!be!applied!to!all!of!them!proportionately.!!
since!he!has!in!fact!paid!more!than!what!is!due!him,!but!respondent! !
applied!portions!of!such!payment!to!his!other!obligations.! i. Meaning%of%“MOST%ONEROUS%TO%DEBTOR”%%
! • Fundamentally! a! question! of! act,! which! courts!
Held:!As!of!July!1992,!Paculdo!had!already!paid!P10,949,447,!which! must!determine!on!the!basis!of!circumstances!of!
if!applied!solely!to!rentals!for!the!Wet!Market!property!would!be!in! each!case!e.g.!!
excess! of! P1M! already.! Respondent! erringly! applied! portions! of! o Co?debtor! (especially! if! solidary)! vs.! sole!
rental!fees!to!his!other!obligations!even!if!the!vouchers!and!receipts! debtor!
show! that! payments! made! were! for! the! rentals.! Such! were! proof! o Same!amount,!younger!vs.!older!
that! petitioner! had! declared! as! to! which! obligations! must! the! o Secured!vs.!unsecured!
payment!be!applied.!In!any!case,!application!to!the!other!debts!was! • It! is! for! the! court! to! determine! which! is! most!
contrary!to!law!since!respondent!applied!it!to!a!debt!not!yet!due!and! onerous!
demandable,! and! should! have! automatically! applied! it! to! the! lease!
of!subject!property,!it!being!the!most!onerous!obligation.! D. Payment(by(Cession(
! (
2. REQUISITES!FOR!APPLICATION!OF!PAYMENT! Art.! 1255.! The! debtor! may! cede! or! assign! his! property! to! his!
a. Same!debtor! creditors! in! payment! of! his! debts.! This! cession,! UNLESS! there! is!
b. Same!creditor!! stipulation! to! the! contrary,! shall! only! release! the! debtor! from!
c. Various! debts! are! of! same! kind,! generally! monetary! responsibility! for! the! net% proceeds% of% the% thing! assigned.! The!
character! agreements! which! on! the! effect! of! the! cession,! are! made! between!
• Must!be!liquidated! the!debtor!and!his!creditors!shall!be!governed!by!law.!!
• Cannot!apply!to!prestation!to!give!specific!thing! !
• Can!apply!to!prestation!to!give!generic!thing! 1. CONCEPT:!!
d. All!obligations!must!be!due! • Assignment! or! abandonment! of! the! universality! of! all! the!
• EXCEPTIONS:!! properties!of!the!debtor!for!the!benefit!of!his!creditors!in!
o Mutual!agreement!of!parties!! order! that! the! latter! may! sell! the! same! and! apply! the!
o Upon! consent! of! the! party! in! whose! favor! the! proceeds!thereof!to!the!satisfaction!of!their!credits.!!
term!was!established! • Debtor!transfers!all!the!properties!not!subject!to!execution!
e. Payment!is!not!enough!to!extinguish!all!debts! in!favor!of!creditors!that!the!latter!may!sell!them!and!thus!
f. Debtor!has!preferential!right!to!choose!the!debt!to!which! apply!the!proceeds!to!their!credits!
his!payment!is!to!be!applied!! • Initiative!comes!from!the!debtor!but!must!be!accepted!by!
• Not!absolute;!LIMITATIONS:! the!creditors!in!order!to!become!effective!
! • Usually!done!by!debtors!in!state!of!insolvency!!
!!!!
2. REQUISITES!FOR!PAYMENT!BY!CESSION!! Case:!
e. Plurality!of!debts! !
f. Plurality!of!creditors! DBP!v.!CA!
g. Complete!or!partial!insolvency!of!the!debtor! Facts:! Respondent! CUBA! loaned! P300,! 000! from! DBP! thru!
h. Abandonment! of! ALL! of! debtor’s! property! not! promissory! notes,! in! which! she! assigned! her! leasehold! rights! to! a!
subject!to!execution!! fishpond! as! security.! She! defaulted! in! her! payments,! DPB!
i. Acceptance! or! consent! on! the! part! of! the! appropriated! said! rights! without! any! foreclosure! proceedings,! and!
creditors! sold!it!to!a!third!party.!CUBA!filed!an!action!and!RTC!found!that!such!
! agreement! violated! Art! 2088,! NCC! because! it! was! essentially! a!
3. EFFECTS!OF!PAYMENT!BY!CESSION!! mortgage,! and! for! being! a! pactum, commissorium.! DPB! appealed,!
saying!it!was!a!novation,!since!promissory!notes!were!substituted!by!
1) Creditors! do! not! become! the! owner;! they! are! merely!
subsequent!assignment!of!rights.!CA!reversed!RTC!
assignees!with!authority!to!sell!
!
2) Debtor! is! released! up! to! the! amount! of! the! net! proceeds!
Held:!The!stipulations!of!the!deed!of!assignments!clearly!show!that!
of!the!sale,!unless!there!is!a!stipulation!to!the!contrary! "!
the!assignment!was!by!way!of!security!for!the!payment!of!the!loans.!
not!total!extinguishment!!
It! did! not! constitute! NOVATION,! since! obligation! to! pay! the!
3) Creditor! will! collect! credits! in! the! order! of! preference!
promissory! notes! still! subsists,! it! being! not! incompatible! with! the!
agreed! upon,! or! in! default! of! agreement,! in! order!
assignment! of! rights.! It! was! not! CESSION! since! there! was! only! one!
ordinarily!established!by!law.!!
creditor!while!Art!1255!needs!2!or!more!creditors!and!assignment!of!
all!of!debtor’s!property.!It!was!also!not!DATION!since!assignment!of!
E. Dation(in(Payment((Dacion(en(Pago)( rights!was!a!mere!security,!and!could!not!satisfy!indebtedness.!CUBA!
! was!still!obligated!to!pay!aside!from!the!forfeiture!of!her!rights!
Art.!1245.!Dation!in!payment,!whereby!property!is!alienated!to!the! !
creditor!in!satisfaction!of!a!debt!in!money,!shall!be!governed!by!law! 2. REQUISITES!FOR!DATION!IN!PAYMENT!
of!sales.!! 1. Consent! of! creditor! "! sale! presupposes! the! consent! of!
! both!parties!
1. CONCEPT:!Delivery!and!transmission!of!ownership!of!a!thing!by! 2. Dacion!will!not!prejudice!of!other!creditors!
the!debtor!and!to!the!creditor!as!an!accepted%equivalent%of%the% 3. Debtor!is!not!declared!judicially!insolvent!!
performance%of%the%obligation.!! 4. Not! a! pactum, commissorium! (a! stipulation! entitling! the!
• Considered!to!be!a!novation!by!change!of!the!object! creditor! to! appropriate! automatically! the! thing! given! as!
• An! onerous! contract! of! alienation! because! object! is! security!in!case!debtor!fails!to!pay)!
given!in!exchange!of!credit! !
• Original!obligation!is!extinguished!ipso,jure! 3. EFFECTS!OF!DATION!IN!PAYMENT!
• Special! form! of! payment! because! one! element! of! • Extinguishes! payment! to! the! extent! of! the! value! at! the!
payment!is!missing:!“identity”! thing!to!be!delivered,!either!as!agreed!upon!by!the!parties,!
! or! as! may! be! proved,! unless! the! parties! by! agreement!
a. Distinguished%from%payment%by%cession%% expressly! or! impliedly! or! by! their! silence,! consider! the!
thing! as! equivalent! to! the! obligation! in! which! case! the!
!
obligation!is!totally!extinguished.!!
DATION!IN!PAYMENT! PAYMENT!BY!CESSION!
• If!property!delivered!to!the!creditor!assumption!that!it!is!a!
Transfers! the! ownership! over! Only! the! possession! and!
PLEDGE,!as!it!involves!less!transmission!of!rights!unless!it!is!
the! thing! alienated! to! the! administration! (not! the!
clearly!the!intention!of!parties!
creditor! ownership)! are! transferred! to!
!
the! creditors,! with! an!
Case:!!
authorization! to! convert% the%
!
property% into% cash! with! which!
FILINVEST!CREDIT!CORPORATIONS!v.!PHILIPPINE!ACETYLEENE!CO.!
the!debts!shall!be!paid!
Facts:! Respondent! PAC! purchased! from! Alexander! Lim! a! motor!
May! totally! extinguish! the! Only! extinguishes! the! credits! to!
vehicle! thru! promissory! notes! and! executed! a! chattel! mortgage! as!
obligation! and! release! the! the! extent! of! the! amount!
security.!Subsequently,!Lim!assigned!all!his!rights!in!the!promissory!
debtor!! realized! from! the! properties!
notes! and! mortgage! in! favor! of! plaintiff! FCC.! PAC! defaulted! in!
assigned,! unless! otherwise!
payments!so!FCC!demanded!said!amount.!PAC!expressed!its!decision!
agreed!upon!
to!return!the!mortgaged!vehicle!as!full!satisfaction!of!debt!but!FCC!
Cession! of! only! some! specific! Involves! ALL! the! property! of! the!
refused.!
thing! debtor!!
!
Transfer! is! only! in! favor! of! one! There! are! various,! plurality! of! Held:!Dation!en!pago!is!the!transmission!of!ownership!of!a!thing!by!a!
creditor!to!satisfy!a!debt! creditors! debtor!to!the!creditor!as!an!accepted!equivalent!of!its!performance!
Usually!only!one!creditor! Several!creditors! of!an!obligation.!Since!it!partakes!in!the!nature!of!being!a!contract!of!
Does!not!presuppose!insolvency! Debtor!is!insolvent!at!the!time!of! sale,!the!essential!elements!of!consent,!object!certain,!and!cause!or!
of!the!debtor! the!assignment! consideration! must! be! present.! Evidence! fails! to! show! that! FCC!
An!act!of!novation! Not!an!act!of!novation! consented! that! mere! delivery! of! mortgaged! vehicle! could! be!
Both! are! substituted! ! construed! as! actual! payment.! Mere! return! does! not! constitute!
performances!of!obligations!! dation! in! payment! in! the! absence! of! the! true! intention! of! the!
! parties.!
!!!!
F. Tender( of( Payment( and( i. Purpose%%
• Avoid! performance! of! an! obligation! becoming!
Consignation(( more! onerous! to! the! debtor! by! reasons! not!
! imputable!to!him!!
1. TENDER!OF!PAYMENT! • Duty!of!attending!indefinitely!to!its!preservation,!
a. Concept:%% without!remedy!to!be!relieved!from!the!debt!
1) The! act! of! offering! the! creditor! what! is! due! him! !
together!with!a!demand!that!the!creditor!accept!the! b. Requisites%of%Consignation%%
same!! 1. There!is!a!debt!due!
• When! creditor! refuses! without! just! cause! to! 2. The!consignation!of!the!obligation!was!made!because!
accept! payment,! he! is! in! mora, accipiendi! and! of!some!legal!cause!
debtor! is! released! from! responsibility! if! he! • Previous!valid!tender!was!unjustly!refused!
consigns!the!thing!due! • Other! circumstances! making! previous! tender!
• Manifestation! made! by! debtor! to! creditor! of! exempt!!!
desire!to!comply!with!obligation! 3. Prior! notice! of! consignation! had! been! given! to! the!
st
• Preparatory! act! to! consignation;! does! not! cause! person!interested!in!the!obligation!(1 !notice)!
extinguishment! of! obligation! unless! completed! 4. Actual! deposit/consignation! with! proper! judicial!
by!consignation! authority!
nd
• Required! ONLY! when! the! creditor% refuses% 5. Subsequent!notice!of!consignation!(2 !notice)!
without%just%cause%to%accept%payment! • May! be! complied! with! by! the! service! of!
• What! are! the! examples! of! unjust! cause! for! summons!upon!the!defendant!creditor!together!
refusal! with!a!copy!of!the!complaint!!
o There! was! ! a! previous! tender! of! payment,! • Should! be! given! to! all! interested! in! the!
without! which! the! consignation! is! performance!of!obligations:!passive!(co?debtors,!
ineffective! guarantors,! sureties)! or! active! (solidary! co?
o Tender! of! payment! was! of! the! very! thing! creditors,!possible!litigants)!
due,! or! in! case! of! money! obligations,! that! !
the!legal!tender!currency!was!offered! i. When%tender%and%refusal%not%required%
o !Tender!of!payment!was!unconditional!
,
o Creditor!refused!to!accept!payment!without!
Art!.1256!Par!2!Consignation!alone!shall!produce!the!same!effect!in!
just!cause!
the!following!cases:!
• What!are!the!examples!of!just!cause!for!refusal!!
1. Creditor!is!absent!or!unknown!or!does!not!appear!at!place!
o Debt!is!not!yet!due!and!the!period!is!for!the!
of!payment!
benefit!of!the!creditor!
o Payment!by!third!persons!not!interested!in! 2. Incapacitated!to!receive!payment!at!the!time!it!is!due! "!
need!not!be!legally!declared!
the!fulfillment!of!the!obligation! "!because!
3. Without!just!case,!he!refuses!to!give!a!receipt!
to! begin! with,! tender! presupposes! capacity!
4. Two!or!more!persons!claim!the!same!right!to!collect!
of!the!payor!
5. Title!of!the!obligation!has!been!lost!
2) Accrual!of!interest!will!be!suspended!from!the!date!of!
such!tenderif!immediately!deposited!with!the!court! %
, ii. Two%notice%requirement%%
b. Requisites%of%a%Valid%Tender%of%Payment%% !
FIRST%NOTICE:%
• Made!in!lawful!currency!
!
• Should!include!interest!due!
Art.! 1257,! Par.! 1.! In! order! that! the! consignation! of! the! thing! due!
• Must! be! unconditional;! but! the! creditor! cannot! vary!
may!release!the!obligor,!it!must!FIRST%be!announced%to%the%persons%
the!terms!of!a!tender!accepted!by!him!
interested!in!the!fulfillment!of!the!obligation.!!
• Unaccepted! offer! in! writing! to! pay! is! equivalent! to!
,
actual!production!and!tender!of!money!or!property!
• Purpose!of!this!notice!is!to!give!the!creditor!the!chance!to!
! reflect! on! his! previous! refusal! to! accept! payment!
2. CONSIGNATION! considering! that! the! expenses! of! consignation! shall! be!
, charged! against! him,! and! that! in! case! of! loss! of! the! thing!
a. Concept% consigned,!he!shall!bear!the!risk!thereof.,
• The!act!of!depositing!the!thing!due!with!the!court!or! • Lack!of!notice!does!not!invalidate!consignation,!but!simply!
judicial! authorities! whenever! the! creditor! cannot! makes! the! debtor! liable! for! the! expenses! occasioned!
accept!or!refuses!to!accept!payment.!! thereby.,
!
• Generally!requires!prior!tender!of!payment!
!
• Made!by!depositing!the!things!due!at!the!disposal!of!
!
judicial!authority!(includes!sheriff)!
!
!
!
!
!
!
!
!!!!
SECOND%NOTICE:% i. With%creditor’s%approval%%
! !
Art.! 1258,! Par.! 2.! The! consignation% having% been% made,! the! EFFECTS:!
interested!parties!shall!also!be!notified!thereof.!! 1. Revival!of!the!obligation!and!relationship!between!creditor!and!
! debtor! is! restored! to! the! condition! in! which! it! was! before! the!
• Purpose! of! this! notice! is! to! enable! the! creditor! to! consignation!!
withdraw! the! thing! or! sum! deposited! in! case! he! accepts! 2. Guarantors! and! sureties! are! completely! releases! from! the!
the!consignation! obligation! upon! the! consignation,! and! their! liability! cannot! be!
! revived!without!their!consent.!
Effects!of!non[compliance:! 3. Solidary!debtors!are!released!from!their!solidary!liability!to!the!
! creditor! but! his! liability! to! co?debtor! for! his! corresponding!
Art.! 1257,! Par.! 2.! The! consignation! shall! be! ineffectual! if! it! is! not% share!subsists!
made% strictly% in% consonance! with! the! provisions! which! regulate! ,
payment.!(Soco,v,Militante),
ii. Without%creditor’s%approval%%
!
%
c. Effects%of%Consignation%% EFFECTS:!!
• When!properly!made,!charge!against!the!creditor% Cannot!be!done.!Once!the!consignation!is!accepted!by!the!creditor!
or! approved! by! the! Court,! obligation! is! extinguished.! Thus! debtor!
Art.! 1260,! Par.! 1.! Once! the! consignation! has! been! duly! made,! the! can!no!longer!withdraw.!
debtor!may!ask!the!judge!to!order!the!cancellation!of!the!obligation.!! !
! f. Expenses%of%consignation%%
• The! debtor! is! released! in! the! same! manner! as! if! he! had! ,
performed! the! obligation! at! the! time! of! consignation,! Art!.1259.!The!expenses!of!consignation,!when!properly!made,!shall!
because!this!produces!the!effect!of!a!valid!payment.!! be!charged!against%the%creditor,
• The! accrual! of! interest! on! the! obligation! is! suspended! !
from!the!moment!of!the!consignation.!! The!consignation!is!deemed!properly!made:!
• The!deteriorations!or!loss!of!a!thing!or!amount!consigned! !
occurring!without!fault!of!the!debtor!must!be!borne!by!the! • When!the!creditor!accepts!the!thing!or!sum!deposited,!
creditor,! because! the! risks! of! the! thing! are! transferred! to! without!objection,!as!payment!of!the!obligation!
the!creditor!from!the!moment!of!deposit.!! • When! the! creditor! questions! the! validity! of! the!
• Any! increment! or! increase! in! value! of! the! thing! after! the! consignation,!and!the!court,!after!hearing,!declares!that!
consignation!inures!to!the!benefit!of!the!creditor.!! it!has!been!properly!made!
! • When! the! creditors! neither! accepts! nor! questions! the!
d. Withdrawal% by% debtor% BEFORE% acceptance% by% validity!of!the!consignation,!and!the!court!after!hearing,!
creditor%OR%approval%by%the%Court% orders!the!cancellation!of!the!obligation!
• Before!the!consignation!is!effected,!the!debtor!is!still! !
the!owner!and!he!may!withdraw!it.!(TLG,v,Flores)! Cases:!
! !
Art.!1260,!Par.!2.!Before!the!creditor!has!accepted!the!consignation,! DE!GUZMAN!v.!CA!
or! before! a! judicial! declaration! that! the! consignation! has! been! Facts:!De!Guzman!sold!2!parcels!of!land!to!Singh,!the!full!amount!of!
properly! made,! the! debtor% may% withdraw% the% thing% or% sum% which!is!to!be!paid!on!Feb.!17,!1975.!2!days!before!such!date.!Singh!
deposited!allowing!the!obligation!to!remain!in!force.!! requested!De!Guzman!to!furnish!her!copies!of!necessary!documents,!
! which! the! latter! refused.! To! avoid! litigation,! they! executed! a!
EFFECTS%OF%WITHDRAWAL%BEFORE%CONSIGNATION%IS%FINAL:%, Compromise! Agreement! which! stipulated! that! delivery! of! payment!
1) Obligation!remains!in!force! was! to! be! made! before! the! judge.! Petitioner! filed! for! issuance! of!
2) Debtor! bears! all! the! expenses! incurred! because! of! the! Writ! of! Execution! for! respondent’s! failure! to! comply! with! said!
consignation!! stipulation!
! !
e. Withdrawal% by% debtor% AFTER% proper% Held:!Failure!to!deliver!the!payment!to!petitioners!was!not!the!fault!
of! respondents.! Records! show! that! respondent! went! to! the! sala! of!
consignation% the! judge! on! the! appointed! day! of! payment! but! petitioner! wasn’t!
, there! to! receive! it.! It! was! only! later! that! his! counsel! appeared! and!
Art.! 1261.! If! the! consignation! having! been! made,! the! creditor! invited! them! to! petitioner’s! house! but! he! was! also! not! there.!
should! authorize! the! debtor! to! withdraw! the! same,! he! shall! lose% Counsel! then! promised! to! call! them! as! soon! as! De! Guzman! arrived!
every% preference% which% he% may% have% over% the% thing.! The! co? home!but!there!was!no!call.!So!on!the!next!working!day,!respondent!
debtors,!guarantors,!and!sureties!shall!be!released.!! deposited! the! remaining! balance! with! the! Clerk! of! Court.! Since!
, deposit! was! made! in! good! faith! and! delay! is! the! fault! of! the!
% petitioner,! there! has! been! substantial! compliance! with! the!
Compromise!Agreement!
% !
% !
% !
!!!!
TLG!INTERNATIONAL!CONTINENTAL!ENTERPRISING,!INC.!v.!FLORES! pay! balance! would! forfeit! the! reservation! fee! in! favor! of! petitioner!
Facts:! Petitioner! here! intervened! in! a! case! as! a! sub?lessee! in! an! and! non?delivery! of! documents! would! obligate! petitioner! to! return!
action! of! declaratory! relief.! To! protect! his! rights,! it! voluntarily! P600,! 000! +! 18%! annual! interest.! Petitioner! failed! to! deliver! so! he!
deposited!the!sum!of!P3,!750!by!way!of!consignation.!Its!motion!to! twice! tried! to! tender! his! payment! to! respondent! but! latter! refused!
withdraw! the! same,! however,! was! denied! on! that! CFI! hadno! to! accept,! arguing! that! it! did! not! include! the! monthly! interest! and!
authority! to! authorize! withdrawal! since! it! has! not! ordered! the! attorney’s! fees! that! they! orally! agreed! upon.! Because! of! refusals,!
intervenor!to!make!any!deposit! petitioner!sent!notice!that!he!is!consigning!amount!with!Makati!RTC!
! Held:! All! essential! requisites! of! a! valid! consignation! were!
Held:!Pursuant!to!Art!1260!NCC,!the!debtor!is!entitled!to!withdraw! present.!Amount!tendered!is!sufficient!since!it!is!only!the!option!fee!
the! deposit! either! before! the! consignation! is! accepted! by! the! plus!interest!which!are!stated!in!the!default!clause.!Also,!manager’s!
creditor!or!prior!to!the!judicial!approval!of!such!consignation.!In!the! check!was!deemed!to!be!valid!since!respondent!did!not!object!to!the!
case! at! bar,! case! was! dismissed! before! either! of! them! was! done.! form.!
Thus,!withdrawal!should!have!been!allowed.!Also,!as!the!contention!
of! the! CFI,! per! Art! 1258,! deposited! money! is! at! the! disposal! of!
judicial!authority!and!thus!could!have!authorized!its!withdrawal.!
III. Loss*or*Impossibility*
!
McLAUGLIN!v.!CA! A. Loss(of(the(Thing(Due(
Facts:! Petitioner! and! private! respondent! entered! into! a! contract! of! 1. CONCEPT!
conditional! sale! but! respondent! failed! to! pay! the! balance.! In! a! • It!is!not!limited!to!obligations!to!give,!but!extends!to!those!
Compromise! Agreement,! respondent! acknowledged! his! which! are! personal,! embracing! therefore! all! causes! which!
indebtedness!and!agreed!to!pay!P1000!per!month!until!obligation!is! may!render!impossible!performance!of!the!prestation.!
fully! paid! with! the! stipulation! that! failure! to! comply! would! rescind! • Generally!applies!to!determinate!things!
the! deed! of! conditional! sale.! On! Nov! 1980,! respondent! tendered! • Must! be! subsequent! to! the! execution! of! the! contract! in!
payment! but! petitioner! refused! to! accept! it.! RTC! granted! Writ! of! order!to!extinguish!the!obligation!!
Execution! for! rescission! of! deed.! Respondent! filed! a! Motion! for! • If! impossibility! already! existed! when! the! contract! was!
Reconsideration,! tendering! at! the! same! time! a! certified! manager’s! made,!the!result!is!not!extinguishment!but!inefficacy!of!the!
check! of! P76,! 059.71! payable! to! petitioner! and! covering! the! entire! obligation! under! Art! 1348! (impossible! things! or! services!
obligation.!CA!reversed! cannot! be! object! of! contracts)! and! Art! 1493! (Sales;! loss!
! object!of!contract,!contract!without!any!effect).!
Held:! While! the! Compromise! Agreement! states! that! failure! to! pay! !
would!entitle!petitioner!to!rescind!deed,!RA!6552!provides!a!30!day! Art.! 1189,! Par.! 2.! If! the! If! the! thing! is! lost! through! the! fault! of! the!
grace! period! for! debtors! to! pay! balance.! Flores’! tender! of! a! check! debtor,!he!shall!be!obliged!to!pay!damages;!it!is!understood!that!the!
deposited!in!court!was!a!valid!payment!well!within!the!grace!period.! thing! is! loss! when! it! perishes,! or! goes! out! of! commerce,! or!
However,! records! show! that! the! check! was! subsequently! withdraw! disappears!in!such!a!way!that!its!existence!is!unknown!or!it!cannot!
and! replaced! by! cash,! but! the! cash! was! not! deposited! with! the! be!recovered.!
Court.! As! such,! while! he! had! preserved! his! rights! as! a! vendee! by! a! !
timely! valid! tender,! he! remains! liable! for! payment! of! his! obligation!
2. KINDS!
because!of!his!failure!to!deposit!the!amount!due!in!Court.!
! a. As%to%extent%
MEAT!PACKING!CORP.!v.!SANDIGANBAYAN! i. Total%
Facts:!MPCP!entered!into!a!lease?purchase!agreement!with!PIMECO,! ii. Partial%
which!stipulates!that!the!contract!is!automatically!deemed!cancelled! !
and!forfeited!upon!default!in!payments!of!rentals!equivalent!to!the! 3. REQUISITES!
cumulative! sum! total! of! 3! annual! payments.! In! 1986,! PCGG!
1. It!must!be!lost!or!destroyed:!
sequestered! all! assets! of! PIMECO! including! the! leased! property.!
• without!the!fault!of!the!debtor!
MPCP! sent! PIMECO! a! notice! of! rescission! for! non?payment! of!
• before!the!debtor!incurs!in!delay!
rentals.! PCGG! tendered! to! MPCP! checks! amounting! to! P5,! 000,000!
• after!the!obligation!has!been!constituted!
which!the!former!refused,!arguing!that!agreement!already!rescinded!
!
since! outstanding! debt! of! more! than! P12,! 000,000! is! already! more!
than!3!years’!worth!of!installments.! 4. PRESUMPTION!
! !
Held:! MPCP’s! ground! for! refusal! of! tender! of! payment! is! the! Art.!1265!Whenever!the!thing!is!lost!in!the!possession!of!the!debtor,!
rescission!clause.!However,!since!PCGG’s!tender!and!consignation!of! it!shall!be!presumed!that!the!loss!was!due!to!his!fault,!unless!there!is!
P5M! was! approved! by! Sandiganbayan,! and! is! therefore! a! valid! proof! to! the! contrary,! and! without! prejudice! to! the! provisions! of!
tender,!the!accumulated!back!rental!were!reduced!to!around!P7M,! article!1165.!This!presumption!does!not!apply!in!case!of!earthquake,!
which!is!less!than!3!years’!worth!of!installments.!As!such,!rescission! flood,!storm,!or!other!natural!calamity.!
cannot!lie! !
! • The!burden!of!explaining!the!loss!of!a!thing!in!the!possession!of!
PABUGAIS!v.!SAHIJWANI! the!debtor!belongs!to!him.!The!debtor!must!show!that!he!is!free!
Facts:!Petitioner!sold!a!parcel!of!land!to!respondent!for!P15M,!P600,! from!negligence,!for!negligence!is!presumed!from!the!mere!fact!
000! of! which! the! latter! aid! as! option/reservation! fee! and! the! of!loss.!(Tolentino)!
remaining! balance! to! be! paid! within! 60! days,! simultaneous! with! o Except! in! case! of! natural! calamity! (eg! earthquake,! flood,!
petitioner’s! delivery! of! necessary! documents.! Agreement! also! storm),!where!lack!of!fault!of!the!debtor!is!likely!and!it!is!
included! a! penal! clause! which! states! that! failure! of! respondent! to! unjust!to!presume!negligence!on!his!part.!(Tolentino)!
!!!!
2. EFFECTS! !
• As!long!as!there!are!things!of!the!kind!stipulated,!whether!
a. In%obligation%to%give%a%specific%thing%% or! not! they! are! possessed! by! the! obligor,! the! obligation!
! subsists,! because! generic! things! are! not! considered! lost.!
(Tolentino)!
Art.! 1262! An! obligation! which! consists! in! the! delivery! of! a!
determinate! thing! shall! be! extinguished! if! it! should! be! lost! or! • Food!for!thought:!The!maxim! genus!never!perishes is!not!
destroyed! without! the! fault! of! the! debtor,! and! before! he! has! actually! true.! (Labitag,! 2014)! [When]! all! the! things! of! the!
incurred!in!delay.! kind!disappear!or!perish,!the!obligation!to!deliver!a!generic!
When!by!law!or!stipulation,!the!obligor!is!liable!even!for!fortuitous! object!is!extinguished.!(Tolentino)!
events,!the!loss!of!the!thing!does!not!extinguish!the!obligation,!and! • Delimited!generic!obligations!?!When!there!is!a!limitation!of!
he!shall!be!responsible!for!damages.!The!same!rule!applies!when!the! the!generic!object!to!a!particular!existing!mass!or!group!of!
nature!of!the!obligation!requires!the!assumption!of!risk.! things,! the! obligation! is! extinguished! by! the! loss! of! the!
! particular!mass!or!group!or!limited!quantity!from!which!the!
In! the! absence! of! law! or! stipulation! to! the! contrary,! prestation!has!to!be!taken,!or!by!the!impossibility!of!getting!
•
impossibility!of!performance,!without!the!negligence!of!the! from!it!the!things!for!the!prestation.!(Tolentino)!
parties,!prevents!enforcement!of!an!obligation.!(Tolentino)! !
• The! extinguishment! of! the! obligation! due! to! loss! of! the! c. In%case%of%partial%loss%%
thing! or! impossibility! or! performance! affects! both! debtor! !
and! creditor;! the! entire! juridical! relationship! is!
Art.! 1264.! The! courts! shall! determine,! whether! under! the!
extinguished,! so! that! if! the! creditor! has! himself! an!
circumstances,!the!partial!loss!of!the!object!of!the!obligation!is!so!
obligation,!this!is!likewise!extinguished.!(Tolentino)!
important!as!to!extinguish!the!obligation.!
• The!debtor!is!released!from!liability;!but!he!cannot!demand!
the! prestation! which! has! been! stipulated! for! his! benefit.! !
(Tolentino)! • This! article! is! based! on! the! presumption! that! the! partial! loss! is!
• Exceptions!to!the!law:! not! imputable! to! the! fault! or! negligence! of! the! debtor.!
o The! law! expressly! provides! that! the! debtor! shall! be! (Tolentino)!
liable!even!if!the!loss!is!due!to!fortuitous!events.!(Art.! • General!rule:!the!obligation!subsists!and!the!debtor!must!deliver!
1174)! the! impaired! object! to! the! creditor;! the! debtor! is! not! liable! for!
o Express!stipulation!of!the!parties.! damages.!(Tolentino)!
o The! nature! of! the! obligation! requires! the! assumption! Except,! when! the! portion! that! is! lost! is! of! such! an! extent! or!
•
of!risk.! nature! that! the! obligation! would! not! have! been! constituted!
o Concurrent!fault!or!negligence!of!the!debtor.! without!it,!then!the!obligation!is!extinguished.!(Tolentino)!
o Loss!occurs!after!the!debtor!has!incurred!in!delay.! In!any!case,!the!intention!of!the!parties!is!the!controlling!factor!
•
o Promise! to! deliver! the! same! thing! to! two! or! more! in!the!solution!of!each!case!of!partial!loss.!(Tolentino)!
different!parties.! !
o Art.!1268!below.! !
!
d. Action%against%third%person%%
Art.! 1268.! When! the! debt! of! a! thing! certain! and! determinate! !
proceeds!from!a!criminal!offense,!the!debtor!shall!not!be!exempted!
from!the!payment!of!its!price,!whatever!may!be!the!cause!for!the! Art.! 1269.! The! obligation! having! been! extinguished! by! the! loss! of!
loss,!unless!the!thing!having!been!offered!by!him!to!the!person!who! the!thing,!the!creditor!shall!have!all!the!rights!of!action!which!the!
should! receive! it,! the! latter! refused! without! justification! to! accept! debtor!may!have!against!third!persons!by!reason!of!the!loss.!
it.! !
! • This! refers! not! only! to! the! rights! and! actions! which! the! debtor!
Two! alternatives! open! to! the! debtor! in! case! of! unjust! may!have!against!third!persons,!but!also!to!any!indemnity!which!
•
refusal!to!receive:! the!debtor!may!have!already!received.!(Tolentino)!
• This! article! is! applicable! to! the! money! obtained! from! the!
o to! consign! the! thing! and! thereby! relieve! himself! from!
any!responsibility!for!such!thing,!or! insurance!of!the!thing!lost!or!destroyed.!(Tolentino)!
o to! just! keep! the! thing! in! his! possession,! with! the!
obligation!to!use!due!diligence,!subject!to!the!general!
rules! of! obligations,! but! no! longer! the! special! liability! B. Impossibility(of(Performance(
imposed!by!this!article.!(Tolentino)!
! 1. CONCEPT!!
b. In%obligation%to%give%a%generic%thing%% !
!
Art.! 1266.! The! debtor! in! obligations! to! do! shall! also! be! released!
Art.! 1263.! In! an! obligation! to! deliver! a! generic! thing,! the! loss! or! when! the! prestation! becomes! legally! or! physically! impossible!
destruction! of! anything! of! the! same! kind! does! not! extinguish! the! without!the!fault!of!the!obligor.!
obligation.!
!
! • This! article! refers! to! an! impossibility! which! arises! after! the!
! obligation!has!been!constituted.!
!!!!
• In! reciprocal! obligations,! the! release! of! the! debtor! due! to! • Art! 1262! Par! 2! (by! analogy)! Impossibility! due! to!
impossibility!of!performance!also!releases!the!creditor!from!the! fortuitous!events!does!not!extinguish!obligation!if:!
counter?prestation.! o By!law!!
! o By!stipulation!!
o Nature! of! the! obligation! requires!
Art.! 1267! When! the! service! has! become! so! difficult! as! to! be! assumption!of!risk!
manifestly! beyond! the! contemplation! of! the! parties,! the! obligor! • If! at! the! time! performance! becomes! impossible! the!
may!also!be!released!therefrom,!in!whole!or!in!part.! debtor!has!already!fulfilled!part!of!the!obligation,!the!
creditor!must!pay!the!part!done!so!long!as!he!benefits!
!
from! such! partial! compliance.! On! the! other! hand,! if!
• This! articles! states! in! our! law! the! doctrine! of! unforeseen!
the! debtor! has! already! received! something! from! the!
events,! rebus! sic! stantibus! (theory! in! public! international!
creditor,! he! must! return! anything! in! excess! of! what!
law).! The! parties! stipulate! in! the! light! of! certain! prevailing!
corresponds!to!the!part!already!performed!when!the!
conditions,! and! once! these! conditions! cease! to! exist! the!
impossibility!supervened.!
contract!also!ceases!to!exist.!
!
• Requisites!for!application!of!Art!1267!
a. Event!or!change!in!circumstances!could!not!have!been! i. impossibility distinguished from difficulty
foreseen!at!the!time!of!the!execution!of!the!contract!
b. Makes! the! performance! of! the! contract! extremely! DIFFICULTY! IMPOSSIBILITY!
difficult!but!not!impossible! Manifest! disequilibrium! in! the! See! discussion! on! physical! and!
c. Event!must!not!be!due!to!the!act!of!any!of!the!parties! prestations,! such! that! one! party! legal!impossibility.!
d. Contract!is!for!a!future!prestation!! would! be! placed! at! a!
• It!is!only!in!absolutely!exceptional!changes!of!circumstances! disadvantage! by! the! unforeseen!
that!equity!demands!assistance!for!the!debtor.!! event.!
! • the! event! or! change! in! 1. obligation! was! possible! at!
2. KINDS! circumstance!could!not!have! the!time!it!was!constituted!!
a. As%to%extent% been!foreseen!at!the!time!of! 2. subsequent!impossibility!
execution!of!the!contract! 3. without! the! fault! of! the!
i. Total% • it! makes! the! performance! debtor!
ii. Partial% extremely! difficult! but! not!
• The!rule!in!Art.!1264!may!be!applied.! impossible!
• Temporary!obstacles!to!the!performance!do!not! • the! event! is! not! imputable!
extinguish! the! obligation,! but! merely! delays! its! to!wither!party!
fulfillment,!unless!by!its!nature!or!the!will!of!the! • the! contract! is! for! a! future!
parties! it! has! to! be! performed! at! a! determinate! prestation!
time.! Unless,! the! obstacles! are! of! an! unknown! !
and!unforeseen!duration.! Cases:!
! !
b. As%to%source% OCCENA!v.!CA!
i. Legal% Facts:! Petitioners! who! are! landowners! had! a! subdivision! contract!
• Direct! ?! when! the! act,! by! reason! of! subsequent! with!Tropical!Homes!Inc,for!the!development!of!their!land.!Tropical!
law!is!prohibited! filed! a! complaint! for! modification! of! the! terms! and! conditions! of!
• Indirect!?!when!the!debtor!is!prevented!by!some! their!contract,!alleging!that!due!to!the!increase!in!the!price!of!oil!and!
supervening!legal!duty!(eg.!military!service)! its!derivatives!and!the!concomitant!worldwide!spiralling!of!prices!of!
ii. Physical:% all! commodities! including! basic! raw! materials! for! the! development!
work,! the! cost! of! development! has! risen! to! levels! which! are!
• the! act! by! reason! of! its! nature! cannot! be!
unanticipated,! unimagined,! and! not! within! the! remotest!
accomplished!
contemplation!of!the!parties!at!the!time!the!agreement!was!made,!
!
such!that!the!conditions!and!factors!which!formed!the!original!basis!
3. REQUISITES!?!Art!1266! of! the! contract! have! been! totally! changed.! THI! wanted! to! modify!
• obligation!was!possible!at!the!time!it!was!constituted!! their guarantee! to! petitioners! of! a! fixed! and! sole! share! equivalent!
• subsequent!impossibility!
to!40%!of!all!cash!receipts!from!the!sale!of!the!subdivision!lots .!They!
• without!the!fault!of!the!debtor!
wanted!to!change!it!to:! fixing!the!proper!shares!that!should!pertain!
!
to! the! herein! parties! out! of! the! gross! proceeds! from! the! sales! of!
4. EFFECTS! subdivided!lots .!
!
a. In%obligations%to%do% Held:!If!THI s!complaint!were!to!be!released!from!having!to!comply!
• Art! 1266! releases! debtor! from! obligation! if! with! the! subdivision! contract,! assuming! it! could! show! at! the! trial!
prestations! has! become! legally! or! physically! that! the! service! undertaken! contractually! by! it! had! become! so!
impossible!! difficult!as!to!be!manifestly!beyond!the!contemplation!of!the!parties,!
• Art!1267!releases!debtor!if!performance!has!become! then!CA!will!be!correct!in!upholding!THI s!complaint.!Without!Article!
so! difficult! to! be! so! manifestly! beyond! the! 1267,!THI!would!remain!bound!by!its!contract!under!the!theretofore!
contemplation!of!the!parties! prevailing! doctrine! that! performance! therewith! is! not! excused! by!
!!!!
the! fact! that! the! contract! turns! out! to! be! hard! and! improvident,! considered! under! this! article.! Mere! pecuniary! inability! to! fulfill! an!
unprofitable! or! impracticable,! ill! advised! or! even! foolish,! or! less! engagement!does!not!discharge!a!contractual!obligation;!neither!is!it!
profitable,!or!unexpectedly!burdensome,!since!in!case!a!part!desires! a!defense!to!an!action!for!specific!performance.!Regarding!the!fact!
to!be!excused!from!performance!in!the!event!of!such!contingencies! that!PNCC s!purpose!for!the!lease!contract the!use!of!the!premises!
arising,! it! is! his! duty! to! provide! therefore! in! the! contract.! THI s! as!a!site!for!a!rock!crushing!plant not!materializing,!this!also!does!
complaint! seeks! not! release! from! the! contract! but! modification,! not!invalidate!the!contract.!The!cause!or!essential!purpose!in!a!lease!
which! is! not! granted! to! the! courts! by! the! cited! article.! Tropical s! contract! is! the! use! or! enjoyment! of! the! thing.! Thus,! the! party s!
complaint!for!modification!of!contract!manifestly!has!no!basis!in!law! purpose!for!contracting!does!not!affect!the!validity!of!the!contract,!
and!therefore!states!no!cause!of!action.! or! its! existence.! The! fact! that! its! purpose! did! not! arise! does! not!
! mean!PNCC!is!entitled!to!a!release!from!its!obligation.!
NAGA!TELEPHONE!CO.!v.!CA! !
Facts:!The!parties!entered!into!a!contract!for!the!use!by!Natelco!of! b. In%case%of%partial%impossibility%=%Art.%1264%
Casureco's! electric! light! posts! in! Naga! City.! In! consideration,! The!courts!shall!determine!whether!it!is!so!important!
•
petitioners! agreed! to! install,! free! of! charge,! 10! telephone! as!to!extinguish!the!entire!obligation!
connections!for!the!use!by!Casureco.!"That!the!term!or!period!of!this!
contract! shall! be! as! long! as! the! party! of! the! 1st! part! (Natelco)! has!
need! for! the! electric! light! posts! of! the! party! of! the! 2nd! part!
(Casureco)!it!being!understood!that!this! IV. Condonation*or*Remission*
contract!shall!terminate!when!for!any!reason!whatsoever,!the!party!
of! the! second! part! is! forced! to! stop,! abandoned! its! operation! as! a!
public! service! and! it! becomes! necessary! to! remove! the! electric!
A. Concept(
lightpost. Casureco! filed! on! Jan.! 1989! against! petitioners! for! Condonation! is! an! act! of! liberality,! by! virtue! of! which,!
•
reformation! of! contract! with! damages,! on! the! ground! that! said! without! receiving! any! equivalent,! the! creditor! renounces!
contract!unduly!favours!Natelco.! the!enforcement!of!the!obligation!which!is!extinguished!in!
! its!entirety!or!in!that!part!or!aspect!of!the!same!to!which!
Held:!A!bare!reading!of!Art.!1267!reveals!that!it!is!not!a!requirement! the!condonation!refers.!
thereunder!that!the!contract!be!for!future!service!w/!future!unusual! It! is! an! essential! characteristic! of! remission! that! it! be!
•
change.! It! states! the! doctrine! of! unforeseen! events,! based! on! the! gratuitous! ,! that! there! is! no! equivalent! received! for! the!
principle! of! rebus! sic! stantibus.! Under! this! theory,! parties! stipulate! benefit! given;! once! such! equivalent! exists,! the! nature! of!
in! light! of! certain! prevailing! conditions,! and! once! these! conditions! the!act!changes!!
cease! to! exist,! the! contract! also! ceases! to! exist.! Disappearance! of! 1. Dation! in! payment! –! receive! a! thing! different! from!
the! basis! of! a! contract! gives! rise! to! relief! in! favor! of! the! party!
that!stipulated!
prejudiced.!However,!the!possible!consequences!of!merely!releasing!
2. Novation! –! object! or! principal! conditions! of! the!
the!parties!from!the!contract!could!lead!to:!1)!disruption!in!Natelco s! obligation!should!be!changed!
essential! service! to! the! public;! and! 2)! causing! prejudice! to!
3. Compromise! –! when! the! matter! renounced! is! in!
Casureco's!business!if!it!returns!the!telephone!units.! litigation! or! dispute! and! in! exchange! of! some!
! concession!which!the!creditor!receives!
PNCC!v.!CA!
• An! offer! of! a! donation! which! must! be! accepted! in! the!
Facts:! Private! respondents! leased! a! parcel! of! land! to! PNCC,! to! be!
proper!form!depending!on!the!law.!
used!as!premises!for!a!rock!crushing!plant!and!field!office.!The!lease!
• Failure! to! demand! payment! is! not! a! condonation,! there!
was!to!run!for!five!years,!with!rent!at!a!monthly!rate!of!P20k,!paid!
must! be! intention! to! donate,! unless! you! can! prove!
yearly!in!advance.!To!begin!the!rock!crushing!project,!PNCC!required!
intentional! failure! to! demand! and! prescriptive! period! has!
industrial! clearance! from! the! Ministry! of! Human! Settlement,! but! it!
ended!
was!only!able!to!obtain!a!Temporary!Use!Permit,!valid!for!two!years!
unless!revoked!sooner!by!the!Ministry.!Respondents!then!requested!
the!first!annual!rental!of!P240k.!PNCC!refused!to!pay,!reasoning!that! B. Kinds(
the!payment!of!rental!would!begin!from!the!date!of!issuance!of!the! (
industrial! clearance,! and! not! from! the! date! of! the! signing! of! the! 1. AS!TO!EXTENT!
contract.! It! also! expressed! the! intention! to! terminate! the! contract,! a. Total%
because! financial! and! technical! difficulties! had! forced! it! to!
b. Partial% ?!!refers!to!the!amount!of!indebtedness,!or!to!an!
discontinue!the!rock!crushing!project.!
accessory! obligation! (such! as! pledge! or! interest)! or! to!
Held:!Art.!1266!expressly!states!that!it!is!applicable!to!obligations!to!
some!other!aspect!of!the!obligation!(such!as!solidarity)!%
do.!The!obligation!in!the!lease!to!pay!rentals!is!an!obligation!to!give.!
!
PNCC! only! stated! the! alleged! uncertainties! in! government! policies!
on! infrastructure! projects,! and! failed! to! identify! specifically! the! 2. AS!TO!FORM!!
circumstances!brought!about!by!the!change!in!political!climate.!The!
unforeseen! event! and! causes! mentioned! by! PNCC! are! not! the! Art.!1270,!Par.!1.!Condonation!or!remission!is!essentially!gratuitous,!
legal/physical! impossibilities! contemplated! by! Art.! 1266.! The! and! requires! the! acceptance! by! the! obligor.! It! may! be! made!
principle!of!rebus!sic!stantibus!is!said!to!be!the!basis!for!Art.!1267,! expressly!or!impliedly.!
which!enunciates!the!doctrine!of!unforeseen!events.!However,!this!
is! not! an! absolute! application.! The! parties! to! the! contract! are! a. Express% - Made! formally! and! in! accordance! with! the!
presumed!to!have!assumed!the!risks!of!unfavorable!developments;! forms!of!ordinary!donations%
therefore,! only! absolutely! exceptional! changes! of! circumstance! are!
!!!!
b. Implied% - Inferred! from! the! acts! of! the! parties;! by! the! The! notation! “full! payment! of! IGLF! loan”! also! doesn’t! bind! private!
acts! of! the! creditor! he! had! every! intention! to! forgive! the! respondent.! It! merely! states! petitioners’! intention! in! making! the!
creditor!(Labitag)% payment.! If! private! respondent! really! condoned! the! amount! in!
question,! petitioners! should’ve! asked! for! a! certificate! of! full!
payment!from!respondent!corporation,!just!like!what!they!did!when!
C. Requisites( they! paid! off! their! first! loan.! The! countersigning! of! the! voucher! by!
( Destajo! did! no! more! than! acknowledge! the! receipt! of! payment! as!
1. The!debt!must!be!existing!and!demandable!at!the!time!the! she! had! no! authority! to! condone! any! indebtedness! as! her! duties!
remission!is!made;! were! limited! to! “issuing! official! receipts,! preparing! check! vouchers!
2. The!renunciation!of!the!debt!must!be!gratuitous,!without! and!documentation.”!
any!equivalent!or!consideration;!
3. The!debtor!must!accept!the!remission.!
!
D. Presumptions(
Art.! 1271! The! delivery! of! a! private! document! evidencing! a! credit,!
a. When%formalities%required% made! voluntarily! by! the! creditor! to! the! debtor,! implies! the!
renunciation!of!the!action!which!the!former!had!against!the!latter.!
Art.!1270!par.!2!One!and!the!other!kind!shall!be!subject!to!the!rules!
If! in! order! to! nullify! this! waiver! it! should! be! claimed! to! be! in!
which! govern! in! officious! donations.! Express! condonation! shall,!
officious,!the!debtors!and!his!heirs!may!uphold!it!by!proving!that!the!
furthermore,!comply!with!the!forms!of!donation.!
delivery!of!the!document!was!made!in!payment!of!the!debt.!
!
!
• It!is!a!bilateral!act!which!requires!acceptance!by!the!debtor!! Not!applicable!to!public!documents!because!there!is!always!a!
•
• Subject!to!the!rules!on!donations!with!respect!to!acceptance,! copy!in!the!archives!which!can!be!used!to!prove!the!credit.!!
amount!and!revocation!
• Surrender!of!weapon!of!enforcement!of!his!rights!
• Formalities! of! a! donation! are! required! in! the! case! of! an! !
express!remission! !
• Revocable!?!subject!to!the!rule!on!inofficious!donations!(The! Art.! 1272! Whenever! the! private! document! in! which! the! debt!
heirs!will!have!to!prove!that!the!condonation!was!excessive! appears!is!found!in!the!possession!of!the!debtor!it!shall!be!presumed!
such! that! their! legitime! is! impaired);! The! rules! and! laws!
that! the! creditor! delivered! it! voluntarily,! unless! the! contrary! is!
governing! acts! of! ingratitude! and! conditional! donations! do!
proved.!
not!apply.!
!
!
• Only!prima!facie!and!may!be!overcome!by!contrary!evidence!
Case:!
to! show! that! notwithstanding! the! possession! by! the! debtor!
!
of!the!private!document!of!credit,!it!has!not!been!paid.!
YAM!v.!CA!
!
Facts:! Petitioners! entered! into! a! Loan! Agreement! with! Assumption!
Art.!1274!It!is!presumed!that!the!accessory!obligation!of!pledge!has!
of! Solidary! Liability! whereby! they! were! given! P500,000! by! private!
been! remitted! when! the! thing! pledged,! after! its! delivery! to! the!
respondent.! Denominated! the! first! Industrial! Guarantee! and! Loan!
creditor,! is! found! in! the! possession! of! the! debtor,! or! of! a! third!
Fund! (IGLF),! the! loan! was! secured! by! a! chattel! mortgage! on! the!
person!who!owns!the!thing.!
printing! machinery! in! petitioners’! establishment.! Petitioners!
subsequently!obtained!a!second!IGLF!loan!of!P300,000.They!made!a!
partial! payment! of! P50,000! on! their! second! loan.! They! wrote! to!
private! respondent! on! their! proposal! to! settle! their! obligation,! to! E. Effects(
which! it! replied! with! a! counter?offer,! namely,! that! it! would! reduce! (
the! penalty! charges! up! to! P1.4M! provided! that! petitioners! can! pay! 1. IN!GENERAL!–!it!extinguishes!the!obligation!
their! obligation! on! or! before! July! 30,! 1986.! On! July! 31,! 1986,! !
petitioners!paid!P410,854.47,!receipt!of!which!was!acknowledged!by!
Destajo.! There! was! still! a! balance! of! P266,146.88! left,! respondent!
2. IN!CASE!OF!JOINT!OR!SOLIDARY!OBLIGATIONS!
filed! a! case! for! the! collection.! Petitioners! contended! that! after! !
receiving! respondent’s! letter! of! conditional! offer! to! reduce! their!
penalty!charges,!they!met!with!Sobrepenas,!president!of!respondent! Joint!Co[Debtors! Only!applies!to!the!share!of!the!
corporation.! The! latter! agreed! to! waive! the! penalties! and! service! joint!co?debtor!to!whom!the!
charges,! provided! that! petitioners! paid! the! principal! and! interest,! benefit!of!remission!was!given!
less! the! earlier! payment! of! P50,000.! This! is! why! they! only! paid! Joint!Creditors! Only!applies!to!the!amount!due!
P410,854.47,!with!the!voucher!having!the!notation!“full!payment!of! to!the!creditor!condoning!the!
IGLF!loan”.! obligation!
! Solidary!Creditors! Applies! to! the! entire!
Held:!Express!condonation!must!comply!with!the!forms!of!donation.! Solidary!Debtors! obligation!
Art.! 748,! par.! 3! provides! that! the! donation! and! acceptance! of! a!
!
movable,! the! value! of! which! exceeds! P5,000,! must! be! made! in!
!
writing,! otherwise! the! same! shall! be! void.! Additionally,! under! Art.!
!
417,!par.!1,!obligations,!actually!referring!to!credits,!are!considered!
!
movable! property.! In! this! case,! it’s! undisputed! that! the! alleged!
agreement! to! condone! P266,146.88! of! the! second! IGLF! loan! was!
never!made!in!writing.!
!!!!
F. Governing(Rules( C. Effects(
! 1. IN!GENERAL!
• One!and!the!other!kind!shall!be!subject!to!the!rules!which! !
govern! inofficious! donations.! Express! condonation! shall,!
Art.! 1275.! The! obligation! is! extinguished! from! the! time! the!
furthermore,! comply! with! the! forms! of! donation.!
characters!of!creditor!and!debtor!are!merged!in!the!same!person.!
Condonation! is! an! offer! of! a! donation! which! must! be!
accepted!in!the!proper!form!depending!on!the!law! !
Obligation!is!extinguished.!
(
!
Art.! 1270.! Condonation! or! remission! is! essentially! gratuitous,! and! Extinction!of!Real!Rights!by!Confusion!
requires!the!acceptance!by!the!obligor.!It!may!be!made!expressly!or! • Real! rights! like! usufruct,! mortgage,! pledge,! right! of!
impliedly.! repurchase,! lease! record,! etc.,! may! be! extinguished! by!
One!and!the!other!kind!shall!be!subject!to!the!rules!which!govern! merger! when! any! such! rights! is! merged! with! ownership!
inofficious!donations.!Express!condonation!shall,!furthermore.( which!is!the!most!comprehensive!real!right!
!
( 2. IN!CASE!OF!JOINT!OR!SOLIDARY!OBLIGATIONS!
!
G. Renunciation( of( Principal( or( Art.!1277.!Confusion!does!not!extinguish!a!joint!obligation!except!as!
Accessory(Obligations( regards!the!share!corresponding!to!the!creditor!or!debtor!in!whom!
the!two!characters!concur.!!
(
1. EFFECTS! !
1. JOINT!OBLIGATIONS!!
• Each!debtor!has!his!own!creditor!to!whom!he!is!liable!and!
Art.!1273!The!renunciation!of!the!principal!debt!shall!extinguish!the!
confusion! taking! place! in! the! person! of! any! debtor! or!
principal! obligations;! but! the! waiver! of! the! latter! shall! leave! the!
creditor!does!not!affect!the!others!
former!in!force.!
• Confusion! will! extinguish! only! the! share! corresponding! to!
the!creditor!or!debtor!in!whom!the!two!characters!concur!
2. RATIONALE:!The!accessory!follows!the!principal,!not!the!other! 2. SOLIDARY!OBLIGATIONS!
way!around.! • Merger! in! the! person! of! one! of! the! solidary! debtors! shall!
extinguish!the!entire!obligation!because!it!is!also!a!merger!
V. Confusion*or*Merger*of*Rights* in!the!other!solidary!debtors.!(Art!1215)!
• Person!in!whom!two!characters!concur!in!effect,!paid!the!
entire! debt,! and! may! claim! reimbursement! from! his! co?
A. Concept( debtors!for!the!shares!which!correspond!to!them!
!
• This,!however,!is!without!prejudice!to!the!provisions!of!Art!
MERGER! OR! CONFUSION! is! the! meeting! in! one! person! of! the!
qualities! of! the! creditor! and! the! debtor! with! respect! to! the! same! 1219! "!Solidary!co?debtor!who!has!been!remitted!is!still!
liable!to!co?debtors!if!one!of!the!had!paid!the!obligation!in!
obligation.!!
full!prior!the!remission!
• Erases!the!plurality!of!subjects!of!the!obligation!!
• Reason! or! basis! for! confusion:! a! mode! of! extinguishing!
obligations!because!it!is!absurd!that!a!person!should!enforce! D. Confusion( in( Principal( or( Accessory(
an! obligation! against! himself;! where! there! is! a! confusion! of! Obligation(
rights,!the!purposes!for!which!the!obligation!may!have!been!
created!are!deemed!realized!
!
• May! be! revoked,! as! a! result! of! which! the! obligation! is! Art.! 1276.! Merger! which! takes! place! in! the! person! of! the! principal!
recreated! in! the! same! condition! that! it! had! when! merger! debtor! or! creditor! benefits! the! guarantors.! Confusion! which! takes!
took!place! place! in! the! person! of! any! of! the! latter! does! not! extinguish! the!
• CAUSE!OF!MERGER:!Anything!that!brings!about!succession!to! obligation.!
the! credit! e.g.! debtor! inherits! credit! from! the! creditor.! !
However,! cannot! be! the! other! way! around! because! under! • Merger! releases! the! guarantor! because! their! obligation! is!
the! present! law,! heirs! do! not! inherit! the! debts! of! their! merely!accessory!!
predecessors.! • When! guarantor! acquires! the! credit,! his! obligation! as!
guarantor! is! extinguished,! but! the! principal! obligation!
subsists! which! he! can! enforce! against! the! debtor! and! other!
B. Requisites(for(Confusion( co?guarantors.!!
1. Must!take!place!between!the!creditor!and!the!principal!
• When! mortgaged! property! belongs! to! a! third! person,! and!
debtor!(Art!1276)!
mortgagee! acquires! a! part! of! the! property,! the! same! is!
2. The! very! same! obligation! must! be! involved,! for! if! the!
released! from! the! encumbrance.! Credit! is! not! extinguished,!
debtor! acquires! rights! from! the! creditor,! but! not! the!
even!in!part.!
particular!obligation!in!question,!there!will!be!no!merger!
• When!mortgage!acquires!ownership!of!the!entire!mortgaged!
3. Confusion! must! be! total! or! as! regards! the! entire!
property,! mortgage! is! extinguished;! but! obligation! secured!
obligation;!must!be!complete!and!definite!!
thereby! is! not! necessarily! extinguished;! may! become! an!
!
unsecured!obligation.!
!!!!
VI. Compensation* 1. DISTINGUISHED!FROM!CONFUSION!
!
A. Concept( CONFUSION! COMPENSATION!
Involves!only!one!obligation! There! must! always! be! two!
! obligations!
Art.!1278.!Compensation!shall!take!place!when!two!persons,!in!their! There! is! only! one! person! in! Two! persons! who! are! mutually!
own!right,!are!creditors!and!debtors!of!each!other.! whom! the! characters! of! debtors! and! creditors! of! each!
! creditor!and!debtor!meet! other!in!two!separate!obligations,!
Compensation! is! a! mode! of! extinguishing! the! obligation! to! the! each! arising! from! a! different!
concurrent! amount! of! the! debts! of! two! persons! who,! in! their! own! cause!
right,!are!reciprocally!debtors!and!creditors!of!each!other.!! Impossibility!of!payment! Indirect!payment!
• Abbreviated!payment!!
Offsetting! of! two! obligations! which! are! reciprocally!
•
extinguished!if!they!are!of!equal,value!or!extinguished!to!the!
B. Kinds(
concurrent!amount!if!of!different,values.!! 1. AS!TO!EXTENT!
• Balancing! between! two! obligations,! involves! a! figurative! a. Total%=%when!two!obligations!are!of!the!same!amount%
operation! of! weighing! two! obligations! simultaneously! in! b. Partial%=%when!the!amounts!are!not!equal;!compensation!
order!to!extinguish!them!to!the!extent!in!which!the!amount! as!to!the!concurrent!amount,!balance!to!be!paid%
of!one!is!covered!by!the!other.!! %
• Payment!is!simplified!and!assured!between!persons!who!are!
indebted!to!each!other.!!
2. AS!TO!ORIGIN!
• Although! it! takes! place! by! operation! of! law,! it! must! be! a. Legal% =% takes! place! by! operation! of! law! when! all!
alleged! and! proved! by! the! debtor! who! claims! its! benefits.! requisites!are!present!even!without!the!knowledge!of!the!
Once! proved,! its! effect! retroacts! to! the! moment! when! the! parties!
requisites!provided!by!law!concur.!! b. Conventional/Voluntary%=% when!the!parties!agree!to!
! compensate! their! mutual! obligations! even! if! some!
DISTINGUISHED%FROM%COUNTERCLAIM:%% requisite! provided! in! Art.! 1279! is! lacking,! such! as! those!
! provided!in!Art.!1282,!which!is!an!exception!to!the!general!
COUNTERCLAIM! COMPENSATION! rule!that!only!debts!which!are!due!and!demandable!can!be!
Must!be!pleaded!to!be!effectual! Takes!place!by!operation!of!law,! compensated%
and!extinguishes!reciprocally!the! %
two! debts! as! soon! as! they! exist! Art.! 1282.! The! parties! may! agree! upon! the! compensation! of! debts!
simultaneously! which!are!not!yet!due.%
No!such!requirement! Requires!that!both!debts!consist!
in! money,! or! if! the! things! due!
!
are! consumable,! they! be! of! the! Requisites!of!Voluntary!Compensation!
same!kind!and!quality! • Each! of! the! parties! can! dispose! of! the! credit! he! seeks! to!
! compensate!
DISTINGUISHED%FROM%PAYMENTS:% • They!agree!to!the!mutual!extinguishment!of!their!credits!
! !
PAYMENT! COMPENSATION! c. Judicial%–%takes!place!by!order!from!a!court!in!a!litigation!
Takes! effect! by! act! of! Takes!effect!by!operation!of!law! i.e.,!when!the!defendant,!who!is!creditor!of!the!plaintiff!for!
the!parties! an! unliquidated! amount,! sets! up! his! credit! as! a!
Capacity! to! dispose! of! Such! capacity! is! not! necessary,! counterclaim! against! the! plaintiff,! and! his! credit! is!
the! thing! paid! and! capacity! because! it! takes! place! by! operation! liquidated!by!the!judgment,!thereby!compensating!it!with!
to! receive! are! required! for! of!law!and!not!by!the!acts!of!parties! the!credit!of!the!plaintiff.!
debtor!and!creditor! !
Performance! must! be! There! may! be! partial! Art.! 1283.! If! one! of! the! parties! to! a! suit! over! an! obligation! has! a!
complete!and!indivisible! extinguishment!of!an!obligation!! claim! for! damages! against! the! other,! the! former! may! set! it! off! by!
! proving!his!right!to!said!damages!and!the!amount!thereof.!
! %
Advantage!of!Compensation!over!Payment!
%
• Simple,! taking! effect! without! action! by! either! party! to!
extinguish!their!respective!obligations! %
• More!guaranty!in!making!the!credit!effective,!because!there!is! %
less!risk!of!loss!by!the!creditor!due!to!insolvency!or!fraud!of!the! %
creditor! %
! %
! %
! %
! %
!
!!!!
d. Facultative%=% when! it! can! be! set! up! only! by! one! of! the! • That! both! debts! consists! in! a! sum! of! money,! or! if! the! things!
parties! ! who,! however,! has! the! right! to! object! to! it,! such! due!are!consumable,!they!be!of!the!same!kind!and!also!of!the!
as!when!one!of!the!obligations!has!a!period!for!the!benefit! same!quality!if!the!latter!has!been!stated!
of!one!party!alone!and!who!renounces!that!period!so!as!to! o Thing! must! be! fungible,! that! is,! things! of! the! same! kind!
make!the!obligation!due! which!in!payment!can!be!substituted!for!each!other!
• When!legal!compensation!cannot!take!place!for!want! ! Whether! prestations! refer! to! fungibles! will! depend!
of!some!legal!requisites! largely! on! the! will! of! the! parties! "! there! can! be!
• As! compared! with! conventional:! facultative! is! compensation! between! two! obligations! to! deliver! a!
unilateral,! while! conventional! depends! upon! cow!and!a!carabao,!if!willed!by!parties!
agreement!of!both!parties! ! When! obligations! refer! to! determinate! or! specific!
• Example:!! things,!there!can!be!no!compensation!
o A!is!obliged!to!deliver!to!B!an!Arabian!horse;!B!is! !
obliged!to!deliver!to!A!any!horse!–!B!can!set!up! • That!the!two!debts!are!due!
compensation! by! waiving! his! right! and! simply! o Debt!has!already!matured!
accept!any!horse! !
o Compensation! between! depositor! and! • That!they!be!liquidated!and!demandable!
depository,! upon! waiver! by! the! former! of! the! • “Liquidated! debts”! –! when! its! existence! and! amount! are!
benefit! given! by! law! (no! compensation! in! determined!or!determinable!
depositum);! depositor! can! assert! compensation! o Compensation! cannot! extend! to! unliquidated,! disputed!
if!depository!sues!him!for!his!debt!under!another! claim!existing!from!breach!of!contract!
obligation! • “Demandable”!–!enforceable!in!court!
• What!are!not!subject!to!compensation!
o Period!which!has!not!yet!arrived,!including!the!case!when!
C. Legal(Compensation( one!party!is!in!a!state!of!suspension!of!payments!
! ! Facultative!compensation:!There!can!be!a!case!where!
1. REQUISITES! in!the!party,!to!whom!the!benefit!of!a!period!is!given,!
! waives! such! period,! thereby! converting! obligation! to!
Art.! 1279.! In! order! that! compensation! may! be! proper,! it! is! a! pure! one,! making! it! due! and! demandable! "! can!
necessary:!!! now!set!up!compensation!
1. That!each!one!of!the!obligors!be!bound!principally,!and!that!he! o Suspensive!condition!has!not!yet!happened!
be!at!the!same!time!a!principal!creditor!of!the!other;!! o Obligation!cannot!be!sued!upon!i.e.!natural!obligation!
2. That!both!debts!consist!in!a!sum!of!money,!or!if!the!things!due! o One!of!the!debts!has!already!prescribed!"!Moment!when!
are!consumable,!they!be!of!the!same!kind,!and!also!of!the!same! two!debts!co?existed,!and!not!when!compensation!was!set!
quality!if!the!latter!has!been!stated;!! up,! is! material;! if! at! the! time! the! two! debts! co?exist,!
3. That!the!two!debts!be!due;!! neither!has!prescribed,!prescription!of!one!afterwards!will!
4. That!they!be!liquidated!and!demandable;!! not!prevent!compensation!
5. That! over! neither! of! them! there! be! any! retention! or! o Natural!obligations!are!not!legally!demandable!
controversy,! commenced! by! third! persons! and! communicated! !
in!due!time!to!the!debtor.! • No! retention! or! controversy! has! been! commenced! by! a! third!
! party!
! o Retention! –! credit! of! one! of! the! parties! is! subject! to! the!
REQUISITES%FOR%LEGAL%COMPENSATION:% satisfaction!of!the!claim!of!a!third!person!
• Mutual! debtors! and! creditors! in! their! own! right,! and! as! o Controversy!–!third!person!claims!he!is!the!creditor!of!one!
principals! of!the!parties!
• There!can!be!no!compensation!when!one!party!is!occupying!a! o Retention! or! controversy! must! be! communicated! “in! due!
representative! capacity! i.e.! guardian,! administrator;! no! time”!"!before!legal!compensation!takes!place!
compensation!if!one!owes!a!debt!personally!to!the!other,!and! o When! one! obligation! is! simple,! and! the! other! is!
has!a!claim!in!a!representative!capacity!against!the!latter! alternative,! or! facultative,! there! can! be! no! legal!
• A!guarantor!or!surety!is!not!a!principal;!principal!debtor!cannot! compensation!
set! up! by! way! of! compensation! what! his! creditor! owes! to! his! o When!one!obligation!has!a!penal!clause,!and!the!other!has!
surety! none,!legal!compensation!is!not!prevented!
• Exception:! A! guarantor! may! set! up! compensation! as! regards! !
what!the!creditor!may!owe!the!principal!debtor!(Art.!1280)! a. “Due”%distinguished%from%“Demandable”%
o If! the! principal! debtor! has! a! credit! against! the! creditor,!
• An!obligation!that!is!due!is!demandable!
which! can! be! compensated,! it! would! mean! the!
• However,!not!all!debts!that!are!demandable,!are!due!
extinguishment! of! the! guaranteed! debt;! either! totally! or!
o When! obligation! is! payable! on! demand,! the!
partially!
obligation! is! not! yet! due! where! no! demand! has!
• Solidary! debtor! cannot! set! up! the! obligation! of! the! creditor! in!
been!made!
favor!of!a!co?debtor,!except!as!regards!the!share!of!the!latter!!
!
!
!
!
!
!
!
!
!!!!
Cases:! Held:! Parties! are! not! both! principally! bound! with! respect! to! the!
! remittances;!neither!are!they!at!the!same!time!principal!creditor!of!
GAN!TION!v.!CA! the!other.!Only!Sapphire!Shipping!is!principally!bound!as!a!debtor!of!
Facts:! Lessee! owes! Lessor! P4,000! as! rents! in! arrears.! Lessor! filed! PNB! to! the! extent! of! the! double! credits.! PNB,! on! the! other! hand,!
ejectment!case;!obtained!favorable!judgment!in!municipal!court,!but! was! an! implied! trustee,! who! was! obliged! to! deliver! to! Citibank! the!
was! later! reversed! by! CFI,! entitling! the! Lessee! to! an! award! of! the! remittances!for!the!benefit!of!Sapphire!Shipping.!
sum!of!P500!as!attorney’s!fees.!Lessee!demands!for!payment!of!said!
attorney’s! fees;! lessor! claims! there! has! been! legal! compensation.! MIRASOL!v.!CA!
Lessee! claims! that! no! compensation! can! be! had,! as! he! is! not! the! Facts:! PNB! financed! Mirasols! sugar! production! under! a! crop! loan!
creditor! in! that! obligation;! P500! was! a! trust! fund! for! his! lawyer! financing! scheme.! Mirasols! executed! mortgages,! empowering! PNB!
which!he!would!turn!over!to!the!latter.!! to! sell! their! crops! and! to! apply! proceeds! as! payment! of! their!
! obligation.! PD! 579! was! issued! by! Marcos,! which! authorized! PNB! to!
Held:! There! is! compensation.! Award! of! attorney’s! fees! is! made! in! finance!Philex’s!purchases,!and!directed!that!whatever!profit!Philex!
favor!of!the!litigant,!not!of!his!counsel.!The!litigant!is!the!judgment! made! from! foreign! sales! was! to! be! remitted! to! a! special! fund! of!
creditor!and!who!may!enforce!the!judgment!by!execution.!It!would! national! government.! PNB! demanded! Mirasols! to! settle! their! due!
be!unjust!to!compel!lessor!to!pay!his!debt!for!P500!when!admittedly! obligations.!Mirasols!failed!to!pay;!mortgaged!properties!foreclosed!
his!creditor!owes!him!P4,000.! but! leaving! a! deficiency! of! P12M.! Mirasols! claim! that! loans! have!
! been! fully! paid! by! virtue! of! legal! compensation—outstanding! debt!
SILAHIS!MARKETING!CORP.!v.!IAC! offset!by!unliquidated!amounts!owed!to!them!by!PNB.!
Facts:! De! Leon! sold! various! items! of! merchandise! to! Silahis! for! P! !
22,913.75;!latter!failed!to!pay.!De!Leon!filed!complaint!for!collection.! Held:! There! is! no! legal! compensation.! They! are! not! mutually!
Silahis!filed!counter?claim,!presenting!a!Debit!Memo!for!P22,200!as! creditors!and!debtors!of!each!other.!PNB!retained!nothing!from!the!
unrealized! profit! for! supposed! commission! that! he! should! have! proceeds!of!the!sale!of!crops,!as!it!was!remitted!to!the!Government.!
received! from! De! Leon! for! the! sale! of! sprockets! made! directly! to! Furthermore,! compensation! cannot! take! place! where! one! claim,! as!
Dole!Philippines.!! in! the! instant! case,! is! still! the! subject! of! litigation,! as! the! same!
! cannot!be!deemed!liquidated.!
Held:! No! compensation.! Compensation! takes! place! when! two! !
persons,!in!their!own!right,!are!creditors!and!debtors!to!each!other.! 2. EFFECTS!!
Compensation!is!likewise!not!proper!where!the!claim!of!the!person! !
asserting!the!set?off!against!the!other!is!neither!clear!nor!liquidated;! Art.! 1290.! When! all! the! requisites! mentioned! in! article! 1279! are!
compensation! cannot! extend! to! unliquidated,! disputed! claim! present,! compensation! takes! effect! by! operation! of! law,! and!
existing! from! breach! of! contract.! Whether! De! Leon! is! liable! to! pay! extinguishes!both!debts!to!the!concurrent!amount,!even!though!the!
Silahis!a!commission!on!the!subject!sale!to!Dole!is!strongly!disputed.! creditors!and!debtors!are!not!aware!of!the!compensation.!!
Debit! Memo! was! not! signed! by! De! Leon;! also! no! mention! of! !
commitment!to!pay!commission.!
Art.! 1289.! If! a! person! should! have! against! him! several! debts! which!
!
are! susceptible! of! compensation,! the! rules! on! the! application! of!
BPI!v.!REYES!
payments!shall!apply!to!the!order!of!the!compensation!
Facts:! Reyes! opened! two! joint! accounts! at! BPI;! one! with! his! wife,!
and!one!with!his!grandmother.!Grandmother!died,!but!was!still!sent! !
US! pension! which! Reyes! deposited! in! his! joint! account! with! the! EFFECTS%OF%LEGAL%COMPENSATION:%
former.!He!later!closed!said!account!and!transferred!its!funds!to!his! 1. Both! debts! are! extinguished! to! the! concurrent! amount! (Art!
joint!account!with!his!wife.!US!Dept.!of!Treasury!learned!about!the! 1290)!
prior!death,!and!requested!BPI!for!a!refund;!BPI!refunded.!BPI!claims! 2. Interests! stop! accruing! on! the! extinguished! obligations! or! the!
Reyes! verbally! authorized! it! to! debit! his! joint! account! with! his! wife! part!extinguished!
for!said!amount.!Reyes!disclaims.! 3. Period! of! prescription! stops! with! respect! to! the! obligation! or!
! part!extinguished!
Held:! There! is! legal! compensation.! All! requisites! of! compensation! 4. All! accessory! obligations! of! the! principal! which! has! been!
present;! debts! are! extinguished! to! the! concurrent! amount,! even! extinguished!are!also!extinguished!
though!creditors!and!debtors!are!not!aware!of!or!did!not!consent!to! 5. If! a! person! should! have! against! him! several, debts, which, are,
the!compensation.!BPI!is!a!debtor!of!Reyes,!a!depositor.!BPI!is!also!a! susceptible, of, compensation,! the! rules! on! application! of!
creditor! of! Reyes! with! respect! to! the! dishonored! US! Treasury! payments! shall! apply! to! the! order, of, the, compensation.! (Art!
Warrant! illegally! transferred! to! his! joint! account.! As! to! the! wife’s! 1289)!!
interest!on!the!joint!account,!element!of!mutuality!is!not!negated,!as! • If! debtor! has! various! debts! which! are! susceptible! of!
she!never!asserted!her!right.!Rule!as!to!mutuality!is!strictly!applied! compensation,!he!must!inform!the!creditor!which!of!them!
at! law,! but! not! in! equity,! where! to! allow! the! same! would! lead! to! shall!be!the!object!of!compensation.!In!case!he!fails!to!do!
unjust!enrichment.! so,! compensation! shall! be! applied! to! the! most! onerous!
! obligation!
PNB!v.!SAPPHIRE!SHIPPING! • Must!be!alleged!and!proved!by!the!debtor!who!claims!its!
Facts:!PNB!intercepted!funds!coursed!through!it,!to!be!delivered!to! benefits;! once! proved,! its! effects! retroact! to! the! moment!
Citibank,!in!favor!of!Sapphire!Shipping,!and!applied!the!same!against! when!the!requisites!concurred!
sums! erroneously! credited! by! it! to! the! latter’s! account.! Sapphire! !
Shipping! demanded! for! the! remittances,! but! PNB! claims! !
compensation,!as!they!are!mutually!indebted!to!each!other.!! !
!!!!
• May! be! renounced,! upon! a! unilateral! declaration! of! the!
debtor!
E. Compensation( of( Debts( Payable( in(
o Expressly!or!impliedly! Different(Places(
o Implied! renunciation! –! (1)! by! not! setting! it! up! in! the! !
litigation,! (2)! consenting! to! the! assignment! of! credit,! Art.! 1286.! Compensation! takes! place! by! operation! of! law,! even!
(3)! by! paying! the! debt! voluntarily,! with! knowledge! though!the!debts!may!be!payable!at!different!places,!but!there!shall!
that! it! has! been! extinguished! by! compensation! "! be! an! indemnity! for! expenses! of! exchange! or! transportation! to! the!
renunciation!cannot!be!made!to!the!prejudice!of!third! place!of!payment.!!
persons! !
• Applies! to! legal! compensation! but! not! to! voluntary!
D. When(Compensation(is(Not(Allowed( compensation!
1. When!there!is!renunciation!of!the!effects!of!compensation! • The! indemnity! contemplated! does! not! refer! to! the!
by!a!party! difference! in! the! value! of! the! things! in! their! respective!
2. When!the!law!prohibits!its!compensation! places!but!to!the!expenses!of!monetary!exchange!(in!case!
a. Depositum!(Art!1287)! of!money!debts)!and!expenses!of!transportation!(in!case!of!
b. Commodatum!(Art!1287)! things!to!be!delivered).!
c. Support!due!by!gratuitous!title!(Art!1287)! • Indemnity! shall! be! paid! by! the! person! who! raises! the!
d. Civil!liability!arising!from!a!penal!offense!(Art!1288)! defense!of!compensation!
!
Art.!1287.!Compensation!shall!not!be!proper!when!one!of!the!debts! F. Effect( of( Nullity( of( Debts( to( be(
arises!from!a!depositum!or!from!the!obligations!of!a!!depositary!or!
of!a!bailee!in!commodatum.!! Compensated(
Neither!can!compensation!be!set!up!against!a!creditor!who!has!a! !
claim! for! support! due! by! gratuitous! title,! without! prejudice! to! the! Art.!1284.!When!one!or!both!debts!are!rescissible!or!voidable,!they!
provisions!of!paragraph!2!of!article!301.!! may! be! compensated! against! each! other! before! they! are! judicially!
! rescinded!or!avoided.!
• A! deposit! is! made! or! a! commodatum! is! given! on! the! basis! of! !
confidence! of! the! owner.! It! is! therefore,! just! that! the! • When!rescissible!or!voidable!debt!is!rescinded!or!annulled,!
depositary! or! borrower! should! in! fact! perform! his! obligation;! effect! is! retroactive,! and! compensation! must! be!
otherwise! the! trust! of! the! depositor! or! lender! would! be! considered!cancelled!
violated.!! • Party! whose! obligation! is! annulled! or! rescinded! can!
• With!respect!to!future!support,!to!allow!its!extinguishment!by! recover! to! the! extent! that! his! credit! was! extinguished! by!
compensation! would! defeat! its! exemption! from! attachment! the!compensation,!because!to!that!extent!he!is!deemed!to!
and! execution.! Support! in! arrears,! however,! can! be! have!made!payment!
compensated!
Depositor! can! set! up! his! deposit! against! a! claim! of! the!
•
depositary,!and!the!lender!can!set!up!his!loan!against!a!credit! G. Effects(of(Assignment(of(Credit(
of!the!borrower!"!facultative!compensation! !
• Support:! includes! legal! support,! and! all! other! rights! which! MADE%AFTER%COMPENSATION%TOOK%PLACE:,,
have!for!their!purpose!the!subsistence!of!the!debtor,!such!as! • No! effect;! compensation! already! perfected,! obligations!
pensions! and! gratuities,! like! annuities! and! salaries! sufficient! extinguished;!nothing!to!assign!at!all!
only!for!the!needs!of!the!debtor! • Assignee!is!left!with!an!action!for!eviction!or!for!damages!
• Debts! in! favor! of! the! Government! in! the! form! of! taxes,! fees,! for!fraud!against!assignor!!
duties,! and! similar! forced! contributions,! cannot! be! !
extinguished! by! compensation;! except! when! debt! is! purely! MADE%BEFORE%COMPENSATION%TOOK%PLACE:%
contractual! !
! 1. WITH!CONSENT!OF!DEBTOR!
Art.! 1288.! Neither! shall! there! be! compensation! if! one! of! the! debts! !
consists!in!civil!liability!arising!from!a!penal!offense.!
Art.!1285,!par.!1!.!The!debtor!who!has!consented!to!the!assignment!
! of!rights!made!by!a!creditor!in!favor!of!a!third!person,!cannot!set!up!
• Satisfaction!of!such!obligation!is!imperative! against!the!assignee!the!compensation!which!would!pertain!to!him!
• Offended!party!entitled!to!the!indemnity!can!set!up!his!claim! against!the!assignor,!unless!the!assignor!was!notified!by!the!debtor!
in!compensation!of!is!debt! at! the! time! he! gave! his! consent,! that! he! reserved! his! right! to! the!
! compensation.!!
NO%COMPENSATION%MAY%OCCUR%EVEN%WHEN%ALL%THE%REQUISITES%
!
CONCUR:,,
• Cannot! set! up! against! assignee! UNLESS! debtor! reserved! his!
• When!there!is!renunciation!of!the!effects!of!compensation!
right!to!compensation!when!he!gave!his!consent!!
by!a!party! "!rests!upon!a!potestative!right!and!unilateral!
• Assignment!does!not!take!effect!except!from!the!time!debtor!is!
declaration!of!renunciation!is!sufficient!!
notified!thereof!
• When!the!law!prohibits!compensation!!
• If! notice! of! assignment! is! simultaneous! to! the! transfer,! debtor!
o Art.!1287!
can!set!up!compensation!of!debts!prior!to!the!assignment!
o Art.!1288!
!!!!
2. WITH!KNOWLEDGE!BUT!WITHOUT!CONSENT!OF!DEBTOR! 2. AS!TO!ORIGIN!
! a. Conventional%=%by!express!stipulation!of!the!parties
Art.!1285,!par.!2!.!If!the!creditor!communicated!the!cession!to!him! b. Legal%=%by!operation!of!law
but! the! debtor! did! not! consent! thereto,! the! latter! may! set! up! the!
compensation! of! debts! previous! to! the! cession,! but! not! of! 3. AS!TO!OBJECT!
subsequent!ones.!!
a. Objective% or% Real% =% change! in! the! cause,! object,! or!
!
principal!
• Only!with!respect!to!debts!prior,to,assignment,!not!subsequent!!
• Debtor!may!set!up!compensation!when!the!assignee!attempts!
b. Subjective%or%Personal% =%modification!of!obligation!by!
to! enforce! the! assigned! credit,! provided! that! the! credit! of! the! the!change!of!the!subject!%
debtor! became! due! before! the! assignment;! if! assigned! credit! • Passive!?!substitution!of!debtor!%
matures! earlier! than! that! of! the! debtor,! assignee! may! • Active!?!!subrogation!of!a!third!person!in!the!rights!of!
immediately! enforce! it,! and! debtor! cannot! set! up! the!creditor%
compensation,!because!his!credit!is!not!yet!due! c. Mixed%=%both!objective!and!subjective!novation%
! %
3. WITHOUT!KNOWLEDGE!OF!DEBTOR! 4.!!!!AS!TO!EFFECT!
! a. Partial% or% modificatory% = only! a! modification! or!
change!in!some!principal!conditions!of!the!obligation!,
Art.!1285,!par.!3.!If!the!assignment!is!made!without!the!knowledge!
of!the!debtor,!he!may!set!up!the!compensation!of!all!credits!prior!to! b. Total% or% extinctive% =% obligation! is! completely!
the! same! and! also! later! ones! until! he! had! knowledge! of! the! extinguished,
assignment.!
! C. Requisites(
• All!debts!maturing!prior,to,his,knowledge,, !
• Rationale:! As! far! as! the! debtor! is! concerned,! the! assignment! Art.! 1292.! In! order! that! an! obligation! may! be! extinguished! by!
does!not!take!effect!except!from!the!time!he!is!notified!thereof, another!which!substitutes!the!same,!it!is!imperative!that!it!may!be!
so! declared! in! unequivocal! terms,! or! that! the! old! and! the! new!
VII. Novation* obligations!be!on!every!point!incompatible!with!each!other.!
!
1. Previous! valid! obligation"! not! only! valid,! but! has! not! been!
A. Concept( extinguished!by!any!cause!
! 2. The!agreement!of!all!parties!to!the!new!contract"consent!of!
Novation!is!the!extinguishment!of!an!obligation!by!the!substitution! all!parties!to!the!substitution!
or!change!of!the!obligation!by!a!subsequent!one!which!extinguishes! 3. Extinguishment! of! the! old! contract"either! express! or!
or!modifies!the!first!either!by:! implied!
1. Changing!the!object!or!principal!conditions! 4. Validity!of!the!new!one!!
2. Substituting!the!person!of!the!debtor! 5. Animus, novandi, or, intent, to, novate! (especially! for! implied,
3. Subrogating!a!third!person!in!the!rights!of!the!creditor! novation!and!substitution,of,debtors)!
! !
• Unlike! other! acts! of! extinguishing! obligation,! novation! is! a! • Novation! is! never! presumed.! There! is! no! novation! in! the!
juridical! act! of! dual! function! in! that! at! the! time! it! absence!of!a!new!contract!executed!by!the!parties.!!
extinguishes,an,obligation,!it!creates,a,new,one,in,lieu,of,the, • It! must! be! established! that! the! old! and! new! contracts! are!
old.!! incompatible!in!all!points,!or!that!the!will!to!novate!appear!by!
• Does! not! operate! as! absolute! but! only! as! a! relative! express!agreement!of!the!parties!or!in!acts!of!equivalent!import!
extinction.!! • Novation!is!not!a!mode!of!extinguishing!criminal!liability.!It!may!
! prevent!the!rise!of!criminal!liability!as!long!as!it!occurs!prior!to!
Art.!1291.!Obligations!may!be!modified!by:! the!filing!of!the!criminal!information!in!court!
1.!Changing!their!object!or!principal!conditions;! !
2.!Substituting!the!person!of!the!debtor;! !
3.!Subrogating!a!third!person!in!the!rights!of!the!creditor! !
!
B. Kinds( !
!
1. AS!TO!FORM! !
a.% Express% =% parties! declare! that! the! old! obligation! is! !
extinguished!and!substituted!by!the!new!obligation! !
b.% % Implied% =% incompatibility! between! the! old! and! the! new! !
obligations!that!they!cannot!stand!together% !
! !
!
!
!
! !
!!!!
Cases:! agreement! between! Eleazar! and! Reyes.! No! hard! evidence! was!
! presented! demonstrating! the! intention! of! AFP! MBAI! to! release!
MAGDALENA!ESTATE!v.!RODRIGUEZ! Reyes! from! her! obligation! to! pay! under! the! contract! of! sale! of!
Facts:! Appellants! Antonio! and! Hermina! Rodriguez! bought! from! securities.! Novation! by! substitution! of! debtor! must! always! be! with!
appellee! Magdalena! Estates,! Inc.! a! 2,191! sq.! m! parcel! of! land! in! the! consent! of! the! creditor! (Art! 1293).! AFP! MBAI’s! receipt! of!
Quezon! City.! In! view! of! an! unpaid! balance! of! P5,000,! appellants! payments!from!Eleazar!does!not!constitute!novation.!At!most,!it!only!
creates!the!juridical!relation!of!co?debtorship!or!suretyship.!!
executed!a!promisory!note,!whereby!they!promised!to!pay!appellee!
!
the! amount! with! a! 9%! interest.! On! the! same! day,! appellants! and! CONCHINGYAN!v.!RB!SURETY!AND!INSURANCE!
Luzon!Surety!Co.!Inc!executed!a!bond!in!favor!of!appellees!whereby! Facts:! Pacific! Agricultural! Suppliers! (PAGRICO)! was! granted! a!
they! bound! themselves! to! comply! with! the! obligation! to! pay! the! P400,000! increase! in! its! line! of! credit! with! PNB.! It! has! to! secure! a!
P5,000! within! a! period! of! 60! days.! When! it! became! due! and! bond! worth! that! amount! which! was! issue! by! R&B! Surety! and!
demandable,! Luzon! Surety! Co.! Inc! paid! the! P5,000.! Appellees! Insurance! Co.! Inc,! who! bound! themselves! jointly! and! severally! to!
demanded! from! Appellants! the! payment! of! P655.89! corresponding! comply!with!the!terms!and!conditions!of!the!advance!line.!PNB!gad!
the! righ! under! the! surety! to! proceed! directly! against! Respondent!
to! alleged! accumulated! interests! on! the! said! amount,! which! they!
without! exhausting! the! assets! of! PAGRICO.! Subsequently,! two!
refuse! to! pay.! They! claim! that! the! unqualified! acceptance! of! identical! indemnity! agreements! were! entered! into! by! Respondent!
payment! made! by! Luzon! without! exercising! its! right! to! apply! a! with! (1)Catholic! Church! Mart! (Cochingyan)! and! (2)PAGRICO!
portion!of!P655.89!to!the!payment!despite!its!presumed!knowledge! (Villanueva)! and! PACOCO! (Liv).! The! Indemnitors! bound! themselves!
constitutes!a!waiver!or!condonation!of!the!interest!due.! to! pay! Respondent! an! annual! premium! of! P5,000.! When! PAGRICO!
! failed! to! comply,! PNB! demanded! from! Respondent! the! P400,000.!
Respondent!paid!a!total!of!P70,000.!Respondent!sent!a!formal!letter!
Held:! No! condonation.! Appellee! did! not! protest! when! it! accepted!
the! payment! of! said! amount! because! he! knew! that! that! was! the! to!indemnitors!(Petitioners)!for!reimbursement!and!for!discharge!of!
complete!amount!undertaken!by!the!surety!in!the!contract.!Liability! its!liability!to!PNB.!!
of! the! surety! is! not! extended,! by! implication,! beyond! the! terms! of! Issue:!WON!the!trust!agreement!has!extinguished,!by!novation,!the!
obligation! of! Respondent! to! PNB! under! the! surety! bond! which! in!
his!contract.!
No!novation.!Novation!by!presumption!has!never!been!favored.!The! turn!extinguished!the!obligations!of!Petitioners!under!the!indemnity!
obligation!to!pay!isn’t!novated!in!a!new!instrument!wherein!the!old! agreements!
is!ratified!by!changing!only!the!terms!of!payment!and!adding!other! !
Held:!No.!Trustor!(petitioners!Cochingyan,!Villanueva,!and!Liv),!since!
obligations! not! incompatible! with! the! old! one.! The! mere! fact! that!
PAGRICO!and!PACOCO!have!defaulted,!is!bound!to!comply!with!his!
the! creditor! receives! a! guaranty! when! there! is! no! agreement! that!
the! first! debtor! shall! be! released! from! responsibility! does! not! obligation! under! the! indemnity! agreements.! Such! shall! not! in! any!
constitute!novation.!The!surety!bond!is!only!an!accessory!obligation! manner!release!respondent!from!its!liabilities.!The!surety!bond!has!
of!the!promissory!note!and!is!not!a!new!and!separate!contract.! not! been! discharged! by! payment! of! the! principal! obligation.! The!
trust! agreement! does! not! expressly! terminate! the! obligation! of!
!
! Respondent,!it!merely!brought!another!person!to!assume!the!same!
REYES!v.!SECRETARY!OF!JUSTICE! obligation! that! respondent! was! bound! to! perform.! For! subjective!
Facts:! Eurotrust! and! BERMIC! entered! into! a! loan! agreement.! novation! to! take! place,! the! old! debtor! must! be! released! from! the!
obligation.!If!not,!the!third!person!merely!becomes!a!co?debtor.!!
Eurotrust! extended! to! BERMIC! P216! Million! to! finance! its! Ritz!
!
Condominium!and!Gold!Business!Park.!BERMIC!issues!21!postdated!
checks! which! were! subsequently! dishonored! due! to! stop! order! BROADWAY!CENTRUM!CONDOMINIUM!CORP!v.!TROPICAL!HUT!
payment!made!by!Gracia!Eleazar!(President!of!BERMIC).!Elsa!Reyes! Facts:! Broadway! Centrum! and! Tropical! Hut! executed! a! contract! of!
(President!of!Eurotrust)!filed!complaint!for!violation!of!BP!22!and!Art! lease!where!Petitioner!agreed!to!lease!3,042.19!sq!m!portion!of!the!
Broadway! Centrum! Commercial! Complex! for! 10! years! with! a!
315!of!the!RPC.!AFP!MBAI!conducted!investigation!and!Found!that:!
(a)!AFP!MBAI!invested!in!Eurotrust!by!buying!from!them!government! monthly! rental! of! P120,000! (first! 3! years),! P140,000! (2! years),!
securities;!(b)!Eurotrust!in!turn,!borrowed!from!AFP!MBAI!the!same! P165,000!(4!years).!In!1982,!P!agreed!to!reduce!the!rent!by!P20,000!
government! securities! but! failed! to! return! it! to! the! latter;! (c)! The! for! a! limited! period! due! to! low! sales! of! R,! on! the! condition! that! R!
would!implement!P’s!suggestions!of!strategies!to!increase!its!sales.!
money! paid! by! AFP! MBAI! to! Eurotrust! was! the! money! lent! by!
Stipulation:! any! reduction! in! rentals! is! merely! a! temporary!
Eurotrust!to!BERMIC!!and!others.!Eleazar!requested!a!meeting!with!
Eurotrust! –! reached! an! agreement! that:! (a)! BERMIC! will! directly! suspension!of!the!original!rate!stipulated.!
settle!its!obligations!with!the!real!owners,!AFP!MBAI!and!DECS?IMC;! !
(b)!BERMIC!started!making!negotiations!and!made!payments!to!the! Held:! No! novation.! The! agreement! clearly! stated! that! it! is!
provisional! and! temporary.! P! retained! the! discretionary! right! to!
latter! (P31,711.11! and! P1M! check! paid! to! AFP! MBAI).! Office! of! the!
Provincial!Prosecutor!of!Rizal!dismissed!the!complaints!of!Reyes!on! return! to! the! original! contractual! rates! whenever! it! deemed!
the! ground! that! the! assumption! of! Eleazar! of! Reyes’! obligation! to! appropriate.! In! novation,! it! is! essential! that! the! new! obligation!
AFP! MBAI! was! a! novation,! which! extinguished! Eleazar’s! criminal! expressly!declare!that!the!old!one!is!to!be!extinguished,!or!that!it!be!
incompatible!on!every!point.!!
liability.!
!
!
Held:! No! novation.! The! last! three! requisites! of! novation! were! not! !
complied! with.! No! new! agreement! for! the! substitution! of! creditor! !
was!made!to!take!the!place!of!the!previous!contract.! !
!
The! two! letters! made! to! formalize! the! agreement! does! not! show!
that!AFP!MBAI!agreed!to!the!substitution!of!creditor.!It!is!merely!an! !
!
!!!!
CALIFORNIA!BUS!LINE!v.!STATE!INVESTMENT!
Facts:!Delta!applied!for!financial!assistance!from!SIHI!for!P25M.!CBLI!
E. Effect(of(the(Status(of(the(Original(or(
purchased!35!buses!and!2!conversion!engines!from!Delta.!To!secure! New(Obligation(
payment,! CBLIE! and! Mr.! Llama! executed! 16! promissory! notes! in! !
favor! of! Delta! (P2.3M! each).! CBLI! also! executed! chattel! mortgages! 1. NULLITY!OR!VOIDABILITY!OF!ORIGINAL!OBLIGATION!
over!the!35!buses!in!Delta’s!favor.!When!CBLI!defaulted,!it!entered!
into! a! restructuring! agreement! with! Delta:! provided! for! a! new! !
schedule! of! payments! and! a! security! clause! that! in! case! of! default,! Art.! 1298.! The! novation! is! void! if! the! original! obligation! was! void,!
Delta! would! have! the! authority! to! take! over! the! management! of! except! when! annulment! may! be! claimed! only! by! the! debtor,! or!
CBLI.! Delta! executed! a! Deed! of! Continuing! Assignment! of! when!ratification!validates!acts!which!are!voidable.!
Receivables!in!favor!of!SIHI!as!security.!CBLI!had!trouble!meeting!its! !
obligations! to! Delta,! so! the! latter! filed! action! to! enforce! takeover! • NULLITY! of! original! obligation! makes! the! new! obligation!
clause.!Delta!executed!a!Deed!of!Sale,!assigning!to!SIHI!5!of!the!16! void!
promissory! notes! from! CBLI.! Delta! and! CBLI! entered! into! a! o One! of! the! requisites! of! novation! is! a! previous, valid,
compromise! agreement"CBLI! agreed! that! Delta! would! exercise! its! obligation!!
right! to! extrajudicial! foreclosure! on! the! chattel! mortgages! over! the! o Also! applies! to! voidable! obligations! that! are! already!
35!bus!units.! annulled/extinguished!
Issue:! WON! the! restructuring! agreement! novated! the! promissory! o One! of! the! requisites! of! novation! is! a! previous, valid,
notes! obligation!!
! o Also! applies! to! voidable! that! are! already!
Held:! No.! The! restructuring! agreement! between! Delta! and! CBLI! annulled/extinguished!
didn’t! expressly! stipulate! that! such! would! novate! the! promissory! !
notes,! hence,! only! a! showing! of! incompatibility! would! sustain! • VOIDABILITY!original!obligation!makes!the!new!obligation!
novation.! Such! incompatibility! isn’t! present! in! the! case.! The! valid!if:!
agreement! merely! provided! for! a! new! schedule! of! payment! and! a! 1. It!is!ratified!before!novation!
security! clause.! Where! the! parties! to! the! new! obligation! recognize! 2. even!if!not,ratified,!but!voidable!at,the,instance,
the!continuing!existence!and!validity!of!the!old!one,!there!could!be! of,the,debtor!
no!novation.!! o Consent! of! debtor! constitutes! implied! waiver! of! the!
action!for!nullity!!
D. Effects( o Defect! is! not! completely! cured! in! expromision!
! wherein!debtor!has!not!intervened!or!consented!
!
1. IN!GENERAL!
2. NULLITY!OR!VOIDABILITY!OF!NEW!OBLIGATION!
!
!
Art.! 1296.! When! the! principal! obligation! is! extinguished! in!
consequence! of! a! novation,! accessory! obligations! may! subsist! only! Art.!1297.!If!the!new!obligation!is!void,!the!original!one!shall!subsist,!
insofar! as! they! may! benefit! third! persons! who! did! not! give! their! unless! the! parties! intended! that! the! former! relation! should! be!
consent! extinguished!in!any!event.!
! !
• The! general! effect! of! novation! is! the! extinguishment! of! the! • If! the! new! obligation! is! NULL,! the! original! obligation!
original!obligation!and!creation!of!a!new!one! subsists! unless! the! parties! intend! the! extinguishment! of!
! the!former!relation!in!any!event!
• VOIDABILITY!of!the!new!obligation!makes!it!binding,!but!if!
2. WHEN!ACCESSORY!OBLIGATION!MAY!SUBSIST! it!is!annulled!and!set!aside,!the!original!obligation!subsists!!
! !
Art.! 1296.! When! the! principal! obligation! is! extinguished! in!
3. SUSPENSIVE! OR! RESOLUTORY! CONDITION! OF! ORIGINAL!
consequence! of! a! novation,! accessory! obligations! may! subsist! only!
insofar! as! they! may! benefit! third! persons! who! did! not! give! their! OBLIGATION!
consent! !
! Art.!1299.!If!the!original!obligation!was!subjective!to!a!suspensive!or!
• As! a! general! rule,! the! extinguishment! of! the! principal! also! resolutory! condition,! the! new! obligations! shall! be! under! the! same!
extinguishes!the!accessory!obligations.! condition,!unless!it!is!otherwise!stipulated.!
• Art! 1296! provides! an! exception! that! accessory! obligations! !
may! subsist! only! insofar! as! they! may! benefit! third! person! • Old!Obligation!Conditional!and!New!Obligation!Pure!
who!did!not!give!the!consent!to!the!novation!! o If! intention! is! merely! to! suppress! the! condition,! no%
a. Why?! The! mortgage,! pledge,! guaranty! was! given! to! novation!
answer! for! a! particular! obligation! or! for! the! o If! intention! is! to! extinguish! the! original! obligation!
insolvency!of!a!particular!debtor;!any!change!in!either! itself! by! the! creation! of! a! new! obligation,! the!
of! this! destroys! the! basis! of! the! consent! of! the! novation%does%not%arise,except!from!fulfillment!of!the!
mortgagor,!pledgor,!surety!or!guaranty! condition!from!original!obligation!
b. A! person! should! not! be! prejudiced! by! the! act! of! • If!the!suspensive!condition!of!the!original!obligation!is!not!
another!without!his!consent! performed,! that! obligation! does! not! come! into! existence,!
! and!the!cause!for!the!new!obligation!would!be!wanting!
!!!!
• If!the!condition!is!resolutory,!its!happening!would!resolve! • Without!the!release,!there!is!no!novation,!the!person!who!
the!old!obligation!as!void!or!extinguished! assumed! the! obligation! of! the! debtor! merely! becomes! a!
• Where! the! original! obligation! is! conditional,! the! novation! co?debtor!or!a!surety!
itself! must! be! held! to! be! conditional,! and! its! efficacy! • No! agreement! to! solidarity,! the! first! and! the! new! debtor!
depends! upon! whether! the! condition! which! affects! the! are!considered!obligated!jointly.!
former!is!complied!with!or!not! !
• Both!Obligations!are!Conditional! a. Expromision%
o If! the! conditions! in! the! two! obligations! are! not! • May! be! done! at! the! instance! of! the! creditor! or! the!
incompatible! with! each! other,! and! they! can! stand! third!party!himself!
together,! they! must! all! be! fulfilled! in! order! that! • Consent! of! the! old! debtor! is! not! necessary,!
novation! may! become! effective.! If! either! of! the! substitution!may!be!made!without!his!knowledge!
conditions! are! not! fulfilled,! no! novation! can! take! !
place!
i. Requisites%
o If! the! two! conditions! are! incompatible! with! each!
other,!there!is!an!obvious!intention!to!substitute!the! %
new! conditional! obligation! for! the! old! one"! results! Art.! 1293.! Novation! which! consists! in! substituting! a! new! debtor! in!
in! the! extinguishment! of! the! old! obligation,! leaving! the! place! of! the! original! one,! may! be! made! even! without! the!
the!new!one!subject!to!its!conditions! knowledge! or! against! the! will! of! the! latter,! but! not! without! the!
consent!of!the!creditor.!Payment!made!by!the!new!debtor!gives!him!
the!rights!mentioned!in!Articles!1236!and!1237.!
F. Objective(Novation( !
! Art.! 1236! par! 2.! Whoever! pays! for! another! may! demand! from! the!
• Change!in!the!object!of!prestations! debtor! what! he! has! paid,! except! that! if! he! paid! without! the!
• “Principal! Conditions”?! principal! terms! (e.g.! making! the! knowledge! or! against! the! will! of! the! debtor,! he! can! recover! only!
debt!absolute!instead!of!conditional!and!vice?versa)! insofar!as!the!payment!has!been!beneficial!to!the!debtor.!!
• Sir!Labitag!lecture!notes!
o Dacion,en,pago!is!an!objective!novation!
!
o If! there! is! an! increase! in! amount! and! you! can! prove! Art.! 1237.! Whoever! pays! on! behalf! of! the! debtor! without! the!
that!the!intention!to!novate,!then!it!will!be!an!implied! knowledge! or! against! the! will! of! the! latter,! cannot! compel! the!
novation,!but!usually,!it’s!not!a!novation!if!you!change! creditor!to!subrogate!him!in!his!rights,!such!as!those!arising!from!a!
the!amount.!! mortgage,!guaranty,!or!penalty.!!
o Extension!of!time!does!not!imply!novation.!But!if!the! !
time! situation! is! reversed! (shortening! of! the! period),! • Consent!of!two!parties!(new!debtor!and!creditor)!
that!is!a!novation.!E.g.!Ynchausti,v,Yulo!! • Knowledge!or!consent!of!the!old!debtor!is!not!required!
o Convertion!of!an!obligation!to!some!other!obligation! !
e.g.!obligation!for!contract!of!deposit!for!one!of!loan,! ii. %Effects%
or!a!contract!of!deposit!to!one!of!commodatum.!! %
,
Art.!1294.!If!the!substitution!is!without!the!knowledge!or!against!the!
will!of!the!debtor,!the!new!debtor’s!insolvency!or!non?fulfillment!of!
G. Subjective(Novation( the! obligation! shall! not! give! rise! to! any! liability! on! the! part! of! the!
! original!debtor.!
• Change!of!debtor!or!creditor! !
• In! all! kinds! of! subjective! novation,! the! consent! of! the! • The! debtor! is! released! from! obligation"without! such!
creditor!is!required.! release,! there! is! no! novation.! The! third! person! who!
! assumed! the! obligation! merely! becomes! a! co?debtor! or!
1. BY!CHANGE!OF!DEBTOR! surety.!
• CONSENT!OF!THE!THIRD!PARTY!ALWAYS!REQUIRED.!Why?! • Creditor! generally! cannot! recourse! from! the! old! debtor! if!
Because!he!assumes!the!obligation!! the!new!debtor!is!insolvent!!
• CONSENT! OF! THE! CREDITOR! IS! LIKEWISE! INDISPENSABLE.! • If!substitution!is!without!his!knowledge!or!consent!
Why?!Substitution!of!one!debtor!for!another!may!delay!or! o Old!debtor!is!not!liable!for!the!insolvency!or!non?
prevent! the! fulfillment! of! the! obligation! by! reason! of! the! fulfillment!of!the!new!debtor!(Art!1294)!
inability!or!insolvency!of!the!new!debtor! o The! new! debtor! can! only! compel! old! debtor! to!
o Consent! may! be! implied! or! express! as! long! as! it! is! reimburse! inasmuch! as! the! payment! has! been!
given.!! beneficial!to!him! "!No!subrogation!takes!place!
o However,!it!cannot!be!presumed!from!his!acceptance! (Art!1237)!
rd
of! payments! by! a! 3 ! party! for! the! benefit! of! the! • If!substitution!is!with!knowledge!and!consent!!
debtor!without!further!acts;!no!novation!because!no! o New! debtor! is! entitled! to! full! reimbursement! of!
consent!to!the!transfer!of!the!debt!itself! the!amount!paid!and!subrogation!!
rd
• It! is! not! enough! to! extend! the! juridical! relation! to! a! 3 ! %
person,! it! is! necessary! that! the! old! debtor! be! released!
rd
from! the! obligation! and! the! 3 ! person! or! new! debtor! %
takes!his!place.!! %
%
!!!!
b. Delegacion% QUINTO!v.!PEOPLE!
• Debtor!offers!and!the!creditor!accepts!a!third!person! Facts:!Leonida!Quinto!was!indicted!for!estafa.!She!received!pieces!of!
who!consents!to!the!substitution!so!that!the!consent% jewelry! from! Aurelia! Cariaga! worth! P36,000! for! the! purpose! of!
of%the%three,is!necessary!! selling! them! for! commission,! but! she! failed! to! return! the! unsold!
• Delegante! (old! debtor),! delegatario! (creditor)! and! jewelry.! As! a! defense,! she! claims! that! she! regularly! transacted!
delegado!(third!person!new!debtor)! business! with! Cariaga"she! sold! the! latter’s! jewelry! to! Mrs.!
• Consent!need!not!be!given!simultaneously! Camacho! and! Mrs.! Ramos.! Quinto! has! a! transaction! with! Camacho!
! where! the! latter! wasn’t! able! to! pay! in! full! and! left! a! balance! of!
! P13,000.! Quinto! bought! Camacho! to! Cariaga! who! agreed! to! allow!
Camacho!to!pay!in!installments.!Quinto!also!sold!Cariaga’s!jewelry!to!
i. Requisites%(vs.%Art.%1293)% Ramos! who! was! unable! to! pay! the! whole! amount,! but! Cariaga!
!
accepted!a!right!worth!P3k!and!P5k!in!cash!
1. Initiative!for!substitution!must!emanate!from!the!
Issue:WON! agreement! between! Quinto! and! Cariaga! was! novated!
old!debtor!
when!the!latter!consented!to!receive!payment!on!installments!from!
2. Consent!of!the!new!debtor!
Camacho!and!Ramos!
3. Acceptance!by!the!creditor!!
!
!
Held:!No.!Changes!alluded!by!Quinto!only!consists!in!the!manner!of!
ii. Effects% payment.! No! substitution! of! debtors! occurred! since! Cariaga! merely!
% agreed! to! the! payment! but! didn’t! give! her! consent! to! enter! into! a!
Art.! 1295.! The! insolvency! of! the! new! debtor,! who! has! been! new! contract.! Acceptance! of! payment! cannot! be! construed! as!
proposed!by!the!original!debtor!and!accepted!by!the!creditor,!shall! expromision! or! delegacion.! If! first! debtor! isn’t! released! from! the!
not!revive!the!action!of!the!latter!against!the!original!obligor,!except! obligation,! there! is! no! novation.! If! a! third! persona! ssumed!
when!said!insolvency!was!already!existing!and!of!public!knowledge! responsibility,!it!only!added!a!number!of!debtors.!
or!known!to!the!debtor,!when!he!delegated!his!debt.! !
% 2. BY! CHANGE! OF! CREDITOR:! SUBROGATION! OF! A! THIRD!
• Original!debtor!is!released!from!the!obligation! PERSON!IN!THE!RIGHTS!OF!THE!CREDITOR!
• The!new!debtor!is!subrogated!in!the!rights!of!the!creditor.!He! !
may!demand!from!the!old!debtor!the!entire!amount!of!what!he! Art.!1300.!Subrogation!of!a!third!person!in!the!rights!of!the!creditor!
has!paid!for!the!obligation.!(Art!1302!Par!2)! is! either! legal! or! conventional.! The! former! is! not! presumed,! except!
• GENERAL! RULE:! Old! debtor! is! not! liable! for! the! insolvency! or! in!cases!expressly!mentioned!in!this!Code;!the!latter!must!be!clearly!
non?fulfillment!of!the!new!debtor!(Art!1295)! established!in!order!that!it!may!take!effect.!
• EXCEPTION:!! !
o He!is!aware!of!the!insolvency!at!the!time!he!delegated!his! • The!transfer!of!all!the!rights!of!the!creditor!to!a!third!person!
debt!(Art!1295)! who!substitutes!him!in!all!his!rights.!
o At!the!time!of!the!delegation,!the!new!debtor’s!insolvency! !
is!already!existing!and!of!public!knowledge!(Art!1295)! a. Conventional%Subrogation%
! • Takes!place!by!agreement!of!the!parties!
Cases:!
!
%
GARCIA!v.!LLAMAS! i. Requisites%
Facts:!Romeo!Garcia!and!Eduardo!de!Jesus!borrowed!P400,000!from! %
Dionisio!Llamas.!They!executed!a!promissory!note!where!they!bound! Art.! 1301.! Conventional! subrogation! of! a! third! person! requires! the!
themselves!jointly!and!severally!to!pay!the!loan!on!or!before!Jan!23,! consent!of!the!original!parties!and!of!the!third!person.!
’97! with! a! 5%! interest! per! month.! The! two! failed! to! pay! despite! • Consent!of!the!old!creditor!"!because!his!right!is!extinguished!!
demands! from! Respondent.! Garcia! claims! that:! he! assumed! no! • Consent! of! the! debtor! "! old! is! extinguished! and! he! becomes!
liability!under!the!promissory!note!because!he!signed!it!merely!as!an! liable!to!a!new!obligation!!
accommodation!party!and!that!he!is!relieved!from!any!liability!since!
• Consent!of!the!third!person!new!creditor!"!becomes!a!party!to!
the!load!has!been!paid!by!de!Jesus!by!means!of!a!check.!He!claims!
the!new!relation! %
that! the! acceptance! of! the! check! novated! the! loan.! However,! said! %
check!bounced.!
!
ii. Distinguished%from%Assignment%of%Credit%
Held:! No! novation.! The! check! couldn’t! have! extinguished! the!
obligation! since! it! bounced.! There! was! no! express! declaration! of! CONVENTIONAL!SUBROGATION! ASSIGNMENT!OF!CREDITS!
novation,!nor!incompatibility!between!the!promissory!note!and!the! Debtor’s!consent!is!necessary! Debtor’s!consent!not!required!
check.! Subjective! novation! must! release! the! old! debtor! and! a! third! Extinguishes! the! old! obligation! Refers! to! the! same! right! which!
person! must! assume! it"! Garcia! didn’t! show! that! he! was! released! and!gives!rise!to!a!new!one!! passes! from! one! person! to!
and!there!was!no!express!consent!from!the!creditor.!Also,!de!Jesus! another!
wasn’t! a! third! party! to! the! obligation! since! they! were! solidary! The! nullity! of! an! old! obligation! Nullity! of! an! obligation! is! not!
debtors! who! could! only! be! released! upon! extinguishment! of! may! be! cured! by! subrogation! remedied! by! the! assignment! of!
obligation.! such! that! the! new! obligation! will! the!creditor’s!right!to!another!
! be!perfectly!valid!
! %
! %
!!!!
iii. %Effects% 3.! When,! even! without! the! knowledge! of! the! debtor,! a! person!
% interested!in!the!fulfillment!of!the!obligation!pays,!without!prejudice!
to!the!effects!of!confusion!as!to!the!latter’s!share!
Art.!1303.!Subrogation!transfers!to!the!person!subrogated!the!credit!
with!all!the!rights!thereto!appertaining,!either!against!the!debtor!or! • When!a!creditor!pays!another!creditor!who is!preferred,!even!
against! third! persons,! be! they! guarantors! or! possessors! of! without!the!debtor’s!knowledge!
mortgages,!subject!to!stipulation!in!a!conventional!subrogation.! o Refers! to! hierarchy! of! credits! which! will! be! taught! next!
sem!hehe!
o Debtor!can!still!use!any!defenses!he!may!have!against!the!
• If! suspensive! condition! is! attached,! that! condition! must! be! original!creditor!such!as!compensation!
fulfilled!first!in!order!the!new!creditor!may!exercise!his!rights. •
rd
When! a! 3 ! person,! not, interested, in, the, obligation,! pays! with!
the!express/tacit!approval!of!the!debtor!
Art.!1304.!A!creditor,!to!whom!partial!payment!has!been!made,!may! • When,! even! without! the! knowledge! of! the! debtor,! a! person!
exercise!his!right!for!the!remainder,!and!he!shall!be!preferred!to!the! interested! in! the! fulfillment! of! the! obligation! pays,! without!
person!who!has!been!subrogated!in!his!place!in!virtue!of!the!partial! prejudice!to!the!effects!of!confusion!as!to!the!latter’s!share!
payment!of!the!same!credit.! o Solidary! co?debtor! may! reimburse! to! the! extent! of! the!
! debtor’s!share!
Case:! o Guarantors,!mortgagors!and!sureties!!
! %
LICAROS!v.!GATMAITAN! iii. %Effects%
Facts:!Abelardo!Licaros!invested!in!the!Anglo?Asean!Bank!and!Trust! %
Limited! which! was! organized! to! do! business! in! the! Republic! of! Art.!1303.!Subrogation!transfers!to!the!person!subrogated!the!credit!
Vanuatu! but! not! in! the! Philippines.! Petitioner! encountered! with!all!the!rights!thereto!appertaining,!either!against!the!debtor!or!
difficulties!in!retrieving!his!profits!and!even!the!very!investments,!so! against! third! persons,! be! they! guarantors! or! possessors! of!
he!consulted!Antonio!Gatmaitan!who!was!a!banker!and!investment! mortgages,!subject!to!stipulation!in!a!conventional!subrogation.!
manager.! Respondent! voluntarily! offered! to! assume! payment! of!
!
Anglo?Asean! subject! to! terms! and! conditions.! They! executed! a!
• If! suspensive! condition! is! attached,! that! condition! must! be!
notarized!Memorandum!of!Agreement!whereby!R!would!pay!$150k!
fulfilled!first!in!order!the!new!creditor!may!exercise!his!rights.!!
to!P!(execute!a!promissory!note!in!favor!of!P);!while!P!undertook!to!
!
assign! his! credit! to! R! in! the! Anglo?Asean.! R! executed! the! PN! worth!
P3M,!but!wasn’t!able!to!collect!from!Asean,!so!he!did!not!bother!to! Art.!1304.!A!creditor,!to!whom!partial!payment!has!been!made,!may!
pay! P.! P! felt! he! had! the! right! to! colled! from! R! based! on! their! exercise!his!right!for!the!remainder,!and!he!shall!be!preferred!to!the!
agreement.! person!who!has!been!subrogated!in!his!place!in!virtue!of!the!partial!
! payment!of!the!same!credit.!
Held:! The! agreement! between! them! is! a! conventional! subrogation! !
and! not! a! transfer! of! credit.! ! Subrogation! is! the! transfer! of! all! the! Cases:!
rd
rights! of! the! creditor! to! a! 3 ! person! who! substitutes! him! in! all! his! ASTRO! ELECTRONICS! CORPORATION! v.! PHILIPPINE! EXPORT! AND!
rights.! The! debtor’s! consent! is! necessary! and! it! extinguished! the! FOREIGN!LOAN!GUARANTEE!CORPORATION!
obligation!and!gives!rise!to!a!new!one.!Nullity!of!an!obligation!may! Facts:!Astro!was!granted!several!loans!by!Philtrust!in!the!amount!of!
be!cured,!such!that!the!new!obligation!will!be!perfectly!valid.!In!this! P3M!with!interest,!secured!by!3!promissory!notes.!Petitioner!Roxas!
case,! the! crucial! distinction! deals! with! the! necessity! of! the! consent! signed! the! PNs! twice:! as! President! of! Astro! and! in! his! personal!
of! the! debtor! in! the! original! transaction.! In! the! whereas! clause! of! capacity.! He! also! signed! a! continuing! surety! agreement! in! favor! of!
their!agreement,!they!stipulated!that!their!agreement!is!conditioned! Philtrust,!as!President!and!surety.!Phil!Guarantee!(respondent(,!with!
rd
on!the!express!conformity!of!the!3 !parties!concerned!(Asean).!Also,! consent! of! Astro,! guaranteed! in! favor! of! Philtrust! the! payment! of!
they! reserved! a! spot! for! Asean’s! signature.! Absent! the! consent! of! 70%!of!Astro’s!loan,!subject!to!the!condition!that!upon!payment!by!
Asean,!the!Memorandum!did!not!become!valid!and!effective.! R,! it! shall! be! proportionally! subrogated! to! the! rights! of! Philtrust!
! against! Astro.! Since! Astro! failed! to! pay,! R! paid! 70%.! Afterwards,! R!
b. Legal%Subrogation% filed!a!complaint!against!Astro!and!Roxas!for!sum!of!money.!Roxas!
disclaims!any!liability!on!the!instrument!because!he!signed!them!in!
• Takes! place! without! agreement! but! by! operation! of!
blank,! and! the! words! “in! his! personal! capacity”! were! fraudulently!
law!because!of!certain!acts!
added.!
• GENERAL!RULE:!Not!presumed,!EXCEPTION:!Art!1302!
Issue:!WON!Roxas!should!be!solidarily!liable!with!Astro!
• The!third!person!is!called!“legal,subrogee”! !
!
Held:! Yes.! The! PNs! signed! by! Roax! twice! are! valid! and! binding.!
i. Requisites%(nothing,in,Tolentino)% Signatures!covered!portions!of!the!typewritten!words!show!that!the!
ii. When%Presumed% typewritten!words!were!already!existing!when!Roxas!signed!it.!R!has!
% all!the!rights!to!proceed!against!Roxas!and!Astro.!It!is!subrogated!to!
Art.!1302.!!It!is!presumed!that!there!is!legal!subrogation:! the!rights!of!Philtrust.!Roxas’!consent!isn’t!necessary!for!subrogation!
1.When! a! creditor! pays! another! creditor! who! is! preferred,! even! to! take! place! because! the! case! is! one! of! legal! subrogation! which!
without!the!debtor’s!knowledge;! occurs! by! operation! of! law! and! without! the! need! of! debtor’s!
2.! When! a! third! person,! not! interested! in! the! obligation,! pays! with! knowledge.! R! as! guarantor,! became! the! transferee! of! all! right! of!
the!express!or!tacit!approval!of!the!debtor;! Philtrust! against! P! because! “the! guarantor! who! pays! is! subrogated!
by!virtue!thereof!to!all!the!rights!which!the!creditor!had!against!the!
debtor”.!!
!
!!!!
C. Characteristics(
TITLE%II:%%CONTRACTS% 1. OBLIGATORY!FORCE!
!
(
Art.! 1308.! The! contract! must! bind! both! contracting! parties;! its!
CHAPTER(1:(((
validity!or!compliance!cannot!be!left!to!the!will!of!one!of!them.!
GENERAL(PROVISIONS( • Just!as!nobody!can!be!forced!to!enter!into!a!contract,!in!the!
same! manner! once! a! contract! is! entered! into,! no! party! can!
renounce! it! unilaterally! without! the! consent! of! the! other,!
otherwise!he!is!liable!for!damages.!
A!contract!is!an!agreement!which!gives!rise!to!an!obligation.!
A. Definition( •
It! must! bind! both! parties! in! order! that! it! can! be! enforced!
against! either.! Without! this! equality! between! parties,! it!
Art.! 1305! A! contract! is! a! meeting! of! minds! between! two! persons! cannot! be! said! that! the! contract! has! the! force! of! law!
whereby! one! binds! himself,! with! respect! to! the! other,! to! give! between!them.!
something!or!to!render!some!service.! !
2. MUTUALITY!
!
!
• Sanchez! Roman:! “a! juridical! convention! manifested! in! legal!
form,! by! virtue! of! which! one! or! more! persons! bind! Art.!1309.!The!determination!of!the!performance!may!be!left!to!a!
themselves! in! favor! of! another! or! others,! or! reciprocally,! to! third!person,!whose!decision!shall!not!be!binding!until!it!has!been!
the!fulfillment!of!a!prestation!to!give,!to!do!or!not!to!do.”! made!known!to!both!contracting!parties.!
• Limited!to!that!which!produces!patrimonial!liabilities!
• Binding!effect!of!contract!based!on!the!following!principles! !
• Obligations! arising! from! the! contract! have! the! force! of! law! • Both!contracting!parties!must!be!bound!by!the!stipulations!of!
between! the! contracting! parties,! laws! then! are! merely! the!contract,!even!if!in!disparate!proportions.!(Labitag)!
suppletory!to!the!stipulation!of!the!parties! • The! decision! of! the! third! party! may! only! bind! the! parties!
• There!must!be!mutuality!between!the!parties!based!on!their! once!it!has!become!known!to!them.!
essential! equality,! to! which! is! repugnant! to! have! one! party! !
bound!by!the!contract!leaving!the!other!free!therefrom!!
• There!is!usually!an!offer!then!a!counter?offer,!followed!by!a! Art.! 1310.! The! determination! shall! not! be! obligatory! if! it! is!
counter?counter?offer,! ad! nauseam.! What! happens! is! evidently!inequitable.!In!such!case,!the!courts!shall!decide!what!is!
haggling/bargaining/negotiating.!(Labitag)! equitable!under!the!circumstances.!
• Contracts! are! agreements! enforceable! through! legal!
!
proceedings.! An! agreement! is! broader! than! a! contract!
• This!article!is!a!disqualification!to!Art.!1309.!!
because! the! former! may! not! have! all! the! elements! of! a!
!
contract.!
! Art.! 1473.! The! fixing! of! the! price! can! never! be! left! to! the!
B. Elements( discretion!of!one!of!the!contracting!parties.!However,!if!the!price!
fixed! by! one! of! the! parties! is! accepted! by! the! other,! the! sale! is!
1. ESSENTIAL!ELEMENTS!(SEE!CHAPTER!II,!INFRA)! perfected.!
a. Consent% !
b. Object% • CONTRACT! OF! ADHESION:! A! contract! in! which! one! party!
c. Cause% has! already! prepared! a! form! of! a! contract! containing!
2. NATURAL! ELEMENTS!!?!Exist!as!part!of!the!contract!even!if!the! stipulations! desired! by! him! and! he! simply! asks! the! other!
parties!do!not!provide!for!them,!because!the!law,!as!suppletory! party! to! agree! to! them! if! he! wants! to! enter! into! the!
to! the! contract,! creates! them.! (e.g.! warranty! against! hidden! contract.!
defects!or!eviction!in!the!contract!of!purchase!and!sale)! !
!
3. ACCIDENTAL! ELEMENTS! ?! Agreed! upon! by! the! parties! and!
!
which! cannot! exist! without! being! stipulated! (e.g.! mortgage,!
!
guaranty,!bond)!
!
!
!
!
!
!
!
!
!
!
!
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Case:! because!the!sling!was!not!properly!placed!and!the!head!of!the!boiler!
! was! caught! under! the! edge! of! the! hatch.!! The! cable! of! the! sling!
GSIS!v.!CA! broke!and!the!boiler!fell!to!the!bottom!of!the!ship’s!hold.!!The!sling!
Facts:! GSIS! conducted! a! lottery! draw! for! the! allocation! of! lots! and! was! again! adjusted! and! the! boiler! was! again! lifted! but! as! it! was!
housing! units.! Esperanza! Leuterio! won! and! was! issued! a! Certificate! being! brought! up! the! bolt! at! the! end! of! the! derrick! broke! and! the!
of! Acknowledgment! to! purchase! the! subject! house! and! lot.! The! boiler!fell!again.!!The!boiler!was!so!badly!damaged!that!it!had!to!be!
parties! entered! into! a! Deed! of! Conditional! Sale! evidencing! the! shipped! back! to! England! to! be! rebuilt.!! MRC! then! filed! an! action!
conveyance! of! the! subject! property! and! all! improvements! thereon! against! the! Streamship! Company! to! recover! said! damages.!! The!
to!the!Leuterio!spouses!for!the!purchase!price!of!Php!19,740!payable! Steamship!Company!caused!Atlantic!Company!to!be!brought!as!co?
over! a! fifteen?year! period.! GSIS’s! Board! of! Trustees! increased! the! defendant! arguing! that! Atlantic! Company! as! an! independent!
purchase! price! indicated! in! the! Deeds! of! Conditional! Sale! covering! contractor,! who! had! undertaken! to! discharge! the! boilers! had!
houses! and! lots! therein.! On! the! face! of! the! Leuterio’s! Conditional! become!responsible!for!the!damage.!
Deed! of! Sale! is! the! marginal! notation! “subject! to! adjustment! !
pending! approval! of! the! Board! of! Trustees.”! The! Leuterio! spouses! Held:!There!was!no!question!that!the!Steamship!Company!was!liable!
alleged! that! this! wasn’t! in! the! Deed! when! they! signed! it.! The! trial! to!Manila!Railroad!as!it!had!the!obligation!to!transport!the!boiler!in!a!
court! found! that! the! appended! words! were! inserted! without! the! proper!manner!safe!and!securely!under!the!circumstances!required!
knowledge!of!the!spouses.!! by!law!and!customs.!!The!Steamship!Company!cannot!escape!liability!
! simply!because!it!employed!a!competent!independent!contractor!to!
Held:! Article! 1473! of! the! Civil! Code! provides! that! “the! fixing! of! the! discharge! the! boiler.! Since! there! was! no! contract! between! the!
price! can! never! be! left! to! the! discretion! of! one! of! the! contracting! Railroad!Company!and!Atlantic!Company,!Railroad!Company!can!had!
parties.”! The! purchase! price! mutually! agreed! upon! is! Php! 19,740.! no!right!of!action!to!recover!damages!from!Atlantic!Company!for!the!
The! spouses! Leuterio! didn’t! give! their! consent! for! GSIS! to! make! a! wrongful! act! which! constituted! the! violation! of! the! contract.!! The!
unilateral! upward! adjustment! of! the! price! depending! on! the! final! rights! of! Manila! Railroad! can! only! be! made! effective! through! the!
cost!of!construction!of!the!subject!house!and!lot.!This!conclusion!is! Steamship! Company! with! whom! the! contract! of! affreightment! was!
also! confirmed! by! the! petitioner! GSIS! in! the! instant! Petition! for! made.!
Review! on! Certiorari! where! it’s! alleged! that! “the! respondent? !
spouses! Leuterio! were! not! required! to! sign! a! new! contract! as! DKC!HOLDINGS!CORP.!v.!CA!
provided!in!Resolution!No.!996.”! Facts:!DKC!entered!into!a!Contract!of!Lease!with!Option!to!Buy!with!
! Encarnacion!Bartolome,!whereby!DKC!was!given!the!option!to!lease!
3. RELATIVITY! or! lease! with! purchase! a! land! belonging! to! Encarnacion,! which!
a. Contracts% take% effect% only% between% parties,% option! must! be! exercised! within! 2! years! from! the! signing! of! the!
Contract.! DKC! undertook! to! pay! Php! 3,000! a! month! for! the!
their%assigns,%and%heirs% reservation!of!its!option.!DKC!regularly!paid!the!monthly!Php!3,000!
! until! Encarnacion’s! death.! Thereafter,! DKC! coursed! its! payment! to!
Victor,! the! son! and! sole! heir! of! Encarnacion.! However,! Victor!
Art.! 1311.! Contracts! take! effect! only! between! the! parties,! their!
refused! to! accept! these! payments.! Meanwhile,! Victor! executed! an!
assigns!and!heirs,!except!in!case!where!the!rights!and!obligations!
Affidavit!of!Self?Adjudication!over!all!the!properties!of!Encarnacion,!
arising!from!the!contract!are!not!transmissible!by!their!nature,!or!
including!the!subject!lot.!Thus,!a!new!TCT!was!issued!in!the!name!of!
by!stipulation!or!by!provision!of!law.!The!heir!is!not!liable!beyond!
Victor.! Later,! DKC! gave! notice! to! Victor! that! it! was! exercising! its!
the!value!of!the!property!he!received!from!the!decedent.!
option!to!lease!the!property!tendering!the!amount!of!Php!15,000!as!
If! a! contract! should! contain! some! stipulation! in! favor! of! a! third!
rent.!Again,!Victor!refused!to!accept!the!payment!and!to!surrender!
person,! he! may! demand! its! fulfillment! provided! he!
passion! of! the! property.! DKC! thus! opened! a! savings! account! in! the!
communicated! his! acceptance! to! the! obligor! before! its!
revocation.! A! mere! incidental! benefit! or! interest! of! a! person! is! name!of!Victor!and!deposited!therein!the!rental!fee.!
!
not! sufficient.! The! contracting! parties! must! have! clearly! and!
Held:!The!SC!held!that!Victor!is!bound!by!the!Contract!of!Lease!with!
deliberately!conferred!a!favor!upon!a!third!person.!
Option! to! Buy.! In! this! case,! there! is! neither! contractual! stipulation!
! nor! legal! provision! making! the! rights! and! obligation! under! the!
• INTRANSMISSIBLE!CONTRACTS:!! contract!intransmissible.!More!importantly,!the!nature!of!the!rights!
o Purely!personal!e.g.!partnership!and!agency!! and! obligations! therein! are,! by! their! nature,! transmissible.! Where!
o The! very! nature! of! obligation! that! requires! special! the!service!or!act!is!of!such!a!character!that!it!may!be!performed!by!
personal!qualifications!of!the!obligor!! another,!or!where!the!contract,!by!its!terms,!shows!the!performance!
o The! payment! of! money! debts! is! not! transmitted! to! the! by!others!was!contemplated,!death!does!not!terminate!the!contract!
heirs!but!to!the!estate! or! excuse! nonperformance.! In! this! case,! there! is! no! personal! act!
! required! from! the! late! Encarnacion.! Rather,! the! obligation! of!
Cases:! Encarnacion!to!deliver!possession!of!the!property!may!very!well!be!
! performed!by!Victor.!
MANILA!RAILROAD!CO.!v.!LA!COMPAÑIA!TRANSATLANTICA! !
Facts:! SS/Alicante,! belonging! to! LCT! de! Barcelona! was! transporting! !
two! locomotive! boilers! for! the! Manila! Railroad! Company.!! The! !
equipment! of! the! ship! for! discharging! the! heavy! cargo! was! not! !
strong! enough! to! handle! the! boilers.LCT! contracted! the! services! of! !
Atlantic!gulf!and!Pacific!Co.,!which!had!the!best!equipment!to!lift!the! !
boilers! out! of! the! ship’s! hold.! When! the! first! boiler! was! being! !
hoisted! out! of! the! ship’s! hold,! the! boiler! could! not! be! brought! out! !
!!!!
b. No%one%may%contract%in%the%name%of%another% Special%disqualifications:%
! !
Art.!1317.!No!one!may!contract!in!the!name!of!another!without! Art.! 87! (FC).! Every! donation! or! grant! of! gratuitous! advantage,!
being!authorized!by!the!latter,!or!unless!he!has!by!law!a!right!to! direct!or!indirect,!between!the!spouses!during!the!marriage!shall!
represent!him.! be!void,!except!moderate!gifts!which!the!spouses!may!give!each!
! other! on! the! occasion! of! any! family! rejoicing.! The! prohibition!
A!contract!entered!into!in!the!name!of!another!by!one!who!has! shall! also! apply! to! persons! living! together! as! husband! and! wife!
no!authority!or!legal!representation,!or!who!has!acted!beyond!his! without!a!valid!marriage.!
powers,! shall! be! unenforceable,! unless! it! is! ratified,! expressly! or!
!
impliedly,! by! the! person! on! whose! behalf! it! has! been! executed,!
before!it!is!revoked!by!the!other!contracting!party.! Art.!1490.!The!husband!and!the!wife!cannot!sell!property!to!each!
other,! except:! (1)! When! a! separation! of! property! was! agreed!
!
upon!in!the!marriage!settlements;!or!(2)!When!there!has!been!a!
• Where!a!contract!is!entered!into!in!behalf!of!another!who!
judicial!separation!of!property!under!article!191.!
has!not!authorized!it,!such!contract!is!not!valid!and!binding!
against! him,! unless! he! ratifies! the! transaction! and! is! !
estopped!to!question!its!legality.!
• The! mere! lapse! of! time! cannot! give! efficacy! to! such! a! Art.! 1491.! The! following! persons! cannot! acquire! by! purchase,!
contract.! even! at! a! public! or! judicial! auction,! either! in! person! or! through!
• The!ratification!retroacts!to!the!moment!of!its!celebration.! the!mediation!of!another:!
! (1)!The!guardian,!the!property!of!the!person!or!persons!who!
Case:! may!be!under!his!guardianship;!
! (2)! Agents,! the! property! whose! administration! or! sale! may!
GUTIERREZ!HMNOS.!v.!ORENSE! have!been!intrusted!to!them,!unless!the!consent!of!the!principal!
Facts:! Orense! was! the! owner! of! a! land! and! its! improvements! in! has!been!given;!
Guinobatan,!Albay.!!His!nephew,!Jose!Duran,!with!his!knowledge!and! (3)! Executors! and! administrators,! the! property! of! the! estate!
consent! executed! before! a! notary! a! public! instrument! selling! the! under! administration;!
land!to!petitioner!the!vendor!Duran!reserving!to!himself!the!right!to! (4)!Public!officers!and!employees,!the!property!of!the!State!or!of!
repurchase!it!for!the!same!price!within!a!period!of!four!years!from! any!subdivision!thereof,!or!of!any!government?owned!
the! date! of! the! said! instrument.! The! plaintiff! company! had! not! or!controlled!corporation,!or!institution,!the!administration!of!
entered! into! possession! of! the! property,! because! of! the! occupancy! which! has! been! intrusted! to! them;! this! provision! shall! apply! to!
by!O!and!JD!by!virtue!of!a!contract!of!lease!executed!by!the!plaintiff! judges!and!government!experts!who,!in!any!manner!whatsoever,!
to!JD.!They!refused!to!pay!rentals!thereon!despite!demands.!Plaintiff! take!part!in!the!sale;!
filed! for! judgment! ordering! defendant! to! execute! an! instrument! to! (5)! Justices,! judges,! prosecuting! attorneys,! clerks! of! superior!
transfer! and! convey! the! property.! O! denied! having! knowledge! and! and!inferior!courts,!and!other!officers!and!employees!connected!
giving!consent!to!the!deed!of!sale!executed!by!JD.!He!prayed!to!be! with! the! administration! of! justice,! the! property! and! rights! in!
absolved! from! the! complaint.! JD! was! charged! with! estafa! but! O! litigation! or! levied! upon! an! execution! before! the! court! within!
testified!that!he!had!given!consent!to!the!sale.! whose! jurisdiction! or! territory! they! exercise! their! respective!
! functions;! this! prohibition! includes! the! act! of! acquiring! by!
Held:!The!sale!of!the!said!property!made!by!JD!to!plaintiff!was!null! assignment! and! shall! apply! to! lawyers,! with! respect! to! the!
and!void!in!the!beginning,!but!it!became!valid.!The!sworn!statement! property! and! rights! which! may! be! the! object! of! any! litigation! in!
made!by!the!defendant,!O,!while!testifying!as!a!witness!at!the!trial!of! which!they!may!take!part!by!virtue!of!their!profession;!
JD!for!estafa,!virtually!confirms!and!ratifies!the!sale!of!his!property! (6)!Any!others!specially!disqualified!by!law.!
effected!by!his!nephew.!Consent!was!proven!in!a!criminal!action!by!
the!sworn!testimony!of!the!principal!and!presented!in!this!civil!suit! !
by! other! sworn! testimony! of! the! same! principal! and! by! other! Art.!1782.!Persons!who!are!prohibited!from!giving!each!other!any!
evidence!to!which!the!defendant!made!no!objection.!The!repeated! donation!or!advantage!cannot!enter!into!universal!partnership.!
and!successive!statements!made!by!the!defendant!O!in!two!actions,!
affirming! that! he! had! given! his! consent! to! the! sale! of! his! property,! !
meet! the! requirements! of! the! law! and! legally! excuse! the! lack! of! • The!existence!of!a!contract!is!not!determined!by!the!number!
written!authority.!They!are!a!full!ratification!of!the!acts!executed!by! of!persons!who!intervene!in!it,!but!by!the!number!of!parties.!
JD!they!produce!the!effects!of!an!express!power!of!agency.! Not! by! the! number! of! individual! wills! but! by! the! number! of!
! declarations!of!will.!!
D. Parties( • As!long!as!there!are!two!distinct!patrimonies,!even!if!they!are!
represented!by!the!same!person!the!contract!will!be!valid.!
1. AUTO[CONTRACTS! !
• It! is! necessary! for! the! existence! of! a! contract! that! two! !
distinct!persons!enter!into!it.! !
! !
! !
! !
! !
!!!!
2. FREEDOM!TO!CONTRACT! deem! convenient,! "provided! they! are! not! contrary! to! law,! morals,!
! good! customs,! public! order! or! public! policy."! Thus,! counter?!
balancing! the! principle! of! autonomy! of! contracting! parties! is! the!
Art.!1306.!The!contracting!parties!may!establish!such!stipulations,! equally! general! rule! that! provisions! of! applicable! law,! especially!
clauses,! terms! and! conditions! as! they! may! deem! convenient,! provisions! relating! to! matters! affected! with! public! policy,! are!
provided! they! are! not! contrary! to! law,! morals,! good! customs,! deemed! written! into! the! contract.! The! governing! principle! is! that!
public!order,!or!public!policy.! parties!may!not!contract!away!applicable!provisions!of!law!especially!
peremptory!provisions!dealing!with!matters!heavily!impressed!with!
! public!interest.!
• The! freedom! to! contract! is! a! constitutionally! guaranteed! !
right.!Save!in!limited!and!exceptional!situations!provided!by!
3. WHAT!THEY!MAY!NOT!STIPULATE!
law! itself,! courts! have! no! authority! to! prescribe! the! terms!
and!conditions!of!a!contract!for!the!parties.! !
• The!contract!is!the!law!between!contracting!parties.! a. Contrary%to%law,%e.g.:%
! • The! law! which! the! terms! of! a! contract! must! not!
Cases:! contravene! are! those! which! expressly! declare! their!
! obligatory! character,! or! which! are! prohibitive,! or!
GABRIEL!v.!MONTE!DE!PIEDAD! which!express!fundamental!principles!of!justice!which!
Facts:! Petitioner! was! employed! as! appraiser! of! jewels! in! the! cannot! be! overlooked! by! the! contracting! parties.,! or!
pawnshop!of!the!Monte!de!Piedad!from!1913!up!to!May,!1933.!!On! which! impose! essential! requisites! without! which! the!
December! 13,! 1932,! he! executed! a! chattel! mortgage! to! secure! the! contract!cannot!exist.!
payment! of! the! deficiencies! which! resulted! from! his! erroneous! • Statutes!generally!have!no!retroactive!effect!and!only!
appraisal! of! the! jewels! pawned! to! the! appellee,! amounting! to! the! laws! existing! at! the! time! of! the! execution! of! the!
P14,679.07,! with! six! percent! (6%)! interest! from! said! date.! In! this! contract!are!applicable!to!the!transaction.!
chattel!mortgage,!the!appellant!promised!to!pay!to!the!appellee!the! !
sum! of! P300! a! month! until! the! sum! of! P14,679.07,! with! interest! is! i. pactum%commisorium%?!automatic!foreclosure%
fully! paid.! According! to! Petitioner,! the! provisions! of! the! chattel! !
mortgage!are!contrary!to!law,!morals!and!public!policy,!and!hence,!
the!chattel!mortgage!! Art.! 2088.! The! creditor! cannot! appropriate! the! things! given! by!
! way!of!pledge!or!mortgage,!or!dispose!of!them.!Any!stipulation!to!
Held:! In! order! to! declare! a! contract! void! as! against! public! policy,! the!contrary!is!null!and!void.!
must! find! that! the! contract! as! to! the! consideration! or! thing! to! be!
done,!has!a!tendency!to!injure!the!public,!is!against!the!public!good,! !
or! contravenes! some! established! interests! of! society,! or! is! • In! order! for! the! appropriation! or! disposition! to! be! validly!
inconsistent!with!sound!policy!and!good!morals,!or!tends!clearly!to! exercised,!the!power!to!do!so!must!be!expressly!given!to!the!
undermine! the! security! of! individual! rights,! whether! of! personal! mortgagee?creditor.!
liability!or!of!private!property.!Examining!the!contract!at!bar,!we!are! !
of!the!opinion!that!it!does!not!in!any!way!militate!against!the!public! ii. pactum%leonina% ?!one!party!bears!the!lion’s!share!
good.! Neither! does! it! contravene! the! policy! of! the! law! nor! the! of!the!risk%
established!interests!of!society.!There!is!substantial!compliance!with!
the!requirements!of!the!Chattel!Mortgage!Law.!The!wording!of!the!
!
affidavit!under!discussion,!as!it!appears!from!the!record,!is!almost!in! Art.! 1799.! A! stipulation! which! excludes! one! or! more! partners!
the!same!language!of!the!statute.!! from!any!share!in!the!profits!or!losses!is!void.!
!
PAKISTAN!INTERNATIONAL!AIRLINES!v.!OPLE! !
Facts:! On! 2! December! 1978,! petitioner! PIA,! a! foreign! corporation!
iii. pactum%de%non%alienando% ?!a!stipulation!not!to!
licensed!to!do!business!in!the!Philippines,!executed!in!Manila!two!(2)!
alienate%
separate! contracts! of! employment,! with! private! respondents!
Ethelynne!B.!Farrales!and!Ma.!M.C.!Mamasig.!The!employment!was! !
to! last! 3! years! subject! to! pre?mature! termination! by! PIA.! A!
Art.!2130.!A!stipulation!forbidding!the!owner!from!alienating!the!
stipulation!to!the!effect!that!the!applicable!law!would!be!the!laws!of!
immovable!mortgaged!shall!be!void.!
Pakistan! and! the! competent! court! would! be! the! Court! of! Karachi,!
Pakistan! was! also! made.! After! one! year! and! eight! months! of!
!
employment,! the! premature! termination! clause! was! used! against!
• But!even!if!the!vendee!may!actually!sell!it,!he!cannot!sell!it!as!
respondents.! They! sought! help! from! the! Ministry! of! Labor! and!
unencumbered.!
Employment! which! ordered! their! reinstatement! as! well! as! the!
payment!of!backwages!and!benefits.! !
! !
Held:! Art.! 278! of! the! Labor! Code,! as! it! then! existed,! forbade! the! !
termination!of!the!services!of!employees!with!at!least!one!(1)!year! !
of!service!without!prior!clearance!from!the!Department!of!Labor!and!
Employment.!The!principle!of!party!autonomy!in!contracts!is!not!an!
!
absolute!principle.!The!rule!in!Article!1306,!of!our!Civil!Code!is!that! !
the!contracting!parties!may!establish!such!stipulations!as!they!may! !
!!!!
iv. In%contracts%of%antichresis%(Labitag)% be! dropped! so! long! as! Juaneza! (client)! would! recognize! Arroyo! as!
! the!owner!of!the!land!and!the!cane,!and!allow!Arroyo!to!apply!for!a!
Torrens!title!over!the!land!with!Juaneza’s!consent.!
Art.! 2137.! The! creditor! does! not! acquire! the! ownership! of! the! !
real!estate!for!non?payment!of!the!debt!within!the!period!agreed! Held:! An! agreement! which! stifles! prosecution! of! a! crime! for! a!
upon.! pecuniary! or! valuable! consideration! is! contrary! to! public! policy.! To!
permit!an!offender!to!purchase!immunity!is!a!perversion!of!justice.!!
! !
• In!a!contract!of!antichresis,!the!creditor!has!a!right!to!receive! FILIPINAS!COMPAÑÍA!DE!SEGUROS!v.!MANDANAS!
the!fruits!from!an!immovable!of!his!debtor,!in!order!to!apply! Facts:! The! Philippine! Rating! Bureau! is! a! formation! of! non?life!
them!to!the!payment!of!interest!(if!owing)!and!thereafter!to! insurance!companies!in!the!country.!It!was!created!as!a!mechanism!
the!principal!of!his!credit.!((Art.!2132)! for!members!to!jointly!fix!rates,!determine!risks,!gather!information,!
! etc.! In! Art.! 22! of! their! constitution! states! that:! “Members! of! the!
b. Contrary%to%morals% Bureau!agree!not!to!represent!nor!to!effect!reinsurance!with,!nor!to!
• Morals!may!be!considered!as!meaning!good!customs;! accept! reinsurance! from! any! company,! body,! or! underwriter,!
or! those! generally! accepted! principles! of! morality! licensed! to! do! business! in! the! Philippines! not! a! member! in! good!
which!have!received!some!kind!of!practical!and!social! standing! of! the! Bureau.”! Defendant! Mandanas! seeks! to! have! this!
confirmation.! stricken!down!as!an!illegal!restraint!on!trade.!
! !
Held:! The! test! as! to! whether! a! given! agreement! constitute! an!
c. Contrary%to%public%order%
unlawful! machination! or! a! combination! in! restraint! of! trade! is!
• Public!order!signifies!the!public!weal.!!
whether,! under! the! particular! circumstances! of! the! case! and! the!
• Public! order! here! does! not! signify! the! material!
nature!of!the!particular!contract!involved!in!it,!the!contract!is,!or!is!
keeping!of!order,!it!represents!the!public,!social,!and!
not,! unreasonable.! There! is! nothing! unlawful! or! contrary! to! public!
legal! interst! in! private! law,! that! which! is! permanent!
policy! either! in! the! objectives! thus! sought! to! be! attained! by! the!
and! essential! in! institutions,! which,! even! if! favouring!
Bureau,!or!the!means!to!their!ends.!It!is!very!clear!that!the!purpose!
some! individuals! to! whom! the! right! pertains,! cannot!
of!the!assailed!article!is!to!promote!ethical!practices,!not!to!prevent!
be!left!to!his!own!will.!
or!eliminate!competition.!
!
!!
d. Contrary%to%public%policy% BUSTAMANTE!v.!ROSEL!
• A!contract!is!void!for!being!contrary!to!public!order!if! Facts:!Bustamante!entered!into!a!loan!agreement!with!Rosal.!He!put!
the! courts! find! that! the! contract! as! to! the! up! piece! of! land! as! collateral! and! agreed! that! should! he! fail! to! pay!
consideration! or! the! thing! to! be! done,! contravenes! upon! maturity,! Rosel! would! have! the! option! to! purchase! the!
some!established!interest!of!society,!or!is!inconsistent! collateral.! Before! the! loan! matured,! respondent! attempted! to!
with!sound!policy!and!good!morals,!or!tends!clearly!to! purchase!the!lot!at!the!agreed!upon!price!but!Bustamante!refused,!
undermine!the!security!of!individual!rights.! offered!another!lot!and!asked!for!an!extension.!Respondent!refused!
! to! grant! an! extension.! Petitioner! tendered! payment! but! Rosel!
Cases:! refused!to!accept!and!so!the!former!filed!for!consignation!while!the!
! latter!filed!for!specific!performance.!
CUI!v.!ARELLANO! !
Facts:! Plaintiff! was! a! law! student! at! Arellano! University! (AU).! His! Held:! The! agreed! upon! stipulation! is! contrary! to! law! for! being! a!
uncle! was! law! dean! and! Cui! received! many! scholarship! grants.! For! pactum!commisorium.!The!elements!are:!!
these!grants,!Cui!executed!a!document!stating!that!he!would!refund! 1.! A! property! is! mortgaged! by! way! of! security! for! payment! of! the!
in!full!the!amount!received!by!him!in!scholarships!should!he!transfer! principal!obligation.!!
to! another! school.! Due! to! the! transfer! of! his! uncle! to! Abad! Santos! 2.! There! exists! a! stipulation! for! automatic! appropriation! by! the!
University,! plaintiff! opted! to! complete! his! law! degree! there.! When! creditor! of! the! thing! mortgaged! in! case! of! non?payment! of! the!
he!was!applying!to!take!the!Bar!exams,!AU!refused!to!hand!over!his! principal!obligation!within!the!stipulated!period.!!
transcripts! because! he! had! not! yet! refunded! the! amount! of! !
P1033.87.!Plaintiff!paid!in!order!to!be!able!to!take!the!bar!exam.!
! E. Classification(
Held:! AU! must! return! the! amount! to! Cui.! In! order! to! declare! a!
contract! void! as! against! public! policy,! a! court! must! find! that! the! 1. ACCORDING!TO!SUBJECT[MATTER!
contract! as! to! consideration! or! the! thing! to! be! done,! contravenes! a. Things%
some! established! interest! of! society,! or! is! inconsistent! with! sound! b. Services%
policy!and!good!morals!or!tends!clearly!to!undermine!the!security!of! !
individual! rights.! The! stipulation! in! question! is! contrary! to! public! 2. ACCORDING!TO!NAME!
policy! and,! hence,! null! and! void.! Scholarships! are! awarded! in!
a. Nominate%?!have!their!own!individuality!(names)!and!are!
recognition! of! merit! not! to! keep! outstanding! students! in! school! to!
regulated! by! special! provisions! of! law! (e.g! deposit,!
bolster!its!prestige.!!
mutuum,!commodatum,!pignus)%
!
ARROYO!v.!BERWIN! b. Innominate% ?!that!which!has!no!name!or!designation!in!
Facts:! Berwin! was! the! attorney! of! a! person! charged! with! theft.! law%
According!to!Arroyo,!his!client!had!cut!cane!on!his!land!for!her!own! !
personal!gain.!They!entered!into!an!agreement!that!the!case!would!
!!!!
5. ACCORDING!TO!FORM!
Art.! 1307.! Innominate! contracts! shall! be! regulated! by! the!
stipulations! of! the! parties,! by! the! provisions! of! Titles! I! and! II! of! a. Common%or%informal%
this! Book,! by! the! rules! governing! the! most! analogous! nominate! b. Special%or%formal%
contracts,!and!by!the!customs!of!the!place.! • There!is!a!required!formality!for!the!validity.!
o donations% inter% vivos! ?! once! accepted,! it!
! normally! cannot! be! revoked;! can! be! in! writing!
not! necessarily! in! a! public! document! for!
1)%do%ut%des% I!give,!you!give!
donations! above! 5000! otherwise! they! may! be!
done! orally! but! it! needs! to! be! coupled! with!
2)%do%ut%facias% I!give,!you!do!
simultaneous!delivery;!and!!
3)%facio%ut%facias% I!do,!you!do! o mortis% causa! ?! most! formal;! subsumed! under!
testamentary! succession! i.e! you! need! the!
4)%facio%ut%des% I!do,!you!give! formalities! of! last! will! and! testament! [three!
attestation! witnesses! who! will! attest! to! being!
! present!when!the!donor!signs!the!donation];!if!
3. ACCORDING!TO!PERFECTION! the! donor! reserves! the! right! to! sell! the!
property,!it!is!not!inter!vivos!but!mortis!causa.!
a. By%mere%consent%(consensual)%
!
!
6. ACCORDING!TO!PURPOSE!
Art.! 1315.! Contracts! are! perfected! by! mere! consent,! and! from! a. Transfer%of%ownership,%e.g.%sale%
that!moment!the!parties!are!bound!not!only!to!the!fulfillment!of! b. Conveyance%of%use,%e.g.%commodatum%
what! has! been! expressly! stipulated! but! also! to! all! the!
consequences! which,! according! to! their! nature,! may! be! in! c. Rendition%of%services,%e.g.%agency%
keeping!with!good!faith,!usage!and!law.! !
7. ACCORDING!TO!THE!NATURE!OF!THE!VINCULUM!PRODUCED!
!
a. Unilateral%
• The! perfection! of! a! contract! is! the! moment! from! which! it!
exists;! the! juridical! tie! between! the! parties! arises! from! that! b. Bilateral/Reciprocal%
time.! !
• The! binding! force! of! a! contract! is! not! limited! to! what! is! 8. ACCORDING!TO!THE!CAUSE!
expressly! stipulated,! but! extends! to! all! consequences! which! a. Onerous%
are! the! natural! effect! of! the! contract,! considering! its! true!
purpose,!the!stipulation!it!contains,!and!the!object!involved.!
b. Gratuitous%or%lucrative%
• Contracts! are! not! what! the! parties! choose! to! call! them,! but! c. Remunerative%
what!they!really!are!as!determined!by!the!principle!of!laws.! !
! 9. ACCORDING!TO!THE!RISK!
b. By%delivery%of%the%object%(real)% a. Commutative%?!fair!exchange!of!values%
! b. Aleatory%?!involves!risk!(example:!insurance!contracts)%
Art.! 1316.! Real! contracts,! such! as! deposit,! pledge! and! !
commodatum,! are! not! perfected! until! the! delivery! of! the! object! F. Stages(
of!the!obligation.!
1. PREPARATION! ?! period! of! negotiation! and! bargaining,! ending!
! at!the!moment!of!agreement!of!the!parties!
• The!requirement!of!the!delivery!of!the!object,!in!addition!to! 2. PERFECTION! ?!moment!when!the!parties!come!to!agree!on!the!
the! consent! is! neither! arbitrary! nor! formalistic,! but! is! terms!of!the!contract!
demanded! by! the! very! nature! of! real! contracts! and! their!
purpose.!
3. CONSUMMATION! OR! DEATH! ?! fulfillment! or! the! performance!
! of!the!terms!agreed!upon!in!the!contract!
4. ACCORDING!TO!ITS!RELATION!TO!OTHER!CONTRACTS! !
a. Preparatory% !
b. Principal% !
c. Accessory% !
! !
! !
! !
! !
! !
!
!
!!!!
Cases:!
G. As( distinguished( from( a( perfected( !
FLORENTINO!v.!ENCARNACION!
promise( and( an( imperfect( promise( Facts:!The!petitioners?appellants!and!the!petitioners?appelleed!filed!
with!CFI!an!application!for!the!registration!under!Act!496!of!a!parcel!
(policitacion)( of! agricultural! land! located! at! Cabugao,! Ilocos! Sur.! The! application!
alleged!among!other!things!that!the!applicants!are!the!common!and!
! pro?indiviso! owners! in! fee! simple! of! the! said! land! with! the!
CONTRACT! PERFECTED!PROMISE! IMPERFECT! improvements! existing! thereon;! that! to! the! best! of! the! knowledge!
PROMISE! and! belief,! there! is! no! mortgage,! lien! or! encumbrance! of! any! kind!
whatsoever! affecting! said! land,! nor! any! other! person! having! any!
Establishes! and! Tends! only! to! assure! and! Mere! unaccepted! estate!or!interest!thereon,!legal!or!equitable,!remainder,!reservation!
determines! the! pave! the! way! for! the! offer! at! in! expectancy;! that! said! applicants! had! acquired! the! aforesaid!
obligation! celebration! of! a! contract! land! thru! and! by! inheritance! from! their! predecessors! in! interest,!
arising! in! the! future;! until! the! their! aunt,! Doña! Encarnacion! Florentino,! and! Angel! Encarnacion!
therefrom!! contract!is!actually!made,! acquired!their!respective!shares!of!the!land!thru!purchase!from!the!
the!rights!and!obligations! original! heirs,! Jesus,! Caridad,! Lourdes! and! Dolores,! all! surnamed!
are!not!yet!determined! Singson,! on! one! hand! and! from! Asuncion! Florentino! on! the! other.!!
Exhibit! O?1! embodied! in! the! deed! of! extrajudicial! partition! (Exhibit!
! O),! which! states! that! with! respect! to! the! land! situated! in! Barrio!
H. With(respect(to(third(persons( Lubong,! Dacquel,! Cabugao,! Ilocos! Sur,! the! fruits! thereof! shall! serve!
to!defray!the!religious!expenses,!was!the!source!of!contention!in!this!
! case.! Florentino! wanted! to! include! Exhibit! O?1! on! the! title! but! the!
1. STIPULATIONS!IN!FAVOUR!OF!THIRD!PERSONS!(STIPULATIONS! Encarnacions!opposed!and!subsequently!withdrew!their!application!
on!their!shares,!which!was!opposed!by!the!former.!After!hearing!the!
POUR!ATRUI)!! motion! for! withdrawal! and! the! opposition! issued! an! order! and! for!
! the! purpose! of! ascertaining! that! the! products! of! the! land! made!
subject! matter! of! this! land! registration! case! had! been! used! in!
Art.!1311,!2nd!par:!If!a!contract!should!contain!some!stipulation! answering! for! the! payment! of! expenses! for! the! religious! functions!
in!favor!of!a!third!person,!he!may!demand!its!fulfillment!provided! specified! in! the! Deed! of! Extrajudicial! Partition! which! was! no!
he! communicated! his! acceptance! to! the! obligor! before! its! registered! in! the! office! of! the! Register! of! Deeds! from! time!
revocation.! A! mere! incidental! benefit! or! interest! of! a! person! is! immemorial;!and!that!the!applicants!knew!of!this!arrangement!and!
not! sufficient.! The! contracting! parties! must! have! clearly! and! the! Deed! of! Extrajudicial! Partition! of! August! 24,! 1947,! was! not!
deliberately!conferred!a!favor!upon!a!third!person.! signed!by!Angel!Encarnacion!or!Salvador!Encarnacion,!Jr.!
! !
Held:! The! said! stipulation! is! a! stipulation! pour! autrui.! A! stipulation!
• When! there! is! a! stipulation! in! favor! of! a! third! person! and!
pour! autrui! is! a! stipulation! in! favor! of! a! third! person! conferring! a!
only!if!he!communicated!his!acceptance!and!the!contracting!
clear!and!deliberate!favor!upon!him,!and!which!stipulation!is!merely!
parties! clearly! and! deliberately! conferred! a! favor! upon! that!
a! part! of! a! contract! entered! into! by! the! parties,! neither! of! whom!
third!person!(the!provision!does!not!contemplate!tangential!
acted! as! agent! of! the! third! person,! and! such! third! person! may!
benefit!to!another)!!
demand! its! fulfillment! provided! that! he! communicates! his!
• There!must!be!no!agency!relationship!and!one!of!the!parties!
acceptance! to! the! obligor! before! it! is! revoked.! The! evidence! on!
and!the!third!person!because!then!the!third!person!ceases!to!
record!shows!that!the!true!intent!of!the!parties!is!to!confer!a!direct!
become!a!third!person.!(Labitag)!
and!material!benefit!upon!the!Church.!While!a!stipulation!in!favor!of!
• Accion! pauliana,! suborgatoria,! directa! (no! relativity! of!
a!third!person!has!no!binding!effect!in!itself!before!its!acceptance!by!
contract!in!these!three)!
the!party!favored,!the!law!does!not!provide!when!the!third!person!
• Test!of!beneficial!stipulation!?!A!mere!incidental!interest!of!a!
must! make! his! acceptance.! As! a! rule,! there! is! no! time! limit;! such!
third! person! is! not! within! the! doctrine;! it! must! be! the!
third! person! has! all! the! time! until! the! stipulation! is! revoked.! Here,!
purpose! and! intent! of! the! stipulating! parties! to! benefit! the!
We! find! that! the! Church! accepted! (implicitly)! the! stipulation! in! its!
third!person!!
favor!before!it!is!sought!to!be!revoked!by!some!of!the!coowners.!
!
!
Requisites!of!stipulacion!pour!autrui!
!
1. Stipulation! in! favor! of! third! person! is! a! part,! not! the! whole! of! !
the!contract!
!
2. Favorable! stipulation! not! conditioned! or! compensated! by! any! !
kind!of!obligation!whatever!
!
3. Neither!of!the!contracting!parties!bear!the!legal!representation! !
or!authorization!of!the!third!party!
!
4. Benefit! to! the! 3rd! person! was! clearly! and! deliberately! !
conferred!to!by!parties!
!
5. Third! person! communicated! his! acceptance! to! the! obligor! !
before!the!latter!revokes!the!same!
!
!
!
!
!
!!!!
COQUIA!v.!FIELDMAN’S!INSURANCE!CO.! Corporation! (Philacor)! to! print! three! volumes! of! "Philacor! Cultural!
Facts:!Fieldmen’s!Insurance!co.!Issued!in!favor!of!the!Manila!Yellow! Books"! for! delivery! on! the! specific! dates.! Private! respondent! had!
Taxicab! a! common! carrier! insurance! policy! with! a! stipulation! that! delivered!to!petitioner!1,097!reams!of!printing!paper!out!of!the!total!
the! company! shall! indemnify! the! insured! of! the! sums! which! the! 3,450! reams! stated! in! the! agreement.! Petitioner! alleged! it! wrote!
latter!could!be!held!liable!for!with!respect!to!“death!or!bodily!injury! private! respondent! to! immediately! deliver! the! balance! because!
to! any! faire?paying! passenger! including! the! driver! and! conductor.”! further!delay!would!greatly!prejudice!petitioner.!Private!respondent!
The!policy!also!stated!that!in!“the!event!of!the!death!of!the!driver,! delivered! again! to! petitioner! various! quantities! of! printing! paper!
the!Company!shall!indemnify!his!personal!representatives!and!at!the! amounting! to.! However,! petitioner! encountered! difficulties! paying!
Company’s! option! may! make! indemnity! payable! directly! to! the! private! respondent! said! amount.! Accordingly,! private! respondent!
claimants! or! heirs! of! the! claimants.”! During! the! policy’s! lifetime,! a! made! a! formal! demand! upon! petitioner! to! settle! the! outstanding!
taxicab!of!the!insured!driven!by!Coquia!met!an!accident!and!Coquia! account.! Petitioner! made! partial! payments.! Meanwhile,! petitioner!
died.!When!the!company!refused!to!pay!the!only!heirs!of!Coquia,!his! entered! into! an! additional! printing! contract! with! Philacor.!
parents,!they!institued!this!complaint.!!The!company!contends!that! Unfortunately,!petitioner!failed!to!fully!comply!with!its!contract!with!
plaintiffs! have! no! cause! of! action! since! the! Coquias! have! no! Philacor! for! the! printing! of! books! VIII,! IX,! X! and! XI.! Thus,! Philacor!
contractual!relationship!with!the!company.! demanded!compensation!from!petitioner!for!the!delay!and!damage!
! it! suffered! on! account! of! petitioner’s! failure.! On! August! 14,! 1981,!
Held:! Athough,! in! general,! only! parties! to! a! contract! may! bring! an! private! respondent! filed! a! collection! suit! against! petitioner.!
action!based!thereon,!this!rule!is!subject!to!exceptions,!one!of!which! Petitioner! cites! the! failure! of! private! respondent! to! deliver! all! the!
is!found!in!the!second!paragraph!of!Article!1311.!In!the!case!at!bar,! reams!of!paper.!
the!policy!under!consideration!is!typical!of!contracts!pour!autrui!this! !
character!being!made!more!manifest!by!the!fact!that!the!deceased! Held:! Petitioner! contends! that! private! respondent! should! be! held!
driver! paid! fifty! percent! (50%)! of! the! corresponding! premiums,! liable! for! petitioner’s! breach! of! contract! with! Philacor.! Private!
which! were! deducted! from! his! weekly! commissions.! Under! these! respondent! cannot! be! held! liable! under! the! contracts! entered! into!
conditions,!it!is!clear!that!the!Coquias!have!a!direct!cause!of!action! by!petitioner!with!Philacor.!Private!respondent!is!not!a!party!to!said!
against! the! Company,! and,! since! they! could! have! maintained! this! agreements.!It!is!also!not!a!contract!pour!autrui.!Aforesaid!contracts!
action! by! themselves,! without! the! assistance! of! the! insured! it! goes! could!not!affect!third!persons!like!private!respondent!because!of!the!
without! saying! that! they! could! and! did! properly! join! the! latter! in! basic!civil!law!principle!of!relativity!of!contracts!which!provides!that!
filing!the!complaint!herein.! contracts!can!only!bind!the!parties!who!entered!into!it,!and!it!cannot!
! favor! or! prejudice! a! third! person,! even! if! he! is! aware! of! such!
CONSTANTINO!v.!ESPIRITU! contract! and! has! acted! with! knowledge! thereof.! The! order!
Facts:! Pastor! Constantino! sold! two! parcels! of! land! to! Herminia! agreement! entered! into! by! petitioner! and! private! respondent! has!
Espiritu,!on!the!condition!that!the!land!will!be!held!in!trust!for!their! not! been! shown! as! having! a! direct! bearing! on! the! contracts! of!
already! conceived! but! as! yet! unborn! illegitimate! son.! Espiritu! took! petitioner!with!Philacor.!To!recapitulate,!private!respondent!did!not!
two! mortgages! on! the! land! and! then! offered! them! for! sale.! violate!the!order!agreement!it!had!with!petitioner.!Likewise,!private!
Constantino! asked! the! court! to:! one,! issue! a! temporary! restraining! respondent! could! not! be! held! liable! for! petitioner’s! breach! of!
order! to! stop! the! sale! of! the! lands;! and! two:! compel! Espiritu! to! contract! with! Philacor.! It! follows! that! there! is! no! basis! to! hold!
execute!a!deed!of!absolute!sale!to!Pastor!Constantino!Jr.,!then!two! private! respondent! liable! for! damages.! Accordingly,! the! appellate!
years! old.! court!did!not!err!in!deleting!the!damages!awarded!by!the!trial!court!
Espiritu! moved! to! dismiss! the! case! on! two! grounds:! Pastor! Jr.! was! to!petitioner.!
not! a! party! to! the! suit;! and! the! Statute! on! Frauds! (which! basically! !
says! that! some! contracts,! including! those! involving! land,! should! be! 6. POSSESSION! OF! THE! OBJECT! OF! THE! CONTRACT! BY! THIRD!
in! writing;! and! signed! by! all! parties! bound! by! the! contracts).! PERSONS!
Constantino! argued! that! what! was! involved! was! an! implied! trust!
!
under!Art.!1453.!
! Art.! 1312.! In! contracts! creating! real! rights,! third! persons! who!
Held:! The! court! ruled! that! the! contract! appears! to! be! a! contract! come! into! possession! of! the! object! of! the! contract! are! bound!
pour! autrui,! although! couched! in! the! form! of! a! deed! of! absolute! thereby,! subject! to! the! provisions! of! the! Mortgage! Law! and! the!
sale,! and! appellant’s! action! was,! in! effect,! one! for! specific! Land!Registration!Laws.!
performance.!The!court!held!that!that!the!Statute!of!Frauds!was!not!
a! strong! defense! as! it! was! “clear! upon! the! facts! alleged! in! the! !
amended! complaint! that! the! contract! between! the! parties! had! 7. CREDITORS!OF!THE!CONTRACTING!PARTIES!
already! been! partially! performed! by! the! execution! of! the! deed! of! !
sale,! the! action! brought! below! being! only! for! the! enforcement! of!
another!phase!thereof,!namely,!the!execution!by!appellee!of!a!deed! Art.!1313.!Creditors!are!protected!in!cases!of!contracts!intended!
of!conveyance!in!favor!of!beneficiary!thereunder.”! to!defraud!them.!
!
INTEGRATED!PACKAGING!CORP.!v.!CA! !
Facts:! Petitioner! and! private! respondent! executed! an! order! • In!rescissible!contracts,!there!is!a!presumption!of!fraudulent!
agreement! whereby! private! respondent! bound! itself! to! deliver! to! alienation! when! the! debtor! does! not! leave! sufficient!
petitioner!3,450!reams!of!printing!paper!worth!P1,040,060.00!under! property!to!cover!his!obligations!(Art.!1387)!
a! specific! schedule.! In! accordance! with! the! standard! operating! • The! creditor! may! ask! for! rescission! –! Art! 1177! (accion!
practice! of! the! parties,! the! materials! were! to! be! paid! within! a! subrogatoria)!and!Art!1381!(accion!pauliana)!!
minimum!of!thirty!days!and!maximum!of!ninety!days!from!delivery.! !
Petitioner! entered! into! a! contract! with! Philippine! Appliance! !
!!!!
8. INTERFERENCE!BY!THIRD!PERSONS! Held:! The! elements! of! tort! interference! are:! a)! existence! of! a! valid!
! contract;! b)! knowledge! on! the! part! of! the! third! person! of! the!
existence!of!the!contract;!and!c)!interference!of!the!third!person!is!
Art.! 1314.! Any! third! person! who! induces! another! to! violate! his! without! legal! justification! or! excuse.! The! three! elements! of! tort!
contract! shall! be! liable! for! damages! to! the! other! contracting! interference!are!present!since!So!Ping!Bun!prevailed!upon!DCCSI!to!
party.! lease!the!warehouse!to!his!enterprise!at!the!expense!of!Enterprising.!
However,! So! Ping! Bun! still! cannot! be! held! liable! for! damages.!
! Though! he! took! interest! in! the! property! of! Enterprising! and!
Requisites! of! Interference! With! Contractual! Relation! by! Third! benefited! from! it,! nothing! on! record! imputes! deliberate! wrongful!
Person:! motives!or!malice!on!him.!The!business!desire!is!there!to!make!some!
1. Existence!of!a!valid!contract! gain! to! the! detriment! of! the! contracting! parties.! Lack! of! malice,!
2. Knowledge!by!a!third!person!of!the!existence!of!a!contract! however,!precludes!damages.!But!it!does!not!relieve!So!Ping!Bun!of!
3. Interference! by! the! third! person! in! the! contractual! relation! the! legal! liability! for! entering! into! contracts! and! causing! breach! of!
without!legal!justification! existing! ones.! Thus,! the! appellate! court! correctly! confirmed! the!
! permanent! injunction! and! nullification! of! the! contracts! between!
Cases:! DCCSI!and!Trendsetter,!without!awarding!damages.!
! !
DAYWALT! v.! LA! CORPORACION! DE! LOS! PADRES! AGUSTINOS! !
RECOLETOS!! !
Facts:!Teodorica!Endencia!obligated!herself!to!sell!a!parcel!of!land!to! !
the! plaintiff.! It! was! agreed! that! the! final! deed! of! sale! will! be! !
executed! when! the! land! was! registered! in! Endencia’s! name.! In! the! !
course!of!the!proceedings!for!registration!it!was!found!that!the!land! !
involved! in! the! sale! contained! a! greater! area! than! what! Endencia! !
originally!thought!and!she!became!reluctant!to!consummate!the!sale! !
of!the!land!to!the!plaintiff.!This!reluctance!was!due!to!the!advice!of! !
the! defendant! who! exercised! a! great! moral! influence! over! her.! !
However,! in! advising! Endencia! that! she! was! not! bound! by! her! !
contract! with! the! plaintiff,! the! defendant! was! not! actuated! with! !
improper!motives!but!did!so!in!good!faith!believing!that,!under!the! !
circumstances,!Endencia!was!not!really!bound!by!her!contract!with! !
the!plaintiff.! !
! !
Held:! The! stranger! who! interferes! in! a! contract! between! other! !
parties! cannot! become! more! extensively! liable! in! damages! for! the! !
non?performance!of!the!contract!than!the!party!in!whose!behalf!he! !
intermediates.! Hence,! in! order! to! determine! the! liability! of! the! !
Recoletos,!there!is!first!a!need!to!consider!the!liability!of!Endencia!to! !
Daywalt.!The!damages!claimed!by!Daywalt!from!Endencia!cannot!be! !
recovered!from!her,!first,!because!these!are!special!damages!which! !
were!not!within!the!contemplation!of!the!parties!when!the!contract! !
was! made,! and! secondly,! these! damages! are! too! remote! to! be! the! !
subject! of! recovery.! Since! Endencia! is! not! liable! for! damages! to! !
Daywalt,! neither! can! the! Recoletos! be! held! liable.! As! already! !
suggested,! by! advising! Endencia! not! to! perform! the! contract,! the! !
Recoletos! could! in! no! event! render! itself! more! extensively! liable! !
than!the!principal!in!the!contract.! !
! !
SO!PING!BUN!v.!CA! !
Facts:!Tek!Hua!Trading!(Trading)!entered!into!agreements!with!Dee! !
C.!Chua!&!Sons!Inc.!(DCCSI)!for!the!lease!of!several!premises!which! !
Trading!used!to!store!its!textiles.!The!successor!of!Trading,!Tek!Hua! !
Enterprising!(Enterprising),!allowed!So!Ping!Bun,!the!grandson!of!the! !
managing! partner! of! Trading,! to! use! the! premises! to! store! his! own! !
textiles.!Later,!one!of!of!the!members!of!Enterprising,!asked!So!Ping! !
Bun! via! a! letter! to! vacate! the! premises! since! he! needed! it! for! his! !
textile!business.!So!Ping!Bun!refused!to!vacate.!Instead,!So!Ping!Bun! !
entered! into! lease! contracts! with! DCCSI! over! the! same! premises.! !
Enterprising!and!Manuel!Tiong!filed!an!action!to!nullify!the!contracts! !
between! So! Ping! Bun! and! DCCSI! and! also! claimed! damages! against! !
So!Ping!Bun!for!unlawful!interference!in!the!lease!contracts!between! !
DCCSI!and!Enterprising.! !
!
!!!!
satisfied!by!transferring!to!him!the!car!and!the!membership!share!of!
CHAPTER(2:(( an! SEADC! subsidiary! in! the! Architectural! Center,! Inc).! On! March!
1996,! a! letter?offer! was! prepared! by! the! SEADC! for! Malbarosa! to!
ESSENTIAL(REQUISITES( sign.! He! didn’t! sign! it! and,! instead,! said! that! he! will! review! it! first.!
After! 2! weeks! without! feedback! from! Malbarosa,! SEADC! withdrew!
its! offer! on! April! 1996.! Malbarosa! transmitted! signed! letter?offer! 4!
OF(CONTRACTS( days!after!such!withdrawal.!
!
Held:! There! is! no! contract! since! Malbarosa! failed! to! meet! the!
requirements!of!a!valid!acceptance!which:!!1)!may!be!expressed!or!
A. Consent( implied,!2)!must!be!absolute,!unconditional!and!without!variance!of!
( any!sort!from!the!offer,!3)!must!be!made!known!to!the!offeror,!and!
1. REQUISITES! 4)! must! be! made! in! the! manner! prescribed! by! the! offeror.!
Malbarosa! communicated! his! acceptance! only! after! the! knowledge!
of! the! withdrawal! of! the! offer.! He! should! have! transmitted! his!
Art! 1319.! Consent! is! manifested! by! the! meeting! of! the! offer! and! acceptance!while!the!offer!was!subsisting.!
the! acceptance! upon! the! thing! and! the! cause! which! are! to! !
constitute! the! contract.! The! offer! must! be! certain! and! the! i. Offer!–!unilateral!proposition!which!one!party!makes!
acceptance!absolute.!A!qualified!acceptance!constitutes!a!counter? to!the!other!for!the!celebration!of!the!contract.%
offer.! a. Must%be%certain!–!Art!1319!
! • An!offer!exists!only!if!the!contract!can!come!
Acceptance! made! by! letter! or! telegram! does! not! bind! the! offerer! into! existence! by! the! mere! acceptance! of!
except! from! the! time! it! came! to! his! knowledge.! The! contract,! in! the!offeree,!without!any!further!act!on!the!
such! a! case,! is! presumed! to! have! been! entered! into! in! the! place! part!of!the!offeror.!It!must!therefore!be:!
where!the!offer!was!made.!! o Definite! –! offer! must! be! distinguished!
! from! mere! communication! indicating!
that!a!party!is!disposed!to!enter!into!a!
• Consent! presupposes! the! following! requisites:! 1)! plurality!
certain! contract,! or! inviting! the! other!
of! subjects,! 2)! capacity,! 3)! intelligent! and! free! will,! 4)!
to!make!an!offer.!
express! or! tacit! manifestation! of! the! will,! and! 5)!
o Complete, –! offer! must! indicate! with!
conformity!of!the!internal!will!and!its!manifestation.!
sufficient! clearness! the! kind! of!
contract! intended! and! definitely! state!
a. Must%be%manifested%by%the%concurrence%of%the% the! essential! conditions! of! the!
offer% and% acceptance% "! with! respect! to! object! and! proposed!contract,!as!well!as!the!non?
cause% essential!ones!desired!by!the!offeror.!
o Intentional, –! offer! should! be! serious!
Cases:! and!not!made!for!fun!or!in!jest!
! !
ROSENSTOCK!v.!BURKE! b. What%may%be%fixed%by%the%offeror!"!time,!place!
Facts:!Elser!began!negotiations!for!the!purchase!of!Burke’s!yacht!in! and!manner!of!acceptance!
1922.!!Elser’s!plan!was!to!organize!a!yacht!club!and!sell!the!yacht!for!
,
P120K,!with!P100K!to!be!given!to!Burke!and!P20K!to!be!kept!by!him!
as!commission.!To!be!able!to!sell!the!yacht,!Elser!wanted!to!make!a! Art.!1321.!The!person!making!the!offer!may!fix!the!time,!place!and!
voyage! on! board! the! yacht! with! businessmen.! The! yacht,! however,! manner,of!acceptance,!all!of!which!must!be!complied!with.!
needed!repairs;!paid!by!Elser.!It!had!been!stipulated!that!Elser!was!
not! to! pay! for! the! use! of! the! yacht.! Burke! subsequently! gave! Elser! !
the! option! of! sale;! Elser! agreed! by! letter.! Burke! demanded! • The! offer! with! a! period! lapses! upon! the! termination! of! the!
performance.! period;!acceptance!must!thus!be!known!to!the!offeror!before!
! the!period!lapses.!If!the!acceptance!is!made!beyond!the!time!
Held:! It! was! not! a! valid! contract! of! sale.! Words! uttered! by! Elser! fixed!in!the!offer,!such!acceptance!already!constitutes!a!new!
could! not! be! interpreted! as! a! definite! offer! to! purchase! the! yacht,! offer!and!may!be!accepted!or!rejected!by!original!offeror.!
but! simply! a! position! to! deliberate! whether! or! not! he! would! • Acceptance!not!made!in!the!manner!provided!by!the!offeror!
purchase! it.! It! was! a! mere! invitation! to! a! proposal! being! made! to! is! not! effective,! but! constitutes! a! counter?offer! which! the!
Elser!which!he!has!the!option!to!either!accept!or!not.! offeror!may!accept.!
! !
MALBAROSA!v.!CA! c. When%made%through%an%agent!"!accepted!from!
Facts:! Salvador! Malbarosa! was! the! president! and! general! manager! the!time!acceptance!communicated!to!the!agent!
of! Philtectic! Corporation! and! an! officer! of! other! corporations! ,
belonging!to!the!SEADC!group!of!companies.!SEADC!assigned!to!him!
a! Mitsubishi! Gallant! Super! Saloon! car! along! with! membership! Art.! 1322.! An! offer! made! through! an! agent! is! accepted! from! the!
certificates! in! the! Architectural! Center,! Inc.! In! 1990,! Malbarosa! time!acceptance!is!communicated!to!him.!!
tendered! his! resignation! and! reiterated! his! request! for! payment! of!
his!incentive!compensation!(P395K).!SEADC!accepted!his!resignation! !
and! entitled! him! to! an! incentive! amounting! to! P251,057.67! (to! be!
!!!!
d. Circumstances%when%offer%becomes%defective!"! • Necessary! that! acceptance! be! unequivocal!
death,!civil!interdiction,!insanity!or!insolvency!! and!unconditional.!
, !
b. Kinds!
Art.! 1323.! An! offer! becomes! ineffective! upon! the! death,! civil! ,
interdiction,!insanity!or!insolvency!of!either!party!before!acceptance!
is!conveyed.!! Art.!1320.!An!acceptance!may!be!expressed!or!implied.!
! !
e. Business%advertisements%of%things%for%sale! i. Express!–!Art!1320!
, ii. Implied! –! Art! 1320;! may! arise! from! acts! or!
facts!which!reveal!the!intent!to!accept,!such!
Art.! 1325.! Unless! it! appears! otherwise,! business! advertisements! of! as! the! consumption! of! the! things! sent! to!
things!for!sale!are!not!definite!offers,!but!mere!invitation!to!make!an! the! offeree,! or! the! fact! of! immediately!
offer.!! carrying!out!the!contract!offered.!
iii. Qualified!–!Art!1319;!not!an!acceptance!but!
! constitutes!a!counter?offer!
• A! business! advertisement! of! things! for! sale! may! or! may! not! !
constitute!a!definite!offer.!It!is!not!a!definite!offer!when!the! c. If%made%by%letter%or%telegram!–!Art!1319,!Par!2!
object!is!not!determinate.! !
• An!offer!must!be!made!to!the!person!with!whom!a!contract! Four!theories!on!when!the!contract!is!perfected!
is!desired!but!it!is!not!necessary!that!the!offeror!should!know! (Sir! Labitag:! “Back! in! the! days! when!
the!person!who!receives!his!offer.!A!valid!offer!to!the!public! communication!was!slow…”):!
can!be!made.!
1. Manifestation, Theory, –, counter?
!
offeree!manifests!his!acceptance!
f. Advertisement%for%bidders%!
2. Expedition%Theory,–, sending!or!mailing!
,
of!the!letter!
Art.!1326.!Advertisements!for!bidders!are!simply!invitations!to!make! 3. Reception% Theory, –, receipt! of! the!
proposals,!and!the!advertiser!is!not!bound!to!accept!the!highest!of! message!of!acceptance!
lowest!bidder,!unless!the!contrary!appears.!! 4. Cognition% Theory, –! Art! 1319,! Par! 2;!
knowledge!of!the!offeror!of!the!acceptance!
!
!
• Not! applicable! to! judicial! sale! wherein! the! highest! bid! must! d. Period%of%acceptance!
necessarily!be!accepted!
!
,
Cases:! Art.!1324.!When!the!offerer!has!allowed!the!offeree!a!certain!period!
! to! accept,! the! offer! may! be! withdrawn! at! any! time! before!
JARDINE!DAVIES!v.!CA! acceptance! by! communicating! such! withdrawal,! except! when! the!
Facts:! Pure! Foods! Corp.! decided! to! install! 2! 1500! KW! generators;! option! is! founded! upon! a! consideration,! something! paid! or!
bidding! was! held.! Pure! Foods! confirmed! award! of! contract! to! promised.!
FEMSCO.! FEMSCO! submitted! the! required! performance! bond! and!
contractor’s! all?risk! insurance! policy.! Pure! Foods! unilaterally! ,,
cancelled!the!award!to!FEMSCO!and!awarded!the!project!to!Jardine.! • When! there! is! a! fixed! period! of! acceptance,! offeree! may!
! accept! at! any! time! until! such! period! expires.! When! the!
Held:! Contracts! are! perfected! by! mere! consent! (acceptance! of! the! offeror! has! not! fixed! a! period,! and! the! offer! is! made! to! a!
offeree! of! the! offer! made! by! the! offeror).! Pure! Foods’! letter! to! person!present,!the!acceptance!must!be!made!immediately.!
FEMSCO! constituted! acceptance.! The! “basic! terms! and! conditions”! When!the!offer!is!made!to!a!person!absent,!the!acceptance!
enumerated!in!the!letter!were!imposed!on!the!performance!of!the! may! be! made! within! such! time! that,! under! normal!
contract!and!not!on!the!perfection!of!such.!Also,!granting!that!Pure! circumstances,!an!answer!can!be!received!from!him.!
Foods’! letter! is! just! a! conditional! counter?offer,! FEMSCO’s! • Acceptance!not!made!in!the!manner!provided!by!the!offeror!
submission! of! bond! and! insurance! was! implied! acceptance.! Pure!
is!ineffective.!!
Foods’! acknowledgement! of! the! bond! and! insurance! shows!
• Offer! implies! an! obligation! on! the! part! of! the! offeror! to!
knowledge!of!FEMSCO’!consent!to!the!offer.!
maintain!it!for!such!a!length!of!time!as!to!permit!the!offeree!
!
to!decide!whether!to!accept!it!or!not.!!
!
!
ii. Acceptance% • Extinguishment!or!annulment!of!offer!!
• An! offer! that! is! not! accepted! does! not! give! rise! o Withdrawal!by!the!offeror!
to!consent,!and!the!contract!does!not!come!into! o Lapse!of!the!time!for!option!period!
existence.! o Legally!incapacitated!to!act!!
• Contract!is!perfect!when!the!offeror!or!counter? o Offeree!makes!counter?offer!
offeror!learns!about!the!acceptance!!! o Contract!becomes!illegal!
! ! !
a. Must%be%absolute!–!Art!1319! !
!!!!
Case:! b. Necessary%legal%capacities%of%the%parties%
!
i. Who%cannot%give%consent%
SANCHEZ!v.!RIGOS!!
Facts:!Sanchez!and!Rigos!executed!an!“Option!to!Purchase”!a!parcel!
of! land.! If! within! 2! years! from! date! of! execution! of! the! said! Art.!1327.!The!following!cannot!give!consent!to!a!contract:!
instrument!Sanchez!shall!not!exercise!his!right!to!buy!the!property,! 1. Unemancipated!minors;!
the! option! shall! be! terminated.! Within! the! said! period,! Sanchez! 2. Insane!or!demented!persons,!and!deaf?mutes!who!do!not!
made!several!attempts!to!pay!to!Rigos!but!the!latter!rejected!these! know!how!to!write.!
payments.!Sanchez!deposited!the!amount!in!CFI?Nueva!Ecija.!
! !
Held:!An!accepted!unilateral!promise!can!only!have!binding!effect!if! • Logical! consequence:! a! contract! entered! into! by! one! of! the!
supported!by!a!consideration,!which!means!that!the!option!can!still! persons! enumerated! above! would! be! wanting! in! consent,!
be!withdrawn!absent!a!consideration.!(See!Art!1324)!The!document! and!hence!inexistent!or!void.!
drawn! between! Sanchez! and! Rigos! does! not! require! Sanchez! to! • Legal! consequence:! if! both! parties! are! incapable! of! giving!
purchase! the! property;! not! a! contract! to! buy! and! sell.! The! consent,!the!contract!is!unenforceable.!If!only!one!is!capable,!
aforementioned! document! does! not! state! that! the! promise! is! it!is!annullable!or!voidable.!
supported!by!consideration!distinct!from!the!price!stipulated.! !
! ii. When%offer%and/or%acceptance%is%made%
e. Contract% of% option! –! Art! 1324;! a! preparatory!
a. During%a%lucid%interval!"!valid!
contract!in!which!one!party!grants!to!the!other,!
b. In% a% state% of% drunkenness! "! voidable;! utter!
for!a!fixed!period!and!under!specified!conditions,!
want!of!understanding!
the!power!to!decide!whether!or!not!to!enter!into!
c. During% a% hypnotic% spell! "! voidable;! utter! want!
a!principal!contract.!
of!understanding!
• Must! be! supported! by! an! independent!
!
consideration! and! the! grant! must! be!
exclusive! c. The% consent% must% be% intelligent,% free,%
• If! the! “option”! is! not! supported! by! an! spontaneous%and%real%
independent! consideration,! offeror! can! i. Effect%
withdraw! the! privilege! at! any! time! by! %
communicating!the!withdrawal!to!the!other!
party,!even!if!the!“option”!had!already!been! Art.! 1330.! A! contract! where! consent! is! given! through! mistake,!
accepted.!! violence,!intimidation,!undue!influence,!or!fraud!is!voidable.!!
!
Case:! ,
! • Requisites! of! consent:! 1)! it! should! be! intelligent,! or! with! an!
ADELFA!PROPERTIES!v.!CA! exact!notion!of!the!matter!to!which!it!refers,!2)!it!should!be!
Facts:! Rosario! Jimenez?Castañeda! and! Salud! Jimenez! and! their! free,!and!3)!it!should!be!spontaneous.!
brothers! were! the! registered! co?owners! of! a! parcel! of! land.! Adelfa! ,
Properties! expressed! interest! in! buying! Rosario! and! Salud’s! share.!
ii. Vices% of% consent! →! vitiated! consent! does! not!
An!“Exclusive!Option!to!Purchase”!was!executed!(P50K!to!be!paid!by!
make!a!contract!unenforceable!but!merely!voidable.!
Adelfa! as! “option! money”! to! be! credited! as! partial! payment! upon!
Intelligence!in!consent!is!vitiated!by:!
consummation! of! sale;! balance! to! be! paid! on! or! before! Nov! 30,!
!
1989).! Before! Adelfa! could! start! payment,! it! received! a! copy! of!
a. Mistake%or%error!–!a!wrong!or!false!notion!about!
complaint!filed!by!the!niece!and!nephews!of!the!Jimenezes!(for!the!
such! matter,! a! belief! in! the! existence! of! some!
annulment! of! the! deed! of! sale! and! recovery! of! ownership! of!
circumstance,! fact,! or! event,! which! in! reality!
property).! Adelfa! informed! the! Jimenezes! that! it! will! hold! payment!
does!not!exist.!
of! the! full! purchase! price! until! settlement! of! the! complaint.! Salud!
attributed!the!suspension!of!payment!to!“lack!of!word!of!honor”.! ,
!
Art.! 1331.! In! order! that! mistake! may! invalidate! consent,! it! should!
Held:! The! Agreement! between! the! parties! is! a! contract! to! sell!
refer! to! the! substance! of! the! thing! which! is! the! object! of! the!
(ownership!is!reserved!in!the!vendor!and!is!not!to!pass!until!the!full!
contract,!or!to!those!conditions!which!have!principally!moved!one!or!
payment! of! the! price)! and! not! an! option! contract! or! a! contract! of!
both!parties!to!enter!into!the!contract.!
sale! (title! passes! to! vendee! upon! delivery! of! the! thing! sold).! ! First,!
!
there!was!an!implied!agreement!that!ownership!shall!not!pass!to!the!
Mistake!as!to!the!identity!or!qualifications!of!one!of!the!parties!will!
purchaser! until! full! payment.! Second,! there! was! no! showing! that!
vitiate! consent! only! when! such! identity! or! qualifications! have! been!
there!was!delivery!of!the!property!(actual!or!constructive)!made!to!
the!principal!cause!of!the!contract.!
petitioner.! The! alleged! P50K! “option! money”! (money! given! as! a!
!
distinct! consideration! for! an! option! contract)! was! actually! “earnest!
A!simple!mistake!of!account!shall!give!rise!to!its!correction.!
money”!which!was!intended!to!form!part!of!the!purchase!price.!
! !
! !
! !
! !
!
!!!!
i. Kinds, Cases:!
1. Mistake, of, fact! –! generally! not! a! !
ground!for!annulment!of!contracts! ASIAIN!v.!JALANDONI!
• Ground! of! mistake! based! on! error! is! Facts:! Asiain! told! Jalandoni! that! he! was! willing! to! sell! part! of! his!
limited! to! cases! in! which! it! may! hacienda!(claimed!to!be!~25?30!ha!and!can!produce!not!less!than!2K!
reasonably! be! said! that! without! such! piculs! of! sugar);! Jalandoni! doesn’t! believe! him.! Asiain! Asiain! wrote!
error!the!consent!would!not!have!been! Jalandoni! a! letter!making! the! same! manifestations! plus! a! claim!
given! that!if! the! sugar!doesn’t! amount! to! 2k! piculs,! he’ll! pay! in! sugar! all!
• Effect! of! mistake! is! determined! by! such!amount!necessary!to!complete!2k.!In!the!event!that!there!is!an!
whether! the! parties! would! still! have! excess,! such! will! be! Asiain’s.! after! acquiring! possession! of! the! said!
entered! into! the! contract! despite! land,! Jalandoni! found! that! 1)! it! only! produced! 800! piculs! and! 23!
knowledge! of! true! fact! "! “influence! cates! of! sugar,! and! 2)! the! land! was! only! 18! ha,! 54! ares! and! 22!
upon!party”!! centiares.!He!had!already!paid!P30K!then.!Asiain!instituted!action!to!
! recover!the!P25K!balance!from!Jalandoni.!Jalandoni!wanted!to!annul!
o As!to! • Error! invalidates! consent! if! it! refers! to! the! the!contract.!
substance! substance!of!the!thing! !
of!object! o Substance! of! the! thing! –! those! Held:! Contract! is! rescindable! at! the!option! of! the! buyer! for!
qualities!which!determine!it!particular! agreement! would! not! have! been! made! without! such! mistake.!
kind,! distinguishing! it! from! other! Stipulating! that! the! land! is! “more! or! less! (size)”! will! not!prevent!
things! granting! of!relief! if! there! was! mutual! mistake! and! the! deficiency! is!
o As!to! • Invalidates!consent! material.! Also,! specific! performance! cannot! be! allowed! at! the!
principal! instance! of! the! vendor.! The! best! course! of! action! would! be! to! put!
conditions! the! parties! back! in! their! respective! positions! before! they! became!
(essential!or! involved! in! the! negotiations! and! before! they! entered! into! the!
substantial! agreement.!
in! !
character)! THEIS!v.!CA!
o As!to! • Error! in! the! name,! without! error! as! to! Facts:!Calsons!Development!Corporation!is!the!owner!of!3!adjacent!
identity!or! person,!will!not!invalidate!the!consent! parcels! of! land.! Adjacent! to! parcel! 3! is! a! vacant! lot! (parcel! 4).! In!
qualification • Error! as! to! the! person! will! invalidate! 1985,! Calsons! constructed! a! 2?storey! house! on! parcel! 3.! In! 1987,!
s!of!one!of! consent! when! the! consideration! of! the! Calsons! sold! parcels! 1! and! 2! to! Theis.! However,! due! to! an! error! in!
the!parties! person!has!been!the!principal!cause!of!the! the! survey! conducted! in! 1985! (unknown! to! Calsons),! what! was!
same;! generally! the! case! in! obligations! to! actually! sold! to! Theis! was! parcel! 4! (does! not! belong! to! Calsons).! In!
do! which! rest! on! confidence! or! demand! 1990,!Theis!discovered!that!parcel!4!was!not!owned!by!Calsons,!and!
special!qualifications! that! what! was! actually! sold! to! them! was! parcels! 2! and! 3.! Parcel! 3,!
• Mistake! as! to! qualifications,! even! when! however,! could! not! have! been! sold! by! Calsons! to! Theis! as! a! house!
there! is! no! error! as! to! person,! is! a! cause! (construction!cost!exceeds!the!price!paid!by!Theis)!had!already!been!
vitiating!consent!if!such!qualifications!have! built! thereon! prior! to! the! execution! of! the! contract! between! the!
parties.!
been!the!principal!cause!of!the!contract!!
!
• Error! as! to! the! solvency! of! the! other! party!
Held:! The! contract! may! be! annulled! on! the! ground! of! mistake.!
is!not!a!cause!of!nullity.!
Consent!of!the!parties!is!one!of!the!essential!elements!to!the!validity!
o As!to! • Error! of! account! "! purely! a! mistake! in!
of!contracts,!and!where!consent!is!given!through!mistake!the!validity!
quantity,!as! computation;! does! not! vitiate! consent;!
of!the!contractual!relations!between!the!parties!is!legally!impaired.!
distinguishe make!proper!correction!
The!mistake!or!error!on!the!subject!of!the!sale!in!question!appears!
d!from! • Error!as!to!quantity!→!may!vitiate!consent!
to! be! substantial! as! the! object! of! the! same! transaction! is! different!
simple! if!the!primary!!consideration!is!the!quantity!
from!that!intended!by!the!parties.!
mistake!of!
!
account!
!
!
!
• Mistakes!that!do!not!affect!the!validity!of!the!contract!
!
1. Error! with! respect! to! accidental! qualities! off! the!
!
object! of! the! contract! (quality! of! paper! of! a! book,!
!
adjoining!owners!of!a!piece!of!land),
!
2. Error! in! the! value! of! thing! (when! a! person,! having!
!
forgotten!the!cost!price!of!merchandise,!erroneously!
!
sells!it!for!less),
!
3. Error!which!refers!not!to!conditions!of!the!thing,!but!
!
to! accessory! matters! in! the! contract! foreign! to! the!
!
determination!of!the!object,
!
!
!
!
!
!
!
! !
!
!!!!
HEIRS!OF!WILLIAM!SEVILL,!ET!AL.!v.!LEOPOLDO!SEVILLA! Cases:!
Facts:! Filomena,! Felisa,! and! Honorata! were! sisters! and! co?owned! a! !
parcel!of!land.!When!Honorata!died,!her!share!in!the!said!parcel!of! DUMASUG!v.!MODELO!
land! was! divided! between! Filomena! and! Felisa.! Before! Felisa! died,! Facts:! Dumasug! assails! the! validity! of! the! contract! of! sale! (of! the!
she!executed!a!Deed!of!Donation!inter,vivos!of!her!share!in!favor!of! lands! and! carabaos)! which! she! executed! in! favor! of! Modelo.!
Leopoldo! and! his! wife;! Leopoldo! accepted! the! donation.! Felisa! and! Dumasug!claims!that!Modelo!persuaded!her!to!sign!a!document!by!
Peter! Sevilla! then! executed! a! Deed! of! Extrajudicial! Partition! of! the! falsely! and! maliciously! making! her! believe! that! it! contained! an!
share! of! the! deceased! Honorata! between! the! heirs! of! Filomena! (8! engagement! on! Dumasug’s! part! to! pay! Modelo! a! certain! sum! of!
children)! and! Felisa.! Leopoldo! and! Peter,! with! two! others,! then! money! as! expenses! incurred! by! Modelo! for! the! lawsuit! in! which!
sought! to! register! the! said! partition.! The! requested! titles! were,! Dumasug! was! a! party.! It! appeared! that! the! sale! was! authorized! by!
however,! left! unsigned! by! the! Register! of! Deeds! pending! the! Dumasug!by!placing!a!cross!between!her!name!and!surname!in!the!
submission!of!proof!by!Peter!that!he!has!the!authority!to!represent! document!(she!didn’t!know!how!to!write).!
the!heirs!of!Filomena.!Meanwhile,!the!other!heirs!of!Filomena!assail! !
the! validity! of! the! Deed! of! Donation! and! the! Deed! of! Extrajudicial! Held:!The!consent!given!by!Dumasug!is!invalid,!thus!invalidating!the!
Partition,!alleging!that!the!donation!was!obtained!through!fraud!as! contract.!The!document!(by!which!Modelo!made!himself!the!owner!
Felisa! was! already! 81! years! old! and! of! unsound! mind! during! its! of!the!properties)!is!not!the!instrument!which!Dumasug!signed.!Also,!
execution,!and!the!partition!was!executed!without!their!knowledge! even! if! it! was,! the! contents! thereof! were! not! duly! and! faithfully!
and!consent.! explained! to! Dumasug.! Had! she! truly! understood,! she! would! not!
! have! accepted.! Articles! 1265! and! 1266! of! the! Old! Civil! Code! state!
Held:! The! donation! inter, vivos! is! valid! as! the! non?existence! of! that!a!consent!given!by!mistake!is!null!and!void.
fraud! is! a! factual! finding.! The! circumstances! presented! by! the! !
petitioner!are!not!enough!to!establish.!(Remember:!He!who!asserts! HEMEDES!v.!CA!
has! the! burden! to! prove.)! Absent! convincing! proof! that! Felisa! was! Facts:! Jose! Hemedes! executed! a! deed! of! donation! inter, vivos!
incapable! of! exercising! judgment! when! she! executed! the! donation,! conveying!a!parcel!of!land!in!favor!of!his!third!wife,!Justa!Kausapin,!
consent! must! be! presumed.! As! to! the! partition,! it! is! void! ab, initio.! subject! to! the! resolutory! condition! that! in! case! of! death! or!
Felisa!did!not!possess!the!capacity!to!give!consent!to!or!execute!the! remarriage,!the!land!would!have!to!revert!back!to!the!legal!heirs!of!
deed! of! the! partition.! When! the! extra?judicial! partition! was! Jose!(Maxima!and!Enrique).!Justa,!however,!may!choose!who!would!
executed,! Felisa! has! already! donated! her! portion! of! the! land! in! receive! the! land.! The! first! deed! of! reconveyance! was! executed! by!
question!to!Leopoldo.! Justa! in! favor! of! Maxima.! Maxima! then! executed! a! mortgage! over!
! the!property!in!favor!of!R&B!Insurance.!When!Maxima!failed!to!pay,!
2. Error,of,law!–!mistake!as!to!the! R&B! Insurance! executed! an! extrajudicial! deed! of! foreclosure.!
existence!of!a!legal!provision!or!as!to! Meanwhile,!the!second!document!was!executed!by!Justa!in!favor!of!
its!interpretation!or!application!! Enrique.! Enrique! claimed! that! he! paid! the! taxes! of! the! real! estate!
o General!rule:!Ignorantia,legis, property.! He! also! claimed! that! Justa! didn’t! consent! to! the! deed!
neminem,excusat! executed! in! favor! of! Maxima.! The! RTC,! relying! on! Art.! 1322! and!
, , , saying! that! 1)! no! one! explained! the! deed! executed! in! favor! of!
Maxima! and! 2)! the! deed! was! in! English! and! Justa! claimed! to! not!
Art.! 3.! Ignorance! of! the! law! excuses! no! one! from! compliance! understand!English,!ruled!in!favor!of!Enrique.!
therewith.! !
Held:! The! deed! executed! in! favor! of! Maxima! is! valid! as! the! mere!
!
denial!of!Justa!cannot!invalidate!the!deed.!Otherwise,!it!would!leave!
o Exception:!Mutual!error!of!law!
the!validity!of!the!contract!to!the!will!of!one!of!the!parties.!Art.!1332!
! ! !
is! not! applicable! in! this! case! as! the! said! article! applies! only! where!
Art.!1334.!Mutual!error!as!to!the!legal!effect!of!an!agreement!when! the!consent!is!vitiated!through!fraud!or!mistake.!Consent!has!to!be!
the!real!purpose!of!the!parties!is!frustrated,!may!vitiate!consent.! given! for! this! article! to! apply! but! it! has! to! be! alleged! that! it! was!
vitiated! through! fraud! or! mistake.! In! the! present! case,! Justa! claims!
! that!there!is!no!consent!and!not!that!it!is!vitiated!through!fraud!or!
• Requisites:! mistake.!
1. Error!must!be!as!to!the!legal! !
effect!of!an!agreement! KATIPUNAN!v.!KATIPUNAN!
2. Must!be!mutual! Facts:!Braulio!Katipunan,!Jr.!is!the!owner!of!a!203?square!meter!lot!
3. Real!purpose!of!the!parties!is! and! a! 5?door! apartment.! Assisted! by! his! brother,! Braulio! entered!
frustrated! into! a! Deed! of! Absolute! Sale! with! brothers! Edgardo! and! Leopoldo!
! Balguma.!Two!years!later,!Braulio!filed!a!complaint!for!annulment!of!
ii. When,one,of,the,parties,is,unable,to,read!→! the! Deed! of! Absolute! Sale,! averring! that! his! brother! Miguel,! Atty.!
burden!of!proof!is!on!the!party!enforcing! Balguma! and! Inocencio! Valdez! convinced! him! to! work! abroad.!
the!contract! Braulio!alleged!that!through!insidious!words!and!machinations,!they!
, made! him! sign! a! document! purportedly! a! contract! of! employment!
(turned!out!to!be!the!Deed!of!Absolute!Sale).!He!further!alleged!that!
Art.! 1332.! When! one! of! the! parties! is! unable! to! read,! or! if! the! he!did!not!receive!the!consideration!stated!in!the!contract.!He!also!
contract! is! in! a! language! not! understood! by! him,! and! mistake! or! alleged!that!Miguel!at!al.,!with!evident!bad!faith,!conspired!with!one!
fraud! is! alleged,! the! person! enforcing! the! contract! must! show! that! another! in! taking! advantage! of! his! ignorance! as! he! only! finished!
the!terms!thereof!have!been!fully!explained!to!the!former.! third!grade.!
!
!!!!
Held:!The!Deed!of!Absolute!Sale!is!voidable!for!vitiated!consent!on! VIOLENCE! INTIMIDATION!
the! part! of! Braulio.! Undue! influence! was! exerted! upon! him! by! Physical!force!or!compulsion! Moral!force!or!compulsion!
Miguel!et!al.!while!it!was!Miguel!who!negotiated!with!Atty.!Balguma,! External! Internal!
they! did! not! explain! to! him! the! nature! and! contents! of! the! Serves! to! prevent! an! act! from! Induces! the! performance! of! an!
document.!His!lack!of!education,!coupled!with!his!mental!affliction,! being!done! act!
placed! him! not! only! at! a! hopelessly! disadvantageous! position! but! Requisites:! Requisites:!
also!virtually!rendered!him!incapable!of!giving!rational!consent.! 1. Physical! force! must! be! 1. Intimidation! must! be! the!
! irresistible,! or! of! such! determining! cause! of! the!
iii. Inexcusable,mistake, degree! that! the! victim! has! contract,! or! must! have!
, no! other! course,! under! the! caused! the! consent! to! be!
circumstances,! but! to! given!
Art.!1333.!There!is!no!mistake!if!the!party!alleging!it!knew!the!doubt,! submit! 2. Threatened! act! is! unjust! or!
contingency!or!risk!affecting!the!object!of!the!contract.! 2. Such! force! is! the! unlawful!
determining! cause! in! giving! 3. Threat!is!real!and!serious!
, the!consent!to!the!contract! 4. Produces! a! reasonable! and!
• An!error!so!patent!and!obvious!that!nobody!could!have! well?grounded! fear! from!
made!it,!or!one!which!could!have!been!avoided!by!ordinary! the! fact! that! the! person!
prudence,!cannot!be!invoked!by!the!one!who!made!it!in! from! whom! it! comes! has!
order!to!annul!his!contract.! the! necessary! means! or!
• Mistake!caused!by!manifest!negligence!cannot!invalidate!a! ability! to! inflict! the!
juridical!act.! threatened!injury.!
! !
b. Violence%and%Intimidation! • Seriousness! of! the! evil! or! wrong! measured! both! objectively!
, (degree!of!harm!that!the!evil!in!itself!is!likely!to!produce)!and!
subjectively! (determining! the! effect! of! the! threat! upon! the!
Art.!1335.!There!is!violence!when!in!order!to!wrest!consent,!serious! mind!of!the!victim!in!view!of!his!personal!circumstances!and!
or!irresistible!force!is!employed.! his!relation!to!the!author!of!the!intimidation)!
! • “Person”!→!not!limited!to!life!and!physical!integrity!but!also!
There! is! intimidation! when! one! of! the! contracting! parties! is! includes! liberty! and! honor;! covers! all! injuries! which! are! not!
compelled! by! a! reasonable! and! well?grounded! fear! of! an! imminent! patrimonial!in!nature!
and! grave! evil! upon! his! person! or! property,! or! upon! the! person! or! ,
property! of! his! spouse,! descendants! or! ascendants,! to! give! his!
i. Effect,
consent.!
!
,
To! determine! the! degree! of! the! intimidation,! the! age,! sex! and! Art.! 1336.! Violence! or! intimidation! shall! annul! the! obligation,!
condition!of!the!person!shall!be!borne!in!mind.!! although!it!may!have!been!employed!by!a!third!person!who!did!not!
! take!part!in!the!contract.!
A!threat!to!enforce!one’s!claim!through!competent!authority,!if!the!
claim!is!just!or!legal,!does!not!vitiate!consent.! • Agreement! is! still! null! and! void! even! if! the! intimidation! or!
threat!had!been!employed!by!a!third!person!who!was!not!a!
!
party!to!the!contract.!
• Duress!–!degree!of!constraint!or!danger!either!actually! !
inflicted!(violence)!or!threatened!and!impending! Case:!
(intimidation),!sufficient!to!overcome!the!mind!and!will!of!a! !
person!of!ordinary!firmness.!Violence!is!physical!force!or! MARTINEZ!v.!HONGKONG!AND!SHANGHAI!BANK!
compulsion.!Intimidation!is!moral!force!or!compulsion.! Facts:! Martinez! executed! a! contract! under! which! she! agreed! to! a!
! conveyance! of! several! properties! to! Adelcoa! &Co.! and! HSBC! as!
! settlement! of! their! claims! against! her! and! her! husband.! During! the!
! trial,! it! was! established! that! during! the! period! of! negotiation,!
! representations!were!made!to!her!by!the!defendants!and!concurred!
! in! by! her! lawyers! that! if! she! assented! to! the! requirements! of! the!
! defendants,! the! civil! suit! against! them! would! be! dismissed! and! the!
! criminal! charges! against! her! husband! would! be! withdrawn.!
! However,!if!she!refused,!her!husband!must!either!spend!the!rest!of!
! his!life!in!Macao!or!be!criminally!prosecuted.!
! !
! Held:!In!order!for!the!contract!to!be!annulled,!it!must!be!shown!that!
! the! plaintiff! never! gave! her! consent! to! the! execution! thereof.!
! However,!it!is!necessary!to!distinguish!between!real!duress!and!the!
! motive! which! is! present! when! one! gives! his! consent! reluctantly.! A!
! contract!whereby!reparation!is!made!by!one!party!for!injuries!which!
! he!has!willfully!inflicted!upon!another!is!one!which,!from!its!nature,!
! is! entered! into! reluctantly! by! the! party! making! the! reparation.!
! Nevertheless,!it!is!binding!and!enforceable.!
!!!!
! • Requisites:!
c. Undue%influence!–!any!means!employed!upon!a! 1. It! must! have! been! employed! by! one! contacting! party!
party! which,! under! the! circumstances,! he! could! upon!the!other!(Arts!1342!and!1344)!
not!well!resist,!and!which!controlled!his!volition! o If! both! party! employs! fraud,! they! cannot! have! an!
and! induced! him! to! give! his! consent! to! the! action!against!each!other;!fraud!is!compensated!
contract,! which! otherwise! he! would! not! have! 2. It! must! have! induced! the! other! party! to! enter! into! the!
entered!into.! contract!(Art!1338)!
, 3. It!must!have!been!serious!(Art!1344)!
4. It! must! have! resulted! in! damage! or! injury! to! the! party!
Art.! 1337.! There! is! undue! influence! when! a! person! takes! improper! seeking!annulment!
advantage!of!his!power!over!the!will!of!another,!depriving!the!latter! • Contract! obtained! through! fraud! is! not! void! ab, initio! but!
of!a!reasonable!freedom!of!choice.!The!following!circumstances!shall! merely!voidable!
be!considered:!the!confidential,!family,!spiritual!and!other!relations! !
between! the! parties,! or! the! fact! that! the! person! alleged! to! have! ! FRAUD!IN!ART.!1171! FRAUD!IN!ART.!1338!
been!unduly!influenced!was!suffering!from!mental!weakness,!or!was! When! it! In! connection! with! the! Prior! or! simultaneous!
ignorant!or!in!financial!distress.! occurs! fulfillment! of! the! to! the! consent! or!
obligation! creation! of! the!
!
obligation!
!
!
! UNDUE!INFLUENCE! INTIMIDATION!
!
Unlawful! or! unjust! Not!necessary! Necessary!!
! ERROR! FRAUD!
act!
When! it! Only! when! it! refers! to! Always,!when!the!fraud!
Moral!coercion! Present! Present!
vitiates! the! matters! mentioned! had!a!decisive!influence!
!
consent! in!Art!1331! on!such!consent!
• Due!influence!does!not!vitiate!consent.!
!
o The!line!between!due!and!undue!influence!must!be!in!full!
Cases:!
recognition! of! the! liberty! due! every! true! owner! to! obey!
!
the! voice! of! justice,! the! dictates! of! friendship,! of!
HILL!v.!VELOSO!
gratitude! and! benevolence,! as! well! as! the! claims! of!
Facts:! Veloso! executed! a! promissory! note! with! Franco! as! solidary!
kindred,! and,! when! not! hindered! by! personal! incapacity!
debtor!(later!died)!in!favor!of!one!Michael!&!Co.!S!en!C,!allegedly!for!
or! particular! regulations,! to! dispose! of! his! own! property!
goods! received! in! La, Cooperativa, Filipina.! A! suit! was! filed! against!
according!to!his!own!free!choice.!
Veloso! because! payment! was! not! received! by! the! creditor! after! 4!
• Sir! Labitag:! sales! talk! is! allowed,! especially! if! there! is! monthly! installments.! Veloso! tried! to! escape! payment! by! alleging!
opportunity!to!investigate!the!facts.!(See!Art!1340)! the! following:! a)! that! Domingo! obtained! her! signature! in! the!
• Circumstances!mentioned!→!not!exclusive! promissory! note! by! estafa,! b)! that! what! she! signed! was! a! blank!
• Undue! influence! employed! by! a! third! person! may! annul! the! document,! on! the! pretext! that! she! was! paying! 8K! in! favor! of! the!
contract.!(See!Art!1336)! guardian!of!the!minor!children!of!her!sister?in?law,!to!whom!she!was!
! indebted!the!same!amount.!CFI,!RTC!and!CA!were!able!to!prove!the!
d. Fraud% or% dolo, –! every! kind! of! deception,! falsity!of!her!defenses.!
whether! in! the! form! of! insidious! machinations,! !
manipulations,! concealments! or! Held:!The!defense!of!error!and!deceit!is!not!admissible!in!this!case.!
misrepresentations,! for! the! purpose! of! leading! Veloso’s! statement! is! not! much! proof! that! can! outweigh! the!
another! party! into! error! and! thus! execute! a! contents! of! the! promissory! note! that! is! the! basis! of! the! complaint.!
particular!act.! On! the! contrary,! it! is! conclusive! proof! of! the! falsity! of! the! other!
, cause! of! debt! alleged! in! the! special! defense.! Also,! Art.! 1269! of! the!
Old! CC! states! that! “There! is! deceit! when! by! words! or! insidious!
Art.! 1338.! There! is! fraud! when,! through! insidious! words! or! machinations! on! the! part! of!one,of! the! contracting! parties,!
machinations!of!one!of!the!contracting!parties,!the!other!is!induced! the!other!is! induced! to! execute! a! contract! which! without! them! he!
to! enter! into! a! contract! which,! without! them,! he! would! not! have! would!not!have!made.”!Franco!is!not!one,of!the!contracting!parties!
agreed!to.! who! may! have! deceitfully! induced! the!other!contracting! party! to!
execute!the!contract.!Therefore,!Veloso!is!still!liable!to!pay.!
• Must! have! a! determining! influence! on! the! consent! of! the!
!
victim!
!
• Insidious! words! and! machinations! –! forms! of! deception!
!
which! may! influence! the! consent! of! a! contracting! party,!
!
without! necessarily! constituting! estafa! or! some! offense!
!
under!the!penal!laws.!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!!!!
WOODHOUSE!v.!HALILI,!supra! 2. Dolo, incidente! –! that! which! does! not!
Facts:!Plaintiff!and!defendant!entered!into!a!written!agreement!that! have! such! a! decisive! influence! and! by!
they!shall!organize!a!partnership!for!the!bottling!and!distribution!of! itself! cannot! cause! the! giving! of!
Mission! softdrinks.! When! bottling! plant! was! already! in! operation,! consent,! but! refers! only! to! some!
plaintiff! demanded! that! the! partnership! papers! be! executed.! Halili! particular!or!accident!of!the!obligation!
promised!to!do!so!after!the!sales!of!the!products!had!been!increased! !
to! 50K.! Defendant! refused! to! give! allowance! to! Woodhouse! and!
settlement! could! not! be! arrived! at! so! the! present! action! was! Art.!1344,!Par!2:!Incidental!fraud!only!obliges!the!person!employing!
instituted.!Defendant!counter?argued!that!his!consent!was!obtained! it!to!pay!damages.!
through! false! representation! of! the! plaintiff! claiming! he! was! the!
!
owner! or! was! about! to! be! the! owner! of! an! exclusive! bottling!
• The! deceit! must! be! serious;! fraud! is! serious! when! it! is!
franchise! when! in! fact! he! was! not.! The! franchise! was! given! to! the!
sufficient! to! impress,! or! to! lead! an! ordinarily! prudent! person!
defendant!himself!during!their!transaction!with!Mission!Dry!Corp!in!
into!error!
the! US.! Thus! the! plaintiff! failed! in! carrying! out! his! undertakings! by!
• Seriousness! of! the! acts! is! not! the! same! as! the! determining!
failing!to!contribute!the!franchise!into!the!partnership.!!
cause!of!the!contract!
! !
Held:! There! are! two! kinds! of! fraud:! 1)! causal! fraud! (principal! ii. Failure,to,disclose,facts;,duty,to,reveal,them!
inducement,!without!which!the!other!party!would!not!have!entered!
→!FRAUD!
the!contract),!which!may!be!ground!for!the!annulment!of!a!contract,!
and!2)!incidental!deceit,!which!only!renders!the!party!who!employs!
,
it! liable! for! damages.! What! was! committed! in! this! case! is! an! Art.! 1339.! Failure! to! disclose! facts,! when! there! is! a! duty! to! reveal!
incidental! deceit! and! the! principal! obligation! that! Woodhouse! them,! as! when! the! parties! are! bound! by! confidential! relations,!
assumed! was! to! secure! the! said! franchise.! However,! the! alleged! constitutes!fraud.!
possession! of! the! rights! to! the! franchise! induced! the! defendant! to!
give! 30%! of! the! net! profit! to! plaintiff! when! plaintiff! has! minimal! !
knowledge! pertaining! to! bottling! (thus! incidental! fraud).! By! • GENERAL!RULE:!Silence!or!concealment!does!not!constitute!a!
pretending!that!he!had!exclusive!franchise!that!would!be!transfer!to! fraud!!
the!partnership,!Woodhouse!obtained!30!%!shares!in!profit.! • EXCEPTIONS:!!
! o There!is!a!special!duty!to!disclose!certain!facts!
GERALDEZ!v.!CA,!supra! o According!to!good!faith!and!usages!of!commerce!the!
Facts:!The!petitioner!and!her!sister!bought!a!tour!package!(VOLARE! communication!should!have!been!made!!
3)! covering! a! 22?day! European! tour! for! $2,990.! Certain! “elements”! • Innocent!non?disclosure!of!a!fact!does!not!affect!the!
of!the!tour!stated!in!the!brochure!were!missing.! formation!of!the!contract!or!operate!to!discharge!the!parties!
! from!their!agreement;!caveat,emptor!
Held:! Kenstar! committed! fraudulent! misrepresentations! amounting! ,
to! bad! faith,! to! the! prejudice! of! Geraldez! and! the! members! of! the! Cases:!
tour! group.! Kenstar! committed! grave! misrepresentation! when! it! !
assured! in! its! package! that! the! hotels! would! provide! the! tourists! TUASON!v.!MARQUEZ!!
complete! amenities! and! were! conveniently! located! along! the! way! Facts:! Marquez! sold! an! electric! light! plant! to! Tuason! for! P14,400! (!
for! the! daily! itineraries.! The! fact! that! the! tourists! were! to! pay! a! P2400!to!be!paid!w/in!60!days!and!the!remainder!w/in!a!year).!The!
lower! amount! does! not! justify! a! substandard! form! of! service! in! first! installment! was! paid! subsequent! to! the! 60?day! period;! the!
return.!Meanwhile,!the!issue!of!whether!the!private!respondent!has! second! installment! has! not! yet! been! paid.! However,! Marquez! has!
committed! dolo, causante! or! dolo, incidente! by! making! already! given! up! his! franchise! of! the! plant! prior! to! selling! it! to!
misrepresentations! in! its! contracts! with! petitioner! and! other! Tuason.!Tuason!thus!had!to!operate!under!a!special!license!until!he!
members!of!the!tour!group!is!irrelevant.!Either!way,!it!is!indubitably! obtains! a! new! franchise.! The! franchise! was! granted,! but! with!
liable! for! damages! to! petitioner.! (See! discussion! of! dolo, causante! conditions! stipulating! renovation! of! the! plant.! Tuason! then! wanted!
and!dolo,incidente!below.)! to!rescind!the!contract,!saying!that!Marquez!did!not!disclose!that!he!
! had!already!given!up!the!franchise.!
i. Kinds, !
1. Dolo,causante!–!that!which!determines! Held:! The! contract! may! not! be! rescinded! despite! the! allegations! of!
or!is!the!essential!cause!of!the!consent! fraud! since! the! franchise! was! not! the! determining! cause! of! the!
(Art!1338)! purchase.! The! innocent! non?disclosure! of! the! said! fact! does! not!
• Only, dolo, causante, can! be! a! affect! the! formation! of! the! contract! or! operate! to! discharge! the!
ground! for! annulment! of! the! parties! from! their! agreement.! Also,! it! must! be! noted! that! 1)! either!
contract! party! could! have! ascertained! the! status! of! the! franchise,! 2)! Tuason!
• Effects:! 1)! nullity! of! the! contract! operated!the!plant!for!16!months!without!question,!3)!Tuason!made!
and! 2)! indemnification! of! the! first! payment! without! protest,! and! 4)! Tuason! only! filed! a! case!
damages! when!the!business!proved!disastrous.!
• Fraud!must!be!established!by!full,! !
clear,! and! convincing! evidence,! !
and! not! merely! a! preponderance! !
thereof! !
! !
!!!!
RURAL!BANK!OF!STA.!MARIA!v.!CA! 98!hectares,!but!in!reality!only!had!60!hectares,!and!that!she!would!
Facts:! ! A! Deed! of! Absolute! Sale! w/! Assumption! of! Mortgage! was! have!not!bought!the!land!if!she!had!known!it!was!only!60!hectares.!
executed! between! Behis! (vendor/assignor)! and! Rayandayan! and! !
Arceño!(vendees/assignees)!for!the!sum!of!P250K.!Rayandayan!and! Held:! There! is! no! mistake! or! misrepresentation.! Citing! Songco, v.,
Arceño,! along! with! Behis,! then! executed! another! Agreement! Sellner,! since! Gay! made! her! own! calculations! of! the! land! area,! she!
embodying!the!real!consideration!of!the!sale!of!the!land!in!the!sum! cannot! later! allege! that! the! vendor! made! false! representations! to!
of!P2.4M.!They!then!negotiated!with!the!principal!stockholder!of!the! her.! Furthermore,! even! if! there! were! misrepresentations! in! the!
bank! for! the! assumption! of! the! indebtedness! of! Behis! and! the! outset,! documents! which! contained! the! real! size! of! the! land! was!
subsequent! release! of! the! mortgage! on! the! property! by! the! bank,! received! and! read! by! Gay! before! they! signed! the! contract.! If! ever!
without! showing! the! Agreement! with! Behis! providing! for! the! real! there! were! misrepresentations,! she! accepted! them! in! her! own! risk!
consideration! of! P2.4M! for! the! sale! of! the! property! to! the! former;! and!had!only!her!credulousness!to!blame!
bank!consented!to!the!substitution!of!plaintiffs!as!mortgage!debtors! !
in! place! of! Behis.! After! payment,! the! bank! agreed! to! release! the! LAURETA!TRINIDAD!v.!IAC!
mortgage!of!Behis,!to!give!its!consent!to!the!transfer!of!title!to!the! Facts:! Plaintiff! offered! to! buy! a! house! and! lot! from! private!
private! respondents;! and! to! the! payment! of! the! balance! of! respondent.! However,! she! heard! from! her! new! neighbors! that! the!
P200kunder!new!terms!with!a!new!mortgage!to!be!executed!by!the! previous! buyers! of! the! house! vacated! it! because! it! was! subject! to!
private!respondents!over!the!same!land.!Bank!could!not!comply!with! flooding.!When!she!talked!to!respondent!about!it,!the!latter!assured!
MOA;!Rayandayan!and!Arceño!instituted!a!Civil!Case.! her! that! everything! had! been! fixed! and! the! house! would! never! be!
! flooded!again,!and!they!entered!into!a!Contract!of!Conditional!Sale.!
Held:! The! MOA! is! not! voidable! on! the! ground! that! the! bank’s! However,!plaintiff!did!not!continue!paying!the!amortization!because!
consent! to! enter! said! agreement! was! vitiated! by! fraud! because! the!house!was!flooded!again!up!to!5ft.!and!charged!respondent!with!
private! respondents! withheld! from! the! petitioner! bank! the! misrepresentation.!
information! pertaining! to! the! real! consideration! for! the! sale! with! !
assumption!of!mortgage.!The!fraud!must!be!the!determining!cause! Held:! Circumstances! surrounding! the! case! belie! the! contention! of!
of!the!contract,!or!must!have!caused!the!consent!to!be!given.!!The! fraud! and! misrepresentation.! It! was! petitioner! who! admittedly!
non?disclosure! to! the! bank! of! the! purchase! price! of! the! sale! of! the! approached!the!respondent!about!buying!the!property,!as!the!latter!
land! between! respondents! and! Behis! cannot! be! fraud! under! Art.! never!registered!it.!She!had!full!opportunity!to!inspect!the!premises!
1338.! For! all! intents! and! purposes,! the! bank! entered! into! the! said! before! entering! into! a! contract! and! being! a! real! estate! broker,! it! is!
agreement!in!order!to!effect!payment!on!the!indebtedness!of!Behis.!! assumed! that! he! made! her! appraisal! of! the! property! not! with! an!
Also,! pursuant! to! Art.! 1339,! silence! or! concealment! does! not! untrained!eye!but!with!experience!and!expertise.!Also,!seeing!the!lot!
constitute! fraud! unless! there! is! a! special! duty! to! disclose! certain! was!depressed!and!there!was!a!drainage!lot!abutting!it,!she!cannot!
facts,!or!unless!according!to!good!faith!and!the!usages!of!commerce! say! she! was! not! forewarned! of! the! possibility! that! the! place! might!
the!communication!should!be!made.!!Respondents!had!no!such!duty! be! flooded.! There! is! also! no! evidence! presented! to! show! that! the!
and! therefore! did! not! act! in! bad! faith! in! failing! to! disclose! the! real! two! previous! owners! vacated! the! property! because! of! flooding!
consideration.!! Also,! it! must! be! noted! that! the! bank! had! other! except!her!own!testimony.!
means!and!opportunity!of!verifying!the!financial!capacity!of!private! !
respondents.!! iv. Mere,expression,of,an,opinion!→!NOT!
! FRAUD,!unless!made!by!an!expert!and!
iii. Usual,exaggerations,in,trade;,opportunity, relied!upon!by!the!plaintiff!
to,know,the,facts!→!TOLERATED!FRAUD! ,
!
Art.! 1341.! A! mere! expression! of! an! opinion! does! not! signify! fraud,!
Art.! 1340.! The! usual! exaggeration! in! trade,! when! the! other! party! unless! made! by! an! expert! and! the! other! party! has! relied! on! the!
had! an! opportunity! to! know! the! facts,! are! not! in! themselves! former’s!special!knowledge.!
fraudulent.!
!
! • An!opinion!of!an!expert!is!like!a!statement!of!fact,!and!if!
• Minimizing!the!defects!of!the!thing,!exaggeration!of!its!good! false,!may!be!considered!a!fraud!giving!rise!to!annulment.!
qualities,! and! giving! it! qualities! that! it! does! not! have! →! • However,!when!the!expert!was!employed!by!the!party!who!
lawful!misrepresentation!(dolus,bonus)! was!misled,!he!cannot!ask!for!annulment!because!he!is!
• Caveat,emptor;!do!not!give!rise!action!for!damages!because! chargeable!with!the!acts!and!declarations!of!his!employee.!
of!their!insignificance!OR,because!the!stupidity!of!the!victim! !
is! the! real! cause! of! his! loss! "! import! of! “opportunity! to! 1. Effects,–,Art,1344,
know!facts”! !
!
Cases:! Art.! 1344.! In! order! that! fraud! may! make! a! contract! voidable,! it!
! should! be! serious! and! should! not! have! been! employed! by! both!
AZARRAGA!v.!GAY! contracting!parties.!
Facts:!Azarraga!bound!himself!to!sell!to!Gay!two!parcels!of!land!for!a! !
lump!sum!of!P47,!000!payable!in!installments.!Gay!already!paid!P25,! Incidental! fraud! only! obliges! the! person! employing! it! to! pay!
000! but! failed! to! pay! last! two! installments! so! Azarraga! filed! action! damages.!
for! collection! for! balance.! Gay! contends! that! plaintiff! knowingly!
misrepresented!to!her!that!the!second!parcel!of!land!had!an!area!of! !
!
!!!!
• Effects!of!fraud:! ii. Made,in,good,faith,
o Nullification!of!the!contract! ,
o Indemnification!for!damages!
! Art.! 1343.! Misrepresentation! made! in! good! faith! is! not! fraudulent!
Case:! but!may!constitute!error.!
!
SONGCO!v.!SELLNER! !
Facts:!Plaintiff!wanted!to!buy!respondent’s!sugarcane!for!the!sum!of! iii. Active/passive,
P12,!000,!executed!in!three!equal!promissory!notes.!After!processing! • Applicable!to!legal!capacity,!especially!
of! sugarcane,! Plaintiff! charged! respondent! with! misrepresentation! age!
for! saying! that! his! sugarcane! would! produce! 3,! 000! piculs! of! sugar! !
but!it!only!produced!2,!017!piculs.! Cases:!
! !
Held:!The!amount!of!3,!000!piculs!of!sugar!was!a!mere!expression.! MERCADO!v.!ESPIRITU!
The! law! allows! considerable! latitude! to! seller’s! statements,! or! Facts:!Petitioners,!who!were!minors!at!the!time!of!the!execution!of!
dealer’s!talk.!Since!Songco!allowed!Sellner!to!examine!the!field!and! the! contract,! allege! that! respondent! induced! and! fraudulently!
the! sugarcane,! Songco! did! not! falsely! represent! the! product! to! the! succeeded! in! getting! petitioners! to! sign! a! deed! of! sale! of! the! land!
extent!that!it!is!actionable.! left! by! their! mother! for! the! sum! of! P400! notwithstanding! the! fact!
! that! the! land! was! valued! at! P3795.! As! a! defense,! respondents!
e. Misrepresentation! argued! that! petitioners! represented! themselves! of! legal! age! and!
i. By,a,third,person, executed!a!notarial!document!ratifying!the!said!sale.!
Art! 1342! Misrepresentation! by! a! third! !
person!does!not!vitiate!consent,!unless!such! Held:!It!is!a!rule!that!the!sale!of!a!real!estate!effected!by!minors!who!
misrepresentation! has! created! substantial! have!already!passed!the!age!of!puberty!and!are!near!the!adult!age,!
mistake!and!the!same!is!mutual.! when!they!pretend!to!have!already!reached!their!majority,!is!valid.!
! Such! minors! cannot! be! permitted! afterwards! to! excuse! themselves!
• GENERAL!RULE:!Fraud!by!third!person! from!compliance!with!the!obligation.!
does!not!vitiate!consent!and!cause!the! !
nullity!of!a!contract;!merely!gives!rise! BRAGANZA!v.!VILLA!ABRILLE!
to!an!action!for!damages!by!the!party! Facts:! Petitioners,! who! were! minors! at! the! time,! received! from!
injured!against!such!third!person! respondent!a!loan!of!70,!000!Japanese!war!notes,!with!a!promise!to!
• EXCEPTIONS:! pay!respondent!after!cessation!of!hostilities.!Payment!was!not!made!
o If!one!of!the!parties!is!in!collusion! and!respondent!and!action!for!collection.!
with!the!third!person,!or!knows!of! !
the!fraud!by!the!third!person,!and! Held:! There! was! no! misrepresentation! of! both! minors! regarding!
he!is!benefited!thereby,!he!may! their! minority.! Quoting! Corpuz, Juris, Secundum,, in! order! to! hold! a!
be!considered!as!an!accomplice!to! minor! liable,! the! fraud! must! be! actual! and! not! constructive.! Mere!
the!fraud!→!contract!becomes! silence! when! making! a! contract! regarding! his! ages! does! not!
VOIDABLE! constitute!a!fraud.!However,!pursuant!to!Art!1340,!it!is!fair!to!hold!
o If!the!third!person!is!not!in! them! liable! for! restitution! of! the! amount! to! the! extent! that!
connivance!with!any!of!the!parties! benefited!them.!
but!leads!them!both!into!error! !
(mutual!error),!the!consent!is! f. Simulation%of%Contracts!–!declaration!of!a!
vitiated!→!contract!is!VOIDABLE! fictitious!will,!deliberately!made!by!agreement!of!
! the!parties,!in!order!to!produce,!for!the!purposes!
of!deception,!the!appearance!of!a!juridical!act!
! VIOLENCE!OR! MISREPRESENTATION!
which!does!not!exist!or!is!different!from!that!
INTIMIDATION!(ART!
which!was!really!executed;!involves!a!defect!in!
1336)!
declaration!
Effect! of! Annuls! contract! even! if! Does! not! annul! contract!
!
act! of! a! such! violence! or! unless! it! produces!
!
third! intimidation! is! exercised! substantial! mutual!
!
person! by!a!third!person! mistake! on! the! part! of!
!
both!contracting!parties!
!
!
!
• Why!the!difference?!1)!The!party!has!nothing!to!o!with!fraud!
!
by!a!third!person!and!cannot!be!blamed!for!it!and!2)!
!
intimidation!can!be!more!easily!resisted!than!fraud.!
!
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Cases:! !
! ! ABSOLUTE! FRAUDULENT!
RODRIGUEZ!v.!RODRIGUEZ! SIMULATION! ALIENATION!
nd
Facts:! Concepcion! Felix,! who! owned! 2! fishponds,! contracted! a! 2 ! Existence! of! No!existing!contract!There! is! a! true! and!
marriage! with! a! Domingo! Rodriguez.! She! executed! a! deed! of! sale! contract! existing!contract!
conveying!said!properties!to!her!daughter!for!P2,!500,!who!in!turn,! Who!can!attack! Any!creditor,!including! Only! by! creditors!
appeared!to!have!transferred!the!same!property!to!her!mother!and! one! subsequent! to! before!the!alienation!
stepfather.! When! Domingo! died! intestate,! Felix! filed! action! to! the!contract!
declare!deeds!fictitious!and!simulated.! Prescription! Does! not! prescribe! Accion! pauliana! to!
! (Arts!1409!and!1410)! rescind!prescribes!in!4!
Held:! Petitioner! is! estopped! from! claiming! that! the! contracts! were! years!(Art!1389)!
simulated!because!she!herself!claimed!that!the!transfer!of!titles!was! !
for! the! purpose! of! converting! the! property! from! paraphernal! to! 2. Relative,(disimulados)!–!parties!have!
conjugal! property.! As! to! the! claim! that! there! was! lack! of! an!agreement!which!they!conceal!
consideration,! Court! found! that! there! was! consideration:! the! price! under!the!guise!of!another!contract.!
of!P2,!500!for!first!transfer,!and!P3,!000!for!the!second,!as!stated!in! • Two!juridical!acts!involved!in!
the!deed!itself.!In!any!case,!action!is!barred!by!latches!since!28!years! relative!stimulation:!
have!already!passed.! o Ostensible!act!(apparent!or!
! fictitious)!–!the!contract!that!
SUNTAY!v.!CA! the!parties!pretend!to!have!
Facts:! Frederico! Suntay! tried! to! apply! with! the! NRC! as! a! miller? executed!
contractor!of!rice!but!was!denied!due!to!outstanding!debts.!He!then! o Hidden!act!(real)!–!the!true!
executed! a! deed! of! sale! in! favor! of! nephew! Rafael,! which! was! agreement!between!parties!
subsequently!followed!by!another!deed!of!sale!from!Rafael!but!was! • If!the!concealed!act!is!lawful,!it!is!
not!notarized.!The!idea!was!to!transfer!the!ownership!of!the!lot!to! enforceable!if!the!essential!
Rafael!for!him!to!apply!to!be!a!miller?contractor,!and!return!the!lot! requisites!are!present!
back! to! Frederico.! However,! Rafael! refused! to! return! the! title! to! !
Frederico.! ii. Effects,
!
,
Held:! Deed! was! obviously! simulated.! The! fact! that! Rafael! never!
asserted!his!ownership,!as!well!as!his!non?disclosure!of!said!property! Art.! 1346.! An! absolutely! simulated! or! fictitious! contract! is! void.! A!
in! his! SALN! shows! that! it! never! was! his! property! since! the! deed! is! relative!simulation,!when!it!does!not!prejudice!a!third!person!and!is!
simulated.! not!intended!for!any!purpose!contrary!to!law,!morals,!good!customs,!
! public! order! or! public! policy! binds! the! parties! to! their! real!
BLANCO!v.!QUASHA! agreement.!
Facts:! Mary! Elizalde! entered! into! a! Deed! of! Sale! over! a! house?and?
lot!with!Parex!Realty!Corporation!for!P625,!000!payable!in!25!equal! ,
annual!installments.!Simultaneously!with!the!execution!of!the!Deed! ! ABSOLUTE! RELATIVE!
of! Sale,! Parex! executed! a! Contract! of! Lease! with! Elizalde! for! the! Validity! VOID! –! does! not! legally! VALID! except! when! it!
same!parcel!of!land!for!25!years,!the!rental!payments!of!which!shall! exist;! illusory,! mere! prejudices! third! persons!
be!applied!in!reduction!of!the!agreed!yearly!installments.!Petitioner,! phantom;! generally! or!has!an!illicit!purpose!!!
as!administrator!of!the!estate!of!Elizalde,!sought!to!nullify!the!sale!as! fraudulent! and! for! the!
simulated!and!fictitious.! purpose! of! injuring! third!
! persons!
Held:!Sale!is!valid.!Although!no!actual!exchange!of!money!was!made,! Recovery! • If!it!does!not!have!an! • If!the!contract!is!
yet! payment! was! effected! between! the! vendee! and! the! vendor! by! under! illicit!purpose,!the! lawful,!it!is!
mutual! agreement.! As! further! proof,! records! show! that! Elizalde! contract! parties!to!the! absolutely!
never!contested!the!sale!of!the!property!nor!the!cancellation!of!the!
contract!may!prove! enforceable;!all!the!
Certificate!of!Title!during!her!lifetime.!Court!is!not!ready!to!delve!on!
the!simulation!in! essential!requisites!
the!motive!of!Elizalde!in!entering!the!contract!since!that!is!a!factual!
order!to!recover! (consent,!object,!
issue!which!is!not!within!the!province!of!the!Court.!
whatever!may!have! cause)!must!be!
!
been!given!under! present!
i. Kinds,
such!simulated!act! • When!the!purpose!
, • If!the!simulated! of!the!simulation!is!
contract!has!an! illicit,!or!to!prejudice!
Art.!1345.!Simulation!of!a!contract!may!be!absolute!or!relative.!The!
illegal!object,!Arts! a!third!person,!the!
former! takes! place! when! the! parties! do! not! intend! to! be! bound! at!
1411!and!1412!apply! true!contract!of!the!
all;!the!latter,!when!the!parties!conceal!their!true!agreement.!
parties!cannot!be!
! enforced!(Art!1409);!
1. Absolute,(simulados)!–!there!is!a!color! neither!party!can!
of!contract,!without!any!substance! have!an!action!
thereof,!the!parties!not!having!any! against!the!other!
intention!to!be!bound.! (Arts!1411!and!1412)!
!!!!
B. Object(of(Contracts( c. Possible%(Art%1348)%
! d. Determinate%as%to%its%kind%(Art%1349)%=% The!object!
Meaning!of!“OBJECT”! of!every!contract!must!be!determinate%as%to%its%kind.!The!
# Thing,! right! or! service! which! is! the! subject?matter! of! the! fact! that! the! quantity! is! not! determinate! shall! not! be! an!
obligation!arising!from!the!contract! obstacle! to! the! existence! of! the! contract,! provided! it! is!
# Object!of!the!contract!and!object!of!the!obligation!created! possible,to,determine,the,same,!without,the,need,of,a,new,
thereby!are!identical! contract!between!the!parties.%
# In! reality,! the! object! of! every! contract! is! the! obligation! e. It% must% be% in% existence% or% capable% of% coming%
created.!The!object!may!be!things,!rights,!or!services.!(de! into% existence% (Art% 1461,% 1493,% 1495)% =% It! is!
Leon)! essential!that!the!object!must!be!in!existence!at!the!time!
! of! the! perfection! of! the! contract,! or! that! it! has! the!
1. WHAT!MAY!BE!THE!OBJECTS!OF!CONTRACTS! possibility!or!potentiality!of!coming!into!existence!at!some!
! future!time.!Thus,!even!future!things!can!be!the!object!of!
contracts.!
Art.! 1347.! All! things! which! are! not% outside% the% commerce% of% men,!
!
including! future! things,! may! be! the! object! of! a! contract.! All! rights!
which!are!not%intransmissible!may!also!be!the!object!of!contracts.!!
3. WHAT!MAY!NOT!BE!THE!OBJECTS!OF!CONTRACTS!
! a. Contrary% to% law,% morals,% good% customs,% public%
No!contract!may!be!entered!into!upon!future%inheritance!except!in! policy%or%public%order%%
cases!expressly!authorized!by!law.!! • When! entered! into,! object! is! contrary! to! law! or!
! morals.!Law!need!not!be!penal!in!nature!as!long!as!it!
All! services! which! are! not% contrary! to! law,! morals,! good! customs,! be!mandatory!or!prohibitive!
public! order! or! public! policy! may! likewise! be! the! object! of! a! • TEST:! WON! an! act! is! repugnant! to! our! sense! of!
contract.! decency!
• Promise!to!change!citizenship,!profession,!religion,!or!
!
domicile!
a. All%things%not%outside%the%commerce%of%man% b. Indeterminable%as%to%their%kind%
• Including!“future!things”!do!not!belong!to!the!obligor!
• “something”!
at!the!time!the!contract!is!made;!they!may!be!made,!
• “an!animal”!
raised!or!acquired!by!the!obligor!after!the!perfection!
of!the!contract! c. Determinable%Things%
o Conditional! –! subject! to! the! coming! into! • All!the!eggs!in!basket!
existence!of!the!thing! • My!land!with!the!smallest!area!
o Aleatory!–!one!of!the!parties!bears!the!risk!of!the! d. Outside%the%commerce%of%man%%
thing!never!coming!into!existence! • Prohibited!drugs!
• “Outside!the!commerce!of!man”!–!all!kinds!of!things! • Clings! of! public! ownership! such! as! sidewalks,! public!
and! interests! whose! alienation! or! free! exchange! is! places,!bridges,!streets!
restricted!by!law!or!stipulation,!which!parties!cannot! • Things! common! to! everybody! such! as! air,! sunlight,!
modify!at!will! rain,!etc.!
o Services! which! imply! an! absolute! submission! by! e. Intransmissible%rights%
those! who! render! them,! sacrificing! their! liberty,! • Political!rights!(right!to!vote,!right!to!public!office)!
independence! or! own! beliefs! or! disregarding! in!
• Parental,!family,!and!marital!rights!
any! manner! the! equality! and! dignity! of! persons!
e.g.!perpetual!servitude!or!slavery! f. Future%inheritance%
o Personal! rights! e.g.! patria! postestas,! marital!
authority,! status,! capacity! of! persons,! honorary!
Art.! 1347,! Par! 2:! No! contract! may! be! entered! into! upon! future!
titles!
inheritance!except!in!cases!expressly!authorized!by!law.!!
o Public! offices,! inherent! attributes! of! the! public!
authority,!political!rights!of!individuals!e.g.!right! !
of!suffrage! Inheritance% is! any! property! or! right,! not! in! existence! or! capable! of!
o Property! while! they! pertain! to! the! public! determination!at!the!time!of!the!contract,!that!a!person!may!inherit!
dominion! in! the! future,! such! person! having! only! an! expectancy! of! a! purely!
o Sacred!things!e.g.!air!and!sea!! hereditary!right!(Blas!v.!Santos,!1!SCRA!899)!!
b. All%rights%not%Intransmissible% ,
c. All% services% not% contrary% to% law,% morals,% good% General, Rule:! Contract! concerning! future! inheritance! is! void.! Art!
customs,%public,%or%public%policy% 1409!Par!7!
,
!
Exceptions:!Cases!expressly!authorized!by!law!Art!1347!Par!2!
2. REQUISITE! ,
a. Within%the%commerce%of%man%(Art%1347)% ,
b. Licit,% not% contrary% to% law,% morals,% good% ,
customs,% public% policy% or% public% order% (Art% ,
,
1347)%
!!!!
Kinds!of!Impossibility:!
Art.!84!FC.!Donations!by!reason!of!marriage!between!future!spouses! 1. Physical,–!when!the!thing!or!service!in!the!very!nature!of!
with!respect!to!their!future!property!to!take!effect,!only!in!the!event! things!cannot!exist!(a!monkey!that!talks)!or!be!performed.!
of!death,!to!the!extent!laid!down!by!law!in!testamentary!succession.! With!particular!reference!to!services,!impossibility!may!be:!
! a. Absolute!–!when!the!act!cannot!be!done!in!any!case!
Art!1080.!Partition!of!property!by!act!inter,vivos,by!a!person!to!take! so! that! nobody! can! perform! it,! such! as! flying! like! a!
effect!upon!his!death.! bird.!In!such!a!case,!the!contract!is!null!and!void.!
b. Relative! –! when! it! arises! from! the! special!
!
circumstances!of!the!case!(to!drive!a!car!on!a!flooded!
Requisites!of!a!Valid!Contract!for!Future!Inheritance!
highway)!or!the!special!conditions!or!qualifications!of!
a. The!succession!must!not!have!been!opened!at!the!time!of!the!
the! obligor.! (To! paint! a! portrait! by! a! blind! person)! If!
contract!
PERMANENT,! it! nullifies! the! contract,! but! does! not!
b. Object!of!the!contract!forms!part!of!the!inheritance!
nullify!if!TEMPORARY.!
c. The!promisor!has,!with!respect!to!the!object,!an!expectancy!of!
c. Legal!–!when!the!thing!or!service!is!service!is!contrary!
a!right!which!is!purely!hereditary!in!nature!
to! law,! morals,! good! customs,! ! ! ! ! ! ! ! public! order,! or!
!
public!policy!!
Cases:!
!
!
Liability!for!damages!
BLAS!v.!SANTOS!
• Since!contract!is!void!and!inexistence!due!to!impossibility,!
Facts:!Petitioner!Blas!married!twice,!first!with!Marta!Cruz!and,!when!
nd amount! of! damages! is! limited! only! to! the! losses! the!
she! died,! with! Maxima! Santos.! Before! the! 2 ! marriage,! there! was!
st creditor! may! have! suffered! by! having! relied! on! the!
no! liquidation! of! the! conjugal! property! of! the! 1 ! couple.! Blas!
contract,!and!cannot!recover!from!non?performance!of!the!
executed!a!will!which!stated!that!half!of!the!conjugal!property!with!
contract!
Santos!is!the!share!of!his!first!wife.!This!was!supported!by!another!
o Debtor!knew!of!impossibility!–!liable!for!damages!!
document! (Exhibit! A)! executed! by! Santos! herself! which! states! that!
o Debtor! is! ignorant! of! impossibility,! and! ignorance! is!
one?half!of!her!shares!of!the!properties!left!by!her!services!would!be!
justifiable!–!no!liability!for!damages!
given!to!the!heirs!named!in!the!will!of!the!husband.!
o Both! parties! have! knowledge! of! impossibility! –! no!
!
liability!for!damages!!!
Held:! Exhibit! A! is! a! valid! contract,! and! not! a! contract! on! future!
inheritance! since! the! document! refers! to! existing! properties! which!
Santos!will!receive!by!operation!of!law!on!the!death!of!her!husband! C. Cause(of(Contracts(
because!it!is!her!share!in!the!conjugal!assets.! (
! 1. MEANING!OF!CAUSE!
TANEDO!v.!CA! • Why! of! a! contract;! the! immediate! and! most! proximate!
Facts:!Lazardo!Tanedo!executed!a!notarized!deed!of!absolute!sale,!in! purpose!of!the!contract,!the!essential!reason!which!impels!
favor! of! his! eldest! brother! and! his! wife,! covering! “one! hectare! of! the!contracting!parties!to!enter!into!it!and!which!explains!
whatever!share!I!shall!have!over!Lot.!No.!191,”!the!subject!property! and! justifies! the! creation! of! the! obligation! through! such!
being! his! future! inheritance! from! his! parents.! After! his! father! died,! contract!!
Lazaro! executed! an! “Affidavit! of! Conformity”! to! acknowledge! and! • Essential! reason! that! moves! the! parties! to! enter! into! a!
validate!the!aforementioned!sale! contract!
! • Requisites!of!Cause!
Held:! Sale! is! not! valid! since! object! is! future! inheritance.! Said! deed! 1. Existing!at!the!time!the!contract!is!entered!into!
cannot!be!source!of!any!right!nor!create!any!obligation!between!the! 2. True!
parties.! Also,! the! “Affidavit! of! Conformity”! does! not! validate! nor! 3. Licit!or!Lawful!
ratify!previous!sale!and!is!useless.! • As!distinguished!from!object!
! o Object! is! the! starting! point! of! agreement,! without!
g. Impossible%things%or%services% which! the! negotiations! or! bargaining! between! the!
! parties!would!never!have!begun!!
o Object!may!be!the!same!for!both!of!the!parties!
Art.! 1348.! Impossible! things! or! services! cannot! be! the! object! of! o Cause!is!different!with!respect!to!each!party!
contracts.! o In! a! contract! of! sale! of! land,! object! is! the! land! itself,!
! while!the!cause!of!the!vendor!is!the!price,to,be,paid,,
Things! are! impossible! when! they! are! not! susceptible! of! existing,! or! while!cause!of!the!vendee!is!the!delivery,of,the,land.!
they!are!outside!the!commerce!of!man.!Personal!services!or!acts!are! • As! distinguished! from! consideration! CONSIDERATION! <!
impossible!when!they!are!beyond!the!ordinary!strength!or!power!of! CAUSE!
man.! Impossibility! must! be! actual! and! contemporaneous! with! the!
making!of!the!contract,!and!not!subsequent!thereto.!
!
!
!
!
!
!
!
!!!!
CONSIDERATION! CAUSE! CAUSE! MOTIVE!
Reason! or! motive! or! inducement! Why! of! contracts;! essential! Objective,! intrinsic! and! juridical! Psychological,! individual! or!
by! which! a! man! is! moved! into! reason! that! compels! reason! for! the! existence! of! the! personal! purpose! of! a! party! to!
bind!himself!by!agreement! contracting! parties! to! contract!itself! the!contract!
celebrate!the!contract! Essential!reason!for!the!contract! Particular! reason! for! a!
Requires! a! legal! detriment! to! the! Never! rejects! any! cause! as! contracting! party,! which! does!
promisee!more!than!a!moral!duty!! insufficient;! need! not! be! not! affect! the! other! and! which!
material!at!all!and!may!consist! does! not! impede! the! existence!
in! moral! satisfaction! for! the! of!a!true!distinct!cause!
promissory! Objective! of! a! party! in! entering! Person’s! reason! for! wanting! to!
! into!the!contract! get!such!objective!
Always! the! same! for! both! Differs!with!each!person!!
Art.! 1350.! In! onerous! contracts! the! cause! is! understood! to! be,! for! parties!
each! contracting! party,! the! prestation, or, promise, of, a, thing, or, Must! always! be! known! to! the! May!be!unknown!
service, by, the, other;! in! remuneratory! ones,! the! service, or, benefit! other!contracting!party!
which! is! remunerated;! and! in! contracts! of! pure! beneficence,! the! If!illegal,!then!contract!is!void! Illegality! does! not! render! the!
mere,liberality!of!the!benefactor.! contract!void!
!
!
GENERAL!RULE:!Motive!does!not!affect!the!validity!of!the!contract.!
a. In%onerous%contracts% !
• Prestation!or!promise!of!a!thing!or!service!by!the! EXCEPTIONS:!
other! 1. When! the! motive! of! a! debtor! in! alienating! property! is! to!
• Parties!are!reciprocally!obligated!to!each!other! defraud!his!creditors,!alienation!is!rescissible!!
• Need!not!be!adequate!or!an!exact!equivalent!in! 2. When!the!motive!of!a!person!in!giving!his!consent!is!to!avoid!a!
point! of! actual! value! especially! in! dealing! with! threatened! injury,! in! case! of! intimidation! the! contract! is!
objects!which!have!rapidly!fluctuating!price!! voidable.!
• E.g.!Sale,!lease! 3. When!the!motive!of!a!person!induced!him!to!act!on!the!basis!of!
! fraud! or! misrepresentation! by! the! other! party,! the! contract! is!
b. In%remuneratory%contracts% likewise!voidable.!!
• One! where! a! party! gives! something! to! another! !
because! of! some! service! or! benefit! given! or! 3. DEFECTIVE!CAUSES!AND!THEIR!EFFECTS!
rendered!by!the!latter!to!the!former!where!such! a. Absence% of% cause% and% unlawful% cause% "!
service! or! benefit! was! not! due! as! a! legal! produces!no!effect!whatever%
obligation!! !
• Purpose! is! to! reward! the! service! that! had! been!
previously!rendered! Art.!1352.!Contracts!without!cause,!or!with!unlawful!cause,!produce%
• E.g.!bonuses! no% effect% whatever.! The! cause! is! unlawful! if! it! is! contrary! to! law,!
morals,!good!customs,!public!order!or!public!policy.!
c. In%contracts%of%pure%beneficence% !
• Essentially!agreements!to!give!donations! Case:!
• Contracts! where! the! cause! of! which! is! the! !
liberality!of!the!benefactor!or!giver! LIGUEZ!v.!CA!
! Facts:! Salvador! Lopez! instituted! a! deed! of! donation! in! favor! of!
2. AS!DISTINGUISHED!FROM!MOTIVE! Liguez,! who! was! only! 16! at! that! time.! CA! found! that! donation! was!
! made!in!view!of!the!desire!of!Lopez,!a!man!of!mature!years,!to!have!
sexual!relations!with!Liguez.!Parents!of!Liguez!would!not!allow!Lopez!
Art.! 1351.! The! particular! motives! of! the! parties! in! entering! into! a! to!live!with!her!unless!he!first!donated!the!land!in!question.!CA!held!
contract!are!different!from!the!cause!thereof.! that!donation!was!tainted!with!illegal!cause!or!consideration!and!as!
! such,!was!inoperative,!null,!and!void.!
Motive!is!the!purely!personal!or!private!reason!which!a!party!has!in! !
entering!into!a!contract.! Held:! There! was! no! finding! that! Liguez,! who! was! only! 16! at! that!
time,!was!fully!aware!of!the!terms!of!the!bargain!entered!into!by!her!
! parents!and!Lopez.!As!the!donation!was!regular!on!its!face,!illegality!
! is!not!presumed!but!must!be!duly!and!adequately!proved.!However,!
! Lopez! could! not! donate! the! entire! subject! property! because! it! is!
! conjugal! in! nature.! He! can! only! donate! part! of! it! insofar! as! it! does!
! not!prejudice!the!wife.!Case!remanded!
! !
! !
! !
! !
!
!
!!!!
b. Statement%of%false%cause%in%the%contract% "!VOID! !
if!there!is!no!other!true!and!lawful!cause% 4. PRESUMPTION! OF! THE! EXISTENCE! AND!
! LAWFULNESS! OF! A! CAUSE,! THOUGH! IT! IS! NOT!
Art.! 1353.The! statement! of! a! false% cause! in! contracts! shall! render! STATED!IN!THE!CONTRACT!
them!VOID,!if!it!should!not!be!proved!that!they!were!founded!upon! !
another!cause!which!is!true!and!lawful.!
Art.!1354.!Although!the!cause!is!not%stated%in%the%contract,!it!is!
! presumed%that%it%exists%and%is%lawful,!unless!the!debtor!proves!
c. Lesion% or% inadequacy% of% cause% "! VALID! unless! the!contrary.!
fraud,!mistake!or!undue!influence!is!present%
! !
!
Art.!1355.!Except!in!cases!specified!by!law,!lesion!or!inadequacy!of! !
cause!shall!not%invalidate%a%contract,!UNLESS!there!has!been!fraud,, !
mistake,or,undue,influence.! !
!
! !
• LESION! is! the! injury! suffered! in! consequence! of! inequality! of! !
situation,!by!one!party!who!does!not!receive!the!full!equivalent! !
for!what!he!gives!in!a!commutative!contract.! !
• Gross!inadequacy!suggest!fraud!and!is!evidence!thereof!! !
! !
Cases:! !
! !
CARANTES!v.!CA! !
Facts:!Petitioner!and!private!respondents!inherited!a!land!from!their! !
father,!a!part!of!which!the!government!needed!to!build!an!airport.! !
Herein! respondents! executed! a! Deed! of! Right! to! Assignment! of! !
Inheritance! in! favor! of! petitioner,! with! monetary! consideration! of! !
P1.!Petitioner!instituted!a!Deed!of!Sale!in!favor!of!government,!and! !
subsequently,! a! certificate! of! title! was! issued! in! favor! of! the! !
government!for!a!part!of!the!subject!land,!and!the!rest!was!named! !
in!favor!of!petitioner.!Respondents!argued!that!deed!seek!to!declare! !
the! deed! null! and! void,! and! reasoned! that! said! assignment! merely! !
authorized! the! petitioner! to! convey! portions! in! their! behalf! to! !
minimize!expenses!and!facilitate!the!transaction! !
! !
Held:!Deed!is!a!valid!contract.!The!sum!of!P1,!a!valid!consideration,! !
appears! in! the! document! as! one! of! the! consideration.! In! addition,! !
the! agreement! states! that! their! father! expressed! to! the! private! !
respondents! that! the! property! exclusively! belonged! to! the! !
petitioner.! This! expression! constitutes! valuable! consideration! –! !
satisfying!their!father’s!will.! !
! !
SPS.!BUENAVENTURA!et.!al.!v.!CA! !
Facts:! Defendant?parents! executed! deeds! of! sale! in! favor! of! their! !
children.!Petitioners,!who!are!also!heirs,!claim!that!the!deeds!of!sale! !
are! null! and! void! for! being! simulated! since! the! properties! are! 3x! !
more! valuable! that! the! sums! they! were! sold! for.! In! addition,! said! !
children! did! not! actually! pay! the! prices! stipulated! in! the! Deeds! of! !
Sale.! They! argued! that! the! sales! were! result! of! a! deliberate! !
conspiracy!to!deprive!them!of!their!legitimes.! !
! !
Held:! Failure! to! pay! the! consideration! is! different! from! lack! of! !
consideration.! The! former! results! in! a! right! to! demand! the! !
fulfillment! or! cancellation! of! the! obligation! under! an! existing! valid! !
contract!while!the!latter!prevents!the!existence!of!a!valid!contract.! !
Petitioners! failed! to! show! that! the! prices! in! the! Deed! of! Sale! were! !
absolutely! simulated,! magnified! by! their! lack! of! knowledge! of! their! !
respondent! sibling’s! capacity! to! pay.! On! the! other! hand,! the! real! !
price!was!stated!in!the!Deeds!of!Sale.!There!is!no!requirement!that! !
the!price!be!equal!to!the!exact!value!of!the!subject!matter!of!sale!as! !
long!as!all!parties!believe!that!they!received!the!commutative!value! !
of!what!they!gave.!
!!!!
CHAPTER(3:(
Art!1874! Sale!of!piece!of!land!through!an!agent:!
!
Authority, of, agent, must, be, in, writing.,
FORM(OF(CONTRACTS(
In, practice:, by, way, of, SPA, which, need,
not,be,notarized,
Art!2134! Contract! of! antichresis;! amount! of!
principal!and!of!the!interest!!
,
Art.!1356.!Contracts!shall!be!obligatory,!in!whatever!form!they!may!
Antichresis, , –, , contract, by, which, a,
have!been!entered!into,!provided!all!the!essential!requisites!for!their!
creditor, acquires, the, right, of, reaping,
validity!are!present.!However,!when!the!law!requires!that!a!contract!
the, fruit, or, other, revenues, of, the,
be!in!some!form!in!order!that!it!may!be!valid!or!enforceable,!or!that!
immovable, given, to, him, in, pledge,, on,
a!contract!be!proved!in!a!certain!way,!that!requirement!is!absolute!
condition, of, deducting, their, proceeds,
and! indispensable.! In! such! cases,! the! right! of! the! parties! stated! in!
from, the, interest, and, principal, of, his,
the!following!article!cannot!be!exercised.!
debt,
Art!1771! Partnership;!when!immovable!property!
A. General(Rule( or!real!rights!are!contributed!",public,
! document,necessary!
Contracts!shall!be!obligatory,!in!whatever,form!they!may!have!been!
Art!1773! Partnership;! inventory! of! immovable!
entered! into,! provided! all! essential! requisites! for! their! validity! are!
property!contributed!!
present.!(“Spiritual!system”!of!the!Spanish!Code)!
,
Inventory,must,be,signed,and,attached,
B. Exception( to,the,public,document,,
!
Art!1956! Charging!of!interest!for!using!someone!
• When!the!law!requires!that!a!contract!be!in!some!form!in! else’s!money!(loan)!
order!that!it!may!be!VALID!or!ENFORCEABLE!! ,
• (Anglo?American! principle! in! Statutes! of! Fraud)! "! No, interest, shall, be, due, unless, it, has,
indispensable!and!absolute;!parties!! been,expressly,stipulated,in,writing,
• Reason!for!exceptions:!To!avoid!litigation!as!oral!contracts! Art!2140! Chattel!mortgage:!
frequently! lead! to! fraud! in! fulfilment! of! obligation! or! to! !
false!testimonies! Accessory,contracts,must,be,written,to,
! secure, a, principal, obligation., Personal,
2!Cases!When!and!Where!Form!is!Absolute!and!Indispensable:! property, must, be, recorded, in, the,
1. Form!is!essential!to!the!VALIDITY!of!the!contract! Registry,of,Property,
2. Contracts!is!UNENFORCCEABLE!unless!in!a!certain!form! Negotiable! Instruments! Parties! cannot! by! their! agreement!
Law! impart! negotiability! to! an! instrument!
C. Kinds(of(Formalities(Required(by(Law( which! is! not! by! its! form! a! negotiable!
! instrument,
1. AD! ESENTIA,! AD! SOLEMNITATEM! " ! THOSE! REQUIRED! FOR! Cattle!Regulation!Law! No! sale! or! transfer! of! large! cattle! is!
THE!VALIDITY!OF! CONTRACTS,!SUCH! AS! THOSE! REFERRED! TO! valid! unless! it! is! registered! and! a!
IN!(SIR!REFERS!TO!THESE!AS!FORMAL!CONTRACTS)! certificate!of!transfer!is!secured!
! ! !
!
Art!748! Donation!of!movable:!
!
!
!
• Value! greater! than! P5000, ",
!
donation, AND, acceptance, must, be,
!
written!
!
• Value! equal! to! or! less! than! P5000,
!
", can, be, made, orally, with, !
SIMULATEOUS, delivery! or! !
document! representing! the! right! !
donated! !
! !
Testation, ClausesM, signed, by, four, !
signatories, (i.e., donor,, donee,, at, two, !
witnesses)., Also, includes, how, many, !
pages, is, the, will, and, testament,, !
including,the,testation,clause., !
Art!749! Donation!of!immovable:! !
! !
Regardless, of, value, must, be, in, public, !
document., Include:, specification, of, !
property,AND,value,of,charges!
!!!!
Cases:!
! rights!or!of!those!of!the!conjugal!partnership!of!gains;!!
HERNAEZ!v.!DE!LOS!ANGELES! (3) The! power! to! administer! property,! or! any! other! power!
Facts:!Petitioner!and!movie!actress,!Marlene!Dauden!Hernaez,!filed! which!has!for!its!object!an!act!appearing!or!which!should!
a! complaint! against! Hollywood! Far! East! Productions,! Inc.! and! its! appear! in! a! public! document,! or! should! prejudice! a! third!
President! and! General! Manager,! Ramon! Valenzuela,! to! recover! person;!!
P14,700!representing!a!balance!allegedly!due!her!for!her!services!as! (4) The! cession! of! actions! or! rights! proceeding! from! an! act!
leading! actress! in! two! motion! pictures! produced! by! said! company.! appearing!in!a!public!document.!
Claim!was!not!evidenced!by!any!written!document,!either!public!or! All!other!contracts!where!the!amount!involved!exceeds!five!hundred!
private! pesos!must!appear!in!writing,!even!a!private!one.!But!sales!of!goods,!
! chattels!or!things!in!action!are!governed!by!Articles,!1403,!No.!2!and!
Held:!Contract!valid!and!enforceable.!In!general,!contracts!are!valid! 1405.!
and! binding! from! their! perfection! regardless! of! form! (Articles! 1315! !
and!1356!CC).!There!are!only!two!exceptions!set!forth!in!the!second! • Does!not!require!form!to!VALIDATE!the!act!but!to!insure!its!
portion! of! Article! 1356.! The! contract! sued! upon! by! petitioner! EFFICACY!
(compensation!for!services)!does!not!come!under!either!exception.! • Reduction! to! writing! NOT! an! essential! requisite! for!
Though! Art.! 1358! provides! that! contracts! where! amount! involved! EXISTENCE! of! the! contract! but! simply! a! COERCIVE! POWER!
exceeds!P500!must!appear!in!writing,!same!article!does!NOT!provide! granted! to! the! contracting! parties! by! which! they! can!
that! absence! of! written! form! in! this! case! will! make! the! agreement! reciprocally! compel! the! observance! of! these! formal!
invalid!or!unenforceable.!In,contractual,system,it,is,not,enough,that, requisites!
the,law,should,require,that,the,contract,be,in,writing.,The,law,must, • Enumerated! contracts! are! therefore! VALID! even! when! not!
further,prescribe,that,without,the,writing,the,contract,is,void,or,not, reduced!into!writing!
enforceable,by,action.! o There! are! contracts! which! requires! it! to! be! in! public!
! instrument!or!registered!for!validity!
2. THOSE!REQUIRED,!NOT!FOR!THE!VALIDITY,!BUT!TO!MAKE!THE! o There!are!those!which!needs!to!be!in!public!writing!and!
CONTRACT!EFFECTIVE!AS!AGAINST!THIRD!PERSONS,!SUCH!AS! entered!in!the!registry!NOT!for!validity!but!for!making!it!
THOSE!COVERED!BY:! EFFECTIVE! against! third! persons! (e.g.! transfer! of!
! ownership! of! immovable! property! to! third! person!
requires! contract! to! be! a! public! document.! Written!
Art.!1357.!If!the!law!requires!a!document!or!other!special!form,!as!in!
memorandum! is! not! enough! as! that! only! indicates! sale!
the! acts! and! contracts! enumerated! in! the! following! article,! the!
of!property)!
contracting! parties! may! compel! each! other! to! observe! that! form,!
!
once! the! contract! has! been! perfected.! This! right! may! be! exercised!
Contracts!that!must!appear!in!a!public!document:!
simultaneously!with!the!action!upon!the!contract.!
(1) Acts! and! contracts! which! have! for! their! object! the! creation,!
!
transmission,! modification! or! extinguishment! of! real! rights!
• This! article! merely! recognizes! a! contract’s! enforceability! by! over! immovable! property;! sales! of! real! property! or! of! an!
the!mere!fact!of!granting!the!contracting!parties!an!adequate! interest! therein! a! governed! by! Art.! 1403,! No.! 2! (those! that! do!
remedy!whereby!to!compel!the!execution!of!a!public!writing! not! comply! with! the! Statute! of! Frauds),! and! Art.! 1405! (when!
or! any! other! special! form! when! such! is! required! so! that! Art.!1403!No.!2!is!ratified);!!
contract!may!produce!the!effect!which!is!desired!
• Requirement! on! form! is! NOT! for! validity! of! the! contract!
• Equivalent!to!an!implied!condition! but!for!transfer!
• Since! defect! would! be! merely! formal:! party! who! executed! (2) The!cession,!repudiation!or!renunciation!of!hereditary!rights!or!
the!document!may!be!compelled!to:! of!those!of!the!conjugal!partnership!of!gains;!!
o reform!it! a. Cession! –! an! assignment! (e.g.! of! hereditary! rights)! or!
o execute! another! document! sufficient! to! carry! out! the! selling!
intent!of!the!agreement! b. Repudiation!–!rejection!or!refusal!
• Article! does! NOT! impose! an! obligation! but! a! privilege! on! c. Renunciation!–!act!of!giving!up!a!right!
both!parties! (3) The! power! to! administer! property,! or! any! other! power! which!
• Though! this! article! does! not! operate! against! validity! of! has!for!its!object!an!act!appearing!or!which!should!appear!in!a!
contracts! nor! acts! performed! voluntarily! by! the! parties! for! public!document,!or!should!prejudice!a!third!person;!!
the! fulfilment! thereof,! ONCE! INVOKED:! it! is! evident! that! (4) The! cession! of! actions! or! rights! proceeding! from! an! act!
under! them! the! question! involving! the! execution! of! public! appearing!in!a!public!document.!
instrument! must! precede! the! determination! of! other! • All! other! contracts! where! the! amount! involved! exceeds!
obligations!derived!from!the!contract.!! five!hundred!pesos!must!appear!in!writing,!even!a!private!
! one.! But! sales! of! goods,! chattels! or! things! in! action! are!
Art.!1358.!The!following!must!appear!in!a!public!document:!! governed!by!Articles,!1403,!No.!2!and!1405.!
(1) Acts! and! contracts! which! have! for! their! object! the! • Origin,of,the,P500,amount,according,to,Prof.,Labitag:,The,
creation,! transmission,! modification! or! extinguishment! of! original, version, this, Statute, of, Fraud, with, a, long,
real!rights!over!immovable!property;!sales!of!real!property! subparagraph, (which, you, are, bound, to, memorize), in, the,
or!of!an!interest!therein!a!governed!by!Articles!1403,!No.! English, law, states, £500, which, when, converted, to,
2,!and!1405;!! Philippine,peso,amounts,to,P500.!!
(2) The! cession,! repudiation! or! renunciation! of! hereditary! !
!!!!
CHAPTER(4:((
3. AD! PROBATIONEM! " ! THOSE! REQUIRED! FOR! THE! PURPOSE!
OF! PROVING! THE! EXISTENCE! OF! THE! CONTRACT,! SUCH! AS!
THOSE!UNDER!THE!STATUTE!OF!FRAUDS!IN!ART!1403!
!
Q:!What!is!the!relation!of!the!statute!of!frauds!(Art.!1403)!
REFORMATION(OF(
INSTRUMENTS(
•
to!the!forms!of!contracts?!
• A:!Sale!of!real!property!or!interest!in!real!property!requires!
it!to!be!in!writing!(via!the!statute!of!frauds;!Art.!1403,!Par.!
2![e]).!
• Also,! to! make! the! contract,! it! must! comply! with! a! certain! Art.! 1359.! When,! there! having! been! a! meeting! of! the! minds! of!
of!form!or!else!it!will!be!unenforceable.! the!parties!to!a!contract,!their!true!intention!is!not!expressed!in!
! the!instrument!purporting!to!embody!the!agreement,!by!reason!
! of! mistake,! fraud,! inequitable! conduct! or! accident,! one! of! the!
! parties!may!ask!for!the!reformation!of!the!instrument!to!the!end!
! that!such!true!intention!may!be!expressed.!!
! !
! If!mistake,!fraud,!inequitable!conduct,!or!accident!has!prevented!
! a!meeting!of!the!minds!of!the!parties,!the!proper!remedy!is!not!
! reformation!of!the!instrument!but!annulment!of!the!contract.!!
!
! %
! MEANING%
! It! is! that! remedy! by! means! of! which! a! written! instrument! is!
! amended! or! rectified! so! as! to! express! or! conform! to! the! real!
! agreement! or! intention! of! the! parties! when! by! reason! of! mistake,!
! fraud,! inequitable! conduct! or! accident,! the! instrument! fails! to!
! express!such!agreement!or!intention.!
! !
! What! is! reformed! is! not! the! contract! itself,! but! the! instrument!
! embodying!the!contract.,,!
! !
! REASON%FOR%REFORMATION%OF%INSTRUMENTS%
! • Equity!dictates!the!reformation!of!instrument!in!order!that!the!
! true!intention!of!the!contracting!parties!may!be!expressed.!!
! • It!is!unjust!and!unequitable!to!allow!the!enforcement!of!a!
! written!instrument!which!does!not!re!
! • flect!or!disclose!the!real!meeting!of!the!minds!of!the!parties!
! • Court!do!not!attempt!to!make!a!new!contract!for!the!parties,!
! but!only!to!make!the!instrument!express!their!real!agreement!
! • Statute!of!Frauds!is!no!impediment!to!the!reformation!of!an!
! instrument!!
! !
! DISTINGUISHED%FROM%ANNULMENT%
! !
! REFORMATION! ANNULMENT!
!
Action! presupposes! a! valid! No!meeting!of!the!minds!or!the!
!
existing! contract! between! the! consent! of! either! one! was!
!
parties!and!only!the!document!or! vitiated!by!mistake!or!fraud!!
!
instrument! which! was! drawn! up!
!
and! signed! by! them! does! not!
!
correctly! express! the! terms! of!
!
agreement!!
!
Gives! life! to! the! contract! upon! Involves!a!complete!nullification!
!
certain!corrections! of!contracts!
!
!
(
!
!
!
!!!!
A. Requisites( EXAMPLE%OF%CASES%WHERE%REFORMATION%IS%ALLOWED%
! 1. Art! 1361! When! a! mutual! mistake! of! the! parties! causes! the!
1. Meeting!of!the!minds!upon!the!contract! failure!of!the!instrument!to!disclose!their!real!agreement,!said!
2. The!true!intention!of!the!parties!is!not!expressed!in!the! instrument!may!be!reformed.!!
instrument! 2. Art!1363!When!one!party!was!mistaken!and!the!other!knew!or!
3. The!failure!of!the!instrument!to!express!the!true!agreement!is! believed! that! the! instrument! did! not! state! their! real!
due!to!mistake,!fraud,!inequitable!conduct!or!accident! agreement,! but! concealed! that! fact! from! the! former,! the!
4. The!facts!upon!which!relief!by!way!of!reformation!of!the! instrument!may!be!reformed.!!!
instrument!is!sought!are!put!in!issue!by!the!pleadings;!and! 3. Art!1364!When!through!the!ignorance,!lack!of!skill,!negligence!
5. There!is!clear!and!convincing!evidence!(which!is!more!than! or!bad!faith!on!the!part!of!the!person!drafting!the!instrument!
mere!preponderance!of!evidence)!of!the!mistake,!fraud,! or! of! the! clerk! or! typist,! the! instrument! does! not! express! the!
inequitable!conduct!or!accident.!! true! intention! of! the! parties,! the! courts! may! order! that! the!
! instrument!be!reformed.!
Note:!Tolentino’s!book!only!mentions!the!first!three!requisites.! !
Paras’!annotations!state!all!five.!! Mutual!mistake!as!basis!for!reformation:!requisites!
! 1. The!mistake!must!be!of!fact,!for!if!it!is!one!of!law,!the!remedy!is!
ADMISSIBILITY%OF%PAROL%EVIDENCE%TO%SHOW%TRUE%INTENT% annulment.!
GENERAL! RULE:! The!Court!may!NOT!allow!the!introduction!of!parol! 2. Such!mistake!must!be!proved!by!clear!and!convincing!evidence;!
evidence!to!show!the!real!agreement!of!the!parties.!Whatever!is!not! 3. The!mistake!must!be!mutual,!that!is,!common!to!both!parties!to!
found! in! the! text! of! the! agreement! should! thus! be! construed! as! the!instrument;!and!
excluded,!waived!or!abandoned.%, 4. The!mistake!must!cause!the!failure!of!the!instrument!to!express!
! their!true!intention.!!
BUT,!a!party!may!present!evidence!to!modify,!explain!or!add!to!the! !
terms!of!the!written!agreement!if!he!puts!in!issue!in!his!pleading:! Cases:!!
1. An! intrinsic! ambiguity,! mistake! or! imperfection! in! the! !
written!agreement;! GARCIA!v.!BISAYA!
2. The! failure! of! the! written! agreement! to! express! the! true! Facts:! Bisaya! executed! a! deed! of! sale! covering! a! parcel! of! land! in!
intent!and!agreement!of!the!parties!thereto;! favor! of! Garcia.! The! land! was! erroneously! designated! as! an!
3. The!validity!of!the!written!agreement;!or! “unregistered!land”!when!in!fact!it!is!a!portion!of!a!big!mass!of!land!
4. The! existence! of! other! terms! agreed! to! by! the! parties! or! registered! under! Sandoval! (third! person! not! interested! in! the!
their! successors! in! interest! after! the! execution! of! the! agreement).!Both!parties!regard!the!present!action!as!an!action!for!
written!agreement!(“agreement”!includes!wills)! reformation,! the! object! sought! being! the! correction! of! the! mistake!
*The! mistake! contemplated! as! an! exception! to! the! parol! evidence! in!the!Deed!covering!the!land.!!
rule!is!one!which!is!a!mistake!mutual!to!the!parties.!! !
! Held:!The!complaint!has!no!cause!of!action!because!it!fails!to!allege!
INEQUITABLE%CONDUCT% that! the! instrument! to! be! reformed! does! not! express! the! real!
Inequitable! conduct,! to! warrant! relief! by! way! of! reformation,! has! agreement! or! intention! of! the! parties.! The! proper! remedy! is!
been!held!to!consist!in!doing!acts,!or!omitting!to!do!acts,!which!the! annulment!of!contract!since!it!appears!that!Garcia!has!been!led!to!
court!finds!to!be!unconscionable.!Examples:! enter!into!a!Deed!through!fraud!or!misrepresentation.!!
1. Taking!advantage!by!one!party!of!the!other’s!illiteracy.! !
2. Abusing!confidence.! BENTIR!v.!LEANDE!
3. Concealing!what!of!right!should!have!been!disclosed.! Respondent!entered!into!a!contract!of!lease!of!a!parcel!of!land!with!
! Bentir! for! a! period! of! 20! years! starting! May,! 1968.! The! lease! was!
CAUSES%FOR%REFORMATION%% extended! for! another! 4! years! (until! May! 1992).! But! on! May! 1989,!
! Bentir! sold! the! leased! premises! to! the! Spouses! Pormada.!
a. Mutual%–!instrument!includes!something!which!should!not!be! Respondent! questioned! the! sale! alleging! that! it! had! a! right! of! first!
there!or!omit!what!should!be!there% refusal! since! its! lawyer! omitted! to! incorporate! in! the! contract! the!
verbal! agreement! between! the! parties! that! in! the! event! petitioner!
a. Mutual!!
b. Mistake!of!fact! leases! or! sells! the! lot! after! the! expiration! of! the! lease,! respondent!
c. Clear!and!convincing!proof! corporation!has!the!right!to!equal!the!highest!offer.!!
d. Causes!failure!of!instrument!to!express!true!intention! !
Held:!Reformation!is!barred!by!prescription.!Prescription!is!intended!
b. Unilateral%% to!suppress!stale!and!fraudulent!claims!arising!from!transactions!like!
a. One!party!was!mistaken! this!case!which!facts!had!become!so!obscure!from!the!lapse!of!time!
b. Other!either!acted!fraudulently!or!inequitably!or!knew!but! or!defective!memory.!!
concealed! !
c. Party!in!good!faith!may!ask!for!reformation! !
c. Mistake%by%3rd%persons%–!due!to!ignorance,!lack!of!skill,! !
negligence,!bad!faith!of!drafter,!clerk!or!typist% !
d. Others%specified%by%law%–!to!avoid!frustration!of!true! !
intent!% !
! !
! !
!
!!!!
B. Cases(where(no(reformation(is(allowed(
Art.! 1368.! Reformation! may! be! ordered! at! the! instance! of! either!
!
party! or! his! successors! in! interest,! if! the! mistake! was! mutual;!
1. Oral!contracts!–!there’s!nothing!to!reform!at!all!!
otherwise,! upon! petition! of! the! injured! party,! or! his! heirs! and!
2. Art!1366!
assigns.!
!
!
Art.!1366.!There!shall!be!no!reformation!in!the!following!cases:!!
(1)!Simple!donations!inter,vivos!wherein!no!condition!is!imposed;!! Art.! 1362.! If! one! party! was! mistaken! and! the! other! acted!
(2)!Wills;!! fraudulently! or! inequitably! in! such! a! way! that! the! instrument! does!
(3)!When!the!real!agreement!is!void.! not! show! their! true! intention,! the! former! may! ask! for! the!
reformation!of!the!instrument.!
!
SIMPLE%DONATIONS%INTER%VIVOS%WHEREIN%NO%CONDITION%IS!IMPOSED%
• Donation! is! an! act! of! liberality! whereby! a! person! disposes! E. Procedure(of(reformation((
gratuitously!of!a!thing!or!right!in!favor!of!another!who!accepts! !
it.!
• If! in! the! deed! of! donation,! a! mistake! or! defect! has! been! Art.!1369.!The!procedure!for!the!reformation!of!instrument!shall!be!
committed,!it!is!a!mere!failure!in!a!bounty!which,!as!the!donor! governed!by!ROC!to!be!promulgated!by!the!Supreme!Court.!
was!not!bound!to!make,!he!is!not!bound!to!correct.!The!donor! !
may!ask!for!the!reformation!of!a!deed!of!donation.!! GENERAL! RULE:! All! persons! interested! in! the! subject! matter! of!
• If! donation! is! conditional! or! is! onerous,! the! deed! may! be! litigation,! whether! it! is! a! legal! or! an! equitable! interest! should! be!
reformed!so!that!the!true!conditions!imposed!by!the!donor!or! made! parties! in! suits! to! reform! written! instruments,! so! that! the!
the!real!intention!of!the!parties!might!be!expressed.!! court! may! settle! all! their! rights! at! once,! and! thus! prevent! the!
! necessity!of!multiplicity!of!suits.!!
WILLS% !
• An! act! whereby! a! person! is! permitted! with! the! formalities! Cases:!
prescribed!by!law!to!control!to!a!certain!degree!the!disposition! !
of!his!estate,!to!take!effect!after!his!death.!! ATILANO!v.!ATILANO!
• Strictly! personal;! a! free! act! which! cannot! be! left! to! the! Facts:! Eulogio! Atilano! I! subdivided! his! land! into! five! parcels! (Lots!
discretion!of!a!third!person.!! 535?A! to! 535?E).! He! sold! one! parcel! (No.! 535?E),! to! his! brother!
• May!be!revoked!by!the!testator!any!time!before!his!death!and! Eulogio!Atilano!II.!Other!lots!were!sold!to!other!people,!while!Atilano!
this!right!is!not!subject!to!waiver!or!restriction.! I! kept! the! remaning! portion! of! land,! presumably! No.! 535?A! for!
! himself.! He! passed! this! to! Ladislao! Atilano! after! Eulogio! I! passed!
WHEN%THE%REAL%AGREEMENT%IS%VOID% away.! Later,! Atilano! II! wanted! to! partition! the! land.! The! land! was!
• IF! the! real! agreement! is! void,! there! is! nothing! to! reform.! resurveyed! and! they! found! out! that! Atilano! II’s! land! was! actually!
Reformation! would! be! useless! because! the! real! agreement! 535?E!and!not!535?A.!(The!titles!on!the!Deeds!were!mixed!up).!The!
being!void!is!unenforceable.!! issue!is!whether!Atilano!II!is!entitled!to!the!REAL!Lot!535?E!(as!stated!
! in! the! Deed),! or! to! 535?A,! the! land! he! has! been! in! possession! the!
whole!time.!
C. Implied(ratification( !
! Held:!Atilano!II!is!entitled!to!Lot!535?A!since!the!land!has!been!in!his!
possession! the! whole! time.! The! Court! used! the! ‘real! intent! of! the!
Art!1367.!When!one!of!the!parties!has!brought!an!action!to!enforce! parties!at!the!time!of!the!sale’!as!basis.!When!one!sells!or!buys!real!
the!instrument,!he!cannot!subsequently!ask!for!its!reformation.! property,! one! sells! or! buys! the! property! as! he! sees! it,! in! its! actual!
setting!and!by!its!physical!metes!and!bounds,!and!not!by!the!mere!
! lot!number!assigned!to!it!in!the!certificate!of!title.!
• Based!on!estoppel!(Art.!1431)!or!ratification!(Arts.!1392,! !
1396)! !
• When!a!party!brings!an!action!to!enforce!the!contract,!he! CARANTES!v.!CA!
admits!its!validity!and!that!it!expresses!the!true!intention!of! Facts:!Lot!No.!44!was!owned!by!the!deceased!Mateo!Carantes.!The!
the!parties.! Government! instituted! proceedings! for! expropriations! since! a!
• There!has!been!election!between!two!inconsistent!remedies,! portion! of! it! was! needed! as! landing! field! of! the! Loakan! Airport.!
one!in!affirmance,!the!other!in!disaffirmance! Petitioner!Maximino!Carantes!(son!of!Mateo)!was!appointed!judicial!
! administrator.! He! filed! a! project! of! partition! and! the! government!
purchased! two! lots.! A! deed! entitled! Assignment! of! Right! to!
D. Who(may(ask(for(reformation(( Inheritance! was! executed! by! four! of! Mateo’s! chidren.! It! assigned!
! their! rights! to! their! inheritance! to! Maximino! for! P1.00! and! also!
• MUTUAL!MISTAKE:!either!party!or!successor!in!interest! contained!a!recital!that!private!respondents!have!ceded!their!rights!
• MISTAKE!BY!ONE:!injured!party,!heirs!or!assigns! to!inherit!the!remaining!lots!to!Maximino,!saying!that!is!with!respect!
! to!Mateo!having!verbally!conveyed!the!lots!to!Maximino!alone.!
! !
! !
!!!!
Held:! There! was! proper! consideration,! and! the! agreement! was! not!
void! ab! initio.! Only! the! total! absence! of! cause! or! consideration!
renders! a! contract! void.! They! discovered! the! fraud! in! 1940,! but! it!
CHAPTER(5:((
was! only! after! 18! years! that! they! filed! a! complaint! thus! the! action!
has!already!prescribed.!!! INTERPRETATION(OF(
!
!
!
CONTRACTS(
!
!
! A. Primacy(of(Intention(
!
! Art.! 1370.! If! the! terms! of! a! contract! and! leave! no! doubt! upon!
! the!intention!of!the!contracting!parties,!the!literal!meaning!of!its!
! stipulations!shall!control.!
! !!!!!If!the!words!appear!to!be!contrary!to!the!evident!intention!of!
! the!parties,!the!latter!shall!prevail!over!the!former.!
!
!
!
• “Verba,intentione,non,e,contradebent,inservare”!?!words!ought!
!
to!be!subservient!to!the!intent,!not!the!intent!to!the!word!
!
• Look!for!the!contractual!intent!
!
• A! contract! is! what! the! law! defines! it! to! be,! and! not! what! it! is!
!
called!by!the!contracting!parties.!!
!
! • Title!does!not!necessarily!determine!a!contract’s!nature.!
! !
! GENERAL!V.!PARTICULAR!PROVISIONS!
! !
!
! Art.! 1372.! However! general! the! terms! of! a! contract! may! be,! they!
! shall!not!be!understood!to!comprehend!things!that!are!distinct!and!
! cases! that! are! different! from! those! upon! which! the! parties!
! intended!to!agree.!!
!
!
!
! • “Generalia,verba,suntgeneraliter,intelligencia”!"!general!
! things!are!to!understood!in!a!general!sense!
! • A!particular!intent!will!control!a!general!one!that!is!
! inconsistent!with!it.!
! !
! Cases:!!
! !
! BORROMEO!v.!CA!!
! Facts:! Defendant! Jose! A.! Villamor! was! a! distributor! of! lumber!
! belonging! to! Mr.! Miller,! the! agent! of! the! Insular! Lumber! Company.!
! Villlamor!owed!large!amount!of!money!to!Mr.!Miller!so!he!borrowed!
! from!his!former!classmate,!and!petitioner,!Canuto!O.!Borromeo.!To!
! pay!his!debt,!Villamor!signed!a!promissory!note!in!favor!of!Borromeo!
! on!Nov.!29,!1933!w/!interest!at!the!rate!of!12%!per!annum,!agreeing!
! to! pay! “as! soon! as! I! have! money”.! The! note! stipulates! that!
! defendant!waives!his!rights!to!the!prescriptions!as!stipulated!in!the!
! Code!of!Civil!Procedure!for!the!collection!or!recovery!of!the!money!
! at! any! time,! even! after! the! lapse! of! ten! years! from! the! date! of!
! execution!of!the!note.!
! !
! Held:! Stipulation! renouncing! future! prescription! is! valid.! In!
! interpretation!of!contracts,!while!ordinarily,!the!literal!sense!of!the!
words!employed!should!be!followed,!this!is!not!the!case!when!they!
appear! to! be! contrary! to! the! evident! intention! of! the! contracting!
parties.!The!intention!shall!prevail.Nothing!implausible!in!the!debtor!
renouncing! his! rights! to! the! prescription! because! in! this! case! the!
creditor!trusted!the!debtor!to!pay!even!after!the!termination!of!the!
ten!year!prescriptive!period.!
!
!!!!
KASILAG!v.!RODRIGUEZ! 3. WHEN!IT!CONTAINS!WORDS!THAT!HAVE!DIFFERENT!
Facts:!Ambrosio!mortgaged!the!improvements!on!her!land!to!Kasilag! SIGNIFICATIONS!
for!P1000.!A!year!later,!Ambrosio!was!unable!to!pay!the!interest!and!
the! tax! on! the! land! and! its! improvements! that’s! why! she! entered! !
into!a!verbal!contract!with!Kasilag!where!she!conveyed!to!the!latter!
Art.! 1375.! Words! which! may! have! different! significations! shall! be!
the! possession! of! the! land! on! condition! that! he! will! not! collect!
understood! in! that! which! is! most% in% keeping% with% the% nature% and%
interest! on! the! loan! and! would! attend! to! the! payment! of! the! land,!
object%of%the%contract.!
among! others.! Ambrosio’s! heirs! filed! a! case! for! recovery! of!
possession! of! the! land! and! its! improvements.! CA! held! that! the! !
contract!was!that!of!absolute!purchase!and!sale!of!the!land!and!its! • Consider!purpose!of!the!contract!
improvements,! and! that! the! heirs! of! Ambrosio! were! the! owners! of! !
the!land!and!its!improvements.!
! 4. WHEN!IT!CONTAINS!AMBIGUITIES!AND!OMISSION!OF!
Held:! It! was! not! a! contract! of! absolute! purchase! and! sale.! The! STIPULATIONS!
cardinal! rule! in! the! interpretation! of! contracts! is! to! the! effect! that! !
the! intention! of! the! contracting! parties! should! always! prevail! Art.! 1376.! The! usage% or% custom% of% the% place! shall! be! borne! in!
because! their! will! has! the! force! of! law! between! them.! The! words! mind!in!the!interpretation!of!the!ambiguities!of!a!contract,!and!
used! by! the! contracting! parties! in! the! contract! clearly! show! that! shall! fill! the! omission! of! stipulations! which! are! ordinarily!
they! intended! to! enter! into! the! principal! contract! of! loan! in! the! established.!
amount!of!P1,000,!with!interest!at!12!per!cent!per!annum,!and!into!
the! accessory! contract! of! mortgage! of! the! improvements! on! the! !
land!acquired!as!homestead.! • Contemporaneous! interpretation! –! social! milieu! at! the! time!
the!contract!was!executed!
B. How(to(Determine(Intention( • Contemporaneous!construction!–!two!parties!interpret!based!
on!their!understanding!
Art.! 1371.! In! order! to! judge! the! intention! of! the! contracting! !
parties,! their! contemporaneous! and! subsequent! acts! shall! be! 5. WITH!RESPECT!TO!THE!PARTY!WHO!CAUSED!THE!
principally!considered.! OBSCURITY!!
!
• Also!take!note!of!the!usage!and!customs!of!the!place! Art.!1377.!The!interpretation!of!obscure!words!or!stipulations!in!
• In!ascertaining!the!intention:!look!at!the!words!parties!used! a!contract!shall%not%favor%the%party%who%caused%the%obscurity.!
• If!there!is!ambiguity!in!the!meaning,!take!into!consideration:! !
o Relationship!existing!between!parties!
• Contracts,of,adhesion!
o Respective!situations!
o Already! printed! form! containing! the! stipulations! of! the!
o Surrounding!circumstances!
agreement! and! one! party! merely! “takes! it! or! leave! it”.!
o Purpose!and!tenor!of!whole!contract!
Imposition! of! the! former! curtails! the! bargaining! power!
of!the!latter.,
C. How(to(Interpret(a(Contract( o Resolved! against! the! party! who! prepared! the! contract!
! and!in!favor!of!the!one!who!merely!adhered!to!it.!,
1. WHEN!IT!CONTAINS!STIPULATIONS!THAT!ADMIT!OF! !
SEVERAL!MEANINGS!! 6. WHEN!IT!IS!ABSOLUTELY!IMPOSSIBLE!TO!SETTLE!DOUBTS!
• Validity!favored! BY!THE!RULES!ABOVE!!
!
Art.! 1373.! If! some! stipulation! of! any! contract! should! admit! of!
several!meanings,!it!shall!be!understood!as!bearing!that!import! Art.!1378,!Par!1:!When!it!is!absolutely!impossible!to!settle!doubts!
which!is!most!adequate!to!render%it%effectual.! by! the! rules! established! in! the! preceding! articles,! and! the! doubts!
refer!to!incidental!circumstancesof!a!gratuitous!contract,!the!least!
! transmission! of! rights! and! interests! shall! prevail.! If! the! contract! is!
! onerous,! the! doubt! shall! be! settled! in! favor! of! the! greatest!
2. WHEN!IT!CONTAINS!VARIOUS!STIPULATIONS,!SOME!OF! reciprocity!of!interests.!
WHICH!ARE!DOUBTFUL!
!
• Contract!to!be!taken!as!a!whole!!
! • In! gratuitous! contracts,! incidental! circumstances! "! least!
transmission!of!rights!and!interests!
Art.!1374.!The!various!stipulations!of!a!contract!shall!be!interpreted! • In!onerous!contracts!"!greatest!reciprocity!of!interests!
together,!attributing!to!the!doubtful!ones!that!sense!which!may! !
result,from,all,of,them,taken,jointly.! 7. WHEN!THE!DOUBTS!ARE!CAST!UPON!THE!PRINCIPAL!
! OBJECTS!SO!THAT!THE!INTENTION!CANNOT!BE!KNOWN!!
• Titles! in! contracts! are! mere! divisions.! Contract! is! to! be! • Null!and!void!
interpreted!as!a!whole!(holistic!interpretation)!"!harmonize.! !
! !
!!!!
Art.!1378,!Par.!2.!If!the!doubts!are!cast!upon!the!principal!object!
of!the!contract!in!such!a!way!that!it!cannot!be!known!what!may!
have!been!the!intention!or!will!of!the!parties,!the!contract!shall!
DEFECTIVE(CONTRACTS(
be!null%and%void.!
1. RESCISSIBLE! –! contract! that! has! caused! a! particular!
•Exception! to! the! in, pari, delicto, rule! (see! Art.! 1411! –! Art.!
damage! to! one! of! the! parties! or! to! a! third! person! and!
1412)!
which! for! EQUITABLE! REASONS! may! be! set! aside! even! if!
!
valid!
Two!kinds!of!interpretation:!
2. VOIDABLE! OR! ANNULLABLE! (contrato% nulo)! –! contract! in!
1. Strict!–!doubts!refer!to!essential!requisites.!Contract!will!be!
which! CONSENT! of! one! of! the! parties! is! defective,! either!
inexistent!if!one!or!some!essential!requisite!is!absent!either!in!
because!of!WANT!OF!CAPACITY!or!because!it!is!VITIATED!,!
fact!and!in!law!
but!which!contract!is!VALID!until!JUDICIALLY!set!aside!!
2. Liberal!–!Art.!1378!(doubts!refer!to!incidental!circumstances)!
3. UNENFORCEABLE! –! contract! that! for! some! reason!
a. In!gratuitous!contracts–!since!other!!party!did!not!part!
CANNOT! BE! ENFORCED,! UNLESS! RATIFIED! in! the! manner!
with!something!"!least!transmission!of!right!favored!
PROVIDED!BY!LAW!
b. In!onerous!contacts!–!greatest!reciprocity!of!interest!
4. VOID! AND! NON[EXISTENT! (contrato% inexistente)! –!
favored!
contract!which!is!an!ABSOLUTE!NULLITY!and!produces!NO!
∗ NOTE:! All! ways! of! interpretation! stated! above! also! applies! to!
EFFECT,!as!if!it!had!never!been!executed!or!entered!into!
interpreting!LEGISLATIVE!INTENT!
!
∗ Exception:!Numbers!5!and!6!
!
Art.!1379.!The!principles!of!interpretation!stated!in!Rule!123!of!the!
CHAPTER(6:((
Rules! of! Court! shall! likewise! be! observed! in! the! construction! of!
contracts.!
RESCISSIBLE(CONTRACTS(
D. Applicability(of(Rule(123,(Rules(of(Court(( Rescissible! Contracts! are! those! validly! agreed! upon! because! all!
! essential! elements! exist,! and,! therefore,! legally! effective! but! in! the!
• Law!in!evidence;!interpretation!of!documents! cases!established!by!law,!the!remedy!of!rescission!is!granted!in!the!
• Partly! written! contract! –! In! case! of! inconsistencies,! the! interest!of!equity!
partly! written! form! will! prevails! over! the! partly! printed!
form! A. Kinds(
• Natural!right!–!Interpretation!favoring!a!natural!right!(e.g.! !
right!to!redeem)!prevails!over!one!against!it.!
! Art.!!1381.!The!following!contracts!are!rescissible:!!
In! between! VALID! and! DEFECTIVE! contracts! is! RELATIVELY! (1) Those! which! are! entered! into! by! guardians! whenever! the!
INEFFECTIVE!–!ineffectively!only!with!respect!to!certain!parties,!but! wards!whom!they!represent!suffer!lesion!by!more!than!one?
are!effective!as!to!other!persons.!! fourth! of! the! value! of! the! things! which! are! the! object!
! thereof;!!
• Against!voidable!contract:!ineffectiveness!is!produced!ipso! (2) Those! agreed! upon! in! representation! of! absentees,! if! the!
jure! latter!suffer!the!lesion!stated!in!the!preceding!number;!!
(3) Those! undertaken! in! fraud! of! creditors! when! the! latter!
• Void! or! inexistent! contract:! can! be! made! completely!
cannot!in!any!other!manner!collect!the!claims!due!them;!!
effective! by! the! consent! of! the! person! as! to! whom! it! is!
(4) Those! which! refer! to! things! under! litigation! if! they! have!
effective! or! by! the! cessation! of! the! impediment! which!
been!entered!into!by!the!defendant!without!the!knowledge!
prevents!its!complete!ineffectiveness!
and! approval! of! the! litigants! or! of! competent! judicial!
!
authority;!!
(1) Assignment! of! the! lease! by! the! lessee! without! the!
(5) All!other!contracts!specially!declared!by!law!to!be!subject!to!
consent! of! the! lessor! is! ineffective! only! as! regards! the!
rescission.!
lessor!!
(2) Transfer!of!a!debt!by!the!debtor!to!another,!without!the! !
consent!of!the!creditor!is!ineffective!as!to!the!creditor,!! KINDS!OF!RESCISSIBLE!CONTRACTS:!
(3) The!payment!by!a!debtor!to!his!creditor!after!the!credit! 1. Entered! into! by! guardians! whenever! the! wards! suffer! lesion!
has! been! garnished! or! attached! by! a! third! person! is! by!more!than!¼!of!value!of!things!object!
ineffective!to!the!latter! • Before!guardian!may!dispose!of!property!of!ward,!he!must!
! first! secure! approval! of! guardianship! court! (in! cases! of!
! sale,!mortgage,!or!other!encumbrance)!
!
• If! there! is! no! approval,! contract! is! unenforceable,!
!
irrespective!of!whether!there!is!lesion!or!not.!They!are!not!
!
rescissible!
!
• What! is! contemplated! in! this! article! are! contracts! which!
!
constitute! mere! acts! of! administration,! and! not! of!
!
ownership!
!
!!!!
• If!there!is!approval,!contract!cannot!be!rescinded,!even!if! REQUISITES!FOR!ACCION!PAULIANA:%
there!is!lesion! 1. Plaintiff!asking!for!rescission!has!a!credit!prior!to!the!alienation,!
• Sir!Labitag:!“thin!band!of!contracts”! although!demandable!later.%
• Contracts!with!Lesion!(Pars.!1!&2)! 2. Debtor! has! made! a! subsequent! contract! conveying! a!
o Lesion! –! injury! which! one! of! the! parties! suffers! by! patrimonial!benefit!to!a!third!person%
virtue!of!a!contract!which!is!disadvantageous!for!him! 3. Creditor! has! no! other! legal! remedy! to! satisfy! his! claim,! but!
o To! give! rise! to! rescission,! lesion! must! be! known! or! would!benefit!by!the!rescission!of!the!conveyance!to!the!third!
could! have! been! known! at! the! time! of! making! the! person%
contract,! and! not! due! to! circumstances! subsequent! 4. Act!being!impugned!is!fraudulent%
thereto!or!unknown!to!the!parties! 5. Third! person! who! received! the! property! conveyed,! if! by!
o The! idea! is! to! establish! parity! between! the! value! of! onerous!title,!has!been!an!accomplice!in!the!fraud%
the!thing!and!its!price,!so!that!if!the!price!is!less!than! %
the!true!value!of!the!thing!at!the!time!of!perfection!of! • Credit! must! be! existing! at! the! time, of, the, fraudulent,
the!contract,!there!is!lesion! alienation,!although!not!yet!due.!But!at!the!time!of!accion,
o Rescission! cannot! take! place! if! the! contracts! have! pauliana,! the! credit! must! already! be! due! because! it!
been!approved!by!the!court! presupposes%a%judgment!and!unsatisfied%execution!which!
o GENERAL! RULE:! lesion! does! not! invalidate! a! contract! cannot! exist! when! the! debt! is! not! yet! demandable! at! the!
except! only! in! special! cases! provided! by! law! (Art.! time!the!rescissory!action!is!brought.!!
1355)! • GENERAL!RULE:!Credit!is!prior!to!the!alienation!!
! • EXCEPTION:!Credit!is!after!alienation!but!entitled!to!accion,
2. Agreed! upon! in! representation! of! absentee,! suffer! lesion! by! pauliana!–!
more!than!¼!of!the!value!of!things!object!! o When! debtor! purposely! and! in! bad! faith! deprives!
• Same!principle!in!relation!to!contracts!by!guardians!! himself! of! the! ability! to! meet! the! consequences! of!
! obligations! he! intends! to! incur! in! the! future;!
3. In!fraud%of%creditors!who!cannot!collect!claims!due!them! alienation! made! precisely! in! view! of! such! future!
• Those! executed! with! intention! to! prejudice! rights! of! obligation!
creditors;!should!not!be!confused!with!those!entered!into! o When! a! party! appears! to! have! become! a! creditor!
without! such! intention,! even! if! some! particular! damage! after! the! alienation,! but! who! may! be! considered! as!
may!be!caused!to!a!creditor!! having!a!prior!right!
• Existence! of! intention! determined! either! by! presumption! ! Claims! were! acknowledged! by! the! debtor! after!
established!by!Art.!1387!or!by!proofs!presented!in!trial! alienation,! but! origin! of! which! antedated! the!
• Fraud! that! justifies! AP! is! not! only! characterized! by! the! alienation!!
intention!to!injure!the!creditor,!but!by!the!knowledge!that! ! Those! who! become! subrogated,! after! the!
damage!would!be!inflicted;!knowledge!exists!when!debtor! alienation,! in! the! rights! of! a! creditor! whose!
knows! that! his! property! cannot! be! alienated! without! credits!were!prior!to!the!alienation!!
producing!evident!injury!to!his!creditors! • Even!secured!creditors!are!entitled!to!AP,!so!long!as!their!
o Gratuitous! alienations! –! simple! knowledge! by! the! credit! existed! prior! to! alienation! and! they! are! prejudiced!
debtor!that!his!act!would!cause!injury!to!his!creditors! thereby!
is!enough! • TEST!OF!FRAUD:!Whether!the!conveyance!was!a!bona!fide!
o Onerous!alienations!–!necessary!that!he!be!motivated! transaction! or! a! trick! and! contrivance! to! defeat! creditors!
by!an!intention!to!prejudice!them! or! whether! it! conserves! to! the! debtor! a! special! right;!
• Remedy!of!rescission!may!be!availed!of!by!a!third!person! founded!on!good!consideration!or!is!made!with!bona!fide!
• Accion!Pauliana!distinguished!from!Simulation:! intent.!"!Does!it!prejudice!the!right!of!creditors??!
! • It!is!not!sufficient!that!it!is!founded!on!good!consideration,!
Accion!Pauliana! Simulation! or! is! made! with! bona! fide! intent;! it! must! have! both!
There! is! a! real! alienation,! but! is! No! alienation! ,! but! a! mere! elements!
fraudulent! pretense! • No!fraudulent!alienation!in!a!sale!made!by!a!debtor!to!one!
Can!be!alleged!only!by!creditors! Can! be! alleged! by! all! creditors,! of! his! creditors,! for! the! purpose! of! cancelling! his!
prior!to!the!act! before!or!after!simulation! indebtedness,! even! if! it! may! be! prejudicial! to! other!
Impossibility! of! satisfying! Not!required! creditors!
plaintiff’s!claim!is!required! • Badges!of!fraud!applicable!!
Action! to! set! aside! a! valid! Does! not! seek! to! set! aside! the! • Date,of,judgment,and,unsatisfied,execution,is,immaterial;,
contract! simulated! contract,! but! merely! even, if, it, be, subsequent, to, alienation,, it, is, merely,
to!declare!its!inexistence! declaratory,,with,retroactive,effect,to,the,date,when,credit,
! was,constituted.%
! • QuasiMdelict, –, act, or, omission, giving, rise, to, liability, to,
! indemnify,must,be,prior,to,the,alienation,,even,if,judgment,
! declaring,it,be,rendered,afterwards%
! !
! 4. Things! under% litigation,! without! knowledge! and! approval! of!
! plaintiff!or!of!competent!judicial!authority!
! • To! secure! payment! of! an! existing! credit! of! a! third! person!
! against!a!party!to!a!contract!sought!to!be!rescinded!
!!!!
• To! make! effective! the! claim! a! party! litigant! over! a! thing! C. Rescission(
under! litigation! which! is! the! object! of! a! contract! entered! !
into!by!the!other!party!with!another!person!
Art.! 1380.! Contracts! validly! agreed! upon! may! be! rescinded! in! the!
• In!the!rescission!of!a!contract!on!things!in!litigation,!a!real!
cases!established!by!law.!
right! is! rendered! effective! with! respect! to! particular!
property! !
• Plaintiff! may! protect! his! right! by! filing! a! notice! of! lis, 1. DEFINITION!
pendens,(real!property),!or!by!petitioning!to!the!court!for! !
the! issuance! of! an! order! of! attachment! (personal! Rescission!is!a!remedy!granted!by!law!to!the!contracting!parties!and!
property),! or! the! appointment! of! a! receiver! to! place! the! even! to! third! persons,! to! secure! the! reparation! of! damages! caused!
property!in!custodia,legis, to! them! by! a! contract,! even! if! this! should! be! valid,! by! means! of!
• Transferee! of! property! in! good! faith! who! acquires! restoration! of! things! to! their! condition! at! the! moment! prior! to! the!
property!for!valuable!consideration,!without!knowledge!of! celebration!of!said!contract.!
the! litigation! or! claim! of! the! plaintiff,! cannot! be! deprived! • It! implies! a! contract! which,! even! if! initially! valid,! produces!
of!property.!! lesion!or!pecuniary!damage!to!someone.!
• Sale! of! thing! under! litigation! is! rescissible! at! the! instance! • NATURE! OF! CONTRACT! –! is! not! limited! to! valid! contracts! as!
of!plaintiff!in!case!he!wins!in!his!suit,!unless!the!transferee! such! validity! is! not! an! essential! condition! of! rescission;!
is!in!legal!possession!in!good!faith! hence,!voidable!contract!may!also!be!rescinded!
! • Set!asides!the!act!or!contract!for!justifiable!reasons!of!equity!
5. Specially%declared%by%law!to!be!subject!of!rescission!! • Grounds!for!rescission!can!only!be!for!legal!cause!!
Examples:! • Sir!Labitag:!Rescissible!contracts!are!in!between!valid!and!
Art.! 1098.! A! partition,! judicial! or! extra?judicial,! may! also! be! void!!
rescinded! on! account! of! lesion,! when! any! one! of! the! co?heirs! !
received!things!whose!value!is!less,!by!at!least!one?fourth,!than!the!
2. AS!DISTINGUISHED!FROM!RESCISSION!UNDER!ART.!1191!
share!to!which!he!is!entitled,!considering!the!value!of!the!things!!
!
Art.! 1470.! Gross! inadequacy! of! price! does! not! affect! a! contract! of! Art.! 1191.! The! power! to! rescind! obligations! is! implied! in! reciprocal!
sale,! except! as! it! may! indicate! a! defect! in! the! consent,! or! that! the! ones,! in! case! one! of! the! obligors! should! not! comply! with! what! is!
parties!really!intended!a!donation!or!some!other!act!or!contract!at! incumbent!upon!him.!!
the!time!they!were!adjudicated.! !
! The! injured! party! may! choose! between! the! fulfillment! and! the!
Art.! 1659.! If! the! lessor! or! the! lessee! should! not! comply! with! the! rescission!of!the!obligation,!with!the!payment!of!damages!in!either!
obligations! set! forth! in! articles! 1654! and! 1657,! the! aggrieved! party! case.! He! may! also! seek! rescission,! even! after! he! has! chosen!
may! ask! for! the! rescission! of! the! contract! and! indemnification! for! fulfillment,!if!the!latter!should!become!impossible.!!
damages,!or!only!the!latter,!allowing!the!contract!to!remain!in!force.!! !
The! court! shall! decree! the! rescission! claimed,! unless! there! be! just!
B. Characteristics( cause!authorizing!the!fixing!of!a!period.!!
! !
This! is! understood! to! be! without! prejudice! to! the! rights! of! third!
1. THEIR!DEFECT!CONSIST!IN!INJURY!OR!DAMAGE!EITHER!TO!
persons! who! have! acquired! the! thing,! in! accordance! with! articles!
ONE!OF!THE!CONTRACTING!PARTIES!OR!TO!THIRD!PERSONS! 1385!and!1388!and!the!Mortgage!Law.!
• LESION:!injury!which!one!of!the!parties!suffers!by!virtue!of! !
contract!that!is!disadvantageous!to!him;!must!be!known!or! Rescission!(Art.!1380)!distinguished!from!Resolution!(Art.!1191):!
could! have! been! known! at! the! birth! of! contract! and! not! !
due!to!subsequent!thereto!or!unknown!to!the!parties! ! Art.!1191!Resolution! Art.!1380!Rescission!
o The! idea! is! to! establish! parity! between! the! value! of! !
the!thing!and!its!price,!so!that!if!the!price!is!less!than!
Similarities! 1. Presuppose!contracts!validly!entered!into!and!
the!true!value!of!the!thing!at!the!time!of!perfection!of!
the!contract,!there!is!lesion! existing!!
• Examples:! • Rescission!v.!Annulment:!the!latter!there!is!
o Art.!1098.!Partition,!judicial!and!extra?judicial!may!be! a!defect!which!vitiates/invalidates!the!
rescinded!on!account!of!lesion!! contract!!
o Art.!1539.!Sale!of!real!estate!of!inferior!thing! 2. Require!mutual!restitution!when!declared!
o Art.!1542.!Sale!of!real!estate!made!for!a!lump!sum!! proper!
! Who!may! Only!by!a!party!to!the! Party! to! the! contract!
demand! contract! suffering!lesion!
2. THEY!ARE!VALID!BEFORE!RESCISSION!! Third! parties! prejudiced! by!
3. THEY!CAN!BE!ATTACKED!DIRECTLY!ONLY,!NOT!COLLATERALLY! the!contract!
4. THEY!CAN!BE!ATTACKED!ONLY!EITHER!BY!A!CONTRACTING! Grounds! Non?performance! or! Various! reasons! of! equity!
PARTY,!OR!BY!A!THIRD!PERSON!WHO!IS!INJURED!OR! breach! of! contract! provided!as!grounds,!mainly!
(implied! tacit! economic!injury!or!lesions!
DEFRAUDED!
condition! in!
5. THEY!CAN!BE!CONVALIDATED!ONLY!BY!PRESCRIPTION!AND! reciprocal!obligation)!!
NOT!BY!RATIFICATION!! Scope!of! May!be!denied!by!the! Sufficiency! of! reason! does!
!!!!
judicial! Court! when! there! is! not! affect! right! to! ask! for! b. The% party% asking% for% rescission% has% no% other%
control! sufficient! reason! to! rescission! (cannot! be! legal%means%to%obtain%reparation%
justify! extension! of! refused! if! all! the! requisites! !
time! to! the! are!satisfied)!
Art.! 1383.! The! action! for! rescission! is! subsidiary;! it! cannot! be!
defendant! in! which! !
instituted! except! when! the! party! suffering! damage! has! no! other!
to! perform! (whether! !
legal!means!to!obtain!reparation!for!the!same.!
slight! or! casual! !
breach)!! %
Kind!of! Only! to! reciprocal! Unilateral!or!reciprocal!! • Plaintiff! must! prove! that! he! has! no! other! legal! means! to!
obligations! obligations! where! Even! when! contract! is! fully! obtain!reparation%
it!is! one! party! does! not! fulfilled! • If!damage!is!repaired,!as!in!the!case!of!lesion!suffered!by!the!
applicable! perform! ward!or!absentee,!rescission!cannot!take!place!
to! • Rescissible! contracts! may! be! assailed! directly! only! by! a!
Character! Principal!Remedy! Secondary/Subsidiary! proper! action! in! court,! and! not! indirectly! or! collaterally! by!
! way!of!defense!
• MUTUAL!DISSENT!is!not!the!same!with!rescission,!because! %
mutual! dissent! is! simply! an! agreement! of! the! parties! to! c. He% is% able% to% return% whatever% he% may% be%
cancel! their! contract! and! mutually! return! the! object! and!
obliged%to%restore%if%rescission%is%granted%
the!cause!thereof.!It!is!tantamount!to!a!simple!creation!of!
new! contract! for! the! dissolution! of! the! previous! one.! In! %
order!for!rescission!to!take!place,!the!requisites!must!first! Art.! 1385,! par.! 1.! Rescission! creates! the! obligation! to! return! the!
be!satisfied.! things! which! were! the! object! of! the! contract,! together! with! their!
• Contract! of! sale! of! personal! property! expressly! providing! fruits,!and!the!price!with!its!interest;!consequently,!it!can!be!carried!
that! owner! may! rescind! it! if! purchaser! fails! to! make! out! only! when! he! who! demands! rescission! can! return! whatever! he!
payments!are!governed!by!Art.!1191! may!be!obliged!to!restore.!!
! !
Cases:! • Mutual!restitution!–!party!seeking!for!rescission!must!offer!to!
! restore!that!which!he!received!from!the!other!
UNIVERSAL!FOOD!CORP.!v.!CA! • There!is!no!obligation!to!restore!if!nothing!has!been!received!
Facts:!Magdalo!Francisco!invented!a!food!seasoning!sauce!known!as! • When! court! declares! a! contract! rescinded,! parties! must!
Mafran! sauce.! By! virtue! of! a! Bill! of! Assignment,! the! use! of! the! return!to!each!other!
formula!was!given!to!UFC.!Under!said!agreement,!Francisco!was!to! (a) The! object! of! the! contract! with! its! fruits! (include! not!
be!appointed!as!Chief!Chemist!in!UFC,!to!preserve!the!secrecy!of!the! only! natural,! civil,! and! industrial! fruits! but! also! the!
sauce! formula.! Events! transpired,! and! UFC! dismissed! Francisco! as! accessions!and!accessories)!
Chief! Chemist.! Francisco! sought! for! the! rescission! of! the! Bill! of! (b) The!price!thereof!with!legal!interest!
Assignment! for! Breach! of! Contract.! UFC! contends! that! rescission! • When! it! is! no! longer! possible! to! return! the! object! of! the!
should! be! denied,! as! under! Art.! 1383,! Rescission! is! a! subsidiary! contract,!an!indemnity!for!damages!operates!as!restitution!
remedy! which! cannot! be! constituted! except! when! party! suffering! • Obligation!to!restore!likewise!applies!to!third!persons!
the!damage!has!no!other!legal!means!to!obtain!reparation.! !
! d. The% object% of% the% contract% has% not% passed%
Held:! Rescission! sought! is! that! under! Art.! 1191! which! gives! the!
injured! party! the! right! to! rescind! contract! for! causal! breach.! It! is! a!
legally% to% the% possession% of% a% third% person%
principal!remedy!and!can!be!immediately!availed!of!at!the!instance! acting%in%good%faith%
of!non?performance.!! !
! • “Third!person”!–!includes!not!only!one!who!is!not!a!party!
3. REQUISITES! to! the! rescissible! contract,! but! also! one! who! is! a! party!
thereto!
a. The%contract%is%rescissible%
• Acquisition! by! a! third! person! is! an! obstacle! to! the!
!
efficaciousness! of! action! for! rescission,! where! the!
• Art.!1380!Contract!must!be!validly!agreed!upon!
following!circumstances!are!present:!
• Art.!1381!Kinds!of!rescissible!contracts! o Third! person! is! in! lawful! possession! of! the! realty—
• Art.!1382!Payments!made!in!a!state!of!insolvency:! registration!of!the!transfer!to!him!in!the!registry!
! o He!did!not!act!in!bad!faith!
Art.!1382.!Payments!made!in!a!state!of!insolvency!for!obligations!to! • Third!person!in!bad!faith!–!if!he!could!not!return!the!thing!upon!
whose! fulfillment! the! debtor! could! not! be! compelled! at! the! time! the!rescission!of!the!contract,!he!will!be!liable!for!the!value!of!
(has!not!yet!matured)!they!were!effected,!are!also!rescissible.! the!property!!
• Insolvency!referred!to!in!this!article!is!insolvency!in!fact,!not! !
requiring!any!judicial!proceeding!on!insolvency! !
• Can! be! established! by! proving! that! the! debtor! did! not! have! !
properties! with! which! to! satisfy! his! creditor! except! that! !
which!was!given!in!payment!prematurely! !
• Also!includes!obligations!which!cannot!be!legally!demanded! !
such!as!natural!obligations!and!those!that!have!prescribed!
!!!!
e. The% action% for% rescission% is% brought% within% the% !
prescriptive%period%of%four%(4)%years% a. With%respect%to%third%persons%who%acquired%the%
% thing%in%good%faith%
Art.!1389.!The!action!to!claim!rescission!must!be!commenced!within! %
four!years.!! • Transferee! of! property! in! good! faith! who! acquires!
For! persons! under! guardianship! and! for! absentees,! the! period! of! property!for!valuable!consideration,!without!knowledge!of!
four! years! shall! not! begin! until! the! termination! of! the! former's! the! litigation! or! claim! of! the! plaintiff,! cannot! be! deprived!
incapacity,!or!until!the!domicile!of!the!latter!is!known! of!property.!!
! • Right!of!transferee!to!retain!alienation:!
• As! a! general! rule,! action! to! rescind! contracts! must! be! o Nature!of!transfer!
commenced!within!four!(4)!years!from!the!date!contract!was! • ONEROUS!
entered!into! ! Good!faith!–!no!rescission!!
o Law! is! silent! as! to! when! period! is! to! be! counted:! ! Bad! faith! –! rescissible! because! of! his!
whether! from! the! celebration! of! the! contract,! or! from! complicity! in! the! fraud! "! not! entitled! for!
the! time! the! creditor! acquires! knowledge! of! the! reimbursement! because! in, pari, delicto;! if!
existence!of!contract! not! possible! to! return,! indemnify! the!
o SC:!since!the!law!is!silent,!general!rule!applies,!i.e.,!from! plaintiff!!
the!moment!the!cause!of!action!accrues! • GRATUITOUS!
o Where!the!action!for!rescission!is!based!on!fraud,!period! ! Good!faith!–!does!not!protect!him!because!
must!be!counted!from!the!time!of!the!celebration!of!the! he!gave!nothing!and!so!he!is!not!prejudiced!
contract! by! the! rescission;! rescissible,! though! not!
o In!a!case!decided!under!Art.!1191,!action!for!rescission! required!to!restore!the!fruits;!he!is!entitled!
by!the!buyer!must!be!commenced!within!four!(4)!years! to! reimbursement! for! necessary! and! useful!
from! the! date! the! judgment! becomes! final! and! expenses!incurred!on!the!thing!
executory! ! Bad! faith! –! rescissible! because! of! his!
o When!action!to!rescind!or!accion,pauliana,accrues! complicity! in! the! fraud;! if! not! possible! to!
! After!all!other!legal!remedies!have!been!exhausted! return,!indemnify!the!plaintiff!
and! have! been! proven! futile! and! all! requisites! for! • Right! to! damages:! When! contract! cannot! be! rescinded,!
accion,pauliana,are!present! because! the! thing! has! been! acquired! in! good! faith! by! a! third!
• Exceptions:! person,!party!who!caused!the!loss!shall!be!liable!for!damages,!
o For!persons!under!guardianship,!period!shall!begin!from! i.e.! guardians! of! minors,! representative! of! absentees,!
the!termination!of!incapacity! transferee!in!bad!faith,!or!defendant!who!transferred!the!thing!
o For!absentees,!from!the!time!the!domicile!is!known! in!litigation!
o Period! commences! on! the! termination! of! the! ward’s! !
incapacity!or!absentee’s!domicile!is!known!! Who!may!bring!action!for!rescission!
% 1. Person! injured! by! rescissible! contract,! such! as! the! ward! or!
4. EFFECT!OF!RESCISSION! absentee! in! the! case! of! lesion,! creditors! prejudiced! by! a!
fraudulent!alienation,!and!the!plaintiff!in!a!case!where!a!thing!
% in!litigation!is!alienated!by!the!defendant!
Art.! 1385.! Rescission! creates! the! obligation! to! return! the! things! 2. Heirs!of!these!persons!
which!were!the!object!of!the!contract,!together!with!their!fruits,!and! 3. Their!creditors!by!virtue!of!accion!subrogatoria!
the! price! with! its! interest;! consequently,! it! can! be! carried! out! only!
%
when! he! who! demands! rescission! can! return! whatever! he! may! be!
obliged!to!restore.!! 5. EXTENT!OF!RESCISSION!
! !
Neither! shall! rescission! take! place! when! the! things! which! are! the! Art.!1384.!Rescission!shall!be!only!to!the!extent!necessary!to!cover!
object!of!the!contract!are!legally!in!the!possession!of!third!persons! the!damages!caused.!!
who!did!not!act!in!bad!faith.!! !
! • Entire! contract! need! not! be! set! aside! by! rescission! if! the!
In! this! case,! indemnity! for! damages! may! be! demanded! from! the! damage!can!be!repaired!or!covered!by!partial!rescission!
person!causing!the!loss.! • Only!the!creditor!who!brought!the!action!can!benefit!from!
! the! rescission,! and! only! to! the! extent! of! his! unsatisfied!
When!rescission!not!allowed:! credit!
• When! party! who! demands! rescission! cannot! return! what! • As! to! the! excess,! alienation! is! maintained! even! if!
he!is!obliged!to!restore!under!the!contract! transferee!is!in!bad!faith!!
• If! property! is! legally! in! the! possession! of! a! third! person! • Tolentino:! But! there! may! be! other! creditors! who! could!
who!acted!in!good!faith! also!bring!the!AP;!they!should!be!given!the!benefit!of!the!
o Registered!property!in!the!Registry!of!Property! rescission,! instead! of! requiring! them! to! bring! another!
o Unaware! of! the! flaw! in! his! title! or! mode! of! action,!if!a!balance!is!left!
acquisition! • BUT!if!transferee!is!willing!to!pay,!no!rescission!
!
!
!
! !
!!!!
! ,
6. PRESUMPTIONS!OF!FRAUD! • Alienation!by!gratuitous!title!
a. Badges%of%fraud% o Under!the!first!paragraph,!donation!is!presumed!
fraudulent!unless!proved!otherwise!
!
• Alienation!by!onerous!title!
Art.! 1387.! All! contracts! by! virtue! of! which! the! debtor! alienates!
o Under! the! second! paragraph,! in! the! absence! of!
property!by!gratuitous!title!are!presumed!to!have!been!entered!into!
some! judgment! rendered,! no! presumption! of!
in! fraud! of! creditors,! when! the! donor! did! not! reserve! sufficient!
fraud! can! arise;! creditors! must! show! that! the!
property!to!pay!all!debts!contracted!before!the!donation.!!
conveyance!will!prejudice!their!rights!
Alienations!by!onerous!title!are!also!presumed!fraudulent!when!
!
made!by!persons!against!whom!some!judgment!has!been!rendered!
Cases:!
in! any! instance! or! some! writ! of! attachment! has! been! issued.! The!
!
decision! or! attachment! need! not! refer! to! the! property! alienated,!
ORIA!v.!MCMICKING!
and! need! not! have! been! obtained! by! the! party! seeking! the!
Facts:!Gutierrez!brought!actions!against!Oria!Hermanos!&!Co.!for!the!
rescission.!!
recovery! of! sums! of! money.! Subsequent! to! the! beginning! of! said!
In! addition! to! these! presumptions,! the! design! to! defraud!
actions,! members! of! Oria! Hermano! &! Co.,! on! account! of! the!
creditors!may!be!proved!in!any!other!manner!recognized!by!the!law!
expiration! of! their! co?partnership,! dissolved! relations! and! entered!
of!evidence.!!
into! liquidation.! Balbas,! liquidator,! entered! into! a! contract! with!
! Gonzales,! selling! all! properties! owned! by! the! company.! Among!
• Not!exclusive;!fraud!may!be!proved!in!any!other!manner! properties!sold!was!Steamship!Serantes,!which!was!under!litigation.!
recognized!by!the!law!of!evidence! Meanwhile,! judgment! rendered! in! favor! of! Gutierrez! in! the! actions!
• Rebuttal!by!evidence!that!conveyance!was!made:! for! recovery.! Balbas! claimed! that! there! were! no! funds! to! pay! the!
o In!good!faith! same.!Sheriff!levied!upon!Steamship!Serantes,!auctioned,!then!sold!
o For!a!good!and!valuable!consideration!or!sufficient! to! highest! bidder,! Gutierrez.! Gonzales! began! present! action! to!
cause! restore!Steamship!Serantes,!claiming!to!be!the!owner!of!the!same.!
• Presumption!not!applicable!in!the!absence!of!transfer! Gutierrez!averred!that!sale!was!fraudulent.!
• Effect!of!presumption!is!to!shift!the!burden!to!the!one! !
who!alienated!to!prove!that!the!transfer!was!not! Held:!Sale!was!fraudulent!and!prejudiced!Gutierrez.!Every!one!of!the!
fraudulently!made! badges!of!fraud!(all!7)!is!present!in!this!case.!Gonzales!was!the!son!
• Only!actual!creditors!can!ask!for!rescission!in!case!of!fraud! and!nephew!of!the!members!of!the!company.!Nothing!of!value!was!
• Effect!of!Fraud:!Does!not!necessarily!make!the!alienation! delivered!by!him!in!consideration!of!the!sale.!He!was!a!young!man,!
rescissible.!It!is!only!one!of!the!requisites!for!accion, 25! years! of! age,! who! was! merely! a! student! without! assets! and!
pauliana.!Can!be!overruled!by!a!transferee!in!good!faith! gainful! occupation.! He! was! also! fully! aware! of! the! suits! filed! by!
and!for!valuable!consideration!! Gutierrez!against!the!company.!The!sale!was!so!unusual,!so!devoid!
! of!care!and!caution,!and!so!wholly!outside!of!the!well?defined!lines!
Badges! of! Fraud! (indicia! of! fraud)! –! rules! by! which! fraudulent! of! ordinary! business! transactions.! Conveyance! was! a! trick! and!
character!of!transaction!may!be!determined! contrivance!to!defeat!creditors.!
1. Fictitious!or!insufficient!consideration! !
2. Conveyance! made! ! after! suit! has! begun! and! while! it! is! Side! note:! Sale! was! not! attacked! in! a! direct! action.! Creditor! has! a!
pending! right! to! make! the! levy! and! test! the! validity! of! the! sale! in! that! way,!
3. Sale!upon!credit!by!insolvent!debtor! without!first!resorting!to!a!direct!action!to!annul!the!sale.!
4. Evidence!of!insolvency!or!large!indebtedness! !
5. Transfer!of!all!or!nearly!all!of!debtor’s!property! SIGUAN!v.!LIM!
6. Transfer!is!between!father!and!son!when!some!of!above!is! Facts:! Lim! issued! two! checks! as! payment! for! her! debts! to! Siguan.!
present! Checks!were!dishonored.!Complaint!for!violation!of!BP!22!was!filed.!
7. Failure! of! vendee! to! take! exclusive! possession! of! the! Lim! convicted! Dec.! 1992.! On! July! 1991,! a! Deed! of! Donation! was!
property,!unless!such!failure!is!with!legal!basis!or!practical! purportedly! executed! by! Lim,! conveying! parcels! of! land! to! her!
reason! children.! Siguan! filed! an! accion, pauliana, and! claims! that! the! Deed!
! was!antedated,!executed!in!fraud!of!creditors.!
Additional!instances!(De!Leon)! !
8. At!the!time!of!the!conveyance,!vendee!was!living!with!the! Held:! Court! not! convinced! that! Deed! of! Donation,! a! public!
vendor! and! the! former! knew! that! there! was! a! judgment! document,! was! antedated.! Donation! was! made! prior! the! existence!
against!the!latter! of!Siguan’s!credit.!In!addition,!when!the!Deed!was!executed,!Lim!had!
9. It! was! known! to! the! vendee! that! the! vendor! had! no! properties! such! as! farming! lands,! a! house! and! lot,! residential! lots!
properties!other!than!that!sold!to!him! which! were! sufficient! to! cover! the! debts.! Moreover,! Contracts!
10. Certificate!of!title!covering!the!lands!sold!remained!in!the! entered!in!fraud!may!be!rescinded!only!when!the!creditors!cannot!in!
name! of! the! vendor! who! declared! them! for! taxation! any! manner! collect! the! claims! due! them.! Action! for! rescission! is! a!
purposes!and!paid!the!taxes,!a!duty!assumed!by!his!heirs! subsidiary! remedy! only.! The! petitioner! was! not! able! to! prove! that!
after!his!death! she! had! exhausted! other! legal! means! to! obtain! reparation! for! the!
11. Gross!disparity!between!consideration!and!real!value! same.!
Above,enumeration,not,exclusive.,, !
, !
, !
, !
!!!!
CHAPTER(7:(((
7. LIABILITY! FOR! ACQUIRING! IN! BAD! FAITH! THE! THINGS!
ALIENATED!IN!FRAUD!OF!CREDITORS!
!
Art.! 1388.! Whoever! acquires! in! bad! faith! the! things! alienated! in!
fraud!of!creditors,!shall!indemnify!the!latter!for!damages!suffered!by!
VOIDABLE(OR(
them! on! account! of! the! alienation,! whenever,! due! to! any! cause,! it!
should!be!impossible!for!him!to!return!them.!! ANNULLABLE(CONTRACTS(
If! there! are! two! or! more! alienations,! the! first! acquirer! shall! be!
liable!first,!and!so!on!successively.!
Voidable% or! annullable% contracts, are! those! which! possess! all! the!
!
essential! requisites! of! a! valid! contract! but! one! of! the! parties! is!
• Purchaser!in!bad!faith!must!return!the!same!if!the!sale!is!
legally!incapable!of!giving!consent,!or!consent!is!vitiated!by!mistake,!
rescinded;!if!return!is!impossible!due,to,any,cause,,with,or,
violence,!intimidation,!undue!influence,!or!fraud!
without,his,fault,!he!must!indemnify!the!former!
• Bad!faith!–!not!mere!bad!judgment!or!negligence;!imports!
a! dishonest! purpose! or! some! moral! obliquity! and! A. Kinds((
conscious!doing!of!wrong! !
• Mere! refusal! of! a! party! that! a! defect! exists! or! his! willful! Art.! 1390.! The! following! contracts! are! voidable! or! annullable,! even!
closing! of! his! eyes! to! the! possibility! of! the! existence! of! a! though!there!may!have!been!no!damage!to!the!contracting!parties:!
defect!in!his!title,!will!not!make!him!an!innocent!purchaser! !(1)!Those!where!one!of!the!parties!is!incapable!of!giving!consent!to!
for!value! a!contract!
• Subsequent!transfers! (2)! Those! where! the! consent! is! vitiated! by! mistake,! violence,!
o Creditor! can! have! an! action! against! subsequent! intimidation,!undue!influence!or!fraud!
transferees! only! when! an! action! lies! against! the! first! These! contracts! are! binding,! unless! they! are! annulled! by! a!
transferee! proper!action!in!court.!They!are!susceptible!of!ratification.!
! The!subsequent!transferee,!even!if!he!knows!the!
first! transfer! was! fraudulent,! can! no! longer! be!
!
held!liable!UNLESS!it!be!shown!that!he!connived! Kinds!of!Voidable/Annullable!Contracts!
with!the!debtor!to!make!the!first!transferee!as!a! Art!.1390!Although!no!damage!to!contracting!parties:!
1. Want!of!capacity!
mere!innocent!intermediary,!or!that!he!knows!of!
the! intention! of! the! transferor! to! defraud! 2. Vitiated!consent!
creditors!
o If! first! transferee! acted! in! bad! faith,! rescissible! B. Characteristics(
character! of! second! alienation! depends! upon! how! !
subsequent!transferee!acquired!the!thing! 1. THEIR!DEFECT!CONSISTS!IN!THE!VITIATION!OF!CONSENT!OF!
! Good! faith! –! transfer! cannot! be! rescinded;! first!
ONE!OF!THE!CONTRACTING!PARTIES!
transferee!liable!for!damages!
! Bad!faith!–!required!to!return!the!property;!first! 2. THEY!ARE!BINDING!UNTIL!THEY!ARE!ANNULLED!BY!A!
transferee!not!liable!for!damages!when!return!is! COMPETENT!COURT!
possible;! if! property! cannot! be! returned,! • They!are!existent,!valid!and!obligatory!unless!annulled!or!
transferees! shall! be! successively! liable! for! set!aside!by!a!proper,action,in!court!
damages! 3. THEY!ARE!SUSCEPTIBLE!OF!CONVALIDATION!BY!RATIFICATION!
- Same! rule! applies! where! subsequent! OR!BY!PRESCRIPTION!!
transferee,! although! acted! in! good! faith,! • Once!ratified,!they!become!absolutely!valid!and!can!no!
received!property!gratuitously! longer!be!annulled.!
!
! C. Annulment(
! !
! ANNULMENT[!is!a!remedy!as!well!as!a!sanction!provided!by!law,!for!
! reason! of! public! interest,! for! the! declaration! of! the! inefficacy! of! a!
contract! based! on! a! defect! or! vice! in! the! consent! of! one! of! the!
!
contracting!parties!in!order!to!restore!them!to!their!original!position!
! in!which!they!were!before!the!contract!was!executed.!
! !
! !
! !
!
! !
! !
! !
! !
!
!
!
!!!!
1. ANNULMENT!DISTINGUISHED!FROM!RESCISSION!! Requisites:!!
! a. Interest!in!the!contract!–!there!must!be!legal!capacity!by!being!
NULLITY!(Voidable)! RESCISSION!(Rescissible)! bound!to!the!contract!either!principally!or!subsidiarily!
Declares! inefficiency! which! Merely! produces! inefficiency,! b. Victim!and!not!the!party!responsible!for!the!defect!–!he!who!
contract! already! carries! in! itself! which! did! not! exist! essentially! in! comes!to!the!court!must!come!with!clean!hands!(so!not!
(intrinsic!defect)! the! contract! (external! defect! i.e.! applicable!to!the!successor!in!interest!of!one!who!has!
pecuniary! damages! or! prejudice! contracted!with!a!minor)!
to!one!of!the!contracting!parties! !
rd
or!3 !persons)! B. MAY%NOT:!!
Principal!action! Subsidiary!action! 1. Capable!parties!cannot!allege!the!incapacity!of!those!with!
Requires!act!of!ratification!to!be! Needs! no! ratification! to! be! whom!they!contracted!
2. Parties!who!exerted!intimidation,!violence!or!undue!
cured! effective!
influence!or!employed!fraud!or!caused!mistake!
Based! on! a! vice! of! the! contract! Compatible! with! the! perfect!
3. Third!person!who!is!a!stranger!to!the!contract.!UNLESS,he!
which!invalidates!it! validity!of!the!contract;!Based!on!
can!prove!that!the!contract!prejudiced!his!rights!with!
lesion!to!one!of!the!parties!or!to!
respect!to!one!of!the!contracting!parties,!he!may!ask!for!
a!third!person!
annulment!e.g.!guarantors!and!sureties!
Annulment! is! a! sanction! based! Rescission! is! a! remedy! based! on!
,
on!law! equity!!
Cases:!
Demanded! only! by! the! parties! Demanded! even! by! third! parties!
!
to!the!contract! affected!by!it!
SINGSONG!v.!ISABELA!SAWMILL!
Public!interest!predominates!! Private!interest!predominates!
Facts:! Garibay,! Saldejeno,! and!Tubungbanua! entered! into! a!
Allowed! even! if! already! Indemnification!bars!the!action! Contract!of!Partnership!under!the!firm!name!"Isabela!Sawmill".!Later!
indemnified! on,! Saldejan! wanted! to! dissolve! the! partnership,! but! instead,! they!
! assigned!their!rights!with!Chattel!Mortgage!in!favor!of!Saldejano.The!
2. GROUNDS!FOR!ANNULMENT!ART!1390! chattel! mortgage! was! later! foreclosed! and! ! their! properties! were!
1. Incapacity%to%consent% auctioned.! Saldejano! transferred! the! proceeds! to! Pan! Oriental!
• Not!a!requisite!sine,qua,non!of!the!contract;!want!is! Lumber!Company.!The!plaintiffs!in!this!case!are!the!creditors!of!the!
only!a!ground!for!annulment!! partnership.!
!
2. Vices%of%consent:%% Held:!!This!Court!has!held!that!a!person,!who!is!not!a!party!obliged!
• Violence,!intimidation,!undue!influence,!mistake!or! principally! or! subsidiarily! under! a! contract,! may! exercise! an! action!
fraud! for!nullity!of!the!contract!if!he!is!prejudiced!in!his!rights!with!respect!
! to! one! of! the! contracting! parties,! and! can! show! detriment! which!
Sir!Labitag’s!comparison!of!circumstances:! would!positively!result!to!him!from!the!contract!in!which!hehas!no!
CONSENT! of! ONE! party! is! VOIDABLE! intervention.!The!creditors!were!prejudiced!by!the!execution!of!the!
vitiated! chattel! mortgage! over! the! properties! of! the! partnership! in! favor! of!
BOTH!parties!are!incapable!of! UNENFORCEABLE! Saldajeno.! Hence,! they! have! a! right! to! file! an! action! to! nullify! the!
giving!constent! chattel!mortgage.!
One!party!is!guilty!of!FRAUD! VOIDABLE! !
BOTH! parties! are! guilty! of! VOID! PHILIPPINE!NATIONAL!BANK!v.!PHILIPPINE!VEGETABLE!OIL!CO.!
fraud!(in!pari!delicto)! Facts:!PVOC!was!in!debt!up!to!P30M,!with!PNB!as!its!largest!creditor!
! (for! P17M);! the! loans! to! PNB! were! secured! by! real! and! chattel!
! mortgage.! Bankruptcy! was! imminent,! and! a! creditors’! meeting! was!
3. WHO!MAY!AND!MAY!NOT!INSTITUTE!AN!ACTION!FOR% held,!where!a!receiver!was!appointed!by!the!CFI.!While!the!receiver!
ANNULMENT!ART!1397! was! in! control! of! PVOC,! an! agreement! was! made! where! creditors!
! transferred! to! GM! Whitaker! their! claims! against! PVOC,! which! PNB!
had!knowledge!of.!PNB!at!this!time!had!two!representatives!in!the!
Art.! 1397.! The! action! for! the! annulment! of! contracts! may! be!
Board! of! PVOC! to! have! a! closer! relationship! with! PVOC.! PNB! then!
instituted! by! all! who! are! thereby! obliged! principally! or! subsidiarily.!
obtained! a! new! mortgage! from! PVOC.! The! receivership! was! then!
However,! persons! who! are! capable! cannot! allege! the! incapacity! of!
terminated! and! the! PVOC! plant! was! closed.! PNB! filed! an! action! to!
those! with! whom! they! contracted;! nor! can! those! who! exerted!
foreclose! its! mortgage! (during! receivership)! on! PVOC’s! property,!
intimidation,! violence,! or! undue! influence,! or! employed! fraud,! or!
which!PVOC!countered.!
caused!mistake!base!their!action!upon!these!flaws!of!the!contract!
!
! Held:! PNB! could! not! secure! a! new! mortgage! while! the! property! of!
A. MAY:!All!who!are!obliged!principally!or!subsidiarily! PVOC! was! in! custodia, legis,! as! it! was! in! the! middle! of! bankruptcy!
! proceedings.! PVOC! at! this! time,! was! prohibited! from! giving! new!
Art.! 1395:! Action! does! not! require! conformity! of! the! other! mortgages! on! its! property.! The! receiver,! who! had! control! of! the!
party!who!has!no!right!to!bring!action!for!annulment!! company,!was!not!party!to!the!mortgage,!nor!was!it!given!authority!
!! by! the! Court! to! consent! to! the! execution! of! a! new! mortgage.! The!
! Court!would!want!to!protect!the!rights!of!all!creditors,!not!just!one!
! creditor! (PNB).! The! mortgage! was! also! accomplished! when! PVOC!
! was!being!influenced!by!PNB!(by!proxy)!while!it!was!negotiating!with!
! PNB!itself.!
!!!!
4. PRESCRIPTION!OF!ACTION!FOR!ANNULMENT!! Cases:!
! !
Art.! 1391.! The! action! for! annulment! shall! be! brought! within! four! CADWALTADER!&!CO!v.!SMITH,!BELL!&!CO!
years.!This!period!shall!begin:! Facts:! Cadwaller! &! Co.! as! assignees! of! the! Pacific! Export! Lumber!
! Company! (PELC)! asks! for! the! amount! of! $3,486! which! is! the! sum!
In!cases!of!intimidation,!violence!or!undue!influence,!from!the!time! differential! of! the! money! that! was! turned! over! to! them! and! the!
the!defect!of!the!consent!ceases.!! money!actually!received.!PELC!exported!cedar!piles!to!be!bought!by!
! Peabody! &! Company! for! the! amount! of! $12! a! piece! however! later!
In! case! of! mistake! or! fraud,! from! the! time! of! the! discovery! of! the! on! it! was! found! out! that! P&C! was! able! to! negotiate! with! the!
same! government!to!sell!the!piles!at!$20!a!piece,!and!that!213!out!of!581!
! piles! were! already! sold! to! the! Government! for! $19! each.! Others!
And! when! the! action! refers! to! contracts! entered! into! by! minors! or! were!sold!at!varying!price.!
other!incapacitated!persons,!from!the!time!the!guardianship!ceases.!! !
Held:! There! is! a! breach! of! duty.! The! contract! of! sale! is! founded! on!
!
fraud! and! is! subject! to! the! annulment! of! the! aggrieved! party! (CC!
Prescription! ?! after! lapse! of! period,! contract! can! no! longer! be! set!
Arts.1265!and!1269).!The!defendants!are!not!entitled!to!retain!their!
aside!
commission! realized! upon! the! piles! included! under! the! annulled!
• Extinctive! prescription! applies! not! only! to! action, for, contract.!However!this!is!only!for!those!that!are!subsequently!sold!at!
annulment,!but!also!to!the!defense,of,nullity, the! time! of! the! negotiation! with! the! Government! and! its! selling! at!
• Applies!to!the!parties!of!to!the!contract,!but!NOT!to!third! the!amount!of!$19!apiece.!
persons! !
! VELARDE!v.!CA!
Art.!1391!?!Within!4!years! Facts:!Raymundo!sold!a!parcel!of!land!to!Velarde!with!the!condition!
Period!shall!begin:!! of!assuming!the!mortgage!amounting!to!P1.8M.!Velarde!enacted!an!
1. Intimidation,!violence!or!undue!influence:!from!the!time! Undertaking,!stating!that!they!paid!R!Raymundo!800k,!and!that!they!
consensual!defect!ceases!! agree!to!pay!the!mortgage!obligations.!Assumption!of!mortgage!was!
2. Mistake!or!fraud:!from!the!time!of!discovery!of!the!same! not!approved!and!Valerde!stopped!paying!to!BPI.!
3. Incapacity:!from!the!time!guardianship,ceases! !
! Held:!!Court!held!that!Raymundo’s!act!of!rescinding!the!contract,!is!
5. EFFECTS!OF!ANNULMENT! justified,!but!ordered!the!restitution!to!Velarde!of!P874,150,!which!
! the! latter! paid! as! a! consequence! of! the! contract! until! it! was!
rescinded.! Pursuant! to! Art.! 1191,! rescission! now! creates! the!
Art.!1396.!Ratification!cleanses!the!contract!from!all!its!defects!from!
obligation! on! both! parties! to! return! to! each! other! the! objects! they!
the!moment!it!was!constituted.!
originally!had!prior!to!the!enactment!of!the!contract.!To!rescind!is!to!
• Cleanses!the!contract!from!all!its!defect!from!the!moment! declare!a!contract!void,!as!if!it!never!happened.!
it!was!constituted!(retroactive!effect),!but!does!not!
rd
prejudice!rights!of!3 !persons!acquire!before!the!
!
ratification!Art!1396! Art.!1402.!As!long!as!one!of!the!contracting!parties!does!not!restore!
! what!in!virtue!of!the!decree!of!annulment!he!is!bound!to!return,!the!
other!cannot!be!compelled!to!comply!with!what!is!incumbent!upon!
a. Mutual%Restitution%%
him.!!
!
!
Art.! 1398.! An! obligation! having! been! annulled,! the! contracting!
parties! shall! restore! to! each! other! the! things! which! have! been! the! • LOSS!THROUGH!PLAINTIFF’S!(party!entitled!to!bring!action)!
subject! matter! of! the! contract,! with! their! fruits,! and! the! price! with! FAULT!or!FRAUD:!Action!is!extinguished,!even!if!at!the!
its!interest,!except!in!cases!provided!by!law.! time!of!the!loss!the!plaintiff!is!still!a!minor!or!insane!(Art!
In! obligations! to! render! service,! the! value! thereof! shall! be! the! 1401)!
basis!for!damages.!! !
• Restore!to!each!other!things!which!have!been!the!subject! Art.! 1401.! The! action! for! annulment! of! contracts! shall! be!
matter! of! the! contract,! together! with! fruits! and! the! price! extinguished! when! the! thing! which! is! the! object! thereof! is! lost!
with!interest,!! through!the!fraud!or!fault!of!the!person!who!has!a!right!to!institute!
• EXCEPT,in!cases!provided!by!law!(principle!of!unjust! the!proceedings.!!
enrichment):!compensation,!services!rendered!in!contracts! If!the!right!of!action!is!based!upon!the!incapacity!of!any!one!of!the!
of!service! contracting!parties,!the!loss!of!the!thing!shall!not!be!an!obstacle!to!
• ELIMINATES,AWARD,FOR,DAMAGES.,But!when!there!is! the! success! of! the! action,! unless! said! loss! took! place! through! the!
loss!or!suffered!damages,!injured!party!may!be!entitled!to! fraud!or!fault!of!the!plaintiff.!
recover!indemnity!for!damages.!! !
! • LOSS! THROUGH! FORTUITOUS! EVENT,! BUT! PLAINTIFF!
! WILLING!TO!PAY:!Apply!Art!1400,!defendant!should!return!
! but!not!including!the!interest!because!loss!not!due!to!his!
! fault.!!!
! • LOSS! OF! FRUITS! AND! ACCESSIONS:! Apply! Art! 1400,! pay!
! value!if!cannot!return!(both!plaintiff!and!defendant)!
! !
!
!!!!
1. When%one%of%the%parties%is%incapacitated% D. Ratification(
Art!1399!not!obliged!to!make!any!restitution!EXCEPT!
1. REQUISITES!OF!RATIFICATION!
insofar! as! he! has! been! benefited! by! the! price/thing!
received! a. Contract%is%voidable/annullable%(i.e.%consent%of%
! one%party%is%defective)%
Art.!1399.!When!the!defect!of!the!contract!consists!in!the!incapacity! b. Ratification%is%made%with%the%knowledge%of%the%
of! one! of! the! parties,! the! incapacitated! person! is! not! obliged! to! cause%for%nullity%%
make!any!restitution!except!insofar!as!he!has!been!benefited!by!the! c. At%the%time%of%the%ratification,%the%cause%of%
thing!or!price!received!by!him.!! nullity%has%already%ceased%to%exist!
! !! !
• Benefit!not!necessarily!a!material!and!permanent!increase! 2. FORMS!OF!RATIFICATION!
in!fortune!
• Proof!of!benefit!incumbent!upon!the!defendant,!in!the!
a. Express%or%tacit:%execute!an!act!which!necessarily!
absence!of!such!proof,!the!presumption!is!there!is!no! implies!an!intention!to!waive!his!rights%
!
benefit/profit!to!the!incapacitated!person!
• If!still!in!the!patrimony!at!the!time!incapacity!ceases,! Art.! 1393.! Ratification! may! be! effected! expressly! or! tacitly.! It! is!
deemed!to!have!been!benefited.!If!he!asks!for!annulment,! understood!that!there!is!a!tacit!ratification!if,!with!knowledge!of!the!
he!must!return!it!to!the!other!party.!If!he!squanders,!it!is! reason!which!renders!the!contract!voidable!and!such!reason!having!
ratification.!! ceased,! the! person! who! has! a! right! to! invoke! it! should! execute! an!
! act!which!necessarily!implies!an!intention!to!waive!his!right.!!
2. When%the%thing%is%lost%through%the%fault%of% !
• EXPRESS:! any! oral! or! written! manifestation! of! the! person!
the%party%obliged%to%return%the%same%(i.e.%
entitled!to!ask!for!annulment!that!he!agrees!to!be!bound!
defendant)% by!the!contract!or!that!he!will!not!seek!its!annulment!!
! • IMPLIED:!!
Art.!1400.!Whenever!the!person!obliged!by!the!decree!of!annulment! o Silence!or!acquiescence!
to! return! the! thing! can! not! do! so! because! it! has! been! lost! through! o Acts!showing!approval!or!adoption!of!the!contract!!
his!fault,!he!shall!return!the!fruits!received!and!the!value!of!the!thing! o Acceptance! and! retention! of! benefits! flowing!
at!the!time!of!the!loss,!with!interest!from!the!same!date.!! therefrom!
! !
• Return! the! fruits! received! AND! the! value! of! thing! at! the! b. By%the%parties%themselves%or%by%the%guardian%in!
time!of!loss,!with!interest!from!same!date! behalf%of%an%incapacitated%party%%
• LOSS!THROUGH!FORTUITOUS!EVENT:!pay!the!value!of!the! !
thing!lost!but!not!fruits!and!interests!
Art.! 1394.! Ratification! may! be! effected! by! the! guardian! of! the!
!
incapacitated!person.!!
6. EXTINGUISHMENT!OF!THE!ACTION!!
• During!the!existence!of!incapacity!
a. By%ratification%% • Right!to!ratify!is!transmitted!to!the!heirs!of!the!party!
• Confirmation/ratification:!cures!a!defect!of!nullity! entitled!to!such!right.!
• Acknowledgment:!remedies!deficiency!of!proof!! !
b. When%the%thing%is%lost%through%the%fault%of%the% 3. EFFECTS!OF!RATIFICATION!
person%who%has%the%right%to%file%the%action%% a. Action%to%annul%is%extinguished%
• LOSS!NOT!THROUGH!THE!FAULT,!e.g.!fortuitous! !
event:!not!extinguished!because!extinguishment!
Art.! 1392.! Ratification! extinguishes! the! action! to! annul! a! voidable!
limited!only!to!the!loss!by!fault!of!plaintiff.!Unjust!
contract.!
enrichment!if!the!loss!is!returned!for!the!defendant!
to!bear.!Hence,!the!defendant!cannot!be!obliged!to! !
make!restitution!to!the!plaintiff!because!of!Art!1402! Case:!
(cannot!compelled!to!return!if!the!other!party!does! !
not!return)! UY!SOO!LIM!v.!TAN!UNCHUAN!
• Cannot!extinguish!action!for!annulment!by!any!event! Facts:!legitimate!children,!and!first!and!second!wife!are!questioning!
not!imputable!to!the!fault!or!fraud!of!the!plaintiff!! the!fairness!and!legality!of!the!lion’s!share!received!Uy!Soo!Lim,!the!
! illegitimate!child!of!the!deceased.!After!all!the!drama,!an!agreement!
! was! reached! stipulating! that! Lim! will! accept! P82,500! in! full!
! satisfaction! and! relinquishment! of! all! his! right,! title,! and! interest! in!
! and! to! the! estate! of! the! deceased.! Lim,!three! (3)! years!
! after!attaining!the!age!of!majority,!commenced!this!action!to!annul!
! the!contract.!
! !
! Held:! Only! choose! one:! ratify! or! annul.! Plaintiff! tacitly! ratified! the!
contract! he! wished! to! annul! on! the! grounds! of! his! minority! upon!
entering! into! said! contract.! Such! ratification! was! evidenced! by! his!
disposing! of! the! greater! part! of! the! consideration! he! received! on!
!!!!
account!of!that!contract!after!he!came!of!age.!His!action!to!rescind!
and!annul!the!contract!cannot!prosper.!
!
CHAPTER(8:((
b. The%contract%is%cleansed%retroactively%from%all%
its!defects%from%the%time%it%was%constituted%%
UNENFORCEABLE(
CONTRACTS(
rd
• EXCEPTION:!Right!of!3 !persons!prior!to!ratification!
!
!
! Unenforceable! contracts! are! those! which! cannot! be! enforced! by! a!
! proper!action!in!court,!unless!they!are!ratified,!because,!either!they!
! are! entered! into! without! or! in! excess! of! authority! or! they! do! not!
! comply!with!the!statute!of!frauds!or!both!of!the!contracting!parties!
do!not!possess!the!required!legal!capacity.1!As!regards!the!degree!of!
!
defectiveness,! they! occupy! an! intermediate! ground! between!
! voidable!and!void!contracts.!(Jurado)!
!
! A. Characteristics(
! 1. THEY!CANNOT!BE!ENFORCED!BY!A!PROPER!ACTION!IN!COURT!
! 2. THEY!ARE!SUSCEPTIBLE!OF!RATIFICATION!
! 3. THEY!CANNOT!BE!ASSAILED!BY!THIRD!PERSONS!(ART.!1408)!
! !
Unenforceable!distinguished!from!Rescissible!and!Annullable!
!
UNENFORCEABLE! RESCISSIBLE!AND!ANNULLABLE!
! Produces! NO! legal! effect! unless! Produces!legal!effects!unless!set,
! ratified!by!competent!court! aside!by!competent!court!
!
! B. Kinds(
! !
! Art.! 1403.! The! following! contracts! are! unenforceable,! unless! they!
! are!ratified:!!
! (1)! Those! entered! into! in! the! name! of! another! person! by! one! who!
! has! been! given! no! authority! or! legal! representation,! or! who! has!
acted!beyond!his!powers;!!
! (2)!Those!that!do!not!comply!with!the!Statute!of!Frauds!as!set!forth!
! in!this!number.!In!the!following!cases!an!agreement!hereafter!made!
! shall!be!unenforceable!by!action,!unless!the!same,!or!some!note!or!
! memorandum,! thereof,! be! in! writing,! and! subscribed! by! the! party!
charged,! or! by! his! agent;! evidence,! therefore,! of! the! agreement!
!
cannot!be!received!without!the!writing,!or!a!secondary!evidence!of!
! its!contents:!
! (a)!An!agreement!that!by!its!terms!is!not!to!be!performed!within!
! a!year!from!the!making!thereof;!!
! (b)! A! special! promise! to! answer! for! the! debt,! default,! or!
miscarriage!of!another;!!
! (c)!An!agreement!made!in!consideration!of!marriage,!other!than!
! a!mutual!promise!to!marry;!!
! (d)! An! agreement! for! the! sale! of! goods,! chattels! or! things! in!
! action,! at! a! price! not! less! than! five! hundred! pesos,! unless! the!
buyer!accept!and!receive!part!of!such!goods!and!chattels,!or!the!
!
evidences,! or! some! of! them,! of! such! things! in! action! or! pay! at!
! the! time! some! part! of! the! purchase! money;! but! when! a! sale! is!
! made!by!auction!and!entry!is!made!by!the!auctioneer!in!his!sales!
! book,!at!the!time!of!the!sale,!of!the!amount!and!kind!of!property!
! sold,!terms!of!sale,!price,!names!of!the!purchasers!and!person!on!
whose!account!the!sale!is!made,!it!is!a!sufficient!memorandum;!!
! (e)! An! agreement! of! the! leasing! for! a! longer! period! than! one!
! year,!or!for!the!sale!of!real!property!or!of!an!interest!therein;!!
! (f)!A!representation!as!to!the!credit!of!a!third!person.!
! (3)! Those! where! both! parties! are! incapable! of! giving! consent! to! a!
contract.!
!!!!
! • APPLICABLE! TO:! Executory! and! not! to! complete! or!
Kinds!of!Unenforceable!Contracts! executed! contracts! because! the! intention! of! the! parties!
1. Entered!into!in!the!name!of!another!person!by!one!who!has!no! become! apparent! by! their! execution.! However,! partial!
authority! or! no! legal! representation! OR! acted! beyond! his! performance!must!also!be!proven.!
powers! • Exclusive!list!of!agreements/contracts!enumerated;!Rule!of!
2. Do! not! comply! with! Statute! of! Frauds,! which! are! agreements! exclusion!!
unenforceable! unless! in! written! memorandum! and! subscribed! • A! personal! defense! (hence! cannot! be! raised! by! 3rd!
by!the!party!charged! persons)!and!the!same!may!be!waived!
a. Agreement! not! to! be! performed! within! 1! year! from! the! • Does!not!determine!credibility!or!weight!of!the!evidence,!
making! merely!concerned!with!the!admissibility!thereof!
b. Special! promise! to! answer! for! the! debt,! default! or! !
miscarriage!of!another! Art.! 1403,! par.! 2.! Those! that! do! not! comply! with! the! Statute! of!
c. Agreement!made!in!consideration!of!marriage!other!than! Frauds! as! set! forth! in! this! number.! In! the! following! cases! an!
“mutual”!promise!to!marry! agreement!hereafter!made!shall!be!unenforceable!by!action,!unless!
d. Sale! of! goods,! chattels! or! things! in! action,! priced! not! less! the!same,!or!some!note!or!memorandum,!thereof,!be!in!writing,!and!
than!P500! subscribed! by! the! party! charged,! or! by! his! agent;! evidence,!
e. Leasing! for! period! longer! than! one! year! OR! sale! of! real! therefore,!of!the!agreement!cannot!be!received!without!the!writing,!
property!or!of!an!interest!therein! or!a!secondary!evidence!of!its!contents!
f. Representation!to!the!credit!of!a!3rd!person!!
%
3. Both!parties!are!incapable!of!giving!consent!to!contract!
THE%STATUTE%OF%FRAUDS%
Note:!For!letter!a!and!e,!the!date!of!entering!into!the!contract!is!the!
a. An! agreement! that! by! its! terms! is! not! to! be! performed!
reckoning!period!
within!a!year!from!the!making!thereof;!
! • In! order! for! the! provision! to! be! applicable,! it! must!
1. UNAUTHORIZED!CONTRACTS! appear! that! the! parties! intended! the! contract! not! to!
! be!performed!within!a!year;!that!a!contract!cannot!be!
Art.!1403,!par.!1.!Those!entered!into!in!the!name!of!another!person! performed! within! a! year! means! an! impossibility! by!
by!one!who!has!been!given!no!authority!or!legal!representation,!or! the!terms!of!the!contract!itself!or!the!understanding!
who!has!acted!beyond!his!powers;! and!intention!of!the!parties!
! • If!no!time!is!fixed!and!nothing!to!show!that!it!cannot!
be! performed! within! a! year,! then! not! within! SoF;!
GOVERNING%RULES%
Partial!performance!also!takes!it!out!of!SOF!
!
!
Art.!1404.!Unauthorized!contracts!are!governed!by!Article!1317!and!
b. A! special! promise! to! answer! for! the! debt,! default! or!
the!principles!of!agency!in!Title!X!of!this!Book.!
miscarriage!of!another;!
! • Default!or!Miscarriage!include!liability!for!tort!and!are!
• Governed!by!Art.!1317!(no!one!may!contract!in!the!name! not! to! be! restricted! to! defaults! and! miscarriages!
of!the!other!without!being!authorized,!or!unless!he!has!by! arising! out! of! contracts;! Must! be! collateral! only! and!
law! a! right! to! represent! him;! representation! without! not!primarily!liable!for!the!debt!!
authority! or! legal! representation! makes! the! contract! • In! a! guaranty,! the! promise! is! merely! subsidiary! or!
unenforceable);!and! collateral! to! the! promise! of! the! original! or! principal!
• Principles! of! Agency! in! Title! X! of! this! Book! (see! also! Art.! debtor;!if!it!is!an!original!or!independent!one!and!the!
1868,!1869,!1881,!1882,!1883,!1900!and!1901)! promisor!becomes!primarily!liable,!the!promise!is!not!
• Does! not! have! a! binding! effect! on! the! principal,! UNLESS! within! the! Statute! and! may! be! proved! by! oral!
principal!ratifies,it,!which!cures!the!unauthorized!contract! evidence!
• Agent!who!binds!his!principal!without!authority!to!do!so!is! • Miscarriage!(as!used!in!the!Statute!of!Frauds):!has!a!
rd
liable!to!3 !persons! different! or! broader! meaning! than! either! “debt”! or!
! “default,”!and!includes!the!failure!by!a!third!party!to!
2. CONTRACTS!COVERED!BY!THE!STATUTE!OF!FRAUDS! succeed!in!a!proposed!business,!regardless!of!the!fact!
! whether!its!failure!to!do!so!would!entitle!the!plaintiff!
Statute! of! Frauds:! Descriptive! of! statutes! which! requires! to!an!action!at!law!or!not!
certain! classes! of! contracts! to! be! in! writing.! Merely! regulates! o Compared! to! “debt”! or! “default,”! an! actionable!
the! formalities! of! the! contract! necessary! to! render! it! duty! is! not! a! requirement! because! the! reason!
enforceable! does!not!exist!in!a!miscarriage!–!the!act!of!a!third!
• Does! not! deprive! parties! of! the! right! to! contract,! but! party!
merely! regulates! the! formalities! to! make! it! enforceable! –! !
effect:!no!action!can!be!proved!unless!the!requirement!is! c. An! agreement! made! in! consideration! of! marriage! other!
complied!with! than!a!mutual!promise!to!marry;!
• NOT! APPLICABLE! TO:! (1)! Action! for! specific! performance,! • When! the! marriage! is! a! mere! incident,! and! not! the!
(2)!Violation!of!the!contract! end! to! be! attained,! it! is! not! deemed! to! be! the!
! consideration!
! • Where!there!is!some!other!consideration!sufficient!to!
support! the! oral! agreement,! in! addition! to! marriage,!
!!!!
the! agreement! is! not! covered! by! the! SoF! and! may! • Does! not! attempt! to! make! contracts! invalid! if! not!
adduce!oral!evidence!as!proof! executed!in!writing,!only!makes!ineffective!the!action!
• Law!states!no!period!of!performance;!an!oral!mutual! for!specific!performance!
promise! to! marry! may! be! proved! by! parol! evidence! • Principal! aims:! (1)! prevent! commission! of! injustice!
although! the! marriage! is! to! be! celebrated! beyond! 1! due! to! faulty! memory,! (2)! discouraging! intentional!
year! misrepresentations!
• Not! limited! to! marrying! parties! but! also! to! promises! • History:! (1677)! English! Parliament! enacted! a! statute!
by!a!third!person!to!one!of!the!parties!contemplating! to! counter! the! evil! practice! of! giving! false! testimony!
the!marriage! in!actions!founded!on!certain!kinds!of!contracts!→!to!
• Examples! covered:! Marriage! settlements! (ante? deal! with! the! prevalence! of! successful! perjury! by!
nuptial!contracts)!or!agreements!entered!into!by!the! making! specified! contracts! unenforceable! unless!
future!spouses!before!the!celebration!for!the!purpose! written! in! a! prescribed! manner! (in! general,! by! a!
of! fixing! the! property! relations! (Art.! 74?76! FC);! written! memorandum! signed! by! the! third! party!
donations! propter! nuptias! (donations! by! reason! of! against!whom!liability!under!the!contract!was!sought!
marriage)!are!donations!made!before!the!celebration,! to!be!enforced)!and!since!then,!it!was!called!“Statute!
in! consideration! of! the! same! and! in! favor! of! one! or! of!Frauds”!
both!spouses!(Art.!82!FC)! • In! the! Philippines:! Originally! taken! from! the! Code! of!
! Civil! Procedure! of! the! State! of! California! and! was!
d. An!agreement!for!the!sale!of!goods,!chattels!or!things!in! introduced! by! Sec.! 335! of! Act! No.! 190! (Code! of! Civil!
action,!at!a!price!not!less!than!five!hundred!pesos;! Procedure)!and!subsequently!embodied!in!toto!in!the!
• Unless!buyer!accepts!and!receives!part!of!such!goods! old! Rules! of! Court! under! Evidence! as! Sec.! 21,! Rule!
and!chattels!or!the!evidences!or!some!of!them!or!pay! 123.!Now,!it!is!embodied!with!slight!modifications!in!
at!the!time!some!part!of!the!purchase!money.!! Art.! 1403(2)! of! the! NCC! under! “Unenforceable!
• EXCEPTION:! sale! is! by! auction! and! entry! is! made! by! Contracts”!
auctioneer! in! his! sales! book! (because! it! constitutes! • Application:!!
sufficient!memorandum)! o Presupposes! the! existence! of! a! perfected!
• Things! in! action:! commonly! termed! a! “chose! in! contract! and! requires! only! a! note! or!
action”! and! is! a! personal! right! to! demand! money! or! memorandum!to!be!executed!in!order!to!compel!
property!by!action! judicial!enforcement!
o Right! to! recover! money! or! other! personal! o Refers! to! specific! kinds! of! transactions! and!
property!by!a!judicial!proceeding! cannot!apply!to!any!other!transaction!that!is!not!
o A!term!in!contradistinction!to!a!chose!or!thing!in! enumerated! therein;! not! applicable! in! actions!
possession,!and!is!applicable!to!cases!where!the! which! are! neither! for! damages! because! of! a!
title! to! the! money! or! property! is! in! one! person! violation! of! a! contract! nor! for! the! specific!
and! the! possession! is! in! another,! which! by! performance!thereof!
contract! he! is! bound! to! deliver! to! the! owner! o Applicable!only!to!executor!contracts!(where!no!
(Ayres,v,Western,R.,Corp)! performance! has! as! yet! been! made! by! both!
o Distinguished! from! a! thing! of! which! owner! has! parties)! and! not! to! contracts! which! are! totally!
actual! or! constructive! possession! but! for! which! (consummated)!or!partially!performed!
action!may!be!brought!to!reduce!it!to!possession! ! Partial! performance! (like! writing)! furnishes!
(Heavy,Lumber,Co.,v,Mutchison)! reliable! evidence! of! the! intention! of! the!
! parties!or!the!existence!of!the!contract!
e. An!agreement!of!the!leasing!for!a!longer!period!than!one! o Not! applicable! where! the! contract! is! admitted,!
year,! or! for! the! sale! of! real! property! or! of! an! interest! by! failure! to! deny! specifically! its! existence! –! no!
therein;! further!evidence!required!
• Must!be!in!writing!to!be!enforceable! o Not! applicable! where! the! writing! does! not!
• Alleged! verbal! assurance! of! a! renewal! of! lease! is! express! the! true! agreement! of! the! parties!
inadmissible! to! qualify! the! terms! of! a! written! lease! because! the! Statute! cannot! be! used! as! a! shield!
agreement!→!unenforceable!under!SoF! for!fraud!or!means!for!perpetrating!it!
! o Does! not! declare! that! contracts! infringing! it! are!
f. Representation!to!the!credit!of!a!3rd!person.! void!and!of!no!effect,!but!merely!unenforceable!
! (Art.!1403!no.!2);!form!is!required!for!evidential!
a. Purpose%of%Statute% purposes!only!(Art.!1405)!
• To!prevent!(and!not!to!encourage)!fraud!and!perjury! o Does! not! determine! the! credibility! or! weight! of!
in!the!enforcement!of!obligations!depending!for!their! evidence! but! merely! regulates! the! admissibility!
evidence! on! the! unassisted! memory! of! witness! but! thereof!
o Defense! of! the! Statute! of! Frauds! is! subject! to!
also!to!guard!against!the!mistakes!of!honest!men!by!
requiring! that! certain! agreements! specified! must! be! waiver!(Art.!1405)!
in! writing! signed! by! the! party! to! be! charged;! o Defense! of! the! Statute! of! Frauds! is! personal! to!
otherwise,!they!are!unenforceable!by!action!in!court! the! parties! and! cannot! be! interposed! by!
strangers!to!the!contract!(Art.!1408)!
• Provides! for! the! manner! which! contracts! under! it!
!
shall!be!proved!
!
!
!!!!
Modes!of!satisfaction!of!the!Statute:! 4. Admissibility,and,evidential,weight,of,electronic,data,messages,
1. The!giving!of!a!note!or!memorandum;! or,electronic,documents!–!nothing!in!the!rules!of!evidence!shall!
2. Acceptance!and!receipt!of!part!of!the!goods!(or!things!in!action)! deny!the!admissibility!of!an!electronic!data!message:!
sold;!and! a. On!the!sole!ground!that!it!is!electronic!in!form!
3. Payment!at!the!time!of!some!part!of!the!purchase!price! b. On!the!ground!that!it!is!not!in!the!standard!written!form!
! 5. Recognition,by,parties,of,electronic,data,message,or,electronic,
Written! Memorandum! or! Note:! Evidence! of! the! agreement! and! is! document!–!a!declaration!of!will!or!other!statement!shall!not!be!
used!to!show!the!intention!of!the!parties! denied! legal! effect,! validity! or! enforceability! solely! on! the!
! ground!that!it!is!in!the!form!of!an!electronic!data!message!
Minimum!requirement!for!written!memorandum:! !
1. Names!of!the!parties! Cases:!
2. Terms!and!conditions!of!the!agreement! !
3. Description!of!the!subject!matter!sufficient!to!render!it!capable! PHILIPPINE!NATIONAL!BANK!v.!PHILIPPINE!VEGETABLE!OIL!CO.!
of!identification! Facts:!PVOC!was!in!debt!up!to!P30M,!with!PNB!as!its!largest!creditor!
4. Date!and!place!of!the!making!of!the!agreement!(Par.!2,!a!and!e)! (for! P17M);! the! loans! to! PNB! were! secured! by! real! and! chattel!
5. Signature!of!the!party!assuming!the!obligation! mortgage.! Bankruptcy! was! imminent,! and! Whitaker! is! alleging! that!
Note:!In!short,!just!the!essential!requisites!of!a!contract!+!signature! the!PNB!made!a!contract!binding!it!(during!period!of!receivership)!to!
! provide! the! necessary! operating! capital! to! PVOC! in! order! for! it! to!
Sufficiency!of!a!Note!or!Memorandum:! continue! operating! its! factory,! and! that! PNB! failed! to! comply! with!
1. No! particular! form! of! language! or! instrument! is! necessary! to! such! a! contract.! He! wants! to! enter! oral! evidence! to! support! the!
constitute!a!note!or!memorandum!–!any!document!or!writing,! existence! of! such! a! contract,! PNB’s! refusal! to! perform,! being! the!
formal! or! informal,! which! states! all! the! essential! elements! of! ground! for! his! right! to! damages.! (Note:! see! Chapter! VII:! Voidable!
the!contract!with!reasonable!certainty,!and!which!is!signed!by! Contracts!for!other!facts)!
the!party!to!be!charged!or!his!lawfully!authorized!agent! !
2. It! need! not! state! the! consideration! for! the! contract! since! the! Held:! The! broad! view! is! that! the! Statute! of! Frauds! applies! only! to!
existence!of!this!element!is!presumed!unless!the!debtor!proves! agreements! not! to! be! performed! on! either! side! within! a! year! from!
the!contrary!(Art.!1354)! the!making;!if!they!are!to!be!performed!on!one!side!within!a!year,!
3. When! a! sale! is! made! by! auction,! the! entry! made! by! the! the! SoF! does! not! apply.! The! Statute! of! Frauds! was! enacted! for! the!
auctioneer!is!a!sufficient!memorandum!even!if!not!signed! purpose! of! preventing! frauds;! it! should! not! be! an! instrument! to!
4. The! note! or! memorandum! required! need! not! be! contained! a! further! them.! Whitaker’s! theory! is! that! he! entirely! performed! his!
single!document,!nor,!when!contained!in!two!or!more!papers,! part!of!the!agreement!(contract!with!PNB),!and!equity!would!argue!
need!each!paper!to!be!sufficient!as!to!contents!and!signature!to! that!evidence!be!admitted!to!prove!the!agreement.!However,!based!
satisfy! the! Statute! –! two! or! more! writings! properly! connected! on! the! minutes! of! the! Board! of! Directors! (PNB),! the! GM! is!
may! be! considered! together! and! their! sufficiency! will! depend! authorized! to! finance! the! operation! of! the! PVOC! under! the!
on!whether!taken!together,!they!meet!the!requirements!of!the! receivership!to!the!extent!of!P500K,!secured!by!Whitaker,!which!said!
Statute! GM! is! to! report! to! the! Board! to! secure! their! approval.! No! contract!
! entered! into! by! the! GM! would! be! valid! without! the! advice! and!
Enforceability! of! electronic! transactions! (RA! 8792,! “Electronic! consent! of! the! Board.! What! the! Board! approved! was! to! finance! it!
Commerce!Act!of!2000”)! under!receivership!to!the!extent!of!P500K.!There!is!no!evidence!that!
o Legal,recognition,of,electronic,data,message!–!information!shall! the! Board! consented! to! an! unlimited! backing! of! the! PVOC.! Even! if!
not! be! denied! validity! or! enforceability! solely! on! the! ground! the! Court! gave! the! oral! testimonies! (Gibbs! and! Whitaker)! the!
that!it!is!in!the!form!of!an!electronic!data!message!(Sec.!6)! broadest! effect,! there! is! still! no! definite! agreement! binding! the!
o Legal, recognition, of, electronic, documents! –! electronic! bank.! There! being! no! valid! contract,! Whitaker! cannot! recover! from!
documents!shall!have!the!legal!effect,!validity!or!enforceability! the!Bank,!no!matter!how!selfless!his!efforts!were!to!save!PVOC;!he!
as! any! other! document! or! legal! writing! (Sec.! 7,! see! also! Art.! cannot! use! the! SoF! as! an! instrument! to! further! the! fraud! (alleging!
1358)! the!existence!of!said!contract).!
o Legal,recognition,of,electronic,signatures!–!electronic!signature! !
shall! be! equivalent! to! the! signature! of! a! person! on! a! written! LIMKETKAI!SONS!MILLING!INC.!v.!CA!
document!if!the!signature!is!electronic!and!proved!by!showing! Facts:!BPI!was!entrusted!by!PRCI!as!to!manage,!administer,!and!sell!
that! a! prescribed! procedure,! not! alterable! by! the! parties! its!real!estate!property!(Barrio!Bagong!Ilog,!Pasig).!Revilla!Jr.,!a!real!
interested,!existed!under!which:! estate!broker!was!authorized!to!sell!the!lot!for!P1K/sq.m,!concurred!
a. A!method!is!used!to!identify!the!party!sought!to!be!bound! in!by!PRCI.!Revilla!contacted!Alfonso!Lim!(of!Limketkai),!who!agreed!
and! to! indicate! said! party’s! access! to! the! electronic! to!buy!the!land!after!viewing!said!property.!Revilla!told!BPI!that!he!
document!necessary!for!his!consent! had!found!a!buyer.!Negotiations!between!Lim!and!BPI!officials!were!
b. Said! method! is! reliable! and! appropriate! for! the! purpose! made,! agreed! lot! would! be! sold! at! P1K/sq.m.! Lim! asked! if! it! was!
for! which! the! electronic! document! was! generated! or! possible! to! pay! on! terms! (initial! of! 10%! then! 90%! within! 90! days),!
communicated! and!if!it!is!disapproved,!price!will!be!paid!in!cash.!Later,!Lim!learned!
c. It! is! necessary! for! the! party! sought! to! be! bound! to! have! that! offer! to! pay! on! terms! was! frozen,! so! he! went! to! BPI! and! paid!
executed!or!provided!the!electronic!signature! the!full!amount!of!P33M.!Payment!was!refused!and!Limketkai!filed!
d. The! other! party! is! authorized! and! enabled! to! verify! the! an! action! for! specific! performance! and! damages,! and! BPI! issued! a!
electronic!signature!and!proceed!with!the!transaction!(Sec.! deed!of!sale!to!NBS.!!
8)! !
Held:! The! contract! between! Limketkai! and! BPI! was! perfected! upon!
the! concurrence! of! the! essential! elements! (agreement! of! the! price!
!!!!
to! be! P1K/sq.m).! Cross?examination! on! the! contract! made! initially! b. How%ratified%
inadmissible! parol! evidence! competent! and! admissible;! and! cross? %
examination! is! deemed! a! waiver! of! the! defense! of! the! SoF.! Under!
Art!1403!of!the!CC,!an!exception!to!the!unenforceability!of!contracts! Art.! 1405.! Contracts! infringing! the! Statute! of! Frauds,! referred! to! in!
No.! 2! of! Article! 1403,! are! ratified! by! the! failure! to! object! to! the!
pursuant!to!the!Statute!of!Frauds!is!the!existence!of!a!written!note!
presentation! of! oral! evidence! to! prove! the! same,! or! by! the!
or!memorandum!evidencing!a!contract.!The!memo!may!be!found!in!
acceptance!of!benefit!under!them.!
several!writings,!not!necessarily!in!one!document.!The!memo!is/are!
written!evidence!that!such!a!contract!was!entered!into.!While!there! !
is! no! contract! of! sale,! there! are! abundant! notes! and! memoranda! How!to!ratify!contracts!under!the!Statute!of!Frauds:!
evidencing!elements!of!a!perfected!contract.! 1. Failure!to!object!to!the!presentation!of!oral/parole!evidence!to!
! prove! the! same! –! failure! amounts! to! a! waiver! and! makes! the!
SWEDISH!MATCH!v.!CA! contract!binding!as!if!it!had!been!reduced!to!writing!
Facts:!Swedish!Match,!AB!(SMAB)!owns!3!subsidiary!corporations!in! 2. Acceptance! of! benefits! under! them! →! SoF! cannot! be! invoked!
the! Philippines:! Phimco,! PTFI! and! OTT/Louie,! Inc.! STORA,! parent! when!the!contract!has!been!partly!executed!
company! of! SMAB! decided! to! sell! the! latter,! and! Enriquez! (VP! of! !
management!company!of!SM!group)!was!commissioned!and!granted! Case:!
full! powers! to! negotiate! the! sale! of! Phimco! shares.! One! of! the! !
interested!parties!was!ALS!Management!(president!and!GM!Antonio! CARBONNEL!V!PONCIO!
Litonjua).! Litonjua! offered! to! buy! all! SMAB! shares! in! the! 3! Facts:!Carbonnel!alleges!that!she!purchased!from!Poncio!a!parcel!of!
companies! for! P750M.! SMAB! said! price! too! low! and! told! them! to! land! at! P9.50/sq.m! (San! Juan! del! Monte,! Rizal),! excluding! the!
undertake! a! comprehensive! review! and! analysis! of! the! value! and! improvements.! She! paid! P247.26! and! assumed! Poncio’s! obligation!
profit! potentials! of! the! shares,! with! the! assurance! that! they! would! with! RSB,! understanding! that! the! balance! would! be! payable! upon!
enjoy!priority,!then!an!exchange!of!correspondence!ensued.!Litonjua! execution! of! deed! of! conveyance,! and! that! one! of! the! conditions!
offered! to! buy! again! ($36M)! subject! availability! of! additional! was! Poncio! would! remain! in! occupancy! for! one! year.! Poncio!
information!and!audit!verification.!Rossi!sent!a!letter*!and!said!that! allegedly! refused! to! execute! the! deed! of! sale,! and! he! has! allegedly!
ALS!should!submit!its!final!offer!not!latter!than!June!30.!Litonjua!said! conveyed! the! property! to! the! Infantes.! Carbonnel! wants! to! be!
it!can’t!give!a!final!offer!before!June!30,!but!can!by!July!17.!Enriquez! declared! the! owner,! but! defendants! countered,! saying! her! claim! is!
said!they!would!have!to!entertain!other!bidders!for!Litonjua’s!failure! unenforceable!under!the!SoF!because!there!was!no!evidence!of!sale.!
to!make!a!firm!commitment;!later,!agreed!with!a!local!group,!but!if! !
local! group! fails! to! comply,! open! again! to! negotiate! with! ALS.! Held:! The! SoF! is! applicable! only! to! executory! contracts,! not! to!
Agreement!with!local!group!failed,!Litonjua!invited!to!bid!again,!with! contracts!that!are!totally!or!partially!performed.!Partial!performance!
new! conditions,! but! Litonjua! said! no,! he! wants! the! old! setup! takes! such! contract! from! the! operation! of! the! SoF.! However,! if! a!
because!they!already!had!a!perfected!contract.! contract! has! been! totally! or! partially! performed,! the! exclusion, of,
! parol,evidence,would,promote,fraud,or,bad,faith,!for!it!would!enable!
Held:!The!SoF!does!not!deprive!parties!of!the!right!to!contract,!but! the!defendants!to!keep!the!benefits!already!derived!by!him!from!the!
merely!regulates!the!formalities!of!the!contract.!Non?compliance! transaction!in!litigation,!and!at!the!same!time,!evade!the!obligations,!
means!the!contract!is!unenforceable!until!the!requirement!is! responsibilities! or! liabilities.! It! is! not! enough! for! a! party! to! allege!
complied!with.!The!purpose!of!the!statute!is!to!prevent!fraud,!so!it! partial! performance! to! declare! SoF! inapplicable,! but! neither! is! he!
requires!certain!transactions!to!be!evidenced!by!a!written!note!or! required!to!establish!it!by!documentary!proof!before!oral!testimony.!
memorandum.!Said!note!or!memorandum!must!be!complete!in! The! rejection! of! any! and! all! testimonial! evidence! on! partial!
itself,!and!cannot!be!partly!in!writing!and!partly!in!parol!evidence.!It! performance! would! nullify! the! rule! that! the! SoF! is! inapplicable! to!
must!contain!the!essential!requisites!of!a!contract.!The!exchange!of! contracts!which!have!been!partly!executed!and!lead!to!the!very!evils!
correspondence!between!the!two!parties!(negotiation)!hardly! that! the! statute! seeks! to! prevent.! Based! on! evidence! and! other!
constitutes!the!note!contemplated.!Rossi’s!letter*!was!incomplete! facts,!Carbonnel!is!entitled!legally,!and!from!viewpoint!of!equity,!an!
because!there!was!no!price!of!shares,!and!the!paragraph!stating!that! opportunity!to!introduce!parol!evidence!in!support!of!her!view.!
ALS!should!submit!their!final!offer!at!a!certain!time!"!shows!an! !
incomplete!transaction,!meaning!no!definite!agreement.!There!was! c. Right% of% the% parties% when% a% contract% is%
no!contract!of!sale!because!one!of!the!essential!requisites!(price! enforceable%but%a%public%document%is%necessary%
certain)!is!absent.!Litonjua!said!the!$36M!was!a!final!bid!(as!
for%its%registration%
defense),!but!his!letters!kept!saying!they!couldn’t!release!the!final!
bid!by!June!30!(he!is!inconsistent).!The!$36M!was!an!offer!subject!to! !
conducting!an!audit;!not!an!offer,!but!if!it!was,!there!was!no! Art.! 1406.! When! a! contract! is! enforceable! under! the! Statute! of!
acceptance,!therefore!no!perfected!contract.!Audit!was!not!partial! Frauds,!and!a!public!document!is!necessary!for!its!registration!in!the!
performance,!but!only!showed!the!sale!was!far!from!complete.! Registry! of! Deeds,! the! parties! may! avail! themselves! of! the! right!
! under!Article!1357.!
! !
! • Art! 1406! →! may! avail! of! their! rights! under! Art! 1357!
! (parties!may!compel!each!other!to!observe!the!necessary!
! form!once!the!contract!has!been!perfected)!
! • For! the! application! of! Art.! 1406,! there! must! be! a! valid!
! agreement! and! the! agreement! must! not! infringe! the!
! Statue!of!Frauds!
! !
!
!!!!
CHAPTER(9:(((
3. CONTRACTS! EXECUTED! BY! PARTIES! WHO! ARE! BOTH!
INCAPABLE!OF!GIVING!CONSENT!TO!A!CONTRACT!
!
Art.!1403,!par.!3.!Those!where!both!parties!are!incapable!of!giving!
consent!to!a!contract.!
VOID(OR(INEXISTENT(
!
a. Effect%of%ratification%by%the%parents%or%guardian%
CONTRACTS(
of%one%of%the%parties%
% A. Characteristics(
Art.!1407,!par.!1.!In!a!contract!where!both!parties!are!incapable!of! 1. VOID!FROM!THE!BEGINNING!
giving! consent,! express! or! implied! ratification! by! the! parent,! or! 2. PRODUCES!NO!EFFECT!WHATSOEVER! " !NULLITY!EXIST!IPSO!
guardian,!as!the!case!may!be,!of!one!of!the!contracting!parties!shall! JURE,!JUDGMENT!OF!NULLITY!IS!MERELY!DECLARATORY!
give! the! contract! the! same! effect! as! if! only! one! of! them! were!
3. CANNOT! BE! CONFIRMED! OR! VALIDATED! (BY! PRESCRIPTION!
incapacitated.!
OR!RATIFICATION),!NEITHER!CAN!THE!RIGHT!TO!SET!UP!THE!
!
• When!the!unenforceable!becomes!VOIDABLE:!Ratification! DEFENSE!OF!ILLEGALITY!BE!WAIVED!ART!1409!
by!the!parent!or!guardian!of!one!of!the!parties!OR!by!one! 4. NO!ACTION!FOR!ANNULMENT!IS!NECESSARY!
of!the!parties!after!attaining!or!regaining!capacity!(express! 5. IF! IT! HAS! BEEN! PERFORMED,! THE! RESTORATION! OF! WHAT!
or!implied)! HAS!BEEN!GIVEN!IS!IN!ORDER!
• It! converts! the! contract! into! a! voidable! contract! at! the!
6. THE! ACTION! OR! DEFENSE! FOR! THE! DECLARATION! OF! ITS!
option!of!the!party!who!has!NOT!ratified!
• The! non?ratifying! party! may:! enforce! the! conract! OR! ask! ILLEGALITY!OR!ABSOLUTE!NULLITY!CANNOT!BE!WAIVED!
for!the!annulment! 7. THE! ACTION! OR! DEFENSE! FOR! THE! DECLARATION! OF! ITS!
! ILLEGALITY!OR!ABSOLUTE!NULLITY!DOES!NOT!PRESCRIBE!
b. Effect%of%ratification%by%the%parents%or%guardian% 8. THE! ACTION! OR! DEFENSE! FOR! THE! DECLARATION! OF! ITS!
of%both%parties% ILLEGALITY! OR! ABSOLUTE! NULLITY! IS! NOT! AVAILABLE! TO!
! THIRD! PERSONS! WHOSE! INTEREST! ARE! NOT! DIRECTLY!
Art.!1407,!par.!2.!If!ratification!is!made!by!the!parents!or!guardians,! AFFECTED!
as!the!case!may!be,!of!both!contracting!parties,!the!contract!shall!be!
validated!from!the!inception.! 9. ITS! INVALIDITY! CAN! BE! QUESTIONED! BY! ANYONE! AFFECTED!
BY!IT!
• When! the! unenforceable! becomes! VALID:! Ratification! by!
the! parents! or! guardians! of! both! parties! OR! by! both!
contracting!parties!after!attaining!or!regaining!capacity! ACCION%REIVINDICATORIA,–!any!person!may!invoke!the!inexistence!
• It! is! validated! and! its! validity! retroacts! to! the! time! it! was! of! the! contract! whenever! juridical! effects! founded! thereon! are!
entered!into!(Art.!1396)! asserted!against!him!
!
Action!to!Declare!Nullity!in!case!the!contract!has!been!fulfilled!
C. Assailing(Unenforceable(Contracts(
• Necessary! because! nobody! can! take! the! law! into! his! own!
! hands!
Art.! 1408.! Unenforceable! contracts! cannot! be! assailed! by! third! • If! the! void! contract! is! still! executory,! no! party! need! to!
persons.! bring!an!action;!but!if!one!party!brings!action!to!enforce!it,!
! nullity!can!be!set!up!as!defense!
• Strangers!to!a!voidable!contract!cannot!bring!an!action!to! • The! judgment! will! retroact! to! the! very! day! when! the!
annul!the!same,!neither!can!they!assail!a!contract!because! contract!was!entered!into!
of!its!unenforceability!(Art.!1397)!
• The! benefit! of! the! Statute! can! only! be! claimed! or! waived! Void/inexistent! contracts! distinguished! from! other! defective!
by!one!who!is!a!party!or!privy!to!the!oral!contract,!not!by!a! contracts!
stranger! VOID! RESCISSIBLE!
• Question:!Is!a!beneficiary!of!a!stipulation!pour,autri!a!third! Defect!is!inherent!in!the! Defect!is!in!their!effects,!either!to!
person!under!the!operation!of!this!provision?! contract!itself!
rd
one!of!the!parties!or!to!a!3 !party!
o I! think! yes,! he! can,! because! he! is! removed! from! the! Matter!of!law!and!public! Based!on!equity!and!more!a!
ambit! of! third! persons! because! of! his! interest! in! the! interest! matter!of!private!interest!
contract! (by! being! a! beneficiary).! However,! why! No!legal!effects!even!if!no! No!action,!remains!valid!and!
would!he!assail!said!contract!if!the!same!is!beneficial! action!is!taken!to!set!it!aside! produces!all!its!effects!
to!him?! Action!to!declare!nullity!of! Action!to!rescind!prescribes!in!4!
! void!contracts!never! years!
! prescribes!
! VOID! UNENFORCEABLE!
Cannot!be!the!basis!of!actions!to!enforce!compliance!
Can!never!be!ratified!and! Can!be!ratified!and!thereafter!
!!!!
become!enforceable! enforced! Case:!
There!is!no!contract!at!all! There!is!a!contract!which,! !
however,!cannot!be!enforced! URADA!v.!MAPALAD!
unless!properly!ratified! Facts:!Atty.!Manuel!Ubarra,!on!behalf!of!his!client!Juanito!Claderon,!
VOID! VOIDABLE! filed!against!Judge!Luzviminda!Mapalad!for!knowingly!rendering!an!
One!of!those!essential! Essential!requisites!for!validity!is! unjust! judgment,! violating! the! Canons! of! Judicial! Ethics,! and! failure!
requisites!is!wanting,!either!in! present,!BUT!consent!is!vitiated! to! decide! within! the! 90! day! period.! It! was! found! out! that! in! a!
fact!or!in!law!or!is!declared! criminal! case! for! grave! threats,! the! accused! (Roberto! Cruda),! was!
void!by!statute! her! brother?in?law.! Instead! of! inhibiting,! she! dismissed! the! case,!
No!contract,!but!only! Valid!until!set!aside,!validity!may! acquitting! Cruda.! She! denies! having! knowingly! rendered! an! unjust!
appearance!of!one,!produces! only!be!assailed!directly,!never!by! judgment!in!favor!of!Cruda!because!she!“was!persuaded!to!dismiss!
no!effect!even!if!not!set!aside!
rd
a!3 !person! the! same! not! on! account! that! the! guilt! of! Cruda! was! not! proven!
by!direct!action!(collateral! beyond!reasonable!doubt!but!by!the!reason!that!both!complainant!
attack!allowed)! and! accused! therein! were! in! pari! delicto.! When! complainant! saw!
Not!susceptible!of!ratification!! May!be!rendered!perfectly!valid! accused! picking! up! the! star! apple! fruits! which! were! theirs,! he!
by!ratification!! harangued!the!accused!and!hurled!invectives!against!him.!If!accused!
Action!to!declare!nullity!does! Action!for!annulment!prescribes!in! pelted!complainant!with!stones!and!threatened!to!kill!him,!said!acts!
not!prescribe,!permanent,! 4!years! were!in!retaliation!to!the!unlawful!provocations!of!complainant.!
even!if!the!cause!of!nullity! !
ceased!to!exist!! Held:!The!in!pari!delicto!doctrine!cannt!be!applied!to!criminal!cases.!
Under! such! doctrine,! where! parties! to! a! controversy! are! equally!
guilty,!they!shall!have!no!action!against!each!other,!and!it!shall!leave!
B. Kinds(
the! parties! where! it! finds! them.! Such! rule! is! a! rule! in! civil! law! (Art.!
1. CONTRACTS!THAT!ARE!VOID! 1411! and! Art! 1412.! In! criminal! suits,! the! State! is! the! prosecutor—
a. Those% whose% cause,% object,% or% purpose% is% thus,! in! pari! delicto! rule! cannot! be! invoked! against! the! State.! The!
contrary% to% law,% morals,% good% customs,% public% private! party! is! but! a! complaining! witness,! and! any! criminal! act!
order%or%public%policy% perpetrated!by!such!cannot!be!imputed!to!the!State.!Although!R!is!
% not! necessarily! guilty! for! rendering! an! unjust! judgment! since! no!
convincing!evidence!was!show!to!prove!that!she!rendered!it!with!a!
Art.!1409!par!1.!Those!whose!cause,!object!or!purpose!is!contrary!to!
deliberate! intent! to! commit! injustice,! she! is! found! guilty! of! gross!
law,!morals,!good!customs,!public!order!or!public!policy!
ignorance!of!the!law.!
• The!contract!of!the!parties!must!conform!with!the!law!in! %
force!at!the!time!it!is!executed.!But!the!right!of!a!party!
under!such!a!contract!cannot!be!affected!by!a!subsequent!
ii. When% the% act% is% unlawful% but% does% not%
law!removing!or!eliminating!such!right.! constitute%a%criminal%offense%
! %
i. When% the% act% constitutes% a% criminal% Art.! 1412.! If! the! act! in! which! the! unlawful! or! forbidden! cause!
consists! does! not! constitute! a! criminal! offense,! the! following! rules!
offense%
shall!be!observed:!
%
1.!When!the!fault!is!on!the!part!of!both!contracting!parties,!neither!
Art.!1411.!When!the!nullity!proceeds!from!the!illegality!of!the!cause! may!recover!what!he!has!given!by!virtue!of!the!contract,!or!demand!
or!object!of!the!contract,!and!the!act!constitutes!a!criminal!offense,! the!performance!of!the!other’s!undertaking;!
both! parties! being! in, pari, delicto,! they! shall! have! no! action! against! 2.! When! only! one! of! the! contracting! parties! is! at! fault,! he! cannot!
each!other,!and!both!shall!be!prosecuted.!Moreover,!the!provisions! recover!what!he!has!given!by!reason!of!the!contract,!or!ask!for!the!
of!the!Penal!Code!relative!to!the!disposal!of!effects!or!instruments! fulfillment!of!what!has!been!promised!to!him.!The!other,!who!is!not!
of! a! crime! shall! be! applicable! to! the! things! or! the! price! of! the! at! fault,! may! demand! the! return! of! what! he! has! given! without! any!
contract.! obligation!to!comply!with!his!promise.!
! This!rule!shall!be!applicable!when!only!one!of!the!parties!is!
%
guilty;!but!the!innocent!one!may!claim!what!he!has!given,!and!shall!
IN%PARI%DELICTO!RULE!!
not!be!bound!to!comply!with!his!promise.!
1. BOTH!parties!at!fault!
!
• Neither!party!may!recover!what!he!has!given!by!
1. BOTH!are!in,pari,delicto!!
virtue!of!the!contract!!
• No!action!against!each!other!!
• Neither!party!may!demand!the!performance!of!the!
• BOTH!will!be!prosecuted! other’s!undertaking!
• RPC!provision!relative!to!the!disposal!of! 2. ONLY!ONE!is!guilty!
effects/instruments!of!a!crime!shall!apply!!
• INNOCENT!PARTY!may!demand!the!return!of!what!he!
2. ONLY!ONE!is!guilty!
has!given!without!obligation!to!comply!with!his!
• INNOCENT!PARTY!may!claim!what!he!has!given!! promise!
• INNOCENT!PARTY!not!bound!to!comply!with!his! • PARTY!AT!FAULT!cannot!recover!what!he!has!given!by!
promise! reason!of!the!contract!!
!
• PARTY!AT!FAULT!cannot!ask!for!the!fulfillment!of!
!
what!has!been!promised!to!him!
!
!
!
!!!!
# Not!applicable!to!fictitious!contracts!because!they!refer!to! OTHER,SPECIFIC,EXCEPTIONS,
contracts!with!an!illegal!cause!or!subject?matter!(criminal! ,
offense!OR!only!illegal),!OR!to!contracts!that!are!null!and! i. When%the%purpose%is%illegal%and%money%is%
void!ab!initio.!Fictitious!or!simulated!contracts!don’t!have! paid%or%property%delivered%therefor%
cause.!
%
!
Art.! 1414.! When! money! is! paid! or! property! delivered! for! an! illegal!
EXCEPTIONS,TO,THE,IN,PARI,DELICTO,RULE,
purpose,! the! contract! may! be! repudiated! by! one! of! the! parties!
,
before! the! purpose! has! been! accomplished,! or! before! any! damage!
General!Statement!of!the!Exception!!
has! been! caused! to! a! third! person.! In! such! case,! the! courts! may,! if!
Art.! 1416.! When! the! agreement! is! not! illegal! per! se! but! is! merely!
public! interest! will! thus! be! subserved,! allow! the! party! repudiating!
prohibited,! and! the! prohibition! by! the! law! is! designed! for! the!
the!contract!to!recover!the!money!or!property.!
protection! of! the! plaintiff,! he! may,! if! public! policy! is! thereby!
!
enhanced,!recover!what!he!has!paid!or!delivered.!
• When! the! PURPOSE! is! illegal, and! money! is! paid! or!
property! delivered! therefore! "! may! be! repudiated! by!
Note:!Agreement!is!not!illegal!per,se,!but!merely!prohibited!!
one! of! the! parties! before! the! purpose! has! been!
• Prohibition!is!designed!for!the!protection!of!the!plaintiff!!
accomplished!OR!before!any!damage!has!been!caused!to!
• Plaintiff!may!recover!what!he!paid!or!delivered!if!public!policy!is! rd
a!3 !person.!%
enhanced!
• Courts! may! allow! the! party! repudiating! the! contract! to!
• ILLEGAL,PER,SE!–!one!that!by!universally!recognized!standards!
recover! the! money! or! property,! if! the! public! interest! will!
is!inherently!or!by!its!very!nature!bad,!improper,!immoral!or!
thus!be!subserved.%
contrary!to!good!conscience.!
%
!
Case:! ii. When%the%contract%is%illegal%and%one%of%the%
MODINA!v.!CA! parties%is%incapable%of%giving%consent%
Facts:! Ramon! Chiang! stated! that! his! wife,! Merlinda,! sold! him! three! %
parcels! of! land! as! evidenced! by! the! deed! of! absolute! sale.! These! Art.! 1415.! Where! one! of! the! parties! to! an! illegal! contract! is!
lands! were! subsequently! sold! to! the! petitioner! Serafin! Modina! by! incapable!of!giving!consent,!the!courts!may,!if!the!interest!of!justice!
Ramon.!Merlina!executed!lease!contracts!with!private!Respondents! so!demands,!allow!recovery!of!money!or!property!delivered!by!the!
Hontarciego,!Figueroa,!and!Hipalla.!Modina!brought!a!Complaint!for! incapacitated!person.!
Recovery! of! Possession! with! Damages! against! private! Rs.! Upon! %
learning!the!institution!of!the!case,!Merlinda!presented!a!Complaint? • When!the!CONTRACT!is!illegal!and!one!of!the!parties!is!
in?intervention,!seeking!the!declaration!of!nullity!of!the!Deed!of!Sale! INCAPABLE!of!giving!consent!"!courts!may!allow!
between! her! husband! and! Modina! on! the! ground! that! the! titles! of! recovery!of!money/property!delivered!by!the!
the! parcels! of! land! in! dispute! were! never! legally! transferred! to! her! incapacitated!person,!if!interest!of!justice!so!demands.!
husband.!!Fraudulent!acts!were!allegedly!employed!by!him!to!obtain! %
a!Torrens!Title!in!his!favor.!!However,!she!confirmed!the!validity!of! Cases:!
the!lease!contracts!with!the!other!private!respondents.!! !
! LIGUEZ!v.!CA!(supra)!
Held:!The!sale!of!the!subject!lots!should!be!nullified.!! Facts:!Conchita!Liguez!filed!a!complaint!against!the!widow!and!heirs!
Art.! 1490.!! The! husband! and! the! wife! cannot! sell! property! to! each! of! the! late! Salvador! Lopez! to! recover! a! parcel! of! land! that! was!
other,!except:! donated!to!her!by!the!latter.!As!a!defense,!the!heirs!of!Lopez!claim!
(1)!!when!a!separation!of!property!was!agreed!upon!in!the!marriage! that! the! donation! is! null! a! void! for! having! an! illicit! causa→that! she!
settlements;!or! would! have! sexual! relations! with! him.! At! the! time! of! the! donation,!
(2)!!when!there!has!been!a!judicial!separation!of!property!under!Art.! Liguez! was! only! 16! years! old.! Said! land! originally! belonged! to! the!
191.! conjugal!partnership!of!Lopez!and!his!wife,!Maria!Ngo.!
The! exception! to! the! rule! laid! down! in! Art.! 1490! of! the! New! Civil! !
Code! not! having! existed! with! respect! to! the! property! relations! of! Held:!The!CA!erred!in!applying!the!pari!delicto!rule.!It!cannot!be!said!
Ramon! Chiang! and! Merlinda! Plana! Chiang,! the! sale! by! the! latter! in! that!both!parties!had!equal!guilt,!considering!that!she!was!only!16!at!
favor!of!the!former!of!the!properties!in!question!is!invalid!for!being! the!time!of!the!donation.!Her!acceptance!doesn’t!necessarily!imply!
prohibited! by! law.!! Not! being! the! owner! of! subject! properties,! sale! knowledge! of! its! terms! and! conditions,! which! was! more! suggestive!
by! Ramon! Chiang! in! favor! of! SerafinModina! is,! likewise,! void! and! of! seduction! that! of! immoral! bargaining.! Also,! Lopez! could! not!
inexistent.! There! is! no! sufficient! evidence! establishing! fault! on! the! donate! the! entirety! of! the! property! to! the! prejudice! of! his! wife!
part! of! Merlinda,! and! therefore,! the! principle! of! in, pari, delicto! is! because!it!is!conjugal!in!character!(void!only!insofar!as!it!prejudices!
inapplicable! and! the! sale! was! void! for! want! of! consideration.!! In! the!wife).!Liguez!is!only!entitled!to!so!much!of!the!donated!property!
effect,! Merlinda! can! recover! the! lots! sold! by! her! husband! to! as! may! be! found! not! to! prejudice! the! share! of! Maria! Ngo! and! the!
petitioner!Modina.!!! forced!heirs!of!Lopez.!
! !
! RELLOSA!v.!GAW!CHEEN!HUM!
! Facts:! Dionisio! Rellosa! sold! to! Gaw! Chee! Hun! a! parcel! of! land,!
! together!with!the!house!erected!thereon,!situated!in!Manila!for!the!
! sum! of! P25,000.! A! contract! of! lease! was! entered! into! on! the! same!
! day! between! Rellosa! and! Chee! Hun.! Thus,! Rellosa! (the! vendor)!
! remained! in! possession! of! the! property.! The! vendor! instituted! the!
!!!!
present! action! in! CFI! Manila! seeking! the! annulment! of! the! sale! as! secure!the!annulment!of!the!contracts.!Both!parties!however,!died.!
well!as!the!lease!covering!the!land!and!the!house!alleging!that:!the! Paragraph!5!of!the!lease!contract!states!that!"The!lessee!may!at!any!
sale!was!executed!subject!to!the!condition!that!the!vendee,!being!a! time! withdraw! from! this! agreement."! It! is! claimed! that! this!
Chinese!citizen,!would!obtain!the!approval!of!the!Japanese!Military! stipulation!offends!article!1308!of!the!Civil!Code!which!provides!that!
Administration! in! accordance! with! (seirei)! No.! 6! issued! on! April! 2,! "the! contract! must! bind! both! contracting! parties;! its! validity! or!
1943,! by! the! Japanese! authorities,! and,! that! the! approval! has! not! compliance!cannot!be!left!to!the!will!of!one!of!them."!!
been! obtained! and! even! if! said! requirement! were! met,! the! sale! !
would! at! all! events! be! void! under! article! XIII,! section! 5,! of! our! Held:!Contract!of!lease!cannot!be!sustained.!If!an!alien!was!given!not!
Constitution.! Defendant! answered! the! complaint! setting! up! as! only!a!lease!of,!but!also!an!option!to!buy,!a!piece!of!land,!by!virtue!
special! defense! that! the! sale! referred! to! in! the! complaint! was! of! which! the! Filipino! owner! cannot! sell! or! otherwise! dispose! of! his!
absolute! and! unconditional! and! was! in! every! respect! valid! and! property,! this! to! last! for! 50! years,! then! it! became! clear! that! the!
binding!between!the!parties.!Defendant!claims!that!plaintiff!is!guilty! arrangement!was!a!virtual!transfer!of!ownership!whereby!the!owner!
of! estoppel! in! that,! by! having! executed! a! deed! of! lease! over! the! divested!himself!in!stages!not!only!of!the!right!to!enjoy!the!but!also!
property,! he! thereby! recognized! the! title! of! defendant! to! that! of! the! right! to! dispose! of—! rights! the! sum! total! of! which! make! up!
property.! ownership.! It! was! just! as! if! today! the! possession! is! transferred,!
! tomorrow,! the! use,! the! next! day,! the! disposition,! and! so! on,! until!
Held:! The! sale! and! lease! contracts! are! not! valid.! The! Constitution! ultimately! all! the! rights! of! which! ownership! is! made! up! are!
adopted! in! September! 1943! (transaction! was! entered! into! on! consolidated! in! an! alien.! And! yet! this! was! just! exactly! what! the!
February! 2,! 1944),! in! its! article! VIII,! section! 5,! provides! that! "no! parties!in!this!case!did!within!this!pace!of!one!year,!with!the!result!
private! agricultural! land! shall! be! transferred! or! assigned! except! to! that! Justina! Santos'! ownership! of! her! property! was! reduced! to! a!
individuals,!corporations,!or!associations!qualified!to!acquire!or!hold! hollow! concept.! If! this! can! be! done,! then! the! Constitutional! ban!
lands!of!the!public!domain!in!the!Philippines",!which!provisions!are! against!alien!landholding!in!the!Philippines,!is!indeed!in!grave!peril!
similar!to!those!contained!in!our!present!Constitution.!As!to!whether! !
the!phrase!"private!agricultural!land"!employed!in!said!Constitution! FRENZEL!v.!CATITO!
includes! residential! lands:! In! Krivenko! vs.! Register! of! Deeds,! the! Facts:! Petitioner! Alfred! Fritz! Frenzel! is! an! Australian! citizen! of!
court! held! that! "under! the! Constitution! aliens! may! not! acquire! German!descent.!He!arrived!in!the!Philippines!in!1974!and!married!
private! or! public! agricultural! lands,! including! residential! lands.! Teresita! Santos,! a! Filipino! citizen.! In! 1981,! Alfred! and! Teresita!
Plaintiffs! cannot! recover! said! land! even! if! they! can! still! invoke! the!
separated! from! bed! and! board! without! obtaining! a! divorce.! Alfred!
Constitution,! or! the! doctrine! in! the! Krivenko! Case,! to! set! aside! the!
sale! in! question,! they! are! now! prevented! from! doing! so! if! their! arrived! in! Sydney,! Australia! for! a! vacation.! He! met! Ederlina! Catito!
purpose! is! to! recover! the! lands! that! they! have! voluntarily! parted! there,! who! was! a! native! of! Davao! City! ! and! was! married! to! Klaus!
with,! because! of! their! guilty! knowledge! that! what! they! were! doing! Muller.!Alfred!proposed!marriage!to!Ederlina,!but!she!said!to!wait!a!
was!in!violation!of!the!Constitution.! little!longer!pending!his!divorce.!Ederlina!!put!up!a!beauty!parlor!on!
! the! property! under! the! business! name! Edorial! Beauty! Salon.! Alfred!
iii. When% the% agreement% is% not% illegal% per% se% paid! Atty.! Hidalgo! ! P20,000.00! for! his! right! over! the! property! and!
but%is%prohibited% gave! P300,000.00! to! Ederlina! for! the! purchase! of! equipment! and!
% furniture! for! the! parlor.! ! As! Ederlina! executed! a! special! power! of!
Art.! 1416.! When! the! agreement! is! not! illegal! per! se! but! is! merely! attorney]!appointing!her!brother,!Aser!Catito,!as!her!attorney?in?fact!
prohibited,! and! the! prohibition! by! the! law! is! designed! for! the! in!managing!the!beauty!parlor!business.!!She!stated!in!the!said!deed!
protection! of! the! plaintiff,! he! may,! if! public! policy! is! thereby!
that! she! was! married! to! Klaus! Muller.! ! Alfred! went! back! to! Papua!
enhanced,!recover!what!he!has!paid!or!delivered.!
New! Guinea! to! resume! his! work! as! a! pilot.! When! he! came! back! to!
%
Cases:! the! Phil,! he! bought! her! a! new! house! for! $20k.! It! was! under! her!
PHILIPPINE!BAKING!CORP!v.!LUI!SHE! name,!since!foreigners!aren’t!allowed!to!own!land!in!the!Phil.!!While!
Facts:!Justina!and!her!sister!Lorenza!were!the!owners!in!common!of! Alfred! was! in! Papua! New! Guinea,! he! received! aletter! from! Klaus!
a! piece! of! land! in! Manila.! They! lived! in! one! of! the! houses,! while! Muller,! telling! him! that! Klaus! and! Ederlina! were! still! marriedHe!
Wong!Heng,!a!Chinese,!lived!with!his!family!in!the!restaurant.!Wong! begged! Alfred! to! leave! Ederlina! alone! and! return! her! to! him.!
had! been! a! long?time! lessee! of! a! portion! of! the! property,! having! a!
Eventually,!their!relationship!turned!sour,!when!Ederlina’s!attempts!
monthly! rental! of! P2,620.! Justina! Santos! became! the! owner! of! the!
to! divorce! Klaus! failed.! Alfred! wanted! his! money! back,! saying! she!
entire! property! as! her! sister! died! with! no! other! heir.! Then! already!
well! advanced! in! years,! being! at! the! time! 90! years! old,! blind,! and!her!family!“stole”!all!of!it.!He!filed!with!the!RTC!for!recovery!of!
crippled! and! an! invalid,! she! was! left! with! no! other! relative! to! live! his!real!and!personal!properties!in!Quezon!and!Manila.!He!also!filed!
with,! but! she! was! taken! cared! of! by! Wong.! "In! grateful! a! complaint! against! her! in! the! RTC! of! Davao,! for! specific!
acknowledgment! of! the! personal! services! of! the! Lessee! to! her,"! performance,! declaration! of! ownership! of! real! and! personal!
Justina! executed! a! contract! of! lease! in! favor! of! Wong! covering! the! properties,! sum! of! money,! and! damages! all! amounting! to! more! or!
entire! property.! On! December! 21! she! executed! contract! giving!
less!P724k.!
Wong!the!option!to!buy!the!leased!premises!for!P120,000.!!
On! November! 18,! 1958! she! executed! two! other! contracts,! one!
Held:!The!transactions!are!void!ab!initio.!Lands!of!the!public!domain,!
extending!the!term!of!the!lease!to!99!years,!and!another!fixing!the!
term!of!the!option!at!50!years.!In!a!codicil!of!a!later!date!(November! which!include!private!lands,!may!be!transferred!or!conveyed!only!to!
4,! 1959)! she! appears! to! have! a! change! of! heart.! Claiming! that! the! individuals! or! entities! qualified! to! acquire! or! hold! private! lands! or!
various! contracts! were! made! by! her! because! of! machinations! and! lands! of! the! public! domain.! Aliens,! whether! individuals! or!
inducements! practised! by! him,! she! now! directed! her! executor! to! corporations,! have! ! been! disqualified! from! acquiring! lands! of! the!
!!!!
public! domain.! Hence,! they! have! also! been! disqualified! from! Art.! 1420.! In! case! of! a! divisible! contract,! if! the! illegal! terms! can! be!
acquiring! private! lands.! Said! transactions! are! in! violation! of! the! separated!from!the!legal!ones,!the!latter!may!be!enforced.!
Constitution;!hence,!are!null!and!void!ab!initio—vests!no!rights!and! • When!the!contract!is!divisible!"!if!illegal!terms!can!be!
creates! no! obligations.! It! produces! no! legal! effect! at! all.! The! separated!from!legal!ones,!enforce!latter!
petitioner,! being! a! party! to! an! illegal! contract,! cannot! come! into! a! o In!case!of!doubt,!contract!is!considered!as!
court! of! law! and! ask! to! have! his! illegal! objective! carried! out.! ! One! divisible!or!separable.!
• EXCEPTIONS:!!!
who! loses! his! money! or! property! by! knowingly! engaging! in! a!
4. Nature!of!contract!requires!indivisibility!e.g.!contract!
contract!or!transaction!which!involves!his!own!moral!turpitude!!may! of!compromise!!
not! maintain! an! action! for! his! losses.! Art.! 1416.! When! the! 5. Intention!of!the!parties!is!that!the!contract!be!entire!
agreement! is! not! illegal! per! se! but! is! merely! prohibited,! and! the! e.g.!if!what!is!void!be!the!essential!part,!void!the!
prohibition!by!the!law!is!designed!for!the!protection!of!the!plaintiff,! entire!contract.!Divisibility!will!only!be!followed!when!
he! may,! if! public! policy! is! thereby! enhanced,! recover! what! he! has! the!nullity!affects!only!the!secondary!or!accessory!
paid!or!delivered.!$Plaintiff!cannot!use!this!provision.!The!provision! obligations.!!
%
applies!only!to!those!contracts!which!are!merely!prohibited,!in!order!
to! benefit! private! interests.! It! does! not! apply! to! contracts! void! ab!
viii. When%the%contract%is%the%direct%result%of%a%
initio.!
previous%illegal%contract%
%
Art.! 1422.! A! contract! which! is! the! direct! result! of! a! previous! illegal!
iv. When% the% amount% paid% exceeds% the%
contract,!is!also!void!and!inexistent.!
maximum%fixed%by%law%
%
• When! the! contract! is! the! DIRECT! RESULT! of! a! previous,
Art.!1417.!When!the!price!of!any!article!or!commodity!is!determined!
illegal!contract!"!also!void!and!inexistent%
by!statue,!or!by!authority!of!law,!any!person!paying!any!amount!in!
!
excess!of!the!maximum!price!allowed!may!recover!such!excess.!
b. Those%whose%object%is%outside%the%commerce%of%
• When!the!amount!paid!exceeds,the,maximum,fixed,by,law! man%
%
"!any!person!paying!in!excess!of!the!maximum!price!may!
recover!such!excess% Art.! 1409! par! 4.! Those! whose! object! is! outside! the! commerce! of!
% man!
v. When% by% virtue% of% a% contract,% a% laborer% • e.g!Things!of!public!ownership!such!as!sidewalks,!public!
places,!bridges,!streets,!etc.;!things!that!are!common!to!
undertakes% to% work% longer% that% the%
everybody!such!as!air,!sunlight,!rain,!etc!
maximum% number% of% hours% of% work% fixed% !
by%law% c. Those%which%contemplate%an%impossible%service%
% %
Art.! 1418.! When! the! law! fixes,! or! authorizes! the! fixing! of! the! Art.!1409!par!5.!Those!which!contemplate!an!impossible!service!
maximum!number!of!hours!of!labor,!and!a!contract!is!entered!into! !
whereby! a! laborer! undertakes! to! work! longer! than! the! maximum! • The!absolute!impossibility!nullifies!the!contract.!
this! fixed,! he! may! demand! additional! compensation! for! service!
• The!relative!impossibility,!if!temporary,!does!not!nullify!
rendered!beyond!the!time!limit.!
the!contract,!such!as!when!a!partner!agrees!to!contribute!
to!the!partnership!an!amount!more!than!is!permissible!by!
• When!by!virtue!of!contract!a!laborer!undertakes!to!work! his!means!
longer,than,the,maximum,number,of,hours!of!work!fixed! !
by!law!"!worker!may!demand!additional!compensation! d. Those% where% the% intention% of% the% parties%
for!service!rendered!beyond!the!limit!
relative% to% the% principal% object% of% the% contract%
%
cannot%be%ascertained%
vi. When% a% laborer% agrees% to% accept% a% lower%
%
wage%than%that%set%by%law% Art.!1409!par!6.!Those!where!the!intention!of!the!parties!relative!to!
%
the!principal!object!of!the!contract!cannot!be!ascertained!
Art.! 1419.! When! the! law! sets,! or! authorizes! the! setting! of! a!
• The!object!of!a!contract!must!be!determinate!as!to!its!kind!
minimum!wage!for!laborers,!and!a!contract!is!agreed!upon!by!which!
or!at!least!determinable!without!the!necessity!of!a!new!or!
a! laborer! accepts! a! lower! wage,! he! shall! be! entitled! to! recover! the!
further!agreement!between!the!parties.!It!need!not!be!
deficiency.!
specified!with!absolute!certainty.!
!
• When!a!laborer!agrees!to!accept!a!lower,wage!than!that! !
set!by!law!"!entitled!to!recover!deficiency! !
% !
vii. When%the%contract%is%divisible% !
% !
!
!!!!
e. Those%expressly%prohibited%or%declared%void%by% D. The( action( or( defense( for( the( declaration( of(
law% the(inexistence(of(a(contract(
% !
Art.!1409!par!7.Those!expressly!prohibited!or!declared!void!by!law! 1.!DOES!NOT!PRESCRIBE!
• Where!the!illegality!of!the!contract!proceeds!from!an! !
express!prohibition!or!declaration!by!law,!and!not!from! Art.! 1410.! The! action! or! defense! for! the! declaration! of! the!
any!intrinsic!illegality,!the!contract!is!not!illegal!per,se!
inexistence!of!a!contract!does!not!prescribe.!
• Examples:!
!
1. Contracts!upon!future!inheritance!except!in!cases!
• Does!not!prescribe,!defect!is!permanent!and!incurable!
expressly!authorized!by!law.!(Art.!1347.)!
• Validity!cannot!be!given!to!it!by!estoppel!if!it!is!prohibited!
2. Sale!of!property!between!husband!and!wife!except!
by!law!or!is!against!public!policy!
when!there!is!a!separation!of!property.!(Art.!1490.)!
3. Purchase!of!property!by!persons!who!are!specially! • There!is!no!need!of!an!action!to!set!aside!a!void!contract.!
disqualified!by!law!(like!guardians,!agents,!executors,! However,!an!action!to!declare!its!non?existence!can!be!
administrators,!public!officers!and!employees,!judges,! maintained;!and!in!the!same!action,!the!plaintiff!may!
lawyers,!etc.)!because!of!their!position!or!relation! recover!what!he!has!given!by!virtue!of!the!contract!
with!the!person!or!property!under!their!care.!(Art.! • The!power!to!ask!for!such!declaration!cannot!be!assigned!
1491.)! !
! 2.!IS!NOT!AVAILABLE!TO!THIRD!PERSONS!WHOSE!INTEREST!IS!NOT!
2. CONTRACTS!THAT!ARE!INEXISTENT! DIRECTLY!AFFECTED!
a. Those% which% are% absolutely% simulated% or% !
fictitious% Art.! 1421.! The! defense! of! illegality! of! contracts! is! not! available! to!
% third!persons!whose!interests!are!not!directly!affected.!
Art.!1409!par!2.!Those!which!are!absolutely!simulated!or!fictitious! !
• e.g.!A!contract!of!sale!is!void!where!the!price,!which! • Ratification!may!take!the!form!of!a!new!contract,!in!which!
appears!thereon!as!paid,!has!in!fact!never!been!paid.! case! its! validity! shall! be! determined! only! by! the!
! circumstances! at! the! time! of! the! execution! of! the! new!
Art.!1345.!Simulation!of!a!contract!may!be!absolute!or!relative.!The! contract.! However,! the! same! does! not! retroact! to! the!
former! takes! place! when! the! parties! do! not! intend! to! be! bound! at! constitution!of!the!first!contract.!
all;!the!latter!when!the!parties!conceal!their!true!agreement.! !
! !
!
Art.! 1346.! An! absolutely! simulated! or! fictitious! contract! is! void.! A!
!
relative!simulation,!when!it!does!not!prejudice!a!third!person!and!is!
!
not!intended!for!any!purpose!contrary!to!law,!morals,!good!customs,!
!
public! order! or! public! policy! binds! the! parties! to! their! real!
!
agreement.!
!
% !
b. Those% whose% cause% or% object% did% not% exist% at% !
the%time%of%the%transaction% !
% !
Art.! 1409! par! 3.! Those! whose! cause! or! object! did! not! exist! at! the! !
time!of!the!transaction! !
!
• The!phrase!“did!not!exist!at!the!time!of!the!transaction”!
!
does!not!apply!to!a!future!thing!which!may!legally!be!the!
!
object!of!a!contract.!
!
!
C. Right( to( set( up( defense( of( illegality( cannot( be( !
waived( !
! !
Art.!1409!last!paragraph.!These!contracts!cannot!be!ratified.!Neither! !
can!the!right!to!set!up!the!defense!of!illegality!be!waived.! !
!
( !
!
!
!
! !
! !
!
!
!
!!!!
! (
TITLE%III:%%% E. As(Distinguished(by(Moral(Obligations(
!
NATURAL%OBLIGATIONS% NATURAL!
There!is!a!juridical!tie!
PURELY!MORAL!
There!is!no!juridical!tie!
Performance! by! the! debtor! is! a! Act!is!purely!liberality!
legal!fulfillment!of!the!obligation!
A. Definition( A! true! obligation! with! a! legal! tie! Matter! is! entirely! within! the!
! between!debtor!and!creditor! domain!of!morals!
!
Art.! 1423.! Obligations! are! civil! or! natural.! Civil! obligations! give! a!
VILLAROEL!v.!ESTRADA!
right! of! action! to! compel! their! performance.! Natural! obligations,!
Facts:! Alejandra! Callao! obtained! loan! payable! after! 7! years,! from!
not!being!based!on!positive!law!but!on!equity!and!natural!law,!do! Estrada!spouses!in!1912.!Jose!Villaroel!(son!of!Callao,!the!latter!now!
not!grant!a!right!of!action!to!enforce!their!performance,!but!after!
deceased)! executed! a! document! in! 1930! recognizing! the! previous!
voluntary!fulfillment!by!the!obligor,!they!authorize!the!retention!of!
debt.!Estrada!filed!for!collection!against!Villaroel!
what! has! been! delivered! or! rendered! by! reason! thereof.! Some!
!
natural!obligations!are!set!forth!in!the!following!articles.!
Held:! The! present! action! is! not! based! on! the! original! obligation!
! which!has!prescribed!but!on!the!new!one!wherein!Villaroel!assumed!
• Natural! obligations! are! not! cognizable! by! the! courts! unless! the!obligation.!The!rule!that!a!new!promise!to!pay!a!prescribed!debt!
there!has!been!voluntary!fulfillment!in!which!case,!the!court! may!only!be!done!by!the!same!person!or!another!legally!authorized!
may! order! the! retention! of! what! has! been! paid! (Ansay! v.! by! her! only! applicable! when! the! new! would! be! debtor! did! not!
Board!of!Directors!of!the!National!Dev.!Co.)! assume!the!debt!voluntarily.!
!
• Midway! between! civil! and! the! purely! moral! obligation.!
FISHER!v.!ROBB!
“Obligation! without! a! sanction,”! susceptible! of! voluntary!
Facts:! AO! Fisher! filled! a! stock! subscription! to! the! Philippine!
performance,!but!not!through!compulsion!by!legal!means.!!
Greyhound!Club!and!paid!2!installments.!Phil.!Greyhound!Club!failed!
• Real! obligation! which! law! denies! action,! but! which! the!
and! John! Robb! established! the! Phil.! Racing! Club! and! acquired! the!
debtor!may!perform!voluntarily.!!
assets!of!the!Greyhound!Club!to!save!investments.!Robb!sent!letters!
• Patrimonial!and!presupposes!a!prestation.!!!
to! Fisher! saying! that! he! felt! morally! responsible! for! the! loss! and!
would! see! to! it! that! the! 2nd! installment! will! be! repaid! even! if! it! is!
B. Four(Types(of(Obligations(in(Juridical(Science( out! of! his! own! pocket.! Fisher! filed! for! collection! of! the! amount! of!
! the!installment!
1. Moral! obligations! –! duties! of! conscience! completely!
!
outside!the!field!of!law!
Held:! There! was! no! contract! formed! between! Robb! and! Fisher! as!
2. Natural!obligations!–!duties!not!sanctioned!by!any!action!
there!was!no!proof!that!Fisher!accepted!Robb’s!offer.!There!was!no!
but!have!a!relative!judicial!effect! consideration!to!be!given!by!Fisher!as!well.!The!obligation!is!purely!
3. Civil! obligations! –! juridical! obligations! that! are! in!
moral!and!thus!not!demandable.!
conformity! with! positive! law! but! are! contrary! to! juridical!
principles! and! susceptible! of! being! annulled;! enforceable!
F. Conversion(to(Civil(Obligation(
by!action!
4. Mixed! obligations! –! full! juridical! effect;! falls! under! civil! !
obligations! GENERAL! RULE:! Partial! payment! of! a! natural! obligation! does! not!
make!it!civil;!the!part!paid!cannot!be!recovered!but!the!payment!of!
C. Requisites( the! balance! cannot! be! enforced.! "! applicable! only! to! natural!
! obligation!because!of!prescription!or!lack!of!formalities!(nullity!due!
1. Juridical!tie!between!two!persons.!! to! form! e.g.! Art! 1430)! and! NOT! to! natural! obligation! subject! to!
2. Tie!is!not!given!effect!by!law!but!instead!by!the!conscience, ratification!or!confirmation.!!
of,man! • Payment! by! mistake! is! not! voluntary! and! may! be!
recovered.! Payment! is! voluntary! when! the! debtor! knew!
that! the! obligation! is! a! natural! one.! One! who! pays! a!
D. As(Distinguished(from(Civil(Obligations(
natural!obligation,!believing!it!to!be!civil,!does!not!thereby!
!
recognize! the! natural! obligation;! and! there! being! no! civil!
! NATURAL! CIVIL!
obligation! either,! he! can! recover! what! he! has! paid.! The!
As!to!enforceability!! Not! by! court! actions,! Court! action! or! the!
debtor!however!has!the!burden!of!proving!the!mistake.!!
but! by! good! coercive! power! of!
!
conscience!of!debtor! public!authority!
1. By!novation!
As!to!basis! Equity! and! natural! Positive! law! (law,!
2. By!confirmation!or!ratification!
justice! contracts,! quasi?
!
contracts,!delicts,!and!
!
quasi?delicts)!
!
!!!!
G. Examples( !
! !
!
Art.!1424.!When!a!right!to!sue!upon!a!civil!obligation!has!lapsed!by!
!
extinctive! prescription,! the! obligor! who! voluntarily! performs! the!
!
contract! cannot! recover! what! he! has! delivered! or! the! value! of! the!
!
service!he!has!rendered.!
!
!
!
Art.! 1425.! When! without! the! knowledge! or! against! the! will! of! the!
!
debtor,! a! third! person! pays! a! debt! which! the! obligor! is! not! legally!
!
bound! to! pay! because! the! action! thereon! has! prescribed,! but! the!
!
debtor! later! voluntarily! reimburses! the! third! person,! the! obligor!
!
cannot!recover!what!he!has!paid.!
!
!
!
Art.!1426.!When!a!minor!between!eighteen!and!twenty?one!years!of!
!
age! who! has! entered! into! a! contract! without! the! consent! of! the!
!
parent! or! guardian,! after! the! annulment! of! the! contract! voluntarily!
!
returns! the! whole! thing! or! price! received,! notwithstanding! the! fact!
!
the!he!has!not!been!benefited!thereby,!there!is!no!right!to!demand!
!
the!thing!or!price!thus!returned.!
!
!
!
Art.!1427.!When!a!minor!between!eighteen!and!twenty?one!years!of!
!
age,! who! has! entered! into! a! contract! without! the! consent! of! the!
!
parent! or! guardian,! voluntarily! pays! a! sum! of! money! or! delivers! a!
!
fungible!thing!in!fulfillment!of!the!obligation,!there!shall!be!no!right!
!
to!recover!the!same!from!the!obligee!who!has!spent!or!consumed!it!
!
in!good!faith.!
!
!
!
Art.! 1428.! When,! after! an! action! to! enforce! a! civil! obligation! has!
!
failed!the!defendant!voluntarily!performs!the!obligation,!he!cannot!
!
demand!the!return!of!what!he!has!delivered!or!the!payment!of!the!
!
value!of!the!service!he!has!rendered.!
!
!
!
Art.!1429.!When!a!testate!or!intestate!heir!voluntarily!pays!a!debt!of!
!
the!decedent!exceeding!the!value!of!the!property!which!he!received!
!
by! will! or! by! the! law! of! intestacy! from! the! estate! of! the! deceased,!
!
the!payment!is!valid!and!cannot!be!rescinded!by!the!payer.!
!
!
!
Art.! 1430.! When! a! will! is! declared! void! because! it! has! not! been!
!
executed! in! accordance! with! the! formalities! required! by! law,! but!
!
one! of! the! intestate! heirs,! after! the! settlement! of! the! debts! of! the!
!
deceased,!pays!a!legacy!in!compliance!with!a!clause!in!the!defective!
!
will,!the!payment!is!effective!and!irrevocable.!
!
! !
Note:! In! Art.! 1427,! it! is! not! the! voluntary! payment! that! prevents! !
recovery,!but!the!consumption!or!spending!of!the!thing!or!money!in! !
good!faith.!! !
• This! article! creates! an! exception! to! the! rule! of! mutual! !
restitution.! ! ?! ! ! Minor! would! have! been! required! to! return! !
whatever!he!received!upon!annulment!of!contract.!! !
• Good!faith:!belief!that!debtor!has!capacity!to!deliver!the!object! !
of!contract! !
• Fungible!thing:!consumable!! !
• Non?consummable:! debtor! cannot! recover! if! no! longer! in! the! !
possession! of! the! creditor,! because! the! right! to! recover! !
presupposes!existence!of!thing.! !
! !
! !
! !
! !
! !
! !
!
!
!!!!
TITLE%IV:%%%
ESTOPPEL!DISTINGUISHED!
!
EQUITABLE!ESTOPPEL!VS.!WAIVER!
ESTOPPEL% !
AS!TO! (EQUITABLE)!ESTOPPEL! WAIVER!
Voluntariness!of! May!arise!without! Is!a!voluntary!and!
Abandonment! intention!by!the!party! intentional!
A. Definition( of!Rights! to!relinquish!any! abandonment!of!a!
! existing!right! known!right!
Concept! !
! Being!misled! It!is!one!of!the!essential! There!is!no!implication!
to!one’s! elements!of!an! that!the!party!who!is!
Art.! 1431.! Through! estoppel,! an! admission! or! representation! is! prejudice! equitable!estoppel.! waiving!a!right!has!been!
rendered! conclusive! upon! the! person! making! it,! and! cannot! be! misled!to!his!own!
denied!or!disproved!as!against!the!person!relying!thereon.! prejudice.!
Number!of! Equitable!estoppel! Waiver!only!involves!the!
parties! involves!the!conduct!of! conduct!of!the!party!
• It!is!a!bar which!precludes!a!person!from!denying!or!asserting! both!parties! waiving!a!right.!
anything! to! the! contrary! of! that! which! in! has,! in! Implication!of! Implication!is!present! Never!
contemplation! of! law,! been! established! as! the! truth,! either! Fraud! frequently!
by!the!acts!of!judicial!or!legislative!officers!or!by!his!own!deed! !
or!representation,!either!express!or!implied. EQUITABLE!ESTOPPEL!VS.!RATIFICATION!
• Its!origin!is!in!equity!and!is!therefore!based!on!moral!right!and! !
natural!justice!(principle!of!equity,!not!principle!of!law).!
AS!TO! (EQUITABLE)! RATIFICATION!
• It!is!only!of!suppletory!application;!it!cannot!supplant!positive! ESTOPPEL!
law.!
Substance/Essence! Inducement!towards! Confirmation!after!
• Sir!Labitag:!It!is!not!a!cause!of!action.!It!can!never!be!used!as!a! another!to!act!to!his! conduct!
sword!or!a!spear,!it!can!only!be!used!as!a!shield.!D’you!get!it?! prejudice!
!
Reason!for!being! Bound,!regardless!of! Bound!because!he!
APPLICABILITY!OF!ESTOPPEL!
bound! intention,!because! intended!to!be!
• Estoppel!will!only!be!available!in!a!defense!of!a!legal!or!equitable!
the!other!will!be!
right!or!claim,!made!in!good!faith!AND!can!never!be!asserted!to! prejudiced!unless!the!
uphold! crime,! fraud,! injustice! or! wrong! of! any! character;! it! is! law!treats!him!as!
applied! against! wrongdoers! and! not! against! the! victim! of! a! legally!bound!
wrong.!
Reliance!on! Is!applied!when!the! Does!not!rest!upon!
• Estoppel! will! not! lie! against! the! government,! acting! in! its! Prejudice! other!party!will!be! the!presence!of!
capacity! as! a! sovereign! or! when! it! asserts! its! rights! as! the! unjustly!prejudiced! prejudice!
government;! it! is! not! estopped! by! the! mistakes,! errors,!
negligence!or!omission!on!the!part!of!its!officials!or!agents.! !
• It! is! based! on! equity! and! hence,! cannot! be! predicated! on! an! KALALO!v.!LUZ!
illegal!act.! Facts:! Kalalo! was! a! civil! engineer! while! Luz! was! an! architect.! Their!
o Labor! provides! a! more! common! example! "! For! example,! respective! firms! entered! into! an! agreement! where! Kalalo’s!
employees!who!received!their!separation!pay!are!not!barred! engineering!firm!was!contracted!by!Luz’s!architectural!firm!to!render!
from!contesting!the!legality!of!their!dismissal!nor!would!it!be! engineering!services.!Later!on,!Kalalo!sent!a!letter!stating!that!there!
considered! as! a! waiver! of! their! right! to! apply! for! was! still! a! balance! of! P59,565;! however,! in! a! separate! letter,! Luz!
reinstatement.! disputes! this! and! claims! the! amount! is! only! at! P10,861,! which! he!
tried!to!pay!to!Kalalo!but!was!not!accepted.!Kalalo!then!filed!a!suit!in!
• There!is!estoppel!when!a!party!who!has!the!right!to!pursue!one!
which! he! added! a! claim! for! a! separate! $28,000! on! top! of! the!
of!the!several,!inconsistent!alternative!remedies!available!to!him!
P59,565!due!him.!The!court!ruled!in!favor!of!Kalalo.!Luz!contended!
(ex.! specific! performance! and! rescission),! chooses! one,! files! a!
that! the! $28,000! should! not! have! been! granted! since! the! letter!
suit! and! prosecutes! the! same! until! final! judgement;! he! cannot,!
Kalalo! sent! (the! one! with! the! value! of! P59k)! estopped! him! from!
later!on,!pursue!the!alternative!remedies!he!did!not!choose.!
making!other!claims.!
• Criminal!actions!for!public!offenses!cannot!be!waived!or!barred!
!
by!estoppel.!
Held:! Estoppel! did! not! arise.! The! court! identified! that! the! estoppel!
• One! who! claims! the! benefit! of! an! estoppel! on! the! ground! of! st
Luz! was! claiming! was! estoppel! in! pais.! Kalalo! did! not! meet! the! 1 !
being! misled! by! the! other! party’s! misrepresentation! should! not! nd
(counduct! amounting! to! false! representation)! and! 2 ! (intent! to!
have! misled! by! his! own! want! of! reasonable! care.! Good! faith!
induce!other!party)!requisites!and!so!estoppel!did!not!arise!because,!
requires!that!due!diligence!has!been!observed.!Estoppel!is!not!a!
as! the! court! notes,! the! letter! was! made! with! a! mistaken!
shield!against!one’s!own!negligence.!
interpretation.!
!
!
!
!
!!!!
2. As%to%the%party%claiming%the%estoppel!
B. Kinds( • Lack! of! knowledge! or! of! the! means! of! knowledge! of! the!
truth!as!to!the!facts!in!question!
1. TECHNICAL!ESTOPPEL!
• Reliance,!in!good!faith,!upon!the!conduct!or!statements!of!
! the!party!to!be!estopped!
1. Estoppel%by%Record% • Action! or! inaction! based! thereon! of! such! character! as! to!
! change! the! position! or! status! of! the! party! claiming! the!
ESTOPPEL!BY!RECORD!is!the!preclusion!to!deny!the!truth! estoppel,!to!his!injury,!detriment!or!prejudice!
of! matters! set! forth! in! a! record,! whether! judicial! or! !
legislative,! and! also! a! preclusion! to! deny! the! facts! KINDS!
adjudicated!by!a!court!of!competent!jurisdiction.! 1. Positive%Estoppel%in%pais!
• An! example! would! be! the! conclusiveness! of! !
judgement! (in! effect,! an! estoppel! by, judgement)! to! a. Estoppel!by!Representation/Misrepresentation!!
the!parties!of!a!case.! !
!
Art.! 1437.! When! in! a! contract! between! third! persons! concerning!
2. Estoppel%by%Deed%
immovable!property,!one!of!them!is!misled!by!a!person!with!respect!
! to! the! ownership! or! real! right! over! the! real! estate,! the! latter! is!
ESTOPPEL!BY!DEED!is!a!bar!which!precludes!one!party!to!a! precluded!from!asserting!his!legal!title!or!interest!therein,!provided!
deed! and! his! privies! from! asserting! as! against! the! other! all!these!requisites!are!present:!
party!and!his!privies!any!right!or!title!in!derogation!of!the! !
deed! or! from! denying! the! truth! of! any! material! facts! (1)! There! must! be! fraudulent! representation! or! wrongful!
asserted!in!it.! concealment!of!facts!known!to!the!party!estopped;!
• A! void! deed,! however,! cannot! be! a! basis! of! this! !
estoppel.! (2)!The!party!precluded!must!intend!that!the!other!should!act!upon!
• This! concept! promotes! the! policy! of! making! formal! the!facts!as!misrepresented;!
documents!final!and!conclusive!of!their!contents.! !
(3)!The!party!misled!must!have!been!unaware!of!the!true!facts;!and!
2. EQUITABLE!ESTOPPEL/ESTOPPEL!IN!PAIS! !
! (4)! The! party! defrauded! must! have! acted! in! accordance! with! the!
CONCEPT! misrepresentation.
!
!
EQUITABLE!ESTOPPEL!or!ESTOPPEL!IN%PAIS!is!a!bar!that!arises!when!
o Ex.! X,! owner,! of! a! parcel! of! land,! and! Y! made! it!
a! party,! by! his! acts,! representations,! or! admissions,! or! by! his!
appear!in!a!document!that!Y!is!the!real!owner.!Y!or!
silence!when!he!ought!to!speak!out,!or!by!his!acceptance!of!benefits!
his! successors?in?interest! cannot! afterwards! assert!
derived!from!a!certain!transaction,!intentionally!or!through!culpable!
ownership!over!the!land,!as!it!cannot!be!said!that!Y!
negligence,! induces! another! party! to! believe! certain! facts! to! exist!
was!misled!by!the!false!representation!being!a!party!
and! such! other! party! rightfully! relies! and! acts! on! such! belief,! as! a!
to!the!same.!
consequence! of! which! the! latter! party! would! be! prejudiced! if! the!
!
former! party! is! permitted! to! deny! the! existence! of! the! facts! the!
X!would!have!been!estopped!from!claiming!any!right!
latter!party!had!relied!and!acted!on.!
over! the! property! had! it! been! sold! by! Y! to! Z,! a!
!
purchaser!in!good!faith.!
TECHNICAL!V.!EQUITABLE!ESTOPPEL!
!
!
b. Estoppel!by!Acceptance!of!Benefits!
AS!TO! TECHNICAL!ESTOPPEL! EQUITABLE!ESTOPPEL!
!
Source! From!records!or!deeds! From!the!conduct!of!
Art.! 1438.! One! who! has! allowed! another! to! assume! apparent!
parties!
ownership! of! personal! property! for! the! purpose! of! making! any!
Existence!of! Regulated!by!well? No!universal!rules;!
transfer!of!it,!cannot,!if!he!received!the!sum!for!which!a!pledge!has!
Rules!! settled!rules!and!admits! depends!on!the!
been! constituted,! set! up! his! own! title! to! defeat! the! pledge! of! the!
certain!applications! particular!
property,!made!by!the!other!to!a!pledgee!who!received!the!same!in!
circumstances!of!the!
good!faith!and!for!value.!
case!
!
!
o When! no! fraud,! either! actual! or! constructive,! is!
ELEMENTS!
involved,! the! effects! produced! by! estoppel, by,
1. As%to%the%party%sought%to%be%estopped!
acceptance, of, benefits, are! similar! to! the! effects!
• Conduct! amounting! to! false! representation! or! produced!by!ratification.!
concealment! of! material! facts,! or! at! least! calculated! to! !
convey! the! impression! that! the! facts! are! otherwise! than! !
and!inconsistent!with,!those!which!the!party!subsequently!
!
attempts!to!assert! !
• Intent,! or! at! least! expectation! that! this! conduct! shall! be! !
acted!upon!by!or!at!least!influence,!the!other!party! !
• Knowledge,!actual!or!constructive,!of!the!real!facts! !
!
!!!!
c. Promissory!Estoppel! ESTOPPEL%BY%LACHES,%DISTINGUISHED%FROM%PRESCRIPTION%
o A! party! is! not! allowed! to! repudiate! what! he! has! AS!TO! LACHES! PRESCRIPTION!
promised!after!the!other!party!has!complied!with!the! Determining!factor! Not!merely!lapse!but! Lapse!of!time!only!
former’s!conditions!in!relation!to!the!promise!made.! the!effect!of!
o An! estoppel! arises! from! this! situation,! even! though! unreasonable!delay!
the!promise!was!made!without!consideration,!if!the! Focus! The!question!of! Deals!with!the!matter!
party! making! the! promise! was! intending! for! the! inequity!in! of!time!
party!to!rely,!and,!in!fact,!was!relied!on.! permitting!the!a!
o The! party! making! the! promise! in! such! a! case! is! stale!right!or!claim!
estopped! because! to! let! him! repudiate! the! promise! to!be!enforced!
he! made! to! other! party! is! to! sanction! fraud,! and! Source! Is!not!statutory!and! Prescription!is!
injustice.! is!applied!based!on! statutory!and!applies!
o The!following!are!essential!requisites!that!gives!rise! the!principal!of! through!law!
to!promissory!estoppel:! equity!
! That! there! is! a! promise! that! is! reasonably! Fixed!Time! Laches!does!not! Prescription!is!based!
expected!to!induce!action!or!forbearance! require!fixed!time!to! on!fixed!time!
! That! such! promise! did,! in! fact,! induce! action! or! attach;!there!is!no!
forbearance! fixed!time!
! That! the! party! who! executed! the! action! or! !
forbearance!suffered!detriment!as!a!result!
!
2. Negative%Estoppel%in%pais! C. Persons(Bound(by(Estoppel*
a. Estoppel!by!Laches, !
, Art!1439 Estoppel!is!effective!only!as!between!the!parties!thereto!or!
• Embodied!in!the!maxim!that!“if!one!maintains!silence! their!successors!in!interest!
when! in! conscience! he! ought! to! speak,! equity! will! !
debar! him! from! speaking! when! in! conscience! he! • An!estoppel!must!bind!both!parties!or!neither!is!bound.!
ought!to!remain!silent.!He!who!remains!silent!when! • If! a! private! corporation! intentionally! or! negligently! clothes!
he! ought! to! speak! cannot! be! heard! to! speak! when! its! officers! or! agents! with! apparent! power! to! perform! acts!
he!should!be!silent.”! for! it,! the! corporation! will! be! estopped! to! deny! that! such!
• Public! policy! requires! for! the! peace! of! society,! apparent!authority!is!real!as!to!third!persons!
discouragement! of! stale! claims! and! laches,! unlike! !
statute!of!limitations,!is!not!a!mere!question!of!time! Case:!
but!principally!a!question!of!inequity!or!unfairness!of! !
permitting!a!right!or!claim!to!be!enforced!or!asserted.! MANILA!LODGE!NO!761!BENEVOLENT!AND!PROTECTIVE!ORDER!OF!
• Also!referred!to!as!“estoppel!by!standing!by.”! ELKS!v.!CA!
• Mere!silence!or!inaction!is!not!enough!for!laches,to! Facts:!Manila!Lodge!had!acquired!from!the!City!of!Manila,!through!a!
attach;!there!must!be!some!element!of!turptitude!or! sale,!a!piece!of!land.!The!City!of!Manila!later!on!is!now!questioning!
negligence! connected! with! such! silence! or! inaction,! the!validity!of!the!sale,!contending!that!to!begin!with,!the!land!sold!
by!which!the!other!party!is!misled!to!his!injury.! was!of!public!domain!and!could!not!have!been!sold.!Manila!Lodge!as!
• Also,!for!laches!to!attach,!it!must!be!shown!that!there! a! defense! claims! that! the! City! of! Manila! should! be! estopped! from!
is!a!right,!that!there!was!an!opportunity!to!speak!and! questioning!the!validity!of!the!sale.!
in!addition,!an!obligation!or!duty!to!do!so.! !
• Laches! extends! to! one’s! heirs! since! they! stand! in! Held:! Government! cannot! be! estopped! by! its! own! actions! and!
privity!with!him.! estoppel!will!also!not!lie!to!validate!contracts!made!by!a!municipal!
! corporation!when!it!is!against!law!or!public!policy.!
Elements:!
1. Conduct! on! the! part! of! the! defendant,! or! of! one! D. Cases(Where(Estoppel(Applies*
under!whom!he!claims,!giving!rise!to!the!situation!of! !
which!complaint!is!made! Art! 1434! When! a! person! who! is! not! the! owner! of! a! thing! sells! or!
2. Delay! in! asserting! the! complainant’s! right,! the! alienates!and!delivers!it,!and!later!the!seller!or!grantor!acquires!title!
complainant! having! had! knowledge! or! notice! of! the! thereto,! such! title! passes! by! operation! of! law! to! the! buyer! or!
defendant’s! conduct! and! having! been! afforded! an! grantee.!
opportunity! to! sue;! actual! knowledge! of! the!
!
commission! of! the! adverse! act! is! not! necessary,! it!
• The! seller! cannot! later! on! claim,! as! a! defense,! that! he! was!
being! enough! that! such! knowledge! may! be! imputed!
not!the!proper!owner!during!the!time!the!sale!was!made.!He!
to! the! complainant! because! of! circumstances! of!
is!bound!by!estoppel.!
which!he!was!cognizant!
!
3. Lack! of! knowledge! or! notice! on! the! part! of! the!
!
defendant! that! the! complainant! would! assert! the!
!
right!on!which!he!bases!his!suit!
!
4. Injury! or! prejudice! to! the! defendant! in! the! event!
!
relief! is! accorded! to! the! complainant,! or! the! suit! is!
!
not!held!to!be!barred.!
!!!!
Art!1435!If!a!person!in!representation!of!another!sells!or!alienates!a! !
thing,!the!former!cannot!subsequently!set!up!his!own!title!as!against!
the!buyer!or!grantee. !
!
• The!phrase!“person!in!representation!of!another”!refers!to!a! !
party’s! agent! or! representative.! Such! agents! or!
representatives! cannot! question! the! validity! of! the! transfer! !
and! claim! title! to! the! thing! sold! or! alienated! against! the!
buyer!or!grantee.! !
!
Art!1436!A!lessee!or!a!bailee!is!estopped!from!asserting!title!to!the! !
thing!leased!or!received,!as!against!the!lessor!or!bailor.!
! !
• An!example!of!the!application!of!this!article!is!that!a!tenant!
cannot!dispute!his!landlord’s!title.! !
• Note:! Read! Estoppel, by, Representation/Misrepresentation,
(Art!1437),and!Estoppel,by,Acceptance,(Art!1438),!discussed!
!
earlier,!for!other!cases!where!estoppel!applies.!
!
!
Cases:!
!
MIGUEL!v.!CATALINO! !
Facts:! Appellants! were! contending! the! validity! of! a! sale! of! their!
deceased!father’s!piece!of!land,!pointing!out!that!there!was!no!deed! !
of!sale.!However,!this!action!was!instituted!34!years!after!the!time!
of!the!sale.! !
!
Held:!Laches!have!already!attached!since!the!court!noted!that!all!the! !
requisites!are!present.!Appellants!knew!that!the!sale!was!invalid!in!
the!first!place!and!did!not!have!to!wait!34!years!to!institute!the!civil! !
action.!
! !
Annotation,!32!SCRA!542!
The! prescription! of! action! for! reconveyance! based! on! implied! or! !
constructive! trust! is! now! a! settled! question! in! our! jurisdiction.!
Correspondingly,! where! implied! trust! is! present,! the! action! to! !
recover!the!property!prescribes!after!the!lapse!of!10!years!unless!a!
fiduciary!relation!exists!and!the!trustee!recognizes!the!trust.! !
! !
! !
! !
! !
! !
! !
! !
! !
! !
! !
! !
! !
!!!!
Title%V:%%TRUSTS%% D. Kinds((
!
Art! 1441.! Trusts! are! either! express! or! implied.! Express! trusts! are!
created! by! the! intention! of! the! trustor! or! of! the! parties.! Implied!
A. Defintion( trusts!come!into!being!by!operation!of!law.!
!
Trust! is! the! legal! relationship! between! one! person! having! an! !
EQUITABLE! OWNERSHIP! in! property! and! another! person! OWNING!
• Merger! releases! the! guarantor! because! they! are! merely!
THE! LEGAL! TITLE! to! such! property,! the! equitable! ownership! of! the!
accessory!obligations!
former! entitling! him! to! the! performance! of! certain! duties! and! the!
• Guarantor! acquires! the! credit,! his! obligation! as! guarantor!
exercise!of!certain!powers!by!the!latter.!!
is!extinguished,!but!the!principal!obligation!subsists!which!
!
he! can! enforce! against! the! debtor! and! other! co?
Characteristic!of!Trust!!
guarantors.!!
1. It!is!a!relationship!!
• When! mortgaged! property! belongs! to! a! third! person,!
2. A!relationship!of!fiduciary!character!
mortgagee! acquires! a! part! of! the! property,! the! same! is!
3. A!relationship!with!respect!to!property,!not!one!involving!
released! from! the! encumbrance.! The! obligation! merely!
merely!personal!duties!
becomes!a!partly!(if!the!acquisition!is!not!total)!unsecured!
4. It!involves!the!existence!of!equitahble!duties!imposed!upon!the!
obligation.!
holder!of!the!title!to!the!property!to!deal!with!it!for!the!benefit!
!
of!another!
Case:!!
5. It!arises!as!a!result!of!a!manifestation!of!intention!to!create!the!
SALAO!v.!SALAO!
relationship!!
Facts:!The!plaintiffs,!all!relatives!of!the!defendants,!instituted!action!
for! a! piece! of! land! in! Bataan,! alleging! it! came! from! common! funds!
B. Governing(Rules( and!that!there!was!an!oral!partition!made!earlier.They!alleged!that!
! the!defendants,!who!became!administrators!of!property!in!Malabon!
inherited! from! their! grandparents,! used! common! funds! to! buy!
Art.!1442.!Principles!of!the!general!law!of!trusts!are!transplanted!to! property!elsewhere.!!
the!Philippine!soil.! !
Held:!It!was!not!proven!that!a!trust!had!been!created!because!there!
!
was! no! documentary! evidence! was! presented! to! prove! an! express!
General!Rule!of!Trusts:!
trust,!and!Art.!1443!says!parol!evidence!cannot!be!used!to!prove!an!
The!trusts!known!to!American!and!English!equity!jurisprudence!are!
express!trust!concerning!realty.!The!evidence!also!did!not!prove!an!
derived! from! judei, commissa, of! the! Roman! law! and! are! based!
implied! trust.! While! an! implied! trust! may! be! proven! by! oral!
entirely!upon!Civil!Law!principles.!!
evidence,!it!must!be!Trustworthy.!It!also!was!not!proven!that!there!
was!fraud!or!mistake!that!was!grave!enough!to!create!a!constructive!
C. Parties(( trust.
! !
1. EXPRESS! TRUSTS! [! created! by! the! direct! and! positive! acts! of!
Art.! 1440.! A! person! who! establishes! a! trust! is! called! the! trustor;! the! parties,! by! some! writing! or! deed! or! will! or! by! words!
one! in! whom! confidence! is! reposed! as! regards! property! for! the! evidencing!an!intention!to!create!a!trust.!!
benefit!of!another!person!is!known!as!the!trustee;!and!the!person!
a. Proof%Required%%
for! whose! benefit! the! trust! has! been! created! is! referred! to! as! the!
!
beneficiary.!
Art.! 1443.! No! express! trusts! concerning! an! immovable! or! any!
!
interest!therein!may!be!proved!by!parol!evidence.!!
1. TRUSTOR!–!Establishes!a!trust!
2. TRUSTEE!–!One!in!whom!confidence!is!reposed!as!regards! !
property!for!the!benefit!of!another!person!! Requisites!of!Express!Trust.(If!any!are!missing,!it!is!fatal!to!the!trust)!
3. BENEFICIARY! OR! CESTUI! QUE! TRUST! –! Person! for! 1. Competent!trustor!
whose!benefit!the!trust!has!been!created!! 2. Trustee!!
! 3. ascertainable!trust!res,
• Liability!of!trustee!who!violates!trust!is!personal.!The! 4. sufficiently!certain!beneficiaries!!
action!(nature!of!a!general!demand!for!damages)!can!be! !
maintained!by!cestui,que,trust!or!persons!claiming!under! • When! it! concerns! an! immovable! or! an! interest! therein?
him!or!by!creator!of!the!trust!only!against!the!trustee.!! writing!is!necessary!to!prove!it.!!
• Cestui!que!trust:!Not!always!necessary!that!should!be! o Writing!not!required!for!validity!of!trust,!only!for!
named,!or!even!be!in!existence!at!the!time!the!trust!is! purposes!of!proof.!!
created!in!his!favor.!, • When! the! property! subject! to! express! trust! is! not! real!
, estate! or! an! interest! therein,! it! may! be! proved! by! any!
, competent!evidence,!including!parol!evidence.!!
! !
!!!!
b. Form%%
Art.! 1451.! When! land! passes! by! succession! to! any! person! and! he!
!
causes! the! legal! title! to! be! put! in! the! name! of! another,! a! trust! is!
Art.! 1444.! No! particular! words! are! required! for! the! creation! of! an! established!by!implication!of!law!for!the!benefit!of!the!true!owner.!!
express!trust,!it!being!sufficient!that!!trust!is!clearly!intended.!! !
Art.!1452.!If!two!or!more!persons!agree!to!purchase!property!and!
! by! common! consent! the! legal! title! is! taken! in! the! name! of! one! of!
• No! particular! form! of! words! or! conduct! is! necessary! for! the! them!for!the!benefit!of!all,!a!trust!is!created!by!force!of!law!in!favor!
manifestation!of!intention!to!create!a!trust.!! of!the!others!in!proportion!to!the!interest!of!each.!!
! !
c. Want%of%trustee% Art.!1453.!When!property!is!conveyed!to!a!person!in!reliance!upon!
his!declared!intention!to!hold!it!for,!or!transfer!it!to!another!or!the!
%
grantor,! there! is! an! implied! trust! in! favor! of! the! person! whose!
Art.!1445.!No!trust!shall!fail!because!the!trustee!appointed!declines! benefit!is!contemplated.!!
the! designation,! unless! the! contrary! should! appear! in! the! !
instrument!constituting!the!trust.!! Art.! 1454.! If! an! absolute! conveyance! of! property! is! made! in! order!
to!secure!the!performance!of!an!obligation!of!the!grantor!towards!
% the!grantee,!a!trust!by!virtue!of!law!is!established.!!
• The!reason!why!a!trust!does!not!fail!for!want!of!a!trustee!is! !
that!to!permit!it!to!fail!for!this!reason!would!be!contrary!to! Art.! 1455.! When! any! trustee,! guardian! or! other! person! holding! a!
the!intention!of!the!trustor!in!creating!the!trust.!! fiduciary!relationship!uses!trust!funds!for!the!purchase!of!property!
! and!causes!the!conveyance!to!be!made!to!him!or!to!a!third!person,!
d. Acceptance%by%the%beneficiary% a!trust!is!established!by!operation!of!law!in!favor!of!the!person!to!
whom!the!funds!belong.!!
% !
Art.! 1441.! Trusts! are! either! express! or! implied.! Express! trusts! are! Art.! 1456.! If! property! is! acquired! through! mistake! or! fraud,! the!
created!by!the!inention!of!the!trustor!or!the!parties.!Implied!trusts! person! obtaining! it! is,! by! force! of! law,! considered! a! trustee! of! an!
implied!trust!for!the!benefit!of!the!person!from!whom!the!property!
come!into!being!by!operation!of!law.!!
comes.!!
!
!
2. IMPLIED!TRUSTS!! Cases:!
a. How%established%(Article%1441;%see%above)% FABIAN!v.!FABIAN!
b. How%proved% Facts:!January!1909:!Pablo!Fabian!bought!lot!164!of!the!Friar!Lands!
! Estate! in! Muntinlupa! from! the! government.! He! died! on! August! 2,!
1928.! He! was! survived! by! 4! children:! Esperanza,! Benita! I,! Benita! II!
Art.!1457.!An!implied!trust!may!be!proved!by!oral!evidence.!! and!Silbina.!November!14,!1928:!Director!of!Lands!sold!lot!to!Silbina!
and! Teodora! (deceased’s! niece),! who! cultivated! the! land.! 1960:!
!
plaintifs! filed! action! of! reconveyance! against! SIlbina! and! Teodora!
c. Examples%% who! allegedly! acquired! the! land! through! fraud.! Spanish! document!
! was!wrongly!translated!into!saying!that!Silbina!was!he!only!daughter!
of!the!deceased.!Defendants!claimed!that!Pablo!Fabian!was!not!the!
Art.!1448.!There!is!an!implied!trust!when!property!is!sold,!and!the!
owner!of!the!land.!!
legal!estate!is!granted!to!one!party!but!the!price!is!paid!by!another!
!
for! the! purpose! of! having! the! beneficial! interest! of! the! property.!
Held:! Pablo! was! the! owner.! Sale! was! goverened! by! the! Friar! Lands!
The! former! is! the! trustee,! while! the! latter! is! the! beneficiary.!
Act.! In! constructive! trusts,! latches! constitute! a! bar! to! actions! to!
However,! if! the! person! to! whom! the! title! is! conveyed! is! a! child,!
enforce! the! trust,! and! repudiation! is! not! required! unless! there! is! a!
legitimate!or!illegitimate,!of!the!one!paying!the!price!of!the!sale,!no!
concealment! of! the! facts! giving! rise! to! the! trust.! An! Action! for!
trust!is!implied!by!law,!it!being!disputably!presumed!that!there!is!a!
reconveyance!of!real!property!based!upon!a!constructive!or!implied!
gift!in!favor!of!the!child.!!
trust,! resulting! from! fraud! may! be! barred! by! the! statute! of!
!
limitations,! and! the! action! may! be! filed! within! four! years! from! the!
Art.!1449.!There!is!also!an!implied!trust!when!a!donation!is!made!to!
discovery!of!fraud.!Complaint!dismissing!the!complaint!is!affirmed.!!
a!person!but!it!appears!that!although!the!legal!estate!is!transmitted!
!
to!the!done,!he!nevertheless!is!either!to!have!no!beneficial!interest!
!
or!only!a!part!thereof.!!
!
!
!
Art.!1450.!If!the!price!of!a!sale!of!property!is!loaned!or!paid!by!one!
!
person! for! the! benefit! of! another! and! the! conveyance! is! made! to!
!
the! lender! or! payor! to! secure! the! payment! of! the! debt,! a! trust!
!
arises! by! operation! of! law! in! favor! of! the! person! to! whom! the!
!
money!is!loaned!or!for!whom!it!is!paid.!The!latter!may!redeem!the!
!
property!and!compel!a!conveyance!thereof!to!him.!!
!
!
!
!
!
!!!!
BUENO!v.!REYES!
Facts:! Francisco! Reyes! claimed! Lot! No.! 2357! to! be! his! and! his! two!
brothers! Juan! and! Mateo! in! January! 1936.! 23! years! later,! plaintiffs!
filed!an!action!of!reconveyance!saying!the!lot!did!not!belong!to!the!
Reyes!brothers.!Land!originally!owned!by!Jorge!Bueno,!whose!three!
children! inherited! it! when! he! died.! The! plaintiffs! in! this! case! are!
Bueno’s! grandchildren! and! son! Rufino! who! claim! that! the! land! is!
theirs.!!
!
Held:! What! was! designed! to! be! an! express! trust! was! for! the! late!
Francisco!H.!Reyes!to!file!an!answer!in!the!cadastral!proceeding!and!
to! obtain! title! to! the! and! for! and! in! behalf! of! all! the! heirs! of! Jorge!
Bueno.! Such! express! trust! failed! to! materialize.! Upon! the! general!
proposition! that! an! act! for! reconveyance! such! as! the! present! is!
subject! to! prescription! in! ten! years! the! appellees! and! the! court! a!
quo! are! correct.! The! question! is! from! what! time! should! the!
prescriptive!period!be!counted,!in!the!light!of!the!allegations!in!the!
complaint?!Order!appealed!form!is!set!aside!and!case!remanded!for!
further!proceedings.!!
!
TAMAYO!v.!CALLEJO!
Facts:! Spouses! Vicente! Tamay! and! Cirila! Velasco! Tamayo! owned!!
parcel!of!land!in!the!barrio!of!Oalsic!or!Gualsic.!Prior!to!Feb!1,!1912,!
spouses!sold!the!northern!portion!to!Fernando!Domantay,!who!took!
possession!of!the!land.!Vicente!died!after!the!sale!but!prior!to!Feb!1.!
His! children! were! declared! sole! heirs! of! the! deceased! on! Feb! 1.!
Aurelio!Callejo!took!possession!of!said!land.!Domantoy!sold!the!land!
he! had! taken! possession! of! to! his! brother,! who! later! on! sold! it! to!
Proceso! Estacio! for! the! purpose! of! creating! a! subdivision! plan.!
Callejo! did! not! allow! the! latter! on! the! premises! and! diled! for!
reconveyance!and!damages.!!
!
Held:!Where!an!implied!trust!was!created!in!favor!of!Domantoy!by!
the!erroneous!inclusion!in!the!Tamayo!brothers’!certificate!of!title!of!
the! parcel! of! land! formerly! sold! by! their! parents! to! DOmantoy,!
which! was! recognized! Tamayo! recognized! such! sale,! such! express!
recognition!had!the!effect!of!imparting!the!aforementioned!trust!the!
nature! of! an! express! trust! which! is! not! subject! to! the! statute! of!
limitations!until!repudiated.!Case!remanded!to!the!court!of!origin.!!
!
!
!
!
!
!

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